core sector communique

Shipping Minister Calls for Three-Fold Increase in Indian Port Capacity
Traffic at Indian Ports to Grow at 11.32% Annually
Minister Calls Streamlining of Clearances of PPP Projects
Need for Robust Regulatory Framework for the Port Sector

The Minister of Shipping Shri G K Wasan today addressing the India Public Private Partnership Conclave on “Reforms, Development and Urbanisation” has said that to sustain India’s present high rate of growth, India has to increase its share in world trade. Since 95% of India’s external trade by Volume and 70% by Value takes place through Ports, it is imperative to augment and upgrade Port infrastructure.



From 2003 to 2010, traffic through Major Ports grew at a Compounded Annual Growth Rate (CAGR) of 8.45%. Traffic volumes in Major Ports increased from 345 million tonnes per annum to 561 million tonnes per annum, an increase of 63%. Simultaneously, there has been tremendous growth in the traffic handled by non-Major Ports and their share in total traffic handled has increased from 10% in 1995 to 31.5% in 2010.



This growth in traffic, the Minister said, has resulted in the Major Ports having a capacity utilisation of more than 90% with some Ports experiencing more than 100% capacity utilisation. This kind of capacity utilisation connotes congestion and very high berth occupancy. For efficient port operations, 70% capacity utilisation is considered to be optimum.



Speaking about the vision document prepared by the Shipping Ministry, Shri Wasan said, the traffic at major ports is likely to grow at a CAGR of 8.03% from 561 Million Tonnes in 2009-10 to 1,215 Million Tonnes by 2019-20, whereas the traffic at non-major ports is expected to grow at a CAGR of 16% from the present level of 289 Million Tonnes to 1270 Million Tonnes. Thus, the anticipated traffic at Indian Ports would be 2485 Million Tonnes by 2019-20 from the present level of 850 Million Tonnes at a CAGR of 11.32%.



To meet this anticipated traffic, the major and non-major Ports have formulated plans for development of new terminals, upgrading existing berths and modernising operations by inducting state of the art cargo handling equipment. Considering the objective of 70% capacity utilization, it is necessary to increase the overall capacity of Indian Ports to 3230 million tonnes by 2020 which is more than 3 times the present level of 963 million tonnes.



All these, the Minister said, will entail large scale investment and induction of newer technologies to reduce cost and to bring in efficiency in operations. This is not possible without involving private sector as active partners in development.



In Port sector the experience with PPPs, he said, has been very encouraging. The Port sector has not only been able to attract private investment for large number of infrastructure projects but has also benefited from cost effective and efficient port operations ushered in by private players. The terminals set up through PPP mode have achieved performance levels which match the best internationally in terms of efficiency and cost effectiveness.



Attracting private capital through PPP projects has been achieved in the Port sector because of a favourable and investment friendly policy framework which was put in place by Government of India. The highlights of some of the policy initiatives taken by the Shipping Ministry are:



· 100% Foreign Direct Investment (FDI) under the automatic route for Port development projects.



· 100% income tax exemption for a period of 10 years.



· Standardisation of bidding documents to ensure uniformity and transparency in the award of projects.



· Model Concession Agreements have been standardised and simplified.



· The tariff setting mechanism has been modified with tariffs being set upfront by Tariff Authority for Major Ports (TAMP).



As a result, 24 PPP projects involving an investment of Rs.6,486 crores have been completed and are under operation. Another 19 PPP projects are under implementation involving an investment of about Rs.12,498 crores and 21 more projects are under bidding. In the last 18 months alone, 19 PPP projects have been awarded a dozen projects are scheduled to be awarded before the end of this financial year. These projects include International Container Terminals at JNPT, International Container Transhipment Terminal (ICTT) at Vallarpadam (which is likely to be commissioned in February, 2011), LNG Regasification Terminal at Cochin, Mega Container Terminals at Chennai and Ennore, new coal berths in Paradip, Tuticorin and Vizag among others.



All the big names in the international maritime sector and leading Indian operators have invested in BOT projects in the Port sector.



Shri Wasan added that though the experience with PPP projects has been very successful so far, it has not been without challenges. There have been considerable delays and uncertainty in getting clearances from various Ministries and agencies. Litigation during the tendering process also takes a heavy toll on some PPP projects. He therefore, stressed on a need to streamline the clearance processes and to ensure that decisions are taken within a timeframe and with a sense of urgency.



He was of the view that a robust regulatory framework needs to be put in place for the port sector so that all operators, public or private and all ports, major or non-major, have a level playing field. At present tariffs are fixed for major ports by the TAMP while non-major ports are free to fix their own tariff. There are concerns that some non-major ports which have locational advantage, are charging exorbitantly from the trade. The role of TAMP also needs to be reviewed in the changing context.



“The Ministry of Shipping is in the process of drafting a comprehensive legislation consolidating the Indian Ports Act, 1908 and the Major Port Trusts Act, 1963 and I am sure it will address these concerns.” said the Minister.



At the port level, it is found that the Port Trusts operate as regulators as well as operators which can lead to conflict of interest. But this, he said, is a transitional phase. There are suggestions that Port Trusts should adopt the ‘Land Lord’ port model in the long run to ensure more efficient service and to promote exim trade.



Fully aware of the challenges and determined to resolve and address them, the Minister said that the Shipping Ministry is very keen on taking forward the reform process and to ensure higher private sector participation in Port development.