Week ending August 20, 2001


News on Ports

P&O Ports, which bagged the development and management of the container terminal of Chennai Port Trust, would invest USD170 million in phases to enable the terminal for handling of mainline vessels calling at the port. As per the agreement, P&O Ports would develop and manage the terminal for the next 30 years and would pay 37.12 per cent of total earnings from the terminal to Chennai Port Trust as royalty. The Chennai container terminal, which presently handles 0.3 million TEUs annually, would increase its productivity to 0.8 million TEUs in three stages within the next five years.

Haldia Dock (HDC) authorities has received good response from four firms bidded for its offering of Berth no. 11 on BOT basis. Four firms viz. P&O Ports, SICAL, Sea Consortium Pte of Singapore along with Gokak Patel & Company and Ripley & Co. in partnership with Marterd Holdings of Germany have been selected by the HDC authorities for the project. Finalisation of the bidding process is expected to be over within a month.

Meanwhile, HDC authorities is expecting the Ministry of Shipping's approval for the selecting Tisco-Mertred consortium for the construction and running of Berth no. 12 to on BOT basis. The draft agreement signed between HDC authorities and International Seaport Private Limited for the construction of Berth no. 4A on BOT basis is also awaiting the clearance of the Union Ministry of Shipping.

Ministry of Shipping has identified Jawaharlal Nehru port (JNP) and Chennai port for development as hub ports. As per the Ministry, the recent awarding of the container terminal of Chennai port to P&O ports for 30 years period was a step towards that direction.

The surge in traffic during the beginning of Q2 in the current fiscal has helped Visakhapatnam port to recover 11 per cent loss in traffic during the first quarter. The port has been able to handle 14.7 million tonnes of cargo by the end of July 2001 vis-a-vis 15.5 million tonnes handled during the corresponding period of the last fiscal and thereby crossed the target of 13.87 million tonnes set by Ministry of Shipping for the port. However, traffic growth at the 12 major ports has received a set back in the first four months of the current fiscal after combined throughput was recorded at 90.9 million tonnes as against the target of 92 million tonnes and last year's performance of 94 million tonnes. The drop in POL products traffic from 37.5 million tonnes handled during the first four months of 2000-01 to 34.1 million tonnes during coresponding period of the current fiscal has been the prime reason for this overall shortfall.

Tariff Authority for Major Ports (TAMP) has appointed a special agency to check the cross-subsidisation of services at major ports. The agency would undertake a detailed study about the financial structure and working of the major port trusts and will work out various options to reduce the cross subsidisation by applying corrective measures. TAMP has planned to rationalise the disparity prevalent in the cost structure amongst the major ports to make it equal for all. It will also examine the option of keeping the cross-subsidisation of services at lowest possible level or complete elimination of that.

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News on Shippings

India Steamship Company, the K.K. Birla group shipping firm, has planned to invest Rs. 6.25 billion over the next nine years for expanding its fleet. The investment plan of the company, which includes acquisition of five Panamax carriers and four tankers of different sizes, would hike its tonnage capacity from 0.1 million tonnes to 0.5 million tonnes in phases and would be financed through internal accruals and borrowings. The company, which has recorded Rs. 15.2 million net profit in the last fiscal, would transfer the entire net to the Ship Acquisition Reserve.

Meanwhile Securities & Exchange Board of India (SEBI) has granted special permission to India Steamship for the allotment of preferential shares to the promoters leading to the increase of promoter's stake to 78.83 per cent. The decision has helped the company to settle its huge dues to the creditors through one-time settlement scheme, where the entire outstanding debt of over Rs. 2.0 billion was settled at around Rs. 750 million including a cash return of Rs. 456.2 million and surrender of all immovable properties valued at Rs. 119.7 million.

