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Development of Business Plan

For
New Mangalore Port Trust
Panambur, Mangalore

Business Plan
(Final Report)
Prepared By RMG/TCS

March 2007
BUSINESS PLAN NMPT

TABLE OF CONTENTS
0. EXECUTIVE SUMMARY ...................................................................................................................i
Vision Statement:...............................................................................................................................i
Mission Statement: ............................................................................................................................i
SWOT ............................................................................................................................................ iii
Port capacity .................................................................................................................................... vi
Investment Plans ............................................................................................................................ vii
Organizational improvements .......................................................................................................... xi
Environmental protection ................................................................................................................. xi
Ports connectivity ........................................................................................................................... xii

Financial Plan ................................................................................................................................. xii


Proposed investments ................................................................................................................... xiii
Action Plan....................................................................................................................................xviii

1. INTRODUCTION ..............................................................................................................................1
1.1 Background ..........................................................................................................................1
1.2 Aim of the present report .....................................................................................................2

1.3 Team of consultants.............................................................................................................3


1.4 Set-up of the report ..............................................................................................................4

2. SWOT, VISION, MISSION AND STRATEGY ..................................................................................5

2.1 NMPT SWOT analysis .........................................................................................................5


2.1.1 Strength................................................................................................................................5
2.1.2 Weaknesses.........................................................................................................................5
2.1.3 Opportunities........................................................................................................................6
2.1.4 Threats .................................................................................................................................6
2.2 Vision and Mission of NMPT................................................................................................7
2.3 Port development strategy ...................................................................................................8
2.4 Commercial Strategy ...........................................................................................................9

2.4.1 Captive cargoes ...................................................................................................................9


2.4.2 Competitive cargoes ..........................................................................................................10
2.4.3 Marketing strategy .............................................................................................................10
2.5 Pricing strategy ..................................................................................................................11

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2.5.1 Tariff structure ....................................................................................................................11


2.5.2 Tariff Setting.......................................................................................................................12
2.6 Land use strategy ..............................................................................................................14
2.7 Role strategy ......................................................................................................................14
2.8 Investment strategy............................................................................................................15
2.9 Public Private Partnership..................................................................................................15

2.9.1 Policy of the Government of India......................................................................................15


2.9.2 PPP Strategy for NMPT .....................................................................................................16
2.9.3 Present leased land ...........................................................................................................17
2.9.4 Privatisation guidelines ......................................................................................................17

3. MARKET ORIENTATION ...............................................................................................................20


3.1 Relevant Government policies and sector development ...................................................20

3.1.1 Agriculture ..........................................................................................................................20

3.1.2 Manufacturing ....................................................................................................................20


3.1.3 Heavy industry policy .........................................................................................................21
3.1.4 Iron and Steel policies........................................................................................................22

3.1.5 Oil and Gas ........................................................................................................................24


3.1.6 Fertiliser .............................................................................................................................26
3.2 Industrial developments in Karnataka state.......................................................................29

3.2.1 New Mangalore Ports Market............................................................................................29


3.2.2 Karnataka State economy..................................................................................................31
3.2.3 Industries significant to New Mangalore Port ....................................................................32

3.2.4 Competing Ports ................................................................................................................37

4. TRAFFIC FORECASTS..................................................................................................................40
4.1 The Position of New Mangalore.........................................................................................40
4.2 Origin-Destination (OD) Analysis .......................................................................................41

4.2.1 Iron ore...............................................................................................................................43


4.2.2 POL Products.....................................................................................................................46
4.2.3 Iron & Steel ........................................................................................................................46
4.2.4 Liquid Bulk - Crude Oil, POL products, LPG......................................................................46
4.3 Projected Cargo Throughput 2006-2013 ...........................................................................49

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4.3.1 Approach & Methodology...................................................................................................49


4.3.2 Liquid products: crude, POL, chemicals, vegetable oils ....................................................49
4.3.3 Dry bulk cargoes ................................................................................................................51
4.3.4 General cargo/break bulk cargo.........................................................................................57
4.3.5 Containers..........................................................................................................................58
4.4 Summary of Cargo Traffic Forecast...................................................................................63
4.5 High and Low forecast scenarios.......................................................................................63

4.6 Long Term Forecast (20 years) .........................................................................................67

5. CAPACITY ANALYSIS ...................................................................................................................69


5.1 Port description ..................................................................................................................69

5.1.1 Quay Walls and Jetties ......................................................................................................70


5.1.2 Existing Equipment ............................................................................................................71
5.2 Port capacity analysis ........................................................................................................73

5.2.1 Actual Handling of Cargo ...................................................................................................73


5.2.2 Benchmarks for cargo handling .........................................................................................76
5.2.3 Vessel TRT ........................................................................................................................81

5.2.4 Modal Split of Commodities ...............................................................................................83


5.2.5 Cargo Handling Distribution ...............................................................................................85
5.3 Berth occupancies .............................................................................................................87

5.3.1 General ..............................................................................................................................87


5.3.2 Berth Occupancy in 2004-2006 .........................................................................................88
5.3.3 Quay Side Handling Capacity ............................................................................................88
5.4 Confrontation of supply and demand.................................................................................90
5.5 Terminals, Cargo Handling and Storage ...........................................................................92

5.5.1 General ..............................................................................................................................92


5.5.2 Storage Facilities and Areas ..............................................................................................93
5.5.3 Storage for Iron ore............................................................................................................94
5.5.4 Storage and stacking of containers ...................................................................................94
5.5.5 Storage for coal..................................................................................................................95
5.5.6 Storage of Fertilizers..........................................................................................................95
5.5.7 Storage of Bulk Liquids ......................................................................................................95
5.5.8 Storage of Cement.............................................................................................................95

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5.5.9 Storage of Other commodities ...........................................................................................95


5.6 Internal Transport...............................................................................................................96
5.7 Marine services ..................................................................................................................98

5.7.1 Nautical Aspects ................................................................................................................98


5.7.2 Ship calls......................................................................................................................... 100
5.7.3 Pilotage operations ......................................................................................................... 100
5.7.4 Tugboat services............................................................................................................. 101
5.7.5 Vessel Traffic Management ............................................................................................ 101

6. INFRASTRUCTURE INVESTMENTS ......................................................................................... 102


6.1 Introduction ..................................................................................................................... 102

6.2 NMDP Projects................................................................................................................ 102


6.3 Iron Ore Mechanization Facility at Berth 14.................................................................... 108

6.3.1 General description and motivation ................................................................................ 108

6.3.2 Technical description ...................................................................................................... 109


6.3.3 Economic feasibility of the project................................................................................... 110
6.3.4 Financial Feasibility......................................................................................................... 111
6.4 Development of a Coal Terminal (berth 15).................................................................... 116
6.4.1 General description and motivation ................................................................................ 116
6.4.2 Technical description ...................................................................................................... 117

6.4.3 Economic feasibility of the project................................................................................... 118


6.4.4 Financial feasibility.......................................................................................................... 118
6.5 Development of a Container Terminal at Berth 1 and 2 ................................................. 123

6.5.1 General description and motivation ................................................................................ 123


6.5.2 Technical description ...................................................................................................... 124
6.5.3 Economic Feasibility of the project ................................................................................. 124
6.5.4 Financial Feasibility......................................................................................................... 125
6.6 Liquid Cargo Jetty ........................................................................................................... 129

6.6.1 General description and motivation ................................................................................ 129


6.6.2 Technical description ...................................................................................................... 129
6.6.3 Economic Feasibility of the project ................................................................................. 130
6.6.4 Financial Feasibility......................................................................................................... 130
6.7 Other projects.................................................................................................................. 134

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6.7.1 Berth and back area for Wind-Mill parts ......................................................................... 134
6.7.2 Construction of new berths and development of marshalling yard................................ 134
6.7.3 SBM ................................................................................................................................ 135
6.7.4 Development of a LNG terminal...................................................................................... 136
6.7.5 Internal road improvement .............................................................................................. 137
6.7.6 Development of new container storage .......................................................................... 137
6.7.7 Container terminal........................................................................................................... 137
6.7.8 Mobile Cranes ................................................................................................................. 137
6.7.9 Improvement/ strengthening Gen. Cargo berths ............................................................ 138
6.7.10 Deepening of the channel and turning basin .................................................................. 138

6.7.11 Road and Railway Connectivity ...................................................................................... 138


6.7.12 Bunkering facilities .......................................................................................................... 139
6.7.13 SEZ in port ...................................................................................................................... 139

6.7.14 KIOCL berth .................................................................................................................... 140


6.7.15 New Harbour tugs ........................................................................................................... 140
6.7.16 Dry dock repair facilities.................................................................................................. 140

6.7.17 Construction of Warehouses........................................................................................... 140


6.7.18 Pilotage. .......................................................................................................................... 141
6.7.19 Navigation aids and systems .......................................................................................... 141
6.8 Summary of all investment projects................................................................................ 142
6.9 Results of implementation of the top projects................................................................. 143
6.10 Projects after 2012-13..................................................................................................... 147

7. INTERNAL TRANSPORT, FUTURE LAND USE, ENVIRONMENTAL and IT PROJECTS ....... 151
7.1 General ........................................................................................................................... 151
7.2 Road improvements........................................................................................................ 151
7.3 Railway Projects ............................................................................................................. 151
7.4 Future Land Use ............................................................................................................. 152
7.5 Environmental Projects ................................................................................................... 153

7.5.1 Existing Environmental Conditions ................................................................................. 153


7.5.2 Potential Environmental Impacts proposed projects....................................................... 155
7.5.3 Pollution and safety Control Measures ........................................................................... 155
7.5.4 Environmental Management Cell.................................................................................... 158

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7.5.5 Summary of Environmental Projects .............................................................................. 159


7.6 IT Developments............................................................................................................. 160

7.6.1 Existing Systems............................................................................................................. 160


7.6.2 IT plans ........................................................................................................................... 162
7.6.3 IT development recommendations ................................................................................. 162
7.6.4 Ad-hoc solutions ............................................................................................................. 165

8. ORGANISATIONAL IMPROVEMENTS ...................................................................................... 166

8.1 General Description ........................................................................................................ 166


8.2 Technical Description...................................................................................................... 166

8.2.1 Institutional aspects ........................................................................................................ 166

8.2.2 Concentration on core activities...................................................................................... 168


8.2.3 Organizational right sizing as a result of Land Lord Port concept .................................. 169
8.2.4 Reorganisation tools and feasibility ................................................................................ 170

8.2.5 Disposition of equipment................................................................................................. 171


8.2.6 Streamlining internal/external processes of NMPT......................................................... 171
8.2.7 Marketing and Public Relations ...................................................................................... 171

8.2.8 Marketing/sales activities ................................................................................................ 171


8.2.9 Business Systems and IT ............................................................................................... 172
8.2.10 Human resource activities............................................................................................... 172

8.2.11 Capacity building............................................................................................................. 172


8.2.12 Cost of reorganisation..................................................................................................... 174

9. PORT CONNECTIVITY ............................................................................................................... 175

9.1 New Mangalore Port, Mangalore City and Hinterland .................................................... 175
9.2 Regional Transportation system ..................................................................................... 175

9.2.1 Roads.............................................................................................................................. 175


9.2.2 Existing Scenario ............................................................................................................ 176
9.2.3 Future developments ...................................................................................................... 178
9.2.4 Railways.......................................................................................................................... 181

10. FINANCIAL PLAN........................................................................................................................ 188


10.1 Introduction ..................................................................................................................... 188
10.2 Current situation.............................................................................................................. 188

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10.2.1 Profit and loss accounts.................................................................................................. 188


10.2.2 Balance sheets ............................................................................................................... 189
10.2.3 Financial indicators and special issues........................................................................... 190
10.3 Investments and timing ................................................................................................... 192

10.3.1 Overview ......................................................................................................................... 192


10.3.2 Implications ..................................................................................................................... 194
10.4 Modelling assumptions ................................................................................................... 194

10.4.1 Model set-up ................................................................................................................... 194


10.4.2 Physical parameters ....................................................................................................... 196
10.4.3 Tariffs .............................................................................................................................. 197

10.4.4 Costs ............................................................................................................................... 200


10.4.5 Existing financial items.................................................................................................... 203
10.4.6 Other general assumptions............................................................................................. 204
10.5 Forecast financial results ................................................................................................ 205
10.5.1 Profits and loss forecast.................................................................................................. 205
10.5.2 Balance sheets ............................................................................................................... 208

10.5.3 Cash-flow ........................................................................................................................ 209


10.5.4 Key-indicators ................................................................................................................. 209
10.6 Sensitivity analysis.......................................................................................................... 210

10.6.1 Introduction ..................................................................................................................... 210


10.6.2 Varying cargo throughput................................................................................................ 210
10.6.3 Varying investment levels ............................................................................................... 211
10.7 Conclusion ...................................................................................................................... 211

10.7.1 Budget cycle.................................................................................................................... 212


10.7.2 Rolling forecast ............................................................................................................... 212

11. ACTION PLANS........................................................................................................................... 213

Annexes............................................................................................................................................... 219

Annex A Drawings ............................................................................................................................ 220


Annex A-1 Existing Port Layout .................................................................................................. A1
Annex A-2 Cargo Distribution Map ............................................................................................. A2
Annex A-3 Existing Land Use Map............................................................................................. A3

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Annex A-4 Mechanization of Berth 14 ........................................................................................ A4


Annex A-5 Development of Coal Terminal ................................................................................. A5
Annex A-6 Development of Container Terminal ......................................................................... A6
Annex A-7 Development of a POL Jetty..................................................................................... A7
Annex A-8 2012-2013 Cargo DistributionMap............................................................................ A8
Annex A-9 2012-2013 Port Land Use Plan ................................................................................ A9
Annex A-10 2025 and beyond Port Land Use Plan................................................................. A10

ANNEX B FINANCIAL STATEMENTS............................................................................................. 221


Annex B-1 Financials: Project evaluation model ........................................................................ 222
Annex B-2 Financial Analysis: Profit & Loss Account.................................................................. 225

Annex B-3 Financial Analysis: Balance Sheet............................................................................. 226


ANNEX C OTHERS.......................................................................................................................... 227
Annex C-1 Air Pollution Levels in NMPT ..................................................................................... 228

Annex C-2 Model calculation of Berth Occupancy ...................................................................... 229

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BUSINESS PLAN NMPT

0. EXECUTIVE SUMMARY
The present report addresses the Business Plan for the New Mangalore Port Trust (NMPT). Based on
the vision, mission statement and a traffic forecast, an investment strategy is developed.
The vision and mission of the NMPT were discussed with the Management of NMPT and the selected
statements were formulated as follows:

Vision Statement:
To be a professional provider of port infrastructure and services of world class standards.

Mission Statement:
To become a leading liquid and multi-cargo port by adopting state-of-the-art technology infrastructure
and cargo handling systems, complying with environmental, social, safety and security standards.

Strategic goals

From this vision and mission a strategy has been formulated, comprising the following main choices:
Be an all cargo type port for both captive and non-captive cargoes.
Develop the access to the port (channel) in the long run (over 7 years) when demand shows
the need and feasibility will be proved.
Co-invest in infrastructure (berths and jetties) for captive cargo (crude oil, POL, LNG, iron ore,
thermal coal) on dedicated terminals.
Creating new facilities to competitive cargoes (containers, coal and fertilizers) based on state
and national growth rates.
Modernization and mechanization of bulk cargo and container handling through PPP in the
long run
Investing in infrastructure, super structure and equipment where needed to modernize in the
short run
Initialize and conclude concession (lease) agreements for existing handling operations of
liquid bulk, dry bulk and general cargo.
Reduce the environmental hazards from cargo handling operations by setting clear rules,
organize pollution awareness training to customers and set penalization schemes for violation
of rules.
Adopting for the time being the Service model for container handling operations until a critical
mass of throughput has been realized.
Shift gradually to a Landlord concept in line with national developments to decentralization of
powers and change of labour laws.
Reorganize the port in view of the privatization development by right sizing (in as far as legally
feasible in view of labour laws) and improving of skills of staff through training.

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Traffic forecast

In continuation of the research in the Inception phase, consultants have more in detail studied the
general (nation-wise, State wise) economic developments for all major commodities. From the market
orientation a number of growth patterns were observed. An Origin-Destination analysis was made to
visualize the supply chain patterns for certain commodities. This has supported a further elaboration of
specific growth trends for individual commodities.

For captive cargoes (in the direct hinterland of the port), the relevant industrial capacity and output
developments have been analyzed to observe out put trends and export/import trends and limitations.
Furthermore vessel developments have been reviewed to establish the capacity limitations on the long
run. Although vessel sizes for bulk cargoes (especially crude oil and iron ore) are below international
standards, no immediate expansion of the capacity can be justified financially.
The research has all lead to cargo flow projections for the next 7 years by commodity group. The
results are summarized as follows (see Table 0-1)

Table 0-1 Cargo flow forecast for the Business Plan (in million tons)
Commodity 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13

Crude Oil Import 12.20 12.20 12.20 12.20 15.00 16.00 17.00

POL products Import 0.60 0.60 0.65 0.70 0.75 0.80 0.85

LPG Import 1.20 1.25 1.30 1.35 0.35 0.40 0.45

Edible Oil Import 0.34 0.36 0.38 0.39 0.41 0.43 0.45

Other Bulk
Import 0.10 0.50 0.54 0.60 0.66 0.72 0.80
Liquids

Dry Bulk (coal) Import 0.90 1.00 1.20 1.40 3.60 4.30 5.00

Fertilizer Import 0.90 0.78 0.90 1.03 1.19 1.37 1.57

Containers Import / export 0.22 0.47 0.60 0.89 1.07 1.25 1.47

General cargo Import / export 0.62 0.65 0.86 0.90 1.11 2.80 2.84

Cement Import 0.20 0.30 0.35 0.40 0.40 0.40 0.40

Iron Ore Export 5.80 7.30 8.40 9.80 9.50 10.20 10.90

Pellets Export 0.40 3.50 3.50 3.50 3.50 3.50 3.50

POL Products Export 8.50 8.50 8.50 8.50 9.00 10.00 11.00

TOTAL 31.98 37.41 39.38 41.66 46.54 52.17 56.23

Two scenarios have been applied to the above Medium estimate to asses the sensitivity to market
fluctuations, either positive or negative.
1) A LOW scenario was based on the assumption that general economic growth will fall short by 10 %
from its Medium assumption, which will affect all flows of commodities. This LOW scenario results in a
decrease of the total throughput by NMP of 5.6 mln ton by 20012/13.

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BUSINESS PLAN NMPT

This means that the total throughput by the end of the planning period will reach 50.7 mln ton. The
effect of this will result in a lower income to private operators and the NMPT.
2) A HIGH scenario, implying an above-expectation developing growth in the Indian economy was
made. This scenario included a number of constraints to developments due to production capacity
limits (crude oil/POL, iron ore pellets) or known limits to demand for product (thermal coal). When all
the limitations and growth trends are combined, the HIGH scenario cargo flow volume would reach
62.7 mln ton by 2012/13. This represents an increase of 11.5 % over the Medium scenario.

A Long term forecast has been made to estimate the potential cargo volumes by 2025/26.
The forecast is based on trend extrapolation of all major commodity types and on assumptions of
production capacity of certain commodities. The combined results are presented in Table 0-2.

Table 0-2 Cargo flow forecast for the Long term - 20 years (in million tons)
Commodity 2012/13 2025/26

Crude Oil Import 17.00 17.00

POL products Import 0.85 2.07

LPG Import 0.45 1.50

LNG Import 0 5.00

Edible Oil Import 0.45 1.68

Other Bulk Liquids Import 0.80 1.75

Dry Bulk (coal) Import 5.00 7.00

Fertilizer Import 1.57 2.58

Containers Import / export 1.47 3.83

Containers x TEU X 1000 98 255

General cargo Import / export 2.84 4.17

Cement Import 0.40 0.56

Iron Ore Export 10.90 20.09

Pellets Export 3.50 5.91

POL Products Export 11.00 11.00

TOTAL 56.23 84.14

SWOT
NMPT has a number of strong and weak points in terms of its position in the Indian and international
port facility and service markets. Furthermore NMPT faces a number of opportunities and threats.

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BUSINESS PLAN NMPT

Strength
In the Arabian Sea basin the port of New Mangalore is ideally positioned to the logistics
service industry and its customer base for a number of reasons.
The port is best suited to cater for South Indian cargo flows that originate or are destined for
the States of Karnataka and partly for Kerala. The hinterland consists of substantial population
and a variety of industries such as the garment producing industry, mineral ore production,
thermal power plants, electronic equipment and consumer goods like coffee and refrigerated
cargoes.
With a hinterland area of over about 50 mln inhabitants NMPT has a sound base to handle a
substantial volume of containers for both imports and exports. Distances by road or by rail to
major neighbouring ports are at least 250 km, which supports shippers of goods to choose
New Mangalore based on origin-destination cost of transport.
The port is equipped with well-maintained deep-water berths up to 15.1 mcd depth and is
operational except on three national holidays. However shipping activities (berthing / de-
berthing) are being carried out even on these three national holidays; it operates 24 hours per
day and can provide facilities for almost all cargo types.

Back up area is in general sufficiently available. This area allows provisional storage and
handling operations to be executed or to be established.
The NMPT enjoys a healthy financial position in both balance sheets and profitability.

Weaknesses
Its marine infra structure is designed to allow ships of max Length Over All (LOA) 245 m. This
implies in general that ships over Dead Weight Tonnage (DWT) 100,000 cannot be handled in
port due to navigational constraints and the channel depth and width.
Cargo handling for certain dry bulk cargoes (iron ore, coal) are still done manually which
results in high Turn Around Time (TRT) for ships. This creates subsequently high cost of
transport to shippers of goods. The manual handling also results in unsafe and environment
unfriendly effects such as cargo spills and dust.
For existing terminals the NMPT is required, by agreements to deploy the Ports dock labour
only to cargo handling operations (ship-shore). This restricts the NMPT to enter into contracts
with private operators that manage a NMPT terminal with their own labour force fully and this
may lead to higher labour cost compared to that in minor/private Indian ports that are at liberty
to employ and manage labour.
Other weak points include the environmental hazards from dust and spills and the rather
administrative authority structure (valid for all Major Indian ports) that restrict the management
and the Board of Trustees in setting up its own (market oriented) port tariffs and service
packages for staff.
The port connectivity seems sufficient at present but the connectivity to National Highways is
in a poor state, heavily congested and sometimes not suitable for heavy truck traffic. The port
enjoys a railway connection to a marshalling yard, but there are no direct railway lines to any
berth.

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Opportunities
NMPT has ample opportunities to increase its throughput and improve its functions. Some
private (captive) customers show firm interest in developing berths and jetties and the time is
ripe for Public Private Partnership (PPP) deals. The partnerships will appear in all cargo types
that are presently handled.
The high volume of captive cargo creates a sound base of income to NMPT and has resulted
and will result in sound operating profits. This automatically implies that funds are and become
available for infrastructure development preferably in cooperation with private investors and
operators of cargo handling.
The participation in the Special Purpose Vehicle (SPV) established to develop the
Mangalores Special Economic Zone (SEZ) creates further opportunity to execute activities
that benefit from tax incentives. Apart from NMPTs involvement, the SEZ will generate
additional cargo flows from nearby industrial and trading activities.

Threats
NMPT faces through its institutional structure (a Port Trust under the MOSRTH) the ever
disturbing handicap of being a public controlled enterprise. Many regulations limit the
management to act as an independent and professional company, such as the labour laws (no
retrenchment), the HR routines (promotion), and the labour conditions (exceeding market
levels).
Furthermore the international vessel size developments will create additional financial burden
of capital dredging and strengthening of quay infrastructure.
The ports capacity can be improved by shifting cargo handling technique to faster and safer
mechanisation. This improvement may however still be insufficient to cater for certain growth
of cargo flows beyond projected cargo flow volumes. This may result (again) in handling
capacity shortage for certain cargo types which may result in either over-utilisation of berth(s)
or additional waiting time for ships.
The ports competence at present is short of certain skills (marketing, IT, HR management) to
cope with future rationalisation of activities and promote and stimulate the port to the market.
The competition may be not very strong at present but other major and minor ports also
develop and will try to take a share of the competitive cargo especially when logistics are
favourable.

Ever continuing competition from nearby ports Cochin, Mormugao, Chennai and non-major
ports of Karnataka which may result in a possible deterioration of tariffs.
The railway capacity of the main connecting lines (to Bangalore) may prove insufficient in the
medium and long run to handle all cargo to and from the port, not in the least caused by the
expected modal shift from truck to rail.

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Port capacity
The analysis of berth occupancies and vessel turn around times has shown that the port has ample
room to increase its berth handling capacity. This is primarily due to the actual slow handling
operations for most of the dry bulk cargoes and containers except for iron ore pellets. Mechanization
of the dry bulk cargo handling will immediately improve capacity.
The capacity for handling crude oil and oil products (POL) is showing a sign of over utilization which
has lead to ships waiting time at anchorage. Additional capacity can solve this capacity shortage.

The capacity of the port (limitation of entrance channel/breakwater) is however limited to ships of LOA
245 m or around DWT 100,000.
The actual berth occupancy was calculated according to Indian Ports Association (IPA) norms and on
330 operating days. The results are shown in Figure 0-1

Figure 0-1 Calculated Berth Occupancy 2004-2006


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The consultants have provided benchmarks for all type of cargo handling rates to allow NMPT to
review development plans and set contract conditions to handling speed and minimum cargo
throughput levels to private operators.
Once infrastructure and superstructure investments (see below) have been made and new capacity for
handling ships and cargo become available, the total port capacity will have reached 65.8 mln ton by
2012-13. In principle this capacity is sufficient to cater for the projected cargo flow of 56.23 mln ton. It
is however possible that excessive growth in certain commodity flows at any time in the planning

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BUSINESS PLAN NMPT

period creates a (temporary) shortage of capacity. On the supply side construction work may be
delayed for a number of reasons and may not be available in time. In both cases waiting times to ship
may appear when berth capacities reach undesired high levels (above the norms). This situation
should be avoided all times and shippers should be intimated in time about capacity available and
plans that are to be completed. The problem, however, may not occur generally since most of the
expansion projects are controlled by private parties who most of the times have captive cargo.

Investment Plans
The projects as approved by National Maritime Development Programme (NMDP) (see Table 0.3) in
the 11th 5-year plan have been reviewed by NMPT. The list of plans involving the projects is based on
the following:

In the past decade many development plans in the NMDP were made but few were implemented.
Berth 14 was commissioned in the year 2006 for the handling of iron ore. The remaining unexecuted
plans were listed in the NMDP overview provided by NMPT. This list was reviewed by consultants and
a new extended list was prepared including recommendations on listed projects and inclusion of new
projects.
Based on the cargo projections and capacity analysis four major projects have been selected as
urgent in view of the demand and the capacity constraints. These projects were reviewed on
technical/operational and financial aspects. The financial feasibility was made for the following four
projects:

1. Mechanization of the iron ore berth (berth 14)


2. Establishment of a new dock (Western) for the handling of thermal and other types of coal
3. Restructuring of berth 1 and 2 to become the first phase dedicated container terminal
4. Construction / conversion of berth 13 (now virtual jetty) into a jetty for crude oil and POL.
The projects are technically described and assessed financially and economically.
Project 1. The total investment on infra and superstructure for the mechanised iron ore berth 14 is
estimated at Rs 196.6 Cr which differs substantially from the original NMDP plan (Table 0.3 and the
later by NMPT revised investment cost of Rs 133 Cr. The difference is caused by the different
assumptions in applied handling technology and cost estimates.
The project is generating an IRR of 32% for the private operator, while the port can expect a very an
IRR of 120%. Very significant economic cost reductions are realised in terms of vessel time, which
benefits the customers. The project is financially and economically attractive and is about to be
awarded to one of the 4 tendering operators.
Project 2. The project is generating an IRR of 22.2% for the operator, on the basis of the shadow
revenue assumption. For NMPT the IRR is irrelevant since hardly any investment is made. The net
income per ton rises marginally compared to the current situation, but the throughput increases for no
investment. The project frees up capacity on berths 2, 3, 6, 7 and 14, which will be available for other
cargoes. Significant cost reductions are realised in terms of vessel time, which benefits the client.

NMPT Business Plan, August 2009 vii


BUSINESS PLAN NMPT

Table 0.3 Investment plans as per NMDP, January 2007 (Rs in Cr.)
Project IR/EBR PPP Total Start Completion

1. Deepening of channels/berths

Improvement berth 8 to 14 m 18 18 2011-12 2011-12

Deepening channel/lagoon to 17 m 390 390 2009-10 2011-12

2. Construction of berths

Development LNG terminal 2600 2600 2008-09 2010-11

Coal handling Western dock-NPCL, b. 15 230 230 2006-07 2009-10

POL jetty at Oil Dock 50 50 2008-09 2009-10

Bulk cargo berth at W Dock 50 50 2008-09 2009-10

Mechanised Iron Ore b. 14 103 103 2007-08 2008-09

Container Terminal for Transshipment 700 700 2009-10 2011-12

Outer harbour development of facilities 300 1025 1325 2010-11 2011-12

SBM for Crude oil 250 250 2009-10 2011-12

Multipurpose berth at W. Dock, b 18 50 50 2010-11 2011-12

3. Procurement of equipment

Harbour cranes 30 30 2010-11 2011-12

Harbour tugs 50 50 2007-08 2011-12

4. Rail and Road connectivity

Internal roads 50 50 2007-08 2010-11

External roads 10 885 895 2007-08 2011-12


Programme of Ministry of
Railway link to KRCL
Railways
5. Other projects

Marshalling yard 10 30 40 2007-08 2009-10

Bunker facilities 10 10 2007-08 2007-08

Dev of SEZ 1 4 5 2007-08 2007-08

Grand Total 1009 5837 6846

Source: NMPT

NMPT Business Plan, August 2009 viii


BUSINESS PLAN NMPT

The location of the projects is shown in Figure 0-2

Figure 0-2 Location of top Projects

Project 3. The upgrading of the container terminal at berth 1 and 2 generates a positive income only if
and when a mechanised handling or an all-in stevedoring tariff is introduced. At the projected
throughputs over the investment period, a tariff of around Rs 700 per box would suffice to generate a
12% IRR. Yet, international tariffs are considerably higher than this level, and a tariff of Rs. 3,000 per
box would generate an IRR of 45%.
The consultants advises to continue the upgrading and to gradually raise handling tariffs up to market
levels.
Project 4. The berth nr 13 oil jetty project is generating an IRR of 29%. As throughput is increasing
and insufficient capacity remains, utilisation of the existing facilities will increase. This project can
relieve that situation and do so very profitably. Even if discounts are to be negotiated, the project will
remain profitable.
The consultants advise to carry out the project.
Other projects as per NMDP list of plans should have lower priority, but can still be executed by taking
up further study or can be rescheduled (for financial and commercial reasons) to a later date. All less

NMPT Business Plan, August 2009 ix


BUSINESS PLAN NMPT

urgent plans were reviewed on their implementation scheme and their need to improve port services.
This has resulted in the formulation of some new plans which are listed in Table 0-4.

Table 0-4 Summary of Investment Projects

(a) Investment projects from 2006-07 to 2012-13 (7 years)


Intern.
Total Inv Capacity Consultants
Nr Project name Resources
x Rs Crore x Mln ton Recommendations
x Rs Crore
Iron Ore Mechanization 196.6 *
1 0 10 Viable Project, urgent
Facility at b. 14 103.0
Development of a Coal 194 *
2 0 8 Viable Project, urgent
Terminal at W. dock, b. 15 230
Development of a Container 32 *
3 32* 1.4 Viable Project, urgent
terminal at b. 1 and 2 New project
Construction Liquid Cargo 54.1 * 54.1 *
4 9 Viable Project, urgent
Jetty at b. 13 50 50
Multipurpose berth Western dock
5 50 50 Probably viable, proceed
, b. 18

6 Marshalling yard 40 10 Executed Under 1 and 2

Upon discussion with the


7 SBM for POL 250 0 15-20
client
Upon discussion with the
8 LNG terminal 2600 0
client
Improvement of Internal Port Proceed but install new
9 50 50
roads handling technology
Container Terminal for
Long term after TEU 100,000
10 Transhipment, W. dock (berth 700 0 West. Dock
p.a.
17)

11 Harbour crane 30 30 Executed under 3

12 Road Connectivity 895 10 Proceed

13 Rail link to KRCL 0 0 0 To follow up with Railways

Preferred use of barges, in


14 Bunkering facilities 10 0
combination with 4
Support, but critical on type of
15 SEZ in port 5 1 10
activities
Improvement berth no 8 (KIOCL)
16 18 18 In line with larger ship sizes
to 14m draft
Replacement and new tug ,
17 New Harbour tugs (2) 50 50
BP 32
5174.7** 305.1**
Total x Rs Crore
5113.0 301.0

Figure based on NMDP; * = consultants estimate,; bold = Top projects; ** indicates the totals of all projects considering
consultant estimated figures for projects 1 to 4 .

NMPT Business Plan, August 2009 x


BUSINESS PLAN NMPT

(b) Investment projects beyond 2012-13


Intern.
Total Inv Capacity Consultants
Nr Project name Resources
x Rs Crore x Mln ton Recommendations
x Rs Crore
Deepening channel / lagoon to Not within 7 years, subject
1 390 390
17 MCD dev. of Western dock
To be done by private
Outer Harbour facilities 1325 300
2 companies
Not within 7 years (subject to
Bulk Cargo berth at western doc
3 50 50 increase in throughput)
arm (berth no 16)

Total x Rs Crore 1765 740

Grand Total (Rs in Cr.) 6939.7** 1045.10**


(a)+(b) 6878.0 1041.0

** indicates the totals of all projects considering consultant estimated figures for projects 1 to 4 of table (a).

Organizational improvements
The NMPT is required to adapt its present organization to the new Land lord concept over the next
years. This process can only take place gradually as authority levels are not transferred fully to the
Trust and it can act as an independent business organization. Especially in the field of Human
Resource Management, the NMPT is more restricted by national laws than minor and private ports.
Furthermore certain business skills are not sufficiently available at NMPT and need to be upgraded.
Improvement of skill and also extension of manpower is required in Marketing functions, IT
applications and general management skills (peoples management, performance appraisal
techniques).
When terminals become fully or partly privatized, right sizing of the organization is required. The
reduction of staff appears not only in direct operational staff (dock labour) but also at the administrative
side. When all handling operations would eventually be transferred to private operators the
redundancy consist of 744 dock workers and additionally between 300 and 450 clerks and managers
in supporting sections.
The lay-off is at present nor legally nor socially feasible. Still NMPT should prepare schemes with
private operators to transfer redundant staff to the private operator. This may cost the NMPT
compensation fees but the transfer is always preferred than maintaining a labour force that has no
work but remains on the payroll.
The business processes at NMPT are inefficient as classical paper flow management and related
approval mechanisms. This could be much improved by starting IT projects and train staff to use PCs
and eventually dedicated software applications. A list of IT projects has been identified by consultants.
Some services to staff could very well be outsourced to other institutions (hospital/staff housing).

Environmental protection
NMP is coping with a number of environmental hazards including coal and ore dust, cargo spills (in the
basin and at terminals and roads), accident probe handling systems and noise pollution.

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A number of plans are composed to overcome hazards and to monitor pollution and spill levels to over
which the Pollution Control Board should have full control. Total cost of improvements add up to Rs 26
Cr out of which, an amount of Rs 2.6 Cr. (10%) only is considered during the period upto 2012-13.

Ports connectivity
The connectivity at present does not create large problems. It is however expected that the roads
connecting the port with the hinterland (already in a poor condition) need to be upgraded in the short
term to avoid further deterioration of logistics cost as a result of slow movement of goods and
accidents.
Railway connections to the port have been improved but NMPT will face capacity shortage when
mechanization of terminals will take place as cargo (bulk) volumes increase.
Not only the marshalling yard will create a bottleneck in the future as a result of a modal shift from
road to rail, but also the rail connection to and from the hinterland. Many of the rail connections are
single track and insufficient rolling stock may cause delays. Further coordination with Railway
authorities need to be established to overcome the potential capacity shortages.

Financial Plan
The current financial position of NMPT should be assessed in view of infrastructure investment and
other development projects. Table 0-5 below presents some major financial indicators of NMPT for the
years 2003-04 and 2005-06.

Table 0-5 Financial indicators for the years 2003/04-2005/06

Definition 2003/04 2004/05 2005/06

Net margin Net income / revenues 26% 29% 56%

Operating ratio Operating cost (excl. 59% 66% 60%


depreciation) / revenues

Current ratio Current assets / current 5.0 3.0 2.5


liabilities

Debt to assets Total long term debt / assets 0.17 0.12 0.09

Revenue per ton (Rs) 84 79 74

Cost per ton (Rs) (excl financial items, incl. 40 32 35


depreciation)

Net surplus per ton (Rs) Net income / throughput 22 23 42

Source: Consultants calculations on basis of NMPT data. Note: the definition of Operating ratio differs from that used by
NMPT. In the Ports definition, depreciation is treated as operating cost and hence included in the ratio. This lowers the
operating ratio in the Ports case.

NMPT Business Plan, August 2009 xii


BUSINESS PLAN NMPT

The net margin of the port has increased from 26% in 2003-04 to well over 50% in 2005-06, while the
operating ratio has fallen back to 60%. The current ratio has been halved over the past three years as
the current liabilities have increased fourfold.

Revenues per ton have fallen from Rs 84 to 74 per ton, but at the same time, the cost per ton has
fallen as well, to reach Rs 35 per ton. The net surplus per ton has increased to Rs 42 Cr ton.
At present, NMPT shows sound credit rating. The financial strength of NMPT makes co-financing
feasible. The current debt to total assets ratio is around 0.1 and the debt to equity is around 0.16. This
is low for capital intensive industries, where ratios of 2 are common. However, in order to be prudent,
a ratio of 1 is reasonable (initially).

Proposed investments
The proposed projects together amount to a total capital expenditure of Rs 6,976 Cr. This amount
includes also projects that will not be implemented during the current planning period. Of the Rs 6,976
Cr, around Rs 1,080 Cr is for the account of NMPT; the remainder is to be covered by private
participation.
The capital expenditure for the current planning period amounts to just over Rs 300 Cr while some
Rs 480 Cr is to be spent during the period 2013-14 to 2017-18. The last large-scale project of Rs 300
Cr is expected to be implemented in 2020-21. In 2006-07, an amount of Rs 15 Cr is likely to be spent,
rising to Rs 92 Cr in 2008-09 and then dropping to Rs 48 Cr and further to Rs 25 Cr.
The most important near-term investments for NMPT are the creation of a POL berth and the bulk
handling facility. Combined, these projects require Rs 100 Cr from the ports resources. In the long
term, substantially larger projects are scheduled to be undertaken, requiring up to Rs 2,000 Cr and
3,000 Cr each.
An overview of the projects and associated annual capital expenditures is given in Table 0-6.

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BUSINESS PLAN NMPT

Table 0-6 Projects and associated annual capital expenditure


Project Operational Capacity Investment (Rs Cr.)
Year Mt NMPT Private Total

Residual works 2006-07 - 25.0 0.0 25.0

Road connect to port (Operational 2011,


2007-08 - 10.0 885.0 895.0
NMPT spending ends 2007-08)

Development of port based SEZ 2007-08 - 1.0 4.0 5.0

Mechanised Iron ore handling berth 14 2008-09 10 0.0 196.6 196.6

Harbour crane (for bulk cargoes) 2008-09 - 30.0 0.0 30.0

Harbour tug, No. 1 2008-09 - 30.0 0.0 30.0

Development of bunker facilities 2008-09 - 0.0 10.0 10.0

Development of coal /NPCL, berth 15 2009-10 8 0.0 194.0 194.0

POL berth at oil dock , berth 13 2009-10 9 54.0 0.0 54.0

Development marshalling yard (with Iron


2009-10 - 10.0 30.0 40.0
Ore/Coal)

Container terminal to 100k TEU 2009-10 1,5 32.0 0.0 32.0

IT development 2009-10 - 4.0 0.0 4.0

Pilot Launch 2009-10 - 5.0 0.0 5.0

Improvement internal roads 2010-11 - 50.0 0.0 50.0

Environment 2010-11 - 2.6 0.0 2.6

Multi purpose berth No. 16 2010-11 5 50.0 0.0 50.0

KIOCL Berth nr. 8 from 13 to 14 m 2011-12 0 18.0 0.0 18.0

Harbour tug, No. 2 2011-12 - 20.0 0.0 20.0

Bulk handling (ore/coal) Western dock,


2013-14 3 50.0 0.0 50.0
berth 17

Development LNG Terminal 2014-15 5 0.0 2600.0 2600.0

Container terminal for Transhipment,


2014-15 3 0.0 700.0 700.0
berth 18

SBM for POL 2015-16 15 0.0 250.0 250.0

Deepening channel/lagoon 15.1/15.4 to


2017-18 - 390.0 0.0 390.0
17 m
Outer harbour for add facilities (if LNG is
2020-21 - 300.0 1025.0 1325.0
realised, then operational by 2014)

Total 1081.6 5894.6 6976.2

NMPT Business Plan, August 2009 xiv


BUSINESS PLAN NMPT

Profits and loss


Table 0-7 shows the profit & loss situation for the years 2004-05 and 2005-06. The Commercial
Revenues (excl. financial income) consist of wharfage dues (around 40%), cargo handling operations
(around 30%) and income from ship services (another 30%).

The expenditure is broken down in Cargo handling & Storage Expenses (about 30%), Port & dock
facilities for shipping (55 %) and overheads (about 23%).
The Operating Surplus of NMPT has ranged between Rs 113 Cr and Rs 154 Cr over the last 3 years.
The Net Surplus (Operating surplus plus Financial Income minus Expenditures) was lower until 2005
due to the provision of pension funds.

Table 0-7 Profit and loss accounts 2004/05-2025-26 (Rs in Cr.)


Item 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2017-18 2025-26

Revenues 267.7 254.7 230.9 260.9 297.4 319.8 299.2 313.1 331.1 397.6 453.5

Total costs 180.32 108.53 130.0 145.1 146.1 156.1 157.2 165.3 169.4 217.8 232.3

EBITDA 87.38 146.17 100.9 115.8 151.3 163.8 142.0 147.8 161.7 179.8 221.2

Depreciation 18.0 16.2 17.5 17.8 21.3 25.3 27.6 27.4 27.4 29.2 27.4

EBIT 69.38 129.97 83.4 98.0 130.0 138.5 114.4 120.4 134.3 150.6 193.8

Total
financial
items 8.6 13.7 26.2 40.2 44.5 46.6 46.4 42.4 46.9 67.7 116.5

EBT 77.98 143.67 109.6 138.2 174.5 185.2 160.8 162.8 181.2 218.3 310.2

Tax 28.47 50.04 32.9 41.5 52.4 55.5 48.2 48.8 54.3 65.5 93.1

Net income 49.51 93.63 76.7 96.7 122.2 129.6 112.6 114.0 126.8 152.8 217.2

As the port is privatising its operations, its income from cargo handling will drop over time. As not all
berths are yet designated to be privatised, a residual income from cargo handling remains on the profit
and loss account. Following remarks can be made with respect to the Profit and loss accounts:

Total revenues of the port are thus forecast to grow from Rs 231 Cr in 2006-07 to Rs 331 Cr in
2012-13 and further to just over Rs 453 Cr in 2025-26.
Total costs will rise over the entire forecast period, reaching around Rs 130 Cr as repair and
maintenance cost increases are offset by salary reductions and privatisation heaves off costs
to private operators.
The EBITDA rises from Rs 101 Cr to Rs 162 Cr by 2012-13 and can then rise further to Rs
221 Cr by 2025-26.
Depreciation increases gradually from Rs 17 Cr to Rs 29 Cr. These amounts are
comparatively low, as most assets have long lifetimes.

NMPT Business Plan, August 2009 xv


BUSINESS PLAN NMPT

The tax obligation rises in line with profit, from Rs 33 Cr in 2006-07 to around Rs 54 Cr in
2012-13 and further to Rs 93 Cr in 2025-26
Net income is thus set to grow from Rs 77 Cr in 2006-07 to Rs 127 Cr in 2012-13 and may
rise to Rs 217 Cr in 2025-26.

Balance sheet
The balance sheets Table 0-8 show that the total assets have grown from Rs 1045.6 Cr in 2003-04 to
Rs 1378.6 Cr in 2005-06. A substantial increase has taken place in investments/financial means,
which are accounted for under the current assets. At the same time, the fixed assets have been added
and resulted in total fixed assets position of nearly Rs 1000 Cr. Capital debts have been lowered
substantially in the past three years.

Overall, it can be concluded that the financial position of NMPT is good and the Port has considerable
funds for future expansion.

Table 0-8 Balance Sheet 2006-07 to 2025-26 (Rs in Cr.)

Item 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2017-18 2025-26

Assets

Fixed assets 497.6 517.7 527.9 493.6 535.6 607.0 669.4 690.2 690.7 688.3 1037.0 1035.3

Investments 323.9 387.5 435.1 476.9 476.9 476.9 476.9 476.9 476.9 476.9 476.9 476.9

Investment 0.0 0.0 0.0 440.1 464.2 483.6 519.3 585.6 696.5 821.5 1220.2 2676.9
reservation
Current 222.2 316.2 415.6 42.0 49.3 54.5 60.8 60.3 63.6 68.3 106.4 140.9
assets &
Liquid means

Misc. Exp. 1.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total assets 1045.6 1221.4 1378.6 1452.7 1526.1 1621.9 1726.4 1813.0 1927.8 2055.0 2840.5 4330.0

Equity
/Liabilities

Equity 629.2 694.8 802.2 944.8 1041.6 1163.7 1293.3 1405.9 1519.8 1646.6 2426.6 3915.0

Loans 192.8 157.3 127.3 104.0 78.0 52.0 26.0 0.0 0.0 0.0 0.0 0.0

Current 223.7 369.2 449.2 403.8 406.5 406.2 407.0 407.1 407.9 408.3 413.8 414.9
liabilities
Total equity/ 1045.6 1221.4 1378.6 1452.7 1526.1 1621.9 1726.4 1812.9 1927.8 2055.0 2840.4 4329.9
liabilities
Source: Consultants calculations

The balance sheet total of the port rises from Rs 1452 Cr in 2006-07 to Rs 2055 Cr in 2012-13 and
can then grow further to Rs 4330 Cr in 2025-26. The increase is built up of additions to the fixed

NMPT Business Plan, August 2009 xvi


BUSINESS PLAN NMPT

assets, which will increase approximately 40% by 2012-13 and more than double in 20 years time.
The loans will be paid off by 2010.
It should be noted however, that this balance sheet assumes that the retained earnings are kept in the
company.

Cash-flow
The total cash-flow of the port (see Table 0-9) will remain positive for almost the entire forecast period,
except for the year 2017-18 when the expansion of the Outer Harbour and Deepening are envisaged.

Table 0-9 Estimated Cash flow (Rs in Cr.)


Years

Item 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2017-18 2025-26

Net Surplus 77 97 122 130 113 114 127 153 217

plus interest after tax 8 7 5 3 2 0 0 0 0

plus NCC (non-cash item -


Depreciation etc) 17 18 21 25 28 27 27 29 27

Minus change in NWC (net


working capital changes) 14 4 5 5 -1 1 2 4 0

Minus capex 25 60 93 88 48 28 25 173 0

Total cash flow 64 57 51 65 95 112 127 6 245

Source: Consultants calculations

The financial outlook is very sound indeed and sufficient funds should be generated to sustain re-
investment and expansion investment as the port and its users require so.

The outcomes appear robust for substantial variations, with only in the very near term a low point in
the cash flow. Borrowing is not required at all.

If and when the projected substantial returns materialise, the port will have to think carefully about
what to do with the proceeds. Several items are of importance:

Co-invest in infrastructure with private clients is a possibility, in order to obtain higher royalties,
if and when the projects are viable.
As traffic and throughput grows, the port is likely to be required to undertake substantial
infrastructure investment. An example of this may be the widening of the entrance channel to
accommodate two-way traffic. This would require construction of new breakwaters, which is a
very capital intensive project.
Many Major ports are now undertaking and planning capacity expansion. At the same time,
private ports are increasing capacity and being constructed. As such, it is likely that at some

NMPT Business Plan, August 2009 xvii


BUSINESS PLAN NMPT

point in the medium term, more than sufficient capacity is available, and then competition will
rise and tariffs will come under pressure. A healthy reserves position is then favourable in
order to be able to lower tariffs and thus retain cargo.

The business plan period can be used to initiate discussions with users, undertake thorough market
research and start planning accordingly. In any case, for projects that are clearly single-user,
discussions should be held with clients to obtain commitments of cargo or direct investment. For multi-
user berths, independent terminal operators may be attracted.

Action Plan
The consultants have prepared an action plan for the next 7 years in which all major plans are listed
and time frames are indicated.
The effective implementation of projects is in many cases depending on the efforts made to and to be
made by private parties in view of BOT and lease contracts. To monitor the projects progress a
Monitoring Unit is recommended that deals with Business plan execution and reports to the Chairman.

The Business is to be reviewed every year upon progress made and new policies that may reset
priorities. Studies should be continued to review cargo flows, project feasibility and technical
(construction, safety) issues.

NMPT Business Plan, August 2009 xviii


BUSINESS PLAN NMPT

LIST OF ABBREVIATIONS
ATF Aviation Turbo Fuel
AV Average
BE Budget Estimate

BEL Bharat Electronics Ltd


BHEL Bharat Heavy Electricals Ltd
BG Broad Gauge

BEML Bharat Earth Movers Ltd


BOO Build, Own, and Operate
BOT Build Operate and Transfer
BP Bollard Pull
BPO Business Process Outsourcing
BU Budget Unit

C & AG Controller and Auditor General


Capex Capital Expenditure
CARG Compounded Annual Growth Rate

CBM Cubic meter


CEO Chief Executive Officer
CISF Central Industrial Security Force
C/F and CIF Cost and Freight and Cost Insurance and Freight
CMFRI Central Marine Fisheries Research Institue
CMIE Centre for Monitoring Indian Economy

CFS Container Freight Stations


CST Central Sales Tax
CWPRS Central Water and Power Research Station
DWT Dead Weight Tonnage
EBIT Earnings before Interest and Taxes
EBIDTA Earnings before Interest, Taxes and Depreciation
EBT Earnings before Taxes
EMC Environment Management Cell
EDP Electronic Data Processing
ERP Enterprise Resource Planning

NMPT Business Plan, August 2009 xix


BUSINESS PLAN NMPT

EXIM Export Import


FA & CAO Financial Advisor & Chief Accounts Officer
FO Furnace Oil
GC General Cargo
GDP Gross Domestic Productivity
GoI Government of India
GRT Gross Registered Tonnage

GSDP Gross State Domestic Product


HMT Hindustan Machine Tools
HOD Head Of Department
HPCL Hindustan Petroleum Corporation Limited
HRD Human Resource Department
HRM Human Resource Management
HSD High Speed Diesel
IDFC Infrastructure Development and Financing Corporation
IOCL Indian Oil Corporation Limited

IMDG International Maritime Dangerous Goods


IPA Indian Ports Association
IPWC Indian Ports Warehousing Corporation

IRP Indian Rupee


IRR Internal Rate of Return
ISPS International Ship and Port Security
IT Information Technology
ITCZ Inter Tropical Convergence Zone
KIOCL Kudremukh Iron Ore Company Limited
KIAD Karnataka Industrial Areas development Board
KIDB Karnataka Industrial Development Board
KISCO Kudremukh Iron and Steel Corperation

KRCL Konkan Railway Corporation Limited


KSPCB Karnataka State Pollution Control Board
KWh Kilo Watt-hour
LAA Land Acquisition Act

NMPT Business Plan, August 2009 xx


BUSINESS PLAN NMPT

LNG Liquefied Natural Gas


LOA Length Over All
LPG Liquefied Petroleum Gas
MCA Model Concession Agreement
MARPOL Marine Pollution
MCD/mcd Metre Chart Datum
MCFL Mangalore Chemicals and Fertilizers Limited

MIOHS Mechanization of Iron Ore Handling System


Mln Million
MoEF Ministry of Environment and Forests
MOSRTH Ministry of Shipping, Road Transport and Highways
MoU Memorandum of Understanding
MPT Act Major Port Trust Act

MRPL Mangalore Refineries and Petrochemicals Limited


MSEZ Mangalore Special Economic Zone
MTOE Million Ton Oil Equivalent
Mton Metric Ton
MW Mega Watt
NDBP National Data Buoy program

NH National Highway
NHDP National Highway Development Program
NIO National Institute of Oceanography

NITK National Institute of Technology Karnataka


NMDP National Maritime Development Program
NMPT New Mangalore Port Trust
NPV Net Present Value
NPC National Power Corporation
NPCL Nagarjuna Power Corporation Limited
NPK Nitrogen Phosphate Potassium
NSDP Net State Domestic Product
NSDRC National Ship Design And Research Centre

O-D Origin Destination

NMPT Business Plan, August 2009 xxi


BUSINESS PLAN NMPT

ONGC Oil and Natural Gas Corporation


OSD Oil Spill Dispersant
PCC Pollution Control Cell
pmt Per metric ton
POL Petroleum Oil and Lubricants
PPP Public Private Participation
R&D Research & Development

RMG Rotterdam Maritime Group


SBM Single Buoy Mooring
SEZ Special Economic Zone
SoR Scale of Rates
SPV Special Purpose Vehicle
SST Sea Surface Temperature
STPI Software Technology Park of India
STS Ship To Shore
SWOT Strength, Weakness, Opportunity and Threats

TAMP Tariff Authority for Major Ports


TCSL Tata Consultancy Services Limited
TEU Twenty feet Equivalent Unit

TOF Transfer of staff


TPD Ton Per Day
TPH Ton Per Hour
TRT Turn Around Time
TSHD Trailer Suction Hopper Dredging
UAE United Arab Emirates
USD United States Dollar
VAT Value Added Tax
VLCC Very Large Crude Carriers

VRS Voluntary Retirement System


VSP Voith Schnider Propulsion
VTMS Vessel Traffic Management System
WTO World Trade Organisation

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1. INTRODUCTION

1.1 Background
Further economic development of India requires an efficient national transport system. The seaports
are major components of that system; the bulk of the imports and exports (about 95%) are entering
and leaving the country via its seaports. India has twelve major seaports and 185 minor seaports
along a coastline of over 7,514 km. The twelve major seaports, Kolkata, Paradip, Visakhapatnam,
Ennore, Chennai, Tuticorin, Cochin, New Mangalore, Mormugao, Jawaharlal Nehru, Mumbai and
Kandla (see Figure 1.1) handle about 75% of total Indian port traffic. The overall growth of Indias port
traffic is estimated at 10% per annum. Due to the foreseen national economic development in the
coming decades, a strong further growth of the countrys port traffic can be expected.

