If Prime Minister Narendra Modi’s Sagar Mala project goes according to plan, India will be witness to a holistic development of ports for the first time. So far, the centre and the states have been pursuing port development haphazardly in their own separate ways.
For long, the growth of India’s maritime sector has been hampered by many procedural and policy related challenges, the most important among them being the presence of a dual institutional structure that has led to the development of major ports (those owned by the central government) and non-major ports (those owned by the state governments) as individual projects. The involvement of multiple agencies in the development of infrastructure to promote industrialization, trade, tourism and transportation across the country is another deterrent.
Lack of infrastructure for evacuation of cargo at major and non-major ports leading to a sub-optimal transport modal mix, limited hinterland linkages and its impact on transportation costs, limited development of coastal areas for manufacturing and economic activities, low penetration of coastal and inland shipping, lack of scale and deep draft at ports also contributed to the skewed growth.
In the past, the federal government had tried to widen its reach to include ports owned by the states in its ambit to strike a balance between two set of ports operating in India. But it had to retreat in the face of stiff opposition from the states. The states did not want to cede control of a key infrastructure sector which could be developed through their own policies on private investments without help from the centre.
The blueprint of the Sagar Mala project—an infrastructure-cum-policy initiative being readied by the shipping ministry—seeks to allow the central government to have a say in the development of non-major ports without adopting a confrontationist approach with the state governments.
The initiative, according to the ministry, will strive to tackle all the challenges by focusing on port modernization, efficient evacuation and coastal economic development through a structured framework for ensuring inter-agency collaboration and integrated development. It will provide the necessary institutional framework to enable the central and state authorities to work together for ensuring inclusive growth.
A key element of the project is the setting up of some 10 coastal economic regions (CERs), which will be the focal point for economic development along India’s vast coastline of over 7,000km. Each CER will hold an integrated and comprehensive plan of the area, combining the growth potential of various industrial clusters and economic activities with the upgradation and development of both major and non-major ports simultaneously. The CER will also develop transport systems for land- and water-borne evacuation of cargo from and to the ports on a regional basis, thus ensuring an optimal modal mix.
By linking major and non-major ports, industrial clusters and evacuation infrastructure into a single system at a larger regional level, a CER will enable seamless and efficient movement of cargo through gateways, thereby allowing ports to enhance competitiveness and offer multiple freight options to customers.
Ports will thus be able to actively participate in driving the economic development of a wider region, which is similar to the role large global ports are playing in their respective countries.
The shipping ministry says this will need enabling policies, institutional framework and appropriate funding mechanism for promoting collaborative development.
The Sagar Mala project would be implemented by a company set up at the national level. Each CER will be developed through a special purpose vehicle having equity participation from the state government concerned and the company. The management of the CER special purpose vehicle would vest with the state government.
The project has the personal stamp of Modi, incorporating the port-led development model that he successfully delivered in Gujarat during his term as chief minister. This includes development port-based industrial parks, captive industries and ancillary facilities such as ship repair, shipbuilding, ship-breaking, bunkering, container freight stations, warehousing facilities, industries requiring significant import of raw materials and industries with large export potential. This will ultimately result in more cargo for ports.
The central government’s plan to go for integrated development of the maritime sector and turn the coast into economic hubs through a collaborative approach with the states will eschew the need for a time-consuming and legislative framework to carry out this task. The states, too, have much to gain from such a collaboration because it would ensure funding and other institutional support from the centre.
Sagar Mala would not have come at a more opportune time for the central government-owned ports, many of which are losing market share to non-major ports mainly due to regulatory reasons. Extending a collaborative hand would help stem the rot and allow both set of ports to grow without eating into each other.
P. Manoj looks at trends in the shipping industry.