A K Bhattacharya: Why Kolkata Port has a future

NEW DELHI DIARY

Until about two years ago, the Kolkata Port Trust was struggling to improve its operations. Its annual cargo handling had stagnated at around 30 million tonnes. Growth prospects appeared bleak.

India's oldest and the only riverine port also faced the problem of shallow draughts ranging between seven and eight metres at both its dock systems at Haldia and Kidderpore.

This was one of the shallowest draughts in any major port in India and it meant that neither of the dock systems could attract ships of higher tonnage capacity. This raised the cost of operations.

And add to this the relatively high non-port charges like those of stevedores and a none-too-cooperative cargo handling workforce, a turnaround in the performance of the Kolkata port looked a remote possibility.

But the new management at the Kolkata Port Trust had other ideas. Last year, it handled over 41 million tonnes of cargo""a rise of 35 per cent in two years, while all major ports grew by only 20 per cent in this period. Only two major ports handled more cargo than Kolkata""the Kandla port at 41.5 million tonnes and the Vizag port at 47.7 million tonnes.

In 2003-04, the Kolkata Port Trust clocked a growth of 15 per cent, compared to the 10 per cent growth recorded by all the major ports. There was no looking back for the Kolkata Port even in respect of container cargo, which grew by 19 per cent to about 4 million tonnes last year, behind only the Jawaharlal Nehru Port Trust and the Chennai Port Trust.

How was this achieved? The Kolkata Port Trust management had a simple strategy that was implemented with little fanfare. It abandoned the age-old fixed tariff system and introduced a flexible policy in which the tariffs were linked to market rates. So, tariffs dropped when the port management considered that necessary to woo cargo away from other ports.

True, this meant a drop in revenue as the port's operating income fell by 24 per cent to Rs 868 crore in 2002-03. But the volume of cargo handled also went up by 18 per cent in 2002-03.

And like in all such tariff-cut measures, operating income began rising from subsequent years. In the case of the Kolkata port, it went up by 10 per cent in 2003-04, riding on a 15 per cent growth in the volume of cargo handled.

That trend is likely to continue in the current year as well. For the Kolkata port management, tariff flexibility was not the only strategy.

It worked towards attracting new types of cargo that would also give a boost to the economy of its hinterland. For instance, it found out that West Bengal had an annual surplus of 25 lakh tonnes of potatoes and that Singapore was a market ready to import more of this vegetable, which would otherwise either go waste or be sold in the domestic market at a throwaway price.

A few thousand container loads of potatoes had been exported. But it was felt that such exports needed special containers, which increased the packaging costs. If only the port could reduce its cargo handling charges, Bengal's potato growers could reap huge export benefits.

The Kolkata port authorities did not take long to reduce by half the wharfage charges for handling potato containers. Now potato exports have become viable. The gainers are the Kolkata port and of course the farm economy of Bengal.

Another such move is to create special linkages with ports in Chittagong and Narayanganj in Bangladesh. A proposal is now under consideration to use barge-based terminals at Narayanganj to ferry about 2,500 containers of products/food items that are exported from Kolkata to Dhaka every month.

So far these were being shipped to Chittagong. But the market targeted by the Indian exporters is Dhaka""a distance of 300 kilometres from Chittagong.

The implementation of the proposal to set up a barge-based terminal at Narayanganj can reduce the transportation cost for Indian exporters, because the distance between Dhaka and Narayanganj is only 21 kilometres.

To sweeten the deal and improve its cargo handling, the Kolkata port already decided to slash its wharfage charge from Rs 6,000 to Rs 1,000 per container (TEU). In a similar move to get more business from north India, the wharfage charges for cargo from north India have been slashed by more than a third to Rs 500 per container.

These are all aggressive measures to attract more cargo for the Kolkata port system and are certain to improve its performance. But the Kolkata Port's growth in the future will be sustained not just by these measures.

There is now a proposal to build a new dock facilities at Sagar, about 150 kilometres from Kolkata. Estimated at a cost of Rs 2,300 crore and to be funded by the Japan International Cooperation Agency, the new dock system will actually be a big help for both the Kolkata and Haldia dock systems.

Studies have shown that for every tonne of cargo handled by the new Sagar dock system, there would be an incremental traffic flow of about 2 tonnes to each of the dock systems at Kolkata and Haldia. The proposal is now awaiting the clearance of the Union finance ministry.

The advantages are many: Sagar can attract bigger ships because its draught is about 12 metres, almost as deep as the draught available at the Jawaharlal Nehru Port Terminal, though not as deep as the Chennai port's 15 metres. But it will be far deeper than the draught available at Kolkata and Haldia.

That is the medium-term strategy for the Kolkata Port. What about its long-term strategy? Well, a plan has already been formulated to set up a floating port at Sandheads, 232 kilometres away from Kolkata. And the draught there is 50 metres!

akb@business-standard.com