Figure 1-1 Ports in India

Ennore

The Ministry of Shipping, Road Transport and Highways (MOSRTH) has formulated a comprehensive
National Maritime Development Programme (NMDP), which envisages various port capacity

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improvements and hinterland connectivity projects across the 12 major ports over a ten-year time
frame. As part of the NMDP, MOSRTH has mandated that each of the twelve major ports should
develop a business plan that:
States a long-term vision for the port that builds on its core strengths;
Establishes the goals to be achieved over the next seven years to satisfy this vision;
Describes the strategy to be followed to achieve these goals;
Provides a detailed plan of action to implement the strategy; and

Identifies sources of financing for all proposed investments.

The business plan is the foundation for an annual planning process in order to be able to adjust it
regularly to changing circumstances. Implementation of the plan is to be financed by private sector
participation and internal financial resources of the Port Trust.

The following phases were followed to formulate the business plan:


1. Preparation of an Inception Report presenting the current base line of the port, This has
already been finalised;
2. Development of an Interim Report, which includes a trade and traffic forecast for all
commodities and cargo groups, and financial and economic calculations based on the forecast
and proposed investments.

3. Preparation of a draft-Business Plan comprising the 20 years vision, 7 year- Action Plan and
recommendations for installation of a process for monitoring and reporting; and
4. Formulation of the final-Business Plan that will provide New Mangalore Port Trust a framework
to integrate existing investment plans and to support future decision-making on port
development programs.

1.2 Aim of the present report


The aim of the Business Plan is to set the scene for preparing 1) contractual and financial agreements
for the top investments, based on trade and traffic forecasts and the capacity analysis, 2)
organisational improvements to assure an effective port strategy and an efficient implementation of the
investments and 3) compose Action Plans in which financial and organisational consequences are
planned for seven years.

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Figure 1-2 shows the methodology used to produce a Business Plan:

Figure 1-2 Approach for the interim phase

Setting of the Supply-demand analysis Organizational


improvements
business plan

Port organisation
Vision Market orientation
Human resources
Mission Trade and traffic
IT
Strategy Present capacity

Development of a business plan for New Mangalore Port Trust

1.3 Team of consultants


The character of the project required a multi-disciplinary approach. The team of consultants included
therefore the following experts:
Mr. R. Q. Kist Team leader/Business planning expert (RMG)
Mr. M. Murali Sai Project Manager (TCS)
Mr. B. Winder Port operations expert (RMG)
Mr. R. Muralidhar Trade & Traffic expert (TCS)
Dr. S. Dekker Trade & Traffic / Financial expert (RMG)

Dr. N. D. Sen Environmental expert (TCS)


Prof. T.M. Vinod Kumar Spatial planning expert (TCS)

In addition, a home office support team was available for data analysis.

The RMG/TCS team is very grateful to the excellent support provided by the NMPT management and
staff, in particular the nodal officer Mr P. Krishnam Raju, Superintending Engineer (Civil) for his
coordination throughout the project and also the members of the mirror group composed of officers of
NMPT.

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1.4 Set-up of the report


The remainder of this report is divided into eleven Sections:
Section 2, SWOT, Vision, Mission and Strategy, describes the market position of NMPT and sets out
the potential ambitions for New Mangalore port.
Section 3, Market Orientation describes the economic development in general which sets the
framework for the traffic forecast of various cargo flows.

Section 4, Traffic Forecast describes the cargo flow forecasts for all existing and prospective
commodities for the next 7 years and for the long term.
Section 5, Capacity analysis outlines the capacity of the marine infrastructure and the terminals and
berths including the handling equipment.
Section 6, Infrastructure investments, describes the 4 (four) top investment projects and their financial
feasibility.

Section 7, Internal transport, future land use and environmental Projects, deals with all logistics,
spatial and environmental issues in and around the port area.
Section 8, Organisational improvements describes the consequences of the Landlord Port Model and
the reorganisation of the NMPT.
Section 9. Port connectivity, describes the infrastructure around the port area and its development.
Section 10, Financial Plan, describes the cash flow plan for the next seven years.

Section 11, Action Plan, outlays the most important steps to be taken by the NMPT in the planning
period.

Drawings and Excell sheets on financial calculations can be found in the annexes of this report.
Abbreviations used in this report are listed with their expansions.

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2. SWOT, VISION, MISSION AND STRATEGY

2.1 NMPT SWOT analysis


The NMPT is to continuously assess its position in the Indian and international port markets and needs
to review its Strength, Weaknesses, Opportunties and Threats (SWOT).

A SWOT assessment indicates the direction in which NMPT is heading to review the strategic actions
identified. Elaborations of elements are to be found in following sections.

2.1.1 Strength
In the Arabian Sea basin the port of New Mangalore is ideally positioned to the logistics service
industry and its customer base for a number of reasons.
The port is best suited to cater for South Indian cargo flows that originate or are destined for the States
of Karnataka and partly for Kerala. The hinterland consists of substantial population and a variety of
industries such as the garment producing industry, mineral ore production, thermal power plants,
electronic equipment and consumer goods like coffee and refrigerated cargoes.

With a hinterland area of over about 50 mln inhabitants NMPT has a sound base to handle a
substantial volume of containers for both imports and exports. Distances by road or by rail to major
neighbouring ports are at least 250 km, which supports shippers of goods to choose New Mangalore
based on origin-destination cost of transport.
The port is equipped with well-maintained deep-water berths up to 15.1 mcd depth and is operational
except on three national holidays. However shipping activities (berthing / de-berthing) are being
carried out even on these three national holidays; it operates 24 hours per day and can provide
facilities for almost all cargo types.
Back up area is in general sufficiently available. This area allows provisional storage and handling
operations to be executed or to be established.
Finally, NMPT enjoys a healthy financial position in both balance sheets and profitability.

2.1.2 Weaknesses
The port faces a number of weak points. Firstly its marine infra structure is designed to allow ships of
max LOA 245 m. This implies in general that ships over DWT 100,000 cannot be handled in port due
to navigational constraints (see section 5.7.1) and the channel depth and width.

Cargo handling for certain dry bulk cargoes (iron ore, coal) are still done manually which results in high
turn-Around-Time (TRT) for ships. This creates subsequently high cost of transport to shippers of
goods. The manual handling also results in unsafe and environment unfriendly effects such as cargo
spills and dust.
For existing terminals the NMPT is required, by agreements, to deploy the Ports dock labour only to
cargo handling operations (ship-shore). This restricts the NMPT to enter into contracts with private
operators that manage a NMPT terminal with their own labour force fully and this may lead to higher
labour cost compared to that in minor/private Indian ports that are at liberty to employ and manage
labour.

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Other weak points include the environmental hazards from dust and spills and the rather
administrative authority structure (valid for all Major Indian ports) that restrict the management and the
Board of Trustees in setting up its own (market oriented) port tariffs and service packages for staff.
The port connectivity seems sufficient at present but the connectivity to National Highways is in a poor
state, heavily congested and sometimes not suitable for heavy truck traffic. The port enjoys a railway
connection to a marshalling yard, but there are no direct railway lines to any berth.

2.1.3 Opportunities
The strong growth of the Indian economy provides room for development of the port as a result of
more business activities and subsequent trading volume increases.
NMPT has ample opportunities to increase its throughput and improve its functions. Some private
(captive) customers show firm interest in developing berths and jetties and the time is ripe for Public
Private Partnership (PPP) deals. The partnerships will appear in all cargo types that are presently
handled.
The high volume of captive cargo creates a sound base of income to NMPT and has resulted and will
result in sound operating profits. This automatically implies that funds are and become available for
infrastructure development preferably in cooperation with private investors and operators of cargo
handling.
The participation in the Special Purpose Vehicle (SPV) established to develop the Mangalores Special
Economic Zone (SEZ) creates further opportunity to execute activities that benefit from tax incentives.
Apart from NMPTs involvement, the SEZ will generate additional cargo flows from nearby industrial
and trading activities.

2.1.4 Threats
NMPT faces through its institutional structure (a Port Trust under the MOSRTH) the ever disturbing
handicap of being a public controlled enterprise. Many regulations limit the management to act as an
independent and professional company, such as the labour laws (no retrenchment), the HR routines
(promotion), and the labour conditions (exceeding market levels).
Furthermore the international vessel size developments will create additional financial burden of
capital dredging and strengthening of quay infrastructure.
The ports capacity can be improved by shifting cargo handling technique to faster and safer
mechanisation. This improvement may however still be insufficient to cater for certain growth of cargo
flows beyond projected cargo flow volumes. This may result (again) in handling capacity shortage for
certain cargo types which may result in either over-utilisation of berth(s) or additional waiting time for
ships.
The ports competence at present is short of certain skills (marketing, IT, HR management) to cope
with future rationalisation of activities and promote and stimulate the port to the market.
The competition may be not very strong at present but other major and minor ports also develop and
will try to take a share of the competitive cargo especially when logistics are favourable. Especially for
container cargo and iron ore and coking coal the nearby ports Cochin, Mormugao, Chennai and non-
major ports of Karnataka will influence the result of NMPT as tariffs may become under pressure.

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The railway capacity of the main connecting lines (to Bangalore) may prove insufficient in the medium
and long run to handle all cargo to and from the port, not in the least caused by the expected modal
shift from truck to rail.

2.2 Vision and Mission of NMPT


The position of the vision and mission in the list of decision parameters in broad perspective is shown
below:

Table 2-1
Decision parameters Subject Particpants

Values The principles we hold each other to Entire Organization

Vision Where the Port wants to be in the future Entire Organization

Mission Why the Port exists Entire Organization

Strategic Goal Port-wide effort that helps achieve our vision Entire Organization

Objective What the Port needs to accomplish or achieve its goal Departments

Action Items The specific tasks that support the achievement of the Departments or Project teams
objectives, and ultimately the goal

The characteristics of the port of New Mangalore and the main conclusions from the SWOT analysis
have been used to develop a focus for the ports future development. Particularly the presence of
deep-draft berths, the continuation of handling of captive cargo flows combined with a rather healthy
financial position offer an excellent starting position for future development.
A visioning workshop was conducted in which the senior management and the mirror group of the
NMP participated. The attendees were individually and anonymously asked to prepare a Vision and a
mission statement for the Port. The results were discussed and, in a separate smaller session, three
variants were formulated.

The selected statements are:

Vision Statement:
To be a professional provider of port infrastructure and services of world class standards.

Mission Statement:

To become a leading liquid and multi-cargo port by adopting state-of-the-art technology infrastructure
and cargo handling systems, complying with environmental, social, safety and security standards.

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Strategic goals

From the vision and mission a strategy has to be formulated, that include goals for as to the choice of
core activities of the port , the land use plan, the port development route , the level of participation of
the private sector and the organizational and financial targets.
The strategy consist of the following main goals:

Be an all cargo type port for both captive and non-captive cargoes.
Develop the access to the port (channel) in the long run (over 7 years) when demand shows
the need and feasibility will be proved.
Co-invest in infrastructure (berths and jetties) for captive cargo (crude oil, POL, LNG, iron ore,
thermal coal) on dedicated terminals.
Creating new facilities to competitive cargoes (containers, coal and fertilizers) based on state
and national growth rates.
Modernization and mechanization of bulk cargo and container handling through PPP in the
long run
Investing in infrastructure, super structure and equipment where needed to modernize in the
short run
Initialize and conclude concession (lease) agreements for existing handling operations of
liquid bulk, dry bulk and general cargo.
Reduce the environmental hazards from cargo handling operations by setting clear rules,
organize pollution awareness training to customers and set penalization schemes for violation
of rules.
Adopting for the time being the Service model for container handling operations until a critical
mass of throughput has been realized.
Shift gradually to a Landlord concept in line with national developments to decentralization of
powers and change of labour laws.
Reorganize the port in view of the privatization development by right sizing (in as far as legally
feasible in view of labour laws) and improving of skills of staff through training.

2.3 Port development strategy


In the planning time span, goals need to be set for specific ship and cargo operations. The
segmentation for the entire port area is to be laid down in a Port Land (and basin) use plan that sets
the conditions for ship and cargo operations at any time and place. The strategy should identify and
determine the main infrastructural investments in the port and the connecting shape and working
methods of a suitable NMPT organisation structure.

The port will undoubtedly continue to act as port for all major cargo types that are presently being
handled like crude oil, POL, iron ore, coal, general cargo and containers. The development of all these
segments cannot take place at the same time due to restrictions like lack of proper interest from the
customer base or constraints on financial capacity.

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A trend is that vessels carrying some of these products will be most likely larger in future. The port is
however not yet suitable to handle very large ships (over DWT 100,000) and needs to set a strategy to
adapt to these market requirements.

The port development strategy is aimed at increasing the ports capacity to cater for higher volumes of
cargo by introducing improved infrastructure and modern handling techniques. The strategy includes
the establishment of dedicated berths and jetties next to common user berths to cater for all types of
cargo flows.

The dedication of berths and jetties will be effected where sufficient cargo volumes can be foreseen.
The port however aims always to optimise the berth facilities to obtain a satisfactory level of berth
occupancy at a zero or low average ship waiting time average. The strategy here is to optimise berth
capacity taking generally accepted berth occupancy standards (see section 5.3) in consideration.
Further expansion of the port is technically feasible (both inside the basin and in the Outer Harbour) to
accommodate eventual structural capacity shortage for any one the commodity types.

Based on market forecasts for the various commodities (see Section 4.3) the port should gradually
increase its capacity to at least cater for the projected 56 mln ton of cargo in the years 2012-13. Long
term prospects lead to higher cargo volumes up to 84 mln ton in 2025-26. The infrastructure
development strategy should be focussed on this expansion of capacity. A prime condition for success
is that all berths and jetties are operated by professional stevedores that use sufficient modern
handling technology to satisfy client demands and maintain the ports overall handling capacity.

2.4 Commercial Strategy


The commercial strategy of the NMPT should be focussed on extension of present cargo flows and
attract new cargo flows for all types of commodities. In this strategy distinction needs to be made for
substantially different market segments such as captive and commercial (non-captive) cargoes, by
type of appearance (liquid, dry bulk, containers) and by pricing services.

2.4.1 Captive cargoes


Special attention needs to be paid to attract the customers interested in a long term relationship with
the port and prepared to use the ports infrastructure, while providing their own super structure
facilities and equipment. These types of customers are those who use or produce high volumes of
commodity or products and are located nearby the port. These so-called captive cargo flows are
usually part of a larger industrial scheme in which port handling plays only a part. Classical examples
are the MRPL jetties, the KIOCL iron ore pellet activities and the proposed establishment of an LNG
terminal.

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The strategy is aimed at providing further infrastructure for green field areas or improves existing
infrastructure or dedicate terminals for certain cargo types and allow only mechanisation that can
secure fast and safe handling of cargo.

2.4.2 Competitive cargoes


Competitive cargoes are those volumes that can be shipped via other (competing) ports. This applies
in particular to containers and to a certain extent to coal, fertilizers and break bulk cargo volumes.
The strategy for competitive cargoes should be aimed at securing a certain market share of all cargo
originated or destined to India or more specifically to the hinterland of the port (roughly the State of
Karnataka and some border areas with neighbouring States of Kerala and Tamil Nadu).

The setting of the market share (in ton or TEU per annum) should be based on logistic analysis that
shows the benefits of using NMPT over the other ports. In this analysis not only Origin-Destination
calculations are required but also a review the practice of trade of the relevant commodities that
determine the port of choice.

2.4.3 Marketing strategy


The marketing strategy should be aimed at a convincing clients to use the port by emphasizing on the
strong points (such as low pre- or on-carriage cost, fast handling in port and adequate shipping
services). The customer base consists of stevedores, shipping agents, shipping companies, freight
forwarders, shippers, receivers and traders of commodities. The relationships with all stakeholders
should be founded on a proper knowledge of the performance of port operations (marine services and
cargo handling) but also on knowledge of inland transport services, logistics and transport economics.
The NMPT should maintain open and interactive customer relationship. This requires a regular
communication on issues of diverting cargo flows to New Mangalore and addressing the issues
relating to physical cargo flow and the documentation (this later issue in collaboration with Customs
and inspection authorities).

The client communication should also be supported by sufficient knowledge of trades and logistics
parameters which will determine (to a large extent) the choice port by traders/shippers/
receivers/freight forwarders/agents of cargo. Adequate Origin-Destination analysis of cargo flows and
logistics cost structures are imperative tasks to communicate with (potential) customers.

Customer response mechanisms include the contact with customers both orally and documentary
(questionnaires) and the visiting of trade fairs, conferences and other public platforms where
customers can be met.
The Marketing Strategy should be in line with a sound Service package strategy that sets competitive
tariffs and other service conditions against the various services rendered.

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2.5 Pricing strategy

2.5.1 Tariff structure


Tariff Authority for Major Ports (TAMP) sets the structure and approves tariffs of Major ports.
The tariff structure in ports and specifically in all major ports in India has evolved with an attempt to
simplify it. Even with all the efforts made, complexity still exists in the tariff structure.
In Table 2-2 a standard tariff charging system for various service groups is presented. The users
express an increasing desire for greater transparency in the detailed billing of port services. This
emphasizes the need for more easily understandable and comparable tariff structures.

Table 2-2 Charging system per tariff item

Service Component / Charging system

group type of service Basis Units Payer Recipient

Port/Other
Conservancy Size of ship GRT Shipping line
responsible body

Port dues Size of ship GRT Shipping line Port

Size of ship Port/Pilotage


Navigation Pilotage GRT Hours Shipping line
Time Association

Tug time involved


Tug services Number GRT Shipping line Port / Tug owner
Size of ship

Mooring / unmooring Size of ship GRT Shipping line Port

Time of ship alongside


Berth hire Hours GRT Shipping line Port
Size of ship

Volume/weight/size Consignee/
Berth Wharfage Tonnes/ TEU/m
3
Port
of cargo Consignor

Ancillary services Amount consumed Various Shipping line Port

Cargo Volume/weight/size 3
Stevedorage Tonnes/ TEU/m Shipping line Provider of service
operations of cargo

Volume/weight/size of 3
Consignee/
Wharf handling Tonnes/ TEU/m Provider of service
cargo Consignor

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Service Component / Charging system

group type of service Basis Units Payer Recipient

Extra-movement Volume/weight/size 3
Consignee/
Tonnes/ TEU/m Provider of service
of cargo Consignor

Volume/weight/size
Special cargo handling of cargo Unit Types Shipping line Provider of service
Type of special handling

3
Tonnes/ TEU/m Consignee/
Storage Time Provider of service
Days Consignor

3
Volume/weight/size of Tonnes/ TEU/m
Packing/unpacking Shipping line Provider of service
cargo Unit type

Equipment/service/ Equipment/
Hours of use by item Hours Stevedore
facility hire services owner

Real estate licensing


Other
management services Various Various Hirer Port
Business
and consusltancy etc.

2.5.2 Tariff Setting


The tariff structure for major ports in India follows the Cost Plus regime. Whenever the port decides to
add a tariff item, it is required to submit a proposal to TAMP for getting the approval. This proposal
emphasizes on the cost estimates that the port has to bear in order to handle that cargo. TAMP
assess the submission made by the port and also involves the port users for comments and
suggestion. This process has little or no consideration on the market forces as well as the value added
to the port user and is resolved in isolation.
The pricing of services should be set in relation to the service rendered and matching or competing
with the competing ports. Tariffs should be set competitively for non-captive cargoes while for captive
cargoes the cost of operations should form the base of the tariff.
As the clients are left with no alternative, the possibility is that NMPT, being monopoly in many
aspects, charges its clients too high for the services. Tariffs to clients need therefore to be set through
negotiation in order to create a win-win situation with investors and operators.
The present tariff structure should be set to satisfy customer without under pricing the service.

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a) For marine infrastructure, the port dues are most suited as tariff tool. The tariff should also provide
cover for regular maintenance cost of survey in the basin, maintenance dredging and navigational aids
such as oil spill combating equipment and other support tools such as security.

b) For quays and jetty usage, berth/jetty hire should be set while for cargo handling and storage
operations volume related tariffs are best used (per mt, per cbm, per TEU, etc). Wharfage dues are a
special category and will not primarily support the general cost of capital dredging. Wharfage dues at
present the dues paid for the infrastructure alone. In BOT/BOO concessions infra structure will be
financed by the concessionaire. The wharfage dues may then be used to obtain return on NMPT
investment parts (capital dredging). The wharfage dues are however depending on commercial
success of the terminal operator and therefore form an unstable income source. It would be preferred
to gradually raise port dues and reduce wharfage dues as a source of coverage for financing capital
expenses.

c) Marine services should similarly be priced by observing all cost (including overhead share) and
priced accordingly. The present pricing of pilotage-cum-towage should be disengaged and pilotage
and tugboat services should be priced separately and revised as the present system creates biased
pricing between ship owners using pilots or tugs and those that do not (or partly).

d) Cargo handling tariffs: The NMPT charges for dock labour (ship-shore) working on vessels. The
tariff is based on a gang tariff and is therefore not fixed to and not depending on cargo volume. This
makes it difficult for shippers/receivers/charterers to calculate their total (C/F) cost of the supply of a
commodity. It is recommended to simplify the handling tariff to a per metric ton (and TEU) related tariff.
The setting should be based on the actual cost records with a mark-up for risk (weather conditions,
break downs of equipment, etc).

The simplification will also reduce the (calculation/billing) work load and the control thereof.

e) Container handling tariffs are extremely low (see Section 0) and not conform market levels.

The rates should be upgraded to justify investments that are needed to be made in view of the cargo
flow forecast.
It is the task of the Marketing Manager to prepare the (revised) tariffs in view of expected future cargo
volumes and related cost of organisation and equipment. The service cost price of handling will
drastically change (increase) when mechanisation of handling is applied due to the high investments
for ship/shore and yard handling operations irrespective of the licensed operator.
It is also the task of the Marketing department to justify and explain (future) price hikes by showing the
benefits to the customer of the speedier and safer handling.

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2.6 Land use strategy


The land use of the port should be aimed to optimising ship-shore handling activities and directly
related storage functions. The port area (especially the waterfronts) is rare along the Indian coast and
should be reserved exclusively for core activities that match the commercial strategy. The Port has
sufficient land available for development. New industrial development will require more waterfront
facilities and adequate back up area for prime cargo handling functions (ore, coal, LNG, general
cargo).

Since most of the port area is not directly connected to the lagoon, other activities and functions have
been allowed such as stuffing and stripping of containers and warehousing functions. Some of the
land is leased to third parties on either short or long term basis(see section 5.5).

The activities in the port area should be further restricted in a revised Master plan that:
concentrates risk-equal activities (oil , oil products, gases)
dedicates terminal to certain commodity (groups)
optimise traffic rotation through the port (logistics plan)
protects the environment (safety, pollution protection plan)
secures the port area (gate and security plan)

NMPT is also participating in a Special Purpose Vehicle (SPV) that will lease SEZ bounded land for
port operations. The total area identified for SEZ type of operations is some 300 acres at the Oil dock
area partly located on the South side of the lagoon (south west of berth 8 and behind the tank terminal
area) and partly behind the tank farm at the shore. In this area there are certain tax free activities;
such activities are not tax free in other areas of the port.

In a SEZ area certain product (cargo) handling activities are tax free while in non SEZ port areas the
taxes are applicable.

2.7 Role strategy


Within the overall strategy the aspects of the institutional development is of paramount importance.
While the NMPT is bound to act as Trust under the Major Port Trusts Act 1963 (and amendments), the
role of the port is confined to primarily service port. This has implied that NMPT provides vessel and
cargo handling services to customers, next to the role of land custodian and marine infrastructure
developer and maintainer.

This port does not fully exercise its role as Service Port as certain jetties have been concessioned for
longer periods to (captive) customers such as MRPL and KIOCL.
This service port concept will gradually diminish when other terminals (berths) will be leased out or
given in concession to private parties.
The institutional strategy will therefore be a gradual shift from Service to Land lord port whereby most
(if not all) cargo handling and storage activities are transferred to private parties. This is further
discussed in section 2.9

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2.8 Investment strategy


The financial strategy of NMPT is logically to make profits to operate the port and its services and to
create a sound base for equity investments.
The investment plans need not only be assessed for their feasibility but also be ranked based on their
priority.
While setting up priority of plans, aspects such as capacity constraints, environmental issues and
customers willingness to finance are the driving factors to prioritise plans.

NMPT is obliged to regularly update a list of investment plans for NMDP, which covers an investment
period of 6 years.
In section 6.2 and subsequent sectors the pre-selection of projects has been elaborated. The
consultants selected four major projects of urgency. Other plans with less priority are reviewed on their
matching with the mission and strategy of NMPT. Those projects that are considered feasible and
desireable are incorporated in the time planning for the medium term (7 years) and long term term(20
years).
For certain NMDP projects external consultants were entrusted to assess technical and economical
feasibility.

2.9 Public Private Partnership

2.9.1 Policy of the Government of India


As has been stated in the An Approach to the 11th 5-year Plan (Planning Commission, GoI, June
2006), Public Private Partnerships (PPPs) are increasingly becoming the preferred mode for
construction and operation of infrastructure services such as highways, airports, ports etc. The
Government of India, which administers the major ports, has realised that port restructuring is
essential to benefit the Indian exporters with low costs in transportation on par with their counterparts
elsewhere. Policy guidelines were issued for private sector participation/investment in the following
areas:
Leasing out existing assets of the port.
Construction/creation of additional assets, such as:
o Construction and operation of container terminals.
o Construction and operation of bulk, break bulk, multipurpose and specialised cargo
berths.
o Warehousing, container Freight Stations, storage facilities and tank farms.
o Cranes/Handling Equipment.
o Setting up of captive power plants.
o Dry-docking and ship repair facilities.
Leasing of equipment for port handling and leasing of floating crafts from the private sector
Pilotage
Captive facilities for port based industries

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PPPs are best implemented through standardized arrangements that constitute a stable policy and
regulatory regime where private capital derives greater comfort and seeks the least possible risk
premium. Model Concession Agreements (MCAs) would be used for providing a stable regulatory and
policy framework. The MCA for PPP in highways has already been approved and published. Similar
work is nearing completion in other sectors.

The development for example of a port concession agreement requires a regulatory system to protect
customers and social interests. To establish such a regulatory system, port authorities need to follow
some basic steps. The Toolkit for Port Reform of the World Bank recommends the following eight
basic steps:
Specify the essential regulatory objectives and tasks,
Determine how far existing laws go toward assigning these tasks,
Determine institutional arrangements for regulatory oversight,
Consider how much regulatory discretion should be allowed,
Consider what regulatory tools and mechanisms will be used,
Specify port operating and financial performance indicators,
Establish and appeal process and procedures, and
Incorporate regulatory details into laws and private sector contracts.

The framework for concession agreements on BOT-basis as promoted by the Government of India is
in line with the above eight basic steps of the World Bank.

2.9.2 PPP Strategy for NMPT


The policy of NMPT is to continue with the implementation of the landlord model further and as such
being responsible for:
Marine infrastructure (Channel, lagoon, navigational aids)
Construction of quay walls (if no BOT arrangement is applicable)
Harbour Masters function: safety and environment
The promotion of the Port
Marine services

The present NMPT strategy is that existing terminals will be given on license (lease) contract to
operators and Greenfield area will be given via public tender to third party investors.
According to the MOSRTH policies privatisation is a major tool to secure funds for major logistics
infrastructural projects.

The privatisation is expected to lead not only a lower consumption of public (port) funds but also to a
more professional operation at terminals as private operators are less hindered by public
administration and Trustee laws and have better trained staff and apply more advanced technology.

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2.9.3 Present leased land


The NMPT has provided parts of its territory to third parties on both short term and long term lease.
The terms of lease are standard and based only on land and do not relate to any object or
constructionon the leased area. The rental fees for port territory is governed and fixed by the TAMP.
The rates vary for pure land lease of Rs 8.81 per m2 per month (2006/07) to Rs 41.02 per m2 per
month for sheds and warehouse including platforms. The lease rental rates are considered high by
users but are in fact very low considering the scarcity and thus the real economical value of the land in
the port. Once fixed, the port is however not allowed to increase or decrease any land lease tariffs for
next 5 years.

In total 344 acres (hectares 140) equalling about 15% of the total port area, are leased of which
around 50 % on short term (less than 3 years) and 50% on long term (mainly 30 years). In practice all
lease agreements that expired in the past were renewed. Since 1994 the Government has restricted
development of the coastal zone up to a distance of 500 m from the waterfront. Projects that are
located within this range need government approval.

The leasing of port land to private sector is limited by law to so called port activities and is to be done
by public tender. The definition of these port activities include those activities that are cargo related
but are not within the frame work of core operations of the port (e.g cargo handling ship/shore and
short term storage). While temporary storage facilities are part of a logistics process, value added
service operations such as packing, labelling, order picking for physical distribution and stuffing and
stripping of containers should be avoided. The latter functions may however need to be executed in
port areas due to Customs regulations. It is then the task of the NMPT to convince the Customs to
accept bonded warehouses and areas outside the port territory that can service these activities.

2.9.4 Privatisation guidelines


Guidelines have been made (March 1996 with amendments) by the MOSRTH to lease out infra
structure and equipment. These guidelines also include rules for leasing of equipment.

As per the guidelines issued in 2004, the lease out can be granted up to 30 years by the Board of the
Trust without approval from the MOSRTH. Short term lease up to 11 months can even be granted by
Chairman without Board approval. The lease may be either granted to captive (industry) users or by
tender. This latter system is required for existing facilities.

Separate conditions exists for


existing premises
construction or creation of additional assets (terminals, berths, warehouses, freight stations,
dry docking, ship repair)
handling equipment of the NMPT and from third parties
Pilotage
Captive facilities for port based industries

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The leasing is done via public tendering, either by lease contracts (with a license) or via BOT (infra-
structure). The tender bids are evaluated first technically and then financially to select the qualified
bidder.
The bids should include :
an entry fee for the license
a Revenue share based on tonnage or revenues (Rs per ton/TEU)
a minimum turnover volume (ton/TEU per annum)

In the contracts for procurement of equipment of floating craft, the evaluation will be done on least
cost basis. All lease plans should match the Ports Master Plan. Foreign bidders are welcomed but
must be registered under the Indian Companies Act.
An important condition is the provisions for Port labour. For leasing of existing port assets
(equipment/quays, back area) the licensee should take labour according to the Industrial Disputes Act
and relevant labour laws. Retrenchment of labour is forbidden. When labour is taken over a similar
service condition should be offered.

For captive infra structure assets that attract more than one bidder, a special amendment was made in
October 1996. In case of 2 or more interested (port based industries) parties the Port may construct
and operate it exclusively for the industries. It may also engage a common Developer-cum-Operator
for this purpose. In case one or more of the industries discontinue their industrial activities, the Port is
free to serve other customers but giving preference to the remaining industries

The license agreement is used for already constructed terminals or for those projects where the (new)
infrastructure provided by NMPT will be paid by the licensor.

The NMPT will be gradually enter into long term concession agreements that allow private sector to
construct and operate port areas with a high degree of freedom. The NMPT (as other major ports) is
confined to use the guidelines for BOT contracts provided by the MOSRTH. The NMPT has adopted
the standard format to its own local situation.

The concessionaire is required to pay a fixed rate (set by TAMP for each year) per square meter of
land (and waterfront at berth) ranging from some Rs. 1,000 per Sq m per annum for green field sites to
a multiple amount when buildings are included.

Any concessionaire will naturally do its utmost to secure a high throughput through his terminal.
Nevertheless business may become slack as a result of market conditions or marketing efforts by the
concessionaire. When actual throughputs become under the agreed benchmarks, the concessionaire

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may need to be penalised by paying wharfage for the minimum agreed volume. In the worst case the
conceding party may cancel the BOT agreement and re-tender the concession.
In any case the BOT agreements should include provisions whereby the NMPT has the right to
interfere temporary when the berth occupancy is below target. This is for instance expected when the
NPCL coal terminal becomes operational and the terminal capacity exceeds the expected cargo
volume substantially. The ports interference may include the ports actions to serve ships at idle berth
times, using the concessionaires facility.

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3. MARKET ORIENTATION

3.1 Relevant Government policies and sector development

3.1.1 Agriculture
The 11th Plan aims to reverse the deceleration in agricultural growth from 3.2% observed between
1980 and 1996-97 to a trend average of only 1.5% subsequently. To reverse this trend, corrective
policies adopted must focus not only on the small and marginal farmers, who continue to deserve
special attention, but also on middle and large farmers who too suffer from productivity stagnation
arising from a variety of constraints.
The growth rate of agricultural GDP needs to be lifted to around 4%. This task has to be seen in the
light of actual growth of agricultural GDP, including forestry and fishing, which was only 1% per annum
in the first three years of 10th Plan and even the rosiest projections for 2005-06 and 2006-07, would
limit this below 2% for the full five year period.

3.1.2 Manufacturing
The manufacturing sector has also not grown as rapidly as might have been expected. The average
growth rate of this sector has accelerated compared to the Ninth Plan but is unlikely to exceed 8% in
the 10th Plan. For the 11th plan, the growth rate is targeted at around 12% in order to achieve a GDP
growth of between 8 and 9%

The sector growth rates consistent with the growth scenarios presented above are given in Table 3-1.
The agriculture growth targets are explicitly derived from the demand side assuming virtually zero
growth in agricultural imports and a step up in the rate of growth of agricultural exports by 10% per
annum. Services sector growth is projected in relation to GDP growth with an elasticity of 1.1, which is
slightly lower than in the past.

In deriving the trade figures, net exports are projected at the level necessary to calibrate aggregate
demand and aggregate supply. Import growth has been related to overall GDP growth with an
elasticity of around 1.5, which is somewhat higher than the historical average of 1.3, reflecting the
assumed impact of trade liberalization and greater dependence on energy imports. However, in these
calculations it has been assumed that there is no further change in energy prices.

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Table 3-1 Structure of Growth in Different Scenarios (% per annum)


Scenarios Low Medium High

GDP set as target 7.0 8.0 9.0

Agriculture 3.2 3.7 4.1

Industry 8.2 9.4 10.5

Services 7.7 8.8 9.9

Imports* 10.9 11.7 12.5

Exports* 14.2 15.4 16.4

Source: NMDP , Note: *Measured in US dollars. In the case of imports, it is assumed that the price of oil remains constant at
$70 per barrel from 2006-07 onwards and average tariff rate stabilises at 10% from 2008-09.

These scenarios suggest that demand for agriculture will restrict its growth to between 3% and 4%.
Services could grow at 8 to 10% and industry a little faster, exceeding 10 percent growth in the 9%
GDP growth scenario. The implicit growth of manufacturing sector, which is a subset of industry, would
be around 12% in the 9% GDP growth scenario. The target growth rates for Industry and Services
certainly appear feasible in the light of recent performance, although the agricultural growth rate is
much higher than recent trends. Nevertheless, every effort will need to be made to achieve the
agricultural growth targets, since failure on this count may require excessively high targets for the non-
agricultural sectors in order to attain the overall GDP growth rate and also expose the economy to
needless vulnerability.

3.1.3 Heavy industry policy


For the longer term through 2020, India has set itself on a rapid expansion path to be arrived at, from
the heavy industry, predominantly mining and basic and intermediate goods production. The steel
industry alone is to nearly triple capacity in 15 years. As a user of some of the main raw materials that
India possesses, this focus on iron and steel will have a large impact on linked industries, both forward
as well as backward, such as ports and mines.

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Table 3-2 Production, Imports, Exports and Consumption of Steel (in mln ton)
Production Imports Exports Consumption

2019-20 110 6 26 90

2004-05 38 2 4 36

1
CAGR * 7.3% 7.1% 13.3 % 6.9 %

Source: National Steel Policy Document, November 2005.

The Planning Commission, Govt. of India expects that the economy can grow between 8% and 9% per
year on a sustained basis provided appropriate policies are put in place. With population growing at
1.5% per year, this would ensure that the real income of the average Indian would double in ten years.

3.1.4 Iron and Steel policies


The country has rich endowments of iron ore and non-coking coal, and has low cost labor. Yet this
advantage is neutralized considerably by low material and energy efficiency, poor quality, poor
productivity, and high cost of coking coal, power, freight and finance.

The production of the planned 110 Mln ton of Iron and Steel by 2019/2020 puts considerable demands
on the iron ore and coal industry as well. Iron Ore production needs to rise nearly fourfold; while
coking coal needs to increase three fold (Table 3-3).

Table 3-3 Critical Inputs for Steel Production (in million ton)
Iron Ore Coking Coal Non-Coking Coal

2019-20 190 70 26

2004-05 54 27 13

Source: National Steel Policy Document, November 2005.

Iron Ore
At present, the in-situ reserves of relatively rich iron ore in India are 11.43 billion ton of haematite and
10.68 billion ton of magnetite ores. Though the reserves of haematite ore appear to be large, high-

1
CAGR stands for Compound Annual Growth Rate. CAGR is the rate at which a given present value would "grow" to a future
value in a given amount of time. The formula is CAGR = (FV/PV)1/n - 1 where FV is the future value, PV is the present
value, and n is the number of years over which the growth is projected

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grade lumpy reserves constitute only 8.7% of the total. Furthermore, the present commercial mining
capacity for iron ore is only 175 mln ton. Production of iron ore in 2004-05 was 145 mln ton, of which
54 mln ton was domestically consumed and 78 mln ton was exported. In order to ensure availability of
190 mln ton of iron ore for domestic production of steel by 2019-20, Government is encouraging
investments in creation of an additional modern mining and beneficiation capacity of 200 mln ton.

Coal
Coal production is nationalized at present and private investment in coal mining is only allowed for
captive mines supplying coal to designated sectors like power, steel and cement.

Coking Coal
The proven reserves of prime coking coal are only 4.6 bln ton. The quality of Indian coking coal is also
not suitable for steel. The production of coal during 2001-02 was 328 mln ton, out of which coking coal
amounted to only 29 mln ton. The low ash coking coals required by steel makers was around 10 mln
ton in 2001-02. Coking coal production has declined at an annual rate of 4.7% during the decade
ending 2001-02.

Poor quality domestic prime coking coal has to be blended with imported coal. Currently the steel
industry imports around 19 mln ton of coking coal annually, and procures 7.5 mln ton from indigenous
sources including captive mines. By 2019-20, about 70 mln ton of coking coal will be required, of
which 85% (60 mln ton) will have to be imported.

The imperatives of coking coal security require that new sources of coking coal be tapped.
Accordingly, the Government would aim for the coal sector to become market-driven, but in the
meantime continue allocation of captive coking coal blocks to steel plants, and establish mechanisms
to share their surplus resource with other steel plants. The Government would encourage joint
ventures and equity participation abroad by steel and coal companies. Simultaneously, efforts would
be made to develop and adapt technologies, which have synergy with the natural resource base (non-
coking coal) of the country. The steel industry would be encouraged to make investments in washing
and beneficiation of coal.

In the medium term, captured in the 11th Plan, Coal will remain the dominant primary source of
commercial energy and total demand for coal is projected to increase from 432 mln ton in 2005-06 to
670 mln ton in 2011-12. The need for the power sector itself would increase by 180 mln ton taking the
total to about 500 mln ton in 2011-12. Meeting these demands poses a formidable challenge in
increasing coal production. Coal India is currently aiming to increase production by an unprecedented
60% during the 11th Plan period inclusive of the recently approved emergency production plan.
However, realistically speaking, this level of increase in output, together with the necessary rail
infrastructure to move the additional coal production, may be difficult to achieve by Coal India alone.

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Non-coking coal
With proven reserves of 74 billion ton, non-coking coal constitutes around 82 percent of the total coal
reserves in India. Production of non-coking coal at 294 mln ton during 2001-02 was 91 percent of the
total coal production of 328 mln ton. In 2004-05, the steel sector consumed about 8 mln ton of non-
coking coal, excluding thermal coal for captive power plants.

For the medium term it is estimated in the 11th Plan that the country may need to import 40-50 mln ton
of superior grade thermal coal by the end of the plan period. Thermal power stations on the Southern
and Western coasts can be competitive using imported coal and the countrys electricity requirement
justifies such import. This requires necessary port handling capacity and coast based power
generation capacity of around 12 to 15 MW to absorb the thermal coal imports.

Sponge iron grade non-coking coal


The sponge iron industry using non-coking coal as input material will play an important role in future as
a substitute input for coke. The capacity of sponge iron industry is set to increase from the current 13
mln ton to 20 mln ton by the end of 2010-11, at a growth rate of 6.5 percent per annum, and thereafter,
till 2020, grow to 38 mln ton. The current trends indicate that a large number of sponge iron based
steel units may come up in the states of Orissa and Jharkhand. By 2019-20 the steel industry will
demand around 26 mln ton of non-coking coal of higher grades.

3.1.5 Oil and Gas


India will remain dependent on crude oil imports. Fortunately, the demand for petroleum products has
grown at only 2.7% per annum in the first four years of the Tenth Plan. Consumption of petroleum
products is likely to rise from 112 mln ton in 2005-06 to about 135 mln ton by the end of the 11th Plan
with net crude oil imports reaching 110 mln ton. Gas consumption is forecast to rise to about 55 Million
Ton Oil Equivalent (MTOE) with imports reaching 20 MTOE unless the recent finds announced in the
Krishna Godavari basin actually start flowing in significant quantities by the terminal year of the 11th
Plan. This assumes that Naphtha based fertiliser production switches completely to gas by the end of
the 11th Plan. The scope for trans-national gas pipelines needs to be explored from a longer-term
perspective, but no pipelines are likely to become available for this level of gas import during the 11th
Plan. Thus LNG imports would need to rise to four times from the current level of 5 mln ton.

The most important policy issue in this sector relates to pricing petroleum products. The recent
increase in oil prices is now expected to persist for some years and although prices of some petroleum
products have been raised the increase still leaves a large uncovered gap. This gap is being borne
partly by the oil companies and partly by the issue of bonds by the government to the companies,
which is equivalent to a government subsidy. Other critical issues facing the oil and gas sector relate
to: (i) pricing of domestically produced natural gas and its allocation to the power and fertilizer industry;
(ii) strengthening upstream regulation in the oil and gas sector; and (iii) ensuring competition and open
access in the proposed pipeline transportation and distribution grid.

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In the longer run, the only viable policy to deal with high international oil prices is to rationalize the tax
burden on oil products over time, remove fat which may exist in existing pricing mechanisms which
give the oil companies an excessive margin, realize efficiency gains through competition at the refinery
gate and retail prices of petroleum products, and pass on the rest of the international oil price increase
to consumers, while compensating targeted groups below the poverty line as much as possible.

The current method of determining prices for petroleum products on the basis of import parity needs
reconsideration. India is deficient in crude oil but has developed surplus capacity in products. Product
price entitlement should therefore be based on export parity pricing, which would be much lower than
import parity. The 10% duty on products has been reduced to 7.5%, which is a step in the right
direction. There is a strong case for further reducing the duty on products to 5% to equate it with the
duty on crude.
The locations of the pertrochemical industries are shown in Figure 3-1

Figure 3-1 Petrochemical industry locations in India

source: mapsofindia.com

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As can be seen from Figure 3-1, ports have a vital role to play in Indias oil and gas imports as most of
the existing petrochemical complexes are coast based and are proposed to be expanded.

Although there has been some improvement in the port sector during the 10th Plan, this sector needs
major expansion and modernisation to support the growth rates envisages for the future. The 11th
Plan will develop ports and related infrastructure to bring them to international standards in turn
around time and clearing of import and export cargoes. Keeping in view the present trend, it is
estimated that the Indian Ports will have to handle cargo traffic of about 800 mln ton by 2012 as
compared to 520 mln ton handled in 2004-05. This requires substantial capacity increases at major
and minor ports.

Since adequate rail-road connectivity of ports with the hinterlands is of crucial importance, it would be
improved on priority basis. The government along with other shareholders such as Port Trusts and
major users intend development of common user facilities.

3.1.6 Fertiliser
India is the third largest producer and consumer of fertilizers in the world with close to 60 large size
plants in the country manufacturing a range of fertilizers. The most widely used fertilizers include
nitrogenous (N), phosphoric (P) and Potosi (K). Potosi fertilizer is not manufactured in India and is
imported. The installed capacity of fertilizer industry in the country is about 12 mln ton of nitrogen and
5.1 mln ton of phosphoric nutrients.

Urea (85% of N-fertilizer consumption) constitutes 58% of the total fertilizer consumption in the country
and Di-ammonium phosphate (DAP) accounts for approximately 66% of India's consumption of
phosphoric fertilizers.

The industry relies heavily on imports for its requirement of raw material. Hence any devaluation of the
rupee could inflate its import bill. Since the N-based fertilizers are protected by the retention price
system (so far), the increased costs will affect P and K fertilizer manufacturers.

Natural Gas is used both as fuel and as a feedstock and constitutes as much as 40% of variable cost
of manufacture. With increasing use of gas in other industries like power and petrochemicals, the
fertilizer industry is facing a shortage of gas. Between 1980 and 2000, the prices of gas have gone up
nine times, while the prices of urea have increased only three times.

Monsoon holds the key to the future prospects of the fertilizer industry. A good monsoon will spurt food
grains production and consequently the demand for fertilizers.

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Table 3-4 Nutrients consumption per Ha of arable land


Country Nutrients consumption per hectare of arable land

(kg)

South Korea 407

Japan 301

China 254

Bangladesh 156

Pakistan 135

India 98

Source: Equity Master, 2005

Table 3-4 shows that India has one of the lowest rates per hectare of arable land consumption of
nutrients. Urea demand is expected to reach 24 mln ton by 2007. At the current capacity levels of 20
mln ton, the demand supply gap is expected to be around 4 mln ton. Moreover, if new capacities are
not added, the gap is expected to mount to 9 mln ton. The above factors indicate a huge potential of
growth for the fertilizer industry.

The Long Term Fertilizer Policy announced by the government could have significant implications on
the fertilizer industry going forward. While, in the medium term, it encourages the switch over from
naphtha/fuel oil based units to gas based ones and creation of a regulator to allocate feedstock, over
the long term it plans to withdraw the setting of selling price and concession scheme.

Around 30% of India's fertilizer production, which is based on naphtha and fuel oil, could become
unviable, with the changes made in the new energy consumption norm. Only the gas-based units will
be able to survive the deregulated era. The likely closure of many naphtha and fuel oil based units
could disturb the demand supply position in the country and the Indian government may have to import
its urea requirements at higher costs.

Consumption of finished fertilizer products has risen modestly over the past 10 years, at an average
rate of 4% per year. Domestic production has risen faster than that, at over 6% per year, displacing
import requirements. The FAI estimates that over the period through 2011-12, domestic consumption
will rise by 3.7% per year, which is in line with the 11th Plan although the earlier years are expected to
grow faster than the later years.

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Figure 3-2 Consumption, production and imports of finished fertiliser 1996-2012

30,0

25,0
Consumption
Production
Imports
20,0
Million tonnes

15,0

10,0

Actual Forecast

5,0

0,0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: FAI, Delhi, July 2006 for actual through 2005-06 and consumption projection through 2011-12.

Consultants have estimated the domestic production on the basis of the current share of total
consumption to remain stable over the forecast period.

According to the 11th Plan targets for Fertiliser and Fertiliser raw materials imports, domestic
production is seen to grow more or less in line with demand and no longer outpace the growth in
demand.

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3.2 Industrial developments in Karnataka state

3.2.1 New Mangalore Ports Market

Captive Markets
Captive markets are by definition those market segments to a port in which shippers of goods are
more or less forced (by virtue of logistic principles) to use the port for their supply chain of goods. The
captive market determines the socalled catchment area in which cargo will be routed via the port in
general without hesitation.
The ports primary captive market and hinterland comprises of Mangalore, Dakshina Kannada (South
Canara) and Udupi and parts of Kodagu, Hassan, Chikmagalur and Shimoga districts in Karnataka
and part of northern Kerala.

Following major industries are located in Mangalore in the captive market / hinterland (with
commodities handled at New Mangalore Port as captive cargoes indicated against each).
These contribute over 75% of the cargo handled at NMP:
MRPL - Crude Oil (import) and POL products (export)
HPCL & Elf Gas - LPG (import)
Oil Marketing Companies like HPCL and IOCL - POL products (import)
KIOCL - Iron Ore pellets (export)
UltraTech Cement - Bulk Cement (import)
MCFL - Fertilizer Raw Materials (import)
Ruchi Soya - Edible Oil crude (import)
BPCL POL (import/export)

Non Captive Market


The non-captive market or secondary hinterland comprises of the rest of Karnataka (except Bidar
district and parts of Belgaum, Bijapur, Gulbarga and Raichur districts in the north and Kolar district in
the east) and parts of Kerala, Tamilnadu and Andhra Pradesh.

In this catchment area the odds to use always NMP are not so strong but still exist. Competitive ports
will also cater for this area whenever they can with marketing tools (tariffs, services) or with better
hinterland connectivity (roads/railways).
Significant cargo origins in this secondary area are the Sandur Chitradurga and Bellary Hospet
iron ore belts which contribute to the iron ore fines / lumps traffic through NMP. Industries such as
Mysore Paper Mills, Davangere Sugars, Iron & steel industries in Hassan, Harihar and Hospet account
for the coal traffic through NMP. Also significant is the Bangalore market where considerable
containers are generated and currently moved to Chennai and Cochin.

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Cargoes of the Non-captive hinterland are:


Iron Ore fines / lumps (export)
Coal (import)
Finished Fertilizers (import)
General / break bulk cargo (import / export)
Containers (import / export)

Figure 3-3 Market of New Mangalore Port

Source: consultants database

The above map illustrates both the primary (green) and secondary (grey/blue) hinterland of NMP
showing locations of various mineral cargo origins and road and rail network connectivity to the
port.The yellow part is indicates the rest of Karnataka state
The port is connected to its hinterland through National Highways network through NH 17, 48 and 13
and to the Indian Railway network through the Konkan railway connecting the port to coastal
Karnataka, Goa and Maharashtra and through south western railways Hassan - Mangalore (BG line
commissioned in May 2006) to Mysore, Bangalore and beyond.

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3.2.2 Karnataka State economy


Karnataka, situated in South West India, is one of the leading States in the country in terms of
economic development. It is the eighth largest State in terms of both Geographical area (192,000 sq.
km) and Population (5.27 crore - 2001 Census).

The State's GDP at constant prices (2002-03) at Rs 72,399 Cr accounts for 5.5 per cent of the national
GDP. The State has witnessed a healthy 6.5 per cent Compounded Annual Growth Rate (CARG) in
the GSDP for the ten year period 1994-2003, being the highest among the leading States in the
country.

Figure 3-4 GSDP Growth Rate of Karnataka

10.09 Gross State Domestic Product


7.81
% 6.21
5.26

2.50

2000-01 2001-02 2002-03 2003-04 2004-05

Source: Centre for Monitoring Indian Economy (CMIE) Report on Karnataka

The State is largely service oriented and income from this sector contributes to half the State's GDP
with the agricultural and the industrial sectors contributing nearly 25% each. The major manufacturing
oriented industries in the State include Sugar, Paper and Cement industries.
In the service sector, Karnataka leads the Indian biotechnology industry. Bangalore, the silicone valley
of India and its suburbs is home to the Information Technology (IT) / Information Technology Enabled
Services (ITES) industry in the State.
In the agricultural sector, the main crops are rice, ragi, jowar, maize, and pulses besides oilseeds and
number of cash crops. Coffee is the principal plantation crop. Cashew, coconut, arecanut, cardamom,
chilies, cotton, sugarcane and tobacco are among the other crops.
On the industrial front, Karnataka is one of the leading states with industrial development both in the
private and public sectors. Bangalore is known for a number of industries like Bharat Electronics Ltd
(BEL), Bharat Earth Movers Ltd (BEML), Hindustan Machine Tools (HMT), Bharat Heavy Electricals
Ltd (BHEL), making it an important industrial city. Bangalore is also one of the major centers for
electronic appliances industry apart from computer software.

