;i*5''iliTt

OF THE COMMITTEE
ON

STANDARDS FOR COASTAL &

INLAND VESSELS;
SEA LIMITS FOR INLAND
VESSELS; AND
INCENTIVE SCF{EME FOR
MODAL SHIFT OF CARGO
FROM ROANRAIL TO
WATERWAYS

Submitted on 8k January 2014

ffi
#;{th
rE\ur:Y

INISTRY OF SHIPPING
GOVER1IMENT OP INDUI

"whoever controls the Indian ocean, dominates Asia, This ocean is the key
century, the destiny of the world wiil be decided in these waters,'.

to the seven seas in

the twenty I

^'l

- Alfred Thayer Mi

':_)

PREFACE
Maritime transport has been recognized as the most fuel efficient, cost effective and
environment friendly transport system. All developed countries have based their development
on their efficient maritime infrastructure and policies.

2.

The issues, as terms of reference before the Committee, are fundamental issues
affecting coastal shipping. The Committee has endeavored in the report to suggest pragrnatic
and "doable" recommendation for implementation.

3.

It is expected that the relaxation/increase in the

area of operation of Inland vessels

supplement our coastal fleet capacity. Besides, cost effective construction and operation
standards fbr inland vessel, I believe, will integrate the operations of inland vessel, coastal
vessels and the foreign going vessels across the country. Further, incentive support to
the
coastal vessels is expected to boost coastal shipping and bring in the desired ideal modal
mix

will

which

will

have direet as well as indirect impact on the country's fuel

reduction of fuel cost, creating positive social and environmental impacts.

bill resulting in

4.

The expert inputs, able guidance and assistance of the Committee members and the
valuable services of the concerned officials in the Ministry are gratefully acknowledged. The
co-opted members from various organizations had played avital role in the deliberations of
the Committee.

5.

The inputs given by Mr. Gautam Chatterjee, Director General of Shipping, Mumbai
were invaluable. The support rendered by ICC Shipping Association by way of KpMG study
report has been extremely useful. The Committee benefitted from the presence and valuable
insights provided by co-opted members including Shri Arun Sharma of Indian Register of
Shipping, Shri Anil Devli and Capt. Kekre from Indian National Shipowners' Association,
Shri Atul Jadhav from All Goa Barge Owner's Association and Capt. Sudhir Subhedar, Capt.
Kiran Kamat, Shri Aditya Suklikar from ICC Shipping Association. The Committee also
benefitted from the presence and inputs from capt. Suraj and capt. shri p. p. sinha from
Directorate General of Lighthouse & Lightships.

6.

hope that the Report and recommendations contained

in it

are useful to the

Government in promoting coastal shipping and inland water transportation in our country.

Captain P.V.K. Mohan,

chairman of the committee &chairman Nationar s.hipping Board
8'n January 2014

EXECIITIVE SUMMARY

1.

Coastal shipping in India presently accounts for only |yo ofthe overall
cargo movement, which is low eompared to other developed countries in
Europe and Asia' The coastal shipping in most of the countries has
flourished
due to focused policy interventions.

2,

There has been demand to extend IV limits for sea for better utilizing the
available coastal fleet. Correspondingly, the safety standards (manning and
technieal standards) required review. The Ministry of shipping ser up a
Committee under the Chairmanship of Capt. P.V.K. Mohan for looking into the
issues of Inland Vessel limits, standards for coastal and inland vessels and

providing an ineentive scheme for modal shift of cargo. The Committee after
detailed deliberations has made the following recommendations:

(i)

After due deliberations and discussions with the stakeholders,

the

Committee has suggested some workable standards. The Committee

has noted that the Directorate General of Shipping has issued DGS
Crder No. 18 dated 31.7.2013 with respect to the new standards for
adoption by required by River Sea Vessels. The Committee noted that
the same has been developed with the necessary input from the Indian
Register of Shipping (IRS) as well as inputs from the industry inputs
and, therefore, no further reoommendation in this regard are being
made by the Committee.

(ii)

To fix Iniand Vessel Limit (IV) and make port wise recommendation
India is a party to United Nations Conventions on Law of Seas
-(I-JNCLOS)
in which the different maritime zones are demarcated. 'Ihe
Ministry of External Affairs, the administrative ministry for
LI{CLOS, has under the Maritime Zones Act, notified the baseline for
the entire Indian coast vide notifieation No. SO IITT (E) dared
1'9.2A09, The water inwards of the baseline has been treated as inland
waters which has been aceepted by the Committee as the limit for
inland vessels. Based on the recommendations of the Committee, the

Directorate General of Shipping has accordingly issued the order on

16th September 2013. However, IWAI has to firm up the guidelines
so
that the same ean be applied by the states concerned.

ilPage

(iii)

To formulate an incentive
raillroad

to

seheme for modal shift of oargo from

inland waterways/coastar shipping
the committee

deliberated in detaii on the various incentive scheme options for

promoting modal shift and keeping in view the implementation issues,
cost of subsidies and fund requirements, recommended the following
incentives/measures for promotion of coastal shipping:

1. In ease of bulk oargoes all new coastal cargoes on Indian flag

vessels on demonstration of a fresh modal shift will be eligible for
an incentive @ of 50 paisa per tonne per nautical mile upl.o a
maximum of 500 nautieal miles. The ioading ports will administer
the release of incentive based on their reeords of coastal movement
by a particular shipper. These major ports will be eligible f<rr a
reimbursement by the Ministry the claims of such incentive
disbursement periodically. Initially, the new cargo eligible fon an

incentive

will be fertilizer, food grains, steel, marbles, tiles,

cement, sugar, salt and automobiles. This list ean be expanded

further based on trade demands and market trends and fund
availability. This incentive will be for a period of five years as it is
expected that the mechanism will create awareness and generate
oargo for both ways"

2, In ease of coastal container cargoes on Indian flag

vessels,

containers upto INR 1000 per TEU rebate may be given subject to
a cap of 500 TEU per vessel in Terminal Handling Charges at both
ends. The service provider of terminal handling may be reimbursed
by the Terminal Operator at aIL Terminals. The Terminal Operator
will in turn claim from the Ministry.

3. Presently, atmajor pofts the vessel related

for all coastal

vessels do not exeeed 60Yo of the corresponding charges for other
vessels. Similarly, the cargo/container charges for aI! coastal
charges

cargolcontainers other than thermal coal, POL including crude oil,

iron ore and iron pallets, do not exceed 60% of the nonnal
cargo/container related charges. It is recommended that the present
rebate of 40% in vessel related charges and cargo related eharges
for vessels other than thermal eoal, POL including erude oil, iron
ore and iron pallets for Indian flag coastal vesseis be increasecl to

iilPagc

60% at both ends. The difference of 20% may be reimbursed to

major ports by Government periodically.
4.

The above schemes may be operationalised for a period of five

years. Meanwhile, the committee expects that two way cargo
movement develops by the increased awareness of the benefits of
ooastal shipping.
is therefore recommended that necessary
infrastructure at major and non-major ports are developed to cater

It

exclusively to coastal cargo movement.

5.

For shipbuiiding, of coastal eargo vessels, the committee

recommends that a total excise and customs duty waiver may be
given for the raw materials. This incentive will motivate shipyards
from taking up vessel construction of coastal ships.

iiilPage

TAT3I,
CHAPTER

1.'

11

OF COhI]'E]\TS

INTRODUCTION

Pg. No.

CHAPTER 2.. COASTAL SHIPPING AND IWT IN INDIA

CHAPTER 3: STANDARDS FORCOASTAL & INLAND

CIUPTER

4,, SEA

Pg No.5

VESSELS.,.,

LIMITS FOR INLAND VESSELS.,,.

...... ps.No. I4
Pg, No.

CHAPTER 5,. INCENTIVE SCHEME TO PROMOTE MODAL 5H1FT..,,,.,.

T.,,IST

Iti

Pg. No. 21

OF'TABLES

Table L' Environment cost and Accident cost............

