The development of ports is a high-risk business. Massive upfront investments are needed to create the required facilities. The infrastructure includes rail and road connectivity, breakwaters, wharfs and backup areas. There is also a need to carry out dredging works and procure port handling equipment. Inadequate facilities affect cargo volumes which, in turn, affects project viability.
Port authorities and companies are required to obtain sanctions and permissions from a number of central and state government agencies such as the Ministry of Environment, Forest and Climate Change, coastal regulation zone authorities, customs authorities, pollution control boards, etc., before undertaking development works. This process of obtaining clearances can, and often does, lead to huge time and cost overruns.
A case in point is Krishnapatnam Port Company Limited, which started providing 24×7 customs facility to its customers only recently, about eight years after it started operations. Another challenge is the shortage of dedicated manpower for customs. Usually, officials from the excise department are engaged at ports to handle customs operations. Port authorities often have to provide on-the-job training to these officials.
Another challenge faced by ports is the undertaking of dredging and reclamation works to maintain navigable channels. Issues such as the high cost of dredging, high port and wharfage charges and shortage of qualified personnel for undertaking dredging operations continue to adversely impact the dredging industry. Further, the involvement of multiple agencies in port development activities including Indian Railways, the National Highways Authority of India, and power companies not only leads to issues in coordination but also results in time and cost overruns. The government also collects port dues from private developers for conservancy services, undertaking dredging, providing pilotage, handling scrap, etc.
Another area of concern is the lack of proper utilisation of backup land which has been made available at ports. The backup land allocated, including village and farm land, encircled private property, marshland and farm roads, has to be developed and maintained by the port authority. Often, the land provided to ports lacks internal roads, power supply, water supply and road connectivity. As a result, port authorities are required to make large capital investments to develop these basic facilities. A social concern is that fishing and farmer communities around the port area also need to be rehabilitated.
In the past, changes in government policy have resulted in huge cargo losses. Among the policy changes that had a negative impact on the sector were the cessation of iron ore exports, restrictions on import of apples, handling of steel scrap only by a few ports, etc. Such unfavourable policy changes force ports to look for alternative cargo to make better use of the existing infrastructure. Besides, the volume of cargo traffic at major and non-major ports has been subdued owing to the continuing global and domestic economic slowdown.
Other concerns relate to the raising of funds for developing port infrastructure which has become expensive as interest costs are very high. Natural disasters such as floods too can result in large losses, especially in the absence of a good disaster management system. The lack of statutory power with the port authority and immigration facilities is also a hindrance to port development.
That said, significant port infrastructure capacity is being created in the country. There is a need to place emphasis on the development of industrial corridors which are required to improve profitability of ports. It is essential to have an oil refinery or a power plant at ports to ensure traffic volumes. The option of land pooling needs to be explored. And a favourable policy framework needs to be provided to encourage the development of the sector. w
Based on presentations by Captain Sriram Ravi Chander, Executive Director, Krishnapatnam Port Container Terminal; and Captain B.R. Pathak, President, Operations, Dighi Port Limited