Let Private Sector Efficiency Come Into Play: Capt Jimmy Sarbh On Indian Port Sector

India has 200 ports, with 13 being called ‘major ports’ and 176 ‘non-major ports’. The country’s port sector is seeing a lot of interest and activity recently, particularly with the privatisation of ports. 

This suggests a positive outlook for the Indian port sector with rapid growth in trade, commerce and overall economic development. “Minor ports [state-owned ports] are gaining a lot of momentum of late,” said Captain Jimmy Sarbh, former chairman of P&O Ports in India, and now an independent consultant. “A stark example [is] the Mundra port, which started as a minor port. Today it is the largest port in India. Can you call it minor anymore? You can't, but the term exists,” he said. 

Sarbh pointed out that the port sector would shape up much better if the efficiency of the private sector came into play. “The government has no business to be in ports,” he emphasised. 

Currently, the Adani Group's subsidiary Adani Ports and Special Economic Zone (APSEZ) is the largest private port operator in the country. “And I can say that technically, they are now much bigger than the Government of India's ports because they are really doing a good job and managing it very efficiently,” he said, again, alluding to the Mundra port.  “It started as nothing, there were just sand dunes there when we took it over…and definitely, we need more ports like that to cater to India's ambition of becoming a $7.3 trillion economy by 2030,” he added. 

He also pointed to the importance of the upcoming Vadhavan port, a major port in Gujarat. “If we want to take on China, if we want to be globally challenging and competitive, we need to build world-class megaports. And Vadhavan will be an answer as a major port to it,” he said.

For The Core Report: Weekend Edition, financial journalist Govindraj Ethiraj spoke to Sarbh to get an outlook on the Indian port sector and how it works at a fundamental level.

Edited Excerpts:  

We have what we call 13 major ports…and I thought I'll allow you to give us that definition because it can get a little confusing. Who runs the port, who owns it, and what is the dynamic between the person who owns it (mostly the government) and the person who runs it (the private sector in some cases at least)? So let's start there. 

India has 13 major ports as you said. Port Blair is the latest port that has been added. So that becomes the 14th if you take Vadhavan being the 13th, which was added. And there are approximately seven on the east coast, seven on the west coast. 

And this term minor, that has come from 1897, according to the Indian Ports Act, is really a stupid term. The word minor means that a minor port is a state government port and a major port is a central government port. So the 14 ports that we are talking about are administered from Delhi as major ports. Minor ports are little ports scattered along the coast of India. And these are called minor ports because they are administered by the state governments. Or let's say, in Maharashtra's case, it is the Maharashtra Maritime Board. In Gujarat's case, it's the Gujarat Maritime Board.

But minor ports are gaining a lot of momentum off late. One example, and a stark example being the Mundra port, which started as a minor port. Today it is the largest port in India. Can you call it minor anymore? You can't, but the term exists. To change the term some legislation is required. But technically, to answer your question, this is how the major and minor are defined. 

And how are the other minor ports… or let's say government versus non-government ports or private ports. How are the other private ports doing in terms of growth? So, Mundra, everyone knows and has been following because as you said, it's now the largest. Who are the others? 

At the moment, the Adani group has most of the minor ports. They've managed to win them. And I can say that technically, they are now much bigger than the Government of India's ports because they are really doing a good job and managing it very efficiently. Mundra being a perfect example, which started as nothing, there were just sand dunes there when we took it over. And I had the privilege of going with Mr. Adani just now on the 12th of December, and he very kindly took me around and showed me the port. And it was amazing what he has created. And definitely, we need more ports like that to cater to India's ambition of becoming a $7.3 trillion economy, as Prime Minister Modi says, by 2030. 

We need more minor ports to be developed, including a major port like Vadhavan, where in the 1996-97, we had envisaged 300 million metric tons in the first phase, 500 million metric tons in the second phase. And in the third phase, we had envisaged 800 million metric tons. So that was a megaport of Vadhavan that was going to fill in the gap that existed in the capacity of Indian ports.

If we want to take on China, if we want to be globally challenging and competitive, we need to build world-class megaports. And Vadhavan will be an answer as a major port to it. And Gautam Seth is already creating lots of other things himself. 

