It’s the second-oldest major port of the country and one that truly made Mumbai the Gateway of India. However, constrained by congestion in the ‘Maximum City’, the port has lost its pre-eminent position to the neighbouring JNPT. Although recent developments at the port signal a revival, the big question is: Will Mumbai Port return to living its popular days again?
Sisir Pradhan | February 2016 Issue | The Dollar Business
Mumbai, which today boasts of being one of the most influential megacities across the globe and serves as the financial capital of India, was once nothing but a group of scattered islands housing communities of fishermen. And, not surprisingly, the trade was negligible. It was the British who first recognised the locational advantage of the region (home to a natural deep-water harbour and the area was perhaps immune to land attacks) and got hold of its reins from the Portuguese in 1661, as part of a marriage treaty. Soon after, development of India’s second-oldest major port began. This resulted in a spurt in trade through the region. However, it was the opening of the Suez Canal in 1869 that revolutionised the maritime trade through the port. The reason was simple – Suez Canal shortened the distance (via sea route) between India and the West, and Mumbai Port became the most important gateway of India. A few years later, in 1873, Bombay Port Trust was formed to look after the overall administration and operations of the port. And the rest as they say, is history!
The port was originally conceived to handle general cargo and most of the development work at the port was done prior to independence, which includes Victoria Dock with 15 berths, two dry docks, Alexandra Dock (later renamed as Indira Dock) with 20 berths, a passenger berth, the port’s own rail network and a liquid handling terminal at Pir Pau.
The port has been through many ups and downs and today holds an aspirational value for Mumbaikars. In a real estate starved city like Mumbai, the grandeur and the history of the port is like a fairy tale that every denizen of this ‘City of Dreams’ would love to live and experience. Be it the 1,800 acre land bank or the sheer size of office space at the heart of South Mumbai or even the 1918-built Chairman’s official bungalow, which even the richest and mightiest can’t afford. The administrative building from where the Port Chairman operates completes 125 years in 2016.
Well before the 1990s, when India liberalised its economy, the port was an important source of business and employment. What’s more? Dozens of Bollywood movies have been created around the activities at the dock, trade unions, gangs, and the ubiquitous smuggling. Though the port is no more as frequently in the news as it used to be, it continues to be an important contributor to the region’s trade and commerce.
Considering Mumbai’s adverse traffic conditions, the port has restricted its road and rail-based cargo movement and is focusing on developing captive jetties and augmenting liquid cargo handling capacity where petroleum, oil & lubricants (POL) and other liquid or chemical products can be transacted from terminal to end user through a piped network. The port is also developing its second liquid chemical berth off Pir Pau with an investment of Rs.126 crore. The new berth will have a handling capacity of 2.5 million tonne and is likely to be commissioned soon. This will help reduce congestion and increase chemical handling capacity, in turn boosting port’s business.
The port is also looking forward to award two new projects. One, a 22 million tonne fifth oil jetty to be developed at an investment of Rs.815 crore. And second, a 5 million tonne liquid re-gasification handling terminal which is already in the second stage of bidding. The two projects have been very carefully chosen so that the port’s cargo volume increases without adding any traffic to the city roads.
When it comes to existing infrastructure, the Indira Dock at the port has 27 berths, which can handle cargo of different profiles such as multi-purpose cargo, containers, general cargo tanker, bulk, food grain and fertiliser. While the port’s Ballard Pier Station has facilities to handle containers, Ballard Pier Extension can handle cargo as well as passenger ships. Further, there are four jetties at Jawahar Dweep terminal to handle crude oil and petroleum products and two jetties at Pir Pau terminal to handle POL and chemicals. However, the port fares poorly in terms of mechanised cargo handling facility. It still carries out cargo handling operations with the help of 4 mobile cranes, 1 tower crane, 25 fork lifts of various capacities ranging from 1 to 16 tonne, 8 electric level luffing and 3 wharf cranes, as against conveyor belts being used for handling incoming and outgoing cargo in other major ports. In terms of storage, the port stands at par with its peers. While Indira Dock has 12 transit sheds spread over an area of 76,740 sq. m., Victoria Dock has sheds spread across 2,602 sq. m. Apartfrom this, the port houses six warehouses spread across 25,007 sq. m. The port, however, has no covered storage for containers.
