The process has gathered momentum. ET Magazine spent a couple of days at Visakhapatnam, or Vizag port, to get a firsthand view. Strategically located midway between Kolkata and Chennai on the east coast, this port in Andhra Pradesh attracted over 2,000 vessels during the last financial year, clocking a business of 74 million tonnes of cargo, mainly iron ore, coal, crude oil, LPG, containers etc. At present, eight out of 29 berths of the port are under the control of six private companies, including Vedanta, Essar and JM Baxi Group, contributing as high as 60% of the total throughput handled at the port. The percentage share of the private players is set to grow as three new PPP projects valued at about Rs 7,00 crore have been awarded recently.
“The VPA (Visakhapatnam Port Authority) has undertaken three more PPP projects which are in the process of finalisation and are likely to be awarded by the end of 2024. These should be operational by 2027,” M Angamuthu, the chairman of VPA tells ET. “By 2030, Visakhapatnam port will reach 100% landlord port model with full-fledged mechanisation and state-of-the-art cargo evacuation system,” he adds, spelling out his blueprint and the target year.
While most ports in India have been accelerating the landlord model, it is the Navi Mumbai based premier container handling port, Jawaharlal Nehru Port (JNP), which has already acquired the tag of a 100% landlord port with all its five terminals operational under PPP mode. Dubai-based DP World, for instance, operates two of its terminals.
“Private sector players bring in more cost and time efficiencies in operations. Ultimately the business is of traffic, which grows with faster movement and lower turnaround times,” says Sanjay Sethi, chairman of Jawaharlal Nehru Port Authority (JNPA), adding how one of the container terminals in the port, which incurred a loss of Rs 200 crore in just eight months, is now churning a surplus of Rs 500 crore after being fully handed over to a private player. “This whole business (of supply chains) is very interconnected. This means entities with presence in multiple parts of the world, and across the value chain, can leverage their position,” Sethi adds.
Spreading across a 7,517-km coastline, India has 12 major ports – JNP, Visakhapatnam, Deendayal (Kandla), Mumbai, Mormugao, New Mangalore, Cochin, Chennai, Ennore (Kamarajar), Tuticorin (Chidambaranar), Paradip and Kolkata (including Haldia). The largest container port in India, Mundra Port of Gujarat, is a private port owned by Adani Ports and Special Economic Zone Ltd. (APSEZ). Out of about 200 nonmajor ports, only 66 presently handle cargo, according to information available with the ministry of ports, shipping and waterways.India’s port sector adopted the PPP mode back in 1997, a policy that has sustained for over two and half decades even as the process underwent a roller-coaster ride with modifications during the course. Some of the Build–Operate– Transfer (BOT) operators, which are presently running businesses in ports on a 30-year-long contract, are mostly guided by a model concession agreement of 2008. But the current lot of PPP operators are chosen on the basis of Major Port Authorities Act 2021, which provides more flexibility to the private players and no separate land lease fees. There is no doubt that the process has gained momentum post-2021.
In a written reply to ET’s queries, shipping minister Sarbananda Sonowal says over 80 PPP port projects worth Rs 42,400 crore were identified by the ministry for a period between 2021-22 and 2024-25, out of which 13 projects worth Rs 10,550 crore were awarded. The other projects are under various stages of rolling out, he adds. “The larger objective of the landlord model is to improve efficiency and productivity of port operations by leveraging technology and efficiencies available with the industry, thereby reducing the overall cost of handling cargo and bringing down the cost of logistics in the country,” Sonowal says.
According to Crisil Market Intelligence, in India landlord is the dominant port model in large and medium sized ports, and is expected to create significant opportunities for private players. “Most Indian ports are increasingly adopting the landlord port model, where the private terminal operator is allotted the concession to operate the port for an agreed period, generally 30 years,” Crisil said.
Official estimates predict cargo volume will increase between 1.7 and 2 times from 2020 to 2030. Further, the portion of cargo handled at major ports by PPP or other operators, is expected to reach 85%, up from 51% now, by 2030. A key element of the landlord port model is allowing market forces to fix the rates for port service users. In the pre-2021 regime, there used to be a Tariff Authority for Major Ports (TAMP) which approved the charges to be levied on users. This power has now been vested with the major port authorities, providing private terminal operators more flexibility and competitiveness.
Among the private players in India’s port sector, APSEZ is by far the biggest, with revenue from operations in FY22 standing at Rs 15,934 crore, according to a Crisil report of April 2023. JSW Infrastructure with `2,273 crore of revenue, ranks second, the report says. The other private players in the terminal operations include JM Baxi, DP World, PSA International and APM Terminals.
APSEZ operates ports such as Mundra, Hazira, Dahej, Kattupalli, Krishnapatnam and Gangavaram as well as terminals in Kandla, Mormugao and Ennore, accounting for about one-fourth of country’s port capacity. Till 2020, the company also operated a terminal in Visakhapatnam port, but the contract was terminated due to its inability to meet the criteria of procuring minimum businesses, says a senior port official on the condition of anonymity. The legal battle is continuing.
JSW Infrastructure, on the other hand, operates ports and jetties at Dharamtar and Jaigarh in Maharashtra as well as terminals in Mormugao, New Mangalore, Ennore, and Paradip. JM Baxi, DP World, PSA International and APM Terminals are predominantly container terminal players.
While the private sector would want more avenues to invest in Indian ports, the appetite may not be the same for all ports. The assets considered for privatisation from fiscal 2021-22 to 2024- 25 are spread across nine of the 12 major ports. Of these, 31 projects have been identified for private sector participation for improved operational efficiency and capacity utilisation of existing port assets.
According to Sethi of JNPA, replicating the landlord port model across the county will need a more nuanced understanding of each asset. “It might work well in some ports with more demand and competition, and not in others,” he cautions.
Maritime India Vision (MIV) 2030, rolled out by the shipping ministry, has listed 39 berths across major ports to be adopted for the landlord port model. There are over 260 berths in India’s major ports of which about 55 are already under the PPP mode.
Highlighting a challenge with multiple private operators in the same port, Sethi says, “There needs to be some uniformity in the technologies used by different terminal operators to ensure better management of cyber security. This is easier said than done since each player has its own protocols which are synergised with their global networks.”
Several early bidders, which bid aggressively in the pre-2021 regime, are now crying foul of discrimination. C Sateesh Kumar, the chief executive of Vizag General Cargo Berth, a Vedanta-owned company, says they have not earned a profit since its operation in 2010. “We have been demanding that old concessionaires like us should also be allowed to migrate to the new model concession agreement under which the private party is allowed to fix tariffs. If we don’t get the freedom of charging tariffs and our competitors next door are allowed to, we will be forced to shut down our terminal. We won’t be able to survive,” Kumar says. According to sources in the know, the government has been weighing the concerns of the old concessionaires and may extend some sops or find out a level-playing field.
Meanwhile, the central government is crystal clear that it does not want to be in the business of running ports. The question is how long will it take to find the right suitors. Quoting the MIV document, minister Sonowal spells out a timeline, “While the current share of cargo being handled by PPP operators at major ports is around 54%, our ministry envisages this share to exceed 85% by 2030 and become 100% by 2047.”
The port of destination is already decided, the question is only about smart shipping.
