You are on page 1of 264

BUSINESS PLAN DEVELOPMENT

FOR
PARADIP PORT TRUST

FINAL REPORT
March 06th, 2007
Business Plan Development for the Paradip Port Trust – Final Report

FINAL REPORT
March 06th, 2007

DEVELOPMENT OF BUSINESS PLAN FOR


PARADIP PORT TRUST

Submitted by
TransCare Logistics India Pvt. Ltd

2
Business Plan Development for the Paradip Port Trust – Final Report

Table of Contents

SUMMARY........................................................................................................................7

1. INTRODUCTION......................................................................................................... 20

1.1 TRADE AND LOGISTICS ............................................................................................ 20


1.2 WORLD MARITIME OVERVIEW .................................................................................. 21
1.3 INDIA MARITIME MARKET ......................................................................................... 22

2. PARADIP PORT TRUST ............................................................................................ 24

2.1 PARADIP PORT STATUS QUO ................................................................................... 25


2.1.1 Existing Volume ............................................................................................. 25
2.1.2 Commodity structure ...................................................................................... 25
2.1.3 Commodity Origin - Destination ..................................................................... 26
2.1.4 Customer Profile ............................................................................................ 27
2.1.5 Vessel Traffic ................................................................................................. 28
2.1.6 Vessel Size Development .............................................................................. 29
2.1.7 Modal Split Analysis ....................................................................................... 31
2.2 PARADIP EXISTING FACILITY AND UTILIZATION.......................................................... 34
2.2.1 Existing Docks and Quays ............................................................................. 35
2.2.2 Berth Utilization .............................................................................................. 40
2.2.3 Handling Equipment ....................................................................................... 41
2.2.4 Storage Yard Area ......................................................................................... 42
2.2.5 Rail Infrastructure ........................................................................................... 43
2.2.6 Road Infrastructure ........................................................................................ 44
2.3 PAST OPERATIONAL PERFORMANCE ........................................................................ 46

3. PPT COMPETITIVE MAPPING .................................................................................. 51

3.1 APPROACH ............................................................................................................. 51


3.2. GEOGRAPHICAL POSITION ...................................................................................... 55
3.3 HANDLING CAPABILITY ............................................................................................ 56
3.3.1 Draught and Vessel Size................................................................................ 56
3.3.2 Berth Availability............................................................................................. 59
3.4 CARGO HANDLING ................................................................................................... 60
3.4.1 Ship Turn Round Time (STRT) ...................................................................... 60
3.4.2 Evacuation ..................................................................................................... 61

3
Business Plan Development for the Paradip Port Trust – Final Report

3.5 HINTERLAND CONNECTIVITY .................................................................................... 62


3.6 HANDLING COST ..................................................................................................... 63
3.7 OTHER COSTS......................................................................................................... 64
3.8 OTHER SERVICES ................................................................................................... 64
3.9 CURRENT AND FUTURE COMPETITIVE MAPPING ....................................................... 65
3.9.1 Current Competitive Mapping......................................................................... 65
3.9.2 Future Competitive Mapping .......................................................................... 66

4. TRAFFIC ESTIMATION FOR PARADIP PORT TRUST 2007-2027.......................... 70

4.1 METHODOLOGY....................................................................................................... 72
4.2 IRON ORE SUPPLY CHAIN ........................................................................................ 72
4.3 COAL SUPPLY CHAIN............................................................................................... 76
4.4 FERTILISER SUPPLY CHAIN ...................................................................................... 84
4.5 CHROME ORE SUPPLY CHAIN .................................................................................. 87
4.6 CONTAINER SUPPLY CHAIN ..................................................................................... 88
4.7STEEL SUPPLY CHAIN .............................................................................................. 94
4.8 POL SUPPLY CHAIN (PRODUCT AND CRUDE) ........................................................... 96
4.9 TOTAL FORECAST SUMMARY ................................................................................... 98

5. CAPACITY BOTTLENECKS AND PROPOSED PROJECTS ................................. 103

5.1 IRON ORE FLOW ................................................................................................... 103


5.2 COKING COAL FLOW ............................................................................................. 109
5.3 NON COKING COAL FLOW ..................................................................................... 113
5.4 CONTAINER TERMINAL PLANNING .......................................................................... 117

6. HINTERLAND CONNECTIVITY ............................................................................... 121

6.1 IRON ORE SUPPLY CHAIN LINK .............................................................................. 122


6.2 THERMAL COAL SUPPLY CHAIN ............................................................................. 125
6.3 COKING COAL AND NON COKING COAL SUPPLY CHAIN ........................................... 128
6.4 CONTAINER SUPPLY CHAIN ................................................................................... 131
6.5 MASTER HINTERLAND CONNECTIVITY PLANS ......................................................... 131

7. FUTURE PORT LAYOUT AND LAND USE PLAN.................................................. 138

7.1 PROPOSED FUTURE PORT LAYOUT PLAN ............................................................... 138


7.1.1 Southern Quay Expansion Layout ............................................................... 139

4
Business Plan Development for the Paradip Port Trust – Final Report

7.1.2 Southern Dock system with aligned wind direction ...................................... 140
7.1.3 Facility Requirement..................................................................................... 141
7.1.4 Development in Phases ............................................................................... 142
7.2 THE FUTURE LAND USE PLAN DEVELOPMENT ........................................................ 148
7.2.1 The Existing Land Use Plan Status.............................................................. 148
7.2.2 The Future Land Use Plan Status ................................................................ 149

8. CORPORATE PLANNING AND STRUCTURE ....................................................... 152

8.1 CORPORATE PLANNING ......................................................................................... 152


8.2 INTERNAL ORGANIZATION STRUCTURE................................................................... 155
8.3 HUMAN RESOURCE MANAGEMENT ......................................................................... 157

9. BUSINESS PLAN ELEMENTS ................................................................................ 159

9.1 VISION AND MISSION DEVELOPMENT ...................................................................... 159


9.1.1 SWOT Analysis ............................................................................................ 159
9.1.2 VISION Statement........................................................................................ 164
9.1.3 MISSION Statement..................................................................................... 165
9.2 GOALS AND STRATEGY DEVELOPMENT .................................................................. 166
9.2.1 Customer Perspective.................................................................................. 167
9.2.2 Internal Business Process Perspective ........................................................ 168
9.2.3 Internal Organizational Growth Perspective................................................. 169
9.2.4 Financial Perspective ................................................................................... 171

10. BUSINESS PLAN - FINANCIAL PROJECTIONS 2007-2027 ............................... 172

10.1 FINANCIAL MODEL ............................................................................................... 172


10.2 FINANCIALLY EVALUATED PROJECTS ................................................................... 176
10.2.1 Deepening of the Channel ......................................................................... 176
10.2.2 Deep Draught Iron ore and Coking Coal Berths Phase I ........................... 181
10.2.3 Deep Draught Non-Coking Coal Berth ....................................................... 187
10.2.4 Container Terminal Phase I & II ................................................................. 190
10.2.5 Fertilizer Terminal ...................................................................................... 192
10.2.6 Iron ore and Coal Project Phase II ............................................................. 193
10.2.7 Western Dock System................................................................................ 196
10.3 SELECTED PROJECT AND PPP MODEL EVALUATION ............................................. 200
10.3.1 Iron Ore Berth Phase I ............................................................................... 200

5
Business Plan Development for the Paradip Port Trust – Final Report

10.3.2 Coking Coal Berth Phase I ......................................................................... 202


10.3.3 Non Coking Coal Berth Phase I ................................................................. 204
10.3.4 Iron Ore and Coking Coal Berths Phase II ................................................. 206
10.3.5 Container Terminal Berth (I&II) .................................................................. 208
10.4 FINANCIAL PROJECTION AND ANALYSIS ................................................................ 211

11. DETAILED ACTION PLANS .................................................................................. 231

ANNEXURE I – LIST OF ABBREVIATION ......................................................................... 246


ANNEXURE II - LONG TERM EXTENSION OF PORT - 2050 .............................................. 248
ANNEXURE III – FINAL REPORT COMMENTS AND TC’S RESPONSE ................................. 255

6
Business Plan Development for the Paradip Port Trust – Final Report

Summary
Port Vision

o Paradip Port Trust (PPT) has a high potential to become a leading Hub Port
of the Indian East Coast and an economic thrust engine for the Eastern part
of India within the next 15 to 20 years.
o This can be attained by leveraging core strengths and values such as the
high draught potential, the rich minerals hinterland, and the developing
economy.
o PPT is a Public service entity, hence, adding value to the stakeholders
(People of the Country) by facilitating the economic development and offering
cost-effective services, should be the key mission of the Port.
o For PPT, the market offers a potential volume of 130 to 190 million tonnes
(MT) of cargo at a Compounded Annual Growth Rate (CAGR) of 6% to 8% in
the next 20 years. This would place the Paradip as a leading bulk terminal
Port in the world.
o The Port will have a stable and sustainable growth during 2017 to 2027 at a
CAGR of 4% to 6%.

Past Trends

o The traffic growth of PPT is analyzed in two phases viz, Phase I (1996-
2000) and Phase II (2001-2006). During Phase I, PPT grew at a CAGR of
6% and in Phase II, PPT demonstrated a healthy CAGR of 11%.
o An interesting trend which could be observed in the last five years is that
the share of overseas cargo grew from 50% in 2001 to 70% in 2006. The
main export destination is China which attracts more than 54% of total
exported cargo in 2006.
o During the last five years, the share of iron ore in the total traffic has
almost doubled from 16% to 31%. The imported coal share grew from less

7
Business Plan Development for the Paradip Port Trust – Final Report

than 1% to 10% in 2006 and the export coal share dropped from 41% to
21%.
o The major drive for last years growth was imported cargo which grew by
35% to 11.42 MT from 8.44 MT. With this, the share of import cargo has
shown a growth from 27% in 2003 to 34% in 2006.
o In 2005-06, vessel traffic grew by 10% to 1,330 vessel calls from 1,209 in
2004-05; however, this growth was less than last year, where a 14%
growth was registered.

Constraints and Threats

o Long decision making processes and land expansion constraints are the key
challenges for the Port to be competitive and reactive to market demands.
o Vizag was rated the best Port in the Eastern corridor by the customers,
however they expressed high potential for PPT in the coming future.
o Dependency on five customers (five customers share more than 60% of total
volume), cyclic pattern in commodity structure trends and policy level linkage
(coal linkage) are the key threats for the Port’s future growth.

Competitive Factors

o Efficient and effective internal logistics systems, capability to handle larger


vessels (180,000 to 250,000 dwt), flexible Port planning with logistics parks
(specific to the steel industry) or SEZ’s, and high speed and dedicated supply
chain connectivity with industrial clusters are the key differentiators for the
Port in the coming future.
o Being proactive to the market demands and key customers, simplified
processes and procedures by introducing IT with a focus to reduce the
customers’ total supply chain costs will ensure the Port a competitive position.

8
Business Plan Development for the Paradip Port Trust – Final Report

Iron Ore Supply Chain

o China and India will drive the world bulk market during the next 20 years.
China’s and India’s steel industries will drive the world’s iron ore and coal
commodity markets respectively.
o China’s steel production will touch one billion tonnes by 2020 at a CAGR of
6% to 8% and will demand 1.2 billion tonnes iron ore from foreign countries.
o The capacity expansion constraints of Indian mines, Australia’s massive
capacity expansion and the increase in domestic iron ore demand will restrict
India’s export growth to only at CAGR of 4% to 6% during the next 20 years.
India’s iron ore export volume will touch 180 MT with a 90% share destined
for China by 2020.
o PPT has the potential to handle 23 to 31 MT iron ore by 2027 taking due
consideration to new hinterland connectivity projects and competitive factors
from other Ports.

Coking Coal Supply Chain

o The Indian steel industry production will hit 140 to 180 MT, at a CAGR of 6%
to 8% by 2027 and will demand coking coal of about 110 to 140 MT during
the same period.
o Indian steel industry’s share of import coking coal will reach 85% and import
about 100 to 120 MT. SAIL will be the major importer and will drive the coking
coal import.
o Even in the competitive environment, PPT has the potential to handle about
20 to 25 MT of coking coal by 2027.

Non Coking Coal Supply Chain

o India’s coal demand will touch 1.5 billion tonnes, with a CAGR of 6% in the
2020’s from a current demand of about 470 MT.

9
Business Plan Development for the Paradip Port Trust – Final Report

o The power industry is the major driver for coal demand consuming 75% of
total consumption and it will grow at CAGR of 4% to 5% during the next 15
years.
o Coal India Limited (CIL) is the monopoly in coal production in India. CIL
reached its maximum production capacity, allowing power plants and
electricity boards to import coal as a short term strategy.
o Customers are not clear about the CIL strategy. CIL may be able to satisfy
power plants for a while, but in the longer term, India will import coal as the
Indian reserve per GDP is very low.
o India will import about 40 to 60 MT of non coking coal based on the realistic
and optimistic scenarios respectively, and PPT’s share will be about 10 to
25 MT in the next 10 to 20 years.

Thermal Coal Supply Chain

o CIL coal production constraints has also impacted the Tamil Nadu (TN) coal
imports from the Talchar fields, which are routed through PPT. CIL has
encountered resource constraints, and cannot supply both NTPC’s new
power plant at Kanika as well as TN.
o Hence, the Coal linkage Committee diverted some volume from Eastern Coal
fields via Haldia and Vizag respectively. This has in effect meant that PPT
has lost about 5 MT of potential cargo to its competitors.
o TN coal demand will only touch 20 to 25 MT by the 2020’s. Thermal coal
handling at PPT, will touch 18 to 20 MT during the next 10 to 15 years.

Other Commodity Supply Chain

o Fertilizer volume will reach 8 to 12 MT by 2020. In the realistic case scenario


it will reach 8 MT.
o Chrome ore and concentrate volume will have a high export potential volume,
but it will reach only 3.5 MT 2020 as it is fully controlled by Government of

10
Business Plan Development for the Paradip Port Trust – Final Report

India with a ceiling level of only 400,000 tonnes per year. Hence, volumes
depend entirely upon the Government’s future plans on export of chrome ore.
o
PPT - Demand Projection - Realistic Scenario
Commodity Structure Ex/Im [mt] 2006 2007 2012 2017 2022 2027
Iron Ore Ex [mt] 10.3 12.2 16.1 18.4 21.1 23.3
T. Coal Ex [mt] 9.2 9.7 12.1 14.0 16.1 17.8
Coking Coal Im [mt] 3.8 4.6 8.0 12.8 17.0 20.7
Non Coking Coal Im [mt] 3.4 4.5 7.6 8.4 9.0 11.0
Fertilizer (RAM, Import) Im [mt] 2.5 3.5 5.3 6.4 7.3 7.9
POL Product Im [mt] 0.90 1.0 1.6 2.3 3.1 3.9
Others
Containers Ex/Im [mt] 0.05 0.06 0.3 0.7 1.8 4.1
Containers in TEUs Ex/Im [TEU] 3420 5063 21022 61587 150693 344749
Ch Ore / Con Ex [mt] 1.5 2.3 3.0 3.6 4.0
2.9
Others (ex.Ch ore / con) Ex/Im [mt] 1.4 2.3 3.5 5.0 6.4
Total Others [mt] 3.0 3.0 4.8 7.2 10.4 14.5
Total Ex/Im [mt] 33.1 38.4 55.6 69.6 83.9 98.9
POL - Crude Im [mt] 0.0 0.0 16.0 27.0 30.0 30.0
Over all Total Ex/Im [mt] 33.1 38.4 71.6 96.6 113.9 128.9

New business Opportunities

o Indian Oil Corporation Ltd (IOCL) is planning to set up its new Single Buoy
Mooring (SBM) along with a petrochemical complex with vision to be a market
leader in polymer production in India.
o PPT crude oil volume will reach 30 MT by 2027 with initial projects from IOCL
planning a first phase capacity of 11 MT and 15 MT in the next 10 years.
o Indian steel exports will touch 23 to 29 MT in the early 2020’s and PPT will
take a share of 3 to 5 MT; however, this to a great extent depends upon
South East Asia’s future demand for steel.
o PPT has a potential to become a container terminal hub for the Eastern part
of India with its high draught potential in the coming future. In the realistic
scenario, the estimated volume would be 350,000 TEU by 2027. In the
optimistic scenario, the volume is estimated to be 1.5 million TEU. However, it
would require an aggressive market and investment strategy to attract a 2%
to 4% share of the Indian container market to PPT in the next 20 years.

11
Business Plan Development for the Paradip Port Trust – Final Report

Capacity Requirements

o The projected parcel size will grow from 40,000 tonnes per ship to 100,000
tonnes per ship in the next 10 to 15 years. The Capesize vessels in the range
of 180,000 to 250,000 dwt will become common visitors as they currently
share 34% of total tonnage in the world.
Future Additional Berth Requirements 2007 to 2027 - Realistic Scenario
Commodity (Existing) 2007 2012 2017 2022 2027 Total
Iron Ore (1) 1 0 0 1 0 2
Thermal Coal (2) 0 0 0 0 0 0
Coking Coal (0) 1 0 0 1 0 2
Non Coking Coal (0) 1 0 0 0 0 1
Fertilizer (2) 0 1 0 0 0 1
Containers (0) 0 1 0 0 0 1
GCB (8) 0 0 0 0 0 0
POL (1) 0 0 0 0 0 0
Total (14) 3 2 0 2 0 7

o The market requires highly mechanized berths with faster turn round times
and less number of trips.
o The market demands three mechanized berths (iron ore, coking and non
coking coal) during 2007 to 2010 and one fertilizer berth and container
terminal during 2011 to 2013.
o After 2020, the Port will need massive investment again if volumes grow as
expected. One more iron ore and coking coal berth will be needed at the
beginning of 2020. A dedicated container terminal with a capacity of about 1.0
million TEU is required during the same period.

Port Planning Strategy

o The Port is currently occupying 70% of the land area for the existing dock and
harbour area, reaching this level over the past forty years.
o Hence, the optimal utilization of land and water in the coming years is the key
for the Port development. Otherwise, the Port will be forced to disturb the

12
Business Plan Development for the Paradip Port Trust – Final Report

township area even earlier than planned to meet Port expansion requirements
in another 20 years.
o The following top two scenarios have been selected and the detailed Port
Planning has been developed for the Southern Dock system scenario:
o The expansion of the southern side with one long, straight southern
quay wall, from west to east
o Southern Dock system aligned with the predominant wind direction

Existing Port Layout

Rank 1 Rank 2 Rank 3


Recommended Selected Alternative
Proposed and Ranked Layouts

13
Business Plan Development for the Paradip Port Trust – Final Report

o The prevailing wind direction from South to North, which will impact the
vessels from the side, is the major concern from the Port to go ahead with this
Port layout. The Port is convinced with a Southern Dock system aligned with
the prevalent wind direction of the Port.
o The future Port planning has been proposed in a phased manner, as follows:

o Phase I Development - BOT Complex

• The first phase expansion plan starts with the Eastern side of
the Port. This dock system is termed the BOT Complex. The
following berth allocation is planned in the BOT complex:
• Two iron ore berths on the Western side of the complex
• One non coking coal berth and one coking coal berth on the
Eastern side of the complex
• The BOT complex can be developed in the following sequence:
ƒ Two berths at the beginning of Phase I
ƒ Two more berths at the end of Phase I

o Phase II Development - Southern Dock Complex

• The Port should start its next phase expansion plan with the
Southern dock system. The following proposal has been made
for this complex:
• 17 meter draught
• One container terminal module with a 700 meter quay length
and a back reach about 500 meter with a rail terminal, on the
Western side of the complex.
• Two berths are reserved for the future expansion on the Eastern
side of the complex, mainly for deep draught vessels.
• The back reach for the south west side of the dock poses no
problem with only minimal disturbance to the township area. A

14
Business Plan Development for the Paradip Port Trust – Final Report

dedicated rail link from the railway station to the planned


container terminal has been proposed with a loop concept.

o During Phase I and Phase II development, the existing General Cargo berths
will be free.
o Hence, the existing Multi Purpose Berths (MPB) and Central quay should be
used for handling clean cargo. The existing Western side of the Port should
be used as a back reach area for clean cargo and other general cargo.

Land Use Plan

o At the end of planning cycle, 83% of total harbour area will be used. The
unutilized areas will be in the Western part of the Port. However, these areas
can not be efficiently utilized for Port development due to draught restrictions
and other logistics planning constraints.
o Hence, TransCare strongly recommends the Port to have an aggressive land
acquisition strategy for the long term Port development.
o The Port should find a suitable area to where the existing township area can
be relocated. The estimated land area for the township relocation is about
500 to 700 acres. It is very critical for the Port to consider this issue which
otherwise would become a major constraint in Port development after 2027.
o Logistics Park’s and CFS’s, not requiring waterfront access, can be
developed outside of the Port premises in the future. The estimated land
required to develop an integrated steel logistics park would be 2500 to 5000
acres depending upon the scale of logistics activities which will be undertaken
in that park.

15
Business Plan Development for the Paradip Port Trust – Final Report

Investment Planning and Financial Evaluation

o The total investment for Paradip Port Trust is estimated to be US$ 500-
725 million in the next 20 years, excluding the Western dock project.

Proposed and Evaluated Projects for PPT - 2007-27


Projects Proposed by Capacity Investment NPV IRR
MT m.US$ m.Rs +/- %
1 Deepening Channel Project PPT/TC 159 7155 (-ve) 11.1%
Channel Deepening (Two Phase) PPT/TC 79 3555
Offshore Break water PPT/TC 80 3600
3 Iron Ore Berth Phase I PPT/TC 12 99 4455 + 16.4%
4 Coking Coal Berth Phase I PPT/TC 12 79 3555 + 16.9%
5 Western Dock PPT 15 143 6435 (-ve) 2.2%
7 Non-Coking Coal TC 12 97 4365 + 18.8%
8 Iron Ore Berth Phase II TC 8 66 2952 + 15.2%
9 Coking Coal Berth Phase II TC 8 61 2727 + 15.1%
10 Container Terminal Phase TC 0.5* 155 2565 + 15.6%
12 Fertilizer Terminal TC 3 11.4 513 + 19.8%
Total all 869.6 34722 +
Total (Excluding Western Dock) 726.6 28287
* in million TEU, PPT - Paradip Port Trust, TC - TransCare

o Investment and operational costs are estimated for the proposed (both by
Port and Consultants) 12 projects during next 20 years. Deepening
channel and deep draught iron ore and coking coal berth projects are
critical for the Port’s future growth and competitiveness. These projects
are financially viable.
o The proposed Western Dock project is found to be financially not viable.
Though the proposed container terminal is financially viable with high
returns, it is very optimistic. It can not be realized unless the Port is very
aggressive on the container market.

16
Business Plan Development for the Paradip Port Trust – Final Report

BOT / PPP Model Evaluation

o The private operators are expected to bring about US$ 396 million or
Rs. 14934 million over the next 20 years, excluding fertilizer terminal.

PPP/BOT Evaluated Projects for PPT - 2007-27


Revenue Investment by
Projects share to Operator NPV IRR
PPP/BOT PPT m.US$ m.Rs +/- %
1 Iron Ore Berth Phase I BOT 25% 73 3304 + 15.7%
2 Coking Coal Berth Phase I BOT 25% 55 2485 + 15.9%
3 Non-Coking Coal BOT 25% 68 3040 + 15.1%
4 Iron Ore Berth Phase II BOT 30% 46 2066 + 15.3%
5 Coking Coal Berth Phase II BOT 25% 33 1474 + 15.8%
6 Container Terminal Phase I BOT 20% 122 2565 + 15.1%
Total 396 14934

o All projects are found to be financially viable.


o The Port should invest in infrastructure like dredging, quay wall
construction and tugs.
o The private operator should invest in cargo related investments like
superstructure, terminals.
o Accordingly, the infrastructure related revenue should go to the Port and
the cargo related revenue should go to the operator.
o The expected revenue share would be in the range of 20% to 30%
depending on that particular project’s characteristics and the risk involved.

Financial Projections

o The total projected revenue will touch US$ 280.2 million or Rs. 12609
million by 2026-27 from US$ 114.1 million or Rs. 5134 million in 2005-6.
Over the next 20 years, the projected growth is expected to display a
CAGR of 4.5%.
o The Port is expected to maintain its operational profit margin at 50% to
53% from the current level of 40% to 45%.

17
Business Plan Development for the Paradip Port Trust – Final Report

o The operational expenses will decrease, due to the increased introduction


of privatization. The Port can expect a net profit margin in the range of
35% to 40% during the planning period.
o The Port’s key strategic project implementation will increase the total
asset addition during the next 20 years.
o During the same period, the net fixed assets will increase from US$ 258.6
million or Rs. 11,637 million to US$ 480.4 million or Rs. 21,618 million.
The return on asset will be maintained at 4% to 4.5%.

Commercial Strategy

o Continue to be a leading and competitive bulk cargo terminal, with 80% of


the hinterland bulk market share.
o Attract clean cargo and general cargo from Eastern hinterland industries
and neighboring hinterlands.
o Explore new business opportunities in petrochemical, alumina, food grains
and containers.
o Brand the Port as a bulk terminal hub with integrated steel logistics parks
and industrial hub.
o Develop a Customer Relationship Cell and key account personnel to
manage key customers.
o Attract a large steel/iron Industry player to be a long term customer or
partner (possibly SAIL).
o Ensure a mechanized plant for coking coal and iron ore before 2010.
o Develop one or two clean cargo berths for steel export and container
handling by 2012-15.

Organizational Planning and IT implication

o The organizational structure should be process based and system driven


rather than people driven. Horizontal integration of the organization

18
Business Plan Development for the Paradip Port Trust – Final Report

through IT system would give visibility in the process and reduce the
paper work, and consequently, improve the process time and efficiency.
o The following IT projects are proposed to integrate the process and
expedite the decision making process:
o Horizontal Integration through Enterprise Resource Planning (ERP)
system
o Vertical Integration through EDI
o Operational processes improvements through
ƒ Project Management Tools
ƒ Port Management Tools
ƒ Vessel Traffic Management
ƒ Asset Management

19
Business Plan Development for the Paradip Port Trust – Final Report

1. Introduction

1.1 Trade and Logistics

Logistics and supply chain excellence influences trade effectiveness and


attractiveness while ensuring that goods reach the customers on time at a
desired cost level. Cost and time are key drivers to determine the
competitiveness of a firm or a product.

The seaport is a nodal point in the end to end global supply chains integrating the
upstream and downstream movements of cargo in the value chain. Within these
supply chains, the seaport adds value to both immediate and end customers
while ensuring a seamless flow of goods and information from off-shore to on-
shore or vise-versa.

Logistics cost is a key competitive factor in today’s business to decide the place
of source and distribution hubs. The logistics cost, as a percentage of total
import/export value, is 4-4.5% in the developed countries. The logistics cost in
India, is more than 10% of total imported or exported value.

The following key competitive factors give the competitive advantage to other
lead developing countries like China, Thailand and Malaysia over Indian
products:
• Capability and logistics processes efficiency at the ports
• High-speed multi-mode corridors
• Maximization of assets through mechanization
• Transparent and flat organization structure
• Information systems and value added services through logistics parks
• Balanced Supply-Demand panning on capacity addition
• Level Playing field for the private operators
• Process or Activity driven cost structure

20
Business Plan Development for the Paradip Port Trust – Final Report

Modern sea ports should see beyond the four walls of the ports and should have
a holistic view and proactive strategies to target the market demands, in order to
be competitive and sustain in the competitive market place. They should add
value continuously to their customers’ competitiveness by being an integral part
of end to end logistics solutions. Today, ports are becoming a key business hub
rather than purely being a transformation point.

Indian Ports, terminal operators and logistics service providers should align their
Business Plan and Strategy according to the above mentioned key factors to
provide the services at an optimal cost and time while maximizing their assets
and resources.

1.2 World Maritime Overview

The world seaborne trade grew by 4.3% to 6.76 billion tonnes in 2004 against
5.8% growth in 2003. Dry bulk cargo grew by 4.4% to 4.4 billion tonnes against
6.9% in 2003, which slowed down the overall growth though the tanker cargo
grew by 4.2% against 3.6% to 2.3 billion tonnes in 2004. The five major dry bulk
cargoes shared 24% of total seaborne trade and grew by 7.6% to 1.59 billion
tonnes.

Coal, iron ore and grain are the major commodities, which control the dry bulk
cargo growth. Steel and power sectors are the major drivers for the iron and coal
trade in the world. World steel production increased to more than a billion tonnes,
which influenced the iron ore market which reached to 590 million tonnes (MT)
with 13.4% growth. China is the major steel producer in the world and its volume
reached 348 MT in 2005-06 and their steel production demand boosted the world
iron ore shipment to 650 MT.

Australia and Brazil are the key exporters and share more than 70% of world
seaborne trade market. Australia and Brazil export volume grew by about 10%

21
Business Plan Development for the Paradip Port Trust – Final Report

and 8.5% respectively over the year. World coal market also grew by about 5%
and reached 650 MT. Australia is the major exporter of coal and shares about
one third of world seaborne trade volume.

1.3 India Maritime Market

India has 12 major ports and 187 minor ports which are scattered across the vast
coastline of nearly 7,517 km. This coastline borders the Arabian Sea, Bay of
Bengal and the Indian Ocean.

The world market trend, especially the China effect, also influenced the Indian
market. Indian maritime (only major ports) traffic grew by 10% to 423 MT against
11.6% growth in 2004-05. This slowdown in growth is mainly attributed by loss of
cargo to minor ports.

Indian maritime trade is driven by liquid bulk with share of 34% of total volume
and it reached 142 MT. Iron ore trade volume in major ports grew only by 4% to
79 MT against 29% last year, which was mainly due to a cargo shift to minor
ports and capacity constraints at the Indian mines. Overall, India exported nearly
about 92 MT of iron ore including minor ports.

High grade coal import grew by 20% and reached 21 MT in 2005-06 against
18 MT in 2004-05. Thermal coal grew only by 3% to 14 MT, which was mainly
coastal shipping. Thermal coal flow happens only between Paradip hinterland
and Tamil Nadu, who is the major importer of thermal coal via sea. The Indian
container market volume increased to 62 MT at a growth rate of 13% over the
year and reached 4.6 million TEUs in the same period.

The East coast of India is mainly driven by bulk cargo traffic with a share of 51%
and the West coast of India is mainly driven by container traffic with a share of
69%. However, the west coast container market grew only by 7% against a
growth of 13% of the east coast container market. JNPT took share of 83% in

22
Business Plan Development for the Paradip Port Trust – Final Report

west coast volume and Chennai shared 52% of east coast volumes during the
same year.

The East coast share of container handling has been increasing over the period
from 26% in 2002-03 to 31% in 2005-06. Tamil Nadu drives the East coast
container trade with nearly one million TEU. For example, Chennai and Tuticorin
handled 74% of total volume in the east coast and Kolkata complex handled
about 23%.

The East coast handled 99% of thermal coal and 88% of coking coal during the
same period. Major ports on the east coast shipped 44 MT of iron ore against
41 MT in 2004-05 and shared 56% of total volume. Major ports on the west coast
shipped about 34.6 MT against 43.9 MT last year. The East coast continues to
have bulk cargo driven ports while having a good growth in the container traffic
also, especially Chennai and Tuticorin ports.

Minor ports of India shipped about 145 MT in 2005-06 with 6% growth against
15% in 2004-05. Gujarat Maritime Board dominates the minor ports trade volume
with 71% share and grew by 7% over the year. POL and iron ore are the key
commodities that dominate the majority of traffic with 46% and 18% share
respectively. Thermal coal and building materials share about 10% each during
the same period.

23
Business Plan Development for the Paradip Port Trust – Final Report

2. Paradip Port Trust

The Port of Paradip, governed by Paradip Port Trust (PPT) is one of the 12 major
ports in India and located at 20° 16’ North and 86°41’ on the east coast of India
and strategically located between Kolkata and Visakhapatnam (Vizag). The port
was built in 1962 with an artificial lagoon to support solely the Orissa export
trade, especially for iron ore export. It gradually moved to a multi commodity
handling port over period of time with its penetration into other commodities,
especially thermal coal, coking coal, fertilizers and iron & steel.

Figure 1.1. Major Ports in India

Fig.2.1 Major and Intermediate Ports in India

24
Business Plan Development for the Paradip Port Trust – Final Report

The Port of Paradip is considered as a modernized bulk port terminal in India


with mechanized coal and iron handlings. It has been growing at more than 10%
over the last four years and reached 33 MT from merely less than 9 MT in the
early 1990’s. PPT has a vast hinterland with more than 3.06 thousand sq.km,
with boundary lines with the states of Uttar Pradesh, Jharkhand and Madhya
Pradesh. This hinterland covers the country’s richest minerals mines and steel
industry setup.

2.1 Paradip Port Status Quo


2.1.1 Existing Volume

Paradip is one of the fastest growing ports with a CAGR of 11% reaching
33.1 MT in 2005-06 from 19 MT in 2000-01. In 2005-06, 21.6 MT of cargo was
loaded and 11.42 MT of cargo was unloaded at PPT.

Import grew by 35% over the year, mainly due to non coking coal growth from
1.2 MT to 3.6 MT. Export growth was almost static with just 0.1% grwoth. This is
mainly due to the decrease in volume of thermal coal export and iron ore
volumes growing only by 1.5 MT over the year. Import and export share stood at
34% and 66% last year.

Overseas cargo trade grew at a CAGR of 16% over the last five years and
increased its share from 48% in 2000-01 to 70% in 2005-06. Coastal trade has
been growing at less then 1% as the coastal cargo to Tamil Nadu (TN) has been
coming down due to alternative sources of supply.

2.1.2 Commodity structure

Iron ore and coal are the major commodities at PPT with a share of about 31%
and 49% of the total volume. The five major commodities share 92% of the total

25
Business Plan Development for the Paradip Port Trust – Final Report

volume. The iron ore share increased from 15% in 2000-01 to 31% in 2005-06,
and the absolute volume of iron ore export increased from 1 MT in the late
1990’s to 10.3 MT in 2005-06. As explained before, there is a slow down in the
thermal coal coastal export volume and its share came down to 28% from 41% in
2005-06.

Commodity Share at PPT


2000-01 2005-06
in mt % share In mt % share
Iron ore 2.992 15% 10.273 31%
Thermal Coal 8.208 41% 9.193 28%
Coking Coal 1.691 8% 3.758 11%
Non Coking 0 0% 3.336 10%
FRM 3.37 17% 2.496 8%
Ch Ore/Con 0.707 4% 1.355 4%
POL 2.199 11% 0.91 3%
Others 0.735 4% 1.788 5%
Total 19.902 100% 33.109 100%
Table 2.1 Major commodity Share

Non coking coal volume grew from 0% to 10%, which in turn boosted the import
trade. The share of coking coal also increased from 8% to 11% in 2005-06.
However, it has been growing steadily over the last five years.

2.1.3 Commodity Origin - Destination

China and Australia are the major trading countries with 54% and 42% of total
export and import market volume respectively. Indian steel industry are mainly
importing high grade coking coal from Australia and China imports iron ore from
India. China shares 90% of over all overseas trade and Tamil Nadu shares 95%
of coastal shipping trade.

26
Business Plan Development for the Paradip Port Trust – Final Report

Export Destination Share 2000-06


Volume (in MT) % Share
2000-01 2005-06 2000-01 2005-06
Overseas
China 3.201 11.423 24.7% 54%
Japan 0.495 0.1 3.8% 0.5%
Coastal 9.259 9.585 71.5% 45%
TNEB (TamilNadu) 9.259 9.585
Table 2.2 Export Destination Share
Iron ore was the single commodity which dominated the export trade with China
from Paradip and the future of overseas export also depends on China growth.
Australia and Indonesia are the major import destinations with a share of 42%
and 31% respectively in 2005-06. Coking coal is mainly imported from Australia
and non coking coal from Indonesia.

2.1.4 Customer Profile

The top four importers share more than 60% of import volume each with volume
more than a million ton per year. SAIL is the leading importer of coking coal with
a volume of 1.5 MT followed by TATA STEEL with 1.2 MT. NTPC and NINL are
the major non coking coal importers with a 10% share each.

Importer Share in 2005-06


Volume Share
(in MT) (in %)
SAIL 1.5 18.83%
TATA STEEL 1.2 14.35%
NTPC 1.1 13.88%
NINL 1.1 13.03%
Total* 4.9 60.09%
Others* 3.3 39.91%
Total 8.2
* excluding FRM and other cargo
Table2.3 Import Share in 2005-06

27
Business Plan Development for the Paradip Port Trust – Final Report

The top five exporters share more than 64% of total export volume with more
than a million tonnes per year. Tamil Nadu electricity board (TNEB) shares about
34% of total volume.

Top Exporter in 2005-06


Commodity Volume Share
(in MT) (in %)
1 TNEB T.Coal 7.3 34%
2 RMIL Iron Ore 2.0 9%
3 ESSEL Iron ore 1.7 8%
4 JINDAL Iron Ore 1.5 7%
5 KPCAL T. Coal 1.4 7%
Total 13.8 64%
Others 7.6 36%
O.Total 21.4 100%
Table 2.4 Top Exporters in 2005-06

RMIL, ESSEL and JINDAL are the other major iron ore exporters with more than
a million ton per year each.

Paradip mainly depends on main five customers under both import and export
category. Paradip future volume growth mainly depends upon these players
strategic decisions in the future

2.1.5 Vessel Traffic

The vessel traffic at PPT has been increasing over the last three years with a
growth rate of over 10% p.a. In 2005-06, the vessel traffic grew by 10% to 1,332
vessel calls from 1,207 in 2004-05; however, this growth was less than that of
last year, which displayed a 14% growth rate.

28
Business Plan Development for the Paradip Port Trust – Final Report

Type of Vessel 2001-02 2002-03 2003-04 2004-05 2005-06 Share in Share in


2006 2001
No of Vessel 909 928 1037 1207 1322 100.0% 100%
Container 0%
Cellular 5 17 23 10 14 1.1% 1%
Break Bulk 8 4 85 144 102 7.7% 1%
Dry Bulk (Con) 421 363 415 530 578 43.7% 46%
Dry Bulk (Mech) 215 306 342 352 423 32.0% 24%
Liquid Bulk 0%
Product 190 148 108 75 73 5.5% 21%
Chemicals 43 48 53 60 66 5.0% 5%
Others 27 42 11 36 66 5.0% 3%
Table 2.5 Vessel Traffic in 2001-06

Dry bulk mechanical and conventional vessel traffic grew by 20% and 9%
respectively from 2004/5 to 2005/6. The dry bulk mechanical vessels growth
almost doubled over the last five years. The share of dry bulk carriers grew from
68% to 74% during the same period.

Type of Vessel 2002-03 2003-04 2004-05 2005-06


No of Vessel 2.1% 11.7% 16.4% 9.5%
Container
Cellular 240.0% 35.3% -56.5% 40.0%
Break Bulk -50.0% 2025.0% 69.4% -29.2%
Dry Bulk (Con) -13.8% 14.3% 27.7% 9.1%
Dry Bulk (Mech) 42.3% 11.8% 2.9% 20.2%
Liquid Bulk
Product -22.1% -27.0% -30.6% -2.7%
Chemicals 11.6% 10.4% 13.2% 10.0%
Others 55.6% -73.8% 227.3% 83.3%
Table 2.6 Vessel Traffic Growth Rate 2002-06

2.1.6 Vessel Size Development

The share of vessels in the 50,000 to 80, 000 DWT category increased from 33%
in 2005 to 37% in 2006. The major contribution comes from dry bulk conventional
carriers, increasing from 150 to 246 in the same period.

29
Business Plan Development for the Paradip Port Trust – Final Report

The trend shows that the large size bulk career vessels will be calling at PPT in
the coming years as the vessel sizes at the Chinese ports has been increasing.
There are regular services, mainly, available for China, Australia and Indonesia.

