After Hyundai, automakers ready to use coastal shipping

But, seek govt support to offset cost overruns in movement of vehicles through waterways

Automobile makers are ready to follow Hyundai Motor India Ltd (HMIL) in using the coastal shipping route to move vehicles from their factories to other cities — an initiative that could de-congest highways and reduce pollution. However, the companies say using this route is not viable at the moment and that the government should give financial assistance to promote coastal shipping.

In February this year, HMIL had sent 800 made-in-Chennai cars from its Sriperumbudur plant through MV IDM Symex, a roll-on-roll-off (RoRo) vessel, from Chennai port to Pipavav port in Gujarat.

ROADBLOCK

• Hyundai sent 800 cars made at Sriperumbudur unit in Chennai to Pipavav port in Gujarat in Feb
• Company, however, says it is not currently viable
• Cost and timing a major concern
• Govt proposed a scheme in 2014 to provide monetary incentives but nothing concrete has come out of it

“We will dispatch more by ships to Gujarat and other states. We are talking to the government for benefits. We need financial support from the government,” said Young Key Koo, managing director of HMIL.

Coastal transportation has   huge potential in India,  blessed with a large network of water bodies, said Guillaume Sicard, president of Nissan India Operations. “We are hopeful that the proposed plan by the government in the long run would iron out the logistical challenges of auto manufacturers in Chennai.”

According to a senior official with a logistics company, there are some major issues. It is not financially viable because trucks are still to be used for transporting cargo from factory to port and again from port to dealers, besides the time taken to ship the vehicles.

It takes around five days for vehicles from Chennai to dealers in Gujarat through coastal shipping. In contrast, it takes only two days if sent through trucks. These factors are pushing up the cost, adequately compensated by the modest incentives on offer. Chennai Port has a flat wharfage rate of Rs 500 per small car and Rs 2,000 for big cars. It recently reduced the wharfage for RoRo vessels by 40 per cent.

Another problem is the lack of return cargo, which means the ships have to come back empty.

According to the official cited above, to boost coastal shipping, there is a need for more small ports with good infrastructure. The government had proposed a scheme in 2014 to provide monetary incentives for coastal shipping, but nothing concrete has come out of it. According to sources in the transport ministry, under the proposed policy, transportation of vehicles through RoRo vessels would be eligible for incentives worth Rs 3,000 per car.

To promote coastal shipping and inland waterways, last year, the central government relaxed cabotage rules for special vessels such as RoRo, hybrid RoRo, RoRo-cum-passenger, pure car carriers, pure car and truck carriers, LNG vessels and project cargo carriers for five years.

This relaxation allowed vessel operators to bring foreign vessels to ply on coastal routes, as such special vessels are in short supply in India.

In India, logistics cost is 18 per cent of the total value of goods, compared to eight per cent in China and 10-12 per cent in European countries.

Nitin Gadkari, Union minister for road transport and shipping, recently said  freight transportation through water was much cheaper than that through road or rail.

He added India could double exports and compete with China by reducing logistics cost from 18 per cent to 12 per cent. “Here is the vision for our government to give the highest priority to the water ways. We have 7,500 km of sea front. Out of which, 78 districts and 13 states have the advantage of sea front.”

“If you go by waterways, the cost is 20 paise; if you go by rail the cost is Rs 1 and going by road would cost Rs 1.50. For us, the first priority is the waterways, and second priority is the Railways and the third priority is the roads.”

Gadkari said his ministry was keen to encourage coastal shipping and asked Hyundai to give its suggestion in writing.

He added that his ministry would take the measures to reduce costs to make coastal shipping viable.