COVID-19 | Focus on reforms to enhance efficiency of Indian ports

COVID-19 has brought life to a standstill. To contain the virus transmission, countries announced lockdowns and border closures. Though it is not clear for how long these measures will be required, it is certain these restrictions would cause a huge blow to the global economy.

The International Monetary Fund (IMF) has remarked that the ‘Great Lockdown’ will dramatically shrink global growth and contract global output by 3 percent in 2020. This would invariably have adverse consequences on global trade, and hence the shipping sector as ports cater to 90 percent of global trade.

The United Nations Conference on Trade and Development (UNCTAD) reports suggest that growth in international seaborne trade slowed down after the 2009 financial crisis and stood at a meagre 2.7 percent in 2018. Moreover, the lockdown in China, which is the leading global manufacturer, disrupted global supply chains.

Against this background, the pandemic can push the ports and shipping sector into unchartered turbulent waters.

India plays a key role in global maritime trade due to its strategic location, and accounts for over 2.1 percent of global trade. There are 12 major ports and over 205 non-major ports along the Indian coastline. Their importance in sustaining supply chains can be gauged by the fact that ports handle over 95 percent of India’s international trade by volume and 70 percent by value.

With India’s export-import destinations being impacted by COVID-19, cargo movement has nearly stopped. The reduction in economic activity has led to a decrease in demand for crude oil and container traffic across the world. This may mean that the already low capacity utilisation — which stands at about 47 percent — of major Indian ports may fall further.

These are also witnessing a huge accumulation of cargo and empty containers as shipping lines cut down sailings to avoid losses. The Directorate General of Shipping issued guidelines to all Indian ports to screen incoming vessels and quarantine suspected ones. This, however, added to delays in evacuation already caused due to port congestion and resulted in an increase in turnaround time by almost six times.

After the pandemic, it is expected that economies would not like to put all their eggs in one basket and would reduce import dependencies on China. This could be an opportunity for India to launch farsighted, multi-pronged reforms to overhaul its ports to attract more cargo traffic. The Major Port Authorities Bill, 2020, requires to be expeditiously passed to provide the much-needed autonomy to major ports.

An effective implementation of the Sagarmala programme, aimed at creating coastal economic zones and enhancing hinterland connectivity, can prove to be a game-changer in linking ports with India’s export-import industry. Planned development of hub ports with deeper drafts at ideal locations can prove beneficial for invigorating coastal economic activity and providing employment opportunities.

The ongoing pandemic would see government expenditure switching towards social sectors in the short run. However, port efficiency enhancement can be a vital cost-effective measure to revamp the ports. Currently, the average turnaround time at Indian ports is over 59 hours — the global average is 24 hours. India can utilise the opportunity hidden behind this crisis to its advantage only if it has the capabilities to handle freight efficiently.

Under the ‘Make in India’ campaign, physical documentation has already been done away with at ports. However, there still exist implementation problems, which must be resolved, to reduce detention and demurrage. This calls for standardisation of procedures across ports, 24X7 operation of principal governance agencies providing clearances, and complete digitisation of container freight stations.

The Port Community System, used for coordination among port operators, suffers from frequent breakdown errors. The efforts of the Ministry of Shipping to move to a National Maritime Portal for all EXIM stakeholders need to be paced up.

Technological advancements, such as exploring the use of artificial intelligence (AI) for autonomous or robotic operations at terminals or container freight stations, can be a key catalyst. This will not only improve efficiency in processes, but also build resilience to shocks, such as this pandemic. There is a long road ahead, but India has the potential to traverse it by undertaking a planned implementation of these structural reforms. It has been rightly said, ‘There can be no economy where there is no efficiency.’
Source: Money Control