The past one year has been an important one for the maritime sector. There has been increased government focus on capacity addition and efficiency improvement at ports, the provision of adequate connectivity as well as the promotion of coastal shipping, inland water transport and the domestic shipbuilding industry. In an interview with Indian Infrastructure, Rajive Kumar, secretary, Ministry of Shipping (MoS), highlights the sector’s performance, key policy initiatives, focus areas, and issues and challenges…
How has the Indian maritime sector performed in the past one year?
The past year has been among the most exciting years in the history of the maritime sector. During this period, the MoS held its first global investment summit, the Maritime India Summit, which attracted investments worth Rs 829.05 billion from both international and Indian stakeholders. The government announced the ambitious Sagarmala programme, which has taken shape and will completely revolutionise not only the maritime sector but also the whole logistics sector.
During April 2015 to March 2016, major and non-major ports crossed the landmark of handling over 1 billion tonnes of cargo throughput. The 12 major ports handled 606.37 million tonnes (mt) of cargo traffic, with a growth rate of 4.31 per cent over 2014-15. Most of the major ports showed positive growth in cargo traffic with Mormugao registering the highest growth at 41.23 per cent, followed by V.O. Chidambaranar (13.68 per cent), Kolkata (8.43 per cent), Kandla (8.17 per cent) and Paradip (7.57 per cent). Kandla port became the second port in the country to cross the 100 mt cargo throughput mark. Most of the major ports also registered an increase in profitability and operational efficiency. During the year, major ports created an additional capacity of 94 mt, which is a record for any year.
All public sector undertakings under the MoS have shown improved performance and increased profitability during the year. The Shipping Corporation of India, which was making losses a couple of years back, registered profits in the past two years.
What were the key initiatives taken by the government to accelerate sector growth over the past one year?
The MoS has made many proactive and progressive interventions for the development of the sector. Some of the key initiatives were:
- Sagarmala programme: The flagship programme of the MoS, Sagarmala aims to promote port-led development in the country. It aims to achieve capacity expansion and modernisation of seaports, enhance port connectivity with the hinterland, facilitate port-led industrialisation to promote trade and the sustainable development of coastal communities.
- New port development: We are developing a number of new ports along the coast of India – Sagar, Enayam, Vadhavan and Paradip satellite port. We are also developing Chabahar port in Iran and exploring opportunities for the development of Paira port in Bangladesh.
- Projects at existing ports: Our aim is to bring the existing 12 major ports up to international standards. Two of our ports, Mormugao and Kamarajar, are being dredged to handle 18 metres draught to enable them to handle the largest vessels globally available. We engaged reputed consultants to benchmark the major ports to the best-in-class global ports. Around 116 initiatives were identified, of which 50 have been implemented and the remaining are under implementation. During the year, a substantial reduction in vessel turnaround time and improvement in efficiency parameters was achieved.
- Renewable energy at ports: The MoS is keen on promoting the use of renewable sources of energy and is in the process of installing solar- and wind-based power systems at all major ports across the country. It aims to set up 135 MW of solar energy capacity at eight major ports and 50 MW of wind energy capacity at three major ports by 2020.
In addition, in order to promote ease of doing business, radio frequency identification systems are being installed to automate gate operations. All container terminals are fully equipped to provide direct port delivery, which will reduce container dwell time.
On the policy front, we are working on the new Central Port Authorities Bill, and reviewing the Merchant Shipping Act, 1958 and the model concession agreement for public-private partnership (PPP) projects.
What are the key focus areas under Sagarmala? What are the targets and timelines?
As part of the National Perspective Plan (NPP), April 2016, prepared under Sagarmala, over 150 projects costing an estimated Rs 4 trillion, have been identified. Some of the signature projects include port capacity expansion, the development of six new ports, freight expressways, a heavy-haul rail project to transport coal, new pipelines for transporting petroleum-oil-lubricants and multimodal logistics parks (MMLPs).
