March 1999 saw a ship called Wan Hai Venus call at India’s first privately funded container terminal at Nhava Sheva International Container Terminal, within Jawaharlal Nehru (JN) Port at Mumbai. This was indeed a momentous event, signifying the commencement of the private sector port business in India. During the 12 years since, no less than 50 privately funded ports have been conceived in India, and some 20 are either actually operating or are at an advanced stage of construction. With these figures in mind, it would certainly seem that the introduction of Public Private Partnerships (PPPs) for ports has succeeded well beyond anyone’s expectations.
In particular, the state of Gujarat has led the way with fully operational PPP ports at Mundra, Pipavav, Dahej and Hazira, all of which deal with diverse cargoes ranging from containers, POL, LNG, coal and cars. Where the Government has been unable to provide basic connecting infrastructure, the private developers have extended the PPP model to the railway lines and have therefore driven through development. Gujarat, recently referred to as “India’s Guangdong” by The Economist magazine, has shown that ports attract industrial investments, which in turn feeds the ports with cargo.
PPP ports in India
Greenfield PPP ports have also been constructed in the states of Andhra Pradesh, Karnataka, Tamil Nadu, Maharashtra and Orissa. In addition, almost all of the 13 Government-run ‘major’ ports have leased out assets to the private sector in return for a share of the revenue, following a business planning exercise in 2006–2007. The private sector in turn has responded with enthusiasm.
With ongoing port projects at Vizag, Hazira, Dahej and Goa, the Adani Group currently leads the market with the largest private port in India, situated at Mundra which has continued to expand its facilities. As a result, traffic has increased at an average rate of 35% since 2006. International operators such as PSA, DP World, AP Moller and TCB are also very active in the market. Indian companies owning port assets include Tata, Jindal, Larsen & Toubro, Essar and Gammon.
The port assets that have been developed through private finance are of a generally high standard with efficient operating parameters, and are an improvement on the Central Government-run ‘major’ ports. The difference between public and private management was starkly demonstrated when former owner P&O (now DP World) took over a container terminal at Chennai Port. Despite having to use the decrepit container cranes that they had inherited, the new owners were able to reduce the vessel waiting time from a very high 21 days to zero within a month of taking over the terminal.
New opportunities
The opportunity in India is obvious. An economy with a population of 1.2 billion people growing at close to 10% per annum is placing an increasing demand for goods and services and leading to growth in exports and imports. India’s port throughput has been rising at an average rate of 14% per annum in the past five years, with Gujarat accounting for a third of this growth. Container trade has also been growing at a rate of 15% per year, with containerization also on the up.
This doesn’t mean that more cannot be done in order to further develop the ports industry in India. Although the private sector has risen to the challenge of owning and operating port assets, there is still much work to be done by central and state Governments in order to provide a realistic overall policy framework for the development of ports in India. Since taking the major step of opening up to PPPs, further progress has been limited. Gujarat has certainly encouraged private investment, but it also needs to do more to help reduce the opportunity costs for developers.
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