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Indian Ports’ Growing Rapport

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Dry Bulk,

The volume of dry cargo handled by Indian ports has been growing due to increasing bulk commodities demand. As many of them lack the facilities to handle dry bulk cargo and the documentation and other procedures can be bureaucratic, the question is whether these ports are equipped to meet the projected volume increase.

India is recognised as one of the largest and fastest growing economies today. Despite political uncertainties and a recent phase of disappointing GDP growth, domestic consumption has been rising continuously. This has resulted in a growth in the country’s exports. Logistical infrastructure will have to expand correspondingly to support this rate of growth in trade activities, and this has probably become the single most important need of the present time.

As gateways to international trade, sea ports play a vital role in shaping the nation’s economy. India has 12 major ports, handling approximately 61% of the country’s total cargo traffic. The ‘non-major’ ports are categorised as minor ports. India’s port sector has experienced high growth over time, with significant traffic being witnessed at both the major and minor ports. The rapidly evolving technological advancements, along with higher consumer expectations of quality deliverables, have presented a challenge to its ports and infrastructure, which apparently have a lot of catching up to do.

Inherent challenges today

While the ports in India are now able to handle the largest of sea-going vessels, there is a notable inadequacy in its infrastructure. In order to sustain growth momentum, the country needs to address its port ecosystem.

There are underlying issues that hinder the productive capacity of the industry, some of which are not explicitly visible. For example, the operational procedures adopted are not standardised or uniform in nature. The costs and time involved in undertaking key processes cannot be predicted due to inherent variation across and within various ports. The challenges which ultimately cause costly detention and demurrage can be generalised as follows:

  • Port Congestion.
  • Inordinate customs clearance procedures.
  • Disparity in shipping line charges.
  • Significant amounts of documentation and paperwork.
  • Cumbersome regulatory clearances.
  • Equipment that is incapable of handling large volumes.
  • Deficient dredging capabilities.
  • Outdated navigational aids.
  • Lack of sophisticated IT systems.
  • Lack of training and technical expertise.

Although government ports have always operated under standard procedures and rates, there is an observed lack of flexibility in finding solutions to problems encountered and resolving the issues through negotiation. This is crucial at the operations stage, and enhanced cooperation could help smoothen the process for all parties.

A silver lining: the minor port advantage

While the major ports in the country are plagued by problems, the minor ports seem to be gaining an advantage over time. The minor ports, which are strategically located along most major shipping highways, have a record of growing faster than the government-owned major ports. Take a look at the federal structure, the Central Shipping Ministry administers the major ports, while the minor and intermediate ports are administered by the relevant departments or ministries in the nine coastal states.

The minor ports appear to possess a competitive edge over the major ones. Private ports are comparatively more proactive in providing the much-needed flexibility in problem-solving. Furthermore, there is a greater ease of operation. For example, their tariffs are mostly negotiable and can be adjusted according to the export/import volumes and quantities at hand. This provides a good incentive to trade. Investment in infrastructure and equipment at private ports yield visible results, and they do not shy away from investing in quality. They are also mostly free from other typical bureaucratic barriers.

A 4.8% y/y cargo tonnage increase was registered during the first 10 months of the fiscal year from April 2019 to January 2020. This clearly outpaces the 1.1% growth recorded by major ports in the same period. Bulk cargo such as coal and containerised shipments were the mainstays for the minor ports, apart from petroleum products. These ports captured 46% of Indian seaborne trade for the April to January period, rapidly closing their combined market share gap with the major ports. Much of this growth comes from the Adani Group-owned cargo terminals at Dahej, Dhamra, Hazira, Kandla, Kattupalli, Mormugao, Mundra and Visakhapatnam, which account for nearly 25% of the country’s total port capacity.

A likely conclusion that we can draw from this is that non-major- ports could lead the development era of the maritime industry. With greater flexibility and a forward-looking vision, the private terminals have the power to drive growth.

The Major Ports Authority Bill 2020 and cabotage law relaxation for dry bulk cargo

In a move to provide more autonomy and improve efficiency and competitiveness among the ports, the much-awaited Major Ports Authority Bill 2020 was passed in the latest annual budget (2020 – 2021). It will replace the existing Major Port Trust Act 1963 which governs all government-run ports.

The new bill will grant more operational autonomy to the 12 major ports. If swifter decisions can be made at the port level, it will not only enhance professionalism, but also empower the ports to perform with greater efficiency. Full autonomy and a decentralised decision-making process could lead to modernisation. This will help to boost export and import (EXIM) trade and bring about more employment opportunities in this sector.

When this new Major Ports Authority Bill 2020 comes into effect, the board of the respective port will be able to fix the scale of rates for various port services and assets. They can then also enter into contracts and plan their own development and infrastructure within their port limits.

To read the rest of this article, please download the full Summer issue of Dry Bulk Magazine here.

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