Column | 316 days ago |

The immense potential of India’s inland waterways has gone unnoticed by the government, in spite of being economical, safe and environmentally friendly. Srinath Manda reports.

Transportation cost comprises 50 percent of the overall logistics expenses (spend) incurred by a majority of Indian industries ranging from hi-tech electronics and communications sectors, to the traditional ones such as food, textiles, and automotive. The modes available for companies for transportation of their cargo can be broadly categorized into three types – land (road, rail, and pipeline), air, and water. The main water transport routes are oceans, coasts, seas, lakes, rivers, and channels. While oceans and seas are used for international cargo transportation, the other water transport routes are used for domestic cargo transportation.

Coastal and inland waterways are considered to be the most economical, safe, and environment-friendly modes of transportation for domestic cargo movement across the world; this is widely practised by large industrial nations, including China. Further, coastal shipping has proven to be the most energy-efficient and the cheapest mode for transporting bulk goods like iron and steel, iron ore, coal, timber, cement, etc. over long distances. It is also well-suited for transportation of petroleum products.

It is estimated that using the waterways mode offers savings from 25-50 percent in the overall transportation cost, especially when utilized for long distances.

India has an extensive network of coastal and inland waterways in the form of rivers, canals, backwaters, and creeks, with a total navigable length of 14,500 kms. Out of this about 5,200 kms of river and 485 kms of canals can be used by mechanized vessels.

At present, the developing and governing body — Inland Waterways Authority of India (IWAI) has declared total five national waterways for inland waterway transport; these are being developed further for large-scale navigation by the IWAI.

Low Use Of Waterways
Unfortunately, the coastal and inland waterways mode has been highly underutilized in India for cargo transportation, compared to other countries like the USA, China, and other developing economies like Brazil. Frost & Sullivan’s research found that only about three-four percent of total transportation within India occurs through this mode. In comparison, the mode’s penetration is about 30 percent in the case of China and about 15 percent in the case of the USA.

Reasons For Restraining Use

  • Limited capacities and lower preference for domestic cargo transportation by existing shipping companies and seaports
  • Lack of integration with other modes of transport, especially rail, except in the case of few select major ports. This results in a partial usage of the coastal mode
  • Also, there is an imbalance in coastal traffic movement, as traffic is not equally available in both directions. This makes it necessary for coastal ships to sail in ballast, at times, on the return journey
  • Another major reason is the old vessels used in coastal shipping. The coastal fleet is ageing fast and over half the fleet is already overdue for replacement

Desired Improvements
a) Expanding major ports capacity to accommodate domestic cargo, which is partly initiated under the Indian Government’s Maritime Agenda 2010-2020.

b) Developing more coastal routes for exclusive domestic cargo movement, if possible through development of multiple minor ports into dedicated domestic cargo ports.

c) Driving or encouraging an increasing number of domestic shipping service providers and facilitating expansion of their scale of operations, if required, through financial support schemes.

d) Providing incentives for both service providers and customers who chose this transport mode, for the mode to gain prominence.

e) Focused development of integrated multi-modal transport networks connected with the terminals and transit points of coastal and inland waterways routes.

Adapting Successful Strategies
Successful initiatives, adopted by governments in neighboring or similar nations, can be adopted by the Indian Government, too, for enhancing the share of coastal and inland waterways.

The Chinese inland waterway sector has been consistently witnessing above ten percent increase in volumes on main rivers such as the Yangzte and Pearl. This was achieved through focused policies and initiatives, prominent among which are:

  • Privatization of inland shipping, port construction and operations.
  • Barge standardization programme–ncluding setting up a scrapping system with subsidies for innovating the fleet
  • Local government incentives in the form of fees deduction for pre-haul and end-haul transport to/from the inland terminals
  • Subsidies offered to set up new shipping routes (during the start-up phase)
  • Development of an IT platform for terminal operating systems to increase efficiency
  • Develop connecting infrastructures to inland ports
  • A preferential tax for inland vessels changed from fixed tax to a fuel fee-system, which is considered to be a fair system by the operators
  • Taking cooperation from foreign partners, such as the Netherlands and the European Commission
  • Gaining support of international financing institutions such as the World Bank and the Asian Development Bank

Further focus of China’s policy programs for the sector includes a long-term waterway development plan till 2020, a vessel standardization program, and a framework concept for an integrated river information system. The country is aiming to achieve a 36,000 kms integrated transport network of coastal and inland waterways.

Vietnam, too, achieved similar success through focused programs supported by the World Bank and developed countries like Canada. Brazil, another prominent developing economy, is pursuing similar policies for developing its coastal and inland waterways sector.

Gravely Underutilized
Coastal and inland waterways in India are gravely underutilized for domestic cargo transportation and multiple reasons including lack of capabilities at ports, as well as service providers, apart from lack of connectivity with alternate transport networks are causing this. Considering the several advantages offered by this mode, including a significantly low environmental impact compared to other modes, it is desirable to develop this as a mainstream transport mode and reduce reliance on road and rail modes. While basic initiatives to improve the situation have been announced in the Indian Government’s ‘Maritime Agenda 2010-2020’, a comprehensive and extremely-focused approach and policies are required to achieve significant success in this effort. It is recommended that successful policies implemented by neighboring and similar nations such as China, Vietnam, and Brazil be adopted by Indian Government to enhance the prominence of this mode here.

Srinath Manda is Program Manager, Transportation and Logistics Practice, South Asia, Middle East and North Africa, Frost & Sullivan.