Port of call

The current stats do not make for enviable reading. If one were to compare India's ports sector with China's, one would find that the country has some 30 times lesser port capacity, and coastal and inland water transport barely commands a 6% share of the overall transport as compared to China's 25% or even Bangladesh's 32%.

Moreover, India's competitive neighbour spends just one-third of what India spends on logistics (no wonder China is such a competitive manufacturing powerhouse). India also pales in comparison with other advanced nations in Europe as well as nations elsewhere worldwide, on most parameters related to ports and shipping. For instance, the 777-km river Seine within the Paris basin in northern France, is an important commercial waterway which moves about 20 million tonnes of cargo. In comparison, the 2,525-km river Ganga (with a navigable length of 631 km) moves just about a million tonnes.

That is the bad news and a pity, considering that India has a coastline of 7,500 km and inland waterways of more than 14,500 km.

The good news is there is much afoot to alter this status quo that has existed for the best part of the country's modern history. While the recent Union Budget in February this year put forward an idea to build a 2,000-km coastal road to improve connectivity between villages and major ports, one of the flagship programmes of the ruling government is the Sagarmala initiative which was launched to promote coastal and port-led development, comprehensively and in a holistic manner. The plan proposes to link 12 major and 180 minor ports with the hinterland to build robust water navigation systems. The Union Minister for Shipping, Nitin Gadkari, in late December 2016, said the government would try to implement projects worth over Rs 5 lakh crore under the ambitious initiative before the completion of its tenure in May 2019. Of the Rs 12 lakh crore being planned for investment under the programme, Gadkari said about Rs 8 lakh crore would be utilised for creating industrial clusters while Rs 4 lakh crore would be used to create and upgrade connectivity projects from ports to railway lines and from ports to roads, as well as mechanisation and modernisation of ports.

Gadkari, who inaugurated the Sagarmala Development Company's (SDC) office in New Delhi at the turn of the New Year, added: “Overall, this project will be a game-changer. It will be the biggest project in the country's history.”

Big words indeed. To be fair, though, there is action on the ground. The SDC (referred to in the paragraph above) has been set up under the Companies Act, 1956, to assist the state/zonal level special purpose vehicles (SPV), as well as SPVs to be set up by the ports, with equity support for implementing projects. The SDC will also provide a funding window and/or implement those residual projects that cannot be funded by any other means.

This is just as well since the major ports seem to be falling behind their private sector counterparts. With the government encouraging private investments in a big way, the non-major ports are eating into the throughput handled by the major ports.

A study conducted by Ernst & Young (EY) in collaboration with Andhra Pradesh Chambers of Commerce and Industry Federation (APCCIF) has confirmed that going by the trend, the non-major ports will account for a majority share of cargo being handled by the port sector in a few years.

In FY16, according to the study, non-major ports constituted a whopping 43% of total traffic, up from just 10% in the previous fiscal. “This reflects a huge shift in trade over a period of 10 years with the private ports emerging as better choices compared to major ports on the back of strategic location, modernisation, efficiency and better infrastructure while achieving cost competitiveness through optimisation of network and logistics,” the EY report said.

N Muruganandam, MD, Indian Ports Association, concurred. “Non-major ports have been losing share,” he told Construction Times. “However, in FY 15, major ports did register a turnaround by clocking a 4% growth while private ports grew less than a percent,” he added. Be that as it may, Muruganandam said that the goal was to achieve global standards in operational efficiency. In the next three years, he said “operational efficiency at India's ports would be at par with global ports like Singapore or Antwerp.”

To achieve such lofty targets, as just pointed out, there is no dearth of progressive measures and policy formulations. Moreover, the on-ground implementation has also received a boost, as compared to earlier times. These are no more flashes of optimism but there have been a number of sector-friendly policies such as 100 percent foreign direct investment (FDI) under the automatic route for projects related to construction and maintenance of ports and harbours. In fact, the Sagarmala initiative aims to attract huge foreign participation as well as provide budgetary and extra-budgetary resources.

The government has taken several measures to improve operational efficiency through mechanisation, deepening the draft and speedy evacuations. In FY 2015-16, the Indian ports sector witnessed capacity addition of 94 million tonnes per annum (MTPA), which is the highest in the history of major ports. The Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce and Industry, reported that the sector received FDI worth $1.64 billion between April 2000 and March 2016.

Nonetheless, bottlenecks remain such as the adoption of technology in the form of port community systems (PCS) or cargo community systems (CCS), financial and infrastructure constraints, policy-related issues, port tariffs, draft restrictions, poor hinterland connectivity and slow progress of public-private partnership projects (PPP).

