My dream is to bring mother ships to JNPT: L Radhakrishnan

In his more than 20 years of heading various public enterprises, L Radhakrishnan has been closely associated with the Indian infrastructure sector. An IAS officer from the 1984 batch and an IIM-Bangalore alumnus, he has been at the helm of ambitious port projects like Vizhinjam International Seaport. In the past, he served on the board of Kochi Port Trust, and as chairman of Kerala Water Authority and principal secretary in the department of water resources, power and ports, Kerala. His latest port of call is Jawaharlal Nehru Port Trust (JNPT). In a free-wheeling chat with R N Bhaskar and Amritha Pillay, the JNPT chairman shares his vision for the mega port, its shortcomings as a public sector company and his ambitious plans for future.

Where is JNPT in your view at present, given the current Indian trade scenario?
JNPT is a critical port for India. Last year, 56.5% of the country’s total volume of container handling was done through JNPT. If this port faces any constraints in terms of linkages to the hinterland, one can imagine the repercussions in terms of export-import trade.

JNPT is the major port on the western coast which can be developed as a transshipment port.  Another port which could have become a good transshipment port in view of its location and draft of around 20 metres is Vizhinjam.

Vizhinjam had bid for 5.4 million TEUs (twenty-foot equivalent units) and some players were willing to take it to 6 million TEUs.  The project, however, did not take off due to various bidding issues, first involving a Chinese company, and second, prolonged litigation in the second round of bidding.   As a result, we are still giving 80% of transshipment revenues to Colombo from Indian exporters and importers.

Mundra and Pipavav have depth, but transshipment ports should ideally be closer to the international shipping lanes frequented by the biggest carriers, without much diversion. Such ships have economies of scale. In order to be competitive, the lowest fuel consumption per TEU becomes important.  To be fuel-efficient and competitive, ships have to be very large and this requires a transshipment port to have depth.  My dream is to bring big ships or “mother” ships to JNPT and I expect to see it happen in the foreseeable future.

How do you plan to turn JNPT into a transshipment hub?
The depth of the Mumbai-JNPT channel is to be taken to 17 metres in two phases - first to 14 metres and then to 17 metres which will make JNPT a major hub for India-related shipping.
Unfortunately, in today’s hub-and-spoke model, the hub is not in India. The hub is in a foreign country and our importers and exporters are paying avoidable freight and transshipment charges to foreign companies.  These charges add 100 US dollars per container of cargo, in addition to the extra freight charges from foreign ports from where only feeder vessels are being sent to Indian ports.

The Indian government envisages JNPT and Kochi to be the hub ports on the west coast and Chennai and Visakhapatnam on the east coast.  But Vallarpadam’s scope is limited by the very high cost of dredging and difficulties to go deeper than 14 metres. 

Kochi is not a natural port and requires extensive dredging and this gives JNPT the advantage, as our channel does not require much maintenance dredging.

When will the planned dredging project finish?
The dredging for the first phase - it will target 14 metres in depth — should take 25 months from the time the work starts. When the first phase is completed, we should be ready with the DPR (detailed project report) and the necessary clearances to take the work ahead for the second phase, which will target 17 metres.
While a deepened channel will ensure faster evacuation on the water side, land evacuation continues to remain an issue. The Dedicated Freight Corridor (DFC) and the Delhi-Mumbai Industrial Corridor (DMIC) hold key to these plans. What’s your take on this, given Maharashtra’s sluggish progress on this count?
The Delhi-Mumbai Industrial Corridor will be relevant after the coming into existence of the DFC and will add substantially to the demand for the services of JNPT.

The DFC, however, is now being contemplated in two phases: the first one from Vadodara to the National Capital Region; and the second phase from JNPT to Vadodara.

As per the explanations of DFCC officials, this phasing has been necessitated because of delays in land acquisition by Maharashtra as also partly due to the delays in tying up the financing of the project. The Maharashtra government has been kind enough to issue very recently an order constituting a committee headed by the chief secretary to review and monitor the progress of implementation of the DFC project.

The committee comprises Maharashtra’s secretaries and officials concerned, the district collectors concerned with land acquisition for the DFC and DFCC’s senior officials. Well, as JNPT chairman, I am also a member of the committee.  I am pinning my hopes on faster progress, in terms of land acquisition and other issues which will need coordination between the DFCC and the state government.  As per the current projections, the second phase of the DFC is expected to be completed by December 2016, which is doubtful unless special efforts to accelerate it are ensured.

