From THE HINDU group of publications
Monday, December 31, 2001


Coastal shipping: For a sea-change in policy

S. S. Rangnekar

INDIA is blessed with a long coastline of 7,500 km. There are 12 major ports and a number of minor and intermediate ports providing tremendous potential for coastal shipping an economical, environment friendly and energy efficient mode of transportation. Yet, coastal shipping in India has not developed to its fullest potential.

This is evident from recent statistics. The total coastal traffic at Indian ports in 1999-00 was just around 78 million tonnes (comprising around 31 million tonnes cargo loaded, 5 million tonnes transshipped and 42 million tonnes unloaded), which is abysmally low compared to the coastal cargo movement in other countries in the region.

For example, in China, coastal cargo even before 1988 touched some 870 million tonnes, followed by Japan with 549 million tonnes, Korea 141 million tonnes and even Indonesia, which is not a developed country, having much higher coastal cargo movement of around 133 million tonnes.

Indicative of this none-too-healthy scenario, Indias coastal fleet has been hovering around a meagre level of only 0.6 to 0.7 million gross tonnage (GT) during the last five years. Coastal cargo traffic during the period 1995-96 to 1999-00 grew at CARG of 5.41 per cent vis-`-vis the coastal tonnage growth in terms of capacity (GT) at CARG of 0.15 per cent.

In spite of the obvious advantages that coastal shipping has over land-based modes in India, it has not grown to become an integral part of the countrys transport Infrastructure. A major reason is that coastal shipping has not been receiving the priority it deserves. Though it is a major link in the integrated transport infrastructure system, vital for the countrys economic growth, coastal shipping is yet to get the infrastructure status. Purists may argue that shipping does not fully conform to the way infrastructure is defined (in that it is movable, and hence not recognised as an infrastructure industry).

It, however has to be recognised that shipping is a vital and inseparable part of the entire transportation system. In view of this fundamental and cardinal equivalence of shipping with other land-based modes of transport, the shipping industry should be granted the relevant benefits and incentives that are being extended to other infrastructure industries. tant ?

The growth of coastal shipping is not an end in itself but a means to a larger development of the economy itself. The tremendous cost-advantages afforded to Indian trade coupled with the immense benefits of energy savings to the countrys economy, and, last but not the least, the boon of a cleaner and greener environment offered to society at large, make the development of coastal shipping important for a maritime country such as India.

In addition, efficient and economical coastal shipping will boost transshipment at Indian ports, thereby enhancing the competitive edge of Indian exports and increasing the ports potential to develop as hub-ports, leading to increased revenues and opportunities for generating both direct and in-direct employment.

To begin with, a clear-cut policy a policy for the development of an integrated transport system needs to be evolved. Coastal shipping should be given the due place it deserves in this policy. Before this, measures must be taken to remove various constraints procedural, operational, fiscal and legislative hindering the sectors growth.

In spite of these limitations, the Indian coastal shipping fraternity, on its part, has been making a vital contribution to the economy by serving trade and industry over the decades. Over the last few years, the Indian Coastal Conference (ICC) association of coastal operators has strengthened its foundations. Its membership has grown from 13 at the time of its inception in 1951 to 30 now. A major issue facing coastal operators is the lack of level-playing field. Though the Cabotage regulation restricts entry of foreign operators in coastal trade, this is being circumvented in one way or the other. Indian coastal operators have been seeking exclusive rights of operation for the members to ensure sustainable development of coastal shipping Another issue is capital. Shipping is a capital-intensive industry. In India, the cost of capital is higher compared to many other countries. To raise equity capital, shipping should attract investors. To enhance investor appeal for developing a larger equity base and encouraging larger investment in coastal shipping, time-bound solutions would have to be found for many of the complicated and vexing problems confronting by the sector.

These include levy of Customs duty on spares, stores and bunkers imported by coastal operators. Unlike other industries, the benefits of waiver from payment of import duty in shipping is available only to the intermediary (SRUs) who imports the spares and not to the end-user (shipowner).

In addition to this, coastal operators have to shoulder the technical and financial burden on account of stringent application of rules and regulations as applicable to foreign-going vessels. Manning scale on Indian ships are higher compared to those in other countries.

On the operator front, lack of dedicated berths for coastal ships at various Indian ports, higher port charges and cargo handling cost make coastal shipping uneconomical.

To really serve the Indian trade by offering quality and cost-effective services matching global standards, there is no alternative to minimising the total transportation cost. This can be achieved only if a truly facilitative policy and supporting systems, rules and regulations and procedures similar to those existing in leading maritime nations are put in place.

Equally important, these policies and procedures must be implemented keeping in view the larger national interests, rather than getting bogged down by restrictive interpretations of various legislations and rules.

(The author is Executive Director, Shipping Corporation of India and Chairman, Indian Coastal Conference. The article is based on a recent speech delivered at the ICC meet in Mumbai.)

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