Inland waterways, which is looking for much needed support from the corporates to increase its traffic, has got several offers from 26 Indian companies like Hindustan Lever, Numaligarh Refinery, Oswal Chemicals and others for moving part of their cargo through different national waterways. Out of around 3.5 million tonnes of assured cargo to be moved on the three national waterways (NW),1.05 million tonnes is likely to be moved through the upstream of NW-1, while downstream movement along the same route is likely to be around 1.18 million tonnes. The upstream movement majorly includes 0.35 million tonnes of DAP from Haldia to Allahabad by Oswal Chemicals, 0.15 million tonnes imported coke from Haldia to Varanasi by Malvika Steeland, while urea, SSP, silica sand, coal and dolomite are identified as the key downstream cargo. NW-2 along the river Brahamputra in Assam is likely get around 55,000 tonnes on upstream, while downstream movement accounts to be around 0.5 million tonnes, which includes 36,000 tonnes of POL product movement by Numaligarh Refinery from Dhansiri to Budge Budge and timber from Guwahati/Dibrugarh to Patna. POL cargo, roiginating from Kochi is likely to dominate the traffic on the NW-3 where all the three major oil PSUs viz. HPCL, IOCL and BPCL assured around 37,000 tonnes, 10,000 tonnes and 37,000 tonnes of POL traffic.

Greenfield Shipping Company, promoted by Mitsui-Enron-SCI consortium for the transportation of LNG for Dabhol Power Company (DPC), is likely to arrange an additional USD55 million to expedite the acquisition of its LNG carrier 'LNG Laxmi' currently under construction at the Mitsubishi yard in Japan. The ongoing fiasco about the Dabhol Power Company with threat from Enron to withdraw from the project has resulted into the denial for advancement of more funds by the consortium of 14 international bankers funding the project. The bankers, who have already given USD110 million out of a total commitment of USD165 million for the acquisition of the vessel, has opposed to give any more fund because of the uncertainty about the repayment of the loans and have declared 'Event of Default' in view of the fate of DPC. As a result, SCI and Enron, who have 20 per cent equity stake each in the company, would have to invest another USD11 million each; while Mitsui, which holds the balance 60 per cent equity stake, will be required to put another USD33 million.

Major shipping lines like Evergreen, P&O Nedlloyd, Mitsui OSK Lines and others have started to bypass the Colombo port of Sri Lanka due to increase in war risk insurance premium. As a result, cargo carried by Colombo feeder operators between Indian ports and Colombo are likely to get diverted to Singapore to catch the mother vessels.

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News on Logistics

Concor has kicked off a massive Rs. 14 billion capex programme to strengthen its position in the increasingly important container business. It has earmarked Rs. 4.5 billion for terminal development (including the development of Dadri termainal at an estimated cost of Rs. 3.0 billion) and Rs. 7.0 billion for maintaining and acquiring rolling stocks, while Rs. 800 million would be spent for acquisition of containers. While, Rs. 1.2 billion would be spent for modernising and acquiring handling equipments; Rs. 500 million was allocated for implementing latest Information technology. Part financing of the programme to the tune of Rs. 3.0 billion would be done through internal accruals and cash balance thereby leading to a possible dip in ROCE from around 28 per cent to 21 per cent. The company has planned to acquire1,100 wagons in the current fiscal followed by another 1,200 wagons in the next fiscal. Thereafter, it would acquire 1,000 wagons in every subsequent year.

Meanwhile, Concor has planned to invest Rs. 40 million at its Sabarmati ICD for the development of two 6,000 sq. mtr. warehouse and a 30,000 sq. mtr. paved area for stacking of containers. Sabarmati ICD, which has recorded around 36 per cent & 37 per cent rise in export and import traffic in the last fiscal, would utilise 3,000 sq. mtr. of the proposed paved area for bonding of cargo. The recent commissioning of Conraj high speed container rake between Ahmedabad and JNPT / NSICT has boosted the traffic growth in the region leading to shifting of traffic from Mumbai to Ahmedabad.

In order to initiate the process for the proposed SEZ near JNP at Navi Mumbai, CIDCO, the agency of Maharashtra state government, has hired the service of Arthur Andersen-led consortium for the preparation of a business plan to find a strategic partner for setting up of the SEZ. The proposed SEZ project, which would be located at Dronagiri near Jawaharlal Nehru port with an area of 4,300 hectares, would be equipped with modern communication systems and is expected to cost around Rs. 22 billion at an IRR of 22-24 per cent under various scenario. The selected consortium will submit the plan by October 15, 2001 and would help the government to attract investors on a success fee basis.

Engineers India Limited and Bridge & Roof Company have signed a MoU (Memorandum of Understanding) to co-operate in taking up highway and bridge projects planned by various organsiations like NHAI, Ministry of Road Transport & Highways and others.


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