Ministry seeks funds to turn tide in favour of water transport

The ministry also plans to revive an inland vessel building subsidy scheme, which ended in March 2007 after a five-year run.

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Bangalore: The shipping ministry is lobbying the Union government to provide Rs500 crore to develop coastal shipping and revive a vessel building subsidy scheme to raise the share of these modes of freight in India’s cargo movement.

It plans to create a coastal shipping development fund, aimed at supporting concessional term loans from banks to buy coastal vessels, a ministry official said, declining to be identified as he is not authorized to speak with the media.

The ministry also plans to revive an inland vessel building subsidy scheme, which ended in March 2007 after a five-year run. The scheme, provided local inland water transport operators 30% subsidy on the ex-factory price of a cargo or passenger vessel bought from an Indian shipyard.

Untapped potential: Ferrying logs on the Hooghly river. Currently, inland waterways account for only 0.15% of the goods moved in the country. Indranil Bhoumik / MintCoastal shipping and inland water transport account for a low share of the country’s inland cargo transportation. Developed nations, on the other hand, rely heavily on these modes as they are cost-effective and fuel-efficient, with huge potential for employment generation.

India’s coastal shipping accounts only for 7% of the domestic cargo moved despite a coastline of 7,517km dotted with 12 government-owned major ports and more than 200 smaller ports. In comparison, coastal shipping in the European Union has a 43% share of total cargo traffic and is rising further.

The ministry is looking to increase the share of coastal shipping in the country’s domestic trade to 15% by 2025, by investing about Rs10,000 crore. India currently has some 450 coastal ships.

Inland water transport has an even lower share, transporting only 0.15% of the goods moved in the country.

“Despite a network of inland waterways spread across 14,500km, India has not adequately exploited this form of transport,” said Arvind Mahajan, national industry director, infrastructure and government at audit and consultancy firm KPMG Advisory Services Pvt. Ltd.

The low share of inland water transport can be attributed mainly to the lack of supporting infrastructure, navigational constraints including shallow water depths and government support, he added.

The shipping ministry estimates that about Rs10,730 crore will be required to boost the sector and raise its share in inland transportation to 2% by 2025.

This 2% share will translate into a saving of 644,000 kilolitre of fuel, or about Rs1,200 crore a year, the shipping ministry official quoted earlier said.

For this, India would have to expand its inland water transport fleet to 2,500 vessels from the existing 400, he added.

Besides financial support, the government would have to take steps to channel investments into the sector by building mechanisms for public-private partnerships, according to experts.

“There is a need for developing bankable and economically viable project structures which are legally sound so that it is attractive to the private sector and end-use customers,” said Neeta Ramnath, vice-president, infrastructure advisory division at Feedback Ventures Pvt. Ltd.

In September, India relaxed staffing requirements for vessels operating along the coast, including cargo, passenger, offshore ships and dredgers, as fleet owners struggle to hire officers in the face of a severe shortage of qualified manpower.

The extent of relaxation varied according to ship sizes and types.

The country’s maritime regulator, the director general of shipping, has separately flagged off a plan to exempt ships engaged in coastal trade from some of the stringent provisions of the Merchant Shipping Act, to promote the sector.