INDIA'S INDIA'S MARITIMEMARITIME

SECTOR SECTOR

INDIA'S MARITIME

SECTOR RISING ABOVE THE WAVES

OVERVIEW

Ports play an important role in the overall economic development of a country. India is one of the fastest-growing and large economies in the world, with a GDP growth rate of 6.1% as of 2018-19. Approximately 95% of India’s merchandise trade is done through sea ports. India is one of the biggest peninsulas in the world with a coastline of ~7,516.6 kms and 200 major and non-major ports. Indian ports are categorised into two parts: Major ports (under central Government administration) and Non-Major ports (under state Government administration). The ports in India serve as a backbone for EXIM, international trade, coastal shipping and cruise shipping.

As India opened its economy towards liberalisation, privatisation and globalisation in the year 1991, government policies were formed to develop export potential and improve trade and commerce. Development of Special Economic Zones (SEZ) and allowing foreign enterprise participation has helped India in achieving high trade growth over the period.

India’s top export destinations are the US, UAE, Saudi Arabia, Hong Kong, China, Germany and Republic of Korea. Key commodities handled at the Indian ports are petroleum products, coal, automobile, iron ore, engineering goods, chemicals and electronics.

1

MAJOR INDIAN PORTS

India has 13 major ports (listed in the table).

Traffic handled at major ports: *April to February 2021 (in 000’ tonnes)

According to the Indian Ports Association data, India's top 13 ports witnessed a considerable decline in cargo traf�ic between April 2020 and February 2021 to 600 million tonnes owing to the Covid-19 pandemic. Cargo traf�ic at 12 major ports dropped by 8.80% to 477.75 million tonnes from April to December 2020 over 523.84 million tonnes YoY.

CARGO TRAFFIC STATS

Traffic Handled at Indian Ports (Million tonnes)

Source: Indian Ports Associa�on

Note: Figures in green indicate growth over previous year. | P: ProvisionalSource: Ministry of Ports, Shipping and Waterways

2

During 2019-20, Major and Non-major Ports in India have handled 1,319.92 million tonnes of cargo, an increase of 3% from the previous year. Major and Non-major ports cargo grew at 0.8% and 5.6% during 2019-20. The share of Non-major Port in the total traf�ic handled at Indian Port increased from 45.5% in 2018-19 to 46.6% in the year2019-20.

Traffic Handled at Indian Ports (Million tonnes)

Share of overseas cargo traffic at Major Ports during 2019-20

The overseas cargo handled at Indian Ports increased by 4.7% during 2019-20 from 4.5% during 2018-19. Among the Major Ports, Deendayal Port handled the maximum overseas cargo of 105.85 million tonnes with a share of 19.4% followed by Paradip Port (14.2%), JNPT (11.8%), Vishakhapatnam Port (10.3%), Chennai Port (7.7%), Haldia Dock (6.9%), Mumbai Port (6.3%), New Mangalore Port (5.3%), V.O. Chidambaranar Port (5.0%), Cochin Port (4.2%), Kamarajar Port (3.3%), Kolkata Dock (3.0%) and Mormugao Port (2.6%) during 2019-20.

SAGARMALA - A GOVERNMENT FLAGSHIP PROGRAMME

The Government of India has planned to modernise the country’s ports through a project called Sagarmala. Sagarmala is the �lagship programme of the Ministry of Ports, Shipping and Waterways (MoPSW) to promote and develop ports in the country by harnessing India’s 7,500 km-long coastline and potentially navigable waterways. Sagarmala, can be a game changer for the maritime sector, due to its focus on port-led development.

3

4

The project is expected to receive Rs. 3.4 lakh crore (US$ 46.27 billion) in investments that will be leveraged towards increasing cargo shipments to 2,600 million tonnes. About 187 minor and major ports have been identi�ied by the government and will be developed in a phased manner, involving public–private partnership.

