Embed Size (px)
Citation preview
Overview Ports handle almost 95% of total international trade volume in India. With the Government of India’s “Make in India” initiative for rapid economic growth, it is expected that the share of merchandize trade in India’s GDP would increase substantially in the next 5 years. Currently, the proportion of merchandize trade in Gross Domestic Product (GDP) of India is 27.5% and USD 623 billion in value terms (as per World Bank- 2016) compared to 32.9% or USD 3.7 trillion worth of merchandize trade of China. This data suggests sizable potential for growth in merchandize trade in India in the years to come, which would require technological upgradation and capacity development of ports.
Indian Ocean region is significant as nearly 50% of the world trade and almost 60% of the global oil trade passes through this region. Indian ports could play a major role by providing technical as well as infrastructural support to these vessels.
Government on its part has ushered in “ease of doing business” measures for the ports sector by allowing 100% FDI and introducing standardized bidding process for PPP Projects. The Government is incentivizing and supporting developers by providing viability gap funding for PPP Projects, giving infrastructure status to shipping industry and tax exemption for infrastructure development in ports.
During 2016-17, capacity addition of 100 Million Tons Per Annum (MTPA) has been implemented across the 12 major ports. The Ministry of Shipping through its major ports trust and entities like Shipping Corporation of India and Dredging Corporation is aiming to raise up to Rs. 50,000 crore of loans in dollar denominated bonds. The government also expects the Private sector to invest over Rs. 2 lkh crore in the next ten years out of which, approximately Rs. 36,000 crore will be towards major-ports expansion and for the development of non-major & intermediate ports.
Growth in trade through ports would be led by petroleum refineries, where major players are planning to double their existing refining capacity by the year 2025. Textiles and garments, consumer electronics, Iron-ore and automobiles would also contribute towards incremental growth in merchandize trade in the coming years.
October 13, 2017 I Industry Research Ports: Sector and outlook
Contact:
Madan Sabnavis Chief Economist [email protected] 91-22-67543489
Ashish K Nainan Research Analyst [email protected] 91-22-67543443
Mradul Mishra (Media Contact) [email protected] 91-22-67543515
Disclaimer: This report is prepared by CARE Ratings Ltd. CARE
Ratings has taken utmost care to ensure accuracy and objectivity
while developing this report based on information available in
public domain. However, neither the accuracy nor completeness of
information contained in this report is guaranteed. CARE Ratings is
not responsible for any errors or omissions in
analysis/inferences/views or for results obtained from the use of
information contained in this report and especially states that CARE
(including all divisions) has no financial liability whatsoever to the
user of this report
Industry I Ports: Sector and outlook
2
Ports: A Global perspective
Ports act as an economic catalyst and help in integrating smaller economies with the global the economic system.
Waterways are the most economical means of bulk transport. For industries to grow and develop in an economy,
uninterrupted power supply for manufacturing and a well-developed logistics is required. in fact, if we take a look at
developed economies, they are not self-sufficient in terms of availability of resources and raw materials required for
manufacturing and setting up industries. However, efficient and economical logistics and power supply have ensured
that they can import and manufacture goods and services at competitive prices.
Source: UNCTAD STAT * Logistics Performance Index is an annual logistics benchmark which was introduced by World Bank in 2007. It takes into account infrastructure, information technology implementation, customs and procedures as well as global shipping volumes, for arriving at the Index score for each country.
Sea transport evolved over the last few decades with innovations like bulk and container shipping. It is estimated that
80% of the global trade by volume and almost 75% of the trade by value is handled by maritime transport. As per data
from World Trade Organization, sea borne trade grew at a CAGR of 3.7% between 1991 and 2016 compared to growth
an annual average growth of 2.8% in the World economy.
