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New port projects, policy revamp hold the key

Tuesday, 12 February 2013 - 5:32am IST | Place: Mumbai | Agency: dna

It took more than 100 years for the Indian port sector to reach a capacity of 1,247 million tonne (2011-12 figure).

It took more than 100 years for the Indian port sector to reach a capacity of 1,247 million tonne (2011-12 figure). So, the 12th Five Year Plan, which envisages more than doubling that capacity to 2,687 tonne by 2016-17, presents a huge challenge.

Experts said it has not been an impressive run for ports so far. But the industry is keen that the upcoming Budget should change all that for the better.

Although major port-specific announcements are unlikely, the industry is still hopeful that the government will help sort out the current bottlenecks plaguing the country’s 13 major ports (which enjoy a 60% market share) and 60 active non-major ports.

The shipping ministry had said it is still keen to achieve the target of awarding 42 new port projects by the end of this fiscal. According to the ministry, 17 of the 42 projects have been awarded already, a marked improvement over the average of 5-6 awards in the past.
Experts feel that given the slow pace of growth, it is very difficult to attain the target unless there is some stimulus from the government.

“Most of the ‘low-hanging grapes’ – the best locations for ports, that is – have been plucked already. Future projects will have considerably more project management challenges and traffic risks due to increased competition,” said Ganesh Radhakrishnan, PricewaterhouseCoopers’s advisor for government and infrastructure.

One thing is for sure – investment requirements will be met mostly by the private sector, not the government. “So, it may be necessary to consider viability gap funding in this sector to incentivise them,” said Radhakrishnan. “It may also be desirable to consider policy initiatives to fund common infrastructure facilities like dredging, navigational aids and connectivity infrastructure for the private ports, too, if we hope to meet the capacity targets within the time frame.”

According to a Barclays report, the dichotomy of major and minor ports has its own dynamics. Capacity constraints at major ports are pushing traffic to minor ports, which is likely to increase the latter’s market share from around 40% to 45% by fiscal 2017-18.
Big expansion plans for major ports are all fine, but executing them will be difficult, given the slow pace of expansion in the past, said experts. According to the Barclays report, major ports have under-achieved their set targets by almost 63% in the last five years, in terms of absolute capacity additions.

To set matters right, the government has been announcing pro-industry measures. For instance, the  2012-13 Budget had earmarked Rs 5,000 crore worth of tax-free bonds for the port sector. However, the industry is yet to tap the bond market in spite of efforts of some key players.

“The process of awarding public-private partnership or PPP projects for new ports should be streamlined quickly in order to bring the ports sector up to speed,” said K Ravichandran, analyst with ICRA.

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