Private enterprise & renaissance of ports sector

The period 1999-2023 has been transformative for the Indian Ports Sector. Much of it has to do with the induction of private capital

As late as the mid-1990s, India’s ports were seen as having an inadequate capacity to cater to a rapidly burgeoning economy, as well as being considered frustrating choke points in the logistics chain. The 1996-97 Union Budget document stated, “A major problem with ports is the mismatch between existing capacity and the demand for traffic.”

As against the total capacity of 217.3 million tonnes on March 31, 1997, major ports (in those days, practically all owned by the government) handled 227.3 million tonnes, resulting in pre-berthing delays and unacceptable ship turn-around times. Moreover, shipping lines constantly complained about lethargic and inefficient operations, whilst importers and exporters chafed at unduly long clearing times.

But, voila, turn to 2021, and what do we see?

nIn 1999, the total traffic across all ports in India was 334 million metric tonnes per annum or MMTPA, of which the share of private ports was 7.4 per cent. By 2021, the traffic at all ports was 1,250 MMTPA (a growth of nearly four times) and, interestingly, the share of private ports and terminals (including captive facilities) rose dramatically to 73.2 per cent.

nIn the 1990s, the average ship turn around (ASTA) was around 7.8 days. By 2021, that figure fell to 2.2 days. (In some specific ports, in cargo like containers, the figure is as low as 19 hours.) Many other operational efficiency indicators such as crane moves per hour, demurrage incurred et al have also shown huge improvements.

This could well be termed the “silent revolution” in India’s infrastructure journey, as much of the attention has been centred around roads, railways, power and airports. It is estimated that the private investment in ports, and port-related road and rail connectivity, has been around Rs 1.6 trillion, and has exceeded the private investment in airports in the last two decades by a fair multiple. This fact is not often recognised because of the poor public visibility of port investments.

Well, this amazing transformation of the Indian ports sector has clearly happened due to a single factor — its being opened up to private capital and private enterprise.

The table shows the participation of the private sector (domestic and foreign) in the period 1999-2023 in port development and operations. It provides three fascinating insights.

One, is the sheer number of locations where private capital has been deployed — 82. For this, the Government of India needs to be complimented along with the states that had forward-looking state maritime policies — notably Gujarat. (Port operating licences can be issued both by the Centre and states.)

Two, is the fact that 65 of the 82 projects have been transparently bid out, negating popular perceptions of widespread cronyism. The 14 negotiated projects have been permitted under publicly announced maritime sector policy frameworks.

Three, is the sheer breadth and diversity of participating players. Whilst the top five players mentioned in the table are well known, the balance 44 parties represent a wide swathe of private industry ranging from L&T to the Tatas and other notable domestic and international investors.

Clearly, ports today represent a vibrant infrastructure sector where the competitive pressures brought on by private enterprise have significantly improved the operations of the entire sector. With the introduction of the “landlord model” as part of the latest ports policy, government-owned “major ports” are ceding chunks of operational responsibilities to the private sector. An extreme example is the Jawaharlal Nehru Port Trust or JNPT, where all the berths and terminals are operated by private players! The success of privatisation efforts at JNPT, no doubt, has created the enabling environment for the massive connectivity investments like the Western Dedicated Freight Corridor and the Delhi-Mumbai Industrial Corridor. The bid to build a transhipment port in the Andamans will now see another epochal investment of private capital in a strategic location.

The extent of employment created is difficult to quantify, but is nevertheless visible. Port-based industries and associated transport and logistics jobs have led to vibrant hinterlands, with many export-based industries having found competitive locations.

There is, indeed, gathering appreciation amongst shipping lines and logistics players that Indian ports have demonstrated one of the best turnaround strategies amongst developing economies, with some of the larger ports easily handling the enormous Panamax and Capesize vessels.

This “renaissance” is clearly a symbol of what private capital and private enterprise can achieve if allowed fair play, as India’s private ports have demonstrated.

The writer is an infrastructure sector expert. He is also the founder and managing trustee of The Infravision Foundation