The port, which once brought the island city to the forefront of global maritime trade and fuelled the city’s growth to become an epicentre of economic activity, has become a victim of its own success. For any port, connectivity holds the key to success and growth. But the heavy traffic of the metropolis has choked the roads to the port, as a result of which the Mumbai Port Trust had to restrict movement of road traffic from and to the port. Similarly, on the rail connectivity side, the port has been given a window of a few hours in the night between 11 pm and 5 am to transfer its cargo. Though the port has started developing a dedicated rail freight corridor between Wadala and Kurla to bypass suburban traffic, the project has hit a stumbling block due to delay in relocation and rehabilitation of project-affected population. The scheduled timeline for the commissioning of the project is May 2016, which as of now seems a difficult target.
Keeping these in mind, the port is now focusing on developing infrastructure to handle POL and chemicals as these can be transported through pipelines, without depending on road and rail transport. To this effect, the port is developing a second chemical handling terminal off Pir Pau. However, the terminal has already missed its scheduled completion deadline of March 2015.
In a bid to limit cargo traffic, where it needs to depend on road or rail, the port is also looking at earning revenue from passenger ships and tourism. For this, the port has taken up new initiatives for development of Kanhoji Angre, an island that houses a Portuguese-built fort and a light house. Having said that, coal, POL, chemicals, steel imports (rods, plates, HR & CR coil), remain major revenue earners for the port as of now.
When it comes to performance, the port handled 61.66 million tonne of cargo in FY2015 compared to 59.18 million tonne in FY2014. While the port’s operating income rose by about Rs.95 crore to Rs.1,399.78 crore in FY2015 (compared to Rs.1,304.88 crore in FY2014), the port reported a loss of Rs.230 crore in FY2015. Interestingly, this was an improvement over the last year as it had reported a loss of Rs.360 crore in FY2014.
Workers with significant disregard for safety measures unloading steel coils at Mumbai Port.Clarifying on the financial performance, Ravi M. Parmar, Chairman, Mumbai Port Trust, says, “We have decided to clear our liability first and then pay taxes. We have a pension liability of Rs.9,200 crore, of which we have disbursed Rs. 6,500 crore. In fact, last year we disbursed Rs.500 crore towards pension. We are hopeful that the pension liability will be settled in the next 4-5 years and once that liability is over, our books will show profits and we will start paying taxes. We don’t have net profits but we do have operating profits.”
Regarding efficiency, he says, “The number of vessel calls has decreased because the parcel size of vessels is increasing. That’s why though our cargo volume has increased while the number of vessel calls has come down. The vessel turnaround time will improve drastically with the commissioning of the second chemical berth.” On a positive note, the port in FY2015 had average detention of liquid bulk vessels of 1.74 days compared to 2.88 days in FY2014. Even in terms of general cargo, the detention was 0.09 days in FY2015 against 0.14 days in FY2014. “Ports are a reflection of the state of an economy. If we check the cargo profile at Mumbai Port, there are steel imports because India has a deficiency in steel. There were almost 5 million tonne of steel imported through our port in FY2015. Similarly, there is a scarcity of coal, and therefore a surge in coal import. Last year we added a commodity to our portfolio – sugar. This year we will add another one in the form of construction sand from Philippines,” Parmar adds.
Meanwhile, one advantage for the port is its natural draft that requires no capital dredging. The port spends an average Rs.30-40 crore on maintenance dredging to maintain the channel draft. However, one of the biggest challenges for the port is to bring down its operational cost and port authorities are hopeful that it will happen in future as the port’s labour force is being pared down.
