Thrust on inland-waterways in India is the game changer: Transforming transport networks

My friend’s example stands out that the apples from Himachal to Chennai will be costlier than importing the same from New Zealand; more so now when the Baltic dry or the Shanghai Container Freight index is at its all-time low.

If you look at prices of commodities in two spatially separated markets, the difference gives you a hint of the transportation networks at play and their relative costs. No matter how inefficient the mechanism of transmission, the substitution patterns in transportation over a range of options is based on pure economics.

If you have commodities produced in one part of India and consumption centers in another part, the dynamics of price will have to factor in transportation cost. If you have inefficient lanes, it may be possible to import from far off distances into coastal cities than moving the same stuff from North of India to the South.

But there are competing modes of transportation from rail, road, air, and now Mr. Gadkari is adding one more which is inland waterways, apart from the coastal movements by the sea. The substitution patterns and the economics of substitution will depend on a host of factors.

Just to name a few, multi-modes, transport rates, prices of commodities at spatially separated markets, and ocean freight rates, all have a bearing on the dynamics of the movements through these different modes. There are many other variables at play, for example the imposed restrictions like the lockages of all kind or the allowable drafts in the river or the taxation imposed by some states on the other are some exogenous variables. This will be further impacted by the volume of rail deliveries (grains in particular) to the export points or the prevailing rail rates. The price of grain becomes a very important variable and barge rates will largely depend on some of these variables at play. The point to note is that we are dealing here with four price functions, namely, rail rates, grain bids, ocean freight rates, and barge rates. Any change in one variable will impact the other and supply shocks in one area will cascade into the other.

Bringing in the waterways dimension into India is a game changer. But it will only augment India’s chances to improve the supply dimension that would reduce transportation costs by reducing the delays and uncertainties around the other modes.

India moves about close to 1 Trillion ton kilometers of all commodities out of which about 660 Billion ton kilometers move by rail. For the size of the country and its populace, this is not even a quarter of what it should be; such are the dimensions of movements we are talking about. Waterways therefore come as an add-on but it will change the dynamics of certain networks.

When we talk of inland waterways, we mean the Ganges (Ganga)–Bhagirathi–Hooghly rivers, the Brahmaputra, the Barak river, the rivers in Goa, the backwaters in Kerala, inland waters in Mumbai and the deltaic regions of the Godavari – Krishna rivers. That is about 14500 kilometers of movement and only 55 million tons are currently moving. Out of this Ganges-Bhagirathi- Hooghly, a stretch of 1620 km is the National Waterway-1, while there are five more National Waterways.

Against India’s 55 Million tons moved through the inland waterways, mainland Europe moves 550 Million tons annually; the geographical area for both these entities is exactly the same. This gives some idea of the potential that actually exists for India.

If we just take the Rhine-Danube system, the major movement connects Rotterdam from the North Sea to the Black Sea running close to Bucharest. This is possible due to the construction of the 171km long canal that connects the Main Rhine with the Danube. This river network is the backbone of transportation in Europe, which is much more cost effective than anything that we can think of in India.

If we look at the lowest allowable draft in Rhine for barges carrying 200T-400T, just 1.8m – 2.2m is sufficient. For most of the Ganges-Bhagirathi-Hooghly, the draft could be a shade better. For carrying 3000T we need a draft of 2.8 meter, which could be an issue but for carrying up to 1000T in barges, we do not have any constraint at all as we do have draft of 2.5 meter in the National Waterway-1.

The constraint is in the corresponding linkages that would connect the river Port with the next mile of road ways or the railways. This is where we start with constraints, which need some long term planning, which we may have missed out to do.

Imagine we want to move barges from Varanasi to Kolkata Port. The draft will never be any problem. The problem would be how would you move the containers by road to Varanasi by rail and then connect it to the inland Port by road or rail and do the same on the other side in Kolkata right up to the Port.

The holistic view of network planning in transportation needs a coordination of five different ministries, Road, Rail, Port, Civil Aviation & Urban Development. Thankfully it is only now that these are getting combined and coordination has improved for infrastructure development.

Now I go back to the network costs. Once we start to initiate waterway networks, we would be creating new economies around these movements impacting prices of commodities. For every progress on waterways we would see reduction in costs, eventually. The equilibrium level of prices in the long term when waterways get developed will be lower and the system much more efficient, but we cannot ignore the investments in a number of areas to facilitate this. Barge demand & supply will depend on some of these dots. Only multi-modal networks can win in our given situation.

Land acquisition, as the mother of all battles, will be one stumbling block, where the polity must converge with some semblance of reason. We cannot solve one problem while creating the other. The barges will move for sure, but only when there is sufficient evidence that the first mile and last mile is also efficient. For that to happen, we would have to connect many dots.

Growth is a no-brainer in India, it is just that we must have the transportation networks work efficiently, so that ease of flow happens and costs are comparable to where the global cost of transportation is.