After covering several major ports, we started scouting for a private port for our current edition. After all, private ports have been found making much noise of late, with many of them indulging in self-praise about their operational efficiencies, technological superiority and contribution to India’s foreign trade. In this regard, following a lot of deliberation, we zeroed-in on Essar Port’s first deep draft bulk terminal – Essar Bulk Terminal Ltd. (EBTL) – at Hazira, which we learnt, was fighting a peculiar enemy

Sisir Pradhan | @TheDollarBiz

Spread over 6,000 hectares, the Hazira industrial hub is a barren piece of land and houses hundreds of small, mid and large scale industries. By late evening, it gets deserted as almost everyone working here head back to Surat, located 30 km away, and all one can see is a beeline of cargo trucks. Since there’s no real human habitat in Hazira, finding even the basics – like a bottle of drinking water – is a challenge for an outsider. But what’s unique about Hazira is that several of the large industries located here have their own captive ports, the biggest deep harbour one being the EBTL. EBTL is a 30 million metric tonne (MMT) per annum, all-weather, deep draft, dry bulk terminal and was setup in 2006, to serve as a captive port for Essar Steel. The terminal’s dry bulk cargo capacity is one of the highest in the country and is equipped to handle all types of bulk cargoes like iron ore, coal, lime stone and break bulk cargoes like pipes, coils and project cargo. EBTL also has a 25-year concession agreement with Gujarat Maritime Board (GMB), effective till April 2035, which makes operating the port very lucrative. As of today, EBTL operates out of a 550 meter jetty, which was commissioned in May 2010. Speaking to The Dollar Business, EBTL CEO Capt. Subhas Das said, “Through dredging, we have reclaimed a large back up area for the port, which will help us add another 1,100 meter berth in the near future.” It’s worth noting that EBTL has received environmental clearance to construct 4.8 km length of berth(s) in total.  

 Ready user EBTL is a fully mechanised facility and with a draft of 14 meters, can accommodate any vessel up to 300 meter LOA (Length Overall). It primarily serves Essar Steel, which is, with a capacity of 10 MMTPA, the world’s fourth largest flat steel making complex and India’s largest exporter of flat products. The Port has its own dredgers to maintain channel depth. It also has a cargo handling storage area, spread over 38 hectares and is equipped with three ship unloaders, with 2,500 tonne/hour capacity each, that discharge cargo through conveyor belts directly to the storage area. The terminal also has four mobile harbour cranes – two each with 80 MT and 140 MT capacities and boasts of other equipment like trailers and forklifts of various capacities. Interestingly, though the terminal mostly handles bulk cargo, the entire area, in and around it, is very clean, with very good security measures in place. It’s worth noting that all customs related clearances at EBTL come under the jurisdiction of Surat Customs.

Made for trade While driving from Surat to Hazira, one passes through several textile markets that can easily dwarf the biggest of shopping malls in terms of size, volume and number of visitors. The Gem and Jewellery Park is another eye catcher on the way. Closer to EBTL, one is welcomed by a rich concentration of heavy industries owned by KRIBHCO, Reliance, L&T, NTPC, ONGC, GAIL, GSPC, ABG and UltraTech Cement. Each of them, spread over acres of land, are either port-based or those that use LNG as the basic fuel.

