Dredging Demand: Key trends and outlook for the industry

Key trends and outlook for the industry

In the past few years, dredging has emerged as a distinct industry in itself and is being driven by the growing dredging requirements at Indian ports and inland waterways. With a significant amount of dredging activity that has taken place so far, draught levels at some Indian ports have increased. However, they still remain considerably lower than international standards. With the global shipping fleet growing appreciably in terms of size and capacity, Indian ports are facing the challenge of handling larger vessels. Most of the ports in the country still have low draught levels, indicating that significant dredging activities are expected to take place at both major and non-major ports to accommodate these larger vessels in the years to come.

During the five-year period 2012-13 to 2016-17, at least 440 million cubic metres (cum) was dredged at the major ports. Another 103 million cum was dredged at non-major ports from 2013-14 to 2015-16. Besides ports, dredging is also undertaken at inland waterways (in rivers, canals, lakes, etc.). From 2011-12 to 2015-16, around 50 million cum of dredging was undertaken at National Waterways (NWs)-1, 2 and 3.

Both capital and maintenance dredging activities are undertaken at Indian ports. Capital dredging is undertaken to develop a new harbour, berth or waterway, or to deepen the existing facilities to allow access to larger vessels. Between 2012-13 and 2016-17, 126.8 million cum of capital dredging was carried out at major ports at an expenditure of Rs 34.2 billion. The maximum capital dredging was carried out at the Jawaharlal Nehru Port Trust (49 per cent share in the total quantity dredged), followed by Kamarajar port (13 per cent) and Deendayal port (10 per cent).

Non-major ports have also witnessed significant capital dredging. From 2013-14 to 2015-16, 81.07 million cum of capital dredging was carried out at non-major ports. The year 2015-16 witnessed the highest amount of dredging being carried out owing to the completion of two projects at the Mundra and JSW Jaigarh ports. Around 25.3 million cum of dredging was carried out at Mundra and 13.5 million cum at JSW Jaigarh port.

Maintenance dredging is undertaken for the periodic removal of silt and sediments from existing navigational channels, berths, etc., in order to maintain an appropriate depth for navigational and operational purposes. Between 2012-13 and 2016-17, maintenance dredging of 359.5 million cum was carried out at major ports, at an expenditure of Rs 42.1 billion. Port-wise, the maximum maintenance dredging was carried out at Cochin port, followed by the ports of Kolkata and Kandla. The Haldia Dock Complex (HDC) has depth limitations on account of high siltation, which results in high annual maintenance dredging and Cochin port has the highest annual siltation load among Indian ports, leading to a large demand for maintenance dredging all year round. With regard to non-major ports, maintenance dredging of 22.7 million cum was undertaken between 2013-14 and 2015-16.

The Indian dredging market comprises both public and private sector companies. In terms of the number of dredgers, Adani Ports and Special Economic Zone Limited is the biggest private players with a fleet of 19 dredgers, followed by Dharti Dredging and Infrastructure Limited (18 dredgers). A public sector entity, the Dredging Corporation of India (DCI), also has a fleet of 18 dredgers at present. Besides, a number of foreign players such as Netherlands-based Van Oord and Royal Boskalis Westminster N.V. and the Luxembourg-based Jan De Nul Group have also gained a significant foothold in the domestic dredging market.

Indian Infrastructure takes a look at the key trends that have emerged in the dredging segment over the past few years…

Increased government focus and launch of Sagarmala

In the past two-three years, the government has announced several key initiatives to promote growth in the dredging industry. In January 2018, the Ministry of Shipping’s (MoS) Cabinet Committee on Security approved the guidelines for processing the security clearance of bidders for public-private partnerships and dredging projects in major ports. Also, the Dredging Guidelines for Major Ports, 2015, have brought clarity on various issues that have resulted in disputes and led to arbitration in the past, thereby delaying dredging projects. Amendments to the guidelines for chartering foreign flag dredgers, promoting the indigenous manufacturing of vessels through financial assistance to domestic shipyards, easing the process of vessel registration, etc., are some of the other important initiatives.

