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Ports in India

January, 2015

Introduction

India has 13 major ports and about 200 non-major ports. Cargo traffic, which was 976 million metric tonnes (MMT) in 2012 is expected to reach 1,758 MMT by 2017. The Indian ports and shipping industry plays a vital role in sustaining growth in the country’s trade and commerce. India currently ranks 16th among maritime countries, with a coastline of about 7,517 km. Around 95 per cent of India's trade by volume and 70 per cent by value takes place through maritime transport, according to the Ministry of Shipping.

The Indian government continues to support the ports sector. It has allowed foreign direct investment (FDI) of up to 100 per cent under the automatic route for projects regarding construction and maintenance of ports and harbours. It has also facilitated a 10-year tax holiday to enterprises engaged in developing, maintaining and operating ports, inland waterways and inland ports.

Market Size

The number of containers handled at major ports in India increased 8.32 percent year-over-year from April through November 2014, the first eight fiscal months, continuing an accelerating growth trend that leaves state-owned port authorities on track to meet annual throughput targets.

Container-handling in the eight-month period totalled 5.31 million 20-foot-equivalent units, up from 4.9 million TEUs a year earlier, according to preliminary figures available from major port authorities. Containerised cargo tonnage in the period was up 5.87 percent, at 80 million tons.

The Indian ports sector 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 ports sector was also awarded 30 projects in FY14, investing over Rs 20,000 crore (US$ 3.24 billion) which is a threefold increase over the preceding year.

In FY14, coal cargo traffic grew by 20.6 per cent to 104.5 million tonnes (MT) from 86.7 MT in FY13. With regard to commodities, there was a rise of 25 per cent in handling of fertilisers in April 2014 as against April 2013. Iron ore handling also grew by 16.8 per cent during that period.

Investments

A massive investment into India’s ports and its road sector has been announced by Indian Minister for Shipping, Road Transport and Highways, Mr Nitin Gadkari, which is expected to help boost the country’s economy. According to the Economic Times, the Kolkata Port Trust along with the Indian government is to construct a port in the Sagar Islands at a cost of more than US$ 1.8 billion. Gadkari has also announced additional investments of more than US$ 520 million in the port sector for floating storages and a dry bulk cargo handling terminal.

  • Reliance Industries has signed shipping agreements with one of the world’s largest shipping companies, Mitsui OSK Lines Ltd (MOL), for transporting liquefied ethane from North America to India. MOL will supervise the construction of six Very Large Ethane Carriers (VLECs), ordered by Reliance. MOL will also operate and manage the vessels after these are built and delivered.
  • Jawaharlal Nehru Port Trust would take 60 per cent equity in the Indian company to be formed for developing the Chabahar port in southeastern Iran. Kandla Port Trust (KPT) would hold the remaining equity. The Special Purpose Vehicle (SPV) is likely to be named Indian Ports Global
  • SKIL Ports and Logistics is planning to invest Rs 1,000 crore (US$ 162.17 million) to build a multipurpose terminal at Karanja near here over the next two years. The proposed terminal would be developed on a 200 acre land parcel at Karanja, off the financial capital's eastern coast, and would have a sea frontage of 1,000 metres.
  • Sajjan Jindal, the owner of diversified JSW Group with interests in steel, cement and power, has bought a 10 per cent stake owned by global hedge fund Eton Park Capital in his privately-owned ports company JSW Infrastructure for roughly Rs 600 crore (US$ 97.3 million). The stake sale signals the bright prospect of the Indian ports sector as cargo traffic rises with increase in demand for steel, coal and petroleum products.
  • Hyderabad-based infra player IL&FS Engineering Services has announced that it has secured a port project worth Rs 179.84 crore (US$ 29.18 million) in Maharashtra. "The company has received a letter of award (LOA) from IL&FS Maritime Infrastructure Company Limited (IMICL) on behalf of Dighi Port Limited for engineering, procurement, and construction (EPC) contract for the evelopment of multipurpose berth, backup yard development and utilities of multipurpose terminal berth 5 on the north of Dighi Port, Agardanda in Maharashtra," the company said. According to the company, the project completion period is 545 days from the date of notice to proceed (NTP) and the scope of work includes design and construction of multipurpose berth, reclamation of 50 acres of backup area, among others.

Government Initiatives

The Indian government will develop 10 coastal economic regions as part of plans to revive the country’s Sagarmala (string of ports) project, according to the Daily Shipping Times. The zones will be manufacturing hubs supported by port modernization projects and could cover 300-500km of coastline. The government is also looking to develop the inland waterway sector as an alternative to road and rail transport for getting goods to the nation’s ports and is hoping to attract private investment into the sector.

The Minister of State for Shipping, Mr Pon. Radhakrishnan has informed that following steps have been taken by the Government for capacity expansion of ports:

  • Upto 100 per cent FDI under the automatic route is allowed for port development projects.
  • Income tax incentives are allowed as per Income Tax Act, 1961.
  • Bidding documents like RFQ, RFP and Concession Agreement have been standardized
  • Enhanced delegation of financial powers to Shipping Ministry to accord investment approval for PPP projects.
  • Streamlining of security clearance procedures.
  • Close monitoring of developmental projects in the Major Ports.

The Ministry of Shipping has formulated a Perspective Plan for development of the Maritime Sector, namely, “The Maritime Agenda (2010-2020).” This Plan has estimated the traffic projections and capacity additions at the ports upto the year 2020. Based on the estimated growth, it has projected capacity of 3130 million tonnes by 2019-20.

In the Union Budget 2013–14, the government allocated Rs 11,635 crore (US$ 1.88 billion) for the expansion of the VO Chidambaranar (VOC) Port in Tuticorin. Industry representatives, especially exporters, feel that the enhancement of berthing facilities there will increase exports and result in big savings in freight for manufacturers who have to send their products bound for the west through Colombo in Sri Lanka.

The Ministry of Shipping has finalised guidelines which allows Indian companies to register their ships under foreign flags. This follows the government’s decision to create a new category of fleet called ‘1 Indian controlled tonnage’. The guidelines will be announced shortly, as per an official.

The National Maritime Agenda 2010–2020 is an initiative of the Ministry of Shipping to outline the framework for the development of the port sector. The agenda also suggests policy-related initiatives to better the operating efficiency and competitiveness of ports in the country.

The Minister for Road Transport, Highways and Shipping Mr Nitin Gadkari said that his ministry will coordinate with other ministries of Environment & Forests, Tourism, Power and Water Resources, River Development and Ganga Rejuvenation for developing transport and tourism along the river Ganga.

Road Ahead

Increasing investments and cargo traffic point to a healthy outlook for India’s ports sector. Services benefiting from these investments include operation and maintenance (O&M), pilotage, and harbouring and provision of marine assets like barges and dredgers.

The Planning Commission of India in its 12th Five Year Plan projects a total investment of Rs 180,626 crore (US$ 29.31 billion) for this industry. Also, through its Maritime Agenda 2010–2020, the Ministry of Shipping has set a target capacity of over 3,130 MT by 2020, driven by private sector participation. Over 50 per cent of this capacity is anticipated to be generated at non-major ports.

Exchange Rate: INR 1 = US$ 0.0162 as on January 21, 2015

References:Indian Ports Association, Ministry of Shipping, Media Reports, Press Releases.