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Adani Group plans to expand its share in the ship-fuelling market by leveraging the ports it has on India’s east and west coast.
The idea is to use its ports to fuel the ships passing through the country, taking away business from ports at Fujairah, Dubai and Singapore, and expanding the 1 million tonne (mt) Indian bunkering market valued at Rs4,000 crore to 3.5mt by 2020. Bunker or ship fuel accounts for the majority of a ship’s operating costs.
Adani Enterprises Ltd, which already boasts a 40% share of the business in India, wants to add one location a year for the bunkering business, said Vinay Prakash Goel, chief executive officer, trading and mining.
Adani Group’s plan comes in the backdrop of India’s ambitious Sagarmala programme which envisages construction of new ports to harness the country’s 7,517km coastline and set up of as many as 142 cargo terminals at major ports at an estimated cost of Rs93,000 crore. India has 12 major ports.
“Singapore accounts for a substantive share of the global bunker market due to its geographical location and facilities offered. For Indian bunker market to compete, we need infrastructure at the ports,” said Goel. Adani Ports and Special Economic Zone Ltd (APSEZ), India’s biggest private port operator has a cargo handling capacity of 151.51mt.
APSEZ owns and operates eight ports and terminals in India at Mundra, Dahej, Kandla and Hazira in Gujarat, Dhamra in Orissa, Mormugao in Goa, Visakhapatnam in Andhra Pradesh and Kattupalli in Chennai. The company is developing terminals at Ennore in Tamil Nadu and Vizhinjam in Kerala.
The global bunkering market is estimated at around 35mt, with vessels coming to India requiring around 10mt of ship fuel.
According to the government, the total overseas traffic registered by the Indian ports in 2013-14 was 811.11mt, of which 91.5% was carried by foreign flag vessels. “To start with, Mundra will be a thrust for creating infrastructure for bunkering business followed by Hazira, Dhamra and Vizhinjam,” Goel said.
Goel added that the country’s ambitious inland waterways programme will help drive demand for fuel. Worried by the capacity utilization of major ports decreasing from 92.85% to 62.82% during the past 10 years, the National Democratic Alliance government plans to increase the country’s port cargo traffic to 3 billion tonnes (bt) from around 1.6 bt now.
Analysts remain buoyant about Adani Group’s port business. “Fitch continues to see APSEZ as being well-positioned to benefit from India’s growth and related cargo opportunities. The company has significantly better flexibility in infrastructure renewal and expansion cap-ex than some other rated peers in the region, which gives it the ability to generate strong free cash flows,” the rating agency wrote in a 10 November report.
The Adani Group has six vessels of its own.
It also charters around 160 ships a year for its commodity business. APSEZ reported a consolidated net profit of Rs848 crore for the quarter ended 31 December, a 26% increase from the same period a year earlier.
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