Inland water transportation is the next big thing in green cargo

The development of inland waterways will help in the protection and conservation of waterways and canals. It will complement the SAGARMALA project, which envisions to build 10 economic zones spanning 300-500 square kilometres.

The flagging off of the PepsiCo’s 16 containers from Kolkata to Varanasi through National Waterways 1 opens up a new chapter in India’s freight movement history. This development comes at a juncture when both demand and supply side perspectives of the operator, supplier as well as that of the beneficiaries are aspiring for better, efficient and cheaper logistics movement every year.

According to the World Bank estimates, India’s freight movement through waterways has an insignificant share of 0.5 percent till date compared to 65 percent by road and 27 percent by rail.

In order to boost the freight transport through waterways, the Narendra Modi-led NDA government had officially notified 111 waterways for the development of Inland Water Transportation (IWT) as per The National Waterways Act (2016). In this context, the inaugurated phase is a very remarkable beginning.

India has nearly 14,500 km of navigable waterways, about 5,200 km of the river and 4,000 km of canals. As the data reveals, the utilisation of this vast network is abysmally small and this has put enormous pressure on the existing road and rail network infrastructure and least to say the cost escalation in the movement of cargo.

According to Nitin Gadkari, Union minister of shipping, the logistical costs in India are around 18 percent; much higher than that of other countries: 8-10 percent in China, 10-12 percent in the European Union. The statistics in the logistics industry shows that between FY15-FY17, logistics expenditure in India ranged between 13-15 percent of the nominal GDP — in relation to an average of 8 percent across G8 nations.

A study by ASSOCHAM-Resurgent India (2016) had stated that India can save $50 billion if logistics cost reduces from 14 percent to 9 percent of GDP. Reduced logistics cost would bring down the prices of products and boost the economy in multiple ways. The proposed plan to develop 111 waterways covering 24 states and around 15 rivers/canals across India is a vital step akin to the Golden Quadrilateral project under former Prime Minister AB Vajpayee.

According to the announcement on the ministry website, the project in discussion called Jal Marg Vikas Project (JMVP) on NW-1 entails development of fairway 3 meters deep, between Varanasi and Haldia (Phase-I) covering a distance of 1,380 km at an estimated cost of Rs 5,369 crore with a target for completion by March 2023. The World Bank offers technical assistance and investment support to the project. The project will help establish six multi-modal freight terminals — at Varanasi, Ghazipur, Kalughat, Sahibgunj, Triveni and Haldia. There will be five new Roll On-Roll Off (RO-RO) crossings at different locations to help trucks and other vehicles transfer from the road to the river and vice versa. The cargo terminals will have the potential to evolve into thriving logistics hubs, providing jobs for thousands of people directly (46,000) and indirectly (84,000). Clearly, the PEPSICO containers movement is only a small beginning of a massive development of the region.

Development of freight transport through waterways have other externalities also. One of them could be that the market forces will start showing interest in the protection and conservation of the waterways and canals. Once the liners and logistics companies become a shareholder and have immense stakes in the ecosystem of the developed waterways, they could be made as a partner to the development. The waterways developed could also be optimised for the transport and tourism opportunities which would, in turn, supplement the freight corridor augmentation.

While the cost of the freight movement through waterways is less, compared to its counterparts in rail and road, it also has a significant role in climate change debate. Studies show that a barge could be equivalent to 15 rail wagons and more than 60 trucks. The cost of moving one tonne of cargo by IWT is one-third of the cost of moving it by the road and the gains could be improved further.

Under the aegis of the International Maritime Organisation, a specialised intergovernmental body of the United Nation for regulating shipping, more than 170 countries have committed to cutting greenhouse gas emissions by at least 50% by 2050. A developed IWT architecture could be a major step for achieving the set targets of India’s commitment to the Nationally Determined Contributors (NDC).

Another aspect of this emerging market could be the development of the shipping industry in India, especially in the merchant shipping sector of a variety of vessels. There could also be policies on ‘no waste discharge to water’ and ‘oil spill contingency plans’.

By and large, the development of waterways will complement the much promised SAGARMALA (string of ports) project. SAGARMALA envisions to build 10 economic zones which could span 300 to 500 square kilometres.

Thus a policy which would encompass the integration of the development of the waterways to SAGARMALA will present a uniform and integrated market upshot, with an accelerated development of logistics infrastructure, shipping industry, manufacturing hubs, etc. — a much-needed economies of scale, which is the need of the hour.

Dr. D Dhanuraj is Chairman at CPPR. The article has research inputs given by Chithira Rajeevan (Research Assistant at CPPR).

This article was first published on moneycontrol.com

Dr. D Dhanuraj

Chairman of Centre for Public Policy Research.
PhD in Science & Humanities from Anna University, Chennai; M.Sc Physics from Mahatma Gandhi University, Kottayam; MA Political Science from Madras Christian College, Chennai; Post Graduate Executive Diploma in International Business from LIBA, Chennai.

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Dr. D Dhanuraj

Dr. D Dhanuraj

Chairman of Centre for Public Policy Research. PhD in Science & Humanities from Anna University, Chennai; M.Sc Physics from Mahatma Gandhi University, Kottayam; MA Political Science from Madras Christian College, Chennai; Post Graduate Executive Diploma in International Business from LIBA, Chennai.

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