Sagarmala Project- Strategy towards Port Led Development

Date: April 03, 2015

Sagarmala port trust The Companies Act 1956

Sagarmala Project

The government recently approved the Sagarmala project, which envisages port-led development at the 12 major ports as well as 1,208 islands identified for development as part of the project.

 The growth of India’s maritime sector is constrained due to many developmental, procedural and policy related challenges viz.  involvement of multiple agencies in development of infrastructure to promote industrialization, trade, tourism and transportation; presence of a dual institutional structure that has led to development of major and non-major ports as separate, unconnected entities; lack of requisite infrastructure for evacuation from major and non-major ports leading to sub-optimal transport modal mix; limited hinterland linkages that increases the cost of transportation and cargo movement; limited development of centres for manufacturing and urban and economic activities in the hinterland; low penetration of coastal and inland shipping in India, limited mechanization and procedural bottlenecks and lack of scale, deep draft and other facilities at various ports in India.

The Sagarmala initiative will address  these challenges by  focusing on three pillars of development, namely (i) Supporting and enabling Port-led Development through appropriate policy and institutional interventions and  providing for an institutional framework for ensuring inter-agency and ministries/departments/states’ collaboration for integrated development, (ii) Port Infrastructure Enhancement, including modernization and setting up of new ports, and (iii) Efficient Evacuation to and from hinterland.

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Need for Port led Development-

Presently, Indian ports handle more than 90% of India’s total EXIM trade volume. However, the current proportion of merchandize trade in Gross Domestic Product (GDP) of India is only 42%, whereas for some developed countries and regions in the world such as Germany and European Union, it is 75% and 70% respectively.  Therefore, there is a great scope to increase the share of merchandising trade in India’s GDP.  With the Union Government’s “Make in India” initiative, the share of merchandise trade in India’s GDP is expected to increase and approach levels achieved in developed countries.  India lags far behind in ports and logistics infrastructure.  Against a share of 9% of railways and 6% of roads in the GDP the share of ports is only 1%. In addition high logistics costs make Indian exports uncompetitive.  Therefore Sagarmala project has been envisioned to provide ports and the shipping the rightful place in the Indian economy and to enable port-led development.

The Sagarmala Project therefore intends to achieve the broad objectives of enhancing the capacity of major and non-major ports and modernizing them to make them efficient, thereby enabling them to become drivers of port-led economic development, optimizing the use of existing and future transport assets and developing new lines/linkages for transport (including roads, rail, inland waterways and coastal routes), setting up of logistics hubs, and establishment of industries and manufacturing centres to be served by the ports in EXIM and domestic trade.  In addition to strengthening the port and evacuation infrastructure, it also aims at simplifying procedures used at ports for cargo movement and promotes usage of electronic channels for information exchange leading to quick, efficient, hassle-free and seamless cargo movement.

Sagarmala will also lead to large scale employment generation of skilled and semi-skilled manpower. Employment generation will be in industrial clusters and parks, large ports, maritime services, logistics services, and other sectors of the economy that will be directly and indirectly impacted by port-led development under Sagarmala.  Manufacture of ships, vessels, cruise ships, barges and tugs will also increase industrial output and also contribute to employment generation.

Implementation of Sagarmala will also result in effective steps to ensure sustainable development of the population living in the Coastal Economic Zones (CEZ) by synergising and coordinating with State Governments and line Ministries of Central Government through their existing schemes and programmes such as those related to community and rural development, tribal development and employment generation, fisheries, skill development, tourism promotion etc.  Today about 70 lakhs persons are dependent on fisheries for their livelihood.

Initiatives under Sagarmala:-

An illustrative list of the kind of development projects that could be undertaken in Sagarmala initiative are -

  • Port-led industrialization
  • Port based urbanization
  • Port based and coastal tourism and recreational activities
  • Short-sea shipping coastal shipping and Inland Waterways Transportation
  • Ship building, ship repair and ship recycling
  • Logistics parks, warehousing, maritime zones/services
  • Integration with hinterland hubs
  • Offshore storage, drilling platforms
  • Specialization of ports in certain economic activities such as energy, containers, chemicals, coal, agro products, etc.
  • Offshore Renewable Energy Projects with base ports for installations.

INSTITUTIONAL FRAMEWORK 

The Institutional Framework for implementing Sagarmala has to provide for a coordinating role for the central government.  It should provide a platform for central, state governments and local authorities to work in tandem and coordination under the established principles of “cooperative federalism”, in order to achieve the objectives of the Sagarmala Project and ensure port-led development.

A National Sagarmala Apex Committee (NSAC) is envisaged for overall policy guidance and high level coordination, and to review various aspects of planning and implementation of the plan and projects.  The   NSAC shall be chaired by the Minister incharge of Shipping, with Cabinet Ministers from stakeholder Ministries and Chief Ministers/Ministers incharge of ports of maritime states as members.  This committee, while providing policy direction and guidance for the initiative’s implementation, shall approve the overall National Perspective Plan (NPP) and review the progress of implementation of these plans.

In order to have effective mechanism at the state level for coordinating and facilitating Sagarmala related projects, the State Governments will be suggested to set up State Sagarmala Committee to be headed by Chief Minister/Minister in Charge of Ports with members from relevant Departments and agencies. The state level Committee will also take up matters on priority as decided in the NSAC.

Sagarmala Coordination and Steering Committee (SCSC) shall be constituted under the chairmanship of the Cabinet Secretary with Secretaries of the Ministries of Shipping, Road Transport and Highways, Tourism, Defence, Home Affairs, Environment, Forest & Climate Change, Departments of Revenue, Expenditure, Industrial Policy and Promotion, Chairman, Railway Board and CEO, NITI Aayog as members.  This Committee will provide coordination between various ministries, state governments and agencies connected with implementation and review the progress of implementation of the National Perspective Plan, Detailed Master Plans and projects.  It will, inter alia, consider issues relating to funding of projects and their implementation. This Committee will also examine financing options available for the funding of projects, the possibility of public-private partnership in project financing/construction/ operation.

At the Central level, Sagarmala Development Company (SDC) will be set up under the Companies Act, 1956 to assist the State level/zone level Special Purpose Vehicles (SPVs), as well as SPVs to be set up by the ports, with equity support for implementation of projects to be undertaken by them.  The SDC shall also get the Detailed Master Plans for individual zones prepared within a two year period. The business plan of the SDC shall be finalised within a period of six months. The SDC will provide a funding window and/or implement only those residual projects that cannot be funded by any other means/mode.