Business Plan for Chennai Port Trust

Final Report

Above and beyond Creating a bright future Final Report Business Plan for Chennai Port Trust Table of Content

1 EXECUTIVE SUMMARY ...... 7

2 MAJOR RESULTS AND CONCLUSIONS...... 24

2.1 PORT DESCRIPTION ...... 24 2.1.1 INTRODUCTION ...... 24 2.1.2 PORT INFRASTRUCTURE ...... 24 2.1.3 PORT ’S NAVIGATIONAL AND HARBOR DETAILS ...... 27 2.1.4 PORT TRANSPORTATION SYSTEM ...... 28 2.1.5 INTERNAL PORT TRAFFIC ...... 29 2.1.6 ASSESSMENT OF HANDLING OPERATIONS ...... 30 2.1.7 STORAGE CAPACITY ...... 31 2.1.8 MARINE SERVICES ...... 32 2.1.9 CARGO HANDLING EQUIPMENTS ...... 32 2.2 COMPETITIVE POSITION ...... 33 2.2.1 THREAT OF NEW ENTRANTS ...... 35 2.2.2 RIVALRY AMONG EXISTING PLAYERS ...... 36 2.2.3 BARGAINING POWER OF SUPPLIERS ...... 39 2.2.4 BARGAINING POWER OF PORT USERS ...... 40 2.2.5 THREAT OF SUBSTITUTES ...... 41 2.3 HINTERLAND CONNECTIVITY ...... 42 2.3.1 HINTERLAND MAPPING FOR CHENNAI ...... 42 2.3.2 ROAD CONNECTIVITY ...... 43 2.3.3 RAIL CONNECTIVITY ...... 47 2.4 CARGO FORECAST ...... 50 2.4.1 COMMODITY ANALYSIS ...... 50 2.4.2 MARKET DRIVERS ...... 54 2.4.3 DEMAND FORECASTING ...... 55 2.4.4 TARGETED TRAFFIC VOLUMES ...... 59 2.5 CAPACITY AND BOTTLENECK ANALYSIS ...... 68 2.5.1 CAPACITY ANALYSIS ...... 68 2.6 LAND USE PLAN ...... 83 2.7 ORGANIZATIONAL ISSUES ...... 88 2.8 SWOT FOR CHENNAI PORT AS A WHOLE ...... 93

3 BUSINESS PLAN ELEMENTS...... 96

3.1 DEVELOPING THE VISION AND MISSION ...... 99 3.2 STRATEGIES ...... 101 3.2.1 INTRODUCTION ...... 101 3.2.2 FUTURE INDUSTRY SCENARIOS ...... 102 3.2.3 PROCESS OF FORMULATION OF SCENARIOS ...... 103 3.2.4 PROCESS OF FORMULATION OF STRATEGIES ...... 106 3.2.5 FUNCTIONAL STRATEGIES ...... 110 3.3 SELECT PROJECTS INCLUDING MOTIVATION ...... 124 3.4 PLAN OF ACTION TO IMPLEMENT STRATEGY ...... 136

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3.4.1 TRANSLATION OF STRATEGY INTO PROJECTS ...... 136 3.4.2 CORPORATE PLANNING CAPABILITY ...... 140

4 DETAILED ACTION PLAN...... 148

5 FINANCIAL ASPECTS...... 151

5.1 OVERVIEW OF INVESTMENTS ...... 151 5.2 APPROACH FOR FINANCIAL PROJECTIONS ...... 152 5.3 PROJECTED FINANCIAL STATEMENTS ...... 159

Page 3 of 185 Final Report Business Plan for Chennai Port Trust List of Abbreviations

ACS Analysis, Consolidation and Strategy AD Ambedkar Dock BD Bharathi Dock BOT Build, Operate & Transfer C&F Cost & Freight CAO Chief Accounts Officer CCP Chief of Corporate Planning CCTL Chennai Container Terminal Pvt. Ltd. CFS Container Freight Station CHAs Custom House Agents ChPT Chennai Port Trust CONCOR Container Corporation of India Ltd. CKD Cars Knocked Down CPCL Chennai Petroleum Corporation Ltd. CPC Corporate Planning Cell CRM Client Relation Management EC Elevated Corridor EMP Environment Management Plan EMRIP Ennore Manali Road Improvement Project ESR Environmental Scanning & Research EXIM Export Import EPZ Export Processing Zone EQ East Quay FEL Front End Loader GDP Gross Domestic Product GRT Gross Registered Tonnes HRD Human Resource Development HMIL Hyundai Motor India LTd ICD Inland Container Depot IMM Implementation Monitoring & MIS IT Information Technology IRR Inner Ring Road JD Jawahar Dock KPCL Krishnapatnam Port Company Ltd Kms Kilometers LOI Letter of Intent MEH Manali Express Highway MIS Management Information System MoU Memorandum of Understanding MoRR Manali Oil Refinery Road m Meter Mtpa Million Tons per annum Mteu Million teu

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MTS Multi Trailer System MT Million Tonnes MP Madhya Pradesh NCR National Capital Region NH National Highway NHAI National Highway Authority of India O-D Origin - Destination POL Petroleum, Oil & Lubricants PPP Public Private Partnership PSA Port of Singapore Authority ROB Rail Over Bridge RMG Rail-Mounted Gantry SAIL Steel Authority of India Limited SBM Single Buoy Mooring SEZ Special Economic Zone SPM Single Point Mooring SQ South Quay SPV Special Purpose Vehicle SWOT Strength - Weakness - Opportunities - Threats UP Uttar Pradesh TAA Technical & Administrative Assistants TPP Tiruvottiyur -Ponneri -Pancheti teus Twenty Foot Equivalent Units TISCO Tata Iron and Steel Company Limited VRS Voluntary Retirement Scheme WQ West Quay

Page 5 of 185 Final Report Business Plan for Chennai Port Trust List of Tables TABLE NO- 2.2-1: COMPARISON OF FACILITIES AT ALL MAJOR PORTS ...... 37 TABLE NO- 2.4-1: TONNAGE HANDLED DURING LAST 7 YEARS (IN MTPA )...... 50 TABLE NO- 2.4-2: MARKET DRIVERS ...... 54 TABLE NO- 2.4-3: CONTAINER TRAFFIC GROWTH (O RIGINAL )...... 58 TABLE NO- 2.4-4: CONTAINER TRAFFIC GROWTH (F INE -TUNED ) ...... 58 TABLE NO- 2.4-5: COMMODITY -WISE PROJECTED TRAFFIC GROWTH RATES ...... 59 TABLE NO- 2.4-6: OTHER COMMODITIES PROJECTED TRAFFIC GROWTH RATES ...... 59 TABLE NO- 2.4-7: CALCULATIONS FOR TARGETED TRAFFIC FOR COAL ...... 60 TABLE NO- 2.4-8: YEAR -WISE TARGETED TRAFFIC FOR COAL ...... 60 TABLE NO- 2.4-9: CALCULATIONS FOR TARGETED TRAFFIC FOR IRON ORE ...... 62 TABLE NO- 2.4-10: YEAR -WISE TARGETED TRAFFIC FOR IRON ORE ...... 62 TABLE NO- 2.4-11: CALCULATIONS FOR TARGETED TRAFFIC FOR POL ...... 63 TABLE NO- 2.4-12: YEAR -WISE TARGETED TRAFFIC FOR POL ...... 63 TABLE NO- 2.4-13: CALCULATIONS FOR TARGETED TRAFFIC FOR CONTAINERS ...... 64 TABLE NO- 2.4-14: YEAR -WISE TARGETED TRAFFIC FOR CONTAINERS ...... 65 TABLE NO- 2.4-15: CALCULATIONS FOR TARGETED TRAFFIC FOR AUTOMOBILES ...... 65 TABLE NO- 2.4-16: YEAR -WISE TARGETED TRAFFIC FOR AUTOMOBILES ...... 66 TABLE NO- 2.4-17: YEAR -WISE TARGETED TRAFFIC FOR PASSENGERS ...... 66 TABLE NO- 2.4-18: ABSTRACT OF TARGETED TRAFFIC VOLUME TO BE HANDLED AT CHPT ...... 67 TABLE NO- 2.5-1: ABSTRACT OF TARGETED TRAFFIC VOLUME TO BE HANDLED AT CHPT ...... 68 TABLE NO- 2.5-2: INFRASTRUCTURE FACILITIES FOR NON -CONTAINERIZED CARGO ...... 69 TABLE NO- 2.5-3: STORAGE AREA REQUIREMENT ...... 71 TABLE NO- 2.5-4: GAP IDENTIFICATION FOR ADDITIONAL STORAGE AREA (IN HA ) ...... 71 TABLE NO- 2.5-5: IDENTIFIED PROJECTS & ASSOCIATED STORAGE AREA ...... 71 TABLE NO- 2.5-6: PHASE -WISE BERTH REQUIREMENT ...... 73 TABLE NO- 2.5-7: BRIDGING GAP FOR REQUIREMENT OF BERTHS...... 74 TABLE NO- 2.5-8: PHASE -WISE CONVERSION OF BERTHS ...... 75 TABLE NO- 2.5-9: MODAL DISTRIBUTION FOR CONTAINERS AT CHPT ...... 77 TABLE NO- 2.5-10: AVG . MODAL DISTRIBUTION FOR IMPORT & EXPORT OF CONTAINERS ...... 78 TABLE NO- 2.5-11: CALCULATION OF RAIL CAPACITY WHICH CAN BE RELEASED ...... 78 TABLE NO- 2.5-12: CALCULATION OF INCREASED RAIL CAPACITY ...... 79 TABLE NO- 2.5-13: PHASE -WISE RAIL AND ROAD SHARE ...... 79 TABLE NO- 2.5-14: ANALYSIS OF PORT ’S CAPACITY WITH RESPECT TO ROAD CONNECTIVITY ...... 80 TABLE NO- 2.5-15: ANALYSIS OF PORT ’S ROAD CONNECTIVITY CAPACITY FOR TRANSPORTING CARS ..80 TABLE NO- 2.5-16: NO. OF VESSELS AND THEIR PARCEL SIZES EXPECTED AT CHPT PER ANNUM ...... 81 TABLE NO- 2.5-17: ABSTRACT OF TRAFFIC VOLUME WHICH CAN BE HANDLED AT CHPT ...... 82 TABLE NO- 2.6-1: IDENTIFIED DEVELOPMENT PLANS UNDER LAND USE PLAN ...... 84 TABLE NO- 2.7-1: ORGANIZATION ISSUES ...... 91 TABLE NO- 2.8-1: CHPT SWOT ...... 93 TABLE NO- 3.1-1: EVALUATION OF CHPT’ S EXISTING VISION STATEMENT ...... 100 TABLE NO- 3.1-2: EVALUATION OF CHPT’ S EXISTING MISSION STATEMENT ...... 100 TABLE NO- 3.1-3: NEW CORE VALUES , VISION AND MISSION STATEMENT ...... 101 TABLE NO- 3.2-1: BUSINESS SEGMENTS VIS -À-VIS THE STRATEGIC POSTURE ...... 108 TABLE NO- 3.2-2: CHPT – TOTAL FUNDING REQUIREMENTS ...... 119 TABLE NO- 3.3-1: CHPT – PROJECTS AND THEIR MOTIVATION ...... 124 TABLE NO- 3.4-1: CORPORATE PLANNING CELL ’S SCHEDULE OF ACTIVITIES ...... 146 TABLE NO- 5.1-1: TOTAL FUNDING REQUIREMENTS ...... 151 TABLE NO- 5.1-2: OVERVIEW OF INVESTMENTS ...... 151 TABLE NO- 5.2-1: PROFIT & LOSS ACCOUNT – PROJECTION DRIVERS ...... 153 TABLE NO- 5.2-2: BALANCE SHEET – PROJECTION DRIVERS ...... 156

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1 Executive Summary

Introduction

The Ministry of Shipping, Road Transport and Highways (MOSRT&H), has mandated Chennai Port Trust (ChPT) to develop a Business Plan that i) states a long term vision for the Port which builds on its core strengths ii) establishes the goals to be achieved over the next seven years to satisfy this vision iii) Describes the strategy to be followed to achieve these goals and iv) provide a detailed plan of action to implement the strategy.

The Department of Shipping, MOSRT&H has appointed Port of Rotterdam as Central Advisors to ensure that the Business Plan developed by the Consultants satisfactorily address all elements in the Consultants’ Scope of work. This Business Plan has been prepared for the Chennai Port Trust (ChPT) addressing the above objectives in mind. The Work on this Business Plan has been reviewed from time to time by Chennai Port Trust and the Central Advisors.

About Chennai Port

Chennai Port is the 2nd largest Port in India in terms of cargo handled, achieving a key milestone of 50 Million tonnes in March 2007. The current financial year is the 125th year of commercial operations Port. The Port serves the geographical regions of Tamil Nadu, Pondicherry, South Andhra Pradesh and parts of Karnataka and has now emerged as hub on the east coast of India. Major commodities being handled at the Port are Containers, Automobiles Exports, POL, Iron Ore, Coal, Fertilizers (products and raw materials), and general cargo items. The total quay length available is around 5.5 km. It has in all 24 berths spread over 3 docks i.e. Ambedkar Dock, Jawahar Dock and Bharathi Dock. The maximum draft available at ChPT is 17.4 m at some of these berths. There is 7.0 km of entrance channel with the depth of outer channel being 19.2 m and that of the inner channel being 18.6 m. The Port has a total land area of 240 ha (approx.). Chennai Port was the first port to start container handling operations in 1983 which were handed over to CCTL in 2001 for operating under BOT basis. A second container terminal has recently been awarded to PSA SICAL at Ambedkar dock recently to augment the container operations.

Key aspects related to the Port Infrastructure and Operations

A major change that will take place in Chennai Port is the development of the second container terminal includes conversion of existing East Quay, Naval berth and South Quay III of the Ambedkar Dock into container berths with a proposed depth of 15.5 m. This terminal will have a Quay length of 832 m. Apart from this, Chennai Port has already commenced strengthening of Jawahar Dock and dredging to a depth of 14 m shall be taken up thereafter.

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The Bharathi dock provides handling facilities for POL, containers & iron ore. It comprises of a total quay length around 1.9 km with approx. 380 m for handling iron ore, 885 for containers and rest for POL. The iron ore berth can cater even Post- Panamax ships as it has draft up to 16.5 m. The draft available at the existing container terminal berths is approximately 13.40 m and is in an ideal location as it is close to Gate No. 1. The terminal is currently able to demonstrate a better efficiency on dwell time parameter because the parcel size of ships currently berthing is in the range of 700 to 1500 teu’s which coupled with proximity to Gate No. 1 enables faster turnaround and evacuation.

Given the structure of the Port and its layout, back up land for cargo storage is expected to be a major issue in future with a not so ideal relationship existing between the berths (length and location) and the back up storage area. In this context, one CFS currently inside the port complex is now proposed to be moved out of the Port premises. There is a fishing harbour on the north side of the outer harbour. The Port is actively considering a proposal for shifting this fishing harbour further north and undertake land reclamation in the existing fishing harbour to meet the requirement of additional storage area for containers.

The existing bulk handling operations of iron ore and coal create a lot of dust within the port area. Coal handling has been identified as a port operation that ChPT would like to discontinue because of the above. The nearby port of Ennore has already built capacities for handling coal operations. Also the present coal operation occupies significant Port land which to a large extent has already been assigned to the second container terminal operations. As regards Iron ore cargo, this is identified as an operation that can positively contribute to ChPT’s profitability until that quay length and associated back-up area is required for container operations or Iron ore handling at ChPT is closed for any other reasons beyond its control. The impact of iron ore in terms of pollution can be reduced substantially by enforcing good “general house keeping”.

Competitive Position

New Entrants

Non-Major ports in the hinterland area of ChPT are fast developing to divert traffic by providing special service offerings. Amongst upcoming non- major ports, biggest threat is perceived from Krishnapatnam Port which has been awarded a concession by Andhra Pradesh to develop the existing minor port into a modern deep water port with a deep draft to handle ships of size up to 200,000 DWT. This port is understood to be targeting iron ore, coal and other minerals cargo. It has a total cargo potential of about 20 Mtpa in the short term to 37 Mtpa in the long term.

Existing Players

ChPT faces competition from other major ports in south / south east India region like Ennore, Vishakapattnam, Tuticorin and Cochin. The shape of the Southern Indian

Page 8 of 185 Final Report Business Plan for Chennai Port Trust peninsula is such that hinterland of these ports increasingly overlaps as one moves from the north to the south of India.

Ennore was originally conceived as a satellite port of Chennai to handle the dusty coal and iron ore. Accordingly ChPT also owns equity in the Ennore Port Ltd. Ennore has already diverted the coal cargo from Chennai. The shift of iron ore cargo from Chennai to Ennore will definitely pick up once the project at Ennore gets completed. Ennore also has plans to become an energy hub port. Tuticorin is perceived to be a larger threat to Chennai in terms of containers compared to Ennore, because container terminal project at Ennore might take some more time for implemention. Tuticorin is a competitor for Chennai mainly for container cargo originating from hinterland south of Chennai and also for region which is equidistant from both locations. Cochin, being just 11 nautical miles from international sea route, has planned for major projects including a trans-shipment hub to explore the opportunities offered by its geography. However the nature of the port being a transshipment port should pose no great challenge to Chennai. Ports such as New Mangalore, Goa and Visakhapatnam do not have much of an overlap with Chennai in terms of the hinterland and therefore do not pose much threat to ChPT.

Hinterland Connectivity

Highway Roads

The Golden Quadrilateral Road Project being implemented by NHAI connects Chennai to Kolkata on the east and Mumbai via Bangalore on the west and is closed to completion with small stretches pending. Chennai is well connected to other major cities by national highways.

Last Mile Road Connectivity

The last stretch of 15-20 kms from North, West and South to the ChPT through Chennai city are clogged and regulated with traffic restrictions. Thus the good penetration in the hinterland is set off against the shorter but complex city transit.

The Golden Quadrilateral shall be connected at Poonamallee outside Chennai city limits. It is therefore proposed that one of the stretches which can improve hinterland connectivity is the stretch from Poonamallee to the Port gate. A dedicated four lane elevated expressway from port’s southern gate i.e. Gate No. 10 is already proposed at an estimated cost of Rs. 750 cr.

As regards the Northern side, presently the traffic movement from the Ennore Expressway to Gate No.1 of ChPT is through the entry to the fisheries harbor which is very narrow and creates traffic hold up causing inconvenience. Therefore this road is also proposed to be upgraded under proposed Ennore-Manali Road Improvement Project (EMRIP) with ChPT participating in the same through an equity stake.

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Rail

ChPT is well connected with the national railway network. The Port is linked to Southern Railway network via Chennai Beach Railway Station which connects ChPT to Southern parts of Tamil Nadu and via Royapuram Station which connects Southern Railway Trunk line to Kolkata, New Delhi, Bangalore, Coimbatore etc. ChPT has an internal rail network of approximately 70 km length.

Rail connectivity to Tondiarpet off Dock facility

There is a need for developing an Off Dock facility. Tondairpet Housing Colony is identified as the available location for the same. Strengthening its already existing rail connectivity with the Port shall be required. This facility will be restricted to only storage of containers and shall be an intermediate point for speedy evacuation between the hinterland and the Container terminals. The facility is spread over 9 acres and is approximately 5 Kilometers away from the Port. There is already rail connectivity to Tondiarpet, but this would be insufficient as a dedicated rail connectivity would be required with the Port to run a shuttle service for effective use of Off Dock facility.

Establishment of a Shuttle railway service

The use of a "port shuttle railway" system moving containers to and from the port to an "off-dock facility" close to the port will substantially reduce container dwell time. This system will free-up valuable land inside the port. Also, the port shuttle railway service will substantially reduce the number of trucks passing through the port gates. The shuttle railway would use modern container wagons and Rail-mounted gantry (RMG) cranes would be used at the Port and the off-dock terminal to efficiently handle containers.

Use of Multi- Trailer System (MTS)

The proposed new container terminals would use tractor- trailer trains (road units) that can carry up to 6 teu with either two 20-feet or one 40-feet container on each of the three trailers. The multi-trailer system (MTS) would quickly and efficiently shuttle containers between the Port’s inter-modal rail yard and the terminals.

Need for a Master Transportation Plan

Presently the iron ore for export and the imported coal are handled exclusively by the Railways, while only about 7-8% of the container traffic is moved by the railway. The Business Plan forecasts (See section 2.4 on trade forecast for containers) that container traffic will increase from the present 0.73 Mteu per annum to more than 3.6 Mteu per annum 15 years from now. To achieve this significant growth, it is of paramount importance for ChPT to devise a comprehensive transportation master plan to handle the landside transportation of the traffic required for seamless operations. ChPT must improve both its internal road / rail system and hinterland connectivity. The ultimate removal of the existing coal yards presents a golden opportunity for ChPT to

Page 10 of 185 Final Report Business Plan for Chennai Port Trust develop a new railway inter-modal yard that will optimize the use of rail transport for the port.

Cargo Forecast

The approach followed for cargo forecast is described in this diagram:

Historic Cargo Commodity Analysis Demand Forecast Multiple Trend Analysis for future focus Regression Analysis

ChPT’s targeted Adjustment towards Fine tuning by qualitative Traffic Competitors Impact factors

The conclusions of the regression analysis and adjustments for qualitative factors result in the following growth rates for traffic for the overall southern region.

Commodity Growth Rates Coal 10% Iron Ore 8% POL 5% Containers 15% Automobiles 12% Passengers 5%

The Targeted Traffic Forecast for all major commodities are derived by taking into account the extent of competition from nearby ports in terms of their impact considering existing infrastructure facilities and considering committed investments already made by them till date. The targeted traffic forecast for each commodity is explained below:

Coal

2012 2017 2022 2027 Demand Forecast in Mtpa 7.00 14.07 28.31 56.93 Share for competitive Port It does not impact our strategic conclusion Targeted Traffic ChPT (in Mtpa) 1.43 0 0 0

The entire thermal coal has already shifted to Ennore Port which has a market share of 43% of the south India coal traffic. Ennore Pot is already doubling its capacities for coal handling. Strategically, ChPT shall not encourage the coal trade to operate out of Chennai.

Iron Ore

2012 2017 2022 2027 Demand Forecast in Mtpa 15.50 22.77 33.46 49.16 Share for competitive Port it does not impact our strategic conclusion

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Targeted Traffic ChPT (in Mtpa) 11.08 11.65 0.00 0.00

Till Dec’ 06, ChPT has handled 7.91 Mtpa of iron ore extrapolated to 11.08 Mtpa for 2006-07. Operational efficiency measures (assumed as 1% p.a) may further increase it to 11.65 Mtpa. ChPT shall make no major additional investments to attract additional iron ore volume. In two years time Ennore facility of 10 million tonnes will be ready so it can cater to all of Chennai’s current cargo. Issues such as a possible ban / restriction on iron ore exports continue to play a large role in the strategy for the Port. It is proposed that Iron ore traffic shall be handled till such time ChPT actually needs the area occupied by this activity for container operations. It is assumed that such conversion to container operations is likely to happen in the third phase (2017-2022). If container traffic does not pick up as expected, Iron Ore operations can continue. On the other hand, if Iron Ore is banned from Chennai in 2008 itself because of regulatory issues, the conversion to container operations may commence as early as 2012 with iron ore gradually moving out by 2011.

POL

2012 2017 2022 2027 Demand Forecast in Mtpa 17.03 21.73 27.73 35.39 Targeted ChPT Traffic (in Mtpa) 15.00 15.00 20.00 20.00

In 2005-06, ChPT handled 13.21 Mtpa of POL and is projected to handle only around 13.34 Mtpa in 2006-07. Discussions with the single POL customer i.e. CPCL reveal that the capacity will stagnate at 15 MT. Export of POL products to the extent of 5 Mtpa are likely to arise in the next 10 year horizon. No new refineries are known to be coming up in the primary hinterland

Containers

2012 2017 2022 2027 Demand Forecast in Mtpa 32.18 56.72 91.34 134.21 Share for Tuticorin Port 6.36 6.36 6.36 6.36 Likely share for Ennore Port 4.8 9.6 19.2 19.2 Targeted ChPT Traffic (in Mtpa) 21.02 40.76 65.78 108.65 Targeted ChPT Traffic (in Mteu ) 1.31 2.55 4.11 6.79

In the 2005-06 fiscal year (April to March), ChPT handled 0.73 Mteu of container volume. It is expected that the port shall handle anywhere between 0.85 Mteu to 1.0 Mteu in the year 2006-07. It is observed that at Tuticorin Port 1.0 teu accounts for around 10.6 Tonnes of cargo volume unlike Chennai where 1.0 teu accounts for around 16 Tonnes. Tuticorin Port is presently handling around 0.32 Mteu (i.e. 3.43 Mtpa) of containers with installed capacity of around 0.45 Mteu (i.e. 4.77 Mtpa). The port is also planning a second container handling facility with expected capacity around 0.15 Mteu escalating its total capacity to 0.60 Mteu (i.e. 6.36) by 2012. Other competitor, who is likely to develop a container terminal is Ennore Port. It is assumed

Page 12 of 185 Final Report Business Plan for Chennai Port Trust that a terminal with a capacity of 1.2 Mteu will become operational at Ennore with capacity utilization around 0.3 Mteu (i.e.4.8 Mtpa) gradually increasing to 0.6 Mteu (i.e. 9.6 Mtpa) in 2017 and upto 1.2 Mteu (i.e.9.6 Mtpa) by 2022.

Automobiles

2012 2017 2022 2027 Demand Forecast in numbers 202.7 357.2 629.5 110.9 Targeted ChPT Traffic (in numbers) 202.7 357.2 629.5 700.0

In 2005-06, ChPT handled around 1 lakh cars. This is expected to increase at the growth rate of 12% and ChPT is therefore projected to handle around 2 lakh cars by 2012. Chennai is fast becoming a manufacturing hub for automobile exports and therefore it is proposed to construct two Multi-Level Stacking facilities. With these, it is expected that the car export capacity will reach saturation between 2022 & 2027 when it shall be catering to a throughput of around 7 lakh cars per annum.

Total Traffic Abstract

Based on the above numbers, the total projected traffic at Chennai Port in different phases will be as follows:

Year COMMODITY 2012 2017 2022 2027 Containers 21.02 40.76 65.78 108.65 (in Mtpa) Containers (in Mteu ) 1.31 2.55 4.11 6.79 Iron Ore (in Mtpa) 11.08 11.65 0.00 0.00 Coal (in Mtpa) 1.43 0 0 0 Automobiles (in ’000 Nos.) 202.7 357.2 629.5 700.0 Passengers (in Nos.) 129,132 164,808 210,342 268,455 POL (in Mtpa) 15.00 15.00 20.00 20.00 General Cargo (in Mtpa) 15.76 8.77 8.77 8.77 TOTAL in Mtpa 64.29 76.18 94.55 137.42

Capacity Analysis

The assessment of maximum possible port capacity and the infrastructure development required is performed with respect to four following basic parameters:

o Ground Storage Area,

o Requirement of berth length,

o Hinterland connectivity,

o No. of vessel and their sizes

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The infrastructure facilities required for commodities other than container cargo handled by the Port i.e. iron ore, coal, automobiles, POL and general cargo are separately analyzed and are found to be capable of meeting the requirements.

Container Ground Storage area capacity:

The capacity of the proposed new container terminals at Chennai Port has been computed using the benchmark of 27,000 teu per annum per ha of land at the upper end of the range and 22,000 teu at the lower end of the range. Based on the above benchmark at 27,000 teu per annum per ha the following storage requirement is worked out.

Year Sr. Particulars Phase-1 Phase-2 Phase-3 Phase-4 No 2007-12 2012-17 2017-22 2022-27 A No. of Containers (in Mteu ) 1.31 2.55 4.11 6.79 B Storage area Requirement (ha) 48.66 94.34 152.27 251.50 C Storage area available (ha) 25.06 25.06 25.06 25.06 Storage Area Gap to be Bridged D 23.60 69.28 127.21 226.44 (in ha) Total additional storage area E possible based on planned 35.00 59.87 108.36 108.36 projects (ha) Net deficit which can not be F -11.40 9.41 18.85 118.08 bridged

As indicated in the above Table, based on planned projects, back up area for container storage shall become a constraint during Phase-3. Total area which can be then used for container storage is 133.42 ha (25.06 + 108.36). This storage area limits the capacity of the port’s container handling facility at 3.60 Mteu (133.42 ha x 27000 teu per ha). The only way to enhance the port capacity for storage area beyond the above number is by taking over land outside but near to the port, possibly the nearby fishing harbour.

Requirement of berth length for Container operations:

The requirement of berth length is worked out below:

Year Sr. Particulars Phase-1 Phase-2 Phase-3 Phase-4 No 2007-12 2012-17 2017-22 2022-27 A No. of Berths Required A1 Total berth length required 944 1947 3150 4419 A2 No. of Berths required* 3.4 7.1 11.5 16.1 B No. of Berths Available B1 Existing Terminal length 885 885 885 885 B2 Equivalent No of Berths* 3.22 3.22 3.22 3.22 C. No of Berths additionally required

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Berth length to be C1 58.80 1061.59 2265.00 3533.75 developed C2 Equivalent No of Berths* 0.21 3.86 8.24 12.85 D Total additional Berths possible to be developed D1 Total proposed berth length 800.00 1455.00 2668.00 2668.00 D2 Equivalent No of Berths* 2.91 5.29 9.70 9.70 E Net deficit in development of additional Berths Net deficit in total length of E1 -744.78 -503.58 -282.67 848.29 Berth (in m) E2 Net deficit in no of Berths -2.70 -1.43 -1.47 3.15

*Average berth length considered as 275.0 m

As analyzed from the above Table, sufficient berth length is available till the end of Phase-3. The requirement of 3 berths in Phase – 4 however cannot be met and hence becomes the limiting factor. Therefore, with 1.47 berths as surplus in phase-3, additional 0.51 Mteu (1.47 x 0.34, being the lowest berth handling capacity) can be handled. The maximum possible capacity of port against berth length by the end of Phase-3 will be 4.11+0.51= 4.62 Mteu.