What might happen if the rail through-put to the DFC does not take place as envisaged?
If rail transportation is not encouraged, say, through competitive and even subsidised pricing and excellent service, there would be huge indirect costs to the economy by way of higher consumption of diesel, to the extent of over four times that of rail transport, if the alternative road transport is resorted to.

There would also be very high environmental costs, in terms of pollution caused by the burning of additional fuel, resulting in health hazards to high-density populations by the national highways, as well as rise in carbon-dioxide emissions that cause global warming.

The third consequence will be high social costs, by way of road accidents which will kill and maim breadwinners of families, reducing their family income. Many such people might be driven below the poverty line as a result of high medical costs and loss of employment and employability.

All these reasons should be sufficient for any government to sit up and take notice of the dire necessity to bring rail transportation to the current alternative road transport which is being increasingly resorted to as cargos rise.

The DFCC is designed as a means of avoiding all these avoidable negative externalities of road transport and also for ensuring faster movement of containers from JNPT to the National Capital Region in 17 hours as compared to four days now taken by rail and three days by road.

There is of course the option of coastal shipping which will also be used to partially mitigate the negative aspects of road transport and save economic, environmental and social costs. But for that, we need to build terminals for coastal ships all around the Indian coastline and not just at JNPT.

Government action is needed for coordinating connectivity in the form of road and rail to such coastal shipping jetties, which can be set up if sufficient incentives are offered to the private sector, and land is acquired and given on long lease.

JNPT will attempt to build such a terminal for coastal ships by which we will be encouraging smaller ships and barges to pick up and bring in containers to our port.  It would take a long time to build infrastructure to enable coastal shipping to move containers. So, JNPT’s expansion, starting with the fourth container terminal (to be built by a company led by the PSA International of Singapore), is highly dependent on the DFC connectivity to ensure efficient evacuation.

Do you see private global port operators like APM Terminal and DP World dominating the west coast as they have an advantage in terms of royalty charges which are lower for ports in Gujarat?
The revenue share or royalty obligations of the port operators in major ports reflect competitive international bidding. Such bidding was made as per the respective company’s projections of port services demand and terminal productivity. They have done their due diligence and they have taken a call.

If you look at the broader picture, port charges contribute only two or three percent of logistics cost. In India , rather strangely, we have a regulator to monitor only this two or three percent of the total cost, while both the hinterland and foreland are allowed to charge what they will.  It is evident that the dual-pricing policy - that is, pricing by private operators in major ports controlled by the TAMP (Tariff Authority for Major Ports) regulations and non-major ports having no such regulations — is leading to more profitable operations by port companies where there are no regulations.

The charges should be related to the quality and range of services offered by the port and determined by market forces as there is adequate competition at least in the area of container handling in India.

In major ports which enjoy good locational advantages, the quality of the supporting infrastructure is a great advantage for terminal operators. One major advantage JNPT offers its private terminal operators is the benefit of dredging.

Firstly, we would increase the depth to 14 metres and subsequently to 17 metres. These measures will ensure larger capacity “mother” vessels to call at JNPT with bigger parcel sizes for containers. This will lead to higher productivity of the terminal operators as well as savings to importers and exporters. For, they can then avoid transshipment charges and freight to feeder vessels which now bring the cargo ultimately to JNPT.

I am trying to ensure that these two dredging projects can be implemented without enhancement of charges to either shipping lines or the terminal operators. This will be more feasible if soft loans from international sources are made available by the Indian government to JNPT. Or, at least allow JNPT to issue Rs1,500 crore of tax-free bonds, from the Rs5,000 crore earmarked for the port sector in 2011-12.

Normally, such capital dredging projects in other countries are financed by sovereign grants. Only the maintenance dredging is done by port authorities. It would be difficult for JNPT to dip into its reserves that were earmarked for waterfront land needed for the fifth container terminal (which will have a capacity of around 10 million TEUs per annum). JNPT is averse to using these funds for low-return projects like dredging which will imperil potential future growth through additional terminals.

