The Shipping Ministry has allowed foreign flagged vessels to transport fertiliser between Indian ports by easing the cabotage law.

What does a cabotage law imply?

• It specifies that only Indian flagged vessels are allowed to carry cargo between Indian ports.
• Foreign vessels can ply in Indian waters only after obtaining a licence and only if an Indian vessel is unavailable.
• The norms to ply without license for foreign vessels has been relaxed earlier this year to transport agriculture, horticulture, fisheries and animal husbandry cargo.
• Fertiliser is the seventh item that has been freed from restriction imposed by the cabotage law.

What are the competitive advantages?

• The Golden Quadrilateral and Goods and Services Tax have helped move goods faster and easier within the country.
• But transporting goods through road still costs Rs.1.5 per tonne kilometre.
• Also, the 3,228 km dedicated railway freight corridor that the government is building will reduce both the time and cost of transportation.
•  Currently, it costs Rs. 1 per tonne kilometre to transport goods by rail.
• But the waterways serve as both the cheapest mode of transportation costing as low as 30 paise per tonne kilometre and also less polluting.
• Also, with its natural advantage of a 7,500 km coastline and 14,500 km of potentially navigable waterways, India can take a lot of pressure from the road and rail infrastructure, which are costly to build and expand.
• For instance, the 3,228 km dedicated rail corridor under construction costs over Rs. 81,000 crores.
• Countries like china and Japan moves over 40% of goods over water while a little over 5% of the goods are moved over water in India
• India is still looking towards road transport (over 60%) and rail (over 30%) to shoulder most of the load.
• Hence, the relaxation of the cabotage law will increase the supply of ships for coastal shipping.
• This should push industries and others to move goods such as cement, fertilisers, agriculture and horticultural produce through sea at lower cost.
• This could be complemented by port connectivity and modernisation of existing ports through the Sagarmala project.
• Along with that, two barges carrying 1,233 tonnes of fly ash were recently flagged off on river Ganga (National Waterway-1) from Kahalgaon power plant.
• The barges will travel 2,085 km across multiple waterways to reach Pandu Inland Port in Assam.
• This could make our waterways establish themselves as possible for cargo transportation and make compete with other sectors.

What are the challenges ahead?

• The government has identified 106 more waterways for navigation apart from NW-1.
• But even NW-1 makes water transportation possible for only a few vessels and only during daytime.
• Also, only in monsoon months when the water levels are high, transportation could be made possible in such rivers.
• Hence measures that need adequate focus are -

1. Dredging of rivers
2. Building new ports
3. A proper river information system
4. Digital GPS for night navigation
5. Need for better berthing facilities
6. Ensuring quick evacuation of goods from the port
7. Leveraging technology to offer single document for multi-modal transportation
8. Lower port charges

• India’s logistics cost is currently at 14% of GDP, way above the 8-10% levels in evolved economies.
• High logistics costs blunt India’s competitive advantage, especially when it comes to the ‘Make in India’ initiative.
• The government is right in focussing on water-based transportation to sharply reduce logistics cost.
• It should be followed by internal reforms, so that Indian shipping companies will not be forced to under-invest in this rising sector.