Indian Coastal Shipping & Salvation

The Big Opportunity To Coastal Shipping: (1)

 

The downturn in shipping is spreading wide & deep to all sectors, with occasional spurious 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
	Litres	Rs	Tons	Litres	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 litre (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, barring the domestic coastal carriage. 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 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: however, in addition, there are other vital considerations to address to have the desired effect. On my next article, I will address the first issue of 'High Cost Of Ship Owning'.

 

 

The Big Opportunity To Coastal Shipping: (2)

Cost Of Ships For The Coast:

 

Looking at the Indian coastal landscape of coastal shipping, the most defining asset involved is the ship – assuming other elements like conducive port facilities, regulatory regimes, connectivity, tax laws, & fuel costs as clear givens. The cost of the ships or trucks (including usage cost of the paved roads) or railways (including the usage costs of the laid tracks) needs to be substantially low to justify lower cost of usage or hire. In the recent past, the hire for ships was abnormally high. Today, it is low. Such fluctuations shall shake & destabilize our economy, assuming coastal shipping carried domestic volumes as high as the railways. Imagine what would happen if railways increase freight by 50% across the board. There could be civil unrest! Therefore, we need the value of ships to not only be the lowest possible, but also relatively stable.

 

The reasons of high cost of our coastal ships – (1) IMO, STCW, IACS & other International regulations are being perceived & implemented as inviolably sacrosanct (2) Complex Bureaucratic Processes (3) Unionism (4) Unimaginative Taxations

 

IMO, STCW, IACS, & the Hague Rules are phrased & designed by the ship-owning countries of the world – Western Europe, USA, & Japan - an obvious attempt of self protection. Their ship-owning interests are not necessarily congruent with our nation's interests. Indian ship owning is infantile in contrast. Asking Indian Coastal Ships to comply with such rules (with hardly any substantive modifications) is like asking a child to wear his father's shoes. The child cannot walk. We need an affordable coastal shipping to support the economy of a country of more than a billion. Majority of this billion, live in dehumanizing poverty. Therefore, this country needs its own desi rules or at least the international rules need indigenization for it to be practical. I know, of one small ship owner, who converted his ship to home flag. He had his ship stuck in the repair yard for nearly three months. Heaps of correspondences, tons of steel, loads of hire losses, and innumerable telephone calls of person-hours, were sacrificed – not to mention greasing a few palms too as we call it under the table. The poor guy was pushed to near-bankruptcy, for daring to flag in. Can we not be less wasteful with out meagre resources? In a coastal trade, where the vessel is not even 20 miles from the coast any time, do we have to be such a stickler for international rules! The coastal vessel is no 'Titanic' in northern Atlantic with surreptitious icebergs around! In extreme event, our Coast Guard could reach it in hours. If we can decolonize our heads, we could make our coastal ships more affordable – simplifying rules and making them practical. Flag rules & IRS – their actions are further demonized by the lethargic Dry Docks & work shops (Refer to Unionism). Delays & greasing costs due to bureaucratic procedures, duties on importation of spares and multiple taxations at various checkpoints, have no less a role to play in this drama. I know that the terrors of Unionism & Customs rules shall crumble in the end, when there is more awareness in the society – until then we need to align our maritime rules to our realities, not to the realities of the west. Sooner the better.

 

If STCW is devilish due its hidden agenda, our Unions are no less. It is easier to kill the devil from the outside, but the devil within is more painstaking to deal with. The answer lies in contracting out navigation & pilotage, maintenance, and cargo operations of coastal ships to specialized private companies. Doing away with STCW is like killing another form of License Raj: imported after independence. In fact, any graduate or engineer with only 3 months on-board experience should be allowed to do maintenance, operations, & assistance to navigation. Navigation is done on a GPS & a marine engine is not so different from any combustion engine. A private pilot could bring the coastal vessel from the berth in Kandla & hand over the vessel alongside in Nhava Sheva and from Nhava Sheva he could bring another vessel back again – as an example. A few crews & engineers are needed to operate & maintain during these short voyages. The specialized private companies shall bring in high standards of vessel operations, safety & maintenance at a fraction of the present cost.

