Indian Infrastructure presents views of Rajiv Agarwal, MD & CEO, Essar Ports on the impact of Covid-19 on the sector’s performance.
What has been the impact of Covid-19 on the sector?
Rajiv Agarwal – The Covid-19 outbreak has impacted the whole world with unprecedented implications on the global economy and has brought normal activities to a standstill. Among the many sectors and industries facing the burden and consequences of the pandemic, the port sector too felt its repercussions.
Even though ports remained operational, the lockdown imposed limitations on the smooth movement of cargo, impacting business operations. Handling of bulk cargo such as iron ore, coal, and oil and gas during this period was smooth at facilities that had a high level of mechanisation as compared to those that handle cargo in conventional ways. Due to the lockdown, there has also been a sharp reduction in demand. This resulted in some of the ports declaring force majeure, as their scope of operations was restricted.
In the first quarter of 2020-21, which saw the maximum impact of the lockdown, the port sector witnessed a substantial decline in cargo traffic, in the range of 15-20 per cent, on account of a demand and supply mismatch. However, at Essar Ports, we have seen an appreciable increase in cargo handling numbers at our facilities after an initial dip in April 2020. For 2019-20, we registered a growth of about 23.5 per cent in cargo throughput. In the month of July 2020, we reached almost 95 per cent of our normal volumes, registering a growth of 74 per cent over April 2020. The recovery has been quick owing to increased demand from the power, steel, mining and oil sectors. Our terminals along the western and eastern coasts are already performing at pre-Covid levels. They have adjusted to the new normal admirably, taking all operational and safety precautions while maintaining a smooth supply chain.
What has been the overall response to the pandemic?
Rajiv Agarwal – On account of the pandemic, the sector has faced issues such as a demand-supply mismatch, burgeoning inventory at ports, hampered operations on account of manpower and cargo movement restrictions, liquidity crunch on account of fall in revenue and high fixed costs, insufficient cash flow and delays in project execution.
Despite all these issues, the industry’s response has been very heartening. The sector has ensured that operations have continued and that supply chains have not been impacted. The industry ensured operations with the highest levels of safety and compliance. The use of technology while working from home has ensured seamless connectivity while meeting all safety parameters.
With the “un-lockdown” happening across the country in phases, India’s port sector has already observed a spike in traffic and is on the path to recovery. However, an overall revival in cargo volumes will depend entirely on how fast the gap between demand and actual consumption is bridged.
What is the outlook for the sector?
Rajiv Agarwal – As we face this pandemic along with an economic slowdown, the recovery of the underlying economy is expected to be gradual. The measures announced by the government have provided the much-needed stimulus to ensure the revival of the economy in a structured manner.
The key objective will be to ensure a balance between demand and supply. Even with the alarming surge in Covid cases, businesses are eager to boost productivity. The port sector will surely be burdened with challenges for a while but demand is bound to revive as the world will eventually emerge from this crisis. India’s massive population and huge domestic consumption are its strength and with the festival quarter approaching, the sector can expect a boost in business going forward.
With India moving towards “atmanirbharta” and positioning itself as an alternative for global manufacturing, the sector is steeped in opportunities going forward.
What will be the key priority areas in the post-Covid world?
Rajiv Agarwal – Infrastructure is the backbone of any economy and plays a pivotal role. It enables trade and businesses to flourish, connects workers to their jobs and creates opportunities for employment, healthcare and education. India plans to spend more than $1.4 trillion on infrastructure by 2025 for projects identified under the National Infrastructure Pipeline. These projects will help the country realise its vision of becoming a $5 trillion economy and this will enable the country to continue on an escalated growth trajectory until 2030. In the coming era of supply chain disruptions and the advent of new technologies, infrastructure growth will have to keep pace with the exponential trade requirements. In particular, port infrastructure investments have a significant influence on GDP and need to increase rapidly to cater to growing global trade requirements. The government has been playing a significant role in boosting the maritime sector. It has taken several measures to promote port efficiency through various policy initiatives and the Sagarmala and Bharatmala programmes.
Strategic trade location, a high level of mechanisation and operational efficiency will be key focus areas for the sector. The emphasis will be on reducing logistics costs and enhancing efficiency, thereby improving India’s competitiveness in the world economy and making it a global manufacturing hub.
Source: Indian Infrastructure (August 2020)