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Monday, 1 August 2011 00:00 - - {{hitsCtrl.values.hits}}
NEW DELHI, (Reuters): India is on track to award 23 contracts for port expansion worth $3.8 billion this fiscal year, as Asia’s third-largest economy turns the corner on funding a sector crucial to its growth prospects, a top bureaucrat said on Tuesday.
Port construction has suffered from chronic funding shortages with the private sector unwilling to invest and the government unable to meet the rising demand for berths in one of the world’s fastest-growing economies and exporters.
Cargo vessels docking in India’s overcrowded ports grapple with lengthy waiting times, raising business costs and taking some of the shine off India’s status as a top emerging market destination for investors.
However, tighter procedures for awarding construction projects have made Indian ports a much more attractive investment prospect, K. Mohandas, the secretary, Ministry of Shipping, told Reuters in an interview.
India is unlikely to fall behind on funding in future years, he added.
He said the government will set up an agency by the end of 2011 to invest in projects such as port construction or provide the support infrastructure for Indian firms in sectors such as mining.
“In India, the port capacity is not adequate as of now...there is a lot of infrastructure supply to be created in the port sector,” Mohandas said.
“Here, port projects are viable. We are not having any problem of lack of investor interest.”
New Delhi has launched a huge drive to privatise its infrastructure development, awarding contracts to private firms to build the roads, power plants and ports India urgently needs to sustain its 8-9 percent annual growth. The country aims to spend $1 trillion on infrastructure between 2012-2017.
Ports have in recent years absorbed few private sector funds, as bureaucratic red tape, problems with land acquisition and environmental clearances watered down investor appetite.
The Planning Commission, an influential advisory body, has predicted the ports sector will miss its funding targets by more than half for the government’s current five-year plan. Mohandas said between 2007-2009 — the first years of the current outlay — “there was hardly any activity in port development.” Since then “projects are being awarded on a regular basis and the investment is substantially coming from the private sector,” he added.
India has tightened up procedures in awarding contracts to private firms, bringing more transparency and predictability to deals and making them more attractive, he said. However, he acknowledged investors were still grappling with problems such as land acquisition, environmental clearances and unnecessary bureaucracy.
“It is a factor, but then you have to live with it. These are days when environmental considerations have to be given due weightage,” he said.
The Ministry plans to set up an investment agency called Indian Ports Global by the end of the year, he said.
It aims to draw equity of up to $453 million from some of the country’s 12 major state-run ports. It is also aiming to issue tax free bonds, though there is no precise figure of how much cash will be raised. The agency will then open itself up to other investment institutions, he said, without elaborating.
The agency aims to follow in the footsteps of similar outfits such as in Dubai or Singapore. Its brief will be to hunt out attractive investment opportunities in port construction around the world, and also look to invest in tandem with Indian companies making forays overseas.
“You don’t look at it as a standalone thing,” he said. “This may be linked to the acquisition of mines, or mining activity by Indian companies. This could be clubbed with maybe rail or road infrastructure.”
