Free Essay

Port Privatization India

In: Business and Management

Submitted By anurag2004
Words 1787
Pages 8
Privatization*of*Port* *Development*and*Operation*and*its* Advantage*

Group&'2& Anurag&Parashar&–&56& &

Current&Scenario& & ! Having&a&coastline&of&more&than&7,&517&km&of&length,&Indian& port§or&encompasses&of&over&200&ports.&& ! There&are&13&major&and&about&200&non'major&ports&in&the& country.& ! &A&rising&need&for&robust&port&infrastructure,&strong&growth& potential.& & ! favorable&investment&climate,&and&sops&provided&by&State& Governments&provide&private&players&immense& opportunities&to&venture&into&the§or. & & &&

Type&of&Port&
Public& Sector& corporate& Government& Managed& Private&Port&

Ports&

Ports

2013

MARCH

There are two basic categories of ports in India

Classification& &
Ports in India

Major

Non-Major (minor)

• There are 13 major ports in the country; 6

• India has about 200 non-major ports of

on the eastern coast and 7 on the western coast
• Major ports are under the jurisdiction of

which one-third are operational
• Non-major ports come under the

the Government of India and are governed by the Major Port Trusts Act 1963, except Ennore port, which is administered under the Companies Act 1956

jurisdiction of the respective state governments’ maritime boards (GMB)

For updated information, please visit www.ibef.org

MARKET OVERVIEW AND TRENDS

5

orts

2013

MARCH

Port&Map&

jor ports in India

Kandla

Kolkata
Mumbai JNPT Mormugao Ennore New Mangalore Cochin Chennai Tuticorn
Notes: JNPT - Jawaharlal Nehru Port Trust
MARKET OVERVIEW AND TRENDS

Paradip Vishakapatnam

Port Blair

updated information, please visit www.ibef.org

6

What&is&fueling&the&growth&of§or?&

Strong&growth&potential,& favorable&investment& climate,&and&sops& provided&by&state& governments&have& encouraged&domestic&and& foreign&private&players&to& enter&the&Indian&ports& sector.&In&addition&to&the& development&of&ports&and& terminals&&& &

The&private§or&has& extensively&participated& in&port&logistics&services&& During&FY13,&29& projects&are&scheduled& to&be&executed&adding& capacity&of&208&& MTPA&at&the&cost&of& USD&8.8&billion&
Million&ton&&a&year&&

Increasing& private& participation&&

Favorable&policies&assisting&the&private§or&&
• Government*has*allowed*FDI*of*up*to*100*per* De6licensing* • A*106year*tax*

&

and*tax* holidays**

Price* flexibility**

• Private*ports*enjoy*price*flexibility*as*the*government*allows*non6major*ports*to*determine*their* own*tariffs*in*consultation*with*the*State*Maritime*Boards;*at*major*ports,*tariffs*are*regulated*by* the*Tariff*Authority*for*Major*Ports*(TAMP)**

Model* Concession* Agreement* (*MCA)**

• An*MCA*has*been*finalized*to*bring*transparency*and*uniformity*to*contractual*agreements*that* major*ports*would*enter*into*with*selected*bidders*for*projects*under*the*Build,*Operate*and* Transfer*(BOT)*model**

prevention**

• The*Ministry*of*Shipping*has*passed*a*regulation*to*prevent*monopoly*power* • An*existing*private*operator*(at*a*port)*cannot*bid*for*the*next*terminal*to*handle*similar*type*of* Monopoly* cargo*at*the*same*port*

Public&Private&Partnership(PPP)&
In&the&mid'1990s,&the&Centre&realized& that&the&capacity&of&ports&will¬&be& enough..&& & In&1996,&Partial&privatization&of&major& ports.&The&first&private&terminal&in&a& major&port&was&set&up&at&the&JNPT&by& P&O&Ports&Australia&in&1999.& & & &After&six&years,&DP&World,&Dubai,& took&over&it&as&part&of&a&global&buy' out&of&P&O&assets.& & &

Privatization&kind&
Captive& Private&port& Privatization& Major&port/ Landlord&Model& General& purpose& Terminal/ Service&

Under&this&model,&the&port&authority& acts&as®ulatory&body&and&as&landlord,& while&port&operations&(especially&cargo& handling)&are&carried&out&by&private& companies& & Many&Major&ports&now&operate&largely& as&landlord&ports&'&International&port& operators&have&been&invited&to&submit& competitive&bid&for&BOT&terminals&on&a& revenue&share&basis& & Significant&investment&on&BOT&basis&by& foreign&players&including&Maersk&(JNPT,& Mumbai)&and&P&&&O&Ports&(JNPT,& Mumbai&and&Chennai),&Dubai&Ports& International&(Cochin&and& Vishakhapatnam)&and&PSA&Singapore& (Tuticorin)& & BOT&–&Build&operate&&transfer&

