Mumbai: With Jawaharlal Nehru (JN) Port, India’s biggest container port located at Navi Mumbai, headed for a capacity crunch later this year, other container ports currently operating below their capacities and located at Visakhapatnam, Pipavav, Mundra and Kandla are looking to grab a bigger share of the country’s container cargo traffic that is growing at more than 15% a year.
However, their ambitions are being thwarted by the lack of adequate shipping services, poor connectivity by road and rail, and substandard support infrastructure.
Port operators who have invested millions of dollars in setting up these cargo terminals now want shipping lines to start calling at their terminals more often to load and discharge cargo shipped in steel containers in the world’s second fastest growing major economy. This, they say, will take the load off JN Port which handles some 60% of the country’s container traffic, and make use of the unutilized capacity at other ports. At a growth rate of 15% a year, India’s container traffic is estimated to reach 21 million twenty-foot equivalent units (TEUs) by 2016 from around 6.5 million TEUs now.
A TEU is the standard size of a container and is a common measure of capacity in the container business.
Container shipping firms, which plan their port of call on the basis of the container volumes handled at a port, say that launching more services at these ports would be uneconomical for them in the absence of larger volumes of container cargo. The irony of that doesn’t escape port operators.
“When we go to exporters urging them to patronize our port, they ask where are the ships to carry the cargo. But, when we go to shipping lines, they ask where is the cargo to justify more calls,” said an official at Visakha Container Terminal Pvt. Ltd, the joint venture terminal operating company floated by JM Baxi and Co. and DP World, to operate a 200,000 TEU terminal at the state-run Visakhapatnam port located in Andhra Pradesh on the country’s eastern coast. The official did not wish to be identified. The Dubai government-owned DP World is the world’s fourth biggest container port operator. JM Baxi is a shipping support services firm.
“This is a typical chicken and egg situation,” said Antonio P. Passaro, chief executive officer of Indira Container Terminal Pvt. Ltd. Indira Container Terminal is an equal joint venture of Gammon Infrastructure Projects Ltd and Spanish port operator Dragados SPL that was awarded a 30-year contract in 2007 to run a 1.3 million TEU container terminal at the state-owned Mumbai port.
Despite being blessed with a depth of 15m (more than JN Port), which will allow bigger container vessels to call at the port, the Visakhapatnam container terminal is operating at just 35% of its designed capacity, handling about 70,000 TEUs a year. There are only about four shipping services a week from the terminal.
Out of the 6.5 million TEUs handled at Indian ports in the 12 months through March,terminals located on the western coast accounted for 5 million TEUs, while those operating on the eastern coast accounted for the balance 1.5 million TEUs.
On the western coast, terminals located at Mundra, Pipavav and Kandla are operating at below their designed capacities. Yet, it is JN Port which is much sought after by the country’s exporters and importers for shipping their cargo. JN Port handled 3.29 million TEUs last fiscal (2006-07) and is growing at more than 23% a year against the national average of 15%a year. “There are historical reasons for this anomaly. India was primarily a West-bound trading nation and the trade was focused on the US, the UK, Germany, France and Italy, among others. This led to the faster development and usage of ports on the western coast,” said Krishna B. Kotak, managing director of JM Baxi and Co. at a recent seminar organized by industry lobby Confederation of Indian Industry in Mumbai.
Eight shipping services operate a week from Pipavav Port in Gujarat which handled just under 200,000 TEUs in 2007 against a capacity of 500,000 TEUs. The port managed by APM Terminals, the container port operating unit of Danish shipping and oil conglomerate AP Moller-Maersk Group, is expanding capacity to handle 1 million TEUs in 2009.
“Eight shipping services a week was a good enough number for 2007’s capacity. But, for the additional capacity which is brought onstream now, we need an increase in the number of ship calls a week,” said Philip Littlejohn, managing director, Gujarat Pipavav Port Ltd. “We are in talks with shipping lines for more services,” he added.
JN Port has 45 shipping services a week, while Mundra has about 17. Mundra handled 671,000 TEUs in the calendar year 2007 against a capacity of 1.2 million TEUs.
On average, there are four shipping services a week from Kandla. Because of depth and tidal restrictions, only small container vessels call here. The Kandla container terminal handles about 175,000 TEUs against a capacity of 300,000 TEUs. India’s exporters and importers prefer JN Port because it has a reasonably good depth of 12.5m, allowing comparatively bigger ships to dock. The port is also well connected by road and rail. There are four railway lines on the Delhi-JN Port sector. This helps in faster clearance of containers landing at the port to inland locations and moving containers from inland locations to the port to be put on waitingships for transportation to final destinations. The large volumes make it worth their while for shipping lines to call atJN Port.