One of the biggest assets of Mumbai Port is its 1,800 acre land bank. Though most of the Indian major ports have similar land banks, the per square metre real estate price in Mumbai is one of the costliest not only in India, but in the world. This means Mumbai Port is sitting on a gold reserve which the real estate developers will jump upon to grab if they are allowed to do so. If Port Trust uses the land for port-based development it can surely make the port one of the most successful landlord ports in the country.
Mumbai Port has recently developed a large parking area for export vehicles at the custom-bonded area inside the port, called Gamadia Complex and has managed to bring down damage to vehicles to about 1% during transportation from Gamadia Complex to the shore.The port also has commercial rights over the water front off Mumbai harbour for which it levies a usage charge on those using the channel. Interestingly, Reliance Industries Ltd. has plans to develop India’s biggest port at Rewas (which is just 9.9 nautical miles south-east of Mumbai Port) and ships entering the proposed private port will have to use Mumbai Port’s water channel. Although the private port has been at loggerheads with regard to the rate of charge for use of the channel, whatever the outcome of negotiations, the upcoming port at Rewas would only mean more revenues for Mumbai Port.
As far as competition from its neighbour (JNPT) is concerned, the port officials say it was never a challenge to them as they themselves created the port. In fact, JNPT continues to pay royalty for use of the harbour channel.
While 95% of JNPT’s cargo volume is in terms of containers, Mumbai Port mostly handles bulk cargo. The cargo which comes to JNPT is almost always bound for other destinations, while the cargo that comes to Mumbai Port is meant for Mumbai and New Mumbai region. This means the two ports complement each other; they don’t compete.
Be it improved performance, net revenues or new developments, Mumbai Port seems to be gradually awakening from its slumber. Perhaps in this case, it’s really not a matter of whether it can become its former enviable self, but whether it can continue to be what it is and leave its future to luck, policy and expectations from India’s growing stake in global trade.
“Old Major Ports Have A Unionised Environment”
TDB: Besides being Chairman of the Mumbai Port Trust, you also look after Kandla Port. Could you tell us what is going on at these ports at the moment?
Ravi M. Parmar (RMP): I have been in charge of Kandla Port since January 2014 and the performance of both the ports are amongst the best in the last few years. Kandla is likely to make a record of handling 100 million tonnes of cargo this year. All the ongoing projects at the port are on time and we have also started to implement recommendations of the Boston Consulting Group (BCG) to improve efficiency of the port.
Similarly, in Mumbai, we have taken up new initiatives like development of Kanhoji Angre, one of the pioneer projects of the Port Trust. We have also conceived a new project for development of a fifth oil berth of 22 million tonne capacity, which is expected to be commissioned in FY2019-20. We have started work on a bunkering project. Mumbai Port last year handled 61.6 million tonne of cargo, which is an all-time high for the port, and by the end of FY2016 we are hopeful to handle more than 64 million tonne of cargo. Apart from these we are also working on sorting out issues related to trade and pending court matters. It is strenuous at times because of the shuttle between Mumbai and Kandla and it is more so because Kandla doesn’t have good flight connectivity.
TDB: The Ministry of Shipping says the process of evaluation is on to select a full-time Chairman for Kandla. Will you be interested to act as a full-time Chairman of Kandla Port?
RMP: The Ministry of Shipping has already shortlisted some candidates for the position, and the process to finalise on a Chairman is on. Regarding taking up full-time charge of the port, it is up to the ministry to take a call. I am at Mumbai Port on a 5-year deputation. While selecting the head of a port, various things are taken into consideration – job qualification as per job requirement, seniority, experience, the kind of assignments one has handled, the track record, cadre review, etc. Port is a specialised sector and one needs enough administrative experience to deal with various issues/agencies related to port operations like dealing with trade and worker unions, police, customs and many more agencies. Old major ports have a highly unionised environment; hence officials with experience in dealing with unions are preferred.
TDB: Mumbai houses the headquarters of most of the large corporates in the country, and it is also politically sensitive. At any point in the last two years, has there been any attempt to influence decisions?
