Relevance: GS-2: Government policies and interventions for development in various sectors.

Relevance: GS-3: Indian Economy, mobilization of resources, changes in industrial policy and their effects on industrial growth.

Key phrases: Shipping service, Logistics Performance Index, trade, major port, minor port, handling capacity, regulation.

Why in News?

• The shortage of shipping containers is likely to be a “persistent problem” and has led to India spending $14.8 billion on importing transportation services, which was 65% more than the previous year, according to the Economic Survey.

Shipping Industry in India:

• Transportation through shipping is an important part of the logistical sector. At present, maritime customers care more about the quality of services as compared to delivery prices.
• According to the Ministry of Shipping, around 95% of India's trading by volume and 70% by value is done through maritime transport.
• India has 12 major and 205 notified minor and intermediate ports. Under the National Perspective Plan for Sagarmala, six new mega ports will be developed in the country.
• India’s key ports had a capacity of 1,534.91 million tonnes per annum (MTPA) in FY20. In FY21, all key ports in India handled 672.60 million tonnes (MT) of cargo traffic.
• Merchandise exports reached US$ 290.63 billion in FY21. In October 2021, India’s merchandise exports grew 43.05% YoY to reach US$ 33.65 billion.
• Between April 2021 and August 2021, cargo handled by India's 12 state-owned major ports recorded an increase of 19.54%, from 245.289 MT to 293.226 MT.
• In FY22 (until October 2021), cargo traffic handled by India’s major ports reached 406.98 MT, a 14.59% increase over the same period last year.
• India was ranked 44th in the Logistics Performance Index, a measure through which the World Bank ranks countries based on their logistics performance.
• It noted that the COVID-19 pandemic-related restrictions led to a smaller flow of containers in active shipping which, along with a slump in manufacturing of containers, distorted their demand and supply. “This had led to very high shipping rates. During April-September 2021, India spent US$ 14.8 billion on transportation services imports, which is 64.9 per cent higher than last year.”

Challenges Faced by shipping industry In India:

Let’s we check out a few challenges faced by shipping companies in India which deter growth in the logistics sector:

• Institutional Challenges: The rigidity of the Indian bureaucracy and its reluctance to give up control adds to the delay. Multiple involvements of the central, state and local governments with overlapping powers add to the chaos. Lack of a single window clearance system has made it challenging for shipping companies in India.
• Infrastructural Challenges: Capacities of all major and minor ports in India need to be increased urgently. Due to transhipment points in other countries, the cycle time of Indian cargoes has rendered the uncompetitive on a global scale. Besides this development of road network, electricity and overall infrastructural development is also the need of the hour.
• Financial Challenges: Shipping companies in India do not have access to any lucrative government schemes that have been available to other channels. The burden of taxes like Customs Duty on Bunkers, Landing Fees, Income Tax etc. without negligible exemptions have made it difficult for shipping companies to thrive.
• Slow Process: The shipment procedures undertaken by shipping companies is quite cumbersome in comparison to other modes of transportation. This, in turn, wastes valuable shipping time and labour time which goes into the logistic process.
• Vessel Size: The sizes of vessels are getting bigger owing to the rise in demand for shipping services. While it might sound like an improved trend, many ports in India are still struggling to keep up, and many of these large vessels cannot be called on into most of the ports.
• Lack of container: The lack of containers led to a rise in sea freight rates in the range of 300% to 350%, the Economic Survey stated, citing a report of the Federation of Indian Export Organisation under the Ministry of Commerce and Industry. Combined with other factors such as a fall in the production of new containers since 2019 and a rise in the disposal of containers in the same period had led to the overall growth in the containers falling from 11% in 2019 to 5% in 2021

Way Forward:

• Transportation of shipment through means of shipping companies has numerous advantages like cost-effectiveness and being environmentally friendly. Shipping companies in India have not been able to realize their fullest capacity due to a few constraints.
• Several measures were adopted to overcome challenges due to the container shortage, which included an increase in the import of empty containers, improving turnaround times of containers through tracking of dwell times and releasing of abandoned or seized containers and increasing duty free stay of containers.
• There is an intense need of integration – connecting port authorities, shipping lines, road transports authorities, railways authorities and inland waterways systems. Too many authorities with too many rules are hampering smooth operations. There is a growing need of single document clearance of cargo and this global trend needs to be incorporated in India and requires advancement of technology and integration of relevant regulations.
• Infrastructure is one of the important issues in the field of shipping related logistics where technical advancement is the need of the hour. But I must say that since last 10 years, technical advancement in infrastructure is on in all the ports.

Source: The Hindu

Mains Question:

Q. India was ranked 44th in the Logistics Performance Index, a measure through which the World Bank ranks countries based on their logistics performance, in this regard discuss the challenges faced by Shipping Industry. What should be the measurse to tackle these challenges? Critically analyse.