Two Large Players Associated with the Shipping Industry Want to Start Coastal Shipping Services Jointly in India
Background and Challenge
The client wanted UC to prepare a business plan for them to enter the coastal shipping business. The client’s perspective was to get into the business, only if the domestic coastal cargo movement was expected to grow. They wanted to evaluate the opportunity of moving containers, project over dimensional cargo (ODC) and dry break bulk commodities along both the east and west coast of India. The client also wished to have combi-vessels.
Approach and Recommendations
To advise entry into coastal shipping in India, UC Conducted desk research and primary research with more than 50 respondents across existing service providers, ports, user industries, shipping lines and developed perspective on:
- Economic benefit for an end-to-end multi modal movement using a coastal leg
- Constraints imposed by the Merchant Shipping Act and Customs Act, on the growth of the industry
- Trends in movement of the project ODC and dry break bulk commodities
- Competition strategy and recent performance on coastal movement
UC recommended that the initial assessment of entering coastal shipping, driven by anticipated growth in movement of domestic cargo is not valid. The movement of transshipment cargo (feeder) is a must as domestic coastal cargo in forward and return directions are not adequate. UC suggested to the client to drive policy level, knowing its leverage with the government. Based on the existing demand-supply situation, there is a limited opportunity to build an adequate presence in ship building business at this point of time. UC indicated the triggers for growth and suggested that the client consider the opportunity in 2 - 3 years when the dynamics of container transshipment are expected to change. It was important to highlight to the client that although technically sea movement is expected to be a cost effective mode of cargo movement, the reality in India was not facilitating the growth of the industry.