Born out of necessity to replace Karachi Port, which went to Pakistan at the time of partition, and ease the load on Mumbai Port, Kandla went on to become India’s No.1 port really fast. And it well deserved the honour. From a safe geographical location to the proximity to a commercially vibrant region, from “Priority” status to a state-of-the-art infrastructure, it has all what it requires to stay on top. Despite all this, critics claim that all’s not well at Kandla. Its biggest competition lies just 60 km south west – Mundra Port, which has recently overtaken it as India’s biggest commercial port. Can Kandla reclaim its lost glory? 

Sisir Kumar Pradhan | @TheDollarBiz

 

Gandhidham, a small town located in the Kutch district of Gujarat, about 810 km from the country’s financial capital Mumbai was created soon after the partition of India to accommodate refugees from Sindh, Pakistan. The extreme climatic conditions of the region can be gauged from the fact that its population density is just 46 per sq km as compared to 416 per sq km for India as a whole. However, the region is commercially very vibrant and is one of the top investment destinations in Gujarat. With Kandla Port – one of the country’s biggest cargo ports – next door, the city has become a testimony to the kind of impact a port can have on a region. No wonder, most major businesses in the town are related to the shipping trade.

A view of Kandla Port’s entry gates: Despite recent problems, Kandla is still India’s No.1 ‘major port’ in terms of cargo-handling

 

It’s in the genes

Another major strength of the town is its large Sindhi population. Founder and owner of Rishi Shipping, a shipping company with an annual turnover of Rs.300 crore, B. K. Mansukhani is one proud member of this enterprising community. Speaking to The Dollar Business this 70-year old shipping industry veteran says, “I was three years old when my family  migrated to Ajmer from Pakistan. I came here to earn a living and took up my first job as a teacher at a salary of Rs.100 per month.” In 1976 his life took a turn for the better when one of his student’s father, who was Traffic Manager at Kandla Port, advised him to trade leftover scrap of cargo ships. One day, he casually approached the captain of a ship and bought some metal drums. “I earned a profit of Rs.21,000 – close to 20 years’ salary – after selling them to a scrap dealer,” he chuckles.

Containers being loaded on Bulk Monaco, a 39,737 gross tonnage ship registered in Panama, at Kandla Port. KPT has floated a tender and invited bids to operate the container terminal

In fact, like Mansukhani, there are several first generation entrepreneurs in the region who have scripted their own success stories in port-related trades.

 

Partition pang

The history of Kandla Port goes back to the pre-independence era. The ruler of the princely state of Kutch, Maharao Khengarji III, in 1930, initiated the construction of a deep draft port for his kingdom and the port was commissioned in 1931. However, Kandla Port’s real glory days started post independence. Following partition, Karachi Port that used to serve the vast hinterlands of North and West India, went to Pakistan. Hence, the Indian government constituted the West Coast Major Port Development Committee, on February 17, 1948, to scout for locations to construct a deep sea port, which could act as a replacement to the Karachi Port. As a result of the committee’s recommendations, the Kandla Port was developed and inaugurated in 1964. The Port is situated in the Kandla creek, 90 km from the mouth of the Gulf of Kutch. This makes it one of the safest during cyclones and tidal disturbances.

 

Never deterred 

The Kandla Port Trust (KPT) caters to a vast hinterland of 11 states, spread across 1 million square kilometre. The region attracts people from all over the country, giving it a cosmopolitan look – the primary reason why there has never been a major labour unrest at the port. However, the deadly earthquake of 2001 disrupted its smooth journey. Post the quake, the Centre announced the ‘Incentive Scheme 2001’ to attract new industries and large investments to the district. Recalling the devastating quake, Ranuj Yadav, who owns a small saloon in Gandhidham, tells The Dollar Business, “There was little left in the region. Most buildings which had more than two floors collapsed.” Adds Nandu Bhai, a tour operator, as he tells the magazine, “We suffered a lot due to the quake. But with the government declaring a tax holiday to help the rebuilding exercise, massive investment poured in.”

Kutch is also home to Asia’s first Special Economic Zone (SEZ). Established in 1965, the The Port of Kandla SEZ is the biggest multiple-product SEZ in the country and was benefitted in a massive way when the new SEZ scheme was introduced in the Export & Import Policy 2000. Stressing on the importance of the Port on the socio-economic growth of the region, The Gandhidham Chamber of Commerce and Industry Joint Secretary Aashish S. Joshi tells The Dollar Business, “All economic activities in the region are directly or indirectly associated with Kandla Port. Apart from giving a boost to heavy and small industries, the Port has also spearheaded export oriented businesses in the region. It has helped the local salt, mineral, timber, hotel and fertiliser industry flourish.”