Table 1.Comparing India and China- Trade, Ports and Logistics India China Germany
Coastline and Major Ports
7,517 km and 12 major ports with capacity of
1,065 MMT
14,400km and 34 major ports with capacity of top 10
ports aggregating 6,100 MMT
2,389 km and 21 port locations
Share in World Merchandize Export
1.7% 13.1% 8.4%
Share in World Merchandize Import
2.2% 9.8% 6.5%
Spend on Logistics as a % of GDP
14% 18% 7-8%
Logistics performance Index (LPI 2016)*
3.45 (Ranked: 35/160) 3.66 (Ranked: 27/160) 4.28 (Ranked: 1/160)
Industry I Ports: Sector and outlook
3
Logistics cost forms a significant part of the GDP in an economy. For instance, China’s logistics cost accounts for 18% of
the GDP. In 2016, China’s share in world total of export and import was 13.1% and 9.8% respectively, making it the
world’s largest exporter and second largest importer.
Chart.1 Ports and its various functions
Ports in India:
There are 12 major and about 200 minor and intermediate ports including 69 operational non-major ports, spread
along the 7517 km coastline of India. The 12 major ports in the country have a combined total capacity of 1,065 million
metric tonnes (MMT), while the capacity at non-major ports is roughly 700MMT. This combined capacity of 1,765MMT
at major and non-major ports is expected to be augmented to 2,500 MMT by 2025.
All the major ports, except Ennore Port which is the only corporatized major port and is registered as a company, are
Central Government administered through relevant Port Trusts.
India was a closed economy till 1990, which gradually adopted a policy of liberalization, privatization and globalization.
Successive governments aimed at developing export potential and announced measures which encouraged foreign
trade. Development of special economic zones (SEZ) and allowing foreign equity participation to aid exports did help
India achieve high trade growth. But these measures were inadequate as it did not lay emphasis on co-development of
infrastructure and cost competitiveness.
China successfully implemented the co-development model. The country started with its reforms in 1980s which led to
the formation of industrial clusters in the coastal regions. Consequently, this attracted FDI which was backed by
policies to create favorable conditions for mass production. This entire chain of policies and development led to foreign
enterprises setting up their export oriented facilities in China. China became a member of World Trade Organization in
2001, and adopted significant changes to its economy, which has led to its deeper integration with the world economy.
The consumer demand boom in mid-2000 in developed and emerging economies provided China the opportunity to
expand its export industry.
•Loading & Discharging
•Combining and separating
•Stuffing and de-stuffing containers
•Inventory management services
Cargo
•Sea and land access with road and rail network connectivity
•Industrial area and infrastructure for berthing and deberthing
•Warehouses and yards to load, discharge, store and distribute goods
Features
•Ship building and maintenance
•Navigation and vessel traffic separation
•Pilotage, tugging and mooring activities
Other services
Industry I Ports: Sector and outlook
4
561.00 569.80 560.10 545.60 555.30 581.30
606.40 647.40
288.9 314.9
353 387.9
417.1
471.2 466.2 484.8
0
100
200
300
400
500
600
700
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Graph 1. Volume handled by Major and Minor Ports (figures in Million Tonnes)
Major Ports Non-Major Ports
Trade volume and performance for the year 2016-17:
Traffic handled at Indian ports grew at a CAGR of 7.4% between 1981 and 2016. For the same period, trade in value
terms increased from USD 24 billion to USD 643 billion. An important shift that has been observed over the last 10
years is the emergence of non-major ports in terms of cargo volume handled. This can be attributed to the strategic
location, modernized infrastructure and efficient operations of non-major ports. Non Major ports constituted less than
10% of the total traffic in FY81. In FY 16 their share has increased to 43%. Non-major ports have come up at strategic
locations such as Mundra on the west coast and Krishnapatnam on the east coast as they are key to container business
growth in India and have also extensively participated in optimizing hinterland connection such as rail and road
operations.
Source: Indian Ports Association
For the year 2016-17, the total merchandize trade in volume terms was 1,132.2 million tonnes, 5.5% growth over 2015-
16. Data for the years 2010-17 of cargo volume handled by major and non-major ports is shown in Graph 1.
- For the current year, April-August 2017, the 12 major ports handled 273.96 million tonnes of cargo as against
265.31 million tonnes handled during the corresponding period of previous year, an overall growth of 3.3%.
