Chabahar port may be delayed due to US-Iran tussle, says Deloitte#39;s public sector leader

July 11
21:29 2018

The Narendra Modi-led NDA government is inching towards closing its five-year term and bracing for elections in 2019. With infrastructure being one of the biggest pushes of the government, the maritime sector saw great impetus from New Delhi. Be it Sagarmala or cruise tourism, India’s “vast coastline” of 7,500 kilometres always hogged the limelight.

In conversation with Moneycontrol, Vishwas Udgirkar, partner, Deloitte India, talks about how the somewhat “less prominent” Ministry of Shipping received its long-due importance during the past five years, if the flagship programme Sagarmala will be able to meet the deadline and how the government might hold divestment in Shipping Corporation of India and Dredging Corporation of India until next term.

Edited Excerpts:

Q) How has the shipping industry shaped up over the years and your evaluation of the industry during the NDA government’s tenure?

We need to have a holistic view to evaluate this sector. Unlike other infrastructure ministries, the Ministry of Shipping and Ports was always a little less prominent because of its own structure. We could never take up larger programmes like National Highways Development Project (NHDP) under roads or railways integrated programmes.

The structure has probably stayed central to major or minor ports. But shipping is a part of the larger maritime industry, so it wasn’t given the post due to (lack of) capital investment, improvement, port efficiency. To that extent I think, in the last four or five years, a lot of initiatives have been taken in the shipping industry which have been linked to other programmes. Everything depends on the overall efficiency of the industry as such. Consider Make in India, ultimately, you’ll look at the logistics chain which will help us to improve the export on one hand and reduce cost of import on the other.

To that extent, I think, a lot of initiatives were taken. Now, of course, all initiatives have not progressed the way they would have liked them to be. But that said, the ministry has now gotten importance in the way that people have started looking at their issues and problems, whether regulatory or bottlenecks.

Q) The only major policy initiative by Ministry of Shipping was its flagship programme ‘Sagarmala’. What is your assessment of the programme? Do you think it needs further assistance or is it enough to give the required impetus to the sector?

Sagarmala is basically to look at the entire supply chain, the ports and export-import (exim) related thing. Also, it looked at how to not restrict it only to port boundaries but also look at the linkages. So, it was more of a larger programme for linking all other elements of the supply chain.

But they are also looking at some other issues, like regulatory ones. As we know, a lot is going on in inland waterways. That is also part of the larger shipping industry. So, it’s not all about Sagarmala, which is just the infrastructural part of it, but other related issues, like the earlier issue of port concession which were charging different port tariff for all. This was also looked at. So, it has gone beyond Sagarmala.

There are many small and large initiatives being looked into to make it an overall shipping and water transport-centric segment.

Also read: Centre pegs investment under Sagarmala at Rs. 3 trillion during 2018-19, expects to add projects worth Rs. 1.1 trillion in a year

Q) Do you think ‘Sagarmala’ will provide the results that are being anticipated in the given time frame?

Like in any other government-related programme, whether this or any other government, you set up a timeline, a target… probably knowing fully that this target is not likely to be fully met. If you set a target of five years, you’ll probably achieve it in seven or eight years. But if you set up a target of seven years, you will probably end up doing it in 10 years.

I feel Sagarmala is definitely running behind schedule. But it is okay if you make it in 10 years, if not seven.

Like if you look at the dedicated freight corridor, it took a really long time but ultimately, it slowly started happening. But then, Sagarmala is a lot more complex and the state has a bigger role to play. It is an inter-ministerial programme. It can’t be only the shipping ministry. It has linkages with railways, roadways, finance etc and it should eventually give the desired results, if not in the given time frame.

Q) … So when do you expect it to start showing results?

I feel it will start showing results only by the end of the next term of the government. Some positive developments, however, will start showing before that as well.

Q) What are your views on inland waterways in India? Do you think our rivers are healthy enough to make way for transportation facilities like ferries or Ro-Ro (Roll on- Roll off)?

We do have challenges. We can’t compare rivers like the Ganges with sea. I am not saying they are not unhealthy, but they were not given any importance. They were not even looked at as a viable or profitable mode of transport. Lot more needs to be done on that.

