Anchoring on self-reliance

‘Atmanirbhar Bharat’ is a lofty ideal. But if its implementation in the logistics sector is not properly thought through, it will have huge implications for India’s overall foreign trade. Last week’s announcement by the Shipping Ministry that all major port trusts must only buy or charter tugboats that are ‘made in India’ is a case in point. Tugs are used to guide huge ships to berth at a port for loading/unloading cargo. With foreign-built tugboats excluded from such tenders, service providers are left with the only option of constructing such vessels in Indian yards. This stipulation may be misused by local yards to quote whatever price they want and it is only going to be passed on to the port users and trade. The issue gets amplified due to the lack of competition among a handful of Indian yards, making price discovery tricky. The higher cost of building vessels in India will further increase the cost of pilotage and towage at state-owned ports. Already, port users are clamouring about high vessel-related charges (port dues, berth hire and pilotage) at Indian ports.

Making Central government-owned ports bear the burden of this extra cost — which they will be forced to pass on to the users and trade at the risk of losing customers or higher cost of foreign trade — and, at the same time, asking them to be competitive vis-à-vis private ports who are not bound by any such restrictions would be a misstep.

That Indian yards lack price competitiveness is a fact. This can be blamed on the absence of a mature ecosystem that supplies critical inputs/parts at competitive rates. This ecosystem will develop when there is scale. The government should focus on developing the ecosystem first before opening the floodgates.

India has the talent and wherewithal to become price competitive in shipbuilding and beat China at its own game. If that happens, it will be a fitting tribute to ‘Atmanirbhar Bharat’.