Traditionally, Indian ports have been synonymous with congestion. But thanks to the strong GDP growth of country during the past one decade, almost kissing the double digit figure, the government and other stakeholders have been compelled to take a serious note of the creaking maritime infrastructure*. The scene is now rapidly changing. For the past few years, the sector is witnessing two parallel but independent developments. While more and more terminals at the 12 “Major” ports (those operating under the Central Government control) are being privatised through the PPP mode, the nine coastal States have also been drawing up ambitious programmes for developing greenfield/brownfield ports and jetties (typically called the non-Major/Intermediate ports) under their jurisdiction, through private investment.
Stumbling blocks
International norms recommend a gap of 30% to be maintained between the installed capacity and the actual throughput. But for Indian ports, this gap works out to just about 8% for certain types of cargo handling, which ultimately leads to a substantial increase in the waiting time for ships and a strain on the port equipments and other infrastructure. While the ship turnaround time in most of the leading ports of the world is in few hours, for Indian ports, the counting still continues to be in number of days, but, of course has vastly improved from ‘weeks’, to about 3-4 days now. The other stumbling block has been the poor draughts which prevents bigger sized ships calling at the ports and the trade losing the benefits of economies of scale. As mentioned earlier, the consistent growth in the economy witnessed since the start of the new millennium led to the cargo movement registering impressive upswing, which prompted the Ministry of Shipping to finally launch a massive USD 21 billion National Maritime Development Programme (NMDP) in 2005, with a view to bring about a sea change in the maritime infrastructure of the country. For the Major ports, 276 projects with investment worth USD12 billion were identified which included construction of additional jetties/berths, augmenting port equipment, deepening of channels, improving port connectivity, etc. The programme, envisaging enhanced private investment, improving service quality and promoting competitiveness amongst ports, is to be implemented by FY 2012. But until six months ago, in the penultimate year of the NMDP, not even 25% of the projects had been completed. Several major projects have missed the deadline and are dragging with a tardy pace due to a variety of factors. Analysts feel that a bulk of them may not meet the 2011-12 dead-line and will have to be carried forward. According to the Ministry’s report card, till 31st March 2010, 50 projects involving a capacity of about 70 million tonnes were executed. Seventy four were underway, 16 projects were approved but yet to be awarded, 29 projects had been firmed up and were under approval and 82 projects were still under planning stage.
Ambitious plan
But this has not stopped the Ministry from announcing yet another ambitious plan titled “Maritime Agenda 2010-20.” In January, this year, the Shipping Minister, G K Vasan, released a 400-page document outlining the Government’s wish list for the maritime sector. It encompasses all the segments like ports, shipping, ship-building, inland-waterways, maritime training, et al. As per the Maritime Agenda, Indian sea cargo traffic is likely to grow 3 folds in the next decade. It is estimated that the ports in the country would need to handle 2.5 billion tonnes of cargo by 2020 and the required capacity would be 3.2 billion tonnes. This would call for an investment of Rs. 3 Iakh crores (USD 66 billion). It is further estimated that out of the 2.5 billion tonnes of traffic, 1270 million tonnes will be handled by the non-major ports and the balance 1215 million tonnes by major ports. Currently the total installed capacity of Indian ports is just over 1 billion tonnes, with the major ports’ capacity at 617 million tonnes. The ‘port to coastline ratio’ of India is lower compared to some of the major maritime nations. When the length of the total coastline in India is divided by the number of large ports, there is 1 port every 583km, whereas it is 1 per 467km in China, 441km in Brazil and 437km in USA. Even countries like Vietnam, South Korea and South Africa fare better in this regard. The Indian Shipping Ministry has therefore announced the 13th major port of the country at A&N Island. Furthermore, the Maritime Agenda mentions of setting up 4 more major ports – two on the east coast and two on the west coast along with conversion of the existing Cochin and Jawaharlal Nehru ports into major hub ports. The Ministry has also decided to corporatise the JN Port, i.e. from a ‘trust’ to a ‘company.’ Further, the Maritime Agenda envisages giving a thrust to coastal shipping, since in spite of immense potential (the country has 7500km coastline and its coastal hinterland comprises of 40 districts across 5 states on the west coast and 4 on the east coast – the hinterland spreading across nearly 3.8 lakh sq km including Lakshadweep and A&N islands), the share of coastal cargo in the total maritime trade is just 7% in India, while it is 15% in the US and 43% in EU. The coastal cargo comprises only 15% of the cargo handled at various ports.