Landlord&Model&

Private&Port&
& Minor&ports&are&already&being& developed&by&domestic&and& international&private&investors:& Pipavav&Port&by&Maersk&and&Mundra& Port&by&Adani&Group&(with&a&terminal& operated&by&P&&&O)& & & Captive*Ports&are&developed&by& companies,&who&set&up&industries& that&require&port&facilities.&These& ports&are&operated&on&Build,&Own&and& Operate&(BOO)&system.&

Scope&for&Private&port&
Currently,&29&private§or&projects&(captive&ports)&with&a& ! capacity&of&203.0&MMT(Million&Metric&Ton)&and&developed&with&an& investment&of&USD2.0&billion&are&already&operational& 24&projects,&with&a&capacity&of&142.0&MMT&and&involving&an& ! investment&of&USD2.7&billion,&are¤tly&under&development&

! 31&projects&are¤tly&in&a&bidding/pipeline&stage&
With&rising&demand&for&port&infrastructure&due&to&growing&imports& (crude,&coal)&and&containerization,&public&ports&(major&ports)&will&fall& short&of&meeting&demand,&&this&provides&private&ports&with&an& opportunity&to&serve&the&spill'off&demand&from&major&ports&and&increase& their&capacities&in&line&with&forecasted&new&demand&

&

Profitability&Government&Vs.&Private&
! Profitability&of&the&dozen&ports&controlled&by&the&Indian&government&is& decreasing.& ! In&the&year&ending&March&2013,&these&ports,&which&have&a&58%&share&of& India’s&total&export'import&shipments,&earned&a&combined&net&profit&of&Rs. 1,220.61&crore&from&handling&545.79&million&tonnes&(mt)&of&various&cargo& ! Where&as&Capacity&was&745&MT& ! In&comparison,&Mundra&port&in&Gujarat,&India’s&biggest&private&port&and&run& by&Adani&Ports&and&Special&Economic&Zone&Ltd,¬ched&up&a&net&profit&of& Rs.1,754.18&crore&from&handling&82.13&mt&of&various&cargo.&
& Info&source1& Annual&report&and& &

http://www.livemint.com/Opinion/jGDe22vKV9is73Z3aHNPxO/Declining1profitability1of1 stateowned1ports1a1lesson1for1po.html&

Current&situation&of&Government&port& & & Of&the&12&ports,&the&Cochin&and&Mumbai&ports&have&been&incurring& losses&for&the&past&three&years.&Rising&costs&of&maintaining&its&channel& & and&paying&salaries&and&pension&liabilities.&
& Mumbai&port&reported&a&net&loss&of&Rs.277.66&crore.& & Kolkata,&one&of&India’s&oldest&ports,&slid&into&a&loss&of&Rs.298.22&crore& from&a&net&profit&of&Rs.138.24&crore&a&year&ago.& & &Mormugao&port,&on&India’s&western&coast,&reported&a&loss&of&Rs.94& crore&against&a&net&profit&of&Rs.24.37&crore&a&year&earlier.&& & This&was&due&to&a&ban&on&iron'ore&mining&and&export&of&the&steel' making&commodity&from&Goa&and&suspension&of&coal&handling&at&two& of&its&berths&on&pollution&concerns.& &

Private&port&Vs.&Government&port&
Gloomy&economic&scenario&has&hurt&all&ports&&alike,&how&private&ports&have& managed&to&outperform&state'owned&ports&???&

! Because&of&their&ability&to&capture&the&entire&value&in&the&chain&right&from&the& time&cargo&enters&a&port&till&it&is&loaded&onto&a&ship&or&from&the&time&it&is& unloaded&from&a&ship&till&it&leaves&a&port.&& ! In&the&case&of&state'owned&ports,&many&of&the&cargo'handling&activities&are& outsourced&to&private&cargo&handlers,&who&share&a&percentage&of&their&revenue& with&the&government'owned&ports&every&year.&

Private&port& &vs.&Government&port&
While&private&ports&pay÷nds&to&their&shareholders,&the&dozen&state' owned&ports&(with&the&exception&of&Ennore&port&in&Tamil&Nadu)&don’t&pay& any÷nd&to&their&owner,&the&government&of&India.&This&is&because&the& 12&ports&are&run&as&trusts&under&the&Major&Port&Trusts&Act&while&Ennore& port&operates&as&a&company&under&the&Companies&Act.& Since&2004,&the&11&ports&have&been&paying&income&tax&to&the&government,& which&they&were¬&required&to&do&earlier.& & & From&a&share&of&just&5%&about&a&decade&ago,&private&ports&now&control&a& 42%&share&of&India’s&cargo&shipped&through&their&ports.& & & & &