 

I do not subscribe to complete waiver of duties and taxes as a means to help the industry grow, as suggested by many. However, the duties & taxes need to be rational, so as not to kill the market. If the taxes were kept small & procedures simple, the businesses would thrive – driving up the volume of tax collections.

 

Last but not the least – when there is a global meltdown pushing the asset values of ships to its historical lows, the government should encourage buying as many ships as the Indian Coast would need in next ten years. These cheap ships, if also run most economically as suggested above, shall add a few numbers to our national GDP and force the Indian railways excel further.

 

The Big Opportunity To Coastal Shipping: (3)

A Critical Look At The Ports: Part – 1 (Unions)

 

Ports in India are the invisible rotten hands of the Unions & the government to suck away any thing it lays its hands on with diabolic impunity. It is an orgy of different government departments and officials to revel in this mayhem. Even the private ports, though many times more productive and progressive, cannot but mime & indulge in this plunder. This may sound harsh, considering its lower contribution to kill coastal shipping in comparison to high cost of ship owning, as discussed earlier – but can be justified because of its insidious effect on our international trade.

 

Let us analyze a simple partial-operation of loading one 20' container by ship's gear, containing 20 MT or CBM of cargo on a coastal vessel. The current tariff stands around Rs 2000/ to Rs 5000/. You need one Crane-Operator, two people ashore to hook the spreader, two people aboard to position & unhook – five men & five minutes to load one box. We shall ignore horizontal movements & cell guides.

 

**Assuming a team of five men needs to do a minimum 120 moves per day (8 Hours) and with an average salary of Rs 10,000/ per month. Informatively, in Chittagong Port in Bangladesh productivity is equal and often higher than 15 moves an hour averaged over 24 hours, using ship's gears.

 

Assumed Salary Per Head Per Month	INR 10,000
Men Involved	5
Manpower Cost per month	INR 50,000
Manpower cost per day	INR 1,667
Manpower cost per move	INR 14

**Actual stevedorage cost per Ton or CBM – Rs 0.69

 

If we take downtime costs & operating margins, we can push this cost to a maximum of three times to Rs 42/. Actual tariff is 50 to 100 times of this. Wharfage & storage are charged for the usage cost of the Port separately. What a colossal national waste, the little Indian has to pay for? The reasons behind this are – Self-serving Port Workers Union and a parasitic bureaucracy that manages the ports. Today I shall discuss on the former.

 

As a case study, I shall discuss the port of Paradip, which is more benign in contrast with Kolkata or Mumbai. There are three Unions involved in an operation of loading a box. One – Unloading cargo from wagon/truck. Two – moving from CY to shipside. Three – shipside to board. One is controlled by a local criminal & stevedoring company, who is the leading member of the Pool of six, entitled to draw labour from this pool – meaning the port is virtually controlled by one man. No outside stevedore company can draw labour. The entry of any new stevedore into this Pool of six is banned by an imbecile Supreme Court verdict. Note - How the so-called independent judiciary is instrumental in sucking little man's blood! This appears gross and murky, because a lower court cannot overturn this demonic verdict. No port user, however mighty, can use this port without the blessings and agreement to the administered price and conditions imposed by this person leading the Pool of six. He decides, out of this six, who will do what. He keeps the cream for himself. The Union leaders are in his pay roll and the poor workers are hoodwinked into his self-serving needs. There are similar & complex mechanisms for the other Unions too.

 

