The Union ministry of shipping is in a time warp. Its data and definitions are anachronistic. It continues to describe all the ports owned by the Union government as major ports, and all those owned by the state governments as minor ports (though nowadays it refers to them as “non-major” ports). This made sense when all major investments were decided by the Centre, but not any more.
States are gradually beginning to generate and invite more investments and hence business than even the Centre.
Also Read R.N. Bhaskar’s earlier columns
Also See Classifying Major And Minor Ports (Graphic)
The share of “minor” ports has increased from a meagre 19% in 1999-2000 to more than 26% in 2006-07. Last year, it was estimated to have further risen to about 30% but precise data is not available. This is because both the shipping ministry and the Indian Ports Association (IPA) provide data only for major ports, and not “minor” ones. And one thought that the ministry was concerned with the entire country, not just Union government’s investments!
Investments (as per the documents compiled by the Planning Commission for the 11th Plan) by “minor” ports are likely to be 36% of the total pie, even if one takes into account all the private investments (66%) planned in the “major” ports.
Then pencil in actual performance figures that are not easy to come by—because neither the ministry of shipping nor the IPA appears keen on providing data for “minor” ports, and the little data provided is presented in such a manner that comparison between ports becomes extremely difficult. For instance, instead of giving data for non-major ports, as the title on its website suggests, the IPA gives aggregated data for all ports in each state. This can be quite misleading.
But some indications are available. Last year, the Mundra Port handled 30 million tonnes (mt) of cargo. Reliance Industries Ltd’s captive port at Sikka near Jamnagar handled 55mt, and with its second refinery going on stream, will handle about 100mt a year. Compare these with the throughput at major ports. It is absurd, therefore, to continue calling them major ports.
What also needs to be noted is while the major ports have notched up their figures after being in existence for at least 10 years, the emerging ports have achieved this in less than five years.
Many of the new non-major ports are yet to commence operations.
Clearly, this is no way to run a ministry. After all, without proper comparison, policymaking can become that much more difficult, and proper analysis that much more complex.
How many ports?
True, these are hard times. Much of the investment planned by many companies has come to a grinding halt because of the financial meltdown that has shaken the entire world, India included. But there are some ports on which work has already begun. And some groups, known to have long hands and deep pockets, could actually continue work on their ports. Of particular interest will be RIL, which has planned to set up at least two ports—Rewas and Positra—and the Adani Group which has already set up the Mundra Port and now wants to expand its activities in the Dholera Port and Dahej Port (the latter is not included by the Planning Commission).
Obviously, this sector comprising “minor ports” is bound to grow because while there are only 12 “major” ports, there are as many as 133 “minor” ports on India’s western coast, and 54 on the eastern coast. These numbers include 10 ports located among the Lakshadweep islands, and 23 ports among the Andaman and Nicobar Islands. Gujarat with 40 ports and Maharashtra with 53 are inevitably going to be big maritime players.
Coastal shipping boost
It all began as a series of coincidences. The Mundra Port had just developed a 65km railway line and had just managed to get the Indian Railways to allow this port-linked private railway line to connect to the national network at Adipur. Then, almost accidentally, the Dubai-based Transworld Group decided to set up an Inland Container Depot (ICD) at Mundra. Transworld is in the business of running ships between Dubai and the western coast of India, and was convinced that Mundra could become a destination port. It made business sense to be located there. But it needed volumes to grow.
That is where a strategy was born. Maruti Suzuki India Ltd was approached and persuaded to consider sending all its cars for exports directly from Delhi by rail to the Mundra Port, because time and cost would be lower and also because waiting periods at Jawaharlal Nehu Port in Mumbai had become uncomfortably long. To further whet Maruti’s appetite, a proposal was also made to use this same route for sending its cars to south India by the coastal shipping route. This way, Maruti would save at least 10-20% on freight costs, considering that 30% of its cars are sold in the southern markets.
The proposal was attractive enough for Maruti to consider shifting its entire logistics chain from the Mumbai ports to Mundra. In fact, such a move helped Maruti in yet another way. Hitherto, it had been sending all its south-bound cars by truck. Earlier, there were no car manufacturing facilities in south India. Hence, truck drivers charged a premium, as their vehicles would have to return empty to Delhi. That became one of the reasons for Hyundai Motor Co. and Ford Motor Co. to set up their manufacturing plants in Tamil Nadu. It would allow them to transport their cars to north India as discounted freight. Maruti discovered, much to its chagrin, that its competitors benefited with every car it sold in south India.
Thus, with one move, Maruti could now reduce its freight costs and watch the costs for its competitors go up, as empty (discounted) trucks which had originated from Delhi would no longer be available. Consequently, Hyundai and Ford, too, have begun seriously contemplating using the coastal route to send cars to Kolkata and to Mundra for markets located in the north-east, north and west of India. Ships disgorging cars at south Indian ports could carry another load of cars back to western and eastern ports for other markets.
All of a sudden, there is a revival of interest in coastal shipping. Not surprisingly, Mundra has decided to set up the country’s first Ro-Ro (roll-on-roll-off) terminal at a cost of Rs100 crore capable of handling half a million cars annually (please see Mint’s report on 17 November). Of this, Maruti alone has committed itself to taking up 250,000 for shipment to south India and for exports commencing January. General Motors Corp. at Vadodara is also expected to use this Ro-Ro facility— as transporting cars by road from Vadodara to Kolkata is more expensive than shipping it by sea even if it involves going round Sri Lanka (though inventory costs could increase a bit as it would take 10-12 days by boat instead of six-seven days by road). Tata Motors Ltd is also examining the coastal route for its yet-to-be-launched Tata Nano, and so are other vehicle manufacturers. After all, small cars may find many buyers in a world which has suddenly witnessed disposable incomes shrivel up like never before.
Expect similar Ro-Ro terminals to be developed at a port in south India (possibly Ennore) and one in Kolkata. This could finally make coastal shipping become a reality. Strangely, after the first moves by the central oil coordination committee in the 1980s requiring all petroleum products along specific routes to be shipped only by sea, coastal shipping did not take off for other products for a variety of reasons. Gujarat Ambuja Cements Ltd tried to revive it during the 1990s, for cement, but a competitor used a clever ploy to obtain a stay order from the courts preventing bulk cement from being transported from Gujarat to Tamil Nadu.
Finally, thanks to Maruti, Transworld and Mundra, coastal shipping may become popular once again, spurred on undoubtedly by the significantly reduced shipping tariffs as evidenced by the fall in Baltic freight indices.
This is one industry that can see a glimmer of brightness on the horizon even during these times.
With work on the Tata Nano commencing in Gujarat, and Indonesia’s Salim Group also contemplating shifting to Gujarat, there appears to be a consensus that this year the Gujarati of the Year award should go to. . . Mamata Banerjee.
R.N. Bhaskar runs a company with significant interests in distance learning and examination certification and writes on corporate and business policy issues. Comments on this column are welcome at email@example.com
Graphics by Sandeep Bhatnagar / Mint