ICRA Flags Risks To Sustainability Of Recovery In Domestic Ports
A laborer rests during his break as a ship unloads cargo at Kolkata Port in Kolkata, India. (Photographer: Prashanth Vishwanathan/Bloomberg)  

ICRA Flags Risks To Sustainability Of Recovery In Domestic Ports

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The sustainability of recovery trend in the domestic ports business remains a concern and the sector is not out of the woods yet, even as the passage of Major Port Authorities Bill, 2020 is a positive for the sector, ratings agency ICRA said on Wednesday.

"The deceleration in cargo contraction is a favourable trend, but recovery in certain segments like POL (Port of Loading), which was expected to be faster with easing of lockdown, has not materialized in line with expectation due to continued subdued demand," Sai Krishna, Assistant Vice President and Associate-Head, Corporate Ratings, ICRA, said.

Further, the recovery in segments like coking coal and containers may be prolonged compared to other segments, he said.

"The recovery trend in certain segments like thermal coal has been volatile at non-major ports. Hence, the sustainability of the recovery trend remains a concern at present and the sector is not out of the woods," Krishna added.

The ratings agency reiterated its forecast of a 6-8% contraction in general cargo throughput in 2020-21 and a 12-15% decline in container segment during the same period.

Also read: Rollout Of SAROD-Ports For Dispute Resolution Credit Positive: ICRA

According to ICRA, the cargo decline rate at major and non-major ports witnessed deceleration in July and August after witnessing strong decline in Q1 FY2021, but its sustainability remains a concern.

The cargo at Indian ports witnessed a 9% year-on-year decline each in July and August after a severe contraction of about 22% in Q1 FY2021 due to the impact of Covid-19 pandemic, it said.

The recovery has been relatively better at non-major ports and is driven by easing of containment measures and uptick in economic activity, ICRA said.

The major cargo segments impacted are POL, coal and containers, while fertilizers and iron ore have bucked the trend and grown during the April-August period of the ongoing fiscal, it added.

While cargo performance has been subdued, there has been traction on reform front with passage of Major Ports Authorities Bill, 2020 in September after witnessing long delays since its initial introduction in 2016, the ratings agency said.

Also read: Adani Ports Completes Acquisition Of Krishnapatnam Port

It aims to provide for regulation, operation and planning of major ports in India and to vest the administration, control and management of such ports upon the boards of major port authorities and for matters connected therewith or incidental thereto.

The Bill should help in improving competitiveness and faster decision making at major ports in the country, ICRA said.

"The passage of the bill is a positive for the port sector, with increased flexibility for major ports with regards to tariff setting, port infrastructure development and financial decisions.

"This should aid the major ports in being more competitive and nimble in the market vis-a-vis non-major ports and also boost their ability to attract more private sector investments in the medium to long term," K Ravichandran, Senior Vice President and Group Head, Corporate Ratings, ICRA, said.

Also read: Cargo Handling At Major Ports Drops In April-July Due To Covid-19 Disruptions

Noting that the legacy tariff disputes with various BOT (build, operate, transfer) players remains an overhang, ICRA said the recent launch of SAROD-Ports for alternative dispute resolution and the proposed constitution of Adjudicatory Board, under the new Act, provide some new avenues for dispute resolution compared to extended and costly litigation and arbitration process.

The early resolution of the long pending disputes should help in unleashing the benefit of reforms and remains a sensitivity factor, it added.

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