February 27, 2021

INDIA’S MARITIME ECONOMY: DRIVING INDIA’S GROWTH

Written By: Anil Jai Singh

To me the Blue Wheel or Chakra in our national flag represents the potential of the Blue Revolution or the Ocean Economy. That is how central the ocean economy is to us.” – Prime Minister Narendra Modi

Introduction

The importance of the maritime domain for India’s security, stability, economic well-being and sustainable development needs no emphasis and is underlined by its rich maritime heritage dating back 5000 years. The world’s oldest drydock has been excavated at Lothal which dates back to the Harappan civilisation. As India now stands on the threshold of becoming a 21st century global economic powerhouse and has set a target of becoming a USD 5 trillion economy by 2025, it is aiming at a USD 25 billion from the maritime zone[i] in accordance with the global standard of about 5%. With the target of achieving a USD 10 trillion economy by 2032, the maritime sector will have a major contribution to make.

Indias Maritime Credentials

India, despite its peninsular geographic conformation and its predominantly continental outlook due to its pre-occupation with its northern and western neighbours, is essentially a maritime nation. The country has a long and porous coastline of 7516.6 kms, an Exclusive Economic Zone (EEZ) in excess of 2.37 million sq. kms, where India enjoys the exclusive legal right to utilise all living and non-living resources. Nine states and four union territories are washed by the waters of the Arabian sea, the Bay of Bengal and the Indian Ocean and more than 200 million people are dependent on the sea for their sustenance and livelihood. About 95% of India’s trade by volume and about 74% by value travels over the sea and is served by a network of 12 major ports and 205 notified minor and intermediate ports. The country has two strategically located island territories. The Andaman and Nicobar archipelagic group comprising 572 islands including 38 permanently inhabited ones are located about 750 miles from the Indian mainland on the eastern seaboard and the Lakshadweep group of 38 islands is located about 200-odd nautical miles from India’s west coast.

The maritime domain is also critical for India’s energy security which in turn has a direct impact on the country’s economy. More than 80% of India’s oil and over 50% of India’s gas is sourced from various parts of the world and travels over the sea. More than 60% of this is imported from the Arabian Gulf. On the indigenous front too, most of India’s critical energy infrastructure is either located afloat or on the coast, thus increasing its vulnerability from the sea.

India is also the first country to have been given a pioneer investor status way back in 1987, and was allotted an exclusive area of 150,000 sq. km in the Central Indian Ocean Basin by the International Seabed Authority for exploration and developmental activity for polymetallic nodules. These rights are presently being exploited over 75,000 sq. km of area.[ii]

Aspiring Maritime Power

India has been blessed with a favourable and pivotal position in the midst of the Indian ocean. Its peninsular tip juts out almost 1000 miles into the sea  and straddles some of the most critical shipping lanes in the world. Its size and economic stature make it the pre-eminent power in the Indian Ocean region which it must leverage to establish itself as a global maritime power of reckoning. Presently its status as a maritime power is based on its highly capable blue water navy (the fifth largest in the world) which is just one constituent of maritime power, although its most important one. However, India still has some way to go in most aspects of non-military maritime power which is critical for a robust maritime economy.

Alfred Thayer Mahan, the doyen of naval strategists in his seminal work, ‘The Influence of Sea Power on History’ had listed six essential attributes for a maritime power (which he referred to as sea power but meaning more or less the same). These were geographical position, physical conformation, extent of territory, size of population, character of the people, and character of government.[iii] These remain as relevant today as they were then and are the very characteristics that influence the development of a maritime economy.

India has all of these in ample measure but has still fallen short of becoming a maritime power. Historically, it is maritime power that has been the key to global domination. Small European countries were able to establish global empires primarily because of their domination of the sea and it was at sea that the survival of the fittest was decided. India provides a classic example. After Vasco da Gama’s famous landing at Calicut on 20 May 1498, the floodgates to the riches of India opened and in the struggle for domination the Dutch, the French and the British followed the Portuguese. Finally, Great Britain prevailed because of its superior maritime power to make India the crown jewel in its global empire on which the sun never set. Pax Britannica gave way to Pax Americana after the World War II, which, on the basis of its economic and technological superiority and the might of its powerful navy, continues to this day. This is now being challenged by China, which, in less than 70 years, has emerged as a leading global maritime power with its ‘Mahanian’ approach to global domination through maritime power and is well on its way to establish Pax Sinica by 2049, the centenary year of the Cultural Revolution and a date the Chinese President Xi Jinping has cast in stone.

