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Business News/ Companies / Delays in capacity expansion taking a heavy toll at JN port
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Delays in capacity expansion taking a heavy toll at JN port

Delays in capacity expansion taking a heavy toll at JN port

Struggling with congestion: A file photo of Jawaharlal Nehru port. The port loads more than half of India’s container cargo and reflects the constraints that inadequate infrastructure imposes on econoPremium

Struggling with congestion: A file photo of Jawaharlal Nehru port. The port loads more than half of India’s container cargo and reflects the constraints that inadequate infrastructure imposes on econo

Bangalore: At least three key capacity expansion projects at Jawaharlal Nehru (JN) port near Mumbai are stuck at various levels five years after they were initiated as India’s busiest container gateway struggles with congestion, hurting exporters and importers.

Last week, Gateway Terminals India Pvt. Ltd, the biggest of the three container-loading facilities operating at JN port, shut its terminal for two days over labour issues, adding to the port’s woes.

The closure stranded several ships waiting to berth at Gateway Terminals to load and unload containers and delayed shipments. Gateway Terminals is 74% owned by APM Terminals Management B.V., the container terminal operating unit of Danish shipping and oil conglomerate AP Moller-Maersk Group A/S.

P.K. Agrawal, chief executive officer of Gateway Terminals, did not respond to calls made to his mobile phone seeking comment.

Apart from Gateway, JN port has two more container terminals—one operated by the government-owned port itself and the other by Dubai’s DP World Ltd.

Struggling with congestion: A file photo of Jawaharlal Nehru port. The port loads more than half of India’s container cargo and reflects the constraints that inadequate infrastructure imposes on economic activity.

The port cannot handle more containers unless it expands capacity.

“Exporters and importers are suffering," said Abbey Philip, a deputy general manager, logistics and commercial, at specialty chemical maker India Glycols Ltd, which ships about 550 containers in a month through JN port.

Inadequate capacity, congestion and equipment breakdowns often lead to delays and longer waiting time for ships. Terminal operators impose restrictions on crane movements —in some cases, ships aren’t given enough time to load containers.

“As a result, a ship departs, leaving as many as 400 containers at the berth. If you miss a ship, you will have to wait for another week for the next ship, delaying shipments by as many as 21 days. As a result, we are not able to meet the delivery schedule committed to our customers," Philip said.

“The earlier they attend to these problems, the better it is for the exporters and importers," said an executive overseeing logistics operations at Reliance Industries Ltd, which ships about 2,000 containers in a month through the port. Reliance, he said, will look at shipping its containers through the facility being built by the Adani group at Hazira in Gujarat. The Hazira terminal, with a capacity to load one million standard containers a year, is expected to start operations sometime in August-September.

“Many others will explore the possibility of diverting their containers through Hazira," said Philip at India Glycols.

The Adani group is also setting up a new container-loading facility, the third, at its port located at Mundra in Gujarat. This will start operations by the end of the year, taking the total capacity at Mundra to 3.3 million standard containers a year.

Over the past few years, the port container traffic in India has been expanding at an average of 15% a year. At this rate, the container traffic is estimated to reach 38.91 million standard containers by 2020, according to a 10-year plan unveiled by the shipping ministry in January 2011. Out of this, JN port is expected to handle 11 million standard containers by 2016 and 23 million standard containers by 2020, it said. India has an existing handling capacity of 11.81 million standard containers a year.

Capacity expansion at JN port has been moving at a snail’s pace, hurting exporters and importers.

In June 2011, a consortium led by Singapore’s PSA International Pte. Ltd won a public auction, the process for which lasted for two years, to build a new 6,700 crore, 4.8 million standard container capacity a year terminal. The project was awarded in September.

But the PSA-led consortium is yet to sign a concession agreement with the JN port.

A concession agreement is a document that sets out the terms and conditions of the contract and puts the project in motion.

The bidding schedule for public-private partnership projects framed by the Union government mandates that the successful bidder has to sign the concession agreement within 30 days of getting the letter of award from the port authority.

The signing of the agreement has been delayed because PSA is not willing to bear the cost of stamp duty for registering the document in Maharashtra.

Besides, ABG Ports Pvt. Ltd, PSA’s local partner in the consortium, has sought JN port’s permission to withdraw from the consortium. JN port has referred the issue to the union shipping ministry for its approval after taking permission from its board. The ministry is yet to take a decision on the matter.

PSA and ABG both declined to comment for this story.

The shipping ministry has referred the issue to the law ministry and the public-private-partnership cell in the finance ministry for an opinion, a ministry spokesman said.

The project cost has now increased to 8,000 crore, according to L. Radhakrishnan, chairman of JN port.

A few days ago, the shipping ministry allowed Hyundai Engineering and Construction Co. Ltd to bid for a 1,571.60 crore channel-deepening tender at the port, a project that will help bigger ships to dock.

The south Korean firm had been disqualified because one of the dredgers it had offered for the work did not meet the age norm of 15 years stipulated in the tender. Hyundai disagreed with the disqualification and appealed to the ministry, arguing that the age of the dredger—which was originally a bulk carrier and converted into a dredger in 2003—should be counted from the date it was converted, thus enabling it to comply with the age norms. Dredgers are specialized ships used to deepen the channel of ports.

Shipping experts said that the age of a ship is always counted from the date its keel is laid and not from the date it is converted.

The ministry ruled in favour of Hyundai after consulting the union law ministry and the Central Vigilance Commission (CVC), a decision that dredging industry experts say may invite litigation and delay the key project even further.

“Without amending the notice inviting tender or the tender documents, how can you qualify somebody on the basis of a letter issued by the ministry," asked a dredging industry executive, who declined to be identified. “Many dredging firms did not participate in the tender thinking that they would be disqualified on age norms. But, with the ministry adopting a different yardstick for counting the age, many of them would now become eligible to participate and may resort to litigation," he added.

Hyundai officials weren’t immediately available for comment.

JN port has been struggling to implement the project, a key to its capacity expansion plans, for close to a decade.

The port is currently not deep enough at 11.5 metres and can accommodate ships with a capacity to load only up to 3,000 standard containers. It plans to deepen the channel to 14 metres to allow bigger ships to dock. The project has been delayed by at least four years and is now slated to be completed by 2014 instead of the earlier estimate of 2010, if an earlier auction had gone through. The last auction had to be scrapped in July 2008 because the lowest bid of 1,050 crore for the work had exceeded the budget of 800 crore.

The port’s plan to set up a smaller container terminal costing 750 crore with a capacity to load 800,000 standard containers is stuck in courts. ABG Ports, which was excluded from the tender because of a monopoly policy framed by the government, has filed a petition in the Mumbai high court seeking permission @to bid. The case is being heard.

“These projects are the infrastructure of infrastructures," a Mumbai-based ship agency executive said on condition of anonymity. “There is an urgent need to expedite these projects which are of critical importance to India’s exporters and importers," he added.

“Speak to JN port, you will get all the details from them," union shipping secretary Pradeep K. Sinha said when asked about the delays.

“The delay has been due to factors beyond the control of JN port," N.N. Kumar, the port’s deputy chairman said.

p.manoj@livemint.com

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Published: 05 Jun 2012, 10:42 PM IST
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