After highways, infra interest in port projects picking up

Around 17 major port projects are to be awarded this year.

Highway projects are not the only area which will hold the interest of infrastructure companies this year. The number of public-private partnership projects in the port sector is also picking up.

Around 17 major port projects are scheduled to be awarded this year. The scope of these projects, to come up on the build-operate-and-transfer (BOT) method, range from building new terminals, deepening ports, building cargo berths, and mechanisation of handling facilities. Of these projects, at least eight are large in size, ranging from Rs 500 crore to Rs 7,000 crore.

The government had already invited bids for projects like the new iron ore terminal in Mangalore, additional berth in the Vizag port, Goa coal berth, and smaller projects in the anchorage port of Cuddalore. “Last year, despite slowdown, there was activity in developing the port sector. This year, the government wants to go in a bigger way. We will see a lot of activity for the next 2-3 years,” says V Ashok, director, Essar Shipping Ports and Logistics.

The increase in announcement of projects is supported by improved financial conditions and an uptick in port traffic. After recession in the US and Europe in 2008, there was a significant drop in port traffic and tariffs. The revival in traffic is also a trigger for companies and investors to participate actively in developing the port infrastructure. In April, container cargo grew by 23 per cent, while iron ore cargo and petroleum cargo were up by 13 per cent and 1.3 per cent, respectively, compared to the same month last year.

“There has been quite a lot of improvement in port traffic because foreign trade has been on the upswing in both imports and exports. We have to keep in mind that foreign trade as a percentage of GDP is very small as compared to other countries. It will go up,” says Arvind Mahajan, leader (infrastructure), KPMG.

Cargo movement is expected to go up, especially in the dry bulk segment with increased demand from export-import trade of steel and coal imports by the power sector.

“By 2012, bulk cargo will grow by 10-12 per cent. Even if 60 per cent of the estimated target for power capacity addition is achieved, we are looking at 170 million tonnes of coal imports by 2017. Most of the ports have to cater to this demand. The container segment is expected to grow at a higher rate at 18 per cent,” says B J V K Sharma, Joint MD and CEO of JSW Infrastructure.

With such prospects in sight, participation by companies is also high. “There is a wide range of interest from players who are not very active in the port sector are also showing interest,” observes KPMG’s Mahajan.

Tough competition is possible as the government has removed restrictions which existed earlier on the number of companies which can bid for a project. “Already, there are 6-7 companies bidding for a single project. If foreign companies enter the fray, the number of bidders can go up to 10-11. They are in the wait-and-watch mode now, but they will come,” says Ashok.