- In terms of cargo profile handled by major ports, 48% of the total was solid cargos which included iron-ore,
coal, fertilizer and other cargo; 33% was petroleum, oil and lubricants (POL) and the remaining was in the form
of container cargo.
- Seven Ports (Kolkata, Paradip, Chennai, Cochin, New Mangalore, Mumbai and JNPT) registered positive growth
in traffic during the period.
- The highest growth was registered by Cochin (19.99%), followed by New Mangalore (13.26%), Paradip
(12.57%), Kolkata [incl. Haldia] (11.45%) and JNPT (6.18%)
- Cochin Ports growth was mainly due to increase in traffic of POL (27.99%) and Containers (12.79%).
- In Kolkata Port, overall growth was positive i.e. 11.45%. Haldia Dock Complex (HDC) registered positive growth
of 19.08%, mainly due to increase in iron ore traffic.
- Kandla, Paradip, JNPT, Mumbai and Vizag handled 60% of the major port traffic during the above mentioned
period.
Industry I Ports: Sector and outlook
5
Cargo-profile: The largest share in total cargo handled was of petroleum, oil and lubricants (POL) which accounted for
34.00%, followed by Container (20.17%), thermal & Steam Coal (12.82%), Other Misc. Cargo (12.12%), Coking & Other
Coal (7.49%), Iron Ore & Pellets (6.84%), Other Liquid (4.29%), Finished Fertilizer (1.17%) and FRM (1.10%). (Refer to
appendix for commodity-wise growth rates)
Evaluating India on Global benchmarks for trading across borders and seaway connectivity:
In terms of ease of doing business and export and import of goods,
India has improved over the years, as per data from World Bank
and IFC report (Doing Business 2015, 2016). The ranking for trading
across border for India has improved from 178/189 in 2015 to
133/189 in 2016. This does reveal that regulations related to
movement of goods for export-import have improved post 2014.
This rank takes into consideration documentation process involved,
time and cost involved in importing/exporting goods. This also exhibits debottlenecking at ports in terms of movement
of goods, documentation, inspection etc.
Source: UNCTAD
- The Liner Shipping Connectivity Index captures how well countries are connected to global shipping networks. It is
computed by the United Nations Conference on Trade and Development (UNCTAD) based on five components of
the maritime transport sector: number of ships, their container-carrying capacity, maximum vessel size, number of
services, and number of companies that deploy container ships in a country's ports. For each of the five
components, a country's value is divided by the maximum value of that component in 2004, and for each country,
the average of the five components is calculated. This average is then divided by the maximum average for 2004
and multiplied by 100. In this way, the index generates the value 100 for the country with the highest average
index of the five components in 2004. India’s score on the Index has grown from 34.1 to 46.2 between 2004-16.
Table 2. Ease of Doing Business Ranking 2016, IFC
100 108.29 113.1
127.85 137.38
132.47 143.57
152.06 156.19 157.51
165.05 167.13 167.48
34.14 36.88 42.9 40.47 42.18 40.97 41.4 41.52 41.29 44.35 45.61 45.85 46.24
76.59 78.41 80.66 88.95 89.26
84.3 90.88 93.32 90.63 88.61
93.98 97.79 97.75
0
20
40
60
80
100
120
140
160
180
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Graph 2. Liner shipping connectivity index
China India Germany
Industry I Ports: Sector and outlook
6
Germany’s score during inception of this index was 76.6 and score stood at 97.75 in 2016. China, which tops the
index since inception has a score of 167.4.
Table 2. Mode of Logistics and their characteristics
Waterways Rail transport Road Transport
Cost of
transportation
Low-cost, low-
pollution, and low-
carbon, mass
transport mode.
Costs approximately
25% more than
sea/waterway
transportation and
15% less than
roadways.
Costs approximately
2-3 times
waterway/sea
transportation.
Usage Best suited for bulk
logistics handling.
Best suited for
industrial and
medium scale
logistics.
