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Evaluating Development Opportunities For Inland Water
Evaluating Development Opportunities For Inland Water
Transport in India
Abstract
Objective: There are 14,500 km of navigable inland waterways in India. However, it constitutes less
than 1% of the overall transport movement [Raghuram G, 2004]. With the increasing cost of
logistics, Inland waterways offer a potential scope of improving the bottom-line for the companies.
The cost of transportation through waterways depends on various factors such as availability of one
way/two way navigation, night navigation and also on infrastructure condition such as availability
of mechanised handling at the terminals [S. Sriraman, 2010]. The purpose of this paper is to present
both qualitative and quantitative comparison in terms of cost between IWT (Inland Water
Transport) and present modes of transport such as railways and roadways. Based on this
comparison, companies can decide which mode of transport would be best suited for transportation
of their goods.
Methodology: Using secondary data about cost of transportation through IWT between various
feasible geographical locations in India [TCS, 2004], a relationship between cost per tonne and
distance travelled in km was estimated. This relationship also factors into account the parameters
related to availability of night navigation and mechanised handling at ports. From-To charts
depicting cost incurred per tonne while transporting goods between different major terminals on
NW-1, 2 and 3 have been prepared. This paper also focuses on connectivity between NW-1 and
NW-2 through waterways of Bangladesh and presents the benefits that can be availed with its use.
A case has been studied to substantiate how NTPC and Cement Industry can help each other in
reducing the total cost through collaboration and availing the benefits of two way navigation.
Findings: Based on the study, it was found that night navigation facility is available in almost all
the national waterways. The study suggests that for one way navigation, fixed cost for transportation
per tonne can be reduced by 20.6% if handling of goods on terminals is mechanised. Furthermore,
Improvising from one way navigation to two way navigation results in reduction of variable cost of
transportation by 50% and fixed cost by 16%. The fixed cost of transportation can further be reduced
by 35.3% if handling of goods on terminals is mechanised for two way navigation. Thus, the focus
of this paper is to assess how a company can reduce the transportation cost by collaborating with
another company operating on the same route and planning return load in advance.
Conclusion: This paper will provide companies with an approach to have a qualitative and
quantitative comparison between various available modes of transportation with IWT for selected
routes. Also, companies would be able to assess how collaboration with other companies for two
way navigation can be explored to avail the maximum benefits of Inland Water transportation.
Despite cost reduction potential, Indian Inland waterway system suffers from certain drawbacks
which affect its utilization in an efficient manner. Some of them are as follows:
a. Inadequate Water Channel Depth- Large vessels cannot traverse without adequate waters
in the rivers. This along with the seasonal dependency of river makes operation of many
ports difficult.
b. Storage Infrastructure- Other than certain government run warehouses whose main
objective is grain storage; most of the warehouses are small in size and lesser in number.
There is inadequate security measures, poor racking system and most important of all there
is lack of cold storage facilities in majority of the ports.
c. High Turnaround Times- Lack of proper material handling equipments and slow evacuation
of cargo leads to congestion and high turnaround times.
d. Excessive siltation- Deforestation and erosion activity of the river leads to siltation
e. Poor Skills and Low Technology Adoption- Lack of automation in processes and low multi-
operation skills affects efficient utilisation of ports.
Despite the above mentioned challenges, IWT has a high potential to change the way logistics
industry operate in India. Early literature and research work has elaborated upon the scope and
prospects of IWT theoretically. This paper goes into the specifics and discusses an estimated costing
for transportation between various ports lying on National Waterways. It takes into account
qualitative judgement by including factors other than cost. It also proposes industry collaboration
for reducing charges further by practicing two-way navigation.
Inland Waterway Authority of India (IWAI) undertook projects to develop Inland Waterways.
Currently there are three major National Waterways in India which are navigable and can be used
for cargo movement domestically:
Other relatively recently declared National Waterways- NW 4, NW 5 and NW 6- are also coming
into prominence.
Multiple projects transporting bulk material via inland waterways has already been taken up by few
companies to reduce their logistics cost and are found to be proved as cost-effective. Some of them
are as follows: [Presentation on ‘Prospects of IWT in Multimodal Transport’, India Maritime Week,
January 2012]
Other than this certain successful projects operating on Inland Waters are involved in the shipment
of Coal, Fertilizers, and Fly Ash etc. These projects stand as a testimony to the merit being provided
by the Inland Waterways. Other projects can be taken up on same lines.
