Department of Shipping to change VGF system to increase operating expenses

The Ministry of Shipping has identified a potential of 340 million tons of freight movements per year through coastal shipping.

To encourage coastal shipping, the Department of Shipping has asked the Treasury Department to consider changes in the profitability gap funding plan so that operating expenses (opex) can be supported.

“Under current policies, VGF (Viability Gap Funding) is offered for investment, but our assessment is that it is required for opex due to the multitude of transshipment points in coastal shipping,” an official said, adding that the Department of Shipping has taken the lead matter with the Ministry of Finance. The official said the ministry was seeking changes in VGF norms.

Currently there is support from the VGF for projects in subway and road construction, the development of food grain silos and the construction of transmission lines, among other things.

However, according to Maritime Ministry officials, VGF for coastal shipping is required by companies like the Shipping Corporation of India (SCI) that operate the service on the Indian coast to help develop the sector.

In her budget speech, Finance Minister Nirmala Sitharaman said that coastal shipping as an energy-efficient and cost-effective mode of transport for both passengers and cargo will be promoted through the public-private partnership (PPP) mode with profitability gap funding.

The Ministry of Shipping has identified a potential of 340 million tons of freight movements per year through coastal shipping. This requires goods to be loaded onto trucks or rail cars and then transported to the ports of origin, from where a round of unloading and reloading onto ships takes place.

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