In an exclusive conversation, Amitabh Verma, Chairman, Inland Waterways Authority of India (IWAI), says the right kind of financial support and easy bank lending will help to make this sector highly competitive.
What is the progress on development of new inland waterways in India?
The Inland Waterways Authority of India (IWAI) was set up in 1986. Since then till 2008, only five waterways could be declared as National Waterways. Work could be started on only three of them: National Waterway or NW-1 that is the Ganga National Waterway, NW-2 that is the Brahmaputra Waterway and NW-3 comprising the backwaters of Kerala. Substantial work has happened on these, but substantial traffic movement hasn't happened. Therefore, we are now also looking at business promotion. In April 2016, Parliament passed a Bill, which has been converted into the National Waterways Act, whereby 106 more waterways were declared as National Waterways. Thereby, we have 111 waterways. We have expedited work with assistance from the World Bank on NW-1, which is also the longest waterway. A Rs 5,000 crore project is being implemented there and substantial progress has been achieved. In NWs 4 and 5, dredging work has started, temporary terminals are being constructed, and we are exploring with private partners to bring in cargo movement. Now as regards the 106 waterways, we have divided them into three categories. The first category is of eight rivers which we feel are highly doable. Based on past reports, we have been able to form our bidding documents and have even tendered out two rivers. The Barak River work has already been awarded, while, in the case of Ghagra River, the tendering process is on.
The limited capacity in the market for dredging constrains our ability to move faster. But we feel that by March 2017, we should be able to tender out these eight waterways, start the process of evaluation and award work, so that by October-November 2017, actual dredging work commences in these rivers. The remaining 98 waterways are divided into Category-2 and Category-3. Category-2 has 50 waterways, which we feel are doable, but since no studies have been done on them in the past, we have appointed consultants for them to conduct a two-phase study: a feasibility report, and based on findings of that feasibility report, we will give them work for a Detailed Project Report (DPR). We should have DPRs too with us for these 32 additional rivers by March or April. There is another category of 48 rivers, under Category-3. Their feasibility reports have been made available to us and we are examining them to see how many of these rivers can be taken up for development. We have taken up on a priority 37 waterways to be developed, with five existing and 32 new ones. Out of the 32, we propose to tender out by March, six waterways. The remaining 26 will be tendered out over the next two years. Work will start on these rivers before 2019.
You raised a very important point about lack of adequate infrastructure for dredging-related work. How are you provisioning for that?
So far, we had been buying our own dredgers and doing it departmentally. But that was a slightly inefficient way of doing it. A few years ago, the IWAI started the process of hiring or outsourcing manpower. That was the second method. The third that we started about three years ago, involves our giving dredgers on lease to the market. The operation and maintenance of the dredger is done by the private party and we give them an agreed rate per cubic metre of dredging. That is working quite successfully. We thought the best system would be an assured depth dredging contract for a longer period of time. We have explored that potential too in the 142-kilometre stretch from Farakka to Bhagalpur with the help of the World Bank and got good bids. Three bids are under evaluation; we shall be awarding work for a five-year assured depth dredging contract. We are trying for a tie-up with the Dredging Corporation of India for some shallow water dredgers in return for assured contracts. We are also in negotiations with the Cochin Shipyard to explore the possibility for the manufac-turing of dredgers in India.
How do you propose to address the interlinking of ports and inland water routes to ensure seamless integration of the two?
There is no issue with the inland waterways that connect to the ports. However, only some level of interconnectivity can be ensured with the waterways that don't link to ports. Earlier the five waterways were on a standalone basis. Otherwise, if you have to move into the hinterland, that requires more loading and unloading facilities, which increases costs. So, it becomes non-competitive with the road and railways. The NW-1 connects with Calcutta Port, NW-2 (Brahmaputra) has no port as it is in the North East, NW-3 has the Cochin Port, NW-4, whenever it develops, has port connectivity to Kakinada, Ennore and Chennai, and NW-5 has connectivity to Dhamra and Paradeep ports. We are entering into joint venture partnerships and Special Purpose Vehicles (SPVs) with ports too. They in turn are taking up the responsibility of developing inland water terminals at their locations. We are developing the waterway and exploring the possibility of ferry, passenger and RO-RO or roll-on/roll-off services. We have just signed an agreement with a team made up of consultants who have advised ferry services in cities such as New York City and Dublin. They are looking at 10 locations on NW-1 where ferry services can be developed. Within a year, the team should be giving us advice on the best vessel design, infrastructure and non-fare box revenue models available globally so that we can set up ferry services and decongest our cities and bridges over rivers using RO-RO facilities.
To what extent can logistical costs be reduced by using inland waterways as a means of passenger and cargo carriage?
It is very clearly established that movement over water is much cheaper. It is almost one-fourth of the cost of movement by road and almost half of the cost of that by railway. That's an established fact. But it assumes a few things such as the availability of return cargo, minimum economic size of vessel carrying the load and that the distance would be the same whether one is travelling by water, road or rail. But in India, rivers meander in several places. Where we can't create adequate draft, bigger vessels can't move. And because this sector has not picked up as yet, there are challenges in getting return cargo orders too.
