— Rajiv Agarwal, Managing Director & CEO, Essar Ports Ltd
Rajiv Agarwal, who has
26 years of experience in
industries like retail,
business process
outsourcing, telecom, and
shipping and logistics
etc., has been associated
with Essar Group since
1997 and was executive
director of
Essar Shipping
Ltd from 1998 to 2002.
As managing director of
Essar Ports, he is
spearheading the
company's expansion plan
from 88 million tpa to 158
million tpa over the next
two years. An interview by
Renu Rajaram.
How is the current dip in
growth affecting the shipping
industry? What is the impact
on Essar Ports' business?
The current downturn in the shipping
industry has not impacted
the port sector. Traffic at ports is
growing at a healthy rate; during
FY12 port traffic increased by 5
per cent to 929 million tonnes. The
shipping industry is mainly
impacted by oversupply of vessels.
Essar Ports' traffic increased by 9
per cent to 43.2 million tonnes in
FY12, from 39.5 million tonnes in
FY11. During the first quarter of
the current fiscal year, Essar Ports'
traffic increased by 13 per cent to
12.65 million tonnes compared to
11.20 million tonnes in the corresponding
quarter of the last fiscal.
How can the government
improve the situation?
We expect some positive steps by
government in policymaking,
capacity expansion and improvement
of port connectivity. We also
expect some positive steps by government
for speedy implementation
of projects, increasing the
availability of funds for financing
of the projects, and reduction of
the cost of the debt. We have presented
to the government,
through different forums, on the
steps to be taken for the growth of
the sector.
Essar Ports is operating two
terminals at Hazira and Vadinar.
Could you elaborate on
your business in the past few
months?
Essar Ports develops and operates
ports and terminals for handling
liquid, dry bulk, break bulk and
general cargo, with an existing
aggregate capacity of 88 million
tpa across two facilities located at
Vadinar and Hazira in Gujarat.
During FY12, Essar Ports handled
43.2 million tonnes of cargo,
registering an increase of 9 per
cent from 39.5 million tonnes of
cargo handling in FY11. During
the first quarter of FY13, Essar
Ports handled 12.65 million
tonnes of cargo, registering an
increase of 13 per cent from the
corresponding quarter of last year,
while major ports in India handled
138 million tonnes of cargo,
registering a decline of 5 per cent
from the corresponding quarter of
last year.
During FY12, the terminal at
Hazira handled 3.58 million
tonnes of cargo, registering an
increase of 28 per cent from the
corresponding quarter of last year,
while the terminal at Vadinar handled
9.07 million tonnes of cargo,
registering an increase of 8 per
cent from the corresponding
quarter of last year.
Essar ports recently
demerged from Essar shipping.
Please tell us on the developments
and plans post the
demerger?
The demerger was completed in
2011 when Essar Shipping Ports
and Logistics Ltd was split into
two, Essar Ports Ltd and Essar
Shipping Ltd. This was done as
both the verticals had attained
sizeable scale, and were going to
be seeing further growth which
required focused management
attention. Also, the fact that
investors and lenders look at the
two industries differently, and
thus the demerger helped bringing
about value creation.
Essar Ports started off with Vadinar
Oil Terminal with 46 million
tpa of capacity. Since then, the
capacity has increased to 88 million
tpa (12 million tpa expansion
commissioned at Vadinar, and 30
million tpa capacities at Hazira).
The revenues of the company
have also seen phenomenal
growth, with a CAGR of 62 per
cent over the past two years; revenue
has increased from
427
crore in FY10 to
1,131 crore in
FY12.
Tell us about the capacity of
your ports and how much is
being utilised at present.
The aggregate capacity of Essar
Ports is 88 million tpa and counting
as the company is adding new
facilities to its portfolio. Essar
Ports achieved cargo handling of
12.65 million tonnes during Q1
FY12 against 11.20 million tonnes
in Q1 FY12, registering an
increase of 13 per cent. Port capacity
utilisation is increasing continuously;
it has increased from 50
per cent in FY12 to 57 per cent in
Q1 FY13.
Capacity is expected to be
increased to 158 million tpa by
2014 and capacity utilisation is
expected to reach 75 per cent by
2015.