Quantitative Analysis
The cost of transportation through waterways depends on various factors such as scope of one
way/two way navigation, availability of night navigation and also on infrastructure conditions such
as availability of mechanised handling at the terminals [S. Sriraman, 2010]. Cost of Transportation
by IWT was given in TCS report on ‘Development on Coastal Shipping’, 2004.
Table 1: Cost of Transportation by IWT (Source: TCS-2004)
In order to determine the relation between cost and distance travelled, following two parameters are
important to be considered:
1. Night Navigation - It is an important criterion that affects depth perception, judgement about
distance and size of shore etc. Night navigation increases availability of time and reduces
freight traffic. With due efforts of IWAI, almost all National Waterways in India have Night
navigation facilities.
The From-To chart can be used by companies in estimating the cost per tonne for transporting
freight from one port to another and comparing it with other available modes of operations. Certain
inferences that can be derived from the chart are as follows:
10
2. For two ports with similar distance, transport cost decreases considerably as navigation
mode changes from one-way to two-way when both ports are mechanised compared to the
case when only one or none of the ports are mechanised. For instance, consider the ports
Bhagalpur and Farakka on NW1 and also ports Kollam and Kottapuram on NW 3. Both are
at distance of 180 Km from each other. For NW1, cost reduces by Rs 183 whereas for NW3,
it reduces by Rs 231 when we shift from one way navigation to two way navigation between
these ports. This again emphasizes the importance of providing mechanisation facilities at
various ports.
Qualitative Analysis
While deciding upon the mode of transport to be used, cost is not the only criteria. Multiple factors
influencing level of service level and acceptable lead time plays an important role in choosing.
Though Waterways may rank higher when it comes to cost for long distance transportation, but it
has certain limitations which needs to be taken care of. But incorporating concepts of two way
navigation by collaborating with other companies can prove beneficial to both of them. Therefore
other than cost consideration, certain qualitative factors taken into account are as follows:
1. Transit Damage - It is the loss to goods due to improper packaging and storage, jerk during
transport etc
2. Speed - With market becoming very demanding, the rate of movement of goods needs to be
high
3. Reliability - It brings in the importance of consistency in performance with minimal delays
in consignment delivery
4. Bulk Shipment Capacity - It is about the load carrying capacity of the vehicle used for the
given mode of transport.
5. Transit Pilferage - It is the theft of some or all the content of the consignment or replacing
actual content with other things in between the despatch and receipt of consignment.
6. Frequency - It takes into consideration how frequently the same vehicle used for given mode
of transport be used for return journey.
7. Availability - It is about how convenient it is to arrange for movement of goods via any
mode of transport in relatively short span of time
8. En-route Check Points - This point highlights the number of check points and paper work
involved while transporting goods
The significance of these factors varies across industries and from product to product. Inland
Waterways have following factors in its support:
a. High Bulk Shipment Capacity due to large size of barges and ships
b. Low Transit Pilferage due to sealed cargo and containers
c. Low En-route checkpoints due to minimal stoppages
High Transit Damage can be improved with proper packaging. Frequency can also be increased if
return cargo is planned in advance. Similarly as the industry develops, the problem of availability
could also be minimized in long term.
The importance of any of the mentioned factors cannot be neglected for transporting bulky material
like steel, cement etc. But shipment capacity and pilferage control surely are very important factors
that are of more interest for the bulk material industry. Inland Waterways can thus provide an
efficient alternative option for it.
One of the major impediments to the regular and effective usage of Inland waterways is the non-
availability of return cargo. This leads to either high cost being incurred for transportation or major
loss of time due to wait for orders which could lead to full capacity utilisation. In order to overcome
this issue, the need of the hour is a long term symbiotic relation among industry. In such a case, two
or more companies (preferably of non-competing nature) operating on same water route but in
opposite direction can collaborate to help each other in ensuring return load, thus minimizing cost
and time for each other.
Consider a scenario wherein there are two companies say NTPC and a Cement manufacturing firm.
