Indian Maritime Agenda 2020 estimates investments at about Rs 274,500 crore. The major challenge would be to create the shelf of projects to attract this level of investment, writes Vikash Sharda.
India with 7,517 km of coast line has 13 major ports and about 176 minor ports. Indian ports handle around 90 per cent of international trade by volume. The share of minor ports has increased significantly from 26 per cent (FY 2005-06) to 34 per cent during 2009-10 highlighting the increasing significance of minor ports in the Indian maritime sector. Traffic in major ports is estimated to have increased to 569 mt during 2010-11.
The Indian shipping industry is about 10 million GT in terms of fleet size and constitutes just over 1 per cent of global fleet. Indian seaborne trade has been growing at above 12 per cent but the share of Indian ships in carriage of overseas trade of the country has been declining over the years (from 40 per cent during the late 1980s to 8.4 per cent during FY 2008-09).
The following policy and initiatives of government contributed to the development of ports including the International Container Transhipment Terminal:
-Corporate income tax holidays for 10 years
-Import duty exemption on equipment and machineries
-Major ports are provided four-lane highway conÂnectivity and double line rail connectivity under special programme considering the impÂortance of hinterland connectivity
-Selection of developer for various terminals in major ports through competitive bidding made mandatory
PPP in minor ports has taken off well in the last decade and Gujarat has been a leader in promoting private sector investment in port sector. The projects mentioned below are some of the landmark projects under PPP in the port sector:
The project to develop an international container transhipment terminal (ICTT) at Vallarpadam, an island north of Cochin Port was successfully bid by DP World in 2004 for a concession period of 30 years. This is envisaged to be the first transhipment hub in India. The construction of the project started in 2005 and was planned in three phases with an overall capacity of 4 million TEUs. The terminal obviates the need for transhipment to base-ports which can result in substantial savings on total logistics cost for the customers. The important features of the terminal are shown below.
Besides rail, the port is also well connected by road with National Highways NH-47 (Kanyakumari-Cochin -Salem) and NH-17 (Panvel-Edappally) passing through Cochin. The location of ICTT can help improve feeder connectivity to other Indian ports as well. With the unmatched locational advantage, the terminal expects to position Cochin as the international transhipment hub in the years to come making India an important maritime destination.
Mundra Port is located in Gujarat, on the northern coast of the Gulf of Kutch. It is now the largest private port in India. It is a convenient nodal point for international trade with Europe, Americas, Middle East and Africa. The concession agreement for the developÂment of this port under BOT basis was signed on 17 FebÂruary 2001 for a concession period of 30 years. Land of 3,404 acre around the port was given for develÂopment.
Mundra is best located to serve north, north-western and central states of India.
-The port has excellent inland connectivity through rail, road, airport and cross country pipelines.
-The port is connected with National Highways NH-8A and NH-15. NH-8A is the starting point of the East-West corridor running between Porbandar in Gujarat and Silchar in Assam. The highway also connects the port with NH8 connecting Mumbai and Delhi, a part of the Golden Quadrilateral.
-Dedicated Freight Corridor between Delhi and Nhava Sheva in Navi Mumbai being planned by Indian Railways is likely to foster trade and economic growth in the region.
-The port has associate facilities like warehousing, container freight stations, storage tanks etc.
Traffic in Mundra Port has grown substantially from 6.1 mt (FY 2004-05) to about 50 mt during FY 2010-11. There are several policy initiatives which contributed immensely to the development of Mundra Port and the same are mentioned below.
-Gujarat Port Policy 1995
-Built-Operate-Own-Transfer Policy 1997
-Gujarat Infrastructure Development Act 1999
-Gujarat Special Economic Zones Act 2004
Gujarat is the first state in India which established a Port Policy to invite private sector participation in port sector and that has really paid off. As a result, many minor ports have been developed through PPP and Gujarat minor ports handled around 231 mt of cargo during FY 2010-11 which accounts for 80 per cent of overall minor port traffic in India. Gujarat is also a pioneer in creating Special Economic Zone Act in 2004 (the Central SEZ Act was passed in 2005). Development of SEZ has given further boost to the development of ports and thereby helped the growth of port.
Issues & Challenges
Indian Maritime Agenda 2020 released by MOS in January 2011 has set the target to increase the traffic handling capacity to 3,200 mt at Indian ports by year 2020. The estimated investment is envisaged to be about Rs 274,500 crore. The major challenge would be to create the shelf of projects to attract this level of investment.
-Major Ports are controlled and administered by Ministry of Shipping (MoS) while minor ports by the respective state governments. Central and state development policies are different with respect to port development and more synchronisation is reqÂuired in this area.
-Ministry of Shipping has come out with a Draft Ports Regulatory Authority Bill 2011 to regulate the sector including minor ports as well but many state governments have opposed the Bill. The Bill appear to be a right step but MoS would be required to hold discussions with different state governments to resolve their concerns. This will ensure a suitable policy and regulatory framework for the development and regulation of this sector.
-The nomenclature of minor port should be changed. Mundra Port which is considered as “minor port” has handled more traffic than many other major ports during 2010-11. Investors outside India get confused with such nomenclature.
-Only about 20 per cent of NMDP target has been achieved by 31 March 2010, around 30 per cent is in different stages of implementation and balance 50 per cent of the target is still to be awarded for construction/development.
-Model Concession Agreement for port projects needs improvement on the basis of experience of the highways sector. It is understood that the Planning Commission has drafted new Model Concession Agreement for ports but the same is yet to be adopted by the various Port Trusts.
-While the traffic volume has increased at major ports, the performance has not improved. The average dwell time of Indian major ports is still very high – with a turnaround time of four days, which is way above international standards.
-Delay in award of PPP projects due to various legal hurdles has adversely affected developers due to increase in expected cost for the project. Latest example is the fourth container terminal at JNPT.
-Electronic Data Interchange (EDI) has not been implemented effectively on a common platform
in major ports – resulting in time wastage in transfer of data amongst ports, customs, shipping lines and users.
-Private players are concerned about the lack of level playing field due to upfront tariff setting guidelines which fixes the maximum ceiling.
-Different tariff guidelines have been issued–pre 2005, 2005 and 2008–this has resulted in different tariffs within the same port for same cargo.
The author is Senior Manager, Infrastructure Practice, PwC India.
Quay length 605 m 1,800 m
Depth alongside 16 m 16 m
Maximum draft 14.5 m 14.5 m
Yard 2,500 TEU ground slots 15,000 TEU ground slots
Capacity 1.5 million TEU 4 million TEU