A DESPERATE RACE TO ADD MORE CAPACITY

The two incumbent container terminals at JNPT have always enjoyed an uncomfortable relationship. The port trust run box terminal and the Nhava Sheva International Container Terminal (NSICT), which is operated by P&O Ports, co-exist side-byside. Nevertheless, P&O Ports has lobbied hard to be allowed to take over the adjoining facility to create a mega-hub, but the port trust has steadfastly declined all approaches.

When quizzed as to his reaction to this, Captain Jimmy Sarbh, P&O Ports’ regional director for the Middle East and South Asia simply notes: “If India wants to be in a position to handle the massive growth in container volumes that are expected in the next two years, it must exploit economies of scale and have large, efficient container terminals. This means one terminal of 2000 metres quay line will handle significantly more traffic than three terminals of 600m (NSICT), 680m (JNPT) and the 720m that the new terminal will have.”

Not surprisingly therefore, P&O Ports was very keen to bid for the proposed third container terminal at the port. However, when the port trust floated the eventual tender, the company’s desire to continue expanding was totally stymied when it was banned from bidding.

“We were devastated at not being allowed to bid and challenged the decision all the way up to the Supreme Court, ” says Sarbh. “We could not understand why the best terminal operator in the land was not being allowed to repeat its success. Surely there had to be a law against it! But the authorities upheld the ban, the implications of which Indian trade is going to have to live with for the next 30 years.”

In the end, there were just four bids for the new 30-year concession, which would be allocated to the bidder offering the most generous share of annual operating gross revenue. In the event this proved to be the consortium put together by Maersk and the Container Corporation of India (Concor), which offered an absolutely whopping share of 35.503%, well in excess of the 31.888% proposed by the second place grouping of the United Liner Agencies of India (ULA) and the Port of Hamburg, and well beyond expectations.

A THIRD OF REVENUE PLUS RENTAL Significantly, other big hitters PSA Corporation (in consortium with the Bombay Dyeing Group) and Evergreen Marine Corp (bidding alongside Marubeni Corporation) restricted their own bids respectively to just 26.892% and 18.25% of total gross revenue.

Not only will the winning consortium additionally have to stump up more than one third of its gross revenue in payment to the port trust, but it will also have to pay an annual lease rental of $5.49m, rising 5% every year thereafter.

To put the Maersk bid into context, it is sufficient to note that Kishna B Kotak, ULA director, was feted by India’s business community when the size of his own bid was made public. Indeed, when Kotak was made aware of the sheer scale of Maersk’s determination to win the concession, he observed that its 35.503% offer was “enormous”.

“It would be an understatement to say that I am disappointed with the result; I am dejected, ” he said, adding that even had he known what winning the bid would have required, he would have been unable to match Maersk’s percentage. “For a multinational company such as Maersk, it is a strategic investment. Only they could have made such a bid, ” he stressed.

The Tariff Authority for Major Ports (TAMP) also pointed out to a disbelieving industry that Maersk would NOT be able to calculate its annual operating gross revenue based on discounted rates, thereby reducing the amount of money due to the government. Although the Danish multinational will be able to offer discounted rates, it will nevertheless have to calculate revenue based on the official tariffs approved by TAMP.

Fears that Maersk would convert the new box terminal into a dedicated facility have also been allayed by the company. Hans Ole Madsen, Maersk’s md for India, notes that the company has promised to invest $22.91m in developing the terminal and therefore it would make no sense whatsoever to restrict use of it to Maersk’s own vessels. “It is a huge investment and we have to do whatever we can to get the best possible returns, ” he emphasised. “I cannot be choosy.”

If the sheer size of Maersk’s bid were not controversial enough, its choice of development partner, Concor, has left members of India’s maritime industry stunned. Concor currently has a monopoly on the movement of containers by rail throughout the country, operating a number of high profile inland container depots close to major conurbations.

Jimmy Sarbh remarks: “It is natural than any shipping line or terminal operator in India today will be extremely concerned about the significance of the largest shipping line serving the country and the only rail service provider joining forces to operate what will be the largest container terminal in India. I can only hope they use their new position wisely.”

However, in recent weeks, accusations have been flying thick and fast that Concor diverted rakes of wagons away from Jawaharlal Nehru’s two operating container terminals in favour of the port of Pipavav, where Maersk’s parent company, APM Terminals, has been awarded a management concession for the container terminal.

Concor md A.K. Kohli strongly refutes suggestions of bias.

“Concor is a government company. We cannot discriminate between one operator and another. Concor operated more trains to Pipavav (in March) as the traffic justified the decision, whereas terminals elsewhere were either facing huge congestion problems or had paucity of cargo, ” he stressed.

Quizzed as to why Concor wanted to expand its existing operations to include terminal management, Kohli states that this is simply a natural evolution of the business. “Why should we remain confined only to running container trains?” he asks, adding that it is up to the Railway Ministry to decide whether open access operators should be allowed to compete with Concor on the provision of container rail transport services.

RECENT DEBACLE In terms of traffic, the new terminal at JNPT should have few difficulties in generating 140,000TEUs during its first year of operation, although the port trust has set a target of 1.3m TEUs for the seventh year. However, during the recent congestion debacle which has dogged the existing two terminals at the port, pundits have estimated that up to 500,000TEUs of additional volume could have been handled if the capacity had existed.

Indeed, the entire throughput of Jawharlal Nehru port last year totalled 2.17m TEUs, of which JNPT contributed 941,526TEUs, while NSICT increased traffic by 8% to 1,231,233TEUs and anticipates a further 5.58% growth this year, bringing the terminal almost to its design capacity of 1.4m TEUs, not bad for a facility only opened in 1999.

P&O Ports has therefore asked the port trust for additional yard space to ease the congestion that the terminal is beginning to suffer.

Sarbh concedes: “As part of our review aimed at improving productivity, which currently varies from between 22 to 35 moves per crane hour, we looked carefully at equipment deployment and have come to the conclusion that extra equipment will make no difference to productivity whatsoever. In fact, with eight quayside gantry cranes, 29 RTGs and three RMGs we have more than sufficient equipment, ” He is less than sanguine regarding the future efficiency of the port as a whole, noting that whatever additional capacity is in the pipeline will not keep pace with growth in container traffic and that congestion is here to stay, at least in the short to medium term.