The Hindu Business Line : Transition will be smooth and benefit all

Dubai's state-owned port operator, DP World, has become a dominant player in container terminal operations in India following its recent global $6.85-billion acquisition of the ports, ferries and property interests of The Peninsular and Oriental Steam Navigation Company (P&O). This deal, cleared by the British court, hangs fire in the US as it has raised protests over issues of port security.

In an exclusive interview to Business Line, Mr Ganesh Raj, Senior Vice-President and Managing Director, Central, West Asia and Africa Region, DP World, however, says that the company is hungry for more terminals and slams concerns of monopoly. He also unveiled DP World's India plans in the wake of the acquisition.

Excerpts from the interview:

What will the organisation structure be like in India?

India has always been and will only gain further importance as our focus area. It will be our intention to ensure that our structure reflects this strategy. The Regional Office will be headquartered in India. In the coming weeks, we expect to put together an integration plan to ensure that the transition of business entities is smooth and seamless.

Will you bid for more terminals in India?

Yes, indeed. DP World looks forward to growing the combined businesses for the benefit of customers, employees and its shareholders. The business philosophy of DP World is to create capacity ahead of demand.

The acquisition will make DP World a monopoly player in India. Your comments...

We do not believe our combined presence in India will result in a monopoly. It is a considerable presence but far from being the only player. Today, approximately 75 per cent of India's containerised traffic moves to and from the ports in Mumbai and Chennai. The NSICT only account for 18 per cent of the combined container berth length capacity of 3280 metres in the Mumbai Cluster. There are several port operators in these clusters to provide a competitive environment.

For instance, in the Mumbai Port cluster, in addition to the two state-run container terminal facilities at Nhava Sheva and Mumbai, there is APM Terminals in the third container terminal facility at JNPT which is scheduled to commence operations in March. With further developments to container terminal facilities, one can distinctly see major port operators competing aggressively for Mumbai's offshore container terminal as well as JNPT box terminals No 4 and 5. Similarly, the Government is close to finalising the private operator through a tendering process for Terminal No 2 at the Chennai Port complex in which P&O Ports was excluded.

PSA is present in Tuticorin, where the port trust recently announced the tendering process for a second container terminal facility. However, in this case PSA was allowed to bid for the same. Given all this, monopoly concerns are site specific and not necessarily country level, especially not for a country as diverse and vast as India.

So, you don't think DP World can dictate tariffs?

Notwithstanding regulation, it is a misconception that terminal operators control trade and will act irresponsibly towards tariff increase and restricting trade growth. As in fast developing countries where the focus is on providing a conducive open environment for key industry players to partake in creating wealth in the country, I believe we should move away from inward looking restrictive regimes.

A strong port infrastructure is a catalyst for trade growth and market forces will mould its progress and determine acceptable pricing levels. At DP World, we have always adopted a policy of working with our customers on a market-driven pricing strategy.

The bid submitted by P&O Ports in 2000 for Vallarpadam was rejected on fears that it would not develop Kochi to its full potential due to its presence at the nearby Colombo port. We have a similar situation now.

If I recollect correctly, the P&O Ports bid in 2000 was rejected on grounds of it being a single bidder and not for its (the company's) presence in Colombo. Incidentally, P&O Ports was allowed to bid for the Vallarpadam project in 2004.

The Vallarpadam project was subsequently awarded to DP World. Kochi has all the necessary ingredients to bring to fruition an ideal government and private partnership of how such deals should be done. Both entities have commitments to fulfil and benefit from. Our commitment to the development of an International Container Transhipment Terminal at Vallarpadam is equal to that of the Indian Government.

Let's not forget that a transshipment facility in Colombo developed to a significant position primarily due to the inability of Indian port infrastructure to keep pace with the rapid development of containerised shipping trends.

In today's scenario, the total trade in India is 41 times greater compared to Sri Lanka and the GDP is projected to grow at a rate in excess of 8 per cent annually. It is only but business logic that a cost effective long-term solution is in the development of port infrastructure in India.

What is preventing CCTL from emerging as a hub port on the east coast, as desired by the Government?

The traffic in Chennai has grown from 3.3 lakh TEUs in 2001 to 7 lakh TEUs in 2005. A 100 per cent growth in four years is by no measure small. The compatibility of a port vis-à-vis depth, marine charges and equipment capabilities is crucial to induce a direct call.

A port/terminal operator can only remove bottlenecks to encourage direct calls, however the final decision lies with the shipping lines in their tonnage deployment, service pattern and ability of Indian cargo to generate sufficient contribution margins.

What is the status of the MoU signed by P&O Ports with the West Bengal government for the development of Kulpi Port?

From our initial assessment, we have found the Kulpi project conceptually very interesting. Especially given the changed investment environment in West Bengal and our own core competencies of successfully running a port linked special economic zone, we would be very keen to pursue the MoU.

Mundra International Container Terminal (MICT) has applied for permission to run container trains. Does this fit into your scheme of things?

We are very keen to take this project forward and facilitate an end-to-end solution for our customers.