Growth Drivers & Challenges
The future of container growth in India is bullish in the wake of various policy initiatives such as Make in India, GST, Digital India, new Foreign Trade Policy and port linked infrastructure projects. On the flip side, encouraging growth picture comes with several riders like fragmented port capacity, increased pressure on terminal assets from vessel upscaling and delay in the implementation of infrastructure projects
The global container traffic, according to Drewry’s estimate is expected to grow by more than 5 per cent in 2017 and 3.5 per cent in 2018. The tide is turning in Latin America, particularly in Brazil that was in doldrums until the third quarter of 2016. The container traffic in North America and Europe is expected to grow by 3 per cent and 3.9 per cent respectively in 2017. The positive demand outlook globally will reflect on the box traffic in India.
New Foreign Trade Policy (FTP)
Under the new Foreign Trade Policy (2015 – 2020), India aims to increase its share in the global trade to 3.5 per cent by 2020. Incentives to agricultural exports and extension of the same under Merchandise Exports from India Scheme to units in SEZ are part of the new FTP. This is aimed to integrate with Make in India and Digital India initiatives.
Infrastructure projects linked to port
Some of the key projects that will be a game changer when fully operational are:
Multi-modal terminal under Jal Marg Vikas project:
The `170 crore multi-modal terminal at Varanasi that will open before December 2018, will connect North India to North East India. The government will also develop 35 MMLP.
Port based multi-product SEZ at JNPT
A port-based SEZ at JNPT will be developed with Free Trade Warehousing Zone, Engineering Goods sector, Electronics & Hardware sector and Pharma sector. Dedicated Freight Corridor (DFC)
Two of the three DFCS are scheduled to be operational in the next three years. DFC will reduce the inland transit time significantly.
Four hundred and fifteen projects have been identified for port modernisation, new port development, port connectivity enhancement and port linked industrialisation. Six new port locations have also been identified.
Proposed transhipment hubs in the south
The government has approved `27,000 crore port project at Enayam. The port is expected to become a gateway port for India by shifting boxes that are currently transhipped at Colombo, Singapore or Port Kelang. The location has a natural draft of 16 meters, and its proximity to East-west shipping route will enable it to be a transhipment hub for cargo from Bangladesh and Myanmar, which are currently being transhipped at Colombo.
The Vizhinam Port being developed by Adani enjoys a natural draft of more than 20 metres will also compete as a transhipment hub.
Challenges for container terminals
1. Spatial distribution of ports:
Fragmented container terminal capacity and develop ment of new facilities in close vicinity will lead to traffic diversion. This will be a significant headwind to opt imum utilisation of terminal facilities.
2. Vessel upscaling:
Increasing pressure on terminal assets from vessels upscaling will inflate the sunk cost for terminal opera tors as container handling equipment becomes obsolete and yard space becomes scarce. For instance, in March the government approved a project worth `2,029 crore for the widening and deepening the Mumbai harbour channel to enable large vessels to call at JNPT.
3. Delay in policy implementation and project approvals:
The best example to cite here is the Vizhinjam port. The plan to develop this port was mooted way back in 1991 and it materialised after 24 years. Another example is the delay in the construction of the fourth container ter minal at JNPT that has proved costly for the port, in terms of traffic diversion to the neighbouring ports.