Incentive Scheme to Boost Indian Coastal Cargo

Maritime transport has been witnessed as the most convinient way of cargo transport comparison to road, rail and other ways of inland transports. Coastal transport is recognized as a viable mode of transport in order to fuel efficient, cost effective and environmental friendly. Maritime sector plays a vital role in the trade & commerce of any country in supporting the internal trade or external trade.

India is naturally blessed with along coastline of over 7,500 km of and home of 14,500 km of navigable waterways to movement of mechanized vessels. The country has 13 major ports and more than 180 minor ports spread across 9 maritime states play a vital role in maritime transport & trade and are the economic drivers for the country and regions.

But Coastal shipping presently accounts for only 7 per cent of overall cargo movement in India. Promotion of coastal shipping is essential due to the potential economic and social benefits it could confer. Hence it is important to address issues such as route development, capacity additions, incentives by reduction in fuel bill, logistic cost, impact of land congestion & pollution on national economy and the environment.

In order to address these issues with the Ministry of shipping’s objective in promoting the coastal and inland waterways in India more viable way of transport, the Indian Coastal Conference Shipping Association (ICCSA) has come up with a formula based on incentives and executed a detailed study on “Incentive schemes to promote Coastal Shipping” to boost coastal shipping in the country. A detailed report including the KPMG findings namely “COASTAL SHIPPING - REALISING A POTENTIAL” was collated by members of ICCSA and submitted to the “Ministry of Shipping” through the “COASTAL SHIPPING STANDARDS COMMITTEE”.

The report was released at a press meet, in the presence of ICCSA Members including among others: Capt. Sudhir Subhedar, President; Capt. Kiran Kamat, Vice President; Capt Sandeep Kalia, Vice President; Shri Aditya Suklikar, Hon Secretary; Shri Ashwin Samant, Joint Secretary and Capt. Vikas Vij, Treasurer.

Capt Kiran Kamat, Vice President, ICCSA, informed that the formula has been chalked out based on the findings of the Committee appointed by the Shipping Ministry and formed under the chairmanship of Capt PVK Mohan, Chairman, National Shipping Board, Shipping Ministry.

The Committee included representatives of various concerned authorities and organization including the Director General of Shipping, Indian Register of Shipping, Indian National Shipowners’ Association, Inland Waterways Authority of India.

The Committee recommended implementations of the incentive scheme formula for bridging the gap of freight differential between the road/rail and waterways. The average value of differential, economy of scale by way of volume of cargo, distance covered and the freight losses in carrying empty containers on the ballast voyage have been taken in to account for arriving at this pragmatic incentive scheme.

The Committee has recommended an incentive plan akin to other countries towards the modal shift of cargo from rail/road to waterways with direct and indirect benefits. The committee feels that implementations of the incentive scheme would bridge the gap of freight differential between the road/rail and waterways. The average value of differential, economy of scale by way of volume of cargo, distance covered and the freight losses in carrying empty containers on the ballast voyage have been taken into consideration in arriving at the numeric figures for pragmatic implementation of the incentive scheme.

Aditya Suklikar, Hony Secretary, ICCSA, informed that the initiative scheme prepared by ICCSA in association with KPMG has come up with a formula based on incentives, which if all goes well will help boost coastal shipping in India. The difference is that all earlier proposals made to the government of India seeing its assistance to promote coastal shipping were based on subsidies and involved various ministries (besides the Shipping Ministry) the Union Finance Ministry and others. As a result these proposals would not find favor with one or the other ministry. This time ICCSA has taken the assistance of the study made by KPMG and come up with a new formula which directly involves mainly the Shipping Ministry.

Capt Sudhir Subhedar, President ICCSA, informed that the Shipping Ministry will agree with the incentive scheme. “The Ministry is working out the modality for coming to a decision as to which authority will disburse the money,” he stated.

“We want the Director General of Shipping offices in Mumbai and shipping master offices in various other ports to be able to disburse the payments on the basis of evidence of having moved the goods. This could be port report indicating that the goods having been loaded and moved out, etc. However, the physical money will not come from them. The shipper will have to go with the endorsement to the authorized bank. We don’t want the customs in the pictures since it means involving unnecessary documentation, including preparing the shipping bill, etc. The Customs Act already has a provision stating that if there is a dedicated area in the port such clearance of cargo is permitted. It is only a question for the ministry bringing all entities together on the same platform including ministry of finance, ministry of home affairs, ministry of petroleum, etc., which for us it is difficult. Recovering the money however will be quite a task,” Capt Subhedar added.

According to Capt Subhedar once the cargo begins to come on to the coast there will be a huge demand for more coastal ships and the ship yards will be flooded with orders. Initially, there will be severe dearth of vessels which can be compensated by in-chartering foreign vessels. Indirectly, INSA is lending support for relaxation of the Cabotage law in order to allow foreign vessels to operate on the coast in a big way initially to make the incentive scheme a success. Besides, their representative on the Committee has supported this ICCSA incentive scheme. Further INSA has been giving ‘No-Objection Certification’ for in-chartering of over 150 vessels into the country each year since their members are not in a position to provide ships for coastal and inland water transport in such a big way.

Adhere to the recommendations by members of ICCSA under the chairmanship of Capt PVK Mohan, Chairman, National Shipping Board, Shipping Ministry the Shipping Ministry has finally approved in spending Rs 300 crore for modal shift of cargo to promote manufacturers and transporters to shift movement of their goods from rail and road to coastal shipping in the coming years.

According to P V Mohan, nine commodities – steel, marbles, tiles, cement, automobile, fertilisers, foodgrains, salt and sugar – have identified for the incentive scheme. The scheme will be in force and under review till 2017.

Detailing the features of the new scheme, he said in the case of bulk cargoes, all new cargoes on Indian flag vessels (with a fresh modal shift) will be eligible for an incentive of 50 paise per tonne per nautical mile (nm) up to a maximum of 500 nms. This incentive will have a Rs 150-crore financial implication on the shipping ministry.

Mohan said that the committee had recommended that the present rebate of 40 per cent in vessel-related charges and cargo-related charges to be increased to 60 per cent at both ends. “The difference may be reimbursed to major ports by the Centre periodically,” he said adding this rebate would have a Rs 130-crore implication on the government.