Shipping secretary says good times for port building

Port building is “going through exciting times”, and backed by keen investor interest, the government is looking to go the whole hog by focussing on their expansion and improving efficiency, shipping secretary, K Mohandas said.

“There is a considerable investor interest in port building,” he said.

Mohandas, a 1974 batch Indian Administrative Services officer, expects India’s port capacity to match the demand by 2015, shedding its tag of inadequacy.

His optimism is evident in the way private ports have started coming up in the country, often giving the state-owned major ports a run for their money.

In what came as a strong signal of change in order, recently, public sector Rashtriya Ispat Nigam shifted its coking coal import business from state-owned Vizag Port to a more cost-effective Gangavaram Port, a privately-held company.

Similarly, Puducherry-based Karaikal Port is playing on its locational advantage to wean over clients from Tuticorin Port and Chennai Port.

“Companies are seeing that they can save between Rs 80-160 a tonne in their cargo and are increasingly coming to us,” a Karaikal Port official said.

Expansion thrust
“India’s current port capacity is about 820 million tonne, and it is expected to go up to 1,250 million tonne by the end of fiscal 2012,” Mohandas said.

The original target was 1,500 million tonne, but it had to be chopped in the wake of the global economic slowdown, which constrained finances and trimmed the demand forecast.

The government has set an ambitious target to develop the major ports in the country in the next financial year.

“As more and more ports come up, business will get distributed... In 2010-11, 21 port projects will be taken up for development of berths and mechanisation. The total investment in these projects is estimated at Rs 14,000 crore,” Mohandas said.

Four of these are in Visakhapatnam, four in Tuticorin, two in West
Bengal, two in Cochin, two in Mormugao, two in Mumbai Port, two in Jawaharlal Nehru Port Trust, two in Kandla and one in Ennore.

He said the plans lined up include setting up of oil jetties in Haldia, West Bengal, a cruise terminal at Cochin, and a container terminal at Ennore.

These projects will be privately funded and built on a build, operate and transfer basis.

In the current financial year, 13 projects have been awarded so far, and one more is likely to be awarded by the month end, Mohandas said.

The ministry is also looking at developing a major port at Andaman & Nicobar Islands.

“Globally, the thumb rule is that port capacity of a country should be at least 30% more than the demand. In India, capacity utilisation is about 93%, which is good for ports and shipping companies, but bad for the economy,” Mohandas said.

He said the International Container Transhipment Terminal at Vallarpadam, Cochin, will be commissioned in the next four months. “This terminal will shift a lot of transhipment activity to neighbouring ports.”

As for the shipping industry, the secretary said his ministry is looking to support the expansion plans of companies.

Proposals galore
The shipping ministry is keen to see Indian carriers clock higher tonnage and a number of proposals are being examined to meet this end.

A chunk of cargo originating or terminating in India is carried by ships registered in other countries, with Indian flagged vessels accounting for only around 12%.

“We would like Indian tonnage to go up, for which the industry has given us suggestions that are related to taxation and the fiscal impact,” he said.

Exploring such proposals was “an ongoing process”, Mohandas said.

Among proposals to prop up the domestic industry, is one to revive an earlier subsidy scheme for ship builders.

Under this scheme, which was discontinued in 2007, the government offered shipbuilders 30% subsidy on manufacturing cost.

He also said the government was vetting a proposal to make a legislation that will give preference to Indian flag carriers over foreign flag carriers.

“This is a protectionist step, but is not unusual. It exists in many countries,” he said.

Asked whether the government was looking to reinstate this scheme, he said, “Ship building is essential and ship building activity has to be promoted. We are working on a proposal and will examine this.”

He, however, cautioned that the government may not agree to all demands of the shipbuilding companies and advised them to become more efficient and financially viable.

“Ship building is a commercial activity and it has to stand on its own,” he said.

Divestment plan
The shipping ministry, in line with the government’s drive to raise resources by selling minority stakes in its companies, has listed four candidates for a possible stock sale.

“We have four divestment candidates—Shipping Corp, Dredging Corp, Cochin Shipyard and Ennore Port. But we have not taken any final views on any of them,” he said.

“Cochin Shipyard has an expansion plan of about Rs 1000 crore, which it may fund through an initial public offer (IPO) and internal accruals and some budgetary support,” he said.

Cochin Shipyard, with a ship building capacity of up to 110,000 deadweight tonnage, is fully-owned by the government.

Shipping Corp will need resources to buy more vessels, which are available cheaper in the aftermath of the global downturn.

“I would also like Shipping Corp to be more conservative about its debt-equity ratio,” Mohandas said.

The government holds 80% in Shipping Corp and 78% in Dredging Corp.
NW18