India’s global maritime ambitions must wait. The finance ministry has rejected the shipping ministry proposal to set up a global port operations company called Indian Ports Global on the lines of Dubai Port World and Singapore’s PSA International, which would invest and acquire stakes in overseas ports and container terminals.
Government sources told FE that the finance ministry is in favour of investing in the domestic port sector facing challenges in capacity addition and technological advancements rather than mobilising funds for an expensive global outing.
India’s major government-backed ports are sitting on about R7,500 crore. Indian Ports Global was proposed to be set up as a 50:50 joint venture with cash-rich ports and financial institutions investing R2,500 crore each. The company was then to leverage this amount to raise another R5,000 crore from the market by issuing tax-free bonds.
The idea was to invest in ports and terminals across the globe. The money was to be used to buy into strategic ports in Africa, Australia and regions that fit with current Indian trade links.
A source informed FE that a recent meeting led by secretary (expenditure) nixed the proposal for an independent public-private port agency, citing funding issues. The meeting felt more investments were required in building domestic ports and strategic interests could be pursued later.
India is not alone in eyeing foreign ports to enhance trade.
China’s construction of deepwater ports in Sri Lanka, Pakistan, Burma and Bangladesh is said to have infuriated India, leading to the idea of Indian Ports Global to serve the country’s commercial and strategic interests. But now, with the finance ministry’s refusal to endorse the proposal, India’s global maritime plans have been put on hold.
Traffic at India’s major ports is projected to increase from 560 million tonnes to 1.2 million tonnes by 2019-2020. To meet this increase in demand, India must upgrade its capacity from the current 963 million tonnes to 3.23 billion tonnes by 2020. This will need huge investments in the sector. According to the latest Economic Survey, over Rs 1.5 lakh crore need to be invested in the country’s port sector in the next five years, of which a major chunk would have to come from the public-private partnerships. Private participation is needed particularly for mechanisation of cargo handling, improvements of drafts at ports, strengthening port connectivity by building road and rail links, and technology upgradation and automation.