The past year has been an important one for the maritime sector. The outlook for the sector remains positive due to the series of initiatives taken by the government such as the Sagarmala programme and Make in India, as well as the increased focus on capacity addition, the provision of adequate connectivity, the promotion of coastal shipping, inland water transport, and the domestic shipbuilding industry. Going forward, issues related to hinterland connectivity and infrastructure development need to be addressed. Industry experts share their views on key developments and sector outlook…
What has been the progress in the port sector in the past one year?
The past year has been excellent for the Jawaharlal Nehru Port Trust (JNPT) in terms of performance as well as in setting better service standards for customers. JNPT achieved the highest ever container traffic of 4.5 million twenty-foot equivalent units (TEUs). JNPT owned and operated container terminal, the Jawaharlal Nehru Port Container Terminal also set a record by handling 1.53 million TEUs, the highest ever since the inception of the port. During the past year, JNPT has initiated and implemented many measures to promote the ease of doing business at the port. Facilitation of paperless transactions, direct port delivery to all importers approved by customs (irrespective of volume), radio frequency identification-based gate systems to facilitate seamless movement, separate parking lots for all terminals, conversion of parking plots into customs processing zones and inter-terminal trailer movement.
In July 2016, a 330 metre stand-alone container terminal developed by Dubai Ports World commenced operations and added 0.8 million TEUs of capacity. At the end of the current year (2017-18), the first phase of the fourth container terminal set up by Bharat Mumbai Container Terminal Private Limited will add a capacity of 2.4 million TEUs, and another 2.4 million TEUs of capacity will be added by end-2022.
Major ports in India handled 647.63 million tonnes of cargo traffic in 2016-17, up 6.79 per cent from 606.47 million tonnes in 2015-16, a growth rate of 4.32 per cent over the previous year (2014-15). The largest share of cargo was handled by Kandla port with 105.44 million tonnes, up 5.39 per cent from 2015-16, followed by Paradip port with 88.95 million tonnes, up 16.45 per cent and Mumbai port at 63.05 million tonnes of cargo, with a growth rate of 3.17 per cent from the previous year.
Major ports also recorded the highest ever capacity addition of 100.37 million tonnes during 2016-17, with total capacity exceeding 1,065 million tonnes per annum during the year. The government has been focusing on improving maritime operational efficiency at these ports with various measures including infrastructure expansion, draught deepening, mechanisation of terminals, improvements in turnaround time, quick cargo evacuation and skill development of employees.
The Paradip Port Trust achieved an all-time traffic throughput of 88.95 million tonnes during financial year 2016-17, as against the previous year’s traffic of 76.39 million tonnes, exhibiting a growth of 16.46 per cent. During 2016-17, Paradip port handled the second highest traffic amongst all the major ports.
During the year, a key port performance parameter – output per berth day – improved to 23,727 metric tonnes, thereby registering a growth of 12.24 per cent. Berth occupancy at the port is 66 per cent as against 67 per cent during 2015-16, despite handling 16.46 per cent more cargo.
Captain B.V.J.K. Sharma
In the past one year, the Indian government has announced massive investment plans in the maritime sector, which are expected to boost the country’s economy in a big way. Under the National Perspective Plan of the Sagarmala programme, a total of 173 projects were initiated under the four categories – port modernisation, port connectivity, port-led industrialisation and coastal community development.
Under Sagarmala, the government plans to invest Rs 700 billion ($10.5 billion) in the 12 major ports over the next five years. The government is also planning to set up low-cost non-major ports along the coastline and has asked all the major ports to accord priority berthing to vessels from these ports to encourage quicker cargo movement.
What have been the most impactful policy developments over the past year?
In the past year, the government has unveiled a host of initiatives aimed at developing and sustaining growth of the maritime sector. In December 2016, the Union cabinet approved the Ministry of Shipping’s (MoS) proposal to replace the Major Port Trusts Act, 1963, by the Major Port Authorities Bill, 2016. The bill was conceived by the government to enable port authorities to become flexible and autonomous as well as to respond fast to situations. Giving further impetus to the sector, the MoS released its proposed new model concession agreement (MCA) in September 2016. The new MCA allows private players to exit port projects after six years and allows them to issue bonds to refinance debt.
With the view to promote transshipment at Indian ports, the MoS has allowed relaxation in cabotage rules. This is applicable to export/ import-laden or empty containers only. Also, any new or existing container port handling transshipment traffic can apply for the relaxation to the Directorate General of Shipping.
The government announced the Major Ports Authority Bill, 2016, a long-pending reform to the Major Port Trusts Act, 1963. The new bill aims to empower major ports and give them full autonomy and bring transparency in their operations by decentralising decision making. The bill will also aid in the expansion of port infrastructure. A simplified structure of boards of major ports bringing the number of members down to 11 (including three to four independent members) to help streamline decision making and strategic planning has also been proposed.
Further, the government plans to develop 14 coastal economic regions as a part of the Sagarmala project. The government is also focusing on developing the inland waterway segment as an alternative to road and rail routes, transporting goods to the country’s ports and attracting more private investment to the region.
