India has embarked on implementing large scale infrastructure projects across the country as part of the plan to develop world class infrastructure in the country and also as an important measure to boost the economy. These projects include smart cities, industrial corridors, rail freight corridors, inland waterways, port and coastal projects. These together form a huge canvass spread across different regions and geographies in the country to build the transport infrastructure, power projects, industrial zones, manufacturing hubs, urban spaces, warehousing and logistics centres to produce and transport goods for export.
“One of the constraints on India’s efforts to accelerate manufacturing-based economic growth and trade competitiveness is excessive logistics costs. It is estimated that logistic costs are equivalent to 18 percent of India’s current gross domestic product (GDP). The major drivers of the high cost of logistics in India include congested road and rail systems, carrying more than 90 percent of the overall freight, and the virtual absence of multi-modalism. The current logistics network is also insufficient to accommodate the threefold increase in freight movement expected over the coming decade. To build logistics infrastructure capable of efficiently handling rapidly growing freight traffic, India will need to pursue an integrated approach that aims to optimally utilize all transport modes. It will specifically require the realization of the huge potential of its waterways. Inland water transport (IWT) forms an integral part of the transport mix in most countries, but infrastructure investment in India has remained focused almost exclusively on roads and railways”.
Inland Waterways Map, courtesy: Indian Express
Among this whole scheme of things the inland waterways have emerged as an important link to transport commodities through river channels in the country claiming it to be cheaper and environment friendly compared to other transport means like roads, rail and airplanes. It is also stated that the waterways are underutilised with only 0.5% of national freight traffic carried through waterways.
For instance the National Waterway 1 will form part of the larger multi-modal transport network being planned along the river. It will link up with the Eastern Dedicated Rail Freight Corridor, as well as with the area’s existing network of highways. This web of water, road and rail arteries will help the region’s industries and manufacturing units switch seamlessly between different modes of transport as they send their goods to markets in India and abroad. Farmers in the agriculturally-rich Gangetic plain will also benefit, as the waterway opens up markets further afield.
In 2016 the Government of India passed the National Waterways Act 2016 and launched the National Inland Waterways Program declaring 111 rivers or river stretches as National (inland) Waterways. As envisaged in the program the national waterways project intends to create large scale, commercial shipping and navigation systems in these 111 waterways for carrying cargo and passengers. However, there were five waterways which had been declared as national waterways, before 2016 – Ganga, Brahmaputra, West Coast Canal with Udyogmandal and Champakara Canals, Kakinada-Puducherry Canals system along with Godavari and Krishna rivers and East Coast Canal with Brahmani river and Mahanadi delta. The act will increase India’s declared national waterways from nearly 4,400 km to over 18,000 km.
Although efforts to develop inland waterways have been ongoing since post-independence with the Central Inland Water Transport Corporation (CIWTC), a public sector undertaking set up in 1967 was the principal inland water operator. In addition to running services from Kolkata to Bangladesh and to Assam as well as services in the River Hooghly and services from Kolkata to Allahabad. The Inland Waterways Authority of India (IWAI) established in 1986, is the nodal agency for the development of infrastructure in the National Waterways. The IWAI Act, 1985 gives very broad powers to the IWAI to act as a provider, facilitator, regulator and even as a joint venture partner.
Financing Inland Waterways
The Government of India is funding the waterways projects through budgetary allocations and extra budgetary resources of Rs 1000 crores through GOI Fully Serviced Bonds was approved by Ministry of Finance.
In addition, it has launched several schemes to promote IWT like vessel building subsidy of 30%, equity participation by government in BOT (Build operate transfer) projects up to 40%, viability gap funding, tax exemption similar to National Highways, enhancement in depreciation rate for inland vessels, joint venture by IWAI and customs duty concessions.
Along with the above initiatives the Government, with a view to promoting public-private partnership (PPP) in IWT sector, has identified several areas which include –
Construction and operation of river terminals or river ports, Ownership and operation of vessels for cargo and passenger, provision and operation of mechanized cargo-handling systems, fairway development and maintenance, putting up and maintenance of navigational aids and setting up and running of training IWT training institution.