Tell us more about the fifth container terminal.
There are plans to have an L-shaped terminal, involving a length of about four kilometres. We have appointed consultants to advise us if we could also build a ship-repair facility in that location.
This project should cost anything from Rs 25,000 crore to Rs 35,000 crore at current rates, but with delays, inflation costs could push it up higher.

We are legally bound not to commission another terminal at JNPT for five years after the PSA project is awarded.  After this period is over, we could go ahead with the process for the fifth terminal. PSA is supposed to complete the first phase of terminal in three years, but they could complete it in two- and-a- half years, if they are very keen.

My plan is, therefore, to have the fifth terminal operational latest by 2019-20, which means that it has to be awarded to a partner by 2015-16 after due approvals and international bidding. The fifth terminal may not be one project but two projects — depending on DPR and demand. We could offer it to two parties and construct it in two phases or even simultaneously.

So, what might be your major development plans?
Our development is planned on six or seven axes.  First is dredging.  That is a strategic aspect that we are working on.  Second, the fourth container terminal and extension of the existing berth by 330 metres. Third, expansion of liquid handling capacity.

We hope to quadruple our existing capacities for which we are in the process of engaging consultants to study the project and advise us.  Fourth, the fifth container terminal and related projects.

Fifth, a port-based SEZ (special economic zone) too will take shape, not as part of the port activity but as an ancillary activity.

Sixth, we are also interested in developing captive jetties to be set up under the new captive port policy of the Indian government. And seventh, a logistics park will also be set up at an appropriate time.

What does the master plan for this planned SEZ look like?
We are talking of about some 3,000 acres, which is not close to the waterfront and cannot be used for direct port activities. We have earmarked an area and have taken a chunk of 267 hectares as Phase-I, half of which we have kept for industrial and logistic value-addition projects. These will add to our container volumes and provide a great deal of support to the Indian logistics industry as well as add value to exports and imports which need to be done from the JNPT premises.  There would also be cold-chains available at refrigerated warehouses. All this would be done by the private sector.

The land development — water, electricity and roads — would be done by us. Then, we would bid out for the above mentioned activities through the process of tendered auction, probably on the model of CIDCO (the City and Industrial Development Corporation of Maharashtra). This would not be merely for maximising income (which can be deployed for land procurement and infrastructure projects including connectivity) but also for increasing synergy with our port activities and other related investments.

The FTWZ (Free Trade Warehousing Zone) part of the SEZ could be like Jebel Ali near Dubai.  Probably, around 20% could be the FTWZ and the remaining would be for last-minute production or value-addition activities before export or after import.

I propose to have activities that can be done only in the port to ensure competitiveness internationally and not others which can be done easily outside in any SEZ or other industrial area. There are a good number of logistics players who have expressed their interest in operating in the port area. Doing so from a place outside the port may not be competitive nor conducive to timely exports.

The second half would be developed for infrastructure, including housing and facilities for the workers that these new projects will require.  Today, around 15,000 people work at the port, even though we employ only 1,800 directly.  Other infrastructure would be made available in this second half, like office complexes, limited housing, hotels, hospitals, shopping malls and smaller businesses, if there is a demand for such facilities.  From all these, I expect substantial revenue, which could then be utilised for low-income activities and future development, including procurement of land, dredging, investment in logistics.

Is there scope for setting up a power station in the port vicinity?
There may be such a requirement if more power is needed for the SEZ. We are now going in for non-conventional energy in a big way. We are engaging consultants to work on wind projects and a bio-mass project.  As the greenest port in India, our ultimate aim is to have at least 50 percent of our energy needs met from non-conventional energy sources.

Do you expect TAMP to monitor the tariffs you levy in the new terminals as well?
TAMP is expected to work under revised guidelines for which TERI has been engaged by the Indian government to propose changes.  It is expected that the role of TAMP would then get revised.

Will JNPT be corporatised?
The Indian government has been considering the corporatisation of JNPT. Government directions are not received yet in this regard. Once JNPT gets corporatised, it should become a “Navratna” company immediately, which will ensure delegation of powers from the government and consequent faster decision-making at the port itself.

When corporatisation happens, it must happen in a manner which is acceptable to the employees. The ministry had held a discussion with the various trade unions to ascertain what their apprehensions are.  We must ensure that employees as well as the port itself gain in the process.