WHILE India’s external trade is soaring with both exports and imports registering impressive growth, the country’s ports sector continues to languish, resulting in huge wastage and delays.
The country’s dozen major ports continue to under-perform and both exporters and importers have to spend more time and money to get their consignments cleared.
In fiscal 2011-12, India’s exports shot up by 21 per cent to $303.7 billion while imports saw a 32.1 per cent rise at $488.6 billion. The external trade adds up to nearly $800 billion and is soon set to breach the $1 trillion-mark. India’s external trade as a proportion of GDP has more than doubled over the last decade and is now almost at 40 per cent.
The bulk of its external trade is carried through shipping, but the ports sector has not seen adequate growth. Worried that the sector would continue to under-perform and slow down India’s global trade, Prime Minister Manmohan Singh, at his recent meeting with infrastructure ministries, emphasised the need to improve performance of the ports.
Officials mentioned a figure of Rs350 billion (about $6.32 billion) for boosting port projects, but the hype behind the huge number was evident just days after the prime minister’s interaction with ministers and bureaucrats earlier this month. Shipping Minister G.K. Vasan said last week that the ministry would award Rs145 billion worth of projects for adding 244 million tonnes of capacity during 2012-13. This would be spread across 42 projects.
Vasan also said two new ports would be established along the eastern coast, one in Andhra Pradesh and the other in West Bengal. However, the ministry’s track-record in developing new ports has been dismal. Last year, for instance, it had planned to take up 24 projects in the ports sector, but contracts could be awarded for just one.
Of course, the shipping ministry is not to be entirely blamed for the delays. Port developers, including private and international players, have to get security clearances from the ministries of home, defence and external affairs. Then there are problems related to land acquisition, environmental clearances and getting other ministries and government departments to build the necessary infrastructure, including roads and rail lines to the new ports.
Many of the private port developers have found the delays frustrating. Even if the federal ministries and departments — including the roads and highways department and Indian Railways — clear the projects, many state governments have the tendency to drag their feet, delaying the setting up of new ports.
ONE of the most glaring instances of how bureaucratic delays and political obstructionism has affected major port projects is the fate of the ambitious international container transshipment terminal at Kochi in the southern state of Kerala. The container transshipment terminal was taken up to attract large shipping lines to Indian ports.
The Indian government decided to promote a container transshipment terminal at Kochi in a joint venture with Dubai Ports World. Though the agreement was signed in 2005, it took six years for the first phase to be completed. And even after the terminal was ready, the requisite infrastructure — including expanding of the national highway and extending a railway line — were unduly delayed.
Sadly, though the terminal was supposed to have handled one million TEU (twenty-foot equivalent unit) containers by the end of 2012, it has performed miserably. In fact, transshipment of containers has virtually come to an end over the past few months, as international shipping firms prefer to deal with the neighbouring port of Colombo.
The main reason for the failure of the Kochi transshipment terminal is India’s cabotage rule, which virtually prevents a foreign shipping line to carry cargo on the domestic route. Many of the foreign liners prefer to call in at Colombo, from where they can send the consignments in smaller vessels to Indian ports. Existing rules prevent them from doing so from Kochi.
Similarly, there are other issues that discourage foreign ships from calling at the transshipment terminal. These include multiplicity of taxes and confusing customs rules. Last November, customs officials at Kochi forcibly got 20 of 60 containers off-loaded from a ship that had picked up the cargo from Tuticorin port for Europe. Customs officials at Tuticorin had already cleared the containers, and their counterparts at Kochi were obviously not supposed to examine them again.
But the dispute has given a bad name to India’s first and only transshipment terminal and has resulted in shipping lines virtually boycotting it.
Traditionally, a bulk of India’s external trade is handled not through the country’s major ports, but through foreign ports such as Colombo, Singapore, Salalah and Dubai. Indian ports do not have the capacity to take in large carriers or containers, either in terms of their draft, or the handling capacity. Consequently, Colombo alone handles nearly 70 per cent of India’s transshipment cargo.
All the leading international shipping firms load and unload cargo from/to India at Colombo, Singapore, Salalah or Dubai, from where smaller ships take the consignments to Indian ports. Besides resulting in delays, it also adds to the costs. But even Indian shipping lines are forced to follow the practice.
Last October, state-owned Shipping Corporation of India selected Salalah as its transshipment hub. Transshipment containers account for almost 98 per cent of the cargo throughput handled by the Omani port, which has a capacity for handling 3.5 million TEUs. Colombo port also handles 3.5 million TEUs of transshipment containers annually, the bulk of it meant for India.
THE Federation of Indian Export Organisation (FIEO) last week released a background paper prepared by an international consultancy on the problems confronting the ports sector. The government wants to encourage public-private partnership (PPP) in the ports sector, but the experience of some of the international players has discouraged potential new partners.