A recent report into the potential of coastal shipping by Ms. Charanya Krishnan, ‘Unlocking India’s Coastal Shipping Business Potential’, has identified coastal shipping as a major potential growth area for the Indian economy, and also shown how it could potentially lead to large reductions in carbon emissions.
Between 1990 - 2000, only 78 million t of cargo were transported by coastal shipping in India. This does not compare well with China, which shipped 870 million t, or Indonesia, which shipped approximately 133 million t in the same period.
Given the enormous benefits of coastal shipping over road or rail transport, the report illustrates why this is strange.
Fuel consumed by shipping is 15% that of road transport and 54% of rail transport.
- Emissions; there would be massive CO2 and CO emissions cuts from using coastal shipping over road and rail networks.
- Huge cost advantages. Coastal shipping is much better suited to handling large parcels, which rail and road networks can’t compete with because of size and infrastructure constraints. This is particularly true of materials such as cement, iron ore and coal. The cost of the carriage of goods by coastal shipping is some 21% of the cost of road transport and 42% of the cost of rail transport.
- Another report released by Ernst and Young and the Confederation of Indian Industry, ‘Coastal Shipping In India: From Challenges to Opportunities’, estimated the potential savings to businesses. For a large cement player to transport 3500 t of cement from Gujurat to Mumbai would take 350 truck trips, this would lead to a turnaround time of seven days for the 700 km trip. Alternatively, a coastal vessel could do the 300 km trip along the coast in just 24 hours, saving time and money.
- External costs; when you take into account the external costs of road and rail transport such as noise pollution, congestion, infrastructure overloading and climate change, the cost of coastal shipping is significantly lower.
- Coastal Shipping also has the potential to offer enormous benefits to the Indian economy through the development of a more integrated transport system, and to enhance the competitive edge of Indian exports.
Obstacles to growth
However there are obstacles to the growth of coastal shipping, which need to be overcome before it can really take off.
The Customs process is slow and cumbersome.
- Bunker fuel oil is not duty free for coastal shipping.
- Lack of infrastructure at major ports for coastal vessels, and a lack of infrastructure at minor ports.
- Taxation: Indian Ocean going shipping is accorded tax breaks but this benefit has not been extended to coastal shipping.
The reports surmise that coastal shipping could be a golden opportunity for India’s future economic development and offers many benefits, especially to the cement trade and other producers of bulk and raw materials.