MAINS CURRENT AFFAIRS GENERAL STUDIES III 48. SAGARMALA & MAJOR PORT AUTHORITIES BILL

Transcription

1 MAINS CURRENT AFFAIRS GENERAL STUDIES III 48. SAGARMALA & MAJOR PORT AUTHORITIES BILL India is the 16th largest maritime country in the world, with a 7,500-km coastline spanning 13 maritime States and Union Territories, including several islands. The nation has 12 major (PSU) ports and about 200 non-major ports; of the latter, about 50 are operational as commercial ports while the remaining are fishing hubs. Major ports are ones that can handle a large volume of cargo. The 12 major ports Kandla, Mumbai, JNPT, Marmugao, New Managlore, Cochin, Chennai, Ennore, VO Chidambaranar, Visakhapatnam, Paradip and Kolkata (including Haldia) handle more than 60 per cent of the country s cargo traffic. The Indian port sector plays a vital role in sustaining growth in the country s trade and commerce. It also has an important role in fulfilling India s dream of achieving greater global engagement and integration with its trading partners. Much of India s port-led development initiative is expected to revolve around growth in maritime trade, given its share in terms of both volume and value in the country s overall trade statistics. Approximately 90 per cent of the export and import trade by volume and 72 per cent by value are moved through maritime transport, according to the Ministry of Shipping. In order to handle the increase in the sea-borne traffic on account of increase in foreign and coastal trade, major expansion is required in the port infrastructure sector in the country. The globalised competitive world today needs a dynamic, flexible, nimble and highly efficient port. MAJOR BOTTLENECKS IN PORT INFRASTRUCTURE 1. The situation of limited capacity and high demand has inevitably resulted in port congestion. As a result, Indian ports have high turn-around time compared to others. For a ship entering an Indian port, for instance, the average turnaround time defined as the average time a vessel needs to stay in the port was a little over two days for the fiscal ended March In Hong Kong, the average turnaround time, which illustrates the capability of the port to efficiently handle cargo flows at the terminals and measures the difference between time of entrance and time of departure, was less than 10 hours. 2. Several major ports lack sufficient depth for large crude tankers. Large vessels are berthed at Colombo, Singapore, or Dubai, and cargo is shipped to India later in smaller vessels, thereby escalating the freight cost. 3. Weak hinterland connectivity is a challenge for most Indian ports, reducing accessibility. Despite investments from the private sector that are encouraging the modernization and development of ports, infrastructure continues to be a major issue. 4. The performance of Indian ports does not compare favorably with that of efficient international ports. On three important parameters- capacity, productivity and efficiency, Indian ports lack in comparison to some of the major international ports. For eg. India s logistics cost is thrice than China s. Besides, China s 10th largest port is 50 per cent bigger than India s largest. Similarly, Colombo can handle more container traffic than all of India s ports put together with something like three-quarters of that being transshipment of containers from India, because India s ports are too shallow to accommodate big container vessels. 5. Truckers, who are the lifeline of transport sector in India, struggle to keep moving on the country s roads, especially when faced with the numerous checkpoints and roadblocks that dot the state borders and national highways. The average waiting time of Indian trucks at checkposts is 70 minutes, compared with 5 minutes globally. As a result, in comparison with a global standard of km per day, Indian truckers are only able to cover a distance of just 300 km per day, according to latest estimates prepared by the Niti Aayog, with eastern states such as Assam, West Bengal and Odisha having the worst record in terms of stop time at check points. 6. Most Indian ports are struggling, especially if the efficiency parameters are contrasted with global benchmarks. The average pre-berthing detention time for India s major ports the time taken by a ship from its arrival at the anchorage and moving to the reporting station till it arrives at the operational berth (excluding time taken for inward movement) is high. At ports such as NEO IAS , , Page 1

