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2018, a tough year for the Shipping Trade: MD, BLA

In the earlier part of the exclusive interview to Sagar Sandesh, Mr. K.G.Ramakrishnan, MD, BLA, had said that 2018 would be a tough year for the shipping industry; and mere reduction of freight on containers  can at best convert some low value cargoes from bulk to Containers and will not influence cargo volumes sizeably. He has rightly pointed out that what matters is the cargo and nothing else. Asked about the East Coast ports, Mr.KGR said that the infrastructure of rail and road connectivity needs to be substantially enhanced on par with the West Coast and this can only happen through government policy and action.  Talking about the terminals in private ports and the government ports, he brought out the difference between the two in terms of performance. While private ports are more recent and with deeper drafts unlike the terminals in the govt ports; moreover, the support from the marketing while it is effective with regard to the private ports, it is lacking for the government facilities .Replying to the question why the coastal shipping has not developed despite govt consistent support, KGR said that 

The government policies alone cannot drive coastal shipping. Though we claim to have a coastline of 7500 Kilometers, you cannot compare our coastline with China. Most of the shipping in our country is one way, movement from north to south. North India being a production centre and southern parts consumes it. It is one-way traffic, with very little return cargo. Asked about what ails East Coast ports, he replied: Majority of ports in the East

Coast are working 40-50 per cent of their cargo handling capacity because of the inherent nature of the Indian industry which is based in the north and finds its comfortable, infrastructure wise to move exports to ports in Western India… Moreover the Railway tariff has been designed in such a way that the freight for moving from

the North to the Ports in Western India is much cheaper than to the ports in the East coast. .. On an average, movement of cargo by rail from North to East Coast ports works out 40 per cent more expensive. The ports in the east coast may be efficient but are unable to attract more cargo since large volume of export cargo from

the hinterland is not available to them.

 

Now, to continue with the interview

 

SS: Why Coastal Shipping has not taken off in India?

KGR: Government policies alone cannot drive coastal shipping. Though we claim to have a coastline of 7500 kilometers, you cannot compare our coastline with China.

Most of the Coastal shipping in our country is one way movement from North to South, with North India being a production centre and south which consumes it.

Coastal shipping has been used by heavy industries to ship raw materials like iron ore and coal from the East to the western ports. However, Coastal shipping cannot be panacea for all our transport issues as it needs different logistic environment for non bulk goods.

Coastal movement of cargo has been active in the west coast from ports in Gujarat to Cochin and Tuticorin, mostly dealing with imports from Gujarat. There is also an effort to link the eastern states with south and west by transshipping within the country.

Contrary to popular myth, moving goods from one inland point to another through coastal shipping need not necessarily be cheaper than the road. Citing an instance he said car movement by coastal shipping from Chennai to the dealers in Rajasthan, via Gujarat ports did not work out since it involved one coastal and two road movements. While there will be a marginal reduction in freight costs due to the coastal leg, the longer transit due to multiple handling may not be acceptable to the end consumer.

This does not take into account the environmental benefits of moving cargo over sea and based more on commercial reality.

What coastal container shipping has achieved in the country has been due to the efforts of smaller companies or entrepreneurs who have converted road cargo to ships through their endeavour. The absence of our bigger shipping companies in this domain is noticeable.

Another hindrance coming in the way of coastal shipping is our customs and immigration Rules. While a truck load needs just a way bill, the documentation to send by sea is elaborate. Also there is variation in the way these are applied from port to port and from officer to officer. The arrangement is ad hoc since the government is yet to formulate the standard operating procedure to deal with the situation.

On the basis of alleged security concerns, immigration authorities have made most of our anchorages outside Ports unusable even in ports in southern India. Ships are not allowed to bunker, undertake repair work or any activity connected with shipping in outer anchorages. This is another disincentive to coastal shipping and shipping in general. It also curtails commercial activity at most ports with most service providers opting to close down in the absence of opportunities. The claim of 7500kms of coastline falls flat when much of the seafront and anchorages cannot be put to any meaningful use.

SS: On the outlook for container shipping industry in 2018.

KGR: Hopefully the industry will get over the consolidation phase in a year’s time. But with so much of tonnage being added to container ship fleet, it is unlikely to the freight rates will go up.

The industry is in for two added pressures of rising cost of fuel and introduction of restrictions of Sulphur emissions. With prices of petroleum looking up it is only question of time before bunkering costs move up and the time lag between this cost increase and freight increase can be crippling.

The upcoming restrictions on sulphur content in fuels to 0.5 per cent in the next two years imposed by the International Maritime Organization would mean serious investment to upgrade ships. With freight rates expected to remain low, the going will be tough for the industry. This will be a serious challenge to the domestic shipping companies and coastal shipping as well.

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