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Container trade growth in southern India stymied by lack of adequate infrastructure and neglect

The upcoming container capacity on Indian shores is threatening the prospects of existing players whose capacities are already idling. With Adani Ports setting up container capacity at Vizhinjam on the west coast, and Dhamra ,Ennore ports and Kattupalli on the east, a fight for volumes is in the offing. Together, the four container terminals will add a capacity of over 6 million TEUs in another three years.

The economy has been slowing since January-March 2016 and growth hit a three-year low of 5.7 per cent in the April-June quarter, indicating slow growth in trade.

The eastern hinterland is neither a major destination nor originator of containerised cargo, comprising intermediate or finished goods, so there is hardly any scope for container cargo growth along the eastern coastline, according to a spokesman of Drewry Maritime Research. Moreover the centre has invested huge sums in building a dedicated freight corridor from Mumbai to Delhi. The corridor to east culminating at Kolkata has no matching port capacity. The centre is also dragging its feet in development freight corridors in southern India. While the work in dedicated freight corridors in Mumbai Delhi and Ludhiana Kolkatta are moving at break neck speed, the corridors in southern India being considered in bits and pieces will take years for takeoff.

On the West coast, with Gujarat, Maharashtra and Delhi the present central government is making large investments in infrastructure during the last three years to make it a large market and hence the scope for container cargo growth is better.

Due to poor investments in infrastructure especially in manufacturing states like Tamil Nadu and Telengana, capacity utilisation on the east coast is expected to be minimal over the next three to four years. The annual growth in containerisation of cargo in India has been 8-10 per cent over the last few years. Container cargo growth is a function of the gross domestic product and is dependent on a country’s merchandise trade. 

“Greater export or import can help increase the share of containerisation, but it depends on how the economy fares,” according to a spokesman DP World. The company suffered badly due to diversion of container cargo from Chennai to nearby ports managed by Alanis. DP world manages a terminal in Chennai port for the last several years but its capacity utilisation has been low. It has been pressing the Tariff authority of India for revision of tariff but Tamp has not conceded its demand. It started levying additional charges on imported containers but the trade is resisting it. TAMP has also asked the Chennai port to direct the DP world terminal among others to stop levying additional charges on the trade

With Adani Ports and Special Economic Zone (APSEZ) adding container capacities in the east and south, a mismatch between container terminals and cargo is imminent in the next few years.

“Adani is expected to pull the southern trade to itself with the kind of capacity addition it is making,” said a consultant. At Ennore, APSEZ is setting up a capacity of 1.4 million TEUs and Dhamra will have the potential to handle more than 100 million tonnes of dry bulk, liquid bulk, break bulk, containerised and general cargo. Adani's Ennore terminal will take at least two years before it achieves its full capacity'

“The Krishnapatnam container terminal is also pulling cargo from the nearby Chennai port by offering competitive rates compared to the private terminals operating at Chennai port. So each container port will look to increase its container business from the existing volume and this could cause capacity to idle on the east coast. While the established and entrenched private container terminals in the east coast remain a contented lot though volumes are slipping, private ports like Katupalli and Krishnapatnam are adopting aggressive marketing strategies to attract more containers.

Container terminals are a capital intensive business and you need have a 30-year horizon. If companies have that strength they can sustain. Container operators in India have been changing their business strategy because of the economic slowdown and excess capacity in the industry. Gujarat Pipavav’s promoter APM Terminals is seeking an exit. Gujarat Pipavav had three years ago lowered its capex plans for the container business and had diversified into the crude oil and car segments.

DP World, too, is planning to diversify into bulk, liquid terminals and logistics. The company has plans to invest $1 billion in India, of which a major portion will be in logistics. Logistics will be our main focus and then the container business, which is our core. Our extended businesses will comprise bulk and liquid,” a spokesman of DP world said.


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