Magazine

English Hindi

Index

Prelims Capsule

Economy

How Ports can play a vital role in Indian Economy?

How Ports can play a vital role in Indian Economy?

Relevance:

  • GS 3 || Economy || Infrastructure || Transportation

Why in the news?

The Indian port plays an important role in the Indian economy as almost 90% of the country’s international trade is conducted by the sea.

Ports Infrastructure in India:

  • Port infrastructure is critical to every country’s growth. India’s coastline is approximately 7,500 kilometers long. Ports handle about 90% of India’s foreign commerce by volume and 70% by value.
  • The maritime route is used to import crude petroleum, iron ore, coal, and other important commodities. On India’s coast, there are 12 major ports and 205 minor ports.

Importance of Ports:

  • Ports are one of the primary components of the general transportation sector and are nowadays linked to the expanding world economy.
  • Ports are basically a means of integration into the global economic system. The maritime sector encompasses a wide range of services, the transportation of goods and passengers being the primary one.
  • Other related services included in this sector are various port services (such as pilotage, towing and tug assistance, emergency repairs, anchorage berth and berthing services, etc.) and auxiliary or supporting services (such as storage and warehousing, maritime cargo handling services, customs clearance services, etc.).
  • Within the port area, a great diversity of activities are performed: infrastructure services, generally provided by port authorities, cargo handling services, in most ports provided by private firms, and other services such as mooring, towage, etc.
  • They perform roles as important links of hinterlands to points overseas. On the other hand, countries also require inner linkages, such as links to other ports, airport and railway connections if they are to perform their role efficiently.
  • Sea conveyance is the cheapest way of transportation when considered in terms of fuel consumption and investment. When compared to other transportation systems, railway transportation requires twice as much energy consumption, while road transportation requires ten times as much as sea conveyance.
  • During the past few decades the world has become increasingly environmentally conscious and, with its lower energy consumption, marine transportation is obviously more environmentally friendly than other means.
  • Ports are a key component of the logistics chain and, therefore, their operation has a direct effect on relevant economic variables such as export competitiveness and final import prices, thus affecting economic development.

Other countries port:

  • China has been expanding its port since decade to become economically more powerful and global leader in import and export.
  • China is the strongest country in the maritime world, boasting six out of the ten busiest ports on Earth and close economic connections with the three of the remaining four – Singapore, Busan and Hong Kong.
  • As part of its drive towards becoming a trade and commercial powerhouse, China has invested heavily, and continues to do, in automation technology in ports and terminals.
  • Qingdao, Asia’s first fully-automated port, holds the global operational efficiency record, with each crane handling more than 30 containers per hour, which means it can unload a cargo ship faster than any port in the world.
  • Being fully-automated, the port can keep working at night, which means it retains its volume throughput levels at all hours.

Issues and challenges with Indian Ports:

  • Inadequate Infrastructure for Evacuation from Major and Minor Ports: Inadequate infrastructure for evacuation from major and minor ports results in a sub-optimal transport mode mix.
  • Inefficient Hinterland Connectivity: Poor hinterland connectivity through rail, road, highways, coastal shipping, and inland waterways results in inefficiency. As a result, the cost of transportation and freight movement rises.
  • High turnaround: Ship turnaround times are long in Indian ports. The typical ship turnaround time in Singapore, for example, is less than one day. It takes almost two days in India, though.
  • Port congestion: Port congestion is a serious problem owing to container volumes, equipment shortages, and inefficient operations. Example- In Nhava Sheva port.
  • Prolonged inspection and scrutiny: While India’s customs processes are increasingly becoming paperless and digital, cargo and other shipping activities continue to be subjected to prolonged inspections and examination.

About Sagarmala Project:

  • Port-led industrialisation, the creation of world-class logistical institutions, and the development of coastal communities are all goals of Sagarmala.
  • Sagarmala will contribute to the expansion of domestic carrying capacity.
  • Shipbuilding, maintenance, and ownership are not popular in India, and the small ship-owning community prefers international register over Indian registration.
  • If this is to change, the authorities’ and the marine business community’s mindsets must shift as well.
  • Make in India will result in a multi-fold increase in cargo growth in the country, and we will require ships to handle both domestic and international trade.
  • Sea and river journeys of less than a week should be promoted.
  • The Ministry should encourage shipbuilding and ownership.
  • The Directorate General of Shipping (DGS) is a member of the National Shipping Board, which is an independent advisory body for the Ministry of Shipping.
  • The NSB should be allowed to examine the DGS’s operation, which is in charge of increasing the country’s carrying capacity.
  • Coastal communities should be given the opportunity to become ship owners.
  • This will pave the path for goods to be transported by tiny ships with shallow drafts along the coast and inland rivers.
  • Sagarmala should focus on bolstering the strength of the coastal young and encouraging them to proudly contribute to the nation’s economy.

