Coastal shipping has very obvious advantages over all other modes when it comes to costs. However Coastal shipping has not had a smooth sailing so far. The Government has announced a plethora of incentives and policies to promote coastal shipping. But these have not translated to realities on the ground.
Coastal shipping was started almost a decade back amidst lot of fanfare and expectations to reduce logistics cost and move significant volume of cargo off the road. A number of schemes were announced by the government to ease coastal shipping into the mainstream, such as dedicated coastal berths, priority berthing, subsidies etc. But still the sector has not been able to pick up steam.
Road and railways still carry 60 per cent and 25 per cent of the total cargo respectively. Coastal shipping, oil and gas pipelines and Inland waterways carry the rest. POL (Petroleum, Oil, & Lubricants) and iron ore constitute 85 per cent of the overall coastal movement. The total freight transported through coastal shipping in the country during the last three years has been growing very slowly.
So why is coastal shipping not growing? What ails the industry? Have the schemes/incentives announced by the government translated to the stakeholders? Is the infrastructure in place? Let’s look at these questions one by one.
For coastal volumes to be viable there has to be consistency in large volumes, says Capt. Vivek Kumar Singh, Executive Director and CEO. “A major problem in the sector is the lack of return cargo. Ships cannot afford to remain idle. While there is no difficulty with trying to encourage new startups of cruise and car carriers, the traditional cargo carriers such as mini bulk vessels or container vessels which are actually engaged in movement of coastal cargo receive no support or encouragement.”
Coastal shipping in the east coast of India has not progressed as compared to the west coast due to paucity of industrialized centers there. Most of the industrial activity in India is not contiguous but concentrated in sporadic areas such as Gujarat, Maharashtra, Tamil Nadu and Andhra Pradesh. From the eastern part of India barring Tamil Nadu, there is no return cargo. Finished products aren’t many in the eastern sector. Thus far the eastern sector had tended to lag behind with the rest of the country.
That being said, GST has brought about a correction of coastal movement in east India. Anil Devli, CEO, Indian National Shipowners’ Association, (INSA) said that the cargo is not growing per se, as economic activity is at a steady state rate. But in fact, containerisation is increasing. Removal of GST on bunker fuel for Indian vessels led to an increase of 97 per cent in tonnage of Indian flag container fleet. Thanks to this and better freight rates offered by Indian vessels, containerised cargo that was being diverted to Colombo, Tanjung Pelepas and Singapore from the East Coast of India is now getting transhipped at ports such as Krishnapatnam and Vizag. This in reality is the cause for greater visibility to cargo on the East Coast of India.
Gujarat – A role model Gujarat effectively uses its ports for coastal shipping and can be a role model for other states. In spite of the fact that most ports in Gujarat have vast tidal ranges, it has used its coast for both captive and commercial coastal movement. The success of Morbi (the ceramic town in Gujarat) could in part be attributed to the movement of these heavy cargo through an efficient mechanism in coastal waters. Ceramics as a cargo is heavy and fragile. Transporting them by road across the country would not only be expensive but also susceptible to damages through knocks and jerks during road transit.
Priority berthing
Even though the government has announced priority berthing for coastal shipping, but it still does not reflect in the ground reality. Anil Devli said even before we go into infrastructure improvement, which is a long shot, what is important is that the current infrastructure be made available to coastal cargo with the same zeal that it is presented to EXIM cargo. For example, there have been reports of Indian vessels not being able to find berthing slots since they are carrying coastal cargo and are not a priority for the port. The facilities provided and the cost of providing the same need to be mapped to the reality of revenues earned by the coastal ship owner. The prohibitive cost of rendering such port services, ensures failure of a coastal service on paper itself.
The government has announced priority berthing for coastal ships but still it is not seen fully implemented at many ports. For instance, a service provider sailing from Chennai to Port Blair has to wait for 2 to 3 days to berth. What will happen when business increases, he asked? “Systems are not in place. Cargo loading is so slow. Harbour tugs provided by the government would be idling, whereas the private tugs would be operating,” he said. “As much as six government tugs would be idling for one reason or the other. Our systems are redundant. There is lax working culture at the ports.” He maintains that it’s not that the port authorities are unaware of it. “You don’t face this problem in Mundra or in Pipavav. Small shipping lines operating in the coastal region cannot afford to have their turnaround time increased by these petty issues.”
