As a fallout of the Covid pandemic and lockdown enforcement, cargo volumes at Indian ports are expected to moderate by five to eight per cent in this fiscal. In case of containers, the slump is expected to be sharper at 12-15 per cent, as per the forecast by ratings agency Icra.
Due to the impact of the pandemic and the nationwide lockdown enforced to check the spread of the contagion during April-May this year, overall cargo throughput contracted by 22 per cent at major ports. Steep decline was noticed in cargo segments like POL (petroleum products & liquid cargo), thermal coal and containers. Non-major ports also experienced volumes dipping by 22-24 per cent in this period.
“Despite the port sector being considered an essential service and continuing to remain operational during the lockdown, there has been an adverse impact on the cargo. This was on account of several factors like subdued global trade, contraction in domestic industrial activity due to lockdown and logistics bottlenecks impacting evacuation of cargo from the ports, especially by road. However, there has been some increase in the share of Railways in container transportation during this period”, the report from Icra noted.
To mitigate the impact of the virulent pandemic, the Ministry of Shipping had announced a host of measures for various stakeholders across the port sector value chain- ports, port employees, shipping lines and PPP (public private partnership) terminals.
While some of the measures are expected to support the liquidity of players such as PPP terminals during Q1 of FY21, a sustained slowdown in cargo volumes beyond this period may exert pressure on their liquidity position. Moreover, extended concessions are poised to have an adverse effect on the financial performance of the port trusts. Some of the weaker port trusts may not be able to provide additional concessions to stakeholders and have to lean on government support.
“The recovery in the port sector will be contingent on the pace of recovery of the domestic industrial activity and the global economy. Further, factors like changes in global supply chain pattern during the recovery phase will also have an impact on the cargo profile. The full year outlook for the sector remains negative, with volume contraction expected in FY2021. The recovery among the cargo segments should be relatively better for essential products like POL and thermal coal, which should be in line with lockdown relaxations and the pick-up in domestic economic activity, while for segments like coking coal and containers the recovery may be long drawn”, the report added.