Not much comfort from a trading niche

Mark Yong of BMT Asia explains that although Gujarat might not have initially seemed an encouraging prospect with a number of state-run facilities and inefficient, creaking infrastructure, the highly efficient Tata and Adani Groups have not only found a bulk trading niche, but have spread the economy upstream as well, realising a number of rail and other hinterland links along the way.

However, India itself is showing that it isn’t quite so easy to rely on the driving force of commerce “when the government doesn’t seem to be able to see that far forward”, as Suren Vakil of BMT India puts it.

The coal routes crossing the Indian Ocean, from Australia to Indonesia to India, had been pushing the coal ports forward. However, the Indian empires that had been grabbing the entire production chain, from ports to power stations and even, latterly, mining interests, have had a setback. Companies such as Reliance, Tata Power, Adani and GVK Group have been on the receiving end of unpalatable price hikes, partly pushed by new energy taxes in the production countries.

The problem is that power tariffs are set by the Indian government and at present, it’s reluctant to raise prices. So, collectively the power players have put their power station plans on hold. This effectively means there’s around 40 gigawatts of power that won’t now be going through the power ports such as Krishnapatnam, Mundra and Ennore.

Dr Yong explains that people are also exploring the importation of LNG – while it’s proved too expensive for the power stations, it’s a clean domestic fuel and there’s plenty of it. Japan, Korea and Taiwan at present are the biggest consumers, while other places like Japan and Malaysia are reviewing their energy policies – and it could start a bigger ball rolling for the LNG market.

However, there are issues around LNG transfer from place to place. It requires a large step change in investment in the ports themselves as it needs very specialised handling and there are lots of safety issues. Realistically, this means development of LNG ports depends on governmental energy aspirations, with heavy state involvement to push forward the large-scale industry required to make use of it.

India’s long arms may also extend to Myanmar, and the truly huge Dawei port and industrial zone, located about 350 kilometers west of Bangkok. Both Delhi and the private sector believe the project could be an important hub for an Indian-Southeast Asia trade corridor, bypassing the Strait of Malacca and cutting costs.

However, even here energy issues play a central role: following public opposition and environmental concerns there is still a degree of uncertainty over the proposed coal-fired power plant, one – central – aspect of the multibillion dollar development which includes port, roads and telecoms in its first phase. Despite this, there is enough of a draw toward pulling the project forward that solutions will probably be found, including the $8bn to develop the port.