India has nearly 14,500 km of navigable waterways, yet inland water transport (IWT) accounts for less than 1 per cent of its freight traffic, compared with ~35 per cent in Bangladesh and ~20 per cent in Germany. And that’s despite IWT’s better cost arithmetic and materially less polluting nature.

The cost of transporting one tonne freight over 1 km by waterway is ₹1.19 compared with ₹2.28 and ₹1.41 by road and rail, respectively. And the cost of developing an inland waterway is barely 10 per cent of a four-lane highway of similar capacity.

Of late, the government has made many moves. The Lok Sabha just passed an amendment to the Central Road Fund Act, 2000, proposing to allocate 2.5 per cent of the funds collected for development of waterways.

This support, amounting to ~₹2,000 crore annually, is significant considering that the cumulative allocation till 2014 was ₹1,500-1,700 crore.

What’s more, the budget for next fiscal has allocated ₹228 crore to the sector and allowed the Inland Waterways Authority of India (IWAI) to raise ₹1,000 crore from the capital market.

But all that is chump change given that the sector’s investment requirements are ~₹90,000 crore over the next few years to develop navigable routes, connectivity infrastructure to and from hinterland, terminals, vessels and repairing facilities.

So public private partnership is the need of the hour.

But given IWT’s nascence, the government and IWAI need to work on two channels — development of physical infrastructure, and policy level interventions — to draw private players in.

Physical infrastructure

The government should focus on developing navigation, channel operation and maintenance, and external connectivity infrastructure. Private players can undertake terminal development, cargo and passenger handling, and building low-draft vessels and related repair facilities.

Navigable route development: Private parties will continue to baulk at investments in terminal development till the government, perhaps in coordination with IWAI, takes 100 per cent responsibility of route navigability (permanent channel of at least 3-metre depth and 45 metre width).

Money for dredging channels can be raised through multilateral finances. IWAI can pursue this by engaging private dredgers through performance-based contracts.

External connectivity infrastructure: For a user, availability of seamless, multimodal last-mile connectivity to and from hinterland reduces trans-shipment cost and makes IWT way cheaper. So the government will need to set up multimodal logistics parks and inland port terminals. For private developers, support infrastructure such as utilities, power, and last-mile connectivity are vital for terminals, and States need to pitch in for this.

Policy interventions

Incentivising cargo transport through inland waterways: To ensure there is enough freight to make physical infrastructure development viable, the following measures can be taken:

(a) Offer incentives, including tax subsidies, for transporting a portion of industry cargo through IWT. This may be devolved based on sliding-scale rules inversely proportional to the size of vessels. Meaning, smaller the vessel, larger the benefit. Specific incentives may also be offered for efficient handling of IW cargo by inland terminals. And as infrastructure develops, the cost advantage of IWT over other modes of transportation will be realised.

(b) The Government can mandate/incentivise industries in the proximity of national waterways to use this mode for a portion of their shipments. Public sector entities such as Food Corporation of India, power plants and refineries can be similarly mandated.

(c) Higher road taxes can be levied on transportation of coal and inflammable material over longer distances because they are harmful to environment or pose a danger to those in proximity.

(d) Many waterways run parallel to transportation corridors and urban centres. For synergy, the government can promote industrial corridors along riverbanks and foster waterways-based industrialisation. This will not only ensure captive IWT cargo, but also tackle erosion of riverbanks as industries will tend to protect the land allotted to them.

(e) Capital dredging, along with different waterways, will also offer opportunities to reclaim land along riverbanks. In West Bengal and Assam, where land for industries is an issue, such reclamation can be an answer.

(f) Promoting passenger transportation and tourism: In many States, there are ferry services on national waterways, but these are mostly unorganised country boats. Terminal facilities are also woefully inadequate. Along with passenger terminal development, the government needs to offer financial support to ferry operators to improve safety, and facilitate insurance coverage. Also, in Kerala and Assam, waterways have huge tourism potential. The Centre and States need to join hands to package and market river tourism in a big way to trigger a virtuous cycle.

(g) Resolving the protocol route issue with Bangladesh: This is critical to the sector’s development. Indo-Bangladesh joint dredging projects in Sirajganj-Daikhawa (146 km) on river Yamuna and in the Ashuganj-Zakiganj stretch (309 km) on river Kushiyara in Bangladesh have been long delayed. Completion of these projects will enable movement of larger vessels from Varanasi in Uttar Pradesh to Sadiya in Assam through Bangladesh, and crank up waterways cargo traffic.

Only such a holistic and concerted effort can change India’s transportation landscape, de-congest arterial roads, and even improve quality of life across geographies.

Padmanabhan is Director & Practice leader, Transport, CRISIL Infrastructure Advisory; Saha is Senior Consultant, Transport

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