India’s creeping port acquisitions open a sea of opportunities for local firms

Sittwe, where India has already invested $500 million, faces challenges as taking cargo to Mizoram or Tripura from there will need a strong road link often through territories that are alternately held by Myanmar and rebel forces.  (PTI Photo) (HT_PRINT)
Sittwe, where India has already invested $500 million, faces challenges as taking cargo to Mizoram or Tripura from there will need a strong road link often through territories that are alternately held by Myanmar and rebel forces. (PTI Photo) (HT_PRINT)

Summary

  • After Maldives, which has begun to hand over its port at Male to China, the involvement in Sittwe signals victory for India at the opposite end of the Indian Ocean

After Chabahar, India is reportedly on course to gain the rights to operate a second overseas port, Sittwe, located in the Rakhine state of Myanmar. There is though no official corroboration yet.

Ports in the Indian Ocean have become hot property as China on one side and the India-US combine on the other race to invest in them. The pace is quickening given the Ocean's growing role as a key global trade corridor for commodities. After Maldives, which has clearly begun to hand over its port at Male to China, the involvement in Sittwe signals victory for India at the opposite end of the Indian Ocean.

China is hamstrung as it does not have direct access to the Ocean. All its export and import trade has to operate through the narrow Straits of Malacca, so it feels threatened in a world where the security of supply chains has become one of the most significant concerns. 

India is hamstrung in another way as it has shown little interest in securing its own supply chains and has only recently woken up to the risks this poses.

Acquiring strategic interests in ports is a costly endeavour. It costs at least $1 billion to develop a basic port infrastructure anywhere in the globe. Doing it abroad also means having to invest in the tricky geopolitical dynamics. 

At Chabahar, where India operates two terminals, one a container and the other a dry cargo, the Iranian government has mandated an annual ratification of India's ten-year lease. This requirement raises the costs for India Ports Global Ltd, the same company that will run the Sittwe port.

This is further complicated as conventional economic wisdom will say many of the ports in the Indian Ocean do not have a very clear economic rationale for their expansion. The nations hosting them lack the market depth to make the ports viable.

For instance, the most prominent of these, Hambantota on the Southern tip of Sri Lanka, in which China has been investing, off and on since 2017 is on a 99-year lease. The $1.3 billion investment that China plans there is unlikely to show any recovery well into the middle of next decade, according to experts. 

Clawing traffic out of Colombo port, with its huge transhipment business, will be a tall order. Sittwe, where India has already invested $500 million, faces the same challenge. Taking cargo to Mizoram or Tripura from there will need a strong road link often through territories that are alternately held by Myanmar and rebel forces. 

Yet ports need these deep hinterland linkages without which operators cannot expect returns. Chabahar for instance, needs a few hundred kilometres of rail link to connect with the projected International North South Trade Corridor. Iran has been keen that India should finance the project.

Why then the interest in ports along the Indian Ocean? One is the strategic concerns. It will be hugely disconcerting for India to have a China-operated port with Sittwe so close to its borders. Hambantota gives a strategic advantage to the Chinese navy that it cannot get from elsewhere.

Even larger is the advantage these ports offer for expanding into the huge wealth the oceans provide. Particularly one like the Indian Ocean. Each of the critical minerals that the world needs to pivot away from fossil fuels is sparsely located onshore but nestled deeply in the Ocean. 

There is no way any major nation will sign on to any international maritime treaty like the ones being debated by International Maritime Organisation, or IMO, without first securing its own rights. India itself has not signed more than a dozen of these conventions to ensure its exploration rights in the deep waters are not circumscribed. This is not unjustified.

The waters are where the nations are stepping into. It will be foolhardy for India to sign away its rights at this juncture without examining the consequences. Realizing that there is no further time to delay, India has just begun updating its maritime laws to take advantage of these possibilities. 

India’s basic maritime law has not been updated since 1976. Several consequences flow from this. Indian companies have been asked by the government to prospect the oceans, but they run the risk of flouting international rules and therefore inviting sanctions. 

Measured in terms of nautical miles, the distance from Indian ports in the Bay of Bengal may exceed the Indian exclusive economic zones. But if a company, say was exploring from Sittwe, it would be able to foray into the deeper reaches of the Bay without inviting trouble. This is just one, albeit a powerful example.

Clearly, the time to tap into the maritime economy has arrived. The scaffolding in terms of ports has just begun to get constructed. Sittwe is one of those.

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