SAGARMALA PROJECT SCOPE

The Sagarmala project will have the following components:

• Portmodernisationandnewportdevelopment: Decongestion and capacity expansion of existing ports and developing new green�ield ports.• Enhancingportconnectivity: Connecting ports to areas deprived of river bodies and optimising the cost and time of cargo shipments through multimodal logistics channels including domestic waterways.• Port-linkedindustrialisation: Developing port-proximate industrial clusters and Coastal Economic Zones to reduce logistics cost and time of EXIM & domestic cargo.• Coastalcommunitydevelopment: Developing coastal communities through skill development and creating livelihood activities, developing �isheries, coastal tourism, etc.• Coastalshipping&inlandwaterwaystransport: Lending an impetus to ship cargo through environment-friendly coastal and inland waterways channel.

More than 574 projects costing Rs. 6.01 lakh crore (US$ 82.03 billion) have been identi�ied for port modernisation, new ports development, port connectivity enhancement, port-linked industrialisation and coastal community development between 2015 and 2035. As of September 30, 2019, 121 projects worth Rs. 30,228 crore (US$ 4.13 billion) have been completed and 201 projects worth Rs. 309,048 crore (US$ 42.18 billion) are underway.

Share of overseas cargo traffic at Major Ports during 2019-20

MARITIME INDIA VISION 2030 – INTRODUCTION

The Maritime India Vision 2030 (MIV) 2030, launched in March 2021, is a 10-year roadmap with the aim of overhauling the Indian maritime sector. It is the latest venture of Sagarmala. A dedicated Maritime Development Fund (MDF) will be created to oversee funding of the Maritime India Vision 2030. The vision envisages Rs. 3 lakh crore (US$ 41.44 billion)

5

investment in port projects that are likely to generate 20 lakh employment opportunities. The MIV 2030 vision document outlines 10 key themes as follows:

1. Develop best-in-class port infrastructure2. Drive e2e logistics ef�iciency and cost competitiveness3. Enhance logistics ef�iciency through technology and innovation4. Strengthen policy and institutional framework to support all stakeholders5. Enhance global share in ship building, repair and recycling6. Enhance cargo and passenger movement through inland waterways7. Promote ocean, coastal and river cruise sector8. Enhance India’s global stature and maritime co-operation9. Lead the world in safe, sustainable & green maritime sector10. Become top seafaring nation with world class education, research & training

Se�ng Up a Regulatory BodyAs required by the Indian Ports Act, a pan-India port authority will be set up over the project to oversee major and non-major ports, enhance institutional coverage and boost investor con�idence by ensuring structured growth of the ports sector. The regulatory authority will be set up under the new Indian Ports Act (to replace the century-old Indian Ports Act 1908).The additional task of the proposed regulatory body will be to develop new ports, regulate scheduled ports, schedule grievance redressal between major and non-major ports and promote healthy competition.

OBJECTIVE OF MARITIME INDIA VISION 2030

The Maritime India Vision aims to streamline the process for exporters by enabling direct movement of shipments from factories without any intermediaries and improving the competitiveness of shippers in international trade. The ministry also aims for increasing India’s visibility in the international maritime sector, and strengthening maritime relations with different countries, as part of the vision.

Key objectives of the Maritime India Vision 2030 are as follows:• Building three mega major ports, each with a capacity of over 300 million tonnes of cargo - Developing mega capacity ports in high potential areas of Gujarat, Maharashtra and Odisha-West Bengal Cluster at an investment of over Rs. 80,000 crore (US$ 11.05 billion) is also in plan.• Increasing the frequency and volume of Indian cargo trans-shipped within the country from 25% to 75% - The government plans to increase the volumes of Indian transhipment cargo at Indian ports from 25% in 2020 to more than 75% by 2030 by operationalisation of Vizhinjam port and development of Transhipment zone in Kanyakumari and Champbell Bay.• Reducing vessel-related charges at major ports, which are 2-6x higher than global ports – Introducing procedures that will ease cargo movements by various initiatives such as implementing Enterprise Business System (EBS) to simplify and digitize processes across Major Ports by 2021, developing National Marine Logistics Portal to implement 100% paperless processes including online payment and implementing uni�ied ship e-registration portal.• Deepening the draft to 14-18 metres based on cargo pro�ile and vessel calls, with at least three major ports to have a depth of over 18 metres.• Development of green sustainable ports to increase the share of renewable energy to over

6

60% by 2030 from current levels of less than 10%. Promoting waste to wealth through sustainable dredging and domestic ship recycling.

