Sagarmala: Transformation of the Maritime Infrastructure and Make in India
Sagarmala – India’s Manufacturing and Infrastructure push complement each other. India, the world’ fastest growing economy puts maritime security and collaboration in central to its strategic policy. In the world of interconnected economies, maritime trade has a crucial role. India’s approach to development is fast and inclusive. After one year of Sagarmala’s launch, in 2016 India has hosted a Maritime India Summit, in which PM Modi has invited the global business community to become a partner in the process of India’s port-led development. In his speech at the summit, PM Modi has said: “In this sector, no country can achieve the desired results in isolation. Nations have to collaborate to realize this potential and to overcome challenges in this sector.”
India has an extensive coastline of 7500 km covering 13 states and union territories. 95 % of India’s trade by volume (68% in terms of value) is moved by sea. Considering the importance of maritime infrastructure to India’s economy and to leverage India’s natural maritime advantages, PM Modi has crafted the vision of ‘Sagarmala’ and ‘Port led Prosperity.’ From 2014, the Indian government has given an emphasis on building the futuristic infrastructure in the country. Through Sagarmala programme, the government wants to modernize the ports and to integrate them with Special Economic Zones, Port-based Smart Cities, Industrial Parks, Warehouses, Logistics Parks and Transport Corridors. Global investors have enormous opportunities in this massive infrastructure transformation programme.
The Sagarmala project is reviving the efficiency of the Indian ports and its results are quite visible. After the consecutive years of losses, now the Indian ports and shipping organizations are yielding good profits. In 2014, the profits from ports in India were Rs. 3,000 crore. With the continuous policy reforms and customer oriented approach, this year the profits from all major ports of the country are expected to cross Rs. 7000 crore. After a period of 10 years, the Cochin Port Trust has posted a net profit of Rs 4.44 crore for 2017–18 against the losses of Rs 27 crore in 2016–17. On the cargo front, it has surpassed the target fixed by the Shipping Ministry by posting a 16.51 percent growth. The major ports and shipyards of India are making a turnaround after a decade. According to the latest stats from Indian Ports Association, country’s all major 12 ports witnessed a 4.97% rise in cargo traffic in the period of February-April 2018. During the period April to November 2017, Kandla Port handled the highest volume of traffic of 72.03 million tonnes followed by Paradip (64.97 million tonnes), JNPT (43.26 million tonnes), Mumbai (42.33 million tonnes) and Visakhapatnam (40.95 million tonnes). For the first time in India, in almost all key sectors, public ports are performing well than the private ports and it’s a great achievement of the government.
The Sagarmala project has a broad vision and the strong leadership commitment. One of the star performers of the Modi government Mr. Nitin Gadkari is known for setting up ambitious goals and pushing the limits to achieve those targets. To streamline the processes in the ports and shipping sector, the government has taken a number of policy reforms, some of the reforms which will speed up the pace of Sagarmala programme are Major Ports Authority Bill 2016, Merchant Shipping Bill 2016, National Waterways Act 2016 and New Shipbuilding policy.
In the month of August 2016, Sagarmala Development Company (SDC) was incorporated for providing equity support to residual projects under Sagarmala. As of now, more than 400 projects with an investment of USD 123 billion and 6 new ports are identified under Sagarmala. In each of the four pillars of Sagarmala programme: port modernization, port connectivity, port led industrialization and coastal community development, there are good opportunities for the domestic and foreign investors.
Under Sagarmala programme 14 Coastal Economic Zones with an investment potential of Rs. 15 trillion have been identified. In the port-led industrialization model of Sagarmala, different industrial clusters i.e. Petrochemicals, Power, Electronics, Cement, Automobile, Steel, Leather Processing, Wooden Furniture and Marine clusters etc., are planned to be set up in the different states of the country. Establishing future industrial capacities near the coast will lower the logistics costs and improve the export competitiveness of the manufacturing industry. In the vision document of Sagarmala project ‘National Perspective Plan 2016’, the concepts of Coastal Economic Zones (CEZs), Coastal Economic Units (CEUs) and Port-Linked Industrial Clusters have been introduced. These Coastal Economic Zones are set to align with the planned industrial corridors i.e. DMIC, VCIC, CBIC, BMEC, and AKIC. These CEZs have the potential to boost country’s exports by USD 110 billion and to generate 40 lakh direct and 60 lakh indirect jobs for the youths.
Ports are the key driver of the economic growth. Of the world’s top 20 free trade zones, 14 are either port-based or port-proximate. We have seen how countries like China, Singapore, Japan and South Korea have leveraged their coastline to boost the manufacturing and exports. India has 12 major and 200 non-major/intermediate ports. During 2016–17, country’s major ports have witnessed an annual growth rate of 6.8%. India’s current port capacity is 1500 MTPA and the goal is to increase it to 3000 MTPA by 2025. To achieve the full potential, Indian ports need to be seamlessly integrated with the hinterlands through Railways, Road Network and Inland Waterways. The two key aspects of Sagarmala vision are port rail connectivity and port road connectivity. For smooth connectivity to ports, more than 150 connectivity projects at an estimated investment of more than Rs. 2 Lac Crore have been identified.
Sagarmala Impact on Logistics Costs and ‘Make in India’
Logistics costs have a crucial role in the international trade. At present, the cost of logistics is very high in India. According to the report of the ASSOCHAM-Resurgent study (2016), India can save $50 billion per annum if country’s logistics costs get reduce from present 14 percent to 9 percent of the GDP. Reducing logistics costs for domestic and international trade cargo is one of the key priorities of the Sagarmala programme. The cost of moving cargo by sea or inland waterways is 60–70 percent lower than the road or railway network. In India, our waterways are underutilized; there is a need to increase the modal share of coastal shipping and inland waterways. Sagarmala envisages to double current share of coastal shipping in India’s overall modal mix from 6 percent to 12 percent by 2025. By taking our transport into the water we can reduce our logistics costs. The logistics cost in India is between 16–18 percent, but in the next two-three years, through the successful execution of Sagarmala and Bharatmala programme, it is expected to come down to match the global average.
Sagarmala is a key enabler of ‘Make in India’ programme. One of the key outcomes of Sagarmala is the reduction in logistics costs, which is crucial for our indigenous manufacturing push. At present India’s logistics costs is around14–18 percent of the GDP, to compete in the global market, it should come down to 4–6 percent. A number of sub-projects under Sagarmala are in sync with the Government’s Industrial Corridors, Dedicated Freight Corridors (DFC), National Highway Development Programme (NHDP) and Special Economic Zones (SEZs). By 2025, Sagarmala will be able to optimize the logistics flows of the country and it will help in saving close USD 5.3–6.1 billion per annum.
Sagarmala’s comprehensive approach of ‘port-led development’, has given a different perspective to understand the maritime space to the world. From connectivity, collaboration and industrial development to initiatives for holistic and sustainable development of coastal regions and communities, the vision of Sagarmala is inclusive. For India, oceans are not mere trade and transport links, as PM Modi perfectly puts “The maritime sector not only creates and facilitates economic activities; it also connects countries and civilizations. Investing in maritime sector is not only investing in one’s own future but in the future of the planet and that of coming generations.”
