3.

0 Traffic Forecast

3.1 Introduction

The complete report on the traffic study conducted by i-maritime has been presented in the
Volume IV of the DPR. Traffic Assessment Report for Gangavaram port summarizes the
forecast of the potential traffic that can be handled over a specified period of time. The traffic
study was carried out on the basis that Gangavaram would be developed as an all weather,
deep water and multipurpose port facility with state of the art cargo handling facilities. Summary
of the Traffic Forecast study is presented in this section.

3.2 Traffic Study for Gangavaram Port

3.2.1 Approach & Methodology

There are two key elements in analysing the cargo traffic coming to at any port - one directed
into and out of the port hinterland and the other by way of transhipment of cargo traffic that is
only handled at the port.

• The traffic study seeks to first identify the hinterland for Gangavaram i.e. primary,
secondary and tertiary for dry bulk, liquid bulk, container and general cargo and then
evaluates the existing and upcoming port capacities competing for same hinterland
cargo.
• Secondly, the report provides an estimate of the transhipment traffic in the East coast.
Using Game Theory, the study depicts the emerging scenario and the forecast traffic for
the proposed port at Gangavaram.

The study report shows the growth rates of various commodities in the hinterland and its
distribution amongst the various competing ports.

Competition in the port sector may be classified as intra-port competition, inter-port competition
and competition between the twin ports. Analysis of past trends based on regression may not
suffice to accurately forecast the future traffic, as this methodology does not take into account
the competitive behaviours of other port projects/ operators. Private players in port sector often
enter into direct negotiations with the shippers for tariffs and priority berthing facilities, which
make the forecast even more difficult. The traffic distribution amongst competing ports would be
a function of not only their own strategies and infrastructure but also of the competing ports.

The methodology involves a detailed Origin-Destination analysis for all the cargo that can
potentially come to Gangavaram port. The OD study here looks at both the hinterland as well as
the ocean distances based on integrated logistics cost analysis. It is being increasingly realized
that the ocean freight is an important determinant for attracting the traffic from a location in the
hinterland as the shippers are increasingly looking at minimizing the overall logistics costs rather

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than just the hinterland logistics costs. The parcel sizes of cargo and also the type and sizes of
ships becomes significant for carrying out the OD study in estimating the traffic potential.

The study has approached India as broadly divided into four cargo hinterland regions - the
Northern region, the Eastern region, the Western region and the Southern region with the
coastlines classified as the Western and the Eastern coastlines. The ports on the Western
coastline have traditionally served Northern hinterland. The study examines the possibility of
shifting Northern hinterland traffic to Eastern ports, more so to Gangavaram port and
Visakhapatnam and the underlying pull factors for the same.

The study also incorporates feedback from a Customer (Shippers and Shipping Lines)
Survey to understand the parameters and their importance in the decision-making process to
benchmark various ports in the vicinity in terms of tariffs charged and facilities provided at the
respective ports.

Desk Research focussed on understanding the past trends and dynamics of the traffic flow,
which will form basis of future traffic analysis. Secondary sources include various publications of
Indian Port Association (IPA), major port trusts; Ministry of Shipping (MoS) etc. Secondary data
collection was limited to updating of the data already available. The secondary data collection
also included information about various other variables like rail-road connectivity and capacity
and linkage issues of the existing network, expansion plans of the existing ports, trends in
shipping and port tariffs, support infrastructure at various ports, commodity profile of the total
cargo etc.

Field Research included collection of data on traffic and customer requirements survey. The
data analysis undertaken includes interpretation of individual data and their inter-relations and
how they impact the growth and flow of traffic.

The Logistics Costs Analysis undertaken in the study takes the approach that shippers are
likely to use port facilities provided overall logistics costs consisting of inventory cost, land
transportation –rail or road costs, port costs e.g. cargo handling, storage and marine costs and
ocean freight are cheaper than that of other ports. After identifying the possible cargo originating
- destination points and their respective volumes, the study calculates the total logistics costs of
cargo handling from competing ports. (In this case it would mainly be Visakhapatnam, Paradip
and Kakinada). Shippers are likely to use Gangavaram port only if its logistics costs are lower
vis-à-vis other ports.

Cargo, which can be handled at the proposed facility, has been identified from the available
cargo in the hinterland based on the logistics cost advantage on the current and future basis. At
the same time plans of other ports for upgrading their facilities by better access through rail or
road, modernising the equipment to increase handling rates, deepening the channel to

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 accommodate the larger ships and using information technology to improve productivity thereby
lowering their costs have also been considered.

3.2.2 Overview of Indian Ocean Trade

India currently accounts for nearly 3% of total world’s seaborne trade by volume, though in
terms of value, its share is less than 1%. The major components of Indian seaborne trade are
POL (import of crude oil), iron ore (exports mainly to Japan and China), coal (imports from
Australia, South Africa), and fertilizers.

