India’s Greenfield Port Expansion: Boosting Capacity and Infrastructure

India’s maritime sector is a critical facilitator of international trade. However, with cargo volumes on a continuous rise, existing port capacity is nearing its limits. To address this challenge, the government is actively promoting the development of greenfield ports – entirely new port projects built on undeveloped land. This strategy aims to not only increase capacity but also address limitations of existing ports, such as the lack of deepwater facilities and proximity to industrial areas.

Current Status and Key Greenfield Port Projects

As of May 2024, India has plans for 22 new non-major ports, representing a total investment exceeding Rs 1.59 trillion. These projects are expected to add a staggering 690 million tonnes per annum (mtpa) of capacity upon completion. Several key projects are currently in various stages of development, including:

• Vadhavan Port (Maharashtra)
• Murbe Port (Maharashtra)
• Keni Port (Karnataka)
• Ramayapatnam Port (Andhra Pradesh)
• Machilipatnam Port (Andhra Pradesh)
• Vizhinjam Port (Kerala)

Details on the current status of these projects can be found in the table below

Challenges and the Road Ahead

Developing greenfield ports is a capital-intensive endeavour, requiring significant investments in breakwaters, dredging, and hinterland connectivity. Additionally, these projects have long gestation periods due to factors such as approvals, land acquisition, and infrastructure development. Regulatory hurdles and stringent requirements for technical expertise and financial capabilities can further delay projects and discourage new entrants. Industry experts estimate that Rs 50 trillion is needed to achieve a target capacity increase of 6,500 mtpa by 2047 through greenfield and brownfield (expansion of existing ports) projects.

To bridge this gap and attract investments, the government can explore various measures:

• Project-specific support: Viability gap funding, streamlined permitting processes, and targeted fiscal or revenue subsidies can make projects more attractive to investors.
• Efficient bidding process: The Ministry of Ports, Shipping and Waterways can play a crucial role by adhering to timeframes for bid finalization and project commissioning. Standardizing the appointment of independent engineers and ensuring timely clearances can expedite progress.
• Flexible concession agreements: Reviewing existing agreements periodically to adjust factors like equity holding, risk-sharing, and minimum cargo guarantees based on market conditions can incentivize participation.
• Promoting PPPs: Encouraging joint ventures between Indian and foreign port operators can foster healthy competition and leverage international expertise.

Potential Beneficiary Sectors

The ongoing greenfield port expansion presents exciting opportunities for companies across several sectors:

• Shipping companies: Increased port capacity will translate to higher cargo volumes, potentially benefiting shipping companies like Great Eastern Shipping Company, Shreyas Shipping & Logistics, and SCI (Shipping Corporation of India).
• Port infrastructure companies: Firms like Afcons Infrastructure, L&T (Larsen & Toubro), and Adani Ports & SEZ Ltd possess expertise in port construction and can play a vital role in developing these projects.
• Cement and steel companies: Increased construction activity will drive demand for building materials, potentially benefiting companies like UltraTech Cement, ACC Limited, JSW Steel, and Tata Steel.
• Logistics companies: Improved supply chain efficiency due to new ports will benefit logistics players like Delhivery, Blue Dart, and Mahindra Logistics.

Conclusion

India’s greenfield port expansion is a strategic initiative to address growing cargo demands and enhance maritime infrastructure. While challenges exist, the government’s focus on attracting investments and streamlining processes paves the way for successful project completion. This development holds significant potential for companies in shipping, construction materials, logistics, and related sectors, making it an attractive investment proposition for investors with a long-term perspective. It is important to remember that the stock market is inherently risky, and past performance is not indicative of future results. Investors should conduct their own research before making any investment decisions.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.