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DR. SADANAND GUPTA: SAGARMALA - A DREAM VENTURE IN INDIA'S MARITIME TRADE
By SEA AND COAST | 06/05/2017

The Sagarmala project will be spread over a period of ten years. It will cover ports, shipping, inland waterways, infrastructure and development of connectivity at ports. If it becomes a reality, the project will put India back on the global maritime map. Implementation of the Sagarmala Project will ensure India's quantum leap into national and Global connectivity.

 

The Sagarmala was not a solitary project. It was a long-term visionary programme of many projects aimed at bringing about rapid capacity expansion and modernisation of the Indian maritime infrastructure, including ports and shipping, along our country's east and west coasts.

It also included shipbuilding, inland waterways, coastal shipping and maritime education and training.

The project would have revitalized shipbuilding and ship repair activities by creating demand for more vessels.

Inter-port connectivity to augment coastal shipping to reduce transaction costs was also envisaged.

The objective of this project was to achieve within a decade. Under the ambitious Sagarmala project, ports, shipping and inland water-ways would have been developed in an integrated manner. The objective of this grand project was to facilitate movement of cargo via the shortest possible route. Equal emphasis was to be given to private and public ports as well as major and minor ports. The Sagarmala project was aimed to create a port-studded coastline for India, focusing on developing all major and minor ports in the country, with an outlay of around Rs 100,000 crore.

At the time of announcement of Sagarmala project on 15 August 2003 the actual cargo handling was 412 MT, which was expected to reach 565 MT by 2006-07, by means of projects like Sagarmala.

The basic aim of Sagarmala project was rapid capacity expansion and modernization of existing ports and establishment of new ports.

It encompasses the development of inland navigation including river terminals.

Sagar Mala would lay emphasis on developing India's ports to levels comparable with the best global ports in terms of infrastructure, efficiency and quality of service, increasing the tonnage capacity, upgrading and creating ship-building and ship repair facilities and increasing the use of inland waterways for transportation.

SCOPE OF SAGARMALA PROJECT

PORTS

Setting up of new ports

Capacity Expansion

Productivity improvement

Modernisation

Improvement in draught

Hinterland connectivity

SHIPPING

Increase the fleet size

Promotion of coastal shipping

Navigation aids

Maritime training

Shipbuilding and ship repair yards

Offshore development

Objectives of the project

  •  Capacity expansion and modernization;
  •  Connectivity from coast to hinterland and promote coastal shipping;
  •  To provide quality service comparable with international standards;
  •  Reduce transactions cost to benefit trade and consumer;
  •  Development of inland water-ways to promote environment-friendly and cost-effective mode of transport;
  •  Promote India as a major supplier of maritime personnel;
  •  Improvement in quality and quantity of Indian tonnage;
  •  Modernisation of navigation aid system.

Thrust Areas of the Project

The thrust areas were augmentation of capacity, efficiency, productivity and connectivity of the ports, increase in shipping tonnage, increase in share of inland water and promotion of coastal shipping, maritime training and navigational safety. This would translate into an addition of Rs 180,000 crore per annum of international trade. Since 90 per cent of India's international trade by volume and 70 per cent by value is carried through the ports, it calls for massive upgradation of maritime infrastructure with a holistic approach resulting in an integrated system of transport, including sea, road, rail and inland water. Sagarmala was expected to string together the coastal assets around our landmass into a 'mala' studded with ports.

Broad principles of Sagarmala Project

The basic idea behind Sagarmala project came out because of India's low investment in port sector as well as weak infrastructural support. To overcome such existing problem by low investment from Indian economy, the only option was to invite private sector participation more and more on same legal and basic principle which safeguard the legitimate interest of the Indian consumers as well as foreign investors. As the basic fundamental of the project was that the development of the port not exceeding the distance of 75 kms from the coastline will reduce the gap from one port to the other, under the project a separate provision of the bridges to link the gateway ports on eastern and western coasts, and hinterland connectivity in one side while in another side tie-up of landlocked states and union territories with ports and investment sharing. Creation of capacity at major ports, which exceeds the projected traffic by at least 20 percent by setting up an administrative mechanism for implementation of Sagarmala project through internationally comparable taxation regime for the maritime sector, will augment overall functioning. Cargo to travel the shortest route and focus would shift to commodity oriented planning in addition to transportation oriented planning for this more Inland Container Depots (ICDs) and Container freight stations (CFS) in each state capital or major industrial centres. There was also provision for the separate fund for the development of coastal shipping and inland water transport. A national authority would be set up for co-ordination and regulation of multi nodal transport agency. Most of the ports under the project would be declared as Special Economic Zone (SEZ).

The project would, in principle, treat private and public ports or terminals alike without any bias in favour of public ports. Under the project capital dredging and channel maintenance would be the responsibility of the states, labour practices would be rationalized and private sector participation would be made easier. The project would be financed via public-private partnership. Public funding would be restricted to around 15 percent of the total cost and would be drawn from diverse sources like budgetary support, internal and extra budgetary support, inter-corporate loans and external funding. Private investment was expected to meet the remaining 85 percent of the requirement.