Addi�onal Projects under Mari�me India Vision 2030• Create Eastern Waterways Connectivity Transport Grid – This project will develop connectivity with Bangladesh, Nepal, Bhutan and Myanmar. • A Riverine Development Fund (RDF) – This fund will provide low-cost �inance to inland vessels and extend coverage of the tonnage tax scheme (applicable to ocean-going ships and dredgers) to inland vessels to enhance their availability• The port charges will be revised to make them competitive by scrapping hidden charges levied by ship liners. More transparency and accountability on port charges• Promotion of water transport – Decongestion of urban areas and development of waterways as an alternative means of urban transport. Five themes will be promoted for cruise tourism – pilgrim, heritage, ayurvedic & wellness, island tourism and regional international circuit (India, Sri Lanka, Myanmar and Thailand). The policy plans to incentivise global cruise liners to make India their home port.• Strengthening the maritime institutions to enhance India’s training and development capabilities at par with global standards. This would help in increasing India's share of seafarers from 12% at present to over 20%.• Prioritising development of 23 national waterways is planned under it with maximum potential in Phase 1 besides increasing the cargo movement from 73 million tonne per annum (MTPA) to over 200 MTPA.

MIV 2030 – Key Targets

7

MARITIME INDIA VISION – IN ACTION

The government has introduced key developments in the areas of ports and shipping, which are in line with the Maritime Vision 2030 superseding the Sagarmala programme:

‘DirectPortEntryFacility’atV.O.ChidambaranarPort–In October 2020, a Direct Port Entry (DPE) facility was launched at the V.O. Chidambarnar Port in Tuticorin by Mr. Mansukh Mandaviya, the Union Minister of State for Shipping and Minister of State for Chemicals & Fertilisers. The Direct Port Entry will facilitate continuous and direct movement of containers from mills to the container terminal, without intermediary handling at container freight stations. Earlier, containers were taken to container freight stations that operated only between 10 am and 8 pm on working days, causing delays in admitting containers into terminals. DPE will enable faster export clearance and provide cost-effective export admittance.

Proposalformandatory'MadeinIndia'Barges– The Ministry of Shipping is considering a plan to make domestically manufactured barges mandatory for coastal and inland waterways movement. The idea is a part of its exercise to formulate the Maritime Vision 2030. Development of the domestic shipbuilding industry through manufacturing of barges is one of the key agendas of the government. The ministry is also looking to bring down the cost of barges to make the Indian industry more competitive for export markets. Shipping Minister, Mr. Mansukh Mandaviya, has highlighted that the Ministry of Shipping has directed all major ports to procure barges that are only Made in India. At present, the ship-building industry remains concentrated in countries such as China, Japan and South Korea, with India being a leading global player in ship recycling.

Easeinregisteringvessels– In October 2020, the Ministry of Shipping announced plans to ease nationality norms for registration of ships by permitting vessels that can be considerably owned by Indian entities and people owned by overseas company Indians and LLPs to register underneath the Indian �lag. At present, only vessels wholly owned by Indian entities can be registered and put up the Indian �lag. The easing of ship registration is a part of the Maritime India Vision 2030 to increase Indian delivery tonnage. Currently, a bare-boat-charter-cum-demise (BBCD) ship can be transformed into an Indian �lagship only when the �inal instalment of the constitution rent is paid to the overseas proprietor. Until then, it puts up the �lag of the jurisdiction of registration. This easing can permit ships bought via BBCD route to register in India earlier than the tip of the constitution interval.

