Charting India's Maritime Future

• 14 Nov 2024

This editorial is based on “India needs to build ships” which was published in Financial Express on 12/11/2024. India’s heavy reliance on foreign vessels for trade, coupled with limited financing options in shipbuilding, poses economic and strategic risks. With major shipbuilding nations controlling the market, India urgently needs policy reforms to strengthen its maritime sector.

For Prelims: India’s maritime sector, Shipbuilding, SARFAESI Act, Maritime India Vision 2030, Sagar Mala Program,  Red Sea crisis, String of Pearls, Security and Growth for All in the Region (SAGAR) vision,  India-Middle East-Europe Economic Corridor , Harit Sagar Initiative , INS Vikrant, BIMSTEC , IORA, Coastal Regulation Zone.  

For Mains:  Current Status of India’s Maritime Sector,  Major Issues India Faces in Enhancing Maritime Infrastructure.

As India nears its role as the world’s third-largest economy, its minimal share in global shipbuilding (0.07%) and ship ownership (1.2%) exposes strategic and economic risks. Relying on foreign vessels for 95% of trade has led to substantial forex outflows. The exclusion of ships from the harmonised infrastructure list and the SARFAESI Act limits access to competitive financing, stalling growth. With China, South Korea, and Japan dominating 93% of global shipbuilding, urgent policy reforms are needed to align India’s maritime sector with its economic aspirations. 

What is the Current Status of India’s Maritime Sector?  

• Status: India ranks as the 16th largest maritime country globally. 
  • The Indian maritime sector handles 95% of India’s trade by volume and 70% by value. 
  • India is the world’s 3rd largest ship recycler by tonnage, holding a 30% global market share in ship-breaking with the world’s largest ship-breaking facility located in Alang. 
• Government Initiatives for Maritime Growth 
  • Maritime India Vision 2030: Launched in March 2021, the vision includes over 150 initiatives for the comprehensive development of the Indian maritime sector. 
    • Aims to serve as a blueprint for accelerated growth across various facets of India’s maritime industry. 
  • Sagar Mala Program (2015): Focuses on port-led development and logistics-driven industrial growth. 
    • Encompasses 415 projects with an investment of $123 billion across four key areas: 
      • Port Modernization and New Port Development 
      • Port Connectivity Enhancement 
      • Port-Linked Industrialization 
      • Coastal Community Development 
  • Targets include generating $2.7 billion in annual revenue from existing assets and creating 2 million direct and indirect jobs by 2030. 

Why is Investment in Maritime Infrastructure Crucial for India? 

• Economic Security & Trade Resilience: The recent Red Sea crisis, where Houthi attacks disrupted global shipping routes, demonstrated India's maritime vulnerabilities, with global shipping costs surged in the first half of 2024 and forcing vessels to take longer routes around Africa.  
  • India's overwhelming dependence on foreign ships (95% of international cargo) resulted in freight costs surging to $75 billion in 2022-23, with projections exceeding $100 billion soon.  
  • As global supply chains face increasing geopolitical pressures, from the Ukraine war to Middle East tensions, India's lack of maritime self-reliance (only 487 vessels for overseas trade) poses a significant economic risk.  
  • Building domestic maritime infrastructure could save substantial forex outflow and provide better control over trade routes. 
• Strategic Positioning in Indo-Pacific: India's maritime infrastructure development aligns with its expanding role in the Indo-Pacific region, particularly as China increases its presence through initiatives like the "String of Pearls" and dominates global shipbuilding with 46.6% market share.  
  • Recent developments like the India-Middle East-Europe Economic Corridor (IMEC) announcement in 2023, competing with China's Maritime Silk Road, demonstrate the strategic importance of maritime capabilities.  
  • Also, India's leadership in initiatives like the Security and Growth for All in the Region (SAGAR) vision requires robust maritime infrastructure to be credible. 
• Employment Generation & Skill Development: India's demographic dividend presents a unique opportunity in maritime infrastructure, especially as traditional shipbuilding nations face ageing populations.  
  • With India ranking third globally in seafarer supply (contributing 10% of global maritime workforce), the sector has massive employment potential.  
  • Recent initiatives like the Sagarmala programme have already generated a significant number of jobs, with projections for millions more through port-led development projects. 
• Environmental Sustainability & Energy Security: Maritime infrastructure modernization aligns with India's COP28 commitments and green shipping initiatives.  
  • The International Maritime Organization's 2023 strategy targeting net-zero emissions by 2050 makes investment in green shipping infrastructure crucial.  
  • India's recent Harit Sagar Initiative shows commitment to sustainable maritime infrastructure.  
  • The success of projects like Cochin Shipyard's zero-emission autonomous vessels and Mumbai's electric water taxi system demonstrates the viability of sustainable maritime solutions. 
• Domestic Manufacturing & Self-Reliance: Investment in maritime infrastructure supports India's Atma Nirbhar Bharat initiative and its goal to become a global manufacturing hub.  
  • Recent successes like the indigenous aircraft carrier INS Vikrant demonstrate India's shipbuilding capabilities.  
  • The PLI scheme's expansion to include marine products create a foundation for domestic manufacturing growth.  
• Regional Connectivity & Trade Integration: Maritime infrastructure development enhances India's regional connectivity initiatives like BIMSTEC and IORA. 
  • The successful launch of the Sittwe Port in Myanmar and development of Sabang Port in Indonesia demonstrate India's growing maritime cooperation. 
  • Recent agreements for maritime connectivity with Maldives and Sri Lanka, despite political tensions, highlight the importance of sustained maritime infrastructure development. . 

