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[Burning Issue] Ports Development

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Ports infrastructure is key to the development of any nation. India has a coastline spanning about 7,500 km. Around 90 percent of India’s external trade by volume and 70 percent by value are handled by ports. Imports of crude petroleum, iron ore, coal, and other essential commodities are all through the sea route. Twelve major ports and 205 non-major ports operate on India’s coast.

The blockage of the Suez Canal by the giant container ship had educated many about the necessity of state-of-the-art shipping and the dependence of the world trade on modernized ports. The alarm created by the shutdown raised fears of extended delays, goods shortages, and rising costs for consumers.

Background

What are ports?

A port can be defined as a harbor or an area that is able to provide shelter to numerous boats and vessels (transferring people or cargo) and can also allow constant or periodic transactions of shipment.

Types of the port according to cargo handled

1) Industrial Ports: These ports specialize in bulk cargo-like grain, sugar, ore, oil, chemicals, and similar materials.

2) Commercial Ports: These ports handle general cargo-packaged products and manufactured goods and passenger traffic.

3) Comprehensive Ports: Such ports handle bulk and general cargo in large volumes. Most of the world’s great ports are classified as comprehensive ports.

Types of port on the basis of location

1) Inland Ports: These ports are located away from the sea coast. They are linked to the sea through a river or a canal. Such ports are accessible to flat bottom ships or barges.

Eg. Kolkata is located on the river Hoogli.

2) Out Ports: These are deep water ports built away from the actual ports. These serve the parent ports by receiving those ships which are unable to approach them due to their large size.

Significance of port development and port connectivity for India

1) Reducing Logistics cost

  • Defragmented logistics: The World Bank Logistics Index released in 2018 ranked India 44th, far behind the US at 14 and China at 26.
  • Cost-effective: India aims to reduce the logistics cost from the present 14% of GDP to less than 10% by 2022 using coastal shipping and inland waterways as they would be 60 to 80 percent cheaper.

2) Blue Economy: Blue Economy as a concept includes all the economic activities related to oceans, seas, and coastal areas and emerges from a need for integrated conservation and sustainability in the management of the maritime domain.

  • India’s blue economy supports 95% of the country’s business through transportation and contributes an estimated 4% to its GDP.
  • India is also among the top 5 fish and aquaculture fish producing countries in the world.

3) Security

  • Ensuring safety of strategic installations: Port development would result in development of India’s coasts that harbor several strategic installations such as naval bases, nuclear power plants, satellite and missile launching ranges.
  • Curtailing transnational organized crime at sea: India is vulnerable to narcotic drug trafficking as it is located between two largest Opium producing regions of the world i.e. Golden Crescent (Iran, Afghanistan and Pakistan) in the west and Golden Triangle (Myanmar, Thailand and Laos) in the east.
  • Port development and efficient management of port resources would curtail such illegal practices and ensure safety of Sea Lanes of Communication (SLOC).

4) Keeping an eye on maritime traffic: Indian Ocean Region (IOR) is also the busiest maritime trade route, with 11,000 to 12,000 ships present in it at any given time.

  • Monitoring these vessels and regulating their movement is challenging but a necessity for prosperity of the country.

5) International Relations

  • Countering the influence of China: Through its Belt and Road Initiative, China has proactively exacerbated India’s pre-existing Sri Lanka-linked trans-shipment problem. Sri Lanka has already leased Hambantota port to China for 99 years. Therefore, port development and ensuring local trans-shipment facilities is a vital strategic necessity for India.
  • Regional integration: India’s eastern seaboard can help recreate an integrated hub and spoke model for regional connectivity in the Bay of Bengal as South Asia remains one of the least integrated areas.
  • Net Security Provider in the IOR: Many western countries are hedging on India’s ability to counter China in the IOR. India could hedge on their support to realize its ambition of Net Security Provider in the IOR by enhancing its coastal security and ensuring port modernizations and its connectivity with the hinterland.

