Table 5.9 Sensitivity Analysis - Impact of Inventory Holding 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 792 NO
VSPL Tondiarpet Pig Iron 16000 Rail 741 Vizag Chennai 633 YES
Kakinada Palghat Food Grains 6000 Rail 657 Kakinada Cochin 681 NO
Tughalakabad
Tondiarpet Food Grains 16000 Rail 1013 Kandla Chennai 952 YES
Tughalakabad
Whitefield Containers 6300
(350 TEUs)
Rail 1389 Kandla Cochin
1734 NO
Jamshedpur
Bangalore Containers 3600
(250 TEUs)
Road 3095 Kolkata Chennai
3109 NO
Banglore Trivandrum Containers 3600
(250 TEUs)
Road 1553 Mangalore Vizinham
1914 NO
Chapter 5: Economics of Cargo Diversion to Coastal Shipping
5 - 16
Impact of social costs
Similarly the social costs to the land modes of transport were not taken into account in the
analysis. Having added the inventory holding costs to the land + sea mode, the social costs
need to be added to the land modes.
If we apply social costs at a meager 0.15P/tkm to rail freight and 0.50P/tkm to road freight
the impact on diversion would be as shown in Table 5.10.
Table 5.10 Sensitivity Analysis - Impact of Social 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 792 YES
VSPL Tondiarpet Pig Iron 16000 Rail 741 Vizag Chennai 633 YES
Kakinada Palghat Food Grains 6000 Rail 657 Kakinada Cochin 681 YES
Tughalakabad
Tondiarpet Food Grains 16000 Rail 1013 Kandla Chennai 952 YES
Tughalakabad
Whitefield Containers 6300
(350 TEUs)
Rail 1389 Kandla Cochin
1734 YES
Jamshedpur
Bangalore Containers 3600
(250 TEUs)
Road 3095 Kolkata Chennai
3109 YES
Banglore Trivandrum Containers 3600
(250 TEUs)
Road 1553 Mangalore Vizinham
1914 YES
5.5.3 Summary
Sea transport offers several advantages in terms reduction of costs, decongestion of road &
rail networks, savings on fuel consumption etc, but additional handling at load and discharge
ports lead to longer transit time. The land based transport networks have over 25,000 Origin-
Destination (O-D) pairs between major production and distribution / consumption centers
spread across the country. For the purpose of analysis O-D pairs were selected on the basis of
some criteria like type of cargo, location, proximity to seaports, land leads and sea distances
etc.
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 hire
contributes 20% to 33%. 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
The viability analysis revealed that diversion was found viable in 68% of the cases. On
applying the recommended measures of reduction of handling costs, port charges and bunker
costs and accounting for return cargo availability 83% of cases became viable.
Chapter 5: Economics of Cargo Diversion to Coastal Shipping
5 - 17
On taking into account indirect costs such as inventory holding costs (in the land + sea mode)
and social costs (in the land modes), it was observed that diversion to land + sea mode
became viable in all the cases (100%) supporting diversion to coastal shipping.
It can be inferred that coastal shipping can integrate with other modes of transport and offer a
better and alternate option with economic advantages.
All the above case studies involved one load port and one discharge port and a return to the
load port on ballast, a typical situation that exists today. But with the development of coastal
shipping & minor ports, a different scenario may emerge where a vessel may call at more
than one port en-route to its destination port and may load/discharge cargo at more than one
port on the return leg also. Such voyages with multiple ports of call would make the
economics of coastal shipping even more attractive.
Encouraging operators to introduce liner services between select ports would also help
develop coastal trade. Voyages with multiple ports of call and availability of liner service
would further enhance the flexibility of the coastal shipping. This flexibility of the coastal
shipping would encourage the shippers to opt for the sea route.
Considering the advantages of Coastal Shipping, it is essential to provide certain incentives to
the trade to promote coastal shipping.
In the present chapter, though very selected O-D pairs were considered for analysis, there
could be several other O-D pairs that may be viable to move in multi-modal environment.
However, lack of proper information about these movements limits the analysis and estimates
for diversion to sea movement. Coastal shipping is highly dependent on the culture of intermodal
movements. In the absence of proper and latest database, it is difficult to plan for the
multi-modalism in India. With an objective to promote inter-modal movement in a coordinated
and economical manner, it is essential to initiate a recording mechanism and
consolidation of the recorded information to plan for optimum transportation of goods.
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