ports & shipping poliy review 2020

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Ports & Shipping

POLICY REVIEW 2020

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FOREWARD

I am pleased to present the Ports and Shipping Policy Review. It comprises diverse points

of view across different industry sectors, this report provides a perspective of the econo-

my in this sector in India. Through this report, we aim to highlight the upcoming events

and possibilities with the objective of doing business in India.

I hope that this report will help business leaders navigate the increasing complexity

around value delivery in today’s environment. I would like to express my sincere gratitude

to all the participants of the survey.

I hope you find the report useful and insightful.

Best regards,

Priyanka Prajapati

CEO, LawDocs.

INDEX

Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . 5

Reasons to invest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Statistics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. 7

Notable trends. . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . 8

Strategies adopted. . . . . . . . . . . . . . . . . . . . . . . . . . .10

Sector Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Financial Support. . . . . . . . . . . . . . . . . . . . . . . . . .. . 12

Investment Opportunities. . . . . . . . . . . . . . . . . . . . 13

Key achievement . . . .. . .. . . . . . . . . . . . .. . . . .. . . . 14

National maritime agenda 2010-2020 . . . . .. . . . . . 15

Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

SUMMARY

• Ports in India handle around 95% of international trade volume of the nation.

Rising trade activities & private participation in port infrastructure is set to support

port infrastructure activity in India.

• India has 12 major ports and around 200 minor ports.

• The major ports had a capacity of 1,452 million tonnes by FY18 end. Maritime

Agenda 2010-20 has a 2020 target of 3,130 MT of port capacity.

• Ports in India handle above 90%4 (by volume) and 72%5 (by value) of India’s

external trade.

• In FY18, major ports in India handled 679.36 million tonnes of cargo traffic,

implying a CAGR of 2.73 per cent during FY08-18. In FY19 traffic increased by 3.77

per cent year-on-year to reach 518.64 million tonnes

REASONS TO INVEST

• The Ministry of Shipping strives to increase the overall port capacity to 3500+ million

metric tonnes per annum to cater to projected traffic of 2500 MMTPA by 2025.

• India’s cargo traffic handled by ports is expected to reach 1,695 MTPA by 2020.

• The capacity addition at ports is expected to grow at a CAGR of 5-6% till 2022, adding

275-325 million metric tonnes of capacity.

• The National Maritime Development Programme has been formulated by the Minis-

try of Shipping. Total investment involved under the programme is US$ 14.3 bn

• India’s cargo traffic handled by ports is expected to reach 1,695 MTPA by 2020.

• Port projects involving investment of over US$ 10 bn identified for award for the up-

coming five years.

• 91 initiatives under Project Unnati, to get better the efficiency and productivity of the

main ports, have been implemented. These initiatives will unlock around 80 MMTPA capaci-

ty.

• An integrated and comprehensive plan for port-led industrialization has been devel-

oped. Plan combines the growth potential of port-linked industries with the competitive lo-

cation for each sector. Port-led industrialization program is going to be delivered through

Coastal Economic Zones and industrial clusters. Every CEZ will consist of multiple industrial

clusters categorised under energy, material and discrete industries.

• India’s increasing integration into Global Value Chains requires a well-established

port infrastructure

STATISTICS

• India is the 16th largest maritime country in the world, with a coastline measuring more than

7500 km

• During 2017-18, the cargo traffic handled at major ports was 679.36 MMTPA, an increase of

5% from 2016-17.

• The cargo handling capacity of key Ports stands at 1451.19 MMTPA in 2017-18. This is a 385.36

MMTPA raise from the 2016-17 value of 1065.83 MMTPA.

• The traffic handled at non-major ports, for 2016-17, stands at 485.2 MMTPA.

• Traffic handled at Major Ports in April 2019 was 60 MMTPA. The value in April 2018 was 56

MMTPA

• Cargo handled at ports during the period April’2017- January’ 2018: Petroleum, Thermal &

Steam Coal (13.72%), Oil and Lubricants (33.74%), followed by Container (19.70%), Other Misc. %),

Coking & Other Coal (7.60%), Cargo (12.09Iron Ore & Pellets (6.72%), Other Liquid (4.15%), Finished

Fertilizer (1.17%)

NOTABLE TRENDS

Increasing private participation

• Strong growth potential, favourable investment climate & sops provided by state govern-

ments have encouraged foreign and domestic private players to enter the Indian ports sector.

