India aims to pour $60 billion into ports by 2020 under a drive to spur the fastest growth in more than two decades and ease bottlenecks stoking the highest inflation among major economies.
The target is part of Prime Minister Manmohan Singh’s planned $1 trillion revamp of choked transport and power networks to achieve faster expansion.
The push must transcend a history of insufficient investment, which has left the world’s most populous democracy trailing a Chinese economy now more than three times larger.
“If there isn’t enough capacity, you lose time and it adds to cost,” said Leif Eskesen, an economist at HSBC Holdings Plc.
India’s clogged harbours put Thermax, a power-equipment maker, at a disadvantage to Chinese rivals for obtaining raw materials and shipping goods.
“It takes 45 days transportation for incoming cargo for me and similar time when I send it to my customers overseas,” said M S Unnikrishnan, managing director of the Pune-based company. “The Chinese can possibly do it in seven days.”
The Indian government is relying partly on investment by companies such as DP World Ltd. and AP Moller-Maersk to lift capability at ports to 3.1 billion tonne by 2020 from 963 million tonne in 2010.
Achieving this objective would enable greater imports of items from electronics to oil, helping damp inflation by better feeding consumer demand.
Deeper berths for bigger container ships also are pivotal to India’s attempt at galvanising exports of items from clothes to cars.
India’s attempt to address port-investment shortfalls stands to benefit builder Larsen and Toubro Ltd, according to Taurus Asset Management Co. Increasing cargo traffic makes Mundra Port & Special Economic Zone a buy, said K R Choksey Shares & Securities Pvt. Ltd.
Port projects worth Rs10,300 crore are under construction or implementation, ministry of shipping figures show.
They involve the government and private enterprise, and include a Rs3,500 crore liquefied natural-gas terminal at Cochin in the south and the Rs1,460 crore development of berths and a terminal in Mumbai.
Larsen and Toubro, India’s biggest builder of power networks and airports, has climbed more than 9% during the last two years. Mundra, a cargo terminal on the west coast, is up 26% in the same period.
Stock prices will recover, corporate-earnings growth will improve and “then you will see substantial performance by the infrastructure sector,” said Sadanand Shetty, a fund manager at Taurus Asset Management.
Investor concern that Europe’s debt crisis and a US slowdown will derail global growth sparked the stocks slide. Even as such risks increase, capacity constraints in the Indian economy are fuelling price pressures, forcing the RBI to fight inflation and protect purchasing power.
The nation has 13 major ports overseen by the central government and 187 smaller harbours, together accounting for 90% of Indian exports by volume. India imports more than it exports and had a trade deficit of almost $105 billion in the last fiscal.
Some terminals are managed by foreign businesses, including APM Terminals, a unit of Maersk, Denmark’s biggest company.
APM operates Gujarat Pipavav Port and a terminal at the Jawaharlal Nehru Port in Mumbai. Dubai-based DP World, the world’s fourth-largest port operator, has terminals at five locations from Mundra in the northwest to Cochin in the south.
The push to add wharves and deepen drafts must overcome a legacy of inadequate investment in a nation that fell 10 places in the infrastructure ranking to 86th among countries in the World Economic Forum’s 2010-2011 Global Competitiveness Report.
Spending on ports may amount to Rs40,600 crore for the five-year period ending March 2012, less than half the original aim, according to the Planning Commission.
Even as obstacles remain, port investment is on course to jump 76% in the five years through March 2012 from `23,000 crore in the previous five-year period, planning commission data show. India’s Maritime Agenda has set a spending goal of `2.77 lakh crore by 2020.
Privately managed ports show the benefits of liberalisation, said Vinayak Chatterjee, chairman of Gurgaon, India-based Feedback Ventures Ltd, which advises on construction projects.
“They are far more aggressive and dynamic and customer friendly,” he said. “Once allowed to implement and operationalise, they deliver.” Bloomberg
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