From Kandla to Kolkata

An intersection of three dynamics

For India to maximize benefits from its long coastline, suitable investment, trade and geopolitical strategies need to be implemented, in line with India’s vision for its domestic growth and place in the global world order.

Infrastructure development

Port infrastructure development in India remains a work in progress. According to the World Bank and S&P Global’s Container Port Performance Index 2023, only three Indian ports are ranked in the global top 50. The performance gap between public and private sector ports is notable: While India’s largest government-owned port — the Jawaharlal Nehru Port Trust (JNPT) complex — ranked 96th globally, the privately operated Mundra Port Terminal in Gujarat ranked 27th.

The difference in performance underpins a shift in cargo handling as well. Until a decade ago, India’s governmentowned ports commanded about 75% of the country’s container volumes, with JNPT and Chennai Port leading the pack. But cargo volumes have increasingly shifted to private ports, given their market-oriented dynamics in a competitive environment, and bureaucratic hurdles associated with pricing and infrastructure investment have limited the attractiveness of government-owned ports.

Notably, the evolving dynamics in public and private sector port development still benefit India’s maritime ambition. The Ministry of Ports, Shipping and Waterways’ Maritime India Vision 2030, released in 2021, is emblematic of the complexity of managing the improvement of 12 government-run and more than 200 privately run ports across India’s vast coastline. 

India has sufficient container capacity for the near term — about 33 million twenty-foot equivalent units (TEUs) compared with 22 million TEUs handled nationwide annually. More capacity is on the way: A US$10 billion greenfield port at Vadhavan, near Mumbai, would command roughly 23 million TEUs of annual capacity at full buildout, and a US$600 million investment in a new container terminal at Tuna-Tekra, near Kandla in Gujarat, would add another 2 million TEUs of annual capacity. This should preclude the worries about overcapacity seen in other Asia-Pacific countries such as China or Vietnam, which have built container capacity for volumes that are slow in coming or unlikely to materialize.

A holistic evaluation of the government’s Sagarmala initiative would also be useful. Through Sagarmala, which was introduced in 2014, the government has underscored the importance of seaborne trade in guiding India’s path to growth by focusing on modernizing ports through efficiency and tactical infrastructure improvements. The government’s deadline of 2025 for India’s importers and exporters to save between US$4.2 billion and US$4.8 billion in logistics costs will be a key indicator of progress.

India’s intent to lure greater imports and exports — traditionally transhipped through the Port of Colombo in Sri Lanka — can be addressed by developing as-yet-absent deepwater ports that serve the largest ships trading between Asia and Europe, and by reducing terminal handling costs at JNPT (which can be 60% higher than at other hubs in Asia and the Middle East, according to a study by the Associated Chambers of Commerce and Industry of India). Vizhinjam Port in Kerala will be a key deepwater gateway, catering to services that until now have relied on Colombo.

While India has long been viewed as moving too slowly in building logistics infrastructure to match its trade ambitions, this methodical approach has likely worked to its advantage. In addition to port development, unlocking India’s trade capacity also depends on in-country infrastructure progress. More investment should be directed toward facilitating connectivity with landlocked states that have import or export demand through freight rail corridors and interstate highways. India’s vast interior markets hold the key to trade development.

Trade opportunities

India’s maritime landscape-led trade growth is poised to continue, while overland and airborne trade share is extremely low. India’s trade is overwhelmingly seaborne, similar to mainland China, South Korea and Vietnam, which also conduct nearly 90% of their trade via sea, as noted by S&P Global Market Intelligence’s Global Trade Analytics Suite. This dependence on maritime routes to manage imports and exports likely informed port development strategies in mainland China, South Korea and Vietnam; India will have to consider port development accordingly.

A litmus test will be how India prepares ports for increasing exports and to manage substantial bulk commodity imports. India’s bulk commodity imports are primarily energy imports in crude oil, liquefied natural gas (LNG), liquefied petroleum gas (LPG) and coal; metallurgical coal for steel making; and agriculture-sector imports such as fertilizers. The demand for these in India is expected to remain strong beyond 2030, backed by economic growth prospects.

The domestic challenge will stem from the fact that handling bulk commodity cargo poses higher operational challenges than handling containerized cargo — and that inadequate handling equipment and a lack of deepwater berths to accommodate larger ships add to costs for Indian energy importers. But this is also an opportunity for India to increase its share of international container shipments on the back of global supply chain diversification. With an estimated compound annual growth rate of 3%–5% in 2023–30, rising bulk commodity imports are a chance for the port ecosystem to evolve and reduce the logistics burden. 

Case study: Coal imports 

India’s dependence on imported thermal and metallurgical coal is likely to stay high for the next decade. The country’s economic development strategy is focused on raising capital expenditure for infrastructure, thereby driving demand for steel and, in turn, for raw materials such as coal. India is now the largest seaborne coking coal buyer, a trend driven by the country’s growing steel capacity and consumption. 

The role of Indian ports in meeting energy security needs and driving efficiency gains to reduce import costs is critical. India’s total metallurgical coal demand is expected to rise from 150 million metric tons (MMt) to over 250 MMt by 2030, while coking coal imports are set to reach 100 MMt in 2030, according to S&P Global Commodity Insights estimates.

India’s ports system also needs to support domestic coal flows. S&P Global Commodity Insights’ Commodities at Sea data shows that coal flows within India have surged since 2021, following an increase in domestic coal production. This represents a fundamental shift in how a key energy material is transported to the country’s power plants, domestic coal having previously been transported via road and rail.  

For India to compete effectively in the Indian Ocean region, it must align the pace of domestic reform, infrastructure buildup and diplomatic outreach, especially among the ministries of External Affairs, Trade and Commerce, and Ports, Shipping and Waterways.

Equally important are India’s workarounds to secure the domestic and overseas capital investment needed to pursue investments abroad and ensure they serve Indian interests, irrespective of shocks in the geopolitical environment. An ideal balance could be achieved by engaging domestic and international stakeholders as follows:

• By encouraging domestic “national champions” to frontload external investments in countries of strategic and economic importance.
• By leveraging multilateral and global alliances that India is part of to pursue joint investment strategies; for example, by seeking financial capital from Japan and providing operational support from India.
• By perusing deep Indian diplomatic expertise to guard against political changes in other countries that risk negatively affecting Indian interests.