Sector Overview India has a long coastline of about 7,517 km along the western and eastern shelves of the mainland. With 12 major ports and 187 minor ports, India ranks 16th among maritime countries and has one of the largest merchant shipping fleets in the world. According to the Ministry of Shipping, approximately 95% of the countrys trade by volume and 70% by value moves through maritime transport, highlighting the importance of ports and their contribution in sustaining the growth and development of the Indian economy. The increasing trend of Western countries moving their manufacturing functions to low-cost countries, and the likely prospect of India emerging as a manufacturing outsourcing hub, is expected to contribute to the growth of the countrys marine industry, according to an Ernst & Young-NMDC report titled Indian CoastlineA New Opportunity. In terms of volume, cargo traffic at Indian ports increased to 883 million tonnes in 201011 from 850 million tonnes in 200910, according to the Ministry of Shipping. During the 12th Five-Year Plan (20122017) about Rs 1,80,626.23 crore is expected to be invested in the ports sector, according to revised estimates of the Planning Commission of India. The ports sector received foreign direct investment (FDI) worth USD 1,635.08 million between April 2000 and July 2011, which was 1.13% of the total FDI inflows into India, according to the Department of Industrial Policy and Promotion (DIPP), which is a part of the Ministry of Commerce and Industry and which formulates FDI policy in India. The major ports are Chennai, Ennore and Tuticorn (in Tamil Nadu); Cochin (in Kerala); Kandla (in Gujarat); Kolkata (in West Bengal); Mumbai Port and Jawaharlal Nehru Port Trust (in Maharashtra); Mormugao (in Goa); New Mangalore (in Karnataka); Paradip (in Orissa); Vishakhapatnam (in Andhra Pradesh); and Port Blair (in the Andaman & Nicobar Islands). Among the major ports, Kandla in Gujarat leads in terms of cargo volumes (82 million tonnes in 201011) followed by Vishakhapatnam in Andhra Pradesh (68 million tonnes). Cargo volumes at all major ports increased in 201011. Among the non-major ports, Mundra Port and Special Economic Zone Limited (MSEZL), in Gujarat, was the largest operator (52 million tonnes in 201011), followed by Essar Ports (40 million tonnes), which has two facilities at Vadinar and Hazira, both located in the state of Gujarat. The Government of India has undertaken several projects in recent years to upgrade the quality of the ports sector. For example, the year 2010 saw the completion of the first phase of some major projects, including the mega container transshipment terminal at Vallarpadam (Kochi) and bulk terminals at Dahej, Mundra and Hazira (all in Gujarat). The first phase at Dhamra (Orissa), a greenfield port, was completed in May 2011. All the major ports in the country have good road and rail connectivity. Moreover, the capacity and quality of the existing connectivity is being further strengthened to facilitate the smooth flow of cargo. The report of a Committee of Secretaries on rail-road connectivity of major ports suggests each major port should be connected by a four-lane road.

Policy and Promotion The Ministry of Shipping, the nodal agency for ports, encompasses the shipping and port sectors, including shipbuilding and ship repair, major ports and inland water transport. As per government policy, 100% FDI is allowed in port development projects. As way of incentive, 100% income tax exemption from income tax is extended to companies investing in port infrastructure. Further, a 10-year tax holiday has been given to enterprises engaged in the business of developing, maintaining and operating ports, inland waterways and inland ports. A major promotional initiative of the ministry is the National Maritime Development Programme (NMDP), an initiative to develop the maritime sector, with an outlay of USD 11.8 billion. The policy lists measures for enhancing private investment, improving service quality and promoting competitiveness to meet medium- and long-term objectives. With this objective, the Department of Shipping has finalized the list of projects to be taken up in major ports under the NMDP up to 201112. These projects will involve a total investment of Rs. 55,804 crore. The programme will be implemented through public/private partnership in two phases. Besides the NMDP, the government has initiated two more notable regulatory and policy initiatives to ensure the holistic development of the Indian port sector the National Maritime Agenda 201020 and the Draft Port Regulatory Authority Bill, 2011. The National Maritime Agenda 201020 outlines the framework for the development of the port sector with a target capacity of over 3 billion tonnes by 2020, largely through private sector participation. The agenda envisages a cumulative investment of around Rs. 2,774 billion in the port sector between 2010 and 2020 in three phases. The non-major ports are expected to account for 61% of the proposed investment and the major ports for the rest. The agenda also suggests policy-related initiatives to improve the operating efficiency and competitiveness of Indian ports. These include major ports to be turned into landlord ports by 2020 with their role being to provide the port infrastructure, while operations and services would be provided by the private sector participants. The Draft Port Regulatory Authority Bill, 2011, provides for the establishment of a regulatory authority to regulate rates for facilities and services provided at the ports and to monitor the performance standards of port facilities and services. The regulatory authority will be tasked with the job of framing guidelines for port authorities and private operators on rates that will be charged for various services. Further, the authority will also lay down performance norms and quality standards to be met by port authorities and private operators, besides monitoring their performance. Port authorities and private operators running facilities with a cargo-handling capacity of less than 5 million tonnes a year will be outside the purview of the authority. Major Players