Private sector participation
Private sector participation, which has worldwide proven to be a panacea for highly capital-intensive infrastructure development, has gained a fair amount of success in the port arena in India when compared with other sectors. It was in 1997 that the Government of India, with a view to provide the much needed boost to the port sector, ushered the era of privatisation and the first concessionaire agreement was signed at JNPT. The birth of NSICT at JN Port virtually heralded a revolution in cargo handling and the success story got repeated at other ports of Chennai, Visakhapatnam and Kandla. Today, there is more than one terminal operator successfully handling the same cargo in a single port giving rise to the much needed competition. As stated earlier, the 9 Indian coastal states have also jumped into the fray of maritime infrastructure creation with each one announcing independent development plans of the various minor ports and jetties under their jurisdiction in the next 10 years. The provincial governments have framed their own maritime policies but largely based on the Model Concession Agreement (MCA) developed by the Planning Commission. Most of the projects will be on BOT basis with the private sector contributing to 96% of the project cost. The total investment is expected to be Rs.167930.84 crores.
The hot spots to watch
The state of Gujarat tops the list with a proposed investment of Rs. 75000 crores (USD16.6 billion) to develop sites at Simar, Dholera, Positra, Maroli, Chhara, Vansi-Borsi, Bedi, Nargol,etc. Gujarat is followed by Andhra Pradesh, which has identified plans worth Rs. 33500 crores (USD 7.44 billion) for Gangavaram (Phase II), Krishnapatnam (Phase II and III), Machilipatnam and Kakinada. Next in the list is Orissa with proposed investment of Rs. 24000 crores (USD 5.33 billion). Some of projects that have been identified/being developed are Dhamra, Kirtania, Astaranga, Gopalpur and Chudamani. Maharashtra state government intends to develop Rewas, Dighi, Vijaydurg, Jaigad, Redi, Dharamtar with total investment of Rs. 20417 crores (USD 4.53 billion) The other coastal states are also upbeat on developing non-major ports falling under their respective jurisdictions. Tamil Nadu intends to develop Katupalli, Thiruchopuram, Kaveri, Vanagiri, Thirukkuvalai, Manappad, Koodankulam, Parangipettai, Udangudi as well as Karaikal (Phase IIA and IIB) in the Union Territory of Puducherry. Kerala is developing Vizhinjam, Azhikkal, Ponnani, Beypore and Alappuzha while Karnataka intends to build up 2 ports at Tadri and Uttar Kanada. West Bengal has lined up development at Kulpi, Kanika Sands and Sag
ar Island. All the top names in the global port industry are vying for the projects in India, a few of whom have been debarred from participating in the tenders on account of security-risk issues. The investors are keenly watching the new port policies being framed by the government like the Port Regulatory Authority Bill and the Indian Ports (consolidated) Act which is in the drafting stage. All in all, a lot is happening in the Indian port sector. Keep watching!
*As per recent reports, looking at the economic growth of the country, the Govt.’s intended investment in the overall infrastructure development has got enhanced to US$ 1 trillion from US$ 514 bill., out of which 1/3rd is expected from private participation. The Planning Commission of India, taking note of the “ports” bottleneck in the country, had estimated that, between 2006 and 2012, the development of Major ports would require Rs. 57450 crores (USD 12.76 billion), while non-major ports (under the various state governments) would need Rs. 36000 (USD 8 billion) crores totally amounting to over Rs. 93000 crores (USD 20.66 billion) Of this, Rs. 68,800 crores (USD 15.28 billion) was expected through PPP. (1 billion = 100 crores and 1 $ = 45 INR, approx).
(The views expressed in this article are those of the author and not the Indian Private Ports & Terminals Association)