There is a pressing need to modernise India’s ports

October 14, 2012 11:31 pm | Updated October 18, 2016 03:01 pm IST

The Essar Group has plans to emerge as a significant player in India’s port sector. Rajiv Agarwal , Chief Executive Officer and Managing Director of Essar Ports, is responsible for driving this business which was demerged last year. Mr. Agarwal, a chartered accountant, loves to go on long drives in his SUV in his spare time and is passionate about transforming the Ruias’ dream into reality. In an interview to The Hindu he spoke about the company’s plans. Excerpts:

What has changed since the de-merger of the company from Essar Shipping, Ports and Logistics?

Initially, it was a shipping company and then it expanded into ports and logistics. All the businesses are growing. But we wanted to refocus as port which is an infrastructure business. Thus, we decided to separate the port business because it is part of the India’s growth story where fair amount of growth is expected.

We wanted to grow this business to the next level, and we are aggressively adding capacity.

At present, Essar Port has a capacity of 88 million tonnes per annum which will go up to 158 million tonnes by 2014-15. And at that level, it will be one of India’s largest port companies with potential to grow even further.

Now we are building five assets (ports) at four locations, out of which three are Greenfield. Except for Odisha (project), which is part of the Paradip Port Trust, the other three located at Salaya, Vadinar and Hazira have been built from scratch. In Odisha, we will have two terminals, and the first one is slated for opening in the current (October-December) quarter. At all port facilities, there is further scope to expand.

How much money has been invested and what is the total investment plan?

The total planned investment is about Rs.9,500 crore for 158 million tonnes capacity out of which Rs.7,300 core has been invested. The balance will be invested in the next two years. It has been funded in the debt equity ratio of 2:1.

What is the pay-back period?

These are infrastructure projects, and it takes time to make money. These are long-term projects. Each of these projects have different rate of return. The PPP projects have 25-30 years of concessions, which can be extended further.

How profitable are you?

Last year, we reported a net profit of Rs.65 crore (one-time). This year, in the first quarter (April-June), we already reported Rs.69 crore and we see a similar trend in future.

So it means, you will cross net profit of Rs.200 crore this year.

Yes, we believe so.

Do you have any overseas expansion plans?

No. We want to fully concentrate on India where there is plenty of growth opportunity.

Why is the company is over-dependant on captive cargo of Essar Group. What strategy do you have for the future?

If you see in the port sector of the major commodities, almost 60 per cent cargo constitutes iron ore, coal and oil & gas (petroleum products). We (Essar Group) have presence in all these sectors, and it gives us (Essar Ports) natural play. We are developing these assets backed by these anchor customers.

Out of the 158 million tonnes planned capacity, 90-95 tonnes will come from group companies while the balance will come from third parties. At present, 95-96 per cent of the cargo comes from the group but this number will come down to 70 per cent over a period.

Recently, you have ventured into the east coast. How is the experience?

The progress is satisfactory. The first terminal with a capacity of 16 million metric tonnes per annum iron ore berth is almost complete, and should start operation in this quarter. Environmental clearance has come for the second terminal that will have a capacity of 14 million metric tonnes per annum coal handling. This facility is scheduled for commissioning in September 2014.

What is the expansion plan at your other ports?

The port at Hazira has a capacity of 30 million tonnes which is being expanded to 50 million tonnes. The facility at Vadinar is fully complete with a capacity of 58 million tonnes.

And the port at Salaya, with 20 million tonnes capacity, will be operational by September 2013. By 2014-15, we will complete all the projects and expect to handle 125 million tonnes of cargo annually from our installed capacity of 158 million tonnes.

What is the shareholding pattern?

The Essar Group has 80 per cent stake in Essar Ports. Recently, Port of Antwerp International (PAI) picked up 4 per cent stake for Rs.175 crore and the balance is with the public.

As per SEBI norms, the promoters have to bring down their stake below 75 % by 2013. Will they auction the shares or divest stake to some strategic investor?

It is yet to be decided. But the promoters will bring down their stake.

What is the employee strength?

Essar Ports is a lean organisation, and we employ 260 people directly and over 500 people indirectly. We have a total manpower of 800.

Do you have any plans to make foray into the South?

We will be happy. But at present we are focusing on organic growth. From the same facilities we can go up to 250 million tonnes. With 158 million tonnes capacity in 2014-15, we will have 13 per cent of the nation’s port capacity.

The promoters of Dhamra Port in Odisha have expressed willingness to divest their stake. Will you be interested to invest there?

Yes, we are looking into it. We have not yet fully made up our mind. We are interested in such projects because we want to grow in this sector, and we will continuously look for right opportunities.

What is the port scenario in the country? How Singapore, being a tiny nation, has been turned into a major port destination?

Singapore is a trading market, and it is a transhipment port. But India is mostly consumption-driven and cargo is India-centric.

Currently, Indian ports handle 1,000 million tonnes of cargo annually. This volume will grow to 2,500 million tonnes in 2020.

So, we will require 3,500 million tonnes of port capacity to handle 2,500 million tonnes of cargo. Thus, India’s port capacity will triple in the coming years.

In comparison to India’s 1,000 million tonnes per annum, China handles 8,000 million tonnes of cargo per year though its economy is only three-and-half times bigger than India’s.

What is the need of the hour?

There is a pressing need to modernise India’s ports. Till a few years ago, India had only 13 major ports owned by the government. Recently, the government encouraged the private sector to set up ports through the public-private partnership (PPP) route to boost the capacity and augment funding for port expansions.

So, now, many private players are setting up new terminals or modernising existing terminals at major ports.

By 2020, major ports will handle 45 per cent of the cargo as compared to 60 per cent now while non-major ports which are currently catering to 40 per cent of the cargo will enhance their market share to 55 per cent.

It is estimated that Rs.2.80 lakh crore is needed to expand the country’s port infrastructure.

lalatendu.mishra@thehindu.co.in

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.