Ports

Analysis of Ports Industry
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Table of Contents
Overview :4
Institutional Framework : 38
Legislative Framework and key Policies : 49
Types & Classification Of Ships : 93
Definitions & Glossary : 117
Inland Waterways : 156
DFC : 188
Transshipment Hub Analysis : 208
Dredging-Analysis : 266
Shift in Traffic : 341
Container Terminal Operation : 444
Competition in container Ports : 513
Indian Ports Analysis : 581
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3
Overview
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Overview of the ports sector in India
The Indian coastline is dotted with 12 major and nearly 187 non-
major ports, catering to coastal as well as overseas trade.
Over the last few years, the share of non-major ports in the total
traffic handled has risen at a higher pace.
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Major ports
A major port is a port notified by the Central government in the

official gazette, or a port that is declared as a major port through
Major Ports Act, 1963.
There are 12 major ports in India, six along the east coast and six
along the west coast.
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Major ports of India
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Major ports of India
All major ports, except Ennore, are regulated by their respective port
trusts.
The Ennore Port is the only corporatized major port and is
registered as a company.
Being the only corporatized major port gives it high operational
autonomy.
It has the flexibility to determine the tariff as the company does not
fall under the purview of Tariff Authority for Major Ports (TAMP),
unlike the other major ports.
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Traffic profile
The total traffic handled at major ports in 2011-12 was around 560
million tonnes as compared to 570 million tonnes in 2010-11.
The capacity at major ports increased during the same year by 3.3 per
cent to 690 million tonnes.
This resulted in a lower capacity utilization of 81 per cent during the
year.
In 2011-12, Kandla port handled the highest traffic, followed by
Visakhapatnam, Jawaharlal Nehru Port Trust (JNPT) and Mumbai.
In terms of capacity, Kandla port had the largest capacity followed by
Chennai, Paradip and Visakhapatnam.
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Major ports - Trends in capacity and traffic
Between 2006-07 and 2011-12, the capacity at major ports grew by 6 per cent CAGR, whereas
traffic rose by 4 per cent CAGR. The lower growth in traffic vis-a-vis capacity resulted in low
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capacity utilization at major ports during the period.
Major ports - Commodity-wise traffic
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Major ports - Commodity-wise traffic
During 2006-07 and 2011-12, container and fertilizer traffic recorded
the highest growth of around 10 per cent and 7 per cent CAGR,
respectively.
Petroleum,oil and lubricants (POL) grew by 3 per cent CAGR.
Iron ore traffic declined by about 7 per cent CAGR due to the
reduced trade on account of the ban on iron ore mining in key states
of Andhra Pradesh, Karnataka, Orissa and Goa in order to curb
illegal mining.
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Major ports - Commodity-wise traffic (2006-07)
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POL continues to account for the largest share of traffic at major

ports, although its share has declined to 32 per cent in 2011-12 from
33 per cent in 2006-07.
Among the other segments, containers have shown the highest
growth in the share of traffic, from around 16 per cent in 2006-07 to
21 per cent in 2011-12, driven by increased imports of capital
equipment, rising garment exports and a move towards
containerization of other bulk commodities.
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Major ports - Coastal cargo as percentage of total cargo
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Major ports - Coastal cargo as percentage of total cargo
Out of the total cargo handled, around 18.8 per cent constitutes
coastal cargo.
Although, the share of coastal cargo to total cargo has been declining
over the last few years, it still forms a significant portion.
In 2011-12, total coastal cargo stood at 106 million tonnes, out of
which Vizag port handled around 21 per cent, followed by Mumbai at
14 per cent and Paradip at 12 per cent.
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Operational performance indicators
The average turnaround time (TAT)
It is defined as total time taken from when the ship reports at the
anchorage till the time it leaves the port.
This measure is an important indicator of port efficiency, as it
determines the total time taken and level of traffic that can be handled
at the port.
The TAT can be divided into the following:
Pre-berthing time : It refers to the duration from the time the ship
reports at the anchorage till it is berthed.
Non-working time : It is the time spent idle at the berth by the ship.
Working time : It is the actual time during which work is carried out
at the berth.
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Major ports - Average turnaround time
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Major ports - Average turnaround time
Average TAT rose from 3.6 days in 2006-07 to 4.5 days in 2011-12.
This rise was mainly due to an increase in pre-berthing time at the
ports.
The high TAT at Indian ports can be attributed to the fact that many
of the ports operate at high capacity utilization levels, resulting in
high congestion levels which impacts their operational performance.
Almost all major ports in India have a TAT of more than 3.5 days,
except Ennore, Cochin, JNPT and New Mangalore which have a TAT
of about 2 to 3 days.
This is still relatively high as compared to international ports whose
turnaround time is few hours.
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Major ports - Average pre-berthing time
Pre-berthing time at major ports too has been rising from 2006-07 to 2010-11. However in
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2011-12, the pre-berthing time declined from 55.7 hours in 2010-11 to 50.2 in 2011-12.
Major ports - Average output per ship berth day
The average output per ship berth day has been steadily increasing over the past few years,
from around 9,745 tonnes in 2006-07 to 11,112 tonnes in 2011-12, indicating better
management and gradual development of allied infrastructure on ports. 23
Major ports - Handling cost per tonne
Handling cost per tonne increased to Rs 98 per tonne in 2011-12 from Rs 90 per tonne in
2010-11. The per tonne handling cost is the highest at the Kolkata port at Rs. 256.55 per tonne
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and the lowest at the Tuticorin port (Rs. 50.89 per tonne).
Traffic handled in terms of number of vessels
Number of vessels handled at the Indian major ports have marginally rteduced over last 5 years.
Among all the ports, JNPT port handled the largest number of vessels, followed by Kandla and
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Visakhapatnam.
Non-major ports
Non-major ports are all ports that are not classified as major ports
under the Major Ports Act, 1963.
Non-major ports include both minor and intermediate ports.
(Intermediate ports are ports whose cargo-handling capacity is less
than 150,000 tonnes per annum).
These ports come under the purview of the respective state
governments and regulated by state departments, or the state
maritime boards.
Progressively, non-major ports are witnessing a higher increase in
traffic due to greater efficiency.
Currently, there are about 187 non-major ports in India. .
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Number of non major ports in the country
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Traffic profile
Non-major ports - Trend in traffic
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Traffic profile
Non-major ports - Trend in traffic
In 2011-12, non-major ports handled around 353 million tonnes of

traffic, accounting for around 39 per cent of the total traffic handled
at Indian ports.
Traffic at non-major ports has grown by around 15 per cent CAGR
over the last 5 years.
The increase in traffic can be attributed to the increase in capacity
and thus, better efficiency at these ports.
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State-wise non-major port traffic profile (2006-07)
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State-wise non-major port traffic profile 2011-12
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State-wise non-major port traffic profile 2011-12
Out of the total traffic handled by non major ports, nearly 73 per
cent is handled by ports in Gujarat.
Over the years, the share in total traffic handled has increased for
ports in Andhra Pradesh and Puducherry and declined for ports In
Karnataka.
The ban on the iron ore exports had led to the decline in the total
traffic handled at the Karnataka ports.
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Non-major ports - Commodity profile 2006-07
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POL continued to account for a major portion of the traffic in 2011-
12 .
Its share has slightly has increased to 47 per cent from 43 per cent
in 2006-07.
Other commodities that account for a major share of traffic include
coal (21 per cent) iron ore (11 per cent).
Container traffic witnessed an increased from 4 per cent in 2011-12
from 7 per cent cent in 2006-07.
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Commodity wise traffic at non-major ports (2011-12)
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Commodity wise traffic at non-major ports (2011-12)
Coal has the major share of traffic in non-major ports.

It accounts for 48.4 per cent of the total traffic handled at non-major
ports.
It is followed by POL and fertilizers accounting for 47.5 and 42.2
per cent of the traffic respectively.
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Institutional Framework
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Institutional framework
Indian ports sector - Institutional framework
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Institutional framework
Indian ports sector - Institutional framework
Both major and non-major ports are governed by the Central/State

governments of India through a number of bodies.
Major ports come under the direct regulation from Central
Government, while the non-major ports are regulated by the state
governments.
The following are the various bodies involved in the governance of
ports:
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Ministry of Shipping
Till 1949, the Ministry of Commerce dealt with shipping related issues,
which were subsequently shifted to the Ministry of Transport and Shipping
in 1951.
For a long time, major ports were controlled by the Ministry of Surface
Transport (MoST).
The MoST is now divided into two different ministries i.e. Ministry of
Shipping and Ministry of Road Transport and Highways.
Major ports come under the purview of the Ministry of Shipping (MoS).
The Department of Shipping encompasses the shipping and ports sector,
which include shipbuilding and ship repair, major ports, national
waterways, and inland water transport.
The Ministry of Shipping is responsible for the formulation and
implementation of policies and programmes for the development of major
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ports.
Tariff Authority for major ports (TAMP)
The Major Ports Trust Act, 1963, was amended by the Port Laws
(Amendment) Act, 1997, to constitute the TAMP.
It acts as an independent authority to regulate all tariffs, related to
both vessels and cargo, and rates for lease of properties with respect
to major port trusts and the private operators located therein.
TAMP's primary task is to bring about uniformity in the procedures
followed by all major ports.
There was very little consistency in tariffs charged at major ports
prior to its establishment.
It prescribes the rates for facilities & services provided by ports; and
rates for lease of port trust properties.
It also monitors the conditions that influence application of these
rates and introduces revision, if necessary. 42
Tariff Authority for major ports (TAMP)
All public and private terminals at any major port fall under
regulation of TAMP.
The orders notified by TAMP can only be challenged in the High
Court.
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Major Port Trusts and Board of Trustees
The major port trusts were set up under the Major Port Trust Act (MPTA),
1963.
These are autonomous bodies managed by a board of trustees under the
control of the Central government through the Ministry of Shipping.
All major ports are covered under MPTA except Ennore, which is a
privately managed port asetsnd its own tariff on the guidelines and norms
set by TAMP.
MPTA empowers board trustees for a major port to manage, control and
administer the operations.
However, Central government can enter into agreements with various
parties for lease of port facilities.
They can execute work and provide appliances/equipment etc, and in
general, the Port Trust has to ensure a regular and smooth operation of the
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port.
State Maritime boards (SMB)
State governments, either through the maritime boards or government
departments, administer non-major ports (intermediate and minor ports).
The state maritime boards were created to focus on the maritime
development of the state.
The structure and the powers of maritime boards are similar to those of
Board of Trustees of major ports.
Establishment of an SMB is mandatory to avail central funds.
Currently, Gujarat, Maharashtra, and Tamil Nadu, have maritime boards.
Andhra Pradesh, West Bengal and Orissa are in the process of forming
their SMBs.
Kerala and Karnataka, administer their ports through state government
departments.
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Maritime States Development Council (MSDC)
To have an integrated approach towards the development of major
and non-major ports, the Maritime States Development Council
(MSDC) has been formed under the chairmanship of the Union
Minister of Shipping and with ministries in-charge of ports from
maritime states as members.
It is a forum for framing an integrated policy for the entire Indian
ports sector, including non-major ports.
The Council functions as a policy coordinating body between the
Central Government and the Maritime States
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Dock Labour Board
In Indian ports sector, labour is organised under two schemes:
Port trust labour (employed on shore, in transit sheds and warehouses as
contract labours)
Dock labour registered with the Dock Labour Boards for cargo handling
onboard ships
The Dock Labour Board (DLB) is a tripartite body comprising of equal
representation from the Indian government, shipping companies and dock
workers & employers.
DLB is headed by the chairman of the Port Trust.
These administer the registered dock workers and assure employment for 21
days in a month to the workers.
The stevedores employ the dock workers as per requirement and pay a fee
including a levy to finance compensatory payments when there is no work.
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Dock Labour Board
(Note: The ports of Tuticorin, New Mangalore and Paradip do not
have a dock labour scheme.
Labour is organised in a common pool and is administered by
stevedoring companies. JNPT employs all labour itself.)
In addition to the above bodies, Ministry of Environment and Forest
(MoEF) regulates the activities at the ports to control environment
pollution.
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Legislative Framework
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Legislative framework
The legislative framework of the ports sector in India includes a large
number of Acts for both major and non-major ports.
While some Acts are common to both, others are specific.
The framework is as follows:
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Following are the brief descriptions of some of the Acts:
I) Indian Ports Act, 1908
The Indian Ports Act (IPA) came into force in 1908.

It lays down rules on safety of shipping and conservation of ports for the
entire port sector and regulates matters pertaining to the administration
of port duties, pilotage and other charges.
This Act is applicable to both major and non-major ports as all Indian
ports derive their definition and status as ports from the provisions of
this Act.
The IPA empowers the state government to extend this Act, to any port
in which this Act is not in force.
The Act clearly defines the powers of the Central and state governments
with respect to ports. 52
Indian Ports Act, 1908 enables the government to:

Extend notification to any port in which this Act is not in force or to
part of any navigable river or channel which leads to a port and in
which this Act is not in force.
Make rules consistent with the Act, as it thinks necessary.
Give licences to persons engaged in providing cargo handling and
other facilities at the port sites.
Appoint an officer or a body of persons, as a conservator for each port.
A conservator has the authority to give and enforce directions for
certain specified purposes mentioned in the Act.
Levy port dues and wharfage charges from time to time.
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Fix and revise tariffs: In case of major ports, the authority constituted
under the Major Port Trusts Act, Tariff Authority for Major Ports
(TAMP) will be responsible for fixing and revision of the tariff and its
collection.
In case of non-major ports, the state government appoints an officer or
a body of persons at every port to collect the port dues on behalf of the
government
(However, it does not fix or revise tariffs).
The funds so collected are to be deposited into a separate account
called the port fund account.
The income as well as the expenditure of this fund is subject to the
control of the government. 54
Set rules for safety of shipping and the conservation of ports.

Make supplemental provisions; giving details regarding publication of
orders of government, services of written notices of directions, duties
of the authority during emergency and so forth.
Provide co-operation to be extended by port officials for defence
activities.
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Domain of authority
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II) Major Port Trusts Act, 1963
The Major Port Trusts Act is an Act to make provision for the
constitution of port authorities for certain major ports in India and to
vest the administration, control and management of such ports.
All ports defined as "major" ports under this Act are classified as major
ports and they fall under the jurisdiction of the Central government.
For each of these ports, the Central government appoints a Board of
trustees to undertake the administration and management of the
respective ports.
The board is under the control of the Central government.
It comprises of a chairman, deputy chairman and board members.
The chairman of the trust is also its chief executive officer and is from
the Indian Administrative Services (IAS).
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II) Major Port Trusts Act, 1963
The board members are selected from government departments, port
labour and industry.
The board can enter into any contract necessary for the performance of
its functions.
However, no contract whereof the value or amount exceeds limits as
prescribed by the Central government can be entered into without the
prior approval of the Central government.
Further, no contract for the acquisition or sale of immovable property
or for the lease of any such property for a term exceeding 30 years can
be entered into by the board.
The Centre has powers to issue directions to the board, thus restricting
the autonomy of the board to take decisions.
The limits of the board is given below: 58
Contracts
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Capital expenditure
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Capital expenditure
The ceiling for the monetary value of contracts which the board can
enter into is Rs 50 crores for new works and Rs 100 crores for the
modernisation of existing assets.
For higher outlays, ports are required to follow the standard
procedure for approval of plan funded projects namely, approval
through the Expenditure Finance Committee (EFC) and Public
Investment Board of the Ministry of Finance.
A board may execute such works within or outside the limits of the
port and provide such appliances as it may deem necessary or
expedient such as wharves, quays, docks, stages, jetties, piers, buses,
railways, dredgers and other machines for cleaning, deepening and
improving any portion of the port etc.
A board may, with the sanction of the government raise loans for the
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purposes of this Act.
Capital expenditure
Loans may be raised by a board in the open market on Port Trust

securities issued by it or may be obtained from the Central or state
government.
No notification shall be necessary if a loan is obtained from the
Central or state government.
However, the terms of all loans shall be subject to the approval of the
Centre.
The board may also borrow money from the International Bank for
Reconstruction and Development or other foreign institutions or take
temporary loans or overdrafts.
A board may, with the sanction of the Central government, apply for
any amount of money, which may be given under the provisions of
this Act. 62
Capital expenditure
The board can apply for the money without prejudicing the security
of the other holders of the Port Trust securities, in repaying the
government any amount which may remain due to it in respect of the
principal of any loan.
The board can request the Central government to acquire land under
the provisions of Land Acquisition Act, 1894, when it is required for
the purpose of the board.
Immediately after April 1 every year and not later, every board shall
submit a detailed report of the administration of the port for the
preceding year to the Centre.
The Centre may, at any time, order a local survey or examination of
any works of a board.
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Amendments to Major Port Trusts Act and Indian Ports Act
The Indian Ports Act and the Major Port Trusts Act were amended
keeping in mind the growth and ever-increasing burden on the major
ports.
Also, under the restricted ambit of the Major Port Trusts Act, 1963,
major ports were unable to operate in market-oriented situations and
ensure flexibility of commercial operations.
A need was felt to develop the major, minor and intermediate ports
which could be achieved only by the privatisation and
corporatisation of the sector.
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The Major Port Trust (Amendment) Bill, 1997
The 1997 bill was a major amendment to the Major Port Trusts Act.
It set the guidelines for private participation in Indian ports.
The amendment also resulted in the creation of Tariff Authority for
Major Ports (TAMP), essentially to regulate the tariffs of major ports.
The functions of the Tariff Authority for Major Ports were to fix the
rates chargeable at the major ports with respect to various port charges
and to revise the rates as and when it becomes necessary due to
increase in labour cost, operational cost, inflation, etc., under the
provisions of the Indian Ports Act, 1908, and the Major Port Trusts Act,
1963.
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The amendment basically deals with two issues relating to
corporatisation:
To include an enabling provision in the MPT Act for empowering
the government to de-notify major ports from the ambit of the Act
before converting them into corporate entities.
The amendment focuses on Section 29 of the Act, which allows the
government to transfer its assets, rights and liabilities in the port
from the board of trustees to the new corporate entity.
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Other features in the proposed document to enable private sector
participation in port facilities are:
Right to lease of port's immovable (wharfage rights, all other rights
exercisable on, over or in respect of any land, wharf, dock or pier)
and movable property (land, existing berths/super
structure/equipment's etc.).
Right to construct or install wharf, dock, quay, stage, jetty, pier
erection or mooring and reclamation of foreshore within the port
limit by private parties.
Allow to perform any of the services to be rendered by the ports such
as piloting, hauling, mooring, landing, shipping or transhipping
passengers etc. by private party on terms and conditions fixed with
the approval of the Central government and recovery of charges by
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the private party for the services rendered by them.
The port will continue to maintain its regulatory role, lease, form, sell
or alienate the rights of the board to levy rates to other party with the
approval of the government.
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III) State Maritime Boards Act
Maritime states are responsible for the planning and development of other
ports (non-major ports) within their region.
For speedy implementation of their plans, the states of Gujarat,
Maharashtra, Andhra Pradesh and Tamil Nadu have constituted an
autonomous regulatory body, namely Maritime Board.
Salient features of the policy formulated by the maritime states on private
sector participation at other ports are:
Government land will be leased.
The concession period will be 30 years, which can be further extended by 20
years.
In selected ports of Gujarat and Maharashtra, the government will take
equity shares to reduce the necessary level of private investment, while the
Kerala government will provide basic facilities, viz, break waters, capital
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dredging, navigational aids and communication equipment.
III) State Maritime Boards Act
Back-up infrastructure of the port will be provided by the government.
Development will be on build-operate-share-transfer (BOST), build-
operate-maintain-share-transfer (BOMST), build-own-operate-transfer
(BOOT) or build-operate-transfer (BOT) basis, varying from state to
state.
The company responsible for developing and running the port will
have the freedom to fix tariffs for all services.
The government shall collect a percentage of the revenue earned by the
port company.
The role of the government will be limited only to areas where it is
necessary and appropriate under any statute, national
interest/security, etc.
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IV) Merchant Shipping Act, 1958
The first Indian shipping law was enacted in 1923, with provisions
along the line of the UK Merchant Shipping Act, 1894.
However, after Indian independence, the Merchant Shipping Act,
1958 was passed taking into consideration the changed conditions in
the shipping industry.
The Act contains provisions relating to the establishment and
composition of the National Shipping Board.
It deals with general administration, appointment of the director
general, and the establishment of mercantile marine departments,
shipping offices, etc.
The Act also defines the Indian ships and procedures for their
registration, provisions for transfer of ships, rules regarding national
character of ships and their flags. 71
IV) Merchant Shipping Act, 1958
It deals with provisions for seamen, safety provisions of ships and

other provisions like prevention of pollution etc.
It gives the Central government the power to control Indian ships,
and prescribes penalties for violation of provisions.
The Merchant Shipping Amendment Bill was passed in 2003 to give
effect to international conventions and protocols adopted by the
IMO.
It focuses on elimination of pollution of marine environment etc.
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V) Dock Workers (Regulation of Employment) Act, 1948
Before independence, the labour employment of Indian ports was
controlled by the private stevedoring companies.
However, this scenario underwent a change after the Dock Workers
(Regulation of Employment) Act was passed in 1948.
This Act was put into action to remove the anomalies in the working
conditions of port workers under private stevedoring companies.
It also aimed to regularise the terms and conditions of employment,
provisions for health, accommodation and other welfare issues.
This Act applies to the entire country except the state of Jammu and
Kashmir.
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V) Dock Workers (Regulation of Employment) Act, 1948
A dock worker is defined as a person employed in or near vicinity of
any port on work in connection with the loading, unloading,
movement or storage of cargoes, or work in connection with the
preparation of ships and other vessels for the receipt or discharge of
cargoes or for ships that leave the port.
This Act led to the formation of Dock Labour Boards (DLBs), which
became exclusive suppliers of labour to stevedoring companies and
port authorities.
DLBs currently function in Kolkata, Visakhapatnam and Kandla,
whereas some DLBs have been merged with port trusts like Mumbai
and Chennai.
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VI) MARPOL 73/78
The International Convention for prevention of pollution from ships
relates to prevention of pollution from operations or accidents.
It has implications for port development and operations as the
regulations require that port authorities provide facilities to ships to
dispose their waste oil and garbage on land.
It is a combination of two treaties adopted in 1973 and 1978,
respectively, and updated by various amendments.
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VII) International Ship and Port Facilities Securities (ISPS) code
The ISPS code is a set of maritime regulations designed to help detect
and deter threats to international security.
It came into force in 2004.
The ISPS code provides a standardised, consistent framework for
evaluating risk, to allow the government to offset changes in case of a
threat to ships or ports.
The ISPS code allows for detection and deference of threats within an
international framework, establishes roles and responsibility, and
enables collection and exchange of security information, provides
methodology for assessing security and ensures adequate security
measures.
It requires ships to mark their identification number on the vessel's
hull. 76
VII) International Ship and Port Facilities Securities (ISPS) code
It also states that a record of the vessel's history, ship or port security
assessment, ship or port facility plan etc have to be maintained.
It also involves training of security personnel, drills, ship security
alert system etc.
It requires the ship and port facilities to collate and assess
information, maintain communication protocols, restrict access,
prevent unauthorised weapons, ensure training and drills and put
security plans in place.
In India, all major ports and 35 non-major ports comply with the ISPS
code.
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Key Policies
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Key Policies
Government Initiatives and Regulations
Model Concession Agreement for private investment in major ports
The government formulated the Model Concession Agreement

(MCA) in January 2008 to encourage and sustain private investments
in ports through the BOT route.
This new guideline spells out the policy and the regulatory
framework for the development of ports.
The framework contained in the MCA is applicable to Public Private
Partnerships (PPPs) in building new port terminals at the existing
ports.
This framework addresses issues such as :
Selection criteria for a concessionaire
Determination and escalation in tariffs
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Key Policies
Government Initiatives and Regulations
Model Concession Agreement for private investment in major ports
Mitigation, unbundling and allocation of risks

Symmetry of obligations between the principal parties
Force majeure and termination
It also addresses other important concerns such as user protection;
independent monitoring; dispute resolution and financial support from
the government.
With this new guideline in place, port authorities can directly approach
the inter-ministerial Public - Private - Partnership Appraisal Committee
(PPPAC) without first requiring an in-principal approval from the
Commerce & Industry Ministry and various other government bodies.
The MCA guidelines are expected to speed up the process of bidding for
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port projects.
Private participation
In the port sector, the thrust is on public-private partnership (PPP)

model.
The PPP model was set up to achieve performance levels that match
the international standards in terms of efficiency and cost
effectiveness.
The objective of privatization is to upgrade and modernize the port
infrastructure.
Guidelines to be followed for private participation in major ports is as
follows:
Bids will be invited based on two-cover system consisting of technical
and financial bids.
Financial bids of only those bidders who have qualified technically
will be opened. 81
Bidders will be asked to indicate in their financial bids (i) an upfront
fee for the license (ii) royalty per tonne of the cargo to be handled (iii)
minimum cargo which they will be willing to guarantee (iv) lease rent
per unit area of land/waterfront and (v) any other financial parameter
to be specified depending upon the facility to be created.
The Tariff Regulatory Authority may fix a ceiling tariff and leave the
private entrepreneur free to charge upto the ceiling at the rates
In case of an innovative / unsolicited proposal, the extent of port trust
participation will be decided on a case-by-case basis.
The port trust's participation will be considered to improve the
viability of the project in a case where a company / consortium is
selected through BOT.
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The port trust or entrepreneur, depending on the project and
requirement, would obtain environmental clearance and other
statutory clearances for a privatized project.
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Tax Holiday
To encourage private participation for investments in Ports and
Inland waterways, the government has introduced a 10-year tax
holiday.
Section 80-IA of the Income Tax Act allows 100 per cent tax deduction
on profits that an undertaking derives from investing in port
infrastructure.
This tax holiday can be availed for any 10 consecutive years in 20-
year period beginning from commencement of operations.
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Foreign Direct Investment
The Union Government allows 100 per cent Foreign Direct Investment (FDI)
under the automatic route in port sector for :
Captive facilities for port based industries
Leasing of equipment for port handling and leasing of floating crafts
Leasing of existing assets of ports
Construction/ creation and maintenance of assets such as-container
terminals bulk/ break bulk/ multi-purpose and specialized cargo berths,
warehousing, container freight stations, storage facilities and tank farms,
handling equipment, setting up of captive power plants, dry docking and
ship repair facilities .
Foreign direct investment helps supplement domestic capital, technology
and skills for accelerated growth.
The FDI equity inflow from April 2000 to January 2013 in ports has been
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US$ 1,635 million.
National Maritime Development Project
Under the programme, 276 projects were taken up for implementation
over the period from 1 April 2005 to 31 March 2012 have been
identified.
Total investment of Rs1,003 billions (2004-05 prices) was allocated
towards the programme out of which, Rs 558 billion were directed
towards the development of ports.
The rest was allocated towards development of Shipping and Inland
Water Transport Sectors.
The objective of the program was to upgrade and modernize the port
infrastructure in India which will enable it to benchmark its
performance against global standards.
No appraisal for the development under the plan has been
undertaken as of now. 86
Maritime Agenda 2010-2020
The shipping ministry and Government of India had introduced a
vision document in 2010, for shipping and ports industry The
Maritime Agenda 2020.
As per the Maritime Agenda, about Rs 3 trillion would be invested in
the ports sector, out of a total proposed investment of Rs 5 trillion in
the shipping and ports sector.
The objective of the programme is to increase the capacity at Indian
port to 3,130 million tonnes by 2019-20 from the existing capacity of
963 million tonnes.
Out of the proposed Rs 3 trillion investment in ports, Rs 1.1 trillion is
the proposed investment for major ports and Rs 1.7 trillion is for non
major ports in India.
87
Maritime Agenda 2010-2020
The capacity at the major ports is expected to increase to 1,460 million
tonnes by 2020 from the present level of 744 million tonnes.
Similarly, the capacity at non-major ports is expected to increase to
1,671 million tonnes from the present level of 483 million tonnes.
88
Summary of Investment for Major Ports
89
Summary of Investment for Major Ports
90
Joint Venture between a Major Port and Foreign Ports
Foreign Direct Investment (FDI) up to 100 per cent under automatic
route is permitted for construction and maintenance of ports and
harbours.
Major port trusts are permitted to form joint ventures (JVs) with
foreign port operators in the following areas:
Construction of new port facilities within the existing port.
Improving productivity of an existing port facility
Development of a new port.
Any combination of the above
The joint venture may be implemented in either of the following
ways:
The Foreign Port may implement the Scheme by promoting Indian
Company in the form of Special Purpose Vehicle (SPV), without
91
equity contribution from Major Port Trust;
Joint Venture between a Major Port and Foreign Ports
A Joint Venture Company(JVC) may be incorporated under the Indian
Companies Act with equity participation from Major Port Trust.
The Major Port Trust will, at all time, maintain a controlling stake in
the JVC necessary for blocking a Special Resolution.
The JV is based on BOT contract for 30 years.
Upon the expiry of the period, the port related assets will revert to the
Major Port Trust in accordance with conditions of Agreement.
No JV can be finalized without a tender process and permission from
the Central government..
Also, central governments' approval is necessary before final contract
is awarded.
92
Types & Classification Of Ships
93
Types and classification of ships
Waterways have been one of the oldest means for carrying out
international trade.
There have been lots of developments in ships and cargo carriers
used for transportation, over the period of time, with changes in
cargo and varying requirements.
Many changes have taken place in vessel technology and design to
suit the continuously growing trade requirements, weather
conditions and to improve operational performance.
The shipping industry has gone through a significant transformation,
especially with the advent of containerization.
All this has resulted in the production of numerous types of ships,
catering to various trade requirements.
94
Cargo carriers can be classified based on several criteria such as

capacity, weight, size, type of cargo, etc.
Broadly, the cargo carriers can be divided into bulk carriers,
container carriers and specialized carriers.
95
Bulk carriers
The broad definition of bulk carriers defines them as the ships

carrying dry unpackaged goods in big lots.
However, lately, tankers, such as oil tankers are also identified as
'liquid bulk carriers'.
Bulk carriers have made the shipping, loading and unloading of
many commodities quite efficient and less time consuming.
Dry bulk carriers
The major commodities being transported in bulk are coal, iron ore,
food grains, phosphate, steel, cement and fertilizers, amongst others.
Some of the variants of the dry bulk carrier are as follows:
96
Basic bulk carrier
This is the most basic form of bulk carrier having in-built cranes for
loading and unloading cargo.
It can transport any form of cargo in bulk.
Combined carriers
They are designed to carry ore, bulk and oil simultaneously and are
hence sometimes abbreviated as OBO.
They are more expensive to be built than simple dry bulk or liquid
bulk carriers.
97
Gearless carriers
These are large bulk carriers without any inbuilt cranes and can only
be docked at very large ports.
Self dischargers
They have inbuilt conveyor belts for discharging cargo efficiently.
Bulk in bag out (BIBO)
They are equipped to bag bulk cargo in the packets of pre-
determined size.
Liquid bulk carriers
Tankers are ships designed to transport liquid in bulk.

