The ports and shipping industry plays a vital role in sustaining trade and commerce. India has 13 major ports and about 200 non-major ones. According to a recent IBEF report, India currently ranks 16th among maritime countries, with a coastline of about 7,517 km. The government continues to support the ports sector and 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.
¨At present, port-led growth is the main concern of the government and it is not only supporting it but working towards it,¨ says Vijay Kalantri, Chairman & Managing Director, Dighi Port Ltd. ¨After the present government has come to power, the outlook on economy and infrastructure has been positive, which has made it possible to fast-track permissions on the state and Central level.¨ Recently, Rail Vikas Nigam Ltd (RVNL) and Dighi Port Ltd (DPL) signed an MoU to develop rail connectivity from Dighi to Roha integrating the region with Delhi-Mumbai Industrial Corridor (DIMC). Also, ITD Cementation India bagged a DP World contract last year in April-May, and the berth is almost completed now. ¨Recently, the company bagged the JNPT contract for the fourth terminal,¨ says S Ramnath, CFO, ITD Cementation India. ¨With this order, the company´s order book is about Rs 6,800 crore.¨
Also, Man Infraconstruction recently bagged a contract with Pipava Port in Gujarat. Parag Shah, Managing Director, Man Infraconstruction, says, ¨The company is doing work for Phase-II and Phase-III. Until permissions are in place, we do not start the job. That said, for this project, all permissions are in place.¨
What does India need?
Of the entire coastline of India, 10 per cent (760 km) is in Maharashtra alone. Suresh Prabhu, Union Minister for Railways, said at the signing of the RVNL-DPL MoU, ¨If Maharashtra grows by 20 per cent, India will grow by 2 per cent; such is the potential of the state. Maharashtra will automatically develop if the coastal areas have ports and can be connected with rest of Maharashtra through rail-road connectivity.¨
To this, Kalantri adds that India needs a minimum of 20 ports. ¨In Maharashtra itself, we need up to five ports,¨ he emphasises. ¨Establishing more ports will improve productivity, which will improve the economic growth of the state and reduce transaction cost. Today, all the mother vessels come to Sri Lanka and Dubai and we get the smaller vessels. If we are able to develop good ports with better depth, we will get the mother vessels and better cargo.¨
Port development is not just about developing a port but the overall economic growth of the area in the region.
And it reduces transaction cost and generates employment and entrepreneurship. Highlighting the challenges, Shah says, ¨Once the contract is awarded, the contractor will be able to begin work in seven days time. But the process of getting the award is a long one and this is what the government has to cut down on. Even municipality permissions take one to two months.¨ And Kalantri points out, ¨The port sector requires 37 permissions. If the government grants these or reduces the number of permissions, ports won´t be delayed. Second is the problem of land acquisition and third is rail and road connectivity. If all this is in place, there are no further issues.¨ As for the private contractor, apart from local issues there are no major challenges. Ramnath agrees, adding, ¨Challenges are fewer because you don´t have impediments to your work as a port is a relatively free area.¨ On the contractor´s side, Suparna Chattopadhyay, Head-Capex, CMIE, says, ¨There are genuine problems in the sector owing to mismanagement by both ports and contractors for huge projects. Contractors face problems because of a lot of design changes that lead to project delays.¨ On a positive note, Prabhu says, ¨Just like our Prime Minister says, it is necessary to develop ports and imperative to connect our ports to rest of the nation. Thus, the Railway Ministry has decided that, wherever possible, we will try and provide port connectivity.¨
The need is evident. How fast can we do it? That´s the real question.
PORTS: CW´S RECOMMENDATIONS
- Up to 100-per-cent FDI under the automatic route allowed for port development projects.
- Bidding documents like RFQ, RFP and Concession Agreement standardised.
- Enhanced delegation of financial powers to Shipping Ministry to accord investment approval for PPP projects.
- Close monitoring of developmental projects in the major ports.