Operator Perspective: Key concerns and proposed solutions

Key concerns and proposed solutions

Maritime states contribute over 60 per cent of India’s total gross domestic product. The maritime sector, however is currently facing a number of challenges that need to be addressed in order to sustain this share.

The biggest challenge faced by the sector today is the absence of adequate rail and road connectivity. Evacuation facilities are dismal in many, if not most, ports. This has resulted in the increased cost of logistics to operators. Despite some initiatives being taken, the speed of freight trains in India is barely 25-30 km per hour, while road speed for freight transportation is less than 35 km per hour. The use of coastal shipping and inland water transport is significantly lower than that of overland transport. No new innovative projects have been planned for transporting liquid cargo through the more cost-efficient pipeline route either.

On the land acquisition front, not much progress has been made. Encroachments continue to hinder port development. This not only impedes project implementation, but also adds to development costs. Another challenge at major ports is to improve capacity utilisation through automation and mechanisation. Steps also need to be taken to use existing capacity more efficiently.

The multiplicity of stakeholders and agencies also slows the pace of project execution. Private operators are required to obtain permits and clearances from a number of central and state government agencies including the Ministry of Environment, Forest and Climate Change, pollution control boards, customs authorities, the National Highways Authority of India, Indian Railways, etc. No major improvements have been seen in terms of dwell time reduction. Lack of specialised skilled manpower is another key concern in the sector and adequate training needs to be provided.

There are instances where the capacity of a port is enhanced by the deployment of modern equipment. However, in such cases, operators are asked to obtain new permits and clearances which delays project execution.

Financing is another key challenge for the sector. The cost of funding needs to come down and new and cheaper sources of funding need to be explored. A periodic review of long-term concessions is also required and there is a need to introduce a 10-year revisit clause in concession agreements.

On the positive side, in the last one and a half years, the government has taken a number of initiatives to foster growth in the sector. The centre has set up the Indian Port Rail Corporation to undertake last mile rail connectivity projects for major ports. However, there is a need to establish a single unified ministry of transport for streamlining the approvals procedure. The good news is that the government is taking positive steps in this direction. Every quarter, one of the ministries is authorised to chair a meeting of all the transport ministries and thus address issues and give recommendations related to a particular transport sector.

There is also greater emphasis on the modernisation, mechanisation and digitisation of ports. In this context, the Ministry of Shipping has appointed consultants to give recommendations for port modernisation and mechanisation. The ministry has also earmarked funds for augmenting shipbuilding capacity. One-time environmental clearance to the master plans of ports is on the anvil. If this is finalised, a number of issues will get resolved.

For the successful implementation of projects, instead of adding more input clauses (for equipment and technology) in concession agreements, output and performance clauses should be specified. Integrated connectivity projects should be planned for ports. In-house programmes for training engineers and mariners joining the ports and shipping sector should be organised. There is also a need to modernise and mechanise existing facilities before setting up more capacity.

In the next three or four years, growth in cargo volumes is expected to remain subdued, especially for ports that have high coal handling capacity. In this scenario, ex-im-oriented ports need to shift their focus to coastal cargo. To attract more cargo, operators should focus on providing modernised and mechanised facilities and services at competitive rates. w

Based on remarks by Krishna B. Kotak, Chairman, J.M. Baxi and Company; Captain B.V.J.K. Sharma, Joint Managing Director and Chief Executive Officer, JSW Infrastructure; and Captain Anil Kishore Singh, Chief Executive Officer, Hazira and Dahej Ports, Adani Ports and Special Economic Zone Limited