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Karnataka aims to achieve an overall economic growth rate of 8% to 9% over the next decade by
promoting the rapid growth of a market driven, knowledge based, efficient and competitive industrial
sector. The states industrial policy aims to achieve an average industrial growth rate of 10% to 12%
per year.

The following major developments are expected to promote growth in traffic through NMP
Expansion of refinery capacity by MRPL to 15 mln ton by 2009-10
Development of a petrochemical complex by MRPL
Development of Mangalore SEZ
Industrial Complex by Suzlon Energy

Commissioning of broad gauge rail for freight movement between Mangalore and Bangalore via
Hassan in May 2006 has improved traffic prospects Karnataka has identified four Growth Corridors,
which are as under:

Table 3-5 Industrial Growth Corridors in Karnataka


Growth Corridor Industrial Sectors

Hubli Belgaum Precision Engineering, Auto Components, Agro-Food Processing, Textiles and ITES

Raichur Bellary Steel, Cement, Power, Mining, Agro-Food Processing and Textiles

Mangalore Karwar Petrochemicals, Steel, Power, Port Based Industries, Seafood and Export Oriented Industries

IT Software & Hardware, Electronics, Biotech, Automobile, Food Processing, Floriculture and
Bangalore Mysore
R&D Centers

Source: Centre for Monitoring Indian Economy (CMIE) Report on Karnataka

3.2.3 Industries significant to New Mangalore Port

Mining

Iron ore

Karnataka produced around 37 mln ton of iron ore in 2005-06 a share of about 24% of total Indian
production. Karnataka has iron ore deposits in Hubli, Bijapur, Bellary, Chitradurg, Tumkur and
Chikmagalur districts and exports around 30 mln ton iron ore through various ports. Of the above
districts, Bellary occupies a prime place as the mines in this belt are connected to Visakhapatnam,
Kakinada and Chennai ports on the east coast and Mormugao and New Mangalore ports on the west
coast. The Bellary-Hospet Belt is blessed with reserves of high quality iron ore deposits to the tune of
1000 mln ton, which can be mined.

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A major exporter of this commodity over the years through New Mangalore port is Kudremukh Iron Ore
Company Limited (KIOCL). KIOCL produces and exports concentrates and pellets, which amounted to
3.45 mln ton in 2005-06.

Table 3-6 Production of Pellets and Concentrates by KIOCL ( million ton)


2005-06 2006-07
Item 2002-03 Actual 2003-04 Actual 2004-05 Actual
Estimated Projected

Concentrate 5.532 5.090 4.350 3.300 -------

Pellets 3.450 3.671 3.795 3.200 3.200

Source: Ministry of Steel, GoI

Other ores
Production of Manganese ores was in the region of 0.4 mln ton, a share of nearly 18% of national
production. Dolomite production reached 0.3 mln ton per annum, a mere 7% of Indias total production.
Bauxite production is confined to a couple of locations was only 40,000 ton; other than these minerals
only silica sand was produced (110,000 ton).

Energy
The energy sector comprises oil (petroleum), coal and electricity

Oil (petroleum)
Karnataka accounts for around 9% of Indian crude oil throughput. The state has (as part of ONGC) a
refinery (MRPL) at Mangalore with present design capacity of around 9 mllion ton of oil products (POL)
per annum but actually produces more.
The crude throughput at the refinery since 2001-02 has doubled as can be seen from the table given
here under:

Table 3-7 Crude Throughput at MRPL Over last 5 years


Year 2001-02 2002-03 2003-04 2004-05 2005-06

Crude Throughput (million ton) 5.5 7.3 10.1 11.8 12.0

Source: MRPL / ONGC

MRPL will increase the refining capacity of MRPL from the current level of 12 to 15 MMTPA by 2009-
10. MRPL has licence to retail petrol and diesel and have also applied for direct / bulk sale of LPG and
kerosene through public and non-public distribution systems.

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In terms of cargo volumes for NMPT, the import of crude will increase to 15 million ton on expansion of
the refinery capacity. Correspondingly POL products exports to overseas destinations would be in the
region of about 9 million ton. MRPL also has plans to produce around 1 million ton of LPG for the
domestic market from 2009-10 which means the current imports by HPCL may accordingly get
reduced to that extent as discussed in greater detail under section 4.3.2. In addition to above it is also
proposed to produce for the domestic market pet coke to the tune of 1 million ton.

ONGC has plans for mega projects in power, petrochemicals and LNG at Mangalore and plans to
invest through its subsidiary MRPL in the proposed Mangalore SEZ (MSEZ) which will be spread over
3800 acres east of the existing refinery. The MSEZ which is likely to materialize in 2009-10 would also
have a 160-acre corridor to connect to the port.

The proposed petrochemical complex will be in the proposed MSEZ. Products of significance from the
complex are paraxylene and benzene with export volumes of about 1 million ton and 0.15 million ton
respectively when the complex is commissioned. Downstream units which may come up 4-5 years
later may produce about 0.9 million ton of polypropylene and 0.75 million ton of polyethylene per
annum for the export market.

In addition, at the port end of the SEZ, 140 acres of land is planned for mega storage tanks for LNG
behind a proposed LNG import terminal at the port and necessary gasification plant for production of
methane, ethane, propane and butane. Also proposed is an LNG power plant close to the gasification
plant. In terms of volumes the indications are that it could be in the region of 10 million ton of LNG

Coking Coal
Karnataka does not have coal reserves and has to depend on neighbouring states, such as Andhra
Pradesh, for its requirement of coal. Coking Coal import through New Mangalore port was around 0.5
million ton in 2005-06.

Electrical Power
Karnataka has a power generating capacity of around 6,000 MW and generated 22.58 billion KWh
units in 2005-06. The contribution between thermal power and hydro power plants is 50% each. Of the
total demand, Karnataka imports about 1/3rd of its requirement from other states. In terms of power
availability the State ranks sixth in India (behind Maharashtra, Gujarat, Andhra Pradesh, Tamilnadu
and Uttar Pradesh).

The main producer of thermal power is the public sector Karnataka Power Corporation Ltd (KPCL)
(83%) almost entirely from their 1470 MW Raichur Thermal Power Station while private producers who
contribute the remaining 17%. Thermal coal required by KPCL is sourced almost domestically. A 500
MW power plant is planned at Bellary but again coal will be sourced from domestic mines including its
own mines that KPCL plans to have.

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The Nagarjuna Power Corporation Limited (NPCL) has plans to set up a 1,015 MW (2 x 507.5) coal
based thermal power plant near Padubidri at Mangalore which is expected to come up by 2009-10.
The coal for the proposed plant is expected to be imported from Australia through NMPT and coal
imports are expected to be in the region of 3.0 million ton.

The GoI furthermore proposes to set up 4,000 MW Coal Based Thermal Power Project at Tadadi in
Kumta taluk of Uttara Kannada District, about 200 kms north of New Mangalore Port. Coal for this
plant is proposed to be imported from China, Australia and Indonesia. The project proposed includes
captive jetty at Tadadi for the coal imports and hence this project may not yield any cargo for NMPT
because it will be handled at the captive jetty.

The projected traffic of import of thermal coal on account of the NPCL project would be 3 million ton
from 2009-10 and is included in the projections under section 4.3.5 (Projected cargo throughput 2006-
13).

Fertilizers
Karnataka has a Gross Cropped Area (GCA) of around 12 million Hectares of which about 25% is
under irrigation. Foodgrain production is in the region of 7 billion ton. Fertilizer consumption is in the
order of 95 kgs per hectare. The annual demand a little over a million ton.

The Mangalore Chemicals and Fertilizers Limited (MCFL) is the only manufacturer of chemical
fertilizers in the state of Karnataka and its factory is strategically located at Panambur, in front of the
New Mangalore Port. The plant has capacity to manufacture 217,800 mt of ammonia and 380,000 mt
of urea annually.

The plant imports phosphoric acid, liquid ammonia and naphtha as feedstock through the New
Mangalore Port and the volumes are 0.2 million ton, 0.06 million ton and 0.175 million ton per annum
respectively totalling 0.435 million ton.

Though there are no major expansion plans at MCFL, the traffic is likely to increase to 0.58 million ton
by 2009-10 according to MCFL and the same has been taken into account in the traffic projections
under Section 4.

Cement
India has a low per capita consumption of cement of only 110 kg against the global average of 260 kg
at present and has enormous potential for growth. The GoI thrust on infrastructure development and
strong growth in the housing sector is expected. The outlook for the industry is expected to grow over
8 % during 2006-07. Some estimates peg the growth at 12% per annum over the next 5 years.

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Karnataka produced 9.976 million ton of cement in 2005-06 and is the 7th largest producer of cement
in the country. In terms of consumption, the state consumed 9.382 million ton and ranks 6th in the
country. The production increase over the past 5 years showed the following:

Table 3-8 Production of Cement in Karnataka over the last 5 years


Year 2001-02 2002-03 2003-04 2004-05 2005-06

Production (million ton) 6.765 8.093 9.277 9.518 9.976

Source: CMIE report on Karnataka

The state has 5 cement plants :as shown in Table 3-9 below

Table 3-9 Cement Plants in Karnataka and their production in 2005-06


Company Plant location District Production in 2005-06

(x mln ton)

Associated Cement Co Ltd Wadi Gulbarga 4.409

Bagalkot Udyog Ltd Bagalkot Bijapur 0.108

Grasim Industries Ltd Malkhed Gulbarga 2.948

Kesoram Industries Ltd Sedam Gulbarga 2.076

Mysore Cements Ltd Ammasandra Tumkur 0.435

Source: CMIE report on Karnataka

UltraTech Cement manufactures various types of cement and has a total production capacity of 17
million ton per annum. Cement is manufactured in various plants throughout the country.
The firm has a packing terminal at Mangalore, next to the NMPT.

Traffic of cement at New Mangalore port is mainly on account of UltraTech which has captive facilities
installed at the port.

UltraTech Cement is the country's largest exporter of cement and clinker exporting over 3 million ton
per annum (about 47% of the country's total exports) to countries in the Indian Ocean, Africa, Europe
and the Middle East. Europe and UAE.

The firm proposes to increase the import of bulk cement through NMPT to around 400,000 ton by
2009-10 from the current level of 250,000 300,000 ton per annum.

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3.2.4 Competing Ports


The port of New Mangalore faces competition from different angles:

Within the State of Karnataka there are 9 minor ports. Of these nine ports, Belekere, Karwar, Old
Mangalore and Malpe Ports have cargo traffic. The minor ports handled a total volume of 1.03 mln ton
in 2005-06. As a comparison, the total cargo throughput at Karnataka Ports in 2005-06 including New
Mangalore Port (97.1%) was 35.48 mln ton.

Figure 3-5 Competing ports for New Mangalore Port

Malpe

source: consultants database

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Traffic at Karnatakas minor ports since 2001-02 is shown in Figure 3-6

Figure 3-6 Growth of traffic at Karnataka Minor Ports

3.209

million T

1.168
1.029
0.676 0.747

2001-02 2002-03 2003-04 2004-05 2005-06

source: CMIE and IPA

The incidental boom observed in 2004-05 in exports of iron ore to China caused a surge in the traffic
handled at Karnataka minor ports as seen Figure 3-6. To meet the high demand experienced in 2004-
05, exporters were using every port available to them. This resulted in a high growth in that year at
Karwar too, which handled export traffic of 2.4 million ton in 2004-05 as against 0.87 million ton in
2003-04. Once the exports stabilized, the traffic at Karwar fell to 0.422 million ton in 2005-06.
Belekere, with a throughput of 588,000 ton in 2005-06, handles only export of iron ore and has two
mechanised ore handling chutes and a transit shed.
Karwar with 2 berths, crane & pay loaders and transit sheds & liquid cargo tanks is also primarily an
export handling port for granite, molasses, maize, aluminium trihydrate besides iron ore. The port is
also used for import of palm oil, rock phosphate, raw sugar and petroleum products like furnace oil,
kerosene and bitumen. The total imports in 2005-06 were in the region of only 31,000 ton out of a total
throughput of 422,000 ton handled at Karwar port. The incidental surge in traffic observed in 2004-05
(see Figure 3-6) was caused by the boom in exports to China. Exporters were using every port
available. Like most ore handling ports, Karwar too handled a high traffic of 2.4 million ton in 2004-05.
Old Mangalore port located south of the New Mangalore port has five wharves, a crane and open yard
and is used for export of cement, granite, river sand and petrol and import of copra, sodium carbonate
and fish. The throughput in 2005-06 was 16,000 ton almost all of which was export.
Malpe port has one wooden jetty, a shed and stacking platform is used for export of silica sand to the
tune of 2,000 ton.

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New Mangalore port does not have any serious threat of competition from any of these ports, with a
mere 1.03 mln ton of throughput in 2005-06. The only minor competition that can be expected in future
is from Belekere port where Adani group has entered into a contract in the current year with the
Govt.of Karnataka for cargo operations. Belekere is closer to the Bellary-Hospet iron ore mine by
about 250 km than NMP. But the loading is at present only possible by barge movement to anchorage
where bulk carriers can be loaded. Any major development in handling improvement is not expected
before 2013.
A captive facility at Tadadi, 200 km north of Mangalore, is expected to come up for handling thermal
coal for the proposed 4,000 MW thermal plant by GoI at Tadadi. This is unlikely to come up before
2012-13. When it does, over 5 million ton of thermal coal will be handled
Other than from Karnataka based ports, NMPT faces more serious competition from the nearest Major
ports of Cochin on the south and Mormugao on the north. While Mormugao is a major iron ore exports
handling port, Cochin mainly handles liquid bulk for the Cochin Refinery. New Mangalore shares a
common origin of iron ore fines & lumps with Mormugao, Chennai, Kakinada for ore originating from
the BellaryHospet belt.
Cochin is developing as a major Container transhipment hub and has been able to successfully attract
coffee as cargo from Bangalore and Kodagu, located in the main coffee producing area of Karnataka.
With the Mangalore Hassan rail route opened for freight traffic after gauge conversion of the railway
line from Meter Gauge (MG) to Broad Gauge (BG) and with more and more shipping lines beginning to
call at NMPT, prospects of diversion of coffee exports through NMPT have brightened,
notwithstanding the fact that NMPT would be a feeder port and Cochin performs as major
transshipment hub.

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4. TRAFFIC FORECASTS

4.1 The Position of New Mangalore


In 2004-05, out of 520 million ton traffic at Indian ports, 383 million ton was at the Major Ports i.e., a
share of 74%. Of the 383 million ton traffic at major ports, NMPT had a share of 8.83% achieving a
throughput of 33.89 million ton. In the XIth Five Year Plan (for the period 2007-12) of the GoI projected
a total traffic of 800 million ton in 2012-13 for all Indian ports that include Major Ports and Non-major
ports.

Under the National Maritime Development Programme (NMDP) of the Government of India, the
commodity-wise traffic projected for 2011-12 and the share of major ports of the total projected traffic
for Indian ports is presented in Table 4-1.

Table 4-1 Commodity wise traffic of the Indian Ports (mln ton)
Commodity Existing traffic in Projected traffic Compounded Annual Share of Major Ports versus
all Ports 2004-05 2011-12 Growth Rate (CAGR) projected traffic 2011-12

POL 195.58 290.00 5.79% 183.50 63%

Container 58.12 150.40 14.15% 140.40 93%

(TEUs x 1000) ( 4,500) (12,500) 15.71% (11,700)

Iron Ore 97.35 121.50 3.22% 87.50 72%

Coal 65.12 148.00 12.44% 103.50 70%

Other Cargo 105.41 166.80 8.77% 100.80 60%

Total 521.58 876.70 7.70% 615.70 70%

Source: Ministry of Shipping, GoI

The NMDP projections in Table 4-1 indicate that the total traffic at all the Indian ports (both major and
minor ports) would grow to 876.70 mln ton by 2011-12, which means a growth (CAGR) of 7.7% from
the 521.58 mln ton handled in 2004-05. The major ports are expected to handle total traffic of 615.7
mln ton (col.5) that amounts to 70% (col.6) of the traffic projected for all the Indian ports. From the
commodity-wise traffic projected it would be seen that containers are slated to grow fastest at a CAGR
of almost 16% in TEU terms. The major ports are expected to handle 93% of the projected container
traffic for all ports. The minor ports current share of 25-26% of total Indian ports traffic is expected to
rise to 30% by 2011-12. The minor ports are expected to handle nearly 40% share of POL and general
cargo traffic of the Indian ports by 2011-12. Projects in each of the 12 major ports under NMDP are
planned to meet the projected commodity wise traffic demand at each port by 2013-14. Table 4-2
shows the projected traffic by 2013-14 at NMPT under the NMDP.

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The commodity wise break up of the projection for New Mangalore under the NMDP is as under:

Table 4-2 Commidity wise projected traffic for New Mangalore port in 2013-14 under NMDP
Commodity X mln tons

POL Crude 15.00

POL Products 6.20

LNG 5.00

Iron Ore 8.50

Non Coking Coal 3.00

Coking Coal 1.90

Fertilizers 0.50

Containers 0.36

Steel Products 0.30

Chemicals & other liquids 1.00

General cargo 1.24

Total 43.00

Source: Ministry of Shipping, Govt. of India

4.2 Origin-Destination (OD) Analysis


New Mangalore Port is a bulk handling port that handles Liquid Bulk (67%) and Dry Bulk (29%). In
2005-06 exports were to the tune of 17.9 million ton and imports 16.5 million ton. This section traces
the domestic origins and overseas destinations for export cargoes and overseas origins and domestic
destinations of import cargoes to understand the movement pattern through the port and also the
trends. Accordingly major commodities are analyzed.

On the import side, the Middle East accounts for two-thirds of all imports. Over 80% of imports from
the Middle East relate to Crude Oil, LPG and petroleum products account for almost all of the
remaining 20%. Only a small portion of Fertiliser is imported from the Middle East as well. South East
Asia accounts for around 5% of all imports. India is the next biggest region for imports, accounting for
nearly a quarter of the imports. Here too, the imports relate for a very large share (75%) to Crude Oil.
Both the imports from the Middle East and India have risen fast in the past five years. Middle East
imports have doubled from around 5 Mln t to 10 Mln t, while imports from India have nearly tripled from
1.4 Mln t to 4 Mln t in 2005-06.

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Figure 4-1 NMPT imports by origin 2001-02/2005-06, 000 t

18000

16000

14000

12000 India
Other
'000 ton

10000 Far East/SE Asia


Australia
8000 Africa
Middle East
6000 W. Hemisphere

4000

2000

0
2001-02 2002-03 2003-04 2004-05 2005-06

Source: NMPT

Exports have more than doubled in the past six years from 8 mln ton to over 18 mln ton. China alone
has accounted for half this growth. Exports to other countries in Asia have quadrupled, from just below
1 Mln t in 2001-02 to nearly 4 Mln t in 2005-06. This is predominantly POL to Singapore, reflecting the
export side of the imports of Crude Oil and hence the refinery activity.

Domestic exports have been relatively static over the years, amounting to 3-4 Mln t per year. In 2005-
06 2.6 Mln t of these exports were POL products and nearly 1 Mln t Iron Ore pellets.

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Figure 4-2 NMPT exports by destination 2001-02/2005-06, 000 t

20000

18000

16000

14000
India
12000 China
'000 ton

Japan
10000 Other Asia
Middle East
8000 Europe
Other
6000

4000

2000

0
2001-02 2002-03 2003-04 2004-05 2005-06

Source : NMPT

4.2.1 Iron ore


Iron ore exports through NMP comprise iron ore pellets and iron ore fines. While the pellets are
exported by KIOCL who have captive facilities at the port, fines are exported by private mine owners in
Karnataka.

Major origins of iron ore fines exported through New Mangalore are Hospet-Bellary belt and Sasnur-
Chitradurg belt in Karnataka and the prime destination countries are Japan and China.

Since Dec 2005, KIOCL have suspended their mining activity in the absence of extension of lease as
a result of litigation and hence are sourcing the ore from NMDC who have their mines in Donimalai in
Karnataka and the Bailadila belt in Chhattisgarh. Ore from Bailadilla is brought by sea and routed
through Visakhapatnam and New Mangalore ports. (See Figure 4-3)

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Figure 4-3 Coastal sea movement of iron ore from Bailadilla to New Mangalore Port

Source: consultantsdata base

While exports to Japan through New Mangalore port has been declining, exports to China has grown
by nearly 350%. This has been as a result of the booming steel industry in China. The trend is likely to
continue as is evident from the fact that China has emerged in 2006 as the largest exporter of steel in
the world overtaking Japan as can be seen from the trends in Figure 4-4 and Figure 4-5

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Figure 4-4 Growth of exports of Iron Ore to China during 2002-06

in '000 T 5941 6271

2558
1831

2002-03 2003-04 2004-05 2005-06

China

Source: NMPT

Figure 4-5 Growth of exports of Iron Ore to Japan during 2002-06

547 555 in '000T

284

141

2002-03 2003-04 2004-05 2005-06

Japan

Source: NMPT

While vessels used for export of fines and pellets are of 70,000 DWT, smaller vessels of 30,000-
50,000 DWT vessels are used for import of fines from Bailadila.

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4.2.2 POL Products


Export of POL products through NMP originating in Mangalore is to the tune of 8.4 million ton currently
of which 2.89 million ton is to Singapore followed by 0.47 million ton to the UAE among foreign
destinations and 2.65 million ton to Indian ports on the coastal trade. Furnace oil and High speed
Diesel Oil are the major products constituting almost 50% of the total product exports. The parcel sizes
vary from 25,000 ton to 88,000 ton and the average parcel size is around 32,000 ton. The exports are
expected to increase by at least 50% over the next 7 years.

4.2.3 Iron & Steel


Another export commodity of some significance is iron & steel. Kudremukh Iron and Steel Co.
(KISCO), engaged in manufacturing of Pig Iron is one of the exporters of this commodity. KISCO unit
is also located in Mangalore close to the KIOCL plant and the port. The main destination for this
commodity is the western Indian region that includes importers like Ispat Industries and Vikram Ispat.
This is more a coastal cargo than an EXIM cargo. However there have been exports to China and
Taiwan until 2004-05.

The trend observed in the growth of this cargo is as in the following Figure 4-6.

Figure 4-6 Growth of coastal sea movement of iron & steel during 2002-06

'000 T iron & steel 954


622 704
516

2002-03 2003-04 2004-05 2005-06


indian ports

Source NMPT

4.2.4 Liquid Bulk - Crude Oil, POL products, LPG


Of the import commodities, crude oil for MRPL refinery at Mangalore is the major commodity. This is
sourced primarily from Iran and other Middle East countries like Saudi Arabia and UAE and also from
indigenous source mainly from ONGCs off shore location at Bombay High off the Mumbai coast. POL
products are mostly from other Indian ports i.e., coastal sea movements. LPG is imported in bulk by
HPCL for bottling and distribution in Karnataka to the tune 1.2 million ton of which 70% is from
overseas origins and 30% from Indian origins. The imports are from Middle East mainly from Saudi
Arabia, UAE and Kuwait. Liquid Bulk imports from various origins and the growth trend observed
during 2002-06 can be seen from Figure 4-7 and Figure 4-8 hereafter.

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Figure 4-7 Growth of imports of Liquid Bulk from overseas origins during 2002-06
6661
in '000 T
5786
5079 5203

2880
2610
2360

1008 1036
427 521
266

2002-03 2003-04 2004-05 2005-06

Iran Saudi Arabia UAE

Source: NMPT

Figure 4-8 Growth of coastal sea movement of Liquid Bulk imports during 2002-06
in '000 T
crude from indian ports 3748
3603

2347

883

2002-03 2003-04 2004-05 2005-06

Source: NMPT

Coking coal
Another import commodity of importance is coking coal for end users such as Mysore paper mills,
Davangere sugars and steel plants like KISCO. The major origins of import of this cargo through New
Mangalore are Indonesia and China. But for a deep slump in 2003-04 understood to be due to

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temporary shifting of some of the imports for Mysore Paper Mills to Chennai, the imports through New
Mangalore have been on the rise. While imports from Indonesia have steadily grown, it has been more
or less a steady flow of 0.18 to 0.19 million ton a year from China as can be observed from the Figure
4-9. The trend indicates imports would be more from Indonesia in future.

Figure 4-9 Growth of Coking Coal imports during 2002-06


in '000 T
198

186 191
180
111

46 93

2002-03 2003-04 2004-05 2005-06

China Indonesia

Source: NMPT

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4.3 Projected Cargo Throughput 2006-2013

4.3.1 Approach & Methodology


Cargo projections can be made through trend analysis where non-captive cargoes are concerned and
carrying out hinterland analysis & market surveys where captive cargoes are involved. The former is a
method in which the past trend in growth of traffic over a period of 5-10 years is observed and based
on the same the future traffic is projected. Though this method is based on actual traffic handled, the
projections may not reflect reality as the past is never a replica of the future. The latter approach, i.e.
hinterland and capacity analysis, is more specific to an existing port/facility and is based on future
plans of current users and industrial / commercial developments in the ports hinterland. It is therefore
used when the growth of future captive traffic through a particular port/facility is estimated. The
projections sometimes may suffer from over- or underestimation as a result of users either giving
grandiose plans which they may not actually achieve or withhold information for business reasons.
In the case of New Mangalore Port, consultants have adopted a mix of both the above methods i.e., a
greater emphasis on the former for general/break-bulk cargoes and containers where number of small
users contribute to the total volumes handled at the port and a greater emphasis on the latter in the
case of bulk cargoes where a limited number of users contributes to large volumes.

Consultants met and held interviews which included major industries in the region, exporters,
importers, freight forwarders etc.
As the cargoes handled largely pertain to overseas export & imports, it is necessary to observe what
the global growth trends are for various cargoes and the factors that drive them. It is also necessary to
look at national trends that indicate growth of commodity wise traffic through Indian ports. The impact
of these trends with respect to specific ports such as New Mangalore Port is evaluated.
The following major cargo groups important to New Mangalore Port are analyzed below
Liquid products: crude, POL, chemicals, vegetable oils
Dry bulk cargoes: Iron ore, coal, fertiliser, cement
General cargo/break bulk cargo
Containers

4.3.2 Liquid products: crude, POL, chemicals, vegetable oils

Crude oil and oil products


MRPL imports around 12 million ton of crude per annum of which 3 million ton is from ONGCs
Bombay, through coastal movement. The remaining 9 million ton is supplied from the Middle East.
Exports of POL arrived to 6 million ton (Furnace Oil and High Speed Diesel Oil taking nearly 50%) and
around 2.5 million ton is shipped to other destinations in India by coastal shipment.
Discussions with the above users of the port have revealed that:

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MRPL will continue to import about 12.2 million ton of crude till their refinery expansion takes
place by 2009-10 and their product exports will also remain around the current level of 8.5
million ton until 2009-10
MRPL will increase their rated refining capacity to 15 million ton by 2009-10
Crude imports will correspondingly increase to 15 million ton by 2009-10 and increase
gradually by about 1 million ton every year to reach about 17 million ton by 2012-13
On expansion of refining capacity by 2009-10, MRPL will produce 14 million ton of POL
products of which 9 million ton will be exported to overseas destinations. Of the remaining 5
million ton, 2.5 will be to meet local demand, 1.5 by pipeline to Bangalore via Hassan and 1
million will be LPG for domestic consumption in Karnataka
POL product imports by oil marketing companies such as HPCL comprise of coastal
movement to the extent of 2/3rd of volumes and the remaining 1/3rd being overseas imports.
The trend is likely to continue with the volumes increasing by about 0.3 million ton over the
next 7 years

LPG
LPG production and distribution by MRPL will take place by 2010-11 replacing imports. However, as
the demand would exceed supplies from MRPL, imports would continue though in reduced quantities.
Thus the downward trend in LPG imports from 2010/11.

HPCL imports around 1 million ton of LPG for bottling & retail sale. The other importer of LPG is Elfgas
India Ltd. who import around 100,000 ton a year.
LPG imports by HPCL will continue over the next 7 years with volumes increasing by 10% by
2009-10 and by 15% by 2012-13 as revealed by HPCL during discussions with them. Elfgas
also indicated an increase of 15% of their traffic from 2007-08 on addition of 1,500 ton to their
present storage capacity of 7,500 ton. In terms of import volumes it will go up from the current
0.1 million ton to about 0.12 million ton. However, when MRPL starts producing and supplying
to the domestic market 1.0 million ton of LPG from 2009-10, the import of this item by HPCL
and Elfgas may be only to the tune of 0.3 million ton, the expected increase in demand (i.e.,
market demand MRPL supply gap)

LNG
The establishment of the MSEZ includes a LNG terminal including 4 mega storage facilities over 70
acres, a gasification plant over another 70 acre to produce methane, ethane, propane and butane.
These facilities will be preferably built in the port premises. While the NMDP expect the plant to be
completed by 2010/11, the consultants believe that such a mega-project will take much longer than 3/4
years and have therefore not taken any import flow volume of LNG in their forecast for the planning
period but in the long term. The first stage in the NMDP plan shows an import volume of 2.5 mln ts. In
the second phase 5 mln t of LNG is foreseen.

Overall, the prospective factors for the Crude oil/POL flow forecast (see Table 4-3) are:

MRPL expansion of refining capacity takes place by 2010-11 instead 2009-10 as planned;
OIL product imports will grow by 0.25 million ton over the next 7 years;

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LPG production and distribution by MRPL replacing imports will take place in 2010-11;
LNG will not come on stream prior 2012/13.

Table 4-3 Forecast of Crude and POL Products traffic through NMPT (in million tons)
Crude oil/POL (x mln ton) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Crude Oil import 12.20 12.20 12.20 12.20 15.00 16.00 17.00

Product import 0.60 0.60 0.65 0.70 0.75 0.80 0.85

Product export 8.50 8.50 8.50 8.50 9.00 10.00 11.00

LPG import 1.20 1.25 1.30 1.35 0.35 0.40 0.45

Total 22.50 22.55 22.65 22.75 25.10 27.20 29.30

Average parcel size for crude is 75,000 ton; product export is 35,000 ton, product import 10,000 ton and LPG 15,000 ton

Edible oils
It is believed that the Govt. will be cautious regarding any significant increase in the import of edible
oil. The quantity of 330,000 ton imported in 2005-06 may not increase substantially. An increase of 5-
6% is estimated.

The traffic of crude edible oil is around 280,000 ton and the balance 0.05 million ton being finished
product. The throughput is expected to grow at about 5% per annum (see Table 4-4).

Table 4-4 Forecast of Edible Oil imports through NMPT (in million tons)
(x mln ton) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Edible Oil 0.34 0.36 0.38 0.39 0.41 0.43 0.45

4.3.3 Dry bulk cargoes


The consultants have concentrated on 4 main commodities that form the bulk of the cargo throughput
that NMP is currently handling. The main dry bulk commodities are: iron ore (fines, concentrates and
pellets), coal (thermal and steam), fertilizers and cement.

Iron Ore
Global trend: A review of the iron ore trade for 2003-05 indicates that China with its rapidly growing
steel production was the engine of world iron ore demand with the country importing 275 million ton in
2005. The first half of year 2006 saw an import of 161 million tons, up 23% year-on-year and more
than in all of 2003. Main sources of Chinese imports are Australia (60 million ton in first half 2006),
India (40 million tons) and Brazil (36 million tons).

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World production of iron ore in 2005 has increased by 10% to reach 1,100 million tons. International
iron ore trade also reached record levels at 580 million tons. Production increased in almost all major
producing countries. Brazil is the largest producer at 245 million ton and Australia remains the second
largest producer and the largest exporter. In 2005 Australia exported 239 million ton (up from 186
million ton in 2003) and Brazil 224 million ton (up from 175 million ton in 2003).
The rise of the Chinese steel industry to become the largest exporter of steel reflects a trend that will
continue to see growing Chinese demand for iron ore. Chinas steel output as estimated by Macquarie
Bank is expected to grow from 349 million ton in 2005 to 560 million ton in 2010 (or nearly 37% of
world demand) (see Table 4-5).

Table 4-5 Top exporters of steel in first half of 2006 (x million tons)
st st
Top Steel Exporters 1 half of 2006 1 half of 2005 % difference

1 China 18.9 15.5 (4) + 22%

2 EU25 16.9 16.1 (3) + 05%

3 Japan 16.6 16.8 (1) - 01%

4 Russia 15.6 16.4 (2) - 05%

5 Ukraine 15.1 13.4 (5) + 13%

Source: Iron and Steel statistical Bureau (ISSB)

Indian exports of iron ore to China are hence expected to continue to grow, though after 2009-2010
the pace may reduce due to new investments in steel industries in India increasing the domestic
demand for iron ore.

Chinese companies such Bau Steel and Capital steel are also looking at investment in India for steel
manufacture. However, consultants are doubtful whether these will materialize since recent trends has
seen the denial of security clearances for Chinese investments in sea ports, construction, electronics
and other industries (e.g. Hutchison, Huawei).

National trend: As discussed under 3.2.4 in the previous chapter, the in-situ reserves at present of
relatively rich iron ore in India are 11.43 billion ton of haematite and 10.68 billion ton of magnetite ores.
Though the reserves of haematite ore appear to be large, high-grade lumpy reserves constitute only
8.7% of the total. Further, the present commercial mining capacity for iron ore is only 175 million tons.
Production of iron ore in 2004-05 was 145 million tons, of which 54 million ton was domestically
consumed. In order to ensure availability of 190 million ton of iron ore estimated as required for
domestic production of steel by 2019-20, Government is encouraging investments in creation of an
additional modern mining and beneficiation capacity of 200 million ton.

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After remaining stagnant at around 35 million ton for about a decade (between 1991-92 to 1999-2000),
exports of iron ore from India have grown in the last 5 years to 79 million ton in 2005-06 on the back of
large exports of iron ore fines to China. Exports may continue to grow over the next 5-7 years but the
pace may come down after 2009-10 as investments are made into beneficiation, sintering and
pelletization in the country, which will use these fines and concentrates which make up about 90% of
Indian iron ore exports currently.

Karnataka has iron ore deposits in Hubli, Bijapur, Bellary, Chitradurg, Tumkur and Chikmagalur
districts. The Bellary-Hospet Belt has reserves of high quality iron ore deposits to the tune of 1 billion
tons, which can be mined and accounts for about a third of Indian exports and the same is likely to
continue over the next 5-7 years. This belt exports around 30 million ton of iron ore through various
ports viz., Chennai (35%), New Mangalore (20%), Visakhapatnam (15%), and the rest through
Kakinada, Krishnapatnam, Mormugao, Karwar and Belekere.

The major exporter of this commodity over the years through New Mangalore port has been KIOCL.
KIOCL produces and exports concentrates and pellets. As a result of stoppage of ore extraction from
its captive mines at Kudremukh on expiry of its mining lease in December 2005 and non renewal of
same the quantity exported by KIOCL came down to 3.45 million ton in 2005-06. In the current year
experiments are in operation with Bailadila deliveries via coastal shipments form Visakapatnam. This
experiment appeared not very successful as the expected volume for 2006/7 is a mere 0.4 mln ton of
pellets.
Export through New Mangalore port of Iron ore fines will likely reach 5.6 million ton in 2006-07. These
fines are exported by private entities that have mining leases in the BellaryHospet and Sasnur
Chitradurg belts. The ore transportation is carried out predominantly by road resulting in higher
transportation costs by at least 20% compared to rail as can be seen from Table 4-6 which shows the
comparative advantage of rail over road mode of transportation.

Table 4-6 Comparative advantages/disadvantages of road and rail modes of transport


Road Rail Advantage

1 Parcel sizes 17 tons 2000 tons rail

2 Freight per ton Rs 1100 Rs 907 rail

3 Transit check posts Several none rail

4 Pilferage, spillage High Low rail

5 Availability of mode for freight High limited road

Source: consultants analysis

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However, the establishment of the HassanMangalore Broad Gauge railway line in 2006 has opened
up the possibilities of transportation of fines from the above belts by rail. This option offers several
advantages that include reduced costs to exporters and higher volumes to the port.
KIOCL is awaiting a decision in the litigation that is holding up allotment of mining leases in Karnataka
and is confident of obtaining a mining lease from Govt. of Karnataka. Until then KIOCL will source its
requirement of ore from NMDC who have their mines at Donimalai (in the Bellary region) in Karnataka
or the high grade iron ore from Bailadilla in Chhattisgarh and importing the same through coastal
route.
In the current year KIOCL has been sourcing iron ore from within Karnataka and also have imported
3 shipments of 50,000 ton each of ore of from Bailadilla and are planning further shipments to total
about 0.7 million ton of imports from Bailadilla during the year. The current year exports are likely to be
2.3 million ton. KIOCL expects that in 2007-08 their export will reach again the level of 3.5 million ton
and will continue, provided technical problems are solved.
Once the mining lease is awarded it will take at least 2 years to develop the mine. KIOCL will then be
able to increase its throughput in stages at the pellet plant that will result in exports to the level of 6/6.5
million ton. The installed capacity of the plant is 7.5 million ton.

Other exporters expect their volumes of exports through NMP to increase by about 15% per annum to
reach around 9 million ton by 2009-10 and thereafter by about 5% per year to reach to almost
11 million ton by 2012-13.

The prime factors determining the forecast (see Table 4-7) are:
KIOCL exports of pellets will remain stagnant at around 3.5 million ton till 2012-13;

KIOCL mining lease and resultant increase in pellet production planned by KIOCL may not
come through and it would continue to source ore from within Karnataka from various
suppliers within Karnataka;
Iron ore exporters from Bellary Hospet and Chitradurga Sandur belts will use the shorter
rail route via Chitradurg-Rayadurg - Ariskere- Hassan and the widened 4 lane NH 17 but
export volumes growth would be reduced due to increased domestic demand i.e., a slow down
in ore export growth to 7.5% beyond 2009-10 instead of 5% discussed earlier.

Table 4-7 Forecast of Iron ore exports through NMPT (in million tons)
Iron ore (x mln ton) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

KIOCL pellets export 0.40 3.50 3.50 3.50 3.50 3.50 3.50
IO fines & lumps export by
5.80 7.30 8.40 9.80 9.50 10.20 10.90
other exporters
Total 6.20 11.00 11.90 13.30 13.00 13.70 14.40
Average parcel size for
50,000 50,000 50,000 50,000 50,000 50,000 50,000
pellets in ton
Average parcel size for fines
35,000 35,000 35,000 35,000 35,000 35,000 35,000
& lumps in ton

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Coal
Presently coking coal is being imported for end users such as Mysore Paper Mills at Bhadravati and
Davangere Sugar Mills at Davangere for their captive power plants. Other plants which contribute to
the growth of this cargo traffic are the new iron & steel plants that have come up in Hassan and
Harihar. The coking coal traffic may increase to about 1.5 million ton by 2012-13.
Another development is the establishment of the NPCL 1015 MW (2 X 507.5 MW) Coal Based
Thermal Power Plant near Padubidri at Mangalore by Nagarjuna Power Corporation Ltd (NPCL) . The
NPCL project is slated to be commissioned by the end of 2009-10. 100% of the thermal coal
requirement for the plant is proposed to be imported. The estimated traffic flow of 1.5 million ton for the
first unit of 507.5 MW can therefore be expected from 2010-11.
Discussions with Mangalore Chemicals and Fertilizers Ltd (MCFL) have revealed that they may import
coal up to 0.25 million ton per year from 2009-10.

The prime factors determining the forecast (see Table 4-8) are:
The growth rate of 17.1% observed over the last 5 years would continue over the next 7 years
resulting in traffic of 1.55 million ton in 2012-13;
MCFL would import coal to the tune of 0.25 million ton per year from 2009-10 as planned;
The 2 X 507.5 MW NPCL (Nagarjuna power plant) comes up in 2 stages with the 1st unit
being commissioned by the end of 2009-10 and the 2nd five years hence i.e., beyond 2012-13
resulting in traffic of 2.0 to 3.0 mln ton between 2010-11 and 2012-13.

Table 4-8 Forecast of Coal imports through NMPT (in million tons)
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Coking Coal 0.90 1.00 1.20 1.40 1.60 1.80 2.00

Thermal Coal 2.00 2.50 3.00

Total 0.90 1.00 1.20 1.40 3.60 4.30 5.00

Av. Parcel size(ton) 35000 35000 35000 35000 35000 35000 35000

Fertilizers
The Indian fertilizer industry (see section 3.1.6) relies heavily on imports for its raw materials and
hence the cost of production of fertilizers is very high.

The traffic of fertilizers raw materials (FRM) imports in 2005-06 was in the region of 0.25 million ton
and finished fertilizer imports in the region of 0.65 million tons.
In addition to the fertilizers manufactured by MCFL, the demand for fertilizers in the state of Karnataka
is also met by imports from abroad by other firms (Indian Potash Ltd, IFFCO, KRIBHCO, Zuari)

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through New Mangalore port. IFFCO and KRIBHCO have developed manufacturing facilities in Oman
and have started importing Urea into India through ports such as Visakhapatnam and New Mangalore.
FRM imports during the current year 2006/07 are expected to reach 0.45 million ton for raw materials
and 0.45 million tons for finished fertilizers. The same are likely to grow to 0.6 million ton for of each of
raw and finished fertlizers in 2009/2010 and to 1.0 million ton up to 2012-13. This means a growth of
10% per year in FRM imports and 15% in the case of finished fertilizers.

MCFL too intends to import finished fertilizers like MAP, DAP, MoP and Urea to the amount of 0.2
million ton from 2007-08. The factors determining the forecast (see Table 4-9) are:
FRM imports by MCFL would grow by about 10% as estimated
MCFL may not import finished fertilizers as planned
Finished fertilizers would continue to be imported by other importers as at present and imports
grow by about 15% per year

Table 4-9 Forecast of Fertilizers imports through NMPT (in million tons)
Fertilizers 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Fertilizer raw materials 0.10 0.50 0.54 0.60 0.66 0.72 0.80

Finished Fertilizers 0.90 0.78 0.90 1.03 1.19 1.37 1.57

Total (Million Tons) 1.00 1.28 1.44 1.63 1.85 2.09 2.37

Average parcel size (FRM) in 6000 6000 6000 6000 6000 6000 6000
tons

Average parcel size (fertilizer) 22000 22000 22000 22000 22000 22000 22000
in tons

Cement
Current traffic of import of bulk cement through New Mangalore port by UltraTech Cement for its
bagging unit is 252,000 ton (2005-06). This cargo pertains to a single user.
The company has no plans in the light of the demand/supply situation prevailing in the country as a
whole and in Karnataka in particular, and indicated that traffic will increase marginally to 400,000 ton
by 2009-10 and will remain so for the period up to 2012-13.
No other parties are expected to participate in the import/export trade and projections are based on
Ultra Tech estimates. The forecast is shown in Table 4-10.

Table 4-10 Forecast of Bulk Cement imports through NMPT (in million tons)
(x mln ton) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Cement (in bulk) 0.20 0.30 0.35 0.40 0.40 0.40 0.40

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4.3.4 General cargo/break bulk cargo


The existing general cargo traffic at NMP (around 0.6 mln ton, import & export) is comprised of import
of wooden logs (nearly 50% of the above traffic) and export of granite stones (around 20%). The
growth over the years has been in the region of around 3% at the most. It is estimated that the growing
containerization will restrict growth to break bulk cargo volumes to about 5% per annum.

Suzlon Energy Limited has recently proposed to set up a port based industrial complex about 30 km
from the New Mangalore port to manufacture windmills. It is planned to import steel products and
components for as well as capital goods (machinery and other project cargo) and export finished
components such as wind turbines/generators. This will be shipped both as general/break bulk cargo
as well as containerized cargo. The projected import volumes are in the region of 180,000 ton per year
until 2008-09 and 360,000 ton thereafter. Containerized cargo volumes are expected to be around
10,000 TEU till 2008-09 and 20,000 TEU thereafter.

The Mangalore SEZ is likely to have a positive influence on general cargo volume. One project relates
to the production of aromatics (paraxylene/ benzene) with a capacity of 1.15 mln ton. There will be
downstream units in the MSEZ, which will produce polypropylene and polyethylene. In terms of
volumes the same will be 0.90 million ton and 0.75 million ton respectively.
Major factors for cargo forecasting (see Table 4-11) are:
General cargo growth is assessed to increase at about 5% per year in line with the growth of
NSDP (Net State Domestic Product) in Karnataka.
Suzlon plans materialize by 2007-08 and cargo flows start from 2008-09 and subsequent
doubling by 2010-11.
Cargo flows from MSEZ may start flowing after 5 years i.e., from 2011-12 instead of 2009-10
as planned.

Table 4-11 Forecast of general cargo traffic through NMPT (in million tons)
X Mln ton 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

General cargo / break bulk 0.62 0.65 0.68 0.72 0.75 0.79 0.83

Suzlon cargoes - - 0.18 0.18 0.36 0.36 0.36

MSEZ cargoes - - - - - 1.65 1.65

Total 0.62 0.65 0.86 0.90 1.11 2.80 2.84

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4.3.5 Containers
Container traffic at Indian ports has grown at a CAGR of 14.8% over the last 5 years. Indian container
traffic in 2005-06 added up to 4.93 million TEU (see 4-12). Distribution of origins / destinations of
export / import containers region wise showed that the majority of containers originated or was
destined for the northern region.

Table 4-12 Region wise distribution of Indian container traffic


Region Volumes in mln TEU % of total

Northern 2.81 57

Western 0.94 19

Southern 0.89 18

Eastern 0.29 06

Total (all India) 4.93 100

Source: Ministry of Shipping, Govt. of India

There is no indication that the high share of the northern region will diminish. Containers from / to the
land locked northern region flow largely to/from western Indian ports for reasons of proximity.
As can be seen from Table 4-12 above, the southern region accounts for 18% of Indian container
traffic (890,000 TEU in 2005-06). Among the southern states, Tamil Nadu accounts for about 75%
followed by Karnataka that accounts for about 10% and the remaining by Andhra Pradesh and Kerala.
Karnataka generates about 90,000 TEU in a year and the Inland Container Depot (ICD) at Whitefield,
Bangalore is a major hub for these containers. While 43,000 TEU were handled at ICD Whitefield, the
balance were stuffed at cargo centres or consolidated at Chennai (see Table 4-13).

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Table 4-13 ICD Bangalore Traffic to various overseas sectors in 2005


Sector Total in TEU Total in % of total

Import Export Import Export

Australia 136 589 0.77 2.32

Canada 613 421 3.48 1.66

Central America 114 90 0.65 0.35

China 2,122 255 12.05 1.00

East Africa 130 255 0.74 1.00

Far East 1,883 583 10.70 2.30

Indian Sub Continent 410 347 2.33 1.37

Japan 2,305 834 13.09 3.28

Mediterranean 1,674 2,250 9.51 8.86

Middle East 818 1,264 4.65 4.98

New Zealand 34 50 0.19 0.20

North Continent 2,407 5,436 13.67 21.41

Red Sea 138 374 0.78 1.47

Russia-CIS 181 1378 1.03 5.43

Scandinavia 153 209 0.87 0.82

South Africa 30 264 0.17 1.04

South America 79 174 0.45 0.69

South East Asia 1,791 1,093 10.17 4.30

UK 626 1,326 3.56 5.22

USA East Coast 805 4,146 4.57 16.33

USA Inland Point 275 2,897 1.56 11.41

USA West Coast 857 816 4.87 3.21

West Africa 25 342 0.14 1.35

Grand Total 17,606 25,393 100 100

Total (Im/Export) TEU 42,999

Source: Kambadkone, an independent database management company, India

The linkages from the ICD Whitefield to various ports and the services available on the linkages are as
given below (see Table 4-14 and Figure 4-10).

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Table 4-14 ICD Bangalore Linkages to Ports and Service


Terminal Gateway ports Mode Service

ICD Whitefield, Chennai Port Rail Four times a week


Bangalore Ro a d On demand
Cochin Port Rail Three times a week
Ro a d On demand
Tuticorin Port Rail On demand
Ro a d On demand
Jawaharlal Nehru Port Rail On demand
Road On demand
Source: CONCOR

Figure 4-10 ICD Bangalore Linkages to Ports

Source: mapsofindia.com

With the broad gauge rail link available between Bangalore and Mangalore, New Mangalore Port could
attract at best 50% of the above traffic that is west bound from / to ICD Whitefield to the ports of

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Chennai and Cochin. In terms of absolute figures, volumes can be about 25,000 TEU at the current
traffic trends.
Container traffic (import + export) at NMP has grown from 4,000 TEU in 2001-02 to 10,000 TEU in
2005-06 indicating a compound annual growth rate (CAGR) of 25.7%. The high CAGR at NMPT is due
to:
a) Containerization at NMPT was at its initial stages and
b) The growth rates are in relation to very low base.

At NMPT out of 9,646 TEU handled in 2005-06, the main import commodity was raw cashew (1928
TEU) followed by wooden logs (580 TEU). The main export commodities were reefer cargo and coffee
which amounted to 1,217 and 1,113 TEU respectively, followed by Cashew kernels (475 TEU).
Empty containers constituted 27.5% of the overall traffic.

In addition to attracting the diverted traffic from Bangalore to other ports, following developments
indicate generation of containers within the ports immediate hinterland:
Development of industrial complex by Suzlon in Mangalore that can result in approx 10,000
TEU per year from 2007-08 and 20,000 by 2009-10;
Development of MSEZ at Mangalore that includes multi product zone besides the
petrochemical zone. The multi product zone is proposed to be developed in phase 2 i.e., after
2009-10. At this nascent stage when it is not known which industry would be interested in
setting up units in the MSEZ or for what products, it is difficult to estimate cargoes or their
volumes. However being an export oriented zone connected to the port, it is reasonable to
assume that container traffic can be expected to / from the zone;
Development of a multi product SEZ has been proposed at Hassan which is in the immediate
hinterland of New Mangalore Port and is now connected by broad gauge railway. This makes
it a potential source of container cargo for NMP. But it is too early to predict traffic from the
zone.

Factors that are considered absolutely essential for growth of container traffic are:
Infrastructure for storage, handling, stacking and loading/unloading to/from ships;
Ensuring availability of vessels (better frequency) i.e., attracting feeder operators to use the
port

The following assumptions are made to project traffic for the period up to 2012-13 (see Table 4-15):
A 25% growth in the current container traffic that is already handled in port;
New traffic on account of Suzlon windmill - energy project;
No diverted traffic from Bangalore hub on a regular basis (only on demand service);

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The average weight per container continues to be around 15 ton per TEU;
Necessary specialized infrastructure required for handling equipment and storage space etc
will be created by NMP after the traffic grows to about 40-50,000 TEU.

Table 4-15 Forecast of Container traffic through NMPT


Containers (x 1000) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Growth in current traffic in
12 16 20 24 31 38 48
TEU
Suzlon traffic 10 10 20 20 20 20
Diverted traffic from
3 5 10 15 20 25 30
Bangalore hub
Total x 1000 TEU 15 31 40 59 71 83 98

Total in million tons 0.22 0.47 0.60 0.89 1.07 1.25 1.47

source: consultants database

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4.4 Summary of Cargo Traffic Forecast


The aggregation of all cargo flow forecasts for all major commodities is shown in Table 4-16.

Table 4-16 Forecast of total traffic through NMPT (in million tons)
Commodity 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13

Crude Oil Import 12.20 12.20 12.20 12.20 15.00 16.00 17.00

POL products Import 0.60 0.60 0.65 0.70 0.75 0.80 0.85

LPG Import 1.20 1.25 1.30 1.35 0.35 0.40 0.45

Edible Oil Import 0.34 0.36 0.38 0.39 0.41 0.43 0.45

Other Bulk Liquids Import 0.10 0.50 0.54 0.60 0.66 0.72 0.80

Dry Bulk (coal) Import 0.90 1.00 1.20 1.40 3.60 4.30 5.00

Fertilizer Import 0.90 0.78 0.90 1.03 1.19 1.37 1.57

Containers Import / export 0.22 0.47 0.60 0.89 1.07 1.25 1.47

General cargo Import / export 0.62 0.65 0.86 0.90 1.11 2.80 2.84

Cement Import 0.20 0.30 0.35 0.40 0.40 0.40 0.40

Iron Ore Export 5.80 7.30 8.40 9.80 9.50 10.20 10.90

Pellets Export 0.40 3.50 3.50 3.50 3.50 3.50 3.50

POL Products Export 8.50 8.50 8.50 8.50 9.00 10.00 11.00

TOTAL 31.98 37.41 39.38 41.66 46.54 52.17 56.23

4.5 High and Low forecast scenarios


The given forecast is considered a medium scenario. It is probable if not sure that the forecasted
figures do not materialise due to circumstantial changes in many economic conditions such as growth
and international trade competitiveness or due to the NMPTs polices (marketing/pricing/servicing etc).

Two scenarios have been applied to the medium to asses fluctuations, either positive or negative.
1) A LOW scenario, implying that growth will fall short by 10 % which will affect all commodities. This
LOW scenario will result in a decrease of 5.6 mln ton by 20012/13.
This means that the total throughput by the end of the planning period will reach 50.7 mln tons. The
effect of this will result in a lower income to private operators and the NMPT.

2) A HIGH scenario, implying an above expectation developing growth in the Indian economy.
The growth is however limited for certain commodities as a result of maximum production capacity
(iron ore pellets, crude oil refining, cement imports). For other commodities the HIGH scenario
includes the installing of new production facilities that create new cargo flows.
A number of developments are reviewed per commodity type.

