Competition from a new private port nearby is driving the Union government-owned Visakhapatnam port, India’s second largest by cargo handled, to improve its efficiency, productivity and services—ironically, with help from a private firm.
Visakhapatnam, or Vizag, port in Andhra Pradesh is upgrading one of its general cargo berths with private funds as it seeks to regain some of the business it lost after Gangavaram port opened in July barely 15km away. Its upgraded cargo berth will handle 10.18 million tonnes (mt) of coking and steam coal a year.
State-owned Rashtriya Ispat Nigam Ltd (RINL), which runs Vizag Steel Plant, shifted to Gangavaram port from Vizag port last year for importing raw materials and exporting finished goods. Routing cargo through the fully mechanized Gangavaram port will save RINL at least Rs150 crore a year on logistics costs as its steel plant is situated next door.
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Coking coal imported by RINL and landing at Gangavaram is taken directly to the steel plant using a conveyor belt, for which the company pays Rs285 a tonne to the private port operator. RINL switched to Gangavaram also because the port offered dedicated berthing facilities to cargo ships without delay. Gangavaram port has a depth of 20m, allowing capesize ships—the biggest of dry-bulk cargo ships—to dock. Shipping cargo on bigger ships leads to savings on ocean freight from economies of scale.
At Vizag port, RINL had to transport cargo on smaller ships because the depth in the inner harbour cannot accommodate bigger vessels.
RINL’s shift was a big blow to Vizag port because the steel maker was one of its biggest customers, giving a business of some 5 mt of cargo a year. The port handled 63.9 mt of cargo in the year to March.
Vizag port is now fighting back. The Rs441 crore mechanization and upgrade of its coal handling berth in the outer harbour, part of the port’s Rs1,250 crore expansion plan, has features comparable with those of Gangavaram port.
The berth will have a water depth of 18m, allowing fully loaded capesize ships to dock. The new equipment at the berth will be able to unload 70,000 tonnes of coal a day from a capesize ship and 42,000 tonnes of coal a day from a panamax vessel—called so for its ability to navigate the Panama Canal fully laden. The average unloading rate at Vizag port now is 20,000 tonnes a day from a panamax ship. In comparison, Gangavaram port recently discharged 80,514 tonnes of coal a day from a capesize ship, setting a national record.
Gangavaram’s average unloading rate, though, is around 50,000 tonnes a day from a ship. A higher unloading rate will help turn around ships faster.
Coal cargo arriving on ships at the new Vizag berth, after unloading, will be taken directly to a 122,000 sq. m storage area on a conveyor belt. From there, the cargo will be despatched on nine rakes (one rake has 55 wagons) that will run daily, leading to faster evacuation of cargo. One rake will run every 2-3 hours. Mechanized wagon loading systems can load two rakes simultaneously.
Vizag port will also offer discounts on port dues, berth hire, pilotage and wharfage charges to long-term customers. Port officials concede that these efficiency and productivity enhancing features are being incorporated to gain a competitive edge over the neighbouring private ports.
The Tariff Authority for Major Ports, the tariff regulator for 11 of the 12 Union government ports, has approved a coal handling rate of Rs131.94 a tonne at the berth. Tariffs are set upfront ahead of calling price bids for all public-private partnership projects auctioned by the Union government in the ports sector.
The line-up of private suitors for the 30-year contract is impressive—Larsen and Toubro Ltd, Mundra Port and Special Economic Zone Ltd, Gammon Infrastructure Projects Ltd, Vadinar Oil Terminal Ltd, and IL&FS Maritime Infrastructure Co. Ltd. This is a good example of how Union government ports, once considered monopolies, are waking up to take on competition from new private ports.
P. Manoj is Mint’s resident shipping expert and writes on issues related to shipping and logistics every other Friday.
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