Kerala’s bid to promote coastal shipping with an incentive scheme gets tangled in power struggle

An incentive policy framed by the Kerala government on June 4 to promote coastal shipping in the State by diverting container cargo from road to water has brought forth a rift between the Indian Administrative Service (IAS) lobby and the Kerala Maritime Board.

Containers shipped between the International Container Transhipment Terminal (ICTT) at Vallarpadam in Cochin Port Trust and non-major ports such as Kollam, Beypore and Azhikkal in the State will be entitled to an incentive of 10 per cent over the road transportation costs as per the base rate set by the National Transportation Planning and Research Centre (NATPAC) in 2018, according to a June 4 order issued by the Fisheries and Ports Department of Kerala government.
Incentive scheme

The incentive will be valid for six months or till December 6.

The NATPAC study focussed on container trailers plying from and to ICTT at Vallarpadam.

For 20 ft double axle haulage trucks (25 metric tons), the base rate has been set at ₹5,517 for up to 40 kms and ₹64.38 per km.

For 20 ft multi axle trailer (31,35,37 MT), the base rate has been fixed at ₹5,625 for up to 40 kms and ₹67.21 per km.

For 20 ft triple axle (40 MT), the base rate has been set at ₹5,771 for up to 40 kms and ₹70.22 per km.

For 40 ft double axle (35 MT), the base rate has been fixed at ₹7,033 for up to 40 kms and ₹73.34 per km.

For 40 ft multi axle (40 MT), the base rate has been set at ₹7,360 for up to 40 kms and ₹75.62 per km.

To calculate the incentive for a container moved from Cochin to Beypore by sea, the roundtrip kilometres for Cochin-Beypore-Cochin by road will be multiplied by the cost per km as per the weight slabs set by he NATPAC study and a 10 per cent extra will be added to this amount. The state government will pay 50 per cent of that amount to a 20-ft container and 30 per cent to a 40-ft container.

The incentive scheme, according to multiple sources, “was not discussed in or with the maritime board” before it was notified by the fisheries and ports department.

The board was set up in 2017 with the task of developing the ports in the State and comprised members who are political appointees.

The fisheries and ports department notified the scheme, rejecting a proposal submitted by the board in October 2019, to grant an incentive of ₹13,000 per container on void slots. This means, if 30 loaded containers are carried on a ship from Cochin to Beypore and only 10 loaded containers are moved on the return leg, the state government would have to give ₹13,000 per container on the 20 empty containers carried on the return leg. This incentive was to be given to the ship operator to promote business on the return leg only where the ship carries mostly empty containers or very few loaded boxes. Operating a ship with empty containers on the return trip has been the biggest impediment to the growth of coastal shipping.

This proposal submitted by the board was not approved by the fisheries and ports department, a source briefed on the issue said.
NATPAC study

The department, instead, structured the scheme loosely based on an incentive scheme that ended in March 2019 after a five-year run. This scheme started with an incentive of ₹1 per km/ton in 2014 and was later increased to ₹3 per km/ton.

Since there was no proper study based on which the incentive of ₹3 per km/ton was disbursed under the earlier scheme, the department chose to rely on the NATPAC study conducted in 2018 for container trailer movements at ICTT, Vallarpadam, to implement the scheme.

The scheme announced on June 4 suggest that the incentive will be payable for all the containers, both up and down. The board wanted the incentive to be given only to empty slots.

Besides, the pay-outs will be benchmarked to the rates recommended by NATPAC in a 2018 study which, again, will be unrealistic in 2020.

In fact, a panel set up by the government to re-introduce the scheme had suggested a pay-out equivalent to 50 per cent of the government-approved road transport rate when there is no such government approved rate.

The container trailer operating industry works in a free-market where the rates are set by the individual owners.

“So, at least, the government should have a fixed figure as the rates. Otherwise, when trailer owners increase the rates, the pay-out will also go up, upsetting the budget,” an industry expert said.

According to the source mentioned earlier, the ship operator had also asked for a flat rate of Rs13,000 per container for empty slots to compensate for the lack of loaded containers on the return leg.

The industry expert said that an incentive of Rs 13,000 per container on void slots was a “better plan in the interests of the state as well as the trade”.

In the June 4 order, the rate is not specifically stated. After every voyage, the rates will have to be calculated based on the NATPAC study. They could have made the rate very clear as long as it is not varying from month to month, the source said.

It currently costs about Rs18,000 to move a loaded 2-ft container from Cochin to Beypore and haul the empty container back to Cochin.

“They could have easily accepted the proposal submitted by the maritime board in this regard,” the source said.

The order is also not clear as to who will get the incentive: the cargo owner or the ship operator.

“They (the IAS lobby) don’t want coastal shipping to take off in Kerala and they want to blame the maritime board for that,” the source said.

Industry sources said that the scheme was “workable” provided the government drafts standard operating procedures (SOP) for its implementation and rationalise the high port costs levied by the minor ports in the state.
Source: The Hindu Business Line

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