Vikas M. Khan

Given the global focus on India and China, India needs to ensure that it stays on target. Having raised the export bar, it has to make radical changes to deal with bottlenecks in the export sector infrastructure. And Indian ports must offer the exporter problem-free gateways.

INDIA's New Foreign Trade Policy 2004-09 sets an impressive target of doubling the country's share in world exports from 0.8 per cent to around 1.5 per cent, within five years. This means that the total quantum of exports will jump to around $195 billion, at a compounded annual growth rate of 33 per cent.

A quick historical perspective: India's share of world trade was a respectable 2.2 per cent in 1948, which slipped to 0.5 per cent in 1983. Exports, however, picked up after the economic liberalisation and increased from $18 billion in 1990 to about $55 billion in 2003. Total goods and services exports rose from $22.6 billion to $82.7 billion, at a CAGR of 10.5 per cent.

By contrast, China's export of goods and services rose from $67.8 billion to $482.9 billion at a CAGR of 16.3 per cent.

Considering the world attention on India and China, India needs to ensure that it stays on target. Having raised the bar, India has to make radical changes to deal with the bottlenecks in the export sector infrastructure.

One such infrastructural glitch is inefficient cargo handling at ports. There are several reasons for this including depth limitations in port channels preventing berthing of larger ships; insufficient marshalling yard space in ports; inadequate train services to clear cargo to hinterland; and, finally, less than adequate number of container terminals to meet India's cargo volume needs.

The congestion at the Jawaharlal Nehru port is a nightmare for exporters, as shipment of export containers becomes highly unpredictable. The situation has deteriorated to such an extent that the port authorities some times need to close the gates when the yards reach a saturation point.

This state of affairs is causing much anxiety in the textile sector — which accounts for more than 25 per cent of the country's overall exports — more so because it has to adhere to stringent delivery schedules.

Today, when India is striving to reach its production potential, export cargo lies stranded in ports. The second largest container terminal in India actually limits the number of containers it allows ships to export.

A lot of improvement plans are "under consideration". The Indian experience shows that it will take a long time to reach fruition. As there is a congestion situation today, improvement of port facilities must happen faster than export growth. Else, export cargo will lie stranded in ports, exporters will miss delivery deadlines and lose contracts. Large consumer retail companies that work on tight supply chain management and inventories will avoid India.

India has a long coastline, with over 100 gazetted ports. Yet, 80 per cent of India's container exports move out of only three major ports. To continue to focus on the traditional large ports for large improvements is the wrong approach. Until the major ports grow organically to accommodate and handle large ships with large volumes, the effort should be divided between the coastal States and the secondary ports.

The first stage would be to allow development of several medium ports, which can deal with export cargo on a feeder network, as China and Malaysia did in the early/mid-1990s, and as Indonesia and Thailand are doing today. The imperative is to get the export cargo out of the country. Transshipment to ocean carriers can even be undertaken at some secondary ports that have a better terminal operation than hinterland connections (for example, Mundra). Cargo from coastal areas up to 900 km from sea should be trucked to local ports for onward transport to hub ports. This would be better than trucking/`railing' all cargo to the major ports. This system releases considerable pressure from the major ports as well as from the rail/ road network.

Midstream operations in Mumbai can be effected in four-six months. Hong Kong does over four million TEU in midstream, a volume larger than the entire Indian container import and export trade in 2003.

China developed a pragmatic port development plan before its exports took off. Until 1994, few Chinese exports went out of mainline ports.

Since then five of its secondary ports have become mainline ports, now handling several million TEUs each and another one in the Pearl River Delta is expected to make the transition next year.

Time is of the essence. Indian ports must offer the exporter problem-free gateways; the exporters have enough problems of their own battling competitors from China and elsewhere.

And it is possible. We need to spread port growth around the country, and encourage organic growth, rather than forcing unrealistically large growth in limited ports.

To deal with severe congestion at key ports such as Nhava Sheva International Container Terminal and the JNPT, the government should considering privatising container movement in the country.

A large part of the problem is insufficient rail connections between ports and the hinterland, particularly to North India. Rail service needs massive upgrading and this sector must open itself to private sector participation. Rail movement of the entire country cannot be left to one single organisation.

India, as a nation today, is in a situation where the internal infrastructure is insufficient to deal with the trade the country can generate. Surely this situation needs introspection and change.

Indian exports will grow dramatically over the next few years. Private entrepreneurship will make sure of it; of that there is little doubt. If they secure the orders, produce goods at competitive prices, and overcome severe global competition, only to lose it all due to a weak link in the transport chain, who will bear the wrath of the India exporter?

With an ambitious exports target of $300 billion by 2015, it is obvious India cannot afford to miss its port of call.

To quote James Broughton, "The only limits, as always, are those of vision"

(The author, based in Hong Kong, is President and CEO of Norasia Container Lines Ltd.)

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