Scope for Growth

Coastal shipping and inland waterways offer significant opportunities

Coastal areas are a major channel for do­mestic as well as global trade, and giv­en that shipping and the economy are closely linked, an impact in one is clearly visible in the other. Coastal shipping is expected to play a key role in the anticipated growth of the Indian economy. At a recent conference, H.K. Joshi, Chairman and Managing Director, Ship­ping Corporation of India, talked about the opp­ortunities in coastal shipping. Excerpts…

Current scenario

Infrastructure underpins economic growth and development as there is a strong correlation between the two. Transportation and Logistics Infrastructure along with other infrastructure together serve as foundation for economic gro­wth and development. According to an over­view of India’s logistics sector, it is worth over $200 billion and is predicted to increase at a compound annual growth rate (CAGR) of more than 10 per cent to more than $300 billion by 2025. The uneven logistics modal mix is dominated by roads, which handle about 60-65 per cent of India’s freight movement, followed by rail­ways (around 30 per cent), waterways (arou­nd 6 per cent) and air (1-2 per cent). With Wa­terways being underutilised, there is an im­m­ense potential for multimodal logistics in India. Sagarmala targets to double the waterways share in the modal mix from 6 per cent to 12 per cent by 2025.

Comparing the logistics cost in India with that in the developed economies, it is observed that, India’s logistics cost at 14 per cent, is significantly higher than that in developed eco­nomies such as Germany (8 per cent), the US (9 per cent), Japan (11 per cent), France and Korea (both 12 per cent). Lower use of Coastal Ship­ping and Waterways is one of the primary reasons for higher logistic costs in India. In comparison to India, all the developed countries with low logistics costs have a much higher contribution from waterways in their multimodal mix. Even our neighbouring countries like Bangla­desh and China, for example, transport 16 per cent and 24 per cent of freight by coastal waterways, respectively, while India carries about 6 per cent only. In comparison to India, all the developed countries with low logistics costs have a much higher contribution from water­ways in their multimodal mix. As the country develops multimodal capabilities and dec­reases congestion on roads and railways, the Indian government must work on strengthening coastal transportation and decreasing logistics costs. It is estimated that a 0.5 per cent dec­rease in logistics costs can lead to a 2 per cent increase in trade and a 40 per cent increase in the range of products that are exported from the country. The government and industry are aware of the issues and are certainly moving in the right direction. There have been notable accomplishments recently such as world maritime history record of flagging-off of All-Women officers coastal sailing of SCI’s MT Swarna Krishna last year between JNPT and Vadinar boosting progressive initiatives like Diversity & Inclusion too in addition to coastal shipping. Gujarat Port and the Logistics Company Limited, a joint venture of Gujarat Maritime Board and Gujarat State Fertilisers and Chemicals Limited, has approved a proposal from Sea Coast Shipping Services Limited to increase coastal waterway cargo movement from minor to major ports.

Waterways are the most fuel-efficient and cost-effective mode of transport. Various estimates suggests that Waterways cost around Rs 1.1 – 1.2, railways cost Rs 1.2 – 1.5 and roadways cost Rs 2-3 to transport 1 tonne of freight over 1 km. Multimodal shift to waterways, utilizing 7,500 km of coastline and 14,000 km of inland water ways can lead to lower transportation costs, environmental impact and economic growth of the na­ti­on. Towards this vision & Gov­er­nment’s efforts to operatio­nalise the waterways, the Ship­ping Corporation of India through its fully owned subsidiary Inland & Coastal Shipping Limited is operating liner service between Kolkata/Haldia & Varanasi on National Waterways-1.

Challenges resulting in high shipping costs

One of the key issues, coupled with a high cost of doing business, is limited modal shift, which is followed by high cargo dwell time and vast hinterland distances. Some of the challenges in implementing coastal shipping are first- and last-mile connectivity quality and cost, because industrial clusters are dispersed throughout the hinterland, underdeveloped multimodal infrastructure, multiple loading and offloading points instead of a seamless end-to-end service, one-way container cargo due to lack of return cargo, tonnage and equipment unavailability, lack of dedicated coastal infrastructure at all ports, and capital-intensive financing. If port terminal and connectivity infrastructure is developed and well established, coastal clusters can score higher on “availability and quality of infrastructure” and perform better on economic indicators.