You need to book a gang well in advance. As a practice, the workers arrive on their sleek motorbikes, one hour after the shift starts. Then one of their leaders would start the loud haggling with the stevedoring supervisor (private) that takes about another 30 minutes to an hour. The first issue would be the quantum of incentive per box, for the workers not to work. Usually, we have to take our own hands from outside to do the operations, because the workers are generally obese & excruciatingly slow in their movements, with huge potbellies and have difficulty in climbing the gangway, let alone the Cranes or container-tops. Each of them owns a fleet of Dumpers or at least one dumper used inside the port by the stevedoring companies by compulsion. They are masters in the twisted Labour Laws of our country and can bamboozle any decent lawyer at any given day. Since it is illegal to bring in outside hands to work inside the port, they can keep their eyes shut on this, as long as the incentive or bribe is meaty enough and it usually is. The other issues for haggling are – working in tea-breaks, number of outside hands taken, meal price, time of stopping the work (Usually before one hour of the shift end, that could stretch to more than 2 hours if not properly negotiated), price of safety gears (we need to pay even if they don't use), and above all speed money. Speed money goes exponentially higher according to the benchmark set by the leader for the shift. If the benchmark set by the leader is 30 boxes, and you end up doing 100 boxes – you need to pay for these extra 70 boxes in different complex slabs. Usually, the leader's mathematical acumen is better than the supervisor, in deciding the number of boxes to load or unload in a given shift. Many times the supervisor bites far more volume and ends up paying so much incentive that, the bottom-line of the stevedoring company takes a beating. Out of 8 hours of shift, 3 hours are lost at the beginning, mealtime, and end of shift: provided you do a decent haggling. In addition, you need to train your outside hands to be respectful and obedient to the workers – failing that, work would be disrupted midway and another bout of haggling could start. This could be disastrous to the profit of the private stevedore. I do not blame the workers at all – In fact, under similar situation I or you would improvise a more sophisticated and ingenious way of maximizing the returns. Unions are a bad idea, but held on to by politicians and criminals to serve their own interests - while the media & intelligentsia look at it as a sacred cow. The little man pays a heavy price though. The above results in monstrous cost-sheets, destroying new businesses & new jobs, deprive the poor little Indian the right to equal opportunity to work, destruction of national economy, and above all a viable coastal shipping. I shall deal with a possible solution to this menace on the sequels.

 

The Big Opportunity To Coastal Shipping: (4)

A Critical Look At The Ports: Part – 2 (Bureaucracy)

 

Our bureaucratic system that manages our ports has smothered not only coastal shipping, but also our international trade. I have personally come across brilliant & dynamic bureaucrats in the ports who passionately wanted to right the wrongs, but in vain. The TAMP validates the wrongs as the rights – helplessly though. The demonic red tapes do not allow them. The Unions strangle them.

 

Port administrations have a huge staff with many departments, many of them redundant and disused, but act as a force to slow things down.  Let me try to cover a few departments and their deterrent acts. The traffic department allocates berths, internal logistics, & storage.  It is badly done. Ships are stuck inside due to slow operations. Ships wait outside to get a place. You need to grease palms to get a berth. This is not the case with private ports. The marine departments are headed & manned by Master Mariners, who have adapted themselves to the new system quickly. They control the pilotage and ship movements with unmatched ineptitude and arrogance. They too need their hands greased. They work totally out of synch with the traffic department. Ships, both inbound and outbound are made to wait with the drop of a hat. Berth utilizations are never optimized with the vacant berths left by a departing vessel to be deserted unoccupied by the next vessel in line for many dead hours and dead days. I reiterate the fact that this stems from systemic fault lines and there is absolutely nothing to blame the people in the system. You need to push papers through a maze of departments to get a simple thing done. Even, the CISF have their own fiefdom to slow things down as much as they can as per the laid out standards of red tape. ISPS (though useful when used wisely) is followed up like God's gospel with little regard to home truths. The recent Mumbai terrorists coming into the heart of the city in Mumbai to hold the nation to ransom, tells us that our security concerns have no answer in the ISPS alone.

Customs department acts as an all-pervading ugly monster to crush any signs of efficiency that might survive the incessant badgering by the above-mentioned departments. Their systems and controls are archaic & arcane, that can stamp out logic & rationality, on any sunny day. Without going into specifics, we can conclude safely that the system pushes cost to the sky, pushing domestic prices high much to the little Indian's misery and rendering international trade uncompetitive against the likes of China or even Bangladesh. The Indian port tariffs for a vessel is four to fives times higher than that of Malaysia or Singapore, while the quality of service provided could be as low as one-fifth. For some strange reason, the pilotage cost is inexplicably high.

 

Solution: The port trusts need to outsource the entire management & operations of ports, including pilotage to private companies. An open bidding process on-line (Similar to the 3G spectrum auction in UK, where the government made money in billions) can be used. Subsequently the Trust can act as a regulator and collector of revenue-share. One common e-platform should be used by the Customs, Port, Banks, RBI, DGFT, DG shipping, Shipping line and all other government departments for coastal movement, exports and imports. This automation can cut on duplications and red tapes. Parts of the port should be declared as national free zones for coastal cargo to exclude the legitimacy of the Unions. Gradually the free zone should be extended to push the Unions out. Once the management is successfully outsourced and Unions are edged out, the tariffs could be rationalized, based on fair costs. In addition to these measures, national ship owning can be accelerated using the principles of 'Smart Flag' as enunciated earlier.

