Delayed invoices, fertiliser subsidy put coastal shipping in slow lane

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Coastal shipping, projected as the cheapest mode of transport, may take some time to kick off because it is facing challenges.


The Union government has begun transporting fertiliser through this means of transport but the move is facing hurdles in the form of delayed invoicing.


According to a shipping ministry official, the coastal shipping initiative has not picked up as expected, mainly due to delays in bill generation and subsequent subsidy reimbursement.


Fertiliser units are, therefore, reluctant to opt for coastal shipping over rail.


The Ministry of Shipping is of the opinion that the way to resolve the matter is by treating coastal shipping on a par with the railways.


“For the time being, coastal shipping can be treated on a par with the Railways and once the bottlenecks of invoice and subsidy calculation are addressed, the transition to coastal mode can take place,” a senior shipping ministry official told Business Standard.


The fertiliser industry supports the proposal but the Department of Fertiliser is yet to make up its mind on this.


“We are all for promoting coastal shipping but the method of payment should not be complicated. The fertiliser freight policy has to be aligned to promote and not hinder coastal shipping,” Satish Chander, director general, Fertiliser Association of India (FAI) said.


However, the movement of fertilisers through the coastal route is not as smooth as it was projected to be. Experts say more than financial the mode of transportation has regulatory issues.


Under the fertiliser freight policy, for instance, the Union government gives subsidy on primary and secondary mode of transportation for movements of urea. The primary movement of freight essentially means rail, coastal shipping and inland water transportation, while the secondary mode means the last mile delivery via roads, this is in accordance with a March 2017 official memorandum of the Department of Fertilisers. However, in the case of other fertilisers (phosphatic and potassic), the reimbursement is only on primary transportation.


The shipping ministry is of the view that the policy could be used to promote coastal shipping by treating it on par with the railways.


An industry expert said, “The government should simply abolish primary subsidy under the freight policy and instead have a fixed subsidy irrespective of the mode of transportation and as far as the remaining cost is concerned it can be recovered from the MRP (maximum retail price).”


This, he felt, would be the real test for coastal shipping; whether it actually turns out to be cheaper and more efficient than the railways not just on paper but also practically.

According to industry figures, 31 million tonnes of urea and 25 million tonnes of other fertilisers (phosphatic and potassic) are moved to various parts of the country.


The government is trying to promote coastal shipping as an eco-friendly mode. In order to give impetus to coastal shipping in the country, the Ministry of Shipping came out with a revised central government scheme to provide financial support to major or non-major ports for creation of infrastructure for movement of both cargo and passenger by sea or National Waterways.


Financial assistance under the revised scheme would be given up to 50 per cent of the total cost of the project, while the balance would be borne by the respective ports or concerned state governments from their internal resources.


The government intends to increase the share of coastal shipping in domestic cargo movement, which is currently only as low as 7 per cent, compared to other developed countries in Europe and Asia. Better infrastructure for coastal shipping in terms of handling facilities will de-congest rail and road network besides ensuring cost competitiveness and effective multi-modal transportation solution.


The National Perspective Plan of Sagarmala envisions the potential to save Rs 210-270 billion through coastal shipping of 230-280 million tonnes per annum of key commodities like coal, cement, fertilizers, iron and steel, food grains and POL (petroleum, oil and lubricants) by 2025.

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