India’s major trading partners are EU, US, Japan and China and it is with these countries that
India’s maximum seaborne trade takes place. An emerging trend in recent years has been
India’s growing trade with China and ASEAN countries thus benefiting ports that are nearer to
these regions. Emergence of China as a leading importer of commodities has led to the surge of
commodity exports especially that of iron ore from India to China in recent years. This factor has
played a leading role in increase of cargo from East coast over last few years.

The Indian ports handled around 419.02 million tons of cargo during 2002-03, with the major
ports handling 313.53 million tons and the minor ports approximately 105.40 million tons.

The Indian seaborne trade (including both major and minor ports) has increased at a CAGR of
around 8% from 165.63 million tonnes in 1990-91 to around 419.02 million tonnes in 2002-03
due to increasing trade, gradual opening and integration of Indian economy with the rest of the
world and increasing pace of growth. The growth in traffic handled at major ports has been
around 6.2% CAGR during this period while minor ports have registered an impressive growth
of around 19.2% from 12.78 million tonnes in 1990-91 to around 105 million tonnes in 2002-03.
Though the pace is not even across all components of the seaborne trade, some components
such as POL (especially crude oil imports) and containers have grown more rapidly as
compared to dry bulk, though off late dry bulk has also started catching up.

3.2.3 India’s Dry Bulk Trade

The dry bulk traffic in Indian Ports constitutes about 46% of the total Indian maritime traffic. The
growth of dry bulk cargo traffic in East coast ports is more than that of West coast ports on
account of India’s rising trade with China and other ASEAN nations, as shown in Table 3.1.
However, Visakhapatnam is growing slowly in terms of cargo traffic growth as compared with
other major ports situated on the East coast. Even if the cargo grows at a CAGR of 5% for the
next ten years, the study forecast for Visakhapatnam envisages a tonnage growth of around 30
million in the next 10 years.

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 Table 3.1: Dry Bulk Traffic at Indian Ports

Dry Bulk Traffic at Indian Ports

(000 Tons) CAGR
1992-93 1997-98 2001-02 2002-03 1-yr 5-yr
Major Ports All India 83,130 115,889 135,674 148,337 9.3% 5.1%
Major Ports East Coast 46,860 72,550 88,896 98,754 11.1% 6.4%
Minor Ports East Coast 2,416 2,551 1,000 675 -32.5% -23.3%
Total East Coast 49,276 75,101 89,896 99,429 10.6% 5.8%
Major Ports West Coast 36,270 43,339 46,778 49,583 6.0% 2.7%
Minor Ports West Coast 10,330 30,353 41,868 44,993 7.5% 8.2%
Total West Coast 46,600 73,692 88,646 94,576 6.7% 5.1%
All India Total 95,876 148,793 178,542 194,005 8.7% 5.4%

Apart from the economic factor another important factor in determining cargo at Indian ports has
been the proximity to industrial areas and technological changes as it has resulted in cargo shift
from one Indian port to another and this is expected to be so in future too as some ports in India
are restricted by natural constraints. Emergence of China as a leading importer of commodities
has led to the surge of commodity exports especially that of iron ore from India to China in
recent years.

There are also other technological changes leading to deeper draft requirement at ports,
changes in berths and channel design and depth, that have led to the change in seaborne trade
pattern. Consequently, this technological shift is the requirement of huge investment in port
infrastructure and design so as to be able to handle larger vessels.

3.2.4 Gangavaram Port

Gangavaram, located 15 km South of Visakhapatnam city, intends to develop itself as the

premier port in the region with a strong focus on the dry bulk cargo. Being on the East coast of
India, this port would be closer to China, Japan, and the ASEAN nations. With the increase in
trade with other Asian countries, Gangavaram has the potential to act as a gateway port for the
Eastern Region.

The study has segmented this hinterland into primary, secondary and tertiary. Primary
hinterland comprise of certain parts of Andhra Pradesh (AP), parts of Chhattisgarh and parts of
Orissa, while secondary hinterland will comprise of some parts of Maharashtra apart from parts
of AP, Chhattisgarh and Orissa. Tertiary hinterland will comprise of part of MP apart from parts
of Maharashtra, AP, Chhattisgarh and Orissa.

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 Commodity Center Type of Hinterland
Iron ore Bailadila Primary
Foodgrains North India Primary & Tertiary
Iron & steel VSP & SAIL Primary
Alumina NALCO Secondary
Containerised spread Primary & Secondary
Coking coal VSP & SAIL Primary
Met. Coke Jesw al Neco Primary
Limestone VSP Primary
Crude HPCL Primary

3.2.5 The ‘Twin Ports’ Concept

It has to be noted that the hinterland is common for both Visakhapatnam and Gangavaram
Ports. Hence these two ports have to co-exist as complementary to each other. This is not
uncommon.

Precedence exists in the twin ports pattern of Mumbai, Kolkata, Chennai and Kandla, where two
ports handle common hinterland traffic. Jawaharlal Nehru Port and Mumbai Port (Mumbai),
Haldia and Kolkata Port (Kolkata), Ennore Port and Chennai Port (Chennai) and Mundra and
Kandla Port have been successful in coexistence and augmenting the total capacities at these
locations.

