Ports play a crucial role in making a nation a powerhouse of manufacturing and exports. China is the prime example: the country has seven of the 10 busiest container ports in the world. India, which aspires to be a big manufacturer and exporter, finds an entry at 35 on the World Shipping Council’s list.
The container volume at Shanghai port surpassed 49 million TEU in 2023, against the global container port throughput of 866 million TEUs. India’s Mundra port, the biggest commercial port by volume, handled 6.64 million TEUs in the period. It has the advantage of a 15-metre natural draft, which lends it the advantage of handling larger vessels.
But India is now drawing up plans to give itself an advantage through a Rs 76,220 crore development: the Vadhavan port in Dahanu, Maharashtra, 150 km north of Mumbai. The project that is being pushed in a public-private partnership mode will see the construction of a port with a container capacity of 15 million TEUs in 2035 and 24 million TEUs by 2040. On top of that, the sea floor’s topography in the region will give Vadhavan port a natural draft of 20 metres, which means it can accommodate container vessels up to 20,000 TEUs.
For any country, it is the port-led infrastructure that contributes towards economic development and sets the tone for more progress. In the case of China, it is clear that this strategy has paid rich dividends and elevated its position as a player to reckon with in global trade. It is long overdue for India to add some port muscle — especially with the government pushing self-reliance; encouraging manufacturing through production-linked incentives and other schemes; and creating pathways to expand export through free trade agreements and other deals.
Union Minister of Ports, Shipping & Waterways Sarbananda Sonowal has said last year that a modern and advanced port infrastructure is of paramount importance for smooth and efficient trading. India’s major ports had collectively handled 795 million tonnes of cargo, registering a 10.4% growth over the previous year. “95% of India's trading by volume and 70% by value is done through maritime transportation,” he had said while speaking at FICCI’s Port Infrastructure Conclave in the capital, highlighting the need to develop port infrastructure if the economy has to grow faster.
In February 2020, the Union Cabinet had given an “in-principle” approval of the Vadhavan port project under the Sagarmala Programme. The project is currently awaiting the Cabinet nod on the proposal to develop the container port, after which it would be tendered out.
Sonowal had told reporters in February this year that they were expecting an approval from the Cabinet soon. “The Union Environment Ministry has given clearance to the Vadhavan Port project. We are soon going to get cabinet approval (for the project),” a PTI report stated.
A senior government official tells ET Digital on the condition of anonymity that such a port is the need of the hour as the size of vessels has increased tremendously. “The parcel size is increasing. As we don’t have a deeper depth in our port, international vessels are going to Colombo and Singapore. So, for example, a 20,000 TEU vessel will first go to Singapore as the port has 20 metres depth, and will discharge cargo there. Thereafter, a small ship will carry the cargo and bring it to India. After Vadhavan comes up, international ships can directly come here with goods from, say, America. That is the advantage,” he says.
India’s growth story
His views hold merit, especially in the backdrop of India’s economic growth curve, which has seen an upward trajectory in recent years. In an interview with ET Now in March, Reserve Bank of India Governor Shaktikanta Das had stated that the Indian economy is likely to grow at a rate exceeding the central government's Second Advance Estimate of 7.6% in the ongoing financial year. “I would not hesitate to say that India’s GDP growth in FY24 will exceed 7.6%, it might be closer to 8%,” he stated.
Such growth implies a need to increase the cargo handling capacities at ports. The senior government official speaking on condition of anonymity says: “Right now the total capacity, including the major and non-major ports, is 2,500 million tonnes per annum. This can go up to 10,000 million tonnes per annum in the coming years, given the country’s growth momentum.”
This is where a port like Vadhavan can be a game changer for India because of its handling capacity. Sameer Bhatnagar, Partner, and Global Head of Ports (Maritime) at KPMG India, says the country does not have a sufficient number of deep draft ports that are capable of handling the next-generation vessels.