Private sources would include FDI, investment through formation of Special Purpose Vehicles (SPVs) and a proposed maritime development cess.

Implementation of Sagarmala Project

An empowered committee headed by the secretary (shipping) would be set up with representations from then the Planning Commission, the ministries of finance, commerce and industry and others for approval of investment pro-posals for projects up to Rs 500 crore.

Besides, a steering committee under the chairmanship of secretary (shipping) would be constituted to finalise the project plan, priorities and the phased manner of project implementation.

It was already proposed that an empower committee would be set up on the basis of fast tract for working of project. A national sea water ways development programme for setting up of new ports would be substituted. A delegation of powers to grant environmental clearance for maritime projects to the ministry of shipping would be set up.

Rationalisation of taxation for Indian sea farers as well as introduction of tonnage tax to increase the revenue of ports, which was likely to be five paise per kilogram of cargo would have been monitored.

Ports to be members of special purpose vehicles (SPV) for rail and road connectivity with contribution up to 30 per cent of equity or as may be required.

Provision to create separate fund for development of coastal shipping and inland water trans-port infrastructure was proposed.

To be set up Sagarmala development authority to channelise budgetary support for setting up new ports.

Development of national sea water ways, state waterways and formulation of an offshore policy fixed schedule services on national waterways was part of the project.

Integration of fishermen/fisher folk into maritime community, establishment of two maritime universities, modernisation of navigation aid system and many more institutional and infra-structural facilities would be collaborated at a common platform.

Projects already identified under the project

  • Integrated development of Jawaharlal Nehru Port and Cochin Port.
  • Development of two offshore container berths at Mumbai port.
  • Setu Samudram Ship Canal Project.
  • Replacement of wagon tippler systems at Mormugao, Chennai and Kolkata (Haldia Dock Complex) Ports.
  • Creation of additional facilities for handling iron ore at Vishakhapatnam, New Mangalore, Ennore, Haldia and Paradeep Ports.
  • Development of Chennai Port as hub port for handling large size container vessels, car carrier terminal and cruise terminal.
  • LPG cavern project at Vishakhapatnam Port.
  • Construction of a new container terminal, LNG jetty, Coal Berth and Jetty for POL.
  • New terminal at Saugor Island for Kolkata port.
  • Terminal and associated facilities to promote cruise tourism in Mumbai, Mormugao, New Mangalore, Cochin and Tuticorin Port.
  • Development and operation of container terminal at Kandla port.
  • River regulatory measure for improvement of draught in Hooghly estuary.
  • Construction of clean cargo berth at Paradip port.
  • Development of foreshore area at Junglee Ghat harbour at Andaman.
  • Providing eastern side embarkation facilities at Amini, Agathi, Minicoy and Kavaratti Islands of Lakshadweep.
  • Building jetty at Shalimar on Hooghly River at Hawra side for inland water transport.
  • Establishment of vessel traffic service in the Gulf of Kutchh and Khambat.
  • Establishment of static sensors at strategic location.
  • Establishment of Maritime Universities, one each in the eastern and western parts of India. An expenditure of Rs 20 billion was planned for maritime education; of these Rs 8 billion would be spent on the two Maritime Universities. Four training ships would also be acquired at a cost of Rs 6 billion.
  • Setting up of two major international size shipyards one on the eastern coast and other on the west coast.
  • Upgradation of the existing shipyards in the public sectors.
  • Development of the strategically located non-major ports of Gopalpur, Cuddalore, Vizhinjam, Azzsikal, Malpe, Karwar, Ratnagiri, Dharamtar, Magdalla, Kakinada deep water port and Krishnapatnam, particularly for coastal shipping.
  • Acquisition of four training ships.
  • Acquisition of simulators and other state of the art training equipments.
  • Infrastructure development of existing national waterways and six new national waterways.
  • Development of state waterways (4,000 kilometres).

Financial Outlay of Sagarmala

The project was estimated to cost over Rs 1,00,000 crore and envisaged to be executed through public-private investment and partnership, out of which expenditure on ports were estimated around Rs 550 billion, shipping sector Rs 390 billion and inland water transport around Rs 160 billion.

Government policy allows 100 per cent foreign direct investment in the port, shipping and inland water transport sector and there appears to be considerable interest among international investors in maritime projects, which needs to be tapped better.

Explorations of funding by international lending institutes were key conception.

The government was envisaging the imposition of a nominal maritime cess on all cargo passing through Indian ports for a specific period to augment budgetary resources for Sagarmala.

For the project in its entirety, a cess of Rs 50 per tones of cargo was proposed on the lines of the fuel cess, which was being used to develop national highways.

A separate act was proposed, on the lines of the Central Road Fund Act for highway development, to ensure that the cess is used only for development work under Sagarmala.