Best suited for on-
demand and small
scale logistics
Challenges Under-developed
infrastructure and
lack of technology
implementation at
ports.
Excess human
intervention causes
delay and increased
costs.
Constant dredging in
case of man-made
ports.
Extensive Rail
network with well
integrated hubs with
other logistics
medium like ports
and roadways.
Road network is not
the easiest of
infrastructure
network to create
given the land
acquisition
impediment in India.
High costs of
construction of roads
and maintenance.
Susceptibility to road
accidents.
Sagarmala Programme
Sagarmala programme is an initiative of the Government of India to modernize India's ports so that port-led
development can be augmented and coastlines can be developed to contribute in India's growth. The project envisages
transforming the existing ports into modern world class ports and integrate the development of these port facilities,
with the Industrial clusters and the hinterland; and creating efficient evacuation systems through road, rail, inland and
coastal waterways. Under Sagarmala Programme, 415 projects, at an estimated investment of approximately Rs.8 Lkh
crore, have been identified across port modernization & new port development, port connectivity enhancement, port-
linked industrialization and coastal community development for phase wise implementation over the period 2015 to
2035.
Development in Gujarat is a major example of economic growth backed by development of logistics and port
infrastructure. Amongst Indian States, Gujarat has been a pioneer in adopting the strategy of port-led development,
with significant results. While in the 1980s, the state grew an average of 5.1% per annum (y-o-y) (National average was
Industry I Ports: Sector and outlook
7
5.47%, this accelerated to 8.15% per annum in the 1990’s (National average was 6.98%) and subsequently to more
than 10% per annum till 2014, substantially benefitting from the port-led development model. Gujarat Maritime Board
(GMB) which administers some 41 non-major ports in Gujarat, has maintained a share above 70% of the total traffic
handled by non-major ports in the country. GMB ports handled 340MT of cargo in FY16.
Master Plans have been prepared for all the 12 major ports under Sagarmala Programme, and 142 port capacity
expansion projects and capacity of 884 MTPA have been identified for implementation over the next 20 years. Port led
development helps industries transport their products at an efficient and economical price levels. Developing and
modernizing ports also offers spill-over benefits like upliftment of coastal communities, employment opportunities and
development of infrastructure and industries along these ports.
Project Theme No. of Projects Project Cost
(Rs. Cr) Port Modernisation 189 142,828
Connectivity Enhancement 170 230,576 Port-Linked Industrialisation 33 420,881
Coastal Community Development 23 4,216 Total 415 798,500
Source: Ministry of Shipping (GoI)
Development projects undertaken in Sagarmala initiative would focus on
- Mechanization and technological improvements: Old and low capacity equipment used at major ports has held
back productivity at several berths. These equipments are insufficient to meet the current productivity
requirements. Inadequate maintenance leads to frequent breakdowns. Several ports including Kandla, Haldia and
Tuticorin have been identified to replace old equipment.
Source: CARE Research
- Draft enhancement (dredging): The draft at major ports is less in comparison to depth required to accommodate
large new-generation ships. Average depth of ports in India ranges between 12 and 14 meters. International ports
like Port of Rotterdam have a depth of 24-26 meter and can handle container vessels with capacity of more than
15,000 twenty feet equivalent unit (TEU) and super tankers. This would not only lead to more vessels using Indian
ports directly but would lead to reduction of Indian goods being transshipped to other foreign ports for lack of
berthing infrastructure, thereby improving the logistics costs for exporters.
Industry I Ports: Sector and outlook
8
- New terminal development: Major ports are nearing their maximum potential to handle cargo. The Government
under the Sagarmala project would focus on building new terminals and berths so that they are able to handle the
large cargo capacity traffic expected in the coming 8-10 years. Kandla port for instance has built a coastal berth to
handle food grains and fertilizers.
Development of Inland waterways:
The Government of India is also trying to develop Inland Waterways which would be known as National Waterway 1 or
NW1- to ferry cargo from the eastern seaport of Haldia to Varanasi which involves a distance of 1360 km.
