India’s global trade hinge: Better ports

By Peter S Goodman and Hari Kumar

The Rishiri Galaxy, a Panamian-flagged tanker 1 1/2 times the length of a football field, sat tethered to the dock on a muggy day at the Jawaharlal Nehru Port on the west coast of India. Freshly arrived from the Persian Gulf, it bore industrial chemicals — raw materials for Indian factories that make pharmaceuticals, auto parts, cosmetics, construction materials and scores of other modern concoctions.

At a second terminal nearby, overhead cranes plucked shipping containers off another vessel operated by Maersk, the Danish shipping conglomerate, setting them onto the beds of trucks. The trucks would haul this cargo — electronics from South Korea, palm oil from Indonesia, machinery from Europe — to warehouses throughout the world’s most populous country.

Roughly 1 of every 4 shipping containers passing through India is loaded or unloaded here, on the docks jutting into the Arabian Sea just south of Mumbai. The flow of containers has roughly tripled over the past two decades, reaching the equivalent of 6.4 million 20-foot boxes last year. Yet by the standards of the world’s largest ports — many of them in China — it remains a small operation.

India is now pursuing an aggressive campaign to catch up, readying plans for new ports while expanding existing docks. Whether those designs come to fruition and how quickly could shape the results of one of India’s grandest aspirations: swelling into a full-fledged manufacturing and export colossus.

That prospect is increasingly imaginable as multinational retailers that have long leaned heavily on factories in China to make their goods seek alternative venues, spooked by trade hostilities between US and China and the supply chain disruptions of the pandemic. That effort is intensifying as businesses absorb the expectation that trade relations between the world’s two largest economies will remain unsettled regardless who wins the US presidential election in November. Many major brands are exploring factories in India.

“The world doesn’t want total dependence on China,” said Unmesh Sharad Wagh, chair of the Jawaharlal Nehru Port Authority. “Definitely, the best alternative is India. Now, people are shifting their base to India.”

Major retailers like Walmart are expanding their sites to India. But whether this trend endures, producing a sustained increase in additional factory orders along with critically needed manufacturing jobs, may hinge on whether India’s ports are able to do their part.

At the Jawaharlal Nehru Port, in Navi Mumbai, construction crews are doubling the size of one of the five terminals, adding two berths.

The major action is aimed at Vadhvan, an industrial area 100 miles up the coast. There, the port authority is proceeding with plans to construct an enormous facility that will have capacity to move 20 million 20-foot containers per year, roughly triple the size of the existing Navi Mumbai port.

The project, estimated to cost more than $9 billion, is to be built in two phases, with completion in 2035. It recently gained the approval of India’s Cabinet.

The key to the new port is its deep water, which can accommodate the world’s largest container ships, those large enough to hold as many as 24,000 boxes. The rest of India’s ports can handle ships carrying up to 18,000 containers.

That limitation constrains the flow of trade. Roughly 25% of the container cargo between India and Europe or East Asia is routed through ports in Singapore, Dubai, United Arab Emirates, or Colombo, Sri Lanka, where their shipments are transferred to and from smaller vessels that are able to dock in India — the equivalent of having to change planes in Chicago or Atlanta, rather than catching a nonstop flight.

As a result, Indian shippers are spending roughly $200 extra per 20-foot container, and the journeys are taking an additional three days, Wagh said. A three-day gap in delivery time undermines India’s competitiveness as a place to make goods.

The Vadhvan port is aimed at reducing such costs and speeding delivery time, Wagh said. “We should not be depending on the smaller vessels,” he said. “Our port should be ready for our future growth.”

Another port in Kerala is being engineered to accommodate the largest container vessels, relying heavily on automation. It recently received its first container ship to test its operations and is expected to open late this year. That facility — delayed for years by the opposition of local communities — is a project of the Adani Group, a central element of the commercial empire amassed by billionaire magnate Gautam Adani.

Adani has long enjoyed close ties with Prime Minister Narendra Modi, who in June began his third term. Modi is a weakened figure following national polls that forced his Hindu nationalist party to forge a governing coalition to maintain power, but is expected to continue his drive to spend aggressively on infrastructure.

Some argue that the expansions underway are already keeping pace with India’s growing exports.

“Port capacity is going up everywhere,” said Shashi Kiran Shetty, founder and chair of Allcargo Group, one of India’s largest logistics companies. “We probably can handle another 25 or 30% increase in demand.”

He noted the expansion of capacity in recent years at a major container port in Mundra.

Recent months have seen chaos at some ports on India’s west coast, with outbound cargo piling up, as ocean carriers bypass some destinations to focus their vessels on major routes linking East Asia to Europe and North America.

Much of the disruption is the result of ships avoiding the Suez Canal to evade attacks by Houthi rebels in Yemen. Ships are instead traveling the long way around Africa. Given the extra distance, shipping companies need extra vessels to maintain weekly schedules. They have diverted some ships that would normally call at Indian ports.

Another source of concern is the possibility of dockworker strikes at India’s 12 largest ports amid an impasse in contract negotiations.

In the longer term, those dependent on trade in India call for more aggressive action to deepen the channels at existing ports — a costly and complicated process.

“Dredging has to be done at Indian ports,” said Dushyant Mulani, chair of the Federation of Freight Forwarders’ Associations in India, which represents trucking firms, customs brokers and other companies. “China definitely has an edge over India.”

Like port overseers on every shore, Wagh, who runs the port authority in Navi Mumbai, is frustrated by the parts of his business that he does not control: congested and bumpy highways that slow the movement of cargo, for instance, and a train system that has traditionally prioritized the moving of passengers.

Rail authorities are nearing completion of a dedicated rail corridor to move freight between Mumbai and New Delhi. That
will allow the double-stacking of containers, while permitting trains to double
their speed, effectively quadrupling the system’s capacity.

The national government is also overseeing the construction of highways.

The question is how long those efforts will take to finish, and whether they can keep pace with growing volumes of cargo. The demands will be even greater if India emerges as a viable alternative to industry in China.

“Rail and road both have to move faster,” Wagh said.