A recent study by the Asian Development Bank found India’s domestic water transportation for freight handling has not kept pace with growing demand. Photo credit: Maersk Line (India).

High logistics costs — a long-running, elephantine problem undermining the competitiveness of Indian export-import merchandise — became the focal point of stakeholder deliberations at a shipping summit in Cochin last week.

Conference panelists and delegates generally agreed that while the government has been working harder than ever to streamline procedures and improve supply chain fluidity, there are still some areas that need regulatory standardization and refinement to alleviate trade bottlenecks.

They highlighted that the absence of a robust policy framework for coastal trade is hurting growth of what the government believes is the key element in lowering first and last-mile logistics costs for shippers and consumers.

Capt. Ashish Chauhan, COO of Shreyas Shipping and Logistics, said Indian ports have essentially been designed to handle export-import trade and as such, terminal stakeholders will need to move away from a culture that has long prioritized mainline calls offering greater economies of scale for the development of coastal shipping and inland waterways. Mumbai-based Shreyas Shipping offers a countrywide coastal network.

Julian Bevis, Maersk’s senior director for South Asia, reiterated a viewpoint held by foreign carriers that India’s liberalized cabotage program has accelerated domestic transshipment and coastal activities. However, he cited investor concerns about government tariff incentive guidelines for coastal calls, given the private terminal operators’ concession obligations toward landlord ports, or the government.

Generally, terminals are obligated to offer a rebate of up to 40 percent of the normal tariff — along with priority berthing arrangements — for coastal traffic, and a similar proactive approach has also gained ground for transshipment handling following cabotage law reforms in May 2018.

Bevis also said a re-look at the complex regulatory pricing model for build-operate-transfer (BOT) contracts and the creation of a well-defined, national coastal policy can boost the confidence of the freight transportation community and thereby help India transform itself into a major logistics hub.

Need for ‘plug-and-play’ solution

Vinita Venkatesh, director of the Krishnapatnam Container Terminal (renamed the Navayuga Container Terminal), also called for a robust regulatory system for intra-country freight transportation — one that can prove to be a “plug-and-play” solution.

Cargo owner representatives said because production sites are mostly in the interior, overland logistics networks play an integral role in originating and terminating shipments and as such, high inland costs have a negative impact on the economic and environmental benefits offered by short-sea offerings.

Concerns about an “abrupt” pricing strategy adopted by rail operators were also raised by shipper and short-sea industry leaders. According to them, rail companies have shown a tendency to drastically lower their hauling rates when they spot any long-term, regular bulk cargo opportunities targeted by coastal carriers, which they said is an unhealthy and cynical approach.

Stakeholders also urged the government to explore the possibility of broadening the reach of the collaborative digital portal, Port Community System, to coastal trade.

Officials from India’s Ministry of Shipping said the government remains committed to further improving supply chain efficiency and is regularly holding consultations with various stakeholders to try to resolve trade issues. 

Rabindra Agarwal, joint secretary at the Indian Ministry of Shipping, said current guidelines enable major ports to extend a 40 percent discount on vessel and container-related charges to incentivize coastal calls and that ports can independently decide on tariff concessions beyond that level.

Inland freight handling well below average

A recent study by the Asian Development Bank (ADB) stated that despite being blessed with 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. The ADB put India’s share in that trade segment at just 6 percent, compared with 34 percent in Japan, 28 percent in Italy, 24 percent in China, 17 percent in Brazil, and 12 percent in the United States. 

To turn things around, the Indian government has lately accelerated investment 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). An 864-mile marine highway between Kolkata and Varanasi via the Ganges River, which opened in 2016, has already caught the eye of major carriers, particularly Maersk, looking to expand their footprint in the eastern corridor — a fact also highlighted by Maersk officials at the event.

Those efforts are arguably paying off. According to government data, cargo transportation on inland waterways soared to 72.31 million tons in fiscal year 2018-19, up 31 percent from 55.03 million tons in 2017-18.

Bency Mathew can be contacted at bencyvmathew@gmail.com.