The Big Opportunity To Coastal Shipping:

The Big Opportunity To Coastal Shipping:

 

The downturn in shipping is spreading wide & deep to all sectors, with occasional pseudo bear rallies as mere noise in the turbulence. This is bad for many. However, this could be an immense opportunity for Indian Coastal Shipping. There will be many cheap ships in the world market, those can be deployed on our coast. In six to ten months, the price of a second hand vessel could be as low as half of a road truck in terms of loadability : (Market Price of Ship ÷ DWT or Market Price of Truck ÷ Maximum Load).

 

	Con	Price	Mx Load	Con/1000	Cost/1000
	Liters	Rs	Tons	Liters	Rs
Ship	37500	13.5	10000	3.75	50.63
Rail	11000	30	3000	3.67	110.00
Road	4000	30	10	400.00	12000.00

 

Con : Consumption of fuel per every 1000 Kms

Price : Price of fuel per liter (IFO in case of ship & Diesel)

Mx Load : Maximum tons  of loadable cargo

Con/1000 : Fuel Consumption per Metric Ton for every 1000 Kms

Cost/1000 : Fuel Cost per Metric Ton for every 1000 Kms

 

** A typical ship of 12000 dwt is compared to rail & road. In case of very light cargo, CBM can be approximated to a Metric Ton for loadability purpose. In case of a mix of weights, the cost could be further leveraged down, more in case of a ship. The figures are approximate to justify the points made. The subsidized diesel price in India is  actually slightly higher than the world market price ( About Rs 23), because the subsidy is calculated on the duty-paid-landed price.

 

Road is too fuel inefficient to have any fair comparison to coastal ship or rail. It has its utility in penetration, spread, & door-to-door capability. A ship is not necessarily a greener substitute to rail, though it could be more economic & practical. However, in case of a much larger ship, we will get that 15% edge(Carbon burning) over the rails. Larger ships could carry only coal or ore in large quantities at a time - not semi-finished and finished goods. We would need more of smaller, faster, cheaper, and varied coastal ships, like RORO/Container Feeders/RORO cum Container carriers/mini-bulkers/tankers & general cargo carriers in addition to the large bulk-carriers to cater to the current and future needs. Coastal shipping would demand less investment in infrastructure – unlike laying new rails or building straight unhindered roads. Even the current port facilities are sufficient for the time being : without the need for dedicated funds for its development to accommodate coastal shipping.

 

Integration of road, rail, & coastal ship can considerably cut on fossil fuel consumption, in addition to saving costs in billions of dollars and boosting productivity . Stand-alone strong coastal shipping or a lopsided rail system, as we currently inherit, will serve no meaningful purpose.  65% of our freight moves by road and 35% moves by rail, if you consider current coastal ship movements as negligible. As a national policy, we need to reverse this ratio, where the rail could carry 65% and the roads 35%. In order to do this, railways needs a challenge from coastal shipping as a competitor. Roadways do not have the teeth to compete with rails, as you can infer from the table on top. As coastal shipping keeps developing, the railways shall be forced to think out side the box to make it more competitive. This process shall balance the mix of rail, road & coastal ships to optimize green-effect & national productivity.

 

Then how do we promote coastal shipping to bring about this evolution? The myriad reports merely strengthen our entitlement mind-sets, with scanty regard to the tax revenue needed for the government for governing the issues in the first place. The reports sing the same songs like the industry bigwigs – tonnage tax, shipping finance from governments, develop port facilities, waiver of import duties on capital goods imports and so on. I feel these are superfluous and shall have insignificant effects, if any in.

 

High cost of ship owning in India, high cost of ship manning, high cost of ship maintenance, Seafarers Union,  high labour costs in ports due to complex layers of Unions, unusually high port tariffs for ships, too much tax on bunkers, greasing costs to Customs, & complex documentations & red tapes are the major cost boosters and in that order. Other problems, like warehousing, connectivity, port development and taxations etc though important, are minor in nature and can be corrected as the process starts building up. The concept of a "Smart Fag" as written in my earlier articles, corrects many of the current inherent problems in coastal shipping. In addition, there are other  vital considerations to address to have the desired effect. On my next article, I'll address the first issue of 'High Cost Of Ship Owning'.