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Port and Harbor Industry Operations Analysis

Essay by   •  January 13, 2019  •  Case Study  •  4,085 Words (17 Pages)  •  74 Views

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Industry Analysis: Port and Harbor Operations

Group 9

  1. Sathishkumar A (17PGP125)
  2. Sylvester Samuel J (17PGP153)
  3. Shruthi V (17PGP156)
  4. Sandeep Mathe (17PGP182)
  5. Shivam Chug (17PGP135)
  6. Vineeth D (17PGP162)

Abstract

This article tries to provide complete analyses on the operations of Port and Harbor industry in India. Port and Harbor industry is one of the major contributor of GDP in India, majority of the trading takes places through ports and harbors. This article talks about the overall Industry productivity and forces acting in this industry. The growth rate of this industry is continuously increasing. Several ports in our nation are SEZs providing livelihood to lot of people and contributing to lots of businesses. Majority of the traffic is handled only by few major ports whereas remaining sum of minor ports handles the rest. This article also talks about the major resources of this industry and also key success factors required in it. Finally this article talks about the problems faced and the issues caused by this industry and then tries to provide few recommendations on the Industry as per the analysis.

Keywords:  SEZ, Cargo Traffic, GDP        

Introduction

        Ports handle almost 95% of total international trade volume in India. With the Government of India’s “Make in India” initiative for swift economic growth, it is expected that the share of supply trade in India’s GDP would increase significantly in the next 5 years. Currently, the percentage of merchandize trade in Gross Domestic Product (GDP) of India is 27.5% and USD 623 billion in value terms (as per World Bank- 2016) [1]compared to 32.9% or USD 3.7 trillion worth of merchandize trade of China. This data suggests substantial possible for evolution in merchandize trade in India in the years to come, which would require high-tech upgrading and capacity development of ports. Indian Ocean region is momentous as nearly 50% of the world trade and almost 60% of the global oil trade passes through this region. Indian ports could play a major role by providing technical as well as infrastructural backing to these vessels.

Industry Definition

        The port and harbor industry pacts with onshore and offshore of goods and services through the sea. The port and harbor industry comprise of companies whose activities supply innovative products and services associated to the port and harbor industry sector.  Port and harbor activities vary from boat building and marine equipment manufacture to marine research and international communications.

Main activities

Marine based industries

Retrieval of resources like offshore oil and gas, fisheries, pharmaceuticals, aquaculture and seabed mining.These are resource-based activities which contribute to major part of the activities happening in port and harbor sector. Over years they play a very essential role in energy generation sector. About 39% of offshores are present in Western part of the country and few in east too.

Offshore Oil and gas mining

[pic 1]

Marine system design and construction

Ship design, construction and repair, offshore engineering and coastal engineering. The leading ship building industries in India are Bharati, Temba, Hindustan shipyard Ltd, Goa shipyard limited, Mazagaon Shipyard to name few. Government plays an important role in this industry because their performance is majorly attributed to the government activities.

Marine operations and shipping

Marine transportation systems, diving operations, dredging and waste disposal. Over the years India have constructed an extensive network for transportation of goods and cargos through ship creating a world class infrastructure in ports. Also they have bettered the inland domestic transportation for better connectivity and to facilitate trade.

Marine-related equipment and service providers

Constructors, manufacturing consultant firms in nautical electronics and instrumentation, machineries, communications, steering systems, special-purpose software and result support tools, marine research and study, and ecological monitoring, training and education. This category also includes tourism and leisure-related services. Mostly the hub for marine communication is in and around Mumbai. It operates in the range of very high frequency. And most of the maritime training and education where marine related training is imparted to students comes under this sector

Barriers to Entry

        This business or in fact whole industry works on economies of scale and which acts as a major barrier to entry for small entrants. This industry has higher exit cost, large capital requirements, huge dependency on government and legal policies and geographical limitations. Distance from other major port and harbor locations and their distance from city Railway stations and airports plays a major role in deciding the location fort this business. Distance from other domestic and international ports plays an important role, Considering Indian context (data available on ibef), Cochin port has witnessed highest growth in India in last 5 years, followed by paradip port (Odisha). Higher Capital expenditure is main reason for new companies to stay away from this business. In recent years, with provision of allowing 100% FDI (Foreign Direct Investment) in this sector along with Tax Exemption for first 10 years has worked as catalyst and attracting option for foreign investor to invest in this business.

Allowance of space for Special Economic Zone (SEZ), with one time help in on time clearing and settlement of land near the port acts as a major attractiveness to this business. Development of SEZ’s in proximity to these ports provide strategic advantage to this industry. Provision for CEZ’s in port and harbor corridor area has also been maintained where, coal-based power plants, steel plants and edible refineries have been setup to boost this industry development. Overall Barrier to entry is not very high and not at all low in this business. It remains little but on higher side, due to huge capital expenditure requirement and low returns in initial years.

Key External Drivers

        High dependence on FDI and foreign coastal industry business acts as an external driver for this business. Private equity supporting private port development acts as major setback to this industry, 100% privatization will reduce the control from the central government and imposes monopoly risk on a specific port and its related prices. Water and air pollution acts as two more negative external factors impeding growth of this industry. Shipping and Cargo operations generates lots of harmful gases like Sulphur dioxide, Nitrous oxide, carbon dioxide etc. Fully Sustainable port development is demand of the hour for this industry due to high environmental impact (Global Warming) because of high diesel usage, which can be reduced through the bio fuel usage. Port activities cause deterioration of air and marine water quality, hence high compliance on legal and sustainable parameters is must. Tsunami, cyclones and other storms can put the whole industry on a back foot and a cumbersome damage. Probability of collision of a ship with static or moving object increased many fold along with threats of other infrastructure and manpower damages. External communication with alert and advance alarming system can help in reducing the damage. Planning of artificial beach with limited or no access for public use and a motive to keep our beaches safe for next 100 years.

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