Infrastructure development
The Coastal Berth Scheme under Sagarmala aims to create infrastructure for the movement of coastal cargo and passengers. Financial assistance would be provided to major and nonmajor ports and state governments. The importance of the Coastal Berth Scheme can be gauged by the government’s intention not just to extend the period of the scheme beyond the 12th Five Year Plan, but also enlarge to cover the cost of preparation of Detailed Project Report and capital dredging at major ports.
But industry leaders say that infrastructure development has become difficult as the rules have been made more stringent and mostly favour the government. Coastal shipping requires smaller vessels that can be brought at a lower cost. Small ports/jetties with 3 to 4 metres draft can be used for moving coastal cargo. Further the incentives and bouquets are only for the start-ups. The new cruise vessels which are coming into India are getting huge discounts in terms of vessel related charges, so are the one or two car carriers running coastal services.
High servicing cost
Cargo vessels find it difficult to compete with road and rail costs due to various problems. For example, carrying out a small servicing of an equipment at an Indian port costs about `1.0 lakh. The same service can be obtained at Colombo for about `40,000. Another example is sign-on and sign-off cost that small Indian flag operators spend in terms of pay offs at port gates. There are so many such hidden costs adding to the cost of operations. Further port charges in India are amongst the highest in the world; Cost of capital paid by shipowners is amongst the highest in the world – all of this adds to cost.
Cabotage
The subject of coastal shipping cannot be discussed without bringing up the contentious subject of cabotage cabotage. This is the right of Indian ships to carry cargo on the national coast by paying local taxes and employing Indian seafarers. Currently only ships registered in India can provide their services on the coastal shipping route.
To cede or not to cede has been the vexing question for the Government. When US, China and other countries are fiercely guarding their turf, should India cede its coastal waters to foreign lines? Would cabotage relaxation give an impetus to coastal shipping? Easing cabotage would bring in expensive and specialised vessels to Indian coasts, which are financially beyond the scope of many Indian ship owners. These vessels would no doubt improve the quality of coastal shipping.
However Devli does not mince words. He said, “The fact of the matter is that foreign shipping companies want to carry Indian cargo and earn revenues, but not invest in the Indian flag and economy. It is our view that foreign lines should invest in the Indian flag and carry Indian cargo.” He said that he was unable to understand how question can be put to them, suggesting models of business which permit generating revenues from Indian cargo, but not investing in India? “To such proposition, he continued, is it your case, that foreign shipping companies should not be flagging in India, should not be paying taxes in India, should not be employing Indian seafarers etc. and yet have the benefit of carrying Indian cargo? If that be the case, then it certainly ruffles my feathers.”
It is a catch 22 situation. The resolution would be to seek a balanced solution; the Indian government reportedly plans to seek a relaxation of the Cabotage rules whilst avoiding undue hardship to the Indian shipping sector, possibly by providing tax incentives to them.
Lack of coordination among ministries
For exploiting coastal opportunities the different ministries also need to work in tandem, but this is not exactly happening. Ministry of shipping and Rail recently came together and conceived a project for multimodal transportation of coal from rail to a combination of rail and sea which involved movement of coal from the mines in Odisha to the nearest port and then by sea to Andhra Pradesh. It was found that coupling rail with sea was cheaper than transporting coal by rail alone to Andhra Pradesh. However, before the project could be consummated the railways went ahead and reduced the rail freight thereby defeating the whole project. This lack of coordination lies at the heart of the sluggish growth of the Indian coastal shipping.
Incentives
To promote modal shift of cargo to coastal shipping the government had announced several incentives:
- Transportation of bulk and breakbulk cargo including fertilisers, foodgrains, marbles, tiles, sugar, edible salt and ODC cargo is eligible for an incentive of `1 per tonne per nautical mile up to a maximum of 1,500 nautical miles in each trip.
