9th Five Year Plan (Vol-2)

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7.1.178 Ports, which are the gateways to India’s international trade, handle over 90% of foreign trade. There are 11 major ports and 139 operable minor/intermediate ports, studded along the 5560 kms. of the coast-line of India. The major ports are administered by the Port Trusts under the control of the Central Government, whereas the responsibility of minor/intermediate ports lies with the concerned maritime State Governments. Major ports of the country are Calcutta and Haldia, Mumbai, Chennai, Cochin, Kandla, Visakhapatnam, Paradip, Tuticorin, New Mangalore, Mormugao and Jawahar Lal Nehru. A port at Ennore is under construction by Chennai Port Trust. Port facilities, to some extent, have also been provided in Andaman and Nicobar Islands and Lakshadweep by Andaman Lakshadweep Harbour Works(ALHW) under the Central Government. A major portion of the dredging requirements of capital/maintenance nature are taken care of by the Dredging Corporation of India.

Eighth Plan Review

Traffic and Capacities

7.1.179 The traffic at all the major ports has been growing continuously over the years. The traffic handled at major ports was 156.64 million tonnes in 1991-92, which increased to 215.21 million tonnes in 1995-96 and further to 227.26 million tonnes in 1996-97, thereby registering an annual average growth of nearly 7.3% during the Eighth Plan period. The details of port-wise traffic handled during the Eighth Plan are given at Annexure 7.1.16.

7.1.180 The POL traffic has registered a significant growth in terms of volume handled. However, its overall share in the total traffic has declined from 44. 3% in 1992-93 to 43.16. % in 1996-97. The container traffic has shown a remarkable growth potential. The container traffic accounted for nearly 4.58. % of the total traffic handled by the ports in 1992-93 which increased to 9.06. % in 1996-97. The container traffic is likely to increase substantially in the Ninth Plan. Coal and general cargo are the other areas where substantial growth in traffic has been witnessed during the Eighth Plan. The composition of traffic during the Eighth Plan is given at Annexure 7.1.17.


7.1.181 Port productivity, in terms of average ship berth day output and idle time at berth as percentage of total time at berth, has registered an improvement during the Eighth Plan period. The average ship berth day output increased from 3942 tonnes in 1991-92 to 4002 tonnes in 1994-95 and to 4249 tonnes during 1996-97. The idle time at berth as percentage of total time at berth decreased from 37% in 1991-92 to 33% in 1994-95 and further to 31% in 1996-97. However, the average turn around time of a ship increased from 6.7 days in 1991-92 to 7.8 days in 1996-97. During the same period, the average pre-berth waiting time has also shown an upward trend. It increased from 1.6 days in 1991-92 to 2.4 days in 1994-95 and further to 3.1 days in 1996-97.

7.1.182 Labour productivity is one of the important indicators for measuring the performance of a port. An analysis of the average output per "Gang Shift" achieved versus the norm of various cargo handled fixed in 1990, reveals that this ratio varies widely from 50% to 200%. Secondly, this ratio in most of the cases is much above 100% which signify that the prescribed norms itself are at a low level and need to be updated and scientifically determined.

7.1.183 Equipment utilisation has been low in most categories of equipment. Low productivity is mainly due to the operational constraints, such as, equipment break-down, time spent on service and power failures etc. Overaging of installed equipments is another area of concern. Out of the total fleet strength, 88% of Wharf Cranes, 66% of mobile cranes and 31% of Fork Lift Trucks have crossed their economic life.

Eighth Plan Outlay and Programme

7.1.184 During the Eighth Plan an outlay of Rs.3216 crore was approved for the ports sector. Against this, the actual expenditure totalled Rs. 1907.01 crore, of which the major ports accounted for Rs.1741.03 crore. Out of the total expenditure of Rs.1907.01 crore, Rs.1521.42 crore or 80% came from the internal resources and inter-corporate loans of major ports. The budgetary support accounted for 20% of the expenditure. A part of the budgetary support was on account of foreign aided projects (about Rs.158.04 crore) and the domestic budgetary support was 11.9% of the expenditure. The details of the Eighth Plan Outlay and Expenditure from 1992-93 onwards are given at Annexure 7.18.

7.1.185 In respect of major ports there has been a heavy shortfall in expenditure as compared to the outlay during 1992-97. The main reasons for the shortfall have been the delays caused in sanctioning the schemes, slow progress of work by the contractors, adverse weather conditions, contractual disputes/litigation, delays involved in tender finalisation/ awarding of contracts and deferment of projects/ schemes, etc.

Operational strategy for the Ninth Plan

7.1.186 During the Ninth Plan port development should keep pace with the expansion in traffic and changes in the shipping scenario including the size of ships, specialisation and automation etc. Container facilities would need to be augmented at the ports in line with the developments abroad. Mechanised loading and unloading facilities would need to be developed at certain locations to handle the coal requirements of the existing and new power stations which are likely to be commissioned during the Ninth Plan. However, the funding of such captive facilities would need to be done by the user agencies. Efforts need to be made to improve the POL handling facilities at the ports by planning in such a way that the completion of tanker discharge/unloading operations is achieved within 24 hours. Acquistion of new tankers and special carriers should take note of shipboard capacities, port facilities available and contemplated. Night navigation facilities would need attention at all the major ports to improve the turn-around of tankers, other vessels and berth utilisation. Before embarking on any major investment in creation of additional infrastructure facilities, the development and modernisation of existing port facilities should receive priority to improve productivity at ports. Besides, the maintenance of port infrastructure would need to be improved. The port capacity would need to be adequately augmented in view of the projected traffic requirements during the Ninth Plan, with larger private sector participation and development of selected minor ports.

                                                                                  PRODUCTIVITY OF INDIAN PORTS

  • Port productivity in the Indian context is not just an assessment of the cargo handling time but depends also to a very large extent on the productivity of the entire logistic chain of which the port is only a link. The chain also comprises road-railway linkages, inadequate inland warehousing facilities, customs clearance procedures etc. which also affect port productivity.
  • Certain productivity indicators like average ship berth day output, idle time at berth, and average ship turnaround time (ASTA) have been continuously improving but are still much lower when analysed with comparable foreign ports. The ASTA for container ships in ports such as Singapore is only 6 to 8 hours whereas in India it is 3.74 days at the most modern port, JNPT. In terms of containers handled per crane hour the average for Indian ports is 14 to 17 boxes as against 25 to 27 for Singapore, 28 for Hongkong, 26 for Colombo and 27 to 30 for Kalang.
  • The area of port productivity must receive major focus in the Ninth Plan period. Modernisation of port equipment, revamping the organisational structure of ports and investments in inter-modal arrangements are all expected to yield higher productivity and greater customer satisfaction. During the Ninth Plan period it is proposed to augment port capacity to reach 424 MT. Measures to improve productivity of both man and machine as reflected in the modernisation and manpower planning methods are expected to contribute substantially to the capacity creation effort over the 9th plan period.

7.1.187 The traffic projections (commodity – wise during 2001-02 are detailed in Table 7.1.14.

                             Table 7.1.14
      Commodity-wise Traffic Projections -- Ninth Plan --- Port Sector
                                                    (in Million Tonnes)
S.No./Commodity                                     Estimated Throughput
                                                       During 2001-02
1. POL                                                     186.7
2  Iron Ore                                                 34.4
3  Coal                                                     93.7
4.  Fertilizer                                              14.2
5. Containers                                               38.7
6. Other Gen. Cargo                                         56.2
            Total                                          423.9
The details of capacity augmentation are given below:	
i)         Capacity of major ports as on 31.3.97            215 MT
ii)	Capacity creation in the major ports  
            during 1997-2002 on account of                  122 MT
            New Schemes 
            Of which :
 a)       Schemes to be funded by Ports                      35 MT
 b)       Improvement of the capacity of 
           existing assets                                   11 MT
c)        Schemes to be undertaken through
           Private Sector                                    45 MT
d)        to be created by captive users                     31 MT
iii)       Capacity accrual on account of spillover 
            schemes of 8th Plan which are under
            implementation                                   37 MT 
iv)       Additional capacity expected on 
            account of productivity increase 
           in Major Ports and contributions                 50 MT
             by development of minor ports.
          TOTAL                                             424 MT

7.1.188 The Ninth Plan visualises an actual physical capacity addition of about 209 million tonnes which include capacity addition of 122 million tonnes on account of new schemes (Annexure 7.1.19) depicting an annual growth of 19.4 percent. The major increase in capacity will take place at JNPT, Kandla, Mormugao, New Mangalore, Mumbai, Chennai and Paradip, mainly to handle POL, coal and container traffic.

7.1.189 In order to augment the resource base for the development of ports as envisaged above, there are a number of other steps that need to be taken including structural changes in the management of major ports. They are discussed in the subsequent paragraphs.

Corporatisation of Ports

7.1.190 The provisions of the Major Port Trusts Act, 1963 do not allow operation of services by Port Trusts on commercial lines. The approval of the Central Govt. is required in a majority of decisions. Under this restrictive ambit, the ports are unable to operate in a market oriented economy with flexibility in commercial operations.