RMP: Port Trusts are commercial organisations and their policies are very streamlined. Decisions are taken keeping commercial interests of the port in mind and as such the chances of grey areas are low. Moreover, the tariffs for various services are decided by TAMP (Tariff Authority for Major Ports). Similarly, contracts for various projects are awarded based on electronic tendering process, and it is an open competitive environment where contracts are awarded based on best market determined price.
TDB: Mumbai Port has registered an impressive growth in automobile exports. What are the steps, in terms of development of infrastructure, that have attracted automobile exporters?
RMP: Infrastructure related development has helped growth of automobile exports from the port. We have developed a large parking area for export vehicles at the custom-bonded area, called Gamadia Complex. We have invested in developing the place and making it suitable for parking of export vehicles. We also had a customer meeting with automobile manufacturers in Pune, and based on the feedback received, we have managed to bring down damages to vehicles to about 1% during transportation from Gamadia Complex to the shore.
TDB: There has been a logjam over container terminal developed by Gammon Infrastructure Projects. What is the current status of the terminal?
RMP: The facility still continues as container handling terminal, but the process of restructuring that terminal into an On-Carriage Darfur (OCD) berth is underway. We have already appointed SBI Capital as our consultant which will guide us in restructuring the project.
TDB: Coal handling at Mumbai Port has been restricted recently. How will it affect your revenue and is there any alternate plan?
RMP: Coal handling in a populated city like Mumbai is no longer feasible because of environmental issues. However, our off-shore coal handling operation will continue. We are handling about 7.5 million tonne of coal, out of which about 2.5 million tonne is transported directly from the anchorage to the Tata Power Plant jetty through barges. Despite being coal, it is a clean operation. Then there is 4.5 million tonne of coal which goes to other side of the harbour through barges. The remaining coal comes to the city side of harbour, i.e. Haji Bunder jetty and that coal is handled manually, which is why it is now the main cause of pollution in that area. Out of the coal that comes to Haji Bunder jetty, a half to a million tonne of coal belongs to MahaGenco (Maharashtra State Power Generation Company), and the remaining coal goes for trading and other activities.
We aren’t in a position to put up closed conveyor belt-based coal handling operation there as it is not cost effective – constructing a closed mechanised conveyor belt system will cost about Rs.400 crore, whereas our total income from Haji Bunder coal handling operation is about Rs.13 crore. We have requested MahaGenco to invest but they are not interested. We have also approached coal handling companies but they say there is no guarantee from MahaGenco that it will continue to bring cargo to this jetty, hence it is not possible for them to invest. Every time coal comes, MahaGenco has a tendering process to select the port of landing and they go for the cheapest port available. Because of this uncertainty of cargo guarantee – and the conditions imposed by the Maharashtra Pollution Control Board – that we can’t handle coal unless we have covered storage and a coal handling facility in place, we are left with no option but to stop coal handling operation at Haji Bunder jetty.
TDB: Mumbai is a congested city. How do you manage to transport cargo in and out of the port?
RMP: The total cargo volume at the port was about 62 million tonne in FY2014-15. Out of that, about 40 million tonne was liquid bulk cargo and went directly to refineries through pipelines. Another 8 million tonne was transhipment cargo, and so it didn’t come to city, but went to the other side of the harbour. Another 2.5 million tonne went to Tata Power jetty directly. So, roughly 10 million tonne of cargo passes through the city. We have two separate corridors to transport that cargo – one is part of Eastern Freeway which goes to Mahul, the other is the rail corridor. Despite having a rail corridor, there is a restriction on its use – we can only use it from 11pm to 5am. We also have a Wadala-Kurla link rail project which is to bypass the existing suburban rail network. This will help in evacuating cargo directly to Kurla, and from there the cargo can go towards Delhi. The project is under implementation but there are about 1,500 PAPs (project-affected persons) who have to be rehabilitated, out of which around 400 families have been rehabilitated. The remaining people need to be rehabilitated by Mumbai Metropolitan Region Development Authority (MMRDA). However, they are delaying the rehabilitation work.
