Hey ! I have recently come across an article in Economic Times. I thought of sharing some of the interesting observations.
There was a comparison made between the government run Kandla port and the privately run Mundra port in Gujarat.It turns out that the Mundra Port is excelling a lot more compared to the Kandla port. Mundra loads nearly seven times more cargo compared to Kandla.
The Adani Group which owns the Mundra Port charges up to five times more compared to the Kandla Port. But still the shippers prefer Mundra, this is mainly because of the high quality of infrastructure provided by Mundra in comparison to Kandla. Mundra does charge more but it properly uses the money in improving the Infrastructure which attracts the shippers.
Anand Sharma, director, Mantrana Maritime Advisory, said that "Shippers choose to go to a port with higher charges but better infrastructure than a port that is cheaper but is saddled with poor infrastructure. A cheaper, but clumsy port would eventually make shippers pay more in total end-to-end logistics cost".
(Economic Times, August 3-2014)
So, I think low tariffs do not make a port more attractive, in fact what matters is the infrastructure of the port. The government should start looking into this, may be it should start charging more and use the revenues in modernizing the ports.
Have a good read at:
http://articles.economictimes.indiatimes.com/2013-08-01/news/40963238_1_mundra-kandla-port-trust-adani-port
http://m.economictimes.com/advantage-pvt-easier-tariff-guidelines-for-govt-run-ports-not-sufficient-to-revive-them/articleshow/39493701.cms
There was a comparison made between the government run Kandla port and the privately run Mundra port in Gujarat.It turns out that the Mundra Port is excelling a lot more compared to the Kandla port. Mundra loads nearly seven times more cargo compared to Kandla.
The Adani Group which owns the Mundra Port charges up to five times more compared to the Kandla Port. But still the shippers prefer Mundra, this is mainly because of the high quality of infrastructure provided by Mundra in comparison to Kandla. Mundra does charge more but it properly uses the money in improving the Infrastructure which attracts the shippers.
Anand Sharma, director, Mantrana Maritime Advisory, said that "Shippers choose to go to a port with higher charges but better infrastructure than a port that is cheaper but is saddled with poor infrastructure. A cheaper, but clumsy port would eventually make shippers pay more in total end-to-end logistics cost".
(Economic Times, August 3-2014)
So, I think low tariffs do not make a port more attractive, in fact what matters is the infrastructure of the port. The government should start looking into this, may be it should start charging more and use the revenues in modernizing the ports.
Have a good read at:
http://articles.economictimes.indiatimes.com/2013-08-01/news/40963238_1_mundra-kandla-port-trust-adani-port
http://m.economictimes.com/advantage-pvt-easier-tariff-guidelines-for-govt-run-ports-not-sufficient-to-revive-them/articleshow/39493701.cms
5 comments:
I would like to add another point. Not only developing port infrastructure but also they should concentrate on connectivity of ports with major cities for easier evacuation of cargo from the port which makes the port more efficient.
hey regarding the lack of development of kundra port,I dont think its because the government didnt invest more.
The bidding was done to develop a terminal.Mumbai-listed ABG Infralogistics won the deal in 2006 to set up a container loading facility at Kandla Port with a capacity to load 600,000 standard containers a year.
However, on 5 November 2012, just six years into the 30-year contract, Kandla Port issued a termination notice on ABG after the firm failed to fulfil a key obligation on handling the contractually-mandated minimum guaranteed volumes at the terminal for the last three years beginning 2008.
Four days later, ABG served a termination notice to the port citing default of the port to fulfill its obligations under the agreement signed in June 2006 on dredging, night navigation and rail connectivity.
This is the first instance of a union Government-owned port been asked to pay lenders money(of 110 crores) on a failed public-private-partnership (PPP) port contract.This resulted in reliability issues regarding port facilities and administration.
Reference:http://www.dailyshippingtimes.com/news-upload/upload/fullnews.php?fn_id=5842
The link provided by Vishnupriya lists that ABG failed to comply with minimum volume of loading. While ABG claims the state failed on 27 counts which include dredging, night navigation, rail connectivity and back-up land. All of which point to poor infrastructure which cannot be achieved without investing lot of money as well as carrying out operations efficiently.
Had the government outsourced some more related activities to ABG, for example night navigation under the purview of ABG, it could have helped them in optimizing it to fulfill their contractually mandated volumes.
One of the solutions could be that before entering into PPP, the government should identify interdependent activities and try to allot them in such a way that it facilitates operations.
That’s the difference between private and public models, government boards, as they are answerable to people they are restricted from taking bold decisions rather they choose to adopt safest path. Only way out of it is to give complete autonomy to the boards of port in terms of financial, recruitment, operational etc and allow them to take bold profit oriented decisions.
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