Visakhapatnam port has its constraints in handling additional cargo beyond a certain limit. It
had plans to expand its capacity by reclaiming land and thereby creating an outer - to - outer
harbour (O to O project). However for creating this harbour huge breakwaters are required.
Visakhapatnam port has another problem of draft in inner harbour, which cannot handle fully
loaded Panamax vessels. Deepening of navigation channel to inner harbour is difficult as
Dolphins nose is a hindrance and inside turning circle is above the V-shaped rock and blasting
of this rock is very difficult.

Shipping and port technological changes are demanding deep draft port with modern handling
equipments for better discharge rate and less berthing time. To achieve economies of scale with
increasing trade, bigger vessels are getting constructed which demands deeper draft and better
handling facilities. Looking at the cargo growth in the proximity of Visakhapatnam and
examining the global shipping port development trends, Visakhapatnam requires a deep draft
port equipped with modern handling infrastructure. For Visakhapatnam port, It is not possible to
upgrade its facilities very easily.

The study suggests that there is a need to have another port, which could decongest the
existing traffic at Visakhapatnam Port. Gangavaram port could fill this need and could emerge

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 as a viable supplement and alternative to Visakhapatnam Port. Gangavaram port’s position as a
twin port with superior facilities to Visakhapatnam port is a step in the right direction.

Newly established ports have performed better than the existing ones. The research shows that
the chances of success for a new port facility being set up near a major port are much higher
than a stand alone green field port project. The new port can leverage on the existing road and
rail connectivity and the logistics for shippers will not be substantially altered.

3.3 Traffic Projections for Gangavaram Port

3.3.1 General

The traffic study examines each of the commodities discussed above and works out the reasons
and possibilities of these commodities being shifted to Gangavaram. Bulk of the commodities
come from primary hinterland, where presently Visakhapatnam port is the sole port handling the
export and import traffic of these commodities. With the setting up of Gangavaram port, the
study expects the surplus traffic coming from increased hinterland traffic as well as from the shift
in traffic from Visakhapatnam port. The individual commodity analysis is undertaken, which
provides a broad overview of the commodity and traffic, with depiction of origin and destination
analysis and traffic forecasts.

3.3.2 Iron Ore

The study tries to develop an understanding of locations, reserves and connectivity of iron-ore
mines with respect to Indian ports and Visakhapatnam. The iron ore port traffic at Indian ports
went up from 32 million tons in 1991-92 to 51 million tons in 2002-03 with a CAGR of 4.3
percent. The major part has been exports, which stood at around 35 million in 2002-03. The
export is mainly to Japan, China and South Korea. This has made a significant contribution to
the cargo handled at the ports on the East Coast of India, particularly Paradip and
Visakhapatnam.

Visakhapatnam, with overseas linkages to Japan & China, sources iron ore from Bailadila mines
in Chhattisgarh for export. The mine is located 475 km away from the port. The port exports iron
ore in the raw form as well as pellets through the OB-1 and OB-2 berths, located in the outer
harbour capable of handling capsize vessels. It also exports iron-ore from inner harbour. The
port also exports iron ore from the mines at Ongole (AP). There is also coastal movement of
iron ore from this port to the minor ports in Gujarat & Maharashtra for catering to the
requirements of some of the steel plants located on the west coast of India, which include Essar
Steel, Ispat industries and Vikram Ispat. From 1990-91 till 2002-03, the iron-ore traffic has
grown at a CAGR of 5%.

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The break-up of iron ore exports from Visakhapatnam is presented hereunder:

Destination Quantity in tons Percentage of total

Overseas
Japan 3,387,185 43.7
China 1,511,158 19.5
Total Overseas 4,898,343 63.1
Coastal
Dharamthara 1,122,381 14.5
Magdalla 768,910 9.9
Revdanda 344,822 4.4
Mumbai 311,788 4.0
Hazira 230,041 3.0
Bhavnagar 82,006 1.1
Total Coastal 2,859,926 36.9
Overall Total 7,758,269 100

Essar is expanding its capacity and has started setting up a slurry pipeline conveyor from
Bailadila mine to its plant located in Visakhapatnam port area. Once this pipeline becomes
functional next year onwards, additional rake handling capacity will be available on the route.
Allocation of rakes has been taken as a constraint and the forecast has taken this into
consideration. The study assumes that the system can easily handle 12 million tons at
Visakhapatnam but congestion is expected, which would result shift of cargo from
Visakhapatnam to Gangavaram port.

As regards Japan and other countries, it is assumed that Gangavaram port will get only the top-
up demand i.e. additional demand, which will come after 2008. As regards China, it has been
assumed that Gangavaram port will take 50% of the total cargo coming to Visakhapatnam/
Gangavaram port.

The positive factor for Gangavaram port is that it would come up with state-of-art facilities, which
can provide improved loading at economical rates.

