Infravisioning With Vinayak Chatterjee: The Indian Port Sector's Turnaround Story

Vinayak Chatterjee: Ever since India’s economy started taking off, which is from the late 1980s actually, although people popularly believe it was 1991. But from the late 1980s, when the economy started taking off till about 1999, all you heard was criticism about ports and that the ports were inefficient, that the ships had to wait long times before they got a berth. There were highly unionised labour that was slow and lethargic about loading and unloading, and all our efficiency parameters were one of the lowest in the world. So, we have lived with that criticism in the whole of the 1990s. 

I did this little exercise of trying to see what happened in the last 20 years, and I was very pleasantly surprised to see that from 1999 to about 2022— and I have the data—these 20 odd years actually demonstrate a complete turnaround of the Indian port story, which I choose to call a renaissance for the simple reason that between 1999 and 2021, the traffic handled in ports—which is imports and exports, across three categories of products including containers, dry bulk and liquid bulk—all the three categories put together, the volume of traffic became four times. That, of course, reflects the robustness of the Indian economy. 

So, in 20 years, traffic was four times but interestingly in these 20 years, something dramatic happened, which is that from ports owned and run by the private sector, which had about 7.4% of the share of total traffic in 1999, it became 73.2%--from 7.4% to 73.2% of a cargo that had quadrupled. 

So, all other efficiency parameters, the more important ones being what the shipping industry called the ASTA–the average ship turnaround time fell from a high of those bad days of eight days to turnaround a ship to about 2.2 days and there are many other efficiency parameters. 

So, because of this, I say not only was there a renaissance of Indian ports, but this renaissance was actually catalysed or created by the massive entry of the private sector in the ownership and management of India’s ports, which at today’s figures would probably be touching close to 75% of the total share handled by private owners and operators of ports. 

Now, this is nothing short of dramatic and while infrastructure discussions are about roads, power, renewable energy, airports, civil aviation and telecom, very few people are focused on this silent revolution in ports as I call it, or a renaissance that has shown a dramatic turnaround.

Vinayak Chatterjee: Well, if you once again go back to the data, it speaks for itself. In these 20 years—1999 to 2021—the volume of traffic quadrupled, became four times, and the share of the private sector in handling this rose to 75% as it is today from 2%. 

So, evidently, a huge amount of capacity came in because of private investment. Now, again, out of curiosity I did a deep dive on how many private projects came during this period and lo and behold, there were 82 new projects.

When I say new projects, I include standalone new ports like Dhamra, etc. Ports where terminals were privatised to the private sector, as happened in Nhava Sheva and a few other ports in Kandla, Nhava Sheva. The ports were not privatised but terminals were handed over to private ownership for control and operations. 

The combination of these ports and the terminals saw 83 projects—now 83 projects in 20 years, is I think a testimony to the energy of the Ports and Shipping Ministry to have managed this volume of PPP, whereas many other ministries have not yet kind of woken up to the true potential of PPP.

For example, the Railways are still faulted for not doing enough to get private capital in, but here you see the ports sector. Airports, how many have been privatised? I would say recently six and before that —Kochi, Bengaluru, Hyderabad, Delhi, Mumbai—five. 

So, you can say at the most about 15 airports have been privatised, but here you have 83 locations that have been handed over to the private sector. So, it's a very strong testimony and I think successive governments deserve credit because these 20 years haven't just seen the NDA, it obviously started in the UPA time and other successive shades of governments. 

So, over 20 years, the government as well as particularly the port sector, should be applauded for very forward-looking policies, not just about privatisation, but they even have to change some policy. For example, they created the landlord policy for ports which means a port which was historically owned by the government was urged to see itself as a landlord, hosting private capital in its terminals. That was a visionary idea. 

The Ports ministry disbanded an archaic institution called the Tariff Authority for Major Ports, which did kind of regulated tariff settings and they made it far more free pricing. So, a lot of things went with it. 

There aren't too many private sector people who are complaining about faulty policies or lack of level playing field. There is a certain robustness to the operation to the ports. And this, in many ways—I am kind of repeating the point—is India's untold story, the turnaround story in infra is ports. 

Vinayak Chatterjee: Well, there is because right now while the port operator has grown leaps and bounds in its quest for efficiency —you already spoke about ASTA—the other efficiency is the average number of moves that a crane makes when it picks up a container or the length of time it takes to load and unload a ship over and above its berthing time. There are many other parameters, but across all these parameters, Indian ports are very much up to the mark. 

In some dramatic cases, a large container ship has been turned around in 17 hours. Very large ships like what are called in shipping jargon, Cape vessels or Panamax vessels have been brought in and loaded and unloaded with the same kind of speed and efficiency that you get in world class ports like Rotterdam or others. 

