East-based Non-major Ports to Lead the Sustainable Growth Path for Indian Maritime Trade: EY Report

Ernst & Young (EY) in association with Andhra Pradesh Chambers of Commerce and Industry Federation, on the occasion of the East Coast Maritime Business Summit, released a detailed research report on India’s maritime sector. Backed with credentials, the report highlights the potential role of non-major ports on the east coast of the country in leading the sustainable growth path for the country’s maritime trade.

With Non-major Ports emerging to constitute a whopping 43% of total traffic in FY16 up from 10% in FY81 reflects a huge shift in trade over a period of 10 years with the latter emerging as better choices compared to major ports on the back of strategic location, modernization, efficiency and better infrastructure while achieving Cost competitiveness through optimisation of network and logistics.

Global trade increased at a CAGR of 6.9% in value terms during 1990-2015 and seaborne trade constitutes 80% of the global trade by volume. Whereas in the Indian context, traffic handled at ports has increased at CAGR of 7.4% during 1981-2016 in line with global trade growth. During the same period, trade in value terms increased from USD 24 bn to USD 643 bn. In the past decade, India’s trade with countries to its east has been expanding. China has emerged as a dominant partner constituting 7.9% of imports and 1.8% of exports in 2015.

With the government having launched a series of measures, most notably the SAGARMALA initiative, which aims to transform existing ports and integrate the development of ports, industrial clusters and hinterland evacuation, it is estimated that India can save up to USD28 billion in infrastructure investment and another USD 3.3 billion in transportation cost if 50% of overall trade moves closer to ports by 2020.

With increasing traffic, congestion at major ports is increasing. Some of the major ports have land constraints limiting their ability to expand as well as promote port-based industrial zone. On the other hand, the study claims that non-major ports have much bigger land banks and have better infrastructure. For example, Mundra port and SEZ on the west coast is spread over 23,000 acres whereas Krishnapatnam port on the east coast has a land bank of approximately 6,800 acres for the primary port area and another 13,000 acres earmarked for industrial development. These ports also have drafts in excess of 18m on par with international standards.
Emergence of industrial clusters near the port, consolidations of distribution centres and warehouses post GST and directional distributional of cargo can address the infrastructural bottlenecks and can reduce the average in-land logistics cost by as much as 68%.

To reduce costs arising from infrastructure bottlenecks, several private non-major ports such as Krishnapatnam, Mundra, Pipavav, etc. have developed close to demand clusters. They are also implementing new concepts to reduce logistics costs. For example, Krishnapatnam port has implemented Direct Port Delivery which has subsequently being adopted by major ports.

According to the report, non-major Ports are also to lead on cost optimisation with improved productivity and cutting edge technology ushering Indian ports onto the world stage. Ports like Krishnapatnam and Nhava Sheva (JNPT) are the only Indian ports that feature in the ranking of major ports in the World on the basis of port productivity.
While most Indian ports have low draft ranging from 7-14 meters, new private ports like Gangavaram, Krishnapatnam and Mundra are filling the void by having deeper drafts. These ports have a draft in excess of 18m which is at par with some global major ports.

The non-major ports of the country are also giving a tough fight to the traditional players with improved operational metrics in terms of increased berth productivity, ship berthing per day, average crane moves per hour among others.

Pre-berthing delays have been a key concern for major ports in India registered as high as 1.6 days average, whereas private terminal operators such as Mundra and Krishnapatnam are performing at par with international ports with near zero delays. Private ports such as Gangavaram and Mundra have 4-lane expressway connectivity while Krishnapatnam port with its connectivity to a 4 lane road and upgradeable makes it a congestion free port.
More so with the government set to create transshipment hubs with modifications in the regulatory framework, ports like the Krishnapatnam on the east coast and JNPT and Mundra on the west, backed with their strategic locations, deep drafts and innovative processes are well poised to emerge as the transhipment hubs of the country.

Commenting on the occasion Mr. Potluri Bhaskara Rao, General Secretary, AP Chambers of Commerce said “Indian maritime trade has been drawing attention both at home and globally on the back of improved trade and a series of measures launched by the government to transform the port sector while establishing the country as a major manufacturing and trading hub. This research aims to highlight key opportunities and challenges in the ports sector. It attempts to provide a base for discussion amongst industry stakeholders, port developers, operators and government agencies. It also attempts to showcase the vast opportunity present in the ports sector in India, especially on the east coast.”

Commenting on the occasion Mr. Kiran Malla, Director Corporate Finance & Strategy, Ernst Young India “If India has to become a global super power by 2030 it has to get ready to make the next big leap in trade. Fortunately, it has a strategic advantage in terms of long coastline which can serve as a backbone for trade. Right strategy would be to create economic epicentres around modern ports with world class infrastructure.”

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