14 and 15 Apr 2016 (Maritime Summit, National Agriculture Market)

Maritime India Summit, 2016:-

About:-Maritime India Summit 2016 (MIS 2016) is a maiden flagship initiative of Ministry of Shipping, Government of India that will provide a unique global platform for investors to explore potential business opportunities in the Indian Maritime Sector.

The Summit will showcase exciting investment opportunities in:

• Shipbuilding, Ship Repair and Ship Recycling
• Port Modernization and New Port Development
• Port-based Industrial Development, Port-based Smart Cities and Maritime Cluster Development
• Hinterland Connectivity Projects and Multi-Modal Logistics Hubs
• Inland Waterways and Coastal Shipping for Cargo and Passenger movement
• Dredging
• Lighthouse Tourism and Cruise Shipping
• Renewable Energy Projects in Ports
• Other Maritime Sector related services (Financing, Legal, Design etc.)

India has 12 Major Ports, administered by the Central Government, and around 200 notified Non-Major Ports, administered by the State Governments. In 2014-15, out of the 200 Non-Major Ports, 69 ports were reported to have handled cargo traffic.

The infrastructure sector, particularly the Maritime Sector, is expected to grow significantly with the increase in international and domestic trade volumes. Since about 95% of India’s trade by volume is via the maritime route (Source : NTDPC), there is a continuous need to develop India’s ports and trade related infrastructure to accelerate growth in the manufacturing industry and to aid the ‘Make in India’ initiative.

India has an extensive network of inland waterways in the form of rivers, canals, backwaters and creeks. Of the total navigable length of 14,500 km, 5200 km of the river and 4000 km of canals can be used by mechanized crafts. Freight transportation by waterways is highly underutilised in the country as compared to countries and regions like the United States, China and the European Union. India has recognized 106 waterways of which 6 are declared as national waterways. Economic viability of a waterway to carry traffic as an alternative to rail and road depends on its length which should be a minimum 500 km and 250 km for both cases respectively. Apart from this, it should have a large hinterland coverage area and potential in order to generate enough traffic on routes.

Globally domestic waterways are found to be cost effective as well as environmentally friendly means of transporting freight. This is also true in India – for instance, the cost of moving coal via coastal shipping is one-sixth of the cost of moving it by the currently preferred means of railways.

Key Initiatives

• Development of NW5 – The significance of NW5 lies in its location close to Talcher-Paradip region which is abundant in resources and industries and therefore provide opportunities for evacuation of different commodities including thermal coal, coking coal and iron-ore. Financial considerations in terms of revenue and expenditure for both the barge owners and IWAI present a strong case for moving cargo on NW5 after relevant infrastructural improvements. A number of steps in terms of infrastructural projects are required to be undertaken to make the project feasible. These include dredging to ensure minimum draft of 2.5-3 m and ensuring channel width of 55-60 m. Other steps include building atleast 5 barrages or navigational locks and a barge jetty/terminal at Paradip, Talcher and Kalinganagar.
• Development of NW4 – This waterway which connects the upcoming capital of Amaravati to the coastal parts of the state is extremely important for the development of new industrial hinterlands proposed under the various nodes of Visakhapatnam Chennai Industrial Corridor. The stretch will have a potential to transport 3-5 MTPA of bulk commodities by 2020.
• Development of NW2 – This waterway, stretching for a distance of 891 km from Dhubri to Sadiya, has immense potential to cater to the traffic in the north eastern region of the country. Basic commodities like foodgrains, fertilizers, etc. can be transported through the route.
• Development of NW1 – With a length of 1620 km, NW1 is the longest waterway in India. It is a stretch of the Ganga-Bhagirathi-Hoogly river system from Allahabad to Haldia. Key opportunities lie in 11 major power plants being located on the banks of NW1 with a cumulative capacity of 12,000 MW as well as multiple chemical and food exporters in UP and West Bengal.

India’s economy has surged ahead in recent years. The pressures of a growing economy have naturally pushed its transport system to full capacity. The movement of bulk commodities is one of the major responsibilities of India’s transportation system. Thermal coal alone accounts for around 61 percent of the freight volume on the Indian Railways and 24 percent of the seaport freight mix.Water currently contributes less than 10 percent to India’s modal mix. China uses its inland waterways to transport raw material and finished goods between Eastern and Western provinces; water contributes 24 percent to China’s freight modal mix. Australia carries 17 percent of goods through coastal shipping. In Germany, 11 percent of goods are moved through inland waterways and coastal shipping. A strong economic case for coastal movement can be made for most of the key commodities.

