Published on August 16, 2013

India has a 7,517 kilometer long coastline and thus plays a pivotal role in maritime transporting. Most of the cargo ships that sail between East Asia and America, Europe and Africa pass through Indian territorial waters. The Indian port sector, with 12 major ports and more than 180 minor ports offers huge international trade capabilities. With the port sector being an essential part of national infrastructure, the Indian Government has undertaken measures to ensure development and expansion of this sector. As a result of government undertakings, the Indian port sector now offers investors with extremely beneficial investment opportunities.

Port traffic at major and non-major ports is expected to increase at a compound annual growth rate (CAGR) of 22 % and 5.5 % respectively over FY12-14. Indian ports handled a total of 930.2 MMT cargo in 2012. India’s 12 major ports account for nearly 58% of the total cargo shipped through the country’s ports. In the first quarter of this year the major ports handled 137 million tonnes (MT) of goods. The container cargo volumes at these 12 ports were assessed at 1.87 million standard containers during the first quarter. The total cargo volume handled by Indian ports is expected to reach 1,225 MMT by FY14. The current year is expected to witness execution of 29 projects that would enhance capacity of 208 million tonnes per annum (MTPA) at an estimated cost of US$ 8.8 billion. Non-major ports are also likely to profit from the strong growth in India's external trade.

Now let’s take a look at some of the important developments that helped the sector achieve greater heights. Government efforts to boost this sector have encouraged increased participation of the private sector- domestic as well as foreign. The private sector in the recent years has contributed to the port logistics services. Special Economic Zones (SEZs) are being established in the vicinity of several ports, which will benefit the industries established in the said zones. SEZs are being developed in Mundra, Krishnapatnam, Rewas etc. Specialist terminal -based ports that comprise of terminals dealing with a particular type of cargo has become a successful trend. Such terminals are useful for handling specific cargo such as LNG, which require specific equipments, and also lead to the best possible use of resources and increased efficiency. Some of the major ports like JNPT, Visakhapatnam etc. have a service port model which enables the port authority to act as the regulator and landlord while private companies carry out port operations. Indian ports have strongly benefitted from the country’s growth in external trade. Ports handle nearly 95 % of the trade volumes, thus increased trade has contributed significantly to cargo traffic. Furthermore, India being the largest importer of coal has brought in more business for the port sector. Majority of the coal imports are transported via sea which will lead to a significant increase in cargo traffic. With private ports expanding their coal handling capacities, non-major ports are also preparing to handle majority of coal imports in the future. Growing demand for crude is likely to further boost the sector. Strong GDP growth has led to a rise in energy demands; the country currently meets about 75 per cent of total crude oil demand by imports. Private ports have succeeded in attracting a huge share of the crude import traffic.

Government has played a key role in developing this sector. Government efforts quickened the pace of the Public-Private Partnership Model (PPP) project award process. The government is still waiting to achieve their target of awarding 42 projects under the PPP model. Furthermore, to prevent delays in projects getting security clearance the Shipping Ministry has formulated a new security clearance policy. The Cabinet Committee on Economic Affairs (CCEA) has approved establishing major ports in West Bengal and Andhra Pradesh. It has also approved projects for expanding the iron ore handling capacity of the Visakhapatnam Port Trust, which will not only generate ample employment opportunities but will also lead to socio-economic development of the region.

The Indian Government has permitted foreign direct investment (FDI) of up to 100 per cent for construction and maintenance of ports and harbours. The National Maritime Development Programme, a government initiative, aims to achieve an all-round development for the Indian maritime sector and to enhance the capacity of this sector by 429 MMT. The programme will include 251 projects such as construction of new berths, rail/ road connectivity projects and is estimated to cost nearly USD11.8 billion.

Recently the Shipping Ministry decided to free major ports from tariff jurisdiction, a move made to increase the flow of foreign investment and to quicken the pace of capacity expansion at the said ports. The new tariff regulations will enable the major ports and not TAMP to determine market linked tariffs. Efforts to raise funds for infrastructure such as roads, ports and power plants are likely to see a sudden boost as the government has decided to sell tax-exempt bonds. Prime Minister Manmohan Singh intends to double the expenses on public work projects to $1 trillion by 2017.

Another major development has been India's $100 million investment in Iran's Chabahar port. This Iranian port holds strategic value for India as it will give India direct access to Afghanistan without having to depend upon a hostile Pakistan. India will also be able to import minerals from Afghanistan's Hajigak iron mine through the same route. Chabahar will enable India to ship goods and supplies. Afghanistan is completely surrounded by land and thus the said Iranian port will help the country reduce its dependence on Pakistan.

It is likely that by the end of 2017 port traffic for India’s major ports will be 943.06 MT and 815.20 MT for its minor ports. India also aims to triple cargo-handling capacity at its ports to 3.2 billion tonnes by 2020. This sector is definitely full of promises and can do wonders for the Indian economy. With a quicker pace of development it can definitely mark great progress in the years to come.