What Gwadar can learn from India’s Mundra port

 

What Gwadar can learn from India’s Mundra port   

Pakistanis who want to see Gwadar reach its true potential would do well to learn from Mundra’s success.

Uzair M. Younus Published August 25,  

Located on the northern shores of the Gulf of Kutch, the Mundra Port is the largest private port in India. Handling almost 150 million tons a year, the port began operations in 1998 and is operated by Adani Ports & SEZ Limited, whose CEO is Karan Adani.

Karan is the son of Gautam Adani, one of the world’s richest men whose net worth is estimated to be almost $140 billion. Mundra’s rise and the strategy followed by Indian policymakers, especially Narendra Modi, first as Chief Minister of Gujarat and then as Prime Minister of India, offers many lessons to Pakistani policymakers seeking to realise the full potential of the Gwadar Port.

The modern era for the Mundra port dates back to 1994 when the Gujarat Maritime Board (GMB) gave an approval for a captive jetty. Four years later in 1998, the first terminal began operations under the Gujarat Adani Port Limited and by the end of 1999, there were multi-purpose berths operating at the port. Recognising the economic importance of this facility, a private railway line was completed in 2001 and by the end of 2002, this line was fully integrated with Indian Railways, allowing efficient transportation of cargo to and from the port across India.

What began as a facility handling commodity cargo — the port was handling crude oil by 2002 — became a Special Economic Zone (SEZ) by 2003.

This SEZ was part of a broader strategy to attract investment into the state of Gujarat through consistent policies favouring domestic and foreign investors. A flagship annual event, titled Vibrant Gujarat, was organised starting in 2003 (it continued until 2019) where prospective investors, policymakers, and other business leaders explored investment opportunities in the state.

The port’s growth soon led to the development of a second terminal, increased supply of power through an agreement with Tata Power, and growth in bulk cargo that was handled by the port and in 2008, the port began handling automobile exports through an agreement with Maruti Suzuki.

By 2007, less than a decade after operations began, Mundra Port and Special Economic Zone Limited (MPSEZ) offered equity shares to the Indian public. The shares were offered at about Rs100 per share and the offering was oversubscribed by 116 times. Today, the entity is the largest private port operator in India with 13 ports in the country, representing almost 25 per cent of the country’s port capacity — the company also recently acquired Haifa Port in Israel for $1.18 billion.

The Mundra Port now has almost two dozen warehouses with a combined storage capacity of 137,000 square meters. These facilities store wheat, rice, fertiliser, and other commodities. The port also has wheat-cleaning and rice-sorting facilities, with a cumulative capacity to handle over 1,700 tons of wheat and rice a day. It is also the world’s largest coal importing terminal with a capacity to handle over 40 million tons of coal a year. These coal imports are critical not only for India’s energy sector but also for Adani, which operates coal mines in places like Australia and owns coal power plants in India.

The foundations of success

The dramatic success of Mundra and the Adani conglomerate is built on two key foundations — the consistency of policy priorities, especially at the state government level, and the recognition that the private sector is best placed to generate economic activity.

Gujarat had high levels of economic growth through the 90s and this focus on economic development continues to this day. Despite significant human development challenges related to childhood malnutrition, literacy, etc, successive state governments have developed a set of policies that prioritise economic opportunity at the local level.

Mundra’s success was built on this priority, meaning that before the port could play a role in helping India’s broader economic story, it had to have a positive impact on the people who lived in the state of Gujarat.

The second priority focused on letting private sector entrepreneurs mobilise resources, gain technical knowhow, and take risks to build critical infrastructure and associated industries around it. While the government offered investment incentives, tax breaks, and other support, the onus on developing, growing, and scaling up Mundra Port was on the Adani Group.

And while people may rightfully point to crony capitalism as being the driver of this innovation, the fact of the matter is that Gautam Adani became one of the world’s richest men through productive investments, not just elite capture of state resources.

The fault with our port

These two core principles seem to be missing as Pakistan seeks to build and scale Gwadar. The regular protests by the residents of Gwadar, who have limited access to drinking water, and the broader disenchantment of Baloch citizens is evidence that inclusive economic opportunity through state-led investments remains a distant dream. The question is: can a major port, that is unable to deliver for the people that live closest to it, generate economic opportunity and wealth that benefits Pakistan and its citizens?

Secondly, the thrust of the development model being followed in Gwadar continues to be state driven where realities of the local economy are ignored. For example, the core economic activity of Gwadar for centuries has been fishing. Despite this obvious fact, not a lot of effort has been made to mobilise private capital to modernise this fishing industry such that it creates well-paying jobs for local citizens in industries affiliated with seafood, combined with a special focus on exporting these products.

Finally, the lack of political stability in Balochistan and the machinations that are the norm in Quetta, means that there is little local ownership in terms of tackling the province’s chronic economic and human development challenges. Over the last few days, the province has been devastated by rains and flooding, but elites, mainstream media, and citizens remain fixated on the political game of thrones being played out in Islamabad.

The dramatic growth at Mundra Port, the economic activity that it has generated in alignment with Gujarat’s own developmental priorities, and India’s broader development trajectory, where it has become more globally integrated, stands in stark contrast with ours.

Mundra as a case study offers key lessons of how and why this divergence is taking place, especially as it relates to mobilising private sector capital to achieve strategic economic objectives.

Pakistanis who want to see Gwadar reach its true potential would do well to learn from Mundra’s success and apply similar strategies in Gwadar. https://www.dawn.com/news/1706574/what-gwadar-can-learn-from-indias-mundra-port