'Low coal import,drop in iron ore exports to hit cargo growth'

Lower coal imports in view of delays in execution of greenfield power projects and a likely drop in iron ore export volumes may have an adverse impact on cargo growth of ports in the medium term, says an Icra report.
K Ravichandran, senior vice-president and co-head, Corporate Ratings, Icra, said, "The near to medium term outlook remains subdued on account of uncertainty associated with particular cargo categories like imported coal (due to ramp up in domestic coal production and persisting delays in execution of Greenfield power projects) and containers (due to the relatively weak global environment affecting exim trade)."
He further said that despite the lifting of mining ban in key states, iron ore export volumes are also expected to be modest over the near term at least.

"The export contract of NMDC, elimination of export duty on low grade iron ore and restarting of mining operations in Goa should support export volumes to some extent. However, the prevalent overall export volumes would continue to be weighed down by high export duty of 30 per cent on higher grade of iron ore as well as low iron ore prices," he said.
Meanwhile, the total cargo handled at Indian ports registered a modest 2 per cent increase to 516 million tonnes (MT) in the first half of the 2015-16 over the corresponding period of the previous fiscal.
"The growth was pegged down by a de-growth in volumes by 1 per cent at non-major ports, which had registered a 13 per cent y-o-y growth in volumes to 471 MT in FY 2014-15. The weak performance was on account of 18 per cent drop in iron ore volumes, 11 per cent drop in other cargo and an 8 per cent drop in coal volumes," Icra said in a report.

Major ports on the other hand, registered a relatively better performance in H1 FY 2016, supported by growth of 12 per cent, 3 per cent and 11 per cent in coal, petroleum and oil and lubricant (POL) and other cargo volumes, respectively, even as iron ore volumes dropped by 48 per cent y-o-y, it said.

During the last fiscal, major ports reported a 4.2 per cent growth in the overall throughput over the corresponding period in the previous year. The growth was supported by an increase in all cargoes except iron ore.
Ravichandran said, "Iron ore volumes have been affected as mining restrictions prevailed during large part of the year in major states like Karnataka, Goa and Odisha, other policy measures such as high export duty (which has been reduced to nil in the Union Budget for 2016-17 on low grade iron ore) and prevailing slump in international demand and prices."

Over the medium to long term, the outlook for cargo
growth continues to be strong, driven by domestic requirements of coal for power (including coastal movements) and other sectors; crude oil, for meeting domestic petroleum requirements; and containers, given the cost and logistical advantages associated with containerisation, Ravichandran said.
Icra said the announcements made by the government in the Union Budget for 2016-17 are positive for the port sector.
The government has announced setting up of new greenfield ports and inland waterways with "a planned outlay of Rs 31.84 billion under the Ministry of Shipping, which includes gross budgetary support of Rs 10 billion" for development of Indian shipping, ports, inland waterways and ship building sector.

While the total funding requirement for implementation of the various planned initiatives is expected to be significantly higher, the allocation of funds in the Budget for the development of these projects should facilitate their progress and is a positive for the incumbents in the port sector and trade overall, it said.