The varieties of products carried by the tankers are oil, LPG, LNG,
chemicals, fresh water, wine, etc.
All these products require different types of handling.
Thus, special tankers are designed for each type of commodity. 98
Oil and oil products tankers
Generally, crude oil is transported through pipelines.

However, medium-sized vessels are used for transporting crude oil in
certain conditions.
The various petroleum products produced at the refineries such as,
petrol, paraffin, diesel, lubricating oil, etc. are transported through
special type of tankers.
These tankers are dedicated to individual products and can carry
more than one product at a time.
99
Chemical tankers
Chemical tankers are designed, depending on the specific

requirements of the type of the chemical to be transported.
The tankers designed for chemicals, like sulphuric acid, for instance,
have their inner walls coated with the resistant to prevent steel from
dissolving.
Chemical tankers are generally painted red or orange, so that they
can be easily identified, thus signalling other vessels to be extra
careful to avoid accidents.
100
Gas tankers
LPG and LNG tankers are one of the most technologically advanced
and expensive tankers.
They are designed to maintain a very low temperature and high
pressure for keeping the gas in liquid form.
Similar to chemical tankers, gas tankers have to be operated very
carefully as even a small pierce in the tank will release highly
inflammable gases into the environment.
101
Container carriers
Containerization has been one of the biggest revolutions in the

shipping industry.
Earlier, various commodities to be transported were delivered to the
port in small packages such as boxes, crates, drums, etc.
This cargo was then loaded, one by one on the ship at the port, and
subsequently, unloaded at the destination port.
The entire process was expensive and time consuming.
Now, with the advent of containerization, cargo is packed in the
standard-sized containers at the manufacturing site itself.
These containers are then sealed and transported to the port via
roads, railways or inland waterways.
The containers are loaded and unloaded at the port with far more
102
ease, resulting in reduced turnaround time.
Container carriers
Finally, the containers are transported from the destination port to

the final customer who unseals them and removes the cargo.
Container ships generally do not have any in-built facilities for
loading or unloading the cargo.
They completely rely on the cranes available at the ports.
Lift on Lift off (LoLo) vessels
In these vessels, containers need to be lifted by cranes for loading

them.
103
Roll on Roll off (RoRo) vessels
These ships are designed to carry wheeled cargo such as automobiles,

railway carriages, etc.
These vessels have been built in ramps that help loading or unloading
the cargo by rolling over.
Special large RoRo vessels are being designed for new automobiles
known as Pure Car Carrier (PCC) or Pure Car Truck Carrier (PCTC).
The cargo in these vessels is generally measured in Lengths in Metres
(LIMs) instead of tonnage.
This is calculated by multiplying cargo length in metres by its width
in lanes.
The car equivalent unit (CEU) is another frequently used unit.
ConRo (Container Roll on Roll off) vessels are also available now, for
104
carrying containers and rolling cargo at the same time.
Feeder vessels
These are the container vessels designed to serve small ports with
much less traffic.
They are smaller in size as compared to conventional container vessels
and sometimes have in-built cranes.
Specialised carriers
Apart from the conventional vessels, there are many vessels designed
to handle a particular kind of cargo or to suit a particular
environment or for some other special purpose.
Some of them are as follows:
105
Reefers
Perishable commodities such as fruits, meat, fish, vegetables, dairy

products, etc, need refrigeration for their transportation.
Reefers are ships specially designed, with in-built refrigeration, for
this kind of cargo.
Although reefers have been in use for quite some time now, a major
chunk of the perishable goods is carried by the refrigerated
containers.
Train ferry
These ships are particularly designed to carry railway vehicles.

On deck, the ship is generally fitted with railway tracks.
The main advantage, of specialised ships for railway vehicles, is
transporting several vehicles at one time.
106
Floating, Production, Storage and Off-loading (FPSO) ships
These ships are designed specifically for the sea at the off-shore oil
and gas stations.
They are capable of loading all the oil and gas produced, process it,
store it and off-load it in the tankers or pipelines as and when
available.
Semi submersible ships
These ships have most part of their body under water.
The cargo storage is also under water.
They are less damaged by waves, as a major part of the body is
under water.
107
Supply vessels
These ships transport goods to and fro from the off-shore oil
platforms.
They are specially designed for this purpose.
The cargo generally includes cement, potable and non-potable water,
chemicals, fuel, etc.
Barge
These ships are generally meant for transportation through the river.
They are flat-bottomed and need to be moved by tug boats or tow
boats.
They are, normally, used for the movements of dry bulky
commodities.
108
Crane vessels
These ships are designed with in-built cranes to lift heavy loads.
They are handy in off-shore constructions.
Ferry
A ferry is a ship designed to transport passengers and vehicles

between two or more ports on a regular schedule.
Another significant criterion of classifying types of ships is by their
capacities.
The capacity of ships based on the type of cargo carried varies as
follows:
109
Classification of ships based on tonnage
110
Tankers
Tankers (liquid bulk tankers) carry crude oil as well as products.
Product tankers are referred to as either 'clean' or 'dirty'.
Clean tankers carry refined petroleum products such as gasoline,
kerosene, jet fuels, or chemicals.
The dirty vessels transport products such as heavy fuel oils or crude
oil.
Larger tankers usually carry only crude oil.
111
Crude tankers
Panamax - Size: 60,001 - 80,000 dwt - Approximate 32.2 metres beam
limitation
This is the largest ship in size that can pass through the locks of the
Panama Canal.
The locks are 1,000 ft long, 110 ft wide and 85 ft deep.
Panamax dimensions are - overall length (LOA) of 965 ft (290 m),
beam of 106 ft (32.3 m) and draft of 39.5 ft (12.04m).
Aframax - Size: 80,000 - 119,000 dwt
This is the largest crude oil tanker size in the AFRA (Average Freight
Rate Assessment) tanker rate system.
Suezmax - Size: 120,000 dwt - 200,000 dwt
This is the maximum size crude oil ship that can pass through the
Suez Canal in Egypt. 112
Crude tankers
Very Large Crude Carrier (VLCC) - Size: 200,000 - 300,000 dwt
These are very large crude oil carriers that transport crude oil from
the Gulf, West Africa, the North Sea and Prudhoe Bay to destinations
in the United States, Mediterranean Europe and Asia.
Although VLCCs are otherwise too large, it is possible to ballast these
vessels through the Suez Canal.
Ultra Large Crude Carrier (ULCC) - Size: 300,000+ dwt
These are the largest man-made vessels that move.

These ships sail the longest routes, typically from the Gulf to Europe,
the United States and Asia.
They are so large that they require custom-built terminals for loading
and unloading.
113
Product tankers
Small - Size: 3,001 dwt - 19,000 dwt
This type of tanker is often used in coastal waters.
These typically carry kerosene, heating oils, fuels and chemicals.
Handy or Handysize - Size: 19,001 - 25,000 dwt
This is a popular-sized tanker, but typically not used in very long
voyages.
Medium or Handymax - Size: 25,001 - 45,000 dwt
This is a larger 'Handy' sized vessel.
Large/Long Range One (LRI) - Size: 45,001 - 70,000 dwt
This vessel is used for long voyages.
Large/Long Range Two (LRII) - Size: 70,001 - 100,000+ dwt
This vessel is used for long voyages.
114
Product tankers
Bulk carriers
These vessels carry dry grains, fertilisers, phosphates and ores.
Handysize - Size: 10,000 - 40,000 dwt
These are small bulk carriers that make up the majority of the world's short
haul fleet.
Handysize can refer either to a bulk carrier or a tanker.
Handymax - Size: 40,001 - 60,000 dwt
These are a larger version of the Handysize vessels and popular for both
bulk and crude carriers.
These vessels have a large variation in size and characteristics.
Panamax - Size: 60,001 dwt - 100,000 dwt
This is the maximum size ship that can pass through the locks of the
Panama Canal.
Locks are 1,000 ft long, 110 ft wide and 85 ft deep. 115
Product tankers
Bulk carriers
Panamax dimensions - overall length (LOA) of 965 ft (290 m), beam of 106 ft
(32.3 m) and draft of 39.5 ft (12.04 m).
Capesize - Size: 100,001 dwt - 199,000 dwt
These are vessels that are too large to pass through the locks of either the
Panama or Suez Canals.
As a result, these vessels must travel around the Cape of Good Hope in South
Africa or Cape Horn in South America to their destinations.
They also require deep-water ports.
Very Large Ore/Bulk Carriers (VLOC/VLBC) - Size: 200,000 dwt - 300,000 dwt
These vessels are large bulk carriers and cannot pass through either the
Panama or Suez canals.
Ultra Large Ore/Bulk Carriers (ULOC/ULBC) - Size: 300,000 + dwt
116
These are the largest bulk carriers built to date .
Definitions & Glossary
117
Definitions & Glossary
Definitions
Capacity: Capacity of a port is the total capacity of all its berths

Berth capacity: (Throughput per day * Occupancy Rate) * No. of
days
Occupancy rate: (Hours occupied / hours available) * 100
Hours available: (365 - planned maintenance - other constraints) *
(no. of hours per day)
118
Operational Performance Indicators
Pre-berthing time: This is the time taken from the arrival of the ship
at the anchorage (reporting station) till the time it is berthed
Turn-around time (TAT): Refers to the time since the ship reports at
the anchorage till the time it leaves the port
Average output per ship berth day: It is defined as the ratio of the
aggregate cargo to the total number of berth days
Non-working time to total stay at berth: It is the total of the idle time
from the time of berthing to sktart of work, idle time during ship
operation and idle time taken from time of completion of operations
to sailing from berth together
119
Inter-dependency of operational Indicators
120
Glossary
Anchorage
Port charge relating to a vessel moored at approved anchorage site in a
harbor.
Approach channels
An approach channel is an artificially dredged portion of the seabed
created to provide adequate navigational depth to the ships entering or
leaving the port. Lack of adequate depth can be a constraint for large
ships from calling on certain ports.
Artificial harbour
An artificial harbour is created by constructing physical obstructing
structures like breakwaters, artificial mounds, dykes etc so that the
impact of sea currents is minimized and ships can enter the harbour
area safely.
121
Glossary
Artificial lagoon port
An artificial lagoon port is established by creating a dredged lagoon
(this extends the sea approach into the land area), which protects the
ships entering the lagoon area from strong sea currents.
Barge jetties
Barge jetties are typically RCC structures that are erected on the
waterfront to handle loading and unloading of cargoes on to barges
using grab cranes.
Berth
Berths are used in ports and harbours to define a specific location
where a vessel may be berthed, usually for loading and unloading.
122
Glossary
Berth hire charges
Berth hire charges form part of the port-related dues claimed by the
port authorities. The dues relate to the fees charged to a shipping line
towards hiring of the berths for cargo unloading and loading
operations at a port. The charges are calculated on the basis of
number of berths engaged by a shipping line and the duration of a
berth hire in terms of berth days or hours.
BOOST
Build-Own-Operate-Share-Transfer (BOOST) is a contractual
modality, wherein an investor (a licensee) is involved with the
licensor in building an infrastructure facility, owning and operating
the facility for the stipulated period of lease. The investor then shares
the facility with the licensor and finally transfers the ownership of
123
assets back to the licensor, after the expiry of the lease period.
Glossary
BOOT
Build-Own-Operate-Transfer (BOOT) is a mode of contract for
taking up infrastructure-related projects, wherein the private
investor builds the infrastructure facility, owns and operates the
facility for a stipulated lease period and transfers ownership back to
the licensor after the lease period is over.
BOT
Build-Own-Transfer (BOT) is one of the modes of financing an
infrastructure project, wherein the private investor builds the
infrastructure facility, operates it for a specified lease period and has
to finally transfer the ownership rights to the licensor after the
expiry of the agreed lease period.
124
Glossary
Break bulk
Break bulk cargo forms part of the general cargo handled by a port,
which comprises of small parcel sizes of various bulk and other minor
commodities, which are carried in the general cargo holds in a ship.
Buffer yard
Buffer yard refers to a port-side warehousing of mainly factory stuffed
containers that directly arrive at the port to be loaded, but need to be
temporarily stored till the ship is berthed for loading in the port.
Creek port
Creek port refers to a port facility that is set up along a creek
formation, which generally extends the sea approach into the land
mass.
125
Glossary
Capital dredging
Capital dredging activity in ports mainly refers to dredging of the
approach channel and port basins, which are normally taken up on a
one-time basis for creation of basic physical infrastructure of ports.
Capital dredging projects are also typically highly cost-intensive and
considered as part of the capital expenditure of ports Captive berths
Captive berths refer to those dedicated berths in a port that are
exclusively reserved by a single user for loading and unloading of
cargo, under a special contract agreement with the port
authority/operator. Sometimes, the shipping lines that have regular
movement of their ships at a particular port may also have a captive
berth to avoid normal berthing delays.
126
Glossary
Captive cargo port
When most of a ports inbound cargoes are being shipped short
distances and most of its export products come from nearby areas,
the port is called a captive cargo port.
Cargo hinterland
The area from which products are delivered to a port for shipping
elsewhere is that port's hinterland.
Cargo related charges
Cargo-related charges refers to port dues payable on account of cargo
loading and unloading operations, including its movement to the
port-side storage area.
127
Glossary
Coastal Regulation Zones (CRZ)
Coastal Regulation Zones (CRZ) are areas demarcated under the
Environment Protection Act, where there are a number of
restrictions imposed on construction of any artificial structures with
a view to protect the marine ecology, including various forms of
marine life and ecological systems.
CONCOR
Container Corporation of India (CONCOR) is a subsidiary of Indian
Railways, handling bulk of the rail-based movement of containers in
and out of ports and ICDs in India.
128
Glossary
Container
A box made of aluminum, steel or fiberglass used to transport cargo
by ship, rail, truck or barge. Common dimensions are 20' x 8 X 8'
(called a TEU or twenty-foot equivalent unit) or 40' x 8' x 8', called an
FEU. Variations are collapsible containers, tank containers (for
liquids) and "rag tops" (open-topped containers covered by a
tarpaulin for cargo that sticks above the top of a closed box). In the
container industry, containers are usually simply called boxes.
Container Freight Station (CFS)
Container Freight Station (CFS) is a custom-bonded warehousing
facility, where the containers are stuffed and de-stuffed for export and
import.
129
Glossary
Conventional dry bulk cargo
Conventional dry bulk cargoes refer to cargoes like coal, iron ore and
food grains.
Demurrage
Demurrage refers to the penalty imposed by the port authority on the
receivers of cargo for not clearing cargo from the port premises within
the stipulated time.
Dockage
A charge by a port authority for the length of water frontage used by a
vessel tied up at a wharf.
Draft
The depth of a loaded vessel in the water taken from the level of the
waterline to the lowest point of the hull of the vessel; depth of water, or
130
distance between the bottom of the ship and waterline.
Glossary
Dry docking
Dry docking of a ship refers to docking of a ship for repairs and other
related maintenance work at a facility specially created for the
purpose.
DWT
Dead Weight Tonnes is a measure of the cargo-carrying capacity of a
ship and refers to the total weight of the cargo that a ship can carry
when loaded down to its marks, including the weight of the fuel,
stores, water ballast, fresh water, crew passenger and other baggage.
Estuary port
Estuary ports are those ports that are located along the inland estuaries
that are formed inside the coastal line and which connect many interior
places with the sea. 131
Glossary
Fair weather port
Fair weather ports are those ports that are not operational throughout
the year and are generally closed during the monsoon months, when
seas are very rough.
Finger jetties
Finger jetties are artificially-created narrow-width RCC-based
structures that protrude into the sea to take advantage of deeper draft
availability away from the shoreline for berthing ships and other
vessels.
Gangway charges
Gangway charges refer to the charges levied by the port authority for
use of roads and passages in the port area to carry cargo from the
berth-side to the storage area. 132
Glossary
GRT
Gross Registered Tonnage is a notified measure of ship capacity
calculated from the total volume of all enclosed spaces measured in
cubic metres, using a standard formula. For some ship types,
especially those with complex hull forms, the gross tonnage and gross
registered tonnage may be significantly different.
ICD
Inland Container Depot is a cargo storage and transit facility that is
connected to a port by a rail.
Inner harbour
Inner harbour refers to a natural harbour area that gets created close
to the shore line by incursion of the seas into the land mass.
133
Glossary
International hub port

International hub port refers to a port that acts as a cargo consolidation
point for overseas-bound cargo from a number of surrounding port
locations. Bulk of the cargo handled through an international hub port
is actually transhipped from other ports.
JIT (Just in Time)
The abbreviation for "just in time," which is a way to minimize
warehousing costs by having cargo shipped to arrive just in time for its
use. This inventory control method depends on extremely reliable
transportation.
Lift On-Lift Off (Lo/Lo)
Cargo handling technique involving transfer of commodities to and
from the ship using shoreside cranes or ship's gear. 134
Glossary
Maintenance dredging
Maintenance dredging refers to the dredging work undertaken by a
port at regular intervals to maintain the draft of the approach
channel and draft along-side berths, especially in case of riverine
and estuary ports.
Marine related charges
Marine related charges refer to charges such as berth hiring charges,
wharfage, light dues etc for use of marine infrastructure maintained
by a port authority.
Marshaling yard
This is a container parking lot, or any open area where containers
are stored in a precise order according to the ship loading plan.
135
Glossary
Containers terminals may use a grounded or wheeled layout. If the

cargo box is placed directly on the ground, it is called a grounded
operation. If the box is on a chassis/trailer, it is a wheeled operation.
Mechanical dry bulk cargo
Mechanical dry bulk cargo refers to those dry bulk cargo items like
coal, iron ore, clinker etc which are loaded and unloaded from ships
at ports using mechanised cargo handling facilities like conveyors
and other technology aided means.
Mother vessels
Mother vessels are large cargo ships that operate on major trade
routes carrying cargo that are consolidated for them by smaller
feeder ships from a number of smaller ports.
136
Glossary
Natural harbour
A natural harbour such as Mumbai is formed when a large portion of
the sea ingress into the land mass and creates a natural sea-front,
which does not experience normal ocean currents and which provide
a tranquil and safe waterfront for ships to sail into and out of the port.
Parcel size
Parcel size refers to the tonnage per shipment handled by a cargo-
carrying ship, with reference to a commodity per single voyage
between port of origin and port of destination.
Passenger jetty
Passenger jetty refers to an artificially created RCC structure used for
landing passenger vessels and for disembarking of passengers.
137
Glossary
Riverine port
Riverine port is one that is located along the river, close to a point of
its confluence with the sea.
Roll on/ Roll off (Ro/Ro)
A ro/ro ship is designed with ramps that can be lowered to the dock
so cars, buses, trucks or other vehicles can drive into the belly of the
ship, rather than be lifted aboard. A ro/ro ship, like a container ship,
has a quick turnaround time of about 12 hours.
Satellite port
Satellite port refers to the development of a port location that is in
close proximity to an existing nearby major port.
138
Glossary
SBMs
Single Bouy Mooring (SBM) is a floating structure that is erected in the
high seas. It features a rotatable upper platform with inlet/outlet for
receiving of crude oil cargo and other liquid cargoes, from large tanker
vessels, which in turn are connected by pipelines through the fixed
part of the floating berth structure to the nearby land storage point.
Bulk of the crude oil handling on the west coast of India is currently
done through such SBM facilities off the ports of Kandla and Sikka.
Tank farms
Tank farms are essentially shore-based storage facilities for liquid
cargo and are often connected by pipeline through which the stored
liquid cargo is finally evacuated to actual user sites like refineries.
139
Glossary
Tidal port
Tidal ports are those ports, whose available draft conditions both at
the port entrance and at berths are dependent on tidal conditions.
Ships generally enter and leave such ports only in high tide
conditions, as available depth under the low tide conditions are not
sufficient for the movement of ships.
Towage charges
Towage charges pertain to towage services provided by the port
authority.
Tug hire charges
Tug hire charges relate to the tugging services provided by the port
operator/authority, which own and operate the tugs.
140
Glossary
Twenty-foot equivalent units (TEUs)
It is the standard size of a container. Two twenty-foot containers
equal one FEU. Container vessel capacity and port throughput
capacity are frequently referred to in FEUs or TEUs.
Vessel related charges
Vessel-related charges pertain to those charges that are levied by the
port authorities on shipping lines for various ship-related services
provided such as anchorage, mooring, pilotage, tugging, towage etc.
Weighment charges
Weighment charges refer to charges for weighing services using
facilities such as weigh bridges in a port area.
141
Glossary
Wharf
A wharf is a fixed platform, commonly on pilings, roughly parallel to
and alongside navigable water, where ships are loaded and unloaded.
They often serve as interim storage areas. Smaller and more modern
wharves are sometimes built on flotation devices (pontons) to keep
them at the same level as the ship even during changing tides.
Wharfage
Wharfage is charged separately by many Indian ports as part of the
marine related charges for having made the provision of a navigable
water front .
142
Key Monthly Developments
143
Traffic at major ports continues to decline in February 2014
In February 2014, traffic at major ports declined marginally by 0.9
per cent y-o-y to about 43.8 million tonnes.
This decline is mainly on account of fall in POL traffic.
On the other hand, increase in traffic for other commodities
restricted the fall.
During April 2013 - February 2014, the total traffic at major ports
grew by 1.2 per cent to about 504 million tonnes.
The increase in total traffic for the 11-month period was supported
by surge in coal traffic.
Traffic for other commodities declined during the period.
144
Monthly traffic at major ports
145
Fall in POL and container traffic led to decline in monthly traffic
Petroleum, oil and lubricants (POL) traffic declined by 12 per cent y-o-
y in February 2014, mainly due to fall in traffic at Kandla port.
POL traffic at Kandla port declined primarily on account of ramping
down of operations at RIL's one of the four crude distillation units
(CDU), which is due to shutdown for regular maintenance in March.
146
Kandla and Kolkata port posted decline in monthly traffic
Decline in monthly traffic was mainly caused by Kandla port during

February 2014.
Kandla port handled a total traffic of about 6.6 million tonnes during
the month, which 17 per cent lower than a year ago.
Kolkata port followed the trend with similar decline in traffic to
about 2.8 million tonnes.
Traffic at Kandla port declined due to lower POL traffic whereas
traffic for almost all commodities declined at Kolkata port.
Haldia Dock Complex (HDC) of Kolkata Port Trust (KoPT) has been
increasingly facing draft issues where incoming vessels offload more
of the cargo at nearby ports like Dhamra and Paradip, before coming
to HDC.
147
Traffic for coal and other cargo increased during February
Total coal traffic for the month increased by about 9 per cent y-o-y to
7.3 million tonnes in February 2014.
This was mainly lead by the growth in coal traffic at Paradip, Ennore
and Vizag ports.
While coking coal traffic increased at Paradip port, increase in
thermal coal traffic drove the growth at Ennore port. Paradip port
handles coking coal for steel plants like SAIL (Rourkela).
Ennore port handles thermal coal mainly for Ennore Thermal Power
Station and Tamil Nadu Electricity Board (TNEB).
Other cargo traffic increased by about 12 per cent y-o-y to 9 million
tonnes.
Other cargo includes bulk chemicals, pulses, edible oil, sulphur, etc.
148
Share of coal traffic increases
149
Coal drives the traffic growth during April 2013 - February 2014
During April 2013 - February 2014, total traffic at major ports

increased by about 1.2 per cent y-o-y to about 504 million tonnes.
Increase in total traffic was driven by a significant increase in coal
traffic.
Total traffic for rest of the commodities declined y-o-y during the
period.
Coal forms about 19 per cent of the traffic at major ports, out of
which about two-thirds is contributed by thermal coal.
Thermal coal traffic increased by about 24 per cent during the 11-
month period, while coking coal traffic increased by about 14 per
cent.
150
Ennore and Paradip port lead the increase in traffic
These two ports have led the growth in total traffic.
While the growth in traffic at Ennore port was led by thermal coal
traffic, traffic at Paradip port increased due to surge in coal and iron
ore traffic.
Iron ore and container traffic dampen the growth
Total traffic increased by 6 million tonnes y-o-y during April 2013 -

February 2014, which is merely 1.2 per cent higher as compared to
last year.
Overall traffic growth was restricted due to fall in iron ore and
container traffic at major ports.
In addition, decline in traffic for other dry cargo and fertilizers has
also affected the growth.
151
Capacity break up at major ports
152
Recent Developments
Adani Ports wins Ennore Container terminal bid
Ennore Port Ltd in Tamil Nadu has awarded a contract to build a

container-loading facility to Adani Ports and Special Economic Zone
Ltd (APSEZ) after the firm placed the highest revenue-share price
bid.
APSEZ had cited a revenue share of 37% for building the new
terminal with an investment of Rs.12.7 billion that can load 1.4
million standard containers a year.
153
New standalone container terminal at JNPT flagged off
Foundation stone of new standalone container terminal was laid
down this month (March 2014).
The project entails developing a 330-meter container terminal with a
capacity of 0.8 million TEUs and an estimated cost of Rs 6 billion.
The project would be developed by Nhava Sheva (India) Gateway
Terminal Ltd (NSIGI).
In addition, development of fourth container terminal was awarded
to PSA Bharat Investments Pte Ltd, at a revenue share bid of 36 per
cent.
The fourth terminal would have the capacity of 4.8 million TEUs per
annum and would be built at an estimated cost of Rs 79 billion.
154
Gujarat Pipavav Port gets environmental clearance for expansion
plan
Gujarat Pipavav Port has received approval from the Ministry of

