Ravindra Gandhi reflects on the importance of container shipping to India’s international trade and economy, considering ways in which foreign participation might help drive modernisation that is required for the country’s supply chain.
Promoting bi-lateral trade relations
Majority of India’s foreign trade is conducted by sea leading to a rise in cargo traffic. According to the Indian Brand Equity Foundation, cargo traffic is expected to reach 1,758 MMT by 2017 as against 976 million metric tonnes (MMT) in 2012. The export items vary from petroleum refined products, engineering goods, chemical and pharmaceutical products, textiles to clothing. These goods are shipped across the world, including the Americas, Europe and Asia.
Foreseeing the potential that the Indian industry has, manufacturers need to have economical and efficient routes to their markets across the globe. In addition; initiatives and policies launched by the new government will further propel growth in the sector by providing jobs and attracting investment for India. Examples of such initiatives include the emphasis laid on port and infrastructure like the ambitious “Sagar Mala” project.
However, the increase in volume is quickly becoming inadequate thus giving rise to needs in both port and infrastructure growth. Certain urgent steps taken to relieve road and quay side congestion as well as berthing delays would be welcomed by the trade.
The biggest challenge, though, remains on improving the hinterland connectivity. While the number of containers handled at major Indian ports has significantly increased, moving cargo from its origin to the export hub economically, safely and reliably still remains a hindrance. All of this has the effect of making the cost of container shipping in India more expensive.
With a view to address this concern, the Union Minister of Road Transport and Highways Nitin Gadkari would look to introduce the Inland Waterways Bill to convert 110 Indian rivers into transport channels during the forthcoming Parliament session.
Short-sea shipping has a role to play but, ultimately, cargo has to move inland via road, rail or alternate waterways.
Developing and financing port infrastructure
Expanding and modernising ports is a priority in supporting the government’s economic plans to ensure they are part of an integrated, efficient supply chain, and not just a gateway.
The Indian ports sector also received FDI worth US$ 1,637.30 million in the period April 2000–November 2014 as per the Department of Industrial Policy and Promotion (DIPP). The government is supportive of further investment, in keeping with its general policy towards modernising the economy.
The government’s recent announcement of 100 per cent FDI for projects related to the construction and maintenance of ports and harbours is being allowed under the automatic route. It has also granted a 10-year tax holiday to enterprises engaged in the business of developing, maintaining and operating ports, inland waterways and inland ports.
Encouraging the Public Private Partnership (PPP) model
This investment, through public and private partnerships, ensures that Indian ports are competitive and offer reliable and high-performing routes to market.
The participation of private companies brings various benefits:
- Operator’s use their experience of working at different ports and in diverse markets across the world to bring a competitive edge to productivity and performance.
- It also drives the introduction of the latest technology and infrastructure, and management techniques required to get the best out of these facilities.
Jawaharlal Nehru Port Trust container port at Nhava Sheva, Mumbai is an example of how foreign investment and public-private partnerships can work together to benefit India’s economy. The port currently has three container terminals, operated by the Trust itself, and two major international companies, DP World and APM.
With business flourishing, the port has recently extended one of its quays and is planning to build a fourth container terminal. All this will be supported by existing logistics facilities and a proposed special economic area offering warehousing, office space, and better inter modal connectivity. The extended quay is being fitted out with new ship-to-shore cranes manufactured by the world’s leading company in this sector, and that is just one example of how the port is investing in first-class facilities.
The work is partly funded and guided by the resources and expertise of the private sector. It is examples of how such partnerships can be leveraged to enhance the quality and productivity of Indian port infrastructure.
Leveraging best practices
Sharing experiences from the ports of developed countries can greatly assist in taking Indian ports to the next level.
Public private partnerships are an important determinant to upscale Indian ports. Port development authorities should cohesively work with the government, by applying a similar approach; to holistically develop supply chain infrastructure in the country.
(The author is the India Territory Director for the UK’s Peel Ports Group, which is developing a new container terminal that will help Indian exporters achieve a more direct route to market.)