I'll come back to the owners of the ports and the management of it in a bit. But tell us about the ports themselves. We've had ports for centuries in India, and at least for maybe several decades, other countries, including the newer economies or tiger economies like the southeast Asian countries, have also built them. So why is it that India has not had more efficient ports? Is it because of natural disadvantages or other reasons? 

The main reason originally was that the government decided to only handle and manage the ports. And I personally have said, right from day one, from the time I have come here, the government has no business to be in ports. And we proved that when they privatised the first private container terminal in India, which was the Nhava Sheva International Container Terminal. 

We changed the paradigm of the way shipping and containers were handled in India. And that is exactly what should be done going forward. More capacity should be brought on by the private sector. I kept saying that the existing JNPT 680 metres of key line should be privatised the day I was bidding for the port. 25 years later, they finally privatised it. So the thinking now is that it is better to let the efficiency of the private sector come into the port's play. 

Between the construction of the port and the management of it, where is it that the private sector involvement matters the most? 

Firstly, India has this tendering process…at some stage along the tendering process, the builders got in and then they came out with these point systems. I think that builders should not be in this running of the ports. They can come in to build the port and leave rather than qualify with all their points to make the port, because after they make the port, all they do is sell it and go away. 

And then you need a good port operator. You need port operators to bid and win the ports and then build them, equip them, put the IT systems in to make it efficient and run it. That's how I think it should be. And this norm that the highest bidder who gives me royalty gets the award, is wrong. What should be really looked at by the Government of India now, and the state governments, is who is giving me how much equipment, turnaround time of the ships, efficiency. These are parameters that should be weighed in on awarding a contract.

How much money are you investing in the port? What type of equipment are you giving? How much employment are you creating? Did you know that for every one job that is created in the port, four or five jobs are created logistically outside the port. So with our population, we need to give jobs to people. And therefore, the more ports you create, the more employment you give to the youth who's coming out. 

I'll come to the management of ports in a moment, but tell us about the nature part of it. All ports are not as well positioned. They don't have the draft to receive ships. Now, India seems to be at a natural disadvantage there...that's one. Second is if we are at a natural disadvantage in the areas where we want to have ports, what does it take to bridge that gap in terms of construction or capital investment? 

Well, all the natural harbours or deep water ports that could be built have already been built. Now, if you look at Vizhinjam, you look at Vadhavan, you look at any new ports that are coming up, you have to go outside, you have to look at the deepwater contour where it comes, because you want 18 metres of natural depth. So you have to go off the coast. This way you avoid all the environmental problems and you prevent all the red flags that keep coming up for every single thing. 

Fortunately, the government ensures that this red flag system is stopped now and ports development goes ahead. So we need to go out. We need to find areas where the deepwater contour comes in, where there is a rock shelf, so you can excavate in the dry by building a cofferdam around the rock shelf, getting the water into the deepwater state, and then developing the port. 

But developing the port is only one thing. You need fantastic or very efficient and good connectivity between road and rail. You need to bring in and take out the volume seamlessly. And that is another folly for India. That doesn't happen. Mundra, Adani has bridged that. I went there and I saw how he has created all these big, broad roads and highways and everything in order to evacuate and bring in his volume. That is what is required for any new port development that takes place. 

And the government, with all the money it is earning from royalties in different ports, should look at not only six laning the roads. We need private operators. I have fought for the rail corridor so many years ago. We went and made a representation with Manmohan Singh. Finally, the freight corridor is happening. It's not finished yet, but when it happens, it'll be a boon. This is only between JNPT and Delhi, but more freight corridors need to be created for connectivity, for efficiency.

You're saying that if there are any natural disadvantages, for example, in the harbour, that's not insurmountable? You're saying the larger challenge is ensuring that the goods get to the port and get out as well. 

Absolutely…now you have dredgers who can dredge deep channels for you. You have equipment which is good enough to blast the rock shells out to create the basins for your port, machinery, technology, everything is now available. In India the challenges are the human capital, where the humans say, we don't want the port for no rhyme or reason, they will just say, we don't want the port, which is wrong. If India has to prosper, it needs ports. 
And as of now, did you know that China handles 44.5 million metric tons to India's 11.4 million metric tons? I'm now only talking about containers. And if you look at the volume, India handles approximately 1.5 billion metric tons of overall cargo to China's 15.4 billion metric tons of cargo, 15 times more. So if you want to compete, we have to have more ports. And the present government is looking at developing more ports.

