Modest Growth

Traffic performance of major ports during 2015-16

Major ports handled 606.37 million tonnes (mt) of cargo traffic in 2015-16, a year-on-year growth of 4.3 per cent. The growth was supported by an increase in all cargo categories except iron ore and fertilisers. Coal, petroleum-oil-lubricants (POL) and containers registered an increase of 10.3 per cent, 3.9 per cent and 3.1 per cent respectively. The sector, as a whole, has benefited from the improved macroeconomic environment and the introduction of new policies.

Besides, several ports have taken technological initiatives to improve efficiency and enable them to handle greater traffic volumes. These include the implementation of a vessel traffic management system at Kamarajar port, the installation of new smart gates at Nhava Sheva International Container Terminal Private Limited and a radiological detection system at the east quay of Visakhapatnam port.

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However, major ports have fallen short of the target set by the Ministry of Shipping (MoS). In fact, the gap between the target and actual traffic handled amplified in 2015-16 to 88.75 mt, after narrowing down from 53.51 mt in 2013-14 to 23.11 mt in 2014-15. The shortfall in traffic was because of multiple reasons. The slower growth of both the Indian and global economy led to a fall in imports. Exports also fell month over month, in view of the global slowdown resulting in reduced traffic for ports.

In 2015-16, only three ports – Mormugao, V.O. Chidambaranar (VOC) and Kamarajar – met the targets set for them. The remaining nine major ports fell short, with the shortfall in traffic ranging from 2.32 per cent for Paradip port (minimum) to 26.33 per cent for New Mangalore port (maximum). Ports like Kandla and the Jawaharlal Nehru Port Trust (JNPT) achieved their targets in 2012-13, but failed to do so in subsequent years.

Notably, only Kamarajar port has been consistently achieving the traffic target set by the MoS over the past three years. Corporatisation of the port is likely to be the primary reason for this, as it helps the top management take decisions quickly.

While there has been an improvement in the volume of cargo handled, major ports continue to operate well below their capacity. The total capacity at major ports stood at about 965.36 mt as of March 31, 2016, while the cargo handled was 606.37 mt, implying a capacity utilisation of about 62.81 per cent. In 2014-15 and 2013-14, utilisation levels stood at 66.7 per cent and 70 per cent respectively. Port-wise, there are huge variations among the major ports in terms of capacity utilisation. While Mumbai port overutilised its capacity at about 124 per cent in 2015-16, the utilisation rate for Mormugao and Cochin ports stood at 42 per cent and 44 per cent respectively.

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Port-wise analysis

For the ninth year in a row, Kandla port retained its number one position among the major ports in the country. The port handled 100.05 mt of cargo in 2015-16, an increase of over 8 per cent over the traffic volume of 92.49 mt handled in 2014-15. With this, Kandla became the first major port in the country and the second port overall (after Mundra) to handle more than 100 mt of cargo in a year.

Paradip port too, has come a long way. From being ranked the fifth highest three years ago (2012-13), in terms of  traffic handlled, the port has moved up to second spot for the past three years (2013-14, 2014-15 and 2015-16). In 2015-16, it witnessed a growth of 7.6 per cent, primarily due to an increase in thermal coal traffic, which increased by 11.39 per cent.

In terms of year-on-year growth, Mormugao port posted the highest increase at 41.2 per cent. The port, which was badly hit by mining restrictions and the ban on iron ore exports, is slowly recovering. Mormugao port handled 3.73 mt of thermal coal in 2015-16 from 2 mt a year earlier. Iron ore traffic at the port increased to 3.97 mt in 2015-16, compared to only 758,000 tonnes in 2014-15 and 44,000 tonnes in 2013-14, after the partial lifting of the mining ban in some parts of Goa and Karnataka in 2015.

Other ports which witnessed significant growth were V.O. Chidambaranar (13.7 per cent) and Kolkata (8.44 per cent). However, four ports witnessed negative growth rates – Chennai (-4.7 per cent), New Mangalore (-2.7 per cent), Visakhapatnam (-1.7 per cent) and Mumbai (-0.9 per cent).

Commodity-wise analysis

The growth in traffic at major ports was attributed to an increase in coal, container and POL traffic. Coal witnessed the maximum increase at 10.3 per cent, followed by POL at 3.9 per cent and containers at 3.1 per cent. “However, the coal import growth rate has been lower than in the previous years due to the increase in domestic production of coal, leading to reduced demand for thermal coal imports by power utilities. Container traffic growth has been negatively affected due to the global economic slowdown adversely impacting exports, while the imports continued to grow. Iron ore imports have continued to fall during the last four years as an outcome of higher domestic production of iron ore, reduced demand from integrated steel plants and cheaper imports of steel, which led to higher levels of steel imports,” says Biswanath Bhattacharya, Partner, Infrastructure and Government Services, KPMG India.

cover (Page 1)Outlook

The outlook for the port sector looks positive due to a series of initiatives recently taken by the government. The Rs 700 billion investment envisaged under the Sagarmala initiative over the next couple of years is expected to increase port capacity and improve the operational efficiency of major ports.  According to Bhattacharya, “Given the policy and fiscal push that coastal shipping received in 2015-16, the overall coastal cargo traffic is likely to pick up pace. The growth is likely to be witnessed in coal, cement and fertiliser traffic. Moreover, the cabotage relaxation may result in increased container movement. The overall export-import traffic may continue to grow, though at a modest rate with slight movement in global trade projections, while the Make in India and Sagar Mala initiatives may have a long-term positive effect on port traffic. The effects of slower global trade would be commodity specific.”

However, resolving key issues such as inadequate infrastructure (especially lack of dedicated coastal berths), the dearth of hinterland connectivity and regulatory bottlenecks is crucial, if traffic targets are to be met in the coming years.

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