In International Shipping News 30/09/2016
Coastal shipping in India will take a while to make its presence felt. With infrastructure remaining exceedingly inadequate and confidence pertaining to regulatory affairs staying feeble, both shipping companies as well as cargo-owners do not see the segment make much headway any soon.
“At present, there is no adequate infrastructure at the ports at all for coastal shipping to take-off substantially any soon. Due to this, coastal shipping will take a while to have impact on overall shipping business, an official with country’s largest private shipping company told Business Standard. This company has small presence in coastal shipping at present but has no plans to increase focus in this area until substantial change takes place on ground.
Currently, the country’s coastal shipping business garners about $1 billion from a cargo volume of 60 million tonne. In coming years, the government is aiming to churn $3-5 billion business from coastal shipping.
“There is no commitment from cargo-owners at all. They just try out one or two voyages via coastal route and shift back to rail or road. This reluctance is keeping shipping companies from investing in coastal business. There needs to be dedicated cargo for vessels to be deployed,” said Captain Kiran Kamat, managing director at Link Shipping and Management. This company was first in the country to offer Ro-Ro (roll-on roll-off) services in February and carried Hyundai cars from Chennai to Pipavav. However, it discontinued the services after it incurred a 60% loss.
India has a coast line of 7,500 km but carries only about 7% of its total domestic cargo via sea. In comparison, China and Europe carry to the tune of 46% and 43% of their total cargo, respectively.
In coastal shipping, the operating as well as capital expenses are far higher as against vessels deployed towards overseas trade.
“High interest rates and taxation issues pertaining to the crew are some of the biggest road blocks that makes coastal shipping unviable despite immense potential,” said a senior official with a leading unlisted shipping company.
State-owned Shipping Corporation of India, Essar Shipping, Great Eastern Shipping and Shreyas Shipping among others are some of the large shipping companies in the country that contribute to the coastal shipping business in India at present.
Meanwhile, domestic cargo owners expressed apprehensions in shifting to sea mode of transportation saying lack of confidence in government’s regulatory affairs is keeping them away from coastal shipping apart from on-ground hurdles.
“Look what happened to some of the steel and power companies that were given captive coal blocks. Upon de-allocation and amid hostile business climate, companies lost heavily and are still struggling to find a way out. We don’t plan to disturb something that is working smoothly. If the government policies changes gears in future we will have a problem,” said an official with a metal company on condition of anonymity.
In late 90s, the government allotted coal blocks to metal and power companies and encouraged firms to make investments within a certain period. Responding to the friendly business environment, firms responded and invested heavily only to lose their captive source in 2014, when the Supreme Court de-allocated all mines leaving companies starved for fuel.
“There is a proposal to take finished steel via coastal shipping but we plan to allot only about 1-2 lakh tonnes out of total 22 lakh tonne on pilot basis. We do not see shifting to coastal route soon,” said a senior official with state-owned Rashtriya Ispat Nigam.The company carries its finished goods via railways at present.
“Coastal shipping has several handling points (loading-unloading at source and destination), this can damage the material (finished goods) in the process. In addition, the distribution channels from destination are not developed at all. In such a situation, it is difficult to shift to coastal any soon,” said an official with state-owned steel company.
The government on the other hand is doing its bit to boost business in this segment. The Shipping ministry has suggested giving large incentives for coastal shipment of select cargo classes. The aim is to incentivise a shift to coastal mode of cargo transport by compensating for first and last mile transportation. The incentive is large for automobiles and select bulk commodities such as food-grains and fertilizers but does not apply to coal and petroleum products, which account for the majority of present coastal cargo.
The ministry has also extended the central sector scheme to include the capex for setting up exclusive coastal berths at major and non-major ports. The other key issue of evacuation of cargo from destination point is also being addressed by creation of Indian Port Rail Corporation Limited (IPRCL), which is focusing on last-mile rail connectivity projects close to ports. This will incentivise the movement of bulk commodities, especially that of coal.
Source: Business Standard