Overall, the government aims to increase efficiency at major ports and ensure rapid and transparent decision making. Following international best practices in port management, the government is taking measures to ensure timely project implementation and reduce costs incurred due to delays. This will also provide an impetus to the Sagarmala project and port-led development, leading to inclusive growth in the sector.
In the past two years, the government has taken a number of initiatives to boost the country’s economy in a big way. The modification of the existing berthing policy and the levy of penal berth hire charges (with effect from November 1, 2015) resulted in the reduction of the non-working time of vessels by approximately 44 per cent. Productivity at the port (in terms of output per ship berth day) improved from 17,736 metric tonnes in 2014-15 to 23,727 metric tonnes in 2016-17. The average turnaround time reduced from 7.01 days in 2014-15 to 4.99 days in 2016-17.
The priority berthing policy for higher loading rate vessels increased the average loading rate per hour from 1,370 metric tonnes in 2014-15 to 2,284 metric tonnes in 2016-17. Besides, the ratio of Handymax/Supramax vessels to Panamax vessels at the mechanised coal handling plant improved to 42:58 in 2016-17 as against 18:82 in 2014-15.
The Paradip Port Trust implemented the creation of dual loading slots at the coal handling plant in May 2016. A record productivity of 101,592 tonnes per day was achieved with the vessel MV Paola Bottiglieri.
Operations at the iron ore handling plant were restarted in May 2016, after resolving the issues with CFH workers.
The deployment of harbour mobile cranes at Central Quay (CQ)-1, CQ-2 and the multi-purpose berth was made compulsory with effect from May 1, 2017. One additional multi-purpose berth was made available for fully laden Panamax vessels from October 29, 2016. Besides, the waiting time for such vessels has been reduced and the wharf area at CQ-1 and CQ-2 is being expanded.
Private cargo handling workers are allowed for cargo operations in case of shortage of port cargo, handling and development workers.
To facilitate hassle-free vehicle movement at gates, radio frequency identification has been implemented at the port. This has resulted in the reduction of vehicle/truck waiting time and the time needed for verification and checking the necessary documents.
Captain B.V.J.K. Sharma
One of the key initiatives taken to empower major ports and give them more autonomy and flexibility and bring in a professional approach in their governance is through the approval of the draft Major Port Authorities Bill, 2016, by replacing the existing Major Port Trusts Act, 1963. Currently, the bill is under consideration of the Rajya Sabha. Other initiatives that are expected to increase the competitiveness of major ports include the new stevedoring and shore handling policy and the new berthing policy for dry bulk cargo.
The government has also proposed the development of 14 coastal economic zones (CEZs) across major and non-major ports to support the Make in India initiative. The CEZs, which require up to Rs 8,000 billion of industrial investment and Rs 150 billion of investment in basic infrastructure, will encompass the 12 industrial clusters within these CEZs. They are also expected to increase the country’s merchandise exports by enhancing industrial competitiveness.
Last year, the government enacted the National Waterways Act, 2016, for developing and maintaining the existing five national waterways (NWs) and 106 new NWs across the country. Further to support the sector and boost inland water transport, the cabinet approved the allocation of 2.5 per cent of the Central Road Fund for NWs. This is expected to provide around Rs 20 billion per year for the NWs.
What are the key challenges that remain unaddressed?
As a leader in the port sector, JNPT’s main challenge is to maintain the new efficiency standards achieved in the past few years and further better the performance parameters for the benefit of trade. A customer-centric approach and its smooth implementation is JNPT’s top priority and focus. The decreasing share of rail as a mode of transport is a major challenge to ports as well as for the railways. To overcome this issue, Indian Railways is developing a dedicated freight corridor between Delhi and Mumbai. Due to double-stack containers and doubling of rakes from 90 wagons to 180 wagons, the capacity will increase fourfold, which will reduce logistics and rail freight costs. This will also increase the share of railways.
The Indian maritime sector is faced with several issues, which have led to repeated failures in meeting growth targets for various ports. The key ones are inadequate infrastructure and investments, low port capacity and challenges to hinterland connectivity from ports.
Further, though the public-private partnership (PPP) model for port development has been successful, investors have faced challenges and delays, litigations in the tendering process and uncertainty in clearances from various ministries and agencies. Other challenges for private participants include issues in obtaining environmental clearances, huge investment requirements, inadequate technical knowhow for waterfront and backup area development, lack of connectivity to key distribution hubs, and the lack of availability of sufficient hinterland next to ports for building storage and additional service infrastructure to attain global standards of operation.
Further, Indian shipbuilding and ship repair capacity is hampered due to the acute shortage of deep draught water space along the coast.
The key challenge that needs to be addressed is the lack of infrastructure for Capesize vessels. The neighbouring Dhamra port is handling Capesize vessels, while Paradip port has been unable to handle such vessels for want of a deep draught berth of 18 metres. Presently, a study is being undertaken for deepening the inner harbour to accommodate Capesize vessels.
