Private ports growing faster

In the 1990s, they were minor ports, then they became non-majors and soon, they will be known as the country’s real major ports.

Twenty years ago, minor ports handled just eight per cent of the country’s cargo traffic. Last fiscal, not only did their share soar to 42 per cent, but they also overtook their big brothers -– the government -owned major ports – in traffic growth.

In 2012-13, non-major ports handled 390 million tonnes, registering a nine per cent growth over the previous year. During the same time, the 12 major ports reported a 2.5 per cent drop, to 545 million tonnes.

What’s more, if the current trend is any indication, the private sector Adani port in Gujarat may emerge the largest in the country in cargo throughput, beating its public sector neighbour Kandla port, which handled 93 million tonnes last year.

The Adanis have set a target of 100 million tonnes for the current fiscal, about 20 per cent growth over its throughput of 83 million tonnes last year. Interestingly, this volume was more than the combined traffic handled by three major ports – Kochi, New Mangalore and Ennore.

From where has the growth come ?

The combined throughput of all ports grew only a modest two per cent to 934 million tonnes in the year to March 2013. This clearly indicates the migration of cargo from major ports to non-major ones. Private ports are seen more aggressive and investor-friendly as they are not subject to tariff regulations like the major ports.

In the past two decades, several private ports have come up in Gujarat, Andhra Pradesh and Tamil Nadu. It was the State Maritime Board in Gujarat that took the lead in developing private ports. The Pipavav port, which started operations in 1998, was the first state level PPP port in Gujarat. Pipavav is now run by APM Terminals, which took over it in 2005. Many other ports such as Mundra, Hazira, Dahej and Reliance captive port at Sikha have come up subsequently.

In Maharashtra, which is home for two major ports — Mumbai and JNPT, the private sector has not been as aggressive as in Gujarat. However, some new ports like Dighi near Mumbai and Jaigad in Ratnagiri have started operations.

The east coast also attracted private capital in the port sector. Ports such as Krishnapatnam, Gangavaram and Kakinada in Andhra Pradesh, Dhamra in Odisha, Karaikal in Puducherry and Kattupalli in Tamil Nadu have added large capacity.

Privatisation of ports

In the mid-1990s, the Centre realised that the capacity of ports will not be enough to handle the increase in cargo traffic as the economy grew. In 1996, the government decided to go for partial privatisation of major ports. The first private terminal in a major port was set up at the Jawaharlal Nehru Port by P&O Ports Australia in 1999. After six years, DP World, Dubai, took over it as part of a global buy-out of P&O assets.

The privatisation policy created a situation where the port trusts became a regulator as well as a terminal operator, resulting in conflict of interest. This prompted the government to set up an independent agency for fixing tariff for major ports. Tariff Authority for Major Ports or TAMP was set up in 1997 through an amendment to the Major Port Trust Act. It was at a time when nearly 90 per cent of the country’s cargo was handled by the government-owned ports. Over the years, the environment has changed, particularly with the emergence of private ports and the TAMP’s regulations were seen as rigid, not investor-friendly and one which discourages efficiency. No wonder, terminal operators are now seeking its liquidation.

Corporatisation

A major weakness of the government-owned ports has been their management structure. Under the board of trustees, they were not operating like commercial organisations. Recognising this, the government in the late 1990s decided to corporatise the ports. But the move was opposed by vested interests and till today, except Ennore Port, which was set up as a company, all others remained trust-managed.

In the early 1990s, ships had to wait for days at ports like Mumbai, Kandla and Kolkata to get a berth. In normal times, the turnaround time for ships used to be more than a week. Most ports had huge labour force. With capacity expansion, reduction in labour force and efficiency brought in by private global terminal operators, the situation has improved a lot.

Yet, nearly 40 per cent of Indian exim cargo is transhipped through Colombo, Dubai and Singapore ports. This adds to the freight cost for Indian trade.

To avoid this, the government decided to develop transhipment ports first at JNPT and later at Vallarpadam in Kochi. The Cabotage rules that prevented foreign ships from operating feeder service along the coast were relaxed for Vallarpadam. However, both these ports are yet to attract large mother ships due to various reasons, including draft limitations.

The optimism over the growth in cargo traffic has prompted the UPA government to approve two more major ports on the east coast. It would benefit trade a lot more if the Centre focuses on making its existing ports efficient, before going in for new ones.

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