Coastal Shipping Policy: Need of the Hour

Despite of a vast cost-line, spanning over almost 7516.6 km, thus forming one of the biggest peninsulas in the world, India’s costal shipping yet accounts only 6 per cent of the country’s total domestic freight.

Coastal shipping – or short sea shipping is an alternate mode for transportation that can help address the challenges faced through use of road and rail. World over use of sea/waterways for transportation is a much more prevalent mode in apparent to India as a very lower share in waterways transportation.

A study on ‘Infrastructure Finance – Key to sustainable growth’ by Assocham and Yes Bank has predicted a downturn outlook for Indian Shipping Industry in 2013-15 and has suggested the government to tweak a coastal shipping policy in order to enhance costal shipping and enable hassle-free multimodal transport within the country.

Hindrance to the waterway transporting in the country, the study found that port congestion, exorbitant terminal charges, inadequate infrastructure and the inability of the Indian ports to meet rising demand in container traffic are the major constraints in plaguing the country’s shipping industry as a whole.

Besides, the diminishing freight market, dwindling demand for ocean transportation of commodities, over-supply of new vessels, a volatile forex market and earnings squeeze are the other problems faced by the Indian shipping industry, the study said.

The study has recommended increasing the Indian tonnage through necessary policy interventions to raise the country’s share in global ship building to 5 per cent from the present level of 1 per cent.

The study has also recommended measures like setting up of a freight exchange, promotion of inland waterways for cargo movement, multi-modal transport operations for door-to-door delivery, introduction of a Shipbuilding Subsidy Scheme and grant of Infrastructure status to shipbuilding industry by the government.

Capacity overhang brought about by the low levels of international trade and fleet additions are likely to keep freight rates muted across the primary segments of dry bulk, tankers and container carriers in 2013-15, the study found.

However, container and tanker rates may exhibit greater stability in 2013-15 due to high capacity additions, stable US demand and upbeat manufacturing activity in emerging nations like China, according to the study.

Faced with high fuel costs and muted revenues, operating margins of shipping companies globally will continue to be under pressure in 2013-15, the study pointed out.

The government has set up a National Maritime Development Plan (NMDP) to improve facilities at India’s 12 major ports envisaging expenditure of USD 12.4 billion.

Moreover, USD 9.07 billion will be invested into 111 shipping sector projects by 2015 and the government is mulling a USD 2 billion package to help domestic shipping firms finance new vessel acquisitions as global lenders tighten their purse strings.

(Source: The Economics Times)

Compiled by: Rakesh Roy