Decline in Coal imports may impact Major Ports' volumes in long term : ICRA

Posted by Daily Shipping Times on 06-10-2017        Tweet

NEW DELHI: A continuous decline in coal volume growth at Major Ports could be a cause of concern over the long-term in absence of diversification into other cargoes, rating agency ICRA said recently.

"Overall volume growth at Major Ports has stood at a mere three percent during the April-August period in FY18 as coal volumes recorded a 12 per cent decline in the period under review, even as iron ore volumes picked up 29 per cent," said K Ravichandran, Senior Vice-President and Group Head, Corporate Ratings at ICRA. 

"The continuing decline in coal volumes at a more rapid rate, as compared to the previous periods, is a concern over the long term for the port sector. A prolonged decline in coal import requirement in the absence of diversification into other cargo categories will impact the returns for such port sector players," he said.

Cargo throughput at Indian Ports registered a 5.7 per cent growth to 1,133 million tonnes (MT) during FY17, as against 1,072 MT recorded in the preceding financial year. The growth was supported by a 133 per cent growth in iron ore cargo volumes at 82 MT, against 35 MT, as mining resumed in Goa, Karnataka and Orissa and also due to a 6 per cent growth in POL & Liquids (petroleum, oil and lubricants) and another 9 per cent growth in the other cargo segments. However, coal volumes slipped 9 per cent on account of several demand-side issues, along with higher domestic production that continued to reduce the domestic demand-supply deficit.

In terms of cargo growth outlook, port sector players will continue to experience healthy growth in cargo in the near term, albeit somewhat lower compared to the recent financial years, as revival in iron ore exports, pick up in POL volumes as well as impetus for Coastal Shipping will be partially offset by lower coal imports and a slowdown in container volumes due to weak export-import trade. Moreover, cash accruals of players will be supported by steadily rising handling rates, barring the projects where the tariff setting process is mired in litigations. Moreover, various initiatives under the Sagarmala programme are expected to aid the long-term growth trajectory of the industry.

While the Government's keen interest in the development of the port sector is positive, resolution of pending tariff-related issues and a swifter redressal mechanism for the connectivity-related issues will be the key for the sector's growth over the long term.