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Indian ports to log 6-8% cargo growth on crude, coal volumes in FY19: Study

Tuesday, 12 February 2019 | 00:00

Indian ports are expected to record six to eight per cent growth in cargo volumes in FY19, backed by drivers like coal, crude oil and containers.

Ports across the country handled 1209 million tonnes of cargo in 2017-18, achieving seven per cent over the previous year.

The sagging coal imports which had raised concerns for ports dependent on the dry fuel, have staged a rebound. The momentum in coal imports seen in the first half (April-September) of this fiscal is set to continue through the year, auguring well for the port operations.

In its outlook for the ports sector, ratings agency Icra said, “Demand revival from the power sector and key consumer industries would be critical for sustained pick-up in coal imports. Icra expects that the revival in coal volume import growth would support the revenue growth for port players operating in the bulk segment in FY 2019 and healthy growth should continue in FY 2020 as well.”

In addition to coal, Icra believes overall cargo growth will gain traction over the medium to long-term, driven by domestic demand for crude oil to meet petroleum requirement. Containers, too, will lead cargo shipments given the costs and logistics advantages associated with containerization.

The Icra report signals a downtrend in iron ore exports in FY19 with spike in domestic demand and curbs on mining activities. Despite the fall in iron ore export traffic, cash accruals for major port players in FY19 and FY20 will be supported by revival in coal volumes and steadily rising handling rates.

According to the report, Sagarmala project where huge investments are being tied up could lead to enhanced cargo for the ports though challenges lies in implementing the scale of projects envisaged, funding resources needed and PPP (public private participation) involved.

“Over the last three years, there has been progress on the port capacity enhancement, efficiency improvement and port connectivity. Over FY 2019 as well, there has been good progress and FY2020 should see further improvement in port capacity, efficiency and connectivity”, it added.

Icra notes that several non-major ports have underperformed owing to cargo ramp-up issues amidst stiff competition for hinterland cargo in the last few years. Given the low returns and high leveraging being faced by certain private sector port players, the sector could see further consolidation in F Y2020. Credit profiles of companies could come under pressure on account of any leveraged M&A (mergers & acquisitions) related impact, cargo-related issues or any adverse movement on litigations.
Source: Business Standard

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