Designateatrans-shipmenthubport– The shipping ministry announced plans to designate a port as a trans-shipment hub to ease India’s dependence on overseas hubs. The ministry has revealed that 4.1 million (twenty-foot equivalent units) TEUs or 25% of Indian-originating and destined container traf�ic were trans-shipped in foreign hubs such as Colombo, Singapore, Port Kelang and Jebel Ali, bene�iting foreign governments at the expense of time & cost inef�iciencies for Indian traders. According to a consultancy �irm Drewry, with the trans-shipment move, Indian traders stand to gain by US$ 40-50 per TEU, translating into annual savings of ~Rs. 800 crore (US$ 108.87 million) if the entire 2.5 million Indian containers get trans-shipped at the V.O. Chidambaranar Port Trust (VOCPT) instead of the Colombo Port.

The ministry will pick the port based on certain criteria to develop a port as a trans-shipment hub. Cochin Port Trust and the VOCPT are potential candidates vying for a trans-shipment tag. Development of the VOCPT as a trans-shipment hub is one of the development areas in the ‘Maritime India Vision 2030’ blueprint.

ReplacingtheMajorPortsTrustsAct(1963)withMajorPortAuthoritiesBill(2020)– The Major Ports Trusts Act (1963) was constituted to enable smooth functioning of ports. However, key ports faced stiff competition due to accelerated growth in the trade and development of private ports. Regulation of tariff under the Major Port Trusts Act and their

8

administrative control by the central government have hindered growth and development of major ports. Hence, the Major Ports Authority Bill (Bill) was introduced in the Lok Sabha in March 2020 to empower ports and make them competitive. The bill aims to enable key ports to function with greater autonomy, enhance decision-making and modernise infrastructure by revamping the institutional framework.

ExpeditingdevelopmentsupporttoVizhinjamPort,Kerala–One of the objectives of the Maritime India Vision 2030 includes prioritising development of the Vizhinjam port by 2023. The vision document highlights the government’s plan to develop another trans-shipment port in the Kanyakumari region by 2030 after completion of the Vizhinjam port. Currently, only 25% of the Indian cargo trans-shipment is handled by Indian ports, resulting in higher cost to Indian traders for routing their containers through Colombo, Singapore and Jebel Ali. A trans-shipment port such as Vizhinjam will act as a hub for smaller vessels to load cargo onto larger ships for transport to the �inal destinations. Vizhinjam port development has received investments worth Rs. 5,552 crore (to compete with Colombo) due to favourable factors such as deep draft and proximity to the main shipping lane. The project is entitled to receive a viability grant funding of Rs. 1,635 crore (to be contributed equally by the central and state governments), making it the �irst port project to receive such a grant.

InstallingPortCommunitySystem(PCS)– Another major initiative taken by the Indian Ports Association is the Port Community System (PCS), which is a centralised hub for electronic �low of trade-related data for all ports and ports-related entities. The PCS acts as a single window for port community members and stakeholders to exchange messages electronically in a secured portal. The government conferred the PCS system with the Digital India Award on December 30, 2020, recognising its signi�icance in the industry.

Implementing digital port ecosystem – In December 2020, the Ministry of Ports, Shipping and Waterways (MoPSW) announced plans to implement a Rs. 320-crore project for �ive major ports to provide a digital port ecosystem. These ports are Mumbai, Chennai, Deendayal, Paradip and Kolkata (including Haldia). A total of 2,474 processes were rationalised, harmonised, optimised and standardised to arrive at a �inal re-engineered process count of 162.

INDUSTRY EXPERTS TAKE ON MARITIME INDIA VISION 2030

From 19 to 20 November 2020, INMEX SMM India, the premier trade exhibition for shipping and maritime industries by Informa Markets, was hosted virtually in India and Hamburg Messe und Congress in Germany. The exhibition recorded 2,876 footfalls (domestic and international buyers from the US, the UK, the UAE, Spain, Germany, Hong Kong, Singapore, Qatar, Turkey and Brazil). Industry experts discussed key issues in the Indian shipping arena including Maritime Vision 2030 document, digitalisation in shipping and impact of COVID-19 on shipping.

