Presentation on theme: "President, Adani Logistics, INDIA"— Presentation transcript:
1 President, Adani Logistics, INDIA Globalization of Port Logistics:Opportunities and Challengesfor Developing CountriesRole of PPP – Adani ExperienceYogendra SharmaPresident, Adani Logistics, INDIA
2 Presentation- Layout Indian Economic Scenario EXIM trade in India Factors Contributing success of Container Terminal developmentRole of the Govt – Policy InitiativesRole of Public-Private-PartnershipAdani experience – a case study
3 In India much has been done in the field of port infrastructure In India much has been done in the field of port infrastructure. Much more needs to be done if India is to avail of the opportunity to secure and maintain a competitive advantage for its industry and thereby its people.
4 India’s Growth StoryIndia is the third fastest growing economy in the worldGDP growth – moving continuously upward5 – 6% in Previous two decades7.5 % in years and8.5% in year9.3% in year10% + GDP growth is achievableThis growth represents a structural increase rather than a cyclic upturnIndia’s GPD shall grow four times by 2020Import of capital goods increasingAccording to the Mc-kinsey report – India shallBecome 5th largest consumer market by She is at 12th position todayHave 400 million people with annual disposable income of US $ 25000Have market size of US$ 1750 million
5 Few Growth DriversIndustries CementFinished Steel Automobile
6 Manufacturing Foreign Tourists arrivals Few Growth DriversManufacturing Foreign Tourists arrivalsOthersPositive demographics – over 50% population under 25 yearsA high 60% literacy rateIncreasing Domestic Consumption
7 Growth drivers of Logistics Globalization:- India , which has a low-cost manufacturing base, is establishing itself as the world’s manufacturing hub. The lowering of trade barriers by various countries, combined with rapid advances in global transportation and information technology, has led to the proliferation of global manufacturing networks. As companies operates globally, their logistics needs increase correspondingly.FMCG:- It accounts for 80% of consumer spending in India. Rapid Growth in the processed food segment, as is evident from expansion of branded food outlets and café chains, provide ample opportunities for logistics service providers.
8 Ocean Logistics Indian coast line -7517 Kms India has 12 major and 184 minor portsSea traffic in India carries 95% of India’s exports by volume and 70% in value terms
9 Major Ports in India (Controlled by Central Govt) KandlaJNPTMumbaiNew MangaloreMarmagoa CochinTuticorin ChennaiEnnore Visakhapatanam ParadipHaldia
11 TRAFFIC AT INDIAN PORTS In Million Tonnes650576522458419384369and (30 Years) Million Tonnesand (10 Years) Million Tonnesand (10 Years ) Million Tonnesand (7 Years) Million Tonnes
12 Traffic Projections at Indian Ports. In Million Tonnes877Overall CAGR : 7.70%Major Ports : 6.99%Non Major Ports : 9.55%( onwards)650522(#) CAGR = Compounded Annual Growth Rate between and8.08 % for Major Ports, % for Non-Major Ports and Overall 8.69%
13 Container Traffic Projections In Million TEUs12.54.964.5(#) CARG = Compounded Annual Rate of Growth for Container Traffic is 15.71%
15 JN PORT- CONTAINER TRAFFIC PROJECTION UPTO 2013-14 TRAFFIC FIGURES IN MILLION TEUs6.085.454.954.454.353.813.3
16 Few FactsThe major ports – contribute to more than 75% of the total traffic handled. A total of MT in as compared with MT in , 9.51 %. Projected capacity of 1 billion ton byFive ports – Vishakhapatnam, Kolkata, Mumbai, Chennai and Kandla – crossed 50 MT each. All have inadequate draft for mainline vessels.The Jawaharlal Nehru Port crossed the 3 million TEU mark, handled 3.30 million TEUs in as against 2.67 million TEUs in – to register a 23.6 per cent growth in container traffic.Container Traffic In India 17.85% in as compared to 13.6% in last five years.The turnaround time at Indian ports improved from 8.5 days in to about 3.5 days inToday ports capacity is short of 7 container berths. Current container handling capacity at terminals is about 7 m TEUs. 60% containers transshipped at Colombo, Singapore and Salalah.US$ 20 billion - estimated investment by the end 0f 11th plan
17 Market Segments The JNPT Case Imports ICD by Rail (33.3 %) ICD by Road (4%)En Bloc CFS (59.7%)Green Channel (3%)ExportICD by Rail (22.6%)ICD by Road (7.5%)CFS by Road + Buffer Yard ( 26.5 % + 7.7%)Factory Stuffed under Excise Seal –35.7%)The above movement pattern throws some basic questions?
