June 2016: EDITOR Devangshu Datta

EDITOR Devangshu Datta

The ports and shipping sector has suffered in the past three to four years from a weak global macro environment and low demand. India’s exports have shrunk considerably, while imports have also reduced. One result of this has been low investor interest in the sector, which was already affected by tardy project execution.

The first six months of 2015-16 saw traffic growth of only 1.9 per cent over the corresponding period of 2014-15. Looking at a longer term, traffic CAGR for the past five fiscals (2010-11 to 2014-15) was only 4.4 per cent in volume terms. Non-major ports grew much faster at 10 per cent CAGR compared to major ports (0.5 per cent).

However, there are ambitious plans on paper, including the Sagarmala programme which aims to completely transform the coastal landscape at an estimated cost of Rs 4,000 billion. There has been some capacity expansion, even if projects have overrun schedules. In theory, the pipeline of capacity expansion projects is worth at least Rs 900 billion. Ports are also looking at potential new revenue streams from cruise shipping, ro-ro facilities, LNG terminals, etc. Along with expansions, there are likely to be new opportunities arising in areas such as dredging and in inland waterways development.

As always, policy support will be required. A relaxation in the cabotage laws should encourage more investments and FDI norms too have been relaxed.  But there are still major legal and procedural delays, as well as the usual issues in terms of land acquisition and environmental clearances.

Side by side, the shipping sector has also faced huge pressures as freight rates have plummeted. There have been a series of favourable policy announcements for Indian shipping and shipbuilding. There may be new opportunities opening up, as the inland waterways segment is developed and as defence-related orders come through for shipyards.

The sector’s fortunes are strongly linked to global trade. Supportive policies – and that is already evident to some extent – can help mitigate external pressures. But a rebound in demand will be required before there is a real chance of sector recovery.