Kolkata Port sails on asset monetisation, intends to expand portfolio

India's oldest port has been leasing its vast land bank for decades. With the Budget announcing plans to monetise public assets, it intends to expand its portfolio and extend to non-land assets, too

The Union Budget may have spelt out the Modi government’s grand plan to monetise assets of public sector institutions for the first time, but at least one organ of the Centre has been doing it for decades.

Meet Kolkata Port Trust, now Syama Prasad Mookerjee Port, Kolkata (SMP, Kolkata), the country’s oldest port and one of the biggest landlords of the city. With 4,000 acres in prime locations of the city and its outskirts, some along the banks of river Hooghly, the port has been on the job of monetising assets for long.

“Each year, we put 20-30 plots on the block and invite bids,” said Vinit Kumar, chairman, SMP.

A significant part of the port’s land is rented to a long list of companies that include Britannia, Hindustan Unilever, ITC, IOC, BPCL, HPCL and estate income forms a sizeable part of operating income.

In 2018-19, estate rentals at Rs 430.89 crore accounted for almost 17 per cent of the port’s operating income; it dropped to Rs 315.48 crore, or about 13 per cent, in 2019-2020, as Covid struck.

The 4,000 acres under the Kolkata Dock System (KDS) is split like this: Core port operations are spread over approximately 1,900 acres (including the port’s own use and custom-bound areas); the remaining areas are under existing lease/licence, township (residential), vacant and miscellaneous usages and the balance is land available for development.

SMP has two dock systems: KDS and the Haldia Dock Complex (HDC). Between the two, the total land holding of the port is about 10,000 acres; HDC, too, rents land to companies and industrial units.

But it’s the KDS area that can translate into handsome gains for the port. Within the city itself, the port has some 1,000 acres; then there are areas on the outskirts and parts of Howrah. Plans are afoot to make good of this land.

About a year and a half ago, the port decided to manage the land monetisation process more professionally.

So, real estate services firm JLL, in consortium with Hyderabad-based RSI Softech, was mandated by the port for mapping the entire SMP estate, digitising maps, scanning documents, monetising select assets and assisting in the bid process management.

The port has also floated a request for proposal, in line with the shipping ministry guideline, for a master planning and a detailed design plan of the land under KDS.

“The master plan will tell us what is the port area, port allied area and township. The township plan will be detailed and will indicate what kind of development is best suited for a particular area,” said Kumar.

A port is not just an infrastructure, it’s an ecosystem, explained Kumar. The 151-year-old-port at one point, had about 30,000 people on its payrolls, housed in huge colonies. For instance, the 50-acre colony on Taratala Road was once Asia’s largest labour colony. Over the years, mechanisation has reduced the requirement of workers (there are about 3,000 on the port’s payrolls now).

“The land has been kept for the township plan,” said Kumar.

Taratala Road, which is in close proximity to New Alipore and Alipore — one of Kolkata’s upscale localities — holds promise and may be a fit case for commercial or retail development.

But before the port sets out to realise the full potential of its assets, it might need a review of its lease tenure. The maximum lease tenure for the land under it is 30 years; a higher tenure would require a nod from the ministry. Surekha Bihani, managing director, Kolkata, of JLL, explained that a longer lease tenure increases investor interest.

Kumar said that a policy was already under formulation by the ministry that would have provisions for longer lease, easier terms and better dispute resolution mechanism.

Land monetisation may be the oldest source of revenue besides its core operations for a port like Kolkata (there are some leases that go back to 100 years), but not its only one currently. Ship repairing is a more recent revenue stream.

The port signed a profit-sharing arrangement with Cochin Shipyard last year for two of its dry docks. And the port may now even consider shipbuilding.

“We just got a 100-acre land back from Burn Standard; it is in Jellingham (about 22 km from the industrial town of Haldia). We are planning to find a partner for shipbuilding there or it could be used for a big-ship repairing activity,” said Kumar.

Some offbeat monetisation plans are also in the works. The port has a 200-bed hospital on Taratala Road on 10 acres, which it plans to upgrade on a PPP model, to make it a 300-bed hospital. In the second phase, a medical college could also come up; it’s a Rs 350-crore project.

“We will transfer the hospital to a private party. They will give us lease rent and a percentage of revenue. They will be allowed to take outside patients while we will have a contract for a fixed number of beds for our staff and officers,” explained Kumar.

Kolkata Port also owns a 1944-built paddle streamer — only a few of these are available in the world today — which is being considered for use as a restaurant or an exclusive exhibition space. Till now, the heritage vessel was being used as a training vessel.

Yet, done right, among the many revenue streams that are in the works, it’s the township development that could be the big money spinner.

Referring to the London Docklands, Kumar said, port land development takes years. “The base has just been laid.”

The London Docklands — once part of the Port of London — was redeveloped through the 1980s and 1990s for commercial and residential use. Canary Wharf — the skyscraper centre and second financial district after the City of London — was also part of the redevelopment.

The redevelopment of docklands, however, was necessary after its decline since the 1950s due to the closure of docks resulting in high levels of unemployment.

The backdrop for SMP’s township planning is far from that. The port reported profit in the last two years after a gap of seven years (the last profit was in 2011-12). In 2019-2020, it beat the slowdown and the Covid-19 pandemic to achieve a record cargo traffic, ranking fifth in cargo handling among major ports in the country; in container traffic, it stood third.