Model Answer

Introduction

India’s maritime sector plays a crucial role in its economy, with over 95% of trade by volume and 65% by value depending on sea transport. Recent reforms in India’s port sector have boosted its global recognition and operational efficiency. The World Bank’s 2023 Logistics Performance Index (LPI) report highlights India’s impressive progress, with the country moving from 44th to 22nd in the “International Shipments” category since 2014.

Key Reforms in India’s Port Sector

1. Sagarmala Initiative (2015)

• The Sagarmala Initiative was launched to harness India’s extensive coastline and waterways for port-led industrialization.
• Focus Areas:
  • Enhancing port infrastructure and logistics efficiency.
  • Promoting coastal and inland shipping.
  • Optimizing cargo-handling capacity and reducing logistics costs.
• Impact: Sagarmala is transforming ports into hubs of industrial and economic growth, making India more competitive globally.

2. Port Modernization and Expansion

• Substantial investments have been made to modernize and expand existing ports and develop new ones.
• Upgraded Facilities:
  • Ports have been equipped with deeper drafts and better cargo-handling capabilities.
  • For example, the capacity at 12 major Indian ports has grown from 871 million metric tonnes (MMT) in 2015 to 1,617 MMT in 2023.
• These improvements allow ports to handle larger vessels and a wider range of cargo types, contributing to better trade facilitation.

3. Private Sector Participation

• The government has promoted Public-Private Partnerships (PPPs) to enhance efficiency and innovation in port operations.
• Benefits: This has attracted significant investments, improving port infrastructure and management.

4. Liner Shipping Reforms (2016)

• The Liner Shipping Reforms aim to make Indian ports more competitive.
• Achievements:
  • Lower shipping costs.
  • Enhanced turnaround times, with India’s average turnaround time (TRT) of 0.9 days, among the best globally.

5. Green Port Guidelines

• The Harit Sagar Green Port guidelines promote sustainable practices in ports, focusing on environmentally safe operations, which helps in reducing the ecological footprint.

Legislative Changes Supporting Port Reforms

1. Major Port Authorities Act, 2021

• This act grants greater autonomy to major ports, empowering them to operate more efficiently and independently.

2. Marine Aids to Navigation Act, 2021

• Ensures better safety and efficiency in vessel traffic management, aligning with global standards.

3. Indian Vessels Act, 2021

• Standardizes regulations for inland waterways across the country, improving uniformity and operational efficiency.

4. Ease of Doing Business

• The National Logistics Portal (Marine) provides a single-window digital platform for various stakeholders, streamlining the processes involved in cargo services, regulatory compliance, and financial services.
• The Sagar Setu app further enhances the ease of goods movement in ports.

5. Foreign Direct Investment (FDI)

• The government allows 100% FDI in port projects under the automatic route, along with a 10-year tax holiday for port developers, which promotes private investment in port infrastructure.

Future Directions

1. Integrated Connectivity

• There is a need to strengthen the integration of ports with railways, roadways, and inland waterways for seamless cargo movement between ports and hinterlands.

2. Digital Transformation

• Adopting advanced technologies like blockchain, Internet of Things (IoT), and artificial intelligence will streamline port operations, including cargo tracking and documentation processes.

3. Investment Promotion

• The government plans to attract more investments through PPP models and investor-friendly policies.

4. Regional Connectivity

• Promoting transshipment and coastal shipping will enhance India’s regional trade, especially in the Indian Ocean.

5. Safety and Security

• Ensuring strict safety measures and compliance with international standards is essential to prevent accidents and environmental hazards at ports.

Model Answer

Significance of the Sagarmala Programme

The Sagarmala programme is a transformative initiative by the Ministry of Ports, Shipping and Waterways, aimed at promoting port-led development in India. This programme leverages the strategic advantages of ports to stimulate economic growth and enhance the country’s maritime infrastructure. Key significance includes:

1. Reduced Logistics Costs: Sagarmala seeks to lower logistics costs for both domestic and international trade by improving connectivity between ports and production centers, making Indian goods more competitive in global markets.
2. Increased Efficiency: The programme focuses on modernizing port infrastructure and using digital technologies to streamline operations, ultimately improving cargo movement and the ease of doing business in the maritime sector.
3. Promotion of Coastal Shipping: By shifting more cargo transport to coastal and inland waterways, which currently contribute only 6% to the transport modal mix, the programme aims to enhance sustainability and reduce road congestion.
4. Job Creation and Economic Growth: The initiative is projected to boost merchandise exports by approximately $110 billion by 2025 and create around 10 million new jobs, significantly impacting the economy.
5. Regional Development: Sagarmala aims to revive traditional trade routes with regions like Africa, West Asia, and Southeast Asia, strengthening India’s position in global trade.
6. Community Development: Funds from the programme will support skill development, livelihood generation, and coastal tourism, benefiting local communities.

Challenges Associated with the Sagarmala Programme

Despite its potential, the Sagarmala programme faces several challenges:

1. Resource Mobilization: Investment mobilization and timely budgetary support remain critical hurdles, as highlighted by ICRA .
2. Complex Taxation: The shipping industry is burdened by a complex tax regime, which increases operational costs and deters investment .
3. Poor Coordination: A report from a Parliamentary Standing Committee pointed out inefficiencies due to lack of coordination among ministries, leading to delays and increased costs .
4. Environmental Concerns: Infrastructure development poses risks to fragile ecosystems, including coastal erosion and challenges associated with dredging .
5. Disaster Vulnerability: Coastal regions, particularly on the eastern coast, are at risk from natural disasters like cyclones, necessitating resilient infrastructure .
6. Security Issues: Developing numerous small ports could heighten security vulnerabilities, especially along the western coast, due to geopolitical tensions .

