THE INDIAN PORT SYSTEM

The case of Bombay ports

Pier Paolo Floreani

3
 INDEX

1. Introduction ...................................................................................... 5
2. The Indian port system ....................................................................... 6
2.1 Government initiatives ............................................................... 8
2.2 Opportunities and foreign investestments ..................................... 9
3. Mumbai’s Port ................................................................................. 11
4. The Jawharlal Nehru Port................................................................... 13
4.1 Facilities ................................................................................. 14
4.2 Labour.................................................................................... 15
4.3 Performances .......................................................................... 15
5. Expansion projects of port system....................................................... 17
6. More reforms to assure development................................................... 17
7. Interview to Mr Ravi Budhiraja, JNPT President ..................................... 19
8. Leading Companies in the sector and services provided.......................... 23
8.1 Costs and Shipping Timings........................................................ 25
8.2 Italian companies working in the sector........................................ 26
Appendix..................................................................................................27
Bibliography ............................................................................................ 30

4
1. Introduction

Mumbai, also known in English as Bombay, is the capital of the

state of Maharashtra, and the most populous city of India, with an
estimated population of about 18 million (as of 2006). Mumbai is
located on Salsette Island, off the west coast of Maharashtra. By some
measures, it is the largest city in the world and along with its
neighbouring suburbs, it forms the world's fifth most populous
metropolitan area with a population of about 22 million. The city has a
deep natural harbour and the port handles over half of India's
passenger traffic and a significant amount of cargo. Mumbai is the
commercial and entertainment capital of India, and houses important
financial institutions and has attracted migrants from all over India
because of the immense business opportunities, and the relatively high
standard of living, making the city a potpourri of various communities
and cultures.

1. 2.

Picture 1: Mumbai’s map with both port areas (Mumbai port on the left side and JNPT
on the right). Picture 2: a view of the city.

A number of Indian financial institutions have headquarters in

downtown, including the Bombay Stock Exchange, the Reserve Bank of

5
India, the National Stock Exchange of India, the Mint, and numerous
conglomerates (the Tata Group, Godrej and Reliance etc). Many
foreign banks and financial institutions also have branches in this area.
Up until the 1980s, Mumbai owed its prosperity largely to textile
mills and the seaport, but the local economy has since been diversified
to include engineering, diamond polishing, healthcare and information
technology. Mumbai’s status as the state capital means that state and
federal government employees make up a large percentage of the
city's workforce. Mumbai also has a large unskilled and semi-skilled
labour population, who primarily earn their livelihood as hawkers, taxi
drivers, mechanics and other such blue collar professions. The port
and shipping industry too employs many residents, directly or
indirectly.
The entertainment industry is the other major employer in
Mumbai. Most of India's major television and satellite networks are
headquartered in Mumbai, as well as its major publishing houses. The
centre of the Hindi movie industry, Bollywood, is also located in
Mumbai, along with its largest studios and movie production houses.

2. The Indian port system

Shipping is a crucial cog in the transport system and it

constitutes the optimal low-cost option for transportation bulk and
cargo; in this contest it is relevant the fact that almost 90% of India’s
trade volume (70% in terms of value) is moved by sea.
During the recent years, considerable private investment has
started flowing into the Indian port sector. A number of existing
facilities have been taken over by private players and many new
facilities have also been set up at existing ports. Two new ports
(Mundra and Pipavav in Gujarat) have also been constructed in the
private sector.
The management and development of the major ports in the
country are controlled by the central government through respective
port trusts; on the other hand minor ports are controlled by state
governments.
India currently has 12 major ports and 184 minor /intermediate
ports spread across the vast coastline of 7517 kms. They handle
almost 90 per cent of India’s total foreign trade. The total cargo
volume handled by major ports has increased from around 157.5
million tonnes in 1992 to over 288 million tonnes in 2001-02. This
accounts for almost 76 per cent while the remaining 24 per cent is
handled by the minor ports. Liquid and dry bulk cargo constitutes

6
about 83 per cent of the total volume of traffic handled. Container and
general cargo comprise the remaining.
The current handling capacity of the major ports in the country is
around 344 million tonnes.
This has been achieved through construction of a new port at
Ennore and a mechanised coal handling facility at Paradip. These two
facilities entailed an investment of around US$ 394 million.

Cargo at major and non-major ports, 1950-2006

450
400
350
300
250 Major ports
200 Non-major ports
150
100
50
0
1950- 1960- 1970- 1980- 1990- 2000- 2004- 2005-
51 61 71 81 91 01 05 06

Font: Indian Infrastructure

India is strategically placed to become a major maritime nation

due to its long coastline that flanks important global shipping routes.
However, the country is ranked only 17th out of the 37 maritime
nations and the overall share of Indian ships in global trade is around
16 per cent.
The major ports tipically offer a combination of dedicated bulk
terminals, some specialised container terminals and several cargo
berths. These ports are regulated under the Major Port Trusts Act (of
1963) and when the act was passed there were only six major ports
(Kolkata, Chennai, Cochin, Kandla, Visakhapatnam and Mumbai). The
other major ports were developed later with the newest facility being
Ennore port.
The major terminals have shown a respectable rate of traffic
growth (10.3% in 2005-06) and cargo traffic has risen to 10.15 %
over the last five years. The port of Nehru in Mumbai is the leader in

7
this segment, controlling 55-60 per cent of container traffic in the
country and the other prominent container operations are based in
Chennai, Tuticorin and Cochin.
POL (Petroleum, Oil, Lubricants) has been the dominant
commodity carried through the ports and contributed 33.57 per cent to
the total cargo in 2005-06; the following commodity is the iron with
18.66% as shown in the chart below.

