Table 5.2 Summary of Findings - Diversion from Rail to Coastal Shipping
Sea
Distance
Total
Land lead
<500
Km
500-1000 km 1000-2000 km >2000 km
< 50km - Sponge Iron: Unviable
Pig Iron: Unviable
Sheets & Coils: Viable
Rice: Viable -
50-150km - - Cement: Viable Food grains1: Unviable
150-500km - - - Coal: Viable
>500 km - - Containers:
Unviable
POL: Viable
Food grains2: Unviable
Parcel size of commodities analyzed:
Coal: 30000 T
POL: 28000 T
Sponge Iron: 2700 T
Pig Iron: 16000 T
Sheets & Coils: 16000 T
Food grains1: 6000 T
Food grains1: 16000 T
Rice: 6000 T
Cement: 8520 T
Containers: 6300 T (350 TEUs)
Table 5.3 Summary of Findings - Diversion from Road to Coastal Shipping
Sea
Distance
Total
Land lead
<500 Km 500-1000 km 1000-2000 km >2000 km
< 50km Viable - Viable -
50-150km - Viable - Viable
150-500km - - Viable
Unviable*
-
>500 km - - Unviable -
* Direct land distance between O & D is only about 40% of the total land + sea distance
Commodity analyzed and Parcel size: General Cargo in Containers: 3600 T (200 TEUs)
Chapter 5: Economics of Cargo Diversion to Coastal Shipping
5 - 12
Table 5.4 depicts the analysis on the economics of the coastal shipping for selected
commodities and selected O-D pairs. The detailed calculations for these O-D pairs are
enclosed as Annexure 5.
Table 5.4 Economics of Coastal Shipping with Respect to Rail and Road Movement
Rail Rail + Sea
Distance Rate/Ton Distance Rate/Ton
Origin Destination Commodity Parcel Size
(MT)
km Rs. kms Rs.
Viability
By Sea
Talcher Kottayam Coal 30000 1900 1342 2792 1139 Viable
Bajva Bangalore POL 28000 1420 1949 2034 1610 Viable
Vizag Steel
Plant
Tondiarpet Sponge Iron 2700 784 699 670 1052 Unviable
Vizag Steel
Plant
Tondiarpet Pig Iron 16000 784 741 670 769 Unviable
Vizag Steel
Plant
Tondiarpet Sheets &
Coils
16000 784 833 670 802 Viable
Kakinada Palghat Food Grains 6000 1250 657 2222 1006 Unviable
Tughlakabad Tondiarpet Food Grains 16000 2200 1013 4144 1185 Unviable
Kakinada Kollam Rice 6000 1500 1079 1990 1057 Viable
Muldwarka Kollam Cement 8520 2500 1631 1830 1189 Viable
kms Rate/TEU kms Rate/TEU Viability
By Sea
Tughlakabad Whitefields Containers 350 TEUs 2500 25000 2944 35865 Unviable
Road Road + Sea
Distance Rate/TEU Distance Rate/TEU
Origin Destination Commodity Parcel Size
(TEU)
kms Rs kms Rs
Viability
By Sea
Jamnagar Mumbai Container 200 847 31445 805 22907 Viable
Mumbai Kolkata Container 200 1987 60355 3927 50392 Viable
Jamshedpur Bangalore Container 200 1834 55708 2110 63751 Unviable
Bangalore Trivandrum Container 200 753 27955 1757 39052 Unviable
Mumbai Chennai Container 200 1329 44854 2722 40029 Viable
Tuticorin Chennai Container 200 579 23450 1390 22993 Viable
Tuticorin Kollam Container 200 281 18968 354 17034 Viable
Mangalore Udaipur Container 200 1686 51212 1798 40580 Viable
5.5.2 Sensitivity Analysis
From a reading of the Summary of viability analysis and the Table 5.2 it would be observed
that out of 18 case studies analyzed, 11 have been found to be conducive to diversion i.e.,
68% of cases indicate viability if status quo is maintained. In order to examine the impact of
the recommendations made in chapter 8 of this report, the 7 cases where diversion is seen to
be an unviable option are taken up and subjected to a sensitivity analysis.
The seven cases found unviable are as under:
Chapter 5: Economics of Cargo Diversion to Coastal Shipping
5 - 13
Status Quo maintained
The case studies reveal that the handling costs and charter hire costs are major contributors to
the sea transportation cost. Handling costs range from 35% to 50% and charter contributes to
20% to 33% (Table 5.5).
Table 5.5 Sensitivity Analysis - Status Quo Scenario
Origin Destination Commodity Parcel Size
(tonnes)
Land
Mode
Cost
(Rs. /
tonne)
Load Port Disport
Multimodal
Cost
(Rs. /
tonne)
Viable
VSPL Tondiarpet Sponge Iron 2700 Rail 699 Vizag Chennai 1052 NO
VSPL Tondiarpet Pig Iron 16000 Rail 741 Vizag Chennai 769 NO
Kakinada Palghat Food Grains 6000 Rail 657 Kakinada Cochin 1006 NO
Tughalakabad
Tondiarpet Food Grains 16000 Rail 1013 Kandla Chennai 1185 NO
Tughalakabad
Whitefield Containers 6300
(350 TEUs)
Rail 1389 Kandla Cochin 1993 NO
Jamshedpur
Bangalore Containers 3600
(250 TEUs)
Road 3095 Kolkata Chennai 3542 NO
Banglore Trivandrum Containers 3600
(250 TEUs)
Road 1553 Mangalore Vizinham 2170 NO
Most of the ports in the case studies are major ports. If the goods were moved through minor
ports where shippers/receivers are free to engage their own labour, the handling costs and
standing costs would come down as turn around time may be reduced.
