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Krishnapatnam port adopts aggressive pricing strategy

Chennai is among the largest and busiest ports on the east coast for container cargo

Aditi Divekar  |  Mumbai 

Representational image
Representational image

Aggressive marketing is helping the container terminal at the privately built port of Krishnapatnam in Andhra's district to become a bright spot on the east coast.

Amid the region's low capacity utilisation, the Navayuga Engineering-operated terminal raised its market share to seven per cent in FY17 from four per cent in FY16.

"Cargo in Andhra-Telangana and north and east Karnataka which is currently going to other ports (like Chennai) have an instant cost advantage on distance if they switch to Krishnapatnam. So, the first leg of our marketing strategy is to bring this to the notice of cargo owners of this region," Vinita Venkatesh, director at the port's container terminal, told Business Standard.

Chennai is among the largest and busiest ports on the east coast for container cargo. During FY15-17, the throughput of container ports on the east coast has moved in a narrow range of 3.1-3.9 million TEU, with utilisation at 42-48 per cent. Krishnapatnam saw port utilisation of 21 per cent in FY17 and is expected to see 45-50 per cent this year.

"We are aiming to hit 500,000 TEU this year from 255,436 TEU last year, a doubling of cargo," said Anil Yendluri, director and chief executive officer.

The CVR Group-promoted company is also offering a price which is a sizable discount to others in the region, the second leg of its marketing strategy. "Our pricing is cost-based, not market-based. Since we have our own infrastructure from warehousing, transportation and customs licences, our price model is connected to the cost we incur, not demand and supply. The idea is to offer a price point which is commercially and economically rational for cargo owners to consider us," Venkatesh explained, without divulging discount details. "Our price offerings are helping customers bring down their total logistics cost by 30 per cent."

It is also looking at drawing in large shipping lines, which typically prefer large city-connected ports. And, looking for new types of cargo — it has brought in cement, cotton yarn and shrimp.

"With the kind of cost-based pricing Krishnapatnam is providing, its profitability could be lower but sustainability would be higher, despite the heavy discounts it is offering as compared to its competitors," said Subrata Behera, manager of port & container research at Drewry Shipping Consultants.

Chennai, being a major port, has its pricing based on the Tariff Authority for Major Ports (TAMP) regulations, and does not enjoy the flexibility a private port does, said industry experts.

"Even if Chennai offered a cost-based pricing structure, its price point would have still been higher than Krishnapatnam, given the royalty component that gets added to Chennai's cost, apart from other items," said an expert, on condition of anonymity.

With more private port container capacity coming up on the east coast, it is perhaps time that government-owned ports become vocal about the need for more pricing power.

Capturing markets

* The Navayuga Engineering-operated terminal raised its market share to 7% in FY17 from 4% in FY16

* Krishnapatnam saw port utilisation of 21% in FY17 and is expected to see 45-50% this year

* The first leg of the marketing strategy is to bring the cost advantage on distance to the notice of cargo owners in Andhra-Telangana and north and east Karnataka region

* Chennai is among the largest and busiest ports on the east coast for container cargo

* The CVR Group-promoted firm is also offering a price which is a sizable discount to others in the region, the second leg of its marketing strategy

First Published: Sun, September 17 2017. 00:05 IST
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