 

The Big Opportunity To Coastal Shipping: (5)

A Critical Look At The Ports: Part – 3 (Unimaginative Tax regimes)

 

High taxes are anti-people. It just implies poorer people and a fiscally irresponsible government looking down the tunnel of inflation & defaults. On the pretext of distributing wealth from rich to poor, the government sucks taxes from every possible transaction in a race to match its greed. The product or the service used by the little man passes through these innumerable layers of taxations, resulting in the poor man actually getting poorer and rich remaining more or less unaffected – since all these taxes pass on as costs to the end user, the little man. Selling rice at Rs 3/ is actually giving back Rs10/ after robbing Rs200/ and in the same breath dis-incentivizing the farmer to work or push him to commit suicide. Loan waiver is short-term. The only logical outcome could be famines.  In India, since the government has to face an election in five years, as it is doing now, it overspends its taxes on revenue expenditures to buy votes, instead of building schools or roads.

 

Taxations if imaginatively & moderately applied can bring in more for the government or else it can destroy many businesses on its crossfire. Our coastal shipping too, is a victim to this heinous crossfire of complex taxations in addition to other evils as enunciated earlier.

 

For example, let us assume that the cost making & selling a cup of tea is Rs 2/. The consumer is willing to pay Rs 4/. If high taxes pushes the selling price to Rs 5/ instead of Rs 4/, there occurs no transaction & the very market vanishes. The seller abstains from the business and government gets no tax at all. That is exactly how things are happening for coastal shipping. If you add all the taxes like duty on bunkers and lubes, service tax on stevedorage, import duties on spare parts, freight tax, corporate tax, fringe benefit tax, taxes on seamen's salary, state tax, municipality tax, professional tax, Octroi and many other forms of taxes plus indirectly paid bribes to government officials, with a perennial culture of delays & lethargy to support it – the business gets almost impossible to conduct with profitability –unless the entrepreneur is ingenious enough to suck out the government system (where the bribe is way cheaper than the high tax), instead of a hara-kiri of compliance. That is exactly the reason, why India sells hardly any bunkers to foreign vessels, any serious repair or workshop job is rendered to ships in India, any crew change is attempted unless there is no option, or any spare parts sent on board from abroad. Similarly, shipbuilding is a shameless begging industry for government subsidy. Business goes away from India and the little Indian loses an opportunity for jobs. No taxes for the government either. Unimaginative taxes, corrosive bribes, & bureaucratic crippling delays, when working at tandem can bring down any new age healthy business to destruction and make the little Indian jobless & poorer. The government too loses taxes, goes poorer, indulges in deficit revenue spending (shamelessly begs privates funds for infrastructure building, while choking them with taxes) and subsidy doling, and prints currency with impunity (instead of sterilization when money supply is high) to give us double-digit inflation that robs the little Indian, his hard-earned savings. Coastal shipping today, stands as a naked Indian orphan for the world to see with the much clichéd '7500 Kms of coast line, 14000 Kms ILW & 160 Ports and of course more than a billion mouths. Fortunately, since all businesses in India are similarly taxed, we cannot demonize its damaging effect on coastal shipping alone in isolation. Nevertheless, we can say that, the complex effects of various excessive taxes, renders coastal shipping unviable similar to many other dying industries like the cup of tea, discussed on top. Little wonder, we buy ships, toys, computer parts, cell phones, & chemicals from China & Korea with our hard-earned forex – remitted inwards by the NRIs or software exporting companies etc.

 

Since most of such issues are political & societal, I shall stay clear of any solution that may look good on paper and would stand impractical. However, as a solution – we can create free-berths or free shipping zones in all our ports. These free-berths can be kept debugged of Unions, red tapes, & unimaginative high taxes to the extents possible. This along with the concept of 'Smart Flag' as discussed earlier can help the coastal shipping grow, augmenting our GDP.