Trffic at major ports (otterseas and coastal) during pas rwo years....
Table 3: Trffic handled at minor and intermediate ports during 2012
-2013 and 201I -2012
Table 4: Trffic handled at minor and intermediate ports during 2012
and 20I j
Table 2:

Table 5: Commodity specific routes andvolumes

-2013

Pg. no.

Pg. no.

....., Fg. no, 9

-20.,2 ...... Pg. no.

l'

Pg. no, 2:

CHAPTER 1 : II\:TRODUCTION
Background

1.1

Environmental threats and the climate change emerging from greenhouse

gas (GHG) emissions have been attracting countries all over the world to
concentrate their focus on promoting a modal shift in cargo transportation from
road to waterways. Besides, the Indian coastline and our waterway resources are
grossly underutilized when it comes to moving domestic cargo. Modal shift
also considerably brings down logistic and fuel consumption costs. There is also
social cosit benefit from decongesting roads and minimizingroad accidents. The
approximate estimation of savings on account of modal shift in terms of
environmental costs and social cost is given in Table 1 below:

Table 1: Environment cost and Accident cost

ENWRONMENT COST PER
MODE

TONNE.KM

ACCIDENT COST PER TONNE-KM

COST

MODE

COST

Road (Freight)

Rs. 0.202

Road -

Rs. 0.062

Rail (Diesel Traction)

Rs. 0.051

Rail -

Rs. 0.001

Rail (Ele:ctric Traction)

Rs. 0.015

Airways

Rs. 0.690

Coastal

Shipping

Rs.0.030

Source; Flanning Commission's Total Transport system Study by MTES

I.2

The definition of IV limits under the IV Act, includes the terms sm66f[
and partially smooth waters, as refemed in the Merchant Shipping Act and such
vessels a,s per their standards ) are permitted upto 2 meters wave heights
dependin6S on weather conditions. The States of Gujarat,Maharashtra and Goa
have already got conducted significant wave height studies of Indian National
Centre fon Ocean Informatics Sciences (INCOIS) showing limits having v/ave
height of less than 1.80 m. There have been demands from the industry that

these waters to be declared as partially smooth nature by Ministry of Shipping

to facilitate declaration of new IV limits. There have also been

demands to

declare inland water limits upto 12 nautical miles seaward from the baseline for
utilization of tonnage to a great extent.

1.3

To bring more focus in its policy approach towards coastal shipping and
inland waterways, the Ministry of Shipping constituted a Committee under
Chairmanship of Chairman, National Shipping Board with the following
composition:

Board
shri M. C. Jauhari, Joint Secretary (Shipping) M/o shipping
Shri C.B. Singh, Adviser, IWo Shipping
capt P.v.K. Mohan, Chairman National Shipping

Shri B. Poiyaamozhi, Development Adviser (ports)

Chair:man

Member
Member

Iwo Shipping Member

Shipping
capt. L. K. Panda, Nautical Adviser to GoI, DG shipping
Shri S. Dandapat, Chief Engineer, IWAI
Shri M.K. Saha, Director (Traffic), IWAI
Shri R. P. Khare, Chief Engineer, IWAI
shri M. M. Hasija, Dy. Financial Adviser, ld/o

Shri B. Krishnamoorthy, Dy. Secretary (MA &MG), N/Vo

Member

Member
Member
Member
Member

Shipping Member
Secretary

I.4

The Committee could also co-opt representatives from the Industry viz,
Indian Register of Shipping, Indian National Shipowners' Association (INSA),
ICC Shipping Association (ICCSA), etc as and when required.

Terms of Reference

1.5

The terms of reference of the Committee are:

i.

flo recommend standards required for coastal and inland

vessels as
different from seagoing vessels (both manning as well as technical
standards) including review of existing standards;

ii.

To fix Inland vessel (IV) limits and make port-wise

recommendations; and

iii. To formulate an Incentive scheme for modal shift of cargo from

r

ailI r o ad to inland waterways/co astal shipping.

The order for setting up the committee is at Annexure

I.

Progress of work

1,.6 The Committee held six meetings on25.4.2013, 20.6.2013,

rr.7.2013,

3I.7.2013,21.8.2013 and 12.9.2013 to deliberate various aspects within the

ambit of its Terms of Reference.

I.7

The Committee entrusted the representative of the Indian Register of

Shipping and the Directorate General of Shipping the task of assisting it with
respect to the standards for coastal and inland vessels.

1.8 As

regards

fixing Inland vessel Limits and make port

wise
recommendations, the Committee requested the representatives from the
Directorate General of Shipping and the Inland Waterways Authority of lndia
(IWAI) to study the existing legislation and the outcome of the deliberationrs on
the issue were discussed at other platforms like the Maritime State Development

Council (MSDC) Meetings, National Shipping Board (NSB) meetings. The

Committee also noted that different ports have determined their port limits for
their operation and notified the same as per the State or Ports rules. There was
no uniformity in the declaration of limits which was based on commercial
operations. Thus, it was felt that instead of making port wise recommendat;ions
for the operation of IV Craft., it would be appropriate if a uniform standard and
area of operation could be adopted with room for expansion at a Iater stage.
This will help in development of Inland and Costal maritime traffic. as the trade
develops.

I.9

The formulating of an incentive scheme for modal shift of cargo from rail
road to Inland waterways/costal shipping was a challenging task. The focus was

to formulrte an incentive mechanism more particularly a sustainable one which

generates incremental increase in outcome. The mechanism so devised could be
operationalised within a framework in which the Ministry of Shipping is able to
administer the scheme efficiently. In its efforts towards framing the scheme, the
Committee immensely benefitted from the inputs provided by Indian Coastal
Conference Shipping Association (ICCSA) as they had got a study conducted
by KPMG on the present trend of coastal cargo movement and in identifuing
scope for improvement.

Organization of the Report

1.1

in

The report has been divided into five chapters. Chapter 1 is introductory
nature giving in brief the background leading to the formation of the

Committee, its composition, Terms

of

Reference and programme of work.

Chapter 2 gives the coastal shipping and inland waterways scenario in India, the
importance and need for modal shift. Chapter 3, 4 and 5 covers the background
on the three issues involved and the recommendations on each of the three
Terms of References respectively.
****{<***(

CHAPTER 2: COASTAI SHIPPING A}ID INI"AND

WATER TRANSPORT SCENARIO IN IIIDIA
Fig 1: Modal Mix of Domestic Cargo

In India, Rail and road accovrft for 57Yo

and 30% respectively whereas coastal
shipping presently accounts for only 7Yo of
the overall cargo movement, which is very
low compared to other developed counties.
Apart from the fact that the developed
countries have an advantage of better
coastal shipping infrastructure, coastal
shipping in most of these countries has

flourished

due to focused policy

interventions. The coastal shipping fleet

and related traffic flow

llote: thue of lffiwhich

i3

stimatBd to b O-5%irincludd in

mtakhipping

in

developed

countries are of a higher scale compared to

India.

2.2

Countries such as China have an enviable percentage of 460/o and 8.3oA,

United States 14 and 8.3% and Europe in general uses 43Yo of waterways in
freight transport. The dependence on the Road and rail sector for freight
movement is going to increase the logistic cost considerably, which is at a very
high level of 18oZ compared to just about 6Yo in developed countries.
Fig 2: Cargo Mix of Indian Coqstal Cargo (2011-12)

,2.3 Currently, most

coastal

movement that is witnessed is of

POL (mainly govemment cargo),
coal and iron ore (captive use).

However, therq

is evidence of

marginal increase of break bulk by

way of containers' movement over
last 5 years. Commodities

presently handled by coastal

shipping in India is largely bulk
and break bulk cargo. Movement

of
Source:

WMG Analvsis

general cargo through coastal

5

shipping is presently very limited in quantity. The category of 'others' in f\g.2

above is largely general cargo which has seen a marginaL increase in the past
five years. This is largely attributed to the growth of containerized cirgo,
especially cargo such as marble, tiles, bentonite, soda ash etc and increase in
movement of project cargo through coastal shipping. However, with a change in
India's trade pattem, especially the "Look-East" policy, the existing pattern of
coastal cargo movement may also change in the coming years. This is more so
in view of the expected to growth in EXIM trade at anaverage rate of 7Yo.

