India Intelligence Report

   Cess for Port Development


The Shipping Ministry is planning to impose a cess to develop funds to build major and minor ports in India to double India’s dismal share of global mercantile trade of .8% by 2009. The proposed cess is 5 paise per kilogram of cargo from deep sea vessels and 2 paise for low value coastal vessels. The Ministry estimates this will net USD 565 million and also plans to add a USD 650 million budgetary support.

What is surprising is the small steps taken here when China has taken giant steps to increase share of shipping and has invested billions of dollars to develop ports not only in China but also in Pakistan and assistance to African nations.

India is expecting investments worth USD 8.7 billion this year and most if it from private investment. In addition, there are plans to connect ports by rail and road. The Indian Railways is planning to build a dedicated freight corridor and has laid a foundation to connect Mumbai and Kolkata ports to Ludhiana, the industrial hub of Punjab.

However, this is nothing compared to the massive investments China is making in shipping. Researchers say that it has captured 20% global ship building market compared to South Korean 35% and Japan's 32%. With its ships costing 20% less than its competitors and facilities also lower by similar percentage, analysts say that China will soon play a dominant role in shipbuilding. According to some figures, Chinese ships carried 86% more cargo than last year and that additional capacity is already saturated. China ranks 3rd in the world in terms of tonnage and 6th in terms of value.

While India is planning to invite foreign investments in infrastructure development, it is not clear what the business model will be for investors to plant vast sums of money when opportunity to continue may be revoked by this or future governments.