Environment & Forests (MoEF) for its expansion plan.
GPPL's expansion plan will increase its capacity to 65 million tonnes,
which will be executed for an estimated cost of Rs 1,097 crore.
155
Inland Waterways
156
Introduction Inland waterways
Rake shortage creates coal pile-up at east coast ports and coal mines
Huge quantities of imported coal and other dry cargo are awaiting
evacuation at the east coast ports of Paradip, Visakhapatnam and
Gangavaram due to the shortage of railway rakes.
The unavailability of railway rakes is an issue of concern to several power
plants, steel plants and to a large number of traders dependent on coal
imports through the eastern ports.
CIL (Coal India Ltd) faces a similar kind of problem at its coal mines with
its coal not being sold owing to reduced availability of railway rakes.
The railways are operating at 120-140 per cent line occupancy ratio on the
Eastern, South Eastern and East coast railway routes, adding to the
problem of significant shortage of rakes.
These issues highlight the need for an alternate mode of transport. 157
Inland water transport in India
Inland water transport (IWT) is an energy-efficient and cheaper mode
of transport for bulk commodities, especially those originating and
terminating on waterfronts.
IWT forms a small part of the total transport network. In terms of total
inland cargo, its share is less than 1 per cent.
In 2008-09, national waterways handled 58.2 million tonnes of traffic
compared to 32.6 million tonnes in 2003-04.
Currently, cargo transportation in an organised manner takes place
mostly on three National Waterways (NW), in the states of Assam,
Goa, Kerala and West Bengal.
India has navigable waterways aggregating to about 14,500 km of
which about 5,200 km of major rivers and 485 km of canals are
suitable for operation of ships. 158
Inland water transport in India
Most of the waterways suffer from navigational hazards like shallow

waters and narrow width of the channel during dry weather, siltation,
bank erosion, absence of infrastructure facilities like terminals and
inadequacy of navigational aids.
Waterways are being developed for navigation with the necessary
infrastructure, such as, fairway, terminals, and navigational aids, fleet
to enable the IWT mode to become competitive and attract cargo
dictated by market forces.
159
Inland waterways
There are five inland waterways with the status of National Waterways. These are depicted in
160
the table below:
The national waterways system
161
NW1 came into being in October 1986. NW2 connects Sadiya to Dhubri,
which lies of the international border of India and Bangladesh.
NW3 refers to the route of the West Coast Canal along with
Champakara and Udyogmandal canal.
The government declared two more waterways in 2008.
These include the NW4 involving the rivers Krishna, Godavari,
Buckingham and the Eluru Kakinada canal system and NW5, which
involves the East Coast Canal in Orissa, Hijli tidal canal in West Bengal,
rivers Brahmani and the Mahanadi.
The government is considering the option of according the status of
NW6 to the Mandovi - Zuari river system, developed and maintained
by Goa, with an annual movement of over 44 million tonnes of iron ore.
162
The Barak river is also under consideration to become NW7 for a
waterway of 140 kms in Assam.
Similarly, the Mumbai creeks and the River Tapi in Gujarat are also
important.
Advantages of Inland Water Transport
An economical means of transportation of coal, minerals and other
bulky dry and liquid raw materials for industries
A highly efficient mode of transport in terms of energy consumption
Immediate access wherever water exists with no investment required
in line haul capacities
A smaller amount of investment for maintenance
163
Limitations of inland water transport
This form of transport is slow as compared to other forms of land
transport
Navigable waterways are not perennial in many areas due to seasonal
fluctuations in water levels
Heavy capital investment required in construction maintenance and
dredging operation of canals
164
Regulation of inland water transportation
Inland Waterways Authority of India
The key responsibility of the Inland Waterways Authority of India

(IWAI), a statutory body under the Ministry of Shipping, is to plan,
develop, maintain and manage the national waterways for shipping
and navigation, and to promote inland water transport in India.
165
IWAIs charter of functions
To maintain existing navigable waterways efficiently, revival of dead
and dying rivers, and channels or canals for navigation
Maintain pilotage and hydrographic survey services
Remove wrecks and obstructions in navigable waterways
Fix maximum and minimum fares and freight rates for inland water
transport on behalf of the government
Ensure coordination of inland water transport with other forms of
transport, with major seaports, industries, and trade and agriculture
interests
Issue permit or licence for right of operations
166
Opportunity for private sector
The government has envisaged the private sector to carry out the
following:
Construct and operate terminals and river ports
Provide mechanised handling systems, and maintain navigational
facilities
Provide pilotage facilities
Own and operate vessels for cargo and passenger movement
The government expects the private sector to participate in
developing infrastructure and services in inland waterways to reduce
the gestation period for establishing new facilities, upgrading
technology, and improving management techniques.
The policy document outlines the areas of government support:
167
Opportunity for private sector
Acquire land where required to create facilities and give the land on
lease
IWAI to have equity participation up to 40 per cent of the project cost
Facilitate long-term cargo assurance
Undertake viability gap funding
Encourage private investment in IWT with 100 per cent foreign direct
investment (FDI) in IWT infrastructure and operations
Exempt company income from IWT operations from income
tax/corporate tax fully for the first 10 years and up to 50 per cent
during the next 10 years
Levy zero customs duty on imported equipment/machineries, spares
and installations for IWT development/operations.
168
Terminals planned by IWAI
IWAI currently operates seven terminals on the three national
waterways.
It plans to add another 50 terminals via the public-private
partnership (PPP) annuity mode.
169
Terminals planned waterway basis
170
Infrastructure requirements at terminals
Permanent berths
Handling gear such as shore cranes and gantries (for containers)
Mobile cranes, forklift trucks and trailers
Storage sheds, warehouses and open stacking yards
Sufficient lighting and power (for shore connection to vessels)
Water supply
Bunker supply
171
Attractive investment opportunity for private sector
With IWAI planning to establish 50 river terminals along the five
national waterways, the private sector has an investment opportunity
of Rs 65 billion.
The river terminals would be built on the PPP annuity basis.
The payback period for a typical project in NW1, involving an
investment of Rs 1.3 billion for a capacity to handle 3 million tonnes of
cargo, will be 6-8 years.
Private terminal builders would have the opportunity to establish
infrastructure to cater to the existing demand in NW1 to transport 12
million tonnes of coal, which is expected to increase to 25-30 million
tonnes over the next 5-7 years.
Terminal operators would have cargo-handling and vessel-calling
charges as the main sources of revenue. 172
Attractive investment opportunity for private sector
Private players have the opportunity of setting up terminals for
captive users such as power and cement plants due to fewer
transportation options available o n account of infra structure bottle
necks .
173
Scope of dry cargo movement through NW1
Unavailability of rakes from railways and higher utilisation levels of
railway broad gauge lines in Bihar, Orissa and West Bengal have
created transportation hurdles for power plants located near national
waterway 1 (NW1) (Ganges River).
This, in turn, has created an opportunity for coal transportation
through NW1, which is more cost efficient than both, rail and road
transport.
The government is planning to set up 15 terminals on NW1, which,
correspondingly, increases the scope of transporting coal on these
terminals.
174
Terminals planned at NW1
175
Terminals planned at NW1
A number of thermal power plants are located on the banks of the

Ganges, making coal a potential cargo.
West Bengal, Bihar and Uttar Pradesh have high agricultural activity.
Therefore, fertilisers (especially urea) become another potential cargo on
NW1.
Currently, several power plants cannot operate at high plant load factors
on account of shortage or poor quality of domestic coal.
At present, there are 10 thermal power plants adjacent to or on the banks
of NW1 (Ganges) in West Bengal and Bihar.
Several power plants, apart from capacity addition in existing power
plants, are expected to come up.
These include, Kahalgaon II, Barh I and II and Farakka III of National
Thermal Power Corporation (NTPC). 176
Power plants located along NW1
177
Power plants located along NW1
It is estimated that thermal power plants consume about 10,000
tonnes of Indian coal (6,000 tonnes of imported coal with lower ash
content) per day for every 500 MW.
A 60-wagon coal train can carry about 1,500 tonnes of coal, which
means a requirement of about seven trains per day for every 500
megawatt (MW).
Hence, for Barh Super TPS alone (3,300 MW), nearly 25 trains per
day are required.
The existing traffic load on the rail broad gauge lines passing
through Bihar and West Bengal and the shortage of rakes makes it
almost impossible for the Railways to meet this demand.
On the other hand, one barge can carry cargo equivalent to 15 rail
wagons or 60 trucks. 178
Efficiency of a barge
179
Advantages of inland water transport:
Cost: Operating cost of IWT per tonne per km is 75 paise by barge,

1.18 rupees by rail and 1.51 rupees by truck.
Higher fuel efficiency: 1 litre of fuel can transport one tonne of
freight through 100-110 km by barge, while it can suffice for only 85-
90 km by rail and 15-20 km by truck.
Moreover, IWT will also score over rail and road transport if the
economic costs of less carbon dioxide emission and noise pollution
are factored in.
This will help in using the opportunity of trading in carbon credits,
which can be obtained given the low pollution levels by waterways.
180
NTPC and IWAI projects
Inland Waterways Authority of India (IWAI) and NTPC Ltd have

signed a Memorandum of Understanding (MoU) for the proposed
movement of imported coal from NTPCs Haldia/Sagar to Farakka,
Kahalgaon, and Barh power stations through the IWT mode.
As per the MoU, NTPC shall provide a commitment of 2.8 million
tonnes of coal and assured return cargo in the form of fly ash from
NTPCs power plants.
IWAI, on the other hand, will provide navigation channels for the
movement of barges, undertake project development activities and
design suitable framework to induct private players for carrying out
the entire coal movement.
181
Location of power plants and terminals
182
Project cost
183
Project cost
Presently, NTPC power plants are not operating at full plant load
factor given shortage of domestic coal.
Eastern Coal Fields are unable to supply more than 15 million tonnes
of coal to Farakka and Kahalgaon Super TPS against their
requirement of about 27 million tonnes per annum.
Kahalgaon and Farakka plants often have zero days of coal stock.
In addition, development of new coal fields has also been slow.
This shortfall is being met by imported coal.
However, due to unavailability of rakes, coal is being piled up at
ports, creating transportation bottlenecks for power plants.
The NTPC and IWAI project is expected to get through these
blockages.
184
Advantages due to water transport to NTPC
185
IWT compares favourably with rail and road costs.
If economic costs of less carbon dioxide emission and noise pollution
are also factored in, then IWT can easily score over rail and road
transport.
IWT provides an economically viable option for supply of imported
coal from Haldia to Farakka, Kahalgaon and Barh thermal power units.
Costs are less than that of railways as far as NTPC is concerned.
NTPC gets assured and economically viable supply of coal for its coal-
starved plants.
As coal starts moving through IWT on NW1, it paves the way for
similar movement to other existing/upcoming power plants.
The successful operation of this project will accord movement of coal
between 510 million tonnes on NW1. 186
Fly ash can be taken by the barges on their return journey.
The policy framework for private terminals in inland waterways
will take time to evolve.
However, at present, private players have the opportunity of setting
up and operating terminals for captive users such as power plants
and cement plants due to fewer transportation options available on
account of infrastructure bottlenecks.
187
DFC
188
Dedicated freight corridor (DFC)
INDIAN Railways (IR) has witnessed a remarkable surge in freight
traffic in the last 3 decades.
Traffic has increased by about 400 per cent from 197 million tonnes
in 1981-82 to 794 million tonnes in 2007-08.
An additional 40 per cent increase is expected by 2011-12 to result in
traffic reaching 1,100 million tonnes.
Most of this traffic will be on the Delhi--Kolkata and Delhi--Mumbai
main lines.
However, these routes are already saturated and utilisation of line
capacity is currently at around 130 per cent.
189
DFC plan
IRs decision to construct dedicated freight corridors (DFC) is seen as

the most effective solution to meet the ever-increasing traffic on these
routes.
The eastern corridor consists of a double line electrified network from
Sonnagar in Bihar to Ludhiana in Punjab (1,279 km).
The 1,483 km double-track western corridor will run from Jawaharlal
Nehru Port Trust (JNPT) to Dadri, where the two corridors meet.
The proposed eastern and western DFCs will segregate passenger
and freight traffic, maximising line capacity to accommodate the
increased traffic in the years to come.
To further enhance the throughput, IR has also decided to use 30-
tonne axle load wagons and double-stack containers (DSC) on these
corridors. 190
DFC plan
The western corridor will handle ISO containers from the west coast
ports to inland container depots (ICD) in the north.
IR has witnessed a steady increase in container traffic originating
from western ports with annual growth of around 20 per cent for the
last 15 years.
This traffic is likely to increase to 14 million TEU per year in the next
10 years.
191
Dedicated freight corridor
192
Project phasing
The Railways has established Dedicated Freight Corridor

Corporation of India Ltd (DFCCIL) to implement the freight corridor
project over the next 5 years.
DFCCIL has an authorised capital of Rs 40 billion at present, which is
likely to be increased subsequently, depending on the requirement. 193
DFC funding
The funding plan for the dedicated freight corridor project is almost
complete now.
For the western corridor, the Government of Japan will provide a loan to
meet about 67 per cent of the construction cost.
It is envisaged that a STEP (Special Terms of Economic Partnership)
Loan of around 450,000 million yen will be provided by the Government
of Japan to finance the western DFC between Rewari and Vadodara, as
well as to meet the locomotive requirements of the Ministry of Railways.
The loan will be extended on soft terms for a period of 40 years with a
moratorium of 10 years.
The Ministry of Railways will bear the remaining portion of the projects
construction cost as equity funding to the Dedicated Freight Corridor
Corporation of India. 194
DFC funding
The eastern corridor is expected to receive funding from multilateral

agencies such as the World Bank and the Asian Development Bank.
The World Bank will finance the 725 km section between Khurja and
Mughalsarai through a loan agreement and partly through equity
extended by the Ministry of Railways.
The combination of a loan from the Asian Development Bank and
equity from the Ministry of Railways will fund the remaining single
line portion between Ludhiana and Khurja.
Private investments will be used only if fund balances fall short.
The railway ministry will provide Rs 90 billion as equity for the project
in the first 2 years.
The total cost of the project is estimated to be Rs 280 billion.
195
DFC funding
The Railways sanctioned about Rs 13 billion during the Railway
Budget 2008-09 to carry out initial survey work.
The Railways Act, 1989, has been amended through an ordinance for
expeditious acquisition of land.
Using the amended Act, special organisations will be set up in each
state that fall under the jurisdiction of the eastern and western
corridors of the DFC project. DFCCIL will control these bodies.
196
Need for DFC
Cargo handled at the 12 major ports increased from 19.3 MT in 1950-1951 to
530.5 MT by the end of 2008-09.
Capacity at various ports is likely to increase with the approved expansion
programmes under the National Maritime Development Programme
(NMDP) and introduction of modern technology.
However, the capacity of the ports to handle cargo and thus reduce the
turnaround time of vessels is dependent upon its capacity to unload cargo
quickly and efficiently.
The lack of quick evacuation directly affects the turnaround time of ships at
major ports in India, which is in the range of over 3 days at present.
CRISIL Research estimates that traffic for all ports in India is likely to grow
at a CAGR of 7.6 per cent.
We expect container traffic to see the highest growth at 8.4 per cent from
197
2007-08 to 2012-13.
Existing railway network versus DFC
198
The existing railway network between Mumbai and New Delhi
covers the distance of 1,340 kms within 45 to 60 hours.
The distance from Delhi to Kolkata is 1,460 kms and it is covered in
50 to 65 hours.
The average speed of freight trains is 28 km/hr.
In the current scenario, mail/express trains are given precedence,
thus delaying the container trains.
The Railways are able to handle axle loads of only 22 kg in the
existing tracks.
Currently, trains carry 60 to 90 containers.
At JNPT port, containers of around 52 million tonnes were handled in
2007-08.
Of this 30 million, around 32 per cent is carried by rail. 199
51 per cent of the total containers sent to JNPT come from Delhi
Tughlakkabad.
In JNPT port, demand is to discharge nearly 4,000 containers but
railways are hardly able to discharge only around 1,000 containers
only.
This affects the turnaround time at the port.
The main commodities handled on the western corridor include
containers, food products, fertilisers etc.
Coal, iron ore, fertilisers etc are the main commodities transported
on the eastern corridor.
200
Proposed new tracks
The western corridors proposed new tracks will be double line in
nature and will be able to carry double stack containers.
The average speed of the new tracks will be 100 km/hr.
Long trains with 80-100 wagons and with the ability to carry 10,000-
15,000 tonnes (400 - 600 containers) are expected to ply on these
tracks.
201
Cost of transportation
Transportation via railways is more cost-efficient than by road.
202
Advantages of new freight corridor
This will lead to an increase the share of Indian Railways in container traffic
from current levels of 32 per cent.
Faster freight train operations will result in higher productivity.
Private players will be able to use high-end technology in freight
operations.
There will be no surface crossings on the corridor, enabling faster
movement of traffic.
The number of trains can be reduced by 40-50 per cent for the same
throughput.
The terminal congestion can be minimised at ports.
Turnaround time of containers at terminals and ports will reduce.
Matching of throughput for larger ships can be fulfilled in lesser time.
This will, in turn, encourage direct services of bigger ships to Indian ports.
203
Transit time for freight between Mumbai and Delhi will drop to
about 1.5 days from the 3 days taken currently.
The number of freight trains in the western corridor is expected to
rise from 15 each way each day to 70 -75.
The mix of containerised cargo to total cargo will improve from 15
20 per cent to 60-80 per cent (which is the global mix).
Turnaround time in the western ports will improve from the current
levels.
IR will be able to discharge more than 4,000 containers per day from
the JNPT port.
Traffic will move from JNPT to private ports in Gujarat because of
lesser distance and better efficiency.
Thus, the unit cost of transportation and inventory costs will reduce.
204
The faster movement of freight and fall in the turnaround time will
help to reduce the freight cost from current levels.
This can reduce even further because of the new technological
advancements in logistics.
The following ports are going to benefit the most from this project
due to faster movement of traffic:
205
Ports to be benefitted by DFC
206
Ports to reap benefits of DFC
CRISIL Research believes that the dedicated freight corridors (both,
western DFC and eastern DFC) will enable ports on the eastern and
western coast to service a larger market area quickly and more
efficiently.
The ports of Mundra, Pipavav, Dholera, Dahej, Hazira in Gujarat
and JNPT, Mumbai and Dighi in Maharashtra are expected to benefit
from the western DFC.
The eastern DFC is expected to benefit the ports of Paradip,
Gopalpur and Dhamra in Orissa and Kolkata in West Bengal.
207
Transshipment Hub
208
Transshipment hub
A transshipment hub port provides terminal and marine services to
handle and facilitate the quick transfer or transshipment of
containers between feeder and mother vessels.
Transshipment hub ports are highly specialised infrastructure
facilities, primarily handling international cargo.
Hence, the facilities of transshipment hubs are distinct from
traditional ports, with only few ports globally being transshipment
hubs.
209
Transshipment hub model
Point-to-point network
210
Transshipment hub network
211
In the transshipment model, the cargo for a certain region is first
delivered to a primary hub in that region, and then transported to the
destination by a feeder system.
Similarly, cargo from the region is also collected at the hub. It is then
re-routed to its destination.
Natural depth and proximity to international shipping routes are the
two most important criteria for the success of transshipment hubs.
The increase in ship size has forced carriers to seek higher returns
from their assets, especially for the mega container ships of 10,000
TEUs or higher.
This has led to a termination of calls to ports with lower volume.
Instead, shipping lines use feeder services to and from a
transshipment hub. 212
Hence, feeder ships and mainline ships are a feature of
transshipment ports, whereas gateway ports tend to focus on
mainline ships and rail/road access for containers with feeder berth
requirements.
Therefore, there is lower focus on transshipment cargo.
213
Industry consolidation and increase in ship size
In 2008, the 20 largest container shipping lines accounted for 8.8 million
TEUs of shipboard capacity, equivalent to 70 per cent of global capacity.
Hence, consolidation through mergers and acquisitions is expected as
shipping lines seek to secure greater economies of scale and scope in
providing global services.
The average capacity of container ships for the top 20 lines is 4,500
TEUs, which is more than double the average size of ships currently in
service.
The capacity of the largest container vessels has almost tripled since
1980, from 3,000 TEUs to more than 10,000 TEUs.
An increase in ship size is necessary to accommodate the continuous
growth in trade and reduce the carrier unit costs in view of severe
competition. 214
Industry consolidation and increase in ship size
The maximum ship size, which has already increased to over 10,000
TEUs, is expected to increase further to 15,000-18,000 TEUs.
Also, consolidation in trade patterns from China to the US and
Europe has contributed to increasing ships sizes.
215
Implications of ship upsizing for ports
A number of traditional ports are unable to accommodate mega

ships.
Key barriers to a port handling such ships include the need to dredge
deeper channels, lack of terminal land area and local traffic
bottlenecks.
Dredging in some ports involves considerable capital expenditure.
Also, mega ships are more easily handled at specially built container
transshipment terminals as compared to depth-constrained and
congested city ports.
New container mega hubs being built in a number of locations across
the world have the natural benefit of deep water, and therefore,
avoid high capital and dredging maintenance expenses.
216
Key success factors
The key factors responsible for the success of a transshipment port are:
Traffic - Transshipment hubs should be able to attract high traffic by
offering competitive charges since transshipment is a high volume, low-
margin business.
Strategic location - Close proximity to trunk routes, where deviation
time is kept to a minimum, allowing for short haul-trunk transit time.
(This is because shipping lines do not prefer to deviate from the
shipping route, unless the additional cost could be justified by re-
routing.)
High level of port efficiency - Transshipment hubs should be able to
achieve quick turnaround times as the journey of the mother and feeder
vessels are at fixed times, and any delay will cause losses to the
shipping line. 217
Key success factors
Adequate infrastructure - Transshipment hubs should have adequate
infrastructure such as container stack yards, multiple cranes capable
of faster movements, container freight stations, floating crafts like tugs
and pilot boats, and a good communication system like electronic data
interchange (EDI).
Good port connectivity - Transshipment hubs should have good rail,
road and coastal shipping connectivity for the smooth movement of
traffic.
A wide range of port services - Transshipment hubs should have a
wide range of port services such as bunkering facilities at competitive
rates, fresh water supply, fumigation services, pollution and oil spill
control, firefighting services, etc.
218
Key success factors
Approximately 25 per cent of all containerised cargo at the ports

relates to transshipment, with the general trend growing towards a
greater proportion of transshipped containers.
Apart from natural deep water and adequate shelter for vessels, the
key requirement of a container transshipment hub is its strategic
location - a hub has to be in a geographically suitable location,
preferably resulting in reduced steaming time for carriers.
A favourable location for a transshipment hub involves:
The ability to use fast feeder services to ensure point-to-point
movement for various origins/destinations, maintaining competitive
time and cost with alternative direct service options.
The site must be sufficiently central to serve a large sub-region, and
allow feeding costs to be minimised. 219
Key success factors
There must be significant cost savings for lines in their choice of a
nominated hub.
Offshore locations are also cheaper to develop and maintain than existing
ports.
Lower running costs benefit global carriers as well.
The terminal capacity utilisation is dependent on:
The handling system adopted - like the arrangement of containers in the
container yard to minimise the servicing time of the mother vessel.
The dimensions and stacking height of cranes.
Optimum utilisation of container yard size.
Transshipment ratio - since the port will handle both transshipment and
point-to-point cargo, it is crucial to have a higher mix of transshipment
cargo (in excess of 75 per cent) for efficient utilisation of infrastructure
220
and resources.
Many fast-growing transshipment hubs based in Asia-Pacific
region, especially China
The trade from China to the US and Europe has risen significantly
over the last two decades, making the route from the Mediterranean
Sea to the Indian Ocean the most important international shipping
lane.
The forecast for container handling mirrors the economic
development of China and its trade relations with the US and
Europe.
The importance that China currently has in container shipping is
apparent from the statistics for container ports.
Of the 25 largest container ports in the world, 16 are located in Asia,
of which seven are in China.
In North America, however, there are only three of these ports. 221
Many fast-growing transshipment hubs based in Asia-Pacific
region, especially China
Europe has six such ports.

