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Port sector revival held up on funds crunch

Port sector revival held up on funds crunch
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First Published: Wed, Mar 25 2009. 01 54 PM IST
Updated: Wed, Mar 25 2009. 01 54 PM IST
Mumbai: Expansion and greenfield projects at Indian ports have almost ground to a halt as an economic slowdown has choked investment into the sector, which holds great potential as a growth driver, industry players said.
A fund shortage has delayed expansion at several Indian ports, raising concerns of higher time lags and congestion after an expected traffic revival in June, they added.
“Apart from 2-3 terminals coming up in 3-4 major ports, other projects are expected to face delays,” said Manish Sharma, director at consultancy firm KPMG.
Among these are JSW group’s captive port on India’s eastern coast, Reliance Industries’ Rewas project on the west coast, besides a few others in south India.
Much of the estimated Rs55,800 crore needed to revive the sector was expected to come from private players. However, this is unlikely due to longer gestation period, tighter credit and a sharper-than-expected drop in economic growth, analysts said.
India is expected to grow around 7% in FY09, its slowest in six years, with even slower growth seen next year.
However, cargo traffic is expected to see a revival in June, but the country’s 12 major ports -- which saw volume drop over 8% in April-Feb 2009 compared with last year -- are not equipped to handle it, analysts said.
“A scenario where capacity additions are put on hold, while cargo volumes pick up in due course could potentially lead to the recurrence of extreme port congestions in the future, similar to those witnessed in the recent past,” KPMG’s Sharma said.
With its strategic location straddling major trade routes and a long coastline that boasts a port every 20 miles, India’s port sector was expected to be a major driver of trade and economic progress, but has not managed to deliver so far.
Even during the last 2-3 years, when trade was at its peak, India’s largest container port, Jawaharlal Nehru Port Trust (JNPT), had a waiting period of up to 10 days.
Port of Singapore, in comparison, took just about half a day.
Capacity utilization in India is also abysmal with three-fourths of its 200-odd ports being defunct or seasonal.
“There is a need for deeper draught ports and services such as bunkering, coastal shipping, connectivity and hinterland development,” Bhavesh Gandhi, executive vice chairman of Pipavav Port, said at a conference in Mumbai recently.
Major ports -- which handle 7 million twenty foot equivalent units of container cargo compared with about 29 million by Port of Singapore -- are expected to see 7.7% volume growth each year till 2013-14, government data showed.
Hope Floats
The public-private partnership model will help boost growth in the sector, Gandhi added.
Of late, companies have started to invest in traditionally state-owned ports on a build-operate-transfer basis for 25 to 50 years to cash in on India’s growing trade, but lacked the desired momentum, industry officials said.
AP Moller Maersk, General Electric, Singapore’s PSA International, UK-based 3i Group have already invested heavily in new and existing port projects.
In the current scenario, these companies and also other domestic players now stand to benefit from cheap land and construction costs, which should help speed up development in the sector, analysts and port officials said.
“This slowdown is an opportune time for capacity expansion by existing ports due to lower cost of construction as well as equipment and significantly less market risk,” a spokesman at Mundra Port & SEZ said.
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First Published: Wed, Mar 25 2009. 01 54 PM IST