At a logistics conference in Dubai last year, three themes were in great focus. The first was that Dubai’s pre-eminence among international trans-shipment ports was rapidly coming to an end. The second was that the western coast of India would soon be host to a destination port that would take away some of Dubai’s business. And the third was that the eastern coast of India was still not ready for a destination port and would have to depend on Singapore or the Port of Tanjung Pelepas (PTP) in Malaysia.
Also Read R.N. Bhaskar’s earlier columns
Also See Trans-Shipment Business: The New Order (Graphic)
Dubai became a significant force in the maritime business for several reasons. First, it has a natural, all-weather, deep-water port. The opening of the Suez Canal also helped. Dubai was quick to realize the strategic significance that a free trade zone (FTZ) would have in this area, and the Jebel Ali FTZ was created. Many businessmen also used it to relabel their consignments and show them as originating from elsewhere, thus benefiting from trade quotas (like they did in Bangladesh, Nepal and Sri Lanka). This bonanza now appears to be drawing to a close. For two specific reasons.
Reason one: Saudi Arabia has decided to have its own FTZs and further develop its ports. It has more money (Dubai has very little oil money), more land area and many more people. Moreover, it is strategically located along the Suez Canal (see map). In fact, what Saudi Arabia could do to Dubai is precisely what PTP could do to Singapore. Malaysia has a larger land mass than Singapore, more people and oil money. That could explain why Singapore’s planners are aggressively diversifying into areas such as services, tourism and even gambling.
Reason two: India developed its own deep-water all-weather port—Mundra Port in Gujarat—in 2006 and it could soon become the new destination port for both trans-shipment and for supply to other ports in India, Pakistan and even those in Iran and Iraq. This is precisely what the Rewas port project, promoted by Reliance Industries Ltd (RIL), also wants to do. Currently, as all other Indian ports are shallower, do not have adjoining FTZs, lack seamless quality connectivity and efficiency, and offer smaller volumes of cargo, all big ships dock at Dubai (or Colombo or Singapore), and smaller ships (operated by Shreyas Shipping and Logistics Ltd, Orient Lines and many others) carry the cargo from or to Indian ports. Within the next four-five years, this trans-shipment business from Dubai could disappear. No wonder then that the managements of trans-shipment companies have begun looking at routes from Singapore/PTP to India’s eastern shore and also at coastal shipping. Thus, Dubai would lose business to both Saudi Arabia as well as India. That could severely hurt Dubai’s property prices. Not surprisingly, some international firms such as package delivery company DHL and Japanese conglomerate Mitsubishi are reported to have issued advisories to their Dubai offices last year not to acquire any new properties.
Rewas port project continues to perplex
In some ways, the most enigmatic port in India could easily be Rewas, promoted by Reliance Industries Ltd, or RIL. Rewas came into the news six years ago when Amma Lines Ltd was awarded the licence by the government of Maharashtra to develop the port.
According to market watchers, this was on account of some deft lobbying by Vijay Papa Rao, a maritime surveyor and promoter of Amma Lines, who believed that a natural flaw in the continental shelf could be exploited to build a port.
He was persuasive enough to convince Infrastructure Finance and Leasing Co. Ltd (IL&FS) into parting with around Rs200 crore, used largely for surveying the region and drawing maps.
Three years ago, RIL evinced interest in this port and the equity share capital was restructured to accommodate Maharashtra Maritime Board, or MMB, (11%), and Rao (24%), with the rest held by RIL and its associates (including Anand Jain’s Jai Corp.). IL&FS , which had spent Rs200 crore on the project, no longer appears to be a stakeholder. Neither IL&FS nor Rao was available for comment . People close to RIL confirmed the equity holding pattern, on condition of anonymity.
So, is Rewas likely to become a major port? MMB officials laugh at the idea despite the board’s stake in the project. “There is just no draft,” says one official who was in charge of surveying this area, on condition of anonymity. “True, a port could always be created by dredging the land under water, but it won’t be easy. It will take both time and money,” he adds.
