Revival in container cargo volumes unlikely, says ICRA report

Pressure from 'laggards' like iron ore and container segments is expected to continue to hurt the port sector in the near-term, as a revival in cargo volumes is unlikely, according to a report by ratings agency ICRA, which also gave a weak outlook to the sector.

"We expect cargo pressure to continue at major ports, with iron ore and containers the main laggards," ICRA said in a note, adding, it has a weak outlook on the sector.

The Supreme Court decision on ore mining, especially on Karnataka, has hurt ore exports, it said, adding that the segment registered an 18% decline in volumes for the first nine months of the fiscal, over the same period, a year ago.

The dip in volumes was the "result of the continued stalemate in domestic mining activities", it said.

For the container segment, it was weakness in global markets as also the dip in domestic growth that resulted in a volume decline of four% for the same period.

"The near-term outlook for revival in these cargo categories remains weak," the rating agency said, adding that resumption in mining after the Supreme Court ruling in Karnataka could improve the outlook "to some extent".

However, it noted that a massive revival in exports is unlikely in the near future, due to the 5% export duty on pellets and continuing restrictions on mining in Goa and Orissa.

The rating agency also acknowledged that there has been a revival in project clearance from the central administrative ministry's side during this fiscal. According to the shipping ministry, it has achieved the target of awarding 30 projects which entail an investment of Rs 21,000 crore.

The report also said reforms on tariff setting from are a welcome step, but underlined the need to pass on the benefits to existing operators to offer a level playing field.

"Existing private operators and major port trusts continue to be governed by the tariff guidelines of 2005 and 2008, which are seen to have certain inherent flaws," it said.

In July 2013, the ministry had announced that new port projects will not be governed by the Tariff Authority for Major Ports (TAMP) guidelines and had also said that it is mulling how to pass on the benefit to existing operators as well. However, no decision has been taken yet.