Once India’s 2nd largest port, in terms of cargo handling, Visakhapatnam was, until recently, fast losing out to competition. However, with a new management at the helm and realisation finally sinking in that the need of the hour is to either perform or perish, the port authority is going all out to woo back users. To enable this, not only is the port authority spending big bucks on improving infrastructure but is also trying to bridge the existing gaps when it comes to communication. While the intentions sound great and doable, it is the actual implementation on the ground that will decide the future of the port

Sisir Kumar Pradhan | @TheDollarBiz 

With the media glare firmly focussed on various ports over the last few months (with news like the possible acquisition of Dhamra Port in Odisha by Adani Ports & Special Economic Zone, Mundra becoming the first Indian port to cross 100 MT cargo mark, etc.), an early morning call one Sunday from my office asking for a field visit to the Visakhapatnam Port felt both exhilarating as well as annoying. It was a Sunday and I was still half asleep. But I hardly had a choice. So, as I started making plans for the journey, the first surprise (actually, not really a surprise considering that 21 million passengers travel daily on Indian Railways) was to see the long waiting list in Vizag-bound trains. Giving up on trains, I booked myself on a nice multi-axle bus, stuffed my bagpack with my camera, iPad, cellphones (our reporters carry two on all field trips to minimise handicaps caused by lack of operator signals in certain zones) and some spare change of clothes...and set out for the ‘City of Destiny’.

The journey from Hyderabad to Visakhapatnam was mostly smooth. The air-conditioning of the bus keept the heat out, and before I could realise, I had dozed-off. Suddenly, a jarring jolt shook me (and most other passengers) out of my slumber. It was a good wakeup call as the bus was just entering the Port City. The splendid mountain range that welcomes you to Visakhapatnam is a beautiful sight.

Jewel of the East

Visakhapatnam Port Trust (VPT), which was at the no.2 spot in terms of cargo handling just a decade back, has now slipped to the fifth position. Irrespective of what the reasons were, this has drawn a flak from all stakeholders and the blame game is on. However, the newly appointed Chairman, M. T. Krishna Babu, who took charge on May 12, 2014, is confident of turning things around and take the port back to its glory days. He feels the fight back will begin in right earnest once the mechanisation and modernisation of the cargo handling dockyard is over. Speaking to The Dollar Business, he said, “It will be difficult for any port in India to dislodge Kandla Port from the top spot since it caters to a vast area spread over Gujarat, Madhya Pradesh, Uttar Pradesh, Rajasthan, Uttarakhand, Punjab and Himachal Pradesh. A significant share of India’s crude oil imports also come via the Kandla Port.”

Fighting back

During our conversation with Krishna Babu, I learnt how VPT’s growth has stagnated for a few years since it failed to upgrade its capacity. Presently, various modernisation projects worth around Rs.2,500-3,000 crore are being executed through several public-private partnerships. This will increase the port’s cargo handling capacity from the existing 80 million tonnes per anUnion government’s maritime agenda 2010-20, Rs.10,000 crore would be spent in a phased manner on several projects during the next six years. Dredging in the outer harbour is complete and with modernisation of the general cargo berth, bigger vessels can be handled at VPT. The dredging work up to the turning circle is likely to be completed by August, while the remaining work is expected to be over by December.

“Cargo handling had suffered to an extent during the past two or three years. Even during the current year, there could be some impact, because of ongoing projects,” he tells The Dollar Business. By the time this story goes to print, tenders for northern arm dredging, to increase a draft from 10 to 14 metres by December, would have been finalised. [The port has already spent Rs.230 crore on increasing the draft.] Bigger vessels would be able to enter the inner harbour from January, once the dredging is over.