China, despite being disadvantaged in its approach to the sea, now has the largest navy (numerically), the largest coast guard, the largest maritime militia, the largest fishing fleet, the largest merchant fleet, the largest shipbuilding industry, seven of the ten largest and busiest ports in the world and has not stopped there. Its ambitious Belt and Road Initiative (BRI), unprecedented in scope and ambition, is clearly intended to reorient the existing global western rules-based maritime order into one with ‘Chinese characteristics.’ Not only has China invested heavily in building this impressive capability, but it has also given a maritime orientation to its historical narrative by eulogising the eunuch Admiral Zheng He and his voyages into a legend of sorts. This maritime consciousness is being successfully imbibed in a nation which, till four decades ago, was barely capable of defending its own maritime frontiers. This comprehensive maritime approach by China is as much about building its maritime economy as it is about its political ambitions. Domination of the waters of its interest and leverage in countries where it is extending its economic largesse (debt trap?), will give it access to marine resources far beyond its own maritime boundaries.

India on the other hand, despite its rich maritime lineage and advantageous location in the Indian Ocean has failed to harness this potential to develop its maritime economy and has lagged behind considerably. While a comparison with China may not be an accurate reflection since the circumstances in that country differ vastly from India’s, there are lessons to be learnt. Developing a maritime economy requires a clear intent, a long-term policy commitment, a flexible approach to adapt to a dynamic environment and the resilience to achieve the desired end-state. The post-independence port and shipping infrastructure, largely state owned, could have become the catalyst for the maritime economy to emerge as part of India’s growth story but systemic inefficiencies retarded the effort and has resulted in India’s maritime economy lagging behind in almost all parameters.

Winds of Change

However, the winds of change became evident with Prime Minister Modi’s first outstation visit after assuming office in May 2014, to the Indian aircraft carrier INS Vikramaditya, where he spent time at sea watching the Western Fleet being put through its paces. Soon after that, he commissioned the indigenously built guided missile destroyer, INS Kolkatta which was an acknowledgement of the strides India has made in indigenous warship production. In March 2015, during his visit to Mauritius, the Prime Minister outlined his vision of SAGAR, (an acronym for Security And Growth for All in the Region), aimed at regional capacity building for mutual benefit of India’s strategic neighbourhood and the larger Indian Ocean region.  The distinct maritime orientation of SAGAR which is the Hindi word for Ocean, was sweet music to those lamenting the lack of attention to the maritime domain. In February 2016, the country hosted an International Fleet Review at Visakhapatnam in which more than 50 navies participated. This reflected India’s importance as a naval power, commensurate with the country’s growing global stature. Two months later, in April 2016, the country hosted a Global Maritime Summit at Mumbai which was aimed at revitalising India’s maritime sector.

The Summit was attended by over 5000 delegates from 42 countries and business worth Rs 82,905 crore was transacted. It was during this summit that the Sagarmala programme, a port development led multi-billion rupee initiative aimed at revitalising and modernising India’s maritime infrastructure was announced. This initiative in fact, lays down the blueprint for developing India’s maritime economy. This spate of activity in the first two years of the present government’s coming to power underlined its serious intent to give this sector its due attention.

SAGARMALA

The Sagarmala Initiative had been preceded by the ‘Maritime Agenda 2010-2020’. This document promulgated by the UPA Government had also emphasised the importance of the maritime sector for India’s economic growth and had laid out a detailed roadmap with specific milestones to be achieved by 2020, though it did so with a caveat that these could well change depending over the years and on the circumstances. At the end of 2020, which marks the end of this 10 year agenda, the report card is not encouraging and has fallen woefully short of the intended objectives across most of the sectors highlighted in the document. Many of these objectives got absorbed into the Sagarmala initiative, which five years down the line remain a work in progress. Sagarmala includes modernisation of the existing port infrastructure, building new ports, augmenting port capacity through improved efficiency, best practices and technology, optimising the cost of freight transportation by developing an extensive inland waterway network, developing coastal communities and building adequate skill sets for generating employment in the maritime sector.

