The Indian port sector has seen tremendous changes in recent years. To facilitate the transition to renewable energy and promote decarbonisation, several steps are being taken. The government has undertaken various green port initiatives at the major ports. These include the Harit Sagar guidelines, which emphasise the use of clean and green energy in port operations; the development of storage capabilities at ports; and the handling and bunkering of fuels such as green hydrogen, green ammonia and green methanol. The sector is also expected to witness higher investments, enhanced capacity utilisation and increased private player participation. At a recent Indian Infrastructure conference, Rajiv Agarwal, managing director and chief executive officer, Essar Ports, talked about Essar Ports and its plans, the prospects for public-private partnerships (PPPs) in the port industry, and the sector outlook. Excerpts…
Operations of Essar Ports
Over the years, Essar Ports has developed 168 million metric tonne per annum (mmtpa) of port capacity in India through investments of over $2 billion, with technology and automation at the core. The result is that these facilities can offer best-in-class services, which can be benchmarked across the globe. Essar Ports specialises in the development and operations of ports and terminals for handling dry bulk, break bulk, liquid and general cargo. Recently, Essar successfully concluded a huge divestment programme as part of its initiative to become debt-free, divesting 148 mmtpa of port capacity. Post the successful divestment programme and the ports business becoming debt-free, the deleveraged assets are on the cusp of a transformation journey where integrated logistics solutions, green energy and value-added services are going to play a major role in paving the way for Essar’s energy transition initiative.
West coast terminals
On the west coast, Essar has developed three facilities – the 50 mmtpa port terminal at Hazira, integrated with the 10 mmtpa steel complex; the 58 mmtpa liquid terminal at Vadinar, integrated with a 20 mmtpa oil refinery; and the 20 mmpta Salaya port, which is integrated with around 1,700 MW of power plants. The facilities at Vadinar and Hazira have been divested and Essar is currently operating Salaya Port.
Salaya port is the only all-weather, deep draught direct berthing port in the southern part of the Gulf of Kutch (west coast of India) with environment-friendly state-of-the-art material handling facilities, ensuring an efficient turnaround time and economies of scale for customers. The port has lower carbon emissions than traditional means of cargo handling. It has a rich hinterland with a mix of refineries, power plants, cement plants, soda ash plants, manufacturing and trading hubs, fertiliser plants and bauxite mines. All of these provide an amazing opportunity for diversifying cargo and the company has taken significant steps on that front. The diversifying cargo profile at Salaya port is expected to get a boost with railway connectivity, green energy (LNG and green ammonia) investments in the region, and clean commodity handling as the world transitions towards net zero targets.
Essar has plans to expand the existing Salaya port terminal facilities and develop Salaya Port Terminal as a green commercial port with a capacity of 50 mmtpa. The Salaya port expansion plan involves building additional infrastructure for handling various types of cargo including cargo for green energy, energy transition, energy security and clean cargo by developing berths and handling and storage facilities, and further increasing the depth in the navigational channel for vessels and additional reclamation of land. It will encompass the handling of multiple types of cargo, LNG, LPG and ammonia, a huge step towards a green port.
With ready infrastructure, Salaya can easily fill the requirements of the Saurashtra industrial belt rather than going in for greenfield investments. The port boosts India’s objective of reducing logistics costs and making our EXIM cargo competitive. It will provide a sustainable edge for our customers for a long time.
East coast terminals
On the east coast, Essar had developed two terminals – one in Visakhapatnam, a 24 mmtpa ore-handling complex at Vizag port in Andhra Pradesh; and the other at Paradip, a 16 mmtpa dry bulk terminal in Odisha. Both these terminals have now been divested.
PPP in ports
Almost a decade ago, there was a frenzy for PPP projects, with a lot of new people coming in. Over the years, the private sector and PPPs have played a pivotal role in the growth of the sector. Having worked with PPPs in both major ports and privately owned ports, I believe there is value creation for investors in both; maybe a little more in the case of private ports compared to PPPs in major ports.
That said, the importance of major ports cannot be undermined. Large industries and groups, which can develop private ports, largely depend on major ports. Major ports provide a platform and framework for these industries. Once a tender is launched for a container port or a line, private players come in and take the projects at a very high premium. This shows the traction that the port sector is getting from the private sector. Moreover, in areas such as bulk or liquid cargo, the private industry is showing interest and taking up opportunities. Therefore, we must try to make them attractive for private players with equitable risk sharing and a window to relook at long-term concessions considering long tenures.
Further, in my opinion, corporatisation of ports is required like in other sectors. For instance, in the telecom sector, Bharat Sanchar Nigam Limited has become a corporation, which has helped it make better decisions more easily. We only have to facilitate the people who are governing these ports. This is because for a private terminal operating in a major port, more than 50 per cent of the revenue goes to the government through various channels such as revenue sharing, GST, income tax and licence fees. Further, like in the power sector, all private captive power plants give power to the grid because that is what is required, and augmentation of these power plants increases generation capacity. On similar lines, since developing greenfield ports is difficult due to problems such as unavailability of land and environmental issues, each state/port location can be helped by augmenting their existing capacity and enabling utilisation of the available capacity.
Indian ports are targeted to become green hubs where land will be used for setting up green ammonia and hydrogen plants, and transportation will take place from there.
Future outlook
According to me, growth in the existing cargo, which includes liquid, dry bulk and containers, is going to be positive. In the next five to six years, the container segment will surpass the other two, registering double-digit growth. This is because liquid and dry bulk are expected to face constraints in the future with the onset of green energy sources, and growth will plateau. Gas is also expected to grow at a healthy rate.
As stated earlier, the port sector is expected to gain traction from private players. The sector will offer ample opportunities for private players, with all terminals, whether outside or in the major ports, being developed by private entrepreneurs. Moreover, major ports will play a big role in the future, as they have a lot of land where they will be able to house the industries. For instance, if ammonia has to be manufactured, major ports can offer the required infrastructure. This is because transporting ammonia to the ports would increase the cost of ammonia, impacting its feasibility.
Another area that is gaining popularity is green infrastructure. Essar Ports is known to invest in environment-friendly mechanisms, technology and efficient handling systems. The Salaya terminal will be a green terminal in the future and will transport green ammonia. It will be a hub for hydrogen, green ammonia etc. During the recent Global Maritime Summit in Mumbai, most of the investments were made in greenfield ports and the greening of ports. Indian ports are targeted to become green hubs where land will be used for setting up green ammonia and hydrogen plants, and transportation will take place from there.
Essar Ports aspires to deliver state-of-the-art solutions through digital transformation and technology uptake, which can give a sustainable advantage to its customers and stakeholders. Under its Green and Energy Transition Theme, the company is focusing on:
- Providing shore power for reducing maritime emissions from ships in the ports.
- Promoting renewable energy and a hydrogen economy, including green ammonia.
- Green transportation of cargo, including mechanised facilities with conveyors and LNG-powered truck fleets to move cargo.
- Diversifying the cargo profile to enable a lower carbon footprint as compared to traditional handling.
