India’s exports have already started picking after a weak year: Unmesh Wagh, Chairman, JNPA

Jun 12, 2024 India Shipping News

MUMBAI : Jawaharlal Nehru Port Authority (JNPA) will aim to handle 7 million TEU of cargo in FY25, up from 6.42 million TEU in FY24, Mr. Unmesh Wagh, Chairman, JNPA, told Moneycontrol in an interview.

Mr. Wagh added that export cargo traffic from India has already picked up after falling in FY24 and freight rates will only stabilise further despite the ongoing conflict in Israel.

He also said that Jawaharlal Nehru Port, the country’s busiest seaport by container traffic handled located in Navi Mumbai and administered by the Jawaharlal Nehru Port Trust, will have a capacity of 10 million TEUs by April 2025, and will likely handle cargo to its full enhanced capacity by 2029.

Mr. Wagh emphasised the need for a new port in India and said that JNPA will start awarding tenders for Vadhavan Port, the proposed deep-sea in neighbouring Palghar district that will be under JNPA, by August as soon as the cabinet approves the project.

Vadhavan will be constructed by a joint venture in which JNPA will have a 74 percent stake and Maharashtra Maritime Board will hold 26 percent.

To be built in phases, the port will handle 15 million TEUs in the first phase and 23.2 million TEUs after the commissioning of its second phase.

Edited excerpts of the interview:

India has witnessed a fall in exports in FY24 over FY23. What is JNPA’s view on exports going forward? When do you see exports picking up again?

A. I feel exports have already started picking up. Since April, volumes at JNPA have seen a 7 percent on-year growth compared to the 6 percent growth we had reported in 2023-24.

And JNPA is not a transshipment port like Mundra, which means that our volume growth means a rise in originating traffic.

Another important aspect of JNPA is that our import and export volumes make up 51 percent and 49 percent of our volumes, respectively, which means that volume growth for JNPA means that India’s exports and imports are on the rise.

While I don’t have the exact details on which segments have seen the biggest growth, what I can share is that pharmaceutical products, automobile parts, chemicals are the biggest products exported from JNPA.

You mentioned that you are growing at 7 percent in the first few months. What is the target for 2024-25?

A. Our target for 2024-25 is to cross 7 million TEUs cargo handling.

We will be capable of handling even more traffic in FY25 if our negotiations with the Port of Singapore to increase transshipment traffic at a terminal at JNPA materialises. Some traffic changes are required as part of the on-going discussions.

The expansion of JNPA from 6.5 million TEU to 10 million TEU is scheduled for April 2025. Can you share any update? What were the biggest bottlenecks you faced?

A. In April 2025, JNPA will have the capacity to handle 10 million TEUs. However, handling 10 million TEUs of cargo will still take time, possibly by 2029.

As far as bottlenecks we face at the moment, we aren’t facing any bottlenecks.

The biggest factor around the expansion of JNPA is that we don’t have any (unused) waterfront left. By 2025 JNPA will have reached its peak capacity in terms of waterfront usage.

Last month you said that expansion of the JNPA to Palghar or the Vadhavan Port will begin in 2025 and go on till 2029. Can you share more details on the overall project? Have all projects as part of this expansion been awarded?

A. Almost 75 percent of our export-import of industrialised goods is through three ports—JNPA, Mundra and Pipavav—and the capacity is increasing at a rate of 7.5 to 8 percent every year. And with our expansion too, JNPA and Mundra will both be full in 2029.

So, we must build one port immediately. We should have made it yesterday, but if not yesterday then immediately. We will start construction of Vadhavan Port soon. All the clearances have been taken and only the cabinet clearance is pending due to elections.

We had expected the Union cabinet to clear the Rs 76,220-crore project before the model code of conduct kicked in, but unfortunately, that has not come so far. But this is a priority of the government.

Once the cabinet clearance comes through we will start awarding tenders for the project. By August tenders will start rolling out and will be awarded throughout the year.

The proposed Vadhavan Port will have a total capacity of 24 million TEUs after its second phase of expansion is completed by 2034. After the first phase Vadhavan Port will have a capacity of 10 million TEUs.