18 Movement Pattern of Containerized Cargo Unevenly distributed over the hinterlandTotal market share – 5.5 MTEUS (06-07)North 1.5 million TEUs – 26%West 2.1 million TEUs – 40 %South 1.5 million TEUS - 26%East million TEUs – 8 %About 70% traffic is on the North- West corridorThis uneven distribution of origin/destination of goods poses a challenge for transporters
19 NUMBER OF CONTAINER TRAINS AT JNPT (Projections between 2006-07 - 2011-12) YEARTRAINS PER DAY2006 / 725.62007 / 830.02008 / 935.32009 / 1044.62010 / 1152.42011 / 1261.6
20 Are We Aware ? That in India containerized trade is JNPT centric YearTotal (MTEU)JNPT(MTEU)%OthersNorth bound5.503.3060%2.2040%2.3112.504.957.555.25This is putting undue pressure on land bridging, both on roads and rail.If JNPT grows as per plan, its market share will come down from 60% to 40% in next five years.And market share of other ports shall reverse from 40% to 60%
21 So What is the Challenge ? By , India will have to create additional 5.35 MTEU capacity in non major ports as JNPT shall add only 1.45 MTEU by that time.Due to their location, additional berths shall come at Mundra, Pipavav, Hazira and Dholera or the cost of inland transportation shall go if southern ports have to deal north bound cargo.By , we will need 150 trains daily from north to western ports to evacuate the cargo.While JNPT shall deal 60 trains, other ports ports shall have to deal with 90 trains per day.It shall be a serious issue as neither ports, dry ports, or the railway are prepared for it.Of late Govt has initiated some action, It is enough? Let us examine?
22 Factors Contributing Terminal Development Composite growth of port logistics depend upon the development of following infrastructurePorts Side FacilitiesOcean side developmentPorts terminal developmentHinterland ConnectivityDry ports developmentRailways connectivityRoadways connectivityContainer Trains
23 Government Initiatives Looking into impressive growth indicators in EXIM business, Indian govt has taken many initiatives in development of port logistics through Public-Private- PartnershipThis has shown impressive results
24 1. Port Terminals Development The Government has redefined the role of ports - from being mere trade gateways to becoming integral components of the global logistics and transportation chain by:Increasing the plan outlay for ports by per cent from US$ 175 million in to US$ 330 million forLaunching National Maritime Development Programme (NMDP) for a 10 year period, to ensure holistic development of the maritime sector. It covers 276 projects with investment of US$ 12.7 billion, of which US$ 7.9 million is expected to come from private investment.Setting up a Committee of Secretaries under the chairmanship of the Prime Minister to oversee projects implementation
25 1. Port Terminals Development Opening up all the areas of port operation for private sector participation.Allowing FDI up to 100 per cent in construction and maintenance of ports/harbours and in other area providing support services, such as operation and maintenance of piers, loading and discharging of vehicles.Leasing out of existing assets of the ports to private operators for providing port services up to 30 years.Establishing an independent tariff regulatory authority, Tariff Authority for Major Ports (TAMP), to regulate tariffs in ports, 100% income tax exception for 10 years..
26 1. Port Terminals through PPP Already US$ 1052 million invested in 15 port development projects, including 7 container terminals, 4 liquid cargo berths and 4 dry cargo berths projects.Further 1 container terminal, 2 for liquid cargo berth and 2 for dry bulk cargo berths – with an investment of US$ 562 million are under way.PSA Singapore-SICAL operates one terminal with 0,4 Million TEU capacity at Tuticorin port, Also developing another terminal at ChennaiMaersk - APM Terminals in Joint Venture with Container Corporation of India Ltd.operates at terminal at JNPT. Maersk also invested in Pipavav port, their total investment is of the order of US$ 500 million in India
27 1. Ports Terminals through PPP DP World - developed one terminal each atJNPTCochinMundra portKulpi ( West Bangal), their total investment to touch US$ 2 billion.Vallarpadam transhipment port in association with Cochin port at an investment of US$ million.ABG Volti- Kandla PortShell HaziraAdani – MundraReliance – RewasTata – DhamraPrivate developers offered revenue sharing between 33.3%(DPW at Cochin) to 48.99%(ABG at Kandla) while bidding.
