Sumit Banerjee, former Vice Chairman, Reliance Cement and Ex MD&CEO, ACC Ltd, says it is only a matter of time before cement companies evince interest in waterways and coastal transportation for competitively moving cement.
How has inland or coastal water transportation evolved over time?
From the early days of human civilisation, habitats and trade centres developed around rivers. This was no accident. Rivers provided a source of water, the elixir of life; helped irrigate lands for farming and provided an easy solution for sanitation (although unacceptable by today's standards). On top of all that, rivers gave humans an avenue for transportation of people and merchandise. However, as newer modes of transport were invented, we favoured railways and roadways over riverine carriage of goods, evidently because we wanted to move things faster, and also away from rivers deeper into the hinterland.
As we started neglecting our traditional waterways, they deteriorated in terms of navigability, due to a variety of reasons such as indiscriminate construction of barrages, bridges and dams and consequent siltation, reclamation of river banks, inadequate investments in de-silting and in terminals, geopolitical controversies regarding sharing of waters between countries, etc.
Altogether, the effect of all these factors has been to push the concept of inland water transportation (IWT) into oblivion, at least in our country. Some other countries have fared better. The Fjords in Norway or the waterway systems in Pittsburgh/Great Lakes area in USA have excellent infrastructure for water transportation. In Germany, IWT constitutes 20 per cent [WB, 2005] and in Bangladesh it is 32 per cent [Rahman Mushfequr, 1994] of the total domestic goods movement. In Norway, it is reported to be 42 per cent. However, in India, it has become a very marginal part indeed (0.15 per cent) [Raghuram G, 2004]. Evidently, we have a lot to do.
How is inland water transport relevant today?
Water transport is the largest cost reduction opportunity in cement logistics. Empirically, we say that rail transport costs half of road transport, on per ton - km basis. Water transport, in turn, would cost half of rail transport, simply because it consumes substantially lesser amount of fossil fuel. So, clearly, IWT is highly relevant from a cost perspective, and as the cost of energy goes up, this cost differential is going to go up. It obviously makes business sense for a nation to focus on IWT, from cost or resource conservation points of view. This is single largest opportunity in front of cement companies to make a dent in their transportation costs, and thereby improve their competitiveness. But there is another dimension to this - that of climate change.
Out of all the global greenhouse gases emitted, 13-14 per cent are caused by transportation. If we can make a sizable dent in this component of GHG, we can, as nations, contribute more to the global effort in climate mitigation. After the recent Paris Agreement (COP21), it has become more important for countries like China and India to evolve development-friendly strategies for CO2 management. IWT has suddenly become doubly more meaningful in this context.
Which industries can benefit from IWT/coastal transport?
To determine this, we have to first acknowledge the weaknesses of IWT, which are its relative slow speed and limited reach, restricted to regions adjoining riverine routes. There will be many products (electronic items, white goods, semi-precious metals) whose prices are high enough to afford faster and costlier modes of carriage like road or even air.
Contrast these with bulk commodities like coal, steel, cement, fertilizers, food grains, iron ore and such other items which are comparatively lower in prices, volumetric and bulky in size, heavy in weight, and large in quantity. In these cases, one will be ready to allow it to spend a few days more in transit, if that saves significant amount of freight. I think it is only a matter of time before cement companies will get interested in exploiting this route for competitively transporting coal, cement, gypsum, clinker, and similar commodities.
However, for this to happen meaningfully, the cement companies will need to plan their footprint keeping in mind water routes, coastal positions and terminals, and most importantly, the location of target markets. Companies like Ambuja Cement and UltraTech have done this well on the western coast.
What steps should the government take to popularise water transport?
This will not move without improved and all-year round navigability and availability of terminals and storage facilities. This is where government investment will have to come in by way of continuous dredging, in addition to building terminals and warehouses along the waterway routes. The move to announce more waterways as National Waterways is most welcome, but this has to be followed through with effective development of infrastructure, which will definitely pay back by way of user fees, over time, as IWT becomes popular with commodity players. We have seen that the last budget has provided for raising Rs 800 crore by way of tax-free infrastructure bonds, specifically for inland waterways, and this is a commendable beginning. In due course, it may be a good idea to allow companies accelerated depreciation (or some such incentive) for investments in barges and riverside godowns, terminals, material handling equipment and similar infrastructure needed for inland water transportation. Andhra Pradesh took a step forward, when the Chief Minister recently announced an incentive of Rs 0.25 per tonnes of water borne cargo, with the aim to achieve a 5 per cent share for IWT in the state.
Minister of Roads and Transport, Nitin Gadkari said that at present there are only five inland waterways and his government has identified 106 more, and now these 111 waterways are being developed as National Waterways. He rightly added that the waterways will prove to be a game changer as this would reduce the cost of transportation for goods and passengers, reduce road congestion as well as play a vital role in reducing pollution. He said that his government plans to construct 2000 water ports.
I feel that is the way to go!