DWT DRY BULK DRY LIQUID BREAK CONT. OTHERS TOTAL %


(MECH) BULK BULK BULK Distribution
SIZE
(CONV)
-10000 0 16 13 131 1 33 194 16%
-20000 0 72 28 4 6 0 110 9%
-30000 19 97 40 5 3 1 165 14%
-40000 36 75 33 1 0 0 145 12%
-50000 57 119 14 0 0 0 190 16%
-80000 241 150 8 0 0 0 399 33%
-100000 0 0 0 0 0 0 0 0%
Above 1 0 0 0 0 0 0 0 0%
Lakh
Grand 353 529 136 141 10 34 1,203 100%
Total:
Table 2.7 Vessel Size Distribution for the year 2004-05

DWT SIZE DRY DRY LIQUID BREAK CONT. OTHERS TOTAL %


BULK BULK BULK BULK Distribution
(MECH) (CONV)
-10000 0 19 12 96 1 66 194 15%
-20000 0 80 12 4 12 0 108 8%
-30000 30 59 42 2 1 1 135 10%
-40000 61 52 42 0 0 0 155 12%
-50000 91 120 27 0 0 0 238 18%
-80000 241 246 11 0 0 0 498 37%
-100000 1 1 0 0 0 0 2 0%
Above 1 0 0 0 0 0 0 0 0%
Lakh
Grand 424 577 146 102 14 67 1,330 100%
Total:
Table 2.8 Vessel Size Distribution for the year 2005-06

The average parcel size was 27,702 tonnes during the last financial year and it
has decreased by 3% due to decrease in dry mechanical bulk carrier parcel size.
Otherwise, over the last five years the average parcel size has increased by 24%
to 27,702 from 22,356 tonnes. Mechanical dry bulk carrier has the maximum
parcel size which is in the range of 35,000 to 44,000 tonnes.

30
Business Plan Development for the Paradip Port Trust – Final Report

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 % Y-O-Y


Increase
Container Cellular 2560 602 1614 2497 3136 3392 33% 8%
ships Combination - - - - - -
Break Bulk Cargo 7,738 1,604 3,624 6,941 3,331 3,912 -49% 17%
Dry Bulk Mechanical 35,271 38,946 41,500 40,602 44,526 37,466 6% -16%
Conventional 22,983 23,938 23,039 22,448 23,134 25,228 10% 9%
Liquid Bulk 11,995 10,593 12,867 12,193 12,235 12,829 7% 5%
Total 22,356 23,618 26,650 26,523 28,565 27,702 24% -3%
Table 2.9 Average Parcel Size – Trend Analysis

2.1.7 Modal Split Analysis

Rail is the major mode of hinterland transport for the Port of Paradip, which is
clearly displayed in the modal split analysis. In 2005-2006, the rail share
recorded 64% and the road and dedicated conveyor system (DCS) shares were
26% and 10% respectively.

Modal Split Road Rail DCS Total

2006 26% 64% 10% 100%

2005 27% 59% 14% 100%

Table 2.10 Modal Split share in 2005 and 2006


There is a decline in DCS and road share due to focus on rail and these shares
are expected to decease further (IOCL plans aside) in the near future as well, as
PPT has been preparing a master plan for increasing future rail capacity for other
than coal transport.

Figure 2.1 Modal Split in 2005-06

10%
26%

64%

Road Rail DCS

31
Business Plan Development for the Paradip Port Trust – Final Report

Inbound Commodity 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 % CAGR % Y-O-Y % Share % Share
(Year on 01 06
Year)
Hinterland Iron Ore 1,974,526 2,362,920 2,623,186 2,536,992 3,547,580 5,473,714 23% 54.3% 19% 36%
to
Thermal Coal 8,312,525 8,973,001 9,387,321 10,310,635 10,162,401 9,548,414 3% -6.0% 81% 62%
Port
Pig iron/ 0 0 0 97,560 290,758 289,515 72% -0.4% 0% 2%
Steel
Total 10,287,051 11,335,921 12,010,507 12,945,187 14,000,739 15,311,643 8% 9.4% 100% 100%

Outbound Commodity 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 % CAGR % Y-O-Y % Share % Share
01 06
Port Coking Coal 1,478,581 1,411,856 1,793,062 2,467,538 2,052,655 2,493,391 11% 21% 84% 44%
To
Hinterland Lime Stone 258,051 166,009 213,996 157,771 168,625 269,151 1% 60% 15% 5%
Coke 14,071 206,221 425,501 650,450 307,500 461,485 556% 50% 1% 8%
CP Coke - 40,212 9,373 33,643 76,000 4,880 -41% -94% 0% 0%
Non Coking Coal - 1,095,660 2,491,546 0% 127% 0% 44%
Total 1,750,703 1,824,298 2,441,932 3,309,402 3,700,440 5,720,453 27% 55% 100% 100%

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 % CAGR % Y-O-Y % Share 01 % Share 06
Inbound 10,287,051 11,335,921 12,010,507 12,945,187 14,000,739 15,311,643 8% 9% 85% 73%
Outbound 1,750,703 1,824,298 2,441,932 3,309,402 3,700,440 5,720,453 27% 55% 15% 27%
Total Traffic – Rail 12,037,754 13,160,219 14,452,439 16,254,589 17,701,179 21,032,096 12% 19% 100% 100%
Total Traffic – Port 19,900,556 21,130,939 23,901,177 25,310,901 30,103,659 33,108,763
Rail Share 57% 62% 60% 64% 59% 64%

Table 2.11 Rail Performance Analysis

32
Business Plan Development for the Paradip Port Trust – Final Report

Rail Performance Analysis

Rail handled nearly 21 million tonnes of the cargo during the last financial year
and this represents 19% growth over the previous year. Rail traffic has been
growing at a CAGR of 12% over last five years. The rail share has increased
from 57% in 2001 to 64% in 2006.

Period No of Wagons Received No of Wagons Dispatched


Loaded Empty Total Loaded Empty Total
2001-02 75,330 978 76,308 11,524 64,783 76,307
2002-03 81,473 2,492 83,965 17,142 66,822 83,964
2003-04 83,586 2,714 86,300 23,410 62,890 86,300
2004-05 96,457 1,196 97,653 24,906 72,468 97,374
2005-06 101,510 12,867 114,377 45,782 68,596 114,378
Table 2.12 Rail Utilization Analysis Inbound– Outbound flow

In 2005-06, PPT received nearly 114,377 wagons with 89% loaded and the rest
empty and dispatched the same number with 40% loaded and 60% empty. The
share of empty wagons drastically reduced to 60% from 74% due to the
increased demand for coking coal distribution by rail.

Period Wagons Received Wagons Dispatched


Loaded Empty Total Loaded Empty Total
2001-02 99% 1% 100% 15% 85% 100%
2002-03 97% 3% 100% 20% 80% 100%
2003-04 97% 3% 100% 27% 73% 100%
2004-05 99% 1% 100% 26% 74% 100%
2005-06 89% 11% 100% 40% 60% 100%
Table 2.13 Rail Utilization Analysis Inward – Outbound flow (in %)

Road Performance Analysis

Though the share of rail traffic has been increasing, the road with 26% percent
share creates high traffic congestion on the NH-5 route, which connects the
mines and other industrial clusters with PPT via Cuttack. Truck traffic is nearly
2,500 to 3,000 trucks per day (observed based on different interaction with PPT
and customers).

33
Business Plan Development for the Paradip Port Trust – Final Report

However, PPT can handle only 700 to 800 trucks per shift and the remaining
trucks are lining up in the queue on NH-5 road. The queue length goes about
25 km and makes the road highly congested incurring a high social cost (as it is
rendered basically not available for use by the public).

Iron ore is the major commodity that drives the truck movements between the
mines and PPT. In 2005-06, 50% of the iron ore traffic was handled by road. PPT
has a capacity constraint at its Iron ore mechanized plant to handle more number
of Rakes per day. It can handle up to 5~6 rakes per day only, where as the
demand is about 9~10 rakes, which led the road to dominate the Iron ore
movement.

2.2 Paradip Existing Facility and Utilization

The Port of Paradip is an artificial lagoon type harbor, protected by rubble mound
breakwaters. The south breakwater is 1,210 m long and the north breakwater is
510 m long. The approach channel is dredged and is 2,200 m long and 190 m
wide. The entrance channel is 500 m long and 160 m wide. The port has one
turning circle with a diameter of 520 m. It allows only one way navigation, and
the Port offers all year service for the vessels.

PPT Harbour Dimension

South breakwater 1,210 m Length

North breakwater 510 m Length

Approach Channel 2,200 m Long , 190 m wide

Entrance Channel 500 m Long, 160 m wide

Turning Circle 520 m diameter

Draft 11.5 m to 13.2 m

Max.Vessel Size 75, 000 DWT


Table 2.14 Port Harbour Dimensions

34
Business Plan Development for the Paradip Port Trust – Final Report

Though the soft soil bed under sea makes the port suitable for dredging to any
depth, the approach channel is maintained at 13.2 m draft. This requires annual
dredging of about nearly 2.2 million cbm, which includes dredging of the basin
side and along side berth and it is mainly carried out by Dredging Corporation of
India. With this existing configuration, PPT handles maximum vessel size ranges
between 50,000 to 75,000 DWT (PANAMAX).

Indian Port Association (IPA) prepared a Master Plan for the Port of Paradip in
1986 and updated it in 1998 for the Port requirements to 2012. As per the plan,
recommendations were given to create two turning circles as well as another
additional 12 berths by end of 2012.

2.2.1 Existing Docks and Quays

Port of Paradip has two wet docks viz. Central and Eastern. The western and
eastern docks are planned for the future development. The eastern dock is
planned for one Iron ore berth and one coking coal berth. The western dcok is
planned for clean and other general cargo.

The configuration of the existing quays and their current status as follows:

Eastern Quay – General Cargo Berth (G.C.B)

It has a quay length of 686 m and contains three berths viz. East quay I, East
Quay II and East Quay III. East Quay I and II can handle 40,000 DWT vessels
with a draft of 11.5 m and East Quay III can handle 60,000 DWT vessels with a
draft of 12.5m. All quays are multi purpose berths handling mainly chromium ore
and other bulk cargos. During the year 2005–06, it also to a minor extent handled
iron ore and containers.

Eastern Quay alone handled nearly 4.4 million tonnes of cargo which is 13.25%
of total cargo handled during 2005–06. Chromium and iron are the main
commodities, which were handled during last year.

35
Business Plan Development for the Paradip Port Trust – Final Report

CQ III
CQ II EQ III
CQ I
EQ II
EQ I

Existing Docks

Future/ Planned Dock

Figure 2.2. Existing and Planned Dock Facility by Port

IOB – Iron Ore Berth CHB – Coal Handling Berth


NQ – North Quay GCB – General Cargo Berth
SQ – South Quay WQ – Western Quay
CQ – Central Quay EQ – Eastern Quay
FB – Fertilizer Berth CC – Clean Cargo
TC – Turning Circle MCB – Multi Commodity Berth

36
Business Plan Development for the Paradip Port Trust – Final Report

Central Quay (CQ)


Central Quay has a length of 755 m with a draft of 13 m. Central Quay consists
of three multipurpose berths and can accommodate vessel sizes of 60,000 to
65,000 DWT. It handled 6.8 million tonnes of cargo which equals 20.58% of total
cargo.

South Quay (SQ)


South Quay has 12.5 m draft and 265 m quay length. It is a single berth and
handled nearly 1.5 million tonnes of cargo which is nearly 4.67% of total cargo. It
is also a multi- purpose berth and handled iron ore, POL and coking coal during
last financial year.

Fertilizer Berths (FB)


PPT has two fertilizer berths viz. FB I and FB II, with quay lengths of 252m and
230 m respectively with a draft of 13 m. Fertilizer berths (together) handled
nearly 2.5 million tonnes of cargo which is 7.54% of total. It already reached 90%
of utilization. These berths are captive and leased to private parties.

Iron Ore Berths (IOB)


The iron ore berth is one of the oldest and first berths of PPT and has draft of
13.2 m and the length of the Quay has been extended from 150 to 230 m during
the last financial year. The large rise in iron ore demand put a capacity constraint
on iron ore berth.

The designed capacity is only 4 million tonnes but it in fact handled more than
6.4 million tonnes, which is 19% of total cargo handled during 2005-06. However,
the total iron ore handled at the Port was nearly 10 million tonnes with the
remaining quantities being handled conventionally at General Cargo or other
berths.

37
Business Plan Development for the Paradip Port Trust – Final Report

S.NO Name of Berth Type of Designed/ Actual Quay length (Mtrs) Maximum Size of Vessel that
Berth depth (Mtrs) can be accommodated

Length Overall (Mtrs) DWT


1 I.O.B Jetty 13.2 230 260 60,000-75,000

2 East Quay-I Berth 11.5 } 260 40,000MT


3 East Quay-II Berth 11.5 } 686.6 260 40,000MT
4 East Quay-III Berth 12.5 } 230 60,000MT

5 South Quay Berth 12.5 265 230 50,000MT

6 Central Quay - I Berth 13 }


7 Central Quay - II Berth 13 } 755 230 60,000-65,000
8 Central Quay- III Berth 13 }

9 Fertilizer Berth-I Berth 13 252 230 60,000-65,000

10 Fertilizer Berth-II Berth 13 230 230 60,000-65,000

11 Multipurpose Berth Berth 13 250 190 40,000-45,000

12 Coal Berth - I Jetty 15 } 520 260 60,000-75,000


13 Coal Berth – II Jetty 15.0
14 Oil Jetty Jetty 14.0 Dolphin to Dolphin 290 mtr 260 65000

Table 2.15 Existing Docks & Quays Detail

38
Business Plan Development for the Paradip Port Trust – Final Report

Designed Capacity in m.tons (% Share) Volume Handled in m.tons (% Share)

4, 10% 0.7, (2%) 6.4, (19%)


7.5, 19% 2.6, 7%
2.5, (8%)

4.9, 13% 15.3, (46%)

20, 51% 8.3,( 25%)

Capacity Utilization in % Share

9.48%
Fertilizer Berth 159.04%

Multi Purpose Berth

Coal Berth 311.46%


96.03%
Iron Ore 41.39%

Oil Jetty

Figure 2.3 Existing Docks – Capacity Utilization Analysis

39
Business Plan Development for the Paradip Port Trust – Final Report

Coal Handling Berths (CHB)


The Port has two mechanized coal jetties with state of the art technology. Each
jetty has a draft of 15 m and 260 m quay length. It can accommodate vessel
sizes up to 75,000 DWT. It has a designed capacity of nearly 20 million tonnes
but handled volumes amounting to only 46% of its total capacity.

POL Jetty
PPT has an oil jetty with a draft of 14 m and 260 m length with dolphin to dolphin
facility. Though, the designed capacity is 7.5 million tonnes it handled less than a
million tonnes during last year, which accounts only 2.15 % of over all volume.

2.2.2 Berth Utilization

The iron ore berth occupancy rate is currently more than 80% and it is already
crossed its maximum capacity. The over capacity utilization and berth utilization
indicates the constraints for iron ore capacity in the coming future.

The coal berth occupancy is 35%, reduced from 40% in 2004-05. The Fertilizer
Berth II is occupancy is only 12% during the last financial year. Last year, Oswal
Fertilizer, who was operating this berth sold off the company to IFFCO. There
was a lay-off for a brief period of time. Hence, the occupancy rate of Fertilizer
Berth II fell sharply. However, the overall port’s berth occupancy rate is about
63%.

Sl. Name of the Type of 2000- 2001- 2002- 2003- 2004- 2005-
No Berth Berth 01 02 03 04 05 06
1 Oil Jetty Mechanized NA NA NA NA NA 13

2 Iron Ore Berth Mechanized 70 73 71 68 70 81

3 East Quay-I Semi-Mech 72 62 51 64 63 69

4 East Quay-II Semi-Mech 78 71 67 60 68 74

40
Business Plan Development for the Paradip Port Trust – Final Report

5 East Quay-III Semi-Mech 78 77 50 53 69 73

6 South Quay Manual 69 65 51 49 51 64

7 C.Q – I Manual 73 83 40 52 66 59

8 C.Q – II Manual 76 70 54 60 70 76

9 C.Q – III Manual NA 35 59 66 79 80

10 Fertilizer Berth- I Mechanized 43 18 48 56 52 73

11 Fertilizer Berth – Mechanized 66 52 28 22 33 12


II

12 C. B. – I Mechanized 25 21 52 76 48

13 C. B. – II Mechanized 25 48 37 11 26

14 MPB Manual 54 29 43 70 81
Table 2.16 Berth Occupancy (All values in %)

2.2.3 Handling Equipment

The Port equipment inventory profile shows the lower utilization. The reason
behind this is that the existing equipments are old and stevedore companies are
not willing to hire the equipment due to frequent breakdowns, which is reflected
in the poor utilization factor.

Equipment Nos Capacity Utilization


Wharf Crane 3 13.2 T 43.0%
Pay Loader 3 4.7 cum (2), 3.4 (1) 12.0%
Mobile Crane 2 18T(1), 20T(1) 4.8%
Fork Lift 6 6T 13.6%
Diesel Loco 7 NA 55.0%
Table 2.17 Cargo Handling Equipments Utilization in 2005-06

41
Business Plan Development for the Paradip Port Trust – Final Report

The Port does not have any container handling cranes (Quay Cranes) due to
inadequate volume of containers. Containers are in fact to a great extent moved
from nearby hinterland to JNPT, Vizag, and other container terminals due to lack
of handling equipments at PPT. The private stevedoring companies are allowed
to bring their own equipment which has kept the invested capital in handling
equipment from the ports side to a minimum.

JNPT and Vizag are the competitive ports for containers originating from and
destined for Orissa. However, the volume which goes to either JNPT or Vizag is
not in significant numbers.

2.2.4 Storage Yard Area

PPT has a storage capacity of 15,00,000 sq.m nearly tripling from 6,66,000 sq.m
in 2001. The coal storage alone displays a 72% share of total capacity, of which,
1,25,000 sq. m is a mechanized coal plot.

The iron ore share of total capacity is 20% and the rest is shared by others. The
storage plots are leased in most cases, either to third parties or customers who
have considerable amount of volume flow. All the plots are bonded plots within
the port boundaries.

Plots Commodities Area ( in Sq m) % share


Siding Plots Coal 5,00,000 33%
Siding Coal 1,60,000 11%
(Construction)
Road bound plots Coal 3,00,000 20%
Manual IO Plots Iron Ore 2,00,000 13%
Mech. IO Plots Iron Ore 1,00,000 7%
MCHP Plots Coal 1,25,000 8%
CON Plots Other goods 70,000 5%
Common plots Common 45,000 3%
Total 15,00,000
Table 2.18 Commodity Storage Yard Area share in 2005-06

42
Business Plan Development for the Paradip Port Trust – Final Report

2.2.5 Rail Infrastructure

PPT owns and operates the rail infrastructure on the port premises. It consists of
9.8 km route km’s and 73 km of track length.

The rail terminal consists of 15 yard lines and 25 sidings inside its main terminal.
PPT has excellent rail handling facilities at its premises. PPT has an open and
closed wagon handling facility for coal handling (bottom discharge) and wagon
tipplers facilities for iron ore handling. However, the existing rail network doesn’t
have signaling, so shunting and rail operations are being done manually.

The PPT rail infrastructure has two main lines. One line is reserved for
mechanized coal handling, the other line accommodates mechanized iron ore
handling as well as transport of other commodities. The coal rail line has a
capacity of 20 rakes per day and the iron ore line has a capacity of only 6 rakes
per day.

Key Indicators In Units


Total Route Length 9.8 KM
Total Yard Lines 15
Total Sidings 25
Total Rakes Capacity per day (Coal) 20
Total Rakes Capacity per day (Others) 10 to 13
Total No of Wagons Handled 114, 377 (one time)
Note: 58 wagons/ rake
Table 2.19 Rail Infrastructure Status in 2005-06

However, the coal rail line currently handles only 10 rakes per day, hence it is
being utilized only 50%. The existing line for iron ore is not sufficient to
accommodate the current demand, and the same applies to other commodities.
The handling time is 120 minutes for one full rake coal wagons and 2.5 hours for
one rake of iron ore wagons processed through the wagon tipplers.

43
Business Plan Development for the Paradip Port Trust – Final Report

The existing Rail hinterland connectivity and proposed plans are discussed in
detail in the Hinterland Connectivity Chapter.

2.2.6 Road Infrastructure

• PPT is connected with all major National Highways through Cuttack,


which is one of the major cities in Orissa.
• Cuttack and Paradip are connected by NH-5A and this existing road
network is currently not sufficient to cater for the increasing demand.
• All road way cargo goes via NH-5A, NH-200 and NH-215 to/from
mines
• Pipelines are used to transport finished crude oil products and raw
fertilizer materials, in total 3.1 million tonnes a year.

44
Business Plan Development for the Paradip Port Trust – Final Report

NH-5

NH-5A

SH-12

Mine
cluster

Figure 2.4 Existing Road Network

45
Business Plan Development for the Paradip Port Trust – Final Report

2.3 Past Operational Performance

The effectiveness of the port operations are mainly measured based on the ship
turn around time (TRT) and pre-berthing time (PBT) parameters and these
determine the effectiveness of both infrastructure and superstructure.

The ship TRT was reduced from 3.08 days in 2001 to nearly 2.57 days during the
last financial year. However, the ship TRT for coking coal and chromium is close
to 4 days due to the inadequate infrastructure and semi-mechanized handlings.
The pre-berthing time has come down from 1.4 day in 2001 to 1.05 day in 2006.

Year Avg TRT time Avg pre-berth Avg Berth Productivity


(no of days) time (no of days) tonnes per Occupancy per
Port Overall Port Overall shift (in %) hook-shift
Account Account berthday (in metric
tonnes)
1990-91 7.82 8.15 1.25 1.58 4181 66 363
1991-92 6.01 6.13 1.07 1.19 4924 60 443
1992-93 5.98 6.09 1.25 1.36 5134 67 491
1993-94 5.69 5.78 0.94 1.03 5263 70 507
1994-95 5.53 5.65 1.24 1.36 5564 79 529
1995-96 5.55 6.29 1.75 2.49 5929 85 560
1996-97 3.92 4.94 0.61 1.63 6405 65 632
1997-98 4.11 5.12 0.66 1.67 6252 65 663
1998-99 3.22 4.11 0.31 1.2 7012 67 798
1999- 3.02 3.88 0.27 1.14 7106 63 743
2000
2000-01 3.08 4.16 0.33 1.41 8503 70 800
2001-02 3.26 3.99 0.46 1.19 8831 56 783
2002-03 3 3.37 0.43 0.8 10763 48 838
2003-04 2.88 3.42 0.21 0.74 10256 53 839
2004-05 2.72 3.41 0.07 0.75 11048 60 826
2005-06 2.57 3.56 0.06 1.05 11316 60 874
Table 2.20 Operational Performance Indicators during 2005-06

Though the berth occupancy is more than 75% at the iron ore berth and the
multi-propose berths, the over all occupancy rate is around 60% due to less
utilization of mechanized coal berths and oil jetty, which are utilized less than
40%.

46
Business Plan Development for the Paradip Port Trust – Final Report

Commodity 2000 2001 2002 2003 2004 2005 2006


TRT TRT TRT TRT TRT TRT TRT
Iron Ore (Mech) 4.79 4.16 4.86 4.65 3.05 1.87 1.74
Iron Ore (Conv) 2 - 1.97 3.36 2.72 2.95 2.63
Thermal Coal (Mech) 2.01 1.91 2.46 1.87 1.98 2.13 1.34
ThermalCoal (Conv) 4 3.63 3.64 2.71 2.53 2.68 2.86
Coking Coal 4.33 3.72 3.87 3.5 3.29 3.65 3.62
FRM 4.62 7.8 4.36 2.91 6.42 2.55 2.85
Ch. Ore/ Ch Con/ Fe Mn etc., 4.45 5.02 5.85 4 4.55 4 3.97
POL 3.32 2.94 1.35 1.35 1.42 1.55 1.23
Overall 3.89 4.16 3.99 3 2.88 2.72 2.57
Table 2.21 Commodity wise Turn around time (TRT) in days (2000-2006)

The berth output per day has been increased from 8,500 tonnes in 2001 to
11,316 tonnes in 2006.

2000- 2001- 2002- 2003- 2004- 2005-


01 02 03 04 05 06
Container Cellular 2256 548 1230 2026 2507 2796
ships Combination - - - - - -
Break Bulk Cargo 2,669 904 1,345 1,108 1,165 961
Dry Bulk Mechanical 12,033 16,253 18,392 17,202 20,709 21,535
Conventional 7,255 6,639 6,820 6,823 7,218 7,714
Liquid Bulk 8,450 8,173 10,275 9,540 8,979 10,414
Other - - - - - -
Total 8,503 8,831 10,763 10,256 11,048 11,316
Table 2.22 Berth output per day (2000-06)

The average output per hook is also steadily increasing from 800 tonnes per
hook to 874 tonnes in last five years. The ship down time is more than 45% for
the bulk dry mechanized cargo and nearly 26% for other bulk carriers, except
containers. The high preparation time at the mechanical loading plants
contributes to the high idle time. The customs procedures and surveying time
also contribute to the high idle time both at mechanized plant and semi
mechanized plants.

47
Business Plan Development for the Paradip Port Trust – Final Report

Customs department team at Paradip Port Trust belongs to the Central Excise
Department and they have been posted at Paradip under deputation except the
Deputy Commissioner (IRS Officer). They do not belong to Sea Customs
department.

As the Customs team does not belong to Sea Customs, they are not well
equipped to handle the Customs process efficiently. This causes delay in
clearing the cargo. They do not work on Saturdays and Sundays. Hence, on
these days the concerned party has to send a requisition letter, and pay the
overtime charges during holidays. Alternatively, the concerned party needs to get
the required documents cleared in advance. Also, customers are generally not
satisfied with the process as it is still driven through manual interventions and
paper work and clearance.

High number of holidays (including Saturdays and Sundays), lack of


professionals and manual intervention adversely affects the customs process at
Paradip, which was also expressed by the customers.

The Port security is managed by CISF (Central Industrial Security Force) under
the guidelines of PFSO (Port Facility Security Officer). Paradip Port Trust is
compliant with ISPS (International Ship and Port Facility Security) norms as per
IMO regulations. The Port has a well prepared security plan PFSP (Port Facility
Security Plan) in place, which is being approved by the Directorate General of
shipping every year.

Directorate General of shipping acts as the inspection agency for the Port’s
security plan. PFSO is supported by four Deputy PFSO’s and CISF team in
coordinating the security aspects of the Port.

48
Business Plan Development for the Paradip Port Trust – Final Report

Conclusion

• Port performance has been increasing over period of time, However, it


is been still below the world standard.
• Though the over all Berth occupancy rate is only 60%, the key berths
are already reached more than 80% of utilization rate.
• An optimal berth utilization as per the world standard, defined by
UNCATD (United Nations Conference on Trade and Development) is
about 65 to 70%.
Performance Analysis Summary

2000-01 2005-06 World Standard


Berth
56% Occupancy 60% 65%
Rate

8,508 t/day 11,316 t/day 30~40,000


Throughput / t/day
day

12,033 t/day 60-70,000 t/day


21,535 t/day (Mech)
(Mech) (Mech)
7,255 t/day 7,714 t/day
(Conv.) (Conv.)
2.4 days
3.4 days Ship Turn
Round Time 2.6 days
Parcel Size
(Mech)
Parcel Size 1.8 days 120,000t (Avg.)
(Mech) (Mech)
37,000t (Avg.)

Figure 2.5 Bulk Port Benchmark

• The world benchmark for through put per day is about 30 to 40,000
tonnes per day. The turn round time for such high productivity ports is
in the range of 1.8 to 2.4 days. The parcel size is about 120,000
tonnes. (Source: Australian Port Association and other bulk Ports in
the world).

49
Business Plan Development for the Paradip Port Trust – Final Report

• The world benchmark for Ports which are on similar scale to PPT as
follows:
ƒ The overall through put per day is estimated about 18 to
25,000 tonnes. For mechanized berths, the throughput per
day is about 25 to 35 tonnes per day.
ƒ The estimated turn around time for such ports is in the range
of 1.5 to 2.1 days.
ƒ The parcel size for vessels which are calling at such ports is
about 60 to 80,000 tonnes.

50
Business Plan Development for the Paradip Port Trust – Final Report

3. PPT Competitive Mapping

PPT has been losing its potential volume to the competitors irrespective of the
fact that the Port is located closer to the rich mineral mines and steel plants.
Hence, it is of strategic importance to evaluate the strength and weakness of
PPT against its competitors.

3.1 Approach

TransCare has developed a “Matter-of-Fact” competitive mapping model, which


determines the position of the Port based on the following key parameters:

• Past facts and performance


• Customers feedback and their future plans
• Competitor’s future plans and their customers feedback
• New Market Entrants

The entire competitive mapping is covered under five major areas which
determine the choice of port by the customers and each area has its sub areas
upon which each port is being evaluated and measured against each other. Here
we considered three major ports viz. Haldia (H), Vizag (V) and Paradip (P) as
these three are the main gateways to the Eastern parts of India, along with the
proposed new ports of Dhamra, Gopalpur and POSCO.

51
Business Plan Development for the Paradip Port Trust – Final Report

Dhamra
Paradip
Posco
Gopalpur

Map 3.1 Port Hinterland and Its Competitors

Iron Ore Mines Steel Plants

Coal Mines Power Plants

52
Business Plan Development for the Paradip Port Trust – Final Report

Draught
Geographical Bulk Commodity
Availability
Position
(Hinterland Base) High value Berth
Goods Availability

Vassal Labor
Productivity
Handling Capability Wharfage
Cargo Handling

Evacuation TTAT
Rail Network
Port Hinterland
Competitive Connectivity WTAT
Mapping Road Network
Responses
Port dues
Marine and customs
Cost
Environmental
Warfage
and labour
Value added

Other Services Security

Fig 3.1 Port Competitive Mapping Model – TransCare Approach

53
Business Plan Development for the Paradip Port Trust – Final Report

Facts and Market Based Research:

TransCare designed tailor made research questionnaires based on a competitive


mapping model, PPT’s core business and its future plans. The team also met all
the stakeholders of the Port (railways, State Government officials and key
customers) as their inputs are important in developing PPT for the future. All
these analyses have been done mainly for primary supply chain, which was
already discussed in the previous chapter.

Matter of Fact Based Model

Past Performance Market Survey

o Past market loss o Customer Feedback


o Performance and and their rankings
other data based on o 40 interviews and
2004-05 more than 15 filled
questionnaires

Future Plans and New market


Entrants and their Plans

Sector Ranking – Excellent, Good, Moderate, Low

Final Ranking - Ranked based on over all performances

Fig 3.2 ‘Matter-of-Fact’ Competitive Mapping Model for PPT

54
Business Plan Development for the Paradip Port Trust – Final Report

3.2. Geographical Position

• PPT ranks high in geographical position as it is closely located to the rich


mineral mines and steel plants. However, it was ranked low as PPT could
not exploit much of its hinterland for its growth.

• PPT hinterland has rich mineral deposits nearby like iron ore, coal,
alumina and bauxite. In terms of bulk cargo, it ranks high and in terms of
high value goods, it ranks very low.

Hinterland Base Hinterland Base


Bulk High value
E
G E
M
G
M
L
L

P H V
H V P

Hinterland Base
Exploitation
E
G
M

V H P

• There is no high value goods based industry in the closer proximity. The
urbanization rate is very low in the State of Orissa and its neighboring
states, when compared to other states in India. Orissa and its neighboring
states’ urbanization level stands at 14% (2005).

55
Business Plan Development for the Paradip Port Trust – Final Report

• PPT has lost already about 54.5% of potential iron ore cargo and 40%
potential thermal coal to Haldia and Vizag.
• Chhattisgarh hinterland based cargo is also attracted by Vizag; the
estimated volume is about 4 MT of coking coal.

3.3 Handling Capability


3.3.1 Draught and Vessel Size

Iron Ore

• PPT ranks high in high draught potential, but ranks low in terms of
exploitation of it. PPT has potential to have a depth about 16 to 19 m but
the Port has only about 12.5m draught. However, the iron berth has a
depth of 13.2m.

• Chennai and Vizag have a draught about 16.5m. However, Haldia has a
draught restriction which limits the bigger vessels to call at the port.

16.5 C Excellent 120-150,000


E 13.2
G
8-10 Good
M

L
P Moderat 65 -80,000

C/V P H H Low 65 -80,000

Iron Ore berth Depth Vessel Size in dwt

56
Business Plan Development for the Paradip Port Trust – Final Report

• For iron ore, customers rate Vizag higher for its higher draught at berth to
handle bigger vessels. They expressed that they will prefer higher
capacity vessels sizes (120,000-150,000 DWT) for the iron ore export to
China.

• Vizag and Chennai have already deployed higher handling capacity with
fully mechanized iron ore terminals to handle larger vessels sizes (more
than 150,000 dwt).

• Chennai and Vizag do not have immediate iron ore hinterland but each
handles more than 9 MT p.a. due to its handing capability.

Thermal Coal

• PPT ranks high in coal handling capability. PPT has a high draught of
about 13 m at its coal berths and handles the vessels sizes about 60,000-
75,000 dwt. The average parcel size is estimated to be 55,000-65,000
tonnes per trip.

12.5

E 10.5 Excellent
G
8-10
M
P Good 60-75000
L

H/V Moder 65 -80000


P V H
Lo
Thermal Coal berth Depth Vessel Size in DWT

• Haldia and Vizag rank low in thermal coal handling capability. Customer
rated them with a ‘Not Satisfied’ note.

57
Business Plan Development for the Paradip Port Trust – Final Report

• About 6.2 MT of cargo is being diverted to Haldia and Vizag due to policy
level constraints.
• However, the customer is quite satisfied with the coal handling and vessel
turn around time at PPT.

Coking and Non-Coking coal

• Vizag has a slight competitive advantage over others in coking/ non


coking coal handling. Vizag is the leading import gateway for coking coal.
SAIL is the biggest customer for Vizag, followed by Vizag Steel Ltd.

• In Vizag, the coking coal is handled at general cargo berth (GCB). The
berth has a depth about 14.5m with a maximum capacity about 3 MT per
annum. But the demand is 8 MT per annum. The rest is handled through
other general cargo berths.

• In PPT, coking coal is mainly handled at Central Quay and Multi Purpose
Berth. Both these berths depth is limited to 12.5 m.

14.5 Excellent
E 12.5
G
8-10 Good
M

L P/V Moderate
65 -80000

Low
V P H H 65 -80000

Beth Depth for Coking/ Vessel size for Coking/


Non-coking coal Non-coking coal

58
Business Plan Development for the Paradip Port Trust – Final Report

• Haldia has draught and quay length constraints at its coking handling
berth. The coking coal handling quay length is limited to 190 m against
Vizag’s 270 m and PPT’s 225 m.
• However, all these Ports are not equipped enough to handle the higher
capacity vessels for coking coal import.
• As coking coal is going to be mostly imported by the steel plants in the
coming years, the ports who want to be competitive should ensure an
adequate mechanical handling facility at their terminals.

3.3.2 Berth Availability

• The berth availability for thermal coal is quite high at PPT but more than
80% berth occupancy rate at iron ore, coking and non-coking coal berth.

70%
70%
E E
G G
90%
M 90%
M
L L

V P P V
H
H

Iron Ore Thermal Coal

E V/H/P
G
M

Coking and non Coking

59
Business Plan Development for the Paradip Port Trust – Final Report

• PPT has a berth occupancy rate of about 81% for iron ore and handled
about 4.3 MT against the total traffic about 10 MT in 2005-06.
• Vizag is comparatively better with its two iron ore berths and handled
about 16 MT during the same year.
• TATA is having its captive berth at Haldia. SAIL is in a good relationship
with Vizag.
• PPT should develop a good relationship with SAIL and encourage them to
have a captive berth at PPT.

3.4 Cargo Handling


3.4.1 Ship Turn Round Time (STRT)

• PPT dominates with better turn round time for thermal coal and Vizag for
iron ore.

2.6 days 2.8 days


E 3.5 days E
G G
M 5.5 days M 3.3 days

L L

V P H P H
Thermal Coal V
Iron Ore

E
G
M 4 days

HVP
Coking and Non-coking

60
Business Plan Development for the Paradip Port Trust – Final Report

• Vizag has only 2.5 days of Vessel Turn Round Time with high productivity
and an optimal berth occupancy rate.
• PPT is more competitive in thermal coal than others with 2.8 days of TRT.
• All three ports are rated low for coking and non-coking coal handling
facility. However Vizag has better productivity rate for the same.
• Growing coking and non-coking coal import demand would put more
pressure on ports to upgrade facilities.

3.4.2 Evacuation

• The inbound and outbound evacuation turn round time is quite high at
PPT. Customers expressed that rakes are not dispatched on time.
• Rakes availability is quite high at Haldia and Vizag for outbound
movement. Customers are quite satisfied with the facilities which are
provided by Haldia and Vizag.

E E
G G
M M

L L

V/H P V H/P

Outbound Evacuation Labour Productivity

E
G
M

V/H P
Inbound Iron ore

61
Business Plan Development for the Paradip Port Trust – Final Report

• The labour productivity is rated at moderate level at PPT. Customers are


more concerned about the effective hours per day at PPT.

• Customers rated Vizag for higher labour productivity and Haldia for lower
labor productivity.

3.5 Hinterland Connectivity

• Hinterland connectivity needs special attention. PPT has been losing its
market share to Haldia and Vizag due to inadequate rail and road network.

• Inefficient handling at the handling terminals lead to a longer rake turn


round time at PPT, which in-turn leads to non-availability of rakes on time
for the customers.

E E
G G
M M

L L

V H P V H P

Rail Connectivity Road Connectivity

• SAIL imports about 4 MT of Coking coal through Vizag for its steel plant in
Chhattisgarh, which is closer hinterland for PPT as well.

• The direct rail link between Raipur industrial cluster and Paradip would
attract this cargo to PPT.

62
Business Plan Development for the Paradip Port Trust – Final Report

3.6 Handling Cost

• PPT has low wharfage charge for iron ore handling (mechanical) but high
costs for manual handing compared to Vizag.

E E
G G
M M

L L

P V H V P H

Iron Ore Coking Coal

E
G
M

V H P

Thermal Coal

• Vizag has low handling charges for the import of coking coal. It is 2.5
times less than PPT. This low charge for the coking coal in Vizag led SAIL
to ship their cargo via Vizag than PPT.

• Coking coal import charge at Haldia is quite high. Thermal coal handling
charge is quite high at PPT but this charge is for mechanized handling.

63
Business Plan Development for the Paradip Port Trust – Final Report

3.7 Other costs

• PPT is rated ‘Moderate’ on total port charges and Vizag is rated ‘Good’.
Total landed transportation costs for coking coal and iron ore are quite
high at PPT when compared to Haldia and Vizag, as rated by customers.

E E
G G
M M

L L

V H P V P H

Landed Cost Total Port Charges

• This is mainly because of longer truck TRT and more dependency on


truck for iron ore transport. And, the higher demurrage charges for rakes
due to poor turn round time for the rakes.

• However, over all, the port charges at PPT is rated at ‘Moderate’ level
compared to Haldia but still Vizag has a competitive charge.

3.8 Other Services

• Generally in other services, all ports are rated equally except Marine
services (High in PPT) and Customer responses (High in Vizag).

• Customers are quite satisfied with the marine service with PPT but they
complained about the inefficient customs process.

64
Business Plan Development for the Paradip Port Trust – Final Report

• PPT does not have a Sea Customs department. The customers are more
concerned about the higher number of customs holidays, which delays the
customs clearance processes and procedures.

Customer’s Rating on Other Services

PPT Vizag Haldia

Customer Responses 4 2 4

Customs Process 4 3 3

Marine Services 1 2 4

Value added services 4 4 4

Environmental Safety 4 4 4

Security 3 3 3

4 - Low, 3 - Moderate, 2 - Good, 1, Excellent

Table 3.1. Customer’s rating for other services

• Customers also rated the ports very low in terms of IT systems and
security aspects.
• As such there is not much value added services at all these ports for bulk
terminal; hence customers rated the service at ‘Moderate’ level at all ports.

3.9 Current and Future Competitive Mapping

3.9.1 Current Competitive Mapping

• PPT is having a competitive position in terms of hinterland base load for


bulk cargo.
• PPT is not a competitive port in terms of handling costs (wharfage and
labour cost) when compared to other key competitive ports.

65
Business Plan Development for the Paradip Port Trust – Final Report

• But PPT ranked low in hinterland connectivity and handling productivity at


the port, especially against Vizag.
• Vizag would be the key competitor for PPT for coking coal and iron ore
traffic.
• Haldia is less competitive than Paradip but it has advantages over
hinterland connectivity and proximity to major steel plants in India.
• However, Halida is having its own natural restrictions; hence, TransCare
expects, in the short run, Haldia will be competitive, but not in the long run.

3.9.2 Future Competitive Mapping

• Dhamra, Gopalpur and POSCO are the newly proposed ports near by
PPT. POSCO will be a captive port for its steel plant.

• Dhamra will be a neutral, private port and located norrth of Paradip Port.
It is a joint venture between L&T and Tata Steel. Tata Steel is one of the
major steel producers in India. The port is expected to handle about 13.5
MT in the first phase and 25 MT in the second phase.