“The Need of The Hour is to Liberalise the Indian Shipping Sector”
TDB: Following the global economic meltdown in 2008, what has changed in the Indian shipping business?
Capt. Vivek S. Anand (VSA): The growth of the business has gone down since 2007-08. Back then, container trade was growing at a rate of 23-24% y-o-y, and that growth came down and took a dip in 2009. It has come to an average growth of about 6-8% a year now.
TDB: Given the cabotage restriction, do you think Indian ships can make coastal shipping successful?
VSA: Cabotage law needs to be lifted completely, as Indian ships are at a disadvantage. They need a level playing field with foreign ships. Once that happens, ship owners will be able to expand their fleet, and participate to a greater extent in trade. The need of the hour is to liberalise, lift restrictions, and then get competition to improve the quality of shipping to and from India.
TDB: What are your concerns when it comes to taxation?
VSA: Some taxes have already been removed, like the tax on seamen which was a big hindrance in hiring Indian shipping crew. The Indian government may remove tonnage tax, but we are yet to see the notification. Ships registered in flags of convenience (FOC) countries save on tonnage tax. This comes as big disadvantage to some Indian ship owners. The tonnage tax should not be there so that Indian ship owners, irrespective of whether or not the ship is registered in an FOC country, are at a level playing field with other shipping lines.
TDB: Recently it was announced that PSUs have to give long-term cargo commitment to Indian ships. Won’t this curb market-driven competition?
VSA: Earlier, Ministry of Shipping had a separate department – Transchart – to finalise sea freight rates. Transchart procured tonnage for all PSUs, which was inefficient. Initially, it was Indian Oil Corporation, which was allowed to book freight using this methodology, then other PSU oil majors followed. The government should curb these restrictions. Let there be free trade, only then there will be ease of doing business. India needs to develop quality domestic shipping. We need to open the market, like we did in the telecom sector. It has to be a market-determined mechanism which will let customers reap the benefit.
TDB: How is the business environment at major ports like Mumbai or JNPT different from the new private ports like Pipavav or Mundra?
VSA: Private ports are customer-friendly and highly professional. They are flexible enough to provide tailor-made solutions to customers. If you go inside Mumbai Port, it is in a pathetic condition, whereas things are different at private ports. The quality of equipment used at private ports is way better than government-run ports. Even if we look at safety standards, private ports fare well. Nobody wants to bring their ship into a port where work is carried out in an unsafe environment. If some incident happens, the shipping line’s insurer gets involved, resulting in shipping line paying higher amount of premium for insurance.
TDB: Several Indian ports are increasing their container handling capacity. Is there enough availability of containerised cargo to feed all these ports?
VSA: Five years ago, ports on the west coast used to handle 79% of all cargo and ports on the east coast used to handle the rest 21%. However, over time, cargo movement on the east coast has increased by 8%. A lot of India’s trade is with Asia. All Asian cargo should come to the ports on the east coast, but it is going to the west coast because inland connectivity on the east coast isn’t as good as on the west coast. It’s important that ports be developed with adequate connectivity. If ships have to wait for long hours outside ports due to the delay in cargo evacuation at the port, then international shipping won’t be interested in trading with India.
While there is enough cargo to feed all ports, we have connectivity issues, and the capacity isn’t correctly positioned. That’s why some ports are operating at more than 100% capacity while others operate at just 25-30% capacity. This is due to the absence of a master plan to develop ports and terminals in India. The focus should be on preparing a roadmap for the sector for the next 50-100 years. The government, in collaboration with all stakeholders, must develop the port sector, keeping in mind the location of mines and minerals, industries and other trade requirements.
TDB: The Sagarmala project has been envisioned to develop port-based industrial growth. Has the government called trade bodies and industry stakeholders for suggestions before preparing the roadmap for the project?
VSA: We’ve been consulted for the project. However, the approach from government side was unplanned. We were asked to attend the project meeting just 1-2 days before it was held. This was a very short notice to prepare ourselves for the meeting.
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