Kandla Port should take strategic steps to face the challenge from neighbouring private ports, says Mansukhani

March 23, 2015 12:20 pm Published by

Kandla Port is losing cargo volume to other neighbouring private ports in South Gujarat, Mr B. K. Mansukhani of Rishi Shipping said in a communiqué to Mr Ravi M. Parmar, Chairman of Kandla Port Trust (KPT).

Three captive ports located between Vadodara and Surat, namely, Essar, Birla Copper, L&T, were handling their own captive cargoes on their berths, were now permitted to use their spare capacity for handling third-party cargoes, which means they would also takeover Kandla’s cargo, he said.

He further said that increasing port capacity was not the problem, but the trouble would be to get cargo volume which would further be reduced in the Kandla/Mundra belt.

To solve the problem, Mr Mansukhani suggested that a proper study should be undertaken with regard to the availability of the cargo volume before proposing more projects.

Idle berths

At present, on an average around 30 per cent of berths in Kandla are idle. Tuna-Tekra project, which had already been commissioned, is waiting for the vessels. They have capacity of 14 million tonnes (mt) on four berths, but thus far handled only one vessel of 70,000 mts, he said.

Kandla Port handled 93 mt of cargo in 2012-13, but declined to 87 mt in 2013-14. This port should be able to handle at least 87 mt cargo during this year. Kandla Port lost 5-6 mt of cargo despite a growth in the liquid cargo, Mr Mansukhani observed.

Though the service providers at Kandla Port were aggressive in marketing, it has limitations to offer discount out of their nominal profits.

Since private ports have enough profit, they can afford to offer discount while in the case of Kandla Port, it is not possible and, therefore, vessels are being diverted from Kandla.

Low draught

Another drawback with Kandla Port was low draught. Though it has a draught of 13 metres in channel and vessels can enter the channel, it cannot berth as highest draught on berth nos 7-10 was just 12 metres, but other neighbouring private ports have draughts of 16.5 metres to 18.5 metres. Vessels such as Panamax (arrival draught 14.5 mts), Mini Cape (arrival draught 16.5 mts) and Capesize vessel with 1,60,000 mts were arriving and directly berthing in these port terminals, he said.

Kandla Port needs berths to discharge 5 mt of cargo from barges arriving at 3.5 metres draught and, therefore, these six berths very well could handle small size of Handymax vessels and barges. By increasing the draught of these six berths, 30 per cent, vessels arriving at less than 10 metres draught would also be able to berth at 14 metres. Kandla Port not only needed higher draught berths but also 30 per cent berths of less than 10 metres draft.

Higher handling cost

Another serious problem at Kandla Port was the handling cost, which was very high due to unwanted wasteful expenses incurred in operation without any use.

The Port has made mandatory booking of notional gang of 12 labourers and charging Rs 26,000 per gang per shift for operating one crane. Stevedores operate 4 cranes paying Rs 10,400 per shift, which comes to almost Rs 3,12,000 per day!

Mandatory booking of notional gangs and charges recovered was a violation of the general guideline issued by the Supreme Court. The apex court has held in one of its judgments that no government, semi-government or private person can recover the charges for the services not rendered.

The court ruled that Major Ports should charge only for services provided for then and no notional booking of labour and other similar notional charges would be permitted.

Railway lines

He further said that though the Port had invested more than Rs 100 crore on railway lines, not even a single rake was being loaded. These lines were either not required, or were defective and the Railways does not agree to keep any rake on these lines from safety point of view.

The Railways suggested that in case if Kandla Port shifts KDLP station inside the port at end point of B/12 and installs two motion weighbridges and request the Railways to notify new location of KDLP station, freight will be charged for the distance between this new point which is about 5 km more from users, then the railway siding charges will not be applicable.

Port officers

Mr Mansukhani said that Port officers should be trade-friendly and help the users to economise their total logistics costs and should not be rigid and force them to discharge cargo compulsory on Port berths when berths are idle and restrict them discharging in stream.

Many traders need to supply part cargo to Kandla and part to any other ports. Since Kandla Port was always congested, they used to discharge first parcel at outer anchorage of Kandla in two days and sailed from anchorage but now since maximum times, the berths are free, the Port does not permit them to discharge in barges and made compulsory to come alongside berths for discharge part cargo.

Since vessels are of bigger size with more GRT, they will have to pay pilotage and berth hire charges amounting to Rs 30 to 40 lakh which was not taken in costing while fixing the vessel but had to pay to Port. Hence, the benefit of chartering bigger vessel would be lost. Therefore, the importers have stopped calling two port discharge vessels in Kandla and now use the neighbouring anchorage port.

PPP model terminals

Public-Private Partnership (PPP) model terminals are successful all over the world and also in India, but failed in Kandla Port because of its failure to depend on consultants. These consultants are professionals who prepare attractive project reports without having basic knowledge. They make the imaginary income calculation to the operator by calculating gross revenue received from tonnage as per the capacity of the terminal but do not check from stakeholders whether the project can generate cargo volume, or whether rates are affordable to users and whether rates proposed by the Port and approved by TAMP are competitive.

Users happily pay higher tariff than at the neighbouring ports as they had facility of direct berthing of Capesize vessels where they were saving 50 per cent of the ocean freight. Users also prefer ports having shorter distance to origin and destination of cargo.

Two of the newly-built private ports had taken over 20 mt of cargo volume from Madhya Pradesh, South Gujarat, Maharashtra, Udaipur belt of Rajasthan, which till last year were handled by Kandla and Mundra ports because of saving in freight due to shorter distance.

Though the cargo handling charges at some of these private ports were higher than Kandla Port, users divert cargo to these ports because they save Rs 300 per tonne from road and rail freight.

