Untapped Potential

Development plans for coastal shipping

Despite India’s long coastline of 7,517 km with 12 major and around 200 non-major ports, the coastal shipping segment remains severely underutilised. At present, only 7 per cent of the country’s domestic cargo is transported using coastal shipping.

As per the latest estimates available, during the period 2010-11 to 2014-15, coastal traffic at Indian ports increased at a compound annual growth rate (CAGR) of 3.25 per cent, from 154.92 million tonnes (mt) to 176.07 mt. Coastal traffic at non-major ports grew at a CAGR of 3.87 per cent and at major ports at 2.97 per cent, during the same period.

A port-wise analysis shows that in 2014-15, Paradip port accounted for the highest share (20.85 per cent) in total coastal traffic at major ports, followed by the Mumbai and Visakhapatnam ports at 20.04 per cent and 12.21 per cent respectively. In terms of commodity composition, coastal traffic at major ports largely consists of petroleum-oil-lubricants (POL) and thermal coal, which together account for about 74 per cent of total traffic.

Among the non-major ports, Gujarat accounts for the majority share of coastal traffic at 55.5 per cent (in 2014-15), followed by Andhra Pradesh and Maharashtra with a share of 23 per cent and 16 per cent, respectively.

As of December 2015, India had a coastal fleet of 873 vessels with gross registered tonnage (GRT) of 1.5 million tonnes, compared to 846 vessels of 1.2 million GRT at the end of December 2014. This reflects a net addition of 27 vessels with an increase of 0.3 million GRT. In terms of composition, the Indian coastal shipping fleet largely comprises dry cargo liners and dry cargo bulk carriers, which together account for about 70 per cent of total coastal vessels in terms of number and 50 per cent in terms of GRT.

Major coastal shipping companies are strengthening their fleet to facilitate better movement of coastal cargo. During the past year, Shreyas Shipping and Logistics Limited acquired three coastal vessels with a combined capacity of over 3,500 twenty-foot equivalent units (TEUs). Moreover, Sima Marine India Private Limited launched coastal container shipping services at four ports – Cochin, Mundra, Goa and Mangalore. For operating these services, the company has acquired two 1,500 TEUs container vessels, Sima Godavari and Sima Narmada.

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Key policy initiatives

In the recent past, the coastal shipping segment has seen some movement on the policy front. The government has laid new guidelines and is preparing new incentive schemes to promote coastal shipping, besides promoting the development of new coastal berths at major ports.

Recently in May 2016, the Central Board of Excise and Customs relaxed the norms for movement of coastal cargo across different ports in the country. According to the new norms, the vessels carrying coastal goods will be clearly marked with the words “for coastal carriage only” on all sides and will be exempted from all examination.

In March 2016, the government relaxed cabotage restrictions for ports which transship at least 50 per cent of the container traffic handled by them. With this relaxation, apart from Indian vessels, foreign vessels too can transport export-import cargo and empty containers from any port in India to transshipment ports and vice versa. Earlier, in September 2015, the cabotage law was relaxed for special vessels such as roll-on, roll-off (ro-ro), pure car carriers, truck carriers and liquefied natural gas vessels for a period of five years.

In order to promote coastal shipping, the government has also exempted bunker fuels from the levy of customs and central excise duties. These fuels – IFO 180 CST and IFO 380 CST – are used in Indian flag vessels carrying a mix of export-import, empty and domestic containers between two ports in India.

Earlier, in November 2015, India signed a bilateral agreement with Bangladesh for coastal shipping. The agreement is expected to enhance bilateral trade between the two countries by bringing down the cost of transportation of export-import cargo. Further, in March 2015, the Ministry of Shipping (MoS) announced new guidelines for the implementation of a scheme for incentivising the modal shift in cargo. The guidelines will initially be implemented from April 1, 2015 to March 31, 2017. Under this scheme, transportation of any commodity in containers with a full container load will be eligible for an incentive of Rs 3,000 per TEU.

The way forward

The MoS aims to increase the share of coastal cargo in total freight traffic to 10 per cent by 2019-20. Various measures and incentive schemes have been introduced to promote coastal shipping. However, there are still some issues that require immediate attention. These include lack of dedicated berthing and dry dock facilities for coastal vessels, regulatory issues such as cabotage laws and lack of hinterland connectivity to the major ports.

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