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INDIA MULLS PRIVATIZING STRESSED PUBLIC CARGO FACILITES TO REGAIN GROWTH

15th Jan 2020

Undeterred by trade union calls for a pause on privatization and other sweeping policy reforms, the Indian government is considering boosting private participation in cargo operations at major public ports where container handling is already dominated by build-operate-transfer (BOT) operators.

The move stems from a government view that some of the major ports have further room for “landlord leverage” to scale up, thereby improving capacity utilization at state-owned cargo handling facilities that have suffered steady volume declines and are caught up in a growth quagmire.

The new roadmap for underutilized infrastructure at major ports was set at a recent brainstorming session the Ministry of Shipping held with various port leaders to review the latest performance and identify measures to bolster port growth.

India has 12 federal government-owned gateway ports dotting its east and west coasts, which together handle approximately 60 percent of the country’s containerized trade. With the exception of the Ennore Port (renamed Kamarajar), near Chennai, major port trusts widely follow a hybrid business model — providing cargo services themselves and secondly, acting as landlords to private concessionaires. Ennore is governed by a board of directors, akin to a typical corporate entity. A few years ago, the government put forward a new draft law to restructure all major port entities with greater operational autonomy, but that legislation has yet to be enacted.

There are approximately 270 cargo berths across these major ports, most  of which are state-owned and designed for general cargo operations. There are 34 container handling berths, with Jawaharlal Nehru Port Trust (JNPT) hosting 11 — eight operated by private concessionaires and three, including a shallow draft facility, run by the port authority.

At the review meeting, JNPT officials noted increasing competitive challenges from private operators — led by APM Terminals, DP World, and PSA International — caused a dire situation for its two main port-owned cargo berths and that all efforts to regain growth proved futile.

Considering those submissions, the ministry gave JNPT the provisional green light to move ahead with its plan to seek BOT operators for its stressed cargo berths, while calling on other port leaders to do likewise to monetize similar underperforming assets, industry sources told JOC.com.  An official announcement to that effect is expected in the coming days.

Source: JOC

INDIA MULLS PRIVATIZING STRESSED PUBLIC CARGO FACILITES TO REGAIN GROWTH
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