A few weeks back the government announced that it had set a target of doubling India’s exports to $500 billion in the next three years. To achieve this, India’s exports need to grow at 26.7 per cent every year for the next 3 years.
It is good to have ambitious stretch targets. However, the question we need to ask ourselves is whether India has the infrastructure to support this doubling of exports in the next 3 years.
Bulk of our exports and imports is handled by the Ports. The ratio of exports and imports is 64:100. Our Ports through which most of the exports and imports are routed, handled 847 million MT last year- 330 million MT of exports and 517MT of imports. Being conservative, let us assume that imports remain at the current level and only exports increase by 330 million MT in the next 3 years. This means that export and imports have to grow at 11.6% and infrastructure to support exports and imports also has to grow at the same rate.
The infrastructure which has to support this doubling of exports are;
- port capacity- bulk and containers
- rail connectivity to ports from the hinterland
The port capacity in India is estimated to be 1000 million MT. Over the next 3 years port capacity is expected to increase by 265 million MT. This is a very optimistic projection based on National Maritime Development Programme (NMDP) projects or which work has at least been firmed up (though they may not yet have been approved and work not yet awarded).
So, on an optimistic note, given that India already has a port capacity of 1000 million MT and 265 million MT more would be created, it can be concluded that port capacity will not be a constraint to meet the “doubling of exports in the next 3 years” target.
The cargo has to be moved from the hinterland to the Ports. This would require road capacity and rail capacity to be increased by 330 million MT over the next 3 years.
Over the last 5 years Indian Railways has increased it’s Freight Loading by 200 million MT. Growth in rail freight traffic has been 6% CAGR over the last 5 years. Given these statistics, it is highly unlikely that the railways will have the capacity to support the doubling of exports over the next 3 years. This will impact the transportation of cargo between the hinterland and ports.
Expecting Indian Railways to increase capacity to carry an additional 330 million MT of export and import cargo in the next 3 years seems to be a very tall order. The Indian Railways will also paralelly have to increase capacity in the non import-export routes and sectors. Hence, capacity increase required from the Indian Railways is much higher.
The constraints from the railways would be (i) track capacity from port to the hinterland and (ii) shortage of wagons.
Hence, the Indian Railways is going to be a constraint in doubling the exports in the next 3 years.
Given these issues and constraints what can be done to meet the targets.
The Indian Railways is not adding railway capacity at the rate required to support India’s GDP growth, let alone support a doubling of Exports in 3 years.
The Indian Railways has a limited capacity to execute big ticket projects quickly – both from a managerial capacity and financial closure standpoint. The Indian Railways’ core competency is running trains.
All big railway construction projects were achieved by a separate SPV – Konkan Railway Corporation and Delhi Metro Rail Corporation.
The Indian Railways record in PPP has not been stellar. As per the Xl Plan, Indian Railways will get 19% of investments from Private Partnerships. Contrast this with 34% for Roads, 62% for Ports and 70% for Airports. Even in absolute terms Railways investments from Private Partnerships is higher only than Airports.
It seems that the Indian Railways is not comfortable with PPP. This could be because do not see any advantage of PPP or have not yet developed a strategy on PPP.
The Indian Railways is the Licensor + Regulator + Service Provider + Competitor, all combined into one. Why will the Indian Railways voluntarily allow it’s monopoly to be threatened by private players. One option is to have an independent regulator similar to IRDA or TRAI, which ensures a level playing field and fair competition.
The DFC has been in the offing for long, but not much progress has been made. This has to be speeded up. The Western Corridor of the DFC from Dadri to JNPT will help container traffic on the Northern hinterland – Western Ports (JNPT, Pipavav and Mundra) route.
The general who loses a battle makes but few calculations beforehand.
Thus do many calculations lead to victory, and few calculations to defeat: how much more no calculation at all!
It is by attention to this point that I can foresee who is likely to win or lose.
– Sun Tzu in the “Art of War”
Not much calculations have been done, before setting the goal of doubling exports in the next 3 years. Will India achieve it’s goal of doubling exports in the next 3 years? If Sun Tzu is to be believed, the answer is apparent.
Given the constraints of logistics exports can utmost increase by 15%-20% in the next 3 years.
Doubling in the next 3 years would require a miracle. And I see no evidence of a miracle.