The Indian ports sector has lined up a major capacity overhaul, but low productivity and infrastructure bottlenecks continue to stifle the performance of the country's major ports. Longer turnaround times and evacuation of cargo still plague Indian ports, despite their efforts at modernisation of cargo handling mechanisms.
"Apart from physical infrastructure, equally important is to employ improved systems and trade facilitation measures in ports. These would increase capacities through reduced turnaround times of vessels and evacuation of cargo. Information and communications technology solutions have proved to be the best trade facilitation through ports," says a report from Ernst and Young.
For example, the turnaround time in major Indian ports is about 1.77 days, as compared to 0.5 in Singapore. Similarly, the vessel evacuation rate is 40 containers per hour, compared to 100 in Singapore, while the dwell time is 3.78 days as against 0.6 in Singapore.
Even in terms of infrastructure, Indian ports need to ramp up their capacities. Jawaharlal Nehru Port Trust, India's premier container port, handles about 60 per cent of India's container throughput; it is has three terminals at present with a linear quay length of 600 meters that is adequate to accommodate nine vessels at a time. Compare this with PSA Singapore, which has four terminals with a quay length of 11,754 mts that can accommodate about 41 container vessels at a time.
Targeting world class
Indeed, Indian ports are virtually struggling to provide flawless basic infrastructure and are only equipped to provide only partial electronic data interchange services. If ports in India are to emerge as key facilitators and accelerators towards economic development, they need to be globally competitive, the report says.
Doubtless, the Indian ports have been exceeding their cargo handling targets set by the Government. These ports handled 519 million tonnes of cargo in the last fiscal, an increase of 12 per cent over the previous fiscal. And for the first time, two ports, Kandla and Visakhapatnam ports, handled a throughput of more than 60 million tonnes each.
But is this enough? There is certainly a need for Indian ports to transform into world-class ports. Statisticians, according to the report, have found a high co-relation between economic growth of the country and cargo throughput in Indian ports. Even a recent study conducted for a private port had concluded that 99.5 per cent of container throughput increase in Indian port can be attributed to faster GDP growth.
Next comes the logistics costs. As per industry sources, logistics costs in India are 13 per cent of its GDP, compared to 11 per cent in Japan, 10 per cent in Europe and 9 per cent in the US. "This is due to under-developed trade and poor logistics infrastructure in India, including ports.
Further estimates suggest that India is missing out an addition 1-2 per cent GDP growth on account of logistics and transportation bottlenecks," according to the report.
What is likely to accentuate this problem is the global trend of going in for bigger vessels that Indian ports cannot accommodate, as shipping companies are increasing use of larger vessels to achieve economies of scale.
Bigger vessels
A comparative study by Drewry Shipping indicates that the use of a 10,000 TEU vessel as compared to a 4000 TEU ship can reduce costs by 37 per cent.
A recent example is the 11,000 TEU Emma Maersk vessel, which is of 1.58 lakh DWT; it has been operating in the Europe-Asia trades for the last year to almost 100 per cent of its capacity.
"The Emma experience has further hastened the race to deploy bigger vessels, with major shipping companies placing large orders for deliveries of ultra-large carriers over the next few years," the E&Y report points out.
However, a positive trend witnessed in the domestic port sector is the increased interest being shown by financial investors, such as banks, private equity funds and even pension funds to invest in port assets.
Corporate interest
Some of the recent domestic merger and acquisition trends in this sector include Reliance buying a stake in Rewas port in Maharashtra, Global Infrastructure Partners, a private equity firm, acquiring 25 per cent stake in Chennai Container Terminal Private Ltd last year and PSA buying a 49 per cent stake in ABG Kandla Container Terminal.
The E&Y report says that the Government has approved 17 private or captive port projects, of which 13 provide capacity addition of around 38.8 million tones per annum. E&Y research has shown that on-going private investments in the port sector is about Rs 17,000 crore, including Rs 1,400 crore in Mundra, Rs 3,000 crore in Dahej, Rs 2,600 crore in Vizhinjam, Rs 1,700 crore in Dhamra and Rs 2,00 crore in Gangavaram.
"Privatisation has been generally accepted as an effective means to increase competition and introduce market forces in the respective sector," the report concludes.
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