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Advent of private terminals has increased competition

Advent of private terminals has increased competition

Adani Ports and Special Economic Zone (APSEZ) has been regularly expanding capacities to capture new business opportunities. Captain <span style="font-weight: bold;">Sandeep Mehta, President, (APSEZ), </span>talks to INFRASTRUCTURE TODAY about the role and impact of private ports in India.
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<p> <span style="font-weight: bold;">What role have the private ports played in shaping India’s shipping industry?</span><br />
Private ports have played a pivotal role in the development of India’s shipping, ports and logistics industries. Previously, a majority of container traffic was routed through government-run ports, which acted as a landlord, with services offered by private stevedoring companies.</p>
<p> The advent of private players, with their focus on mechanisation and customers, changed the whole scenario. Containerisation has involved carriers and shippers having to reconfigure their entire supply chains and inland transport, which means that private operators, of necessity, had to offer a higher level of service, efficiency and productivity, in order to entice the larger players to their ports. </p>
<p> Besides injecting the much needed capital and port capacity (capacity to handle TEUs/year), the private port operators were at the forefront in introducing the latest technologies and world-class processes, in a bid to provide superior levels of service and customer satisfaction. The overall handling capacity and average productivity levels at ports increased as a consequence, leading to the private ports taking a large share of container volumes to and from India. </p>
<p> This, in turn, has forced the government-run ports to enhance their own capabilities to compete with the private ports, further benefitting the industry and end users.</p>
<p> <span style="font-weight: bold;">Do you think the public, private, partnership (PPP) model in private container terminals is better than the government-run container terminals?</span><br />
There is certainly a strong case to be made for the PPP model. Setting up ports on the PPP model can help ensure that ports are developed in strategic locations, are aimed at boosting trade, reduce logistics costs, boost employment opportunities in relatively underdeveloped regions, set up at locations closer to hinterlands and strengthen supply chains.</p>
<p> With the massive land requirements for port projects, setup costs can be prohibitively expensive, deterring potential investors. Over-reliance on existing government ports will lead to congestion, shortage of capacity, lack of development and job opportunities in other parts of the country and adversely impact industries and trade players.</p>
<p> <span style="font-weight: bold;">Do you think India will have too many container terminals by 2020 end, when all the projects are completed?</span><br />
In the last five years, India has seen an infusion of investments in the ports sector and injection of capacity. Besides private port operators, who have set up new terminals, the government-run ports have also embarked upon ambitious expansion projects to increase their capacity and capability. There has been a severe congestion in JNPT and other ports. Also in the global context, the capacity at Indian ports is still far below other southeast Asian countries.</p>
<p> The global trade is likely to pitch up and we can see this new capacity getting absorbed quickly in India.</p>
<p> <span style="font-weight: bold;">Are there any more opportunities in areas of bulk, liquid and LNG terminals?</span><br />
Modernisation of existing bulk facilities, building new liquid storage and establishing gas facilities for new energy ambitions that are key to promoting the use of clean energy, and the development of India as a global player- these are where the opportunities lie.</p>
<p> <span style="font-weight: bold;">India’s first LNG terminal is coming up at Dhamra. How will it help in improving India’s energy security?</span><br />
India is reliant on imported sources of gas in meeting a growing share of its energy requirements and LNG is the most efficient mode of import. The east coast has no LNG import or gas production facilities at present and the government is already committed to investing over Rs 200 billion in gas transmission infrastructure in the east and northeast. It is, therefore, clear that Dhamra LNG has a massive role to play in creating a gas-based economy in east India. The terminal is being designed to handle the world’s largest LNG vessels and accept LNG from virtually all known sources of supply. This onshore terminal will have a nominal capacity of 5 mtpa and comprise two full containment storage tanks of 180,000 m3 capacity each.</p>
<p> <span style="font-weight: bold;">At Adani, you are developing two large trans-shipment terminals at Mundra in a joint venture with MSC and CMA. Once these facilities are operational, what size of ships are you expecting?</span><br />
Our deep draught ports or terminals are capable of handling the largest vessels that are being built today. </p>
<p> <span style="font-weight: bold;">How exactly do private terminals help to generate better job opportunities for the youth?</span><br />
Modern ports are enormous entities, with operations on a massive scale, involving various ship and land side handling operations and related activities. These naturally will need plenty of manpower, both skilled and unskilled, to ensure that the port operates optimally, leading to the creation of thousands of jobs at all levels. This will also provide an opportunity for unskilled labour to subsequently develop their technical and academic skills and move up the ranks to more value adding and technical roles.</p>
<p> <span style="font-weight: bold;">But increased automation in private terminals will result in lesser job opportunity.</span><br />
Automation is a part and parcel of modern life and business, designed to reduce human effort and increase productivity. Safety is a key consideration to assess in the introduction of automation. Therefore, automation is inevitable and needs to be embraced and accepted. The wiser course of action would be to view it as a factor which facilitates the moving of jobs up the value chain and enables up-skilling of human resources.</p>
<p> <span style="font-weight: bold;">With more and more business being captured by private terminals, do you think that the government will get out of the terminal business and privatise the existing facilities?</span><br />
Ports have traditionally been owned and operated by the government-appointed institutions. Besides their primary role of supporting export and import trade, they are also vital in generating employment and enhancing industries and promoting equitable development across regions. There is also an additional focus nowadays on environmental impact. Until recently, the government ports operated on typical landlord model, mired in red tape and afflicted by inefficient equipment and labour troubles. The advent of private players has forced the government ports to improve their operations to compete with private ports. Given the massive investment required in developing greenfield sites and having unencumbered land, private players reasonably cannot be expected to create capacity and infrastructure large enough to cater to India’s overall needs, so the government and private players will need to work jointly. To conclude, in view of the strategic, social and economic role played by the ports sector, the best option is for the government to work jointly in PPP mode.</p>
<p> <span style="font-weight: bold;">The advent of private terminals will result in cost escalation to the end users. Do you agree?</span><br />
On the contrary, the advent of private terminals has increased competition in the Indian ports sector, which has directly benefitted the end users. Besides offering a greater degree of choice (in selection of ports), the competitive pressure has also forced the government-run ports to increase their efficiency and productivity, thereby positively impacting trade and exports and imports.</p>
<p> Apart from this, as I already said, the advent of private terminals has also resulted in more robust supply chains, lower transportation costs, more efficient logistics, world-class service levels and adequate container handling capacity at ports. An intangible benefit has been the paradigm shift in the mindset of port operators, where they now view themselves as enablers of trade and look for opportunities to collaborate with carriers and end users, as opposed to the earlier tendency to view themselves as monopolistic and stand-alone providers of port services.</p>
<p> <span style="font-weight: bold;">Private ports have invented and brought in better business practices and increased safety standards. How has it helped India’s foreign trade?</span><br />
The higher productivity and efficiency has reduced the turnaround time for ships and decreased the overall trading cycle, resulting in faster movement of goods, higher turnover, lower supply chain costs and higher margins. The above coupled with the increase in port capacity, the Indian manufacturers or exporters or importers are now able to trade in greater volumes, enabling them to avail of economies of scale and garner a greater share of global trade.</p>
<p> <span style="font-weight: bold;">Any other comments you want to make?</span><br />
The government has undertaken various measures to introduce transparency and accountability, thereby reducing transaction costs and time. These have started to show results now. The logistics sector, to which the port industry belongs, is going through a period of major technological breakthroughs. Disruption in existing models is underway.</p>

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