The maritime sector in India is playing a crucial role in facilitating cargo transshipment. With demand growing continuously, the throughput at Indian ports is reaching capacity limits. In order to fulfil the increasing demand, it is necessary to construct new greenfield ports as well as expand the existing ones. There are several other drivers for port capacity expansion, including the lack of deep ports, which have lower costs for facilitating transshipment; the need to enhance supply chain efficiency; and the need for ports near industrial areas and along global trade routes.
Current status
In the changing scenario, the sharp increase in cargo and transshipment volumes is encouraging states to construct greenfield ports. According to India Infrastructure Research, 22 new non-major ports, involving an investment of over Rs 1.5 trillion, have been planned. On completion, these projects are expected to add over 690 million tonnes per annum (mtpa) of capacity. Of the 22 non-major ports projects, seven are at the planning stages, two have called for bids, five have had contracts awarded and eight projects have started construction.
Update on key projects
Vadhavan Port: The Public Investment Board granted approval for the Vadhavan port project in February 2024 and recommended the project for final approval from the Union Cabinet. The Prime Minister’s Office has suggested the hybrid annuity model (HAM) for its implementation. Under HAM (if finalised), the project cost will be borne by the government agency and the private operator in the ratio of 40:60. As per the earlier plan, the port was intended to be developed as a landlord port by Vadhavan Port Project Limited, a joint venture between Jawaharlal Nehru Port Trust as the lead partner with 74 per cent equity participation and the Maharashtra Maritime Board (MMB) with 26 per cent stake. The project was estimated to cost Rs 762.2 billion with a capacity of 298 mtpa, including 9.87 million twenty-foot equivalent units (TEUs).
Murbe Port: The project involves the development of an all-weather greenfield port at Murbe in Maharashtra. MMB has extended the bid due date for the development of the port to May 22, 2024. The scope of the project includes the development of a greenfield port at Murbe (Palghar district) on a design, build, own, operate, transfer basis through the public-private partnership (PPP) mode. The estimated cost of the project is Rs 42.59 billion and it is expected to be completed in 48 months.
Keni Port: Keni Port is envisaged as an all-weather, greenfield, multi-cargo, direct berthing, deep-water commercial port for handling all types of cargo on the west coast in the North Karnataka region and serve industries in the area. These regions encompass Bellary, Hosapete, Hubballi, Kalaburagi and South Maharashtra. Construction work on the port project is likely to commence soon. In November 2023, JSW Infrastructure Limited received a letter of award to develop the project on a PPP basis for Rs 41.19 billion. JSW Infrastructure’s subsidiary, Masad Infra Services Private Limited, has signed an agreement with the Karnataka Maritime Board to develop this port project.
Ramyapatnam Port: Commercial operations at Ramayapatnam Port are likely to commence by July 2024. The project includes the development of a greenfield port comprising major components such as breakwaters, berths and dredging works in Prakasam district, Andhra Pradesh, at an estimated cost of Rs 37.36 billion.
Machilipatnam Port: The project involves the development of a greenfield, modern, all-weather, deep-water, multi-purpose port at Machilipatnam in Krishna district in a phased manner on an engineering, procurement and construction (EPC) basis. The estimated cost and capacity of the project are Rs 51.56 billion and 35 mtpa respectively. Berth-related piling works for the project are expected to commence soon, and land-side dredging works are also in progress. All the technical equipment for port construction has been delivered to the construction area. In addition, about 30 per cent and 38 per cent of work has been completed on the south breakwater and the north breakwater respectively.
Vizhnjam Port: The project involves the construction of a greenfield, deepwater international container transshipment terminal at Vizhinjam in Kerala at an estimated cost of Rs 77 billion, for which the state government has contributed 500 acres of land. So far, about 72 per cent of the work has been completed. This includes 68 per cent of breakwater construction, 87.75 per cent of berth construction, 81 per cent of building construction, 52 per cent of container yard development, 73 per cent of crane and tug installation, and 51.8 per cent of road construction inside the port.
Major challenges and the way ahead
The development of greenfield port projects is highly capital intensive, as it requires investments for breakwater, capital dredging and hinterland connectivity works. These projects also have long gestation periods, starting from project award, concession agreement, marine infrastructure development, land acquisition and statutory clearances to constructing connectivity infrastructure. Regulatory requirements, such as technical experience and financial requirements and capabilities, act as entry barriers for new players and lead to project delays.
According to industry experts, around Rs 50 trillion of investment is required for non-major greenfield and brownfield port projects to increase capacity by 6,500 mtpa by 2047, considering 60 per cent are container ports and petroleum, oil and lubricant ports, and 40 per cent are bulk ports. In order to reduce the project cost and attract investment, the government should provide project-specific credit support, such as viability gap funding, permits, and directed fiscal and revenue subsidies. The Ministry of Ports, Shipping and Waterways should also adhere to the time frames set for completing the bidding process, from the issuance of tenders to the commissioning of the project. Some of the initiatives to be taken in this regard are standardising the appointment process of independent engineers, ensuring timely fulfilment of conditions set by the port authority, and implementing mechanisms to expedite environmental clearances. It is also necessary to periodically revisit concession agreements with respect to equity holding, risk sharing and minimum guaranteed cargo, as per market conditions. Flexibility in the regulatory environment would be the key determinant of success for PPP projects in the times to come. To promote healthy competition, there should be increased focus on joint ventures between Indian and foreign ports.