The problem is that JN Port is operating beyond its designed capacity. “The container handling capacity at JN Port will run out later this year. There will increasingly be much more demand than there is capacity. I have serious doubts how much growth the existing capacity can handle. And there is no help in sight,” said Julian M. Bevis, area line and operations manager, South Asia, at Maersk Line, the world’s biggest container shipping firm.
“In 2008, there will be a demand for handling 4.6 million TEUs at JN Port. But the port can only handle a maximum of 4.3-4.4 million TEUs. In 2009, it’s going to be worse. So, there is a problem out there. And, there is not going to be any answer to that. You cannot operate ports like that,” added Bevis who is also the chairman of the Container Shipping Lines Association, a body representing container shipping firms operating from India.
The government plans to raise the capacity of JN Port by adding a new terminal (the port’s fourth). “But, the constraining factor would be inland connectivity. There is no space for rail expansion,” said Bevis.
“Ports can only flourish if there is good hinterland connectivity,” said Dutch transport minister Camiel Eurlings during a visit to India last week. His country’s Rotterdam port, the biggest port of the 37-member European Union, is a prime example of this.
Experts say creating more terminals at JN Port without adequate supporting infrastructure could lead to problems of aggregation and disaggregation of containers to and from different destinations.
Terminal operators say that Mundra, Kandla, Pipavav and Visakhapatnam have extra capacity, both in terms of port and rail to absorb a big portion of the additional cargo growth. “These ports are ready—the port side capacity is not a problem and the rail side capacity is also not a problem. On the Delhi-Mundra and Delhi-Pipavav sectors, some stretches have a single line while some have a double line. If volumes go up, rail capacity can be increased with further lines relatively painlessly. On the other hand, putting more than four lines on the Delhi-JN Port sector will be difficult. But, our biggest problem is that shipping lines are not calling at these ports as much as they should,” said an official at Pipavav port who did not wish to be identified.
“By and large, Indian ports can compete with their counterparts elsewhere. But, the problem lies outside (ports),” said M.P. Pinto, India’s former shipping secretary.
Though private container train operators have started operating trains to different destinations, Bevis said that this wasn’t enough. Container train operators run three services a week in each direction linking locations in north India with Pipavav and Mundra ports. In the case of Visakhapatnam, this is just two a week in each direction, while Kandla has none. Container cargo to and from Kandla are hauled by road.
“We are in talks with Concor for operating a direct train service to our terminal,” said Saket Agarwal, managing director, ABG Infralogistics Ltd, which runs the container terminal at Kandla Port.
“Container train operators need to bring more wagons to these ports,” Bevis said.
With India’s trade increasingly growing eastwards, the usage of eastern coast ports is bound to increase. “This is because, there will be demand for lowering transit times in this era of just in time deliveries,” said JM Baxi’s Kotak.
Capt. B. Mahapatra, chief executive officer, Crescent Shipping Agency (India) Ltd, said that container cargo coming from South-East Asia should ideally go through Visakhapatnam port because it offered the shortest possible transit time between the two destinations. “It takes three more days for a ship coming from South-East Asia to go from the east coast to JN Port on the west coast. Each extra day will cost about $ 15,000 for a ship,” said Mahapatra of Crescent, the Indian agent for MISC Berhad, a majority-owned subsidiary of Malaysia’s state-run oil firm Petroliam Nasional Berhad or Petronas. The extra charge is on account of ship rentals and ship fuel (bunker) alone and does not include port charges which are high in India compared with other ports in the region. “If there are volumes, ships will call. It needs a bare minimum volume to make a port call viable for a container ship,” said Mahapatra adding that this “needed a change in the mindset of the exporters and importers to shift from JN Port.”
More container terminals have started operating or are in the process of starting both on the west and east coasts. Mundra Port and SEZ Ltd has started operating a new container terminal at Mundra Port in 2007. And Krishnapatnam Port in Andhra Pradesh will start container cargo handling operations in April-May this year, said Mahesh K. Goel, president, container business, Krishnapatnam Port Company Ltd. “The time has come for shipping lines to become a little proactive and re-route their port of call. They should start making more calls at Mundra, Pipavav, Kandla and Vizag,” said the official at Visakha Container Terminal.
But, for this to happen support infrastructure has to be created in terms of rail and road connectivity and inland cargo terminals, Bevis added.