BMI View: The primary issue in Indian shipping continues to be the state of the nation's ports. Investment in the 12 major state-run facilities has not kept up with the demand engendered by rapid economic growth experienced in India over the past decade. This is leading to repeated issues of congestion at port s. I nvestment is now starting to be made, but t his may be a case of too little too late. Further more , plans to push ahead with the privatisation of the state-run facilities will likely see mass strikes in the sector in 2015. Although we believe the move is necessary in order to compete in the long-run, in the short term the privatisation will likely see throughput lost to private ports.
Headline Industry Data
2015/16 (ending March 2016) port of Kandla tonnage throughput forecast to grow by 1.8%. Over the medium-term forecast period to 2019/20, growth will average 2.3%.
2015/16 port of Jawaharlal Nehru container throughput forecast to grow by 3.0%. Growth to average 2.5% per annum to 2019/20.
2015/16 trade real growth forecast at 8.7%, and to average 8.4% to 2019/20.
Key Industry Trends
Adani Sole Bidder For Vizhinjam Port: Multi-port operator Adani Ports and Special Economic Zone (APSEZ) is the sole bidder for the Vizhinjam International Deepwater Multipurpose Seaport container terminal in Thiruvananthapuram, Kerala, India. APSEZ became the only bidder after the other two shortlisted teams did not submit any final bid for the project. The public-private partnership involves construction of a container transhipment terminal, with initial capacity to load 600,000 twenty foot equivalent units (TEUs) annually. The terminal capacity can be increased to 1mn TEUs, depending on demand. The terminal will provide a quay length of 2,000m in three phases. The project is estimated to cost INR40.9bn (USD721mn). The terminal will be developed on a design, build, finance, operate and transfer basis under a 40-year contract. The contract has the option to be extended by an additional 20 years. India is following a model whereby its ports are increasingly operated by private companies.
Pushing Ahead With Privatisation: The Indian government appears determined to push ahead with plans to corporatise the 12 major state-run ports. The plan will see them transmute from the current trustee model under which they operate into companies. It is hoped that this privatisation will enable the ports to compete more effectively with the raft of new ports that have been developed by private operators in recent years, and which have grown at a faster rate than the state-run facilities. Pipavav is a case in point.
However, the plan is coming up against stiff opposition from the unions, which fear that moving from a trustee model will result in a loss of jobs, and harm pension interests. The unions argue that more flexibility can be introduced to the ports' operations through amending the Major Ports Trusts Act that governs them, rather than opting for privatisation. Workers across India's largest ports may go on an indefinite strike from March 9, against the central government's plans. The corporatisation of major ports is against the interest of workers, according to all-India General Secretary of Water Transport Workers' Federation of India, Narendra Rao, who added that such a move by the government would put the futures of 55,000 direct employees at risk. The strike would lead to a loss of INR650mn (USD10.52mn) per day, according to Rao.
Milaha Introduces Direct Container Service To India: Qatar-based Milaha Maritime and Logistics, a subsidiary of the Milaha Group, has introduced the first direct container service between Qatar and India. The move aims to further enhance bilateral trade, which has registered significant growth in recent years. The non-stop weekly service will link Qatar's Doha port with India's Jawaharlal Nehru Port in Mumbai, in the state of Maharashtra. The direct service will help to increase reliability and decrease travelling time and costs, as shipments will not have to be transported via the UAE's Jebel Ali port.
Key Risks To Outlook
The key risk to our medium-term throughput forecasts for India's ports continues to be the problem of congestion at the state-run major ports. Any further bans on dusty cargos at major ports, or an extension of the ban on mining in India, would also impact our outlook. Industrial action has also proved a problem, with container lines imposing congestion surcharges on facilities as workers have gone on strike. Signs that JNPT's fourth terminal is moving forward are positive.
In the short-term, another pronounced sell-off of the rupee could impact Indian imports, but the greater effect would be to make exports more attractive, and could see greater volumes of boxes sent from Indian ports to export markets in the West.