We are looking up to the Sagarmala project to catalyse ‘port led development’ in India.

While moderating a panel discussion at an industry conclave recently, it appeared that many colleagues from the maritime and logistics sector are perhaps still wondering, how can ports lead to economic development and what is this twist of words about?

Having contributed to multi country programs in aerospace and logistics related sectors for over two decades, am outlining my perspective on port led development.

Cities have historically developed around ports. Venice, Alexandria, St Petersburg, New York, LA and Mumbai Kolkata Chennai are few examples. Modern port cities like Antwerp and Rotterdam in Europe and Asian cities like Singapore, Shenzhen and Shanghai, contribute significantly to the economy of their countries.

Similarly aerotropolis like Schiphol ( Amsterdam), Dallas Fort Worth ( Texas) , Dubai International and Incheon ( S Korea) etc make significant contribution to their regional/national GDP.

Most of us would perhaps agree that, India needs to invest significantly in the development of infrastructure towards ‘ease of doing business’ and to make the ‘make in India’ initiative happen. Some studies have indicated that, improved infrastructure can contribute to India’s GDP by about 2 % additionally.

Why are ports and airports important: Think of sea ports and airports as physical portals or gateways through which, goods (cargo), related services and people move in and out of the country. In other words, ports provide the country’s exporters, access to the world markets and provide the world, access to Indian markets, linking the producers and consumers.

With the continued growth of exports & imports in absolute terms as well as a share of GDP, the development of these gateways will contribute significantly in supporting India’s aspirations for economic growth.

From the port developer’s perspective, most ports were small fishing villages and most airports were sleepy hamlets in the middle of nowhere, before a development project is taken up with a view to transform these into modern commercial gateways.

Even after securing the development rights, regulatory clearances and winning the significant land acquisition/aggregation challenges to set up these mega projects, attracting talented people to relocate to the project sites and live there, continues to be a challenge.

It’s a myth that a great location by itself can make the port or airport successful. The port can be in the coastline with deep draft or an airport at the centre of the hinterland-where ships will reverently sail across and aircraft will happily overfly-however without good commercial reasons like availability of cargo or passengers and good hinterland connectivity, shipping lines do not decide to berth at a new port or airlines, to land at a new airport.

After the physical infrastructure has been constructed, attracting shipping lines to the ports and airlines to the airports could remain a challenge for years. Shipping lines don’t include a dip into the newly developed port, until there is sufficient cargo to be collected or discharged , likewise airlines do not plan a landing at the airports, until there is a base load of passengers and cargo.

Interestingly, the established ports and airports, having endured these issues and devised their solutions over time also enjoy the benefit of having their regulatory agencies like customs, FDA etc better equipped to clear cargo efficiently. Further, the business ecosystem including offices of freight brokers, agents, forwarders, transporters etc are usually located near gateways, that have other amenities like schools, colleges, universities, malls, entertainment options.

Therefore the successful development of infrastructure projects like ports and airports require development of the hinterland as an integrated region, along with industrial and social clusters to support cargo generation and consumption.

While successful private infrastructure developers of ports like Mundra Port and Krishnapatnam Port have internalised this and begun investing in the development of the hinterlands, they do not have the wherewithal to develop large industrial and residential clusters in the hinterland on their own and, need the government to step in as the owner of the zone and a facilitator.

From the governance perspective, major ports are administered by the central government and the non-major ports by the state government(s), making coordination of the development priorities cumbersome, for the ports as well as their hinterland zones.

Sagarmala project is expected to create 10 large coastal economic regions (CERs), as focal points for integrated planning and development/upgrade of major & non-major ports, industrial clusters in the hinterland and also transportations systems including roads, rail and waterways, along the 7500 kms coastline of India. This will enable the central & the state governments collaborate to make integrated development of ports and their hinterlands happen. The first coastal economic zone, to be developed near JNPT has recently received approval from the government recently.

Thinking big, the government has set up an umbrella agency-The Sagarmala Development Company Limited (SDCL)- that takes a unified view of the 10 coastal economic regions (CERs)-each set up as special purpose vehicles ( SPVs) with equity participation from the state(s) and the centre- responsible for coordination of the Sagarmala project. The objectives of SDCL include : the development of projects emanating from the National Perspective Plan (NPP), providing assistance to project SPVs set up by Central Line Ministries / State Governments/State Maritime Boards/Ports etc, providing funding window for residual projects that cannot be funded by any other means, preparation of detailed master plans for the Coastal Economic Zones (CEZs) identified as part of the National Perspective Plan and raise funds from multi-lateral and bilateral agencies as debt/equity, as per the project requirements

India’s ports can then contribute to the development of a wider coastal region, which in turn contributes to cargo generation and consumption for the gateway ports.

India has made relatively better progress in the development of ports through public private partnership (PPP) projects, compared with similar projects to develop airports, roads and other infrastructure.

Port led developments, especially in the east coast of India can also contribute to the development agenda in the SAARC region

The concept of port led development, applies to the other infrastructure projects like airports, roads, and power plants as well.

A similar initiative for integrated development in the airports sector, would be quite welcome by the stakeholders.

With the commencement of mega-initiatives like the Sagarmala project, in turn supporting multiple large infrastructure projects, expect the infrastructure sector to move into a higher orbit, providing a growth impetus to the Indian economy.

If you have any thoughts on port or airport led developments, please feel free to share.