28 2. Container Freight Station/Dry ports Dry ports play an integrated role in promotion of EXIM trade of a country having big land mass like that of India.Rail linked dry ports, known as ICDs, facilitate smooth movement of containers by rail over a long distance and reduce pressure on roads, to avoid case like Diesel clouds in China as reported in papers recently.So far only state owned CONCOR was operating container trains in India. Today they have 56 terminals across country.Due to monopoly of CONCOR, there has been limited growth of dry ports, leading to spurt in Freight Stations near port causing congestion on roads, pollution in Cities.Quality of terminal services has also been a major issue due to monopolistic environment
29 2. Development of Dry Ports through PPP So far Private parties were free to open Container Freight Stations any where in the country, However they were not given rail connectivityResult – They were using roads for moving goods to the gateway ports, leading to high cost and inefficiency.Govt in Jan 2007 has signed a 20 year agreement with 14 other private operators for setting up rail side container terminalsAlready 3 private terminals with annual rated capacity of 0.2 million TEUs have become operational.At least 10 terminals are likely to come in year 2008.Private party arrange land, building, equipment, rail facility, manpower, etc.Govt only facilitates rail connectivity and provides locomotive for evacuation of their trains. Operators is free to market its services and retains revenue.This will create capacities for meeting growing demands of EXIM trade . Also there shall be technological advancement due to competition
31 NORTHERN INDIA - 6 SOUTHERN INDIA - 10 WESTERN INDIA - 13 EASTERN INDIA - 08CENTRAL INDIA - 09TOTAL
32 Port-Hinterland connectivity According to Govt policy, all major ports should have a minimum offour-lane road connectivity anddouble line rail connectivityIn case of projects having low IRR, govt provides budgetary assistance or viability gap fundingRoad connectivity upto 50 kms shall be part of port infrastructure.This is to create supply ahead of demand
33 3.Port Connectivity – Roads India has second largest road network in the world, with 3.32 million km roads, however congested, leading toover deaths every year..National Highway Authority of India set up to take development of national highways, including development of4 lane highways to six lane, 6500 kms2 lane roads to four lane highways, 12,000 kmsSingle roads to 2 lane roads, 20,000 kms,New Expressways 1000 kmsRing roads, grade separators, bypass, and service roads, etc.Needs US$ 50,000 million for next five years.Private sector investment is pouring in toll roads, accelerating speedy implementation.However, Such PPP projects some time become unaffordable for the consumer and expectations fall leading to backlash as seen in south America, Eastern Europe and RussiaGovt encourages 100% FDI in such projects
34 The Golden Quadrilateral and North- South, East- West projects
35 4. Port Connectivity – Rail In 2000 – Railways in association with a private developer, set up a Special Purpose Vehicle under PPP to provide rail connectivity to Papavav port( 270 km).In 2003 – under National Rail Vikas Yojna, Ministry of Railways set up Rail Vikas Nigam Limited to develop various railway projects under PPP in order toImprove rail connectivity to various portsAugment rail capacity on golden quadrilateralIn 2004 – Another SPV (Kutch Rail Company) was set up to convert 301 Km MG line to provide double line to Kandla and Mundra ports. Other partners were Kandla port, Mundra port and Govt of Gujarat.In 2005 – Another SPV set up to improve connectivity to New Mangalore port.. Other partners are State Govt, Financial institutions.In 2007 – 3 more SPVs formed for providing connectivity to Paradip, Krishnapatnam and Dahej portsIn Dedicated Freight Corridor Company limited set up to plan and construct two Freight corridors at the cost of US$12500 Million
37 5. Opening of Container Train Operations to the private sector So far only govt owned company CONCOR was in container train operations in India.CONCOR market share has been only 30%, other 70% cargo either moves by road or gets de-stuffed at port and moves in break bulk.It defeats very purpose of multimodal transport, which is based on the principle of Door to Door delivery of goods in containers.It also poses many problem to the local administration as the roads leading to major ports are getting chocked.Also due to monopoly of one operator, quality of service was affecting too.
38 Private Container Train Operation. In a land mark initiative, Ministry of Railways, in Jan 2007, threw open operation of container trains to the private sector.CONCOR monopoly endsLicence to 14 more players granted10 for all India operations4 for operations to other than JNPT20 year licence granted on payment ofUS$ 12.5 million for all port routes andUS$ million for ports other than JNPT.Operators to acquire rolling stock, plan ICDs and commence operations in 3 years time.Railways to maintain rolling stock and provide locomotive, crew, etc. for movement of their trains on payment of predetermined haulage charges.Private operators are free to market services and fix tariff based of market conditions.
