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Investment storm in India's
ports
By Arun Bhattacharjee
NEW DELHI - The euphoria that has taken over
India as it experiences its highest ever foreign
reserves, a projected 8 percent growth in agriculture, 6
percent in industry and a 7 percent gross domestic
product increase - likely to touch 8 percent - hides the
growing concern over a drop in the country's export
growth.
India's export growth has slipped by
5.07 percent over a 12 percent growth projection last
year, and if one goes by the projection made by the
Federation of Export Organization, India's export growth
in 2004 has to be 17 percent to cover the shortfall in
2003 and sustain economic growth. The Commerce Ministry
maintains that the shortfall will be covered in the last
quarter, but traders disagree.
One of the
reasons for these doubts, cited by M Rafeeque Ahmed,
president of the association, is poor port facilities,
which delays maritime trade and leads to failed
deadlines. Indian ports are so congested that shipping
companies charge more from the exporters for the
downtime due to the long waits involver. It takes
between 15 to 30 days for a berth to become available at
Kolkata port. The ports at Chennai and Mumbai are no
better. Even the many export processing zones that have
been built around the ports to boost exports have not
reached their full potential as supply lines continue to
be blocked.
India is under pressure from major
shipping lines, apart from the need for better port
facilities, to meet the challenges of globalization and
the growing need for specialized port facilities,
including bulk carriers, mostly for petroleum and
liquefied natural gas. Once the automobile sector was
liberalized, demand for petroleum shot up, resulting in
a demand for bulk imports to meet the shortfall, given
that the country hardly produces 30 percent of its
energy needs.
Although the Ministry of Shipping
is trying to improve cargo clearance and berthing
facilities by adding offshore container terminals, funds
for port development continue to be a problem, despite a
government commitment for US$22 billion. Although the
effort to privatize the country's airports was slowed
down by bureaucratic delays, the government is spending
the $22 billion to build, expand and modernize seaports
with locally generated resources. The southern port of
Kochi has been selected to have foreign government
partners develop the port into a container transshipment
terminal. Foreign investment to the tune of $438 million
is being sought as well for the development of
Jawaharlal Nehru Port Trust. Development and
modernization of other southern and western ports will
cost $3.29 billion.
Also on the sick list are 27
ports, but those requiring immediate modernization are
Mumbai and Kandla on the west coast, Vishakhapatnam in
Andhra Pradesh, New Mangalore in Karnataka, Ennore in
Tamil Nadu, Haldia in West Bengal and Paradeep in
Orissa. To serve the sand-choked Kolkata Port, a
container terminal has to be built at Sagar Island, 170
kilometers from Kolkata.
With the World Trade
Organization dateline of 2006 for liberalized imports,
the deadline for developed ports seems to be yesterday,
and India is aware that to become the projected
fourth-largest global economy by 2020 it will need
modern infrastructure in every area.
The
government believes that one way to meet fund
requirements could be through persuading foreign
governments to invest in the modernization and
development of India's ports. Singapore, the United
Kingdom and the Netherlands have been approached with
proposals allowing them to hold equity in Indian ports.
A Shipping Ministry official explains that the idea is
compatible with recent trends. "If Singapore Airlines or
some others are permitted to hold equity in
government-owned airlines, why can the foreign
governments not hold equity in government-owned sea
ports?" he questions.
But the reality is, India
has not yet allowed shares of Air India or Indian
Airlines to be owned by foreign airlines or governments.
To make an exception in the case of its ports, the
government would have to amend its traditional
investment rules, a time consuming process which needs
the sanction of parliament; an unlikely possibility as
parliament will not be in session beyond February 5 in
preparation for general elections expected between the
end of March and early May.
A law ministry
official says that India may succeed in allowing foreign
equity in ports without parliament's approval as Indian
port authorities are independent corporate bodies that
generate their own revenue from port charges and
government subsidies.
Infrastructure spending
nowadays is not confined to the central government
level. The states are raising funds and asking for
support. Opposition Congress Party's Sheila Dikshit, the
second-term chief minister of Delhi, is ready with a
blueprint that will be made public before March of next
year to make New Delhi a global city.
Work
started in 2001 to globalize the capital city with an
underground railway system costing $1.49 billion, the
building of a "sky train" network backed by 17
overpasses and broad road networks to smooth Delhi's
congestion created by 1.5 million motor vehicles. As
Delhi prepares for the Asian Games in 2008, the central
government assures that investment for infrastructure
need not be held up for want of funds. The central
government is spending $38.4 billion on the superhighway
network.
Following a Soviet model of development
in the 1950s and 1960s, India went for heavy industry,
steel plants and mining projects on a grand scale to
provide the industrial infrastructure and lay the
foundation for its industrial development. But the
government-owned industrial behemoths failed to generate
profit due to poor management, bureaucratic control,
lack of fund infusion and modernization, and highways,
airports and seaports received very low priority during
this period.
Now it appears that things might
change.
(Copyright 2004 Asia Times Online Ltd.
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