6) Environment: The Indian Ocean is warming three times faster than the Pacific Ocean. Overfishing, coastal degradation, and pollution are also harming the marine ecosystem. Hence, good design and sound environmental impact management of construction and operational activities of the port are critical.

7) Social

  • Inclusive development: Industries require a safe and cheap means of exporting finished goods and importing raw materials. Hence, most industries in the world are located in the coastal belts, in the vicinity of major ports.
  • Sustainable livelihood development in the fisheries sector: India is the second largest fish producer in the world. By enhancing the capability to ship them to foreign countries, India could raise the income of fisher folk and secure the food security and nutrition security.
Examples of Port-led Development
1. Singapore: Singapore’s natural deep-sea ports and the geographical location at the crossroads of important shipping channels make its trade a major economic sector, next to production and services.
2. China: According to the Liner Shipping Connectivity Index (LSCI), several of China’s container ports rank among the most connected in the world.
3. UK: It is estimated that in 2017 the ports industry directly contributed to 61% of turnover, 57% of GVA, and 52% of employment.  

Significance of Port-led development

  • To improve the ease of trading across borders, port-led development is crucial.
  • Developing ports enables efficient and cost-effective import and export.
  • For this, India needs to develop major transshipment ports, provide last-mile connectivity to ports, develop linkages with new regions, and enhance multi-modal connectivity with ports.

Governance of ports in India

Ports in India are classified as Major and Minor Ports. Major Ports are owned and managed by the Central Government and Minor ports are owned and managed by the State Governments. India has 12 major and 205 notified minor and intermediate ports.

Major Ports:

  • Major Ports are under the Union list of the Indian Constitution and are administered under the Indian Ports Act 1908 and the Major Port Trust Act, 1963.
  • Each major port is governed by a Board of Trustees appointed by the Government of India. Their functions include planning, management and operations of ports.

Minor Ports

  • Minor ports are managed at the State level by the department in charge of ports or the State Maritime Board, if created, as is the case in Gujarat, Maharashtra, and Tamil Nadu.
  • The functions of the State maritime boards are similar to those of port trusts, and also include the authority to set tariffs.
  • They also focus on attracting private investment by awarding concession contracts, providing incentives, exclusivity rights and assuring land acquisition.

Service port model vs. Landlord port model

  • The service port model: The port authority owns the land and all available assets—fixed and mobile—and performs all regulatory and port functions.
  • The landlord port model: The publicly governed port authority acts as a regulatory body and as landlord while private companies carry out port operations—mainly cargo-handling activities.
    • Here, the port authority maintains ownership of the port while the infrastructure is leased to private firms that provide and maintain their own superstructure and install own equipment to handle cargo.

The recent performance of India’s port sector

  • Almost a quarter of India’s maritime trade is shipped through ports in other countries and over 80 percent of its trans-shipment cargo uses facilities at ports in Singapore, Colombo in Sri Lanka, and Klang in Malaysia.
  • Trans-shipment costs are leading to Indian port industry losses of Rs 15 billion annually. Thus, India has huge potential to harness when it comes to port utilization.

