India’s maritime transport growth is driven by developments in the global economy – growth in world output and trade – as well as the domestic economy. The past four-five years have witnessed weak world trade volumes and thus not much growth has been seen in terms of world seaborne trade. Exports from and imports to India have also met a similar fate.
Going forward, however, the port sector is expected to witness reasonable growth in cargo traffic in the next two-three years, with the revival of iron ore exports, an increase in the import of petroleum, oil and lubricants, the coastal movement of bulk cargo, etc. With the government actively responding to challenges such as connectivity, and financial and administrative hurdles, through the adoption and implementation of new and supportive policy measures, the outlook for the sector seems bright.
Indian Infrastructure takes a look at the key trends in the maritime sector as well as the future outlook…
Sector growth and trends
- Cargo traffic at Indian ports grew at a compound annual growth rate (CAGR) of 4.74 per cent between 2013-14 and 2017-18, to reach 1,171 million tonnes (mt).
- In 2017-18, major ports handled 679.37 mt of traffic, registering a year-on-year growth of 5 per cent, as against 7 per cent during 2016-17. The share of major ports, which declined continuously till 2014-15, has been increasing since. The share of major ports stood at 58 per cent in 2017-18, as compared to 55 per cent in 2014-15.
- In terms of capacity addition, major ports have added a capacity of 650 mt in the past five years (2013-14 to 2017-18). As of March 2018, capacity at major ports stood at 1,451 mt.
- Private participation has been invited for the development of berths, container terminals and new ports, mechanisation of facilities, etc. With 100 per cent foreign direct investment and other favourable policy initiatives, the sector has attracted several foreign players – PSA International, Dubai Ports World, APM Terminals – that have a strong presence in the sector. In 2016-17, of the total traffic of 606.46 mt handled at major ports, 158 mt (29 per cent) was handled by public-private partnership (PPP) operators. In a major development, in January 2018, the cabinet approved the revised model concession agreement for PPP projects at major ports. The revision is expected to make port projects more investor-friendly and make the investment climate in the sector more attractive.
- At the state level, traffic at private ports is increasing significantly, driven by greater efficiency levels, deeper draught and a competitive tariff structure. The Adani Ports and Special Economic Zone Limited-operated Mundra port became the first commercial port in 2013-14 to handle over 100 mt of cargo in a year. Krishnapatnam port, which was commissioned in 2008, is among the fastest growing ports on the east coast.
- A benchmarking exercise was conducted under Project Unnati for major ports to improve their operational efficiency and profitability. Overall, 116 initiatives were identified to unlock a capacity of 100 million tonnes per annum (mtpa), of which 86 initiatives have been implemented unlocking 80 mtpa. The remaining initiatives are planned to be implemented by 2019.
- On the efficiency front, there has been a significant reduction in turnaround time, from 94 hours in 2013-14 to 64 hours in 2017-18.
- With regard to financial performance too, operating surplus increased to Rs 56.67 billion in 2017-18 from Rs 25.19 billion in 2013-14. Net profits increased over three times from Rs 10.26 billion to Rs 34.13 billion during the same period.
- Promoting the ease of doing business has become a key focus area for the govern-
- Under this, a number of activities such as the elimination of manual forms, initiation of direct port delivery, and the installation of container scanners at ports and radio frequency identification-based automation systems are being undertaken.
- Major ports are undertaking renewable energy projects in a bid to generate over 150 MW (solar and wind energy) in the next five years. During 2016-17, 15 MW of solar and 6 MW of wind power projects were commissioned. By the end of 2018, 91.5 MW of solar and 45 MW of wind power capacity is expected to be achieved.
- Cruise tourism is another emerging area of growth. Cruise terminals are operational at Mumbai, Mormugao, New Mangalore, Cochin and Chennai, and the upgradation of a terminal at Mumbai and the construction of a new terminal at Cochin are under way.
- The long-term outlook for the sector remains positive, backed by a series of policy initiatives taken by the government in the recent past. The initiatives – giving more autonomy to port trust boards, revising the MCA, bringing some clarity on the tariff front, the promotion of coastal shipping and inland water transport, ease of doing business, formation of dedicated special purpose vehicles for last-mile connectivity projects, etc. – are expected to revive investor interest and speed up the pace of project execution.
- Meanwhile, the launch of Sagarmala has brought optimism in the maritime sector and given concrete shape to India’s maritime development plans.
- In 2017-18, the Ministry of Shipping (MoS) awarded projects worth Rs 279.86 billion. In the current fiscal year (2018-19), projects worth Rs 718.68 billion are planned to be awarded.
- Cargo traffic and capacity is expected to increase to 2,500 mt and 3,500 mt respectively by 2025, as per MoS estimates. The overall exim traffic is expected to grow, though at a modest rate with slight movement in global trade projections.
- Going forward, given Sagarmala’s scope and huge investment requirement, the key lies in effective and timely execution of projects. The process related to obtaining clearances, land acquisition, etc., that have slowed down project execution, need to be fast tracked.
- The creation of adequate infrastructure (connectivity, draught, etc.) as well as access to finance will be a key enabler for projects and for garnering investment.
- The creation of dedicated freight corridors, coastal economic zones, road and rail connectivity, etc., are expected to reduce the overall logistics cost of trade. First- and last-mile connectivity through rail, road and pipeline networks needs to be planned and developed in advance. The setting up of a dedicated fund for developing last-mile connectivity can be looked at.
- There is also a need for periodic review and monitoring of projects to ensure time-bound implementation of port projects.
- Overall, while the sector will remain heavily dependent on global trade cycles, increased government support in terms of announcements of new policy measures is expected to provide a more conducive environment for stakeholders going forward.