In recent years, the coastal shipping segment has been a focus area of the government and has been identified as one of the priority areas for growth in the port sector. Major policy initiatives such as cabotage relaxation for fertilisers, containers and agricultural commodities, extension of the Coastal Berth Scheme (CBS), etc., taken during the past year bode well for the sector.
Trends and developments
As per the latest estimates available, during 2017-18, of the total traffic handled at Indian ports, coastal traffic accounted for about 233.51 million tonnes (mt) and grew at a compound annual growth rate (CAGR) of 10.33 per cent between 2013-14 and 2017-18. Of the total coastal traffic in 2017-18, 155.05 mt was handled at the major ports, while the remaining 78.46 mt was handled at non-major ports.
There has been an interesting trend in coastal traffic growth with non-major ports surpassing the major ports. Over the five-year period 2013-14 to 2017-18, coastal traffic at the major ports grew at a CAGR of 7.87 per cent, while that at non-major ports grew at 16.18 per cent. Of the total traffic handled at the major ports, Paradip handled the maximum coastal traffic in 2017-18 at 31.57 mt (20.36 per cent), followed by the Mumbai and Kamarajar ports, handling around 28.93 mt (18.69 per cent) and 18.52 mt (11.94 per cent) respectively.
With regard to non-major ports, Gujarat handled the maximum coastal traffic in 2017-18, accounting for a share of 54.11 per cent in the total coastal traffic at non-major ports. It was distantly followed by Maharashtra with a share of 22.87 per cent.
In terms of coastal fleet, as of April 30, 2019, the Indian shipping industry had a fleet of 1,409 vessels of 12.79 million gross tonnage and 19.39 million deadweight tonnage (DWT).
The entry of the Container Corporation of India (Concor) into coastal shipping marked an important development for the segment. On January 10, 2019, Concor flagged off the maiden coastal voyage of SSL Mumbai from Deendayal port. Following this, India Gateway Terminal Private Limited (IGTPL) received the maiden call of Concor’s new coastal service. The maiden call was marked by the berthing of the vessel, MV SSL Mumbai. The weekly service commenced operations at IGTPL with effect from January 15, 2019. In August 2018, Avana Logistek initiated its first coastal container service at Kakinada port. Meanwhile, in June 2018, TCI Seaways launched a new vessel, MV TCI Express, with a capacity of 770 containers of 30 tonnes each, for coastal trade from Mundra. Earlier, in March 2018, it had acquired a new vessel of 26,262 DWT and a capacity of 766 containers.
Key policy initiatives
There has been a renewed focus on the coastal shipping segment in the past three-four years, and that too, on a much larger scale. The government has been providing financial assistance to the ports for construction of dedicated coastal berths through the CBS under the Sagarmala programme. In order to equip ports for coastal cargo movement, the period of the CBS has been extended from April 1, 2017 to March 31, 2020 and its scope has also been widened.
Besides Sagarmala, the government has been taking various initiatives to encourage a modal shift of cargo movement from road/rail to coastal waters. These include a discount of 40 per cent on port/vessel-related charges for coastal vessels at the major ports, a discount of 80 per cent for a period of two years on vessel- and cargo-related charges for coastal roll-on, roll-off (ro-ro) vessels and the provision of green channel clearance for coastal cargo from existing berths. On the taxation front, a duty exemption has been put in place for Indian flag container vessels and the goods and services tax levied on bunker fuels has been reduced from 18 per cent to 5 per cent.
In May 2018, the Ministry of Shipping (MoS) allowed relaxation under Section 407 of the Merchant Shipping Act, 1958, for coastal movement of exim transshipment containers and empty containers. It has allowed foreign-flag container ships to carry exim-laden containers for transshipment and empty containers for re-positioning on local routes without a licence or other conditions. In September 2018, the MoS further eased the conditions for foreign flag vessels to carry fertiliser cargo along the coast. Recently, in June 2019, the Department of Fertilisers approved a policy for reimbursement of freight subsidy for transportation of fertilisers through the coastal shipping route.
At present, coastal shipping of cargo is largely restricted to the transportation of thermal coal, iron ore, and petroleum, oil and lubricants. However, going forward, there exist significant opportunities to transport commodities such as cotton, tiles, sugar, cement and automobiles through this mode. In a base-case scenario (where GDP growth is 7.5-8 per cent), India has the potential to increase its coastal cargo to approximately 343 mt by 2024-25. There is a need to generate two-way traffic and enhance the cost-effectiveness of the multimodal route.
Undoubtedly, coastal shipping has received the much-needed attention from the government, especially recently; however, substantial progress on the ground is yet to be seen.