Just for comparison's sake, at Haropa Port in France, among the top five ports of Europe, the smooth running of their PCS ensures that the cargo of an arriving ship is cleared by the Customs department as in just five minutes. For instance, when a ship arrives in Haropa, most of the cargo that has to be unloaded is already cleared. The Customs declaration can be made five days before the ship arrives and the actual clearance takes five minutes in the IT system. “We implemented this in 2015 and it is running very well for us. We are among the least congested ports in the world today with minimal waiting time for vessels,” Herve Martel, President, Haropa Port, told

Construction Times.

The mounting cost of dredging has been a matter of concern as well. “The world over, dredging is done by sovereign funds. In India, dredging has to be done by a developer,” says Vijay G Kalantri, CMD, Dighi Port and Balaji Infra Projects. He adds: “The government does not give any grant, which makes dredging expensive. Moreover, the government levies service tax, which further adds to the cost of dredging.”

Yet another long-standing issue is with respect to connectivity, both first-mile and last-mile. To be sure, this is what the Sagarmala initiative is attempting to solve with its emphasis on port-led development as well as the rail connectivity projects, ultimately linking to the dedicated freight corridor (DFC). Till such time, logistics will continue to be expensive and will hinder the progress of the much talked about initiatives for coastal shipping.

Kalantri says: “Inadequate hinterland connectivity hinders the growth of external trade. It results in a sub-optimal choice of route and mode of transport, leading to time and cost escalations, and in many cases, congestion in the ports due to the inability to move cargo. Thus, investment in port infrastructure becomes imperative.”

The ongoing projects aim to facilitate movement of cargo by inland waterways and coastal routes which are envisaged as feeders to ports and will help in reducing the cost of transportation when compared to roads. “The prime objective of the Sagarmala project is to promote port-led direct and indirect development and to provide infrastructure to transport goods to and from ports quickly, efficiently and cost-effectively. It also aims to promote growth of industries in coastal areas in proximity to ports,” Kalantri sums up.

Apart from the ongoing and proposed projects under the Sagarmala mission, the government is also planning a more transparent procedure in matters relating to shipping and maritime logistics. The impending overhaul of the Multimodal Transport Goods Act, 1993, is expected to discourage container freight stations from overcharging both exporters and importers.

The Act provides for regulation of such transportation from any place in India to one outside India on the basis of a contract. The latest amendment was in the year 2000. Stakeholders such as The National Shipping Board and the Association of Multimodal Transport Operators of India (AMTOI) have been consulted by the Ministry of Shipping which is believed to be awaiting suggestions. A comprehensive law, once passed, is expected to bring in transparency into end-to-end logistics with respect to sea transport. The government is also expected to put in place a Stevedoring and Shore Handling Policy for all major ports with the intention of establishing a mechanism for transparent auction of permits to stevedoring agents for cargo handling.

A memorandum of understanding (MoU) has already been signed between the Inland Waterways Authority of India (IWAI) and Dedicated Freight Corridor Corporation of India (DFCCIL) to create logistics hubs with rail connectivity at Varanasi and other places on the various national waterways. The joint development of a state-of-the-art logistics hubs at Varanasi and other areas is envisaged to lead to the convergence of inland waterways with railways and roadways, thus providing a seamless, efficient and cost-effective cargo transportation solution.

To ensure smoothness in operations, Vivek Kele, President, AMTOI, told Construction Times, the MMTG Act has been in the works for some time and once introduced and implemented, will iron out key issues that are troubling transporters. “For instance, who decides how a dispute will be resolved in case of an issue between a trucking company and a railway line? The agreement is between the importer and the shipper. It is therefore, essential to bring in an effective MMTG Act that takes into account all aspects of the multimodal chain,” Kele said.While the government pursues policy initiatives, there is also work that has begun with respect to setting up four new major ports. It plans to set up four new major ports at Tamil Nadu, Maharashtra, West Bengal and Andhra Pradesh at an investment of Rs 32,000 crore under the PPP model. The proposed projects are at Colachel, Tamil Nadu (at an estimated cost of Rs 6,000 crore approximately), Dahanu, Maharashtra (Rs 9,000 crore approximately), Sagar Island, West Bengal (Rs 11,000 crore approximately) Dugarajapatnam, Andhra Pradesh (Rs 6,000 crore approximately).

Increasing investments and cargo traffic point towards a healthy outlook for the Indian ports sector. Cargo traffic, which recorded 1,052 million metric tonnes (MMT) in 2015, is expected to reach 1,758 MMT by the end of 2017. The forecast is for an investment of Rs 180,626 crore for the industry in the current period. In addition, through the Maritime Agenda 2010–2020, the Ministry of Shipping has set a target capacity of over 3,130 MMT by 2020, which is expected to be driven by increasing participation from the private sector. Non-major ports are expected to generate over 50 per cent of this capacity.

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