June 2019

The maritime transport sector is heavily dependent on the global trade cycle and that, unfortunately, looks as though it is going into a decline. This means less cargo activity and lower shipping rates for a sector that is growing slowly in any case. In addition, the shipping industry faces the challenge of converting to cleaner (and more expensive) fuel, as emission norms are being tightened drastically.

Despite these problems, there is a great deal that can be done to improve the operating metrics of the sector. Port capacities can be enhanced, with the setting up of new ports, and adding capacity through container and bulk terminals at existing ports. The efficiency of cargo transport to and evacuation from ports can be improved by strengthening road and rail links from ports to the hinterland. Inland waterway transportation can be promoted through dredging works and setting up of terminals and jetties. All these projects can be accelerated by efficient contract management, and faster environmental clearances and land acquisition. In addition, major ports should be allowed to charge market-determined tariffs as in the case of private nonmajor ports. It is to the credit of policymakers that attempts are being made to address concerns across these areas. Project execution has speeded up somewhat, and project award has speeded up a lot, although issues related to land and clearances remain. Serious attempts are being made to address disparities in tariff setting at major and non-major ports.

The flagship Sagarmala programme has seen acceleration with 133 projects worth Rs 1.1 trillion awarded at the major ports, and 42 projects completed in 2017-18. Road-rail connectivity to ports has also improved and there is a much-enhanced budget for developing inland waterways. The project pipeline includes another 550-odd projects which could absorb Rs 10 trillion with the private sector contributing around two-thirds of the investments.

It is more difficult to tackle lack of demand for shipping. Shipyards are teetering on the edge of bankruptcy and shipping companies are struggling to cope with losses while they also require investments to replace ageing fleets, and to convert to cleaner fuels. Given the cyclical nature of the segment, it will be imperative for shipping companies to stay financially afloat until such time as global trade picks up. Policy changes on the tax and subsidy front could certainly help. Once Sagarmala gets up and running, there will also be a significant boost to coastal transportation
of domestic cargo.

The maritime industry is one of the lynchpins that enable trade. India has significant assets
in terms of its long coastline, its strategic proximity to the world’s critical shipping lanes and its
extensive internal riparian network. If policymakers maintain their focus on leveraging these
critical advantages, the private sector will find opportunities to enable the sector emerge from
the current slowdown with enhanced efficiency.

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