Indian Coastal Shipping – An Untapped & Under-utilized Opportunity

• Tyagi

India is blessed with a long coastline of 7500 kms and 14,000 kms of navigable rivers. India is one of the fastest growing economies of the world.

To sustain this economic growth & maintain the momentum, it is critical for India to keep logistics cost under control. Logistics cost in India presently is 16% of GDP whereas for developed economies it is 8-10%. Ocean haulage is the cheapest mode of transport as compared to road and rail. Coastal shipping involves the transportation of goods along the coast over relatively short distances. In India share of Coastal Shipping is barely 6-7%. 60 % of the freight is transported through the roads, 31% by rail, as compared to international benchmark of 25-30% road; 50-55% railways, 20-25% share of waterways.

The Indian coastline is underutilised for coastal shipping despite several Govt. Initiatives. Reasons cited have been various and includes limited back haul opportunities, multiple handling, last mile logistical challenge, policy regulations etc.

Govt. of India is committed to increasing the Coastal Shipping from 6-7% to 12 -14% by 2025. To support this commitment, Govt. has introduced initiatives and incentives to promote Coastal Shipping in India.

Assuming above impediments are addressed in a progressive manner, Coastal shipping will drive significant economic benefits by not only removing supply chain bottlenecks ensuring smooth flow of traffic but also help in the full utilisation of minor ports on the coast.

The cost advantages of coastal shipping particularly for the movement of cargo in bulk will reduce India’s reliance on imported fuel while also supporting the ambitious GHG emission targets through a greener & cleaner mode of transport as compared to road and rail.CO2 emission is the highest through road transport.

Increasing Coastal shipping will require faster turnaround in ports, custom made coastal vessels like the RSP 4 or better with good speed and consumption, optimum port costs etc.as it has to compete with road transportation with respect to time and cost.

As these benefits kick in, the rate of returns on assets deployed will significantly improve. The bottom-line improvement will drive top-line revenue. This in turn will attract more volume over the coastal mode assisting all supply chain partners & stakeholders save costs within their respective domain.

There are numerous infrastructural, Statutory and Operational challenges for converting cargoes from road and rail mode to coastal mode. Road and rail connectivity needs to be scaled up to ensure seamless transition. Various facilities in minor ports like storage, stacking areas, clearing facilities will need a make-over which would boost customer confidence. Other barriers hindering the development include the complex taxation, custom duty on ship fuel to be paid by ship owners /operators etc.

The advantage of Coastal shipping far outweighs the efforts needed to build the regulatory & infrastructure framework. There is going to be huge cost savings for all parties involved. Operational efficiencies will drive service excellence with more consistent and reliable transit times. The net outcome would be taking trucks off the road which reduces the congestion & spend needed to maintain road infrastructure. A huge decrease in air pollution leading to a positive carbon footprint with less pilferage & theft.

Coastal shipping is ideal for Project Cargoes, RORO & variety of dry bulk cargo such as coal, grain, fertilizers, steel, metals and minerals. Liquid bulk cargo such as crude,

Diesel and other fuel-based products only stand to benefit from this modal.

Coastal shipping checks all boxes from financial & environmental perspective.

Key Govt Initiatives:

* Project Unnati

– Over 116 Initiatives of which 95 have been implemented as of 2021 and 12 are under implementation. This includes several infrastructure improvements measures to operational efficiency. New policies that encourage public/ private partnership to enhance connectivity with Hinterland market

* Sagarmala Initiatives

– This includes over 114 road and 23 rail connectivity projects. There are also 111 national waterway projects that has been identified for development. Building economiczones that could converted into key

manufacturing hubs could span 300-500 Kms ofthe coastline. Paradip & Haldia have been identified to be developed as 2 smart Industrial port cities.

*Financial Initiatives

–              A robust financial incentive policy that provides 10-year tax holiday for enterprises that develop, maintain, and operate ports and inland waterways. Subsidising berth hire costs for coastal vessels & providing relief on pilotage & port dues along with Cabotage relaxation enables a focused approach to create enough stimulus for this segment.

High level Challenges:

*Infrastructure~

• Major consumption and cargo generating centres are not near the port
• Inadequate last mile connectivity
• Poor Connectivity between coastal areas and hinterland

*Regulatory~

• High Bunker Prices
• Complex Taxation
• Cabotage Law
• Trade structure not duty friendly

*Operational~

• High Port Costs
• Lack of bunkering facilities
• Congestion

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