Performance Review

Major ports register marginal upswing during the first half of 2019

The first six months (April-September) of the current fiscal year (2019-20) have been moderate for the port sector. The major ports handled 348.45 million tonnes (mt) of cargo traffic during April-September 2019, compared to 343.38 mt in the corresponding period of 2018-19, registering an increase of only 1.48 per cent. Healthy volume growth in the container, crude and iron ore segments was offset by the decline in coal and other bulk cargo volumes.

The growth was primarily led by petroleum, oil and lubricants (POL), containerised cargo and iron ore, whose combined share in total port traffic is 62.24 per cent. Iron ore registered a double-digit increase of 34.64 per cent, increasing from 18.39 mt during April-September 2018 to 24.76 mt during April-September 2019.

Commodity-wise analysis

Traffic volume at the major ports during the first six months of 2018-19 was dominated by POL at 117.12 mt (33.61 per cent), followed by container cargo at 75 mt (21.53 per cent) and coal (thermal and coking) at 74.16 mt (21.28 per cent).

The growth in traffic at the major ports can be attributed to an increase in iron ore shipments and container traffic. Iron ore traffic (including pellets) witnessed the maximum increase of around 35 per cent, increasing from 18.39 mt during April-September 2018 to 24.76 mt during April-September 2019. The key reason behind the notable jump was the exceptional increase in iron ore imports from Paradip port. Iron ore imports from the port increased from 1.62 mt in April-September 2018 to 5.42 mt in April-September 2019, a growth of 234.34 per cent. The increase in imports can be linked to the delays in auctions of mining leases that are due to expire in March 2020. Owing to the delays, the country is forecasted to become a net importer of iron ore in the next fiscal year, importing 25-30 mt.

Iron ore was followed by container traffic which increased from 72.04 mt during April-September 2018 to 75 mt during April-September 2019, an increase of 4.11 per cent. This increase could be attributed to the government’s renewed thrust on containerising cargo. However, overall container traffic during the 2019 period under consideration declined as compared to 2018. A number of international factors such as slowing trade growth and increasing trade tensions coupled with domestic factors such as tightening liquidity, and a slowdown in key manufacturing sectors have impacted the country’s containerised traffic growth, slowing overall traffic growth to 1 per cent during April-September 2019 (as compared to 9 per cent during the corresponding period of 2018).

Coal traffic registered a decline of 3.85 per cent during April-September 2019 over the corresponding period of 2018, marking the single biggest fall by any commodity during this period. While coking coal volumes surged by 15.25 per cent to 29.29 mt, thermal coal volumes declined by 13.2 per cent, decreasing from 51.7 mt to 44.87 mt. The decline in coal im-ports is despite the fact that Coal India Limited’s dispatch cargo declined from 247 mt during April-August 2018 to 241 mt during April-August 2019, a fall of 3 per cent. Hence, the fall in coal imports can be attributed to the economic slowdown in recent months. Meanwhile, fertiliser traffic (finished and raw) witnessed a marginal fall of 1.35 per cent during April-September 2019.

Port-wise analysis

As in the past, Deendayal port (erstwhile Kandla port) handled the highest traffic volume of 115.4 mt in 2018-19, a growth of 4.81 per cent. The port has retained its number one position among the major ports since 2007-08. During the first six months of the current fiscal year, Deendayal port handled the maximum traffic of 61.05 mt, compared to the 58.63 mt of traffic handled in the corresponding six months of 2018-19, registering a year-on-year growth of 4.12 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 six years from 2013-14 to 2018-19. In 2018-19, the port handled 109.27 mt of cargo, an increase of 7.11 per cent over the corresponding period. During April-September 2019, the port handled 55.55 mt of cargo, an increase of 5.02 per cent over the corresponding period of 2018-19.

In terms of year-on-year growth, the performance of Kamarajar port has been even more impressive. It recorded a growth rate of around 13 per cent in traffic volumes during 2018-19, the highest among the major ports. However, the port registered a decline of 4.88 per cent during April-September 2019, primarily because of a fall in coal traffic (thermal, steam, coking and others) by 19.89 per cent.

During the six-month period under consideration, Visakhapatnam and V.O. Chidambaranar (VOC) ports registered significant growth as traffic volumes at the ports increased by 9.41 per cent and 8.87 per cent respectively. The increase in traffic at VOC port can be attributed to an increase in fertiliser (26.71 per cent growth) and container traffic (12.47 per cent growth), while traffic at Visakhapatnam port grew primarily because of an increase in container volumes (12.57 per cent growth). Meanwhile, five major ports witnessed negative growth. These are Mormugao (17.3 per cent), New Mangalore (11.47 per cent), Chennai (8.83 per cent), Kamarajar (4.88 per cent) and the Jawaharlal Nehru Port Trust (1.15 per cent).

Outlook

In the long run, the outlook for the port sector seems promising with the government taking the requisite steps to carve an economic model of port-led development to utilise the country’s long coastline. The Sagarmala programme has also generated a lot of optimism in the sector. The programme aims to increase total port capacity to 3,500 mt to handle the projected traffic of 2,500 mt by 2025. However, in the short run, the outlook of the sector remains moderate owing to the projected increase in coal imports and weak container growth.

The sector is still marred by several issues that have led to various ports repeatedly failing to meet the growth targets. “Some of the challenges faced at the existing ports include internal connectivity issues; infrastructural bottlenecks within the port area; inefficiency and congestion due to hindrance in hinterland connectivity through rail, road, highways, coastal shipping and inland waterways; limitations in the storage area; limited usage of IT/cutting-edge automation; hurdles in the availability of modern equipment; high costs for maintaining deep draught berths; etc. Also, implementing port projects is, in itself, a major issue, as these projects, by their very nature, have long gestation periods and therefore the private sector has difficulty in accessing financing from banks and other financial institutions,” says Sanjay K. Mehta, chairman, Deendayal Port Trust.

“While port capacity needs to be increased to cater to the growing cargo traffic, at the same time, supplementary port services such as operations and maintenance, dredging and harbouring also need to grow at a similar pace,” says Jaideep Ghosh, partner and chief executive officer, management consulting and national head, transport, leisure & sports sector, KPMG.

Going forward, the redressal of these issues is essential if the targets are to be met.

Garima Arora

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