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Water runs deep for pvt sector in IWT

Vinson Kurian

THE new Inland Water Transport Policy authorises the Inland Waterways Authority of India (IWAI) to issue bonds and mobilise funds from the market as is the case with other infrastructure sectors.

Investments in the inland water transport (IWT) sector will be encouraged subject to the financial exposure of the Government being limited to equity participation. Additional concessions in the form of grants, subsidies and other expenditure for develop ment of infrastructure will be outside the scope of the joint venture projects.

In-principle approval has been accorded to policy guidelines for private sector participation. This is subject to the equity participation of the Government/IWAI being limited to the ceiling of 40 per cent in BOT projects, to be worked out on a case-to-c ase basis and also subject to details of the scheme being finalised in consultation with the Planning Commission.

Such participation will be for such areas as fairway development and maintenance, construction and operation of terminals, provision and operation of mechanised cargo handling systems, storage facilities, provision of navigational aids, pilotage and sett ing up and running of IWT training institutions.

Guidelines for private investment have been issued separately.

IWT has been accorded the status of infrastructure under Section 80 1A of the Income-Tax Act, making it eligible for concessions applicable to that sector.

To encourage IWT fleet expansion, a scheme will provide shipowners a 30 per cent subsidy for inland vessels built in Indian shipyards. As per the scheme, any `inland vessel' registered under the Inland Vessels Act, 1917, will qualify for the subsidy. The Ministry of Shipping will formulate a comprehensive vessel building subsidy scheme in consultation with the Finance Ministry.

In-principle approval has been given for levying minimum Customs duty on imported equipment and machinery for development of inland waterways to be identified by the IWAI. A list of such equipment/machinery items will be submitted to the Finance Ministry .

The revival of the IWT system would entail an increase in coverage of national waterways and provision of necessary infrastructure for shipping and navigation and in augmenting the IWT fleet. While budgetary support will be required for development of th e sector, the need for large-scale private sector participation is being felt, both for creating infrastructure and for fleet operations.

The IWT strategy: The IWT strategy aims to generate a more proactive role by various agencies for development of the sector. It has now been decided to enlarge the scope of the Government's role as provider, facilitator and regulator, offering concession s to the private sector for its effective participation by way of investment for creating an enhanced IWT infrastructure as also for fleet operations.IWT is an energy efficient and cheaper mode of transport for bulk commodities, especially those generati ng and terminating on the waterfronts. It is environment-friendly and has high employment potential. However, at present, it forms a very small part of the total transport network. In terms of tonne kilometers of total inland cargo, its share is less tha n one per cent. Cargo transportation in an organised manner takes place now mostly on the three national waterways (NW) _ in Assam, Goa, Kerala and West Bengal. The annual cargo moved by IWT is 16-18 million tonnes corresponding to about 1.5 billion tonn e km, the balance being served by road and rail.

India has navigable waterways aggregating to about 14,500 km, of which about 5,200 km of major rivers and 485 km of canals are suitable for operating mechanised craft. Most waterways suffer from navigational hazards such as shallow waters and narrow widt h of the channel during dry weather, siltation, bank erosion, and absence of infrastructural facilities such as terminals and inadequacy of navigational aids. The availability of vessels for IWT in the public and private sectors put together is less than 400, including tankers, bulk carriers, dumb barges and other craft of average capacity of 600 tonnes.

The thrust of the Government efforts is to develop waterways for navigation with the necessary infrastructure such as fairway, terminals, navigational aids and fleet so that the IWT mode becomes competitive and can attract cargo dictated by market forces .

Guidelines for private investment: The development of infrastructure and services needs mobilisation of substantial resources to improve the efficiency and quality of services. The IWT sector has been thrown open to private investor participation in cons onance with the general policy of liberalisation. It is expected that private sector participation would result in reducing the gestation period for setting up new facilities and services and bring in the latest technology and improved management techniq ues.

Areas of private participation

The areas of private participation identified by the Government are:

(a) Ownership and operation of vessels for cargo and passengers; (b) Fairway development and maintenance;

(c) Construction and operation of river terminals or river ports;

(d) Provision and operation of mechanised cargo-handling systems;

(e) Putting up and maintaining navigational aids;

(f) Provision of pilotage services; and

(g) Setting up and running of IWT training institutions.

Demand scenario

Three major waterways have been declared National Waterways: The Ganga, from Haldia to Allahabad (1,620 km); the Brahmaputra, from Dhubri to Sadiya (891 km); and the West Coast Canal from Kottappuram to Kollam (205 km). Techno-economic studies have been conducted on many new waterways such as the Godavari, the Krishna, the Buckingham Canal system from Kakinada to Marakanum, the Sunderbans, Goa rivers, the Brahmani river and the East Coast Canal from Talcher to Paradip and Haldia; the DVC Canal and the B arak river.The Ninth Plan provision for the IWT sector is Rs 408 crore, which would be used to create the necessary IWT infrastructure in the National Waterways. The Ninth Plan goal is a growth of IWT to capture 20 billion tonne-km of cargo which would b e about two per cent of the total inland cargo. This is a modest target compared to the US, China and Europe, where private participation has resulted in a substantial share of cargo movement by IWT varying from eight to 20 per cent. The inland waterways of India also offer ample scope for development and with the anticipated growth in industry and the demand for transport infrastructure, a shift in mode to IWT dictated by market forces has become inevitable.

A target of 20 billion tonne-km would require about 2,000 inland cargo vessels, about 30,000 trained crew, a number of terminals with intermodal linkages and warehouse/mechanical loading facilities and, a well-developed/maintained fairway. There is need for small, medium and large companies and individuals to invest in various areas of IWT.

Identification of projects

The following principles will be generally observed in identifying projects for being taken up with private investment, either under a joint venture with the IWAI or any of its subsidiary organisations or under permission from IWAI without its participat ion:

(a) That the project shows a positive financial and economic internal rate of return (FIRR/EIRR);

(b) That projects of national importance which may have a low FIRR, but high EIRR may also be considered; and

(c) That priority will be given to projects satisfying any of the following criteria: inter-State waterways, port-hinterland connection, strategical importance, connecting places not adequately served by other modes and waterway-based recreation activity projects.

(To be concluded)