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Crude oil and POL

Table 4-17 HIGH Scenario Forecast of Crude and POL Products traffic through NMPT (in
million tons)
Crude oil & POL (x mln ton) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Crude Oil import 12.20 12.20 12.20 15.00 16.00 17.00 18.00

Product import 0.60 0.65 0.70 0.75 0.80 0.85 0.90

Product export 8.50 8.50 8.50 9.00 10.00 11.00 12.00

LPG import 1.20 1.25 1.30 1.35 0.40 0.45 0.50

Total 22.50 22.60 22.70 25.10 27.20 29.30 31.40

Ores
The HIGH scenario assumptions are:
KIOCL exports of pellets will remain around 3.5 million ton till 2012-13
Iron ore exporters from Bellary Hospet and Chitradurga Sandur belts will use the shorter
rail route via Chitradurg-Rayadurg - Ariskere- Hassan and the widened 4 lane NH 17 that
would result in export volumes increasing at 15% till 2009-10 and at 10% thereafter as
discussed above

Iron ore exports by traders to China will continue to grow over the period under consideration
i.e 2006-13 in view of the growing demands of Chinese steel industry, which has emerged in
2006 as the leading exporter of steel products
Projected traffic of iron ore is summarized below.

Table 4-18 HIGH Scenario Forecast of Iron ore exports through NMPT (in million tons)
Iron ore (x mln ton) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

KIOCL pellets export 2.30 3.50 3.50 3.50 3.50 3.50 3.50
IO fines & lumps export by
6.30 7.35 8.55 10.00 11.00 12.10 13.30
other exporters
Total 8.60 10.85 12.05 13.50 14.50 15.60 16.80

Coal
Under a HIGH Scenario the following may occur:
Mangalore Chemicals and Fertilizers Ltd (MCFL) have revealed that they may import coal to
the tune of 0.25 mln ton per year from 2009-10.
Import by current coal importers together with that by MCFL will grow at a CAGR of 20% over
the next seven years.
The NPCL plant will come up as planned.

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Then the projected traffic of iron ore through NMP up to 2012-13 would be as under

Summary of the estimated traffic is as under

Table 4-19 HIGH Scenario Forecast of Coal imports through NMPT (in million tons)
Coal (x mln ton) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Coking Coal 0.90 1.10 1.35 1.45 1.85 2.35 2.95
Coking coal for MCFL 0.25 0.25 0.25 0.25
Thermal Coal for NPCL 3.00 3.00 3.00
Total 0.90 1.10 1.35 1.70 5.10 5.60 6.20

Fertilizer

Under the HIGH scenario it would be reasonable to assume that


As discussed in 3.2.3 the demand supply gap increases in the absence of new capacities
being added triggering need for increased imports of both raw materials for existing facilities
and finished fertilizers for distribution
FRM imports by MCFL would grow by about 10% as estimated

MCFL too intends to import finished fertilizers like MAP, DAP, MoP and Urea to the tune of 0.2
mln ton from 2007-08 and continue to do so during the period with growth rate at par with the
imports by others
Finished fertilizers would continue to be imported and imports grow by about 15% per year

The resultant projected traffic is summarized as under

Table 4-20 HIGH Scenario Forecast of Fertilizers imports through NMPT (in million tons)
Fertilizers ( mln ton) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Fertilizer raw materials 0.10 0.50 0.54 0.60 0.66 0.72 0.80
Finished Fertilizers by MCFL 0.90 0.98 1.13 1.29 1.48 1.71 1.96
Total 1.00 1.48 1.67 1.89 2.14 2.43 2.76

General cargo/break bulk cargo


Under a HIGH Scenario the following may occur:

General cargo growth is assessed to increase at about 5% per year in line with the growth of
NSDP in Karnataka.

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Suzlon plans materialize by 2006-07 as proposed and cargo flows start from 2007-08 and
subsequent doubling by 2009-10
Cargo flows from MSEZ start flowing from 2009-10 as planned
Based on the above, summary is as under.

Table 4-21 HIGH Scenario Forecast of general cargo traffic through NMPT (in million tons)
X Mln ton 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

General cargo / break bulk 0.62 0.65 0.68 0.72 0.75 0.79 0.83

Suzlon cargoes 0.18 0.18 0.36 0.36 0.36 0.36

MSEZ cargoes 1.65 1.65 1.65 1.65

Total 0.62 0.83 0.86 2.73 2.76 2.80 2.84

Containers
Under a HIGH Scenario the following assumptions are made:

A 30% growth in the current container traffic that is already using NMP;
New traffic on account of suzlon energy project;

Diverted traffic flowing to other ports from Bangalore hub (a regular service between
Bangalore and NMP);
The average weight per container continues to be around 15 ton per TEU;

Necessary infrastructure in terms of handling equipment and storage space etc will be created
by NMP to attract the diversion from Bangalore and aggressive marketing is done towards not
only attracting shippers and importers to use the port but also shipping lines to call at the port.

Summary of projected traffic based on the above is as under (Table 4-22).

Table 4-22 HIGH Scenario Forecast of Container traffic through NMPT (in million tons)
Containers (x 1000) 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Growth in current traffic in
13 17 22 29 37 48 63
TEUs
Suzlon traffic 10 10 20 20 20 20
Diverted traffic from
0 15 20 25 30 35 40
Bangalore hub
Total in TEUs 0 42 52 74 87 103 123

Total in million tons 0.22 0.63 0.78 1.11 1.31 1.55 1.85

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If all HIGH scenario events would take place the forecast yields a cargo flow volume of 62.7 mln ton by
2012/13 (see Table 4-23). This represents an increase of 11.5 % over the Medium scenario.

Table 4-23 HIGH scenario Forecast of total traffic through NMPT (in million ton)
Commodity 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13

Crude Oil Import 12.20 12.20 12.20 15.00 16.00 17.00 18.00

POL products Import 0.60 0.65 0.70 0.75 0.80 0.85 0.90

LPG Import 1.20 1.25 1.30 1.35 0.40 0.45 0.50

Edible Oil Import 0.34 0.36 0.38 0.39 0.41 0.43 0.45
Other Bulk
Import 0.10 0.50 0.54 0.60 0.66 0.72 0.80
Liquids
Dry Bulk (coal) Import 0.90 1.10 1.35 1.70 5.10 5.60 6.20

Fertilizer Import 0.90 0.98 1.13 1.29 1.48 1.71 1.96

Containers Import / export 0.22 0.63 0.78 1.11 1.31 1.55 1.85
Containers x
X 1000 13 42 52 74 87 103 123
TEU
General cargo Import / export 0.62 0.83 0.86 2.73 2.76 2.80 2.84

Cement Import 0.20 0.30 0.35 0.40 0.40 0.40 0.40

Iron Ore Export 6.30 7.35 8.55 10.00 11.00 12.10 13.30

Pellets Export 0.40 3.50 3.50 3.50 3.50 3.50 3.50

POL Products Export 8.50 8.50 8.50 9.00 10.00 11.00 12.00

TOTAL 32.48 38.15 40.14 47.82 53.82 58.11 62.70

The financial implications of both a 10 % decrease and increase in cargo flow and subsequent effects
to NMPTs profit & loss and cashflow prognosis is elaborated in section 10.6.

4.6 Long Term Forecast (20 years)


Beyond the year 2012/2013 the forecast for cargo flows becomes less clear but the trend is
undoubtedly positive for certain cargo flows such as containers, ores and coal.
Most commodity flows will follow a trend of the the planning period provided no external factors are
breaking the trend. Certain export commodity flows will not continue to grow since its is expected that
the supplies or demands from captive cargo types (State of Karnataka) reach their limits.
Another growth slowing trend is the expected development of competitive ports which beyond 2013
have assumingly increased or improved their handling capacity.
Container flows will increase according to the average growth of the nation and likely more due to the
substitution of break bulk cargo to containerized cargo.
By 2012/13 the flow of LNG has come on stream and requires a volumes of 5 mln t by 2025/26.

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The general growth trends and the indicated limitations and developments result in a Long Term
forecast reflected in Table 4-24.

Table 4-24 Long term (20 year) cargo flow forecast (x mln ton)
Commodity 2012/13 2025/26 Annual growth rate %

Crude Oil Import 17.00 17.00 -

POL products Import 0.85 2.07 7.1

LPG Import 0.45 1.50 9.7

LNG Import 0 5 -

Edible Oil Import 0.45 1.68 10.7

Other Bulk Liquids Import 0.80 1.75 6.2

Dry Bulk (coal) Import 5.00 7.00 2.6

Fertilizer Import 1.57 2.58 3.9

Containers Import / export 1.47 3.83 7.6

Containers x TEU X 1000 98 255 7.6

General cargo Import / export 2.84 4.17 3.0

Cement Import 0.40 0.56 2.6

Iron Ore Export 10.90 20.09 4.8

Pellets Export 3.50 5.91 4.1

POL Products Export 11.00 11.00 -

TOTAL 56.23 84.14 3.2

As to the sensitivity of the Long Term forecast, some major events may substantially change the
figures:

The enlargement of the SEZ/LNG production facility which may boost volumes of import to 10 million
tons.
It is clear that in the long term the port capacity for a level of 84 mln ton per annum is insufficient. The
NMDP indicated plans of enlargement of the Western Dock with 2 new bulk cargo berths becomes
then a necessity.
The LNG terminal and the related Outer Harbour development should be sufficient to cover the
throughput for liquid cargo, also based on the assumption that the SBM (15-20 mln ton capacity) is
operational in time.
The present area for the new container terminal (Western dock) is expected to be able to handle some
250,000 TEU. Once the actual flows however start exceeding the 300,000 TEU volume, a second
terminal, may be a solution (berth 1 and 2 or in an new outside harbour yard).

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5. CAPACITY ANALYSIS

5.1 Port description


New Mangalore Port is located on the West Coast of India and managed by New Mangalore Port Trust
(NMPT), which is supervised by the MOSRTH. The Port is a modern all-weather port situated at
Panambur, Mangalore (Karnataka State in South India), on the West Coast of India, 170 nautical miles
South of Mormugao and 191 nautical miles North of Cochin Port. The Mangalore Harbour Project
started in 1962 and was completed in May 1974. On 1st April 1980, the Port Trust Board was set up
under the Major Port Trust Act, 1963. Since then, NMPT has been functioning as the 9th Major Port
Trust and has fallen in line with other Major Port Trusts functioning in the country.

Figure 5-1 Existing Port layout (October 2006), aerial photo from Google Earth

Mallya Gate

Silver Jubilee Gate

Koorikatta Gate

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5.1.1 Quay Walls and Jetties


Its marine territory stretches from 21 km off shore (equal to the 12 miles territorial zone of India) to a
length of 12 km along the coast. The land inside the security wall including the lagoon covers an area
of 885 acres (565+320). The Port is a lagoon port completed in 1974, which can be reached by a 7.5
km long channel and is protected by 2 breakwaters each of length of 770 meters. The lagoon consists
at present of 14 berths for both dry and liquid cargo vessels; see Table 5-1 for detailed berth
information. According to the table and NMPT, berths 10, 11 and 14 were designed for larger water
depths and can be deepened to accommodate larger vessels. Berth 14 is 350m long and recently
constructed. Most bulk vessels in the port are between 25,000 and 35,000 DWT and have a LOA
between 170 and 190m. In case the quay wall of berth 14 had been made 50m longer, it could have
accommodated two vessels at the same time.

Table 5-1 Characteristics of berths 1-14


Design Maximum size Vessel
Berth Length Present Max.
Main commodities handled dredged Depth
no. (m) Draft (m)
(m) LOA in m DWT x 1000t

1 General cargo (G.C.) / Bulk 125 7.0 6.5 90 4

2 G.C. / Bulk / Containers 198 11.3 10.3 190 30

3 G.C. / Bulk / Containers 198 11.3 10.5 190 30

4 Liquids / G.C. / Bulk 198 11.3 9.5 190 30

5 Edible oil / G.C. / Bulk 198 11.3 9.5 190 30

6 G.C. / Bulk / Containers 198 11.3 9.5 190 30

7 G.C. / Bulk / Containers 198 11.3 9.5 190 30

8 Iron ore pellets / Bulk 300 14.0 13.0 245 60

9 LPG/POL 330 11.5 10.5 235 45

10 Crude oil/POL 320 18.2 14.0 245 85

11 Crude oil/POL 320 18.2 14.0 245 85

12 Chemicals/POL 320. 13.1 12.5 230 50

13 POL virtual jetty N.A. 12.5 12.0 195 n.a.

14 Iron ore / G.C. / Bulk 350. 17.0 14.00 280 85

Source: NMPT Administration report 2005-2006 page 45 and Inception report page 37

* Temporary mooring facilities up to a draft of 12m at virtual jetty

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5.1.2 Existing Equipment


The NMPT owns cargo handling equipment, such as wharf cranes, mobile cranes and smaller
equipment like forklift trucks. A complete list of existing equipment is shown in Table 5-2.

Table 5-2 Cargo handling equipment in New Mangalore Port


Month and year
Type of equipment Number Capacity
of purchase

Mobile cranes

a) Coles Model Husky 680S Tyre Mounted Crane 75 t. at 3 m radius


1 March 1987
with telescopic boom 26 t. at 6 m radius
b) TIL Grove RT 880 Tyre Mounted Crane 75 t. at 3 m radius
1 March 2000
with telescopic boom 18 t. at 6 m radius

Wharf cranes

a) Braith Waite ELL wharf cranes 3 10 t. at 6-23 m radius 1978

Fork lift trucks

a) Voltas High Visibility mast model DVX-30-FC-BCD 1 3 t. March 2001

b) Godrej Low Mast model G-300 D 2 3 t. March 1998

c) Godrej Low Mast model G-1000 D 1 10 t. March 1995

Pay loader

3
a) Hindustan 2021 front end loader 1 1.5 m March 1995

Source: NMPT 2005-2006 Administration Report page 47

The electrical wharf cranes are located at berths 2 and 3 and are mounted on rails. The rails continue
from berth no 2 to berth no 4, but they can not lift and drive with a container simultaneously. The
cranes can only be operated at berths 2 and 3. All 3 cranes are 30 years old and according to the
NMPT administration report of 2005-2006, they were used only for 8.74% of the total amount of
operational hours per year. The main reasons are the limited demand. Most cargo is presently
unloaded and loaded by ships gear, that operates faster and has in most cases more handling
capacity. The wharf cranes have a maximum capacity of 10 ton in combination with a small radius and
are, for example, not capable to load iron ore with slings since this exceeds the 10 ton. At present they
need to be constantly moved along the berths, since they hamper the cargo operations.
Due to its limited use and high maintenance cost, the consultant recommends to dispose the three
cranes and go for mobile cranes. Feasibility of installing is to be established.

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The mobile cranes of NMPT are mainly used at the container yard, due to the lack of proper container
handling equipment, such as reach stackers. The mobile cranes have manual spreaders, which are
used to lift the containers to and from the trucks. Normal trucks are used to transport the containers to
and from the quay and within the container stacking yard. Operations are slow comparing to container
operations with modern equipment and one of the disadvantages of the mobile cranes is restricted
mobility in the container yard, in contrast to reach stackers.
It is suggested to purchase container handling equipment for the container terminal and keep the
present mobile cranes as spare. In addition, they can be used elsewhere in the port to assist with
minor cargo operations, such as general cargo and maintenance jobs.

The forklift trucks are mainly used for general cargo in and around the warehouses. They are of limited
capacity (3-10 ton) and are between the 5 and 10 years old. They can be used in the future for general
cargo and to handle empty containers.

The pay loader is used for several small works in side the port. Cleaning of spills during the cargo
operations is one of these tasks, although this is done predominantly by the stevedores. According to
the NMPT administration report 2005-06 it is hardly used (0.64%). It is recommended to keep this
equipment for cleaning and maintenance works.

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5.2 Port capacity analysis

5.2.1 Actual Handling of Cargo


The performance of the vessels in the port has been analysed using the data as received from NMPT
(administration reports from 2004-05 and 2005-06).

The data in the reports were divided in three groups: Liquid bulk, Dry Bulk and Break Bulk. For
analysis purpose, only the main commodities under these groups were analysed. Commodities in
smaller quantities were grouped under general cargo or other bulk liquids.

The following data given in the administration reports were collected: Yearly Throughput, Average
parcel size, number of ships, pre-berthing delay time, berthing time, the total turn around time (TRT) of
the vessels.
A summary of these data is presented in the tables and graphs hereafter.

Table 5-3 Handling capacity of the Port, main commodities, 2004-2006


Average Cargo
Cargo Cargo Handled in Average Parcel
Commodity Number of Ships Handling x 1000
Flow Mln Ton Size x 1000 tons
ton/day
04/05 05/06 04/05 05/06 04/05 05/06 04/05 05/06

Crude Oil import 163 165 11.9 12.2 73.0 73.9 59.2 61.0

POL import 47 63 0.4 0.6 8.0 9.5 9.7 10.0

LPG import 83 78 1.2 1.2 14.8 15.1 5.2 4.9

Edible Oil import 55 47 0.3 0.3 4.8 7.1 4.9 5.1


Other Bulk
import 52 53 0.3 0.3 5.7 5.7 11.0 12.1
Liquids
Dry Bulk (Coal) import 10 14 0.3 0.5 31.5 36.7 6.2 8.5

Fertilizer import 18 30 0.4 0.7 19.6 22.1 2.6 3.1


import/ex
Containers 36 39 0.1 0.2 3.8 3.9 3.3 4.1
port
import/ex
General Cargo 76 70 0.7 0.6 6.9 6.9 3.0 2.6
port
Cement import 13 18 0.2 0.3 12.0 14.0 4.8 4.0

Iron Ore export 172 171 5.5 5.8 32.2 33.8 10.9 11.7

Pellets export 96 71 4.7 3.5 48.9 48.7 47.6 43.3

POL export 236 261 7.8 8.4 33.2 32.3 24.4 24.3

Total 1057 1080 33.8 34.6

Source: Administration Report 2005-2006 pages 76-77 and 2004-2005 pages 133 137,

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Other bulk liquids are Phosphoric Acid, Liquid Ammonia, Benzene. Methanol and Molasses.

General Cargo is Timber, Granite Stones, Wood Pulp, Yellow peas, Lime stones, Clay, Bentonite and
Raw Sugar.

The following commodities are presently handled with mechanized installations in the port:
Pellets (operated by KIOCL)

POL
Crude
Bulk Liquids (liquid ammonia and edible oils)
Cement

All other cargos are handled by mostly ships gear and are all cargoes are transported from and to the
quays by trucks.
Iron Ore loading rate is very low comparing to mechanized loading. Loading is performed by vessel
gear and slings. Trucks move between the storage area near K K gate and the berths. This method of
loading is very slow; rates of 11,700 ton per day were achieved in 2005-06. The low production rate is
due to the method of using slings and ship gear, which has mostly a slow cycle time. Another reason
that loading is slow is due to the unavailability of trucks. During observations of the consultants, the
stevedore gangs were waiting for trucks. The turn around time of each truck is about 15 min (distance
1.5km). Each crane cycle contains 15-20 ton and about 15-20 moves per hour should be achievable.
This means that every 3-4 min a truck should arrive. A total of 6 to 7 trucks are then necessary per
loading gang. The maximum loading rate per gang which can be achieved with this method is 6,300
ton per day (21 hours per working day). There are 3 gangs per ship thus a loading rate of 18,900 ton
per day can be achieved.
This method of loading is slow comparing to mechanical loading and also causes pollution due to
spillage of the cargo both on the quay and in the basin.
International benchmarks for loading iron ore are difficult since to give; it highly depends on the ship
size. Rates can vary between 1,000 and 8,000 ton per hour. Normally a Panamax vessel of about
60,000 DWT should be loaded in about one day. This means a loading rate of about 3,000 ton per
hour should be achieved. This can be obtained for example with two ship loaders each of 1500-2000
ton/ hr capacity.

Fertilizers are unloaded with ship gear in to a moveable hopper on the quay. Discharge rates are very
low, about 3,000 ton per day (140 ton/hr). Discharge is performed with ships gear with grabs of about
8 ton. The cycle time is about 20 moves per hour. The discharge rate will thus be 160 ton per hour per
gang. The fertilizer is dumped into a hopper on the quay wall. Trucks arrive directly from outside the
port, are loaded via the hopper, pass the weighbridge and leave the port or the fertilizers are dumped
into the transit sheds.

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Each ship has 3 gangs and total production per hour should be around 480 ton/hr or about 10,000 ton
per day. At present the actual discharge rate is 3,000 ton per day. The difference can have several
reasons; one is the unavailability of trucks.
The present practice of fertlizer unloading is not very environmentally friendly and very slow. A lot of
material is spilled and mixed with other, earlier spilled, material on the quay. Sometimes the trucks are
overloaded resulting in spillage. The spilled cargo collected using shuffles from the quay.
A proper designed hopper with mobile belt conveyors to the warehouses will create a great
improvement. In combination with a mobile crane more capacity will result in unloading rates of about
7,000 ton per day per gang. This is a critical project which can be developed under a concession
agreement with a private operator. The operator will invest in the required equipment, while NMPT
proides the quay wall.

Coal is handled the same way that of fertilizers and the same conclusions apply. Improvements may
be sought in mechanization of the operations.

POL is handled at various jetties in the bulk liquids basin and consists of many different products, all
with their own loading and discharge rates. There is a difference between imported POL and exported
POL. The discharge rate for imported POL is 10,000 ton per day, for exported POL the loading rate is
higher, about 24,000 ton per day. The rate of imported POL depends on the pumping capacity of the
ships, while the rate for exported POL is fixed by the capacity of shore pumps. Normal bench marks
for such products are between the 300 and 1000 ton per hour. The rates as presently used in the port
are within these figures.

Crude oil is mainly discharged at jetties 10 and 11 with a rate of about 60,000 ton per day, which is
within the normal benchmarks considering the pump capacity of vessels up to 75,000 DWT, about
3,000 ton per hour.

LPG is discharged at jetty 9 and transported to the storage tanks. The discharge rate depends highly
on the type of ships and receiving station. At this moment, the rate is about 5,000 ton per day or 240-
250 ton per hour. Higher rates are only achievable in case the receiving installation and the pipe line
will be larger. In addition, also the ship size should increase. Up to 30,000 DWT, the ships have a
maximum pump capacity of 300 ton per hour. The latter will probably not occur.

Containers are handled mostly by ships gear. The containers have an average weight of about 12-15
ton and are too heavy to be handled with the electrical wharf cranes at berth 2 and 3. The handling
rate is about 4,000 ton per day or 190 ton per hour.
The main import cargoes through New Mangalore port are raw cashew and wooden logs and export
cargoes are reefer cargoes, which contribute to a higher average of around 20 tons. Assuming a share
of around 30% empty containers the average pay load of a TEU is 15 ton as against a national

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average of around 12.5 tons. No significant change in this composition is envisaged as the cargo
composition in general is not likely to change significantly.

The handling rate of container is about 13 TEU per ship per hour. Applying a TEU/box relation factor
of 1.5, this arrives to 8 moves per hour, or, with 2 gangs working, 4 moves per hour per gang.
This is about the maximum capacity that can be reached with the present operation techniques (using
vessels gear). Since very small volumes are handled, the total TRT of an average container vessel is
about one day. The average call size is about 4,000 ton or 250 TEU or 170 containers.
The containers are directly loaded to normal trucks, due to the lack of reach stackers. It is very time
consuming to load containers with ships gear directly on normal trucks. Higher rates can be achieved
by placing the containers first on the quay wall, while reach stackers will be used to load the
containers on the trucks. In case bumbcarts will be used instead of normal trucks, containers can be
loaded directly from the ship on the bumbcarts. This type of equipment can withstand higher shocks of
the container loading than normal road trucks.
In case mobile cranes are used in combination with proper container handling equipment, much higher
rates can be reached. A mobile crane has an output of about 15 moves per hour, which is about 22
TEU or 340 ton per hour. Using only one mobile crane the day rate for container is about 7,000 ton,
which is almost double the present capacity. The TRT of the container vessels can be reduced by a
third.
A second mobile crane is necessary in case the container throughput growth. Outputs of about 14,000
ton per day can than be achieved, in combination with larger vessels and call sizes.

The main conclusion of the analysis of the existing handling operations is that there is plenty of room
for improvement. It seems that the main bottlenecks are the lack of sufficient trucks. Besides this, the
question should be raised whether to continue with the manual loading and manual discharging
methods. In the sections hereafter, several solutions are presented for mechanization of the dry bulk
cargo handling.
The purchase of mobile harbour cranes with capacities to handle containers and other bulk cargos,
such as fertilizer will contribute to a higher output per ship.

5.2.2 Benchmarks for cargo handling


CONTAINERS
Container terminals performance depends on:
ratio loaded vs. unloaded containers: empty boxes are not always included in the port
statistics (they may be considered as other tare weights) but have to be handled;
unproductive moves, i.e., the handling of all the containers that do not have to be unloaded but
have to be moved: mostly empty and light containers and those containing hazardous
materials, loaded on top or on the deck;

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the level of automation of the gantry-cranes; one of the limiting phases of the handling cycle is
the time spent positioning accurately the spreader on a container (loading), or the container on
a trailer, a MAFI trailer (specialized equipment used to shift containers within port limits) or a
chassis maneuvering on the apron (unloading).
Most modern gantries are automated and equipped with anti-sway devices, and now, the
problem is more the capacity to deliver or remove containers without delaying ship-to-shore
operations.

the average weight of containers and the proportion of containers requiring special attention:
flats, liquid bulks, reefers etc.; and the mix of containers of various sizes: 20/40/45 which will
require to maneuver or change spreaders;
commercial constraints; most of the lines calling at a port may have similar commercial
constraints, leading to unevenly distributed calls.

Highest performance is observed during calls of large container-carriers loading and unloading a large
number of containers, with balanced flows of full containers in and out; terminals dedicated to a single
company can be highly productive (mainly East-West traffic);

Conversely, lower performances are recorded when smaller container-carriers call for a limited number
of containers and have to handle many empty boxes (mainly North-South traffic);
The tables hereafter show some performances of terminals in Europe, North America and Asia.

Table 5-4 Container handling productivity (1)


Major North European Terminals
Container Gantries Yard Area Berth Length
Port / Terminal
TEUs per unit TEUs per hectare TEUs per metre
Primary Terminals 127,280 16,809 963

Secondary Terminals 117,321 16,201 703

All Terminals 124,390 16,638 874

Table 5-5 Container handling productivity (2)


Throughput Max. Crane
Max. Throughput Max. Quay Productivity
Port Terminal Capacity Productivity
density (TEU/ha) (TEU/m)
(TEU / year) (TEU/Crane)
Hamburg Eurogate 4,000,000 28,500 222,200 1,950

Bremen Eurogate 6,000,000 29,850 222,200 1,975

Dalian Dalian Terminals 3,400,000 30,900 188,900 1,350

Hong Kong Hong Kong Terminals 12,550,000 67,470 199,200 2,050

Singapore Singapore Terminals 24,000,000 56,740 172,700 1,920

Tuticorin Tuticorin Container Terminal 450,000 45,000 150,000 1,220

Sources: Port of Hamburg (2007), Port of Bremen (2007), PSA (2007)

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BUSINESS PLAN NMPT

BREAK-BULK / GENERAL CARGO


Due to the wide range of products, ships, equipment, methods, assuming an average performance for
all kinds of commodities and packaging makes little sense:
Specialized traffic like paper, frozen meat, fish or fruits should be studied separately,
according to their packaging and to the type of ship and handling equipment (specialized or
not).
Most commodities in big bags, pre-slung or pre-palletized loads, pallets, nets etc., can be
handled with a crane; a good organization should adapt to a rhythm of one cycle every 1.5 to
3 minutes (20 to 40 moves per hour), depending on the nature of the cargo, the unit weight of
the load, the ships size and other factors as weather conditions, tide and swell, etc. Whenever
the volume of goods to be handled is large enough to allow for a reasonable cost recovery of
additional equipment, special devices can be adapted to improve the unit load or to shorten
the cycle.
Examples:
cements bags : 2 ton pallets built in the hold or on the apron: 40 ton/hour/crane. Pre-palletized bags:
80 ton/hour/crane, and more with spreaders. Cement in bulk can be handled at much higher speed.

exotic wood: logs up to 6-8 tons, handled by the piece with hydraulic clamps: 120 to 160
ton/hour/crane. Logs handled with slings; less than 100 ton/hour; only in daylight.

Table 5-6 General Cargo Terminals Port of Hamburg


Quay Length Terminal Area Annual Handling
Terminal Commodities Equipment
(m) (ha) Capacity

Sud West Containers 1300 18 9 multi-purpose


250000 TEU
cranes (<100t)
Breakbulk cargo
2 mln ton breakbulk
Multi purpose

HHLA Fruit RoRo 530 1 container bridge

Forest products 2 mobile quay


cranes (18 t) 1 mln tons
Ferrous metals

Non ferrous metals

Reichholtz Green coffee 440 16,5 Mobile cranes


GmbH
Cocoa

Nuts 80,000 TEU

Seeds

Dried fruit, etc.

Sources: Port of Hamburg (2007)

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BUSINESS PLAN NMPT

DRY BULK TRAFFIC


Agri-food products / fertilizers
These low-density products are transported in bulk-carriers ranging from small cargo-boats (5,000
dwt) to cape-size bulk-carriers used for basic products (100,000 to 130,000 dwt ships).

Handling of export products is operated mainly with conveyors, whenever possible, with performances
varying from 100 to nearly 1,000 ton/hour per conveyor, depending on ship size, port equipment,
product characteristics and density, brittleness, and environmental and safety considerations linked to
dust.
Ship to shore operations of import products require cranes and hoppers (20 to 35 ton capacity - 150 to
300 ton/hour), or elevators (400 to 1000 ton/hour) : two to three cranes per ship, or one elevator and
two or more cranes on panamax and larger ships;
On the apron, small cargoes are generally loaded in trailers; large cargoes are carried through
conveyor belts to warehouses or silos. High performance may be reached only if ship to shore
operations are dissociated from commercial operations. Direct delivery alongside is the major cause of
poor performance in bulk handling.

Ratios :

small bulk-carrier, 1,500 to 3,000 t shipment: 100/120 ton/hour per crane; 2 cranes operated
in one day
from Panamax up to cape-size, 60,000 t shipment: 1 elevator and 2 cranes; 1,100 ton/hour,
15,000 to 18,000 ton/day; operated in four
days

That performance may be reduced when operating multi-product cargo-ships. Some sticky, dusty or
hard-to-handle products, such as manioc roots, impair the average performance. Brittle or dusty
products may require lower handling rate for quality, safety and environmental purposes.

Ore / coal

Export cargoes are usually loaded with conveyors; 1,000 to 2,000 ton/hour or more. Import traffic is
handled with large gantry cranes geared with very large grabs: up to 1,000 ton/hour/gantry crane or with
special devices. Same constraints, related to quality, safety and environment, may have to be taken into
consideration.
Bulk-carriers ranging from the panamax to the cape-size: throughput: up to 15,000 to 20,000 ton/day.
Examples of terminal handling:
EECV in Rotterdam unloading of coal at 3000 ton/hour (one of the largest continuous unloaders in the
world. Total unloaded in 2006 4.1 million ton.

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BUSINESS PLAN NMPT

EMO Bulk Terminal in the Port of Rotterdam is by far Europe's most important dry bulk terminal. Each
year, about 35 million ton of Coal and Iron Ore is handled in the port with the following characteristics:
Available quay length: 1,280m
Maximum depth: 23m
4 shore based cranes
2 floating cranes
Daily unloading capacity of 140,000 tons

The biggest vessels can leave the port again within 2 to 3 days
Storage area: 160 ha

Dekheila, Egypt, Unloading of Iron-ore pellet with a rate of 2,000 ton/hour. Unloading of Coal with
1,800 ton/hour with two gantry cranes. Total throughput of 6 million ton per year.
Reijka, Croatia, Unloading of coal 2,000 ton/hr and unloading or iron-ore 3,000 ton/hr. Total throughput
2 million ton per year.
New developments: iron ore loading 8,000 ton /hour.

LIQUID BULK TRAFFIC


Generally, unloading performances depend on the size of the ship which provides pumps and energy.
They depend also on its viscosity, temperature, and on safety regulations, for hazardous products.
Most liquid carriers are operated within one day, whatever the size.
Throughput: 300 to 1,000 cu m /hour, up to 10,000 cu m /hour and more for very large tankers.

Table 5-7 Pump Capacity of Tankers


Pump Capacity
Size of Tanker (DWT) (m/hour)

200,000 12,000

100,000 7,000

50,000 4,500

25,000 3,500

Source: Agerschou 2004

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BUSINESS PLAN NMPT

5.2.3 Vessel TRT


The total turn around time for ships is defined as the moment the ship arrives at the anchorage, sailing
to the berth, berth time, sailing to the anchorage till the moment it leaves the anchorage. The average
TRT time for the vessels was given in the statistics from the NMPT and is presented for the last two
years in Figure 5-2.
The three main items in Table 5-8 are pre-berthing, berthing / de-berthing and time at the berth form
the total vessel Turn Around Time.

Pre-berthing is the waiting time for the vessels and has several reasons, such as the cargo availability,
berth availability etc. Above table only distinguishes the causes of delay between ports account and
other accounts. It can be noted that most of the delays are not caused by the port but by a
combination of not readiness of cargo (waiting orders).
Berthing / de-berthing is mainly the sailing of the ship from the anchorage to the berth. The trip takes
about 1 to 1.5 hours depending on the berth location vessel size and type.
Time at the berth is separated in idle time and working time. Idle time is the time for mooring, paper
work, doctor on board etc. The working time is the actual time when cargo is loaded or discharged.

Table 5-8 Commodity Wise Vessel Turn Round Time during 2005-2006
Pre-berthing Berthing / De-berthing At the berth Total

Commodity Port AC Other AC Idle Pilotage Idle working TRT

Average in hours Average in hours Average in hours Average in hours

Crude Oil 0.1 25.3 0.2 2.7 5 25 58

POL (import) 0.4 15.0 0.0 2.3 6 20 43

LPG 2.4 17.6 0.4 2.1 5 64 92

Edible Oil 0.0 5.0 0.0 1.8 5 29 41

Other Bulk Liquids 0.0 9.0 0.0 2.1 5 12 28

Dry Bulk (Coal) 5.6 16.3 0.0 2.1 11 91 126

Fertilizer 0.0 7.8 0.0 2.1 24 148 183

Containers 0.0 3.5 0.0 1.4 6 20 30

General Cargo 0.7 3.7 0.0 1.4 19 57 82

Cement 1.4 13.8 0.0 1.7 6 73 96

Iron Ore 3.2 19.5 0.5 2.0 12 61 99

Pellets 0.0 10.5 0.0 2.0 9 24 45

POL (export) 0.0 26.4 0.5 2.5 8 28 65

Source: Administration Report 2005-2006 pages 76-77

Idle time at the berth for the type of vessels in the port should be between the 3 and 5 hours. The idle
time reported in the last two years is higher.

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BUSINESS PLAN NMPT

For the berth occupancy calculations the values under berthing / de-berthing and time at the berth are
used and exclude the pre-berthing delays (for whatever cause).
Bottlenecks can be seen for the dry bulk, especially for fertilizers and coal. These are imported
products and discharge is done by ships gear at a very slow rate. The solutions lie in mechanization of
handling techniques which is planned for coal at the Western dock. Fertilizer handling (dry bulk) can
be improved by using larger hoppers but the slow handling is most of the time a result of logistics, lack
of trucks and/or arrival of trucks alongside the ship).

Loading of iron-ore occurs also with at a very slow rate, resulting in a large TRT. Parcel sizes for bulk
are more or less equal, about 25,000 to 35,000 ton. The TRT for these commodities can thus be
compared with each other.

Figure 5-2 Average TRT vessel in the period 2004-2006

Average TRT vessel 2004-2006

250.00

200.00

150.00
Hours

TRT 2005-2006
TRT 2004+2005

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BUSINESS PLAN NMPT

5.2.4 Modal Split of Commodities


Using the figures from Table 5-9, the total amount of cargo in 2005-2006, which arrived and left the
port by road, is about 7.6 million ton. The average truck load is about 15 ton for fertilizer and about 30
ton for iron ore. An average truck load of 25 ton is taken for the calculations, which results in about
300 trucks in the port or about 800 trucks per day(in 2005/06).

Table 5-9 Model Split 2004-2006


2004/05 Despatched or Received 2005/06 Despatched or Received
Commodity Cargo Flow (in mt) (in mt)
Rail Road Pipeline Rail Road Pipeline

Crude Oil Import 11.89 12.20

POL Import 0.38 0.27 0.32

LPG Import 1.23 1.19

Edible Oil Import 0.26 0.03 0.31

Other Bulk Liquids Import 0.29 0.27

Dry Bulk (Coal) Import 0.02 0.30 0.51

Fertilizer Import 0.13 0.23 0.43 0.23

Containers import/export 0.14 0.15

General Cargo import/export 0.66 0.56

Cement Import 0.002 0.15 0.25

Iron Ore Export 0.06 5.48 0.17 5.61

Pellets Export 4.70 3.46

POL Export 7.81 8.43

Total 0.2 7.0 26.6 0.6 7.6 26.2

Source: Administration Report 2005-2006 pages 63-64 and 2004-2005 pages 119-120.

Each train or rake contains 3,500 ton and has about 61 wagons each with a payload of about 57-58
tons. In 2005/2006, 600,000 ton was transported by rail, which implies about 170 rakes per year or 3
to 4 rakes per week. Mostly fertilizer was transported by rails, followed by iron-ore.

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BUSINESS PLAN NMPT

Figure 5-3 Road Transport per Commodity for the years 04/05 and 05/06

Model Split Road 2004-2006

100%

90%

80%

70%

60%
% of the Cargo

04/05
50%
05/06

40%

30%

20%

10%

0%
Dry Bulk (Coal) Fertilizer Containers General Cargo Cement Iron Ore Pellets
Commodity

Figure 5-4 Rail Transport per Commodity for the years 04/05 and 05/06

Model Split Rail 2004-2006

70%

60%

50%
% of the Cargo

40%
04/05l
05/06
30%

20%

10%

0%
Dry Bulk (Coal) Fertilizer Containers General Cargo Cement Iron Ore Pellets
Commodity

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BUSINESS PLAN NMPT

5.2.5 Cargo Handling Distribution


The cargo handled in the New Mangalore port can roughly be divided into two groups: Dry Bulk and
Bulk Liquids. Bulk Liquids are mainly handled at the POL jetties located at he south west side of the
port, while dry bulk is mainly handled at the north east side of the port. An exact distribution of the
various commodities over the berth was not presented in the Administration reports and was obtained
during discussions with the NMPT. The results are shown in Figure 5-5. To show a more visible
distribution the figure is enlarged in Figure 5-6.

Figure 5-5 Cargo Distribution per Berth in 2005-2006 Entire Port

Cargo Distribution 2005-2006

12,000

10,000

POL export
Pellets
8,000 Iron Ore
Cement
General Cargo
'000 Ton

Containers
6,000 Fertilizer
Dry Bulk (Coal)
Other Liquids
Edible Oil
4,000
LPG
POL import
Crude Oil
2,000

0
Berth 1 Berth 2 Berth 3 Berth 4 Berth 5 Berth 6 Berth 7 Berth 8 Berth 9 Berth Berth Berth Berth Berth
10 11 12 13 14
Berth

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BUSINESS PLAN NMPT

Figure 5-6 Cargo Distribution per Berth in 2005-2006

Cargo Distribution 2005-2006

4,000

3,500

3,000 POL export


Pellets
Iron Ore
2,500 Cement
General Cargo
'000 Ton

Containers
2,000 Fertilizer
Dry Bulk (Coal)
Other Liquids
1,500 Edible Oil
LPG
POL import
1,000 Crude Oil

500

0
Berth 1 Berth 2 Berth 3 Berth 4 Berth 5 Berth 6 Berth 7 Berth 8 Berth 9 Berth 12 Berth 13 Berth 14
Berth

The cargo handling distribution can also be shown in the port map, which provides a good impression
at which berth the various commodities are handled.

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BUSINESS PLAN NMPT

Figure 5-7 Spatial Cargo Distribution per Berth in 2005-2006

5.3 Berth occupancies

5.3.1 General
The statistics as indicated in the previous sections were used to compute the berth occupancy of all
berths in the port.
The following formula was used to calculate the berth occupancy:

Total days at a berth (this includes, berthing and de-berthing + time at the berth)

Total amount of days (330)

The total available berth-days 330 days (instead of the 365 as used by the port) has been used to
determine the maximum quay side capacity. A model calculation of berth occupancy is tabulated as in
Annex C-2

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BUSINESS PLAN NMPT

5.3.2 Berth Occupancy in 2004-2006


The berth occupancy has been calculated for 2004-05 and 2005-06 per berth and the results are
presented in Figure 5-8.

Figure 5-8 Calculated Berth Occupancy 2004-2006


100%

90%

80%

70%
Berth Occupancy in %

60%

2004-2005
50%
2005-2006

40%

30%

20%

10%

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5.3.3 Quay Side Handling Capacity


The present cargo handling capacity is determined with the rates of 2005-06 and the maximum
acceptable berth occupancies as determined by the IPA are given in Table 5-10. It can be stated that
these maximum acceptable berth occupancies are in line with the international accepted standards.

Table 5-10 Acceptable Berth Occupancy (in %)


Type of Berth Acceptable utilisation

Specialised berths:

One berth 60%

More than one berth 70%

For interchangeable berths

Up to 3 berths 70%

More than 3 berths 75%

The available number of days is determined as 330 per year

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BUSINESS PLAN NMPT

Figure 5-6 shows the enlarged cargo distribution by excluding liquid cargo berths 10 and 11.
A first assessment of the berth occupancies shows that notably the liquid jetties are heavily occupied.
The berth occupancies for these jetties exceed the acceptable amounts of 70%. High berth occupancy
results logically in more waiting times for ships at the pre-berthing areas. Table 5-8 shows indeed
waiting times of 18 to 25 hours for the bulk liquids.

The maximum quay side capacity of the port under the present conditions can be calculated, using the
handling rates of 2005-06 and the acceptable berth occupancies in Table 5-10. This will result in the
graph (shown hereafter) in which the excess use is the use of the berth where the occupancies
exceed the acceptable limits. Remaining means that the berths are presently under utilized and there
is room for more cargo. As was mentioned in Section 5.2.1, there is room for improvement of the
present dry bulk handling rates. These improvements on the rates have not been incorporated in the
capacity analysis are shown in the figures hereafter. The reason is that, although the manual handling
can be slightly improved, the focus should be on the mechanization improvements.
Figure 5-9 summarises the remaining capacity, or the excess use with its implications on waiting time
as indicated in the previous section.

Figure 5-9 Capacity use by berth, 2005-06


12.0

10.0

8.0
Million Tons

Excess Use
6.0 Remaining
Allowable Througput

4.0

2.0

0.0
Berth 1 Berth 2 Berth 3 Berth 4 Berth 5 Berth 6 Berth 7 Berth 8 Berth 9 Berth 10 Berth 11 Berth 12 Berth 14
Berths

The excessive actual berth occupancy of berth 10 and 11 are entirely caused by the policy of the client
to allow tankers to wait for berth to enable them to secure a continuous flow of liquids to supply their
refinery and to satisfy export commitments.

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BUSINESS PLAN NMPT

5.4 Confrontation of supply and demand


The confrontation of supply and demand of the ports capacity is given in Figure 5-10 and Table 5-11.

Figure 5-10 Capacity use by berth group, 2005-06 versus 2012-13


25.0

20.0

15.0
Million Tons

Future Excess
Future Remaining
Current Excess Use
Current Remaining
10.0 Allowable Througput

5.0

0.0
Berth 1 Berth 2 Berth 3 Berth 4 Berth 5 Berth 6 Berth 7 Berth 8 Berth 9 Berth 10 Berth 11 Berth 12 Berth 14
Berths

Orange segments indicate the shortfall of capacity that is already experienced at the moment. In Red,
the present capacity is compared with the future throughput levels according to the traffic forecast and
current use of the facilities.

Figure 5-10 shows that the berth 10 and 11 are currently over-utilised compared to the norms as given
in Table 5-10. The cargo flow forecast shows an increase in flow by 2012-13. Without expanding berth
capacity the over-utilisation will not be solved. This justifies a berth capacity expansion that is already
planned by NMPT (development of berth 13).
Remaining capacity is available at all other dry cargo berths. Berth 8 is presently underused due to
short fall of export of pellets and concentrates.

Table 5-11 shows the maximum port capacity at the moment in case no changes in handling methods,
idle time at berths and berth allocation will occur and using the maximum allowable berth occupancies.
The jetties for bulk liquids can actually handle less than presently is done, while the dry bulk jetties can
handle more cargo. It all result in a maximum capacity of about 36 million ton for the entire port.

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Table 5-11 Allowable capacity versus current and future throughput, x mln ton
Allowable throughput capacity Throughput 2005-2006 Throughput 2012-2013

Berth 1 0.8 0.08 0.13

Berth 2 2.1 1.32 2.13

Berth 3 1.4 1.04 1.67

Berth 4 0.8 0.38 0.61

Berth 5 0.9 0.74 1.20

Berth 6 1.4 1.22 1.97

Berth 7 2.2 1.46 2.35

Berth 8 5.5 3.68 5.92

Berth 9 1.1 1.36 2.19

Berth 10 7.9 10.36 16.68

Berth 11 7.1 9.06 14.58

Berth 12 2.6 1.27 2.04

Berth 14 2.4 1.91 3.08

Total 36.20 33.88 54.55

Note: future demand is allocated on the basis of current berth use

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BUSINESS PLAN NMPT

5.5 Terminals, Cargo Handling and Storage

5.5.1 General
The prime area for ship-shore and related port activities is the port area that lies within a boundary wall
and is secured by CISF and Customs control. This total area is 565 acres excluding the water area
that covers an area of 320 acres.

Figure 5-11 Existing Land Use

Table 5-12 shows the division of land within the port security wall. The long term lease area amounts
to 123 acres and includes lease to major customers such as MRPL, IOCL,IMC and IPWC. Short term
leased (on license basis for max 3 years) area is 67 acres.

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Table 5-12 Land use within the Port Security Wall


Areas within the Port Security Wall Surface in acres Land use (in %)

Existing Leased Land 190 33.6%

Port Buildings / Roads,. 45 8%

Quay walls and jetties 15 2.6%

Greenery 185 32.7%

Unused Land 130 23.1%

Total 565 100%

Source: NMPT

The total of Port territory outside the wall is consisting of an area of 1023 acres adjacent to the walled
area and a remote area of 444 acres at some 10 km from the port. The adjacent area outside the wall
includes the Marshalling Yard, storage areas, sheds, Port Colony, Hospital, greenery, roads and
buildings and unused land.

Table 5-13 Land use outside the Port Security Wall


Areas within the Port Security Wall Surface in acres

Long and short term lease 154

Port Building , Colony, Hospital, roads etc. 295

Marshalling yard 153

Greenery 290

Unused Land 131

Quarries 444

Total 1,467

Source: NMPT

The total of all vacant and greenery area amounts to 315 acres inside the wall and 421 acres outside
the wall.

5.5.2 Storage Facilities and Areas


The port distinguishes two different storage facilities, an open area storage and closed storage such
as warehouses and silos.

At present, the port has the following open storage areas in use:
Storage of iron ore: Area of 350,000 Sq m, South of K K Gate, within the port wall
Storage of Coal: Area of 60,000 Sq m, West of the Administration building outside
the port wall
Stacking of Containers: Area of 30,000 Sq m, Just south of the Mallya gate

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The port has 2 transit sheds at berth 2 and 4. The shed at berth 2 (capacity of 8,000 ton) is currently
used for grains; while the transit shed at berth 4 (10,000 ton) is used for dry fertilizers. In addition, this
shed is partly being converted to a passengers terminal.
Two overflow sheds are located near berth 2 and have a capacity of 8,000 ton each. Another overflow
shed is located near berth 6, but it is to be demolished due to its deplorable state.
Two new warehouses are to be constructed and the area behind berth 5, 6 and 7 is being paved for
open area storage, total area is about 30,000 m2.

5.5.3 Storage for Iron ore


The (UNCTAD) guidelines for determination of storage areas for export products were used to verify
whether the existing capacity is sufficient for the present iron-ore throughput.

Figure 5-12 Source Port Development second edition United Nations (page 188)

Figure 5-12 uses the average shipload and the annual throughput to determine the maximum stacking
capacity. The average shipload for iron-ore is 30,000 ton, while the maximum throughput exceeds
4 mln ton. The figure shows a maximum stacking yard, which can hold 250,000 ton. The area
presently in use can contain 2 to 3 million ton depending on the stacking height and amount of
different grades. The area is not paved and iron-ore is dumped on the natural soil.

5.5.4 Storage and stacking of containers


Containers are stacked at a paved area of asphalt which is about 30,000 Sq m. Containers can be
stacked only 2 high due to the limitation of the equipment. The average stacking height can be taken
as 1.5. containers. The present operations need about 80 Sq m of storage per TEU. The total capacity

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BUSINESS PLAN NMPT

of the area is 560 TEU. About 30% of the area is required to store empty containers, this means that
the total capacity for full containers is only 390 TEU. The average dwell time according to the traffic
manager is about 7 days. The total throughput capacity of the present area is about 20,000 TEU per
year. The throughput in 2005-06 was 153,000 ton or 13,000 TEU. The area should be large enough to
cope wih the expected 98,000 TEU by 2012-13, certainly when the NMPT extends the stacking area
behind the fishing boat beach.
It should be noted that dwell time should be kept within days at all times to relieve the yard from costly
handling operations of shifting containers in/from stacks. Also the storage of empty containers on the
terminal should be discouraged.
Furthermore the use of reach stackers will allow 3 tier stacking which also will reduce ground slot
requirements.

5.5.5 Storage for coal


Coal is stored outside the port security wall at an area of about 60,000 Sq m. At present the NMPT is
creating more storage space north of berth 14, due to insufficient space outside the port. Only 513,000
ton of coal was imported in 2005-06, which normally requires less storage than available at present.
However the coal has a dwell time of minimum 2 months, a maximum could not be given. The area
outside the port is used as storage area for the end user, instead of transit storage.

5.5.6 Storage of Fertilizers


Fertilizers are stored in the transit sheds at berth 2 and 4. The dwell time is maximum 7 days and after
that it is moved to the storage sheds near berth 2 which are rented by the fertilizer company or the
fertilizer is transported to the hinterland. The throughput in 2005-06 was 660,000 ton with an average
ship load of 22,000 ton. The necessary storage facility should have a capacity of at least 1.5 x the
average ship load + 660,000 ton divided by 52 (dwell time is one week), which is 33,000 + 12,000 =
45,000 tons. The present capacity of the transit sheds is 18,000 ton and 16,000 ton of the overflow
sheds. The total capacity of 34,000 is not enough. The transit sheds do not provide enough space to
store 1.5 x the ship load, which is 33,000 ton. Additional capacity is necessary.

5.5.7 Storage of Bulk Liquids


The storage of liquids is entirely in hands of the refinery and the importers / exporters. They will
construct more tanks if required.

5.5.8 Storage of Cement


Cement is stored in silos outside the port and is privately operated. At this moment the capacity is
18,000 ton and is sufficient for the present throughput. In case the throughput increases, the private
operator will increase its storage capacity.

5.5.9 Storage of Other commodities


Other commodities, such as general cargo are in general not stored in the port, but transported directly
to the hinterland or transported directly from outside the port to the ship.

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5.6 Internal Transport


All cargo is transported by trucks within in the port security wall, due to the lack of railway. Within the
secured port boundary wall there are no rail tracks in use. Some old track can be found covered with
soil or partly dismantled.

Figure 5-13 Existing Port Roads and Railway (October 2006)

Existing Roads inside the port

Existing Roads outside the port


Existing Railway

Iron ore trucks arrive at the Silver Jubilee gate, south of the port, and have to transport the cargo to
the storage area near K K gate. This implies that they travel through the entire port, creating a heavy
impact on the use of the internal roads and causing pollution of iron-ore.
About 500 iron-ore trucks or 1000 movements per day were calculated in 2005-06, which means about
50 truck movements per hour. These truck movements are excluding the trucks necessary to load the
ships. A better solution is to use the K K gate (see Figure 5-13) for the iron-ore trucks, which is closer
to the storage area.
Containers are all transported by road. In 2005-06 about 9,000 boxes were moved, using an equal
number of trucks, which is 24 trucks per day or one truck per hour.
Fertilizers are transported either via rail and road. Since the port does not have railway facilities inside
the port boundary, all fertilizers are transported by trucks in side the port. About 660,000 ton was
imported in 2005-06, with an average truck load of 15 ton about 44 trucks were using the port roads,
which is 120 trucks per day or 6 per hour.

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A total number of 800 trucks per day were calculated for all commodities in the port. This means about
80 truck movements per hour or 3 truck movements per minute using a peak factor of 1.5.
A normal 2 lane road has a capacity of about 3,200 vehicles per day. The internal roads are capable of
handling the amount of trucks, but it is recommended to reorganise the truck routing, especially the
iron-ore trucks.
The port has a truck parking area close to the Hospital of 17.500 sqm. The area looks large enough to
allow some 50 trucks provided they are well instructed and park their vehicles not at random. The
future container flow may require new parking areas closer to the Mallya Gate. Alongside the N17 new
parking lots are built to absorb certain additional truck volume.