This cargo will come to Gangavaram only if all the concerns of the iron-ore exporters like,
availability of staking area close to berths, railway connectivity, etc. are addressed. The port will,
however, need to consider the cost of providing very high loading rates as against the quantum
of cargo. The port may initially provide basic equipments that can satisfy the exporters and then
as and when cargo increases add additional sets of equipment to increase the berth
throughputs. The traffic forecast for Iron ore at Gangavaram Port is provided in Table 3.2 below:

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 Table 3.2: Forecast of Iron ore traffic at Gangavaram port

Visakhapatnam / Gangavaram (mn tons)

Coastal (pellets) (mt)
Coastal (iron ore) (mt)
Japan & Other Countries (mt)
China (mt)
Total
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
2.60 2.78 2.98 3.19 3.41 3.65 3.90 4.18 4.47 4.78 5.11 5.20 5.20 5.20 5.20
2.80 3.00 3.21 3.43 3.67 3.93 4.20 4.50 4.81 5.15 5.51 5.60 5.60 5.60 5.60
3.40 3.40 3.40 3.40 3.40 3.47 3.55 3.64 3.73 3.83 3.92 4.02 4.12 4.22 4.33
2.00 2.45 2.78 3.15 3.56 4.02 4.54 5.11 5.10 5.12 5.04 5.10 5.02 5.55 6.12
10.80 11.63 12.37 13.17 14.04 15.07 16.19 17.43 18.11 18.88 19.58 19.92 19.94 20.57 21.25

Gangavaram (mn tons)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Coastal (iron ore) (mt) 1.18 1.47 1.80 2.16 2.57 2.75 2.80 2.80 2.80 2.80
Japan & Other Countries (mt) 0.07 0.15 0.24 0.33 0.43 0.52 0.62 0.72 0.82 0.93
China (mt) 2.01 2.27 2.56 2.55 2.56 2.52 2.55 2.51 2.78 3.06
Total 3.26 3.89 4.60 5.05 5.56 5.79 5.97 6.03 6.40 6.79

3.3.3 Iron & Steel

During 2002-2003, India exported 4.15 million tons of iron and steel (0.58 million tons pig iron
and rest as finished steel) registering a growth of 15 percent over that of 2001-02, which stood
at 3 million tons. This increase was mainly due to 36 percent increase in the export of finished
steel of 3.7 million tons in 2002-03 over that of previous year. India has been annually importing
around 1.5 million tons of steel. Imports have largely dropped (from 2.2 million tons in 1999-00
to 1.5 million tons in 2002-03), partly an indication of greater self-sufficiency and partly the
ability to control inflow of seconds and defectives. The bulk of trade in iron and steel products is
through the major ports, but minor ports particularly in Gujarat are also being increasingly used.
Mumbai, Visakhapatnam, Kolkata and Kandla ports jointly handle more than 80 percent of the
iron & steel traffic.

Steel products exported at Visakhapatnam Port are procured mainly from VSP and SAIL. A
direct railway line connecting Durg - Raipur - Vizianagram - Visakhapatnam is used for
transporting steel from SAIL Bhilai plant. Finished steel is mostly exported to China, Philippines,
Sri Lanka, and Korea. The trend of steel export is expected to continue with present parcel
sizes.

As Gangavaram port is logistically closer to VSP the entire cargo of VSP will shift to
Gangavaram port. Logistically Visakhapatnam port is around 26 km away from VSP, whereas
Gangavaram port is almost adjacent to VSP.

As regards Bhilai steel plant, it has been assumed that initially 20% of Bhilai steel cargo will
shift, which will increase to 30% and after stagnating at that level for 2 years it would increase to
40% and finally to 50%.

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 The forecast is based on the assumption that Gangavaram port would provide better handling
facilities. Moreover as several commodities are handled at the same berth as iron and steel
products, some congestion is expected at Visakhapatnam port. Gangavaram port would be free
from such congestion. The traffic forecast for Steel Products at Gangavaram Port is provided in
Table 3.3 below:

Table 3.3: Forecasts of traffic in Steel products

(mn tons)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Steel Products / Pig iron
- VSP 0.9 0.9 1.3 1.3 1.3 1.3 1.3 1.7 1.7 1.7
- SAIL 0.5 0.6 0.6 0.7 0.7 0.8 0.8 0.9 0.9 1.0
Gangavaram from SAIL 0.1 0.1 0.2 0.2 0.3 0.3 0.4 0.4 0.5 0.5
Gangavaram (SAIL + VSP) 1.0 1.0 1.5 1.5 1.6 1.6 1.7 2.2 2.2 2.2

3.3.4 Food grains

Food grains form about 5% of total traffic at Visakhapatnam port.

India is the 3rd largest producer of food grains in the world and its estimated food grain
production in 2003 at around 182 million tons, accounts for 9 percent of total world’s food grain
production. India’s food grains exports (rice and wheat) at the end of 2002 was 9.46 million tons
up 78 percent over that of 2001. During the period 2000- 2002 India’s exports of food grains
have nearly become three and half times from 2.675 million tons in 2000 to 8.51 million tons in
2002 due to ease of restriction on food grains export quota norms, and indirect subsidy to the
exporters on exports from stock of Food Corporation of India (FCI).

