India is strategically located close to the Trans Pacific and Europe Far East liner shipping routes and the intra-Asia North South trade lanes. Almost all global shipping lines have their presence in India to cash in on the flourishing south-east Asian market opportunities and derive advantage of the strategic location.
The National shipping line Shipping Corporation of India (SCI) has one of the largest fleets in the world. In addition to this, the Government has promoted and developed several ship building and repair yards to promote the growth of the shipping industry.
The Indian Register of Shipping was set up to help trade and the country has one of the biggest ship breaking facilities located at Alang in Gujarat on the west coast. The shipping industry in India has always been fully liberalised with no restrictions on the entry of private sector companies.
Several policy changes were legislated towards achieving this objective. Presently, the Indian shipping industry comprises of a few large and medium size shipping companies dominated by the state owned Shipping Corporation of India and a host of private players.
India’s Coastal & Maritime Scenario
As many as 12 out of India’s 26 states have a shoreline, spreading across 7,517 kms and about 200 small harbours. Despite a strong platform, the Government has so far failed to transform coastal shipping into a lucrative business opportunity in India.
Most cargo that can be transported via costal shipments are still being transported through traditional modes like Rail and Road. Government regulations are not coastal-shipping friendly yet. Though India has 14,500 kms of navigable waterways, large cargo vessels are unable to use them due to insufficient draught. Furthermore, as these rivers are extensively used for irrigation and electricity generation, the capacity for cargo transportation is severely restricted even further.
The Inland Waterways Authority of India (IWAI) was set up in 1984 to develop, maintain and administer the waterways while The Central Inland Water Transport Corporation (CIWTC) was set up to undertake freight transport. However, a marginal proportion of domestic cargo is moved via this mode, which the policy makers wish to improve upon.
Coastal Shipping in India – Challenges
- Lack of infrastructure: It is one of the biggest obstacles faced by the coastal shipping industry. The Government has failed to develop infrastructure that is expected to make shipment easy and efficient. Infrastructure involves electricity, road network and overall area development, which complements the use of this route.
- Lack of lucrative government schemes: Unlike other channels of transportation, the Government’s efforts to benefit coastal shipping users financially are limited. Companies using coastal shipments until now had to face harsh and impartial taxes like no exemption from Income tax, customs duty on bunkers, landing fees, etc.
- Slow and cumbersome process at Customs: The shipment process is extremely slow and laborious compared to other modes of transport, which are much faster. Companies are unwilling to waste precious time in adhering to these processes.
There are a few other major problems the Indian shipping industry is facing:
Vessel size – Vessels are getting bigger and bigger, the largest – 22,000 TEUs! (1 x 20ft container = 1 TEU – 1 40ft container = 2 TEU). Whilst this sounds like a good idea, ports are struggling to keep up and the largest of vessels cannot call into many ports.
One of the biggest challenges is the sulphur cap that will happen in 2020. This will likely increase fuel costs by 50 to 300%. With fuel cost already one of the biggest operating costs of shipping, you can see how this presents a major challenge to all shipping companies.
The major problem the shipping industry is facing now is the demand supply gap. The supply is much more than demand. Ships are growing bigger without an increase in demand. Deep pocket shipping companies are replacing smaller ships with bigger ships to enjoy economies of scale, resulting in supply surplus.
Unless this supply glut is fixed either by vessel scraping or demand increase because of economy improvement, the shipping industry will continue to be in doldrums.
In Kochi alone the government has proposed to develop 17 minor and medium posts to boost coastal shipping in India. A ten-year plan titled Maritime Agenda 2010-2020 consisting of a budget of USD 110 billion has been put in place to increase India’s ports’ capacity significantly and reduce its dependency on road transport. By 2015, it targets to handle about 50% of India’s national cargo by coastal shipping means.
The Way Ahead
It is well known that Indian bureaucracy is very rigid and reluctant to give up control, the regulations and laws are cumbersome, which add to delays and expenses. There are several central ministries regulating the transport sector with over lapping powers in addition to state and local government bodies adding their bit to the chaos.
Beginning 2018, the Indian Government is planning to constitute a committee to make port projects more investor-friendly and to improve the investment climate in the sector while clearing several stalled port projects.
The Union Cabinet chaired by Prime Minister Narendra Modi approved amendments in the Model Concession Agreement (MCA) which envisage the constitution of the Society for Affordable Redressal of Disputes-Ports (SAROD-PORTS) as dispute resolution mechanism similar to provision available in highway sector.
Coastal shipping is no doubt cost-effective, environment friendly and more favoured than alternative modes of cargo transport in developed countries. Despite its wide scope and popularity in other nations, India is yet to explore its coastal shipping’s true potential.
Sea News Feature, January 5