But are you saying that if we had more ports, we would have automatically reached the numbers that, let's say, China is doing?

I think the Indian entrepreneur spirit is very strong. I think if the capacity is there, the volume is there. When I started at Nhava Sheva International Container Terminal Pvt Ltd. (NSICT)...in the first calendar year of handling our NSICT port, we had bid that we would handle 150,000 Twenty-foot equivalent units (TEU) when we came on stream. We handled 487,192 TEUs. This is fantastic. So to say that, where is the volume going to come from? The volume will come if you show that you have the capacity and most importantly, you have the efficiency. When we came on stream, we did 29 moves per hour per crane, while JNPT next door was only doing nine moves per hour per crane. So what happened? The customers moved to us. Same way, if you create capacity with efficiency, the volume will come. And if India wants to go to 2030 as a $7.3 trillion dollar economy, we need more efficient ports. 

Right. And I'll come back to that in a moment. If you could compare for us, let's say Singapore. Everyone talks about it. There used to be horror stories in India about ships waiting for 30 days to berth. That obviously has come down now, and we are close to international standards. But what are international standards today? 

It is extremely important that vessels don't wait for berths. When the vessel comes, the vessel should be brought alongside and efficiently loaded and discharged. That is important. I can't speak for everybody else, but I can tell you that at P&O-managed terminals, our vessels did not wait. And if they had to wait, it was due to pilotage, which was government-controlled, or draft dredging and all that. 

As far as we were concerned, we allocated windows to certain shipping lines who called as our customers to our port, and we handled them efficiently, and that should be the norm going forward. Vessels should not wait for berths. 

Give us a sense of turnaround times today versus, let's say, the international benchmark that you think, for example, is something to look at. And what should be our aspiration? 

I think the minimum is 25 moves per hour per crane for containers, as far as oil is concerned, depending on the size of the vessel, of course. But any big vessel should be discharged within 48 hours because India imports most of the oils. Mr. Adani has got a good SPM there up at Mundra, which I saw, which is doing an efficient, efficient job. 

But if you look at Butcher Island in Bombay, or if you look at Chennai, the discharging there is still slow because it's government-operated and it's not meeting the international norms. If it is privatised, it will meet international norms, which is what should be the aim. What about container ships? Container ships, again, depending on the number of TEUs that you are bringing in and loading out. 

Let's say an average-sized container ship, how long would it take to turn around in Singapore? Or the same size ship, how long would it take to turn around in JNPT or Adani port? 

Singapore is a good example. They are very efficient and they turn around a decent-sized ship within 24 hours. And at NSICT or at Mundra, where we operated as P&O ports, we turned around the vessels in exactly the same way. As I said, our delays were more related to pilotage, towage, tuggage, all the other things that we couldn't control. 
In Adani's case, he's managing the pilotage and he's managing the dredging. So it's working efficiently. 

Right, so this is the map of India. And we can see that we have ports on the left side and that's the west coast. And we have ports on the east coast…How is this going to shape up? I mean, is trade going to drive and the nature of trade going to drive which ports will become more important? Or is this sort of spread what is ideal or optimal? 

Well, each port from the coast is serving the hinterland. And as India is a V, it starts to bunch down a lot. So the competition in the south between Kochi, Vallarpadam, now, Vizhinjam, Chennai, Chidambaram, Tuticorin – all that is getting congested. But in the north, if you see Mundra, it is very well placed where it is. It serves the Delhi hinterland, the north hinterland UP (Uttar Pradesh). So strategically it's very well placed. 

Similarly, West Bengal, the Netaji docks and Haldia and all…are all defunct in my opinion. I mean, because they don't dredge the channel. We had tried to do a port called Kulpi there, which never really took off. We were going to use the Rangaphala channel instead of the normal channel because the normal channel keeps silting out and you can't..and the minute the draft goes down, the ships have difficulty. So Pardeep, Vizag, these are all bulk sort of ports, more than containers. They handle more bulk volume because of the iron ore.