Visakhapatnam port is identified as one of the major gateway ports for the export of food grains
from the East coast of India. Food grains exported from Visakhapatnam port is procured mainly
from Punjab and Haryana. From Visakhapatnam port, wheat is dispatched to Philippines,
Indonesia, and Korea whereas rice is dispatched to Philippines, Indonesia and Nigeria. A direct
railway line connecting Punjab - Jhansi - Bhopal - Itarsi - Nagpur - Warangal - Vijaywada -
Visakhapatnam is used for transporting food grains from Punjab to Visakhapatnam port.

Given the comfortable situation of food stock in India, the exports of food grains from India can
be expected to go further up.

The study assumes that by 2008 around 2.2 million tons of food grains will come to
Visakhapatnam/ Gangavaram port, which will increase to 4.6 million tons by 2017. Further, it
assumes that 50% of the cargo will go to Gangavaram port, if the facilities are adequate.

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 As food grains export is dependent on various factors such as monsoon, rail rakes availability,
government policies etc. it is difficult to associate a large chunk of food grains export through
any port like Gangavaram port. At times, the government has also exported food grains
produced in northern states through Tuticorin. Therefore availability of rail rakes and other
factors become more prominent instead of logistics and other costs. The traffic forecast for
Food grains at Gangavaram Port is provided in Table 3.4 below:

Table 3.4: Forecast of food grains traffic at Gangavaram port

(mn tons)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Foodgrains 1.08 1.17 1.26 1.36 1.47 1.59 1.71 2.00 2.16 2.33

3.3.5 Coking Coal

India’s requirements of Coking coal is increasing. The domestic coking coal production in India
has decreased in past few years and has stagnated around current levels in the last two years.
This is going to help Visakhapatnam as majority of coking coal (over 90%) at present in India is
imported from Australia and Visakhapatnam being on the East coast is nearer to Australia and
in future too it will continue to be the main supplier of coking coal to India.

In 2002-03 Visakhapatnam port handled around 6.3 million tons of coking coal with 95% of this
being imported from Australia. Out of this around 3.5 million tons was for SAIL and around 2.8
million tons for VSP. It has increased from 2000-01, where the coking coal handled was around
4.7 million tons.

The break-up for different originating countries is as follows:

Origin Quantity in tons Percentage of total

Overseas
Australia 6,143,443 98.0
New Zealand 79,125 1.0
China 46,200 0.7
Canada 20,280 0.3
Total Overseas 6,288,048 100
Coastal Nil Nil

As per expansion plans of VSP, they would be producing around 5 million ton of hot metal by
2007-08, around 7.5 million tons by 2009-10 and around 10 million tons by 2014-15. This would
require about 4.5 million tons of coking coal by 2007-08, 6.8 million tons by 2009-10 and around
9.1 million tons by 2014-15. Apart from the capacity expansion plans, some de-bottlenecking is

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 likely which may increase the production capacity. Therefore, it is assumed that there would be
an increase of 7% from 2003 till 2007 before the expansion in capacity comes up in 2008. As
per expansion of Bhilai steel plant, it has been assumed that the increase in production would
be mainly due to de-bottlenecking of existing operations and not owing to any addition of
capacity.

Due to logistical advantages, better handling facility and facility to handle capesize vessels,
entire VSP and SAIL cargo will shift to Gangavaram. The traffic forecast for Coking coal at
Gangavaram Port is provided in Table 3.5 below:

Table 3.5: Forecast of coking coal at Visakhapatnam and Gangavaram port

(mn tons)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Coking Coal
- VSP 2.8 3.0 3.2 3.4 3.7 4.5 4.5 6.8 6.8 6.8 6.8 6.8 9.1 9.1 9.1
- SAIL 3.5 3.7 4.0 4.3 4.6 4.9 5.3 5.6 6.0 6.4 6.9 7.4 7.9 8.4 9.0
Gangavaram 9.4 9.8 12.4 12.8 13.2 13.7 14.2 17.0 17.5 18.1

3.3.6 Metallurgical Coke

Metallurgical coke is used in foundries and Visakhapatnam port alone is currently handling this
for Jeswal Necco Company located in Bhilai. All the quantity is handled at the inner harbour at
Visakhapatnam, which is capable of handling only Handymax vessels. The unloading rate of
Metallurgical coke in Visakhapatnam is very low at 13,000 tons per day as against the world
average of around 40,000 tons per day. Jeswal Necco wants to handle bigger vessels.

There is only one user based in Bhilai, who is procuring metallurgical coke from Visakhapatnam
port and the cargo is welcomed by railways as it is the back cargo for rakes used for export of
thermal coal from Brijrajnagar. Metallurgical coke is handled at various berths and no constraint
can come up as regards handling facilities. Stockpile area is not a constraint as far as storing
the metallurgical coke is concerned.