Coastal fleet profile of Indian tonnage

During financial year 2020-21, cargo handled at major ports was 22 per cent coastal and 78 per cent overseas, while cargo handled at non-major ports was 16 per cent coastal and 84 per cent overseas. In terms of coastal cargo handled in financial year 2020-21, Paradip port remains the leader among the Major Por­ts. In terms of fleet profile, around 69 per cent of the total number of vessels under Indian tonnage are deployed on Coastal Trade as against 31 per cent on Overseas Trade. In terms of deadweight tonnage (DWT), Coastal shipping accounts for only 9 per cent of Indian tonnage by deadweight tonnage (DWT) while international shipping accounts for 91 per cent. Data shows that the number of coastal vessels has increased significantly over the years, with 1,026 vessels having DWT of 1.7 million registered on the coastal trade as of November 31, 2021, out of a total of 1,487 Indian tonnage ve­ss­els with DWT of 19.5 million. Around 45 per cent of the total coastal fleet is over 20 years old, with another 10 per cent aged between 16 years and 20 years. Coastal shipping in India can benefit significantly from a younger fleet of Indian tonnage.

Initiatives to promote coastal shipping

Various infrastructure measures, such as increasing coastal tonnage, building coastal berths and enhancing connection and synergy between major and non-major ports, are being taken to harness the potential of coastal shipping. On the strategy front, integration of inland waterways with coastal traffic, connectivity and coastal integration of NW-1 and NW-2 through the India-Bangladesh Protocol route, policy additions to support coastal shipping, availability of shore-to-ship electricity to coastal vessels as well as a roadmap to run coastal vessels on clean energy to make India’s maritime industry and logistics sector dynamic and competitive vis-à-vis developed nations, must be focused on simultaneously.

Future outlook for coastal shipping in India

India intends to accomplish net zero transmission by 2070, eliminate 1 billion tonnes of carbon emissions from total projected emissions by 2030, lower the economy’s carbon intensity to 45 per cent by 2030, and fulfil 50 per cent of its energy needs with renewables by 2030. Waterways, as the most fuel-efficient mode of transportation, plays a critical role in India’s ambitious sustainability goals.

By financial year 2030, the overall volume of cargo traffic at ports is expected to expand by 1.7 to 2 times. Coastal cargo has enormous development potential since it is predicted to account for 65-70 per cent of the total transportation movement by 2030. Special economic zones and industrial clusters are being developed around several ports. India is the world’s third largest energy consumer and its energy demand is expected to grow at the fastest rate of any country until 2040. Coastal shipping can become a significant leg in EXIM shipping if it is smoothly connected with inland waterways and multimodal connections. Coas­tal ports can also serve as gateways for landlocked neighbouring ports, making trade and business possible. Remarkably, the CAGR has been increasing for the past five years. Coas­tal shipping in Indian ports has the potential to expand to 380 million tonnes per annum by 2030. The hinterland is served by coastal trade. In addition to enhancing domestic connection and trade, coastal shipping is augme­nting inland waterways and multimodal connectivity to improve connectivity and trade with neighbouring countries.

Conclusion

Coastal shipping plays a critical role in the economy’s competitiveness, expansion and long-term sustainability. The shipping industry is ex­pected to grow at a robust pace. To take advantage of the potential of coastal shipping, a complete coastal logistics ecosystem must be established, including seamless multimodal connectivity, first- and last-mile connectivity, warehousing, integrated waterways, technology and hu­man resources There is a need for a level-playing field for coastal Shi­pping & Water­ways in terms of investments and other resour­ces compared to those deployed for the development of other modes of Transport.  Several multimodal projects and initiatives covering various paradigms of infrastructure, strategy, commercial, policy, regulatory and public-priva­te partnerships are being developed and need to be strengthened further to boost coastal shipping. The need of the hour is to create an integrated, holistic and progressive strategy for the growth of coastal shipping.

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