The Public Investment Board in February cleared the construction of a container terminal that will have a capacity to handle annual cargo of 23 million TEUs, or 254 million tonnes, and recommended the mega project to the Union cabinet for a final nod.

Vizhinjam Port in Kerala two months ago became the first transshipment port in India. Is JNPA looking to get approvals to become a transshipment port as well?

A. At the moment JNPA has some capacity that can be utilised for transshipment. We need to expand our yard to make space for containers to be held as part of transshipment traffic needs to be held at ports before being transported further.

The Port of Singapore, which runs the Bharat Mumbai Container Terminal at JNPT, has some capacity, so they are contemplating this particular move.

We are very positive that if everything goes well, JNPT will start servicing some transshipment cargo this year. At the moment around 1 percent of the cargo we handle is classified as transshipment cargo, in a few years this can rise to make up 10-15 percent of our cargo.

Over the last few years, global shipping has been affected, first by the COVID-19 pandemic, then by the outbreak of the Russia-Ukraine war, and now by the outbreak of the Hamas-Israel war. As the war escalates, how will it impact your volumes?

A. While shipping freight rates have seen volatility over the past two years, it has not impacted volumes at JNPT if you look at our annual growth numbers.

We have seen temporary delays and a slowdown in especially commodity and agricultural products to Europe at times in the last two years, but exporters have adopted alternative routes and new freight rates.

The industry has shown great resilience to most anomalies that have shown up in the last few years.

Now, it wouldn’t be correct to say that there has not been any impact of the geopolitical issues on our port. However, the industry has shown great agility to cope and come out on top.

Going forward, I think the industry has accepted the new shipping rates and in my opinion rates will only stabilise further in the coming months. It would be very hard to predict the extent to which freight rates will stabilise, but I don’t expect freight rates to skyrocket anytime soon.

What are JNPA’s top line and EBITDA (earnings before interest, taxes, depreciation and amortisation) margin targets for FY25? And what are your capital expenditure plans?

A. I would like to start by saying that JNPA is a government port and our priority is to reduce logistics costs at the port and also across India. We are confident of reducing it by at least 10-15 percent next year. Also, JNPA should be among the top ports in the world.

We will reduce our logistics cost by improving operational efficiencies and as we become more efficient, our bottom line will also continue to grow.

I can give you one example—JNPA started a centralised parking plaza for factory-sealed export containers. This helped reduce the costs for traders as charges fell from Rs 10,000-15,000 (in cases where the container is sent to a container freight station) to Rs 100 which we charge at the moment.

Our capital expenditure will be around Rs 2,000 crore in FY25, but it has the potential to rise to around Rs 5,000 crore if we receive land clearances to procure land to develop road and rail infrastructure for Vadhavan Port.

Last year, the government (specifically the Department for Promotion of Industry and Internal Trade) had estimated the proportion of India’s logistics cost to total cost at 7.8-8.9 percent. In your opinion, how accurate is the government’s estimate?

A. I think the estimate the government has come out with through a very fair exercise shows that during the last few years, we have really done well in terms of infrastructure to reduce the logistics cost in India.

This does not mean that we should get complacent now and stop our efforts to reduce logistics costs further. I believe that India’s logistics cost can be brought down further to 7 percent, and the completion of the (Indian Railways’) Western Dedicated Freight Corridor will be a big step in this direction.

What are the major benefits you have seen from the operationalisation of the Eastern Dedicated Freight Corridor? By when do you expect the Western Dedicated Freight Corridor to be fully operational?

A. I haven’t really seen a lot of benefit from the EDFC but we are eagerly awaiting the completion of the WDFC.

The DFC and other authorities are saying that it will come by December 2025. The delay is affecting JNPA a little because it has already reached Mundra and is not very far from JNPA.

We have competition in NCR (National Capital Region) cargo and will lose some cargo to them (Mundra), but it’s okay. If it is cheaper for exporter or importer to go to Mundra, they will go and I don’t think there should be any complaint.

I have already said that an industry located in NCR should go to the nearest port and save logistics expenses. And for the country, logistics cost should be minimum since for a person, whether for import or export, he should have his cargo delivered to him or delivered from him within time for minimum cost.

We are already having enough traffic and if DFC comes early, it should be better and beneficial to us.

Source : Money Control