Infrastructure: Hubs Of Good Hope

Muthukur is still a little known place. Till recently, this coastal village in Andhra Pradesh didn’t even have a motorable road that the rural folk could use on their weekly visits to the nearby market to vend home-made pickles, which is still the livelihood of many. Children at the village had to travel at least 14 kilometres to the nearest school at Venkatachellum and electricity and mobile phones were distant dreams for most.

Things have changed since. The once remote village now has a couple of star category hotels and a number of commercial hubs on both sides of a new four-lane road. Not just the hotels, but most of the small cafes too offer free WiFi connectivity. A smart city is on the anvil, which could provide state-of the-art living standards to hundreds of skilled and unskilled employees likely to be absorbed in an emerging industrial hub. Come June, children of this rural village will walk into an elegant five-storey international school.

The catalyst of change was a seaport that came up at the coastal village. The Krishnapatnam Port, an all-weather deep water port built on India’s east coast, brought in its wake an industrial economy that gave this village an instant urban facelift. At least a dozen large cargo-based industrial units, including power plants, fertilizer units, food and edible oil processing units and a host of ancillary service providers, are already operational in and around the port. The port operator, Krishnapatnam Port Company and the Andhra Pradesh government, have begun mulling on a larger industrial hub, to be built at a cost of Rs 11,000 crore across nearly 14,000 acres of land, in partnership with foreign investors.

Mahatma Gandhi had said, “If the village perishes India will perish too.” The modern and new generation port development process promises to live up to the Gandhian dream of development. A host of new generation ports are set to turn many little known hamlets and hick towns into happening economic hotspots.

New Generation Ports
At least 11 such ports are already operational so far. Among the major Greenfield ports that are already in operation around the country are those at Pipavav, Mundra, Hazira, Dahej, Dighi, Dhamra, Kattupalli, Krishnapatnam, Gangavaram and Kakinada. Two other important projects coming up along the western coast include the country’s first international transhipment port at Vizhinjam and a cargo port at Ponnani in Kerala.

Since the major ports at near saturated metropolises like Mumbai, Chennai and Kolkata offer little scope for expansion, the large seaports of the future are likely to emerge at remote locations along the Indian coastline. The existing city-based ports are also constrained by limited operational flexibilities, as they are not too mechanised and have huge fixed overheads, like a large number of employees and related liabilities. The traffic clutter within the ports and beyond them, moreover, restrict cargo movement beyond a point.

The new generation ports bank on large parcels of land, making provision as they do for fully integrated and massive cargo handling facilities, with multiple industrial hubs around them. The new, modern, self-sustaining and cost-efficient port projects, therefore, are likely to emerge along rural locales of the Indian coastline.

Recent government reforms in port development regulations and a liberal approach on investments have facilitated private sector participation in most of the new ports, which is just as well, since the initial investments are very high. The private operators, mostly cash-rich companies with expertise in port construction, operations and related services, have tended to treat the port projects like professional business units. They have exploited every opportunity for cost efficiency, providing competitive pricing to clients.

Large capacity Greenfield ports like Krishnapatnam, are usually rated high on operational parameters, like optimum cost, reliability, fastest turnaround time for all types of vessels and minimal waiting time to avoid demurrage. These new cargo ports, which are mostly operational round the year and capable of round-the-clock navigation without any restrictions, also provide end-to-end services from stevedoring to custom documentation.

Industrial users of these ports are assured of inbuilt connectivity with the dock for cargo movement, with zero wastage and no delay. At Krishnapatnam Port for instance, industries in its vicinity like power plants, cement units, food processing units and edible oil plants, are directly connected through ramps or pipelines with the dock, facilitating direct loading and unloading of cargo. The logistics of these modern ports include increased rail and road connectivity through existing and newly planned inter-State corridors and highways and inland water transport systems.

“We want to offer even e-commerce with door-to-door service to help not only business clients but also retail customers, who want to purchase or send individual items from anywhere in the world,” says Anil Yendluri, director and CEO, Krishnapatnam Port.

Gateway to the world
Vizhinjam in Thiruvananthapuram is another remote village, which will be linked to an international sea route through the country’s first transhipment port. This port is likely to effect a more transformative change in the rural economy in its hinterland than the Krishnapatnam Port, once it becomes operational by 2020.

