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Developing India's ports

AFTER THE GRANDIOSE National Highways development plan, the Prime Minister, A.B. Vajpayee, has come up with an equally massive `Sagar Mala' programme to develop and modernise the ports. His announcement may have enhanced the feel-good factor in the stock market and among foreign investors, but a mammoth project of this kind, with an estimated investment of Rs. 80,000 crore to Rs. 100,000 crore over a ten-year period, needs a much closer scrutiny before the Government proceeds with the works. There may be nothing new in Mr. Vajpayee's blueprint except that the many individual port development plans are now being strung together in a `mala', and on an ambitious scale. The basic question therefore relates to the viability of such a massive investment without clear indications of a commensurate growth in traffic.

The first phase of the project relates to Mumbai and Kochi, where the deepening of the channels could begin before March 2004. Dredging at established ports, important as it is for unhindered operations, is easy to justify. However, the challenge will be to attract money to develop new ports or improve facilities at the minor ports. Realising it does not have all the resources, the Shipping Ministry wants to tap foreign and domestic private investment, keeping the Government's share to a mere 10 to 15 per cent. Private investors look for guaranteed traffic and growth to ensure a fair return on investment. But the growth in traffic in recent months has not been too encouraging. The major ports handled 25.68 million tonnes in June this year, compared with 24.86 million tonnes handled in June 2002, implying a lower growth of just 3.3 per cent against a 7.5 per cent growth the previous year. Cumulatively from April to June, the cargo handled at major ports recorded a 5.2 per cent growth compared with 13.2 per cent growth for the same period in 2002. The slowing down of growth is obviously linked to the lower growth in Gross Domestic Product. But the inadequate road and rail connectivity from the hinterland to the ports has not helped matters.

Since the Government has accepted the role of a facilitator or junior partner in the port projects, it has a job on its hands to woo investors. There have been expressions of interest from investors in the East — Singapore, Malaysia and Australia in particular. But the authorities will now have to undertake a detailed pre-feasibility study for the ports they want to develop so that they can convince investors about their viability. While some new private ports on the east coast have failed to attract enough business, investment in upgrading equipment at existing ports has paid off. At the recently privatised container terminal in Chennai, ships are being turned around virtually in a day, as against seven days previously, illustrating the point that priority must be given to making improvements at existing ports rather than to setting up new ports. That holds good also for another reason. Building cargo volumes at existing ports is the key to attracting main line container vessels, which provide fast and direct service to global destinations. As volumes are fragmented across many Indian ports, these vessels prefer to use Colombo, Singapore or Dubai as hubs. Promoting domestic cargo movement by sea is one other way to enlarge traffic at the ports, but for that shipping laws need to be updated. There is also a need for the development plans to stay focussed on the environment: to develop `clean ports' and to keep the waters around them pollution-free.

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