The Singapore-based global ports company, PSA International, will construct a container terminal that can handle one million twenty-foot equivalent units (TEUs, the standard measure for containers) per annum for the Hazira Private Port Ltd (HPPL), about 25km from Surat, on a build, own and operate (BOO) basis. This means while HPPL would continue to own the general port infrastructure, PSA would pay HPPL for the use of the port.
HPPL and PSA India Pte Ltd signed a Heads of Agreement for the development by PSA of a two-berth container terminal at Hazira on 13 January 2007.
Shell Gas BV, part of the Anglo-Dutch Shell Group, has a 74% stake in HPPL, while France’s Total Gaz Electricité holds the rest. PSA India is a 100% subsidiary of PSA International Pte Ltd of Singapore, which operates 20 ports in 11 countries, and in India, the Tuticorin container terminal. “The development of a container terminal is part of Hazira’s concession agreement,” a Shell spokesman said.
HPPL has built and is operating Hazira port under a concession agreement between HPPL, the Gujarat Maritime Board and the government of Gujarat. Once operational, not only would the container terminal boost capacities in the country, it would also provide industries in the region a gateway for imports and exports as well as shorten access time to the northern India market. It will also provide relief to the congestion at the Mumbai area terminals.
“In accordance with the provisions of the concession agreement, HPPL has identified PSA to develop a container terminal at Hazira port. HPPL and PSA will now negotiate a Container Cargo Terminal Agreement and jointly develop a detailed project report for submission to the Gujarat Maritime Board,” the Shell spokesperson said.
The proposed twin-berth container terminal would be the first in south Gujarat and may require an initial investment of Rs1,400 crore ($341 million). Building the terminal at Hazira will mean more competition for other private container terminal companies such as Maersk and Adani, that already run container terminals in the state.
Industry analysts said that Hazira has an advantage over other ports as it has good hinterland connectivity both by road and rail. “The proposed terminal can cater to Maharashtra and northern India. It will also lead to competition among the container ports in terms of charges and better turnaround time of the vessels,” Arvind Mahajan, executive director at accounting firm KPMG said.
The development is another sign of the interest of international port players in the India growth story. And there could well be more entrants, given the shortfall in capacity.
The proposed terminal will help in adding much-needed container handling capacity in the country, which at present is around six million TEUs. This is much less compared with the 7.49 million TEUs handled in 2005 by the Los Angeles port alone, which is the world’s 10th largest container port. In comparison, India’s largest container port—the Jawaharlal Nehru Port in Mumbai—handled roughly 2.67 million TEUs in 2005-06. Half of the world’s traded goods are containerized and this is expected to grow further. India has 12 major ports and 187 non-major ports which handle over 90% of foreign trade. The container traffic volume in the country is expected to grow to 22 million TEUs by 2015.
“There is a huge capacity that requires to be added as the share of container traffic is increasing vis-a-vis the bulk cargo traffic. The long-term container terminal market looks good but for the short- term, the players will have to compete with each other and the competitive environment needs to be relooked,” Mahajan added.