Increased activity in the inland waterways and river linking segments and under the Sagarmalaprogramme has given an impetus to dredging operations in the past few years. However, meeting the demand for dredging is costly as it is a capital-intensive activity. There is also a need to modernise dredging equipment and bring down costs for ports. That said, there is huge potential in the segment in terms of maintenance and capital dredging works, as well as other works such as flood control management and defence works for the Indian Navy.
The Dredging Corporation of India (DCI) has a notable market share in dredging activity undertaken at ports and its disinvestment has boded well for the corporation. In March 2019, the central government sold its 73.44 per cent stake in DCI to a consortium of four ports – the Visakhapatnam Port Trust, the Paradip Port Trust, the Jawaharlal Nehru Port Trust (JNPT) and the Deendayal Port Trust. At present, the corporation has a healthy order book for the next couple of years and its dredgers are fully employed. DCI has classified ports into three segments for dredging works. The first is riverine dredging where dredging is required round the year. The Kolkata, Kandla and Cochin ports are among those that need round-the-year dredging. Next is post-monsoon dredging, which is seasonal in nature and generally starts in September and lasts up to March. The third type is short-tenure dredging, which lasts for one-two months.
The development cost of government ports is much lower than that of private ports. For instance, capital dredging works recently undertaken at Paradip port cost one-fifth that incurred at JNPT.
DCI is supporting the central government in its endeavour to develop a few large ports with bigger capacities, deeper draught levels, faster turnaround time and greater ability to handle large capesize vessels, instead of developing a larger number of smaller ports. The government has also increased draught levels at ports to about 14 metres, and is now working on further improving these to 16 metres. According to DCI, creating a large number of ports is not necessarily the best solution. For example, the ports created under China’s One Belt, One Road initiative are not yielding the expected level of traffic and returns at present. As a result, ports in Pakistan and Sri Lanka have been leased out to China for a period of 99 years. Therefore, instead of creating a large number of ports, the key focus should be on building fewer ports with higher draught and greater capacity to evacuate traffic. As far as navy contracts are concerned, DCI is of the view that such contracts should not be awarded to foreign contractors due to security concerns. In light of companies moving away from investing in China during the current situation, DCI is hopeful of attracting greater investments.
Recent developments
DCI has benefited from initiatives taken under the Sagarmalaprogramme and the development of inland waterways. Further, the dedicated freight corridors are expected to further speed up evacuation of cargo, thereby achieving faster turnaround times.
The government is also working towards encouraging greater private participation across the dredging segment. It is now focusing on undertaking dredging in the public-private partnership (PPP) mode, the proposal for which is currently under discussion. Further, DCI is exploring the possibility of experimenting with the hybrid annuity model of PPPs in the dredging segment wherein 40 per cent of the risk will be borne by contractors such as DCI and the remaining 60 per cent of the risk will be borne by the ports. DCI is also working on exploring another model under which a port can have a separate dredging contract, along with a maintenance dredging contract, to develop deeper channels with equity participation from DCI. Under this model, the ports can share the returns with DCI based on the additional revenues earned from higher capacity vessels and traffic. The government and DCI are also working on a model to reduce the cost of dredging and pass on the competitive advantage of lower costs to the ports. The corporation plans to utilise its dredgers in such a way that it becomes cost effective for the port as well as for DCI.
Impact of Covid-19
DCI’s operations have not been impacted much by the pandemic. It dredged a quantity of 20 million cubic metres (cum) in the first quarter of 2020-21. However, it did face some issues with respect to its rotational staff, inability to deboard workers from dredgers, additional compliances, idling equipment, etc. DCI has not been able to deboard its personnel from dredgers due to restrictions on their movement. As a result, they have been stuck on the vessels for more than six months. Further, due to technical issues with some vessels, DCI could not operate them at their full potential during the lockdown as it was unable to arrange for replacement of damaged parts given the restrictions on offshore trade.
At present, DCI is deploying technology to the maximum extent through e-office, e-payments, e-procurement and e-tendering so as to be able to work without disruptions during the ongoing pandemic.
Future plans
DCI’s key focus is on changing contract management practices, and enhancing and modernising its fleet through renovations. It is also providing training to its personnel. Besides, it is in the process of acquiring a water injection dredger and reducing dredging costs for ports. It has already started a modernisation drive for its equipment and is planning to provide door-to-door delivery of cargo. It plans to acquire high capacity dredgers and develop a special facility for dredgers with world-class amenities. DCI is looking at reclaiming land and recycling the sand dredged at the ports. In the case of Kolkata port, which is a riverine port, the sand is rich in nutrients with a significant potential for reuse. Besides, Cochin port also has good sand quality, and it can be used on plantations, as well as for industrial and construction activity rather than dumping it into the sea. Further, ports such as Hong Kong and those in Japan have reclaimed land and created land parcels to use dredged materials effectively. Adani port has also reclaimed land from the sea using its capital dredging equipment. It has even been able to recover some of its port costs through land reclamation.
With regard to seasonal dredging, DCI has developed a concept of joint captive dredgers for ports. This will reduce the ports’ reliance on DCI dredgers if they have their own dredgers. Meanwhile, DCI is ready to assist the ports and provide its own dredgers in case of any contingencies.
Further, the corporation has plans to enter the offshore dredging market as well. Its maiden offshore project, involving the dredging of around 3.88 million cum, was executed at Mangla port in Bangladesh in 2019 at a cost of Rs 1 billion. This was the first international contract secured by it through global competitive bidding. DCI is also working towards catering to the entire domestic maintenance dredging market.
Based on remarks by Sumiran Bansal, Chief Financial Officer, DCI, at a recent India Infrastructure conference