The Hindu Business Line : Financing port development

The consistently salutary performance of the country's foreign trade, both exports and imports, over the last four years, despite infrastructure impediments, has been a puzzle.Yet, to carry on with a `business-as-usual' attitude, without addressing ground-level glitches, would not only slow the country's growth momentum but also stall its ambition to be a global trade major in the foreseeable future.

Recognising the key role ports play in economic development, as about 95 per cent by volume and 70 per cent by value of the country's international trade relies on maritime transport, the UPA Government set up a Committee on Infrastructure (CoI) under the Chairmanship of the Prime Minister, Dr Manmohan Singh. In May 2005, the CoI approved a broad framework to develop ports and mandated that the programme be put in place by 2013-14.

Currently, there are a dozen major ports, six each on the east and west coasts, and about 45 non-major and private ports handling the country's maritime merchandise. The aggregate volume of traffic handled by all Indian ports during 2005-06 was 573 million tonnes (MT) and the overall projected traffic for 2011-12 is 1009 MT. The traffic share of major ports in 2005-06 was 424 MT and to ensure holistic development these ports have zeroed in on projects that can be categorised under construction and reconstruction of berths/jetties; deepening of channels/berths; procurement of equipment and others.

The growth in cargo, which has been about 19 per cent for the last two years, is likely to keep up this pace, while the rate of growth in containers is likely to be 15-18 per cent.

On the direction of the CoI, the Empowered Sub-committee under the chairmanship of the Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia, in May last year, resolved that the financing plan for major ports would be formulated by a Task Force under Member, Planning Commission, Mr Anwarul Hoda. This Task Force recently came out with a set of recommendations for financing ports. The Task Force says candidly that the country's port sector has reached a stage where the available capacity is facing saturation due to growing volume of traffic.

Recommendations

Owing to inefficiency and burgeoning congestion, the average pre-berthing detention and turnaround time remain high by global standards and as such building of additional capacity is unavoidable for rapid improvement in the sector.

The current capacity of the major ports is 456 MT comprising 62 MT (5.18 million twenty feet equivalent units) for containers, 162 MT for petroleum, oil and lubricants (POL) and 232 MT for other cargo, respectively. Keeping in view the projected traffic and the need to provide for buffer capacity to meet the surge in requirements, as also the possibility of bunching of traffic, it is proposed to increase capacity at major ports to 1002 MT, which means capacity of about 546 MT is to be built between 2006-07 and 2011-12.

The Task Force reckons the total investment in major ports during 2007-12 at Rs 57,452 crore. Capacity addition through new projects would be 464 MT, requiring capital investment of Rs 32,875 crore.

PPP mode

The Task Force reckons that following the successful experience of operating berths at major ports on public-private partnership (PPP) basis, and in a bid to maximise the inflow of private capital, all new berths taken up after June 30, 2006, at major ports would be constructed through PPP mode, with likely investment of Rs 38,079 crore. With some ports having funds of their own to meet expenditure on dredging, replacement of equipment and other port-specific activities, it is estimated that investment of about Rs 14,175 crore could be funded through the internal resources of Port Trusts. The shortfall between inflows from all sources and projected outflow is proposed to be met out of market borrowings. But these borrowings would be capped by the ability of port trusts to repay. It is estimated that about Rs 2,174 crore could be raised through borrowings by Port Trusts. Where necessary, the feasibility of loans from one Port Trust to another could be explored, on the lines of inter-firm investments, the Task Force has suggested.

It has also plumped for government support, for capital dredging projects, deepening port channels and constructing of break waters, where the financial position of any major port so warrants. Budgetary support of around Rs 3,024 crore has been projected for the Eleventh Plan. But given the limitations on budgetary support, shortfalls might have to be met either by market borrowings or through inter-port on terms to be set by the government.

Capacity addition

Over and above the investment in major ports, maritime States with non-major ports have projected a capacity addition of 346 MT with an investment of Rs 35,933 crore that would be funded by private capital. In their funding proposals, States and Union Territories have projected a requirement of about Rs 3,488 crore from the Central Government. A plan of action for implementation of the various projects formulated by an inter-ministerial group comprising the Ministries of Shipping, Finance, Coal, Petroleum and Natural Gas and respective Port Trusts and Plan panel would be drawn up by next month and forwarded to the CoI.

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