Fertiliser, 2.88
Other Cargo, 16.3
Coal, 13.99
Fertiliser
Coal

Container, 14.6 Container

Iron ore
POL
POL, 33.57
Other Cargo
Iron ore, 18.66

Font: Indian Infrastructure

2.1 Government initiatives

The government has studied various strategies adopted by ports

world-wide to address similar issues facing ports in India, taking into
account the commercialization, the privatization and the modernisation
of the major existing ports. These are expected to result in
technological upgrades and overall improvement of performance
levels; measures to strengthen the regulatory structures of major
ports have also been initiated. These pertain to tariff rationalisation
and the establishment in a phased manner, of a corporate structure for
the existing ports.

8
 The government has also announced a series of measures to
promote foreign investment in the port sector and put down some
guidelines for private/foreign participation that allows the formation of
joint ventures or foreign collaboration for setting up port facilities. 100
percent foreign investment is permitted for construction and
maintenance of ports and harbours and in projects providing support
services to water transport. The private sector is allowed to set up
captive facilities and the government is offering various fiscal
incentives to the investors; for example, a 10-year tax holiday in the
port development, operation and maintenance. Investors in inland
waterways and inland ports are also entitled to these incentives.
The Tariff Authority for Major Ports (TAMP), an independent
authority, is now responsible for determining and revising tariffs on
major ports. The existing legal framework is being amended to
facilitate changes consistent with structural reorganisation of major
ports. The government has announced guidelines for revised bidding
and bid evaluation process. Maritime states have also formulated their
port development plans through private investment as well as by user
agencies. An Integrated port development strategy comprises creation
of port facilities, industrialisation and development of infrastructure
facilities like roads and railways linking the hinterland. Suitable sites
have been identified, techno-economic pre-feasibility studies have
been carried out and guidelines formulated.

2.2 Opportunities and foreign investments

Currently Indian ports cater mainly to transhipment and coastal

movement. Most of the Indian cargo is transhipped through hub ports
like Colombo, Singapore and Salalah. This results in an increase in the
freight of Indian cargo. To resolve this problem, the government is
planning to set up two hub ports, one each on the east and west
coasts at Chennai and Jawaharlal Nehru Port at Mumbai. Further, it is
proposed to develop an International Container Transhipment Terminal
at Cochin Port on BOT basis.

9
 Growth of Indian shipping tonnage (as on Dec. 31, 2005)

9000000
8000000
7000000
6000000
Coastal
5000000
(GRT)

Overseas
4000000
Total
3000000
2000000
1000000
0
1990 2000 2001 2002 2003 2004 2005
Source: Shipping Ministry

Major investment opportunities exist in the leasing out assets of

existing ports, the construction and operation of terminals, berths and
storage facilities, and finally in the captive facilities for port based
industries.
According to government estimates, private sector investment in
major ports may exceed US$ 2.33 billion in over 42 projects within a
decade. A number of private companies have already set up port
facilities in the country. Two ports have been set up through private
participation. A number of foreign companies like Peninsular and
Oriental (P&O) Ports of Australia, PSA-Sical Terminals Limited,
International Sea Ports Limited (ISPL) and the Shell-Essar consortium
have invested/are in the process of investing in the port sector within
India.
Recently some bids are being invited for development and
operation of container terminals at Kandla, Cochin and Mumbai,
conversion of bulk terminal into container terminal at Jawaharlal Nehru
Port and for bulk and liquid cargo terminals/jetties at Ennore port. P&O
(Peninsular & Oriental) Ports of Australia and Port of Singapore
Authority International (PSA International) are among the
largest investors in the port sector within India. P&O received the first
container terminal (at Jawaharlal Nehru Port) in the country to be
offered to private participation. The project is called the Nava Sheva
International Container Terminal and the terminal started operations in
1999. To be noted that the Australian company holds 95 per cent
equity in the project.

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P&O is also operating and managing the Chennai container terminal
and the company will invest US$ 100 million in the first five years.
Since the commencement of their operation in September 2001, P&O
handled 3,50,930 TEUs (upto October, 2002). First mainline vessel
called at Chennai Port after a gap of 18 years and sailed on 16.6.2002.
The Australian company is in the process of investing in the new
container terminal at Mundra Port in Gujarat. All this means a growing
interest demonstrated by international investors towards the Indian
port system, which will have great improvement margins even for the
short term.

3. The Mumbai port

The historical origins of the port of Mumbai have their roots on

the British empire era, when the docks of Indira, Prince and Victoria
were built beside the natural disposition of the islands. The
construction finished in 1891 and since the beginning the port and the
city constituted a point of reference for all the commercial activities of
western India. Moreover, after the creation of Suez Channel in 1869,
which had started up a new trade way between Far East and Europe,
the city became the world's chief cotton trading market, resulting in a
boom in the economy and subsequently enhancing the city's stature,
transforming Bombay into one of the largest seaports on the Arabian
Sea.
The city became in a few years the second largest in India
following Calcutta and it grew along with the port activities even after
the end of the British colonisation. Nowadays, Bombay’s port has more
than 130 years of history and even if it has a primary role in the
region’s economy, it’s loosing its importance in favour of the new and
more functional Nehru port, situated in the south part of the city. In
the 90s Mumbai’s old port realised a 30.97 million tonnes traffic
(12.3% of the Indian total) employing 30% of India’s workers in the
sector.
Also the Cornell Group, a port consulting American company,
recently declared that this port will slow down more and more as the
development of Nehru port is attracting private and public
investments.