2 Rotterdam and Singapore, the time taken is almost nil. Shipping permits and clearances take up to 3 days in India, whereas, in Singapore or Hong Kong, arranging a shipment and get all clearances takes about a couple of hours. 7. Indian ships account for a tiny part of the country s trade: about 15 per cent, compared to the international norm of 40 per cent. It has no civilian shipyards to compare with the world s best. The two or three private ones that look to build commercial vessels are deep in debt and short of orders; most Indian ship-owners prefer to look to foreign yards, because of better quality and assurance on delivery schedules. In short, India s maritime business needs a booster shot. 8. Ports displayed specific patterns of issues based on differences in geography, infrastructural capacity, operational aspects, contractual arrangements, and so on. For eg. Natural challenege of heavy siltation and inadequate dredging capacities at Haldia Dock Complex in Haldia, West Bengal; Congestion at the approach road in Jawaharlal Nehru Port in Maharashtra etc. Such issues, though unique to certain ports, needs to be addressed separately. The growth of India s maritime sector is constrained due to many developmental, procedural and policy related challenges namely, involvement of multiple agencies in development of infrastructure to promote industrialization, trade, tourism and transportation; presence of a dual institutional structure that has led to development of major and non-major ports as separate, unconnected entities; lack of requisite infrastructure for evacuation from major and non-major ports leading to sub-optimal transport modal mix; limited hinterland linkages that increases the cost of transportation and cargo movement; limited development of centres for manufacturing and urban and economic activities in the hinterland; low penetration of coastal and inland shipping in India, limited mechanization and procedural bottlenecks and lack of scale, deep draft and other facilities at various ports in India. As India eyes resurgence in port-led activities in the country, these issues, though specific to certain ports, indicate the need for the Central government to undertake measures to facilitate trade through Indian ports, either in terms of building and maintaining infrastructure for handling desired capacities or undertaking relevant policy and regulatory reforms. In terms of infrastructure, it is important to maintain draft to serve bigger vessels, ensure mechanisation of ports through introduction of new equipment and procedures, build new facilities, upgrade existing facilities and automate systems/procedures. In terms of policy and regulatory reforms, it is important to streamline tariff determination by Tariff Authority for Major Ports (TAMP) along with a provision for periodic revisions, ensure transparent and effective contractual arrangements in PPPs, implement strengthened communication platforms for seamless information flow among stakeholders, strengthen system integration, ensure paperless clearance of procedures and transactions, develop user information portals, and so on. Apart from reviving the ports currently operational, these measures, if duly incorporated, promise to sufficiently bolster prospective ventures as the country moves towards an optimistic maritime trade regime. CHINESE THREAT India is worried about China's expanding reach in the region through port investments in Sri Lanka, Bangladesh and the Maldives. China is also developing Pakistan's Gwadar seaport as part of a $46 billion China-Pakistan Economic Corridor. China had also wanted to partner with an Indian company to build the Vizhinjam port, but its proposal was rejected by the government on grounds of national security. Though, India has not banned Chinese firms from investing in its ports, it takes a cautious approach as most ports are also used for "strategic purposes". This is because of the dual-use port facilities that could also be used by naval vessels. The docking of a Chinese nuclear submarine at Colombo's commercial port in 2014 shocked India's security establishment and has added urgency to New Delhi's push to strengthen its port infrastructure. Meanwhile, India is seeking to extend its commercial and strategic reach as it tries to catch up with China, pledging up to $500 million to develop the Iranian port of Chabahar to give itself trade NEO IAS , , Page 2

3 access to Iran, Afghanistan and the hinterlands of Central Asia, now largely blocked by Pakistan. Furthermore, Vizhinjam port will have dedicated berths for India's navy and coastguard. MAJOR PORT AUTHORITIES BILL, 2016 Non-major ports have been able to steadily increase their market share from 20 per cent in the eighties to 45 per cent now. They are incorporated as corporate entities under the Companies Act and are agile as a firm to respond to the market forces within their self-defined corporate charter. Their managers enjoy autonomy in decisions on investment, raising equity and debt resources from the market and in entering into contracts. They also enjoy freedom to set tariff. In contrast, the ability of major ports to respond to the changing dynamics is constrained