Page last updated at 22:44 GMT, Tuesday, 21 February 2006

Mumbai firms hope new port will help

By Karishma Vaswani
Mumbai business correspondent, BBC World

Mumbai has had a long history of trade.

Mumbai ports
Mumbai plays host to ships of all shapes and sizes

Between the 9th and the 13th centuries, the Indian Ocean - and especially the Arabian Sea, on which Mumbai sits on - was the world's centre of commerce.

Ships laden with goods transported merchandise between Mumbai (Bombay) and cities in the West.

As demand for goods from India increased, shipping lanes were crowded and busy, and Mumbai's businessmen prospered.

Hundreds of years later, business is still booming in the city, now India's financial capital.

The Indian economy is expected to grow by 7% this year at least, and 5% of that comes from Mumbai.

Western retailers and manufacturers are hungry for Indian products - like garments, footwear, and steel.

And as more Indians are able to afford goods from the West, imports to India are growing too.

Nought to 60%

In an attempt to meet demand from both outside and inside India, the country has built a brand-new port.

Jawaharlal Nehru Port Trust (JNPT) is about an hour's ferry ride away from the main city of Mumbai, and it currently acts as a conduit for more than 60% of India's imports and exports.

It was built in 1989 to divert congestion at Mumbai's original ports, run by the Mumbai Port Trust.

And with demand soaring, it is now expanding.

Its very hard to do business in this city, but you can't leave it either... This is the commercial hub of India
Manoj Jagwani

"We are building two new container terminals, which will be ready in the next few years," says Chairman Ravi Budhiraja.

"The demand for importing and exporting goods through Mumbai city is expected to grow threefold in the next few years, as the economy grows by 7% or 8%.

"Already we've seen business at our ports increase. In order to handle the growing demand, we have to expand our capacity."

'You can't leave'

For some, the expansion cannot come fast enough.

Manoj Jagwani has been exporting home furnishings to Western retailers such as Ikea and Carrefour, for 14 years.

Hundreds of trucks belonging to companies such as Mr Jagwani's crawl along the route to Mumbai's ports every day, carrying billions of dollars worth of merchandise.

But congestion at the ports have caused delays in shipments of his goods to Europe and America, leaving them - on occasion - stacked in warehouses for as much as a month.

Even before the goods reach the dockside, there is Mumbai's vicious congestion to contend with, which means a 40-kilometre journey can take 10 hours, even on a good day.

Red tape can add as much as a week too.

Mr Jagwani is understandably frustrated with the slow pace of development at the ports.

Cargo ship loading at Mumbai
The port now accounts for 60% of India's cargo

"Its very hard to do business in this city, but you can't leave it either," he says.

"This is the commercial hub of India. If I move from Mumbai, where do I go? All my suppliers are here, my manufacturers are here, my workers are here. I can't just up and leave and go somewhere else."

Infrastructure shortfall

And it is not just the Mumbai ports that are facing this problem.

Infrastructure in some of India's main commercial hubs is in desperate need of investment.

Traffic in Bangalore, India's Sillicon Valley, regularly grinds to a halt, and this has caused many foreign firms to rethink their decisions to set up in the city.

Bangalore's state government is worried and says the city needs a new brand image to attract more foreign investment to its shores.

But in order for that to happen, Bangalore needs more investment in its infrastructure.

Breakneck pace

As does Mumbai.

The city's ports, roads and airports cannot handle the pace of growth in India.

The Indian government wants to attract more foreign investment, and in an attempt to do that it privatised two of India's major airports, Mumbai and Delhi, this month.

But the privatisation was met with protests and strikes across the country by airport workers.

Mumbai ports
The new port is already needing to expand

They say they are worried that privatisation will cost them their jobs.

Foreign investors say privatisation of state owned entities, and modernisation of roads and airports, must happen soon.

"The privatization of Mumbai airport is a test case fore foreign investors," says Andrew Holland of Merrill Lynch in Mumbai.

"If it happens, it will help India to maintain its economic pace of growth of 6-7%.

"But there are concerns that if it stalls, then imports and exports will stall, and that could spell trouble for the economy."



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