 

I shall take a leaf out of one of such sorry anecdotes to bring home the point. A coastal cargo parcel moved from Vizag to Kolkata (door to door), beating the Railways tariff. The shipment just froze in KPT. Customs wanted their pound of flesh and they were not sure how big the pound of flesh could be. Ultimately, the port demurrage & greasing costs pushed the losses to unbearable proportion. It was not only a bitter pill for the undertaker, but also other entrepreneurs. There were a lot of other sub-plots to the above gory tale like: Vessel not getting a berth, when in practice there were berths unoccupied, the vessel could not enter because the draft dropped in the mean time, the open disagreement between the traffic department & the marine department, the description in the customs filing was not up to the satisfaction of some officials, & many more.

 

India's Coastal Shipping: (6)

Indian Cabotage Rules:

 

Indian Shipping Policy is like a garrulous old hag's valiant misadventures with a translucent, skimpy swimwear, in the comical miming of youthful exhibitionism, with a vain struggle to masquerade the colony of flabby cellulites. Derisions apart, Cabotage had a profound effect in keeping our Coastal Shipping – a famished, wasted, & stunted bedlam in comparison to the powerful national shipping of US or China. US could and still can afford the Jones Act of 1920. Going by their experience of the two world wars and many other wars fought far away from their home soil, their military-expediency to hold on to this Protectionist Act far out-weighs their commercial interests. Independent India fought all its wars on its shores and borders. I do not foresee a future where India shall have the same world-domineering mind-set, ambition or need like the US to fight away from home soil. Our hands are already too full anyway to contemplate otherwise. China has significantly modified its Cabotage Law in 2003 to allow transhipment of containers by foreign vessels. Indonesia, Malaysia, & Brazil have had similar dilutions. Our shipping policy is not only rigid, inconsistent, impractical, & patchy but also highly detrimental to our national shipping and blatantly anti-people. You would notice blind arrogance in its laid out objectives. The number of times the word 'control' is used in the document – as if a dirty leaf out of Stalin's manifesto - would make people like you or I regurgitate in disgust. It is a cruel policy of a megalomaniac bureaucratic power robbing the nation & its people of their means to conduct business freely with dignity. How can such controls protect a famished & dying Indian shipping anyway? In fact, it has smothered and stunted it beyond salvage. How can we just ape Jones Act with complete disregard to our national interest? A rich US can afford this Act, but not a poor India – impoverished under the Socialistic scalpels of anti-market & anti-people ideologies for more than half a century. Our priorities are different. Our topography is different. And so are our demography, culture & philosophies. We need a strong defence not offensive military outlook. We cannot bleed our poor in the name of Cabotage & import substitution.

 

Allowing foreign flags to participate in coastal shipping shall cut costs of both coastal & exim cargo. The combination of the volumes of domestic & exim cargo shall give that extra edge of economy of scale. The scale is desperately needed, when you see one-way domestic volumes from north to south on the west coast & the elusive volumes on the east coast. Foreign flags are no threat to Indian shipping today because Indian shipping has survived as a sick child, the deathblows of Nehruvian policies far worse than what international competition could auger. I can safely affirm that by dilution of the Cabotage, we shall benefit on costs to the nation and the coastal shipping. This shall have no damaging effect on our national tonnage. In fact, this might give a small push to Indian ship owning – indirect or direct. Therefore, I have strongly proscribed the notion of a 'Smart Flag' concept that would transform Indian shipping into a vibrant & powerful one in a matter of months. For more on this you can visit www.maxiconline.com under the link of articles.

 

Example: A foreign or smart-flagged vessel calls Nhava Sheva from China with full load. On the return leg, it is practically empty all the way until China. If Cabotage is diluted, she can carry transhipment & domestic boxes from Nhava Sheva to Tuticorin, Cochin & even Chennai or Vizag at an amazing price, while rationalizing the freight levels from China.  Imports from direct calls from Europe, US, Africa, & Middle East to these ports shall be transhipped in Nhava Sheva or Mundra. Along with this exim lot, the domestic cargo will flow with a fraction of its current cost. Similar activities will spring up in Chennai or Vizag too. There would blossom commercially sagacity in having dedicated feeders from Chennai/Vizag to Nhava Sheva/Mundra with both legs having ample cargo. Once fully implemented, Colombo, Salalah, Singapore, Portklang, or Tanjung Pelapas shall have a run for their money & billions of much needed precious dollars could be saved from utterly wasteful projects on Vizhinjam or Vallarpadam or Colachel and focused on more constructive projects like the Sethusamudram or expansions in Nhava Sheva or Ennore.

