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CONTENTS Acknowledgments vii Executive Summary 1 Background of the Report 13 Section One: The Present Situation of India’s Major and Non-Major Ports 15 1.1. Trade Growth and Port Development 17 1.1.1. The ‘Merchandise Trade’ 17 1.1.2. India’s Economic Development 18 1.1.3. Cargo Volumes in India’s Ports 19 1.2. Demand and Capacity Needs 21 1.2.1. Evolution in Shares of Different Types of Cargo 21 1.2.2. Forecast Versus Realization of Cargo Volumes at Major Ports 21 1.2.3. Commodity-Wise Forecast Versus Realization 22 1.3. Port Capacity Utilization and Possible Shortfalls in Capacity 23 1.3.1. The Ministry of Shipping Maritime Agenda 2010-2020 23 1.3.2. Comparison of Port Throughput Volumes and Capacity in Major Ports 24 1.3.3. Comparison of Port Throughput Volumes and Capacity in Non-Major Ports 25 1.3.4. Capacity by Main Regions Between Major Ports and Non-Major Ports 25 1.3.5. Berth Occupancy Ratios 26 1.4. Performance of Indian Ports 27 1.4.1. Port Performance between 1991 and 2011 27 1.4.2. Present Performance Levels in Major Ports 29 1.5. Concluding Remarks 29 Section Two: Issues and Constraints 31 2.1. Vessel Drafts in Major Ports 33 2.2. Hinterland Connectivity 35 2.2.1. Rail Transportation 35 2.2.2. Road Transport 36 2.2.3. Planning Commission Estimates of Modal Distribution 37 2.2.4. Corridor Initiatives 38 2.2.5. Coastal Shipping Connections 39 2.2.6. Inland Waterways Connectivity 41 2.3. The Investment Gap and Financing Issues 44 2.3.1. Investment Requirements in Major and Non-Major Ports 44 2.3.2. Financing Port Projects 45 2.4. Trends and Challenges Regarding Port Governance 46 2.4.1. Challenges Relating to the Governance Structure 46 2.4.2. Modalities of Port Authority Reform 48 2.4.3. Lessons from Port Governance in Selected Countries 51 iii Reforming the INDIAN PORTS SECTOR 2.5. Issues with Respect to Port Regulation 54 2.5.1. The Essence of Regulation in the Port Sector: Scope of Regulated Activities and Possible Entities of Regulation 54 2.5.2. Levels of Port Competition 55 2.5.3. When and How to Establish a Port Competition Regulator 57 2.6. Policy and Legal Issues Impacting the Port Sector in India 58 2.6.1. The ‘Draft Indian Ports Bill 2011’ 58 2.6.2. Draft Ports Regulatory Authority Bill, 2011 59 2.6.3. Land Policy for Major Ports, 2010 and Directives for Land Management by Major Ports, 2012 62 2.6.4. The Tariff Regulator’s Role Under Discussion 65 2.7. Issues with Respect to PPPs in Indian Ports 66 2.8. The Use of Information Technology in Ports 68 2.9. Lessons from Case Studies 69 2.10. Concluding Remarks 71 Section Three: Recommendations for India’s Future Role Within a Remodeled Vision and Strategy 75 3.1. Governance and Business Model 78 3.2. Private Sector Participation 81 3.3. Economic Regulation 82 3.4. Hinterland Connectivity 84 ANNEXES 87 Annex One: Forecast vs. Realization by Major Commodities and Regions 89 Container Volume 89 Dry Bulk Volume 91 Iron Ore 92 Coal 92 Petroleum, Oil and Lubricants and Other Liquid Bulk 94 Annex Two: Details of Proposed PPP Projects 95 PPP Projects in Major Ports 95 PPP Container Terminal Projects in the Pipeline 98 Annex Three: Port Privatization in Gujarat with Examples of APSEZ in Mundra and APMT in Pipavav 100 The Profile ofA PSEZ in Mundra State Port 100 The APM Terminals (APMT) Pipavav State Port 103 Annex Four: Port Governance Models in Selected Countries 105 The United States of America 105 China 106 The Port of Shanghai 106 Annex Five: The Concept of Corporatization and Issues for India 108 iv Contents Annex Six: ‘Draft Guidelines for Tariff Setting for Major Port Trusts and Private Terminals 2013’ 111 Notification of Reference Tariff 111 Actual Tariff to be Levied by PPP Operators 112 Payment of Revenue Share by PPP Operators 113 Levy of a Tariff by Major Port