11
 In the map above: the entrance channel to Mumbai port, which is located
near Mumbai’s downtown.

The Mumbai’s port is runned by the Mumbai Port Trust and is

located in the southern part of the city and its limits actually are
related to its long history. The entrance channel and berths depth
varies from 6.5m to 10m and the ships can take even 5 days to enter
an operative berth. The trucks that have to reach the port have in
many cases to go through the caotic traffic of the city, often running
into police controls. Difficult is also the situation related to the labour:
about 32,000 workers (of whom 2,000 employed in liquid materials
transportation and 30,000 in varios materials and goods) are currently
working for the port and this high number is determined by the poor
infrastructure system; therefore the productivity is low and even
whether the Mumbai Port Trust struggled in the past to introduce new
machineries to increase it, the powerful trade unions always seemed to
be against those policies.

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4. Jawharlal Nehru Port

Among the 12 major Indian ports, Jawaharlal Nehru Port Trust

(JNPT) occupies a place of prominence. Commissioned in 1989 and
located within the Mumbai harbor on the west coast of India, JNPT is
the second youngest and one of the most modern major ports of the
country. Certified an ISO 9002 port, it was initially planned to be a
“satellite port” to the Mumbai Port with the purpose of decongesting
traffic at the latter. Being one of the oldest ports in India, the Mumbai
port was proving to be structurally inadequate to meet the
requirements of modern cargo handling. Shallowness of the channel,
congestion of roads and railways through the Mumbai city linking the
port to its hinterland, as well as labor problems, including over-
manning, were among the major problems ailing the Mumbai Port in
the prereform days. As a result, the Port was simply incapable of
handling the expanding volume of modern cargo directed to the west
coast and there was an urgent need for a new port in the Mumbai
region, which eventually led to the birth of JNPT in 1989.

In the image above: a view of JNPT port.

The port was completed at a cost of Rs. 1,109 crores ($ 200 million),
out of which Rs. 956.97 croreswere obtained as loans from various
funding agencies, with the World Bank being one of the major
contributors.
Although JNPT was initially being planned as a “satellite port” to
Mumbai under the Mumbai Port Trust, eventually however, the JNPT
was developed as an independent port on its own right and it became
the country’s largest container port, presently handling about 60% of

13
India’s container cargo. In fact, a recent study by the International
Association for Ports and Harbor (IAPH) based on throughput data in
2002 has ranked JNPT as the 29th largest container port in the world.
The land area in possession of the JNPT measures 2,584 hectares with
enough back-up area ideally suited for developing additional facilities
for future maritime requirements of the country.
Equipped with one of the most modern cargo handling facilities among
major Indian ports, JNPT started operating with two dedicated
terminals, one for handling import and export of containerized cargo,
with 8 container freight stations, and the other for handling dry bulk
cargo. JNPT has also been a pioneer in running its day-to-day
operations with the help of information technology (IT), including
Electronic Data Interchange (EDI) and vessel traffic management
system (VTMS).
JNPT enjoys very good road and rail linkages with its hinterland
as well as important business centers like Thane, Nasik and
Ahmedabad, which facilitate excellent portindustry interface. JNPT is
also characterized by highly automated and round-theclock operations
and has demonstrated enough potential and capacity to develop as
India’s first major hub port.

4.1 Facilities

At the time of its inception, JNPT was equipped with modern

container and bulk handling facilities, with a separate terminal
dedicated to each type of cargo. In particular, the container terminal
of 680 meter quay length (three berths) was designed and equipped to
handle large container vessels. JNPT was also provided with adequate
liquid cargo berth, shallow draft berth and multipurpose berths.
Moreover, compared to most other major Indian ports, JNPT enjoyed
better communication through intensive use of IT. Right from its
inception, it has made ample use of the container tracking and
management system as well as the vessel traffic management system
(VTMS). The port also has the most advanced Electronic Data
Interchange (EDI), which ensured unhindered and efficient interaction
between the port, the port users and the customs.
Better connectivity of JNPT with its hinterland, which facilitated
faster clearance of cargo from the port, was ensured by close
proximity to National Highways 4B and 17 and other state highways
that directly link JNPT to Thane, Nasik and Ahmedabad. The port also
enjoyed road connections with 23 inland container depots (ICDs) as
well as with the Konkan, Central and Western railway systems. The

14
primary mode of container cargo movement was through road, but
railways, operating through the Container Corporation of India
(CONCOR), also accounted for about 33% of the same.
It may be noted that terminal charges, including shore handling,
storage, delivery etc. at JNPT were the lowest among all major Indian
ports.