2.4

Indian major ports do not have dedicated facilities to coastal shipping and
coastal vessels are looked at by ports from the view point of its ability to
generate revenue. The upgradation of infrastructure standards in port faciltities
and development of connectivity infrastructure entails lot of capital infusion.
Facilities at ports like Sir creek, Dahej, Porbandar, }irazira, Ratnagiri lJaigarh,
Karaikal, Ennore, Krisnapatnam, Kakinada, Gopalpur, Haldia can be rnade
capable to handle exclusive coastal cargo improving India's carbon foot prirrt.

2.5

The problems of low draft, inadequate dredging and its maintenance,

slow pace in development of new ports, port tariff structures, and such other
transaction costs of customs and immigration have also been affecting costal
shipping. In the past, the flow of bulk goods from west coast hinterlands to the
east coast hinterlands always followed the coastal route. For instance, coal from

Kolkata was carried in bulk on regular basis by coastal vessels to ports around
the country right up to Kandla and Bhavnagar and salt in bulk was carried lback
to Kolkata either from Kutchh ports or Tuticorin.

2.6

The commodity-wise coastal traffic overseas, coastal and total at major

and non major ports are given at Table 2 and Table 3 respectively.

2.7

Traditionally the west coast ports have been handling industrial and
finished products along with the petroleum products, whereas the east coast
ports have been handling the bulk and mineral products.

2.8

Unavailability of consolidated cargo, return cargo and general lack of

awareness among shipper community is generally the cause of low coastal
shipping movement. On the contrary, the high penetration level of road
followed by rail coupled with the ability to effect door-to-door movemerrt of
cargo makes the field tougher for coastal shipping.

2.9

The Karachi - Rangoon stretch vide Colombo was designated as coastal

route. The ships carried rice in bulk as well as bags right from Rangoon to

Chennai, Tuticorin and across to Kochi and even to Kandla and on the return
journey, salt, cement and clinker were the cargo carried to Kolkata. Coastal
vessels freighted small parcel sizes of general cargo such as spices, tea, coffee,
cashew nuts coir and jute, until efficient containerization and equally rapid rail

and road systems took over. However, due to missing unitization phase
containerization took long time to catch up with modern transpoftation. This
marked the shift of proportionate trading activities towards other modes of
transport such as rail and road rather than coastal shipping. From 1992 to 2002,
the coastal fleet tonnage had been hovering around 0.47 million GT and had
increased only marginally to 0.6 million gross tonnes (GT) in 2003.While the
Indian overseas fleet registered II73% growth in numbers from 1951 to 2003,
the coastal fleet inched upwards in the colresponding period to 2}g%.India's
coastal fleet has been hovering around a meager level of less than 1 million
gross tonnage (GT) during the last five years. Out of the 805 coastal vessels (as
on March 3I, 2013) only 146 are effective cargo carrying vessels constituting
0.66 million GRT.

2.10 Ship acquisition is presently burdened with high finance cost and low
term of loan. High taxation, duties and compliance costs are of serious concem
and this is compounded by port waiting times, inappropriate cargo handling
practices and facilities.

2.1I

In order to increase coastal trade and effect modal shift, it is necessary to

develop minor ports. Also, it is vital to provide for connectivity of the minor
ports with the road and rail network. Ports like the Pipavav port had suffbred
because of the lack of connectivity. The Pipavav - Surendranagar rail link was
established by the port of Pipavav in joint venture with the Indian Railways.
Given the belief that the Phase 3 of the National Highway Development
Programme would provide for connectivity to the minor ports; higher priority
and weightage needs to be assigned to this.

2.I2 High share of rail and road can be attributed to the concessional rates
provided for select commodities such as fertilizers by rail which makes it
unviable to move the same through other modes of transport over longer
distances. Subsidy on diesel has resulted in actual cost of transportation by road
being lower than what it truly is.

2.13 There is a need for effective development of routes between production

and consumption locations by identifuirg potential cargo that could move by
coastal shipping.

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Inland Waterways

2.I0 India has an extensive network of rivers, lakes and canals, which, if
developed for shipping and navigation, can provide resourceful inLland
connectivity. India has approximately 15000 km of navigable waterwaysi. At
present Inland Waterway Transport forms a very diminutive part of the total
transport network. In terms of tonne kilometers of total inland cargo, its share is
a paltry 0.15 per cent. Most of the waterways suffer from a numbe,r of
inadequacies like navigational hazards and lack of infrastructure facilities like
terminals and inadequacy of navigational aids. In contrast, in countries like
China, Netherlands, and Germany etc. the IWT system is highly organised.
China is directing a lot of investment towards further developing the
infrastructure and system. The Yangtze River in China moves around 80% of
the countries IWT traffic. Potential of planning vessels, which are capable of
moving in IWT as well as coastal areas, should be explored. The promotion of
IWT concurrently with coastal shipping would go a long way in moving cargo
from up country locations to major/minor ports for movement between ports in
India. It is essential to design vessels like Ro-Ro vessels, silo vessels etc to
facilitate the movement of trucks over long distances and cargo like cement and
food grains efficiently. Konkan Railways has demonstrated that Ro-Ro wagons
can effectively shrink movement by road.

2.ll

Transport based on inland waterways (IWT)-rivers, canals, lakes, etc.

and also overlapping coastal shipping in tidal rivers-constitute 20Yo of the
transport sector in Germany and 32o/o in Bangladesh. In India it has a paltry
share of 0.15%.This is in sharp contrast to other countries like China where the
coastal cargo traffic handled in 2010 was around 1000 million tonnes. In China
ports, coastal cargo even before 1988 touched some 870 million tonnes,
followed by Japan with 549 million tonnes, Korea 141 million tonnes and even
Indonesia, which is not a developed country, having much higher coastal cargo
movement of around 133mi11ion tonnes. The total cargo moved by Inland $iater
Transport (IWT) in 2011-12 was about 70.5 million tones coffesponding to just
over 3.8 billion tonne kilometre.
Investments

2.I2 A review

of the public sector investment in the transport sector since the

First Five Year Plan reveals that the average investment in the shipping sector
per plan was only 5o/o as against 60Yo for railways and 50o/o for road se,ctor.
Even this meager investment was almost entirely allocated to overseas shipping
11

and ports sector. In the port sector also, very little investment has been made by
the maritime states on the development of minor ports and by the central
government for major ports on creating earmarked facilities for coastal cargo.

General impediments affecting coastal shipping:

2.L3 There are several impediments which hinder

measurement

of

coastal

cargo. These are:

1.
2.
3.
4.
5.

unequal competition provided by rail and road transportation

Double handling costs involved due to innovation in systems

Lack of active transportation policy

Cumbersome and lengthy customs procedure

Non availability of concessional finance for the acquisition of coastal

vessels

6.
7.
8.

High import duties on bunker oil and spares

High manning scales which increase operational costs
Stringent - international deep sea - specifications for construction of
vessels leading to higher capital costs

9.

Personal income tax, which discourages quality officers from continuity

on India coastal vessels

10.

Lack of separate berthing facilities at Major ports and inadequate cargo

handling facilities at the minor ports

11.

Absence of institutional mechanism for inter-sector coordination

Operation costs of coastal shipping

2.14

The major elements of cost in coastal shipping are:

(i)
(ii)
(iii)
(iv)

Handling costs: 35 % - 50%

Charter Hire costs:20Yo - 33%

Port Dues: I0o/o - 20%

Bunker Costs: 13% - 30%.

Advantages of coastal shipping

2.I5

Fuel consumption by coastal shipping at 4.83gm/km is just I5Yo of the

consumption by road and 54oh of that by rail. Emissions of carbon dioxide,
carbon monoxide, hydrocarbon etc with the exception of SO2 from coastal
t2

shipping are much lower than that in rail and road. Coastal shipping can handle
large parcel sizes easily. Whereas rail and road transport because of their
limited capacity and infrastructure cannot handle large quantities of coal, iron
ore etc. The cost of carriage of goods, from coast to coast, by coastal shipping
(about 2IYo of cost by road and 42o/o of cost by rail) works out to be much lower
than that by road and rail. Consolidation of cargo (small parcels) andunitization
will improve these figures substantially.