Addressing these challenges through better coordination, integrated planning, and climate-resilient infrastructure is essential for the success of the Sagarmala programme.

Model Answer

Drivers of Growth in India’s Aviation Sector

India is rapidly emerging as one of the largest aviation markets in the world. Several key factors are fueling the growth of the country’s civil aviation sector:

1. Higher Household Income
   • Rising incomes are leading to increased business and leisure travel. Professionals are opting for air travel for work, and more individuals can afford to travel for leisure.
   • Fact: The aviation sector is benefiting from growing household income, contributing significantly to the rise in passenger traffic.
2. Entry of Low-Cost Carriers
   • Low-cost airlines have revolutionized air travel by making it affordable for the common man, further driving domestic traffic growth.
   • Fact: The expansion of budget airlines has made air travel more accessible across various segments of the population.
3. Increased Foreign Direct Investment (FDI)
   • The government has allowed up to 100% FDI in non-scheduled air transport services, seaplanes, and helicopter services, leading to infrastructure development and further growth.
   • Fact: 100% FDI is allowed through the automatic route in key aviation sectors, promoting development.
4. Increased Tourism
   • A rise in inbound tourism has contributed to the growth of air travel. In 2021, 87.5% of foreign tourists arrived in India by air.
   • Fact: 87.5% of the 1.52 million foreign tourists in 2021 entered India via air.
5. Development of Modern Airports
   • Airports are being upgraded with new technologies, focusing on speed, capacity, and sustainability, which boosts the aviation industry.
   • Fact: The development of modern airports is a key driver of growth, incorporating advanced technologies.

Challenges Faced by India’s Aviation Sector

Despite strong growth drivers, the Indian aviation sector faces several challenges:

1. High Fuel Costs
   • Fuel costs, particularly Jet Fuel, make up 20-30% of operational costs. In 2022, the cost of Aviation Turbine Fuel (ATF) rose by over 70%, one of the steepest increases in recent years.
   • Fact: High ATF prices in India, due to taxes and levies, make fuel costs among the highest in the world.
2. Infrastructure Bottlenecks
   • Many airports are outdated and located in hard-to-reach areas. Expanding runways is costly, time-consuming, and complicated due to land acquisition issues.
   • Fact: India faces challenges with aging airport infrastructure and limited space for expansion.
3. Regulatory and Compliance Issues
   • Multiple government agencies overseeing the sector create delays and increase compliance costs.
   • Fact: The involvement of several regulatory bodies complicates the sector and causes delays.
4. Shortage of Skilled Workforce
   • The aviation sector faces a lack of skilled labor due to the high cost of training and the need for updated facilities and equipment.
   • Fact: There is a shortage of qualified personnel, exacerbated by expensive and outdated training infrastructure.
5. Security and Efficiency Challenges
   • The need for stringent security measures, while essential, can add to travel time and costs.
   • Fact: Security measures are essential but contribute to delays and increased costs in the aviation sector.
   • Source: Provided content.

Conclusion

India’s civil aviation sector has the potential to become the world’s largest, driven by rising incomes, increased tourism, the expansion of low-cost carriers, and modern airport development. However, challenges like high fuel costs, inadequate infrastructure, regulatory complexities, workforce shortages, and security measures need to be addressed to fully realize this potential.

Model Answer

Despite a significant increase in capital expenditure, the operating ratio of Indian Railways (IR) has not shown improvement due to several interrelated factors:

1. Cross-Subsidization of Passenger Services: A major issue is the substantial loss incurred from passenger services, which amounted to ₹68,269 crore in 2021-22. This loss effectively nullifies the profits generated from freight traffic, leading to a deteriorating operating ratio .
2. Rising Debt Levels: The Indian Railways has been increasingly reliant on Gross Budgetary Support (GBS) and Extra Budgetary Resources (EBS) to fund its operations. Currently, approximately 17% of its revenue receipts are allocated to servicing debt, which has escalated due to a lack of surplus funds .
3. Declining Modal Share: The modal share of Indian Railways in freight transport has significantly decreased, dropping to around 27% from over 80% at the time of independence. This decline is attributed to stiff competition from road transport, particularly in coal transport, where rail’s share fell from 70% to 60% between 2011 and 2020 .
4. Fluctuating Net Tonne Kilometres (NTKM): The NTKM, a key performance indicator for freight efficiency, has shown inconsistent growth. Over the seven years ending in 2021-22, NTKM grew at an annual rate of only 3.5%, which is considerably lower than the growth rate of road transport .
5. Decreasing Earnings: In FY 2021-22, Indian Railways reported a loss of approximately ₹15,000 crore. This decline in net revenue has been exacerbated by rising staff costs following the 7th Pay Commission, the adverse impacts of the COVID-19 pandemic, and various social service obligations .

The Parliamentary Standing Committee has recommended that the Ministry of Railways implement measures to enhance operational efficiency, improve capacity, and increase non-fare revenues to address these challenges effectively.