The Hindu Business Line : Coastal shipping: The cost-competitive route

The Indian peninsula has a long coastline of 7,517 km, dotted with 12 major ports and 185 non-major ports, and a vast hinterland. All these factors are ideal for vibrant coastal shipping, but the sector is still in a nascent stage and not integrated with the overall transport sector, including international shipping, feel shipping experts.

Traffic through coastal shipping (movement of cargo among Indian ports) at major ports was 90.48 million tonnes in 2005-06 — representing less than 10 per cent of land and water-borne traffic in India. A study by Tata Consultancy Services (TCS) says that this volume will increase to 220 million tonnes by 2012.

Experts feel investment in shipping has been meagre when compared to other infrastructure sectors.

There is less focus on coastal shipping, despite the fact that in the last couple of decades, more than ten committees, including that of Afzalpurkar, Pinto and TCS, studied the sector in detail, says Mr Sudhir S. Rangnekar, Managing Director and Group CEO, Sical Logistics.

Of the total resources for infrastructure, railways got 51 per cent of the share and the road sector 32 per cent. Shipping got 5 per cent, while coastal shipping got a measly 1 per cent. “Coastal shipping has been completely neglected over the years,” he said, at a meeting organised by the Confederation of Indian Industry (CII) on “Indian Coastal Shipping: Opportunities towards economical logistics.”

In the road and rail sector huge investments are made on laying rails and roads, and not on wagons or vehicles. Both these sectors have ‘infrastructure’ status, with incentives and tax holidays.

While the port-based costs in shipping were less than 10 per cent, the majority of the investment in the sector is on the ships themselves.

But shipping is yet to get infrastructure status and without incentives to buy ships, it is difficult to develop coastal shipping, he added.

Mr Poul V. Jensen, Managing Director, TransCare, a logistics consultancy firm, says that, unlike roads, the coastal route does not impose costs related to congestion, accidents, energy consumption and environmental damage.

Why coastal shipping?

Fuel consumption for every tonne-km of cargo carried by the water route is only 15 per cent of that of road and 54 per cent of that by rail. Further, coast-to-coast carriage of goods by coastal shipping costs 21 per cent of that by road and 42 per cent that by rail.

Coastal shipping in Japan accounts for 41 per cent of freight volume, compared with 7 per cent in India. Japan has coastal shipping rules and regulations in place. Similarly, the I-95 Corridor Region in the US is home to 31 of the largest 150 marine ports in the country, he says: “What India needs is the integration of transport modes — an efficient inter-modal transport system,” he said. “World over, the move is towards better utilisation of water transport,” he added.

According to Mr Vineet Garg, Director, Ministry of Transport, Government of India, diverting 5 per cent of cargoes to waterborne mode will yield annual savings of around Rs 2,000 crore. This is apart from 6 per cent reduction in harmful emissions and pollutants, and savings in fossil fuels.

The country’s accelerated trade demand growth is far outstripping transport capacity (road and rail).

Small players dominate the coastal shipping. However, years of recession and wafer-thin profit margins make operations economically vulnerable, as the profit margins are not commensurate with the risks and capital involved.

There is an urgent need to tap and fully utilise the coastal shipping potential, felt Mr Garg.

Integration, the key

“Stop looking at coastal shipping as an end itself,” said Mr Raghu Venkatnarayan, Director, KPMG, a consultancy company. “Look how it will fit into the overall movement of goods across the country, and how it can be integrated with rail and road transportation,” he said.

Coastal shipping accounts for only of 7 per cent of domestic cargo movement, compared to 40 per cent in the US and European Union. However, coastal shipping may emerge as a cost-competitive option compared to surface transport to move commodities from surplus to deficit States.

Looking ahead

Mr Venkatnarayan of KPMG feels that though only 7 per cent of Indian domestic cargo volumes are transported through coastal shipping, recent regulatory changes that allow for flexible manning norms and exemptions from provisions of the Merchant Shipping Act, 1958, could boost coastal shipping.