• It is expected to be operational by 2008, however, there is reason to


believe that it will be ready only by 2009-10. Plans are to construct one
berth with 17m depth and a capacity to handle up to 180,000 dwt vessels.

• The port will be able to handle 150,000 dwt vessels all the time, but will be
restricted to handle larger than 150,000 dwt vessels at only 45% of their
total operations time in a day.

66
Business Plan Development for the Paradip Port Trust – Final Report

Iron Ore Thermal Coal Coking Coal

Geographical
position PPT PPT PPT/HALDIA
(Hinterland Base)

VIZAG PPT VIZAG/PPT


Handling Capability

Hinterland VIZAG PPT/VIZAG VIZAG/HALDIA


Port Connectivity
Competitive
Mapping
PPT HALDIA/VIZAG VIZAG/PPT
Cost

VIZAG PPT HALDIA/VIZAG


Other Services

VIZAG PPT V/P/H


Over All

Fig 3.3 Port Competitive Mapping – Existing Condition

67
Business Plan Development for the Paradip Port Trust – Final Report

Iron Ore Thermal Coal Coking Coal

Geographical
position DP/PPT PPT PPT/DP/HALDIA
(Hinterland Base)

VIZAG/DP/PPT PPT PPT/DP


Handling Capability

Hinterland DP/PPT PPT/VIZAG PPT/DP


Port Connectivity
Competitive
Mapping
DECIDING HALDIA/VIZAG DECIDING
Cost FACTOR FACTOR

DECIDING PPT PPT/DP


Other Services FACTOR

DP/PPT PPT PPT/DP


Over All

Fig 3.4 Final Competitive Mapping with New Entrants

68
Business Plan Development for Paradip Port Trust – Final Report

• Dhamra port will pose a stiff challenge to Paradip Port Trust in terms of
attracting cargo as this port would be closer to the mines and the
proposed steel plants in Orissa and Jharkhand.

• Tata Steel is also planning to setup a 6 MT steel plant at Duburi in Orissa.

• The port is situated at a distance of about 187 km from the proposed steel
plant and 387 km from the existing Tata Steel plant in West Bengal. The
port is strategically located to cater to both its steel plants.

• Based on TransCare estimation, Dhamra will be a key competitive port in


the future for PPT. By the time Dhamra comes into operation, PPT should
be ready with its new iron ore and coking coal berths with mechanized
systems to overcome the competition.

• PPT will also be ready with its new hinterland projects, (connectivity
projects: Banspani – Daitari and Haridaspur – Paradip lines) that will
connect the mines cluster to Port with the shortest distance possible.

• In the future, the competition would be based on differentiating factors like


service level and costs etc. Hence, PPT should be in a competitive
position to offer cost effective service with a customer driven approach.

69
Business Plan Development for Paradip Port Trust – Final Report

4. Traffic Estimation for Paradip Port Trust 2007-2027

TransCare has developed a pragmatic approach model “NBA (Network Based


Analysis)” to arrive at the final traffic flow through PPT for 2007 to 2021. NBA
considers not only the key drivers that influence the commodity trend but also
considers the sub-factors which influence the macro factor. The model has three
phases, which are explained as follows:

Phase-I:

o Identification of key drivers based on historical trend and identification of


current and future influence factors.
o Rank the drivers which have high influence on the future growth and arrive
at an optimistic growth factor and a realistic growth factor.

Phase-II:
o Arrive at Global projections and National level projections based on the
identified and ranked growth factors.
o The growth factors are further vetted with Market research and experts’
opinion on the commodity growth and port competitiveness.

Phase-III:
o Port share is arrived at based on its past and future competitive factor to
attract the cargo; the competitive factors mainly hinterland land costs,
capacity, and capability and handling facility at the port.
o Risk and mitigation are also considered on all projected forecast.
.

70
Business Plan Development for Paradip Port Trust – Final Report

Analysis Past Trends


• Historical Growth Key Drivers
• Influence Factors analysis Identification and
• Policy level analysis their future
• Competition / Market share impact and growth
• others, if there is any

Rank and Weigh Demand Projection


Demand Projection the main drivers (1st Level)
Model by
TransCare Market Survey Total Market Potential
and Experts input Arrival and PPT Share

Final Projection

Risk and I) Optimistic Scenario


Competition Analysis iii) Realistic

Fig 4.1 Network Based Analysis (NBA) model – TransCare Approach

71
Business Plan Development for Paradip Port Trust – Final Report

4.1 Methodology

TransCare also segregated the entire analysis under two broader supply chains
viz. primary supply chain which contributes more than 92% of total Paradip
volume, and secondary supply chain, which contributes the rest and future
business opportunity

o Each supply chain is mapped with current volume flows


o Identification of bottlenecks and constraints
o Competitive analysis of each flow
o Then, arrive at the demand forecast for each supply chain

4.2 Iron Ore Supply Chain

The main market driver for iron ore, at least for next 8 to 12 years, is going to be
China’s steel consumption and production rate. Indian iron ore market also
depends upon China’s import growth of iron ore. Hence, we decided to arrive at
China’s steel demand, for which we considered two planning horizons viz. short
term period between 2007 to 2012, and long term period of 2012 to 2027. The
following steps are adopted to arrive at China’s future iron ore consumption:

o The sub key drivers for steel consumption for China are identified and
their future growth perspectives are studied as well as industry expert
views and opinions on the market trends.
o Past trends have also been considered and the major influencing factors
are identified along with its growth rate.
o Finally, two growth scenarios were derived, viz. Optimistic and Realistic.
For the demand estimation, the Realistic trend forecast is considered.

72
Business Plan Development for Paradip Port Trust – Final Report

Three major drivers for the China steel industry have been identified being
construction, shipbuilding and automobile industries. Chinese GDP has been
growing at more than 8% to 10% over the last 10 years and it is expected to grow
at an annual average growth rate about 7% to 8% in the Realistic scenario, which
was observed from various studies (World Bank and IMF).

• Chinese steel demand will cool down and stabilize and sustain for next five to
8 years at least.
• China Steel Industry would grow at CAGR of 6% to 10% during 2007 to 2021
period – Possible or Optimistic
• China Steel Industry would grow at CAGR of 5% to 8% over the planning
period – Conservative or Realistic
• Iron ore demand is 1.6 times of steel production (1 ton steel requires 1.6 tons
of iron ore)
• Import share of iron ore will increase to 70% during the projection period as
domestic share will keep reducing.
• Chinese demand will touch 385 to 392 MT during this year and it is projected
to touch 564, 828, 1057 MT by 2011, 2016 and 2021, respectively.
• China market will grow at a CAGR of 8%, 6% and 5% during the forecasted
period.
• Indian share will come down to 16% from 17% during the forecasted periods
due to the following reasons:
• The capacity expansion rate will not be at the same rate of the growth of
Chinese demand.
• Local iron ore demand increases but only to some extent as India Steel
industries do not use iron ore fines, which is being exported to other
countries.

73
Business Plan Development for Paradip Port Trust – Final Report

Optimistic
Projection
Assumptions • 2007 – 86 MT
• Current Market Share 25% & • 2011 – 121 MT
come down to 21% by 2014 • 2016 – 168 MT
China’s import and 17 % by 2016 - 2020
• 2021 – 201 MT
of Iron ore • Aus and Brazil heavily invested
from India on plant capacity expansion
• India capacity expansion is
limited Realistic
• Domestic Iron ore demand Projection
Increases • 2007 – 84 MT
• 2011 – 110 MT
• 2016 – 140 MT
• 2021 – 159 MT

Fig 4.2 China’s import of iron ore from India –Projection

• India’s overall iron ore export would reach 100 MT by 2007 and it will
reach 125, 152, 172 MT by 2011, 2016 and 2020 respectively.
• The Chinese share of iron ore exports will increase from 83% to 92%
during the forecasted period.

Optimistic
Projection
• 2007 – 103 MT
Assumptions • 2011 – 138 MT
• 2016 – 183 MT
• 80% share goes to China • 2021 – 217 MT
Projected • The rest goes to Japan
demand for India mainly
• China share, Long run, 80 Realistic
goes up to 90% Projection
• 2007 – 101 MT
• 2011 – 125 MT
• 2016 – 152 MT
• 2021 – 172 MT

Fig 4.3 India iron ore export- Projection

74
Business Plan Development for Paradip Port Trust – Final Report

The traffic forecast for PPT is mainly arrived from the total demand flow through
both Indian minor and major ports in the forecasted period, based on the
following assumptions:

Optimistic
Projection
• 2007 – 12.4 MT
• 2011 – 18.0 MT
Assumptions • 2016 – 24.9 MT
• 2021 – 26.1 MT
• 80% share goes to China • 2027 – 31.1 MT
Projected • The rest goes to Japan
demand for PPT mainly
• China share, Long run, 80
Realistic
goes up to 90%
Projection
• 2007 – 12.2 MT
• 2011 – 15.1 MT
• 2016 – 18.2 MT
• 2021 – 20.7 MT
• 2027 – 23.3 MT

Fig. 4.4 PPT Iron Ore Export Projection

Optimistic Scenario based on


ƒ Optimistic about China demand and
ƒ PPT will keep their hinterland share and
ƒ New iron ore handling facility during 2011-12

Realistic Scenario based on


• Realistic opinion on China demand and
• PPT will grow at the same rate with stable growth
• New iron ore handling facility during 2011-12

Based on the above scenarios, TransCare expects that PPT has the potential to
attract 26 MT of iron ore traffic by 2020. However, looking at port investment

75
Business Plan Development for Paradip Port Trust – Final Report

constraints, capacity constraints and hinterland network, PPT will reach only 20
MT by 2020.

4.3 Coal Supply Chain

Coal is one of the key energy resources for the power sector, and the steel and
cement industries. Hence, these are are the key drivers for coal consumption. To
arrive at coal demand (Coking, Non-coking, Thermal coal) for PPT, the following
analysis has been made:

• Indian coal production and consumption trends are observed.


• The key influencing drivers are identified, studied and their future
consumption is being projected.
• The sub drivers which influence the major drivers are also studied and its
future influences are observed.
• Consequently, the impact of these trends on Indian ports’ traffic is also
studied.
• Based on Indian mines production in the future and the plans for capacity
addition, corresponding port initiatives and competitive factors are also
considered to arrive at the market share for PPT.
• In total, the power sector consumes 75% of total coal production, followed
by industrial segments with 13% share. The rest is consumed by
commercial and residential users.
• Indian coal production grew by 5% to 405 MT against demand growth of
6% to 446 MT and more than 40MT of coal left unfulfilled and imported.
• Power sector, Steel and Cement industries are the major drivers for the
coal demand in India. Domestic coal demand has been increasing more
than planned production over the years.
• Coal production is fully controlled by Government of India. Coal India
Limited (CIL) is the major subsidiary of Government of India, which
produces nearly 85% of total production in the country.

76
Business Plan Development for Paradip Port Trust – Final Report

• Coal demand has been increasing at a CAGR of 6% over the last six
years against production growth rate of 5% during the same period, which
left the gap in the coal supply.
• Non coking coal shares 90% of total coal production and the balance is
coking coal. Coking coal production is stagnated at 30 to 32 MT.
• The steel industry is the major consumer of coking coal and now they
have to depend fully on import market.
• Non coking coal demand has been increasing especially from the power
sector which consumes 75% of total thermal coal production in India.

4.3.1 Coking Coal Demand Projection

• India’s thermal based power generation capacity would touch 104,000


MW with 7% growth by 2012 or during 11th year plan. As per the
Government plan, the capacity addition would grow at 7% and the
corresponding demand for coal would grow at 8%.
• These assumptions are mainly based on an Indian GDP growth rate of 8%
and power consumption demand of 6%.
• Coal India was not prepared for this sudden increase in demand. Hence
the market has opened to private sector and encouraged captive mines to
fill up the supply-demand gap.

Based on the past trend in the steel consumption rate of core sectors consuming
nearly 80% of steel production in India, TransCare arrived at the following
assumption for the steel production in India.

• Steel demand in India will grow at a healthy rate along with GDP growth of
7% to 8% pa over the next 6 to 8 years.
• Based on core sectors such as construction, power plants and auto
industry and considering India’s low steel consumptions rate, TransCare

77
Business Plan Development for Paradip Port Trust – Final Report

predicts the growth at CAGR of 6% to 8% for Realistic case and 8% to


10% for Optimistic scenario.
• Iron ore demand is 1.6 times of steel production (1 ton steel requires 1.6
tons of iron ore)
• Coking coal demand is 0.8 times of Steel Production (1 ton steel requires
0.8 ton of coking coal)
• India doesn’t have sufficient coking coal reserve and it is allowed to import
without any excise duty, so domestic share will keep decreasing
• Coking coal demand will follow only with production and consumption rate
and not capacity addition. Hence, coking coal demand is derived based on
production and consumption trend.
• India will touch 110 MT of production in the Realistic scenario and 130 MT
in the Optimistic scenario. The major thrust would come from construction
industry and power plants.

Optimistic
Projection
• 2007 – 26 MT
• 2011 – 41 MT
Assumptions (only for import) • 2016 – 62 MT
• 2021 – 89 MT
• 1 ton steel = 0.8 tons of • 2027 – 120 MT
India Coking Coking coal
Coal Demand • Import continued to increase
and touch 85% by 2015-2020 Realistic
Projection
• 2007 – 25 MT
• 2011 – 38 MT
• 2016 – 54 MT
• 2021 – 74 MT
• 2027 – 94 MT
Fig 4.5 India Coking Coal - Demand Projection

• Coking coal is the major constraint, as Indian coking coal production by


CIL has reached its full capacity

78
Business Plan Development for Paradip Port Trust – Final Report

• Hence, all the steel players, especially, big players like SAIL fully depend
on import market. SAIL is already importing 80% of their coking coal
demand. SAIL will be the key drive for coking coal import in the coming
future as well.
• The Indian steel industry coking coal import volume will reach 88 to
120 MT. The current year volume will touch to 23 to 25 MT. By 2016, it will
touch 49 to 57 MT.
• Based on historical trends, current steel clusters and future competition,
PPT will have a potential to handle up to 20 MT by 2020. However,
competition and new player’s entry will limit the coking coal import traffic
through PPT to about 10 to11 MT only.
Optimistic
Projection
• 2007 – 4.7 MT
• 2011 – 7.4 MT
• 2016 – 13.6 MT
• 2021 – 19.7 MT
Assumptions (only for import) • 2027 – 26.4 MT
PPT Coking • 1 ton steel = 0.8 tons of Coking
Coal Demand Coal
• Import continue to increase
and touch 85% by 2015-2020 Realistic Projection
• 2007 – 4.6 MT
• 2011 – 6.8 MT
• 2016 – 11.9 MT
• 2021 – 16.3 MT
• 2027 – 20 MT

Fig 4.6 PPT Coking Coal - Demand Projection

4.3.2 Thermal Coal Supply Chain

• Rail dominates the thermal coal distribution in India. About 48.8% of


thermal coal was transported by rail in 2005-06.
• Road shared 22.2% and Merry Go Round (MGR) systems shared 23%.
Rail cum sea and other (belt & conveyor system) shared 5.9% of total

79
Business Plan Development for Paradip Port Trust – Final Report

thermal coal transport in India. Sea cum rail is estimated to be about 4%


of over all coal transportation.
• Tamil Nadu (TN) is the only state, located in southern India, served by the
sea cum rail system. TN’s major sources of coal are Orissa and West
Bengal.
• TN is planning to install three thermal power stations with each 1000 MW
capacity in the next 5 to 8 years.
• However, the power addition is at a very low rate in TN during last two five
years plans, hardly about 1500~1600 MW. TN is one of the self sufficient
power states in India, even with a high power consumption growth rate of
8% per annum; the peak demand was 8500 MW during 2005-06.
• New thermal power plant with 1000 MW (2*500MW) will be commissioned
in Tuticorin by 2008-09 and it would be in operation by 2012 or 2013 with
a demand of another 2.3 MT of coal.

The main thermal coal consumer via sea is TN, which is the base assumption
upon which the traffic forecast for PPT is arrived at for the following two
scenarios basis:

• Optimistic Scenario based on


• Optimistic opinion on TN new projects and that they will consume from
Orissa hinterland mines
• Even if TN decides to choose captive mines, it will be routed through
only via PPT, as the customer is more convinced with PPT than
Ennore route.

• Realistic Scenario based on


• Coal linkage plays major role to allocate the coal distribution
• CIL production constraints
• Project delays based on previous experiences
• Alternative sourcing (Import).

80
Business Plan Development for Paradip Port Trust – Final Report

Thermal coal traffic will be 19 MT and it will reach 9.8, 12.9 and 16.5 MT of cargo
by 2007, 2011 and 2016 respectively. This is quite optimistic, provided, CIL
agrees to distribute the required amount of coal to TN via PPT. This would be fair
to assume as the Government and the Port have invested heavily in mechanical
coal handling facilities at the Port which currently are about 50% utilized, with 10
MT capacity unused.

In the Realistic case scenario, the cargo traffic will be 15.8 MT by 2021 and
reach 9.7, 13.6 and 15.8 MT by 2007, 2011 and 2016 respectively.

Optimistic
Projection
Assumptions • 2007 – 9.8 MT
• 2011 – 12.9 MT
• TN dependency on Coastal movement • 2016 – 16.5 MT
• 2021 – 19.1 MT
• Thermal Power plants drive the coal demand • 2027 – 22.8 MT
Coking
Coal Demand • One 210 MW needs one MT of thermal coal
Projection • All power plant projects in TN are considered
• Only 500 MW project is commissioned
• Other 2*500 MW will be in 2008-09 Realistic
• The rest are not yet fully materialized out of Projection
3000 MW planned • 2007 – 9.7 MT
• Project growth rate would be 2~3% • 2011 – 11.7 MT
• Coal source constraints • 2016 – 13.6 MT
• 2021 – 15.8 MT
• 2027 – 20 MT

Fig 4.7 India Coking Coal - Demand Projection

4.3.3 Non Coking Coal Supply Chain

To estimate the non coking coal traffic via PPT, TransCare has followed the
following approach:

81
Business Plan Development for Paradip Port Trust – Final Report

o The coal demand for India during the forecast period was derived by
considering the core sector growth viz. power, steel and cement.
o Based on CIL future production plan, capacity addition and privatization, the
team arrived at two scenarios:
ƒ Optimistic Scenario (Import will increase)
• Only Realistic production growth of CIL production of thermal coal
till 2014 and later high production growth
• Import duty is relaxed (5% only)
• Major drive is power sector
• However, since CIL has resource constraints, Government may
tend to encourage more imported coal

ƒ Realistic Scenario
• Everything goes according to CIL plans
• Power sector is the first preference and Government may try to
satisfy power sector needs
• If CIL satisfies the demand, then import comes down and then
import is only a short term remedy.

• There is a sudden peak on imported non coking coal. The power sector and
electricity boards all expressed that they still prefer to consume only from CIL.
• They all expressed that it is only a short term plan. In the long term, they all
plan to have their own captive mines.
• TransCare believes that non coking coal demand will keep growing but
whether it is high or moderate growth depends on CIL production constraints.
Government may encourage other industries to import, as it may tend to
preserve the domestic coal resources for power production.
• Though the cement industry is growing at a fast rate, it may not depend much
on non coking coal as they are planning to use lignite as an alternative.

82
Business Plan Development for Paradip Port Trust – Final Report

• Indian coal demand will reach 475 to 477 MT and it will touch one billion by
2017-18. By 2015-16, the demand will touch 840 MT in the Realistic
projection and about 900 MT in the Optimistic projection.
• PPT’s non coking coal volume will reach 18 MT in the Optimistic scenario by
2020 if CIL continues to have production constraints; otherwise, the volume
will touch only 9 MT by 2021.

Assumptions

• The key importer would be Optimistic


NTPC for its new plants Projection
• There is no concrete agreement for • 2007 – 4.9 MT
NTPC’s new plants though CIL • 2011 – 10.9 MT
promised but only 85% supply • 2016 – 16.8 MT
• However, NTPC continues to import • 2021 – 14.1 MT
to maintain its stock level • 2027 – 25.0 MT

Supply
Demand GAP -
PPT

Risk and Mitigation

• NTPC is the major player Realistic


• CIL fulfills NTPC demand with its • 2007 – 4.5 MT
new plans
• Import is not at higher rate
• 2011 – 7.9 MT
• PPT share would be 22 to 25% on • 2016 – 8.0 MT
total import non-coking coal • 2021 – 9.3 MT

Fig 4.8 Import of Non-coking coal through PPT- Projection

• In 2007, the volume will be in the range of 4.5 to 5 MT and it will reach 8 to
10 MT by 2011. The import will come down during 2012 to 2016, as CIL
will have an additional capacity and NTPC will be having its own mines in
operation.

83
Business Plan Development for Paradip Port Trust – Final Report

4.4 Fertiliser Supply Chain

• World fertiliser consumption surged in 2003-04 and 2004-05, with growth


rates of 3.7% and 4.7% respectively. Because of declining agricultural
commodity prices and higher fertiliser prices, global demand contracted
slightly in 2005-06.
• Consumption is estimated at 154.1 MT nutrients, compared to 154.8 MT
the year before. After this temporary dip, world fertiliser demand is
projected to increase again in 2006-07.
• Demand is expected to increase steadily in West Asia and North-east
Africa and rise moderately in Central Europe and in Eastern Europe and
Central Asia
• Agriculture accounts for about one-fourth of India’s GDP. Demand for
fertiliser raw materials (FRM) is proportional to the growth rate of
agriculture. The growth rate of the agricultural sector for the last years was
around 2.4%.
• India manufactures three types of chemical fertilisers. Nitrogen based
(Urea), Phosphate based (DAP) and complex fertilisers.
• India is self-sufficient in terms of raw materials for nitrogen, whereas it
totally depends on imported raw materials like rock phosphate and sulphur
for phosphate based fertilisers.
• The installed capacity as on 30.10.2005 reached a level of 120.61 lakh
toonnes of nitrogen (inclusive of an installed capacity of 205.12 lakh
tonnes of urea after reassessment of capacity of which the non-functional
capacity is estimated at 3.30 lakh tonnes) and 56.20 lakh tonnes of
phosphatic nutrient, making India the 3rd largest fertilizer producer in the
world
• In a five-year perspective, world fertiliser demand is projected to grow
steadily, reaching 171.9 Mt in 2010-11. This would represent an 11.6%
increase over 2005-06, or a 2.2% average annual growth.

84
Business Plan Development for Paradip Port Trust – Final Report

• This arises from expectations that China and India will promote balanced
fertilisation, and nitrogen use efficiency will continue to improve
elsewhere.
• In the medium term, most of the increase in demand is expected to come
from Asia. South Asia and East Asia, together accounting for more than
half of total growth.
• Regional demand is anticipated to remain strong in South Asia with 3.3%
p.a., while the growth of fertiliser demand is projected to slow down in
East Asia to 2.0% p.a.
• FRM is a captive cargo for PPT. PPL and IFFCO are the phosphate based
fertiliser units (DAP) and they mainly depend upon imported raw material
for their plants.
• PPL is importing about 6 chemicals that include 3 solid and 3 liquid
chemicals. Current volume is about 2.4 lakhs tonnes pa. This is going to
be increased by 20% in the next fiscal year.
• Sulphuric acid is one of the main by-products of steel production. With the
proposed arrival of new steel plants in and around Paradip, more sulphuric
acid will be generated. This would attract many small fertilizer plants, for
which sulphuric acid is one of the main raw materials.
• IFFCO has a captive berth – a leasing agreement signed between the Port
and Oswal, when Oswal was running this plant starting 1999. This
agreement is valid till 2014. According to the agreement, IFFCO has a
Minimum Guarantee Throughput (MGT) with the port at 2.5 MTPA.
• Currently, the plant is running at 40% of its total capacity of 1.9 MTPA of
fertilizers. One unit of DAP (final product) requires about 2.5 units of FRM.
IFFCO would be importing about 5 MTPA of FRM through the Port at its
full capacity.
• The main driver for IFFCO’s business is agriculture. IFFCO is not
exporting any finished product as Government has banned the exports of
DAP (due to shortage in the local market).

85
Business Plan Development for Paradip Port Trust – Final Report

• IFFCO is planning to reach 1.5 MT this financial year 2006-07 and full
capacity (1.9 MT) by the year 2007-08. IFFCO will increase its capacity by
50% in the next two to three years (2009-10).
• IFFCO imports FRM like Rock phosphate, Sulphur, Sulfuric Acid,
Ammonia. IFFCO’s berth is currently equipped to handle about 5 MTPA of
FRM.
• Deepak Fertiliser is planning to setup its manufacture units and utilize the
facilities of Paradip port for importing the raw material and exporting the
finished product. More than 1,00,000 tonnes of liquid ammonia will have to
be imported annually.
• Fertilizers & Chemicals Ltd is keen to set up in the port area an
ammonium nitrate fertiliser plant with an estimated capacity of 2,50,000 to
3,00,000 tonnes annually.

Assumptions
• Fertilizer market would grow
at 6 to 7%
• FRM import would grow at 7 to 8%
• These growth factors are verified with
Interview with Industry experts
Fertilizer Import
Projections
Risk and Mitigation
• It is captive cargo and
it depends upon the individual
players’ growth
• Govt. has also sealed maximum
import of FRM.
• Hence, it would not be in the
range of 6 to 8%

Fig 4.9 Fertilizer Import Projection for PPT

• Based on the assumptions explained in the figure, FRM import will touch
8.6MT by 2020. In the Realistic scenario it will reach 7.7 MT.

86
Business Plan Development for Paradip Port Trust – Final Report

• Overall the developing countries’ consumption rate will increase by 3%


CAGR, while the developed countries would have a decreasing growth
rate.

Fertiliser Projections – Optimistic

2006 2011 2016 2021 2027


1 RAM 2.5 5.3 7.3 10.1 11.4
2 Finished 0.0 0.6 1.3 1.7 2.3
3 Fertiliser(1+2) 2.50 5.9 8.6 11.9 13.7

Fertiliser Projections – Realistic


2006 2011 2016 2021 2027
1 RAM 2.5 4.1 4.7 5.5 6.4
2 Finished 0.0 0.5 0.8 1.0 1.3
3 Fertiliser(1+2) 2.50 4.6 5.6 6.5 7.7
Table 4.10 Fertiliser Commodity Projection

4.5 Chrome Ore Supply Chain

• Chrome ore and Chrome concentrate grew at a CAGR of 6% and reached


1.35 MT. It adds export share of nearly 6%. Orissa is the main hinterland
for Chrome ore and Chrome concentrate.
• The export of Chrome ore purely depends on the Government control,
which has ceiling level of only 400,000 tonnes every three years. The
growth of Chrome ore purely depends upon Government control. Orissa
has about 98% of India’s chrome ore reserves.
• TATA and OMC are the major exporters of chrome ore with a share of
almost 75%. India exported nearly 440,000 tonnes last year.
• Chrome concentrate is potential export volume from Orissa hinterland,
however, volumes are low.
• Chrome concentrate is the main input to stainless steel products which is
a high value added product. It is mainly exported to China and gets value
added and exported from there to Japan.

87
Business Plan Development for Paradip Port Trust – Final Report

Assumptions
• High demand of chrome ore and Optimistic
Concentrate Projection
• India is the major sourcing 2007 – 1.5 MT
Location 2011 – 2.4MT
2016 – 3.5MT
• TATA plant expansion 2021 – 4.7MT
• Exporters are demanding increase in
ceiling of chrome ore to 1.5 MTPA
Chrome ore
and concentrate

Risk and Mitigation


Realistic
• Govt. would control the Chrome Projection
ore export 2007 – 1.5MT
2011 – 2.2MT
2016 – 3.0MT
2021 – 3.5MT

Fig 4.10. Chrome Ore/ Conc. - Demand Projections

• Based on the above assumptions, the chrome ore and chrome


concentrate volume would touch 1.5 MT by 2007. However, it all depends
on Government policy changes on export of Chrome ore.

4.6 Container Supply Chain

• India shares almost 1.15% of world market in 2005-06 with 4.6 million
TEU throughput at all its major ports. It is neglible when compared to
India’s share of world population at about 17%. In comparison, China’s
share of world container throughput is more than 17% with a share of
world population of 20%.
• Indian container market grew at a CAGR of 14% over the last ten years
from 1.4 million TEU to 4.6 million TEU. In the last six years, it grew at a
CAGR of 13% only, whereas the world average growth was about 12% to
14% during the same period.

88
Business Plan Development for Paradip Port Trust – Final Report

• The world average growth rate also came down to 11%. But China
continued to grow with more than 18% since last 10 years.
• India’s containerized cargo is currently only at 48% against the global
benchmark which is more than 75%.
• The west coast shares 70% of total throughput, the east coast 30%.
JNPT shares 58% of total container volume and 85% of total west coast
volume in India.
• Chennai Port Trust (CPT) shares 16% of total volume and 52% of total
east coast volume. CPT and JNPT are the high growth ports in India with
more than 18% over the last five years. The new container capacity
additions to CPT and JNPT will further boost the trade at these ports.
• The southern parts of India generate almost 1.3 million TEU and shares
28% of total container market in India.
• The major clusters are Chennai (automobile, leather goods, textile and
garments), Coimbatore (textile and machineries), Thirupur clusters (textile
and garments), Bangalore (automobile, vegetables and electronic goods)
and Cochin hinterland (raw cashew and tea).
• South India market grew at a CAGR of 14% over the last five years
against 11% growth of North. It grew by 13% over the last year against
only 9% growth by Northern India.
• East bound cargo grows faster than West bound cargo, especially to Far
East and inter Asia movement is increasing. East coast gateways volume
grew at a CAGR of 15% against 13% by West. It grew over 13% against
only 7% growth by West.
• JNPT and CPT alone share more than 74% of total container market,
along with Tuticorin, the share is 81%. JNPT and Chennai are the fastest
growing terminals in India with 18% and 16% growth rate respectively.
• Rail container traffic grew at a CAGR of 17% over six years and reached
1.5 m TEU in 2005-06. It is growing more than the over all container
market growth rate in India. It grew by 13% over the year against 9% of

89
Business Plan Development for Paradip Port Trust – Final Report

total container market in India. This consistent growth boosted the over all
share of rail from 29% in 2001 to 34% in 2005-06.
• India has more than 184 terminals but predominately CONCOR only has
inter-modal terminals spread mainly in north and south. CONCOR alone
has more than 54 terminals for both EXIM and Domestic distribution.
• Tughlakhabad is one of the biggest terminals in India and also in South
Asia with a share of more than 35% of total EXIM volume in India. It is
currently closing with 600,000 TEU. It is located at the outskirts of Delhi
region and it is the hub terminal for northern region cargos.
• Indian container market is mainly driven by G3 countries viz. EU, USA and
Japan. The Indian market is also export driven and not balanced.
• The world container market is projected to grow at a CAGR of 9% to 10%
and estimated to touch more than 600 million TEU before 2011-12
(estimated based on various studies).
• This trend is mainly going to be driven by Asian markets with strong
manufacturing related economic growth.

The Indian container market is under transformation change in terms of growth


and commodity structure.

• The growth is mainly coming from export rather than import with 7:3 ratio
and this trend may change when the Indian domestic market starts to
consume more high value goods.
• The current containerisation level would increase from 48% to 75% over
period of time (planning horizon is 20 years).
• East bound traffic will grow more than west bound traffic.
• Growth factors are derived for each port hinterland clusters while
considering the current hinterland growth rates and future hinterland growth.
• South India will have a high potential growth rate but North India will still
dominate with high volume penetration but will grow less than the south
Indian market.

90
Business Plan Development for Paradip Port Trust – Final Report

• Current trade policies on key commodities are considered especially on


textile and agricultures, as these two commodities boosted the China
container market.
o The quota on textile was removed and it may boost the trade growth
but only moderate growth achievable in the short term and high
growth in the long term.
o The current capacity at the textile industry and port capacity will
restrict the high growth rate.
o The US has started to outsource more from India than China as it
has put restriction on China textile imports.
o It is uncertain whether and when India will enter into WTO on
agriculture products. It is not likely to happen in the next 3 to 5 years.
• In the near future, India has no chance to have hub port terminals like
Singapore or Hong Kong.
• The Indian container market growth would come from domestic market
consumption rather than from export market demand generation in the long
run.
• TransCare assumes that the world container market will still grow in the next
10 years at a growth rate between 7% to 9% and to cool down from 2018
with a growth rate about 5% to 6.5%.
• When the Chinese market cools down, the Indian market will start to
dominate, but not at the scale of China. India starts to import more high
value goods and core products like paper, electronics, raw material, raw
cotton and semi-finished auto and machineries.
• The Indian container market is expected to grow at 15% to 18% over the
next five years. Chennai and JNPT would grow more than country average
growth by 18% to 20% potential.

91
Business Plan Development for Paradip Port Trust – Final Report

PPT Container Market Potential

PPT handled only 3400 TEU containers last year and grew from 67 TEU in 2000.
PPT is not located near any major industrial cluster and also its hinterland does
not have high value consumer goods production centers.

PPT hinterland comprises less urbanized area, only 12% when compared to
national average about 40%. However, TransCare feels that there is a huge
potential for export containers in terms of finished steel, alumina final products,
Chrome concentrate products, papers and food grains. Based on two scenarios,
TransCare evaluated the future container potential for PPT, which has described
below:

• Realistic Scenario

o Since PPT is not located near any major high value production
clusters, it is less competitive to attract the containerized cargo
though it has high draught potential to berth mother vessels.
o However, the existing hinterland with finished steel and related
industry would grow. It will boost the volume but at not par with
other Indian ports.
o The share of over all will remain even less than 1%.

• Entrepreneurial Scenario

o Since PPT has core strength of deep draught potential, it has a


potential to be a container distribution center to East and North
parts of India for the East bound cargo.
o Delhi is a land locked cluster; the current volume is moved by rail
and road to JNPT and west coast. However, JNPT can not cater

92
Business Plan Development for Paradip Port Trust – Final Report

the future volume and it will touch the maximum capacity even by
2014-15.
o The other potential competitor for the Northern cargo is Kolkata but
it has draught restriction (less than 10 meter). It can not
accommodate bigger vessels. In the future scenario, even the
feeder vessels size would be in the range of 1500 to 2500 TEU
capacity. Hence, Kolkata, with its current draught, cannot
accommodate.
o These scenarios give a clear potential for PPT. Developing rail
corridors between key industrial clusters, especially as follows,
would ensure a competitive advantage for PPT.

ƒ Delhi – PPT
ƒ Nagpur – PPT
ƒ Kolkata - PPT

o However, PPT needs to follow the below strategy if it all it has to


capture this potential:

ƒ Market its core strength (Deep Draught) and bring a


competitive operator.
ƒ Try to tie up with the rail operators who could route its block
trains from Delhi, Kolkata and Nagpur via PPT.
ƒ Volume matters when a green field terminal is planned to
attract the shipping lines.
ƒ Develop ICD/CFS with leading service providers.

93
Business Plan Development for Paradip Port Trust – Final Report

Assumptions
• PPT has high potential since it is
only 3400 TEU Optimistic
• Current cargo flows to Calcutta
and Vizag Cargo can be attracted 2007 – 5000 TEU
2011 – 80,000 TEU
• Hinterland is Orissa, Jharkhand, 2016 – 320,000 TEU
Chhattisgarh 2021 – 984,000 TEU
• Strategic implementation to divert
Container cargo from JNPT to PPT and distribute
Demand to Northern India.
Projection

Risk and Mitigation


Realistic
• Dhamra Port is also planning for
container Terminal
2007 – 5,000 TEU
• Urbanization would be still low by 2011 – 16,000 TEU
2021(21%) 2016 – 51,000 TEU
2021 –120,000 TEU

Fig. 4.11 Container – Demand Projection

• Based on this scenario, TransCare estimates a share of 2.5% by 2017


and 3.5% by 2021 of total volume in India.
• PPT will touch about 440.000 TEU by 2017 and 1.6 million TEU by 2027
based on these assumptions. It is very optimistic but if the Port is
aggressive and follows above mentioned strategy, PPT can be developed
as a JNPT of the East Coast.

4.7Steel Supply Chain

• India’s steel export grew at a CAGR of 12% over the last five years
against production growth of 9%. However, there was one peak export
year which influenced this growth; otherwise, growth has been almost flat
for the last three years.

94
Business Plan Development for Paradip Port Trust – Final Report

• China, USA and United Arab Emirates, together take more than one third
of India’s export volume. The Far East accounts for nearly 40% of total
exports followed by Middle East and Europe with 15% and 17% share.
• Mumbai Port exported about 1.5 MT with 33% market share and Haldia
exported about 0.85 MT with 18% share followed by Vizag and Paradip
with 0.65 MT and 0.33 MT of total volume.
• Paradip shares nearly 7% of total market share, with potential to reach
10% to 12%. However, the POSCO entry will again bring it down to same
percentage in the next 15 years.
• Indian steel production will touch 29 MT if India shifted its market strategy
and export destinations as India mainly depends on the US and EU. The
demand of these countries is stabilizing and the US is trying to regulate
Indian steel imports to protect their local steel market.
• Based on historical trend and new investments in PPT hinterland, PPT
has the potential to touch about 1 MT by 2011, 2 MT by 2016 and 3 MT by
2021.
• In the stable scenario, India can reach 21.3 MT as the new players like
POSCO will boost Indian export market. In a worst case scenario, the
market will touch 13 MT.
• It is quite optimistic, given the competitive factors like POSCO and TATA’s
new port Dhamra. Hence, TransCare estimates about 1 MT of steel export
via PPT by 2013 at 14% growth rate, provided the facilities are in place.

PPT Share (2007-2021)


All figs in MT 2007 2011 2016 2021 CAGR
Optimal 0.46 0.95 1.99 2.93 14%
Real 0.46 0.81 1.49 2.13 12%
worst 0.46 0.74 0.99 1.33 8%

Table 4.12 Steel Demand Projections

95
Business Plan Development for Paradip Port Trust – Final Report

4.8 POL Supply Chain (Product and Crude)

PPT handled less than a million tonnes of POL with a negative CAGR about 16%
over the last five years. PPT has an oil jetty with a draught of 14 m and 260 m
length with dolphin to dolphin facility. Though the designed capacity is 7.5 MT, it
handled less than a million tonnes during last year, which accounts for only 2.15
% of over all volume.

• IOCL, HPCL and BPCL are the three major customers who pump the oil
from the port premises to their local storage tanks. From there, they
distribute to the hinterlands of Orissa by trucks and wagons.
• IOCL has installed its own facilities / pipelines at the port and the others
use the IOCL facilities / pipelines and pay IOCL.
• These players mainly import petrol, diesel, kerosene, black oil, furnace oil
and light diesel from their own refiners in Vizag or Mumbai and distribute
to the local retail shops.
• HPCL and BPCL receive only 2 to 3 vessels per month and they also
expressed that even in the future it would be only 3 to 4 vessels per
month. The oil jetty was installed mainly to have IOCL’s POL traffic flow
via PPT to other parts of the country, but the project got delayed.
• In the future, IOCL plans to reduce their freight cost by using bigger tanks
in the range of 180,000 to 220,000 DWT, which cannot be accommodated
at Haldia due to the tidal wave and draught restriction.
• Hence, IOCL decided to have a terminal at Paradip and pump the oil from
here to Haldia where they have their petrochemical plant.
• IOCL is planning to complete its 11 MT SBM and pumping facility from
Paradip to its refinery at Haldia through an underwater pipeline by March,
2007.
• It would give an additional load about 11 MT in the span of next 4 to 5
years (conservative figure) for Paradip which would boost POL traffic as

96
Business Plan Development for Paradip Port Trust – Final Report

well as over all volume at the Port. IOCL will add another SPM with 15 MT
capacity by 2014 along with a petrochemical refinery plant.
• In the future Paradip will be the transshipment hub for the East Coast of
India for other gateways.
• Paradip is going to have high potential to be a World Standard
Petrochemical Hub in Asia with IOCL’s plan of 15MT SBM capacity along
with Petrochemical plant plan by 2015-16. The pre-feasibility study has
been done and IOCL is going ahead with its plan, already starting
implementation work.
• IOCL is a new entrant in the polymer market in India. Polymer is a by-
product of petrochemical and its demand has been increasing in India.
• The polymer market is growing at 4% to 5% at the global level and it is
growing at 5% to 6% in India.
• Reliance and IOCL alone share more than 70% of total. IOCL is coming
up with a huge investment in the polymer segment.
• India’s polymer consumption per capita is 4.5 kg, whereas the world
polymer consumption per capita is at 18 to 21 kg per head.
• It offers a huge opportunity for Indian market. Indian Polymer Industry is
expected to grow at 10% to 14% in the next five years.
• Indian polymer capacity would reach 12-13 MT by 2010 and India would
reach 3rd position in polymer production during the same period.
Polyethylene (PE) and Polypropylene (PP) are the major contributors
among the polymer products at global level, as well as at Indian level
• IOCL will be the key player in next 6 to 10 years in the polymer market.
ICOL production will give an additional volume about 0.1 to 0.25 MT in the
next 10 to 20 years if the IOCL polymer plant is realized in the hinterland
of Paradip port.

