Ports and Shipping

OVERVIEW

India has 12 major ports and about 200 non-major ports handling export and import cargo, which are spread over approximately 7500 kilometers of coastline. The 12 major ports of India handled approximately 57 percent of total cargo traffic in 2019-20. According to the Ministry of Shipping, around 95 percent of India's trading by volume and 70 percent by value is done through maritime transport. India’s ranking under the Trading Across Border (TAB) parameter of Ease of Doing business (EoDB) has recorded a jump from 80 to 68 in 2020, due to various measures such as direct port delivery (DPD), direct port entry (DPE), introduction of RFID, installation of scanners/container scanners, simplification of procedures, amongst others.India is also re-elected to the International Maritime Organization (IMO) Council under “Category B - States with the largest interest in international seaborne trade” for the biennium 2020-21.

Capacity and Traffic
FDI
Outlook

Capacity and Traffic

India has seen an unprecedented growth of Indian seafarers employed on-board Indian and foreign flagged vessels, as a result of cumulative improvement in the quality of Maritime Training. The number of seafarers increased from 2.08 lakh in 2018 and to 2.3 lakh in 2019 as a result of initiatives taken by the Ministry of Shipping to increase the training capacity, increase the number of training berths, standardization of course curriculum and course material, improvement in examination system, simplified processes and e-governance modules.

The Ministry of Shipping, along with the State Governments is striving to increase the overall port capacity to 3300+ million metric tonnes per annum (MMTPA) by 2025 to cater to the growing traffic. Towards achieving this goal, more than 574 projects have been identified for implementation, during 2015-2035. These projects are spread across the areas of port modernization and new port development, port connectivity enhancement, port-linked industrialization and coastal community development. As of 30 September 2019, a total of 121 projects have been completed and 201 projects are under implementation.

Trends in Cargo traffic Handled at Major and Non-Major Ports in India

Year	Major Ports		Non-Major Ports
Year	Cargo (MT)	% Growth	Cargo (MT)	% Growth
2013-14	555.5	2	417.2	7.5
2014-15	581.3	5	470.6	12.8
2015-16	606.5	4	465.9	-1
2016-17	648.4	7	485.2	4.14
2017-18	679.4	5	528.5	8.9
2018-19	699.1	2.9	582.5	10.22
2019-20	704.8	0.8	-	-
Source: Ministry of Shipping, Exim Bank Research

Cargo traffic at major ports in India stood at 704.8 MT in 2019-20, registering a CAGR of 4.04 percent between FY14- FY20 and y-o-y growth of 0.8 percent in 2019-20 as compared to previous year. The vessel traffic on the other hand saw negative y-o-y growth of (-) 6.5 percent in 2019-20. The container traffic reached 9,988 thousand twenty- foot equivalent units (TEUs) in 2019-20 as compared to 9,877 thousand TEU in the previous year.

The traffic at non-major ports has been increasing over the past 5 years (FY14-19) with a slight decline of less than (-)1 percent in 2015-16. The cargo traffic handled at non-major ports in India has outperformed traffic handled at major ports;recording a CAGR of almost 7 percent during FY14-19 and y-o-y growth of more than 10 percent in 2018-19 as compared to previous year.

FDI

To attract investment for the growth of this sector, the Government has allowed FDI of upto 100 percent in the shipping sector under automatic route for projects related to the construction and maintenance of ports and harbors. During April 2000- March 2020, ports attracted FDI of US$ 1.63 billion, accounting for 0.35 percent of the total FDI inflows into the country.

Outlook

India’s increasing integration into global value chains requires a well-established port infrastructure. To supplement this, the Ministry of Shipping has proposed investments worth ₹ 6.01 lakh crore under Sagarmala Programme. A total of 92 port capacity expansion projects worth ₹ 58,884 cores have been identified for implementation over next 20 years and are expected to add 712 MTPA to the capacities at major ports. Under the Sagarmala Programme, the government has envisioned a total of 236 projects for modernization of ports involving an investment of ₹ 1.18 lakh crore by the year 2035.

