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Indian ports (1)
 

Indian ports (1)

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    Indian ports (1) Indian ports (1) Presentation Transcript

    • INDIAN PORTS
    • Port Sector: Issues & Challenges India’s seaborne trade 95% by volume & 67% by value  Length of the coastline 7,517 km - 9 maritime States & 5 UTs ( including 2 island groups)  Parallel competing port management & legal Systems - 12 under Major Ports Act, 1963 - 1 (Ennore) under Company Act - 184 Non-major ports  Port legislation & Structure - Indian Ports Act, 1908 allows Maritime States to set up their own port systems - Major Port trust Act, 1963, regulates 12 major ports.  Major Ports fall under operational & financial control of M/O shipping & subject to tariff regulation by Law
    • Growth dynamics of cargo traffic (2000-2011)  Overall annual growth (major & non-major) 9.2%  Major ports (7.3%) & Non major ports (13.7%)  As a consequence share of non major ports in cargo handled rose from 24% in 2000-01 to 36% in 2010-11  Capacity utilisation around 90% at Major ports  Highest annual growth in container traffic (15%)  Containerisation at about 2/3rd of general cargo compared to global levels 80% plus.  Container traffic has grown, but is uneven in pace, demand centred in North West Hinterland (60%)  Indian ports have low draft, makes access of large bulk vessels problematic. Entails higher unit
    • Major & Minor Ports: Share in Cargo Traffic (In Million Tonnes) PORTS 1990-91 2000-01 2005-06 2010-11(P) Major 151.67 (92.2) 281.13 (76.3) 423.57 (73.2) 569.92 (64.4) Non- Major 12.78 (7.8) 87.37 (23.7) 155.42 (26.8) 314.55 (35.6) All Ports 164.45 (100.0) 368.50 (100.0) 578.99 (100.0) 884.47 (100.0) Figures in Brackets indicate percentage to total
    • Recent developments – select projects Dhamra: IO & Coal, 2009 Gangavaram: Coal +, 2008 Krishnapatnam: Coal, IO, 2008 Karaikal: Coal +, 2008 Select recent projects and expected dominant commodities • Recent capacities added to minor ports •Dominated by bulk capacities on the east coast
    • World Top 10 Cargo Ports Port 2008 (Million Tonnes) 2009 (Million Tonnes) 1.Shanghai (PRC) 582.0 590.0 2Zhoushan/Ningbo (PRC) 520.1 570.0 3.Singapore 515.4 472.3 4.Rotterdam 421.1 387.0 5.Tianjin (PRC) 355.9 380.0 6.Guangzhou (PRC) 344.3 375.0 7.Qingdao (PRC) 300.3 315.5 8.Qinhuangdao (PRC) 252.2 243.8 9..Hongkong (PRC) 259.4 243.0 10..Busan (S.Korea)) 241.7 226.2 India (total) 744.0 (2008-09) 884.5 (2010-11) Major Ports 530.8 (2008-09) 569.9 (2010-11) Kandla 72.2 (2008-09) 81.9 (2010-11) Source:For S.No.s 1-10, Port of Rotterdam ,Statistics,2010
    • World Top 10 Container Ports Port 2008 (Million TEUs) 2009 (Million TEUs) 1. Singapore 29.92 25.87 2.Shanghai (PRC) 27.98 25.00 3.Hong Kong (PRC) 24.49 20.90 4.Shenzen (PRC) 21.40 18.25 5.Busan (S.Korea) 13.45 11.98 6.Guangzhou (PRC) 11.00 11.19 7.Dubai Ports (UAE) 11.83 11.12 8.Zhoushan / Ningbo (PRC) 11.23 10.50 9.Qingdao (PRC) 10.32 10.26 10.Rotterdam (Netherlands) 10.78 9.74 India Major Ports 6.59 (2008-09) 7.54 (2010-11) JNPT 3.95(2008-09) 4.27 (2010-11) Source:For S.No.s 1-10, Port of Rotterdam Authority, May 2010.
