Source: Livemint
Bangalore: Until the turn of the century, when commodities trader Gautam Adani ventured into building ports, India’s maritime sector was dominated by 12 ports owned by the Union government. Exporters and importers had no choice but to ship their cargo through one of these ports, enduring the poor service quality at these maritime gateways.
Adani braved many challenges in developing Mundra port in Gujarat, now India’s biggest private port and the only one to be listed on stock exchanges. Mundra handled 35.8 million tonnes (mt) of cargo in the year to March and earned a net profit of Rs467 crore on revenues of Rs1,140 crore.
So, in a short span of eight years since starting operations, Mundra handles more cargo in a year than at least three Union government ports—Tuticorin, Cochin and Ennore. In fact, Ennore, the newest of the government-owned ports that also started operations in 2001, the same year as Mundra, handles a paltry 11.5 mt of cargo in a year.
The Adani Group has invested close to Rs2,400 crore to build the port. It currently handles cargo such as dry bulk, liquid bulk, containers and automobiles. The Adanis plan to raise the port’s cargo handling capacity to as much as 100 mt by 2014.
Mundra went public in 2007, putting Adani in the elite list of India’s billionaire businessmen.
Mundra’s biggest selling propositions are its natural deep draft (depth), proximity to the north-west hinterland (a port’s cargo generating and destination area), railway connectivity and ability to provide all cargo handling services under one roof.
“Mundra has got the basics right,” said Tapasije Mishra, chief executive at investment bank IDFC-SSKI Ltd. “A deep draft, integrated infrastructure, adequate rail and road connectivity has been the key attraction for its customers. Its proximity to the northern hinterland market saves inland logistics costs for exporters and importers vis-à-vis Jawaharlal Nehru Port and Mumbai port (both Union government-owned) also on the western coast.”
Mundra’s location near the entrance of the Gulf of Kutch on the north-west coast of India places it near major maritime trade routes to serve as a hub port for foreign trade to and from West Asia, Asia, Africa and other global destinations.
“As a port, Mundra is the deepest in the country with a water depth of 17.5 metres,” said Rajeeva Sinha, a director at Mundra Port and Special Economic Zone Ltd (MPSEZ).
At this depth, Mundra can easily handle capesize ships, the biggest ships that can carry dry bulk commodities such as coal, iron ore, steel and grains. A capesize bulk carrier hauls 175,000 tonnes of goods. Among the Union government-owned ports, only Visakhapatnam can handle capsize ships.
“Using larger vessels reduces ocean transportation costs for exporters and importers through economies of scale,” said Sinha.
Mundra’s strategic location helps it serve a big population of the land-locked north and north-west regions of India that generates significant port traffic.
About half of India’s trade in commodities such as crude oil, coal, fertilizers, food grain and container cargo is accounted by cargo centres in north and north-west India, including the National Capital Region of Delhi, Gujarat, Rajasthan, Haryana, Punjab and Uttar Pradesh.
Being a port outside the control of the Union government, Mundra is free to set its own tariffs, whereas the tariffs at 11 of the 12 Union government ports are set by the tariff regulator, the Tariff Authority for Major Ports (TAMP).
Ennore is the only exception in this regard because it was set up under the Companies Act and, hence, outside the scope of TAMP. Sinha said that the rates at Mundra are competitive. “Otherwise, why would anybody come to us, particularly when the Union government-owned Kandla port is just next door,” he asks.
Kandla is India’s biggest port by cargo handled. In the year to March, it handled 72.2 mt of cargo, earning about Rs500 crore. Mundra handled only half the cargo volumes handled at Kandla, but earned double the revenue of the Union government port. Mundra’s revenue excluded earnings from land lease and interest income that are typically factored into the financials of Union government ports.
“In terms of revenues from pure port operations, Mundra is the highest revenue earning port in the country today,” Sinha said.
At other ports, cargo handling is done by many different agencies. “At Mundra, we do all things ourselves,” he noted.
Since it was a port owned by the Gujarat government, but given to a private firm for development and operations, the Adanis did not face any legacy issues particularly relating to labour while building Mundra.
At the beginning, the Adanis faced connectivity issues for bringing cargo to the port and for evacuating the cargo landing there. “But we turned this weakness into a strength by investing our own money to build a 64km-long broad-gauge railway track linking Mundra with Adipur (in the Kutch district of Gujarat) on the Indian Railways network,” Sinha said. India’s 12 big state-owned ports have since opened marketing departments to sell their ports to exporters and importers, something that was non-existent in these monopolies until new private ports such as Mundra came along.
