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India Loses $12b on Higher Transaction Costs
Tuesday, April 22, 2008
India loses about $12b each year because of higher transaction costs at its ports, according to MM Saggi, nautical adviser to the government of India.
Saggi told an industry conference that the transaction costs at Indian ports is about 10 percent, compared to 6 percent in developed countries, owing to problems like large turnaround time, port congestion, inadequate use of information technology, a shortage of dredging capabilities, and a shortage of trained personnel.
India has 12 major ports that handled 519 million tonnes of cargo in the year ended March 2008, with 12 percent year-on-year growth, a study by Ernst & Young Pvt. Ltd. shows.
Identifying a lack of dredging facilities as an impediment, Samson said the government must accelerate processes, as an 8-billion-rupee proposal to deepen the channel at Jawaharlal Nehru Port Trust's (JNPT) port at Mumbai, which handles most of India's seaborne trade, is lying undecided for about five years.
He said that though a quote had been made for 10 billion rupees for capacity dredging at JNPT, delay costs amount to about 0.5 billion rupees a year.
The Indian government allows 100 percent foreign direct investment in the shipping and ports sector but the no foreign company has come forward, an official said.
The shipping industry both in India and globally is short of trained personnel, according to Rajesh Tandon, managing director of V Ships India Pvt. Ltd., which supplies manpower to shipping companies. He said the shortage is so acute that his company plans to source labour from countries like Vietnam.
Government of India figures show infrastructure, including ports development, needs about $500 billion investment by 2012.
Source: Thompson Financial
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