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Ports expansion in 12th plan period may run into troubled waters

Problems are common to major and non-major ports managed by the Centre and states.

Written by Gunjan Pradhan Sinha | New Delhi | Published: September 5, 2011 12:02:23 am

While the government has envisaged a Rs 1.5 lakh crore ports expansion plan for the 12th plan period,analysts have flagged delays in awarding projects,aggressive bidding by private developers and eroding returns as issues that may prove to be stumbling blocks for capacity addition.

The problems are common to major and non-major ports managed by the Centre and states.

For instance,the process of awarding the two most salient projects Jawaharlal Nehru Port Trust (JNPT) container terminal IV and Chennai mega-container terminal have been pending for three years. The two alone account for Rs 10,000 crore of investment.

Moreover,aggressive bidding in the recent past has eroded profitability,especially as tariffs are still controlled and determined by Tariff Authority on major ports.

In FY’12,the government’s target is to award 15 major port projects,aggregating 196 MT capacity and involving investments worth Rs 16,000 crore. Growth opportunity is also limited with some of them functioning at 90 per cent capacity utilisation such as Kandla,Vizag,Mumbai and JNPT.

Most of the major port plans are running behind schedule. Only four of the 16 projects are new ventures while 11 are delayed projects being carried forward from previous years. Case in point being the Chennai mega container terminal worth Rs 3,600,the RFQ for which was issued for the first time way back in 2008.

On the other hand while returns and growth potential is better for greenfield non-major ports,these opportunities take longer to fructify with gestation periods of 3-10 years even after the concession agreements are finalised,according to a recent study by equity analysis firm CLSA.

Awarding projects has proved to be a long drawn process at the state level. For instance,Mundra Port and Special Economic Zone (MPSEZ) have been trying to finalise a port concession on the east coast for the last few years. The only bright side currently is that all three key listed Indian ports stocks (MPSEZ,GPPV,Essar) are trading at a premium to global peers on account of the international situation.

As many as ten non-major port projects also faced significant delays before they actually became operational,points out the report.

In the case of Orissa’s Dhamra port,the concession period was signed way back in 1998 but the port became fully operational only after L&T picked up the entire stake in 2004. The port battled with the lack of environment clearances for almost three years.

In the case of Orissa’s Dhamra port,the concession period was signed way back in 1998 but the port became fully operational only after L&T picked up the entire stake in 2004. The port battled with the lack of environment clearances for almost three years.

Similarly,in the case of Dighi port in Maharashtra the concession agreement was signed in 2002 but $2 billion project became operational only in 2011. It is being developed jointly by Balaji Infra Projects,Maharashtra Maritime Board and IL&FS.

The government has indicated its intention to double the capacity of Indian ports to about 2,590 million tonnes in the next plan period. In the next decade,the plan is to treble capacity to 3,100 MT from the current 960 MT to cater to incremental traffic and bring down utilisation rates from 85 per cent currently to optimum levels of 65-75 per cent.

However,time lag in setting up greenfield ports and slow award by the Centre continue to remain the major challenges even in the next plan period.

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