The waterways stretch between Kolkata and Delhi passes through one of India’s most densely populated areas. While
the region is estimated to generate about 370 million tonnes of freight annually, only a fraction of it currently is
transported by waterways. Cargo from the Gangetic states of Bihar and Uttar Pradesh are transported to the sea ports
of Mumbai in Maharashtra or Kandla in Gujarat through roadways or railways. The development of inland waterway
will help these states transport goods directly to the Kolkata-Haldia Port complex. The World Bank is financing the
development of the Ganga waterway with a loan of USD375 million.
The Project will help establish six multi-modal freight terminals - at Varanasi, Ghazipur, Kalughat, Sahibgunj, Triveni and
Haldia. Additionally, five new Roll On-Roll Off (RO-RO) crossings at different locations will help trucks and other
vehicles transfer from road to river and vice versa.
Government initiatives and policy support for strengthening ports sector:
In order to strengthen the shipping and ports sector and make it internationally competitive, the Government of India
has taken various steps which include:
- The Government introduced the Major Port Authorities Bill, 2016 in Lok Sabha in December 2016. The bill seeks to
give greater autonomy in order to help the major ports impart faster and transparent decision-making. The bill also
empowers boards of respective ports to determine the tariffs and rates-
- For services that will be performed at ports,
- The access to and usage of the port assets, and
- Different classes of goods and vessels.
Currently, the Tariff Authority for Major Ports, established under the 1963 Act, fixes the scale of rates for assets
and services available at ports.
- Exemption of Customs and Excise Duty levied on bunker fuels used in Indian flag vessels for transportation of EXIM,
domestic and empty containers between two or more ports in India. Bunker fuel is the generic term given to any
fuel poured into a ship’s bunkers to power its engines. Deep sea cargo ships typically burn the heavy, residual oil
left over after gasoline, diesel and other light hydrocarbons are extracted from crude oil during the refining
process. The Ministry of Shipping extended this exemption as a measure to promote modal shift of cargo from
roads to coastal waters not only to decongest roads but more importantly to harness the higher fuel efficiency of
coastal movements vis-à-vis roads, as well as to reduce carbon footprint.
- Abatement of service tax of 70% for transportation of goods by Coastal shipping and inland waterways
transportation.
Industry I Ports: Sector and outlook
9
- On April 13, 2016, the Ministry of Finance notified inclusion of stand-alone shipyards undertaking activities such as
shipbuilding and ship-repair in the Harmonized List of Infrastructure sectors.
- Setting up port based SEZ’s with Mundra, Krishnapatnam and Rewas and few others underway.
- The introduction of National highways development programme (NHDP) of the National Highway Authority of India
(NHAI) and various projects launched by Rail Vikas Nigam Ltd (RVNL), would now be responsible for the
development of road and rail infrastructure under the public-private partnership model which would integrate the
land and water transport mediums. These projects more specifically aim at connecting the mainland and industrial
towns with major and private ports. This would lead to better connectivity of mainland and industries with major
ports in the region.
- The Government is also targeting to power all 12 major domestic government ports on renewable energy. The
government plans to install 200 MW wind and solar power generation capacity by 2019 at the ports.
- Indian government is in the process of developing mega ports on the Eastern and Western coasts at locations like
Vizhinjam (Kerala) and Enayam (TN) which would be funded by private companies as well as its own funds. These
ports with deep drafts (berth depth of over 20 meters) would cut transshipment of goods to other foreign ports.
Other policies:
- The New Berthing Policy came into effect from August, 2016. This policy provides standardized framework for
calculation norms specific to the commodity handled and infrastructure available on the berth. This will improve
the efficiency at ports and productivity norms across ports. The New Stevedoring Policy has been implemented
since July, 2016. This will improve productivity, efficiency and safety in the ports.