The Indian Shipbuilding and Ship Repair industry primarily comprises firms that develop, build and repair – ships, underwater equipment and naval architectures for the shipping industry, fishing industry, naval defence and extraction of ocean resources. A growing Indian economy, favorable government policies and incentives framework, a long coastline and growing sea borne trade present a huge business opportunity within the Indian Shipbuilding Ship Repair and Ship Recycling industry.

 Three marine clusters for India could include:

• Gujarat – Combining the steel cluster at Hazira, upcoming automobile cluster at Sanand, Shipyard at Pipavav, Ship-breaking yard at Alang, and Gujarat International Finance Tec-City.
• Tamil Nadu – Combining the automotive clusters at Chennai and Ennore and proposed new steel cluster near Chennai/Ennore.
• Andaman & Nicobar Islands – Marine cluster to leverage the potential of the region for tourism and possibly MRO services for ships passing through the international east-west trade route

Green initiatives for Major Ports:

• In order to promote the use of green energy at the Major Ports, the Ministry of Shipping has recently introduced an incentive scheme under which the Ministry will share up to 50% of the total project cost that promote the use of green energy, such as, waste water treatment, renewable energy generation and the use of Bio-diesel. Each Port will be given a financial grant up to Rs 25 crore (US$ 4 Million) for undertaking these projects.

Marine environmental pollution monitoring:

• Anti-fouling System Convention of International Maritime Organization has been incorporated in the Merchant Shipping Act, 1958.
• Anti-fouling certificates will be issued to all Indian vessels bearing 400 gross tonnage or more.

Use of bio-diesel at Haldia Dock Complex:

• Environment friendly, bio-diesel is used for operations of locomotives.
• It has resulted in reduction in the consumption of high speed diesel and in turn reduced environmental pollution.

Lighthouse Tourism

India has as many as 189 lighthouses dotting its vast coast line including the Andaman and Nicobar Islands in the Bay of Bengal and Lakshadweep Islands in the Arabian Sea. Steeped in rich maritime heritage, each lighthouse has a tremendous tourism potential.

The Ministry of Shipping through the Directorate General of Lighthouses and Lightships (DGLL) has drawn up a programme for developing tourism in the land adjacent to 78 lighthouses, in the first phase, under Public Private Partnership (PPP). The key objective of this initiative is to enhance development of the existing lighthouses and its surrounding areas into a unique maritime tourism landmark. This initiative also offers investment opportunities related to development of hotels, resorts, viewing galleries, adventure sports, thematic restaurant and allied tourism facilities at the proposed lighthouse location

Facts and Figures of Indian Maritime Sector:-

• India is one of the fastest growing major economies in the world with an expected GDP growth rate of 7.5% in 2015-16
• India’s long coastline of 7,517 km and a navigable inland waterways of 14,426 km offers immense potential for development
• 4th most attractive FDI destination in the World as per UNCTAD
• Over the last decade, seaborne trade has grown at twice the global growth rate of 3.3%
• Maritime Container trade has grown at 6.5%, which is higher than the world average of 5.4% over the past 10 years (FY 2005 – 2015)
• Cargo traffic at Indian ports has doubled to 1 billion tonnes per annum over the last decade (FY 2005 – 2015) and is expected to reach 1.7 billion tonnes per annum by 2022
• US$ 2.6 Bn invested in Ports and Shipping sector between 2011 and 2014
• 150 + projects identified in Indian maritime sector offering numerous investment opportunities.

Major Ports in India:-

Ancient Ports of India:-

• Barygaza – which today is known as Bharuch in Gujarat;
• Lothal in Gujrat
• Muziris which today is known as Kodungallur near Cochin in Kerala;
• Korkai which is today’s Tuticorin;
• Kaveripattinam which is in Nagapattanam District of Tamil Nadu;
• Arikamedu which is in Ariyankuppam District of Puducherry

National Agriculture Market(NAM)

Background:-

Details :-

With nearly 58 per cent of its people continuing to depend upon agriculture for their livelihood, the critical role of the sector cannot be gain said.  Agriculture sector is also highly vulnerable to the vicissitudes of nature that impact the crop enterprise at its production stage.