In July 2015, Sagarmala, the government’s most ambitious programme for the port sector till date, was launched. The National Perspective Plan of the programme was released in April 2016. So far, 605 projects, involving an investment of over Rs 8.7 trillion, have been identified over the four focus areas of Sagarmala – port modernisation and new port development, port connectivity enhancement, port-linked industrialisation, and coastal community development. These projects are to be implemented by 2035. The development of six new ports – Sagar, Cuddalore/Sirkazhi, Belekeri, Vadhavan, Paradip outer harbour and Enayam – has also been announced as a part of the programme. A significant amount of dredging will be undertaken as part of these projects. Further, to give a push to coastal traffic at ports, the Coastal Berth Scheme under the Sagarmala programme has been extended for three years (till March 31, 2020). Its scope has also been expanded to cover capital dredging at the major ports as well as the preparation of detailed project reports for the development of new coastal berths.

Increased focus on inland dredging

There is a renewed focus on inland waterways. With the enactment of the National Waterways  Act, 2016, the government has declared 106 waterways across 24 states as National Waterways  in addition to the five existing. The National Waterways  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 feasible. These are the Barak in Assam, Ghaghra in Uttar Pradesh, Gandak and Kosi in Bihar, Sundarbans in West Bengal, and Mandovi and Zuari in Goa. In 2018, the Inland Waterways Authority of India (IWAI) invited bids for undertaking dredging on the Namkhana-Atharabanki stretch under the Sundarbans delta inland water transport (IWT) project.

Further, the Jal Marg Vikas project, involving an investment of Rs 53.69 billion, has been launched for capacity augmentation of NW-1 with technical and financial assistance from the World Bank. The revised dredging strategy for NW-1, 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 on the Haldia-Farakka stretch (351 km).

Improvements in dredging technologies

In the past few years, several research and development activities have been undertaken to improve the productivity of dredgers and reduce operating costs. Dredger manufacturing companies are not only introducing innovative components for existing dredgers, but are also developing new dredgers with advanced and cost-effective components and spare parts.

However, the capability of Indian shipyards in the manufacturing of dredgers and dredging components is fairly limited. Most of the technology transfer arrangements made for the construction of dredgers in India have met with limited success or no success at all. According to industry experts, in most cases, the original design calculations have been retained by the technology provider with no provision for transfer of knowledge or technical know-how to the domestic player.

New types of contracts being explored

The MoS has started entering into long-term contracts of up to five years for maintenance dredging as compared to the one-year contracts awarded earlier. In November 2016, DCI secured the contract for maintenance dredging in the shipping channel leading to the HDC in the Hooghly estuary for a period of five years. Besides, IWAI has proposed the award of the dredging contract for the 71 km Bhagalpur-Farakka stretch on an assured depth basis. If successful, the model will be utilised for other stretches as well.

Opportunities and challenges

Going forward, the demand for dredging will remain robust, given capacity augmentation projects at existing ports, the construction of new ports, growing offshore activities and an increasing focus on IWT. The Indian dredging industry is all set to grow, driven by the government’s plans to develop new waterways and ports as well as modernise and expand existing ports.

The development of six new ports under Sagarmala, the declaration of 106 new National Waterways  and the launch of the Jal Marg Vikas Project all augur well for growth in the industry. The majority of the demand for dredging works will continue to come from ports, primarily due to significant capacity additions planned at existing ports as well as the development of new ones. Given the dredging requirement, ample opportunities exist for private players, as DCI alone cannot meet the demands of the industry. Consultants and survey firms also stand to gain with a considerable number of projects in the preliminary/planning stages.

Despite the huge potential, certain issues still remain that require urgent attention from stakeholders. The Indian dredging industry has still been unable to develop a comprehensive contract document based on International Federation of Consulting Engineers guidelines. According to private contractors, the conditions stated in the bid documents of government-owned dredging projects are stringent and the bidding parameters are not clearly defined.

Inherent complexities in the sector such as high costs for dredging, shortage of qualified and certified dredging personnel, limited knowledge of dredging contracts, lack of proper soil investigations, and environmental impact of dredging, etc. need to be addressed in a timely manner. Once the requisite steps are taken to address these issues, the segment is expected to realise its true potential.