4.2 Labour

JNPT was also fortunate to have a relatively young and educated

workforce and did not have to carry the baggage of huge labor supply
(resulting in massive overstaffing) like Mumbai or Kolkata Ports or
problems of militant and unreasonable trade union activities. Unlike
some of the other major ports in India, JNPT did not have a Dock
Labor Board for recruitment of its workforce. Note that the formation
of a DLB was left to the discretion of individual port trusts. Moreover,
there was not any clause in the Dock Workers Act (1948) that
stipulated any minimum number of laborers the port had to employ,
although the existing pool of labor in any port enjoyed complete job
security under the provisions of this Act. Both of these points worked
in favor of the JNPT authority and helped them avoid the problems of
overstaffing which plagued the older ports by being cautious on this
issue right from the beginning. Moreover, since selective liberalization
of the various sectors had already been initiated in the Indian
economy from the mid 1980s, there had been a change in the mindset
of the government and the policy makers and there was less pressure
on public sector units, especially the new ones, to employ labor in
excess of requirement just to fulfill social objective of employment
generation.
Thus, on the whole, it is quite apparent that on several accounts,
JNPT was different from most of its sister ports right from the
beginning and enjoyed distinct advantages.

4.3 Performances

In terms of port productivity, however, JNPT presented a mixed

picture. In some areas, it seemed to have performed well towards the
end of the 1990s with respect to other Indian ports, whereas in certain
others, its performance can at best be described as modest. In 1995-
96, average turnaround time of ships at JNPT (9.03 days) was among

15
the higher ones in India, but it progressively declined to 1.96 in 1998-
99, the lowest among all major ports. Average pre-berthing time at
JNPT was 2.1 days in 1996-97, substantially lower than that in Kandla,
Mumbai and Chennai, but somewhat higher than the rest. By 1998-99,
it became 0.83 days, again lowest among all major ports. Likewise,
the percentage of idle time at berth to total time at JNPT also exhibited
a downward trend. It was the third lowest among major Indian ports in
1995-96 (24.38%) but declined to 9.8% in 1998-99, the lowest among
all major ports. It should be noted that there was a substantial gap
between JNPT (9.8%) and Mormugaon (20%), the best performer
among the remaining ports in terms of this parameter. On all these
counts, JNPT compared favorably relative to other major ports in India
even in the pre-reform days.
With respect to average ship berth output, however, JNPT’s
performance was not at par with the best in India. It experienced a
massive expansion in average ship berth output from 1996-97 (2,987
tonnes) to 1997-98 (6,209 tonnes) and stabilized at that level in the
next two years (See Chart 5). It is notable that JNPT’s rank among the
12 major ports with regard to ASBO improved from 10th in 1996-97 to
just 6th in 1998-99, reflecting no distinct advantage enjoyed by JNPT
in this context in the prereforms period.
JNPT’s financial performance was quite impressive, especially with
respect to other major Indian ports (except Kolkata-Haldia), improving
from a net operating surplus of Rs. 7.09 crores in 1990-91 to Rs.
228.13 crores in 2002-03. Ever since 1990-91, it has consistently
recorded an operating surplus despite some fluctuation in 1996-97. It
should be noted that some other Indian ports, like Mumbai, were
running losses. However, despite comparing by and large favorably
vis-à-vis other Indian ports, JNPT failed to achieve the standards of
the other efficient ports of the world, as it could not escape certain
inherent shortcomings of the Indian port sector in general.
For instance, in 1992, even the very modern container facilities
at JNPT handled at most 10 containers per hour (of vessel at berth),
which probably increased to 11 or 12 containers per hour in 1994 but
still fell far short of comparable ports in East Asia, namely Bangkok
and Singapore, which handled an average of 38 and 69 containers per
hour respectively during the same period. At Singapore, particularly
for container ships, the average turnaround time was only six to eight
hours, a cut above the levels achieved by JNPT (1.96 days) in 1998-
99.
The bottomline is that JNPT clearly enjoyed an edge over other
Indian ports with respect to both infrastructure and performance and
was perhaps the obvious candidate for the reforms experimentation.
However, it did suffer from some of the drawbacks inherent in the

16
Indian port sector in the pre-reforms era, especially in terms of
capacity that prevented it from achieving world standards of port
efficiency and performance. No doubt, there was a natural growth of
traffic at JNPT and its performance also showed an upward trend, but
clearly, it failed to reach its full potential commensurate with growing
volumes of container cargo.

5. Development project of JNPT

The Indian government has recently approved an RS 8 billion

project ($175 dollars) to develop the facilities of Nehru port. The aim
is to attract more cargo ships and to make Mumbai as a regional hub.
The main bay and the access channels will be improved and made
deeper, and the project should be finished by the beginning of 2008.
This project will be completed in two phases and will improve the
depth of the channels along the berth from the actual 12.5 m to 15m.
At the same time, also another container terminal will be realised and
this will increase the port capacity from 2.5 million TEU to 7 million
TEU.
The third terminal is expected to be finished later in 2006 and
will add 1.3 million TEU to the port’s capacity. SCI (Shipping
Corporation of India) and Maersk India have demonstrated great
interest for a fourth terminal and the first phase of the project will be
operating in 2009 or in 2010, implying the construction of 700m-long
berth. The second phase will finish in 2014 and bring another 1000m
to the terminal; to be noted that each phase will improve port’s
capacity by 1.5 m TEU. Nerhu Port Trust has selected 11 technical and
financial participants for the tender which purpose is to realise a
container terminal near the coast. Among those participants are
Hutchinson Port Holdings, Evergreen, DP World and MOL. The winner
will manage the operations at the actual container terminal at Ballard
Estate’s berth until the new terminal will be ready, probably in 2009.
The facilities will dispose of two berths near the coast and ready to
receive ships with 600 to 900 TEU capacity.