In addition to the development of ports , the private sector has extensively participated in port

logistics services

Focus on draft depth

• All the greenfield ports are being developed at shores with natural deep drafts & existing

ports are investing on improving their draft depth.

• Higher draft depth is required to accommodate big sized vessels. Due to the cost and

time advantage associated with the big sized vehicles, much of the traffic is shifting to large ves-

sels from smaller ones, especially in coal transportation

Setting up of portbased SEZs

• SEZs are being developed in close proximity to numerous ports, thereby providing stra-

tegic advantage to industries within these zones. Plants being set up include –

• Steel plants and edible oil refineries

• Coal-based power plants to take advantage of imported coal

• Development of SEZs in Mundra, Krishnapatnam, Rewas and few others is underway.

Ports to operate on Green energy

• The Government of India is targeting to make the country the 1st in the world to operate

every 12 major domestic government ports on renewable energy. government plans to install

almost 200 MW wind and solar power generation capacity by 2019 at the ports. Energy capacity

could be ramped up to 500 MW in future years

Continued....

Specialist terminalbased ports

• Terminalisation: Focus on terminals that deal with a particular type of cargo .

• Examples of specialist terminals: ICTT in Cochin, LNG terminal in Dahej Port

• It is useful for handling specific cargo such as LNG that needs specific equipment &hence high

capital costs. Forming specialist terminals for such cargo result in optimal use of resources and in-

creased efficiencies .

‘Landlord port’ model

• To promote private investments, the government has reformed the organisational model of

seaports –

• To: A ‘landlord port’ model where port authority acts as a regulator& landlord while

port operations are carried out by private companies.

• From: A ‘service port’ model where the port authority offers all the services

• Major ports following ‘landlord port’ model: JNPT, Chennai, Visakhapatnam and Tuticorin.

Sanitation

• The Haldia Port of West Bengal was rated as the cleanest port among all the major ports in the

first ever ranking by the Ministry of Shipping. The ranking of major 13 Indian ports was conducted by

the Quality Council of India during the 'Swachhta Pakhwada

Coastal Economic Zones

• The Government of India is planning to build 14 CEZs in the country to increase manufacturing

and jobs. In November 2017, the first mega CEZ at the Jawaharlal Nehru Port in Maharashtra was

cleared.

Rising traffic at non major ports

• With the rising private participation in establishing minor ports. Cargo traffic handled by the

minor ports are outpacing cargo traffic at major ports.

STRATEGIES ADOPTED

• Adani group, leading private port operator in India, is now venturing into providing allied

services like dredging. Its dredgers which were being used just at its own ports in the past have

now started taking work from other ports.

• Port authorities are modernising and upgrading port facilities to meet the needs of the

port users in competitive environment. Indian Ports Association launched a cloud based communi-

ty system called ‘PCS1x’.

• Adani group has also ventured into the container railway business becoming the biggest

private link in the country. It conducts operations on a pan-India basis operating six container

rakes.

• After having a strong advantage on India’s West coast, Adani Ports and Special Economic

Zone Ltd is looking to strengthen its position by winning the bid of a new container terminal at

Ennore port located on the east coast. Also Adani Ports has acquired Dharma Port to replicate its

development and growth on the eastern coast

• Essar Ports Ltd., a top port operator, plans to build a port in Gujarat with investments

worth US$1.49 billion. For the same, the company has signed a MoU with Gujarat Maritime

Board .

• Essar Ports Ltd as a part of it strategic move to raise its potential on the east coast has won

the contract for the modernisation of 3 ports at Visakhapatnam

• Geographic diversification as in the case of Adani group acquiring coal minesand setting up

coal terminal in Australia to take the benefit of increasing coal imports in India.

SECTOR POLICY

SAGARMALA

• Sagarmala aims to change India’s logistics sector performance, by unlocking the full poten-

tial of India’s coastline and waterways. A variety of projects have been initiated under the Sagar-

mala project:18

-Port connectivity enhancement

-Coastal Community Development

-Port connectivity enhancement

• The Sagarmala Project has the following aims:19

-Reduce logistic cost for export import and domestic trade with minimal infrastruc-

ture investment

-Optimise cost of EXIM container movement

-Improve export competitiveness by developing port proximate discrete manufactur-

ing clusters

-Lower the logistics cost of bulk commodities by locating future industrial capacities

near the cost

-Reduce cost of transporting domestic cargo through optimising modal mix

• The Sagarmala Project is predicted to mobilise infrastructure investments worth US$ 5.7

bn by 2025.This is predicted, that by 2025, the estimated logistics cost saving per annum will be

US$ 5-5.7 bn.