2.16 Taking in account the external costs arising out of accidents, noise
pollution, air pollution, climate change, congestion and infrastructure burden
etc., the cost of coastal shipping as a percentage of road and rail transport is
much lower. In the EU, the marginal costs of coastal shipping have been
estimated at 20.7Yo and 40.5Yo of road and rail respectively. In India there is
also high element of compliance cost on coastal shipping with road rail in India
far behind Intemational norms and practices.
Concessions already offered by government to promote coastal shipping:

2.17

Some of the concessions provided by Government for coastal shipping are:

1. Provision of dedicated terminals for coastal shipping at some of the rnajor

ports in India.

2. Exemption from light dues for coastal vessel operators

3. Exemption from filing a bill of coastal goods at load ports and bill of
entry at the discharge port for coastal vessel operators

4. Reduction by around 40Yo of vessel related charges for coastal vessels

and cargo related charges for coastal cargo compared to charges for
foreign going vessels

5. Relief of customs

excises duty on ships for coastal use.

t3

CHAPTER 3: STAhIDARDS FOR COASTAI &

INI"AND VESSETS
TERMS OF REFERENCE (D
To recommend standards required for
coastal and inland vessels (both manning as well as technical standards)
including review of existing standards.
The existing legislations

3.1

The governing legislations for the two segments i.e the Inland Vessels
and the coastal vessels are the Inland Vessels Act. I9l7 and the Merchant
Shipping Act 1958 respectively.
The Inland Vessels Actwas enacted in the year 1917, and has seen only minor
changes. Though the Act was amended in the year 2007 this amended Act, does
not adequately address the essential elements of structural safety, adequate
equipment and training of personal for operation of such vessels in the proposed
area of operation. The act also does not cover the issues that have come up in the
recent years with respect to security, insurance, pollution, due to increase in the
size of the Inland Vessels. Though the IV Act is a central Act, the enactment of

its provisions is with the Costal State concerned through its

appointed

Department/Maritime Board etc.

The Merchant Shipping Act

The aspects relating to safety, security, pollurtion

and other related to human element
going

for sea
ships, costal or foreign going
ships are governed under the provisions of the Merchant shipping Act. Though
the Act is an outcome of consolidation of related merchant shipping legislation
prior to independence and took its present shape in 1957 but it has been amended
from time to time to keep pace with the International requirements. It is a central
Act administered by the central Government.

3.2

The Merchant Shipping Act and the rules made there-under, ab initio do
not have separate standards with respect to construction, manning scale, survey
requirements etc for Coastal vessels. Safety of Life at Seas (SOLAS) convenLtion
of the International Maritime Organisation (IMO) gives the flexibility to the
coastal states to adopt equivalent standards for the vessels operating within their
coastal waters. Therefore, within the provisions of the SOLAS Convention and
the Merchant shipping Act, necessary measure/ relaxations can be considered so
that with partial relaxation from the stringent requirement as applicable to deep
t4

sea vessels can be granted to vessels operating near the coast reducing the
Capital as well as operating cost for the Costal vessels.

International practices

3.3

The committee analyzed the compliance cost and cost of operatiLons,

application of international shipping elements, transaction costs, manning,
training of appropriate cadre, comparison of other administrations such as
Australia, Singapore, China, Japan, EU, etc.

3.4

The committee examined the equivalent of Japanese JG Class and tasked

IRS to study the possibility of framing similar rules. IRS after due consideration
observed that there was no need to duplicate JG Class of vessels as in Japan
because Indian rules developed sufficiently reflect similar requirements. The
Committee requested the Directorate General of Shipping to revisit the standards
for River Sea Vessel (RSV)

The River Sea Vessel (RSV) Notification

3.5

The Directorate General of Shipping studied the provisions under the

Merchant Shipping Act, Inland Vessels Act, the relaxations permissible under
the International Conventions and revisited the RSV (River Sea Vessel)
Notification vide Order 13 of 201O.Subsequently, a revised RSV Notification
was notified by DG Shipping Order No. 18 of 2013 dt. 31't July 2013
(Annexure II). This revised notification increases the scope of the river sea
vessel movement including enhanced threshold and application to other types of
vessels other than passenger vessels.

3.6

The revised RSV notification is developed based on past industry

experience of similar 2010 Notification and has fuither liberalized the
requirements. Indian Register of Shipping (IRS) applies the provision of revised
RSV notification for operations within territorial waters of India so that such
vessels could go up to 20 nautical miles (limit for Class notation). The wonk is
in progress.

Recommendation

3.7

The Committee has noted the DGS order 18 of 2013 issued on the 3l-072013 with respect to new standards for adoption by River sea vessels adequertely
address the issue. It is also noted that the same has been developed with the
necessary input from the IRS, and the Industry input and meets the objectives as
mentioned. No further recommendation on the above terms of reference at
this stage is necessary.
15

CHAPTER 4: SEA TIMITS FOR INI"AND VESSETS

TERMS OF REFERENCE (ii)
port wise recommendation.

-To

fix Inland Vessel Limit (IV) and make

4.1

The subject of declaration of the IV limit has been under consideration at

different forums for considerable period. The issue has special significance as
the same governs the area of operation for the vessels registered under the
I.V.Act. Neither the declaration of such limit has been uniform nor has it been
declared for the whole coast of India. IV limits has direct reference in the I.V.
Act and has an indirect reference to the M.S.Act. There has been demand for the
declaration of new IV limit. The committee examined the need and rationale
for new IV limits required by IV amendment Act 2007 so as to move away from
earlier limits quite near the coast given new technology and demand for water
transport.

4.2

To understand the issue, it is essential to interlink the three main legal

instruments dealing with registration and operation of vessels in different areas.

a)
b)
c)

Inland vessels Act

Merchant shipping
United Nations Convention on the law of the sea.

The Inland Vessel Act (I V Act)

4.3

The Inland Vessels Act, among the three instruments, is the oldest,
which was enacted in I9I7 and has had only minor modifications with the last
being in 2007. The Act though is a central Act but it is to be enacted by the
States after bringing in the principles/ provisions of the Act through appropriate
Gazette Notification. The provisions of certification of the vessel, personnel
haven't changed much since its enactment, though the size and operations lhave
changed considerably.

The Merchant shipping Act (MS ACT)

4.4

The Merchant Shipping Act is the national legislation enacted in 1958

and has been amended several times. The act gives provisions for all aspects of
operation, safety, construction etc. for vessels registered under the merchant
shipping Act. This Act has to embed the requirement of International
16

convention and is dynamic, as vessels registered under the Act can operate
around the coast of India and in International waters.
The United Nation Convention on Law of Sea (UNCLOS)

4.5 The TINCLOS of 1972, (India acceded to it in 1974) gives the broad
guidelines on which the International shipping law including sea areas,
territorial issues are to be recognized. The Ministry of External Affairs,
Ministry of Shipping and the Ministry of Agriculture have been enacting the
provisions of the Convention, through the Acts and the rules made there-under.

4.6

The IV Act has been amended several times however the definition of the
Inland water had remained the same till 2007.The terms used in the I.V. Act
such as smooth andpartially smooth waters have not been defined in clear terms
and is left to interpretation.

4.6

The committee does not have the necessary mandate for examination of
how such definitions were left un-defined and why the amendments to the IV
Act in 2007 brought in such terms etc, including interlinking of the IV limit.
The deliberations were based on finding a reasonable solution, which can be
applied in a uniform manner across the whole coast including the Islands. The
IV Act had defined the Inland vessel limit in the Act of 1907 which was
amended keeping in mind the trade development, seasonal conditions etc. the
2007 amendment to the IV act integrated sea and inland water. The 2007
amendment increased the arca and interlinked to smooth and partially smooth
water and thus the "Inland water" as defined in IV Act is:

a. Any

canal, river, lake or other navigable water in the state

b. Any area of any water deemed to be the Inland Water as defined by

Central Government under Section 70 of the Act.

c. Waters declared by the Central Government to be smooth

and partially
smooth water under Clause 41, Section 3 of the Merchant Shipping Act.

