Indian ports are undergoing rapid expansion and hence the requirement for dredging is unceasing. With the global shipping fleet growing rapidly in terms of size and capacity, ports have realised the importance of deeper channels and berths, which will help them accommodate bigger ships, attract more cargo and increase revenues. With a significant amount of dredging activity having taken place so far, draught levels at some Indian ports have increased. Most major ports have achieved a draught of at least 14 metres. However, they still remain considerably lower than international standards.
Indian Infrastructure takes a look at key trends that have emerged in the dredging segment over the past few years…
Maintenance dredging dominates the segment
Though both capital and maintenance dredging activities are undertaken at Indian ports, the domestic dredging market is mainly for maintenance dredging. Between 2017-18 and 2019-20, 258.33 million cubic metres (cum) of dredging was undertaken at the major ports. Of this, 219.84 million cum (85 per cent) was accounted for by maintenance dredging.
During 2019-20 alone, of the 84.97 million cum of quantity dredged, maintenance dredging accounted for about 94 per cent. Port-wise, the maximum maintenance dredging was carried out at Cochin port, followed by Kolkata port and the Jawaharlal Nehru Port Trust (JNPT). Cochin port has the highest annual siltation load among Indian ports, leading to a great demand for maintenance dredging all year round. The Haldia Dock Complex, which has depth limitations due to high siltation, also requires high annual maintenance dredging.
Dredging market serviced by both domestic and foreign players
Both domestic and foreign players have a presence in the Indian dredging market. In terms of the number of dredgers, Adani Ports and Special Economic Zone Limited is the biggest private player with a fleet of 23 dredgers, followed by Dharti Dredging and Infrastructure Limited (over 18 dredgers). Public sector entity, the Dredging Corporation of India (DCI) has a fleet of 17 dredgers at present. Besides, a number of foreign players such as Netherlands-based Royal Boskalis Westminster N.V. and Van Oord and the Luxembourg-based Jan De Nul Group have also gained a significant foothold in the domestic dredging market.
Increased government focus under Sagarmala
Launched in July 2015, the Sagarmalaprogramme is one of the most ambitious government programmes for the port sector till date. So far, 611 projects entailing an investment of Rs 7.78 trillion have been identified for implementation across the four pillars of the programme – port modernisation and new port development, port connectivity enhancement, port-linked industrialisation, and coastal community development. Greenfield port development has also been identified under the programme. These ports will require a significant amount of capital dredging.
Challenges faced and key recommendations
There are a number of issues hampering growth in the dredging segment. Lack of proper soil investigations is one of main challenges being faced. Changes in soil types/conditions between what has been stated in the tender document and the material that is actually encountered is one of key causes of disagreements between clients and contractors. Conducting proper and detailed investigations, interpreting them correctly, making all the relevant data available to the contractor and ensuring adherence to design parameters can resolve the issues arising out of inadequate investigations.
Delays in making payments to contractors/ dredging firms also hampers project progress. In this regard, accepting reasonable payment schedules in the dredging contract can avoid time overruns due to delays in payments. Variation in the agreed scope of work due to the volatile nature of dredging works is another challenge faced. Avoiding variations and leaving scope for making amendments, in case of any eventuality, can avoid disputes in dredging contracts.
Another concern raised by contractors is that the risks associated with dredging contracts are not predetermined and are left to interpretation by the contractor. Placing the risk on the party that is best equipped to mitigate it is the right solution. Further, deploying scientific methods of project cost estimation, as per the Construction Industry Research and Information Association’s manual, can also minimise the risks associated with a change in the project cost.
With respect to project guidelines, adopting a contract document based on International Federation of Consulting Engineers guidelines (Fourth Edition 1987, reprinted in 1992) for dredging with suitable amendments could also be looked at in place of standard operating procedures or the dredging guidelines issued by port trusts. It is always safer to adopt a document that has universal acceptance.
There is also a need to avoid the award of dredging contracts on a nomination basis without evaluating the pre-qualification criteria. Further, the dredging market is dependent on equipment availability. During a slowdown (Covid-19 outbreak), a project can be executed at a much cheaper rate as dredgers of a number of major players are idling due to the restrictions imposed. To exemplify, DCI was able to sub-contract the maintenance dredging contract with JNPT to Van Oord for a consideration of Rs 720 million. The project was originally awarded by JNPT to DCI for Rs 1.65 billion. This also highlights the fact that the dredging segment requires an open competitive bidding process instead of a nomination-based process. Meanwhile, ensuring that the contractor has 70-75 per cent ownership of the dredging equipment helps in faster execution of the project.
Going forward, there is a need to focus on building rock dredging capability as part of the Atmanirbhar Bharat Abhiyan. Allowing joint ventures with international firms for ensuring an adequate number of rock dredgers in the overall fleet is a possible solution. Besides, Indian dredging companies (including DCI) need to execute global dredging projects to enhance their brand visibility.
The way ahead
The demand for dredging is expected to remain robust, given capacity augmentation plans at existing ports, upcoming greenfield ports, increasing requirement for land reclamation and the government’s plans to develop inland waterways as an alternative mode of transport. Most of the dredging demand is expected to come from ports due to their significant capacity augmentation plans. Given the dredging requirement, ample opportunities exist for private players, as DCI alone will not be able to meet the huge demand.
As has been the case in other industries, the Covid-19 outbreak impacted the dredging industry as well. However, the impact was felt more in capital dredging projects that came to a complete halt due to the restrictions imposed to stem the spread of the virus. Maintenance dredging works at ports continued despite the pandemic.
Despite the huge potential, there are certain issues that require attention from stakeholders. Inadequate soil investigations, discrepancies in tender documents with regard to site conditions, lack of technical know-how related to rock dredging, award of contracts on a nomination basis instead of competitive basis, absence of an internationally recognised contract document, and long arbitration processes, among others, are some of areas that require timely intervention. Once the requisite steps are taken to address these issues, the segment is bound to realise its true potential.
Based on inputs from a presentation by Devdatta Bose, Group Sector Head, Ports and Harbour, Tata Consulting Engineers Limited, at a recent India Infrastructure conference