India has an extensive 7,500 km coastline with 12 major ports and just under 200 minor ports, of which 139 are functioning. Primarily, the major ports deal with, by volume, 95% of India's total foreign trade. But, across the board, these ports are underperforming because of serious infrastructure and connectivity problems. Due to India's inadequate infrastructure, many investors are wary of getting involved in business in the region. We spoke to Quantified Commerce about how they circumnavigate the problems associated with India's ports.
In terms of maritime capabilities, India is consistently being outperformed by many of its Asian neighbors. According to the 2016 World Bank's global performance index, India ranked at 35 out of 160 countries. It was beat out by Singapore (ranked 5), China (25), and Malaysia (32), which are it's immediate competitors. For example, in Singapore, average ship turnaround time was less than a day. In India, it was just over two days.
Why Are India's Ports Lagging So Far Behind Their Asian Competitors?
Equipment incapable of handling large volumes, deficient dredging capabilities, outdated navigational aids and IT systems, lack of proper logistics companies, lack of proper equipment handling training and technical expertise, are just some of the direct port-related problems that India faces. Although port maintenance is a major problem, it is surpassed by overall infrastructure issues
It's difficult for seafaring cargo to be shipped off in time if the cargo has problems reaching the port in the first place. Poor hinterland connectivity, road, and railway problems make it challenging to export goods in a timely manner in India.
"Years and years of underinvestment have left our country with a bad need for infrastructure across various fields like roads, railways, ports, airports, telecommunications, and electricity," says Pradeep Gupta, the executive director of Jagson International. "Businesses in India cite infrastructure as the single biggest hurdle. These kinds of infrastructure challenges are affecting economic growth here."
What Is The Government Doing To Get Around These Issues?
The Indian government has taken a handful of initiatives to improve the country's major and minor ports. In 2016, India passed the Central Port Authority (CPA) Act. The act grants more autonomy to the major ports. Also in 2016, it released the Revised Model Concession Agreement (MCA), which includes incentives for the private sector to get involved with the ports through updated tariff guidelines and discounted revenue shares. The government also provides a 10-year-tax holiday to companies that help maintain and operate ports. If these companies undertake a port development project, the government will help with up to 50% of the cost.
But, it may take years before the government can enjoy the fruits of their labor through these port projects. The answer for bringing in investors to India may have to be independent of the ports entirely.
How Does Quantified Commerce Bypass The Port Problem?
"Companies can't solely rely on port infrastructure for shipping needs," says Agam Berry, co-founder of Quantified Commerce. They are a vertically-integrated company that builds E-commerce brands within the beauty and wellness sector. It manufactures all of its products from it's India-based factories that operate at GMP standards. The ingredients needed for their products aren't sourced domestically.
"Waiting on a cargo shipment from the ports can require waiting an invariably long time, up to 20 days or more," Berry says. "Ports in India need an overhaul. Thankfully, since we are in the health and beauty space, we only need to import very exotic ingredients that are not available in India, and we are able to use air freight instead."
Once their materials do get to the factories, Quantified Commerce is currently investing in middle-mile shipping to help overcome issues of poor road infrastructure."In terms of middle-mile shipping, we are looking at switching to trucks running on alternative fuels like CNG," Berry says. "Though more expensive upfront, they are half the running cost of diesel and are better for the environment. There is a massive pollution problem in India's major cities. Quantified Commerce wants to do it's best to not contribute to that."
Down the road, or very literally, above the road, drones are another possibility that Quantified Commerce is considering. "In some years time, drones can be a clean and efficient alternative to our product delivery in India. Most of our products are light enough for drones to carry, and this circumnavigates any problems with road connectivity," Berry says.
Still, most major businesses within the country still do rely on ports. But, with all these government initiatives to revive the infrastructure, India will hopefully see a revival of her major ports. For the time being, companies like Quantified Commerce have found ways to get around the problem.