G.K. Vasan Strongly Advocates PPP Mode in Port Investment

“Invest-Port” Inaugurated

[Ministry of Shipping, PIB Press Release dated 7^th February 2012]

The Union Shipping Minister, G.K. Vasan has strongly advocated Public Private Partnership (PPP) mode in port investment opportunities in India. Inaugurating “Invest Port”, a conclave on investment opportunities in India in New Delhi on 7 February, Mr. Vasan said that the maritime sector plays a crucial role in facilitating India’s international trade. Almost 95% by volume and 70 % by value of India’s global merchandise trade is effected through the sea route. 

To ensure seamless passage of cargo both from and to the port through the hinterland, Mr. Vasan said that it involved harmonisation of berth side development (including installation of cargo handling equipment) with marine side development (including enhancement in channel depths, where necessary). Optimum utilisation of the port facilities are required to be achieved through improvement in road and rail connectivity infrastructure 

Regarding the perspective plan prepared by the Shipping Ministry “Maritime Agenda 2020” Mr. Vasan said that the Agenda encompasses development of the 12 major ports functioning under the Union Government and also the 176 notified non-major ports. The objectives of the Agenda inter alia includes creation of port capacity of around 3200 million MT to handle the expected traffic of about 2500 million MT by 2020. Mr. Vasan said that developing and improving the infrastructure to world-class standards required massive increases in investments. This investment has to come from both the public and the private sectors, he emphasised. Regarding Government’s effort Mr. Vasan said that the Government has been paying utmost attention to developing the infrastructure with much higher investments in the past few years but the massive investment requirements in this sector cannot be met by the Government alone. The Minister strongly felt that the private sector has to play a greater role in developing the infrastructure in the country in the coming years through Public Private Partnerships.

Giving a detailed perspective of the traffic at major ports, the Minister explained that it is likely to grow at a Compounded Annual Growth Rate of about 8% from 561 Million Tonnes in 2009-10 to 1,215 Million Tonnes by 2019-20, whereas the traffic at non-major ports is expected to grow at a growth rate of 16% from the present level of 289 Million Tonnes to 1270 Million Tonnes. Thus, the anticipated traffic at Indian Ports would be 2485 Million Tonnes by 2019-20 from the present level of 850 Million Tonnes at a growth rate of more than 11%.

Considering the objective of 70% capacity utilization, the Minister emphasised that it was necessary to increase the overall capacity of Indian Ports to 3230 million tonnes by 2020, more than 3 times the present level of 963 million tonnes.

Regarding the Government’s experience with PPPs in the Port sector, Mr. Vasan said it has been quite satisfactory. The Port sector has not only been able to attract private investment for large number of infrastructure projects but has also benefited from cost effective and efficient port operations ushered in by private players.

Stating that the Government has been encouraging PPP in the ports sector to infuse funds, to induct latest technology and improved management practices, and above all for addition of capacity, Mr. Vasan said, 100% Foreign Direct investment under the automatic route is permitted for port development projects. 100% income tax exemption is also available for a period of ten years.

Regarding the challenges of PPP projects, the Minister however said that it has been observed that there are considerable delays and uncertainty in getting clearances from various agencies in some cases. He said, litigation during the tendering process also takes a heavy toll on some PPP projects and urged the need to streamline the clearance processes and to ensure that decisions are taken within a timeframe and with a sense of urgency. He further assured that the Shipping Ministry was very keen on taking forward the reform process and to ensure higher private sector participation in Port development.