The people close to RIL implicitly confirm this, saying that dredging costs alone could be in excess of Rs1,800 crore. But this figure, compiled last year, could rise because the state government has not yet given RIL the go-ahead to develop the port. Hence, tenders for dredging have not yet been floated. Work on dredging will take a minimum of four years to reach the first phase, which will cost Rs5,000 crore, and give the port a draft of 14 metres. The deepening of this draft to 20 metres will be accomplished in phases II and III.
The second problem that bedevils Rewas is land. Ports require a lot of land—for storing goods that have been offloaded from ships, and goods that must be loaded onto these vessels, for rail lines and roadways, and for container freight stations and container depots.
But land acquisition by RIL has run into trouble, and without the land, the port becomes unviable. In fact, critics say land acquisition is what made the Rewas port attractive, calling it more of a real estate exercise than one involving port development. But others disagree, and the controversy continues.
Other ports: more claims, less answers
Four ports in India have begun to generate a great deal of interest. The first is Vizhinjam in Kerala, which was recently awarded to a group led by Lanco Infratech Ltd (with the state holding a 26% stake).
This is one port that has a natural depth of more than 18 metres, but its location prevents it from attracting cargo for, and from, northern and western India.
So, it is likely to cater only to the relatively smaller requirements of southern India, particularly the south-western coast, extending up to Goa. Even the Sethusamudram project will not help much as it will have a draft of just 10 metres. Big ships passing through Colombo could leave (or pick up) cargo meant for (or from) India, brought from (or to) Vizhinjam. Smaller vessels could then ferry the consignments between Vizhinjam and other smaller ports. In fact, all the tenders floated by Vizhinjam to date indicate that this could be its unique selling proposition.
Jawaharlal Nehru Port (JNP) in Navi Mumbai cannot grow because it has shallower waters, unlike Mundra in Gujarat or Vizhinjam, and little land for either expanding its storage areas or for improving its rail and road connectivity. The land that the government could have offered to Jawaharlal Nehru Port Trust (JNPT) has already been taken up by Reliance Industries Ltd for its Navi Mumbai special economic zone projects. Moreover, as of August 2007, waiting periods at the port have begun to stretch to two months and more. (Email queries sent to JNPT officials were not answered). This has made Mundra even more attractive.
Another port that has invited media attention is the Krishnapatnam Port promoted by the Navyuga Group. It is located in Andhra Pradesh, not far from the boundary of neighbouring Tamil Nadu.
Krishnapatnam port hopes to cater to iron ore (handling 14 million tonnes, or mt, a year), coal (7mt), general cargo (2mt) and can accommodate ships not exceeding 105,000 dead weight tonnage, or DWT (with a depth of 15m). It also hopes to have its own power generation capacities (of around 12,000MW), around 5,000 acres of land around the port and is expected to begin operations by 2012.
However, nobody from the port is willing to discuss details about its operations and the markets it will cater to, and at least one senior person (the president) has already severed relations with its management.
Another port, also on the eastern coast, is Damra in Orissa, jointly promoted by Tata Steel Ltd and Larsen and Toubro Ltd (L&T), both holding 50% of the equity. It is being built on a BOOST (Build, Own, Operate, Share and Transfer) basis.
The concession period is for 34 years—including four years for construction—which can be extended for two additional periods of 10 years each. The ratio of captive to merchant cargo for phase I is likely to be 1:4 in 2010-11, but the project could get delayed.
Unfortunately, neither of the promoters appears willing to talk about this port. The biggest question is what kind of linkages (rail and road) this port will have with industrial areas which seek to import and export goods using ocean navigation.
Could this be a port that is meant for the proposed Posco steel plant? Or will it be used for transporting iron ore and coal? Once again, there are more questions than answers.
Ultimately, the choice of a port does not depend on the port authorities’ marketing abilities as much as the dictates of shipping lines.
The managers of these lines look for key requirements—it should generate volumes of at least 7,000-8,000, twenty-foot equivalent units per vessel that berths;·the port must be capable of 120 moves per berth/ship; and 30 container moves per gantry crane per hour. Efficiency is important.
The ports must have seamless connectivity to the hinterland from where cargo can be fetched or reached. Most new ports have yet to convince shipping lines that all these conditions can be met.
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 Ahmed Raza Khan / Mint