“India’s port traffic has gone up from 368 million tonnes in 2001 to 929 million tonnes in 2012. Port traffic is further expected to touch 2500 million tonnes by 2020. Compared to China, which handled 145 million TEUs of containerized cargo in 2010, India handled only 9 million TEUs,” remarked Mr. Rajiv Agarwal, CEO and Managing Director, Essar Ports, while speaking on the topic “Foreign Investments in Indian Infrastructure” during the recently held India Shipping Summit 2012. However, he sounded optimistic about the investments flowing in the ports industry with the sector having witnessed a FDI equity inflow of $ 1.6 billion during April 2000 and June 2012 as per the available data.According to Mr. Agarwal, there has been a fair amount of interest and people have been investing in ports with the main ingredients being available like demand and growth. Talking about major and non-major ports, he said the 13 major ports are under the control of the Central Government and they are looking at modernization. Hence, the investment potential at major ports is quite strong. Similarly, the 187 non-major ports are under the State Governments and the State Port Depatments / Martime bodies have been awarding port projects to private players.
Citing his concerns Mr. Agarwal pointed out that some uncertainties still loomed large, for example, there is no clarity regarding the 4th container terminal at JNPT and the container terminal at Ennore Port. Besides, issues like growth rate being lower than expected, overall interest rates going upwards (steep for infrastructure projects) and slowdown of global economy are also hampering the investments flow in Indian ports industry.
“In order to attract more foreign investments in India it is extremely important that the criteria for investment by insurance funds and pension funds for infrastructure projects are relaxed. There is also a need to develop a corporate brand market in India,” he suggested.
Other problems pointed out by Mr. Agarwal were:
• Very high revenue share being quoted by a few private players
• Delays in environment and forest clearance increase project cost
• Tariff fixation by the TAMP at artificially low level making the projects financially unviable
He said the port tariff should be deregulated and the Government should allow free competition which will enable a level playing field and healthy growth in port sector.
Speaking on the same topic, Mr. Anil Singh, Senior Vice President and Managing Director, DP World Subcontinent, asked: “Is foreign investment attractive in India? What can we do to make India an attractive destination for foreign investors?”
“Traffic at major ports in India is expected to grow at CAGR of 8% and at CAGR of 16% at non-major ports. Are we ready? No. The answer is doing it through FDI,” Mr. Singh stressed.
Giving an overall picture, he said in 2012-13, 25 projects have been identified for awards at major ports under the PPP model. We also have a very ambitious maritime agenda such as creating port capacity of 3200 MT to handle the expected traffic of 2800 MT by 2020 and increasing tonnage under the Indian Flag. To achieve these goals we have to look at alluring more investments.
Mr. Singh further questioned that when the port sector is granted 100% FDI unlike the 49% in retail sector then why is India still not attractive? According to him, the prime reason is that while “everything looks very attractive on paper it is not being translated into reality.” He stressed that it is now the right time to go in for regulatory revamp, relook at the bidding models for ports and that a normative approach to tariff fixation needs to be applied which allows ports to retain efficiencies and re-invest.
He felt that the Indian Government is getting pro-active with the Cabotage Law being relaxed and infrastructure projects being fast-tracked. But, we still have to be fast and create capacity before demand.
Dr. Priyath Wickrama, Chairman, Sri Lanka Ports Authority, said that the development of Indian ports sector would also be very crucial for Sri Lankan maritime sector. “We never consider Indian ports development as a threat; in fact, it would be very beneficial for us. From our end, Sri Lankan ports are ready to serve the growing demands of India and its massive growth. India and Sri Lanka should rather join hands to produce a cooperative maritime agenda.
Explaining why despite being attractive India is not garnering the kind of investments it should in the ports sector, he felt that issues like Cabotage, long gestation period in construction, bureaucratic procedures and over capacity utilization at major ports need to be seriously addressed.
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