Cochin, India - January 15, 2016: The International Container Transshipment Terminal (ICTT), part of the Cochin Port, Kerala, India. Cochin Port is a major and is one of the largest ports in India. The modern port was established in 1926.

A new chapter in India’s shipping history

India’s coastal contours resemble a necklace and its new national program, with a symbolic name - Project Sagar Mala (meaning Ocean’s Necklace) - aims to accelerate economic development by harnessing the potential of its coastline. Find out why this initiative is making waves in the country and what it means for the maritime industry.

Text: Asha Gopalkrishnan Photo: iStock / Gilitukha

Come November, and the river Mahanadi in Cuttack, the former capital city of eastern Indian state, Odisha, will turn into a sea of colour and light, as small boats made of coloured paper, cork, and banana tree barks will be set afloat with lamps to celebrate the historic festival Bali Yatra, which literally meansa voyage to Bali’. The week-long fair that draws over a million people every day, each year, commemorates the state’s ancient maritime legacy – a time when Odisha’s traders used to set sail to distant lands of Bali, Java, Sumatra, Borneo, Myanmar, Japan, China, and Sri Lanka to forge trade and cultural ties.

India’s maritime trade has flourished manifold since then. About 95% of India's trade by volume and 70% by value takes place through maritime transport. But with a coastline of over 7500 kilometres, 12 major ports and 200 non-major or minor ports, there’s still a lot to be desired.

“Development of port and coastal region is a sure shot way of developing the economy,” says Ramesh Singhal, Chief Executive of i-maritime, a Mumbai-based consultancy.

“In 300 years of industrialisation, most of the economic development has happened along the coast or on the coast. Look at global cities like Singapore, Dubai, Hong Kong, London, Tokyo, New York, San Francisco - everything is by the coast,” he points out.

There is merit in his argument. Even in India, three (Mumbai, Kolkata, and Chennai) out of four metros are coastal metros with active trade flows. According to a recent government study, the contribution of maritime states to India’s GDP is close to 60%. This explains why there is a renewed impetus on developing India’s maritime sector through a national program – Project Sagar Mala.

The International Container Transshipment Terminal (ICTT), part of the Cochin Port, Kerala, India. Cochin Port is a major and is one of the largest ports in India. The modern port was established in 1926. (photo: iStock / Gilitukha)
The International Container Transshipment Terminal (ICTT), part of the Cochin Port, Kerala, India. Cochin Port is a major and is one of the largest ports in India. The modern port was established in 1926. (photo: iStock / Gilitukha)

Betting on the ports of India

This strategic project by the Indian Shipping Ministry aims to pave way for port-led industrialisation in the country, which has long been constrained by factors such as high logistics cost and poor linkages between industrial and logistics infrastructure. Since the turn of the century, India’s major ports (categorised as those under the central government) have lost about 20% of their total cargo to minor ports (categorised as those under private players or state governments) due to inadequate capacity and longer turnaround time - the time taken to unload and reload freight.

A recent report by McKinsey states that waste caused by poor infrastructure, costs India around USD 45 billion per year, or 4.3 percent of its GDP. According to a government report, due to poor port infrastructure and productivity, India’s trans-shipment cargo is handled at South Asian hubs like Colombo or Singapore, which costs Indian ports around USD 230 million in revenue annually.

But all this is expected to change soon. With over 150 initiatives under its belt, the Sagar Mala project promises to script a new story for India’s coastal regions.

“I don't think any country has an ocean-led growth initiative,” Singhal points out. “It is very unique to India,” he adds.

The program’s framework encompasses the entire value chain. It includes building new mega ports, improving port infrastructure, modernising ports, augmenting the capacity of ports, creating efficient evacuation systems through rail and road linkages, identifying coastal economic zones and developing urban centres next to ports.

“There has to be a balance though - between modernisation, creating more capacity, and setting up new ports,” notes Singhal. He believes setting up new ports is not critically required at the moment since there is already an excess capacity compared to trade requirement, but focusing on modernisation could help because paybacks are much faster in the latter.  

Crowd at the beach of Chennai
Crowd at the beach of Chennai (photo: iStock / robas)

Knowledge sharing between public and private ports

Private port players in India would agree. They are not only quick in executing capacity expansions and undertaking infrastructure upgrades, but also in seeking out international partnerships to grow their businesses. Private players like Adani, Essar, Krishnapatnam port, among others, are rewriting the rules of the game.

“Efficiency and margins of India’s private sector ports are the best in the world,” says Singhal.

“In the last 10 years, private sector ports have grown by 13% with operating margins of 60-65%, while government sector ports have grown only by 3-4% with operating margins of 20-25%,” he explains. To improve their margins and be able to face stiff competition from minor ports, public or major ports will have to gauge the requirements of the future and modify their offerings accordingly.

Take the changing nature of cargo, for example. “So far, almost 50% of the 1.1 billion tonne cargo handled by India has been through commodity-based industries like power plants, steel, refineries, cement plants, and fertilizer plants, to name a few, but in the next 10-15 years, containerised cargo with high-end electronics, textiles, automobiles, for instance, will drive economic growth,” pre-empts Singhal.

Public ports are taking notice. For instance, Jawaharlal Nehru Port Trust or JNPT in Mumbai – the country’s busiest and largest container port - is fixing its congestion issues by automating cargo processes and gate systems, introducing inter-terminal trucking system linking all terminals, creating a logistics data bank to track movement of containers, and introducing new tariff incentives for rail cargo to drive up intermodal volumes.

The results are outstanding. Container dwell times have fallen dramatically. From an average of 11 days for imports and 88 hours for exports, it has now reduced to 1.5 days and 63 hours respectively. Easing of congestion has also improved communication between stakeholders and terminals thereby introducing a collaborative working mechanism.

This is a good sign. “If public ports become more efficient, it will mean huge economic benefits for India,” acknowledges Singhal.

The domino effect

Additionally, the trickle-down effect of the various initiatives under Sagar Mala project will benefit different segments and players. While building small, low-cost ports with multi-modal connectivity to the hinterland (at strategic locations along the coast), is expected to give a fillip to the coastal shipping sector, the initiative to develop inland waterways as a viable means of transportation will reduce cost and time for transporting goods. This will benefit industries and boost the merchandise export to a much higher level.

The umbrella project will also open doors to dredging opportunities in the country, which will enable berthing of larger vessels at ports.

That’s not all. Employment opportunities, for local communities around ports, are expected to rise. “This is where a 1000-fold multiplier effect will come into play. So while a port could employ only 1000 people, a nearby industrial centre would employ one million people,” explains Singhal. “In short, ports could become a conduit for industrial, economic, and urban development,” he sums up.

It implies that development of coastal areas would indeed have a domino effect on the overall economy of the country. In the years to come, India may have a new reason to celebrate. But until then Bali Yatra will remain symbolic of the country’s maritime history.  

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