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Essar Ports, Adani Ports vie for eastern coast projects - 2013-06-07

Two of the country's largest port operators — Essar Portsand Adani Ports and Special Economic Zone — have been vying to take control of port projects on the east coast that promise better growth potential than the ones on the west coast. While Adani Ports have held discussions with Dhamra Port to acquire a majority stake, Essar Ports won the right to develop three iron ore berths at Vishakhapatnam port for more than Rs 800 crore. Dhamra Port has a natural advantage as the port has adequate draft to handle large vessels.

In addition, Essar and Adani have also bid for developing a Rs 4,000-crore mega container terminal at Chennai port and is also expected to bid for a project at Ennore Port for a container terminal. "The east coast of the country is a mineral rich area while the west coast is a consumption rich area. Container business only contributes to 10%-12% of the total cargo in India. In such a scenario, east coast which handles cargo, including raw materials, minerals and bulk cargo, has huge potential," said Rajiv Agarwal, MD of Essar Ports.

Traffic from the eastern coastline has witnessed a surge and is expected to handle 35% of the country's total cargo by next year, according to industry experts. Ports on the east coast are key gateways for import of coal, iron ore and other cargo, excluding container cargo, and a change in India's trade pattern has also added more potential for port operators. In recent times, China has emerged as the largest trade partner while the trade between India and other south Asian countries, including Singapore and Indonesia, have also been on the rise. "There is a huge potential in the port sector across India. On the east coast also we see potential, but the government needs to put in place enabling infrastructure to make the east coast more attractive," said Rajeev Sinha, Director at Adani Ports.

Essar currently operates two terminals at government-controlled Paradip port for handling iron ore and coal. The company believes that the iron ore terminal in Vishakhapatnam will help it to increase its third party cargo by at least 15%. Adani Ports, meanwhile, had recently said that the company's focus will be on the east coast of the country. It has raised money by offloading its stake in Abbot Point terminal in Australia to invest in port projects on the east coast.

With several major power plants coming up in Chhattisgarh and Jharkhand, the ports in east coast are expected to handle coking coal and non-coking coal imports besides helping in the coastal movement of coal to Tamil Nadu. The shipping ministry had recently decided to set up two new ports on the east coast in West Bengal and Andhra Pradesh to cater to the rising cargo growth in the region. Major ports under government control on the east coast include Paradip port, Vishakhapatnam port, Kolkata port and Chennai port.

"In the short run, ports on the east coast will have to cannibalize into each other as the cargo is coming from a common hinterland. But in the long run, there is a huge potential and India is lacking in terms of port capacity," said Shailesh Garg, director at London-based Drewry Maritime Research.

Source: The Economic Times