Hinterland connectivity

Since coal and iron ore operations presently occupy most of the rail capacity at the port, it is expected that the same shall be released for container handling in terms of additional rail handling capacities in Phase-4. After considering this possible shift of containers to rail mode, the total no. of containers which are to be handled by road are estimated based on the balance modal share. The port gate capacity is worked out based on the following:

1) Average Working days in a year and avg. number of working hours per day

2) Number of existing lanes for the two gates of ChPT,

3) The average no. of trucks which can be handled per lane

The working has been provided in separate tables in section 2.5 for containers, cars and general cargo. This working is done assuming that the two proposed dedicated expressways each with four lane capacity lead right upto the two port gates. Thereafter, once inside the port gates, traffic will split into three different directions, one with four lanes road and the balance two roads of 2 lanes each.

The need for further expansion of both the existing gates is envisaged based on the above working. Addition of 2 more lanes at both the gates is proposed for container movement. A further addition of one dedicated lane is proposed in Phase III for cars and general cargo. The above analysis assesses the maximum possible capacity of port against connectivity as 4.11 Mteu.

Number of vessels and their size

Presently, the maximum numbers of ships visiting ChPT have parcel size between 700 to 1500 teu. Current market trend indicates that there is a possibility of larger ships

Page 15 of 185 Final Report Business Plan for Chennai Port Trust coming on the trade route. The likely container vessel calls as per the ship size and average parcel size for the targeted container cargo at ChPT have been worked out in section 2.5.

Based on the likely mix of ship sizes and average parcel sizes achieved at some other major Indian and international ports, the analysis indicates that the port would be able to handle 4.14 Mteu in phase-3.

Bottleneck Analysis

For each of the above described parameters the maximum possible capacities for container handling are compared to decide the weakest link i.e. bottleneck and arrive at the most likely port capacity for container cargo volume in teu’s.

Capacity against storage space= 3.60 Mteu

Capacity against berths requirements= 4.62 Mteu

Capacity against connectivity= 4.11 Mteu

Capacity against vessel sizes and numbers= 4.14 Mteu

The above analysis therefore indicates that the overall capacity of the port for container handling is limited by the storage space at the port. As the next limiting factor is connectivity at 4.11 Mteu , there is a need of additional storage space of around 19 ha [(4.11 – 3.60) Mteu / 27000= 18.89 ha] to handle this no. and it is proposed that the same can be made available by taking over nearby fishing harbour and shifting the existing one further north with better facilities.

Proposed Projects

Sl. Projects No Infrastructure Projects (Client Related) 1. Development of Container Terminal-2; which would include; 1.1 Conversion of EQ & SQ3 berths into container berths, 1.2 Reclaiming land at the area north of sand screen, 1.3 Conversion of a portion of coal yard into container storage yard. 1.4 Conversion of a portion of Marshalling Yard into container storage cum railway yard 2. Peripheral Road Development from Gate-1 to Gate-10 to Container Terminal-2 3. Developing a Flyover on southern side of the port connecting container terminals to Gate no. 10 4. Creation of New Cruise Terminal clubbed with a multi level car parking facility 5. Developing a Off-Dock facility at Tondiarpet Housing Colony 6. Development of Container Terminal-3; which would include; 6.1 Conversion of JD2, JD4 & JD6 berths into container berths, 6.2 Conversion of balance portion of coal yard into container storage yard.

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Sl. Projects No Infrastructure Projects (Client Related) 6.3 Strengthening of berthing face to handle ships requiring depths of 14 m 6.4 Conversion of a portion of Marshalling Yard into container storage yard 7. Development of Container Terminal-4; which would include; 7.1 Conversion of Iron Ore berths into container berths, 7.2 Conversion of back-up storage area for iron ore into container yard. 7.3 Conversion of existing CFSs into container storage yard 8. Development of Container Terminal-5; broadly includes; 8.1 Conversion of WQ1, WQ 2, WQ 3, WQ 4 & CB berths into container berths, 8.2 Reclamation of a small amount of water front on west quay to create additional back-up land 8.3 Strengthening of berthing face to handle ships requiring depths of 14 m 8.4 Dismantling of existing warehouses and passenger terminal at west quay, Ambedkar Dock 9. Reclamation of Timber pond as storage yard for General Cargo 10. Reclamation of Port Basin for container storage yard 11. Reclaiming land near Gate no.1 to the north of Bharathi Dock adjacent to eastern breakwater. 12. Ennore-Manali Road Improvement Project (EMRIP) 13. Dedicated Elevated Corridor on NH-4 from Gate-10 at Port to Maduravoyal 14. Connecting Off Dock facility at Tondiarpet to Port with Shuttle Railway.

Sl. Organization Improvement Related Projects No Marketing Projects 1. Marketing Department Capacity Building Project 2. Customer Relationship Management Project 3. Market Offerings Expansion Project System and IT related Projects 4. Restructuring of the IT Department Organization 5. Process reengineering and Improvement Project 6. Activity Based Costing 7. Security Enhancement Projects HR Projects 8. Organization Re-design and Right-sizing 9. Employee Upliftment Project 10. HR Process Improvement Project

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Port Development Projects 11. Identifying Cost Reduction Avenues and Implementing Cost Reduction Measures 12. Efficiency Improvement Project 13. Institutional Strengthening Project 14. Corporate Social Responsibility Project

Vision and Mission Statements

After extensive discussions and with active participation from ChPT personnel, the following Core Values, Vision Statement and Mission statement were agreed upon: Core Values - Integrity - Proactive - Professional - Committed - Conscious of Environment / Social obligations Vision Statement To be recognized as a futuristic port with foresight Mission Statements - Achieve excellence in port operations with state-of-the-art technologies. - Enhance competence and enthuse workforce to maximise customer satisfaction - Anticipate and adapt to the changing worldwide scenario - Act as a catalyst for sustained development of the region

Business Strategy Internal Analysis (SWOT Analysis, Stakeholder Key Uncertainties The process of Strategy Analysis) Future formulation has been Insights Industry External Assessment Scenarios elaborated in the (PESTLE Analysis, 5 Force Pre-determined Forces diagram alongside. The Analysis, Traffic/Demand Analysis) Strategy Formulation Business Strategy Thrust Areas process first entails the Business Strategy to be Functional formulated followed by Strategy Finance, IT, HR functional strategies. Projects & Process followed: Action Plan IRR, NPV, Feasibiliy 1. Identification of the Business Business Plan Projected Financials Segments: A business segment is a combination of a product / service and its key / target customers.

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2. Evaluation of Key Business Segments: After the identification of the Business Segments the next step is to evaluate and identify the segments that make the most business sense for ChPT.

3. Proposed Strategic postures: Having considered merits and demerits associated with the different business segments it becomes necessary to deal with these business opportunities strategically. We propose three different strategic postures vis-à-vis these segments:

o Shaping the Future: This posture indicates a perception that there is very good opportunity and that ChPT should capitalize on its strengths to make the most of it. It implies that in these chosen business segments ChPT shall aspire to play a leadership role and hence lead the industry. This may mean creating capacity ahead of anticipated demand.

o Adapting to the Future: This posture reflects the judgment that the intensity of pursuit or abandon depends on changing market dynamics. In these segments focus will be to compete with the regular players and to be with the trend.

o Reserving the right to Play: This posture is recommended where the level of uncertainty is very high. Thus while keeping a tab on the business dynamics, ChPT does not commit significant investments or undertake focused projects with a view to tap the business potential.

The table below indicates the strategic posture that ChPT should adopt vis-à-vis the different business segments identified.

Business Segment Strategic Posture Reserve Shape Adapt the No. Customers Service / Product the to the Right to Future Future Play 1. Shipping Lines/ IPLSP* Container Handling √ 2. Shipping Lines Ship Repair Facilities √ 3. Shipping Lines / Cruise Facility √ General Public 4. General Public Marina Facility √ 5. PS Units Liquid Cargo (POL) √ Handling 6. Public Sector / Private Bulk Cargo (Iron √ Sector Units / IPLSP Ore) Handling 7. Public Sector / Private Bulk Cargo (Coal) √ Sector Units / IPLSP Handling 8. Companies Automobile Handling √ 9. Local Govt. Bodies Desalination facilities √ 10. Other Ports Engineering √ Consultancy services 11. Public Sector / Private Break Bulk and √

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Sector Units / IPLSP Project Cargo Handling 12. Other Ports Marine Services √ 13. Acquisition of Minor Investment √ Ports 14. Other Ports Providing BOT √ services

* Integrators/Port Logistic Service providers

Key elements of the agreed business strategy include:

o Port chooses to focus on becoming a clean port with a focused attention on container handling, automobile exports and cruise terminal operations. It also anticipates coal cargo and later on iron ore cargo to be gradually phased out

o In keeping with its vision of becoming a “Futuristic Port with a Foresight” the port wants to change its image.

o ChPT key business decisions shall primarily be focused on optimum utilization of its limited land resources.

o ChPT shall also aggressively identify opportunities and take controlling stakes in other ports to either support the cargo it has decided to attract or to service at a different location the cargo it is constrained to forego.

o ChPT appreciates that its people are one of its most important resource and shall hence usher flexible HR policies along with aggressive training

o ChPT recognizes that it must have its stakeholders strongly rallying behind it and shall focus on relationships

ChPT’s Functional Strategies are classified into separate three categories as under:

Commercial Strategy

o Port Development Strategy: Infrastructure Strategy, Institutional Strengthening Strategy, Information Technology Strategy and HR Strategy

o Financial Strategy

o Financial Aspects

The principal task under this component of the assignment was to forecast financial position and financial performance of ChPT for the next 20 years. For arriving at the Financial Projections for ChPT, the following process was followed:

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Financial Understanding Discussions Deciding Statement Key Elements with ChPT Projection Analysis and Industry Drivers Experts

Preliminary Financial Financial Strategy Strategy & Financial Model Financial Strategy

For deciding the financial Strategy, we can split financial needs of ChPT in Four distinct areas:

o Financing Projects which would be able to generate commercially attractive returns once executed

o Financing Projects which have already been sanctioned and work on which has begun and which do not have adequate returns or directly identifiable returns

o Financing Working Capital requirements

o Using Surplus Funds

Private Sector Participations (through PPP Schemes) has been recommended for those projects which would be able to generate commercially attractive returns once executed. Investments by ChPT and Viability Gap Funding have also been recommended where the feasibility analysis indicates that Projects which are unviable based on forecasted revenues and expenses. For other Projects, use of Internal Funds has been recommended.

In the later part of the next 20 years, the Financial Projections show that ChPT is likely to have significant surplus funds. Various suggestions have been made for utilisation of these funds.

Financial Model: Key Outcomes

The Projected Profitability Statement for ChPT appears as follows:

Overview of Profit & Loss Account

14000

12000

10000

8000

6000 Rs. in Million in Rs. 4000

2000

0

7 9 2 7 0 0 08 0 11 1 13 14 16 1 19 2 22 24 25 27 0 0 0 0 0 0 0 0 0 0 20 2 20 2010 2 20 2 2 2015 2 20 2018 2 20 2021 2 2023 2 2 2026 2 Year Total Operating Revenue Total Operating Costs Operational Net Earnings before Depreciation, Interest & Tax Net Earnings before Tax Net Earnings

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As would be evident from the above, profitability of ChPT’s operations is likely to rise

Overview of Assets

120000

100000

80000

60000

Rs. in Millions in Rs. 40000

20000

0

6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 7 0 0 0 1 1 1 1 1 1 1 2 2 0 0 0 0 0 0 0 0 0 2 2 2 200 201 201 201 20 20 2 2 2 2 2 2 202 202 202 2024 2025 2026 20 Year

Fixed Assets Current Assets Investments Liquid Means steadily over the forecast period. Given the rise of BOT operations in the subsequent years, the gap between operating revenues and operating expenses is likely to widen thereby increasing the Operating Ratio year-on-year. The drop in revenue in the years 2019 to 2022 is because of gradual reduction in Iron Ore Traffic during this period. Net earnings have been forecast to rise quite steadily because of interest earnings from surplus funds. Interestingly due to reinvestment of surplus funds and consequent high interest earnings, Earnings before tax in last couple of years rises above the operating revenues. As has been mentioned in the paragraph on Financial Strategy above, rather than just parking these funds in government securities/Fixed Deposits, suggestions have been made for more optimum utilization of these surplus funds.

The projected Balance Sheet of the ChPT is a follows:

Overview of Liabilities

100000

90000

80000

70000

60000

50000

40000 Rs. in Million in Rs. 30000

20000

10000

0 8 2 3 7 8 2 6 7 0 1 1 1 1 2 2 2 0 0 0 0 0 0 0 0 2006 2007 2 2009 2010 2011 2 2 2014 2015 2016 2 2 2019 2020 2021 2 2023 2024 2025 2 2 Year Equity Reserves Provisions Long term loans Short term Liabilities

A reading of the assets clearly shows that investments are the only components on the rise and all other asset categories are more or less constant or are reducing gradually. This is largely because, as mentioned in the profitability analysis above, BOT operations are likely to be the flavor of the day in the years to come and due to this reason; revenues are expected to rise without a corresponding increase in expenses

Page 22 of 185 Final Report Business Plan for Chennai Port Trust giving rise to high level of cash surplus. These have, in the Model, been parked in Government Securities/Fixed Deposits (as is the current practice) and these are shown as Investments in the Balance Sheet. Investments also include investments against dedicated Funds like Provident Fund, Pension and Gratuity and these too are increased with the passage of time. Since no major asset acquisitions by CHPT are required, asset values steadily decline over the years.

Mirroring the effect on the asset side, on the liabilities side, the most significant increase is in Reserves – mostly General Reserves – which basically is the accumulated net revenue surplus of CHPT year-on-year. Provisions rise steadily mainly due to increased tax provisions which would be necessitated due to high levels of net earnings.

A more elaborate analysis of ChPT Financial Projections has been given in Chapter-5.

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2 Major Results and conclusions 2.1 Port Description 2.1.1 Introduction

Chennai Port is one of the twelve major ports in the country and the second largest port in India in terms of cargo volume handled per annum. It serves the geographical regions of Tamil Nadu, Pondichery, South Andhra Pradesh and parts of Karnataka.

Chennai Port is located at latitude of 13.06° N and longitude of 80.18° E on the southeast coast of India and in the northeast corner of Tamil Nadu. It is located on a flat coastal plain known as the eastern coastal Plains.

From a humble beginning of its commercial operations 125 years ago, it has now grown into an emerging hub on the east coast of India. Though it is about 600 nautical miles away from the international maritime route, because of its location, proximity to market, Figure 2.1-1: Location of Chennai Port with other major ports competitive pricing, safe and secure operations this is one of the preferred ports for the trade.

2.1.2 Port Infrastructure

This section of the chapter will illustrate the results and conclusions drawn while assessing the port facilities. Details on Infrastructure facilities available in Chennai Port have been furnished in Section 7.1 of Interim Report.

Chennai Port has 24 alongside berths in the 3 Docks viz., Dr. Ambedkar Dock, Jawahar Dock and Bharathi Dock. The existing Container Terminal is situated in Bharathi Dock. A detailed map of the Port covering all the docks is provided in Annexure-1.

The major cargo commodities being handled in the Port of Chennai are Containers, Automobiles export, POL, Iron Ore, Coal, Fertilisers products, Fertiliser Raw Materials, and general cargo items.

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Dr. Ambedkar Dock (AD): AD has a total quay length of around 2.3 km through 11 berths which generally cater to passengers, general cargo, fertilizers, and other ore cargoes. Of this total, the quay length of 200 m i.e. one berth is presently dedicated for naval vessels. The draft in the dock varies from a minimum of 8.5 m for passenger berth to a maximum of 12 m for general/ore berths. The entrance at AD is 125 m wide.

Figure 2.1-2: Location of Dr. Ambedkar Dock inside the Port N

Dr. AMBEDKAR DOCK

Not to scale

In order to cater to increasing future volumes of containers, the development of a second container terminal at Chennai port was conceptualized in March 2005. The proposal includes conversion of existing East Quay, Naval berth and South Quay III of the Ambedkar Dock into container berths. As this would entail shifting of Navy operations, it is decided that a 218 m long finger jetty at the erstwhile Chokhani Dry Dock can be handed over to Navy.

In order to cater to the increasing growth in the container cargo a second container terminal is in the offing. This second container terminal will be build with an investment of 491.76 crores. It will operate on BOT (Build Operate Transfer) model. The letter of intent for the same has been issued to a private operator. Chennai Port will contribute around Rs. 100 crores and operator the balance.

This terminal will have a Quay length of 832 m consisting of East Quay and South Quay-III. Four hundred meters of this length can be dredged to a depth of 15.5 m, which will be sufficient to handle fourth generation vessels.

Jawahar Dock (JD): The total quay length in JD is of around 1.3 km with 6 berths which generally cater to food grains, coal and other ores. The draft in the dock varies from a minimum of 10.4 m to 11.0 m. This is a closed dock with basin dimensions of 655m x 152m.

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Figure 2.1-3: Location of Jawahar Dock inside the Port N

JAWAHAR DOCK

Not to scale

As the deepest berth in AD, East Quay (12 m) is now being handed over to private operator for second container terminal and understanding the need for modern terminal operations, Chennai Port has already commenced modernization/ strengthening of JD. It is learnt that the work is being executed in a phased manner and strengthening is expected to be completed in November 2008 and dredging to a depth of 14 m shall be taken up there after.

In view of the trade requirements and the future ship sizes, this dock will be dredged to a depth of 14 m to enable handling of larger vessels. It is observed that this proposed modernization has already been included as a part of NMDP program in March 2006.

Bharathi Dock (BD): This dock provides handling facilities for POL, containers & iron ore. It comprises of a total quay length slightly more than 1.9 km with around 380 m for handling iron ore, 885 for containers and rest for POL. The iron ore berth can cater even Post-Panamax ships as it has draft up to 16.5 m. The two POL berths have drafts of 14.6 m and 16.5 m. The iron ore berth and one of the POL berths are the deepest berths at the Port.

Figure 2.1-4: Location of Bharathi Dock inside the Port N

BHARATHI DOCK

Not to scale

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BD also encompasses container handling operations of the port through a dedicated container terminal. The container terminal has a total quay length of 885 m with 4 berths. The draft available is approximately 13.40 m at all the berths. The entrance at BD is 350 m wide. This terminal is operated by a private operator under a Concession Agreement.

Bharathi Dock has oil berths which are capable of loading and discharging crude and petroleum products using marine loading arms and has a capacity of more than 12 Million Tonnes per annum (Mtpa).

The iron ore berth was commissioned in year 1977. It is capable of receiving, stocking, reclaiming, weighing, sampling and ship loading 8 Mtpa of iron ore per annum. It has a Bulk carrier handling capacity of 1,50,000 DWT and a Stock yard capacity of 8 lakh tones. It has a rated ship loading capacity of 8,000 Tonnes per hour.

The first dedicated container terminal in India stated operations at Chennai Port. This terminal with a quay length of 885 m and the backup area of 25 ha was handed over to a private terminal operator CCTL (Chennai container terminal) under a thirty year Concession Agreement. This terminal in the year 2005-06 handled 0.73 million teu (Mteu). The terminal is connected to the hinterland through the Beach Road railway station. There is one CFS inside the port complex.

2.1.3 Port’s navigational and harbor details

The Chennai Port has total land area of around 590 acres (i.e. 238 ha approx.) and total water area of around 420 acres (i.e. 170 ha approx.)

The port has 7.0 km of entrance channel with depth of outer channel being 19.2 m and that of the inner channel being 18.6 m. The turning circle in the inner harbour is 560 m in diameter with a depth of 18.0m.

The width of channel gradually increases from 244 m to 410 m at the bent portion and then maintains a constant width of 305 m.

At Chennai Port, being located on open straight coast, the challenges of port development were critical because of prevalence of two monsoons viz. southwest monsoon during months of June to September and north east monsoon during the months of November to February. These monsoons cause wave actions associated with littoral drift. It is learnt that the littoral drift caused due to southwest monsoon season is much more dominant compared to northeast monsoon. The orientation of the port entrance was planned facing north to avoid siltation in the approach channel and at the entrance resulted in reduced menace from the littoral depth.

The development of port caused accretion of sand on the southern side and erosion on the northern side. In order to mitigate siltation at the entrance of the port, a long bund termed as ‘Sand Screen’ was constructed at the Surf Zone, which gave a relief against siltation process at the port entrance. The severely eroded portion north of Chennai port has been fruitfully used for developing outer harbour with entrance facing north.

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Thereafter a fishing harbour has been developed on the north side of the outer harbour with the entrance facing towards north. Due to the orientation of entrance facing north and overlapping breakwaters of ports and fishing harbour (eastern breakwaters), the siltation at the entrance has been minimal.

There has been severe erosion north of fisheries harbour for several kilometers due to lack of sand supply from southern region. Due to the erosion, the Ennore Expressway north to the port has been endangered.

The Chennai - Ennore Port connectivity Project has been taken up by National Highways Authority of India (NHAI) through a separate special purpose vehicle company named Chennai Ennore Port Road Company Limited. Sea protection works including construction of groyns is an important feature in this scheme and are nearing completion.

On the south side of Chennai Port, there has been progressive creation of beach and this is creating additional land. By and large this has a beneficiary effect in the form one of the long artificial beaches in the world.

2.1.4 Port Transportation System

From April 2006 to December 2006, ChPT handled approximately 39.00 Million Tonnes (MT) of inbound and outbound cargo. Of this traffic, containerized cargo amounted to around 10.35 Mt i.e. 0.65 Mteu at an average of 16 tonnes per teu. Presently the outbound iron ore and the inbound coal are handled exclusively by the Indian Railways, while only about 7-8% of the container traffic is moved by the railway. It is apparent that the use of rail transport is underutilized when compared to other modern international ports. This is especially true for container traffic.

The Business Plan forecasts (See section 2.4 of this chapter on trade forecast for containers) that container traffic will increase from the present 0.73 Mteu per annum to more than 4.0 Mteu per annum 15 years from now and is likely to cross 6.0 Mteu per annum by the end of 20 years horizon period. This represents a dramatic increase in container traffic.

To achieve the significant growth in container traffic, it is of paramount importance for ChPT to devise a plan to handle the landside transportation of the traffic through the Port and City to the hinterland. Otherwise the full growth potential of ChPT will not be realized and competitors may gain the upper hand, diverting the traffic that should rightly be handled by ChPT.

ChPT must improve both of its existing internal road / rail system and its hinterland connectivity to retain its competitive advantage. ChPT must also reduce its heavy dependence on road transport to avoid increased congestion and efficiency loss at the existing and future terminal developments.

Shipping lines use a number of factors when selecting a port of call, including depth of water, port charges, berth availability, terminal efficiency and land transport. ChPT is

Page 28 of 185 Final Report Business Plan for Chennai Port Trust presently competitive in most of these categories, but as competition arises, a status quo position will not do.

ChPT’s Strategy (outlined in Section 2.2 of this Report) is to become the preferred Port for container business. This means that ChPT must develop the most efficient transport system possible, if it wants to become the Port of first or second call for the shipping lines. To become a Port of first call and receive the largest container vessels plying the coast, ChPT must have the best transport infrastructure and processing /security systems in India to deal with the increased handling of containers, say when a 4,000 teu vessel arrives and wants to discharge and load 2,500 teu each.

2.1.5 Internal Port Traffic

The Chennai Port receives Iron Ore mostly from the mines in the Bellary-Hospet region in Karnataka. Iron Ore is hauled by rail wagons entering the port passing through Royapuram station on the main rail network. The mechanized ore handling facility for ship loading at the iron ore berth has the installed capacity of 8000 tonnes per hour.

Chennai Port use to handle large quantities of Coal but in the recent past large share of this coal volume has shifted to Ennore Port. Coal is being shipped out of port premises using rail mode. The rail transfer yard has five railway sidings and is connected to beach road railway station of the southern railway network. These railway wagons can reach the Jawahar Dock as the rail lines are laid upto this point. Front –end loaders are used to load these wagons and also in the coal storage yard for housekeeping.

Break bulk cargo handled mostly at Jawahar Dock and Ambedkar Dock West quay is mostly in smaller parcel sizes and hence is transported to and from the port by road network. This cargo is stored inside the port complex in open spaces available and in the covered warehouses.

Chennai Port handles sizeable number of cars. A dedicated parking area of 46,000 sq. m is identified for storage of cars behind West Quay berths. These cars are driven inside the port only four days ahead of scheduled departure. The cars are generally covered to prevent any damage/ dust accumulation and are at times washed prior to their export.

The existing container terminal, presently being operated by CCTL, is in an ideal location as it is close to Gate No. 1. Unfortunately, the proposed new second container terminal located on the east side of the port will not have the same advantage. The present route to ChPT’s main exit gate is long and circuitous and subject to much traffic congestion and potential delays to vehicular traffic. For this reason, it is proposed that ChPT implement the proposed road connection to Gate No. 10 with the proposed elevated roadway that will serve as a direct “truck only” route to the location outside of the City limits.

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Although the present railway tracks within ChPT does not adequately serve the potential east-side container terminals, the ultimate removal of the existing coal yards presents a golden opportunity for ChPT to develop a new railway inter-modal yard that will optimize the use of rail transport for the port. In fact, it is envisaged that ChPT could implement a shuttle railway that could quickly and efficiently move container wagons to an off-dock inter-modal container yard located within 6 kilometers from the Port.

The Land Use Plan now shows a new perimeter road connecting the east-side terminals to a new proposed elevated corridor at Gate No. 10. The road connector requires a grade-separated overpass spanning a proposed Port railway yard. The road will also allow truck passage to/from Gate No. 1 for traffic exiting the port in a North West direction.

The Port road and rail system illustrated on the Land Use Plan is conceptual in nature and is indicative of what the proposed system would entail. As soon as ChPT reviews and accepts the major findings and proposals of its Land Use Plan as part of this business plan, it should undertake a comprehensive Transportation Master Plan that will allow ChPT to develop a transportation system required for seamless operations through the next 20 years. The plan should analyze the present logistics of container movements throughout the entire system encompassing the hinterland, through the City and within the Port. It should also identify the present and future needs of all stakeholders and potential customers, including potential locations for one or more off- dock inter-modal terminals.

Details on Shuttle Railway concept are explained in details at section 7.2 of Interim Report.

2.1.6 Assessment of Handling Operations

The vision of ChPT is to create an environmentally clean Port. The existing bulk handling operations of iron ore and coal create a lot of dust within the port area.

It is anticipated that ChPT will continue with Iron Ore for at least 10 -15 years unless there are any regulatory constraints imposed. Iron ore is identified as an operation that can positively contribute to ChPT’s profitability until that quay length and associated back-up area is required for container operation or any other strategically feasible option. The iron ore operation is entirely for exports and includes the unloading of iron ore from wagons to stockpile and later reclaiming of the iron and conveying it to the vessel by ship-loader.

Consultants past experience show, dust levels at the iron ore operation can be reduced substantially by enforcing good “general house keeping” such as keeping the terminal area clean; reviewing the bulk handling operations in terms of conveyor transfer points and other areas where material is allowed to fall or collect; and minimizing vehicular and equipment traffic within the terminal.

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It is recommended that ChPT undertake a diagnostic review of the dusting situation as a means to minimize future dusting. The review can also look at potential benefits of making any minor adjustments or renewal of equipment to increase efficiency and throughput.

Coal handling has been identified as a port operation that ChPT would like to discontinue within the very near future. It is a very dusty operation due to the types of coal handled and the way that the coal is handled by front end loader (FEL) and trucks. The present coal operation also occupies a considerable portion of Port property as it is generally a low-tech, flat storage operation.

2.1.7 Storage Capacity

Out of the total available land area of 240 ha, around 27 km of roads with various widths ranging of 6 m to 26 m are spread over an area of around 33 ha (assuming average width as 12m). Broad-Gauge Railway tracks totaling to around 68 km takes around 17 ha of the port’s land area.

Existing container terminal has been earmarked with an area of approximately 25 ha. Out of balance area, it is learnt that, around 90 ha is presently earmarked for allotment to select customers/cargo commodities.

Details on the respective storage capacity of Chennai Port are provided at Section 7.1.1. of the Interim Report.

Given the land requirement, the Port has obtained the Coastal Regulation Zone clearance from the Ministry of Environment and Forest for the first stage reclamation work for area north of sand screen to an extent of 8 hectares to create an additional open storage area. It is also envisaged that storage space shall be created by:

1. Reclamation of Port Basin for container storage yard

2. Reclaiming land near Gate no.1 to the north of Bharathi Dock adjacent to eastern breakwater to an extent of 60 hectares

It is also envisaged that existing CFS’s can be shifted out site the port premises to enhance the container storage capacity of the port. A proposal to acquire a 24 ha (60- acre) of land at Sathangadu from CMDA for setting up off-dock CFS and parking area is also included in the NMDP. However due to delay in the land acquisition, an alternative has been proposed for creating this facility at Tondiarpet Housing Colony by dismantling some old quarters. A proposal is already drawn up for the scheme and approval of Southern Railway is awaited. This will make available a buffer storage area for catering to the increasing volumes of cargo likely to be handled at Chennai port.

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2.1.8 Marine Services

Marine services basically comprises of dredgers, tugs, pilot & mooring launches etc providing assistance during berthing/ unberthing of ships. Details on the same are provided at section 7.1.1 of Interim Report.

2.1.9 Cargo Handling Equipments

The details of equipments at Chennai port include Shore Electric Cranes, Gantry Cranes, Mobile Cranes, Low Capacity, Diesel Fork Lift Truck, Heavy Duty Diesel Fork Lift Truck, Pay Loader, Diesel Electric Loco and Floating Crane-Thangam and are furnished in section 7.1.1 of Interim Report.

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2.2 Competitive Position The competitive position of ChPT was determined using “Porter’s Five force Analysis” model. As per the model, there are five competitive forces affecting an organization:

Threat of new entrants: How easy or difficult is it for new entrants to start competing, which barriers do exist?

Threat of substitutes: How easily can a product or service be substituted, especially made cheaper?

Bargaining power of buyers: How strong is the position of buyers? Can they work together in ordering large volumes?

Bargaining power of suppliers: How strong is the position of sellers? Do many potential suppliers exist or only few potential suppliers (monopoly)?

Rivalry among the existing players: Does a strong competition between the existing players exist? Is one player very dominant or are all equal in strength and size?

All of these five forces were analyzed and findings were presented in our Interim Report. A summary of the findings are depicted in Figure 1.3-2 on the next page. Conclusions reached for each of the Forces have also been given in this sub-section.

