Cargo growth to continue driven by crude, containers: Study

The prospects of the Indian port sector are favourable, supported by healthy growth in cargo of volume drivers like crude and coal, and over the medium to long-term, it will continue to gain traction, ratings agency Icra expects.

Giving the sector a stable year-end outlook, the agency said cargo growth has been driven by domestic requirements of crude oil to meet domestic petroleum requirements, and containers, given the cost and logistical advantages associated with containerisation.

According to Icra, coal imports, which had become a concern over the last two years, have been witnessing a rebound and could continue to, with the momentum witnessed in first half of FY2019.

"The prospects for the Indian port sector players in the medium-term are expected to be favourable, supported by continuing healthy growth in cargo of major volume drivers like coal, crude and containers," the agency said in a statement issued here.

"Demand revival from the power sector and key consumer industries would be critical for sustained pick-up in coal imports," it added.

The agency further noted that cash accruals for the major players will be supported by steadily rising handling rates, barring the projects where the tariff setting process is mired in litigations.

"However, iron ore imports, which increased over the last four-six quarters, could decline with continuing curbs on mining activities thereby higher reliance on domestic iron ore which could lead to decline in exports," Icra said.

At present major ports are being targeted for modernisation and efficiency improvement under the Sagarmala project and over the last two years, there has been progress on the port capacity enhancement, efficiency improvement and port connectivity.

Also, the ministry of shipping has chalked out a roadmap over the next 5-10 years, wherein significant investments would be made in the sector to boost trade and development.

"In the long-run, the implementation of the project could lead to increased cargo for the ports, however, several challenges remain, given the vast scale of the project and the significant funding resources and PPP participation required to make the targets a reality," it said.

Further, the agency noted, that several non-major ports have underperformed owing to cargo ramp-up issues amidst stiff competition for hinterland cargo.

"Given the low returns and high leveraging being faced by certain private sector port players, the sector could see further consolidation. Credit profiles of companies could come under pressure on account of any leveraged mergers and acquisitions related impact, cargo related issues or any adverse movement on litigations," the agency added.