India can save $30 bn by moving part of trade closer to ports by 2020: EY

The EY report 'Knowledge Paper on Port Sector' was released by Andhra Pradesh Chamber of Commerce

India can save up to $ 28 billion in infrastructure investment and another $ 3.3 billion in transportation cost if 50 percent of overall trade moves closer to ports by 2020, according to a report prepared by the professional advisory services firm EY (formerly Ernst and Young).

India ranked as low as 126 out of 189 countries on total cost of trade while China and Germany are ranked at 98 and 18 respectively, the report said.

The EY report "Knowledge Paper on Port Sector", which was released by Andhra Pradesh Chamber of Commerce, maintained that the non-major ports on the eastern and western coasts can play a pivotal role in port centric industrial development thereby achieving cost competitiveness through optimsation of network and logistics.

Emergence of industrial clusters near the port, consolidations of distribution centers and warehouses post GST and directional distribution of cargo can address the infrastructural bottlenecks and can reduce the average in-land logistics cost by as much as 68 percent, it said.

While major ports are facing increased congestion owing to constraints in their ability to expand any further, non-major ports in India have a bigger scope for development, according to the report.

"For example, Mundra port and SEZ on the west coast is spread of 23,000 acres whereas Krishnapatnam on the east coast has a land bank of around 6,800 acres for the primary port area and another 13,000 acres was earmarked for industrial development. These ports also have drafts in excess of 18 meters on part with international standards, it said.

An important shift that has been observed over the last 10 years is the emergence of non-major ports, in FY16 their share increased to 43 percent, according to the report. Non-major ports have come up at strategic locations and are expected to emerge as better choices compared to major ports on the back of modernisation, efficiency and better infrastructure, the report suggests.

Potential transhipment hubs in India

Cabotage law hindered transhipment volumes at many terminals which are otherwise strategically located and benefited foreign ports such as Colombo which commands the largest share of India's transhipment volume in FY15 accounting for 48 percent of traffic whereas Singapore commands 22 percent traffic.

It has suggested further modification of the regulatory framework to facilitate the creation of additional transhipment hubs on both the east coast and the west coast.