Threat of New Entrants

Competitive Bargaining rivalry within Bargaining Power of the industry Power of Suppliers Customers

Threat of Substitutes

Figure 2.2 -1: Port er Five Force Analysis

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Figure 2.2-2: Summary of conclusions of Porter’s 5 Force Analysis for ChPT

Chennai port faces very negligible
Chennai port enjoys
Chennai port presently has a pressures from various service monopoly because of Threat of New Entrants monopoly due to geographical provides like stevedores, CHA, location committed advantage concessionaire. investments by users.
New port facilities planned by
Chennai has a First Mover Advantage
The relations with labour unions are
The new port facility requires minor and major ports and has an established base of under good balance under present huge investment and long
Sethusamundram Project customers circumstances. However, they do gestation period possess lot of bargaining power.
All the ports in the southern Indian
However, this scenario may change if
Proactive measures by peninsula have smaller hinterland to initiates action to solve existing nearby major ports and minor serve and large number of upcoming labour issues ports to attract customers ports, resulting into greater competition
Labour issues faced by CCTPL will through efficient services impact future plan of becoming a hub and modern technology. Potential of new ports or
Better infrastructure and efficiency by port
Increasing containerization minor, major & international ports service providers likely to put pressure
The agreements with concessionaires and upcoming projects provide them the power to enforce through the international
All the competing ports are planning fulfillment of obligations of ChPT shipping route in the Indian for port based SEZ and also trying Ocean is increasing the grab other cleaner cargo like auto
The contractors do possess certain bargaining power due to cartelization international competition export, container cargo, project among them export, etc.

Bargaining power of service Rivalry among existing Bargaining power of port providers competitors users
Contractors/ equip. suppliers Ability to control negotiations by the
Better tariff terms Size & importance of
Cargo traffic enablers
Concessionaires threat of curtailing / cancelling services
Better efficiency the port user to the port
Importers/ exporters, CHA
Labor unions
Better connectivity
Shippers, steamer agents

Increasing containerization and rise in variety of break bulk cargo, project export,
Chennai port has negligible threat auto exports, etc. provide avenue for from competing transport modes like diversification rail/road congestion. In fact, there is Ability to utilize other ports
Monopoly status a possible opportunity for or other sources of supply
Chennai port is the entry point of sea trade promoting coastal trade. & generates employment for local
Substitutes for principal cargo community, giving bargaining power to unlikely ChPT
Principal Cargo can shift to other
Chennai port is dependent on few port users ports for its cargo like iron ore, coal & POL
Minerals export cargo (iron ore, Potential for global
Enabling policies of state Govt. to promote manganese) might also face substitute captive ports leading to increased reduction because of government bargaining power policy to impose restrictions on
Other sources of supply
User friendly attitude and efficient services minerals export to avoid domestic
Substitute products by competing ports coupled with probable shortage. decrease in hinterland transport costs

Terminology:
Threat - Negative impact
Opportunity – Positive/ neutral impact Page 34 of 185 Final Report Business Plan for Chennai Port Trust

2.2.1 Threat of New Entrants

ChPT will face threat from new entrants which are non-major ports of Tamil Nadu and other neighboring states and upcoming projects of major ports in the region. The adjacent figure represents the upcoming non-major ports and existing major ports in the Figure 2.2 -3: Upcoming non -major Southern India region. Since the liberalization policy of the central Government in 1991 and resultant increasing foreign trade, the State Governments have been trying to develop non-major ports. The increasing privatization among infrastructure projects and supporting policies and incentives have given a Vizag renewed focus to the Colachel Kakinada development of these non- Krishnapatnam major ports. New Ennore Mangalore Our analysis suggests that non- Chennai Azhikkal Pondicherry major ports in the hinterland Beypore Cuddalore area of ChPT are fast moving Cochin Nagapattinam Tuticorin forward to grab traffic by Alappuzha Major Port Tirukkadaiyur providing special service options Vizhinjam Minor Port like developing Single Point Mooring (SPM) for different customers. The state government policies for greater private sector participation have been the catalyst for such development. However, the efficient facilities provided by ChPT will help in maintaining the existing tonnage growth. The non-major ports will take some time to attract a large customer base.

Amongst upcoming minor ports, biggest threat is likely to come from Krishnapatnam Port. Krishnapatnam Port Company Ltd. (KPCL) has been awarded the concession by the Government of Andhra Pradesh to develop the existing minor port into a modern deep water port. The port is designed with deep draft to handle ships of size up to 200,000 DWT. The port is targeting iron ore cargo from Bellary – Hospet region in Karnataka, coal cargo for power plants and cement plants in the nearby areas and other minerals

Page 35 of 185 Final Report Business Plan for Chennai Port Trust cargo originating from Andhra Pradesh. Krishnapatnam has a total cargo potential of about 20 Mtpa per year in the short term and over 37 Mtpa in the long term. The port has expansion plans to build up to 30 berths and has 4000 acres of back-up area. The phase I of the port development will be completed by 2008. Krishnapatnam port has the potential to attract iron ore cargo of ChPT. Contrary to this we do not envisage any threat from Krishnapatnam for container cargo.

Apart from non-major ports, the Sethusamudram Project is expected to result in acting as catalyst for rise in coastal trade. As per a TCS report for DG Shipping on “Development on Coastal shipping and non-major ports”, about 4 Mtpa of traffic can be diverted to coastal route without increasing the transportation cost, and if the capacity planning is done in a proper way, coastal traffic can go upto 10 Mtpa by 2012. The promotion of transshipment traffic can help in saving recurring economic loss of Rs. 600 Crores annually on cargo handling alone1

The beneficiaries of the coastal trade will be all the major ports as well as non-major ports along the route. The impact of Sethusamudram project on coastal trade and on facility planning at ChPT needs to be studied.

2.2.2 Rivalry among Existing Players

Rivalry among existing players basically covers analysis of Figure 2.2 -4: Southern Indian peninsula competitive pressure from other major ports in south / south east India region like Ennore, Vizag, Tuticorin and Cochin. Existing players also cover international ports in the region like Colombo, Singapore and Hong Kong.

The shape of the Southern Indian peninsula is such that hinterland of different ports Ennore increasingly overlaps as one move from the north to the south; this is depicted in the Captive hinterland Secondary hinterland adjacent figure.

This phenomenon results in smaller hinterland area for ports in Southern peninsula and larger hinterland to serve for ports as we move northward. This creates immense competitive pressures among ports in the south because they compete for the same

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cargo, and this requires a focused planning for identifying desired niche cargo and to be the first in grabbing this traffic.

The following Table No- 2.2-1 summarizes the facilities provided by major ports in the region. Table No- 2.2-1: Comparison of facilities at all Major ports New Tuticorin Ennore Chennai Cochin Port Vizag port Mangalore Port Port Port Berths 24 11 2 10 26 13 Main berth Coal, iron Dry bulk, Coal General POL, iron ore, General types ore, POL, oil & coal cargo, liquid general cargo, Cargo, POL, General bulk, POL, fertilizer, LPG iron ore Cargo fertilizer Container 885m long, 370m 573m long, 451m long, terminal 13.4m deep long, 12.5m deep 15m deep 10.7m deep Storage 172 acre 137 acre 14 acre of 300 acres, 2 20 acres, facility owned port, inside covered Mt of various 64000 tons 200 acre & security area, 25 acre cargo storage of cargo 14000 KL of wall, 2158 of open area, owned by storage by liquid by acres 125400 tons private parties private private outside of liquid parties parties the main cargo by gate private parties Cargo 1 floating 6 electric 2 shore 12 electric 25 electric 3 electric handling crane, 12 wharf gantry wharf wharf cranes, wharf equipments electric wharf cranes, 4 type cranes, 2 4 mobile cranes, 2 cranes, 3 lift trucks grab, 1 mobile cranes, 15 fork mobile mobile mobile cranes, 26 lift trucks, 92 cranes, 7 cranes, 3 hopper, fork lift top lift carrier fork lift gantry 6 temp. trucks, 1 trucks cranes, 29 hopper floating fork lift trucks crane, 9 transfer cranes, 2 mobile cranes, 2 gantry cranes Flotilla 7 tugs, 3 pilot 5 towing 3 tugs, 2 3 barges, 3 5 pull tugs, launches, 4 tugs, 2 pilot mooring 3 pilot mooring pilot launches, launches, 2 launches, 4 launches launch, 2 3 floating mooring floating mooring cranes, 4 pilot launches cranes, 4 launches launches barges & lighters Other Mechanized Mechanized facilities ore handling ore handling facility facility, raw Water supply fertilizers, & bunkering crude oil and Crude oil liquid handling chemicals

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New Tuticorin Ennore Chennai Cochin Port Vizag port Mangalore Port Port Port facility handling facility Ship repair facility Water supply & bunkering

Ennore was originally conceived as the satellite port of Chennai to handle the dusty coal and iron ore. Ennore has already succeeded in diverting the coal cargo from Chennai. Even though the shift of iron ore cargo from Chennai to Ennore has been virtually not there at present, the project to be implemented by PSA SICAL at Ennore will definitely start the trend in next two years. With the proposed developments like LNG power project, a Petro Chem Park and a Naphtha Cracker Plant, in the immediate hinterland, Ennore port has identified its role to be the energy hub port and planned for projects like LNG terminal and marine liquid terminal. Ennore being promoted as dirty industrial port, it is very unlikely that categories like cars will move there. POL traffic of Chennai, if it at all moves out, it will shift to a SBM, and possibly not to Ennore.

While both Ennore and Tuticorin pose competitive threats to ChPT, Tuticorin is perceived to be major threat to Chennai in terms of containers compared to Ennore, because the projects at Ennore might take some time to be implemented. This was the result of the initiative taken by Tuticorin Port to privatise and improve the efficiency in the container terminal. Tuticorin is a competitor for Chennai mainly for container cargo originating from south of ChPT. Tuticorin Port has plans for further expansion in capacity for containers, coal and POL products. Tuticorin port is not directly exposed the cyclone induced delays, unlike Chennai.

Cochin, being just 11 nautical miles from international sea route, has planned for major projects including a trans-shipment hub to explore the opportunities offered by its geography. Cochin has identified big ticket infrastructure projects under SEZ led port development plan. However the cargo hinterland for this projects and the very nature of the same being a transshipment port should pose no great challenge to Chennai.

Major traffic of New Mangalore port comprises of iron ore and POL of Kudremukh Iron Ore Company Ltd. and Mangalore Refineries & Petrochemicals Ltd. respectively. The port has planned for LNG terminal and coal handling facilities. However, Mangalore, situated on the seaward side of Western Ghats does not share a major common hinterland with Chennai and therefore is not considered to be a threat to Chennai.

ChPT has identified its role to be a hub port in the Indian subcontinent on the eastern coast, However, Chennai will face competition for container cargo, coal, iron ore and POL products. In the nearby hinterland area, Chennai has the presence of global vehicle manufacturing giants like Ford, Caterpillar, Hyundai, BMW and Mitsubishi as well as domestic heavyweights like MRF, TI cycles of India, Ashok Leyland, Royal Enfield, TAFE Tractors and TVS. Hyundai has also signed a MOU with Chennai guaranteeing traffic at

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Chennai. Chennai, therefore, enjoys a strong competitive advantage so far as automotive exports are concerned.

As far as international ports in concerned, ChPT faces stiff competition from these ports for attracting main line vessels. Chennai is greatly hampered by its location which is not on the international maritime route.

2.2.3 Bargaining Power of Suppliers

Suppliers for the ChPT consist of the following:

3. Stevedores

4. Civil Construction Contractors

5. Work Contractors & Equipment Suppliers

6. Labour Unions & Dock Labour Boards

7. Private Operators & Concessionaries

Bargaining powers of these groups have been discussed below:

A. Stevedores

ChPT has been able to withstand pressures from these players because of its government protected monopoly. Even though these agencies are given opportunity to participate in management decisions by having a representative on port trust board, their say in the decision making might be limited.

However, considering the fact that the cargo to be handled at ChPT is going to be mostly containers and its consolidation, stuffing/de-stuffing will happen outside the port limits, they will become irrelevant entity.

B. Work Contractors & Equipment Supplier

The scenario presented clearly indicates that the ChPT enjoys good relations with contractors. The port is able to get the desired performance from the contractors, while the contractors have been able to get timely payments with decent tender terms and conditions. However, recent cartel formation among contractors is a cause of concern.

C. Labour Unions & Dock Labour Boards

Our study indicates that even though the port has not faced any man-day loss due to labour unrest in the past, the port does face problems of surplus labour and poor efficiency coupled with commensurate higher wage bill. As and when the Port will try to address these issues by taking tougher decisions, it is expected that there will be immediate fallout on port performance. Labour issues faced by CCTL (the container terminal operator in Chennai) are a matter of great concern because it affects the credibility of ChPT and reduction in revenue share because of effect on cargo volume handled.

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D. Private Players & Concessionaries

ChPT has substantial experience of dealing with private players ever since the introduction of the berth reservation scheme in 1995. The port has privatized a container terminal and plans to establish second container terminal through BOT operator. Whenever a PPP opportunity is tendered, ChPT receives good responses from credible infrastructure operators. This shows the possibility of the future private participation for traffic expected to be generated through such facilities.

2.2.4 Bargaining Power of Port Users

ChPT like most other major ports provide very little room for negotiation or bargaining with their users. The tariffs are fixed and the service delivery and efficiency is not comparable to private ports. Given the increasing need for international reach and the extreme congestion on rail/road traffic modes, industry players have started to look for ports as an alternative for transfer of their goods.

All these factors clearly indicate that ChPT is increasingly facing or bound to face tremendous pressure from the corporate players in terms of creating their captive ports or single buoy moorings and thus shift the cargo volume from the port.

Considering this trend, the ChPT will have to look for options like berth reservation or private participation in the port facilities. However, the port user industry might prefer berth reservation only if the port trust is able to achieve considerable efficiency improvement. Similarly, increasing container trade and break bulk cargo will result in reduction of dependency of the port trust on a particular port user.

The port should move towards a partnership model directly with its customers. For instance, partnerships with automobile manufacturers like Ford and Hyundai ought to be envisaged.

For iron ore cargo, ChPT faces competition from other major ports like Tuticorin and Vishakhapatnam, so the iron ore exporters can shift their cargo handling to other ports if the efficiency is higher, or port charges are lower and the connectivity is not the major problem. Increasing awareness about pollution issues and judicial action will require that either these cargos be shifted from ChPT or be handled with more environment management initiatives.

Bargaining power of steamer agents, shipping lines, CHA’s

These user support agencies have very little bargaining power in terms of direct interface with ChPT. However, these agencies may have power in terms of influencing the decision of the actual port users (cargo importers/ exporters) for selection of any particular port facility. However, the small port users, who trade and handle small quantity of general cargo, will switch the port facility only if the total cost results in sufficient cost reduction, because the land transportation cost is higher than the sea transportation cost. These users will also have less bargaining power because of less importance to ChPT due to lower traffic and revenue.

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2.2.5 Threat of Substitutes

The main commodities of traffic handled by the port include POL, iron ore, container cargo and other cargo. Out of the different type of cargo handled by the port, only the export of iron ore has the potential substitute source. The majority of the iron ore exported at the ChPT is carried to the ports of China. However, the National Steel Policy of the Indian government seeks to give Indian steel producers priority in the use of domestic iron ore production.

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2.3 Hinterland Connectivity The importance of maritime infrastructure in facilitating international trade and economic growth is well recognized. The recent economic indicators point towards India’s economy growing possibly at a GDP growth rate of upwards of 8 percent per annum in a sustained manner. This would require a marked improvement in modernization and up gradation of the overall port infrastructure, especially for ensuring seamless movement of cargo.

With introduction of new technology and additional capacity building, the cumulative / total capacity available at ports generally matches the current requirement. However, evacuation of cargo from ports is a matter of concern. Thus, despite having the capability of developing adequate capacity and modern handling facilities at the berths, the ports are not able to ensure competitiveness of India’s EXIM trade in the global market. This undermines the competitiveness of Indian ports vis-à-vis other ports in the region. Therefore, it is important that connectivity to gateway ports with the hinterland is augmented not only to ensure smooth flow of traffic for the present level of cargo volume but also to meet the future requirements of projected increase in traffic.

2.3.1 Hinterland mapping for Chennai

Chennai has the entire South India as its hinterland. If one were to consider the seaward connections too as hinterland for cargo potential, Chennai is well located and connected with other ports in the Bay of Bengal. The above mentioned generic advantages are somewhat nullified due to inherent disadvantages arising out of a seaport wherein the city has outgrown and gained in importance vis-à-vis the Port. Situated at the eastern end of the urban conurbation, connectivity to ChPT is time consuming and resulting additional cost burden. Use of by Rail for cargo movement is limited and hence there is overdependence on Roads for cargo evacuation.

The hinterland served by ChPT is dynamic but is shared by the major ports like Ennore, Tuticorin, Visakhapatnam, and New Mangalore port on the eastern and western coast and will be the potential hinterland for the upcoming non major ports as well. Currently Cargo to / from ChPT is handled through rail (33%), road (40%) and pipeline (27%).

An origin destination profile (O-D Profile) was prepared based on available data. Details on O-D profile are provided at section 6.2 of the Interim Report.

In order to assess the hinterland for ChPT, Origin and destinations analyzed above, the regional presence of other major & minor ports and the competitive advantage they may have over ChPT is considered. Hence, keeping in mind all these factors hinterland for Chennai have been plotted accordingly in Figure 1.5-1.

Even though there are no natural barriers, the presence of other major ports like Visakhapatnam to the North, Tuticorin to the South West (technically on East Coast) and Kochi to the west and other upcoming non- major ports like Kakinada, Krishnapatnam,

Page 42 of 185 Final Report Business Plan for Chennai Port Trust etc, the primary hinterland of Chennai can be stretched to the extent of about 100 miles only.

Further, the hinterland may be called as secondary wherefrom competition may also be able to take away Chennai’s cargo share, although logically, distances would not justify such loss of trade share. This can be stretched to 200-300 miles radii from Chennai’s location.

As it happens, beyond Bangalore the Western Ghats become a natural barrier and so it determines the western limit. Figure 2.3 -1: Hinterland Map Further to north/north-west and south/south-west, the tertiary hinterland stretches to the twin cities of Vishakhapatnam Hyderabad- Secunderabad Port and to the industrial settlement of Tiruchirappally. Rail connection by CONCOR to the former and the National Highway connection to the latter strengthen the New Mangalore Chennai Port Port same. However to the west, Bangalore remains the limit for the aforesaid reasons. Primary Hinterland The adjoining hinterland mapping is sketched as Secondary Hinterland Cochin described above. There are Port Tertiary Hinterland no strict distances, staging points, cities or towns that delineate as above. Competition between ports and service providers determine the hinterland outreach.

2.3.2 Road Connectivity

Popularly known as "Gateway to South India", Chennai is well connected to other major cities by national highways namely NH-5 which connects it to Kolkata, NH-4 which connects it to the western part of the country and NH-45 which connects it to Dindugal, the southern region.

With the objective of providing improved port connectivity, National Highway Authority of India (NHAI) has been mandated the implementation of connecting the major ports to the nearest National Highways through strengthening and four-laning of these high- density corridors.

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The Figure 2.3-2 shows the alignment of Golden Quadrilateral Project and North-South and East-West corridors.

Figure 2.3-2: Alignment of Golden Quadrilateral Project and North- South and East-West corridors

Golden Quadrilateral connects Chennai to Kolkata on the east and Mumbai via Bangalore on the west. The status of Chennai city’s in-turn ChPT’s connectivity through Chennai- Kolkata stretch under Golden Quadrilateral till Dec 2006 is depicted in figure 2.3-3.

Figure 2.3-3: Status of Chennai- Kolkata stretch under Golden Quadrilateral till Dec 2006

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The status of Chennai city’s in-turn ChPT’s connectivity through Chennai-Mumbai stretch under Golden Quadrilateral till Dec 2006 is depicted in Figure 2.3-4.

Figure 2.3-4: Status of Chennai- Mumbai stretch under Golden Quadrilateral till Dec 2006

These developments on ground suggest we can reasonably consider that Chennai city is expected to have better connectivity to the National and State highway network within a reasonable timeframe.

But the last stretch of 15-20 kms from North, West and South to the ChPT are clogged and regulated with traffic restrictions. Thus the penetration in the hinterland is set off against the shorter but complex city transit; Bangalore to Chennai outskirts may be hauled in 4-5 hours but the last 20 kms at times require up 1.5-2.0 hours, that too only during night time. The ring roads circumventing the city have helped but increased the distance and costs against marginal savings in hauling time.

The Golden Quadrilateral shall be connected at Poonamallee outside Chennai city limits. It is therefore proposed that one of the stretches which can improve hinterland connectivity is Poonamallee to the Port gate. A dedicated elevated expressway from port’s southern gate i.e. Gate No. 10 of ChPT near the War Memorial on Kamarajar Salai, over the EVR Periyar High Road to Maduravoyal leading to the NH-4 is already proposed in NMDP program at an estimated cost of Rs. 750 cr. This corridor is planned as a four-lane corridor along the Poonamallee High Road.

In view of the improving the port’s connectivity on the northern side, improvement and strengthening of major road network in Ennore and Manali area is envisaged. This is proposed to provide much desired connectivity to the Port from the national highway and also provide a face–lift to the approach roads to the Port. Presently the traffic movement from the Ennore Expressway to Gate No.1 of ChPT is through the entry to the fisheries harbor which is very narrow and creates traffic hold up causing inconvenience. The road passing through the fishing harbor should also be upgraded under proposed Ennore Manali Road Improvement Project (EMRIP). The EMRIP project has already been taken up by NHAI through a separate special purpose vehicle named Chennai Ennore Port Road Company Limited. Under this scheme, the following works will be taken:

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o Sea protection works on Ennore Expressway.

o Widening of Ennore Express way to 4 lane along with service Roads on both sides for 6.8 Km.

o Improvement and widening of TPP road

o Strengthening of IRR and MORR road

Sea erosion protection works are nearing completion and other components of the project are in initial stages of implementation. About 80,000 sq.m. of land has been reclaimed along the Ennore coast, which was in the past affected by sea erosion. Work on Tiruvottiyur -Ponneri -Pancheti (TPP) Road was inaugurated in the month of March’06 and the project components inside Fishing Harbour and at MORR and Inner Ring Road will be taken up soon. Total road length under EMRIP project is around 30 km and the Figure 2.3-5 indicates the alignment of proposed roads under this EMRIP Scheme.

Figure 2.3-5: Alignment of proposed roads under this EMRIP Scheme

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Government had approved participation of ChPT in the Special Purposed Vehicle comprising ChPT, National Highways Authority of India (NHAI) and Government of Tamil Nadu. The State Government is also participating in this project by way of equity in this company worth Rs.30 crores by virtue of handing over of Northern portion of Inner Ring Road (IRR), Manali Oil Refinery Road (MORR) and Thiruvottriyur - Ponneri - Panchetty Road (TPP).

2.3.3 Rail Connectivity

The ChPT is well connected with the national railway network. The Port is linked to Southern Railway network via Chennai Beach Railway which connects ChPT Station to Southern parts of Tamil Nadu and via Royapuram which connects Southern Railway Trunk line to Kolkata, New Delhi, Bangalore, Coimbatore etc.

Port railways interchange traffic with southern railway

o Port’s connection from Via Royapuram Station to Bharathi Dock for exchanging Iron Ore traffic coming from Ore mines meant for export through ChPT.

o Exchanges other general-purpose traffic via Chennai Beach Station into Marshalling Yard at ChPT Railway. This general purpose traffic includes import of Steam Coal, Coke and Thermal Coal for steel and cement industries and also for the two power stations for APSEB and KPCL.

o The exchange of container trains from Chennai Beach Station into N&C (North & Central) yard of Port Railway System. The unloading and loading of container is handled by CONCOR. CONCOR is provided with a dedicated siding and also developed port land for stacking containers.

The ChPT has a rail network of approximately 70 km. The Bharathi Dock marshalling yard has a capacity to handle 10 rakes of railway wagons per day for Iron Ore and 2 container rakes. Similarly the coal yard including sidings can handle 7 rakes.

As the port in its strategy has emphasized on containerized cargo, it is imperative to improve the share of rail in transporting containers from the present 7%, to take the load off from roads and faster movement of containers to the hinterland locations. In this regard, the following projects are required to be undertaken to improve rail connectivity.

Developing an Off-dock facility at Tondiarpet

There is a need for developing an Off Dock at Tondairpet Housing Colony as shown in figure below and strengthening its already existing rail connectivity with the Port. This facility will be restricted to only storage of containers and shall be an intermediate point for speedy evacuation between the hinterland and the Container terminals. Activities related to a typical CFS such as stuffing / de-stuffing will not be carried out at this location. The facility is spread over 9 ha and is approximately 5 Kilometers away from

Page 47 of 185 Final Report Business Plan for Chennai Port Trust the Port. Though dedicated rail connectivity from Tondiarpet Housing Colony to port is envisaged, we also propose to check the feasibility of having a dedicated elevated rail link.

It is also proposed to carryout a study for assessing the possibility of further augmenting the land capacity of this facility by relocating the nearby stadium and school as shown in the figure below

Tollgate Road

School

THC

Thiruvo ttriyur High Road

Stadium

Establishment of a Shuttle railway service

Initial observations and the experience of the Consultant indicate that the use of a "port shuttle railway" system moving containers in-bond from the port to an "off-dock facility" close to the port will substantially reduce container dwell times. This system will free-up valuable land at the port that is presently used for the storage of containers. Also, the port shuttle railway service will substantially reduce the number of trucks presently servicing the port. With good management, the port shuttle railway would always have a balanced flow of loaded and empty containers moving in both directions ensuring a high level of utilization.

The shuttle railway would use modern container wagons and depending on distance and train speed would shuttle between the off-dock inter-modal container yard and the port on a around-the-clock basis. Rail-mounted gantry (RMG) cranes would be used at ChPT and the off-dock terminal to efficiently handle the containers. The proposed new inter- modal railway yard would allow all terminals to receive containers via the railway system.

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Use of Multi- Trailer System (MTS)

The proposed new container terminals would use tractor- trailer trains (road units) that can carry up to 6 teu with either two 20-feet or one forty-foot container on each of the three trailers. The multi-trailer system (MTS) would quickly and efficiently shuttle containers between the Port’s inter-modal rail yard and the terminals. The MTS system is successfully used at number of international terminals where containers must be quickly moved within the Port areas over medium distances.

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2.4 Cargo Forecast Cargo handling forecast is the most pertinent factor as it enables us in deciding upon the future infrastructure and other functional facilities required and service levels demanded. This section presents the excerpts of a detailed cargo forecast study carried out and the outcomes.

In order to forecast the cargo potential over the horizon period of 20 years, the historic cargo trends with various quantifiable and non-quantifiable variables were used as inputs in developing a Statistical Model. The statistical model is developed using multiple regression analysis and resulted in demand forecast for the region which is further translated into targeted traffic forecast for ChPT. Detailed methodology followed and various interim outcomes are illustrated in section 6.6 of the interim report.

2.4.1 Commodity analysis

In order to understand the trade flux, the traffic analysis was carried out based on the last 7 year statistics of cargo volume handled at the Port. The same is presented in Table No- 2.2-1: Table No- 2.4-1: Tonnage Handled During Last 7 Years (in Mtpa) 1999- 2000- 2001- 2002- 2003- 2004- 2005- Commodities 2000 2001 2002 2003 2004 2005 2006

POL 10.05 8.69 8.51 8.92 9.48 11.7 13.21

Growth% over last year -13.53 -2.07 4.82 6.28 23.42 12.91

% share 26.84 21.08 23.57 26.48 25.82 26.71 27.96

Iron Ore 6.19 6.82 7.44 7.94 8.92 9.6 9.46

Growth% 10.18 9.09 6.72 12.34 7.62 -1.46

% share 16.53 16.55 20.60 23.57 24.30 21.92 20.02

Fertilizers 0.69 0.48 0.49 0.42 0.38 0.55 0.71

Growth% -30.43 2.08 -14.29 -9.52 44.74 29.09

%share 1.84 1.16 1.36 1.25 1.04 1.26 1.50

Raw Fertilizers 0.47 0.43 0.32 0.28 0.32 0.32 0.36

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1999- 2000- 2001- 2002- 2003- 2004- 2005- Commodities 2000 2001 2002 2003 2004 2005 2006

Growth% -8.51 -25.58 -12.50 14.29 0.00 15.63

% share 1.26 1.04 0.89 0.83 0.87 0.73 0.78

Thermal Coal 9.23 11.67 7.19 2.68 1.86 1.99 1.91

Growth% 26.44 -38.39 -62.73 -30.60 6.99 -4.02

% share 24.65 28.31 19.91 7.96 5.07 4.54 4.04

Cooking Coal 0.41 0.53 0.52 0.98 1.34 1.32 1.26

Growth% 29.27 -1.89 88.46 36.73 -1.49 -77.13

% share 1.10 1.29 1.44 2.91 3.65 3.01 2.67

Containers 3.98 5.99 5.86 7.22 8.63 9.86 11.76

Growth% 50.50 -2.17 23.21 19.53 14.25 19.27

% share 10.63 14.53 16.23 21.44 23.51 22.51 24.89

Others 6.42 6.61 5.78 5.24 5.78 8.46 8.58

Growth% 2.96 -12.56 -9.34 10.31 46.37 100.94

% share 17.15 16.04 16.01 15.56 15.75 19.32 18.16

Total 37.44 41.22 36.11 33.68 36.71 43.80 47.25

Growth% 10.10 -12.40 -6.73 9.00 19.31 7.88

Containers (teu) 321960 352307 344528 424665 539265 616530 734778

Growth% 9.43 -2.21 23.26 26.99 14.33 19.18

Cars 5260 4635 8432 39868 83121 102692

Growth% -11.88 81.92 372.82 108.49 23.55

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Having observed the change in the total cargo volumes in the last 7 years there is a need to analyze the transformation pattern for each major commodity individually. Detailed commodity analysis has been carried out in the section 6.1 of the Interim Report.

The commodity analysis has been further bifurcated into Trade analysis & Trade Focus. Trade analysis talks about trade pattern observed in the recent years and trade focus illustrates the future expected pattern. The conclusions on the same have been presented below for each major commodity:

A. Coal

Trade Analysis: Thermal coal is one commodity which has dropped drastically from 9.0 Mtpa to 2.0 Mtpa over the last few years. The main reason is that the coal linkages to power utilities have been moved to nearby ports and the remaining volume serviced out of Chennai is only to the private sector.

