February 2021

Maritime trade is intimately linked to the state of the global economy and it was badly affected by the pandemic. Apart from lower traffic, it derailed project timelines, led to unclaimed cargo clogging warehouses, labour shortages due to social distancing, increased waiting time for ships, etc. It is estimated that traffic declined by around 10 per cent in 2020-21, with October being the first month where year-on-year growth was not negative. Although a recovery is expected, 2021-22 could remain stressful since the extent of recovery will depend on an acceleration in the pace of both global and domestic activity.

However, there have been several positive developments over the past year, which augur well for the sector’s future. The pandemic led to an enforced increase in the digitalisation of port processes and a reworking of labour practices, which will lead to sustained efficiency gains. Digitalising business processes, creating single-window clearance systems and user-friendly interfaces will ensure faster, cheaper traffic in future.

Meanwhile, capacity additions have continued across ports, backed by policy support. Sagarmala is making a positive difference, even if the pandemic caused a slowdown. Containerisation is picking up alongside increases in bulk cargo capacities. Port connectivity to the hinterland has also continued to improve. The growth drivers for container traffic include increased handling capacity, improved road and rail connectivity, better draught levels, and modern equipment leading to faster cargo handling.

The likely reworking of global value chains as the world economy revives should benefit India. On the policy front, new dredging regulations and new legislation should improve the ease of doing business and aid in attracting private capital and knowhow to the sector. Importantly, tariff deregulation gives major ports a chance to set their own tariffs, which could make them more competitive.

Unfortunately, the Inland Water transport options and coastal connectivity remain sub-par, although these are potentially more cost-effective and efficient means of transporting domestic cargo. Greater policy support is clearly required to solve last-mile connectivity issues in this area and to overcome the barrier of high initial investments and attract more interest.

There is a lot of scope for private participation. A strong project pipeline and multiple policy initiatives have attracted some private interest. But there is a need to rework standard contracts to ensure that risks and responsibility are clearly defined and there is less scope for dispute. Faster environmental clearances without lowering standards are also imperative.

Putting it all together, the sector has emerged in surprisingly good shape from this crisis, even though it was negatively impacted. The measures taken to combat the pandemic will lead to sustained gains in efficiency. Given India’s long coastline, which straddles some of the world’s busiest trade routes, the sector can look to the future with confidence.

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