In the past few years, dredging has emerged as a distinct industry in itself. It is being driven largely by the growing dredging requirements at Indian ports and inland waterways.
During the five-year period 2011-12 to 2015-16, at least 400 million cubic metres (cum) was dredged at major ports in the country. Another 103 million cum was dredged at non-major ports during 2013-14 and 2015-16. With such a significant amount of dredging activity, draught levels at Indian ports have increased over the years. However, they still remain substantially lower than international standards.
Besides ports, dredging activities are also undertaken at inland waterways (rivers, canals, lakes, etc.). From 2011-12 to 2015-16, around 50 million cum of dredging was undertaken along National Waterways (NWs) 1, 2 and 3.
Dredging can be in terms of both capital and maintenance activities. Capital dredging focuses on the development of a new harbour or waterway or the deepening of existing facilities at ports to allow access to larger ships. From 2011-12 to 2015-16, capital dredging to the tune of 121.1 million cum was carried out across the country’s major ports at a total expenditure of Rs 35.6 billion. Of this, the maximum capital dredging was carried out at the Jawaharlal Nehru Port Trust (a 51 per cent share in the total quantity dredged), followed by Kamarajar port (11.5 per cent) and Kandla port (10.5 per cent).
Non-major ports also saw significant capital dredging taking place. During the three-year period 2013-16, 81.07 million cum of capital dredging was undertaken at these ports. Significant momentum was recorded during 2015-16 owing to the completion of two projects at Mundra and one at JSW Jaigarh port.
Meanwhile, to ensure smooth operations at the country’s ports and waterways, maintenance dredging is undertaken periodically to remove silt and sediment. During 2011-12 to 2015-16, maintenance dredging to the tune of 225 million cum was carried out at major ports, at an expenditure of Rs 31 billion. Port-wise, the maximum maintenance dredging was carried out at Cochin port, followed by Kolkata and Kandla ports. Across non-major ports, maintenance dredging of 22.7 million cum was carried out during 2013-16. However, it has been observed that maintenance dredging during the two-year period 2013-15 was exceptionally high, amounting to 21.52 million cum. A major contributor to this was the critical maintenance dredging work carried out at Dhamra port during the period. The project involved dredging at the access channel and turning basin and alongside the berths of the port.
At present, both public and private sector companies are present in the Indian dredging market. In terms of dredgers, the Dredging Corporation of India (DCI), a public sector entity, is the biggest player with 18 dredgers, followed by private players such as Dharti Dredging and Infrastructure Limited and Adani Ports and Special Economic Zone Limited with 16 dredgers each. Meanwhile, a number of foreign players such as Van Oord and Royal Boskalis Westminster N.V. (both based out of the Netherlands) and the Luxembourg-based Jan De Nul Group have also gained a significant foothold in the dredging market. Foreign players also dominate the dredger components and spare parts market. Further, the segment is evolving constantly with the entry of several new players such as Laxyo Energy Limited, BEML Limited and Abu Dhabi-based National Marine Dredging Company.
Key trends
Several key trends have emerged in the dredging segment over the past few years.
Improvements in dredging technologies
Over the past few years, several research and development activities have been undertaken to improve the productivity of dredgers and reduce operating costs in the industry. Dredger manufacturing companies are not only introducing innovative components for existing dredgers (which help reduce fuel consumption and enhance productivity), but are also developing new dredgers with advanced and cost-effective components. However, the experience of Indian companies in manufacturing dredgers and dredger components is fairly limited, and most of this equipment is currently being imported. While the government has implemented some measures to augment indigenous manufacturing of dredgers, most of the technology transfer arrangements have met with limited or no success at all.
Government focus on dredging
The government has announced several key initiatives aimed at promoting the growth of the dredging industry. The Dredging Guidelines for Major Ports, 2015, have brought clarity to various issues that earlier resulted in disputes and arbitrations, thereby delaying dredging projects. Amendments to the guidelines for chartering foreign flag dredgers, promoting indigenous manufacturing of vessels through financial assistance to domestic shipyards, easing the process of vessel registration, etc., are some of the other important initiatives undertaken by the government. Further, the Inland Waterways Authority of India (IWAI) is in the final stages of preparing a dredging policy and is planning to put it up for stakeholder consultation soon.
