Traffic Analysis

Major ports register cargo growth during first half of 2018

The first six months (April-September) of the current fiscal year (2018-19) have been rather good for the port sector. Major ports handled 343.26 million tonnes (mt) of cargo traffic during April-September 2018, registering a growth of 5.12 per cent.

This growth was a result of an increase in all key cargo categories except iron ore and fertilisers. Coal, container, and petroleum, oil and lubricants (POL) traffic registered an increase of 18.52 per cent, 9.1 per cent and 3.15 per cent respectively. The sector benefited from the new policies and initiatives introduced by the central government.

The initiatives taken to address the problems associated with the ease of doing business at Indian ports include the elimination of Form Nos. 11 and 13 required to be submitted for taking trucks and cargo inside the port area, setting up of laboratories in the port area, the deployment of direct port delivery systems, the installation of container scanners and the creation of a logistics data bank. As part of its efforts for promoting ease of doing business through digital transformation and building world-class port infrastructure in the country, the Indian Ports Association (IPA) has appointed Tech Mahindra as the managed service provider for five major ports – Mumbai, Kolkata, Chennai, Deendayal and Paradip. The IPA has also appointed EY as a consultant to assist in conceptualising a port-enterprise business system (EBS) and supporting the IPA and port trusts in project implementation. The proposed EBS will consist of three core solution components – port operations solutions, standard enterprise resource planning solutions and auxiliary solutions. The system will be driven by transparent, simple and error-free business processes, that can be easily measured by clearly defined key performance indicators. It will use the latest technology to achieve strategic business objectives and integrate seamlessly with prevalent systems and devices.

In terms of capacity addition, the major ports set a record with the addition of more than 385.36 mt in 2017-18. With this, the total capacity reached 1,451.19 million tonnes per annum at the end of fiscal year 2017-18. Under Project Unnati, major ports have been benchmarked to international standards to improve their operational efficiency and profitability. To this end, a total of 116 initiatives aimed at improving efficiency have been identified by the government. As of August 2018, 89 initiatives have already been implemented.

Port-wise analysis

As in the past, Deendayal port (the erstwhile Kandla port) handled the highest traffic volume. It handled 110.1 mt in 2017-18, registering a growth of 4.42 per cent. The port has retained its number one position among the major ports since 2007-08. During the first six months (April-September) of the current fiscal year, Deendayal port handled the maximum traffic of 58.63 mt. Compared to the 53.29 mt of traffic handled in the corresponding six months of 2017-18, the port registered an increase of 10.03 per cent.

Paradip port too has come a long way in terms of volume of traffic handled. From being ranked fifth in 2012-13, the port has held second position for the past five years (2013-14 to 2017-18). In 2017-18, the port handled 102.01 mt of cargo, registering an increase of 14.68 per cent primarily due to an increase in POL and coal traffic, which increased by 21.95 per cent and 16.39 per cent respectively. During April-September 2018, the port handled 52.9 mt of cargo, an increase of 11.12 per cent over the corresponding period of 2017-18.

In terms of year-on-year growth, the performance of Kamarajar port has been even more impressive. It recorded a growth rate of around 20 per cent in traffic volumes during April-September 2018-19. This can be attributed to an increase in coal and POL traffic, which increased by 18.54 per cent and 14.67 per cent respectively.

During the six-month period under consideration, Cochin port also registered double-digit growth. Traffic volumes at the port increased by 11.51 per cent, from 14.26 mt to 15.91 mt, between April 2018 and September 2018. Meanwhile, three major ports witnessed negative growth. These are Mormugao (-27.09 per cent), Mumbai (-5.9 per cent) and V.O. Chidambaranar (-2.94 per cent).

Commodity-wise analysis

The traffic volume at major ports during the first six months of 2018-19 was dominated by POL at 114.54 mt (33.37 per cent), followed by coal (thermal and coking) at 77.91 mt (22.7 per cent) and container cargo at 72.03 mt (20.99 per cent). In terms of a commodity-wise share in total traffic, no significant changes were seen in the period under consideration.

The growth in traffic at major ports can be attributed to an increase in coal shipments and container traffic. Coal shipments (thermal, steam and coking coal) witnessed the maximum increase of over 18 per cent, increasing from 65.74 mt during April-September 2017 to 77.91 mt during April-September 2018. The key reasons behind the double-digit growth in coal shipments are higher demand for thermal coal and lower-than- required growth in domestic coal production. Although Coal India Limited has ramped up its production substantially, the demand for power is likely to keep coal imports up.

Coal was followed by container traffic which increased from 66.03 mt during April-September 2017 to 72.03 mt during April-September 2018, an increase of 9.1 per cent. This increase could be attributed to the government’s renewed thrust on containerising cargo.

Iron ore shipments registered a decline of 10.65 per cent during April-September 2018 over the corresponding period of 2017, marking the single biggest fall by any commodity during the period under consideration. In 2017-18, major ports handled 41.05 mt of iron ore, a 3.5 per cent decline compared to 2016-17 (42.54 mt). In view of the lack of adequate demand for lower-grade fines, 148.66 mt of iron ore was accumulated at the mine pitheads in 2016-17. The figure has been estimated to be more than 150 mt for 2017-18. Iron ore stock mostly comprises low-grade fines for which there is no domestic demand.

Outlook

In all, the outlook for the port sector seems promising with the government planning to evolve an economic model of port-led development to utilise the country’s long coastline. The launch of the Sagarmala programme has brought optimism to the sector. The programme, centred on port modernisation and infrastructure development, is aimed at increasing the competitiveness of the Indian maritime sector. Between 2015 and 2035, more than 500 projects involving an investment of about Rs 8 trillion have been identified across the four pillars of the programme – port modernisation, new port development, port connectivity enhancement, port-linked industrialisation and coastal community development.

“Sagarmala projects have seen significant traction, with projects worth Rs 113 billion having been completed and Rs 23.72 billion worth of projects under implementation. Moreover, several other projects are at the tendering and detailed project report preparation stages. On the port connectivity front, bottlenecks are being addressed with several projects under way in the railway, road and multimodal logistics park segments,” says K. Ravichandran, senior vice president and group head, Corporate Ratings, ICRA Limited.

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 berths), low port capacity, low draught levels, lack of hinterland connectivity, land acquisition issues, regulatory bottlenecks, etc. “Despite several policy measures, the share of cargo traffic through coastal shipping and inland waterways remains minuscule, with last-mile connectivity issues making the transition expensive for customers. Besides, more budgetary support will be required to initiate the remaining projects under Sagarmala as the private sector may not have the risk appetite to take up these risky ventures. While new bills (such as the Major Port Authorities Bill, 2016 and the Indian Port Bills, 2018) have been introduced in order to revamp the functioning of the port sector, there have been delays in passing the bills, which calls for urgent attention,” adds Ravichandran. Going forward, the redressal of these issues is essential if the targets are to be met.

Garima Arora

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