- (ii) Full Container Load movement of any commodity is eligible for an incentive of `3,000/- per teu. Transportation of commodity through forty feet or other larger sized containers shall be incentivized based on number of times the said container size can be converted into TEUs.
- (iii) Ro-Ro movement is eligible for incentives of `300 per two-wheeler, `600 per three-wheeler and `3,000 for other vehicles However, industry leaders are of the opinion that not all incentives are percolating down to the shippers.
Global scenario The coastal movement in other nations is significantly higher. Europe, China and Japan are at 20 per cent, 30 per cent and 40 per cent respectively. There are additional schemes to bring more commodities to coastal shipping. The Marco Polo scheme of the EU is geared to eliminate 20 billion tonnekm of traffic from the roads annually. China aims to convert one billion tonnes of coal, steel, grains and fertilizers to coastal movement.
In Japan big industries have their own private jetties capable of handling multiple cargoes. A Master Mariner once discharged iron ore in Japan. They then went out to the anchorage, cleaned the holds and came back to the same berth to load the finished products. Japan has 292 ports.
Conclusion
Much work lies ahead. Awareness of the importance of coastal shipping need to be promoted. As in any new project there would be general inertia to switch from the traditional mode to coastal shipping. Potential areas of growth, volume of cargo for coastal shipping need to be identified. Return shipments is what makes coastal shipping profitable. As far as possible integrate coastal and Inland Water Transport wherever possible and promote Rail-Sea-Rail route. Coastal shipping does involve multiple handling. But as Devli clarifies, “In a true multimodal transport, there is no option to multiple handling. What needs to be done is to bring in efficiencies and reduce costs.”
“We are committed to Coastal shipping”
Providing door-to-door and port-to-port service, Shreyas Shipping is making steady investment to serve the growth in market.
Q Shreyas is two decades into coastal shipping in India. And your investments in this sector have been steady and consistent. Why did you choose to go into coastal shipping?
Shreyas shipping is part of the 40-year old global conglomerate Transworld Group with experience of owning and operating container ships. Shreyas shipping and logistics ltd was formed with a vision to develop coastal shipping for container transshipment and domestic cargo transportation. Visualizing the potential of coastal shipping, we pioneered, nurtured, and continue to be market leader in coastal container shipping services. Our investment in this sector has been steady and consistent to service growth in the market. We are committed to enhance coastal shipping in India and we will continue with our dedication and investment to service coastal shipping customers and overall growth.
Q Are you able to provide door to door operations? What is your modus operandi?
Shreyas Shipping and logistics is only coastal operator to provide doorto- door service besides port-to-port, which makes us different from other coastal operators. On an average we handle 45 per cent of our total shipment on door-to-door basis servicing direct customers.
Q How is the flow of coastal cargo?
The main flow of cargo is from Gujarat ports, i.e. Mundra, Kandla, Pipavav and Hazira to all other ports in south and east coast of Indian. Since domestic cargo flow is unidirectional hence hardly 10 per cent volume comes on reverse legs.
Q How many ships do you ply and what kind of cargo do you carry?
We own and operate a fleet of 13 vessels of total capacity 23,143 Teus, and deadweight of 3,15,722. We carry containerized domestic cargo, Exim transshipment cargo as well as Exim liner cargo for direct port-to-port shipment. The main commodities for domestic cargo are tiles, marbles, cement, steel, raw cotton, food grain, fertilizer, mineral etc.
Q Which cargo is your mainstay?
The domestic cargo is our main stay and tiles is the main commodity carried by us.
Q Do you also carry perishable cargo and would you be investing in reefer ships?
We do carry some refrigerated cargo of fish from Pipavav to Cochin but volume will not sustain investment in reefer ships for coastal operation.
Q What incentives have been announced by the government for coastal shipping?
Do they percolate to you as a shipping line? None of the incentives announced by the government in the recent time percolate to our business and we do not foresee any incentive requirement.
