A port? A landlord? Or both? Waters choppy around JNPT

The good news first: total container traffic handled at the Jawaharlal Nehru Port Trust or JNPT, the largest port in the country and owned by the government, increased in the year ending March 31, 2010, year on year.

Now the not so good: The picture that emerges after a closer look at some financial indicators is less than flattering.

But before all that, a caveat: JNPT does not publish its financial details and does not give its annual report to anyone outside the government and its banks — despite the fact that the government plans to corporatise JNPT soon.
So what are the financial indicators saying?

For one, that JNPT takes credit for volumes that were on account of other operators, and it earned more money as a landlord rather than as an operator of ports.

It is quite possible that if JNPT’s own terminal were to be taken as a separate business unit, without accounting for royalties and revenue share from other terminal operators, the bottomline would have had a red hue.

A detailed email questionnaire on the traffic data sent last week to JNPT chairman remained unanswered at the time of writing the story.

To understand this, is it necessary to note that JNPT has three terminals. While two of them are being operated by Gateway Terminals of India (operated by AP Moller, which also owns and runs Maersk Lines) and Nhava Sheva International Container Terminal (operated by Dubai Port World), respectively, the third is handled by JNPT itself. It is known as the Jawaharlal Nehru Port Container Terminal.

It is when one looks at the operations of the three terminals separately, that one realises that volumes for both Gateway and Nhava Sheva went up by 19.89% and 7.35% respectively, during 2009-10 over the preceding year, while those for Jawaharlal Nehru Port Container Terminal declined by a whopping 27%. The trend doesn’t seem to have changed since.

Annualised figures for the current fiscal, based on the container traffic data available for April-November 2010 show the highest recovery for Jawaharlal Nehru Port Container Terminal at 8.22%, while growth in annualised volumes for Gateway and Nhava Sheva were at around 5.25% and 1.24%, year on year, respectively.

The figures for Nhava Sheva have been sourced from industry sources as DP World refused to share details.

However, Jawaharlal Nehru Port Container Terminal’s highest growth rate is also due to a low base in the previous year compared with the other two terminals.

Another moot point is, the best indicator of efficiency at a port is the way the cranes operate — which is measured by the number of moves they make per hour.

This determines the number of containers that can be moved every hour from shore to ship or the other way around.

In this, the Jawaharlal Nehru Port Container Terminal had the lowest crane rate among all the three operators — and the efficiency has declined over the years.

In sharp contrast, Gateway has seen a progressive increase year on year. The record of Nhava Sheva appears to have faltered in 2008, but it managed to rebound smartly in 2009.

Take the second indicator — berth productivity — which measures the total moves of all cranes on the ships every hour. This gives total productivity, not just the average of each crane.

Here, again, Jawaharlal Nehru Port Container Terminal remains the laggard, and its performance worsened in 2009.

All this shows in the numbers. The operating income of JNPT during 2008-09 was `965.06 crore. Of this, nearly half, or Rs434.46 crore, came from the concession royalties that Gateway and Nhava Sheva paid to JNPT.

If one excludes piloting and berthing charges — which are applicable to any ship that comes to any of the three terminals — it is believed that more than half of JNPT’s income comes from its role as a landlord than as a terminal operator.  

What these figures indicate is that JNPT should be persuaded to stop operating the one terminal it has, and give out even that to a better operator and thus earn even more than it currently does.

Clearly, it is better off as a landlord than as a port operator.