  • The present organisational structure of the major ports in the form of Port Trust presents many problems. It creates time lags in decision making and is not conducive to such commercially oriented decision making needed for the management and operation of a modern port.
  • A corporatised organisational structure will impart administrative autonomy which will directly improve the efficiency and viability of operations . As a corporate entity Indian major ports would be able to raise resources through equity and debt from the market. Access to institutional finance will be easy since tangible assets will be available for use as collateral. Joint ventures with foreign ports and private sector will be smoother and more efficient in a corporatised framework.
  • Steps are being taken by the Govt. of India towards facilitating corporatisation. The Ennore port will be the first corporatised port which will be followed by Jawahar Lal Nehru port in the second phase. Action in respect of corporatisation of other ports will be taken up on the basis of a study and experience with regard to corporatisation of the earlier ports

Joint Ventures

7.1.191 A scheme for formation of Joint Ventures between major ports and foreign ports, between a major port and minor port(s) and between major ports and private companies (Indian and Foreign) has been approved. The objective is to attract new technology, introduce better managerial practices, expedite implementation of schemes, foster strategic alliances with minor ports for creation of optimal port infrastructure and enhance the confidence levels of the private sector in the funding of ports.

7.1.192 The existing norms of productivity of labour and equipment will be stepped up and manning scales rationalised. Mechanical aids and cargo handling techniques will be introduced.

7.1.193 The surplus labour under both cargo handling and non cargo handling categories will be identified, re-trained for other trades where feasible and re-deployed to the best extent possible for meeting the additional requirement of labour during the Ninth Plan period.

7.1.194 Systematic and well-designed training will be imparted to the port personnel to improve their skills and to prepare them for the switch over from conventional general cargo handling operations to more sophisticated container handling and also for fast bulk handling operations. The training will also be given to managerial officers to improve their managerial capability.

7.1.195 All efforts will be made to eliminate the multiplicity of agencies present in commercial cargo handling operations and ensure unified cargo handling labour with complete inter-changeability between shore and ship. The start made in this direction at the Mumbai and Cochin ports for the merger of Dock Labour Boards with Port Trusts may be continued and extended to other ports.

7.1.196 The complementary role of intermediate and minor ports to major ports in handling domestic and international traffic is well recognised and necessary assistance will be extended for selective development and modernisation of such ports showing potential and promise.

Private Sector Participation

7.1.197 The broad objectives of participation of private sector in port development have been to bring about an improvement in efficiency, productivity and quality of service as well as to usher in competitiveness in the provision of port services. In addition, the private sector is expected to mobilise adequate resources required for capacity augmentation and to introduce the latest technology and improved management techniques in the ports sector.

7.1.198 The modernisation and augmentation of capacity at major ports to meet the projected traffic demand require huge investment. With a view to harnessing sufficient resources, ushering in an element of competition and introducing the latest technology and improved management techniques, the Government has opened up the port sector for private participation. The Major Port Trusts Act 1963, permits private sector participation in port development and as such, no specific legislation is necessary for ensuring private sector participation in this sector. The issue of private sector participation in ports gained momentum during the Eighth Plan and the focus shifted from leasing of existing assets to creation of new port assets through private sector participation. In order to ensure transparency and uniformity, detailed guidelines have been laid down in respect of the procedures to be followed for inviting private investment. The Government has already awarded the project for construction, management and maintenance of two berths container terminal on BOT basis at JNPT to a consortium headed by an Australian firm. The cost of the project is around Rs.700 crore to be spent in three years. The new terminal will augment the container handling capacity at JNPT to around one million TEUs annually. Other ports are also preparing/implementing projects to augment capacity through private investment.

7.1.199 The following areas have been identified by the Government for private sector participation in the ports sector :

  1. Leasing out assets of the ports
  2. Construction and operation of container terminals, multipurpose cargo berths and specialised cargo berths, warehousing, storage facilities, tank farms, container freight stations, setting up of captive power plants, etc.
  3. Leasing of equipment for cargo handling and leasing of floating rafts from the private sector.
  4. Pilotage.
  5. Captive facilites for port-based industries.

7.1.200 In order to attract the much needed private sector participation in the port sector during the Ninth Plan, it has been decided to amplify the guidelines to enable the major ports to forge joint ventures in the field of port development and operations with Indian companies having/not having foreign equity. Joint ventures will also be forged between major ports and maritime State Governments in respect of projects in their own ports or other ports or ports of maritime State Governments. During the Ninth Plan, with a view to bringing in global technology in port development and operations, it is envisaged to promote tie-up between Indian major ports and suitable foreign State ports, like Singapore/Rotterdom etc. under a Government to Government bilateral assistance programme, which would obviate the need to follow the tender route and help in the speedy implementation of various projects in the port sector.

7.1.201 Further, to make the system transparent and streamlined, an independent Tariff Authority for Major Ports has been set up to deal with tariff matters. The Authority will fix and revise the various port charges and the charges to be collected by private providers of ports facilities and publish the same from time to time.

7.1.202 During the Ninth Plan, an ambitious investment plan through private sector participation is to be initiated. In addition to plan allocations for major ports, resources to the extent of Rs. 8000 crore are likely to be available for development of ports. A major portion of this investment is expected from the private sector.

Science and Technology

7.1.203 In the light of the rapid technological changes taking place in the maritime industry, the three major areas, where automation will be aimed at during the Ninth Plan, are :

  1. use of Vessel Traffic Managements System (VTMS) to facilitate night navigation and help in safe pilotage of vessels at the port channels.
  2. use of computers in cargo handling operations (especially in container terminals) as without a well developed data base and computer system to monitor the operations, efficiency in container handling operations cannot be realised.
  3. use of Electronic Data Interchange (EDI) for trade related document transactions to enable the ports and the port user community to usher in computer networking.

Manpower Planning

7.1.204 Initially, the handling of cargo for loading/unloading of ships in the Indian ports was to be done manually and was highly labour intensive. This scenario has changed with the advent of technological development in the maritime transportation system. The emphasis has shifted towards carriage of goods in larger vessels, and mechanised loading/unloading . The cumulative outcome of all these has been handling a larger quantity of cargo with less number of workers at the Indian ports.

7.1.205 The manning scales were evolved over a period of time based on local conditions and other factors that prevailed at individual ports. The existing norms of productivity of labour and equipment can be stepped up and the manning scales rationalised based on a more rationalised categorisation of cargos, introduction of mechanical aids and cargo handling techniques. Innovative efforts, including private sector participation in maintaining and leasing equipment, need to be initiated to improve the productivity levels at ports.

Development of Intermediate and Minor Ports

7.1.206 Minor/intermediate ports are in the concurrent list of Constitution of India. The primary responsibility of their development and management rests with the concerned maritime State Governments. There are 163 minor and intermediate ports, out of which 139 are stated to be operable at present. Only a few of these ports are well developed, providing all -weather alongside berthing facilities, each handling over 1.0 million tonnes per year. Many are only fair weather ports. The minor ports handle cargo like fishery products, foodgrains, fertilizers, building materials etc.

7.1.207 The traffic handled by the minor ports is continuously on the rise. Traffic handled by these ports has increased from 12.78 million tonnes in 1990-91 to 24.93 million tonnes in 1996-97. Currently, nearly 10% of the total traffic is being accounted for by the minor ports.

7.1.208 The role of minor ports is increasingly assuming importance owing to the development of coastal shipping and is viewed as an alternative to the over-congested major ports. Therefore, there is an urgent need for the concerned States to provide adequate funds for the development of minor ports so that they can effectively cater to coastal and sailing vessels and thereby serve as instruments for the development of hinterland. The Ministry of Surface Transport, Government of India as major policy initiative setup a Committee for Navigational Safety in Ports (NSPC) to take care of all aspects of navigational safety, navigational aids, pilotage, hydrographic survery etc., covering new and existing minor/captive/private ports. The Ministry of Surface Transport has also set up a Maritime States Development Council under the chairmanship of the Minister for Surface Transport with Transport/Port Ministers from Maritime States as members with a view to coordinating the developmental activities of minor ports.

7.1.209 For proper development of port infrastructure and to check wasteful duplication of port facilities, an integrated approach will be evolved in the Ninth Plan to ensure utmost coordination among the major and minor ports.