4.7

With the 2007 amendment, IV ACT was interlinked to M S Act with the
limited purpose of declaration of smooth water andpartial, smooth water. The M
S Act in section 3, subsection 41 refers to the terms of smooth and partially
smooth water as the limit from where sea begins.

4.8

It was accepted that smooth water will imply thatthe area of sea where
and when the significant wave height will be less than 1.2 meters, similarly the
partially smooth water will be the area and period when the significant wave
17

height will be less than 2 meters. This was to be determined by the Central
Government. The above parameters are based on the general trend, observations
and is purely pragmatic and do not have any legal reference as such. Similar
parameters have been used in UK and other nations to determine their
operational limits for the development of the trade on their coast.

4.9

The United Nations Convention on the maritime matters, the United

Nations Convention on the Law of the Sea of 1972 has recoqnized three areas
namely:

a)

Internal waters: Water and areas inside the base-line. Broadly the
base line is the line up to which the water recedes during the lowest
tide, though there are various methods prescribed in the UNCLOS
to draw the base line in case where the contours of the coast are not
regular or there are small bays, back waters etc. Various sections
also prescribe to draw base line in an integrated manner, even
around the Island and archipelagos.

b)

Territorial Waters/sea: This is an area which extends to 12 nautical

miles from the base line and the sovereignty of the state will be
extended subject to the LINCLOS and other rules of International
laws.

c)
4.10

Exclusive Economic Zone: The area up to 200 Nautical miles from

the Base line. This demarcation is mainly for protection of marine,
living and nonliving resources.

It may be noted that the term "Inland water" defined in the IV act of

India is historic, prior the UNCLOS. The TINCLOS term of "internal water" has
the same meaning as Inland water and in-fact is de-facto replacement,
consequent to India's acceptance of LINCLOS, which makes it very clear that
beyond Internal waters the International Conventions, will apply.

4.II

Noting the provisions under the LINCLOS and the responsibility of

the maritime nations to declare the limits under section 2 of the Convention, the
Ministry of External Affairs as the administrative ministry enacted the Maritime
Zones Act. Under this Act vide notification no SO 1197 (E) dt.lst September
2009 that Ministry has already declared the base line around the whole coast of
India including the Andaman & Nicobar Island, Lakshadweep Island. The
waters inside the base line are deemed to be Internal Waters in which the state
can have absolute jurisdiction to formulate its own laws for vessels operation.
t8

However, beyond the Internal waters, as per the provisions under the UNC[,OS,
the parties to the Convention are required to follow Internationally accepted
norms, in this case, the standards prescribed by IMO.

4.12 Though the section3-41 of the of the Act

IV Act
as amended in 2007, gives direction for declaration of Inland water limit but in
view of the above notification by the MEA, provision of the UNCLOS, the
limitation pointed out, the Committee is of the view that it will be correct in law
and pragmatic to acoept the MEA's declaration of the base line as the limit of
and the provision of the

the Inland water/internal water.

4.13

It is also noted that keeping the above provisions in mind, for the safety

of vessels , trade and personnel oper ating such Inland vessels around the coast of
India, the Inland water authority of India (IWAD has been entrusted with the
task of preparing model rules for Inland vessels to operate in new enhanced IV
limits subject to zoning defined by maritime states. The said rules will take into
consideration all elements of safety of the vessels, training and certification of
personnel

4.14 The issue of IV limits was discussed in the 14th meeting of the Maritime
State Development Council held on 7th January 2013. The committee decided

that the Ministry of Shipping through an Office memorandum or any other

method may issue a directive on the subject so as to bring in clarity, uniformity
of application and betterment of coastal trade. Ministry of Shiping accordingly
issued the directive to Directorate General of Shipping to issue an order to
include the following:

a)

Noting the MEA notification no SO Il97 (E) dated 7-9-2009, the internal
water as described is accepted as the Inland vessels operating limits for
all vessels registered under the IV Act. The maritime Boards/ State
authorities may provide necessary informationldata from national
agencies to the IWAI for extension of such limits for the benefit of trade,
without compromising the safety standards as per the IWAI model
regulations.

b) In

accordance

with the provisions under the IV Act the

State

Governments concerned may incorporate the "model IWAI rules" in the

official Gazette or procedures for implementation. A11 aspects of the
model IWAI standards may be implemented by the State authorities or
may be delegated with effective monitoring and control to the competent
19

organizations. The implementation may be delegated in accordance with

the provisions of the IV Act.

c)

For the purpose of growth of coastal trade and in public interest, vessels
intending to operate beyond internal waters but up to the territorial water

limit, will have to comply with the appropriate provision of the M S Act
(RSV Notification) and the delegation of authority for enactment of the
state provisions /notification including the registration may be made to
the State authority/Maritime boards, if required.

d)

Inland vessels duly complying with the provisions under M.S. Act (I{SV
Notification) may continue to maintain the dual registration with the State
Authorities.

e)

The committee studied limits imposed by MEA as part of UNCLOS and

Maritime Zones Act to declare 'base line'. The committee decided that the
base line should be new IV limits subject to the States recommending
more or less depending on study of significant wave height etc. The
committee noted that the some States had done such studies from
INCOIS Hyderabad, NIO Goa and awaiting declaration of new smooth
andpartially smooth waters by DG Shipping.

4.15 As per the direction of the Ministry of shipping through the Directorate
General of shipping has issued the DGS Order No.19 dt.16th September,2013
clari$ring the issue as above.

Recommendation

4.16

Based on the directives of the Ministry of Shipping, the Director General

of Shipping vide DGS Order no. 19 of 2013 dt. 16'h September 2013 has issued

the necessary communication to all concerned (Annexure III). In this context,

it is recommended that that IWAI should firm up necessary guide line as
mentioned in the DGS order so that the same can be applied by all the sates
concerned. l{o further recommendation is made by the committeeo as

necessary implementation has been made

and the issue has been

adequately addressed.

20

CHAPTER

5: INCEI\ffIVE SCHEME TO PROMOTE

MODAI SHIFT

TERMS OF REFRENCE (iii)

formulate an incentive scheme for modal
-To
shift of caago from railhoadto inland waterways/coastal shipping.

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International practices

5.1

Globally, countries are adopting freight modal shift programs by

providing incentives as a financial reward for switching the shipping method of

choice from truck to rail or marine. The ground for such an incentive is that this
shift would generate social benefits that offset the cost of the incentives
provided. Countries like, Australia, UK, China,Brazil, Canada are resorting to
reducing their emission levels by rationalising their transport systems. Most
countries are contemplating promotional mechanisms by way of
grantlassistance to viable modal shift from road to rail or waterways.

5.2

In UK the Mode Shift Revenue Support Scheme assists companies with

the operating costs associated with running rail or inland water freight transport
instead of road, where rail or inland waterway transport is more expensive. It is
designed to facilitate and support modal shift, generating environmental and
wider social benefits from reduced lorry journeys on Britain's roads. There is
also Waterborne Freight Grant Scheme to assist a company with the operating
2l

costs associated with running waterborne freight transport instead of road,

where transport by water is more expensive. The grant applies to coastal and
short sea shipping and can assist a company for up to 3 years. The scheme will
be operational until 31 March 2015.

5.3 In China, the number of coastal vessels available is estimated to be

between 11,000 and 12,000 and it is estimated that 1 bn mt of coal, steel, grains
and fertilizers move via coastal shipping currently. In USA, the Maritime

Administration has places significant importance on movement of cargo

through coastal shipping and inland waterways with a view to reduce
congestion on road network. The European Union has taken proactive measures
to develop multi-modal logistics to reduce pollution, congestion, accidents and
at the same time achieve balance in modes of transport. The Marco Polo scheme
of European Union aims to free Europe's roads of an annual volume of 20
billion tonne-kilometers of freight.

