‘The fourth terminal will be crucial to JN Port's growth'

For Jawaharlal Nehru Port, the proposed fourth container terminal is crucial as the terminals here are working beyond capacity. With the Supreme Court earlier this month allowing AP Moller Group to bid for the fourth terminal, the port is now trying to speed up its tender process. The group was earlier barred from bidding on the grounds that it already operates a terminal at the same port. It moved the court and the case delayed the tender for the terminal by several months. In an interview to Business Line , Mr L. Radhakrishnan , Chairman, JNPT, talks about the proposed terminal and the plans to increase the port's capacity.

Excerpts from the interview:

Now that the legal issues are over, how long will it take for you to award the contract for the fourth terminal?

Some legal issues are still pending. Mundra Port (one of the bidders) has been denied security clearance by the Government. They have challenged it before the Mumbai High Court. Their financial bid is with us but we cannot open it. There is no stay and we hope that the case will be disposed of soon. Simultaneously, we are evaluating the RFQ of AP Moller. If it would like to bid, it can do so relatively fast as it is already a partner in one of our terminals and know the project well. I think we would be able to award the contract in the next few months.

How crucial is the fourth terminal for JN port?

The fourth terminal will be a major project that will take the port's capacity to 10.35 million TEUs from 4 million TEUs. The first phase, expected to be ready in three years, will add 2.4 million TEUs and another 2.4 million one year later. We also plan to enhance the capacity of our own container terminal (JNPCT).

Ideally, the capacity utilisation of a port should be 70 per cent. Last year the port was not functional for nearly a month following the collision of MSC Chitra and MV Khallija . Outside of that, our capacity utilisation was more than 110 per cent. This is a huge strain on our men and machinery. With added capacity eventually it may come down to the comfortable level of 70 per cent. Generally, infrastructure projects including ports should have a higher capacity, so that sudden seasonal changes can be accommodated. So the fourth terminal is very crucial.

Can you elaborate on the expansion plans for your own terminal?

We expect to enhance the capacity of our own terminal by 0.5 million TEUs this fiscal itself. It will be done through modernisation of the terminal. We will be soon getting three modern cranes that we have ordered from a Korean manufacturer. These cranes will improve JNPCT's productivity.

We have also placed orders for three cranes with a joint venture of Mitsubishi with an Indian company. In addition to this, the 330-metre berth expansion will bring 0.8 million TEUs in less than two years.

Are there plans for a greenfield project?

Yes, we are planning a new mega port project at Nhava Island which will have a capacity of 6 to 9 million TEUs per annum. We have made a formal request to CIDCO for 500 hectares. The project could have other facilities, including a ship repair yard. Our plan is to develop 3-4 km of quay length in phases, depending on the demand and cargo projections.

What about the connectivity?

The bigger challenge for the project will be the timely completion of the dedicated freight corridor project, which is not in our hands. That is the big opportunity and a bigger risk. If it does not happen in time, it will certainly be a huge problem for evacuation of containers from the port and the supply of containers especially which come from the northern part of the country. We are really apprehensive that the move to take the freight corridor in two stages will be to the detriment of the development plan to ensure that Mumbai remains the major maritime hub.

Today JN Port has been functioning reasonably well because of our connectivity to the roads and railways. Currently we are evacuating 21 per cent of the containers through railways. But with the projected increase in capacity we need to evacuate at lest 50 per cent of the enhanced capacity.

What is delaying the corridor project?

The progress of the corridor is slow and I think the problem is with the land acquisition in Maharashtra. Up to Vadodara, there are fewer problems, as reported by the DFC officials. If the land acquisition is not done on a war-footing in Maharashtra, it will lead to delay in commissioning of the corridor to the JN Port; It will be big a blow to Mumbai's development in the logistics sector. And so, the project should be implemented in a single phase.

At what stage is the plan for dredging the port channel?

We have invited tenders (RFQ and technical bid) and the end of this month is the last day for submitting them. We have received all the clearances except one from the PIB. We had appointed Tata Consulting Engineers as Project management Consultants for the first phase. In the first phase, it will have 14 metres depth.

What would be the cost?

The project cost is estimated at about Rs 1,400 crore. We have gone for a new method of “assured depth” contract, as per the advice from Government. Under this, it is the contactor's responsibility to ensure the assured depth even if he encounters with any unexpected additional geological hurdles. The contract value under this may be more. But we will get the assured depth and we will be assured that no additional cost arises out of geological surprises.

How are you funding it?

We had approached Japan International Cooperation Agency, which is keen to finance the project. But there is a problem; they can approve the project only by December 2011. If we avail it, we could lose one full year. So we are looking at other avenues. We could tap the Rs 5,000-crore, tax-free infrastructure bonds announced in the Budget for port development. We have appointed Deloitte as a consultant.

We propose to have an SPV with 90 per cent equity by us and 10 per cent by Mumbai port for undertaking the work. The SPV will apply for the finance.

We are working out a scheme with a revenue generating stream. Without raising the normal port or ship related charges. In the second phase of the dredging — 16-17 metres — we want to work out an innovative way of financing it.

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