08 June 2016 15:38:25 IST

Sagarmala, set to churn the waters

The shipping industry, government and private players will all benefit from projects set to transform the port sector

Coastal cities in India see big crowds head to the beaches to chill out on hot summer evenings in India. But the coasts are not just places to relax and frolic; these regions also hold great promise for the economy. The coastal zones can, in fact, add an estimated ₹3 lakh crore to India’s GDP.

A wave of change is coming for the country’s ports and coastal regions, thanks to the Government’s ambitious Sagarmala programme. The projects will not only strengthen maritime infrastructure but help boost trade and industry while reducing transportation costs.

Rough waters

India has a long coastline of over 7,000 km, located along key international trade routes. Yet, only 3.5 per cent of trade happens through waterways, compared to 47 per cent in China. Water is the cheapest way to transport cargo — moving goods by water only costs ₹0.25 per km per tonne, compared to ₹1.5 and ₹1 for roads and railways. But the lack of major and minor port infrastructure and inadequate inland waterway connectivity are adding to logistics costs. Transport costs are high in India – 18 per cent of GDP, compared to less than 10 per cent in China.

One reason for the low share of water-based trade and transport is the lack of port and inland waterway infrastructure. Sample this. China’s tenth largest port is 50 per cent bigger than India’s largest. Singapore handles as much traffic as all the 12 major ports in India combined. The ports are too shallow — most ports cannot handle ships with capacity of over 10,000 twenty-foot equivalent units (TEU) while Colombo can accommodate even the newest breed of 18,000 TEU containers ships. Infrastructure and linkages in the country are, frankly, a sinking ship.

Two, the efficiency of our ports has been low. For instance, ship turnaround time — the time a vessel spends at a port from entry to exit — is long. In Kamarajar Port, for example, the turnaround time jumped from 0.08 days between April and December 2014 to 1.80 days in the same period last year, as per the Ministry of Shipping. This is attributed to improper scheduling by importers, leading to bunching of ships as well as low productivity of ships and idle time due to crane or conveyor stoppages.

While maritime trade and transport have drifted along so far, pushing up GDP will require serious investments in infrastructure. For initiatives such as Make in India to drive exports, our ports and waterways have to be revamped.

Good tidings

Enter Sagarmala, a programme aimed at giving ports a major facelift and transforming coastal region connectivity. The idea is to reduce transport costs and time, benefiting industries and export/import trade. The initiative is expected to boost India’s merchandise exports to $110 billion by 2025 and add 2 per cent to GDP.

Sagarmala is not just one project, but is a chain of 104 projects, to be implemented in the next five years at an estimated cost of ₹4 trillion. The projects will be spread across four broad areas.

— One, modernising the 12 major and about 200 minor ports. For example, the depth of ports will be increased to enable larger ships to dock. Capacity will also be enhanced so that more vessels and cargo can be handled, and a fifth container terminal at the Jawaharlal Nehru Port Trust is planned. Also, six new ports will be built spread along the coastal States. The new port planned at Enayam in Tamil Nadu, for instance, would cost ₹1,000 crore.

— Two, improving transport connectivity to the ports so that goods movement is easier. There will be rail corridors, freight-friendly expressways and inland waterways to better link the coasts for smooth and efficient cargo transport. About 45 road and 35 railway projects have been identified and three of the railway projects have already been awarded.

— Three, enable port-led industrialisation, chiefly by creating 14 Coastal Economic Zones or CEZs and a special economic zone at the Jawaharlal Nehru Port Trust in Mumbai. These would have energy, bulk materials as well as discrete manufacturing and industrial clusters. Four, develop human resource skills of fishermen and other coastal and island communities.

All these require big money and proper structured planning at the Central, State and local levels if they are to be executed well. A Sagarmala Development Company (SDC) will be set up under the Companies Act to provide equity support and assist the various Special Purpose Vehicles (SPVs) that will be set up. State-level bodies will also be created. While the government will fund most of the projects, some, such as developing islands and tourism, are expected to be through the public private partnership route.

Wave of benefits

So who will reap the benefit of these initiatives? At a broad level, industry, in general, will benefit as logistics costs are reduced in moving raw material and completed products. It is estimated that logistics cost savings of over ₹35,000 crore a year will be realised and coastal shipping volumes will go up by up to five times. The Government will also gain as brisker trade will mean more export/import duty collection.

Communities in coastal regions will find greater employment opportunities. An estimated ten million new jobs — four million in direct employment — are expected to be created. This, in turn, can boost the property market.

All this port and road development will need a lot of cement, benefiting cement manufacturers. Infrastructure contractors such as L&T will profit from more project development work. State-run Dredging Corporation of India may also find more orders coming its way for both port and inland waterway dredging operations.

Port-linked logistics companies that operate warehouses will also see improving efficiencies and utilisations boosting profits. Port operators such as Adani Group may find tougher competition as state-owned ports perk up. The company operates nine ports and the installed capacity is set to increase to 490 mt by 2016-17 — making it the country's largest ports operator in the private sector. Adani-run Mundra port handled the most cargo in the country. But improving connectivity will benefit all port operators in the long run.