The Hindu Business Line : Proposed acquisition of P&O Ports, Kochi

There is concern in Kochi port circles over the outcome of the takeover of P&O Ports by DP World, if it materialises. A section of the trade fears a monopoly of the container service trade.

THE proposed acquisition of P&O Ports by DP World for its worldwide container terminal operations seems to have raised apprehensions in the minds of the trade here about the potential impact it could have on the Kochi port.

Speculation is rife in Kochi port circles over the possible outcome of the takeover, if it materialises. A section of the trade fears a monopoly of the container service trade in the country by DP World.

The trade also has concerns about the fate of a container transhipment terminal at Vallarpadam as P&O Ports operates an established major international transhipment terminal at the Colombo Port catering to 90 per cent of the Indian transhipment trade.

Trade sources point out that the Colombo Terminal is working smoothly with efficient vessel turnaround, high productivity, ship-handling etc.

Also the rates are a third that in Kochi. With all these advantages, would DP World bring up Kochi as a competition port to Colombo, it wonders.

Strengthening their argument, trade sources cited the rejection of the P&O Port bid by the Cochin Port Trust in 2000 when the port had called for tender for the Vallarpadam terminal.

The port had done this only on the ground of the P&O's operations in the Colombo transhipment terminal. It feared that as P&O Ports had an interest in Colombo, it may not develop Vallarpadam to its full potential.

It was generally thought that there was some merit in the argument. Obviously, if the important ports of India are to be controlled by a single operator, importers and exporters could face not only fiscal but also non-fiscal barriers to open trade to and from the country.

The Vallarpadam project went on re-bid twice and finally the Dubai Ports won the bid and entered into a contract for revenue sharing with the port in 2004.

Consequently, the container terminal was handed over to Dubai Ports in early 2005. There are certain commitments from the port, such as road and rail connectivity and capital dredging, which would cost the port around Rs 900 crore, so that the time-bound transfer of the terminal to Vallarpadam may take effect by March 2009. It is in this context that the latest developments of DP World and P&O Ports have to be seen, the sources added.

It is true that BOT contracts entered into by different ports with the terminal operator may not have a clause restricting acquisitions of this kind. However, when the effect of such global acquisitions is to restrict the shipping trade of India, the Government will have to act, the sources say.

The Tariff Authority for Major Ports (TAMP) can, of course, look at the tariffs and ensure that they are not monopolistically exploitative, but pricing is not the only mechanism by which the terminal can control the trade.

It is time to re-look the policy of privatisation of terminals and lay down guidelines to control the unfettered growth of such monopolies, which would only ultimately hamper the Exim trade.

However, there are also positive arguments for the acquisition by the two entities as another section in the port feels that it will benefit Kochi in the long run.

Though sufficient safeguards have been incorporated to ensure that Kochi is not under-developed so as to function merely as a feeder to Colombo, sources in the port said that this situation could be turned around for the advantage of the port. Kochi could aim to become a global hub with its geographical advantages leveraging on the strength of DP World.

Brushing aside all speculation, DP World officials maintain that the Vallarpadam Terminal would, as per schedule, be developed into a full-fledged transhipment terminal.

The soil excavation survey has been completed and the tender awarded to carry out test piles at the location. The first phase of the development will be 600 metres of key phase along with 900 metres of back-up area.

The company hopes to engage reputed consultants for civil and rail designs by January 2006 and the project is going on full steam as per the plan, the officials added.

With the establishment of Vallarpadam transhipment terminal, the officials said that DP World would provide customers with international standards of port management and logistics solutions. The development of world-class facilities in the container business will help customers carry out business cost-effectively.

On the propriety of developing more than one transhipment terminal in a region, the officials pointed out that there is a need to develop more world-class terminals in different locations considering the pace of container movement.

Sounding a note of caution, the Water Transport Workers Federation of India said that the new development did not augur well with the Government's policy to facilitate competition in container port service through concession agreements involving private sector partners for operation of container terminals.

The new development also calls for a review of the concession agreements with the private sector in all Indian ports so as to make them conform with Indian laws that curb the emergence of monopolies.