As part of the Sagarmala Programme, more than 574 projects (Cost: Rs. 6.01 lac crore) have been identified for implementation, during 2015-2035, across the areas of port modernisation (236 projects) port connectivity (235), port led industrialisation (35) and coastal community development (68). As of 30 September 2019, a total of 493 projects had either been completed (121) or were either under implementation (235) or under development (137).[iv]

At the end of 2020, the Government announced its intention of promulgating a ‘Maritime Vision 2030’ document which, in the words of the Director General of Shipping, Shri Amitabh Kumar, speaking on the opening day of the two-day Inmex SMM Virtual Expo in November 2020 “…will remain dynamic over the next decade, changing its contours with time, and adapting to situations that may arise, and keeping abreast of developments”.[v]

Maritime Vision 2030

The DG Shipping also highlighted that this vision will be developed on four limbs underlined by the overall objective of the Sagarmala vision of a string of highly efficient and productive ports along the Indian coastline. Port development, which is the first limb, has lagged in this country with not a single major Indian port in the list of the top 25 global ports. Many of the 205 non-major ports lack even the basic port infrastructure for handling and transhipment of coastal and inland waterway cargo. The Vision envisages a doubling of port capacity to 2600 million tonnes which is still short of the figure outlined in the earlier maritime agenda, but with the progress made over the last few years, very much more realistic. It also envisages the setting up of three major ports though the two major ports outlined in the previous agenda have as yet failed to materialise.

Coastal shipping and inland waterways have also been identified as the second limb. Movement of goods over water is the cleanest and most economical mode of transportation and the vast network of inland waterways in India can become a valuable source for connecting the vast Indian hinterland to the coastal port network. Shipbuilding as a national asset has been identified as the third important priority area with the endeavour being to increase Indian flagged ships. Maritime training has been identified as the fourth limb to address the requirement of qualified personnel over the next decade. Indian seafarers constitute 9.35% of the world’s total[vi] which is in line with the figure of 9% envisioned in the maritime Agenda 2010-2020.

The Vision also includes the setting up of a Rs 25,000 crore Maritime Development Fund to provide the financial impetus and a robust regulatory framework more relevant to the contemporary environment than the antiquated extant laws.

The Security Dimension

In the last two decades, the global shift in the geopolitical and geo-economic centre of gravity to the East, driven primarily by the rise of China and India and the rapid growth of the East and South East Asian economies has focussed attention on the Indo-Pacific. This region is home to about 65% of world population, generates 62% of world’s GDP and accounts for 46% of global trade.[vii] China has been the first off the block to exploit the potential of this region; its claims on the South China Sea, it’s bid to dominate the East China Sea, its belligerence in the Taiwan Straits and its expanding presence in the Indian Ocean are part of its larger global strategy of military intimidation to achieve economic domination through maritime superiority. A large Chinese maritime presence in the Indian Ocean has very serious security and economic implications for India; it must develop a long-term strategy to thwart any Chinese attempts at establishing a dominating presence in the Indian Ocean in general but more specifically India’s strategic maritime neighbourhood.

Besides the permanent presence of the PLA Navy in the Indian Ocean which is bound to increase as it develops more power projection capability, there is already enough evidence of China’s large fishing fleets indulging in illegal, unreported and unregulated (IUU) fishing in the Indian Ocean. Their research ships are frequently seen in the eastern Indian Ocean carrying out oceanographic research to understand these waters better for economic gain and military use. India had expelled one such vessel from the eastern Indian Ocean in 2019. However, there is not much India can do legally as long as this presence continues in international waters but it must take adequate steps to guard against any encroachment in its Exclusive Economic Zone and take the lead in strengthening its strategic neighbourhood through inclusive and cooperative capacity and capability building initiatives to ensure that its own economic and security interests and also those of its maritime neighbours are adequately protected.

China has been very actively pursuing its economic and military diplomacy in the region through arms exports and economic inducements including infrastructure upgradation. India obviously cannot match China’s economic muscle but a comprehensive and proactive all-of-government approach with effective use of its sharp and soft power has shown encouraging results in India’s engagement with its neighbours. Recent visits by senior functionaries of the government to most of the neighbouring countries, the NSA level India-Sri Lanka-Maldives trilateral meeting, integration of the neighbouring countries into the coastal security network, initiating information sharing mechanisms and increasing economic engagement through connectivity initiatives and favourable trading arrangements have been beneficial in consolidating the existing gains and overcoming past dogmas about India’s big brother approach.

