From Anil Nair in Mumbai
The new draft maritime policy published in July this year states that the Government has plans to spend Rs 61,000 crore over the next 10 years on 228 projects to expand port capacity and upgrade infrastructure. The plans are grand and will change the economic landscape of the country. In a recent conference on infrastructure in Mumbai a port-user asked the Union Shipping Minister a benign question: ??Can we have a situation where there is more spare capacity in the ports in India and the importer can choose the port of his choice??? Choosing the port of landing imports, or even exports, usually depends on the access roads and other facilities provided by the port and the cost. But the way trade has been growing, which is commensurate with the way the economy has been developing in the last decade, most experts do not believe that situation will ever come true. Not that the government is not trying, but it is not trying hard enough. The recent floods devastated the infrastructure in Mumbai completely, laid bare the fallacy of converting Mumbai to a world-class city. Most other cities and infrastructure in the country sail in the same raft. The controlled indignation of the software industry on the failing infrastructure in Bangalore is instructive.
The government has embarked on a Rs 1,52,000 crore project to build roads of international quality which would run 30,000-mile across the landscape of this country. The project will be completed by 2012. But the experts are skeptical about the infrastructure development. Because the investment plans made by the government towards infrastructure amounts only to about six per cent of the GDP (gross domestic product). China, India'snational role-model, invests about 20 per cent of its GDP in developing its infrastructure, which becomes evident when you travel across that country. So how much money, we ask the experts, does India need to employ in infrastructure to make 7+ per cent GDP growth. The consensus is that India will have to spend at least 10 per cent of its GDP in infrastructure; this figure does not, admittedly, take into account the high levels of corruption prevalent in India which could distort the outcome.
The plan to invite FDI through Indian players in the modernisa-tion of the Mumbai and New Delhi airports is demonstrative. Couldn'tthe government come up with such a policy for the seaports too. Most of the Indian ports being owned completely by the government, efficiency and return on investments are pathetically low. Interestingly, the handing over of rights to operate the ports and terminals to private operators has resulted in the operators collecting shipping fees and paying the government royalties. It has to be noted that today nearly a third of the total cargo is handled by private ports and terminals in some states like Gujarat. Private docks have a turn-around of 10-12 hours which is remarkably better than earlier three days for ships to unload and load. P&O Nedlloyd of the Netherlands which operates one terminal in Mumbai'sNhava Sheva port and another in Chennai bought over Mundra port in Gujarat for Rs 933 crore. If only public sector ports could be managed by private players then we could actually witness the kind of situation the port user suggested. Also, the Danish shipping giant A.P. M?ller-Maersk Group runs a terminal at Mumbai along with state-run Container Corporation of India Ltd. (an Indian Railways subsidiary).
The JNPT, which is the jewel in the crown, will also have to buckle up if it has to meet the rising demands of trade. Container traffic is growing at 15 per cent annually and the PSU ports are just not able to handle the rush. JNPT is bursting at the seams already and can manage to meet the demand of very little of the fast-paced growth in trade. Union Finance Minister Pallaniappan Chidambaram has called for foreign investments to help fund the Rs 8,62,400 crore spending on roads, ports and other infrastructure in the next 10 years so as to meet the economic growth forecast of seven per cent.
Even after huge investments ports demand will override supply.
Evidently, failure to invest in ports will slow trade growth. Exports, which account for more than 10 per cent of India'sRs 29,08,400 crore economy, rose a stupendous 25 per cent in August. Imports gained 32 per cent as the middle-class splurged on mobile phones and DVD players. Earlier, congestion at JNPT forced the Centre to suspend laws which banned foreign-flagged ships from carrying cargo between Indian ports and thus allowing the vessels to unload their cargoes at several terminals. The suspension was imposed in January this year and was extended for a further six months in August.
India'seconomy has grown by 6.9 per cent last year. Its eight largest container ports handled about 3.8 million standard 20-foot containers last year. JNPT shipped 2.4 million containers. The average turnaround time for ships at Indian ports is about three-and-a-half days which when compared to eight hours at Hong Kong, which is the world'sbiggest container port and which handled 22 million containers last year, is a shame.
JNPT is converting a bulk cargo terminal into a container terminal at a cost of Rs 900-crore; the expanded capacity will be ready by next August. JNPT admits the port will be able to handle an additional 1.5 million containers a year after the new terminal is built. But the demand at that time will immediately gobble up the new capacity. So work on a fourth terminal has to begin now.
The Centre in March approved a second container terminal in Chennai. The new terminal is estimated to cost Rs 490 crore and will be capable of handling 8,00,000 standard 20-foot containers a year. Chennai port, which handled 2,44,000 containers last year, is expected to move 10,00,000 containers by 2010-11. So where are we headed?