India’s shipping industry and port system serve as the backbone of the country’s economy. Their contribution is crucial not only in enhancing trade and exports but also in strengthening the nation’s logistics capabilities. In recent years, the government has undertaken several reforms in this sector, leading to rapid growth.
Let’s take an overview of India’s shipping and port sector by analysing its various aspects.
Current Status of Ports in India
Nearly 95% of India’s trade volume and 70% of its trade value rely on maritime transport through ports. The country has a total of 12 major and over 200 non-major ports. The major ports include Mumbai, Chennai, Kolkata, Visakhapatnam, and Paradip. Additionally, under the Sagarmala Programme’s National Perspective Plan, six new mega ports are set to be developed.
Cargo traffic at major ports increased from 606 million tonnes in FY16 to 819 million tonnes in FY24.
On June 19, 2024, the Indian government approved the establishment of a major port in Vadhavan, Maharashtra, with an estimated cost of Rs 76,220 crore ($9.14 billion). Moreover, in November 2024, the Union Minister of Ports, Shipping & Waterways, Mr Sarbananda Sonowal, inaugurated infrastructure projects worth Rs 187.33 crore ($22.19 million) at Chennai and Kamarajar ports. These projects aim to boost trade and support green initiatives.
Sagarmala Project and Infrastructure Investment
Under the Sagarmala Project, a total of 802 projects are set to be implemented by 2035, involving an investment of Rs 5.40 lakh crore ($64.88 billion). Of these, 220 projects, valued at Rs 1.12 lakh crore ($13.45 billion), have already been completed. Meanwhile, 231 projects worth Rs 2.21 lakh crore ($26.55 billion) are currently in progress. Additionally, 351 projects, with an investment of Rs 2.07 lakh crore ($24.87 billion), are in various stages of development.
Studies conducted under the Sagarmala Programme estimate that cargo traffic at Indian ports could reach approximately 2,500 million metric tonnes per annum (MMTPA) by 2025. However, the current cargo handling capacity of ports is only around 2,400+ MMTPA.
India’s Shipping Industry and Its Economic Role
With a 7,516.6-kilometer-long coastline, India is the world’s sixteenth-largest maritime country. In FY24, all major Indian ports handled 817.97 million tonnes of cargo traffic, reflecting a 4.45% increase compared to FY23’s 784.305 million tonnes.
Under the 2025 IT Bill, the government has announced tonnage tax reforms to provide tax relief to domestic shipping companies, giving them a competitive edge. This reform is expected to enhance the global competitiveness of Indian shipping firms. Additionally, under the ‘Make in India’ initiative, the government is providing financial support to make India’s shipbuilding industry self-reliant.
Investment and Foreign Participation
Several initiatives have been taken to encourage Foreign Direct Investment (FDI) in India’s ports and shipping sector. India allows 100% FDI under the automatic route for port and harbour development. From April 2000 to March 2024, the total FDI equity inflow into the port industry stood at $1.637 billion, indicating India’s growing appeal to global investors.
Additionally, the Public-Private Partnership (PPP) model is being promoted in Indian ports. This model has attracted private investments in various infrastructure projects, helping enhance port capacity and strengthen logistics networks.
Favourable Policies Supporting the Port Sector
The Indian government has introduced several policy reforms to encourage port development:
100% FDI: Allowed under the automatic route, enabling foreign companies to invest in port development in India.
Major Port Authorities Bill, 2020: Aims to improve port administration and decentralise decision-making processes.
Model Concession Agreement (MCA): Designed to bring transparency in contracts between major ports and private investors while offering them greater security.
Project UNNATI: Identified 116 key initiatives, out of which 98 had been implemented by September 2020.
Tax Incentives: Enterprises involved in port development, maintenance, and operation of inland waterways and ports are granted a 10-year tax exemption.
Read More About- India’s Net FDI at 16-Year Low! Why?
Stocks to Add to Your Watchlist
If you are considering investing in India’s shipping and port industry, here are some key stocks to keep an eye on:
Future Prospects and Challenges
India’s shipping and port industry is expanding rapidly, but it faces some challenges, including limited infrastructure capacity, high logistics costs, and a shortage of skilled manpower. However, government initiatives promoting digitisation, indigenous shipbuilding, and eco-friendly technologies will further strengthen this sector.
Read More About- Exploring the Decline in FDI Inflow: In-Depth Analysis
According to a study under the Sagarmala Programme, India aims to increase the total port sector capacity to 2,500 MTPA (million tonnes per annum) by 2025. Currently, the cargo handling capacity stands at 2,406 MMTPA. Additionally, Indian shipping companies may find opportunities to form alliances with global shipping consortia, enhancing their competitive position in international trade.
*The companies mentioned in the article are for information purposes only. This is not an investment advice.
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