39 Container Trains by Private Operations MOR guaranteed level playing field to all operators, including CONCOR.In less than a year, 10 private operators have commenced operations, putting 35 rakes into service so far. CONCOR has only 160 rakes in all. This means 22% expansion in capacity in less than a year.This has also lead to new innovations where due to competition, operators are busy in providing customized solutions, including new box types for domestic cargo.For the first time, automobiles have started moving in containers.It also opens up new opportunities for coastal shipping of domestic cargo.
41 6. Double Stack Container Train Due to multiple players, improving throughput on the oversaturated railway system has been a big challengeThrough an another innovative exercise, in March 2006, Indian Railway introduced operations of double stack container trains, India becomes 3rd in the world.IR is operating DSC trains on flat BLC wagons on diesel territory, thereby enhancing throughput by 100%With Average pay load of 12tonne per TEU, it is possible to operate DSC on IR with Ton axle loadRailways have also decided to increase axle load to 22.9 ton on DSC routes to carry heavier weight cargo
42 6. Double Stack Container Trains Indian Railways also announced 50% concession in haulage rates for the containers moving on the upper deck.According to an estimate, for moving 0.2 million TEUs in double stack form, there is direct saving of US$ 15 million.Cost of inland transportation in India is about 14% as compared to 8% in developed countries.DSC trains shall enable the operators to lower their cost for shifting cargo from road to rail.Operators are also trying to innovate for movement of cars in double stacks under electrified territory to reduce cost.
45 What is PPP?A Public-Private-Partnership is a contractual agreement and a legal framework between a public agency (Federal, State or Local) and a private entity in order to execute an assigned project for sharing risks and rewardsCharacteristics of PPPInadequate public funding leading to significant gap between demand and supplyNeed for attracting private capital providing reasonable rate of return to them, who improve managerial efficiencyAll stakeholders share risks and rewardsGovernment or the Principal agency develops projects and facilitates its execution, whereas Private investors bring in design, technology ,execute, and manage operations & maintenance.In case project is not viable, on the recommendations of the nodal public agency, Govt provides viability gap funding
46 Govt Initiatives on PPP To promote PPP, a committee on Infrastructure was set up under Chairmanship of the Hon Prime MinisterIn 2005, Govt of India announced “Scheme for Financial Support to PPP in Infrastructure”Under the scheme, Govt provides Viability Gap Funding to the important projects of relatively low Internal Rate of ReturnVGF is granted for a maximum amount of US$ 50 Million, subject to 20% of the total project cost
47 Service/ Management Contracts Complete Privatization Kinds of PPPThere are various types of PPPs based on the extent of Private Sectors ParticipationPublic Private PartnershipService/ Management ContractsBOT/ ConcessionBOOT/ BOOComplete PrivatizationLeaseLowHighExtent of private sector participation
48 Roles Allocation between Public and Private PPP OptionsAsset OwnedO&MCapital ExpCommercial riskDurationService contractPublicPrivate1-3 yrsManagement Contract3-5 yrsLeaseShared8-15 yrsConcession/ BOTPrivate/Public25-30 yrsBOOT/BOO25-30 yrs/ indefinite
49 Agents of PPP Principal The principal is usually a government agency, a local or federal government body that recognizes the need for a public facility to be provided under PPPConcessionaireThe concessionaire is usually a private party/consortium that takes the responsibility of developing (designing, financing and constructing), maintaining and operating the facility, on behalf of the principal.The concessionaire is the owner of the facility during the concession period and realizes profits on their investment through the usage of the facility
50 Agents of PPP Investors Contractor The shareholders bring in capital in exchange for equity,Lenders support the concessionaire in project development and provide finances as debt through long term loansContractorconcessionaire appoints a contractor for construction of the project under an agreementIn some cases, the contractor is part of the concessionaire’s consortiumcontractor is responsible for the construction of the project and for hiring subcontractors, suppliers and consultantsLenders may include banks, insurance companies and bond holders Concessionaire
51 Agents of PPPOperatorThe concessionaire either by itself or through its agent manages the day to day operationsThe operator brings new technology and set higher benchmarks for improved efficiencyThe Concessionaire either by itself or through same /other operator maintains the facilityThe Operator recovers its cost on O&M from the concessionaire
53 Mundra Port – A successful PPP case With a coast line of 1600 km, Gujarat has 43 ports including only one major port.In 1995, state government invited private parties for development of minor ports in GujaratTwo ports were developed, including Mundra port by Gautam AdaniMundra had no rail connectivity. Adani built 62 km line at his cost.Adani also took 20% equity in 315 km line providing alternate route to Mundra port.Adani asked P&O ports to operate one container berth.Adani provided all social infrastructure required for port operators and the users.
