India’s coastal shipping has a lot to thank Kamat and Tiwana for

To revive the roll-on-roll-off coastal shipping service, the government’s policy managers need to hand-hold the industry to ensure its success


While many believe Kamat and Tiwana deployed old ships to test the unchartered waters with a roll-on-roll-off (Ro-Ro) service, it was, perhaps, the right thing to do to discover the operational and procedural risks involved in the business rather than deploy younger ships and burn more cash than they eventually did. Photo: Bloomberg
While many believe Kamat and Tiwana deployed old ships to test the unchartered waters with a roll-on-roll-off (Ro-Ro) service, it was, perhaps, the right thing to do to discover the operational and procedural risks involved in the business rather than deploy younger ships and burn more cash than they eventually did. Photo: Bloomberg

A lot has been said about the environment, social and cost benefits of moving goods locally using the sea route or inland waterways which India is blessed with in abundance and ease the burden on road and rail apart from cutting logistic and fuel consumption costs.

It took two enterprising businessmen to show that the sailing is not smooth for India’s untapped coastal shipping and inland waterways. What India learns from the two short-lived experiments of Mumbai-based Link Shipping and Management System Pvt. Ltd run by Kiran Kamat and Singapore-based Symex Maritime Inc. owned by Mandeep Tiwana would determine whether the nation can truly harness the potential of these two alternate modes of transport.

While many believe Kamat and Tiwana deployed old ships to test the unchartered waters with a roll-on-roll-off (Ro-Ro) service, it was, perhaps, the right thing to do to discover the operational and procedural risks involved in the business rather than deploy younger ships and burn more cash than they eventually did.

Link Shipping undertook 18 voyages between October 2015 and February 2016, carrying laden trucks between New Mangalore port in Karnataka and Hazira port in Gujarat before shutting the service and scrapping the 22-year-old pure car and truck carrier (PCTC) named MV Maria India.

Symex Maritime ran a solitary voyage in February 2016, carrying 800 cars manufactured by Hyundai Motor India Ltd from Chennai to Pipavav in Gujarat, folded up and sent the ship, IDM Symex, also a PCTC, for demolition.

While Symex Maritime and Hyundai agreed to load 2,000 cars on the ship with a capacity to load 4,000 cars, IDM Symex finally sailed with only 800 cars. The non-availability of return cargo from Pipavav also hurt the ship’s ability to operate viably on a sustainable basis.

The failure of the two Ro-Ro services was an embarrassment to India’s shipping ministry, which has been harping on the virtues of coastal shipping given its potential to transform the way cargo/goods/products are moved within the country. Maria India charged Rs.900 per metric tonne gross vehicle weight from customers. At this rate and cost structure, operating at 60% of capacity, the ship ended up losing about Rs.14.5 lakh per voyage.

To add to the woes, Konkan Railway Corp. Ltd, which runs a similar Ro-Ro service from Mangalore, lowered its rates after Maria India started operations.

A review of the operational cost of the ship revealed the vessel- and cargo-related port charges accounted for nearly 26% of the total voyage cost of Maria India.

Ports owned by the Indian government such as New Mangalore have been offering a 40% discount on normal rates to coastal shipping, both vessel-related and cargo-related, to encourage a modal shift from road/rail to sea. The rates for coastal shipping, both vessel- and cargo-related, are denominated and collected in Indian rupees. The vessel-related charges for foreign-going ships are denominated in dollars and collected in rupees, while the cargo-related charges for the same are denominated and collected in rupees.

However, a month before Maria India started services, the shipping ministry amended the concession rules for coastal shipping by denominating the vessel-related charges in dollars, which translated into a steep hike in the rates for coastal shipping.

By the time the shipping ministry realized that its action would hamper efforts to promote coastal shipping and put the amended rule in abeyance in May 2016, Maria India had ceased operations.

In effect, the amended rule had a huge cost impact on the operations of Maria India and IDM Symex as it coincided with the time the Ro-Ro services operated.

In coastal shipping, either the origin or the destination and sometimes both fall in the so-called non-major ports (those owned by the state governments but given to private firms for development and operations) which does not grant concession such as the 40% discount given by Indian government-run ports. This erodes the competitiveness of coastal movement unless the states step in to extend the concession to non-major ports also.

While Indian government-owned ports give a 40% concession in rates for coastal shipping, there is scope for giving a higher discount by levying the vessel-related charges for Ro-Ro ships on the basis of the vessel’s dead weight tonnes (DWT) instead of calculating it on a gross registered tonnage (GRT) basis, as is now being done.

Levying vessel-related charges for Ro-Ro ships on DWT basis is considered a better proposition to make coastal shipping more competitive and for attracting cargo.

In other general cargo/tanker vessels, DWT is higher than GRT. But, in Ro-Ro vessels, GRT is higher than DWT (Maria India had a GRT of 8,260 metric tonnes and a DWT of 5,271 metric tonnes) as the cargo is voluminous in nature and hence, the shipowner has to pay higher port charges.

Non-major ports owned by the state governments need to rationalize the vessel-related charges for coastal shipping and place them on par with the rate levied by Indian government ports. Non-major ports should also set up exclusive facilities that give priority berthing to coastal ships.

This will enable Ro-Ro vessels to call at multiple ports en route, while simultaneously improving their fill factor for better viability and sustained operation. This measure will help Ro-Ro ships to offers more competitive rates.

The standardization of wharfage charges at all Indian government ports for cars on a flat basis per unit until this alternate mode of transportation is accepted by all stakeholders and a similar action on stevedoring charges for handling cars are the other key takeaways from the failed Ro-Ro services.

Some say both Kamat and Tiwana would have been better off had they picked the right Ro-Ro ships for the service that are more fuel-efficient with lower speed to cut the vessel operating costs. Ship selection should have been based on a correct assessment of the cargo volume to ensure the vessel is optimally loaded and generates revenue to offer competitive rates to customers.

To revive the Ro-Ro coastal shipping service, the government’s policy managers need to hand-hold the industry to ensure its success. One of the key policy interventions in this direction is to dust up a financial scheme drafted by the shipping ministry in 2015 that seeks to incentivize cargo owners for diverting cargo from land to sea and inland waterways. Cargo owners would have received Rs.3,000 per truck when transported on Ro-Ro ships. The scheme, though, got lost in the corridors of power.

If that happens, Kamat and Tiwana would be content in knowing that the first small steps they took led to a giant leap for the sector.

In the meanwhile, let us wait for the outcome of the first Ro-Ro service that was flagged off on 12 August ferrying cars made by Maruti Suzuki India Ltd on the longest inland waterway stretch in India linking Varanasi in Uttar Pradesh with Haldia in West Bengal.

P. Manoj looks at trends in the shipping industry.

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