Coastal shipping benefits in more ways than one

Coastal shipping benefits in more ways than one
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First Published: Fri, May 01 2009. 12 53 AM IST

Updated: Fri, May 01 2009. 12 53 AM IST
Last week, when Chennai-based Caravel Logistics Pvt. Ltd started coastal container shipping service connecting Mundra in Gujarat with Kochi in Kerala and Tuticorin in Tamil Nadu, the event went largely unnoticed.
It was not surprising because coastal shipping accounts for a low share of India’s total domestic cargo moved by different modes of transport. In comparison, developed nations rely heavily on coastal shipping, considered to be eco-friendly, cost-effective and fuel-efficient.
In India, coastal shipping moves just 7% of the local freight despite a coastline of 7,517km dotted with 12 state-owned ports and around 200 smaller harbours. The share is low compared with the European Union, where coastal shipping has a 43% share of the cargo traffic. In the US, it has a 15% share.
It’s another matter that Caravel had to fight it out with the powerful industry body, the Indian National Shipowners Association, to start the new service. India’s coastal trade is reserved for Indian registered ships and foreign ships are allowed to operate only when Indian ships are unavailable. Caravel has hired a foreign ship to run the service.
India has a limited number of coastal container ship operators. Besides Caravel, these include Shreyas Shipping and Logistics Ltd, Shipping Corp. of India Ltd, Seaways Shipping Ltd, Jindal Waterways Ltd, Vikram Logistic and Maritime Service Pvt. Ltd and Kinship Shipping and Logistics Pvt. Ltd.
Many freight forwarders and logistics firms who have committed volumes, however little they may be, are now dependent on these few firms to move the cargo.
Coastal shipping cannot operate on its own; it needs support from road and rail to move the cargo from factories and warehouses to the ports and then deliver it to customers from the destination ports.
Taxation and regulatory issues have curbed the growth of coastal shipping. Vessels engaged in coastal trade are much smaller than ships that ply international waters. But the same provisions of India’s Merchant Shipping Act, 1957, relating to construction, equipment, operation, certification and safety also apply to both ocean-going and coastal ships.
For instance, crew qualification criteria are the same for coastal and ocean-going ships. But the crew on coastal ships pay income tax while those on foreign-going ships are exempted from it. Coastal ship operators also have to pay customs duty on ship fuel, spares and stores.
In September last year, India’s maritime regulator, the Directorate General of Shipping, eased staffing requirements for vessels operating along the country’s coast. The regulator has separately flagged off a plan to exempt certain classes of ships used only in coastal trade from some of the stringent provisions of the Merchant Shipping Act to promote the sector. It has prepared a draft of the proposed conditions, called the Indian Coastal Ship Safety Code, that such vessels will have to comply with in order to avail of the exemption. The new code is awaiting notification.
The Indian government is charging a concessional tariff for coastal ships calling at its 12 ports. Coastal ships are given a concession of as much as 40% on vessel-related charges, or port calling costs such as port dues, berth hire and pilotage, compared with similar charges for other ships.
Besides, a discount of 40% is also extended to coastal cargo and container-related charges such as ship-shore transfer and transfer from berth to storage yard and vice versa.
The shipping ministry is also lobbying for a Rs500 crore corpus from the government to develop coastal shipping. The arrival of many private container train operators is another big facilitator for coastal shipping. With global recession slowing demand for goods and consequent fall in ship values and rentals, there are plenty of idle container ships in the global market that can be bought or hired at dirt cheap rates to ply along India’s coast as Caravel has shown.
Competition in this sector, with the arrival of more operators, will drive down the logistics costs for Indian customers, who are now primarily using road (some 65% of domestic freight), by offering multimodal transport combining rail and sea with peripheral deliveries and pickup by road.
According to one industry estimate, cost of transporting goods from north to south India and vice versa can be reduced by about 50% with a combination of rail and sea.
P. Manoj is Mint’s resident shipping expert and writes on issues related to shipping and logistics every other Friday. Respond to this column at allaboveboard@livemint.com
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First Published: Fri, May 01 2009. 12 53 AM IST