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Special Report: Is Kandla Port's Mega Container Terminal Project The Game-Changer The Region Needs?

Multinational logistics company DP World won the bid for the project and will be taking on the Adani-run Mundra Port, an industry giant.

By Himanshu Bhayani
New Update
Kandla Port's Mega Container Terminal Project

The national highway leading to Gujarat's Kandla Port, officially known as the Deendayal Port Authority (DPA), bustles with activity during the day. The highway is lined with lorries carrying containers and timber logs, heavy vehicles, earth-moving equipment, and city traffic navigating its way into the side lanes.

Cruising flyovers, a dilapidated state-transport bus stand, and a line of hotels and eateries serving Sindhi and Punjabi food welcome those taking the national highway to Kandla, passing through Gandhidham.

 Kandla-Gandhidham, as locals call it, is a port city established as migrants from the Sindhi community settled in the town after partition in Gujarat's Kutch district.

 The Kandla port, a government-administered establishment and one of the largest in India, made headlines in August this year. The DPA signed an agreement with Dubai-based multinational logistics company Dubai Port World (DP World) for the development, operation, and maintenance of a new mega container terminal at Tuna-Tekra, located near Kandla. Tuna-Tekra is a satellite port site managed by Kandla Port, 15 kilometres away.

 

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 An aerial view of the liquid cargo terminal at Kandla Port

 

Close to the Kandla port town is Adipur, where 15,000 acres of land were allotted to migrants through the Sindhu Resettlement Corporation. Of this, 2,600 acres were allotted for the Gandhidham-Adipur township settlement, and the rest for the port area.

While the new agreement is good news for the Kandla Port and the surrounding areas, it competes with the Mundra Port managed by the Adani Ports and Special Economic Zone Limited. The Mundra Port is an all-weather port and the largest commercial port in India.

There have been allegations that the present-day government supported privatisation in the area to benefit a few specific corporate entities. Locals in Gandhidham, Kandla, Tuna-Tekra, and Mundra believe that this new agreement could signify a move towards the privatisation of the Kandla port as well. The agreement also comes at a time when DP World needed a project to continue its presence in India. While the Tuna-Tekra project will help the port at Kandla improve its services, it will still have to contend with the Mundra port, a mammoth in the industry.

 

What Will The New Project Entail? 

While the concession to develop the mega-container terminal at Tuna-Tekra was awarded to Hindustan Infralog Private Limited (a joint venture between DP World and National Investment and Infrastructure Fund, India’s collaborative investment platform anchored by the Government of India) in January 2023, the agreement between DP World and DPA was signed on August 25. 

The project will address 2.19 million twenty-foot equivalent units (TEUs) container cargo annually, which will be constructed and designed to handle next-generation vessels carrying more than 18,000 containers.

The ballpark investment figure presently pegged for the project stands at  Rs 4,244 crore and is scheduled to be completed by February 2027 in public-private-partnership mode, on a build-operate-and-transfer basis for 30 years initially, with an extension option of another 20 years. DP World presently operates five other container terminals in India.

ADANI PORTS AERIEL VIEW PIX
Aerial view of Container Cargo Terminal with Ship Anchored at Adani Group managed Mundra Port

 

DP World’s Big Bid 

SK Mehta, the DPA chairperson, called this new project a game changer for the Kutch region and is the biggest investment to date under the private-public partnership model for major ports. 

DP World’s royalty bid for the Tuna-Tekra project was shockingly high. DP World quoted a royalty of Rs 6,500. The only other bid was from the Adani group at Rs 1,500 per container.  

Girish Joshi, editor of The Marine Lines said, “DP World's Rs 6,500 per container bid had shocked many in the maritime trade. Having lost the Jawaharlal Nehru Port Container Terminal project, where DP World's bid ranked fourth, DP World was seen as limiting out on options to remain in the container terminal business on India's west coast.”

This was expected as it emerged fourth in the Jawaharlal Nehru Port Container Terminal (JNPT)  auction in 2022. DP World built a significant presence in India over the past few years and now operates five terminals in India — Mundra International Container Terminal Private Limited (MICT), Nhava Sheva International Container Terminal and Nhava Sheva India Gateway Terminal at JNPT, the Chennai Container Terminal and the India Gateway Terminal in Cochin. 

The company's contract with JNPT will complete a 30-year tenure in 2028, followed by the Mundra agreement ending in 2031.

Meanwhile, Adani and DP World have been embroiled in a legal battle for years over the sub-concession of the MICT and it is not clear whether DP World will continue to operate it. 

Given the situation, the Tuna-Tekra terminal deal is seen as a major breather for the company. It is also a win-win situation for the government and DP World as the government needed a private player to spearhead operations at Kandla to compete with Mundra. 

 

Kandla Vs Mundra

The Port of Kandla Special Economic Zone, established in 1965, was the first special economic zone to be established in India. The port once serviced almost 70% of the export-import traffic of the northern Indian hinterland. Things began to change after the devastating cyclone in 1998 followed by the earthquake in 2001. 

The Mundra port was conceptualised decades later when the Gujarat Maritime Board gave a nod to set up the present-day port in 1994 and became functional in 1998. The port picked up pace in the early 2000s  after Narendra Modi, now prime minister of India, became the chief minister of the state.

