No takers for coastal shipping of automobiles

By Ramesh Kumar

Over the past few months, the Indian automotive industry has been trying to cut carbon emissions by opting  for coastal shipping. For instance, Hyundai Motors India had successfully shipped its finished vehicle from Chennai port to Mundhra on the Gujarat coast using Sical Logistics, while commercial vehicles major Ashok Leyland sent mint fresh trucks to Bangladesh by ship from Chennai.

Nitin Gadkari, who looks after both surface transport and shipping ministries, has been relentlessly pushing to boost the underutilised coastal shipping segment, much to the annoyance of fleet owners enjoying a huge chunk of long-haul surface transport business. Along with this is Gadkari's energetic push to use the Ganges to ferry Maruti Suzuki's finished vehicles on the inland waters from Varanasi to Hooghly. It moves finished vehicles from its Gurgaon and Manesar plants in Haryana by road to Varanasi.

However, this has not gained momentum due to a slew of reasons. Sical Logistics, which enabled Hyundai to push its products to the markets of west and northern India partly through coastal shipping and road, finds that this exercise is not a lucrative business. Hence, it is reluctant to provide coastal vessels, though Hyundai officials concede that coastal shipping route was certainly a better option than movement by road.

In the case of Ashok Leyland, its maiden coastal shipping attempt to send trucks to Bangladesh around Diwali 2017 helped cut short the transit time drastically vis-a-vis the road route from Petrapole on the Indian side of the border in West Bengal to Benapole across the border. However shipping costs proved to be a problem. Negotiations are now underway to revise freight rates downwards. Till the rates are brought down, coastal shipping will not be a cheaper option.

Be it Hyundai or Ashok Leyland, until the comparative freight cost between road and coastal movement works in favour of the former, promotion of coastal shipping for the automotive segment is unlikely to gain traction. It is pertinent to point out that APL Vascor, the global major already that operates rakes to ferry automotibles using the Indian Railway tracks and engine-cum-drivers for the past three years, faces the same cost challenge.

Every single auto OEM would shift a sizeable chunk of road ready vehicles from road to rail provided the freight is at least equal to what they pay car carriers on road. Yet, the economics of rail transport does not permit that. APL Vascor's plea for better terms from the Indian Railways has gone unheeded because automotive movement on rails is a fraction of total rail freight movement, and therefor of not much significance the railways. This poses a dichotomy - expand volumes to seek better terms, as the Railways want. On the other hand, unless better rail movement rates are offered, auto movement on rails is unlikely to gain traction.

Still, APL Vascor is going in for additional rakes. The global giant can absorb financial challenges to maintain its first-mover advantage in the years to come.

This confidence stems from the fact that the Indian automotive segment is expected to grow multifold over the next decade. Transport experts predict India moving up from the fifth slot globally at present to the third? during this period.

While Project Bharatmala and coastal shipping are sure to reduce the stress on road, the rail option is unlikely to diminish.

Rail and coastal transport for long-haul and road for short-haul destinations would be the ideal mix for finished vehicle movement. Experts say, this is definitely expected to emerge, but not today or in the immediate future, but a decade down the line.

(The author works for london-based Automotive Logistics Magazine and Finished Vehicle Logistics Magazine)