Mumbai: India is likely to miss the target of increasing the capacity of major ports as the government has awarded only one out of 23 proposed projects, according to two senior shipping ministry officials.
The government had identified 23 port projects for the current fiscal year to increase the capacity of ports in India by 236.63 million tonnes (mt) a year with an estimated investment of Rs 16,743.92 crore, according to Maritime Agenda 2010-20, a shipping ministry plan for the development of the maritime sector.
The country’s major ports play a key role in facilitating external trade, which accounts for 40% of India’s gross domestic product (GDP).
Capacity constraints: A ship docked at the Jawaharlal Nehru Port in Navi Mumbai.
The delays will cost the Indian economy a significant chunk of GDP growth that could have been otherwise realized, according to Manish Saigal, executive director and head (transportation and logistics) at consulting firm KPMG.
Saigal said the actual spending in the 11th Five-Year Plan was less than half the original projection. For instance, under the National Maritime Development Programme formulated for 2005-12, about 276 projects were proposed till 2012, while the number of projects completed till FY10 were just 50.
Mint’s P.R. Sanjai says the India will probably fall short of its own targets for expanding capacity at ports, thanks largely to security issues
“We are likely to miss the port capacity target for this year as many of the projects are stuck because of security clearances. We are expecting a couple of security clearances in the week, but we will still fall short of awarding projects this fiscal,” said a senior shipping ministry official.
Two projects in V.O. Chidambaranar Port (formerly Tuticorin Port) and one in Visakhapatnam Port Trust are likely to get clearance shortly, he said.
Union shipping minister G.K.Vasan said the ministry may not be able to award the projects because of litigation and security clearance.
“We have set up committees to speed up security clearances for the projects. I cannot offer comments on the projects mired in litigation. But we expect to award at least 60% of the projects in numbers,” Vasan said.
The ministry will award at least five projects in the next two weeks, he said.
Out of the 23 projects, a project for development of a fourth container terminal at Jawaharlal Nehru Port Trust (JNPT) on a build-operate-transfer basis was awarded to PSA Mumbai Investment Pvt. Ltd. on 26 September.
One of the officials said a second project will be awarded to Mundra Port and Special Economic Zone Ltd as it has emerged as the highest bidder for the Rs 1,036-crore project to build a bulk cargo-handling terminal at Kandla port. Mundra port has offered to share 25.09% of the annual revenue from the terminal at Kandla Port.
The existing port capacity of the major ports as on 31 March is 670.13 mt. Indian ports handled total cargo traffic of around 870 mt in 2010-11, and 66% of that was handled by the major ports. The maritime agenda envisages that traffic is expected to rise to around 2,495 mt by 2020. To cope with the volume of traffic, the government wants to increase the capacity of ports to 3,130 mt by 2020 with an estimated investment of Rs 2.77 trillion.
KPMG’s Saigal said persistent delays have critical implications, including cost and time overruns that ultimately make projects financially challenging to implement in addition to the loss of efficiency and business opportunity that such projects could have brought to the marketplace if they had been realized in time.
“Further, such delays also negatively impact investor sentiment, making them more sceptical about investment decisions (target and timing),” Saigal said.
About 90% by volume and 70% by value of the country’s international trade takes place through ports.