by the institutional structure (namely the port trust) run by the Board of trustees comprising diverse interests who have become anachronistic with time and impede real time decision making. Besides, their tariffs are regulated by Tariff Authority for Major Ports (TAMP) and this often renders ports uncompetitive. Moreover, with increased focus on mechanisation and efficiency, private-owned non-major ports in the country are eating into the market share of government-owned major ports. In the last three years, the share of major ports in total cargo has declined continuously, while that of non-major ports has been increasing. As a result, capacity utilisation of non-major ports was better than their counterparts. The Ministry of Shipping has prepared a draft Bill Major Port Authorities Bill, 2016 to replace the Major Port Trusts Act, 1963, with a view to promote the port infrastructure and facilitate trade and commerce. The proposed bill aims at giving more autonomy and flexibility to the major Ports and to bring in professional approach in their governance. This will help to impart faster and transparent decision making which will benefit the stakeholders. SALIENT FEATURES An independent review board has been proposed to resolve disputes with the public private partnership (PPP) investors and users. The regulation to tariff by TAMP has been removed. Future PPP operators will be free to fix tariff based on market conditions and notify the Port Authority. The Board of the Port Authority has been delegated the power to fix the scale of rates for other port services and assets like land. The Bill seeks to simplify board composition and induct Independent Members (IM) into the Board. Port related and non port related use of land has been defined. A distinction has been made between these two usages in terms of approval of leases. The Port Authorities are empowered to lease land for Port related use for upto 40 years and for non-port related use upto 20 years beyond which the approval of the Central Government is required. For PPP projects the tenure of the lease of land would be as per the PPP policy of the Government. The need for Government approvals for raising loans, appointment of consultants, execution of contracts and creation of service posts have been dispensed with. The Board of Port Authority have been delegated power to raise loans and issue security for the purpose of capital expenditure and working capital requirement (borrowing up to 50 per cent of its capital reserves from the market). Concept of internal audit of the functions and activities of the Central Ports has been introduced on the lines of Companies Act, CONCERNS Though the Bill has balanced commerce and public policy admirably, there may be a few elements of concerns. For instance, PPP project is defined to cover only royalty or revenue sharing ones; it needs to be amended to provide for other PPP models, including annuity. Also, capital reserves have been defined to include capital reserves, revenue reserves and current assets. To avoid wrong counting, current assets should be dropped from the definition. The clause that the Board cannot borrow without prior approval of the Centre beyond 50 per cent of capital reserves NEO IAS , , Page 3

4 also may need to be reviewed. Alternatively, the Centre should set borrowing limits like corporates, based on the debt servicing ability of individual ports which is based on the ports expected cash flow and business plan. Another issue is that tariff procedures do not enable real time pricing flexibility. Remuneration payable to Independent Members of the Board in the nature of honorarium set by the Centre may not be able to attract talent. In case of board meetings convened at short notice to transact urgent business presence of independent member is not essential but if the government nominee is absent the decision shall not be final unless he ratifies the decision. This provision needs review to restore the primacy of independent members. All decisions at the board shall be adopted by a simple majority with no distinction in quorum between major decisions and others unlike corporates. Further, the Centre should induct lenders, investors and trade bodies in the board and make the board truly independent. The new Bill is a bold initiative by the Centre and should hopefully enable major ports to adjust their sails and row their own boat. SAGARMALA India is located along key international trade routes in the Indian Ocean and has a long coastline of over 7,500 km. Yet, capacity constraints and lack of modern facilities at Indian ports tremendously elongates the time taken to ship goods in and out of the country and has held back India s share in world trade. Incidentally, port infrastructure and linkages have been a sinking ship and initiatives such as Make in India cannot take