The Prime Minister’s invitation to the SAARC Heads of Government during the swearing in of the NDA government in May 2014 and the BIMSTEC Heads of Government during the swearing in after the election victory in May 2019 conveyed his personal commitment to the region to foster an inclusive and cooperative relationship for mutual economic benefit. Various socio-economic capacity building measures have gone a long way in instilling the confidence and reassurance of India’s support in their economic development through an inclusive approach. Security and economic development go hand in hand, thus highlighting the importance of the SAGAR (Security and Growth for all in the Region) doctrine. Being the net security provider in the Indian Ocean bestows on India the responsibility of ensuring that the economic benefits from the maritime domain in this region remain within.

Blue Economy

The term Blue Economy, which first became popular with Gunther Puauli’s use of the term in his book ‘The Blue Economy: 10 years – 100 innovations – 100 million jobs’ was about opportunities for developing a sustainable model for the future and had no specific maritime connotation.[viii] However, the term gained currency subsequently as a model of sustainable development for mankind with the responsible utilisation of marine resources. The burgeoning global population, rising living standards and improved conditions in many previously impoverished nations coupled with the loss of agricultural cover due to rapid  urbanisation and lack of agricultural space is leading to an alarming  depletion in land resources. The consequent challenge to global and national food security itself is a matter of concern. Water too is already a contentious issue both within and across national boundaries. Hence, it is to the oceans that mankind is turning to address this existential threat.

The oceans are integral to human sustenance covering about 72% of the earth’s surface and constitute more than 95% of the bio-sphere. More than 80% of global trade transits over the seas; essential ingredients that support life on earth and provide the balance to sustain it are found here. The growing demand for energy in large part is met from the sea and research is continuing to further use the sea for sources of alternate energy. This precious resource is therefore bearing the huge burden for sustaining humankind. Responsible utilisation of this resource will ensure a model of sustainable development and as a source of food, transportation, energy and livelihoods.

Goal No 14 of the 17 Sustainable Development Goals (SDG) listed in the 2030 Agenda for Sustainable Development adopted by the United Nations member states in 2015[ix] specifically addresses the marine aspect though various other aspects are included in many of the other SDG too. Developing a global Blue Economy has been defined by the World Bank as “sustainable use of ocean resources for economic growth, improved livelihoods and jobs, while preserving the health of ocean ecosystem.[x]

The global focus of the Blue Economy is on the oceans and the challenges being faced due to unregulated exploitation and the effects of global warming and climate change. Some of the small island states in the Indian Ocean are facing a challenge to their very existence with the rising sea levels threatening them with inundation. Even low-lying coastal areas of larger nations are facing a similar threat. The effect of this could be disastrous on coastal economies and coastal communities besides upsetting the delicate balance of the marine bio-sphere.  The effects of climate change are also being seen in the rising incidence of natural disasters which cause widespread destruction and damage to life and property with the consequential effects on the economy. India too has its fair share of weather and climate related disasters which leave cities and villages devastated and hundreds of thousands of people destitute, homeless and without a livelihood.

India is deeply committed to addressing climate change issues through its adherence to the targets set out in the Sustainable Development Goals, its leadership of the Global Solar Initiative and its internal efforts to reduce its carbon footprint. As this century progresses, the existence of mankind on land will be deeply affected by the sea. If this is not properly addressed through a multilateral cooperative framework for sustainable exploitation of marine resources, it will inevitably lead to competition, confrontation and possibly conflict besides destabilising large sections of the global population and coastal communities dependent on the sea for their sustenance and livelihood. The Indo-Pacific is itself home to many large and small coastal and archipelagic states which are wholly dependent on the sea for their very existence.

There is enough evidence to establish that the recent maritime resurgence in the region through various economic development models like the BRI is all related to the Blue Economy. The belligerence of some of the extra-regional powers is aimed at seizing the initiative in tapping the abundance of marine resources and leveraging this to create dependencies for further exploitation which may actually be detrimental to the region. India should take a leadership role in promoting the Blue Economy initiatives for the responsible exploitation of the oceans and champion the cause of the smaller countries in the region, particularly the small though strategically located island states at various global fora where India wields considerable influence as a stabilising force for good.

