JNPT needs to double capacity

Written by MG Arun | Nikita Upadhyay | Nikita Upadhyay | Updated: Mar 16 2012, 09:18am hrs
Jawaharlal Nehru Port Trust (JNPT), which operates Indias largest container port, needs to urgently increase its capacity and deepen its channel to allow bigger ships to berth. However, delay in government approvals is playing spoilsport. A project to deepen its channel is yet to be cleared and an agreement it reached with a consortium of Port of Singapore Authority (PSA) and ABG Ports for a new terminal has been put on hold. These delays will cost the company roughly R500 crore in revenues every year as large ships choose to anchor elsewhere. L Radhakrishnan, JNPTs chairman since September 2010, tries to clear the air on these delays and explains his plans to create a port-based SEZ, in an interview with Nikita Upadhyay and MG Arun.

The delay on the new container terminal could mean a loss of R500 crore every year in revenues for JNPT. When do you think the agreement will be finally signed

The project is on and it is just a matter of time before the concessional agreement is signed. The signing has been delayed because of a confusion over a stamp duty amount that the consortium has to pay. It was estimated that the stamp duty amount payable would be around R5.9 crore and PSA was willing to pay it. However, during some subsequent interactions, they were given to understand that this could be as high as R150 crore. So, they want to adjudicate the matter and that is taking a little bit of time.

The impact of these delays must have a heavy impact on the port. How will you address this

We needed to expand 10 years ago, and I realised this the moment I joined. That is how plans for the fourth container terminal were drawn up. The fifth mega-container terminal is also being planned, and will come up at Nhava in Navi Mumbai. JNPT needs to more than double its capacity, from 4.3 million TEUs or 20-ft equivalent units now, to even handle the current demand. At present, we are working over 100% capacity, which puts strain on the staff and machinery. We are trying to speed up the approval process and also create capacity and infrastructure to accommodate bigger ships. We cannot afford our ships to go to Salalah or, even Colombo, for transhipment and add to time and cost. There are huge economies of scale in shipping, which is enabled by change in technology. I want to have large ships as soon as possible as they have lower fuel consumption and, thus, the entire logistics cost comes down.

The channel deepening project has been delayed for eight years now...

We are working on deepening the channel to normally acceptable depth of international standards. With the dredging, we will be creating a national asset that would be useful not only to us but also to Oil & Natural Gas Corporation, the Mumbai Port (MbPT) and the Navy. Once bigger ships arrive, logistics costs will come down. Dredging is a costly process and the first phase was estimated at R1,570 crore. However, given the rise in fuel price and rupee depreciation, costs will rise. We have got three bids so far for the project. The second phase of dredging will cost around R5,000 crore, for which we might go in for the first public-private partnership (PPP) model in this space. We will work from now on to get approvals ready for this.

If the PPP model doesnt work out, do you have a plan B

In the first phase, MbPT is investing 9.5% of the total cost. We have been talking to the Japanese International Co-operation Agency (JICA) for funds and we are given to understand that those funds would take some time to materialise, although we would like to get them faster. We could raise tax-free bonds like we planned for the first phase. We had enquiries for 100% subscriptions of these bonds as we have a AAA rating and are a debt-free company with an annual income of R800 crore.

What is the progress on the plan for a port-based SEZ

We have earmarked 7,000 acre, of which 3,000 acre will be the SEZ, and the rest would be for green plantations, commercial office space or ancillary and assembling units. Initially, we will develop 700 acre, half for port-based logistical SEZ and commercial office-based space.