Goa port congestion means $27 mn loss for mining firms

Goa port congestion means $27 mn loss for mining firms

At a time when iron ore export from India is booming, mining companies are having to bear the cost of congestion at Goa’s Mormugao port, which is the main facility for shipping the mineral abroad.

Glenn Kalavampara, joint secretary of the Goa Mineral Ore Exporters Association, said mining companies have had to take a hit in demurrage to the tune of around $27 million (Rs111 crore) last year at the rate of around $1 per tonne due to loading delays.

Demurrage is the loss suffered by exporters as the importer deducts an amount on account of late loading and arrival of goods.

“The exporters are definitely having to pay a price for the lack of infrastructure at the port," said Kalavampara.

A third of the iron ore shipped from the 13 major ports in India is shipped from Mormugao.

Last year, the port handled 26,740,000 tonnes of the mineral, out of a total tonnage of 80,563,000 tonnes shipped from the country.

According to an ICRA Ltd report, in the last three years, the quantity of iron ore handled at ports in the country has grown at around 77.9%.

As infrastructure has not kept pace with the increase in cargo, the port has become congested and operates at 107% of its capacity.

The turnaround time of the vessels, which call at the port, has also increased from 2.04 days in 2002 to 4.65 days in 2007, the ICRA report said.

Infrastructural bottle-necks have hit exporters with demurrage costs, rues Kalavampara.

Apart from port congestion, another reason for the delay and the demurrage cost was shortage of vessels that were stuck at some Australian ports, said Ashwini Kumar Vaishnaw, deputy chairman of Mormugao port. “They had fewer vessels to offer and so there were delays," Vaishnaw explained.

Vaishnaw agreed that the lack of capacity at the port had led to the increase in shipping costs. “We are augmenting the capacity of our mechanical ore-handling plant," he further added.

“We have also chalked out many public-private partnership projects to improve connectivity with the port in order to evacuate goods faster."

Demurrage is adding to the cost of Indian exports, said Arvind Mahajan, an infrastructure expert and an executive director with KPMG International, a business information services firm. “As of now, since there is demand for iron ore, the mining companies will be able to pass on the additional cost to the importers," he said. “But what happens if demand slows down?"