While the global focus of the Blue Economy is on the oceans, the internal waters of a large country like India are also vital for economic sustainability and development. India has rivers and canals extending about 1.95 lakh sq. km, flood plain lakes that cover an area of 8.12 lakh hectares, ponds and tanks covering 24.1 lakh hectares, reservoirs of about 31.5 lakh hectares, brackish water in extent of about 12.4 lakh hectares and dams over 48,570 lakh hectares.  The effects of climate change and unregulated exploitation of land is leading to increasing frequency of floods, storms, pollution etc. Hence, at least in India’s case, its internal marine environment must be integrated into its overall Blue Economy initiatives. The Sagarmala programme and the forthcoming Maritime Vision 2030 have focussed their attention on this.

Indias Maritime Economy

Ports and Port Infrastructure

India has 12 major ports and 205 non-major/intermediate ports including those in the private sector. With the steady growth in the Indian economy and a targeted USD 5 trillion economy by 2025, the volume of trade will also grow exponentially. For many years India’s ports were languishing, but in the last five years or so there, has been a focussed effort on augmenting India’s port infrastructure in some key areas; the cargo capacity has increased from 871.52 MT in 2015 to 1534.91 MT in March 2020 with an ambitious target to achieve 3130 MT of which about 50% is expected be at the non-major ports.[xi] Construction of six mega ports is envisaged under the Sagarmala plan, although the soon-to-be-released Maritime Vision 2030 will provide a clearer picture. Foreign Direct Investment of 100% is now permitted for projects related to the construction of ports and harbours with a 10 year tax holiday. A National Maritime Development Programme (NMDP) for improving both port infrastructure and port connectivity has been initiated under which various rail and road projects are underway. The Shipping Ministry also launched Project Unnati to enhance and improve port operations under which a majority of programmes have already been implemented.

However, these encouraging initiatives notwithstanding, Indian ports continue to be plagued by outdated equipment, an inefficient work force and lack of some fundamental infrastructure which makes them uncompetitive. The state of non-major ports needs major attention with some even lacking a complete perimeter fencing and basic cargo monitoring equipment. With more than 90% of India’s trade by volume being seaborne, the importance of an efficient port infrastructure is critical to India’s economic progress.

Inland Water Transportation

India’s vast network of inland waterways has never been utilised for economic benefit despite providing a cleaner and cheaper alternative to road and rail transport This was perhaps because the potential of using inland waters for this purpose was never recognised. The Sagarmala programme gave a fresh impetus and in 2019, the first cargo arrived at the inland waterway Multi Modal Terminal at Varanasi from Kolkata on the River Ganges in the presence of the Prime Minister. The development of India’s inland waterway infrastructure will enhance the hinterland connectivity to the port network along the coast. Inland waterway transportation is used extensively in countries with an interconnected marine network and is a long overdue development in India. It is still in its initial stages here and constitutes less than 6% of the total goods transportation. It has been included in the Government’s National Maritime Development Project (NMDP) and will require a sustained effort to become a viable alternative to the present rail and road network.

The National Waterways Act 2016 has declared 111 inland waterways as National Waterways with a total length of 20, 725 kms across 24 states.[xii] Sound policy formulation, sustained budgetary support and effective professional implementation will be critical for its success. Inland water transportation is not restricted only to movement of freight; it has potential in transporting people as well as a source of inland water tourism. The development of an inland waterway gird will benefit India’s land-locked neighbours providing them access to the Bay of Bengal and enhancing India’s capacity building efforts.

Fishing

India has a large fishing industry providing employment to over 24 million people either directly or indirectly. However, the industry has yet to realise its full potential, a large part of  which either remains unutilised or under utilised. Hence, a well-structured, efficient and well regulated fishing industry performing to its full potential would provide a substantial boost to the national economy besides the upliftment of the coastal community which in India is in excess of 200 million. The share of the fisheries sector in the national GDP has gone up from 0.4% in 1950-51 to 1.05% in 2017-18 and has contributed over 1.75 lakh crore to the GDP. A little-known fact is that India’s marine exports constitute over 5% of all exports and in 2017-18 this translated to about USD 6.75 billion. It is believed that India’s total fisheries potential is about 22.3 million metric tons (2018) but the actual figure for the year was only 13.42 million metric tons.

