According to a Hindu Business report, the Indian Govt doesn’t want to push up logistics cost.
India and hence they are toying with the idea of not imposing the International Maritime Organisation (IMO)-mandated stringent green norms on ships plying in domestic waters, said a government official.
Shipping Sector Confused
The new norms will kick on in less than four months. The Indian shipping sector, however, is confused as to how this can be achieved as some other countries such as Indonesia, which tried this strategy, had to retreat within a few days.
Fear of Rising Shipping Costs
Starting January 1, 2020, ships globally have to use bunker or fuel oil with low sulphur content — set at 0.5 per cent against the present norm of 3.5 per cent. This is as per the IMO’s norms to prevent pollution from ships. Indian ship owners fear that this will increase the cost of shipping exorbitantly to the point of making the business unviable, and will lead to customers shunning coastal shipping or inland waterways mode for cheaper transportation modes such as rail and road sector.
Estimated Cost Increase
The cost of such low sulphur emitting fuel is estimated to go up by about $80-130 per tonne, as per present indications, while the scrubbers that the shipbuilders need to install to lower emissions can cost up to $2 million, Indian National Shipowners Association (INSA) CEO Anil Devli told BusinessLine.
Freight Charge Increase Expected?
Devli said such cost increases will have to be offset by an increase in freight charges, or a fuel surcharge. International container companies such as Maersk, CMA CGM, MSC, for instance, has already announced a fuel surcharge.
Playing with Different Strategies
India is trying to push more cargo along the coast and inland waterways, while keeping the total logistics cost low. So, the Shipping Ministry is mulling different strategies for ships that sail in domestic and in international waters. “We will not insist on implementing the IMO norms for ships that ply in domestic waters — in inland waterways or only along the Indian coast – in order to keep a check on the total logistics cost,” a Shipping Ministry official said. This is a line of thought in the Shipping Ministry and there is no official announcement on this yet.
What does this mean for the country?
India is a signatory to IMO’s MARPOL norms regarding lowering pollution from shipping by use of low sulphur emitting fuel. “The regulations do not provide a leeway of not adhering to the rule. The philosophy is that the higher cost has to be borne by society at large for the greater long-term good. China is already using fuel with 0.1 per cent sulphur content,” said Devli. Indian shipowners support the cleaner fuel norms, but at the same time they fear there will be a flight of customers from a less polluting coastal shipping or inland waterways route to cheaper mode of transports such as road and rail within the country.
Cleaner fuel norms
“Cargo on the coastal mode which had been added over the last few years may move off to road or rail as customers start looking for cheaper mode. INSA supports the initiative and is looking for ways to implement the same without losing market share. Maybe the government could pay a subsidy to the shipowners to offset these costs,” said Devli.
IMO Approved Bunker To Be Available?
That said, India will make available bunker or fuel used in ships – that meet the IMO norms – at two ports on the West coast – JN Port and Cochin Port. For the east coast, bunker meeting IMO norms will be available based on the requirement, added the official.
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Source: HinduBusinessLine
