Coastal Shipping Would Have Numerous Beneficiaries
BMI believes that a potential new deal between India and Bangladesh, whereby volumes will be transhipped from Bangladeshi ports to India utilising Bangladeshi vessels, provides significant upside potential for volumes at the country's ports. The deal would also make it easier to transport goods between the 'seven sister' states of India and the rest of the country.
At a recent two-day shipping secretary-level discussion held between India and Bangladesh, a plan was discussed that would see volumes transhipped from the premier Bangladeshi facilities of Chittagong and Mongla on to Indian ports. Bangladeshi shipping secretary Abdul Mannan Hawlader said: 'The cost will be very high if we carry goods from India by truck. But if we carry goods through the sea, the cost as well as travel time will be significantly reduced. Both countries can be benefited if coastal shipping is introduced.'
|Upside Potential For Future Throughputs|
|Port of Chittagong Tonnage And TEU Throughput|
BMI notes that India has strict cabotage laws that prevent foreign vessels from participating in coastal shipping. However, the domestic shipping fleet lacks sufficient vessels to cope with demand, and the government has come under increasing pressure to relax these laws. In June it was announced that a partial relaxation would be introduced for goods passing through the International Container Transhipment Terminal (ICTT) at Vallarpadam (see our online service, June 29, 'Potential Cabotage Relaxation For ICTT'). The deal with Bangladesh is also likely to see more Bangladeshi vessels plying the Indian coastline.
Ostensibly, the deal is for a 50:50 split between Indian coastal shippers and Bangladeshi. However, India's coastal shipping fleet is severely underdeveloped, while according to ship owners nearly half of Bangladesh's inland and coastal vessels are unused. Halwader said that 98% of the vessels that will be operated under the protocol will be Bangladeshi. This may change over time as the Indian coastal fleet is developed; a number of measures are being adopted to promote this, including the introduction of tax breaks to encourage the development of the Indian fleet.
The benefits would not only be to the ports and the ship operators. Shippers would also benefit hugely from direct coastal shipping between the Bangladeshi ports and India. According to Bangladeshi newspaper the Daily Star, any seaborne imports from India currently have to travel via Singapore or Colombo, with cargo costing US$1,200 a tonne. The coastal shipping route would by contrast cost just US$1,200 a tonne. The major beneficiaries of this saving would be shippers operating out of those seven Indian states north east of Bangladesh, which would be able to transport goods to and from the rest of India much more easily.