Paving the way for India’s Chemical & Energy Needs
Liquid bulk constitutes 40% of overall Indian ports traffic and only 18% of berths are dedicated for them. This indicates inadequate port infrastructure leading to higher vessel turnaround time. Liquid bulk volumes are expected to increase with accelerating economic growth and government’s thrust on domestic manufacturing, thereby creating greater opportunities for Liquid bulk handling & storage operations. It is estimated that diversion of 5% of overall cargo transportation to water mode can result in annual savings of INR 2,500 crore with liquid bulk transportation constituting 20% of savings. In order to realize the true potential of the future opportunities, there is a need for augmenting port capacities, infrastructure up-gradation and supportive regulatory policies say Manish Panchal, Siddharth Paradkar and Pulkit Agarwal of TATA Strategic Management Group.
Growth in Liquid Bulk Trade
Liquid Bulk Industry comprises of crude oil, LNG, POL products, bulk chemicals & petrochemicals and vegetable oil. Bulk liquids are raw materials and intermediaries for several downstream sectors like automotive, textiles, consumer durables, personal care, food production and energy. The Indian liquid bulk trade is dominated by crude oil and POL products. Imports of bulk liquids have grown at 6.9% per annum over the last five years to reach 244.7 Mn. M.T. in FY14. During the same period, exports have grown at 11.4% per annum to reach 71.8 Mn. M.T. in FY14.
Indian Port Industry Overview
Indian ports sector consists of 13 major and about 200 non-major ports with major ports handling almost 55% of the country’s trade by volume. The cargo traffic at Indian ports mainly consists of liquid bulk, containers, coal and iron ore. Liquid bulk constitutes 40% of cargo handled at Indian ports (Refer Figure 2 for cargo breakup). Thus, liquid bulk plays a critical role in the growth of port industry. However, liquid bulk handling at ports is faced with a number of challenges which impact port and vessel operational performance.
Challenges faced in liquid bulk handling
Indian Liquid Bulk Handling Industry is faced with a number of infrastructure and regulatory challenges. The key challenges are:
Capacity constraints and lack of adequate infrastructure at Ports: Indian ports are faced with the challenge of above-optimum capacity utilization because of capacity mismatch and inadequate port infrastructure. Liquid bulk capacity utilization at Indian ports stands at 90-95%, this is much higher compared to international average of 70-75% which is considered to be ideal. While bulk liquids comprise 40% of cargo traffic, only 18% of berths are dedicated for handling them. This results in higher turnaround times and longer waiting period for berthing at ports. A comparison of Indian ports with global ports on key parameters such as draft depth, productivity and pipelines indicates inadequate focus and planning for liquid bulk handling infrastructure at ports.
- Lack of multimodal connectivity: Despite a coastline of almost 7,500 Km (1.3 times that of Europe), coastal shipping handles only 7% of local freight as compared to 43% in European Union. However, majority of liquids are transported by roads in India. Like coastal shipping, the potential of Inland Water Transport (IWT) is yet to be fully harnessed. Similarly, there is inadequate stock of dedicated wagons for handling bulk chemicals. As a result, most of the liquid bulk is transported by road although it is not the safest or preferred transportation mode.
- Regulatory Issues: Regulatory restrictions are also leading to an increase in overall turnaround time and decrease in productivity at Indian ports. The Coastal Regulation Zones (CRZ) notification by the Ministry of Environment and Forests limits setting up of liquid storage facilities at a waterfront. As a result, storage facilities have to be built outside CRZ zones, far away from shore. This adds to the investment in pipelines and increases total cost and time for operations. Similarly, Cabotage Law restricts use of foreign flag vessels along the coastal routes. This limits the use of coastal shipping which is more cost and energy efficient.
Accelerating economic growth coupled with government’s thrust on domestic manufacturing through ‘Make In India’ campaign would result in rapid growth in end use sectors. This would lead to increase in demand for bulk liquids, drive conversion from containers to bulk and create opportunities for storage & handling of larger volumes and a wider product portfolio.
In order to realize the potential of future opportunities, the following steps need to be taken to overcome the challenges faced in liquid bulk handling:
- Port capacity expansion and infrastructure up-gradation: There is a need to augment capacity at current berths and build more berths for handling liquid cargoes with specialized handling equipment. This would reduce turnaround time and pre-berthing delays and increase hourly throughput. Draft at ports need to be increased to enable them to handle larger vessels. With Govt. impetus on infrastructure development, some capacity additions are expected over the next few years. This would ease port congestion and reduce operational load at ports (Refer Table 2 for announced capacity additions). However, a feasibility study for assessing the transformation and expansion opportunity at all operating ports is urgently required.
- Alternate transport modes: Conscious efforts should be made to shift transport load from roads to safer and economical modes like rail and water (Refer Table 3). Policies should be developed to avoid procedural delays in setting up rail infrastructure for liquid bulk transport. Dedicated wagons can be introduced to transport bulk liquid chemicals across the country over rail. Steps should be taken to promote the use of coastal shipping and inland waterways. It is estimated that diversion of 5% of overall cargo transportation to water mode can result in annual savings of INR 2,500 crore with liquid bulk transportation constituting 20% of savings.
- Additional Steps: Following additional steps can be taken by independent storage providers to promote industry growth:
- Industry Platforms: Liquid bulk handling industry should come together and highlight their cause and importance to Government bodies and concerned authorities. Unlike other industries, there is no exclusive association, council or a common industry platform for this industry. Developing such industry bodies would help raise industry concerns at appropriate levels.
- Focus on SHE Practices: A strong focus is required on SHE practices in handling and storage operations. Regular trainings should be undertaken to build awareness and inculcate discipline towards compliance of SHE practices. Implementation and adherence to SHE practices would help ports and storage providers assuage environmental concerns. It would also help build confidence amongst global clients for usage of facilities at Indian ports.
- Outsourcing Opportunities: Oil Marketing Companies (OMCs) should be encouraged to outsource their storage and handling operations to independent third party operators. This would not only propel the liquid bulk handling industry growth but also help OMCs to focus on their core operations of refining and retailing, achieve operational efficiency, improved asset management and resource optimization.Increase in liquid bulk volumes is expected to generate opportunities in bulk handling. However, infrastructural and hinterland connectivity challenges exist. Taking appropriate steps as mentioned, can help overcome challenges, eliminate bottlenecks and streamline handling operations. This would lead to cost effectiveness and increase port & vessel operational efficiency.