India Needs Better Port Infrastructure to Expand Exports

India aims to become a major worldwide exporter of mini cars and sub-compact models. However, the country needs to improve its port infrastructure to fulfill this ambitious goal. Although there are 13 major ports in India, many of them are unable to handle an increase in capacity. In fact, India ranks 83rd (out of 139 nations) for the quality of its port infrastructure, according to the World Economic Forum’s Global Competitiveness Index 2010-2011.

Ammar Master

India’s government recognizes this bottleneck and has earmarked INR 50 billion (US $1.07 billion) worth of tax-free bonds for the development of major ports in the financial year ending March 2012. India’s Ministry of Shipping will bid on as many as 23 projects worth INR 170 billion (US $3.7 billion) this year.

In addition, the Ministry aims to create seven new ports by 2017, with a public and private investment of INR 350 billion (US $7.6 billion). Under India’s Maritime Agenda 2020, the goal is to increase capacity at India’s ports to three billion tons at an investment cost of INR 3 trillion (US$ 65 billion).

All of this looks very impressive on paper, but the important question is how quickly these plans will be translated into completed projects on the ground. In the past, such massive infrastructure projects have been overset with delays.

Perhaps, this is why Maruti Suzuki decided to make its own investment in a dedicated car-handling facility at Mundra Port in 2008, just before it started exporting its A-Star (sold as the Alto) to Europe. Similarly, Hyundai built a multi-level car park at the Chennai Port to enhance the capacity of its car terminal at that port.

Hyundai, Maruti Suzuki, Nissan Export Programs Already in Place

For the moment, India’s biggest vehicle exporters Hyundai, Maruti Suzuki and Nissan will have to make the best of the current situation. All three have major vehicle export programs set up in India, and also have plans to increase these volumes in future years.

Hyundai, for instance, chose India as a global production base for its i10 mini car. Through July of this year, Hyundai exported 137,000 vehicles, and a majority of these were i10 and i20 sub-compacts heading to Europe.

Maruti Suzuki, the largest vehicle maker in India, exported 70,000 light vehicles between January and July 2011, and its major export model was the A-Star (Alto), which was shipped to Europe.

The third major exporter, Nissan, made the critical decision to shift production of the Micra from its Sunderland, UK, facility to the newly constructed Renault-Nissan plant in Chennai, which is in southern India. The foreign automaker exported a total of 94,000 Micras to the UK through July.

More Automakers to Begin Exporting Overseas Small Cars Made in India

In the future, more vehicle makers in India plan to start exporting their made-in-India small cars as they seek to fully utilize plant capacities and gain from economies of scale through higher output.

What is also most pressing is that India suffers from a wider ‘infrastructure deficit’ that is, in part, preventing the automotive industry from reaching its full potential.

Our J.D. Power special report “India Automotive 2020: The Next Giant from Asia,” released in June 2011, notes “The inadequacy of India’s infrastructure cannot be overstated. The country needs more roads, better port facilities, and reliable power generation.”

Besides India’s low standing for port facilities on a global basis, India’s ranking for the quality of its roads and power generation is no better. The World Economic Forum’s Global Competitiveness Index 2010-2011 ranks India 90th for the quality of its roads and 110th for the quality of its power supply among 139 nations.

Again, the government has earmarked enormous sums of money to improve India’s overall infrastructure. Plans have been announced to spend the equivalent of US $514 billion on infrastructure during its 11th Economic Plan (2007-2008 to 2011-2012). The government further aims to increase this amount to US $1 trillion during the 12th Plan (2012-2013 to 2016-2017).

While this investment is massive, the government must ensure that the funds are spent on projects that align with its overall strategy for growth. The timely completion of infrastructure projects is also critical to the sustained development of the country’s economy. This is not to say, however, that the country’s growth in infrastructure cannot be rapidly achieved. Much has already been accomplished in less than 5 years, including road and airport construction.

It is clear that much is required of India before it can become a truly global production base and export hub for small cars. Each of India’s infrastructure needs will first have to be met before this ambitious objective can be fully realized.Ammar Master, Manager, J.D. Power Asia Pacific, Thailand branch

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