‘Last Mile Connectivity is Key to Success’

Vijay Kalantri
Chairman and Managing Director of Dighi Port
Vijay Kalantri, Chairman & Managing Director of Dighi Port has added a feather to his cap by developing the first Greenfield port of Maharashtra. He talks to SMP World in an email interaction about the opportunities and challenges faced by the port sector, significance of SEZ & FTWZ and many more. Excerpts:

How do you evaluate the growth of Indian Port Sector? Please detail the opportunities and challenges faced by the sector in the country?
Our port sector growth level has almost tripled in last decade to 880 million tonnes in FY11 from 300 million tonnes in FY01 as per India Infrastructure, Aug 2011. But this is not even half the journey looking at the infrastructure development and port privatization taking place in the country. More investors and corporates are interested to have stakes in Indian ports sector.

FDI in port sector is attracting International port operators who JV with local players to bid for upcoming projects in India is a big boost. This is a great opportunity for Indian players to develop in technology, health and safety, equipment, and port management system with collaboration with foreign entities like DP World, AP Moller, PSA etc. Also plan for corpotarisation ports has been an encouraging sign.

If we talk about challenges, we are way behind the desired infrastructure requirement today. Most major ports are suffering congestion and the minor ports are challenged with poor hinterland connectivity and poor drafts and the high cost of dredging, which are obstacles that are very difficult to overcome without the support of the Government. Apart from this regulatory policies and approvals take too much time and hence the viability of certain projects is lost due to the high investments made in the projects.

Dighi Port is being developed as the first Greenfield and Private Port in Maharashtra. Can you comment on the speciality of this port?
Dighi Port is the first private sector Greenfield port in Maharashtra. A 50 year Concession Agreement has been signed between Balaji Infra Projects Ltd (Promoters of Dighi Port Ltd) and the Maharashtra Maritime Board (MMB).

Dighi Port is an all weather port, deep draft, direct berthing, multi-cargo port and is located near Mumbai. The unique feature of the port is that it is being built on the two banks (namely the North Bank and the South Bank) of the Rajpuri Creek. Another salient feature of the port is its fortuitous location within a natural harbour and exclusive channel. A total of 5 berths are being constructed in Phase 1 of the development of the port. The advantage of having two separate banks allows the port the flexibility to segregate the dirty cargo from the clean cargo. On the completion of Phase 1, the port will have an installed capacity of 30 million MTs.

The port has a land bank of 1600 acres and a total waterfront of 5 kms. The 2 berths on the South Bank are operational and the port has been handling regular shipments of Bauxite, Coal and Steel.

Dighi Port is also the last node of the prestigious Delhi Mumbai Industrial Corridor (DMIC) and has recently been nominated as one of the seven mega National Investment and Manufacturing Zones (NIMZ) under the new Manufacturing Policy of the Government of India.

Dighi is in close proximity to Mumbai, the financial and trade capital of the country as well as upcoming of industrial regions like Mahad, Roha, Khopoli, Patalganga, Nagothane, Vile Bhagad etc. From these industrial region commodities such as Fertilizer, Coal, Steel and Sugar which are currently being handled at ports in adjoining states can be handled at Dighi Port, resulting in lower transaction cost, handling loses etc.

What is the significance of SEZ and FTWZ at the port in the global investment context?
A port based Special Economic Zone (SEZ) and Free Trade Warehousing Zone (FTWZ) is also being developed at Dighi Port. This will be one of the largest port based SEZs in Maharashtra.

There are numerous advantages in setting up a port based SEZ & FTWZ. Some of them are listed below:
  1. Direct Tax Benefits – Income Tax (As per the prevalent tax laws)
  2. Indirect Tax Benefits - Perennial exemption in all taxes including
  3. Domestic Tariff Area (DTA) supplier is eligible for export benefits on SEZ sales making the sourcing cost competitive.
  4. External Commercial Borrowings upto US $ 500 Million without any specific approvals. Cost competitive financing can be availed from Offshore Banking Units (OBUs).
Dighi Port Ltd has all the requisite regulatory permissions and licenses in place for the development of the SEZ. FTWZ will provide dedicated/general purpose world-class infrastructure for industrial units, warehousing of various products, state-of-the art equipment, transportation and handling facilities, commercial office-space, water, power, communication and connectivity, with one-stop clearance for import and export to support this integrated zone as ‘international trading and transshipment hub’.

Industry experts are skeptical about the port future as the port grapples with infrastructure constraints like connectivity. Please comment?
Connectivity is the lifeline to any port project. Without proper connectivity, the best planned port in the world is also of no use.

Further port connectivity is a significant component of port capacity development because when port capacity development is planned, connectivity plays an equally important part. Without evacuation, the capacity cannot really be utilised.

Both road and rail connectivity are critical for the success of a port and we at Dighi Port are aware of the important role that connectivity plays in the success of a port. It is essential that the port has proper rail and road connectivity in order for it to survive.

In context to Dighi Port, the 2 banks of the port are connected by the State Highways to the National Highway 17, which is 45 kms from the port. The nearest Konkan Railway Rail Head Indapur - Mangaon is 47kms from the port.

Dighi Port Limited has received an approval from Ministry of Railways (MoR) to develop the railway siding at the port under the ‘Private Rail Siding (PRS)’ model. Land acquisition is currently in progress.

