The Union Budget for FY 2020-21 has made an allocation of ₹ one lakh crore to the infrastructure sector. The amount is to be spent for projects in the National Infrastructure Pipeline which include housing, drinking water, clean energy, healthcare, education, railways, airports, bus terminals, metro and light transport, logistics and warehousing. However, the maritime sector, a focussed area of policy discussion in recent years, has virtually gone without a mention. Reference to the maritime sector is limited to the proposed corporatisation of one major seaport and its subsequent market listing, completion of the Jal Vikas Marg on National Waterways-I and the 890 km-long Dhubri-Sadiya inland waterway connectivity.
The Indian maritime sector, for long, comprised primarily of shipping lines catering to the needs of India’s domestic and external trade, a small shipbuilding sector (except for the government-owned shipyards utilised for strategic needs), the major ports for export cargo and the smaller jetties for movement of domestic cargo. In recent years, however, India has embarked on a course of transformation of the maritime sector. The country achieved good success in setting up and operating minor ports. Modern shipbuilding activities were also started, though the respective shipyards are yet to achieve any significant success. In recent years, there have been discussions at various levels, highlighting the potential of the maritime sector in bringing down logistics costs, making the economy more competitive, and thereby help push up exports. The potential of inland waterways, coastal shipping, port-led industrial growth, and the consequential positive spinoff effect on the economy have been duly recognised. It has been also duly acknowledged that a vibrant maritime sector necessitates a strong shipbuilding sector, ports and terminals, warehousing etc. Shipbuilding sector, particularly the new private sector shipyards, require attention to sustain and grow their business so as to preserve the modern assets created. These discussions have also highlighted the need for setting up a Maritime Development Fund (MDF) to meet the specialised long-term financing needs of the sector, at an internationally competitive cost.
Government of India has adopted important programmes for the maritime sector, including Sagarmala and growth and development of Inland Waterways. While Sagarmala focusses on a port-led development model, Inland Waterways proposes to increase the share of the maritime sector so as to make it a dominant mode of domestic cargo transportation, and as a feeder for international cargo trade. Both these programmes are expected to usher in significant investments in the economy, and be an important growth multiplier.
The Sagarmala programme aims to improve export competitiveness by reducing logistics cost. It envisages a comprehensive port-led development model, including Port Modernization & New Port Development: De-bottlenecking and capacity expansion of existing ports and development of new greenfield ports; Port Connectivity Enhancement: Enhancing the connectivity of the ports to the hinterland through multi-modal logistics solutions; Port-linked Industrialisation: Port-proximate industrial clusters and Coastal Economic Zones; Coastal Community Development: Skill development & livelihood generation activities for coastal communities; and Coastal Shipping & Inland Waterways Transport.
Waterways currently contribute around six percent to India's transportation modal mix, which is significantly less than that in developed economies as well as some of the developing economies. The National Waterways Act 2016, has declared 111 rivers, river stretches, creeks, estuaries in India (total length: approximately 15,000 km), as National Waterways, with an intention to create large-scale, commercial shipping and navigation systems. The waterways are proposed to be linked to the Dedicated Freight Corridors (DFCs) project for better utilisation. Inland waterways can accelerate the growth of coastal shipping by providing both backward and forward linkages. The network can also be a feeder to international waters, and thereby facilitate trade.
The capital cost of the Internal Waterway network, as planned, is estimated at over ₹ 22,763 crore. In addition, there would be capital spends on terminals, jetties, godowns, manufacturing/repair yards, as well as vessels/boats, the estimates of which, is not readily available.
Under Sagarmala, 574 projects for port modernisation, port connectivity, port-led industrialisation, coastal shipping routes have been approved. The projects identified involve an investment of around ₹ 6.01 lakh crore, and are to be implemented between 2015-2035. Of these, 121 projects, involving a total investment of over ₹ 30,000 crore, have been completed, while 200 projects with a total investment of over ₹ 3 lakh crore are under various stages of implementation. The respective authorities/government departments will undertake implementation responsibility, mainly through private/PPP mode. Sagarmala Development Company Limited (SDCL) has been incorporated to provide equity support for the project-specific special purpose vehicles (SPVs) set up by the implementing agencies.
The projects identified include 236 port modernisation projects involving an investment of over ₹ one lakh crore, 235 connectivity projects with an investment of over ₹ two lakh crore, and 35 port-led industrialisation projects with an investment of over ₹ two lakh crore. Master plans have been finalised for all the 12 major ports. They involve investments worth over ₹ 50,000 crore in 92 port capacity expansion projects for implementation over next 20 years, which is estimated to add a capacity of 712 million tonnes per annum (MTPA. In addition, two new major ports are proposed to be set up at Vadhavan, in Maharashtra, and Paradip Outer Harbour, in Orissa.
Sagarmala is a comprehensive project to usher in port-led industrial development. Increase in efficiency and expansion in capacity of existing ports, as well as setting up of greenfield ports and improving port connectivity envisaged under Sagarmala, are critical infrastructure initiatives to meet the needs of a growing economy. The aim of a port-led industrialisation strategy would be met through investments in 14 approved greenfield industrial estates and SEZs well-distributed across the country and linked with respective ports, as well as expansion/upgradation of the existing ones. Setting up of 30 industrial and maritime clusters with an investment of over ₹ 2 lakh crore have also been approved under Sagarmala.
India’s inland waterway network has no continuous connectivity. It requires a multimodal network, comprising water bodies and roadways, including culverts, bridges etc. to be developed. This involves investments in a large number of allied infrastructure development including ports/terminals, riverside jetties, godowns, boat building workshops, repairing yards and ancillary industries. Some of these port/terminals are planned as multimodal hubs, which will connect rail, road and waterways. For example, the multi-modal hub at Varanasi. In its full scope, the inland waterway is conceived as part of an ambition to link several big infrastructure projects. Implementation of the programme could also spur investment of a large order in a decentralised manner in the country. Utilisation of the inland waterways network is expected to substantially reduce the cost of transportation of goods, vis-à-vis other established modes, and thereby make the economy more competitive. The network would also help penetrate internal markets, by expanding the hinterland. Goods transportation to the North Eastern states of India would be facilitated through this internal network. Implementation and subsequent operation would generate a series of forward and backward linkages with prospects to penetrate deep into the economy. The multiplier effect of the investment and its linkages can result in a virtuous cycle of all-round growth.
The maritime sector in India has not been able to contribute to the Indian growth story as per its potential. The sector has remained small and marginal, with activities remaining concentrated among few shipping companies, the major ports and the Government-owned shipyards catering mostly to captive needs. Inland waterways transport, once an important activity, especially in the riverine route, had also been relegated in the country’s cargo transport.
Over the past five years, the maritime sector has been brought back into focus in various official and commercial discussions. Gradual policy-induced switch to maritime mode and its consequential benefits have been appreciated and investments planned/proposed. Most of these investments are in enabling infrastructure, and could lead to decentralised growth. None of these investment programmes appear to have found explicit mention in the Union Budget. Considering the benefits which could accrue, it is desirable that the maritime proposals can be prioritised, so that projects with the maximum linkage effects can be included in the Infrastructure Pipeline.
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