 

Our Coastal Shipping: (7)

A Critical Look At Our Transhipment Policy

 

 

The little Indian has decided, stamping his authority on sanity, stability, & progress. I believe that the insane past policies shall be sent to the cleaners, just like the self-serving ideologies of Socialism or bigotry. Our coastal shipping and national shipping certainly deserves rescue from the monsters of the past and their policies, blinded by the lenses of Fabian Socialism. And that too decisively. I read a story in 1980. A rich African chief wanted to be famous. He called one big consultant from Europe for the job. The project was presented to the chief on nearly 300 pages of crisp documents with an elegant leather cover. Then the consultant rigged a big bamboo tower on a river with a huge plastic ball filled with stones to create the biggest splash in the world, in front of a huge crowd of reporters (specially brought in by him). The project's cost was 5 million dollars, those days. The chief & his people were very happy with the glorious outcome of this project and the pride it brought to their tribe!

 

Our government's consultants were Dutch - Frederic R Harris. Our polity & bureaucracy wanted a mega transhipment port in Vallarpadam & the consultants were paid to validate it at any cost. No bidder displayed any serious interest in this imbecile drama except 'P &O' who had their hands full in Nhava Sheva, Colombo, Chennai, & Mundra. It was strategic for them to remove this irritation & partake in the orgy too. Being the sole bidder, they had a five years right to honeymoon on the old port & further more usage of the port equipments, with a few noodle-strap strings attached, like a pittance of a penalty of 10 Crores on defaults on a mega project of more than 1200 Crores, where majority of the investment would come from the tax payers pockets for the development of roads, rails, & infrastructure. Have you heard the splash? Are you not proud like the Africa tribe?

 

Transhipment is an unnecessary, dumb & passive activity. Direct calls reduce costs and transit times. We need efficient transport systems from places of excess production to places of consumption. By arbitrarily developing a big transport system, defying the above logic, shall not convert a consuming place to a producing place or vice versa. The pledge to have a great transhipment in Vallarpadam sounds no different from the African Chief's pledge to fame. There is nothing wrong with the drafts, facilities, or capacities - current & future - in Vizag, Mundra, Chennai or Nhava Sheva. A few metres can always be dredged to accommodate Suezmax or even Malaccamax vessels and box handling areas can be increased with a cost. The reason why so many big main line ships do not call many Indian ports is that the volumes are insufficient – not because of drafts or port facilities. Since there is not enough volume to bring in a direct call, it makes commercial sense to collect volumes into doable frequent lots in a business friendly Port and send that on a small vessel, just right for the collected lot. It makes sense to build a doable lot in a port with captive import & export volumes like Nhava Sheva or Chennai to get at the advantage of the economy of scale for transhipment or distribution hub. Look at what China has done to Shanghai or Shenzen for transhipment. Trying to do that in Vallarpadam with politically, spiced bravado of utter ignorance tantamount to playing Holi with little man's sweat. We need transhipments for old handicapped ports like Kolkata, Haldia, Kandla or even Kochi itself (handicapped by anti-market & anti-people ideologies and having small volumes of exports/imports) from bigger ports like Nhava Sheva or Chennai – not the other way round. We need to build or expand port facilities where we need them – not develop ports like Vallarpadam & expect industries to come there for the captive cargo or transhipment.

 

Vallarpadam Mega-project is a thunderous and putrid degasification of an irresponsible & megalomaniac bureaucracy & polity belching out the stench of unaccountability on a bloated diet of little Indian's sweatshop. Vallarpadam is a bad dream. Millions of dollars be it private or public, are being poured into this leaky bucket. The home truths about Kochi : Cancerous Unions, insignificant local import & export volumes to assist in economy of scale, improbability of hinterland industrialization due the perverted anti-market and anti-people ideologies, illogical idea of feeding from small port to large port rather than large to small, a perennial & costly need to continuously dredge the silting, and not the least of shelving & politicizing the 'Sethusamudram Project'.

