Few weeks back India Middle East Europe economic corridor was announced in a successful G 20 event hosted by India. This corridor is expected to redefine the trade route between Europe, Middle East and South Asia. It will be true multimodal network connecting Mumbai to Piraeus by ocean, rail and roads for connecting deep parts of Europe. The project shows a real collaborative approach between many countries. IMEC corridor will start from Mumbai and connect Dubai in first leg by ocean. From Dubai it will connect Haifa by rail, travelling through UAE, Saudi Arab, Jordan and Israel. Once again, from Haifa it will move to ocean mode and will reach to Piraeus in Greece. This proposed corridor will provide an alternate to existing ocean route to Europe, which passes through Arabian Sea, Gulf of Aden, Red Sea, Suez Canal and Mediterranean Sea.
As per many analysts, proposed IMEC is a counter to China’s ambitious Belt and Road Initiative (BRI) project, but nowhere its policy document mentions about BRI. BRI is a country centric initiative with its own limitation, while IMEC is a joint initiative of many developed and developing economies with a clear objective of boosting trade and strengthening supply chain.
A project of this magnitude can have significant impact in terms of geopolitical strategies, Global trade and supply chain. It seems to be well thought strategic triumph for participating nations, but we don’t have deep understanding of geopolitics. Definitely from the supply chain point of view it will be a growth enabler.
In the IMEC corridor Mumbai – Piraeus section will have a new connectivity route and any leg post Piraeus will be similar to other trade lane. Mumbai to Piraeus via Suez Canal is approximately 7637 km (4124 nautical miles), which takes approx. 15-16 days shipping time (considering 11 knots per hour). This route goes without any transshipment of cargo. In the IMEC scenario this travel distance will reduce to approx. 6600 Km (Mumbai – Dubai:1335 NM; Dubai to Haifa: 2600 Km and Haifa to Piraeus: 828 NM). This route may take travel time of approx. 9 days considering same cruising speed of ships and 1.5 to 2 days will be required for train connection between Dubai and Haifa. This time excludes the transshipment time for Dubai port and Haifa port, which can be considered one day in optimal scenario (12 hrs for single transhipment in a port including placement of ship and trains). So, the time from Mumbai to Piraeus will become 10-11 days in total, leading to saving of 5-6 transit days for any container. The scenario may vary slightly in case of bulk / non containerised movement.
On the other hand, IMEC route will have impact on shipping cost as well, due to variance in ocean freight vs rail freight and two additional transshipments. The freight cost varies based on various factors like mode, distance, volume, handling requirement etc. In absence of absolute cost comparison between rail and ocean mode, we have referred two different available studies from two different continents for per Km per container transport cost comparison for a long-haul route. First source is from a research paper of Faculty of Engineering Czech Technical University in Prague. Showing a very high degree of variance in cost of both modes.
Second reference source is an article of Maritime Executive dated Dec 2017, which also compares the per Km cost of long-distance rail vs road in USA and Canada. Its results shows that rail cost is almost 3 times higher than ocean freight. Based on both the references and few inputs from experts, we have considered that rail freight is minimum 2.5 times higher than ocean freight and this assumption has been taken for cost comparison.
In the proposed route of IMEC, almost 40% distance will be travelled by rail mode. Which will lead to higher freight cost in spite of reduction in transit distance by more than 1000 Km. Based on the referred assumptions, transport cost will be higher by approx. 35% excluding the cost of transshipment at 2 points. These transshipments will also have some cost like wharfage, stevedoring etc and will further increase overall cost.
Apart from cost factor, Planned IMEC will have higher usage of rail mode compared to existing route of Suez, whereas rail is less environment friendly in comparison with shipping. As per a study by Fraunhofer ISI and CE Delft, carbon emission on rail mode is more than maritime shipping. On shorter hauls of inland waterways, emission is higher than railways. The proposed route is substituting approx. 3700 Km maritime shipping with 2600 Km of rail corridor. Which means no direct reduction in carbon emission is expected from IMEC. But once rail mode uses power generated from nuclear power plants, there will be reduction in carbon emission and benefit to environment.