After failing to persuade Korean steel giant Pohang Iron and Steel Co. Ltd (Posco) to use Paradip port in Orissa for setting up an exclusive coal and iron ore berth to support its planned $12 billion (Rs48,000 crore), 12 million tonne (mt) capacity greenfield steel plant, the government-run port floated global tenders last week to develop these berths with private investments.
Paradip port plans to build a Rs387 crore 10mt capacity berth for handling imported coking coal used for firing steel plants and another Rs505 crore 10mt capacity berth for handling iron ore export from India. When fully operational, the two berths will have deep drafts of 16 metres capable of handling ships of 125,000 tonnes initially and later 185,000 tonnes.
These two projects fit perfectly into the requirements of Posco, which has unveiled plans to build a mega steel plant near Paradip in Jagatsinghpur district of Orissa. It will import coking coal to fire its steel plant and export a portion of the iron ore extracted from its captive mines in Orissa. Posco would be looking at using capesize vessels to move these commodities to achieve economies of scale.
Capesize ships are the largest ships capable of carrying dry-bulk commodities and can typically carry as much as 175,000 tonnes of coal, iron ore or steel. Posco, says Paradip port chairman K. Raghuramaiah, is welcome to bid for the two projects. The world’s third biggest steel maker will now have to participate in the tender to try and bag the deal, which it would otherwise have got without any contest.
The shipping ministry had tried in vain to convince Posco on using the existing Paradip port for setting up these facilities, which would have taken taken lesser time and cost.
“It takes time and money to set up a new port and the services provided by the port will be much costlier than an existing port,” says Mumbai Port chairperson Rani Jadhav.
On its part, Posco preferred to set up a captive port at Jatadhari, 7km south of Paradip port to develop the coal and iron ore handling facilities. The proposed project at Paradip port would be a multi-user facility. “The private entity operating the berths would have to accommodate other users as well,” says Raghuramaiah of Paradip port.
The advantage of setting up a captive port at Jatadhari is that Posco will be free to fix tariffs without taking approval from a tariff regulator. In contrast, the entity operating the berths at Paradip port will have to take clearance from the Tariff Authority for Major Ports, the tariff regulator for the 12 government-run ports for fixing and revising tariffs.
Experts feel that setting up a new port when there is an up and running port in the area to serve the requirements is not a wise move. “When Paradip port is building the coal and iron ore berths with private investments, Posco doesn’t require a separate port. It is a waste of national assets,” says T.V. Shanbhag, former head of Transchart, the chartering arm of the Union government. According to him, it would be cheaper for Posco to operate from Paradip port. “Being a single user bringing huge quantities of coking coal and iron ore, it can negotiate an exclusive rate that is much cheaper,” adds Shanbhag.
Paradip port currently operates a 4mt capacity iron ore berth that handled 6.5mt of iron ore in the 12 months to March 2007. “Customers who take coal through Paradip port are allotted only 10mt by the coal ministry. Unless, we are given more, we cannot handle more,” says Raghuramaiah. The coal linkages for each customer are allocated by the coal ministry. Coal is shipped from Paradip to Ennore and Tuticorin ports for customers such as Tamil Nadu Electricity Board, Karnataka Power Corp. Ltd and AP Genco.