Trust-owned Terminals 113 Grievance Redress 113 Mandatory Disclosures by Operators 113 Annex Seven: The Development of a National Port Network in Turkey 115 Introduction 115 Transformation in the Physical Infrastructure 117 Objectives that Guided this Transformation 118 Evolution in Institutional Relationships 118 Underlying Governance Structure 118 Legislative Changes 119 Cross Country Comparison 119 Annex Eight: The Maputo Corridor Development 120 Introduction 120 Cross Country Comparison 122 Transformation in the Physical Infrastructure 122 Maputo Corridor Logistics Initiative (MCLI) 124 Evolution in Institutional Relationships 126 Underlying Governance Structure 126 Legislative Changes 127 Conclusions 127 Annex Nine: Ensuring Competition in the Provision of Port Services 129 Introduction 129 The Scope of Port Services 129 The Problem: Competition Issues in the Provision of Port Services 132 Regulatory Solutions Developed in the European Union 135 Regulation of Port Services Provision in the UK 138 Conclusions with Regard to the Indian Ports 141 References 143 List of Abbreviations 144 List of Figures Figure 1 : Indian trade shares by major partners in 2005 and 2011 19 Figure 2: Crane performance at container terminals (boxes/hr.) 29 Figure 3: Breakdown of port access costs 133 Figure 4: Provision of port services in UK Ports 139 List of Tables Table 1 : CAGR of value of exports, imports and total merchandise trade in India 17 Table 2 : Population, GDP and GNI growth for selected Asian countries and global groups of countries (2010) 18 v Reforming the INDIAN PORTS SECTOR Table 3 : World merchandise trade shares (2000-2010,%) 18 Table 4 : Cargo volume in major ports versus non-major ports, 1999-2011 (in million tons) 20 Table 5 : Cargo volumes in India (international versus domestic), 2001-2011 (in million tons) 20 Table 6: Evolution in the shares of major commodities (all ports between 1992 and 2011, by tons, import and export) 21 Table 7 : Port cargo volumes and expected increase 2005/2015 versus realized increase 2005/2011 22 Table 8 : Projected growth in key maritime cargo categories (in million tons) 23 Table 9 : Projected volume growth versus capacity growth (in million tons) 23 Table 10: Major ports, existing and projected volume and capacity (in million tons) 24 Table 11: Non-major ports existing and projected volume and capacity (in million tons) 25 Table 12: Non-major ports existing and projected volume per maritime state (in million tons) 25 Table 13: Share in capacity of major ports per port cluster (2010-11) 26 Table 14: Performance improvements in major ports 27 Table 15: Crane and berth productivity benchmark for selected container ports (moves/hour) 28 Table 16 : Drafts at major ports by commodity category 33 Table 17 : Share of rail transport in the major ports (volumes in 1,000 tons) 36 Table 18: Planning commission of India for estimating modal share per cargo category 37 Table 19 : Distance, time and haulage costs for rail transit and inland haulage from Delhi 38 Table 20: Projects included in development program of IWAI 42 Table 21: Projected investments in major ports (2010-20) 44 Table 22: Projected investments in non-major ports (2010-20) 44 Table 23: Key agencies and their role in Australia 51 Table 24: Key agencies and their role in EU countries 52 Table 25: Port management in the EU member states 53 Table 26: Container volumes and expected increase 2005/2015 versus realized increase 2005/2011 90 Table 27: Container volume 2006-07 to 2010-11 in Indian ports (1000 TEU) 90 Table 28: Dry bulk volumes and expected increase 2005/2015 versus realized increase 2005/2011 91 Table 29: Iron ore volumes and expected increase 2005/2015 versus realized increase 2005/2011 92 Table 30: Coal volumes and expected increase 2005/2015 versus realized increase 2005/2011 93 Table 31: Thermal