Table 4. Capacity addition at 12 Major Ports
Name of Major Port Capacity Addition 2016-17
Kolkata and Haldia Port Complex 9.11
Paradip 16.50
Visakhapatnam 3.00
Kamarajar (Ennore) 12.00
Chennai 0.00
V.O. Chidambaranar 6.64
Cochin 6.91
New Mangalore 9.86
Mormugao 1.25
Mumbai 16.00
JNPT 0.00
Kandla 19.20
Total 100.47 million tonnes
Industry I Ports: Sector and outlook
10
Financial performance of major ports:
During the past three years, technology improvements such as new container terminal projects at JNPT, Kamrajar Port
in Tamil Nadu, new cargo terminals, improving rail connectivity and implementation of RFID system across ports has
helped improve the efficiency and handling capacity.
- Major ports continued to witness growth in operating surplus backed by steady increase in operating margins.
India’s 12 major ports, owned by the union government posted a combined net surplus of Rs 2,820 crore in the
year ended 31 March 2017 on income of Rs 11,894.5 crore from handling 647.6 million tonnes (MT) of cargo.
- The operating margins of the major ports rose from 28% in FY 14 to 35% in FY15, 39% in FY16 and 41% in FY 17.
- The net surplus of the 12 ports jumped from Rs 1,026 crore in FY 14 to Rs 1,805 in FY15, Rs 1,977 in FY16 and Rs
2,820 in FY17.
Source: Financial of Major Ports-Ministry of Shipping (Government of India)
- Kolkata earned Rs 1,924.11 crore, the highest income among the 12 ports, on handling 50.31 MT of cargo, yet it
ended the year with a net deficit of Rs 210.01 crore, down from the net deficit of Rs 243.44 crore last year.
6644 6591
6690
6975
6300
6400
6500
6600
6700
6800
6900
7000
7100
2013-14 2014-15 2015-16
Cost (in Rs. Crore)
28%
35%
39% 41%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2013-14 2014-15 2015-16 2016-17
Operating Profit Margin (%)
2518
3599
4309
4919
0
1000
2000
3000
4000
5000
6000
2013-14 2014-15 2015-16 2016-17
Operating Surplus (In Rs. Crores)
1026
1805 1977
2820
0
500
1000
1500
2000
2500
3000
2013-14 2014-15 2015-16 2016-17
Net Surplus (Rs. Crore)
Industry I Ports: Sector and outlook
11
7
1
1
1
Graph 8. Top 10 Global Ports
China
Singapore
South Korea
The Netherland
- Mumbai Port Trust earns much more than Kandla; still it is a loss-making port. Mumbai Port Trust earned Rs
1,461.09 crore on handling 63.05 MT of cargo, yet posted a net deficit of Rs 332.77 crore, down from the net deficit
of Rs 473.57 crore last year.
- Losses incurred in case of Mumbai and Kolkata ports are due to pension fund liability which is funded by the
surplus earned by these ports every year. Higher dredging cost in case of Kolkata and Cochin Ports have added to
the costs of these ports.
- Kandla Port Trust, India’s biggest state-owned cargo handler by volumes, earned Rs 1,291.90 crore on handling
105.44 MT of cargo (the only major port to reach 100 MT of cargo a year) and posted a net surplus of Rs 651.02
crore.
- JNPT, India’s biggest container gateway, earned Rs 1,677.90 crore on handling 62.02 MT of cargo (including 4.5
million TEUs) and reported a net surplus of Rs 1,303.89 crore.
Challenges:
India’s ports have been constrained due to many developmental, procedural and policy related challenges-
Multiple agency model- Dual institutional structure has led to development of major and non-major ports as separate,
unconnected entities.
- Lack of requisite infrastructure for evacuation from major
and non-major ports leading to sub-optimal transport
modal mix;
- Limited hinterland linkages increases cost of
transportation and cargo movement;
- Under-developed centers of manufacturing and urban and
economic activities in the hinterland;
- Low penetration of coastal and inland shipping in India
- Limited mechanization, procedural bottlenecks and lack of
scale, deep draft and other facilities at various ports in
India. This also
Volume: India is not an export-driven economy unlike other Asian countries like China, Indonesia, and South Korea.