Coking coal has grown from 0.4 Mtpa in 2000 to 1.26 Mtpa in 2006 showing a 215% phenomenal growth. However the annual growth rates are uneven with negative growths in 2002, 2005 and 2006 as compared to the previous years. After the substantial catch up growth in 2003-04, the total Coal cargo has been approximately 1.3 Mtpa during the last three years.

Trade focus: Growth opportunities appear limited, unless policy decisions compel increased use of the linkage via ChPT. Though India has ample reserves of Thermal Coal, the ash content therein is found to be high and calorific value lower than imported coal. The coal reserves of the nation are on the northern side of the country. High domestic transportation cost makes imports attractive and coastal power plants and industrial units better propositions in the peninsular geography. As such Coal in all its forms is expected to be imported in high volumes, with improved / increased supplies from Indian mines catering to a part of the demand surge in the hinterlands.

As regards coking coal, new coke oven plants are being put up and its import has been dropping. Therefore, coking coal is to be considered only as a minor contributory to Chennai trade.

B. Iron Ore

Trade Analysis: As it can be seen from the historic trend that this is a commodity which has never seen negative growth rate except for the year 2005-06. Share of Iron Ore to the total Port tonnage ranges from 16% to 20% and the commodity has averaged a growth of over 7% in the last seven years.

Trade Focus: Exports of iron ore are touching a 10 Mtpa mark. This growth has been driven by the Chinese boom which is in for some correction. Due to environmental issues, the impeding creation of an Iron Ore loader facility at Ennore Port, and the

Page 52 of 185 Final Report Business Plan for Chennai Port Trust possibility of a reduction / ban on its export to preserve it for domestic steel plants, the dependence on its growth and share for CHPT will have to be toned down.

C. POL

Trade Analysis: This is one of the most important commodities that has accounted for a quarter of the port’s total cargo during the last seven years. Further, the strength of this sector can be seen by the fact that even the oil prices surged high to a price of 75$ per barrel, then also this sector continued to show a growth rate of 13% during 2005- 06. POL has consistently contributed at above 20% of the total Port’s tonnage.

Trade Focus: Under POL, the most important product is crude oil which is being imported from the Gulf countries. With the evolution of new technology like Single Buoy Mooring (SBM) the throughput at the ports can be affected in the future. After imports were liberalized, the oil products, more appropriately the petrochem sector has seen growth and diversification terms of product range from base oil (lube) to orthoxylene and carbon black. These can be expected to increase in variety and volume. Newer refining capacities have made India a net exporter of Petroleum Products driving up crude imports too. As India has turned into a net surplus refiner, petroleum product exports are on the increase. POL has ample capacity and demand potential for growth through general economic drivers. Therefore, POL throughput will continue to increase incrementally in the near future. The scope of the Port is however limited in managing the increase in the POL traffic numbers because ChPT has only one POL customer and there is a basic limitation to the total refining capacities that the customer has. No new refining capacities are envisaged in the ChPT hinterland.

D. Containers

Trade Analysis: It is observed from the historic trend that growth has been around 20% over the previous year’s numbers and the share of containers in the total cargo volume has been constantly increasing in the past few years from 10% seven years back to 25% by 2005-06. In addition to this, the recent trend indicates various new commodities are also being containerized resulting in further addition to the growth pattern. With this, container trade can be considered to be main thrust area in the coming years.

Trade Focus: Chennai is a pioneering port with container handling facility on the east coast and coupled with a distinct locational advantage, container trade is expected to have phenomenal growth in the future years. A second container terminal is already in the offing at the port to cater the expected increase in container traffic. Understanding the fact that privatizing the containerized operations brings improvement in the productivity, the second terminal has been planned on BOT basis. Presently, smaller ships are calling at the port, hence the facilities at the port for container handling are under utilized, but in the near future the trade pattern may change which may lead to increase in the container trade. The worldwide shipping pattern also indicates the ship sizes are gradually becoming larger to benefit from the economies of scale.

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E. Automobiles

Trade Analysis: This sector has seen phenomenal growth from 5260 cars being exported in year 2000-01 to 102692 cars in the year 2005-06. This is in addition to the cars brought down in knocked down condition (CKD). It is envisaged that this sector will show continuous improvement in the coming years.

Trade Focus: Industry research has shown positive results which further strengthen the belief that this sector will grow as many new car manufacturing, ancillary and assembling units are coming up in the vicinity of Chennai. Hyundai is planning capacity expansion of its plant which will double its production capacity. The other vehicle manufacturers include Ford, Leyland, Daimler & Chrysler, etc. Hence a good traffic growth can be expected in this sector.

2.4.2 Market Drivers

The traffic handled at the Port is affected by the multiple market drivers. These market drivers help in projecting the growth rates for the commodities as we look into the future and work out a traffic forecast. Most of these market drivers have considerable affect on the ChPT traffic but several of these are non-quantifiable. Details on the impact of each market drivers (shown in Table No- 2.2-2) have been discussed in the section 6.5 of the Interim Report. Table No- 2.4-2: Market Drivers Macro Economic Drivers Port Sector Drivers Activities Government Policies Administered Agriculture Focused Population Commodity Driven Import Substitution Location Trade Oriented Manufacturing Industrial Development Facilitating Role Assembling Economies: Global & Public-Private Partnerships Export Oriented National Consumer driven TRADE & Exchange Rates Weather windows Historical Linkages Human Resource Hinterland Resources Technology Drivers Labour Oriented Minerals Equipment Cost driven Rain-Fed Agriculture Productivity led Plateau –less Quality focus mountainous Unionism Adaptability Professional pool Hinterland Connectivity Island Trade Urban conurbation Coastal Trades Road access Cruising Air & Rail Connectivity Ship Repair Facilities Waterway possibilities

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2.4.3 Demand Forecasting

For estimating the demand forecast for ChPT’s hinterland i.e. South India, all commodities have been split into two groups:

o Major Commodities

o Other Commodities

Major Commodities:

This Group consists of the following commodities:

o Coal

o Iron Ore

o POL

o Containers

o Automobiles

For these major commodities, demand forecast has been derived using a combination of two methods:

o Regression Analysis for quantifiable factors

o Analysis of Qualitative factors

A statistical model (Multiple Regression Analysis) has been developed for estimating the demand in Southern India for major commodities based on available quantifiable factors. Multiple Regression Analysis is an effective statistical tool used for demand forecasting where the demand for a particular commodity depends upon various quantifiable factors. This demand Forecast has further been adjusted / fine tuned by taking into account all the non quantifiable factors. This adjusted demand forecast for Southern India has been translated into a specific targeted traffic forecast for ChPT by taking into account the extent of competition from nearby ports which have an equal opportunity to attract the southern India demand forecast as worked out above. The impact of competition has been worked out keeping in mind existing as well as planned infrastructure facilities at the competing ports. The detailed Methodology adopted for Demand Forecasting and then translating Demand Forecast into Targeted Traffic forecast is illustrated in section 6.6 of the Interim Report.

A. Coal

Coal traffic has been forecasted based on the following principal factors:

Quantitative Factors (i) Southern Region Gross State Domestic Product % (GSDP), and (ii) Growth in coal handled by all major ports & Growth in coal import

Qualitative Factors used for this forecast are:

o Liberal trading, stocking, stacking and leasing facilities at local ports till date

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o Inadequate inland supply of coal

o High ash content in Indian coal supply - Most Indian coals have high ash content of the order of 25–35%. High ash in the coal not only reduces the thermal value of coal which is not preferred by the Indian thermal plants but also leads to production of fly ash, which is a major environmental problem.

o Slow liberalization in mining

o Distances from mine pits – given the distances and quality constraints, imports may still be a better option

o Surging demand for coastal thermal and cement plants due to infrastructure- housing building boom

o Macro Economic Factors

The multiple regression analysis indicates that the coal volumes are expected to grow at the growth rate of around 7.44%. However, for coal traffic, there are a host of qualitative factors which will impact the growth of coal traffic in the region.

Taking these factors into consideration the demand of coal can be assumed to be growing at 10 % for the southern India.

B. Iron Ore

Iron Ore traffic has been forecasted based on the following major factors:

Quantitative Factors:

o India’s Gross Domestic Product % (GDP)

o Growth in Iron Ore handled by all major ports

o Growth in Iron Ore exports

Qualitative Factors:

o With the upcoming facility at Ennore, Chennai theoretically might stand to lose its entire volumes. However, given the likely higher pricing at Ennore may prove beneficial to ChPT.

o Capacity utilization of major suppliers like Australia and Brazil could impact demand from India

o Steel industry in India is lobbying hard to restrict / ban iron ore exports as new mega plants are planned by domestic giants like TISCO, SAIL, POSCO, MITTAL etc. While their demand is for prohibition and ban of Iron Ore export and it is indeed a distinct possibility in a long term, in the short term, restrictions seem more likely than such drastic measures.

o Various other Macro Economic Factors

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The multiple regression analysis done for iron ore resulted in growth rate of around 9.98%. Taking into account the above qualitative factors, Iron Ore demand has been adjusted to 8 % for the future.

C. POL

POL traffic has been forecasted based on the following important factors:

Quantitative Factors:

o India’s Gross Domestic Product % (GDP) (Factor X1 in regression analysis)

o Growth in POL handled by all major ports (Factor X2 in regression analysis)

o Growth in POL Imports (Factor X3 in regression analysis)

Qualitative Factors:

o The only import-commodity under this category is Crude oil. With an SBM (Single Buoy Mooring) being installed off Paradip, traffic through ChPT will reduce. A SBM off Chennai itself could be a reality eventually.

o While demand for POL products will continue, exploitation of the opportunity is not entirely within the Ports’ reach as Oil companies are the ones who determine usage and terminal throughputs.

o Eventual shortage of availability of Crude Oil

o Drop in consumption given the rise in prices

o Controls through pricing when the price surges further

o Gas substitution and new Refining capacity impacts.

The multiple regression analysis enabled us in conclude that POL volumes will grow at around 7.07%. Given the above qualitative factors, growth in POL traffic for the southern region has been adjusted to 5% p.a.

D. Containers

Container traffic volumes for the future years have been estimated on the statistical model using the following principal factors:

Quantitative Factors:

o Total traffic of Indian major ports

o Container traffic trends in India

o Containerization of break bulk cargo

o Manufacturing growth rate

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Qualitative Factors:

o Hinterland Connectivity

o Trade Pattern

The multiple regression analysis enabled us in understanding that the container volumes will be as indicated in Table No- 2.4-3: Table No- 2.4-3: Container Traffic Growth (Original) Year Southern India’s Container Traffic Growth % 2007-12 16.30 2012-17 11.80 2017-22 10.38 2022-27 8.09

However, as mentioned before, traffic forecast is not only a derivative of quantifiable factors but also depends on certain qualitative factors as well. Qualitative factors like hinterland connectivity and emerging trade pattern will also play a role in arriving at the forecasted traffic volumes.

Keeping these quantitative and qualitative two factors in mind the demand forecast was further adjusted to the % growth presented in Table No- 2.4-4.

Table No- 2.4-4: Container Traffic Growth (Fine-Tuned) Year Southern India’s Container Traffic Growth % 2007-12 15% 2012-17 12% 2017-22 10% 2022-27 8%

These growth rates shall provide us with demand forecast in the hinterland near ChPT.

E. Automobile

Projected Automobile export volumes have been forecasted based on the following principal factors:

Quantitative Factors: Automobile Export trends in India & South India GDP growth

Qualitative Factors: Trends in Automotive Industry & Macro Economic Factors

The multiple regression analysis enabled us in understanding that that automobile volumes will grow at the rate of 13 % in the future years. But considering the impact of certain qualitative factors like trend seasonality & cyclic fluctuation in the industry and other macro economic factor as well, the growth of automobiles volumes can be corrected to 12 % in the coming years.

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Summary of the Commodity wise projected traffic

Table No- 2.4-5 indicates the abstract on Demand Forecast for all above major Commodities. Table No- 2.4-5: Commodity-wise Projected Traffic Growth Rates YEAR COMMODITY 2007-12 2012-17 2017-22 2022-27 Coal 10% 10% 10% 10% Iron Ore 8% 8% 8% 8% POL 5% 5% 5% 5% Containers 15% 12% 10% 8% Automobiles 12% 12% 12% 12% Passengers 5% 5% 5% 5%

F. Other Commodities

For other commodities, a mix of quantitative and qualitative factors was analyzed. The demand forecast growth rates so derived for other commodities are based on industry expertise and expert views obtained on the likely growth pattern for these commodities. This approach has been taken considering that all of these commodities collectively contribute to a little less than 20% of the total cargo handled by ChPT in 2005-06.

The final demand forecast figures have been presented in Table No- 2.4-6: Table No- 2.4-6: Other Commodities Projected Traffic Growth Rates Commodity Growth Rates (%) Fertilizers 4% Grains & Sugar 4% Engineering Goods 10% Other Minerals 8% Steel Products 8% Consumer Products 15% SEZ Products 8%

As business plan shall be supported by several initiatives in terms of development of infrastructure facilities and functional capabilities, it required demand forecast to be translated into a traffic forecast which ChPT can target. The section below would translate the derived demand forecast into targeted traffic volumes for ChPT.

2.4.4 Targeted Traffic Volumes

After understanding the total demand potential in the ChPT hinterland and estimating the likely share which can be taken away by competing ports based on their future plans, the targeted share for the ChPT is estimated.

The estimation of the targeted share of each commodity for ChPT is illustrated below:

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A. Coal

In the year 2005-06, ChPT handled 3.17 Mtpa of coal comprising of 1.26 Mtpa of Coking Coal and 1.91 Mtpa of Thermal Coal. As it is observed from the recent years, almost entire thermal coal has already shifted to Ennore Port and is no longer handled at ChPT. In addition, in view of specific strategy outlined in Chapter 2,2 of this report regarding coal, ChPT will now no longer encourage the coal trade to operate out of Chennai. A significant part of the area currently used for coal storage is already allotted for the second container terminal. Based on the above, coal volume including coking coal shall also be shifted to Ennore Port as quickly as possible. It is assumed that complete shifting of coking coal may take some time. In the current year, till December 2006, the port has handled around 1.073 Mtpa of coking coal which is expected to reach 1.43 Mtpa by the end of the year 2006-07. As no special initiatives are envisaged for attracting this commodity at the port, it is expected that the volume to be handled would not increase but remain more or less the same i.e. 1.43 MT. This is in spite of the fact that the overall demand forecast for the southern India hinterland is pegged at 10%. Table No- 2.4-7: Calculations for Targeted Traffic for Coal COAL (in Mtpa) 2012 2017 2022 2027 Demand Forecast in Mtpa 5.60 9.02 14.53 23.41 Share for competitive Even if other ports attracts some of this traffic, it Port does not impact our strategic conclusion Targeted Traffic at ChPT (in Mtpa) 1.43 0 0 0

Estimated volumes thereby are indicated in Table No- 2.4-8: Table No- 2.4-8: Year-wise Targeted Traffic for Coal Demand Traffic Year Growth Forecast Forecast (in %) ( in MT) (in MT) 2006 -07 10% 3.48 1.43 2007-08 10% 3.83 1.43 2008-09 10% 4.21 1.43 2009-10 10% 4.63 1.43 2010-11 10% 5.10 1.43 2011-12 10% 5.60 1.43

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Demand Traffic Year Growth Forecast Forecast (in %) ( in MT) (in MT) 2012-13 10% 6.17 2013-14 10% 6.78 2014-15 10% 7.46 2015-16 10% 8.21 2016 -17 10% 9.02 2017-18 10% 9.92 2018-19 10% 10.92 2019-20 10% 12.01 2020-21 10% 13.21 2021-22 10% 14.53 2022-23 10% 15.99 2023-24 10% 17.58 2024-25 10% 19.34 2025-26 10% 21.28 2026-27 10% 23.41

B. Iron Ore

In the year 2005-06, total iron ore handled at ChPT was 9.46 MT. In the current year, till December 2006, the port has handled 7.91 Mtpa of iron ore. But in line with future strategy and identified thrust areas as outlined in this Report, no special efforts will be made to attract additional iron ore. This also means that no major additional investments will be made for the Iron Ore handling. With this strategic posture, it is planned that the iron ore traffic shall be handled by ChPT only till such time we actually need the area occupied by this activity for any other strategic infrastructure development especially container operations.

A marginal improvement of around 1% in throughput has been considered with various operational efficiency measures like reduction in pre-berthing and related delays, reduction in non-working days, and corresponding improvement in operating out put.

During the future port planning process as per the capacity requirement, it is observed that the actual need for this conversion may arise during the period 2017 – 2022 i.e Phase-III and accordingly necessary measures can be taken in advance to stop the iron ore handling operations so that the area can be made available before the conversion of this berth to container berth can be taken up.

Given the above, iron ore traffic numbers are expected to rise from 10.66 Mtpa in 2007- 08 to 11.65 Mtpa by the end of 2017 and would further start ceasing gradually to zero by the end of 2022.

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Table No- 2.4-9: Calculations for Targeted Traffic for Iron Ore IRON ORE (in Mtpa) Year 2012 2017 2022 2027 Demand Forecast in Mtpa 15.50 22.77 33.46 49.16 Share for competitive Even if other ports attract some share of this Port traffic, it does not impact our strategic conclusion Targeted Traffic Volume at ChPT (in Mtpa) 11.08 11.65 0.00 0.00

Estimated targeted volumes thereby are indicated in Table No- 2.4-10: Table No- 2.4-10: Year-wise Targeted Traffic for Iron Ore Demand Traffic Growth Year Forecast Forecast (in %) ( in Mtpa) (in Mtpa) 2006 -07 8% 10.55 2007-08 8% 11.39 10.66 2008-09 8% 12.31 10.76 2009-10 8% 13.29 10.87 2010-11 8% 14.35 10.98 2011-12 8% 15.50 11.09 2012-13 8% 16.74 11.20 2013-14 8% 18.08 11.31 2014-15 8% 19.53 11.42 2015-16 8% 21.09 11.54 2016 -17 8% 22.78 11.65 2017-18 8% 24.60 8.00 2018-19 8% 26.57 6.00 2019-20 8% 28.69 4.00 2020-21 8% 30.99 2.00 2021-22 8% 33.47 0.00 2022-23 8% 36.14 2023-24 8% 39.04 2024-25 8% 42.16 2025-26 8% 45.53 2026-27 8% 49.17

As the decision of shifting the Iron Ore to Ennore Port is not governed completely by strategy adopted by ChPT, the possibility of any ban on its export from Chennai also exists. A scenario with Iron Ore getting shifted to Ennore port by the end of year 2012 has also been presented in Annexure 5.

C. POL

In 2005-06, ChPT handled 13.21 Mtpa of POL and is projected to handle only around 13.34 Mtpa in 2006-07. Based on discussions with the single POL related customer i.e. CPCL, it is understood that the capacity will stagnate at 15 Mtpa. This is because there are currently no plans for oil companies to set up new refining facilities in the immediate

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Chennai hinterland. Export of POL products to the extent of 5 Mtpa is also envisaged from third phase onwards; increasing it to 20 Mtpa. Table No- 2.4-11: Calculations for Targeted Traffic for POL POL 2012 2017 2022 2027 Demand Forecast in Mtpa 17.03 21.73 27.73 35.39 Targeted Traffic at ChPT (in Mtpa) 15.00 15.00 20.00 20.00

Table No- 2.4-12: Year-wise Targeted Traffic for POL Demand Traffic Growth Year Forecast Forecast (in %) ( in MT) (in MT) 2006 -07 5 13.34 13.34 2007-08 5 14.01 14.01 2008-09 5 14.71 14.71 2009-10 5 15.44 15.00 2010-11 5 16.21 15.00 2011-12 5 17.03 15.00 2012-13 5 17.88 15.00 2013-14 5 18.77 15.00 2014-15 5 19.71 15.00 2015-16 5 20.69 15.00 2016 -17 5 21.73 15.00 2017-18 5 22.82 15.00 2018-19 5 23.96 15.00 2019-20 5 25.15 15.00 2020-21 5 26.41 15.00 2021-22 5 27.73 20.00 2022-23 5 29.12 20.00 2023-24 5 30.58 20.00 2024-25 5 32.10 20.00 2025-26 5 33.71 20.00 2026-27 5 35.39 20.00

D. Containers

In the 2005-06 fiscal year (April to March), ChPT handled 0.73 Mteu of container volume. In the current year till December 2006, it has handled 0.65 Mteu. It is expected that the port shall handle anywhere between 0.85 Mteu to 1.0 Mteu in the year 2006-07 i.e around 16 MT. For the purpose of capacity analysis an optimistic assumption of 1.0 Mteu i.e. 16 MT is taken considering tremendous growth in the recent years. The demand forecast for Chennai hinterland is shown in Table 6-19 of above in Chapter-6.6 of Interim export.

Using the available data for the last four years, it is observed that at Tuticorin Port 1.0 teu accounts for around 10.6 Tonnes of cargo volume. Tuticorin Port is presently

Page 63 of 185 Final Report Business Plan for Chennai Port Trust handling around 0.32 Mteu (i.e. 3.43 Mtpa) of containers with installed capacity of around 0.45 Mteu (i.e. 4.77 Mtpa). The port is also planning a second container handling facility on its berth no. 8 for which proposals have already been invited from interested parties and therefore it could be reasonably expected that the new facility shall be operational any time before 2012. The expected capacity of this new facility is around 0.15 Mteu escalating its total capacity to 0.60 Mteu (i.e. 6.36) by 2012.

Given the growing demand for container cargo in the hinterland, it is assumed that container traffic at Tuticorin Port shall also grow at the growth rates similar to hinterland growth rate till it achieves its capacity utilization. Therefore Tuticorin port container traffic is likely to reach 6.9 Mtpa in 2012, 12.16 Mtpa in 2017, 19.58 Mtpa in 2022 and 31.54 Mtpa in 2027.

Since the total capacity is less than the demand forecast, the share of Tuticorin port will be equivalent to its capacity while estimating the ChPT’s share.

Other competitor, who is likely to develop a container terminal is Ennore Port. Given the present position and growing economic activity, it is assumed that a terminal with a capacity of 1.2 Mteu will become operational at this port by 2011.. In the year 2011, it is expected that the capacity utilization may be around 0.3 Mteu (i.e.4.8 Mtpa) gradually increasing to 0.6 Mteu (i.e. 9.6 Mtpa) in 2017. However, the container handling at this competing port is likely to increase upto 1.2 Mteu (i.e.9.6 Mtpa) by 2022. As this port is likely to take the share of container traffic from ChPT, the conversion factor for 1.0 teu is considered to be the same as observed at ChPT i.e. 1 teu is equivalent to 16 tonnes.

Therefore out of total demand of 23.65 Mtpa in the hinterland, Tuticorin port’s share would be around 6.36 Mtpa and likely share for new competing terminal would be around 9.6 Mtpa by the year 2012. Estimation of targeted containerized cargo for the 20 years horizon period is illustrated in Table No- 2.4-13: Table No- 2.4-13: Calculations for Targeted Traffic for Containers CONTAINERS (in Mtpa) Year 2012 2017 2022 2027 Demand Forecast in Mtpa 32.18 56.72 91.34 134.21 Share for Tuticorin Port 6.36 6.36 6.36 6.36 Likely share for Ennore Port 4.8 9.6 19.2 19.2 Targeted Traffic at ChPT 21.02 40.76 65.78 108.65 (in Mtpa) Targeted Traffic at ChPT 1.31 2.55 4.11 6.79 (in Mteu)

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Table No- 2.4-14: Year-wise Targeted Traffic for Containers Demand Traffic Share for Growth Forecast Likely share for Forecast Year Tuticorin (%) Ennore Port ( in Mtpa) Port (in Mtpa)

2007-08 15 18.40 3.94 14.46 2008-09 15 21.16 4.54 16.62 2009-10 15 24.33 5.22 19.12 2010-11 15 27.98 6.00 21.99 2011-12 15 32.18 6.36 4.80 21.02 2012-13 12 36.04 6.36 5.76 23.92 2013-14 12 40.37 6.36 6.72 27.29 2014-15 12 45.21 6.36 7.68 31.17 2015-16 12 50.64 6.36 8.64 35.64 2016-17 12 56.72 6.36 9.60 40.76 2017-18 10 62.39 6.36 11.52 44.51 2018-19 10 68.63 6.36 13.44 48.83 2019-20 10 75.49 6.36 15.36 53.77 2020-21 10 83.04 6.36 17.28 59.40 2021-22 10 91.34 6.36 19.2 65.78 2022-23 8 98.65 6.36 19.2 73.09 2023-24 8 106.54 6.36 19.2 80.98 2024-25 8 115.06 6.36 19.2 89.50 2025-26 8 124.27 6.36 19.2 98.71 2026-27 8 134.21 6.36 19.2 108.65

E. Automobiles

In 2005-06, ChPT handled 102692 cars. As identified in above Chapter-5, it is expected to increase at the growth rate of 12% and thereby projected to handle round 202696 cars in the last year of phase-I i.e. 2012. At present there is no major competition for exporting cars from ChPT. Therefore it is assumed that ChPT can handle car traffic by the way of establishing a multi-level car parking yard. Presently, the cars are being parked in an area of about 47700 sq.m. As the proposed Multi-Level Stacking facility is proposed at two different locations, the total storage for car stacking after this facility shall be confined upto 72,000 sq.m.

With this available area, it is expected that the car export capacity shall be catering to around 7,00,000 cars. Table No- 2.4-15: Calculations for Targeted Traffic for Automobiles AUTOMOBILES (in ’000 numbers) 2012 2017 2022 2027 Demand Forecast in numbers 202.7 357.2 629.5 110.9 Targeted Traffic Volume at ChPT (in numbers) 202.7 357.2 629.5 700.0

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Table No- 2.4-16: Year-wise Targeted Traffic for Automobiles Demand Traffic Year Growth % Forecast Forecast

2005-06 12 102.7 102.7 2006 -07 12 115.0 115.0 2007-08 12 128.8 128.8 2008-09 12 144.3 144.3 2009-10 12 161.6 161.6 2010-11 12 180.9 180.9 2011-12 12 202.7 202.7 2012-13 12 227.0 227.0 2013-14 12 254.2 254.2 2014-15 12 284.8 284.8 2015-16 12 318.9 318.9 2016 -17 12 357.2 357.2 2017-18 12 400.0 400.0 2018-19 12 448.1 448.1 2019-20 12 501.9 501.9 2020-21 12 562.0 562.0 2021-22 12 629.5 629.5 2022-23 12 705.1 700.0 2023-24 12 789.7 700.0 2024-25 12 884.4 700.0 2025-26 12 990.6 700.0 2026-27 12 1109.5 700.0

F. For Passengers

In 2005-06, ChPT handled 96,360 passengers. As worked out in demand forecast, this is expected to increase at the growth rate of 5% and thereby projected to handle round 129,132 passengers in the last year of Phase-I i.e. 2012.There is no serious competition expected for this activity except for some small activity at Tuticorin. ChPT already has a passenger terminal in place and all the expected traffic can be serviced with the same terminal facility.

Table No- 2.4-17: Year-wise Targeted Traffic for Passengers Demand Traffic Year Forecast Forecast Growth % (in Nos) (in Nos) 2005-06 5% 96360 96360 2006 -07 5% 101178 101178 2007-08 5% 106237 106237 2008-09 5% 111549 111549 2009-10 5% 117126 117126 2010-11 5% 122982 122982 2011-12 5% 129132 129132 2012-13 5% 135588 135588 2013-14 5% 142368 142368

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2014-15 5% 149486 149486 2015-16 5% 156960 156960 2016 -17 5% 164808 164808 2017-18 5% 173049 173049 2018-19 5% 181701 181701 2019-20 5% 190786 190786 2020-21 5% 200326 200326 2021-22 5% 210342 210342 2022-23 5% 220859 220859 2023-24 5% 231902 231902 2024-25 5% 243497 243497 2025-26 5% 255672 255672 2026-27 5% 268455 268455

G. Abstract

As estimated above, the abstract of targeted traffic forecast for ChPT is presented in Table below: Table No- 2.4-18: Abstract of Targeted Traffic volume to be handled at ChPT Year COMMODITY 2012 2017 2022 2027 Containers 21.02 40.76 65.78 108.65 (in Mtpa) Containers (in Mteu ) 1.31 2.55 4.11 6.79 Iron Ore (in Mtpa) 11.08 11.65 0.00 0.00 Coal (in Mtpa) 1.43 0 0 0 Automobiles (in ’000 Nos.) 202.7 357.2 629.5 700.0 Passengers (in Nos.) 129,132 164,808 210,342 268,455 POL (in Mtpa) 15.00 15.00 20.00 20.00 General Cargo (in Mtpa) 15.76 8.77 8.77 8.77 Total in Mtpa 64.29 76.18 94.55 137.42

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2.5 Capacity and Bottleneck Analysis 2.5.1 Capacity Analysis

A detailed capacity and bottleneck analysis is carried out and is presented in this section. The Analysis starts with the assessment of available & required infrastructure facilities and the identification of the gap to be bridged based on the translated targeted traffic volumes.

As estimated above in section 2.4, the abstract of targeted traffic forecast for ChPT is presented in Table No- 2.5-1: Table No- 2.5-1: Abstract of Targeted Traffic volume to be handled at ChPT Year COMMODITY 2012 2017 2022 2027 Containers 21.02 40.76 65.78 108.65 (in Mtpa) Containers (in Mteu ) 1.31 2.55 4.11 6.79 Iron Ore (in Mtpa) 11.08 11.65 0.00 0.00 Coal (in Mtpa) 1.43 0 0 0 Automobiles (in ’000 Nos.) 202.7 357.2 629.5 700.0 Passengers (in Nos.) 129,132 164,808 210,342 268,455 POL (in Mtpa) 15.00 15.00 20.00 20.00 General Cargo (in Mtpa) 15.76 8.77 8.77 8.77 TOTAL in Mtpa 64.29 76.18 94.55 137.42

In general, the most critical constraint on container terminal capacity is quay length rather than storage area capacity. The quay length is usually fixed, while off-dock storage and selection and quantity of cranes and yard gantries can be installed to suit the requirements. ChPT has sufficient existing berths that are suitable, after due strengthening and modification, for handling a range of likely sizes of container vessels that will call at the port.

The assessment of maximum possible port capacity and the infrastructure development required is performed with respect to four following basic parameters:

o Ground Storage Area,

o Requirement of berth length,

o Hinterland connectivity,

o No. of vessel and their sizes.

