Coastal Ship­ping on East Coast: New Op­por­tu­ni­ties

In a re­gion where man­u­fac­tur­ers and traders have a con­stant chal­lenge of deal­ing with trans­port unions and car­tels, cargo move­ment by wa­ter­ways and sea seems to be a much more vi­able op­tion. The ses­sion dis­cussed var­i­ous chal­lenges faced by the trade whil

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In a re­gion where man­u­fac­tur­ers and traders have a con­stant chal­lenge of deal­ing with trans­port unions and car­tels, cargo move­ment by wa­ter­ways and sea seems to be a much more vi­able op­tion. The ses­sion dis­cussed var­i­ous chal­lenges faced by the trade while mov­ing goods by sur­face trans­port, and how coastal ship­ping could be a more ef­fi­cient mode of trans­port for this re­gion.

The fo­cal point of dis­cus­sion in the third and con­clud­ing busi­ness ses­sion was coastal ship­ping on the east coast of In­dia, and es­pe­cially the trade op­por­tu­ni­ties that can be un­leashed in Odisha by us­ing coastal sea route to move cargo.

Capt. S.B. Mazumder, Ex­ec­u­tive Direc­tor, Sea­horse Ship Agen­cies: The his­tory of coastal ship­ping dates back to about two and half decades, and the growth in this seg­catch ment started about 10 years ago. In the last 4-5 years cargo move­ment has in­creased on coastal route, es­pe­cially in the con­tainer seg­ment and there is mo­men­tum in bulk and break-bulk as well. But last mile con­nec­tiv­ity is still a chal­lenge, and bet­ter rail and road con­nec­tiv­ity in the coastal re­gion can fur­ther boost trans­fer of road and rail cargo to wa­ter and sea mode. The trans­for­ma­tion has taken place glob­ally, and coastal ship­ping would soon up in In­dia as well.

Anurag Garg, Vice Pres­i­dent (Busi­ness De­vel­op­ment and M & S), TM In­ter­na­tional Lo­gis­tics: Gov­ern­ment has been en­cour­ag­ing coastal ship­ping for the last two decades, how­ever ship own­ers have al­ways lob­bied for ex­cise duty-free bunker at par with EXIM ves­sels. Now VAT on bunker fuel for coastal car­ri­ers has come down to about 5 per cent and al­most null for diesel. There are some struc­tural is­sue which hin­ders growth in this seg­ment, and the is­sues are re­lated to prod­ucts and in­dus­try and not re­lated to ship­ping sec­tor. The big boost in coastal ship­ping on east coast started in 2001 after Asian De­vel­op­ment Bank funded de­vel­op­ment of ter­mi­nals at En­nore and Paradip to move TNEB coal via sea route. Ear­lier the power plants in states were op­er­at­ing on cost con­tract, which means the cost in­curred by these units are passed onto the con­sumers. But after 2011, a new norm came as per which power plants op­er­ated as per tar­iff-based bid­ding. It means the elec­tric­ity tar­iff is fixed for the power gen­er­a­tion units which com­pelled them to opt for coastal ship­ping only if freight rate is lower than rail or road. Though coastal move­ment of coal con­tin­ues but due to the cost fac­tor there was no ma­jor scale up of cargo vol­ume. In power or steel sec­tor, raw ma­te­rial move­ment

like coal and iron ore are very pre­dictable com­modi­ties in terms of vol­ume de­mand whereas there is un­cer­tain­ity of vol­ume for fin­ished goods move­ment such as steel. Fin­ished prod­ucts have pe­cu­liar dy­nam­ics as there is no cer­tainty about the mar­ket de­mand due to which it is dif­fi­cult to build an eco-sys­tem for coastal ship­ping to cater to steel or any other fin­ished prod­uct. Sim­i­larly in case of au­to­mo­bile trans­port by road it would take 1 or 2 days whereas by sea the time would in­crease to about 5 days which adds to the in­ven­tory cost of a man­u­fac­turer. Hence, coastal ship­ping for raw ma­te­rial would grow but it might not be pos­si­ble to repli­cate sim­i­lar growth for fin­ished prod­ucts. Fin­ished goods move­ment by coastal route would be suc­cess­ful in cases whether the con­sump­tion cen­ters or man­u­fac­tur­ing units are lo­cated near ports, and there is lower level of mul­ti­ple han­dling. Petroleum prod­ucts have a good po­ten­tial for growth by coastal route but it is sub­ject to pipe­line con­nec­tiv­ity at the dis­charge point, and union and state gov­ern­ments should ex­tend in­cen­tives to en­cour­age.