Marco Polo Programme

5.4

The largest and most comprehensive program in the world is the Marco
Polo Programme (MPP) the European Union's modal shift program.
Designed to reduce congestion and contribute to an efficient and sustainLable
transportation system, the program has offered funding for projects that shift
freight transportation away from the roads. The first MPP was launched in 2003
and ran tiII2006. Owing to its great success, a second ongoing Marco Polo II
was launched in 2008 and runs tiII2013. Marco Polo II expands the program to
countries neighbouring the European Union and benefits from alarger budget of
450 million, more than four times that of the first program. To qualiff for
funding under the MPP, the applicant must demonstrate that a project shifts an
average of at least 60 million tonne-km of freight per year and produces net
benefits to society. Social benefits taken into account are noise, pollutants and
climate costs as well as accidents, infrastructure and congestion. An action
produces social benefits if it results in net savings in social costs. In other
words, as some modes of transportation generate larger social costs per tonnekm, benefits can be produced by shifting to a less costly mode, and the net
benefit is computed as the difference between the two costs. The social cost
figures used are based on an internal European Commission paper and are
summarized as follows:

22

Costs per

tonne-k* by Mode of Transport:

Mode of Transportation
Road
Rail
Net Social Benefit

Costs

per tonne-km ()

0.035
0.015
0.020

Modal Shift Incentive scheme of Kerala Government

5.5

The Kerala government has initiated a scheme to promote use of coastal

shipping for cargo generated out of Kerala. Incentive of INR 1 per tonne per
km is to be provided. For example, if 1 tonnes of cargo is transported from
JNPT to Vizhinjam and the distance is 1085 kms, the incentive provided will be
provided at the rate of INR 1 per tonne per km moved along the coast of Kerala.
In this case the incentive provided would be INR 540 per tonne as the total
coastline of Kerala is 540 Kms only. The State Government has currently
allocated Rs. 3 crore to Coastal Shipping Promotion Fund. The fund when fully
grown is to have a corpus of Rs. 300 crore. Besides, coastal vessels will enjoy
discount in port charges and soft loan will be provided to buy vessels at an
interest rate of two per cent for upto 40 per cent of the cost of the vessel, and at
a rate of 10 per cent for up to 80 per cent of the vehicle cost. The proposed
activities include development of infrastructure at minor ports also.

5.6

The government has identified four types of cargo for coastal shipping construction materials, food grains, LPG and vehicles. These are now coming to
Kerala from other states by road or rail. The government intends to bring them
by ships. The target is to divert at least 20Yo of the cargo currently moved by
road to coastal shipping by 2015 and 40Yo by 2020. The operationalisation of
the Coastal Shipping Promotion Fund is dependent on the constitution of the
Kerala Maritime Board, which will be the implementing agency of the fund.
The service providers i.e. ship operators are to benefit from the scheme. The
scheme has been operational since March 2013.

5.7

The Committee studied this model and the view that emerged was Kerala
coastline being 540 kms from Kasargod to Vizhinjam will be a short-sea service
and such a model may not be replicable at a pan-India scale given the total
length of Indian coastline.

ZJ

KPMG Study

5.8

ICC Shipping Association, Mumbai engaged KPMG to analyse the cargo

potential for coastal shipping and also develop an incentive scheme so as to
make coastal shipping competitive vis-d-vis other modes of transport in August
2013.

5.9

KPMG collected the inputs from ICCSA management, coastal vessel

operators, end user companies of coastal shipping, Ministry of Shipping, Kerala
Port and other secondary sources.

5.10

The recommendations made in the KPMG report are as under:

(A)

Cargo Potential
KPMG analysed 14 cargoes in terms of volumes, average parcel size and
coastal route potential and shortlisted nine cargoes namely cement,
fertilizer, foodgrains, steel, marble, tiles, salt, sugar and automobiles.
KPMG assesses the potential cargo movement of nine cargoes as 19.7
million tonnes. The details are:
Table 5: Commodity speci/ic routes and volumes
Commodify

Key Routes

Volumes
(in rnn tonnes)

Cement

Mundra-Cochin
Cuddapah-Kri shnap atnam-Haldia-Burdwan
Cuddapah-Kri shnap atnam-C o chin

0.7

Fertilizers

Kandla to Mangalore
Haldia toYizas
Paradip to Chennai

0.4
0.2
0.8

Foodgrains

anipat-Kandl a-Mangalore

1.2
1.8

pat-Kandla-Cochin
P anip at-Kandla-Chennai
Guntur-Vizag-Ha\dia

0.6
0.7

Steel

Jamshedpur-Chennai

Marble

Rourkela-Chennai
Udaipur-Cochin

0.2
0.5
0.9

Salt

Udaipur- Chennai
Gandhi dham-Kandla-Mans

Pani

Sugar

0.3

al

ore

Gandhidham-Kandla-Cochin
Tuticorin-Haldia
Tuticorin-Paradip
Vellore-Chennai-Paradip-Bhubane swar
Vellore-Chennai-Haldia-Kolkata
B el gaum-Mangalore-Kandla-Ahmedabad

1.5

0.2
0.9
0.3
0.1

0.4
0.2
24

Automobiles
(#of cars)
Tiles

Pune-Chennai

35,000

Pune-Cochin

20,000

Gursaon-Cochin
Morbi-Mundra-Chennai
Morbi-Mundra-Mangalore-B angalore

50,000
0.4
0.2

Source: KPMG Analysis

(B)

Incentive Scheme
KPMG considered the road coast'oon actual quotes received and industry
benchmarks" and the rail costs 'on actual haulage rates along with
surcharges". Coast of coastal cargo was estimated as vessel charter rates,
bunker fuel coasts, port charge and terminal handling charges. KPMG
finally suggested an incentive amount of Rs. 1 per ton per km but subject
to a maximum of Rs. 500 per tonne. The incentive for container cargo for
the movement less than 500 km and greater than 1500 km varies between
Rs. 1600 to Rs. 3500 per TEU.

(c)

Other recommendations

The other recommendations include rationalisation of wharfage for

coastal vessels, development of low cost non-major ports, reduction of
transaction time at ports, offer of concession for coastal vessels built in
India, allocating dedicated berths at ports etc.

Commodity-wise analysis

5.11 The inputs from ICCSA by way of KPMG Study have been of

great

assistance to the Committee. The present trends of cargo movement highlighted

in the study have helped in focussing on a commodity-oriented approach for

promoting modal shift. The main trends in present movement of focus
commodities are as under:
Cement

The average parcel size for cement is 2,200 tonnes, which is

effectively an entire rake load. Currently transportation mode mix for cement is
Fierrl 610/o, Road 38o/o and, coastal shipping 1 %. The present movement of
cement is seen along (i) Rajasthan to Uttar Pradesh, Gujarat and other North
Indian States (ii) Gujarat to Kerala and (iii) Andhra Pradesh to KeraIa and West
5.1 1.1

Bengal.
25

5.rr.2

At present, rail movement happens from Andhra Pradesh to West

Bengal of around 1.2 mn tonnes ayeat of which 0.5 mn tonnes moves by rail
and 0.7 mn tonnes moves by road. The major companies like MyHome
cements, Zuari Cement, Ultratech Cement, India Cement and Madras Cement
have manufacturing units near Nalgonda and Cudappah from where cement
moves in 50 kg bags to Burdwan area in West Bengal.