Further, three of the four largest container ports in the world are in
China.
It is not just the size of these ports but also their level of activity.
Container handling in Shanghai increased by 45 per cent between
2005 and 2007, while at the Shenzhen Container Port, it was 30 per
cent.
This growth was on the back of sizeable capacity expansions at these
ports.
222
Top 20 container terminals and their throughput for 2005, 2006
and 2007
223
Top 20 container terminals and their throughput for 2005, 2006
and 2007
Singapore handled higher volumes than Shanghai and Hong Kong.
Over 92 per cent of the containers handled in Singapore are in the
transshipment category.
This high proportion is due to the relatively small home market.
However, ports in the Middle East are handling a very high
proportion of transshipment traffic.
Even some Mediterranean ports have unusually high proportion of
transhipment traffic.
This is especially true of the port of Tanjung Pelepas in Malaysia,
which has a transshipment level of 96 per cent.
224
Major transshipment hubs in Asia
Singapore Port
PSA Singapore Terminals and Jurong Port collectively operate the

worlds largest transshipment hub at Singapore.
In 2008, PSA handled 29.0 million TEUs.
Functioning as an integrated facility, its four terminals at Tanjong
Pagar, Keppel, Brani and Pasir Panjang serve 200 shipping lines,
which offer connections to 600 ports in 123 countries.
Jurong Port handled 0.062 million TEUs and 1.2 million tonnes of
bulk cargo in 2008.
225
Dubai Port
Dubai Port (DP) World's port at Jebel Ali in the UAE is among the
leading hubs and the seventh largest container port in the world,
serving more than 100 shipping lines.
In 2008, DP World recorded an 11 per cent growth in throughput,
handling 11.8 million TEUs as compared to 10.65 million TEUs in 2007.
Further, Jebel Ali has the largest cranes in the world, with the ability to
lift four 20-foot containers or two 40-foot container simultaneously.
The port can handle vessels of any size currently in operation.
Each terminal is equipped with a container repair yard.
The port also offers a full range of supply chain and logistic services,
including customs clearance, import and export freight management,
and stock control. 226
Colombo Port
Colombo Port in Sri Lanka is situated in an artificial harbour formed by
three breakwaters constructed over a century ago.
Colombo Port is owned by the Sri Lanka Ports Authority (SLPA), a
statutory body under the Ministry of Ports and Aviation (MPA).
SLPA operates three container facilities at the port.
The main container terminal, Jaya Container Terminal (JCT), has a
capacity of 2 million TEUs.
The two other container facilities are Unity Container Terminal with a
capacity of 0.3 million TEUs and Bandaranaike Quay with a potential
capacity of 0.2 million TEUs.
In addition, a private sector company, South Asia Gateway Terminal Pvt
Ltd (SAGT), promoted by APM Terminals, operates Queen Elizabeth
227
Quay, which has a capacity of 1 million TEUs.
Colombo Port
Currently, the majority of container operations are organised through

the four terminals.
The total capacity at Colombo Port, which is around 3.5 million TEUs,
handled 2.8 million TEUs of traffic in 2007.
Other cargo-handling facilities operated by SLPA within the harbour
include a tanker berth, cement and bulk grain-handling facilities,
quays used for vehicle imports, general cargo and military goods, and
a passenger/cruise berth at the southern end of SAGT.
228
Transshipment Hub-Indias Transshipment Hub Plan
229
India's transshipment hub plans
Container traffic at Indian ports is growing rapidly, increasing at a
CAGR of 16 per cent over the last 5 years, from 3.71 million TEUs in
2003-04 to 7.7 million TEUs in 2008-09.
CRISIL Research expects this growth to continue, and by 2013-14 the
country is estimated to handle 12.4 million TEUs.
However, inadequate facilities, distance from international shipping
routes and draft restrictions at most of the Indian ports prevent
mother vessels from berthing, creating a bottleneck to transshipment
cargo in India.
Jawaharlal Nehru Port Trust (JNPT) and Mundra Port are the only
ports along the west coast that receive mother vessels of around
4,000 TEUs.
230
Dubai, Singapore and Colombo ports act as transshipment hubs for
approximately 80 per cent of India-bound cargo, earning around
$350 million annually.
Hence, development of a transshipment hub capable of handling
large ships would help attract Indian cargo being handled at these
ports.
Approximately 69 per cent of the countrys total container traffic
originates in or is bound for northern and western India, with the
South accounting for 26 per cent and East a mere 5 per cent.
JNPT handles 50 per cent of this total traffic.
The main containerised cargo comprises garments, electronic goods,
agro products, cotton yarn, machinery/parts, granite products, coir
products, leather products and jute products. 231
With a 28 per cent share, the US-Canada-South America sector is the
main destination for containerised exports, and the Far East sector,
with a 25 per cent share, is the chief originator for containerised
imports.
Further, 82 per cent of the total container traffic is transshipped
through the Colombo, Singapore and Dubai ports.
232
Hub ports for India (2008)
233
Kerala ideally located for Indian transshipment hub
234
Kerala not only caters to the cargo interests of southern India but
also of northern and western India (though for specified
movements).
Hence, it could become viable to use ports in Kerala as a
gateway/transshipment port instead of transshipping cargo through
Colombo, Singapore or Dubai.
Due to Keralas proximity to international east-west sea routes, and
the deep draft available at the ports, savings in total origin-to-
destination cost of movement of containers to and from foreign
destinations can be achieved in several cases if containers move
through Kerala.
The hinterland of the port could thus be said to extend to not only
southern India but also western and even northern India. 235
This will considerably increase the potential for traffic at the port.
The strategic location of Kerala will make it an ideal transshipment
port for inter-coastal movement of domestic Indian containers by
coastal shipping as well.
The volumes derived from such transshipment will augment the
already point-to-point export-import trade handled from these
locations.
Further, dredging of the Setu-Samudram channel will reduce costs
and make it extremely attractive for lines to transship in Kerala.
There are proposals to start transshipment hubs at Kochi and
Vizhinjam in Kerala, and Colachel in Tamil Nadu.
236
While the Vallarpadam ICTT at Kochi will be operational in the next
few months, the bidding process for the Vizhinjam transhipment
hub has not yet been completed, and feasibility study for the
Colachel project is still to be carried out.
237
Vallarpadam International Container Transshipment Terminal
The emergence of Kochi in Kerala as a transshipment hub for India will
become a reality following the commissioning of the 1-million-TEU
phase I International Container Transshipment Terminal (ICTT) at
Vallarpadam.
The ICTT will be the largest single player among the container terminals
planned in India.
Kochi, being adjacent to the main shipping routes and linked to the
hinterland through a well developed system of national highways and
rail network, is an ideal location for the development of a hub catering
to global container trade and container trade from India towards Europe
and US.
DP World won the bid to develop and operate ICTT on a build-operate-
transfer (BOT) basis for 30 years by quoting the highest revenue share of
238
33.3 per cent to the Cochin Port Trust.
Thereafter, DP World formed a special purpose vehicle, India
Gateway Terminal Pvt Ltd (IGT), with 76.0 per cent equity held by
DP World, 15.0 per cent by Container Corporation of India
(CONCOR), 5.0 per cent by the Chakiat Group and 4.0 per cent by
Transworld Shipping.
DP World will subsequently transfer operations of the Rajiv Gandhi
Container Terminal (RGCT) at Kochi, which is currently, to ICTT.
ICTT will be constructed on 115 hectares of land at Vallarpadam, a
special economic zone inside Cochin Port.
The project is proposed to be developed in three phases - phase I will
be developed with 600 metres of quay designed to handle 1.0 million
TEUs at a capital cost of Rs 15 billion.
239
This phase of the project will have six Super Post Panamax cranes with
the terminal facilities and processes designed to service the largest
container ships.
Phase II will add another 300 metres of quay with a capacity to handle 0.5
million TEUs.
Phase III will add 900 metres of quay with a capacity to handle 1.5 million
TEUs.
The terminal will have the facility to berth mainline vessels and feeders
together with the possibility of exchange of containers.
From the feeder vessel, a container would be directly put onto the
mainline vessel, or vice-versa, resulting in a better turnaround time (TAT)
for the shipping line.
240
The containers landed at the terminal will have a multi-mode

transport option to the hinterland with good road connectivity
through National Highway (NH)-17 and NH-47.
The 8-km electrified rail link (with a capacity to carry 15 trains per
day each way), connecting ICTT to the main lines of the southern
railway at Edappally, is under construction.
In addition, the port has signed a memorandum of understanding
with Inland Waterways Authority of India (IWAI) to operate Ro
Ro/Lo Lo (roll on-roll off/lift on-lift off) barge services for
transportation of containers from all the 11 existing National
Waterway (NW)-3 terminals from Kollam to Kottappuram in
southern Kerala.
241
The success of ICTT will depend on:

Operational efficiency at the terminal (which should be higher with higher
volumes, and the number of crane moves should be significantly higher
than other ports).
The terminal handling charges at the port, which should be competitive
enough to attract traffic from Colombo.
The amount of transshipment traffic ICTT is able to attract from ports in
India such as Tuticorin Port, New Mangalore Port and Chennai Port, which
is currently handled by Colombo.
Reduction in marine charges by the Cochin Port, which is one of the highest
in Asia.
Cabotage law which reserves coastal shipping in India for only vessels of
Indian flag, thereby discouraging foreign shipping vessels from calling at
242
ICTT.
Other projects coming up at Cochin Port will help ICTT to attract

more traffic, especially the international ship repair complex and
international bunkering terminal.
243
Other investments at Cochin Port
244
Strategic importance of ICTT for promoters
DP World is one of the largest marine terminal operators in the

world, with 49 terminals and 12 new developments across 31
countries.
In 2008, DP World handled more than 46.8 million TEUs, an increase
of 8 per cent from 2007.
The company currently operates five container terminals at Indian
ports: Mumbai, Chennai, Vishakhapatnam, Kochi and Mundra.
ICTT will help the company streamline their business in the Indian-
subcontinent and compete with global competitor APM Terminals,
which operates SAGT in Colombo.
245
Transshipment Hub-Project Economics
246
Project economics of transshipment hub
CRISIL Research has analysed the attractiveness of a transshipment hub
port project for a port developer from a returns perspective.
We have tried to estimate the project IRRs and equity IRRs for port
projects, given the economic and regulatory environment, and factoring
in the traffic growth and tariffs chargeable by a port.
Note: The returns at various ports may vary depending on location,
operational efficiency, hinterland connectivity, tariffs, competition, size of
capacity expansion, timing of capacity expansion, economic growth rate,
amongst others.
CRISIL Research analysed the project economics of a transshipment hub
port similar to the ones set up in Kerala, with a capacity of 1 million
TEUs, and operating in a highly competitive environment.
Land for port activities is assumed to have been arranged by the Central
247
and state governments.
Details of project considered for transshipment hub
Charges and tariffs for port
Ports get their revenues from tariffs.

Each time a ship enters a port, the port earns revenue in the form of
vessel-related charges.
Over and above this, the port also earns tariffs through cargo-
handling charges.
248
Vessel-related charges
Vessel-related charges are charged on all vessels entering a port based
on the ships gross registered tonnage (GRT).
Vessel-related charges are levied on ships for the services that ports
provide in terms of guiding the ship to port, providing tug services,
letting the ship use the port, etc.
In relation to this, the port earns revenues in the form of port dues,
pilotage charges, berthing/unberthing charges, tug charges, etc
249
Cargo-related charges
Vessel-related charges are levied depending on the commodity being
transported through the port.
The key cargo-related charges include wharfage charges and cargo-
handling charges.
Tariffs will have to be competitive to attract traffic.
Initially, tariffs could be significantly lower than RoCE mandated at
major ports.
250
Base case analysis
The port that we have considered for the base case is situated in
Kerala.
The port that has been considered for our base case mainly handles
transshipment traffic.
It has a natural draft, ranging between 15-32 metres, and can handle
mother vessels.
The port offers good hinterland connectivity in terms of connection to
state and national highways, and to the railway system.
The port also offers operational efficiencies in terms of reduced pre-
berthing and quick TAT.
The following table provides details on the capacity that can be
handled at the port.
251
Assumptions on capacity and terminals at the port
Sources of revenue for port
Containers: We have assumed that the port authorities are only involved in
providing marine services for vessels arriving at the port, while all functions
related to handling of containers and providing the required equipment for
operations of the container terminal are provided by the terminal operator.
The port earns royalties from the sub-concessionaire, depending on the traffic
it handles at the port.
Apart from this, the port also earns revenue from marine charges.
Other income: The port provides rail services for the movement of container
and general cargo from the port to a mid-link connecting to the Indian rail
252
network.
Sources of revenue for port
The port also provides facilities for the storage of containers and
required inland container depots/container freight stations as per the
requirement of containers.
253
Base case traffic assumptions in movement of traffic
P: Projected
254
Base case traffic assumptions in movement of traffic
Containers: In the case of containers, the port does not have any
dedicated customers.
It will take some time for the port to attract traffic, with the total
traffic expected to grow at a steady pace.
From 2019-20 onwards, we have assumed traffic to be relatively
stable.
Note: The ability of a port to ramp up traffic in the initial period of
operation significantly influences its returns.
In a buoyant economic growth scenario, the port would have been
able to ramp up capacities faster.
255
Other assumptions of the base case
256
Transshipment hub - lucrative investment option
Project and equity IRRs for the base case are healthy at 11 per cent
and 14 per cent, respectively, which makes it an attractive investment
option for a developer.
These returns can further be enhanced by entering into contracts with
dedicated users and long-term buyers.
257
Operating margins to remain strong in initial years of operation,
to fall thereafter
In the initial period of operation, the port is expected to enjoy strong
EBITDA margins of around 45 per cent.
As increased traffic is handled, the ports operating efficiency will
tend to deteriorate.
To counter this, the port will have to incur expenditure on dredging
activities, adding more equipment, cranes, tugs, etc.
This will increase overhead costs. Moreover, by 2013-14, competition
around the port is expected to increase due to the capacity expansion
at competitive ports.
Hence, to remain competitive, the port will have to reduce its tariffs.
This will affect operating margins.
Thus, operating margins enjoyed by the port are expected to decline
258
over a period of time.
Operating margins to remain strong in initial years of operation,
to fall thereafter
Meanwhile, net margins are likely to be negative for the first 3 years
of operations on account of high interest and depreciation costs, as a
percentage of revenues.
As revenues of the port increase, margins are expected to improve,
with net margins peaking at around 31 per cent, before declining
gradually.
259
Forecast of net margins
P: Projected 260
Sensitivity of returns to key parameters
To understand the influence of various parameters on the returns of
ports, CRISIL Research has carried out a sensitivity analysis of
revenues of ports with respect to the following major parameters:
Sensitivity to traffic growth
Sensitivity to changes in tariffs at ports
Sensitivity to changes in interest rates
261
262
Sensitivity to change in tariff
263
Sensitivity to change in interest rates
The project returns are most sensitive to changes in traffic, followed

by tariff, and least sensitive to interest rates.
Also, the traffic at the port is primarily dependent on arrangements
the port makes with container shipping lines.
Tariffs are significantly influenced by location and competition-
related factors.
In this case, the port is operating in a highly competitive location.
In order to compete, the tariffs (adjusted for inflation) would have to
be reduced or else, traffic would move to competing ports. 264
Sensitivity to change in interest rates
Further, the terminal operators ability to attract shipping liners and
its strategic importance in the overall global operation of major
terminal operators can significantly influence tariffs, traffic and
returns.
265
Dredging-Overview
266
Overview of dredging
CRISIL Research expects investments to the tune of Rs 838 billion in
the Indian ports sector between 2010-11 and 2014-15.
Dredging of water channels and increasing the draft at ports accounts
for around 20-25 per cent of the total investment for a port developer
or the port trust.
Given the significance of this industry in terms of investment, we
have evaluated the scope and profitability of the dredging industry
for this period.
Ongoing technological developments and the need to improve cost
effectiveness have resulted in the construction of larger, more
efficient ships.
This, in turn, has resulted in the need to widen or deepen many of
our rivers and canals, in order to provide adequate access to ports
267
and harbours.
Dredging is the relocation of underwater sediments and soils for the
construction or maintenance of waterways for transportation
infrastructure and reclamation.
Nearly all the major ports in the world have at some time required
new dredging works - known as capital dredging - to widen and
deepen access channels, provide turning basins and achieve
appropriate water depths along waterside facilities.
Many of these channels also require maintenance dredging, i.e. the
removal of sediments which have accumulated in the bottom of the
dredged channel, to ensure that they continue to provide adequate
depth and width for the vessels engaged in domestic and
international commerce.
268
Capital dredging involves the creation of new or improved facilities
such as a harbour basin, a deeper navigation channel, a lake, or an
area of reclaimed land for industrial or residential purposes.
Capital dredging is undertaken in cases which involve:
Relocation of large quantities of material
Removal of compact soil
Low contaminant content (if any)
Significant layer thickness
Non-repetitive dredging activity
Maintenance dredging involves removal of siltation from channel
beds, which generally occurs naturally, in order to maintain the
design depth of navigation channels and ports.
269
It is undertaken in cases which involve:
Removal of variable quantities of material
Disposal of soft, uncompacted soil
Possible contaminant content
Repetitive activity
The dredging process consists of the following elements:
Excavation: This process involves the dislodgement and removal of
sediments (soils) and/or rocks from the bed of the water body.
The dredger is used to excavate the material either mechanically,
hydraulically or by combined action.
Transport of excavated material: Transporting materials from the dredging
area to the site of utilisation, disposal or intermediate treatment, is generally
achieved by one of the following methods: (a) in self-contained hoppers of
270
the dredgers (b) in barges (c) pumping through pipelines and (d) using
natural forces such as waves and currents.
Other, rarely used transport methods are truck and conveyor belt
transport.
Utilisation or disposal of dredged material: In construction projects,
dredging is driven by the demand for dredged material.
In navigation and remediation dredging, the project is driven by the
objective of removing the material from its original place.
271
Types of dredging activities
272
Dredging is carried out by specially developed equipment that varies
widely, in size and type, and mainly includes water-based and
sometimes land-based machines.
Dredging equipment, classified according to the methods of
excavation and operation, can be grouped into the following main
categories:
A. Mechanical dredgers
Mechanical dredgers are well-suited to remove hard-packed material
or debris and to working in confined areas.
Cohesive sediments dredged and transported this way usually
remain intact, with large pieces retaining their density and structure
through the whole dredging and placement process.
273
Bucket-ladder dredger
Globally, bucket-ladder dredgers once comprised a major part of the

dredging fleet.
They use a series of buckets mounted to an endless chain loop.
They can be effectively used in many materials including soft rock.
They are not used widely these days because of their relatively low
production rates, the need for anchor lines (dangerous for other
navigation traffic) and high noise levels.
274
Bucket-ladder dredger
Backhoes
The backhoe is common to dry land excavators.

They have an articulated excavation bucket on a boom.
Once the material is excavated, it is brought to the surface and placed
in barges for transport.
275
Backhoes
They can dig a broad range of materials, from sand to moderately

hard rock.
The capacity of the bucket can vary from 0.5 to 13 Cu.M.
They have constraints with regard to dredging depths but with
some modern backhoes, it is possible to dredge deeper.
Backhoe dredger
276
Grab dredgers
A grab dredger is a revolving crane equipped with a grab placed on

a pontoon or a hopper-vessel.
The dredging operation consists of lowering the grab to the bottom,
closing the grab and raising it to the surface to discharge the contents
of the grab.
The grab works best in clays, loose sand and rubbish close to quay
walls or other places that are difficult to access.
It generally produces an irregular bottom profile.
277
Grab dredger
278
B. Hydraulic dredgers
The hydraulic dredgers' dredge and transport methods "slurry the
sediment", that is, they add large amounts of process water and thus
change the original structure of sediments.
They involve the use of pipelines and hopper transport.
In some cases, hydraulic dredgers may pump the material into
barges for transport.
279
Stationary suction dredger
Stationary suction dredgers are effective in unconsolidated materials

such as sands and gravel.
They are used e.g. in aggregate winning operations and large
reclamation projects.
They are rarely suitable for channel or harbour construction projects
as they are designed to produce small, deep excavations.
280
Stationary suction dredger
Cutter suction dredger (CSDs)
Cutter suction dredgers are equipped with a cutting device to

increase the dislodging force.
These "cutter" dredgers are suitable for use in high strength materials
such as clays, packed or compacted sands and rocks.
281
Cutter suction dredger (CSDs)
While dredging, the cutter head describes arcs and is swung around
the spudpole, powered by winches.
The dredged material is pumped through a pipeline ashore or into
barges.
Cutter suction dredger
282
Trailing suction hopper dredgers (TSHDs)
A hopper dredger operates very much like a floating vacuum cleaner.

Hopper dredgers are free sailing, self-propelled vessels that load their
hoppers when trailing.
Often operating in the seas, they can carry their load over large
distances.
They can dredge all "non-rock type" soils.
The hopper is emptied by opening bottom doors or by pumping its
load ashore.
Because of its high production rates, trailers carry out most land
reclamation projects.
They are also suitable for harbour maintenance dredging and pipe
trenching.
283
Trailing suction hopper dredger
284
Pipelines
A pipeline can have an important effect on both the performance and
operational efficiency of hydraulic dredging processes.
The dredged material is pumped through the pipeline as slurry.
The diameter of the pipeline will directly influence the efficiency of
the hydraulic transport process.
The material pipelines are made of can vary from simple steel to
sophisticated plastics and rubber.
Flexibility of the pipelines is important in confined working areas
and, particularly, when working in exposed sea areas with
significant wave activity.
Where water level is subject to tidal variation, special connections
are needed between floating and shore pipelines.
285
Pipeline
286
Dredging-Global Dredging Industry
287
Global dredging industry
Waterborne transport is vital to domestic and international
commerce.
It offers the most economical, energy-efficient and environmentally-
friendly transportation of all types of cargo.
With larger ships being built, there has been an increasing need to
widen and deepen many channels, rivers and canals to provide
access to them.
This is known as capital dredging.
Many of these channels will later require maintenance dredging, i.e.
the removal of sediments which have accumulated in the bottom of
the dredged channel, to ensure that they continue to provide
adequate dimensions for the large vessels engaged in domestic and
international commerce.
288
Global dredging industry
Dredging is vital to the social and economic development of a
country, in particular, to the construction and maintenance of the
infrastructure on which the economic prosperity and social and
environmental well-being depend.
The total turnover of global dredging contractors is estimated at
10,225 million euros for 2008.
289
Dredging demand drivers
290
Main drivers for dredging globally in 2008
Turnover of global dredging market per driver (in million euros)
291
Maintenance and capital dredging
Global trade has increased steadily between 2000 and 2008
regardless of business cycles in the global economy.
Container ships are getting larger and faster, putting increased
demand on the capacity and efficiency of ports.
Dredging solutions support ports in meeting this challenge by
maintaining and deepening channels as well as supplying dredged
material for building berths, quay walls and hinterland
infrastructure.
From 2000 to 2008, seaborne trade increased 34 per cent in tonnage
terms (Source: UNCTAD 2009).
292
Urban development and coastal defence
Urban development has been a strong driver for the dredging
industry for years and has increased by 48 per cent since 2000 to
1,805 million euros in 2008.
Dredging for coastal defence increased by 93 per cent to 695 million
euros since 2000.
293
Energy
Despite attempts to find alternative fuel sources, fossil fuels still
dominate our energy needs.
Offshore resources need dredging to prepare the seabed and dig
the trenches for pipelines, and then protect these pipelines by
backfilling with sand, gravel and rock.
From an eco-friendly perspective, more and more wind farms are
being placed at sea.
Energy related dredging has increased by some 340 per cent since
2000 to 2,015 million euros in 2008.
294
Tourism and Leisure
Water-related tourism has become an important source of national
income for many countries.
With marinas and cruise terminals, theme parks and resorts coming
up, an increasing amount of dredging is required.
Dredging for recreation and tourist attractions has often been a spin-
off of coastal defence activities such as beach replenishments.
Tourism is also a driver for dredging in its own right with 630
million turnover in 2008.
Dredging is carried out by specially developed equipment that varies
widely, comes in many sizes and types, and includes mainly water-
based and some land-based machines.
295
Tourism and Leisure
The selection of dredging equipment for a particular project will
depend upon a combination of factors including the type of physical
environment, the method of placement, the distance to the disposal
site as well as the nature, quantity and quality of the material to be
dredged.
296
Global capacity
297
Global capacity
298
Global capacity
By the end of 2008, there were 1,206 dredgers, of which, 264 were
backhoes, 433 were CSDs and 509 were TSHDs.
The total capacity of TSHDs has increased by 32 per cent since 2000 to
2.95 million DWT.
The total capacity of CSDs increased by 17 per cent since 2000 to 1.75
million installed kW.
Some new, larger sea-going CSDs have replaced older cutters.
The total capacity of backhoe/grab/dipper dredgers has increased by
7 per cent since 2000 to 224,000 total installed kW.
299
Top-10 players ranked according to capacity per category
Backhoe, Grab and Dipper Dredgers
300
Cutter Suction Dredgers
301
Trailing Suction Hopper Dredgers
302
Capacity distribution
The Netherlands dominates the global dredging market. India stood sixth in terms of global
capacity, based on the number of dredgers in 2008.
303
Regional market size
In 2008, the Middle East, Europe and China were the largest
dredging markets representing 64 per cent of the global turnover.
304
Region-wise market share
305
Region-wise market share
The volume of dredging executed by state- and/or port-owned

companies as well as dredging projects closed to international
tenders is still substantial, with China and the US being the largest
closed markets.
In China, some projects are open for international tenders.
The US market is effectively closed by the Jones Act, which allows
only a US-owned and controlled contractor to tender.
Globally, however, the market share of these closed markets
dropped from 42 per cent in 2000 to 29 per cent in 2008.
306
Region-wise free and closed markets
307
Dredging-Indian Dredging Industry
308
Indian dredging industry
The size of the Indian dredging industry is estimated to be around

Rs 38.7 billion in 2008.
Dredging Corporation of India (DCI) is the major player with a
market share of nearly 32 per cent.
Constant efforts by the government for development of the ports
sector have boosted the dredging industry, thereby leading to
increased demand for capital and maintenance dredging.
The opportunity for the Indian dredging industry is driven by
increasing PPP investments in the ports sector and aggressive
government expenditure plans for improving cargo handling
capacity and efficiency, at both, major and non-major ports.
309
While DCI dominates the maintenance dredging of major ports, other
opportunities in capital and maintenance dredging at non-major ports
and capital dredging at major ports are available to Indian and foreign
dredging firms.
It has been observed that for both high and mid-volume segments,
private dredging companies are increasingly being employed for
capital dredging, while port authorities and other government
agencies are mostly employing DCI for maintenance dredging.
Major foreign players, equipped with better infrastructure, manpower
and having low cost of operations are increasingly taking the lead role
in new dredging activities by reducing DCI's share.
310
India's dredging market was dominated by DCI and mid-size private
companies such as Jaisu Dredging and Shipping Ltd and Dharti
Dredging etc.
But, these entities do not have enough efficient fleet to cater to the
growing demand for dredging work in the country.
As a result, Dutch dredging firms such as Van Oord, Royal Boskalis
Westminster NV and Belgium firms like Dredging International NV
and Jan De Nul NV have won dredging contracts in India through
their Indian subsidiaries.
These four firms control a major chunk of the world dredging market
that is estimated at 10.2 billion euros in 2008.
311
Apart from the the high capital cost required to buy high quality
dredgers, Indian dredging companies are unable to buy new
dredgers as most of the world's dredger-building facilities are booked
till 2012.
Port developers such as Adani Group and Marg Ltd (which is
developing the Karaikal port in Puducherry), have purchased
dredgers to meet their requirements.
312
Market share of DCI in 2008-09
Due to significant competition from mid-size Indian players and global players, DCI's market
share has decreased significantly from 90 per cent in 1999-00 to 32 per cent in 2008-09.
313
Policy framework
The Eleventh Five-Year Plan's dredging policy which is designed to give
Indian companies an edge while bidding for contracts, has stated that all 12
major ports shall invite open competitive bids for dredging works and
companies having Indian flag dredgers like DCI, private Indian dredging
companies and Indian subsidiaries of global companies shall have the right
of first refusal if the rate is within 10 per cent of the lowest valid offers.
The policy will be effective from April 1, 2007, and will remain valid for 4
years.
It will apply to both maintenance and capital dredging works.
This will exclude maintenance dredging requirements of the Kolkata port,
which will be decided by the Ministry of Shipping.
The Indian government also reserves the right to assign, in public interest,
any contract for dredging work in any of the major ports to Dredging
314
Corporation of India on nomination basis.
Dredging trend in major ports
In 2008-09, 234 million Cu.M was dredged in India, out of which, 111 million Cu.M was dredged
in major ports for a cost of Rs 6.9 billion. 315
Total cost and cost per Cu.M trend at major ports
The dredging price per cubic metre has been falling due to the severe competition between
mid-size Indian players and global players in the Indian dredging market. Dredging price per
cubic metre has reduced from Rs 123 in 2006-07 to Rs 62 in 2008-09. 316
Fleet profile
The average age of DCI's fleet is around 20-30 years, due to which, the company suffers from
operational problems. DCI's fleet suffers from efficiency issues as well.
317
Focus on core activities and high break-even lead to outsourcing
of dredging contracts
In India, normally, a port with a capacity of 20 million tonnes will
require capital dredging of around 40-60 million cubic metres.
Ports focus on their core activities and prefer to outsource dredging
activities to dredging firms, due to specialized nature of the activity.
If a port opts to purchase one trailing suction hopper dredger & one
cutter suction dredger, CRISIL Research estimates break-even time to
be close to 4 years and the quantity required to be dredged to break
even is around 250- 300 million cubic metres.
318
Dredging-Player Profiles
319
International players
Van Oord Dredging & Marine Contactors BV, Netherlands
Indian Subsidiary: Van Oord India Pvt Ltd, Mumbai
Van Oord had a turnover of 1,424 million euros as of end-2009.