A state-of-the-art 103 tonne capacity crane commissioned via PPP at Kandla Port. PPP projects have not been as successful in Kandla as they have been elsewhere

In fact, Kandla is the epicentre of India’s timber trade. Kandla Timber Association Vice-President Sameer Garg reasons this. “The timber business requires a lot of storage space. In the late 70s, timber importers in India tried ports like Kolkata and Mumbai. But Kandla Port turned out to be the most cost effective and also convenient because of the availability of a lot of vacant land,” Garg tells The Dollar Business. He proudly adds that about 70% of India’s total timber imports are handled by Kandla.

Moreover, the 4,000 MW ultra-mega imported coal and super-critical technology based power plant by Coastal Gujarat Power Ltd. also uses the port to import coal. Indian Farmers Fertiliser Cooperative Ltd. too uses Kandla as a gateway port. However, the main reason why Kandla continues to be India’s preferred port is the ‘Priority Port’ status that has been accorded to it for LNG, coal, petroleum and fertiliser imports. 

 

Roadblocks

Despite necessary ecosystem being in place, all is not well at KPT. Its biggest competition lies just 60 km south west. Adani group-controlled Mundra Port has now overtaken KPT and has become India’s largest port in terms of cargo handling. The flagship port of Adani Ports and SEZ (APSEZL), Mundra be came the first Indian port to handle 100 million metric tonnes (MMT) in a year after it crossed the mark in FY2014. As compared to this, KPT handled about 87 MMT during the period. At the same time, of the 87 MMT that KPT claims to have handled, a significant share was accounted for by KPT’s satellite port Vadinar. It’s worth mentioning that Vadinar handles liquid petroleum products and is managed by Essar Ports.

A wide-angle view of state-of-the-art heavy duty ELL wharf cranes commissioned at Kandla Port

According to a Ministry of Shipping report, Kandla not only missed its target of 95 MMT but also recorded a fall of 7.1% in cargo handled in FY2014. The reason why KPT officials and other stakeholders should be very worried is the mushrooming of minor and intermediate ports all over Gujarat’s coast, which are growing at a frantic pace. For instance, in FY1999, while KPT handled 40.6 MMT cargo, all intermediate and minor ports in Gujarat, put together, handled just 25.1 MMT. This ratio has turned upside down in the last 15 years. Interestingly, in FY2014, minor and intermediate ports in Gujarat handled close to four times of what Kandla handled during the year!

Limited draft is another obstacle to the Port’s growth. KPT is a tidal port and ship movement is possible only during high tide. The Port has a draft of about 12.5 meter, which limits the entry of bigger vessels. On the other hand, Mundra, being a deep sea port, has no such issues. Mansukhani blames slow decision making, lack of pro-activeness, and faulty PPP (public-private-partnership) and BOT (build–operate–transfer) models for the Port’s recent poor show.

Another Kandla stakeholder Gyan Singhvi, Director of Singhvi Tradelink, a company that uses Kandla Port for exporting its products tells The Dollar Business, “The major problem with KPT is that its Chairman is rarely available since he also heads the Mumbai Port. This delays decision-making.” [In fact, the day our team reached the KPT’s administrative office, most cabins were vacant. Piles of files scattered all over, made a mockery of the government’s claim of making transactions in public sector organisations paperless.] “The Port has become an orphan. Neither the trustees, nor the government is bothered about the Port’s development. Out of 15 berths, six remain idle most of the time,” laments Singhvi.

 

Newbies have arrived

Gujarat Maritime Board (GMB), which was created in 1982 to manage non-major ports in the state, currently manages 41 minor ports along Gujarat’s 1,600 km long coastline and is doing an excellent job. This has resulted in competition for Kandla and is only growing fast. While private ports like Mundra have a faster project conceptualisation and realisation process, KPT officials have to get approvals from the trustees and the Centre for even basic administrative issues.

Despite all such issues, KPT, due to its strategic location, vast hinterland and ‘Priority Port’ status, has managed to retain its No.1 rank among all major ports in India. Congestion at Mumbai Port and JNPT has also contributed to the diversion of traffic to Kandla. However, KPT shouldn’t take this for granted and needs to develop infrastructure at a much faster rate if it wants to hold on to its No.1 major port rank. “There are some people with vested interests who don’t want the Port to grow. The Port’s dependence on the Centre to make decisions has also affected its performance,” says Mansukhani of Rishi Shipping. It’s worth noting that in 2007, a report by the then KPT Chief Vigilance Officer to the Ministry of Shipping had confirmed allegations that 16,000 acres of KPT’s land had been leased away to salt manufacturers at throwaway prices.