 

We depend on Singapore or Colombo - not because of physical infrastructure or geographical advantage alone, but because of business-friendly efficiency & cost. If we can develop similar if not same, efficiency and cost for the transhipment of containers in Ennore, Tuticorin, Nhava Sheva, Mundra or Vizag, while bundling domestic or international traffic, we shall not only reduce costs of transports but also spruce up Indian national tonnage & coastal shipping. Geographical advantage of Vallarpadam, Vizhinjam or Colachal as promulgated by many is just an excuse to hide our own dirty under-wears. Even Chennai, Ennore or Tuticorin have better geographic & demographic conveniences without the other out-weighing baggage.

 

 

India's Coastal Shipping: (8)

Sethusamudram – A Rethink

"Activities with low productivity or low value addition, in the final analysis, hurt the poorest the most." – APJ Abdul Kalam in 'India 2020'

 

At a cost of 600 million $ - a project to blast & dredge 89 Kms of rocky seabed & land, entailing a canal of 167 Kms with a width of 300 metres and a depth of 12 metres – joining Arabian Sea to the Bay of Bengal, Sethusamudram appears to be of ' Low productivity & low value addition.

 

Quote from official government web site: "The channel will cut short sailing of an additional distance of 254-424 nautical miles and 21-36 hours of sailing time"

 

Facts: The most distance you can save is from Chennai to Tuticorin is only about 350 nautical miles. From Africa, you save no distance at all. From Red sea or Persian Gulf region towards Malacca straits, you would some distance. Considering the best-case scenario of west coast to east coast, you would save 18 to 29 hours depending on a speed of 20 to 12 Knots. In the canal, you have to slow down to about 6 to 8 Knots for shallow water effects. You have to slow down to pick up or drop pilot too. So effectively, you could save 12 to 20 hours. You would save fuel of about 25 Tons for an average 12000-Ton ship drawing about 8 metres of draft. The largest vessel transiting the canal can draw a maximum draft of 10 metres along with smaller ones. From charterer's point of view, you can save about 12000 $ in today's market (This could go higher when charter rates and bunker prices go up), provided the transit is free of cost for the vessel in the example. Moreover, it is not meant to be free. The project plans to recover the costs in 30 years! 600 million $ in 30 years amounts to daily net profit margin of 55000$. The project guestimates 9 calls a day, implying a net profit of 6100$ per vessel call. To get a net profit of 6100$ per ship, perhaps you have to charge 9,000$ per vessel – because you will have the running costs of staff, navigation, & periodic dredging too. No ship owner or charterer would be willing to save only 2000$ for the trouble, unless the transit tariffs are brought down.

 

Going by the news reports, China & Pakistan have provided arms and UN support to Srilankan government to crush the LTTE. As part of this deal, they are building a port on the southern part of Srilanka for undisclosed purposes. 'Sethusamudram' project has irritated and threatened our friendly neighbour to cosy up with China & Pakistan. This would cost us heavy too in military expenses. Was this an externality, unimagined?

 

Solution: Coming back to the cost of 600 million $, the dredging cost is phenomenally high. The charter hires of dredgers had obscene figures like 40,000 to 80,000$ a day. In this current market situation, the numbers need to be crunched harder with repeat tenders. This can bring down the cost to about 300 million $, if you stick to a depth of 12 metres. I would suggest bringing the depths down to about 7 metres for coastal barges, small vessels and ships in ballast – after all, we need to start from smaller ships & barges. This would bring down the dredging cost further to about 200 million $. The coastal Masters should be allowed to navigate without compulsory pilots. This shall open the door for development of coastal shipping and trade. When demand increases further for bigger vessels instead of barges, the canal can again be dredged keeping the commercial viability in mind. At the same time, our friendly neighbour should be constructively involved in its making and usage, removing any threat perception and collaborating on mutual share of the facility. The saved money should be used for development of 'Smart Flag' & port facilities – where we need the funds desperately.

 

  

India's Coastal Shipping: (9)

Doctrinal Handicap:

 

"The problems as discussed so far, can hardly be solved by the government – because the government itself is the problem."