  • Traffic at Indian ports in the year 2020 is estimated to be 1,200 million tonnes whereas the existing capacity at the major ports can, at most be expanded to 550 MT. Future expansion in port capacity therefore has to come through development of minor ports in a manner complementary to the major ports.
  • The responsibility for developing minor/intermediate ports vests with the concerned State Governments. However, the Government of India has also taken a number of steps to facilitate minor port development including amendments to the Major Port Trusts Act, 1963 to facilitate joint ventures between major and minor ports to enable them to access institutional funding and adopt the latest port management techniques.
  • Gujarat has taken the lead in planning the development of 10 green field ports of which 6 would be exclusively under the private sector. These projects are likely to involve an investment of Rs.14,566 Cr. The ports to be developed by the private sector are to be given on BOMT (Build Operate Maintain and Transfer ) basis.
  • Maharashtra has decided to invite competitive bids for the development of 7 minor ports (out of 48 in Maharashtra) on Build Own Operate Transfer (BOOT) basis. In addition the State Govt. has also formulated a policy for allocation of sites for captive jetties required by port based industries in the other minor ports.. Many in principle approvals have also been given to some companies for construction of private jetties to handle cargo.
  • Andhra Pradesh has embarked on a minor port development strategy in respect of two intermediate ports at Kakinada and Machilipatnam and 10 minor ports. During the Ninth Five Year Plan the State Govt. has decided to develop five ports viz., Kakinada, Machilipatnam, Vodarevu, Nizampatnam and Bhavanapadu at an estimated cost of Rs.41.02 Cr. The development of Deep Water Port at Kakinada taken up with ADB loan assistance is completed and ships are being handled from October, 96 successfully. The State Govt. has also decided to privatise the operation and maintenance of the existing three berths on Operate Maintain Share and Transfer (OMST) basis and the future berths to be constructed on Build Operate Share and Transfer (BOST) terms. In Phase I the ports of Kakinada, Machilipatnam, Krishnapatnam and Nizampatnam were offered to the private sector and the remaining ports in Phase II.

Andaman and Lakshadweep Harbour Works (ALHW)

7.1.210 The ALHW executes the Plan projects related to the development of port and harbour facilities in the Union Territories of Andaman and Nicobar Islands and Lakshadweep. During the Eighth Plan, Rs.70.84 crore were spent on the schemes run by ALHW.

7.1.211 In the Ninth Plan, the emphasis has been given on completion of spillover schemes of the Eighth Plan and to carry out new schemes based on future requirements as indicated in the "Master Plan for Transport System in the Andaman and Nicobar Island and Lakshadweep" prepared by the Expert Committee and the recommendations of the Expert Committee (1986) set up for the "Development of Harbours in Lakshadweep". Both these Expert Committees were set up by the Ministry of Surface Transport.

Minor Ports Survey Organisation (MPSO)

7.1.212 The MPSO was created in 1962 for carrying out hydrographic surveys of minor ports and inland waterways. This organisation works on "no profit, no loss basis" and charges for the survey undertaken. At present, this organisation is carrying out hydrographic surveys required for the construction and expansion of ports and harbours, inland waterways, survey of rivers for navigation and flood control, coastal erosion and general navigational surveys of harbours. During the Eighth Plan, the MPSO has spent Rs. 11.40 crore in its survey-related activities.

Dredging Corporation of India (DCI)

7.1.213 The DCI was created in 1976 to provide integrated dredging services to the major ports, minor ports, etc. The DCI has a modern fleet of seven trailer suction hopper dredgers, two large cutter suction dredgers with pipelines, one ocean going tug and three inland dredgers and other allied crafts.

7.1.214 It was projected that 131 million cubic metres of capital dredging would be undertaken during the Eighth Plan period. Against this, only 46 million cubic metres of capital dredging has been actually carried out. During the Eight Plan, DCI spent Rs.88.43 crore on the dredging - related activities.

7.1.215 The Ninth Plan proposals have been formulated keeping in view the following needs: (a) replacement of DCI dredgers which are more than 15 years old: (b) augmentation of dredging capacities to meet the maintenance requirements of major and minor ports; (c) meeting the emerging needs of IWAI for Inland dredgers and (d) providing for ship-repair facilities for DCI dredgers. The projected dredging requirements during the Ninth Plan period is estimated to be around 534 million cubic metres comprising of capital dredging of 142 million cubic metres and maintenance dredging of 392 million cubic metres.



7.1.216 The role of shipping in promoting trade and economic development in a country has been recognised by maritime countries world over. For India, with a coast line of about 5560 kms. studded with 11 major ports and more than 139 operable minor and intermediate ports, this sector is of vital importance. At present, over 90% of its international trade in terms of volume and 77% in terms of value is moved by sea.

7.1.217 In all, there are 80 shipping companies including the public sector, Shipping Corporation of India (SCI) in the country. Of these, 10 principal private companies own a fleet of 115 ships with a tonnage of 2.245 million GRT accounting for 32.7% of the total tonnage. The largest shipping company is SCI. It owns 118 ships with a tonnage of 3.037 million GRT accounting for 44.2% of the total tonnage.

7.1.218 The financial position of most of the shipping companies has improved over a period of time. The financial position of SCI has also shown an encouraging trend. There has been a steady improvement in the financial performance of SCI over the years. The net profit of the company increased from Rs.109 crore in 1990-91 to Rs.143.18 crore in 1992-93 and to Rs.323 crore in 1995-96 but came down to Rs.233 crore in 1996-97.

7.1.219 An analysis of the age-profile of the Indian fleet, however does not depict an encouraging picture. A large number of vessels have either completed their economic life or are due to complete it in the near future. Nearly 15% of the total fleet is in the age group of above 20 years and 56% in the age group of 11 to 20 years, thus leaving only 29% in the age group of below 10 years. 31% of the ships owned by SCI is in the age group upto 10 years, 56% between 11 and 20 years and another 13% in the age group of more than 20 years.

7.1.220 The Indian shipping industry also plays a prominent role in foreign exchange (FE) earnings of the country. During 1996-97, the Indian shipping industry earned foreign exchange to the tune of Rs.5008 crore, as compared to Rs.3176 crore during 1992-93. The FE earnings of SCI were higher at Rs.2310.06 crore during 1996-97, compared to Rs.1745 crore during 1994-95.

7.1.221 The share of Indian shipping in India’s overseas trade is continuously declining, after attaining the peak level of about 41% in 1987-88. At the beginning of the Eighth Plan, the share of Indian flag ships in its overseas trade was nearly 36% and by the terminal year of the Plan it dropped to 28 percent. This decline can be attributed mainly to the stagnating fleet strength, despite the fact that India’s exports and imports have grown at an average annual rate of 18 percent. The liberalisation of the Indian economy has sparked of a rapid growth in imports necessitating the country to promote the shipping sector so as to generate foreign exchange earnings/savings. The requisite fleet expansion programme needs to come through both the public and the private sectors.

Eighth Plan Performance

7.1.222 Indian shipping has made a steady progress during the post-independence period. The Indian tonnage, which was only about 1.92 lakh GRT on the eve of independence, reached 6.6 million GRT by the beginning of the Eighth Plan.

7.1.223 For the expansion of Indian tonnage, the Government has taken a number of steps during the Eighth Plan. These include liberalisation of the procedures regarding acquisition of vessels, liberalisation of ship repair procedure outside India and amendment of the Merchant Shipping Act to facilitate external commercial borrowings by the shipping companies. As a result of these policy initiatives, the Indian tonnage has exceeded the Eighth Plan target of 7 million GRT in December, 1995 itself i.e. more than a year ahead.

Eighth Plan Thrust Areas

7.1.224 The thrust areas in the shipping sector during the Eighth Plan included scrapping of obsolete vessels, acquisition of modern fuel-efficient vessels, gradual delicensing and deregulation of the shipping industry, cargo support to Indian shipping, human resource development etc.

7.1.225 In order to develop the Indian shipping industry, a new shipping policy was initiated in 1991. The several policy measures initiated since then are summarised below:

  1. No approval is required for acquisition of ships, except small crafts.
  2. No approval is required for sale of ships and acquisition of ships from an Indian shipyard.
  3. Shipping companies are given freedom to time charter out Indian ships.
  4. Shipping companies are allowed to retain the sale proceed(s) of their ships abroad and utilise the same for fresh acquisition.
  5. Shipping companies are allowed to acquire vessels through bare boat charter-cum-demise method.
  6. The shipping companies are permitted to get their ships repaired in any shipyard without seeking prior approval of the Government.
  7. Quarterly Block Allocation Scheme for repair of ships has been dispensed with entirely and the RBI now releases foreign exchange for ships repair/drydocking and spares for imported capital goods without any value limit.
  8. Certain sections of the Merchant Shipping Act have been amended to facilitate external commercial borrowings by the Indian shipping companies for acquisition of ships from abroad.

Plan Outlay and Expenditure

7.1.226 The details of the Eighth Plan outlay and the progress of expenditure for the shipping sector are given in Table 7.1.15

                   Table 7.1.15
               Plan Outlay and Expenditure
Scheme            8th Plan         1992-96           1996-97           8th Plan    
                  1992-97          Expdr.           ------------------   Expdr. 
                  Outlay          (Actual)          Outlay      Expdr.          
1. Shipping       3300.00          2390.78         1895.03     267.80     2658.58 
Corpn.of India
2. Interest Subs-    1.82            Nil              -            -         -
idy for sailing
3. DG Shipping      98.18            89.81           25.01      14.50      104.31  
Total             3400.00          2480.59         1920.04     282.30     2762.89

Externally Aided Projects

7.1.227 To meet the training needs, the Directorate General of Shipping is in the process of upgrading and modernising the training equipments through a grant-in-aid from the Government of Japan. The on-going schemes relate to acquisition of three simulators, namely ship handling simulator; engine room simulator and liquid cargo handling simulator. These simulators have since been acquired and become operational.

