Corporatisation of Ports to make Port Mgmt more Efficient; however Union Strike may affect Q4: Freight Cos

New Delhi: Finance Minister Arun Jaitley in his maiden full-year Budget 2015 on Saturday announced corporatisation of 12 major ports which is seen by employees as a measure to privatise the port. They fear loss of employment and have announced an indefinite strike from March 9.  Freight Industry experts says the employee strike may affect their Q4 business marginally. According to the industry, corporatisation of the ports will make port management much more efficient. The government also proposed speeding up process of Dedicated Freight Corridors, which, it is believed will help in the movement of cargo from the ports into dry hinterlands.

There are 12 major ports which fall under this category of corporatisation – Kandla, Mumbai, JNPT (Jawaharlal Nehru Port Trust), Marmugao, New Mangalore, Kochi, Chennai, Ennore, VO Chidambarnar (formerly Tuticorin Port), Visakhapatnam, Paradip and Kolkata (including Haldia) which handle around 61 per cent of the country’s total cargo traffic.

Terming the budget proposal to corporatise major ports as an “enabling provision” to privatise them, port workers unions said they will go ahead with the planned indefinite strike from March 9 to protest the move.  “This is an enabling provision for privatising the ports.. we had anyways given a call for an indefinite strike from March 9 and will go ahead with it in a strong way,” All-India Ports & Docks Workers Association secretary Uday Choudhary, told.

Based on the ongoing trend, it is likely that Port unions will go for strike.  Below is verbatim transcript of the interview with Sachin Bhanushali, CEO, Gateway Rail Freight on the impact of Port unions strike:

Q: Wanted to start by asking you about the corporatisation of 12 major state-owned ports in the country. Something that was announced in the Budget and we do understand that Jawaharlal Nehru Port (JNPT) has welcomed this move and said they would be one of the first to undertake some corporatisation. Will that impact your company?

A: Over a period of time the old structure of operating under a landlord port has done very well. However, once the clean cargo, liquid cargo and the general bulk cargo separation started taking place there was a need to get a new structure in place. Corporatisation of the 12 majors ports which are present are covered under the major ports acts is something which was expected and a natural consequence of that. Once this is done the overall port management will become much more efficient. Though initially there may be some resistance from the employees of the port and we may face some strikes but in the medium and the long run the capacity utilisation of the ports as well as the ability to handle efficiently both clean cargo that is containerised and non-containerised big bulk as well as the dry bulk and liquid bulk cargo will definitely improve. This is good news for the sector in terms of improvement in the ports side handling capacity. Because the three major bottlenecks that have been faced by the containerisation in India which roughly stands at about 50 percent of the overall general cargo as against 85 percent internationally have been port evacuation capacity, evacuation by road or rail into the hinterland and delivery mechanism. As far as delivery mechanism is concerned, lot of inland container depots (ICDs) and container freight stations (CFS) have developed over a period of time there is an adequate capacity in place. Gateway is present both in CFS as well as ICD business. The dedicated freight corridor should address to a very great extent the ability to evacuate the cargo from port into the hinterland locations. The issue of capacity at the port has always been one of the major issues that have resulted into some kind of obstacle to growth of the sector. Everyone is eagerly looking at the 4th terminal at JNPT coming through. Corporatisation will help all of us, the ports as well as the CFS and ICD operators.

Q: What about the IPO of Gateway Rail freights that is something that the markets want to know for quite sometime now?

A: It is too early to speak about IPO because at this stage we just started out journey on the IPO front. It will take at least a couple of months for us to come out with an official communication on this.

Q: If the JNPT employees go on strike and that would be effective March 9 how would that impact business for you in terms of volumes in Q4?

A: It is going to be only short-term impact on the overall volumes. The plan is to go on strike from 9th. But I am sure the mechanism of communicating with them at an early stage will help defusing the situation. Also, I do not see this strike likely to extend into a long duration strike which may hamper the over all ports capacity to handle cargo. In the short run, may be in the last month of this quarter we may face some obstacles in movement of containers between the port and the terminals. I am sure the administration will in a position to handle this problem without major impact on the volumes. As far as Gateway Rail is concerned, it has access not only for JNPT port but also Mundra port and Pipavav port. So on the whole I do not think it will have a major impact on business of Gateway Rail either.

Q: How much do you generate in terms of volumes and in terms of revenue from JNPT in particular out of say your Q3 numbers?

A: If we look at the overall revenues, the revenues are split almost equally between three ports JNPT port, Mundra Port and Pipavav port. JNPT is roughly 30 percent of our revenue so we do business worth Rs 15 crore per month from imports and exports originating and terminating at JNPT.