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India’s busiest cargo-handling port faces capacity shortage

India’s busiest cargo-handling port faces capacity shortage
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First Published: Wed, Jan 30 2008. 11 54 PM IST

Need expansion: Jawaharlal Nehru Port handles around 60% of the container cargo collectively handled by all Indian ports.
Need expansion: Jawaharlal Nehru Port handles around 60% of the container cargo collectively handled by all Indian ports.
Updated: Wed, Jan 30 2008. 11 54 PM IST
Mumbai: In a few months, India’s busiest container cargo handling port will reach a stage where it will not be able to handle any more cargo containers—not unless the central government that owns the port clears its expansion plans immediately. Located in Navi Mumbai and named after the country’s first prime minister, Jawaharlal Nehru (JN) Port handles around 60% of the container cargo collectively handled by all Indian ports.
Need expansion: Jawaharlal Nehru Port handles around 60% of the container cargo collectively handled by all Indian ports.
Even an immediate clearance from the government, however, will not help the port beat a looming capacity crunch. That’s because the government typically takes several months to complete bidding processes and award contracts in the ports sector. It then takes more than 18 months, on average, for the private firm that wins the contract to develop the cargo handling project and start operations.
For instance, the third and the newest container cargo handling terminal at JN Port, run by APM Terminals, the container terminal operating unit of the Danish shipping and oil conglomerate Maersk A/S, and state-run Container Corp. of India Ltd or Concor, was awarded the project on 10 August 2004, after a two-year long bidding process. The consortium started full-fledged operations at the terminal only on 30 October, 2006. However, in the first year of operations itself, the private operator handled container cargo volumes which it was supposed to reach only in the fifth year of the 30-year contract, mainly due to a booming economy.
The port has two other container cargo handling terminals—one, run by the government-owned port itself, and the other by DP World, the world’s fourth biggest container port operator, owned by the Dubai government.
Between April and December 2007, JN Port handled 2.97 million twenty-foot equivalent units (TEUs) as against a target of 3.50 million TEUs for fiscal 2008 and, at the current pace, will reach its designed capacity of 3.6 million TEUs by June this year. A TEU is the standard size of a container and a common measure of capacity in the container business.
“We are heading towards a capacity crunch sometime towards the end of 2008 if the port does not come up with expansion,” said an official with APM Terminals who did not wish to be identified.
Traffic diversion
Once JN Port becomes congested, exporters and importers will have to ship their cargo through Mumbai, Mundra, Pipavav or Kandla ports located on the country’s western coast. These ports are currently operating below their capacities and can accommodate some of the containers that JN Port cannot handle, but not all because they too have capacity constraints beyond a certain level.
Besides, these ports do not have adequate train, road and ship connectivity like JN Port does. Private container train operators have recently started hauling containers to these ports, but even this may not help, said Kshitiz Bhasker, head, business development at Gammon Infrastructure Projects Ltd, an infrastructure developer.
Last fiscal, the container traffic at JN Port grew by 23.7% from 2.66 million TEUs to 3.29 million TEUs. In comparison, other container handling ports in India have been averaging a growth rate of 15% a year. Indian ports handled close to six million TEUs in the year through March 2007.
Container cargo represents only about 30% by value of India’s external trade. In comparison, the global average of containerised cargo is 70-75%.
“All the three terminals are currently handling more containers than they were designed to handle. This will continue for another two-three years till the fourth terminal starts operations,” said D.N. Maurya, spokesperson for JN Port.
The port is currently designed for a capacity of 3.6 million TEUs a year with each of the three terminals designed to handle 1.2-1.3 million TEUs. But, the terminal run by DP World handled 1.47 million TEUs in the calendar year 2007, mainly through better and efficient use of cranes and other supporting infrastructure.
The terminal run by Maersk-Concor has just crossed a million TEU mark and will handle 1.3 million TEUs by March. The terminal run by the government also will close the fiscal year 2008 at 1.3 million TEUs.
