Coastal shipping is the way to go

Late in January this year, the Food Corporation of India decided for the first time to move a parcel of 20,000 tonnes of foodgrain from Kakinada Port on the Andhra Pradesh coast to Kochi in the West by sea instead of the usual land route. Weeks later, the company announced that it would move at least one consignment of 20,000 tonnes every month using this mode for a year, as it was cheaper than road and rail movement.

Steelmakers such as the Tatas and Jindals are exploring ways to ship their finished products from Kolkata to Mongla in Bangladesh, avoiding the circuitous land route. Rashtriya Ispat Nigam, the corporate entity of Vizag Steel, is toying with the idea of buying barges to shift part of its movement from road and rail to coastal shipping.

Slowly, but surely, India’s congested highways are pushing companies to opt for coastal shipping to transport foodgrain, industrial raw materials and commodities such as steel, cement and fertilisers.

The recent announcement by the Government on fresh incentives for coastal shipping has stirred the interest of Indian industry, as this mode could bring down transportation costs and time.

“The incentive package will kick in within a few weeks. It was delayed because of the polls. But, the announcement itself has attracted significant response from industries,” says PVK Mohan, Chairman of the National Shipping Board.

As coastal shipping gets more cargo, the string of private and Non-major ports along the coast will have to play a bigger role. The Government is now keen that these ports are included in the incentive package so that coastal ships get priority berthing and other facilities.

In the European Union the cost of coastal movement is about 20 per cent and 40 per cent cheaper than road and rail movement, respectively. China is estimated to move one billion tonnes of coal, steel, grains and fertilisers through about 12,000 specially built coastal vessels.

India today has just about 140 such vessels carrying 150 million tonnes (mt) of commodities, accounting for 7 per cent of overall cargo movement. The already overburdened road network shoulders 57 per cent of the load, followed by the rail network with 30 per cent and oil and gas pipelines with 6 per cent.

It has been estimated by several committees in the past that the unit cost of transportation is ₹5 by road, ₹2 by rail, ₹15 by air and ₹1 through coastal shipping. Given current prices, unit costs will be higher but the comparative range will be more or less similar, say experts.

Based on the recommendation of a committee formed by the Shipping Ministry, the government announced fresh incentives for the segment in January this year. These include a cash incentive of 50 paise per tonne per nautical mile to manufacturers of eight commodities, including steel, fertiliser and cement.

Container shippers will get incentives in the form of ₹1,000 per TEU (20-foot equivalent units) in terminal handling charges and reduction of vessel related charges at ports by another 20 per cent for new coastal cargo.

“These incentives will be passed on to the shippers through the Major Ports. We are now exploring ways to include private and Non-major ports in this, as they can also garner additional cargoes,” said National Shipping Board’s Mohan, who headed the committee.

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