The past few years have seen increasing competition between the major and non-major ports as the port sector has been gradually moving away from a monopolistic market model to a competitive one. Of the total cargo traffic handled at Indian ports in 2017-18, non-major ports accounted for a share of around 44 per cent as compared to 24 per cent in 2000-01. This increase was primarily led by the growth in private ports, with maritime states accelerating their efforts to develop such ports, largely through private participation.
Testing the waters
According to India Infrastructure Research, 22 new non-major ports involving an investment of more than Rs 963 billion have been planned. Upon completion, these projects are expected to add over 675 million tonnes (mt) of capacity. With regard to the type of public-private partnership (PPP) format, design-build-finance-operate-transfer (DBFOT) is the most preferred. Of the 22 non-major ports, six are at the preliminary/planning stage, bids have been invited for one project, contracts have been awarded for 10 projects, construction work has commenced on four projects and one port project is currently stalled.
Overall, the implementation of new non-major ports has been quite slow due to a host of problems at the bidding, pre-construction and post-completion stages. The key issues are delays in land acquisition and obtaining statutory clearances (coastal regulation zone [CRZ], forest, pollution and environmental). In all, the lackadaisical approach by various stakeholders in the implementation of new port projects has been responsible for their sluggish execution. Development works at a number of ports, for which concession agreements were signed almost a decade ago, are yet to take off. For instance, the concession agreement for Astaranga port was signed in November 2010. Till date, a number of cases related to land acquisition are pending in court. Similarly, the foundation stone for Subarnarekha port was laid in February 2019, 11 years after the concession agreement was signed.
Indian Infrastructure provides an update on the key projects…
- Astaranga port, Odisha: The port is being developed by Navayuga Engineering Company Limited (NECL). The project requires 5,596.83 acres in 11 villages of Astaranga tehsil. The land acquisition process for the port has been facing legal hurdles with several cases pending in the Odisha High Court. The state government has now directed the district administration to speed up the process of identifying government land. The project developers have been asked to obtain environmental clearance for the port. Meanwhile, the government has initiated the process for getting the necessary permissions for the development of rail and road corridors for the port.
- Azhikkal port, Kerala: Proposed to be developed in two phases, the Kerala state cabinet approved the formation of a special purpose vehicle (SPV) for the development of the port in September 2017. Following this, the state government sanctioned the project in October 2017. Currently, dredging works (part of Phase I) are going on and are expected to be completed by June 2020. Phase II works are expected to be completed by June 2021.
- Beypore port, Kerala: Being developed by INKEL Limited, the scope of work involves the construction of a dedicated berth for handling cargo and passenger vessel movement to and from Lakshadweep, and the development of other infrastructure facilities.
- Bhavanapadu port, Andhra Pradesh: In January 2018, the Andhra Pradesh government approved the award of the contract for port development to Adani Ports and Special Economic Zone Limited (APSEZL), which had emerged as the sole bidder for the Bhavanapadu port project. However, the revenue share offered by APSEZL was lower than expected. After a round of negotiations, the concessionaire agreed to offer a higher revenue share to the state government. As per the revised proposal, APSEZL will now give 2.3 per cent of the port revenues to the government for the first 30 years, a 4.6 per cent share for the next 10 years, followed by 9.2 per cent revenue share thereafter. Currently, the district administration is in the process of conducting a comprehensive survey of the land, structures and horticulture crops in the proposed villages.
- Chudamani port, Odisha: To be implemented on the build-operate-transfer (BOT) model, the project’s fate is uncertain as the Aditya Birla Group, which had signed an MoU with the state government to set up the port, has backed out of the project.
- Dahej port, Gujarat: Construction work on the port, involving the development of two solid cargo terminals, one liquid terminal and one container terminal, is currently in progress. Bids to acquire the 74 per cent stake in the project owned by Sterling Port Limited were invited in November 2017. A consortium of ILog Port (Dahej) Private Limited (wholly owned by Srei Infrastructure Finance Limited) and JSW Infrastructure Limited is likely to acquire the 74 per cent stake in the port.
- Devbhumi Dwarka commercial port, Gujarat: The port will be developed to handle bulk cargo, general cargo, liquids including petroleum, oil and lubricants, chemicals and liquefied petroleum gas. Essar Ports Limited (EPL) has signed an MoU with the Gujarat Maritime Board for developing the port. Currently, work on the detailed project report is under way.
- Kulpi port, West Bengal: In February 2019, during the Bengal Global Business Summit 2019, DP World announced that it would set up a container port terminal at Kulpi. The port will be built on PPP basis by DP World, Bengal Ports Limited and the state industrial development corporation, holding stake in a ratio of 44.5:44.5:11. The state government has also received the necessary permits to build a port at Kulpi in South 24 Parganas district near the mouth of the Hooghly river.
- Machilipatnam port, Andhra Pradesh: To be developed in a phased manner, the Andhra Pradesh government in June 2018 approved the proposal for raising a loan of Rs 13.85 billion by the Machilipatnam Urban Development Authority for port development. The loan will be utilised for development of the port, an industrial corridor, trunk infrastructure and industrial townships, including the purchase of the in-between pockets of land. Construction work on the project is currently in progress.
