Earlier this month, the Indian cabinet approved the setting up of a new port at Sagar Island in West Bengal that will be controlled by the central government. The new port may take at least five years, if not more, to become operational, given the pace at which infrastructure projects are developed in India because of the complexities involved in various regulatory approval processes.
Nevertheless, the clearance for the new port could have a significant impact on the future of the nearby Kolkata port, India’s only riverine port and one that’s closely linked to the country’s colonial history. Built by the East India Co., this was the premier port in British India.
Kolkata port has been struggling for several years now with low depth caused by heavy siltation in the Hooghly river that impedes ship movement and the resultant drop in cargo volumes. Kolkata’s cargo volume has dropped from a historic peak of 57.32 million tones (mt) in 2007-08 to 39.88 mt in 2012-13.
Kolkata port has two docks—the one at Kolkata has a depth of 7 metres, while the other at Haldia has a depth of 7.5 metres. At this level, Kolkata is the port with the lowest water depth in India.
At the most, Kolkata/Haldia can accommodate Panamax ships—so called because they can transit the Panama Canal fully loaded. Even these ships have to reduce their load by more than half at other Indian ports to be able to dock at Kolkata/Haldia because of depth restrictions.
This under utilization of capacity is a loss to shipowners while customers have to pay extra to ship cargo into and out of the port.
The Sagar Island port will be run as a company without any of the historical baggage associated with the port at Kolkata, which operates as a trust under the Major Port Trusts Act, 1963. Of course, port experts have cast doubt over the commercial viability of the new port because of the massive investment involved in building rail or road links to evacuate cargo.
Kolkata’s main problem is dredging.
It spends about Rs.350-400 crore every year just to maintain the water depth at the current level, and the dredging bill is funded by the Indian government that owns the port. The port, as such, is easily India’s biggest dredging customer.
The only beneficiary of this is state-run dredging contractor Dredging Corp. of India Ltd, which earns more than half its revenue every year from the port. This work is given to Dredging Corp. without calling for competitive bids, in line with government policy.
The approval for the new port at Sagar Island comes as the government is thinking hard about phasing out the dredging subsidy given to Kolkata port over a five-year period.
The money given by the government for maintaining the channel of Kolkata port, it is argued, could well be utilized to set up a modern port at Sagar Island. This is clearly an ominous portent for the Kolkata port.
The withdrawal of the dredging subsidy will pose a big challenge. The port doesn’t have the financial muscle to foot the dredging bill on its own. The revenue earned by the port from handling cargo is spent mostly on paying salaries to its 7,000 employees and liabilities of 30,000 pensioners, apart from routine maintenance.
Low levels of mechanization mean that stevedores with political links hold sway over cargo-handling activities. These stevedores buy annual licences from the port worth about Rs.100,000 each but don’t share any revenue they earn with the port.
The irony is that one of the first mechanized berths at an Indian port was set up at Haldia in 1977.
Kolkata’s cargo woes deepened after state-run oil refiner Indian Oil Corp. Ltd shifted base to Paradip port in Orissa, a few years ago, for import of crude oil to feed its Haldia refinery. Crude oil imported on super tankers is pumped from Paradip to Haldia through a pipeline.
On top of this, the workers at Kolkata port are highly unionized, with the ranks being a stronghold for the Left parties and now the Trinamool Congress as well that governs the state.
It’s no surprise then that Kolkata has witnessed the lowest level of private participation in cargo handling after the Indian government opened the ports sector to non-state entities in the late 1990s.
Only two private berths are currently operating at the port and both are at Haldia, where the depth is marginally deeper than in Kolkata.
Operation and maintenance contractors such as Haldia Bulk Terminals Pvt. Ltd abandoned the project in October, just two years into the 10-year contract citing the worsening law and order situation at the port.
The port has issued tenders for developing at least four cargo-handling berths with private funds but port operators have stayed away from the bidding process because of a high-risk perception.
The message from all this is loud and clear: Kolkata port needs to act fast if it wants to survive. It has to look at ways to trim flab and modernize cargo-handling, particularly containers, if it doesn’t want to be relegated to the status of a barge-handling port. A plan to convert Kolkata into a barge port fell through a few years ago because of opposition from Trinamool Congress, then a key ally of the ruling Congress party-led federal government. Barges require very low depth and can easily call at Kolkata and Haldia.
The port also needs to identify and shut down activities that are not earning any money.
Kolkata’s survival also hinges to a large extent on the commercial utilization of the huge tracts of land it owns. The port is currently in the process of allotting as much as 50 cargo sheds and warehouses of varying dimensions to private parties on an annual-lease basis.
Mumbai port lost is pre-eminence when the government set up the Jawaharlal Nehru port, just a few miles away, in the late 1980s. The Jawaharlal Nehru port now handles significantly more cargo than Mumbai. Will Kolkata port go the same way after the Sagar Island port is developed? India’s oldest port has to figure out what to do before it’s too late.
Source:-www.livemint.com
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