In the case of bagged cargo moved as break bulk, besides the high handling costs at ports,
loading / unloading time are also high leading to higher charter hire costs.
Port dues and other port charges constitute around 10% to 20%. The bunker cost varies from
13% to 30% depending on length of sea voyage. Another factor is the cargo-related charges
at ports like wharfage, storage etc., which is the same for exim as well as domestic cargo.
In order to make coastal shipping more competitive and a viable alternative to the highly
congested, very inefficient and expensive land modes,
− The handling costs at ports need to be reduced by 40%
− The port charges need to be reduced by 30% (equivalent to shifting to minor ports)
− The bunker costs to be reduced by 22.6% (equivalent to exemption of duties on
bunkers)
− Availability of return cargo (equivalent to no ballast voyage)
Impact of handling costs + port charges
In order to see the impact, 40% reduction in handling costs and 30% reduction in port charges
are applied and the results are as shown in Table 5.6.
Chapter 5: Economics of Cargo Diversion to Coastal Shipping
5 - 14
Table 5.6 Sensitivity Analysis - Impact of Handling Costs and Port Charges
Origin Destination Commodity Parcel Size
(tonnes)
Land
Mode
Cost
(Rs. /
tonne)
Load Port Disport
Multimodal
Cost
(Rs. /
tonne)
Viable
VSPL Tondiarpet Sponge Iron 2700 Rail 699 Vizag Chennai 894 NO
VSPL Tondiarpet Pig Iron 16000 Rail 741 Vizag Chennai 638 YES
Kakinada Palghat Food Grains 6000 Rail 657 Kakinada Cochin 854 NO
Tughalakabad
Tondiarpet Food Grains 16000 Rail 1013 Kandla Chennai 1061 NO
Tughalakabad
Whitefield Containers 6300
(350 TEUs)
Rail 1389 Kandla Cochin
1794 NO
Jamshedpur
Bangalore Containers 3600
(250 TEUs)
Road 3095 Kolkata Chennai
3292 NO
Banglore Trivandrum Containers 3600
(250 TEUs)
Road 1553 Mangalore Vizinham
2009 NO
Impact of bunker costs
In addition to the reduced handling costs and the port charges 22.6% reduction in bunker
costs is applied. The impact observed is as shown in Table 5.7.
Table 5.7 Sensitivity Analysis - Impact of Bunker Costs
Origin Destination Commodity Parcel Size
(tonnes)
Land
Mode
Cost
(Rs. /
tonne)
Load Port Disport
Multimodal
Cost
(Rs. /
tonne)
Viable
VSPL Tondiarpet Sponge Iron 2700 Rail 699 Vizag Chennai 861 NO
VSPL Tondiarpet Pig Iron 16000 Rail 741 Vizag Chennai 623 YES
Kakinada Palghat Food Grains 6000 Rail 657 Kakinada Cochin 792 NO
Tughalakabad
Tondiarpet Food Grains 16000 Rail 1013 Kandla Chennai 1008 YES
Tughalakabad
Whitefield Containers 6300
(350 TEUs)
Rail 1389 Kandla Cochin
1747 NO
Jamshedpur
Bangalore Containers 3600
(250 TEUs)
Road 3095 Kolkata Chennai
3222 NO
Banglore Trivandrum Containers 3600
(250 TEUs)
Road 1553 Mangalore Vizinham
1932 NO
Impact of return cargo availability
Besides the 40% reduction in handling costs at ports, 30% in port charges and 22.6% in
bunker costs if ballast voyage costs are ignored due to availability of return cargo the impact
is as shown in Table 5.8.
Chapter 5: Economics of Cargo Diversion to Coastal Shipping
5 - 15
Table 5.8 Sensitivity Analysis - Impact of Return Cargo Availability
Origin Destination Commodity Parcel Size
(tonnes)
Land
Mode
Cost
(Rs. /
tonne)
Load Port Disport
Multimodal
Cost
(Rs. /
tonne)
Viable
VSPL Tondiarpet Sponge Iron 2700 Rail 699 Vizag Chennai 774 NO
VSPL Tondiarpet Pig Iron 16000 Rail 741 Vizag Chennai 599 YES
Kakinada Palghat Food Grains 6000 Rail 657 Kakinada Cochin 641 YES
Tughalakabad
Tondiarpet Food Grains 16000 Rail 1013 Kandla Chennai 887 YES
Tughalakabad
Whitefield Containers 6300
(350 TEUs)
Rail 1389 Kandla Cochin
1682 NO
Jamshedpur
Bangalore Containers 3600
(250 TEUs)
Road 3095 Kolkata Chennai
2986 YES
Banglore Trivandrum Containers 3600
(250 TEUs)
Road 1553 Mangalore Vizinham
1826 NO
Out of seven cases four have become viable.
Impact of inventory holding costs
As already mentioned under section 5.2.8 of this chapter, the inventory holding costs have
not been taken into account in the viability analysis. The inventory holding costs are
computed by calculating the interest @15%p.a on the value of the cargo held for the period in
excess of the land mode transportation time. If it were applied now, the impact would be as
shown in Table 5.9.