97
Business Plan Development for Paradip Port Trust – Final Report

4.9 Total Forecast Summary

o TN coal demand will touch 20 to 25 MT only by the 2020’s, which can be


accommodated at PPT with existing facility. Thermal coal demand, at PPT,
will touch 18 to 20 MT during the next 10 to15 years.

o The Indian steel Industry’s share of import coking coal will reach 85% and
imports about 100 to 120 MT during the same period. SAIL will be the major
importer and will drive the coking coal import.

o Even in the competitive environment, PPT has a potential to attract 20 to 25


MT of coking coal by 2027.

o The Indian mines’ capacity expansion constraint, Australia’s massive capacity


expansion and increase in domestic iron ore demand will restrict India’s
export growth to only 4% to 6% during the next 20 years. India’s iron ore
export volume will touch 180 MT with a 90% share destined for China by
2020.

o PPT has the potential to reach 23 to 31 mt of Iron ore by 2027 while


considering new hinterland connectivity projects and competitive factors from
other ports.

98
Business Plan Development for Paradip Port Trust – Final Report

PPT - Demand Projection - Realistic Scenario - I


Commodity Structure Ex/Im [mt] 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Iron Ore Ex [mt] 10.3 12.2 12.8 14.0 14.6 15.1 16.1 16.3 17.1 17.8 18.2
T. Coal Ex [mt] 9.2 9.7 10.1 10.6 11.2 11.7 12.1 12.4 12.8 13.2 13.6
Coking Coal Im [mt] 3.8 4.6 5.1 5.5 6.1 6.8 8.0 8.6 9.4 11.1 11.9
Non Coking Coal Im [mt] 3.4 4.5 5.3 6.1 6.8 7.9 7.6 8.0 8.4 7.6 8.0
Fertilizer Im [mt] 2.5 3.5 3.7 4.0 4.5 5.0 5.3 5.7 5.9 6.0 6.2
POL Im [mt] 0.90 1.0 1.1 1.2 1.3 1.5 1.6 1.7 1.9 2.0 2.2
Others
Containers Ex/Im [mt] 0.05 0.06 0.08 0.11 0.15 0.20 0.3 0.3 0.4 0.5 0.6
Containers in TEUs Ex/Im [TEU] 3420 5063 6835 9228 12457 16817 21022 26277 32846 41058 51322
Ch Ore / Con Ex [mt] 1.5 1.6 1.8 2.0 2.2 2.3 2.4 2.6 2.7 2.9
Others (ex Ch ore/Con) Ex/Im [mt] 2.9 1.4 1.6 1.7 1.9 2.1 2.3 2.5 2.7 3.0 3.2
Total Others [mt] 3.0 3.0 3.3 3.6 4.0 4.5 4.8 5.2 5.7 6.2 6.7
Total Ex/Im [mt] 33.1 38.4 41.5 45.1 48.5 52.4 55.6 58.0 61.2 63.9 66.8

POL - Crude Ex/Im [mt] 0.0 0.0 4.2 10.0 11.0 15.0 16.0 17.0 18.0 21.0 24.0
Over all Total Ex/Im [mt] 33.1 38.4 45.7 55.1 59.5 67.4 71.6 75.0 79.2 84.9 90.8

Table 4.3 Total Demand Projections – Realistic -I

99
Business Plan Development for Paradip Port Trust – Final Report

PPT - Demand Projection - Realistic Scenario - II


Commodity Structure Ex/Im [mt] 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Iron Ore Ex [mt] 18.4 19.9 19.6 19.9 20.7 21.1 21.5 21.9 22.4 22.8 23.3
T. Coal Ex [mt] 14.0 14.4 14.9 15.3 15.8 16.1 16.4 16.7 17.1 17.4 17.8
Coking Coal Im [mt] 12.8 13.4 14.5 15.2 16.3 17.0 17.7 18.4 19.1 19.9 20.7
Non Coking Coal Im [mt] 8.4 8.6 8.3 8.0 8.7 9.0 9.4 9.8 10.1 10.5 11.0
Fertilizer Im [mt] 6.4 6.6 6.8 7.0 7.1 7.3 7.4 7.6 7.7 7.8 7.9
POL Im [mt] 2.3 2.5 2.6 2.8 2.9 3.1 3.2 3.4 3.5 3.7 3.9
Others
Containers Ex/Im [mt] 0.7 0.9 1.1 1.3 1.5 1.8 2.1 2.5 3.0 3.5 4.1
Containers in TEUs Ex/Im [TEU] 61587 73904 88685 106422 127706 150693 177818 209825 247593 292160 344749
Ch Ore / Con Ex [mt] 3.0 3.1 3.3 3.4 3.5 3.6 3.7 3.7 3.8 3.9 4.0
Others (ex Ch ore/Con) Ex/Im [mt] 3.5 3.8 4.1 4.4 4.7 5.0 5.2 5.5 5.8 6.1 6.4
Total Others [mt] 7.2 7.8 8.4 9.1 9.8 10.4 11.0 11.7 12.5 13.4 14.5
Total Ex/Im [mt] 69.6 73.2 75.1 77.1 81.2 83.9 86.6 89.5 92.5 95.6 98.9

POL - Crude Ex/Im [mt] 27.0 27.0 28.0 28.0 28.0 30.0 30.0 30.0 30.0 30.0 30.0
Over all Total Ex/Im [mt] 96.6 100.2 103.1 105.1 109.2 113.9 116.6 119.5 122.5 125.6 128.9

Table 4.4 Total Demand Projections – Realistic -II

100
Business Plan Development for Paradip Port Trust – Final Report

PPT - Demand Projection – Optimistic Scenario - I


Commodity Structure Ex/Im [mt] 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Iron Ore Ex [mt] 10.3 12.4 13.3 14.8 15.7 16.5 18.0 18.6 19.8 21.0 21.9
T. Coal Ex [mt] 9.2 9.8 10.5 11.3 12.1 12.9 13.5 14.2 14.9 15.7 16.5
Coking Coal Im [mt] 3.8 4.7 5.3 5.8 6.6 7.4 8.9 9.6 10.6 12.6 13.6
Non Coking Coal Im [mt] 3.4 4.9 6.2 7.5 8.9 10.9 11.4 13.5 15.8 16.0 16.8
Fertilizer (Ram, Import) Im [mt] 2.5 4.0 4.4 4.8 5.3 5.9 6.3 6.8 7.4 8.0 8.6
POL Im [mt] 0.90 1.0 1.2 1.3 1.5 1.6 1.8 2.0 2.2 2.4 2.6
Others
Containers Ex/Im [mt] 0.05 0.1 0.1 0.3 0.6 0.8 1.5 1.6 2.0 2.9 3.4
Containers in TEUs Ex/Im [TEU] 3420 5632 4874 31081 58722 80008 140876 153555 191286 278002 321961
Ch Ore / Con Ex [mt] 1.5 1.7 1.9 2.1 2.4 2.6 2.8 3.0 3.2 3.5
Others (ex.Ch ore / con) Ex/Im [mt] 2.9 1.5 1.7 1.9 2.1 2.4 2.6 2.9 3.1 3.5 3.8
Total Others [mt] 3.0 3.1 3.4 4.1 4.8 5.6 6.6 7.2 8.1 9.6 10.7
Total Ex/Im [mt] 33.1 39.9 44.2 49.6 54.8 60.8 66.6 71.9 78.8 85.3 90.7

POL - Crude Ex/Im [mt] 0.0 0.0 4.2 10.0 11.0 15.0 16.0 17.0 18.0 21.0 24.0
Over all Total Ex/Im [mt] 33.1 39.9 48.4 59.6 65.8 75.8 82.6 88.9 96.8 106.3 114.7

Table 4.5 Total Demand Projections – Optimistic -I

101
Business Plan Development for Paradip Port Trust – Final Report

PPT - Demand Projection - Optimistic Scenario - II


Commodity Structure Ex/Im [mt] 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Iron Ore Ex [mt] 22.4 24.5 24.3 24.8 26.1 26.9 27.7 28.5 29.4 30.2 31.1
T. Coal Ex [mt] 16.9 17.5 18.0 18.5 19.1 19.6 20.2 20.8 21.5 22.1 22.8
Coking Coal Im [mt] 14.8 15.7 17.1 18.1 19.7 20.6 21.7 22.8 23.9 25.1 26.4
Non Coking Coal Im [mt] 17.7 18.3 17.1 15.5 14.1 15.5 17.1 18.8 20.7 22.7 25.0
Fertilizer (RAM, Import) Im [mt] 9.1 9.7 10.2 10.9 11.5 11.9 12.2 12.6 13.0 13.3 13.7
POL Im [mt] 2.9 3.1 3.4 3.7 4.0 4.4 4.7 5.1 5.5 5.9 6.4
Others
Containers Ex/Im [mt] 4.6 6.6 7.4 8.2 9.2 10.2 12.7 13.6 14.4 15.4 16.4
Containers in TEUs Ex/Im [TEU] 438672 626579 702428 785490 876383 975773 1212397 1291203 1375131 1464515 1559708
Ch Ore / Con Ex [mt] 3.7 3.9 4.1 4.4 4.7 4.8 5.0 5.2 5.4 5.7 5.9
Others (ex.Ch ore / con) Ex/Im [mt] 4.1 4.4 4.8 5.2 5.6 5.9 6.3 6.6 7.0 7.5 7.9
Total Others [mt] 12.4 8.3 8.9 9.6 10.2 10.8 11.3 11.9 12.5 13.1 13.8
Total [mt] 96.2 97.1 99.1 101.1 104.7 109.7 114.9 120.4 126.3 132.6 139.2
0.0 0.0 0.0 0.0 0.0 0.0
POL - Crude Im [mt] 27.0 27.0 28.0 28.0 28.0 30.0 30.0 30.0 30.0 30.0 30.0
Over all Total Ex/Im [mt] 123.2 124.1 127.1 129.1 132.7 139.7 144.9 150.4 156.3 162.6 169.2

Table 4.6 Total Demand Projections –Optimistic -II

102
Business Plan Development for Paradip Port Trust – Final Report

5. Capacity Bottlenecks and Proposed Projects

5.1 Iron Ore Flow

5.1.1 Capacity and Productivity

In 2005-06, PPT handled 10.6 MT of iron ore cargo. PPT has one mechanized
iron ore plant to handle iron ore. The existing plant has shipped only 6.4 MT in
2005-06 but the ship loader capacity is 2500 tonnes/hour.

The remaining iron ore cargo is being handled at other general cargo berths.
Hence customers face low productivity, high turn around and evacuation times.

o Central Quay I - 3%
o Central Quay II - 4%
o Central Quay III - 3%
o MPB - 6%
o South Quay - 6%
o Eastern Quay I - 2%
o Eastern Quay II - 3%
o Eastern Quay III - 11%
o Iron Ore Berth (IOB) - 62%

The cargo from the PPT hinterland grew at 15% from 2001 to 2005 but PPT
could not install the required capacity on time to meet this demand. Due to this
delay, potential cargo for PPT went to other port gateways. Paradip planned for
10 MT capacity addition in 2002 but it has been deferred till now.

103
Business Plan Development for Paradip Port Trust – Final Report

Internal Logistics

o The existing plant is connected with two wagon tipplers with a capacity of
1500T/ Hr or 25 wagons per hour.
o PPT has tippler constraints which limits the capacity to 3.5-4 rakes (54
wagons per rake) per day and iron ore is also handled manually from a
different iron ore siding with an average of 1-2 rakes/ day.
o The tippler capacity is 25 wagons per hour and there are two tipplers that
can together handle about 50 wagons per hour.
o According to this designed capacity, even 60% efficiency and 15 hours of
effective work, the tippler should handle at least 10 MT. In other words, it
should handle at least 10 rakes per day.
o These constraints have forced exporters to move the rest of cargo by
road, which accounted for nearly 1250 trucks per day or 404,888 trucks in
2005-06. 55% of total iron ore volume is being transported by rail and the
rest by road to PPT in 2005-06.
o Last year, 1212 wagons were tippled equaling nearly 4 MT out of 5.4 MT
of rail bound cargo. The rest, 1.4 MT of cargo were unloaded manually
from the wagons at a different siding and moved later to the conventional
manual plots.
o Further 2.4 MT of cargo out of 6.4 MT of total mechanized cargo was
moved by trucks to the mechanized plant, which equals to 660 trucks
movement per day inside the plant.

The following key operational constraints were also observed:

o The number of engines is not adequate for handling the rakes at the
tippler point. At least three or four engines are required at the tippler plant
(two for placing the wagons in the tipplers, one for clearing the empty
wagons and one for haulage purpose).

104
Business Plan Development for Paradip Port Trust – Final Report

o The total availability of the engines for the tippler per day is only two.
These engines are also not powerful enough to handle the rakes alone.
o Locomotives allocated for empty line clearing is being engaged for other
purposes also. Hence, there is a delay in tippling.
o Conveyors often need to be stopped to clear the foreign particles that
come along with iron ore and gets jammed in the conveyor.
o Stackers at the plot area will wait to position at the right plot. This will add
some delay in the tippling process.
o The mechanical plots are not allocated in an optimal manner in order to
maximize the utilization of the mechanized system.

Bottlenecks and Constraints impact on Business

o The tippler constraints forced the customers to dispatch the iron ore in
trucks and to other port gateways especially Vizag and Haldia.
o During the market survey, the majority of the customers have expressed
their concern that they could send only one rake against the requirement
of 2 to 3 rakes per day. They have to send it either by truck or to other
gateways
o The mechanized plant can only handle 800 to 1000 trucks per day but the
shippers send about 1200 to 1500 trucks per day. The mechanized plants
are mainly designed to handle only through tippler via conveyor system.
Hence, the truck handling is limited.
o It is been observed from market survey interviews that the total truck turn
around time is 7 to 9 days from mines to PPT and back to mines. The
average waiting time at PPT is 4 to 5 days.
o This in turn reveals that 2300 to 3000 trucks on average stand on the
road, which approximately equals 20 to 22 km of queuing (one truck
equals to 15m).

105
Business Plan Development for Paradip Port Trust – Final Report

o Since trucks are getting locked on the road, shippers face truck non
availability at their plant. The availability of number of trucks limits the
queue in the loop.

One can observe from the above analysis how PPT has lost some market share
or its piece of the cake to others due to delay in capacity investment and
handling constraints at the port. Hence the following actions need to be taken
immediately, to ensure the market share and also remove the queuing problems:

o The above findings emphasize the need for investment in one more iron
ore berth with at least 6000 to 8000 tonnes per hour capacity ship loader.
o Until new investment comes, the iron ore handling plant should be
optimized with adequate availability of engines and reliable conveyor
systems.
o Optimize the mechanical plot arrangement according to the conveyor
constraints or remove that bottleneck at the conveyor.

5.1.2 Future Port Capacity Planning – Investment on Additional Berths

PPT will continue to lose its potential cargo to its competitor unless the current
bottleneck at the plant is removed and add additional 2 to 3 MT of capacity
handling, especially at the tippler plant and conveyor systems at the iron ore
plant.

The average parcel size will be in the range of 80,000 – 120,000 tonnes at PPT
in the future. To achieve an effective turn around time of less than two days, Port
should need at least 50,000 to 55,000 tonnes per day through put.

According to different mechanical scenarios, only 55% to 60% of capacity


utilization is possible at any mechanized plant. Hence, the following factors are
considered for the capacity planning:

106
Business Plan Development for Paradip Port Trust – Final Report

• Maximum peak hour load of 4 to 5 hours, with ship loader capacity of


6,000 to 8,000 tonnes per hour
• Hence, PPT can handle at least 8 to 10 MT of volume with 65% berth
occupancy rate.
• The berth occupancy is always 70 to 80% range under Indian scenario.
The International standard is 65% occupancy rate. It is recommended for
the port to adhere to the international standards.

To support 6,000 to 8,000 tonnes per hour ship loading capacity, Port should
need at least 2 reclaimers and 2 stackers with capacity of 3,000 to 4,000 tonnes
per hour each. One reclaimer may be needed to have flexible operation and to
avoid down time during loading.

Wagon tippler station with 4,000 tonnes per hour capacity needs to be installed.
It could be a system with 2,000 tonnes per hour with full rake handling with
engine on train. PPT needs to have additional handling facility of about 7 to 15
rakes during the forecasted period. The storage capacity of 1,500,000 tonnes
should be required with an assumption of stock of 10 to 15 days annual demand
per day.

107
Business Plan Development for Paradip Port Trust – Final Report

Iron Ore Capacity Planning - Export


Mechanical Plant 2007 2011 2016 2021 2027

Projected Parcel Size [tons/ship] 40,000 55,171 81,064 116,904 145,050


Projected Demand [MT/year] 12 15 18 21 23
No. of Vessels [ships/year] 304 273 225 177 160

Projected Through Put [Tons/day] 35,000 55,000 55,000 55,000 55,001


Turn around Time [days] 1.1 1.0 1.5 2.1 2.6
No of Berths with 65% [No] 1.6 1.3 1.5 1.8 2.0
Additional Berth [No] 1.0 0.0 0.0 1.0 0.0
Back Reach and Logistics Requirements
No of Rail Requirements Per
Day [No] 12 14 17 20 22

Storage Capacity Requirement [tonnes] 774,568 958,216 1,158,465 1,314,801 1,480,680


Facility Requirements
Ship Loader (1) [t/Hr] 6,000-8,000

Reclaimer (3) [t/Hr] 4,000

Stackers (2) [t/Hr] 4,000

Twin Tippler [t/Hr] 3,000


Table 5.1 Iron Ore Capacity Planning

108
Business Plan Development for Paradip Port Trust – Final Report

5.2 Coking Coal Flow

PPT does not have any mechanized plant for handling coking coal import and it
is mainly handled at the following berths with percentage distribution.

o Central Quay I - 18%


o Central Quay II - 22%
o Central Quay III - 20%
o MPB - 21%
o Eastern Quay I - 13%

Nearly, 60% of total volume of 3.7 MT is handled at Central Quay and 21% is
handled at Multi Propose Berth (MPB) and other 13% is handled at Eastern
Quay.

Commodity 2000-01 2004-05 2005-06 % CAGR


Coking Coal
Volume 1.47 2.05 2.49 11%
(in MT)
Table 5.2 Coking Coal volume by Rail

In 2005-06, 2.5 MT of coking coal is transported by rail and it is mainly


dispatched to the larger players at their plant sidings. About 75-80% of total
volume is being moved by rail.

Coking coal rail movement grew at a CAGR of 11% over the years and in 2006 it
shared about 44% of total outward rail movement from PPT. It has 84% of total
rail share in 2001 and reduced to 44% due to increase in non coking coal, which
is also moved by rail.

109
Business Plan Development for Paradip Port Trust – Final Report

5.2.1 Bottlenecks and Constraints

Productivity

o The productivity is reasonable at 11,000 tonnes per day. There are two
new cranes each with 20 T capacity which have been installed to handle
both coking coal and non coking coal at Central Quay III.
o It has been observed that the productivity is still low and the operators are
not skilled enough to exploit it.

Internal Logistics System

o Inbound evacuation is the major constraint at the plant. Customers are not
able to evacuate the cargo on time due to non-availability of engines on
time to clear the rakes.
o Loaded rakes wait for a long time (5 to 8 hours) to be moved, for which
customers need to bear the wagon demurrage charges.

Handling Capability

o With existing general cargo berths (GCB’s), the Port can not handle the
projected volume and also customers are planning to reduce their costs by
increasing parcel sizes and making fewer trips.
o The number of wharfage cranes is not enough to unload the cargo at
GCBs. PPT needs to exploit its existing new cranes with skilled operators
and need to install additional new cranes, at least another 2 to 4 harbour
cranes to attract the cargo. Otherwise, customers and the Port will depend
heavily on ships with own gears only.

110
Business Plan Development for Paradip Port Trust – Final Report

5.2.2 Future Port Capacity Planning – Mechanize Coking Coal Handling

Coking coal is one of the main commodities, which assures healthy growth rate
in the coming years and the growth path is clear. Hence, PPT should build the
required capacity that will reduce the Customer’s total supply chain cost and
subsequently, keep the port competitive enough. The following key factors are
considered for the capacity coking coal capacity calculation:

o PPT is going to have tough competition between the new emerging port
Dhamra, which is going to have a dedicated facility with more than 6000
tonnes per hour capability, and already well established ports like Haldia
and Vizag port.
o Steel industry in India is going to import the coal, mainly from Australia
where the cape size vessels are very common on longer route.
o During market survey, customers also expressed that they will go for
larger vessels provided ports are having enough facilities to cater to it.
Even if the land cost is high, the cargo can still be attracted with a total
lower supply chain cost.

Based on already existing trend on coking coal import at Indian ports, we have
simulated the required capacity needed for PPT to handle coking coal during the
next 15 years.

111
Business Plan Development for Paradip Port Trust – Final Report

Coking Coal Capacity Planning - Import


Mechanical Plant 2007 2011 2016 2021 2027
Projected Parcel Size [tons/ship] 40000 56454 90919 121381 144935
Projected Demand [MT/year] 5 7 12 16 21
No vessels to be called [ships/year] 114 120 131 135 143
Projected Through Put [Tons/day] 25000 45000 45000 45000 45001
Turn around Time [days] 0.9 1.3 2.0 2.7 3.2
No of Berths with 65% [No] 0.5 0.7 1.2 1.7 2.1
Additional Berth Required [No] 1.0 0.0 0.0 1.0 0.0
Back Reach and Logistics Requirements
No of Rail Requirement Per Day [No] 4 8 11 16 20
Storage Capacity Requirement [000'tonnes] 211680 336485 620178 893779 1197749
Back Reach Area Requirement [tonnes]
Facility Requirements
Ship Unloader / Grab Crane (2) [t/Hr] 2500 -3000
Reclaimer (3) [t/Hr] 2500 - 3000
Stackers (2) [t/Hr] 3000
Wagon loader (2) [t/Hr] 2000- 2500
Table 5.3 Coking Coal Capacity Planning

112
Business Plan Development for Paradip Port Trust – Final Report

According to the capacity calculation, PPT needs to have two mechanized berths
during next 15 years time, one during 2008 to 2011 and the other one during
2016 to 2020, to cater to the growing coking coal import. The mechanized coal
import berth should have at least 4,000 tonnes per hour unloading capacity with
conveyor system from shore to yard (it should be two stream layer system).

The installing stacker should have the same rated capacity as the grab unloader
does, with rated capacity of 2000 (2) tonnes per hour. The critical logistics in coal
loading is wagon loading as it involves synchronization between wagon loader
and rake movements.

The standard designed loading rate is 1.25 hours per rake, however, the service
time is the biggest constraint, which limits the efficiency of the system. We
propose to have a facility for loading two full rakes with two wagon loaders
having capacity of 2000 tonnes per hour.

5.3 Non Coking Coal Flow

PPT does not have any mechanized plant for handling non-coking coal import as
well, and it is mainly handled at the following berths with percentage distribution.

o Central Quay I - 7%
o Central Quay II - 25%
o Central Quay III - 31%
o MPB - 15%
o Eastern Quay II - 12%
o Eastern Quay I - 4%

Nearly, 60% of total volume 3.3 MT is handled at Central quay and 15% is
handled at Multi Propose Berth (MPB) and another 12% and 4% is handled at
Eastern Quay II & I.

113
Business Plan Development for Paradip Port Trust – Final Report

Non-Coking Coal by Rail in 2001-2006


Share in
Commodity 2000-01 2004-05 2005-06 CAGR Growth
2005-06
Non-Coking
NIL 1.09 2.49 127% 127% 44%
Coal (in MT)
Table 5.4 Non-Coking Coal volume by Rail

In 2005-06, 2.5 MT of non coking coal is transported by rail and it is mainly being
dispatched to NTPC, Talchar, which is located 200 km away from the Port. About
75-80% of the total volume is being moved by rail.

Non coking coal imports started only during the year 2004-05 with more than one
million tonnes and it is mainly consumed by NTPC. Rakes arriving with thermal
coal for unloading are used for back loading with non coking coal to the Talchar
plant.

5.3.1 Bottlenecks and Constraints

o The productivity is reasonable at 11,500 tonnes per day but the parcel
size is always large with more than 60,000 tonnes per vessel (observed
from the last 4 months data sheet from the Port).
o Since Central quay is mainly used for handling both coking and non
coking coal, the newly installed crane with 20 MT capacity is used. The
same issues and challenges which are observed in the coking coal are
applicable to non coking as well.

114
Business Plan Development for Paradip Port Trust – Final Report

5.3.2 Future Port Capacity Planning – Mechanize Non-Coking Coal Handling

Non-Coking coal traffic growth seems to be largely uncertain, as even the


customers are not clear whether they are going to import coal in the future due to
the shortage of domestic coal and corresponding policy changes in the future.

However, Government is encouraging the users to import the deficit coal in the
short to medium term. This is quite evident with the reduction in the Customs
duty in the last budget. Otherwise, the state electricity boards are already
planning for captive mines to satisfy their needs in the future.

Hence, during next five years, we expect the traffic to grow as it takes time for
CIL to respond to the needs of power plants and state electricity boards. But it is
clear that other customers are willing to go for import as it is quite tough get the
preference from CIL.

Non coking coal will grow in the short to medium term, but it is totally uncertain
about long term. But, looking at Indian reserve per capita, after 2020, India may
face the coal crisis again though it will survive with short term measures for a
while. Hence, Coking coal and non-coking coal would dominate the trade in the
long run and it may change the entire logistics flow after 2020.

We simulated with above discussed facts while arriving at the projections for
PPT. The following factors were considered for the non coking coal capacity
planning,

o The major customers would be NTPC or trading bodies like MMTC or STC
and they would be importing at larger quantities.
o The parcel size assumptions and design parameters are all same as
Coking coal.

115
Business Plan Development for Paradip Port Trust – Final Report

Non Coking Coal Capacity Planning - Import


Mechanical Plant 2007 2011 2016 2021 2027

Projected Parcel Size [tons/ship] 40,000 70,567 102,726 133,508 175,506


Projected Demand [ton/day] 5 8 8 8 10
No vessels to be called [ships/year] 98 155 164 106 142

With Current Through Put [Tons/day] 45,000 50,000 50,000 50,000 50,000
Turn around Time [days] 1 2 2 3 3
No of Berths with 65% [No] 1 0 0 0 0
Additional Berth Required [No] 1 0 0 0 0
Back Reach and Logistics Requirements
No of Rail Requirement Per Day [No] 5 8 16 13 24
['000
Storage Capacity Requirement tonnes] 223,559 496,049 765,612 641,550 1,136,545
Facility Requirements
Ship Unloader (2) [t/Hr] 2500 -3000
Reclaimer (3) [t/Hr] 2500 - 3000
Stackers (2) [t/Hr] 3000
Wagon loader (2) [t/Hr] 2000- 2500
Table 5.5 Non Coking Coal Capacity Planning

116
Business Plan Development for Paradip Port Trust – Final Report

o Hence, whatever proposed for coking will applicable to non coking coal as
well.
o In the short term, PPT can use the coking coal facilities, wait till 2009 and
then start thinking creating facility for non coking coal.
o If the power plants continue to suffer from coal sourcing constraints, then
PPT would need two berths before 2020.
o This is a transition period for non coking coal, which makes it really difficult
to project the future trend. Hence, TransCare arrived at the projections
based on very realistic scenario.

5.4 Container Terminal Planning

PPT does not have a dedicated container terminal facility. The existing volume,
which is less than 5000 TEU per year, is not justifiable to have a dedicated
terminal.

However, Port should exploit its core strength of deep draught and attract the
containers from the East and North India clusters. Since, Haldia has a draught
restriction; PPT can be developed as an alternative feeder port for East bound
cargo from East and Northern parts of India.

These assumptions are considered and projected about 350,000 TEU and 1.5
million TEU during next 20 years under realistic and optimistic scenario.
However, Consultants convinced that even 350,000 TEU is quite optimistic as
Port has to start container business from the scratch though there is market a
good potential. It needs an aggressive market focus and entrepreneurial strategy
to tap this business opportunity.

Consultants assumed realistic scenario for the container capacity planning.


Though projected volume is 350,000 TEU, consultants propose a container
module with 450,000 TEU capacity, with a flexible to reach up to 700 to 850,000
TEU per year in the future (After 2027).

117
Business Plan Development for Paradip Port Trust – Final Report

The following assumptions are made for the container capacity planning:

• The terminal is considered to be an import and export terminal


• The terminal is planned as a feeder terminal for the East and North
India market, to the South East Asia hubs like Singapore and Malaysia
• An average 850 TEU /quay meter/ year is assumed as it is a feeder
terminal.

Quay Crane Capacity


Planning RTG Capacity Planning

Moves / Hr 25 Moves / Hr 23

Peak Hours (80%) 9 Peak Hours (80%) 4

Total Moves/Day 270 Total Moves/Day 110

Working Days 330 Working Days 330

Moves/year/Crane 89100 Moves/year/Crane 36432

Table 5.6 Crane Capacity Planning

• The estimated through put per quay crane is about 89,100 TEU / year/
crane.
• The estimated throughput per RTG crane is about 36,432 TEU / year /
crane.
• For quay crane, 9-hour is considered as a peak period during which
80% of volume per day will be handled.
• For RTG cranes, 4-hour is considered as a peak period during which
80% of moves per day will be handled.

118
Business Plan Development for Paradip Port Trust – Final Report

Container Terminal Capacity Planning 2007-27


Design Parameter Units Realistic
Planned Module in TEU 450,000
Quay Crane No 5,0
RTGs No 12
Quay Length in m 529
Back Reach in m 500
Total Area in Ha 26
Assumed Dwell Time In days 14
Through Put TEU/Ha 17000
Through put/Quay length TEY/m 850
Table 5.7 Container Terminal Capacity Planning

Based on the above assumptions, the estimated container terminal area is about
26 ha, with a quay length about 530 m and back reach about 500 meter. The
required quay cranes and straddles are estimated to be 5 cranes and 12 cranes,
respectively.

119
Business Plan Development for Paradip Port Trust – Final Report

Conclusion

o The projected parcel size will be in the range of 40,000 tonnes per ship to
100,000 tonnes per ship in next 10 to 15 years. The Cape size vessels in the
range of 180,000 to 250,000 dwt vessels will be common as already it shares
34% of total tonnage in the world.
o Market needs highly mechanized berth with high turn around time with less
number of trips.

Additional Berth Requirement from 2007-27


Commodity 2007 2011 2016 2021 2027 Total
Iron Ore 1 0 0 1 0 2
Thermal Coal 0 0 0 0 0 0
Coking Coal 1 0 0 1 0 2
Non Coking Coal 1 0 0 0 0 1
Fertilizer 0 1 0 0 0 1
Containers 0 1 0 0 0 1
Others 0 0 0 0 0 0
Total 3 2 0 2 0 7
* Mech Berth 1 = 8 to 12 MT, 1 Container Terminal = 0.5 m TEU
Table 5.8 Facility Requirement Summary

o Market demands three mechanized berths (Iron ore, coking and non coking
coal) during 2007 to 2008 and one fertilizer berth and container terminal
during 2011 to 2013. Container berth with a 0.45 million TEU capacity is
required by 2016.

o After 2020, Port will need a massive investment if the volume grows as
expected. One more Iron ore and coking coal berth are required at the end
2021.

120
Business Plan Development for Paradip Port Trust – Final Report

6. Hinterland Connectivity

PPT hinterland is divided into three main layers for the future development. The
following hinterlands should be focused under these layers:

Layer I – Orissa and its immediate Hinterlands – coal and iron ore

• This layer mainly covers all the mines, especially, coal, iron ore, alumina
and other minerals.
• Five high value goods production locations are also covered.
• Here PPT has a quite competitive position though it has been losing its
hinterland cargos to Haldia and Vizag due to direct missing links from the
Port to mines.

Layer II – Jharkhand, Chhattisgarh, North-West Andrapradesh, West-


Bengal

• This layer covers mainly the steel industry and iron ore mines. The West-
Bengal cluster is the key for the high value goods
• Layer II is divided into two parts viz. Layer A and B. Layer A consists of
mainly West Bengal and Layer B includes Jharkhand, Chhattisgarh and
North-west Andra Pradesh.
• Paradip is not a competitive port to attract cargos which are produced in
these clusters. Haldia is competitive in Layer A and Vizag is the key player
in Layer B.

Layer III – Northern and Central Indian cluster

• Layer III is mainly considered for high value goods production clusters.
60% of Indian container market clusters are located in this layer.

121
Business Plan Development for Paradip Port Trust – Final Report

• Currently, PPT attracts hardly any cargo from this cluster and it is a quite
competitive cluster as well.
• JNPT takes almost 90% of the total volume which is produced in these
regions.
• In the market analysis, the future Eastern Corridor has a higher growth
potential than the Western.
• PPT needs to be aggressive on marketing its core strength of Deep
Draught and proximity to Eastern Market.
• PPT should gain market share at the cost of JNPT’s poor service and
establish a dedicated corridor which will link Central India (Nagpur
Cluster), Northern India (Delhi cluster), Western India (JNPT Cluster) and
Paradip.
• Though it is optimistic, this is the future potential target market for PPT. It
can be achieved only by excellent multimodal connectivity.

6.1 Iron Ore Supply Chain Link

• Banspani and Daitari are the key iron ore clusters in layer I. Banspani is
the major iron ore producing cluster.
• This cluster generated about 40 MT in 2005-06. About 16 MT was
exported and the rest went to domestic consumption by the steel plants.
• Though Banspani is located 300 to 320 km from the Port, it is not served
with a direct link to the Port. The cargo has take to take a circle route from
the mines to the Port via TATA Nagar, Kharragpur and Cuttack. It equals
more than 650 km.
• Banspani is served with a direct link with Haldia. However, Haldia
attracted 5 MT. However, it was almost nil five years back from this
cluster to Haldia. PPT could attract only 9 MT out of these 16 MT.

122
Business Plan Development for Paradip Port Trust – Final Report

650 Kms
4.5 MT

BANSPANI
SECTOR

DAITARI, 1.2 MT

310 Kms
4.5 MT
PARADIP

10.2 MT (EXPORT)

RAIL LINK

ROAD LINK

IRON ORE MINES

Network Map 6.1. Paradip Hinterland connectivity by rail and road

123
Business Plan Development for Paradip Port Trust – Final Report

CHAIBASA, 3.1 MT

400 Kms
24MT
5 MT
16 MT

650 Kms
BANSPANI 9MT HALDIA
40 MT

8.1 MT
700 Kms (Export)
2 MT
PARADIP

10.2 MT
(Export)
475 Kms
IRON ORE – DOM.
5 MT CONSUMPTION

18MT IRON ORE FOR EXPORT

5 MT
IRON ORE MINES
BAILADILA
23 MT VISAKHAPATNAM EXISTING RAIL LINK

BELLARY / 16 MT PROPOSED RAIL LINK


HOSPET, 9 MT (Export)
Network Map 6.2. Iron ore Export from PPT’s Hinterland

124
Business Plan Development for Paradip Port Trust – Final Report

• However, if the Port brings high handling capability and an efficient


internal logistics system, the potential cargo from these clusters could be
attracted.
• The customer focus would be on Total Supply chain cost optimization.
Hence, the lower competitiveness on hinterland for this cluster could be
compensated by capability and logistics systems at the Port itself.

6.2 Thermal Coal Supply Chain

• Thermal coal mainly originates from the Talcher mines at Mahanadi


Coalfields, and is destined for TN and Karnataka.
• Thermal coal is mainly transported to State Electricity boards in TN and
Karnataka, which account for nearly 99% of total PPT thermal coal export
volume.
• Talcher is the main coal mine for these boards, which is located nearly
200km from PPT.
• Rail cum Sea was the most optimal model chosen by TNEB, which
imported about 7.9 MT during 2005-06 and KPCL imported nearly 1.4 MT
in 2005-06. Thermal coal volume decreased by 12% to 9.1MT from 10.4
MT in 2004-05.
• TN’s requirement for thermal coal is about 14 MT per annum for its 3200
MW coal based thermal power plants. The source of coal for TN is MCL
(Talcher, main source and IB valley).
• The cheapest route distribution of coal from Orissa to TN is Paradip to
Ennore. The detail cost analysis is as follows:
o The existing routes to TN (with landed cost)
- Talcher – Paradip – Tuticorin ( Rs. 1450/t)
- IB valley – Vizag – Tuticorin (Rs. 1,874/t)
- Talcher – Paradip – Ennore (Rs. 1,350/t)
- IB Valley – Paradip – Ennore (Rs. 1750/t)

125
Business Plan Development for Paradip Port Trust – Final Report

Raniganj

IB Valley
Haldia
3.4 MT
Talcher
Paradip
9.2 MT

Vizag
2.8 MT

8.4 MT
Ennore Exiting Rail Link

Vizag – Tuticorin 2.8 MT


Chennai
Mettur 1.9 MT
PPT – Ennore 5.9 MT
PPT – Chennai 0.5 MT
PPT – Tuticorin 2.7 MT

Tuticorin Haldia – Ennore 2.4 MT


Haldia – Chennai 0.4 MT
6.1 MT
Haldia – Tuticorin 0.6 T

Network Map 6.3 Coastal Movement of Thermal Coal

126
Business Plan Development for Paradip Port Trust – Final Report

• Though routes are cheap, coal is being distributed from other routes
because
o CIL gives the first preference to NTPC plant at Talcher during
the coal allocation process. Talcher could supply 18 rakes only
against the demand of 24 rakes/ day.
o Rake availability is higher on Vizag routes from MCL than on the
PPT route.
o Though coal mines clusters come under Layer I itself, the full
cargo potential could not be attracted due to other policy level
constraints.
o Coal India Ltd linked 3.4 MT of TN demand via eastern coal
mines at the cost of PPT share, which reduced 100% potential
share to 80%
o Talcher plant could not supply the full demand of TN. Hence,
coal shipped through Paradip is only 7.9 MT, which reduced
market share to 50%.
o IB valley is another coal mine region of MCL, which is located in
Orissa and 2.74 MT is linked from these mines through Vizag
port.
o Though IB valley to PPT is the cheapest route, coal is being
diverted via Vizag to TN due to high availability of rakes on this
route.

Though, PPT and Ennore thermal coal facilities are built for TN to handle 20 MT
of thermal coal, capacity is not being utilized completely due to the above factors.

127
Business Plan Development for Paradip Port Trust – Final Report

6.3 Coking Coal and Non Coking Coal Supply Chain

• Indian steel companies imported nearly about 21.8 MT of coking coal


through major ports. Coking coal import has been growing at a CAGR of
nearly 12% over the year, which is more than GDP growth.
• Vizag leads the coking coal import with 35% share and reached 7.52 MT
during 2005-06. Paradip shares with 17% and reached 3.75 MT. Goa and
Haldia are the other major ports which imported the coking coal.
• Major driver for the coking coal are the steel plants, importing 60% of total
coking coal from China and Australia.
• About 65% of trade happened through eastern parts of India as major
steel plants are located there.
• Chhattisgarh and Jharkhand are the key clusters for the steel plants.
These clusters come under Layer II, where Vizag and Haldia enjoys high
competitive advantage.
• Bhilai, Roukela, Bokaro, Durgapure, TATA Nagar are the key steel plants
located within Layer II.
• Nearly 78% of coking coal is being imported through PPT, Vizag and
Haldia. SAIL is the major importer of coking coal with a share of almost
45%, which is about 9.8 MT.
• SAIL imported nearly 4 MT through Vizag to its Bhilai steel plant in
Chhattisgarh. Vizag doesn’t have any major steel plants in its hinterland
except Vizag steel Plant.
• This hinterland along with Orissa generates nearly about 14 to 15 MT.
PPT has got only 28% of total cargo which was generated in this
hinterland and potential is there for another 4 to 5 MT from Vizag.
• However, the competition would be very tough against Vizag as it has an
excellent hinterland network.