Unique model

The journey of Hazira’s love affair with ports started in the mid-1990s. Following liberalisation, there were expectations that the country’s exim trade would grow by leaps and bounds. In a bid to tap the vast hinterland of North India, the then Gujarat government came up with a Port Policy in December 1995, since the GMB did not have enough port infrastructure to handle large vessels and specialised and container cargo. To enable this, the state government encouraged private players to invest in port and port-based industries and leased out its water-front to private operators to develop port infrastructure under various public-private-partnerships (PPPs) like Private/Joint Sector Ports, Private Jetties, Captive Port Terminals and GMB Ports/GMB Jetties. Under the captive jetty model, several companies created port facilities for themselves to import raw material and export finished products. As a result, GMB, today, has 40 ports, including 11 intermediate and 29 minor ports. A majority of these minor ports are lighterage ports, capable of only handling smaller vessels or barges. At the same time, GMB had identified 10 greenfield sites for the development of deep draft ports to accommodate bigger vessels. In 1997, GMB floated a global tender for the development of green field port facilities in Gujarat, including Hazira. Royal Dutch/Shell Group-led Hazira Port Private Limited signed the Concession Agreement with GMB in April 2002. Later, in January 2003, the Central government okayed Shell’s FDI proposal and hence started Hazira’s relationship with ports, most of which are owned by private players. “All the captive jetties at Hazira come under the administrative control of GMB’s Magdalla Port, where these captive berths pay the port related charges to GMB,” Magdalla Group of Ports’ Port Officer Capt. Kuldeep Singh told The Dollar Business. Magdalla Ports’ jurisdiction also includes 20 industrial parks, which house around 41,905 industrial units, four Special Economic Zones (SEZs) and one Special Investment Region (SIR). Singh added, “The state government signed agreements with various private players for the development of ports and jetties along the coastline. From amongst the identified locations, Hazira was earmarked as an industrial port to be entirely developed by private players on Built-Operate-Maintain and Transfer basis.” Some of the other operational captive jetty operators in Hazira include the ones operated by Reliance Industries and Gujarat Ambuja Cement.

 Rock and a hard place

The biggest risk for EBTL is that it is entirely dependent on Essar Steel for revenue. And given that steel is a very cyclical commodity, it urgently needs to tap other customers to hedge itself, something which the state government is yet to give a nod to. EBTL CEO Subhas Das is optimistic though. “We are pursuing Gujarat Maritime Board to allow third parties to use our port facilities and also develop future terminals as multi-user commercial port,” he said. When The Dollar Business tried to figure out the reason(s) for the delay, Capt. Kuldeep Singh said, “We had an agreement for captive use by them. Now since they want to open it for third parties, they have to be a bit patient.”  

 It’s worth noting that Hazira LNG & Port – the first private commercial port to get an approval in Hazira – had signed a sub-concession agreement with Adani Group’s Adani Hazira Port Pvt. Ltd. (AHPPL) and GMB for development of a non-LNG cargo facility. Following an investment of Rs.2,500 crore, AHPPL now has five commercially operational berths in Hazira. In terms of infrastructure too, AHPPL is quite advanced, with two dedicated container berths, one coal handling berth and two berths, with facilities to handle multi-purpose cargo from vessels of sizes ranging from 80,000 DWT to 150,000 DWT. Some industry insiders claim since EBTL will be a direct competition to AHPPL, the chances of it getting the nod for third party usage, in the near future, is low, particularly given the political clout of the Adani Group. Validating such fears, Capt. Gourab Nandi, Head, Marine Services, AHPPL, told The Dollar Business, “EBTL is very unlikely to get the approval from GMB. We have invested heavily in our Hazira project. Hence, if another port comes up in such close vicinity, it will be difficult for us to survive.” Not the way forward

When The Dollar Business contacted Gujarat Infrastructure Development Board General Manager (Port and Harbour Planning) Swati Buch to figure out if there is a no-competition clause in GMB’s agreement with AHPPL, which is acting as a hurdle in giving an approval to EBTL, she said, “There is no such competition agreement between GMB and private players. But there are certain clauses that are mentioned in individual agreements that need to be followed.” It’s worth noting that EBTL has expanded its terminal into a deep water terminal as per its agreement with the Gujarat government in 2011. And now that there’s a slowdown in the global steel market and Essar Steel is operating at 30-40% utilisation levels, the terminal is turning out to be nothing but a white elephant. And given that several minor ports under GMB are handling single-digit MMT cargo per year, which has made even maintaining them difficult, AHPPL having a monopoly on the Hazira coastline is the last thing the industrial hub needs.