Bangalore: Two Union government-owned ports located just a few kilometres away on India’s eastern coast are slugging it out to develop container handling facilities with private investment to cater to rising needs of exporters and importers in the world’s second fastest growing major economy.
Growing traffic: Containers being brought in at Jawaharlal Nehru Port Trust in Mumbai. Demand for container facilities is rising in the country and both the Chennai and Ennore ports are looking to tap it.
One of them, Ennore Port Ltd, was set up primarily to handle the so-called dirty cargo such as iron ore and coal and free Chennai Port, just 20km away, from handling such cargo that could pollute the city. But, with Ennore getting into the business of handling clean cargo such as containers, Chennai Port says it sees no reason to give up dirty cargo.
The fight between the two ports started when Ennore Port, the country’s first Union government-owned major port set up under the Companies Act 1956, floated a global tender on 8 March to set up a Rs1,300 crore container cargo facility with an annual capacity of 1.5 million twenty-foot equivalent units, or TEUs, at the port. A TEU is the standard size of a container and is a common measure of capacity in the container business.
Chennai Port retaliated and, on Wednesday, floated a global tender for building a mega Rs3,150 crore container terminal with an annual capacity of 4 million TEUs at the port, leaving bidders confused as to which one to bid for. “It will restrict competition among firms for the two projects. It would have been better if Chennai had come out with the tender after Ennore had completed the bidding process,” said a Gammon Infrastructure Projects Ltd official, who did not wish to be named. Firms have until 16 June to submit initial bids for the 30-year project at Chennai Port, which is expected to get operational by 2013.
In case of Ennore Port, firms have until 30 April to submit pre-qualification documents to be eligible for bidding.
“It is a good sign that ports are ambitious and are looking at large volumes of container traffic,” said S. Hajara, chairman and managing director of state-owned Shipping Corp. of India Ltd. India’s container traffic is estimated to rise to 21 million TEUs by 2016 from about 7.5 million TEUs now, according to the union shipping ministry.
Chennai and other 10 Union government-owned major ports are run as trusts under the Major Port Trusts Act, 1963. These ports are regulated by the Tariff Authority for Major Ports; Ennore being a corporate port is not.
PSA International Pte. Ltd, the world’s second biggest container port operator owned by the Singapore government’s investment arm Temasek Holdings Pvt. Ltd, will not be allowed to bid for the third terminal at the port, says the tender issued by Chennai Port.
This is because of a Union government policy which prohibits a firm that wins the last cargo-handling contract at a major port from participating in the bidding for the immediate next contract in an effort to promote competition within a port. PSA International is building the second container handling facility at Chennai Port along with local partner Sical Logistics Ltd.
DP World, the world’s fourth biggest container port operator, already runs a 1.4 million TEUs a year container terminal at Chennai. It handles 1.1 million TEUs from this facility, which is expected to reach full capacity later this year.
By December, PSA International will start operating a new 1.5-million-TEU-a-year terminal. The second container terminal at Chennai Port is expected to reach full capacity by 2013-14, when the third terminal is slated to start operations.
Initially, the government had decided that dirty cargo would be shifted to Ennore Port when it started operations so that Chennai Port could focus only on clean cargo. Ennore Port started operations in June 2001 and handles about 9 million tonnes (mt) of coal imported by the Tamil Nadu Electricity Board, or TNEB, to fire its power plants in the state. “But, this (the shifting of dirty cargo) has neither happened nor will it happen in future. At no point can Chennai (Port) stop handling coal and iron ore,” said a Chennai Port official, who did not wish to be identified.
Ennore Port, meanwhile, has changed its master plan to include facilities for handling clean cargo such as LNG (liquefied natural gas), LPG (liquefied petroleum gas), petroleum products, chemicals and containers, putting it in direct competition with Chennai Port. It even plans to set up dedicated berths for facilitating export of cars manufactured in and around Chennai, a business that the Chennai Port already caters to.
“We are not willing to handle dirty cargo, but are compelled to handle them because there is no facility at the moment to handle these cargoes in Ennore Port . We want to get rid of coal and iron ore cargo, but the trade will not go (elsewhere),” said the same official at Chennai Port.
The trade also prefers Chennai because it charges lower rates for handling coal and iron ore—being an old port— when compared with Ennore.
As a result, Chennai Port continues to handle iron ore and coal. The port handled 10.8mt of ore and more than 9mt of coal in the 12 months to March 2008. The port will lose revenues if this cargo shifts to Ennore Port. A policy decision on shifting the dirty cargo entirely to Ennore rests with the shipping ministry, said the Chennai Port official.
Even after Ennore Port starts operating an 8mt-capacity coal terminal for non-TNEB users and a 15 mt-capacity iron ore terminal with private investments, there will be a capacity crunch at Chennai and Ennore ports to handle dirty cargo.
The coal cargo at Chennai Port has been growing at about 10-15% a year on the back of strong demand from power plants, sugar mills and cement factories in southern India. At this rate, the coal traffic of non-TNEB users in Chennai Port alone is expected to touch15-16mt a year from the existing 9mt.
“There will always be a shortage of capacity for importing coal and exporting iron ore from this region. In the absence of adequate capacity, where will the exporters and importers go?” asked the Chennai Port official. “Instead of setting up facilities to handle more coal and iron ore, Ennore Port is getting into container business,” he added.
However, Ennore Port claims that there is enough container cargo for everybody in this business.
“Trade is growing and containerization of cargo is growing. Everybody has got business in India,” an Ennore Port official said. “Because we are located close by makes it obvious that we are competing. That way all ports are competing with each other for cargo,” he added. Ennore has awarded contracts to private firms to develop and operate coal, iron ore and liquid terminals. It also plans to increase capacity for handling TNEB coal by about 4mt a year from the current 9mt.