What are your upcoming
expansion plans?
We are in the process of increasing
our aggregate capacity by 70 million
tpa to 158 million tpa by 2014
with expansion projects at Hazira,
a new port at Salaya in Gujarat,
and two terminals at Paradip in
Odisha. The ports expansion projects
have been undertaken, in
part, to accommodate the increase
in traffic expected to arise from
plant expansions planned to be
carried out by the company's affiliated
customers, and in part to
support the increase in business
from non-affiliated customers
being targeted by the company.
Could you elaborate on the
Salaya project?
We are in the process of setting up
20-million tonne capacity all weather
deep draft terminal at
Salaya, Gujarat, for handling bulk
cargo. The jetty is located in the
Salaya Harbour, which is naturally
protected by two islands, Kalubhar
Tapu and Dhani Be.
The terminal will have a 385m
berth with 14m draft and can handle
minicape vessels (1,05,000
DWT). It will have facilities to
import as well as export dry bulk
cargo like coal, bauxite etc. It will
be the deepest terminal in the
region and will reduce the logistics
cost of its consumer by direct
berthing of up to minicape vessels.
Can you talk about your deep
draft coal berth project at
Paradip. The project is expected
to add 14 million tpa to 18 million
tpa of third-party cargo volumes
to Essar Ports?
Essar Ports is developing two terminals
at Paradip Port - mechanisation
of existing terminal at CQ-
3 berth for handling export cargo
of iron ore, coal etc., and development
of new terminal for import of
coal. Export terminal for handling
iron ore and coal will be commissioned
in Q2 FY13 while terminal
for import of coal will be commissioned
in 2014.
Development, operation and
maintenance of the deep draft terminal
for import of coal for a 30-
year period on BOT basis has
been awarded to Essar Ports Ltd
by Paradip Port Trust. It will be an
all-weather deep draft terminal
capable of handling capesize vessels.
Terminal will handle imported
coking coal and thermal coal
and it will be fully mechanized terminal
which will reduce the logistic
cost of the coal importers.
Major customers will be integrated
steel plants who will import
coking coal and power plants who
will import thermal coal.
We look forward to start construction
activities at the earliest
and target commissioning in
24 months' time. This will add significantly to our third-party
volumes.
What are the key achievements
of Hazira and Vadinar
ports?
Oil terminal at Vadinar is one of
the deepest natural draft terminals
in India. It is an integrated oil
terminal with one SPM, two product
berths, storage tanks, and rail
and road gantries. SPM is capable
of berthing VLCC vessels
(325,000 DWT) and two product
berths are capable of berthing
Aframax vessels (100,000 DWT).
It has handled 31.2 million ton
cargo in FY12 and 9.07 million ton
cargo in first quarter of FY13. It
can unload VLCC vessels in two
days and has received several
awards for its exemplary performance
in the field of health safety
and environments, such as,
- Awarded the Sword of Honour
and 5 star rating by the British
Safety Council for health and
safety
- Gold Award for Occupational
Health & Safety from The Royal
Society for Prevention of Accidents
(RoSPA), UK.
Recently, the terminal handled
1,000th vessels at its product jetty.
Hazira terminal started operation
in May 2010 and in its second
year of operation it handled 12
million tonnes of cargo. It is capable
of direct berthing of minicape
vessels (105,000 DWT) and partially
loaded capesize vessels. It
is highly mechanized terminal
with a discharge rate of 80,000
tonnes per day. Recently, the terminal
was awarded GreenTech
Safety Silver Award 2012 for outstanding
achievement in safety
management
Recently, Essar Ports
announced a strategic
alliance with Port of Antwerp
with an investment of 175 crore.
Essar Ports has entered into a
long-term strategic alliance with
Port of Antwerp International
which is the international investing
arm of Antwerp Port Authority.
PAI has made an investment of
about
175 crore in Essar Ports
through global depository
receipts. The partnership is for
technical assistance for port planning,
process improvement, and
quality and productivity improvement.
There will also be assistance
for the growth of port traffic.
The investment is long-term and
strategic in nature, focusing on
commercial relationship between
the two companies and mutually
enhancing productivity, skill set
and performance.