Geographically, I think our trade is more with the West. So the west coast will serve better. And now with the government's ideology of linking certain things in order to sort of compete with China on the One Road One Belt system, I think Vadhvan and the JNPT and all the JNPT container terminals and all are beautifully placed. It should work.

So in general, I mean, if you look at the west coast and the east coast. Where would you think that we should be investing more resources in terms of either new ports? 

Well, I've always advocated that Indian volumes should move to and from India. But if you show me the map and ask me, then I have to look at the world sea trade routes. And if you look at the sea trade routes, then south is more important because people are going out of the Red Sea. Although there's a problem with the Red Sea at the moment, as you know. But otherwise they're going right from the Red Sea. 

So the south, where you invest in a port, which is where Mr. Adani has invested in Vizhinjam, VallarPadam is a good example. But the diversion that we are talking about is not a lot at all, because even if you did bring the vessels to the south, the volume is more to the north. So ports like Vadhvan, JNPT, Mundra especially, are all well located for the volume movement within the Indian hinterland to go to. We cannot neglect the east coast. We do a lot of trade with China. Chennai is well positioned. 

The world is moving towards containers now. So we have to look at containerisation. And with India doing more and more cars, we have to look at car terminals, because cars are a big thing now. And India can develop good cars at a good price.

You talked about Vizhinjam. That's a transhipment port. Tell us about what transhipment ports are and what will this serve. Or rather, what will the Vizhinjam port serve specifically in our overall objectives of shipment? 

Well, you already heard me. I'm not a supporter of Indian volume being transhipped at all, even if it is over an Indian port. I'm not an advocate for that. But what Vizhinjamis going to do, and it's a great concession that Adani has. So it's good. What is a transhipment port? The volume will come. The Indian volume will come and get discharged into Vizhinjam or even other volumes, even African volumes can be discharged here. So it's a hub and spoke system. 

So the main line will be the hub, which will bring the volume, it'll discharge it, it'll go into the yard. The container will come back onto the feeder vessel. The feeder vessel will then take the volume to the respective port. From there it will be shipped into the hinterland. So you see, there is time involved, there is money involved. I'm not going as a transhipment terminal. I'm not going to give you this move for free. It's costing me money to take your box off the vessel, put it in my yard. Then when the feeder ship comes, bring it back and put it back onto the ship to send it back. Then when it goes to its origin port, it'll again have the same move there. This is expensive. 

And how do you measure money in terms of time? Time is money. Every day the box sits into a transshipment port, it is costing the importer and exporter… Indian volume should come to India.
 
So why are they not coming to India? 

Because the port capacity is not there to handle this. And the big mother ships cost a lot per day. So they don't want a) any form of diversion from the normal sea route that she's going on, and b) she doesn't want to wait. She wants efficiency. Transshipment ports normally do give better efficiency than a normal port to a certain extent, because they are geared up only for that purpose. 

Okay, let's look ahead now and I'll come back to oil in a moment. So there's the hardware and there's the software. So tell me about the software. Software obviously brings about efficiency. It ensures that, let's say ships are coming in and going in a way that everyone knows what's going on. So what are the efficiencies to be gained on that side? And where are we in India at this point?

For software, you need very good blockchain systems, which is now the new mantra, as you know. And the blockchain is really revolutionising the way everything is being done. So you need a good terminal operating system called TOS, be it NAVIS, be it Tata Consultancy, who, when we were here, we developed a system with Tata Consultancy. So you can use any terminal operating system, link it with the blockchain system, so that with one piece of paper, we know where the container is… When we go into the system, we know where it is, where it has to go, how it has to go. 

Now, you keep this old-fashioned way of terminal operating systems and all…what we need to look at is procedural systems also, as far as software is concerned. If you have a delay at customs, if you have a delay with the Central Industrial Security Force (CISF), which is something we always had, and I pulled my hair out saying that I want efficiency. We need efficient custom systems, we need efficient CISF inspection systems. We don't want delays to take place. If you want to bring machines, to find out if they are drugs in the container, install more machines, but have a seamless procedure of taking the box straight through into the port and bringing it out from the port. So that is important. 