6. More reforms to assure development

Although the implementation and management of the reforms

have been carried out by the Port Trust, it has always been under the

17
clutches of bureaucratic control from the Government of India
(Ministry of Shipping). The existing policy guidelines for private
participation indicate that the major port trusts can decide the facilities
and operations where they would like to invite private initiative.
However, the port trusts are functionally dependent upon their
controlling ministry (the erstwhile Ministry of Surface Transport and
the current Ministry of Shipping) for approval of expenditure beyond a
particular limit (Rs 100 crore) and also for other significant decisions,
under the Major Port Trust Act of 1963. The involvement of the
Ministry creates an additional level of decision-making, which may not
always facilitate the larger interests of port trusts. This has often acted
as a major stumbling block in effective and efficient reform
management – design as well as implementation. Survival in a
competitive environment demands quick and effective decision-
making, free from red-tapism and bureaucratic hassles. Due to a
prominent presence of core civil servants at the helm of affairs at the
Port Trust, there is always a tendency to exercise considerable caution
in implementing aggressive reforms.
Interestingly, the technical personnel at the senior management
level at JNPT are, perhaps, more spontaneous in suggesting pro-active
and bold steps towards executing reform management.
De-linking of the ministry from port trusts in the context of key
decisionmaking can therefore help the latter in taking quicker, and
probably more valueadditive steps, as far as increasing their efficiency
and productivity are concerned.
The quality and outcome of further reforms at JNPT and other
Indian ports will therefore depend upon the extent to which ministerial
control continues to prevail over ports. Corporatisation can be looked
upon as a possible solution to this problem of restricted autonomy that
characterizes port administration in India. Corporatisation of Indian
ports will certainly increase their ability to muster resources from the
market. To that extent, the ports will become less dependent on
budgetary support. Port trusts may be transformed into companies
under the Indian Companies Act, 1956, but this requires legislative
action for amendment of the Major Port Trust Act of 1963, which is
pending in the Parliament. But corporatisation can only be a means to
reduce, and not put a complete end to, ministerial control. Even
corporate ports might continue to face ministerial and bureaucratic
interferences as long as they remain public sector corporations.
Corporatisation of ports, essentially, can be thought of as constituting
a first step towards privatization of the same, which would result in
complete removal of ministerial control and bureaucratic hurdles that
obstruct port operations. However, corporatisation and privatization of
ports may not be easy reforms to implement in India, especially if one

18
takes into account labor interests and the clout that labor lobbies
enjoy in the country. An ex-post analysis of India’s economic reform
experience reveals that there have hardly been any labor market
reforms in the country. Several important legislations, like the
Industrial Disputes Act (1947) and the Contract Labor Act (1970),
have been proposed for amendment in order to remove the existing
rigidities in the labor market and put in place a flexible exit policy for
the organized sector. However, these amendments are yet to be
effected. Since port sector reforms involve a pronounced labor
component, decisions to corporatise major ports are bound to have
long-term implications for dock labor, which is one of the strongest
and most secure lobbies in the organized sector of the Indian
economy. The group has significant representation in the Indian
legislature as well, in the form of parliamentarians, who have close ties
with trade unions. This is probably one of the reasons why the Major
Port Trust Act (1963) Amendment Bill, which is expected to facilitate
corporatisation of major ports including JNPT, is yet to be passed.
However, it is mentionable in this context, that even after
corporatisation, decisions pertaining to retrenchments and lay-offs
may not be easy to implement immediately, since the financial
difficulties of most major ports may constrain them from offering
attractive retirement packages. This is an issue that deserves careful
attention especially in a country like India, where there is no social
security for organized labor in the eventuality of their loss of jobs.
Regulations Greater autonomy for ports, coupled with efforts to
introduce privatization, must be accompanied with a good regulatory
framework, especially with regard to tariffs. The presence of a
regulator will set out a road map for determining optimaltariffs in
various port services and shall be instrumental for augmenting
competition in the sector. The TAMP, right now, is fulfilling this
obligation only partially by fixing tariff ceilings. However, it does not
have any quasi-judicial mandate for settling disputes unlike the
Telecom Regulatory Authority of India (TRAI) or the Securities
Exchange Board of India (SEBI).

7. Interview to Mr Ravi Budhiraja, JNPT chairman

Mr Ravi Budhiraja, JNPT Chairman, is confident that

infrastructure bottlenecks would be ironed out and the port would
emerge as one of the world's leading container ports in the future. In
an interview with Business Line, he dwells at length on the prospects
and challenges before the port. Excerpts:

19
 Mr Ravi Budhiraja, Chairman, JNPT

Let us start with JNPT's performance in the last fiscal. How

does it compare with the previous year?

In 2004-05, the port achieved a throughput of 32.81 million tonnes,

against 31.18 mt in 2003-04 and 26.84 mt in 2002-03. The total
container traffic during the year was 28.7 mt, of which the JNPT
terminal handled 13.9 mt and the NSICT (Nhava Sheva International
Container Terminal) handled 14.8 mt. The other cargoes handled by
the port include fertiliser, steel coil, sugar, iron and wood pulp.

