Freight subsidy on fertiliser movement via coastal shipping

Government has decided to reimburse freight cost for movement of phosphatic and potassic (P&K) fertilisers and urea by coastal shipping and inland waterways, a move that will help save up to Rs 1,000 crore annually by 2025.
The Shipping Ministry is estimating movement of about 9-10 million tonnes of fertiliser through coastal and inland waterways by 2025, which could save around Rs 900-1,000 crore per annum in freight cost.
The Nutrient Based Subsidy (NBS) on P&K fertilisers was earlier applicable only to movement of crop nutrients by rail from plant or port to various rake points in districts. It will now apply to the movement through coastal shipping and inland waterways, Shipping Ministry said today.

This would promote transportation of fertilisers through coastal shipping under the Ministry's flagship Sagarmala programme.
"The origin destination study conducted as part of the progarmme identified that the total opportunity for coastal movement of fertilisers is 9-10 million tonnes per annum (MTPA) by 2025, with an estimated savings of around Rs 900-1,000 crore per annum," the Ministry noted.
The demand for fertilisers has grown along with the demand for food. Currently, India imports 28 MT of finished fertilisers and raw materials with Andhra Pradesh, Gujarat and Odisha being the biggest clusters.

Kakinada, Mundra and Kandla will continue to be the largest finished fertiliser importing ports, while Paradip, Kandla and Vishakhapatnam will be the largest fertiliser raw material-importing ports. Soil nutrients constitute about 2 per cent of the total cargo handled at ports in India.

Coastal shipping and inland waterways currently form around 7 per cent of the total modal mix in India, compared to around 10-20 per cent for other emerging countries like China.
While, rail is currently the primary mode of transport for long-distance fertiliser movement, analysis indicates that a modal mix shift towards coastal shipping can significantly reduce costs, the Ministry added.
Coastal plants in Andhra Pradesh and Gujarat have the potential to coastally ship their products to the peninsular states. If key rail movements are considered to be from the major fertiliser plants to the top-200 fertiliser-consuming districts in the country, around 10 plants have the potential to shift to coastal shipping, it added.

Fertiliser corporations with multiple plant locations across the country seem to have the highest potential to leverage coastal shipping (example IFFCO and RINL).
The revision in the existing NBS policy, would help in decongesting the rail and road network and would help in bringing down the logistic costs, it added.