Coastal and inland waterway transportation (IWT) is an energy efficient and eco-friendly means of transport that also helps reduce the cost of domestic freight movement. However, despite its long coastline of 7,500 km, the share of coastal and inland waterways in India’s freight modal mix stands at a modest 6 per cent. This highlights the huge potential for coastal shipping and inland waterways in India. To this end, the government has undertaken various measures to give a fillip to coastal and inland waterway cargo movement. In fact, the promotion of this segment is one of the key priorities of the Ministry of Ports, Shipping and Waterways under the Sagarmala programme.
Growth in coastal and inland waterways traffic
Cargo movement on the national waterways (NWs) has witnessed an increase in recent years, from 72.3 million tonnes (mt) in 2018-19 to 108.79 mt in 2021-22. There was a steep increase in traffic movement in 2021-22 at 30.12 per cent, compared to 13.54 per cent in 2020-21 and 1.8 per cent in 2019-20. In 2022-23, during the April-February period, cargo movement stood at 113.98 mt, 18.4 per cent higher than that in the corresponding period of 2021-22 (96.31 mt).
With the implementation of the Sagarmala programme, the share of coastal cargo in the total cargo handled increased from 16.34 per cent in 2014-15 at the start of the programme to 19.73 per cent in 2021-22. Owing to the various initiatives taken by the government, coastal traffic at Indian ports increased at a compound annual growth rate of 8.92 per cent from 2015-16 to 2019-20, compared to 2.83 per cent during 2011-12 to 2015-16. Coastal traffic witnessed a considerable increase of 14.7 per cent in 2021-22 (as compared to 2020-21) to reach 260.27 mt. During the April-January period of 2022-23, coastal traffic stood at 245.41 mt, 16.7 per cent higher than that in the corresponding period of 2021-22 (210.28 mt).
Initiatives taken to promote development
With the aim of continuing the pace of coastal shipping and enabling further growth of coastal trade, a perspective plan up to 2025 for the development of coastal shipping in India has been prepared by the Asian Development Bank. To encourage a modal shift, coastal vessels are being provided a discount of 40 per cent on port charges over foreign-going vessels. Other measures to boost coastal shipping include initiatives such as reduction of the goods and services tax on bunker fuel from 18 per cent to 5 per cent, cabotage relaxation for cargo vessels, integration of inland and coastal cargo, subsidy support to Indian shipping companies, green channel clearance for coastal cargoes and priority berthing for coastal vessels at major ports. These were notified to reduce turnaround time for coastal vessels and improve their utilisation. A licensing relaxation has also been issued for foreign flag vessels on carrying transshipment containers; empty containers; fertilisers; and agricultural, fishery, animal husbandry and horticultural commodities along coastal routes.
Various upgradation and modernisation projects have also been undertaken to promote coastal shipping. In November 2022, the Jawaharlal Nehru Port Authority and JM Baxi Port and Logistics Limited signed a concession agreement for the expansion of the shallow water berth and coastal berth projects at the Jawaharlal Nehru Port Trust.
The Government of India is aiding the construction or upgradation of exclusive coastal berths, platforms or jetties; mechanisation of coastal berths; and capital dredging. Five dedicated coastal berths have already been constructed at various ports, and another six are under development at several other ports. Financial assistance of up to 50 per cent of the total project cost or the maximum funding limit may be provided to the implementing agency for the creation of infrastructure to promote the movement of cargo/passengers by sea/NWs.
With the initiation of PM Gati Shakti and the National Logistics Portal, coastal shipping will get the additional boost it needs. This will help in realising the goal of bringing down the overall logistics costs. Meanwhile, in Union Budget 2023-24, the government has unveiled plans to deploy public-private partnerships and viability gap funding to promote coastal shipping.
According to the Economic Survey of India 2022-23, the inland waterways network spans close to 14,850 km, across rivers, channels, backwaters and creeks. The government aims to develop NWs in a bid to cut logistics costs, make Indian industry competitive, and develop the country’s inland waterways as a viable, thriving mode of transport, especially for cargo. According to the Inland Waterways Authority of India, a number of initiatives have been taken to complete the Five-Year Vision and develop a self-sustainable, economical, safe and environment-friendly supplementary mode of transport for the overall economic growth of the country. The key initiatives include increasing the modal share of inland waterways in freight movement from 2 per cent to 2.5 per cent, developing 5,000 km of IWT routes across states, integrating IWT with coastal shipping, and enhancing regional connectivity through the Eastern Waterway Connectivity Transport Grid. With the approval of a project for the development of NW-2, the development of Pandu port as a hub of inland shipping in the Northeast is also being initiated.
To promote IWT in the country, 111 inland waterways spread across 24 states have been declared as NWs under the National Waterway Act, 2016. Development work has commenced on 14 NWs that have been found feasible for cargo and passenger movement. The marquee initiative in this regard is the Jal Marg Vikas Project (JMVP) for navigation capacity augmentation of NW-1, which is being implemented at a cost of Rs 53.69 billion ($800 million) with technical assistance and funding support from the World Bank. Construction work on multimodal terminals at Varanasi and Sahibganj have been completed under the JMVP for navigation capacity augmentation of NW-1 from Varanasi to Haldia. As of January 2023, about 99.6 per cent of the work on the Haldia multimodal terminal, and 96 per cent of the work on the Navigational Lock at Farakka has been completed. The project is expected to be completed by December 2023.
Other initiatives to boost IWT development include extension of the Tonnage Tax Scheme to inland vessels in order to attract private investment. The newly launched Least Available Depth Information System provides real-time information on the least available depths at the waterways. Meanwhile, the central sector scheme for the development of inland waterways in the north-eastern states, including Sikkim, provides 100 per cent financial assistance for the improvement of connectivity to the north-eastern states.
Another important development was the introduction of the Inland Vessels Bill, 2021, which replaced the over 100-year-old Inland Vessels Act, 1917. Various sections of this act came into force in the year 2022, to support improved navigation, connectivity, operations and management. The act aims to bring uniformity in laws and regulations relating to inland waterways, and will promote IWT as a potential mode of transport for large-scale movement of cargo as well as passengers across the country, owing to its relative cost effectiveness. In April 2022, the Indian Register of Ships drafted a new set of rules for the construction and classification of inland waterway ships, to ensure the safety of cargo, vessels and the environment.
Further, the Indo-Bangladesh Protocol route was developed to allow inland vessels of one country to transit through specified routes of the other. The second addendum to the Protocol for Inland Water Trade and Transit was signed between India and Bangladesh in 2020. Through this addendum, five ports of call and two extended ports of call have been added on each side: Dhulian, Maia, Kolaghat, Sonamura and Jogigopha on the Indian side, and Rajshahi, Sultanganj, Chilmari, Daudkandi and Bahadurabad on the Bangladesh side. International agreements have also been signed with Nepal, Bhutan and Myanmar for the use of waterways for the transportation of goods.
The full potential of reducing logistics costs through the use of inland waterways and coastal shipping is yet to be realised. Under the Maritime Vision 2030, a target of 200 mt of cargo movement on NWs by 2030 has been fixed. In order to achieve this, another target of 120 mt has been set for 2024-25. Going forward, both segments have a positive outlook owing to the stream of government initiatives and programmes, and will present various opportunities for stakeholders.