Ports – Porting Ahead

A lot of optimism has set in with 100 per cent FDI inflow, the Sagarmala Project, greater thrust on PPP projects, and the ´Make in India´ initiative.

The Indian ports and shipping industry plays a vital role in sustaining growth of the country´s trade and commerce with the country´s vast coastlines and major ports. India is the 16th largest maritime country in the world, with a coastline of about 7,517 km. India has 13 major ports, namely, Mumbai, Jawaharlal Nehru Port Trust (JNPT), Kandla, Kolkata, Haldia, Paradip, Vishakhapatnam, Ennore, Chennai, VO Chidambaranar Port Trust (VOCPT), Cochin, New Mangalore, Mormugao, and 187 non-major ports out of which 48 are operational and the remaining are fishing hubs. As per the Ministry of Shipping, around 95 per cent of India´s trading by volume and 70 per cent by value is done through maritime transport, which is a major lifeline for the country. The major ports together handled 20,402 vessels in 2013 Cargo traffic, which recorded 1,052 million metric tonne (MMT) and is expected to reach 1,758 MMT by 2017.

India´s major ports container traffic total tonnage increased by 4.1 per cent for 2014-15 119,379,000 TEU 7,958,000 increased by 6.7 per cent against 2013-14, out of which JNPT contributed the major share with tonnage of 56,934,000 for 2014-15 and TEU 4,466,000, an increase of 7.3 per cent from the previous year. This is followed by Chennai tonnage increase of 5.7 per cent from the previous year 29,945,000 and TEU 1,552,000 for 2014-15.

The vessel traffic has steadily increased, with the total vessel handled in 2012-13 being 20,402, Dry Bulk led by Vishakhapatnam (924), Pradip (883), and in Liquid Bulk Mumbai (1018) followed by Kandla (1372), Break Bulk by Mumbai (518), Chennai (499), container vessels by JNPT (1846), and Chennai (786). The Indian Government has been playing an important role in supporting and developing the ports sector. It has liberalised and allowed foreign direct investment (FDI) of up to 100 per cent under the automatic route for port and harbour construction and maintenance projects. It has also facilitated a 10-year tax-free holiday to enterprises that develop, maintain, and operate ports, inland waterways, and inland ports.

Massive Expansion
A major capacity expansion programme is underway at JNPT to handle the growth in cargo. In July, the port awarded a $1.3 billion contract to Singapore based Port of Singapore Authority PSA International for the construction of a fourth terminal in two phases; JNPT accounts for approximately 56 per cent of the total container volumes handled at India´s 13 public ports and around 40 per cent of the nation´s overall containerised ocean trade. The new terminal will have 2,000 m of berthing space and add 4.8m teu of annual capacity, more than doubling the current 4m TEU capacity. Dubai-based DP World is nearing completion of work to commission its second container facility in Nhava Sheva, with a designed capacity of 800,000 TEUs per year. The capacity of all the major ports as on March 31, 2015 was 871.52 MMT, compared with 581.54 MMT in cargo traffic handled through 2014-15. Thus, the capacity utilisation through 2014-15 was around 66 per cent. Container-handling in FY15 expanded at 6.7 per cent year-over-year to 8 million twenty-foot-equivalent units (TEU) from 7.46 million TEU through the same period in 2013-14. The data also showed that containerised cargo tonnage grew 4 per cent to 119 million tonne. In FY2014-15, cargo volumes at the major ports expanded by 4.7 per cent year-over-year to 581.3 MMT. In FY15, thermal coal cargo traffic grew 20.36 per cent to 859.02 MMT from 713.69 MMT in FY14. With regard to commodities, fertiliser handling rose 29.67 per cent to 791.4 MMT in FY15.

The Department of Industrial Policy and Promotion (DIPP), the Ministry of Commerce and Industry, reported that the Indian ports sector received FDI worth $1,637.3 million between April 2000 and May 2015. The ports sector was also awarded 30 projects in FY14, investing over Rs.20,000 crore ($3.16 billion), which is a threefold increase over the preceding year.

Sagarmala Project
The Indian Government plans to develop 10 coastal economic regions as part of plans to revive the country´s Sagarmala (string of ports) project. The zones would be converted into manufacturing hubs, supported by port modernisation projects, and could span 300-500 km of the coastline. The government is also looking to develop the inland waterway sector as an alternative to road and rail routes to transport goods to the nation´s ports.

A memorandum of understanding (MoU) has been signed between the Inland Waterways Authority of India (IWAI) and Dedicated Freight Corridor Corporation of India (DFCCIL) to create logistics hubs with rail connectivity at Varanasi and other places in future on national waterways. The joint development of state-of-the-art logistics hubs at Varanasi would lead to the convergence of inland waterways with railways and roadways, thus providing a seamless, efficient, and cost-effective cargo transportation solution.

The Visakhapatnam Port Trust (VPT) has outlined an Rs.3,000 crore ($474.7 million) expansion cum modernisation plan aimed at enhancing the port´s capacity by nearly 50 per cent. The port is estimated to invest Rs.800 crore ($126.6 million), a fourth of the planned investment, while seeking private partners to invest the remainder by way of public-private partnerships (PPP).

Maharashtra´s Jawaharlal Nehru Port Trust (JNPT) plans to build a satellite port at Wadhwan near Dahanu (bordering Gujarat), which is estimated to cost Rs.10,000 crore ($1.56 billion) to build and is likely to ease congestion of ships at JNPT. The Union Minister for Minister of Shipping and Road Transport & Highways Nitin Gadkari stated that the Government of India has set an ambitious target to convert 101 rivers across the country into waterways to promote water transport and propel economic growth. The government plans to establish two new major ports, one at Sagar in West Bengal and the other at Dugarajapatnam in the Nellore district of Andhra Pradesh. The government is considering a proposal to set up an Integrated National Waterways Transport Grid (INWTG), which covers primarily five national waterways namely Ganga Bhagirathi Hooghly River System, Brahmaputra, West Coast Canal, Kakinada Puducherry Canal and East Coast Canal integrated with Brahmani and Mahanadi delta river system . The INWTG plan involves the development of these national waterways with at least 2.5 metre of least available depth (LAD), upgrade/setting up of priority terminals, and establishment of road connectivity (wherever feasible) and rail and port connectivity.

The Ministry of Shipping has formulated a Perspective Plan ´The Maritime Agenda 2010-2020´ to develop the maritime sector. This plan includes forecasts for traffic and capacity additions at the ports up to 2020. The expected capacity of the ports is likely to be 3,130 MMT by 2019-20.

The Union Ministry of Shipping has chalked out a comprehensive plan to raise Rs.100,000 crore ($15.6 billion) to develop ports, build ships, and improve inland waterways in the country.

Conclusion
India´s growing investments by FDI, public-private sector thrust on ports, infrastructure, and increasing cargo traffic point toward a healthy outlook for the economy, in general and the Indian ports sector, in particular. Providers of services such as cargo operation and maintenance (O&M), pilotage and harbouring, and marine assets such as barges and dredgers are benefiting from these investments. The Planning Commission of India estimates an investment of Rs.180,626 crore ($28.6 billion) for the port industry in its 12th Five Year Plan. In addition, through ´The Maritime Agenda 2010-2020´, the Ministry of Shipping has set a target capacity of over 3,130 MMT by 2020, which would be driven by participation from the private sector. Non-major ports are expected to generate over 50 per cent of this capacity.

This article has been authored by Mansoor Kidwai, Senior Consultant, Transportation & Logistics Practice, Frost & Sullivan.