The National Fisheries Policy 2020 has identified the areas that need attention and has suggested a very detailed though ambitious framework for this sector to achieve its full potential. However, the devil lies in the implementation and overcoming the existing constraints of limited scope for expansion, inefficient and archaic fishing practices, inadequate regulatory framework, supply chain constraints and lack of skilled manpower. Traditional fishermen operating in a loosely disorganised manner constitute the bulk of people involved in fishing but contribute barely 2% of the total marine fish production. It is this large base of traditionally skilled but technologically challenged fishermen who have to be integrated into a modern framework for this sector. From a regional economic perspective, the environment is becoming increasingly global which requires a robust regulatory mechanism and a cooperative and coordinated management of the common waters. India is fully committed to various international initiatives aimed at eliminating IUU (Illegal, Unreported and unregulated) fishing and should, on behalf of its smaller maritime neighbours ensure that this scourge is reduced even if not fully eliminated.

Oil and Gas

India’s dependence on sourcing a majority of its energy requirements from abroad not only makes the Indian economy vulnerable to global pressures but also hazards the country’s energy security. India imports over 80% of its crude oil (in April 2020, crude oil imports peaked at 84.5%) with a major portion of the indigenous 20% being sourced from offshore oil fields. The Prime Minister has set a 10% reduction target in crude oil import by 2022 and as per the Petroleum Minister, India is on track to meet this target. About 50% of its gas requirements is imported. It is already the third largest consumer of oil in the world after China and the US and as per the BP Energy Outlook 2050,[xiii] India “will be the largest source of demand growth out to 2050”. Hence, in the absence of adequate exploration, India’s import dependency is likely to increase substantially in the next few decades.

This has a significant effect on the economy, even though India is focussing on reducing this dependence by increasing its upstream activity and widening its supply base while also investing in offshore exploration in other countries. Blue Economy initiatives to develop sources of alternate and renewable energy by harnessing wave energy and offshore wind power need to be invested in for the long term to reduce the vulnerability of India’s energy security from an economic as well as security perspective. As part of its regional capacity building initiatives, India must also focus on investing on nationally flagged tankers and gas carriers to reduce its dependence on foreign flagged tankers. The Iran-Iraq tanker war is a case in point when Indian flagged tankers ensured an uninterrupted supply of India’s critical oil requirement from the Arabian Gulf despite being attacked. Building more Indian flagged ships is a priority area in the draft Maritime Vision 2030.

Marine Tourism

On 14 February 2021, the Prime Minister inaugurated India’s first full-fledged cruise terminal called Sagarika at Kochi. Promoting cruise tourism is one of the objectives of the Sagarmala programme which also includes the development of coastal tourist circuits lighthouse tourism, a national maritime heritage museum at Lothal and an underwater viewing gallery at Beyt Dwarka. However, international cruise tourism is just one of the many avenues for promoting marine tourism. India is blessed with a long and scenic coastline and pristine beaches. The popularity of Goa and more recently Kochi and the Kerala backwaters has rarely been capitalised on to make India a top-class marine tourism destination. Internal cruise tourism along India’s inland waterways should be promoted. Beach resorts should be developed as tourist friendly, clean and accessible venues with a range of activities for all ages including water sports. Such facilities do exist but are few and far between. India’s tourism potential has barely been tapped as yet and marine tourism even less. Just building infrastructure may not be sufficient unless it is well managed. It will take much more than cruise terminals to attract the well-heeled cruise tourist to India. While marine tourism has great economic potential there is also the risk of damage to the delicate marine biodiversity. Shrinking mangroves, damage to marine growth and increasing water pollution are feeling the effects of climate change. An estimated 8 million metric tons of plastic enters the oceans directly or indirectly through rivers and other inlets into the sea which adds to about 150 million metric tons that is currently circulating in our marine environments. An effective monitoring and regulatory framework will have to be put in place to address these issues.