India is a human capital drain. Most of the foreign ports, after we have trained them, they take these people on higher wages. When I started it, I was challenged on the number of people I would employ. And I said I would employ PAP people, which is the project affected people at Nhava Sheva. 

So what did I do? I ordered a simulation system for my container cranes. I took these villagers and farmers from the fields, I put them onto the container simulation machines and made them learn how to handle the crane. And we did it exactly the way the crane would behave, the seat of the crane would behave and how the jerks would be. We introduced rain, we introduced all kinds of dust and everything so that the vision is impaired and how this guy will handle it and train them. Once we train them and they become very good and they're up, they go. They go to Singapore, they go to Dubai. All these people keep stealing them. 

But that's good news in a way because there's upward mobility for these people. True. And you'll create fresh jobs. 

True. But we are slowing down in the timing…in the human capital, which is then just being picked up. 

Right. Tell us about how you're seeing the composition of trade and how the port sector will be or could be better geared to meet the $7.3 trillion figure, including through the Vadhavan kind of ports, which, again, illustratively, I'm assuming, is the most or potentially the most newest generation port that we will see. 

Absolutely. You see Mumbai and Nhava Sheva is now very heavily congested. So you need to let it off, let the steam off from this congestion. Because as you and I know, we are suffering on the roads. We can't get from a to b. It takes too long. And all these trucks and all these volumes and the rail traffic and all slows everything down. Now, Vadhavan is just south of Dahanu. It's in a quiet area. The volume can move there if you give good road and rail connectivity. 

Depending on what is there in the hinterland, cars can come. Container volumes can come. The same container volume that is going all the way to JNPT doesn't need to come south of Vadhavan. It can just turn around at Vadhavan and go north. That way you decongest Mumbai and Nhava Sheva and Navi Mumbai... to start with. I am not saying that Vadhavan will take away the volume from here. It will not. 

The way India is growing, it will not take away the volume, but it will help decongest the cities and that is what is required. Oil also is required to come up there rather than come to Butcher Islands, I feel. 

So would you say that as a country now, we're obviously seeing a lot of port activity, including by the private sector? Would you say that ports like Vadhavan fulfil, therefore, more than one objective? One is to obviously take away traffic from existing old cities like Mumbai. The other is to sort of maybe set a benchmark in terms of what a world-class port could be. 

We had envisaged Vadhavan to be a mega world class port. We were designing it on the Rotterdam. So I had always said the slogan was ‘Vadhavan was the Rotterdam of India’. So by that, I mean we are setting a very high benchmark in terms of efficiency, in terms of terminal operating systems, in terms of discharging, and loading time. Time is money in every aspect. Now the port is being built outside. It's got an 18-metre natural draught, which is good. You're not dependent on the tide. I don't like being dependent on the tide. The ship should not be waiting for a tide. It should come as a natural thing. 

There will be more Vadhavans required as India grows. Vadhavan is already too late. Remember, we planned it in 1997. We are 26 years late. 

Okay. Right. And last question. So in your own vision of ports in India, what's missing and what is the sort of unfinished agenda?

I think what is missing is this educating people not to put up red flags all the time for any and everything. This is extremely tiring. It is extremely expensive. We need people, NGOs and all, to be educated rather than raising red flags, we need them to explain to the people that if the country has to grow, India has to be strong, then trade has to be strong. And for trade to be strong, it needs ports for volumes to come in and go out. That is very required. Custom procedures, I want them streamlined. Pilotage - I want that privatised. Dredging - I want private companies to come in as dredging companies to handle the dredging, to make sure that every time after the monsoon, there's siltation problems. The draft. 

You have 14 major ports, and by the time the government approves the tender, the draft has reduced considerably. And that is what used to happen at NSICT, that used to happen at Chennai Container Terminal (CCT), which should not happen. If you want efficiency, you've got to streamline customs processes, CISF processes, pilotage, dredging, operating road and rail linkages, privatise concord, and create a dedicated freight corridor. Let's not build four-lane roads. Let's build six and eight-lane roads. With 1.4 billion people, there is a lot of volume that can go in and out of ports. And if you want it, let's do it.