 

The killers - High cost of ship owning under Indian ensign, irrelevant Unionisms, a lost & self-serving bureaucracy & polity, bad planning of ports and canals, & greedy taxations. There too are many other factors in addition. All of them are just the symptoms of a bigger disease. Therefore, attending to the individual symptoms shall have limited effect with side effects too. The disease is the fundamental political doctrine from where emanates all policies for the nation – building its social and business architecture. Shipping policy too is derived from that centrality.

 

Gandhijee said, "Any thing you do must in its final measure wipe the tears of the poor and the downtrodden."  Nehru said, "We must eradicate poverty, illiteracy, disease, ignorance & so on."  Until today all policy makers sing the same song but in different tunes. Gandhijee, Nehru, Indira and others could only think of Socialism – a benignly mutated middle path of Communism & Capitalism – as a solution to our problems since independence. The current thinking has tilted more in favour of free-market Capitalism – expecting the fruits to trickle down to the poor & downtrodden or bubble up from them. But none of these ideologies could wipe the tears. There needs to be a single Dream for all Indians (Not leaving anyone outside it is very central), best articulated by APJ Abdul Kalam. The ten-year-old girl who aspired to live in a Developed India, made him espouse - "India to be a developed nation by 2020". The statement is profound. It bites. If all policies are stretched from here, no doubt, millions of issues, be they social, political, economic, or environmental shall find a clearer direction & solution. We can never call ourselves developed with untouchables, caste systems, bigotry, festering slums, a degraded eco-system, a sick national tonnage, a demonic bureaucracy or a confused military. All this shall disappear within a 15 trillion dollar economy by 2020.

 

Let us take up an issue like "Vallarpadam".  Ask a simple question – "Will this project take India to be a developed nation by 2020?"  Answer is "No". Same argument will go for excessive government controls & regulations for shipping or Labour Laws those make the cost of carriage of goods expensive and therefore cannot be congruent with the central maxim of a developed nation by 2020. Similarly bad bureaucracy, polity, & procedures resulting in a wasteful corrupt culture shall be the first in the hit list. Till the time you think of Socialism, Marxism, or tilting-to-market-capitalism to bail you out, you will never think of correcting this bureaucracy and the systems – rather you would use this lazy-super-tool to enforce the ephemeral doctrines, resulting in lop-sided growth or retardation in many sectors and regions. Paradigm needs to shift from imported ideology of Fabian Socialism, Marxism, or free-market Capitalism to our own desi mantra of being a developed nation by 2020. Our cultural value system is far too strong & durable to need crutches of these hardened stands of ideologies. All it needs is clear well-defined goal. China has improvised from dancing with the wolf to becoming one. The so-called free-market idea has been twisted beyond recognition by the Communist China. Can you tell me how a dozen plastic Chinese combs costs us a few cents, where the input costs (Including the low labour costs) are far higher ! Hay days of bounties & drawbacks in China. I am sure, Adam Smith wont believe this - if he was watching this from the heaven. Their GDP is more than three times than ours. Poverty though not completely gone is still not as shocking like ours. We too can wipe the tears of the poor & the downtrodden, without being a wolf. We must adapt & change quickly. We must not blindly follow free-market or central-control of Socialism or any such dogmatic rigid stands – since we don't need them.  We live in a world, where other countries erect tariff or non-tariff barriers. They create tax heavens. They do not export us sensitive technology or materials. They try crippling our economic edifice. They block us. There is no perfect free-market or Utopian human equity through Socialism, Communism or Capitalism. Those ideologies are almost obsolete in their functions in a real world of today. Therefore, if we adopt "A developed Indian by 2020", we can jump over these degenerative spin-offs of imported ideologies or their mutated variations. Then we need not line up to pay bribes to government officials or politicians to get permission for doing fair business or getting our ration-cards. We need not despair & pay obscene donations to send our children to the best private schools, while many less unfortunate children are ghettoed to shabby vernaculars. No one can harass us in our own land. We shall vote only the Politicians those deliver. Systems shall change quickly from the ashes of the colonial hangovers and imported ideologies. India in 2020 shall wipe the tears seen by Gandhi and the poverty or illiteracy seen by Nehru. We shall become a dominant maritime nation with healthy coastal shipping. We must break all old rules and write our own rules by doing all we must to be "A developed India by 2020". We must .