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Construction : Feature | February 2016 | Source : CW-India

Oceans of Opportunity

Construction, engineering and technology opportunities abound, perhaps more than there are takers for, unless some policies change.

Opportunities in port development are expected to abound, with the government pledging to double tonnage capacity at major state-owned ports from the current 800 million tonne to 1.6 billion tonne in the next five years.

¨Overall, the capacity addition is expected to facilitate incremental cargo growth as trade expands, alleviate congestions where present and provide alternate gateways for cargo and end-customers (shippers),¨ according to Sameer Bhatnagar, Director, KPMG in India. ¨By encouraging competition in certain regions, sectors and commodities, it could also ensure better pricing and service-levels for end-users.¨

Opportunities to watch out for
Significant construction and engineering opportunities are expected to materialise from the planned capacity addition. ¨Expect berth, marine infrastructure, terminal and backup area development contracts. As ports are designed for deeper drafts or terminals are constructed further into the sea, dredging contracts and potentially more complex assignments will also materialise,¨ reckons Bhatnagar. Demand for technology - especially mechanised equipment and IT or automation facilitating greater productivity and discharge rates - will grow. ¨Ports require both fixed or berth side equipment and flexible or mobile equipment in backup yards for cargo handling. IT and automation could play a major role in debottlenecking current capacity and assets,¨ as per Bhatnagar.

¨We expect a greater requirement for cutter section dredgers for port or harbour maintenance and vibratory hammers for port or jetty construction,¨ says Uthpala Suvarna, Director, Sales & Service, Suretech Infrastructure Pvt Ltd.

Capacity additions will also call for new skills and competencies. ¨Where the land in ports is limited, terminal and berth designs will be based on reclaimed lands and these will require joint dredging and on-shore civil engineering competencies. Also, demand will rise for skilled and qualified operators who can run new-generation equipment and modern terminals, and system engineers for managing automation and IT,¨ adds Bhatnagar.

Additionally, the aggressive infrastructure development programme - Sagarmala - to upgrade port connectivity infrastructure, especially intermodal rail access to the hinterland, is expected to generate opportunities for the supply chain or 3PL and logistics companies to create new logistics solutions for their clients and redefine business or operation models to serve end-users better.

But few takers for greenfield projects
Earlier this year, Adani Ports and Special Economic Zone Ltd was the lone bidder for the construction and operation of the proposed Vizhinjam container trans-shipment port on PPP model. Why? What challenges are keeping other developers away? ¨Greenfield non-major port projects are inherently more risky than brownfield terminal development in major ports,¨ says Manish R Sharma, Partner and Logistics Leader, PwC India. ¨Soft economic conditions witnessed during the past few years, coupled with stretched balance sheets of most developers, resulted in a muted response to greenfield port projects.¨

Also, greenfield port projects have lumpy upfront capex. Unless captive cargo (power plant, operating SEZ or an industrial unit) exists that can service such capex from day one, most greenfield projects will witness a gradual ramp-up of commercial traffic as the port ecosystem - hinterland connectivity services, liner connectivity, presence of CFAs, CHAs, etc - takes time to develop. On the other hand, the port developer is committed to retire substantial project debt within the first 15 years of operations, making it challenging to attract developers in a subdued economic environment where traffic outlook is uncertain, reasons Sharma. However, the hinterland aspect is less relevant in case of Vizhinjam, as it is planned as a trans-shipment port. But it will face stiff competition from incumbents like Colombo port that are undertaking rapid expansion and modernisation.

Trends in demand for maritime equipment
One of the key trends in the Indian ports sector is medium-sized ports aspiring and moving towards handling Panamax and bigger vessels. Such opportunities are expected to grow, given projections showing that India will be among the top three fastest growing economies worldwide, opines Sunil Kalra, Divisional Manager Maritime Cranes, Liebherr India. ¨Infrastructure will play a vital role in this scenario, and the port sector is expected to focus on global trade.¨

Like major ports and some others, medium-sized ports are investing in advanced, high-capacity material and cargo-handling equipment like harbour mobile cranes, container handling cranes, floating cranes, etc, leading Kalra to say:

¨ The year 2015 has been a good one with high demand for our cargo-handling solutions in India. Our outlook for 2016 is promising, with the government focusing on the development of coastal shipping and inland waterways transport as well as reviving the shipbuilding industry.¨ India needs to induct high-capacity mechanised equipment, observes A Janardhan Rao, Managing Director, Indian Ports Association.

Ports using Liebherr´s LHM/LPS 600 mobile or portal harbour crane, which is capable of lifting 208 tonne, include Krishnapatnam, Visakhapatnam, Dahej, Hazira and Goa. Now, Liebherr has launched the biggest mobile harbour crane in the world, the LHM 800, with a maximum capacity of 308 tonne and a maximum radius of 64 m. Offering 100 tonne more capacity than the next model in the range, it is able to achieve over 2,300 tonne of bulk handling per hour with a four rope grab operation, which has a lifting capacity of 90 tonne till an outreach of 36 m. With hoist speeds of 120 m a minute, it can handle 38 containers an hour in standard configuration and is able to handle container vessels up to 22 rows across. When equipped with Liebherr´s Pactronic hybrid power booster, it can handle up to 45 containers an hour. When fitted with Liebherr´s Sycratronic software, two LHM 800 cranes can also carry out tandem lifts of up to 616 tonne.

