PORTS: REFORMS & CHALLENGES

Sea ports play a vital role in the Exim trade and thereby in the economic development of a country. To become globally competitive, due importance needs to be given to the development of infrastructure in general and port sector in particular, as ports play vital role in the overall economic development of the country.

According to the Ministry of Shipping, around 95% of India's trading by volume and 70% by value is done through maritime transport. In November 2020, the Prime Minister, Narendra Modi renamed the Ministry of Shipping as the Ministry of Ports, Shipping and Waterways.

India has 12 major and 205 notified minor and intermediate ports. Under the National Perspective Plan for Sagarmala, six new mega ports will be developed in the country. The Indian ports and shipping industry play a vital role in sustaining growth in the country's trade and commerce. India is the sixteenth-largest maritime country in the world with a coastline of about 7,517 kms. The Indian Government plays an important role in supporting the ports sector. It has allowed Foreign Direct Investment (FDI) of up to 100% under the automatic route for port and harbour construction and maintenance projects. It has also facilitated a 10-year tax holiday to enterprises that develop, maintain and operate ports, inland waterways and inland ports.

Market Size

India's key ports had a capacity of 1,534.91 million tonnes per annum (MTPA) in FY20. In FY21, all key ports in India handled 672.61 million tonnes (MT) of cargo traffic. Merchandise exports reached US$ 255.92 billion in FY21 (until February 2021).

The Government has taken several measures to improve operational efficiency through mechanisation, deepening the draft and speedy evacuations.

Government Initiatives

Some of the major initiatives taken by the government to promote the ports sector in India are as follows:

• India is expected to begin full operations in Iran's Chabahar Port by the end of May 2021. India is building two terminals at the port and will operate them for 10 years
• In Union Budget 2020-21, the total allocation for the Ministry of Shipping was Rs. 1,702.35 crore (US$ 233.48 million).
• The key ports are expected to deliver seven projects worth more than Rs. 2,000 crore (US$ 274.31 million) on a public-private partnership basis in FY22.
• The Finance Minister proposed to double the ship recycling capacity of ~4.5 million light displacement tonnes (LDT) by 2024; this is expected to generate an additional ~1.5 lakh employment opportunities in India.
• In Union Budget 2021, the government announced subsidy funding worth Rs. 1,624 crore (US$ 222.74 million) to Indian shipping companies to encourage merchant ship flagging in the country.
• In February 2021, the Major Port Authorities Bill, 2020 was passed by the Parliament of India. The bill aims to decentralise decision-making and reinforce excellence in major port governance.

Road Ahead

Increasing investment and cargo traffic point towards a healthy outlook for the Indian ports sector. Providers of services such as operation and maintenance (O&M), pilotage and harbouring and marine assets such as barges and dredgers are benefiting from these investments.

The capacity addition at ports is expected to grow at a CAGR of 5-6% till 2022, thereby adding 275-325 MT of capacity. Domestic waterways have found to be a cost-effective and environmentally sustainable mode of freight transportation. The government aims to operationalise 23 waterways by 2030.

As part of the Sagarmala project, more than 574 projects worth Rs. 6 lakh crore (US$ 82 billion) have been planned for implementation between 2015 and 2035.

In Maritime India Summit 2021, the Ministry of Ports, Shipping and Waterways identified a total of 400 projects worth Rs. 2.25 lakh crore (US$ 31 billion) investment potential.

Mega Ports…

Sanjay Sethi (IAS), Chairman of Jawaharlal Nehru Port Trust (JNPT), said, “This is the era of mega-ships-big, enormous models of engineering ingenuity, carrying more cargo than ever before at 10-15% lower operational costs and forcing the world to move towards Mega Ports. The cost of not creating mega ports is higher than creating them. The three key criteria for a mega port are deep-draft availability to handle bigger ships in the future; effective hinterland connectivity to facilitate best-in-class evacuation, and land availability to create a sustainable industrial ecosystem. The planned mega ports are likely to enhance India's cargo handling capacity by 466 million tonnes per year. As part of the Sagarmala vision, India's cargo traffic handling capacity will be enhanced from 1,550 million tonnes per year to 3,000 million tonnes per year by 2025. Mega ports can be considered truly indispensable nodes of the current globalised economic system. These ports will also boost up coastal shipping, thus decreasing the dependence on transportation through railways and roadways, and will cut down the inland transportation costs by up to 80%.”