Further, the sector is also exposed to the current weaknesses of the agricultural marketing system.  The annual income of a farmer depends upon both yield and the price that his produce fetches.  While the Government has rolled out large number of programmes to improve yield levels on a sustainable basis, it recognises the need for creating a competitive market structure in the country that will generate marketing efficiency.  Only when the market is integrated over space and time, can market efficiency be realised.

Integration of agri-markets across the country through the e-platform is seen as an important measure for overcoming the challenges posed by the present agri-marketing system namely – fragmentation of State into multiple market areas, each administered by separate APMC, multiple levy of mandi fees, requirement for multiple license for trading in different APMCs, licensing barriers leading to conditions of monopoly, poor quality of infrastructure and low use of technology, information asymmetry, opaque process for price discovery, high level of market charges, movement controls, etc.  The need to unify the markets both at State and National level is, therefore, clearly the requirement of time, in order to provide better price to farmers, improve supply chain, reduce wastages and create a unified national market.

For integration with the e-platform the States/UTs will need to undertake prior reforms in respect of (i) a single license to be valid across the State, (ii) single point levy of market fee and (iii) provision for electronic auction as a mode for price discovery. Only those States/UTs that have completed these three pre-requisites will be eligible for assistance under the scheme.

The e-marketing platform should promote reform of the agricultural marketing sector and apart from promoting free flow of agri commodities across the country should result in greater farmer satisfaction as the prospects for marketing of his produce would be significantly enhanced.   He will have improved access to market related information and better price discovery through a more efficient,  transparent and competitive marketing platform which gives him access to a greater number of buyers within the State and from outside, through transparent auction processes. It would also increase his access to markets through warehouse based sales and thus obviate the need to transport his produce to the mandi.

The Why , What and How:-

Why is the National Agriculture Market (NAM) a necessity today?

The purpose behind NAM is the creation of a common national market for agricultural commodities through an e-platform network. At present, agricultural produce market committees (APMCs) regulate market yards, limiting the scope of trading in agricultural commodities at the first point of sale where farmers bring in their produce following the harvest at a mandi located nearby. Mandis located across a state are not integrated and there are substantial transaction costs for moving the produce from one mandi to another within a state. Separate licences for each mandi are required for trading in different market areas within a state. This has led to a highly fragmented market and there is a high transaction cost for buying and selling agricultural commodities. Besides, it creates barriers for free movement of agricultural goods across the country.

NAM is an online platform with a physical market or mandi at the backend. Agriculture ministry officials say that NAM is not a parallel marketing structure but rather an instrument to create a national network of physical mandis which can be accessed online. According to the official document, NAM seeks to leverage the physical infrastructure of mandis through an online trading portal, enabling buyers situated even outside the state to participate in trading at the local level.

What is the government’s plan for developing NAM?

The electronic platform under NAM is being created through a special software developed by the agriculture ministry and the same is provided to each mandi—which agrees to come on board—free of cost. There are some basic criteria for a state to integrate into NAM. For instance, the concerned state must amend its APMC Acts by bringing in provision for electronic trading. Besides, states must provide a single licence to anyone willing to trade through NAM in a local mandi.

The agriculture ministry is aiming at integrating 200 markets in NAM by September 2016; 200 more regulated markets would be integrated with NAM by March 2017 and the rest 185 markets by March 2018.

How will NAM function and what are the benefits that it would bring?

NAM increases the choice for a farmer after he brings in his produce to a mandi. Local traders can bid for the produce, as also traders on the electronic platform sitting in other states. The farmer may choose to accept either the local offer or online. In either case, the transaction will be on the books of the local mandi and they will continue to earn the transaction fee. With more mandis coming onto the NAM platform, the volume of business will significantly increase, as there will be greater competition for specific produce, resulting in higher transaction fees for a mandi. Agriculture ministry officials say that the gradual integration of all major mandis into NAM e-platform would ensure common procedures for issue of licences, levy of fee and movement of produce.

Over 5-7 years, the ministry expects significant benefits through higher returns to farmers, lower transaction costs for buyers, and stable prices and availability to consumers. “NAM will also facilitate the emergence of integrated value chains in major agricultural commodities across the country and help promote scientific storage and movement of agri goods,” the official document on NAM notes.

