Possibilities for Indian maritime sectors in the changing times

Posted by: Shanid KP

Designation: Associate

Date: August 29, 2022

After 80 years of driving global economic growth and peace, international trade is now facing multiple challenges. The Covid-19 pandemic has disrupted supply chains, and high fuel prices caused by the Russia-Ukraine war have made transportation costs unmanageable for many businesses. The war has also affected international grain trading. The recent crisis in Sri Lanka is linked to the war as well.

Tensions between China and Taiwan have grown, leading some to fear that globalization is going into reverse—a trend supported by all previous challenges. Furthermore, decisions about how to respond to anthropomorphic climate change will influence the following: which fuel is chosen, where it is sourced from, and even more pressure for shorter supply chains.It is impossible to predict how international trade will be reshaped as technological and economic forces push and pull on the strategies of shipowners, ports, and logistics companies.

Economic commentators have been talking about inflation, recession, and stagnation. But let’s look at what opportunities crisis creates for India—in particular its maritime sector.

The Sri Lankan economic crisis has had a negative impact on Colombo Port, the key transhipment hub of South Asia. Is this an opportunity for the DP World-sponsored International Container Transhipment Terminal (ICTT) in Cochin Port or Vizhinjam International Seaport, which is being developed by Adani Group? Both ports are located close to Colombo (two hundred nautical miles from Vizhinjam and three hundred nautical miles from ICTT Cochin).

They have secure origins and destinations—and the capacity for large-scale transhipment. The crisis in Colombo presents the opportunity to prove that Cochin and/or Vizhinjam are viable options. Thus giving an opportunity to become the leading transhipment hub of South Asia and reap the benefits that come with it.

The growing fears of dependence on China have led to the development of diversified supply chains that reduce both redundancy and risk. The pursuit of supply chain strategies that seek multiple sourcing options and distribute risk across different countries and regions is a less risky approach. It may be more expensive than pursuing scale and cost above all other considerations. But most risks have financial implications when they occur, and risk created by a single point of failure is likely to cost manufacturers very dearly.

Some of these trends have been around for a while: re-shoring, near-shoring and friend-shoring. These are also considered “green”, since many companies want to reduce their carbon footprint as well as mitigate risk. India is a proud non-aligned nation, with friendly relations with almost all countries. This provides India with an opportunity to showcase itself as a friend-shoring location—a country that can be relied upon by its allies and trading partners alike.

One with a massive domestic market—an alternate destination for factories where companies will be able find cheap production costs while still accessing the resources they need from abroad. The Coastal Economic Zones offer location advantages for companies in terms of low logistics costs and efficient export-import operations. The economic and political crises in neighbouring countries such as Sri Lanka, Pakistan and Bangladesh are clear signs of the importance of stability and security. These factors make India a safe, secure destination for industrial investments—and a reliable partner in supply chains.

So, how prepared is the Indian maritime sector to take advantage of worldwide challenges? What is the state of our infrastructure? Is it adequate to meet the demands of a modern economy? What reforms are needed, and how can we implement them most efficiently?

In the last 20 years, India has seen a dramatic transformation in its major ports: from inefficient port operators to profitable and effective landlord ports. Jawaharlal Nehru Port Authority (JNPA) recently completed the realignment to being a landlord port. All the operational major terminals are now privately operated. The Jawaharlal Nehru Port Trust has become a true landlord port, no longer competing with its own tenants. This move will level the playing field between private terminal operators and welcoming full business competition. We anticipate a reduction in logistics costs due to high productivity and the need to keep users happy.

Constantly striving to provide the highest possible level of service, port authorities must develop visionary strategies for meeting tomorrow\’s demands. One concern and one fact emerge from this: The inability of port authorities to make the most out of statutory reforms, together with the astonishing growth in minor or private ports—which are taking full advantage of their freedom. The JNPA is young, but we need to see them lead from the front with new ambitious projects and programs that will reimagine what a port should be in the 21st century. JNPA SEZ and Vadhvan Port are two possible examples. Digitalisation and process reformation are areas where change is needed. The JNPA could consider how it has fallen behind Mundra Port, a port that rose from nothing to become India’s largest.

Continuing with our reality check, Sagarmala seeks to support port modernization and connectivity. Modest progress is being made in inland waterways transport and coastal community development, though it does not seem to be keeping pace with new port development; port-linked industrialization; or shipping along coastlines. In addition to the delay in privatization of CONCOR, there have been slow progress on dedicated freight corridors and a lethargic attitude in the public sector on warehouse and cold storage development. We cannot afford to let our efforts in these initiatives fall behind. It is essential that the public and private sectors work together to address these issues, just as they did for the Production Linked Incentive (PLI) scheme and semiconductor foundry proposals.

The development of Gati Shakti, which streamlines the process of executing major infrastructure projects and programs, is a promising one. Private developers\’ focus on inorganic growth strategies and private players\’ aggressive involvement in establishing warehouses and cold storage facilities are both positive trends. Regardless, the government, port authorities, and private sector need to work together strategically to take advantage of available opportunities. We must make sure that India does not miss out on the next big thing. In the 90s, China became known as a manufacturing hub and India became one of its biggest consumers—let’s ensure we don\’t repeat history! Let\’s use this moment of change to create a new future.

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