Asian Development Bank
The international financial institutions have also been interested in engaging in the waterways projects in the country. The initial such intervention was by Asian Development Bank in 2002, when a USD 900,000 Technical Assistance grant was given by ADB financed by Japan Special Fund for preparing the Inland Waterway Sector Development Program. The objectives of the TA were to assess the technical, economic and financial feasibility of inland water transport and to prepare a sector development strategy and to prepare inland waterway transport investment projects for ADB loan financing. The activities of the TA were to be tentatively completed in 8 months by May 2004.
However, the TA account was closed in November 2008 and the completion report was filed in June 2020. The completion report noted that the delivery timeline of the TA were ambitious and there were deficiencies in the design. It also mentioned that while at the beginning it was an integral part of India’s development priorities and ADB’s country strategy, this changed and by the end of the TA the government had decided not to proceed with the investment project. The planned inland waterway investment project was dropped. It also noted that there were delays in providing clearances for release of data to the consultants and comments to the final report. The project was rated less than relevant and less than effective.
Finally, the completion report remarked that the outputs of the TA were not used in subsequent ADB assistance. Although planned ADB assistance did not proceed, the World Bank is currently financing development of the Ganga inland waterway with a loan of $375 million; a corridor which was examined as part of this TA.
Jal Marg Vikas National Waterway 1 project –
The World Bank approved the loan for Ganga National Waterway 1 project in 2017 in addition to this the Bank is also financing Assam Inland Water Transport project and West Bengal Inland Water Transport, Logistics And Spatial Development Project. The Jal Marg Vikas National Waterway 1 project is estimated to cost US$ 800 million. The World Bank share is estimated at US$ 375 million. Government of India share will be US$ 380 million and the balance US$ 45 million would be funded through local private financing sources. Ro-Ro facilities will be developed using private sector contribution.
The project appraisal document notes that “the practical experience of countries with substantial and mature IWT industries, for example, in China, Europe, and the United States, is that most of the investments and operating and maintenance costs of navigation infrastructure is publicly provided and funded with only a small proportion of such costs charged to waterway users. Cargo shipping operations are mainly privately operated. Passenger ferry operations are sometimes privately and sometimes publicly operated (in the latter case sometimes administered by road agencies). Provincial and local governments are heavily involved in developing ports that often host private terminal operators as lessees or concessions. Private sector companies are widely contracted to undertake construction works, dredging, bank stabilization, installation and maintenance of navigation aids, and so on”.
“Public sector provision and financing of navigation infrastructure is therefore the only feasible approach for the infrastructure and an appropriate way forward. Private sector participation will be sought in shipping operations, management of port and transshipment facilities, and support services such as repair yards”. Under the project multi modal terminals are proposed at Varanasi, Ghazipur, Kalughat, Sahibganj, Tribeni/ Balagarh/ Kalyani and Haldia.
The Bank states that among the key principles is to – “engage with the private sector to pinpoint the preconditions for an investment climate that will encourage private investment in shipping services and terminals”. Further to involve the participating states, Uttar Pradesh, Bihar, Jharkhand and West Bengal, for even more active role and to fast track inland waterway development, IWAI is also creating special purpose vehicles (SPVs) in joint venture with the states. During the operations phase, IWAI proposes to outsource operational management of various assets/nodal point facilities to the private sector. An operational strategy and tariff structure is being developed for managing the various nodal point facilities.
The project states that “in operational terms, the most critical factor will be long-term fairway maintenance. Similar to many of India’s waterways, NW-1 is subject to high siltation and a changeable river course. Potential shippers and investors in vessels and ports need to be convinced of availability of the targeted navigation standards over a long period in the future to justify their investments”.
A subcomponent under the project includes “improving the overall investment climate through (a) undertaking market development studies and preparation of business cases (by location, industry, and cargo type) and (b) investigating arrangements for private sector participation in the construction and operation of terminals and other navigational facilities. Both of these activities are being executed through service contracts”.