R. Ravi Kumar, Secretary General - IPPTA, said, “The intent of Government for private sector involvement on a large scale in port modernization is quite clear. We have no doubt in our mind that privatisation is the panacea for addressing infrastructure and investment issues in the country. There could be a challenge in privatising the existing assets as all of them may not be amenable to privatization. Having said this, we have to bear in mind that while the government has introduced several policy measures designed to encourage growth in the port sector, certain policy reforms are needed to accelerate the development of India's port sector.”

According to Mohammad Aslam Bijapur, Managing Director at Royal Haskoning DHV, India, “Government of India (GoI) has initiated infrastructure and connectivity improvement of existing ports on a large scale. Infrastructure improvements have taken place for road and waterways. Establishment of organisations like IPRCL, G-Ride, DFC etc and proposal for setting up of Port Infrastructure Vikas Nigam Limited by GOI are some of the key steps which can improve the port connectivity effectively. Implementation of Dedicated Freight Corridor projects is going to be a game changer in improving logistics infrastructure of India. Ports in association with highway development authorities have undertaken widening of roads connecting port with the hinterland. This is helping reduce logistics time and costs associated with international trade. Government has invested a huge amount in improving water transport infrastructure on national waterway (NW-1) River Ganga. Implementation of this project would lead to creation of additional mode of transportation for landlocked states namely Uttar Pradesh, Bihar, Jharkhand, etc.”

He further added, “Government of India initiatives in the port sector increasing public private partnership mode of investment is likely to generate large cargo handling capacity. Looking at the development and fast growth of private ports like Mundra and Hazira on the West, Krishnapatnam, Kakinada, Gangavaram and Dhamra on the East which are in close proximity to the major ports of India, it is evident that private players are competent to add substantial value and growth to the port sector in India. JNPT is one of the best examples for successfully running the JN Port with the involvement of various key private operators.”

Rajiv Agarwal, Managing Director, Essar Ports, said, “Digitization and deployment of cutting- technologies is not a choice any longer, but has become imperative across sectors and industries. The ports are no exceptions.In fact, adoption of facilitating technologies has become even more rapid after the onset of Pandemic. Essar Ports, with its commitment of continuous improvements, has been in an early adopter of digital technologies including IoT& data analytics. Essar ports believes that the infusion on digitization and advancement of technology, enables better customer service, reduces operation costs, improves efficiencies and ensures environmentally conscious/eco-friendly business operations.”

Suresh Kumar R, Chief Executive Officer - India, Allcargo Logistics, said, “Building on the many progressive initiatives over the years, we believe strong focus on boosting investments – public and private sectors will further strengthen the country's warehousing/logistics capabilities. In the public sector, the priorities would be to accelerate the pace of infrastructure projects, fast-pace the completion of Dedicated Freight Corridors and continue upgradation of the National Highways Network. In tandem with the efforts for upgrading the haulage capabilities is the need for building of warehousing competitiveness by setting up a robust Pan-India warehousing infrastructure. Policy interventions in the form of speeding up environmental clearances and allocating land banks for setting up large logistics parks and Grade-A warehouses is pivotal to positioning Indian logistics on a high-speed growth curve.”

According to Sanjay Bhatia, Co-founder & CEO, Freightwalla, “While the initial lockdown in 2020 deeply impacted the trade globally, things have started picking pace in recent months. The rise of the second wave had made exporters, and shipping companies fear another trade catastrophe, but things worked better than expected. One of the primary reasons for this relief isthe tech-adoption that followed the nationwide lockdown imposed in India starting March 2020. Businesses that adopted digital tools for their business and supply chain operations managed to import/export seamlessly even while working remotely. Although there is still a slight delay in the shipments of commodities from India due to an acute container shortage, we are optimistic that things would gain pace in the next few months.”

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