Expansion Course: Policy changes drive growth in the sector

Mr Rajiv Agarwal Operating Partner, Infrastructure, Essar, and Managing Director, Essar Ports share his views with Indian Infrastructure magazine’s 24th anniversary issue on the progress in the port sector, recent initiatives, and the future outlook.

Port traffic has witnessed fast-paced recovery from the pandemic and has been on an uptrend. A number of policies and reform measures have been introduced to attract greater private investments into the sector. The launch of the Gati Shakti initiative is expected to be a game changer for the maritime sector. Besides, the pandemic has paved the way for greater digitalisation of operations and the emergence of smart ports. Indian Infrastructure presents the views of leading experts on the progress in the port sector, recent initiatives and the future outlook…

Here are excerpts from the interview.

What has been the progress in the ports sector in the past one year?

Rajiv Agarwal: The Indian port sector has been performing remarkably and keeping up with the requirements of the industry and trade. The year 2021-22 saw the sector handling 1,320 million metric tonnes (mmt) of traffic with a growth of more than 5.5 per cent. The handling has surpassed the 2019-20 levels and hence, we have surpassed the pre-Covid levels. In terms of share, major ports have handled about 54 per cent of cargo traffic, while non-major ports handled about 46 per cent in 2020-21.

What has been the impact of the key initiatives undertaken by the government?

Rajiv Agarwal: Port infrastructure investments, particularly, have a significant influence on a country’s GDP and competitiveness. The government has been playing a significant role in boosting the maritime sector and has taken several measures to promote the efficiency of ports through various policy initiatives. A few of the notable ones are:

  • The launch of the Maritime India Vision 2030 to accelerate growth of the Indian maritime sector over the next decade.
  • The launch of the National Infrastructure Pipeline to propel India to become a $5 trillion economy and towards “Atmanirbhar Bharat.”
  • Enacting the Major Ports Act, 2021, to enable flexibility, self-governance and swiftness in decision-making.
  • Release of Tariff Guidelines, 2021 in December 2021, which enable tariff flexibility for new projects to be bid.
  • Launching model concession agreement (MCA) 2021 for new port projects in major ports.
  • Undertaking public-private partnership (PPP) projects on existing assets, which will unlock value and boost efficiency.

PM Gati Shakti – the national masterplan for multimodal connectivity – has paved the way for the holistic development of infrastructure in India and will ensure logistics and manufacturing excellence. These efforts are likely to catalyse rapid transformation of India in becoming a global manufacturing hub.

What are some of the key emerging trends in the area of digitalisation?

Rajiv Agarwal: The pandemic has changed and revolutionised the way industry operates. It has paved the way for smart and digital ports of the future with advancements such as hybrid working models, Automation, renewable energy, artificial intelligence, internet of things, drone technology, seamless connectivity, blockchain technology and much more. Vessel traffic management systems with real-time information sharing and visibility are now becoming essentials of day-today activities.

We, at Essar, have been investing extensively in developing and building state-of-the-art mechanised terminals that give our customers a competitive edge. Our terminals across India comprise state-of-the-art IT systems supplemented with vessel traffic system, ensuring round-the-clock availability and visibility. The firefighting and dust-suppression systems (including cold fog systems) not only minimise pollution but also ensure environment-friendly cargo handling, with a strong focus on environmental, social, and governance concerns. Investments are being undertaken in data analytics and systems, which will further improve operational efficiency.

What are the sector’s key challenges that remain unaddressed?

Rajiv Agarwal: The logistics sector has an indispensable role to play in nation-building. However, there are certain factors, that industry players need to work on, to stay ahead of competition such as increasing operational efficiency through mechanisation of non-mechanised terminals, reducing pre-berthing delays and improving turnaround time. Technology and digitalisation will play a key role in this.

There is also a need to develop deeper draft at existing and new ports to accommodate larger-size vessels. Developing multimodal evacuation facilities at existing port terminal facilities, with a key focus on developing a comprehensive rail/road connectivity, is needed as it will reduce congestion considerably.

Additionally, the sector requires low-cost financing to fund projects in view of the slow cargo build-up and long gestation period. Similar to low-cost financing for debt and equity that the government enjoys, funds and low-cost instruments should be opened for the private sector, in view of the need for private sector participation with the NIP, which is going to play a key role in the time to come.

The sector needs renewed interest of private players. It is the need of the hour that their challenges are looked at and existing PPP projects are supported and their concerns are addressed. Tariff flexibility for old concessions in major ports (under different tariff regimes) is one area that private terminals are looking at. It will put old concessions on an equal footing with new concessions in major ports and nonmajor ports. Mechanisms are needed to enable flexibility in long-term concessions to cope with the evolving market dynamics and other risks impacting projects and operations.

What is the sector outlook for the next one to two years?

Rajiv Agarwal: Despite the dip in the total traffic handled in 2020-21, India’s port sector handled cargo in excess of 1,318 mmt in 2021-22, which is an all-time high for the industry. The growth has continued in 2022-23. There has also been an uptick at Essar Ports’ facilities this year.

India’s EXIM trade has witnessed a steady growth and continues to indicate an upward trend. With the current geopolitical situations and external factors such as Russia-Ukraine war, debt crisis of countries, high inflationary pressures, risk of world currencies, etc., the Indian manufacturing and services sector is well poised to fill the growing gap, positioning India as the alternative and a region to depend with stability and good infrastructure.

As India charts its way to a $5 trillion economy and more, with a focus on the manufacturing and services sectors, it is expected that there will be a huge demand for cost-effective logistics in the country. The Indian EXIM trade is bound to grow by leaps and bound in the current context. I believe this will need a three-pronged strategy, that is, effective utilisation of the existing infrastructure, multimodal evacuations with hinterland connectivity and a steady increase in capacities to facilitate the growing demands of the economy. Overall, it looks like the next few years will be a mix of opportunities and challenges.

Source: Indian Infrastructure ❘ August 2022