Strengthening India's Shipping Infrastructure: Key Investments Needed for Global Competitiveness
India is at a crucial juncture where strengthening of logistics is key to the growth of its economy. Currently, Indian shipping infrastructure leaves much to be desired. While there have been investments and policy changes to improve India’s standing in global logistics, it is important that we focus on shipping infrastructure that goes beyond ports.
In the face of global disruptions and increasing demands, it is essential to address key areas of improvement—domestic manufacturing of containers, reducing reliance on foreign carriers, and tackling dependency on foreign transshipment hubs. This will ensure the Indian logistics is disruption proof and competitive in global markets.
With this blog, we aim to explore strategic investments required to strengthen India’s shipping infrastructure to improve its global competitiveness over the next five years.
The Importance of Shipping Infrastructure in India
Shipping infrastructure is a critical pillar of India’s trade and logistics ecosystem. With 95% of India’s trade by volume and 70% by value being conducted via maritime routes, it is imperative to address challenges that threaten the efficiency and cost-effectiveness of the supply chain. Strengthening this infrastructure is essential for India to position itself as a major global player, especially in a world where supply chain resilience is of utmost importance.
1. Boosting Domestic Container Manufacturing
The container shortage of recent years has exposed India’s heavy reliance on imports for shipping containers. The pandemic and subsequent global disruptions highlighted the vulnerabilities in depending solely on international markets for essential shipping equipment. According to the Federation of Indian Export Organisations (FIEO), India imports 70-80% of its container requirements from China (2023). To put things in perspective, India manufactures around 30,000 containers while China produces 2.5 to 3 million containers.
To address this challenge, India needs to focus on boosting domestic container production. Developing container manufacturing clusters can not only reduce the dependency on imports but also provide opportunities for local employment and increase self-sufficiency. The Ministry of Ports, Shipping, and Waterways has already initiated steps to encourage domestic manufacturing, with plans for developing dedicated container production units. Bhavnagar in Gujaratis already being developed as a container manufacturing hub and with that we hope to bridge the gap between container demand and supply.
Key Investments Needed:
⦁ Establishing container manufacturing hubs in collaboration with public and private entities.
⦁ Providing incentives and subsidies to local manufacturers to boost production capacity.
⦁ Promoting technology transfer to enhance the quality and durability of domestically produced containers.
2. Reducing Reliance on Foreign Carriers
India’s reliance on foreign carriers to manage a significant part of its maritime trade is another concern. Currently, foreign shipping lines carry approximately 90% of India’s export-import cargo. This dependence often leads to higher freight charges and limited bargaining power during periods of global disruptions. In contrast, Indian shipping companies led by SCI (Shipping Corporation of India) manage only about 5-10% of country’s total trade volume.
To reduce this dependency, India should invest in building a stronger fleet of indigenous shipping carriers. Expanding the Indian merchant navy will not only reduce reliance on foreign entities but also create strategic flexibility in managing trade disruptions. This will require investments in new ship acquisitions, improving the financial viability of Indian shipping companies, and creating a supportive regulatory environment. The Great Eastern Shipping Company is considering diversification into the container shipping sector. Such initiatives should be welcomed and even incentivized, to encourage more home grown private entities to foray into maritime trade.
Key Investments Needed:
⦁ Financial support and subsidies for Indian shipping companies to expand their fleets.
⦁ Favourable tax policies to encourage investment in shipping lines.
⦁ Strengthening partnerships between the government and private sector to establish a competitive and capable shipping fleet.
3. Addressing Dependence on Foreign Transshipment Hubs
India currently relies heavily on foreign transshipment hubs such as Colombo, Singapore, and Port Klang to handle a significant portion of its transshipment cargo. This results in increased costs, extended transit times, and dependency on the efficiency of foreign ports. As per the Indian Ports Association, around 25% of Indian cargo was transhipped through foreign ports in 2023, leading to a loss of valuable revenue.
Developing India’s own transshipment hubs, such as Vallarpadam International Container Transshipment Terminal (ICTT) in Kochi, can be a game-changer. The government has also announced plans to develop the Galathea Bay Transshipment Port in the Andaman and Nicobar Islands, which could significantly reduce dependency on foreign hubs and strengthen India’s position in regional trade. Overall India plans to have four transshipment hubs - Cochin, Vizhinjam, Galathea Bay in Andaman Nicobar Islands and Kanyakumari, of these, Cochin, Vizhinjam and Galathea have made good headway.
Key Investments Needed:
⦁ Modernizing existing ports to handle larger vessels and accommodate increased container traffic.
⦁ Developing dedicated transshipment terminals with world-class facilities and technologies.
⦁ Improving rail and road connectivity to key ports to facilitate seamless cargo movement.
Conclusion
Strengthening India’s shipping infrastructure is not just about expanding capacity; it is about building resilience, reducing dependence on foreign players, and positioning India as a dominant player in global trade. By focusing on domestic container production, building an Indian shipping fleet, and reducing dependency on foreign transshipment hubs, India can create a robust and self-sufficient shipping network. This along with greater focus on logistics infrastructure, finding and operationalising alternate routes, like the IMEC and building strong trade partnerships with global economies, will go a long way in improving India’s competitiveness on the global stage.
The next five years present an opportunity for India to lay the foundation for long-term competitiveness in the global shipping industry. With the right investments and policy support, India can overcome existing challenges, improve its shipping infrastructure, and become a global maritime leader.