How did the port do on the financial front?

It was a good year for us. During the year, the operating income
touched Rs 601.10 crore, compared with Rs 579.60 crore in the
previous year. There was a slight increase in the operating expenditure
at Rs 257.35 crore (, Rs 234.06 crore), which is attributed to the
increase in traffic. The net surplus was at an all-time high of Rs 246.76
crore (Rs 203.37 crore).

How do you see the trend in container traffic flow in the

current fiscal?

JNPCT along with NSICT has targeted a throughput of 2.45 million

TEUs, with a growth rate of 5.5 per cent in 2005-06. With the
commissioning of the third container terminal in April 2006, having an
estimated capacity of 1.3 million TEUs, the total container handling
capacity will increase substantially. JNPT will be playing a major role in
container traffic handling in the country.

How is work on the third container terminal progressing?

After obtaining the approval of the Ministry of Shipping in June 2004, a

letter of acceptance was issued to Gateway Terminals India Pvt Ltd

20
(GTI), a joint venture between Maersk and Concor. The licence
agreement for the project was signed in August 2004. They achieved
financial closure within the stipulated time and commenced execution
of site works such as, demolition of sheds for constructing a stack yard
for the containers reclamation works and jetty modification works. GTI
is expected to complete construction and commence operations within
the stipulated 24 months. When fully operational, the terminal will
have capacity to handle about 1.3 million TEUs.

JNPT has proposed a fourth terminal. What is the status of the

project?

It has been estimated that the port would be required to handle

container traffic to the tune of 6.8 million TEUs by 2015-16. To handle
the traffic after re-development of bulk terminal into a container
terminal, the port is planning to develop a fourth container terminal as
an extension of the BPCL jetty and a chemical terminal on build,
operate, transfer basis. We are in the process of preparing a feasibility
report for the development of the fourth terminal and marine chemical
terminal through Consulting Engineering Services (India) Pvt Ltd. CES
has submitted the inception report and is preparing the feasibility
report. The report is expected by October. The first phase involves
construction of 700 m of container quay line along with conversion of
existing 300 m of liquid cargo berth into container berth so as to
develop a quay length of 1,000 m for handling containers. The
estimated container handling capacity of the terminal will be 1.5
million TEUs and is likely to be operational by 2010-11. It also includes
reclamation of 200 hectares of land and development of 100 hectares
of land for yards.

Congestion has been a problem at JNPT during the last two

years. With the commissioning of the third and fourth
terminals, will the problem not get worse? What steps have the
port initiated to solve it?

JNPT has initiated action to ease traffic congestion by developing

parking areas, additional buffer yard for containers, widening of roads,
and providing separate corridor for passenger vehicles. The works are
in different stages of execution. All efforts are being made to ease
traffic congestion in forthcoming monsoon. Some of the works like
developing a five-hectare parking area and additional buffer yard of
14,000 sq.m will be ready before this monsoon. All other works are
scheduled to be completed within 18 months.

21
The port has plans to widen the existing roads from four lanes to six
lanes to handle the increasing traffic, which also include development
of parking areas at various locations. The estimated cost of the work is
Rs 147 crore. Further, to improve the road connectivity by widening
existing 2 lanes to 4 lanes, a special purpose vehicle (SPV) was formed
between JNPT, NHAI and CIDCO. Four-laning of NH - 4B is almost
completed and it will be ready by this month-end.

Inadequate supply of rakes by Concor has been one of the

factors contributing to the congestion problem. Has the supply
position improved?

The average number of rakes supplied by Concor is 9-10 a day. The

average number of rakes needed by JNPT to avoid congestion is 12-13
a day. Though Concor has agreed to provide 70 per cent dedicated
rakes and 30 per cent mixed rakes for JNPCT and NSICT, they have
been giving about 54 per cent dedicated rakes and 46 per cent mixed
rakes. To study the rail facilities at the port and difficulties faced in
handling of incoming and outgoing ICD traffic, we have engaged the
services of RITES. Their report will be ready by the month-end.
Dedicated goods rail corridor is proposed for faster movement of cargo
from the port to Delhi. The approximate length of the rail line is 1,400
km and may be taken up by the Railways at a cost of Rs 5,700 crore.

How do you propose to fund the channel-deepening project?

A proposal to carry out deepening and widening of main harbour

channel and JNP channel to handle 6,000 TEU container vessels using
tidal window was approved by the Public Investment Board in March.
It was decided at the meeting that JNPT might take up this project by
raising loans from the market or through its internal resources or
combination of both. The cost of this project is about Rs 800 crore. It
is likely that the project will be commenced in April 2006 and
completed within 27 months.

What are the other developmental projects the port will be

taking up in the future?

About 3.6 hectares is being developed for stacking containers behind

the shallow water berth at a cost of Rs 9 crore. This will add stacking
capacity by 2,400 TEUs. The yard will be put into operation by
December 2005. We are also augmenting the capacity for handling
ICD containers by modernising the existing ICD facilities along the
railway line No 6 and 8 by constructing pavements and by procuring

22
two RMGCs. An additional buffer yard is also being developed at a cost
of Rs 2 crore, which will add an additional stacking capacity of 900
TEUs.

