Facilitating a Shift: Steps to promote the use of coastal shipping

Steps to promote the use of coastal shipping

India is witnessing a definite, albeit slow, shift towards the use of coastal transportation as a result of the increased attention that this mode has received in the past few years. At present, cargo moved through this mode accounts for only 6-7 per cent of the total cargo moved in the country, while the share of inland water transport (IWT) in the transportation sector is less than 0.4 per cent. In contrast, many developed nations use coastal shipping as a common mode of transport and carry over 40 per cent of their passenger and freight traffic via water.

Measures to promote coastal shipping

The Ministry of Shipping (MoS) has taken several steps for realising the full potential of the maritime sector. The various initiatives taken to increase the share of coastal traffic in overall cargo are the Sagarmala programme, promoting the use of IWT, various modernisation projects (undertaken by port authorities), and port-rail/road connectivity projects, among others.

A strategic, customer-oriented, Rs 8.35 trillion ($130 billion) investment initiative, Sagarmala, with its focus on port-led development, lays emphasis on the coastal movement of a number of commodities, setting up of coastal economic zones (CEZs), offering new targeted incentives, etc. The government’s flagship programme entails the setting up of over six mega ports, the modernisation of several ports, linking industrial corridors via rail, road and air with these ports, etc. It is expected to help in the development of coastal shipping by focusing on three pillars of development – port-led economic development, port infrastructure enhancement (including modernisation and the setting up of new ports), and efficient evacuation to and from the hinterland.

Under Sagarmala, a total of 14 CEZs have been identified along the coastline, which are to be developed in a phased manner. Further, the government has identified 2,000 km of coastal roads to be developed to facilitate hinterland connectivity and accelerate the development of CEZs.

Special emphasis has been laid on increasing the coastal tonnage of cargo, which has increased by almost 85 per cent in the past two years in response to measures taken by the government. The other step taken by the government is the issuance of coastal shipping rules for coastal vessels operating within a distance of 20 miles off the coast, exemption from customs and central excise duty on bunker fuels (IFO 180 and IFO 380 CST) carried by Indian flag coastal vessels, the simplification of customs procedures and an increase in discounts by major ports in port-related charges for general cargo vessels (to 40 per cent) and for roll-on, roll-off (ro-ro) vessels (80 per cent).

Critical factors to success

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. Factors critical in ensuring the successful adoption of the coastal shipping concept are that it must facilitate cargo movement at a minimum cost, and that there be requisite infrastructure development for fast evacuation from the major and non-major ports, an improvement in operational efficiency at the existing ports, and the setting up of dedicated infrastructure facilities for coastal vessels, among others.

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 transport infrastructure. In a base case scenario (where GDP growth is expected to be 7.5-8 per cent), the country has the potential to increase its coastal cargo to approximately 320 million tonnes. With the aim of increasing coastal movement of cargo, special economic zones (SEZs) are being developed in close proximity to several ports, thereby providing a strategic advantage to the industries within these zones. At present, the development of SEZs in Mundra, Krishnapatnam, Rewas, etc. is under way.

Going forward, while the share of containerised cargo has been growing at a steady pace in coastal shipping, there is a need to promote the movement of other types of cargo such as ro-ro, break bulk, coal, steel and fertilisers through coastal shipping as well. Ro-ro movements to meet the demand across the country along with other general cargo could provide the incremental volumes needed to make coastal movement viable.

The future of the Indian port sector, especially of non-major ports, hinges significantly on coastal movement of cargo and increasing the share of IWT. The government needs to encourage public-private partnership models for infrastructure development at ports and rivers to improve connectivity and promote coastal movement.

Based on a presentation by Sangeeta Sharma, Director, Liner & Passenger Services, Shipping Corporation of India, at a recent India Infrastructure conference