Potential Benefits of Sagarmala Project

  • The government wants to triple cargo traffic in the next five years under this port-led growth strategy. It will assist around 14% of the country’s total population, with at least 13 states and union territories benefiting.
  • Through the establishment of Coastal Economic Regions and projects with synergies to coastal Industrial Corridors, the project will integrate the coastal economy with the ports.
  • To enhance living conditions, the initiative will lead to the construction of port-based smart cities and other urban infrastructure.
  • Through the Sagamala project, skill development/livelihood generation initiatives for coastal community development will be implemented.
  • Existing ports will be modernized/capacity expanded, and new Greenfield ports will be built, reducing bottlenecks for future growth.
  • Improving port evacuation (road, rail, and inland waterways) and logistics infrastructure will lower total logistics costs and boost cargo flow to and from the hinterland.
  • The project will help to expand the maritime sector, which will result in more economic activity in the region – for example, the Cluster for Shipbuilding and Repair.
  • Improving policy and institutional bottlenecks for project approvals, funding, and implementation partners will help in the proper execution and monitoring of projects.
  • Additional advantages include:
    • It will make conducting business easier.
    • It will shorten the time it takes for products and raw materials to get from farm to industry.
    • It will result in the creation of jobs.
    • India might become a key destination for port-led commerce between major economies in the east and west in the future.

Government Initiatives:

  • Due to the COVID-19 pandemic, JNPT and New Mangalore Port handled 120 tonnes of medical oxygen on an urgent basis on May 10, 2021.
  • By the end of May 2021, India was scheduled to start full operations in Iran’s Chabahar Port. India will construct two terminals at the port and operate them for a period of ten years.
  • The entire budget for the Ministry of Shipping in the Union Budget 2020-21 was Rs. 1,702.35 crore (US$ 233.48 million).
  • In FY22, the main ports are scheduled to complete seven public-private partnership projects totaling more over Rs. 2,000 crore (US$ 274.31 million). Over the previous five years, private sector investments in ports have gradually grown, reaching an all-time high of US$ 2.35 billion by 2020.
  • The Finance Minister recommended increasing ship recycling capacity to 4.5 million light displacement tonnes (LDT) by 2024, which would result in an extra 1.5 lakh jobs in India.
  • The government proposed subsidized support for Indian shipping businesses worth Rs. 1,624 crore (US$ 222.74 million) in the Union Budget 2021 to boost merchant ship flagging in the nation.
  • The Indian Parliament enacted the Major Port Authorities Bill, 2020 in February 2021. The law intends to decentralize decision-making and strengthen the governance of major ports.

Suggestions:

  • Choosing smaller ports is a step in the right way; at the moment, rail and road transportation systems are meeting this need.
  • Resurrection of projects like Sagarmala, which aims to build a network of ports along India’s coastline to protect marine interests.
  • Physical modernisation is needed in Indian ports, but its poor performance might also be due to administrative issues. Institutional transformation is both a prerequisite for privatization and one of its most significant advantages.
  • Low productivity at Indian ports is mostly due to overmanning and restrictive labor policies. Proposals for a reform program to encourage investment in new freight handling technologies have been made.
  • In the transition to a landlord port system, India confronts several challenges. Through the demonstration effect, the creation of ‘centres of excellence’—modern, integrated terminals run under license by the private sector—will hasten port modernisation.

Road ahead:

  • Rising investment and container traffic hint to a bright future for India’s ports industry. These investments assist providers of services such as operation and maintenance (O&M), pilotage and harbouring, and maritime assets such as barges and dredgers.
  • Port capacity expansion is anticipated to expand at a CAGR of 5% to 6% until 2022, adding 275-325 MT of capacity.
  • Freight transportation over domestic rivers has shown to be both cost-effective and environmentally friendly. By 2030, the government hopes to have 23 canals functioning.
  • More than 574 projects costing Rs. 6 lakh crore (US$ 82 billion) have been proposed for implementation as part of the Sagarmala project between 2015 and 2035.
  • The Ministry of Ports, Shipping and Waterways selected 400 projects with a total investment potential of Rs. 2.25 lakh crore (US$ 31 billion) in the Maritime India Summit 2021.
  • According to research by the National Transport Development Policy Committee, India’s cargo volume handled through ports is anticipated to exceed 1,695 million metric tonnes by 2021-22.

Mains oriented question:

The Indian port industry is critical to the country’s continued expansion in trade and commerce. What are the issues confronting India’s port sector? What steps have been made to deal with them? Examine. (250 words)