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Portways-Magazine-April-2018-Issue- Second Week

MINISTRY 6 Sagarmala

MINISTRY 6 Sagarmala will cut logistics cost dramatically : Jt. Shipping Secretary The ongoing Sagarmala project, launched in 2015, will drastically reduce the logistics cost in the Country and make the industry competitive, according to Kailash Kumar Aggarwal, Joint Secretary in the Union Ministry of Shipping, who is in charge of the project. At present, logistics cost in the Country is in the range of 14-16 per cent against 8-10 per cent in other Countries. Aggarwal was speaking at a seminar on enhancing port and coastal infrastructure, organised by the Union Ministry of Finance, the Asian Infrastructure Investment Bank (AIIB) and the Confederation of Indian Industry (CII) here recently. The seminar was organised as a run-up to the annual conference of the AIIB to be held in Mumbai in June. Aggarwal said that as part of Sagarmala, estimated to cost over Rs. 8 lakh crore, 562 projects would be taken up in the Country between 2015 and 2035. “Port modernisation and capacity augmentation, port connectivity (including Coastal Shipping and inland waterways), port-led industrialisation and development of coastal communities such as fishermen are the four main components of the Sagarmala,” he said. The capacity of the ports would go up to 3,500 million tonnes by 2025 from 2,000 mt now. “A total of 112 port projects have been taken up, of which 50 have been completed and the rest are in various stages of implementation. The total estimated cost of these projects is Rs. 70,000 crore,” he explained. Multi-Modal Logistics Parks Aggarwal added that 15 Multi-Modal Logistics Parks would also be set up at a cost of Rs. 3,553 crore, as part of Sagarmala, which would truly transform the sector. He said the AIIB, the ADB and other multilateral development banks would have to play a key role in the project. Yee Ean Pang, Director General of Investment, AIIB, said the bank was ready for big investments in the Indian port sector and in developing supporting infrastructure. But suitable projects would have to be identified and the private sector should also take a lead role in the matter. EXIM Commerce Ministry looking for alternatives to export subsidies With the US questioning India’s export subsidies at the World Trade Organisation (WTO), New Delhi has got cracking on identifying alternative ways to support exporters without facing challenges at the multilateral forum. “An informal committee has been set up under the Director General of Foreign Trade (DGFT) to look into the existing export promotion schemes. The idea is to identify the non-compatible provisions and to look for alternatives assuming that India's eight-year phase-out period argument is not accepted,” a Government Official said recently. Industry bodies invited In a recent meeting, the informal committee invited views from industry bodies FICCI and CII, exporters’ body FIEO and the Commerce Ministry’s think-tank, Indian Institute of Foreign Trade (IIFT), on the matter. “Issues, including problems with the existing export subsidy schemes vis-à-vis the WTO rules, and how other countries were supporting their exporters were discussed,” the official said. The informal committee is likely to be given a formal shape soon through an official notification, and more industry bodies and export bodies could be part of it. Options being explored The committee, headed by the DGFT, will look at ways in which a production-based subsidy can be used to replace export subsidies, as these are allowed under the WTO. “We could look at the cluster-based approach, where export-centric clusters could be selected and subsidies given to units based on what they produce rather than what they export,” the official said. US complaint The US dragged India to the WTO’s dispute settlement body last month complaining that India’s export subsidies were harming American companies. It identified five popular export promotion schemes, including the merchandise export from India scheme (MEIS) and the export promotion capital goods scheme, as violating the WTO’s Agreement on Subsidies and Countervailing Measures. The US complaint is based on the fact that since India’s per capita Gross National Income (GNI) exceeded the threshold of $1,000 for three years in a row in 2015, as per WTO rules, it is no longer eligible to extend export subsidies. The committee headed by the DGFT will look at ways in which a production-based subsidy could be used to replace export subsidies, as these are allowed under the WTO. DST Nitin Gadkari on Korea visit to strengthen maritime ties eration between India and Korea in shipping, address a business forum on the maritime maritime relationship. ports, inland waterways, highways, river sector and also a seminar on India- Korea In- The visit of Shri Gadkari is aimed at interlinking and infrastructure sectors. An frastructure Corporation Forum. An interac- strengthening ties between the two nations Undertaking on Mutual Recognition of Cer- tion with financial institutions and investors and further cementing cooperation in areas tificate of Competency of sea-farers will be is also scheduled. including sharing of technology, experience Shri Nitin Gadkari, Union Minister of Shipping, Road Transport & Highways and Water Resources, River Devel- signed during the visit. Known for maritime technology prowess, Republic of Korea had partnered with the Ministry of Shipping in the Maritime India The Minister will meet his counterpart, Minister of Ocean & Fisheries and Minister for Land, Infrastructure & Transport and interact with the captains of RoK trade and in- in port development and operation and joint participation in port-related construction, building and engineering projects of mutual interest amongst others. opment & Ganga Rejuvenation is on an Summit held in Mumbai during April 2016. dustry. FICCI is partnering to organize a coincid- official visit to the Republic of Korea from This visit will further promote the bilateral India and RoK have an institutional frame- ing visit of a business delegation from India 9 April 2018. cooperation. Shri Gadkari will visit Sam- work for cooperation through the memoran- comprising of firms with business interests During the 4 day visit, Shri Gadkari will sung Heavy industries, Busan Port, National dum of understanding (MoU) for cooperation in Maritime, Highways and infrastructure focus on taking forward the bilateral coop- Transport Information Centre in Seoul, and and mutual assistance to facilitate develop- sectors. ment of ports, port-related industries and DST