128
Business Plan Development for Paradip Port Trust – Final Report

NTPC,
1 MT
TATA,
0.08 MT

511 Kms
NTPC,
1.6MT

HALDIA
211 Kms 1.2 MT
NALCO,
0.2 MT
PARADIP
220 Kms

3.3 MT

VIZAG
1.1 MT EXISTING RAIL LINK

Network Map 6.4 Non- Coking Coal hinterland distribution

129
Business Plan Development for Paradip Port Trust – Final Report

BOKARO DURGAPUR
454 Kms,
3.7 MT
TATA 305 Kms,
ROURKELA 0.6 MT

511 Kms,
0.7 MT
BHILAI HALDIA
120
Kms, NINL
1 MT 5.4 MT
515 Kms
1.5 MT PARADI
P
554 Kms
4 MT

3.7 MT

Steel Plants
VISAKHAPATNAM
2.5 MT
7.5 MT Existing Rail Link
VSP

Network Map 6.5 Coking Coal Hinterland Distribution

• Developing inter-connected multimodal rail link between these steel


clusters and high handling capability at the Port would ensure a
competitive advantage for PPT.
• Non Coking coal is mainly destined for NTPC plants in the Orissa cluster.
There are new power plants being additions as well under NTPC projects.
It comes under Layer I where PPT is already having a competitive
advantage.

130
Business Plan Development for Paradip Port Trust – Final Report

6.4 Container Supply Chain

• PPT hinterland is not driven by high value goods though the Port has a
good potential to develop a container terminal on its core strengths (deep
draught and closer to Eastern markets).
• Market survey also concluded that there is not much scope for high value
goods in the short and mid term.
• However, finished steel and alumina may give some potential volume,
though not enough to justify a dedicated container terminal. The Port must
therefore start to expand its focus to the Layer III clusters.

6.5 Master Hinterland Connectivity Plans

The projected potential volume through rail would be 82 MT in 2027 from the
current volume of about 21 MT in 2006. About 43 MT would be an outbound
cargo flow while the inbound cargo flow would be 39 MT. The outbound and
inbound volume would get balanced over period of time. The rest will be carried
by road, especially from the near by hinterlands.

A 3-pronged-strategy has been proposed for the Port of Paradip to be a Lead


hub port on the Eastern corridor:

• Strengthen the hinterland connectivity competitiveness with already


planned projects in the Layer I
• Establish a link between all the steel plant hubs with the Port through
Public Private Partnership. The key focus is on Layer II.
• Develop a win-win strategy partnership with rail operators to bring a multi-
modal connectivity to divert cargo from Northern and Central India viz
Paradip. It relates to Layer III.

131
Business Plan Development for Paradip Port Trust – Final Report

Strengthening Layer I & II Category

Daitari - Banspani rail link

• This rail link of 155 km will upon completion link the port with iron ore
mines. This will dramatically reduce the distance and freight cost for
export iron ore.
• The work is estimated to cost Rs. 590 crores. The anticipated date of
completion of this work is February 2007. It is under progress by RVNL.
The following cargo streams are expected on this route

• Iron ore for export


• Iron ore for steel plants and
• Coking coal for steel plants in Jharkhand area.

Business Impact

• The current flow from the mines to Paradip is via TATA Nagar, Kharragpur
and Cuttack, which is a distance of 663 km.
• This new link will make the distance from the mines to Paradip via Cuttack
only 328 km. It will give a competitive advantage to the Port as the
cheapest route to move the cargo.
• However, only the rake availability and handling capacity will determine to
what extent Paradip will be able to benefit from this project.

Haridaspur - Paradip rail link

• This link of 78 km will upon completion link the port with iron ore mines
and steel plants as a dedicated corridor. This will also shorten the distance
of the proposed steel plants from the port.

132
Business Plan Development for Paradip Port Trust – Final Report

• The project with an estimated cost of Rs. 441 crores will be executed by
RVNL. A SPV has been signed on 24.05.05 for equity of Rs. 180 crores
between the following players:

Investment Share by Different Entities


RVNL: 30% Govt. of Orissa: 1%

PPT: 10% Essel: 24%


Rungta: 24% Jindal: 11%
Table 6.1 Investment share
• The anticipated year of completion is 2008. The cargo stream on this route
will be iron ore for export, coking coal for steel plants and limestone, fluxes
for steel plants.

Business Impact

• The reduction in distance and freight cost for export of iron ore after
completion of the rail connectivity projects will be as below:

Via Tata-KGP- Via Daitari- Via Daitari-


Cuttack Cuttack Haridaspur
Barbil-Paradip Distance in km 661 383 341
Freight in Rs. 555.70 340.10 309.30
Nuamundi- Distance in km 645 359 317
Paradip Freight in Rs. 540.30 317.00 286.20
Banspani- Distance in km 663 328 286
Paradip Freight in Rs. 555.70 293.90 263.10
Table 6.2 Cost Benefit analysis on different routes

• As of now, the cargo flows to PPT via Cuttack. With these proposed new
rail links, the total distance from the mines and steel clusters will
decrease. It will give a clear competitive edge to Paradip.

133
Business Plan Development for Paradip Port Trust – Final Report

Doubling and Electrifying Cuttack - Paradip rail link

• This link of 90 km connecting the Port with Howrah-Chennai main line at


Cuttack has been doubled and is currently being electrified. Originally, it
was a single broad gauge line and it is now completely doubled.
Electrification of this line will be done in one or two years.

• This will increase the capacity to 40 MT inward and 40 MT outward per


annum. Hence the estimated rakes per day would be 35 to 37 rakes each
way. That would clear the rail link as a bottleneck in the whole logistics
chain, leaving the other parts of the chain, i.e. the internal logistics
systems, to be optimized.

The Port should work on internal logistics design and ensure faster turn around
time of rakes. Rakes are restricted on PPT routes as railways are not able to get
the rakes back on time, which in turn leads to the non availability of rakes on the
route.

Four laning of Chandikhol-Paradip road (NH-5A)

This existing two lane link with a distance of 77 km connects the Port to the
mines via Chandikhol is being four laned. It is being implemented by NHAI at a
total cost of Rs. 428 crores and work has commenced in Feb’ 04. The anticipated
date of completion is February 2007.

A SPV has been formed called Paradip Port Road Company Ltd (PPRCL) for the
above purpose and an agreement has been signed between NHAI and PPRCL
for the above purpose in July 2004. PPT’s contribution to this project is about Rs.
40 Crores. PPT has contributed Rs. 20 Crores till date.

134
Business Plan Development for Paradip Port Trust – Final Report

Four laning of Cuttack-Paradip road (SH-12)

This existing two lane road is intensively used for infrastructure development
activities and construction of projects. The total distance is about 82 km.
MOSRTH has sanctioned Rs. 26.46 crores for improvement of the existing road.

• PPT has agreed to pay Rs.15 crores and the balance will be funded by
Govt. of Orissa and other stake holders. The 4 laning will be taken up later
on BOT basis.

• This is mainly going to used for public transport as the Chandikhol –


Paradip road is always congested with truck movements. Even if there is a
four laned road, the length of queue may come down, but not the
congestion. This will only happen if there is a strategic shift to rail or
internal logistics system re-engineering.

The project is getting delayed. Hence the day to day life is affected as people are
not able to go on the main way due to truck congestion. Although the Port wants
to solve it, the Government takes its own time to implement it.

Four laning of Keonjhar-Panikoili road (NH-215)

• This two lane link of 269 km distance connects the port to the iron ore
mines. The cargo stream on this route consists of iron ore for export. DPR
for this is being prepared by NHAI.

• The estimated cost is Rs. 1076 crores and the work will be taken up on a
BOT basis. It is only in the pre-feasibility phase and it will take time to get
materialized.

135
Business Plan Development for Paradip Port Trust – Final Report

S S

T
S

H
S
N

JNPT P
I

D - Delhi , H – Haldia, JNPT – Jawaharlal Nehru Port Trust, P- Paradip Planned Rail Links Proposed Rail Links
V – Vizag, S- SAIL Plants, T – Tata Plant, C- Coal mines, I – Iron Ore mines Rail Links – Under Cons. Existing Rail Links

Master Network Map.6.6

136
Business Plan Development for Paradip Port Trust – Final Report

Four laning of Chandikhol-Duburi (NH-200)

• The existing two lane road of 39 km links the port with steel plants and
coal mines. The cargo stream on this road consists of coal for steel plants
and finished steel for export. DPR for this is being prepared by NHAI.

• The estimated cost is Rs. 160 crores and the work will be taken up on a
BOT basis. This is also under process and it will take time to get
materialized.

Layer III – Integrated North, Central and Eastern Clusters

Delhi and Paradip Corridor

• JNPT is quite congested and Kolkata has a draught restriction to


accommodate bigger vessels. Hence, Paradip can be developed as a
future satellite port for JNPT or Kolkata for container distribution.

• Developing rail corridors between key industrial clusters, especially as


follows, would ensure a competitive advantage for PPT.
ƒ Delhi – PPT
ƒ Nagpur – PPT
ƒ Kolkata - PPT

137
Business Plan Development for Paradip Port Trust – Final Report

7. Future Port Layout and Land Use Plan

7.1 Proposed Future Port Layout Plan

The Port is currently occupying 70% of the land area for the existing dock and
harbour area, reaching this level over the past forty years. However, the Port has
experienced high growth only during the last 8 years, and according to the
market analysis, the Port is expected to grow at 6% to 8% during the next 20
years.

• The Port is currently using 70% of its total available land for dock and
harbour areas. It is about 1981 acres, of which, 371 acres or 150 ha is
being used for stacking purposes (including mechanical and manual
storage).
• The mechanized plots occupy only 22% of total stacking area, but handled
about 15.5 million tones of cargo. The utilization factor is about 700,000
tonnes per Ha.
• The remaining storage area is occupied by manual handling for iron ore
(manual handling), coking and non coking coal. The utilization factor is
only about 140,000 tonnes per ha.
• The Port has only about 200 ha for any further industrial development
activities in the future
• The land availability for the future expansion is mainly located at the
following locations:
o The south and west side of the Port.
o Near the north break water or east side of the Port

Since 70% of the existing area is already been used, the optimal utilization of
land and water in the coming years is the key for the Port development.

138
Business Plan Development for Paradip Port Trust – Final Report

Otherwise, the Port has to disturb the township area, which the Port will be
forced to do anyway in another 20 years to meet Port expansion requirements.

• The Port will touch about 129 MT by 2027, which is almost 4 times the
current throughput. The available land, however, is limited.

• The Port’s future growth is also driven by minerals, mainly coal and iron
ore, but the Port has an opportunity to also attract high value goods.

• The mineral traffic always depends upon the supply and demand
scenarios of domestic market. Hence, the traffic flow is vulnerable to the
changing market dynamic conditions and competition.

The Port should have a flexible Port planning in place to adopt any kind of market
dynamics and risks. TransCare has evaluated different scenario possibilities for
the Port’s future expansions. The different alternatives have been presented to
the Port, not only for next 20 years, but also beyond 2027. Many discussions and
workshops have taken place between the Port and TransCare (Ref. Interim
Report, Port Planning section).

The following top two scenarios have been selected and the detailed Port
Planning is developed for Southern Dock system scenario:
• The expansion of the southern Side with a long southern quay wall, from
south west to east
• Southern Dock system aligned with wind direction

7.1.1 Southern Quay Expansion Layout

The prevailing wind direction from South to North, which will impact the vessels
from the side, is the major concern from the Port to go ahead with this Port
layout. It is not a major issue as far as bulk vessels are concerned, rather for

139
Business Plan Development for Paradip Port Trust – Final Report

container vessels it may tend to be a challenge. Tug operations may also be


presented with challenges with winds charging the vessels from the side. Current
and future mooring technologies would, however, enable the vessels to be stable
at the berths, even given the wind impact.

The case study on Rotterdam Port was also placed for the Port. The new
terminal is designed opposite to the prevalent wind direction. Moreover, these
terminals are for container vessels, which have high vulnerability to the wind.
Indeed, some of the key Australian bulk ports are highly vulnerable to hurricanes
but they are able to manage the marine and nautical issues with their
sophisticated mooring and navigation tools.

However, a detailed simulation study is what is required for the Port to


have a final decision on the same.

7.1.2 Southern Dock system with aligned wind direction

Port is convinced with a Southern Dock system aligned with the prevalent wind
direction of the Port. The following key inputs have been considered for the final
Port Planning layout:

• The current planned Dry dock should not be disturbed as the work is
already started.
• Minimal disturb to the existing township area.
• The planned Western dock system should be removed as the
proposed project is not financial viable.
• Reserve berths for oil terminal.
• Develop a dedicated rail link to the southern dock.

140
Business Plan Development for Paradip Port Trust – Final Report

7.1.3 Facility Requirement

TransCare has projected future facility requirements based on realistic scenario


for the Port planning, which are the followings:

o Two iron ore mechanized berths


o Two coking coal mechanized berths
o One non-coking coal mechanized berth
o One container terminal
o One fertilizer berth

No need for general cargo terminals if the existing eight multi purpose berths are
used with high productivity. At least 8000 to 10000 tonnes per day would ensure
minimum 2 MT per annum, which would give 14 MT capacity from current
capacity about 4.9 MT.

Even in the optimistic scenario, other cargo is projected to be only 14 MT by


2027. Hence, TransCare is not envisaging any additional berths for other cargos
if the Port upgrades the existing general cargo facilities. The following design
criteria have been considered while developing the future Port planning:

Deep draught berths


• Vessel size – 150 to 220,000 dwt
• Draught – 17 meter
• Quay – 350 meter
• Beam – 52 meter
Container Terminal
• Vessel size – 40,000 to 90,000 dwt
• Draught – 17 meter
• Quay – 700 meter
• Back reach – 500 meter

141
Business Plan Development for Paradip Port Trust – Final Report

7.1.4 Development in Phases

Based on the realistic scenario, 7 berths need to be accommodated within the


available land and water areas, along with rail and road connectivity. The future
Port planning has been proposed in a phased manner, as follows:

Phase I Development - BOT Complex

The first phase expansion plan starts with Eastern side of the Port. This dock
system is called to be a BOT Complex. It was already proposed by the Port for
deep draught Iron ore and coking coal berths. However, TransCare revised the
plan with more number of berths per dock along with modifications in logistics
flow and rail connectivity for the proposed dock. The following key design criteria
have been considered:

• Number of berths versus adequate back reach area for rail terminal
planning and storage.
• Number of berths versus different types of cargos (iron ore, coking coal
and non coking coal).

Dock Design Planning

The dock with 700 meter length and 250 meter width is planed in the identified
area. Two berths at each side of the dock with a length about 350m can be
accommodated. The following berth allocation is planned in the BOT complex:

• Two Iron Ore berths on the western side of complex


• One Non coking coal and Coking coal berth on the Eastern side of
complex
• The BOT complex can be developed in the following sequence:
ƒ Two berths at the beginning of Phase I
ƒ Two more berths at the end of Phase I

142
Business Plan Development for Paradip Port Trust – Final Report

Back reach area Planning

Two locations are identified for the back reach areas:

• Immediate back reach area with 200 meter width and 700 meter length
• The existing CSF area with 250–300 meter width and 700 meter length

The back reach requirement for each deep draught berth is 250×700 sqm. This
includes at least 30 to 40 meter rail terminal for loading or unloading. Hence, four
berths will not possible.

• TransCare therefore proposes a dock system with 400×250 sqm with


sufficient back reach area for the long run.

• The proposed coking coal quay could be used for both coking coal and
non coking coal in the short term until the next phase development is
realized. Hence, the investment for non coking coal could be postponed
for a while and it would give a high utilization rate of the coking coal berth,
thus improving the return on investment.

• The CISF residential area should be moved to another location. For which,
the existing vacant area, behind the Jaganath Temple in Sandhakud
village could be used.

Logistics Planning

• The current wagon load terminal should be extended to the current


chrome ore stacking area.
• The immediate back reach of the proposed dock should be used for iron
ore stacking and the proposed wagon unloading system for tippler
operations.

143
Business Plan Development for Paradip Port Trust – Final Report

• The identified CISF area should be used for coking coal and non coking
coal stacking with a wagon loading system.

Rail terminal Planning

• The rail terminal should be developed in the Chrome yard area for the Iron
ore
• Once the iron ore is unloaded, the same rake should be cleaned and sent
to coking coal yard for coking coal loading to the CFS area.
• Engine on Head (EOH) concept should be exploited for the logistics
operations.
• The proposed rail lines could be linked to the ADB lines or can be
developed as a new line along ADB sidings. The ADB line can not be
used in the long run as the line will be congested if thermal coal
movement is increased. TransCare therefore proposes a new line along
the current ADB line and offset the existing road.
• In total, 3.2 km rail track length and 6 km road length with 4-way has been
proposed.

Road and Gate Planning

• The chrome ore yard should be moved to the central dock area.
• Once the iron ore and coal cargos handlings are mechanized, the need of
road movement would drastically come down. Hence, the need of Gate
No. 1 is not necessary.
• Hence, Gate No.2 which is mainly used for iron ore trucks can be used for
other cargo trucks as an out going Gate.
• Gate No.3 should be used for incoming trucks for all other cargos.

144
Business Plan Development for Paradip Port Trust – Final Report

Phase II Development - Southern dock Complex

As discussed in the previous chapter, the Port should start its next phase
expansion plan with south quay extension or Southern dock system

Dock Design Planning

The dock with 1050 meter quay length in the south west and 700 meter quay
length in the south east side is proposed. The proposed dock width should be
250~300 meter. The following proposal has been made for the south dock
complex:
• 17 meter draught
• One container terminal module with a 700 meter quay length and back
reach about 500 meter with a rail terminal, on the West side of the
complex.
• Two berths are reserved for the future expansion on the Eastern side of
the complex, mainly for deep draught vessels.

The projected container traffic is about 350,000 TEU and it is only in the
optimistic scenario. Hence, the proposed container terminal could be used
both for clean cargo as well as container volume.

The back reach for the south west side of the dock is not a problem with
minimal disturbance to the town ship area. There is flexibility in the proposed
design as the panned dock can be also developed as clean cargo or break
bulk cargo terminals.

Logistics Planning

• To serve the Southern dock complex, a dedicated rail service line system
has been proposed.

145
Business Plan Development for Paradip Port Trust – Final Report

• The container terminal has been proposed with a dedicated rail yard.
• A dedicated rail link from the Railway station to the planned container
terminal has been proposed with a loop concept.
o The train can take a turn at 250 meter radius from the station, just
before the existing flyover and go via the existing Golf area to the
terminal.
o The marshalling yard or parking area for the Rail terminal has been
proposed in the golf area as well.
o The existing golf area can be developed as CFS area within the
Port premises. The estimated area is about 300 acre, which is
sufficient for the planned terminal capacity.
o A loop concept or MGR system is proposed with a radius of about
260 m between golf area and container terminal area.
o Hence, the train does not need to be shunted; rather, it can come
directly to the terminal through a loop system, which has been
proposed at both end of the terminal, and move to the marshalling
yard or main line, as a block train.
o The estimated land requirement is about 1 km from the existing
boundary wall to the township.
o The other option is a rail link with a shunting system.
• Both options can be developed in a phased manner
o Phase I - Rail link with a shunting system
o Phase II - Loop System, when South dock handles high traffic
volume
• With a loop system, the planned South dock complex can be served
efficiently and effectively.
• The existing road which leads to the IOCL refinery from the proposed
south dock complex zone will be a key corridor to link the Port to the
Industrial zone in the future. This corridor passes through the existing
Sandhakud village near by Port premises. Hence, the existing settlement
in the Sandhakud village should be relocated outside the port limit in the

146
Business Plan Development for Paradip Port Trust – Final Report

coming future. Since oil tankers and other trucks movement will have
frequent movements on this road in the future, it will not be a safe place
for the residential zone.
• The disturbed facilities in the township area during south dock phase
development could be moved to the Sector 4.

Recent Development

Port has recently received a requisition from its Oil customer, IOCL, for the
relocation of its existing pipe line from the oil terminal to its marketing terminal.
For which, Port has come up with the following suggestions for the IOCL’s
requisition and also an intensive discussion was held with TransCare on the
same.
• The proposed western dock complex (opposite to the container
terminal) can be used for the oil terminals development in the near
future.
• The existing oil terminal could be moved to the proposed area along
with an additional oil terminal and convert the existing oil terminal into
a coal jetty for the imported coal.

Since, the requisition came just three days before the submission of the final
Business Plan report; TransCare couldn’t give any a solid recommendation on
the above mentioned suggestions by the Port.

However, TransCare is fully agreed and convinced the Logistics advantage that
could be achieved by moving the Oil terminal to the Southern dock complex,
provided, the proposed suggestions meet the financial viability criteria and
environmental standards by having oil terminals opposite to the clean / container
cargo terminal.

147
Business Plan Development for Paradip Port Trust – Final Report

7.2 The Future Land Use Plan Development


7.2.1 The Existing Land Use Plan Status

PPT has about 6383 acres of land in Paradip which comes under Jagatsinghpur
district in Orissa. The split of the existing land use is as follows:

• Dock and Harbour area occupies about 1981 acres of land.


• The township which was built around the Port occupies about 2188 acres
of land.

The Existing Land Use Plan Split Up by Zones


Existing Zones Area (in acres)
Zone I Dock& Harbour (including ADB Project area) 1981
Zone II Township (Township and administrative area) 2188
Zone III Sector – 21 (Fishing Harbour, Resettlement site, Ecologically 604
fragile area)
Zone IV Oil Industry, Utility& Transportation (include SE railway terminal) 1611
Total 6384
Table 7.1 Existing Land Use Plan Status

The township shares almost 34% of total land area of the Port. Dock & Harbour
shares about 32% of land. Industry and other related activity except the fishing
harbour shares 25% of the total land. Fishing harbour share is about 9%.

The Port developed the existing township area since its commencement of
operations in 1966. The entire support to the township such as power, water,
road and drainage systems are provided by the Port. The township is very close
to the harbour area; hence, it is the biggest bottleneck for the future
development.

Existing land use status under Zone I – Dock and Harbour Area

As discussed earlier, the Port uses about 1382 acre already for the Port
development. The western side of the Port, where Western dock system was

148
Business Plan Development for Paradip Port Trust – Final Report

planned by the Port, has free land of about 314 acre. The rest of the free areas
are available in the Southern and Eastern side of the port.

Zone 1 - Port Area (Dock & Harbour, including ADB Project area)
A Total allocated Land 1981
B Total Available Land 599
Western Dock Area 314
Near South Break Water 140
Near North Break Water side 145
C Used Land 1382
% Used 70%
Table 7.2 Existing Land Use Plan Status – Zone I

7.2.2 The Future Land Use Plan Status

The following areas will be transferred during Phase I and Phase II planning to
the Port development from other Zones:

A. Areas will be transferred from Zone IV to Zone I Area (in acres)


Warehouse Area 145
Area near Kalinga Engg. Works 45
Central Stores Area 60
Total 250

B. Area will be transferred from Zone III to Zone I Area (in acres)
CISF Area for Phase I development 124
Total 124

C. Area will be transferred from Zone II to Zone I Area (in acres)


Golf Area and others for Phase II development 630
Total 630
Total transferred areas to Zone I (A+B+C) 1004
Table 7.3 Land Use Plan Changes – Zone I

During Phase I and Phase II, the total transferred areas to the Port development
is proposed to be 1004 acres. The following table explains how much land will be
used under Zone I for the Port development, after transferred of lands from other
zones.

149
Business Plan Development for Paradip Port Trust – Final Report

Zone 1 - Port Area Updated after Phase I & II


Activity Area (in acres)
1 Used Land
Already Used before Phase I&II 1382
North Break Water used for BOT complex 145
South Break water used for Clean cargo Complex 140
Central Store Area used for Clean Cargo Complex (Rail Yard and CFS) 124
CISF Area used as Back reach for BOT complex 60
Golf and other Areas from Zone II used for Clean cargo complex 630
Total Used Land will be 2481
2 Available Land
Western Dock Area 314
Areas transferred from Zone IV 190
Total Land Availability 504
3 Total Land at the End of Planning Cycle under Zone I 2985
4 Land Utilization at the End of Planning Cycle under Zone I 83%
Table 7.4 Future Land Use Plan Update – Zone I

The existing free area nearby Northern breakwater will be used for the BOT
complex development, which comes under phase I development. CISF area will
be used as a back reach area for the BOT complex. This back reach area will
also be used as a stacking area for imported coal.

The land availability near the south break water will be used for Phase II
development. The existing township area will be disturbed for an efficient
logistics planning and back reach area for Phase II development. The estimated
area reclaimed from the township would be 630 acres.

At the end of planning cycle, only western dock area and the transferred area
from Zone IV will be available. However, these areas can not be used for the Port
development due to draught restrictions and other logistics planning constraints.
Hence, TransCare strongly recommends the Port to have an aggressive land
acquisition strategy for the Long term Port development.

150
Business Plan Development for Paradip Port Trust – Final Report

Updated after Land use after Phase I & II


Zones (in acres) % Share
Zone I Dock& Harbour (including ADB Project area) 2985 47%
Zone II Township (Township and administrative area) 1558 24%
Zone III Sector – 21 (Fishing Harbour, Resettlement site, 8%
Ecologically fragile area) 480
Zone IV Oil Industry, Utility& Transportation (include SE railway 21%
terminal) 1361
Total 6384 100%

The overall land area will remain the same except the share of each zone during
next 20 years unless the Port buys new areas during the same period. At the end
of the planning cycle, the total land area under Zone will be 2985 acre with a
share about 47%.

The Port will anyway be forced to disturb the township to a great extent after 20
years, possibly even earlier if the projected volume outperforms the expectations.

Hence, the Port should find a suitable area to where the existing township area
can be relocated. The estimated land area for the township relocation is about
500 to 700 acres. It is very critical for the Port to consider this issue which
otherwise would become a major constraint in Port development after 2027.

151
Business Plan Development for Paradip Port Trust – Final Report

8. Corporate Planning and Structure

8.1 Corporate Planning

Corporate structure, planning, strategy and control mechanisms are the key
vehicles for any organization to drive and achieve its vision. The following are the
key objectives of the corporate planning:

• To achieve the organization’s vision and goals while satisfying the stake
holders’ interests.
• According to the corporate vision, mission and goals, drive the long term,
mid term and short terms plans and draw the road map for the
implementation by each business unit in the organization.
• Measure the targets and meet the gaps through operational,
organizational and service efficiency.
• Develop flexible and proactive strategies to win over the competition

Although the organization should not be people driven, but rather process driven,
it is the people and their knowledge as assets which is the key element taking the
organization along the right path.

Moreover, the right people at the right place and at the right time make the
organization more proactive and highly reactive to the market needs. Hence,
updated knowledge, motivation and decision making skills are vital skills required
from the people in the organization.

Here the current corporate planning and decision making processes are mapped
and analyzed.

152
Business Plan Development for Paradip Port Trust – Final Report

Key Observations

Planning

• Though planning is done for 20 years and 5 years with a break up of each
year, the detailed corporate planning is not in place.

• The Corporate Plan should include the organizations long and mid term
goals and strategy along with detailed traffic and revenue projections.
Objective and strategy of each department should be drawn up in detail.
This is however not followed by the Port.

• The Master planning (done by IPA) is not updated regularly. The traffic
projection by IPA for 2006-07 is 64 MT whereas the Port is only handling
33 MT by 2005-06. Many market changes took place during the last ten
years, but it was not updated in the plan.

• The sudden rise of iron ore demand and the drastic fall of predicted coal
demand have caused supply-demand issues for which the Port was not
prepared. The Master Plan predicted less than 2 MT of iron ore, a far cry
from the actual 10.3 MT handled in 2005-06.

Decision Making

• The Port does not have full autonomy to decide and take its own decision
for the key projects which are critical for the Port competitiveness.

• Ministry (GoI) has full control over the Port’s critical projects such as
dredging, port expansion (berths, jetties and terminals). The planning and
approval process takes not less than 3 years, a period for which the

153
Business Plan Development for Paradip Port Trust – Final Report

market is not prepared to wait, rather, the market finds alternative routes
for its cargo flows, i.e. competitors profit from this inaction.

• PPT planned deep draught berths both for iron ore and coking coal by
2001-02 but it has not yet materialized. It is almost 6 years since it was
planned, on the other hand, iron ore markets are now stabilizing.

• Even if the Port can manage to finance investments from its own internal
resources, it has to wait for the Ministry approval.

• Once the policy has been drawn at the central level, it is not being clearly
communicated to the Ports and its concerned departments. Hence, the
Port goes through a long learning cycle before fully adapting to the new
policy level changes.

• Tariff fixation is not under Port control. Tariff Authority for the Major Ports
(TAMP) controls the tariff fixation based on some key parameters. Hence,
the Port can not fix its own tariff entirely flexibly. Even if the Port decided
to cut its prices, it has to go through a rigorous process.

Implementation Process

• The long tendering process further accentuates the delay of projects,


which are already delayed due to the planning and approval stages.
• Many times, the Port has to go through a re-tendering process as the
suppliers or consultants’ proposed cost estimation would not match with
the planned estimation by the Port. It is understandable that, the market
value changes very often depending upon the supply and demand.
• The value of a project will change by the time the Port gets the final
approval from the Ministry. Hence, the concerned project team needs to

154
Business Plan Development for Paradip Port Trust – Final Report

appraise the Committee or Chairman or Ministry on the changes and then


go through a new tendering process.
• A tendering process takes from not less than six months (best case) to 1.5
years (normal case).
• There is no IT based project management system in place and also there
is no measure on planning and administration costs on the projects.
• All the projects are being managed and monitored manually through paper
files.

Control or Feedback Mechanism

• There is no clearly defined Corporate Performance Measurement system


in place.
• Corporate Performance Measurement system helps the organization to
measure its goals / objectives against its actual achievements. And
consequently to find the gap and its business impact.
• However, the actual results are measured against the planned results and
the reasons are being discussed. However, based on the financial
projection gaps only would not lead to the actual cause of the problem.
• Hence, the goals should be clearly defined and measured to rectify the
strategy, and accordingly to develop new alternative strategies.

8.2 Internal Organization Structure

For any Port in the world, the key business objective is to facilitate the trade and
economic development of a country while maximizing its assets and people
resources.

Organizational structure should be designed in such a way that itfulfills the


corporate objectives and goals in an efficient and effective way. The business

155
Business Plan Development for Paradip Port Trust – Final Report

process time and cost should be optimized while meeting the targeted
achievements on time. Once the business process activity is triggered from the
market, there should be a seamless flow of information, communication and
workflows, till it achieves its purpose.

PPT organization structure is functionally driven rather than process driven. A


functionally driven hierarchy leads to a silo-minded approach and less interaction
between each department, and consequently, a long decision making process.

Key Observations

High processing time on the project planning and estimations (internal process
planning only) is a key concern for the Port as it impacts its ability to be highly
reactive to the market needs.

• The organizational structure is functionally driven rather than process


driven. Hence, each department acts based on its functional requirement
rather than the requirement of the process.
• There is no horizontal integration within the processes, which leads to
communication gaps between different process owners.
• There is no cross functional planning, rather each department plans based
on its own needs and constraints and then it is being communicated to the
other departments.
• The objectives for each department are not well defined. A Performance
Measurement and Control mechanism is not in place.
• All communication happens only through paper documents or files. Each
document needs to be signed by at least 5 to 6 functional heads. In the
worst case, up to 12 to 14 signatures are required per document. It is not
an efficient way of managing communication.
• The Port does not even have an email communication system and people
are lacking in IT skills.

156
Business Plan Development for Paradip Port Trust – Final Report

• Marketing and finding new business opportunities plays a smaller role in


the overall planning. Marketing function comes under Traffic department. It
has been observed that the marketing activity within this department
shares less than 5% of overall functions of the department.
• There is no real market research report upon which to base a five year
planning and annual planning. Master Port Planning is only a macro level
strategy tool and it needs to be validated according to the market changes
regularly.
• The key observation is that, there is no real project management tool in
place; rather, all the projects are managed in papers / files. Hence, the
project management, updating and monitoring is all driven manually by
individuals, rather than by an IT system.
• The financial department also manages all its accounting and financial
transactions in Excel sheets and papers.

8.3 Human resource Management

People are the greatest asset for any organizational improvements. Hence, the
quality of people and their motivation, commitment and knowledge put the
organization in the right path.

Paradip Port has about 3,901 employees as on 31.03.2006 against its total cargo
volume of about 33 MT in the same year. This works out to be 8500 tonnes per
employee.

Key Observations

• As discussed, the Port does not have a well established Human Resource
department in place, which is really an area of concern which the Port
needs to address in the coming years.

157
Business Plan Development for Paradip Port Trust – Final Report

• The skill set of people, especially, from 2/3rd layer levels, are not up to the
mark. People need to be updated with world standards, best practices and
processes in the Port industry.
• People also lack skills in IT systems which is essential in today‘s
environment where all information exchanges are online.
• Performance appraisal system is not based on quantitative performance
assessment; rather, people are assessed based on the concerned heads’
individual perception about that employee under him/her.
• Promotions are based on the past five years best performances and
seniority basis. Promotions should be based on the concerned post’s roles
and responsibilities. Accordingly the required parameters need to be
developed, such as people management, project management and
technical capability for that post need to be defined and assessed against
the prospective candidates.
• Training and development department is not in place though it is being
taken care of by the administration department.
• The attitude of labour (cargo handling labour) is not at a satisfactory level
and it was rated below average by all the customers during the market
survey. It leads to moderate productivity at the terminals.
• The Port has the potential to increase its productivity more than 10% to
15% if the workers work at least 80% of their allocated time during the
handling process. Long meal breaks (more than 2 hours) and tea breaks
make for less productivity at the terminals.

158
Business Plan Development for Paradip Port Trust – Final Report

9. Business Plan Elements


9.1 Vision and Mission Development

The Port, especially being a Public Port, has a mission to facilitate the trade with
cost effective services while maximizing the taxpayers’ funds. On the other hand,
the demand pressure on Ports for higher capability has been increasing from the
customers due to technology changes in the international trade. Hence, Ports like
PPT, are under pressure to perform while addressing the budgetary constraints.

The mission and vision of the Port have been developed based on the following
key parameter Inputs:

• Ports current Strength and Weakness


• Challenges and Threats from the market places
• Opportunities
• Customer and Stakeholder Perspective
• Internal Business Processes and Organizational issues

9.1.1 SWOT Analysis

The Strength, Weakness, Opportunities and Threats are summarized as follows:

PPT Core Strength

• Mineral Reserves: PPT is strategically located near main mineral


reserves of the country. Iron ore, coal, alumina and chrome ore are the
key minerals from India and which are mainly located near PPT hinterland
clusters.

159
Business Plan Development for Paradip Port Trust – Final Report

• Deep Draught Potential: Deep Draught potential up to 20m is the core


strength of the Port and currently PPT is one of the deepest ports on the
East Coast of India, with an average draught of about 13.2m.
• Steel Industry Hub: All lead steel plants are located within a 600km
range of the Port. New steel plants are proposed for development in the
same hinterland in another five to ten years. The proposed steel plants
capacity goes more than 70 MT compared to the current Indian steel plant
capacity of about 45 MT.
• Mechanization: PPT has a dedicated mechanized State of Art Handling
facility for thermal coal. The designed capacity is about 20 MT/pa. The
dedicated iron ore plant has a capacity about 4.5 MT/pa.
• Strategic Gate for Land-locked Location: PPT is strategically located
on the line along with Nagpur (Central India) and JNPT (Western India).
High potential for a strategic gateway for Northern India cargo via PPT to
Eastern markets.

Key Challenges / Weakness

• Supply Chain Connectivity: Though the Port is strategically located very


close to mineral reserves and steel hubs, it is not well connected on the
last mile by Rail and Road with key mines and industrial hubs.
• Land Constraint: The Port has already used 70% of its existing land and
manual handling cargo occupies the largest part of the land. The
mechanized plant utilization factor is 700,000 tonnes per Ha and the
manual handling utilization factor is about only 140,000 tonnes per ha.
• Internal Logistics System: Port handling capacity is not aligned with the
market demand. The bottleneck at the iron plant impacts the service level
and loss of market share to the competitors.
• Capacity Addition: Long processes and delay in capacity addition which
leads to the loss of potential market share to competing ports.

160
Business Plan Development for Paradip Port Trust – Final Report

• High Cost of Operations: The cost of operation is quite high when


comparing to the competitors, especially, the labour cost is very high.
• Organizational Structure and Labour Issue: The organization is driven
by functional silos rather than being process driven.
o Labours are not working effectively (long meal break, unskilled
operators and high cost).
o There is no Corporate or Strategic planning team established to
oversee the Strategic vision of the Port.
• Horizontal Integration with IT System: Organization is not integrated
through a well defined ERP (Enterprise Resource Planning) system. The
customer, Port and customs interfaces are not fully established.
• Project Management approach: PPT does not have any project
management system to monitor and manage the tendering process and
implement the projects.
• Mechanization: Coking coal and non coking coal handling are not yet
mechanized, which leads to lower productivity and higher handling costs.
• High Value Goods: The Port hinterland is not served with high value
goods.
• Customs Process: No sea customs at the port. Saturdays and Sundays
are holidays for the customs at the port, which delays the customs
process.

Threats to the Port

• Competition: Dhamra is the key competitive Ports.


o Vizag is the key competitive port for both iron ore and coking
coal through its cost effective operations and hinterland
connectivity.
o Among new entrants (Dhamra and Gopalpur), Dhamra Port would
be the emerging competitive player for PPT with its deep
draught berths and commitment to world class services.

161
Business Plan Development for Paradip Port Trust – Final Report

o Other minor ports which are proposed viz. Gopalpur, Bali-


Harichandi (Puri), Astarang (Puri), Bahuda Muhan (Ganjam) and
Chudamani (Ganjam), would not be serious competition for PPT.
• Customer Dependency: The Port is fully dependant on five customers.
o The top five exporters share more than 64% of total export volume,
each exporting in excess of 1 MT/pa
o The top four importers share more than 60% of import volume each
with a volume more than 1 MT/pa
o If these customers shift their volume to new emerging ports, then
the Port will be challenged to replace or substitute those volumes.
• Market Dynamic and Policy Constraints:
o Non coking coal demand pattern is not certain due to import policy
level changes at NTPC (Import is only a short term not long term).
o Thermal coal linkages. Coal is being routed through other ports
rather than PPT based on linkage committee recommendation, not
based on customer preference.
• Customer loyalty / Bargaining Power:
o Customer loyalty level is moderate.
o The bargaining power of the customer will increase in the near
future if the new ports are developed in the PPT hinterlands.
o If new ports are developed with the same facilities, customers are
ready to shift their cargo due to labour attitude and other service
level issues.
Opportunity

• A Leading Bulk Port in the world:


o If the Port’s core strategic projects are realized (deep draught
berths with mechanized handling), it can be developed as a leading
bulk port in the world in next 20 years, with growing energy demand
from domestic (power and steel industry) as well as international
demand (China).

162
Business Plan Development for Paradip Port Trust – Final Report

o Supply Chain connectivity would play a major role to support that

• Hub for Liquid Bulk and Petrochemical:


o The Port will become a leading liquid bulk hub in the East Corridor
if the IOCL plans are realized in the coming future.

• Clean cargo and Container Hub of East Coast:


o Emerging new steel plants like Arcelor Mittal Steel
o PPT can be developed a leading distribution center for land locked
regions for the containers. Especially for the Northern and Central
regions.
ƒ West-Bengal Cluster should be a target market as well for
the Port, as Haldia Port can not accommodate feeder
vessels in the range of 1500 to 2000 TEU capacity.

163
Business Plan Development for Paradip Port Trust – Final Report

9.1.2 VISION Statement

• PPT has a good opportunity to become a hub port of East Coast based
on its core strengths that others do not have viz deep draught,
proximity to mineral reserves and land locked regions.

• The Focus should be dry bulk in the short term, liquid bulk in the
mid term and containers in the long term.

• The Target Market should be


o Be competitive in Layer I Category - Short Term
o Strengthen the competitive position in Layer II Category – Short
and Mid Terms
o Strategic Initiatives to attract cargo from North, Center and North-
East cargo clusters – Mid and Long term

To become a Lead Hub Port of the East Coast and an Economic


Thrust Engine for Eastern India

Short Term - Dry Bulk


Mid Term - Liquid Bulk
Long Term - Containers / Clean Cargo

164
Business Plan Development for Paradip Port Trust – Final Report

9.1.3 MISSION Statement

• PPT is a Public service entity, hence, adding value the stakeholders


(People of the Country) by facilitating the economic development and
offering cost-effective services, should be the key mission of the Port.

