Eighty Percent Of Essar Ports Earnings Will Be In Dollars: Ceo

1-Jul-2013

Essar Ports, India's second-largest private sector port and terminal operator, has said it is moving towards a system where almost all its customers will pay it in US dollars. The company has recently begun the process of migrating to a dollar tariff structure, its chief executive Rajiv Agarwal said in an interview.



"Some of the customers we are working for have income in dollars. They have a dollar balance sheet. Because the pricing is dollar denominated, for example, steel," Agarwal said. "Customers will have to pay tariff in dollars, which will then be converted into rupees at the prevailing exchange rate. So if the rupee becomes 65 to the dollar, then I get 65 rupees, if it is 55, I get 55."



Essar Ports started charging in dollars at its Salaya port a while back. "Eighty percent of total earnings will be in dollars," Agarwal said.



Essar will be the second port operator after Gujarat Pipavav shipyards to start moving away from rupees while charging tariff. The company, which operates terminals at Vadinar, Hazira, Salaya and Paradip among others, mostly handles coal and bulk cargo imports apart from container traffic.



India's container cargo industry has been going through a spell of privatization of late, with international companies including Maersk and DP World setting up shop in India. This traffic has grown at an average rate of 13.27 per cent per year at India's major ports. Globally, container traffic has grown at around 10 per cent over the last 20 years.



The development also comes at a time when India's rupee has plunged to a record low against the US dollar. Last week, even exporters in India rang alarm bells about the rupee.



The Federation of Indian Export Organisation (FIEO) in a statement last week urged India's exporters to use derivatives as a hedge to combat rupee volatility. Charging tariff in dollars will create a natural hedge for Essar Ports, Agarwal said.



The Essar Ports stock has lost 19.64 per cent, falling from Rs 89.1 to Rs 71.6 in the last three months on the Bombay Stock Exchange. The company declared net profit of Rs 331.6 crore on revenues of Rs 1,434.6 crore in FY13.

Source:-businesstoday.intoday.in