Since its inception in 1968, dredging' has remained Van Oord's core
activity.
320
International players
Van Oord Dredging & Marine Contactors BV, Netherlands
Indian Subsidiary: Van Oord India Pvt Ltd, Mumbai
The Dutch firm has been involved in some of the most prestigious
projects worldwide, including Palm Jumeirah' and The World', in
Dubai.
With 71 different types of dredgers, it provides services for dredging
harbours and waterways, dredging sand and land reclamation,
constructing artificial islands, beach and foreshore replenishment.
As of December 31, 2009, Van Oord's order portfolio stood at 1,777
million euros.
321
Royal Boskalis Westminister NV, Netherlands
Indian Subsidiary: Boskalis Dredging India Pvt Ltd, Mumbai
Boskalis is a Netherlands-based company, founded in the early

1900s.
Besides, dredging and earth-moving, Boskalis is also involved in
other maritime infrastructure and terminal services.
Dredging and earth-moving comprise of 83.4 per cent of its turnover
of 2,175 million euros and its overall EBITDA margins are 20 per
cent (as of end-December 2009).
322
Royal Boskalis Westminister NV, Netherlands
Indian Subsidiary: Boskalis Dredging India Pvt Ltd, Mumbai
Through its arsenal of 89 different varieties of dredgers, Boskalis

provides construction and maintenance services for ports and
waterways, land reclamation, coastal defense and riverbank
protection.
Its previous projects in India include large-scale dredging,
trenching, pipe-pulling and backfilling on the Krishna Godavari
Basin for Reliance Industries, dredging and reclamation project at
Pipavav, Gujarat, for Gujarat Pipavav Port Ltd, Mumbai High
Fields-to-Uran trunkline project for ONGC Ltd.
As of end-December 2009, its order book stood at 2,875 million
euros.
323
Jan De Nul NV, Belgium
Indian Subsidiary: Jan De Nul Dredging India Pvt Ltd, New Delhi
Founded by Jan de Nul in 1938, the company caters to dredging,

civil works and other offshore service requirements.
In end-December 2009, it reported turnover of 2,103 million euros
and operating margins of 15 per cent.
324
Jan De Nul NV, Belgium
Indian Subsidiary: Jan De Nul Dredging India Pvt Ltd, New Delhi
Jan De Nul offers capital dredging, maintenance dredging, land

reclamation and port infrastructure works.
In India, Tuticorin Port has contracted Jan De Nul for dredging of
approach channel, harbour basin and areas adjacent to the berth and
jetties.
It has employed one cutter suction dredgers and one backhoe
dredger to dredge 1.8 million cubic metres of silt and reclaim 0.6
million cubic metres of land.
325
Dredging International NV, Belgium (DEME)
Indian Subsidiary: Dredging International India Pvt Ltd, New Delhi
DEME was established as a holding company of two Belgian

dredging contractors: Dredging International and Baggerwerken
Decloedt, who currently control the share capital. DEME is a Belgian
dredging and hydraulic engineering group with about 150 years of
history.
It reported turnover of 1,403 million euros and EBITDA margin of 21
per cent for the year ended 2009.
326
Dredging International NV, Belgium (DEME)
Indian Subsidiary: Dredging International India Pvt Ltd, New Delhi
Besides, DEME also possesses two bucket dredgers and two water
injection dredgers.
It has secured 53.6 million euros worth of dredging, land
reclamation and bund protection project at Indian Oil Corporation's
Paradip refinery project.
Here, it will dredge 19 million cubic metres of sand from the bed of
Jatadharmohan Creek and protect the bund of 0.175 million cubic
metres.
At Hazira port, it had previously conducted capital dredging and
land reclamation activity in 2004.
327
Indian players
Dredging Corporation of India Ltd (DCI)
DCI is a Government of India undertaking, established in the year

1976, to provide dredging services to the major ports of India.
DCI is a pioneer organisation in the field of dredging in India.
It reported turnover of Rs 6,454 million and operating margins of 4.5
per cent for the year ended March 2010.
328
Indian players
Dredging Corporation of India Ltd (DCI)
DCI provides services in capital dredging, maintenance dredging,

beach nourishment and land reclamation.
Besides engaging in most of India's major port dredging activity,
DCI has also historically undertaken dredging contracts in Taiwan
and Bahrain.
329
Meka Dredging
Meka Dredging is a part of the Meka Group and was spun off from
Amma Lines to focus exclusively on the dredging market.
Besides, capital and maintenance dredging, Meka also provides rock
dredging services.
Meka was involved in dredging projects at Karaikal Port and Cochin
Shipyard.
It has also received a capital dredging contract from Larsen &
Toubro.
330
Jaisu Shipping
Privately incorporated in 1987, Jaisu Shipping Company Pvt Ltd is
completely owned by the Kewalramani family.
It had an annual turnover of Rs 1,300 million in 2008-09.
Jaisu provides capital dredging, maintenance dredging, rock
dredging, salvage removal and bunkering facilities.
331
Dharti Dredging and Construction Ltd, Hyderabad
Incorporated in 1993, Dharti Dredging grew during 2005, when it
secured the capital dredging contract of Visakhapatnam Port Trust.
Prior to this, it had also operated in Singapore and Middle East
markets.
IT continues to serve the Indian, Asia Pacific and Middle East
markets.
332
Dharti Dredging and Construction Ltd, Hyderabad
Dharti Dredging undertakes capital dredging, pipeline trenching,

land reclamation and other environmental projects.
It reported revenues of Rs 3,000 million for the year ended March
2009 and operating margins of 26 per cent.
333
Dredging-Industry Outlook
334
Industry outlook
India to see dredging investments worth Rs 197 billion
New and developing ports require dredging on a large scale to

create new berths, harbours and to deepen the sea to allow large
ships to enter the port.
Based on expected ports expenditure plans, CRISIL Research
estimates Rs 197 billion will be invested in dredging operations by
Indian ports from 2010-11 to 2014-15.
Out of this, Rs 110 billion would be invested by non-major ports and
Rs 87 billion would be invested by major ports.
CRISIL Research estimates out of the total Rs 197 billion, Rs 122
billon would be invested in capital dredging, while Rs 75 billion
would be invested towards maintenance dredging.
(These estimates include only port-related dredging activities.) 335
Outlook on Indian dredging investments
336
Outlook on Indian dredging investments
We believe that 996 million Cu.M would be dredged by ports in
India from 2010-11 to 2014-15.
Out of this, 595 million Cu.M would be dredged in major ports and
401 million Cu.M would be in non-major ports.
582 million Cu.M would be dredged by capital dredging and 414
million Cu.M would be dredged by maintenance dredging out of
the total 996 million Cu.M to be dredged.
337
Outlook on Indian dredging activity
338
Increase in competition to impact margins adversely
With major dredging projects in the Middle East (accounting for
almost 30 per cent of the total global dredging market) having
entered their final stages, there is likely to be a huge supply of
dredgers in the global market.
Therefore, competition will intensify in the Indian dredging market.
Indian players have been unable to vie against the big global players
who have Indian subsidiaries due to the high capital cost involved in
buying high-quality dredgers.
The scarcity of skilled manpower in the Indian dredging market is
another concern that is affecting the prospects of Indian players.
Further, there is increased competition from port operators like
Adani and Marg Group, who have their own dredgers.
339
Increase in competition to impact margins adversely
Due to the intense competition in the dredging market and huge
supply of dredgers, CRISIL Research expects the price of dredging
per cubic metre to slip from the current levels of $6-7 for capital
dredging and $3-4 for maintenance dredging.
This would exert pressure on the profitability of players in the
Indian dredging industry.
340
Shift In Traffic-Introduction
341
CRISIL Research projects traffic at Indian ports to grow at a
Compound Annual Growth Rate (CAGR) of 7.3 per cent from 850
million tonnes in 2009-10 to 978 million tonnes in 2011-12.
A certain shift in traffic to newer and upcoming ports is imminent
considering the expected growth in traffic, congestion at existing
ports, cargo-handling equipment, draft, and advantages in terms of
cost and distance offered by some of the new ports to the hinterland.
CRISIL Research has analysed traffic of five key commodities -
namely petroleum oil and lubricants (POL), iron ore, coal, fertilisers
and container traffic, based on the location of end-users.
We have studied the current traffic patterns at different ports for
each of the above commodities.
342
In view of the constraints faced by existing ports and taking into
account ports that have been set up recently, ports expected to be set
up by 2014-15 and capacity expansion programmes at the existing
ports, we have attempted to analyse the possibility of a shift in the
pattern of movement of traffic between ports.
With new non-major ports like Krishnapatnam, Gangavaram,
Karaikal and Jaigadh commencing operations in the last 2 years
there has a been a shift in traffic from major to non-major ports.
Iron ore traffic from the Bellary-Hospet belt in Karnataka is being
exported from Krishnapatnam in Andhra Pradesh instead of ports in
Karnataka due to geographical proximity to markets like China and
better rail connectivity to the port, which enables the exporters to
save 1-2 days of transit time.
343
India Cements' cement manufacturing plants which imported coal
from Tuticorin port to Karaikal port due to better proximity to the
plant.
On the container traffic side, due to heavy congestion levels at JNPT,
the incremental container traffic from the Northern part of the
country is increasingly being handled at non major-ports like
Mundra and Pipavav due to better rail and road connectivity to the
port.
344
Major beneficiaries of shift in traffic
Note: We have not considered the extent of mechanisation, handling charges and the
time taken for customs clearance for our assessment of shift in traffic.
345
Shift In Traffic-Iron Ore Movement
346
Iron ore movement at ports
India is one of the leading producers and exporters of iron ore in the
world.
In 2009-10, India produced around 224 million tonnes of iron ore, of
which 149 million tonnes was exported from the country.
Chief countries importing iron ore from India are China, Japan and
South Korea.
Iron ore mines in India are mainly located in the southern and eastern
parts of the country.
347
Ports handling iron ore traffic in India
348
Around 85-90 per cent of the total iron ore traffic is transported using
rail.
Many companies have their own rail sidings to transport iron ore
from the mine to the port.
The remaining 10-15 per cent is transported by road.
The two iron ore mines in Goa completely rely on waterways for
transportation of iron oreVarious factors are taken in to account
while choosing a port for exporting iron ore. These include:
Distance from the mine to the port
Distance from port to the exporting country
Handling capacity at the port
Draft availability at the port
Turnaround Time (TAT) at the port 349
Total port charges in terms of vessel and cargo related charges
The general cargo berth is not preferred due to unavailability of
specialised equipment such as conveyor belts, which handle iron ore
quickly with minimal wastage.
Moreover, as iron ore is dirty cargo, it is not mixed with other cargo in
the general cargo berth.
Large iron ore consignments are ideally transported in Capesize vessels,
as huge quantities can be transported at a lower cost.
As most ports in India, have lower draft levels they use Panamax and
Handymax vessels to transport iron ore.
In addition, ports on the eastern coast have an added advantage in
terms of time (1-2 days) and cost savings ($1-2/tonne in transportation)
over the ports on the western coast due to geographical proximity to
350
markets like China.
For our analysis, we have arrived at the total logistical cost based on
the rail/road/waterway cost of transporting a tonne of iron ore from
mines to the ports.
We have also estimated the cost-benefit achieved by switching to
alternative ports.
351
Location of iron ore mines in India
352
Iron ore mines in southern belt of India
353
Around 112 million tonnes of iron ore is currently being exported
from the southern major and non-major ports in Goa, Karnataka,
Andhra Pradesh and Tamil Nadu.
GOA
Barges on the Mandovi and Zuari rivers are used for transporting
iron ore from mines to ports.
Capacity utilisation at Mormugao port is 143 per cent.
In order to ease congestion at its iron ore berth, the port is
developing facilities to handle iron ore cargo.
So, we do not expect the iron ore traffic coming to this port to be
diverted to any other port for exports.
354
Karnataka
With the commissioning of the Krishnapatnam port in 2008, there
has been some shift in traffic from the existing ports.
In terms of the logistics involved in transporting iron ore from the
mine to the port, Krishnapatnam port offers better advantages in
terms of distance and cost as compared to the ports of Chennai and
Ennore.
Krishnapatnam port has a deeper draft as compared to the ports of
Panaji, Karwar and Belekeri, thus enabling it to handle Capesize
vessels.
Considering the location of end-markets for exports, ports on the
eastern coast will be able to ensure faster delivery as the distance to
the destination is lesser than that for ports on the western coast. 355
Karnataka
Krishnapatnam port has a dedicated iron ore berth and utilisation levels
are still low.
The port has a good draft level of 15 metres and adequate rail and road
connectivity.
Further, in terms of distance, it is closer to China.
Consequently, there is a significant drop in sea freight costs.
With the new railway line connecting the BellaryHospet belt through
Hassan, this port will increasingly garner iron ore traffic from this belt.
It is noteworthy that while Krishnapatnam (a minor port on the eastern
coast, which was commissioned in 2008) handled 10.6 million tonnes of
iron ore traffic in 2009-10, iron ore traffic handled by New Mangalore port
(a major port on the western coast) in 2009-10 declined by 3 million tonnes.
356
Andhra Pradesh
The Chennai and Visakhapatnam ports are already congested with

iron ore berths working well over 100 per cent utilisation.
Ennore port does not have an iron ore berth at present and handles
operations from its coal berth. In order to ease congestion,
Visakhapatnam port (where the iron ore berth is working at a
utilisation rate of 152 per cent) is in the process of setting up a
multipurpose berth (WQ-6) and developing facilities for handling dry
bulk cargo by 2012-13.
Ennore port has planned an iron ore terminal by 2011-12.
The Krishnapatnam port provides an advantage to the mining belts of
Ongole and Guntur in terms of shorter distance and lower cost.
The port has a dedicated berth for handling iron ore.
357
Because it is a new port, utilisation level is relatively low.
Iron ore mines in central and eastern India
358
Orissa
Iron ore from the Keonjhar belt is exported from the Paradip and
Visakhapatnam ports.
The iron ore berths at these ports are currently operating at high
utilisation rates with some traffic being handled at their non-iron ore
berths.
Paradip port is in the process of setting up an iron ore berth, which is
expected to get commissioned by 2012.
The Vizag port is also adding capacity to ease congestion rates.
Despite this, utilisation levels of these ports will continue to remain high.
With Gangavaram port becoming operational in 2008 with a draft of 21
metres, dedicated facilities to handle iron ore with good road and rail
connectivity, traffic from the existing ports is expected to see a shift to
359
this new port.
Orissa
Dhamra port is expected to come up in 2010-11.

It is being developed as a deep sea port, with a draft of 18 metres.
As it is the closest port to the mining belt, exporting iron ore from
this port will provide a cost advantage of Rs 275 per tonne over the
Visakhapatnam port.
This port is also connected to the national highway network through
NH-5.
Rail network to the Chennai-Howrah line is under construction.
The Gopalpur port (expansion) is likely to come up by 2014-15.
Going forward, some of the iron ore traffic from the Keonjhar belt
will also be handled through this port.
Gopalpur port already has road and rail connectivity.
360
Jharkhand
The Chiria mines are located in Jharkhand.
These mines have some of India's largest iron ore reserves.
As these mines are located in the interior region, iron ore from this mine is
exported from the ports of Haldia and Paradip.
The iron ore berth at Haldia and Paradip ports are working at a high
capacity utilisation rate.
As Haldia port has high siltation, it does not have sufficient draft to handle
big vessels.
Once Dhamra port is operational in 2010-11, the iron ore traffic from the
Chiria mining zone will shift to Dhamra owing to the distance and cost
advantage.
With the commissioning of the Gopalpur port, some traffic will move
361
through this port as well.
Madhya Pradesh
The Chhatarpur mining belt is located in Madhya Pradesh.

Due to absence of a port in the vicinity, iron ore from the mining zone is
exported from the Haldia, Paradip and Visakhapatnam ports.
Due to high capacity utilisation at the iron ore berths at the ports of
Paradip, Haldia and Vizag, shift in traffic from these ports is imminent.
Given that the port of Gangavaram has commenced operations and has
a dedicated berth to handle iron ore, some of the traffic currently
handled at Haldia, Paradip and Visakhapatnam will shift here.
The port will not offer any significant distance advantage over the
existing ports to the mining belt.
However, it offers a higher draft as compared to the existing ports as a
result of which it can handle larger vessels and consignments.
362
Madhya Pradesh
Once the ports of Dhamra and Gopalpur start operations, the iron ore
traffic from the Chhatarpur belt can also be handled at these ports
Chhattisgarh
The Durg iron ore mining belt is located in Chhattisgarh.

Iron ore from the belt is currently exported via Paradip and Vizag
ports.
For reasons cited earlier, traffic from this belt will shift to
Gangavaram.
Once the Dhamra and Gopalpur ports commence operations, iron ore
traffic from the Durg belt will also be handled at these ports.
363
Shift In Traffic-Coal Movement
364
Coal movement at ports
India derives more than 50 per cent of its total energy requirement from
coal, making it an important source of energy for India.
The power, steel and cement sectors are prime consumers of coal.
In 2009-10, the country handled close to 113 million tonnes of coking and
thermal coal at major and non-major ports of the country.
Coking coal is mainly sourced from Australia, whereas non-coking coal
comes from Indonesia.
Around 95 per cent of coal is transported from ports by rail; road moves the
remaining.
Due to the high cost of transportation involved, some companies are also
considering waterways for transporting coal.
Key factors taken into account while selecting a port for handling coal
include
365
Proximity to the plant
Coal movement at ports
Operating efficiencies at the port
Facilities to handle coal at the port
Port charges
Dedicated coal berth
Coal is usually transported in Handymax or Panamax vessels.
Companies prefer to handle their coal requirement through ports that have a
dedicated coal facility as they have dedicated equipment available for
handling the commodity.
In other cases, coal is handled through the general cargo berth.
For our analysis, we have looked at ports used by the power and cement
plants for their requirement of thermal coal.
The logistical cost per tonne of thermal coal transported has been computed
after considering the distance and cost involved in moving the cargo via
366
rail/road from the port to the power/cement plant.
Ports handling coal traffic in India
367
Traffic for power plants
Location of power plants in India
368
Power plants in eastern India
369
The Farakka Thermal Power Station, National Capital Thermal
Power Station (UP/Bihar) and Kahalgaon
Thermal Power Station (UP/Bihar) currently use the Haldia port for
thermal coal imports.
Haldia port has a low draft level on account of high siltation and
can only handle barges.
So we expect traffic carrying thermal coal imports for power plants
to shift to Paradip port due to draft issues at Haldia.
The Talcher Thermal Power Station (Orissa) operated by NTPC is
currently meeting some of its coal requirements through imports
from the Paradip port, which has a dedicated berth for handling
coal cargo and is currently operating at a capacity utilisation of 98
per cent. 370
The port is setting up a deep draft coal berth, expected to be

operational by 2011-12.
The port also offers a good draft of 12.5 metres.
So, we do not expect a shift in traffic to any other port.
371
Power plants in southern India
372
Ramagundam Thermal Power Station operated by Andhra Pradesh
Power Generation Corporation (APGENCO) and Simhadri Thermal
Power Station operated by NTPC have their power plants in Andhra
Pradesh.
They meet some of their coal requirements through imports.
As they are located close to the port of Visakhapatnam, both these
power plants source their requirements from this port.
Gangavaram port does not offer any logistical cost benefit over Vizag
port.
Due to high congestion levels and higher efficiency, traffic could shift
from Vizag to Gangavaram.
373
Ennore Thermal Power Station, Mettur Thermal Power Station, North
Madras Thermal Power Station and Tuticorin Thermal Power Station, all
operated by Tamil Nadu State Electricity Board (TNSEB), handle their coal
requirements through the Ennore port.
Sical Logistics Ltd, which operates the coal terminal, has entered into an
agreement with TNSeB to handle coal at the Ennore terminal for 20 years.
So, coal traffic is not expected to shift to any other port during this period.
As it is located close to Tuticorin port, the Tuticorin Thermal Power
Station sources its imported coal requirements from this port.
The coal berth at Tuticorin is operating at a utilisation rate of 90 per cent.
Since there is no other port in the vicinity, Tuticorin port will continue to
handle coal requirements for this plant.
374
Power plants in western India
375
The Sabarmati Thermal power plant (Ahmedabad) operated by AECO and
the Gandhinagar thermal power plant (Gandhinagar) operated by Gujarat
State Electricity Board (GSEB) source their imported coal requirements from
the Kandla and Mundra ports that handle coal from their multipurpose
berth.
Some shift in this traffic is likely when the Dahej and Dholera ports
commence operations.
In terms of distance, Dahej and Dholera ports enjoy an advantage over the
ports of Mundra and Kandla.
Sikka Thermal Power Station operated by Gujarat State Electricity Board
(GSEB) is located at Sikka in Gujarat.
The power station handles its coal requirements from Sikka port on account
of its proximity.
376
So we do not expect any shift in traffic pattern.
The Ukai Thermal Power Station (operated by GSEB) near Surat

currently handles its coal requirements from the port of Magdalla.
By 2011-12, Hazira port will be setting up a jetty with capacity to
handle coal.
Once this is commissioned, coal traffic handled by Magdalla port is
expected to shift to Hazira port due to its proximity to the power
station.
The Wanakbori Thermal Power Station is located at Wanakbori near
Ahmedabad.
The power plant currently handles its coal requirements from the
ports of Magdalla and Bhavnagar.
The Dholera port is setting up a jetty to handle coal cargo.
377
Once this commences operations, coal traffic currently handled by
Magdalla and Bhavnagar is likely to shift to Dholera as this port will
be closer and will ensure a cost advantage of Rs 96.4 per tonne
transported over Magdalla port and Rs 34 per tonne over Bhavnagar
port.
Adani Power Plant commenced operations in 2010 and the Tata
Power UMPP is expected to commence operations in 2012-13.
Both these power plants totally rely on coal imports for power
generation.
As they are located close to Mundra port, a dedicated coal terminal
is being set up at Mundra port to cater to the requirements of both
these power plants.
378
Rajasthan Rajya Vidyut Prasaran Nigam Ltd (RRVVNL) operates the
Suratgarh Thermal Power Station in Rajasthan.
The plant, currently, handles its coal requirements from Kandla and
Mundra ports.
Once the Dholera port comes up by 2012-13, the traffic handled by
Kandla and Mundra port is expected to shift to the new port.
Currently, Kandla port's general cargo berth, where coal is being
handled is operating at a capacity utilisation of 157 per cent.
Dholera will also be closer to the power station as compared to Mundra
port.
The MSEB Khaperkheda thermal power station is located near Nagpur.
The power plant used to handle its coal imports from the ports of
Mumbai and Visakhapatnam. 379
However, with Gangavaram port becoming operational, the power
plant is handling its coal requirements from this new port.
Importing coal to eastern ports and then transporting it to the power
plant saves shipping time of around 2-3 days in addition to cost
savings of around 3-5$/tonne (sea freight) as most of the coal
requirement is imported from Indonesia.
Tata Power's thermal power plant is located at Trombay.
The power plant currently sources its coal requirements from Mumbai
and Dharamtar ports.
Mumbai port is working at a utilisation rate of 120 per cent.
Going forward, we expect the Dharamtar port to handle incremental
coal traffic for the power plant.
BSES has a thermal power plant at Dahanu in Maharashtra. 380
Being located close to the Dahanu port, the power plant meets its
coal requirements from this port.
We do not expect a shift in traffic.
381
Coal traffic for cement plants
Location of cement plants and cement clusters in India
382
Coal traffic for cement plants
Location of cement plants and cement clusters in India
Cement production in the country has grown at a CAGR of around 10

per cent between 2004-05 and 2009-10.
On the eastern coast, cement companies are largely concentrated
along the coast of Tamil Nadu.
The cement plants located in the southern states handle their coal
requirement either through ports in Andhra Pradesh or Tamil Nadu
based on their location.
383
Cement plants in southern India
384
India Cements operates two plants in Andhra Pradesh, namely
Chilamkur Works and Yerraguntla.
The plants of Chilamkur Works and Yerraguntla have their plants
located in Cuddapah district.
The plants handle their coal requirements from the ports of Chennai
and Ennore in TN.
We expect some of the coal traffic currently being handled by these
ports to shift to Krishnapatnam port primarily due to its proximity to
the cement plant.
Cement plants of Dalmia Cement, Grasim Cement, Madras Cement,
Chettinad Cement and India Cements are located in Tamil Nadu.
As the cement plants of Dalmia, Grasim and Madras Cement are
located very close to the Chennai port, they meet their coal
385
requirements from Chennai port itself.
So, we do not expect any shift in traffic.

Chettinad Cement is located at Karur in Tamil Nadu.
The plant meets its coal requirements from the Tuticorin port.
With Karaikal port commencing operations in 2009, some of the
traffic has shifted to this port as it is closer than Tuticorin.
The distance advantage to the plant has driven some shift in traffic.
The port is well connected via road and rail.
The Dalavoi cement plant currently handles its requirements from the
Tuticorin port.
However, we expect it to opt for Karaikal port because of its cost
advantage of around Rs 100 per tonne.
386
Other cement clusters
Nalgonda cluster- Cement plants forming a part of the Nalgonda cluster
in Andhra Pradesh mainly source their coal requirements from Vizag
port in Andhra Pradesh and Chennai and Ennore ports in Tamil Nadu.
Going forward, we expect the coal requirements currently handled at
Vizag port to shift to Gangavaram port and the coal handled at Chennai
and Ennore ports to shift to the newly set up Krishnapatnam port,
mainly on account of the logistical time and cost advantage, coupled
with higher operational efficiencies at the new ports.
Tiruchirapalli cluster This cluster of cement companies is located in
Tamil Nadu.
Chennai, Ennore and Tuticorin ports currently cater to the coal
requirements of this cluster.
387
With Karaikal port becoming operational, we expect some of the coal

handling to be routed through this port.
Gulbarga cluster - Coal for this cluster in Karnataka is handled from
the port of Vizag.
Over the next few years, we expect some of the coal requirement to
be routed through Gangavaram port.
Bilaspur cluster - Located in Chhattisgarh, it currently handles its
coal requirements from the ports of Paradip and Vizag.
Over the next few years, we expect coal handled at these clusters to
shift to Dhamra and Gangavaram ports.
Satna cluster The Satna cluster is located in Madhya Pradesh.
Cement companies in this cluster source their coal imports from the
Paradip and Haldia ports. 388
Once Dhamra port begins operations, we expect some of the coal
requirements to be handled through the new port.
Chanderia cluster Located in Rajasthan, this cluster currently
sources its coal requirements from the Kandla and Mundra ports in
Gujarat.
We expect some amount of coal handling to be routed through the
Dahej and Dholera ports once they are commissioned.
Chanderpur cluster This cement cluster of Maharashtra handles its
coal requirements from Mumbai and Visakhapatnam ports.
Going forward, we expect some of the coal handling to shift to
Gangavaram port.
389
Cement plants in western India
390
Digvijay Cement (a subsidiary of Grasim Cement) has its cement

manufacturing plant in Sikka.
As it is located close to the Sikka port, from where its coal
requirements are handled, there will be no shift in the port handling
coal for the cement plant.
Gujarat Sidhee Cement has its cement manufacturing plant in the
Junagadh district of Gujarat.
Due to its proximity to the Porbandar port, the plant sources its coal
requirement from here.
So, we do not expect any shift in traffic. Ultratech Cement has a plant
at Magdalla.
Being close to the Magdalla port itself, the plant sources its
requirements from here. 391
Saurashtra Cement has its plant at Ranavav.
The plant sources its coal requirements from Porbandar port due to its
closeness to the same.
Sanghi Industries' cement plant is located near Rajkot.
The plant's coal requirements are met from Bedi port because of its
proximity to the same.
Given that there is no other port in the vicinity, Rajkot port will continue
to handle the coal requirement for the plant.
The Gagal cement plant, operated by ACC Ltd is located in the Bilaspur
district of Himachal Pradesh.
The plant imports its coal requirements from Kandla and Mundra ports
in Gujarat as it is situated in a landlocked state.
The Dholera port is being set up with facilities to handle dry bulk cargo.
392
Due to congestion at Kandla port, we expect some traffic to shift to
Dholera port.
In terms of distance too, the upcoming port at Dholera scores over
Mundra port as it is located closer to the cement plant.
The expansion project of the Chanderia plant was commissioned in
April 2009.
Considering the logistical costs involved, draft available and present
congestion at Kandla port, Mundra port is better suited to handle the
coal import required for the project in spite of being located farther
away from the plant.
Even in the case of the cement grinding (Ajmer) project, Mundra port is
best suited to handle coal import requirement.
393
Shift In Traffic-Fertilizer Movement
394
Fertiliser and fertiliser raw material movement at ports
India imports both, finished fertilisers and fertiliser raw material

(FRM), for indigenous production of phosphatic and urea-based
fertilisers.
In 2009-10, the country handled close to 24 million tonnes of
finished fertilisers and FRM at both, major and non-major ports, in
the country.
395
Ports handling fertiliser traffic in India
396
Some fertiliser plants even have their own captive jetties at ports for
handling their import requirement.
Imported finished fertilisers are usually sent directly to the
consumption centres without moving to the company's fertiliser
plant.
Around 90 per cent of the fertilisers are transported by rail.
Road are used only in cases where the quantity of fertiliser cargo is
very less and the distance to be covered (either from port to fertiliser
plant or to the place of end-consumption) is less than 100 km.
Key factors considered while deciding the port for handling fertiliser
cargo:
Distance between the port and the plant/consumption centre
397
Draft at the port - Fertiliser cargo normally comes in handymax
/panamax vessels
Condition of the port in terms of mechanisation and availability of
equipments, etc
Warehousing facilities at the port to aid in bagging of fertiliser cargo at
the port (in case of import of finished fertilisers)
Total charges for various services offered at the portFor our analysis,
we have arrived at the total logistical cost based on the rail/road cost
of transporting a tonne of fertiliser raw material through the ports to
the fertiliser plants.
We have also estimated the cost benefit achieved by switching to
alternative ports.
398
In the case of finished fertilisers, where the fertiliser directly

reaches the place of consumption, we have analysed the shift of
cargo to alternative ports.
399
Location of fertiliser plants in India
400
Fertiliser plants in western India
401
Gujarat
There are seven fertiliser plants in Gujarat.