But, at the end of the day, I really can’t comment on their health or if they are viable or not. I think, we need to put in a lot more and there is a long way to go. We need to look at which pockets are viable and how we integrate it with other modes of transport. If we do not have integrated water transport, inland water transport, then it cannot be possible due to overall geographical nature of the country.

If you look at it, we have had the Inland Waterways Authority of India (IWAI) for ages now, but we seem to be a little bit active only now. But we must remember that inland waterways can’t be looked at like national highways, integrating the entire country. They must be looked at something that is integrated within states.

Also read: Planning to spend Rs 1,700 crore for development of national waterways in 2018-19: IWAI VC

Q) Do you think the US pulling out of the Iran nuclear deal will affect India’s investment plan in the country, given the fact that we already have made investments in Chabahar port?

It’s more of a political decision. When we had gone for the Iran port and started talking about it probably 10 years ago, there was an Indian-origin private group that had gone with the government to talk with the country. But then, it went to cold-storage. This government has finally revived it.

While reviving it, we talked only about the importance and its connectivity. Now, with the US withdrawing from the nuclear deal, we will use another justification how it will affect the project.

But it was a good project which could have helped us. However, that said, it is a geo-political issue and we can’t look at it in isolation. We can’t say if government is taking a good decision or bad decision. I hope the government holistically thinks about that and has another plan so that the development doesn’t affect us.

Q) …But going by Union Minister Nitin Gadkari’s comment, the Centre is expecting to inaugurate it by 2019. Do you think it is possible?

It will be delayed. I don’t think it will be possible to inaugurate it by 2019. Even otherwise, it would have been delayed. It started about two-three years ago. Normally, it would have taken three to four years. 2018-2019 was an aspirational deadline. I don’t think we are progressing in that direction.

Q) India has been consistently given low ranking under ‘ease of doing trade across border’, a parameter to judge Ease of Doing Business. How do you think this can be improved given lack of requisite infrastructural facilities at Indian ports?

There are two parts to this issue — procedural and infrastructural. We do not have a great ranking. But we are complying with the World Trade Organisation’s (WTO) agreement, according to which we have committed to meet and comply with certain conditions which has combination of both, bringing in some of the procedural reforms and improvements as well as looking at some specific part of the infrastructural supply chain.

So, a separate inter-ministerial, high level group has been formed to look at all these identified facilities and locations and the status report. They are studying what needs to be done. They are in the process of getting an external agency to work with them not only to give a report to them but basically, to continuously work with them, hand-hold and see on year-on-year basis how we are progressing on these compliances.

So, it’s a four-year initiative that they are planning. And they have to do that, because if we don’t meet the international compliance, we’ll face repercussion on trade and reputation. So, they are serious but like any other government initiative, it is moving slow.

Also read: Iran criticises India for not making promised investments in Chabahar port

Q) The Centre has eased ‘cabotage rules’ to allow foreign vessels to ship into Indian waters. How do you think this will impact domestic players in the market given there is dearth of transshipment facility?

For a long time, they were debating on easing the cabotage rule. The lobbies were working around whether it should be eased for foreign vessels or if it should only be for domestic players. A paper debating this was being circulated for the past two years and stakeholders were being consulted. Finally, they have come out with this. Of course, only the regulation will not help. Along with that, you need to have infrastructural facilities. Now the government thinks that probably when there was no regulation, you can’t have any investment or money spent because there could be trouble for transshipment facilities. (But) once we have the regulations, we can slowly look into it. Also, some of the private players could also be interested in participating.

Again, it is one part of it. Like discussed earlier, whether the government is looking only at Sagarmala or not… (So) the government is looking at these aspects also. This was a long-pending item. The government had different interest, lobbies had other. So it took a long time to open the sector to foreign players.

Ultimately, we cannot restrict the sector to Indian players. They have limited interest, limited players. So we have to make it open. So that once it’s open, Indian players will start looking at it more competitively. And thus, both sides will benefit. Restricting things only to India will not help in the long run.

Q) The Indian Ocean has gained importance in the recent past due to geo-political and security concerns. How do you think New Delhi can take the best advantage of its vast coastline?

