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Shipping: Sailing Into The World

The much-talked about Sagarmala Project could bring in a sea change to India’s shipping sector

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From ancient times, India’s shipping sector has played a significant role in connecting the country to the outside world.  Since the country won Independence from the British Raj, which entered India through the marine route, successive governments have focused on improving India’s shipping industry and the result is evident. Compare this: in the year 1947, the gross registered tonnage (GRT) of Indian ships was just 0.19 million tonnes. It now stands at  12.268 million after 70 years.

According to the Ministry of Shipping, more than 90 per cent of India’s trading by volume and 70 per cent by value is done through maritime transport. India has 13 major and 200 notified minor and intermediate ports. Cargo traffic, which recorded 1,052 million metric tonnes (MMT) in 2015, is expected to reach 1,758 MMT by 2017. Cargo traffic at major ports stood at 606.37 MMT in FY 16 and has increased at a compound annual growth rate (CAGR) of 7.4 per cent during FY07-17.  

However, despite the growth, the shipping sector has its shortcomings. The existing ports in India are overcrowded and there is a big need to make vessels locally. Talking about the growth of shipping sector, Jaijit Bhattacharya, Partner, Strategy and Economics, KPMG, says, “Shipping industry of India has done well but not enough when we compare it with a country like South Korea.” Realising this, the government has put its attention to deal with the shortcomings and navigate growth opportunity in the sector through its ambitious Sagarmala Project.  

With a coastline of about 7,517 km, the success of India’s shipping industry will largely depend on the efficient implementation of the Sagarmala Project.  Under the government’s ambitious programme, 415 projects, at an estimated investment of Rs 8 lakh crore, have been identified across port modernisation and new port development, port connectivity enhancement, port-linked industrialisation and coastal community development for phase-wise implementation over the period 2015-2035. As per the approved implementation plan of Sagarmala Programme, these projects are to be taken up by the relevant Central Ministries/agencies and State governments preferably through private/PPP mode.

Private players, which have so far stayed away from investing in the sector, have started showing interest.  Reliance Defence and Engineering (RDEL) has signed a contract with the Ministry of Defence for the design and construction of 14 fast patrol vessels (FPVs) for the Indian coast guard, at a cost of Rs 916 crore. Tata Steel has signed an agreement to purchase 51 per cent stake in Creative Port Development (CPDPL), which has a concession agreement with the Odisha government to develop a 10-million -tonnes-per-annum Subarnarekha Port in Balasore.

Talking about the Sagarmala Project, Minister for Road Transport, Highways and Shipping, Nitin Gadkari, recently stated that besides saving Rs 35,000 crore-Rs 40,000 crore as logistics cost annually, boosting exports by about $110 billion and generating one crore new jobs, Sagarmala is also expected to double the share of domestic waterways in the modal mix in the next 10 years.

The government is also working on increasing inland waterways transportation by declaring 111 waterways as National Waterways for cheaper and greener water transportation. Gadkari also said that with the right initiatives, revenues can go up to Rs 35,500 crore in 2022 from over Rs 700 crore last year with cascading benefits to increased business in hospitality, car rentals and food and beverage sectors. A marine tourist destination at Mumbai port is also in the works. The ministry is building the country’s first terminal at a cost of Rs 800 crore at Mumbai port and expects to handle almost 100 international cruise ships a year.

“If all goes well, with the Sagarmala project, India’s shipping industry which is 14th largest in the world, might as well become 5th largest by 2047,” concludes an industry expert.