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The infrastructure facilities required for commodities other than container cargo handled by the Port i.e. iron ore, coal, automobiles, POL and general cargo are analyzed and is presented below in Table No- 2.5-2:

Table No- 2.5-2: Infrastructure facilities for non-containerized cargo Sr. Commodity Berth Storage facility Connectivity No 1 Iron Ore Dedicated berth in Sufficient storage facility Rail Bharathi Dock available for the projected traffic. 2. Coal Dedicated berths Sufficient storage facility Rail for in Jawahar Dock available for the Thermal coal projected traffic for only and Road for 1.43 MT coking coal 3. Automobiles Dedicated berth Multi-level car parking Road. recommended on facility recommended as North Quay in a part of the Business Ambedkar dock Plan. 4 POL Dedicated berth None required Pipeline available 5 General Currently being Back up area on western Road / Rail Cargo handled at side of Jawahar Dock Ambedkar and (behind JD 1, 3 and 5) Jawahar Dock. It is made available for proposed to shift general cargo. Proposals general cargo to provided for reclamation Jawahar Dock to of Boat Basin and Timber the extent of Pond for additional capacity of 3 storage area berths

The following paragraphs therefore deal with the assessment of infrastructure required for container cargo only.

A. Ground Storage Area

Factors such as dwell time, stacking height, utilization factor, split between loaded and empty containers, split between import and export containers and split between refrigerated and non-refrigerated containers have to be taken into consideration while determining of the number of terminal ground slots (tgs) required for on-site container storage. The area and configuration of the land, selection of handling equipment and location and number of truck gates also affect the number of teu that can be handled at any terminal.

The most accurate method for determining a terminal’s capacity is to layout the required number of terminal ground slots (tgs), estimate the average stacking height for containers and estimate the average dwell time then apply a discount factor for peak periods of say 30 percent. Prior to building a terminal, computer spreadsheet models are used to model the critical elements of the terminal (berth occupancy, crane productivity, yard productivity, truck gate productivity) and arrive at a practical operating capacity. It

Page 69 of 185 Final Report Business Plan for Chennai Port Trust should be noted that the practical operating capacity is always less than the maximum capacity as the maximum capacity is not sustainable without affecting operating costs or customer service levels.

At the conceptual stage, benchmarks or rules-of-thumb are often used to estimate throughput capacity. Figures are used for annual throughput per meter of quay length, annual teu per ha of land, annual teu per guay crane and number of quay cranes per berth and yard gantries per quay cranes. These benchmarks can vary considerably from terminal to terminal; therefore caution must be used when comparing the capacity of one terminal to another.

Since Chennai Port has ample berth length, it was decided to use industry “best practices” to estimate what the capacity of each new terminal could be in the future based on the land available at each potential container terminal site. The potential future throughput capacity of the proposed new container terminal operations is estimated at 27,000 teu/ha of land using industry best practices and assuming an RTG or RMG based operation with a complementary off-dock container terminal.

Because of all of the “service specific” factors, that can affect a terminal’s capacity, the practical operating capacity of the future terminals is estimated based upon experiences at similar international terminals. The two separate such terminals are about 30 ha in size and have annual practical maximum operating capacity of about 27,000 teu per ha. Both terminals have road congestion owing to city ports and are currently using rail for evacuation of about 50% of the traffic. Both terminals, mainly handle vessels making second and third calls. Depending upon yard operational system and on dwell times, the practical operating capacity could be greater or less than 27,000 teu per ha. Also, the volume per ha can be exceeded, but not for long periods of time, as service may suffer with the consequent that the shipping line may move to another terminal or worse, another port.

DP World’s 27.6 ha Centerm Container Terminal at the Port of Vancouver Canada was recently converted from a top-pick operation to an RTG operation. DP World has advertised Centerm’s annual throughput capacity at 800,000 teu or the equivalent of 29,000 teu per ha of land. Terminal System Inc.’s, Vanterm Container Terminal has an advertised throughput capacity of 645,000 teu on approximately the same area of land for 21,500 teu per ha capacity. The capacity of the proposed new container terminals at Chennai Port were therefore assumed to equal 27,000 teu per ha of land at the upper range and 22,000 teu at the lower range.

The total area required for container storage in future is worked out, as shown in Table No- 2.4-3, considering the same operating capacity of 27,000 teu per ha. This would be the best case scenario for ChPT. An alternative scenario estimating port’s capacity against the assumption 22,000teu per ha is also developed and is presented in Annexure-4. The calculations assume that the current estimated throughput per ha at the existing terminal(s) may decrease in the future as larger container vessels call at

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ChPT, likely traffic congestion with increased volumes at ChPT and as shipping lines demand higher service performance levels with respect to vessel turn-around. Table No- 2.5-3: Storage Area Requirement Sr. Year Particulars No 2007-12 2012-17 2017-22 2022-27 Cargo volume to 1 be handled 21.02 40.76 65.78 108.65 (in Mtpa) Cargo volume to 2 be handled (in 1.31 2.55 4.11 6.79 Mteu) Total Storage area 3 48.66 94.34 152.27 251.50 Requirement

Presently, the container terminal operated by Chennai Container Terminal Limited is operational in an area of around 25.06 ha. Deduction of this area from the above area requirement enabled us in estimating the storage area gap need to be filled. The same is presented in Table No- 2.5-4. Table No- 2.5-4: Gap Identification for Additional Storage Area (in ha) Sr. Year Particulars No 2007-12 2012-17 2017-22 2022-27 Storage area A 48.66 94.34 152.27 251.50 required Storage area B 25.06 25.06 25.06 25.06 available Storage area gap C 23.60 69.28 127.21 226.44 to be bridged

The land use plan is developed for all the four phases depicting the requirement and identification of land within the port which can be converted and used for best possible/required storage requirements.

The Table No- 2.5-5 illustrates the phase-wise need of additional container storage area for a 20 year horizon period, based on the targeted container traffic volumes and areas which could best be converted to meet those requirements.

Table No- 2.5-5: Identified Projects & Associated Storage Area Sr. Year Particulars No 2007-12 2012-17 2017-22 2022-27 No. of Containers to be A 1.31 2.55 4.11 6.79 handled (in Mteu)

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Total Storage area B 48.66 94.34 152.27 251.50 Requirement (ha) Storage area available C 25.06 25.06 25.06 25.06 (ha) Storage Area Gap to be D 23.60 69.28 127.21 226.44 Bridged (in ha) E Planned Projects and corresponding Backup Storage Area conversion E1. Container Terminal-2 Area to be developed is 35.00 35.00 35.00 35.00 shown in Drawing-1 E2. Container Terminal-3 Area to be developed is 0.00 24.87 24.87 24.87 shown in Drawing-2 E3. Container Terminal-4 Area to be developed is 0.00 0.00 29.67 29.67 shown in Drawing-3 E4. Container Terminal-5 Area to be developed is 0.00 0.00 18.82 18.82 shown in Drawing-3

Total additional F storage area possible 35.00 59.87 108.36 108.36 to be developed (ha)

Net deficit in storage G area required which can -11.40 9.41 18.85 118.08 not be bridged

Note: Negative (-) indicates surplus

As indicated in above Table No- 2.5-5, with various measures suggested, back up area for container storage shall become a constraint after Phase-3. Total area which can be then used for container storage is 133.42 ha (25.06 + 108.36). This storage area freezes the capacity of the port’s container handling facility at 3.60 Mteu (133.42 ha x 27000 teu per ha)

As it can be seen from above table, with the available area it would be difficult to handle entire targeted container traffic. There is a net deficit ranging from around 9 ha by the end of Phase-2 to more than 100 ha by the end of Phase-4. The only way to provide this additional requirement of land is by taking over land outside but near to the port. Our understanding of the nearby region of the port shows that the possibility of taking over the nearby fishing harbour should be explored. This can be developed as storage yard for the port in the phased manner depending upon the exact land requirement.

So, the port capacity for container handling against storage as one of the limiting parameter can not go beyond 3.60 Mteu.

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B. Berth Requirements

The requirement of berth length is worked out considering average length of berths as per the number and sizes of vessels given in above Table No- 2.5-6. The requirement of berths corresponding to the total number of vessels and average number of days for which the ship will be required to be at berth is given in Table No- 2.5-6. The assumption for the number of days of ship at the berth for the initial period of 10 years is based on the efficiency of the cranes presently used for handling containers. For the later phases, from 2017 onwards, it has been assumed that quay cranes, which can handle twin-containers of 20 feet length at a time, shall be deployed. As a result, in spite of increasing average parcel size, turn around time for ships in numbers of days at berth are considered as 1.5 only. Table No- 2.5-6: Phase-wise Berth Requirement Berth Requirement Year Sr. Particulars 2007- 2012- 2017- 2022- No 2006-07 2012 2017 2022 2027 Cargo to be 1 16.00 21.02 40.76 65.78 108.65 Handled (in Mtpa) 2 Total No of Mteu 1.00 1.31 2.55 4.11 6.79 3 No. of Vessels 592 900 1,350 1,800 2,525 Average parcel size 4 1,700 1,500 1,900 2,300 2,700 (approx teu's) Average length of 5 200 200 250 350 350 berth required No. of days at berth 6 1.4 1.6 1.7 1.5 1.5 per ship No of Berths 7 2.8 4.7 7.8 9.0 12.6 required Total length of 8 564 944 1947 3150 4419 berths No of Berths of 9 average 275.00 2.1 3.4 7.1 11.5 16.1 length

Numbers of container berths available presently in Bharathi dock are four, aggregating to a total quay length of 885 m.

Based on the requirement of berths to handle targeted volume of containerized cargo and the available berths, the additional requirement to bridge the gap is worked out and produced in Table No- 2.5-7:

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Table No- 2.5-7: Bridging Gap for Requirement of Berths Available/ Additional Berths Year Sr. Particulars 2007- 2012- 2017- 2022- No 2006-07 2012 2017 2022 2027 A No. of Berths Required Total length of berths A1 564 944 1947 3150 4419 required No. of Berths Required of A2 2.1 3.4 7.1 11.5 16.1 average length 275.0 m B No. of Berths Available Existing Container Terminal B1 No. 1 having 4 berths of 885 885 885 885 885 200.00 m length each

No of Berths of equivalent B2 3.22 3.22 3.22 3.22 3.22 length of 275.00 m C. No of Berths additionally required Total length of Berths C1 -320.63 58.80 1061.59 2265.00 3533.75 required to be developed

No of Berths of equivalent C2 length of 275.00 m -1.17 0.21 3.86 8.24 12.85 required to be developed

Note: Negative (-) deficit indicates surplus

Berths Identified for conversion to meet the additional requirement

In order to meet the additional requirement of berths to cater to the incremental cargo volume, the possibility of converting available infrastructure is considered. The berths which are at present being used for handling coal, iron ore, break-bulk/general cargo will be converted into container berths in phased manner. The berths which could be converted into container berths are as under:

o Berth on East side in Dr. Ambedkar Dock consisting of Naval Berth, EQ, SQ3 and SQ2. This is already identified by ChPT to be developed as a Container Terminal-2 on BOT basis and the process of awarding the project is complete. Since the targeted container cargo includes the requirement for ChPT as a whole, the present capacities and proposed capacities at second container terminal are also considered as part of business plan. The total additional length available after this conversion will be around 880 m and this terminal is estimated to handle 0.9 Mteu annually.

o The next quay length considered for conversion into container berths is at Jawahar Dock. The berths available are JD2, JD4 and JD6 on east side of Jawahar Dock covering a total length of 655 m. Based on the present level of throughput the potential handling capacity could be 0.6 Mteu p.a. but with

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increasing size of container vessels and corresponding increase in parcel size supported by deploying better cranes on the berths there could be increase of 30% - 40% in the above throughput. This is proposed as Container Terminal- 3.

o The berths available at this proposed terminal are more or less in straight line with the berths proposed for container terminal-2. A portion of back-up space available behind these berths is already assured to second container terminal operator for container storage. For developing container terminal -3 here, the back-up land available to support this is only on the southern side of Jawahar Dock. So it is recommended that, if this berthing face is combined with the berthing face of terminal-2, it would provide a continuous berthing face of more than 1000 m. The possibilities of clubbing these two terminals have to be studied in conjunctions with contractual obligations between ChPT and second terminal operator.

o Another berth which is available for conversion is the existing iron ore berth in Bharathi Dock with total length of 360 m. The draft available in front of this berth is 17.4 m which will allow vessels of 8000 teu to berth. With the use of cranes with twin lifting facilities and the bigger size vessels calling, the throughout at the berth can be estimated to be around 0.9 Mteu p.a. This is termed as Container Terminal-4

o The berths available on west side of Dr. Ambedkar Dock namely; WQ 1, WQ 2, WQ 3, WQ 4 and CB covering the total length of 853 m are also proposed to be converted into container berths. The draft at this location is 11 m to 12 m and is planned to be deepened to -14 m. Based on the present level of throughput the handling capacity could be about 0.9 Mteu but with larger size of container vessels calling at ChPT and corresponding increase in parcel size together with deployment of better cranes, the throughput can be increased by 30% - 40% upwards. This is proposed as Container Terminal-5.

As there is insufficient back-up space for this proposed terminal, we envisage the need of shifting the berthing face eastward and reclaiming the additional area which shall provide some area at the back to be used as stacking space.

The detailed working and the phase in which other cargo berths are required to be converted to container berths are given in Table No- 2.5-8. Table No- 2.5-8: Phase-wise Conversion of Berths Identification of New Berths Year Sr. Particulars 2007- 2012- 2017- 2022- No 2006-07 2012 2017 2022 2027 A Berths to be additionally provided Total length of Berths A1 -321 59 1062 2265 3534 to be additionally

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developed (in m)

No of Berths of equivalent length of A2 -1.17 0.21 3.86 8.24 12.85 275.00 m to be developed B Berths to be newly developed B1 Container Terminal-2 Proposed Berth length 0.00 800.00 800.00 800.00 800.00 (in m) Proposed No. of 0.00 2.91 2.91 2.91 2.91 Berths B2 Container Terminal-3 Proposed Berth length 0.00 0.00 655.00 655.00 655.00 (in m) Proposed No. of 0.00 0.00 2.38 2.38 2.38 Berths B3 Container Terminal-4 Proposed Berth length 0.00 0.00 0.00 360.00 360.00 (in m) Proposed No. of 0.00 0.00 0.00 1.31 1.31 Berths B4 Container Terminal-5 Proposed Berth length 0.00 0.00 0.00 853.00 853.00 (in m) Proposed No. of 0.00 0.00 0.00 3.10 3.10 Berths C Total additional Berths possible to be developed Total proposed berth C1 0.00 800.00 1455.00 2668.00 2668.00 length (in m) Total no. of proposed C2 0.00 2.91 5.29 9.70 9.70 berths (each 275 m) D Net deficit in development of additional Berths Net deficit in total D1 -320.63 -744.78 -503.58 -282.67 848.29 length of Berth (in m) Net deficit in no of D2 -1.17 -2.70 -1.43 -1.47 3.15 Berths

Note: Negative (-) deficits indicates surplus

As analyzed from Table 2.4-8, sufficient berth length is available till the end of Phase-3. It becomes a constraint only in phase-4, where there is a need of another 3.15 (say 3) berths even after considering various possible developments / conversions. This requirement however cannot be met and hence becomes the limiting factor.

As observed from the Table 2.4-8, the average container handling capacity of any berths in last years of each of phases 2007-12, 2012-17, 2017-22 & 2022-27 is 0.47, 0.38, 0.34 & 0.42 Mteu respectively. Based on the assumptions made, additional numbers of

Page 76 of 185 Final Report Business Plan for Chennai Port Trust containers which can be handled at one berth is considered using the lowest of these four i.e. 0.34 Mteu.

Therefore, with 1.47 berths as surplus in phase-3, additional 0.51 Mteu (1.47 x 0.34) can be handled. The maximum possible capacity of port against berth length by the Phase-3 will be 4.11+0.51= 4.62 Mteu.

So, the practical possible port capacity against the berths as one of the parameters is limited to 4.62 Mteu annually.

C. Connectivity

In order to determine the maximum possible capacity of the ChPT, the connectivity parameter was evaluated. An understanding of the number of container teu which can be shifted to rail mode and those which can be handled by available and planned road network is necessary.

Rail Mode

To estimate the percentage container traffic that can be shifted to rail mode in the future years, the trend for the earlier years was analyzed. The Table No- 2.5-9 & Table No- 2.5-10 indicates that the present share of containers being transported by rail is barely 6.7% while the majority is by road. Table No- 2.5-9: Modal distribution for Containers at ChPT EXPORT Year Rail Road 2000-01 8.10% 91.90% 2001-02 4.70% 95.30% 2002-03 5.60% 94.40% 2003-04 6.40% 93.60% 2004-05 5.80% 94.20% 2005-06 6.40% 93.60% Average 6.20% 93.80% IMPORT 2000-01 7.30% 92.70% 2001-02 5.60% 94.40% 2002-03 5.50% 94.50% 2003-04 11.80% 88.20% 2004-05 5.90% 94.10% 2005-06 7.00% 93.00% Average 7.20% 92.80%

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Table No- 2.5-10: Avg. Modal distribution for Import & Export of Containers Rail Road Export 6.20% 93.80% Import 7.20% 92.80% Average 6.70% 93.30%

Worldwide all the efficient ports have a reasonable share of containers being hauled by rail network. Therefore to improve the composite port capacity, there is an immediate need of shifting some more load from the roads to rail.

As per the strategy adopted by the port, it is envisaged that the coal operations should be shifted to Ennore Port by the end of phase-1 i.e. year 2012 and iron ore terminal shall be converted into container terminal at the time when the port would actually need additional berths and storage area for handling incremental container volumes. Based on the current estimation of targeted forecast, it is observed that this conversion is expected by the end of Phase-3, i.e. year 2021 / 2022.

Since coal and iron ore operations presently occupy most of the rail capacity at the port, it is expected that the same shall be released for container handling in respective years.

Similarly, the need of off-dock facilities is also envisaged for handling containers outside the port premises. The port has already developed a proposal for developing an Off- Dock facility at Tondiarpet Housing colony. This facility is expected to handle around 144,000 containers per annum.

The rail capacity which is expected to be released by shifting coal and iron ore handling to Ennore is estimated and shown in Table No- 2.5-11: Table No- 2.5-11: Calculation of rail capacity which can be released Calculation of rail capacity which can be Description released For Coal Total coal transported using rails in 2005-06 (in MT) 4,572,500 Quantity of Coal being transported in one wagon (in Tonnes) 60 Therefore, total number of wagons being handled per annum to handle coal (in numbers) 76,208 Number of wagons per rake (in numbers) 58 Total number of rakes per annum for transporting coal (in numbers) 1,314 Total number of rakes per annum for transporting container (in numbers) 1,314 Quantity of containers per rake (in teu) 45

Additional Quantity of containers, which can be handled (in teu) 59,127

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For Iron Ore Total iron ore transported using rails in 2005-06 (in MT) 8,949,394 Quantity of iron ore being transported in one wagon (in Tonnes) 60 Therefore, total number of wagons being handled per annum to handle iron ore (in numbers) 149,157 Number of wagons per rake (in numbers) 58 Total number of rakes per annum for transporting iron ore (in numbers) 2,572 Total number of rakes per annum for transporting container (in numbers) 2,572 Quantity of containers per rake (in numbers) 45 Quantity of containers, which can be handled by shifting iron ore (in teu) 115,725

These above additional capacities will increase the present rail capacity for containers in Phase-4 as shown in the Table No- 2.5-12. Table No- 2.5-12: Calculation of increased rail capacity Year Sr. 2005- 2007- 2012- 2017- 2022- No Particulars 2006 2012 2017 2022 2027 No. of containers 1 presently being 49,420 49,420 49,420 49,420 49,420 handled by rail Additional capacity 2 created by shifting 0 0 0 174,852 Coal & Iron Ore Additional capacity created by developing an Off- 3 144,000 144,000 144,000 144,000 Dock facility at Tondiarpet Housing Colony Total Nos. of containers which 4 can be handled 193,420 193,420 193,420 318,852 using rail links (in teu)

With this enhanced rail mode capacity to handle containers, the expected percentage share of targeted traffic by rail and road mode is presented in Table No- 2.5-13: Table No- 2.5-13: Phase-wise rail and road share Sr. No. Phase Rail mode Road mode 1 2005-2006 6.73% 93.27% 2 2017-2012 11.98% 88.02% 3 2012-2017 7.59% 92.41% 4 2017-2022 4.70% 95.30% 5 2022-2027 5.42% 94.58%

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Road Mode

Now, with this modal share for road in the last year of each phase, the total containers which are to be handled by road are estimated and further the connectivity issues are analyzed. Details are provided in the Table No- 2.5-14. Table No- 2.5-14: Analysis of port’s capacity with respect to road connectivity Year Sr. 2007- 2012- 2017- 2022- No Particulars 2012 2017 2022 2027 1.31 2.55 4.11 6.79 1 Total Number of Mteu to be handled % traffic to be transported by rail 11.98 7.59 4.70 5.42 2 mode % traffic to be transported by road 88.02 92.41 95.30 94.58 3 mode Traffic in Mteu to be handled by road 1.16 2.35 3.92 6.42 4 per annum Traffic in teu to be handled by road per day (assuming 300 working days 3855 7846 13060 21408 5 per annum) Traffic in teu to be handled by road per hour (assuming 18 working hours 214 436 726 1189 6 per day) Total no. of lanes for container 8.0 8.0 12* 12* 7 movement No. of Trucks/ teu to be handled per 27 54 60 99 8 lane/hour on the port gate No. of trucks which are to be handled at any gate with 4 lane (2 inbound + 2 107 218 242 396 9 out bound) Average no. of trucks which can be 50 50 60 60 10 handled per lane No. of trucks which can be handled on 200 200 240 240 11 any gate 12 Net Deficit (9-11) in Nos -93 18 2 156

Note: Negative (-) deficits indicates surplus

* The need of further expansion of both the gates is envisaged. Addition of 2 more lanes to both the gates is considered.

The table below indicates the analysis of port’s capacity against road connectivity for transporting cars: Table No- 2.5-15: Analysis of port’s road connectivity capacity for transporting cars Year 2007- 2012- 2017- 2022- Sr No Particulars 2012 2017 2022 2027 1 No. of Cars expected to be handled 202,696 357,219 629,542 700,000 2 No. of cars transported in one trailer 6 6 6 6 3 Total No. of trailers required for 33,783 59,537 104,924 116,667

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transporting forecasted nos. of cars Total numbers of trailers to be handled by road per day (assuming 345 4 working days per annum) 98 173 304 338 Number of trailers to be handled by road per hour (assuming 20 working 5 hours per day) 5 9 15 17 No. of dedicated lanes for car trailer 6 movement 1 1 1 1 No. of trucks to be handled per 7 lane/hour at the port gate 5 9 15 17

Based on the above table, a further addition of one lane is proposed in Phase III for cars and general cargo

The above analysis assesses the maximum possible capacity of port using the connectivity parameter and indicates that the maximum practical capacity of the port for container handling shall be the targeted container volume by the end of phase-3 i.e. 4.11 Mteu.

D. Vessel Size and Numbers

Presently, the maximum numbers of ships visiting ChPT have parcel size between 700 to 1500 teu with few vessels above 2000 teu and some below 500 teu. Current market trend indicates that there is a focus on container trade and there is a possibility of larger ships coming on the trade circuit. By deepening of docks for additional draft, it will be possible to bring vessels maximum up to 8000 teu at ChPT but only at one berth i.e. the present Iron ore berth if it is converted into a container handling facility (Proposed Container terminal No 4). The likely container vessel calls as per the size and average parcel size with the targeted container cargo at ChPT is given below in Table No- 2.5-16. Maximum size of the vessel considered is 8000 teu with 300 m length and draft requirement of 16 m and a berth length of 350 m. Table No- 2.5-16: No. of Vessels and their parcel sizes expected at ChPT per annum Size of Vessels 2007-12 2012-17 2017-22 2022-27 8000 teu and above 0 0 0 75 6000 teu 0 0 50 150 4000 teu 75 200 350 500 2000 teu 300 550 750 1200 1500 teu 350 400 500 500 1000 teu and below 175 200 150 100 Total No. of container Vessels 900 1350 1800 2525 Average Parcel size in Teu 1800 2000 2300 2700 Total No. of teu 1620000 2700000 4140000 6817500

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Above Table No- 2.4-16 provides one possible mix of ship sizes and average parcel sizes achieved at some other major Indian and international ports. The Table No- 2.4-16 indicates that with this mix of sizes and numbers, the port would be able to handle 4.14 Mteu in phase-3.

E. Bottleneck Analysis

For the above described multiple parameters the maximum capacities for container handling are compared to decide the weakest link i.e. bottleneck and arrive at the most likely container cargo volume in teu. o Capacity against storage space= 3.60 Mteu o Capacity against berths requirements= 4.62 Mteu o Capacity against connectivity= 4.11 Mteu o Capacity against vessel sizes and numbers= 4.14 Mteu

The above analysis therefore indicates that the overall capacity of the port for container handling is limited by the storage space at the port.

As the next limiting factor is connectivity at 4.11 Mteu, there is a need of additional storage space of around 19 ha [(4.11 – 3.60) Mteu / 27000= 18.89 ha], it is proposed that the same can be fulfilled by taking over nearby fishing harbour and shifting the existing one to further north with better facilities.

H. Abstract of traffic volume which can be handled at ChPT

With above estimation of port capacities against various parameters, we provide below the abstract of actual traffic volumes which can be handled in different phases ranging to 20 years keeping in mind the bottlenecks identified above. Table No- 2.5-17: Abstract of Traffic volume which can be handled at ChPT Year COMMODITY 2012 2017 2022 2027 65.78 108.65 Containers 21.02 40.76 Restricted Restricted (in Mtpa) to 57.6 to 57.6 4.11 6.79 1.31 2.55 Restricted Restricted Containers (in Mteu ) to 3.6 to 3.6 Iron Ore (in Mtpa) 11.08 11.65 0.00 0.00 Coal (in Mtpa) 1.43 0 0 0 Automobiles (in ’000 Nos.) 202.7 357.2 629.5 700.0 Passengers (in Nos.) 129,132 164,808 210,342 268,455 POL (in Mtpa) 15.00 15.00 20.00 20.00 General Cargo (in Mtpa) 15.76 8.77 8.77 8.77 94.55 137.42 Restricted Restricted TOTAL 64.29 76.18 to 86.37 to 86.37

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2.6 Land Use Plan In order to make optimum utilization of the most valuable and scarce resources i.e. land available within the port, a Land Use Plan is developed. This is prepared keeping in mind the vision of the port “To be a futuristic Port with a foresight” .

The total area available within the port is approximately 240 ha. Out of this total available land, around 27 km of roads with various widths ranging of 6 m to 26 m are occupying an area of around 33 ha (assuming average width as 12m). Broad-Gauge Railway tracks totaling to around 68 km occupy around 17 ha of the port’s land area. Existing container terminal operated has been allotted an area of approximately 25 ha.

The balance area of around 165 ha is being used for various activities including handling coal, iron ore, general cargo, Car export, POL etc. It is learnt that, around 90 ha is presently earmarked for allotment to select customers for storing cargo commodities.

World over, the container terminals are managed with integrated transportation network which includes efficient gate operations, apposite railways and road network. As the efficient use of the railway and road system is critical to improve the capacity of the port, it is recommended to undertake a transportation plan. The plan will formulate the best strategy for the future use of the railway system as the port is presently heavily reliant on the roads for cargo evacuation.

It is proposed that a 20 m wide road (4 Lane divided carriageway) along the periphery of the port boundary be developed for smooth cargo movement. In future, as the container cargo increases, there will be a need for use of railway for evacuation of cargo in order to avoid road congestion. It is therefore suggested that an Off-Dock facility should be created and the containers should be shifted to this location as quickly as possible. For this purpose it is proposed that on the extreme southern side a railway yard may be created with facility for load and unload containers using Rail Mounted Gantry’s. It is proposed that the existing rail network towards the coal yard be removed once the development of container terminal no. 3 is taken up by converting JD2, JD4, & JD6 in Jawahar Dock. This is to create additional back-up storage area immediately behind the quay length and also ease movement of tractor, trailors within port area.

Conversion of existing facilities i.e. berths and godowns/warehouses into container facilities is taken up based on strategic decision to focus on container business and reduce the activity of handling dirty cargo. Various developments phases have been indicated separately in the drawing.

Along with the development of 3rd Container terminal, it is recommended that a Rail over bridge (ROB) as shown in attached Land Use Plan (ROB) also may be constructed connecting proposed container terminals to an elevated road corridor proposed separately. This will help faster evacuation of cargo which is south bound.

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It is also proposed that in the long run to avoid the congestion on the expressway connecting the northern hinterland, a by pass road from the Maduravoyal side of the proposed elevated corridor may be constructed avoiding the Chennai city traffic.

Based on the targeted cargo volumes, the phase-wise development of available land is indicated in order to create sufficient back-up storage area and the other utilities and support infrastructure.

The land use plans are developed for all the four phases and are attached with this report in Annexure-II. This schedule of creation of berths is indicated in the Table No- 2.6-1 below: Table No- 2.6-1: Identified Development plans under Land Use Plan Sr. Land Use Identified development plans Phase Period Color No Plan (LUP) shown No. in LUP 1. Attached Container Terminal-2; Phase-1 2007- Land Use broadly includes; 2012 = Plan - Conversion of EQ &SQ3 berths into container berths, - Reclaiming land at the area north of sand screen, - Conversion of a portion of coal yard into container storage yard. 2. Peripheral Road Development from Gate-1 to Gate-10 to Container Terminal-2 3. Conversion of a portion of Marshalling Yard into container storage cum railway yard 4. Developing a Flyover on southern side of the port connecting container terminals to Gate no. 10 5. Creation of New Cruise Terminal clubbed with a multi level car parking facility 6. Strengthening of berthing face at JD2, JD4 & JD6 to handle ships requiring depths of 14 m 7. Developing a Off-Dock facility at Tondiarpet Housing Colony

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8. Attached Development of Container Phase-2 2012- Land Use Terminal-3; broadly 2017 Plan includes; = - Conversion of JD2, JD4 & JD6 berths into container berths, - Conversion of balance portion of coal yard into container storage yard. - Shifting berthing face eastward by demolishing existing JD-2, JD4, & JD6. 9. Conversion of a portion of Marshalling Yard into container storage yard 10. Phased development of Fishing Harbour as container storage facility 11. Attached Development of Container Phase-3 2017- Land Use Terminal-4; broadly 2022 Plan includes; = - Conversion of Iron Ore berths into container berths, - Conversion of back-up storage area for iron ore into container storage yard. 12. Development of Container Terminal-5; broadly includes; - Conversion of WQ1, WQ 2, WQ 3, WQ 4 & CB berths into container berths, - Reclamation of a small amount of water front on west quay to create additional back-up land - Strengthening of berthing face to handle ships requiring depths of 14 m - Dismantling of existing warehouses and passenger terminal at west quay, Ambedkar Dock - Reclamation of Timber pond

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13. Conversion of existing CFSs into container storage yard 14. Phased development of Fishing Harbour as container storage facility 15. Attached Reclamation of Port Basin for Phase-4 2022- Land Use container storage yard 2027 = 16. Plan Reclaiming land near Gate no.1 to the north of Bharathi Dock adjacent to eastern breakwater.

