Muted Growth

Major ports register cargo growth of 3.24 per cent during first half of 2017

Major ports handled 326.38 million tonnes (mt) of cargo traffic during the first six months (April-September) of the current fiscal year (2017-18), registering a growth of 3.24 per cent. The growth was supported by an increase in all cargo categories except fertiliser and coal. Iron ore, petroleum, oil and lubricants (POL) and containers registered an increase of 23.48 per cent, 7.13 per cent and 6.6 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 initiatives towards increasing the ease of doing business as well as adopting technologies to improve efficiency, which have enabled them to handle greater traffic volumes. The technological initiatives include the introduction of automated gates at DP World’s terminal at the Jawaharlal Nehru Port Trust, the opening of a radio frequency identification access gate at East Quay-7 and at the general cargo berth gate at Visakhapatnam port, the implementation of a vessel traffic management system at Kamarajar port, and the Jawaharlal Nehru Port Container Terminal migrating its terminal operating system to the SPARCS N4 platform.

The initiatives taken by the central government to address the problems associated with the ease of doing business at ports in the country include the elimination of form nos. 11 and 13, the accommodation of laboratories in the port area, direct port delivery systems, the installation of container scanners and the creation of a logistics data bank, among others.

“The government has been focusing on improving maritime operational efficiency at major ports with various measures including infrastructure expansion, draught deepening, mechanisation of terminals, improvements in turnaround time, quick cargo evacuation and skill development of employees.” says Jaideep Ghosh, Partner and Head, Transport and Logistics, KPMG in India.

In terms of capacity addition, major ports set a record with an addition of more than 100 mt in 2016-17. With this, the total capacity at major ports crossed the 1 billion tonne mark, reaching 1,065 million tonnes per annum (mtpa), as of March 2017. The capacity of major ports during 2015-16 was 965.36 mtpa.

Major ports have also been benchmarked to international standards. A total of 116 initiatives have been identified by the government for the same, of which 70 have already been implemented and the remaining will be implemented by 2019.

Port-wise analysis

During the first six months (April-September) of the current fiscal year (2017-18), Deendayal port (the erstwhile Kandla port) handled the maximum traffic at 53.28 mt. However, compared to the 53.96 mt of traffic handled in the corresponding period of 2016-17, the port registered a decline of 1.25 per cent. Deendayal port has retained its number one position among the major ports in the country since 2007-08. In 2016-17, Deendayal port handled 105.44 mt of cargo, an increase of over 5 per cent over the traffic volume of 100.05 mt handled in 2015-16. With this, for the second time in a row, Deendayal port was the only major port and the second among Indian ports (after Mundra port) to handle over 100 mt of cargo in a year.

Paradip port, too, has come a long way. In terms of traffic handled, from being ranked fifth in 2012-13, the port has held second position for the past four years (2013-14 to 2016-17). In 2016-17, it witnessed a growth of 16.45 per cent, primarily due to an increase in iron ore and POL traffic, which increased by 282.3 per cent (though from a low base) and 34.7 per cent respectively. During April-September 2017 as well Paradip port ranked second in terms of traffic handled. The port handled 47.61 mt of traffic, registering an increase of 11.57 per cent over the corresponding period of 2016-17.

In terms of growth, Cochin port outperformed all other major ports and posted the highest increase at 19.62 per cent. The growth was led by an increase in POL and container traffic. POL traffic at Cochin port increased from 7.61 mt during April-September 2016 to 9.72 mt during April-September 2017, registering a growth of 27.8 per cent. Container traffic at the port registered an increase of 10.3 per cent, increasing from 3.37 mt to 3.72 mt during the period under consideration.

Other ports which witnessed double-digit growth were Kolkata port (11.95 per cent), New Mangalore port (11.71 per cent) and Paradip port (11.57 per cent). Five ports witnessed negative growth rates – V.O. Chidambaranar port (-10.53 per cent), Kamarajar port (-7.01 per cent), Mormugao port (-3.02 per cent), Visakhapatnam port (-1.7 per cent) and Deendayal port (-1.25 per cent).

Commodity-wise analysis

The growth in traffic at major ports was attributed to an increase in iron ore, POL and container traffic. Iron ore witnessed the maximum increase at 23.48 per cent, followed by POL at 7.13 per cent and containers at 6.6 per cent. Coal (thermal and coking coal) and fertilisers (finished and raw) traffic witnessed negative growth rates of -13.06 and -6.75 per cent respectively.

The deceleration in commodities like raw and finished fertilisers and thermal coal has contributed to the overall muted cargo growth. Raw fertiliser traffic slumped 2.55 per cent, while the cargo figure for finished fertilisers was down by 4.2 per cent.

Thermal and steam coal shipments registered a decline of 16.37 per cent during April-September 2017, marking the single biggest fall by any commodity during the period under consideration. The lower volume of thermal coal was primarily due to a decline in imports as a result of better availability of domestic coal. During April-July 2017, the country imported 67.7 mt of coal, a decrease of 8.5 per cent compared with the same period of the previous fiscal year.

Outlook

The long-term outlook for the sector remains positive, backed by a series of government initiatives taken in the recent past. Cargo traffic and capacity are expected to increase to 2,500 mt and 3,500 mt, respectively, by 2025 (Ministry of Shipping estimates). Besides, the overall export-import traffic is also expected to grow, although at a modest rate with slight movement in global trade projections.

The launch of the Sagarmala programme has brought optimism to the maritime sector. The programme, centred on port modernisation and infrastructure development, is aimed at increasing the competitiveness of the Indian maritime sector. As a part of Sagarmala, more than 400 projects involving an investment of Rs 7 trillion have been identified in the areas of port modernisation, new port development, port connectivity enhancement, port-linked industrialisation and coastal community development.

“The port sector is expected to experience reasonable growth in cargo in the next one-two years, with the revival of iron ore exports, an increase in the import of crude, liquefied petroleum gas, liquefied natural gas, and POL products, coastal movement of bulk cargo as well as the impetus to coastal shipping. There is greater optimism about growth in the container segment with major merger and acquisition deals that are changing the landscape of container shipping, says Captain B.V.J.K. Sharma, joint managing director and chief executive officer, JSW Infrastructure Limited.

Recent policy initiatives – giving more autonomy to port trust boards, revising the model concession agreement, bringing some clarity on the tariff front, promoting coastal shipping and inland water transport, increasing ease of doing business, setting up dedicated special purpose vehicles for last-mile connectivity projects, etc. – are expected to revive investor interest and speed up the pace of project execution.

However, the Indian maritime sector still faces several issues, which have led to repeated failures in meeting growth targets for various ports. Key among these are inadequate infrastructure (especially dedicated coastal berths) and investment, low port capacity, lack of hinterland connectivity and regulatory bottlenecks. Resolving these issues is crucial if traffic targets are to be met in the coming years.

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