BENGALURU: Singapore’s PSA International Pte Ltd, the world’s top container terminal operator by volume, plans to set up a container loading facility at Kakinada port in Andhra Pradesh as it looks to expand its presence in Asia’s third-largest economy, two people briefed on the matter said.
“PSA has signed a memorandum of understanding with Kakinada Seaports Ltd (the company that operates Kakinada port) for operating a container terminal at the port,” a Mumbai-based port consultant, one of the two people, said, asking not to be named. PSA International is owned by Temasek Holdings Pte Ltd, the investment fund owned by the government of Singapore.
Kakinada port is located between Visakhapatnam and Chennai ports. Kakinada Infrastructure Holdings Pvt. Ltd is the majority stakeholder in Kakinada Seaports. The port, constructed by the Andhra Pradesh government in 1997, was privatized in 1999.
Kakinada port has the freedom to set rates because it is a port outside the control of the Union government. In comparison, the 12 ports owned by the Union government are regulated by the Tariff Authority for Major Ports (TAMP).
PSA and Kakinada Seaports did not respond to emails sent on Wednesday seeking comments. Kakinada port loaded 17.961 million tonnes (mt) of cargo in the year ended March 2015.
The planned facility at Kakinada will strengthen PSA’s presence in India, where it runs three container loading facilities, all on the east coast, while another terminal is under construction at Jawaharlal Nehru port near Mumbai and India’s busiest container gateway on the western coast. Mint could not independently ascertain the commercial details of PSA’s investment in Kakinada port.
PSA runs a 1.5 million twenty- foot equivalent units (TEUs) capacity-a-year terminal at Chennai port, India’s third-biggest container port, and a 500,000 TEU capacity a year terminal at VO Chidambaranar port in Tuticorin, both Union government-owned and located in Tamil Nadu.
The Singapore firm started operating a container loading facility at Kolkata port, also Union government-owned, from November last year on a 10-year contract.
PSA is currently constructing a Rs.7,915 crore container loading facility at Jawaharlal Nehru port that handles more than half of India’s container cargo shipped through its ports. The project involves foreign direct investment (FDI) of about Rs.3,100 crore, the biggest single FDI in an Indian port project. The new terminal at Jawaharlal Nehru port will be designed to load 4.8 million TEUs a year. The first phase of the Jawaharlal Nehru port facility will start operations some time in 2017.
When operational, Kakinada would be PSA’s first facility at a port outside the control of the Union government. PSA has picked ports on India’s eastern coast to run container terminals because container cargo originating and destined for the country’s eastern region is generally trans-shipped through regional hubs such as Colombo and Singapore.
Temasek Holdings also owns Neptune Orient Lines Ltd, the shipping company that runs APL, one of the world’s top container carriers. “Ports on the east coast of India usually trans-ship containers to foreign ports,” a spokesman for the shipping ministry said.
Singapore and Colombo account for 66% of the 2.2 million TEUs trans-shipped from India through foreign hubs every year. Singapore is one of the world’s biggest regional trans-shipment hubs,
A container trans-shipment terminal such as Singapore acts like a hub into which smaller feeder vessels bring container cargo, which then gets loaded onto larger ships. Larger vessels bring about economies of scale and lower the cost of operations for shipping lines, which translates into lower freight rates for exporters and importers. Due to depth restrictions and lower volumes, bigger container ships cannot call at many of India’s ports.