Shipping

More than 80% of global trade travels over the sea which highlights the importance of a robust shipping industry in a globalised interconnected world. In 2019, India had 1405 registered ships with a total deadweight tonnage (DWT) of 19.22 million tonnes of which about 458 ships with a DWT of 17.58 million tonnes constituted ocean going ships used for external trade. While these numbers may look impressive, the Indian fleet is only a minuscule 1.3% of global shipping. Many of these ships are ageing and the cyclical nature of the shipping business which is directly dependent on the global economic ups and downs is deterring shipowners from augmenting their fleets. Ironically, of the 90% of Indian trade by volume which is seaborne, only a little over 7% sails on Indian flagged ships. National flagged ships are a strategic asset as these reduce dependence and consequent vulnerability to international geopolitical pressures or likely disruptions in troubled areas. As in many other areas requiring private enterprise, an indifferent state controlled bureaucratic approach has retarded the growth of this sector. Added to that are the inherent inefficiencies in the system which drive up costs and make Indian shipping uncompetitive in the international market particularly when the shipping cycle is going through a trough. India’s biggest shipping company is the state owned Shipping Corporation of India which owns 30% of the total Indian tonnage. Plans are afoot for the government to divest part of its stake in the company which is a positive step but the government would do well to exercise care in ensuring that the strategic advantage of having one’s own ships in times of difficulty is not lost. The Maritime Vision 2030 has identified an increase in Indian flagged tonnage as one of the four ‘limbs’ on which the Vision is anchored.

Shipbuilding

Shipbuilding was one of the pillars of India’s rich maritime heritage. However, with the Industrial Revolution from which India was excluded by its colonial masters and the transition from wood to steel and sail to steam, India saw a decline in its shipbuilding industry. The thrust on industrialisation after independence led to a revival, but over the years, the industry has once again lost momentum. The Maritime Agenda 2010-2020 had set an ambitious target of achieving a 5% share which has been an abysmal failure, the reasons for which are not far to seek. An unfavourable competitive environment, official indifference and inefficient management practices among others has restricted the total capacity of India’s 28 or so shipyards at less than 0.5% of the global share while China, Japan and South Korea account for more than 90%. Various financial initiatives like a 30% subsidy has failed to excite the industry because of an uncertain policy environment, the delay of years in approvals which does not therefore benefit the shipbuilders who have to raise capex at prohibitive rates of interest which makes them uncompetitive at the very outset itself.

The government has now introduced the Shipbuilding Financial Assistance Policy offering a financial incentive of 20% over the next ten years but whether this will be able to allay the apprehensions of industry is yet to be seen. India’s shipbuilding industry is being kept alive with naval and coast guard orders. Other than the five major shipyards building warships, there is very little commercial shipbuilding activity except for small craft being built including some for overseas clients. However, these are not enough to sustain these yards. The lack of an enabling environment has led to two large shipyards being forced into liquidation and another two have their backs to the wall. At a time when India should be augmenting its shipbuilding capacity and creating a favourable environment, the opposite seems to be happening. Perhaps the effective implementation of the Maritime Vision will reverse the trend. Shipbuilding is a complex process and spawns a large ancillary industry of Tier 1 and Tier 2 suppliers. It is estimated that shipbuilding activity generates a multiplier of six which is an asset for employment generation and economic benefit.

Ship repair activity generates substantial revenue for shipyards with lesser capital recurring costs. India’s share of the global ship repair market is hovering around 2% but could be more with a more efficient system in place. Archaic facilities, inherent systemic inefficiencies, delays in refits and high costs deter shipowners from sending their ships to Indian yards and prefer more efficient ship repair yards in Singapore etc to optimise both cost and time.

Ship Recycling

India’s ship recycling industry is likely to grow from the present 30% of the global share to about 60% with the promulgation of the ‘Recycling of Ships Act 2019’ which ratifies the Hongkong Convention for environment friendly recycling processes. This will also increase the contribution of this industry to USD 2.2 billion from the present USD 1.3 billion.

Coastal Community Development

India has a coastal community of around 200 million who form the backbone of the marine economy. However, most of them still rely on traditional skills to ply their trade with the attendant inefficiency in the contemporary technological environment. Modern practices, skill training and community development initiatives are essential to improve productivity and their contribution to the national economy. A close industry-academia interaction to optimally harness the benefits of modern disruptive technologies for developing innovative solutions will lead to better economic outputs for the larger community.