SpeakingontheMaritimeVision2030document,Mrs.HKJoshi, CMD, Shipping Corporation of India, observed that the Maritime Vision 2030 has come at the right time and it is a visionary approach of the ministry to ensure growth. “Vision2030documentaimsforIndiatobecomeself-reliantinshipping,shipbuildingandshipinfrastructure,andaglobalplayer.Ifwebecomealeadingdomesticplayer,wecanmoveontotheglobalmap.Shipping,portsandinlandwaterwaysareindustriesthataregoingtochurntheeconomicdevelopment.Themaritimesectorcanoilthewheelsoftheeconomy.Shippingisthecoreandprerequisiteforthegrowthofshipbuilding.WeneedtohavesubstantialgrowthinIndiantonnage,whichwillautomaticallyboostancillaryindustries.TheMaritimeVision2030documentintegratesthesetoensureIndianbuilt,�laggedandowned,foreignbuiltandIndian�laggedandownedshipscansupporttheexistingtonnageand�indtheadvantage.”

Director-GeneralofShipping(DGS),Mr.AmitabhKumar, at an industry speci�ic event recently stated,“Vision2030isstilladraftvision,andthe�inaldocumentisnotready.Butitwill

9

remaindynamicoverthenextdecade,changingitscontourswithtime,andadaptingtosituationsthatmayarise,andkeepingabreastofdevelopments.ProperlydevelopedportsareoneofthefourlimbsofVision2030.Wehavealreadysolicitedtheparticipationoftheprivatesectorinmaritimeinfrastructuredevelopmentandadoptedtheprivate-publicpartnership(PPP)modelforterminalmanagementatports.”

Hefurtheradded,“AnotherimportantlimboftheVision2030documentismaritimetraining.Wearelookingatlaunchingatleast�iveseamencoursestodealwithshipsthatwillcomeintothemarketduringthedecade2020to2030.Thecourseswillcombineelectronicswithnauticalscience,andelectronicswithmarineengineering.Alotofemphasiswillbegiventoresearchbybringingtogethernotjustthemaritimesectorinstitutes,butalsorelatedstakeholdersliketheIndianInstitutesofTechnology(IITs).”

Geographicalfactors–India is a peninsular country with a long coastline—surrounded by the Indian Ocean and Bay of Bengal. India’s ports are strategically located on the world shipping routes. Most cargo sailing between East Asia and America, Europe and Africa pass through Indian territorial water.

Economicfactors–India is an emerging economy with a large population, growing consumer base and strong labour force. India's emerging middle-class population will continue to drive the demand for products and services. Consumption is in the upward trend, making India an attractive investment destination. India is the third-largest economy in the world, after China and the US, in terms of Purchasing Power Parity (PPP). It is also one of the major G-20 economies with an average growth rate of 7%+ for more than a decade.

Industrialgrowth– While the pandemic affected manufacturing industries in 2020, it is interesting to note that the index of industrial production (IIP) is now gradually picking up owing to lockdown relaxations. The Prime Minister’s Aatmanirbhar campaign has caused most industries to be self-reliant by boosting its production. This will help in increased exports through the ports. Additionally, strong growth in the country's steel industry is boosting the demand for coal, iron ore and crude steel imports and exports. Waterways is the most economical means of bulk transport. Growth in manufacturing will ensure higher demand for cargo shipments via ports.

Encouragingcruisetourism– Cruise tourism in India is still in a nascent stage. However, the government has now taken cognizance of the matter and announced several cruise tourism development projects that will bene�it the overall ports. The union government plans to develop cruise tourism and increase the number of Indian cruises from 150 to 1,000 in �ive years, with effective use of the coast and inland water for cruise tourism. In August 2020, the

KEY FACTORS DRIVING THE MARITIME SECTOR

10

Ministry of Shipping rationalised tariff rates for cruise vessels. To attract cruise ships to Indian shores, port charges have been decreased from US$ 0.085 to US$ 0.35 per Gross Registered Tonnage (GRT) for the �irst 12 hours of stay. Shipping Minister Mr. Mansukh Mandaviya has applauded the ministry’s decision, stating that the move is a result of the ministry’s efforts to realise the Prime Minister’s vision of putting India on the global cruise map (for ocean and river cruises).