Such vessels are larger in size, typically they can up to 24,000 TEUs against 3000 or 4000 TEUs at one point of time. These vessels typically call on ports like Singapore, Jebel Ali or Hong Kong, which are very deep draft, transshipment ports.
“Vadhavan port will create a kind of scale which will be fairly large in terms of its handling capacity,” Bhatnagar says. “For example, JNPT is expected to max out its capacity at 10 million TEUs and after that there is no other port in the vicinity of JNPT or in Maharashtra with that capacity of a big scale traffic. Hence, now Vadhavan is being planned to be set up as a large capacity port,” Bhatnagar says.
The port will service the vast hinterland regions of Maharashtra, Gujarat, western Madhya Pradesh and North Indian states. It will be the third major port in Maharashtra, besides JNPT and Mumbai port, catering to the varied requirements of global trade as a deep draft port.
Logistics costs
Besides natural depth, Vadhavan port brings in another great promise that has the potential to redefine business dynamics for even small manufacturers. The enhancement to India’s port infrastructure can cut logistics costs, say experts.
According to the Economic Survey 2022-23, logistics costs in India have been in the range of 14-18% of GDP against the global benchmark of 8%. Improving the quality of trade and transport-related infrastructure such as ports, railroads, roads and information technology was cited as important factors to address this aspect.
KPMG’s Bhatnagar explains how the new port project is a step forward in that direction: “If there is a larger vessel to carry an Indian export container and such vessels only stop at the major transshipment hubs instead of halting at all the places across the world, it would result in more volumes and direct calls. This would reduce the cost of shipping one box which, in turn, will reduce the logistics cost for India.”
If a big vessel directly comes to the port in India — instead of going to, say, Singapore to load or unload goods — transshipment cost comes down. So the unit cost for a larger vessel is cheaper as it does not stop at every port. This will also make such ships reach the destination faster, thereby changing the way the logistics of export and import would happen through containers.
Rotterdam is often considered the gateway to Europe and a central hub of global trade with a throughput of approximately 14 million TEUs per year.
Vadhavan port’s scheme falls in line with India’s ambitions to be a developed nation by 2047, by giving a push to port-led growth and planning. “In the coming years, a lot of development in port and waterway infrastructure will be seen and we are hoping for more contribution from road and railway as well,” the senior government official adds. “Once such projects are in good shape, the logistics cost will come down in 5-10 years, infrastructure will be better and the ultimate beneficiary will be the people. It has to reach every person at the end of the chain.”
In august company
But is it too ambitious an aim for India to be in the top 10 ports alongside Shanghai and Singapore?
Experts say that it is not just deep draft that has contributed to the success of such ports but also the landside infrastructure that allows the cargo to be loaded and unloaded efficiently. Bhatnagar points out that effective cargo handling involves quick unloading at the port and seamless evacuation of the cargo to the hinterland. The movement has to be fast and paperwork should not be a barrier here.
“The way they (officials at Singapore and Shanghai) handle the processes, the documentation is something which allows them to work very efficiently and rapidly,” he says. “Last year, the Port of Singapore alone handled approximately around 39 million TEUs while India’s total traffic of containers was around 20-25 million TEUs.”
This puts the efficiency situation in perspective and highlights the need for officials in India to streamline infrastructure and processes behind the port.
Bhatnagar, however, adds that even though such nations may enjoy certain geographical advantages — such as Singapore’s presence on a global shipping lane and Shanghai port’s sheer scale — India can still strive to build its port infrastructure with a focus on quality of service and streamlined processes.
As part of the Amrit Kaal Vision 2047, India has six mega ports on the anvil as part of its maritime expansion plans. This is also expected to ramp up cargo handling capacity significantly. Can the Vadhavan port project help keep such ambitions afloat in the next few years?
As Bhatnagar puts it, “The saying is well known that a ship is safest in the harbour, but that is not the place where it is meant to be. Even in the world of shipping commerce, ships are not meant to spend too much time in a harbour. The faster one is able to turn around a vessel, the better is the reputation of the port. And that capability is something that India also has to develop.”
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