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5.7 Marine services

5.7.1 Nautical Aspects


The navigational access channel provides access to the port basins from open sea. The channel is
about 7.5km long, 245 m wide and 15.4m deep. The distance from the tip of the breakwaters to the
turning circle is about 1.5km.

Figure 5-14 Nautical Aspects in Future Port layout

The channel width is 245m and is presently used for one way traffic. The required width for one way
traffic is about 5 x B (beam of ship), 2B for fairway and 2 x 1.5B for bank clearance. Most ships have a
beam between 40 and 50m, taking into account larger vessels. The required width is 5 x 50 = 250m.
The channel has just the required width for one way traffic. Therefore two way traffic can not be
allowed.

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During the Monsoon period, strong cross shore currents occur and hinder the ships of reducing speed
in the channel outside the breakwaters. During this period, the ships can start reducing their speed
only when they are in between the breakwaters. The stopping distance depends on the ship size
(DWT and LOA) and available tugs. There are no international norms, but normally 4 to 5 times the
LOA is taken. A simulation should determine the actual distance. The distance to the turning circle is
about 1.5km, which means that vessels with a maximum length of 300m can arrive to the port,
provided the water depth is sufficient.

The present turning circle has a diameter of 490m, according to the NMPT (NMPT documents show
570m). Normally, without extensive study, the diameter of the turning circle is taken as 2 x LOA. In this
case the turning circle is sufficient for ships to a maximum LOA of 245m.
Figure 5-14, shows that the diameter of the turning circle can be increase to 600m, taking in to
account future developments in the port, such as the western dock and an additional berth adjacent to
berth 8. Ships with a LOA of 300m can be handled inside the port. The present and future turning
circle is not positioned in the middle of the access channel; this will require high skills of the pilot and
tugs to safely guide ships in and out.

Ships with a maximum LOA of 300m could be handled in port, provided there are no draft restrictions.
Bulk carriers with a LOA of 300m have a DWT of about 200,000. Tankers of that length are between
the 170,000 and 180,000 DWT. These vessels have a draft about 18.5m. At the moment draft
restrictions prohibit these operations.

The berth with the largest water depth is berth 14. This berth has a water depth of 15.10 m and can
handle ships with a draft of 14m. The quay wall has a design depth of 17m and by dredging in front of
the berth; it can handle ships with a draft of 16m and ships with a maximum of 130,000-140,000 DWT.

All liquid berths have permissible drafts up to 14m. Berth 10 and 11 can be combined using the each
others mooring dolphins for large vessels. Combining the two berths should only considered as an
exception and in case it does not create congestion. These berths can be deepened to a water depth
of 18.2m and an allowable draft of 17m (to cater for 150,000 DWT and LOA 285m). The critical
limitation at these 2 berths is the length of the ship. It is designed for a maximum ship of LOA 245m.
Larger ships can be handled when berth 10 and 11 will be combined. Tankers with a LOA of 245m
have on average a DWT of 100,000 and a draft of 14m.

Concluding, only for berth 14 and to some extent for berth 10 and 11 deepening of the channel is
useful. In case the channel is dredged to at least 17.5m, berth 14 can be deepened, and ships up to
140,000 DWT can be accommodated.

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In the future, when additional berths are developed, the channel might be deepened further to 19.5m.
This water depth allows ships up to LOA 300m and bulk carriers up to 200,000 DWT to enter the port.
The new berths obviously should be designed for such ships. The width of the channel will be increase
when deepened. A detailed technical study should be taken up to verify of that this does not
jeopardize the stability of the breakwaters. Since the limitation for the ship sizes is the turning circle
and not the stopping distance, there should not be any need to extend the breakwaters.

5.7.2 Ship calls


The present volume of ship calls (1,087 in 2005/06) does not cause a problem to the marine service
organisation and its performance. With an average number of ship calls of around 3 per day the
marine services can be adequately executed. Even with a substantial increase in ship calls the
present capacity of pilotage launches, tug boats and mooring boats looks adequate to handle the
demand, provided the equipment is well maintained and crews and administrative staff is performing
timely and professionally.

5.7.3 Pilotage operations


Ships waiting for the pilots at anchorage need to redirect their vessel to allow safe boarding of pilots
during the Monsoon periods. This causes the ship to turn their ship around to enter the channel.
In general, pilots dislike very much the sailing on the present pilot launches during the Monsoon
periods due to the swell. Two plans exist to ease this situation: using faster pilot boats (speed 15-20
knots) and the utilization of helicopter haulage of pilots during Monsoon periods.

NMPT faces furthermore an acute shortage of pilots. The requirements are to employ 6 pilots but the
in near future only 3 pilots remain available, which results in excessive servicing of staff and the
possibility of failure as a result of tiredness. The background problem is that experienced Master
Mariners and Captains can earn better salaries (wages) on board of merchant ships than when
working for NMPT, for which strict class oriented remuneration system is in place (as for all major
ports). A secondary problem is that short term hired pilots do not enjoy the same secondary benefits
as long term registered civil servants at NMPT.

Apart from the remuneration issue, the shortage of pilots may result in a reduction of operating hours
(for instance night time service). This will damage the ports performance and result in waiting time for
ships.

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5.7.4 Tugboat services

At present, the port operates with 5 tugboats of which 1 of 22.5 ton BP capacity, 3 of 32 ton BP and 1
of 50 ton BP capacity. In line with the increased vessel traffic and vessel size, the amount and size of
tugs should be checked versus the required amount and bollard pull. The port is presently able to
handle vessels up to 100,000 DWT. In case the vessels in the port become larger, for example after
deepening of the channel and the basin, additional 32 ton BP Tugs should be purchased.

The Marine Department has indicated that it will replace the 22.5 BP capacity tug with a 32 BP tug in
the next year. The NMPT prefers to limit the use of the 50 BP tug as the fuel consumption is twice the
level of a 32 BP tug.

5.7.5 Vessel Traffic Management


The function of safe navigation resorts under the control of the Harbour Masters office that employs a
VTMS system in port. The system is AIS compatible and equipped with radar and VHF systems. In
general the system works well but no interlink exists between fixed (main vessels particulars) and
dynamic data (cargo details, draft). An IT project is ongoing to solve this inefficiency that causes re-
entry of data.

The existing AIS (automatic information system) and radars are in place at the marine control tower
and are sufficient for the navigation aid. The layout of the port is such that vessels guidance through
VTMS inside the lagoon is not practical at present. The IT requirements to accomplish such
efficiencies are discussed in Section 7.6.

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6. INFRASTRUCTURE INVESTMENTS

6.1 Introduction
This section describes the possible investment projects that could be implemented in order to cope up
with the future demand. The shortfall in capacity was determined in section 5.2. NMPT has updated
the investment project list for the NMDP, which includes project to enhance the ports capacity. This
list has been taken as reference. All major projects are reviewed in the light of demand-capacity
analysis but also on the timing, the efficiency and the urgency of projects. Moreover, consultants have
made proposals for amendment of renewal of projects in order to enhance the efficiency in the port.

6.2 NMDP Projects


The projects as approved in NMDP have been reviewed by NMPT in the 11th 5-year plan. The list of
plans consists of projects involving:
1. Deepening of channels and berths/jetties
2. Construction/reconstruction of berths/jetties
3. Procurement of equipment
4. Rail and Road connectivity works
5. Other projects

The list of NMDP projects (see Table 6-1) is reviewed on the bottlenecks that exist and may appear as
a result of shortage of capacity and of the imminent interest of customers to improve or construct
facilities. The review has thus lead to identifying urgent projects and less urgent projects. This has
resulted in some rescheduling of projects to either earlier implementation or later implementation and if
required of amending the time span of investments in the coming years.

While the less urgent projects are reviewed on their need for execution, the urgent projects have been
financially analysed in section 6.2 and beyond.
The consultants have identified several improvement projects which are outlined hereafter partly
based on the list of projects of the port and partly basing on the port analysis and cargo forecast.
Furthermore an elaboration is given on the NMPT projects list as shown in the section hereafter.
The overall strategy of NMPT should be to optimize the ports capacity by combining handling of
similar cargo types and by mechanization. This results in separate and dedicated handling facilities for
liquid cargo, dry bulk and container in the port.
Dedicated berths or priority berths for these main commodities are highly relevant to keep the
customers satisfied. A prime condition for success is that these commercial berths and jetties will be
operated by professional stevedores or private operators those use sufficient modern handling
technology to maintain the ports overall capacity.

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Table 6-1 Investment plans as per NMDP, January 2007 (Rs in Cr.)
Project IR/EBR PPP Total Start Completion

1. Deepening of channels/berths

Improvement berth 8 to 14 m 18 18 2011-12 2011-12

Deepening channel/lagoon to 17 m 390 390 2009-10 2011-12

2. Construction of berths

Development LNG terminal 2600 2600 2008-09 2010-11

Coal handling Western dock-NPCL, b. 15 230 230 2006-07 2009-10

POL jetty at Oil Dock 50 50 2008-09 2009-10

Bulk cargo berth at W Dock 50 50 2008-09 2009-10

Mechanised Iron Ore b. 14 103 103 2007-08 2008-09

Container Terminal for Transshipment 700 700 2009-10 2011-12

Outer harbour development of facilities 300 1025 1325 2010-11 2011-12

SBM for Crude oil 250 250 2009-10 2011-12

Multipurpose berth at W. Dock, b 18 50 50 2010-11 2011-12

3. Procurement of equipment

Harbour cranes 30 30 2010-11 2011-12

Harbour tugs 50 50 2007-08 2011-12

4. Rail and Road connectivity

Internal roads 50 50 2007-08 2010-11

External roads 10 885 895 2007-08 2011-12


Programme of Ministry of
Railway link to KRCL
Railways
5. Other projects

Marshalling yard 10 30 40 2007-08 2009-10

Bunker facilities 10 10 2007-08 2007-08

Dev of SEZ 1 4 5 2007-08 2007-08

Grand Total 1009 5837 6846

Source: NMPT

Four top projects were selected to be financially screened. These projects were chosen primarily on
the urgency to clients and the importance to the Port to fulfil its strategy.

The overall strategy of NMPT should be to optimize the ports capacity by combining handling of
similar cargo types and by mechanization. This results in separate and dedicated handling facilities for
liquid cargo, dry bulk and container in the port.

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Dedicated berths or priority berths for these main commodities are highly relevant to keep the
customers satisfied. A prime condition for success is that these commercial berths and jetties will be
operated by professional stevedores or private operators that use sufficient modern handling
technology to maintain the ports overall capacity. .

For each projects the following items will be covered:


General description and motivation
Potential throughput is based on the traffic forecast
Capacity
Investment and operational costs
Manpower
Implementation period
Feasibility of the project on financial and economic grounds

The 4 top projects are (see Figure 6-1):


1. Iron Ore Mechanization Facility at Berth 14
2. The development of a coal import terminal (berth 15)
3. The development of the container terminal at berth 1 and 2
4. The development of liquid cargo jetty at berth 13

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Figure 6-1 Location of top Projects

In order to assess their feasibility a project appraisal needs to be made to see the overall effect of the
project without indirect benefits to the society.

Project Appraisal
Projects are normally assessed via feasibility. Two main types are commonly used:

1. Financial Feasibility.

The feasibility concentrates on the perspective from the investors point of view. In this assessment the
ownership of property and equipment is irrelevant (either NMPT and/or a private party). The financial
assessment is made to show the attractiveness for private investors to participate in tenders for
privatisation (BOT and other concessions) of terminals.

2. Economic feasibility.

In this assessment the project is compared with the existing situation (e.g. not investing) and wider
economic (logistics) elements are observed such as the benefits to the trading industry and the
environment. The economic assessment is not undertaken in this study but the relevant economic
effects from investment plans are described for each major project. An economic feasibility is thus

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wider than financial feasibility. However, not all theoretically possible elements need to be included in
such an evaluation. When a project is feasible on the basis of direct user benefits for instance, no
further analysis is required.

Financial feasibility
The consultant applied a financial assessment model (in MS Excel) that consists of the following
modules:

Assumptions: Assumptions with respect to the main financial and operational aspects
Tariffs: A list of tariffs based on the existing tariff structure, allowing for scenario adjustments
Financing: A financial indicator for loans
Cargo forecast based on market orientation and specific commodity production and demand
limits
Revenues: Revenue calculations on the basis of the NMPT and stevedoring tariffs and cargo
forecast volumes
Investments timing: years the components of the investments are purchased
Investments: Listing of the investment components, the depreciation and re-investment
scheduling
Operational costs : Staff, maintenance, general expenses and overheads.

The investment appraisal assumes a 100 % funding, e.g. no loans are taken into account.
Cargo flows are set according to the forecast in Section 4.
Tariffs of wharfage are based on NMPTs scale of rates (as of July 2006), while assumptions on
stevedoring rates are based on the Indian market. Port dues, berth hires and berth lease (if applicable)
are based on NMPTs tariffs too.

The Model calculates all yearly costs (investments and operational) and revenues and calculates on a
discounted cash flow basis, the Internal Rate of Return (IRR). Furthermore the model sets the Net
present Value of the project at a discount rate of 8 % per annum.

Project acceptance
Once the IRR is calculated the project should be reviewed for approval.
This should be done by taking the economic benefits into account. Once the IRR may not suffice from
a commercial perspective, the economic benefits may support the project. In this case the investor
needs to be supported by governmental support, either by PPP (a part of investments is paid by the
port with or without governmental support (soft loans, tax incentives).
For terminal development projects under the Land lord model, the port will look at the part of
investments that it will make itself and relates this to income from wharfage and vessel related dues.
The financial consequences of the calculation in the yearly cash flow of NMPT is dealt with in the
Business Plan.

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Two projects have been calculated from two different perspectives, that of the BOT operator and that
of NMPT as a Landlord. The respective projects are the NPCL coal terminal and the mechanisation of
the Iron Ore handling operations. The inputs used are as per the proposed contracts.
For the POL jetty and the proposed container terminal, the calculations are based on an integral
approach (i.e. from a Service Port perspective) whereby an analysis is added to the range of possible
royalties that a project can bear without jeopardising the attractiveness to a private operator. In this
Service Port concept, NMPT is organising ship-shore operations and the concessionaire all other land
operations (from quay to stack and beyond).

A DCF method (Discounted Cash Flow) is applied to all 4 top projects in order to assess their financial
viability.

The following general principles for all investment appraisal calculations were applied:
Life time infra structure is set at 50 years. The residual value after 20 years is entered into the
cash flow of the project as a negative capital expenditure. This value is taken as the residual
book value (i.e. purchase price minus depreciation). In the summary tables of the financial
results, this item is shown as divestment.
Life time equipment (various types) is set at 10 years for equipment that has high turnover and
maintenance intensity (such as electrical works) and 20 years for other types of equipment.
The discount rate is set at 8%
Only those income and cost elements that are relevant to the investment are taken into
consideration.
Where applicable an incremental IRR has been calculated. This is the IRR based on the net
cash flow that results from the implementation of the new project less the cash flow that could
be realised if the existing solution were to be continued.

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6.3 Iron Ore Mechanization Facility at Berth 14

6.3.1 General description and motivation


Berth 14 is in principle very suitable for iron ore handling since it provides space for a stacking yard, a
mechanized loading facility and has a water depth larger than 14m. NMPT has already initiated this
project and is currently in the process of the BOT tender for the mechanization of berth 14. The tender
is based on a previous executed feasibility study.

The main concept in this study is that the iron ore, which arrives by train or by road will be stacked in a
proper organized stacking yard. The iron ore will be transported by belt conveyors from the stacking
yard to the berth. Re-claimers will pick it up from the stacking area and ship loaders at the berth will
load the vessels.

Presently the loading of iron ore is done with slings at several berths, with a very slow loading rate and
causing environmental problems. The spill of the iron ore often falls literally between the quay and
ship, the quay walls are polluted with iron ore.
A mechanized loading facility solves these problems, since a proper and environmentally considered
stack yard will be developed . Also loading rates will be much higher and as a result the ships TRT will
decrease drastically.

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Figure 6-2 The Iron-Ore Mechanization Facility at berth 14

6.3.2 Technical description


The average ship size calling at berth 14 will be approximately between 60,000 and 70,000 DWT. The
rate of ship loading should be selected in such a way that a ship can be loaded in 1 day for a
Panamax size bulk carrier ships and 2 days for sizes over 130,000 DWT (only feasible when the
entrance channel will be widened and deepened). In most cases higher loading rates alone will not
directly result in a shorter TRT for the vessel. This is due to the necessary time for paper works,
readiness of the ships next destination, etc.

In case the mechanized loading facility is intalled as indicated in Figure 6-2, the berth will be able to
load about 8 million ton of iron ore with two ship loaders with a capacity of 1,500 ton/hr per loader or
3,000 ton/hr total.

The mechanization of the handling at berth 14 implies that this berth increases its throughput
drastically and will lead to a shift of iron-ore consignments from the berths 1-7. As a result of this, the
occupancy rates for these berths will drop to below the 50% and creates capacity for other type of
cargo.

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In the new concept, the supply of material by trains will be unloaded at the marshalling yard by
dumping the iron-ore in a receiving pit. This can be mechanized by a wagon tippler or wagon bottom
discharge (in case the wagons are equipped for this) or manually. In case that manual unloading is
selected the following method can be used. Each wagon of the rake is unloaded at a special rail track
with a reception tunnel with a belt conveyor along side. The rake can be unloaded in 3 hrs (present
rates according to NMPT) which means that each rake of 3,500 ton can be unloaded at a rate of 1,100
ton per hour

In the financial feasibility, the option to use a mechanized wagon tippler is taken. The tippler can
unload a rake in about 1 to 2 hours which is slightly faster than manual unloading, but much friendlier
for the workers.

The cargo is transported to the stacking yard with a belt conveyor and staked using a stacker-re-
claimer. This equipment grabs the ironore up from the stack and a belt conveyor transports the ore to
the ship loaders on the quay.

The new stacking capacity can be determined using the graph in Figure 5-12. The average parcel size
will be 70,000 ton while the annual throughput exceeds the 4 million ton. The figure shows a required
storage of 500,000 ton. The stacks will be about 35m wide and will have a height of 10m and will have
a storage capacity of 175 ton per meter length. The stacking length is 650m, which means that the
total capacity per stack is 114,000 cubic m or about 300,000 ton. There is space to create 3 stacks
and the maximum capacity will be 0.9 million ton. Since the project is anticipated to be executed as a
BOT project, the investor or operator will determine the final required stacking area. The rough
calculations here above show that enough space is available.

6.3.3 Economic feasibility of the project


The existing facility is using manual labour, resulting in low turn-around-times. The vessels calling at
the port for discharging iron ore are up to 70,000 Dwt, but the average parcel size is 40,000 tons.
Berth days are calculated to fall to 1.5 per call, down from around 6 currently. Increases in parcel sizes
and vessel sizes are likely when mechanisation is realised and sufficient cargo is generated. The
reduction in TRT is around 4.5 days. The economic benefits accruing to the users are in the order of
1150 days of ship time not alongside in the near future and rising to 1380 when at full capacity. This
large reduction is possible as cargo from other berths will relocate to Berth 14. The cost saving to the
clients is estimated on the basis of a time-charter equivalent of 15,000 USD/day for a Handymax and
25,000 USD/day for a Panamax, indicating that annual savings are in the order of USD 19 Mln/yr, or
USD 400 Mln over 20 years.

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The benefits are :


larger capacity at berth 14 to cater for cargo flow growth
concentration /dedication of handling operations for one cargo type
safer and environmentally friendly operations
generation of new cargo flow as a result of lower C/F cost of product which enables more
trade.

The present capacity of berth 14 is a mere 2 mln ton per annum. Any excess volume would need to be
handled (manually) at other berths that will also not be equipped with a mechanised loading system
and would thus not benefit from the savings. Dedication of terminals is not feasible when the
mechanisation does not take place.

Furthermore the concentration of all iron ore fine handling to one (sophisticated) berth will free up
berth space for other cargo at other berths. This will result in additional income to the port from marine
services, wharfage dues and berth hire of other vessels. These benefits have not been estimated for
this project.

The project can be made operational in 2009.

6.3.4 Financial Feasibility

The total investment is estimated at Rs 196.6 Cr. and is specified in Table 6-2.

Table 6-2 Investment mechanisation Berth 14


Cost x USD (Mln) Cost x Rs. Cr.

Belt conveyor 7.4 33.1

Transfer tower 0.8 3.6

Stacker/ reclaimer 10.8 48.8

Loader 9.0 40.5

Electrical works 3.0 13.5

Civil works 6.7 30.1

Wagon tippler 4.0 18.0

Unloading station wagons 2.0 9.0

Total 43.7 196.6

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The estimation differs from the NMDP plan estimate (Rs 103 Cr) due to a tailor made mechanization
scheme based on market prices.
The operator will pay to NMPT a royalty of Rs. 36/ton as well as a land lease of Rs. 1.1 Mln/Ha per
year. The wharfage will be levied to the user of the berth by NMPT and is Rs. 35/ton. In total, NMPT
will receive Rs. 71/ton for every cargo handled, while the BOT operator receives Rs. 120/ton. This
charge is a reflection of the fact that the current handling operations are manual, which result in similar
total charges to the user.

Furthermore, with increased throughput it is assumed that storage will start to generate revenues as
well. The rate is set at Rs 3.5 per ton as an average income. This is comparable to the average
generated in other ports.

It is estimated that the current number of staff involved in the loading of the Iron Ore is around 150 to
handle around 2 mln ton/year, with an average all-inclusive salary of Rs 200,000 /year. Total labour
cost (salaries) amounts to Rs 3.0 Cr./year.

In the new situation, the staff for the mechanical facility is estimated at 100 per year when working at
full capacity. The initial staff required is estimated to be the same, as the throughput in the start-year is
projected to be 7.5 mln ton/year and additional volume can be realised through efficiency gains.
Average labour costs will be higher than for the manual unloading, as higher staff qualification is
required. At an average salary cost of Rs 290,000 per head /per year or for 100 staff a total of Rs 2.9
Cr. per annum.

Table 6-3 Comparison of Current and New situation parameters


Current New

Staff 150 100

Average salary * , Rs Lakh 2.0 2.9

Total labour cost, Rs. Cr./yr 3.0 2.9

Wharfage Rs/ton 35.0 35.0

Handling Rs/ton - 120.0

Storage Rs/ton - 3.5

Royalty Rs/ton 36.0

Land Lease (on 14.5 Ha) Rs.Mln/year 15.9

* includes payments of pensions and other benefits, calculations

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Maintenance cost are set as follows on the civil works: 1.5% p.a., equipment: 2.5% p.a.. and 6% for
the electrical works.

The residual value of the investments that have a lifespan greater than the calculation period is
included as a negative capital expenditure in the final year. However, it should be realised that this
amount may not be fully realised in liquidity.

A comparison between the existing and new situation is not undertaken, as the operational set-up is
entirely different. NMPT will no longer handle cargo, a BOT operator will do so. Therefore, a
comparison between the financial returns of the BOT operator and NMPT is shown, to indicate the
viability of the project of the private operator and the attractiveness for NMPT.

The current situation is generating positive income to the port of around Rs 17 per ton. For the BOT
operator, the net income is expected to be nearly Rs. 57/ton. The port is expected to receive nearly
Rs. 72/ton.

The Net Present Value of the project is Rs 261 Cr. when discounting at 8% for the operator. For NMPT
the NPV is Rs. 556 Cr.

Table 6-4 Summary table of financial feasibility over 20-year period


Item Current situation New situation New situation

BOT operator NMPT

Total operating Cost, Rs/tonne 33.7 14.1* 0.7

Net income, Rs/tonne 17.4 57.25 71.6

IRR, % 32% 120%

NPV @ 8%, Rs. Cr. 260.9 555.8

Note:* excludes the Royalty payment to NMPT, which is not considered to be an operating cost, but a charge to income

The mechanical handling tariff makes the project feasible for the operator. NMPT undertakes limited
investment only, and its operating cost is very low. Given that the port expects to cream off a
substantial amount of the operators revenue, while retaining the wharfage, the resulting financial
results are very positive indeed for NMPT.
Table 6-5 below details the financial implications for the BOT operator on the basis of above
assumptions. Likewise, the revenue stream and cash-flow for the port is indicated.

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Table 6-5 Details of the financial feasibility in the new situation, BOT operator x Rs Cr.

Year

-2 -1 1 2 3 4 5 10 15 20

Throughput (mln Iron Ore


ton) 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0

Revenues Handling 96.0 96.0 96.0 96.0 96.0 96.0 96.0 96.0

Storage 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total 96.0 96.0 96.0 96.0 96.0 96.0 96.0 96.0

Royalties paid Land lease 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5

Throughput fee 28.8 28.8 28.8 28.8 28.8 28.8 28.8 28.8

Total 30.3 30.3 30.3 30.3 30.3 30.3 30.3 30.3

Operating cost Labour 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9

R & M.
Consumables 7.2 7.2 7.2 7.2 7.2 7.2 7.2 7.2

Other 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1

Total 11.3 11.3 11.3 11.3 11.3 11.3 11.3 11.3

Depreciation 8.6 8.6 8.6 8.6 8.6 8.6 8.6 8.6

Total cost 19.9 19.9 19.9 19.9 19.9 19.9 19.9 19.9

Net Income 45.8 45.8 45.8 45.8 45.8 45.8 45.8 45.8

Capex Investment -166.5 13.5

Cash flow -166.5 54.4 54.4 54.4 54.4 54.4 40.9 54.4 54.4

Note: numbers are rounded so that totals may differ from individual items.

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Table 6-6 Details of the financial feasibility in the new situation, NMPT x Rs Cr.

Year

-2 -1 1 2 3 4 5 10 15 20

Throughput (mln Iron Ore


ton) 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0

Revenues Wharfage 28.0 28.0 28.0 28.0 28.0 28.0 28.0 28.0

Royalties 30.3 30.3 30.3 30.3 30.3 30.3 30.3 30.3

Total 58.5 58.5 58.5 58.5 58.5 58.5 58.5 58.5

Operating cost R & M.


Consumables 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

Other 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Total 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5

Depreciation 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6

Total cost 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2

Net Income 57.3 57.3 57.3 57.3 57.3 57.3 57.3 57.3

Capex Investment 15.1 15.1 13.5

Divestment -18.12

Cash flow New situation -15.1 -15.1 57.9 57.9 57.9 57.9 57.9 44.4 57.9 76.0

The project will be carried out as a BOT project. As the project returns are very attractive, it is likely
that a private operator can be found to execute the project.

In summary:
The project is generating an IRR of 32% for the private operator, while the port can expect a very high
IRR, here estimated at 120% Very significant economic cost reductions are realised in terms of vessel
time, which benefits the clients. The project is financially and economically attractive and has room for
private operatorship.

The consultants advise to carry out the project.

Financial coverage
The financial coverage for the investments is expected to be made by a (selected) operator who will
have a long term concession to operate the berth.

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NMPT is not expected to invest in any super structure while investments on the infrastructure has
already been completed in March 2006. It is assumed that operators can be found based on the
assumption that NMPT has negotiation margin in the shape of wharfage dues. The results of
negotiations should lead to a concession agreement in which final wharfage dues to the NMPT are
fixed. These dues will be taken as income to the future revenues of the NMP and reported in the
Business Plan.

6.4 Development of a Coal Terminal (berth 15)

6.4.1 General description and motivation


At present about 600,000 ton coking coal is imported at various berths in the port. It is expected that
for the use in power plants thermal coal will be imported. Discussions between one of them, the
Nagarjuna Power Corporation at Padubidri (near Mangalore) and the NMPT for the construction of a
dedicated coal import berth are serious. It is reported that NPCL wants to invest in the quay wall,
dredging works at the waterfront of the berth and the unloading installation. The location for such berth
is selected just west of berth 14 and will be the first part of the development of the western dock.

A further increase in import of coal is expected once the terminal becomes operational. The handling
of coal is planned to be done through a mechanized installation. Presently coal is unloaded by ships
gear at a very slow discharge rate (about 3,000 to 4,000 ton per day). In this development both
pollution (dust) levels at the port will be minimized and bulk carriers will have a lower TRT which
should result in lower ocean freights for the buyer (or the seller).

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Figure 6-3 Coal Terminal at berth 15

6.4.2 Technical description


The quay wall, which will be constructed should be able to accommodate vessels of about 50,000
DWT or larger. Since the quay wall will be part of the future Western Dock, it is advisable to construct
the quay with sufficient water depth preferable to 17-18m. The anticipated parcel size in the future will
be between the 60,000 and 80,000 ton or larger in case these vessels can enter the port when enough
draft is available. In order to create sufficient discharge capacity to unload the vessel within 1 or 2
days, two un-loaders (grab un-loaders) should be placed at the berth with a capacity of 1,500 tph each
or 50,000 ton per day total capacity. This will result in an overall quay wall capacity of about 8 million
ton per year.
In the case that NCPL would not be willing to undertake the role of operator, the development of the
dock and terminal may be granted to a third party developer/operator on a BOT contract basis.
The storage of the coal can be located just behind the berth. The storage capacity should be at least
1.5 x the parcel size + some reserve, preferably one week of storage. This will result in about 270,000
ton of storage. The storage can be organized in stacks of about 35 m wide and 10m height, resulting
in 175 sq. m storage per m stacking length or 140 ton storage per meter stacking length. The

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maximum available length is 650m, which means that each stack has a capacity of about 90,000 ton.
Space for three such stacks is available, which can provide a total storage capacity of 270,000 ton.

The coal is reclaimed from the stack, using re-claimers and transported to the marshalling yard by
conveyor belts. It is assumed that all of the coal will be transported to the hinterland by rail. At the
marshalling yard, a wagon loading facility will be installed for proper loading of the coal wagons.

6.4.3 Economic feasibility of the project


The existing facility is using manual labour, resulting in high turn-around-times. The vessels calling at
the port for discharging coking coal are approximately 40,000 DWT, with an average load of 35,000
tons. Berth days are calculated to fall to 2.0 per call, down from around 3.6 currently. This will result in
lower ocean freight rates depending on charter market levels for ships hire. Based on a Time charter
rate of about Rs 900,000 (US$ 20,000) per day, the decrease in berth days of 1.6 will result in roughly
a saving of Rs 45 (US$ 1) per ton on ocean freight.

Increase in parcel sizes and vessel sizes are likely to happen when mechanisation is realized and
sufficient cargo is generated. This results in an extra saving on ocean freight from applying economy
of scale. Development of a power plant is likely to generate 3 mln ton per year throughput and will
most likely result in moving towards Panamax-size vessels. For Coking Coal, imports are currently
limited and given the projected throughput, vessel size increases are not expected. For other coal
import however, the utilization of Panamax vessels will give a similar saving effect when mechanized
handling is installed. This effect is, as explained, not taken into account in the financial feasibility.
In addition, the client will save considerably on stevedoring charges.

6.4.4 Financial feasibility


The incremental throughput over the berth is estimated to rise from 3 mln ton in the first year of
operations to around 5-6 mln ton by the end of the project horizon (20-years). The project can be
operational in 2009 and thermal coal throughput can commence 2010.
The total investment is estimated at Rs 194 Cr and broken up as follows:

Table 6-7 Investment mechanisation Berth 15


Cost USD (Mln) Cost Rs. Cr.

Grabunloaders 10.0 45

Betlconveyors 5.0 23

Stacker / Reclaimers 8.0 36

Hoppers 1.0 5

Transfer towers 1.0 5

Wagon loader 4.0 18

Fill / Dredging 3.0 14

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Cost USD (Mln) Cost Rs. Cr.

Rails Loader 0.2 1

Mechanical Works 3.0 14

Quay Wall (300m) 7.5 34

Civil Works 0.5 2

Total 43.2 194

The depreciation period is split in three categories. The civil works are depreciated over 50 years,
while the equipment is split into equipment with high maintenance cost and short operational life time
(10 years) and that with longer life time (20 years) and lower maintenance cost. On this terminal, all
equipment has an operational life time of 20 years, except for the belt-conveyors. The residual value of
the civil works is added in the last year to the cash flow.

The income elements of the project are split between the BOT operator and the port.
For the BOT operator the income is as follows:

The coal handling facility is part of an industrial process for the operator of the berth. Hence, rather
than directly paying handling rates, the operator will face a shadow cost. This shadow cost is assumed
to be the same as the possible revenues the operator could realise, if and when the company would
handle third party cargoes. A total shadow cost of Rs. 125/ton has been assumed, which is a payment
for the mechanical handling, in line with the current manual labour cost.

The berth hire is collected by the BOT operator, as the berth will be constructed by NPCL.

Furthermore, with increased throughput it is assumed that storage will generate revenues as well. The
rate is set at Rs.3.5/ton as an average income. This is comparable to the average generated in other
ports.

For NMPT, income is as follows:


The BOT operator will pay a Landlease of Rs. 1.1 Mln/Ha per year. The total area is 10 Ha.
Royalties are Rs. 19/ton
Wharfage of Rs. 25/ton for cargoes other than Thermal Coal.
50% Berth hire of all cargo throughput over and above 3 mln t /year.

The incremental cargo will generate revenues to the port in the form of port dues, pilotage and towage.
On the cost side, apart from the Royalties the operator pays to NMPT, the operator will also pay for
maintenance dredging in front of the berth.

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It is estimated that the current number of staff involved in the unloading of the coking coal is around 50
to handle around 0.6 mln ton/yr, with an average all-inclusive salary of Rs 200,000/yr. Total salary
amounts to Rs 1.0 Cr./yr.
In the new situation, the staff for the mechanical facility is estimated at 100 per year when working at
full capacity. The initial staff required is estimated at 40, irrespective of the amount of cargo handled.
Average labour costs will be higher than for the manual unloading, as higher qualification is required.
Total salary costs are set at 290,000 Rs/yr for 40 staff, or Rs 1.2 Cr/yr. This will increase as throughput
increases to a maximum of Rs 2.9 Cr/yr.

Table 6-8 Comparison of Current and New situation parameters


New situation New situation
Current
BOT operator NMPT
Staff 50
Average salary * (Lakh Rs.) 2.0 2.9
Total labour cost, Rs. Cr./yr 1.0 1.2
Royalty Rs. Ton - 19
Wharfage Rs/ton** 25.0 - 25
Handling Rs/ton - 120
Storage Rs/ton - 3.5
Berth hire, Rs. Mln/call 0.1 0.05 over 3 Mt/yr
* includes payments of pensions and other benefits, calculations ; ** Assumed shadow revenue

Maintenance cost on the civil works: 3.5% p.a (which includes maintenance dredging)., short life
equipment: 6% p.a. and long life equipment 2.5%. The conveyor belts will be replaced after 10 years.

The current situation is generating positive income to the port of around Rs 20 per ton. For the BOT
operator, the net income is expected to be around Rs. 76/ton. The port is expected to receive around
Rs. 34/ton.
The Net Present Value of the project is Rs 270 Cr. when discounting at 8% for the operator. For NMPT
the NPV is Rs. 162 Cr.

Table 6-9 Summary table of financial feasibility over 20-year period

Item Current situation New situation New situation

BOT operator NMPT

Total operating Cost, Rs/tonne 34.5 15.2 -

Net income, Rs/tonne 20.3 76.3 34.1

IRR, % 22.2% -

NPV @ 8%, Rs. Cr. 270 162

Note:* excludes the Royalty payment to NMPT, which is not considered to be an operating cost, but a charge to income

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The mechanical handling tariff makes the project feasible for the operator. NMPT undertakes limited
investment only, and its operating cost is very low. Given that the port expects to cream off a
substantial amount of the operators revenue, while retaining the wharfage, the resulting financial
results are very positive indeed for NMPT.
The following tables detail the financial implications for the BOT operator on the basis of above
assumptions. Likewise, the revenue stream and cash-flow for the port is indicated.

Table 6-10 Details of the financial feasibility in the new situation, BOT operator x Rs Cr.

Year

-2 -1 1 2 3 4 5 10 15 20

Throughput (mln Coking coal


ton) 1.8 1.8 2.0 2.2 2.4 3.2 4.0 4.7

Thermal coal 2.0 2.5 3.0 3.0 3.0 3.0 3.0 3.0

Total 3.8 4.3 5.0 5.2 5.4 6.2 7.0 7.7

Revenues Handling 47.5 53.8 62.5 65.4 67.1 77.6 88.1 96.5

Storage 0.6 0.6 0.7 0.8 0.8 1.1 1.4 1.7

Total 48.1 54.4 63.2 66.2 67.9 78.7 89.5 98.2

Royalties paid Land lease 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1

Throughput fee 7.2 8.2 9.5 9.9 10.2 11.8 13.4 14.7

Total 8.3 9.3 10.6 11.0 11.3 12.9 14.5 15.8

Operating cost Labour 0.8 0.9 1.0 1.0 1.0 1.2 1.3 1.4

R & M.
Consumables 6.9 7.0 7.1 7.2 7.2 7.4 7.6 7.7

Other 0.8 0.8 0.8 0.8 0.8 0.9 0.9 0.9

Total 8.5 8.7 9.0 9.1 9.1 9.4 9.8 10.0

Depreciation 9.1 9.1 9.1 9.1 9.1 9.1 9.1 9.1

Total cost 17.6 17.8 18.0 18.1 18.2 18.5 18.8 19.1

Net Income 22.3 27.4 34.6 37.0 38.4 47.3 56.2 63.3

Capex Investment -24.8 -169.7

Divestment 29.7

Cash flow -24.8 -169.7 31.3 36.4 43.6 46.1 47.5 56.4 65.3 102.1

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Table 6-11 Details of the financial feasibility in the new situation, NMPT x Rs Cr.

Year

-2 -1 1 2 3 4 5 10 15 20

Throughput (mln Coking coal


ton) 1,8 1,8 2,0 2,2 2,4 3,2 4,0 4,7

Thermal coal 2,0 2,5 3,0 3,0 3,0 3,0 3,0 3,0

Total 3,8 4,3 5,0 5,2 5,4 6,2 7,0 7,7

Revenues Wharfage 4,5 4,5 5,0 5,6 5,9 8,0 10,1 11,8

Berth hire 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Royalties 8,3 9,3 10,6 11,1 11,3 12,9 14,5 15,8

Total 12,9 13,8 15,6 16,7 17,2 21,0 24,7 27,7

Operating cost Total 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Depreciation 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Total cost 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Net Income 12,8 13,8 15,6 16,6 17,2 20,9 24,7 27,6

Capex Investment 0,0 0,0

Divestment

Cash flow New situation 0,0 0,0 12,8 13,8 15,6 16,6 17,2 20,9 24,7 27,6

The project will be carried out as a BOT project.

In summary:
The project is generating an IRR of 22% for the operator, on the basis of the shadow revenue
assumption. For the port, the IRR is infinite, as no investment is made. The net income per ton rises
marginally compared to the current situation, but the throughput increases for no investment. The
project frees up capacity on berths 2, 3, 6, 7 and 14, which will be available for other cargoes.
Significant cost reductions are realised in terms of vessel time, which benefits the clients.
Financial coverage
Since the berth is a full concession (BOT) with NPCL, NMPT will not be required to reserve any funds.
In that case the Port may act as partner in the PPP by supporting to the development of the dock.
NMPT may consider to expand the dock with other berths (to share capital dredging cost) or, more
directly participate in the PPP by paying a part of the infrastructure investments.

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6.5 Development of a Container Terminal at Berth 1 and 2

6.5.1 General description and motivation


NMPT wishes to improve the handling of containers in the port. Presently containers are handled at
various berths with ships gear. A stacking yard for containers is developed about 150m from the
closest berth (nr. 2) and containers are transported to and from the yard by trailers and trucks. The
containers at the stacking yards are handled by a hydraulic crane. Special container handling
equipment is not available. Recently the NMPT has ordered a reach stacker.

The plan is to gradually attract container shipping lines and increase the throughput by modernization
and some dedication of container handling operations. In 2005-06 the throughput was about 10,000
TEU per year and volumes are likely to rise even though the port lacks modern handling equipment at
present. At the eastern dock, space is available to handle about 100,000 TEU per year. In case the
throughput increases beyond this amount, a new dedicated container terminal should be projected
elsewhere, preferably within the new Western dock.

Figure 6-4 Container Terminal at Berth 2

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6.5.2 Technical description


In order to handle more containers than presently, the purchase of special handling container
equipment is necessary and the stacking yard needs to be reorganized and expanded.
It is proposed to handle the containers only at berth 2 and if required additionally, at berth 1. Berth 2
provides a draft of 10.5m which is sufficient for container vessels up to 2,000 TEU capacity. It is
expected that the container throughput will grow within 7 years to 100,000 TEU per annum. This
amount is too little to justify an investment in Ship-to-Shore gantry cranes; beside they can not be
placed on the present quay wall at berth 2 due to load limitations. A good alternative are mobile cranes
while these cranes can also be used for other type of cargo in case they are idle. Quay wall at berths 1
and 2 should be able to withstand the loads of mobile cranes with a capacity of about 65-75 ton lifting
capacity. In case a crane will be purchased the berth strenght should be carefully checked with the
actual loads of the crane.

A container stacking yard should be developed. The ideal location should be directly behind berth 2.
Sufficient storage space is available for a throughput up to 100,000 TEU per year (average dwell time
of 7 days and stacking up to 3 high) and train loading facilities can be constructed. However some
bottlenecks exist such as the warehouses located at berth 2, presently used for fertilizers and wheat,
which need to be removed and be placed elsewhere preferable behind berth 3 and 4, just west of the
port wall. The present container stacking yard can be used for empty and reefer containers. The
handling of the containers at the yard should be done with reach stackers (2). The advantage over the
use of mobile harbor cranes is that they have a faster handling rate than ships gear. Such a crane can
handle about 60,000 to 70,000 TEU per year. The capacity is normally 15 moves or 22 TEU per hour,
or 460 TEU per day, which is 70% faster than present rates. During idle time of the mobile crane, it
can be used elsewhere along the quay. This is particularly the case the first coming years. Although
the calculations show that during the first years, one crane is sufficient, it is advisable to purchase at
least two cranes. In case that one crane breakdown, the operations stop immediately. In case the
container throughput grows beyond 60,000 TEU per year, an additional crane is anyway necessary.

6.5.3 Economic Feasibility of the project


The development of a container terminal will provide an opportunity to many traders and producers of
(high) value commodities to start or improve businesses in and around Mangalore. Such a terminal is
also imperative for the development of the Mangalore SEZ in the vicinity of and also inside the port
territory.
The economic benefit is thus embedded in a general increased economic activity in the region in the
form of job creation and income generation.

The project will have a significant impact on the logistics position of the NMPT.
Firstly, Shipping Lines (initially feeder lines serving Colombo and Mumbai) will have the benefit of a
time saving when they handle containers. At present the handling takes place by ships gear and the
utilization of the mobile crane will reduce handling time to an estimated 0.5 day for ship loads of 200
TEU or less and 1 day for 400 TEU or more.

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Secondly, the modernisation of the handling and of the container yard will encourage (new) Shipping
Lines to bring in larger volumes of containers. This would attract new container flows that are not yet
been routed via NMPT but via Kochi or even Chennai (coffee, garments).

Another saving can be secured when the mobile crane, certainly in the early years of operation when it
will be idle at the container terminal, will be used at other berths. By increasing the utilization, other
project will co-share the cost of utilization. The benefits of sharing are not taken into account in the
financial feasibility.

The savings could be as high as Rs 4,500,000 (US$ 100,000) per annum for a 50/50 sharing on
various berths.

6.5.4 Financial Feasibility


The current capacity of the port to handle containers is estimated at 10,000 TEU/year. The cargo
forecasts suggests that by 2012-13 some 100,000 TEU will be handled and rise further over the
investment period. The project can be realised quickly. In view of the cargo developments it is
envisaged that the equipment will be operational in 2007.

The incremental throughput over the two berths is estimated to rise from 4,000 TEU in the first year of
operations to around 98,000 TEU by 2012-13 and then increase further to 255,000 TEU by the end of
the project horizon (20-years). However, under the current projections and investments, the
throughput cannot rise above the capacity of 50,000 TEU. The feasibility of the project has therefore
been calculated on a 7-year horizon only, where the residual value of the investment is liquidated. It
follows that a different solution for container handling must be accommodated. A suitable location of a
new container terminal is the south of the western doc. About 350 m of quay wall can be constructed
which is sufficient for a throughtput of about 300,000 TEU per year.

The total investment is estimated at Rs 31.5 Cr and specified as follows:

Table 6-12 Investment Container terminal berth 1 and 2


Cost USD (Mln) Cost Rs Cr.

Civil works 1.1 5.0

Electrical/information equipment 0.4 1.8

Mobile harbour crane 65T/75T 3.0 13.5

2 Reach stackers 1.0 4.5

Other equipment 1.1 5.0

Engineering/unforeseen 0.5 2.2

Total 7.1 32

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Part of the equipment has an estimated economic life time of 10 years. This applies to the electrical
works, which is thus depreciated over ten years, and also has a higher maintenance cost. The residual
value of the investment at the last year of the project horizon is added to the cash flow.

The container rates in New Mangalore are different from rates for other cargoes. At an average load
per TEU of 15 ton per TEU, the wharfage amounts to around Rs 20 per ton. In addition, the port
charges Rs 30-100 per container for re-handling. The port also charges storage at a rate of Rs 10 per
container per day. Combined, the container handling charges are low and will not suffice to cover the
investments at all. It is suggested that the port includes a higher stevedoring rate for the use of the
mechanical equipment. The justification is smilar to that of the introduction of mechanical handling
tariffs for dry bulk cargoes. The tariff should also reflect the, in general, high value of the commodities
or products inside containers, which in essence is a way of charging what the market can bear. In the
case of NMPT the improvement of services is used to introduce a rate that will allow recovery of
investments and costs and generate profits. For the calculations an average of Rs 2,000 per container
has been assumed.

It is estimated that around 50 staff are required to handle 10,000 TEU and 100 staff to handle 100,000
TEU. The average all-inclusive salary is estimated at Rs 200,000 per head. Total salary amounts to
Rs 1.0 Cr/year initially, rising to Rs 1.5 Cr/year by the end of the investment period.

The table indicates the parameters for the calculations. The wharfage, handling and storage charges
are composite charges per box, based on the actual tariffs per TEU, independent whether the
containers are full or empty or are 20 and 40 long.
For storage it is assumed that 3 days dwelling is occurring.

Table 6-13 Comparison of Current and New situation parameters


Current New

Staff 50 50-100

Average salary * (x Lakh Rs.) 2.0 2.0

Total labour cost (Rs. Cr./yr) 1.0 1.0-2.0

Wharfage (Rs/container) ~300 ~300

Handling (Rs/ton) ~60.0 ~300

Storage (Rs/container) - 29

Stevedoring (Rs/container) - 3,000

* includes payments of pensions and other benefits, calculations

Maintenance cost on civil works: 1.5% p.a., on equipment: 2.5% p.a. on investments.

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The calculations ignore the current situation, as this charge is required to realise a return on
investment. In the current situation it is highly unlikely that such a charge can be levied and see traffic
increase.

Without a stevedoring charge, the project is not viable. A break-even stevedoring charge is estimated
at Rs 700 per box on the basis of the assumed throughput, while a charge of Rs 3,000 per box would
generate an IRR of 45%. The operating cost is around Rs 13 per ton for the new situation. The net
income in the new situation is approximately Rs 55 per ton.

The Net Present Value of the project is Rs 64 Cr. when discounting at 8%.

Table 6-14 Summary table of financial feasibility over 7-year period


Item Current situation New situation at assumed throughput

Labour cost, Rs/TEU 242 170

Total operating Cost, Rs/TEU 1,224 301

Net income, Rs/TEU 429

IRR, % 45%

NPV @ 8%, Rs Cr. 63.7

Table 6-15 Details of the financial feasibility in the new situation, Rs Cr.
Year

-2 -1 1 2 3 4 5 6 7
Throughput
Containers 38 50 62 74 86 98 100
(000 TEU)
Revenues Wharfage 0.8 1.1 1.4 1.6 1.9 2.2 2.2

Handling 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Storage 0.1 0.1 0.2 0.2 0.2 0.3 0.3

Stevedoring 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total 0.9 1.2 1.6 1.9 2.2 2.5 2.5


Operating
Labour 1.0 1.1 1.2 1.4 1.5 1.6 1.6
cost
R & M.
0.8 0.8 0.8 0.8 0.8 0.8 0.8
Consumables
Other 0.3 0.3 0.3 0.3 0.4 0.4 0.4

Total 2.1 2.2 2.4 2.5 2.7 2.8 2.8

Depreciation 1.5 1.5 1.5 1.5 1.5 1.5 1.5

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Year

-2 -1 1 2 3 4 5 6 7

Total cost 3.5 3.7 3.8 4.0 4.1 4.3 4.3

Net Income 7.6 11.0 14.4 17.8 21.2 24.7 25.2

Capex Investment 0 31.3

Divestment 21.2

Cash flow New situation -31.3 9.0 12.4 15.9 19.3 22.7 26.1 47.9

.
In summary:
The project generates a positive income only if and when a mechanised handling or stevedoring tariff
is introduced. It implies that the current situation is loss-making. However, even at the projected fairly
low throughputs over the investment period, a tariff of around Rs 700 per box would suffice to
generate a 12% IRR. Yet, international tariffs are considerably higher than this level, and a tariff of Rs.
3,000 per box generates an IRR of 45%

The consultants advise to determine the possible tariff and then carry out the project as and when the
tariff is above the break-even value.

Financial coverage
Since it is the intention of NMPT to undertake the project fully within NMPT (contrary to other major
BOT/lease type of projects), the NMPT financial requirements add up to USD 7 mln (including the full
investment on the mobile crane). This amount should be reserved from the cash flow in the coming
year 2006-07. Based on the present financial position of NMPT, no additional loan needs to be
secured as the net surplus provides sufficient funds. An alternative to lessen the capital commitment,
NMPT can lease some of the equipment. This may be done for the mobile crane since a good
functioning second hand crane may suffice for the start up period. The effects of such a lease are not
considered but may slightly reduce the return on investments as the lessor assumes an interest
margin in lease amounts.

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6.6 Liquid Cargo Jetty

6.6.1 General description and motivation


The handling of crude and POL will drastically increase due to the increase of the capacity of the
refinery. The present crude and POL jetties are already exceeding the allowable berth occupancy and
can not handle the expected cargo in the future and expansion is required.

6.6.2 Technical description


The expansion possibilities for the handling of bulk liquids in the port should be focused on the south
side of the port where the other liquid facilities are concentrated. Two possible locations are available.
The first expansion is the construction of a jetty at the location of the virtual jetty nr 13. The
construction can be similar to the existing ones.

The second expansion possible, is just east of berth 13 around the corner and located west of berth 8.

Figure 6-5 Liquid Cargo Jetty at berth 13

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6.6.3 Economic Feasibility of the project


The loading and discharge facilities will enable the captive operator MRPL to allow more tanker to
berth, relieving the existing jetties of pressure and reduce the cost of waiting for berth at the roads.
This result is substantial as charter hires of tanker up to 100,000 DWT are high and lead to high
demurrage rates.
Apart from the relief from pressure, the new jetty will increase the capacity to the demand of the client
who will increase its refining capacity. No specific savings is foreseen on ocean freights as the size of
tanker to berth is expected to remain constant over the forecast period. While parts of the crude oil
may come in 100,000 Dwt capacity vessels, a substantial amount will likely remain as it is. As for POL
exports, current average parcel sizes are 35,000 ton, which may increase over time as exports
increase.
User benefits will arise as a result of reduced occupancy of the existing berths, and these benefits will
increase over the next few years before the new jetty is operational. The benefits have not been
calculated, as the project is feasible on throughput alone.

A more than visible benefit is the reduction of waiting time of tankers at anchorage. With the present
berth occupancy on the jetties nr 11 and 12 under pressure, the need to create additional handling
capacity is imminent. Based on the 2006 ship waiting time outside on account of NMPT
(Administration Report 2005-06), the total waiting time for tankers carrying POL or crude oil arrived at
25 hrs for crude oil carriers and 15 hours for POL tankers. Based on the 2005-06 ship call figures (165
crude oil tankers and 278 POL tankers) the total crude oil carriers waiting time was 171 days and for
POL tankers 174 days. Of these totals no record is held by NMPT to what extent the waiting time is a
result of an occupied berth. Assumed is that at least 1/3 of the total pre-berthing time (e.g. 60 days per
annum) is on account of non-availability of berth. Considering a daily Time Charter Hire of Rs
1,350,000 (US$ 30,000) for crude oil carriers and Rs 900,000 (US$ 20,000) for POL tankers, the total
waiting time cost arrived at Rs 135,000,000 (US$ 60 x 30,000 + 60 x 20,000 = US $ 3 mln) per annum.
The project can be operational in 2009.

6.6.4 Financial Feasibility


The investment for the port excludes the loading arms and pipelines, as these will be for account of
the user. The remaining total investment is estimated at Rs. 54 Cr. and broken up as follows:

Table 6-16 Investment Liquid Berth 13


Cost USD (Mln) Cost Rs. Cr.

