Why a Chinese company's monopoly may pose a security risk at Indian ports

Chinese crane maker ZPMC was the subject of a recent US probe that raised concerns about possible surveillance

Several Indian ports like Vizhinjam port and Jawaharlal Nehru port could become vulnerable due to the monopoly held in India by Chinese crane maker Shanghai Zhenhua Heavy Industries Company (ZPMC). It was the subject of a recent US Congressional probe that raised concerns about possible surveillance and even sabotage. 

Shanghai-based ZPMC is the world’s biggest maker of ship-to-shore (STS) cranes and a part of the state-controlled China Communications Construction Company. The company has responded to the accusations by insisting that it poses “no cyber security risk”. STS cranes are used to move containers on and off vessels and are necessary for handling very large container ships. 

 

But concerns about Chinese hackers are serious enough that in February, US President Joe Biden signed an executive order aimed at strengthening cyber security at US ports. An investment of over $20 billion over the next five years to improve US port infrastructure, including reviving domestic production of cranes, was also announced. 

Dominant position   

ZPMC has a monopoly in critical port equipment in India. 

“Not just in India, but globally, ZPMC Shanghai is a major supplier of maritime cargo handling equipment, including cranes. Industry estimates put the installed base of ZPMC at 75-80 per cent globally, and the same holds true for India,” says Davinder Sandhu, co-founder & chairperson of Primus Partners, a business and management consulting firm.

More than 250 cranes sourced from ZPMC were installed across various ports in India, including the Jawaharlal Nehru port, by the end of 2020, according to a recent Rajya Sabha question addressed to the Ministry of Ports, Shipping and Waterways. 

ZPMC’s Indian customers   

In July of 2020, the Centre restricted public procurement from countries which share a land border with India on grounds of national security, in a move that was squarely aimed at China. 

According to the order, any bidder from countries sharing a land border with India would be eligible to bid in a procurement of goods, services or works only if the bidder was registered with the competent authority constituted by the Department for Promotion of Industry and Internal Trade. Political and security clearances from the Ministries of External and Home Affairs would also be mandatory. The order is applicable for central and state governments, public sector banks, autonomous bodies, state-owned companies, and public-private partnership projects receiving financial support from the government.   

The order applied only to new tenders for public procurement. It did not apply to procurement by the private sector. 

An analysis of documents available on ZPMC’s website shows how many cranes have been ordered, processed, or shipped for Indian ports since then. Out of the at least 29 cranes of various types that ZPMC shipped for use at Indian ports after the July 2020 public procurement order, the Adani Group accounted for the lion’s share, at 11, including cranes shipped for the Vizhinjam International Deepwater Multipurpose Seaport in Kerala.   

Fully-owned by the Kerala government, the Vizhinjam port is being built by Adani Vizhinjam Ports Pvt Ltd, a subsidiary of Adani Ports and SEZ Ltd, India’s largest private sector port operator. Described as India’s first mega transshipment container terminal, it is expected to be fully operational by December 2024. 

Since Adani Ports and SEZ reportedly placed the Vizhinjam port crane order with ZPMC in 2018, two years before the restrictions were imposed, the company is not affected by the 2020 procurement order despite receiving government financial support by way of viability gap funding for the project.

Gateway Terminals India (GTI) comes in second with eight cranes shipped from ZPMC. 

APM Terminals Mumbai, which is registered as GTI, has a 30-year license from the Jawaharlal Nehru Port Trust (JNPT) to build and operate container handling services at its facility. APM Terminals Mumbai is a joint venture between APM Terminals, which is part of Danish shipping and logistics giant A P Moller-Maersk, and the state-run Container Corporation of India. GTI is one of the three container terminals operating at the state-run Jawaharlal Nehru port, which is located near Mumbai. 

In the context of the Centre’s July 2020 restrictions, GTI does not receive any financial support from the government or its undertakings. Additionally, GTI is reportedly configured to operate with ZPMC cranes, making the installation of cranes of any other make challenging. 

However, there is a discrepancy in the number of ZPMC cranes procured by Indian entities since the 2020 order. ZPMC also has an Indian subsidiary, ZPMC Engineering India, which is registered as an engineering and technical services company. 

Though its website does not have a similar press statement detailing shipments and orders, some of its receipts of cranes however, were documented on its social media handles on LinkedIn and Facebook. 

An analysis of these social media posts found that of the 45 cranes unloaded in India between February 2021 and August 2023, 20 were received at the APM Terminals, Mumbai, and 20 at various Adani ports.   

The remaining orders of cranes were received at GTI Mumbai, VCTPL Visakhapatnam, PSA Chennai and DPW Cochin. The Indian subsidiary has mentioned GTI Mumbai and APM Terminals separately while cataloging the unloading of cranes.

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Questions sent to the concerned ports or operators on the orders for ZPMC cranes and if they had any security concerns regarding them did not elicit a response till the time of filing. Questions sent to the Ministry of Ports, Shipping and Waterways on the total number of ZPMC cranes in India and if it had any security concerns regarding them also did not elicit any response. 

ZPMC’s dominance likely to continue   

“In 2012, the (Union) Cabinet had laid down specific guidelines, and the import of ZPMC cranes, especially at sites near Indian naval installations, was restricted. To facilitate port expansion, the restriction was reconsidered in 2014, and most private sector port operators have ZPMC cranes in operation,” explains Davinder Sandhu. 

Acknowledging that some of those security concerns have re-surfaced recently, Sandhu says, “Indian port operators do have choices to source from Europe and US, but there will be considerations around project delays, spares and maintenance supply chain, and certainly around costs, which may rise by 25 per cent when compared to ZPMC.” 

The previously mentioned Rajya Sabha question had raised three specific points. First, whether the government was aware of ZPMC’s monopoly in critical port equipment. Second, whether it was aware that ZPMC’s cranes could have surveillance sensors and what actions it had taken. And third, what steps was it taking to increase the domestic production of such cranes. 

In his answer in February, Union Minister of Ports, Shipping and Waterways Sarbananda Sonowal said that major ports were gradually moving towards a landlord model where the terminal was being operated by public-private-partnership operators, who were required to procure cranes while adhering to all applicable rules and guidelines. 

Sonowal added that no report had been received up to that point from any of the major ports regarding the presence of “sophisticated sensors” in ZPMC’s cranes. 

Lastly, he said that the Make in India initiative was being "actively promoted" in the ports and shipping sector as well. 

ZPMC, listed on the Shanghai Exchange, made over $4 billion in revenue in 2022-23 and over $600 million in profits. Meanwhile, the Indian company made about Rs 57 crore in revenue and over Rs 7 crore in profits in the same financial year.   

ZPMC’s troubles in the US   

Last month, an eight-month US Congressional investigation’s findings became public, revealing that a number of ZPMC-made cranes used at US ports contained communications equipment that had no clear purpose and which had been installed without any record of the same. 

The investigation was conducted by the US House of Representatives’ House Committee on Homeland Security and House select committee on China. 

Chinese-made cranes account for almost 80 per cent of the cranes used at US ports. US lawmakers found cellular modems, which could allegedly be used for remote communication, installed on these.

The details of the probe, which focused on over 200 Chinese-made cranes at US ports and regulated facilities, came a month after the US Coast Guard said it would impose new cybersecurity requirements on the operators of these cranes. 

According to US experts, there is a possibility that these cranes could be controlled remotely. A hacker could potentially collect intelligence from US ports or even disrupt the functioning of equipment.