MAJOR PORT AUTHORITIES BILL, 2016

• The bill objects to decentralize decision making and infuse professionalism in governance

of ports.This will also help bring transparency in operations of a variety of ports.

REVAMPED MERCHANT SHIPPING BILL, 2016

• The bill replaces the Merchant Shipping Act of 1958. The bill objects to promote ease of

doing business to meet new challenges which the merchant shipping sector faces. The act will; (i)

safeguard rights and privileges of seafarers; (ii) enhance safety and security of vessels and life at

sea; (iii) develop Indian coastal shipping and trade.

• To increase investments into the port sector, the Government revised the Model Conces-

sion Agreement for PPP projects in major ports. It includes the establishment of the Society for

reasonable Redressal of Disputes- Ports as a dispute resolution mechanism.

COASTAL BERTH SCHEME

• The scheme aims to give financial support to ports/state governments for the creation of

infrastructure for movement of cargo/passenger by sea or National Waterways.

FINANCIAL SUPPORT

• Total allocation made to Ministry of Shipping in 2019-20 stands at US$ 272 mn.

• Total budget allocation towards the development of main ports stands at US$

14.08 mn and is US$ 15.7 mn for minor ports.

• Total capital expenditure allocation in the union budget 2019-20 stands at US$ 38.1

mn.26

• Total allocation towards inland water transport stands at US$ 108.3 mn.

For further details about budget allocation for the Ministry of Shipping, please log onto

Budget Allocation for Ministry of Shipping.

• An allocation of US$ 78.7 mn has been made towards the Sagarmala Projects.

INVESTMENT OPPORTUNITIES

• Shipbuilding

• Ship recycling

• Ship repair

• Development of inland waterways and inland water transport

• Port and harbour construction projects

• Port and harbour maintenance projects

KEY ACHIEVEMENTS

• Under the Sagarmala Programme, 89 projects were completed, while 443 projects worth

US$ 617.9 bn are under different stages of implementation and development.3

• The average output per ship berth has raised to 16,166 (up to 31 October 2018) from

15,333 in 2017-18.

• above 50 projects with an investment of US$ 1.4 bn and involving capacity addition of 90

MMTPA are being awarded during 2018-19.

• The average turnaround time reduced to 60.48 hours (up to 31 October 2018) from

64.32 hours in 2017-18.

• Six new port locations –Enayam (Tamil Nadu), Tajpur (West Bengal), Paradip Outer Har-

bour (Odisha), Sirkazhi (Tamil Nadu), viz Vadhavan (Maharashtra), and Belekeri (Karnataka)

have been identified to increase overall cargo handling capacity.

NATIONAL MARITIME AGENDA 2010–2020

Increasing capacity

• To create a port capacity of approximately 3,200 MT to handle the expected traffic of about 2,500 MT by

2020

World-class infrastructure

• To implement full mechanisation of cargo handling & movement at ports, so bringing Indian ports on par

with the best international ports in terms of performance and capacity

Strategically building ports

• To develop two major ports to promote trade as well as two hub ports (one each on the West coast and the

East coast) – Mumbai (JNPT), Kochi, Chennai and Visakhapatnam

• As of March 2018, projects worth Rs 1.85 lakh crore had been awarded under Sagarmala programme.

• Master plans for 142 capacity expansion projects worth Rs 91,434 crore have been prepared by the Govern-

ment of India under the Sagarmala programme.

Increasing investments

• Proposed investments in major ports by 2020 are expected to total US$ 18.6 billion, while those in non-

major ports would be US$ 28.5 billion. government is also working to float a specialised Maritime Finance Corporation

with the equity of ports & financial institutions to fund Port projects

• Gujarat ports attract Indian and foreign firm investments of about Rs 36,000crores (US$ 4.98 billion)

Landlord ports

• Major ports have been working towards implementing ‘Landlord port‘ concept duly limiting their role to

maintenance of channels and basic infrastructure leaving the development, management, operation, of terminal and

cargo handling facilities to the private sector

Bringing ports under regulator

• To establish a port regulator for every ports in order to set, monitor and regulate service levels, technical and

performance standards

FOREIGN INVESTORS

• AP Moller Maersk (Denmark)

• PSA Singapore (Singapore)

• Hyundai Engineering and Construction Company Limited

(South Korea

• Dubai Ports World (UAE)

N O T E S

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