Coastal shipping is a cost-effective and carbon-efficient mode of transport. Yet, India has not fully utilised its 7,500 km coastline and over 14,000 km of navigable inland waterways — water transport accounts for only 6.4 per cent of overall trade logistics.
In contrast, waterways have 24 per cent share of trade logistics in China, 17 per cent in Australia, and 11 per cent in Germany.
The past few years have seen several initiatives to promote coastal shipping in India, including green channel clearance, priority berthing, discounts on vessel- and cargo-related charges, and relaxation in cabotage laws. Additionally, the Coastal Berth Scheme, under the Sagarmala programme to promote port-led development, seeks to create dedicated infrastructure for coastal shipping.
Currently, around 30 million tonnes (MT) of coal is moved on the coastal route from eastern India to south and western India; potential demand is nearly 100 MT by 2030. Similarly, while steel is produced in eastern India, its highest usage is in south and northwest India — nearly 2 MT steel is moved from east to west, and this is estimated to rise to 6 MT. Petroleum products and cement, too, can be transported efficiently through coastal shipping.
With these opportunities in store, the constraint the industry faces is the shortage of vessels for coastal trade and the need for additional tonnage.
Coastal trade is also regulated due to security concerns such as drugs trafficking and so on. So the question is how do we balance security concerns with the need for additional tonnage. The solution is in encouraging Indian flag vessels to sail more on coastal routes.
The recent Cabinet approval of the Coastal Shipping Bill needs to be looked at in this context.
Bill proposals
As a regulatory feature in the Merchant Shipping Act 1958, any vessel sailing in our coastal waters must have a licence from the Director General of Shipping. The bill proposes to do away with this licence requirement for Indian vessels and make it a statutory obligation for foreign-flagged vessels.
The intent is to encourage domestic flagging of coastal vessels, which will not only increase tonnage but also create demand for the manufacture of coastal vessels.
Secondly, the bill proposes to integrate coastal shipping with inland water transport and identify newer routes for the movement of additional cargo. This can be done through origin-destination studies and formulating a strategy for the modal shift of cargo. The bill proposes to draw up a ‘national coastal and inland shipping strategic plan’.
Besides identifying routes, the plan will focus on delineating best practices, fleet modernisation, dredging requirements, and so on, to facilitate robust coastal trade.
The bill proposes that the Director General of Shipping should maintain a ‘national register of coastal shipping’ to serve as a data repository of routes, commodities, and costs, aiding periodic policy implementation to facilitate trade.
Cost worries
However, shippers are sceptical about the dynamic freight rates, since there are fewer ships available. Moreover, the rates are stabilised only when there is return cargo for shipowners.
On the operations side, fuel cost, which accounts for nearly 70 per cent of voyage cost, is a sensitive indicator, especially when prices fluctuate and sustainability mandates require the usage of costly low-sulphur fuels. In such a chicken-or-egg situation, the bill is indeed a hope on the horizon.