At a water depth of 12-12.5 metres, the Indian government-owned Kandla port in Gujarat and India’s biggest cargo handler is nowhere near handling so-called Capesize ships—the biggest of the dry bulk cargo carriers that require a depth of 18-19 metres.

It was in this backdrop that Bhagwan K. Mansukhani, 69, promoter of the Kandla-based Rishi Shipping Pvt. Ltd, entered the scene with a novel initiative that allowed the harbour to handle these big ships for the first time since starting operations in the 1950s and help importers save money on ocean freight. It has also enabled Kandla improve productivity and increase cargo volumes.

Capesize ships loaded with coal would anchor in the mid-sea, some 31 nautical miles from Kandla. From there, floating cranes deployed by Rishi Shipping would unload the cargo into barges that are taken to the port.

At its current depth, Kandla can only berth Supramax-size ships that can carry 53,000-55,000 tonnes of cargo. Ocean freight for a Supramax ship coming from the world’s largest coal export terminal at Richards Bay in South Africa to Kandla is $18-19 per tonne. The ocean freight can be cut to $10-11 per tonne if a Capesize ship, with a capacity to load 150,000 tonne, is deployed on the route.

In shipping, the bigger the vessel, the lower the freight cost for exporters and importers.

Even after factoring in a cost of $2 per tonne on the floating crane and barge operations, importers will be able to save $6-7 per tonne on a trip from South Africa to Kandla if a Capesize ship is hired. Consequently, power plants get to buy and import coal at cheaper rates, which translates into reduced power tariff, reduced inflation and, more importantly, saving in foreign exchange for the government because ocean freight is paid in dollars.

Other industries get to import raw materials at cheaper rates.

Rishi Shipping has signed a 10-year contract with Kandla port for the cargo operations by deploying two floating cranes and 32 barges each having a capacity to load 2,000 tonnes of cargo and requires a water depth of 3.5 metres to berth. The firm started the floating crane and barge operations in April. In this way, Kandla has handled eight Capesize ships with a cumulative cargo of 1.2 million tonnes (mt). Kandla has set a rate of 24.5 per tonne for the floating crane and barge operation, out of which Rishi Shipping is contractually mandated to share 72%, or about 18 per tonne, with Kandla port.

Every importer would like to bring cargo on Capesize ships because of the economies of scale. Only three ports in India can handle this type of ship at their facility—Mundra in Gujarat on India’s western coast and Gangavaram and Krishnapatnam in Andhra Pradesh on the eastern coast.

None of the 12 ports owned by the Indian government and located at key spots can handle Capesize ships at their berths because of lack of adequate depth, which average 13 metres. Deepening the port channel and maintaining it requires hundreds of crores of rupees. For instance, deepening the channel at Kandla by an extra metre to 13 from 12 would cost about 300 crore.

Kandla is a tidal port and prone to heavy silting. On an average, there is siltation of 0.5 metre every month. If Kandla port does not do maintenance dredging, the draft in the channel gets reduced to 12 metres in two months. Year-round dredging is therefore inevitable at Kandla. The port now spends most of its revenue on maintaining the channel, which will increase further if the depth is increased. This, in turn, will make Kandla expensive for ships to call at because dredging costs are passed on to the ships calling there. Hence, increasing the depth beyond a limit is not economical for Kandla.

Likewise, the other Indian government-owned ports will have to spend more than 1,000 crore a year on deepening the channels and maintaining them. Spending huge money on deepening the channel is not good for the Indian economy when big ships can be handled in the mid-sea.

Kandla has been losing cargo to Mundra port, now India’s biggest private port located just 60km away, because it cannot match Mundra in terms of depth and productivity. It’s no surprise that the initiative of Mansukhani, a former mathematics teacher, came in for praise from India’s shipping minister G.K. Vasan.

The other ports owned by the Indian government faced with similar depth restrictions could consider whether Mansukhani’s idea would be worth replicating in their own ports, Vasan said last week.

At Kandla, this idea has already been replicated by another firm. Frost International Ltd has been given a similar contract by Kandla port.

The cornerstone of Mansukhani’s idea is to make imports into India less expensive and exports viable and competitive in the international market. And Kandla can add much-needed extra capacity without making large investments. Kandla loaded 94 mt cargo in the year to March and hopes to cross the coveted 100 mt-mark this year, the first by an Indian port.

P. Manoj looks at trends in the shipping industry.

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