Recent Resurgence: Coastal shipping picks up pace

Coastal shipping picks up pace

Coastal shipping has started making strides during the past few years, primarily due to greater attention from all quarters. A series of initiatives such as the construction of dedicated coastal berths, the expansion of the Coastal Berth Scheme and the reduction in taxes on bunker fuel have been taken to promote coastal traffic in the country.

As per the latest estimates available, during 2016-17, of the total traffic handled at Indian ports, coastal traffic accounted for about 201 million tonnes (mt) and grew at a compound annual growth rate (CAGR) of 5.3 per cent between 2012-13 and 2016-17. Of the total coastal traffic, 135 mt was handled at major ports, while the remaining 66 mt was handled at non-major ports. Petroleum, oil and lubricants and thermal coal together accounted for around 68 per cent of the total coastal traffic handled at major ports in 2016-17.

Over the five years 2012-13 to 2016-17, coastal traffic at major ports grew at a CAGR of 5.42 per cent, while traffic at non-major ports grew at 5.06 per cent. Of the total traffic handled at non-major ports, Gujarat handled the maximum coastal traffic in 2016-17 at 38.48 mt. Andhra Pradesh was a distant second, handling 12.29 mt of coastal traffic in 2016-17, while Maharashtra was next, handling around 9.59 mt in the same year.

In terms of infrastructure, as of May 31, 2018, the Indian shipping industry had a fleet of 934 coastal vessels with a tonnage of 1.48 million gross tonnage and 1.62 million deadweight tonnage (DWT).

A series of initiatives

The Ministry of Shipping (MoS) has taken several initiatives to increase the share of coastal traffic in the overall cargo. Recently, in May 2018, the MoS allowed relaxation under Section 407 of the Merchant Shipping Act, 1958, for coastal movement of export-import (exim) transshipment containers and empty containers, meeting the long-pending demand of the industry. Under the act, foreign flag ships are permitted to carry exim-laden containers for transshipment and empty containers for repositioning on local routes without a licence or other conditions.

In order to equip ports for coastal cargo movement, the period of the Coastal Berth Scheme has been extended from April 1, 2017 to March 31, 2020 and its scope has also been expanded. The MoS has taken up projects worth Rs 23.02 billion under the scheme. The most recent recipients of funds under the scheme are the Jawaharlal Nehru Port Trust and the Karnataka government which received funds worth Rs 250 million and Rs 500 million, respectively, as grants-in-aid.

Other reforms include a reduction in the goods and services tax on bunker fuel from 18 per cent to 5 per cent in October 2017, a proposal for the development of 2,000 km of coastal roads to improve hinterland connectivity in Union Budget 2018.

To meet the growing demand for cargo movement through coastal shipping, key shipping players acquired new coastal vessels in the past year. Apeejay Shipping acquired a Japanese Panamax vessel, while TCI Seaways acquired a new coastal vessel with a DWT of 13,760 tonnes. Besides, new coastal services were also launched. In October 2017, Ashok Leyland started using coastal shipping services to export its commercial vehicles to Bangladesh. Earlier, in July 2017, a weekly service between Mundra and Tuticorin was initiated by TCI Seaways and Dakshin Bharat Gateway Terminal.

Besides, in November 2017, the government approved the setting up of the country’s first mega coastal economic zone at the Jawaharlal Nehru Port Trust in Maharashtra.

The way forward

Despite concerted efforts, issues still remain that impede the sector from reaching its full potential. These issues include the lack of suitable infrastructure to enable movement through coastal shipping; and a lack of multimodal transport to provide hinterland connectivity as coastal shipping is just one leg in the entire multimodal transport chain that must necessarily include land modes.

Further, there is no separate tariff for coastal vessels at the port and the rate is linked with the foreign-going (FG) vessel rate. The rate of coastal vessels moves directly with the tariff rates for FG vessels. Further, according to 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 a part of their fund for coastal and inland vessels.

From the shipping operators’ point of view, one-way traffic and empty load returns are the major concern areas, especially since even if return cargo is available, it may not match the parcel size.

Though the uptake of coastal shipping has been limited so far, there has been a turnaround following a series of policy and regulatory initiatives. There exist immense opportunities for transportation of commodities like cotton, automobiles, etc. that were historically transported through bulk, break bulk, road or rail. Moreover, much needs to be done to expand the cargo base, generate two-way traffic and create a multimodal supply chain, to help the sector reach its full potential.