In the past few years, the Indian port sector has recorded significant growth. The sector plays a vital role in the trade and economic growth of the country. Around 95 per cent of the country’s trade by volume and 65 per cent of its trade by value is undertaken through maritime transport. The Indian port industry is currently undergoing modernisation in terms of capability, capacity and connectivity, enabling it to compete globally. With the government’s increasing focus on port-led development, Indian ports are working towards transformation to be among the top 25 ports in the world. However, despite the notable expansion in the sector, a few challenges remain unaddressed. At a recent India Infrastructure conference, Krishna B. Kotak, chairman, JM Baxi, discussed the growth of the Indian port sector, government initiatives, underlying challenges and the outlook for the sector. Excerpts…
Growing Indian port sector
In the last 20-25 years, globalisation has become more prominent. With this, the global demand for the ports and shipping sector has also increased widely, in turn increasing the importance of ports in the global supply chain. Port activities, worldwide, are no longer limited to cargo movement but also include logistics service provision as a core part of the business. This is also significantly impacting the growth of the Indian port industry.
In recent years, cargo traffic movement has exhibited strong growth in India, with both major and non-major ports registering a notable increase in cargo traffic. The three priority areas for the ports to grow in the future are size, speed and sustainability. Going forward, ports need to start focusing on becoming a separate entity from other parts of the supply chain.
For instance, the Jawaharlal Nehru Port Authority is aiming to set a new benchmark in port-led industrialisation by becoming a special economic zone. It is taking the geocentric advantage of being well connected, both locally and globally.
“I think we should be pursuing excellence by putting our best foot forward.”
Moreover, the entire manufacturing chain in India has undergone a massive transformation. India is a large country and its ports are expected to play a central role in manufacturing. The materials for various industries and sectors that are manufactured in the interiors of the country should be ready for shipment via ports. This needs to be the priority now, to complete the supply chain.
Advancements in technology
Adopting state-of-the-art technologies is another crucial factor for ports. Indian ports have taken a series of initiatives to transform operations and enhance efficiency. These include smart cranes, smart gates, and unmanned and manned vehicles. These modern, technological and digital initiatives have helped reduce dwell time and transaction costs. Today, the dwell time of cargo and ships in India has plunged to extremely competitive levels, compared to a few years ago.
The pace of technological change is accelerating every day. Keeping up with technology is an enormous task which impacts not only a company’s intellectual capital, but also its cash capital. If any errors occur, doubts are raised about all other decisions as well. So, to remain competitive and up to date, technology is something that all stakeholders need to keep an eye on.
Government Initiatives
Both central and state government ports have taken numerous initiatives for port development in India. All of the actions taken so far have been positive, and have had a significant impact on the ports and shipping sector.
Today, there are a range of major ports that do not have draft restrictions. Moreover, there are hardly any major ship types that cannot find berths in India, whether on the east coast or the west coast. It is a matter of pride for India that any large ship of any size can be accommodated at any terminal, including those of JM Baxi. It is, I believe, a great win for the port sector in the country. Another major step taken towards the development of the port sector is the change of major ports to port authorities. This was a long overdue action taken by the government.
However, we should not become complacent. There needs to be a more holistic plan to bring all the ports together. Because, whilst the ports compete with each other, as a nation, we need to treat them as a single entity. That said, there are a lot of policy measures that are being discussed and put in place by the government. I believe that the land policy and green ports are the two most crucial ones that the government needs to focus on. Zero emission ports that use renewable energy and terminal operators building their own sources of green energy should be the focus now.
Challenges and the road ahead
Despite all of the advancements in the ports and shipping sector over the years, some bottlenecks continue to exist. The primary one is the cost of land. With the high cost of land, land acquisition for port development in India is a significant challenge. As mentioned earlier, ports are expected to become the cornerstone of the supply chain. To this end, the focus needs to be on reducing the cost of land, making Indian ports more competitive. Another challenge concerns the logistics and surface transportation cost of goods. What needs to be figured out, primarily, is the different kinds of costs associated. I believe that the cost of the land is under the control of the authorities and stakeholders. This is substantially under the control of the ports and other related authorities, and their power can be exercised to control costs. Similarly, productivity is under the control of the port authorities. Today, the capital cost in India is substantially higher than that in many other geographies in the world. The ports need to start focusing on reducing the per unit cost of production by handling about double the current traffic with the same capital investment.
Another important aspect of the ports and shipping sector is first- and last-mile connectivity. The government is improving connectivity with the introduction of dedicated freight corridors (DFCs), which is going to be a major development. The DFCs will connect the existing ports and industrial areas for faster movement of goods. They will also help reduce the cost of overall freight operations and improve connectivity between rail, road and inland waterways.
“Technology is something that all stakeholders need to keep an eye on.”
However, I am afraid that, despite the growing changes and developments in the ports sector, we are still not there yet. India is not moving up the chain of excellence or sophistication. It is actually going downwards in terms of technology adoption and falling efficiencies. We, as the port community, now need to focus on improving our entire value chain, including equipment, rail wagons, trailers, etc. I think that it would be fair to say that we are being penny-wise and pound-foolish.
My recommendation to all the stakeholders involved in the port sector is to put their heads down and work towards transforming the sector for the better. My only request is to make this journey positive for all of us. I think we should be pursuing excellence by putting our best foot forward.