India to Strengthen Maritime Freight Capacity

January 2, 2014 Posted by India Briefing Reading Time: 2 minutes

Jan. 2 – India’s Ministry of Shipping announced the approval this week of five major port development projects aimed at strengthening the country’s maritime freight capacity. The projects will be developed under the public-private partnership model, and have been endorsed by the Public Private Partnership Approval Committee, whose members include the Secretary of Economic Affairs, the Secretary of the Planning Commission and other high-level government officials.

The projects will include the development of container terminals in Mumbai, Chennai, Gujarat and Kolkata, and will require an investment of US$2.8 billion. The projects are expected to increase India’s port capacity by 150 million metric tons per year.

Port infrastructure development has been a priority for the Ministry of Shipping, with 16 new projects already under development this year. In total, the projects approved in 2013 are expected to increase freight capacity by nearly 250 million metric tons.

In recent years, ports throughout the country have reported heavy congestion and freight bottlenecks as demand for port infrastructure overbalanced supply. In response to these concerns, the Ministry of Shipping has utilized both public and private support to develop the sector’s infrastructure capabilities.

“Today, the container handling capacity just about matches the annual traffic of about 10 million TEUs (twenty-foot equivalent units),” said S. S. Kulkarni, Secretary General of the Indian Private Ports and Terminals Association.

As of 2011, India ranked as the world’s 13^th largest importer of goods and 21^st largest exporter. Despite this high level of traffic, Indian ports only handle 9.7 million TEU per year, far lower than the global benchmark ratio. Singapore, for example, handled 30 million TEU last year.

“Although infrastructure within the ports is improving to facilitate increased cargo volumes, it is still inadequate to meet with the new generation ships,” said Managing Director of CEVA Logistics, Murlidhar Yadav.

Despite these concerns, Mr. Yadav remains optimistic towards port and freight activities in India, citing the country’s commitment to further infrastructure development. “This segment presents ample opportunities and we have strengthened our team at major gateways to capitalize and sustain growth,” he said.

The new opportunities available to investors under the public-private partnership model have also attracted large private equity firms including TPG Capital India, which is currently considering a majority stake investment in the Puducherry Karaikal Port.

With an annual capacity of 1,500 million tons per year, the projects approved this year by the Ministry of Shipping represent a growth in capacity of nearly 17 percent. This trend is expected to continue into the future, with total capacity expected to reach 2,500 million tons by 2020.

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