- Nargol port, Gujarat: Cargo Motors Private Limited is developing the port in phases. Phase I involves the construction of a coal berth and two container/break bulk berths, while Phase IA involves the construction of a coal berth, a container berth and a multi-purpose berth. In September 2018, the expert appraisal committee of the Ministry of Environment, Forest and Climate Change recommended the grant of environmental clearance and CRZ clearance for the project.
- Ponnani port, Kerala: The project is being developed by Malabar Ports Private Limited. The port requires 350 acres of land, of which the Kerala government has acquired 29.3 acres. The acquired land will be leased to Malabar Ports for a period of 33 years. Reclamation works for the project commenced in 2015 and were scheduled to be completed by December 2018. However, the work had reportedly come to a halt due to undisclosed reasons.
- Kakinada port, Andhra Pradesh: The port is being developed by Kakinada Gateway Port Limited, a subsidiary of Kakinada SEZ Limited, a company promoted by GMR Infrastructure Limited. It will handle coal, general cargo, and liquid cargo over the concession period. The foundation stone for the project was laid in January 2019.
- Ramayapatnam port, Andhra Pradesh: The foundation stone for the project was laid in January 2019. Involving a capacity of 40 million tonnes per annum (mtpa), construction work on the port is expected to begin in January 2020 and port operations are likely to commence in January 2023.
- Rewas port, Maharashtra: The Maharashtra Maritime Board (MMB) has awarded the contract for the valuation of Rewas Port Limited (RPL) to the joint venture of SBI Capital Markets Limited and Kakode Associates Private Limited. RPL, promoted by the Reliance Group, was incorporated as an SPV for the development, operation and management of the proposed port. Reportedly, as of October 2018, the Jawaharlal Nehru Port Trust (JNPT) has plans to acquire the port and is in talks with Reliance Industries Limited for the same.
- Riverine port on Mahanadi river, Odisha: The port project is planned on the Mahanadi river at Akhadasali village in Kendrapada district. In 2018, the High Level Clearance Authority cleared the implementation of the project. The committee has approved the list of shortlisted companies after the first-phase bidding process. The four companies which have been shortlisted are Hindustan Ports Private Limited, APSEZL, EPL and NECL.
- Subarnarekha port, Odisha: In January 2017, Tata Steel Limited (TSL) signed a definitive agreement with Creative Port Development Private Limited (CPDPL) for the development of the port. As per the terms of the agreement, TSL will acquire a 51 per cent stake in CPDPL. Meanwhile, land acquisition for the project stands completed. The Odisha government laid the foundation stone for the port on February 13, 2019.
- Sagar port, West Bengal: After the dilemma on the development of the Tajpur and Sagar ports, the Kolkata Port Trust has decided to undertake the implementation of both ports in phases. While Tajpur port will be taken up in the first phase, Sagar port will be taken up in the next. To be set up in South 24 Parganas district of West Bengal, Sagar port is being developed to handle coal, ore, containers, steel products, fertilisers, sugar, foodgrains, etc.
- Tajpur port, West Bengal: To be developed in two phases, the project does not require any land acquisition and will be built on reclaimed land. In view of the lack of support from the central government, the West Bengal government has decided to develop the port with its own resources.
- Tadadi port, Karnataka: The project is being implemented by the Karnataka State Industrial Investment and Development Corporation. An SPV, Tadadi Port Limited, was incorporated for project execution. In May 2017, the Indian Institute of Science requested the central government to shelve port development. A letter in this regard was sent to the government in March 2017 along with the request to not grant environmental clearance to the proposed port. No further update is available.
- Vijaydurg port, Maharashtra: To be developed in two phases with a cumulative capacity of 75 mtpa, the port is being developed by Privilege Hi-Tech Infrastructure Limited (63 per cent stake), HIPE Transport Infrastructure Ventures Private Limited (26 per cent stake) and MMB (11 per cent stake). According to reports, the Ministry of Shipping is working towards taking over the Vijaydurg port project from the Maharashtra government and linking it with the proposed mega refinery at Nanar in Ratnagiri district. Further, JNPT is also planning to acquire the port and is in talks with the stakeholders.
- Vizhinjam port, Kerala: The port is being developed by Adani Vizhinjam Port Private Limited, a wholly owned subsidiary of APSEZL, at a cost of Rs 75.25 billion. The completion date of the project has been revised to October 2020 owing to delays due to Cyclone Okchi.
- Yogayatan port, Maharashtra: The port is situated at Thane creek near Mankhurd in Maharashtra. The foundation stone for the port project was laid in December 2015. The port is to be developed by the Yogayatan Group at an investment of Rs 2.5 billion.
To sum up
Overall, the progress of greenfield port projects has been slow and unsatisfactory. Very few of them have moved from the proposal/preliminary stage to the implementation stage owing to a number of issues. Obtaining environmental clearances and acquiring land still remain difficult for greenfield projects.
In order to match government’s ambitious targets of 3,500 mtpa capacity by 2025, the development of new ports needs to pick up pace. There is a need to fast-track the process of granting environmental clearances and clearing land acquisition proposals. To conclude, effective coordination between the central and state governments as well as different ministries in addressing these issues will determine the future pace of project development.