Much stick, little carrot

Make no mistake about it India urgently needs container berths. Growth in India’s containerised cargo traffic is currently running at about 15% a year and experts predict that as much as $15bn will need to be spent on new port facilities country-wide over the next five years.

But more important is the urgent need to level the playing field and make foreigners feel welcome to invest in this crucial sector if its manufacturing dreams are to take off. Hutchison Port Holdings’ participation in the nation’s port projects was deemed a threat to national security last year and this summer in a bitter standoff PSA announced in early July that it was reducing the operating capacity of Tuticorin Container Terminal to 300,000 teu, mothballing one of three quay cranes. The dispute, which lasted a month, was in protest to a decision last September when India’s Tariff Authority for Major Ports announced it was cutting tariff rates at Tuticorin Container Terminal by 54%, leaving it in a loss-making position as it pays a fixed royalty to the Indian authorities.

APL’s president for South Asia savaged India’s inadequate infrastructure and high port and inland transport costs at a conference last year saying it was “hurting its development as an exporter to the rest of the world”. Kenneth Glenn pointed out that foreign companies wishing to outsource manufacturing operations to Asia needed to be near ports with world-class efficiency.

By late 2008 some 25% of world container capacity will be carried on ships of at least 6,000 teu, he added, but as yet India has no port that can handle this class of ship. Furthermore, only one Indian port, Mumbai’s Jawal Nehru Port Trust (JNPT), was in the world’s top 100 container ports (at number 36) in 2005, he said, suggesting Indian investment in ports is “too fragmented”. And the proposed Shipping Trade Practices Bill in India represented “a bureaucratic approach to the regulation of pricing”, he warned, that could increase supply chain costs and further “disadvantage India’s global competitiveness”.

The high cost and lack of uniform charges at India’s ports is causing severe aggravation to both shippers and lines. For instance, lines calling at India’s largest grain handling port located at Kandla on the western coast were told this July to pay between 15% and 50% more for docking at the port, after the tariff regulator for the Union government-run ports approved a hike in vessel related charges.

However, grand plans are envisioned. Under the nation’s transport blueprint the aim is to raise port capacity from 600m tonnes to 2bn tonnes by 2016. “Given that the growth rate of cargo has been more than 10% in the last two years and trade volume is expected to grow by over 25%, India must target a total port capacity of 1.5bn tonnes by the end of 2012 and 2bn tonnes by 2016,” shipping secretary AK Mohapatra said.

JNPT is the current bright spot among the India port constellation, with a throughput of 3.1m teu last year.

A new APM Terminals/Container Corp of India terminal called Gateway Terminals India with 1.5m teu capacity debuted this January and bids are being submitted for a fourth $1.1bn terminal there suggesting India will have a top 20 boxport soon. JNPT handled 326,000 teu during the month of July, the first time all terminals have crossed the 100,000 teu mark at JNPT. The port is expected to maintain a growth of above 20% this fiscal year, port authorities maintain.

Civil work of the sunrise infrastructure project, Vallarpadam International Trans-shipment Container Terminal (VITCT), in Kerala, will start in the last quarter, according to sources at India Gateway Terminals Private Ltd (IGTPL), the Indian arm of Dubai Ports World (DP World).

The Cochin Port Trust (CPT) had mooted the idea of an international terminal way back in the early 1990s. The deadline for commissioning the terminal is April, 2009. Meanwhile, the earth-filling work in the project area has been completed and 275,000 cu m of earth has been filled so far, which is the base for commencing the construction work.

DP World is also developing Port Kulpi in West Bengal. The east coast terminal, the first phase of which will be completed by the end of 2009, will include 450 metres of quay wall, annual box-handling capacity of 650,000 teu, a ship demolition facility and an adjacent industrial park.

In addition to new port facilities, the 3,000-acre Dubai World development at Kulpi will incorporate a 2,700-acre Special Economic Zone. The project has already seen protests by local civil liberty group – Paschim Banga Khet Mazdoor Samity – whose members believe that the project lacks transparency and has not justified the displacement of local villagers.

APM Terminals, meanwhile, will invest about 10bn rupees ($226m) to develop a new container berth at Pipavav Port in the Indian state of Gujarat. The port will set up the new container berth with a quay length of 385 metres, in addition to an existing 350 metre container berth.