Dredging 0.5 2.3

Jetty 10.0 45.0

Infrastructure 1.0 4.5

Fire Fighting towers 0.5 2.3

Total 12.0 54.1

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The project revenues consist of wharfage, berth hire and port dues.
The current scale of rates indicates a wharfage of Rs 30 Cr /ton. This will be reduced significantly in
future when a new Memorandum of Understanding (MOU) is entered with the MRPL. For purpose of
the feasibility calculations, a wharfage of Rs 30 Cr /ton has been used.

It is estimated that a staff complement of 20 is required, irrespective of the amount of cargo handled,
with an average all-inclusive salary of Rs 200,000 Cr /yr. Total salary cost amounts to Rs 0.4 Cr /year.
This staff relates only to the maintenance of the jetty, as operations are carried out by the client.

The cargo flow is all new, so that the current situation is set at zero. As the facility includes dredging,
as well as construction of infrastructure, and all cargo is new, all income elements (and hence related
costs) are taken into account for evaluating the feasibility of the project.

Table 6-17 New situation parameters


New

Staff 20

Average salary * (Lakh Rs.) 2.0

Total labour cost, Rs Cr/year 0.4

Wharfage Rs/ton 30

Berth Hire Rs/grt/8 hours 0.9

Port Dues, Pilotage, Towage: Mln Rs/vessel call 75 K Dwt 1.1

40 K Dwt 0.7

* includes payments of pensions and other staff benefits

Maintenance cost are set as follows on the civil works: 1.5% p.a., equipment: 2.5% p.a.

The project has an IRR of 30%. The operating cost is around 21 Rs per ton for the new facility, while
the net income in the new situation amounts to approximately 26 Rs/tonne.

The Net Present Value of the project is Rs. 130 Cr. when discounting at 8%.

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Table 6-18 Summary table of financial feasibility over 20-year period


Item New situation

Labour cost, Rs/ton 0.8

Total operating Cost, Rs/ton 20.6

Net income, Rs/tonne 26.4

IRR, % 29%

NPV @ 8%, Rs. Cr. 130

All projected traffic is incremental.

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Table 6-19 Details of the financial feasibility in the new situation, x Rs Cr.
Year

-2 -1 1 2 3 4 5 10 15 20

Crude Oil 2.8 3.8 4.8 4.8 4.8 4.8 4.8 4.8
Throughput (Mln
ton)
POL 0.8 1.8 2.9 2.9 2.9 3.2 3.4 3.7

Revenues Wharfage 10.7 16.8 23.0 23.1 23.3 24.0 24.7 25.5

Port Dues 5.8 9.4 13.0 13.1 13.2 13.7 14.2 14.7

Berth Hire 0.3 0.6 1.0 1.0 1.0 1.1 1.1 1.2

Total 16.8 26.9 36.9 37.2 37.5 38.8 40.1 41.4

Operating cost Labour 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6
R & M.
0.8 0.8 0.8 0.8 0.8 0.8 0.8 0.8
Consumables
Other 5.9 10.0 14.1 14.2 14.3 15.0 15.7 16.3

Total 7.3 11.4 15.5 15.6 15.8 16.4 17.1 17.7

Depreciation 1.1 1.1 1.1 1.1 1.1 1.1 1.1 1.1

Total cost 8.5 12.6 16.6 16.8 16.9 17.6 18.2 18.9

Net Income 8.3 14.3 20.3 20.4 20.5 21.2 21.8 22.5

Capex Investment 25.9 28.1

Divestment 31.0

Cash flow New situation -25.9 -28.1 9.4 15.4 21.4 21.6 21.7 22.3 23.0 54.7

In summary:
The project is generating an IRR of 29%. As throughput is increasing and insufficient capacity
remains, utilisation of the existing facilities will increase. This project can relieve that situation and do
so very profitably. Even if discounts are to be negotiated, the project will remain profitable.

The consultants advise to carry out the project.

Financial coverage
The NMPT has projected the investment to be done in 2008/9 and in 2009/10.
The consultant strongly suggests starting the investment in year 2006/7. This may lead to the resetting
of priorities in the overall investment plans.

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6.7 Other projects

6.7.1 Berth and back area for Wind-Mill parts


A recent project in development is the creation of a wind mill producing unit near Mangalore on
account of Suzlon Ltd. This plan requires the supply of general cargo (steel plates, equipment, parts)
and the export of the wind mill parts via NMPT.
The cargo volumes are estimated in two different Phases i.e., Phase-1 and Phase-2. In Phase-1,
temporary arrangements are required to be created for handling and storage of transit cargo within the
Port premises. The volume of cargo handled is approximately 139,000 tons of steel plates, steel
plunges and 5,000 containers per annum. The export will be fabricated wind mills which are proposed
and stacked for conversion of cargo and subsequently shifted in definite intervals for which an area of
30,000 Sq, M is earmarked for transit storage. In Phase-2 the capacity of export and import will be
doubled.
The volume of cargo does not justify a separate berth. The cargo is however partly oversized (wind
mill parts) which requires separate handling equipment and storage in a dedicated area before
shipment.
The expected area for handling and storage (estimated at 6 ha) is available at berth nr 5, 6, or 7.

The project cargo will be, according to NMPT, handled by the operator so a lease agreement with
Suzlon will be required for long term. The NMPT may propose a tariff structure based on the value of
the cargo. Consultants disencourage this tariff structure as values of material/items are not related to
cargo weight and/or size and not related to the cost of handling operations. While terminal handling
will reportedly be done by labour and equipment of the operator, there is a need to contractually
regulate the situation of utilizing the berth(s) when no cargo for this client is handled.

The NMPT believes furthermore that the volume and size of this cargo package requires that the
cargo is handled at a dedicated berth at the Western dock. In that case the dock arm will have to be
suitably designed taking into consideration various other developments proposed in the form of
construction of berths within proposed Western Dock Arm. The consultants however believe that the
Suzlon cargo can be adequately handled at berths 5, 6 or 7 where sufficient back area is or can be
made available, certainly in coherence with the development plans of the iron ore terminal at berth 14
(see section 6.5). The financial and technical parameters will have to be worked out.

6.7.2 Construction of new berths and development of marshalling yard


It is envisaged by NMPT that the Western dock arm can be developed to accommodate 5 to 6 berths
to suit the future trend of ships especially those, which are carrying bulk cargo. The expected growth in
the near future may not encourage the construction of new berths immediately in the western dock
arm. Therefore, the development of Western dock arm is envisaged to be taken up in phases by
carefully considering the future requirements for handling bulk or break bulk or containers.

There is a need of a deeper berth for export of the break bulk cargo produced from the steel mills.
Similarly, there is likely requirement from oil refinery i.e., MRPL which may produce coal out of their

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refined material and which may likely to be exported through New Mangalore Port to the extent of
1 mln ton.

Figure 6-6 Existing Marshalling Yard

Marshalling Yard

At present, the NMPT is renovating the track at the east side of the yard. This is being done for the
KIOCL. They are currently transporting iron-ore fines to their plant by rail way, since the closure of the
slurry pipeline. The iron ore is transported from the marshalling yard to the plant by trucks. Ideas are in
the pipeline to connect the marshalling yard with the plant by either a rail connection or an overhead
belt conveyor. This will be a project entirely financed by the KIOCL.
Other developments of the marshalling yard should be performed under the mechanization of berth 14
and the development of the coal terminal (berth 15). In 2005-06, the average number of rakes in the
marshalling yard arriving and leaving was only 6 to 8 per week. In 2012-13 it is expected that the
marshalling yard will have about 20 rake movements per day. Additional tracks are necessary to
handling this amount of rakes.
New necessary railway tracks should be constructed according to the requirements of the two
mentioned projects. The yard has the available space to create more tracks.

6.7.3 SBM
About 60% of the total throughput in 2005-06 in New Mangalore was crude oil and POL. The present
loading and discharging capacities at the bulk liquids AT berth 10 and 11 are reaching its maximum
capacity. Additional capacity should be rapidly developed. The project under section 6.6 describes the
development of a new crude/POL jetty bringing the capacity in line with the expected throughput in
2012-13.

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Further expansion possibilities for bulk liquids jetties within the lagoon area are limited and solutions
must be sought in the outer area of the port.
The construction of a Mooring Buoy is under investigation by MRPL. The SBM will be used to unload
crude and the anticipated capacity is about 15 to 20 million ton per year which depends highly of the
size of the tankers.
Since the SBM will be placed in the open sea, larger drafts are available than in the port, which opens
the possibility to receive VLCC which will not be able to enter the port.

6.7.4 Development of a LNG terminal


Ideas to develop a LNG terminal in the port of New Mangalore are around for the last 15 years. A
Master plan of 1990 already shows some possible locations at the sea side, near the breakwaters. In
June 2005, the Indian Ports Association (IPA) has conducted a feasibility study for setting up a LNG
terminal at New Mangalore Port. The intended capacity is set at 10 mln t per annum (based on MRPL
information).

A recent discussion between the consultants and GMR energy expresses the interest in using LNG
above other fuels for the generation of electricity. GMRs power plant is currently using Naptha as
energy source and is seriously investigating the possibility to switch to LNG. Their plant is 220 MW
located near the NMPT guesthouse, at the south side of the port. Since the present port does not have
any LNG discharging facilities, they are looking for possibilities to develop a LNG terminal and are
seeking the cooperation with the NMPT.
It is not unthinkable that more of such projects will develop and a LNG terminal can be made
financially feasible.
According to the executed feasibility study in 2005, the regional demand for LNG is in the order of 5
million ton per annum and will be served by tankers of about 65,000 DWT with a draft of 12.8m. The
joint venture formed exclusively to setup LNG import facilities, Petronet LNG Ltd (PLL), showed
interest to invest in such terminal.

Location of the terminal


Although the expected ship size of 65,000 DWT can easily enter and moor in the port, the feasibility
study of 2005 showed the best location for the development of such terminal is outside the lagoon
area, south of the existing southern breakwater.
The possible location of a LNG terminal alongside the greenery between berth 8 and 13 is considered
unsafe from navigational point of view. The main reason is the required distance between a moored
LNG tanker and other vessels. On this stretch the location for the jetty will be very near to the turning
circle in the basin. The development of this location may cause collision risks in case of engine failure
of ships arriving in the lagoon. A technical study by H.R. Wellington has reportedly dealt with the
safety issues (both environmental and navigational). According to MRPL the terminal could be erected
in 2 years. A solution would be to create a dedicated LNG dock to eliminate the risk of collision. This
would however raise the development cost substantially.
In addition the LNG terminal requires considerable land area for the re-gasification plant and storage
facilities. About 50 hectares or 125 acres is required.

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The study shows an investment cost of about Rs 710 Cr, for only the infrastructure and berths,
excluding the mechanical facilities. The feasibility study of 2005 is complete and suitable for further
steps in the development of a LNG terminal. In addition it is necessary to investigate the final location
for the LNG terminal. Nautical aspects should be preferably verified in a real time navigation simulator.
Although this development plan is of national interest it is due to its complexity and long development
period not selected as top project for the Business Plan period.

6.7.5 Internal road improvement


The NMP plans to start refurbishments of internal roads as from 2007-08. The total cost would arrive
to Rs 50 Cr spread over 4 years.
It must be said that road rehabilitation has less impact when conventional (cargo spilling) handling
systems are continued to be used as roads are covered by product and hard to clean and maintain.
Road improvement work should be in line with the educating stevedores to handle cargo more safely.

6.7.6 Development of new container storage


The development of additional container storage space should be in line with the capacity limits of the
container terminal at berth 1 and 2. Before the critical limts have been reached a detailed project plan
should be made to assess the size of the port area and the volume expectations for container handling
above 100,000 TEU.

6.7.7 Container terminal


The Container Terminal Plan includes a dedicated terminal at high investment cost (Rs 700 Cr) to be
constructed as from 2009-10 via PPP. Such a terminal is only required when sufficient cargo volumes
justify the investment. The present and the forecasted container throughput volumes can be handled
on existing berths. Once the port foresees a volume exceeding about 100,000 TEU per annum
throughput another location would be required as well as higher capacity ship-shore and container
yard equipment. The most logical place is at the western side of the Western dock, close to the
marshalling yard.
By 2013 some 98,000 TEU are expected, while at 2026 a double volume of containers is foreseen

6.7.8 Mobile Cranes


Recently the NMPT has granted permission to one operator to position a mobile crane that will be
operational in 2007.
This crane, provided efficiently used and allocated over cargo berths, is ready to operate this present
year 2007. Price indications for a second hand mobile crane is USD 1.5 mln while for a new crane
USD 3 mln is as enquired in the market.
At least one of the mobile cranes should be positioned at the - dedicated - container terminal (berth 1
and 2). Two cranes should both be able to work in the container berths when two ships or more are
being at berth. Sufficient training needs to be organised prior utilisation.

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6.7.9 Improvement/ strengthening Gen. Cargo berths


The strengthening of the general cargo berths concerned the berths 2, 3 and 7 and involved the
dredging to larger draft and adjusting the quay walls for this new depth. The main reason for this
project was to make the berths suitable for container vessels. The present draft of 10.5m is sufficient
for container vessels, fully laden up to 2,000 TEU. Larger container vessels fully laden are not
expected at that location. The container terminal which can be developed at berth 2 will have a
capacity of about 100,000 TEU per year and the type of container vessels expected will be in the order
of 500 to 1,000 TEU capacity. The strengthening project originally conceived in NMDP was
subsequently dropped from the list.

6.7.10 Deepening of the channel and turning basin


According to the NMDP plan the investment of Rs 390 Cr, 50% is to be financed through loans (Rs
195 Cr). The project is scheduled to start in the year 2009. Section 5.7.1 shows that deepening of the
channel at present has only effect on berth 14. Berth 14 is designed for a water depth of 17m and
larger vessels can be accommodated in case that the channel will have a larger water depth. When
the entire deepening/widening cost (Rs 390 Cr) is included in the feasibility of the mechanization of
berth 14 the project cannot be justified.
In case however, the coal terminal at the Western dock (berth15), will be developed, the dredging
costs may be spread over more berths. At the moment NPCL has no plans to increase the vessel size
and would not opt for this huge investment.

The only way the deepening/widening investments can be covered is by a contribution of NMPT out of
the wharfage fees/royalties. A simple calculation shows that the present level of wharfage/royalties of
Rs 25 / 30 pmt for bulk cargo creates an yearly revenue of some Rs 3.75 Cr to RS 4.5 Cr over the two
developed berths (14/15). This is insufficient to recover the capital dredging cost, let alone for the
additional maintenance dredging.
Only once the entire Western dock is going to be developed for deep sea container ships and Cape
size bulk carries the cost of the deepening may become feasible.
It is recommended to execute the dredging works, in line with the complete development of the
western dock. The channel can first be dredged to a depth of -17.5m and then in a later stage,
depending on the vessel sizes which are then in use, to a water depth of -19.5m to accommodate
Cape Size bulk carriers.

6.7.11 Road and Railway Connectivity


Roads
The National Highway Authority has substantial plans to upgrade the connecting Highways NH 17 and
48 connecting Mangalore and the port with its hinterland(see section 9.2.1). An amount of Rs 885 Cr is
to be financed via a PPP construction. The port connectivity programme is a National Programme of
connecting all ports to major National Highways. The New Mangalore Port connectivity programme is
being implemented by New Mangalore Port Road Development Company Limited (NMPRDCL) with
an Special Purpose Vehicle (SPV) format. The NMPT is supposed to fund Rs 20 Cr in 2007 along with
contribution from major users by equity participation (Rs 10 Cr approximately by NMPT).

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Railways
The rail connectivity is at present sufficient but with the volume increase and the likley shift from road
to rail transport for most dry bulk cargoes , the demand for rail connectivity increases.
Various projects are in process by the southern and Konkan Raiways. A more detailed description is
presented in section 9.2.4.

6.7.12 Bunkering facilities


Bunkering in the port could be possible, but only by bunkering barges. It is not very likely that ships in
port will berth at a dedicated bunkering jetty. Ships should be bunkered while moored along the quay
wall during the loading and discharging of the ships. Bunkering barges are suitable for this kind of
operation. The new POL / Crude jetty at the location of the present virtual jetty, berth 13 can be
designed in such a way that both tankers and bunkering barges can moor simultaneously. This project
is in line with the feasibility study Development of Bunkering Facilities at New Mangalore Port as
carried out by the National Ship Design And Research Centre (NSDRC).

6.7.13 SEZ in port


NMPT has decided to participate in the Special Purpose Vehicle (SPV) for the development of the
Mangalore Special Economic Zone (MSEZ), almost adjacent to the New Mangalore Port.
A part of the port territory (some 300 acres) is to be handed over to the SEZ and will be connected to
other SEZ areas by a special dedicated corridor. The port area selected is southwest from the present
KIOCL berth 8 and includes the back area behind berth near 10/11.
On the port area southwest of berth 8 (now forest) plans are made to install a LNG jetty and a liquid
gas tank farm. The LNG gasification plant would in this plan be located south of and outside the port
area, along the coast. Studies were made to assess the feasibility and the environmental and
navigational hazards.
An extraordinary situation may eventually occur that handling of cargo becomes tax free (according to
SEZ rules) while other handling outside the SEZ, remain taxable. This unequal (and fair competition
disturbing) playing field for cargo handling operations may create discrimination between customers
due to tax differences. Such a situation should be avoided. The consultant has no specific
recommendation in this respect, other than ensuring fair competition.

The SEZ, having another principal goal and strategy than the NMPT (e.g. establishing industries), may
desire to use NMPT port land for so-called port based activities. This could be accepted by NMPT as
far the activities are essential (core) to the ship-shore operations of the port. No secondary activities
(stuffing/stripping of containers, distribution centers, product manipulation, long time storage, etc)
should be allowed, no matter how attractive these activities financially may be. The NMPT should
protect its prime goal (mission) and refrain from any non-core activity. The consultant nevertheless
supports the development of the SEZ as such (primarily outside port area) in view of the new cargo
flows that will be generated from local industries. It is expected that in particular the container flows will
further grow once the industrial operations are established.

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6.7.14 KIOCL berth


According to the NMPT investment plan, Rs 18 Cr will be spent from Internal Resources in 2011 to
deepen the depth to 14m.
The feed stock for the iron ore pellets production arrives temporary by coastal vessels from
Visakapathnam port. This rather long supply chain looks very costly (ocean freight, double handling)
and is expected not to last for very long time. The KIOCL at present tests the different types of ore
from various sources in Karnataka and beyond and expects a multi-supplier market to cover the
needs.

At the moment the ore is also supplied via rail wagon to the marshalling yard at NMPT. From there the
ore is carried by truck to the plant causing double handling, an undesired and long truck traffic in port
disturbing other cargo operations and logistics particularly for containers.
The KIOCL has indicated that they are developing a rail wagon supply of ore to Thokur railway station
(3 km from the port) from where a new conveyor belt should be installed to the plant. This logistic
solution avoids truck traffic in port and outer roads, is environment friendly and allows the plant to
maximize loading volumes. This also supports the KIOCLs plans to act as stevedore for iron ore fines
and concentrates for third parties as the loading installation at berth 8 is under-utilized and has a spare
capacity of 3-4 mln ton per annum. The benefits to the NMPT will be found in wharfage.

There is however one drawback to this plan: The mechanization of berth 14 may include an exclusivity
clause for handling of iron ore fines at NMPT. The consultant feels that there is sufficient cargo volume
expected to justify the development of berth 14 even if KIOCL will be allowed to handle fines.

6.7.15 New Harbour tugs


New Harbour tugs are planned, one as replacement for an overaged tug and one new tug. The
requirements are 2 numbers of 32 BP tugs. Investments are scheduled for 2007-08 (Rs 30 Cr) and Rs
20 Cr for 2011-12.

6.7.16 Dry dock repair facilities.


The plans to install a dry dock in the ports basin were analyzed but do not fit in the strategy to reserve
space for dry bulk, LNG and container handling facilities. The consultants believe the dry dock
operations should therefore not be allowed. If operator can be found, the dry dock may be located
outside the present lagoon.

6.7.17 Construction of Warehouses


The port is in the process of constructing additional warehouses in the port. Previous findings of the
storage analysis showed indeed a need for additional covered storage in the port. However, in line
with the strategy of the port, it is recommended that the construction of such warehouses should be
done by private companies. The warehousing operations should not be allowed to those storage
function that entail long term storage or high traffic generating physical distribution. The warehouses

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should only be allowed when to protect cargo from weather and other outside influences and when
their location does not interfere with core activities of ship-shore handling.
According to calculations there is a need for increase of storage capacity for fertilizers.

6.7.18 Pilotage.
The Marine department has requested for a faster pilot boat. This is driven by the demand for faster
turn-around-time of pilots but primarily to improve the navigation at sea which in monsoon periods can
be very unpleasant. Another plan to acquire a hired helicopter for pilots looks attractive but may cause
pilot landing hazards and will appear costly. No specific study has been made to assess the viability.

6.7.19 Navigation aids and systems


The existing AIS (automatic information system) and the recent proposal to have radars in place at the
marine control tower shall be sufficient for the navigation aid. The layout of the port is such that the
fancy technology like VTMS is not required. However marine services, being one of the core
competences of the port, may face new requirements for sophisticated applications to guide vessels
for which financial resources need to be reserved. At this moment the consultant does not foresee any
provisions required.
The IT requirements for upgradation of the VTMS are discussed in the Section 7.6.

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6.8 Summary of all investment projects

Table 6-20 Investment projects NMPT

(a) Investment projects from 2006-07 to 2012-13 (7 years)


Intern.
Total Inv Capacity Consultants
Nr Project name Resources
x Rs Crore x Mln ton Recommendations
x Rs Crore
Iron Ore Mechanization 196.6 *
1 0 10 Viable Project, urgent
Facility at b. 14 103.0
Development of a Coal 194 *
2 0 8 Viable Project, urgent
Terminal at W. dock, b. 15 230
Development of a Container 32 *
3 32* 1.4 Viable Project, urgent
terminal at b. 1 and 2 New project
Construction Liquid Cargo 54.1 * 54.1 *
4 9 Viable Project, urgent
Jetty at b. 13 50 50
Multipurpose berth Western dock
5 50 50 Probably viable, proceed
, b. 18

6 Marshalling yard 40 10 Executed Under 1 and 2

Upon discussion with the


7 SBM for POL 250 0 15-20
client
Upon discussion with the
8 LNG terminal 2600 0
client
Improvement of Internal Port Proceed but install new
9 50 50
roads handling technology
Container Terminal for
Long term after TEU 100,000
10 Transhipment, W. dock (berth 700 0 West. Dock
p.a.
17)

11 Harbour crane 30 30 Executed under 3

12 Road Connectivity 895 10 Proceed

13 Rail link to KRCL 0 0 0 To follow up with Railways

Preferred use of barges, in


14 Bunkering facilities 10 0
combination with 4
Support, but critical on type of
15 SEZ in port 5 1 10
activities
Improvement berth no 8 (KIOCL)
16 18 18 In line with larger ship sizes
to 14m draft
Replacement and new tug ,
17 New Harbour tugs (2) 50 50
BP 32
5174.7** 305.1**
Total x Rs Crore
5113.0 301.0

Figure based on NMDP; * = consultants estimate,; bold = Top projects; ** indicates the totals of all projects considering
consultant estimated figures for projects 1 to 4 .

Note: The above table excludes investments towards residual works including IT, Environmental projects and procurement of
pilot launch.

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(b) Investment projects beyond 2012-13


Intern.
Total Inv Capacity Consultants
Nr Project name Resources
x Rs Crore x Mln ton Recommendations
x Rs Crore
Deepening channel / lagoon to Not within 7 years, subject
1 390 390
17 MCD dev. of Western dock
To be done by private
Outer Harbour facilities 1325 300
2 companies
Not within 7 years (subject to
Bulk Cargo berth at western doc
3 50 50 increase in throughput)
arm (berth no 16)

Total x Rs Crore 1765 740

Grand Total (Rs in Cr.) 6939.7** 1045.10**


(a)+(b) 6878.0 1041.0

** indicates the totals of all projects considering consultant estimated figures for projects 1 to 4 of table (a).

6.9 Results of implementation of the top projects


In case the 4 (by consultants) selected top projects will be implemented the port will create much more
capacity than it has at present. The additional capacity is also supported by relocating cargo the other
berths, a more efficient loading of other bulk cargo (fertilizers, coal) and reduction in idle time at berths
caused by a better logistics and documentary processing by private operators.

Table 6- shows the number of ships, the cargo throughput, the average parcel size and the new cargo
handling rates in the years 2012-13.

Table 6-21 Port key figures by 2012/13


Commodity Cargo Flow Number of Cargo x mln Average Parcel Average Cargo Handling x
Ships ton Size x 1000 ton 1000 ton/day

2012-2013 2012-2013 2012-2013 2012-2013 2005-06

Crude Oil Import 227 17.00 75 67 61

POL Import 106 0.85 8 13 10

LPG Import 30 0.45 15 5 5

Edible Oil Import 75 0.45 6 5 5

Other Bulk
Liquids Import 133 0.80 6 12 12

Dry Bulk (Coal) Import 52 2.00 35 50 9

Thermal Coal Import 30 3.00 50 50

Fertilizer Import 71 1.57 22 10 3

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Commodity Cargo Flow Number of Cargo x mln Average Parcel Average Cargo Handling x
Ships ton Size x 1000 ton 1000 ton/day

2012-2013 2012-2013 2012-2013 2012-2013 2005-06

Containers import/export 368 1.47 4 8 4

General Cargo import/export 406 2.84 7 3 3

Cement Import 33 0.40 12 4 4

Iron Ore Export 218 10.90 50 50 12

Pellets Export 70 3.50 50 48 43

POL Export 333 11.00 33 24 24

Total 2152 56.23

The new berth occupancies are calculated for the year 2012-13 and are listed in Figure 6-7. The
remaining and excess use of berths in 2001-13 is shown in Fig 6-8 The port cargo distribution of
various commodities by 2012-13 is shown in Fig 6-9.

Figure 6-7 Berth Occupancy in 2012-2013


100%

90%

80%

70%
Berth Occupancy in %

60%

2004-2005
50% 2005-2006
2012-2013

40%

30%

20%

10%

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BUSINESS PLAN NMPT

Figure 6-8 Remaining and excess use in 2012-2013


12.0

10.0

8.0
Million Tons

Excess Use
6.0 Remaining
Allowable Througput

4.0

2.0

0.0
Berth 1 Berth 2 Berth 3 Berth 4 Berth 5 Berth 6 Berth 7 Berth 8 Berth 9 Berth Berth Berth Berth Berth Berth
10 11 12 13 14 15
Berths

Table 6-22 Future throughput and capacity after implementation of projects, 2012-13, mln ton
Expected throughput 2012-13 Available capacity after investments

Berth 1 0.73 1.2

Berth 2 1.43 1.4

Berth 3 1.24 1.2

Berth 4 1.53 1.5

Berth 5 1.00 1.0

Berth 6 0.65 0.7

Berth 7 0.62 0.7

Berth 8 4.59 9.2

Berth 9 0.45 1.0

Berth 10 6.53 7.0

Berth 11 8.69 9.1

Berth 12 4.10 4.2

Berth 13 9.87 10.0

Berth 14 9.81 9.8

Berth 15 3.31 7.8

Total 54.5 65.8

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Figure 6-9 New Port Cargo distribution by 2012-13

Eastern dock

B16 B15

B17 B18

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6.10 Projects after 2012-13


Table 6-22 Future throughput and capacity after implementation of projects, 2012-13, shows that
after the implementation of the proposed cargo, the port has an available capacity of about 66 million
ton per year, while the projected cargo throughput is only 56.23 million ton. The remaining capacity is
mainly found at the dry bulk cargo berths. The bulk liquids berths have not much capacity left.
In line with the long term vision of the port there is room for the development of more capacity. Several
development options are available, such as further development of the western dock and expansion of
the port towards the sea.

Breakwater and port entry


Although early plans were made to deepen the channel to 17 m, the average ship size increase to
sizes over DWT 100,000 may demand a safer navigation when entering the lagoon. This implies the
break waters need to be extended or relocated in view of the LNG terminal plans. The first option
(extension) seems justified but risk analysis should assess all risk and possible damages. The latter
option (relocation/reconstruction of breakwaters) is costly and needs to be justified by feasibility
studies that include proposals to cover the huge cost by tariff hikes in typically vessel related charges.

Mallya Gate harbour area (berth 1 and 2)


Once the present container terminal will be transferred to the Western dock a substantial area
becomes vacant for new activities. These could very well include a decent passeneger terminal or a
RoRo terminal based on new cargo flow forecasts. The present fishing boat beach facilities do not fit in
this development and may then be transferred to other beaches or to the Old Mangalore Port.
Also the container inspection areas become vacant as they are being relocated to the Western dock
after 2013.

Western Dock (second phase)


The Western dock provides best opportunity to enlarge capacity for dry bulk cargo and general
cargo/containers when studies prove that capacity runs short in future. The future land use plan in
2012- 13 shows an intermediate development phase (1) of the Western dock in which berth 15 (NPCL
and other coal), berth 18 (Multipurpose cargo) are planned to be developed. Space for two or three
more berths are technically feasible when the dock is extended to the north.
The new capacity could be very used to cover new bulk cargo requirements and or container/general
cargo. The start of construction should be driven by proper cargo volume studies to be carried out in
2009-10 when the first phase is about to be completed.
The Western dock has the advantage of a substantial back area where storage and other handling
activities can take place in direct continuation with waterfront operations.

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Oil dock
The eastern dock will be fully utilized when berth 13 is commissioned and no space is left for
enlargement of liquidbulk jetties.
Berth 9 becomes less occupied when LPG volume decrease (as a result of substitution with LNG).
This provides some spare capacity for other POL.
The crude oil import may very well be shifted by 2013 to a SBM some 20 km offshore. This wil create
also spare capacity for POL at the existing jetties (10, 11, 12 and new berth 13).

Special attention should be paid to the activities at this area that is assigned as one of the two inner-
port SEZ plots (the second one located at the shore, beyond the tank terminal behind berth 10 and
11.
If the LNG terminal is not to be developed at the location between berth 8 and 13, then other activities
should be developed such as further extension of tank farms for POL and /or edible oils or dry bulk
handling activities (provided sufficient volumes are foreseen). Eventually some SEZ operations may
be allocated if not other suitable purposes can be found.

Vacant land/greenery between berth 8 and 13


The south side greenery area between berth 8 and 13 could very well developed into an area for liquid
storage. Various options have been reviewed by consultants:
a) construction of an LNG jetty. This option is in most opinions unsafe due to the nearness of the
turning circle and the portential risks of collision between incoming ships and moored LNG tankers.
b) development of a new dock inside the vacant area. This option has the advantage of being more
safe. Nevertheless the back area (some 50 ha or 125 acres) seems insufficient to establish a full LNG
deliquification plant, at least of a substantial capacity. A customer has shown interest in this option.
The consultants however do not recommend this development as a result of limited expansion area.
The project should be studied furthermore.
The full developed lagoon port within the breakwaters will create a total capacity of roughly 80 million
ton, which is according to the long term forecast to be expected not before 2015.

Back area and marshalling yard beyond the secured wall


The back area behind berth 5, 6, 7 and 14 will be largely occupied by bulk handling facilities (storage ,
railwagon tipping) but some area remaind vacant (or greenery). For routing puposes some building
may be relocated to smoothen rail and truck traffic flows.
In the long term the secured wall be not physically but administratively be redrawn as Customs
clearance systems become less depending on physical inspection in port but elsewhere. Also the port
security area may undergo a redrafted as security may be extended to all port area that contains cargo
handling activity. This would logically exclude the Port Colony, the Hospital and the quarries.
As stated in the Inception Report the non-core activities of Port Colony and Hospital could be very well
outsourced without harming the staffs secondary benefits.

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Outer Harbour development


The development of the Outer Harbour seems logical for certain cargo types as LNG. The risk factors
play an important role in the identification of (safe) locations and ample pace is available at the
southern side of the southern breakwater.
The breakwaters would thus need to be relocated in order to allow safe navigation at Monsoon times.
Under the NMDP programme some Rs 700 Cr is foreseen as development cost for an LNG terminal of
max 10 mln capacity. Other liquid cargo type flows may benefit from this development as more jetties
could be constructed at this facility.
Figure 6-11 is the pictorial representation of Outer Harbour as per NMPT.

Figure 6-10 Cargo flow distribution after 2012

Eastern dock

B16 B15

B17 B18

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Figure 6-11 Outer Harbour

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7. INTERNAL TRANSPORT, FUTURE LAND USE, ENVIRONMENTAL AND IT PROJECTS

7.1 General
The following sections present the internal transport requirements related to road/rail traffic movement
and identify the necessary projects that can help in meeting these requirements. The cost and time
schedules for the identified projects are taken from the NMPT project data wherever applicable and for
the newly proposed projects block cost estimates are made based on the previous experience and
discussions with NMPT officials.

Besides the internal connectivity projects, attention will be paid to projects in the field of the
environment, the marine services and IT projects.

7.2 Road improvements


Due to the proposed mechanization of the various projects as described in Section 6, the road traffic
will be concentrated around the main gate of the port.
The future use of the port roads by iron-ore trucks will be very limited due to the mechanization of
berth 14. Most iron-ore is expected to arrive by train. The project, mechanization of berth 14, should
provide a truck reception facility near the train unloading facilities in order to avoid any iron-ore truck
inside the port. Coal import is transported by belt conveyors to the wagon loading stations and no coal
trucks are expected in the port in the future.
Only general cargo, some fertilizers and containers will use the port roads in 2012-13.
Improvement of internal port roads should be concentrated around the main gate, near the future
container terminal and fertilizer berths. Roads should be planned according to the new port Master
plan which should be developed. Other roads should be maintained properly and are for the use of
lighter traffic in the future.
The main gate should be capable of handling about 1,500 truck movements per day which is sufficient
for the container trucks, fertilizer trucks and general cargo. These types of cargo should be handled at
the main gate, in order to avoid unnecessary traffic along the internal port roads.

7.3 Railway Projects


At the moment there is no railway inside the secured port wall area. It is expected that in 2012-13
about 50 % of the containers will leave and will arrive to the port by train. The estimation is however
that a critical mass of containers (100,000 TEU) will lead to development of a dedicated container
terminal elsewhere in port. The obvious location is the Western dock.
A railway connection should be made between the railway marshalling yard and the (new) container
terminal. Might this development not take place soon enough then a railway track should be
constructed to the berth 2. This may require a new routing scheme of container traffic. The alignment
should be according to a previous railway line, which is currently dismantled.

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7.4 Future Land Use

Figure 7-1 Land Use Plan 2012-2013

Mallya Gate

Kudremukh
Pellet Plant

Eastern dock

Silver Jubilee Gate

B16 B15

Western dock

B17 B18

KK Gate

The new land use distribution in the years 2012-13 is a direct result of the new projects as discussed
in Section 6 and concentration of the handling of the same type of cargo at certain areas. Open
stacking areas are necessary for the storage of iron-ore, coal, project cargo and containers and should
be as close to the quay walls as possible to avoid large inter port traffic or long belt conveyors.
The yellow area K K Gate is meant for future port development, the extension of the western dock with
new quay walls.
The yellow area, west of the Kudremukh Pellet plant, which has an area of about 35 hectares, will
remain unused. The land could be used for additional liquid storage and leased to MRPL or other bulk
liquids traders.
The unused area just north of the Kudremukh Pellet plant was part of the previous container terminal,
which is now shifted to the berth 2. This land could be used for the storage of general cargo or
development of warehouses.
The leased land just behind and east of berth 3 and 4 is expected to be leased out to the fertilizer
companies for the storage of fertilizers. This land was previously occupied as port used land.

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Warehouse can be constructed as replacement for the demolished ones at berth 2. A belt conveyor for
the transport of fertiliser between the berth and warehouse could be constructed. This should be
developed in line with the Fertilizer Company and importers demand. Preferably they should construct
these warehouses themselves.
Figure 7-1 and Annex A-9 show the overall land use of the entire port area.

7.5 Environmental Projects

7.5.1 Existing Environmental Conditions


The various activities of port operation can effects environmental parameters like air, noise, water, and
biological environment.

a. Air Environment
Air pollution from various port activities/facilities are an area of concern. Potential sources and
activities are summarised in Table 7.1.

Table 7-1 Air Environment


Pollution Source Activity Remarks

Unloading of iron ore from wagons and loading the


Marshalling yard cargo to trucks
Unloading coal from trucks and loading it to wagons

Stack yard Fugitive emission from the stock pile

Re-suspension of dust Movement of bulk cargo from stack yard to berth for Regular Water sprinkling carried out in
from internal roads loading in to the ship port to suppress the re-suspension
Exhaust from trucks that are playing between
Line sources
marshalling yard and berth/stock yard

Wharf area Loading and unloading activity

Large diesel engines propel vessels, auxiliary


Emission from ocean
engines that provide electric power for navigation,
going vessels
crew support, and other uses

Being a coastal site, the port area experiences good circulation of winds and subsequent diffusion and
transportation of the pollutants. Even after that, pollution levels are still high in the port area (Refer to
Annex C-1). Dust pollution is a hazard in working area. Incidences of bronchial and respiratory
diseases are common among workers, exposed to such areas over prolonged period. Individuals with
a history of pulmonary diseases are worst affected. Inhalation of dust containing asbestos particles is
known to be carcinogenic. Fine particles of iron, coal dust and dust from ores may cause respiratory
diseases.

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b. Noise Environment
Sources of noise are movement of trucks, rails, loading and unloading operation, operation of cranes,
lifting equipments. Port monitor the noise levels at a selected point and data infer that the ambient
noise levels are under prescribed limits.

c. Water Environment
Storm water runoff mixed with bulk cargo is a major source of water pollution in NMP. Potential
sources and activities are summarised in Table 7-2

Table 7-2 Water Environment


Pollution Source Activity Remarks

Stack yard Surface runoff from the stock pile mixed with the
bulk cargo (Iron ore and coal) materials

Internal roads Runoff from internal roads that mixed with over
spilled bulk cargo

Ship loading/ Bulk cargo escaping to water through the gap


unloading between quay and ship
operations

Maintenance Port undertakes regular annual dredging of 6


3
dredging mm of bottom sediment to maintain its channel

Disposal of effluent Domestic sewage generation within the port and Port has 1.2 MLD capacity sewage treatment
colony plant for treating the sewage. During the dry
season, port effectively uses the treated effluents
for dust suppression and irrigating the plants
within the port area.

The suspension of iron ore in water reduces light penetration in water. This also has an adverse
impact on bottom flora and fauna. The sedimentation of the spilled cargo like iron ore, coal etc reduces
the draft within the harbour waters. This increases the maintenance dredging cost.

Port undertakes a regular annual dredging of 6 mln cubic meters of bottom sediment to maintain its
channel. Dredging and its waste disposal in sea create negative impacts in aquatic environment.

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7.5.2 Potential Environmental Impacts proposed projects


The prioritised projects are considered for impact analysis.

The mechanization of Iron ore export berth 14 would avoid the internal movements of trucks which
causes the re-suspension of dust, spillage of bulk cargo on internal roads, and vehicular exhaust. This
has a positive impact on the dust and spill production. Increased capacity of the iron ore handling in
the port leads to more bulk cargo at the marshalling yard and more stock pile in the stack yard. Both
the handling and storage of the bulk cargo would be a major source of dust pollution. The
environmental impacts of the coal import terminal (berth 15) would be similar to other bulk cargo (iron
ore) handling, but higher in magnitude because of fine particles in the pulverized coal.
Solutions are to install systems to lower dust emission and which should be made by the operator but
controlled by NMPT.
NMPT can expect higher volume of storm water drainage mixed with iron ore from the marshalling
yard and storage area.
The operation of conveyors would be a continuous source of noise within the port premises. The
persons working close to the conveyors would be exposed to higher noise levels. Adequate ear
protection equipment usage should be enforced and monitored.

7.5.3 Pollution and safety Control Measures


Pollution occurs (a) at berths, (b) from vessels staying at port, and (c) from handling of cargo.
Considering various sources of pollution, control measures are suggested at either the source of
pollution or at the receiving environmental component. Adoption of these measures would help keep
the pollution control costs to a minimum.

a. Air Pollution Control


Dust emissions from the cargo handling consist of minor particles. Mechanical handling of bulk cargo
would help to reduce the fugitive emissions. While designing of mechanical handling system following
environmental friendly activities may be considered:

A completely closed belt-conveyor from the ship to storage yard


Belt-conveyor into the ship and unloading of coal from ship to conveyor by using sloping
chutes rather than drop,
Arranging chute to feed conveyor in the direction of the flow,
Using high-capacity conveyor at low speed rather than low capacity conveyor at high speed
reducing conveying movement and number of transfers,
Mechanisation of loading operation into wagons/trucks using small conveyor belts and
hoppers

The commodity that is stacked in the port area needs to be covered as much as possible to reduce the
exposure to wind. NMPT may develop a wind breakers/shelter belts (by growing tall trees) around the

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bulk stacking area. Continuous water sprinkling on fine bulk cargo storage will also reduce the fugitive
emission. Long term solution will be to construct covered storage areas.

Truck parking and loading bay areas need to be concreted to reduce the re-suspension of dust
particles. NMPT should adopt clean fuel policy for port vehicles. All the port vehicles should be using
modern technology engines to provide least emissions.

Re-suspension from the road surfaces can be minimized by improving the road conditions in and
around the port. While constructing the new roads, considerations for operating larger capacity trucks
need to be considered. Regular maintenance /cleaning of internal roads is required to keep the re-
suspension under control. Tractor mounted road sweepers can be used to clean the road. During the
dry season, the present method of water sprinkling needs to be continued. Above measures will help
in reducing the re-suspension of dust particles from the road surfaces. NMPT can also plan to develop
avenue plantation along the sides of the internal roads. Plants with varying heights and thick foliage
area may be opted for the avenue plantation. These greenbelts will prevent the transportation of dust
particles from the road corridors. Haulers need to be instructed to avoid overloading and spillages of
materials on road while transporting the materials inside the Port. Offenders may be imposed with
appropriate fine but more supporting is a proper awareness campaign to teach truckers/stevedores to
cooperate in spill free handling operations. Port also needs to liaise with NHAI to improve the road
conditions outside the port area.

b. Noise Pollution Control


Noise should be prevented rather than controlled. Installation of electrical systems instead of
pneumatic ones will reduce noise levels. Rubber padding may be provided with the noise generating
equipment. Mufflers should be provided wherever possible to reduce noise levels from mechanical
operations and workers in noisy areas should be provided with ear muffs to prevent hearing loss.

Ministry of Environment and Forests guidelines for ports and harbours recommend that noise levels
should be kept below 85 db at a height of 5 feet anywhere in the occupational work area at the port. In
addition, the ambient noise standards for various areas as per Central Pollution Control Board should
be maintained. Taking these guidelines into consideration, the horns installed on the vessels should
be of specific standards (certified by Bureau of Indian Standard) to avoid excessive noise generation.
For reducing the noise propagation from operations areas to office and residential areas, tree
plantations are recommended.

c. Water Pollution Control


Provide garland drains around the storage area and collect the contaminated runoff in collection pits
adjacent to the storage area to minimize the pollution. The runoff from the dust suppression (water
sprinkling) system can also be collected through these drains. Separate drains for different cargo
types are recommended to recover the cargo from the sludge. It would be ideal to have a number of
collection tanks to allow one tank to settle while other tanks receive the fresh runoff. These settling

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tanks can also act like the groundwater re-charging points. Flooring/lining may be providing to storage
areas to prevent infiltration of leached from the cargo. For long term NMPT need to plan for Master
drainage system covering cargo handling area, internal roads, cargo storage area and berths.

Currently 30% of the potable water requirement of the port is being met by pumping groundwater. In
view of the expansion plans, port requires additional water supply to cater it needs (both in vessel side
as well as other areas). Pumping the additional water from shallow wells may not be advisable, as this
deplete the water table of the port area and affect other water users and vegetation of the area.
Probably NMPT needs to identify alternative water supply sources such as developing adequate
reservoir or help municipal authorities to augment the water supply to the Panambur region.

Finally the NMPT needs to plan for expansion of the sewage treatment plant considering the projected
enhanced usage of water consumption.

The disposal site for the dredged (capital dredging for deepening the channel) materials need to be
jointly identified along with ocean technology consultant and marine environmental specialist.

While on-board pollution generated from individual vessel may be negligible, accumulated pollution
from all vessels may be significant. At present no specific mechanism has been observed to monitor
waste discharge from vessels. In future NMPT must ensure that vessels coming to harbour must have
treatment facility on board. NMPT may also have effluent treatment facility so that in case it is required
to hold the effluents on the vessel for a longer time, all the wastes collected in these holding tanks may
be discharged into the proposed on-shore treatment plants.
Oil spills from tankers during loading and unloading may be a major pollution problem at POL
terminals. Containment and retrieval of fuel oil from water should be carried out to prevent the spread
of oil in waters. India is party to MARPOL convention (MARPOL 73/78).

d. Solid Waste Control


Currently licensed contractors are engaged in collecting garbage from ships and disposing it on
municipal waste disposal yard. In view of projected larger marine activity, the amount of such waste
collection and disposal would be higher in quantity. Therefore port need to have better control of the
waste disposal. Port need to audit the contractors movement of the waste from port to disposal site to
ensure safe disposal.

e. Dangerous goods control


The handling of dangerous goods in containers requires specific knowledge and skills of container
handling staff. The incorrect handling may lead to spills of harmful gases or liquids which may cause
accidents (spillage, explosions).

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It is likely that the knowledge and skill level is insufficient. NMPT should arrange professional training
courses for staff dealing with dangerous goods. The development of the crude oil/POL (berth 13) will
increase the handling of liquid cargo. The enhanced operation however is within closed systems of
pipelines. The potential spillage of bulk liquids into port waters needs to be monitored regularly and
protected when occurs. The port has at the moment sufficient oil spill combating equipment and
mechanism to tackle such occurrences.
A further concern would be the truck parking and loading bay area. Unless the parking and loading
bay areas are concreted, the soil under these areas gets loosened and form uneven surfaces and
ultimately causes re-suspension dust emissions and muddy water runoff from these areas.

7.5.4 Environmental Management Cell


Environment Management Cell (EMC) need to be strengthened in view of operation of the pollution
control system, monitoring of pollutants and development of greenbelt by either appoint a qualified
person or given adequate training to the existing staff. Institutes like IIT Mumbai offers environmental
courses to candidates recommended by organisations like NMPT.

EMC will be responsible for regular environmental quality monitoring, proper operation of pollution
control equipment and STPs, and liaison with regulatory bodies such as the Karnataka State Pollution
Control Board (KSPCB), external stake holders, etc.

Additional monitoring requirements

Port would continue to take the assistance from National Institute of Technology Karnataka (NITK),
Surathkal for sampling and analysis with increased awareness and remedial measures. . However
more rationalization of monitoring sites needs to be done on urgent basis. More air quality monitoring
at near by villages like Meenakalia need to carry at regular basis. The sediments should be monitored
once in every season, for different chemical and biological parameters to assess the extent of
contamination. Regular monitoring may be taken up at harbour area. The sampling points for
monitoring could be in stagnant areas and fishery zones and near terminal sites. Health of aquatic
environment in and around NMPT port needs to be monitored on regular basis. Annual survey of
plants and species can be done with the help of near by institutes like Mangalore fisheries collage or
Central Marine Fisheries Research Institutes (CMFRI).

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7.5.5 Summary of Environmental Projects


Various projects under the environmental management and its budgetory costs are summarised in
Table 7-3

Table 7-3 Summary of Environmental Projects


Cost Estimate
Project Purpose Remarks
x lakhs
Mechanical handling of for reducing the dust pollution from cargo Covered as a part of
-
cargo handling and internal transportation main project
to reduce the fugitive dust emission from stock
Water sprinkling system 50
piles
Two mechanical road
Mechanical Road sweeping to reduce the re-suspension from internal
50 sweeping machines
machines roads of the port
are considered.
Development of truck
parking zone and loading to reduce the dust emission 400
bays
to reduce the wind speed at operation and
handling area, Considering 10 ha of
Greenbelt development to prevent the transport of dust particles from 50 greenbelt
source development
for noise attenuation
Garland drains around the
reduce the contaminated storm water runoff
storage areas, collection 100
reaching the open water sources
pits, settling tanks, linings

Water supply augmentation to meet the water demand of the port 500

to treat the domestic sewage and disposal


STP capacity enhancement 100
system
Developing Master drainage
manage the storm water runoff from the port. 1000
system
to assess the impact of port operation in
Aquatic environment study marine flora and fauna and take preventive 50
measures
Enhance the oil spill
readiness for oil spill handling 200
handling capacity of the Port
to prepare the port for better management of
EMC strengthen and EIA environment
100
studies for conducting EIA studies for environmental
clearances

Total Rs 2600 lakhs

It is assumed that 10% of the above cost, i.e Rs 2.6 Cr is considered in the planning period upto 2012-
13

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7.6 IT Developments
EDP activities are directly under the control of FA & CAO. It is the central nodal point for supporting
the IT activities in the port. It has 13 personnel working. EDP is headed by a Joint Director assisted by
one Deputy Director and two Junior Directors. Other staff includes two Software Assistants, three EDP
Assistants, three Programming Assistants and one Senior Assistant.

7.6.1 Existing Systems

Servers
There are three servers,
a. One Sun system running Solaris in Wharf area.
b. One Local brand system running Linux (for mail exchange server with outside agencies
like Customs and port users and banks) in Wharf;
c. One Compaq server running NT server in EDP in the administrative building.

Apart from these, there is a separate system for VTMS

Nodes
There are 228 nodes.
o On LAN with Admin Server -
a. 34 nodes in Administrative Block
o On LAN with Warf Server
b. 18 nodes in wharf
c. 2 nodes in stores
d. 3 nodes in hospital
e. 4 Labour Deployment Section
f. 4 in Gates

o 163 nodes are stand alone ones.

Apart from the above there are 4 laptops.

Switches and Routers


a. 7 Unmanageable switches in admin building.
b. 2 3-Com switches in wharf.
c. One CISCO router for leased line of 128Kpbs for internet connectivity.
d. 4 ASDL Modems for broad band connectivity

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Application Systems
Various application systems available on these servers are listed as below.

The Wharf side server hosts D2K and Oracle based applications such as

i. Traffic Management System


ii. Equipment Handling
iii. Invoicing
iv. Labour Deployment System (Partly)

The wharf side server also hosts VB/Delphi/SQL server based Finance System

Server in the admin building hosts MS SQL/Delphi/VB based systems such as:
i. Finance
ii. Partly HRD
iii. Payroll
iv. Provident Fund Ledger Maintenance System.
v. Hospital Management (Issues and purchasing being used, others not used)
vi. Inventory Management with Issues and Receipts (without Purchase systems) with
interfaces between related modules
vii. Utility (water and power billing) system

Systems under development are

i. Estate Management.
ii. Pension Monitoring System
iii. EDI between Port and bank

Application Systems on different servers do not communicate due to lack of network. Interfaces
between the required systems exist but need to be refined.

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7.6.2 IT plans
The following projects are already in the pipeline:

Table 7-4 IT Projects


Project Name Start Time End Time Current Status

Campus Network 01/01/2007 30/06/2007 Work awarded

Development of application systems 01/11/2006 01/05/2008 User requirements elicitation is


underway

NMPT has the plan for a campus network and for networking 450 nodes within 2 years down covering
all the areas like Operational areas, Administrative block and Hospital. Currently the Port colony and
Oil jetty are not covered. Furthermore NMPT plans to go for ERP solutions to automate the information
needs of non-operational areas.

There are additional requirements for computerization from various departments. In view of the ports
decision to revamp the existing system and develop a new system, recommendations are made
appropriately.

7.6.3 IT development recommendations

Development of Application Modules

1. The automation needs of the port are classified into the following categories
a. Integrating existing Vessel Traffic Management System (VTMS) with operational modules
for better control of ship movements within the port area.
b. Operational Modules
c. Non operational areas covering information systems like Personnel, Payroll and Finance
etc.
d. Electronic Data Interchange (EDI) for transacting with/by outside agencies
e. Surveillance System to monitor Vehicular and Personal movement within the port area.

2. Integrating VTMS with Vessel Information and Control Systems, which will provide better
control of Ship movements and operations on ship.

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3. The following operational modules are required to cover the needs of operational area:
a. Vessel Information and Control System
b. Cargo Information and Control System (import & export and rail/road/internal movement
operations)
c. Container Tracking and Control System (import & export and rail/road/internal movement
operations)
d. Engineering & Equipment Management System
e. Labour Management System

4. List of the modules for the non-operational area proposed are:


a. Personnel Information System or Human Resource Management System
b. Payroll System
c. Finance Management System
d. Inventory and Material Management System (including Purchase System)
e. Hospital Management System
f. Estate Management System
g. Workshop Management System
h. Management Information System for Port

5. Electronic Data Interchange System provides the electronic interaction between port and its
community like port users, customs and banks etc.

a. This enables the exchange of messages between the parties in a mutually agreed format
for faster information flows to avoid delays due to manual interaction.
b. These systems require network connectivity to communicate with the EDI community.
c. The inputs from this system are made use by the operational modules for further
processing.

6. Surveillance System proposed are:

a. Closed Circuit Monitors, installed at various critical places like gates and oil jetties
integrated with a control room to closely monitor the vehicular and person movements.
b. Smart card based control systems to validate and control the personal entries in the
restricted areas
c. Finger Print / Biometric based systems to validate employee attendance

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Integration of Applications
The above mentioned application systems should have interfaces between relevant modules for
exchange of data. This integration reduces the time delays due to manual inputs and avoids
duplication of data.