Q What policy push would you like to see for better results?
GST imposed on import of ships has increased cost of coastal shipping operation which needs to be reconsidered for waiver. Approval for routing Indian flag vessels via port of Colombo and Chittagong with domestic cargo on board as same bottom cargo is still in process and need to be cleared. Policy for moving North eastern states domestic cargo via port of Chittagong for faster and economical logistic service.
Q Do you feel there is sufficient competition in coastal shipping?
Considering a small market in coastal shipping as compared to Exim trade, I feel there is sufficient competition in coastal shipping.
Q Is coastal shipping lucrative and would you restrict operations to the Indian coastal waters?
Standalone coastal shipping is not lucrative due to mainly one-way trade, which is main reason we have not restricted our operation to Indian coastal waters but extended our service to Middle East ports for better utilization of space on both direction.
Q Will the Make in India move significantly impact your business?
Make in India may not significantly impact our business but Sagarmala project if achieved in right spirit may help in the growth of coastal shipping.
“Incentivise coastal cargo movement”
“A policy introduction by the Government by way of subsidies provided for the movement of cargo on the sea route instead of road will be beneficial to transfer cargo from road to sea,” says Vinita Venkatesh, Director, Krishnapatnam Port Container Terminal.
Q You are one of the few terminals which has seen success in getting positive responses in handling coastal cargo. How is the journey?
We are very fortunate to get the support from Shreyas Shipping which is India’s largest coastal operator. They are not only able to provide sufficient vessels to cater to the EXIM transhipment volume to mainline operator between Krishnapatnam and Kolkata/ Haldia, but also through their NVOCC wing, they are able to provide domestic containers for carrying domestic cargo. Further, we also received good support from the mainline operators such as, Maersk, Safmarine, Hyundai Merchant Marine (HMM), ZIM Line, Shipping Corporation of India (SCI) and Shreyas Shipping who used our port for transhipment operations to/ from Kolkata/Haldia.
Q How is the coastal cargo movement on the east coast? The government is keen to see it growing from the present level of 7 per cent to 10 per cent by 2020. Do you think this target is achievable considering the current growth rates?
At Krishnapatnam Port, we commenced coastal cargo movement in Nov’16 with an initial volume of 2,640 teus per month and this has rapidly developed and grown to 16,746 teus per month in Feb’18. Response from the trade to the coastal shipping is very encouraging.
Q Is your coastal berth ready for operations? How can infrastructure be improved in ports to ease coastal shipping? What infrastructure is required which is now currently lacking? Krishnapatnam Port is ideally positioned on the East-coast of India to facilitate the coastal shipping and transhipment operation. We are today the deepest draft port with 18.5 meters draft and 16 metres draft at our container berth to handle large mainline service which is a pre-requisite for transhipment operations. We have also made available coastal berth infrastructure with 15 meters berth length with two MHCs to facilitate handling of feeder vessel from Kolkata which are unable to maintain schedule and window time due to the congestion and berthing delays at Kolkata Port. Further, KPCT also offer a very competitive tariff to Indian flag vessel operators calling at our port.
Q What are key concerns of customers to shift cargo to coastal route?
There is a large volume of cargo which travels by road from KPCT hinterland to the north eastern states as well as to Kerala and Gujarat area. This cargo currently travels by road in trucks carrying small size consignments and crossing various state borders to reach the buyers factories. The cargo travelling for domestic distribution is chillies, granite and cotton yarn. The primary concern of customer to shift the cargo to the coastal route is multiple handling as well as competitive ocean freight rate.
Q What more policy push would you like from the government?
Currently, the cargo is moving by road for long distances into the North-East states in trucks adding to congestion on the roadways and pollution due to old and poorly maintained trucks being used. As against this, on the East-coast of India, there is large port infrastructure and sufficient port capacity to handle domestic cargo by sea route in an efficient manner. A policy introduction from the Government by way of subsidies provided for the movement of cargo on the sea route instead of road will be beneficial to transfer cargo from road to sea.
