India’s private ports gain ground on public rivals

India’s private ports gain ground on public rivals

Cargo throughput at minor ports surged 10.1 percent year over year in fiscal 2018-2019, while volumes at major public ports grew 2.9 percent in the same period. Photo credit: Krishnapatnam port.

The pace of growth in cargo movement via India’s minor privately owned ports, armed with more modern infrastructure and unregulated tariffs, has been on the upswing in recent months, after signs of a slowing trend in the past year.

According to a JOC.com analysis, cargo tonnage at minor ports surged 10.1 percent year over year in fiscal year 2018-2019, which ended March 31, far outpacing the 2.9 percent growth at major government-owned competitors in the same 12-month period. By volume, throughput at private ports totaled 578.5 million metric tons (637.7 million tons) in fiscal 2018-2019, compared with 699 million metric tons at state-run ports.

That growth upsurge enabled private operators to make further inroads into the Indian freight market, pushing their share of the country’s total trade to 45.3 percent from 43.6 percent in fiscal 2017-2018. As a result, major ports’ market share slid from 56.4 percent to 54.7 percent, after having rebuilt their combined slice of the pie to a steady 57 percent in the previous three fiscal years.

Although it is not unusual for growth rates for the two port groupings to diverge, the gap has widened sharply. Minor ports’ cargo growth in fiscal 2017-2018 was estimated at 8.3 percent, whereas major ports saw total volume rise 4.9 percent in that year.

Gujarat state, which hosts the country’s busiest non-government ports of Mundra and Pipavav, accounted for 68.6 percent of total volume handled by minor ports in the last fiscal year, followed by Andhra Pradesh, at 18.3 percent, and Maharashtra, at 7.7 percent. Cumulatively, these three states represented approximately 95 percent of the total minor port throughput, according to the analysis.

India has 12 publicly-owned ports and about 200 minor ports dotting its 4,600 miles of coastline. Unlike terminals at major public ports, privately-built independent ports are free from complicated bureaucratic controls associated with pricing and investment.

Much of the minor ports’ growth has come from Adani Group-owned cargo terminals at Mundra, Hazira, Dahej, Kandla, Dhamra, Mormugao, Visakhapatnam, and Kattupalli, which together reportedly account for nearly 25 percent of the country's total port capacity. Another important player in this unregulated market is the Navayuga Container Terminal (NCT), formerly Krishnapatnam port, located about 112 miles north of Chennai.

Also contributing to the overall growth in port volume is a recent cabotage reform that allows foreign ship operators to participate in coastal trade. Touted as a “game changer” for the emerging market economy's freight transportation industry, India’s liberalized cabotage program has resulted in significant cargo gains at private ports. Mundra, for example, saw domestic transshipment volume surge 21.4 percent year over year to 715,320 TEU in fiscal 2018-2019, according to data collected by JOC.com.

Similarly, NCT logged solid growth in a more conducive market environment, with transshipment accounting for 230,682 TEU of the port’s total record throughput of 506,000 TEU in fiscal 2018-2019.

Amid ever-mounting challenges from minor private ports and evolving trade demands, the Indian government has embarked on a “counter makeover program” for major ports — encompassing construction of new berths, last-mile rail infrastructure, dredging, equipment upgrades, and digital solutions — under its mammoth Sagar Mala logistics development program.

According to a recent government review, a total of 599 projects, involving an estimated combined investment of Rs. 876,304 crore (about $125 billion), have thus far been approved for implementation under the Sagar Mala program since its launch in 2015. Of these, 115 projects with an investment of Rs. 24,104 crore have been completed.

Those efforts mean additional capacity and efficiency gains at major ports in the years ahead, but a widening growth differential suggests state-owned heavyweights could run the risk of missing government targets on capacity utilization.