Govt's infra push fails to improve fortunes of port sector

Capacity addition down 9%

Traditionally, the port sector has seen good flow of foreign investment. One of the first infrastructure segments to attract private capital, the sector, however, recorded a fall in capacity addition since 2010-11. Against a rise of nine per cent in capacity in 2010-11, 2011-12 saw a rise of only four per cent rise. In 2012-13, major ports saw capacity addition of six per cent. Though re-bidding and low cargo volume were the primary reasons behind the poor show, clearly, the government’s infrastructure push is yet to show results in the port sector.

While capacity addition has been hit by the poor economic climate, little has been done to improve the efficiency of ports. In April and May 2013, major ports recorded an improvement in the average turnaround and pre-berthing time for ships—these fell seven and 11 per cent, respectively. The drop wasn’t so much due to capacity addition woes, but due to a fall in trade, as the number of vessels handled by ports fell from 3,260 to 3,139 during the period.

“Port modernisation is yet to happen. Facilities such as automated lifts and continuous power supply are not available. The turnaround time of a ship could be about three days here; in Singapore, it is less than six hours. More time means more cost for shippers,” said Aman Chaddha of the Engineering Export Promotion Council.

With no major port project taking off in the last couple of years, the inflow of foreign direct investment into the sector in 2011-12 was nil, against $10 million in 2010-11 and $65.4 million in 2009-10. The poor economic environment has resulted in substantial underutilised capacity.

As of March this year, total port capacity stood at 745 million tonnes (mt), while the total cargo handled during 2012-13 fell 2.58 per cent to 545.68 mt. In May 2012, Prime Minister Manmohan Singh had set a target of awarding 42 projects for the port sector. He had also set capacity addition and investment targets of 244 mt Rs 35,000 crore, respectively.

Experts say the long-term outlook for the sector, too, is skewed. Capacity addition isn’t being seen, considering the future cargo requirements.

“We need more containerisation on both sides of the coastline to provide support to our exports. This is not happening,” said a port sector analyst, on condition of anonymity. Among the projects awarded last year, only 10 mt of container terminal capacity was added, at Jawaharlal Nehru Port Trust. Most projects are keeping in mind the import requirements of fuel and energy — petroleum, oil & lubricants and coal cargo.

Not only has private investment been short of targets, various companies opted out of port sector projects last year. French shipping company Louis Dreyfus Armateurs was left with no choice but to leave behind its cranes at the Haldia port, after a dispute there. The company was set up as a joint venture for operations of the ABG Haldia bulk terminal. Spanish firm Dragados, too, has been looking to exit a partnership with Gammon Infrastructure for the Indira Container Terminal at the Mumbai port.

“The tariff regime is such that if a private operator handles more cargo, he has to reduce rates. Efficiency being discouraged, global operators don’t upgrade or bring their best technologies to India,” the senior analyst said.

The multi-million dollar fourth container terminal at the Jawaharlal Nehru Port would account for private investment of Rs 8,000 crore. This has generated interest among top global players, including Port of Singapore Authority, Maersk, Dubai Port World and Port of Hamburg.