India’s Infrastructure: Bad News, Good News

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 157-160:

Next to airports, India’s seaports require thoroughgoing modernization. The biggest and most famous of them all, Mumbai, has a notorious reputation for terrible delays and incompetent handling of goods. A few years ago, turnaround time was about eight days, regardless of the size of the vessel; this has improved somewhat but even now about four days are required to load or unload a ship. This is due to deliberate negligence as the port earns more by collecting demurrage charges than by any other means. The trick of this trade is the stranglehold which Port Authority labour has on the loading and unloading of goods. In most other ports around the world, the port authority is merely a landlord, providing berths and cranes, etc. but no labour, with loading and unloading done by labour hired by the shipowner or his agent. The port authority with ‘dedicated’ labour is a British legacy. In British ports it may have made sense to retain a labour force specialized in loading and unloading ships, particularly in the past when most of this work was not mechanized. Nobody would have thought that delay rather than speed would be the result of retaining specialized labour. Making money on demurrage charges is, of course, a flagrant example of being penny-wise and pound-foolish. No shipowner in his right mind would enter a port such as Mumbai unless he absolutely has to because it is his destination. Bulk breaking is taking place elsewhere in efficient ports like Singapore or Colombo. Many a ship with only part of its load to be delivered to India would rather call at those ports than enter an Indian port. Jawaharlal Nehru Port across the bay from the old port of Mumbai is supposed to be somewhat more efficient than the old one, but it is first and foremost a container port under the management of the Indian railways and is thus not a direct competitor of the old port. Although Jawaharlal Nehru Port is India’s largest container port, it handles only about 10 per cent of the freight handled by Hong Kong, the world’s largest port of this kind. The inefficiency of Indian ports is not only delaying imports, it is also harming the export trade. In the old days of ‘export pessimism’ this was ignored, but now when producers in India wish to export some of their production to achieve economies of scale, they may give up such plans as their goods get stuck in the port….

The story of Sunil Bharti Mittal, who is now the biggest private operator in this field, is a good example of the rise of the new type of Indian telecom entrepreneur. He is not related to the famous steel tycoon Lakshmi Niwas Mittal, and his rather unusual family name Bharti is made up. His father, who belonged to a caste of traders, married a woman of a higher caste. This inter-caste marriage was frowned upon at that time and the couple adopted the name Bharti. Sunil started making cycle parts in Ludhiana. In 1983 when many imports were still banned, he hit upon the idea of manufacturing push-button telephones and then launched his Airtel brand of mobile phones in 1995. From making phones it was only one further step to acquiring two mobile phone licences and one fixed net licence. Subsequently Mittal expanded his operations and now provides his services in all 23 mobile telephone circles of India in which field he has overtaken the public sector firm BSNL. In order to raise the capital for this relentless expansion he linked up with foreign investors. In 2001 the American firm Warburg Pincus acquired about 6 per cent of Bharti Televentures; later the Singapore firm SingTel and the British firm Vodafone also acquired shares in Mittal’s company, but they are all minority shareholders. Meanwhile Sunil Mittal dominates the Indian telecom scene and continues to win prizes both in his personal capacity as an exemplary entrepreneur and for his company as the best in its field. He has also pioneered broadband connectivity in various fields and is always a step ahead in adopting new technologies. Mittal had started from scratch as an innovative entrepreneur. As he has stated, he was inspired by Mahatma Gandhi’s words: ‘First they ignore you, then they laugh at you, then they fight you, and then they lose.’

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Filed under economics, India, industry, labor

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