One of the country’s vital economic drivers, India’s port sector forges ahead to achieve the target of 3130 million tonnes in capacity by 2020 by adopting efficient technologies and enhancing the scope for private participation. Veena Kurup, Elets News Network (ENN) finds out…
India is one among the most attractive economic investment destinations and has emerged as preferred hub for global trade activities. With a coastline of more than 7,517 kms with more than 200 ports, the country’s maritime activities play a vital role in leveraging the economic growth index. The country presently has 12 major ports and about 200 non-major ports across its vast coastline. The favorable location and availability of a long coastline has India’s standing as a prime destination for executing maritime economic activities. The increasing importance attached to maritime economic activities has further led to the development of many container terminals in the country.
However, the constantly increasing volume of global trade and the inflow of economic activities towards India have reinforced the need for advanced and efficient infrastructure facilities at the country’s ports. Aiming to meet the challenge of globally expanding maritime trade activities, modernization of ports is being upheld as an aspect of vital importance by the governing bodies as well as private port operators.
The push to equip the ports with advanced technologies and equipments to achieve operational efficiency has opened the doors for private players in the country’s port sector. Exploring these opportunities, the government also widely promotes the concept of public-private partnership (PPP) models for the development and operation of ports and container terminals in India. The sector has today opened doors for private port equipment manufacturers, technology providers and also private port developers and operators on a positive scale. A robust participation is also witnessed from the international port equipment players in exploring the opportunities put forth by the modernization of ports and container terminals. According to the sector analysts, non-major ports are expected to benefit on a larger scale as against the public majors due to the strong growth in India’s external trade.
According to the recent ICRA data, the cargo throughput registered at major Indian ports could achieve only a modest growth of six percent in volumes in the second quarter of FY2014 as against the corresponding period a year ago. The reported volumes for the first half of the current fiscal posted a marginal improvement of 2.2 percent over the same period last year, registering 276 million tonnes against 270 million tonnes (MT).
The growth in the throughput at major ports, on consolidated basis, was dominated by Ennore, Paradip and New Mangalore Ports, respectively recording a year-on-year (y-o-y) growth of 59 percent, 33 percent and 16 percent respectively. The country’s largest port, Jawaharlal Nehru Port Trust (JNPT), however showed a decline in the container volumes with the index showing a five percent fall in TEU (twenty-foot equivalent unit) volumes during the second quarter of FY2014. According to the Ministry of Shipping, the capacity at major ports has increased to 800 million tonnes (December 2013) from the 575 million tonnes recorded in 2009. The ministry also disclosed that in the last four years, 88 new projects have been approved with an investment of Rs 42,953 crore, which is expected to make an additional capacity of 558 million tonnes per annum.
Non-major ports on the other hand reported a robust increase in throughput, wherein Adani Ports and Special Economic Zone, Essar Ports and Gujarat Pipavav Port led the growth index. Adani’s flagship Mundra Port’s growth momentum was driven mainly by the robust inflow of liquid cargo and dry bulk volumes; whereas Essar port terminals benefited from the new volumes of iron-ore terminal at Paradip, capacity expansion at Vadinar and Hazira during the quarter period on y-o-y basis. The growth reported at Pipavav Port stood at 30 percent in its volumes on y-o-y basis and 14 percent growth on a quarter-onquarter (q-o-q) basis on the back of increased container volumes.
Coal Cargo – Raising Bars
The ban on mining activities has resulted in a considerable fall in the import and export of iron ore cargo. “The lull witnessed in the sector’s growth pace is mainly due to the reduction in the exports of iron ore cargo. However, a positive trend being witnessed is due to the increase in the inflow of coal and petroleum cargo,” opines Rajiv Agarwal, Managing Director and CEO, Essar Ports.
According to the Indian Ports Association, India’s major ports handled 17 percent more imported coal this fiscal, ended March. The major upswing in the coal imports is due to the escalation in the rush to add power capacity after years of under-investment. Coal and petroleum products are expected to remain as significant contributors to the cargo growth at major ports. As per the government records, while the revival of container volumes is dependent on overall manufacturing activities, iron ore exports could be favorably supported by the resumption of mining in certain areas.
The total coal cargo handled by the India’s 12 major ports escalated to 104.7 million tonnes in FY13-14 from 86.7 million tonnes in the corresponding period a year ago, states the Indian Ports Association.
PPP to Leverage Standards
A major concern hovering on the sector is the need to develop and maintain deep sea ports and deeper drafts. “Today, the lack of deeper drafts has diversified the inflow of containerized trade, being transshipped to Indian ports to the neighboring regions of Colombo and Singapore on a larger scale,” echoes a sector analyst. India’s location is also a hindrance in setting-up deep-water ports. As per the country’s geographic condition, Mumbai and few islands on the east and west coasts are the only regions that offer favorable locations for development of deep-water ports.
The situation has today escalated the requirement for effective dredging, to catch up the rapidly growing foreign trade activities. Dredging however, more than a process, is a detailed study and requires a planned approach for effective operations. According to industry experts, effective dredging can be achieved only through a detailed study on the wave flows, current behavior, weather conditions and systematic geographical data analysis. In addition, the use of costly machines and technologies makes this process even more expensive.
Participation of private players, in such situations, can effectively contribute in enhancing the port operations and technical efficiencies. Private participation has been expanding in the port sector over the years, and public private partnership models (PPP) have emerged as the most technically apt developmental solution. “PPP models help in developing port operations and technologies in a planned manner, wherein the participation from private players can assist government bodies in enhancing the operational efficiencies by enabling access to globally advanced technologies,” adds Agarwal.
The Ministry of Shipping considers PPP as the best mode of development, wherein the tariff reforms has further enhanced the growth of the sector. Presently, 36 PPP terminals are operational at the major ports, while 34 are under construction. Exploring the positive approach from the private players into port operation and development activities, the government also outlined and initiated numerous initiatives favoring the participation of multinational and global players.
Raising total port capacity is outlined by the Ministry of Shipping as a need of the hour for meeting the dynamic growth in the maritime economic activities. By considering the prevalent scenario of economic activities, the Ministry has now set a target of achieving more than 3130 million tonnes of total port capacity by 2020. Apart from meeting the growing demand for import and export activities, the enhancement in port capacity can also enhance in the potential in accommodating large sized cargos and container volumes. Furthermore, about Rs 21,000 crore have been invested in 30 projects during the current financial year in achieving the target outlined by the Prime Minister’s Office for the Port sector. The government has also allowed foreign direct investment (FDI) of up to 100 per cent under the automatic route for projects related to the construction and maintenance of ports and harbours and a 10-year tax holiday for enterprises engaged in port.
The proactive approach and investment planning though outlines a positive sketch for India’s port sector, the ability for quick adoption of infrastructural facilities, need for developing world-class terminals with deep drafts and mechanization of port terminals prevails as a crucial and immediate requirement. Players involved in the sector though varies in reviewing the approach over government policies, uniformly upholds mechanization as an able and only solution to enhance the India’s port sector on a globally accredited level.