India is witnessing a definite, albeit slow, shift towards the use of coastal transportationas a result of the increased attention that this mode has received in the past two-three years. Ports have set up dedicated coastal berths, reduced port charges, offered discounts, etc., to promote coastal traffic.
As per the latest estimates available, during 2015-16, of the total traffic handled at Indian ports, coastal traffic accounted for about 179 million tonnes (mt), a 21 per cent share in total traffic. Of the total coastal traffic, 125 mt was handled at major ports while the remaining 54 mt was handled at non-major ports. During 2015-16, petroleum, oil and lubricants (POL) and thermal coal together accounted for a share of approximately 79 per cent in the total coastal traffic at the major ports.
Between 2011 and 2016, coastal traffic at Indian ports increased at a compoun d annual growth rate (CAGR) of 2.83 per cent, increasing from 159.98 mt in 2011-12 to 178.92 mt in 2015-16. Except for a negative growth of about 3.6 per cent in 2013-14, the year-on-year growth remained positive during the 2011-16 period.
The growth in coastal traffic at Indian ports has been led primarily by the major ports. Over the five-year period 2011-12 to 2015-16, coastal traffic at major ports grew at a CAGR of 4.38 per cent. On the other hand, traffic at non-major ports declined during the same period. Also, the share of major ports in the total coastal traffic handled at Indian ports increased to 70 per cent in 2015-16, as compared to 66 per cent in 2011-12.
Of the total coastal traffic at non-major ports, Gujarat handled the maximum in 2015-16, at 33.18 mt. Sikka and Magdalla were the major coastal cargo handling ports, accounting for a share of 66 per cent in the total coastal cargo traffic handled in the state. Gujarat was followed by Andhra Pradesh, a distant second, with the latter handling 10.23 mt of coastal traffic in 2015-16.
In terms of infrastructure, as of May 30, 2017, the Indian shipping industry had a fleet of 1,325 vessels of 11.85 million gross tonnage (GT) and 17.78 million deadweight tonnage (DWT). Of the total vessels, 913 were coastal vessels with a tonnage of 1.52 million GT (1.68 million DWT).
A string of initiatives
The Ministry of Shipping (MoS) has been taking several steps for realising the full potential of the country’s maritime sector. The government’s flagship programme, Sagarmala, with its focus on port-led development, lays emphasis on the coastal movement of a number of commodities, the setting up of coastal economic zones (CEZs), offering new targeted incentives, etc.
In order to equip ports for coastal cargo movement, the scope of the coastal berth scheme has been expanded and integrated into the Sagarmala programme. Under this scheme, 16 projects have been sanctioned and Rs 1.52 billion has been released as of March 2017.
Under Sagarmala, a total of 14 CEZs have been identified along the country’s coastline, with each coastal state having one or more CEZs. These zones have been geographically mapped out covering one or more districts, and specific industrial clusters relevant for each CEZ have been proposed.
In March 2016, the MoS launched a scheme for encouraging a modal shift of cargo from road and rail to coastal shipping – the Scheme for Incentivising Modal Shift of Cargo. The scheme provides monetary incentives for moving cargo via coastal and inland waterway networks, which can be availed of by shippers who transport identified categories of cargo through coastal shipping or inland waterways or both, using Indian flag vessels, river sea vessels or barges.
Besides, the cabotage law has been relaxed for roll-on, roll-off (ro-ro), hybrid ro-ro, ro-ro passenger (ro-pax), pure car carriers, pure car and truck carriers, liquefied natural gas vessels, and over-dimensional cargo or project cargo carriers for five years, with effect from September 2, 2015. In addition, all the major ports in the country have been directed to provide priority berthing to coastal ships to reduce their waiting time.
Meanwhile, the customs and excise duty levied on bunker fuels for the transportation of export-import cargo, and empty and domestic containers between ports in India has been done away with. Service tax for coastal shipping has been brought at par with road and rail at 70 per cent.
Following the significant emphasis being laid by the government on coastal shipping, new players are entering the coastal shipping segment, especially in coastal container shipping. Recently, some foreign ship owners have registered their ships under the Indian flag to carry cargo on local routes.
Singapore-based container shipping company Pacific International Lines Private Limited was among the first few companies to convert a container ship registered in Singapore to the Indian flag. Subsequently, Sima Marine India Private Limited launched coastal container shipping services in India, with the Mundra-Goa-Mangalore-Cochin-Colombo port rotation. For coastal service operations, Sima Marine operates two container vessels, Pamba and Sarayu, of 2,442 twenty-foot equivalent units (TEUs) each. These ships are now sailing under the Indian flag to work within the cabotage law.
Besides, existing players are acquiring new coastal vessels. Earlier this year, a leading coastal shipping player, Shreyas Shipping and Logistics Limited, acquired two new coastal vessels, M.V. SSL Kolkata and M.V. SSL Delhi, with a DWT of 1,100 TEUs and 2,500 TEUs, respectively, to be deployed along the Indian coast.
Issues remain
Water, as a mode of transportation, has a minuscule share in the movement of inbound and outbound cargo, despite being the most cost-effective and efficient mode of transport. There are various issues that have been impeding the growth of the coastal shipping segment in the country.
Coastal shipping is only one leg in the entire multimodal transport chain. Cargo has to be transported from its inland origin to the port of loading and again from the port of discharge to the inland destination by road or rail. For coastal shipping to be viable, the multimodal chain as a whole needs to be cost effective vis-à-vis the uni-modal road or rail. According to industry experts, the coastal shipping route is not cheaper when first-mile and last-mile connectivity and taxes are considered.
Though, there has been demand for a coastal and inland shipping development fund for quite a while, no action has been taken in this regard. As per industry stakeholders, there is no dedicated bank for financing shipping equipment and therefore no long-term policy has been drawn up by financial institutions to earmark funds for coastal and inland vessels.
Further, there is no separate tariff for coastal vessels at ports. The rate is fixed at the foreign going (FG) vessel rate. If the FG vessel rate goes up, so does the tariff for coastal shipping. One-way traffic and empty load returns are other areas of concern for shipping operators. According to industry estimates, even if return cargo is available, it may not match the parcel size of the vessel available. In addition, the frequency of coastal vessel deployment also needs to be looked at.
The way forward
Though coastal shipping has evident advantages over land-based modes of transportation, it is yet to become an integral part of the country’s transport infrastructure. In a base case scenario (where GDP growth is expected at 7.5-8 per cent), India has the potential to increase its coastal cargo to approximately 320 mt.
Going forward, there is a need for demand-side incentives to those who offer cargo for movement through the multimodal chain. The government could also develop a comprehensive policy on coastal shipping and set up a separate department for coastal shipping in the MoS. Much needs to be done to broaden the cargo base, generate two-way traffic and make the multimodal route, as a whole, cost effective vis-à-vis the uni-modal road or rail.