Metallurgical coke is imported mainly from China, Japan, and Russia at Visakhapatnam port. A
direct railway line connecting Durg - Raipur - Vizianagram - Visakhapatnam is used for
transportation of Met coke used by Jeswal Neco based in Bhilai. The traffic forecast for
Metallurgical coke at Gangavaram Port is provided in Table 3.6 below:

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 Table 3.6: Forecasts of metallurgical coal traffic at Gangavaram port

(mn tons)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Metallurgical Coke 0.6 0.6 0.6 0.7 0.7 0.8 0.8 0.9 0.9 0.9

3.3.7 Limestone

Limestone traffic in Indian ports depends mainly upon imports since Indian limestone production
is inadequate to cater to its domestic demand. With increasing emphasis on industrialization
and infrastructure building, the demand for cement is expected to go up while Indian limestone
production is stagnating at current level of production thus leaving it for imports to bridge the
gap.

Limestone is handled at outer harbour GCB berth at Visakhapatnam, where Panamax vessels
are handled. The unloading rate of Limestone in Visakhapatnam is around 14,000 tons per day.
Only VSP in Visakhapatnam procures limestone. Limestone will continue to be handled in
present parcel sizes, but sometimes non-availability of berth forces VSP to call Handymax
vessels. Hence availability of deep draft at Gangavaram port will change the mix of vessels.

At Gangavaram, direct conveyor from port to plant will bring in additional cost savings for VSP
whereas Visakhapatnam port is about 25 km away. Hence it is expected that the entire cargo
would shift to Gangavaram port because of logistics advantage.

In 2002-03, Visakhapatnam imported around 0.36 million tons of limestone, of which, 0.3 million
ton was imported by VSP. But their requirement for the current capacity is around 0.45 million
tons, which is imported in the year 2003-04. As per expansion plans of VSP, they would be
producing around 5 million ton of hot metal by 2007-08, around 7.5 million tons by 2009-10 and
around 10 million tons by 2014-15. Therefore, their requirement of limestone may increase to
0.6 million ton by 2007-08, around 0.9 million ton by 2009-10 and around 1.2 million ton by
2014-15. Thereafter this cargo will remain constant.

Also, limestone is handled in large parcel sizes of around 58,000-60,000. If bigger ships call on
Gangavaram port, then they would prefer to unload in larger ships. The traffic forecast for
Limestone at Gangavaram Port is provided in Table 3.7 below:

Table 3.7: Forecast of limestone traffic at Gangavaram port

(mn tons)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Limestone 0.60 0.60 0.60 0.90 0.90 0.90 0.90 1.20 1.20 1.20

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3.3.8 Crude oil

The total import of crude oil in India has become almost two and half times during the five-year
period from 1997-98 to 2002-03 from 34.49 million tons to 81.99 million tons, a CAGR of 18.9
percent. Crude oil in Indian ports is mainly an import cargo from Middle East and gulf countries.
The crude oil traffic at Indian major ports went up from 29 million tons in 1994-95 to 70 million
tons in 2002-03, a CAGR of 12 percent.

Visakhapatnam port imported 7.5 million tons of crude oil for the 7.5 mtpa oil refinery plant of
Hindustan Petroleum Corporation Limited (HPCL) in 2002-03. Imports are primarily in Suezmax
tankers and coastal traffic from indigenous sources such as Ravva oilfields, Mumbai High
offshore fields and other sources is generally done through LR vessels. The crude is handled at
the Offshore Tanker Terminal (OSTT) at outer harbour of Visakhapatnam port, which is capable
of handling fully loaded Suezmax tankers.

HPCL has a 36-inch dedicated pipeline from the jetty to refinery for import of crude and a 24-
inch pipeline for import of petro-products. These pipelines are around 15 km in length. They
have a separate pipeline for export of LSHS and Naptha from refinery. Apart from these three
pipelines IOC operates one separate pipeline for imports of products.

HPCL is keen to handle VLCCs at Visakhapatnam but there are no facilities. Also, importing
crude oil in VLCC will require additional tanks for which there is no land available at the refinery.
Gangavaram port can establish a Single Point Mooring within its port limits and also provide
additional tankage capacity within its port area so that HPCL can route its crude oil imports
through the SPM at Gangavaram. The traffic forecast for Crude oil at Gangavaram Port is
provided in Table 3.8 below:

Table 3.8:Forecast of Crude Oil traffic at Gangavaram port

(mn tons)
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Crude Oil 8.30 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00

3.3.9 Containers

Container handling in India is presently concentrated in JNP/Mumbai with a 64% share of the
total Indian traffic. The West Coast ports handle about 72% of the traffic with the east coast
ports handling the rest. On the East Coast, Chennai is the leading container handling port with
about 13% share.

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 At Visakhapatnam, Dubai Ports International in association with JM Baxi is operating a
container terminal on BOT basis. During the past 4 years, the annual traffic has been more or
less stagnated at about 20,000 TEUs.

