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Examining the Captive Port Policy at Gujarat Maritime Board
Ramesh Singhal, Chief Executive Officer, i-maritime Consultancy A period of tremendous growth entails a trial-and-error in policy, and as Gujarat Maritime Board (GMB) has become a prominent figure in port development, there are areas which should be examined more closely to continue on this aggressive trajectory. One such area is the captive port policy.

The current captive port policy at various ports in Gujarat allows the port developers to handle third party cargos at an additional wharf age of 1.5 times of what they currently pay to GMB. GMB gives a vessel-by-vessel permission for handling cargo at captive ports which at times gets delayed due to administrative inefficiencies. This is also the policy for cargos which compete with GMB’s own ports/jetties.

Lately it has been observed that due to the setting up of a large number of greenfield ports, the government of Gujarat is discouraging handling of third party cargos at captive ports. This is due to the fact that new upcoming greenfield ports are lobbying to government that their investment would not be justified in case third-party cargos go to captive facilities. Moreover, the government is discouraging setting up of new captive facilities as they feel that the new upcoming ports can also handle these captive cargos.

If one looks up from the point of view of the government, they should be concerned with setting up a sound, reliable and efficient port infrastructure where the logistics cost is the least for the industrial users. We need to examine whether this shift in policy towards the greenfield ports is actually helping the government. Gujarat’s largest port Sikka at Jamnagar is a captive port developed and operated by Reliance industries for their refinery projects. In 2010-11 they handled around 115 million tones.

One can see from Table 1 and Table 2 that the total volume of cargo being handled at captive port facilities is far in excess of cargo handled at greenfield private ports.

The government has two alternatives. The first is to increase the port capacity at captive ports and utilise it for third party cargo handling. This in our view would be a much cheaper option compared to the other alternative of investing huge capital costs in the capacity development of new greenfield private ports.

Typically in the fi rst phase of port project development the capital cost per million tonnes is around 100 crores. Th e fi rst phase capacity could be 15 to 20 million tonnes and a capital outlay of around 2000 crores is envisaged. A signifi cant investment goes towards creation of break waters, rail and road connectivity and capital dredging. In the second phase of Port project development where capacity has to be enhanced beyond 20 million tonnes, most of the capital investment would be in form of berth capacity creations, equipment and back-up area development. This entails a cost of 40-60 crores per million tonnes capacity enhancement, depending upon the type of commodity and extent of mechanisation used for port facility development. Therefore, captive port facilities that have developed port infrastructure, have break waters, capital dredging and connectivity are in a much better position to augment their port capacity at a cost of roughly 50 per cent of greenfield private ports. Further wharf age available to GMB would be much higher in case of captive ports.

Also port capacity creation by two LNG terminals at Dahej and Hazira was envisaged and GMB had asked them to create solid cargo capacity along with these two LNG terminals whereby the rational was that two large captive port investments by patronite and Shell would also help in creating additional bulk facilities at these two locations with significantly lesser capital outlay.

Today's environmental laws have become very strict and land acquisition for greenfield port development is increasingly getting difficult; therefore, the government should re-examine its port policy through augmenting captive port infrastructure for third party cargo.

From the table it can be observed that captive jetties handle more than 50 per cent of the cargo handled at GMB. However, in the last few years there was a policy shift towards creating greenfield private ports, which is a laudible objective in itself, but this has led to a declining trend in captive port capacities. The government needs to study this and accordingly enable both captive and multiuser private ports to flourish.

It is also to be noted that a significant size of the cargo at the greenfield private port is actually the captive cargo generated by the major stakeholder/promoter/corporate house. For example, Mundra and Pipapav ports, Adani group and Maersk bring in sizeable captive cargo volumes respectively.

Therefore, the Gujarat government should allow both the types of ports to grow by generating economies of scale. This would be achieved by increasing the efficiency of additional mechanisation, increasing the berth lines, creating better rail and road connectivity, deepening the excess channel, inviting expert port developers/terminal operators to handle specialised cargo at captive facilities while at the greenfield multi-user ports, industries can be encouraged to set up captive cargo handling facilities.

We believe that government should evaluate its port policy for capacity build up at Gujarat coast and allow captive port facilities to grow and in the process enrich itself. A healthy competition between captive port facilities and greenfield private ports would give rise to creation of both efficient and a scalable port infrastructure in Gujarat.