A new dawn
Credit: Lisa Tancsics
India is a container market that all major international terminal operators want a piece of due to its major growth potential.
Compare India with China: India has a population of 1.17bn people and China 1.33bn; in 2010 container traffic in India was just 8.1m teu and in China it was some 134m teu; in India the percentage of total cargo containerised is in the order of 18%, in China it is clearly much higher. All this proves that in India the container revolution has some way to run and there is significant untapped potential.
But if there is anything that has put the brakes on the Indian container revolution then it is the bureaucracy the country is famous for. It is the universal complaint of all investors in India that it takes an inordinate amount of time to get things done and even when they are in place the Indian authorities cannot resist the temptation to regulate.
A major issue in the latter respect has been the Tariff Authority of Major Ports (TAMP) which has the ability to cap the charges imposed by terminals in the ports under central government control. Port investors have complained – and not without some justification – that they have taken significant risks and then government has come along and capped their earning power, and in some cases reduced it.
It is, therefore, refreshing to hear that India’s Shipping Ministry under its Maritime Agenda 2010-2020 proposes to allow the major ports to decide their charges based on market conditions. It will retain a Regulator but this will not be focused on tariffs but instead will “set up, monitor and regulate service levels, technical and performance standards”.
Additionally, the Maritime Agenda states that the Shipping Ministry foresees an increase in port capacity to 3.3bn tonnes per annum by 2020 from the current level of just below 1bn tonnes per annum. And that the Government projects that almost half of the proposed port capacity will be generated by the non-major (state controlled) ports - 1605.5m tonnes per annum.
Such a scenario will thus see an adjustment between the major and non-major ports where there is a much more level playing field created in terms of regulation and the addition of new capacity – as of March 2010 the major ports accounted for around 65% of the total capacity of 953m tonnes per annum while non-major ports accounted for the remainder. Further, across the board it is envisaged that it is the private sector that will fund the lion’s share of the new port capacity increase.
Thus slowly but surely signs are that India may become a significantly friendlier location for port investors, where it is less problematic to gain entry to the market and less onerous in terms of the regulation of earnings. It is also to be hoped that this more investor-friendly environment will be reflected in the letting of concessions which has more than once proved to be a problematic exercise.
Indicative of this is the recent filing of an application in the Supreme Court by Jawaharal Nehru Port Trust (JPNT) calling for an urgent verdict in the case related to the $1.51bn container terminal project at the port. The Government rejected the APM Terminal’s bid which APM challenged in the Bombay High Court and subsequently, when it was not successful there, in the Supreme Court. Now, however, with the bank guarantees of all the bidders set to run out in the immediate future JPNT wishes for the Supreme Court to make a prompt decision. If it does not then tenders will have to be called for again and a new set of project cost parameters may apply.
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