Significant investment is being done on BOT basis by foreign players. Some of these foreign players are Maersk (JNPT, Mumbai), P&O Ports (JNPT, Mumbai and Chennai), Dubai Ports International (Cochin and Vishakhapatnam) and PSA Singapore (Tuticorin). Some of the prominent Indian port companies include Mundra Port and Special Economic Zone Limited, Ennore Port Limited, Mormugao Port Trust, Kakinada Seaports Limited, Krishnapatnam Port Company Limited, Dhamra Port Company Limited and Adani Petronet (Dahej) Port Private Limited. There are several port terminal operators too, with some of the big companies being TM International Logistics Limited, Chennai International Terminals Private Limited, Nhava Sheva International Container Terminal Private Limited, Chennai Container Terminal Private Limited, Mundra International Container Terminal Private Limited, Sical Iron Ore Terminals Limited, International Seaports Haldia Private Limited, Vizag Seaports Limited and Ennore Tank Terminals Private Limited. Major companies that operate as port service providers are Ocean Sparkle Limited, Seabird Marine Services Private Limited, Sealion Sparkle Maritime Services Limited, Sealion Sparkle Port & Terminal Services (Dahej) Limited, IMC Limited, Polestar Maritime Limited, TM Harbour Services Private Limited, International Seaport Dredging Limited, Adani Logistics Limited, Navkar Corporation Limited, Pipavav Railway Corporation Limited, Saurashtra Containers Private Limited and Triway Container Freight Station Private Limited. Sector Outlook According to estimates by the Ministry of Shipping, cargo volumes in India are expected to breach the 1-billion tonne mark in the 201112; the 2-billion tonne mark by 201617; and 2.4 billion tonnes by 201920. A report on the Indian port sector (ICRA Rating feature, September 2011), released by consultancy firm ICRA, states that the prospects for cargo growth over the medium- to long-term remain positive based on the level of activities in the key end-user industries. Going forward, growth of traffic at Indian ports is expected to be driven mainly by higher volumes of coal (to meet requirements of the large number of current and proposed thermal power projects based on imported coal); containers (given the market under-penetration and potential for cost savings); crude oil and POL (large upcoming refinery capacity); fertilizers (strong domestic demand and low self-sufficiency); and steel (mega projects proposed in the eastern part of the country). Most of the expected traffic growth in India is based on domestic demand drivers, which are expected to spur growth in various port-related logistics and service activities, although competitive pressures in these business lines would remain high. For private players investing in the ports sector, another positive trend is the increasing adoption of the landlord/asset ownership model for major ports; this model allows the private sector a dominant role in capacity additions, and port services and operations. The Gujarat Maritime Board (GMB) has identified 10 greenfield sites to develop all-weather direct berthing ports under the build-own-operate-transfer (BOOT) mechanism. These ports will be transferred back to GMB after the completion of 30 years of operations under the BOOT mechanism.

Useful Links http://www.ey.com/Publication/vwLUAssets/Ports_and_shipping_1_April_2011/$FILE/1Apr il2011_Ports_shipping.pdf http://dipp.nic.in/English/Publications/FDI_Statistics/2011/india_FDI_Ju... http://icra.in/Files/ticker/Indian%20Port%20Sector_Final_26Sep11.pdf http://infrastructure.gov.in/pdf/Rail_Report.pdf http://www.deloitte.com/assets/Dcom-India/Local%20Assets/Documents/aport... http://www.gidb.org/downloads/gmb_status.pd