What are the Major Issues India Faces in Enhancing Maritime Infrastructure?

• Financing & Infrastructure Status Barriers The issue of ships not being included in the harmonised list of infrastructure (they are not classified as infrastructure) severely limits financing options, despite shipyards having infrastructure status since 2016.  
  • The exclusion from SARFAESI Act 2002 makes banks reluctant to provide long-term loans as ships cannot be mortgaged as securable assets.  
  • Also, In India, financing costs are higher because the shipbuilding relies heavily on imports of critical raw materials 
  • India currently holds a very small share of the global shipbuilding market at just 0.06%, significantly lagging behind the leading countries like China, South Korea, and Japan, largely due to these financing constraints. 
• Port Infrastructure & Efficiency Gaps: Despite handling over 1.4 billion tonnes of cargo in 2022-23, Indian ports struggle with efficiency metrics well below international standards.  
  • The average turnaround time at Indian ports is 2.1 days compared to 0.6 days in Singapore.  
  • India’s existing major ports have depth limitations that restrict the accommodation of ultra-large container vessels, thereby increasing the reliance on transshipment hubs in nearby countries. 
• Skilled Workforce & Infrastructure Constraints:  While India provides 10-12% of global seafarers, there's a significant shortage in specialized shipbuilding skills.  
  • Also, the Indian maritime sector lags in adoption of smart port technologies and automation. 
  • The integration of blockchain, IoT, and AI technologies in port operations remains at nascent stages. 
• Regulatory & Policy Coordination: Multiple regulatory bodies and overlapping jurisdictions create operational inefficiencies.  
  • Port expansion and maritime infrastructure development face significant challenges in land acquisition and Coastal Regulation Zone compliance.  
  • The coordination between government agencies involved in the maritime sector leads to delays in project approvals, averaging 2-3 years for major port projects. 
  • The absence of a single-window clearance system, despite announcements in Maritime India Vision 2030, continues to hinder development. 
• Competition & Market Position: India faces intense competition from established maritime nations and emerging players.  
  • China's dominance in shipbuilding (46.6% global share) and container manufacturing creates significant entry barriers. 
  • The lack of economies of scale, with Indian shipyards operating at 60-70% capacity utilisation, further impacts competitiveness. 
• Coastal Shipping Development Lag: Despite a 7,500 km coastline, coastal shipping accounts for only 6% of India's domestic freight movement. 
  • Currently, around 30 million tonnes (MT) of coal is moved on the coastal route from eastern India to south and western India; potential demand is nearly 100 MT by 2030. 
• Hinterland Connectivity Gaps: Last-mile connectivity remains a major challenge with only 30% of major ports having direct rail evacuation systems. 
  • The absence of dedicated freight corridors connecting major ports to industrial clusters increases logistics costs by 15-20%. 
  • Limited development of coastal shipping and inland waterways infrastructure restricts multimodal transportation options. 

What Measures can India Adopt to Accelerate the Development of Maritime Infrastructure?  