Tonnage Acquisition Target for the Ninth Plan

7.1.228 The emphasis during the Ninth Plan will be mainly on maintaining the existing share of Indian flag vessels in its overseas trade. At present, the share of Indian shipping is as follows:

  1. In the liner trade it is 9.8 per cent, as against India’s entitlement under UNCTAD Liner Code of 40 per cent.
  2. In the dry bulk trade it is 15.6 per cent as against the expectation of 50 per cent.
  3. In POL products it is 51.8 per cent as against the expectation of 80 percent.

7.1.229 The shipping tonnage of 7.13 million GRT of the Indian fleet represents 1.4 per cent, of the world tonnage of 507.87 million GRT as on Ist July, 1996. To maintain the existing share, the ideal level of Indian tonnage should be around 14 million GRT by the end of the Ninth Plan. But, keeping in view the ground realities like the prevailing difficult conditions in international shipping, shortage of trained and qualified manpower, and constraint of resources, a tonnage of 9 million GRT has been set as the target for the Ninth Plan. The additional tonnage would be 50 per cent newly built ships and 50 per cent second-hand acquisitions.

Ninth Plan - Thrust Areas and Strategy

7.1.230 Recognising the role of the shipping sector in the context of the over-all growth strategy in general and the promotion of export and foreign exchange earning in particular, modernisation and diversification of Indian fleet will be accorded top priority during the Ninth Plan. The other objectives are:

  1. The world of shipping has undergone a structural change with the introduction of container vessels. The strength of the Indian fleet will be augmented with the acquisition of modern fuel-efficient vessels particularly suited for handling container cargo.
  2. To remove the constraints with a view to achieving the target of 9 million GRT, the endeavors in brief, will be to (a) create a conducive environment for raising resources from the capital markets and external borrowings, (b) relax the existing constraints of licensing and sectorwise allocation of tonnage in India’s overseas and coastal trade in a phased manner; (c)provide further autonomy in ship acquisition; (d) address the issues of recruitment, training and retention of manpower in Indian Flag vessels; e) make appropriate amendments to the Merchant Shipping Act: (f) ensure speedy development of coastal shipping.
  3. Innovative means will be considered for the expansion of the fleet. The setting up of subsidiaries off shore, dual registration of ships and foreign investment either as joint ventures or directly will be encouraged.
  4. The system of cargo cupport of canalising the cargo of public undertakings and Government Departments/ agencies through Transchart arrangement will continue. The present policy of purchase on FOB and sale on CIF terms is to be followed vigorously.
  5. The infrastructural facilities at the ports will be geared not only to relieve the existing congestion but also to take steps to develop the ‘hub and feeder’ system to enable them to handle large containerised vessels in an efficient manner. The repair facilities will be strengthened to meet the requirements of the shipping sector.

Coastal Shipping

7.1.231 Coastal shipping is one of the most energy efficient and the cheapest mode of transport for movement of bulk commodities over long distances. It entails no investment in line-haul capacity except in navigational aids and terminal facilities. Considering the vast coast line and severe congestion faced by the land modes of transport, the coastal shipping offers an effective alternative means of transport. The land route particularly along Chennai, Visakhapatnam on the east coast is parallel to the coast thereby holding the potential for diversion of rail/road cargo to the sea route which will result in immense savings owing to the energy efficiency of this mode of transport.

7.1.232 Presently, the cargo moved by coastal shipping comprises coal, clinker, cement, crude oil, POL and iron ore. Over the years, the general cargo, which is an important component of the coastal trade, has been weaned away by other modes of transport. Thermal coal is presently the major commodity moved by coastal shipping with a share of 63% followed by POL (23%) and iron ore (12%). General cargo accounts for just 1% of the total coastal cargo.

7.1.233 The development of coastal shipping has been slow despite the fact that the entire coastal trade is reserved for Indian vessels. The shipowners are reluctant to acquire dedicated coastal vessels due to various impediments such as complex customs procedure, time-consuming system of port clearance, high manning scales at par with overseas shipping, poor port infrastructure etc.

7.1.234 One of the important thrust areas during the Ninth Plan will be the development of coastal shipping so that the potential of this mode of transport could be tapped with a view to relieving the pressure on other surface modes of transport.

7.1.235 The Ninth Plan target of coastal tonnage is around 1 million GRT, as compared to 0.7 million GRT as at present. This target has been fixed in view of the increased movement expected for commodities like coal, iron ore, clinkers etc. in the Indian coast on account of new projects which are coming up biz. Power plants (involving coal movement), mega refineries (involving POL movement), new cement plants on the west coast (involving movement of coal, clinker and cement) etc.

7.1.1236 Though the target is modest, it can be achieved only if the various constraints to the growth of coastal tonnage are removed. The low productivity at major ports, the paucity of ship repair services and the relative under development of minor ports all affect the operations of coastal shipping very adversely. A package, which may include the creation of infrastructure facilities, the simplification of customs procedure, fiscal incentives for development of coastal shipping and synchronising minor port development with the needs of coastal shipping is essential to remove the various impediments hampering its growth.

7.1.237 The development of coastal shipping in the country warrants that it should be accorded a status at par with other modes of domestic transport system without subjecting it to rigorous customs procedures. Further, there is a need to develop water transport as a part of a multi-modal transport system to connect the major\minor ports with the hinterland in a cost- effective manner for the efficiency of the maritime trade to increase the tonnage handled in our ports. Development of minor ports is a necessary precondition for according coastal shipping its proper place in the domestic transport system. While developing these ports special care should be taken to ensure that adequate infrastructure is provided for onward transmission of goods to hinterland.

Manpower Planning

7.1.238 The ship acquisition target set for the Ninth Plan will require more than 10,000 trained crew to man them. In addition, India is endowed with a tremendous potential to enter into the field of export of manpower services which has become a major source of foreign exchange earnings in developing countries like Philippines and South Korea. This warrants not only the strengthening of the existing training institutes approved by the DG(Shipping) but also initiatives being taken urgently to supplement the efforts of DG (Shipping) by the development of private merchant marine training institutes and involvement of other major players in the field.

7.1.239 Keeping in view the enforcement of stringent standards of training and certification of merchant marine personnel in the wake of the implementation of IMO Convention, it is necessary to upgrade the existing training facilities. State-of-the-art simulators will need to be acquired besides other training equipment, to strengthen the training infrastructure.

Lighthouses and Lightships

7.1.240 The Department of Lighthouse and Lightships is a revenue earning Department and derives its income from light dues and light charges from ships. During the Eighth Plan, the anticipated revenue earning is Rs.266 crore.

7.1.241 The Eighth Plan provided an outlay of Rs.57 crore. Against this, the expenditure has been Rs.25.48 crore.

7.1.242 In the Ninth Plan, emphasis will be placed on automation of existing lighthouses, improvement in visual aids, replacement of existing light house tenders and improvement of training facilities. Establishment of new light houses would be considered on a selective basis.



7.1.243 Inland water transport (IWT) is an energy efficient and cheapest mode of transport for bulk commodities originating and terminating on the water fronts. It has a high employment potential. However, at present it forms a very small part of the total transport network. In terms of tonne kilometres its share is less than 1 per cent. The main reason for the small share of IWT is its spatial limitation.

7.1.244 India has navigable waterways aggregating 14,544 kms., of which only about 5,200 kms. of major rivers and 485 kms. of canals are suitable for operation of mechanised crafts. Most of the waterways suffer from navigational hazards like shallow waters and narrow width of the channel during dry weather, siltation, bank erosion, absence of infrastructure facilities like terminals and inadequacy of navigational aids. The existing availability of vessels for IWT in the public and private sectors put together is less than 400 vessels including tankers, bulk carriers, dumb barges and others of average capacity of 600 tonnes.

7.1.245 Inland water transport was given priority commencing from the Sixth Plan by laying stress on the development of waterways and modernisation of vessels. The two Central Government organisations namely, the Inland Waterways Authority of India (IWAI) and the Central Inland Water Transport Corporation Ltd. (CIWTC) together constitute the basic machinery for bringing about a visible growth of the IWT sector. The Inland Waterways Authority of India (IWAI) was set up in October, 1986 to coordinate and implement various Central schemes for the development of waterways. Three waterways have been declared as "National Waterways". These are : Allahabad-Haldia stretch of Ganga-Bhagirathi Hooghly river system; Sadiya-Dhubri stretch of Brahamputra river and the West Coast Canal (Kolla-Kottapuram) alongwith Chempakara Canal and Udyogmandal Canal. A number of hydrographic surveys and techno-economic studies have been undertaken on various waterways.

7.1.246 The Central Inland Water Transport Corporation (CIWTC) was set up in 1967 by the Government to (i) operate river services, (ii) build ships for which it has a ship building yard at Rajabagan and (iii) undertake ship repair. The CIWTC has been incurring heavy losses. Its capacity remains under-utilised for want of adequate traffic offerings.

