Three years ago, I was a speaker at an event in New Delhi called ConQuest, organized by the Indian daily maritime newspaper EXIM. The sentiments expressed there about the pace of infrastructure development and the prospects for improvements in the future were overwhelmingly negative. Terminals took too long to be planned and built, rail connections were inadequate, port roads were perpetually clogged and no relief was in sight.
There was much discussion about the Gateway Terminals India site, the multi-terminal complex north of Mumbai that handles half of the nation’s container volume. When GTI opened in 2006, it was expected to reach capacity in six years, but the facility was filled in just two years.
Plans for the next major expansion at JNPT are still on the drawing board, with the first ship unlikely to arrive until later in the decade. China, a nation with few barriers to infrastructure expansion, has four times the GDP of India but more than 10 times the container volume -- 100 million TEUs versus 8 million last year, respectively.
Little appears to have changed on the surface since the ConQuest event. But developments are under way suggesting big changes may be coming. Without a doubt, the biggest issue is the rate at which capacity is being created and the efficiency of the chain that leads to exporting and importing, said SN Srikanth, senior partner of Chennai-based consultant Hauers, a former shipowner and a frequent speaker on India at international conferences.
I spoke with him last week at The Journal of Commerce Breakbulk Europe conference in Antwerp and found confidence in India’s growing role in global trade tempered by a realistic view of the challenges ahead. “Road and rail connectivity remains a very big problem, and we continue to have problems at India ports, such as shallow drafts, inadequate capacity, poor connectivity; I would say that sums it up,” he said.
An example of the slow development is seen in container rail, considered a key element of modernization as the growth of middle class consumerism puts more cars on the road, choking roadways. Three years ago, this was a big topic because of recent reforms that had partially privatized container rail services, restricting the ability of private firms to freely operate on India’s rail system but giving them more access than before and allowing for the introduction of innovation and technology.
One firm, Arshya International, is building a network of foreign trade zone distribution centers and a rail network with track-and-trace capability, new rail sidings and customized train cars.
But the pace of rail development is slow, Srikanth said, due in part to difficulties private operators face in acquiring land. That is a protracted process in India, where authorities must give strong deference to the property rights of traditional landholders and plans can get tied up in court for years. Other obstacles include a basic lack of power; last week it was reported that 13,000 containers were waiting at JNPT for inland rail transport by the state container rail company Concor.
Despite the obstacles, port development in India is progressing, driven by an economy growing at 8 to 10 percent a year. One area Srikanth said he is watching is the growing presence in the port sector of India-based industrial groups. Several of the country’s largest industrial groups have built bulk facilities at port cities in the Southeast. They can be expected to expand their ambitions to include containers, with potentially big impact on the evolving container landscape in India.
Examples are the Tata group’s bulk facility at Dhamra, Essar’s iron ore dock at Paradip and Jindal Steel’s project at Jaigarh. Other bulk facilities are at the ports of Krishnapatnam, Gangavaram and Karaikal. Having started in bulk, Srikanth said, these companies likely will see opportunities for growth in containers and will first gain a presence and then perhaps a dominating share of container trade in India, providing strong competition to international operators such as DP World, APM Terminals and PSA.
“There is no doubt in my mind that they will become very competent operators a few years down the line,” he said. “Ultimately, these local groups will be the ones who predominate, perhaps 10 years from now.”
Another development that bears watching is India’s first pure transshipment port, set to open later this year in Cochin in southwest India, posing competition to Colombo, Sri Lanka. The International Container Transshipment Terminal at Vallarpadam, to be operated by DP World, could change the dynamics of the transshipment business in South Asia. It’s already succeeded in bringing confidence within India that such change is possible.
Peter Tirschwell is senior vice president for strategy at UBM Global Trade. Contact him firstname.lastname@example.org.