• Integrated Port Development Framework: Establish a unified National Port Grid Authority to coordinate development across major and minor ports, eliminating inter-port competition and promoting specialisation.  
  • Implement a hub-and-spoke model where 3-4 mega ports (like the new Vadhavan Port) act as transshipment hubs while others serve as feeder ports.  
  • Develop port-specific master plans aligned with regional cargo profiles and hinterland industrial clusters.  
  • Link port development with industrial corridors and Special Economic Zones to ensure cargo sustainability. 
• Technology-Driven Port Modernization: Deploy Smart Port Infrastructure Management Systems (SPIMS) across all major ports, starting with JNPT and Mundra as pilot projects.  
  • Introduce blockchain-based Port Community Systems for paperless trade facilitation, building on the success of JNPT's recent digitalization.  
  • Establish IoT-enabled cargo tracking and port equipment monitoring systems. 
  • Accelerate the development of National Maritime Single Window like the United Kingdom integrating customs, immigration, and port operations. 
• Multimodal Connectivity Enhancement: Fast-track the completion of pending Dedicated Freight Corridor sections connecting major ports to industrial hubs.  
  • Develop coastal economic zones with integrated logistics parks. Implement a standardised Port-Rail-Road connectivity model at all ports, similar to Gujarat's successful GIFT City model.  
  • Create a dedicated port connectivity fund under the National Infrastructure Pipeline for last-mile projects.  
• Green Port Initiative: Mandate solar and wind power integration for all ports, targeting a fixed percentage of renewable energy usage.  
  • Implement shore-to-ship power supply systems to reduce vessel emissions while berthed.  
  • Develop green channel clearances for environmental-friendly port projects. Install automated environmental monitoring systems at all ports.  
  • Create dedicated green corridors for cargo movement with electric vehicle infrastructure. 
• Skill Development and Capacity Building: Establish Maritime Skill Development Centers at all major ports in partnership with the private sector.  
  • Create specialised courses for port automation and smart port operations. Implement mandatory certification programs for port workers aligned with global standards. D 
  • Develop exchange programs with leading international ports for knowledge transfer. Set up maritime innovation labs at IITs and maritime universities focusing on port technology. 
• Private Sector Participation Model: Redesign PPP frameworks with more balanced risk-sharing mechanisms and clear exit options.  
  • Introduce hybrid annuity model for port projects similar to successful highway projects.  
  • Create special purpose vehicles for port-led development with equity participation from states and private sector.  
  • Establish port infrastructure investment trusts (InvITs) to attract long-term capital.  
• Coastal Community Integration: Develop fishing harbours and coastal tourism infrastructure alongside commercial port development.  
  • Create skill development programs specifically for coastal communities in port-related activities.  
  • Implement comprehensive rehabilitation packages for project-affected persons with long-term livelihood support.  
  • Establish community-managed minor ports for local trade and fishing activities. 
• Port Efficiency Enhancement Program: Implement port performance benchmarking system with real-time monitoring and rewards.  
  • Develop specialised cargo handling facilities based on port-specific cargo profile.  
  • Create dedicated coastal berths at all major ports to promote coastal shipping. Establish port-based free trade warehousing zones to reduce logistics costs. 

Conclusion:  

Strengthening India’s maritime infrastructure is pivotal for enhancing trade resilience, fostering economic growth, and bolstering strategic security in alignment with its economic aspirations. Through targeted policy reforms and investment, India can reduce its reliance on foreign vessels, promote sustainable practices (SDG 9: Industry, Innovation, and Infrastructure). Also, developing a robust maritime sector will not only support domestic manufacturing but also enhance environmental sustainability (SDG 13: Climate Action) for future generations. 

Drishti Mains Question:

Assess the strategic, economic, and environmental significance of developing India's maritime infrastructure. How can strengthening this sector contribute to India’s self-reliance, trade resilience, and regional security in the Indo-Pacific?

 

 

UPSC Civil Services Examination, Previous Year Question (PYQ)

Q. With reference to ‘Indian Ocean Rim Association for Regional Cooperation (IOR-ARC)’, consider the following statements: (2015)

1. It was established very recently in response to incidents of piracy and accidents of oil spills. 
2. It is an alliance meant for maritime security only. 

Which of the statements given above is/are correct? 

(a) 1 only 

(b) 2 only  

(c) Both 1 and 2  

(d) Neither 1 nor 2 

Ans: (d)

Q. What is blue carbon? 

(a) Carbon captured by oceans and coastal ecosystems 

(b) Carton sequestered in forest biomass and agricultural soils 

(c) Carbon contained in petroleum and natural gas 

(d) Carbon present in atmosphere 

Ans: (a)

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Mains: 

Q. Defining blue revolution, explain the problems and strategies for pisciculture development in India. (2018)