Sagarmala, India’s port modernisation project

24 October 2016

The Ministry of Shipping’s ambitious Sagarmala project that aims to modernise India’s ports is estimated to save up to Rs 40,000 crore per year spent on logistics by key industries, says a study done by the ministry.

The study has come as a whiff of fresh air at a time when India’s lopsided freight modal mix is costing the economy as high 14 percent of its GDP. In contrast, developed nations spend at the most 9 percent of GDP per annum.

As per the study, the Sagarmala project will save logistics costs for commodities such as coal, cement, iron, steel, food grains, fertilisers, and petroleum, oil and lubricant.

The report says that the project will lead to an increase in coastal shipping of these products up to 280 million metric tonne per annum by the year 2025.

Every year 740 million metric tonne of coal is moved through the country. But only 23 million metric tonne per annum is moved through coastal shipping. Railways cost six times more than coastal shipping, but due to lack of optimisation of coastal shipping infrastructure, a major portion of the coal is moved through railways.

Due to Coal India Limited’s efforts to increase its productivity, coal movement may spike up to 1,200 million metric tonnes per annum (MMTPA) by 2025. In that case lack of optimum coastal shipping infrastructure may lead to higher pressure on the railways. More than 90 percent of the railway tracks relevant to coal are running over capacity.

The study says that coastal shipping can help India move up to 200 MMTPA of coal transported to the 400 thermal plants, and save up to Rs 17,000 crore per annum. It will also cut down prices of power produced in such plants by 50 paise per unit, says the study.

The study also says that thermal coal amounting up to 70 MTPA for non-power uses can be transported through coastal route if port-based coastal linkages are provided. The report further says that steel and cement plants in India are mostly located near the places where raw materials are found. It sees potential of establishing up to 80 MMTPA steel and cement plants in the coastal regions, and savings of up to Rs 6,500 crore per annum in logistics.

India can save another Rs 5,600 crore using coastal routes to move commodities such as fertilisers, petroleum, oil and lubricants, food grains and iron.

The study also identifies locations for steel plants in Odisha, northern Andhra Pradesh, northern Tamil Nadu, and Maharashtra. For cement plants locations in southern Gujarat and central Andhra Pradesh have been identified, based on the mapping of limestone reserves.

The projects aims to decrease exporting time by five days, which is now 32 days and save up to Rs 6,000 crore. It uses a three-step approach that requires connecting highways with ports, building dedicated toll lanes for export and import on national highways, and simplification of customs clearance method.

The railways are also going to play a major part in decreasing logistic charges, the study says, adding that the share of railways in container transportation can be increased to 25 percent from 18 percent. It can help save up to Rs 3,000 crore in freight.

The report adds that India’s container transport is skewed towards road transport due to high railway freight, lack of last mile connectivity, and lack of reliable rescheduling of freight trains. The study has identified 14 road to railway networks to bridge this gap. It envisions to save up to Rs 3,000 crore.

The Rs 70,000 crore Sagarmala Project launched by the Government of India aims at changing the way logistic evacuation happens in India and decrease cost of freight for goods handled and evacuated by sea ports.

Source – Firstpost