MUMBAI : In H1 FY2016, total cargo handled at Indian ports registered a modest 2% increase to 516 million tonnes over H1 FY2015. The growth was pegged down by a de-growth in volumes by 1% at Non-Major Ports, which had registered a 13% yoy growth in volumes to 471 million tonnes in FY 2015.
The weak performance was on account of 18% drop in iron ore volumes, 11% drop in other cargo and an 8% drop in coal volumes. Major Ports on the other hand, registered a relatively better performance in H1 FY2016, supported by growth of 12%, 3% and 11% in coal, POL and other cargo volumes, respectively, even as iron ore volumes dropped by 48% yoy. ICRA research notes that during 11m FY2016, the Major Ports reported 4.2% growth in the overall throughput over the corresponding period in the previous year. The growth was supported by an increase in all cargoes except iron ore.
According to Mr. K. Ravichandran, Senior Vice-President and Co-Head, Corporate Ratings, ICRA, “Iron ore volumes have been affected as mining restrictions prevailed during large part of the year in major states like Karnataka, Goa and Odisha, other policy measures such as high export duty (which has been reduced to nil in the Union Budget for 2016-17 on low grade iron ore) and prevailing slump in international demand and prices. The decline in coal volume growth in the last few months has been on account of increase in the domestic production and subdued demand on account of the slowdown in energy demand and delays in commissioning of new power plants due to several issues be-deviling the domestic power sector. As Non-Major Ports had higher share of coal cargo, their volumes were relatively more impacted during H1 FY 2016.”
The announcements made by the Government in the Union Budget for 2016-17 are positive for the port sector.
The GoI announced setting up of new Greenfield Ports and inland waterways with a planned outlay of Rs. 31.84 billion under the Ministry of Shipping (MoS), which includes Gross Budgetary Support (GBS) of Rs. 10 billion for development of Indian shipping, ports, inland waterways and ship building sector. While the total funding requirement for the implementation of the various planned initiatives is expected to be significantly higher, the allocation of funds in the Budget for the development of these projects should facilitate their progress and is a positive for the incumbents in the port sector and trade overall. The GoI also announced plans to issue guidelines for re-negotiation of PPP concession agreements, which is also a long term positive. Since the re-negotiation of the concession agreement was not permissible as per guidelines, neither the port authority nor the private players had rights to demand for a re-negotiation based on the impact of externalities or changes in the business environment, despite the long term nature of these agreements. If these guidelines could clearly specify the deviations/conditions under which re-negotiation could be possible, it could reduce the long term risks involved in setting up PPP projects by the private players as well as by port authorities.
In terms of the cargo growth outlook, Mr. K Ravichandran mentioned, “The near to medium term outlook remains subdued on account of uncertainty associated with particular cargo categories like imported coal (due to ramp up in domestic coal production and persisting delays in execution of Greenfield power projects) and containers (due to the relatively weak global environment affecting export import trade). Further, despite the lifting of mining ban in key States, iron ore export volumes are also expected to be modest over the near term at least.
The export contract of NMDC, elimination of export duty on low grade iron ore and restarting of mining operations in Goa (which could have surplus production of low grade iron ore for exports once mining operations resume in full flow) should support export volumes to some extent. However, the prevalent overall export volumes would continue to be weighed down by high export duty of 30% on higher grade of iron ore as well as low iron ore prices. Over the medium to long term, the outlook for cargo growth continues to be strong, driven by domestic requirements of coal for power (including coastal movements) and other sectors; crude oil, for meeting domestic petroleum requirements; and containers, given the cost and logistical advantages associated with containerisation.
Source: Dailyshippingtimes.com
