The Exim Bank has been both a catalyst and a key player in the promotion of cross-border trade and investment, and helped in the globalisation efforts of Indian industries, writes the Bank’s Chief Managing Director, Yaduvendra Mathur
India is a major maritime nation by virtue of its long coast line. The importance of the maritime sector can be gauged from the fact that about 90 per cent by volume and 70 per cent by value of the country’s international trade is carried on through maritime transport. However, a matter of concern is the fact that currently only about 10 per cent of India’s foreign trade is carried by ships with an Indian flag, while the ships manufactured in India carry even less cargo. Although the Indian seaborne trade has been growing rapidly, Indian shipping and shipbuilding sector has been lagging behind despite their development potential. As per the Government’s Manufacturing Plan 2012, India aims to achieve five per cent share of the global shipbuilding market and 10 per cent share in the global ship-repair industry by 2020. This would need concerted efforts of all stakeholders.
With the new Government’s keenness to develop ports, shipbuilding and the shipping industry, the maritime business of the country shows the promise of rapid growth. The prospects seem big for a growing maritime profile of the country. The Government of India’s Maritime Agenda – 2010-2020 has highlighted several issues and focus areas for promotion of the Indian shipping and shipbuilding industry in the country.
Revitalisation of Ports
With a view to transforming Indian ports into world-class facilities, the Government has initiated many path-breaking measures which would facilitate enhanced private investment, improve the service quality and promote competitiveness, apart from achieving the expansion of capacities in the country. These include measures, such as formulation of Maritime Policy, revision of various operational policies and preparation of perspective plans for the major ports, among others.
‘Make in India’ Initiative, Sagarmala Project
The ‘Make in India’ initiative of the Government of India provides a major boost to the manufacturing sector in India and also opens up immense opportunities for the maritime sector in the country. There exist opportunities for Make in India, especially in the shipbuilding industry, development of port infrastructure and development of ancillary industries. In this context, the Government’s Sagarmala project, an infrastructure development-cum-policy initiative, strives towards holistic development of India’s maritime sector. The Project would especially provide opportunities for expansion and modernisation of port infrastructure, development of port-based industrial parks, developing efficient rail, road, coastal and inland water transport networks to the hinterland and development of ancillary industries and Coastal Economic Zones (CEZ). The Project, in the years to come, could play a significant role in modernising and enhancing the capacity of major and non-major ports, thereby enabling them to become drivers of port-led economic development.
State Maritime Policies
Development of state maritime policies and state maritime boards is extremely important for development of the sector. A case in point is the Gujarat Maritime Board , which has recently come up with its own shipbuilding policy (Shipbuilding Policy 2010). The policy aims to develop Marine Shipbuilding Parks and clusters to create ancillary base for the industry and help reduce costs to the shipbuilders by sharing costs, such as common infrastructure, logistics etc. Besides GMB, the Tamil Nadu Maritime Board and the Maharashtra Maritime Boards are also actively trying to promote and revive the maritime sectors in their respective states. Other states should also be encouraged to have similar enabling policies, so as to help develop the maritime industry.
Maritime Financing Facilities
The financial needs of the sector include provisioning of long-term funds for meeting the large capital, operational and other requirements of the industry. Long-term funds are also needed for providing long-term buyers credit facilities and at competitive rates in line with international competition. The need of the hour is, thus, essentially long-term and low-cost funding, as is the case in countries, such as China, Korea and Japan, where players in the maritime sector receive loans for a very long tenure at competitive rates supported by government measures and initiatives.
In the current scenario, the maritime sector and especially the shipbuilding industry in India is facing a challenging time. Banks and Financial Institutions (FIs) face increasing difficulty in extending further financial assistance to the sector, and particularly to the critical needs of the shipbuilding sector. It is time perhaps for the banks and FIs to get together and set up a dedicated fund for the purpose. Possibilities of enhancing the corpus by international borrowings, through suitable credit enhancement may have to be explored by the banks and FIs to finance this critical need of the industry.
Long-term funds are needed for providing longterm buyers credit facilities and at competitive rates in line with international competition… essentially, the need of the hour is long-term and low-cost funding
Conducive Maritime Ecosystem
With regard to innovative financing mechanism, there is a need to provide an enabling environment, backed by availability of physical infrastructure to facilitate and promote the maritime sector in India. An example in this regard could be the case of the Busan International Finance Centre, in Korea. The marine finance units of Korea Eximbank (KEXIM), Korea Trade Insurance Corporation (Ksure) and Korea Development Bank have collaborated to create a Maritime Financing Centre (MFC) in the Busan International Finance Centre, for effective implementation of their marine financing schemes. The Centre provides a single source bouquet of services to the maritime industry in Korea. A similar model could be replicated and implemented in India and perhaps the GIFT city in Gandhinagar could be an ideal location for this endeavour.
Exim Bank’s Support to Maritime Sector
Since its inception, Exim Bank has been both a catalyst and a key player in the promotion of cross-border trade and investment. Commencing operations as a purveyor of export credit, like other export credit agencies in the world, Exim Bank of India has, over the period, evolved into an institution that plays a major role in partnering with Indian industries, in their globalisation efforts, through a wide range of products and services offered at all stages of the business cycle. Exim Bank is one of the key financial institutions supporting the Indian maritime industry, with financial support extended to Indian companies in sectors, including shipbuilding, shipping services, ports and services, and other infrastructure. In the past, Exim Bank has also extended buyer’s credit to the Government of Sri Lanka for financing acquisition of vessels, being executed by Goa Shipyard Ltd. (GSL).