Growth Potential: Leveraging Make in India and Sagarmala initiatives

Leveraging Make in India and Sagarmala initiatives

Dr J.N. Singh, IAS, Chief Secretary, Government of Gujarat

India has a significant geographic advantage with a coastline of 7,500 km. It is also strategically located at the centre of the Europe-Asia international trade route.

Maritime logistics play an important role in the Indian economy, accounting for almost 90 per cent of international trade by volume and more than 70 per cent by value. During financial year 2016, Indian ports collectively handled more than 1,000 million tonnes (mt) of cargo, which is about 10 per cent of total international maritime trade.

The National Perspective Plan of the Government of India’s Sagarmala initiative has aptly highlighted the fact that industrialisation impacts per capita income, which in turn has a direct bearing on the prosperity of a region. However, for industries to be competitive, they need to have an effective and efficient logistics system. Therefore, either the industries should be in proximity of ports or there should be adequate linkages to ports to ensure competitiveness. At present, opportunities arising from port and port-led development in the country is immense, but to a large extent untapped.

Sagarmala: Developing a blue economy

The vision of Sagarmala is to reduce logistics costs for both domestic and export-import cargo with minimal infrastructure investment. With the logistics optimisation plan and the implementation of the identified strategies, Sagarmala is expected to result in infrastructure investment and efficient manufacturing.

The initiative aims to promote the development of 10 coastal economic zones (CEZs), which will be converted into manufacturing hubs, supported by port modernisation projects. The government is also looking to develop the inland waterways sector as an alternative to road and rail routes to transport goods to ports. It also hopes to attract private investment in the sector.

Sagarmala is expected to integrate all the components of the maritime industry and develop robust infrastructure in the country. The initiative focuses on four main pillars of port-led development, which are:

  • Port modernisation and capacity augmentation
  • Port connectivity
  • Port-led industrialisation
  • Coastal community development

Gujarat has proposed a number of projects to be taken up under the Sagarmala programme. Currently, these projects are under various stages of development. Of these, a few projects are presently being actively considered by the Ministry of Shipping. The salient aims of Sagarmala which need to be considered while planning port development and planning are:

  • Increasing coastal shipping from 250 mt to 330-420 mt by 2025. Commodities which are expected to boost coastal shipping are coal, petroleum oil and lubricants, iron ore and cement.
  • Increasing the modal share of railways in freight transportation from the current 18 per cent to at least 25 per cent.
  • Improving export competitiveness by developing port-based or port-proximate manufacturing clusters.
  • Increasing cargo handled at Indian ports from the existing 1,000 mt to 2,500 mt by 2025.
  • Increasing port capacity from 1.55 billion tonnes per annum (tpa) to more than 3 billion tpa by 2025.
  • Adding 850 million tpa of port capacity at non-major ports by 2025.
  • Developing last-mile connectivity across pipeline, water, rail and road networks.

If we have to plan the development of futuristic ports comparable with the best in the world, these initiatives and trends will need “disruptive” thinking. We need to discard the conventional approach where ports are first developed and subsequently the necessary infrastructure and logistics requirements are thought of. Ports should not be looked at as just stand-alone projects but as part of the entire logistics value chain.

Providing logistics facility for Make in India

The Make in India initiative was launched to encourage companies to increase manufacturing in India and envisions making the country a global manufacturing hub. It not only includes attracting overseas companies to set up a manufacturing base in India, but also encourages domestic companies to increase production within the country. Led by the Department of Industrial Policy and Promotion, the initiative aims to raise the contribution of the manufacturing sector to 25 per cent of the gross domestic product (GDP) by the year 2025 from 16 per cent currently.

Make in India has introduced a number of new initiatives for promoting foreign direct investment (FDI), implementing intellectual property rights and developing the manufacturing sector. FDI went up by 60 per cent to $77.86 billion in the two years following the launch of the Make in India initiative in September 2014. The initiative is built on the following pillars:

  • Reform the FDI policy and improve the ease of doing business
  • Develop industrial corridors and build smart cities with state-of-the-art technology and high speed communication.
  •  Identify 25 focus sectors to promote investments in manufacturing and generate employment. Some of the sectors identified, such as automobiles, chemicals, electrical machinery, mining, oil and gas, and thermal power, will demand the availability of vibrant transport infrastructure and logistics facilities.

Implications for ports in Gujarat

Port and port-led development has always been a focus area in Gujarat, because this concept integrates ports and industrial and urban areas in a cohesive manner. The non-major ports of the state have facilitated the development of strong oil and gas infrastructure facilities, petrochemical/chemical industries, power plants and cement industries.

The maritime shipbuilding parks (MSPs) proposed in the Shipbuilding Policy announced by the Gujarat government in 2010 intended to create an integrated shipbuilding and repair cluster with back-end integration with engineering companies. Similarly, the new concept of maritime services cluster is aimed at creating an ecosystem for housing all maritime services at one location.

The port policy announced by the state government in 1995 had laid out the concept of port-led economic development. Various policy initiatives and public-private partnership (PPP) port projects were developed because of the investor-friendly framework laid out in the policy. It also ensured the development of a thriving economy in the coastal areas of the state.

Manufacturing has a significant share in Gujarat’s economy. Moreover, the proposed initiatives under the Delhi-Mumbai Industrial Corridor and Make in India will increase manufacturing acitivity and Gujarat will leave no stone unturned in facilitating capacity augmentation at ports to capitalise on this opportunity. Planning and executing an efficient logistics value chain will also be a focus.

Assuming that ports in Gujarat (including Kandla) will continue to handle 40 per cent (conservative estimates) of national maritime trade in the future, strategic planning and private sector funding will be necessary to create port facilities. This is also the right time to revise our existing port policy and identify diverse areas related to ports and shipping for the holistic development of logistics infrastructure in the state.

It is a well-known fact that the first port policy brought out by Gujarat in 1995 was a path-breaking initiative in the country. Its revision is now being undertaken to capture the global developments in the maritime industry. It will also cover all aspects of greenfield ports, captive/private jetties, shipbuilding, port services, etc.

Gujarat is an active participant in the Sagarmala programme and has formed the State Sagarmala Committee headed by the chief minister and senior officials from key departments to smoothly implement projects which require interdepartmental coordination. Three CEZs – one in Kutch with a focus on petrochemicals, cement and furniture; the second in the Saurashtra region with a focus on the apparel and automotive sectors; and the third in South Gujarat with a focus on marine industries – are being planned for development under Sagarmala.

For effective coordination, Gujarat Ports Infrastructure and Development Company Limited, a subsidiary of GMB, is likely to be nominated as a special purpose vehicle for Sagarmala projects.

To conclude, the Make in India and Sagarmala initiatives are the key priorities set by the central government, as the manufacturing sector and a blue economy have the potential to transform the country into a developed, sophisticated economy. If the target set by the Make in India initiative to increase the contribution of the manufacturing sector to 25 per cent of country’s GDP by the year 2025 has to be achieved, the maritime and logistics sectors will undoubtedly have to play a significant role. With the assumption that the targets of Make in India will be achieved, our ports need to be ready for handling such traffic volumes, projected to be more than 2,500 mt by 2025, from the present 1,000+ mt.