Impetustodomesticwatertransportchannel–Passenger movement through waterways is rising along the rivers and the coast. Waterways are found to be an economical and environment-friendly means of transportation. RO-RO vessels, RO-PAX vessels, mainland-island and inter island vessels, and ferry vessels are in demand across the country. In India, Inland Water Transport (IWT) has the potential to relieve the over-burdened railways and congested roadways. The Jal Marg Vikas Project (JMVP) for the development of National Waterways in India is �inancially supported by the World Bank and expected to be completed by 2023. The JMVP was implemented with an aim to reduce rail and road congestion, carbon footprint and minimal resource depletion. The states covered under the Jal Marg Vikas Project are Uttar Pradesh, Bihar, Jharkhand and West Bengal.

Additionally, in Dec. 2020, the government announced plans to develop new routes for ferry and RO-RO (Roll-on Roll-off) services to promote coastal shipping and boost coastal tourism. The new routes will connect Somnath Temple, Hazira, Okha and Jamnagar. The destinations, along with six international routes, have been identi�ied under the Sagarmala project, a �lagship programme of the MoPSW. The ministry has recently implemented one such service by deploying the RO-PAX vessel ferry service between Hazira and Ghogha.

An ambitious project, Kochi Water Metro Project, is being carried out by Kochi Metro Rail Limited (KMRL) for easy passenger movement between metro rail, water and road in and around Kochi. At least 16 stations have been identi�ied on the waterfront. As of December 2020, ~50% of piling work for the Water Metro’s boat jetty at high court has been completed. The KMRL has so far completed construction of 18 piles at the site. KMRL has engaged about 40 labourers, through its contractor, and work is on in full swing. Apart from piling, other civil construction activities are also being undertaken.

Tradecollaborationsandmaritimecooperationwithothercountries– India and several Gulf countries have recently began collaborating in the maritime sector and such cooperation is expected to boost port operations.

Recently, India and Denmark have agreed to partner in the areas of maritime technologies. The latest meeting between the two parties was conducted in December 2020. The areas of cooperation between the two countries include the following:

• Online maritime knowledge cluster – India has invited the Technical University of Denmark (DPU) and Maersk Maritime Technology to become a global partner in India’s Maritime Knowledge Cluster • Digital certi�icates for seafarers and ship registry – India and Denmark are developing their own systems for digital certi�icates for the seafarers and are working on an online ship registration system• Maritime security – Both countries have decided to tackle the issues of piracy in the Gulf of Guinea• Green technologies – Indian and Danish companies will cooperate on several green technology-based projects in the ports sector through public-private partnerships. Talks are also on with Denmark for technical cooperation to �loat solar power stations and shore-based power supplies at Indian ports

Additionally, in December 2020, India and Sri Lanka have rekindled their key trilateral maritime dialogue after a gap of six years. External Affairs Minister, Mr. S. Jaishankar, has revealed that New Delhi will assist Colombo in enhancing its capabilities to meet the rising maritime and security challenges in the Indian Ocean region.

11

THE ROAD AHEAD

India Maritime’s short-term prospects remains bleak due to the pandemic affect, global developments, and low domestic demand. However, the long-term outlook looks promising backed by a series of government reforms and recovery of trade globally.

India Infrastructure Research report suggests that cargo traf�ic at Indian ports is expected to be in the range of 1,700 mt to 2,271 mt by 2024-25.

A strong pipeline of 574 projects worth around Rs. 6 lakh crores (US$ 81.97 billion) by the Sagarmala program for the development of Indian ports offer signi�icant opportunities to various stakeholders.

Consistent focus of the government to develop port infrastructure, robust project pipeline, Sagarmala programme, proposed National Integrated Logistics Policy, draft Maritime India Vision, etc, are expected to keep investors interested in the sector

Additionally, most key government policies such Major Port Authority Bill, Merchant Shipping Bill, the Indian Ports Bill, and other acts and guidelines are already at different stages of scrutiny. The government has also granted ‘infrastructure status’ to logistics and ports sub-sectors which is leading India to be a global manufacturing and trade hub.