Sau­rav Agar­wal, Part­ner, Son­thalia Rice Mill: Though the lo­gis­tics in­dus­try is more fo­cused on trans­porta­tion of com­modi­ties like steel, petro­chem­i­cals or other nat­u­ral re­sources by coastal route but Odisha be­ing the third largest pro­ducer of paddy in In­dia also of­fers lot of po­ten­tial for other prod­ucts as well. The growth of coastal ship­ping sec­tor re­quire steady and con­sis­tent cargo and food grains could fit into the re­quire­ment. The com­pany has started rice move­ment by coastal ship­ping from Paradip in a small man­ner and there is lot of po­ten­tial which needs to be tapped. The rice pro­duc­ers in Odisha couldn’t reach out to many mar­kets in an ef­fi­cient man­ner which makes them less com­pet­i­tive as com­pared to peers in other re­gions like north­ern parts of In­dia. For ex­am­ple, while rice pro­duced in Odisha is at par with the rice in Ut­tar Pradesh in terms of pric­ing but lo­gis­tics cost make Odisha millers less com­pet­i­tive. A com­pet­i­tive freight rate could make Odisha millers at par with oth­ers. The freight rate charged for coastal ship­ping is higher in com­par­i­son to other re­gions. The sit­u­a­tion is such that the freight rate of­fered by road trans­porters is at par or in some cases lower as com­pared to coastal route which shouldn’t be the case. The other is­sue with coastal ship­ping is the ves­sel sched­ule. While in the post-gst mar­ket, trucks reach Ker­ala or Tamil Nadu in about 3-4 days while by sea it takes about 15-20 days. Whereas cargo move­ment by coastal ship­ping takes much lesser time on the west coast, for ex­am­ple it takes about 3-4 days from Gu­jarat to Ker­ala. Fre­quency of ves­sels also needs to in­crease. Odisha is a con­sum­ing state, hence it of­fers an op­por­tu­nity for coastal ves­sels to bring in con­sum­ing ma­te­rial into Odisha, and ves­sels could carry paddy or other prod­ucts pro­duced in the state as re­turn cargo which would help to main­tain the cargo bal­ance for ves­sels.

Adithya Man­i­maran, Re­gional Sales Man­ager – East In­dia, Nepal & Bhutan, Maer­skline In­dia: Maersk Line started its first trans­ship­ment from Paradip to the US via Chen­nai a decade ago. But the ser­vice didn’t clicked as ex­pected. A year later the trans­ship­ment started from Visakha­p­at­nam for Kolkata and Hal­dia but there was lack of mo­men­tum, fol­low­ing which trans­ship­ment ser­vice started from Kr­ish­na­p­at­nam. A ma­jor de­vel­op­ment is re­lax­ation on cab­o­tage. Last year due to cab­o­tage re­stric­tions the com­pany had to re­po­si­tion equip­ment to cater to the reefer cargo sea­son start­ing in June-july. Boxes had to move to Colombo be­fore they could be repo­si­tioned back in Visakha­p­at­nam, which con­trib­uted to in­crease in tran­sit time and cost. "The change in cab­o­tage pol­icy has al­lowed us the op­por­tu­nity to po­si­tion Maersk Line mother ves­sels to serve cus­tomers in the re­gion." The new rul­ing has opened op­por­tu­nity for In­dia to be­come the trans­ship­ment hub wherein empty 20’ con­tain­ers could be brought in di­rectly to cater to the in­dus­tries. There is no need to call lot of mother ves­sels to mul­ti­ple lo­ca­tions, rather states should fo­cus on ways to con­sol­i­date cargo and move it as one ma­jor pool which would make the freight more ef­fi­cient for all. Maersk has part­nered with lot of stake­hold­ers to serve the trade such as it has been work­ing with Kalin­gana­gar ICD for about 2 years to en­cour­age the trade to pool cargo at one lo­ca­tion in Odisha and then ship. The prac­tice in Odisha has been such that com­pa­nies have man­u­fac­tur­ing units in the state but they con­sol­i­dated cargo in West Ben­gal and shipped via Kolkata or Hal­dia Ports. Though it seems ef­fi­cient in cur­rent sce­nario but in the long-run it will in­crease cost for ship­pers. Hence it is time the ship­pers should con­sol­i­date cargo in the state it­self at hubs closer to the ports to cre­ate an ef­fi­cient freight move­ment eco-sys­tem and it would en­cour­age ma­jor lo­gis­tics com­pa­nies to come to the state. Maersk has cho­sen Kalin­gana­gar ICD as an empty con­tainer yard even though the line is in­cur­ring loss due to de­ten­tion of in­ven­tory but it is creat­ing an op­por­tu­nity for cargo move­ment from the re­gion. Maersk started with Jhar­sug­uda as a hub to con­sol­i­date cargo but due to the pres­ence of car­tels the cost in­creased. In a bid to tackle the sit­u­a­tion, the com­pany started last mile con­nec­tiv­ity through trucks at places like Bala­sore and pro­vid­ing cus­tomers end-to-end cargo de­liv­ery. In mar­kets like Odisha, end-to-end freight ser­vice and last-mile ser­vice could only help to limit the cost and im­prove ef­fi­ciency. Odisha also of­fers op­por­tu­ni­ties to con­vert break-bulk cargo to con­tain­ers and lot of ship­pers are into the prac­tice of us­ing their im­port boxes to ex­port their goods. Break-bulk cargo vol­ume is high in the state and it opens the op­por­tu­nity to cre­ate a sur­plus pool in the state it­self. Creat­ing cargo hubs within the state would un­leash lot of po­ten­tial for coastal ship­ping and trans­ship­ment from the re­gion, and also give bet­ter ef­fi­ciency of time and cost for ship­pers.

L to R: Capt. S.B. Mazumder, Ex­ec­u­tive Direc­tor, Sea­horse Ship Agen­cies; Anurag Garg, Vice Pres­i­dent (Busi­ness De­vel­op­ment and M & S), TM In­ter­na­tional Lo­gis­tics; Adithya Man­i­maran, Re­gional Sales Man­ager – East In­dia, Nepal & Bhutan, Maer­skline In­dia: Sau­rav Agar­wal, Part­ner, Son­thalia Rice Mill

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