J.N Port is a favourite with India’s exporters and importers located in the western and northern hinterlands. “It is strategically located with good rail and road connectivity which makes it easier and faster to distribute cargo both to the western and northern parts of India,” said Bhasker of Gammon Infrastructure Projects. On average, the port handles about 20 trains per day with each train carrying 45 forty-foot equivalent units (FEUs) or 90 TEUs to the port that are then shipped to final destinations on container ships waiting at the port and containers arriving on ships are hauled to inland locations from the port. An FEU is double the size of a TEU.
About 45 shipping services operate a week from the port, helping exporters and importers to ship cargo to and from countries in the Persian Gulf, Europe and America. These services are run, among others, by the world’s biggest container shipping line Maersk Inc., CMA CGM SA, Hapag- Lloyd AG, APL Ltd, state-run Shipping Corp. of India Ltd, Pacific International Lines (Pte) Ltd , OOCL, Zim Line and Mediterranean Shipping Co.
Around 80% of the total containers handled at JN Port comes directly to the port and is moved directly to final destinations. The balance 20% of the containers is transhipped through neighbouring hub ports such as Colombo, Dubai and Singapore.
In transhipment, containers are first shipped from India on smaller feeder container ships and taken to one of the hub ports from where the containers are loaded onto bigger ships and transported to final destinations.
Transhipment is resorted to when the ports do not have adequate depth for bigger vessels to call. But this exercise entails extra time and adds to the cost of exporters and importers and makes Indian goods uncompetitive in the global market. In other Indian ports only 13% of the containers comes or goes directly while 87% is routed through a hub port, said G. Raghuraman, a professor at Indian Institute of Management, Ahmedabad, who has studied the sector closely.
More terminals
The port also plans to develop a Rs600 crore small container terminal with a berth length of 330m (half of normal length of 650-700m) with a capacity to handle 600,000 TEUs a year through the public-private-partnership (PPP) route. It is currently awaiting approval from the Union shipping ministry for the request for qualification (RFQ) documents ahead of calling bids for the project.
The port authorities are also drafting the RFQ documents for the Rs6,035 crore, 4.6 million TEU a year new container terminal (the port’s fourth) for which 41 entities had submitted expressions of interest in 2005.
But, before developing the fourth container terminal, the port will need to deepen its channel to 14m from the current depth of 12.5m to help optimum utilization of capacity and faster turnaround of larger size container ships that call at the port for achieving economies of scale.
The board of JN Port in July 2007 had cleared the lowest bid submitted by Dutch firm Van Oord Dredging and Marine Contracting Company NV for the dredging project which is still awaiting clearance from the government. “The fourth terminal can be developed only after deepening the channel,” said a port official.
“On conservative estimates, these projects are expected to be completed not earlier than 2010-11. From our side, we have completed all preliminary work on the projects. It now depends on various government clearances,” the official who did not wish to be identified added.
To squeeze in more capacity before these expansion plans materialize and ease congestion, the port has started operating a shallow berth which has a depth of 9m, allowing smaller-size container ships to call.
Three shipping services operate from the shallow berth and ships use their own equipment to load and unload container cargo. Port officials said that the shallow berth can easily handle 550,000 to 600,000 TEUs a year if cranes and other equipment are installed there.
The port is also buying more cranes for its own container terminal to help load and unload containers faster, thereby increasing capacity.
In 2007, the port had ordered three new modern cranes from Argentine container handling cranemaker IMPSA. These cranes, currently manufactured at IMPSA’s factory in Malaysia, were earlier contracted to arrive in April but they will be now delivered in October, Maurya said.
These cranes will replace older cranes that are not able to function at full capacity and add capacity by another 200,000 TEUs a year. The port plans to purchase three more new cranes, a tender for which will be floated in the next few days.
All these short-term plans will stretch the cargo handling capacity at the port to a maximum of 4.3 million TEUs a year from the designed capacity of 3.6 million TEUs. “It can’t go beyond this level unless the expansion plan takes shape,” the port official said.
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First Published: Wed, Jan 30 2008. 11 54 PM IST