The Sagarmala Development Company is being set up by the MoS to provide equity support to project special purpose vehicles (SPVs) and funding support to the residual projects under Sagarmala. The implementation of a roadmap for these projects is being finalised in consultation with the relevant stakeholders, with a 2016-35 time horizon. At least five projects (total cost of approximately Rs 144 billion) are being considered for implementation starting 2016-17, of which three are being considered for part-funding under Sagarmala.
While the roadmap is still being finalised, significant progress has already been made to-wards project implementation. Technoeconomic feasibility reports have already been prepared for four new port locations (Colachel, Sagar Island, Paradip satellite port and Vadhavan). Of the seven MMLPs proposed under Sagarmala, the development of five is already under way. The Ministry of Road Transport and Highways (MoRTH) has agreed to prepare detailed project reports for the 18 road projects, proposed under Sagarmala, on an immediate basis.
In 2015-16, while the NPP was under development, 12 projects were considered for part-funding under Sagarmala. Of these, 11 projects have been approved and funds have been released for six projects.
The MoS has come up with the Central Port Authorities Bill, 2016 to replace the existing Major Port Trusts Act, 1963. How far will it go in providing operational autonomy to major ports and ensuring quick decision-making?
The objective of the draft Central Port Authorities Bill, 2016 is to give more autonomy and flexibility to major ports in their functioning and bring in a professional approach in their governance. The new act will facilitate the transformation of major ports to landlord ports from the present service port model. Some of the highlights of the bill are:
- The composition of the board of the port authority has been made compact. It will now consist of 10 members including three to four independent members instead of the 17-19 members under the port trust model.
- The need for government approvals for raising loans, the appointment of consultants, the execution of contracts and the creation of service posts has been dispensed with. The board of the port authority has been given the power to raise loans and issue security for capital expenditure and working capital requirements.
- The board has also been given the power to fix the scale of rates for services and assets. The regulation of tariff by the Tariff Authority for Major Ports has been dispensed with. For PPP projects, operators will have the freedom to fix market-based tariffs after intimating the port authority.
- The port authority will be deemed a “local authority” under the provisions of the General Clauses Act, 1887 (and other applicable statutes), so as to prepare appropriate regulations with respect to the area within port limits, to the exclusion of any central, state or local laws.
- Some best practices in governance like regular internal audits by professional auditors, publishing balance sheets and profit and loss accounts of ports, provision for meetings through videoconferencing, etc., have also been included in the new bill.
The ministry is in the process of revising the MCA What are the likely changes to make it more investor friendly?
The MCA has been reviewed to provide equitable risk distribution between the port authority and private investors and to promote greater investment in ports. In the new MCA, the private investor will be free to exit from the project after six years from commercial operation date. PPP operators can give discounts and the revenue share can be paid on the discounted tariff after due approval. The revenue from storage charges has been excluded from the computation of gross revenue and also for revenue sharing. Concessionaires will have the option to migrate to new tariff guidelines as and when they are issued.
Lack of adequate connectivity is a major hindrance to sector growth. What are the steps being taken to address this issue?
In order to focus on last-mile connectivity of ports, a dedicated SPV, Indian Port Rail Corporation Limited (IPRCL) has been formed by the MoS with equity contribution from major ports.
The MoS, under its Sagarmala programme, has identified 18 road connectivity projects, which are being taken up by the MoRTH and the National Highways Authority of India (NHAI) under the Bharatmala scheme. These projects will provide last-mile connectivity to ports like Gangavaram, Krishnapatnam and Sagar.
A total of 82 road connectivity projects have been identified under the NPP including 10 potential freight-friendly expressway stretches, road connectivity with the Jawaharlal Nehru Port Trust and last-mile connectivity to ports in the Western Ghats, among others.
For strengthening the rail evacuation network, 21 rail connectivity projects have been taken up under Sagarmala by Indian Railways and 22 port-rail connectivity projects have been taken up by IPRCL.
