While global peers in the ports sector are offering enormous value added services including SEZ’s for years, we are still not in a position to consider a port based SEZ will be beneficial or not.
Even after several initiatives taken by the government to promote port-based Special Economic Zone (SEZ) in past seven years, India could not leverage the obvious advantages, thanks in part to moving goalposts such as tax (and other) policy flipflops and unlucrative locations. The very idea to set up port based SEZ or using coasts was not just for transport and trade of finished goods but to create manufacturing hubs.
Unfortunately, most of the ports in India are brown¡field ports with hardly any land available along side the port to develop SEZ in the neighbourhood. Port SEZs are a good idea as it’s beneficial for manufacturers to cut down their transportation cost, says DT Joseph, Former Shipping Secretary, Government of India, hastening to add that ports like Mundra and Vallarpadam that have taken to the idea are greenfield with the provision to plan for land banks to develop SEZs.
No market study has been made on the requirement of port-based SEZs. Joseph says that in a bid to implement SEZs, port authorities and the government should take necessary steps in terms of acquiring lands, easing customs law and providing incentives.
Gujarat has implemented this idea proactively. As a result, ports in Gujarat have boosted the growth of SEZs in the state. Presently, Gujarat has 41 ports along a coastline of 1,600 km and nearly 60 SEZs. More SEZs are expected to come up along the side with its planned minor ports.
"SEZ should be completely engaged in export activity and thus should be near to a seaport making export in a more convenient way. From a port developer’s perspective, one port can get its majority of cargo from its SEZ (which can secure both traffic and revenue) on the other hand manufacturers will get benefit to have a port near to its unit," says Capt. Sandeep Mehta, Executive Officer (Container & Logistics) at Adani Ports and SEZ.
Over the decades, the Indian government established a total of eight Export Processing Zones (EPZs) in order to boost exports and manufacturing in the country. These were at Kandla and Surat (Gujarat), SEEPZ (Maharashtra), Chennai (Tamil Nadu), Falta (West Bengal), Noida (Uttar Pradesh), Cochin (Kerala) and Visakhapatnam (Andhra Pradesh). All eight, except Noida, were in coastal areas. But interestingly, not a single SEZ has become an iconic manufacturing hub. Most of them went the IT and ITES way, which neither created port traffic nor revenues, says Manish Agarwal, Executive Director, Infrastructure Advisory at PwC India. Unclear policy frame¡work has frustrated the potential of how an SEZ can synchronise its business potential with a port or vice versa.
In a developer’s perspective to build an SEZ will cost somewhere around Rs 40,000- 50,000 crore.
Private developers are typically reluctant to take such big risks unless there is an interesting business proposition attached to it. To develop a port-based SEZs government should clarify its stand on SEZs and port-based SEZs and lay out a clear cut policy frame work for their development, Agarwal says.
The advantages of productivity for a port stem chiefly from economies of scale and scope. The most productive ports will be those that are equipped to handle large cargo volumes and/or those significantly reduce unit costs through efficient management and other value-added services like SEZ in nearby areas.
Shippers and carriers select individual ports not only based on their cargo handling service capabilities, but also on the benefits. Unless a port can deliver benefits that are superior to those provided by its competitors in a functional aspect, port customers are likely to select ports based merely on price. This fact raises the question of how a port can achieve value differentiation.
The government would do well to spur policies or schemes to enable private developers to work together with port developers or authorities to set up multipurpose SEZ along the ports.
Leave a Reply
You must be logged in to post a comment.