Also, due to the implementation of the freight policy in August 2016, freight for all rail routes has increased by 2-6 per cent as against 26-36 per cent through the rail-sea-rail mode.
Captain B.V.J.K. Sharma
Keeping in mind the rapid growth in Indian trade, first- and last-mile connectivity through rail, road and pipeline networks needs to be planned and developed in advance. Poor evacuation networks can mar the entire operation of a port. Hence, there is a need for periodic review and monitoring to ensure the timebound implementation of connectivity projects.
Regarding the implementation of PPP projects at major ports, both the concessionaire and the concessioning authority are equally responsible for the success of a project. The contractual obligations of the concessioning authority (port trust) includes obtaining environmental clearances during the pre-construction period, undertaking dredging and providing road and rail connectivity at the time of construction as well as during the operational phase of the PPP project. The concessionaire is responsible for the creation of the terminal infrastructure within the specified period of time. Any failure to meet such obligations should entail penalties on both the concessioning authority and the concessionaire. Port trusts also need to be flexible and make changes in the minimum guaranteed cargo in the concession agreement wherein the cargo is linked to changes in international market conditions and government policies. At the same time, there is a need to focus on having a fast dispute resolution mechanism for PPP projects to ensure cost reductions and enhanced efficiency at terminals.
What is the sector outlook for the next one-two years?
India’s total port capacity can go up to 3,000 million tonnes by 2025 from the current 1,500 million tonnes, with an ambitious investment of Rs 1 trillion in port-led development. In addition to building capacity, it will improve the performance of ports and turnaround time. Six new port locations have been identified based on three themes: port saturation, non-availability of a port on the coastline stretch, and strategic location. Vadhavan port, Paradip south satellite port and Sagar port have been identified for development in locations where capacity at the existing ports has been saturated. The port at Vadhavan near Dahanu (Thane district), with a depth of 20 metres, will act as a satellite port for JNPT, and is expected to cater mainly to container traffic from the northern hinterland.
The sector seems to be moving ahead to achieve the targets set by the Maritime Agenda 2020, which laid down details on traffic projects, policy initiatives and an action plan for the period 2010-20. The annual cargo volume at current growth rates is forecasted to be approximately 2,500 million tonnes by 2020. When compared to the planned growth of 3,200 million tonnes as per the Maritime Agenda, this will mean a spare capacity of approximately 30 per cent, which is considered optimum for efficient port operations. Initiatives such as Make in India and Sagarmala are further expected to provide an impetus to the sector. Measures are being adopted and implemented, and the outlook for the sector appears to be upbeat. With the government responding to multiple challenges such as infrastructure constraints, financial bottlenecks and administrative hurdles, the future of the port sector is seemingly bright.
The Paradip Port Trust is all set to handle 100 million tonnes of cargo during 2017-18 and our aim is to continue the growth trend.
Captain B.V.J.K. Sharma
The port sector is expected to experience reasonable growth in cargo in the next one-two years, with the revival of iron ore exports, an increase in the imports of crude, liquefied petroleum gas, liquefied natural gas, and petroleum, oil and lubricant products, coastal movement of bulk cargo as well as the impetus to coastal shipping. There is greater optimism about growth in the container segment with major merger and acquisition deals that are changing the landscape of container shipping. However, there remain numerous risks and uncertainties, including tensions in various parts of the globe like the Middle East and the Korean peninsula and the protectionist mindset of various countries.
Globally, competition is getting more intense. Hence, Indian companies are required to innovate and improve total logistics costs to stay competitive. Infrastructure developments like dedicated freight corridors, CEZs, road and rail connectivity projects, and the implementation of Sagarmala, Make in India, the goods and services tax and the Digital India initiative are expected to reduce the overall logistics cost of trade. Technology is also expected to play a pivotal role in the betterment of the sector. The future logistics system could be based on new transportation concepts like hyperloop systems supported by efficient data management systems. Hence, it will be important for Indian port and shipping stakeholders to have technology integrated into their logistics and transportation systems.
“India’s total port capacity can go up to 3,000 million tonnes by 2025 from the current 1,500 million tonnes, with an ambitious investment of Rs 1 trillion in port-led development.”
Anil Diggikar, Chairman, Jawaharlal Nehru Port Trust
“The Indian maritime sector is faced with several issues, which have led to
repeated failures in meeting growth targets for various ports. The key ones
are inadequate infrastructure and investments, low port capacity and poor
Jaideep Ghosh, Partner and Head, Transport and Logistics, KPMG in India
“The key challenge that needs to be addressed is the lack of infrastructure
for Capesize vessels. The neighbouring Dhamra port is handling Capesize
vessels, while Paradip port has been unable to handle such vessels for want
of a deep draught berth of 18 metres.”
Rinkesh Roy, Chairman, Paradip Port Trust
“In the past one year, the Indian government has announced massive investment
plans in the maritime sector, which are expected to boost the country’s
economy in a big way.”
Captain B.V.J.K. Sharma, Joint Managing Director and Chief Executive Officer, JSW Infrastructure Limited