India's minor ports increase pressure on major, public rivals


India's minor ports, which are mostly privately owned and operated, bounced back with gusto in fiscal 2017-2018, after a slowdown in their pace of growth in two prior years that industry analysts attributed to accelerated government efforts to win back cargo with improved/streamlined service levels.

New provisional port statistics show total freight handled at minor ports during the revenue/accounting year, which ended March 31, increased 9.2 percent year over year to 529.57 million tons.

In contrast, minor ports had ended the previous two years on a mild note — with a 4 percent gain in fiscal 2016-2017 and a 1 percent fall in 2015-2016, year over year.

(A data analysis also shows total cargo volume via India’s 12 major, public ports in fiscal 2017-2018 grew 4.7 percent to 748 million tons, from 713.34 million ton in the previous year.)

New data show the western state of Gujarat, which houses the biggest privately developed ports of Mundra and Pipavav, accounted for as much as 70 percent of total cargo routed through minor ports, followed by Andhra Pradesh, at 16 percent, and Maharashtra, at 7 percent. As a result, these three states together represented about 93 percent of minor ports’ seaborne trade in fiscal 2017-2018.

By volume, minor ports in these three states handled freight as follows: Gujarat — 370 million tons, up from 345 million tons in 2016-2017; Andhra Pradesh — 86 million tons, up from 70 million tons; and Maharashtra — 38 million tons, up from 35 million tons, according to statistics.

India has about 200 minor ports dotting its 4,600 miles of coastline. With a market-driven pricing regime — versus tariff regulations at major ports — and relatively more sophisticated infrastructure, some of these private minor terminals, especially those built by domestic port conglomerate Adani Group, have steadily increased their market share at the expense of their publicly owned major rivals, which have been slow to increase capacity and upgrade infrastructure to keep pace with trade growth.

For example, Adani Group-owned Mundra Port, which is in the process of doubling capacity to 6.6 million TEU annually through strategic terminal partnerships with liner giants CMA CGM and Mediterranean Shipping Co., has been aggressively positioning itself as a preferred gateway for northwestern hinterland shippers in order to lure cargo away from Jawaharlal Nehru Port Trust (JNPT), India's biggest public container handler. Mundra is about 300 nautical miles from JNPT.

The other two key factors driving minor port volume growth in Gujarat are their closer proximity to the northern corridor — creating rail cost advantages compared with JNPT — and strong service networks, as major carriers in Indian west coast trades increasingly use "multiple port calls" as a strategy to maximize their liftings.

On the east coast, Chennai Port is battling ever-intensifying competition from a string of new minor ports, such as Krishnapatnam, Gangavaram, and Kattupalli.

Meanwhile, new government legislation to transform major, public ports into independent companies with greater autonomy, especially pricing power, is widely seen as an effective way to fix many of the things that have prompted the rapid growth of minor operators.

With the opening of a new, 2.4 million-TEU terminal by PSA International and various ease-of-doing-business measures, particularly gate automation, JNPT is well-positioned to handle the anticipated growth, but it needs to devise new strategies to thwart nearby minor, private rivals’ attempts to poach business.