Methodology for development


Development of application systems should be done using software platforms of latest technologies for
better support, maintainability and productivity. A three-tier client-server model is the best suited with
one separate tier/layer for each of User Interaction, Business Logic and Data Storage responsibilities.
Web based application development in fact even gives the flexibility to access the application on the
intranet by internal users and on the internet by external port community.

Expansion of Hardware
In view of the increase of transactions due to the projected growth in the traffic, aspects of up-
gradation of hardware and network should be studied to expand appropriately.

Network
Campus network should be completed to share and exchange information between different servers
and between nodes and servers.

Though this is already on the anvil, this should be taken up as top priority to support integration
between applications hosted on different servers. It can be achieved on an incremental basis by
prioritising connectivity between servers in Administration building and in wharf side for the required
nodes as a first measure. This helps to avoid manual inputs and duplication of data.

Management Information System (MIS)


Though this is specified in the list of systems in the previous sections, the MIS needs special attention
as various levels of managers need different levels of information.

Work and document flow management


Work flows and document flows should be defined for each department and subsection. This may lead
to better coordination and communication between staff members and set individual authorities right.
The interaction can be supported by an intranet system that will speed up processes and improves
quality of work (avoidance of duplication of work, less errors, digital filing).

E-Mail messaging and Internet


This facility is vital for internal and external communication. It can only be achieved by an integral PC
network system (see above).

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Internet connections should be distributed on LAN basis, connected through a proxy server. Internet
access should have password authentication. The usage should be monitored to avoid misuse. Fire
Walls should be implemented to prevent security loopholes.

IT department capacity
EDP does not have sufficient number of technical staff. Additional technical staff should be hired for
the department. On exact number for each skill, a detailed analysis should be undertaken keeping in
view the challenges to maintain the new software.

Training
The following trainings are suggested for various levels of people to encourage IT use. The existing
staff of EDP needs to be trained on latest technologies to upgrade their skills and to augment
developmental and supporting activities of the IT systems. A detailed list of training programmes is
given in Trainings section (ref. section 8.2.11 and Table 8-2).

End user trainings should also be conducted as and when new application systems developed are
being implemented. This promotes the immediate and correct use of the system being deployed.
The total cost of IT projects including networks, hardware and software development will be to the tune
of Rs 4 Cr. This cost will be spread out over the next 4 years equally.

7.6.4 Ad-hoc solutions


The following may be immediately addressed till such a time the new proposed system with the whole
campus network goes live.

a. Application Systems on different servers do not communicate due to lack of network.


Network Connectivity should be provided between all such critical systems.
b. Interface requirements between the necessary systems should be studied and
implemented immediately.
c. Additional requirements from user departments may be studied and developed with
appropriate interfaces with other systems (e.g. Purchase System).

It should be noted that private operators of terminals will install their own IT systems based on their
business operations requirements. A close coordination of possible links between NMPT systems and
third party systems needs to be executed to streamline operations and information exchange.

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8. ORGANISATIONAL IMPROVEMENTS

8.1 General Description


Under the NMDP, 228 projects have been identified for implementation in two phases through public-
private partnership. By identifying specific projects and other measures, the NMDP over the next 10
years will give a concrete shape to the vision and strategy of the National Maritime Policy
The future success of NMPT requires institutional and organisational changes along with strategic
improvements on infrastructure and private sector participation. In this strategic vision, the concept of
a Land lord Port model prevails above the service Port model that the NMPT presently adopts. NMPT
has to gradually shift its role and functions to the Land lord concept as a most preferred model of
operations. The main drive behind this vision is that the private sector is in a better position to adopt
modern technologies and business systems for cargo handling than a governmental body. The further
professionalism of the cargo handling operations will benefit both the port and the regional and
national economy. Another benefit is that there will be a more clear and logical separation between the
operator of cargo handling equipment and the controller (NMPT).

The Land lord port model would also imply ultimately that the NMPT will not any longer provide marine
services by itself but have a private operator undertaking these activities. The need to outsource the
tug boat, mooring boat and pilotage activities to third parties is however not really existing at present.
The tugboat services seem to be professionally managed while pilotage activities are performed by
(too few but skilled) pilots.

A third reason for adopting the Land lord port model is the reduction of capital employment from the
national budgets. It is assumed that the terminals and jetties of NMPT will attract sufficient investors to
acquire and allocate modern (and usually expensive) handling equipment in the port basin. A
subsequent effect is that modern handling equipment will speed up handling time and automatically
increases the ports capacity which will reduce the claims for new infrastructure construction in future.

8.2 Technical Description

8.2.1 Institutional aspects


Adopting the concept of a Land-Lord Port model requires first of all institutional changes. Any
amendment in the Major Port Trust Act 1963 and Indian Ports Act 1908 is ruled by Central
Government.

The Port will gradually become in due course of time a Port Authority that has two main functions:

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1. Port regulator
The regulatory functions include all task in view of a safe and timely handling of ships and
cargo/passengers in and outside the port basin (access channel). The sub tasks include:
Vessel Traffic management
Cargo handling and storage safety rules(IMDG/MARPOL)
Port security (ISPS)
Port State Control (vessel/crew inspection)

2. Port developer, custodian and maintainer


The port acts purely as:
stimulator of the port as logistics nodal point
developer and maintainer of port areas, entrance channel, terminals, jetties, storage areas,
etc.
lessor of port property :long/short term lease/concessions for mainly infrastructure, less super
structure.

The IPA has recommended (Master Plan part IV, August 2006) the establishment of a corporate
structure for NMPT. This structure is in line with modern business organisation concept and foresees a
streamlined organisation that is able and equipped to make major decisions professionally and with
limited interference with MOSRTH. The corporate structure foresees a share company with 100%
shares to the MOSRTH, and a Board of Directors (BD) to supervise the Executive management.

The Executive Directors will, in this concept, be Chief Executive Officer (Chairman of the BD), a
Director of Operations, a Director of Administration and a Finance Director. The consultants suggest
further restructuring by trimming hierarchy levels and increasing authority to CEO, executive directors
and HODs to cope with day-to-day activities. Major investments would still need shareholders
approval. Contrary to the present situation, the corporation may need to be monitored in view of
market regulation/exploitation (as semi-full monopolist) by a tariff regulator.

The NMPT will remain active in the field of port developer and infra structure maintainer. The port will
continue to develop port area (or re-arrange its territory) in accordance with cargo handling prospects
and maintain the infra structure (water depths in channel and basin, quay walls, jetties, storage areas,
etc) up to required standard. As a Port developer, the NMPT will act more and more as conceding
Authority to concession agreements with the private sector to have terminals, jetties and storage areas
operated by the private sector. There may very well be agreements made where the port areas are
completely built and operated by the private sector (BOO, BOT concessions) in order to limit or even
avoid public financing.

Within the present physical structure of the port is preferred that NMPT maintain its role as port
Authority and will not engage in private port concessions as is applicable in other Indian ports (ref.
Mundra/GAPL or Ennore Port).

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The above 2 major functions require amendments of the NMPTs charter (Articles of Association) and
in the port by-laws. The amendments will cover the regulation and responsibilities of the port and its
customers in terms of obligations and liabilities. In this revision exercise especially provisions need to
be laid down on leasing of infra-structure and the ruling of the gradual transfer of equipment and
manpower to the private sector.

8.2.2 Concentration on core activities


The Land lord port model requires management to concentrate on its core activities. This implies that
non-core activities should be gradually outsourced or transferred to other institutions of the private
sector.
Activities already outsourced or eligible for outsourcing or discontinuation are:
Cargo handling and storage operations
Workshop activities for cargo handling equipment
Tally and cargo inspection
dredging operations
indirect human resource services: housing, medical care
port security

In principle activities can be out-sourced subject to the availability of professional services at a


competitive price quality combination.

Maintenance dredging requires high capacity equipment which is not available at NMPT and therefore
outsourced.

Human resources provisions of certain specific training, housing and medical care can best be
provided by professional organisations.
Training and services that cannot be provided by outside organisations should be organised by NMPT.
Housing is a secondary labour condition to staff and forms part of the collective labour agreement with
unions. There is however no reason that NMPT should continue to manage this activity as external
organisations (housing corporations/housing society) can provide for managing residential complexes
(at cost). The NMPT may also privatise the Port Colony operations by setting up a special foundation.
Logically the secondary benefits to staff should not need to change as a result of outsourcing or
privatisation.

The same line of thinking may apply to the medical services to staff of NMPT. Either the hospital
should be teaming up with a public Hospital in Mangalore or it should be privatised in a foundation.
Again, the intention of this shift is not to reduce staff rights to medical treatment.

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8.2.3 Organizational right sizing as a result of Land Lord Port concept


The new role and related functional composition of the port requires a re-arrangement of the NMPTs
organisational structure.
Firstly, the gradual transfer of cargo handling activities to the private sector will imply that certain port
organisational capacity (manpower and equipment) becomes gradually obsolete. The reduction and
ultimate ceasing of cargo handling operations by the port will lead to redundancies depending on the
speed of concessioning the terminals and jetties. Logically also handling equipment and related
systems and maintenance thereof will be obsolete as will be done by the private operators.
For the time being the container terminal operations will be continued to be executed by NMPT
operational staff for the entire planning period.
The NMPT organisation is categorised as follows:

Table 8-1 Employment at Port as on 31-3-2006


Number and Category of Number of Non-cargo handling Cargo handling workers Total
Officers employees (Scheme 1990)

Class I Class II Class III Class IV Others Class III Class IV

66 100 727 223 0 316 476 1908

Cargo handling workers on shore /on board vessels (under New Mangalore Port Cargo Handling Workers Regulation of
Employment Scheme 1990), are further categorised as follows:

Class III Class IV Total

1) Port office Staff 38 10 48

2) Cargo Handling Workers 278 466 744

Apart from the direct operational dock labour, a substantial volume of staff working at the
Administration building and in the Port (wharf) Office is involved in document processing, charging
tariffs to disbursements, calculation of incentives and bonusses, preparing invoices, follow up
payments, etc. This work will gradually disappear when handling operations will be transferred to
private operators. The indirect supportive work will also disappear such as medical, HR, housing, IT
documentation, security, vehicles etc.
Two indicative measures can be used to estimate the total work force reduction as a result of transfer
of handling activities:
a) Without having made an in-depth study of the organisation and the individual (job-wise) task
divisions the consultant estimates that in the Indian context for every 5 dock workers (total 744) 2
administrative and indirect supportive staff are supporting their work. The total of redundant
administrative staff directly or indirectly involved arrives thus to some 300 based on Full Time
Equivalents (FTE).
b) Reduction of work as a result of shifting handling operations to third parties will appear in
administrative and supportive sectors of NMPT. This additional reduction in work load is hard to
estimate but as a rule of thumb the consultants estimate that a proportional volume of work will be lost;

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in other words, when ,all dock labour (744 divided by 1908 which is 39% of all staff at NMPT) would
become redundant and the additional administrative and other supporting work will reduce equally or,
in numbers, 39 % of the non dock labour force (i.e 1908 - 744 = 1164) say 453 jobs will be lost.
Ultimately the staff reductions (both operational and administrative) will lead to a much meaner and
leaner organisation that can be managed more effectively and work more efficiently as coordination
and communication becomes less voluminous and business processes become simpler.
Apart from redundancies, new staff will need to be hired to cope with the revised functions at NMPT.
The Marketing Unit and the IT department need to be strengthened and this vision will create new and
enriched jobs. As the previous sections of this report have indicated, some 10 staff is required for
Marketing functions while IT development may also require an additional staff of 10. Some of the
redundant staff may very well be retrained for these functions.

8.2.4 Reorganisation tools and feasibility


The NMPT may want to opt for a gradual reduction of staff but not be able to achieve this easily. Firstly
Indian Labour laws for civil servants prohibit the retrenchment of staff. Since this is a nation wide
issue, consultants have no other advice than to recommend government to take away the restrictions
in the laws and regulations to allow gradual redemption of staff.

Nevertheless the NMPT should timely produce a Manpower-Exit plan in which redundancies are
scheduled for the coming years. The most common scheme to reduce the work force, available to all
major ports, is the special Voluntary Retirement Scheme (VRS), set by the Central Government, and
designed to allow staff to request for early retirement by availing a compensation for past and future
service years. The rules of this VRS schemes are fixed and not negotiable. A Special VRS has been
used in 2004-05 by 64 staff but during 2005-06 only 2 staff members opted for this.
This Special VRS includes the payment of a gratuity which is Rs 4.5 Lakh on an average on top of
general VRS benefits as salary compensation for past and future years of employment, encashment,
Pension fund (Superannuity) and Provident fund.
Financially offering Special VRS is not beneficial to NMPT, as it is costlier than providing employment
until retirement. Perhaps only the advantage of VRS to NMPT is the reducution in overheads, which
are incurred otherwise.

This leaves the NMPT to find other solutions to reduce its work force. One tool is to try to transfer staff
to the (new) private operators in the port. This Transfer of Staff (TOF) can help lessen the social
problem of unemployment even though it may imply that staff (dock workers) will continue to receive
the full benefits of a NMPT employment package.

The benefits of a reduction of work force (through any means) are both financial as a result of reduced
labour cost in future and operational as a result of efficiency of a smaller organisation. The actual cost
of retrenchment is done on the basis of natural retirement only and is included in the future cash flow
and P & L accounts.

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8.2.5 Disposition of equipment


Due to the transfer of cargo handling activities the NMPT will gradually have obsolete equipment in
case the private operator does not wish to employ the ports equipment (at a price). Equipment may in
that case be sold or leased out (less preferred) to third parties. Market values will determine whether
NMPT can book profits on sale of equipment (preferably by tender) or not. For calculation purposes it
is assumed that equipment is sold on average at book value.

8.2.6 Streamlining internal/external processes of NMPT


Not withstanding the effects of transfer of activities to the private sector, NMPT needs to streamline its
administrative and marine service operations to arrive to a lean and mean cost level. This requires a
sound analysis of operation procedures and the establishment of short cuts and decentralisation of
tasks. The streamlining will cut paper work and approval procedures and reduce workload on all
administrative and operational levels. Although a detailed workflow analysis has not been made, it is
expected that the NMPT can reduce its workload by at least 20 % by applying efficiency measures in
its operations and administration. This may require certain level of redrafting of the Charter (top
hierarchy authorities), departmental task descriptions and job descriptions. It is suggested that
analysts will describe processes in detail and come with efficiency proposals to reorganise
departments and reset inter-departmental and external processing. Logically IT and communication
tools will support this process and need to form part of the analysis.

8.2.7 Marketing and Public Relations


In the new set up it is of great importance that certain management support sections are established
or, if existing, are upgraded for general marketing and public relations. In order to market the port to
the shipping and transport sectors, a marketing and PR department needs to be strengthened. This
department should be sufficiently skilled and equipped to communicate with the public and the
stakeholders . At present only 1 man is assigned with marketing tasks. A department of 10 persons is
required composed of various skills and experience in the fields of market research, marketing and
PR.

8.2.8 Marketing/sales activities


While general port marketing remains a key function for NMPT, the private concessionaires will
undertake specific (customer oriented) marketing and sales activities on their own to optimize
berth/terminal utilization. However, as long as NMPT still executes cargo handling activities without
private interests involvement, NMPT needs to perform the marketing and sales function itself.
The commercial strategy requires regular contact with existing customers, search for new customers,
solving of complaints/comments of customers and the active coordination between all parties involved
in the logistic process to improve (shorten/cost reduce) the physical and administrative processing
through the port.

To execute the Marketing and Sales tasks properly a professional Marketing department is required
that deals with all sub tasks of market research, market data base management, market pricing and
service jobs and after-service tasks.

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The competences of the Marketing department include:


international shipping market knowledge
logistics analysis/economic skills
language skills
data base management skills
negotiation skills
behavioural skills

The marketing mix to attract and keep customers should furthermore consist of promotional activities,
pricing of services and customer response mechanisms.

Promotional activities may include advertising in trading / production industry magazines, the further
development of the content and features of the NMPT website and the press releases and other
communication with customers and public.

8.2.9 Business Systems and IT


The present EDP (Electronic Data Processing) department is the central nodal point for supporting the
IT activities in the port. EDP is directly under the control of FA & CAO. It has 13 personnel working
with it. Apart from 2 managers (Head and Deputy) other staff includes two Software Assistants, three
EDP Assistants, three Programming Assistants. One Senior Assistant from other department is taken
on loan basis.
IT is dealt with in detail in Section 7.6.

8.2.10 Human resource activities


Human resource activities are at present executed by the Secretarys department. This now
administrative department needs to shift its focus from employment administration to a real effective
Human Resource management unit that deals with all contemporary tasks of hiring/firing, career
development, job descriptions and job evaluation, staff performance appraisal systems and personnel
information systems. This requires the upgrading of key Secretary department personnel to become
professional HR officers.

While the present strength of the Secretarys department is more than sufficient to manage the HR
activities, the skills need to be addressed in view of possible decentralisation of powers to the NMPT.
Many HR tasks are ruled by central government civil servant regulation (Salary system, promotion,
hiring/firing, etc) and room for individual manoeuvring is limited. The organisation should however be
prepared to act more independently when rules are going to be lessened.

8.2.11 Capacity building


The present organisation is rather engineering oriented and certain business competencies are
underdeveloped.

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Overall training needs


The NMPT staff needs to be trained in:
marketing analysis, customer response, Origin-destination cost calculations (Marketing
department, 2 weeks, group session)
financial and economic feasibility assessment (Project development/planning department, 1
week)
Information analysis (IT oriented)

Management skills need further to be improved in view of a more business oriented organisation. The
training program should consist of :
staff performance appraisal
work processing and planning
cost price calculation and project feasibility.

IT Training
The existing staff of EDP needs to be trained on latest technologies to upgrade their skills and to
augment developmental and supporting activities of the IT systems. The recommended courses are
listed in Table 8-2.

Table 8-2 IT Training


Title of the Course Intended Audience Duration

Computer Appreciation (Including


fundamentals of computers, Windows All IT users not conversant 2 weeks
NT/XP and MS office)

C & Unix (Linux) Programmers not familiar with these topics 2 weeks

UNIX (Linux) Administration Staff entrusted in system administration 2 week

Network Administration Staff assigned to perform network administration 2 weeks

Oracle 10g (Programming) All Programmers conversant with lower versions. 2 weeks

Oracle 10g( Administration) Staff entrusted with Oracle system administration 2 weeks

Part time training sessions may be considered if employees can not be spared full time. Some training
programs on Java, VB/.net can also be planned once the platform for the new system is decided.

Apart from the above training, end user trainings should also be conducted as and when new
application systems developed are being implemented. This promotes the immediate and correct use
of the system being deployed.

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Finally NMPT should start organizing awareness courses on handling hazardous cargoes and
handling techniques to staff of stevedoring companies (shore workers, truck drivers). This support is
required since the present handling techniques are not protecting the natural environment and
handling is not done professionally (resulting in over stowing trucks and hoppers, cargo spills on quays
and in the dock, commingling of dropped cargo with other cargo types).
The training is best provided through external experts with support from NMP staff.

8.2.12 Cost of reorganisation


The cost of implementation is very much depending on the speed of decision making by the NMPT.
Since retrenchment of staff is not permitted, the reorganisation cost will only be substantial when the
labour regulation will change towards a more decentralised HR management concept.
If the VRS is reopen, some staff may opt and the cost needs to be assessed and budgeted.
In this respect it is important to take the number of retirees into account. Indication is given that some
150 staff members will retire within the next 3 years.

The effect of the Transfer of Staff is depending on the desire of the concessionaire (PPP partner) of a
terminal to accept and employ NMPT staff. Even when the operator will agree to take over staff, the
remuneration may not be equal (e.g. less) than the present package that the staff enjoys at NMPT.
The balance between the present and the new remuneration package may be substantial and the
NMP may be forced to pay the difference for the entire employment period up to retirement of the staff
member. This option should be further elaborated.
It is nevertheless advised to try to include some transfer-of-staff volumes into concession agreement
as a condition sine qua non (a compulsory condition).

Training funds need to be reserved for either in house or external training on the basis of annual
programme.

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9. PORT CONNECTIVITY

9.1 New Mangalore Port, Mangalore City and Hinterland


The New Mangalore Port and Mangalore city are well connected by road, rail and air to major cities of
India. New Mangalore Port mainly handles liquid bulk and dry bulk cargo. While the former is almost
entirely transported by pipeline, the latter is transported mainly by road and to a lesser extent by rail.
There is no inland water transport connectivity to the port. This chapter deals only with road and rail
connectivity, which are common user facilities managed by independent organizations and not pipeline
connectivity which is exclusive to the concerned port users.

9.2 Regional Transportation system

9.2.1 Roads
Three National Highways pass through Mangalore connecting the city to the rest of the country as
shown in Figure 9-1.

NH-17 (Two Lane), which runs from Panvel (in Maharashtra) to Edapally Junction (near Kochi
in Kerala), passes through Mangalore giving it an excellent North South connectivity.
NH-48 (Two Lane) runs eastward from Mangalore to the state capital Bangalore.
NH-13 (Two Lane) runs north-east from Mangalore to Sholapur.

Figure 9-1 Road Connectivity to New Mangalore Port - National Highways

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The Port at present has three entry / exit gates as under:


Mallya gate opposite the National Highway 17,
Silver Jubile gate on the southern side and
K.K. gate on the northern side.

These gates are connected to the National Highway 17, by two lane roads and provide direct access
to the operational areas. NH13 and NH 48 are also connected to the NH 17 providing the port with
access to all three highways. Besides the National Highways, the port is connected to Mysore region
through the State Highway from Bantwala to Mysore passing through the hill town of Madikeri.

9.2.2 Existing Scenario


As already mentioned in the para after Figure 9.1, the port main gate is directly connected to the NH-
17, which is currently a 2-lane highway except for the stretch at the port gate, which is a 4-lane
highway. But this stretch is in a very poor state at present (October 2006) at a number of locations with
the asphalt pavement completely damaged that has resulted in numerous potholes. The bad condition
has lead the normal average speed of vehicle movement on a highway from 60 to 80 km/hr dropping
to about 10 to 30 km/hr.

On NH-13, while the stretch between Sholapur and Chitradurga is in good condition, the stretch
between Chitradurga to Mangalore needs to be widened and strengthened. The stretch between
Karkala to Shringeri falls in the Ghat section. Therefore, heavy vehicles from Hospet -Bellary region to
the port do not use this route. Instead, they use the relatively longer route via Hubli-Karwar and via
Chitradurga-Tumkur-Hassan to Mangalore. If the Chitradurga- Mangalore stretch NH-13 is widened
and strengthened, the distance between Hospet -Bellary region and the port will be reduced by 150
km.
Position of New Mangalore Port with reference to Karnataka Road Network is shown in Figure 9-2 .

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Figure 9-2 National and State Highways in Karnataka

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9.2.3 Future developments


Since the existing network of 2-lane National Highways and the single-lane State Highway may prove
inadequate to handle the future traffic that will flow through the region, the Central Government has
decided to upgrade the National Highways connecting New Mangalore Port to Surathkal, which is
about 6 km north on NH 17 and B.C. Road junction, which is east of Mangalore on NH 48 to four-lane
under the port connectivity programme of the National Highway Development Programme (NHDP).
The work (costing Rs 195 Cr) on this project which involves a total of about 37 km stretch of road
started in June 2005 and is now expected to be completed by June 2008 as may be seen from Table
9-1.

Table 9-1 Port Connectivity Projects Under Implementation by NHAI


Stretch of NH funded by SPV NH Length Date of
(Km)
Start Completion Original

Completion Estimated

4-laning of NH-17 (Suratkal-Nantur 13, 17 & 48 37 Jun 2005 Dec 2007


Section), Nantur to Padil (By pass)
along NH13 and Padil to B.C Road Jun 2008

along NH-48 (Padil Bantwal Section)

Other proposed developments are

On NH 17:
4-laning from Surathkal to Kundapura north of the port.
Extension of 4-Lane from Nanthur to Thalappady (on Kerala border) south of the port.

4-laning from Thalappady to Kannur / Trichur in Kerala.


On NH 48:
4-laning from Hassan to Nelamangala (Bangalore) east of the port.

Besides the above, improvements to NH 13 which as already discussed in preceding para under
existing scenario, provides access to the northern region through Sholapur and passes through
Hospet Bellary is of importance to the NMP. Hence the port has proposed the same for inclusion in the
XIth plan.

In addition, 4-laning of Hubli-Ankola section is also required to meet the increased demand of traffic on
this segment on which iron ore from Bellary Hospet Region is moved to New Mangalore Port and other
ports. Likewise, Dharwad-Ramdurg Stretch of the Road and Chikkanayakana Halli to Hassan, which
caters to iron ore traffic also need to be widened.

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In the case of the State Highways, 2-laning of Mysore-Kushalnagar is underway.


Other projects proposed for inclusion in XIth plan that would significantly improve connectivity to the
port are 2-laning of Bantwala Sampaje Road and Sampaje Road Kushalnagar Road. This would
result in 2-lane access from Bantwala to Mysore from the existing single lane.

While NMPT has taken up its own road rehabilitation inside the port, it has also agreed to participate in
the Special Purpose Vehicle (SPV) for the ongoing project described in Table 9-1.

Import / export cargoes moved by road from / to the port.

In 2005-06, 11% of import cargoes and 33% of export cargoes handled at New Mangalore Port were
transported by road accounting for more than 90% of the road and rail movement. Major cargoes
among the export cargoes were iron ore fines 5.67 million ton (97% of the ore traffic) and granite
stones 0.13 million ton (100% of the commodity) among other export cargoes transported by road
containers accounted for about 0.08 million tons. Major import cargoes transported by road are 0.513
million ton (100% of coal traffic) Fertilizers 0.235 million ton (35% of fertilizer traffic), wooden logs 0.23
million ton (85% of log traffic) and POL products 0.27 million ton (46% of POL product traffic). Other
import cargoes of significance are cement, bentonite powder and containers. The cargoes handled on
these road networks are also shown alongside the map in Figure 9-3.

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Figure 9-3 Road Connectivity to New Mangalore Port NH

Within the port and partly outside the port area huge volumes of iron ore and coal are colouring the
roads orange / brown and the roads are damaged / uneven on account of the ore movement. As a
result, truck tyres also affected outside roads and parking places.
The poor road conditions have both an effect on transit time for goods arriving or leaving the port and
the safety of road haulage.

Before the cleaning up and rehabilitation of the port roads and port access roads are undertaken, most
if not all of the manual commodity handling for iron ore fines and other bulk cargo needs to be

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mechanized so as to avoid a repetition of deterioration of roads after repairs and subsequent


rehabilitation cost.

9.2.4 Railways
New Mangalore Port is connected to the Indian Railway Network through Southern Railway, South
Western Railway and Konkan Railway. The Railway Marshalling Yard at Panambur is inside the New
Mangalore Port is a part of the Southern Railway. This is connected to the Konkan rail network at
Thokur providing access to Mumbai via Coastal Karnataka and Goa, to the South Western railway at
Kankanady providing access to the Karnataka heartland and Bangalore and Mysore via Hassan and to
Kerala through the southern railway. This is illustrated in Figure 9-4.

Figure 9-4 Rail Connectivity to New Mangalore Port

The marshalling yard Panambur yard under the southern railway but located inside the port area has
four captive lines (broad gauge) for the use of KIOCL and four lines (broad gauge) for transporting
cargoes of other users and one escape line.

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Position of New Mangalore Port with reference to the Karnataka rail Network is shown in Figure 9-4
and to the Konkan Railway is shown in Figure 9-5.

Konkan Railway

Konkan railway provides access from the yard to the hinterland of New Mangalore Port through
Thokur station. (see Figure 9-6).

Current Scenario
The system carries about 3 rakes down and 2 rakes up on an average in a day and has the capacity to
take another 3-4 rakes down and 3-4 rakes up. All rail-transported cargoes to & from New Mangalore
Port has hitherto (until 2005-06) been by Konkan Railway. The main import cargo that is transported
by rail on this system is Fertilizer (0.43 million ton i.e., 65% of Fertilizer imports in 2005-06) mainly to
interior Karnataka and Maharashtra and Goa in the north. About 23 rakes are transported in a month.
Other import cargoes include Crude edible Oil to Indore, RBD palmolein to Cochin. Among the export
cargoes only iron ore requirement of KIOCL (0.18 million ton i.e., 3% of ore exports in 2005-06) was
transported by rail from Sandur (Ranjitpura). Also, KISCOs requirement of iron ore is transported by
this rail (however it does not form part of NMP cargo traffic).

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Figure 9-5 Konkan Railway Network connecting the hinterland of New Mangalore Port

However, Konkan Railway imposes 50% additional charges on the freight rates due to under utilization
of capacity making the freight 150% of prescribed tariff. The exporters of iron ore from the Bellary
Hospet currently use road for transportation of ore as they feel that the 50% additional burden does
not make rail economical to them (rail would be a viable option if the additional burden is removed).
KRCL is prepared to waive these charges if volumes are committed and fulfilled by the exporters.
A resolution to this problem may increase the rail traffic to NMP. KRCL is extending the waiver to
KIOCL, which uses this rail and transports about 15-20 rakes a month thereby assuring volumes.

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Future Developments
The Bellary Hospet iron ore belt, which is of importance to the New Mangalore Port in view of the
significant exports to China from the belt, is now connected by Konkan rail network at Madgaon in
Goa, a route that is too long and results in high transportation costs. In order to reduce the distance of
over 150 kms and the resultant transport cost to exporters and also to improve traffic from the belt to
the NMP, NMPT has proposed a Railway line linking Hubli and Ankola.
The distances from the above origins of cargoes to the port via the existing Konkan rail route are as
follows:

Table 9-2 Distances between various origins in Hospet Bellary Belt to NMP by Konkan rail
Origin Distance in kms to the port Users of the network

Sandur (Ranjitpura) 884 KIOCL / KISCO iron ore

Bellary 897 Iron ore by exporters

Hospet 827 - do -

In addition to the above proposal by NMP, another proposal by Konkan rail, which is of significance to
NMP, is the extension of existing Kolad link (near Roha, the zero km station of Konkan railway) to
Surathkal Ro-Ro Service to Panambur as well. This will enable loaded trucks to be transported from
Maharashtra, Goa and north coastal Karnataka to the marshalling yard inside NMP.

A 2 x 507.5 MW power plant by Nagarjuna Power Corporation Ltd (NPCL) is proposed at Padubidri 35
kms north of New Mangalore Port. The rail connectivity to the plant from the port to receive thermal
coal will be constrained by the limitation of routing through Thokur station as only 1 rake per day can
be handled on the single line available as at present as learnt from KRCL. In order to overcome this
constraint NPCL, which may require at least 3 rakes a day, may have to invest in a by pass line at
Thokur and also have double line instead of the single line since KRCL has no plans to double the line
or construct a by pass at Thokur.

South Western Railway


A map of the South Western Rail connectivity to New Mangalore is shown in Figure 9-6.

Under public-private partnership scheme, an SPV named Hassan-Mangalore Rail Development


Company (HMRDC)) was formed by South western railway, with participation of Government of
Karnataka K-RIDE (Karnataka Rail infrastructure Development Company) and other strategic
investors, for construction (gauge conversion from meter gauge to broad gauge), operation and
maintenance of a broad gauge railway track, between Hassan and Mangalore connecting the New
Mangalore Port. This was completed and opened to freight traffic after conversion to broad gauge in
May 2006. The total distance between Mangalore and Arisikere is 236 kms and the project was about
Rs 170 Cr.

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Figure 9-6 Arsikeri - Hasan - Mangalore Network connecting NMP to the hinterland

Thokur

Current Scenario
Commissioning of this route to freight traffic has opened up the possibility of a modal shift in the
transportation of freight to / from NMP to the Karnataka heartland from road to rail and the port users
availing of the advantages of reduced transportation cost on account of economies of scale and lower
rail freight compared to road freight. Though the gauge conversion work has been completed and
freight movement initiated, other activities such as creation of assets like crossing stations required at
every 10-12 kms, availability of additional locos particularly for the ghat section of the route and
manpower requirements to operate stations and trains etc., which are essential for efficient functioning
of the network are underway. These are expected to be in place by March 2007. This essentially
means that this rail network will become fully operational from the coming year i.e., 2007-08.

After the opening of freight traffic, the following cargoes are being transported on this route

Coking coal for Mysore Paper Mills at Bhadravati and for Birla Rayons in Harihar to the extent
of 4-5 rakes a month.
Fertilizers to various parts of Karnataka and Andhra Pradesh via Bellary.
Petroleum Products and LPG Devanagothi (Bangalore).

The present traffic on this network is 6 rakes a day (4 down and 2 up) this system has a limitation at
present in terms of transit between Subramanya Road and Sakleshpur where three engines are
required for haulage downhill six engines for uphill haulage. There are not enough engines to meet
any additional traffic. On account of this additional infrastructure engaged the railways charge double
the freight for the 55 kms stretch and single freight for the remaining distance. This results in

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chargeable distance of 238 kms as against an actual distance of 183 kms between Mangalore and
Hassan.

The design capacity of this route i.e., Hassan-Mangalore is 12 trains per day in each direction. 3 trains
in each direction are earmarked for passenger traffic. Of the remaining 9 trains per day that can be
theoretically operated on the route in each direction, only 6 trains per day in each direction on an
average is proposed to be operated from 2007-08, in view of the operational and maintenance
difficulties particularly in the ghat section that runs through steep hills and thick forests prone to land
slides during heavy monsoon periods. In terms of cargo volumes, at least 8 million ton a year is
expected to be handled on the route taking into account empty trains that may run in the return
direction from the port to the hinterland.

Future Developments
Also of importance for the Hassan Mangalore connectivity to be optimally utilized are the following
proposals of NMP for inclusion in the XIth Plan for implementation by the Railways:
Bangalore-Mangalore line via Sravanabelagola and Hassan to reduce the distance and
provide access to the industrial belt of Bangalore for movement of containers.
Additional Kadur Chikamagalur via Hassan to provide accesss to the region for cargoes
such as iron ore, coffee, coal / coke etc.
Stabilizing the Thokur Kankanady tracks which are old.
Doubling of Thokur Kankanady tracks.
By pass between Panambur marshalling yard and Kankanady to have free access to south
western railway.

While the development of the Mangalore-Hassan connectivity has opened up the possibility of iron ore
traffic from the Bellary - Hospet belt being diverted from the longer road route to this rail route, there is
a threat of losing the traffic if issues such as above are not resolved. This is especially valid in view of
the another project by South Central and South Western railway that would enhance the connectivity
of the belt to the east coast ports such as Chennai, Krishnapatnam and Kakinada.

It is proposed to double the broad gauge connectivity between Hospet and Guntakal in Andhra
Pradesh at an estimated cost of Rs 93 Cr as shown in the map below (Figure 9-7) by south central
and south western railway to improve port connectivity to the belt.

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Figure 9-7 Doubling of Hospet Guntakal broad gauge line

HOSPET - GUNTAKAL DOUBLING

ANDONI
To West

U
Coast ASPARI

AL L
Ports PET

A NG

Y
L AR
HOS

TOR
From

BE L
HUBLI GUNTAKAL
To East
Coast
Ports

SWAMIHALLI

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10. FINANCIAL PLAN

10.1 Introduction
The main objective of the financial assessment is to come to a coherent, consistent and integrated
analysis of the future operating costs, the revenues and impact of the investments proposed. As was
stated in the ToR for the project, the NMPT has to be financially self sustainable in the coming
planning period. Investments have to be self financed or by the involvement of the private sector. The
policy of NMPT is aimed at further implementing the land lord principle, which implies that NMPT will
be responsible for the nautical activities and the investment in the basic infrastructure. Investments in
the new terminals will be given in concession to private operators, who will pay concession fees or
royalties/revenues share.
For this purpose, a financial model has been developed and will be the basis for future annual updates
of the business plan. The basis for the model for business planning takes as a starting point the
financial accounts of NMPT for the years 2003-04 to 2005-06. The profit and loss account and the
balance sheets will be summarised in section 10.2 and a calibration for the years 2004-05 and 2005-
06 has been carried out.
The financial assessment considers the NMPT as a whole.

10.2 Current situation


This section gives an overview of the current financial situation of NMPT by presenting profit and loss
accounts, balance sheets and financial indicators for the years 2003-04 to 2005-06. This overview will
be used as starting point for further financial assessment (see further).

10.2.1 Profit and loss accounts


The profit and loss accounts of NMPT for the years 2003-04 to 2005-06 are presented in Table 10-1

Table 10-1 Profit and loss accounts for the years 2003-04 to 2005-06 (Rs. in Cr)

2003-04 2004-05 2005-06

Income

Cargo handling & storage 154.9 184.9 167.8

Port & Dock charges 55.5 65.5 66.6

Railway earnings 0.2 0.4 0.9

Estate Rentals 13.6 16.9 19.5

Total 224.2 267.7 254.7

Expenditure

Cargo handling & Storage Expenses 29.7 37.9 39.3

Port & dock facilities for shipping 51.7 42.7 51.7

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2003-04 2004-05 2005-06

Railway workings 0.3 0.5 0.4

Rentable land & building 2.1 2.7 2.8

Management & Gen. Adm. Exp. 24.3 24.3 25.9

Total 108.1 108.1 120.1

Operating surplus 116.0 159.6 134.6

Finance & Miscellaneous Income 13.9 20.6 27.5

Finance & Miscellaneous Expenditure 70.5 102.2 18.4

Net Surplus 59.4 78.0 143.7

Source: Administration reports NMPT

It can be observed from Table 10.1 that the Profit and loss accounts for the years 2003-04 to 2005-06
(Rs in Cr.) above that the Commercial Revenues (excl. financial income) consist of wharfage dues
(around 40%), cargo handling operations (around 30%) and from ship services (another 30%). The
expenditure is broken down in Cargo handling & Storage Expenses (about 30%), Port & dock facilities
for shipping (55 %) and overheads (about 23%).

The Operating Surplus of NMPT has ranged between Rs 116 Cr and Rs 159.6 Cr over the last
3 years. The Net Surplus (Operating surplus plus Financial Income minus Expenditures) was lower
until 2005 due to the provision of pension funds. This was caused by the establishment of a
Superannuation Fund in 2002 that takes care of all pensions for existing staff, retired staff and their
families and is for the time being self supporting.

In 2006, the Net Surplus exceeded the Operating Surplus for the first time as no provision is required
for the pension fund and the financial income is more than the expenses. The Net Surplus is
furthermore charged with a Profit tax of 30%. Moreover, a Service tax of 12% is charged on the
turnover and is accounted separately and remitted to tax department.

In general it can be stated that the financial position of NMPT is healthy and ample contribution to the
NMPT reserves have been made (see Table 10-2).

10.2.2 Balance sheets


The balance sheets of NMPT for the years 2003-04 to 2005-06 are presented in the following table.

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Table 10-2 Balance Sheets for the years 2003-04 to 2005-06 (Rs in Cr.)

2003-04 2004-05 2005-06

Assets

Fixed assets 497.6 517.7 527.9

Investments 323.9 387.5 435.1

Current assets 222.2 316.2 415.6

Misc expenditure 1.9 0.0 0.0

Total 1045.6 1221.4 1378.6

Liabilities

Capital & Revenue Reserves 629.2 694.8 802.2

Capital debts 192.8 157.3 127.3

Pension & provident funds 143.4 208.5 216.5

Current liabilities 44.3 105.4 167.5

Deferred tax liability 36.0 55.3 65.2

Total 1045.7 1221.4 1378.6

Source: Administration reports NMPT

The balance sheets show that the total assets have grown from Rs 1,045.6 Cr in 2003-04 to Rs
1,378.6 Cr in 2005-06. A substantial increase has taken place in investments/financial means, which
are accounted for under the current assets. At the same time, the fixed assets have been added and
resulted in total fixed assets position of nearly Rs 1,000 Cr. Capital debts have been lowered
substantially in the past three years.

Overall, it can be concluded that the financial position of NMPT is good and the Port has considerable
funds for future expansion.

10.2.3 Financial indicators and special issues


The table below presents some major financial indicators of NMPT for the years 2003-04 to 2005-06.

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Table 10-3 Financial indicators for the years 2003-04 to 2005-06

Definition 2003-04 2004-05 2005-06

Net margin Net income / revenues 26% 29% 56%


Operating ratio Operating cost (excl. 59% 66% 60%
depreciation) / revenues
Current ratio Current assets / current 5.0 3.0 2.5
liabilities
Debt to assets Total long term debt / 0.17 0.12 0.09
assets
Revenue per ton (Rs) 84 79 74
Cost per ton (Rs) (excl financial items, incl. 40 32 35
depreciation)
Net surplus per ton (Rs) Net income / throughput 22 23 42
Source: Consultants calculations on basis of data provided by NMPT

Note: the definition of Operating ratio differs from that used by NMPT, as in the Ports definition, depreciation is treated as
operating cost and hence included in the ratio. This lowers the operating ratio in the Ports case.

The net margin of the port has increased from 26% in 2003-04 to well over 50% in 2005-06, while the
operating ratio has fallen back to 60%. The current ratio has been halved over the past three years as
the current liabilities have increased fourfold.

Revenues per ton have fallen from Rs 84 to 74 Cr per ton, but at the same time, the cost per ton has
fallen as well, to reach Rs 35 Cr per ton. The net surplus per ton has increased to Rs 42 Cr per ton.
At present, NMPT shows sound credit rating. The financial strength of NMPT makes co-financing
feasible. The current debt to total assets ratio is around 0.1 and the debt to equity is around 0.16. This
is low for capital intensive industries, where ratios of 2 are common. However, in order to be prudent,
a ratio of 1 is reasonable (initially).
The estimated cash flows for the years 2004-05 and 2005-06 are presented in the table below.

Table 10-4 Estimated Cash flows (Rs in Cr)

2004-05 2005-06
Net Surplus 78.0 143.7
plus interest after tax 19.6 11.7
plus NCC (non-cash item - Depreciation 16.7 17.9
etc)
minus change in NWC (net working 32.9 37.3
capital changes)
minus Capital Expenditure 38.4 3.0
Total cash flow 43.0 133.0
Source: Consultants calculations on basis of data provided , definitions differ from NMPTs accounting practice

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The Port's cash flows are strong and provide ample room for debt servicing. The current debt is Rs
127 Cr. If one applies the debt to equity ratio of 0.16, the debts can be raised sixfold by around Rs
700-800 Cr. The securing of loans would increase interest payments to Rs 50 Cr. (at 6-7 % interest)
while the repayment would demand another Rs 50 Cr. (depending on the redemption scheme).

10.3 Investments and timing

10.3.1 Overview
The proposed projects together amount to a total capital expenditure of Rs 6,976 Cr. This amount
includes also projects that will not be implemented during the current planning period. Of the Rs 6,976
Cr, around Rs 1,080 Cr is for the account of NMPT; the remainder is to be covered by private
participation.

The capital expenditure for the current planning period amounts to just over Rs 300 Cr while some
Rs 480 Cr is to be spent during the period 2013-14 to 2017-18. The last large-scale project of Rs 300
Cr is expected to be implemented in 2020-21. In 2006-07, an amount of Rs 15 Cr is likely to be spent,
rising to Rs 92 Cr in 2008-09 and then dropping to Rs 48 Cr and further to Rs 25 Cr.

The most important near-term investments for NMPT are the creation of a POL berth and the bulk
handling facility. Combined, these projects require Rs 100 Cr from the ports resources. In the long
term, substantially larger projects are scheduled to be undertaken, requiring up to Rs 2,000 Cr and
3,000 Cr each.

An overview of the projects and associated annual capital expenditures is given in the Table 10-5.

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Table 10-5 Projects and associated annual capital expenditure (Rs in Cr.)
Annual capital exp (Rs Cr.)
Capacit Investment
Project Operational
y (Rs Cr.)
2006 2007 2008 2009 2010 2011 2012

Year Mln t NMPT Private Total 2007 2008 2009 2010 2011 2012 2013

Residual works* 2006-07 - 25.0 0.0 25.0 25.0 0.0 0.0 0.0 0.0 0.0 0.0
Road connect to port
(Operational 2011,
2007-08 - 10.0 885.0 895.0 0.0 10.0 0.0 0.0 0.0 0.0 0.0
NMPT spending ends
2007-08)
Development of port
2007-08 - 1.0 4.0 5.0 0.0 1.0 0.0 0.0 0.0 0.0 0.0
based SEZ
Mechanised Iron ore
2008-09 10 0.0 196.6 196.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0
handl berth 14
Harbour crane (for bulk
2008-09 - 30.0 0.0 30.0 0.0 15.0 15.0 0.0 0.0 0.0 0.0
cargoes)
Harbour tug, No. 1 2008-09 - 30.0 0.0 30.0 0.0 15.0 15.0 0.0 0.0 0.0 0.0
Development of bunker
2008-09 - 0.0 10.0 10.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
facilities
Development of coal
2009-10 8 0.0 194.0 194.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
/NPCL, berth 15
POL berth at oil dock ,
2009-10 9 54.0 0.0 54.0 0.0 0.0 27.0 27.0 0.0 0.0 0.0
berth 13
Development
marshalling yard (with 2009-10 - 10.0 30.0 40.0 0.0 3.3 3.3 3.3 0.0 0.0 0.0
Iron Ore/Coal)
Container terminal to
2009-10 1,5 32.0 0.0 32.0 0.0 0.0 16.0 16.0 0.0 0.0 0.0
100k TEU
IT 2009-10 - 4.0 0.0 4.0 0.0 1.3 1.3 1.3 0.0 0.0 0.0

Pilot Launch 2009-10 - 5.0 0.0 5.0 0.0 1.7 1.7 1.7 0.0 0.0 0.0
Improvement internal
2010-11 - 50.0 0.0 50.0 0.0 12.5 12.5 12.5 12.5 0.0 0.0
roads
Environment 2010-11 - 2.6 0.0 2.6 0.0 0.0 0.9 0.9 0.9 0.0 0.0
Multi purpose berth No.
2010-11 5 50.0 0.0 50.0 0.0 0.0 0.0 25.0 25.0 0.0 0.0
16
KIOCL Berth nr. 8 from
2011-12 0 18.0 0.0 18.0 0.0 0.0 0.0 0.0 0.0 18.0 0.0
13 to 14 m
Harbour tug, No. 2 2011-12 - 20.0 0.0 20.0 0.0 0.0 0.0 0.0 10.0 10.0 0.0
Bulk handling (ore/coal)
2013-14 3 50.0 0.0 50.0 0.0 0.0 0.0 0.0 0.0 0.0 25.0
Western dock, berth 17
Development LNG
2014-15 5 0.0 2600.0 2600.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Terminal
Container terminal for
2014-15 3 0.0 700.0 700.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Transhipment, berth 18
SBM for POL 2015-16 15 0.0 250.0 250.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Deepening
channel/lagoon 2017-18 - 390.0 0.0 390.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
15.1/15.4 to 17 m
Outer harbour for add
facilities (if LNG is
2020-21 - 300.0 1025.0 1325.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
realised in OH, then
operational by 2014)
Total 1081.6 5894.6 6976.2 25.0 59.8 92.7 87.7 48.4 28.0 25.0

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10.3.2 Implications
It is likely that further privatisation of the ports activities will lead to negotiations on royalties to be paid
to the port, both for the land in use and the use of the port for handling cargo. This implies a move
away from wharfage dues, and in some cases berth hire too if and when the operator constructs his
own quay.

Port dues, and vessel related charges will remain the privilege of the port, insofar the Marine Services
are not privatised.

As indicated in Chapter 6, with the description of the Iron Ore mechanisation and the Coal handling
berth, the port is reducing its future cost base substantially, while securing revenues. The port may
choose to construct the berths itself, so as to retain the berth hire and the wharfage income, while
securing royalties, or revenue sharing from the cargo handling operations. Therewith, the port is
focussing on its role as provider of common user facilities, whilst retaining earning power.

10.4 Modelling assumptions

10.4.1 Model set-up


A model has been developed that integrates the cargo forecast, the current financial position of the
port, the planned investments and their timing as well as the prevailing tariffs. The impact of the basic
planning program is calculated in terms of the financial situation of the port over a 20-year horizon.
The model is flexible and allows for different choices with respect to the planned investments in terms
of capacity, investment amount, timing as well as ownership. Tariffs and cargo forecasts are flexible in
the sense that percentage deviations from the base situation can be defined and calculated.
The structure of the model is indicated in the figure below.

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Figure 10-1 Financial model flowchart

The green blocks relate to the physical inputs of the model. These consist of: the capacity of the port,
the expected demand, the parcel sizes of cargo shipments and hence the number of vessel calls.

The yellow blocks relate to the revenue-side of the equation. The prevailing tariffs are multiplied by the
amount of cargo that the port can handle (in case insufficient capacity is created, then the demand will
be capped at the capacity level). Appropriate tariffs are used for the vessel calls cost estimates.

The blue blocks relate to the assets of the port. The existing, or current, assets are depreciated and
flow to the balance sheet. The projects that are implemented are added to the assets and depreciated.
The additional assets are put on the balance sheet and the depreciation is moved to the profit and loss
account.

The operating costs are in orange. The maintenance costs are taken as a percentage of the value of
the assets. Staff costs are calculated separately. Costs flow onto the profit and loss account.

From the balance sheet and the profit and loss account, key indicators are derived. The available cash
is checked against the requirements for the investment program and then it is checked whether loans
are required or not. The loan requirements are checked against the balance sheet and the profit and
loss in an iteration procedure.

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The main components of the model flow are described in the next sections.

10.4.2 Physical parameters


The physical parameters follow from the cargo forecast section. Investments create capacity, but the
timing of the investments may result in capacity shortage. If that is the case, demand is kept at
capacity.

Figure 10-2 Capacity and Base Case Demand, Mln t, 2004-05 to 2025-26

80
Capacity
Demand
70
Capacity and throughput Mt

60

50

40

30

20

10

0
20 / 0 5

20 /06

20 /08

20 / 1 0

20 /11

20 /13

20 / 1 5

20 /16

20 /18
20 /09

20 /20

20 /21

20 /23

20 /25

6
20 /07

20 / 12

20 /14

20 / 17

20 /19

20 / 22

20 /24

/2
05

07
08

09
10

12

14
15

17

19
20

22

24
25
04

06

11

13

16

18

21

23
20

It is foreseen, that if trend lines continue as they are, by the middle of the next decade investments in
new liquids capacity will be required. These investments have not been taken into account in the
results presented here.

The assumptions on parcel sizes and vessel-size developments result in a forecast of vessel calls by
vessel type. In the base case, the total vessel calls roughly double over the twenty year period through
2025-26, to reach around 2000 (see Table 10-6).

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Table 10-6 Parcel size and vessel calls by product, 2005-06 to 2025-26
Avg parcel
Annual
Direction Product size 2005-06 2009-10 2012-13 2016-17 2025-26
Growth**
(000 Dwt)
Crude 100* 0% 163 163 163 85 85

Oil Products 8 2% 60 57 89 87 73

LPG 15 2% 77 72 25 31 65

Edible Oil 6 2% 48 45 63 64 54

Other Liquids 6 2% 48 45 112 103 86

Dry Bulk-Coal 35 2% 14 26 48 63 93
Imports
Fertiliser 22 2% 31 37 60 64 76

General Cargo 7 0% 86 123 214 214 214

Cement 12 0% 25 29 33 38 38
Dry Bulk Thermal
50 0 111 111 111
Coal
Containers 7 0% 21 106 210 314 547

LNG 60 0% 0 0 33 84

Iron Ore 40 5% 132 165 176 157 157

Exports Pellets 50 5% 63 55 47 58 79

POL 33 0% 255 258 333 333 333

Total 1,023 1,181 1,684 1,755 2,095

Notes: * Average crude parcel size switches to 200 when SBM becomes operational.

** Annual growth up to maximum sizes in several cases.

10.4.3 Tariffs
The tariffs are those presently applied by the port. No increases are included, so tariffs remain static in
real terms. A differentiation in tariffs between coastal and foreign vessels has been accounted for. The
tariffs are broken up in the following categories:
Cargo-related tariffs:
o Wharfage
o Handling
o Storage
Vessel related tariffs:
o Port dues
o Pilotage/towage
o Berth hire

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Handling refers to mechanised handling of cargo, which is not applicable in New Mangalore at this
point (except at the KIOCL berth operated by the client). Storage income is presently very low and has
therefore been ignored in the model.
As the terminals are handed over to private operators under concession (BOT or other) deals, the
tariffs will change into royalties in the form of revenue sharing. For the purpose of the financial model,
the royalties have been kept on par with the wharfage tariffs since the future arrangement is unknown.
In the case of the BOT of the coal berth and iron ore berths (15 and 14 respectively), the actual
arrangement is taken into account.
These arrangements are respectively:
Coal, berth 15:
o No Wharfage on Thermal Coal of concessionairs
o Wharfage on other coals/products: Rs. 19/ton
o Land lease, 10 Ha at Rs. 1.1 Mln. per year

o Revenue sharing/royalty: Rs. 19/ton


o 50% of Berth hire as per scale of rates from cargo volumes over 3 Million tons or
others.