So, the interface between the vessel and land, the port operations, have come up to international standards. Where we still have a lot of catching up to do is what happens in the immediate hinterland of ports. There is congestion in the roads that carry the containers. There’s a lack of container freight stations, there's delay in customs. So, there are a whole bundle of issues that also now need to move up to world-class efficiencies and that is a challenge there.

Vinayak Chatterjee: The rate at which volume is growing–as I already said, the last 20 years we have seen a quadrupling of volume. So, it is simple to say that the minimum that will happen in the next 20 years will be quadrupling, if not more. 

Now, a quadrupling requires again a significant increase in port capacity. Port capacity happens in two ways: one, it happens by creation of new ports and secondly, it happens by augmenting the capacity of an existing port by building more terminals, adding more berths, adding more terminals. So, both will come into play but there are some exciting horizons that have opened up. 

One is that Indian ports operators are also going international. For example, the Adani Group is already present in Colombo and in Haifa port in Israel. There are others in discussion for port opportunities on the East African coastline or in the Bay of Bengal, Indian Ocean area.  

But if you ask me even as of yesterday, there was a news item that Bangladesh has in a very friendly gesture opened up its ports, particularly the largest ones—the Chittagong called Chattogram—for transshipment of Indian goods up to the northeastern states. So, therefore, there's certainly going to be a vibrancy on some of the ports which are on the eastern coast, that face Bangladesh, they are going to see certain vibrancy. 

But if you ask me, one of the most interesting developments right now is that the government has decided to build a transshipment terminal in the Andamans, in the Car Nicobar Islands. Historically, India has never had a transshipment port of any stature.  

Transshipment means that a big vessel unloads containers and they get dispersed geographically into other smaller or equivalent ships. It's called transshipment. It's not the ultimate destination, but it's a bulk of cargo that it gets dispersed in a geographic region.

India didn't have a transshipment port of any size or stature and the government recognised it, so the request or proposal is out to build a world class transshipment centre in the Andamans. 

I expect it to roll fast and if in the next three or four years, we have India developing a transshipment port in Andamans and in the Car Nicobar, it is certainly going to upset the existing patterns of established shipping routes from Dubai, Singapore and Colombo, as India starts pulling more traffic into Andamans. Much of it will be Indian traffic because our economy is growing so well. So, that's big excitement on the horizon and the other excitement is the creation of new ports. 

There's a new port coming up in West Bengal, called Tajpur. Other bids are coming up in different areas. There is a port in Kerala, Vizhinjam, which is under development. So, there's a whole lot of action. 

But funnily enough, what I find is that ports are not something that the Indian public can see, touch or feel. You can touch and feel an airport, you can see a Vande Bharat train rushing across the countryside. You can see national highway roads on which you and I can travel, but ports are very much a distant activity and therefore does not get the kind of visibility and the attention from Aam Aadmi for example, and the media also doesn't report too much on ports. 

Vinayak Chatterjee: Well, port operations are exciting and positively exciting. The report card financially of the people operating the private ports is pretty decent. But it's also a very cut-throat aggressive market because people are fighting for market share, whether it is containers or liquid, there is a certain positive aggression to building capacity of bidding. 

So, there's a lot of raw creative and positive energy in the port sector and as you can see, if people were unhappy, they would not bid for further projects. 

One bid that happened near Kandla port saw DP World of Dubai bidding aggressively and winning. Similarly, even international players like Port of Singapore are up there and they continue to be very bullish and buoyant on the Indian ports opportunity. So, the bottom line is yes, they are doing financially well, it's virtually a free market now with the breakdown of a lot of regulating pricing and seems to be an exciting sector for the Indian economy.

Vinayak Chatterjee: What is going to happen now is that the drive for improvement of the hard infrastructure, which is building port efficiencies is well done. 

The emphasis on policy reform is shifting to the softer aspects, which are well captured. If you read the National Logistics Policy, it seeks to do precisely this—it attacks the softer side by cutting down the amount of paperwork required to move a container, by cutting down the number of inspections that are required for export and import, for cutting down the amount of paperwork required by customs. So, by increasing now in terms of linkages —Gati Shakti, for example; the Ports Minister Sarbananda Sonowal has gone on record that Gati Shakti has identified 100 port connectivity projects that required capacity enhancement. 

So, a port connectivity project means a road that links the hinterland to the port or a railway line that links the hinterland to the port. So, the port connectivity projects, clearing the baggage of regulatory maze of paperwork, these are the things which now need to be done and many of them are being done. So, India’s ports sector and associated logistics in the years ahead should actually be a shining star.