Review of Eighth Plan

7.1.247 Inland water transport was given a high priority during the Eighth Plan. A provision of Rs.240 crore was made for IWT for the Eighth Plan, against which only a sum of Rs.63.94 crore was spent.

7.1.248 There has been a wide gap between the Plan allocation and actual expenditure. Only 26% of the allocated funds have been utilised by the IWT sector during the Eighth Plan. There have been major shortfalls in the implementation of the schemes related to modernisation of Rajabagan dockyard, vessel acquisition and development and maintenance of West Coast canal. In general, there have been delays in conceptualisation and execution of the schemes and in achieving the physical and financial targets set for the IWAI and the CIWTC during the Eighth Plan.

7.1.249 The cargo moved by the CIWTC has not shown any upward trend and in fact it constituted a very insignificant proportion of the total cargo moved by IWT mode. In contrast the private operators in Goa have shown a remarkable progress and maintained a steady upward trend in terms of iron ore movement by IWT. The private operators in Calcutta have also made considerable progress in increasing their tonnage.

Ninth Plan - Thrust Areas and Strategy

7.1.250 The potential of cargo movement by the declared National Waterways and other waterways is estimated to be 50 billion tonne kms. by 2005, compared to the current level of less than one billion tonne kms. Considering the potential role and significance of IWT, it is necessary that a substantial step-up in the traffic is achieved in the Ninth Plan, so that the IWT sector will be able to launch itself as a future alternative mode of environment-friendly transport system in the sectors identified for its growth. It is estimated that a shift of one billion tonne kms to IWT will reduce the fuel cost by Rs.25 crore and the cost of transportation by Rs.45 crore.

7.1.251 Keeping in view the constraints facing IWT and recognising its potential for growth, the thrust will be to make IWT as an acceptable mode of transportation. The basic requirements identified are: reduction in cost and time of transportation and enhancement of safety and reliability of the cargo. To achieve this, fairway, fleet, terminals and navigational aids are pre-requisites and unless these facilities are provided, IWT will not be able to offer its inherent advantages in terms of cost of transportation and fuel saving.

7.1.252 To achieve a substantial step-up in traffic in the Ninth Plan the thrust should be on the creation of infrastructure in the form of fairways with adequate depth and width besides the setting up of terminals and navigational aids. At the same time, there is a need to augment the IWT fleet by suitable type of vessels and ensure adequate cargo support. The objective of developing IWT as an important mode of transport cannot be achieved only through the provision of budgetary support to the State enterprises. The private sector has to play a crucial role in the development of the sector. The private sector may be involved not only with ownership and operation of vessels for cargo and passengers but also with the construction and operation of terminals and river ports, the provision and operation of mechanised cargo handling system, fairway development including dredging, provision and maintenance of navigational facilities and provision of pilotage services. In order to attract the private sector for development of this mode, suitable fiscal incentives as well as measures aimed at providing cargo support need to be considered. The Inland Waterways Authority of India (IWAI) is the nodal agency for the development of the navigational infrastructure in the National Waterways.

7.1.253 Considering the huge requirements of investible funds, there is also a need for taking suitable policy initiatives to channelise the funds for identified user agencies.In the Ninth Plan, efforts will be made for pooling the resources through captive users such as public sector undertakings dealing with oil, coal, fertilisers and cement. These agencies will be encouraged to make liberal investment in IWT sector either as soft loan or as capital investment which would be recoverable either directly or indirectly over a period of time.

7.1.254 Another important avenue to be explored as a source of funding for the IWT projects would be the external resources. Investment in potential waterways as turn-key package with external assistance may be explored as part of privatisation.

7.1.255 Efforts will be made to strengthen the activities of CIWTC through its fleet acquisition programme to facilitate movement of cargo through mechanised cargo-vessels. Its performance specially in terms of fleet capacity utilisation needs urgent improvement.

7.1.256 Modernisation of waterways needs to be planned to facilitate 24-hour navigation in the inland waterways. To meet this goal, a number of lighted buoys are to be provided along the entire water route. Possibilities will be explored for private participation in the provision of turn-key project for the supply, installation and maintenance of lighted buoys.

7.1.257 Special emphasis would be laid on the development of inland water transport facilities in the North-Eastern region. The main bulk commodities, which can be considered suitable for inland water transport movement are coal, POL, foodgrains, limestone and dolomite etc. The development of inland water transport facilities in the North-Eastern region would ensure cost effective transportation of the above mentioned commodities.

7.1.258 In the past, there have been delays in the formulation and execution of the schemes/projects on account of organisational constraints. Accordingly, human resource development is also essential if the Plan objectives are to be achieved. With the objective of making IWT economically viable and self sustaining, a massive increase in its outlay has been suggested.

Need for inter-sectoral coordination

7.1.259 Interlinking waterways and ports with coastal shipping holds good prospects in respect of several river systems in India. For instance, Ganga- Brahmaputra-Sunderbans river system has the potential to be integrated with Haldia-Calcutta ports, the Brahmani-Mahanadi river system with Paradip port, Krishna-Godavari-Buckingham Canal with Chennai port, West Coast Canal with Cochin port and the Mandavi-Zuari-Cumberjua Waterway with Mormugao Port. The development and connectivity of these waterways with the ports will not only ensure development of the entire hinterland but will also help in relieving the pressure on the other already congested modes of transportation. Research and Development in IWT sector

7.1.260 Due to the nascent stage of development of the IWT sector, R and D has to play a crucial role in the development on this sector. Design of low-cost and shallow-draft vessel and introduction of navigational aids are important factors for improving the economics of IWT. In view of this, during the Ninth Plan, an R and D Cell will be set up in IWAI to act as a nodal agency to coordinate the R and D activities required to be carried out in this sector.

Manpower Planning

7.1.261 Being labour-intensive in nature, the IWT sector has the potential for creating employment generation to many categories of personnel for river conservancy and river-development activitiies, operation and maintenance of terminals and in particular, for manning the inland vessels.

7.1.262 The requirement of trained manpower in the IWT sector can be classified into two groups. The first category would consist of professionals in various fields, like hydrography, navigation, civil engineering, mechanical engineering, naval architecture and transport economics for the development and management of the waterways and operation of various supporting infrastructural facilities. The second category of personnel would be required for operational purposes to man the inland vessels.

7.1.263 For building up trained and skilled manpower for IWT operations, the augmentation of Human Development Programme will be accorded priority and the setting up of a National Inland Navigation Institute, Regional Navigational Institutes and Regional Crew Training Centres will be considered during the Ninth Plan.

7.1.264 The safety record of inland water transport is not very encouraging. The various factors such as navigation aids etc. suggested earlier for the development of inland water transport would help in improving the safety of inland water transport operations.



7.1.265 The civil aviation sector is broadly structured into three distinct functional entities, namely regulatory-cum-developmental, operational and infrastructural. The regulatory functions are performed by the Directorate General of Civil Aviation(DGCA) and the Bureau of Civil Aviation Security (BCAS). The operational functions are performed by Air India Ltd., Indian Airlines Ltd., Pawan Hans Helicopters Ltd. and other scheduled/non-scheduled airline operators. Air India Ltd. (AI) provides international air services to/from India. Indian Airlines Ltd.(IA) and other scheduled/non-scheduled operators are responsible for providing domestic air services in the country. Indian Airlines Ltd. also provides international air services to some of the neighbouring countries. Pawan Hans Helicopter Ltd. provides helicopter support services primarily to the petroleum sector.

7.1.266 The infrastructural facilities are provided by the Airports Authority of India, which is responsible for the management of 92 airports, including the five international airports at Delhi, Mumbai, Calcutta, Chennai and Thiruvananthapuram, and 28 civil enclaves at the defence airports. The Indira Gandhi Rashtriya Uran Akademi (IGRUA) is the premier flying institute responsible for imparting flying training for award of Commercial Pilots Licence and Commercial Helicopters Pilots Licence. Hotel Corporation of India, a subsidiary of Air India Ltd., is responsible for providing in-flight catering and it also operates hotels in the vicinity of airports for catering to the transit passengers.

Review of the Eighth Plan

7.1.267 Several significant developments took place in the field of civil aviation during the Eighth Plan period. With the repeal of the Air Corporation Act 1953 in 1994, the monopoly of Indian Airlines, Air India and Vayudoot over scheduled air transport services ended. Consequently, 6 private operators, who were hitherto operating as air taxis, were granted the status of scheduled airlines. During Eighth Plan, 7 scheduled operators and 19 air taxi operators have been given permits for operation of domestic air transport services in India. Air India Ltd. and Indian Airlines Ltd. were registered as companies under the Companies Act, 1956 and the undertakings of Air India Corporation and Indian Airlines Corporation were transferred to the respective new companies w.e.f. 1.3.1994. With the enactment of the Airports Authority Act, 1994, the two airports authorities viz. the International Airports Authority of India (IAAI) and the National Airports Authority (NAA) were merged w.e.f. 1.4.1995 to form a single unified body, viz., the Airports Authority of India (AAI). Vayudoot Ltd. was merged with Indian Airlines Ltd. w.e.f. 25th May, 1993.