Note: Scale of Land Use Plan is considered as 1:100000.

The port trust has already proposed reclamation of approx 60 ha of land on eastern breakwater near fishing harbor. The cost of this reclamation is about 135 crores. The analysis of various parameters considered for finalizing the maximum practical container capacity of the port indicates that the availability of backup area for container storage is not the only constraint over the 20 year period. Other parameters are also becoming a limiting factor for handling container volume beyond Phase-3. Hence this proposed reclamation of additional 60 ha of land is proposed in last phase so that this can be made available for any possible requirement arising out of increased cargo operations at the port.

The business plan exercise brings to the notice of any organization the core business segments to excel in service delivery and also throws open the various opportunities for optimum utilisation of all available resources - both physical as well as soft resources. ChPT has a natural advantage of being in the close proximity of a thriving and upcoming industrial region. This throws open multiple options to the port for the utilisation of this new area that can be made available by reclamation. One of these options is to set up an Export Processing Zone (EPZ).

EPZ are be defined as “industrial zones with special incentives set up to attract foreign investors, in which imported materials undergo some degree of processing before being re-exported". Today, there are many types of export processing zones (EPZs) which include free trade zones, special economic zones, bonded warehouses, free ports and customs zones.

With developments in information technology, "imported material" would also include "electronic data" today as well as call centers located in these zones. EPZs have evolved from initial assembly and simple processing activities to include high tech and science parks, finance zones, logistics centers and even tourist resorts.

Port cities like Hong Kong and Singapore have enhanced their strategic trading role by providing special customs regimes for export processing and transshipment. While many public agencies are still establishing zones, there is a distinct trend towards the private development of zones often by foreign developers.

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In the EPZ, facilities are provided for activities in manufacturing, processing, packaging, warehousing and the distribution of goods and services. The EPZ also provide investors with the added option of constructing their own facilities and developing infrastructure within an EPZ, including independent utility installations.

As regards the Port itself, the development of an EPZ entails the following benefits:

o Direct Import and export cargo potential without competition pressures

o No hinterland connectivity issues

o Generate direct / indirect employment potential in the region.

The ChPT can implement the above referred project after doing a detailed feasibility study. This should clearly establish the activity possible within the available surplus land and the economic considerations thereupon. Since the consultants are of the opinion that exhaustive exercise is needed to work out the financial attractiveness of that project, nature of implementation and the direct/ indirect benefits to the nearby hinterland, it is premature to comment on this project at this stage. However this business plan aims at showcasing the basic strengths of the ChPT and recommends setting up of such EPZ if any surplus land can be made available.

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2.7 Organizational Issues In every organization there are inherent strengths and weaknesses which are developed over a period of time. It is important to first identify these strengths and weaknesses and then take appropriate measures to overcome the weaknesses and develop the strengths into core competencies.

In order to find out the above the SWOT Analysis as a tool was used.

A SWOT Analysis Workshops were conducted by Deloitte in the month of July 2006. Deloitte explained and assisted all the nodal officers in conducting the SWOT Analysis for their respective departments. During this workshop, the nodal officers were provided with guidelines to carry out SWOT analysis for their respective departments. During this exercise, the Department Head and other key officials of the Department interacted with each other for sharing their perspective on respective strengths, weaknesses, opportunities and threats.

The consultants team reviewed these SWOT notes developed by the departments and later discussed thoroughly with respective departments for due validation. These workshops resulted in the finalization of strengths and weaknesses, opportunities and threats for the ChPT as an organization.

Some of the major strength and weaknesses of the port arising out of this SWOT analysis are mentioned below.

Strengths of the port

o Geographical Location: The major strength of the port is its geographical location. Situated on the eastern coast it is known as the “gateway” to the India and is well connected to other major cities by rail & road network.

o ISO 9001:2000 Compliant: Chennai port it is a ISO 9001: 2000 compliant port which further enhances its reputation in comparison to other minor and major ports present in the vicinity.

o Well trained staff in Marine, Engineering, Traffic & Accounting: The marine department has marine survey teams for effectively monitoring the depths of basins, channels and berths. Key personnel especially in Traffic, Engineering, E&M and Accounts departments have relevant technical skills and qualifications for carrying port related operations which can be improved with continuous training programs, to face the challenges of the new technologies and competing environment.

o Good Employment & Training facilities: The port provides it employees with good salary and other benefits and attrition rate has been not too high for the port. It has its own training institute to impart training to its employees.

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o Transparency in operations: Port maintains transparency in all its internal and external procedures and enjoys a good reputation among its employees and customers.

o Good Industrial relations: Port enjoys cordial industrial relations with labor unions and there have been no major problems with unions in the past few years.

o First Mover Advantage: The port has a first mover advantage in Southern India especially in Containers and has an established base of customers. It has long term user agreements with companies like CPCL and Hyundai, and hence assured traffic commitments.

o IT Developments & Automation: The port has kept pace with the developments in IT sector, many of its departments have been computerized and some are undergoing the process of basic automation and computerization. The accounts department has full automation in revenue collection and paperless transaction in receipts, salary, etc.

o Sound Financial Position: The port has sufficient working capital to meet its current obligations. Chennai Port is almost a Zero Debt organization and all capital / revenue expenses are met only from internal accruals. The Port has a good quality financial accounting system;

Weaknesses of the port

Like in all other organizations, there are inherent weaknesses which the port has to keep in mind and try to overcome in the near future to remain competitive. Few critical weaknesses are discussed in the next few paragraphs of this section.

o Outdated Environment Management Plan: The Environment Management Plan (EMP) at ChPT was developed 16 years back. The absence of a latest and comprehensive environment management plan with clear allocation of responsibilities may affect the Port’s image in the industry scenario.

o High attrition of Skilled workforce in Marine departments: In Marine Department, the port does not have sufficient skilled manpower to operate some of the critical port equipments. The attrition amongst these categories is very high. This results in lower utilization and higher fixed costs of dredger thereby increasing overall cost of dredging.

o Unstructured Framework for internal Communication: The Port faces constraints due to absence of structured framework for intra-department communication. This results into lower knowledge transfer within the different departments.

Page 89 of 185 Final Report Business Plan for Chennai Port Trust o Succession Planning not done by HR department: The Port does not carry out forward HRD Planning for manpower requirements keeping in mind factors like profile of retiring employees, required skill sets for future operations etc. This is more because of a decentralized HR function that focuses more on personnel management functions at the departmental level. The Port also faces several HR related issues in attracting new talent some of which is related to career growth opportunities, remuneration gaps, and existing work conditions o Failure to benefit from Treasury Management: The ChPT, like many other major ports in India, have over the years’ generated huge surplus. The working capital requirements are met internally. All funds, however, have effectively been lying idle in the form of bank balances, fixed deposits, and Government Securities. There is huge potential for these port trusts to gain from efficient Treasury Management by suitably utilizing these funds. The existing government guidelines restrict investment of surplus fund to government securities and nationalized banks fixed deposits. o Absence of internal audit department: There is no independent internal audit department in the port for review of the functions / procedures performed by all the departments. From an internal control point of view it is important that processes and functions are reviewed separately so that inherent weaknesses are identified and addressed appropriately. o Lack of customer focuses: There is no specific department for focusing on marketing port facilities and the traffic department handles the marketing activity. There are competing ports coming up which will try to take away share of Chennai cargo. Marketing of the port infrastructure hence has a crucial role in the future market driven economy. o Multiple Regulatory Bodies: Chennai port being a major port is governed by Central legislation administered by the Ministry of Shipping in the Government of India. However, Chennai port is also influenced by the statutory and regulatory provisions of the state and the local self government. Any legislative and regulatory action required to improve overall port operations, especially in matters related to city congestion, pollution and port connectivity is affected to a large extent by these multiple regulatory requirements. Labour laws have to satisfy the requirements posed by all these bodies. o Cumbersome Business Procedures: Business Processes within the port require re-alignment keeping in view the service quality standards and the requirements of modern global environment. o High Tariff: The tariff structure of the port is perceived to be comparatively higher than the tariff structure of the ports in the region.

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o Ageing workforce and issues related to excess labor: Due to a ban on recruitments over the last few years, the average age of the workforce is no longer young. Moreover, it has also been seen that the port has a surplus of labor in various departments which leads to high operating expenses.

o Lack of computer training to the staff: The process of computerization of basic port activities has been completed in different phase, but the employees have not been imparted proper training to make better use of the system. Hence proper training programmers should be developed based on the specific needs of employees.

Port Organizational Issues

A perusal of the above perceived strengths and weaknesses brings out the need for Chennai Port to have a paradigm change in the way it is structured and the manner in which the port operations are conducted. Key to increased tonnage in the future in the face of stiff competition entails a market driven approach that emphasizes on efficient customer handling and back office IT driven business processes, implementation of an marketing plan, and resolution of customer related issues in terms of hinterland connectivity and infrastructure support issues. The Port also needs to carry out better tariff management that focuses more on implementing cost reduction measures (especially in staff related costs) and ascertaining the actual cost of service. The Port also needs to strengthen its IT Department capabilities, given the need to provide e- support to all Port Operations and at the same time maintain adequate IT and physical security standards.

As outlined earlier, there is a need to further enhance the strengths listed above so that they become core competencies of the Port. Given the competitive requirements of the future, some of these strengths may no longer continue as such if adequate organizational reforms are not implemented. On the other hand several weaknesses listed above can be comprehensively addressed if a set of given organizational reforms are implemented along with the hard infrastructural projects.

The Table No- 2.7-1 documents the summary of all organizational issues that emerge from the above analysis and the set of organizational reforms that need to be implemented: Table No- 2.7-1: Organization Issues Sr. Function Organizational issues Organizational reforms required. No. 1. HR Ageing workforce, Organizational reforms require a surplus labor, need for comprehensive look at current retaining existing and organizational structure & design, and attracting new talent, structure of the current remuneration and addressing employee policies, The Organizational design also related problems on emphasizes on reduction in workforce

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remuneration and work numbers and increased salary and conditions. pension costs to some extent. The reform process should undertake centralization of the HR Department & implementation of a centralized HR MIS software that focuses on skill set requirements, current availability and sourcing of required skill sets through training or new recruitments, 2. Business Cumbersome business Organizational reforms such as Processes processes and business process re-engineering, and IT procedures, reduced renewed focus on current Support work efficiencies due to Implementation of port automation manual processes, and software, Implementation of IT inadequate IT security Security systems and enhancing the IT and capabilities to organization are some of the steps that manage IT can address these issues. Infrastructure. 3. Marketing Lack of a market and Since marketing has never been a customer driven focus area for ChPT, this area requires approach and providing a slew of organizational reform logistics services initiatives that require the marketing support. function to be institutionalized in the Port. This involves setting up a Marketing research / operations cell, implementing a CRM solution and a Port community system to cater to customer care, customer profiling & segmentation, and developing partnerships with key customers. 4. Financial Issues in Financial Chennai Port would need tom identify management management relate to and implement cost reduction high operational costs, measures to ensure that its operational and resultant perceived costs are reduced. This will facilitate a high tariffs. re-look on the tariff structure and the possibility of a rationalization of tariffs in favor of the customer. Implementation of an activity based costing as a part of the Business process re-engineering and automation

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exercise would also be required.

The strategy to implement these organization reforms is outlined in Section 3.2 of the Report and the strategy implementation is sought to be taken up by implementation of various organizational projects outlined in Section 3.3. 2.8 SWOT for Chennai Port as a whole Based on the above sections related to Port Infrastructure, competition analysis, hinterland connectivity, traffic forecast, capacity & bottleneck analysis, and organizational issues, a all compassing assessment of ChPT as a whole was developed in the form of Strengths, Weaknesses, Opportunities and Threats (SWOT). This provides an essence of the analysis carried out in the previous sections. Table No- 2.8-1: ChPT SWOT Strengths Weaknesses

• Strategic Geographical location • Congested approach road • Dedicated facilities for handling all • Traffic evacuation not allowed during major cargo types the day time • Good multimodal connectivity • Restricted land availability • First Mover advantage and an • Higher tariffs for use of plants & established base of customers equipments • Long term agreements with users like • Sub-optimal usage of rail connectivity CPCL and Hyundai • Exposure to dust & saline • Best location on the East Coast for environment, requiring higher cruise operations in view of good air maintenance expense connectivity and proximity to cruise • Perceived need for improvement in destinations like Bangkok/ Pattaya/ service levels to retain existing Singapore/Malaysia/ Indonesia / clients, avoid them being lost to other Andaman & Nicobar ports and for developing new ones • ISO 9001: 2000 compliant port • Efficiencies lower and tariffs levels • ISPS Compliant port higher than those in international ports in the region like Singapore, • Good IT implementation, web enabled Colombo, Hong Kong and Dubai port-user interaction • Ageing workforce • Good labour relations • Need for additional environment / • Uninterrupted pilotage operations pollution management • Port trust has diverse representation • Surplus labour of about 600 in of different interest groups different departments • Port’s own training institute • Restriction on investment of surplus • Sufficient reserves & surplus fund to government securities and nationalized banks fixed deposits • Good traffic growth and revenues in recent years • High turnover among skilled staff in

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• Sufficient working capital to meet its marine department like pilots and current obligations marine engineers

• Inadequate manpower to operate the dredgers round the clock resulting in lower utilization of dredgers and higher fixed costs thereby increasing overall cost of dredging • Port does not have fully computerized management accounting system • Lack of systematic marketing and Customer Relationship Management skills / systems

Opportunities Threats

• Positive economic environment in the • Competition from major ports years to come with an anticipated 7% specially from Ennore and Tuticorin GDP growth rate, stable inflation and port foreign exchange rates and rising • Competition from minor ports mainly international trade from Krishnapatnam • Increasing containerisation and good • Expected ban on export of minerals forecasted demand with strong business potential • Loss of lucrative cargo like coal & iron ore • Strong forecasted growth in automobile exports • Increase in awareness among common public about environmental • Increased ship sizes issues • Increasing automation • There are too many gates providing • Possibility to tap other sources of access to port, increasing vulnerability revenue: and efforts to maintain security • Ship Repair facilities and services • High possibility of reduction in to Ship Owners government funding • Engineering Consultancy Services to Other Ports • Provision of Marine Services/BOT services to other Ports • Management & Technical consultancy & training services to other smaller ports • JV or strategic investment with minor/ intermediate ports • Potential to attract main line vessels • Better road connectivity after construction of proposed road projects • To facilitate cruise tourism by

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construction of a cruise terminal and marina

• Increased focus on private-public- partnerships and the landlord model of port operations

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3 Business Plan Elements

Consolidation, increasing competition, rapidly changing technology, changed regulatory landscape, competitive pressures in managing capital, & knowledge resources, increasing demand from stakeholders etc. are affecting businesses in all industrial sectors. Therefore the business strategy has to be developed in such a way that it anticipates and sustains all the macro-changes in the environment and reflects well the Vision and Mission of the organization.

In order to develop the strategy for the Chennai Port it was essential to develop the Mission, Vision and goals known as Business Imperatives for Chennai Port. Well-defined Vision and Mission statements are essential for evaluating, formulating and implementing strategy. Without clear statements of Vision and Mission, an organization’s short-term actions can turn out to be counter productive to long term interests.

Business imperatives, by definition are ‘essential pillars’ of any organization. Business imperatives are arrived at an interaction of two essential constructs viz. The Business Definition and Business Constraints. Development of the Business Constraints, Business Definition and consequently, Business Imperatives is the first step of a Strategic Planning process.

Business Definition: The Business Definition describes the organization in terms of its Values, Vision and Mission.

Business Constraints: Business Constraints basically are perspectives of various stakeholders of the organization.

The interaction between Business Definition and Business Constraints allows the organization to assess the magnitude of impact of constraints on the present and future lines of business.

Identification of Business Constraints

For identification of ChPT’s Business Constraints, the following activities were undertaken:

o Preparing a list of ChPT’s Stakeholders

o Conducting interviews with Key Stakeholders

o Compilation and analysis of Stakeholders’ responses

For details of the interviews conducted with key stakeholders. please refer to section 4.2 of the Interim Report.

The compilation of Stakeholder responses and its analysis are depicted below:

Strengths

The greatest strength of the ChPT is its geographical location. Majority of the stakeholders have pointed out due to high costs associated with inland transportation,

Page 96 of 185 Final Report Business Plan for Chennai Port Trust businesses close to Chennai and other nearby areas would transport their goods through ChPT only even though there may be problems like congestion etc. Rank Strengths Rank 1 Monopoly because of geographical location Rank 2 Management Response Rank 3 Nothing Rank 4 Industrial growth in the port's vicinity Rank 5 Port has all the required equipments

It is agreed by almost everybody that key officials from the Port are cooperative and responsive. Lower level employees, however, do not enjoy the same level of confidence among stake holders. There is a class of stakeholders which believes that the Port does not possess any strength. Some of these stakeholders, however, do not deny that Chennai enjoys a monopoly position.

Industrial activities in the Port’s hinterland have grown considerably in recent years and the growth rate is expected to be maintained in the coming years ensuring a healthy hinterland market for the Port’s services. This is going to be one of the ChPT’s great opportunities cum strength. The fact that ChPT is an all weather port, a multi cargo port and port with good rail connectivity are other strengths that emerged from the analysis.

Weaknesses

The problem relating to evacuation, congestion and non-existence of good road connectivity are some of the biggest weakness as revealed in the analysis.

Rank Weaknesses Rank 1 Road Connectivity / Traffic Congestion / Evacuation Problem Rank 2 Low Labour Productivity Rank 3 Land / Storage space constraints Rank 4 High service charges / Avoidable overheads Rank 5 Huge & Inefficient manpower

In terms of manpower, the Port suffers in three different ways. First, it has huge work force which makes the establishment overheads a major cost of total cost. Second, labour productivity is very low. Reasons for such low productivity ranges from unfocused attitude, late coming and early going, unnecessary breaks, unnecessary high gang composition of 11 labors, no watching gang for labors etc. Third, the labour cost is very high when compared with market rates.

The Port’s inability to extent its geographical limits due to land constraints is a major issue which comes next in list of weaknesses. The next issue in the list is the charges for services provided by the Port. The users still want the Port to reduce its charges which

Page 97 of 185 Final Report Business Plan for Chennai Port Trust they felt were on the higher side. Their view is that this is because of inclusion of avoidable overheads and notional levies in the Port’s charges

From the interviews and responses, the following appear to be the main business constraints imposed by various stakeholders: Stakeholder Constraint imposed - Ensure adherence to provisions of Major Port Trusts Act, Port 1963 Trustees - Ensure fiscal and corporate governance - Maintain and raise profitability - Maintain and raise profitability Port Management - Ensure performance of duties by sub-ordinates - Personal and professional growth Employees - Personal and professional growth - Adequate Channel depth Shipping lines - Minimum pre-berthing detention and turnaround time - Lower Tariffs Stevedores, steamer - Lower Tariffs agents, C&F - Efficient procedures agents, - Co-operative employee attitudes CHAs, CFS, - Efficient handling equipments and other infrastructural ICD, facilities Importers, - Hinterland Connectivity Exporters - Adequate Channel depth Container Adequate storage facilities and hinterland connectivity Terminal - - Adherence to Concession Contract terms - Adherence to applicable Laws Public Authorities - Contribution to economy (local and national) - Pollution control Citizens, - Corporate Social Responsibility Environment Groups - Pollution Control

Some of the other stakeholder perceptions are listed below:

o The major threat for the Port is the Tuticorin Port in the container segment of cargo.

o The main suggestion that emerged from the stakeholder analysis is the need for privatization of operations.

o The foremost objective for the Port should be to provide adequate infrastructure to the Port users.

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3.1 Developing the Vision and Mission Business Definition is the description of an organization’s Core Values, Vision and Mission. The terms are defined below:

Core Values: These are set of commonly held fundamental beliefs that describe the kind of behavior it will take to realize the organization’s Vision. They provide guidance on how work is expected to be done.

Vision: A Vision is an idealized view of a desirable future– where and what an organization would like to be in the future. It is a clear, concise, compelling statement that provides direction and guides business activities.

Mission: A Mission is an enduring Statement of Purpose, the organization’s reason for existence. It describes what an organization does, who it does it for and how it does it.

For, ascertaining the future Vision, Mission and Core Values, the following process was undertaken. ChPT already has a Vision and Mission Statement and these were re-visited and examined to ascertain their suitability in the current circumstances, likely future environment and their appropriateness when benchmarked against requirements of a sound Vision and Mission statement. Each of the above steps has been explained below:

Understanding ChPT

Understanding of ChPT’s business was developed through number of interactions and discussions with Chennai port officials and data gathered from ChPT during the inception mission and subsequent vision.

Stakeholder Analysis

As mentioned under developing Business Constraints above, A Stakeholder Analysis exercise was conducted and the results are documented in the Interim report

Researching Best-in-Class Vision and Mission

In order to develop Values, Vision and Mission statements for ChPT the Vision & Mission Statements of other Ports in India and some of the best managed Ports internationally were examined.

Preliminary Environment Analysis

A preliminary analysis of Global, National and Local environments was undertaken and key likely developments were summarized. These likely developments formed the backdrop for revisiting/developing the Vision and Mission statements of ChPT.

Summary of Preliminary Environment Analysis have been depicted in table 4-4 of the Interim Report.

Revisiting ChPT’s Vision and Mission

After undertaking the above steps, the final step undertaken was to re-visit ChPT’s current Vision and Mission. This was done in a Visioning Workshop. The present Vision

Page 99 of 185 Final Report Business Plan for Chennai Port Trust and Mission statements were analyzed to evaluated whether they meet the essential requirements for a sound Vision and Mission statement.

Vision Statement

Table No- 3.1-1: Evaluation of ChPT’s existing Vision Statement

Clear Forward Call to Unifying Statement Our Remarks looking Action theme To become the best – Vague expression of among all ports in all Intent aspects – Too wide a canvas to X √ X X enthuse action

Empower employees for – More like a mission than shouldering higher a vision responsibilities resulting in – Does not enjoy a proper job enrichment and job √ √ X X connect with the vision satisfaction identified above

To become the best port in − Duplication with the first environmental statement management and in − Emphasizes only one √ √ √ X controlling pollution dimension of the overall vision Mission Statement: Table No- 3.1-2: Evaluation of ChPT’s existing Mission Statement Connect Specific Statement Our Remarks with guide to Comprehensive Vision action Strive to achieve excellence – Why ‘Strive to?’ in port operations through Mission is a call ‘TO dedicated, loyal and DO’ committed workforce to – Duplication with vision X √ X enhance customer statement satisfaction

Strive for continual – Why ‘Strive to?’ improvement at all levels by Mission is a call ‘TO enhancing skills, knowledge DO’ and enthusiasm to meet the – Vague expression of X X X needs of the changing world Intent

Strive to achieve maximum – Why ‘Strive to?’ value addition through the Mission is a call ‘TO most effective use of DO’ resources – Vague expression of X X X Intent

Further to the review, various suggestions were also provided for suggested Core Values, Vision and Mission Statements. After extensive discussions and with active participation from ChPT personnel, the following Core Values, Vision Statement and Mission statement was agreed upon:

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Table No- 3.1-3: New Core Values, Vision and Mission Statement Core Values

- Integrity - Proactive - Professional - Committed - Conscious of Environment / Social obligations Vision Statement

To be recognized as a futuristic port with foresight Mission Statements

- Achieve excellence in port operations with state-of-the-art technologies. Enhance competence and enthuse workforce to maximise customer satisfaction - Anticipate and adapt to the changing worldwide scenario - Act as a catalyst for sustained development of the region 3.2 Strategies 3.2.1 Introduction

Figure 3.2-1: Strategy Process

Strategy is all about making Internal Analysis Key Uncertainties choices in the face of (SWOT Analysis, Stakeholder Analysis) Future multiple alternatives, about Insights Industry External Assessment Scenarios making the right decisions. (PESTLE Analysis, 5 Force Pre-determined Forces It is about identifying Analysis, Traffic/Demand Analysis) strategic options, and Business Strategy choosing and implementing Thrust Areas them in a manner that leads Functional to the achievement of the Strategy Finance, IT, HR stated objectives within the planning horizon. It often Projects & involves sacrificing some Action Plan IRR, NPV, Feasibiliy immediate gain for a future long term advantage, Business Plan Projected Financials something tangible for something intangible, or something gross and manifest for something subtle and - at that point- hypothetical. Usually these deeper intentions are not apparent from a superficial view of the actions taken and the actions lend themselves to the criticism / skepticism of the uninitiated.

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Implementing a strategy requires commitment and conviction in the adopted plan. The ability to resist the urge to profit opportunistically and stay invested strategically is hence critical to reaping the genuine benefits of adopting a strategy. This ability of organizations is constantly assaulted by the plethora of opportunities that arise in the dynamic and turbulent business times we live in. A weak commitment results into a compromise of strategic focus. It is hence necessary to think a strategy through very carefully and involve the key stakeholders in its design, so that it enjoys strong ownership and broad endorsement that can consistently withstand doubt, when under pressure for deviation during implementation.

The process of Strategy formulation has been elaborated in the diagram above. As is evident, the inputs to the process are in the form of Insights from internal/ external analysis and a visualization of likely Future Industry Scenarios. The Strategy Formulation process first entails the Business Strategy to be formulated followed by functional strategies which are then elaborated and articulated in the from of Projects and Action Plans.

Key Insights, as mentioned above, are an outcome of an elaborate internal and external assessment. We have listed several factors that are relevant to ChPT given its location, its business, its competition - broadly its internal and external environment. Further, the Vision adopted by ChPT is “To be a futuristic port with a foresight” . This requires developing a shared understanding of how ChPT ought to be as a “Futuristic Port”. This vision has to be realized in the future. We hence need to develop a view of the future. Since the future can never be projected with certainty one needs to develop multiple scenarios in which ChPT might find itself pursuing its vision.

Deciding the Business Strategy at its first level is about determining what business an entity should be in given its larger mandate. It involves identifying the approach in which the potential for achievement of the Corporate Vision is the highest. Once strategy at this level is decided, detailing of supporting strategies at a functional level can be undertaken. It is hence essential to look at the Vision and Mission and link this right up to the Projects comprising the Action Plan.

In the strategy formulation, few key insights were identified which are used in the formulation of industry scenarios and the development of the overall business strategy. .

List of key insights has been discussed in section 5.2.1 of the Interim Report.

3.2.2 Future Industry Scenarios

As the pace of change within an industry accelerates- in technological advances and consumer demands, in economic and regulatory shifts- exploring the future through scenarios helps management make informed planning decision. By identifying and exploring events that may be unfolding, companies can avoid surprises, adapt to change, and proactively target new business growth activities.

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A Scenario Building Process is made up of two driving forces. These driving forces usually fall into one of two categories:

o critical uncertainties

o predetermined forces

Critical Uncertainties

We define critical Uncertainties as critical areas / events / developments which are likely to be important in shaping the future of the Port but which are uncertain at present.

Predetermined Forces

Predetermined Forces are those critical areas / events / developments / trends which are likely to be important in shaping the future of the Port and happening/non-happening of which can be predicted at present with reasonable certainty.

Pre-determined forces do not depend on a chain of events to occur, they are already underway. Critical uncertainties are the forces why organizations develop various pictures of the future i.e future scenarios.

A list of critical uncertainties & predetermined forces has been discussed in the Annexure to the Interim Report.

3.2.3 Process of formulation of scenarios

The predetermined forces are expected to happen invariably and hence are to be taken as given. Any strategy that is developed will have to ensure that this view is factored into the decision. It is the Key Uncertainties which need to be iterated for scenario planning. Doing so is practically impossible unless we have a limited No Restrictions Scenario-2 Scenario-1 number of variables to permute and combine. Hence from the list of Key Restricted Iron Ore Uncertainties we have picked up the top Exports Scenario-3 Scenario-4 two uncertainties for the purpose of a Severe scenario development: Restrictions Poor Key Stakeholder Support Good o Reduction in Iron Ore Export / Coal imports

o Key Stakeholder support Figure 3.2-2: Scenario Matrix

Combinations of these two Key uncertainties give rise to four probable scenarios as tabulated below:

For developing forecasts, we have identified:

o Base Case Scenario – Most Likely Scenario

o Optimistic Scenario – All positives materialize

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o Worst Case Scenario – All negatives materialize

Base Case Scenario – Most Likely Scenario

We believe that the most probable future scenario in which ChPT will find itself shall be characterized by the following key factors:

o Restricted iron ore exports

o Good Key Stakeholder Support

Restricted Iron Ore Exports

It is understood that the Indian Iron Ore reserves are depleting at an alarming rate and are expected to run out at the current rate of exploitation in the next 15 years. The Steel manufacturers of the country are lobbying for a ban on Ore exports and the argument is gaining support from the economists and the citizens alike – albeit for different reasons. It is expected that there will be restrictions on iron ore exports and it could even mean a complete ban.

Our assessment is that given so many interests aligned against the iron ore exports it is very likely that such exports shall witness increasing regulation and restrictions. Coupled with the fact that ChPT finds the business of handling iron ore exports (as also the coal exports) to be a bone of contention with the citizens of Chennai and faces pressure from growing environmental regulations. Any strategic imperative to forcefully retain such business therefore is suspect. Also competing Ennore Port has created capacity to handle bulk cargo (read iron ore) through PSA SICAL. Even if these restrictions do not materialize, service substitution of such export facilities is foreseen. The end effect – that of depriving ChPT of assured iron ore traffic through it – is reasonably anticipated.

