Recent Developments

Policy initiatives gain traction

In the past year, the maritime sector witnessed some major developments. The government undertook various measures to improve both policy and institutional frameworks for the ports and shipping sector. Key among these were the policy for waterfront development, the relaxation of cabotage restrictions, preparation of the central port authorities bill and the introduction of the financial assistance policy for shipbuilding. Progress was documented in project completion and awards, with greater focus on connectivity. Attention was also given to developing inland waterways on a larger scale, with the passing of the National Waterways Bill, 2015.

A snapshot of the recent developments in the ports and shipping sector…

  • The Ministry of Shipping (MoS) has approved a policy for the award of waterfront and associated land to port-dependent industries at major ports. It has also formulated a new berthing policy for dry bulk cargo for all major ports. The ministry has also withdrawn 13 archaic rules under the Merchant Shipping Act, 1958.
  • The MoS has prepared the draft Central Port Authorities Bill, 2016 to replace the Major Port Trusts Act, 1963. Suggestions from various stakeholders have been invited on the draft bill.  The act, if implemented, will give greater autonomy and flexibility to major ports and will bring in a professional ap- proach in their governance.
  • The government has approved a revised central sector scheme for providing financial support to major ports and to state governments for non-major ports for the creation of infrastructure to promote the movement of cargo and passengers by coastal/inland waterways.
  • To address the major issue of cabotage, the MoS relaxed the cabotage law for special vessels such as hybrid roll-on, roll-off (ro-ro), ro-ro-cum-passenger, pure car and truck carriers and liquefied natural gas vessels. The relaxation is for a period of five years, commencing September 2, 2015. Subsequently, in March 2016, the government also relaxed cabotage restrictions for ports which transship at least 50 per cent of the container cargo handled by them.
  • On the institutional front, the cabinet ap-proved the incorporation of the Sagarmala Development Company (SDC) on July 20, 2016. The SDC will have an authorised share capital of Rs 10 billion and a subscribed share capital of Rs 900 million. In April 2016, the MoS launched the National Perspective Plan under the Sagarmala programme. The plan has been approved by the National Sagarmala Apex Committee. A total of 150 projects involving port modernisation, connectivity, port-led industralisation and coastal community development have been identified under the plan. These projects entail an investment of Rs 4,000 billion.
  • In a major development, the MoS released new dredging guidelines in 2015. Long-term contracts for maintenance dredging (up to five years); pre- and post-dredging and payment surveys by a third party; open competitive bidding; linking contracts with the incentive and disincentive mode of payment; inclusion of a price adjustment clause, etc. are the key facets of the policy.
  • Indian Port Rail Corporation Limited (IPRCL), a special purpose vehicle (SPV), was formed to provide last-mile connectivity to major ports. As of August 2016, IPRCL has awarded five rail connectivity projects worth Rs 1.93 billion.
  • To streamline the customs procedure, the Central Board of Excise and Customs introduced an integrated declaration system with effect from April 1, 2016, under which all the information required for import clearance by government agencies has been incorporated into an electronic format at a single point.
  • At the state level, the Maharashtra cabinet passed a revised State Port Development Policy on January 25, 2016. The policy, covering greenfield ports, jetties, coastal shipping, inland waterways, shipyards and coastal economic zones, will be in force for the next five years.
  • According to India Infrastructure Research, during the period August 2015 to August 2016, projects involving a capacity addition of at least 52 million tonnes (mt) were completed at Indian ports. These include a liquefied petroleum gas unloading facility at Berth No. 13 at New Mangalore port (7.8 mt), a second liquid chemical berth at Mumbai port (2.5 mt), the upgradation of capacity at Berth No. 7 at Mormugao port (2.39 mt) and the mechanisation of container Berth No. 5 at Kamarajar port (2 mt). Further, Essar Ports Limited also commenced commercial operations at its dry bulk terminal in Salaya.
