PORT ECONOMY: ECONOMY
NEWS: Vizhinjam Port economy to drive India’s growth
to new heights: PM Modi
WHAT’S IN THE NEWS?
India's port economy is evolving into a strategic growth driver through
initiatives like Vizhinjam Seaport and Sagarmala, aiming to boost trade,
logistics efficiency, and maritime self-reliance. However, high logistics
costs, foreign transshipment dependence, and environmental concerns remain key
challenges.
Context: Vizhinjam International Seaport and Vision for Coastal Development
- Prime
Minister Narendra Modi, during the commissioning of the Vizhinjam
International Seaport in Kerala, emphasized that coastal states and
port cities will drive India’s economic transformation.
- This
aligns with India’s vision to become a developed economy by 2047,
by tapping into its strategic maritime potential.
What is the Port Economy?
- The Port
Economy encompasses all economic activities generated by the
operation, infrastructure, and services of ports.
- It
includes cargo handling, shipping, shipbuilding, repair services,
logistics, customs clearance, inland connectivity, and allied sectors.
- Ports
serve as gateways for international trade, facilitating export-import
(EXIM) commerce, passenger movement, and maritime security.
- A
robust port economy stimulates regional development, improves logistics
efficiency, and strengthens geostrategic presence.
History of India’s Port Economy
Ancient Period
- Ports
like Lothal (Gujarat), Muziris (Kerala), and Arikamedu
(Tamil Nadu) were prominent centers of Indo-Roman, Indo-Greek, and
Southeast Asian trade.
- These
ports were used for exporting spices, textiles, gems, and ivory,
contributing to ancient maritime prosperity.
Medieval Period
- Coastal
trade flourished through ports like Surat, Calicut, and Masulipatnam,
which had active trade links with Arabs, Persians, Chinese, and
Europeans.
- Indian
ports during this time operated as commercial and cultural bridges
between East and West.
Colonial Period
- The
British focused on resource extraction, transforming ports into
export hubs for raw materials like cotton, indigo, and jute.
- The development
of port infrastructure during colonialism was skewed towards colonial
interests, not national development.
Current Status of Port Development in India
- India
has a 7,517 km coastline, with 13 major ports and over 200
non-major ports across states and union territories.
- 95% of
India’s foreign trade by volume and 70% by value is handled through
these ports.
- As of
2024–25, India ranks among the top 20 global shipbuilding nations.
- Two
Indian ports—Jawaharlal Nehru Port Authority (JNPA) and Mundra
Port—are in the top 30 ports globally for container traffic.
- India’s
ranking in the World Bank’s Logistics Performance Index (LPI), 2023:
- 22nd in
International Shipments
- 38th
overall in LPI score
- Vizhinjam
Seaport is India’s first dedicated transshipment port,
intended to reduce India's 75% reliance on foreign transshipment ports
(Colombo, Singapore, Klang).
- Kochi is
being developed as a shipbuilding and repair cluster under the Sagarmala
initiative.
Benefits of a Robust Port Economy
1. Geostrategic Value
- Strengthens
India’s position in the Indian Ocean Region (IOR) and supports
foreign policy initiatives like:
- SAGAR
(Security and Growth for All in the Region)
- Project
Mausam (cultural maritime diplomacy)
- Enhances
India’s naval and economic presence near key sea lanes of
communication.
2. Regional Economic Development
- Ports
act as growth poles that attract investments in infrastructure,
logistics parks, and industrial zones.
- Port-led
development boosts employment, connectivity, and hinterland growth.
3. Environmental Efficiency
- Efficient
ports reduce fuel consumption and emissions through:
- Faster
turnaround time (arrival to departure duration)
- Greater
use of inland waterways and rail transport
- Inland
Water Transport (IWT) emits 50% less CO₂ per tonne-km compared to
road transport.
4. Employment Generation
- Ports
directly and indirectly support millions of jobs in:
- Dock
labour, logistics and warehousing
- Customs,
transport services, and shipbuilding
- Ancillary
sectors such as food services, fuel, maintenance, and security also
benefit.
Challenges in India’s Port Sector
1. High Logistics Costs
- India’s
logistics costs are around 13–14% of GDP, higher than the global
average of 8–9%.
- This
erodes competitiveness of Indian exports.
2. Dependency on Foreign Ports
- 75% of
India’s transshipment is done in ports abroad (Colombo, Singapore, Port
Klang).
- Indicates
limited deepwater and container handling capacity at domestic
ports.
3. Port Congestion and Inefficiency
- Lack
of digitization and manual procedures lead to delays, increasing
turnaround time.
- Port
congestion affects overall supply chain reliability.
4. Environmental Impact
- Dredging,
land reclamation, and construction disturb marine ecosystems and biodiversity.
-
Coastal erosion and habitat destruction are common in areas with unregulated port expansion.
Government Initiatives for Port Modernization
1. Sagarmala Programme
- Launched
to enhance port performance through:
- Modernization
of existing ports
- Port-led
industrialization
- Connectivity
improvements via roads, railways, and inland waterways
- Skill
development in the maritime sector
2. Maritime India Vision 2030
- Aims
for ₹3 lakh crore investment to enhance capacity to 2,500
million metric tonnes.
- Targets
digitization, green technology, and automation in port
infrastructure.
3. National Logistics Portal (Marine)
- A digital
platform integrating all stakeholders in maritime logistics—customs,
shipping lines, ports, and freight forwarders—for paperless, efficient
operations.
4. Maritime Development Fund (MDF)
- A ₹25,000
crore fund, with 49% government contribution and 51% from
private/port sector, to finance:
- Port
infrastructure
- Shipping
lines
- Logistics
and warehousing facilities
5. PM Gati Shakti Plan
- A multimodal
connectivity platform integrating transport and infrastructure
planning.
- Aims
to reduce logistics bottlenecks by unifying rail, road, air, and sea
connectivity.
Way Forward: Building a Sustainable and Competitive Port Economy
1. Develop Green Ports
- Encourage
investments in:
- Shore
power supply for vessels to reduce emissions at berth
- LNG
bunkering for cleaner maritime fuel
- Eco-friendly
dredging practices to minimize environmental damage
2. Enhance Private Sector Participation
- Public-Private
Partnerships (PPP) can speed up capacity creation, reduce costs, and
bring in modern technology.
- Incentivize
private players to operate terminals, logistics parks, and maintenance
yards.
3. Maximize India’s Strategic Location
- Leverage
India’s proximity to international shipping lanes (e.g.,
Suez-Malacca route).
- Develop
India as a global transshipment and logistics hub, especially with
Vizhinjam’s operationalization.
4. Digitization and Transparency
- Implement
blockchain, AI, and big data in port operations for real-time cargo
tracking and inventory management.
- Reduce
corruption and delays through automated workflows.
5. Focus on Hinterland Connectivity
- Strengthen
rail and road links between ports and industrial regions.
- Reduce
dwell time and ensure seamless movement of goods from factory to
ship.