Awareness of the Maritime Domain

Oceanographic research in India has barely scratched the surface and still has a long way to go in exploiting what lies beyond its coastline and below the surface. India’s large EEZ is a repository of minerals and resources waiting to be tapped. Underwater Domain Awareness (UDA), a subset of Maritime Domain Awareness is important from a scientific, economic and security perspective. There is also not enough scholarship on this subject which is very important to better utilise the resources within. India will have to make the sizeable investment required to reap the benefits.

Multilateral Initiatives

India is on the threshold of becoming a major global power. Its economic potential and developmental initiatives are being noticed. Its future potential has led to its participation at various leading multilateral fora; an invitation to attend the next G-7 Summit in the UK being the latest. India has recently become a non-permanent member of the UN Security Council for two years (2021-22) and in 2022 will assume the Presidency of the G20. It is a leading member of the Indian Ocean Rim Association (IORA) and its Act East Policy has successfully bridged the gap with the countries east of the Malacca Straits. India has comprehensive strategic partnerships with most countries in the region. It is a member of the Quad grouping and supports a free and open Indo-Pacific. It is committed to maintaining resilient supply chains and it has played a stellar leadership role during the pandemic, both at the beginning and now with its vaccine diplomacy. Nearer home, it is paying increasing attention to BIMSTEC and building economic connectivity between eastern South Asia and South-East Asia. India has recently launched the Indo-Pacific Oceans Initiative. India’s unprecedented diplomatic outreach over the last few years is yielding very positive outcomes and India must leverage this to economic advantage in the predominantly maritime construct of the Indo-Pacific.

Conclusion

India has embarked on a comprehensive revival of its maritime economy though a slew of policy initiatives and development programmes. Sagarmala and the Maritime Vision 2030 have clearly articulated the milestones to be achieved. However, there are challenges within. The political leadership over the years, despite appreciating the importance of the maritime domain towards furthering India’s strategic ambitions has been unable to drive the change required to make India a maritime power. There is a need for an Ocean Governance Architecture under a single maritime authority to shape and implement policy. Presently, ocean and marine issues are dealt with by a plethora of ministries and departments with differing priorities. The government must overcome its bureaucratic dogmas and harness India’s famed entrepreneurial spirit by creating an enabling environment with a fair regulatory framework and timely financial incentive to compete globally. Despite India’s vast Exclusive Economic Zone and seabed mining rights in the Central Indian Ocean Basin, knowledge about what lies beneath the surface of the sea is grossly inadequate. Even the Chief of the Naval Staff in his recent Navy Day press conference alluded to the importance of underwater domain awareness. The centre-state interaction in the maritime domain should work in the spirit of cooperative federalism towards achieving outcomes where the whole is greater than the sum of its parts. A comprehensive all-of-government approach towards developing a Blue Economy will require a deep understanding of the maritime domain in its entirety if India wants to be among the first movers in what is clearly going to be the developmental model for the future.

(Author Brief Bio: Commodore Anil Jai Singh is a former submariner and is presently the Vice President of the Indian Maritime Foundation.)

[i] Dr Ajay Kumar , Defence Secretary at the commissioning ceremony of two Coast Guard vesselds at GRSE, Kolkata. 12 January 2020.

[ii] Press Information Bureau, Ministry of Earth Sciences, Government of India, 21 August 2017

[iii] Mahan, A. T. (Alfred Thayer), 1840-1914. The Influence of Sea Power Upon History, 1660-1783. Boston: Little, Brown, 1911.

[iv] http://sagarmala.gov.in/projects/projects-under-sagarmala

[v] http://sagarsandesh.in/single.php?newstitle=15635

[vi] https://www.dgshipping.gov.in/Content/OurStrength.aspx

[vii] https://journalofeconomicstructures.springeropen.com/articles/10.1186/s40008-020-00222-4

[viii] https://www.theblueeconomy.org/the-book.html

[ix] https://sdgs.un.org/goals

[x] https://www.worldbank.org/en/news/infographic/2017/06/06/blue-economy

[xi] https://www.ibef.org/uploads/industry/Infrographics/large/Ports-Infographic-November-2020.pdf

[xii] https://pib.gov.in/PressReleseDetail.aspx?PRID=1605385

[xiii] https://www.bp.com/en/global/corporate/energy-economics/energy-outlook.html

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