Everyone in the transport sector agrees that moving goods by ship is cheaper, fuel-efficient and more eco-friendly than by truck or train. India has a 7,500 km coastline with around 200 ports spread over nine States. Yet, coastal shipping accounts for only eight per cent of the country’s total domestic freight (on a tonne-km basis).

Why is this low-cost mode of transport not growing in India?

At a CII conference on coastal shipping in Mumbai last week, speakers and participants — including ship-owners, shippers, Government officials and academicians — identified roadblocks hindering flow of cargo traffic to waterways and also offered remedies to remove them. Ironically, the roadblocks listed were the very same cited at several such sessions over the past decade or more. The remedies suggested were also not very different, only the speakers were.

Safe but ignored

So, on the coastal shipping front, nothing much has changed over a decade. The Indian coastal fleet, as on December 2012, comprised of 118 cargo vessels (of 6.71 lakh dwt) and 33 passenger vessels. Petroleum, coal and cement form a major part of the cargoes carried by them. Very little general or container cargo is moved along the coast, though there is huge potential, said a report prepared by maritime consultants Hauer Associates for CII.

The fact is that over 60 per cent of the domestic cargo is still moved by congested roads and 30 per cent by the overburdened rail. This is despite the fact that thousands of people die in road accidents every year and road transport accounts for more than 80 per cent of the gas emissions.

All stakeholders including the Government are aware of the issues hurting the growth of this safer mode of transport. There are several reports on coastal shipping prepared by experts for the Government to refer to. The Shipping Ministry has all the relevant information on this sector.

DODGING ISSUES

Then where is the hitch? Why is India, a growing maritime nation, unable to take advantage of its long coastline? Before seeking the answer, let us hear what the stakeholders have to say.

Sarvesh Shahi, a Mumbai-based coastal shipping operator, says besides high tariff, getting a berth at major ports on time is one of the biggest problems he and his fellow operators face today. Ocean-going vessels get priority at ports and coastal vessels have to wait, often for days, for a berth. This makes the service uneconomical, he points out.

There are regulatory issues. “Coastal ships are governed by the same norms on age, manning and statutory surveys as applicable to ocean-going vessels. This increases their cost of operation,” says Shahi.

Another issue is finance. There is no source of long-term finance for buying coastal vessels. Banks provide funds for five-eight years. Coastal vessels need 20-25 year funding, he explains.

There are many such issues. But what are the solutions?

Chicken and egg Situation

As for berths, Shahi’s suggestion, which he has been repeating for years, is to have dedicated berths for coastal ships, at least at all major ports.

It is a workable idea, but port managers say they do not see the demand potential to create berths exclusively for coastal cargo. This is a classic ‘chicken and egg’ situation. Ports do not want to invest in capacity creation unless there is cargo demand. Shippers do not want to move cargo by coastal vessels if they cannot get delivery on time. Ship operators cannot assure timely delivery as they are not sure about getting their berth.

According to Shipping Secretary P.K. Sinha, the Government is considering development of disused minor ports for exclusive use for coastal ships. How far this would help resolve the problem remains to be seen.

Again, berths alone cannot attract traffic. Cargo has to move from ports to the final destination by road or rail. So, who will ensure this hinterland connectivity for domestic cargo?

Michael Pinto, former Shipping Secretary, says the Union Government should finance the development of ports and other facilities exclusively for coastal services. Such projects may not be viable for private investors in the short term. Every major port should have a dedicated berth for coastal shipping. The Government can also consider viability funding for such projects.

To address these issues, a workable Government policy for “shift of freight to coastal waterways” is required, says S.N. Srikant, Senior Partner of Hauer Associates, who has been associated with coastal shipping projects for long.

According to him, coastal shipping needs to be viewed as one leg of the multimodal transport network. “It is not a standalone mode,” he says. It can grow only with the support of road and rail for hinterland connectivity.

Road transport costs

He says the land-based transport modes, especially roads, carry huge “external costs” — hidden costs such as accidents, noise pollution and climate change — that burden not only road users but also society at large. The Government should undertake a study on the ‘external costs’ of moving goods by road, suggested Srikant.

A common view is that coastal shipping needs subsidies and fiscal incentives.

The Director General of Shipping, Gautam Chatterjee, is in favour of supplying duty-free bunker (fuel) to coastal ships. He also sees merit in the demand for flexible manning norms for coastal ships.

It may be useful to study the Kerala model. The State Government, as part of its effort to ease the burden on roads, has recently announced an incentive scheme to divert cargo from roads to costal and waterways. This includes direct subsidy for both shippers and ship operators. The State’s plan is to divert at least 20 per cent of the cargo from road to coastal shipping by 2015 and 40 per cent by 2020, according to James Varghese, Secretary, Ports in Kerala.

For long-term finance, it is suggested that the proposal to create a Rs 500-crore corpus for coastal shipping, may be revived.

There have been enough debates and discussions on the subject. What’s required now is a “workable Government policy” as suggested by Srikant. Ministers and bureaucrats often talks about it, but there has been no tangible progress.

As Pinto remarked at the CII event “maybe coastal industry’s voice is not loud enough to reach Delhi.” So, supporters of coastal shipping may have to ensure that their voice is heard by the right people. How to go about it? Start lobbying for coastal shipping or find an effective lobbyist?