Shipping sector cost optimisation: Uptick in capacity addition amid falling expenses

While FY17 saw capacity addition of 86.59 MT, which is 1.5 times of that added in FY14, the ports spent only Rs 1,196 crore during the period

Written by Sunny Verma | New Delhi | Published:June 7, 2017 2:03 am

Port infrastructure development has witnessed a sharp improvement in cost optimisation over the last three years. While in the financial year 2013-14, the 12 major ports added 55.61 million tonnes in additional capacity and saw an expenditure of Rs 2,458 crore on upgradation of ports, the numbers have significantly improved since then. According to data sourced from the Ministry of Shipping the year ended March 2017 saw capacity addition of 86.59 million tonnes (11 months) which is 1.5 times of that added in FY14, the ports spent only Rs 1,196 crore during the last financial year, which is less than half of what it spent in FY14. This is the lowest annual spending on facility upgradation in the last four years. Expenditure on facilities upgradation was Rs 1,648.29 crore in 2015-16, while capacity addition stood at 93.84 million tonnes.

Even as the spending on upgradation of major port facilities declined over the years, capacity addition has been on the uptick. Capacity addition at the major ports was highest in the year when lowest spending was done for facility upgradation. In contrast, addition to major ports handling capacity was lowest in the year 2013-14, when the highest amount of spending was done for facility upgradation at the major ports. These data sets pertains to 12 major ports including Kolkata, Paradip, Vizag, Chennai, Kamarajar, Chidambaranar, Cochin, New Mangalore, Mormugao, Mumbai, JNPT and Kandla. In a research report on the port sector on Tuesday, State Bank of India said capacity addition at major ports grew by around 400 MT with a compounded annual growth rate (CAGR) of 7.4 per cent in last 5 years from 2012 to 2017.

SBI expects addition to grow at 5-6 per cent CAGR in the five years till 2022, adding 275-325 MT of capacity. “Major ports’, which handle approximately 61 per cent of the country’s total cargo traffic, capacity crossed 1,065 MTPA during 2016-17. Boosted by a slew of steps, the major ports surpassed private players by handling a record 647.43 million tonnes of cargo in 2016-17. They registered an annual growth rate of 6.79 per cent in cargo handling against 4.32 per cent in 2015-16, whereas private ports annual growth rate stood around 4 per cent in the just-concluded fiscal,” the report said.

To further boost the sector, the government has identified six new port locations under the Sagarmala programme. These locations include Vadhavan in Maharasthra, Sagar Island in West Bengal, Paradip Outer Harbour in Odisha, Enayam in Tamil Nadu, Sirkazhi in Tamil Nadu and Belekeri in Karnataka. These proposals are at various stages of examination from preparation of techno economic feasibility reports to detailed project reports. Under the Sagarmala plan, the government has envisioned a total of 189 projects for modernisation of ports involving investment of Rs 1.42 lakh crore over a 20-year period till 2035.

In 2015, the ministry of shipping had identified 116 initiatives for major ports to enhance their efficiency and productivity to international benchmarks. These included modernisation of port infrastructure, mechanisation of berths/terminals and deepening of drafts, among others. The government has implemented 70 out of the total 116 measures, resulting in improvement in the overall average turnaround time and productivity of the major ports.

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