Not a cakewalk

R. Rajesh, who has more than a decade of experience in port operations and is currently looking after his company’s affairs at both the Visakhapatnam and the Gangavaram Ports, says that (on the condition that his company’s name won’t be revealed) it will be difficult for Visakhapatnam Port to regain lost glory. Reason: The port has lost its two major clients – Visakhapatnam Steel Plant and Hindustan Zinc – within a span of five to six years. VPT lost the Visakhapatnam Steel Plant to Gangavaram Port in 2009 as the steel major found that using the private port was more economical due to its proximity. The second blow to Visakhapatnam Port came in the form of closure of Hindustan Zinc in 2012. Nevertheless, VPT Deputy Chairman G. V. L. Satya Kumar is not a worried man. While speaking to The Dollar Business, he says, “When a major port reaches its peak capacity, traffic will be diverted to other ports.” He feels that the region has enough economic activities to feed all the ports in the east coast.

The ground reality, though, gives a picture which is in total contrast to what the port authority claims. The approach road to the administrative office is full of potholes and one can notice a thick layer of dust covering its neighbourhood. Most of the stevedoring agents carry out loading and unloading of bulk cargo manually and with the help of excavators and earth movers. This open handling of cargo leads to heavy air pollution and the quantity of dust particles in the air is so high that lung diseases and eye infections are very common in the area.

“It is the job of the stevedoring agents to take actions to keep pollution under control. However, some of them are not following the pollution control guidelines. The port authority is helpless as there is severe shortage of manpower, so we cannot keep a watch on the vast areas where loading and unloading activities are going on,” Satya Kumar tells The Dollar Business. Despite spending Rs.14,234.7 crore on management and general administrative expenses during FY2013, the fact that the port has trimmed down the number of its permanent employees from around 10,000 to 4,000 in the last decade and aims to reduce it further to 2,000, might be a reason for the poor state of affairs.

All is not lost

Until recently, Visakhapatnam Port was the only major port between Kolkata and Chennai Ports with multi-commodity handling capacity. Paradip Port had its berthing limitations. VPT’s proximity to Singapore, a major transshipment hub, has also contributed to the port’s growth. During the year 2000, there was a rise in the number of mines and mineral-based industrial activities in the hinterland. The seafood sector kept the port busy. A large quantity of project cargo also landed at the port.

However, the stagnancy perhaps came about because of complacency. The port authority failed to upgrade their cargo handling capacity on time. This led to a major congestion. And private and non-major ports located in the vicinity made the maximum of this. Port users complain that out of 23 berths, only the oil berth and the Vedanta General Cargo Berth (VGCB) are fully mechanised. The remaining berths are not fully mechanised and hence depend on port sourced equipment for loading and unloading. Even the poor quality of equipment affect productivity. However, Port officials tell The Dollar Business that they have outsourced repair and maintenance work. Sources also say the Port does not have adequate equipment to meet user requirements. There have been repeated demands from users for better equipment like mobile cranes of 150 tonne capacity and shore cranes of 40 tonne capacity. But these demands have remained just that – demands.

Paper trail

One of the major challenges at most major ports in India is multiplicity of documentation. While speaking to The Dollar Business R. V. S. Raju, President of the Visakhapatnam based manufacturer of refractory products RHI Clasil Ltd., says, “I import and export around 4,000 tonnes of cargo every month for the refractory manufacturing unit located on the outskirts of Visakhapatnam. The cost of documentation is very high. The policymakers too frequently change or introduce new guidelines for importers and exporters. For one shipment, an exporter has to submit documents to various agencies like customs, port, banks, excise department and the DGFT etc. The government should come forward with a single window system, where one can submit the document for all the concerned authorities.” Further, there have also been allegations that exporters and importers have to keep the various stakeholders “happy” for faster berthing of ships, allocation of wagons and clearance of cargo at the Port.

