Dredging policy: Out of the blue

Trade and commerce on the nation's vast waterways have been hampered by an archaic approach to dredging, as well as monopolistic practices and policies. But all that is set to change with the revamping of the government's Dredging Policy and the forward-looking Indian Maritime Agenda 2020, which promise to encourage private enterprise and competition in order to drive dredging and excavations on the fast track to growth, Shashidhar Nanjundaiah writes.

As insufficiently as India's coastline and inland waterways are utilised, the opportunities in water transportation are burgeoning as need grows and policies change.

The total navigable length of India's waterways is 14,500 km, out of which about 5,200 km of rivers and 4,000 km of canals can be used by mechanised crafts. The total cargo moved over the country's inland waterways was just 0.1 per cent of the total inland traffic, compared to 21 per cent in the United States. While waterways have been limited to a few privileged deltaic or deep-river states—mainly Goa, Kerala, Andhra Pradesh, West Bengal and Assam—it is possible to have waterways in other coastal states as well as further up major rivers such as the Ganga.

One of the main constraints of having cheaper mode of cargo transportation is the lack of depth in our waterways. Silting on the east coast is particularly heavier, and the average depth in a major port in India hovers at around 11 m. Underwater excavation of various types of materials like rocks, boulders, cobbles, gravel and sand alone can increase the depth for better navigation.

When we set out to do a statistical research on dredging, something was found conveniently missing—availability of
depths in our ports. While many of the ports have declared drafts, many others do not wish to commit. This lack of data represents a larger problem–that ongoing dredging is still not a priority for many of our ports—affecting the continuous availability of depth.

The Dredging Policy in India is undergoing changes, entailing more competition. The Indian government has prepared a draft note on the dredging policy it plans to submit to the cabinet. The policy will allow private companies to compete for underground excavations in the marine sector. The legislation is also likely to end the preferential treatment meted out to state-owned Dredging Corporation of India (DCI), which will have to compete like any other firm. Shipping Minister GK Vasan had said in January that the government plan initiatives included formulating a new Dredging Policy, promoting coastal shipping and increasing the share of Indian ships in the country's trade.

Poor record and the glasnost era

There is a reason why private dredging companies in India are few and far between. The Dredging Corporation of India (DCI) enjoys a huge ‘handicap' advantage, having bagged annual maintenance contracts (AMCs)–last fiscal alone, DCI executed 812.18 lakh cu m of dredging works. Out of the AMC requirement of about 650 lakh cu m in maintenance dredging, the entire contract is in DCI's kitty. The dredging requirement in 2011 at major ports, as envisaged in the 11th Plan, was 890.1 lakh cu m of maintenance dredging, plus 258.1 lakh cu m of capital dredging. For minor ports, these figures were 103 lakh cu m and 715 lakh cu m respectively. Capital dredging costs (for both major and non-major ports) alone will be to the tune of Rs 11,300 crore out of an envisaged investment of Rs 55,800 lakh crore.

However, here is the requirement-supply scenario of projected versus achieved dredging in the 10th Five Year Plan: Among major ports and the Indian Navy, a total requirement of 32.01 crore cu m of maintenance dredging was targeted, while only 23.49 crore cu m was achieved; against a capital dredging target of 13.81 crore cu m, the achievement was an abysmal 1.52 crore cu m.

Per the existing Dredging Policy of 2007, all major ports invite open competitive bids for dredging works with the DCI having the first right of refusal if the rate is within 10 per cent of the lowest valid offer. This would apply to both maintenance and capital dredging works. The government through the Department of Shipping reserves the right to assign, in public interest, any contract for dredging work in any of the major ports to DCI on nomination.

The removal of the unfair 10 per cent clause happened in 2007, in revision of the 2004 Dredging Policy. This means that not only DCI, but other Indian companies will have a level playing ground by having a first right of refusal if the competitive bid is within 10 per cent of the lowest. No longer will DCI alone enjoy the preferential clause. However, DCI will continue to enjoy an edge under the Nomination Clause, and only if this nomination is opened up to all Indian dredging companies will it be both fair to private players and more competitive in the marketplace. Major ports must open competitive bids for dredging works, and this is already in operation everywhere except in the Kolkata Port. The regulatory policy for non-major and private ports mandates that such ports will be allowed to charter foreign-flag dredgers only if a competitive bidding process is followed for awarding the contract and if Indian-flag dredgers are provided ample time and opportunity to participate.

Over the next 10 years, dredging requirements will take off even further, and the government knows its approach must be more aggressive. As the requirements surge, the emergence of new companies and especially foreign technical collaborations is imminent and inevitable. New technology is also poised for major expansion. Such technology will increase efficiency and reduce costs. For example, while traditional methods for maintenance dredging cost Rs 80-100 per cu m of dredged slurry; use of jet pumps will reduce it to Rs 25 per cu m.

While the Indian Maritime Agenda 2020 is an initiative in the right direction, we have much to learn from the Middle Eastern experience. Dredging in that region has grown exponentially because the governments and private players have effectively leveraged the opportunities in land reclamation projects. Oil and gas related ports need deeper drafts, and the Persian Gulf's biggest export item finds its path through well-dredged ports. There is much to learn from the spectacular success of The World islands in the UAE—the largest dredging project ever—and others in the league around the world. The World project, expected to be completed next year, entails 35.2 lakh cu m of dredged-and-reclaimed land per month, employing 10 trailing suction dredgers that can suck up and discharge 30 lakh cu m of sand every week. Perhaps the biggest such lesson is ‘green dredging'. As the Indian government has already expressed, environment-friendly dredging now needs to be included as part of a mandatory operational agenda, and for this, the Ministry could seek MoEF's help to draft a workable model.

The bottomline is that it is imperative ports and the government look inward at transparency issues in port depth, and at the policy that seems to protect DCI. Perhaps much more incentive is needed for private dredging companies in India to be even in contention to match up to global giants in dredging, otherwise the ones with the most muscle will win, regardless of the 10 per cent incentive for bidders.

Maintenance-Heavy

There are four kinds of dredging:

• Capital Dredging (creating depths)
• Maintenance Dredging (Maintaining depths)
• Inland Dredging (Dredging in rivers, canals, lakes etc.)
• Associated Activity (Land reclamation and beach nourishment)

The total dredging requirement between FY11 and FY15, including minor ports, is estimated to be 996 million cu m. Of this, maintenance dredging alone is expected to account for 414 million cu m. The Indian market is a largely maintenance dredging-oriented market because of the location of ports / river in ports, the siltation pattern, and established monsoon seasons.

Maintenance dredging is funded by the ports themselves except in Kolkata where the government funds it.