7.1.268 Against an outlay of Rs. 3998 crore a sum of Rs. 7096.58 crore was spent during the Eighth Plan. The details of the outlays and expenditure during the Eighth Plan period for different constituent units in the civil aviation sector are given at Annexure-7.1.20. The bulk of the expenditure (98.76%) was financed from internal and extra budgetary resources (IEBR). The plan of Air India, Indian Airlines, Pawan Hans and Hotel Corporation of India were entirely financed from their IEBR.

Policy Framework and Programme for the Ninth Plan

7.1.269 In domestic air transport operations, the objective would be to provide adequate capacity, ensure healthy competition between the private and the public sector as also safe and reliable operations. To achieve this objective, the private sector would be encouraged to provide air service, while ensuring that only the technical and financially sound players enter the field. In this regard transparent norms would be worked out and regulatory mechanism strengthened with a view to promoting a healthy competition amongst the airlines and protecting the interest of the users.

7.1.270 Indian Airlines was virtually the sole provider of domestic air services for about four decades. With the opening of the domestic Civil Aviation sector, a number of Indian companies announced their plans to start an airline. However, a few of them really got started. Since many of them did not pursue the airline business, their licenses were cancelled. A couple of companies made an early exit after showing their presence for a while. The new airlines which remained in the field concentrated and over-expanded on trunk routes, made inroads into Indian Airlines market share on these routes and in the process reduced the capacity of the national carrier to subsidise the operation on other routes including those in backward and isolated areas. Led by over-enthusiasm these new entrants operated without adequate trained personnel and experience, sustained on the poached highly skilled manpower trained by the Indian Airlines and benefited by the route network developed by the national carrier during a period of more than four decades. While new entrants operated old aircrafts, which were heavy of fuel, Indian Airlines, faced with shortage of skilled manpower particularly pilots, could not fully utilise the rated capacity of the state-of-art aircraft acquired at a heavy cost. Unhealthy business practices and the tendency to offer more frills to the passengers brought about the financial ruin of some of the new entrants; in the process, financial health of the national carrier was also adversely affected.

7.1.271 The national carrier plays an important role in the provision of air services in the country. One of the policy objectives for the development of civil aviation in the 9th Plan would be to create a proper environment to enable the national carriers to operate to full capacity and bear the social burden which it is required to carry and, in the process, ensuring that the country gets adequate return for investment made in developing infrastructure, in training highly skilled manpower and in acquisition of the sophisticated and costly array of equipments and instruments.

7.1.272 The bulk of the capacity of both the Indian Airlines and the private operators is deployed on trunk routes carrying heavy traffic. The regional routes, particularly, in isolated and backward areas are characterised by shorthaul operation un-economic load factor, high cost of operation and low revenue yield. The operations on these routes are usually unviable. In order to ensure that the scheduled operators provide air services on these routes, Route Dispersal Guidelines were issued. Under these guidelines, scheduled operators operating on specific trunk routes are required to deploy a part of their capacity on regional routes including routes in backward and remote areas. However, the main burden for providing services on routes serving remote and backward areas is borne by the Indian Airlines. It is necessary that the financial losses of providing air services on these routes are shared equitably by all operators. It is equally important to ensure that remote areas are provided with reliable air services. To meet these objectives, a more transparent and enforceable mechanism for cross subsidising these routes from the surplus generated by operation on trunk routes will be evolved.

7.1.273 Air services for distances less than 300 kms. are generally uneconomical as compared to surface modes. The corridors where good surface transport modes can be introduced as an alternative to air services will be identified.

7.1.274 There are twenty airports in seven States in the North Eastern Region. Development programmes have been planned at the airports at Guwahati, Agartala, Shillong, Dimapur and Lilabari. In addition, development works are already in progress at airports at Imphal, Tezpur, Silcher, Dibrugarh etc., with the financial assistance from North Eastern Council. Further, two new greenfield aerodrommes are under construction under State Plan at Tura in Meghalaya and Lengpui in Mizoram. Efforts will be made for operating flights in the North Eastern Region to connect each State with Calcutta/Guwahati, preferably on a daily basis. In this connection, the recommendations of the High Level Commission on tackling the backlogs in basic minimum services and infrastructural needs would be kept in view.

7.1.275 International air services are governed by bilateral agreements. The general objective of India's bilateral civil aviation relations will be to provide adequate capacity to facilitate easy movement of international traffic to/from India. But in doing so, a balance will be struck between the interests of the national carriers on the one hand and promotion of trade, commerce and tourism and convenience of passengers on the other. A more liberal approach will be adopted while negotiating the opening up of new routes, under-served routes and routes providing connection to neighbouring countries.

7.1.276 The future development/upgradation of airports in the country will be undertaken on the basis of the role they are expected to play in handling the air traffic. Master Plans for the development of international, national and regional hubs shall be prepared and upgradation/modernisation taken up accordingly. Private sector investment will be encouraged in the construction of new airports from greenfield level and legal framework will be created for private/joint participation in the airlines and airport development projects.

7.1.277 Facilities for maintenance of aircrafts of domestic /foreign airlines will be developed and training of foreign pilots will be encouraged so as to promote regional cooperation and enhance foreign exchange earnings.

Air India Ltd.

7.1.278 The international passenger traffic passing to/from India has shown a growth of 4.8% per annum during the period 1987-94. The growth rate for foreign carriers has been 6.3% per annum whereas that of Indian carriers has been only 1.74 percent. As a result of this, the market share of Air India in the international passenger traffic has shown a steady decline from 32.8% in 1980 to about 21.3% in 1997.

7.1.279 The growth in capacity and traffic carried by Air India Ltd. during the Eighth Plan period is shown in Table 7.1.16.

                   Table 7.1.16
             Capacity and Traffic - Air India
(in million)
   Year           Capacity          Capacity       Load     
                  Available         Utilised       Factor
                  (ATKMs)           (RTKMs)         (%)
  1991-92         1973.1            1148.6         58.2
  1992-93         1904.7            1094.8         57.5
  1993-94         1912.9            1093.8         57.2
  1994-95         2316.2            1384.6         59.8
  1995-96         2610.4            1619.0         62.0
  1996-97         2452.1            1484.6         60.5

7.1.280 While the capacity increased by 24.27%, traffic registered a growth of 29.25% in the Eighth Plan. The financial performance of the Air India during the Eighth Plan period is indicated in Table 7.1.17.

                   Table 7.1.17
                     Air India - Financial Performance
                                                        (Rs. in crore)
Financial       92-93       93-94        94-95       95-96         96-97   
Revenue       2435.86      2581.76      2989.01     3426.55       3533.19
Expenses      2146.28      2459.96      2920.06     3647.56       3945.82
Profit/(loss)  289.58       121.80        68.95      221.01        412.63 
Total         2583.19      2767.96      3130.26     3562.70       3817.78
Total         2250.05      2566.06      3089.46     3834.54       4114.72
Net Profit/    333.14       201.90        40.80     (271.84)      (296.94)

7.1.281 Air India recorded profits during the first three years of the Eighth Plan. Its market share in the international traffic, however, declined during the period to a low level of around 20% in 1993. With the capacity injection through wet leasing of aircrafts, starting from December, 1994, the maket share improved to 21.3% in 1997. The profitability of Air India during the period, however, was seriously affected by a softening of yields, partly caused by the necessity of selling the higher capacity.

7.1.282 Air India's Gulf operations, which have been the most profitable segment in its network, have been badly hit by over capacity resulting from the combined effect of new entrants like Indian Airlines, Oman Aviation and Quatar Airways. The resultant decline in Air India's passenger load factors on the Gulf from 64.7% in 1992-93 to 57.9% in 1995-96 put a downward pressure on yields, straining the profitability of the airline.

7.1.283 The losses of Air India in Europe went up from about 85 crore in 1993-94 to about Rs. 188 crore in 1995-96 because of increased bilateral entitlements to European carriers, which, through higher capacities have led to fare wars and increased discounting in a bid to attract traffic. Further, the fall in the value of Indian rupee has affected Air India's profitability adversely, as its proportion of dollar- related expenditure is higher than its proportion of dollar- related revenues.

7.1.284 The key to improvement in the financial performance of Air India is in maximising yields and improving the net margins. To achieve this objective, Air India will intensify the marketing efforts, improve its product and on time performance. Given the capacity constraint and the need to maximise asset utilisation, Air India will also strive to increase the market share through code shares and alliances. The strategy will be to deploy maximum fleet of the airline on core network and derive feed by building up secondary network through alliance and tie-ups.

7.1.285 Air India has a number of routes which do not cover even their cash cost of operations but continue to corner the capacity. This calls for reducing the frequencies on these routes and redeployment of the released capacity on relatively profitable routes such as India- Gulf route. In the Ninth Plan as a part of turn-around strategy, route rationalisation and redeployment of capacity will be a dynamic function so that Air India would be able to respond proactively to variations in market demand.

7.1.286 The physical and financial performance of Air India will be examined in depth with a view to working out a comprehensive strategy for turn-around.

