New Delhi, July 25 -- A 7,500-kilometre coastline anchoring 12 major ports and more than 200 non-major ports and intermediate ones backs India's vast and vibrant maritime legacy.
Steady Rise of India's Maritime Sector
As the pillar of trade and commerce, the maritime segment accounts for 70 per cent of India's trade by value and 95 per cent by volume. In the past decade, the National Democratic Alliance (NDA) government has attempted to modernise shipping and scale up port infrastructure, with positive outcomes. The cargo handling capacity of major ports reached 1,629.86 million tonnes (MT) from 871.52 MT between FY2014 and 2023-24, recording a robust rise of 87.1 per cent. In FY2024, domestic ports handled cargo of 819.22 MT, rising 4.45 per cent from the earlier year. During this decade, the sector also benefitted from 100 per cent FDI via the automatic route for harbour and port projects alongside a 10-year tax holiday for firms engaged in developing ports.
Understanding India's Industry and Investor-friendly Initiatives
In the Union Budget 2025, the government introduced the Maritime Development Fund (MDF) to provide financial assistance through equity or debt securities for the shipping industry, reflecting its continued fiscal support for the sector. However, the government's promotional stimulus in Union Budget 2025 seemingly stopped short of the port sector.
At a time when India's focus on port-led economic development was catching global attention, the omission of supportive institutional measures for the port sector in the Union Budget 2025 failed to make sense. Their strategic importance cannot be overstated.
Non-major ports are integral to regional trade, handling nearly 45 per cent of India's cargo traffic. They support small-scale exports and other sectors critical to the national economy. With the government's strategic push via initiatives like the Sagarmala Programme to promote port-led development, a concerted effort is underway to attract private investments via Public-Private Partnership. Presently, around 51 per cent of major ports operate under the PPP model, with ongoing plans to increase this to 80 per cent by 2030. While injecting capital into port development, it will also bring in advanced technologies and management expertise from private players.
Why Non-major Ports Also Need Institutional Support?
The impact of non-major ports' performance on the country's economic growth and maritime trade is well documented. These ports have also created templates for private investment-led economic growth in port connectivity. As they head towards the end of their concession, they face uncertainties around the extension and resultant business challenges. The deliberations around the extension of agreements mark a litmus test for India as an investment destination and will be optimistically followed by the global investor community.
Modernised, efficiently operated ports can substantially enhance the nation's export potential while curbing logistics costs. Non-major ports have substantially augmented India's maritime infrastructure. In states like Gujarat particularly, these ports contribute to industrial growth in hinterland areas by attracting private investments and supporting regional development. In this, private investments can be instrumental in modernising India's ports, majorly boosting capacity and operational efficiencies and sustaining an eco-friendly supply chain
Concessionaire Agreements-Key to Unlocking the Potential of Maritime Transport
With many non-major ports approaching the end of concessionaire agreements, the existing concessionaires and potential investors face uncertainty. The lack of clear policies regarding extensions or renewals can deter private investment, which is crucial for infrastructure upgrades and operational efficiency that increase India's competitiveness in international trade. This uncertainty can cause stagnation in port development, hindering India's capacity to meet growing trade demands. Implementing transparent policies to clarify the terms of concessionaire agreements is imperative to attract and retain investments.
Supportive Views from the Parliament
The Parliamentary Standing Committee on Tourism, Transport, and Culture, a high-level legislative oversight and advisory forum, held a pragmatic view on promoting stability in session agreements for ports involving the PPP framework. The Panel favoured longer gestation periods for port concessions. In its report on the Functioning of Major Ports in the Country", released in 2023, the Standing Committee questioned the successive overhaul of Model Concessionaire Agreements and sought regulatory consistency. It also noted that the port segment is capital intensive and longer concession periods leading to gestation for a larger capital cycle could become the norm in the future.
The Committee had voiced concerns about successive changes in the Model Concessionaire agreement in 2008, 2018, and 2021. These amendments led to a major overhaul in tariff fixation norms and provisions for change in cargo. The Standing Committee believed that frequent amendments in MCA placed concessionaires in a disadvantageous position. The Committee suggested a relook at the retrospective application of the MCA, 2021. The Parliamentary Panel advised an investor-friendly approach to promote private sector participation, governed by a framework that would enable the private sector partner to secure a reasonable return while enabling value addition for public resources. The Standing Committee endorsed longer concession periods.
To build a conducive investment environment, transparent, predictable policies remain necessary vis-a-vis concessionaire agreement extensions. A stable regulatory framework will ensure continued participation from private players and facilitate capital inflows and technology transfers. Investors must be reassured that a reliable regulatory environment that is backed by law, which will ultimately enhance operational efficiency across Indian ports, safeguards their investments. For this, it is essential to draw a parallel from the global benchmarks.
India needs to prioritise investor-friendly policies for port development to achieve its ambitious goal of emerging as a trillion-dollar economy. The observations made by the Parliamentary Standing Committee in its 2023 report aptly characterise the essence of private partnerships in critical areas such as ports. The observations provide directional clarity to lead India into the next stage of port-led economic development. This can only be achieved by establishing clear and transparent norms for the PPP and by entering into an unambiguous and specific contractual relationship.
The writer is former Chief Secretary, Manipur and Member Secretary, Tariff Commission, Department of Industrial Policy & Promotion, Ministry of Commerce and Industry. Views expressed are personal
Published by HT Digital Content Services with permission from Millennium Post.