Tapping the ‘blue economy’ has been quite high on Prime Minister Narendra Modi’s agenda, and the centerpiece of it all has been the ambitious Sagarmala project. But, a recent report by ICRA, a Moody’s Investor Service Company, raises some serious concern over its financial viability.
The report states, ‘given the modest budgetary support of Rs. 6 billion for Sagarmala project for the year, there continues to be significant challenges in terms of mobilisation of funding especially towards the other two pillars of Sagarmala – development of industrial clusters and coastal communities, where progress has been limited’.
This is not the first time that such concerns regarding the mammoth Sagarmala programme have been raised, time and again, environmentalists and researchers have been pointing out its environmental implications as well as the social costs of pushing it. But, before going into more details, it is important to delve into the composition of the much hyped programme in the first place.
What is Sagarmala all about?
Proposed for the time in 2003, at a much smaller scale by the Atal Bihari Vajpayee government, the Sagarmala programme in its present form attempts to transform the transport and logistics infrastructure of the country, while accelerating port-based development. The project includes constructing ports, augmenting coastal infrastructure, developing inland waterways, intensifying fishing, and creating special economic zones as well as tourism promotion.
The government claims, that by 2025, initiatives under the Sagarmala Programme will mobilise 4 lakh crore from infrastructure investment, save Rs. 35,000-40,000 crore per year on logistics, double the share of waterways by 6 percent and boost exports by USD 119 billion. And, the government plans on gaining these benefits from the project via these activities:
• Ports Modernisation: It includes maintainace, upgradation in 12 major (Centrally – operated) ports and create 6-7 new greenfield ports.
• Connectivity enhancement: Expand and connect different modes of transport and freight including roads, railways, pipelines, coastal shipping and create 111 inland waterways, including 5 dry docks on rivers.
• Port led industrialization: Create 29 Coastal Economic Zones- that include both industrial and manufacturing, for example – power, refineries, ship breaking yards, food processing and apparel, etc. across 8 coastal states.
• Coastal community development: Train coastal communities for skill development relating to port based jobs and create social welfare and livelihood generation projects.
While the actual names of all the projects under Sagarmala and the exact figures concerning each such project remains uncertain, as per the available information, nearly 111 projects are currently under implementation, 203 projects are to be implemented by 2020, while 83 projects are earmarked for implementation after 2020 – bringing the total number of projects to 397 (approximately). These projects, include modernization and expansion of existing projects, as well as completely new initiatives such as greenfield ports.
The programme was approved by the Union Cabinet in March 2015 and McKinsey and AECOM, both American firms, were selected to provide infrastructural as well as project analysis for the programme. But, clearly the plan was already outlined much before MCKinsey was given the task of chalking it out.
Falling under the Ministry of Shipping, a host of agencies are responsible for the project implementation. These include existing agencies as well as bodies that have been newly incorporated to further the Sagarmala Project.
The project and its ramifications
At the heart of the concern is the fact that the coastline is important ecologically, socially and economically while being highly sensitive. Sizeable traditional fishing communities live along the coastline and have been dependent on the coast for their livelihood and survival.
The programme implies an entire reconstruction of India’s coastline and river ways. But, it does not give out a clear picture on what would happen to the rivers, forests, water-bodies and the population which depends on these natural resources, as the projects scheduled under the programme picks up pace. It seems that the government assumes that all these elements would simply adjust themselves with the changes that the creation and sustenance of industrialization and infrastructural projects would entail.
Ironically, as G Devashayam, a retired IAS officer points out, the key job generating element of the Sagarmala plan are the Coastal Economic Zones (CEZ) which estimates the creation of only 15,000 jobs, that is Rs.5.33 crore per job! Which seems rather minimal when compared to the growing unemployed population in the country.
Apart from failing to address the unemployment issue, at no point does any planning document of the Sagarmala assess the current social, environmental and economic milieu that the projects – particularly, the creation of coastal clusters, inland waterways and multiple new port projects will be displacing. It assumes that providing skills training to the communities living along the coastline would be enough, but it does not consider the fact that such displacement would eventually lead them to becoming workers in industries, looting them off their traditional skills.
The Indian coastline is a densely populated zone, with a unique ecosystem of its own, any major intervention should be made only after serious consideration of the multi-faceted implications and a cost-benefit analysis that goes far beyond just numbers and economic evaluation.
The Union Budget for 2018-2019 earmarked Rs.168.57 crore for the Sagarmala Project, but the questions on where is it that the required investment is going to come from remain unanswered. An analysis of the available information suggests that the key mechanisms worked out by the government for raising funds include reviving the public-private partnership model (PPP), including Viability Gap Funding (VGF). But, an assessment of the performance of previous PPP projects is missing from the public domain as are questions of the risks associated with the same.
Planning documents by McKinsey suggest the use of dollar denominated loans and development financing – but are restricted to expansion projects in major ports only. It also accounts for only 18 percent of the total estimated project cost of Rs. 7,98,500 crore, besides suggesting the pooling together of existing funds with the State and Center, as well as other agencies and ministries involved. The ensuing tussle for funds between state and center has already begun as is the case with Andhra Pradesh.
The planning documents of the Sagarmala Project further suggests changes in the environmental and coast related policies and legislations of the country, indicating that the implementation of the mega project might face a roadblock due to the existing environmental regulations.
Some of the legislative changes suggested include PPP in Major ports (already underway) and transition to a landlord port model, changes in TAMP and tariff regulations in major ports.
Fast tracking the process of land acquisition and utilization of already existing land parcels with state governments – as can be seen in the case of the Kandla Port. It also suggests changes to the Coastal Regulation Zone. The report proposes, ‘flexibility on exemptions and exceptions on a special case basis in the CRZ’ – which has also been initiated.
As pointed out by a Business Standard report, “recent changes to land legislations imply a ‘transformation in land use policy for two classes of lands – India’s 7,000 km shoreline and 700,000 sq km of forestland. Taking place through changes in existing legislations – both can be passed without parliamentary approval. These policies facilitate the entry of private capital and business to areas that till now have been somewhat protected.”
Four years into the project, several flagship programmes of the Sagarmala project have already run into problems. A case in point is the International Enayam Container Transhipment Terminal (EICTT), which has affected fishing the community.
The governments decision to go ahead with the project, despite the fact that it has ramifications at several stages, leaves one wondering as to why is it that the government is still pushing similar multiple projects. And, while doing so, the government seems to be prioritizing the needs of the industry over other more important concerns.