Chabahar Port can become a transit hub: Arun Kumar Gupta

Our contract is to equip and commercially operate the port for 10 years. Basically, Chabahar Port is to support Afghanistan, which is a landlocked country. Afghanistan has very cordial and special relations with India. I feel they would like cargo to come to Afghanistan via Chabahar rather than any other route .

They have commenced operations with a berth of 360 metre. Cargo volume isn't great in the beginning, but to make a start was important. That's exactly what has been done

I see a lot of potential in Chabahar Port in the long term and our contract is for 10 years. Early bird gets the worm. Therefore, private players want to have a foothold

Initial years will be a struggle. Our private partner will help us in managing the port. We will give them a management fee. By virtue of being our partner, they will manage the port along with us. The private firm has to bid for the amount they will charge as a management fee

Chabahar Port in Iran, where Indian Ports Global Ltd (IPGL) is engaged, is of great strategic importance and was inaugurated in early December. Now, India is also looking at another neighbour – Myanmar – for a port development project. Arun Kumar Gupta, managing director of IPGL, which is a joint venture between Deendayal Port Trust and Jawaharlal Nehru Port Trust, in an interview with Ateeq Shaikh, talks about Chabahar Port and the upcoming Sittwe Port in Myanmar.

What are the projections for cargo handling at Chabahar Port during the initial years and the growth thereafter?

The initial five years will be challenging. It should be appreciated that for any port, the gestation period is inevitable. You need time to attract traffic. First of all, one has to generate confidence in various stakeholders, that yes, Chabahar Port is there and it can give quality service. We have to prove that we have arrived by providing cost-effective, efficient service. Not only the port has to demonstrate efficiency, but also beyond. The cargo which is going to hinterland should be transported at an attractive total logistics cost. We are seeing Chabahar Port as a transit point for cargo to Afghanistan and Eastern CIS (Commonwealth of Independent States) countries like Turkmenistan, Kazakhstan, etc. It will take time for all activities to stabilise.

What about rail links to Turkmenistan and Kazakhstan for freight?

At present, Chabahar doesn't have a rail link, but good road link to Afghanistan is there. Chabahar-Zahedan (Zahedan is a city Iran) rail line of 663 kilometre is in the pipeline. Iran has started doing the sub-structure. There was a Memorandum of Understanding signed between IRCON (an Indian Railways enterprise) and their counterpart in Iran. Please understand that a lot of funds are required for it. We are hopeful that port will have rail connectivity by 2020.

Isn't five years too short a time to have a rail link?

It can happen. They are already doing the sub-structure work. If funding can be arranged, it will be done.

Three bids have been submitted to manage, operate and maintain the port. By when will the tender be awarded?

Our internal deadline is to declare the winner by March 31.

Given that the cargo will be low for initial five years, isn't the port more for strategic importance than business?

Geographical location of the port is indeed strategic and it has immense potential of becoming a transit hub.

Will naval presence be allowed at this port?

Navy is not in the picture. Our contract is to equip and commercially operate the port for 10 years. Basically, Chabahar Port is to support Afghanistan, which is a landlocked country. Afghanistan has very cordial and special relations with India. I feel they would like cargo to come to Afghanistan via Chabahar rather than any other route.

India alone wouldn't benefit. There are other countries too who would push their trade.

Yes, absolutely. We want anything going to Afghanistan and coming out of Afghanistan via Chabahar. Hence, all trading partner countries would benefit.

What commodities would be part of the Exim (export-import) trade?

Once everything settles down, the business will start. Minerals and dry fruits are there for sure. We have exclusive persons who are looking after business development, marketing, etc. Exports from India would be anything like rice, wheat, tiles, pharmaceuticals, finished steel products, etc. There are a lot of things. Presently, the priority is to fully equip and operationalise the port.

There are bids in the pipeline for procurement of cranes.

Several tenders are in hand. We have already given Letter of Award for rail mounted quay crane (RMQC), we have also signed the contract, now Letter of Credit has to be opened. We are going by the priority. The equipment that has the maximum of lead (manufacturing) time and what is immediately required for port operations gets preference. RMQC has the highest lead time; that's why we have tackled it first. Now, we are focusing on rubber tyred gantry crane (RTGC), which will be followed by other equipment.

The first phase was inaugurated in early December but it isn't ready yet.

It will get completed soon. They have commenced operations with a berth of 360 metre. Cargo volume isn't great in the beginning, but to make a start was important. That's exactly what has been done.

Why would a private player come ahead with a proposal to manage the port if the traffic is not good?

I see a lot of potential in Chabahar Port in the long term and our contract is for 10 years. Early bird gets the worm. Therefore, private players want to have a foothold.

This means profitability at the port is only for five years. Is there a ratio to share the profit or loss between IPGL and the private operator?

Our projection is that the initial years will be a struggle. Our private partner will help us in managing the port. We will give them a management fee. By virtue of being our partner, they will manage the port along with us. The private firm has to bid for the amount they will charge as management fee.

How much investment has been made in the port and how much more would be invested?

Our total commitment is $150 million loan from Exim Bank and equipment worth $85 million. After 10 years, this equipment will be transferred to them.

Is IPGL looking at any other ports?

We are not looking at any other port directly. However, Ministry of External Affairs is assisting in Myanmar's Sittwe Port. There, Inland Water Transport Authority (IWAI) is their consultant and we are the implementing agency. An inland water transport jetty has already been constructed by India at Sittwe. Possibly, a container terminal might also come up at Sittwe. We have just got a detailed project report and the same is being reviewed.

Apart from IWAI's interest in improving connectivity in Mizoram, is there any other reason to have a container terminal in Sittwe?

There is a river, Kaladan, which originates from Mizoram and flows from North to South. Part of the river has been made navigable to a draught of about 1.5 to 2 metres. It is planned to transport cargo through barges up the river till Palletwa. The final leg to Mizoram border will be by road. This will avoid transporting goods to Mizoram through the "chicken's neck".

What's the timeline for the Sittwe project?

There are several projects in progress concurrently. Each project has got its own individual timeline - road connectivity, river dredging, construction of barges and inland water terminal. Some wrecks are there in the port and removal of the same is also being undertaken.

Apart from Chabahar and Sittwe, is IPGL looking at any port in Sri Lanka and Bangladesh?

Nothing at present.

What about an opportunity to have an Indian port in Sri Lanka as it is a transshipment hub?

We cannot take away the geographical advantage of Sri Lanka as a transshipment hub. I am sure Vizingham (at Trivandrum in Kerala) would give a tough competition to Sri Lanka in future.

Coming to marketing Chabahar Port, what's the plan?

There will be road shows and business events to tell customers about advantages of Chabahar Port and its free zone. The first one will happen in early 2018 in New Delhi in presence of ministers from both the countries.