Private Terminals At Major Ports Could Usher In Dynamic Rates

Shipping Ministry officials pointed out that several non major ports-- run by private players including the Mundra Port promoted by Adani Ports and Special Economic Zone Limited (APSEZ) have been regularly offering differential pricing with discounts.

The Gautam Adani promoted APSEZ in 2021 for instance decided to offer a 50 per cent discount on charges to vessels that operated on liquefied natural gas (LNG), to promote clean energy.

"Dynamic pricing could see us gaining traffic which otherwise may get diverted to other neighbouring countries like Sri Lanka or Bangladesh," a top official explained.

Complete deregulation of tariff at the terminals that have been leased out to private players will not only ensure transparency and level-playing field to the major ports that come under the aegis of the Centre but is likely to attract more investments from the corporate sector.

Once approved, the proposal will allow these private terminals to fix their own tariffs based on their individual cost structure, which varies from port to port. 

Subhomoy Bhattacharjee, Director, Centre for Regulatory Governance, Jindal Global Law School, Jindal Global University, told The Secretariat, “The government’s proposal to provide flexibility to the private players that have leased terminals at the major ports in fixing tariffs will improve efficiency and help ease of doing business."

Explaning how it could work, he said, "During a lean season, the terminals could reduce tariffs while in peak or busy seasons, they can increase rates, depending on their own business models and calculations,” .

The flexibility to fix tariffs "already existed for the country's private ports..this move will now give a level playing field to the other ports too..this is much required,” Bhattarcharjee added.

Out of more than 275 berths -- inside the terminals or ports where the vessels are moored-- that the major ports have, 80 are operated on the public private partnership (PPP) model.

This number could significantly rise once the new norm is put in place as many other private players are expected to enter the fray as well.

Needless to say that this will boost overall efficiency and traffic at the central government administered ports that have been steadily losing business to the private ports.

Major Ports Vs Non Major Ports 

In 2023-24, the non major ports recorded an 11.18 per cent increase in cargo handling compared to the previous year.

The total cargo handled by these ports increased to 721.05 million tonnes (MMT) from 648.54 MMT in 2022-23, official data revealed.

In contrast, the major ports registered a single digit growth of 4.38 per cent in the same period.

In fact, for these ports, the growth in cargo handling showed a drastic slowdown in 2023-24 compared to an over 8.8 per cent growth 2022-23, though the total cargo handled in absolute numbers increased. 

The major ports have been struggling for years. Growth in cargo handling by the major ports has been continuously slowing from 2016-17 to the covid-hit year of 2020-21, when it declined by 4.57 per cent.

While in 2021-22, these major ports registered more than 7 per cent growth compared to the previous year, cashing in on the Covid slump, growth is once again starting to slow down.

Private sector participation has been allowed in these central government run ports on a PPP model for operating terminals and berths besides other projects through concession agreement for a fixed period.

This is done by way of a bidding process on revenue share or royalty payment mechanism by the concessionaire.

As part of a move to eliminate the bureaucratic process of fixing tariff at the terminals at the major ports, the government had dismantled the  Tariff Authority for Major Ports (TAMP) in 2021.

“PPP concessionaires at major ports were constrained to operate under the stipulations of these guidelines (by TAMP) whereas private operators/PPP concessionaires at non-major ports were free to charge tariff as per market conditions," an official statement had said.

Post the TAMP, the leased terminals have been granted autonomy to fix tariffs but subject to port authorities’ approval.

China's Ports

Data portal Statista revealed that in 2022, China's river ports and sea ports handled 5.55 billion and 10.13 billion metric tons of cargo. Over the past 15 years, cargo throughput at China's ports has increased 1.2 times from seven billion metric tons in 2008.

China has been focusing on development and modernisation of its ports since its economy opened up. Along with developing its own ports, Beijing has aggressively developed ports outside its boundaries as well to avoid any untoward disruptions.

China managed to decentralise its port management while developing special economic zones (SEZs). Exports have been one of the key pillars of the dragon’s economic growth story.

 “For exports to boom, China needed to establish seamless connectivity with the rest of the world and for this, it used its ports,” Afaq Hussain, Director and Founding Member, Bureau of Research on Industry and Economic Fundamentals (BRIEF) said.

He added that though investments for port infrastructure have increased in India leading to rise in cargo throughput, there is still room for a lot of improvement.

Importance Of India’s Port Infrastructure

More than 90 per cent of India's trade by volume is conducted through the maritime routes. India has initiated several programmes to boost its maritime dynamics.

This in turn is expected to accelerate growth in the manufacturing industry. 

According to the ministry of ports, shipping and waterways, under the Sagarmala scheme, 234 projects at cost of Rs 2,91,622 crore have been undertaken for implementation. Out of total 234 projects, 94 projects worth Rs 31,517 crore have been completed.

About 229 ports are dotted across India’s coastline-- of these 217 categorise as non-major ports run by state governments or union territories in partnership with private players. The concentration of the non major ports is mostly in Gujarat and Maharashtra.

India, which wants to be a $5 trillion economy within the next few years, needs to move swiftly on upgrading ports infrastructure while reducing costs.

Among the challenges, India’s high logistics cost as a percentage of GDP is a cause for concern.

Upgradation and modernisation of India’s port infrastructure will be critical for the next phase of economic growth in the country.