Container cargo is assumed to be growing at 18% per annum in the hinterland of Gangavaram
port. If Gangavaram port sets up equivalent facility then it is expected that 50 % of container
cargo may come to Gangavaram port. The traffic forecast for containerised cargo at
Gangavaram Port is provided in Table 3.9 below:

Table 3.9: Traffic Forecast for Containerised cargo for Gangavaram

Container traffic (mn tons)

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Visakhapatnam/Gangavaram 0.02 0.02 0.03 0.03 0.04 0.04 0.05 0.06 0.07 0.08 0.10 0.12 0.14 0.16 0.19
Gangavaram 0.02 0.03 0.03 0.04 0.04 0.05 0.06 0.07 0.08 0.09

3.3.10 Thermal Coal

NTPC is in the business of power generation (both thermal and gas based), operating at 20
locations across India and it is the major importer of thermal coal. Its Simhadri power plant,
near Visakhapatnam port, has an installed capacity of 1000 MW. It procures around 5 million
tons of F-grade coal from Talcher and Mahanadi coalfields of Orissa, which are about 557 km
away from the plant by rail.

VSP also procures 1.5 million tons of Thermal coal from the Talcher coal mine and its current
method of procurement is also the same as that of NTPC i.e. by rail. So combined cargo can be
evaluated for the coastal shipping option. Coastal shipping of required Thermal coal may prove
more cost efficient than the current method of transportation. The route followed by coastal
shipping would be from Talcher to Paradip by rail for a distance of around 180 Km and from
Paradip to Gangavaram port through coastal shipping and from Gangavaram port to NTPC
power plant through rail.

The thermal coal procured from Talcher coal mines has a very high ash content of more than
35%. Such high ash content coal generates huge quantities of fly ash, which is creating lot of
environmental issues for NTPC and VSP. Government has been encouraginge such users of
high ash content coal to either set up coal washeries or import low ash content coal. It is likely
that NTPC may start importing part of its thermal coal requirement and blend this with the
domestic high ash content coal.

Since there are number of variables that will play a crucial role in this cargo coming to
Gangavaram, it is assumed that this will be sensitive in nature and is included under sensitive
cargo scenario discussed in subsequent paragraphs.

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3.3.11 Alumina and Aluminium Cargo

Kutch Alumina Power & Coke Ltd (KAPCOL) intends to set up a Aluminium smelter plant
around 30 kms from Gangavaram port. During the initial phase, KAPCOL will import Alumina
but during subsequent phase of expansion, it plans to put an Alumina refinery. The entire
Aluminium produced will be exported. KAPCOL has expressed intentions of using Gangavaram
port for its import and export requirement.

Since this cargo is dependent upon successful and timely implementation of KAPCOL project, it
is treated as sensitive cargo and is included in sensitive cargo scenario discussed in
subsequent paragraphs.

3.3.12 Sensitive Cargo

Sensitive cargo is the cargo for which the likelihood of coming to Gangavaram port cannot be
established clearly, either due to logistical or operational reasons. Sensitive cargo will also
consist of some new cargo originating in future as a result of some commercial project getting
executed in the hinterland of Gangavaram port in future.

After a thorough analysis of the geographical characteristics, proximity to port, rail road
connectivity to competing ports, a list of relevant potential projects in the 72 districts in the
Gangavaram hinterland has been arrived at. Only those projects that have the potential to
generate 100,000 tonnes of cargo has been taken for further analysis.

It has been conservatively assumed that only 25% of the total sensitive cargo will materialise.
The details of sensitive cargo forecast at Gangavaram is given in Table 3.10 below:

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December 2004 Section 3 - Page 15 of 18
 Table 3.10: Sensitive cargo forecast at Gangavaram

Sensitive Cargo (mn tons)

