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Ports: Safe harbour

Port investments are continuing apace—for now.

Shalini S. Dagar | Print Edition: April 19, 2009

Fact 1: The global economic crisis has hit Indian ports hard. The volumes were down as much as 20 per cent in the last few months.

Fact 2: Investors are continuing to see value in the Indian ports sector. 3i Private Equity committed an investment of $161 million in Krishnapatnam Port on the east coast of India in February. This was the infrastructure fund’s second investment in the sector after Mundra.


Anil Ahuja, Head of Asia at 3i, says: “There is no demand issue that we have seen in both the companies that we invested in. The basic business model remains intact.” Ahuja has another $700 million to put to work in the Indian infrastructure sector over the next two years, and believes there are enough opportunities to do so— many in the ports sector.

On the west coast, at the Gujarat Pipavav Port, the planning is already veering around to deal with the traffic flow that will come to it as the economic upturn happens. “Nhava Sheva (JNPT) is gradually running out of capacity. Where will the cargo go? Pipavav is the closest.

We are just eight hours away,” says Managing Director, Prakash Tulsiani. And, in preparation, the Pipavav Port is dredging deep to ensure a draft of 12.5 metres to 14.5 metres, among other things. This will allow bigger ships to call at Pipavav. Neighbouring Mundra Port, too, is continuing apace with the construction of a coal terminal.

“Considering the growth of the Indian economy and other economies in few years, there is a need to create more capacities in existing ports and to develop new greenfield sites,” says Rajeeva Sinha, Director, Mundra Port and SEZ.

Yet, as D.T. Joseph, former Shipping Secretary and now Special Advisor to UK-based Eredene Capital, points out, it may be early days to assess the impact of the economic crisis on the Indian maritime sector.

However, even if demand flags, it is clear that port projects, which are tied to, say, coastal power projects would always find takers. Work will continue on the projects now being implemented. The major ports are already chock-a-bloc, hamstrung as they are by tariff controls and decision-making delays. So, the investment enthusiasm is mostly focussed on the “non-major” ports as they enjoy more flexibility.

To address these issues of competition and skewed development, Joseph says, “a comprehensive maritime policy needs to be devised.” Now, who can argue with that?

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