Re-contouring the Maritime Sector

India is no doubt a country of many advantages, inherent and otherwise. Boasting a coastal line of over 7,500 km, India’s exim trade is growing at a CAGR of 4.4%. Not being the focus sector in the past, development of India’s maritime efficiency could not achieve optimum levels. However now, with ever advancing ties with the neighboring, as well as far off countries, India’s maritime trade has gained much attention of the government.

India is the 16th largest maritime country in the world. It has 12 major and 187 non- major ports. According to the Ministry of Shipping, maritime transport accounts for around 90% of India’s trading by volume and 70% by value. Cargo traffic recorded at 1,052 mnt in 2015 is expected to reach 1,758 mnt by 2017.

The handling capacity of major ports in India is sufficient to match trade demand. The capacity of all the major ports as on March 31, 2016 was 965.36 mnt, more than sufficient to handle the 606.37 mnt cargo traffic through 2015-16, thus marking the capacity utilization of major ports during the year at around 63%. As per internationally-accepted norms, the gap between traffic and capacity is usually around 30%.

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Government Initiatives

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 prime minister has laid the foundation stone for the Fourth Container Terminal of Jawaharlal Nehru Port at Mumbai, which is expected to increase the existing capacity of the container terminal by more than twice.

The Ministry of Shipping, in collaboration with Rajasthan government, has planned to develop an Inland Shipping Port at Jalore, Rajasthan.

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The Cabinet Committee on Economic Affairs (CCEA) has approved the Mechanisation of East Quay (EQ) Berths- 1, 2 and 3 at Paradip Port on Build, Operate & Transfer (BOT) basis, under Public Private Partnership (PPP) mode, which will increase their coal handling capacity from existing 7.85 mnt to 30 mnt.

Maritime India Summit 2016: The maiden Maritime India Summit 2016 was held around mid-April in Mumbai. The Indian government unveiled its plans for the development of the maritime infrastructure and called for investments in various projects, all in view of giving tremendous boost to the sector. It has allowed Foreign Direct Investment (FDI) of up to 100% under the automatic route for port and harbor construction and maintenance projects. It has also facilitated a 10-year tax holiday to enterprises that develop, maintain and operate ports, inland waterways and inland ports.

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 modernization projects, and could span 300–500 km of the coastline. INR 700 billion will be invested in 12 major ports in next five years under the Sagarmala project which plans to set up low cost non major ports along the coastline. As many as 8 new mega ports will be developed under the project, as revealed by Union Minister at the MIS 2016, including ones at Sagar, West Bengal; Paradip Outer Harbor in Odisha; Enayam in Tamil Nadu and Vadhavan in Maharashtra. In addition, potential has been identified for new ports to come up in central Andhra Pradesh, south eastern Tamil Nadu and possibly northern Karnataka.

Integrated National Waterways Transport Grid: The government is considering a proposal to set up an Integrated National Waterways Transport Grid (INWTG), which covers primarily five national waterways. The INWTG plan involves the development of these national waterways with at least 2.5 meters of least available depth (LAD), upgrade/setting up of priority terminals, and establishment of road connectivity (wherever feasible) and rail & port connectivity. The Central Government has approved amendments to ‘The National Waterways Bill 2015’ which will provide for enacting a Central Legislation to declare 106 additional inland waterways, as the national waterways.

Investments

Jindal ITF plans to invest nearly INR 5 billion to further trans- loading operations in Haldia. The company, which already transports imported coal in barges to NTPC’s power plants in Farakka and Kahalgaon from the Sandheads, plans to transload cargo at the deep-drafted location at Kanika Sands and transport it to Haldia.

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 on national waterways.

The state-run Shipping Corporation of India Ltd (SCI) is expected to purchase five vessels from the state-owned Cochin Shipyard Ltd. It is also likely to issue tenders to buy two used liquefied petroleum gas (LPG) carriers as it looks to re-start ship purchases that were frozen after poor financial performance.

Kamarajar Port Limited (KPL, erstwhile Ennore Port Limited) has signed an agreement with M/s Toyota Kirloskar Motor Pvt Ltd to export automobile units through Kamarajar Port. The agreement primarily includes a clause that would restrict original equipment manufacturers (OEMs) to use KPL as their primary port. KPL would in turn offer volume-based discounts on the tariffs on certain facilities for the smooth functioning of operations.

The Visakhapatnam Port Trust (VPT) has outlined an INR 30 billion expansion-cum-modernisation plan aimed at enhancing the port’s capacity by nearly 50%. The port is estimated to invest INR 8 billion a fourth of the planned investment, while seeking private partners to invest the remainder by way of public private partnerships(PPPs).Maharashtra’s Jawaharlal Nehru Port Trust (JNPT) plans to build a satellite port at Wadhwan near Dahanu (bordering Gujarat), which is estimated to cost INR 100 billionto build and likely to ease the congestion of ships at JNPT.

Source: India Brand Equity Foundation

 

The Maritime Agenda 2010–2020: 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 estimated capacity of the ports would be 3,130 mnt by 2019–20. The Union Ministry of Shipping has chalked out a comprehensive plan to raise INR 1,000 billion to develop ports, build ships and improve inland waterways in the country.

In view of the increasing traffic at the ports, the time appears to be ripe and stands to benefit the investors. The laid out plans represent numerous investment opportunities and are said to create 10 million employment opportunities. The Planning Commission of India forecasts an investment of INR 1.8 trillion for this industry in its 12th Five Year Plan. Government’s focus on the maritime sector certainly proffers a constructive outlook for the Indian economy.

Source: Steel 360 Magazine May’16 Issue