On the Right Track

Sagarmala driving growth, but miles to go

The past few years have been significant for the port sector. The sector has benefited from the strong intent and increased

support of the government for port-led development. The unveiling of the Sagarmala programme, in particular, is being regarded as a game changer for the maritime sector, due to its focus on port-led development.

The potential of coastal shipping and inland water transport, though still largely untapped, is receiving the much-needed attention. Sincere efforts are being made to address the disparities in tariff setting at major and non-major ports, a long vexed issue.

Progress on the ground in terms of capacity addition, efficiency improvements and ease of doing business is becoming visible. With the government actively responding to challenges related to connectivity, ease of doing business, etc., the outlook for the sector seems bright. Indian Infrastructure assesses the key trends in the port sector as well as the future outlook…

Trends and developments

  • Cargo traffic at Indian ports grew at a compound annual growth rate (CAGR) of 5.59 per cent between 2013-14 and 2017-18, reaching 1,208.95 million tonnes (mt). The growth was led by non-major ports, which witnessed a CAGR of 6.16 per cent, as compared to 5.16 per cent for major ports. In terms of year-on-year growth, port traffic witnessed single-digit growth from 2012-13 to 2017-18.
  • Commodity-wise, growth has been largely driven by the 3Cs – containers, coal and crude – which together comprised 75 per cent of the total traffic in 2017-18.
  • Though capacity addition has picked up pace at the major ports, progress on the development of new non-major ports remains tardy. Overall, the major ports added a capacity of 650 mt between 2013-14 and 2017-18. As per the latest estimates available for March 2018, capacity at the major ports stood at 1,451 million tonnes per annum (mtpa). At the state level, the capacity of non-major ports increased by 233 mtpa from 2013-14 to 2017-18 while the pace of greenfield project execution continues to remain sluggish.
  • Launched in 2015, Sagarmala, the government’s flagship programme for the maritime sector, has picked up momentum. During 2016-17 and 2017-18, 133 projects worth Rs 1.1 trillion were awarded at the major ports under the programme. Of these, 42 projects were completed in 2017-18, compared to 15 in 2016-17. On the connectivity front, there has been gradual improvement with respect to both port-road and port-rail connectivity. Work has started on 10 of the newly declared 106 national waterways (NWs).
  • The government has also given a strong push to port modernisation, mechanisation and digitalisation, with a number of ease of doing business initiatives implemented in the past year.
  • In addition, greater investments have been made by ports in technology deployment. The launch of the revamped port community system (PCS) – PCS1x – is expected to connect stakeholders and provide real-time information to them on a single platform.
  • Ports are exploring new business areas to diversify their portfolio and reduce business risks, with roll-on, roll-off and liquefied natural gas terminals, smart port cities, cruise tourism and port-based special economic zones emerging as new areas of growth. Given India’s strategic location on the international trade route, the country can also offer ship repair and maintenance services to ships plying from the west to the east along the route.

The way forward

  • According to India Infrastructure Research, there is a strong pipeline of 551 projects worth over Rs 9.8 trillion at Indian ports. Of these, 366 projects worth Rs 6.6 trillion are yet to be awarded, highlighting the significant opportunities for stakeholders across the maritime chain.
  • However, a number of issues remain. Obtaining environmental clearances and acquiring land still remain difficult, especially for greenfield projects. Overcapacity is another key issue facing the container shipping segment and ports and could put pressure on the margins of terminal operators.
  • Another major concern is the shrinking public-private partnership appetite for the sector due to the high cost of capital, lack of clarity in contracts, and absence of last-mile connectivity.
  • Factors such as the shortage of trained and skilled manpower for operating advanced technological systems, a general reluctance among port trusts to adopt new technologies, strict labour laws, presence of old and obsolete equipment and server issues have limited the adoption of technologies in port operations.
  • Sagarmala is certainly going to provide the much-needed fillip to the port sector. However, given the large variety of projects, requirement of massive project investment to be sourced from different sources/agencies, and the need for effective coordination between the central and state governments, the actual materialisation of projects could take more time than envisaged.

  • The key to increasing cargo handling lies in efficient handling (loading) and dispatching (unloading) of cargo. This efficiency can be achieved through modernisation and mechanisation as well as through setting up of the necessary support infrastructure.
  • There is a need to provide low-cost financing options (for increasing private participation), encourage refinancing of existing assets and transfer of assets, reduce rigidity of project parameters and undertake proper project structuring.

  • Customs procedures at ports must become more efficient by facilitating online submission of documents and forms, providing single-window clearances, and obtaining more container scanning equipment.
  • Periodic review and monitoring of projects to ensure timely implementation, modification in existing policies and the regulatory framework depending on the changing requirements, close coordination between the central and state governments, etc., are the needs of the hour to capitalise on the growth opportunities.
  • Overall, the sector will continue to remain heavily dependent on the global trade cycle. Nevertheless, on the domestic front, the government has shown strong intent to promote the overall growth of the maritime sector. It has already started taking concrete steps to address the long–pending issues of the sector, and thus there are hopes of revival and growth acceleration in the port sector.

 

Yashu Ramnani

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