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Enhancing trade competitiveness through sustainable shipping in India

Shipping is generally a low energy, low cost and a low impact method for freight transport on a per ton-km basis. In India, the push to sustainable shipping is twofold:

1) Efficiency for Trade: India incurs high logistics costs compared to other countries. Transportation cost efficiencies are required to reduce the ‘drag’ on trade of raw materials, intermediary products & commodities.

2) Tougher Sustainability Regulation: international mandates for sustainable shipping are tightening compliance requirements, creating a civic and criminal legal liability for shipping companies that cannot adapt and comply in time. 

Planning is underway to shift freight from road to railways, coastal & inland shipping 

Road transport sector has around 80% share of country's freight, while railways' share has been steadily decreasing — from 32% in 2002 to 20% at present.   With the introduction of heavy axle trucks and a fuel adjustment component (FAC) for rail freight which increased charges by 5%-8% in Feb 2013 will have further shifted traffic away from rail to trucks. Road transport is competitive as it needs little infrastructure to enable cheap packing & handling at loading and unloading points, and has a more flexible network. Terrestrial transport pathways are saturated and will be unable keep up with projected demand – with 9 of the top 10 national highway routes operating at utilisation rates 10% higher than what maximum daily capacity and a similar situation for key rail routes. This stimulated the industry to lobby for investment for greater levels of coastal & inland shipping infrastructure, port mechanisation, and connectivity. The National Maritime Development Programme has invested Rs.1,00,339 Cr over 2005-2012 with Rs. 55,804Cr for the Port Sector and the balance for the shipping and inland water transport (IWT) sectors.  This momentum has been carried forward to the Maritime Agenda 2010-2020, which sets aside Rs. 16,395 Cr for shipping, and Rs. 10,500Cr for IWT. 

 

De-congesting port infrastructure a key priority for sustainable shipping

The saturation of existing capacities at India’ major ports have led to an increase in vessel turn-around and detention times and the proliferation of non-major ports.  

Even though there has been a growth in traffic of cargo at major ports, the output per ship berth per day has not been able to keep up with this traffic leading to a 25% rise in turn-around time for ships. More concerning is that ships may not be able to berth for up to 2 days – an 85% increase in detainment time over six years that poses considerable cost and wasteful resource use for charterers.

To absorb capacity shortfall in major ports, non–major ports have handled cargo and their traffic has increased by 136% over 2006-2012.  However, the proliferation of non-major ports increases the net footprint of shipping services to India by reducing the scope for using benefits of scale in port infrastructure and developing consolidated rail/ in-land water corridor connectivity with ports.

An increase in port pre-berthing and turnaround times for vessels increases the net energy use, emissions and local marine pollution impacts. The fuel consumption and environmental pollution of in-port activities are comparable and in some cases exceed impacts of cruising. Currently, duration of port activities last at least 4.56 days on average for a ship on an Indian port. However, global averages when adjusted for Indian traffic mix suggest that an improvement to 37 hours per ship (on average) is possible.

Based on the fuel and environmental metrics given above, even an hourly reduction in duration of port activities could substantially reduce local pollution and save energy costs across a whole fleet.  For India, given the projected growth in container traffic is expected to increase. Containers are a type of cargo that can be handled very efficiently.  Container mechanisation in India could generate efficiency gains that could be passed on to reduce pressure on port facilities for other types of bulk (such as dry goods) and reduce overall average duration of in-port ship activities. 

Sustainable shipping must focus on a large volume of small to medium sized vessels 

Overall, the opportunity to make a meaningful impact on sustainable energy demand within the shipping services in India must focus on a large volume of small to midsize vessels.  This requires:

  • A focus on operational or process based improvements if ship design & technology retrofits are not feasible for an aging fleet of small vessels
  • Investment in retrofits rather than new-build in order to increase sustainability of existing ships
  • Uptake of retrofits where upfront cost is small, and can be recovered through  partnerships between owners and charterers by securing payback through long term chartering contracts for small and mid-sized vessels

In India, around 62% of registered national shipping capacity caters to demand representing oil imports. Of this, only 8 vessels exist with the capacity of more than 85 000 gross metric tonnes (GRT), with only 5 vessels (all oil tankers) that could be potentially considered Alfra/Suezmax level. (These terms roughly denote capacity of oil tankers i.e. Alframax (80,000–120,000 DWT) & Supramax (120,000–200,000 DWT).)

While oil tankers make up a significant portion of tonnage in India, the energy requirement is greatest for Dry Bulk Carriers (coal, mineral ores, grains and fertilisers).

 

 

Analysis by cKinetics

Image Credits: AJay, WmJas

Author: Sustainability Outlook