Should the Sagarmala project be scrapped?

DEBATE

S S KULKARNI
Secretary General,
Indian National Shipowners Association

The change of guard at the Centre has led to speculation over the fate of the over-Rs 1 lakh crore Sagarmala project announced by former Prime Minister Atal Bihari Vajpayee on August 15, 2003, in his address to the nation.

The fact that this question is being asked underscores the importance that is attached to the project by not only the entire Indian maritime sector but also prospective foreign investors, the media and even the common man. This one announcement has ensured much-needed attention and mileage for a so-far neglected sector.

Strictly speaking, nothing new was announced by the former prime minister. Only a new name was coined "" Sagarmala, a diamond-studded necklace, representing the shape of the mainland Indian coast dotted with numerous ports.

It encompassed all the existing project proposals under the consideration of the shipping ministry. All these projects were brought under one roof and a catchname was given. Just like the Golden Quadrilateral, Sagarmala became an ambitious programme.

The khichdi had all the ingredients: development of ports, shipping (coastal and inland), shipyards, maritime training/university and so on. Even the tonnage tax demand was made a part of the programme.

An outlay of over Rs 1 lakh crore was announced, out of which 85 per cent was expected to come from private initiatives and the shortfall of up to 15 per cent was to be met by the government.

One of the controversial proposals that attracted immediate protests from the industry was the fresh levy of 5 paise a kg on all cargo handled at the ports, to partly fund the programme. Another over-ambitious proposal that also drew criticism was the building of a port every 75 to 100 km on the entire stretch of the Indian coastline.

I feel that the levy of this cess to fund the programmes is not correct because this will ultimately be passed on to India's exporters and importers and will affect the country's export competitiveness.

Further, a rethink is needed on the need to have a port every 75 to 100 km. Are so many ports required? Does the projected growth in cargo warrant this?

Just when the Sagarmala project started becoming a talking point and even as the Cabinet approved some of the components of the programme, there was a change of guard. Obviously, there were question marks on the continuation of many of the schemes of the earlier government.

But it was heartening to note that the recent Budget speech of the finance minister had several references to the maritime sector, even if there was no mention of Sagarmala. Some of the Budget highlights pertaining to ports and shipping are:

Infrastructure: An inter-institutional group has been formed by a group of financial institutions and banks "" Industrial Development Bank of India , the Infrastructure Development Finance Company, State Bank of India, Life Insurance Corporation of India, ICICI Bank, Bank of Baroda and Punjab National Bank "" that will look into the projects, including sea ports, and ensure speedy conclusion of the financial agreement and implementation of the project. A sum of Rs 40,000 crore is to be made available as and when necessary.

International Container Transhipment Terminal (ICTT) at Vallarpadam: The government has, in principle, agreed to the construction of an ICTT at Vallarpadam in Kochi port on build-operate-transfer basis. High priority has been given to the development and expansion of port infrastructure to take full advantage of the location.

Sethusamudram Ship Canal Project: This long-standing demand has been, in principle, agreed to; the environmental impact assessment study has been completed by the National Environmental Engineering Research Institute; and they are now finalising the techno-economic feasibility report. The ministry of shipping has proposed to establish a Special Purpose Vehicle (SPV) that will raise funds for the project, with the government participating in the funding through a mix of equity support and debt guarantee. The Union Budget has also announced the introduction of the tonnage tax regime for the shipping industry.

Looking at the above provisions, one can safely assume that Sagarmala is likely to continue sans the name. I would also like to throw my weight behind the proposal but feel the government should relook the issue of levy and ports being built in such proximity.

MICHAEL PINTO
Former Shipping
Secretary,
Government of India

Planners have targeted a modest increase in India's share of global trade from the current level of 0.67 per cent to 1 per cent by 2007. This will mean an increase of about $ 40 billion in the country's foreign trade.

Typically, about 90 per cent by volume and 75 per cent by value of India's foreign trade passes through the country's sea ports. To achieve the targeted increase, therefore, it will not be enough merely to boost our exports.

We will have to crank up India's port infrastructure to bring it on par with international standards and boost the country's fleet so that a greater share of our foreign trade uses Indian bottoms.

It was these and other allied tasks that the former prime minister had in mind when he announced the launch of the Sagarmala project on Independence Day last year.

In a sense, Sagarmala is a continuation of other moves to upgrade the country's infrastructure to world standards and should do for the maritime sector what the Golden Quadrilateral project did for the road sector.

By 2006-07, traffic in India's sea ports is projected to rise from the current level of 412 metric tonnes to about 565 metric tonnes.

Unless ports are modernised and linked to the Golden Quadrilateral by a network of high-speed expressways, they will not be able to handle this level of increase. This is an important component of Sagarmala and it ably complements the achievements of the Golden Quadrilateral.

Sagarmala covers all aspects of maritime development. It seeks a facilitative environment in which India's shipping tonnage, which currently languishes at barely 7 million gross registered tonnes, can achieve its full potential.

It emphasises the importance of modern training so that the country can maintain and even expand its traditional role as the main supplier of technical manpower to the global maritime industry. Given the competition the country faces from late entrants like China, Myanmar and the Philippines, this emphasis has not come a moment too soon.

Sagarmala will give a boost to coastal shipping. We have a huge, 7,500 km-long coast line, but have done practically nothing to exploit it. Instead, we have spent vast sums to build roads and railways without realising that our coastline is akin to a national waterway that has been built and is being maintained for us by nature.

By establishing small, low-cost ports with multi-modal connectivity to the hinterland at strategic locations along the coast, Sagarmala will give a fillip to coastal shipping and, therefore, to employment.

Not only will the coastal vessels have to be manned, but India's nascent ship-building industry will get a much-needed shot in the arm. Both activities will provide employment exactly where it is most needed: in small, decentralised communities that the country's rapid economic growth has left relatively untouched.

No less important is the initiative proposed under Sagarmala to develop inland waterways as a viable means of transportation. The efficiency of this means of transport has never been in question. It is estimated that one litre of fuel can move 24 tonne kilometres (TKM) by road, 85 TKM by rail, but 105 TKM by inland water.

Yet our inland waterways have been neglected to the extent that their draft is unreliable, jetties for handling cargo simply do not exist and multi-modal connectivity to the hinterland has never been planned.

A special package for developing this sector will be at the core of Sagarmala. The state will ensure that the necessary infrastructure is in place leaving it to private individuals to operate vessels.

Given that Sagarmala does no more than to bring the different development projects for the maritime industry under one umbrella, thus enabling policy makers to take a holistic view, it is difficult to understand why there should be any opposition to it.

The expectation is that funding will be partly by budgetary grants, partly by private sector participation and partly by a cess to be levied on cargo handled at Indian ports.

The last could have the effect of making Indian ports more costly than they currently are, but, provided that the amount levied is nominal, the increase can probably be absorbed by the trade.

The project represents government's determination to complete the unfinished task of bringing all the country's infrastructure on par with international standards. As such, it deserves our unstinted support.