8. Companies operating in the sector and services provided

There are about one hundred companies operating at Mumbai

and JNPT ports and the services provided are customised to all the
business activities. This implies a vast arrange of tariffs, which depend
on insurance costs, clearing services and destination distance. Anyway
the time to get the major destinations in Europe is approximately 12-
15 days without considering eventual ports of coal.
The government-owned giant Shipping Corporation of India
(SCI) dominates the shipping sector, but private companies such as
Great Eastern Shipping Company (GE Shipping), Mercator Lines
Limited (MLL), Varun Shipping Company (VSC) and Essar Shipping
Limited (ESL) also control significant market share. Most shipping
companies posted impressive results in 2005-06 and the Indian fleet
comprised 704 vessels with a combined tonnage of 8.3 million gross
registered tonnage (GRT) on October 2005. To be added is the fact
that the imposition of a tonnage tax regime has helped to attract
foreign direct investment and new players.

Market share of Indian shipping companies

as on December, 31 2005

9%
5%
24%
Mercator Lines
5%
Essar Shipping
2%
Varun Shipping
Surendra Overseas
Great Eastern Shipping
21%
Shipping Corporation of India
Others
34%

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Source: Ministry of Shipping

SCI is India’s premier shipping line. It is involved in the

transportation of crude oil and petroleum products, phosphoric acid,
liquefied petroleum gas (LPG), ammonia and dry bulk. It offers
services in all shipping areas such as liner and passenger services,
coastal services, feeder services, tanker and offshore services. As on
December 2005, SCI owned a fleet of 84 vessels, comprising about 34
per cent of the total Indian tonnage.
On the other hand, GE Shipping is the country’s largest private
sector shipping and offshore services provider. The shipping division
provides marine bulk transportation services and operates two main
businesses: dry bulk carriers and tankers. Moreover, in December
2005 GE Shipping acquired a 26 per cent stake in United Shippers
Limited, a Mumbai-based barging and cargo handling company; GE is
also carving a niche for itself in the international offshore services
market. In March 2006, it signed a contract with STX Shipbuilding
Company Limited in Korea for the construction of two product tankers.
ESL (Essar Shipping Limited) was the first company to operate in
the quality-conscious markets of the US and Europe and is involved in
the transportation of crude and bulk cargo and controls almost 14 per
cent of India’s shipping fleet.

8.1 Costs and shipping timings

Shipping is managed by the main companies depending on

corporate’s necessities, therefore duration and costs of transport vary
on the type of material carried, insurance fees and distance from the
port, in the case the producers are not able to provide themselves to
carry the goods out to port terminals.

Sample of basic tariffs for container type Mumbai-Genoa

20’ Steel Dry Cargo Container 40’ Steel Dry Cargo Container

Length 6.05m Length 12.19m

Width 2.43m Width 2.43m
Height 2.59m Height 2.59m
Weight 30.48t Weight 30.48t
Price* 895$ Price* 1495$

24
* Including normal insurance costs, custome charges at the arrival and considering the goods
ready to be loaded at terminal.

Transportation costs per container can vary from about 900-1000$,

considering the route Mumbai-Genoa and can grow up to 2500-3000$
in the case the goods need particular containers for their
transportation (for example flammable goods). It is to be considered,
though, that tariffs vary in a significant manner depending on various
factors concerning logistics, custom tariffs and quantity of goods to be
carried out.
Concerning the timings, to carry out a container from Mumbai to
the major European ports it takes about 12-15 days, excluding
intermediate ports of station, that can increase the duration to 25-26
days. The major routes are those which pass through the Arabic Sea
and the Red Sea, then proceeding to the Meditarranean through Suez
Channel (as the map below shows).

In the map we can find an example of some routes (going in red, return in
blu) from the Indian subcontinent to the main European ports. Nhave Sheva is one of
the terminals of JNPT port. Below: a schedule representing the timings to get major
European ports.

NHAVA SUEZ PORT PORT SUEZ

ISE COLOMBO
SHEVA CANAL SAID
BARCELONA FELIXSTOWE ROTTERDAM HAMBURG GENOA
SAID CANAL
COLOMBO

ETA SUN THU SAT SUN FRI WED THU SAT SAT THU THU SUN
ETD TUE SAT SUN MON FRI WED FRI SUN SUN THU FRI TUE
T/S
0 2 11 13 18 23 24 26 33 38 39 49
TIME

To be considered are also the atmosphering conditions at the

moment of the transport, but the medium timings are respected in
most cases, mainly by the main companies which dispose of fleet of
affidability. Major Italian ports (Genoa, Gioia Tauro, Napoli, Taranto,

25
Venezia and Trieste) have direct links (also daily in the case of Genoa-
Mumbai) with the main Indian terminals.

8.2 The Italian presence

Main companies operating in the port sector in India are Savino

Del Bene Spa, Italia Marittima Spa and Rina Group.