Works under Progress

It was Government proposal that the JNPT to be developed as a hub port under Sagarmala project. Sagarmala so far and as the first stage of the nearly 8-10 years project-envisaging modernization and expansion of the Cochin and JNPT at a cost of Rs 7,500 crore along with this Coastal shipping would be promoted.

The Ministry has already identified a list of 14 strategically located minor ports, under the control of respective states, which would be developed exclusively for the purpose of coastal shipping.

These minor ports are Cuddalore, Vizhinjam, Azzhikal, Karwar, Ratnagiri, Krishnapatnam, Kakinada deep water port, Malpe, Gopalpur, Dharamtar, Magdalla, Sikka, Pipavav and Mundra.

The cost of this phase of minor port development would be around Rs 4.2 billion. Another Rs 8 billion would be spent in the second phase to develop 20 more minor ports.

The Sagarmala project envisaged integrated development of the JNPT and Kochi ports for handling containers. The liquid berth at JNPT would be converted a container berth. Two offshore container berths would be set up at Mumbai port while a new container terminal would be constructed at Ennore port.

Chennai port would be developed as a hub for handling large-size container vessels. Terminals and associated facilities to promote tourism would be developed at the Mumbai, Mormugao, New Mangalore, Kochi and Tuticorin ports. The development of waterways was another priority. Sagarmala encompasses infrastructure development on the three existing national waterways, the Ganga, Brahmaputra and West Coast Canal, which have a combined length of 2700 km.

Six new national waterways would be developed. The combined cost would be around Rs 57 billion. The development of state waterways would be undertaken though centrally sponsored schemes. Poor port connectivity was to a certain extent responsible for the under utilization of port capacity. All major ports and other important ports would therefore be connected with the national highways network and rail con-nectivity would be strengthened. This would have help to speed cargo movement.

Issues

Financing was a major bottleneck. The Government proposes to contribute only 10-15 percent towards the project's equity. It was questionable whether enough funding can be raised from other sources. The government hopes to address this issue by offering fiscal incentives and making a few reforms. It proposes the replacement of corporate taxes with tonnage tax. It had also said that withholding tax on external commercial borrowings by shipping companies will no longer be applicable.

Another proposal suggests increasing the limit for ECBs without RBI approval with specific reference to shipping companies.

10 Challenges

Many questions have been raised, for example, about the viability of the project proposal to build 50 non-major Ports at a distance of not more than 75 kilometres from each other.

Doubts have been expressed whether ports so close to each other would have the requisite 6-8 metres draught for them to be feasible and whether major cost factors such as those pertaining to hinterland connectivity and building breakwaters have been taken into consideration.

A big chunk of the total project cost of more than Rs 100,000 crores was expected to come from the private sector through foreign direct investment (FDI) in ports and other related activities.

New projects would be offered for private investment at major ports with a view to improving efficiency and increasing productivity and competitiveness.

Yet another feature of Sagar Mala was that it seeks to promote commodity-based transportation whereby a commodity moves by the most efficient mode of transport.

To find financing on such a grand scale would be a challenging task. The government would invest in the equity component of various subprojects and is likely to restrict its own investment to around 10-15 percent of the total cost of the project.

It was also argued that expecting the private sector participation to 85 percent of the project investment was a bit far-fetched.

Besides, some experts have even expressed reservations about the ability of the government to fund its share of the cost; pointing out that the proposed cess of 5 paise per kg of cargo would raise no more than Rs.2800 crore and this would be in spite of cargo traffic increasing to the estimated 565 million tonnes by 2006-07. Though, the formulated milestones were already achieved.

Another expected challenge that since the project involves coordination between different agencies like port trusts, state maritime boards, the inland Waterways Authority would also need the freedom to function independently, which was not very easy in reality.

This was essential to ensure that all key areas benefit equally from the project.

The National Highway Development Project (NHDP) has already proved skeptics wrong, simply by staying more or less on track.

The thrust areas were augmentation of capacity, efficiency, productivity and connectivity of the ports, increase in shipping tonnage, increase in share of inland water and promotion of coastal shipping, maritime training and navigational safety.

It calls for massive up-gradation of maritime infrastructure with a holistic approach resulting in an integrated system of transport, including sea, road, rail and inland water.

Sagarmala was expected to string together the coastal assets around our landmass into a 'mala' studded with ports.

All proposed visions were futuristic but instrumental in creating comparative and competitive advantage in global scenario.

The purpose to investigate the scheme after thirteen years of formulation is to highlight the fact that the Central and State governments dropped a scheme all of sudden merely on the ground that the scheme was started by some other political party.

Whereas, the continuity of a project should be based on economic viability and its importance in national economy as well as in the entire production function system.

The worst part in regulation of post economy is that it has no regular as well as sustained policy outlook as of now.

 (The views expressed are author's only and don't necessarily reflect the views of the magazine)




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