    • India’s Major Ports:APBT (2010- 11 0 0.7 1 2.3 2.5 4.6 5.8 7.7 9.4 13.7 14.2 27.6 36.2 0 5 10 15 20 25 30 35 40 Hours Ports Average Pre- Berthing Time (APBT) in Hours
    • Draft and Average Parcel Size Port PPT KOPT HDL TPT MBPT JNPT COPT PT KPT CHPT NMP T MOPT ENNO RE Draft (Mtr) 12.8 5.3-8.4 6.7 10.4 10.9 11.0 12.8 10.7- 20.0 4.6-23.5 12.0- 17.4 (OH) 15.4 14.4 16.0 2868 7227 14986 16510 17420 19582 19833 27259 28555 30013 33883 37101 39494 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 Tonnes Average Parcel Size (Tonnes) 2009-10
    • Major Ports: Non Working Time at Berth 12.8 17 19 21.5 23.4 23.8 25.8 27.6 28 29.4 32.3 36.7 49.5 0 10 20 30 40 50 60 Percentage Ports Percent of idle time to total time at Berth
    • Port Call Charges (US$) (24Hrs stay of 50000 GRT vessel 2009- 10 ) 2387 6958 9552 9733 18946 26330 31727 50634 0 10000 20000 30000 40000 50000 60000 PortCallCostsUS$ Ports Source: Task Force on Transaction Cost in Exports, 2011, Ministry of Commerce and Industry
    • Efficiency of Container Terminals at Major Ports:2009-10 Performance Indicators of select container terminals Port/Terminal Moves/Hr TEU/Mtr. TEU per Employee Dwell Time (Days) TRT (Day) Tuticorin 25 1187 3008 2.6 0.8 Chennai 27 1286 2797 2.0 1.1 JNPCT 15 1142 829 2.0 2.0 JNPT - NSICT 24 2553 3563 2.5 1.6 JNPT - GTICT 30 2462 3265 2.9 1.1 Cochin 16 536 579 6.4 1.4
    • TEU per meter of Berth Global Median=945 1187 1286 1142 2553 2462 536 2122 2061 2661 2109 1418 0 500 1000 1500 2000 2500 3000
    • Productivity of Gantries (Moves/Hr), 2009-10 15 16 20 24 25 27 28 30 30 35 35 35 36 40 0 5 10 15 20 25 30 35 40 45 Port Global median mover per hour 30
    • Turn Round Times: Global Comparisons 10 10 10 11 12 12 18 19 20 22 48 59 Singapore Shanghai Dubai Hong Kong Rotterdam Los Angeles JNPT Chennai Tuticorin Mundra Pipapav Cochin 13 14 16 17 18 18 27 28 29 32 37 46 Los Angeles Cochin Hong Kong Singapore Rotterdam Mundra (Adani) Pipavav Shanghai Dubai JNPT Tuticorin Chennai Indian ports have much longer vessel turnaround times than global best practices 1 Derived from several months of Maersk Line’s recorded statistics of port entry and exit times of their vessels SOURCE: Maersk Line website Vessel time spent in port1, hours, 2010 MAERSK LINE EXAMPLE Actual time spent in port … … normalised for 1,000 TEU call Indian ports
    • Quayside Productivity: Global Comparisons 141 166 189 192 207 Terminal quayside productivity at Indian ports is far below global figures 1 Pipapav is in ramp-up phase SOURCE: Containerisation International 2008 ▪ Mumbai is the only port that comes close to quayside performance of best practice ports ▪ Quayside performance partially affected by scale ▪ Mumbai is the only port that comes close to quayside performance of best practice ports ▪ Quayside performance partially affected by scale Pipapav1 188 Cochin 612 Mundra 666 Tuticorin 1,185 Chennai 1,356 JNPT 1,639 Colombo 1,259 Port Klang 1,307 Singapore 1,730 Hong Kong 2,205 T. Pelepas 2,593 = / 32 86 84 146 171 164 173 141 126 123 126 100 84 87 80 112 127 TEU/quay meter/yr ’000 TEU/STS crane/yr STS crane spacing (m)
    • Dwell Time: India Vs Best Indian ports have much higher dwell times than global best practices SOURCE: Report of the inter-ministerial group on reduction of dwell time in Indian ports, 2009 Number of days, 2006 Import Export Import Export +86% Best practice 14 Indian worst 64 Indian best 13 Indian average 261 +43% 14 34 13 201 +186% 0.6-0.8 8.2 1.2 2.0 +443% 0.6-0.8 6.5 1.0 3.8 Dry bulk Container 1 Recent Indian average figures from Indian Ports Association NOTE: Based on best practices at Rotterdam and Singapore ports. Singapore is a transshipment port and thus, may not be exactly comparable
    • Impact of External Factors-Dwell Time Parameter India Singapore Denmark Automation Few processes automated All custom procedures processed on line via trade net; 90% within 10% minutes of submission All customs declaration filed & processed electronically Single Window No single window concept in use Single window facility via trade net with links to 34 agencies; unique registration no. required Single window service single unique registration number required Examination Risk management system (RMS) in operation; 50% still physically examined Mainly post audit controls and use of non intrusive technology for examination 3 tier RMS & only 2 to 5% goods physically examined Help desk No single help desk exist Outsourced call centre 24*7 Outsourced call centre 24*7 Duty structure Reduced levels but multiple rates with exemptions makes export promotion cumbersome & complicated Single low duty rate, GST not paid on input for exports Single low duty rate, duty refund on inputs used in exports Source: Based on Task Force on Transaction Cost in Exports, 2011, M/o Commerce and Industry