off without better port infrastructure. Moreover, transportation by waterways has historically remained under-utilised in India although waterways are significantly cheaper compared to road and railways. Therefore, developing rivers as inland waterways can help save domestic logistics costs. Thus, the potential for port-led development has for long been constrained in India and is in urgent need of revamp. According to a World Bank report, India s current port capacity can be boosted by at least 35 per cent simply by revamping port management practices, especially for the government- run major ports. Sagar Mala is a strategic, customer-oriented initiative of the Government of India to evolve a model of port-led development whereby India s long coastline will become the gateway of India s prosperity. The programme aims at promoting port-led development by harnessing the country s 7,500-km-long coastline, 14,500 km of potentially navigable waterways and strategic locations on key international maritime trade routes. Nations like the United States, Japan, Korea and more recently, China, have leveraged their coastline and waterways to drive industrial development. The Sagarmala programme, led by the Ministry of Shipping, aims to replicate these successes in India. OBJECTIVES The prime objective of the Sagarmala project is to promote port-led direct and indirect development and to provide infrastructure to transport goods to and from ports quickly, efficiently and cost-effectively. Sagarmala aims to integrate the development of the Ports, the Industrial clusters and hinterland and efficient evacuation systems through road, rail, inland and coastal waterways resulting in Ports becoming the drivers of economic activity in coastal areas. In addition to strengthening port and evacuation infrastructure, it also aims at simplifying procedures used at ports for cargo movement and promotes usage of electronic channels for information exchange leading to, quick, efficient, paperless, hassle-free and seamless cargo movement. The Sagarmala initiative also strives to ensure sustainable development of the population living in the Coastal Economic Zone (CEZ). This would be done by synergising and coordinating with State Governments and line Ministries of Central Government through their existing schemes and programmes such as those related to community and rural development, tribal development and employment generation, fisheries, skill development, tourism promotion etc. The Sagarmala Project therefore intends to achieve the broad objectives of enhancing the capacity of major and non-major ports and modernizing them to make them efficient, thereby enabling them to become drivers of port-led economic development. NEO IAS , , Page 4

5 NATIONAL PERSPECTIVE PLAN (NPP) For a comprehensive and integrated planning for Sagarmala, a National Perspective Plan (NPP) for the entire coastline is prepared and it identifies potential geographical regions to be called Coastal Economic Zones (CEZs). While preparing the NPP, synergy and integration with planned Industrial Corridors, Dedicated Freight Corridors, National Highway Development Programme, Industrial Clusters and SEZs is ensured. This plan is based on four strategic levers optimizing multi-modal transport to reduce the cost of domestic cargo, minimizing the time and cost of export-import cargo logistics, lowering costs for bulk industries by locating them closer to the coast, and improving export competitiveness by locating discrete manufacturing clusters near ports. Sagarmala aims to deliver impact through over 150 projects and initiatives in four broad areas. One, modernize India s port infrastructure, add up to 5 to 6 new ports and enhance capacity. Additionally, over 40 port-capacity enhancement projects will be taken up. Besides increasing capacity, these projects will result in a more modern port infrastructure through the mechanization of berths and deepening of drafts to accommodate larger vessels. The second focus area is port connectivity, where over 80 projects are being planned. These include connectivity infrastructure projects like a heavy-haul rail corridor to evacuate large volumes of coal in Odisha, freight-friendly expressways to enable efficient movement of containers on key routes, and the development of strategic inland waterways through Jal Marg Vikas programme. The third set of projects aims to tap into the potential of port-led industrialization to boost industrial and export growth along the coastline. This will be realized through 14 Coastal Economic Zones (CEZs) along the coastline, each of which will house a number of industrial clusters. The clusters will have industries from the energy, bulk materials as well as discrete manufacturing segments, all of which will be able to use high-quality infrastructure which is fullyintegrated