In a first, JK directly enters into JV with Dubai Ports
Dubai, Feb 11: In a maiden and major development, the Government of Jammu and Kashmir last evening signed a Memorandum of Understanding (MoU) here with Dubai Ports World to establish Multi-Modal Logistics Park (MMLP) and transportation hub in the State through Foreign Direct Investment (FDI).
The MoU was signed by JK Finance Minister Dr Haseeb Drabu with the Dubai Ports Chairman & CEO Sultan Ahmed Bin Sulayem in presence of the Prime Minister Narendra Modi and the Crown Prince of Abu Dhabi Mohammed bin Zayed Al Nahyan at Presidential Palace in Abu Dhabi.
The historic MoU would also facilitate, for the first time ever, FDI to the tune of Rs 5000 crore to Jammu and Kashmir, through Joint Venture, over the next five years. “In the first phase an investment of Rs 1500 crore would be made by the Dubai Ports World in the multi-modal logistics parks (Dry Port) which would swell upto Rs 5000 crore over the next 5 years,” Dr Drabu said over phone from Dubai.
He said the proposed Inland Logistic Parks to be established at Samba in Jammu and Ompora in Kashmir would include warehouses and specialised storage solutions including CA Stores and Cold Storage Chains for transportation of agriculture, horticulture and handicraft products and other trade-able goods from J&K directly to the markets worldwide bringing down the transportation costs substantially.
Enumerating on how the ambitious project is going to benefit J&K, Dr Drabu said it will not only bring down the transportation costs of goods, but also increase their market accessibility and transform the abysmal scenario wherein logistics accounts for about 18% of the total product cost in the State, as against 8-12% in other countries including China. “The Logistic Parks will help the local industry and businesses to transition from point-to-point freight movement to the hub-and-spoke model followed in developed economies,” he said and added that the integrated transportation mechanism including air, road, rail and waterways would immensely improve efficiency in freight movement bringing down the transportation costs by 20 to 25 percent and giving major flip top the local economy.
Pertinently, Sultan Ahmed Bin Sulayem, alongwith a team of Senior Executives of Dubai Ports visited J&K earlier this week to hash-out the modalities for setting up Inland Logistics Parks in Jammu and Srinagar and finalize the MoU in this regard. The Dubai Ports delegation held detailed deliberations with the Chief Minister, Mehbooba Mufti, Finance Minister, Dr Haseeb Drabu, Industries Minister, Chander Parkash Ganga and other State Government officials and also visited the proposed site for the Logistics Park at Samba in Jammu. The delegation will be again visiting the State during summers this year to finalize the site in Kashmir, preferably at Ompora near the Srinagar International Airport.
The visit of Dubai Ports World delegation followed the announcement made by the Finance Minister Dr Drabu in his budget speech in the state Legislature last month about government’s plan to attract foreign direct investment by setting up two Dry Ports in the state to boost local economy.
Dr Drabu, in his budget speech, said that there were two basic reasons for the development deficit of J&K: cost structure and the missing multiplier. “Being geographically disadvantaged, the cost structure of our economy is high which impacts margins of all small businesses making them operate on wafer-thin margins. Any shock to the system renders them unprofitable and they fall into a debt trap and are unable to service their borrowings,” he said, adding the only way out was to create an integrated logistics network that will reduce the logistics costs from existing 30 percent to below 10 percent.
“A well-developed logistic sector will not only increase our trade activity across all sectors but will also enhance the competitiveness of our businesses. I propose to change the relationship between the level of economic development (as measured in terms of GDP per capita), the composition of the state economy and logistics costs by proposing one dry port in Jammu and another one in Kashmir,” the Finance Minister had said in his Budget speech adding that the state government has moved forward on this and have in principle understanding with the Government of Dubai. “The government of J&K and the logistics arm of the Government of Dubai, DP World, will get into a joint venture for construction of a logistics hub, including an integrated dry port in the state,” he said.
Dry Port, also called an inland port or multimodal logistics centre, is an inland terminal connected to a seaport by rail or road. It serves as trans-shipment point in transport of export/import goods and is named so because it is very similar to a seaport in services it offers except that it is not near a sea.
Dubai Ports World, a logistic arm of UAE Government, is operating 78 marine and inland terminals supported by over 50 related businesses in 40 countries across six continents with a significant presence in both high-growth and mature markets.
The company owns 6 marine terminals and 6 goods trains in India and two marine terminals in Pakistan. It has also marine terminals in China, Philippines, Indonesia, Thailand, Cambodia, Vietnam, South Korea and USA.