Development proposals for ambitious India

Narendra Modi’s administration has not been backward in its ambitions for India. As the reforming prime minister approaches his third year in office in May, there has been no shortage of initiatives to open the once closed, centrally controlled economy to foreign investment and private business. Although the Indian ‘elephant’ is not quite yet a ‘tiger’, the ruling National Democratic Alliance (NDA) can trumpet 7.5% growth, the fastest among the larger economies, and a reversal of an earlier slowdown. Development remains the watchword for Modi’s government as it renews efforts to overhaul the country’s patchy ports and transport system.
 
With 95% of India’s trade volume waterborne (70% by value), Modi has prioritised port modernisation as a strategic necessity to boost Indian exports. Policies to support the drive include the promotion of foreign direct investment of up to 100% for port projects and a 10-year tax holiday for enterprises that develop and operate ports and inland waterways. 
 
Modi’s policies have started to bring expansion, with capacity at India’s 12 major ports up by 11% in the 2016 fiscal year to 96 Mt, compared with 300 Mtpa in 2005, although utilisation trails at 60% of capacity in the long shadow of the world economic downturn.
 
India’s major ports, together with its 200 non-major ports, are finally seeing the substantial cargo growth the government has sought, with dry bulk, which represents almost half of throughput at major ports, driving this growth.
 
New Delhi’s decision last year to lift production bans and lower duties on iron ore has helped stimulate throughput. Overall, volumes are set to rise from 1.07 Bt for the 2016 fiscal year to 1.76 Bt for the full year in March. Non-major port volumes are expected to grow by 75% to 815 Mt, outstripping the rate of the advance of the larger ports, and driven by dry bulk demand. 
 
Port makeovers
 
The uptick comes after a decade of central government initiatives to makeover India’s ports. In 2011, the National Maritime Agenda set out its vision of how to expand port capacity to 3.2 Bt and handle 2.5 Bt by 2020, with proposed investments of US$18.6B in the majors and US$28.5B in non-majors. Full mechanisation of cargo handling was highlighted as crucial for India’s port performance and capacity to reach a par with international competitors. A major port and hub on each coast was selected at Mumbai and Kochi, Chennai and Visakhapatnam. The major ports were encouraged to stick to landlord duties and leave the private sector to drive development and investment of US$12.4B to 2020.