To offer World Class Marine and Operational services, while


adding value to Stakeholders (Public)

• Through cost-effective operations,


• Deep draught, Highly mechanized, and cargo dedicated handling
facilities
• Superior supply chain connectivity and dedicated corridors
• Continuous improvements through IT implementation and process
reengineering
• Maximization of Port assets and value
• Offering a competitive place to work and share knowledge
• Strategic partnership with investors (Private Players) while offering a
level playing field.

• World class service may contradict to the cost-effective operations;


however, it can be achieved through economics of scale.
• Though it is not mentioned in the mission statement, it is quite
important that the Port should reduce the burden on taxpayers and
create internal funds to support the future growth.

165
Business Plan Development for Paradip Port Trust – Final Report

9.2 Goals and Strategy Development

To achieve the mission and vision that have been developed, the Port should
have a balanced perspective, and accordingly, Goals and Strategy should be
developed.

The basics of the Goals and Strategy development is based on the Balanced
Score Card (BSC) approach developed by a MIT professor in the early 1990s.
However, it has here been modified to a Public entity and tailor made to Port
Operations.

Customer Perspective
Who do we define as our
customer? How do we create
value for our customer?

Financial Perspective
Internal Business Processes
How do we add value for Mission and
customers while controlling To satisfy customers while
Vision
costs? How do we raise the funds meeting budgetary constraints, at
necessary to support operations? what business processes must we
excel?

Employee: Learning and Grow


How do we enable ourselves to
grow and change, meeting
ongoing demands?

Fig. 9.1 Balanced Score Card

According to the Model, the Port should have four perspectives on how ports
should be developed. Each perspective is important to reach the mission and
vision in next 20 years.

166
Business Plan Development for Paradip Port Trust – Final Report

9.2.1 Customer Perspective

To achieve the mission of becoming the lead hub port in the East Corridor, the
sort of goals and strategy that the Port should need to establish from Customer
Perspective are as follows:
d become a Lead Hub Port of East Coast ….Customer Perspective
To

Goals to achieve for Bulk Cargo Vision

• Retain and Increase the Market Share in Iron Ore,


Thermal Coal, Coking Coal and Non Coking Coal

Iron Ore
o Current Share » 13 %
o Target Share » 25 %

Coking Coal
o Current Share » 17 %
o Target Share » 30 %

Non Coking Coal


o Current Share » 17 %
o Target Share » 25%

Thermal Coal
o Current Share » 60 %
o Target Share » 80 %

Liquid Bulk (Excluding POL Product)


o Current Share » 0 %
o Target Share » 60 %

Goals to achieve for Container & Clean Cargo Vision


• Increase Clean Cargo and Container Market Share

Containers and Clean Cargo


o Current Share » Less than 0.1%
o Target Share » 5%

167
Business Plan Development for Paradip Port Trust – Final Report

What Market Demands – Value Addition to Customer

• Superior Supply Chain Connectivity


• Cost effective services – Total Supply Chain Cost Reduction
• Higher vessel handling capability and Faster turn around time
• Dedicated Berths
• Efficient documentation and customs processes
• Faster Evacuation Rate of cargo
• Friendly Attitude from the Labour and Port Officials

Commercial and Marketing Strategy

• Develop Target Market and Customer Driven Approach


• Build a Long Term Partnership with Customers
• Develop Deep Draught Berths
• High Speed and Dedicated Rail Corridors
• Promote Special Economic Zone or Logistics Parks
for Steel or clean cargo Industry

Key Measures

• Customer Satisfaction Survey


• % of Retained Customers - Increase / Loss
• % of Market share - Increased / Loss
• % of new customer addition with volume increase

9.2.2 Internal Business Process Perspective

To satisfy the market or customers demands, while meeting budgetary


constraints, at what business processes must port should excel?

168
Business Plan Development for Paradip Port Trust – Final Report

To become a Lead Hub Port of East Coast ….Business Process Perspective

Internal Business Processes Goals

• Safe and Reliable Marine Services


• An optimal Utilization of Land
• Faster, Efficient and Effective Cargo Operations
o Faster Evacuation of Cargo (Inbound and
Outbound)
• Faster Documentation Process

Operational Strategy

• Mechanized Handling
• Flexible and Effective Port Planning
• Integrated Rail cum Off-shore handling system
• IT enabled Processing Systems (EDI Integration)
• IT enabled Vessel operations Systems

Key Measures

• Ship Turn Round Time


• Down time
• Truck / Wagon Turn Round Time
• Productivity per quay length or Day
• Productivity per Ha

9.2.3 Internal Organizational Growth Perspective

How do Port should enable themselves to grow and change, meeting ongoing
demands?

169
Business Plan Development for Paradip Port Trust – Final Report

To become a Lead Hub Port of East Coast ….Organizational Growth

Organizational Growth Perspective Goals

• Develop a Customer-Process Oriented Organization


• Ensure a Competitive Place to work and share knowledge

Organizational Improvement Strategy

• Process Driven Structure rather than Functional


• Continuous Improvements of Employee Skills sets
• Customer oriented Process Planning Structure
• Project Management Approach

Key Measures

• Employee Satisfaction Survey


• Employee Skill Set Level
• No of Training days per year
• Project Lead time measurements

170
Business Plan Development for Paradip Port Trust – Final Report

9.2.4 Financial Perspective

How Port would add value for its customers while controlling costs? How do we
raise the funds necessary to support operations?

To become a Lead Hub Port of East Coast ….Financial Perspective

Financial Perspective Goals

• Offer Cost Effective Services


• Maximization of Return on investments

Financial Improvement Strategy

• Activity Based Costing Implementation


• An Effective Public Private Partnership Implementation
• Continuous Cost Reduction through process
Reengineering

Key Measures

• Cost per tonnes


• Return on Investment
• Cash Flow measures

171
Business Plan Development for Paradip Port Trust – Final Report

10. Business Plan - Financial Projections 2007-2027

10.1 Financial Model

To be competitive and tap the market potentials, TransCare along with PPT have
come up with many project concepts and ideas for the next 20 years. However,
projects are selected based on market demand estimation. All facility
requirements are based on the realistic market demand estimation. The
developed financial model has four major steps, which are the following:

Step 1: Project Selection

All projects proposed by PPT were considered as well as projects which are
based on market demand projection. The technical specifications and detailed
investment requirements are derived at each identified project, along with the
expected additional volume generated by these projects.

Step 2: Financial Evaluation

The financial viability of each project has been evaluated at 15% IRR (Internal
Rate of Return). However, for essential infrastructure projects like deepening of
the channel, the IRR need not to be 15%. Even less than 6% to 8% IRR could be
acceptable, as the future port development, traffic projections and competitive
advantages are based on this key infrastructure project.

The revenue projection for each project has been derived based on competitive
tariffs, and the financial viability of the project has been evaluated over a 30-year
time horizon. The projects which are financially viable are selected for the next
step. Sound reasoning and risks that Port may face on financially not viable
projects has been given.

172
Business Plan Development for Paradip Port Trust – Final Report

Financial Model

Project Selection
based on Market demand
Investment – Balance Sheet
Revenue – P&L
Evaluation of Projects
(Investments, Revenue, IRR
@15%)
Port Share

No Yes
PPP Model
Viable?
Evaluation

Operator
Share
Reasoning and
Recommendations
Revenue Share and
Financial Viability

Fig. 10.1 Financial Model

173
Business Plan Development for Paradip Port Trust – Final Report

Step 3: Investment Model / PPP Model Evaluation

The sourcing of funds for all selected projects has been defined based on the following
criteria:
• The Port should invest in all infrastructure related projects like deepening of
channel and berth constructions. For this, the Port should get loans either
from the government or banks or use its internal resources.
• Hence, the infrastructure revenue, like Port dues and pilotage and towage
should go to the Port account.
• The private operator should bring the investment in plants like iron ore, coal
plants and terminals like container. The cargo related revenue should go to
the operator along with berth hiring charge.

In conclusion, the Port will invest in all infrastructure related elements under any project
and the private operator will invest in cargo related investments. The cargo related
investments are allocated to the Operator and the infrastructure related investments are
allocated to the Port.

All projects, except deepening of channel project, are based on Build Operate and
Transfer model (BOT). The following criteria have been assumed for the BOT model:
• All the selected BOT model projects are financially evaluated at an IRR about
15%.
• The time horizon for all BOT model projects is 30 years.
• Only additional volume has been considered for all projects.
• The revenue share model has been followed for all the projects.
• An optimal revenue share percentage between Port and Operator has been
derived. The optimal revenue share is the rate (revenue share) at which, the
operator would get better return on investments.

174
Business Plan Development for Paradip Port Trust – Final Report

Step 4: Financial Elements Projection (Balance Sheet, P&L and Cash flow)

Once the investments and revenue shares are defined under Port account, the detailed
balance sheet, profit and loss account and cash flow statement are projected for the
next 20 years.

Discount Rate Calculation

The cost of Capital employed is calculated based on TAMP (Tariff Authority for Major
Port Trust) guidelines as follows:

• The Risk Free Rate (Rf) based on the transaction - weighted yields on
Govt. of India Bonds having a residual maturity of 10 years considered
over the period July - Dec., 2004, viz, 6.35%.
• The Market Risk Premium (Rm -Rf) based on the a review of the
various methods for calculating the risk premium in India's context,
presently estimated at 7.15%;
• The Equity Beta (Be) based on the review of the asset Betas of port
sector and other domestic sector companies, presently estimated at
0.84;
• The Debt Risk Premium (Rd) based on the risk profile of the port sector
as assessed, presently considered at 5.55% as 'investment grade';
• The Debt : Equity ratio for the industry, presently factored as 1 :1; and
• The Corporate tax rate applicable as per the Income Tax Act and rules
there under.
• The rate so fixed, 15% per annum, is used for all the Investment
calculations.

175
Business Plan Development for Paradip Port Trust – Final Report

10.2 Financially Evaluated Projects

The following projects have been proposed by PPT. Most of these projects are at
the stage of finalization except the western dock project.

1. Deepening of Channel to handle 1,25,000 to 1,85,000 dwt vessels


• Tendering process is over and the project is at the final stage

2. Construction of Deep Draught Iron Ore berth on BOT basis


• In principle approval by the Government

3. Extension of break-water
• Works to be taken up after conclusive model studies and
presently being studied by CWPRS, Pune, and IIT, Chennai

The following projects have been proposed by TransCare based on the realistic
scenario. The investment plans and financial viability for these projects have
been calculated along with the client related investment planning.

1. Two iron ore mechanized terminals


2. Two coking coal mechanized terminals
3. One non-coking coal mechanized terminal
4. One container terminal
5. One fertilizer terminal

10.2.1 Deepening of the Channel

PPT has proposed to deepen the entrance and approach channel to


accommodate the increase in traffic of larger vessels in the coming years. At

176
Business Plan Development for Paradip Port Trust – Final Report

present, the Port handles Panamax size vessels up to 90,000 dwt. On the east
coast, PPT is the only Port having high draught potential.

The bulk cargos, mainly iron ore and coal, demand higher capacity vessels in the
mid term as well as in the long term. Hence, the Port decided to exploit its core
strength and go for deepening of its channel and deep-draught berths.

The break water construction is also proposed to provide necessary stopping


distance for the larger vessels and support the maintenance dredging process
during the monsoon (south-west). The Port has two alternative proposals for the
breakwater constructions, which are the following:

• The extension of south breakwater from 600 m to 2100 m


o Onshore extension with an addition of about 1500 m

• Off shore island break water with a length about 1600 m


o 600 m away from the onshore

However, the Port has not yet decided on these alternatives. The Port has been
working on economic feasibility of the project. For the full technical details of
the project please refer to the interim report.

Investment Calculations:

The estimated capital cost for the deepening channel would be Rs. 2430 million
in the first phase and Rs.1125 million in the second phase. The dredging cost per
cbm is estimated at US$ 5 and US$ 6 during the first and second phase of the
project respectively. The total project costs are estimated to be about Rs. 3555
million.

177
Business Plan Development for Paradip Port Trust – Final Report

The extension of the break water would cost about Rs. 1500 million. The
construction cost of onshore breakwater is Rs.1 million per meter with a depth
range of 10 to 12 m. The offshore breakwater cost is estimated to be Rs. 3500
million. Since the Port has not yet decided on the proposed alternatives by
various consultants, it was decided for this exercise to take the higher side of the
investment, i.e. the off-shore breakwater, into consideration for the financial
viability.

Financial Evaluation:

The proposed deep draught berths during the next 20 years will get the direct
benefit from the deepening channel project. Hence, the marine revenues, which
would be generated by the bigger vessels calling at the proposed berths, are
considered. Since the proposed breakwater investment is to provide the safer
navigation for the bigger vessels at the channels, the breakwater investment is
being considered under deepening channel project.

The following proposed projects are considered as projects benefiting from the
deepening channel project:
• Two iron ore berths
• Two coking coal berths
• One non coking coal berths

178
Business Plan Development for Paradip Port Trust – Final Report

Deepening of Channel Project Investment Calculation


Phase I Phase II Total (I+II)
Quantity Cost in Rs. m Quantity Cost in Rs.m in in.
m. cbm m.US m cbm m.US m.US$ m.Rs
1 Capital Dredging 7.5 45 2025 4 20 900 65.0 2925.0
2 Mobilization and LS 2.8 126 LS 1.6 72 4.4 198.0
Equipments
3 Sub Total 47.8 2151 21.6 972 69.4 3123.0
4 Contingencies at 12% 5.7 258 2.8 126.36 8.5 384.5
5 Project Management 1% 0.48 22 0.2 9.72 0.7 31.2
6 Total (3+4+5) 54 2430.63 0 25 1108.08 78.6 3538.7
Table 10.1

Off-shore Break water Construction Cost Estimation


Quantity/m3 US$/unit m.US$
1 Mobilization and De Mobilization 20.01
3 Armour 118 35 6.61
4 Core 1085 25 43.40
5 Secondary 168 15 4.03
6 Sub Secondary 104 15 2.50
7 Toe 45 5 0.36
9 Bedding Layers 36 5 0.29
m.US$ 77
m.Rs 3474
Project Management 1% 3509

Table 10.2

179
Business Plan Development for Paradip Port Trust – Final Report

Financial Viability on Deepening Channel Project


Year Investments Revenue Generation Cash Flow
Dredging Breakwater Maintenance Due P&T Total Net flow
in. mln in. mln Rs in. mln Rs in. in. m.Rs in. m.Rs in. m.Rs
Rs m.Rs
2007 1944 360 0 0 0 0.0 -2304.0
2008 486 1440 0 0 0 0.0 -1926.0
2009 0 1800 0 0 0 0.0 -1800.0
2010 0 0.0 506 275 596 870.6 364.4
2011 0 0 506 302 654 956.0 449.7
2012 0 0 506 329 715 1043.9 537.6
2013 1125 0 506 343 743 1086.0 -545.3
2014 0 0 506 368 799 1167.0 660.8
2015 0 0 608 389 844 1233.4 625.9
2016 0 0 608 409 887 1295.3 687.8
2017 0 0 608 427 926 1353.2 745.7
2018 0 0 608 508 1101 1608.7 1001.2
2019 0 0 608 510 1107 1617.2 1009.7
2020 0 0 608 515 1118 1632.9 1025.4
2021 0 0 709 566 1229 1795.5 1086.7
2022 0 0 709 624 1353 1977.0 1268.3
2023 0 0 709 651 1412 2063.4 1354.7
2024 0 0 709 679 1473 2152.7 1443.9
2025 0 0 709 708 1537 2244.9 1536.1
2026 0 0 709 738 1602 2340.1 1631.4
2027 0 0 709 769 1669 2438.5 1729.8
2028 0 0 709 789 1711 2500.0 1791.2
2029 0 0 709 799 1734 2532.8 1824.1
2030 0 0 827 818 1775 2592.6 1765.7
2031 0 0 827 818 1775 2592.6 1765.7
2032 0 0 827 818 1775 2592.6 1765.7
2033 0 0 827 818 1775 2592.6 1765.7
2034 0 0 827 818 1775 2592.6 1765.7
2035 0 0 827 818 1775 2592.6 1765.7
2036 0 0 827 818 1775 2592.6 1765.7
2037 0 0 827 818 1775 2592.6 1765.7

Financial Figures
mln Rs Discount
Rate Pay back Period 13 to 14Years

NPV (1678) 15%


IRR 11.1%
Table 10.3

180
Business Plan Development for Paradip Port Trust – Final Report

The financial evaluation is calculated with a discount rate of 15%, usual when
considering Port infrastructure investment in India. The net cash flow is
generated for next 30 years. The Internal Rate of Return (IRR) is 11.1%.

The project is financially feasible. However, it is the key strategic project as far as
Paradip Port is concerned, in order to be competitive in the bulk port business.
The Port should not delay the project and maximize its core strength (deep
draught) through this project.

10.2.2 Deep Draught Iron ore and Coking Coal Berths Phase I

Motivation

The project envisages construction of integrated cargo handling facilities for


20 MT of coal and iron ore at Paradip. The project includes a berth for handling
ships of 125,000 dwt in the initial stage and 185,000 dwt in the final phase.

Iron Ore Berth

The existing iron ore mechanized berth could handle a maximum of 7 MT,
against its designed capacity about 4.5 MT. Last year, PPT handled about 10 MT
of iron ore but the Port could handle only 6.4 MT at their existing mechanized
plant and the remaining quantity was handled at the general cargo berths.

The size of vessels has been increasing as the customers prefer to have larger
vessels with quick turn around time. This can only be possible if the Port has
deep draught mechanized berths.

181
Business Plan Development for Paradip Port Trust – Final Report

Coking Coal

The coking coal berth is another key and high potential commodity for PPT in the
near future. The volume has been increasing at a CAGR of 8% and the steel
plants are already facing coking coal supply constraint from the domestic market,
hence, they will depend on coking coal imports in the future.

The Port currently handles 3.3 MT of cargo and it is expected to grow at 11% to
reach 20 MT by 2020. To gear up the facility to suit the above projected demand,
PPT has already initiated this plan. However, it is still getting delayed due to the
long planning process at the Ministry of Shipping. The project is necessary for
PPT to be a key player in coking coal import market in India.

Iron Ore Berth Phase I

The capital cost is estimated to be US$ 99.5 million or Rs. 4477 million. The
major capital cost drivers are handling equipments and electrical power
installation. The annual operational and maintenance costs are worked out to be
US$ 21.6 million or Rs. 973 million per year.

The project is estimated to generate a NPV of Rs. 5160 million at a discount rate
of 15%. The IRR of the proposed project would be at 16.4% over a 30 year
project period.

A sensitivity analysis was also done on the estimated operational costs. The cost
of the operations increased every year from 1% to 4% over the period of the
project cycle. However, the project is financially viable.

182
Business Plan Development for Paradip Port Trust – Final Report

Capital Cost Estimation for Iron Ore


Dimensions Volume Cost/Unit Total Total
Unit in m.US$ In In m.Rs
m.US$
1 Cut and Cleaning - LS 0.25 11
2 Berth Construction M 350 0.015 5.25 236
3 Yard Cleaning and M2 56000 0.00 0.34 15
Construction (Civil Work)
4 Road Connectivity km 6 0.1 0.60 27
5 Rail Connectivity Km 1.5 0.3 0.45 20
6 Electrical, Mechanical and LS 40 1800
other civil
7 Floating Crafts No 1 8 8 360
9 Handling Equipments 0
Stackers No 4 3 12 540
Ship-unloaders No 2 2.5 5 225
Reclaimers No 2 2 4 180
Wagon Tippler No 2 3 6 270
10 Dredging m3 1071000 0.000008 9 386
11 Total (1 to 10) in m US 90.45 4070
12 15% contingencies 9.0 407
12 Final Total in m.US 99 4477
Table 10.4

Operations Cost Estimation Per Year for Iron Ore


Cost in Cost in
m.US$ m.Rs
1 Maintenance work (Dock, P&T) 6.0 269
2 Depreciation (Civil) 0.2 10
3 Maintenance Work (Mechanical) 9.0 81
4 Other Utility and Energy Cost 1.3 60
5 Energy 1.5 68
6 Manpower 3.6 117
7 Over all annual cost per year 21.6 585
Table 10.5

183
Business Plan Development for Paradip Port Trust – Final Report

Financial Flow Evaluation for Iron ore Berth Phase I


Year Investment O&M Traffic Revenue Cash
Flow
m.RS m.RS m.t m.RS m.RS
2007 895 0 0.0 0 -895.5
2008 2239 0 0.0 0 -2238.7
2009 895 0 0.0 0 -895.5
2010 448 973 8.6 1539 118.4
2011 0 993 9.1 1626 633.2
2012 0 1013 10.1 1816 803.7
2013 0 1033 10.3 1851 817.6
2014 0 1054 11.1 1992 938.5
2015 0 1075 11.8 2120 1045.0
2016 0 1096 12.2 2191 1094.7
2017 0 1118 12.4 2234 1116.4
2018 0 1140 13.9 2503 1362.4
2019 0 1175 13.6 2450 1275.4
2020 0 1210 13.9 2489 1279.3
2021 0 1246 12.0 2154 908.0
2022 0 1284 12.0 2154 870.6
2023 0 1322 12.0 2154 832.1
2024 0 1362 12.0 2154 792.4
2025 0 1403 12.0 2154 751.6
2026 0 1445 12.0 2154 709.5
2027 0 1488 12.0 2154 666.2
2028 0 1533 12.0 2154 621.5
2029 0 1579 12.0 2154 575.6
2030 0 1626 12.0 2154 528.2
2031 0 1675 12.0 2154 479.4
2032 0 1725 12.0 2154 429.2
2033 0 1777 12.0 2154 377.4
2034 0 1830 12.0 2154 324.1
2035 0 1885 12.0 2154 269.2
2036 0 1941 12.0 2154 212.7
2037 0 2000 12.0 2154 154.4
0
Financial
Investment
NPV 5,160.8 m.RS
IRR 16.4%
Table 10.6

184
Business Plan Development for Paradip Port Trust – Final Report

Coking Coal Berth Phase I

The capital cost is estimated to be US$ 79 million or Rs. 3555. The annual
operational and maintenance cost is calculated to be Rs. 800 to 1800 million per
year during the project cycle.

Capital Investment Cost Estimation - Coking Coal


Dimensions Volume Cost/Unit Total Total
m.US$ m.Rs
1 Cut and Cleaning - LS 0.25 11
2 Berth Constructon M 350 0 0 0
3 Yard Cleaning and Construction (Civil M2 56000 0.00 0.34 15
Work)
4 Road Connectivity km 6 0.1 0.60 27
5 Rail Connectivity Km 1.5 0.3 0.45 20
6 Electrical, Mechancial and others LS 30 1350
7 Conveyor System KM 6 0.05 0.3 14
9 Handling Equipments
Stackers No 4 3 12 540
Ship-loaders No 2 3 6 270
Reclaimers No 2 1.8 3.6 162
Wagon Loader No 2 0.8 1.6 72
Floating Craft No 1 8 8 360
10 Dredging m3 1071000 0.000008 9 386
11 Total 72 3227
12 10% contingencies 7 323
13 Final Total in m.US 79 3549
Table 10.7

Operations Cost Estimation Per Annum


m.US$ m.Rs
1 Operational and Maintenance Work (Dock, P&T) 6 284
2 Depreciation (Civil) 0.0 2
3 Maintenance (Mechanical) 7.7 70
4 Other Utility and Energy Cost 1.0 45
5 Energy 1.5 68
6 Manpower 4.0 112
7 Over all annual cost per year 19.9 562
Table 10.8

185
Business Plan Development for Paradip Port Trust – Final Report

The major cost drivers are electrical and mechanical systems apart from
dredging costs.

Financial Flow Evaluation for Coking Coal Berth Phase I


Year Capital O&M Traffic Revenue Cash
Flow
m.Rs m.Rs m.t m.Rs m.Rs
2007 710 0 0 0 -710
2008 1775 0 0 0 -1775
2009 710 0 0 0 -710
2010 355 896 6.1 1073 -177
2011 0 914 6.8 1191 277
2012 0 932 8.0 1416 484
2013 0 951 8.6 1515 564
2014 0 970 9.4 1663 694
2015 0 989 11.1 1958 969
2016 0 1009 11.9 2095 1086
2017 0 1029 12.8 2256 1227
2018 0 1060 13.4 2369 1309
2019 0 1092 14.5 2549 1458
2020 0 1124 15.2 2677 1552
2021 0 1158 12.0 2116 957
2022 0 1193 12.0 2116 923
2023 0 1229 12.0 2116 887
2024 0 1266 12.0 2116 850
2025 0 1304 12.0 2116 812
2026 0 1343 12.0 2116 773
2027 0 1383 12.0 2116 733
2028 0 1424 12.0 2116 691
2029 0 1467 12.0 2116 648
2030 0 1511 12.0 2116 604
2031 0 1556 12.0 2116 559
2032 0 1603 12.0 2116 512
2033 0 1651 12.0 2116 464
2034 0 1701 12.0 2116 415
2035 0 1752 12.0 2116 364
2036 0 1804 12.0 2116 311
2037 0 1859 12.0 2116 257
Financial
Investment
NPV 420.11 m.Rs
IRR 16.9%
Pay Back 9.0 Year
Table 10.9

186
Business Plan Development for Paradip Port Trust – Final Report

The project is financially feasible with a positive NPV of US$ 9.34 million or
Rs. 420 million at a discount rate of 15%. The project IRR is 16.9%. The project
was found to be financially viable and would attract investors.

10.2.3 Deep Draught Non-Coking Coal Berth

TransCare proposes a non-coking coal terminal (fully mechanized) to cater to the


future expected non coking coal traffic. The forecast of future traffic considered
here is conservative.

In the optimistic scenario, three non coking coal terminals are proposed,
however, TransCare is convinced with one terminal for the realistic scenario. If
the traffic goes as per the optimistic scenario, the Port should consider additional
terminals as discussed in the capacity planning section (Interim Report).

The estimated traffic through the proposed terminal would be 6 MT by 2010 and
12 MT at the end of the project cycle. The proposed module will have 12 MT
capacity per annum. The estimated capital cost would be US$ 97 million or
Rs. 4350 million. The operation costs are estimated to be US$ 19.3 million or
Rs. 869 million per annum.

The project is proposed to be implemented in two phases. The first phase


module would be 8 MT capacity and the second phase module would be 6 MT.
The project would give an IRR of 18.8% with an NPV value at US$ 11.16 million
or Rs. 499 million.

187
Business Plan Development for Paradip Port Trust – Final Report

Capital Cost Estimation for Non Coking Coal


Volume Cost/Unit Total Total
Unit in m.US$ In In
m.US$ m.Rs
1 Cut and Cleaning - LS 0.25 11
2 Berth Construction M 350 0.015 5.25 236
3 Yard Cleaning and Construction (Civil Work) M2 56000 0.00 0.34 15
4 Road Connectivity km 6 0.1 0.60 27
5 Rail Connectivity Km 1.5 0.3 0.45 20
6 Electrical, Mechanical and others LS 35 1575
7 Floating Crafts No 1 8 8 360
9 Handling Equipments
Stackers No 4 3 12 540
Ship-unloaders No 2 3 6 270
Reclaimers No 2 2 4 180
Wagon Loaders No 2 0.8 1.6 72
Other warfrelated equipments LS 2 90
10 Dredging m3 1071000 0.000008 9 386

11 Total (1-10) 84 3782


12 15% contingencies 13 567
12 Final Total 97 4350
Table 10.10

Operations Cost Estimation Per Year for Non Coking Coal


Cost in Cost in
Factors m.US$ m.Rs
1 Operations and Maintenance (Dock, P&T) 0 8 348
2 Depreciation (Civil) 1.5 1.5 66
3 Mechanical Plant Handling 1.1 5.4 243
4 Other Utility and Energy Cost 1.5 1.5 68
6 Manpower 3.2 145
7 Over all annual cost per year 19.3 869
Table 10.11

188
Business Plan Development for Paradip Port Trust – Final Report

Financial Flow Evaluation for Non Coking Coal


Year Capital O&M Traffic Revenue Cash
Flow
m.Rs m.Rs m.t m.Rs m.Rs
2007 870 0 0.0 0 -870
2008 870 0 0.0 0 -870
2009 217 0 0.0 0 -217
2010 217 869 6.8 1353 267
2011 0 895 7.9 1566 671
2012 0 922 7.6 1521 599
2013 0 949 8.0 1592 642
2014 0 978 8.4 1665 687
2015 0 1007 7.6 1514 506
2016 870 1038 8.0 1597 -310
2017 1305 1069 8.4 1672 -702
2018 0 1101 8.6 1888 787
2019 0 1145 8.3 1830 685
2020 0 1191 8.0 1745 555
2021 0 1238 7.7 1698 460
2022 0 1288 9.0 1978 691
2023 0 1339 9.4 2058 718
2024 0 1393 9.8 2140 747
2025 0 1448 10.1 2225 777
2026 0 1506 10.5 2314 808
2027 0 1567 11.0 2407 840
2028 0 1629 11.5 2524 894
2029 0 1694 11.5 2524 829
2030 0 1762 12.0 2633 871
2031 0 1833 12.0 2633 801
2032 0 1906 12.0 2633 727
2033 0 2001 12.0 2633 632
2034 0 2101 12.0 2633 532
2035 0 2206 12.0 2633 427
2036 0 2317 12.0 2633 317

Financial
Investment
NPV 499.51 m.Rs
IRR 18.8%
Table 10.12

189
Business Plan Development for Paradip Port Trust – Final Report

10.2.4 Container Terminal Phase I & II

Port should exploit its high draught potential to attract the container market
especially from Eastern and Northern parts of India. The projected volume would
be 1.53 million TEU by 2027.

This is very optimistic as the Port has to start this business from scratch. Hence,
all the proposed terminals are based on only optimistic scenario. Otherwise, it is
recommended to use the existing general cargo berths with additional cranes for
the container operations.

One container module is proposed with 650,000 TEU capacity on the south side
of the Port. The proposed quay length is 700 m with a draught of 17 m. It is
proposed at the south side of the Port. The back reach would be about 500 meter
with rail sidings. The project also envisages additional rail links and roads to the
project site.
Capital Investment on Container Terminal
Units Quantity m.US$ m.Rs
1 Dredging m.cu.m 1785000 14 643
2 Quay Wall Construction M 700 14 630
3 No of Ship to Shore Cranes No 5 48 2138
4 No of Mobile Cranes No 14 35 1575
5 Yard Area and Other Site Preparation LS 15.8 709
6 Rail Network connections and Sidings KM 5 12.5 563
7 Site Preparation and Cleaning M2 210000 2 76
8 Total 141 6332
9 Total with % 10 contingency 155 6965
Table 10.13

The estimated capital investment would be US$ 155 million or Rs. 6965 million in
a phased manner. The estimated operational costs would be US$ 11~20 million
per year during 30 years period. It is proposed to implement the project in two
phases as the projected volume is less than 0.5 million TEU in the realistic
scenario. Phase I should start by 2012-13 and phase II should be in 2022-23 if
the projected traffic exceeds 0.5 million TEU.

190
Business Plan Development for Paradip Port Trust – Final Report

Operating cost per annum Estimation


m.US$ m.Rs
1 Maintenance and Operations (P&T, Dock) 4.2 190
2 Maintenance Civil 0.99 45
3 Maintenance (Mech, Electrical, Equip) 5.36 241
4 Human Resource 0.65 29
5 Total 11.2 505
Table 10.14

Financial Flow Evaluation for Container


Year Capital O&M Traffic Revenue Cash
Flow
m.Rs m.Rs m.TEU m.Rs m.Rs
2011 2438 0 0.08 0 -2438
2012 2438 0 0.14 0 -2438
2013 0 505 0.15 668 163
2014 0 505 0.19 832 327
2015 0 515 0.28 1209 693
2016 0 525 0.32 1400 874
2017 0 536 0.44 1907 1371
2018 0 547 0.44 1907 1360
2019 0 563 0.44 1907 1344
2020 0 580 0.44 1907 1327
2021 0 597 0.44 1907 1310
2022 0 615 0.44 1907 1292
2023 2090 634 0.44 1907 -816
2024 0 653 0.44 1907 1254
2025 0 672 0.44 1907 1235
2026 0 693 0.44 1907 1215
2027 0 720 0.44 1907 1187
2028 0 749 0.44 1907 1158
2029 0 779 0.44 1907 1128
2030 0 810 0.44 1907 1097
2031 0 843 0.44 1907 1065
2032 0 876 0.44 1907 1031
2033 0 911 0.44 1907 996
2034 0 948 0.44 1907 959
2035 0 986 0.44 1907 921
2036 0 1025 0.44 1907 882
2037 0 1066 0.44 1907 841
2038 0 1109 0.44 1907 798
2039 0 1153 0.44 1907 754
Financial
Investment
NPV 200.05 m.Rs
IRR 15.6%
Table 10.15

191
Business Plan Development for Paradip Port Trust – Final Report

The project found to be financially viable with a positive NPV about US$ 4.5
million or Rs. 200 million and an IRR at 15.6%. The competitive market rate is
assumed for the project at US$ 74 or Rs. 3330 per TEU (Including all terminal
charges) during the forecasted period.

10.2.5 Fertilizer Terminal

The fertilizer market is expected to expand during the forecasted period. The
Indian players are expected to dominate in the export market as well, but only on
a small scale, as the Government of India would keep the domestic market
protected. Fertilizer is a captive market for PPT, hence the growth of PPL and
IFFCO would determine the fertilizer volume.

According to the market survey, three terminals are estimated for fertilizer, an
optimistic estimate. Hence, TransCare proposes only one terminal addition
during the forecasted period.

However, the Port should work on bringing more players to the Port. The
proposed terminal will handle both export and import traffic. It is envisaged to be
a captive berth. So, the Port need only to incur dredging and construction
investment costs and the rest will be invested by the operator. The estimated
capital cost investment for the Port is US$ 11.4 million or Rs. 513 million and it is
envisaged to be completed by 2015-16.

The estimated annual operational costs would be in the range of Rs. 12.6 to 22.5
million. The major revenue comes in terms of lease and wharfage charges. The
project was found to be financially feasible with a positive NPV about US$ 4.34
or Rs. 195.6 million and an IRR of 19.9%. The estimated payback period is 7
years. For details, please refer to the Interim Report (Section 12).

192
Business Plan Development for Paradip Port Trust – Final Report

10.2.6 Iron ore and Coal Project Phase II

Iron Ore Berth Phase II

The Phase I iron ore berth is expected to reach its maximum capacity by 2020-
21. Hence, an additional mechanized iron ore berth is proposed. The estimated
additional volume would be 2.7 MT by 2023 and 6.6 MT by 2027.

The capacity of the Phase II iron ore module is designed to be 12 MT per annum.
The detailed technical description has been discussed in the capacity planning
section.

The estimated capital cost would be US$112 or Rs. 5040 million and the
operational cost per annum is estimated to be between US$20 or Rs. 900 million
to US$30 or Rs. 1350 million over during a 30-year period of project cycle.

The project was found to be financially infeasible over period of time with a
negative NPV value as the projected volume would be saturated after 2027. The
IRR is estimated to be only 4% and the payback period is 20 years.

However, the project is financially feasible if the project is implemented in two


phases. During the first phase, the 8 MT module should be developed followed
by the second module with another 6 MT. This scenario was simulated and the
project was found to be financially feasible with an IRR of 15.2% and an NPV
value of Rs. 42.2 million or Rs. 1899 million.

193
Business Plan Development for Paradip Port Trust – Final Report

Financial Flow Evaluation for Iron ore Berth Phase II


Year Capital O&M Traffic Revenue Cash
Flow
m.Rs m.Rs m.t m.Rs m.Rs
2018 1476 0 0 0 -1476
2022 1181 0 0 0 -1181
2023 295 0 0 0 -295
2024 0 596 2.7 824 228
2025 0 596 3.1 948 352
2026 0 602 3.5 1020 418
2027 0 608 3.9 1094 486
2028 0 614 4.4 1170 555
2029 0 621 4.8 1246 626
2030 0 627 5.3 1325 698
2031 0 639 5.7 1403 764
2032 0 652 6.2 1482 829
2033 767 665 6.6 1560 128
2034 511 678 6.6 1595 405
2035 0 692 6.6 1630 938
2036 0 706 6.6 1665 959
2037 0 720 6.6 1700 980
2038 0 734 6.6 1735 1001
2039 0 756 6.6 1770 1013
2040 0 779 6.6 1805 1026
2041 0 803 6.6 1840 1037
2042 0 827 6.6 1875 1048
2043 0 851 6.6 1910 1059
2044 0 877 6.6 1945 1068
2045 0 903 6.6 1980 1077
2046 0 930 6.6 2015 1085
2047 0 958 6.6 2050 1092
2048 0 987 6.6 2085 1098

Financial
Investment
NPV 42.55 m.Rs
IRR 15.2%
Table 10.16

194
Business Plan Development for Paradip Port Trust – Final Report

Coking Coal Project Phase II


The Phase I coking coal berth is expected to reach its maximum capacity by
2019-20. Hence, an additional coking coal mechanized berth is proposed. The
estimated additional volume would be 4.3 MT by 2021 and 8.7 MT by 2027.
Financial Flow Evaluation for Coking coal Berth - Phase II
Year Capital O&M Traffic Revenue Cash Flow
m.Rs m.Rs M.T m.Rs m.Rs
2018 1091 0 0 0 -1091
2019 1091 0 0 0 -1091
2020 545 0 0 0 -545
2021 0 968 4.3 1198 230
2022 0 978 5.0 1297 320
2023 0 987 5.7 1401 413
2024 0 997 6.4 1508 511
2025 0 1017 7.1 1620 602
2026 0 1038 7.9 1736 698
2027 0 1058 8.7 1857 798
2028 0 1079 8.7 1857 777
2029 0 1112 8.7 1857 745
2030 0 1145 8.7 1857 711
2031 0 1180 8.7 1857 677
2032 0 1215 8.7 1857 642
2033 0 1251 8.7 1857 605
2034 0 1289 8.7 1857 568
2035 0 1328 8.7 1857 529
2036 0 1367 8.7 1857 489
2037 0 1408 8.7 1857 448
2038 0 1451 8.7 1857 406
2039 0 1494 8.7 1857 362
2040 0 1539 8.7 1857 317
2041 0 1585 8.7 1857 271
2042 0 1633 8.7 1857 224
2043 0 1698 8.7 1857 158
2044 0 1766 8.7 1857 90
2045 0 1837 8.7 1857 20
2046 0 1910 8.7 1857 -54
2047 0 1987 8.7 1857 -130
2048 0 2066 8.7 1857 -209
Financial
Investment
NPV 8.62 m.Rs
IRR 15.1%
Table 10.17

195
Business Plan Development for Paradip Port Trust – Final Report

The capacity of Phase II Iron ore module is designed to be 8 MT pa. The


estimated capital cost would be US$ 60 or Rs. 2700 million. The operational cost
per annum is estimated to be between US$ 20 or Rs. 900 million to US$ 34 or
Rs. 1530 million over a 30 year period of project cycle.

The project was found to be financial feasible over the project period with a NPV
value of Rs. 8.62 million. The IRR is estimated to be 15.1%.

10.2.7 Western Dock System

This is a new dock system at the Western side of Port, adjacent to the existing
central dock. PPT is planning for two clean cargo berths and general cargo
berths, expecting the new proposed steel plants near by PPT hinterland to
generate finished steel traffic.

The following traffic volume is forecasted by the Port for the Western dock
system.
Additional Traffic Projections for Paradip Port Trust in MT
Year Steel Other General Cargo Total
2011-12 2.7 5.22 7.92
2015-16 3.8 7.32 11.12
2019-20 6.0 10.27 16.27
Table 10.18

The project is planned in two phases as follows:


• Phase 1 (2011-12) – Four berths
• Phase 2 (2015-16) – Two berths (additional)

The expected vessel size is 60,000 dwt (bulk carrier), accordingly the Port
considered 240m width for the dock basin with berths on both side. The dredged
depth would be 11.8 m in the initial stage and then it will be increased to 12.75 m
to accommodate 60,000 dwt vessels in the future.

196
Business Plan Development for Paradip Port Trust – Final Report

The Port is having 7 general cargo berths with total estimated capacity about
4.9 MT. Hence, the Port has decided to go for the Western side Port to
accommodate the future general cargo and steel traffic. All the proposed berths
would have the designed capacity of 2.5 MT per annum.