Iron ore, berth 14:


o Wharfage collected by NMPT, Rs. 35/ton
o Land lease, 14.4 Ha at Rs. 1.1 Mln. per year

o Revenue sharing/royalty: Rs. 36 /ton


o Berth hire as per scale of rates

Berth hire remains a revenue stream for the port, as no quays are built by operators (except in the
case of NPCL). In case of an SBM facility for crude oil, berth hire may fall away.

The tariffs used in the model, for wharfage by commodity, are presented in Table 10-7.

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Table 10-7 Wharfage tariffs by product (in Rs/ton)


Product As per tariff book After discount

Crude 70 30

Oil Products 70 30

LPG 180 150

Edible Oil 50 50

Other Liquids 60 60

Dry Bulk-Coal/Thermal Coal 25 25

Fertiliser 35 35

General Cargo* 20-100 20-100

Cement 50 50

Containers 34,5 34,5

Iron Ore 35 35

Pellets 30 30

POL 70 30

*Note: for the purposes of the model an average tariff of Rs. 25/ton has been used.

The wharfage for containers has been recalculated on the basis of the charge per container and the
observed mix between empties and full containers (10% and 90% respectively).

Table 10-8 presents the vessel-related charges, which have been used in the financial model.

Table 10-8 Vessel-related charges


Item Levy Unit

Port dues 6.4 Rs/ GRT

Pilotage Less than 30,000 Dwt 14 Rs/GRT, minimum 0.004 Cr. Rs

30-60,000 Dwt 12 Rs/GRT plus 0.04 Cr. Rs

More than 60,000 Dwt 10 Rs/GRT plus 0.08 Cr. Rs

Berth hire Tankers 0.11 Rs/GRT/hr

Crane berths 0.10 Rs/GRT/hr

Non-crane berths 0.08 Rs/GRT/hr

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The berth hire is determined by the length of the stay at the berth. As mechanisation is introduced, this
berth time will fall. Table 10.9 indicates the berth time used for the various cargo types. The reduction
in berth time coincides here with the realisation of relevant projects. The biggest reductions will take
place with the introduction of mechanised handling of coal, where the berth time will drop from 3.5 to
0.9 days and the introduction of mechanised handling of fertiliser, where berth time falls from 7.5 to
2.2 days. Iron Ore handling will nearly halve from 3.1 to 1.6 days.

Table 10-9 Berth time by product, days


Product Current Future

Crude 1.4 1.3

Oil Products 1.2 1.0

LPG 3.0 3.0

Edible Oil 1.5 1.4

Other Liquids 0.5 0.6

Dry Bulk-Coal/Thermal Coal 3.5 0.9

Fertiliser 7.5 2.2

General Cargo 4.0 3.3

Cement 3.2 2.9

Containers 1.1 1.1

LNG - 1.0

Iron Ore 3.1 1.6

Pellets 1.5 1.3

POL 1.6 1.6

10.4.4 Costs
The main cost items are:
staff
repair and maintenance
depreciation
interest

Staff costs, or labour costs have been included in the model on the basis of a top-down calculation.
That is to say, overall staff levels have been used, multiplied by an average basic salary of Rs 0.26
mln per year. This salary will be increased by 25% as of January 1st 2007. With mechanisation and

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privatisation, staff will become redundant. It is estimated that the coal handling facility and the iron ore
handling facility will result in reduced labour of around 210. Furthermore, an annual retirement rate of
3% has been applied, and a 0.25% normal labour switching rate. A rehire rate of 30% has been used.

Repair and maintenance on existing assets has been kept constant as per current practice, including a
Rs 40 Cr./year allowance for maintenance dredging.

Repair and maintenance costs on new projects (see table below) are taken as percentages of the
initial asset value of the equipment. Maintenance is only applied to those projects in which NMPT
invests. No escalation is included. Following percentages have been applied as per Table 10-10:

Table 10-10 Repair and Maintenance costs (Rs in Cr.)


Project %-age of value Annual cost First year of operation

Road connect to port (Operational 2011, NMPT


spending ends 2007-08) 2.5% 0.3 2007

Harbour crane (for bulk cargoes) 5.0% 1.5 2008

Harbour tug, No. 1 5.0% 1.5 2008

POL berth at oil dock, berth 13 1.5% 0.8 2009

Development marshalling yard (with Iron Ore/Coal) 1.5% 0.2 2009

Container terminal to 100k TEU 6% 1.9 2009

Pilot Launch 5.0% 0.3 2009

Multi purpose berth No. 18 1.5% 0.8 2010

Improvement internal roads 1.5% 0.8 2010

KIOCL Berth nr. 8 from 13 to 14 m 1.5% 0.3 2011

Harbour tug, No. 2 5.0% 1.0 2011

Bulk handling (ore/coal) Western dock, berth 16 1.5% 0.8 2013

Deepening channel/lagoon 15.1/15.4 to 17 m 10.0% 39.0 2017

Outer harbour for add facilities 1.5% 4.5 2020

Depreciation of assets (see Table 10.11) is split between depreciation on existing assets and
depreciation on new assets. Existing assets are depreciated in line with the observed norms as per the
ports annual accounts. The depreciation varies between 0% on land and nearly 8% on plant and
machinery. The total depreciation on existing assets amounts to Rs 16.2 Cr. per year.

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Table 10-11 Depreciation existing assets


Item %-age of gross block value Annual cost (Cr Rs.)

Land 0.0% 0.0

Capital Dredging 1.0% 2.1

Buildings Sheds and Other Structures 2.1% 0.6

Wharves, Roads, Boundaries 1.8% 1.3

Floating Craft 5.0% 5.2

Railway and Rolling Stock 1.7% 0.1

Docks, Sea-Walls, Piers, and Navigational: Aids 2.1% 2.0

Cranes and Vehicles 5.3% 2.8

Plant & Machinery 7.9% 0.6

Installations for Water, Electricity, Telecom. & Fire 5.9% 1.6


Fighting

Total 16.2

Depreciation on new assets (see Table 10-12) depends on the type of asset, with civil works having
substantially longer economic lives than equipment. All are straight line depreciations. The table
indicates the depreciation periods that have been applied. The biggest items are the deepening of the
channel and the outer harbour. However, these projects will not be operational before 2017. On the
immediate horizon, the biggest items are the harbour crane and harbour tug.

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Table 10-12 Depreciation new assets


Depreciation period Annual cost
Project First year of operation
(years) (Rs in Cr.)
Residual works* 20 1.3 2006
Road connect to port (Operational 2011,
30 0.3 2007
NMPT spending ends 2007-08)
Harbour crane (for bulk cargoes) 15 2.0 2008
Harbour tug, No. 1 20 1.5 2008
POL berth at oil dock , berth 13 40 1.4 2009
Development marshalling yard (with Iron
50 0.2 2009
Ore/Coal)
Container terminal to 100k TEU 15 2.1 2009
Pilot Launch 20 0.3 2009
Multi purpose berth No. 18 40 1.3 2010
Improvement internal roads 50 1.0 2010
Environment 30 0.1 2010
KIOCL Berth nr. 8 from 13 to 14 m 50 0.4 2011
Harbour Tug, No.2 20 1.0 2011
Bulk handling (ore/coal) Western dock, berth
40 1.3 2013
16
Deepening channel/lagoon 15.1/15.4 to 17 m 100 3.9 2017
Outer harbour for add facilities (if LNG is
40 7.5 2020
realised in OH, then operational by 2014)
Note: *residual works are taken up as general items for capital works in progress 2006-07

10.4.5 Existing financial items


In order to arrive at an ongoing financial statement, the model integrates the current accounts of the
port as per the 20005-06 book-year. This implies that on several items assumptions have had to be
made with respect to their future levels. This applies for:
Investments on the assets side
Financial income
Current assets
Current liabilities
Overhead costs
Existing loans

The investments/reserves have been held static at the current level of Rs 477 Cr.

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The financial income is derived from the investments. The port has provided an outlook through 2012.
After 2012, it is assumed that the income will remain static at the then levels of Rs 22 Cr.
The current assets amounted to a total of Rs 415 Cr per end book year 2005-06. Those have been
integrated with the currents assets and liquid means. A further assumption is that an inventory is held
of 5% of the book value of the equipment and accounts are received after 50 days.

The current liabilities amounted to Rs 383.9 Cr, those have been kept static over the forecast period,
with variations occurring in two separate items of current liabilities, salaries and accounts payable. The
former is set at 1/12 of salaries payable and the latter at 45 days of operating costs.

The overhead costs are predominantly made up of the engineering workshop and other costs. The
total costs amount to Rs 23.8 Cr per year. These have been held constant.

The port has loans to a total of Rs 127 Cr, of which Rs 3.5 Cr is in the form of Government loans. The
loans amounting to Rs 123.5 Cr carries an interest rate of 9% approximately, whereas the
Government loan of Rs 3.5 Cr carries 11% interest rate approximately. Both loans will be paid down in
three years.

10.4.6 Other general assumptions


Following general assumptions have been made:

All financial figures are in constant prices, no inflation is assumed.


Salaries are adjusted by 25% in 2006-07
Financial implementation of the projects takes place at the beginning of the year

The liquid means are held at 2% of the total assets


The retained earnings are put into an investment reservation fund on which it is assumed that
4% interest will be realised. This assumption is used to cover any possible capacity
requirements that may arise after the planning period. It is thus assumed that the net income
generated from any virtual investment is equal to 4%. This assumption is assumed to be a fair
representation of the investment returns on public service investments. Thus, after the current
planning period, when no further capital expenditure is foreseen, this is to be covered from
these reservations. Typically, capital expenditure does not fall below Rs 30-35 Cr per year.
Non-planned capital expenditure is excluded from the analysis. These amounts may be around
Rs 20 Cr per year, when occurring. As per the previous item, this amount is covered from the
investment reservation on the balance sheet.
Area lease is held constant at Rs 20 Cr, except where BOT contracts are entered into which
include an area lease arrangement.
A flat payment of Rs 3 Cr per year for Pension Fund obligations is included
Tax rate is set at 30% and paid in the year of realisation

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10.5 Forecast financial results

10.5.1 Profits and loss forecast


A forecast of profits and losses is presented in Table 10-13. Detailed tables per year have been
included in Annex B-2

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Table 10-13 Profit and loss accounts 2006-07 to 2025-26 (Rs in Cr.)

Years

Item 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2017-18 2025-26

Operating revenue
Cargo related fees from
terminals 113.0 128.5 133.5 147.1 136.5 145.1 153.7 191.4 223.5

Vessel related fees 76.7 90.3 94.8 103.4 104.5 106.9 113.5 133.5 154.7

Other income 21.0 21.8 16.8 11.8 1.8 1.8 1.8 2.3 3.0

Total operating revenue 210.7 240.5 245.1 262.2 242.7 253.8 268.9 327.1 381.1

Non-operating revenues

Royalties 0.0 0.0 30.2 35.3 34.0 36.5 39.2 45.3 45.3

Area lease 20.2 20.4 22.1 22.3 22.5 22.8 23.0 25.2 27.0

Total other revenues 20.2 20.4 52.4 57.6 56.6 59.3 62.2 70.5 72.3

Total revenues 230.9 260.9 297.4 319.8 299.2 313.1 331.1 397.6 453.5

Operating costs

Salaries and benefits 46.7 56.6 51.5 46.6 45.2 43.8 42.5 36.6 28.7
Repair and
maintenance/consumables 59.4 64.3 70.4 85.3 87.9 97.3 102.7 157.2 179.6

Total operating costs 106.0 120.9 121.9 131.9 133.1 141.2 145.3 193.8 208.3

Non operating costs 23.9 24.1 24.1 24.1 24.1 24.1 24.1 24.0 24.0

Total costs 130.0 145.1 146.1 156.1 157.2 165.3 169.4 217.8 232.3

EBITDA 100.9 115.8 151.3 163.8 142.0 147.8 161.7 179.8 221.2

Depreciation 17.5 17.8 21.3 25.3 27.6 27.4 27.4 29.2 27.4

EBIT 83.4 98.0 130.0 138.5 114.4 120.4 134.3 150.6 193.8

Financial items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Income 41.0 52.6 54.6 54.3 51.8 45.4 49.9 70.7 119.5

Less: Interest -11.8 -9.4 -7.1 -4.7 -2.4 0.0 0.0 0.0 0.0
Less: Provision Pension
Fund -3.0 -3.0 -3.0 -3.0 -3.0 -3.0 -3.0 -3.0 -3.0

Total financial items 26.2 40.2 44.5 46.6 46.4 42.4 46.9 67.7 116.5

EBT 109.6 138.2 174.5 185.2 160.8 162.8 181.2 218.3 310.2

Tax 32.9 41.5 52.4 55.5 48.2 48.8 54.3 65.5 93.1

Net income 76.7 96.7 122.2 129.6 112.6 114.0 126.8 152.8 217.2

Note: *Assumed interest as per general assumption on investment reservation of retained earnings

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Revenues
The port retains cargo handling income on many berths, as it will keep collecting wharfage, except on
the Coal berth on thermal coal and on the Iron Ore Berth. Cargo throughput is increasing, and even
though wharfage tariffs are lowered on liquid cargoes and coal, cargo related revenues are expected
to increase slightly from the current Rs. 113 Cr. to Rs. 154 Cr. by 2012-13 and then further with long
term throughput increases, to Rs. 227 Cr. by 2025-26. A part of the increase is due to the fact that
NMPT will retain wharfage revenues on the Iron Ore berth.

The port will also retain labour related income from manual handling activities as long as
mechanisation has not been entirely implemented. The revenues are currently around Rs. 20 Cr. per
year, and expected to be phased out by 2010.

The royalties or revenue sharing will partly take over the function of wharfage dues. With the gradual
transfer of operations to private operators, royalties are set to grow from Rs. 30 Cr. in 2008-09 to
Rs.40 Cr. in 2012/13 and further to nearly Rs. 45 Cr. in 2025-26.

Vessel related revenues will grow steadily from Rs. 77 Cr. to 114 Cr in 2012-13 and further to Rs.155
Cr. in 2025-26.

Total revenues of the port are thus expected to grow from Rs. 231 Cr. in 2006-07 to Rs. 331 Cr. in
2012-13 and further to nearly Rs.453 Cr. in 2025-26.

Operating Cost
Salary costs will fall moderately over time, as the natural outflow is only partly rehired, so that the total
headcount falls over the forecast period. Current salaries amount to Rs. 46.7 Cr., which is due to rise
to Rs. 56.6 Cr. as a salary increase is imminent. With retirement, salary levels will drop to just above42
Cr. Rs by 2012-13 and further to Rs.28 Cr. by 2025-26

Repair and maintenance costs are set to rise by 75% through 2012-13 as projects are implemented.
Further increases will then follow with the outer harbour expansion projects, if these take place.

Total costs will fluctuate somewhat over the entire forecast period around Rs 130 Cr. and then
increase to Rs. 232 Cr. as repair and maintenance cost increases with the need to undertake
maintenance dredging when the channel is deepened.

Financial results
The EBITDA rises from Rs. 101 Cr. to Rs.162 Cr. by 2012-13 and can then rise further to Rs 221 Cr.
by 2025-26.

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Depreciation increases gradually from Rs.17 Cr. to Rs.29 Cr. These amounts are comparatively low,
as most assets to be held by the Landlord port have long lifetimes.

The tax obligation rises in line with profit, from Rs 33 Cr. in 2006-07 to around Rs. 54 Cr. in 2012-13
and further to Rs 93 Cr. in 2025-26
Net income is thus set to grow from Rs.77 Cr. in 2006-07 to Rs.127 Cr. in 2012-13 and may rise to
Rs.217 Cr. in 2025-26.

10.5.2 Balance sheets


A forecast of the balance sheets is presented in the Table 10.14. Detailed tables per year have been
included in Annex B-3

Table 10-14 Balance Sheet 2006-07 to 2025-26 (Rs in Cr.)

Years

Item 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2017-18 2025-26

Assets

Fixed assets 493.6 535.6 607.0 669.4 690.2 690.7 688.3 1037.0 1035.3

Investments 476.9 476.9 476.9 476.9 476.9 476.9 476.9 476.9 476.9

Investment reservation 440.1 464.2 483.6 519.3 585.6 696.5 821.5 1220.2 2676.9

Current assets & Liquid


means 42.0 49.3 54.5 60.8 60.3 63.6 68.3 106.4 140.9

Total assets 1452.7 1526.1 1621.9 1726.4 1813.0 1927.8 2055.0 2840.5 4330.0

Equity and Liabilities

Equity 944.8 1041.6 1163.7 1293.3 1405.9 1519.8 1646.6 2426.6 3915.0

Loans 104.0 78.0 52.0 26.0 0.0 0.0 0.0 0.0 0.0

Current liabilities 403.8 406.5 406.2 407.0 407.1 407.9 408.3 413.8 414.9

Total equity and liabilities 1452.7 1526.1 1621.9 1726.4 1812.9 1927.8 2055.0 2840.4 4329.9

Source: Consultants calculations

The balance sheet total of the port rises from Rs.1,453 Cr. in 2006/07 to Rs.1,927 Cr. in 2012-13 and
can then grow further to Rs.4,329 Cr. in 2025-26. The increase is built up of additions to the fixed

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assets, which will increase approximately 40% by 2012-13 and more than double in 20 years time.
The loans will be paid off by 2010.
It should be noted however, that this balance sheet assumes that the retained earnings are kept in the
company.

10.5.3 Cash-flow
The total cash-flow of the port (see table below) will remain above Rs.50 Cr. per year for the entire
forecast period, except for the year 2017-18 when the bulk of the immediate investments is expected
to take place in financial terms.

Table 10-15 Estimated Cash flow, (Rs in Cr.)

Years

Item 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2017-18 2025-26

Net Surplus 77 97 122 130 113 114 127 153 217

plus interest after tax 8 7 5 3 2 0 0 0 0

plus NCC (non-cash item -


Depreciation etc) 17 18 21 25 28 27 27 29 27

Minus change in NWC (net


working capital changes) 14 4 5 5 -1 1 2 4 0

Minus capex 25 60 93 88 48 28 25 173 0

Total cash flow 64 57 51 65 95 112 127 6 245

Source: Consultants calculations

10.5.4 Key-indicators
The key-indicators, as presented previously in this chapter for the historical figures, are shown in the
table below. The net margin is expected to remain around 30 - 35% through 2012-13.

Table 10-16 Financial indicators for the years 2006-07 to 2012-13

Indicator Definition 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Net margin Net income/revenues 33% 37% 41% 41% 38% 36% 38%

Operating
Operating ratio
income/revenues 36% 38% 44% 43% 38% 38% 41%

Current assets/current
Current ratio
liabilities 1.2 1.3 1.3 1.4 1.6 1.9 2.2

Debt to assets Total debt / assets 0.1 0.1 0.0 0.0 0.0 0.0 0.0

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Indicator Definition 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Revenue per ton (Rs) 73 71 76 75 70 69 69

(Operating cost +
Cost per ton (Rs)
depreciation)/throughput 46 44 44 43 44 43 42

Net surplus per ton (Rs) Net income/revenues 24 26 32 31 27 26 27

Source: Consultants calculations

The operating ratio is also expected to stay around 40% through 2012-13. The balancing of the
operating costs between staff reductions and increased maintenance is translated immediately in
improved margins as revenues increase with rising throughput.
The current ratio is also growing from the current 1.2 to 2.2 by the end of the planning period.
However, much hinges on the assumption with respect to the investment policy of retained earnings in
this respect.
With the payback of the loans by 2010, the debt to assets ratio drops to zero.
The revenues per ton falls somewhat over the years from Rs.73 per ton to Rs.70 per ton as the mix of
cargo switches to relatively lower revenue earning cargoes and wharfage is lowered significantly on
certain products.
The total cost per ton (excluding financial items) falls from Rs.46 Per ton currently to Rs. 43 Per ton by
2010-11 and is henceforth likely to remain static through the end of the horizon.
The net surplus per ton is expected to remain fairly static over the entire period.

10.6 Sensitivity analysis

10.6.1 Introduction
In order to analyse the sensitivity of the cash flow outcomes, the assumptions of the model have been
adjusted to reflect alternative possible paths of the future. These variations are applied to:

Cargo throughput, plus and minus 10% from the base


Investment levels, plus and minus 20% of the estimated capital costs

10.6.2 Varying cargo throughput


The results for a varying cargo throughput are presented in the table below.

Table 10-17 Estimated cash flows for a varying cargo throughput (Rs. in Cr.)

Years
Cash flows NMPT 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2017-18 2025-26

Base case cash flow 64 57 51 65 95 112 127 6 245

At 10% higher throughput 68 64 61 79 109 127 139 20 262

At 10% lower throughput 54 43 33 46 77 94 107 -18 212

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Source: Consultants calculations

A 10% variation of the cargo throughput results in a 25% variation in the cash flow on average over
the medium term. At its lowest, the cash flow would drop to minus Rs.20 Cr.

10.6.3 Varying investment levels


The results for varying investment levels are presented in the table below.

Table 10-18 Estimated cash flow for varying investment levels (Rs. in Cr.)

Years

Cash flows NMPT 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2017-18 2025-26

Base case cash flow 64 57 51 65 95 112 127 6 245

At 20% higher capital cost 58 45 31 46 83 104 119 -40 229

At 20% lower capital cost 69 70 71 85 107 121 135 51 261

Source: Consultants calculations

A 20% variation of the capital cost, applied across the board, results in comparatively similar cash flow
impacts as a 10% different cargo throughput.

10.7 Conclusion
Given the expected cash flow and key indicators, the port can be expected to undertake the
investments entirely from internal resources without jeopardising any activities. The financial outlook is
very sound indeed and sufficient funds should be generated to sustain re-investment and expansion
investment as the port and its users require so.

The outcomes appear robust for substantial variations, with only in the very near term a low point in
the cash flow. Borrowing is not required at all.

If and when the projected substantial returns materialise, the port will have to think carefully about
what to do with the proceeds. Several items are of importance:
Co-invest in infrastructure with private clients is a possibility, in order to obtain higher royalties,
if and when the projects are viable.
As traffic and throughput grows, the port is likely to be required to undertake substantial
infrastructure investment. An example of this may be the widening of the entrance channel to
accommodate two-way traffic. This would require construction of new breakwaters, which is a
very capital intensive project.

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Many Major ports are now undertaking and planning capacity expansion. At the same time,
private ports are increasing capacity and being constructed. As such, it is likely that at some
point in the medium term, more than sufficient capacity is available, and then competition will
rise and tariffs will come under pressure. A healthy reserves position is then favourable in
order to be able to lower tariffs and thus retain cargo.

10.7.1 Budget cycle


In the proposed organisation set-up the different port groups are organised as separate business
units. In the longer term, the ports might even be transformed in a separate legal entity
(corporatisation). The organisation of a port into business units requires a larger budgetary autonomy
for those units. It is therefore proposed to introduce a budgetary cycle, clearly linked to a strategic
planning cycle. Within the budget the unit has a certain freedom to decide on expenditures. The exact
degrees of freedom still have to be defined and might differ in relation to the size of the port.

Starting point of the budget cycle are the individual strategic plans per Business Unit, in combination
with the overall NMPT strategic master plan. Multi-annual plans will be translated in a year plan and
year budget based on the expected expenditure requirements and revenue. These annual budgets
should be based on internationally accepted accounting principles, taking into account all expenditure
and revenue categories. Budget progress of NMPT should subsequently be monitored and reviewed
on a regular (quarterly) basis based on proper accounts and records.

10.7.2 Rolling forecast


Parallel to the budget cycle an investment programming cycle is introduced, which eventually will be
integrated in the annual budget of each Budget Unit (BU). The investments addressed in this cycle
refer to major investment as minor investment will be included in the regular budget. On the basis of
the overall master planning of NMPT, investment needs and priorities should be identified, which
should be translated in a multi-annual investment programme and an annual investment plan for the
port as a whole.

The NMPT will need to forecast its future capital and current expenses requirements in view of
identifying funding bottlenecks. At present the NMPT is following the NMDP tables to forecast the cash
flow for the next 6 years. This forecast is based on revenue forecast based on the actual tariff scheme
and on operating cost as per present level and on forecast of capital expenditure on investments.
The forecast could be improved by or enriched by applying certain expected tariff changes and cost
developments. It would be sensible to make alternative cash flow forecasts based on tariff changes
(increase/reductions) and the effects of cost price inflation.

The Financial Plan should be updated yearly by adding new information on investment plans and cost,
inflation rates, tariff changes and possible redundancy schemes. This rolling forecast will show the
new funding requirements and the timing of securing external funds.

It is of importance that NMPT regularly communicates with project developers or investors to obtain an
update prognosis on plan initiation, continuation and completion.

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11. ACTION PLANS


In general the recommendations resulting from the study on hand reflect concrete actions to meet the
main objectives i.e. to transform the port of New Mangalore into a port adapted to modern and
competitive transport markets and to reorganise its staff and systems to maintain a sound service level
and a strong financial capacity:
a) restructuring the present port management and its stevedoring activities into the landlord
port model;

b) fostering private participation and competition in Port operations;


c) increasing operational productivity and financial performance;
d) upgrading Port facilities and linkage to inland transportation networks;
e) improving co-operation between City and Port Authorities and taking into account urban
and regional (SEZ) development plans.

An overview of the main recommendations is presented in Table 11-1 and is classified by main issue
or topic of attention and / or by type of activity.

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Table 11-1 Proposed Action Plan


Issue Type of action Specific Actions Organisations involved Timing
Investment projects Preparation and Prepare contracts for berth 13 construction(employ consultant if needed) NMPT,Users &consultants 2007
(infrastructure) implementation of plans prepare BOT for Western dock
prepare detailed container terminal plan for berth 1 & 2 (employ a consultant if NMPT & Consultants
needed)
Complete negotiations with NPCL Coal terminal berth 15 on W dock NMPT,NPCL
Implementation of Award contract to winner of tender Operations of berth 14; make an NMPT&Operator 2007
mechanisation berth 14 implementation plan
MIOHS Start and completion construction 2008-2009
Operational 2010
Implementation of Make implementation plan with NPCL NMPT,NPCL&Consultants 2007
Western dock Start and competion construction works 2008-2009
phase 1 Operational 2010
Construction of jetty nr Plan contracting construction works on jetty 13 in conjunction with MRPL; NMPT,Users &consultants 2007
13, MRPL Acquisition of infra structure equipment 2008
Start and completion construction 2008-2009
Operational 2010
Improvement of the Design terminal at berth 1 and 2 and prepare tender documents for purchase of NMPT and consultant 2007
container terminal * equipment and civil works
Remove sheds as per plan, acquire equipment (incl. one mobile crane) 2007
Operational 2008
Select and appoint terminal manager when volume exceeds 40,000-50,000 NMPT&Private Party 2009/2010
TEU p/a
Development of a Study by private operator of existing terminal NMPT&Private party 2010
container terminal for Issue tender for development terminal at Western Dock 2011
Transhipment br. 17 Construction of berth, yard and super structure 2012-2013

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______________________

Issue Type of action Specific Actions Organisations involved Timing


Operational 2014
Multipurpose cargo berth Co-ordinate quay and back yard development plan NMPT,Users &consultants 2008
a Western dock, phase 1 Set handling/storage tariffs based on cbm 2009
(berth nr 18). Make storage area available for phase 1 2011-12
Operational 2010
Bulk handling at Western Study demand for bulk cargo by 2010 NMPT,Users &consultants 2009
dock, phase 2 (berth nr If justified , prepare extension plan Western dock 2009
16) If feasible, start construction Contractors 2010-2012
If justified, operational 2013
Deepening channel and Study market for large carriers (Cape Size), safe navigation aspects and NMPT& Consultant 2009
lagoon extension of breakwaters;
If study proves justification, make dredging plan for channel and lagoon 2009
If feasible, start dredging and/or construction operations Contractors 2009-2010
Channel Operation NMPT 2011-2016
2017
LNG terminal Study locations, environmental effects and investment cost MRPL and NMPT 2007-2008
Conclude negotiations and conclude contract
Start construction 2008-2013
Operational 2014
KIOCL berth nr 8 Deepening waterfront to 14 m NMPT,KIOCL&Contractors 2011
Outer harbour port Study to the justification NMPT, consultant & Private 2009
facilities If justified, plan developments Parties 2010
If feasible, start construction works 2012
Operational Contractors 2013 / 2020
SBM for POL Plan preparation by MRPL MRPL and NMPT 2009
Start construction pipeline and civil works MRPL 2011
Complete construction MRPL 2012

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______________________

Issue Type of action Specific Actions Organisations involved Timing


Operational 2013
Procurement of Harbour crane(mobile) Placed recently in port by customer for own and general use NMPT 2007
equipment Second harbour crane to be used at Container Terminal (see above) 2007
Harbour tugs (2) Select type and models NMPT&Ship Yards 2007
Acquire tugs and train crew 2008, 2010
Pilot launch * Select type and model (min 20 knots) NMPT&Ship Yards 2007
Acquire new and sell one in fleet and train crew 2008
Pilot helicopter * Study cost, operations and safety elements NMPT 2007
Hire a helicopter and pilot for 3-4 months annually and train operations 2007
Port connectivity Port road rehabilitation Execute road rehabilitation according to plan NMPT 2007-2011
Outer road development Follow construction progress NHAI NMPT&NHAI 2007-2012
Pay share NMPT (Rs 10 Cr) 2007
Rail link from KRCL Follow up progress of projects NMPT,Railways 2007-2012
Marshalling Yard Construct according to plan NMPT,Railways & users 2007-2010
Other projects Bunkering Facilities Review plan of operator NMPT&Oil Companies 2007
SEZ Participate in SPV and follow up progress NMPT,MRPL&Chamber of 2007
commerce
Business process Port costs and Tariffs Apply Activity Based Costing (ABC) techniques FA & CAO 2007
improvements Raise container tariffs TM, FA & CAO 2008
Separate pilotage and tugboat fees Dy Cons, FA & CAO. 2008
Simplify cargo handling charges for labour. TM, FA & CAO. 2008
Marketing and business Strengthen Marketing dept. and create a Strategic Business Unit (SBU) TM and Secretary 2007
development * Assign (new) staff to individual client groups, formulate SBU tasks and create
job descriptions 2007
Undertake market research and customer response activities TM and client groups 2007-2013
Train staff in O-D (logistics) analysis, marketing tools and project evaluation Training institutes 2007-2013

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______________________

Issue Type of action Specific Actions Organisations involved Timing

Relation with public Establish a Port Promotion Council NMPT 2007-2013


stakeholders Organise presentation to the Mangalore public PR dept.

Human Resource Solve shortage of pilots Secretary and consultant 2007


development * Analyse work flows and create job descriptions 2007-2008
Evaluate departmental tasks and jobs and integrate tasks where needed in 2008
view of deminishing work load
Make Gap analysis of required skills and staff qualifications 2009
Define a company training program for the next 7 years Secretary and HODs 2007
Organise training of staff (internal/external) and budget costs 2007-2013
Information Technology * Set up Task Force for IT projects NMPT 2007
Analyse work flows and responsibilities of departments and staff Task Force and consultant 2007-2008
Enlarge IT section with required skills Secretary 2007
Introduce and train staff for PC network IT dept and consultant 2007-2008
Set up a MIS Task Force, CFO 2008-2009
Integrate internal; EDP systems (VTMS, billing cargo handling, staff payments). IT dept. 2008
Install EDI system to port clients and service suppliers IT dept. 2009
Train IT dept and other staff according to a training program Training institutes 2007-2013
Relation with Road and Establish a Port Connectivity Council TM and trucking firms and 2007
Railways Authorities * Railways
* = projects proposed by consultants.

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Establishing of monitoring unit


To guide an effective implementation of the Business Plan, a monitoring unit has to be established.
Such unit has to advice the management of NMPT on required time, budget, manpower and
knowledge. It has to decide upon hiring assistance in, for instance, preparation of plans and
prioritisation of actions, and to judge on methods adopted for planning, scheduling and reviewing.

The recommended place of the monitoring unit in the organisation of NMPT management is indicated
in the figure below. The monitoring unit as staff department for the Chairman and the board fits within
its role as advisor.

Figure 11-1 Monitoring unit in NMPT

Chairman/Deputy Chairman

Monitoring unit

Secretary Chief Chief Traffic Deputy Chief FA &CAO

Engineer Mech. Manager Conser- Medical


(Admin) (Finance)
Engineer vator Officer
(Civil)
(Marine)

The manpower needed for a monitoring unit should reflect the following disciplines:
Business planner, chairman of the monitoring unit,
Port planner, who focuses on the performance of port services and facilities,
Port economist, who is specialised in port market analysis and trade and traffic issues,
Financial expert, who takes care of the financial aspects

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______________________

ANNEXES

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______________________

ANNEX A DRAWINGS

Annex A-1 Existing Port Layout

Annex A-2 Cargo Distribution Map

Annex A-3 Existing Land Use Map

Annex A-4 Mechanization of Berth 14

Annex A-5 Development of Coal Terminal

Annex A-6 Development of Container Terminal

Annex A-7 Development of a POL Jetty

Annex A-8 2012-2013 Cargo DistributionMap

Annex A-9 2012-2013 Port Land Use Plan

Annex A-10 2025 and beyond Port Land Use Plan

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ANNEX B FINANCIAL STATEMENTS

Annex B-1 Financials: Project evaluation model

Annex B-2 Financial Analysis: Profit & Loss Account


Annex B-3 Financial Analysis: Balance Sheet

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Annex B-1 Financials: Project evaluation model

Part 1, Project evaluation model: input parameters and Revenues

Investment project:
Capacity: 0 Mt is total capacity of the new installation (including capacity being replaced)
Start-year: 0 Increase 0%
Area 0,0 Ha Mln USD Mln Rs
Investment

Lifetime infrastructure 0 years Civil works 0,0 0,0 0,0


Lifetime equipment a 0 years Equipment 0,0 0,0 0,0
Lifetime equipment b 0 years Equipment B 0,0 0,0 0,0
Investment cost infrastructure: 0 Mln Rs.
Investment cost equipment a 0 Mln Rs.
Investment cost equipment b 0 Mln Rs.

Number of staff: 0 @ full capacity 0 Initially 0 Additional from base per million ton
Operating cost

Average cost of labour: 0,0 Mln Rs./head/yr Check with NMPT Port Cargo Handling Workers and Direct labour of NMPT
Maintenance cost % infrastructure 0,0 of investment cost
Maintenance cost % equipment a 0,0 of investment cost
Maintenance cost % equipment b 0,0 of investment cost
Fuel/lubricants/water/electricity 0,0 Rs./tonne
PDF costs 0,0 Mln Rs./call Calculate crude average per vessel from PDF costs EXCL Berth Hire
Overhead costs 0,0 of labour/maintenance/consumable cost combined
Other/unforeseen 0,0 of total operating cost

Cargo 1: Cargo 2: Cargo 3:


Max capacity 0,0 Mt/yr 0,0 Mt/yr 0,0 Mt/yr
income

Wharfage 0,0 Rs/tonne 0,0 Rs/tonne 0,0


related
Cargo

Handling 0,0 Rs/tonne 0,0 Rs/tonne 0,0


Stevedoring 0,0 Rs/tonne 0,0 Rs/tonne 0,0
Other (Storage, etc) 0,0 Rs/tonne 0,0 Rs/tonne 0,0

Port dues/Pilotage/Towage 0,00 Million Rs./call 0,20 0 Note: 0,095 Rs is Port Dues,
Berth Hire 0,00 Million Rs/call 0,00 0,00
Average parcel size 0,0 DWT 0,0 0,0
income
related

Average ship size 0,0 DWT 0,0 0,0


Vessel

Average ship size 0 GRT 0 0


Average stay at berth 0,0 days 0,0 0,0
Assumptions

Berth Hire 0,0 Rs/grt/8 hr 0,0 0,0

Operating model: 0 Landlord = 0, Service = 1


model

Royalties: 9000000 225000000000


Op.

Land lease 0,0 Mln Rs/Ha 1575 23625000


Throughput fee 0,0 Rs./tonne -8998425 -224976

Year
Throughput in Mln Tonnes 1 2 3 4 5 6 7 12 17 22
-1 0 1 2 3 4 5 10 15 20
Throughput 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Throughput 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Throughput 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Total throughput 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Vessel calls: number


0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
Total calls 0 0 0 0 0 0 0 0

Revenues in Mln Rs.


Wharfage 0 0 0 0 0 0 0 0
Handling 0 0 0 0 0 0 0 0
Storage 0 0 0 0 0 0 0 0
Port dues/Pilotage/Towage 0 0 0 0 0 0 0 0
Berth Hire 0 0 0 0 0 0 0 0
Total 0 0 0 0 0 0 0 0

Royalties:
Land lease 0 0 0 0 0 0 0 0
Per unit fee 0 0 0 0 0 0 0 0
Total royalties 0 0 0 0 0 0 0 0

Revenue after distribution 0 0 0 0 0 0 0 0

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Part 2 Project evaluation model: Cost side and Cash FLows


Operating Costs in Mln Rs.:
Labour 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Maintenance, infrastructure 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Maintenance, equipment 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Fuel/lubes/electricity/water 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
PDF Costs 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Overheads 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Other/unforeseen 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Total operating costs 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Operating income 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Depreciation
Infrastructure 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Equipment 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Total 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Net income 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

Capital expenditure 0,0 0,0 0 0 0 0 0 0 0 0,0

Cash flow current: Mln Rs. 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

IRR 0,0%
NPV @ 8% 0 Million Rs.

Cash flow New-Old 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

IRR 0,0%
NPV @ 8% 0 Million Rs.

The model has inputs in coloured cells, where assumptions are taken from different departments of the
Port.
Investment block
The start year is the first year of operations.
The area of the facility is the total area for which land lease will be paid, if applicable
The capacity of the facility is what it can handle on an annual basis in Million ton
The economic lifetime of the infrastructure/civil works investments in years (for depreciation)
The economic lifetime of the equipment investments with long life in years (for depreciation)
The economic lifetime of the equipment investments with short life in years (for depreciation)
The investment costs in Rs. Mln. For infrastructure/civil works
The investment costs in Rs. Mln. For equipment with long life
The investment costs in Rs. Mln. For equipment with short life

Operating cost block


Number of staff: head count at full capacity.
Initial amount of staff at start of operations (model will calculate staff per million ton of cargo)
Average cost of labour: total annual cost per head in Rs. Mln
Annual Maintenance cost of infrastructure as percentage of purchase value
Annual Maintenance cost of equipment with long life as percentage of purchase value
Annual Maintenance cost of equipment with short life as percentage of purchase value
Fuel/Lubricants/water/electricity: Rs. Per ton of cargo handled
Overhead costs: percentage of combined operating costs
Other/unforeseen: mark-up percentage over total operating costs to allow for contingencies

Cargo related income


Section split in three different cargoes that can be handled on terminal/berth
Cargo1: name of cargo

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Max. capacity: maximum throughput that the facilities can handle according to technical
calculations, taking into account waiting times of vessels. Capacity in Mln ton per year
Wharfage: Rs./ton
Handling: Rs./ton
Stevedoring: Rs./ton
Other: Rs/ton

Vessel related income


Port dues: calculated on basis of scale of rates
Berth hire: calculated on basis of scale of rates, ship size and berth time
Average parcel size: input from Traffic Dept., data in tons
Average vessel size: input from Traffic Dept. data in tons
Average size in GRT is calculated on assumption of ratio of GRT/DWT
Average stay at berth: input from engineers and Traffic Dept. This is the handling capacity
divided by the parcel size, plus allowances for berthing/deberthing, arrival and departure and
waiting times at berth. Time in days.
Berth hire: as per scale of rates in Rs./GRT/per eight hours

Operating model
choose 1 or 0 for calculations as Service Port and Landlord Port respectively (Service Port
means port undertakes all investments, Landlord: port only carries out civil works investments)
Land lease: operator pays fee per hectare: Rs. Mln. Per hectare
Throughput fee: royalty/revenue sharing in Rs. Per ton handled

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Annex B-2 Financial Analysis: Profit & Loss Account

Profit and Loss - All port


Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Throughput
Ores Mt 9,5 9,3 6,2 10,8 11,9 13,3 13,0 13,7 14,4 14,9 15,5 15,2 15,4 15,6 15,8 16,0 16,1 16,2 16,3 16,6 16,8 16,9
Coal Mt 0,3 0,5 0,9 1,0 1,0 1,5 1,8 1,8 2,0 5,3 5,5 5,7 5,9 6,0 6,2 6,5 6,7 6,8 7,0 7,2 7,4 7,6
Liquids Mt 22,1 23,2 23,3 23,3 23,4 24,1 23,8 25,0 26,2 26,1 27,3 32,6 33,3 34,4 35,5 36,6 36,6 36,8 36,9 37,0 37,1 37,1
Other Mt 1,0 1,3 1,3 1,4 1,8 1,9 2,3 2,9 3,1 3,1 3,2 3,2 3,3 3,4 3,5 3,5 3,6 3,7 3,8 3,9 4,0 4,1
Containers Mt 0,1 0,2 0,2 0,2 0,2 0,9 1,1 1,3 1,5 1,5 1,8 2,0 2,2 2,4 2,6 2,7 2,9 3,1 3,3 3,5 3,6 3,8
Total throughput 33,0 34,5 31,8 36,6 38,2 41,8 41,9 44,6 47,1 50,9 53,2 58,8 60,0 61,7 63,5 65,3 66,0 66,6 67,3 68,1 68,9 69,6
Revenue per ton 80 81 73 71 76 75 70 69 69 68 66 63 63 63 63 63 63 63 64 64 64 64
Revenues
baseline

Cargo Handling Ores 333 326 217 378 417 466 453 478 504 523 542 531 537 544 552 559 565 568 572 581 586 592
Cargo Handling Coal 7 11 21 23 23 34 41 41 46 52 56 61 65 69 74 79 83 88 92 97 101 106
Cargo Handling Liquids 1 326 1 168 853 841 843 889 772 814 857 840 886 1 059 1 087 1 131 1 175 1 218 1 232 1 246 1 260 1 273 1 287 1 301
Cargo Handling Other 30 41 40 43 53 83 98 118 131 133 145 153 161 169 177 185 194 202 211 219 228 237
Port & Dock dues 365 393 361 431 462 517 529 533 573 630 652 676 690 705 722 738 749 760 772 785 797 810
Pilotage/towage 368 424 380 441 454 482 481 501 523 592 530 553 565 584 604 623 647 652 660 669 677 684
Other Marine related income 26 29 26 31 32 35 35 36 38 43 41 43 44 45 46 48 49 49 50 51 52 52
Railway income 4 4 10 18 18 18 18 18 18 20 22 21 22 23 24 25 26 26 27 28 29 30
Labour related 200 200 200 150 100
Total Revenue 2 457 2 595 2 107 2 405 2 451 2 622 2 427 2 538 2 689 2 832 2 876 3 096 3 171 3 271 3 373 3 475 3 545 3 592 3 644 3 703 3 757 3 811

Royalties and land lease


Estate income 169 200 202 204 206 208 210 212 214 217 219 221 223 225 228 230 232 235 237 239 242 244
Land rent/lease revenues 0 0 15 15 15 15 15 26 26 26 26 26 26 26 26 26 26 26 26 26
Royalties on Thermal Coal 0 0 0 0 0 0 0 0 0 57 57 57 57 57 57 57 57 57 57 57 57 57
Royalties on Iron Ore 0 0 0 0 242 282 272 292 314 317 317 317 317 317 317 317 317 317 317 317 317 317
Royalties on:
Royalties on: 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Royalties on:
Royalties on:

Total royalties 169 200 202 204 463 506 498 520 544 617 619 621 623 625 628 630 632 635 637 639 642 644

Total revenue 2 626 2 795 2 309 2 609 2 914 3 128 2 924 3 058 3 233 3 449 3 495 3 717 3 794 3 897 4 001 4 105 4 177 4 227 4 281 4 343 4 399 4 456

Operating Costs
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Employment Headcount 1907 1795 1742 1585 1433 1390 1349 1309 1270 1232 1195 1160 1125 1092 1059 1028 997 968 939 911 884

all 970 496 467 566 515 466 452 438 425 413 400 388 377 366 355 344 334 324 314 305 296 287
Total Labour cost 970 496 467 566 515 466 452 438 425 413 400 388 377 366 355 344 334 324 314 305 296 287

Repair & Maintenance 586 588 594 643 704 853 879 973 1 027 1 108 1 096 1 129 1 153 1 572 1 603 1 632 1 696 1 714 1 734 1 755 1 775 1 796
Fuel & lubricants 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total repair, maint, fuel and lubricants 586 588 594 643 704 853 879 973 1 027 1 108 1 096 1 129 1 153 1 572 1 603 1 632 1 696 1 714 1 734 1 755 1 775 1 796

Total Other operating costs

Total operating costs 1 556 1 084 1 060 1 209 1 219 1 319 1 331 1 412 1 453 1 521 1 496 1 517 1 530 1 938 1 958 1 976 2 030 2 038 2 049 2 060 2 071 2 083

Studies 1 1 1 1 1 1 1
Training 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
Other overhead costs 238 238 238 238 238 238 238 238 238 238 238 238 238 238 238 238 238 238 238 238 238 238
Total non operating costs 238 238 239 241 241 241 241 241 241 240 240 240 240 240 240 240 240 240 240 240 240 240

Total costs 1 794 1 322 1 300 1 451 1 461 1 561 1 572 1 653 1 694 1 761 1 736 1 758 1 770 2 178 2 198 2 217 2 271 2 279 2 289 2 301 2 312 2 323
Cost per ton 54,4 38,4 40,9 39,6 38,3 37,3 37,5 37,1 36,0 34,6 32,6 29,9 29,5 35,3 34,6 34,0 34,4 34,2 34,0 33,8 33,6 33,4
EBITDA 832 1 473 1 009 1 158 1 453 1 567 1 352 1 405 1 539 1 688 1 758 1 960 2 024 1 718 1 802 1 888 1 906 1 948 1 991 2 042 2 087 2 132

Depreciation 180 162 175 178 213 253 276 274 274 280 280 280 280 292 240 240 315 315 315 295 274 274

EBIT 652 1 311 834 980 1 240 1 315 1 076 1 131 1 264 1 407 1 478 1 679 1 744 1 427 1 562 1 648 1 591 1 633 1 676 1 747 1 813 1 859

Financial income 206 274 310 350 360 350 310 220 220 220 220 220 220 220 220 220 220 220 220 220 220 220
Interest earne 4% 0 0 100 176 186 192 204 229 271 318 372 398 430 466 465 505 548 594 673 755 841 930
Interest paid 120 137 118 94 71 47 24 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Provision Pension Fund 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30 30
VRS 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Financial cost per ton 3 1 -3 -6 -6 -5 -4 -3 -4 -4 -5 -5 -6 -6 -7 -7 -6 -7 -8 -10 -11 -12
EBT 738 1 448 1 096 1 382 1 685 1 779 1 536 1 549 1 725 1 916 2 040 2 267 2 364 2 083 2 217 2 343 2 329 2 417 2 539 2 692 2 844 2 979
Total pre-tax cost per ton 57 39 38 34 32 32 33 34 32 30 27 25 24 29 28 27 28 27 26 24 23 21
Tax 30% tax rate 221 434 329 415 505 534 461 465 518 575 612 680 709 625 665 703 699 725 762 808 853 894

Net Income 517 1 014 767 967 1 179 1 246 1 075 1 084 1 208 1 341 1 428 1 587 1 655 1 458 1 552 1 640 1 630 1 692 1 778 1 884 1 991 2 085

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BUSINESS PLAN NMPT
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Annex B-3 Financial Analysis: Balance Sheet

Balance Sheet - All port


3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Assets baseline

NBV Equipment 976 1 484 2 285 2 998 3 294 3 388 3 452 3 510 4 292 5 075 5 858 7 352 7 922 8 493 8 988 8 733 8 479 8 244 8 031 7 818
NBV Buildings, civil works 3 961 3 873 3 784 3 696 3 608 3 520 3 432 3 343 3 255 3 167 3 079 3 018 2 958 2 898 2 837 2 777 2 716 2 656 2 596 2 535
Total PPE 4 936 5 356 6 070 6 694 6 902 6 907 6 883 6 853 7 548 8 242 8 937 10 370 10 880 11 390 11 825 11 510 11 195 10 900 10 626 10 353

Investments 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769 4 769
Investment reservation 4 401 4 642 4 794 5 101 5 715 6 770 7 960 9 292 9 949 10 760 11 655 11 623 12 624 13 693 14 838 16 828 18 887 21 028 23 253 25 571
Inventory 5% of NBV Equipment 49 74 114 150 165 169 173 175 215 254 293 368 396 425 449 437 424 412 402 391
Accounts Rec 50 days of revenues 289 329 336 359 332 348 368 388 394 424 434 448 462 476 486 492 499 507 515 522
Other current assets
Cash and liqu 2% of assets 83 90 95 98 104 116 138 162 189 203 219 237 237 257 279 302 343 385 428 474

TOTAL ASSETS 0 14 527 15 261 16 177 17 171 17 987 19 080 20 291 21 640 23 063 24 652 26 308 27 815 29 369 31 011 32 647 34 338 36 117 38 002 39 993 42 079

Liabilities

Net Debt 0 1 040 780 520 260 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0


Other non interest bearing liabilities 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839 3 839
Salaries 1/12 of salaries 39 47 43 39 38 37 35 34 33 32 31 30 30 29 28 27 26 25 25 24
Accounts paya 45 days of operating costs 160 179 180 192 194 204 209 217 214 217 218 269 271 273 280 281 282 284 285 286

TOTAL LIABILITIES 0 5 078 4 845 4 582 4 330 4 071 4 079 4 083 4 091 4 086 4 088 4 089 4 138 4 140 4 141 4 147 4 147 4 147 4 148 4 149 4 149

Equity

Reserves & Surpluses 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681 8 681
Additional paid in capital
Retained earnings 767 1 735 2 914 4 159 5 235 6 319 7 527 8 868 10 296 11 883 13 538 14 996 16 548 18 188 19 819 21 510 23 288 25 172 27 163 29 249

TOTAL EQUITY 0 9 448 10 416 11 595 12 840 13 916 15 000 16 208 17 549 18 977 20 564 22 219 23 677 25 229 26 869 28 500 30 191 31 969 33 853 35 844 37 930

TOTAL LIABIITIES + EQUITY 0 14 527 15 261 16 177 17 171 17 986 19 080 20 291 21 639 23 063 24 652 26 308 27 815 29 369 31 010 32 647 34 338 36 116 38 002 39 993 42 079

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BUSINESS PLAN NMPT
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ANNEX C OTHERS

Annex C-1 Air Pollution Levels in NMPT

Annex C-2 Model calculation of Berth Occupancy

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BUSINESS PLAN NMPT
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Annex C-1 Air Pollution Levels in NMPT


Location
Season Pollutant UOM
1 2 3 4 5

g/m
3
SO2 14.6 9.0 11.8 8.8 11.3

g/m
3
NO2 18.2 12.8 14.1 9.7 16.9
Monsoon (05)
g/m
3
SPM 214 234 223 235 213

g/m
3
SO2 12.8 5.6 3.6 3.2 5.0

g/m
3
NO2 32.1 14.5 10.3 9.5 12.4
Post Monsoon
g/m
3
SPM 42.2 388 102 210 132
(05)
g/m
3
RPM 156 295 85 97 111

g/m
3
SO2 30.4 21.7 15.8 12.3 30.7

g/m
3
N-E Monsoon NO2 37.0 23.6 16.5 13.0 36.9
(06)
g/m
3
SPM 547 324 259 87 233

g/m
3
RPM 238 140 98 72 132

g/m
3
SO2 33 6.2 4.8 3.4 8.4

g/m
3
Pre-monsoon NO2 16.8 12.5 11.7 6.5 12.0
(06)
g/m
3
SPM 448 476 162 128 212

g/m
3
RPM 171 188 110 85 109

SO2- Sulphur Dioxide, NO2 Nitrogen Dioxide, SPM Suspended particulate matter, RPM Respirable particulate matter

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BUSINESS PLAN NMPT
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Annex C-2 Model calculation of Berth Occupancy

Iron Ore Actual Future Remarks

Cargo volume in tons 5,785,293 10,900,000

Nr of ships 171 218

Average parcel size in ts 33,832 50,000 Future: assumption

A Loading/unloading 700 3000 Based on handling system in


capacity in tons/hr place

B Operating time per day in 21 21 3 hrs are lost due labor shift
hrs changes

C Calculated loading rate per 14,700 63,000 Is A x B


day

D Effective working rate in % 80 80 20 % loss from shifting between


holds /cleaning up

E Effective loading rate in 13,440 57,600 This is the real loading capacity
ts/day per day

Effective ship working time 2.5 0.9 Is the parcel size divided by E
in days

F Pre-berthing time per call 22.6 10.5 Actual: Port and non Port acct.
in hrs
Future: no Port acct.

G Berthing/deberthing time in 14.4 3.0 From arrival Pilot station to


hrs (pilotage/tugs) berth and return, including
sailing o and from the
anchorage

Berthing time in hrs (idle) 12.4 5.2 Future: 25 % of effective


working time

H Total days in port 3.14 1.21 Excl pre-berthing time

I Total Turn around time in 4.08 1.65 H + Pre-berthing/24


days

Total ship days in port 536 264

Operational days per year 330 330 UNCTAD norms

Next step is to divide the cargo over the available quay walls

For example 30% Berth 14 49% Actual berth occupancy for


berth 14 (30% X 536 / 330)

For example 90% Berth 14 72%

NMPT Business Plan, August 2009 229