    • Moving Containers: Distribution of costs  The cost of moving a container fall into five major categories and the distribution of costs (as percentage of total costs) of moving containers is as follows: - inland transport (25%) - the ship/ocean freight costs (23%) - ports and terminals (21%), including stevedoring - the containers (18%), including maintenance - other costs, including container repositioning (13%) Source: Jean-Paul Rodrigue, Hofstra University; Martin Stopford, is the drive for ever bigger container ships irresistible? Lloyd’s list shipping forecasting conference, April, 2002 quoted in Fairplay.com.uk
    • Costs & Procedures in Foreign Trade India China Malaysi a Korea Singapor e Documents for Export (Numbers) 8 7 7 3 4 Time to export (Days) 17 21 18 8 5 Document to import (Numbers)) 9 5 7 3 4 Time to import (Days) 20 24 14 8 3 Cost to export * 945 500 450 742 456 Cost to import* 960 545 450 742 439 * US $ per container. Source: Doing Business 2010, IFC
    • Port Management Models Port Type Infrastructure Super structure Stevedoring labour Other functions Service port (Major Indian Ports Public Public Public Mainly public Tool port (France,some African nations) Public Public Private Mainly public Landlord port (Antwerp,Rotter dam,Singapore etc Public Private Private Mainly private Private port (UK,New Zealand) Private Private Private Mainly private
    • When to Regulate?  Market power  Imperfect & Asymmetric information: Operator (Agent) has an informational advantage over the Government/Regulator (Principal)  Externalities: occur when production or consumption of goods/services impose costs/benefits on others which are not reflected in the prices charged for the goods & services being provided  Joint provision & consumption
    • Starting Point: Efficient Markets P Pc Qc Q D S = Marginal Cost Pc = Marginal Revenue Optimum: MR = MC Social Welfare = Consumer Surplus + Producer Surplus
    • Philosophy of Regulation  Case for Economic Regulation exists when: ◦ Activity or industry has elements which bestow advantages of natural monopoly, it occurs when:  Industry/Activity has large sunk costs and falling average costs  Significant barriers to entry  Locational advantages which bestow near monopoly advantages on the operator
    • The economic Characteristics of Port Infrastructure  The basic port infrastructure is: - indivisible & requires large sunk costs -long lived -constructed in a specific space for a specific use  => Perfect conditions for the existence of scale economies  The most obvious difference with other public services: - Multiple services associated with the port infrastructure  This multitasking dimension matters a lot when thinking about economic regulation, including pricing - the infrastructure provide a service: you can charge a price - the infrastructure is an input: you can charge a price
    • Why Tariff Regulation in Ports  Port Trusts (PTs) can not regulate their own tariffs or of Terminal Operators due to ◦ Conflict of Interest ◦ Being Competitors ◦ Need to safeguard user’s interests  Therefore, the need for 3rd Party Neutral Regulator
    • Charter of TAMP To fix scale of rates :  For services rendered by the ports  Rentals for use of port trust properties  Fix charges for services rendered by port operators (BOT, concessionaries etc. under MPT  Prescribe conditions for services rendered by Port Trusts/operators. Guiding Principles  Safeguard the interest of port users;  Just and fair return to operators  Promote economy in use of resources & efficiency
    • Tariff Guidelines 2005: Approach Anchored on cost plus basis  Cost as per estimate for future & ROCE determine tariff  Revenue share/royalty not treated as cost - Except in cases prior to July 29, 2003 subject to a maximum of second lowest bidder  ROCE is on sum of net fixed assets plus working capital  Return on capital allowed 16% as of now - full ROCE allowed for capacity utilization of 60% & above.
