India’s maritime sector needs workable action plans.
The new shipping minister G.K. Vasan has his task cut out. He has taken over the reins of one of India’s key infrastructure ministries at a crucial juncture.
Like his predecessor T.R. Baalu of the Dravida Munnetra Kazhagam, Vasan also hails from Tamil Nadu, the state that has had the unique distinction of sending several of its politicians as shipping ministers at the Centre over the past 10 years. But unlike Baalu, Vasan belongs to the Congress party, which makes his task a bit easier while working on a 100-day action plan for the country’s maritime sector. Prime Minister Manmohan Singh has asked all ministries to outline their priorities for the first 100 days of government.
For that, Vasan will have to first clear the mess left by his predecessor. For the past five years, the shipping ministry has been trying to expand cargo-handling capacity at its dozen ports, but with no success. The 12 ports, which account for some 70% of India’s external trade by sea, together handled 530 million tonne (mt) of cargo in the year ended 31 March, exceeding the capacity of 529mt.
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The statistics prove that these ports are operating at peak capacity, hurting efficiency and productivity as this leads to longer waiting periods for cargo and delays in the turnaround time of ships. This is evident from the fact that it takes five-seven days for a ship to load and unload cargo at the 12 ports. That compares with just 6-8 hours in Singapore, the world’s busiest container port.
India’s latest private cargo-handling terminal, auctioned by the National Democratic Alliance government, started full-fledged operations in January 2007 at Jawaharlal Nehru Port, India’s busiest container port, near Mumbai. In a little over two years, the new terminal, run by a joint venture led by Danish firm APM Terminals Management BV, has reached its full designed capacity of 1.3 million standard cargo containers a year. The terminal operator was mandated to achieve this cargo volume in the seventh or eighth year of operations as per the terms of the contract. This is a telling sign of the demand-supply mismatch at state-run ports.
To overcome capacity constraints, the Union government had drafted plans to raise the cargo-handling capacity at the 12 ports to 1,016mt a year by 2012 from 529mt now. The additional 487mt capacity will require an investment of close to Rs55,401 crore, of which Rs36,868 crore will come from the private sector, according to the shipping ministry.
But not a single cargo-handling project could be auctioned in the past four years as litigation, triggered by controversial rules related to qualification criteria and short-listing, delayed the process of selecting private operators for developing and operating these facilities.
Vasan will have to take a fresh look at these rules and possibly relax some of the conditions if the government is to attract private investment. A subsidy given to local shipbuilders on export as well as domestic orders, ended on 14 August 2007 after a five-year run. India’s shipbuilders, who have lined up funds worth about Rs20,000 crore to expand existing facilities and erect new ones, are asking for continuance of the subsidy to help them compete with global yards.
A continuance of the shipbuilding subsidy will depend on how strongly Vasan lobbies with the finance ministry, whose support is critical for the reintroduction of the scheme.
A $20 billion (around Rs94,800 crore) investment plan of local shipowners to replace some of their ageing fleet and to expand capacity to carry more cargo, has sailed into rough weather due to trouble-facing global banks, especially ship finance specialists in Europe. Local shipowners are asking the government to set up a corpus of low-cost funds that can be accessed by them to buy ships. The shipping industry also wants the government to grant infrastructure status to ships, a tag that will entitle them to tap some portion of the huge funds and refinance facility pledged by the government-backed India Infrastructure Finance Co. Ltd for infrastructure developers.
Time has also come for the shipping ministry to close endless debates and take decisive steps to promote the country’s untapped coastal shipping sector that has remained neglected for long.
P. Manoj is Mint’s resident shipping expert and writes on issues related to shipping and logistics every other Friday.
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