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Journalism of Courage
From just one big port, Mundra, in 2001, the Adani Group today has grown to be the largest private operator with as many as 14 ports and terminals handling a quarter of all cargo passing through the country’s ports.
This phenomenal expansion, much of it through acquisitions — six in the last 10 years — is becoming a cause of concern in sections of the government with at least three top officials, including a former competition regulator, in conversations with The Indian Express, flagging risks of market concentration in such a key infrastructure sector.
Indeed, along India’s 5,422-km coastline, Adani has a presence every 500 km on an average, from just a blip on the country’s far western end 10 years ago.
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All this gives Adani Ports and Special Economic Zone Ltd (APSEZ), the port operator and logistics company, a coastal network that rivals that of the Central government-controlled 12 ports.
In fact, part of the rise in Adani Group’s market share in the ports sector — from 9 per cent to 24 per cent in 10 years — has come at the cost of the Central government-controlled ports (called ‘major ports’ in industry parlance) whose cargo share has fallen.
“This is a concern,” a top economic ministry official told The Indian Express.
Adani’s total cargo volumes have grown at a compounded annual growth rate of 14 per cent between FY13 and FY23. In FY23, it was 337 million tonnes. In contrast, the cargo volumes of all other ports put together grew at a CAGR of just 2.7 per cent during the period from 842.66 million tonnes in FY13 to 1,096.39 million tonnes in FY23.
What has also not gone unnoticed among a section of government officials and regulators is that this growth has been through the inorganic route.
Cargo handling data analysed by The Indian Express shows that the ports acquired over the last decade by the Adani Group account for more than a third of the total cargo volumes (123.7 million tonnes of 337 million tonnes, or 37 per cent) handled by the company.
“Such a growth model compounds the concerns about the growing concentration risk,” the same official said.
Mails to Adani Group spokesperson for comments on its expanding footprint and attendant concentration risks did not elicit a response.
On key indicators of port efficiency like turnaround time — the duration between entry and exit of a cargo ship — Adani’s ports outperform the government’s. In August, the company said that it had an average turnaround time for ships of just around 0.7 days, while the central government-controlled ports had an average turnaround time of around two days.
However, the increasing presence of one player across the coastline — west to east — does potentially mean a gradual erosion of bargaining power of shipping companies, especially in specific geographies.
A senior official with the shipping ministry said that Adani ports may be well-managed and profitable businesses but there were substantive risks of high market concentration — low competition, high entry barriers for newer and smaller players, high dependencies on dominant players, and higher chances of abuse of dominant position.
Another senior official from an economic ministry, who also did not wish to be named, said that what has deepened anxiety over this market concentration in a strategic sector like shipping, is the backdrop of allegations of accounting fraud and stock manipulation against the Adani Group first by US-based short-seller Hindenburg Research and, more recently, in reports based on documents obtained by the Organised Crime and Corruption Reporting Project and shared with the Guardian and the Financial Times.
The Adani group has consistently denied these allegations and called them motivated.
A decade ago, in FY13, Adani Group’s ports business had cargo volumes of around 91 million tonnes, accounting for just 10 per cent of the cumulative cargo volumes handled by all ports, and over 23 per cent of volumes handled by all minor ports (a port is a minor port if it is not government controlled; the nomenclature has nothing to do with the size of the port or cargo volumes handled). So, Adani-owned Mundra Port is also a minor port even though it handled the most cargo — 155 million tonnes in FY23, more than any of the 12 Central government-owned ports.
Amongst ports which are not under the control of the Central government, the Adani Group has a significantly higher footprint. In FY23, the minor ports — those not owned by the Central government — handled close to 650 million tonnes in cargo, while APSEZ, whose cargoes primarily came from its eight operational minor ports in India, handled around 337 million tonnes in volume.
Besides ports, APSEZ operates terminals at three major ports as well. One port, Vizhinjam in Kerala, is under construction, and so is a terminal at the Syama Prasad Mookerjee Port (Haldia). The company also completed the acquisition of Karaikal Port in Puducherry in April, but since it was not part of the Adani Group in FY23, its volumes are not included in Adani’s total market share.
Over these 10 years, APSEZ’s volumes registered higher growth than what was seen in volumes handled by major ports and minor ports in most years. Even in FY21, when India’s overall port volumes, and volumes at major and minor ports contracted by over 4 per cent year-on-year due to the pandemic, APSEZ’s volumes were up nearly 11 per cent over the previous year.
Fuelling the ASPEZ expansion was a series of acquisitions: Dhamra in Odisha; Kattupalli in Tamil Nadu; Krishnapatnam and Gangavaram in Andhra Pradesh; and Dighi in Maharashtra. In FY23, APSEZ’s non-Mundra volumes accounted for 54 per cent of its overall port cargo, having grown at a CAGR of around 36 per cent since FY13.
According to a former chairperson of Competition Commission of India (CCI), while ports may be considered natural monopolies at a broad level, there are issues with this. “Its (APSEZ’s) share has been continuously growing in a creeping fashion. It is definitely a concern if there is a creeping acquisition of capacity by one player while the others fall or languish. It may not be too glaring now but down the line, say in five to 10 years, it could be a problem. The government and the CCI should keep an eye,” the former CCI head said on the condition of anonymity.
Another former CCI chairperson said for the regulator, the growth of a company in sectors that are “natural monopolies” such as ports and airports is not that much of a concern; their clear mandate is to address and prevent “abuse of monopoly”. And until the time there is evidence of that, there is no case for intervention.
Incidentally, the Adani group’s footprint has expanded rapidly in a few other sectors as well. It is now the largest private sector airport operator in India with eight airports under its belt. The group is also the largest cement manufacturer and private sector thermal power producer in the country.
As minor ports are under the state governments and state maritime boards, their tariffs were not governed by the Tariff Authority for Major Ports (TAMP), allowing APSEZ to charge higher tariffs for providing better infrastructure, efficient operations, and most importantly, turnaround times significantly lower than the major ports.
Typically, port tariffs usually account for a small share of overall shipping costs, while ship hiring charges are significantly higher. This means that customers usually tend to use ports with lower turnaround times, even if it means paying higher tariffs.
E-mails sent to the CCI requesting the regulator’s views on the matter did not elicit any response.