7.1.287 The fleet of Air India as on December 31, 1996 consisted of 28 owned aircrafts, comprising 9 Boeing 747-200, 2 Boeing 747-300, 6 Boeing 747-400, 8 Airbus A310-300 and 3 Airbus A300-B4 aircraft. At present, Air India's fleet consists of 5 types of aircraft having varied capacity and technical features. This necessitates higher investment in creation of infrastructure facilities which are sub-optimally utilised.

7.1.288 In the Ninth Plan, therefore, Air India will standardise its fleet to three aircraft types. The fleet with lesser aircraft types will require lesser investments on spares, maintenance facilities and simulators and will also result in better utilisation of aircraft infrastructural facilities and technical manpower of pilots and maintenance engineers.

Indian Airlines Limited

7.1.289 The long-term annual growth in domestic passenger traffic from 1960-61 to 1987-88 has been around 10% per annum. However, during the period 1988-93, the growth was erratic and negative on overall basis. Following the entry of private scheduled operators, making available additional capacity on domestic routes, domestic passenger traffic grew significantly in 1993-94. The growth, however, was not sustained and began to taper off from the very next year and later declined further to register a negative rate of growth in 1996-97.

7.1.290 The growth in capacity and traffic carried by Indian Airlines Ltd. during the Eighth Plan period is indicated in Table 7.1.18.

                                   Table 7.1.18
                           Capacity and Traffic - Indian Airlines

                                                                                             (in million)
         Year                   Capacity                  Capacity                            Load
                                  Available                  Utilised                             Factor
                                  (ATKMs)                (RTKMs)                            (%)
         1991-92             1089.9                          761.1                            69.8
         1992-93               967                            685                                70.9
         1993-94             1057                            695                                65.8
         1994-95             1026                            686                                66.9
         1995-96             1045.8                        722.7                              69.1
         1996-97             1075.2                        698.1                              64.9           

7.1.291 Indian Airlines achieved a negative growth of (-)1.34% and (-)8.28% in capacity and traffic, respectively in the Eighth Plan. This is largely because Indian Airlines could not utilise its fleet and other facilities optimally due to exodus of pilots and engineers after the opening up of the sector to the private operators. There was a marked decline in aircraft utilisation by Indian Airlines during the 1990s and the level achieved in 1995-96 for A-300, A-320 and B-737 aircrafts hovered between 1600 and 2200 hours, which is far below the previous or a desirable level of 2700 hours per annum per aircraft.

7.1.292 The share of Indian Airlines in the domestic market declined with the induction of capacity by other domestic operators. The loss in market share is largely concentrated on the trunk routes of Indian Airlines resulting in the private operators cornering almost half of this market segment.

7.1.293 The fleet of IA at the end of Eighth Plan consisted of 10 A-300 aircrafts, 30 A-320 aircrafts and 12 B-137 aircrafts.

7.1.294 The financial performance of Indian Airlines during the Eighth Plan period is indicated in Table 7.1.19.

                                                    Table 7.1.19
                                   Indian Airlines - Financial Performance
                                                                                                (Rs. in crore)
Financial                     92-93         93-94          94-95          95-96          96-97  
Revenue                 1513.12      1781.79      2044.72       2466.81    2848.55
Expenses                1592.01      1849.76     2008.48       2310.30     2713.24
Profit/(loss)            (78.89)        (67.97)          36.24        135.31       266.65
Total Revenue       1560.97     1816.37      2070.24      2489.84      2914.39
Total Expenses      1756.08     2074.83      2258.97      2599.82      2928.98
Net Profit/
(loss)                      (195.11)      (258.46)    (188.73)      (109.98)      (14.59)

7.1.295 The Airline has incurred losses during Eighth Plan period. The deterioration in the physical performance of the airline was reflected in its financial performance. The airline, which was making profits till the end of 1980s, started making losses since 1989-90. From 1989-90 to 1996-97 Indian Airlines has incurred losses of over Rs.1000 crore including a sum of around Rs.767 crore in the Eighth Plan. This has led to a severe reduction in the reserves of the Indian Airlines. Apart from the unsatisfactory physical performance, the reasons for poor financial performance after 1989-90 include the grounding of A 320 aircraft from February 1990 till October, 1990, the burden assumed by the airlines after the merger of Vayudoot and the absorption of high increase in the input cost by Indian Airlines.

7.2.296 Indian Airlines operations on routes in the North East and Jammu and Kashmir have been traditionally loss- making. But these operations are vital and have to be maintained. Earlier, Indian Airlines was able to cross-subsidise these routes from surpluses on profitable routes. With the introduction of private airlines and consequent decline in the market share and profitability on trunk routes, the capacity of Indian Airlines to cross-subsidise these routes has been severely eroded. Indian Airlines has been operating services to these areas well above the mandatory guidelines of DGCA. The losses suffered by Indian Airlines on account of operations on these routes amount to Rs. 325 crore for the period from 1989-90 to 1994-95.

7.1.297 A Committee of experts has examined the various causes of the deterioration in physical and financial performance of the Airlines and suggested turn-around strategies. In line with the recommendations of the Committee, the financial restructuring of the Indian Airlines would be carried out with the budgetary support from the Government . A fresh equity injection of Rs. 125 crore will be made by the Government of India to enable the Airlines to realign its presently unacceptable levels of leverage and also to serve as an indicator of the Government's continued commitment to the Airlines. As a part of financial restructuring the equity share holding of the Government in the Company will be brought down to 49%. The major effort, however, has to come from the organisation itself. It is, therefore, necessary that the airlines should continue to improve its product so as to remain a dominant airline particularly on the trunk routes. This objective will be achieved through better fleet utilisation and by ensuring healthier industrial relations oriented towards enhanced productivity.

7.1.298 Indian Airlines has to play a role distinct from that of privately owned commercial airlines. A leading carrier in domestic aviation in which considerable amount of public investment had been made in the past, Indian Airlines is expected to meet certain strategic requirements and provide services which may be essential in the national interest. Indian Airlines is to act as a leader of the airlines industry in the country in establishing safety norms, reliability, productivity as well as viability. Over the years, it has developed expertise not only in the provision of air services but also in the field of engineering services and development of highly skilled personnel. Indian Airlines, therefore, has the potential to develop as a dominant regional player not only as a provider of air services but also as an institution which can provide training and engineering services to other users and airlines, both domestic and regional.

7.1.299 In order that Indian Airlines play this role, it is necessary, on the one hand, to create a conducive policy framework; and, on the other, to take suitable financial and organisational measures to make the airlines a viable and a vibrant enterprise. This calls for the restructuring of Indian Airlines in which all stakeholders will be involved. Apart from financial restructuring aimed at improving its financial health and providing a sound capital base, organisational restructuring will also be carried out so that it can function as a company managed by a Board constituted of professionals. Indian Airlines has to be given autonomy in their day- to- day working without the Government relinquishing its responsibility. There is a need to evolve fleet planning strategy which takes into account the route structure of the Indian Airlines so as to ensure optimum utilisation of resources, particularly aircrafts.

7.1.300 The market share of Indian Airlines in the domestic passenger traffic is presently hovering around 65 percent. Indian Airlines has targetted a market share of around 55-60% in the Ninth Plan.

Airports Authority of India

7.1.301 The Airports Authority of India is responsible for management and development of civil airports and civil enclaves at Defence airports in the country. Apart from this, the Authority is also responsible for providing navigational facilities to the aircrafts operating in India.

7.1.302 In 1996-97, 3.96 lakh aircraft movements involving 243 lakh domestic and 122 lakh international passengers and 2 lakh metric tonnes of domestic and 4.8 lakh metric tonnes of international cargo were handled at the AAI Airports. Presently, air operations are being carried out only through 61 airports. The remaining are lying unutilised or at best handling occasional aircraft operations.

7.1.303 The Airports Authority of India was able to attain substantially the goal of upgradation of infrastructure and modernisation of communication facilities as well as maintenance of existing infrastructure during the Eighth Plan period. In order to keep pace with the growth of international trade and for promotion of exports the airport infrastructure was upgraded in terms of storage space, better handling capacities and development of cargo complexes particularly in Delhi and Mumbai airports. Investments were also made in respect of the hinterland airports, having potential for exports as well as tourism such as Agra, Jaipur, Ahmedabad, Varanasi, Lucknow, Thiruvananthapuram. Substantial investments were made for the development of air strips and upgradation of communication facilities and other infrastructure in remote areas like North-East, J and K, Andaman and Nicobar islands as private investment was unlikely on account of the remoteness of the areas and adverse economic factors. Twelve airports were identified for being developed as model airports and renovation/construction of new terminal complexes, extension of runways, upgradation of communication facilities and other passenger related facilities were undertaken on a priority basis.

7.1.304 The Airports Authority of India has significantly improved its financial performance during the Eighth Plan period. The details of the financial performance of the International Airports Division and the National Airports Division are given in Table 7.1.20.