“As part of activity (b), IWAI has engaged IFC as its transaction adviser in mobilizing private sector involvement in the development of inland waterways in India. As the first step of this engagement, IFC is assisting IWAI with the development and operation of inland water terminals in Kolkata and Patna, located on NW-1, through private sector participation”.
It notes that This first engagement on equipping, operating and managing inland water transport at Garden Reach terminal in Kolkata and Gaighat and Kalughat terminal in Patna is at an advanced stage, where the structure of the project has already been approved, the tender documents have been issued against which three bids have been received which are under evaluation.
Assam Inland Waterway Transport Project –
Similarly, the World Bank financed Assam Inland Waterway Transport project was approved in December 2019. The total project cost is USD 110 m, with the World Bank financing of USD 88 m.
Major Project Activities include –
Carrying out technical assessments/studies to prepare an integrated state-wide inland water transport (IWT) strategy and investment plan, to mainstream inland water transport and promote multi-modal integration and last mile connectivity;
Carrying out environmental and social impact assessments in relation to inland water transport investments financed under the Project;
Carrying out studies on weaknesses, institutional requirements and business plans for the IWT sector, to prepare institutional reforms including basic legislation for the strengthening of Assam Inland Water Transport Regulatory Authority (“AIWTRA”) to develop and enforce safety, environmental and economic regulations for the IWT sector;
Unbundling shipping/ferry and terminal operations in Assam by establishing and operationalizing the Assam Shipping Company (“ASC”) and Assam Ports Company (“APC”), developing business plan
The project will also look to explore investment opportunities in Assam like Development of IWT Terminals, Development of Port Townships, Operation of River Taxis, River Front Development, etc.
West Bengal Inland Water Transport, Logistics and Spatial Development Project –
In November 2020, the Bank has signed West Bengal Inland Water Transport, Logistics And Spatial Development Project with a total project cost of USD 150 million, the bank financing for the project is USD 105 million. The implementing agency is West Bengal Transport Infrastructure Development Corporation Limited.
Policy Reforms envisaged under the project include – (a) bridging the infrastructure and connectivity gaps; (b) enabling logistics policy and institutions for private sector engagement; (c) supporting land use policies; and (d) access to finance.
Objectives of the project are to – (i) improve the efficiency and safety of passenger and freight movement across the Hooghly River; and (ii) establish a spatial planning framework to enhance accessibility within Kolkata Metropolitan Area.
The International Finance Corporation (IFC) is providing transaction advisory service for PPPs in inland waterways projects. It is also investing in creating warehousing facilities in connecting waterways with industrial corridors.
However, despite the hype around financing and investments in the construction of thousands of kilometres of waterways across the country, several critical issues have not been addressed. Starting with the assessments of majority of the waterways found non-viable for cargo or passenger or tourism services. The actual investments in the waterway projects have not been at the level promised by the government. Many claimed benefits, like low costs and environmental friendliness are simply fallacious, being based on wrong or incomplete analysis. There are many incidents of vessels getting stuck due to lower water depths, vessels facing problems even when the river flows are high, suspension of services of RoRo, seaplanes, barges sinking, etc. Inland waterways and their components such as the multi-modal terminals are being kept outside of the legally binding Environmental Clearance process. Implementation of waterways projects could have serious adverse environmental and social impacts due to dredging operations, movement of heavy vessels in the navigational channels, and impacts due to riverine terminals could lead to degradation of aquatic ecosystem including adverse impacts on fish population, endangered species such as Gangetic Dolphins.
The international financial institutions have also been driving the waterway projects without going into the details of addressing the critical issues emerging due to these projects. The mechanisms used under the loans from these institutions continue to push for building more infrastructure projects with private sector participation and use of public private partnerships in waterway projects, although acknowledging that the funding for such projects would come from public sources.
The author would like to acknowledge valuable feedback and support from Anuradha Munshi and Shripad Dharmadhikary in drafting this note.
Picture Courtesy: seo work/Flickr
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