Despite significantly lower costs, water transport accounts for about 6 percent of total freight movement in India in ton km terms.
The government will tap vast swathes of its underutilised coast on the eastern and western seaboard to promote an energy efficient and low cost mode of transport for freight and passengers through public-private-partnership (PPP) and viability gap funding, Finance Minister Nirmala Sitharaman said in her Budget speech to Parliament on Thursday.
“Coastal shipping will be promoted as the energy efficient and lower cost mode of transport, both for passengers and freight, through PPP mode with viability gap funding,” the Finance Minister announced.
Coastal and inland waterway transportation are considered energy efficient, eco-friendly and helps reduce logistics costs for domestic freight.
India’s long and contiguous coastline spanning 7,500 km and extensive navigable inland waterways offers an excellent opportunity to tap an environmentally friendly water based modal transport, which can complement rail and road-based cargo movement. Currently, coastal, and inland waterways contribute only about 6 percent of the country’s freight modal mix, while adjacent developing economies, such as Bangladesh (16 percent) and Thailand (12 percent) have a higher share of water-based transport, highlighting the scope for improvement in India.
“Despite significantly lower costs, water transport accounts for about 6 percent of total freight movement in India in ton km terms,” according to the Maritime India Vision 2030, a ten-year blueprint for India’s maritime sector. “Industrial development has not fully utilized the structural advantages of efficient supply chains leveraging proximity to coast,” it said.
“Focus on enhancing coastal shipping through PPP mode and VGF would help towards achieving aggressive targets for capacity expansion which have been identified under the Sagarmala project. Deployment of funds towards coastal shipping would also lead to cost optimisation at the end user side,” said Ajay Sawhney, Partner, Cyril Amarchand Mangaldas.
The modal shift of cargo using coastal shipping is one of the four focus areas identified by the government to improve logistics efficiency and cost competitiveness for maritime logistics.
The Maritime India Vision 2030 says that private party engagement should be encouraged in operating roll-on, roll-off (Ro-Ro) and ferry services. Engagement of a private party facilitates synergies between it and the public entity. A PPP structure will augment the collective financial capability, operational capability, and risk-taking capability of both parties for effectively meeting project objectives. Globally, private players have been involved in Ro-Ro terminal operations, fleet maintenance and operations. However, in India, private players could be engaged through operation and maintenance (O&M) or management-based contracts in the initial years, the Vision document said.
As compared to Ro-Ro services, potential for private investments is higher in ferry operations. In case of ferry, public authority sanctions the projects, but the development and operations are usually taken up by the private players. Countries like Belgium and the US follow this mode.
Improvement of water-based transport share would lead to lowering of logistics costs for end-user industries as water-based transport is inherently cheaper than rail and road modes.
It offers other indirect economic benefits such as reduced air and noise pollution and reduced rate of accidents.
However, development of water-based transport would require development of effective multimodal solutions as first mile/last mile connectivity, lead times and costs become important factors for ensuring a shift from door-to-door services provided by road and rail-road modes.
Thus, an integrated approach to development is required to design the most cost-effective and hassle-free logistics solutions for end-user industries.
Ministry of Ports, Shipping and Waterways has undertaken several initiatives in the last few years to facilitate coastal shipping such as incentivizing construction of dedicated coastal berths, reducing port tariffs for coastal cargo, provisioning green-channel clearance of coastal cargo, prioritizing berthing of coastal vessels and relaxation of cabotage rules for increasing vessel availability. These measures have led to a double digit growth in coastal shipping movement.
However, the vast potential for coastal shipping is yet to be fully realized, and a more focused approach is required to realize this potential, the Maritime India Vision 2020 added.