Out of this, only three plants meet their raw material requirements
through imports.
The remaining plants meet their raw material requirements through
indigenous production.
GSFC has one fertiliser plant for manufacturing complex fertilisers at
Sikka and another plant at Fertiliser Nagar.
The company has a captive jetty at Sikka port to meet its requirements.
So we do not expect cargo meant for its fertiliser plants to be diverted
to any of the upcoming ports.
IFFCO imports phosphoric acid for manufacturing complex fertilisers
at its Kandla plant from Kandla port due to its proximity to the port.402
Gujarat
The general cargo berth at the port is working at a utilisation rate of

157 per cent and is already congested.
Mundra port is located around 55 kms away from Kandla port, with
facilities to handle fertiliser cargo.
As there is an alternative available near the Kandla port, we expect
some amount of FRM requirement of this plant to be handled at
Mundra port in the coming years due to lower congestion levels and
higher efficiencies.
403
Gujarat
The ports in Gujarat handle import of finished fertilisers for the

markets of Gujarat, Madhya Pradesh, Rajasthan and the entire
northern belt of Haryana, Punjab and Uttar Pradesh (UP).
With the commissioning of facilities to handle fertilisers at the ports
of Navlakhi and Hazira in the state, we expect some traffic of
finished fertiliser imports to shift to these ports.
This will mainly be due to distance advantage offered by these ports
to some of the end-markets being served.
Some of these new ports are also well equipped in terms of cargo-
handling equipment, modernisation of the berth, etc.
Currently, only Navlakhi offers rail connectivity up to the port.
Hazira port is setting up end-to-end rail connectivity. 404
Maharashtra
Rashtriya Chemicals and Fertilisers' (RCF) plant at Trombay in

Mumbai, was handling its FRM requirements from the Mumbai port
itself till about 2-3 years ago, when it opted for Dharamtar port.
The FRM traffic is transported via road to the plant.
The general cargo berth at Mumbai port, where the port handles
fertiliser cargo, is working at a utilisation rate of 120 per cent,
resulting in slower evacuation of cargo.
In view of this, we expect the Dharamtar port to continue to handle
the plant's FRM cargo requirement.
Currently, Mumbai port primarily handles the state's requirements of
finished fertilisers.
By 2011-12, Dighi port is coming up with a general cargo berth. 405
Maharashtra
The port will offer a distance and cost advantage over Mumbai port
to some of the markets being served in the hinterland, thus leading
to a shift in handling of finished fertiliser cargo from Mumbai to
Dighi port.
406
Fertiliser plants in southern India
407
Goa
Zuari Industries Ltd has its fertiliser plants at Zuari Nagar in Vasco
in Goa.
Mormugao port caters to its fertiliser requirement of the plant its
general cargo berth, which is working at an utilisation rate of 44 per
cent.
We do not expect any shift in traffic from this port.
408
Karnataka
Mangalore Chemicals and Fertilisers' (MCFL) plant imports raw

materials for manufacturing fertilisers through Mangalore port.
The New Mangalore port handles fertiliser traffic at its general cargo
berth, which is working at a capacity utilisation of only 40 per cent.
The port enjoys a draft of 9.5 metres and can handle Handysize
vessels.
Since this plant is located very close to the port, it will continue to
handle raw material requirement for this plant.
409
Andhra Pradesh
Historically, the ports of Vizag and Kakinada have been importing

finished fertiliser cargo to cater to the requirements of Andhra
Pradesh and, to a small extent, of some markets of Orissa and
Chhattisgarh.
With commissioning of the Gangavaram and Krishnapatnam ports,
these states will have more avenues to meet their import
requirements.
Both, Gangavaram and Krishnapatnam ports, offer both road and rail
connectivity up to the port.
Godavari Fertiliser's complex fertiliser plant is located at Kakinada,
near the Kakinada port itself.
So, it procures its requirements from this port. 410
Andhra Pradesh
The port enjoys a draft of 9.1 metres and can handle Handysize
vessels.
We do not expect any shift in fertiliser cargo from this port.
Coromandel plant at Visakhapatnam operates in the land owned by
Vizag Port Trust and uses Vizag port to handle fertiliser traffic.
The port is currently facing a lot of congestion due to high operating
rates at both its berths.
Therefore, going forward, we expect Gangavaram port to handle
greater traffic.
411
Tamil Nadu
SPIC has a plant at the Fertiliser complex in Tuticorin.

The plant has a captive jetty at Tuticorin port for handling its
requirements.
In view of this, we do not expect any shift in the pattern of traffic
from the port.
RCF has a fertiliser plant at Manali.
The plant handles its operations from Chennai port.
Chennai port handles fertiliser traffic at its general cargo berth, which
is currently working at a utilisation rate of 91 per cent.
Since the plant is located close to the port, it will continue to source its
requirements through Chennai port.
Coromandel Fertilisers has a fertiliser plant at Ennore and Ranipet. 412
Tamil Nadu
Since both the plants are located near Chennai port, they source their
requirements from the same.
Due to the distance and cost involved in transportation from
Chennai port to these plants, this port would continue to handle the
requirements of these plants.
413
Fertiliser plants in eastern India
414
Orissa
Paradip Phosphates Ltd and IFFCO have their plants at Jagatsinghpur

and have their own captive jetty at Paradip port for meeting their FRM
requirement.
The port has a dedicated fertiliser cargo berth, which is currently
working at a capacity utilisation rate of 48 per cent.
The port has a draft of 12.5 metres and can handle Handysize and
Handymax vessels.
So, we do not expect a shift to any other alternative port.
Currently, Paradip port is the only port in the state catering to finished
fertiliser requirements of the states of Orissa, Bihar, West Bengal,
Jharkhand and Chhattisgarh.
415
Orissa
By 2014-15, the Gopalpur port will come up with facilities to handle

fertilisers at its general cargo berth.
With the distance advantage that Gopalpur port may offer to certain
areas in these markets, we expect some shift in traffic from Paradip
port.
416
Shift In Traffic-POL Movement
417
POL movement at ports
Pipeline connectivity is the basic factor while considering the port to
be handled for a particular refinery.
Finished products are exported only by coastal refineries.
The port closest to the refinery is used for handling the refinery's
requirements.
This section primarily analyses the ports currently serving different
refineries and any shift in ports due to new pipelines that are being
set up.
418
Location of refineries in India and their pipelines
419
Refineries in western India
420
Indian Oil Corporation Ltd (IOCL) has refineries at Panipat near Delhi,
Mathura in Uttar Pradesh and Koyali in Gujarat with a total capacity of 33.7
MTPA.
It meets its crude oil requirements through the Kandla-Panipat pipeline,
Mundra-Panipat pipeline, Salaya-Mathura pipeline from ports like Mundra,
Kandla, Vadinar and Dahej.
The IOCL refinery at Panipat has planned to augment its capacity to 15
MTPA by 2010-11.
These three ports would continue to cater to the needs of this refinery to
meet the increased crude oil requirement.
Reliance Petroleum Ltd (RPL) has a refinery at Jamnagar (Gujarat) with a
capacity of 62 MTPA.
The refinery sources its crude oil requirement from the Sikka port which
421
was set up by Reliance.
Sikka port also handles export of refined products from the refinery.
To meet the increased demand for POL, Sikka port is in setting up
three additional single point mooring (SPMs), which are expected to
be commissioned by 2011-12.
Essar Oil has a refinery located at Vadinar in Gujarat with a capacit
of 10.5 MTPA.
The refinery is currently meeting its crude oil requirements and
export of products from the Vadinar facility of Kandla port.
As the refinery is scaling up its capacity to 18 MTPA by 2011-12,
Kandla port will commission an offshore liquid terminal to meet the
rise in demand.
So crude oil requirements of this refinery will continue to be met
from this port. 422
Bharat Oman Refineries Ltd is setting up a refinery at Bina in
Madhya Pradesh.
The refinery is expected to be set up with a capacity of 6 MTPA.
It is likely to become operational in 2010-11.
The refinery will source crude oil from Vadinar port though the
proposed Vadinar-Bina crude oil pipeline.
Hindustan Petroleum Corporation Ltd (HPCL) is setting up a
refinery at Bhatinda in Punjab.
The refinery is scheduled to commence operations in 2012-13 with a
capacity of 9 MTPA.
So, the company has set up a dedicated SPM at Mundra port with a
capacity of 25 million tonnes.
HPCL and BPCL's refineries are located in Maharashtra. 423
The Mumbai port is the key port handling crude oil in the state.
At its Mumbai refinery, BPCL has a capacity of 12 MTPA, while
HPCL's Mumbai refinery has a capacity of 5.5 MTPA.
Both these refineries meet their crude oil requirements and export
refined products from Mumbai port.
The oil berth at Mumbai port is currently working at a utilisation rate
of 116 per cent.
To ease the flow of oil through the port, it is setting up its fifth oil
berth at Jawahar Dweep with a capacity of 15 million tonnes.
424
Refineries in southern India
425
The Mangalore refinery operated by MRPL in Karnataka has a
capacity of 9.7 MTPA.
The refinery meets its requirements from the New Mangalore port.
The refinery is planning to expand its capacity to 15 MTPA by 2011-
12.
It will continue to meet its requirements from the New Mangalore
port.
Kochi refinery in Kerala has a capacity of 9.5 MTPA and is operated
by BPCL.
Its requirements are met by Kochi port.
We do not expect this to change.
Vizag refinery in Andhra Pradesh is operated by HPCL. It has a
capacity of 8 MTPA.
426
The refinery's import of crude oil and export of refined products are
handled by Vizag port.
The refinery is planning to expand its capacity to 8.3 MTPA by 2011-
12.
The POL berth at Vizag port, now working at a utilisation rate of 112
per cent, is in the process of augmenting its capacity by 15 MT to meet
the increased POL requirement.
The Manali refinery and Narimanam refinery operated by Chennai
Petroleum Corporation Ltd (CPCL) are located in Tamil Nadu.
Currently, Chennai, Ennore and Nagapattinam ports handle crude oil
in the state.
The Manali refinery has a capacity of 9.5 MTPA.
The crude oil requirements of the refinery are met by Chennai port.427
Being a coastal refinery, it also exports refined products.
The refinery is planning to expand its capacity to 10.5 MTPA.
The port will continue to meet its requirements from Chennai port.
The Narimanam refinery has a capacity of 1 MTPA.
It handles its crude oil requirements through Nagapattinam port.
We do not expect a shift in the pattern of traffic movement.
The Cuddalore refinery of Nagarjuna Oil is expected to come up
with a capacity of 6 MTPA in 2012-13.
Once the crude oil pipeline is in place, the Chennai port would be
best suited to handle requirements of this refinery.
428
Refineries in eastern India
429
Ports in West Bengal cater to the requirements of the refineries in the
north eastern part of the country covering states of Assam, Bihar and
West Bengal.
Haldia port is the key port handling crude oil in the state.
BRPL, a subsidiary of IOC, has its refinery in Assam.
The refinery has a capacity of 2.4 MTPA.
It sources its crude oil requirements from Haldia port through the
Haldia-Barauni pipeline, which moves on to serve the Bongaigaon
refinery.
The refinery is not adding any capacity.
It will continue to source its crude oil requirements through the
Haldia port.
The Digboi refinery, operated by IOC, is located in Assam. 430
The refinery has a capacity of 0.7 MTPA.
It sources some of its crude oil requirement from Haldia port
through the Haldia-Barauni crude oil pipeline.
The refinery is not adding any capacity and will continue to source
its crude requirements through the port of Haldia.
The Haldia refinery (IOC-operated) is located near the Haldia port in
West Bengal.
It has a capacity of 6 MTPA.
While Haldia port is the nearest to this refinery it has been plagued
by siltation problems, thus affecting efficiency.
With the commissioning of the Paradip-Haldia crude oil pipeline,
the crude oil will now be handled at the Paradip port.
431
Haldia port can only handle ships up to 35,000 DWT due to siltation
problems.
Paradip port, with a draft of around 13 metres can handle larger
vessels, i.e. around 1.5 lakh tonnes (Suezmax vessels).
The refinery has not planned any capacity additions.
Export of products from the refinery will continue to be handled at
Haldia.
IOC's Barauni refinery is located in Bihar.
The refinery has a capacity of 6 MTPA and gets its crude oil from
the Haldia-Barauni pipeline.
It has traditionally been handling its crude oil requirements through
the Haldia port.
432
With the commissioning of the Paradip-Haldia crude pipeline, the
crude oil for this refinery will be handled at the Paradip port due to
the draft issues at Haldia port.
The refinery has planned a capacity expansion of 1.5 MTPA.
Numaligarh refinery operated by Numaligarh Refinery Ltd (NRL) is
located in Assam.
The refinery has a capacity of 3MTPA.
It sources its crude requirement through Haldia.
Due to draft issues at Haldia, the crude requirements for this refinery
are expected to shift to the Paradip port.
At present, Paradip has no operational refinery.
Paradip port is the only port handling POL traffic in the state.
433
IOC's Paradip refinery has proposed to come up with a capacity of 15

MTPA in 2013-14.
Paradip port is best suited to handle requirements of this refinery.
434
Shift In Traffic-Container Movement
435
Container movement at ports
Container traffic at Indian ports is set to grow at a CAGR of 17 per
cent from 116 million tonnes in 2009-10 to 159 million tonnes in 2011-
12.
Ports which handle majority of container traffic in India are major
ports like JNPT, Chennai, Kolkata, Tuticorin, Cochin, Mumbai and
non-major ports like Mundra and Pipavav in Gujarat.
Huge capacity expansions are planned in major ports like Chennai,
Cochin, JNPT and in non-major ports like Pipavav, Hazira in Gujarat
and Dighi in Maharashtra.
JNPT, which handles around 50 per cent of the country's total
container cargo, is operating at a capacity utilisation of 92 per cent
and the new container terminal is facing delays in expansion.
436
Container movement at ports
Container traffic handled by Mundra port has grown at 17 per cent
to 11.3 million tonnes in 2009-10, while container traffic at Pipavav
port has grown at 65 per cent to 3.1 million tonnes
CRISIL Research expects the incremental container traffic originating
from the western and northern hinterland to shift to ports like
Mundra, Pipavav and Hazira, which offer better rail and road
connectivity to the hinterland.
437
Shift In Traffic-Conclusions
438
Conclusions
Non-major ports (Krishnapatnam, Gangavaram, Dhamra) to benefit
most from traffic growth
Strategic location, better connectivity, state-of-the-art mechanisation

and higher efficiency at non-major ports will attract higher traffic
over the next 5 years.
Among these, we expect Krishnapatnam and Gangavaram ports in
Andhra Pradesh, the port of Dhamra in Orissa and Mundra and
Pipavav ports in Gujarat to benefit the most during this period.
Other ports likely to benefit from the shift in traffic from major ports
include non-major ports of Karaikal in Pondicherry, Gopalpur in
Orissa, Dholera and Dahej in Gujarat and the port of Dighi in
Maharashtra.
Coal and iron ore are the main commodities contributing to the rise
in their share of traffic. 439
Conclusions
Apart from offering certain location-based advantages, these ports
are expected to develop as modern, deep-drafted ports with fully
mechanised operations.
Having a deep draft enables these ports to handle larger vessels and
offer economies of scale.
Mechanisation will ensure higher operational speed and will reduce
the overall TAT.
Most of the major ports are plagued with problems of overutilisation
of capacity, which is reflected in their poor operational performance.
Krishnapatnam port is expected to attract traffic away from the ports
of Chennai and Ennore.
440
Conclusions
Gangavaram port is likely to benefit from the shift in traffic from

Visakhapatnam port.
The upcoming ports of Dhamra, Gopalpur and Kirtania will see a
shift in traffic from the ports of Haldia and Paradip.
441
Conclusions
Profitability to remain unaffected in medium term despite competition
in ports sector
With a slew of non-major ports in the process of being set up,

competition in the ports sector is set to increase in the next 5 years.
The share of non-major ports is expected to grow from 34 per cent in
2009-10 to 36 per cent in 2011-12.
While many of these non-major ports are increasingly attracting
higher traffic, they are charging higher tariffs for commodities
handled at their ports due to higher efficiency offered in terms of
faster TAT, better equipment and modernisation.
This could lead to a situation of major ports reducing tariffs to
compete with these non-major ports, which could result in a tariff
war and affect profitability of players in the long term.
442
Conclusions
Profitability to remain unaffected in medium term despite competition
in ports sector
However, we do not foresee such a situation in the short term due to

healthy traffic growth and high capacity utilisation levels.
Considering that growth in port traffic will continue to be robust,
margins of major ports will remain healthy.
Moreover, considering their location and other advantages (rail
road-connectivity) that some of the ports offer, these ports will
continue to witness a regular flow of traffic despite competition.
443
Container Terminal Operators-Industry Overview
444
Container trade fastest growing segment in shipping industry
Container trade has been the fastest-growing segment of global
seaborne trade over the last decade as compared to dry bulk and
liquid cargo.
It constituted 18 per cent of the global seaborne trade in 2010.
Global seaborne trade consists of three main segments:
Dry bulk cargo (like coal and iron ore), which is carried by dry bulk
shipping vessels
Liquid cargo, which is carried by specialised vessels such as tankers
Containerised cargo, which is carried by container vessels
Containerisation of cargo increases the efficiency of its transportation
by standardising the container used for both seaborne and overland
transportation of cargo.
445
This facilitates the integrated multi-modal transportation of cargo by
sea, rail and road.
Containerisation also allows for the efficient storage of goods on
ships or on land, provides protection against damage to goods in
transit, increases the security of the cargo during transport and
enables faster loading and unloading of cargo.
Container shipping, which was first introduced in the 1950s, has
expanded rapidly to emerge as the dominant method for the
international transportation of a broad spectrum of industrial and
consumer goods.
The goods transported include agricultural products, raw materials
and semi-manufactured and finished consumer goods, among others.
446
The container terminal industry has grown in line with the container
shipping industry, which has particularly benefited from the
globalisation of world trade.
Global container throughput grew at a compound annual growth rate
(CAGR) of 8.4 per cent over the last 10 years to reach 514 million teus
in 2010(E), up from 236.6 million teus in 2000.
447
Global containerisation slowing down in mature economies,
but significant pick-up in India and China
The growth rate of containerisation has slowed over the past 30 years,
especially in developed economies ever since the near-completion of the
process of containerisation.
(Almost all tradable goods that are capable of being transported in
containers along the deep-sea trade routes are now transported in this
way.)
However, trade routes to and from emerging economies, notably India,
China and Africa, continue to offer further scope for significant growth.
For the first time ever, container throughput at the world's ports fell (by
almost 10 per cent) from 525 million teu in 2008 to 476 million teu in 2009
as a consequence of adverse global economic trends.
Most global container terminal operators saw a drop in volumes across
448
their networks in 2009.
Modes of container trade
Origin and destination (O&D) mode
Transshipment mode (Hub & Spoke mode)
Chart 1: Origin & Destination (O&D) network
449
Chart 2: Transshipment hub network
The two main categories of throughput are O&D (also referred to as

import and export) and transshipment.
Every container shipped by sea is by definition an export container
at the origination terminal and an import container at the
destination terminal.
A container that is transferred from one ship to another at some
point during the journey is said to be transhipped. 450
It gives rise to transshipment throughput at an intermediate
terminal, somewhere between the load terminal and the discharge
terminal.
O&D throughput is often preferred by container terminal operators
due to the opportunity to generate additional revenue from ancillary
services, such as CFS and container cleaning.
As the latest generation of container ships on order have nominal
capacities in excess of 13,000 teus and are too wide and too deep to
call at many ports in the world, shipping lines instead seek to, or are
required to rationalise the number of port calls they make.
This trend has resulted in shipping lines favouring larger, centrally
placed ports in a region leading to the creation of hub-and-spoke or
gateway terminals. 451
Despite the advantages of O&D throughput, there are numerous
large container terminals around the world for which transshipment
accounts for a very high percentage of total throughput.
Some of these include, terminals at Singapore port, Tanjuung
Pelepas in Malaysia, Gioia Tauro in Italy, Salalah in Oman and
Algeciras in Spain.
The incidence of transshipment at container terminals worldwide (as
a percentage of global throughput) increased from 17.6 per cent in
1990 to 28.6 per cent in 2009.
This boosted growth in global throughput over the period as the
inclusion of transshipment along an otherwise direct O&D route
adds at least two port calls for each container shipment.
452
Top twenty container ports across the globe:
453
A typical container terminal:
454
Global terminal operators can be classified into three broad
categories:
Global stevedores: These are companies whose primary business is
port operations and they view terminals as profit centres.
Global carriers: The main business of these companies is container
shipping, but they have investments in container terminals to support
this core activity and often run terminals as cost centres.
Global hybrids: These are companies where the main activity, or that
of the parent group, is container shipping, but they have established
separate terminal operating business units that handle a significant
amount of third party business, as well as in-house traffic.
455
Of the top 10 largest terminal operators by gross throughput, five are
global stevedores (Hutchison Port Holdings, PSA International, DP
World, Eurogate and SSA Marine); three are global carriers
(Evergreen, MSC and CMA-CGM ) and two are global hybrids (APM
Terminals and Cosco).
456
Industry ownership and operating structures
Container terminals are operated under a number of different
ownership and operating structures, which can vary by region.
The various ownership models are summarised in the table below.
457
458
A large number of countries around the world still operate under the
state-owned model, wherein the port land remains the property of the
state and an operator has varying degrees of rights and obligations.
In the United Kingdom, most container terminals are 100 per cent
privately owned, albeit this is a relatively rare structure.
Conversely, in the United States, container terminal operators will
usually lease the terminal infrastructure and equipment from the
state.
Concession agreements have traditionally been used in developed
economies, but in recent years they have started to be used as a
privatisation vehicle for emerging economies.
459
Typical concession terms are for a duration of 25 to 50 years and
include royalty fees as a percentage of revenue and/or volume,
upfront payment and/or commitment to make capital expenditure
and nominal rent per hectare or per meter .
Due to the typical length of concession agreements and the recent
proliferation of their use, factors influencing concession renewal are
likely to become more apparent in the future.
CRISIL Research expects that incumbent operators will typically be
granted concession renewal, often because it can be costly to switch
operators (due to the initial inexperience or inefficiency of a new
operator).
460
The trend towards privatisation and BOT schemes discussed above has
largely been driven by government attempting to fund much-needed
container port development projects to improve the trade
competitiveness of their respective countries.
Privatisation and BOT initiatives are aimed specifically at expanding
quay length and yard area to increase throughput capacity, increasing
port efficiency by adding container handling equipment and
implementing technological improvements.
461
Efficiency and productivity of Container Terminals
462
Container handling productivity is directly related to the transfer
functions of a container terminal, including the number and
movement rate of quayside container cranes, the use of yard
equipment, and the productivity of workers employed in waterside,
landside, and gate operations.
The efficient use of available ground space relates to the number of
containers stored in a given area of the terminal.
Improving the utilization of ground space typically reduces the
operational accessibility to containers; that is, ground space utilization
and container accessibility are inversely related.
The challenge is therefore to define container accessibility in relation
to ground space utilization based on a terminal's operational targets
and unique physical characteristics. 463
The efficiency in operating terminal facilities is the basis in realizing
high productivity and, consequently, low costs per teu.
To obtain efficiency for the whole handling operations in the
terminal, there are several sub processes that are needed to be
correlated, namely gate efficiency (handling of trucks), stack
efficiency, berth efficiency, container handling efficiency, and other
forms of efficiency (for example train and barge handling efficiency).
The productivity of a container terminal is influenced by a range of
factors, only some of which can be controlled by terminal operators.
Factors internal to the terminal and under the control of the operator
include terminal layout, capital invested in machinery, and, to a
certain extent, labor productivity.
464
External factors beyond the control of operators include trade
volumes, shipping patterns, and the ratio of import to export
containers (which influences the number of empty containers handled
at a terminal and the availability of space at container yards) as well
as the landside capacities and performance of intermodal rail and
highway systems, are additional external factors affecting the
productivity of terminal operations.
465
466
Container Terminal Operators-Demand Supply
467
Global container trade bounced back in 2010
468
The container terminal industry has grown in line with the container
shipping industry.
Over the last 10 years, global container throughput has grown at a
compound annual growth rate (CAGR) of 8.4 per cent to reach 514
million teus in 2010(E), up from 236.6 million teus in 2000.
Global container trade has always grown at 3-4 times world GDP
growth.
469
Container trade handled at ports bounced back in 2010 by 8 per cent from the drop in traffic by
around 9 per cent in 2009 due to the global economic slowdown
470
Regional variations in demand
There have been significant regional variations in the growth of
container traffic.
Eastern Europe, Africa, South Asia, South America, the Middle East
and the Far East have recorded the fastest growth in recent years.
Currently, ports in these regions are emerging as the largest handlers
of container volumes globally.
Between 2004 and 2009, throughput at the container terminals in
these regions grew at a CAGR of 10.2 per cent, 10.8 per cent, 10.3 per
cent, 4.9 per cent, 8.7 per cent and 7.7 per cent, respectively.
In mature markets like North America and Western Europe
throughput grew at a CAGR of 3 per cent during the same period.
471
High level of consolidation prevalent in the container-
handling industry
The container terminal industry is characterised by a small number of
large operators.
Among these operators, the largest four collectively accounted for
46.8 per cent of global gross throughput as of December 31, 2009, and,
adjusted for equity, 29.6 per cent of global throughput for the year
ended December 31, 2009.
Global terminal operators increasingly compete based on the size and
diversification of their terminal portfolios, which enable them to offer
global networks to their liner customers, who are themselves
consolidating and becoming increasingly large.
The following table provides a breakdown of terminal operators by
gross throughput, capacity and market share for the year ended
472
December 31, 2009.
handling industry
473
handling industry
The total container-handling capacity in 2009 stood at 752 million
teu where the traffic was around 476 million teu, implying a
utilisation rate of 63 per cent.
In 2009, HPH handled highest traffic with 64.2 million teu, while
APM terminals had the largest capacity of 105 million teus.
474
Container Terminal Operators-Player Profiles
475
Hutchison Port Holdings (HPH)
Hong Kong-based Hutchison Port Holdings (HPH) continues to be ranked
as the leading global terminal operator in terms of total container
throughput.
Its global network, which has some 305 berths operating at 50 ports in 25
countries, handled 64.2 million teu in 2009.
In 2009, volumes handled by HPH fell by 5 per cent from 67.6 million teu in
2008 in line with the decline in the total container traffic witnessed by the
industry due to the economic slowdown .
HPH managed to increase its share of the global container terminal business
from 13 per cent to 13.6 per cent between 2008 and 2009.
Three Chinese ports, Hong Kong, Yantian and Shanghai, are the biggest in
HPH's global container terminal business.
These ports handled around 26.3 million teu between them in 2009,
476
accounting for 41 per cent of the total handled by HPH facilities worldwide.
477
As traffic reduced in 2009, revenues dropped and operating margins slipped to 31 per 478
cent
from 33 per cent in 2008.
APM Terminals
APM Terminals, which is a subsidiary of the AP Moller Maersk
group, operated 50 container terminals in 34 countries as of end-2010.
In 2009, the Netherlands-based company remained the second-
biggest global terminal operator.
APM Terminals' total throughput in 2009 fell by 11.6 per cent to 56.9
million teu as compared with 64.4 million teu in 2008.
479
APM Terminals
480
APM Terminals
481
PSA International
Singapore's PSA International group ranked third in terms of the total
teu throughput, handling 45.6 million teu in 2009.
PSA has considerably broadened the geographic scope of its operations
in recent years and now has terminals in 28 ports in 16 countries.
Singapore terminal, PSA's flagship terminal, accounted for over 25
million teu of its total throughput in 2009.
PSA's key home-port terminal facilities posted a 13 per cent decline as
compared with 2008, but overall, Singapore remained the world's
largest container port with respect to traffic handled for the fifth year in
a row.
In contrast, traffic at other facilities contracted by a relatively modest 7
per cent, with business in South Korea and China proving relatively
resilient in the face of the economic downturn.
482
PSA International
For instance, Tianjin saw a substantial increase in volumes over 2008
and contributions from new port start-ups at Chennai in India and
Vung Tao in Vietnam.
483
PSA International
484
DP World
In line with the other leading global container terminal operators,
DP World saw its total throughput fall from 46.2 million teu in 2008
to 45.2 million teu in 2009.
Although the group recorded a relatively modest reduction of
around 2 per cent during the economic downturn, its market share
rose from 8.9 per cent to 9.5 per cent between 2008 and 2009.
It has a portfolio of 49 terminals across the globe.
The estimated average utilisation of DP World's facilities in 2009
was 72.2 per cent.
This was only slightly less than the 7 3 . 2 percent recorded in 2008 .
DP World's flagship terminal at Jebel Ali in Dubai, proved relatively
resilient, with traffic dropping by 6 per cent to around 11.1 million
teu. 485
DP World
DP World is developing additional facilities in Abu Dhabi to absorb