India is targeting a 5 per cent share in the global shipbuilding market by 2020. What are the measures being taken to achieve this?
Shipbuilding is an important industry because of its high multiplier effect on investment and employment. It is also a strategically important industry due to its critical role in ensuring energy security, national defence and for developing the heavy engineering industry. The government is actively promoting this sector and has already taken some steps in this direction.
The financial assistance policy for Indian shipyards, approved by the government, offers monetary incentives to Indian shipyards for ships built in India. Further, the government has exempted customs and excise duties on inputs utilised for manufacturing ships as well as for those used in ship repair. It has also granted infrastructure status to shipyards.
What is the government’s plan for the coastal shipping and inland waterways segments?
There are three basic infrastructure requirements for making a waterway viable for shipping and navigation. These are a navigation channel with adequate depth and bottom width as well as horizontal and vertical clearances; navigation aids for day and night navigation; and terminals to provide berthing of vessels, loading and unloading of cargo/passengers and road/rail connectivity.
To improve the above-mentioned infrastructure, the government has undertaken various initiatives. Through government resources, infrastructure such as navigational aids, river information systems, differential global positioning systems, fixed and floating terminals etc. is being created. The Jal Marg Vikas Project, at an estimated cost of Rs 42 billion, has been launched for capacity augmentation of National Waterway (NW) 1 with technical and financial assistance from the World Bank. This project envisages the construction of multimodal terminals with road and rail connectivity at Varanasi, Sahebganj and Haldia, the construction of a new navigational lock at Farakka and assured-depth dredging on various stretches of NW 1. Work at the Varanasi terminal has started, while land acquisition for Sahebganj and Haldia has been completed and tendering is under way.
With the enactment of the National Waterways Act, 2016, the government has declared 106 waterways across 24 states as NWs in addition to the existing five NWs. In this regard, various technoeconomic feasibility studies, environmental impact assessment and environment management plan and coastal regulation zone studies have been undertaken. Depending on the outcome of these studies, suitable developmental plans will be designed for making these rivers navigable. It is expected that since many of these rivers are tributaries of main rivers, they would play the role of feeder waterways to the main NW such as NW 1, NW 2, NW 3 and NW 4, and help decongest road and rail networks.
What are the measures being taken to increase the share of Indian shipping lines in seaborne trade?
To promote seaborne trade, a financial assistance policy for Indian shipyards has been approved by the government, which offers monetary incentives to Indian shipyards for ships built in India. A number of tax-based incentives have been offered by the government to the sector, cabotage has been relaxed to promote roll-on, roll-off vessels, pure-car carriers, liquefied natural gas vessels and over-dimensional cargo. The government has also reduced the central excise duty on capital goods, raw materials and spares used for the repair of oceangoing vessels. There has also been a reduction in the duty levied on bunker fuel.
What, in your view, are the major issues and challenges facing the sector?
Though significant achievements and progress have been made in the sector in the past two years, many challenges still remain. Providing efficient road, rail and inland water connectivity to all ports is a focus area. To significantly increase the share of cargo transport through inland waterways, substantial resources and investment are required. The simplification of procedures to make things easy for trade is another challenging area. India’s share in the global shipbuilding market and the share of Indian flag vessels in the global shipping industry are low. It is our ministry’s endeavour to increase this share. Given India’s long coastline, coastal shipping is one area which has tremendous untapped potential.
As the secretary, MoS, what are your priorities for the sector for the next one-two years?
Sagarmala is a comprehensive programme to promote port-led development and has the potential to revolutionise the maritime sector and bring in broad-based and equitable development of our coastal areas. This programme will be our priority.
Promoting coastal shipping and inland water transport is another focus area of the MoS. Raising the efficiency of ports to global standards, creating a transshipment hub in the country and simplifying processes to promote the ease of doing business will also be a priority.
We propose to undertake all these developments in a harmonious fashion taking along the coastal communities and without damaging the ecology. Our objective is to promote sustainable eco-friendly development of ports and coastal areas.