MUMBAI : The Covid-19 pandemic brought to the fore unprecedented challenges for the maritime sector. It struck at a time when the sector was already experiencing a downturn due to poor domestic performance and international trade disruptions. While the sector has started showing green shoots of recovery from June 2020 onwards, the pace of revival will be contingent on a plethora of factors, including domestic industrial activity and changes in the global economy.
Rajiv Agarwal Operating Partner, Infrastructure, Essar, and Managing Director, Essar Ports Limited share his views on recent developments and the sector outlook with India Infrastructure magazine. Here are excerpts from the interview.
What has been the progress in the port sector in the past one year?
During the unprecedented crisis posed by the Covid-19 pandemic, many businesses across sectors were severely impacted. The port sector too faced numerous challenges such as mismatched demand-supply (which affected shipping volumes and cargo), reduced manpower movement (due to lockdowns), lower revenues but sustained costs, higher inventory build-up, delayed project commissioning, etc.
However, with several restrictions now being eased, the port sector has regained its momentum and is now on the path to recovery. The Indian port sector recorded a capacity of about 2,500 million tonnes per annum (mtpa) at the end of financial year 2021. The aggregate cargo traffic handled by Indian ports in financial year 2021 was 1,247 mtpa, indicating a capacity utilisation of about 50 per cent. The cargo handled declined by 5.5 per cent in financial year 2021 as compared to financial year 2020. The reduction was purely on account of the impact of the pandemic. In terms of share, major ports handled about 54 per cent of cargo traffic while non-major ports handled about 46 per cent in financial year 2021. The overall revival in cargo volumes and in the sector will depend entirely on how quick the demand and actual consumption meet the gap.
What has been the impact of the key initiatives undertaken by the government?
In order to mitigate the impact of the pandemic on the port sector and push for early revival, the Indian government has been supporting the sector with multiple reforms and policies. The efforts undertaken, particularly by the Ministry of Shipping for enhancing the sector and economy, are highly commendable. The efforts are noticeable through a plethora of initiatives such as the Major Ports Bill, 2020, which will enable flexibility, self-governance and swiftness in decision-making; the launch of 400 investible projects worth $31 billion for improving the maritime sector; the announcement of the Maritime Vision 2030, which will pave the way for global maritime leadership; conceptualising the National Infrastructure Pipeline to enable the infrastructure support required for Atmanirbhar Bharat; and undertaking PPP projects on existing assets in major ports to unlock value and enhance efficiency.
These initiatives will not only enhance the efficiency of the port sector but also improve the country’s competitiveness. These efforts are likely to catalyse rapid transformation of India in becoming a global manufacturing hub.
What has been the impact of Covid-19 on the sector? What has been your organisation’s response to the pandemic?
Financial year 2021 witnessed port traffic falling by 5.5 per cent. This was predominantly on account of the pandemic during the first two quarters. However, subsequent to that, there was an uptick in economic activity, which resulted in an increase in cargo volumes and operations, taking the figures close to pre-Covid levels.
Since inception, we have been investing extensively in developing and building state-of-the-art mechanised terminals that have led Essar Ports to achieve one of the best turnaround times in the Indian port sector, while maintaining a clean and safe environment. Despite the pandemic and challenges faced, our facilities have been fully operational and we have seen interest of trade strengthening at our facilities. As a matter of fact, our Vizag terminal – India’s largest ore handling complex – posted a growth of 7 per cent in financial year 2021 despite the industry showing a downward trend. The demand for our terminals is strong and we believe our terminals are well placed to offer sustainable advantage to our customers and trade.
Our facilities have played a crucial role in ensuring smooth operations of our customers’ supply chains. The handling of cargo at Essar Ports has been in compliance with the guidelines set by the government and in close coordination with the authorities.
What are the sector’s key challenges that remain unaddressed?
The logistics sector has an indispensable role to play in nation building. However, there are certain factors that industry players need to work on to stay ahead of competition, such as increasing operational efficiency through mechanisation of non-mechanised terminals, reducing pre-berthing delays and improving turnaround time. Technology and digitalisation will play a key role in this.
There is also a need to develop deeper draft at the existing and new ports to accommodate larger-size vessels. The development of multimodal evacuation facilities at the existing port terminal facilities, with a key focus on improving comprehensive rail/road connectivity, is needed as it will reduce congestion considerably.
Additionally, the sector requires low-cost financing to fund projects in view of slow cargo build-up and long gestation periods. Like the government enjoys low-cost financing for debt and equity, a similar type of fund and low-cost instrument should be opened for the private sector in view of the need of private sector participation with the National Infrastructure Pipeline expected to play a key role in the time to come.
What is the outlook for the sector for the next one to two years?
Infrastructure is the backbone of any economy and the port sector is one of the key drivers of economic development. With the world still grappling with the pandemic, we are all striving to ensure resilience and business continuity.
As the pandemic continues to affect many facets of the supply chain, the prime minister’s ambition of Atmanirbhar Bharat is sure to bring a new change in the business ecosystem. It will surely pave the way for local manufactures and for us to develop localised supply chains that would reduce exposure to any possible disruptions. This will certainly give the desired push to the economy and a big boost to ports, shipping, coastal and inland waterway transport.
Also, technology has taken centre stage during the pandemic and transformed the way business is done. So, it would be apt to say that digitalisation is the future and the way forward for how businesses will be conducted across sectors and industries. Digitialsation and advancement in technology would enable better customer service, reduce cost of operations, improve efficiencies, ensure environmentally conscious/eco-friendly business operations and faster turnaround of vessels. With this, the port sector is certain to see the emergence of more effective business models with technology taking centre stage in the coming years.
Source : www.essar.com