News Content

Unless India can unclog infrastructure, potential will not be realised

UNLESS Indian Prime Minister Narendra Modi's government makes faster progress on stalled rail and road corridors, like one that would link Mumbai to Delhi, India's exporters will find it hard to compete on price and speed in global trade.

Nowhere is this more evident than at state-owned Jawaharlal Nehru Port Trust (JNPT) in Mumbai, Reuters reports. Last year, JNPT signed a US$1.26 billion deal with Singapore's PSA International to build a fourth terminal in Mumbai on reclaimed land.

Prime Minister Modi has also acted to simplify export procedures, launching electronic clearance by customs, trade and port officials.

"Ports are the gateway to trade growth," said Neeraj Bansal, the head of JNPT. "The government is expanding port capacity and building railway freight corridors and roads to reduce logistics costs for exporters."

The two-stage expansion by PSA International would boost capacity to around 11 million TEU. That would speed turnaround times and cut costs - it can take up to 12 hours for a truck to enter the port due to narrow approach roads, limited parking and customs delays. More than 10,000 trucks enter every day.

Imports, too, are hobbled by the poor infrastructure, with several container shippers imposing congestion surcharges of up to $200 per TEU to cover the cost of delays in unloading.

"Congestion at major ports is predominantly caused by an inability to clear cargo from the quayside, and that manifests itself mostly on the bulk handling terminals on the east coast," said Ian Claxton, managing director of Thoresen Shipping.

Analysts estimate it takes up to four times as long to fill or unload a ship at JNPT than at private rival the Adani Port and Special Economic Zone Ltd up the coast in Gujarat, the prime minister's home state.

"Land connectivity plays a major role," said Deven Choksey, managing director at KR Choksey Securities, a brokerage, adding that even after the expansion "the inherent disadvantages of JNPT will continue".

"Even a delay of a few hours results in missing the vessel and sometimes cancellation of an order," said Khalid Khan, a Mumbai-based exporter of engineering goods and regional president of the Federation of Indian Export Organisations.

A fix can't come quickly enough for Avinash Gupta, whose family business supplies steel forgings from the industrial hub of Ludhiana in northern India.

Mr Gupta pays nearly $800 to a state-run rail cargo company to transport a TEU to Mumbai - 40 times the cost of shipping it onto Dubai.

For now, the inefficiencies are exacerbating the pain of weak global demand and a 15 per cent drop in exports between December and June from a year ago.

Exporting a standard container requires seven documents, takes 17 days and costs $1,332 in India, according to the World Bank's Doing Business 2015 report.

India ranked 126th of 189 economies on the ease of trading across borders, well behind Mexico (44th) and China (98th). All of India's ports together handle less trade than Shanghai alone.