Wharf-cranes Wheat being loaded onto a vessel with the help of ELL wharf cranes at Kandla Port. Kandla has been accorded the status of ‘Priority Port’ when it comes to grain exports

 

Back and forth

In year 2000, KPT floated a global tender and invited bids from private players to develop a container terminal on BOT basis. Post the bidding, Australian company P&O Ports got the letter of intent (LoI) since it quoted the highest bid of Rs.300 crore. However, KPT trustees rejected the offer giving a vague reason that the company’s offer was detrimental to the interests of the port. Three years later, P&O Ports acquired 100% stake in Mundra International Container Terminal, which is now the second largest container terminal in India. Hilarious!

 

In 2006, KPT once again ventured out on the container terminal mission and selected Mumbai-based ABG Infralogistics to build and operate it on BOT basis for a period of 30 years. ABG Infralogistics’ subsidiary ABG Kandla Container Terminal Limited signed a MoU with KPT on an annual revenue sharing model. However, this deal too turned sour as KPT officials accused ABG Infralogistics of failing to handle minimum guaranteed volumes of container, while ABG accused KPT of failing to meet its obligation to provide adequate draft, night navigation and rail connectivity.

Finally, in 2013, KPT took over the assets of ABG in exchange for Rs.110 crore. In its FY2013 annual report, ABG Infralogistics mentioned, “ABG Kandla Container Terminal Limited used to operate the container terminal at Kandla Port on BOT basis. It has terminated its contract with Kandla Port Trust vide its letter dated November 9, 2012 due to the failure of Kandla Port Trust in meeting its obligations as per the license agreement.”

When The Dollar Business asked KPT Chief Mechanical Engineer K. C. Kuncheria to give KPT’s side of the story, he says, “AGB had some management issues, hence the agreement was terminated.” On questioning why KPT did not conduct enough background check before allocating the project to ABG, Kuncheria was evasive. “I took over charge just two months back and hence I am not aware about the technicalities of the MoU. However, KPT has floated a fresh tender and has invited new private players to operate a container terminal of 0.6 MTU capacity,” he defends.

People queuing up to take a look at INS Gomati, a frigate of Indian Navy, docked at Kandla 

A glass half-full

Despite huge challenges, all’s not lost for KPT. The mismanagement of KPT has thrown up great opportunities for private stevedoring and cargo-handling companies, who have come up with innovative solutions. For example, the issue of Kandla having a shallow draft is now being bypassed with the use of floating cranes to load and off-load cargo from bigger vessels in the mid-sea. Speaking to The Dollar Business about such initiatives, KPT Deputy Traffic Manager P. Suresh Babu says, “We are working on improving infrastructure and the inner channels will be dredged to achieve the required draft.”

The PPP model has its own issues though. Yogendrasinh Rana, Senior Executive, RAS Infraport, which partnered with KPT to develop berth number 13 on BOT basis, feels port authorities need to be more liberal when it comes to revenue sharing. “Due to the existing revenue sharing model, our berth has become 5 times more expensive than KPT-managed berths. If KPT officials want the Port’s growth, they have to provide much more support than what they do now,” Rana tells The Dollar Business.

V. G. Sivadas, Assistant Manager of shipping agency ULA, feels congestion is the biggest issue for KPT. “Port authorities need to upgrade traffic handling capacities if they want to stop traffic moving to other ports,” he says.

The way forward

Pained by the poor state of affairs at Kandla Port and disappointed that new private ports are thriving at its cost, solutions and advices for KPT are plenty. Singhvi of Singhvi Tradelink reasons why it is foolish to write off Kandla. “There is a nexus between customs house agents, shipping agencies and container freight stations (CFS) at Mundra Port. Shipping agencies force customers to off-load cargo at a specific CFS. If the importer off-loads the cargo at his/her preferred CFS, he/she is forced to pay a rent for the used CFS and also the CFS chosen by the ship liner. This is not the case at KPT. That’s why a lot of users prefer it.” He adds if KPT can get its act together, glory days would be back again. 

The Bhuj-Kutch region has around 72 large scale and public sector units, of which 12 are located in and around Gandhidham. These units act as cargo feeders to Kandla Port. There is another reason that makes Kandla the choice of exporters and importers. “Mundra Port is 60 km from our depots in Gandhidham. This increases transportation cost by Rs.100-150/cubic metre,” reasons Garg of Kandla Timber Association.

A full-time Chairman on deck should be the right start to mending Kandla’s wrongs that have resulted in rising popularity of competitor-port Mundra amongst the trader community.

Having spent a few days in Gandhidham, despite criticisms, one cannot escape the feeling of love and respect that its residents have for Kandla. It made Gandhidham. [Know what we mean?]You can almost hear their silent prayers. If only the right gods were listening.

Coal being loaded onto trucks using a mechanised coal handler at Kandla Port