In future, no bank will finance successful bidders of PPP model in Kandla Port because they don’t have confidence in Kandla Port’s projects, Mr Mansukhani told the KPT Chairman.

He said that Kandla Port should at least now realise that no bidder would come for container terminal operation as failure of all PPP models has brought bad reputation.

Mr Mansukhani suggested that Kandla Port should permit PPP model berth nos 13 and 15 to handle containers along with dry cargoes.

All PPP model port projects of the Gujarat Maritime Board (GMB) were successful because the Board was not expecting revenue share from these projects nor it makes any investment in dredging and rail/road connectivity.

GMB collects only royalty at the rate of Rs 10 per tonne on total cargo handled and leave terminals to make their own profits by fixing their own tariffs while in the present case, Kandla Port management became partner and signed concession agreements, takes responsibility for dredging, commitment of providing 13 metres assured draught, and rail connectivity to the nearest point and also road connectivity.

The Port recovered royalty of Rs 5 crore yearly from the project in the name of waterfront and lease of marsh land under water and MGT for cargo handling of 2 mt.

If the terminal succeeded in generating 2 mt of cargo in a year, their per tonne cost of waterfront charges would be Rs 25 per tonne and proportionally more/less depending on the volume of cargo generated. Kandla Port was also to receive share from cargo handling, berth hire charges and storage charges. Storage charges were fixed very high at Rs 12 per tonne per day after free period of 5 days for these terminals while storage charges of Tuna-Tekra was fixed at Rs 2 per tonne per day.

TAMP-notified rates for handling dry bulk cargo for discharge of the vessel, transportation from landing point to back-up area and delivery to importers into their trucks, including five days free period was fixed at Rs 190 per tonne. The regulator also fixed berth hire charges five times of Kandla Port berth hire and storage charges at Rs 12 per tonne per day, which was very high.

The Port receives 32 per cent of gross revenue share from B/13. The Tamp-notified tariff of B/13 for cargo handling was fixed at Rs 190 per tonne so Kandla Port was to receive Rs 60.80 per tonne for cargo handling operation.

An operator has to share Rs 60.80 per tonne with Kandla Port for cargo handling and also share Rs 25 per tonne for waterfront charges of Rs 5 crore. Tamp-notified rates were only Rs 190 per tonne in cargo handling so after sharing with Kandla Port, the operator is hardly left with any profit from cargo handling while he does not make any profit out of berth hire charges and storage charges so the operator does not have any surplus with him.

The operator had invested Rs 140 to 150 crore on construction of berth, back-up area, covered and open storage godowns and spent another Rs 60 crore to purchase two mobile harbour cranes which makes the total investment of not less than Rs 200 crore for each terminal. Since these projects are on BOT terms, the operator has to depreciate total investment and hand over the terminal to port free of cost so he, as a businessman, has to recover total cost of Rs 200 to 210 crore to make some profit.

Mr Mansukhani said that he had tried to explain the costing to Port officers, but they were not responsive.

“We are really worried about the development of the Port and feel sorry that investment was made but failed which is not good for the Port as well as township nor good for the Indian economy as bank’s finance is lost and now accounts will be NPA”, he said.

He suggested Mr Parmar to take decision on declaring four PPP model terminals on six available berths 1-6. The quay length of these six berths was 1,050 meters so 260 meters length of berth should be allotted to each of the four terminals.

Mr Mansukhani said that tender be floated on the following bases so that the Port should receive revenue share fixed per tonne of cargo handled on each of the terminal from shallow draught vessels and/or barges, MGT for each terminal should be fixed for 2 million tonnes for tonnage handled from ships or barges, including tonnage of containers, operator should be permitted to handle dry bulk, break-bulk and containers on this terminal. They should be permitted to handle containers through barges by using terminal jetty for barge operation and floating crane in stream to transfer containers from barges to vessel and vice versa, no separate royalty should be given for mobile cranes and floating cranes used for containers loading on to vessels and barges, terminal should be responsible for the maintenance of the jetty and dredging on the jetty, if any bidder quotes for the existing portion of berth no. 6, which was completely damaged, he would revive the same at his own cost, the Port should handle the operator and the lease period should be of 30 years.

During 2014-15, Kandla Port handled minimum 5 million tonnes of dry bulk cargo like coal and iron ore/pallets by using floating cranes and barges and the Port opened up for handling Capesize vessels up to 2,00,000 tonnes cargo. Kandla Port handled 1,80,000 tonnes from one of the vessels at outer anchorage, while the neighbouring private port cannot handle vessel beyond 18.5 metres so maximum can berth and discharge vessel of 1,65,000 mts.

The Kandla Port should encourage and facilitate barge operation for dry bulk and containers too. Containers were handled in fair weather at anchorage in China, Holland, Europe, the US and Hong Kong but never made attempt to handle in mid-sea in India. Kandla totally lost container business and now we propose to forget terminal and permit users to do marketing for handling containers conventionally on all berths as well as PPP model berths which failed to generate cargo volume.

Build basin connected by canal with sea

He suggested that the Port should build basin connected by canal with sea for navigation of barges. Back-up area of the basin be allotted to waterfront-based industries using imported raw material and coal.

Since Kandla is the largest timber market, logs were imported and there were large number of saw mills around the area who import about 5 mt timber in break-bulk and containers.

If they have waterfront, they can bring logs in barges and save huge logistics costs and can develop furniture making in Kandla.

The Kandla Port should be liberal in providing land to these industries at reasonable rates as industries requiring hundred acres of land cannot pay equal to small plots the Port auctioned in the past, making basic price of previous tenders as benchmark.

Mr Mansukhani requested the KPT chief to examine his suggestion and, if possible, arrange a debate in the next meeting of stakeholders and implement the same if found useful for Kandla Port and the country.

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This post was written by Atlantic Admin