Domestic shipping companies see coastal shipping miles away

03 October 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.

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.

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.

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.

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 – BS