Does this imply that various taxes and levies imposed by APMCs will be subsumed in NAM?

According to agriculture ministry officials, NAM—which is currently being implemented through the Small Farmers’ Agribusiness Consortium (a body under the agriculture ministry)—would not lead to reduction in various levies imposed by states besides mandi taxes. However, because of single registration given to traders in a state, this would lead to payment of mandi taxes only at one place even if the concerned trader is buying commodities through the NAM platform in multiple markets across a state. The government is aiming at reduction in taxes and levies imposed by states in the next phase of reforms.

How will quality checks and payment systems work under NAM?

The concerned APMC—which has agreed to be part of NAM—will ensure quality standards of agricultural goods sold through its platform. NAM envisages harmonisation of quality standards of agricultural produce and provisions of assaying (quality testing) infrastructure in every market to enable informed bidding by buyers. By end-March, as many as 14 states amended their respective APMC Acts for making provisions for e-trading. These are Andhra Pradesh, Chhattisgarh, Gujarat, Jharkhand, Haryana, Himachal Pradesh, Karnataka, Rajasthan, Sikkim, Goa, Madhya Pradesh, Mizoram, Telangana and Uttarakhand.

Are existing APMCs or mandis capable of handling NAM?

Experts say that infrastructure available for NAM at local markets varies from state to state. The NAM platform is being supported by agriculture ministry, which is bearing maintenance costs for each mandi. The integration cost for local mandis and customisation of software, training, etc, will also be paid for by the ministry as a one-time grant of around R30 lakh at the time of accepting the mandi in the national network. However, the running costs of the software at the local level, staff costs for quality check, etc, will be met with the transaction fee to be generated through the sale of produce. The key reason behind this support is to avoid any upfront investment by the mandi when it integrates into NAM, and enable it to support the running cost through additional generation of revenue.

How will NAM operate in the current form?

The 21 mandis where NAM is being formally launched would offer trading in commodities such as chana, castor seed, paddy, wheat, maize, onion, mustard and tamarind. But fruits and vegetables, where there often are prices fluctuations, are yet to be included in the NAM platform. Besides, the country’s two biggest mandis—Azadpur (Delhi) and Vashi (Mumbai)—have not yet agreed to come on board. A number of states which have amended their APMC Acts are yet to make changes for allowing the sale of fruits and vegetables through e-trading platform. Farmers face price volatility in selling fruits and vegetables as these are perishable, while in case of other commodities such as grains and pulses there are several traders involved in procurement.

What needs to be done from here?

Experts say that as long as fruits and vegetables are kept outside the purview of NAM, the volatility in prices would continue, thus depriving farmers from getting better prices. Barriers hampering interstate transfer of agricultural commodities also have to be removed. High taxes and levies imposed by states such as Punjab, Haryana and Andhra Pradesh on agricultural commodities trade have to be brought down; this would boost interstate trade and farmers’ income.

World output faces risk of 3.9 % drop by 2021

The decline in oil prices has helped countries such as India improve their external positions, but low commodity prices have kept risks elevated in emerging market economies, the International Monetary Fund (IMF) said in its latest Global Financial Stability Report.

• The financial stability report assesses the risks faced by the global financial system and the current edition surveys the issues that surfaced since October 2015.

• The spill-over effects of the growing uncertainty about China’s economy and setbacks to growth and confidence in advanced economies are other factors undermining global financial stability. These developments tightened financial conditions, reduced risk appetite, raised credit risks and stymied balance sheet repair.
• Global output could decline 3.9% by 2021 if action isn’t taken to address the risks faced by the financial system.

The main message of this report is that additional measures are needed to deliver a more balanced and potent policy mix for improving the growth and inflation outlook and securing financial stability. In the absence of such measures, market turmoil may recur. However, if timely measures are taken, world output could expand by 1.7%, relative to the baseline, by 2018.

The report identifies a window of opportunity in the current economic recovery to deal with what it calls a “triad of global challenges,” namely, the legacy issues in advanced economies, vulnerabilities in emerging markets and greater systemic market liquidity risks. IMF suggests that in advanced economies, banks must deal with bad assets and other legacy issues.