Building Port Infrastructure To Boost Indian Exports

With the recent relaxation on cabotage laws for foreign vessels, there could be an increased utilisation of Indian ports as transshipment hubs, contributing positively to cargo traffic within India.

- Shalini Nair

India is the sixteenth largest maritime country in the world. Its vast coastline of about 7,517 kilometres plays a vital role in sustaining growth in the country’s trade and commerce. The cargo traffic handled by ports is expected to reach 1,695 million tonnes (MT) by 2021-22, according to a report of the National Transport Development Policy Committee. Interestingly, with the recent relaxation on cabotage laws for foreign vessels, there could be an increased utilisation of Indian ports as transshipment hubs, contributing positively to cargo traffic within India.

As per the ministry of shipping, around 95 percent of India's trading by volume and 70 percent by value is done through maritime transport. The ministry has set a target capacity of over 3,130 MT by 2020, which would be driven by private sector participation. Non-major ports are expected to generate over 50 percent of this capacity. As of December 2017, the 12 major Indian ports run by the government had a capacity of 1,358 MT of cargo a year. For the year ended March 2018, it handled a combined 679.35 MT of cargo, operating at a capacity utilisation of 50 percent.

Earlier this year in March, a revised model concession agreement (MCA) was sanctioned to make port projects more investor-friendly and make investment climate more attractive. The agreement will provide exit route to developers by way of divesting their equity up to 100 percent after completion of two years from the commercial operation date (COD). The provision for commencement of operations before COD will lead to better utilisation of assets provided by the port in many projects before the formal completion certificate.