    • Tariff Guidelines 2005 Approach  Tariff approved by TAMP valid for 3 years  Rates fixed by TAMP are ceiling rates -Ports/operators enjoy flexibility to offer rebates  Tariffs fixed are -Vessel related (port dues, berth hire on GRT basis) -Pilotage sliding rates (higher for higher GRT) -Cargo related (wharfage rates) based on cargo handling  Concessional tariff for coastal cargo/containers/vessels -60% of normal tariff applicable
    • Tariff Guidelines 2005:Issues  Information intensive exercise  Too much emphasis on individual operator’s profitability  Weak incentives for efficiency  Disallowance for revenue share in tariff and its long term effects ◦ Partial pass through of royalty/revenue share for private terminals which came prior to July 2003.
    • Tariff Guidelines 2008  Simple & Norm based  No provision for midterm review ◦ Unchanged Tariff for 30 years  May not encourage regular investment by operators or  May bestow windfall gains on operators if any change in planning/parameters  Norms do not cover all areas of operations
    • Upfront Tariff Guidelines 2008  Committee on infrastructure found that combining cost plus model of tariff and revenue share model of bidding was untenable  Recommendations ◦ Upfront tariff ◦ Uniform tariff cap at the same port ◦ Normative cost based with fair return on capital ◦ Capacity utilisation of 75% ◦ Tariff caps to be reviewed once every five years to adjust for any unforeseen events ◦ Tariff indexed to 60% of WPI variation  Guidelines for upfront tariff setting for PPP projects ◦ Notified in the Gazette on 26.2.2008
    • Salient Features of 2008 Guidelines  TAMP to fix upfront tariff cap before bidding based on proposals from major ports ◦ Bid document to incorporate the upfront tariff ◦ Tariff cap set for a port would be applicable to all projects bid out subsequently for identical cargo during the next five years  Approach – Normative cost based approach ◦ Estimated capital and operating cost based on norms prescribed ◦ Fair rate of return on capital employed (presently @ 16%)  Annual indexation of upfront tariff ◦ 60% of the variation in the WPI of the relevant year  TAMP to review tariff caps ◦ Once in five years for extra-ordinary events ◦ Revised tariff caps applicable to subsequent
    • Fixation of Upfront Tariff  Capacity  Tariff to be fixed with reference to the optimal capacity irrespective of traffic forecast  Indicative norms for capacity are prescribed in the guidelines for handling containers, iron ore, coal, liquid bulk and multipurpose cargo  Optimal capacity is 70% of the maximum capacity ◦ Lower of the quay capacity and stack yard capacity is to be adopted
    • Current Issues: Port Tariffs  Tariff Models ◦ Tariff Guidelines 2005 ◦ Tariff Guidelines 2008  Non Major Ports outside tariff regulation  Inadequate Statutory Powers ◦ No power to compel submission of information & documents ◦ No power to enforce its Orders
    • Rate of Return Regulation  Tariffs are set to generate Annual Revenue Requirement enough to recover operating costs and fair/predetermined return on capital; ◦ In essence limits the level of profit to be earned  Operator’s cost are reviewed & costs deemed unnecessary eliminated. ◦ Problem in determining allowable costs  No incentive to operate efficiently  Operator may over invest
    • Guiding Principle Regulator sets regulated rates or tariffs for the regulated entities so that the regulated rates allow the entity to earn a revenue that covers the “justified costs” of their operation, that is the costs that are necessary, unavoidable and reasonable and offer a predetermined return on assets to render regulated service at a predefined level of quality Revenue Requirement=Total Cost=Variable Cost+(Rate level*Rate Base)
    • Pitfalls of Cost Plus Regulation  Motivation for over-investment (increased rate base) – ‘gold plating’  No motivation to increase productive efficiency  Continuous pressure for price increase  No incentive for selection of right equipment  Information asymmetry at the regulator’s side: - no up-to-date operating cost information - no data on future business plans (investments, cost-reduction, etc.), - obscure picture on demand side.
    • Port pricing Models: Theoretical Perspective  Presence of economies of scale => problem to implement a first best pricing policy (price equal to marginal cost) => not possible to recover investment costs.  Second-best alternatives, common to other transport sectors, are: - Average-cost pricing, - Two- part tariffs, - Long-run marginal cost pricing, and the use of rental fees from concessionaires.
