The ‘silent revolution’ in the Indian ports sector is still waiting to happen
Port protagonists, particularly in New Delhi’s corridors of power, often cite the performance in this sector as a “silent revolution”. Statistics on tonnage handled, capacity created, public private partnerships (PPPs) achieved and efficiencies recorded are offered to suggest that impressive progress is being made; and that unlike power, roads and airports, the ports sector is not getting the attention and visibility it deserves.
Is this true?
My colleague Neeta Ramnath, who is passionate about the ports sector, readily agreed to take this question head-on along with me.
India’s major ports handled 561 million tonnes in FY10, reflecting an average growth of under 4 per cent in the last two years. Since the economic downturn had stretched over a longer period in the developed world, the ports sector in India was hit more severely than most other economic segments. Hence we may not be able to reach definitive conclusions from statistics on tonnage alone.
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Let us look at PPPs in the ports sector. The PPP movement, which started in the 1990s, has taken firm root and definitely provides a positive flavour to the ports sector. In the last 10 years, approximately 40 private concessions have been awarded in major ports, while over 60 minor port PPPs have been planned (see diagram).
The concession document in major ports is fairly standardised and well accepted.
The pace of the PPP implementation, on the other hand, has been slower than expected. The government had planned to award over 25 major port concessions in 2009-10, but ended up awarding only 13. Several minor port licences have remained on paper; in fact, only 10 out of the 60 minor ports are operational or close to being operational.
Let us now turn to issues of capacity-addition effected, turnaround times and scale that allow us to get a sense of real progress in ports, or the lack of it.
Capacity addition
Chart-1 shows planned investment during the 11th plan, and what we are likely to end up achieving. The revised 11th plan (of Rs 40,600 crore) is less than 50 per cent of the original plan.
Efficiency
Chart-2 shows that the average turnaround time for ships unloading and loading cargo at India’s major ports has actually gone up in 2009 compared to 2008. It is over four days in India compared to 10 hours in Hong Kong.
Scale
India’s first trans-shipment container terminal is under construction at Vallarpadam in an attempt to create a hub for container traffic – on the lines of Colombo and Singapore. Although delayed, this is a welcome step. Currently JNPT, India’s largest container port, ranks 24th amongst the world’s busiest container ports. JNPT handled over 4 million twenty-foot equivalent units (TEUs) in 2009 compared with more than 26 million TEUs handled by Singapore in the same year. In fact, 10 of the world’s busiest 25 container ports are in China. Despite India’s massive growth, JNPT’s ranking has not changed in the last five years. Our best ports do not have the channel depth to handle large vessels or achieve scale.
This brief overview leads to the question: “What really ails the India’s ports sector?” Outlined below are four dimensions that are known to require attention.
Planning
New capacity at major ports is often planned with total disregard to market realities or the existence of minor ports in the vicinity. Examples include the container terminal planned at New Mangalore port — it received no bids when it was bid out recently. Container shipping thrives on a magnet effect. A port needs to have many main line vessels calling at high frequency for customers to use the port, and main lines come only when they see high volumes. The Indian coastline can afford a maximum of four to five container ports. India should be concentrating on strengthening these ports rather than creating new container facilities at every Indian port. There is no central body planning the number of ports required in different parts of the country. Hence each state has been doling out port licences, several of which are not viable.
Evacuation
Evacuation constraints have been the single biggest concern at ports. Constraints are primarily linked to rail line (JNPT, Krishnapatnam and so on) and, to a lesser extent, road connectivity and related urban congestion (Chennai and Ennore). The ministries of rail, roads and shipping need to work in tandem on this issue. Hopefully, the high-powered Rakesh Mohan Committee on Transportation will address this issue.
Asset upgradation
Most major ports suffer from low productivity and high manpower due to their governance structure and legacy issues like unionisation, low mechanisation, low incentives for faster turnaround and so on. Though new capacity is required, it is high time major ports started finding ways to be efficient landlords, and gave out operations and management on PPP basis — not just of berths, but also other assets that they hold. By doing so, the port trusts would be able to focus their resources on the main issues of dredging and port planning.
Click for the Graph
Governance
Most reform discussions in the Indian ports sector focus on tariff setting. Though tariff setting is a critical issue, it is a small issue compared to the fact that the Indian ports sector requires a major institutional overhaul. It is high time India had a world-class Independent Regulatory Authority for Ports (IRAP), subsuming the current Tariff Authority for Major Ports (TAMP).
* IRAP needs to have powers over major port trusts as well as state maritime boards to be able to perform its function effectively. The body’s primary responsibility should be to plan port capacity based on an overall master plan for the development of the Indian ports sector.
* IRAP must also be given authority to work with the ministry of rail and roads to develop and modify the PPP framework for facilitating private investment in rail infrastructure for port connectivity.
* IRAP should initiate revamping the governing trusts of the major ports to bring professional management into the governing bodies of all the major ports.
This overview of the Indian ports sector leads to the impression that the so-called “silent revolution” may be just too silent for comfort.
The writer is the chairman of Feedback Ventures. The views expressed here are personal