Com m odity Location * 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Cement (E)
-Sanghi Cements Guntur (T) 0.22 0.22 0.22 0.22 0.32 0.32 0.32 0.32 0.32 0.32
-Prism Cements Kurnool (T) 0.09 0.09 0.09 0.09 0.14 0.14 0.14 0.14 0.14 0.14
-KCP Krishna (S) 0.06 0.06 0.06 0.06 0.09 0.09 0.09 0.09 0.09 0.09
-Chola Cements Guntur (T) 0.02 0.02 0.02 0.02 0.04 0.04 0.04 0.04 0.04 0.04
Total 0.39 0.39 0.39 0.39 0.59 0.59 0.59 0.59 0.59 0.59
Alumina (E)
-BALCO Korba (S) 0.09 0.09 0.09 0.09 0.14 0.14 0.14 0.14 0.14 0.14
-Utkal Alumina Koraput (P) 0.90 0.90 0.90 0.90 1.35 1.35 1.35 2.70 2.70 2.70
-Vedanta Alumina Kalahandi (S) 0.42 0.42 0.42 0.42 0.63 0.63 0.63 0.63 0.63 0.63
-Kapcol Vizag (P) 0.75 0.75 0.75 0.75 1.13 1.13 1.13 1.13 1.13 1.13
Total 2.16 2.16 2.16 2.16 3.24 3.24 3.24 4.59 4.59 4.59
Aluminium (E)
-Kapcol Vizag (P) 0.15 0.15 0.15 0.15 0.23 0.23 0.23 0.23 0.23 0.23
Total 0.15 0.15 0.15 0.15 0.23 0.23 0.23 0.23 0.23 0.23
Coking coal (I)
-Visa Industries Korba (S) 0.00 0.00 0.00 0.00 0.27 0.27 0.27 0.27 0.27 0.27
-SAIL BSP Bhilai (T) 3.93 4.20 3.93 4.21 3.86 4.13 3.68 3.94 4.22 4.51
Total 3.93 4.20 3.93 4.21 4.13 4.40 3.95 4.21 4.49 4.78
Thermal Coal (I)
-VSP Vizag (P) 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50
-NTPC Simhadri (P) 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00
-Kapcol Vizag (P) 1.50 1.50 1.50 1.50 2.25 2.25 2.25 2.25 2.25 2.25
Total 6.50 6.50 6.50 6.50 7.25 7.25 7.25 7.25 7.25 7.25
Thermal Coal (C)
-S E Coalfields Korba (S) 0.60 0.60 0.60 0.60 0.90 0.90 0.90 0.90 0.90 0.90
Total 0.60 0.60 0.60 0.60 0.90 0.90 0.90 0.90 0.90 0.90
Total Sensitive cargo 13.73 14.00 13.73 14.01 16.33 16.60 16.15 17.76 18.04 18.33
Expected Sensitive cargo 3.43 3.50 3.43 3.50 4.08 4.15 4.04 4.44 4.51 4.58

* (P) - Primary hinterland, (S) - Secondary hinterland, (T) - Tertiary hinterland

3.3.13 Total Traffic Forecasts for Gangavaram Port till 2037

The total traffic forecast for Gangavaram including the sensitive cargo for all the cargo types
discussed herein is summarised in the attached Table 3.11.

3.4 Design Traffic for the Phase 1 Development

While the long term traffic projections have been used for laying out of a Master Plan for the port
development, the traffic projection over a shorter time horizon for immediate and near future
development has to be derived so that the port facilities could be developed in stages.

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 Accordingly, for the initial phase of development i.e. Phase 1, GPL provided another scenario of
the firm traffic, which could be taken as guaranteed for the port at Gangavaram. The details of
the traffic for this first phase development are presented in Table 3.12 below:

Table 3.12: Traffic Forecast for Phase 1 Development

Commodity Traffic Scenarios

(In million tons per annum)
Firm Realisable
EXPORT
Iron-ore 3.26 3.26
Steel/Pig iron 0.96 0.96
Foodgrains (Bags) 0.03 0.03
Aluminium 0.00 0.04
IMPORT
Alumina 0.00 0.54
Coking Coal 6.18 9.41
Thermal Coal 0.00 5.00
Metallurgical Coke 0.56 0.56
Limestone 0.60 0.60
Containerised cargo 0.02 0.02
TOTAL 11.61 20.42

It is to be noted that in the above table, the traffic for food grains (bulk) is not to be considered
for the phase 1 development, in view of its unlikelihood.

The crude oil traffic meant for HPCL refinery is proposed to be handled through a Single Point
Mooring and hence has not been included in the above Table.

3.5 Details of Port Users

The identified major customers for the Port facilities at Gangavaram are:

Customer Commodities Location

VSP Coking Coal, Limestone, Thermal Coal, Steel Within 2 Km

Products
SAIL Coking Coal, Steel Products Bhilai About 590 Km

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 Customer Commodities Location

NMDC Iron Ore Bailadila Mines about 475 Km

KAPCOL Aluminium, Alumina, Thermal Coal Plant to be set up at about 33

Km from Port
NTPC Thermal Coal About 12 Km from the Port

Jeswal Necco Metallurgical Coke Bhilai About 590 Km

3.6 Transport Logistics

Based on the location of the prospective users and the traffic projections for these users,
MHCEPL has considered the following logistics for cargo movement to / from the port area for
planning of the port facilities:

Commodity Inland Movement of Traffic

Iron-ore Receipt by Rail

Steel/Pig Iron Receipt by Road

Food Grains (Bags) Receipt by Road

Aluminium Receipt by Road

Alumina Evacuation by either Road or Rail

Coking Coal

VSP Evacuation by Conveyor directly to VSP Plant

SAIL Evacuation by Rail

Thermal Coal

NTPC Evacuation by Rail

KAPCOL Evacuation by either Rail or Road

Metallurgical Coke Evacuation by Rail

Limestone Evacuation by Conveyor directly to VSP Plant

Containers Receipt/Evacuation by Rail/Road

Expected Sensitive Cargo Evacuation by Rail/Road

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