Big push under Sagarmala
In 2016, the National Perspective Plan of the Sagarmala programme was released, under which 415 projects (including dredging projects) worth about Rs 8 trillion have been identified for development. Further, master plans for 12 major ports have been finalised and 142 projects (at a total cost of Rs 914.3 billion) have been identified for implementation till 2035. A benchmarking exercise has also been conducted for major ports to improve their operational efficiency and profitability – 116 such activities have been identified for implementation over three years. Of these, around 70 exercises have already been implemented. In addition, the development of six new ports has been announced as part of the programme, and these are expected to create significant opportunities for the dredging segment.
Increased focus on inland dredging
There is a renewed interest in the development of inland waterways. With the enactment of the National Waterways Act, 2016, the government has declared 106 waterways across 24 states as NWs, in addition to the five existing ones. The NWs have been divided into three categories on the basis of economic viability and feasibility of development. In the first category, eight rivers have been declared as feasible. These are Barak in Assam, Ghaghra in Uttar Pradesh, Gandak and Kosi in Bihar, the Sundarbans in West Bengal, and Mandovi and Zuari in Goa.
Meanwhile, the Rs 42 billion Jal Marg Vikas project has been launched for capacity augmentation of NW-1. The revised dredging strategy for the waterway, which was approved in June 2017, provides for performance-based assured depth dredging for the Farakka-Kahalgaon (146 km), Sultanganj-Mahendrapur (74 km) and Mahendrapur-Barh (71 km) stretches; and quantity-based maintenance dredging for the Haldia-Farakka stretch (351 km).
New types of contracts are being explored
In a bid to speed up implementation works, the Ministry of Shipping, under the new dredging guidelines issued for major ports in 2015, is seeking long-term maintenance dredging contracts of up to five years. In November 2016, DCI secured the contract for maintenance dredging in the shipping channel leading to the Haldia Dock Complex in the Hooghly estuary for a period of five years. Recently, it also secured a three-year maintenance contract at Mumbai port.
Meanwhile, IWAI is exploring the issuance of an assured depth-based contract for the 71 km long Bhagalpur-Farakka stretch. If successful, the model will be utilised for the development of other stretches as well. Measures are also being taken to encourage participation from smaller contractors in the inland waterways segment. For instance, in the tender document for the Barak and Ghaghra rivers, the project length has been divided into two-three parts. Hence, smaller contractors that do not have the expertise to fulfil the pre-qualification criteria for the entire project length can participate in the tendering process by bidding for a particular stretch.
Opportunities and challenges
Going forward, significant growth momentum is expected in the Indian dredging industry. Most of this growth will be driven by the government’s plans to develop new waterways and ports, and modernise and expand existing ports. India Infrastructure Research estimates that more than 25 dredging projects are planned or are currently being undertaken at major ports. In the coming years, the demand to dredge around 170 million cum is expected at the existing major ports alone. Further, at least eight dredging projects are on the anvil at existing non-major ports, and around 18 million cum is proposed to be dredged under these projects. In addition, the six new ports that are planned to be set up under Sagarmala offer another area of opportunity for the dredging segment.
Meanwhile, the declaration of 106 new NWs also presents a huge opportunity. In the next 10 years, over 200 million cum of dredging volume has been assessed for the existing five waterways as well as the 32 new NWs that have so far been found viable for development.
Given this increase in dredging requirement, the sector offers ample opportunities for private players, as DCI alone cannot meet the immense industry demand. Consultants and survey firms also stand to gain in the near future with a considerable number of projects being in the preliminary/planning stages.
At the same time, there will be an increase in the demand for new dredgers. Significant scope exists for the indigenous manufacturing of dredgers due to their cost competitiveness. However, since Indian shipyards are yet to gain the technical know-how for manufacturing dredgers and dredging equipment, most of the opportunities are expected to be tapped into by foreign players, at least in the short term.
Meanwhile, the new guidelines proposing contract periods of five years are expected to be a game changer for the segment. These guidelines will also go a long way in resolving problems such as incomplete marine surveys, supply of inadequate information by clients, etc.
While the growth potential is huge, there are some areas that will need attention. For instance, contracts will need to be well defined, with a clear allocation of risks and responsibilities across all stakeholders; dredged material will need to be properly managed; effective coordination among various authorities and stakeholders will have to be ensured for faster project execution; and greater stress will have to be laid on manpower training. The procedure for obtaining approvals and clearances from the government will also need to be fast-tracked. Besides, dedicated repair and dry-docking facilities for dredgers need to be set up. Once steps are taken to address such issues, the segment will be set to realise its true potential.