    • Port pricing Models: Theoretical Perspective  This possible alternative: long-run marginal cost (LRMC)  It is defined as: short-run marginal cost (SRMC)+ the marginal cost of capacity (MCC) LRMC = SRMC + MCC  which keeps the idea of social optimality, and at the same time, achieves full cost recovery  The idea could be:  SRMC: paid by the ships  MCC: paid by port services operator
    • Regulation Versus Market Failure  Are there regulatory errors in setting prices?  Is regulation intrusive and costly?  Does it discourage long term investment?  Too much focus on short term cost/prices  Is regulatory innovation desirable
    • Issues in Port Sector • Why are vessel related charges higher at Indian Ports. • What makes high turnaround time and pre berthing detention at Indian Ports - lower levels of technology & lack of coordination amongst stakeholders • How to make Indian Port sector vibrant? - Change in institutional structure(Trusts versus Corporatized entity) - Does ownership matter ? All Ports in Europe (except in the UK),Dubai, Singapore etc owned by the State - Synergy with trade and industrial policy (SEZs and FTZs). • Are port related charges villain of the piece? - No, port related charges account for around 10-15% of total logistics cost. - High inland transit costs, connectivity constraints influence cargo flows/costs.
    • Issues: Port Sector  Captive versus common carrier terminals  Inter port and intra port competition • Inter port competition constrained by hinterland economic activity, connectivity & inland transit costs • Intra port competition can serve to mitigate the pricing power • Intra port competition may be ineffective in situations where ownership is concentrated  Financing of port infrastructure  Land acquisition and environmental clearance - long gestation period for green field port projects (15 years)  Scale of operations at Indian Ports - Fragmented and small compared to China - Combined throughput at Major Indian Ports barely matches that of Shanghai alone.  Draft limitation restricts access of large vessels to Indian Ports resulting in: - More number of ship calls leading to congestion - Higher demand for berthing
    • Hinterland •Level of Economic Activity •Road/Rail Network •Material Access •Feeder Services Port Performance - Sum of parts! Efficiency improvements should target the entire sphere of activities and result in increased competitiveness Technology •Port Equipments •Software applications •IT based custom & security •Communication system •Master Plan & port capacity •Level of congestion •Ability to handle large ships •Geographical location •Management practices •Customer satisfaction •Personnel quality & motivation •Crane productivity •Yard equipment planning & productivity •Gate productivity •Equipment Utilization •No. of berths •Port Charges Port System Efficiency is the Key Intangible Factors Terminal Efficiency Physical Features of Port
    • Key Developments during H1 2012-13 (Apr-Sep)  CONCERNING CARGO GROWTH AT MAJOR PORTS:  3% decline in the cargo growth registered in volumes on a yoy basis to 271 MT for the six months period ended Sep 2012.  Ministry of Shipping (MoS) target of major ports crossing the 600 MT cargo mark in FY 13 appears difficult to achieve.  Reasons for degrowth in cargo volumes in the current fiscal: 1. Continued pressure on iron ore exports due to regulatory issues in the domestic mining sector and weak global demand conditions. 2. Reduced fertilizer and fertilizer raw material imports due to low domestic demand and high global prices.  Modest growth rates in case of other cargo categories including coal, containers and POL ranging from 2-4% on a yoy basis.
    •  CONCERNING CARGO GROWTH AT NON-MAJOR PORTS:  Healthy growth period on period for the non major ports namely Adani Ports and Special Economic Zone Limited (APSEZL); Essar Ports Limited (EPL) and Karikal Port Pvt Limited (KPPL).  Gujarat Pipavav Port Limited (GPPL), the operator of Pipavav port in Gujarat has been the only exception to this trend with degrowth being experienced by it in both bulk and container categories due to market related reasons.
    •  CONCERNING CAPACITY EXPANSION:  Limited progress on new awards at both major and non major ports.  Till date only 3 PPP projects have been awarded, hence the PMO set target of 42 projects for fiscal 2013 appears ambitious and difficult to achieve.  Some initiatives like enhancement of the financial powers of Ministry of Shipping taken recently, however their actual impact in terms of pick up in pace yet to be seen.
    • Ports: Union Budget 2013- 2014  2 new major ports will be established in Sagar, West Bengal and in Andhra Pradesh adding about 100 MT of capacity.  A new outer harbour will be developed at Thoothukkudi, Tamil Nadu at an estimated cost of Rs. 75 billion.
    • THANK YOU