Major ports reverse decline in market share

The Shipping Ministry has reversed the declining market share of the government-owned 12 major ports over the last two years through a series of efficiency improvement steps. Trade sources, however, said the growth potential could be much higher if the port trusts offered larger rate incentives/discounts for more ships to call.

Between 2015-17, cargo volumes at the dozen major ports grew by 5 per cent, from 581 million tonnes (mt) in FY15 to 648 mt in FY17. In comparison, private ports grew by 2 per cent from 471 mt in FY15 to 489 mt in FY17.

The market share of the 12 major ports in the overall Indian traffic, which was on a rapid decline since FY10 and touched 55 per cent in FY15, rebounded to 57 per cent in FY17.

The average vessel turn-around time (time taken for a ship to unload/load and sail-off) declined 14 per cent from 4 days in FY15 to 3.44 days in FY17.The productivity parameters for discharging/loading cargo in terms of tonnes per day also recorded significant improvements ranging from 3 per cent to 117 per cent between FY15 and FY17.

For instance, the productivity of edible oil berths at Deendayal Port Trust (earlier known as Kandla Port Trust) rose by 90 per cent, unlocking 50 per cent more capacity, enabling 500 more ships to call at Deendayal Port.

However, rates charged by the port trusts, according to trade sources, are impeding further growth.

In 2015, the ministry introduced a new tariff determination policy for major port trusts (not applicable to private firms running cargo terminals there) that allows them to set rates for different services to the extent needed for meeting their annual revenue requirement (ARR).

“Based on the ARR, major port trusts will have the flexibility to determine rates to respond to market forces on its commercial judgment within the ceiling of ARR,” according to the new rate policy.

“While changing the rates, the major port trusts will have to ensure that there will not be loss of traffic. The responsibility of ensuring this would rest with the chairmen of the major port trusts,” the Shipping Ministry wrote in the new policy.

By adopting the new rate policy, major port trusts secured large rates hikes on port dues, berth hire and pilotage from the regulator in 2016 and 2017. The rate hike was intended to help the port trusts adopt a dynamic pricing policy followed by private ports that are free from regulations-and compete effectively with private ports.

But, the ministry’s decision to pin the blame on port trust chairmen for loss of cargo has dampened the introduction of a dynamic pricing system.

“The rate hikes are not competitive with neighbouring ports,” said the managing director of a logistics firm that runs terminals in many major ports.

For instance, a ship has to spend more on deviation costs to go to Deendayal Port located inside the Gulf of Kutch. “ If the port charges are higher in Deendayal and the deviation costs are more, why would a ship call at Deendayal”, he asked.

“The port trusts are mandated/authorised by the government to give greater discounts, but they don’t due to fear of being hauled up by the CVC and CBI,” he said. “They have more than doubled the rates in 2016 and 2017 on which they give a 50 per cent discount. It comes back to the pre-hike level. The discounts given are not adequate. As a result, the competing private ports are still cheaper”, he said.

This is becoming a big issue with all major port trusts; they need to encourage trade by offering more benefits and incentives for ships to call, he added.

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