Investment Opportunities in Ports

Investment Opportunities in Ports

Port is an integral part of an infrastructure. Government is trying hard to develop world class ports by ensuring both private and public participation. Government of India is planning to invest billions of dollars in this sector to built new ports and enhance the capacity of the existing ones.


Facts and Figure

• As compared to 2003 -04, Indian ports had handle cargo of 510 million tonnes in 2004-05, 10.8% increase over the previous year.
• Out of total port traffic, 80% by volume is dry and liquid bulk whereas remaining 20% is general cargo, including containers
• Containerized cargo is growing at a faster rate. Over the last five years, it has grown at a rate of 15% p.a.
• India has long coastline of 7517 km catering 12 Major Ports and 185 Minor Ports.
• Out of total traffic, major ports handle 75% of the total traffic. Over last 3 years, cargo handled by Major Ports has increased by 9.5% p.a.
• 11 ports of the 12 major ports, run by the Port Trusts whereas, the port at Ennore is a corporation under the Central Government. The cargo handled by these ports in 2004-05 was 383 million tonnes
• For modernization of Indian ports two major projects of the Government are underway:

1. Project “Sethusamundram”: The project involves the dredging of the Palk Strait, in Southern India for facilitating maritime trade through it
2. Project “Sagarmala”: This is a $22 billion project to modernize the Major and Minor Ports
   Structure

• Initially it was the Government of India that take care of everything about ports. However as a major policy shift, government is now involving private players in this venture.
• Government has also invited International port operators to submit competitive bid for BOT terminals on a revenue share basis
• Many foreign players have invested in port development and operations, on BOT basis. Some of the major foreign players are Maersk (JNPT, Mumbai) and P & O Ports (JNPT, Mumbai and Chennai), Dubai Ports International (Cochin and Vishakhapatnam) and PSA Singapore (Tuticorin)
• Domestic and international private investors are developing the minor ports. Some of the players are: Pipavav Port by Maersk, Mundra Port by Adani Group (with a terminal operated by P & O)
  

Government Policy
Government has announced following policy regarding port development and for ensuring participation.

• 100% FDI has been allowed under the automatic route for port development projects
  As tax benefits government has also allowed 100% income tax exemption for a period of 10 years
• The ceiling for tariffs charged by Major ports/port operators is regulated by Tariff Authority of Major Ports (TAMP). This is however not applicable to minor ports.
• Government has also formulated a comprehensive National Maritime Development Policy for facilitating private investment, improve service quality and promote competitiveness
  

Investment Opportunity and Potential

1. There is a huge investment potential in the Indian ports sector. It is projected that cargo handling at all the ports will grow at 7.7% p.a. till 2013-14. Minor ports will however grow by much higher rate of 8.5% as compared to 7.4% for the Major ports
2. According to Government reports, by 2013-14 port traffic will increased by 960 million tonnes Containerized cargo, it is expected would grow at 17.3% over the next 9 years
3. New Foreign Trade Policy of India envisage to double India’s share in global exports in next five years to $150 billion
4. 95% of trade by volume and 70% by value will be through the maritime route
5. There is need to address requirement of merchandise trade that is expected to grow over 13% p.a
6. Under National Maritime Development Program (NMDP) to boost infrastructure at these ports in the next nine years the total investment needed is $13.5 billion
7. NMDP has identified nearly 219 projects for the development of Major ports
8. Private players have envisaged to invest 64% of the proposed investment in Major ports

Government is also planning to enhance an additional port handling capacity of 530 MMTA in Major Ports through:

• Port development Projects (construction of jetties, berths etc.)
• Up-gradation of port equipment
• Deepening of channels to improve draft
• Projects improving port connectivity
• For minor port improvement total investment needed is $4.5 billion