India’s new vigorous approach to business means the logistics industry must brace itself for huge and potentially disruptive growth, attendees of the Colombo International Maritime Conference were told.

India’s government is pushing reforms designed to boost growth from the current 7.5% to over 10%, much to the delight of the transportation sector. “One can see a zing in the industry,” said Vinita Venkatesh, director of the Krishnapatnam Port Container Terminal, located on India’s east coast about 200 km north of Chennai.

Key to government reforms is the Sagar Mala port modernization project which treats India’s ports and their transport infrastructure holistically, rather than as standalone projects, thereby improving connectivity across all of India. The project is also concerned with the development of six megaports in India’s coastal states.

Sagar Mala focuses on three levels, with the first two being ports and their rail and road connections as well as coastal shipping and inland waterways. The third level, Venkatesh says, is the tie-in of industry to make it “a very nice package.”

While there have been initiatives like this in the past, what makes it different this time is government engagement, she says. The government has established what she called “a robust administrative network,” which she says is designed to monitor and examine the basis of implementation. “Things are actually moving forward,” she said.

This has helped the government to start pushing through what is likely to be an ongoing series of reforms, especially in the area of coastal shipping. This is being watched closely in Sri Lanka, as 25% of Indian cargoes are transhipped, with 48% of that trade being handled by Colombo.

The most important of these reforms was the removal of cabotage limitations on ro-ro vessels, said Venkatesh, pointing out the importance and complexity of the automotive supply chain in India.

“At least it’s a beginning where the government is recognizing the need to lift some of the cabotage restrictions,” she said. However, the current issue is for the government to do more and make it more practical, as its most recent suggestion would have given transhipment status to ports with a 50% transhipment threshold founded on an unrealistic time scale.

“We are still in the process of representing to the government. It’s a wonderful initiative, but not very practical,” she said.

The other positive development, Venkatesh noted, was that India’s Ministry of Shipping’s Tariff Authority for Major Ports was changed to put government ports on a level playing field with smaller, but more competitive, minor ports.

“The government has now realized that perhaps there is no need to control the tariffs of the major ports,” she said, describing the situation as “better.”

All is not perfect, though, as she drew attention to the need to reform Indian Customs.

The basic problem is the same as is found elsewhere with no effective national system, as the value of consignments is assessed differently in different ports. This creates not just problems of goods being unnecessarily moved to go through a favourable port but issues of cross-country movement.

More changes are needed, such as rules limiting storage to one month, but the basic problem of Customs having the authority to allow or block shipments is something Venkatesh was clear needs to be taken care of – although she did not specify how.

What she was clear about was its implications. “There is a great opportunity for us in India to be a trading hub. This is an opportunity again we are losing completely because of Indian Customs,” she said.

Upcoming is the issue of reform via further growth. India’s economy is moving along at a nice 7.5%, but the hope is to increase growth to 10% under the Make In India campaign by encouraging the growth of manufacturing.

With transport infrastructure tight but being worked on, there are questions about how India’s ports can cope with such a surge. “Only time will tell,” said one speaker, although there was some feeling that, longer term, Sri Lanka and other countries might well have to change to deal with a new, and much more productive, India.

By Michael Mackey

Southeast Asia Correspondent | Colombo