Since this is one of the key cargos, its loss is expected to impact the fortunes and business case of ChPT significantly. It will be constrained to find other ways of maintaining its profitability e.g. setting up another Container Terminal. On the environment front however, the effect will be positive with increased public support for such initiative by ChPT. Also, given that ChPT will be regarded as a ‘Clean Port’, it may be able to attract cargo like automobiles, food grains etc. which need a clean environment. Absence of Iron Ore will also lead to increased space availability which can be used to handle alternate cargoes mentioned above.

Good Key Stakeholder Support

Key Stakeholders for ChPT include the important customers as well the Central Government. ChPT being a government organization and likely to remain under government ownership in the future, it is imperative that there is continued government support in the years to come for ensuring smooth implementation of ChPT development initiatives. Support here means policy support and not just financial support. E.g. it is understood that the two key projects expected to impact the access to ChPT are:

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o The Manali Express Highway (MEH)- which shall connect ChPT to NH-4 connecting CHPT to the northern hinterland bypassing Chennai city

o Elevated Corridor (EC) - This shall connect ChPT to NH-4 connecting ChPT to the southern hinterland bypassing the city.

Both these projects are important not only to ChPT but also the city of Chennai as they would help to decongest the excessive traffic flow through the city that is currently accounted by ChPT operations. If ChPT enjoys continued government support, it is very likely that these projects shall enjoy speedy implementation.

It is expected that ChPT will continue to obtain strong stakeholder and Government support given the current political equations in the State and at the Centre. This may not continue right through the planning horizon for this business planning exercise. From a policy perspective however, there is consensus on developing the ports in the peninsula and providing the required support. Hence, ChPT can too some extent, bank upon good stakeholder support from the respective governments.

So far as other important stakeholders are concerned, the biggest advantage ChPT has over upcoming competing ports is that it has an established base of customers, many of whom have committed investments in ChPT’s hinterland e.g. Hyundai and CPCL. Also important customers have an established supply chain and a working relationship with ChPT and they are unlikely to shift preferences at a short notice. Given this fact, it is fair to assume that ChPT will continue to enjoy good support from its important customers.

Optimistic Scenario – All positives materialize

This scenario presumes the following:

o There are no restrictions on iron ore exports

o Good Key Stakeholder Support

The difference between this scenario and the other earlier is that this scenario assumes that they are no restrictions on iron ore exports.

Currently, most of the Iron Ore exports from India are to China. China has a huge demand for Iron Ore and this demand is unlikely to reduce in the near future. While domestic demand of Iron Ore is also increasing, due to foreign exchange earnings associated with exports, it is possible that the government may be reluctant to impose any kind of restrictions on exports of Iron Ore. So far as exports from ChPT port are concerned, ChPT has the required resources and infrastructure to retain the traffic of Iron Ore. If, for any reason, cargo does not shift from ChPT to alternate locations like Ennore, ChPT may still be able to continue Iron Ore exports taking adequate measures to reduce environmental hazards.

If ChPT is able to retain Iron Ore as a key commodity, it will ensure a steady profitability for the Port in the near future. At the same time, however, due to severe space constraints at the Port, continuance of Iron Ore may hamper other plans like setting up

Page 105 of 185 Final Report Business Plan for Chennai Port Trust a 3rd Container Terminal, handling additional cargo like automobiles (which require significant storage space) etc. Also, if the local citizens are not taken into confidence, anti-port sentiments may also continue and may have adverse legal ramifications.

Worst Case Scenario – All negatives materialize

This scenario presumes the following:

o There are restrictions on iron ore exports

o Poor Key Stakeholder Support

The difference between this scenario and the base case scenario is that this scenario assumes that along with restrictions on iron ore exports, ChPT suffers from poor key stakeholder support.

As mentioned earlier, ChPT is primarily a public sector entity and Central government taking all major policy decisions regarding the Port. With a change in government, a possibility that a new government will have different ideas about the Port sector than its predecessor cannot be denied. This might mean a different attitude to development of Ports in the country.

So far as other key stakeholders – important customers – are concerned, it may happen that given the severe competition in the Port sector coupled with aggressive marketing/services/lower tariffs provided by other ports, these customers may look to shift to other ports if ChPT is unable to provide similar level of services.

3.2.4 Process of Formulation of Strategies

Once the base case scenario has been developed, then for developing the strategy we have followed the following process:

1. Identification of the Business Segments: A business segment is a combination of a product / service and its key / target customers. Based on a review of the current business scenario, including a stakeholder analysis, the Business Segments were identified.

2. Evaluation of Key Business Segments: After the identification of the Business Segments the next step is to evaluate and identify from this exhaustive list the segments that make the most business sense for ChPT. This is a strategic step, relying significantly on the experience of ChPT senior management, the experience of the consultants and the views of the stake holders.

The relative merits and demerits of key business segment have been discussed in Section 5.4 of the Interim Report.

3. Proposed Strategic postures: Having considered these merits and demerits associated with the different business segments it becomes necessary to deal with these business opportunities strategically. We propose three different strategic postures vis-à- vis these segments:

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o Shaping the Future: This posture reflects the overarching confidence we have in pursuing such a business. It indicates a perception that there is very good opportunity and that ChPT should capitalize on its strengths to make the most of it. It implies that in these chosen business segments ChPT shall aspire to play a leadership role and hence lead the industry. This may mean creating capacity ahead of anticipated demand, concept selling and other aggressive posturing in the business with a view to emerge the clear leader in that segment.

o Adapting to the Future: This posture reflects the judgment that the intensity of pursuit or abandon depends on changing market dynamics. To not lose opportunity in these segments, it would be necessary to have capacity to be up and running to deliver at a relatively short notice and hence, while maintaining a state of readiness, more importantly, a constant monitoring of the market forces is essential. In these segments focus will be to compete with the regular players and to be with the trend. This typically happens to be the area where ChPT has lot of experience and capability to spot and catch trends.

o Reserving the right to Play: This posture is recommended where the level of uncertainty is very high. It also rests in the confidence that ChPT stays ready to increase its participation in the market if indicators look up and the haze around some important market forces clears resulting into a clearer direction. Thus while keeping a tab on the business dynamics, ChPT does not commit significant investments or undertake focused projects with a view to tap the business potential.

These postures are depicted below:

Figure 3.2-3: Strategic Postures

The table below indicates the strategic posture that ChPT should adopt vis-à-vis the different business segments identified and whose merits and demerits have been described earlier. This posturing has also been discussed with ChPT.

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Table No- 3.2-1: Business Segments vis-à-vis the Strategic Posture Business Segment Strategic Posture Shape Adapt to Reserve No. Customer Service / Product the the the Right Future Future to Play Shipping Lines Container 15. √ Handling Integrators/Port Container 16. Logistic Service Handling √ providers Shipping Lines Ship Repair 17. √ Facilities Shipping Lines Cruise Facility 18. √ General Public Cruise Facility 19. √ General Public Marina Facility 20. √ Public Sector Liquid Cargo 21. √ Units (POL) Handling Public Sector / Bulk Cargo (Iron 22. Private Sector Ore) Handling √ Units Integrators/Port Bulk Cargo (Iron 23. Logistic Service Ore) Handling √ providers Public Sector / Bulk Cargo (Coal) 24. Private Sector Handling √ Units Integrators/Port Bulk Cargo (Coal) 25. Logistic Service Handling √ providers Multinational Automobile 26. National Handling √ Companies Local Govt Desalination 27. √ Organizations facilities Other Ports Engineering 28. Consultancy √ services Public Sector / Break Bulk and 29. Private Sector Project Cargo √ Units Handling Integrators/Port Break Bulk and 30. Logistic Service Project Cargo √ providers Handling Other Ports Marine Services 31. √ Acquisition of Investment 32. √ Minor Ports Other Ports Providing BOT 33. √ services

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Summary Strategic Statement

In summary, as a strategy ChPT chooses to focus on becoming a clean port with a focused attention on container handling, automobile exports and cruise terminal operations. It sees itself operating in a market where more likely than not, iron ore exports face restrictions either in view of environmental pressures or due to economic and political reasons. So also it anticipates the coal cargo to be gradually phased out in view of the environmental pressures on a city port and emerging alternative capacities in the vicinity.

Having identified the business segments of the future, it recognizes the need to realign its focus and proactively prepare for the change. However in appreciation of the fact that current customer dependencies need to be served and the change over needs to be least disruptive to the industry, it shall move away from such cargo operations in a phased manner and over a period of time. While ChPT is sure that intensity of competition shall increase, it is also confident that it has identified the appropriate business segments where the demand –supply gap is likely to be so wide that it can afford the privilege of proactively altering its service portfolio.

In keeping with its vision of becoming a “Futuristic Port with a Foresight” the port wants to change its image and undertake several strategic initiatives which will position it as such. In view of the fact that such transformation hinges more on changes to the way of doing things, to its approach, rather than a long list of physical infrastructure projects alone, it shall undertake several ‘soft’ initiatives like organizational reforms, systems reengineering etc. To obtain foresight and dynamically update its understanding of the marketplace and the changing competitive landscape, it shall formalize market and industry research activities in its organization.

ChPT expects to become a clean port handling primarily containers and automobiles and also operating a cruise terminal that leverages its geographical advantage of being a city port on a potentially attractive tourist circuit. In view of the fact that it has to contend with limited land availability, the direction of growth for its real estate has to be vertical. Its key business decisions shall hence primarily be focused on optimum utilization of its limited land resources.

It shall also aggressively identify opportunities and take controlling stakes in other ports to either support the cargo it has decided to attract or to service at a different location the cargo it is constrained to forego. In that sense it shall turn into a ‘Strategic Landlord Port’ rather than a ‘Plain Landlord Port’. It shall attempt to achieve the best performance metrics within its peer class in terms of turn around times etc. and merit recognition as the Port of preference for shippers and traders alike. In its endeavor to achieve these objectives it appreciates that its people are one of its most important resource and shall hence usher flexible human resource policies along with aggressive training especially in customer focus and service.

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ChPT recognizes that it must have its stakeholders strongly rallying behind it to succeed in the face of uncertain future and shall hence attempt to maintain excellent strategic alignment with all its stake holders like key customers, the government and the local citizens. It shall focus on relationships and where possible, not hesitate to collaborate with its competitors, in the larger interest of the country’s trade, commerce and industry; of which it considers itself an important integral facilitator. It thus hopes to emerge truly as a socially responsible “Futuristic Port with a Foresight” .

ChPT also realizes that the manner in which the port management is structured at present i.e. in the form of a Trust is not the most flexible ownership structure for operating a business entity. Given the pressure of a competitive market, there is a need to adopt a more flexible and robust management structure that can act swiftly in a changing environment. At the same time, the Board must also have an efficient governance structure that can oversee the appropriate utilization of public funds invested in the port. The port management is therefore conducive to a corporate form (a public sector company) that has a desired management and decision making autonomy duly superimposed by adequate corporate governance and statutory legal requirements. The port is, therefore, willing to participate in any initiative undertaken by its key stakeholders in amending the required legislations to convert itself from a Trust to a corporate entity.

3.2.5 Functional Strategies

These strategies are subordinate to the main Business Strategy. While the Business Strategy addresses the larger issue of what businesses ChPT should be in, the functional strategies are designed for ChPT to be in those businesses most effectively, efficiently and hence successfully. These strategies attempt to articulate the functional direction relevant in the context of the earlier established corporate direction. They also elaborate on how in their spheres ChPT should strive to best realize its objectives. They hence contain an identification of the functional objective, recognition of the various alternatives considered for achieving the objective and the choice made along with its rationale.

These strategies are developed for the base case scenario and to this narrative are suffixed the implications of the two broad variations in the scenario – the optimistic and the pessimistic scenario. Flexibility, dynamism and adaptability are necessarily the hallmarks of good strategies and factoring a consideration of the vagaries of future through such scenario planning is hence an important aspect of the strategy development.

ChPT’s functional strategies are classified into three categories as under:

o Commercial Strategy

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o Port Development Strategy (further bifurcated into Infrastructure Strategy, Institutional Strengthening Strategy, Information Technology Strategy and HR Strategy)

o Financial Strategy

COMMERCIAL STRATEGY

Commercial strategy for each of the focus Business Segments has been given below. ChPT is expected to focus on the following key service segments:

Containerized Cargo

ChPT chooses to be a Clean Port. An analysis of the historical trends and a review of the business climate indicates that there is a growing trend of Containerization. The traffic forecast for containerized cargo is robust and shows a consistent growth pattern. Given the current capacity and proposed additions expected to expand market capacity, there will still remain significant gap between demand and supply. This under-capacity projection gives it the basic confidence that this cargo can be focused upon with benefit.

ChPT currently has a dedicated container terminal operated by a private player under a BOT arrangement. LOI for the second container Terminal has also been awarded. Thus it already enjoys a lead and can capitalize on this advantage. Strategically it needs to become an active partner with the private BOT operator in attracting more and more container cargo to the Port and also in improving the operating efficiencies. From sleeping / dormant partnership to strategic partnership is the key change. Such change must add value and care should be taken that it does not become a burden rather than an advantage to the BOT operator.

Key customer segments for this service are the Shipping Lines, the Integrators / third party logistics services providers and the importers / importers. ChPT should focus on developing close relationships of these three types of customers. It should come out with special schemes – like special tariffs / discounts, special facilities, waivers etc. in the nature of quantity discounts.

Significant volume of the country’s containerized cargo emanates from the northern hinterland through various ICD’s and CFS’s in UP, MP, Haryana & NCR, etc. This however flows out of western ports. It is possible to attract this cargo for export through Chennai especially when it is bound for Far East and China. It is however necessary to find return cargo to reduce costs of empty rake and container movements. Key lies in identifying imports made by this extended hinterland and structure their imports through Chennai in a cost effective manner. This may require looking at the profitability of imports and exports as conjoined and indivisible. ChPT may, after detail study of the import / export dynamics, identify price and service differentiation through which it can attract and retain this class of customers.

A calculation of per container cost of transportation from this hinterland to various destinations through Chennai should be developed and compared with the costs

Page 111 of 185 Final Report Business Plan for Chennai Port Trust currently incurred by the target customers. After suitable restructuring of tariffs (as merited and if required), such comparisons should be presented by ChPT at suitable forums and to the appropriate customers and industrial associations to wean them away to Chennai. These efforts should be made in tandem with the BOT operators.

Since the traffic forecast for this service line is quite attractive, these measures in terms of price reductions are conceived only to draw in more market share initially. These can be gradually withdrawn / phased out as the customers appreciate the service, establish their supply chains through Chennai and get hooked. Effort should be to retain these customers with ChPT through superior servicing and customized offerings in the long run, rather than through lower prices. Price competition would have been necessary had forecast cargo not been sufficient. Tactical resort to price competition in response to competitor moves should of course be undertaken. But this should be in the nature of an aberration rather than a norm.

The potential customers operating in proximate hinterlands of other competitors should be targeted and lured to patronize ChPT through introduction pricing and customized service offerings.

Automobile Exports

Chennai’s hinterland is slated to witness handsome and consistent growth in terms of automobile exports in view of the current and upcoming capacities. It is noticed that automobile exports are not as lucrative and return lesser revenue per square meter of port area occupied. ChPT has the opportunity of raising its tariff for this commodity. The outer limits of pricing for this service need to be tested. ChPT’s taking up a multi-tier car parking facility can provide a good opportunity to escalate the tariff. Competition in this is relatively unlikely to come, as by removing the dirty cargo, while ChPT becomes clean, competitors absorbing this cargo servicing may become dirty and hence undesirable for handling this cargo thus enabling ChPT to virtually monopolize this segment.

ChPT has recently entered into a MoU with Hyundai which will effectively guarantee cargo for the next 10 years. Similar MoU should be entered into with other exporters too. Focused marketing teams at ChPT should study customer preferences and supply chains on a regular basis to detect any shifts in power balance as the key spirit of the strategy for this cargo depends on such power of being a virtual monopoly.

Investments in Minor / Other Ports

In making investments in other ports an attempt should be made to pick up strategic partnership in ports that are geographically well positioned, endowed with good drafts and possibly good connectivity. Strategically if such ports can actually help displace the dirty cargo from ChPT and absorb the same, ChPT may be able to retain its present customers. However, unless such ports have definite competitive cost advantage over other ports such customer retention may be short lived. In that circumstance, it may make more sense to pick stakes where container handling can be focused upon so that the experience and insights of this line of business can be leveraged. It may also be a

Page 112 of 185 Final Report Business Plan for Chennai Port Trust good idea to partner with world class port operators to run and manage these ports. It should be possible to transplant the experience to other business where such partnerships don’t exist, with benefit.

Such ports should be so selected as to bring otherwise excluded hinterland within ChPT’s reach and possibly divert from the clutches of competition. In order that ChPT can manage these ports investments should preferably be in controlling stakes (e.g. 51% of control) and not be treated as pure financial investments. ChPT should develop a strong relationship with Tamilnadu Maritime Board and evince interest in actively promoting minor ports by investing in them. Relationship with TMB should be that of partners in progress – a “win-win” for both!

An attempt can be made to identify other ports in nearby locations that enable consolidate and coastally trans-ship such cargo to and from ChPT and thus cutting down supply chain costs and resulting into capture of hitherto inaccessible hinterlands.

Cruise Terminal Services

To develop a flourishing cruise business will require a number of cruise liners to call on Chennai at relatively frequent intervals. It will also require the tourism department to take a lead and promote cruise tourism to locations around Chennai. Since the revenue potential of this segment is more owing to non-port activities, this segment provides a degree of diversification in the Portfolio of a port. To leverage the financial gain attached to the promotion of this activity at the Port, the Port must take strategic stakes in the appropriate ancillary non-port activities. Such infrastructure facilities should ideally provide facilities like accommodation to travelers, shopping malls, multiplexes, spa and other entertainment, secure but efficient immigration and customs clearances, money changing, local sight seeing tours packages and possibly other water sports.

ChPT should market these facilities through getting the cruise shipping lines to start including Chennai up on their itineraries as a port of call. Initially, to invoke interest in this new concept, it may resort to significant tariff discounts to shipping-lines, and work to develop tour packages jointly with travel agents and cruise liners. It will also make sense to structure this business as a separate business unit with a focused empowered leader. Preferably the cruise part of this may be undertaken in partnership (BOT basis etc.) with another cruise terminal operator or a cruise shipping company or a global travel agent, while other strategic partners may be invited to participate in the setting up of malls, multiplexes etc.

The general public should be attracted to this through publicity and value for money tourism experience. Advertisement and public information seminars should be organized in the key ten cities of the country on a repeat basis at least once a quarter.

Iron Ore & Coal

These are identified as cargo requiring a non city port for handling given the concomitant environmental implications. The strategic posture in respect of these cargoes is to wait & watch the relevant drivers and forces dynamically and be tactical in

Page 113 of 185 Final Report Business Plan for Chennai Port Trust benefiting from market changes. It is not required to increase the existing exposure and hence no proactive marketing is called for. Market should be tracked and trends observed to infer the need for any change in tactics. Coal handling, being relatively less revenue earning than Iron Ore is likely to be discontinued a lot earlier than Iron Ore. The base scenario assumes that exports of iron ore are likely to be restricted eventually. In this case, no marketing efforts will be required for this segment. Even in case there are no restrictions, in the long term it is clearly the objective to reduce dependence on these cargoes as ChPT being the city port it is, will be constantly under pressure on environmental issues and unless these cargoes are given away, the relationship with the local citizens will remain adversarial..

POL & Liquid Cargo

ChPT shall track the market for any new demand likely to come up in this area and try to attract this cargo by tailoring their service contracts to the needs of the importers and offering the most competitive rates. This is considered to be a relatively easy service that is not labour intensive, gives steady revenues, and while it is hazardous it is not environment unfriendly. However this demand can grow only once in a while given the nature of that industry and hence proactive focus is not called for.

Other Cargo

Other business segments are not expected to be key focuses and are to be dealt with opportunistically.

PORT DEVELOPMENT STRATEGY

The port development strategy has four main components:

o Infrastructure Strategy

o Port Management Strategy

o Systems and Information Technology Strategy

o HR Strategy

Each of these strategies is described below: i) Infrastructure strategy

Infrastructure strategy emphasizes upon alignment of proposed investments in the port’s infrastructure facilities with the key business segments identified under the Business Strategy.

The Business Strategy seeks to “Shape the future” for containers handling, automobiles, cruise facility and investment in minor ports. Naturally port infrastructure for these segments would need to be of global standards and the most efficient.

Other than general and need based infrastructure development measures, no pro-active efforts need to made for liquid cargo handling, bulk cargo handling, and ship repair facility where a posture of “Adapt the future” has been recommended and for segments

Page 114 of 185 Final Report Business Plan for Chennai Port Trust like Break-bulk cargo handling, providing consultancy services in the market place providing marine facilities where it has been decided to “Reserve the right to play”

Containerized Cargo: The capacity at the Port for handling containers should be adequate to handle maximum possible demand with global benchmarks for capacity utilization factor. In fact, keeping in mind ChPT vision of being a port with a Foresight, it would be preferable to create infrastructure before the demand rather than playing catch-up with demand. With an existing container terminal in operation and another to commence very shortly, there appears to be sufficient capacity for the time being but there is a need to strategically decide on equipping the port with expected future requirement and adding similar service facility.

Given the land constraints at the port, the best possible way to add capacity would be to convert some of the existing facilities which cater to non-strategic segments and/or to create infrastructure to handle larger cargo ships at the existing terminals. Given that the future industry scenario assumes that there is a possibility of likely restrictions on Iron Ore exports and this segment has been perceived to be non-strategic, converting existing iron ore berth for container operations is proposed as an initiative.

In addition, the strategic focus on containerization also entails further deepening of berths for increased drafts to handle future sizes of the ships likely to call at Chennai e.g. Post Panamax.

Given the shortage of ground storage space within the Port, container storage is likely to be a problem in future. To address this problem, there would be a need for (1) speedy evacuation of containers from the port and (2) facilities outside the port which serve as an extended arm of the port wherein some of the port’s functions can be performed. Quick evacuation should be achieved through efficient business processes (this point has been addressed in Port Management Strategy) and better connectivity to hinterland. Road connectivity to the Port, presently, is a constraint but this is expected to improve after construction of the two proposed road connectivity projects. Efforts should be made to ensure that these projects are completed as quickly as possible. Restructuring the railway marshalling yard would be another step in ensuring speedier evacuation. The road and rail connectivity projects would benefit not only the container trade but all trade from the port and hence they assume an even higher importance.

So far as creating facilities outside the Port is concerned, the Port is already looking at constructing an off-dock facility which should help faster evacuation.

Automobile Handling: Car export is almost expected to double in the next seven years but the land presently being utilized for storing the same would not suffice. This business segment would demand an enormous storage area for its safe and clean storage. Understanding the land constraint and emerging need of land for future expansion in container handling facilities, vertical expansion seems to be the best mode for creating the necessary storage space. Constructing a multi-level car parking is, therefore, proposed to cater this growing trade.

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Cruise facility: ChPT has an advantage of an operational passenger terminal already having been set up to cater to any future such requirement. The move towards creating a cruise terminal or upgrading the existing passenger facility into a full fledged cruise terminal with duty free shops, restaurants etc. would facilitate ChPT in adding the leisure business to its profile. Efforts would be required to market this facility and ensure regular calls of cruise ships. This has been dealt with in detail in the Commercial Strategy. ii) Port Management Strategy

Port Development essentially happens through infrastructure creation as well as several internal initiatives related to port operations, management of stakeholder expectations and management of the environment. Typically, in the past, Indian ports have focused on creating infrastructure but emphasized little on streamlining their operations, costs and overheads. No significant attention was paid to what the society at large and its customers perceive of the port’s services and capabilities. This is also due to the fact that till recent times, port industry has largely been a supplier’s market with most of the Major Ports being virtual monopolies in their hinterland. Therefore no need felt for such initiatives.

The Port Management Strategy draws heavily from the overall Business Strategy of carrying out a transformation that hinges more on changes to the manner in which port operates its approach, rather than a big list of physical infrastructure projects alone. Thus, the port development strategy emphasizes on areas like cost reduction, environment management, and perceptions / expectations management etc. Key elements of the port management strategy are outlined below:

o In conjunction with the commercial / marketing strategy to review tariffs for container operations and offer incentive and promotional schemes to customers, the port development strategy focuses on better cost identification and rationalization: In the years to come tariff level is likely to be one of the main battlegrounds in the competitive scenario. This strategic initiative will require projects to assess the current cost structure and to identify avenues of cost reduction. This strategy has been appropriately dovetailed with the Systems and IT Strategy to improve internal MIS, implement activity based costing etc.

o Being an organization with significant stakeholder influence and with likely support from key stakeholders unlikely to be the same in the future, it will be crucial to have measures in place to ensure that stakeholders support is adequate to facilitate important development initiatives likely to be finalized in the Business Plan. This is especially true in the context of hinterland connectivity, which will be extremely crucial to maintain Chennai Port’s competitive position.

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o One of the thrust areas in the overall Business strategy is to look at options for making port related investments or take up management of operations in any of the minor ports nearby. The Port Management will need to identify such ports which fulfill the predetermined criteria that make such an investment strategic.

o The overall business strategy emphasizes on the concept of ChPT being a “Clean and Green” Port based on core values of being conscious of the environment obligations. This translates into several strategic initiatives that the Port has to undertake to manage the environment and the social impact of ports activities on the city.

o The Port has a mission to be recognized as an entity conscious of its social obligations and to act as a catalyst for sustained development of the region. In this context it is essential that the Port takes up measures to further community welfare. ChPT will also undertake a public relations exercise in order to build awareness among the community about steps being taken by Chennai Port on various fronts. iii) Systems and Information Technology Strategy

ChPT’s vision for a being a futuristic port and its mission to achieve excellence in port operations with state-of-the-art technologies require a systems and Information Technology strategy that demands intensive automation in all customer interface and support functions. Whereas investments in fully automated port operations will take some time to come, ChPT realizes that automation of all support functions is inevitable in today’s context. The core components of the Systems and Information Technology Strategy are as follows:

Systems: ChPT recognizes the need to have robust systems and implement best-in-class processes that can help optimum efficiencies in all business areas. This entails several initiatives and projects such as business process re-engineering that will eliminate unnecessary and wasteful activities, the introduction of activity based costing and creating capacities within the organization for better financial management, budgeting and MIS.

Applications: In the future, increased use of Information Technology tools is going to immensely affect the efficiency of business process. ‘Best-in-Class’ business processes in ports all across the world are increasingly getting IT driven. Several initiatives have been introduced to implement IT applications that would be required to introduce IT driven processes at the Port. Some of these initiatives would be to take up the implementation of the Port community system initiated by the IPA, implementation of a very efficient customer interface CRM solution and very quickly implement the balance modules of the ongoing ERP custom developed software and thereafter undertake a comprehensive review of the same. Another key application implementation would be a modern day HR

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MIS which would shape an intersection in between human resource management (HRM) and information technology.

Hardware and Networking: Key initiatives in this area would be the undertaking of implementation of a full fledged Port security system. This would also be complemented by the development of an IT security policy, e-security initiatives and development and implementation of a disaster management plan. There is also a need for an appropriate file and print server to store and access common information across the Port.

IT organization: The SWOT analysis identified some key weaknesses in this component such as inadequate IT training, ageing staff in the same IT department age group, stagnation and need for inducting younger people. The IT strategy recommends a higher focus to this function by shifting the IT Department directly under the Chairman and inducting qualified and trained IT professionals to manage and implement the entire IT infrastructure. iv) HR Strategy

The implementation of the Business Strategy requires that skill sets are tailored to handle containers, cruise and automobile segments. In order to generate efficiencies training on usage of new equipment and adoption of best business practices shall be required. Customer relationship handling skills shall need to be imbibed at all levels. There shall also be an induction of management expertise and if required lateral inductions and fresh blood shall also be encouraged. Comprehensive use of information and information technology shall need expertise in IT as well.

Many of these new businesses are expected to be PPP initiatives and in such circumstances, while required to maintain a certain basic level of expertise and competence in-house, it shall be even more necessary to have the skills to negotiate and monitor implementation of these PPP contract and the obligations there under. The organization structure shall be restructured to align it with the strategy and the delegation of powers shall be enhanced to ensure fixation of delivery responsibility more firmly on the concerned and to enable them to deliver.

Thus a critical strategic objective of the HR Strategy is to carry out an organizational structural re-design that can enable introduction of best in class processes and ensure organizational readiness for the challenging competitive environment. Another important strategic objective is to harness the existing employee potential and attract upcoming talent by being perceived as an Employer of Choice. To achieve the above, the HR Strategy envisages the implementation of the following:

o Review and redesign of the Organization structure

o Centralize the HR Department with direct reporting to the Chairman instead of from the current practice of having establishment sections in all departments

o To implement robust processes in HR which would go a long way in ensuring higher work satisfaction and consequently higher employee morale and

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commitment? This is in recognition of the fact that HR is the single most important asset of Chennai Port and therefore, needs special attention and secondly, in recent times, employee morale has been an area of concern for management with skilled staff attrition in certain areas. Some of the projects here include design and implementation of a Performance Management System and an HRMIS Software.

o To ascertain the current manpower position and profile of the Port and also to find out the needs of the employees. The strategy envisages initiatives to improve employee satisfaction and to ensure that HR practices and policies are attractive enough for the present as well as potential employees. Some of the projects envisaged here are continuous improvement through ongoing training in select areas, review and improvement of promotion and recruitment policies, bringing about improvement in Work conditions infrastructure and review and upgrade remuneration levels

o Right size the workforce with attractive retirement and placement schemes.

FINANCIAL STRATEGY

The Current Situation

ChPT is a largely self financed entity – deriving its funds by reinvesting its operating surpluses entirely in its business. Its capital base consists mostly of Reserves with just a negligible amount in the form of Loan Funds (taken from Government of India). There is no owner’s equity as the Port is not a corporatised entity. The Port maintains its funds in the form of Reserves. The funds in these reserves are available for utilization in the form of Investments (in Government Loans, Bonds and Securities), Fixed Deposits and Bank Balances

Trends in these current assets over past five years indicate a steady increase in the overall funds over the years. From around Rs.13,800 Million in 2001-02 it has increased to over Rs.20,000 Million in 2005-06, an increase by more than 44%. This indicates the strengthening of the financial position of ChPT over the period. Of the amount, around Rs. 14,000 Million are committed reserves and would not be available for projects. The balance Rs. 6,000 Million are available for utilization by ChPT.

