Key Trends and Outlook: Sagarmala project to provide growth impetus

Sagarmala project to provide growth impetus

India handled 972 million tonnes (mt) of export-import (ex-im) cargo in 2013-14. Of this, five commodities – petroleum, oil and lubricants (POL), coal, iron ore, fertilisers and containers – accounted for around 80 per cent of the share. Three big hinterland clusters accounted for 90 per cent of the ex-im container volumes –the northwest (National Capital Region and Punjab); west (Maharashtra and Gujarat); and south (Chennai, Bengaluru and Tamil Nadu). The growth in total traffic handled at Indian ports has come mainly from the non-major ports.

A comparison with China indicates that India’s coastline remains highly underutilised. In China, the economy’s engines of growth are much closer to the coastline, whereas in India the hinterland states in the north are the major contributors to growth. The contribution of coastal and inland waterways in domestic transportation is less than 1 per cent in India, while in China it has increased to 24 per cent. Port capacity as a percentage of gross domestic product (GDP) is 1 per cent for India, and 3 per cent for China. Currently, India has seven shipyards, while China has 70.

Coastal and inland waterways have a prominent share in the modal mix of countries like China (24 per cent) and Germany (11 per cent). In India, however, they account for a minuscule share of 1 per cent, despite being environment friendly and cost-effective. The per tonne cost of moving coal by road is between Rs 2 and Rs 3, whereas in the case of coastal shipping it is between Re 0.20 and Re 0.30. India has the potential to move 80 to 90 million tonnes per annum (mtpa) of coal through coastal shipping. If exploited, this could lead to savings of Rs 70 billion per annum. Besides coal, coastal shipping can also be used to move iron and steel, cement and fertilisers.

India also has a large potential for the development of transshipment hubs. Around 25 per cent of India’s container traffic is transshipped to the US and western Europe and 40 per cent to Colombo. In fact, a number of sites have been identified in the country which can be developed into transshipment hubs. As ports such as Vizhinjam become operational, more of India’s transshipment trade can be handled within the country itself.

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The Sagarmala project

The Sagarmala project has a number of elements. Among these, the primary element relates to port modernisation and capacity augmentation, which aims at improving operational efficiency of major ports to unlock existing capacity, augmentation of capacity at existing ports, and development of new ports. Industry analysts are also of the opinion that the immediate focus should not be on creating more capacity, but on identifying the shortfall in capacity for key cargo categories.

The other element relates to the efficient and speedy evacuation of cargo. This would entail improving hinterland connectivity and enhancing port evacuation facilities by deploying optimal multimodal logistics solutions for efficient cargo movement, and harnessing the potential of inland waterways and coastal shipping.

Port-led development is another element of the Sagarmala project. This focuses on the development of coastal economic zones as well as port-based smart cities. It also aims to align itself with the Make in India initiative through port-based industrial and maritime clusters.

Another aim of the Sagarmala project is coastal community development. Under this, skill development, promotion of tourism and fishery will be undertaken. The challenge here is to ensure that the coastal communities benefit from these development programmes. Moreover, issues pertaining to land acquisition can be resolved more easily if coastal communities are involved in the project rather than have decisions imposed on them.

Outlook

Going forward, the growth momentum is expected to come from non-major ports. The Sagarmala project is likely to lead to the development of five to six new mega ports and a world-class transshipment port in the country. It will create additional capacity of 1,200 to 1,500 mtpa by upgrading the existing ports. Two to three port-based smart cities will also be developed. In addition, there will be a focus on transporting higher volumes through inland waterways and coastal shipping. w

Based on a presentation by the associate principal of a leading global consulting firm