with the corresponding ports. Further, coastal states will be developed through modernisation, mechanisation and computerisation and it would create huge employment besides boosting the country s GDP. Finally, the potential of coastal communities will be harnessed by focused skill-development to support port-led industrialization as part of Deen Dayal Upadhyaya Grameen Yojana (DDU- GKY) and marine fisherman skill development projects. The set of initiatives under this head also includes developing opportunities for fishermen and other coastal communities as well as development of the numerous islands along India s coastline. In terms of economic impact, the Sagarmala envisages investments of close to Rs. 4 lakh crore to flow into infrastructure. The Sagarmala program has taken shape using the government s core philosophy of cooperative federalism. Keeping this in mind, the National Perspective Plan was drawn up with stakeholder consultations in parallel. SAGARMALA DEVELOPMENT COMPANY (SDC) As part of the efforts to promote port-led development in the country, the Sagarmala Development Company (SDC) has been incorporated under the Companies Act, The main objective of the company is to identify port-led development projects under the Sagarmala Programme and provide equity support for the project Special Purpose Vehicles (SPVs) set up by the Ports / State / Central Ministries. Though the implementation of the identified projects would be taken up by the relevant ports, state governments/maritime Boards, central ministries, through private or PPP mode, the Company would act as the nodal agency for coordination and monitoring of all the currently identified projects under Sagarmala as well as other projects emerging from the master plans or other sources. NEO IAS , , Page 5

6 SDC would be raising funds as debt/equity (as long term capital), as per the project requirements, by leveraging resources provided by the Government of India and from multi-lateral and bilateral funding agencies. It would also aim to increase the scope of private sector participation in project development. Further, SDC will undertake the preparation of the detailed master plans for the Coastal Economic Zones (CEZs) identified as part of the NPP and provide a framework for ensuring the integrated development of Indian maritime sector. BENEFITS Port modernisation and new port development projects will be attractive for domestic/international container terminal operators as well as port developers who currently operate large non-major ports in India. Port connectivity projects (road and rail) should be of interest to road developers and port developers themselves. With development of Coastal Economic Zones (CEZ) identified under Sagarmala, developers of Special Economic Zones (SEZ) and townships should also evince strong interest. According to the NPP, the projects will mobilise investments worth more than Rs.4 lakh crore, besides creating 1 crore new jobs, including 40 lakh direct employment, in the next 10 years. If Indian port development takes off effectively, local and foreign funds would flow in and coastal regions may become good bets for real estate too, as they will see industry and job growth. Logistic costs savings of over 35,000 crore per year can also help the Centre spend on development and possibly reduce taxes. Once implemented, this will result in cargo traffic increasing three-fold while the ports will also go under performance audit and the development of port-based industrial clusters will help reduce the overall cost of exports from India and counter the Chinese dominance in certain markets. Coastal and internal water shipping transport are the cheapest means when compared to road and rail modes within the country. So, if we do a modal shift, economic benefits will not only accrue to the industry, but also to the common man. GUJARAT S SUCCESS WITH PORT-LED DEVELOPMENT Gujarat has been a pioneer in adopting the strategy of port-led development with significant results. While in the 1980s the State grew at only 5.08 per cent per annum (against a national average of 5.47 per cent), this accelerated to 8.15 per cent in the 1990s (national average 6.98 per cent) and subsequently to more than 10 per cent, substantially benefiting from the port-led development model. IMPORTANT PROJECTS UNDER SAGARMALA Government has awarded three rail connectivity projects under its ambitious Sagarmala project, two projects worth Rs crore and Rs 9.28 crore at Visakhapatnam and third one at Chennai Port Trust. Further, to stay ahead of expected trade growth, the government proposes to establish four new major ports in the country. The ports likely to be established at Dahanu (Maharshtra), Colachel (Tamil Nadu), Sagar (West Bengal) and Dugarajapatnam (Andhra Pradesh) at an estimated cost of Rs. 32,000 crore over the next few years. These projects will help increase connectivity and efficiency of ports. Multi-modal logistic parks would be set up along the Dedicated Freight Corridor (DFC) spanning across the country to facilitate seamless movement of goods. The logistics parks would facilitate the last mile connectivity in terms of door to door services for customers besides giving value addition including packaging, retailing, labelling, transportation of the goods on the dedicated tracks. The Ministry of Road Transport & Highways/NHAI has agreed to prepare the Detailed Project Reports for 18 road projects, proposed under Sagarmala, on immediate basis under the proposed NEO IAS , , Page 6