Finally proactive

The Visakhapatnam Port authorities, in recent times, have woken up to competition from Gangavaram Port. Two major developments, in order to tackle the competition, are the creation of the Visakhapatnam Cargo Terminal (VCT) and Vedanta General Cargo Berths (VGCB). Before the establishment of the VCT, importers and exporters from the hinterland used to depend on Chennai Port for container cargo shipment. According to VCT Deputy General Manager (Business Development), P. Balakrishnan, “Vizag Cargo Terminal has the capacity to handle 1,500 cargoes in 36 hours, which is at par with any other international container handling port.” Prior to the VCT, sea food exporters used to export their shipments from berth number L17, which was right next to a coal berth. This used to be a concern for exporters as dust particles were all over the place. Since its inception, VCT has seen a significant rise in users.

Despite claims of availability of enough number of berths by port authority, congestion and berthing related delays have increased over the years. Due to the non-availability of berths, importers and exporters, have to pay demurrage charges. So are mechanised berths the answer to decongest the port?

“Mechanised ports provide the advantage of faster loading and unloading which in turn, improves the turnaround time with vessels being released at a faster pace,” D. K. Manral, CEO, Vizag General Cargo Berth (VGCB), tells The Dollar Business. Mechanised cargo handling facilities not only reduce faster evacuation but is also more cost effective due to faster turnaround time. The covered operation with water sprinklers also keeps air pollution under control. The mechanised coal handling facility is capable of discharging 75,000 tonnes a day as compared to 15,000-20,000 tonnes of cargo per day in manual mode.

More to come

The VPT Chairman has assured that steps will be taken to increase the draft of inner channel to anchor larger vessels. The port will opt for the PPP mode to mechanise some more berths. However, some tipper operators fear that they might lose business due to the mechanisation.The port authority says this is the only way out to tackle competition and stay in the business.

Even stevedoring agencies have learnt that no matter how much they lobby, sooner than later they are going to be out of business. A senior official with Integral Trading & Logistics tells The Dollar Business, “Mechanisation is the future. Though it requires huge investment, it also provides faster turnaround time.” In fact, the company has started to develop itself as a customs freight station (CFS). A CFS typically operates outside the port area to decongest traffic inside the port.

Money matters

Inter-port challenge has forced private port operators to cut down their tariff. The tariff at major ports are governed by the Tariff Authority of Major Ports (TAMP), which is about 40% less compared to private ports. Non-availability of storage space is another major challenge. “Gangavaram Port is giving the option of 60 days of free storage as is a green field project and has lots of vacant land. However, the Vizag Port gives an option of just 10 days of free storage, after which the user has to pay rentals,” says Manral. Rake evacuation is also another problem area and there are not enough rakes available for cargo evacuation.

Another major hurdle that some exporters face is the non-availability of LCL (Less-Than-Container Load). Currently, only 12-13 multinational shipping companies like Maersk, Hyundai, Hanjin, APN and Evergreen Line operate from VCT. The average container freight rate for shipping out from VCT to New York is $4,200 and if it is to an inland destination like Boston, where there is a need for multimodal transportation, the cost goes up to about $6,300.

Now or...

There isn’t much time left for VPT authority as Paradip Port has already started the process of complete mechanisation and the Adani Group is eyeing the east coast by acquiring the Dhamra Port.

All this means VPT’s new boss has to hit the ground running if he wants to win glory days back for the Vizag Port. Several exporters and importers tell The Dollar Business that in order to ensure minimum idle time for vessels and post-handling delay at berths, it is necessary that information sharing interfaces between the port, the customs department and users become more efficient.

However, G. Sambasiva Rao, MD, Sravan Shipping, sees a bright future for the port. “VPT has been declared as the second preferred port after Calcutta Port for users from Nepal. It has a vast hinterland where heightened economic activities will fuel growth,” Rao tells The Dollar Business. One sincerely hopes that the optimism shown by him and many other stakeholders of VPT becomes a reality, particularly now that the Telangana issue has been resolved.

Three days at VPT made the challenges more apparent. Those that made me forget the beautiful sight of the mountains that welcomed me to Vizag. But as they say, destiny has its own plans. And with the new VPT boss working 18-hours each day, change could just be a sweet mile away.

They don’t call it the ‘City of Destiny’ for no reason!