Currently there is coastal movement between Mundra and Cochin

by cement companies located in the Kutch region. Companies like Sangi
Cement, Ambuja Cement and Saurashtra Cement present in the Kutch region
move their cement from to Kochi.
5.1 1.3

Currently, 1.8 Mn tonnes of cement is moving from Andhra

Pradesh to Kerala by rail. Coastal distance is almost thrice the road and rail
distance due to non-operational state of Sethu Samudram of which ships have to

5.tr.4

sail all the way around Colombo

Fertilizer

5.11.5

Domestic movement of fertilizer is estimated to be 31 mn tons with

rail accounting for 93o/o and road accounting for 7Yo with limited coastal
movement. Average parcel size of cement is 2,200 tonnes which is effectively
an entire rake load. Current transportation mode mix of fertiliser is Rail 93%
and Road 7%. At present, movement of fertilizer is seen along Orissa to Andhra
Pradesh, Gujarat to Kerala, Karnataka, Rajastahn, Madhya Pradesh and
Chattisgarh, Goa to Kerala and Kamataka, Uttar Pradesh to Bihar, Jharkhand
and northern India.

5.r1.6
India currently imports 30% of its total fertilizer requirement.
Fertilizer imported include fertilizers such as DAP, which is not manufactured
locally. Significant proportion of imports is moved through Kandla andYtzag.
Imports that move via KandIa are largely moved north and movement along the
coastal states in the south is limited, if any. However, there is movement of
some imports along with domestic produce of fertilizers from Andhra Pradesh
to West Bengal. This number is estimated to be 0.2 million tonnes per annum.
Further, there is movement currently taking place from Orissa from companies
such as IFFCO and Paradip Phosphates to Chennai. On the west coast, primary
interactions indicate that IFFCO presently moves 0.2 mntonnes from Gujarat to
Mansalore.

26

Food grain

5.11.7

Domestic movement of food grain is estimated to be 260mn tons

with rail accounting for 30Yo and road accounting or 70o/o with limited coastal
movement.

Bulk movements of food grains are nornally the equivalent of a

rake load, which is2,200 tonnes. Food grains comprise rice, wheat,maize,bajra
and jowar. Rice and wheat account for 75o/o of total food grain production in
India. Food Corporation of India (FCI) accounts for approximately I5o/o of
overall food grain movement in India. FCI's split of road and rail is l0o/o and
90Yo respectively. At present, FCI is moving significant proportion of food
s.1 1.8

grains from North to South which has potential to be converted to coastal cargo.

Significant long distance movement or rice and wheat presently

occur by rail. FCI and large traders move food grains in bulk from North India
to Kerala, Tamil Nadu and Karnataka. Apart from this, Andhra which produces
a lot of rice in the Kakinada and Guntur region moves significant quantity to
West Bengal. This movement ocours through both rail and road. Primary
interactions indicate split between road and rail to be 30:70.
5.11.9

Steel

5.11.10

Domestic movement of Steel is estimated to be 51mm tons with

rail accounting for 50Yo and road accounting for 50Yo with limited coastal
movement. Average parcel size for cement is 2,200 tones, which is effectively
an entire rake load. Current transportation mode mix for steel is Rail- 500/o and
Road- 50%. At present, movement of steel is seen along the routes of (i)
Bihar/Jharkhand to UP, West Bengal, Maharashtra and southern markets (ii)
Raigadh to Delhi, Yizag, Mumbai, Kolkata, Chennai and Hyderbad (iii) Orissa
to West Bengal, Andhra Pradesh and Tamil Nadu. Consumption takes place
near the ports where ship building lakes place. Coastal movement in steel in
limited to companies like Essar Steel. There is currently a movement of around
0.5mm tones of steel through the coast from Hazira to Tuticorin. Companies
like Tata Steel send around 5mm tones of Steel and steel products Tamil Nadu.
The preferred mode of transport for auto companies in Chennai is road due to
scratch sensitive steel required by the industry. Currently, 0.2mm tones of steel
is moving from Orissa to Tamil Nadu by rail Companies like JSW steel send
their consignment by road and in smaller parcel sizes.

27

Marbles

5.11.11

Total production of marbles in India is estimated to be 14.3mm

tons with rail accounting for -5o/o and road accounting for -95% of domestic
movement. Kishangarh and Udaipur are the marble manufacturing hubs in
India. Marble tile movement by rail is largely containerized. Bulk movement is
limited, if any. On average,2T tonnes of marble is moved in a TEU. At present,
movement of marble is seen along the routes of (i) Rajasthan to Kerala and
Tamil Nadu (ii) Rajasthan to NCR, West Bengal and Karnataka. Discussions
indicate 600/o of marble movement from Rajasthan to Eastern India is through
rail. However, for movement to Western India and South India it appears that
road is still the preferred mode of transport. Rajasthan accounts for 90o/o of
overall marble production in India. Movement along the west coast is largely
though road with some movement occurring through rail too Share of rail on
this route is estimated to be between 5 * I0o/o only. Discussions with marble
manufacturers and coastal vessel operators indicate that potential for coastal
movement exists from Udaipur to Kochi and from Udaipur to Chennai. Marble
manufactures indicate that Kerala and Tamil Nadu account for about 10% of the
domestic consumption of marble. Further, it is estimated that Chennai accounts
for 60 - 65% of overall marble movement to these two states.
Ceramic

5.I1.I2

Total domestic movement of ceramic tiles is estimated to be 60mm

sq. mts with significant proportion of transportation happening through road
currently. Approximately 7.2 mm tones of ceramic tiles was produced in FY12,
assuming average weight of 1 sqm tile to be 12 kgs. Average parcel size for rail
is 28 tonnes per container, for road is l5-2I tonnes and for coastal shipping is
28 tonnes per container

5.11.13

Tiles largely move in containers when moving by rail and coastal

shipping: average weight per container is 28 tonnes. When moving by road,
average parcel size for tiles per truck is 15 - 17 tonnes. Ceramic tiles at present
moves through rail and coastal shipping, primary discussions indicate
movement through rail and coastal shipping aggregating to 30 - 35%" At
present movement of ceramic tiles is seen along the routes of (i) Morbi to
Chennai by rail and road (ii) Morbi to Kolkata by rail and road (iii) Morbi to
Bangalore by rail and road (iv) Morbi to Cochin by coastal shipping (v) Alibaug
to Chennai by rail and road. At present, containerized coastal shipping of tiles is
happening from Morbi to Cochin. Hence this route has not been considered.
28

5.II.L4

Discussions with ceramic tiles manufacturers indicate that 5a/o of

overall production at Morbi moves to Chennai. This movement presently
happens largely by roacl with rail accounting for 5-10% only. Another potential
route for coastal shipping could be the movement that occurs to Bangalore
currently. Primary interaction that 2-3% of the ceramic tiles production from
Morbi moves to Bansalore.

Salt

.15

Domestic rnovement of Salt is estimated to be 22 mm tons with rail

accounting for 30% and road accounting for 70% with limited coastal
movement. Average parcel size for cement is 2,200 tonnes, which is effectively
an entire rake load. Current transportation mode mix for salt is Rail - 30oA,
Road - 70% and Coastrel Shippittg - 0%. At present, movement of salt is seen
along the routes of Raja"sthan to Uttar Pradesh and northern India (ii) Gujarat to
Madhya Pradesh, Maharrashtra and West Bengal (iii) Gujarat to Karnataka
and Kerala (iv) Tamil Nadu to Andhra Pradesh, West Bengal and Orissa.
Currently, there is some movement from Kandla to Tuticorin due to price
differential of raw salt between the cities. The nearest port to Gandhidam, the
salt hub of Gujarat, is K.andla from where movement can happen to other ports.
5.1

From Gujarat, 1.5MMT can move to Mangalore to meet requirement of

0.9MMT of Karnataka and 0.6MMT of Andhra Pradesh. From Gujarat, another
0.2MMT can move to Cochin to meet demand for Kerala. Currently, Movement
from Tuticorin is not possible due to non operational stage of the
Sethusamudram Project, The route is potential only when it gets operational.
Sugar

5.11.16

Total domestic movement of sugar is estimated to be 19.6 mm tons

with rail accounting for 20Yo and road accounting for 80Yo with no current
coastal movement. About 5.7 mm tones of sugar were exported in FY 2012.
Bulk movement of rail is an entire rake load ; Sugar refineries have a ruiI siding
normally and load 2,200 2,400 tonnes when moved by rail. Current
transportation mode mix for sugar is from IJttar Pradesh to Bihar, West Bengal
and NCR (ii) Maharaslrtra to Gujarat and Rajasthan (iii) Tamil Nadu to West
Bengal, Odisha and Assam(iv) Karnatakato Kerala and Gujarat . West Bengal
requires -1.83 mm tones of sugar annually. This requirement is presently met
from both Uttar Pradesh and Kerala. Discussion with sugar refineries and
transport operators indicate that 20 - 25% of West Bengal's requirement is met
by Tamil Nadu.

