India has one of the largest coastlines in the world expanding over 7500 kilometres that are serviced by 13 major ports and 200 minor ones. Almost 90 per cent of India’s foreign trade goes through sea ports, of which nearly 57 per cent is handled at major ports. Yet, the sector is weighed down by congestion and capacity constraints. Government owns 12-13 major ports of the nation and is working at 85 per cent capacity, way above the global standard of 70 per cent. There is a high concentration of activity at Mumbai’s Jawaharlal Nehru Port (JNPT), the largest in India for solid cargo, where it is working at over 100 per cent capacity. Overcapacity increases the average time for clearing by nearly 6 times compared to most major economies.
In addition to that the major public sector ports have also been losing out to private sector ports like Adani Port that are slightly more efficient than those that are run by the government-owned companies. The move gains significance especially in light of the fact that major ports had a 90 per cent market share of cargo handling in 1996. This has fallen to 57 per cent in 2014. According to a Citi Research report, major ports’ share of cargo handling may slip to 50 per cent if corrective steps are not taken.
The problem in the sector are numerous but the major problem is underinvestment by both private and public companies. Even though private ports have been quickly gaining market share from their public sector counterparts but they too have their own problems.
Essar Ports, for example, was saddled with about Rs 5,836 crore ($950 million) debt at the start of this fiscal. Another minor port, Krishnapatnam port was grappling with a debt of around Rs 3,890 ($600 million) crore in 2013. The government has allowed 100 per cent FDI in the sector. Global operators such as APM Terminals and DP World have already established presence in the country. While APM Terminals operates a port in Gujarat, DP World owns a number of terminals at major ports in the country.
But more investment is required and the existing Indian companies have to lead the way.
Government Stepping Up the Game?
Recently, the government gave in-principle approval for the concept and institutional framework of Sagarmala and the prime objective 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.”
Under this plan, a comprehensive and integrated planning for Sagarmala for the entire coastline shall be prepared within six months which will identify potential geographical regions to be called Coastal Economic Zones (CEZs).
As per the second decision of the Cabinet, a SPV would undertake projects of last mile connectivity to major ports; modernization of evacuation infrastructure in ports; to operate and manage internal port railway system and to raise financial resources for funding port related railway projects. Major ports have identified a shelf of nearly 40 projects which includes the last mile connectivity projects and internal port rail projects that would require Rs 2,372 crore investment.
The proposal is expected to partly solve decades old problem of the sector. India’s ports have suffered from chronic under-investment and a lack of strategic planning, including inadequate linkages to railway and road transport networks.
In another official release, the government said that the proposal to develop 101 new national waterways will create a logistic supply chain with intermodal (rail, road and waterways) connectivity. It added the proposal would positively contribute to the GDP by opening up business opportunities in the area of dredging, barge construction, operation and repair facilities, terminal construction and operation, storage facilities, providing modern aids to day and night navigation, tourist cruise, consultancy, training of manpower for manning barges, hydrographic survey, and so on.
Separately, Finance minister ArunJaitley proposed to work towards converting 12 public port trusts in India into corporations under the Companies Act to bring greater efficiencies in operations, raise funds for growth and compete better with their private sector counterparts.
But the revival of the sector depends upon the turnaround time the proposals take and if they really materialize from concepts papers in to something concrete