Channels for Growth

Key trends and outlook for the dredging industry

Indian ports are undergoing rapid expansion, and thereby increasing the dredging requirement. Following the expansion of the global shipping fleet, both in terms of size and capa­city, Indian ports have realised the importance of deeper berths and channels, which help acc­ommodate bigger vessels, attract more cargo and increase revenues. With a significant am­ou­nt of dredging, draught levels at some Indian ports have also increased. While most major ports have achieved a draught of at least 14 metres, they still remain substantially low in comparison to international standards.

At present, only a handful of Indian ports have adequate draught to handle Capesize vessels. As of 2020, the average size of a container vessel calling at Indian ports was around 9,800 deadweight tonnage (DWT), whereas in China, it was around 16,000 DWT.

Dredging so far

The activities of the Indian dredging market primarily include capital dredging (deepening and widening of draughts for creating depths) and maintenance dredging (maintenance of dep­ths). Besides, dredging is undertaken at inland waterways (rivers, canals, lakes, etc.) and shipyards (maintaining depths at channels). It is also used for land reclamation, beach nourishment and laying of pipelines.

During the five-year period from 2014-15 to 2019-20, at least 400 million cubic metres (cum) was dredged at major ports. During this period, 49.08 million cum of capital dredging was carried out at major ports at an expenditure of Rs 30.96 billion. During 2019-20, the maximum capital dredging was carried out at Paradip port (1.05 million cum at a cost of Rs 200.2 million), followed by the Jawaharlal Nehru Port Trust (JNPT) (0.44 million cum at a cost of Rs 500 million).

Maintenance dredging is undertaken for the periodic removal of silt and sediments from existing navigational channels, berths, etc., in order to maintain an appropriate depth for navigational and operational purposes. Between 2014-15 and 2019-20, maintenance dredging of 347.02 million cum was carried out at major ports at an expenditure of Rs 39.71 billion. Port-wise, during 2019-20, the maximum ma­in­ten­ance dredging was carried out at Cochin port (25.21 million cum), followed by the ports of JNPT (8 million cum) and Kolkata (8.48 million cum). The Haldia Dock Complex has depth limitations on account of high siltation, which results in high annual maintenance dredging. Cochin port has the highest annual siltation load among Indian ports, creating a large de­mand for maintenance dredging all year round.

Increased government focus and launch of Sagarmala

Launched in July 2015, the Sagarmala programme is one of the most ambitious government programmes for the maritime sector till date. As of August 2021, 802 projects entailing an investment of Rs 5.52 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. Of these, 172 projects worth Rs 882.35 billion have been completed, 235 projects worth Rs 2.16 trillion are under implementation and the re­maining 395 projects worth Rs 2.48 trillion are at various stages of development. Besides, greenfield port development has been identified under the programme, offering a significant amount of capital for dredging.

There is a renewed focus on inland waterways. The Jal Marg Vikas Project, entailing an investment of Rs 46.34 billion (revised cost estimate), has been launched for capacity aug­me­ntation of National Waterway (NW)-1 with technical and financial assistance from the World Bank. In April 2016, 106 new waterways were declared as NWs to promote inland water transport (IWT) in the country, in addition to the five existing NWs. Further, India and Bangla­desh signed an MoU for fairway development from Sirajganj to Daikhowa (175 km) and Ashuganj to Zakiganj (295 km) on the Indo-Bangladesh Protocol route. The scope of the MoU involved dredging, and development and maintenance of a fairway of 2.5 metre depth and 30 metre width for a period of seven years. The projects being implemented under these initiatives involve a significant amount of dredging works, thus offering several opportunities to dredging contractors.

Focus on sustainable dredging and use of modern techniques

Of late, there has been an increased focus on sustainable dredging in view of the environ­me­n­tal cost of dredging activities. The Dred­gi­ng Guidelines, 2021 also envisage sustainable dredging using modern dredging techniques. The guidelines promote the adoption of the “waste-to-wealth” concept, which involves recycling dredged material and ensuring its beneficial use. Haldia port has recently started the treatment of dredged sand on a small scale for selling it for construction purposes. Moreover, Visakhapatnam, Paradip and Chennai ports have undertaken beach nourishment works to avoid excess soil erosion.

With regard to the use of modern dredging techniques, major port trusts have been implementing dredging projects within the framework made available to them either by the Gov­ern­ment of India or dredging-related international bodies. The government has made it imperative to adhere to the International Mari­time Organi­sation’s regulations, amended Environmental Act, Ports Authorities Bill, Merchant Shipping Act and National Water­ways Act.

Indian and foreign players in the dredging market

The Indian dredging market comprises both public and private sector companies. 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. The Dredging Corporation of India (DCI) also has a fleet of 17 dredgers. Besides, a number of foreign players such as the Netherlands-based Royal Boskalis Westminster N.V. and Van Oord, and the Luxembourg-based Jan De Nul Group have gained a significant foothold in the do­mes­tic dredging market.

New types of contracts

Until now, dredging contracts at major ports have been awarded on a depth-based model; engineering, procurement and construction basis; lump sum basis; or cubic metre basis. However, the Dredging Guidelines, 2021 have clearly defined points for a public-private partnership (PPP) model for dredging works. Cu­rrently, two committees – one at the ministry level and the other at the NITI Aayog level – are working on the modalities of the PPP model for tendering dredging projects. With respect to the award of dredging contracts, the guidelines have specified that the major port trusts are now allowed to undertake open competitive bidding, instead of just nominating DCI following market price discovery. However, the port trusts have to ensure adherence to certain guidelines and parameters stated under the Make in India programme. Further, any dredging tender that is worth less than Rs 2 billion has to be awarded to a domestic company.

The road ahead

The demand for dredging remains robust given the capacity augmentation projects at existing ports, construction of new ports, growing offshore activities and increasing focus on the IWT segment. The dredging market is expected to expand, with a significant focus on port development and inland waterways. The development of greenfield ports under the Sagar­mala programme, declaration of 106 new NWs and the Jal Marg Vikas Project all au­gur well for sector growth. The Dredging Guidelines, 2021 envisage dredging of around 3 billion cum (1.6 billion cum capital dredging and 2.4 billion cum maintenance dredging) over the next 10 years, thus offering sizeable dredging opportunities. As per India Infra­str­ucture Research estimates, dredging works of over Rs 30 billion are being implemented un­der the Sagarmala programme.

Going forward, the inherent complexities in the sector such as the high cost of dredging, shortage of qualified and certified dredging personnel, limited knowledge of dredging contracts and negative environmental impact of dredging need to be timely addressed. Further, it is imperative to augment the current dredger fleet in order to cater to the future requirement.

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