Water transport: Still missing the link

It holds out great promise for improving India's logistics and therefore needs to be pushed aggressively

In January this year, Union Minister for Shipping, Nitin Gadkari, along with railways minister Piyush Goyal, flagged off Container Corporation of India’s (Concor) coastal freight shipping service from Kandla port to Tuticorin via Mangalore and Kochi. What was important was the symbolism — Concor is an Indian railways company, explicitly venturing into coastal shipping. Also important was the fact that the two Union ministers (who between them decide policy on all the major transport infrastructure sectors) were together at the event highlighting the importance of the interconnection between different modes of transport. 

Since then Concor has gone further — in September it opened a freight shipping service from Krishnapatnam port in Andhra Pradesh to the port of Chittagong in Bangladesh. This followed the broadening of the Inland Water Transit and Trade protocol between the two countries in 2018 to cover more ports.

These moves, small in themselves, are critical components in the much broader plan of inducing what logistics professionals call the ‘modal shift’. Enabling freight to be transported through modes other than roads and railways is key to reducing costs and making Indian goods more competitive in global markets. Waterways has till now been the missing link.

The cost of freight movement by road is Rs 2.58 per ton-kilometre, compared with Rs 1.41 per ton-km for rail and Rs 1.06 per ton-km for waterways. Yet, it is the high cost option, road transport which accounts for the bulk of Indian freight transport – close to 60 per cent. Coastal shipping and inland waterways account for barely 7 per cent of freight transport in India, compared with 24 per cent in China and 11 per cent in Germany. The over-reliance on roads has meant that the cost of logistics as a share of the price of final goods is around 18 per cent in India, compared with just 9-10 per cent in developed countries. Water transport is obviously also less polluting as compared to road transport. 

The need for such a shift has long been recognised by the government. In 2015 it launched the ambitious Sagarmala project to develop water freight transport. The project involved developing new ports, enhancing port connectivity and port linked industrialization. Augmenting inter-modal connectivity is especially important. Much of the cost advantages of waterways get lost if shippers find themselves bogged down at terminals waiting for freight to be moved from truck or rail to ship.

The cost of freight movement by road is ~2.58 per ton-kilometre, compared with Rs 1.41 per ton-km for rail and Rs 1.06 per ton-km for waterways

Since the launch of Sagarmala, a slew of other reforms have followed. Amendments passed to the Central Road Fund Act in 2017 aimed to use 2.5 per cent of the funds collected for waterways development (India currently has 14,500 km of navigable inland waterways). Early last year, the Indian government eased cabotage rules to enable foreign flagged container ships to ply freight on local coastal routes. The government has also put in motion the Jal Marg Vikas project to enhance commercial navigation of vessels of size 1,500-2,000 deadweight tons on National Waterway-I between Haldia and Varanasi at a cost of Rs 5,369 crore. The project is expected to be completed by 2023. A landmark for the project was reached just a couple of months before Concor’s venture into coastal shipping kicked off, when Prime Minister Narendra Modi received the MV Rabindranath Tagore at Varanasi. The ship had moved 16 truckloads of freight belonging to beverages giant Pepsi from Kolkata. 

Progress on Sagarmala too, four years on, has been encouraging. The government claims that as of September, 125 projects have been completed under the programme, at a total cost of Rs 31,447 crore. These include LNG terminals at Ennore and Mundra port, each at the cost of over Rs 5,000 crore, and modernisation of JNPT port for a total of Rs 6,600 crore. But it’s early days yet — a whopping Rs 5.7 trillion of projects (1,314 projects in total) is in the pipeline.

Over the next few years, around Rs 90,000 crore is required to be invested in the water transport sector, according to an estimate by Jagannarayan Padmanabhan of Crisil and Sudipta Saha in an article last year. The authors call for tax subsidies to incentivise transport by water over road, and for efficient handling of cargo at inland terminals. Incentivising industries adjacent to national waterways to use water transport is also an option. At the other end, governments could also impose heavier taxes for long-haul road transport of coal and inflammable material and ‘nudge’ transporters to shift to waterways for long-haul carriage (where the efficiencies of water transport kick in). 

For a long time, the focus was on encouraging shippers to move from roads to railways. But with investments in Sagarmala taking off and other enabling policy changes getting the go-ahead, it looks like it will actually be waterways, hitherto a much-neglected sector, finally getting the attention it deserves. But this effort needs to be pushed harder.

The author is chairman, Feedback Infra