Gautam Adani goes into overdrive for ports3 min read . Updated: 26 Nov 2009, 09:55 PM IST
Gautam Adani goes into overdrive for ports
Gautam Adani goes into overdrive for ports
Hazira Port Pvt. Ltd, or HPPL, an entity formed by Shell Gas BV and France’s Total Gaz Electricite, had won the rights from the Gujarat government to develop and operate Hazira port to handle liquefied natural gas (LNG) cargo for 30 years beginning 2002. As part of the contract, HPPL has to develop facilities to handle other cargo at the port and MPSEZ was selected through a global bidding process.
Also Read P Manoj’s earlier columns
A few years ago, MPSEZ clinched a similar deal at Dahej port in Gujarat where Petronet LNG Ltd was contractually bound to develop non-LNG cargo-handling facilities under a deal signed with the Gujarat government. MPSEZ is developing a multi-purpose port to handle non-LNG cargo at Dahej port.
MPSEZ also holds the right to develop and operate a new port at Dholera in Gujarat in partnership with the JK Group.
In July, MPSEZ won the rights to develop and operate a new coal-handling terminal at the Union government-owned Mormugao port on the western coast.
Adani is now scouting for port development opportunities on India’s eastern coast, particularly in Andhra Pradesh and Orissa, as well as in South-East Asia and Africa.
So, will Adani’s flagship port company MPSEZ become India’s answer to DP World Pvt. Ltd and PSA International Pte Ltd, two of the world’s top container port operators?
It is a paradox of India’s port privatization programme that these two government-owned companies account for more than half the cargo containers shipped in and out of the country.
DP World is majority owned by the Dubai government while PSA is fully owned by Temasek Holdings Pte Ltd, which is the investment arm of the Singapore government.
In comparison, India’s 12 big ports owned by the Union government, which together account for 72% of India’s overseas cargo shipped by sea, have never looked beyond the country for new opportunities.
Adani is placing a huge bet on India’s ports through which at least 90% of India’s external trade moves. Port capacity constraints could pose a big problem for India’s exporters and importers as trade grows.
He has picked mainly ports outside Union government control for this business. These ports are owned by the states but are given or are being given to private firms for development and operations. Firms operating such ports are free to set rates and have greater operational flexibility. Cargo-handling rates at ports owned by the Union government are set by the Tariff Authority for Major Ports.
In a short span of eight years, MPSEZ has catapulted itself to the eighth spot in cargo handling among India’s ports, overtaking Union government-owned ports located at Kochi, Ennore, Tuticorin, New Mangalore and Mormugao. By 2013, Mundra is expected to handle at least 100 million tonnes (mt) of cargo.
Mundra’s growth is a big cause of concern for the Union government-owned Kandla port, India’s biggest port by cargo handled. In the year to end-March, Kandla handled 72.2 mt of cargo, earning about Rs500 crore. In comparison, Mundra, located just a few nautical miles away, handled 35.8 mt of cargo but earned double what the government port did.
In terms of revenue from pure port operations, Mundra is India’s highest revenue earning port. In the year to March, Mundra earned Rs1,140 crore from handling different types of cargo. This excludes revenue from land lease and interest income, which are typically factored into the financials of Union government-owned ports.
At Union government ports, cargo handling is done by various agencies. But Mundra does everything on its own and offers complete services for cargo handling in one place. As a result, it has been able to capture the full value of the infrastructure created.
Unlike building a terminal for handling specific commodities, in which firms such as DP World and PSA have specialized, setting up new ports is a different game altogether. It is more challenging and riskier. But with the experience and expertise gained from turning Mundra into a success story, Adani is focusing on other ports, both in India and abroad, to replicate his strategy in this key logistics infrastructure.
It may be time for India to stand up and be counted among the galaxy of top-notch port developers and operators.
P. Manoj is Mint’s resident shipping expert and writes on issues related to shipping and logistics every other Friday.
Respond to this column at firstname.lastname@example.org.