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Ports-A Critical Infrastructure for Indian Economy

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NN Kumar, Chairman, Jawaharlal Nehru Port Trust, in an exclusive conversation with Veena Kurup, Elets News Network (ENN) shares his outlooks over the prevalent scenario of Indian ports, need for efficient port infrastructure and opinions on recent governing policies on port sector

nn-kumar

NN Kumar,
Chairman,
Jawaharlal Nehru Port Trust

Jawaharlal Nehru Port Trust is considered as a major player in the port sector. As a sector leader in this space, please throw light on the port sector in India?
Port sector in general and major ports in particular are in a rapid growth phase. Overall 23 projects out of the targeted 30 projects for FY13-14 involving a total capacity addition of 116 million tonnes (MT) were awarded in all major ports up to mid-February. The largest project in the port sector in India, i.e. Jawaharlal Nehru Port Trust’s (JNPT) fourth container terminal, has been awarded to PSA. Through this project the container handling capacity of JN Port will be more than double the present capacity. The overall traffic at Indian ports, including major and non-major, grew by a modest 2.2 percent year-on-year in FY13. Shipments of crude oil and petroleum products, containerized goods and coal which together accounted for 71.8 percent of the traffic at major Indian ports grew by 5.1 percent in FY13. This was particularly driven by an increase in shipments of crude oil and petroleum products due to the growth of India’s refining output and increase in inbound coal shipments for electricity generation and industrial activities. Container traffic (in TEUs – twenty-foot equivalent units) at major Indian ports remained subdued in FY13 and grew by a mere 0.8%. The situation was hurt by weak external demand for Indian goods as well as poor import demand due to slowdown in domestic economy.
However, the tentative demand recovery in Europe and the US can drive up global container trade as well as outbound container shipment volumes from Indian ports in 2014. In addition,a sustained growth in international trade led by increasing demand from Europe and the US along with containerization of existing cargo could lead to an improvement in container volumes, as the pace of cargo containerization in India is only 22 percent as against the 85 percent index in the developed nations.
Port is a critical infrastructure for our country and for the development of our economy. However, the importance of the ports is often not directly understood by the masses. The impacts on daily livelihood and inflation due to lack of required port capacity and inefficiency of equipment qualitative infrastructural facilities at the ports are often not clearly understood. The situation hence demands for a proactive approach from the stakeholders involved in the sector to create such awareness among the masses about the importance and need for efficient ports and port facilities for the development of our economy.

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Recently, a drop was witnessed in the total cargo handled at JNPT, falling to 62.35 MT as against 64.49 MT in the previous year. What could be the possible reasons behind this fall in the cargo handled?
The containerized cargo handled by major ports was 7.47 million TEUs, marginally lower by 3.10 percent than the 7.70 million TEUs handled in the last year. Of this total index, JN Port handled 4.16 million TEUs which is 55.74 percent of the container traffic handled by the major ports. This year also JNPT retained its first position in container handling among major ports.
Cargo volumes fell in the last fiscal, mainly due to the labour troubles and cut in the output by one of our private terminals. Our own terminal registered a growth of 8.66 percent in volume, but our two private terminals reported lower volumes. While both these terminals were hit by a strike and go-slow action by employees, NSICT fearing revenue loss, reduced the volume after the tariff regulator cut its rate in 2012. This ultimately resulted in a fall in the cargo volumes handled during the period.

With the increasing private participation and development of ports in the neighboring state of Gujarat, do you see a shift in the cargo inflow from JNPT?
The report of cargo shifting from JNPT to private port is untrue. We have been handling four million plus TEUs of cargo for the last four years. What has shifted is the growth in the cargo volume. After 2006, we did not add any capacity. Cargo growth of last five years, i.e. 15 percent growth in the first three years and eight percent in the last two years (about three million TEUs) has moved to the other ports. Our port has always functioned at 100 percent capacity levels. Essentially, the cargo that we could not handle moved to the neighbouring ports.

With the increasing maritime trade and economic activities, the need for deep-draft ports has been constantly on a rise. Can you detail us about the development of dredging activities being executed at JNPT?
JNPT shares about 22 km long main harbor channel with the Mumbai Port. The Mumbai harbor channel is presently maintained to a depth of 10.7 – 11m below Chart Datum. JNPT has a navigational channel of 7.2 km in length, which is maintained to a depth of 11m below Chart Datum. Presently, large size vessels having a draught up to 12.5m navigate through Mumbai harbor main channel and JNPT channel, making use of the tidal window. The Port is deepening and widening the existing channel to accommodate up to 14m draught vessels (+6000 TEU vessels) by using the tidal window. The dredging component of the work was completed on 15 February 2014 and foundation work of the leading lights is in progress. Tata Consulting Engineers is the Engineer for this project.
Furthermore, under the Phase-II dredging project is in the planning stage, wherein the focus is to deepen the channels from 14m – 15m. The feasibility report for the Phase-II capital dredging project has been already submitted. The estimated project cost is Rs2,774 crore. The proposal for granting permission to carry out detailed project report (DPR) with additional studies required for the completion of DPR has been already put forth before the Ministry of Shipping. We have also requested the Ministry to grant 75 percent cost of the project or budgetary support for this project.

Is development of facilities like World Class Terminals a need of the hour to accommodate large sized vessels and increasing water commutation networks?
The Ultra Large Container Carriers (ULCCs) have been deployed by Maersk and other big shipping lines in port overseas. Deployment of such vessels depends not merely on the fact that the port infrastructure supports such vessels or not. For such development, one needs to assess if the economy and the commercial activity of the region supports such volumes of trade and requires such vessels. In India, JNPT need to be a transshipment hub for such big ships to be able to call at our Port.

The Planning Commission now wants rates at ports owned by the states to be regulated. Share with us your views on this policy. Can this be considered as a favorable measure?
New ports that receive viability-gap grants from the Indian government for construction to boost their financial viability will need to have a pre-determined tariff as a pre-requisite for availing the grant, as per the India’s apex planning body. The Commission says that that the plan is to have tariff caps, which is essential to prevent projects from being used for speculative gains. Such rate ceilings do not exist now at any of the ports owned by the States.  The Union Shipping Ministry, through its Maritime Agenda, has taken several steps to achieve a market-linked rate regime for the major ports to put them on par with the non-major counterparts. It is at this juncture that the Planning Commission has prescribed regulating rates. The Ministry had earlier tried to regulate ports owned by the States by drafting port regulatory authority legislation in 2001, but the plant was abandoned after the States and other stakeholders, including the Planning Commission objected the move.
However, this time, the chances of the plan sailing through are bright as it is linked with the viability-gap funding. All new ports to be constructed with such funding will have to follow a model concession agreement, which in turn, prescribes a tariff cap. The objective, according to the Commission is to secure value for public money and provide efficient and cost-effective services to the users. Financially-stressed States are unlikely to say no because it would eliminate the possibility of getting this fund from the Indian government to build new ports. Even if no VGF is involved, the States may still be forced to follow the model document as the lenders may insist on adopting such standard frameworks approved by the Commission and would be comfortable on lending in the basis to protect their interests. Moreover, the Commission also states that a tariff cap is necessary as the States are giving monopoly rights for the projects; this move guarantees and compensates the port operators from construction of competing ports within a 50km radius for 15 years.
Hence, irrespective of VGF received or not, the model document, instead of acting as a guiding principle for the State authorities, will ensure continued government control on rates, operations, cargo, customer composition, productivity and performance standards.

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