Savino Del Bene, a multinational Italian company with the main

branch in Scandicci (Firenze), operates in the sector of freight
forwarding and is actually quoted among the first 10 companies, as
resulting from IATA’s classification. It has its presence through its
offices and desks in Italy, Germany, France, Australia, Brasil, United
States, Canada and various countries of South East Asia. In India, as
tells us the CEO of Mumbai’s branch, Mr Sheraz Malegamwalla, the
activities of the company begun in 1998 and since some years it has
instaurated a partnership programme also with other companies or
Italian joint ventures, as for example Raymonds, Birla and Graziano
Trasmissioni. Regional offices of Savino Del Bene are based in Mumbai,
Bangalore, Chennai, Delhi and Pune.
Italia Marittima is the new name of Lloyd Triestino di
Navigazione (from March, 1st 2006) and this new name represents the
aim to be a true flag carrier for Italy. The company was born in 1836
as a branch of Austrian Lloyd of insurance when the Austro-Hungaric
Empire was in held. It is one of the oldest companies in the sector
worldwide and his main office is based in Trieste (Italy). Since the
beginning of its activities, the company has always looked at Asia as a
destination with great potentiality. Actually in India has about 18
regional offices and provides transportation services to Europe, North
America and the other countries of South-East Asia.
Finally Rina Group, as an International Certification Institute,
provides a long experience in the sector of certification of company
management systems regarding the shipping and logistics.

26
 The actual globalised markets has made very important the
certification process as an instrument to give visibility and
transparency to the internal policies of the companies. Therefore Rina
Group provides consultancy and classification services covering all
maritime corporates world, from ships construction to cargo shipping
carriers.

27
 APPENDIX

Table 1: Policy initiatives in Ports sector

• FDI (Foreign Direct Investment) up to 51% is allowed on

automatic basis in support services like operation and
maintenance of piers and loading and discharging of vessels.
• Up to 100% FDI under automatic route is permitted in projects
for vehicular tunnels, ports and harbours.
• The BOT model will generally be used for private sector
participation with the assets reverting back to the port after the
concession period.
• Major ports have been permitted to form joint ventures with
foreign ports, minor ports and other companies to attract new
technology, better management practices, implementation of
development schemes and creation of optimal port
infrastructure.
• Inputs and concessional import duty allowed with liberalised
trade policy.
• The process of phased corporatisation has been initiated for the
major ports.
• An independent Tariff Authority for major ports set up to fix and
revise ceiling tariff.
• Ten year tax holiday that may be availed in a block of fifteen
years for infrastructure facility relating to port, inland port and
inland waterways, w.e.f. 1 April 2002 under section 80-IA of IT
Act.

Source: Ministry of Shipping

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Table 2: Major projects being offered for Private Sector Participation

Port Project Capacity Project Cost

(Millions Tonnes) (Millions Rupees)
1 Cochin Development of an
international container 5,00 6,000
transhipment terminal
2 Cochin International bunkering 1,00 1,830
Terminal
3 JNPT Marine chemical terminal 9,00 30,000
4 JNPT Redevelopment of an existing
bulk terminal into 14,00 9,000
a container terminal
5 Bombay Construction of new
off-shore two berths 7,53 9,580
container terminal
6 Paradip Paradip construction of a 1,00 1,000
berth for clean cargo
7 Kandla Development and operation 3,36 2,000
container terminal
8 Ennore Construction of an alongside
jetty for very large crude 9,50 2,500
carrier for import crude
9 Ennore Construction of an iron ore 12,00 3,500
berth (including equipment)
10 Ennore Construction of a berth 2,50 2,000
for liquefied natural gas
11 Ennore Construction of a coal berth 8,00 3,000
of users other than TNEB
12 Ennore Construction of jetty for POL
products/chemicals and 3,00 2,000
oil products

Source: Ministry of Shipping

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Table 3: Bombay ports performances in relation to the other Indian
ports

(Million Tonnes)

April 2004 to Mar 2005 Vis-a-Vis April 2003- to Mar 2004

Port Year Import Export Tranship- Total
ment
Kolkata 2004-2005 3418 1742 4785 9945
2003-2004 3107 1077 4509 8693
Haldia 2004-2005 25007 11205 0 36212
2003-2004 22676 9890 1 32567
Paradip 2004-2005 8438 21666 0 30104
2003-2004 6705 18606 0 25311
Vishakhapatnam 2004-2005 21290 24915 3942 50147
2003-2004 19306 21369 7061 47736
Chennai 2004-2005 24620 19186 0 43806
2003-2004 20302 16408 0 36710
Tuticorin 2004-2005 12060 3751 0 15811
2003-2004 10184 3494 0 13678
Cochin 2004-2005 11045 3050 0 14095
2003-2004 11119 2453 0 13572
New Mangalore 2004-2005 15512 18379 0 33891
2003-2004 13045 13624 4 26673

Mormugao 2004-2005 5631 25028 0 30659

2003-2004 4468 23406 0 27874
Mumbai 2004-2005 17651 11912 5562 35125
2003-2004 16469 10861 2665 29995
J.N.P.T. 2004-2005 15693 15217 1899 32809
2003-2004 13412 15099 2679 31190
Ennore 2004-2005 8960 520 0 9480
2003-2004 9277 0 0 9277
Kandla 2004-2005 31384 9538 619 41541
2003-2004 31080 10308 135 41523
2004-2005 200709 166109 16807 383625
Grand Totals
2003-2004 181150 146595 17054 344799

Source: Indian Ports Association.

30
Table 4: JNPT performance since his construction

(Million Tonnes)

Source: Jawaharlal Nehru Port Trust

31
 Bibliography

Indian Infrastructure
Financial Times
The Times of India
The Hindu
www.mumbaiporttrust.com
www.mumbaicustoms.gov.in
www.indiabusiness.nic.in
www.ipa.nic.in
www.thehindubusinessonline.com
www.jnport.com
www.jawaharcustoms.gov.in
www.informare.it

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