  • In terms of award, projects entailing a total capacity addition of over 115 million tonnes per annum (mtpa) were awarded at Indian ports during 2015-16. In 2016 alone (January-July) projects worth about Rs 38 billion have been awarded. These include the conversion of an existing iron ore terminal into a common user coal terminal at Kamarajar port awarded to Sical Iron Ore Terminals Limited (Rs 5.94 billion, 12 mt), a development, operation and maintenance contract for the container terminal at Berth Nos. 11 and 12 at Kandla port to International Cargo Terminals and Infrastructure Private Limited (Rs 1.59 billion, 22.8 mt), the mechanisation of Eastern Quay (EQ)-1 to EQ-3 berths at Paradip port to a consortium of JSW Infrastructure Limited and South West Port Limited (Rs 14.38 billion, 22.15 mt), the construction of a ro-ro-cum-general cargo berth at Kamarajar port to L&T Geostructure (Rs 1.15 billion, 0.2 million cars), the redevelopment of Berth Nos. 8 and 9, barge berths and the existing mechanical ore handling plant at Mormugao port to Sterlite Ports Limited (Rs 10.85 billion, 19.22 mt), and the construction of a ro-ro terminal at the ferry wharf, Mumbai, to Karagwal Construction Private Limited (Rs 0.35 billion).
  • The year also witnessed the laying of the foundation stones for two much-awaited projects – the Rs 75.25 billon Vizhinjam international container transshipment terminal and the Rs 79 billion fourth container terminal at the Jawaharlal Nehru Port Trust (JNPT) in December and October 2015 respectively.
  • On the connectivity front, one of the biggest projects to be awarded was at JNPT – the widening of a 43.9 km length (comprising National Highway 4B, State Highway 54 and Amra Marg linkages) to six/eight lanes along with two-lane service roads. This project, worth Rs 20.51 billion, was awarded in October 2015. JNPT signed an agreement with DBS Bank and the State Bank of India on April 15, 2016 to raise a dollar-denominated loan of $400 million for the project.
  • The sector witnessed some progress on the technology front as well. JNPT commenced logistics data bank (LDB) services at the port on July 1, 2016. The LDB service provides the facility to track containers on a real-time basis, using radio frequency identification technology, while the containers are being transported by rail and road (on major highways), through its web portal. Meanwhile, Mundra port inaugurated the new digitised port community system on February 1, 2016. The Mundra international container terminal (ICT) also installed technically advanced terminal operating system – TOS ZODIAC.
  • On the shipping front too, some major milestones were achieved. In June 2016, the MoS approved a set of guidelines for the implementation of the shipbuilding financial assistance policy. An institutional mechanism has also been put in place within the ministry for the redressal of grievances related to the policy. Approved by the cabinet in December 2015, the policy aims to provide financial assistance to Indian shipyards for shipbuilding contracts signed between April 1, 2016 and March 31, 2026. It involves the grant of financial assistance to shipyards after delivery of ships (to counter cost disadvantages) at 20 per cent of the contract price or the fair price, whichever is lower. Such assistance will be reduced by 3 per cent every three years.
  • Many new shipping services were also launched during the year. Coastal shipping services between Bangladesh and India were launched from India’s Krishnapatnam port to Bangladesh’s Chittagong port, on March 22, 2016. Under the bilateral protocol on inland water transit signed between the two countries, vessels will be operated on river protocol routes between seven ports in India (Kolkata, Haldia, Paradip, Visakhapatnam, Kakinada, Krishnapatnam and Chennai) and Bangladesh. The Haldia ICT also resumed container handling services for Nepal after nearly two decades. A number of feeder services were also initiated during the period – Sima Marine India Private Limited launched coastal container shipping services in India covering four ports (Cochin, Mundra, Goa and Mangalore), Maersk Line and Far Shipping (Singapore) Pte Limited launched a feeder service from the Kakinada container terminal to Colombo, Sri Lanka.
  • In July 2016, the Cabinet Committee on Economic Affairs gave its approval for the construction of a new dry dock within the existing premises of Cochin Shipyard Limited (CSL). The project is estimated to cost Rs 17.99 billion, and will be funded by CSL’s internal and extra budgetary resources.
  • The inland waterways segment also received a major boost with the passage of the National Waterways Bill, 2015, which aims at developing 106 additional national waterways (NWs). The bill was passed in the Lok Sabha and Rajya Sabha in December 2015 and March 2016 respectively. After the inclusion of 106 additional waterways to the existing NWs, the total number of NWs will rise to 111.
  • Meanwhile, the foundation stone for the Varanasi multimodal inland water transport terminal was laid on August 12, 2016. The terminal is being developed by Afcons Infrastructure Limited at an estimated cost of Rs 1.7 billion.

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