“Mundra’s success illustrates the attractive equity returns available in the infrastructure sector when developers execute to a well thought through strategy,” said Mishra at IDFC-SSKI.
Adani braved many challenges in developing Mundra port in Gujarat, now India’s biggest private port and the only one to be listed on stock exchanges. Mundra handled 35.8 million tonnes (mt) of cargo in the year to March and earned a net profit of Rs467 crore on revenues of Rs1,140 crore.
So, in a short span of eight years since starting operations, Mundra handles more cargo in a year than at least three Union government ports—Tuticorin, Cochin and Ennore. In fact, Ennore, the newest of the government-owned ports that also started operations in 2001, the same year as Mundra, handles a paltry 11.5 mt of cargo in a year.
The Adani Group has invested close to Rs2,400 crore to build the port. It currently handles cargo such as dry bulk, liquid bulk, containers and automobiles. The Adanis plan to raise the port’s cargo handling capacity to as much as 100 mt by 2014.
Mundra went public in 2007, putting Adani in the elite list of India’s billionaire businessmen.
Mundra’s biggest selling propositions are its natural deep draft (depth), proximity to the north-west hinterland (a port’s cargo generating and destination area), railway connectivity and ability to provide all cargo handling services under one roof.
“Mundra has got the basics right,” said Tapasije Mishra, chief executive at investment bank IDFC-SSKI Ltd. “A deep draft, integrated infrastructure, adequate rail and road connectivity has been the key attraction for its customers. Its proximity to the northern hinterland market saves inland logistics costs for exporters and importers vis-à-vis Jawaharlal Nehru Port and Mumbai port (both Union government-owned) also on the western coast.”
Mundra’s location near the entrance of the Gulf of Kutch on the north-west coast of India places it near major maritime trade routes to serve as a hub port for foreign trade to and from West Asia, Asia, Africa and other global destinations.
“As a port, Mundra is the deepest in the country with a water depth of 17.5 metres,” said Rajeeva Sinha, a director at Mundra Port and Special Economic Zone Ltd (MPSEZ).
At this depth, Mundra can easily handle capesize ships, the biggest ships that can carry dry bulk commodities such as coal, iron ore, steel and grains. A capesize bulk carrier hauls 175,000 tonnes of goods. Among the Union government-owned ports, only Visakhapatnam can handle capsize ships.
“Using larger vessels reduces ocean transportation costs for exporters and importers through economies of scale,” said Sinha.
Mundra’s strategic location helps it serve a big population of the land-locked north and north-west regions of India that generates significant port traffic.
About half of India’s trade in commodities such as crude oil, coal, fertilizers, food grain and container cargo is accounted by cargo centres in north and north-west India, including the National Capital Region of Delhi, Gujarat, Rajasthan, Haryana, Punjab and Uttar Pradesh.
Being a port outside the control of the Union government, Mundra is free to set its own tariffs, whereas the tariffs at 11 of the 12 Union government ports are set by the tariff regulator, the Tariff Authority for Major Ports (TAMP).
Ennore is the only exception in this regard because it was set up under the Companies Act and, hence, outside the scope of TAMP. Sinha said that the rates at Mundra are competitive. “Otherwise, why would anybody come to us, particularly when the Union government-owned Kandla port is just next door,” he asks.
Kandla is India’s biggest port by cargo handled. In the year to March, it handled 72.2 mt of cargo, earning about Rs500 crore. Mundra handled only half the cargo volumes handled at Kandla, but earned double the revenue of the Union government port. Mundra’s revenue excluded earnings from land lease and interest income that are typically factored into the financials of Union government ports.
“In terms of revenues from pure port operations, Mundra is the highest revenue earning port in the country today,” Sinha said.
At other ports, cargo handling is done by many different agencies. “At Mundra, we do all things ourselves,” he noted.
Since it was a port owned by the Gujarat government, but given to a private firm for development and operations, the Adanis did not face any legacy issues particularly relating to labour while building Mundra.
At the beginning, the Adanis faced connectivity issues for bringing cargo to the port and for evacuating the cargo landing there. “But we turned this weakness into a strength by investing our own money to build a 64km-long broad-gauge railway track linking Mundra with Adipur (in the Kutch district of Gujarat) on the Indian Railways network,” Sinha said. India’s 12 big state-owned ports have since opened marketing departments to sell their ports to exporters and importers, something that was non-existent in these monopolies until new private ports such as Mundra came along.
“Mundra’s success illustrates the attractive equity returns available in the infrastructure sector when developers execute to a well thought through strategy,” said Mishra at IDFC-SSKI.
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