India can save up to USD 28 billion in infrastructure spend and another USD 3.3 billion in transportation cost if 50% of overall trade moves closer to ports by 2020, an EY report said today.
India can save up to USD 28 billion in infrastructure spend and another USD 3.3 billion in transportation cost if 50% of overall trade moves closer to ports by 2020, an EY report said today. With initiatives like Sagarmala, “it is estimated that India can save up to USD 28 billion in infrastructure investment and another USD 3.3 billion in transportation cost if 50% of overall trade moves closer to ports by 2020,” as per the research report by EY.
The report said non-major ports on the east-coast of the country could play a major role in leading the sustainable growth path for the maritime trade.
“Non-major ports emerging to constitute a whopping 43 per cent of total traffic in FY16…reflects a huge shift in trade over a period of 10 years with the latter emerging as better choices compared to major ports on the back of strategic location, modernization, efficiency and better infrastructure, while achieving cost competitiveness through optimisation of network and logistics,” the report said.
It said global trade increased at a CAGR of 6.9 per cent in value terms during 1990 – 2015, and sea borne trade constitutes 80 per cent of the global trade by volume.
“In the Indian context, traffic handled at ports has increased at CAGR of 7.4 per cent during 1981-2016 in line with global trade growth. During the same period, trade in value terms increased from USD 24 billion to USD 643 billion,” the report said.
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In the past decade, India’s trade with countries to its east has been expanding. China has emerged as a dominant partner constituting 7.9 per cent of imports and 1.8 per cent of exports in 2015, it said.
It also said that with increasing traffic, congestion at major ports is increasing. Some of the major ports have land constraints limiting their ability to expand as well as promote port based industrial zone.
On the other hand the study claims that non major ports have much bigger land banks and have better infrastructure. For example, Mundra port and SEZ on the west coast is spread over 23,000 acres whereas Krishnapatnam port on the east coast has a land bank of approximately 6,800 acres for the primary port area and another 13,000 acres earmarked for industrial development.
It said these ports also have drafts in excess of 18 meter on par with international standards.
Emergence of industrial clusters near the port, consolidations of distribution centres and warehouses post GST and directional distributional of cargo can address the infrastructural bottlenecks and can reduce the average in-land logistics cost by as much as 68 per cent, it added.
The report said that to reduce costs arising from infrastructure bottlenecks, several private non major ports such as Krishnapatnam, Mundra, Pipavav, etc have developed close to demand clusters.
They are also implementing new concepts to reduce logistics costs. For example, Krishnapatnam port has implemented Direct Port Delivery which has subsequently being adopted by major ports, it said.
According to the report, non-major ports are also to lead on cost optimisation with improved productivity and cutting edge technology ushering Indian ports onto the world stage. Krishnapatnam and Nhava Sheva (JNPT) are the only ports that feature in the ranking of major ports in the world on the basis of port productivity.
“While most Indian ports have low draft ranging from 7-14 meters, new private ports like Gangavaram, Krishnapatnam and Mundra are filling the void by having deeper drafts. These ports have a draft in excess of 18 meters which is at par with some global major ports,” it said.
The non-major ports of the country are also giving a tough fight to the traditional players with improved operational metrics in terms of increased berth productivity, ship berthing per day, average crane moves per hour among others.
Identifying pre-berthing delays as key concern for major ports in India with as high as 1.6 days average delay, the report said private terminal operators such as Mundra and Krishnapatnam are performing at par with international ports with near zero delays.
Private ports such as Gangavaram and Mundra have 4-lane expressway connectivity while Krishnapatnam port with its connectivity to a 4 lane road and upgradeable makes it a congestion free port.
More so with the government set to create transshipment hubs with modifications in the regulatory framework, ports like the Krishnapatnam on the east coast and JNPT and Mundra on the west, backed with their strategic locations, deep drafts and innovative processes are well poised to emerge as the transshipment hubs of the country.