INTERVIEW 7 The Vision of Essar Ports Volumes at Indian cargo ports have been on a growth trajectory over the past decade, with a 5.7 pct compound annual growth rate (CAGR) in traffic recorded during the 2007-2017 period. The major ports in India handled 499.41 million tons of cargo during the period from April to December 2017, marking a growth of 3.64 pct year-on-year. The highest growth was registered by Cochin Port, followed by Paradip, Kolkata, New Mangalore and JNPT, data from India’s Ministry of Shipping shows. However, there are numerous challenges for the country’s ports moving ahead. “Projects in India are prone to higher implementation risk in terms of high financing cost, commodity risk, non-flexibility in contracts, delay in securing various approvals, land acquisition issues and issues in hinterland connectivity for evacuation of cargo. This has led to a reduced interest of private sector participation in recent years,” Rajiv Agarwal, CEO & Managing Director of Essar Ports, one of the largest private port developers and operators in India, said in an interview with World Maritime News. Agarwal explained that it is necessary to equitably share risks in order to spur the growth in the port sector, boost investor confidence and private sector investment. Furthermore, it is necessary to modernize facilities and expedite the decision-making process. For this to become a reality it is required to ensure access to low cost and long-term funding solutions for the infrastructure sector, simplify approval process and provide flexibility to concessionaires under contracts, Agarwal added. Other issues that need to be addressed are a tax exemption for import of capital equipment for development, flexibility with the Concessioning Authority when dealing with various contracts under stress along with reservation of land for port and connectivity projects and simplifying land acquisition process, he continued. At the beginning of this year, Essar Group announced an investment worth USD 500 million in existing and new projects. The investment was assigned to Salaya Terminal, Vizag Terminal and the expansion of Hazira Terminal by another 1,100 m with mechanization. According to the port developer, the investment in its Salaya and Vizag terminal projects, both fully automated, has the potential to increase its revenues by 30 pct in the fiscal year 2018-19 on the back of third-party cargo growth. “Our recently commissioned 20-million-ton dry bulk terminal at Salaya is the first deep-draft terminal in the Saurashtra region, and has been designed to berth Capesize vessels with a vessel turnaround time of less than two days, thus offering a competitive advantage to the local industry for both exports and imports. The facility has already started catering to major industries of the region,” Agarwal said. Furthermore, the company has completed a USD 128 million expansion project at the Vizag Terminal, which almost doubled the terminal’s capacity totaling in 24 million metric tons per annum (MMTPA). The commissioning of an 8,000 TPH ship loader, resulted in cargo handling rate ranging between 70,000 to 120,000 tons per day (TPD), depending on the size of a ship, Agarwal noted. “This project has been undertaken in synchronization with operations, and the facility is already handling close to 10 million tons in a year. The performance is further expected to improve with enhanced operational parameters,” he pointed out. Presently, the overall port capacity of the group is 90 MMT- PA, however, post completion of the Hazira expansion, the overall port capacity will increase to 110 MMTPA. “Our state-of-the-art Hazira port terminal is strategically located within the industrial belt of Gujarat and has access to North India hinterland. As part of the capacity expansion project, cargo handling capability is being increased by additional 1,100 m waterfront in addition to existing 550 m waterfront. Of the 1,100 m waterfront, 600 m waterfront has been completed and balance works are underway along with mechanization. The facility caters to the Essar’s Hazira complex which houses steel, power and heavy engineering industry along with the other requirements of the region and trade. It has the capability to handle dry bulk, unit cargo, general cargo and liquid cargo,” he said. What is more, Essar Ports also plans to develop an LNG regasification facility in Hazira, in the west coast, and Haldia in the east coast of India. Internationally, Essar Ports has set sights on developing a coal terminal in Mozambique under a 30- year concession agreement with the Government of Mozambique inked last year. The terminal will have a nameplate capacity of 20 MMTPA and will be developed in two stages. “Mozambique has significant coal resources, mainly coking coal, which makes our project more interesting. Through this project, we aim to provide a credible end-to-end solution to the miners in Mozambique. The first phase is expected to have an investment of close to over USD 250 million over two years. The facility will be able to berth Supramax vessels and will provide the mechanized efficient operations in Beira Port. The project will entail rail reception facility, storage and loading of cargo on to the ship through mechanized means. The second phase of development will be undertaken post stabilization of Phase 1 of the project,” Agarwal said. Speaking of Essar Ports key strategic objectives, Agarwal pointed to the completion of existing expansion projects within timelines and budget, as well as the increase in the share of third-party cargo to more than 40 pct of the total cargo handling portfolio. The terminal operator is also targeting an increase in overall cargo handling at the existing port facilities to a similar growth rate of 22 pct y-o-y as of the fiscal year 2018 and boosting profitability and return on capital employed. For the nine months ended December 31, 2017, the company registered a 16 percent cargo growth overall, compared to the same period last year. For the full year, the numbers depict a promising picture as well. “We expect that for FY 18 our traffic handling will be more than 36 million tons, registering a growth of 22 pct y-o-y with third-party traffic growing by more than 73 pct y-o-y,” he said. The fiscal year has also seen divestment of Vadinar Oil Terminal Facility (VOTL) for USD 2 billion, which has reduced the company’s cargo handling portfolio to dry bulk and general cargo. “The growth of this segment will be in line with the growth of the underlying business of steel, cement and power. With consumer demand being robust, these underlying business will have substantial growth in the coming year thereby increasing cargo volume to be handled at the port,” Agarwal continued. Essar Ports’ CEO stressed that mechanization and automation remain the key priority in its business. “Our vision of technology is that of an enabler for better customer service, low cost of operations, improved efficiencies, environmentally conscious/eco-friendly operations and better controls,” he pointed out. “Modern ports, in addition to features like the deep draft and sufficient storage space, need to have a high level of mechanization and automation to handle bigger ships to achieve economies of scale and faster turnaround of vessels.” World Maritime News Staff

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