Issues and challenges in India’s port connectivity

  • High turnaround times: Ports in India suffer from high turnaround times for ships. For example, in Singapore, average ship turnaround time is less than a day. However, in India, it is over two days.
  • Port congestion: Port congestion due to container volume, shortage of handling equipment and inefficient operations is a major concern. Eg. Nhava Sheva port
  • Sub-optimal Transport Modal Mix: Lack of requisite infrastructure for evacuation from major and non-major ports leads to sub-optimal transport modal mix.
  • Limited Hinterland Linkages: There is inefficiency due to poor hinterland connectivity through rail, road, highways, coastal shipping and inland waterways. This in turn increases the cost of transportation and cargo movement.
  • Lengthy inspection and scrutiny: Though customs operations in India are rapidly going paperless and converting to digital, inspections and scrutiny continue to be lengthy for cargo and other shipping operations.
  • Inadequate infrastructure and Technology Issues:
    • Lack of adequate berthing facility, number of berths, and sufficient length for proper berthing of the vessels at the Non-Major Ports.
    • Most Non-Major Ports do not have proper material handling equipment in place which could facilitate a quick turnaround.
    • lack of equipment for handling large volume
    • lack adequate navigational aids, facilities and IT systems
  • Issues with Regulations:
    • Major and non-major ports fall under different jurisdictions. Further, the regulatory framework is rigid.
    • Foreign-flagged vessels are not allowed to ship cargo from one Indian port to another as that remains a protected turf for domestic shippers
    • Land acquisition and environmental clearances
  • Issues with PPP Model:
    • Most port PPPs impose strict limits on what private operators are allowed to do, usually in terms of the types of cargo they are allowed to handle.
    • Until recently, Other problems were related to tariff regulation and absence of dispute resolution mechanism
  • Environmental impact:
    • During the operation of ports, spillage or leakages from the loading and unloading of cargo and pollution from oil spills are common due to poor adherence to environmental laws and standards.
    • The water discharged during the cleaning of a ship and the discharge of ballast water is a threat to marine ecosystems
    • Dredging causes environmental problems (increased sedimentation) affecting local productivity of the local waters and its fisheries.
  • Social impacts of Port Development:
    • Most port projects and development results in displacement (such as Gangavaram Port in Andhra and Mundra in Gujarat).
    • other important concern expressed by fishing communities is the restriction of access to fishing grounds around a port
  • Manpower and Labor Issues: Lack of adequate training, falling manpower quality, opposition to reform are major issues
  • Unhealthy Competition: Analysts have cited the concerns over development of multiple ports in close vicinity handling similar cargo as it might lead to ports competing for the same cargo arrivals.

Government initiatives

1) Sagarmala program

  • It focuses on modernizing and developing ports, enhancing port connectivity, supporting coastal communities, and stimulating port-linked industrialization.
  • Sagarmala aims to reduce the logistics costs for foreign and domestic trade. It also aims to double the share of water transportation in the modal mix.

2) Jal Marg Vikas project (JMVP)

  • It is a project for the development of National Waterways in India.
  • It was implemented as an initiative towards national integration with an aim to reduce rail and road congestion, carbon footprint, and minimal resource depletion.

3) Central Road and Infrastructure Fund

  • The Ministry of Finance has amended the Central Road Fund Act, 2000 to include a list of projects and infrastructure sub-sectors, including inland waterways, for which the CRF could be used.
  • The CRF has since been renamed the Central Road and Infrastructure Fund.

4) The Draft Indian Ports Bill 2021 aims to centralize the administration of minor ports that are currently managed by state governments.

5) The Inland Vessels Bill 2021

  • Instead of distinct regulations created by the states, the bill attempts to include a single legislation for the country.
  • The registration certificate will be valid throughout the country and state approvals will not be necessary.
  • It also establishes a single database for recording vessel and crew information on an Internet portal.

6) Marine Aids to Navigation Bill 2021: It was passed by the Parliament, incorporating global best practices, technological developments and India’s international obligations in this field.

Way Forward

  • Environmental clearances, Tariff norms, land acquisition etc. need to be standardized and implemented for the port sector so as to boost foreign investments
  • It is important to provide rail and road connectivity to major and minor ports in order to ensure seamless multimodal transport and improve efficiency
  • Priority should be given on expanding capacity and improving operational efficiency. Emphasis should be placed on installing advanced cargo handling processes, scalability in processes and mechanization of port operations.
  • Technologies like big data and advanced GPS navigation systems should be optimally used for better functioning of ports
  • The regulatory regime should be made less complex and less rigid. Further, there should be vertical integration of all stakeholders for holistic development of ports in India
  • Port modernization and new port development, port connectivity enhancement, port-linked industrialization and coastal community development under the Sagarmala project has an immense scope for reduction in transportation and logistics costs and boosting export competitiveness.
  • The government needs to open up the dredging market to attract more players, particularly international players, in dredging activities to increase and maintain draft depth at ports to attract large vessels and enable them to become hub ports.

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