Iron ore export ban punches hole in ports’ profits

T. E. Raja Simhan | | Updated on: Mar 12, 2018




The ban on iron ore exports two years ago has left major ports bleeding. The cumulative revenue loss for seven major ports is expected to be nearly Rs 645 crore in the current financial year. This is more than triple the number when compared with three years ago.

Mormugao port was the worst affected, followed by Chennai and Paradip, Government data shows.

Export of iron ore was banned from Karnataka two years ago. Later, a ban on mining of iron ore was imposed in Goa too. This left seven berths with a total yard capacity of around 5 million tonnes (MT) empty.

The berths collectively used to handle annually over 70 MT.

With huge space available, the Union Shipping Ministry is now looking at creating additional storage to facilitate export of food grains by Food Corporation of India. It also introduced a special voluntary retirement scheme at various ports to reduce the burden for ports, Shipping Minister G. K. Vasan recently told Parliament.

It is a peculiar situation at Ennore port, which entered into a licence agreement with Sical Iron Ore Terminal Ltd on September 14, 2006, to handle iron ore for a period of 30 years on build, operate and transfer basis. The operator has developed a terminal to handle 6 MT at an investment of Rs 360 crore. While the project has been completed, it has not been commissioned due to the ban.

K. Ravichandran, Vice-President, ICRA Ltd, who tracks the port sector, said the scenario is unlikely to change in the near term even if the ban on mining is removed.

The resumption is likely to come with several riders, which could impact exportable surplus volume.

While conversion of the iron ore terminals to handle other cargo is feasible it could take at least a year to complete the conversion project, besides entailing higher capex.

Until there is regulatory clarity on iron ore mining, it is unlikely that major ports will immediately go for conversion option. They may, however, give the option to private developers who will have debt servicing commitments for the completed/ongoing projects, he said.

Published on March 18, 2013
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