All above board | Indian ports size-up SEZ benefits3 min read . Updated: 07 Aug 2014, 11:23 PM IST
JN and Kandla ports are cashing in on the new port land policy that allows ports to lease or license land for as long as 99 years, thereby giving certainty to those setting up units in the SEZ
Two of India’s state-owned ports—one a container hub and the other a bulk gateway—are setting up special economic zones (SEZ), taking a leaf out of the book of a larger private rival to boost cargo volumes and augment revenue.
Jawaharlal Nehru (J.N.) port, located near Mumbai, and Kandla port in Gujarat will set up SEZs, India’s finance minister Arun Jaitley announced in his budget speech to Parliament on 10 July.
J.N. port, India’s busiest container gateway, will launch its port-based SEZ project by the third week of this month with an investment of ₹ 1,000 crore. This port-based SEZ would be developed over an area of 277 hectares. It has secured all the necessary approvals, including the key environment clearance, from the government.
SEZs are industrial enclaves, deemed foreign territories from the perspective of several economic laws. Industrial units in the SEZ benefit from a complete waiver on import duty, excise duty and service tax on the capital goods or raw materials they procure. J.N. Port will set aside 40% of the proposed SEZ for a free trade and warehousing zone and the remaining would be allocated for electrical, software and other industries.
The planned SEZ at J.N. port would also benefit from the upcoming dedicated railway freight corridor linking the port and the proposed Navi Mumbai International Airport.
Details of the Kandla SEZ are being worked out.
Both J.N. port and Kandla port are cashing in on the new port land policy of the government that allows ports to lease or license land for as long as 99 years, thereby giving stability and certainty to those setting up units in the SEZ.
Both J.N. port and Kandla port have been losing business to Mundra port run by private firm Adani Ports and Special Economic Zone Ltd (APSEZ) for different reasons.
A lack of capacity and perennial congestion at J.N. port has led to diversion of containers to Mundra port. J.N. port has three container loading facilities with a combined capacity of 3.6 million twenty-foot equivalent units or TEUs (the standard size of a container and a common measure of capacity in the container business). During each of the last four years, J.N. port has been loading containers in excess of 4 million TEUs.
J.N. port’s ability to handle more containers has been hampered by delays in expanding capacity.
Kandla’s cargo throughput is made up of dry bulk and liquid bulk cargo. Its ability to handle more cargo has been hit by a lack of adequate depth for bigger ships to dock.
In comparison, Mundra is strong in both containers and bulk. Besides, it has a deep draft (depth) for bigger ships to call.
In the past four years, Mundra added 2.7 million TEUs of additional container loading capacity to the 1.5 million TEUs it had initially. Another 1.3 million TEU capacity will come on stream within the next two years at Mundra, taking the total capacity to 5.5 million TEUs.
Mundra’s success is also partly due to the SEZ operating within its premises.
Globally, land owned by the ports has been leveraged for optimizing cargo volumes and increasing revenue of ports. It is an established practice globally for ports to allot land for carrying out economic activity including establishing industry to ensure captive cargo to the port, thereby enhancing the sustainability of that port.
Port land has also been used to set up SEZs aimed at encouraging industrial development in their vicinity. Ports are generally expected to utilize their land, with port-related activities being given the first priority and activities incidental to the port being treated as secondary in nature.
After a delay of more than eight years since it last expanded capacity, J.N. port has finally managed to award two capacity augmentation contracts to private firms. These two projects will add a combined 5.6 million TEUs at J.N.port, more than doubling its existing capacity. By developing the SEZ, J.N. port is seeking to ensure that the planned terminals have a steady supply of containers to run viably. It’s a model other state-owned ports can emulate to stay relevant and profitable as it faces rising competition from modern private ports that enjoy many operational and financial flexibilities compared with the former.
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