With increasing economies of scale, the size of vessels is growing, transshipment hubs are being constructed and modernisation of infrastructure is taking place. This reflects a need to widen the depth of channels. The dredging industry is being driven by increasing infrastructure investments in waterways and coastal areas. At a recent India Infrastructure conference, Capt. S. Divakar, chief general manager, Dredging Corporation of India Limited (DCI) shared his views on the evolving Indian dredging market and its fleet size, policies, growth factors, and future plans. Edited excerpts….
Indian dredging market
At present, the Indian dredging market encompasses about 157 million cubic metres (mcum). Of this, maintenance dredging accounts for 110 mcum and capital dredging 47 mcum. Some of the major ports have already enhanced their capacities to accommodate large vessels, and are now augmenting it further to accommodate large container ships. Given the prospects, coupled with new developments in the national waterways (NWs) and offshore exploration, the scope for the Indian dredging industry seems to be vast in the shipping, and crude and petrochemicals segments. About 95 per cent of India’s foreign trade by volume and almost 75 per cent by value moves through ocean routes.
Dredging opportunities at NWs
Twenty-three NWs, spanning 5,200 km, have been identified to have the potential to support mechanised crafts. Of these, 17 are currently operational.
At present, in India, the modal share of inland waterways is 2 per cent, as against the global share of 8-15 per cent. There is a lot of potential for growth in inland waterways. The capacity of inland waterways is expected to increase to 140 million metric tonnes per annum (mmtpa) by 2030 across 14,000 km.
Recently, DCI signed an MoU with Inland Waterways Authority of India to take up dredging works in the northeastern region of the country, particularly in the Brahmaputra, Barak and Kopili rivers. The company is trying to finalise a tender for this project, which will be taken up by mid-November, 2024. Additionally, there will be other projects coming up at NWs, with a potential cumulative worth of about Rs 600 billion.
Policies and growth drivers
On the policy front, the Government of India has taken progressive steps to strengthen the dredging industry. These initiatives are expected to drive dredging demand in India.
Under the Sagarmala Programme, 839 projects, entailing an investment of about Rs 5.8 trillion, are to be implemented by 2035. Moreover, the Sagarmala National Perspective Plan has identified a range of projects that can unlock opportunities for port-led development. These are expected to entail an investment of about Rs 4 trillion in the next 10 years.
Under the flagship programme of the Government of India, Project Unnati, global benchmarks were adopted to improve the key performance index of efficiency and productivity at 12 major ports. Around 116 initiatives were identified across 12 major ports to unlock more than 100 mmtpa of capacity through efficiency improvement. Of these, 93 have been implemented to unlock more than 80 mmtpa of capacity.
To develop global-standard ports in India, Maritime India Vision 2030 has identified initiatives such as developing world-class mega ports and transhipment hubs, and carrying out infrastructure modernisation of ports. It estimates that investments to the tune of Rs 1 trillion-1.25 trillion will be required for capacity augmentation and development of world-class infrastructure at Indian ports.
The coastal economic zone (CEZ) has been envisaged to facilitate port-led industrialisation and/or export import/coastal trade of goods and commodities. The government is planning to invest about Rs 10 billion for the development of the CEZ.
To incentivise dedicated investments in manufacturing, the Make in India initiative has been launched.
Building capacity and fleet
The government’s plan emphasises new capacity creation and shallow waterways dredging to improve navigability and efficiency in the nation’s waterways.
At DCI, capacity is being utilised mainly for maintenance dredging, which accounts for about 90 per cent, while capital dredging accounts for only 10 per cent. This is because DCI does not have capital equipment. However, it is trying to charter some dredges whereby they will be able to cater to the inland waterways. The company has signed an MoU for a period of three to five years, and has started tender processes for the northeastern states and beach nourishment. DCI is also a project management consultant for a few of the major ports.
To facilitate beneficial use of dredging material, DCI has dredged material from the sand trap area inside Visakhapatnam. About 0.3 mcum of sand is available in the sand trap, and The company has dredged about 0.2-0.3 cum per annum, which is being used for beach nourishment. This is known as the “waste-to-wealth” beneficial use of dredged material.
Furthermore, it has done about 2 mcum of land reclamation and is going to take up another land reclamation project of about 10 to 12 mcum of capacity for the Odisha Industrial Infrastructure Development Corporation.
DCI’s fleet and equipment include 10 trailing suction hopper dredgers, one cutter suction dredger, one backhoe dumb (non-propelled) dredger, one inland cutter suction dredger and auxiliary craft to assist the main fleet. The cumulative hopper capacity is 59,000 cum. With this, DCI can dredge up to 60-65 mcum per annum. In order to meet the balanced market requirement, it is currently outsourcing work by subcontracting projects.
DCI has ordered 12,000 cum of hopper capacity for Cochin Shipyard Limited (CSL). On September 13, 2024, CSL laid the keel of India’s largest dredger, for DCI Dredge Godavari. DCI now intends to order two more trial section dredgers supporting 24,000 cum of capacity, in two phases. The first phase is likely to be concluded by 2028, and the second by 2030. With this, the company will be able to increase its capacity by 75,000 cum and undertake about 80 mcum of maintenance dredging for the Indian dredging market.
DCI’s key upcoming projects include rock dredging of Mangrol Fishing Harbour (0.125 mcum), maintenance dredging of Syama Prasad Mookerjee Port for five years, and dredging of inland waterways at NW 2 and NW 17.
DCI has an order book worth Rs 40 billion for the next five years, and of Rs 20 billion for 2024-25. Currently, most ports are calling for open tenders. It has received five-year contracts from existing ports through tenders. It has also committed to back Deendayal Port for about three years, and Cochin Port for about two years.
Vision forward
Going forward, the Indian dredging market is expected to reach 200-250 mcum. The market potential for maintenance is Rs 18 billion-Rs 20 billion, while that for capital dredging is Rs 25 billion-Rs 28 billion. Moreover, Vadhavan Port will account for Rs 280 billion worth of dredging and reclamation works. V.O. Chidambaranar Port is also expanding its outer harbour port at an investment of about Rs 120 billion.
DCI’s vision is to transform itself into a global player in integrated dredging services, meet stakeholders’ expectations with a sustainable business plan by focusing particularly on wealth creation to achieve a share price of Rs 20 billion in the next two years, and ensure adequate liquidity. The company is exploring the infusion of funds through equity from promoter ports to meet its future growth needs. The company’s capex plans include augmentation of hopper capacity to 36,000 mcum by 2030.
DCI is looking to partner with multinational companies to form joint ventures. It aims to diversify its portfolio and foray into foreign markets to collaborate with maritime organisations and engineering, procurement and construction contractors, as well as undertake the dredging of inland waterways.
Its future plans include improving operational efficiency, expediting the construction of new dredgers, reducing the operational cost of dredgers, undertaking debt arrangements at competitive rates, digitalising and automating processes through the adoption of new technologies, and increasing the scope for forward and backward integration through joint ventures.