future UAE traffic and regional transshipment growth, along with
Jebel Ali.
486
DP World
487
DP World
488
Container Terminal Operators-Global Outlook
489
Container traffic to record healthy growth
CRISIL Research expects container traffic handled at ports to grow at

a CAGR of 7 per cent from 514 million teu in 2010 to 718 million teu
in 2015, driven by growth in the Asia and other major emerging
economies.
490
491
CRISIL Research expects container-handling capacity at ports to
grow at a CAGR of 2.7 per cent.
Container capacity will grow to 895 million teus by 2015 from the
current capacity of 782 million teu.
A majority of these capacity additions are planned by global
stevedore operators.
Due to the slower growth in capacity vis-a-vis traffic, utilisation rates
at container terminals will increase from the current 66 per cent to
around 76 per cent by 2015.
492
Container Terminal Operators-Domestic Review &
Outlook
493
Significant growth in India's container trade over last decade
India's container trade has grown at a CAGR of 14 per cent in the last
15 years from 1.2 million teus in 1994-95 to 9.3 million teus in 2009-10.
Indian ports currently have the capacity to handle 14.5 million teu of
containers.
Major global container terminal operators like DP World, PSA and
APM terminals are present in India.
494
495
Container trade is majorly handled at ports in Gujarat and
Maharashtra which account for around 70 per cent of the total
container trade in India.
JNPT is the largest container-handling port, accounting for around
52 per cent of the container trade to and from India.
It has a capacity of 4.6 million teu, followed by Chennai with 3
million teu and Mundra with a capacity of 2.5 million teu.
DP World, the world's fourth-largest container terminal operator is
present in JNPT, Chennai, Cochin, Vizag and Mundra.
APM Terminals operate terminals at JNPT and Pipavav, while PSA
is present in Kolkata, Chennai, Tuticorin and Kandla.
496
Container handling capacity as of December 2010
497
CRISIL Research expects capacity expansion of 16 million teu in
container-handling capacity in India over the next 5 years with an
investment of Rs 196 billion.
During the same period, the container traffic is projected to grow at a
CAGR of 13 per cent to 20 million teus.
498
With capacity growing faster than traffic, the utilisation rates at container terminals are set
to fall from the current level of 74 per cent to 64 percent in 2015-16 .
499
Container Terminal Operators-Project Economics
500
Project economics of a standalone container terminal
CRISIL Research has analysed the attractiveness of a standalone

container terminal project from a returns perspective for a port
developer.
We have tried to estimate the project IRRs and equity IRRs for the
project, given the economic and regulatory environment.
We have also factored in the traffic growth and tariffs chargeable by a
port.
Note: The returns at various ports may vary depending on location,
operational efficiency, hinterland connectivity, tariffs, competition,
size of capacity expansion, timing of capacity expansion, economic
growth rate, amongst others.
501
Base case analysis
CRISIL Research has analysed the project economics of a standalone
container terminal in a port, with a capacity of 1 million teu, and
operating in a highly competitive environment.
Land for port activities is assumed to have been acquired by the
Central and state governments.
The port that has been taken for our base case only handles
container traffic.
It has a natural draft of 15-32 metres and can handle mother vessels.
The port offers good hinterland connectivity and has operational
efficiencies in terms of better pre-berthing and quick turnaround
time.
502
Charges and tariffs
Ports derive revenues in the form of tariffs.
Each time a ship enters the port, the port earns revenues in the form
of vessel-related charges.
Over and above this, it also earns revenues through cargo-handling
charges.
Vessel-related charges
Vessel-related charges are charged on all vessels entering a port based

on the ship's gross registered tonnage (GRT).
Vessel-related charges are levied on ships for the services provided by
the port like guiding the ship to port, providing tug services, letting
the ship use the port, etc.
The port earns revenues in the form of port dues, pilotage charges,
berthing/unberthing charges, tug charges, etc. 503
Cargo-related charges
Cargo-related charges are levied depending on the commodity being
transported through the port.
The key cargo-related charges include wharfage charges and cargo-
handling charges.
Tariffs will have to be competitive to attract traffic.
504
Sources of revenue
Containers: We have assumed that the port authorities are involved only
in providing marine services for vessels arriving at the port, while all
functions related to handling of containers and providing the required
equipments for operations of the container terminal are provided by the
terminal operator.
The port earns royalties from the sub-concessionaire, depending on the
traffic it handles at the port.
Apart from this, the port also earns revenue from marine charges.
Other income: The port provides rail services for the movement of
container and general cargo from the port to a mid-link connecting to the
Indian rail network.
The port also provides facilities for the storage of containers and
required inland container depots/container freight stations as per the
505
requirement of containers.
Sources of revenue
506
Traffic assumptions
Containers: In the case of containers, the port does not have any
dedicated customers.
It will take some time for the port to attract traffic, with the total
traffic expected to grow at a steady pace.
From 2019-20 onwards, we have assumed traffic to be relatively
stable.
507
Container terminal - a lucrative investment option
Project and equity IRRs for the base case are healthy at 15.3 per cent
and 20 per cent, respectively, which makes it an attractive investment
option for a developer.
These returns can be enhanced further by entering into contracts with
dedicated users.
To understand the influence of various parameters on the returns of ports,

CRISIL Research has carried out a sensitivity analysis of revenues of ports
with respect to the following major parameters:
Sensitivity to changes in tariffs at ports
Sensitivity to changes in revenue share
Sensitivity to changes in capacity utilisation for the first year
508
Sensitivity to changes in interest rates
509
510
511
The project returns are most sensitive to changes in revenue share,
followed by traffic, then tariff and is least sensitive towards interest
rates.
Also, the traffic at the port is primarily dependent on arrangements the
port makes with container shipping lines.
Tariffs are significantly influenced by location and competition-related
factors.
In this case, the port is operating in a location of high competition.
In order to compete, the tariffs (adjusted for inflation) would have to
be reduced; else traffic would move to competing ports.
Further, the terminal operator's ability to attract shipping liners and its
strategic importance in the overall global operation of major terminal
operator can significantly influence tariffs, traffic and returns. 512
Competition In Container Ports-Overview
513
Container traffic witnesses strong growth of 15 per cent over
medium term
Container traffic in India, which is currently 9.3 million TEUs, is
expected to grow at a healthy CAGR of 13 per cent between 2010-11
and 2015-16.
Over the past five years, domestic container traffic has grown
consistently, driven by underlying commodities like capital and
engineering goods, textiles and food items, which are essentially
carried by containers.
The CAGR of container traffic from 2005-06 to 2010-11 was 15 per
cent.
514
medium term
515
medium term
Geographically, the major share of domestic container traffic

originates in the northern and western industrial hinterland due to
the high concentration of industrial hubs within the region.
Hence, container terminals in the western zone account for 67 per
cent of the total container traffic in the country.
516
medium term
517
medium term
In this report, CRISIL Research has analysed the competitive
landscape for container ports in India on a regional basis.
For this purpose CRISIL Research has divided India's traffic into
three major zones: West zone, East zone and South zone.
We have analysed each of the ports in these zones on selected
parameters to determine their competitiveness.
518
Parameters considered for competitive analysis across ports
For the competitive analysis, all the ports have been evaluated on
various key parameters.
Weightages have been assigned to these parameters depending on
their relative importance.
Subsequently, ports have been assessed within their specific regions
on the basis of the aggregate scores obtained on each of the
parameters.
The following chart represents the parameters considered for
evaluation and the respective weightages assigned to them.
519
Parameters considered for competitive analysis across ports
520
Infrastructure
Port infrastructure is the most important parameter for a port to attract

traffic.
It is the infrastructure at the port that determines whether the entry of
large vessels and high storage capacity are possible.
Port infrastructure can be further broadly divided into
Port-related infrastructure
Connecting infrastructure
Within port-related infrastructure are the following parameters:
521
Infrastructure
522
Infrastructure
In connecting infrastructure we have considered the rail and road

connectivity from the port to the hinterland, under the following
classifications:
Rail/road connectivity
Double stacked container trains
Double line railway track for container trains
Road network
523
Efficiency:
Efficiency of a port determines the logistics cost for a shipping liner.
This parameter has been measured in terms of total turnaround time
at a port.
A port with a lower turnaround time has high chances of being
preferred over one that has lower tariffs.
This is because delays in shipment can result in more significant
losses as compared to higher tariffs.
Total turnaround time of a port consists of:
Pre- berthing time - This is the time taken from the arrival of the ship
at the anchorage (reporting station) till the time it is berthed.
Vessel turnaround time - Refers to the time since the ship reports at
the anchorage till the time it leaves the port.
524
Location:
The location of a port is an important driver of preference for that
port.
The strategic advantage of location of a port has been assessed by the
following two parameters:
Distance to the nearest industrial hinterland
Distance from the major shipping route
525
Total traffic handled by the port
The traffic handled by a port determines its ability to attract shipping
lines on a regular basis.
Also, a large port like JNPT, due to its sheer volumes, has several
direct services to major export import destinations like Far East Asia
and Europe.
On the other hand, ports with smaller volumes have to send feeder
vessels for consolidation of traffic at transshipment hubs and,
subsequently, the traffic is then sent to the main shipping route.
This process significantly increases the port's total logistics cost and
lowers the preference for it.
526
Competition In Container Ports-Competitive Analysis
West
527
CRISIL Research has classified ports within Gujarat, Maharashtra and
Goa, which cater to the western and northern hinterland, as the west
zone.
Ports in the western zone caters to the Delhi-Haryana industrial belt
as well as the industrial clusters in Gujarat and Maharashtra.
The major containerised commodities in this zone are textiles, bicycle
parts, foodgrains, pharmaceuticals, chemicals, marble, tiles, ceramics,
and cement.
Three ports - JNPT, Mundra and Pipavav - account for around 98 per
cent of the total traffic handled by the western zone; JNPT alone
accounts for around 70 per cent of the traffic handled by the zone.
The remaining two per cent in the western zone is accounted for by
Kandla port in Gujarat and Mumbai port in Maharashtra.
528
West zone - Map
529
West zone - Map
Mundra, Pipavav, and Kandla ports are located in Gujarat while
JNPT and Mumbai are located in Maharashtra.
Gujarat-based ports are located closer to the northern hinterland,
which is the hub of most of the industrial activity in India.
Ports in Maharashtra such as JNPT and Mumbai are located farther
from the northern industrial centre.
As shown in the above map, for ports in Gujarat, the advantage in
terms of proximity to hinterland becomes a disadvantage in terms of
distance from the major shipping route.
Ports in Maharashtra are closer to the major shipping route ( towards
Europe and US) compared to ports in Gujarat.
530
Major shipping route : Map
531
Infrastructure (Port related)
532
Infrastructure (Connecting)
533
Traffic handled and efficiency
534
Port performance: West Zone
535
Mundra Port ranks among the best ports in the west zone
Mundra port currently has two terminals
Adani Mundra Container Terminal (AMCT) - Operated by Mundra
port and SEZ Ltd
Mundra International Container Terminal (MICT) - Operated by DP
World
Mundra port is one of the best in the west zone in terms of
infrastructure, efficiency as well as location.
Mundra port has the highest draft, and the number of cranes, yard
capacity and quay length are more than adequate according to the
traffic that the port handles.
Its current capacity utilisation is only 49 per cent, which is much
below the optimal capacity utilisation of 75 per cent; the port has the
capability to handle more traffic with the current infrastructure. 536
Connecting infrastructure, like rail and road connectivity, is sufficient

to handle the current traffic at Mundra port.
The congestion at railway line as well as roads is much lower as
compared to JNPT.
Also, presence of double stacked container rail tracks further reduces
evacuation time.
Currently Mundra and Pipavav ports are the most efficient ports with
a turnaround time of less than a day.
However, Mundra port, being a relatively new port, has very low
traffic currently as compared to bigger and older ports like JNPT.
Due to this reason, it has lower shipping frequency and limited
frequency of mainline services.
537
This means that traffic from Mundra port is largely transshipped to
a transshipment hub like Dubai, which subsequently increases the
total logistics cost for the end-user.
538
Pipavav port: ranks best on infrastructure, efficiency and location
Pipavav port has one container terminal, operated by APM Terminals

Ltd.
It is a relatively new terminal that began operations in 2010.
Pipavav is also one of the best ports in the western zone in terms of
infrastructure, efficiency, and location.
Pipavav port has more than adequate infrastructure compared to the
traffic it handles.
Even with significant growth in its container traffic, it will be able to
sustain operations on the current infrastructure.
Rail road connectivity is sound for the traffic it handles at present.
Like Mundra, it has the capability of handling double stacked
container trains.
539
Pipavav port: ranks best on infrastructure, efficiency and location
Pipavav port also has the advantage of strategic location like all
Gujarat-based ports.
The port has high efficiency with a turnaround time of less than a
day.
However, like Mundra port, Pipavav port also handles very less
traffic as compared to JNPT, because of which its shipping frequency
is low.
540
Jawaharlal Nehru Port Trust: loses out on congestion issues and
delays
The Jawaharlal Nehru Port Trust or JNPT is the largest container port
in India with a share of 46.5 per cent in total container traffic.
JNPT has three container terminals
Jawaharlal Nehru Port Trust (JNPT) - Operated by the port trust
Gateway Terminals India Pvt Ltd (GTI) - Operated by AP Moller-
Maersk Group
Nhava Sheva International Container Terminal (NSICT) - Operated
by DP World
JNPT has an overall average score on account of capacity constraints,
high rail and road congestion and low efficiency.
JNPT has low efficiency due to congestion issues and paperwork
delays.
541
delays
It has a turnaround time of 2 days, which is significantly high for a
container port.
Although JNPT has sound rail / road connectivity, it is not sufficient
for the extremely high amount of traffic that it handles.
Also, as the traffic has to move on one of the busiest rail/road routes
in India, evacuation of traffic takes a lot of time.
Despite these factors, JNPT continues to be the largest container port
in India.
It attracts a lot of shipping lines as it handles a large amount of traffic,
guaranteeing traffic at all times.
Hence, shipping frequency is the maximum at JNPT as compared to
other ports on the western zone.
542
delays
JNPT has the largest infrastructure in India for handling container
traffic.
Including all its three terminals, JNPT's quay length, cranes, berths
and yard capacity far exceed those at Mundra and Pipavav ports.
Going ahead, JNPT is expected to lose share to newer ports like
Mundra and Pipavav on account of the aforementioned reasons and
capacity constraints.
543
Kandla Port:
Kandla port has a single container terminal that is operated by PSA-
ABG.
The port is very small in terms of traffic it handles as compared to
JNPT, Mundra and Pipavav.
It has an average infrastructure, with a draft of 12.5 metres, quay
length of 545 metres and 2 berths.
It also has average efficiency with a turnaround time of 1.7 days.
It fares well on the location parameter due to its strategic presence.
However, overall it is not expected to gain share from better ports in
the West zone like Mundra, Pipavav and JNPT.
544
Mumbai Port:
Mumbai port has one container terminal operated by Mumbai Port
Trust.
Mumbai port has below-average infrastructure and efficiency.
Also it handles very low amount of container traffic.
Hence it has been benchmarked as a below-average port.
545
West Zone: Privately owned non-major ports to gain share in
container traffic
JNPT, which currently occupies a share of 67 per cent in the western
zone, suffers from capacity constraints and is operating at higher
than optimal utilisation levels of 94 per cent.
Also, given its bottlenecks on account of rail/road congestion and
lower efficiency, traffic is expected to move to non-major ports like
Mundra and Pipavav.
546
container traffic
Traffic at JNPT has increased at a CAGR of 9.8 per cent from 2005-06, while during the same
period, traffic at Mundra and Pipavav grew at a CAGR of 35.5 per cent. Going ahead, this
trend is expected to continue. 547
container traffic
548
container traffic
The share of JNPT in the western zone is expected to decline from
the current 69 per cent to around 50 per cent by 2015-16.
This will ease congestion, and capacity utilisation levels are expected
to improve to 85 per cent.
Hazira port, which is being developed by Mundra Port and SEZ is
expected to become operational in the western zone by 2015-16.
However it is not expected to gain significant share over the medium
term .
549
Competition In Container Ports-Competitive Analysis South
550
South Zone: Chennai dominates container traffic
The south zone is dominated by Chennai port, which accounted for
66 per cent of the zone's container traffic in 2010-11.
Under south zone, CRISIL Research has covered ports located in
Kerala, Tamil Nadu, and Karnataka that mainly cater to container
traffic originating from Tamil Nadu, Andhra Pradesh and
Karnataka.
Major commodities transported from the region are auto and auto
ancilliaries, textiles, electrical machinery, organic chemicals, rubber
and plastics.
The south zone is plagued by severe overcapacity and aggregate
utilisation level in the zone is 51 per cent at present.
551
South Zone: Chennai dominates container traffic
With no expectation of an extraordinary improvement in container
demand in the southern zone, all south-based ports face the threat
of surplus capacities .
This region has three main ports
Chennai Port
ICTT - Vallarpadam, Cochin
Tuticorin Port
As shown on the map, Chennai and Tuticorin ports are located on
the eastern coast while Cochin is located on the western coast.
Chennai is located in Tamil Nadu, which has the maximum
container traffic potential. Hence, it has a huge strategic advantage.
On the other hand, Tuticorin and Cochin ports have the advantage
of being closest to the major shipping route (to US and Europe). 552
South zone map:
All ports in the south zone have been assessed on the four main parameters discussed 553
before:
Major shipping route - Map
554
Infrastructure (Port - related)
555
556
Efficiency and traffic handled
557
Cochin Port: Ranks best in south zone
558
Cochin port has a single container terminal that is operated by DP

World.
It is the best port in the southern zone with the best infrastructure,
sound efficiency, and low congestion levels.
Cochin port has the best infrastructure among all the ports in the
southern region.
This is because it has developed infrastructure appropriate for a
transshipment hub in competition with the Colombo transshipment
hub in Sri Lanka.
Cochin port also has better efficiency than Chennai port, with a
turnaround time of 1.5 days as of 2009-10.
This is estimated to have significantly improved as the
transshipment terminal began operations in 2010-11. 559
Cochin is closer to the major shipping route than Chennai port.
However, Cochin port handles lesser traffic as compared to Chennai
port, which lowers the shipping frequency to the port
560
Chennai Port: Loses out on congestion issues, efficiency
Chennai port has two container terminals:
Chennai Container Terminal (CCT) - Operated by DP World
Chennai International Terminals Private Limited (CITPL) - Operated by
PSA
Chennai port has been benchmarked as an average port due to the
following reasons:
Chennai port is located within the city limits.
This leads to heavy congestion and, consequently, significant delays in
arrival and evacuation of container traffic from the port.
Although it fares well on other infrastructure parameters, Chennai port has
very low yard capacity (just 17 hectares)
Efficiency at Chennai port is low with a turnaround time of 1.7 days, which
is high for container traffic, due to congestion and evacuation issues. 561
Chennai Port: Loses out on congestion issues, efficiency
However, Chennai port has the strong advantage of being closest to
the southern hinterland.
This makes it a preferred choice for end-users, despite its bottlenecks,
as land logistics costs form the largest proportion of logistics cost.
Also, Chennai port currently handles the largest amount of traffic in
the south zone.
This, along with the fact that it is the oldest container port in the
zone, results in higher shipping frequency compared with its
counterparts.
562
Tuticorin Port
Tuticorin port has a single container terminal that is operated by
PSA.
It has been benchmarked as an average port due to the following
reasons
Traffic handled is quite low, hence, container vessels at Tuticorin
port are generally feeder vessels and limited lines offer direct
services.
Tuticorin port ranks the worst on infrastructure parameters, with low
draft, quay length, yard capacity, number of berths, and cranes.
It is located far from the southern hinterland.
But Tuticorin port has the following strengths:
As it is located on the lower east coast of the country, in Tamil Nadu,
it is very strategically located, close to the major shipping route. 563
Tuticorin Port
The port has sound connecting port infrastructure with double line
rail connectivity and road connectivity to all major national
highways
564
Shift in container traffic: South Zone suffers from overcapacity
at ports
Given the congestion and low efficiency at Chennai port, traffic is
expected to shift to newer ports such as Cochin, and new ports such
as Ennore and Katupalli that are expected to come up within the next
5 years.
Tuticorin is also expected to lose share given its distance from the
hinterland and low shipping frequency.
Chennai port's share is expected to decline from 66 per cent currently
to around 50 per cent in 2015-16.
565
at ports
566
at ports
The upcoming container terminal at Ennore port has all the strategic
advantages offered by Chennai and is also located outside city
limits, which will provide it a significant advantage over Chennai
port.
Hence, Ennore is expected to gain 9 -10 per cent share by 2015-16.
However, the ongoing Chennai - Ennore - Manali Road
Improvement Project (EMRIP), which is expected to be completed
by 2013 is a key monitorable as there is currently no road
connectivity to Ennore port.
Katupalli, another new port being planned on the south-western
coast of India, is expected to become operational by 2015-16.
567
at ports
568
Competition In Container Ports-Competitive Analysis East
569
East Zone: Lowest contribution to container traffic in India
The east zone consists of container ports based in West Bengal, Orissa,
and Andhra Pradesh.
These ports largely cater to the container traffic originating from and
destined towards the eastern hinterland.
The east zone currently comprises only two main container ports:
Kolkata Port - operated by PSA- ABG
Visakhapatnam port - operated by DP World
The east zone largely caters to traffic originating from the eastern part
of India and constitutes only 7 per cent of the total container traffic in
India.
570
East Zone - Map
571
East Zone - Map
The eastern ports also have the disadvantage of being located far
away from the major shipping route.
The major shipping route is 736 NM from Vizag and 1127 NM from
Kolkata, the farthest among all Indian container terminals.
572
Infrastructure (Port related)
573
574
Efficiency and traffic handled:
575
East zone: Vizag Port ranks best
Vizag port has one container terminal operated by DP World.