                                                Table 7.1.20
                                               Airports   Authority  of India
                                           (International   Airports Division)
                                                  Financial Performance

                                                                                                (Rs.in crore)
        Financial                   92-93          93-94           94-95         95-96          96-97              
        Revenue                 282.80        333.59         419.97        535.43       580.29
        Expenses                187.07        214.87         236.27        317.84       389.50
        Net Profit/
        (Loss)                     95.73          50.22          97.70         217.59        190.79

                                               Airports Authority of India
                                              (National Airports Division)
                                                    Financial Performance

                                                                                                          (Rs.in crore)
       Financial                  92-93          93-94          94-95          95-96          96-97       
       Revenue                192.77       264.13        414.13        467.90       561.83
       Expenses               175.90       210.73        319.97        409.44       506.92
       Net Profit/
       (Loss)                     16.87          53.40           94.16         58.46           54.91

7.1.305 During the Ninth Plan period, the emphasis would be on upgradation and expansion of airport infrastructure. At present, almost all the international airports are facing capacity shortage and therefore congestion. The traffic projections in case of the airports which are not presently facing congestion indicate that only with the augmentation of capacity it would be possible to meet the future traffic demand.

7.1.306 The major thrust in the Ninth Plan will be to augment the capacity both in passenger and cargo terminals at the international airports with the objective to ease the congestion which is likely to accentuate with the growth of traffic in the Ninth Plan. Investments will be made on modernisation and upgradation of communication and navigational facilities at all airports to improve the air traffic management system in the overall interest of safety and capacity utilisation.

7.1.307 The capacity, demand and augmentation for passenger terminals at the five international airports in the Ninth Plan period is summarised at Annexure-7.1.21.

7.1.308 Keeping in view the growth of traffic, capacity augmentation in passenger terminals at Mumbai, Calcutta, Thiruvananthapuram and Chennai is proposed during 9th Plan period. Preliminary action will be taken during the Plan period so as to augment capacity further at passenger terminals in Thiruvananthapuram, Chennai and Delhi.

7.1.309 The capacity, demand and augmentation for international cargo terminals at the international airports in the Ninth Plan period is summarised at Annexure-7.1.22. The capacity of cargo terminal at Calcutta, Chennai and Delhi will be augmented.

7.1.310 The traffic demand at both passenger and cargo terminals would be closely monitored.

7.1.311 Apart from augmenting the capacity at terminals, the programme for upgradation of runways, additional taxi-ways and increased aircraft parking stands at the international airports would be taken up during the Ninth Plan period as is summarised at Annexure-7.1.23.

7.1.312 These works are proposed to be taken at all the five international airports with a view to improving the runway capacity and safety of operation, facilitating the efficient movement of aircraft and providing better service to passengers.

7.1.313 The airports other than five international airports handle approximately 26.5% of the total traffic. In the Ninth Five Year Plan period 30 domestic airports would be further developed for meeting the traffic demand. AAI has planned to take up expansion and modification of existing terminal building, construction of new terminal building and terminal complexes at 30 Airports. Extension/strengthening and construction of new runways at 28 airports are planned during the period. It is proposed to upgrade and modernise the Ground and safety services at the airports.

7.1.314 Communication and navigational facilities will be improved in the interest of safety. Installation of Aircraft Collision Avoidance Systems (ACAS) equipment on all aircrafts flying in India shall be made mandatory. Satellite based Communication, Navigation, Surveillance /Air Traffic Management (CNS/ATM) systems are being introduced at Delhi and Mumbai airports. These will be extended to other airports as soon as possible. The objective will be to cover the entire air space by Secondary Surveillance Radars and Satellite Based Systems. Further, a greater civil- military liaison will be maintained for joint surveillance of Indian air space.

7.1.315 Speed and efficiency will be ensured in passenger and cargo handling. For this purpose, technological and other improvements will be made by the introduction of automation and computerisation, mobile check-in counters, improvement in immigration and security checks, mechanisation of baggage and ground handling services, provision of aero-bridges, improvement in systems of passenger transfer between terminals, improvement in cargo terminals, reduction in bunching of flights and contracting out the operation and maintenance facilities.

Development of airports through public/private participation

7.1.316 As airport construction is highly capital intensive, Government alone will not be able to meet the investment requirement. Private sector, therefore, will have to be encouraged to participate in the construction of airports at greenfield level. A greenfield airport may be permited where an existing airport is unable to meet the projected requirements of traffic or a new focal point of traffic emerges with sufficient viability. It can be allowed both as a replacement for an existing airport or for simultaneous operation. The Government may, while permitting a greenfield airport decide whether it will be in the public or private sector or to be taken up as a joint venture.

7.1.317 In order to involve private sector in the development of airports in the country, Ministry of Civil Aviation and Airports Authority of India have taken certain steps. These include creation of Directorate of Infrastructure Development in Airports Authority of India, creation of Airport Restructuring Committee to identify existing airports for private sector participation etc. However, it is necessary to take up concrete steps for involving private sector in the development of airports. These have been identified and would be taken up by the Ministry of Civil Aviation and Airports Authority of India in a time bound manner.


  • There is a need for the participation of private sector in the development of airports both for reasons of bridging the gap in resources as also to bring in greater efficiency in management of airports. The legislative framework for privatisation of airports already exists in India. In fact, some airports are already owned by State Governments, private companies and even individuals.
  • The strategy in the Ninth Plan will be to permit utmost latitude in the patterns of ownership and management of airports in the country. All the options in respect of the management of airports or parts of airports will be kept open. These could be on Build-Own-Transfer (BOT), Build-Own-Lease-Transfer (BOLT), Build-Own-Operate (BOO), Lease-Develop-Operate (LDO), Joint Venture, Management Contract or Wrap-around Addition basis. In each individual case, the exact pattern could be negotiated, depending on the circumstances.
  • Ministry of Civil Aviation will identify existing airports, in respect of which private sector involvement for development and upgradation of infrastructure is desired. Initially five airports will be identified for upgradation as world class international airports. Ministry of Civil Aviation will also prepare a shelf of projects in respect of greenfield airports. The pre-feasibility reports will be made available to private investors
  • In order to attract private investment, Airports Authority of India (AAI) will be corporatised. AAI will create separate profit centres for all individual airports and hive them off as subsidiary companies on a case to case basis, for the purpose of entering into commercial arrangements or joint ventures with private parties. An independent statutory body will be set-up to facilitate expeditious decision on the proposals for setting up of greenfield airports.

Pawan Hans Helicopters Limited

7.1.318 The main function of Pawan Hans Helicopters Ltd. is to provide support services to the oil sector. Pawan Hans is also meeting the helicopter requirements of State Governments, PSUs and other customers. With the increased competition, owing to the entry of private operators, Pawan Hans would need to strengthen its customer base. The Company is exploring new areas for providing helicopter services such as police, para military forces, geophysical surveys, adventure sports and tourists charters. It also hopes to become a maintenance centre for light helicopters for other smaller operators.

7.1.319 The financial position of Pawan Hans is quite sound as it was having monopoly in the market segment being catered to by it. However, with the entry of private operators, Pawan Hans will have to gear up to meet the challenge.

Directorate General of Civil Aviation

7.1.320 Directorate General of Civil Aviation (DGCA) is making efforts to enhance the level of air safety in India. These efforts are yielding good results and as a result number of accidents are decreasing. The efforts will not only be continued but intensified in the Ninth Plan so as to enhance the safety level. DGCA has identified several steps to achieve this objective.

7.1.321 The main thrust during the Ninth Plan period would be on stepping up the regulatory control through reorganisation, expansion of existing disciplines and development of human resources through intensive advanced training.

Bureau of Civil Aviation Security

7.1.322 The Bureau of Civil Aviation Security (BCAS) is responsible for ensuring adequate security arrangements at the airports in all its aspects. During the Ninth Plan period, the BCAS will augment the existing Bomb Detection and Disposal Squads units at Delhi, Mumbai, Calcutta and Chennai airports. It will also provide latest security equipment namely Explosive Detectors, Coloured X-Ray Baggage inspection Systems, Metal Detectors (Door Frame and Hand held) at various airports in the country.

Indira Gandhi Rashtriya Uran Akademi

7.1.323 The IGRUA was set up in 1985 to provide training for commercial pilots. The Akademy, located at Fursatganj, U.P. is equipped with modern training aids including aircraft, helicopters and flight simulator etc. The Akademi, was initially being funded by the Government, Air India and Indian Airlines for meeting its requirement towards capital expenditure. However, since the major beneficiaries of the pilots getting the training from the Akademi are the two national carriers,viz., Air India and Indian Airlines, it was decided that they should be required to contribute towards the expenditure of the Akademi.

7.1.324 With the entry of the private operators on the civil aviation scene, the national carriers are no more the only beneficiaries of the training imparted by the Akademi. Therefore, contributions will also be raised from the private airlines. Efforts will be made to make the Akademi self-sustaining by increasing the number of trainees and enhancing the fees charged from the trainees.

Hotel Corporation of India

7.1.325 Hotel Corporation of India is a subsidiary of Air India. After a gap of about 11 years, it has turned the corner and is earning profits from 1994-95. The Company hopes to earn profits during the Ninth Plan period. The Air India will explore the possibilities of disinvestment in the Company during the Ninth Plan period.

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