With the development of inland waterways and ports calling larger vessels, another visible trend is the increasing need for multipurpose cranes suitable for handling different kinds of cargo - containers, break bulk, heavy lifts, bulk, etc - and different sizes of vessels, from small barges to large cape size bulk carrier vessels, adds Kalra.

How might 100 per cent FDI impact the sector?
Allowing 100 per cent FDI under the automatic route for port development projects is likely to increase the number of JVs between Indian companies and international players for the development of port infrastructure, according to Rao.

This bodes well for the sector.

¨With the new FDI policy, I expect major ports to develop and upgrade infrastructure like berths or terminals, induct latest technologies especially cargo-handling equipment or infrastructure, and improve upon their management policy to benchmark their performance against global standards,¨ says Rao.

Suvarna expects the use of imported equipment to grow. So, she sees more scope for Damen Cutter Suction Dredgers and ICE vibratory hammers, products for which Suretech is an exclusive authorised dealer in India. Damen Cutter Suction Dredgers are dismountable, customisable, highly productive, and offer reliable operations, well powered by computer-controlled diesel engines with low fuel consumption and low emissions. ¨We´ve supplied 205 ICE vibratory hammers from the Dieseko Group to Indian customers,¨ she adds.¨ Dieseko Group´s ICE vibratory hammers are known for their robust design, ability to work in high ambient temperatures and versatility - they can be used for pile driving and extraction, sheet piling, tube piling, etc.¨ Evidently, equipment providers can look forward to sailing into more ports.

Call to Make in India

Fill gaps in port development expertise and technology

Dr PV Chandra Mohan, President-Technical, Navayuga Engineering Company, identifies some gaps in port development expertise and technology in India:

  • Equipment: Construction of berths in a harbour requires deep-seated piling and putting up diaphragm walls. Although we do quite a bit of these two constructions in India, the equipment required for doing so is not manufactured in the country. This has been the situation for many decades. We still depend on foreign countries for such equipment.
  • Academic expertise: Harbour engineering is a narrow field and few opportunities exist for those practising this branch of technology. There are hardly any takers for courses run by academic institutions. So, their participation has also diminished. Almost all the consultants in this field are foreign companies.
  • Physical hydraulic model studies expertise: CWPRS, Pune, is a prime organisation of world standard. Now, the trend everywhere is to construct and operate ports in the private sector. This policy is also being encouraged by the Indian Government. However, as CWPRS does not entertain private companies for conducting model studies of private enterprises, private companies are compelled to depend on laboratories outside India for their physical modelling requirements.

Make Greenfield port projects more attractive

Manish R Sharma, Partner and Logistics Leader, PwC India, suggests ways to make greenfield port projects more attractive to developers:

  • Prepare projects better: Project preparation entails an extensive technical and financial feasibility study to infuse confidence on project development costs and the market. In the past, in absence of reliable information on these aspects, in most instances bidders have found it challenging to arrive at a correct estimate of the bid parameter. Little reliable information and keeping bidding cycles short, at four to six months, also precludes bidders from undertaking their own technical assessment. Sometimes, access to the site for undertaking these investigations is not enabled. Bidders who still go ahead and subsequently discover high project costs either withdraw or surrender the project to authority, putting at risk their bid security, a large amount.
  • Develop a less risky structure: Concession arrangements for greenfield port projects should have a balanced set of obligations for developers and the Government Port Authority. Increasing project viability by committing government cargo or by the government taking responsibility for constructing some core assets, such as breakwater and dredged basins, external rail and road, etc, is desirable. A case in point is the roads sector, where NHAI has introduced an attractive hybrid model to develop highways, wherein the government bears 50 per cent of the capex. Of course, the biggest challenge in providing such capex support could be the availability of funds with state port authorities and maritime boards.
  • Focus on building few large ports: Aggressive plans to develop multiple ports in states could scare away investors as it could make incumbent projects less viable by promising excessive port capacity. It is also more capital-efficient to expand newly developed non-major ports, which typically have large unused land parcels, into 150-200 million tonne capacity ports, and invest in their connectivity to the hinterland. Currently, Mundra is India´s only port that could contend for a position in the top 20 ports in the world. Dhamra, Gangavaram and Krishnapatnam in the east are good candidates for being developed as mega ports. There is also a strong case for a new large multi-cargo port on the Maharashtra-Gujarat coastline.

Fast facts
12 major ports steaming ahead

  • Cargo handled in FY2014-15: 581.3 million tonne, an increase of 4.65% over FY13-14.
  • Yearly container volumes: 8 million 20-ft-equivalent units, up 6.7% from 7.46 million TEUs in FY 2013-14.
  • Source:

Quick Bytes

  • Government to double tonnage capacity at major state-owned ports.
  • Demand for technology especially mechanised equipment and IT or automation to grow.
  • Opportunities for supply chain or 3PL and logistics companies and for skilled and qualified operators.
  • Key trend is medium-sized ports aspiring to handle bigger vessels; increasing need for multipurpose cranes suitable for handling different kinds of cargo.
  • Outlook for 2016 is promising.

Opportunities for equipment vendors

  • JNPT container terminal: 15 rubber-tire gantry cranes (immediate).
  • Kolkata Port Trust: Setting up floating crane facilities to increase lightening or topping up of cargo (immediate).
  • JSW Jaigarh: Eight quay cranes and 24 RTGs.
  • Kattupalli Port: Proposed capacity expansion already has environment clearance.

Source: Miscellaneous news sources

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