The Covid-19 pandemic struck at a time when the maritime sector was already saddled with low activity levels due to poor domestic performance and disruptions in international trade. Despite being allowed to operate, the port sector faced severe setbacks. While the sector has started witnessing green shoots of recovery with a reduction in the rate of cargo contraction, it is expected to remain under stress, at least during the current fiscal.
In this scenario, therefore, self-reliance, or Atmanirbhar Bharat as it is being termed, will be the key to becoming an export-driven economy. The country is well placed to take advantage of realignments in global supply chains currently under way. Digitalising business processes, creating single-window clearance systems and developing user-friendly interfaces will form the foundation of this large transformation.
Traffic trends
The overall traffic at Indian ports stood at 1,310 million tonnes (mt) during 2019-20, a growth of 2.2 per cent over that in the previous fiscal. The growth was mainly driven by the non-major ports (3.83 per cent increase in 2019-20 over 2018-19 compared to 0.83 per cent increase at major ports during the same period under consideration). Traffic handled at non-major ports has been increasing for the five years 2015-16 to 2019-20, with an exception during 2015-16. Overall, their share has remained between 43per cent and 45 per cent in the total traffic handled at the Indian ports for the past five years.
Major ports fell short of the Ministry of Ports, Shipping and Waterways’ (MoPSW) 704 mt target for 2018-19 only marginally by 1 per cent. The key reason for this has been the underachievement of ports with traditionally high iron ore volumes such as Mormugao and lower-than-expected volume increase at the Jawaharlal Nehru Port Trust from its new capacity. For the second consecutive year (2019-20), major ports missed their 725 mt target (which would have represented a growth of 4 per cent) due to the outbreak of the novel coronavirus.
Commodity-wise, cargo growth is driven largely by the 3Cs – containers, crude and coal. The three commodities form about 74 per cent share of the total cargo. Petroleum, oil and lubricants (POL) account for the lion’s share in the total traffic at both major and non-major ports – 33.64 per cent at major; ports and 33.68 per cent at non-major ports (2019-20). POL is followed by containers for major ports and coal for non-major ports.
Over the past few years, there have been significant changes in the commodity composition. Containers have been reporting strong activity due to the thrust given to increasing the level of containerisation at Indian ports. POL volume growth also continues on account of the rising demand. Capacity addition has also picked up pace at the Indian ports. During the five-year period from 2015-16 to 2019-20, about 769 mt of capacity has been added (528 mt at major ports and 241 mt at non-major ports) by deepening of berths and terminals, mechanisation and modernisation initiatives, etc. The improvement in rail and road connectivity too has helped reduce the congestion at ports. With regard to capacity utilisation, there exist significant interport variations in utilisation rates at both major and non-major ports.
Progress under Sagarmala programme
Launched in July 2015, the Sagarmala programme has modernisation and ease of doing business among its key components. The four pillars of the programme are port modernisation and new port development, port connectivity enhancement, port-led industrialisation, and coastal community development.
For improving operational efficiency, a study to benchmark the operational and financial performance of major ports with selected Indian private ports and international ports was undertaken. Termed as Project Unnati, 116 initiatives were identified for implementation. As of September 30, 2020, 98 have already been implemented to unlock more than 80 mt per annum (mtpa) of capacity.
Overall, 611 projects have been identified across the four pillars entailing an investment of Rs 7.78 trillion. Of these, 118 projects have been completed so far, creating a capacity of 549 mtpa. Component-wise, progress under the port modernisation and connectivity components has been quite visible. Although the programme has been making steady progress, the detailed project report of about 48 per cent is still under preparation.
The Covid-19 fallout
The outbreak of Covid-19 posed unprecedented challenges to the maritime sector. When the pandemic struck, maritime trade was already experiencing a downturn due to disruptions in international trade (China-US trade war) and poor domestic performance. After the outbreak, a number of berth and terminal operators invoked the force majeure clause. Additional measures were put in place for vessels arriving from ports of affected countries.
While the nationwide lockdown enforced to stem the spread of Covid-19 brought all the infrastructure sectors to a standstill, ports and shipping, deemed as an essential service, was allowed to operate, though on skeleton staff. The impact of the pandemic on the sector ranged from derailed project execution to revenue losses due to limited activity, unclaimed cargo lying at ports, increased waiting time, labour shortages and additional delays due to adherence to physical distancing norms, among others.
However, the government did not leave any stone unturned to mitigate the impact of the pandemic on the already stressed maritime sector and ensure smooth functioning of supply chains. The key initiatives by the MoPSW include issuing various advisories/ circulars to provide relief to trade in terms of non-charging of demurrage and other penalties/charges; major port authorities ensuring storage space for cargo and accommodation and food for migrant labourers working in their premises; remitting vessel-related charges for quarantined vessels, etc. Customs authorities were also quick to respond to the crisis situation. From clearing goods on the basis of acceptance of electronic country-of-origin certificates instead of physical certificates, to issuance of e-gate passes, electronic communication of PDF copies of bills of entry, customs authorities underwent a significant transformation to adapt to the changed requirements.
Despite the challenges faced, the pandemic has had a positive impact in terms of an increase in the uptake of technological solutions. Technologies that were supposed to be deployed sequentially were implemented in parallel. Steps taken to expedite the induction of technological/digital solutions to maintain smooth functioning without human interference include the introduction of e-office for internal use, use of e-invoice, e-payment, etc., at port community system, PCS1x; use of e-pass modules for sign-on and sign-off; utility for data verification of seafarers from chartered flights; ensuring e-learning by providing virtual classes and online exit exams for maintaining continuity in maritime training; and facilitating online ship registrations and online charter licensing; among others.
What lies ahead?
The pandemic has had a negative impact on trade. At the same time, it has emphasised the need for accelerating the digitalisation of all processes at India’s ports. Despite all initiatives, the maritime industry is expected to remain under pressure, at least for the coming fiscal year. According to reports, the cargo traffic at ports is expected to decline by 10 per cent during 2020-21, owing to significant underperformance during the first half of the ongoing fiscal. According to a report by credit rating agency ICRA, the ports, for the first time after seven months, reported a positive growth during October and November, when cargo traffic increased by 3 per cent and 1 per cent, year on year, respectively. The report further added that container volumes have shown better-than-anticipated trade volume growth, resulting in a fall in the rate of decline to 10-12 per cent during 2020-21, as against the earlier projections of a 12-15 per cent decline.
The POL, coal and container segments witnessed a contraction of about 13 per cent, 23 per cent and 12 per cent, year on year, during April-November 2020. However, there are definite signs of recovery, given that the three segments performed significantly better during October-November than in previous months.
However, as per ICRA, the pace of recovery in the port sector will be contingent on the pace of recovery of domestic industrial activity and the global economy. Further, factors such as changes in the global supply chain pattern during the recovery phase will also have an impact on the cargo profile.