Investment Cost Calculation Estimation


Quantity m.US$ m.Rs
1 Dredging 455000 5.5 246
2 Quay Wall Construction 250 2.5 113
3 Site Preparation and other work LS 1.0 45
4 Equipments (2 mobile cranes) 2 1.6 72
5 Total 1 12.7 570
6 Contingency @ 5% 0.6 29
7 Total 2 24 1074
8 Six Terminals (Total 3) 143 6444
Table 10.19

Investment, Operations Cost and Financial Calculation

The capital cost is estimated to be US$ 143 or Rs. 6444 million. The operational
cost is estimated to be US$ 10~20 million or Rs.450~900 million for the entire
dock. The dredging costs are allocated to each berth construction. The berths
should have a maximum of two multi purpose mobile cranes.

Operational Cost Estimation per Year per terminal


m.US$ m.Rs
1 Maintenance and Operations (Dock,Chennel) 1.5 68
2 Civil Maintenance 0.1 5
3 Mechanical Maintenance (Equip) 0.3 14
4 Human Resource 0.4 17
5 Total I 2.53 114
Table 10.20

The additional volume traffic reference is from the current forecast. The optimistic
scenario volume is considered for the financial viability. The project was found to

197
Business Plan Development for Paradip Port Trust – Final Report

be financially not viable. The project would give a negative NPV value of
Rs. 4410 million with a 15% discount factor. The IRR of the project is estimated
at 2.2%. The Port is expecting to add about 15 MT additional capacity but the
cargo traffic is not aligned with the planned capacity.

Financial Flow Evaluation for Western Dock


Year Capital O&M Traffic Revenue Cash
Flow
m.Rs m.Rs m.t m.Rs m.Rs
2009 2148 0 0.0 0 -2148
2010 2148 0 0.0 0 -2148
2011 0 456 0.0 0 -456
2012 0 465 0.0 43 -422
2013 0 475 0.0 123 -351
2014 0 484 0.3 211 -273
2015 1074 494 0.7 306 -1262
2016 1074 504 1.2 410 -1168
2017 0 514 1.8 498 -15
2018 0 565 2.4 593 28
2019 0 571 2.9 695 124
2020 0 576 3.4 804 227
2021 0 582 4.0 921 338
2022 0 594 4.7 1011 417
2023 0 606 5.3 1105 500
2024 0 618 5.9 1205 587
2025 0 630 6.4 1310 680
2026 0 643 7.0 1420 778
2027 0 656 7.6 1537 881
2028 0 675 8.2 1537 862
2029 0 696 8.9 1537 841
2030 0 716 8.9 1537 820
2031 0 738 8.9 1537 799
2032 0 767 8.9 1537 769
2033 0 798 8.9 1537 739
2034 0 830 8.9 1537 707
2035 0 863 8.9 1537 674
2036 0 898 8.9 1537 639
2037 0 934 8.9 1537 603

Financial
Investment
NPV (4,410) m.Rs -198465
IRR 2.2%
Pay Back 23.0 Year
Table 10.21

198
Business Plan Development for Paradip Port Trust – Final Report

Conclusion

The total investment for Paradip Port Trust is estimated to be US$500-700 million
in next 20 years, excluding the western dock project.

Deepening channel, deep draught iron ore and coking coal projects are critical
for the Port’s future growth and competitiveness. These projects are financially
viable with an IRR of more than 15%.

Proposed and Evaluated Projects for PPT - 2007-27


Projects Proposed by Capacity Investment NPV IRR
in MT in m.US$ in m.Rs +/- %
1 Deepening Channel Project PPT/TC 159 7155 (-ve) 11.1%
Channel Deepening (Two Phase) PPT/TC 79 3555
Offshore Break water PPT/TC 80 3600
3 Iron Ore Berth Phase I PPT/TC 12 99 4455 + 16.4%
4 Coking Coal Berth Phase I PPT/TC 12 79 3555 + 16.9%
5 Western Dock PPT 15 143 6435 (-ve) 2.2%
7 Non-Coking Coal TC 12 97 4365 + 18.8%
8 Iron Ore Berth Phase II TC 8 66 2952 + 15.2%
9 Coking Coal Berth Phase II TC 8 61 2727 + 15.1%
10 Container Terminal Phase TC 0.5* 155 2565 + 15.6%
12 Fertilizer Terminal TC 3 11.4 513 + 19.8%
Total all 869.6 34722 +
Total (Excluding Western Dock) 726.6 28287
* in million TEU, PPT - Paradip Port Trust, TC - TransCare
Table 10.22 Total Investment Overview

The proposed Western Dock project is found to be financially not viable. Though
the proposed container terminal projects are financially viable with high returns, it
is very optimistic. It can not be realizable unless the Port is very aggressive on
container market.

199
Business Plan Development for Paradip Port Trust – Final Report

10.3 Selected Project and PPP Model Evaluation

The sourcing of funds is the key for any business plan projections with a long
term focus. Though the Port has different options to fund the projected
investments in the next 20 years, an ideal mix of funding is the best way to
maximize the asset investments while addressing the budgetary constraints.

The following projects are selected and considered for the PPP/BOT model,
based on financial viability which was evaluated in the previous chapter.

• Iron Ore Berth Phase I

• Coking Coal Berth Phase I

• Non – Coking Coal Berth

• Iron Ore Berth Phase II

• Coking Coal Berth Phase II

• Container Terminal Phase I

Only the above mentioned projects are recommended along with deepening
channels project for the Port’s future development.

10.3.1 Iron Ore Berth Phase I

The project envisages a total investment of US$ 99.5 million or Rs. 4478 million.
The investment from the private operator is estimated to be about US$ 75.22
million or Rs. 3385 million. The Port should bring the rest of investment in terms
of infrastructure creation (dredging, civil construction and tugs).

The operator will receive only the cargo related revenue such as mechanical
handling and berth hire charges. The annual operational cost for the operator is
estimated to be US$ 13~20 million during the 30 year operational period. The net

200
Business Plan Development for Paradip Port Trust – Final Report

cash flow is discounted at 15% and the project is expected to generate positive
cash flow with an IRR of 15.3%, while sharing the revenue with port by 25%.

Operations Cost Estimation Per Year for Iron Ore


Cost in Cost in
m.US$ m.Rs
1 Mechanical Maintenance and Operation 7 329
2 Depreciation (Civil) 0.0 0
3 Yard Maintenance and Others 1.0 45
4 Other Utility and Energy Cost 1.3 57
5 Energy 1.5 68
6 Manpower 1.7 75
7 Over all annual cost per year 12.5 598
Table 10.23

The project is financially viable and attractive for the private operator as well and
the investor can expect an IRR at 16~18% with price inflation and operational
efficiency.

Financial Flow Evaluation for Iron ore Berth


Year Investment O&M Traffic Revenue Cash
Flow
m.Rs m.Rs m.Rs m.Rs m.Rs
2007 535 0 0 0 -535
2008 1789 0 0 0 -1789
2009 713 0 0 0 -713
2010 267 573 8.6 940 99
2011 0 576 9.1 992 417
2012 0 579 10.1 1108 530
2013 0 581 10.3 1129 548
2014 0 584 11.1 1216 631
2015 0 587 11.8 1294 706
2016 0 590 12.2 1337 747
2017 0 593 12.4 1364 770
2018 0 605 13.9 1527 922
2019 0 617 13.6 1495 878
2020 0 629 13.9 1519 890
2021 0 642 12.0 1315 673
2022 0 655 12.0 1315 660
2023 0 668 12.0 1315 647
2024 0 681 12.0 1315 633
2025 0 695 12.0 1315 620

201
Business Plan Development for Paradip Port Trust – Final Report

2026 0 709 12.0 1315 606


2027 0 723 12.0 1315 592
2028 0 738 12.0 1315 577
2029 0 752 12.0 1315 562
2030 0 767 12.0 1315 547
2031 0 783 12.0 1315 532
2032 0 798 12.0 1315 516
2033 0 814 12.0 1315 500
2034 0 831 12.0 1315 484
2035 0 847 12.0 1315 467
2036 0 864 12.0 1315 450
2037 0 881 12.0 1315 433
Financial
Investment
NPV 127.15 m.Rs
IRR 15.7%
Table 10.24

10.3.2 Coking Coal Berth Phase I

The estimated total project investment is about US$ 79 million or Rs. 3555
million. The investment from the private operator is estimated to be about
US$ 55.22 million or Rs. 2485 million. The Port should bring the rest of
investment in terms of infrastructure creation (dredging, civil construction and
tugs).

Operations Cost Estimation Per Annum


m.US$ m.Rs
1 P&T and Maintenance (Channel and 0 0.0
Dock)
2 Depreciation (Civil) 0.1 4.5
3 Mechanical Maintenance 7.7 346.5
4 Other Utility and Energy Cost 1.0 45.0
5 Energy 1.5 67.5
6 Manpower 2.5 111.2
7 Over all annual cost per year 12.4 556.2

Table 10.25

202
Business Plan Development for Paradip Port Trust – Final Report

Financial Flow Evaluation for Coking Coal Berth II


Year Capital O&M Traffic Revenue Cash
Flow
m.Rs m.Rs m.Rs m.Rs m.Rs
2007 284 0 0 0 -284
2008 1418 0 0 0 -1418
2009 569 0 0 0 -569
2010 213 556 6.1 663 -107
2011 0 562 6.8 735 173
2012 0 567 8.0 874 307
2013 0 579 8.6 935 356
2014 0 590 9.4 1027 437
2015 0 602 11.1 1209 607
2016 0 614 11.9 1293 679
2017 0 626 12.8 1393 766
2018 0 639 13.4 1462 823
2019 0 652 14.5 1574 922
2020 0 665 15.2 1653 988
2021 0 678 12.0 1306 628
2022 0 692 12.0 1306 614
2023 0 705 12.0 1306 601
2024 0 727 12.0 1306 579
2025 0 748 12.0 1306 558
2026 0 771 12.0 1306 535
2027 0 794 12.0 1306 512
2028 0 818 12.0 1306 488
2029 0 842 12.0 1306 464
2030 0 868 12.0 1306 438
2031 0 894 12.0 1306 412
2032 0 920 12.0 1306 386
2033 0 948 12.0 1306 358
2034 0 977 12.0 1306 330
2035 0 1006 12.0 1306 300
2036 0 1036 12.0 1306 270
2037 0 1067 12.0 1306 239

Financial
Investment
NPV 140.1 m.Rs
IRR 15.9%
Pay Back 9.0 Year
Table 10.26

203
Business Plan Development for Paradip Port Trust – Final Report

The operator will receive only the cargo related revenue such as mechanical
handling and berth hire charges. The annual operational cost for the operator is
estimated to be at US$ 13~20 million during the 30 year operational period. The
net cash flow is discounted at 15%.

The project is expected to generate a positive cash flow and an IRR of 15.9%,
while sharing the revenue with the Port by 25%. The project is financially viable
and attractive for the private operator as well and the investor can expect IRR at
18~20% with price inflation and excellent operational efficiency.

10.3.3 Non Coking Coal Berth Phase I

The total estimated project investment is US$ 96.66 million or Rs. 4485 million.
Port should invest in infrastructure and the operator will invest on superstructure
and terminal. The estimated investment from the private operator is about
US$ 68 million or Rs. 3060 million.

The annual operational cost for the operator is US$ 9~18 million during the 30
year operational period. The net cash flow is discounted at 15%. The project is
expected to generate a positive cash flow with an IRR rate of 15.4%. The
proposed revenue share is 25% to the Port by the operator.

Operations Cost Estimation Per Year for Non Coking Coal


Cost in Cost in
m.US$ m.Rs
1 Maintenance Cost (Dock & P&T) 0 0
2 Depreciation (Civil) 0.0 0
3 Mechanical and Operations 6.8 307
4 Other Utility and Energy Cost 1.5 68
6 Manpower 1.2 56
7 Over all annual cost per year 9.6 431
Table 10.27

204
Business Plan Development for Paradip Port Trust – Final Report

The project is financially viable provided the operator implemented the project in
a phased manner. The operator can expect even more than 16~17% IRR with
price inflation and operational efficiency.

Financial Flow Evaluation for Non Coking Coal


Year Capital O&M Traffic Revenue Cash
Flow
m.Rs m.Rs m.Rs m.Rs m.Rs
2007 347 0 0.0 0 -347
2008 695 0 0.0 0 -695
2009 173 0 0.0 0 -173
2010 130 431 6.8 664 104
2011 0 435 7.9 769 334
2012 0 440 7.6 747 307
2013 0 444 8.0 781 337
2014 0 453 8.4 817 365
2015 0 462 7.6 743 281
2016 651 471 8.0 784 -338
2017 1044 481 8.4 821 -704
2018 0 490 8.6 863 372
2019 0 539 8.3 836 297
2020 0 545 8.0 797 253
2021 0 550 7.7 776 226
2022 0 556 9.0 904 348
2023 0 561 9.4 940 379
2024 0 572 9.8 978 405
2025 0 584 10.1 1017 433
2026 0 595 10.5 1057 462
2027 0 607 11.0 1100 492
2028 0 626 11.5 1153 528
2029 0 644 11.5 1153 509
2030 0 664 12.0 1203 540
2031 0 684 12.0 1203 520
2032 0 704 12.0 1203 499
2033 0 725 12.0 1203 478
2034 0 747 12.0 1203 456
2035 0 769 12.0 1203 434
2036 0 792 12.0 1203 411

Financial
Investment
NPV 5.88 m.Rs
IRR 15.1%
Table 10.28

205
Business Plan Development for Paradip Port Trust – Final Report

10.3.4 Iron Ore and Coking Coal Berths Phase II

The estimated total project cost for the second phase iron ore berth is about
US$ 59 million or Rs. 2655 million. The private operator is expected to bring
about US$ 45.9 million or Rs. 2065 million.

Financial Flow Evaluation for Iron ore Berth II


Year Capital O&M Traffic Revenue Cash
Flow
m.Rs m.Rs m.Rs m.Rs m.Rs
2018 885.6 0.0 0.0 0.0 -885.6
2022 943.2 0.0 0.0 0.0 -943.2
2023 237.6 0.0 0.0 0.0 -237.6
2024 0.0 348.1 2.7 609.0 260.9
2025 0.0 348.1 3.1 646.2 298.1
2026 0.0 358.5 3.5 677.2 318.7
2027 0.0 369.3 3.9 708.9 339.6
2028 0.0 380.4 4.4 741.1 360.8
2029 0.0 391.8 4.8 774.0 382.3
2030 0.0 403.5 5.3 807.6 404.1
2031 0.0 415.6 5.7 841.2 425.6
2032 0.0 428.1 6.2 874.7 446.7
2033 0.0 440.9 6.6 908.3 467.4
2034 0.0 454.2 6.6 943.3 489.2
2035 0.0 467.8 6.6 978.3 510.5
2036 0.0 481.8 6.6 1013.3 531.5
2037 0.0 496.3 6.6 1048.3 552.0
2038 0.0 511.2 6.6 1083.3 572.2
2039 0.0 531.6 6.6 1118.3 586.7
2040 0.0 552.9 6.6 1153.3 600.4
2041 0.0 575.0 6.6 1188.3 613.3
2042 0.0 598.0 6.6 1223.3 625.3
2043 0.0 621.9 6.6 1258.3 636.4
2044 0.0 646.8 6.6 1293.3 646.5
2045 0.0 672.7 6.6 1328.3 655.7
2046 0.0 699.6 6.6 1363.3 663.7
2047 0.0 727.6 6.6 1398.3 670.8
2048 0.0 756.7 6.6 1433.3 676.7

Financial
Investment
NPV 40.86 m.Rs
IRR 15.3%
Pay Back 20.0 Year
Table 10.29

206
Business Plan Development for Paradip Port Trust – Final Report

The cargo related revenue will go to the operator and the infrastructure related
revenue will go to the Port. The project is expected to generate a positive cash
flow, and an IRR 15.3%. Port will get a revenue share about 30% from the cargo
related activities. The project is found to be financially viable and would give
more than 16% IRR with price inflation and operational efficiency for the
operator.
Financial Flow Evaluation for Coking coal Berth - Phase II
Year Capital O&M Traffic Revenue Cash Flow
m.Rs m.Rs m.Rs m.Rs m.Rs
2018 491.4 0.0 0.0 0.0 -491.4
2019 655.2 0.0 0.0 0.0 -655.2
2020 327.6 0.0 0.0 0.0 -327.6
2021 0.0 482.8 4.3 522.0 39.3
2022 0.0 492.4 5.0 600.7 108.3
2023 0.0 502.3 5.7 682.6 180.4
2024 0.0 512.3 6.4 767.8 255.5
2025 0.0 522.6 7.1 856.3 333.8
2026 0.0 533.0 7.9 948.4 415.4
2027 0.0 543.7 8.7 1044.2 500.5
2028 0.0 554.5 8.7 1044.2 489.7
2029 0.0 565.6 8.7 1044.2 478.6
2030 0.0 576.9 8.7 1044.2 467.3
2031 0.0 594.3 8.7 1044.2 450.0
2032 0.0 612.1 8.7 1044.2 432.1
2033 0.0 630.4 8.7 1044.2 413.8
2034 0.0 649.4 8.7 1044.2 394.9
2035 0.0 668.8 8.7 1044.2 375.4
2036 0.0 688.9 8.7 1044.2 355.3
2037 0.0 709.6 8.7 1044.2 334.6
2038 0.0 730.9 8.7 1044.2 313.4
2039 0.0 752.8 8.7 1044.2 291.4
2040 0.0 775.4 8.7 1044.2 268.8
2041 0.0 806.4 8.7 1044.2 237.8
2042 0.0 838.6 8.7 1044.2 205.6
2043 0.0 872.2 8.7 1044.2 172.0
2044 0.0 907.1 8.7 1044.2 137.1
2045 0.0 943.3 8.7 1044.2 100.9
2046 0.0 981.1 8.7 1044.2 63.1
2047 0.0 1020.3 8.7 1044.2 23.9
2048 0.0 1061.1 8.7 1044.2 -16.9
NPV 73.51 m.Rs
IRR 15.8%
Table 10.30

207
Business Plan Development for Paradip Port Trust – Final Report

The total estimated investment cost for coking coal second phase project is
about US$ 66 million or Rs. 2970 million. The private operator is expected to
bring about US$ 53 million or Rs. 2385 million. The project is expected to
generate a positive cash flow at IRR 15.8%.

Port will get a revenue share about 25% from the cargo related activities. The
project is found to be financially viable and would give more than 16% IRR with
price inflation and operational efficiency for the operator.

10.3.5 Container Terminal Berth (I&II)

The total project cost is estimated to be US$ 155 million or Rs. 6975 million. The
project is proposed for a single private operator, who can build the terminal in two
phases based on cargo estimation. The estimated investment for a private
operator is about US$ 121 million or Rs. 5445 million in two phases.

Capital Investment by Private Operator


Units Quantity m.US$ m.Rs
1 Dredging m.cu.m 1785000 0 0
2 Quay Wall Construction M 700 0 0
3 No of Ship to Shore Cranes No 5 48 2138
4 No of Mobile Cranes No 14 35 1575
5 Yard Area and Other Site Preparation LS 15.8 709
6 Rail Network connections and Sidings KM 5 10 450
7 Site Preparation and Cleaning M2 210000 2 76
8 Total 110 4947
9 % 10 contingency 121 5442
Table 10.31

The rest of the investment would be brought by Port on infrastructure such as


dredging and quay wall construction. The estimated operational cost would be
US$ 8 to 10 million per year as the terminal is not expected to cross more than
0.45 million TEU traffic.

208
Business Plan Development for Paradip Port Trust – Final Report

Operating cost per annum Estimation


m.US$ m.Rs
1 Mechanical (P&T, Dock) 0.0 0
2 Maintenance Civil 0.53 24
3 Maintenance (Mech, Electrical, Equip) 5.36 241
4 Human Resource 0.47 21
5 Total 6.4 286
Table 10.32

Financial Flow Evaluation for Container


Year Capital O&M Traffic Revenue Cash
Flow
m.Rs m.Rs m.Rs m.Rs m.Rs
2011 1632 0 4 0 -1632
2012 1905 0 6 0 -1905
2013 0 286 7 429 143
2014 0 286 9 535 249
2015 0 292 13 777 485
2016 0 298 14 900 602
2017 0 304 20 1226 923
2018 0 310 20 1226 917
2019 0 316 20 1226 911
2020 0 322 20 1226 904
2021 0 329 20 1226 898
2022 0 335 20 1226 891
2023 1980 342 20 1226 -1095
2024 0 349 20 1226 878
2025 0 356 20 1226 871
2026 0 363 20 1226 864
2027 0 366 20 1226 860
2028 0 370 20 1226 856
2029 0 374 20 1226 853
2030 0 378 20 1226 849
2031 0 381 20 1226 845
2032 0 385 20 1226 841
2033 0 389 20 1226 837
2034 0 393 20 1226 834
2035 0 397 20 1226 830
2036 0 401 20 1226 826
2037 0 405 20 1226 822
2038 0 409 20 1226 818
2039 0 413 20 1226 814
Financial
Investment
NPV 16.17 m.Rs
IRR 15.1%
Table 10.34

209
Business Plan Development for Paradip Port Trust – Final Report

The terminal handling charges along with berth hire charge should go to the
operator. The infrastructure charges should go to the Port. The operator would
achieve an IRR of 15.1% at 20% revenue share with the Port. Since the operator
has start to the business from scratch, it involves high risk. Hence, the revenue
sharing of 20% is quite optimal and it is a win-win strategy for both parties.

Conclusion

The private operators are expected to bring about US$ 396 million or Rs. 14934
million over the next 20 years excluding fertilizer terminal. Since the fertilizer
terminal is a captive berth, it comes under PPP model as well.

BOT/PPP Evaluated Projects for PPT - 2007-27


Revenue Investment by
Projects share to Operator NPV IRR
PPP/BOT PPT in m.US$ in m.Rs +/- %
1 Iron Ore Berth Phase I BOT 25% 73 3304 + 15.7%
2 Coking Coal Berth Phase I BOT 25% 55 2485 + 15.9%
3 Non-Coking Coal BOT 25% 68 3040 + 15.1%
4 Iron Ore Berth Phase II BOT 30% 46 2066 + 15.3%
5 Coking Coal Berth Phase II BOT 25% 33 1474 + 15.8%
6 Container Terminal Phase I BOT 20% 122 2565 + 15.1%
Total 396 14934

Table 10.35 Overview of BOT Projects Evaluation

All the projects are found to be financially viable. The Port should invest in
infrastructure like dredging, quay wall construction and tugs. The private operator
should invest in cargo related investments like superstructure, terminals.
Accordingly, the infrastructure related revenue should go to the Port and the
cargo related revenue should go to the operator.

The expected revenue share would be in the range of 20 to 30% depending on


that particular project’s characteristics and the risk involved. Although the
container terminal project is found to be financially viable, it has high risk since it
is to be started from scratch with aggressive customer and market targets.

210
Business Plan Development for Paradip Port Trust – Final Report

10.4 Financial Projection and Analysis

10.4.1 Past Performance

• The operating revenue grew by 9% to Rs. 5135 million in 2005-06 over


the last financial year, with a CAGR of 10% for the last four years
• The net profit margin for the year 2004-05 reached to 28% with a
Rs. 1143 million surplus against 12% in 2004-05.
• The operating margin has been maintained at 44-48% over the last
four years and the operating expenditure increased by 9% to Rs. 2620
million.
• Cargo handling and storage is the major revenue center with more
than 66% of the operating revenue in 2005-06. The costs of dock and
berths maintenance have been increasing over the years.
• The Port has been paying back the Asian Development Bank (ADB)
loan, which had been received for the Thermal Coal project.
• The loans from ADB and GOI stand at Rs. 1113 million and Rs. 1000
million during 2005-06, respectively.
• PPT has deposited almost 99% of its investment in fixed deposit in the
banks and the closing cash balance is nearly Rs. 1344 million growing
more than 1.7 times in the last four years.
• There has not been a big investment by the Port over the last four
years as the net asset addition has come down by 7%.
• The current ratio is less than 0.5, excluding the Pension Fund. The
return on equity and assets stand at 9.3% and 4.8% in 2005-06.

211
Business Plan Development for Paradip Port Trust – Final Report

10.4.2 Financial Model Assumptions

The financial model reflects the Port’s vision and action plans for the next 20
years. The following assumptions are considered for the business plan:

Traffic Projections

The financial model is based on realistic scenario projections. Whenever a


project or terminal is handed over to the BOT operator, the corresponding traffic,
in terms of revenue and costs, for that project or terminal is removed from the
Port account and transferred to the operator account.

Investment Overview

The estimated total investment is about US$ 750 million or Rs. 33,748 million
over the next 20 years.

Investment Plan 2007-27

4000
3626
3500
3050
2877
3000
2452
Rs.in millions

2500 2209

2000 1829 1818


1535 1477
1500 1300 1347 1289
1155 1099 1107 1125 1125 1125
936
1000 819
450
500

0
07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27
20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

Year

212
Business Plan Development for Paradip Port Trust – Final Report

The investments are divided under two categories viz. project related
investments and other investments. The project related investments come from
all proposed projects. For BOT projects, only PPT’s share of investment is
transferred to the Port account.

For other investments, a particular portion of money is allocated for the Port as
investment in other than the proposed projects during next 20 years. For
example, the financial model allocated about US$ 10 million or Rs. 450 million
per year for next five years.

The Port should retain these funds for investments in especially dredging,
channel deepening, docks and support infrastructure like road and rail.

Source of Funds

The model assumes that the Port should get at least one third of total investment
per year from the external resources like bank borrowings, to keep the debt to
equity ration at an optimal level. The rest of the investment comes from Port’s
internal resource. Since, most of the investments come from private operator, the
investment burden on the Port will be reduced.

Depreciation

The model assumes an overall deprecation rate of 3~3.5% pa based on past


performance. In the past, Port infrastructure has been depreciated by 2~2.8% pa
and the plant and machineries have been depreciated by 3~4% pa. Since the
Port investments are mainly focused on infrastructure, the depreciation rate at
3% is reasonable.

213
Business Plan Development for Paradip Port Trust – Final Report

Capital Reserves

Three essential funding categories are mainly defined in the financial model,
which are the following:

A. Replacement and Modernization of Existing Assets


B. Developments and Repayment of Loan and Contingencies
C. Pension Fund (PF)

The funds are allocated each year from the surplus under above mentioned
categories. Pension fund goes as an investment in the balance sheet and the
rest goes under capital reserve.

The funds are created, except Pension Fund, under appropriations in the P&L
statement at 21% of surplus and moved to Categories A and B. The rest of the
surplus in the P&L statement goes into balance sheet under the revenue reserve
category.

Tax and Interest Paid

The corporate tax structure is considered for the Port and it is estimated to be at
32% (each year). Loans are paid back each year with a specified percentage of
total amounts to be paid.

For example, the model assumes 10% payment of total amount to be paid, till
2011. For the remaining financial years, 25% payment of total amount to be paid
is assumed. The assumed interest rate for the financial income is 9% pa.

214
Business Plan Development for Paradip Port Trust – Final Report

Current Liability

The major liability for the port is Pension Fund to their employees. The funds are
allocated each year for the Pension Fund as an investment in the balance sheet.
The model also assumes payment from the Pension Fund to the employees
every year at some specific amount.

Revenue Categories

The following revenue centers are considered for the financial model:

• Marine charges, which includes the port dues, berth hire and pilotage
and towage
• Wharfage services
• Stevedoring
• Storage
• Concession fee from the Operators
• Other Incomes
o Rail services
o Real estate

The competitive tariff structure is assumed for all cargos based on the market
inputs and past performance of the port. The charges are kept at a constant level
without many changes as the revision of tariff is not frequent. The defined
charges are derived while considering the future price fluctuation in the market.

Cost Centers

The following cost centers are considered in the model and the costs are
simulated based on past performance and future expected strategic changes like
BOT model implementation.

215
Business Plan Development for Paradip Port Trust – Final Report

• Running Cost
o Cargo handling and Storage
o Port and Dock facility
o Railway workings
• Other costs
o Salaries
o General Administration
o Real Estate maintenance

The following assumptions are made under each cost centers:

Cargo handling and storage cost


• The cost per tonne is US$ 0.654 based on past records
• The fluctuation of 4% is considered for next four years
• For the remaining financial years, it is projected to decrease
with a fluctuation of 2 to 4%
• The cost of cargo handling will come down as the key terminals
are transferred to the private operators
• The cost of operation will come down to US$ 0.45 per tonne at
the end of business plan
• Though cost is assumed based on per tonne basis for the future
as well, it is simulated with different fluctuation ranges to adopt
the future changes. The cost can not be reduced at the same
rate at which cargos are moved to private operator.

Costs related to Port and dock facilities


• The cost per tonne is US$ 0.384 based on past records
• A fluctuation of 3~7% is considered for all the financial years
• The Port’s major investments comes on core infrastructures
projects during next 20 years

216
Business Plan Development for Paradip Port Trust – Final Report

• Hence, the cost of operations is also expected to rise. The cost


per tonne will go up to US$ 1 per tonne at the end of business
plan

Railways
• The cost per tonne is US$ 0.15 based on past records
• A fluctuation of 2~3% is considered for all the financial years
• Since the port will still handle railway operations, the cost of
operations will also rise
• It is expected to touch about US$ 0.25 per tonne at the end of
business plan

Salaries and Management Cost


• The cost per tonne is US$ 0.35 based on past records
• A fluctuation of 1~3% is consider for all the financial years
• Though cargo traffic will be moved to the private operator, a
drastic reduction in manpower is not expected
• However, the cost will be reduced over the period, but not at the
same scale of cargo handling reduction by Port
• The estimated cost per tonne would be US$ 0.28 per tonne
• Since there is no separation between salaries and general
administration cost in the past, the administration cost is
assumed to be 12% of over all management and administration
cost
• The real estate costs will also rise in the range of 0.5% to 4%
and is expected to touch US$ 0.40 per tonne from US$ 0.25.

217
Business Plan Development for Paradip Port Trust – Final Report

10.4.2 Financial Model Projections

Revenue Projections

The total projected revenue will touch US$ 280.2 million or Rs. 12609 million by
2026-27 from US$ 114.1 million or Rs. 5134 million in 2005-6. The projected
growth is at a CAGR of 4.5% over the next 20 years.

Marine service Revenue

Marine service revenue is the major revenue center for the Port. It is projected to
increase at a CAGR of 6% over the period from US$ 26.5 million or Rs. 1192
million in 2005-06, to US$ 95.5 or Rs. 4297 million in 2026-27. The projected
bigger vessels and high infrastructure investments would drive marine service
revenue growth.

Stevedoring and Wharfage

Stevedoring and cargo handling revenues are expected to reduce and will be
quite stable at the end of business plan period.

• Since, all the key cargos like coal and iron ore are mechanized, there
would not be much demand for stevedoring operations in the coming
years except for general cargo.
• The wharfage revenue will be also come down as the cargo related
revenues will go under private operator.
• The projected wharfage revenue would be US$ 72.6 million or
Rs. 3267 million in 2026-27, from US$ 55.4 million in 2005-06.
• The SBM or Crude oil cargo will boost the revenue during 2008 to
2011 and this peak will come down to a stable condition after BOT
implementation.

218
Business Plan Development for Paradip Port Trust – Final Report

Concession Fee

The Port will earn cargo revenues from the private terminals in terms of revenue
sharing model which was discussed in the BOT evaluation chapter. The
expected revenue from this revenue center would be US$ 31.6 million or
Rs. 1422 million at the end of business plan period.

Operational Margin and Net Profit

The Port is expected to maintain its operational profit margin at 50% to 53% from
the current level of 40% to 45%. The operational expenses will come down as
discussed earlier due to privatization.

Profit M argin Analysis

60.0%

50.0%

40.0%
in %

30.0%

20.0%

10.0%

0.0%
2006
2007
2008
2009
2010
2011
2012

2013
2014
2015
2016
2017
2018
2019

2020
2021
2022
2023
2024
2025
2026
2027

Year
Operational Profit Margin Net Profit Margin

However, the expenses on infrastructure related facility will keep increasing. Only
the cargo related expenses will come down. Hence, the cost of operations will
grow at CAGR of 3% only. The Port can expect the net profit margin in the range
of 35 to 40% during the planning period.

219
Business Plan Development for Paradip Port Trust – Final Report

Financial Position

The total assets will increase at a CAGR of 8% from US$ 513 million or
Rs. 23,085 million in 2005-06 to US$ 2500 million or Rs. 112,500 million by
2006-27. The Port’s key strategic project implementation will increase the total
asset addition during the next 20 years. The net fixed assets will increase from
US$ 258.6 million or Rs. 11,637 million to US$ 480.4 million or Rs. 21,618 during
the same period.

The current ratio will improve from 0.37 to 20.9 during the same period. The net
working capital ratio will also improve from -0.27 to 0.52 over the period. The
positive cash flow from the business activities at less cargo related expense and
investment would improve the current ratio and net working capital drastically.

Working Capital and Current Ratio


25.00 0.60

20.00 0.40

15.00 0.20
in %

`
10.00 0.00

5.00 -0.20

0.00 -0.40
06
07
08
09
10
11
12
13
14

15
16
17
18

19
20
21

22
23
24

25
26
27
20
20
20

20
20
20

20
20
20

20
20
20
20

20
20
20
20
20
20
20
20
20

Current Ratio Year


Net working Capital Ratio

The return on asset could be maintained at 4 to 4.5% over the planned period.
However, the asset turn over will decrease to 0.12 from 0.22 during the planned
period. The reason is the vast asset addition during the period.

220
Business Plan Development for Paradip Port Trust – Final Report

The debt ratio will come down to 1.5% from 9.8% during the same period due to
repayment of all loans. The Port will have enough internal resources to fund or
invest on its own without depending on external resources.

The net cash flow will increase from US$29.2 or Rs. 1314 million to US$ 1217
million or Rs. 54765 million during next 20 years. Since it is not a manufacturing
industry, the net cash flow is on the higher side as it does not need to invest on
raw materials every year. Rather, the Port has one time infrastructure
investments.

However, the Port should look into any other business opportunity to invest the
accumulated cash flows to ensure efficient management of the cash flow.

221
Business Plan Development for Paradip Port Trust – Final Report

Projected P & L Statement for PPT 2006-16


2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
1. Revenue
Marine Services (Port Dues & P&T) 1185 1378 1584 1805 1835 1994 2124 2241 2406 2559 2712
Wharfage Services 3388 2491 2729 3028 1984 2145 2257 2277 2365 2474 2592
Stevedoring Services 0 675 815 848 912 489 519 542 586 629 503
Storage 0 203 219 238 255 274 291 302 318 333 347
Concession Fee 0 0 0 0 484 536 597 730 808 938 1009
Other Income
Rail handling 458 590 724 801 931 1070 1151 1233 1368 1485 1605
Others (Estate) 104 79 90 98 82 80 84 87 93 98 101
Total Revenue 5135 5417 6161 6819 6483 6588 7023 7412 7945 8516 8869
2. Cost of Operations
Running Cost
Cargo Handling& Storage Charges 974 1221 1511 1895 1269 1411 1442 1456 1489 1578 1666
Port& Dock facilities 519 638 710 795 491 535 582 623 671 721 777
Railway workings 236 279 335 408 287 336 361 383 408 450 494
Total 1728 2138 2555 3098 2047 2281 2385 2463 2568 2749 2938
Others (Estate)
Rentable lands& buildings 371 435 475 521 315 340 363 382 403 425 453
Salaries 520 529 577 634 384 410 425 433 444 454 465
Administration expenses 0 86 94 103 62 67 69 70 72 74 76
Total Cost of Operations 2620 3188 3701 4356 2808 3098 3242 3348 3488 3701 3932
3. Operating Surplus 2515 2229 2460 2463 3674 3490 3781 4064 4457 4814 4937
4.Financial and Other Incomes 391 758 816 875 942 1017 1088 1161 1240 1326 1417

4. EBITA 2906 2987 3276 3338 4617 4507 4869 5224 5697 6140 6354
5. EBTA 1913 2761 2964 2969 4187 4047 3740 4296 4713 5286 5604
6. EBT 1413 2356 2529 2534 3578 3457 3194 3671 4028 4519 4792
7. EAT 913 1602 1720 1723 2433 2351 2172 2496 2739 3073 3259
Net Profit Margin 18% 30% 28% 25% 38% 36% 31% 34% 34% 36% 37%
Table. 10.36

222
Business Plan Development for Paradip Port Trust – Final Report

Projected P & L Statement for PPT 2007-27


2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
1. Revenue
Port Dues 2852 3030 3146 3274 3412 3532 3681 3827 3979 4139 4295
Wharfage Services 2706 2790 2886 2967 3006 3022 3064 3119 3174 3217 3265
Stevedoring Services 518 543 553 564 597 612 627 642 659 677 695
Storage 361 380 388 397 418 430 443 456 470 483 498
Concession Fee 1134 1186 1222 1251 1231 1272 1301 1330 1358 1390 1424
Other Income
Rail handling 1673 1774 1828 1864 1975 2022 2072 2124 2179 2237 2298
Others (Estate) 105 110 113 116 120 122 124 127 130 132 135
Total Revenue 9349 9814 10136 10432 10758 11011 11311 11625 11948 12276 12611
2. Cost of Operations
Running Cost
Cargo Handling& Storage Charges 1750 1747 1771 1747 1821 1825 1800 1717 1690 1661 1632
Port& Dock facilities 835 906 982 1062 1258 1332 1452 1497 1627 1762 1908
Railway workings 540 562 598 627 694 738 773 783 819 854 891
Total 3125 3215 3351 3435 3772 3895 4026 3996 4135 4278 4432
Others (Estate)
Rentable lands& buildings 482 514 546 579 673 699 741 742 783 833 884
Salaries 476 487 498 502 556 549 554 527 524 520 515
Administration expenses 78 79 81 82 90 89 90 86 85 85 84
Total Cost of Operations 4161 4295 4476 4599 5091 5233 5410 5351 5529 5715 5915
3. Operating Surplus 5188 5519 5659 5834 5668 5778 5902 6274 6420 6561 6696
4.Financial and Other Incomes 1512 1611 1715 1824 1935 2048 2164 2285 2411 2541 2674

4. EBITA 6700 7130 7375 7658 7602 7826 8065 8559 8831 9101 9369
5. EBTA 5832 6297 6620 6957 6966 7236 7511 8030 8281 8560 8816
6. EBT 4987 5386 5663 5952 5959 6191 6425 6871 7086 7325 7544
7. EAT 3391 3662 3851 4047 4052 4210 4369 4672 4818 4981 5130
Net Profit Margin 36% 37% 38% 39% 38% 38% 39% 40% 40% 41% 41%
Table 10.37

223
Business Plan Development for Paradip Port Trust – Final Report

Projected Balance Sheet for PPT in Rs. Million

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Asset
1. Fixed Asset
Gross Asset 13995 14774 15583 19209 21418 23869 25698 26634 27453 30330 31484
Asset Addition 779 450 3626 2209 2452 1829 936 819 2877 1155 1099
Depreciation 3497 4011 4645 5351 6139 6987 7866 8772 9773 10812 11887
Net Asset 11637 11572 14565 16066 17730 18711 18768 18681 20557 20672 20696

2. Liquid Means 7789 8420 9064 9724 10472 11296 12088 12899 13779 14730 15744
3. Current Asset 3667 4803 4307 5146 6485 8228 10148 12465 13866 16556 19488

Total Asset 23092 24795 27936 30937 34687 38235 41004 44044 48201 51958 55928

Liability
Loan and other Debt 2255 2029 2805 3320 3870 4142 3387 2786 2952 2561 2250
Current Liability 9936 9711 9711 9756 9711 9711 9486 9261 9036 8721 8406

Total Liability 12190 11740 12516 13076 13581 13853 12873 12047 11988 11282 10656

Capital Reserve and Surplus


Capital Reserve 7161 8912 10857 12864 15586 18263 21445 24725 28285 32023 35829
Loan and Other Investment Reserve 81 81 81 81 81 81 81 81 81 81 81
Employment welfare Reserve 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0
Statutory Reserve
Fund for Replacement of Asset 2213 2416 2633 2851 3155 3450 3723 4036 4378 4761 5167
Fund for Development and Loan Payment 1442 1645 1848 2065 2282 2587 2882 3155 3467 3810 4193

Total Equity 10902 13055 15420 17861 21106 24382 28132 31997 36213 40677 45272

Total Liability Plus Capital 23093 24795 27937 30937 34687 38235 41005 44044 48201 51958 55928

