Two decades on, Gujarat to revive port policy

Ahmedabad: After over two decades, Gujarat government, which was the first to lay down a port policy in the country in 1995, has decided to revive the policy that would nearly double the existing port (480 million tonnes) capacity to 1 billion tonnes by 2020 besides identifying new locations for greenfield ports.

Gujarat Maritime Board, the regulator for all the non-major ports or ports that are not controlled by Central government in Gujarat, has got a nod from the state government last month to revive the policy with a target to maintain the present share of GMB traffic (32%) in the India’s maritime trade which is the maximum by any state in the country.

With about half a dozen port locations out of the 10 identified by GMB in 1995 being stuck for viability or environmental issues and the new shipbuilding policy of the state laid down in 2010 yet to take off, the regulator has begun the process of hiring consultants for identification of new sites.

“Also, Gujarat offers a concession period of 30 years for greenfield ports that can be extended by another 20 years, while other states are offering concession period of 50 to 60 years. This needs to be looked into and revised,” said a senior GMB official on conditions of anonymity while adding it would take at least six months for the government to come out with the policy.

Considering the fact that it has been now close to 20 years, there is an urgent need to review the policy as a lot of developments have taken place nationally as well as globally, he added.

“While Gujarat had the first mover advantage, the overall regulatory and government policy has led to development of port sector in the state. The land availability in Gujarat for port development as compared to states like neighbouring Maharashtra has been a major advantage. Also labour issues in Gujarat are much lesser in comparison. Maharashtra also has hinterland connectivity issues. Also, Gujarat has many large industries in comparison that contribute to port traffic like petrochemicals, chemicals, pharma, steel, cement and textile,” said Ramesh Singhal, chief executive, i-Maritime Consultancy, which tracks the port and shipping sector.

The port development in Gujarat has been driven by some policies of the state government including The Gujarat Infrastructure Act, Framing of the Model Concession Agreement, captive jetty policy, ship breaking rules and regulations and LNG policy.

The policy helped in opening up Gujarat’s ports sector for privatization as well as development of various execution models for attracting investment. During this time, Pipavav was developed as the country’s first private port in India. This was followed by the first chemical terminal and first LNG terminal in Dahej.

Singhal however cautions that one needs to remember that port demand is driven by industries and it is not the other way round. “Many existing ports in Gujarat can triple their current capacities, so while new greenfield ports should come up, there is need for industrialization near existing ones,” according to Singhal.

The port policy in Gujarat announced in 1995 had targeted “handling 100 million tonnes of cargo in Gujarat waters accounting approximately for 25% India’s total cargo by 2000 AD.”

In the FY 2000-2001, the non-major ports of Gujarat accounted for about 20% of the total national throughput.

The largest commercial port in the country–Mundra port, promoted by Adani Ports and Special Economic Zone and Sikka captive jetties by Reliance Industries Ltd together accounted for about 74% of the total 336 million tonnes traffic handled by GMB ports in FY 15. Both these ports handled more than 100 million tonnes of cargo last year. Majority of the growth between FY10 and FY15 was due to coal (24.48% growth) and containers (20.32% growth) majority of which was handled at Mundra port.

Gujarat is home to two liquefied natural gas terminals and private shipyards, including the one promoted by ABG Group in Magdalla and Pipavav Shipyard Ltd near Bhavnagar. Gujarat also houses one of the largest shipbreaking yards at Alang near Bhavnagar.

The state government came up with a Shipbuilding Policy in 2010 and about 13 private companies have evinced interest to set up shipbuilding projects in the state. Their plans however remain largely on paper till date.

Singhal blames the overall slowdown in the sector for these projects not taking off.

According to Lloyd Institute report “Global Marine Trends 2030”, the maritime world in 2030 will be fundamentally a different place, owing to the rise of emerging countries, new consumer classes and greater resource demand in Asia. China, India and Brazil would be in the top 5 list in terms of GDP ranking.

“The port policies announced by other maritime states seem to offer more incentives to private developers. They may not have been as successful as Gujarat till now but states like Andhra Pradesh, Tamil Nadu have initiated PPP port projects and their share in the cargo handling is consistently increasing. Gujarat needs to act fast,” said a second GMB official in the know of the matter.

As per the existing policy, greenfield port developers have an exclusivity of 150 km, which means no other port can come up in this vicinity for 15 years. The new policy will re-look into this aspect also this limits the opportunities that arise out of greenfield port development, said the second official.

The traffic at private jetties has grown only by 7.8% during the last decade compared to the overall traffic growth of 13.2% of all Gujarat non-major ports during the same period. Many private jetties are facing issues in achieving Minimum Guaranteed Cargo, he said while adding that there was a strong need to revisit the Private Jetty Policy also.

Also advanced technologies for cargo handling, mechanisation, integrated port management system (ISPS), Integrated Security Management System (ISMS) are some of the other areas that the new port policy needs to look into.

Major ports have lost market share to the non-major ports in the last 15 years or so. Gujarat has one major port at Kandla run by Kandla Port Trust which achieved cargo handling of about 100 million tonnes in 2014-15, the first major port to achieve this feat.

The total traffic handled by both the major and non-major ports for 2014-15 was a little over 1000 million tonnes. The share of 12 major ports have come down from nearly 75% in 2001-02 to 55% in 2014-15. The major ports handled 606.37 million tonnes, a 4.3% growth over the year previous.

Congestion and low capacity addition at major ports of Kandla, Jawaharlal Nehru Port Terminal (JNPT) and Mumbai have also played a role in increasing traffic at non-major ports in Gujarat.

“There are issues related to expansion, the structuring of major ports (run as a Trust) and labour problems that have worked against major ports,” said managing director of BMT Consultants India, a maritime consulting firm.

The tariff at major ports are regulated by the Tariff Authority of Major Ports (TAMP) while non-major ports, have the freedom to charge tariff based on market forces, he explained.

“Last year, growth at the major and non-major ports appears comparable at 3-4%. While major ports shown a healthy growth, the non-major ports have substantially reduced their growth rate,” according to Singhal.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.