It has adequate infrastructure with a high draft of 16.5 metres and a
yard capacity of 24 hectares.
It has high efficiency with a turnaround time of 0.8 days.
Connecting infrastructure of the port is average with double line rail
connectivity and road connectivity to the national highways.
576
Kolkata Port
The Kolkata port has a single container terminal that is operated by
PSA-ABG.
Kolkata port is a riverine port, which constrains its draft facility,
making maintenance dredging very expensive.
It has been scored below average as it performs poorly on all
parameters.
Kolkata has sub-standard infrastructure with low quay length, draft,
cranes and berths.
It has the lowest efficiency among all the ports considered with a
turnaround time of 4.5 days.
577
Shift in container traffic: East Zone traffic to shift to Vizag and
Dhamra
In the east zone, Kolkata currently has the maximum share in
container traffic of 72 per cent.
Also, due to lack of capacity at other ports, it is currently operating
at over 100 per cent utilisation levels.
578
Dhamra
Kolkata port does not have any capacity expansion plans nor does it
have any significant plans of augmenting its infrastructure.
Capacity constraints as well as efficiency issues are expected to
benefit ports such as Vishakhapatnam and Dhamra, reducing
Kolkata's share to less than 50 per cent by 2015-16.
Dhamra port, which will be operational by 2014-15, is expected to
gain significant share of 25 per cent by 2015-16 due to lack of
capacity at the other ports in the east.
579
Dhamra
580
Indian Ports-Traffic
581
Port traffic to decline in 2012-13; moderation to continue over
medium term
Indian port traffic is estimated to have declined by 0.2 per cent in

2012-13.
This has been largely on account of an estimated 48 per cent decrease
in iron ore traffic during the year.
Post 2012-13, port traffic is expected to grow at a moderate pace,
resulting in a 4-6 per cent CAGR over 2011-12 to 2016-17.
The moderation in overall port traffic is primarily on account of the
ban on illegal iron ore mining intensifying and increasing cost of
exporting iron ore due to which iron ore traffic is expected to remain
low over the 5-year period.
Growth in port traffic will be largely driven by strong growth coal
imports and healthy container traffic.
582
Outlook on traffic at Indian ports
E: Estimated 583
Outlook on traffic at Indian ports
At major ports, port traffic has declined by an estimated 4 per cent in
2012-13, largely due to a 65 per cent decrease in iron ore traffic.
Iron ore traffic at major ports fell to a mere 21 million tonnes in 2012-13
from a peak of 100 million tonnes in 2009-10 as the ban on illegal mining
intensified, the export duty was increased and logistics costs rose.
The pace of growth in container traffic also slowed down sharply, with
an estimated growth of just 0.5 per cent (y-o-y) in 2012-13 as against a
CAGR of 10.3 per cent during 2006-07 to 2011-12.
On the other hand, coal traffic grew by a healthy 25 per cent due to a
significant increase in imported coal requirement.
Non-major ports are also estimated to have registered a slowdown in
traffic growth at 5 per cent (y-o-y) in 2012-13 as compared to a CAGR of
13.4 per cent during 2006-07 to 2011-12, mainly due to a decline in iron
584
ore traffic.
Traffic at ports in India
585
Non-major ports to continue to capture share in overall port
traffic
Non-major ports are expected to account for around 47 per cent of
the total traffic pie by 2016-17 as compared to 38 per cent in 2011-12.
This is due to capacity expansion plans by non-major ports coupled
with better efficiencies and infrastructure at non-major ports.
Plans for port-based power projects and special economic zones near
non-major ports, and improvement in infrastructure such as road
and rail connectivity will also drive traffic growth at non-major
ports.
Operational efficiency-related issues such as congestion, capacity
constraints, connectivity issues, etc will compel traffic to shift to non-
major ports from major ports as well.
586
Break-up major and non-major ports
P: Projected
587
Indian Ports-Commodity Wise Port Traffic
588
Steep fall in iron ore traffic drags overall port traffic; exports to
remain low
Iron ore traffic at Indian ports has declined sharply since 2009-10
when a ban on illegal mining of iron ore was imposed.
The ban was followed by an increase in export duty to 30 per cent
from 20 per cent, and a hike in freight rates for rail transportation of
iron ore meant for export.
Following these events, iron ore exports have plummeted, resulting
in a decline of 60 per cent in iron ore traffic at the ports from 149
million tonnes (MT) in 2009-10 to a mere 97 MT in 2011-12.
In 2012-13, with the enforcement of the mining ban becoming stricter
in Karnataka, Andhra Pradesh and Odisha, and iron ore mining in
Goa also being banned during the year, iron ore traffic is estimated to
have fallen further to 50 MT.
589
Iron ore port traffic
590
P: Projected
The worst affected regions were Karnataka and Andhra Pradesh, followed
by Odisha, West Bengal and Goa.
The ports that have been worst affected by the ban are New Mangalore,
Krishnapatnam and Dhamra.
In 2011-12, Indian ports registered an overall decline of 48 per cent y-o-y in
port traffic:
Eastern region : Port traffic in the eastern region, comprising West Bengal
and Odisha, declined by 47 per cent y-o-y in 2011-12.
An environmental ban in Odisha reduced iron ore exports from the region.
While the mining lease of iron ore mines will be renewed, it will be only for
mines that are being used for captive purposes (iron- and steel-making) by
the lessee, with the balance land reserved for the Odisha Mining
Corporation. 591
Additionally, the Government of Odisha, through a circular dated
December 5, 2012, brought about further regulations, namely: Half of
the production of merchant miners (who were yet to exhaust their first
30 years of the lease period) is to be sold to standalone end-users
within the state.
These regulations are expected to continue to keep iron ore exports
from the region in check over the medium term.
Southern region: Port traffic in the southern region, comprising
Andhra Pradesh, Tamil Nadu and Karnataka, decreased by 40 per cent
y-o-y in 2011-12.
Mining activity declined in Karnataka, Tamil Nadu and Andhra
Pradesh on account of a blanket ban on mining.
592
The Supreme Court in April 2012 allowed iron ore mining in
Karnataka to restart, but with the condition that mining had to be
capped at 30 MT.
Also, only the ore not purchased domestically was to be sold via e-
auction and exports.
Hence, exports are not expected to revive in this region over the
medium term.
Western region: Port traffic in the the western region, comprising
Goa and Gujarat, fell by 15 per cent y- o-y in 2011-12.
The Goa state government suspended iron ore mining in the state in
September 2012 with a view to check illegal mining.
This was followed by the suspension of environment clearances for
all 93 mining leases by the Ministry of Environment and Forests. 593
While this is expected to eliminate exports from Sesa Goa, it will also
lead to even lower iron ore exports from this region going ahead.
However, growth in Gujarat's iron ore imports is expected to
marginally offset the overall decline in iron ore port traffic in this
region.
The slowdown in iron ore exports is expected to continue over the
next 5 years despite healthy demand from key iron ore consuming
countries such as China, South Korea and Japan.
This can be attributed to the continued stricter enforcement on illegal
mining and exporting of iron ore, as well as increased cost of
exporting iron ore.
Moreover, domestic consumption is likely to rise at a faster pace vis-
a-vis the previous corresponding period. 594
Consequently, total iron ore traffic is expected to remain stagnant at
0-2 per cent CAGR or around 50 million tonnes between 2012-13 and
2016-17.
Subdued growth in container traffic due to slowdown in global trade,
revival expected post 2012-13
Growth of container traffic primarily depends on the import /export of

capital and engineering goods, textiles and food items.
With the slowdown in global trade, the pace of growth in container
traffic is estimated to have declined significantly to 0.5 per cent y-o-y in
2012-13 as compared to 12.3 per cent CAGR during 2006-07 to 2011-12.
With India`s EXIM trade and the global economic environment likely to
improve post 2012-13, container traffic is projected to grow by 3-5 per
cent y-o-y in 2013-14. and by 5-7 per cent CAGR during 2011-12 to 2016-
595
17.
Subdued growth in container traffic due to slowdown in global
trade, revival expected post 2012-13
Import growth is expected to be driven by non-electrical machinery,
electronic goods and transport equipment.
Also propelling container traffic in the country are higher exports of
food grains and textiles.
596
Container traffic at ports
E: Estimated; P: Projected
597
Container traffic at ports
During 2011-12 to 2016-17, container traffic at major ports is expected
to increase between 0-2 per cent CAGR to 125 MT from 120 MT.
Container traffic at non-major ports is expected to grow at a faster
rate of 22-24 per cent CAGR to 72 MT from 25.3 MT over the same
period.
Hence, the share of non-major ports in the total containerised traffic is
expected to increase to 37 per cent from 17 per cent over the next 5
years.
Container capacities at non-major ports of Mundra, Krishnapatnam,
Pipavav, Hazira and Dighi will primarily drive the higher growth in
container traffic at non-major ports.
598
Unavailability of domestic coal to drive coal imports; non-major
ports to gain the most
Coal traffic is estimated to have grown by a significant 25 per cent in
2012-13 on account of commissioning of several imported coal-based
capacities.
During 2006-07 to 2011-12, coal traffic at ports grew by a steady 19.7
per cent CAGR.
Going forward, the rise in domestic steel-making capacities would
result in a higher demand for coking coal, while thermal coal traffic is
set to rise due to the increase in capacities of coal-based power and
cement plants.
However, limited production at existing mines and regulatory
hurdles in the commissioning of new mines are expected to continue
to result in healthy growth in coal imports over the medium term. 599
Unavailability of domestic coal to drive coal imports; non-major
ports to gain the most
Domestic coal production, though, is expected to improve post 2013-
14 on account of favourable government policies, leading to a
deceleration in coal imports.
During 2011-12 to 2016-17, coal traffic at ports is expected to grow by
14-16 per cent CAGR.
600
Coal traffic at ports
E: Estimated; P: Projected 601

As significant coal-handling capacities are coming up at non-major
ports, their share in total coal traffic at ports is expected to increase
significantly.
The augmentation of coal-handling facilities at non-major ports will
be led by ports such as Mundra, Hazira, Krishnapatnam and
Karaikal.
Capacity constraints in coal-handling at major ports coupled with
their lower turnaround times is also expected to steer coal traffic
towards non-major ports.
A few imported coal-based power projects have been planned in the
vicinity of some non-major ports, which would further drive coal
traffic towards non-major ports.
602
Between 2011-12 and 2016-17, CRISIL Research expects coal traffic

handled at non-major ports to grow to 187 MT from 74 MT, a CAGR of
20 per cent.
During this period, coal traffic handled at major ports is expected to
expand by 8-10 per cent to 121 MT from 78.7 MT.
The faster pace of growth at non-major ports will increase its share in
total coal handling traffic to 60 per cent from the current 48 per cent.
603
POL traffic to grow at steady pace over next 5 years; major ports
to gain share
Rising domestic demand for personal transportation and industrial
activity is expected to propel the demand for motor spirits and high
speed diesel.
Additionally, continued peak power deficit and shortage of natural
gas for power plants will boost the demand for diesel-powered
captive power plants.
Due to the increase in demand for refined products, crude oil
imports are expected to increase by 5-6 per cent CAGR over the next
5 years.
However, on account of rising domestic demand for petroleum
products, India is expected to register a decline of 3.8 per cent CAGR
in POL (petroleum, oil and lubricants) exports during 2011-12 to
604
2016-17.
POL traffic to grow at steady pace over next 5 years; major ports
to gain share
Consequently, the growth of POL traffic at Indian ports is expected to

moderate over the next few years.
CRISIL Research estimates total POL traffic to grow by 2-4 per cent
CAGR to 390 MT in 2016-17 from 341 MT in 2011-12.
605
POL traffic at ports
606
POL traffic at ports
POL traffic at major ports is expected to grow by 4-6 per cent CAGR
to 222 MT in 2016-17 from 179 MT in 2011-12, spurred by capacity
additions at Bharat Petroleum Corporation Ltd's Bina refinery,
Indian Oil Corporation Ltd's Paradip refinery, Hindustan Petroleum
Corporation Ltd's Vizag refinery and Essar Oil's Vadinar refinery.
POL traffic at non-major ports is set to register a 0-2 per cent CAGR
during the same period.
Consequently, the share of non-major ports in total POL traffic is
expected to decline to 43 per cent in 2016-17 from 47.5 per cent in
2011-12, since a majority of the capacity expansions are planned at
refineries connected to major ports via pipelines.
607
Share of iron ore in commodity mix to decline, coal to increase
A steep decline in iron ore exports and high growth in coal traffic is
expected to change the commodity mix at Indian ports over medium term.
The share of iron ore traffic is projected to fall to 5 per cent in 2016-17 from
10.6 per cent in 2011-12.
However, over the same period, the high growth in coal traffic is expected
to result in an increase in the share of coal in total port traffic to 27 per cent
from around 16.8 per cent.
In 2011-12, POL accounted for the largest proportion of traffic at Indian
ports.
While POL is expected to continue to comprise the largest share in total
traffic between 2011-12 and 2016-17, its share is expected to decrease to 34
per cent from 38 per cent.
During this period, the share of iron ore traffic is also expected to remain
608
low at 9 per cent (10 per cent in 2011-12).
Commodity-wise break-up of port traffic
P: Projected 609
Indian Ports-Capacity & Utilisation
610
Utilisation rates to plummet in 2012-13 as capacity addition
outpaces demand
Total port handling capacity at Indian ports increased by around 180

million tonnes over 2011-12 to 2012-13 to 1,425 million tonnes.
Port traffic during this period is estimated to have declined by 2
million tonnes to 906 million tonnes.
As a result, utilisation rates at the ports fell to 64 per cent from 73 per
cent.
611
Utilisation rates at Indian ports
612
Capacity additions to continue to outstrip demand over next 5 years
CRISIL Research expects capacity at Indian ports to expand to 1,821

million tonnes by 2016-17, which is a 5-year CAGR of 8-10 per cent.
Since traffic at the ports is expected to grow by a lower 4-6 per cent
CAGR, utilisation rates over the long term as well are likely to decline
significantly.
Between 2011-12 and 2016-17, the utilisation rates are projected to
decline from 73 per cent to 64 per cent (similar to 2012-13 levels).
613
Utilisation rates at Indian ports
P: Projected
A majority of the capacity additions are planned at non-major ports. 614
Declining utilisation rates to impact profitability, especially in
regions with overcapacity
Lower utilisation rates at the ports could result in a decline in

profitability.
However, profitability at ports with strong anchor traffic, in the form of
POL (petroleum, oil and lubricant) products for refineries and coal for
power plants, is likely to remain healthy.
With iron ore traffic expected to remain very low at a mere 50 million
tonnes over the next few years, the profitability of ports dependent on
iron ore traffic is likely to be affected.
For instance, Sical Iron Ore Terminals Ltd, which has developed a 12-
million-tonne iron ore terminal at Ennore port, has not been able to
attract any traffic due to the ban on iron ore exports from Tamil Nadu
and Karnataka. If the ban continues, and Sical is unable to diversify its
615
cargo, its ability to continue operations could come under severe strain.
Declining utilisation rates to impact profitability, especially in
regions with overcapacity
In the case of container terminals, there is an oversupply in the southern
region.
The Chennai mega container terminal project, with capacity of 48 million
tonnes per annum (mtpa), is under bidding.
Katupalli container terminal, with a capacity of 7 mtpa, is under
construction.
And Krishnapatnam port commissioned its container capacity of 15 million
tonnes in 2012-13.
These capacities will bring down the utilisation rate of the southern region
(including Tamil Nadu, Andhra Pradesh, Karnataka and Kerala).
The rising competition in a free tariff pricing scenario could pressurise the
profitability of port operators in this region.
616
Indian Ports-Investments
617
Investments at ports to remain healthy over next 5 years
Between 2012-13 and 2016-17, CRISIL Research expects investments

totalling Rs 1,025 billion in Indian ports, directed at capacity
augmentation, addition of new berths, creating more storage or
warehousing facilities, rail-road connectivity, adding new equipment,
etc.
CRISIL Research expects the private sector's contribution of the
projected investment to remain above 80 per cent.
618
Outlook on investments at ports
619
Port investments in Twelfth Plan far higher than Eleventh Plan
According to a Working Group report, expenditure under the
Eleventh Five-Year Plan was estimated at Rs 176.8 billion as against
a planned expenditure of Rs 303.2 billion.
For the Twelfth Five-Year Plan, a total outlay of around 1,806 billion
has been earmarked for port investments.
Around 86 per cent of the investments are expected to be from the
private sector in both major and non-major ports.
620
Investments in ports
IR: Internal resources; GBS: Gross budgetary support; EBR: Extra budgetary support; PPP:621
Public-
private partnership
Indian Ports-Commodity Wise Port Capacities
622
Capacity additions at ports to be driven by coal, container segments
Given the high growth expected in coal and container traffic,

maximum capacity additions at Indian ports are expected to be
directed towards coal and container facilities.
At major ports, capacity additions for handling POL (petroleum, oil
and lubricant) products are also expected to be significant.
However, due to a sharp fall in iron ore exports, most iron ore
centric port projects have been shelved or delayed.
623
Major ports capacity additions
P: Projected 624
Non-major ports capacity additions
P: Projected
625
Iron ore
Capacity additions to be low due to sharp fall in demand
Stringent enforcement to curb illegal iron ore mining and increase in export
duty for iron ore have resulted in a sharp drop in iron ore traffic at Indian
ports since 2010.
Only two significant dedicated iron ore handling capacities are expected to
be commissioned during 2012-13 to 2016-17.
At major ports, iron ore handling capacities to be added include a 6.8
million tonne per annum (mtpa) capacity expansion at Vizag port outer
harbour and an 8 mtpa terminal by Sterlite at Mormugao port.
In the case of non-major ports, Gopalpur and Ashtaranga ports are expected
to begin operations during the next 5 years, adding 10 mtpa of iron ore
handling capacity each.
Although these capacities have been planned as iron ore capacities, they can
626
be used as multi-purpose terminals as well.
Iron ore
Capacity additions to be low due to sharp fall in demand
The uncertainty on availability of iron ore traffic continues to affect

future prospects of all iron ore handling port terminals.
The iron ore terminal at Ennore, with an annual handling capacity of
12 million tonnes, was commissioned in 2010-11 but is yet to handle
traffic.
Similarly, significant progress had been made on the New
Mangalore iron ore terminal by Sical Logistics before it declared
force majeure due to an absence of iron ore traffic in the Karnataka
region.
627
Coal
Coal capacities to keep pace with increasing demand
Over the next 5 years, the coal handling capacity of Indian ports is
expected to increase by around 140 million tonnes from 235 million
tonnes.
Given the expected high growth in coal traffic, utilisation levels are
likely to increase to 80-82 per cent over the next few years as
compared to the current 71 per cent.
However, despite expectations of strong growth in coal traffic,
several port projects were envisaged keeping in mind linked demand
from imported coal-based power plants.
The Krishnapatnam port project was set up to meet a large portion of
its targeted coal traffic from the upcoming imported coal-based
Reliance UMPP at Krishnapatnam. 628
Coal
Coal capacities to keep pace with increasing demand
However, on account of feasibility issues, this plant is not expected to

come up during the next 5 years.
As a result, the utilisation rates of coal capacities at Krishnapatnam
port are expected to remain significantly low.
On the other hand, coal capacities at the Mundra port as well as the
Salaya port are expected to get healthy traffic from their respective
anchor projects.
629
Feasibility of linked power projects affecting viability of
certain coal handling port terminals
630
Container
Utilisation rates to fall due to high pace of capacity addition vis-a-
vis demand
Container traffic is expected to grow at a moderate pace of 5-7 per cent

during 2011-12 to 2016-17 as against a 12.3 per cent CAGR during 2006-
07 to 2011-12.
On the other hand, container handling capacities are expected to grow
by 10 per cent CAGR over the next 5 years.
Consequently, the utilisation rates of container handling facilities are
likely to fall to 70 per cent in 2016-17 from the current 75 per cent.
Container handling capacity addition is particularly aggressive in the
southern region, with several major and non-major ports adding
capacities.
631
Container
Utilisation rates to fall due to high pace of capacity addition vis-a-vis demand
CRISIL Research expects the Chennai mega terminal project, Ennore port
container terminal and Vallarpadam phase II at Cochin port to be delayed
beyond the investment horizon (2016-17) on account of excessive container
handling capacities in the region.
These include the already commissioned Krishnapatnam, Katupalli and
Cochin ports.
In the western region, on the other hand, although capacities are expected to
match demand, concerns about lower-than-expected profitability on account
of lower tariffs at Mumbai and Jawaharlal Nehru Port Trust (JNPT) ports
continue to stress terminal operators.
Also, the fourth container terminal project is unlikely to come up within the
investment horizon on account of JNPT terminating its contract with the
632
developer.
Key container projects expected to be delayed
633
Major Ports-Traffic
634
Sharp drop in iron ore export pulls down traffic at major ports
Traffic at major ports is estimated to have declined by around 3 per
cent in 2012-13, largely on account of a sharp drop in iron ore traffic.
Iron ore traffic at major ports fell by 65 per cent to around 21 million
tonnes in 2012-13 from 61 million tonnes in 2011-12 due to stricter
enforcement to curb illegal mining of iron ore and cost increases for
exports of iron ore.
635
Traffic at major ports in India
636
Growth in major ports traffic to remain subdued over medium
In 2012-13, major ports are estimated to have registered a decline in

traffic of around 4 per cent.
Additionally, moderation in global trade is expected to lead to
slower growth of 0-2 per cent in container traffic.
However, over the 2011-12 to 2016-17 period, traffic at major ports is
expected to grow by 2 - 4 per cent CAGR from 560 million tonnes to
621 million tonnes.
This will be largely driven by growth in coal and container traffic.
Iron ore traffic is expected to remain subdued at the current levels of
20-22 million tonnes at major ports during the same period.
637
Outlook on traffic at ports
638
Share of iron ore in commodity mix to remain subdued; coal,
POL and container traffic to rise
The share of iron ore in major ports traffic declined to 11 per cent in
2011-12 from 17.9 per cent in 2009-10.
This share is likely fall further to 3 per cent by 2016-17.
With the ban on iron ore exports in some regions expected to continue
and the likely increase in domestic iron ore consumption, iron ore
traffic is expected to record a CAGR of a mere 0-2 per cent over the
next 5 years.
During this period, rising demand for both thermal and coking coal is
expected to translate into total coal traffic at major ports growing to
121 million tonnes from the current 78.7 million tonnes.
This will raise the share of coal in total traffic at major ports to 20 per
cent from 14 per cent over the next 5 years. 639
The share of container traffic in total major port traffic is expected to
remain stable at 20-22 per cent due to moderate growth in container
traffic over the next 5 years.
The share of POL (petroleum, oil and lubricant) traffic in the
commodity mix at major ports is forecast to increase due to additional
refineries coming up at major ports; BPCL's Bina refinery, IOC's
Paradip refinery, HPCL's Vizag refinery and Essar Oil's Vadinar
refinery are all expected to come up by 2016-17.
640
641
P: Projected
642
Major Ports-Capacity & Utilisation
643
Large capacity additions, declining traffic affects utilisation
rates of major ports
Port handling capacity at major ports is estimated to have increased
by 48 million tonnes in 2012-13, with POL capacities comprising the
maximum additions.
Majority of the additions were at Paradip port (34 million tonnes) and
in Chennai (nine ports).
During the year, traffic at major ports is estimated to have declined
by 20 million tonnes, which led to the utilisation rates of major ports
declining to 72 per cent in 2012-13 from 80 per cent in 2011-12.
644
Utilisation levels at major ports
645
Utilisation rates at major ports to fall further
CRISIL Research expects capacities at major ports to grow by 6-8 per
cent CAGR to around 987 million tonnes by 2016-17 from 697 million
tonnes in 2011-12.
However, traffic is projected to grow at a lower CAGR of 2-4 per cent.
As a result, utilisation rates are forecast fall further to 63 per cent by
2016-17.
646
Outlook on utilisation level at major ports
P: Projected 647
Paradip to become largest major port by 2016-17
With planned capacity additions of nearly 84 million tonnes, Paradip
port is likely to replace Kandla port as the country's largest major
port by 2016-17.
648
Capacity at major ports
649
Major ports to see investments totalling Rs 434 billion over next
5 years
CRISIL Research expects investments of Rs 434 billion to flow into
major ports over the next 5 years. In addition to augmentation of
capacities, investments have been planned for adding new berths,
creating additional storage or warehousing facilities, improving rail-
road connectivity and procuring new equipment.
CRISIL Research expects the private sector to account for around 80
per cent of the total planned investments.
Further, around 45 per cent of these investments are expected to be
directed towards the JNPT, Tuticorin, Paradip and Vizag ports.
650
Major ports to see investments totalling Rs 434 billion over next
5 years
651
Non Major Ports-Traffic
652
Growth in non-major ports traffic to be constrained by fall in
iron ore
The traffic at non-major ports is estimated to have increased by only

5.4 per cent y-o-y in 2012-13 vis-a -vis a CAGR of 13.4 per cent
during 2006-07 to 2011-12, mainly due to a 21 per cent y-o-y decline
in iron ore traffic.
Iron ore traffic at non-major ports was severely affected due to the
ban on iron ore exports in the states of Karnataka, Andhra Pradesh,
Odisha and Goa which impacted the non-major ports of
Krishnapatnam, Karwar, Belekari and Panaji.
653
Traffic at non-major ports
654
Non-major ports to witness healthy traffic growth, albeit at
slower rate
The traffic at non-major ports is expected to grow by 8-12 per cent
CAGR between 2011-12 and 2016-17, largely driven by coal and
container traffic.
Traffic of both these segments is expected to grow significantly on
account of a shift in preference from major ports to the more efficient
non-major ports.
However, the expected growth in port traffic will be lower than the
CAGR of 13.4 per cent registered over the past 5 years, largely due to
an expected slowdown in iron ore and POL (petroleum, oil and
lubricant) traffic.
Also, most of the capacity additions at refineries are likely to be
linked to major ports.
655
Outlook on traffic at non-major ports
E: Estimated; P: Projected 656

High growth of 20-22 per cent CAGR in coal as well as container traffic,
and a shift in share from major ports to non-major ports would help
increase the share of these segments in overall traffic at non-major ports.
The share of coal in non-major port traffic is expected to increase
significantly to around 35 per cent in 2016-17 from 21 per cent in 2011-12,
while container traffic is expected to increase to 13 per cent from 7 per
cent.
However, the share of POL traffic in the overall pie is expected to decline
sharply on account of a slow growth of 0-2 per cent CAGR between 2011-
12 and 2016-17.
Similarly, due to stagnant and subdued iron ore traffic at just around 30
million tonnes during 2012-13 to 2016-17, the share of iron ore is
expected to fall to 6 per cent in 2016-17 from 10 per cent in 2011-12. 657
658
P: Projected
659
Non Major Ports-Capacity & Utilisation
660
High pace of capacity additions at non-major ports impact
utilisation rates in 2012-13
Non-major ports are estimated to have added 130 million tonnes of
capacities in 2012-13, with significant capacities added at Mundra
Port (25 million tonnes), Krishnapatnam Port (15 million tonnes),
Katupalli Port (15 million tonnes) and Karaikal Port (6 million
tonnes).
During the year, traffic is estimated to have grown by 19 million
tonnes y-o-y, resulting in utilisation rates at non-major ports
declining to an estimated 54 per cent in 2012-13 from 63 per cent in
2011-12.
661
Utilisation at non-major ports
662
Utilisation rates at non-major ports to stabilise at current levels
CRISIL Research expects handling capacities at non-major ports to

grow by 8-10 per cent CAGR to 834 million tonnes by 2016-17.
Since traffic at non-major ports is also expected to grow by 8-10 per
cent CAGR, the utilisation rates are expected to stabilise in the
current 63-65 per cent range by 2016-17.
663
Outlook on utilisation at non-major ports
664
P: Projected
Gujarat to comprise over half of non-major ports' capacity by
2016-17
Majority of the capacity expansions over the next 5 years will take
place in Gujarat, Andhra Pradesh, Maharashtra and Odisha.
By 2016-17, non-major ports in Gujarat are expected to account for 54
per cent of the total non-major port capacity in India.
665
State-wise capacity at non-major ports
666
P: Projected
Significant pick up in investments in non-major ports
CRISIL Research expects non-major ports to attract investments
totalling Rs 591 billion over the next 5 years.
This would include investments for capacity augmentation, addition
of new berths, creation of more storage or warehousing facilities,
rail-road connectivity and installation of new equipment.
667
668
A bulk of these investments is expected to be in Gujarat, Odisha and

Andhra Pradesh (around 75 per cent) due to the development of user
industries such as power and steel plants in these states.
669

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Analysis of Ports Industry

A major port is a port notified by the Central government in the

POL continues to account for the largest share of traffic at major

In 2011-12, non-major ports handled around 353 million tonnes of

Coal has the major share of traffic in non-major ports.

Both major and non-major ports are governed by the Central/State

I) Indian Ports Act, 1908

The Indian Ports Act (IPA) came into force in 1908.

Indian Ports Act, 1908 enables the government to:

Set rules for safety of shipping and the conservation of ports.

Loans may be raised by a board in the open market on Port Trust

It deals with provisions for seamen, safety provisions of ships and

The government formulated the Model Concession Agreement

Mitigation, unbundling and allocation of risks

In the port sector, the thrust is on public-private partnership (PPP)

Cargo carriers can be classified based on several criteria such as

The broad definition of bulk carriers defines them as the ships

Tankers are ships designed to transport liquid in bulk.

Generally, crude oil is transported through pipelines.

Chemical tankers are designed, depending on the specific

Containerization has been one of the biggest revolutions in the

Finally, the containers are transported from the destination port to

Lift on Lift off (LoLo) vessels

In these vessels, containers need to be lifted by cranes for loading

These ships are designed to carry wheeled cargo such as automobiles,

Perishable commodities such as fruits, meat, fish, vegetables, dairy

These ships are particularly designed to carry railway vehicles.

A ferry is a ship designed to transport passengers and vehicles

These are the largest man-made vessels that move.

Capacity: Capacity of a port is the total capacity of all its berths

International hub port

Containers terminals may use a grounded or wheeled layout. If the

Decline in monthly traffic was mainly caused by Kandla port during

During April 2013 - February 2014, total traffic at major ports

Total traffic increased by 6 million tonnes y-o-y during April 2013 -

Ennore Port Ltd in Tamil Nadu has awarded a contract to build a

Gujarat Pipavav Port has received approval from the Ministry of

Most of the waterways suffer from navigational hazards like shallow

The key responsibility of the Inland Waterways Authority of India

A number of thermal power plants are located on the banks of the

Cost: Operating cost of IWT per tonne per km is 75 paise by barge,

Inland Waterways Authority of India (IWAI) and NTPC Ltd have

IRs decision to construct dedicated freight corridors (DFC) is seen as

The Railways has established Dedicated Freight Corridor

The eastern corridor is expected to receive funding from multilateral

Transportation via railways is more cost-efficient than by road.

A number of traditional ports are unable to accommodate mega

Approximately 25 per cent of all containerised cargo at the ports

Europe has six such ports.

PSA Singapore Terminals and Jurong Port collectively operate the

Currently, the majority of container operations are organised through

The containers landed at the terminal will have a multi-mode

The success of ICTT will depend on:

Other projects coming up at Cochin Port will help ICTT to attract

DP World is one of the largest marine terminal operators in the

Charges and tariffs for port

Ports get their revenues from tariffs.

Sources of revenue for port

The project returns are most sensitive to changes in traffic, followed

Globally, bucket-ladder dredgers once comprised a major part of the

The backhoe is common to dry land excavators.

They can dig a broad range of materials, from sand to moderately

A grab dredger is a revolving crane equipped with a grab placed on

Stationary suction dredgers are effective in unconsolidated materials