Coal India provides Coal to NTPC. Coal mine of CIL and the cement firm are located close to port
A. Coal India transports coal from port A to NTPC plant located near port B. The distance between
place A and B is assumed to be 525 km. Burning of Coal leads to generation of high amount of fly
ash which are superior due to low content of sulphur and presence of unburnt carbon. Fly ash is
used in the production of certain types of cement and concrete. If cement manufacturing firm comes
into strategic collaboration with NTPC to carry fly ash in return route after unloading coal at port
B, both companies can reduce logistics cost. Lead time will reduce and cost per tonne will also go
down as a result of two way navigation.
Cost incurred while transporting coal from place A to Place B via 3 main modes of Roadways,
Railways and Waterways are calculated and compared as shown in Fig.4.
Railways
Referring to Class Rate for Coal from Fig.5, it is found that a distance of 525 Km lies in the range
of 501 to 550 Km. The corresponding cost per tonne is Rs 722.9. In this handling charges needs to
be separately included which depends on the per hour wages which may vary from place to place.
Roadways
From secondary sources it is found that transportation by highways may cost on an average Rs 1.5
per km. considering this data for a distance of 525 km, an estimated cost of Rs 787.5 is achieved.
This also does not include handling charges which needs to be additionally added.
Waterways
For waterways all three cases discussed above are considered and cost per tonne is individually
calculated using mentioned equations. As it can be observed that for two way navigation in all the
cases, the cost of transportation per tonne is lesser than both railways and roadways. Cost further
reduces based on the mechanisation facilities provided at the port. This makes a very strong case
for exploring possibility of two way navigation each time transportation through waterway is to be
considered.
Fig. 3: Railway Freight Charges for transportation of Coal through Indian Railways
(Source: Freight Operation Information System, Ministry of Railways, GOI)
Transportation by Waterways
Fig.4
Conclusion
The inland waterways system may considerably reduce the logistics cost. The degree to which a
cost can be reduced depends upon the distance, night navigation facility and the level of
mechanisation at the port. As the distance between which goods has to be transported increases,
scope of cost reduction due to use of waterways increases. But waterways are not always the
cheapest mode. Instead of using roadways or railways directly without proper analysis, a methodical
approach as explained in the paper needs to be adopted which could compare risks as well as
benefits in terms of cost reduction due to use of inland waterways.
Future Scope
The existing paper is restricted to the extent of developing an approach for evaluating modes of
transport in terms of both qualitative and quantitative aspects. If the expected cargo movement
between various ports on National Waterways is estimated, a list of ports can be made which are
ranked and prioritized based on freight volume and scope of overall cost reduction on waterway.
Government can allocate limited resources and money on the port mechanisation and its
development as per the priority list.
References
1. Dr. S. Sriraman, January 2010 – ‘Long Term Perspectives on Inland Water Transport in India’, RITES Journal
2. Dr. Sriraman, April 2002 – ‘Perspective on Inland Water Transport in India’, RITES Journal
3. TCS, Tata Consultancy Services, Mumbai, 2004: ‘Report on the Development on Coastal Shipping’
4. Deloitte : ‘Report on Logistics Sector Present situation and way forward’
5. KPMG: Presentation at CII on ‘ Transforming India’s Logistics Industry’
6. Rangaraj, N, and Raghuram, G., New Delhi, 2007 – ‘Viability of Inland Water Transport in India’, INRM
Policy Brief, Asian Development Bank
7. Manoj Kumar Singaravelu: ‘Gujarat Ambuja, Cost leader in the Indian Cement Industry’, IBS Centre for
Management Research
8. The Working Group Report on Shipping And Inland Water Transport for The Eleventh Five Year Plan
9. http://www.iwai.gov.in/waterwaysnw2.html
10. http://www.cuttingthechai.com/2013/08/6461/india-inflation-adjustment-calculator
11. http://www.haldiadock.gov.in/Aspx/BulkTerminals.aspx
12. http://www.kolkataporttrust.gov.in/cargofacility.html
13. http://www.fois.indianrail.gov.in/
14. http://www.business-standard.com/article/companies/ntpc-s-farakka-project-gets-domestic-coal-via-inland-
waterways-114060800075_1.html