5.ll.l7

Orissa has a requirement of -0.83 mm tones. Primary interactions

indicate that this requirement is met by Maharashtra, Karnataka and Tamil
Nadu. Coastal movement potential exists for movement from Tamil Nadu to
Orissa to the tune of 0.07 mm tones. Gujarat has a requirement of -I.27 mm
tones which is catered by Maharashtra and Karnataka. Karnataka meets -20%
Guj arat's sugar requirement.

of

5.11.18

Primary interactions indicate freight cost is an important factor

while deciding the sourcing location. There is a preference for movement of
sugar from the south due to the comparatively lower cost compared to sugar
from UP.
Automobile

5.11.19

The total domestic movement of automobiles in India was -20 mm

in 2012 with major movement occurring through road transportation. Average
parcel size for automobiles in road transportation is 8, 10, and 15 depending on
the car model being transported. Maruti Suzuki has two manufacturing facilities

in

Haryana. Tata Motors, Fiat, General Motors and Volkswagen have

manufacturing facilities in Maharashtra. Hyundai, Mitsubishi, Renault Nissan
and Ford have manufacturing facilities in Tami Nadu. At present, movement of
automobiles is seen along the routes of Gujarat to Tamil Nadu and Kerala (ii)
Chennai to Maharashtra, Gujarat and NCR (iii) Pune to Punjab, Haryana and
Tami Nadu.

5.II.20

At present, road movement takes place between Pune and Chennai.

Different companies have manufacturing locations in Pune and Chennai, hence
one brand of cars is transported from Chennai to Pune and another brand is
transported from Pune to Chennai.

5.II.2l

Currently, cars are not being transported by rail as companies want

to avoid multiple handling during the way. The reason for this is that even a
small scratch or dent to the automobile during transit significantly increases the
costs for the company which is very costly for the company. A pilot was
conducted to transport Maruti cars from Gurgaon plants to Cochin via Mundra
port.
Recommendation

5.12 The Committee deliberated in detail on the possibility of extending an

incentive on a per tonne per km basis to the extent of INR 1 subject to a
maximum of INR 500 per tonne across any distance and similarly a slab system
30

and similar incentive for container vessels. The Committee, after elaborate
deliberations and keeping in view the implementation issues, cost of subsidies
and fund requirements, recommends the following incentives/measures for
promotion of coastal shipping:

1. In case of bulk cargoes all new coastal cargoes on Indian flag vessels on
demonstration of a fresh modal shift wilt be eligible for an incentive @ of
50 paisa per tonne per nautical mile upto a maximum of 500 nautical
miles. The loading ports will administer the release of incentive based on
their records of coastal movement by a particular shipper. These major
ports will be eligible for a reimbursement by the Ministry the claims of
such incentive disbursement periodically. Initially, the new cargo eligible
for an incentive will be fertilizer, food grains, steel, marbles, tiles,
cement, sugar, salt and automobiles. This list can be expanded further
based on trade demands and market trends and fund availability. This
incentive will be for a period of five years as it is expected that the
mechanism

will

create awareness and generate cargo for both ways.

2. ln case of coastal container cargoes on Indian flag vessels, contai.ners

upto INR 1000 per TEU rebate may be given subject to a cap of 500 TEU
per vessel in Terminal Handling Charges at both ends. The service

provider

of

terminal handling may be reimbursed by the Terminal

Operator at aIl Terminals. The Terminal Operator

the Ministry.

will in turn claim from

3. Presently, at major ports the vessel related charges for all coastal vessels
do not exceed 600Z of the conesponding charges for other vessels.
Similarly, the cargo/container charges for all coastal cargo/containers
other than thermal coal, POL including crude oil, iron ore and iron
pallets, do not exceed 600/o of the normal cargo/container related charges.
It is recommended that the present rebate of 40o/o in vessel related
charges and cargo related charges for vessels other than thermal coal,
POL including crude oil, iron ore and iron pallets for Indian flag coastal
vessels be increased to 600/o at both ends. The difference of 20o/o may be
reimbursed to major ports by Government periodically.

4. The above schemes may be operationalised for a period of five years.

Meanwhile, the Committee expects that two way cargo movement
develops by the increased awareness of the benefits of coastal shipping. It
is therefore recommended that necessary infrastructure at major and non31

major ports are developed

to

cater exclusively

to

coastal cargo

movement.

5. For shipbuilding, of coastal cargo

vessels, the Committee recommends

that a total excise and customs duty waiver may be given for the raw
materials. This incentive will motivate shipyards from taking up vessel
construction of coastal ships.
?ktr*rr?k

JZ

A.n""ut. J
$

i{r-" -

No.

SS/n 6SI l/il2$tr 1-SL-&{G

GOVERNMENT If,F'INDT,A
MINIST'RV OF SF{XPPING

"tr-ransport

Bhawan" I, parliarnent Street

New Delhi datecl tlre 3,'.rApril 2013

OR.DER

SuLr'iect: committee to reeonri'nend

stanclards required for eoastal and inland
vessels as different fio*r
seagoi*g vessels ineluding review
or_eiistin! riunourou; to fix intana vessel limits
and mal<e
port-u'ise reeommendations; and
fo fo'nulai-e an ineentiv* ,*n.** ror
rur rlro.,at
modal snrfi
shift ot
of ccargo
fi"onr rair/road to inrarrd waterlvays/coastar
srripping.
nn 'pursuallce

of the policy to promote coastai shipping and

inland rvater trunsport, it has been

ciecided to constitute a ccmmittee

wittr the f'oilowi"g

'

""nrpiriri"",
uiJ Capt. P"V: I(. \4ohan. Chairman. National Shipping
Boarcl
2) Shr.i M.C. .iauhari, Joint Secrerary (Shipping), M/o Shipping
3) shri ts. poiyaamozhi, Deveropment Adviser (ports),
M/o shipping
4i Capt. I-.K. panda, Nautical Aclviser. DC (Shipping)
q) Shri R..P. Khare, Chief Engineer (Civil), IWAI
5)' Shri M.M. Hasija, Dy. Financial Adviser, Wo Shippping
7| shri ts' idrislinanroorlhy, Deputy secrerary (MA & MG),

In Clrair
Member
Member
Member
Member
Menrber

M/o shipping Member Secretary

'[-lte colnrnittee
may also co-opt representatives of Indian
Register of Slripping (lRS), Indian
l\atio.af sliip-owners Association (INSA),
Indian coastar conr"r.nlJ iir*r", Associarion
(rcc) or
other representatives as members, aS
and when requi;J L
The Terms of Reference of the Conrmittee

l'

arc:_

i'
ii'

To recommend standards required for

coastal and inland vessels as different
from seagoing
vessels (both nranning as weli as
technical standards) h"ruoing ;.Jew
of existing standards;
To fix xnla'rcl vessel (lv) limits and
make port-wise recommendations;

iii' To fbrmulate an {ncentive scheme for

waterways/coastal shippi ng.

1*-

"rffllcornmittee

and

modal shift

of

cargo from raillr.oad

to

inrand

shall subrnit its report to the Minisrry

within a period of three monrlrs fiorn the

ror artending trre meeting or the comrnittee,

ir any.

i,,,, ,*

;n:ffifJi"i?l:.,1L:;1J.*isi#urred

6'

This is issued witrr the approvar of

competent authoritv.

To Al[ Members of the Cornmittee

Copy to:
(i) FS to Minisrer (Shipping)
(ii) pS to MoS (Shipptirg) -'
(iii) Sr. ppS to Secretary (Shipping)

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