One of the challenges that we have in our maritime sector is our institutional structure. Consider that we have major ports which are as good as a separate entity or a trust. One or two of them are even corporates now. Then we have some states that are more pro-active in building their own infrastructure. Take Gujarat for instance: it has allowed the private sector to come around.

So, Indian ports, in a way, are competing against each other. Even though the competition is healthy, it will not allow us to compete with countries like China. Because China, as a country, is moving beyond its boundaries, growing and expanding, whether through the ‘silk route’ or through presence in the Indian ocean.

India has always lacked there. So unless the government decides which port will be established as the main port, which one will be nexus of the container hub, we won’t be able to compete even with, for example Colombo port, where China has already invested. We have a vast coastline but we are struggling on how to use it. Probably because the approach that we adopted was not holistic.

Q) The ministry has been quite slow in either policy formulation or its implementation. Consider, cruise tourism. The policy has been in pipeline for about a year, yet nothing concrete has come up. Similarly, SEZs have been shaping up at snail’s pace. What do you have to say?

Of course the pace is slow. But we need to look at this in two parts. One is that there are policy decisions that lie within the shipping ministry and there are some where decisions lie with other ministries like cruise tourism or special economic zones. Shipping ministry, here, can’t take the decision alone; it goes beyond that. But these programmes are part of Sagarmala, so as that will progress forward, we will have to push hard for these policies. If you look at cruise tourism, when Sagarmala was last chalked out, they were looking at tourism aspects along with it. But Sagarmala may not be successful if there are no SEZs. But yes, they need to push the initiatives harder. However, it is not only this ministry. Some of the well-established ministries take long to take decisions as any policy decision goes to inter-ministerial groups. So that’s the larger issue with India that we take long time to bring major policy decisions.

Also read: Here’s a look at what Ship Min’s pet projects, JNPT SEZ and Smart Paradip Port, are up to

Q) Environmentalists have claimed that proper clearances are not being provided and that the rules are being tweaked by the ministries. What are your comments on that?

This has always been an issue of debate. We need to have balance between the two. In all the other ministries — power ministry for hydel projects or roads or railways — there is always a tussle between the ministry of environment and economic ministries. Now, in a country like India, it is important to ensure that we have the environmental balance maintained and take all the precautions. But then, you can’t only bring in (environment) or allow the environment ministry to be the first hurdle into it.

I think, the only way to go (ahead) is to have closer coordination between these two ministries. Otherwise, on one hand we ask why the ministry of shipping is not doing enough or not pushing enough policy reforms or implementation of projects is slow… At the same time, the processes, procedures and approvals at the ministry of environment takes lot of time… Sometimes, it is not even consistent. So, the only way to have the mechanism is where the PMO (Prime Minister’s Office) acts as a facilitator between inter-ministerial groups for large projects. This is one part to improve the entire process.

Secondly, individual ministries should ensure that there is compliance and there, I think, we have a poor track record. We don’t see environment given enough importance.

Q) … Then how can we have sustainable development in India?

For this, we actually need to have a board who can sit above these ministries and do that. Otherwise, just moving a file from one ministry to another will not help. When we talk about China, we talk about how things move… probably they are more ruthless… But their single-window approach, I think, is not only for investors. It is also to see how larger programme, whether internally or otherwise, larger initiatives and projects work. That’s the only way to (make it) happen. We need a high-level, high-power group to be formed to see we’ll move ahead.

Also read: SCI to get Rs 500 crore to purchase ships: Nitin Gadkari

Q) At this point, when government-owned companies are not finding takers, is divestment in shipping-related companies (Dredging Corporation of India and Shipping Corporation of India) possible? Do you think government will have to find some other route to raise money?

I don’t think it is likely to happen before elections. When you hold divestment, on one hand it is a long-term process and secondly, both of them are listed entities. So even if in short-term, they show that they are divesting, they might just transfer it from one government entity to another. They might ask some of the other profit making PSUs (public sector undertaking) to buy the government’s shares. But in real sense, further divestment or dilution of the government’s stake, directly or indirectly, may not happen before election. Eventually, they should seriously think of some real divestment because then only we bring in real efficiency and value to the shareholders. Today, they are listed companies but are controlled by government. So, all this will not happen in the next five months.

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