As per the studies conducted under the Sagarmala Programme, cargo traffic at Indian ports is expected to be approximately 2500 MMTPA by 2025, while the current cargo handling capacity of Indian ports is only 1500 MMTPA. The 2 new major greenfield ports are proposed to be developed at Vadhavan (Maharashtra) and Paradip Outer Harbour (Odisha) to fill the demand gap and expand overall capacity of ports in India. Increasing investments and cargo traffic point towards a healthy outlook for the Indian ports sector.

India became a prime destination for green ship recycling with the passing and enactment of the landmark Recycling of Ships Act, 2019. India has also acceded to IMO’s Hong Kong International Convention for Safe and Environmentally Sound Recycling of Ships in November2019. The new Act provides a legislative framework for implementation of the provisions of the Hong Kong Convention. With the enactment of this Act, ship recycling volume is expected to double by 2024. Accession to IMO’s Hong Kong International Convention will give boost to the domestic ship recycling industry in India, making it one of the five major ship recycling countries in the world.

SELECT GOVERNMENT INCENTIVES

Select Government Incentives

Project “UNNATI” has been started by the Government of India to identify the opportunity areas for improvement in the operations of major ports. Under the project, around 116 initiatives were identified across 12 major ports to unlock more than 100 MTPA capacity just through efficiency improvement, of which, 91 initiatives have been implemented to unlock around 80 MTPA capacity.
The Government has accorded approval for strategic disinvestment of 100 percent GOI shares in Dredging Corporation of India Ltd. (DCIL) in favour of a consortium of 4 Major Port Trusts viz. Visakhapatnam, Paradip, Jawaharlal Nehru and Deendayal, providing more operational and financial freedom in decision making and executing works in an efficient manner.
The Ministry of Shipping has provided guidelines for setting up Floating Storage Regasification Unit (FSRU) within Portsto meet the infrastructure requirement for LNG imports. The set up would facilitate a low cost, fast track and flexible option for LNG imports as compared to traditional onshore terminals.
In order to boost the bilateral trade with other countries and to ensure cooperation and coordination in the maritime sector, several MoUs were signed with countries like Bangladesh, Nepal, Myanmar, Bhutan, Maldives, Denmark and Sweden.
- MoUs signed between India and Maldives will pave the way for ferry and cargo services between Maldives and Kerala.
- Another agreement has been signed with Sweden for mutual recognition of the certificates of seafarers in December 2019. This will enable the employment of Indian seafarers on-board Swedish flag ships.
- To promote movement of passenger, cruise services andcargo transit to North East Region (NER), an alternative connectivity route via Bangladesh’s Chattogram and Mongla Portswas discovered and operated. The new route is expected to increase trade volumes and reduce logistic costs of the cargo. Eight routes are opened under the Agreement which would enable access of NER via Bangladesh.
- A similar agreement for inland waterway connectivity was also added in the Treaty of Transit between India and Nepal for transportation of cargo. Three routes for evacuation of cargo have also been agreed by both countries.
- A total of 3 MoUs were signed between Ranong Port (Port Authority of Thailand) and the Port Trusts of Chennai, Vishakhapatnam and Kolkata to enhance economic partnership by cutting down the sea travel time between India and Thailand from 10- 15 days to 7 days.
Eligibility criteria have been relaxed for Indian shipyards to qualify for Right of First Refusal (a contractual right to enter into a business transaction with a person or company before anyone else can) in 2019. Technical qualification of Indian shipyards will be based on the relaxed norms for infrastructure availability and capability of the shipyards to execute the shipbuilding contracts. The Ministry of Shipping has amended the guidelines regarding Grant of Right of First Refusal to Indian shipyards by Government departments or agencies for procurement of vessels by them for own use or Government use.

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The EU - The EU has put in place an extensive legislative framework for safety, environmental protection and quality shipping, which covers the entire chain. For more information, refer to Mobility and Transport