This has led to inadequate development of port infrastructure compared with other emerging economies in the region.
Compared to India’s cargo of 1070 million tonnes in 2017, Shanghai Port in China handled over 750 million tonnes in
that year. Compared to 12 million TEU of container traffic for India, China handled 120 million TEU. India is aiming to
minimize its import of fossil fuels over the years to control import bills and has already initiated policies regulating
import of thermal coal used for power plants. This could lead to capacity idling at dedicated ports for handling bulk
mineral oil and coal. Restriction by certain states on export of mineral ores could also hamper exports of certain
commodity on regional port facilities leading to capacity remaining unused.
Cannibalization: Development of multiple ports in close vicinity handling similar cargo would lead to ports competing
for the same cargo arrivals. Competition though is a welcome move, but given the criticality of the sector and the dire
Industry I Ports: Sector and outlook
12
need to healthily develop the port infrastructure eco-system, it is important that specific ports in a region are
developed to handle specific variety of cargo like minerals, oil, gas, container etc. This way, multiple stakeholders get
to service a dedicated cargo category without eating into each other’s revenues. Once the port system in the country
reaches an advanced stage, they could slowly add on to capacity in other cargo segments.
Efficiency: Indian ports, especially the major ports have a lot of scope for improvement in operational efficiencies
compared to international ports. Apart from a few exceptions like JNPT, the quay/wharf capacity of most ports is
substantially below (less than half) that of top global ports. Draft is also a major limitation in India as terminals and
ports are unable to cater to vessels beyond Panamax (Draft over 13 meters) size that are increasingly dominating
global trade.
Source: Indian Ports Association and Respective port websites The turnaround time of a ship refers to the time the vessel reports at the anchorage of a port to the time it sails out from the berth. They broadly reflect the efficiency of the port.
Regulations: While India has a fairly extensive regulatory framework for ports, its effectiveness is questionable. The
main problem is that major and non-major ports fall under different jurisdictions with continued uncertainty as to the
ultimate scenario.
- Land acquisition and environmental clearances are specific challenges for non-major ports.
- Lack of connectivity of major ports with industries by rail or roads has been a major challenge. Transporting
finished goods to ports and imported raw materials reaching their manufacturing units take long period of time
which leads to time and cost over-runs. NHAI has given an impetus to port connectivity, but many crucial projects
suffer from implementation delays. The railways network also needs to be ramped up considerably with rake
availability being a problem even when connectivity exists on paper. The privatization of container train operations
is widely seen to be less than optimal and has not found many takers.
- Manpower and labor issues are a serious challenge in some of the older ports. Surplus manpower, lack of adequate training, falling manpower quality, opposition to reform and various anti-competitive practices are among the key dimensions of this problem. 12 major ports in the country employ around 45,000 employees as per last reported data provided by the government. In a sharp contrast, Port of Rotterdam, which handles as much as 66% of the cargo handled by all major ports in India and handles more containers than all ports combined in a year In India, employs 1100 people. Port of Rotterdam is ranked among the top-10 ports in the world and has highest level of automation with least possible human intervention which ensures smooth movement of goods, fast and efficient offloading/on-loading of cargo and containers.
1.33
0.83
1.25
0.55
0
0.2
0.4
0.6
0.8
1
1.2
1.4
Singapore Shanghai Rotterdam Boston
Graph 9. Mean Time (Days)
Mean Time (Days)
4.63
5.29
4.56 4.24
3.84 4.01 3.64
2.11
0
1
2
3
4
5
6
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Graph 10. Average Turnaround Time of Major Indian Ports (days)
Industry I Ports: Sector and outlook
13
Outlook:
India is striving to improve its manufacturing competitiveness with the “Make in India” initiative. Ports are the drivers
of socio- economic change and aid long term growth trajectory of the economy. The Government is making effort
towards developing ports into manufacturing eco-systems which attract trade as well as investments. Ports also aid in
creating employment and economic and industrial growth of an entire region. The major ports are performing well
financially, despite their shortcomings and inadequacies. It also underlines the significance to improve on these
inadequacies at the earliest so that the stakeholders, especially the users are benefited by the improved efficiency in
terms of cost and time.
