During the first five months of FY 16, the cargo throughput at major ports has registered a 5.5% growth over the corresponding period of previous year. The growth was supported by an increase in all cargoes except Iron Ore (-51%). Coal volumes have picked up sharply in the last few months and growth was significant at 16% yoy, as the demand due to domestic shortfall was further supported by prevailing lower global coal prices, according to ICRA. 

''The outlook for cargo growth continues to be strong over the medium to long term driven by the domestic requirements of coal, for power and other sectors; crude oil, for meeting domestic petroleum requirements; and containers, given the cost and logistical advantages associated with containerization,'' said ICRA.

Some near term uncertainty may, however, be associated with particular cargo categories like imported coal, due to uncertainties plaguing the power sector and persisting delays in execution of greenfield power projects; and containers, due to the relatively weak global environment affecting exim trade, it added.

Further, despite the lifting of mining ban in key states, iron-ore export volumes are also expected to be modest over the near term at least. The reduction of export duty on low grade iron ore and restarting of mining operations in Goa (which could have surplus production of low grade iron ore for exports once mining operations resume in full flow) should support export volumes to some extent, however, the prevalent overall export volumes would continue to be weighed down by high export duty of 30% on higher grade of iron ore as well as the sharp drop in prices in recent months, the rating agency said.

On tariff front, the new tariff policy, which has brought the long awaited clarity on tariffs going forward is a favourable development. The past fiscal has witnessed a keen interest of the GoI on the development of infrastructure sector including ports, which is evident in the ambitious launch of the Sagar Mala project and various other schemes and initiatives.

In the long run, ICRA believes the implementation of the project could lead to increased cargo for the ports, however, several challenges remain. The actual materialization could take significant time given the time consuming legislative framework required for efficient collaboration between the central and state governments. 

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