India's Leading Infrastructure Companies

India's Leading Infrastructure Companies 2015

Ports form a crucial part of a nation’s maritime transport sector by supporting competitive and cost-effective international trade. India’s 7,517 km long coastline dotted with 13 major ports and about 187 notified minor ports makes it a major maritime nation. Around 95% of India’s trade in terms of volume and 68% in terms of value are carried out by sea.

Trend in cargo traffic
During FY14, all ports in India together (major and minor) handled about 972.6 MT of cargo. This translated into a modest 4.2% growth compared with the preceding year. A sharp 13.4% decline in iron ore traffic and 4.3% decline in the containers traffic at major ports held back overall traffic volumes. In FY14, India’s GDP and exports grew a tepid 4.7% and 4%, respectively, a reflection of the trade outlook on a broader scale.

Major ports handled 57.1% of the total cargo traffic in FY14. Cargo traffic at major ports returned to growth after a 2.6% fall in FY13. However, the growth rate was merely 1.8%. On the other hand, traffic at minor ports grew 7.5% compared with 9.9% rise in the preceding year.

The cargo traffic at major ports rose to 555.5 million tonnes in FY14 compared with 545.8 million tonnes in the preceding year, reflecting a 1.8% growth. The cargo traffic of coal (the third largest commodity handled by ports) grew at a healthy rate of 20.6% due to strong demand for thermal coal from thermal power plants and coking coal from steel makers. On the other hand, a sedate 0.6% growth in cargo volumes of petroleum, oil & lubricants (POL) and a 4.3% fall in cargo volumes of containerised cargo restricted the overall growth in cargo traffic at major ports. Iron ore cargo traffic continued to decline for the fourth consecutive year in a row, declining by 13% to 24.7 million tonnes in 2013-14.

POL was the largest commodity handled by major ports in FY14, with a share of 33.7% in total cargo volumes. With a share of around 20%, containerised cargo was the second largest commodity handled by major ports during the year. Coal accounted for another 18.9% of total cargo volumes.

Among the 13 major ports, the ports at Kandla, Paradip, JNPT, and Mumbai accounted for almost 50% of the total cargo traffic at all major ports taken together. Eight of the major ports registered an increase in cargo volumes in 2013-14. Cargo traffic grew the fastest at Ennore port, by 52.9%. Cargo traffic at the Paradip port rose by a healthy 20.3%. The growth at both these ports was mainly driven by a sharp rise in the volumes of thermal coal, POL, and miscellaneous cargo. In contrast, the steepest fall in cargo traffic was seen at the Mormugao port, by 33.7%.

The growth in cargo handled at minor ports in FY14 was aided by substantial increase in cargo traffic of coal, containers, building materials, and fertilizers, largely at ports based in Andhra Pradesh and Gujarat. Gujarat accounted for close to three-fourths of the total traffic handled at minor ports during the year, followed by Andhra Pradesh (13%), Maharashtra (6%), and Goa (4%). These four states together accounted for close to 96% of the total traffic handled by the non-major ports in the current year.

Capacity at ports
As of July 31, 2014, the total capacity of all ports in India taken together (major and minor) stood at about 1,430.1 million tonnes (MT). However, most ports, especially the major ones, are already running at close to full capacity levels. Due to land constraints, possibilities of expansion are limited. As per the Maritime Agenda 2010-2020 formulated by the Ministry of Shipping, the anticipated traffic at Indian ports would grow to 2,495 MT by 2019-20 from 972.6 MT in 2013- 14 at a CAGR of 17%. This warrants huge investments in development of new port facilities to facilitate handling of traffic, going forward.

Challenges and outlook
The Maritime Agenda 2010-2020 has plans for port development, not merely for creating more capacity, but also aimed at augmenting existing port performance. It has set a target of expanding India’s port capacity to 3,130 MT by 2020, half of which is to be created at minor ports. Considering the fact that nearly 40% of the traffic is handled by minor ports and is likely to increase significantly during the 12th Five Year Plan, this gap in the system needs to be bridged quickly. This expansion plan is expected to entail an investment of around र 2.8 trillion.

The capacity and operational efficiency of existing ports can be improved with measures taken for construction, deepening and modernisation of berths and terminals. Rail and road connectivity of ports would facilitate faster movement of cargo. Standardisation of documents and streamlining of security clearance procedures are expected to make port projects more attractive. Further, there exists a need to expand the existing framework to attract participation from the private sector for development of infrastructure facilities.

The average output per ship berth per day improved from 9,745 MT in FY07 to 10,967 MT in FY12. As per the 12th Five Year Plan, port-wise performance shows that the average turnaround time declined mainly due to good performance by Paradip, Mormugao, Chennai, and Kolkata ports. Despite adequate capacity and handling facilities, the average turnaround time of major Indian ports as of FY14 stood at around 3.9 days, which is higher compared with the average turnaround time of about 10 hrs in Hong Kong in 2012.

Investment in port infrastructure is critical. Although domestic investment contributes significantly, government must promote FDI, going forward. Even though the cap of foreign investment in ports is 100%, the government needs to reduce complexity and improve transparency of the regulations. It is important to digitalise all major and non-major port facilities to improve efficiency.

During FY14, about 30 port projects were awarded to various entities, entailing an investment outlay of र 207.1 bn. On completion, these projects would add 217.57 MTPA to the outstanding capacity of ports. Finance Minister Arun Jaitley proposed the awarding of 16 new port projects in 2014-15 with a focus on improving port connectivity. An amount of र 116.4 bn would be allocated for the development of Outer Harbour Project in Tuticorin for phase I. Further, SEZs would be developed in Kandla and JNPT, two of the major ports in India. Furthermore, a comprehensive policy on the Indian ship building industry is expected.