Indian container traffic has been witnessing considerable growth for the past few years, despite the global slowdown. The 28 operational container terminals cumulatively handled 16.99 million twenty-foot equivalent units (TEUs) in 2018-19, as compared to 11.76 million TEUs in 2014-15, registering a compound annual growth rate of 9.63 per cent. However, volumes in recent months have shown a declining trend. Container traffic volumes at the major ports witnessed a growth of only 2.79 per cent during April-October 2019.
Increase in transshipment traffic at Indian ports, launch of the port community system, in-crease in the traffic handled through direct port delivery and direct port entry, use of advanced and automated container handling equipment and technology, and huge investments in infrastructure improvement under the government’s ambitious projects and programmes such as the dedicated freight corridor, the Delhi-Mumbai industrial corridor, Sagarmala and Bharatmala have augmented container traffic.
Given the importance of containerised trade in overall trade, the Ministry of Shipping (MoS) is striving to increase the share of container traffic. According to MoS estimates, it is expected to increase to 33.4 million TEUs by 2024-25.
Indian Infrastructure analyses key trends in the container market in terms of traffic, capacity, region, and origin and destination, as well as issues faced and the way forward…
Key trends
The share of containers in total port traffic is increasing, slowly but steadily. The reasons for this are multiple. Since containers can move across all modes of transport, they save handling costs when transferred from one mode to another – from ships to trucks or trucks to rail.
Overall, the current container capacity is sufficient to handle traffic at least for the next four-five years. The current utilisation level is still at only 59 per cent, much below the optimal utilisation figure of 70-75 per cent. However, there are a number of inter-port and regional variations.
With regard to non-major ports, their market share rose to around 41 per cent in 2018-19, as compared to 28 per cent in 2014-15. Historically, among the non-major ports, Mundra and Pipavav had been driving container traffic. Though their share in total container traffic at non-major ports still remains dominant, Krishnapatnam and Kattupalli ports on the east coast account for a significant portion of overall container volumes at non-major ports.
Since relaxation of the cabotage law in May 2019, transshipment volumes have increased considerably. During the period May 2018-May 2019, 807,932 TEUs of containers were transshipped through Indian ports – 625,858 TEUs of laden containers and 182,074 TEUs of empty containers. Global container liners are capitalising on the opportunity resulting from cabotage relaxation to reposition empties in deficit locations, optimise ease of doing business for the export-import (exim) community and increase transshipment through Indian ports.
The increased focus on coastal shipping and inland water transport is also being reflected in the container volumes being handled through such modes at the major ports. The past year witnessed the commencement of container movement on National Waterway (NW)-1. From November 2018 till July 2019, around 70 TEUs was moved between Varanasi and Kolkata on NW-1, carrying containers of PepsiCo, Dabur, Maersk, IFFCO, etc.
Road is the primary mode of transporting container cargo bound to and from ports. The road coefficient for most container handling major ports is more than 85 per cent. This is despite the fact that rail is a relatively more cost-efficient and faster mode of delivery. Only a few ports, mainly private ports such as Mundra and Pipavav, have significant rail coefficients for container cargo at 40 per cent and 72 per cent respectively. Meanwhile, the government has planned to ensure an optimal modal mix to bring down logistics costs as a percentage of GDP, from the current estimated levels of 13-14 per cent to 10 per cent. This, in turn, will bring down the costs of domestic movement of containers.
Overall, as against a total throughput of 17 million TEUs, India has a container handling capacity of around 25 million TEUs, almost one and a half times more than the traffic. Coast-wise, the west coast has been playing a dominant role with the highest container handling capacities created around Maharashtra and Gujarat (67 per cent of overall Indian capacity in 2018-19), while capturing 70 per cent of the country’s container business. Despite higher capacity expansion at east coast ports, their share in the total container movement stands at only 28 per cent.
On the west coast, competition is quite intense between upper west coast ports in Gujarat and ports on the Greater Mumbai coast. The Jawaharlal Nehru Port Trust (JNPT), which had a share of 66 per cent in the west coast traffic in 2010, slipped to 35 per cent by 2019. On the other hand, Mundra expanded its share from 18 per cent to 32 per cent during the same period. Two terminals at JNPT – the Nhava Sheva India Gateway Terminal and APM Terminals Mumbai – are operating at more than 100 per cent capacity at 117 per cent and 102 per cent respectively. The Adani Mundra Container Terminal at Mundra port also has a high capacity utilisation rate of 88 per cent.
On the east coast, the competition is increasing between Chennai and the ports a few miles north of Chennai. Krishnapatnam and Kattupalli, that started operations in 2013, currently hold a market share of 5 per cent and 8 per cent, respectively, in east coast traffic, while Chennai’s share has fallen from 52 per cent to 41 per cent.
Mundra and Pipavav are the only ports whose primary hinterland lies outside the port state, that is, besides Gujarat, they are handling significant container volumes from the National Capital Region (NCR) and Punjab. A significant portion of the total container traffic from the hinterlands of NCR and Punjab is also handled at JNPT. This is despite the fact that they are closer to the Gujarat port cluster.
Challenges faced and future outlook
Despite the increased focus, the Indian container market is still marred by several challenges. Lack of integrated planning (independent port plans by the central and state governments) has led to an imbalance in capacity creation across the country. Besides, the lack of adequate evacuation facilities at ports, high port charges, imbalances in exim trade, poor connectivity, lack of uniformity in technology adoption across ports, and draught restrictions, among others, are some of the other challenges being faced by the Indian container market.
In spite of these challenges, the container segment is expected to maintain its strong growth in the medium to long term. It is expected to grow by at least 7-9 per cent amidst weak world seaborne trade. However, in the short time, the growth could be less than 5 per cent.
Going forward, in order to meet the targets, there is a dire need to build additional dedicated container berths, improve port-road/rail connectivity to terminals, develop supporting infrastructure and bring about an improvement in draught levels.
Garima Arora