The ports and shipping sector has witnessed significant growth in the past few years. The sector outlook remains positive on the back of government and industry initiatives. At the recent “Ports in India” conference organised by Indian Infrastructure, industry experts talked about their experience, expectations from the government, the key trends and challenges, as well as the unresolved issues for the sector…
Areas of involvement in the port and related sectors
Essar is a diversified group and so far it has created about 168 million tonnes (mt) of capacity across India and divested a very large portion of it in two tranches. In a recent deal, the Essar Group divested its three ports and terminals to ArcelorMittal for over $2 billion. At present, the company is in its rebuilding phase. The company has 20 mt of capacity at Salaya and another 20 mt of capacity at Stanlow in the UK.
Krishna B. Kotak
The JM Baxi Group prides itself on being about 107 years old. It operates eight terminals, with two to three more in the pipeline. These are port terminals, inland terminals, as well as distribution and logistics centres. Currently, the company owns and operates 30 trains, which provide connectivity from different inland terminals and inland locations to its ports. The company has also ventured into the digital and technological fields. While containers is a substantial part of the company’s business, the company is also a significant operator or participant in non-container commodities such as fertilisers and sugar. Our company is also a pioneer in project logistics and door-to-door transportation of over-dimensional cargo.
JSW Infrastructure started about 18 years ago to cater to its own supply chain management security system. It started with one port having a capacity of about 7.5 mt. Today, it has a portfolio comprising a capacity of about 158 mt in India as well as agreements to run two operation and management ports outside India. As the company expands along the east and west coasts, its profile and share of the product basket is changing a lot. Almost one-third of the company’s business comes from its external customers. The company ventured into the container and terminal business of Mangalore port about a year back and is performing well. It has also got into the liquefied petroleum gas (LPG), fertiliser and sugar businesses.
State of the sector and expectations for the coming year
India has witnessed a robust growth of 15-20 per cent, which is basically a reflection of the economy. The country’s gross domestic product (GDP) has increased 100 times in the past 75 years, per capita income has increased 500 times to $2,300 (still very low) and total exports have also witnessed an increase of 500 times during the same period. India is expected to become a $32 trillion economy by 2047. This implies that it will have a 10-fold multiplier growth year on year and will emerge as a manufacturing and services centre of the world. There are not many countries that will be growing in that manner and India is planning to grow its per capita income to $20,000. In terms of infrastructure, the cargo handling capacity at Indian ports is expected to increase from 2,500 million tonnes per annum (mtpa) to 15,000 mtpa, air movement to increase from 200 million trips to about 1.5 billion trips, length of highways from 145,000 km to 290,000 km, length of urban railways (metro) from 700 km to 7,000 km and passengers travelling by railways (length of 70,000 km) will increase from 8 billion passengers to about 20 billion passengers. Some of the factors that are working in India’s favour are demographics, the digitisation drive, decarbonisation and decentralisation with realignment in global supply chains.
With a reduction in the usage of fossil fuels, industries will undergo a lot of changes. India is projecting a timeline of 2070 to achieve net zero. In the coming years, gas, hydrogen and ammonia, green hydrogen and green ammonia are going to play a major role. Further, containerisation will keep increasing and global trade itself might take different forms. There will be changes driven by the strong currency. Going forward, green transportation is expected to gain more prominence.
“Some of the factors that are working in India’s favour are demographics, the digitisation drive, decarbonisation, decentralisation with realignment in global supply chains.” Rajiv Agarwal
India has performed really well in the past. JSW Infrastructure as a company is exceeding the growth level year on year. Due to geopolitical changes in dynamics, there is a realignment of the supply chain across the globe and it will continue to happen in the foreseeable future, and India is well positioned to take full advantage of it. The import of bulk raw materials and petroleum products has increased from Russia and reduced from Australia and the US. Additionally, transshipment has witnessed significant improvement in India and the country is perfectly positioned across the globe among all the major powers. The China plus one strategy completely favours India, which will bring in more EXIM trade. Overall, the port sector will witness traffic growth of 7-8 per cent in the next year.
“A realignment of supply chain management has happened globally and it will continue to happen, which will be advantageous for India.” Arun Maheshwari
Key trends and opportunities
Krishna B. Kotak
Today, 50-60 per cent of our exports are consumption specific, which include agriculture, about 10 per cent are non-consumption (such as textiles, cotton and yarn), around 10 per cent are industrial exports and the rest comprise materials. In terms of volume, our largest exporting destination is the Middle East, followed by Africa and Europe. Overall, the East will play a greater role for India.
“In terms of volume, our largest exporting destination is the Middle East, followed by Africa and Europe.” Krishna B. Kotak
There are three Cs where the port company thrives; these are crude, coal and containers. India is witnessing a significant increase in coal movement and improved efficiencies in coal supply chain management. The alternative sources of energy that are getting produced within India (solar, wind and hydro) have started replacing the traditional modes of supply source in the country. However, the increasing need of energy will see coal volumes growing for at least the next 20 years. In the coming years, there will be more requirement of containers, pipelines, tanks and green methods for transporting or transshipping materials. For this, strategic locations and investments in these sectors are expected to emerge.
In the coming years, trade with the East will grow more as compared to the West because of its natural resources as well as manpower. For instance, Malaysia, Indonesia, Thailand, Vietnam, and the Philippines are very efficient, dynamic and aggressive. Overall, it is a good time for the port industry in India in the coming decades.
The biggest challenge seems to be interest rates. India needs to improve its climate for long-term and low-cost borrowing for infrastructure projects. Several initiatives are being taken by the government.
Krishna B. Kotak
With respect to JM Baxi, there are three challenges – people, people and people. The company focuses on manpower and skill development. It has a programme, which enables people to upgrade their skills. From a practical standpoint, training people remains a challenge.
Although steps have been taken, it is still difficult to be transparent and handle problems quickly. Government ports have so much potential that they can function well without investment; the only issue is that the authorities are not allowed to make a bold choice. India doesn’t require investments to build capability.