- The next leg of growth in cargo capacity handled is expected to be led by the containers segment. Major ports in
India are already ramping up container handling capacity even though global container movement and freight
movement have been sluggish in the past two years. We expect the same to recover globally over the next 2-3
years. We also expect a pick-up in containerization of wider variety of cargo in India, since handling and
transportation becomes faster and easier.
- With the Sagarmala Programme aiming to increase depth of major ports so as to cut on trans-shipping of Indian
goods, Indian ports would be able to handle new-generation mega vessels in the next 2-3 years. We expect Cargo
container handling to reach 25 million TEU by 2020-21 across major and non-major ports from the current 13
million TEU. Non-major ports are expected to add higher capacity in the segment.
- India’s petroleum refining capacity currently stands at 230 MMTPA and the government intends to double the
same in order to meet its domestic demand as well as augment its exports. Petroleum and its products account for
almost 25-30% of the import-export volume of India. The increased refining capacity is expected to cater to
regional demand especially petroleum exports to countries like Bhutan, Nepal, Myanmar, Bangladesh and Sri
Lanka. We expect the petroleum, oil and lubricant (POL) segment to be major growth segment for overall growth of
cargo capacity handled by ports.
- Capacity utilization at 6 major ports on the eastern coast was 56.2% in 2016-17, a 3.4% decrease over previous
year. For the western coast, the capacity utilization was 65.9% in 2016-17, a decrease of 3.3% over the previous
year. This indicates excess handling capacity at major ports on the eastern coast. During 2016-17, major ports
implemented 100 MT of capacity addition. We expect the capacity utilization to remain stable during the current
year. Fall in import of commodities like coal would be compensated by the increased export of iron-ore, zinc and
steel.
- Environmental clearances, Tariff norms, land acquisition etc. need to be standardized and implemented for the sector to witness interest from foreign investors. Major ports have been raising their funding requirements through dollar denominated bonds which lowers their cost of debt. Additional Rs. 50,000 crore of dollar denominated loans are being planned for the funding requirements of major ports and Government entities like Shipping Corporation of India and Dredging Corporation, which provides a convenient and safer avenue for foreign investors to invest into the ports sector in India.
Capacity Utilization (%) (2016) Capacity Utilisation (%) (2017) Variation Y-o-Y
Eastern Coast 58.3% 56.3% -3.4%
Western Coast 68.1% 65.9% -3.3%
Industry I Ports: Sector and outlook
14
APPENDIX:
Sources: Ministry of Shipping, Indian Ports Association, World Bank, Reserve Bank of India, UNCTAD and Special thanks to Port of Rotterdam Authorities.
LNG Terminal New Capacity Addition (Tentative)
Proposed Facilities (Expected ) Pipavav LNG Terminal (APM Terminals)
Mundra LNG Terminal (GSPC/Adani) – (5MT)
Ennore LNG Terminal Ltd (IOCL/TIDCO) (5MT by 2018)
Mangalore LNG Terminal Ltd (5MT);
Paradwip LNG Terminal (GAIL)-(4.8MT)
Kakinada LNG Terminal owned by GAIL, GDF SUEZ and Shell. (5MT)
Kakinada LNG Terminal owned by VGS Cavallo, (3.6 MT)
Kakinada LNG Terminal owned by GMR,(1.75MT)
Gangavaram (5MT)
Vizag LNG Terminal owned by Petronet(10MT)
CORPORATE OFFICE: CARE Ratings Limited (Formerly known as Credit Analysis & Research Ltd) Corporate Office: 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai - 400 022; CIN: L67190MH1993PLC071691 Tel: +91-22-6754 3456 I Fax: +91-22-6754 3457 E-mail: [email protected] I Website: www.careratings.com
Follow us on /company/CARE Ratings
/company/CARE Ratings