54 Mundra Port as a PPP case Today Mundra has 12 berths, including two for container handling. Mundra also has India’s first multi commodity SEZ spreading over 100 sq km area.Handled 19 million ton cargo in , shall handle 50 million ton by 2010.With one additional berth becomes operational, port can handle 2 million TEU.Cargo handled in increased by more than 140 % over the previous year.Mundra port and SEZ is inviting huge investment, shall give rise to port traffic.Today Mundra has deepest draft (17.5 meter) in IndiaMundra provides shortest route to the vast northern hinterland , providing cost effective solutions to the customers.Now Adani is developing two more non major ports in Gujarat.
55 Mundra Port- Logistical Connected RAILConnected to the Indian Railway network at Gandhidham through the Mundra – Adipur Broad Gauge lineAIRAerodrome at Mundra to land private jets, to be opened to commercial planeROADConnected to the National Highway (NH 8A) and State Highway (SH 6)
56 PPP Effect - How did Govt gain? India’s expenditure in infrastructure has been only 4% of its GDP during the period from to In recent years, the infrastructure deficiencies have become more visible because of high growth,Infrastructure at port, highways, railways, airports, etc. are overstretched, leading to overcrowding and queuing up.India need over US$ 490 billion in next five years in various infrastructure projects, including $200 billion from private investment.Unable to meet growing demands, India promoted PPP in infrastructure and received massive capital funds through Private investment.This has lead to availability of govt resources for other projects in social sectors.Through PPP govt is able to create asserts, which shall revert back to them after the expiry of concession period.
57 How did Promoters gain?Private developers, who are able to raise money at the competitive rates, due to innovation in design and new technology in construction are able to create assets at much faster pace and get fixed returns as annuity paymentsOr in case of BOT projects, developers recover their investment through access /toll charge as in case of highway /railway projects.In case of ports and airports, investors get direct revenue from the services provided based on revenue sharing mechanism.In case of Railways, JV companies get apportioned revenue after meeting their O&M cost. In addition, investors get rail connectivity, which is crucial to their project such as private green field ports because the existing rail infrastructure was inadequate in meeting growing demands.This is evident from the growth of private ports such as Mundra in state of Gujarat.Due to better connectivity, a large number of major industries moved into the area leading to more opportunities for the state and rapid growth in employment, real estate, power, roads, health, service sector etc.
58 How did Customers gain?Under monopolistic situation it is the customer who suffers the most as supply becomes limited.We have seen in case of telecom in India, how life of a ordinary customer changed after it was opened to the private sector. Today even daily wage earner is able to afford a cell phone.In case of transportation, customers are able to have better services at lower cost, meet their shipment needs.Today they can opt port of their choice for discharging their goods at much faster pace.Indian Manufacturers are increasingly becoming cost effective in the export goods.Global manufacturers are moving into India, which shall lead to better goods at low cost to the customers.
59 RecommendationsAs JNPT shall not be able to handle projected growth and evacuation shall become difficult, need to promote other ports to handle containerized cargo and improve rail linkages through PPP with consistent policy frame work.Govt to facilitate development of dry ports as land acquisition by the private parties is becoming difficult. Railways are on the other hand asking for a very high land lease for providing rail siding. Development of dry ports should be open to FDI as in case of ports.North- West dedicated rail freight corridor have to come fast, with the present speed it is not likely to come beforeContainer train operators have to be given lower haulage rates as the present tares are not viable to start new business, particularly if you compete with roads.Railways to promote hub and spoke system by offering telescopic rates for the individual boxes as per their destination and not for a minimum number of boxes for a particular destination (80TEUs today). It will attract short lead traffic to rail and also improve frequency of service.Today acquisition of rolling stock and ICD equipments do not come under Export Promotion Scheme and there is no savings on excise/custom duty, as revenue does not come in foreign currency. Investment in EXIM trade logistics should come under EPCG.