Table 10.38

224
Business Plan Development for Paradip Port Trust – Final Report

Projected Balance Sheet for PPT in Rs. Million


2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Asset
1. Fixed Asset
Gross Asset 32583 35634 37452 38751 40098 41205 42330 43455 44580 46115 47404
Asset Addition 3050 1818 1300 1347 1107 1125 1125 1125 1535 1289 1477
Depreciation 13063 14299 15578 16901 18261 19658 21092 22563 24085 25649 27262
Net Asset 22570 23153 23173 23197 22945 22673 22364 22018 22030 21755 21619

2. Liquid Means 16798 17901 19060 20267 21499 22750 24040 25388 26790 28230 29709
3. Current Asset 21472 24370 27797 31421 35230 39211 43377 47860 52057 56595 61205

Total Asset 60840 65424 70031 74885 79673 84634 89781 95265 100877 106579 112533
Liability
Loan and other Debt 2603 2497 2263 2101 1908 1769 1664 1585 1649 1624 1661
Current Liability 8091 7641 7191 6741 6291 5841 5391 4941 4266 3591 2916

Total Liability 10694 10138 9454 8842 8199 7610 7055 6526 5915 5215 4577

Capital Reserve and Surplus


Capital Reserve 39875 44136 48493 52977 57402 61926 66563 71452 76499 81686 87024
Loan and Other Investment Reserve 81 81 81 81 81 81 81 81 81 81 81
Employment welfare Reserve 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Statutory Reserve
Fund for Replacement of Asset 5590 6046 6524 7027 7531 8054 8596 9176 9774 10391 11027
Fund for Development and Loan Payment 4599 5021 5477 5956 6459 6963 7485 8028 8608 9205 9823

Total Equity 50146 55285 60577 66043 71474 77025 82726 88739 94962 101365 107956

Total Liability Plus Capital 60840 65424 70031 74885 79673 84634 89781 95265 100877 106580 112533

Table 10.39

225
Business Plan Development for Paradip Port Trust – Final Report

Projected Cash Flow Statement - All in Rs. Million - 2006-16


Cash flow from Operations 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source Of Fund
Operational Profit 2515 2229 2460 2463 3674 3490 3781 4064 4457 4814 4937
Depreciation 454 514 634 707 788 848 879 906 1001 1039 1075
Financial Earnings 391 758 816 875 942 1017 1088 1161 1240 1326 1417

Loan /Borrowing 0 0 1088 883 981 732 374 327 1151 462 440
Other Capital Resources 0 0 0 0 0 0 0 0 0 0 0
Profit/Loss on sales of Asset 0 0 0 0 0 0 0 0 0 0 0

Total Source of Fund 3360 3501 4997 4928 6385 6086 6122 6458 7849 7641 7869
Application of Fund

Asset Addition 779 450 3626 2209 2452 1829 936 819 2877 1155 1099
Interest Paid 993 225 312 369 430 460 1129 929 984 854 750
Tax Paid 0 802 868 869 1259 1215 1117 1295 1429 1612 1714
Current Asset Change (Inventory and Receivable) 225 225 135 180 90 135 180 225 270 135 360
Change in Current Liability 108 450 225 180 270 225 450 450 450 540 540
Long Term Investment 648 405 434 435 609 589 546 625 685 767 812

Total Source of Application 2753 2558 5600 4242 5110 4453 4358 4342 6695 5062 5276

Total Cash Flow 607 943 -602 686 1275 1633 1765 2116 1154 2578 2593
Cash Balance (Opening) 707 1314 2257 1654 2340 3615 5248 7013 9129 10283 12862
Cash Balance (Closing) 1314 2257 1654 2340 3615 5248 7013 9129 10283 12862 15455

Table 10.40

226
Business Plan Development for Paradip Port Trust – Final Report

Projected Cash Flow Statement - All in Rs. Million - 2017-17


Cash flow from Operations 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Source Of Fund
Operational Profit 5188 5519 5659 5834 5668 5778 5902 6274 6420 6561 6696
Depreciation 1176 1236 1279 1323 1360 1397 1434 1471 1522 1564 1613
Financial Earnings 1512 1611 1715 1824 1935 2048 2164 2285 2411 2541 2674

Loan /Borrowing 1220 727 520 539 443 450 450 450 614 516 591
Other Capital Resources 0 0 0 0 0 0 0 0 0 0 0
Profit/Loss on sales of Asset 0 0 0 0 0 0 0 0 0 0 0

Total Source of Fund 9096 9093 9173 9520 9405 9673 9949 10480 10967 11181 11573
Application of Fund

Asset Addition 3050 1818 1300 1347 1107 1125 1125 1125 1535 1289 1477
Interest Paid 868 832 754 700 636 590 555 528 550 541 554
Tax Paid 1787 1936 2040 2148 2151 2238 2326 2492 2573 2662 2744
Current Asset Change (Inventory and Receivable) 405 225 180 270 315 360 135 135 135 270 180
Change in Current Liability 540 675 675 675 675 675 675 675 900 900 900
Long Term Investment 845 911 958 1006 1007 1046 1085 1159 1195 1235 1272

Total Source of Application 7495 6398 5907 6147 5891 6033 5900 6115 6887 6897 7126

Total Cash Flow 1601 2695 3267 3373 3514 3640 4049 4365 4080 4284 4447
Cash Balance (Opening) 15455 17056 19750 23017 26390 29904 33544 37593 41958 46038 50322
Cash Balance (Closing) 17056 19750 23017 26390 29904 33544 37593 41958 46038 50322 54769

Table 10.41

227
Business Plan Development for Paradip Port Trust – Final Report

Financial Ratio 2006-16


Financial Ratio 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Operational Profit Margin 49.0% 41.1% 39.9% 36.1% 56.7% 53.0% 53.8% 54.8% 56.1% 56.5% 55.7%
Net Profit Margin 17.8% 29.6% 27.9% 25.3% 37.5% 35.7% 30.9% 33.7% 34.5% 36.1% 36.7%

Return on Asset 4.8% 6.7% 6.5% 5.9% 7.4% 6.4% 5.5% 5.9% 5.9% 6.1% 6.0%
Return on Equity 9.3% 13.4% 12.1% 10.4% 12.5% 10.3% 8.3% 8.3% 8.0% 8.0% 7.6%

Asset Turn over 0.22 0.23 0.23 0.23 0.20 0.18 0.18 0.17 0.17 0.17 0.16

Current Ratio 0.37 0.49 0.44 0.53 0.67 0.85 1.07 1.35 1.53 1.90 2.32
Net working Capital Ratio -0.27 -0.20 -0.19 -0.15 -0.09 -0.04 0.02 0.07 0.10 0.15 0.20

Debt to Equity Ratio 21% 16% 18% 19% 18% 17% 12% 9% 8% 6% 5%
Debt Ratio 9.8% 8.2% 10.0% 10.7% 11.2% 10.8% 8.3% 6.3% 6.1% 4.9% 4.0%

Table 10.42

228
Business Plan Development for Paradip Port Trust – Final Report

Financial Ratio 2007-27


Financial Ratio 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Operational Profit Margin 55.5% 56.2% 55.8% 55.9% 52.7% 52.5% 52.2% 54.0% 53.7% 53.4% 53.1%
Net Profit Margin 36.3% 37.3% 38.0% 38.8% 37.7% 38.2% 38.6% 40.2% 40.3% 40.6% 40.7%

Return on Asset 5.8% 5.8% 5.7% 5.6% 5.2% 5.1% 5.0% 5.0% 4.9% 4.8% 4.7%
Return on Equity 7.1% 6.9% 6.6% 6.4% 5.9% 5.7% 5.5% 5.4% 5.2% 5.1% 4.9%

Asset Turn over 0.16 0.16 0.15 0.14 0.14 0.13 0.13 0.13 0.12 0.12 0.12

Current Ratio 2.65 3.19 3.87 4.66 5.60 6.71 8.05 9.69 12.20 15.76 20.99
Net working Capital Ratio 0.22 0.26 0.29 0.33 0.36 0.39 0.42 0.45 0.47 0.50 0.52

Debet to Equity Ratio 5.2% 4.5% 3.7% 3.2% 2.7% 2.3% 2.0% 1.8% 1.7% 1.6% 1.5%
Debt Ratio 4.3% 3.8% 3.2% 2.8% 2.4% 2.1% 1.9% 1.7% 1.6% 1.5% 1.5%
Table 10.43

229
Business Plan Development for Paradip Port Trust – Final Report

Conclusion

o The total projected revenue will touch US$ 280.2 million or Rs. 12609
million by 2026-27 from US$ 114.1 million or Rs. 5134 million in 2005-6.
Over the next 20 years, the projected growth is expected to display a
CAGR of 4.5%.
o The Port is expected to maintain its operational profit margin at 50% to
53% from the current level of 40% to 45%.
o The operational expenses will decrease, due to the increased introduction
of privatization. The Port can expect a net profit margin in the range of
35% to 40% during the planning period.
o The Port’s key strategic project implementation will increase the total
asset addition during the next 20 years.
o During the same period, the net fixed assets will increase from US$ 258.6
million or Rs. 11,637 million to US$ 480.4 million or Rs. 21,618 million.
The return on asset will be maintained at 4% to 4.5%.

230
Business Plan Development for Paradip Port Trust – Final Report

11. Detailed Action Plans

PPT has a good opportunity to become a hub port of the Indian East Coast
based on its core strengths that others do not have, i.e. deep draught, proximity
to mineral reserves and land locked regions.

• The focus should be Dry Bulk in the short Term, Liquid bulk in the
mid term and Containers in the long term.

• The following Action plans have been proposed for the Port to realize
its vision and mission in the next 7 to 20 years.

1. Develop Targeted Market and Customer Driven Approach

• The Target Markets should Be


o Be competitive in Layer I – Short Term
o Strengthen the competitive position in Layer II – Short and Mid
Terms
o Strategic initiatives to attract cargo from North, Center and North-
East cargo clusters – Mid and Long term

• Build a Long Term Partnership with Customers


o Develop a partnership with newly emerging steel plants in Layer I
and Layer II hinterlands.
o SAIL and Arcelor Mittal Steel are the key attractive customers.
o Develop strategy initiatives with these players. TATA will not be an
attractive customer as they will shift their volume to Dhamra Port.

231
Business Plan Development for Paradip Port Trust – Final Report

• Have a clearly defined and dynamic marketing team. It should be in


a place in the coming years. The key objectives of the team are:

o Retain and ensure the immediate hinterland customers by


addressing their needs and facilities.
o Develop a closer relationship with big customers and strive for
longer relationship tie-ups.
o Identify and initiate new business opportunities and tie ups. It could
be captive customers through industrial parks, logistics parks and
steel processing units.
o Brand the Port as a deep draught and integrated bulk terminal Port
• Develop a Customer Relationship Cell and key account positions
under the Marketing Teams

2. Develop Superior High Speed Dedicated Corridors

• Strengthening Layer I & II – with following projects (target)


o Daitari - Banspani rail link (2006-07)
o Haridaspur - Paradip rail link (2007-08)
o Electrification Cuttack - Paradip rail link (2007-08)
o Four laning of Chandikhol-Paradip road (NH-5A) (2007-08)
o Four laning of Cuttack-Paradip road (SH-12) (2007-08)
o Four laning of Keonjhar-Panikoili road (NH-215) (2008-09)
ƒ This is a key project initiative as Arcelor Mittal Plant is
planned for development in Keonjhar Districts
o Four laning of Chandikhol-Duburi (NH-200) (2008-09)

• Layer III – Integrated North, Central and Eastern Cluster


o Delhi and Paradip Corridor
• JNPT is quite congested and Kolkata has draught
restrictions, unable to accommodate bigger vessels. Hence,

232
Business Plan Development for Paradip Port Trust – Final Report

Paradip can be developed as a future alternative port for


JNPT or Kolkata for container distribution.

• Developing rail corridors between key industrial clusters,


especially as follows, would ensure a competitive advantage
for PPT.
ƒ PPT – Delhi
ƒ PPT – Nagpur
ƒ PPT – Kolkata

3. Improve Internal Logistics System and remove the existing bottlenecks

• Remove the current handling bottleneck at the iron ore handling plant
o Increase the productivity of cranes with skilled labour
o Ensure availability of engines and adequate handling facilities for
imported coal

4. Maximize the Core Strength of Deep Draught Potential

The Port should maximize its core strength to beat competition. The following
facilities should be implemented based on the realistic projection and high
mechanized capability:

Phase I 2007-2012
o Iron ore mechanized terminal Phase I (2009-10)
o Coking Coal mechanized terminal Phase I (2009-10)
o Non-Coking Coal mechanized terminal Phase I (2012-13)
o One container terminal (2012-13)
o One fertilizer terminal (2012-13)

233
Business Plan Development for Paradip Port Trust – Final Report

Phase II 20018-2027 (If traffic out performs than expectation)


o Iron ore mechanized terminal Phase II (2018-19)
o Coking coal mechanized terminal Phase II (2018-19)

5. Maximization of Land Utilization - Flexible Port Planning & Mechanization

The Port is currently occupying 70% of the land area for the existing dock and
harbour area, reaching this level over the past forty years.

Hence, the optimal utilization of land and water in the coming years is the key for
the Port development. Otherwise, the Port has to disturb the township area,
which the Port will be forced to do anyway in another 20 years to meet Port
expansion requirements.

The following top two scenarios have been selected and the detailed Port
Planning is developed for Southern Dock system scenario:
• The expansion of the southern Side with a long southern quay wall, from
south west to east
• Southern Dock system aligned with wind direction

The prevailing wind direction from South to North, which will impact the vessels
from the side, is the major concern from the Port to go ahead with this Port
layout. Port is convinced with a Southern Dock system aligned with the prevalent
wind direction of the Port.

Based on the realistic scenario, 7 berths need to be accommodated within the


available land and water areas, along with rail and road connectivity. The future
Port planning has been proposed in a phased manner, as follows:

234
Business Plan Development for Paradip Port Trust – Final Report

Phase I Development - BOT Complex

The first phase expansion plan starts with Eastern side of the Port. This dock
system is called to be a BOT Complex. The following berth allocation is planned
in the BOT complex:

• Two Iron Ore berths on the western side of complex


• One Non coking coal and Coking coal berth on the Eastern side of
complex
• The BOT complex can be developed in the following sequence:
ƒ Two berths at the beginning of Phase I
ƒ Two more berths at the end of Phase I

Phase II Development - Southern dock Complex

Port should start its next phase expansion plan with Southern dock system. The
following proposal has been made for the south dock complex:
• 17 meter draught
• One container terminal module with a 700 meter quay length and back
reach about 500 meter with a rail terminal, on the West side of the
complex.
• Two berths are reserved for the future expansion on the Eastern side of
the complex, mainly for deep draught vessels.

• The back reach for the south west side of the dock is not a problem with
minimal disturbance to the town ship area. A dedicated rail link from the
Railway station to the planned container terminal has been proposed with
a loop concept.

At the end of planning cycle, the 83% of total Harbour area will be used. The
unutilized areas will be in the western part of the Port. However, these areas can

235
Business Plan Development for Paradip Port Trust – Final Report

not be used for the Port development due to draught restrictions and other
logistics planning constraints.

Hence, TransCare strongly recommends the Port to have an aggressive land


acquisition strategy for the Long term Port development. Port should find a
suitable area, where, the existing township area can be moved. The estimated
land area for the township relocation is about 500 to 700 acre. It is very critical for
the Port, otherwise, Port development will be a big question mark after 2027.

6. Mechanize the Existing General Cargo Berths with Harbour Cranes and
use it for clean cargo

• After Phase I and Phase II, the manual coal and non coking coal storage
areas will be free. The area is estimated and is marked in the land use
plan.
• The existing MPB (multi purpose berth) and Central quay should be used
as clean cargo. The existing western side of the Port should be used for a
back reach area for clean cargo and general cargo.
• If there is need any need for an additional clean cargo berth in the future,
the existing quay, which is in the west side of current central dock, can be
extended further from the PPL berth by another 300m.
• The vacant land along the rail siding should be used in such a way that it
should not affect the railway lines.

7. Develop a Logistics Parks, specific to the Steel Industry, along the Steel
Industry cluster to Port corridor

• Many leading steel Industry players are proposed to set up steel plants in
the Port hinterland. It is estimated to generate more than 70 MT of cargo
during next 10 to 15 years. Though, these plants are focused on domestic
front, there is good potential for export market as well.

236
Business Plan Development for Paradip Port Trust – Final Report

• If these proposals are realized in the coming years, there will be a huge
demand for last mile logistics services such as consolidation of load,
packaging, labeling, temporary storage and distribution.

• Hence, developing a consolidation center or a Logistics Park with a focus


on steel industry, near the Port premises would create a highly competitive
advantage and help to tap the clean cargo volume as well.

• The Logistics Park should be developed with an integrated intermodal


terminal with excellent access to the Port and industry Zones.

• The following key activities could be defined under such a Logistics Park

a. Warehousing Zones
b. Consolidation or Cross docking centers
c. 3PL and 4PL service Zones
d. International Banks and Customs
e. Packaging & Barcoding and Containerization centers
f. Final value addition centers (not the core manufacturing)
g. Intermodal terminals
h. Sourcing platforms

• Based on TransCare experience, the estimated land area for such a


logistics park development would be in the range of 2500 to 5000 acres
based on the level of activities to be performed and the industry cluster
segment size.

• Since the Port does not have enough land to develop such a Park, it has
to locate a suitable site anywhere along the corridor between the industry

237
Business Plan Development for Paradip Port Trust – Final Report

cluster and the Port. However, the Port should take up a detailed study to
tap this potential before its competitors.

8. Develop a Corporate Planning Culture within established Organization


Structure

The objective of Corporate Planning is to develop the organization’s long term


vision, goals, objectives and strategies. The corporate planning team should be
in a place to carry out the following objectives:

• Develop a long term planning with detailed financial and market risk
implications (competition and market changes).
o Forecasting the long term business scenarios
o Develop a detailed competitive road map
o Develop Financial and Investment / capital implications
o Risk and Mitigation scenarios
o Translate the corporate vision and mission to the bottom line of the
company or organization.
• Derive short and mid term plans from the long term plan.
• Develop strategies to achieve short and mind term plans, consequently,
long term plans. The strategies are many fold:
o Market / Business Strategy
o Organizational Strategy (How the organization should be structured
to achieve these plans)
o Port Planning Strategy
o Land use plan Strategy
o Operational / Supply Chain Strategy
o Financial Strategy
o HR Strategy
• Continuous measurement of the developed strategies and identifying the
gaps for continuous improvements.

238
Business Plan Development for Paradip Port Trust – Final Report

Hence, the continuous measurement mechanism and flexible corporate


strategies to the changing competition scenarios and market dynamics will
enable the Port to be on right path to achieve the organization’s vision and
goals.

9. Develop Corporate Planning Cell (CPC) or Cross Functional Team


Set-up

A Corporate Planning Cell (CPC) has been proposed. At present, the Port plan is
based on the Government’s five year plan. The projection for the five years and
the corresponding capacity addition and financial implications are communicated
to the Government. However, it is not based on a detailed business plan and
market research. Based on the targeted demand or projection, each department
gives its plans and estimations for the future. Finally, the consolidation plan is
communicated.

CPC team should be developed as a separate entity to take care of the corporate
planning and monitoring. The objectives of the team as follows:

• Develop and define the organization’s goals and objectives both for long
and mid terms.
• Prepare a detailed or updated Business Plan for at least every five years
based on rigorous market research and competition scenarios analysis.
• Co-ordinate with all the departments and finalize the plan and
communicate to the Chairman.
• Develop the detailed objectives/plans for each department. This should be
drawn by co-coordinating with their Head of the Department (HOD).
• Continuous monitoring and updating the plans as and when there is delay
in implementation or changes in the market places.

239
Business Plan Development for Paradip Port Trust – Final Report

• Develop a well defined Performance Measurement System which can


evaluate the organization performance at a balanced level, not only based
on financials and throughputs. The system should measure the value
created to the stakeholders, country and customers, while addressing the
internal improvements.
• Update the Chairman on the planned activities and take his valuable
inputs.
The corporate planning team structure should be as follows:

• The team should be either headed by the Deputy Chairman or next senior
most person of the organization along with the following team members:

o Marketing (1) – Part time


o Operations (1) – Part time
o Financial (1) – Part time
o Marine (1) – Part time
o Infrastructure Team (1) – Part time
o Business Analyst (2) – Full Time

ƒ These two analysts should be analytically strong and should


support the team for all kind of analysis.
ƒ Analysts should be selected from the existing employees, no
new recruit.

10. Develop a Marketing and New Business Initiative (MBI) Team Set-Up

It is proposed for the Port to have a clearly defined and dynamic marketing team
to be in a place in the coming years. The key objectives of the team are:

• Retain and ensure the immediate hinterland customers by addressing


their needs and facilities.

240
Business Plan Development for Paradip Port Trust – Final Report

• Develop closer relationship with big customers and look for longer
relationship tie-ups.
• Identify and Initiate new business opportunities and tie ups. It could be
captive customers through industrial parks, logistics parks and steel
processing units.
• Updating the market dynamics to Chairman, operations Head, CPC and
other concern departments.
The proposed team structure for the marketing and new business initiative
team is as follows:
• Core Business Team ( 5 to 8 persons)
o Vertical Focus
ƒ Coal, Iron ore, Coking coal and Fertilizer
• New business Initiative Team ( 2 to 4 persons)
o Core focus is on identifying new business opportunities, for
example, container business initiatives
• Market Intelligence Team (2 to 4)
o It should provide all the necessary market information and
analysis to the core teams.
• Customer Cell (6 to 10)
o It should understand and process the customer complaints and
their feedback and communicate to the concern department.

11. Develop Personal Department and Learning Center Cell (PLC)

It is proposed that a well established and defined HR department should be in


place along with a Learning Center Cell. The objectives of the department are as
follows and all the HR activities should come under this department:

o Human Resource Planning, It should be based on the needs of


each process and function of the organization

241
Business Plan Development for Paradip Port Trust – Final Report

o Develop standard recruitment criteria and responsibility chart for


newly identified or vacant positions
o Right sizing the people strength if the there any department has a
higher number of people than required.
o Develop performance based appraisal systems and promotion
schemes.
o Facilitate the employees’ welfare and their related issues.
o Manage the employees’ salaries, working hours and provident fund
details by coordinating with financial department and ministry.

12. Develop a Process Based and IT enabled Organization structure


As discussed, the organization should be process based and system driven
rather than functionally driven. Horizontal integration of the organization through
an IT system would give visibility in the process and reduce the paper work,
consequently, increase the process time and efficiency. The following processes
are defined for PPT and the responsible departments are mentioned under the
defined process.

Demand and Infrastructure requirement Planning


Demand Planning
The marketing and new business opportunity team should be responsible for the
demand planning.

• A solid market research and expert opinion report on the market should be
prepared along with potential new business opportunities.
• This report should be sent to the corporate planning cell (CPC) team.
Once it has been agreed within the corporate team, it should be
communicated to the Operations Management team for the infrastructure
requirement planning.
• The demand planning should also include the vessel size developments
and expected trends in shipping and Port industries in the world.
The process owners

242
Business Plan Development for Paradip Port Trust – Final Report

• Marketing and New business Initiative Team (MBI)


• Corporate Planning Cell (CPC)

243
Business Plan Development for Paradip Port Trust – Final Report

TAMP
Corporate Planning and Demand Planning
Ministry
Finance Project and Tender
Resource Planning Management
System
HR
Customers
Vessel Traffic Management Navigational Systems
Admin Banks

Customs
Asset Management

Fig.11.2 Process Integrated System for PPT EDI


Planning

Supporting

Operations

244
Business Plan Development for Paradip Port Trust – Final Report

2007- 2010 2010- 2015

Deepening berth
(Iron ore and C/NC
Coal)

IT Container /
Implication Clean Cargo
Hinterland
IOHP Missing Links
Handling and Roads
Criticality to
the Handling
Business Productivity

Investment Size
Fig 11.3 Action Plans Summary

245
Business Plan Development for Paradip Port Trust – Final Report

Annexure I – List of Abbreviation

• BALCO – Bharat Aluminium Company Limited


• BPCL – Bharat Petroleum Corporation Limited
• BOT – Build, Operate and Transfer
• BOOT – Build, Own, Operate and Transfer
• CAGR – Compounded Annual Growth Rate
• CIL – Coal India Limited
• CONCOR – Container Corporation of India Limited
• CWPRS – Central Water and Power Research Station
• DWT – Dead Weight Tonnage
• DPR – Detailed Proposal Report
• EXIM – Export / Import
• FB – Fertilizer Berth
• FDI – Foreign Direct Investment
• FRM – Fertilizer Raw Material
• FY – Financial Year
• GCB – General Cargo Berth
• HINDALCO – Hindustan Aluminium Company Limited
• HPCL – Hindustan Petroleum Corporation Limited
• IFFCO – Indian Farmers and Fertilizer Cooperative Ltd
• IOCL – Indian Oil Company Limited
• IOHP – Iron Ore Handling Plant
• KPCL – Karnataka Power Corporation Limited
• JNPT – Jawaharlal Nehru Port Trust
• m TEU – Millions of Twenty Feet Equivalent
• MCHP – Mechanical Coal Handling Plant
• MCL – Mahanadi Coal Limited
• MT – Million Tonnes
• MW – Mega Watts

246
Business Plan Development for Paradip Port Trust – Final Report

• NALCO – National Aluminium Company Limited


• NBA – Network Based Analysis
• NH – National Highways
• NINL – Neelachal Ispat Nigam Limited
• NMDC – National Mineral Development Corporation
• NMDP – National Maritime Development Project
• NTPC – National Thermal Power Corporation
• PBT – Pre Berthing Time
• PPL – Paradip Phosphates Ltd
• PPT – Paradip Port Trust
• RBI – Reserve Bank of India
• RINL – Rashtriya Ispat Nigam Limited
• RMIL – Rungta Mines India Limited
• RVNL – Rail Vikas Niganm Limited
• SAIL – Steel Authority of India Limited
• SEZ – Special Economic Zone
• SH – State Highways
• SPM – Single Point Mooring
• STAT – Ship Turn Around Time
• STC – State Trading Corporation Limited
• TAMP – Tariff Authority for Major Ports
• TEU – Twenty Feet Equivalent
• TN – Tamil Nadu
• TNEB – Tamil Nadu Electricity Board
• TRT – Turn Round Time
• VIZAG – Visakhapattinam
• VSP – Vizag Steel Plant

247
Business Plan Development for Paradip Port Trust – Final Report

Annexure II - Long Term Extension of Port - 2050

To show the potential future development earliest after 2050, a possible layout
for long term expansion has been developed also. Principally, it is feasible to
extend the port area step by step towards the township if the handling volume will
further increase in which case the township would have to be re-located.

It is possible to install either an additional dock parallel to the coast as


demonstrated in fig 16. The second main solution would be an extension parallel
to the planned South quay wall. The following layouts are just to visualize that an
even further development is feasible for the recommended layout as well as for
the alternatives.

Here the long quay wall would allow for flexibility in accommodating various
vessel sizes, and maneuverability is easy. The long term extension layout no. 3 –
parallel coast would enable the port to include a vast area dedicated to a SEZ, a
logistics park, an intermodal terminal should the container market exceed all
expectations, or any other value adding or revenue generating activity.

This long term extension layout no. 3 – orthogonal coast, will “spare” part of the
township, however, it will create maneuverability issues as well as the previously
mentioned nautical challenges with the wind making berthing and unberthing
activities difficult.

Long term extension layout no. 5 – parallel coast, will alleviate the nautical
challenges and also, similar to long term extension layout no. 3 – parallel coast,
create an area made available to utilize for a SEZ, logistics park, intermodal
terminal or other value adding services.

248
Business Plan Development for Paradip Port Trust – Final Report

Phase V

Fig. 1: Long term Extension Layout No. 3 - South Quay parallel port border - parallel coast

249
Business Plan Development for Paradip Port Trust – Final Report

Phase V

Fig. 2: Long term Extension Layout No. 3 - South Quay parallel port border - orthogonal coast

250
Business Plan Development for Paradip Port Trust – Final Report

Phase V

Fig. 2: Long term Extension Layout No. 3 - South Quay parallel port border - orthogonal coast

251
Business Plan Development for Paradip Port Trust – Final Report

Fig. 3: Long term Extension Layout No. 5 - Mirroring Dock aligned SW - parallel coast

252
Business Plan Development for Paradip Port Trust – Final Report

SEZ/LOGISTICS
PARK

Fig. 4: Long term Extension Layout No. 5 - Mirroring Dock aligned SW - parallel coast

253
Business Plan Development for Paradip Port Trust – Final Report

Fig. 4: Long term extension Layout No. 6 - “Copying” existing Dock system

254
Business Plan Development for Paradip Port Trust – Final Report

Annexure III – Final Report Comments and TC’s response

Review of Final Business Plan Comments and


TransCare Response

Port – Paradip Port Trust

February 2007

255
Business Plan Development for Paradip Port Trust – Final Report

Review of Final Business Plan by RPA (Rotterdam Port Authority)

Port: Paradip
Consultant: Transcare
Submission date: February 2007

The team from the Port of Rotterdam, as Advisor to the Indian Port Association, has
monitored the activities of the Consultant in the preparation of the Business Plan for the
Port of Paradip. In line with the agreement with IPA, the regular activities of the Advisor
consisted of reviewing the various reports submitted by the Consultant:
• Inception Report,
• Interim Report,
• Draft Final Business Plan,
• Final Business Plan.

Other regular activities were the participation in the discussions in India during meetings
and presentations of the results of findings by Consultants.

In addition the Advisor provided - where needed – recommendations and suggestions


with respect to various issues of the project, such as long term masterplanning, port land
use, calculation reviews on cargo handling operations, logical sequencing in the set up of
the business plan, reviews of calculation financial feasibility, relation between the
projects and the financial accounts, consistency of financial data etc.

The Consultant has performed his scope of work as outlined in the briefing to the
Consultants by IPA and Advisor at the start of the project, to a satisfactory level.
Although the Advisor could not be involved in the day-to-day co-operation between the
Consultant and the Port Trust, the Advisor is of the opinion that counterpart personnel of
the Port Trust has been sufficiently involved. Furthermore the Advisor considers that the
Financial Model as prepared by the Consultant can serve as a management tool to adjust
the Business Plan in the future where needed.

With the submission of the Draft Final Business Plan, the Consultant already provided a
reasonable basis for the development of the port in the coming 7 years. With the
subsequent submission of the Final Business Plan by the Consultant and this review
made by the Advisor, Advisor considers that both parties have now completed their
work related to the Port of Paradip.

The Final Business Plan forms a sufficient basis for implementation of the related
projects in the coming 7 years. The Advisor recommends that the Port Trust will take
the following suggestions, as final remarks made by the Advisor, into account before
commencement of the implementation of the Final Business Plan.

256
Business Plan Development for Paradip Port Trust – Final Report

MAJOR REMARKS ON DRAFT FINAL REPORT REMARKS ON FINAL TransCare Reply to RPA
REPORT Remarks

Format of report is more or less in line with format provided by the Advisor. The As in Draft Final Report, which is good in As per the Port recommendation, the Report
extensive part on major results of Interim and Inception phase (up to page 138) general. Suggestion for improvement of has been submitted with full blown analysis.
includes many relevant aspects from the earlier project phases, however could readability has not been followed up. TC did not condense the report, rather,
have been more condensed and balanced followed the Port recommendation.

In the Interim phase Consultants have prepared transparent background Summary has not been prepared as suggested. RPA asked to prepare summarize the Chapter
considerations, analysis and estimates on competitive mapping (chapter 6) and Sequence of subjects has been improved and 3 and 6, but, TC followed the Port comments
forecast (chapter 3). Much of these considerations and the related Interim Report is more logical (the full blown analysis report)
text have been copied to the Draft Final Report. Advisor would have preferred a
summary of the findings and references to the Interim Report where applicable.
Furthermore the above subjects need to be described in the correct sequence; first
competitive mapping and then forecast as in the Interim Report.

Port maps have been included in the summary of the existing situation and Suggestion has not been followed up. Map on The existing Port map has been included in
considered master plan(s), as well as overview of throughput per commodity. existing and planned situation (page 127 of the hard copy for the Port but it was not
This is appreciated although the map of the existing port as a base of all DFR) has been left out rather than improved. attached to the RPA copy in the email. (file
development projects should be more pronounced and clear, at least at the level too big for email) Since, it is only hard copy,
of the revised Interim Report. we couldn’t send in the email.

The existing port layout and facilities are


explained under chapter 2.2 with Port map
already.

The summary provides a lot of figures and growth percentages. Tables and in Suggestion has not been followed up. Since TC provided the Report with full flown
particular graphs would be more illustrative. Figures indicating same elements in analysis, the figures can not be avoided.
tables and text need to be consistent and should be expressed with significant
number of digits only. Ensure that abbreviations are explained and that in all

257
Business Plan Development for Paradip Port Trust – Final Report

tables it is clear in which unit the figures in the tables are expressed.

Interesting observations on institutional aspects have been included in section 8. As in Draft Final report, which is good. No comments

The translation from forecast to required port facilities has been made in tables in Suggestion has not been followed up. POL It was misinterpreted. POL crude is only
the Interim Report. No references have been made in the Draft Final Report to imports are growing strongly however no growing, not POL products. For POL crude,
these tables, with the result that in chapter 7 required port facilities come out of facilities have been projected/evaluated. TWO SBMs are planned already by IOCL.
the blue However, two berths have been proposed if
the POL products grow more than expected.
Please Ref Page No. (147)

The assumptions and summaries of the economic and financial analysis have Introduction to financial analysis have been No comments
been described in the Interim Report. No references have been made in the Draft added.
Final Report to these important background data with the result that in chapter 10
the findings of the analysis come out of the blue.

Advisor is missing a clear relation between bottlenecks encountered, resulting Part of this remark is related to the remarks No comments
projects proposed, action plan, investments, cost benefit analysis, proposed public above on Section 7 up to the action Plan. For
related and client related projects. the stages beyond the action plan (financial
items) improvements have been made.

258
Business Plan Development for Paradip Port Trust – Final Report

Financial Remarks Financial Remarks TransCare Reply to RPA


Final Report Remarks
Draft Final Report Paradip

In the report two scenarios have been worked out: Remark has been followed up in FR 1 No comments
scenario where deepening of channel and
• Internal resources and borrowing
berths constructions is funded with internal
• PPP resources and investment in plants by BOT
These scenarios are worked out for PPT as a whole.

The financial coverage of the individual projects follow the PPT scenarios.

The character of the individual projects is different (entrance channel or


terminal), so an individual approach seems appropriate.

A BOT scenario is not evaluated, where it seems appropriate for terminals. If


these options are not appropriate due to circumstances it should be motivated in
the report.

Projected financial accounts (annexes IV V and VI) Remark has been followed up. Extra lines No comments
have been added in P&L to provide missing
The statement of accounts is not in line with the information outline, especially
information
the format for the projected profit and loss account deviates.

The details for: Information has been added (table 2.22 and No comments
2.23)
Fixed assets, Categories of revenues, Categories of costs, Long term
liabilities, Equity and reserves as required in the information outline are
missing.

The details for the fixed assets should include an overview of the investments in Information has been added (table 2.24 and No comments
fixed assets per year and per project. The investments in the fincial accounts

259
Business Plan Development for Paradip Port Trust – Final Report

Financial Remarks Financial Remarks TransCare Reply to RPA


Final Report Remarks
Draft Final Report Paradip
(additions to fixed assets) seem to be far out of line with the investments in the 2.25)
projects (see revised interim report).

For the period 2007-2016 the investments in the projects are Rs 24 billion, for the Not applicable anymore as the two scenarios No comments
internal and borrowing scenario it is Rs 33 billion and for the PPP scenario it is have been deleted and a new one has been
Rs 16 billion. added.

The differences between the 2 scenarios with regard to revenues, costs and
investments are selfexplanatory; consultants are requested to explain.

The assumptions for the 2 scenarios are missing; the text in the report only In FR there is only 1 scenario with extensive Ref the first financial comment, only one
handles the results description of assumptions scenario was adopted in the Final report, for
which the detailed description has been given.
Since two scenarios are no more valid, TC
gave description for only one scenario.

The relation between the selected projects and the financial accounts is missing Still missing, especially the PPT investments It was clearly explained or discussed during
for BOT projects is unclear the draft final presentation that PPT would
bring the investment in the form of
infrastructure and BOT operator will invest in
superstructures.

Page 156 and 157: Explain how deepening of channel (basic infrastructure A Cash flow calculation has been added, TransCare already explained how the
project) can be a stand alone feasible project. however the assumptions regarding revenue revenues are calculated to the Port. It was
are still dubious. explained and discussed during the final draft
The financial viability for all projects is evaluated on the basis of an IRR of 15%
presentation in Mumbai.
for all projects. For essential infrastructural projects a much lower IRR is The IRR is 11,1% where the NPV at a
acceptable and normal. The IRR for this project is above the 15% standard. The discount rate of 15% is positive. This cannot

260
Business Plan Development for Paradip Port Trust – Final Report

Financial Remarks Financial Remarks TransCare Reply to RPA


Final Report Remarks
Draft Final Report Paradip
assumptions in the interim report regarding the revenue for this project are be correct. (page 181) Regarding, IRR & NPV, the correction has
dubious. It is recognised that this project is essential for all other projects and been made.
should be seen in connection with the other projects, regardless the doubts on the
IRR calculation.

Major Remarks related to Financial model in the Draft Major Remarks related to TransCare Reply to RPA
Final Report Paradip Financial model in the Final comments
Report

The financial model has not been received. The Financial Model has been received No comments
and is adequate for the calculations of the
projected financial accounts. The figures
in the Financial model are in line with
the figures in the financial accounts in
the latest version of the Final Report.
This version has been received on 26th
February.

261
Business Plan Development for Paradip Port Trust – Final Report

Indian Port Association Comments (IPA) and TransCare


Response

IPA Comments TransCare Response

There are variations in the projection of The issue has been considered during our
Iron ore traffic by different consultants. demand planning for the Iron ore market.
Govt. policy, demand for iron ore for steel
production in domestic market etc may
impact export of Iron – ore. These aspects
may be duly considered, if not considered
so far.

The consultants have given world standards Incorporated: Ref page No: 49.
in port productivity parameters. The source
of this information, if possible, may be
given. The comparison is to be made with
similarly placed ports also so that
conclusions are meaningful. This aspect
may be covered.

Industrial park, steel city, unless port has Incorporated: Ref page No: 236-237.
sufficient land, can be developed outside
port area so that precious land area
available with the port can be used for Port
development in future.

The impact of deep draft port coming up in It was considered under realistic scenario.
west Bengal should be factored in one of
the scenarios.

The suggested layout does not keep The layout has been modified and new
provision for future growth of container layout has been proposed.
terminals in the port.
Ref page no: 145 – 146 along with the
Proposed Port Master Plan.

A proper land use plan indicating zoning Incorporated: Ref page No: 151
with details of land area available with the
port, leased, utilized for Port infrastructure
vacant land etc may be given.

262
Business Plan Development for Paradip Port Trust – Final Report

The consultant has shown almost the entire It has been reexamined. However, the
capital expenditure during 2007-2008. This investment was distributed according to the
may be reexamined with reference to the needs.
need and period to create the assets to meet
the demand as per traffic projections. Since, Port has planned to complete the
entire deepening channel project in a year,
the investment during 2007-08 is quite high
than other years. It was also agreed under
the contract with the selected dredging
company by the Port.

The consultants may examine whether Examined and proposed locations for CFS
CFSs are to be developed within the port area under container terminal planning.
area or outside the Port area.
Please ref page No: 146.

Consultant has assumed the WACC as Incorporated ref page no: 175.
15%. The basis for this may be explained
duly indicating the cost of debt and equity
and debt equity ratio.

The consultant shall adhere to the agreed The final report has been submitted on 14th
date of submission of Final report and the of February to the Port and 16th of February
port after examination of the report should to IPA.
transmit it to the advisor and IPA by 16-
02.07

263
Business Plan Development for Paradip Port Trust – Final Report

Paradip Port Trust Comments (IPA) and TransCare Response

PPT Comments TransCare Response

Suggestion for the future land requirement Incorporated. Ref page no: 150-151
plan and land acquisition for the Port
development.

Suggestion or comment on CISF area Incorporated. Ref page no: 143


relocation. The land need to be identified to
relocate the existing residential area in the
CISF zone.

Reexamine the IRR calculation for Incorporated. Ref page no: 180-181
Deepening channel project.

Comments on “the service to the proposed The service lines (Road and Rail) have
southern dock system”. been proposed for the different phases.

Please ref page no: 146


Please ref also the proposed Master Plan.

Comments on “the newly proposed concept Incorporated. Ref page no: 146-147
for the Oil project/flow”.

264