Capacity expansion at

ports: Success hinges on

connectivity link
The government has embarked on a programme to develop and expand the
capacity of ports across the country and wants to increase total port capacity from
1,400 million tonnes to 3,000 million tonnes by 2025. A look into the capacity
addition at major ports reveals that there has been a significant progress on that
front in line with the rising cargo traffic over the last two years.
On Tuesday, the Reserve Bank of India in its monetary policy statement said that
several key infrastructure segments such as ports, road and railways indicate an
uptick in the economy. While a rising traffic at ports signals revival in economy, a
full blown domestic economic revival, success of the governments Make in India
initiative and pick-up in global growth rates may throw a challenge on domestic
ports which they need to be prepared for.
A closer look at the traffic and port capacity infrastructure shows that while there
has been a rise in cargo traffic, the government has already added more than 20 per
cent capacity across the 13 major ports over the last two years from a capacity of
800 million tonnes in the year ended March 2014 to 965.3 million tonnes by March
2016.
Over the last two years, there has been a steady rise in traffic at the ports. While the
cargo traffic at major ports witnessed contraction in FY12 and FY13, and a
marginal rise of 1.78 per cent in FY14, the growth rates picked up and crossed 4
per cent in the last two financial years. In the month of April alone, the cargo
traffic at 13 major sea ports of India witnessed a year-on-year growth of 9.7 per
cent in cargo traffic.

Where the additions are happening

While 11 out of the 13 major ports witnessed a rise in their capacity, the biggest
increase in capacity over the last two years has taken place at Ennore and Tuticorin
ports and the additions have been 45 and 40 per cent, respectively. Even the
Mormugao port, which has seen the biggest year-on-year increase in cargo traffic
in the month of April has seen a capacity enhancement by 33 per cent. In April
2016, the cargo traffic at the port jumped to 3.3 million tonnes, up from 1.3 million
tonnes in April 2015.

Kandla Port has seen the biggest addition in capacity in absolute terms to become
the port with the largest capacity over the last two years. In 2014, Paradip was the
largest port with a capacity of 108.8 million tonnes as against 102 million tonnes of
Kandla port. However, as of March 2016, Kandla is the largest with a total capacity
of 131 million tonnes against a 126.9 million tonnes of Paradip. Two major ports at
Cochin and New Mangalore did not add any capacity over the last two years.
While the sector is witnessing some movement on rising traffic and addition of
capacity, experts within the industry say that infrastructure development related to
port should not be limited to developing and expanding a ports infrastructure in
isolation and the government should look at the holistic development and
connectivity with the hinterland with roads and railways.

In an earlier interaction with The Indian Express, Adil Zaidi, partner, Ernst &
Young said: Along with the port expansion there needs to be better connectivity
with the hinterland and Sagarmala project should address the same. While several
investments have been proposed and MoUs have been inked at the MIS, the
Ministry of Shipping needs to create a strong investment facilitation team so that
the investments hit the road sooner than later and the investors get the incentives
being provided by the government. Also, the projects have to be structured in a
way that it attracts financing from banks and other institutions.
The Sagarmala project that was formally approved by the Union Cabinet on March
25, 2015 aims to promote port-led development and provide all the necessary
infrastructure to transport goods to and from ports quickly and efficiently. It will
also promote port-based or port-proximate industrial and manufacturing clusters
and the government has identified 27 potential coastal industrial clusters across
three sectors such as energy, materials and discrete manufacturing.
There is also a view that in its bid to capitalise the opportunities in maritime sector,
the government should focus on the improvement of infrastructure and deployment
of technology in maritime sector. Also, more focus is needed to link inland
waterways to various ports to facilitate coastal shipping and enhance last mile
connectivity.