Companies go global for a variety of reasons, some to increase their market share and some to reduce their dependence on the home market. There are others which see the advantage of easy access to raw materials and cheaper labour or capital. And yet others may be looking for overseas opportunities to increase the shareholder value or expand their brand equity.

The Union Shipping Ministry harbours an ambition to take Indian ports global. Its objective is admirable: Make India a “world power in the port sector”. The Ministry's Maritime Agenda for the decade, released earlier this year, had suggested the creation of an SPV called “India Ports Global”, or IP Global, to explore overseas investment opportunities. Nobody took this crazy idea seriously then. Now, some bureaucrats are trying to test the waters.

Going global sounds great! But are Indian ports capable of putting this grand idea into practice? Are we capable of exporting port services that can compete with the best in the world? India's port sector, despite being in existence for hundreds of years, is in no way comparable to the best in the world today. Cargo handling costs at Indian ports are higher than those at their counterparts in the neigbouring countries.

Many factors make our ports different from those that operate globally. The government-owned Major Ports are governed by one set of rules, while private ports under the State governments operate under different regulations. There is a dichotomy in the tariff structure and there are regulatory issues too.

Differentiating factors

The Maritime Agenda also cites the examples of the Port Authority of Singapore (PSA) and DP World, Dubai. Both these organisations operate port terminals in several countries, including India. Yes, they are indeed names to reckon with in the world of ports. But one should realise the circumstances these ports were in when they ventured out for global opportunities. Both Singapore and Dubai had become world-class transhipment centres. They had reached a saturation level in their home country.

“We need to look at their background before treading their path. Both Singapore and Dubai are maritime countries. But their home market is limited. They are forced to go overseas to grow and expand. They have large funds at their disposal. That is not the case with India,” says Mr A. Balasubramanian, an expert in the port sector and also board member of a leading infrastructure finance company.

The maritime Agenda has argued that India has a rich maritime heritage, as well as the talent and experience to create a port company that can bid for projects abroad. Even if we have the potential to take on the mighty worldwide, is that our priority today? Should we make not focus on improving services at home rather than trying to offer better services to others?

One can understand the merit of the proposal in a scenario where the Indian ports sector has reached such a saturation level that it needs to look for opportunities overseas. Today, that is not the case. Besides the need to upgrade existing facilities, India has to create huge additional domestic capacities to meet the expected demand.

According to the Maritime Agenda, the cargo handling capacity needs to grow at least 11 per cent every year to meet the projected traffic during the current decade. Traffic is expected to grow from over 900 million tonnes in 2010-11 to 2,484 million tonnes by 2020. To create additional cargo-handling capacity, the Agenda estimates the investment required will be over Rs 2.77 lakh crore ( Rs 1.09 lakh crore for major ports and Rs 1.68 crore for non-major ports).

In addition to this, there is a huge investment opportunity in dredging. The creation of new ports, use of larger vessels, increased focus on coastal shipping and inland water transportation will result in huge demand for both capital and maintenance dredging.

Earlier the government had estimated that dredging at the major ports alone could cost over Rs 6,000 crore over a period of five years ending March 2012. Most of these projects, including the channel dredging at JN Port (over Rs 1000 crore), are yet to be taken up.

Other opportunities

There are plenty of other investment opportunities in the Indian port sector. It is reported that the government wants Major Ports with cash surpluses to invest in a corpus to meet the port sector's global ambitions. One wonders how those who make such suggestions could be oblivious to the urgent investment needed at the major ports to improve their productivity and efficiency. The same ports are seeking private and foreign investments to create additional capacities.

There appears to be confusion and an utter lack of understanding on crucial issues at the government level. Take the case of the Rs 5,000-crore tax-free bonds allotted in the Union Budget for the port sector. Immediately after the announcement, officials in the Shipping Ministry said the proposed dedicated financial institution for the maritime sector — Indian Maritime Finance Corporation — would be set up soon and that the institution would be given the mandate to raise the Rs 5000 crore in tax-free bonds.

Subsequently, the Ministry had asked Ennore Port, the only corporatised port among the 13 government-owned ports, whether it would take up the responsibility to issue the tax-free bonds. Earlier, it was reported that the Shipping Ministry was awaiting the Finance Ministry's guidelines to go ahead with the tax-free bond issue. Going by recent reports, the Ministry wants the proposed Indian Ports Global to issue the tax-free bonds. As per the Budget proposals, the funds raised through tax-free bonds are meant for development of Indian ports ant not for investment in other countries.

The Shipping Ministry's global ambitions are admirable. But what about the Indian shippers' local dreams — to see that their goods are shipped on time, at costs that are comparable elsewhere in the world?

We have been talking about making JN Port a major transhipment hub ever since it was commissioned more than two decades ago. Vallarpadam, in the South, another international transhipment terminal in the making, is faced with teething troubles. The Shipping Ministry could not even ensure the assured draught at the terminal on time so that it could handle large vessels.

Clearly, for Indian ports, there's a lot to be done at home before going global.

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