The disparity in cargo is stark. Data from the last five years shows that Mundra has a clear upper hand.

 

 

The rise of Mundra Port created a division in cargo traffic, leaving Kandla grappling with challenges. Mundra Port's superior facilities, marked by a huge vessel anchoring capacity of several liners and a fast turnaround time, among others, have attracted exporters and importers and contributed to its success. In contrast, Kandla struggles with problems of labour, and vessel handling capacities and has a long turnaround.  

Manan Bhatt, a retired Indian Navy personnel said, "With 24 nautical miles sea route distance between Kandla and Mundra Port, the game lies with the ship liners because this is kind of no-distance in naval parlance. Secondly, here on the West Coast and Gulf of Kutch, we have open sea, we do not have a channel, in a few of the busiest ports, vessels have to anchor out of port areas at least 10-12 naut miles and that is a cost.” 



Photo
Aerial view of the longest vessel of Mediterranean Shipping Company anchored at Adani Group-managed Mundra Port

 

 Optimism Nonetheless 

There is much optimism in the air of Gandhidham-Kandla-Tuna with the announcement of DP World's container terminal project. It will be one of the largest container terminals in the country. And it will help increase the productivity and cargo handling capacity of the port. The Kandla Port plans to enhance its capacity to serve businesses by reducing congestion and driving trade efficiency. 

Port authorities are in talks with the Indian Railways and Ministry of Road Transport and Highways for initiatives to enhance connectivity of Kandla and Tuna-Tekra. The Indian Railways have also recently approved the quadrupling of the Samakhiali-Gandhidham line, which will be a big boost for Tuna Tekra. 

 

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Containers stacked train at the Adani Group-managed Mundra Port Train Terminal

                        

 Traders in the area hope that Kandla will emerge as the preferred port once it has the muscle to address container volumes and reduce turn-around time. Navneet Gajjar, president of Kandla Timber Association said, "All these initiatives and tie-ups of DP World with ship liners will surely make a turnaround for Kandla Port.” 

The road distance between Kandla and Mundra is 70 kilometres. Gajjar believes that once the DP World facilities are operational and large-sized vessels start calling the Kandla Port, this will surely save road logistics costs for exporters and importers. 

Dhansukhbhai Khatri, a custom handling agent from Gandhidham, said, “The kind of tie-up container freight stations (CFS) have with ship liners also matters here, trade expects that DP World will equally facilitate fast turn-around from CFS facilities, which will be an additional cost-savings for customers.”  However, even when the Tuna-Tekra DP World Container terminal becomes functional, combined installations at Kandla Port for container cargo handling may touch half of the present-day container cargo handling capacities at Mundra Port. 

Yet, the sentiment on the ground is bullish and is reflected in the increasing real-estate prices. 

 

Will Kandla Port Be Privatised? 

Four prime bodies manage the administrative activities of this port city — Kandla Port Trust (now DPA), Sindhu Resettlement Corporation (SRC), Gandhidham Development Authority and Gandhidham Nagarpalika.

Kuldipsinh Maadh, a local businessman from Gandhidham, "Interestingly whatever development happens in Gandhidham-Adipur-Kandla, the land is owned by the port authority, the proposals for land development are slotted by Sindhu Resettlement Corporation which is subject to approval by the port authority, once the port authority gives a nod, the plans and maps are approved by Gandhidham Development Authority and Gandhidham Nagarpalika. It is like an entity house-keeping, taking care of day-to-day cleaning, drainage and water supply.” 

Several companies have also bought huge parcels of land in and around the Bhadreshwar area which lies between the Mundra and Tuna-Tekra. This too contributed to increased real-estate prices. 

Six months ago, an acre was available for Rs 15 lakh. Today it costs no less than Rs 90 lakhs to 1 crore.

Meghdeepsinh Jadeja, a real estate investor from Mundra, said, “There are few players from logistics trade eying space for container freight stations and container yards as well. So prices of the land in that area have increased and most of the land is available for resale.”

DP World's container project is strategically located between the Kandla Port site and Tuna Tekra Adani Bulk Cargo Terminal, so local trade and fraternity are not ruling out the possibility of privatisation of Kandla Port.

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CaptionA sign board displayed at the Adani Kandla Bulk Terminal Pvt Ltd site in Tuna-Tekra

                   

The coastline of the Gulf of Kutch from Jakhau to Kandla is full of potential for those engaged in the maritime sector.

An eminent trade member, requesting anonymity said, "The government port is being strengthened on its weak segments, via public-private-partnership mode on the same lines the way things are happening in Indian Railways or with other Public Sector Undertakings (PSUs). The way Port Trust has been converted into Port Authority, the way land is procured between Mundra and Tuna-Tekra, the days are not far where the privatisation of Kandla Port may be on the cards.” 

In light of the possibility of port-led growth in the Gulf of Kutch, real-estate players are betting big in the Saurashtra-Kutch region.

What is feared most is the privatisation of the government-administered Kandla Port, a major port which opened the flood-gates of prosperity in post-independent India, while the Maharao of Kutch had generously donated the land to catalyse growth and economic prosperity of the nation.

 

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