National commitment required to boost Coastal Shipping

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While China has increased its waterborne cargo by 1000 times over the last15 years, India has barely managed to double it.

Anything floating is weightless.  A ship loaded with 200,000 tonnes of cargo can be moved by mild wind or current.  As against this a huge amount of energy is required if we have to drag the same cargo over by roads or rails.  In spite of having a 7000 km coastline, our natural gift of a multi-lane highway in the sea, most of our cargo still moves in rails and trucks along the coast.  While sincere efforts by efficient and well-meaning bureaucrats like D. T. Joseph (ex-D. G. Shipping and Secretary-Shipping) and Dr. Satish Agnihotri (ex-D. G. Shipping and Secretary-Shipping), for  increasing and revitalizing our coastal shipping have been made, we are yet to see the kind of utilization of the coast as may be the need of the day;  In this, after almost 25 years, where we have tried to incentivize the ship owners with added frills of some subsidy or exemptions and other cuts for their expenses, we MUST acknowledge that the model has not worked and we are unable to shift the cargo from trucks and rails to container ships on the coast.

While we are spending thousands of crores on creating new highways and roads, we have failed to utilize the multi-lane  natural highway  on our 7000 kms long coast.

While some of the possible reasons for this failure are discussed later in this article, I would like the reader to first try to understand the logical ball-park statistics of saving & operation costs between the ship & road transport. Why are we so concerned and what are we losing? It really makes amazing reading.

Let’s consider a single voyage of a ship of 10000 DWT (a ship which can carry about 10,000 MT of cargo) from Mumbai to Goa – this usually is a one-day sailing, about 19 hours to be more accurate.

The ship consumes 10 tons per day of heavy oil at about INR 38000 per ton. The total cost for one day voyage is INR 3,80,000. As against this, considering that the same cargo may have to be moved by road, in trucks of 12 MT capacity – 833 trucks will be required; trucks will consume 120 litres of HSD per truck at INR 75 per litre. The total cost of diesel will work out as – 833 X 120 X 75 = INR 74,97,000. Hence, by simple arithmetic, by using a ship, there is a saving of INR 71,17,000 in the movement of just 10,000 MT of cargo. Now, this is per day, per ship. Hence, for 300 days operation, for say 10 ships, this saving in fuel costs alone may be INR 2130 Crores. Furthermore, we need to consider the manning in both modes – 833 trucks requiring a minimum of 2600 people as against 20 persons employed on the ship. The saving in manning costs, therefore, will also be colossal.

The main reasons for this failure are being attributed to high ship costs, high-interest rates, cumbersome customs procedure, high port dues, high manning costs and substantial delays due to non-priority for coastal shipping. The reasons for failure enumerated above need to be tackled with “Out of Box Thinking” which assumes ships as infrastructure.

While we are ready to spend thousands of crores to build new highways and roads, why can we not buy 10 ships of say 5000 to 10000 DWT and treat this as infrastructure and give it to ship owners to operate without any capital or interest costs?

To avoid adverse publicity, we can start by giving these ships to Shipping Corporation Of India, where the motive of the government will not be doubted. We can ask them to quote on operation costs basis without taking into account the capital and interest costs. We can also consider a model where the government owns the ships and gives it to more than one operators to induce efficiency and competition.

As for the priority for berthing, high port dues, cumbersome customs procedure and high manning costs, all these factors are within the powers of Govt. of India, as most of the ports are owned and operated by Govt. itself. Once the operating profits are generated and the costs of carrying can be reduced substantially, the incentives should actually go to the shippers and not to the ship owners.

It is estimated that if 10 vessels perform, 5 on the west coast and 5 on the east coast, voyage between the coastal ports, a saving of over 7 crores can be made per day on the fuel costs and the same amount on the manning costs.

With a proactive, innovative and progressive Minister of Shipping, it is time for the Maritime Professional to understand these economics well and to push the case of development of coastal shipping in a big way.  We should not forget that carrying of cargo by trucks has serious implications of pollution, congestion on roads causing deaths and accidents, wastage of natural resources on rubber tyres and high incidence of pilferage and damage causing heavy insurance losses.

While trucks are able to offer a point to point delivery, a system will need to be developed to ensure that the shippers have these facilities of the containers being picked up from their premises and delivered to the point of delivery. Everything from toothpaste to televisions can be carried in containers. The operational savings in the first year itself will pay for the cost of ships.

So, at the end, all it requires is our will and commitment to use our coast for carrying our goods. We have to resolve this as a National Commitment and appoint a team of professionals to implement the scheme as early as possible.

This article has been authored by Chandreshwar Dayal. He is a senior marine technocrat, presently consultant to EDOT Solutions, Vasco and Honorary Secretary of the Society for Industrial and Technical Education of Goa. He can be contacted at: dayal.chandreshwar@gmail.com