7 Bharatmala scheme. Through these 18 projects, approximately 450 km of roads will be developed, at a cost of 5,100 crore, which will provide last-mile connectivity to the non-major ports and the new port at Sagar. The government also plans to award projects worth at least Rs 2,000 crore towards inland waterways development, known as Jal Marg Vikas programme, in Developing rivers as inland waterways can also help save domestic logistics costs too. TRANS-SHIPMENT PORT AT COLACHEL Ports are generally categorised as gateway ports and transshipment ports based on the nature of cargo handled. A transshipment port is defined as one where transfer of cargo takes place from a mother ship to a daughter ship. A gateway port is one which depends largely on its export/import cargo base originating from or destined to its primary/secondary/tertiary hinterland. The shipping ministry has reportedly decided to establish an International Container Transshipment Port at Colachel in Tamil Nadu at an estimated cost of about 27,000 crore. There is already a container transshipment terminal at Vallarpadam in Cochin. About 105 nautical miles south of Vallarpadam, in Vizhinjam, another container transshipment port is under construction. Thus, Colachel will be the third container transshipment terminal to come up about 22 nautical miles from Vizhinjam. In other words, all the three container transshipment terminals will come up within a radius of about 130 nautical miles from Vallarpadam. This is seen as a move to compete with Colombo transshipment port. However, the current market environment in the transshipment business is so depressing that even established transshipment ports are losing traffic volumes. This decline in transshipment business is attributed to sustained overcapacity, weak trade growth and prolonged lower oil prices. Further, by 2019, Colombo on the strength of a strategic co-operation agreement on container logistics development with China s Zhanjiang Port Group will have a deep water container terminal, consolidating its position as a major transshipment hub in South Asia. By the time Colachel becomes operational, which is sandwiched between Vizhinjam and Colombo, Vizhinjam will have already developed as a transshipment port and Colombo will have made much headway in the transshipment business, making the entry of a third competitor difficult. Therefore, the strategy of the Centre should be to not build a third container transshipment port at Colachel as that would weaken all the three transshipment ports in India. India s interest would be better served if the Centre utilises its resources to develop Vizhinjam and Vallarpadam where it has made large investments, to be able to function as competitors to Colombo. CONCLUSION India lags far behind in ports and logistics infrastructure. Against a share of 9 percent of railways and 6 percent of roads in the GDP the share of ports is only 1 percent. In addition, high logistics costs make Indian exports uncompetitive. To improve ease of doing business, the Centre has accelerated the clearance processes, including that of green clearances, and introduced online application and clearance in an extensive manner. These measures along with Sagarmala project has been envisioned to provide ports and the shipping the rightful place in the Indian economy and to enable port-led development. Successful implementation of Sagarmala can be a game-changer in terms of savings, employment generation, and value creation but the challenges in the way are just as formidable, with as much as Rs.4 lakh crore of investment needed in infrastructure. It is a no-brainer that the private sector would need to play a huge role if such mammoth investment is to materialise. And this is not likely to happen unless the structural and systemic issues hindering growth are resolved. NEO IAS , , Page 7

8 MODEL QUESTION 1. India is located along key international trade routes in the Indian Ocean and has a long coastline of over 7,500 km. Yet, India lags far behind in ports and logistics infrastructure. In what way could the Government s Sagarmala initiative change this scenario? Examine. NEO IAS , , Page 8