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Friday, November 27, 2015

Bogged down by capacity constraints


Given the growth in cargo traffic and maritime trade, ports in India are in urgent need of capacity augmentation in order to meet the country’s growing economic needs and also to grow its share of international trade.
K S NARAYANAN | Issue Dated: March 29, 2013, New Delhi
Tags : Indian ports | International trade |

India, which has a long and meandering coastline stretching 7,500 kms, expects its ports – 13 major ports and around 200 non-major ones spread across the nine maritime states that dot its western and eastern corridors – to demonstrate efficiencies to sustain the demands of its growing international trade. About 95% by volume and 70% by value of the country’s international trade is carried on through maritime transport. Over the past decade, Indian ports have seen a sharp surge in traffic, which grew four-fold to 9.7 million TEU (One TEU represents the cargo capacity of a standard intermodal container, 20 feet long and 8 feet wide or 6.1 m long and 2.44 m wide) in 2011, from 2.4 million TEU in 2001 – a staggering growth of 395%.

Unfortunately, India’s ports are ill-equipped to meet this surge in traffic demand as they have not been able to significantly ramp up their capacity and efficiency. Several port projects in the PPP as well as private mode are facing delays on account of regulatory approvals. Take, for instance, projects such the mega container terminal of Chennai, 4th container terminal of JNPT, Vizhinjam port project of Kerala, Rewas port of Maharashtra and the offshore container terminal of Mumbai port, all of which have been delayed. Delays in getting the security clearance, complicated bidding process, poor response of developers and legal issues are the major factors holding up these projects.

Among the PPP port projects that have been hit worst by delays include the construction of six riverine jetties at Kolkata port with 4.5 million tonnes capacity worth Rs.3 billion. Besides, at the Paradip port Trust, construction of the new coal terminal is still in limbo due to want of certain clearances. Some of the other projects awaiting security clearance include conversion of berth No. 8 as Container Terminal at V. O. Chidambaranar (Tuticorin) port. Private players in infrastructure like the Adanis and Punj Lloyd have been denied security clearance for the coal import terminal at the government-controlled Mormugao port in Goa. Similarly, Lanco Infratech has been denied permission for developing a container terminal project for cargo berth facility at Tuticorin port.

As a result of these project delays and unwillingness on the part of the government to award private players port development projects, India has not been able to achieve the target of its capacity expansion. According to the Planning Commission, the capacity of Indian ports will have to nearly double to 2,302 million tonnes (MT) over the next four years to be able to handle the fast growing cargo traffic. The total capacity of the port sector is envisaged to be 2,301.63 MT, to meet the overall projected traffic of 1,758.26 MT by 2016-17, as per the 12th Five Year Plan (2012-17) document. The Planning Commission estimates that cargo traffic by the end of the 12th Plan would be 943.06 MT and 815.20 MT for the major and non-major ports respectively, with corresponding port capacities of 1,241.83 MT and 1,059.80 MT respectively. In light of the fact that our port-handling capacity is way short when compared to the throughput of major ports globally, the Planning Commission has set a target of expanding the annual capacity of major ports to 1229.24 MT by the end of March 2017.

However, till date, no Indian port is capable of handling large container vessels. Most international cargoes are off-loaded at Colombo or nearby ports and then transported to India in bits and pieces. This incapability robs Rs.10 billion from traders. Worse, the turnaround time for ships entering our ports is inordinately high, aggregating 4.67 days and leading to high levels of congestion. The high turnaround time at our ports also leads to pre-berthing delays for ships, which can vary from 2 hours to 40 hours, depending on the port and cargo with the overall average for FY12 being 11 hours.

Addressing concerns related to turnaround and pre-berthing time calls for urgently ramping up our port infrastructure. Already, the dilatoriness in resolving such issues is beginning to impact our cargo trade adversely. Traffic at Indian ports grew by just 2% in 2011-12 (a sharp contrast from 9.2% CAGR recorded during 2005-06 to 2010-11), points out Prof. Sham Choughule, Visiting Faculty, Mumbai University and Member, Port and Logistics Committee of Maharashtra Chambers of Commerce & Industry. Clearly, innovative solutions are needed to stem the tide of declining port traffic. L. Radhakrishnan, Chairman, Jawaharlal Nehru Port Trust, suggest that alternative means of transport such as coastal shipping and inland water transportation should be promoted inviting PPP along with larger viability gap funding by the Government. He also warns about how the tariff guidelines of TAMP (Tariff Authority for Major Ports) are harming private initiative. “The tariff cuts enforced on private terminal operators by TAMP are not benefitting exporters/ importers but are actually getting passed on to international shipping lines.” He suggests that this anomaly needs to be corrected since no authority similar to TAMP exists anywhere else in the world.

To boost capacity augmentation of our existing ports and develop newer ones to meet the demands of growing trade, the Indian government has come out with an action plan spanning ten years. The Maritime Agenda 2010-2020 envisages an investment of Rs.1,650 billion in the port and shipping sector by 2020, of which the majority will be from private investors. The Ministry of Shipping also proposes to build an overall port capacity of 3200 MT by 2020 to cater to the projected traffic demand. This near tripling of capacity in less than a decade’s time is proposed to be achieved by undertaking upgradation of existing ports and development of new major ports.

A successful port industry will not only make our goods more competitive but can also become a self-funding profitable industry. So even while the policy measures as enunciated by the Maritime Agenda augur well for the development of the Indian port sector, the gap between planning and implementation remains significant because of various procedural and systemic issues. It’s the resolution of these issues that will determine whether the Indian port sector will be able to realize its full potential.

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Issue Dated: Apr 27, 2014