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India eyes coastal links for regional trade push

      09/11/2019

Centering on its “Look East Policy,” India is considering establishing coastal links with more countries in South Asia for regional trade development — an effort that has seen some traction on the back of an updated inland water transit and trade protocol with Bangladesh.

Toward that goal, the government intends to embark on a two-pronged program — negotiate country-to-country partnership agreements under the BIMSTEC [Bangladesh, India, Myanmar, Sri Lanka, Thailand, Nepal, and Bhutan] platform, and examine the possibility of extending the reach into Indonesia over the Bay of Bengal.

Those plans follow a brainstorming session the Ministry of Shipping held last month with various industry stakeholders and related transport agencies to specifically identify more coastal trade opportunities.

At the meeting, industry leaders — representing the Indian National Shipowners Association (INSA) and the Container Shipping Lines Association (CSLA) — raised issues they believe have put a crimp on coastal trade growth, while seeking government intervention for a more conducive environment.

INSA highlighted that a relook at first- and last-mile logistics costs, as well as marine charges, is critical to rejuvenating the coastal market sentiment. The government agreed to review domestic carrier concerns about the overall cost picture.

A representative of the CSLA, the umbrella organization of foreign shipping lines in India, said the Indian Railways commands the bulk of freight transportation by train, arguably as much as 77 percent, thereby giving niche containerized intermodal logistics providers, such as Container Corporation of India (Concor), and private companies little leeway to adjust rail tariffs.

Domestic ship owners also cited the intricate procedure for relicensing vessels from a “foreign run” category into a “coastal run” status, despite recent regulatory changes to mitigate those complexities.

“The conversion of foreign-flag vessels for coastal run is a challenge, impacting potential movement of cargo as customs procedures take considerable time and involve cost/duty on bunker consumption,” INSA and the Indian Coastal Conference Shipping Association (ICCSA) said.

In that context, Indian customs in August 2018 issued a public notice by which applicants can obtain “provisional conversion” approval within two days of filing, subject to meeting all requirements. However, shipping interests have been upset that some ports continue to treat vessels operating with such ad-hoc permissions as foreign-flag tonnage, attracting higher port charges instead of subsidized tariffs for coastal calls, until a “final conversion” license is granted.

The Asian Development Bank (ADB), which has reportedly been hired by the ministry to study the development of coastal shipping, is now expected to draw up a comprehensive comparative port-cost analysis for coastal calls in India and other major maritime countries. In a previous preliminary study, the ADB found that despite boasting the luxury of a vast coastline and extensive river networks, India’s domestic water transportation for freight handling has not kept pace with growing demand and remains significantly below the global average.

Industry stakeholders and government officials concluded that to encourage trade development and maximize cost benefits, coastal shipping will need to play a "complementary role" to inland modes, especially rails.

That viewpoint also arose during stakeholder deliberations at a recent shipping summit in Cochin.

As Indian transport leaders work harder than ever to lower logistics costs and improve supply chain efficiency, it is expected that coastal transportation will remain the bellwether of government policy actions. The government is already investing heavily in the development of inland waterways, with a total of 111 projects currently in various stages of implementation by the Inland Waterways Authority of India (IWAI). A new multimodal terminal that the IWAI is scheduled to open on Thursday at Sahibganj in the state of Jharkhand for freight transportation via the Ganges River is the latest example.

“The convergence of road-rail-river transport at Sahibganj through the new multi-modal terminal will connect this part of the hinterland to Kolkata, Haldia, and farther to the Bay of Bengal. Also, Sahibganj will get connected to northeast states through Bangladesh by river-sea route,” the Ministry of Shipping said in a statement. “The objective is to promote inland waterways as a cheaper and more environmentally friendly means of transport, especially for cargo movement.”

Although efforts have yielded some positive results — an impressive 31 percent rise in inland waterway freight handling last fiscal year — India still has a long way to go as it aims to double the share of its overall domestic water transport trade from 6 percent to 12 percent by 2025.