Export curbs dent Dhamra port's capacity utilization

Curbs on iron ore exports by the Odisha government, coupled with sharp fall in iron ore shipments following imposition of 30 per cent export duty by the Centre have hit cargo volumes at Dhamra port, jointly promoted by Tata Steel and L&T.

The port which operates two berths with a combined capacity of 25 million tonne per annum (mtpa), has handled a little over 15 million tonne, inclusive of export and import cargo, till March 5, this year since the beginning of its commercial operations in May 2011. The achievement is barely 60 per cent of its available capacity.

"Restriction on iron ore exports by the state government has been a dampener for the Dhamra port. As a result, one of the two berths, dedicated for iron ore shipments with handling capacity of 13 mtpa, saw minimal traffic in 2011-12", said DPCL sources. The export traffic from this berth has gone up marginally to two mtpa (iron ore fines and thermal coal) in the current fiscal.

The port, however, has breached the 10 million tonne cargo mark in 2012-13, thanks to the rise in import of lime stone and coking coal through the other berth, till March 5, this year. The total cargo traffic is expected to reach 11.2 mtpa by the turn of the fiscal. In 2013-14, the port projects to handle export and import cargo of 18 mtpa.

Imposition of 30 per cent duty on exports of iron ore lumps and fines from December 30, 2011 has rendered the country's ore uncompetitive in the international market, especially China compared to competing nations like Brazil and Australia. Problems of exporters were compounded by frequent hike in railway freight between February 2010 and March 2012.

In the April-January period of this fiscal, iron ore exports declined 62.3 per cent to 15 million tonnes against 39 million tonne in the year-ago period. In a pre-Budget memorandum to the Union finance ministry, Federation of Indian Mineral Industries Ltd (Fimi) had demanded cut in export duty on iron ore fines to five per cent.

Moreover, exports from Odisha had suffered as the state government sought to restrain it to conserve the raw material for its local steel making industry.

Through a resolution dated December 5 last year, the state government had imposed a special condition, making it mandatory for mine lessees without end-use plants, to sell at least 50 per cent of their extracted iron ore to state based industries.

Realizing that iron ore traffic is unlikely to be its growth driver given the current clampdowns on exports, Dhamra port has lined up Rs 10,000 crore second phase expansion with an aim to add berths, which can handle diversified cargo.

The expansion will take the port's capacity to 100 million tonne. It will raise the port's berth strength to 13 with a focus on handling of container cargo, liquid cargo, LNG (liquefied natural gas) and crude oil.

But getting 800 acres land for the second phase expansion seemed challenging for the port authorities with the state government imposing three conditions for allotment of land.

First, the port has to achieve capacity utilisation of 70 per cent of Phase-I in accordance with clause 4.4 of the concession agreement.

Second, it has to obtain environment clearance from Union ministry of environment & forests (MoEF) for the proposed expansion. Third, DPCL has to get a no-objection certificate from the National Green Tribunal for expansion of port limits.