All these factors make this seem slightly non-competitive presently. However, going forward, there is a clear distinct advantage in this. And we realise that we have to make it more economically viable. So, we are working on liquefied natural gas (LNG) barges. If we have LNG barges, the operational costs reduce substantially and there is greater benefit to the environment. As it is, movement over a waterway has less polluting impact than movement over road or rail. We are looking at the right kind of vessel designs that can carry larger capacity. We have already appointed a consultant to look into the right kind of vessel designs, which can carry 2,500 to 3,000 tonnes of cargo in a draft of 2.5 metres. That report too should be with us six months down the line. When all these things work and the market matures slightly more than what it is today, movement by water will be far cheaper than movement by road or rail.
The only point is that we haven't focused in earlier years on setting up our industries on river banks. That adds to loading and unloading costs. In China, most industries are located on river banks. We have been impressing upon state governments to construct industrial estates on river banks to reduce costs. We are trying to tackle that by creating a conveyor belt system. Need for land acquisition in waterways is almost negligible. The infrastructure creation cost for roadways and railways has also gone up substantially. And there is a limit to growth. So, even if you are even marginally competitive, there will be movement on that. The last point is logistics. Our industry has to pay about 15 per cent of the cost of the product towards logistics. Globally it is between 7 to 8 per cent. So, the Indian industry is suffering purely on account of logistics. And in logistics, 35 per cent is accounted for by only transportation. So, unless you ensure seamless multimodal transportation, you won't be able to make the Indian industry highly competitive.
We have to see what kind of financial support can we provide to this sector by the government in the initial years. The government has come out with a vessel subsidy scheme. Some states like Kerala have announced subsidy schemes like one rupee per kilometre of tonne moved. Andhra Pradesh too has made some public announcements, but it is yet to release a government notification. Availability of freight and vessel subsidy and easy bank lending will help to make this sector highly competitive.
Historically, why have we been unable to exploit the full potential of inland water routes in the country?
See, it is difficult to cite any one reason - this has happened over a long period of time. What I personally feel is that when we gained Independence in 1947 we required a modern network of roadways and railways to get in the league of the developed countries of the world. At that time, there was tremendous scope for growth in those areas. But along the way, we missed out focusing on waterways.
Till 1986 there was no organisation to look at inland water transportation. Therefore, in our zeal to provide road and rail connectivity, we constructed road and rail bridges across waterways without leaving sufficient vertical and horizontal clearances. So, now it becomes difficult for vessels to pass under them if sufficient clearances are not there. Then you put power lines over rivers. For irrigation purposes, you drew water from them. You constructed dams for hydel power without putting in navigation locks. All these were right priorities at that point in time, but they did not balance the requirement of inland water transportation. When IWAI was created, our focus was miniscule as there was no demand from the market. Nobody knew how to move on the waterway.
So, in the first 27 years of its creation, from 1986 to 2012, we spent only Rs 1,700 crore. In comparison, China spent about Rs 78,000 crore from 2005 to 2010 on its waterways. And it has taken a major leap in its development. The push in India has come in only the last three years. The government has given us the direction to approach the markets for extra budgetary resources. We are looking at public-private partnership. The International Finance Corporation (IFC) is a partner with us. We have floated a PPP tender. We are doing JVs with state governments and ports. We are looking at accessing the Central Road Fund (CRF). And we are also looking at arranging multilateral funding.
How emphatic or strict are you regarding timelines?
We have been working strongly and actively. For instance, the World Bank's country director recently wrote to the Ministry of Shipping to say that IWAI is moving very fast. They have expressed apprehensions that this might affect the quality of the output of our consultants and execution of work! The fact that after announcing 106 new waterways in April, we have all the feasibility studies with us within a period of eight months. We have already tendered two waterways and allotted work for one of them. DPR is being prepared for 32 waterways. Our preparedness is very good and we are following strict timelines. In fact, work has started on a multimodal terminal at Varanasi, with the contract having been awarded to AFCON there. In Sahibganj, work has been awarded to L&T for a multimodal terminal.
A new navigation lock is being constructed at Farakka for which work has again been awarded to L&T. For Haldia, we are evaluating the tender applicants for the Rs 500 crore project. For the movement of cargo too, we have been approached by several leading players. Similarly, well-known operators have shown interest in the cruise market. Now there is a requirement for maturity of projects. Like the Motor Vehicles Act, there is an Inland Vessels Act for the purpose. This is a 100-year old Act. However, there have been several changes in technology, business, trade practices and regulations since then. Moreover, there are lot of concerns on pollution. Similarly, the skill requirements of a vessel's crew also need to be upgraded. So, we have redone the whole Act after extensively consulting stakeholders. The Bill is presently with the Law Ministry. We believe that in the Budget Session of Parliament a new Bill will be introduced so that we can have a new Inland Vessels Act in 2017.
- Manish Pant