Last mile connectivity is the key and future for ports in India. Ports need to provide customers with an end to end solution. All services with regards to transportation of customer’s cargo from the port to the point of delivery at the customer’s factory or vice versa need to be offered by ports under one logistic umbrella.

As compared to major ports, non-major ports have registered remarkable growth in cargo handling this fiscal. Can share the details about it? What is the role of your company for this achievement?
Ports generally attract majority of the cargo from industries located in their primary hinterland. Most of the major ports have been in operation for almost 100 years and have all the facilities in place especially with regard to connectivity and as a result cargo they are able to handle cargo generating from areas other than their primary hinterland. Due to this, most of the major ports in the country are working at 100 per cent capacity and some of them even above 100 per cent. In FY12, JNPT operated at nearly 120 per cent of its capacity. This capacity constraint at JNPT has benefitted private ports like Mundra and Pipavav in Gujarat, which are operating at around 60 to 70 per cent of their capacity. This in turn is leading to congestion at these ports and high waiting time for vessels which is increasing the total cost of the shipment. As a result, of the capacity constraints being faced by major ports, cargo is being diverted to the private ports due to their locational advantages, higher efficiency and overall better service.

Cargo growth at Indian ports continued to be moderate in 2011-12 with a 5 per cent year on year increase being registered in throughput to 930 million tonnes. This subdued growth was mainly attributable to the significant slump in volumes of iron-ore cargo following mining restrictions and other policy related adverse developments. Further with respect to new capacity additions, the progress on the award of public private partnership (PPP) projects at major ports continued to be below expectations due to prevailing structural issues. Only 3 projects could be finalized and awarded in FY12 as against the planned target of 23.

Given that no near term resolution of these structural problems appears to be in sight, the capacity addition at Indian ports is likely to fall short of envisaged targets and demand requirements. As a result, the major ports most of which are already operating at peak capacity are likely to continue facing capacity and efficiency constraints while the private ports by virtue of their superior cargo handling equipment, investment in large capacity creation and high operating efficiency would be well placed to divert traffic from major ports in the years to come.

With regard to Dighi Port, the port has recently commenced operations and has been handling regular shipments of Bauxite, Coal and Steel and has handled approximately 3.5 million tons of cargo till date. In 2 months of operations in this financial year the port has already handled about 80 per cent of the total cargo that it handled in the last year.

Please elaborate on the achievement of handling such Capesize vessel ‘MV Luciana Della Gatta’ recently by the port?

A: After successfully handling a gearless Post Panamax vessel in January this year, Dighi Port handled its first Capesize vessel ‘MV Luciana Della Gatta’ earlier this month.

MV Luciana Della Gatta measuring 269 m in length and having a DWT of 122,760 tonnes is one of the largest vessels to call any port in Maharashtra. The two Gotwalld mobile harbour cranes were used to discharge the coal from the vessel and the port was able to achieve an average discharge rate of 800 MTs/hour.

The port is in a position to handle these size vessels on a regular basis.

Have the expectations of Shipping and Port Industry met in the Union Budget 2013?
The Union Budget for the fiscal year 2013–14 could be an overall termed as a good and balanced budget which has a feel good factor about it. However, with regard to the Logistic Industry, certain critical areas have once again not been addressed in the budget and the demands of the logistic sector have been partially met. The Government’s decision to introduce and establish a panel to monitor the costs of doing business in India is a step in the right direction. This initiative taken by the Government will lead to reduction in transaction costs of trading domestically as well as internationally

However, there is some disappointment in the logistic industry as there were no announcements or clarifications with regard to the implementation of GST. However the Finance Minister has assured that he intends to present the draft bill on GST in the parliament in next few months to enable the creation of the common market to permit free and unimpeded movement of goods and services across the country.

How do you plan to play an active role in the development of Indian Port Sector? Do you have any plans to set up LNG transportation terminal at Dighi? What are your plans for future?
Dighi port has all the requisite permissions and approvals in place for setting up of a LNG facility. The port has earmarked land and waterfront for the setting up of a dedicated LNG facility. The planned LNG facility at Dighi will offer:
a) Berth & Draft:
  1. The LNG Berth will have a depth of 14 mtrs in front of the berth accommodating LNG vessels upto a capacity of 135000 cubic meters this can be further scaled up to accommodate larger vessels as we finally intend to create a depth of 20 mtrs.
  2. The berth will be so designed that all the required pipelines can be mounted on the berth with adequate safety precautions.
  3. Further there is ample inter tidal area adjacent to the berth to create re-gasification facilities for 5 MTPA scalable to 8 MTPA.
b) Navigation:
  1. The channel for navigation of LNG vessels is proposed to be 14.5 mtrs deep.
  2. The length of the channel to the planned LNG berth is approx. 9 kms.
  3. The initial facility planned will offer a 350 mtr quay length, which can further be expanded to a 1000m quay length to meet future demands
c) GAIL Pipeline:
The GAIL pipeline is only at a distance of 22 kms from Dighi Port, which will be an added advantage to the LNG facility planned at Dighi Port.

It is evident that there is and will be a huge demand for LNG in India especially from the power and the automobile sector, which is only going to increase in the years to come. We are of the opinion that Dighi Port proves to be an ideal location for creation of dedicated LNG facilities to service the needs of Maharashtra and the West coast of India.

With regard to future plans, capacity augmentation has been planned in a phased manner. The port is likely to have an installed capacity of 90 million MTs by 2020.