India's Shipping Industry and Port Infrastructure:Ready for future
Despite the weak economic sentiments, the logistics industry is expected to continue its robust growth. The global maritime logistics market is expected to grow at a robust rate of around 10 per cent to 12 per cent in the next couple of years. Due to its significant maritime industry, India is considered as a major player in the global logistics industry. With over 200 non-major ports and 12 major ports, India has the potential to increase its trade volume. Not only will it reduce costs, it will also cut down on delivery time. India’s maritime industry is also key to the country’s energy needs.
India has a rich maritime history. The shipbreaking and shipbuilding industry flourished during the Indus Valley civilization. Today, India has the biggest shipbreaking yard in the world. It is estimated that around half of the world's ships are broken down by Alang. Through the various initiatives introduced by the government, India's shipping industry has grown significantly since independence. As of 2019, India's fleet has a total of 1405 ships, which is equivalent to a deadweight tonnage of approximately 19.2 million. The country's infrastructure projects have also helped the industry. Govt. of India worked upon various key initiatives to ensure smooth functioning of India. Although government's ambitious Sagarmala initiative aims to double the share of the port industry in Indian cargo movement by 2025. This initiative was launched in 2017 to rationalize the freight costs and improve the competitiveness of the export market. Government is also planning to spend $123 billion on various port modernization projects through the Sagarmala Program. This will help boost the country's export efficiency and create jobs. In 2021, around 161 projects under the Sagarmala Program have been completed. Prime Minister Narendra Modi on November 8, 2020, launched the Ro-Pax ferry service between Ghogha and Hazira which helped in cutting the journey time between the two cities to around four hours. In 2020, the total port capacity has increased to 1534.91 million tons a year. It was previously estimated that the port capacity would reach 871.52 million tons in 2014. The Merchant Shipping Bill, 2020, aims to promote the growth of the Indian marine industry and prevent air pollution. Projects related to inland water transport are also under the Jal Marg Vikas focused on improving the efficiency and safety of navigation. The government has also lowered the Goods and Services Tax (GST) for foreign-flagged vessels and coastal ones. This will help boost the marine industry.
Future prospects of maritime logistics in India:
Out of the 200 non-metro ports in India, 44 are already operational and strategically located. This is largely due to the huge cargo traffic that has shifted from the major ports to the smaller ones. The non-major ports’ traffic grew at a robust rate of 45% during the financial year 2020 as the government's initiatives to decongest the roads and railways continued. Major ports handled a total of 704.6 million tonnes of cargo during the year under review, up 0.8% from the previous year. The capacity of these facilities is expected to grow at a robust rate of 6% over the next couple of years. The Indian government's plan to establish 23 waterways by 2030 is geared toward addressing the country's logistics needs. Whereas, The Make in India campaign will help boost the country's marine repair industry and its shipbuilding industry. and Due to the increasing awareness about the environment, the maritime industry is pushing for the use of cleaner fuels. The Indian Ocean's strategic location makes it the most advantageous place for India's shipping industry. Its trade with other countries is 95 percent based on volume. India's maritime sector is one of the country's top priority areas for foreign direct investments. It is estimated that the industry could generate annual revenue of over US$81 billion. In line with this, the country's Ministry of Shipping is planning to improve the concession agreement (MCA) to attract more private investors. As Indian subcontinent has a coastline of over 7,517 kilometers, which is strategically located near the Indian Ocean Region. This region supports around 80 percent of the global maritime oil trade. The country's shipping industry is expected to contribute significantly to the country's economic growth. A recent study conducted by the MoPSW revealed that around 95 percent of India's international trade volume is carried out through its maritime channel.
Ports in India (Existing infrastructure and capacity):
India has 12 major seaports, 205 notified minor ports, and six major ports that are under the central government's jurisdiction. Under the National Port Policy, six new mega ports are being developed with world-class infrastructure. These include Vadhavan port in Konkan, Paradip port in Odisha, and Kandla port in Gujarat. The Jawaharlal Nehru Port Trust in Mumbai is the largest container handling port in India. Its utilization rate is reportedly higher than the world average. whereas, average turnaround time of major Indian ports has decreased over the years. It was 59.51 hours in the financial year 2019 compared to 87.81 hours in the previous year. In the financial year 2018, the 12 major ports handled over 704.93 million tons of cargo, which is higher than the previous year's figure. It is estimated that by 2025, India's total cargo traffic will reach over 2,500 million tons annually. To meet this demand, the country's ports are planning to expand their capacity to handle over 3300 million tons annually. Non-major ports handled 613 million tons of cargo in the financial year ended March 31, 2019, which is higher than the 575 million tons handled by the major ports during the same period. This shows that the bulk of cargo traffic has shifted to non-major ports, which has a compound annual growth rate of 4.3 percent over the last five years. An analysis of the cargo traffic at major ports revealed that solid cargo (41.9 percent) and liquid cargo (37.5 percent) made up the majority of the total cargo handled. In the past financial year, coal dominated the solid cargo category with a 23.1 percent share, followed by iron ore and fertilizers with a respective share of around 5.2 percent.
Investment opportunities in the Indian shipping industry:
India's maritime sector has been streamlined and expanded its scope for investments. Its focus on developing inland waterways, ports, and shipbuilding has raised the country's profile. Under the automatic route, foreign investors can acquire up to 100 percent of the projects related to ports and harbors. In total, India has identified over 574 new projects worth over $6 trillion under the Sagarmala Project, which is expected to be implemented by 2035. As of September 2019, a total of 121 projects have been completed under the project, and 201 are under implementation. Sector priorities also include the use of clean / renewable energy sources, along with augmentation of related infrastructure for trade and tourism. In March 2021, India launched 400 new projects in the maritime sector, which have an investment potential of over US$30 billion. In its Vision India 2030, the government has also laid out a slew of initiatives for the development of the maritime sector. These include setting up of smart ports and a port regulatory authority.
Policy amendments for private cargo terminals to renew concession period:
As part of its efforts to boost the country's ports and marine infrastructure, India has planned to give a 10-year tax holiday to those involved in developing inland waterways and ports. In the Union Budget for the 2021-22 fiscal year, the government announced a subsidy of over 16 billion Indian dollars to encourage ship-flagging. The Major Port Authorities Act, 2021 has been passed to align governance models in these ports with international best practices. The government has also issued a revised Model Concession Agreement to improve transparency and uniformity in the agreements between investors and port operators. The increasing privatization of India's ports has raised concerns regarding the transparency of the industry. To address this issue, the Ministry of Public Service launched a dispute redressal platform in 2020. The same year, the Ministry also launched a software solution for the vessel traffic services industry. The launch of this solution marked a significant step forward for the industry, as it allowed the operators to easily monitor and communicate with vessels traffic services.
The Ministry of Ports, Waterways, and Ports Authority has revised the model concession agreement for private cargo-handling terminals. This new feature allows the terminals to renew their contract for a fresh term. This policy will also apply to existing cargo handlers that are approaching the end of their concession period e.g. Nhava Sheva International Container Terminal, PSA-Sical Terminals Ltd etc For new contracts, the terminal assets revert back to the port authority after the contract terms have been revised. The private terminal operators can then renew their contract by approaching the port authority for approval. While approaching the port authority, the private terminal operator should also express its willingness to participate in the competitive bid process for the fresh term. The final decision on whether or not to renew or extend the concession period will be made by the concerned authority.
(The views expressed are those of the author and do not represent views of CESCUBE.)