Privatization&Is&the&way&to&go&
State'owned&ports&have&been&seeking&private&funds&to&set&up&cargo' handling&activities&due&to&paucity&of&funds,&in&line&with&the& government’s&policy&on&privatization&to&promote&efficiency&and& productivity.& & & & & & & & & & India’s&plan&to&convert&all&major&ports&from&trusts&into&corporate& entities&has&been&foiled&by&labor&unions,&which&are&opposed&to&the& move.&& & &

Indian&Trade&Advantage&&
As&a&result&of&Government&policy& & private&port&have&flourished&in&India& & & that¬&only&helped&better&port& infrastructure&but&also&helped& growth&of&other&industries.& & & & Gujarat&has&pioneered&the&concept&of& port&liberalization&in&India&and&used& this&to&become&the&country's&fastest' growing&state.& & Gujrat&has&used&the&port&lead& development&model&to&fasten&its& growth.& & & &

Advantage& &
! Ports&play&a&vital&role&in&the&overall&economic&development&of&the& country.&& ! About&90%&by&volume&and&70%&by&Value&of&the&country’s& international&trade&is&carried&on&through&maritime&transport.& ! && ! Privatization&has&improved&Indian&port&operation& ! Turnaround&time&since&then&has&reduced& ! With&huge&private&investment&project&execution&is&getting&&faster& ! With&new&technology&better&cargo&handling&and&better&overall& operation,&cost&of&shipment&is&getting&reduced&

Port&Induced&Industry&
* * Port*Induced*Industry* & ! The&new&ports&have&also&helped&bring&forth&new&industries.&The&most&important& example&of&this&is&the&emergence&of&a&global&pipeline&hub&at&Anjar,&near&Mundra&port,& which&caters&to&the&burgeoning&oil&and&gas&industry&world'&wide.& ! Five&companies&have&already&set&up&a&combined&pipeline&capacity&of&1.5&million&tons&per& year,&and&this&is&being&doubled.& ! Heavy&plate,&which&is&needed&for&manufacturing&oil&and&gas&pipelines,&is¤tly&being& imported&from&Europe.&& ! To&overcome&this&dependence,&Welspun&Gujarat&Stahl&Rohrer&has&set&up&a&captive&plate& mill,&and&plans&to&set&up&a&captive&steel&plant&too.&Jindal&Saw&has&set&up&a&blast&furnace& to&produce&iron&for&ductile&pipes&

Port&Induced&Industry&
Another&example&of&port'induced&industrialization&is&the&ship' building&industry.&For&a&long&time,&Gujarat&was&famous&for&ship'& breaking&rather&than&ship'building& & ABG&Ship'&yard&is&setting&up&a&major&ship'building&facility&at&Dahej,& capable&of&constructing&very&large&crude&carriers.& &&

Port&Induced&Industry&
! The&Adani&group&is&setting&up&another&major&shipyard&at&Mundra,& capable&of&building&Panamax'size&bulk&carriers.& ! &SKIL&Infrastructure&Ltd.&is&setting&up&a&major&ship'&yard&at&Pipavav,& where&it&earlier&built&a&private&port.&& ! L&T&has&long&been&building&offshore&plat'&forms&and&support&vessels& at&Hazira.&& &

Export&oriented&Industries&
Special&Economic&Zones&adjacent&to&its&new&ports&are&being&setup&to&attract& export&oriented&industries.& & & With&the&permission&of&Captive&port&Industry&heavily&dependent&on&material& import&can&&get&operation&and&cost&advantage.& & &

Mundra&Port&success&story&
! &It&is&the&largest&private&port&in&India&in&terms&of&&&volume.&& ! &Revenue&(FY12):&USD668.6&million&& ! Operating&profit:&USD333.8&million&& ! Cargo&traffic&at&Mundra&port:&64.0&MMT&in&FY12&& ! &Container&traffic&contributed&the&most,&followed& &&&&&&&by&coal&and&edible&oil,&chemicals&and&POL& ! Has&the&world’s&largest&fully&mechanized&coal&terminal&with&a& capacity&of&60&MTPA&& ! &Handles&the&third&highest&container&traffic&in&India&& ! &In&1H&FY13,&revenue&increased&to&USD323.4&million&as&against& USD239.5&during&1H&FY12,&an&increase&of&35&per¢&& &

Mundra&Port&success&story&

Thanks&

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