The Rs 4,000-crore Vizhinjam International Seaport, is a deep water multipurpose port. It is an ambitious project taken up by the government of Kerala through a public-private partnership (PPP). India’s largest private sector seaport builder, the Adani Group, is the private investor in this project and is expected to complete the first phase of work by 2018. It has been awarded a 40-year build, operate and transfer contract.

The transhipment port, expected to compete with the busiest ports in Singapore and Colombo, should logically be able to attract a massive cargo-based industry in its hinterland. “Since the port is being developed as a transhipment hub that caters to the largest mother vessels, it can turn into a gateway for India’s foreign trade attracting cargo movements from all other inland ports to this international route,” says A. S. Suresh Babu, managing director and CEO, Vizhinjam International Seaport.

“Given Vizhinjam’s access to prominent international maritime route, the project will be a significant catalyst in positioning India strategically as a global transhipment hub,” says Gautam Adani, chairman, Adani Group.

Past Glory
The recent thrust on water transport and cargo ports by the Union and State governments has resulted in the revival of some historical sea-trade hubs. Perhaps the first among these is the Rs 3,000 crore deep water cargo port being developed by Malabar Port at Ponnani in Kerala. Sangam literature, which documents the history of the ancient Tamil country (between 300 BC and 400 AD), refers to the coastal town as Tondi and describes it as a major hub for foreign trade, taking advantage of a natural harbour. The coastal town in now likely to regain its old glory with the new cargo port.

The public-private partnership project, which has no financial investment by the State government except a 30-year land lease, is expected to be completed in three years. The sleepy town that lost its sheen as a port city centuries ago, will now wake up to a new dawn. Ponnani should in the years ahead, evolve into a bustling port attracting sea trade not only to Kerala, but also neighbouring industrial cities like Coimbatore and Tirupur in Tamil Nadu.

“I am sure that this project will change Ponnani into one of the biggest commercial hubs in the State and perhaps in South India, soon,” says P. Sriramakrishnan, the local legislator and current Speaker of the Kerala Assembly.

Thrust on ports
India is currently the sixteenth largest maritime country in the world. It has close to 12 major and 187 minor ports. India’s total cargo traffic was 1,052 million metric tonnes (MMT) in 2015, and is expected to touch 1,758 MMT by 2017. India’s coastline of 7,517 km is among the longest in the world. The seaports and the shipping industry play a key role in India’s trade and commerce.

The Union government is expected to invest Rs 70,000 crore in 12 major ports over the next five years. The proposals include reviving the Sagarmala project (a string of ports). The Sagarmala project involves setting up of several low-cost minor ports along the coastline in the vicinity of the 12 major ports, to accord priority berthing to shipping vessels and to facilitate faster movement of cargo.

The recent proposals of the Union Ministry of Shipping, Road Transport and Highways for massive investments in India’s ports and roads sector include developing 10 coastal economic regions. The economic zones will evolve into manufacturing hubs, supported by port modernisation projects spanning across at least 300 km to 500 km of the coastline. The Union government is considering developing the inland waterway system as an alternative to road and rail routes for transporting goods to ports and hopes to attract private investment in the sector.

Two new major ports are on the anvil, one at Sagar in West Bengal and the other at Dugarajapatnam in the Nellore district of Andhra Pradesh. Once operational these ports too will enhance the country’s sea cargo handling capacity and space to berth more shipping vessels. The proposals to add new terminals to the existing ports will also augment India’s sea cargo handling capability.

The port sector has been allowed 100 per cent foreign direct investment through the automatic route. Investment incentives for the sector include a 10-year tax holiday for enterprises that develop, maintain and operate ports, inland waterways or inland ports. Standardization of bidding documents and concession agreements, enhancement of the shipping ministry’s powers to delegate finances to accord investment approval for PPP projects and streamlined security clearance procedures will go a long way to boost the maritime infrastructure in India.

All silver linings have clouds embedded within and so do these projects that could breathe life into the backwaters, where time has stood still. Social and environmental groups warn of the menace of land grabbers and of potential damages to the natural ecosystem should the projects go awry.

unni@businessworld.in ; @unni_ch