Bottlenecks in The Indian Shipping Sector
India’s seaborne trade is more than 75 per cent by volume and there is ample opportunity for the major and minor ports to grow, tapping the potential in inland water transport to boost Indian maritime industry. Globally, very large ships are much in demand. Since these ships require deep draft ports, India needs to develop facilities at both major and minor ports, along its seaboards. The challenge lies in increasing operations with zero stoppage to enhance efficiency that would be at par with global standards. State governments have already shown interest in developing minor ports, and the private sector has entered the fray, especially where developing ports, terminals and warehouses are concerned.
Of India’s international trade, about 95 per cent by volume and 70 per cent by value is undertaken through the maritime route. There has been a sustained rise in the volume of exports driven by robust growth in the manufacturing sector and improved export competitiveness. The Indian government has fixed an ambitious target of 150 billion USD for exports by 2008-09 and to double India’s share in world exports from nearly 0.8 per cent to 1.5 per cent (Fig 1).
The total volume of the traffic handled by all Indian ports during 2006-07 was 650 MT, of which 463.78 MT, i.e., around 71 per cent was handled by major ports and the remaining 186.12 MT by non-major ports. A review of Ministry of Shipping’s data on overall compounded annual growth rate (CAGR) of traffic at major ports between 1951 and 2007 shows 5.77 per cent, whereas during the post-liberalization period, i.e., during 1992 to 2007, the CAGR has been 7 per cent. In fact, in the last five years, the traffic growth at major ports has exhibited a CAGR of 10.08 per cent.
Indian shipping industry strives to employ trained and skilled manpower for port operations. However, for this, it needs to meet stringent International Maritime Organization (IMO) regulations. The Indian government needs to especially drive support and build a ‘green passport’ to train the newly skilled personnel and help them meet global standards.
The ship breaking and ship building industries, too, need to frame stringent coastal regulations for a clean environment. The same applies for the ship repair industry and port operations. The Indian ship recycling and ship breaking industry (Fig 2) has come a long way since its inception in 1982. Starting with recycling of just five ships in 1982, India’s ship recycling yards recycled more than 500 ships in 2012. The last three decades has seen enormous growth, notwithstanding the cyclic nature of the shipping, shipbuilding and ship recycling industry.
India entered into ship recycling when shipping was at its peak during the oil boom of the ‘80s. However, the freight market soon began to fall, leading to a larger supply of ships for recycling. This saw India end up with a larger market share in ship recycling. Meanwhile, ship building has slowed down in recent years, with many yards languishing for want of orders. With sea trade expected to expand at a fast pace, India needs to seize this opportunity and expand its works.
Maritime shipping produces an estimated 2.7 per cent of the world’s CO2 emissions, as per the World Shipping Council’s report ‘Liner shipping industry and carbon emissions policy’, published in 2009. It is expected to grow further and the trend can be arrested only if the shipping industry drafts a strategy that includes economically viable technological and operational measures to lower environmental pollution. This can also counter uncertainties stemming from volatile fuel costs and fuel availability (Table 1). As low carbon shipping becomes high on global agenda, a draft policy in keeping with international maritime regulations becomes an imperative.
A draft policy will need to incorporate advances in technical changes for lowering emission; enhancing of infrastructure in ports and its allied logistics; putting in place regulation and barriers; and engaging in low carbon shipping. Many experts, researchers and industrial bodies are already at work on these issues.
There have been technical advancements in the matter of ballast water, SOX, NOX, CO2 and energy efficiency. The International Convention for the Control and Management of Ships’ Ballast Water and Sediments (BWM Convention), despite being adopted by consensus at a Diplomatic Conference held at IMO Headquarters in 2004, has not yet entered into force. However, the schedule for mandatory treatment of ballast water has been fixed independent of when the convention is ratified. Any delay in ratification will simply create a larger backlog of technology orders. Indian shipping has to meet these standards and inspect arriving ships to maintain a healthy coastal environment.
Numerous data analyses from ships are being used in simulation to identify the changes needed in technology by 2020. The major concerns pertain to reduction of CO2 and SOX emissions, besides fuel efficiency. With seawater scrubbing, an after-treatment of exhaust gas that uses sea water to wash SO2 out of the exhaust gases, becoming increasingly popular, it is bound to impact emissions with tests showing that SO2 emissions can be reduced to zero and particulate matter can be reduced by 80-85 per cent. With use of LNG rising steadily, new shipping designs will save anywhere between 25 to 40 per cent of fuel and cut costs.
For SOx emissions, there are two deadlines by IMO that must be kept in mind, one in 2015, when the 0.1 per cent sulphur limit is enforced, and 2020 or possibly 2025, when a global limit of 0.5 per cent sulphur content in fuel will become effective.
As the new concept of energy efficiency design index (EEDI) has been introduced for newly built ships, and IMO has structured a special ship energy efficiency management plan to measure and control GHG emission from the already existing shipping fleet. The introduction of EEDI into the shipping industry has forced the engine manufacturers to design components that meet regulations. SOx which is considered difficult to control due to the high sulphur content in fossil fuels can be substituted with LNG fuelled marine engines contributing towards improving the EEDI—to fall in line with the emission regulations of tier III.
India has over 110 companies in the shipping sector with major domestic players including Shipping Corporation of India Limited. However, India’s shipping industry has not grown at a pace commensurate with its international trade. From 1990-91 to 2006, the Indian fleet’s total gross tonnage grew at around 1.8 per cent per annum compared to the average trade growth of about 14 per cent. Consequently, India’s maritime trade is dominated by foreign fleets and the ratio between foreign and Indian fleets in Indian maritime trade is 70:30. Further, the average age of Indian ships is 16.5 years as against the world average of 12.2. The Indian fleet is mostly deployed on international operations, which account for 93 per cent of the total capacity, while coastal shipping accounts for 5.7 per cent and the rest is accounted for by offshore shipping. The market share of Indian shipping companies also declined due to a fall in assured cargo on account of the liberalisation of regulatory environment and due to major customers such as refineries, starting their captive shipping operations.
The Indian Government has undertaken several policy initiatives for improving the Indian ports sector. However, international trade procedures are complex, causing significant inconvenience and delays to traders. According to the World Bank, eight documents are required for exports and it takes an average of 18 days to clear all export related procedures. This is significantly more than the average requirement for Organization for Economic Cooperation and Development (OECD) countries. Trade procedures need to be simplified by improving co-ordination between customs and port authorities.
Although comprising an important part of the Indian economy, ship-breaking and ship-building have largely been outside the ambit of regulatory norms, especially where greenhouse emissions of SOx, CO2 and other gases are concerned. But this is bound to change, particularly by 2020. The Indian ship building and ship recycling industries will have to invest in improved technology and come up with innovations that make ships fuel efficient, and low emitters of GHGs, if India is to remain well ahead in the global race.