Project Funding Requirements

The total funding requirement of the Port in the next 7 years is given below: Table No- 3.2-2: ChPT – Total Funding Requirements Project Genesis Funds required (approx) Client Investment Projects and Public Investment Projects INR 30,471 mn. suggested by Deloitte Organizational improvement projects suggested by Deloitte INR 200 mn. Current Capital Works already sanctioned/planned by ChPT* INR 3,400 mn. Total INR 33,871 mn.

* Source: ChPT Mgmt/Appendix B of 2005-06 Administrative Report

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Suggested Financial Strategy

For deciding the financial Strategy, we can split financial needs of ChPT in Four distinct areas:

o Financing Projects which would be able to generate commercially attractive returns once executed

o Financing Projects which have already been sanctioned and work on which has begun and which do not have adequate returns or directly identifiable returns

o Financing Working Capital requirements

o Using Surplus Funds

Financing Projects which would be able to generate commercially attractive returns once executed

These would be projects like constructing new container terminals, conversion of Iron Ore berth to a container terminal etc. which are cost intensive but at the same time, have a potential to generate an income once the projects have been successfully executed. We suggest that for these projects, the PPP route be adopted. Feasibility for these projects has already been calculated both from the BOT operator and ChPT’s point of view. Results of the feasibility studies have been given in the project sheets at Annexure. For Projects which are unviable based on forecasted revenues and expenses, the following two support mechanisms have been proposed:

Viability Gap Funding: The Central Government has undertaken to fund upto 20% of the Project Costs for those projects which are not considered financially viable based on their likely costs and revenues.

Equity Contribution by ChPT: Contribution by ChPT has been assumed for some of the projects to reduce the capital costs for the promoter and consequently make the projects feasible. Equity Contribution will also help mitigate any risk and control issues that may arise in these projects. For this purpose, equity shares could have disproportionate voting rights to address the control issues (if need be).

Executing projects on a PPP basis will yield two benefits:

o the inherent benefits of a PPP project as mentioned above efficiency in service delivery, flexibility in meeting client demands, timely completion of projects etc. will be realized. This will help improve the competitive position of the Port and will eventually translate into a healthier bottom-line.

o By not using the Port’s own resources for these big projects, funds can be made available for other projects which, while important for the Port’s development, are not expected to earn revenues on their own making them a relatively unattractive proposition for private sector participation

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Given the number of projects to be undertaken on a PPP basis, would be essential to:

o build capabilities among the Port’s staff to execute and manage such relationships

o take help of professionals (PPP experts) in structuring the transaction, bid process management and selecting bidders

So far as strategic investment in Minor Ports is concerned, funding would depend on likely rate of return from the investment as compared with interest to be received if internally accrued funds are kept idle/invested elsewhere. Given the fact that there are no precedents in India for such investments, it is uncertain whether financial institutions/ banks will fund such investment. Even if they do, they may require substantial monetary commitment by ChPT. Given this scenario, such investment may have to be funded by internal accruals. In this case, external funding/PPP should be looked at financing the balance requirements for development of such strategic facility.

Financing Projects which have already been sanctioned and work on which has begun and which do not have adequate returns and/or directly identifiable returns

The decision as to whether internal accruals should be used for these projects would depend on the likely returns (financial and/or strategic) from investment of internal accruals in these projects as compared to returns if these funds are kept idle. Currently, Government guidelines restrict investment of surplus funds to government securities and fixed deposits with Public Sector banks. One alternative is for ChPT (jointly with other ports) to request the Central Government to relax the investment restrictions so that surplus funds can be managed/invested through a proper Treasury Management function. However, we believe that in the near future, this restriction is unlikely to be removed and ChPT will have to work under the present limitations. Given this scenario, we suggest that these projects should be funded from internal accruals. The Financial Model prepared has indicated that internal accruals in the coming years are likely to be adequate to cater to these requirements.

For one client related project – Construction of Off Dock Facility at Tondiarpet – given the market dynamics, returns calculated do not seem to be adequate enough to attract private sector participation. In this case, to make the proposition attractive for the private sector, it is recommended that handling costs at the Off Dock be borne by ChPT and consequently apart from lease rentals, no other revenue share will accrue to ChPT from this venture. However, the Off Dock facility is likely to facilitate handling or additional containers at the Container Terminals and consequently revenue is expected to flow indirectly to ChPT.

As mentioned in the earlier sub-heading, of the current projects planned by ChPT, major projects include procurement of equipments like Floating Crafts, Mobile Cranes and Fork Lift Trucks. The total budgeted acquisition cost for all these projects is nearly Rs. 3,100 Million. These equipments should be procured on lease/hire purchase to reduce upfront

Page 121 of 185 Final Report Business Plan for Chennai Port Trust capital commitments. The possibility of outsourcing operation and maintenance of these equipments should also be examined. Stakeholder analysis undertaken by Deloitte indicates that Trade may be willing to own and operate some of these equipments.

Financing Working Capital requirements

Ports do not usually have working capital problems as most of the business is carried on a cash basis. We believe that working capital position is and has been strong over the years. The projected financial statements also give a similar picture in the years to come and hence, working capital will not need to be financed through external sources. If need be, however, we believe, line of credits/bridge finance would be easily available from the institutional lenders.

Using Surplus Funds

In the later part of the next 20 years, as shown in the graph below, the Financial Projections show that ChPT is likely to have significant surplus funds. This is because of increased receipts by way of concession fees from BOT operators with marginal corresponding expenditure. This would give rise to the question as to which could be possible avenues of investing these funds. Following table gives some alternatives in this regards:

Consolidation of stake in Elevated Corridor and EMRIP Projects are road connectivity Elevated Corridor and projects which, effectively, will be the lifeline of ChPT in the EMRIP Project SPVs years to come. Both these projects are to be executed on a BOT basis with a Special Purpose Vehicle (SPV) to be formed to construct and operate the facility. ChPT has agreed to invest in both the SPVs’ equity. Given the critical nature of these facilities, it may be a wise decision to consolidate ownership of the SPV or atleast take a majority share as this would prevent other promoters from taking any decision detrimental to ChPT’s interest.

Land Acquisition In the years to come, given the steady increase in cargo, it is possible that the Elevated Corridor and EMRIP road connectivity projects may not be able to fully cater to the demand for connectivity. In this case, the Corridor may need to be extended and/or expanded. Further, in order to minimize congestion at ChPT gates, it will be preferable that all procedural formalities happen before trucks actually enter these two road facilities. In that case land may need to be acquired to expand/extend to two facilities. Land, for this purpose, may be procured by ChPT.

Investment in Minor As mentioned before, investment in Minor Ports will be wise decision as it would help tap traffic which cannot be met by

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Ports ChPT due to capacity constraints.

Land Reclamation Given the land availability constraints, one the possible (but expensive) ways to obtain more land area is to reclaim land. Land reclamation projects may be undertaken with available funds in order to handle cargo which otherwise would have to be forfeited due to space constraints

Investment in other If apart from the above two connectivity projects, Rail connectivity projects connectivity and/or other Road connectivity projects are conceptualized, ChPT should invest in these projects as it would help increase the handling capacity at the Port.

Value Added Services In the years to come, the trend will be to provide value added services like Cold Storage Facilities, CFS, Logistics Parks, RFID based tracking. While these facilities may be constructed and operated private sector developers, ChPT can procure land for this purpose and/or also invest equity in SPV formed to construct and operate the facilities.

Regional Improvement ChPT traffic ultimately depends on the economic Projects development in its primary and secondary hinterland. ChPT can invest in projects which have a solid potential in furthering the economic development of the hinterland e.g. Special Economic Zones, Industrial Parks, Rail/Road/Air Connectivity Projects etc.

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3.3 Select Projects including motivation Based on the results and conclusions elaborated in various sections of Chapter-1, several projects which were identified at Interim Stage were further evaluated in details. Further evaluation of all those projects resulted in a fine list of select “top projects” relating to infrastructure and Organization related developments.

As a whole the motivational factors for deriving and selecting the projects includes; comparison of present and future trend in the sector, comparison of present and future capacities for equipping the port to cater the upcoming/future sector trend effectively and efficiently, and assessing the organization improvement related capabilities.

Detailed project sheets for all the projects listed below along with there financial elements including financial feasibility parameters have been provided in Annexure-3.

The projects listed below also includes some of the projects which were conceptualized by ChPT but through the analysis presented in sections above, the need of such projects has been strategically endorsed by Deloitte.

All select top Projects along with their motivation are as under: Table No- 3.3-1: ChPT – Projects and their Motivation Sl. Projects Project Phase Motivation No Phase Period Infrastructure Projects (Client Related) 15. Development of Phase-1 2007- This project is already underway Container Terminal-2; 2012 during the preparation phase of this which would include; Business Plan. This container 1.5 Conversion of EQ terminal project was conceived by & SQ3 berths into the port 2-3 years back to augment container berths, its container handling capacity from 1.6 Reclaiming land the existing 0.8 Mteu to 1.7 Mteu. at the area north The project has already been of sand screen, awarded to a private container terminal operator recently on a BOT 1.7 Conversion of a basis and a concession period of 30 portion of coal years. The private operator is yard into expected to commence operation at container storage this terminal by the end of next two yard. years. 1.8 Conversion of a This terminal is situated in Dr portion of Ambedkar Dock on the east quay. Marshalling Yard This shall provide additional into container berthing face of 880 m and storage storage cum facility of around 35 ha. railway yard This business plan covers the details of this container terminal in the proposed land use plan. 16. Peripheral Road Phase-1 2007- The existing container terminal, Development from Gate- 2012 presently being operated by CCTL,

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Sl. Projects Project Phase Motivation No Phase Period 1 to Gate-10 to is in an ideal location as it is close Container Terminal-2 to Gate No. 1. Unfortunately, the proposed new second container terminal located on the east side of the port will not have the same advantage. The present route to ChPT’s main exit gate is long and circuitous and subject to much traffic congestion and potential delays to vehicular traffic. For this reason, it is proposed that ChPT implement the proposed road connection to Gate No. 10 with the proposed elevated roadway that will serve as a direct “truck only” route to the location outside of the City limits. 17. Developing a Flyover on Phase-1 2007- As indicated in item-2 above, a new southern side of the port 2012 perimeter road connecting the east- connecting container side terminals to a new proposed terminals to Gate no. 10 elevated corridor at Gate No. 10 is required. The road connector requires a grade-separated overpass (flyover) spanning a proposed Port railway yard. The road will also allow truck passage to/from Gate No. 1 for traffic exiting the port in a North West direction. 18. Creation of New Cruise Phase-1 2007- Export of cars has grown by Terminal clubbed with a 2012 manifolds in the last few years. multi level car parking Starting from a nil base, last three/ facility four years back, its surge has been phenomenal. The potential for further growth is enormous, with Hyundai and Ford on expansion spree using Chennai as the manufacturing hub. Further additional volumes can be expected from Toyota-Kirloskar, Ashok Leyland etc.

It is learnt that Hyundai Motor India Limited (HMIL) aims to increase its export from one third to 50% of the cars manufactured in India. FORD too will change gear to export in larger numbers. A third auto-plant of Malaysian connections is reported to be in the process of

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Sl. Projects Project Phase Motivation No Phase Period setting up. This sector demands clean friendly environment and will nudge out the dirty ones.

Car export is expected to growth with a rate of around 12%. With this growth rate, annual automobile traffic after a decade is expected to grow at least three folds. Understanding the fact that port being a city port provides its exclusive land for various purposes including car storage. But in order to cater upcoming requirement of land for car storage, it is not feasible for the port to augment its ground storage area. This is the right time to conceptualize vertical expansion of storage capacity as a Multi level parking facility. This will facilitate the port to cater future storage area requirement while earmarking less land.

In addition to this facility, we also propose to club this Multi-Level Car Parking Facility with a Passenger/ Cruise Terminal. Though the port already has a passenger terminal in place, but having this facility created along with Multi-Level Car Parking facility will enable port to spare some area for other revenue generating propositions. 19. Developing a Off-Dock Phase-1 2007- Average modal transportation by facility at Tondiarpet 2012 rail is observed to be only around Housing Colony 7% for container handling. Excessive dependence on road as a mode for transporting containers has resulted into the problem relating to evacuation and congestion. These problems with non-existence of good road connectivity are identified as some of the biggest weaknesses during SWOT analysis.

An area of around 9 ha land at the Tondiarpet Housing Colony (THC) is proposed as an Off-Dock facility

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Sl. Projects Project Phase Motivation No Phase Period which is adjacent to the southern railway main line running between Korrukupet and Attipattu. This makes it possible to develop the railway line inside the land earmarked for this facility.

Another important motivational aspect in the conceptualization of this project is that it shall provide additional storage area to stack around 0.14 Mteu of containers that too outside the port premises. With shuttle railway service connecting port with this facility, it would enable port to evacuate containerized cargo faster and thereby also address the issue of congestion at the port gates and the last mile connectivity. 20. Development of Phase-2 2012- By the end of Phase-2, the Container Terminal-3; 2017 targeted container volume at which would include; the port may go upto 1.6 Mteu. 6.5 Conversion of This volume shall be dealt with JD2, JD4 & JD6 existing container terminal and berths into second container terminal container berths, already in offing. Total area 6.6 Conversion of requirement to handle 1.6 Mteu balance portion of is estimated to be around 60 ha coal yard into which is expected to be fulfilled container storage by 25 ha of existing area and yard. additional 35 ha of second 6.7 Strengthening of terminal in offing. It is expected berthing face to that the targeted container handle ships volumes at port may reach 2.5 requiring depths Mteu and first & second of 14 m terminals would not be able to 6.8 Conversion of a accommodate this additional portion of volumes. This additional Marshalling Yard container volume of 0.9 Mteu into container shall require additional berthing storage yard length and storage area. The berthing length which shall additionally be required to cater this increased container volume is around 1000 m and it poses additional storage area requirement of around 34 ha. Understanding this need, another container

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Sl. Projects Project Phase Motivation No Phase Period terminal is conceptualized by converting existing berths JD-2, JD- 4 and JD-6 at Jawahar Dock into a container terminal with can provide the berthing length of 655 m and an additional back-up area of around 25 ha. 21. Development of Phase-3 2017- The targeted cargo forecast Container Terminal-4; 2022 indicates that the three terminals which would include; shall not be able to meet increasing 21.1 Conversion of requirements after Phase-2 i.e. Iron Ore berths year 2016-17. into container As presented in section 1.4 of this berths, report, existing container terminal (CCTL) together with proposed 21.2 Conversion of container terminal -2 on east quay back-up storage and container terminal-3 in area for iron ore Jawahar Dock shall be able to meet into container the terminal requirements upto 2.5 storage yard. Mteu. But it is forecasted that by 21.3 Conversion of the end of Phase-3, total traffic existing CFSs into requirement may go upto 4.1 Mteu. container storage yard Total additional area requirement to 22. Development of Phase-3 2017- handle this increased capacity of 1.7 Mteu is estimated to be around Container Terminal-5; 2022 58 ha. The berthing length which broadly includes; shall additionally be required to 22.1 Conversion of cater this increased container WQ1, WQ 2, WQ volume is around 1200 m. 3, WQ 4 & CB Understanding this need, another berths into two container terminals are container berths, conceptualized by converting 22.2 Reclamation of a existing iron ore berth and west small amount of quay in Ambedkar Dock into water front on container handling facilities as west quay to Container Terminal -4 & 5. The shift create additional of iron ore facility is also envisaged back-up land due to likely depletion in present 22.3 Strengthening of boom and possibility of a ban on berthing face to iron ore export due to major thrust handle ships on requirement of iron ore for requiring depths domestic steel plants. of 14 m 22.4 Dismantling of We also envisage the need of warehouses and higher drafts in the Phase-3 as it is passenger expected that ships requiring higher terminal at west drafts in the range on 15-16 m may quay, Ambedkar also arrive the port. As the present Dock available draft in front of iron ore

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Sl. Projects Project Phase Motivation No Phase Period berth is around 17.4 m, this shall be a perfect match to this future requirement. 23. Reclamation of Timber Phase-4 2022- With west quay in Ambedkar Dock pond as storage yard for 2027 proposed to be converted in to a General Cargo container handling facility, all the general cargo shall be handled at JD-1, JD-3, & JD-5. This may pose additional requirement of back-up area. It is proposed that timber pond, currently not in appropriate usage, can be reclaimed and used for general cargo storage. 24. Reclamation of Port Phase-4 2022- With west quay in Ambedkar Dock Basin for container 2027 proposed to be converted in to a storage yard container handling facility, it is observed that there would be additional need of back-up storage land which is not available immediately near to this proposed terminal. Therefore, the port basin which is located near this container terminal can be made use of for storage space by reclamation. 25. Reclaiming land near Phase-4 2022- The port trust has already proposed Gate no.1 to the north of 2027 reclamation of approx 60 ha of land Bharathi Dock adjacent on eastern breakwater near fishing to eastern breakwater. harbor. The analysis of various parameters considered for finalizing the maximum practical container capacity of the port indicates that the availability of backup area for container storage is not the only constraint over the 20 year period. Other parameters are also becoming a limiting factor for handling container volume beyond Phase-3. Hence this proposed reclamation of additional 60 ha of land is proposed in last phase so that this can be made available for any other possible requirement arising out of increased cargo operations at the port. This therefore opens up multiple options to the port for the utilization of this new area that can be made available by reclamation. One of these options is to set up an

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Sl. Projects Project Phase Motivation No Phase Period Export Processing Zone (EPZ). Details of exploring this possibility are provided in section 1.6 of this report. Infrastructure Projects (Public Related) 26. Ennore-Manali Road Phase-1 2007- In view of the improving the port’s Improvement Project 2012 connectivity on the Eastern side, (EMRIP) improvement and strengthening of major road network in Ennore and Manali area is envisaged. This is proposed to provide much desired connectivity to the Port from the national highway and also provide a face–lift to the approach roads to the Port. Presently the traffic movement from the Ennore Expressway to Gate No.1 of ChPT is through the entry to the fisheries harbor which is very narrow and creates traffic hold up causing inconvenience. The road passing through the fishing harbor should also be upgraded under proposed Ennore Manali Road Improvement Project (EMRIP). The EMRIP project has already been taken up by NHAI through a separate special purpose vehicle named Chennai Ennore Port Road Company Limited. Under this scheme, the following works will be taken: - Sea protection works on Ennore Expressway. - Widening of Ennore Express way to 4 lane along with service Roads on both sides for 6.8 Km. - Improvement and widening of TPP road - Strengthening of IRR and MORR road 27. Dedicated Elevated Phase-1 2007- After assessing the connectivity of Corridor on NH-4 from 2012 Chennai city with the status of Gate-10 at Port to Golden Quadrilateral and NS &EW Maduravoyal corridor, we can reasonably consider that Chennai city is expected to have better connectivity to the National and

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Sl. Projects Project Phase Motivation No Phase Period State highway network within a reasonable timeframe. But the last stretch of 15-20 kms from North, West and South to the Chennai Port are clogged and regulated with traffic restrictions. The Golden Quadrilateral shall be connected at Poonamallee outside Chennai city limits. It is therefore proposed that one of the stretches which can improve hinterland connectivity is Poonamallee to the Port Gate no.10. A dedicated elevated expressway from port’s southern gate i.e. Gate No. 10 of ChPT near the War Memorial on Kamarajar Salai, over the EVR Periyar High Road to Maduravoyal leading to the NH-4 is already proposed in NMDP program at an estimated cost of Rs. 750 cr. This corridor is planned as a four-lane corridor along the Poonamallee High Road. 28. Connecting Off Dock Phase-1 2007- Although the present railway tracks facility at Tondiarpet 2012 within ChPT does not adequately Housing Colony to Port serve the potential east-side with Shuttle Railway. container terminals, the ultimate removal of the existing coal yards presents a golden opportunity for ChPT to develop a new railway inter-modal yard that will optimize the use of rail transport for the port. In fact, it is envisaged that ChPT could implement a shuttle railway that could quickly and efficiently move container wagons to an off-dock inter-modal container yard located within 6 kilometers from the Port.

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Sl. Organization Motivation No Improvement Related Projects Marketing Projects 15. Marketing Department Since marketing has never been a focus area for ChPT, Capacity Building Project this area requires a slew of organizational reform initiatives that require the marketing function to be institutionalized in the Port. This involves setting up a Marketing research / operations cell, implementing a CRM solution and a Port community system to cater to 16. Customer Relationship customer care, customer profiling & segmentation, and Management Project developing partnerships with key customers. The projects listed under this category will address the organizational issue of Chennai Port having less than required market and customer driven approach. It also addresses concerns of customers on existing tariffs. In terms of Chennai Port expanding its operations beyond its traditional cargo handling operations, these projects 17. Market Offerings will help identifying what other logistics services support Expansion Project could be provided and whether the Port can address its limitations of being a city based port and therefore restricted land availability. Systems and IT projects 18. Restructuring of the IT These projects are required to address specific Department organizational issues such as Cumbersome business Organization processes and procedures, reduced work efficiencies due to manual processes, and inadequate IT security 19. Process reengineering and capabilities to manage IT Infrastructure. A and Improvement complete change over in terms of business process re- Project engineering is required. There is a need for renewed 20. Activity Based Costing focus on current Implementation of port automation software, Implementation of IT Security systems and enhancing the capabilities of the IT organization. 21. Security Enhancement Projects

HR Projects 22. Organization Re-design These projects address some of the critical and Right-sizing organizational issues related to an ageing workforce, surplus labor, need for retaining existing and attracting new talent, and addressing employee related problems on remuneration and work conditions. These projects 23. Employee Upliftment Organizational envisage a comprehensive look at Project current organizational structure & design, and structure of the current remuneration policies, The Organizational design also emphasizes on reduction in workforce numbers and the need to undertake centralization of

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24. HR Process the HR Department & implementation of a centralized Improvement Project HR MIS software that focuses on skill set requirements, current availability and sourcing of required skill sets through training or new recruitments.

Port Development Projects 25. Identifying Cost These projects address organizational issues in Financial Reduction Avenues and management relate to high operational costs, and Implementing Cost resultant perceived high tariffs. Reduction Measures Some of these projects also address other concerns 26. Efficiency Improvement related to the lack of an internal audit function in the Project Port, the need to have a stronger stakeholder relationship management process and the need to have an appropriate communication framework with internal 27. Institutional and external entities. Strengthening Project There is also a need to convert some of the existing strengths into core competencies such as strengthening the engineering function and utilizing the same to spin 28. Corporate Social off a consulting entity in the port domain. Responsibility Project

Apart from the above Projects proposed in the Business Plan, the Port has also envisaged several other port modernization and infrastructure enhancement projects some of which are already sanctioned and are in various stages of Implementation. Since these projects are already underway and meet an overall objective of creation / maintenance of infrastructure facilities, no motivation statements have been provided. However, these have been included in the financial projections and financial model. The administrative report 2005-06 categorizes these projects into section-I and section-II.

The broad understanding of type of these projects is as under:

Projects in Section-I

Buildings, Sheds & Other Structures related projects-

o Construction of office complex for Container terminal services - completed

o Modernization and extension of Quay- completed

o Development of Open storage yard behind WQ berth

o Modification of iron ore Berth- completed

Wharves, Roads and Boundaries

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o Ennore Manali Expressway

Floating Crafts

o Purchase of new FC Thangem

o Procurement of bullard pull tugs

Docks,Seawells, Piers Jetties & Navigational Aids

o Extension of SQ-III berths- completed

o Construction of naval berths- completed

o Deepening of Ambedkar Basin and Entrance channel- completed

o Construction of eastern side walls of port basin- completed

Cranes & Vehicles

o Procurement of wharf, rope grabbing and electric cranes

Installation for water, electricity, telecommunication & firefighting

o Improvement of oil handling facilities at Bharathi dock

o Study on modernization of fire fighting system

o Procurement of Marine Loading arms

Major Schemes

o Replacement of Dredger Coleroon for Dredger Cauvery- completed

Section–II broadly covers many small port modernization related projects.

The Port has also envisaged some new projects in its Annual Plan which are at the conceptual stage. These were evaluated by the Consultants for inclusion in this Business Plan document. Most of these projects are in line with the overall vision and strategy envisaged in this Business Plan and therefore finds their due mention in the client related and public investments listed above.

The Strategy envisaged in Chapter 2.2 of this Report portrays the strategic postures that the Port shall take up vis-à-vis several Business Segments in which the Port can operate. The Strategy recommends that the Port must actively pursue those Business Segments which have a “Shaping the Future” and “Adapting to the future” strategic postures. The Strategy also recommends that the Port must not commit significant investments or undertake focused projects in those Business Segments that have been earmarked with a “Reserve the Right to Play” posture. In other words, the strategy recommends that the Port adopt abundant caution in making investments in Business Segments that have this latter posture because the level of uncertainty is very high and there is a haze around some important market forces that prevent the identification of a strategic direction. The Projects envisaged by the Port which have a “Reserve the Right to Play” posture are listed below.

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o Installation of a Windmill operated power generator

o Construction of a Marina

o Annexing of the existing Fishing harbor after construction of a new fishing harbor

o Development of an EPZ near fishing harbor

o Development of a new Trade Convention center

These projects are therefore not evaluated in greater detail nor have they been taken into account in the financial projections. It is however recommended that as a part of the annual planning process, these business segments are regularly reviewed in the future in the context of their postures and should the Port arrive at a conclusion to shift them to the “Shaping the Future” and “Adapting to the future” strategic postures, these projects can be taken up for implementation.

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3.4 Plan of Action to Implement Strategy 3.4.1 Translation of strategy into projects

Strategies and plans are required to be translated into specific actions points in an action plan. This action plan is necessary to achieve desired vision through the continuous monitoring and produce expected business performance. After formulating the strategies required for success, another fundamental task is to translate the strategy into action plans that will facilitate successful implementation.

The strategy formulated in section 2.2 of this report provided us the basic input for developing the action plan to implement the final strategy.

The strategy was formulated keeping in mind various possible business segments in future for the port and core competencies required for pursuing those business segments. After analyzing applicable strategic posture for various business segments and required core competencies, strategic objectives have been identified.

For achieving these strategic objectives, they have been broken down into smaller manageable ‘Focus Areas (Initiatives)’ which would ultimately help decide the Projects to be undertaken. For each of the objectives, the Strategic Initiatives have been given below:

Strategic Objectives with required initiatives are identified as under:

o Foresee future trade requirements and provide required infrastructure facilities

- Creating the Infrastructure for future trade - Ensuring Port Connectivity o Take proactive measures for being recognized as an environmentally and socially responsible port

- Taking environment conservation related initiatives - Taking Community welfare related initiatives o Attract and retain clients through a powerful customer focused approach

- Know your customers - Build Market Sensing Capabilities - Collaborate with customers - Provide Value added Services o Be seen as employer of choice for upcoming talent

- Current Status and Need Analysis - Enabling Best-in-class HR practices

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The projects and related sub-projects are identified under each and every strategic initiative and are demonstrated below:

Strategic Objective Strategic Initiatives Identified Projects/Sub- projects

Foresee future trade requirements and provide required infrastructure facilities Creating the Infrastructure for future Ensuring Port Connectivity trade + Augmenting Container handling + Ennore-Manali Road Improvement capabilities by converting facilities Project (EMRIP) being used by other cargo + Shore protection work along the commodities in to container terminals Ennore coast; + Development of Container + Terminal-2 broadly includes- Four laning of the Ennore Express way; - Conversion of EQ & SQ3 berths into container berths, + Improving the Tiruvottiyur - Reclaiming land at the area Ponneri Panjetti (TPP) Road; north of sand screen, + Improving of MORR and Inner ring - Conversion of a big portion of road and existing coal storage yard into + container storage yard. Rehabilitation and Resettlement of Project affected families + Development of Container Terminal-3 broadly includes- + Dedicated Elevated Corridor on NH-4 - Conversion of JD2, JD4 & JD6 from Port to Maduravoyal berths into container berths, + Designating personnel to ensure - Strengthening of berthing face quick completion of connectivity to handle ships requiring projects depths of 14 m - Conversion of balance portion of coal yard into container storage yard. - Conversion of a portion of Marshalling Yard into container storage yard + Development of Container Terminal-4 broadly includes- - Conversion of Iron Ore berth into container berths, - Conversion of back-up storage area for iron ore into container storage yard. - Shifting existing CFSs outside the port to create additional

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storage space. + Development of Container Terminal-5; broadly includes- - Conversion of WQ1, WQ 2, WQ 3, WQ 4 & CB berths into container berths, - Reclamation of a small amount of water front on west quay to create additional back-up land - Strengthening of berthing face to handle ships requiring depths of 14 m - Dismantling of existing warehouses and passenger terminal at west quay, Ambedkar Dock + Reclamation of Timber pond for General Cargo Storage + Creation of new cruise terminal clubbed with a multi level car parking facility + Peripheral Road Development from Gate-1 to Gate-10 to Container Terminal-2 + Developing a Flyover on southern side of the port connecting container terminals to Gate no. 10 + Reclaiming land near Gate no.1 to the north of Bharathi Dock adjacent to eastern breakwater. + Developing Off Dock facility at Tondiarpet Housing Colony for handling containers outside the port

Take proactive measures for being recognized as an environmentally and socially responsible port Taking environment conservation Taking Social & Community welfare related initiatives related initiative + Corporate Social Responsibility + Corporate Social Responsibility Project Project + Developing an Environment + Contribute certain portion of Management Plan capital expenditure required to + Periodic assessment of create a secondary care hospital Environment Impact of Chennai + May contribute towards setting up Port’s activities of vocational training school for + Creation of Green area / belt providing education to poor and inside the port premises backward people in the immediate vicinity of the port. This will also help the port in meeting the

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future requirements of skilled technical manpower. + Promoting / Opening counseling centre in the region + Taking up City Development Projects like; creation of parks/gardens, design/build traffic junctions

Attract and retain clients through a powerful customer focused approach Know your customers Build Market Sensing Collaborate with Capabilities customers + Customer Relationship + Market Department + Customer Relationship Management Project Capacity Building Project Management Project + Profiling and + Formulating a + Developing segmenting Marketing Plan partnership with Customer portfolio + Restructuring the the key customers + Implementing a marketing cell + Market Offering Client Relation + Developing a cell Expansion Project Management “CRM” specifically for + Identifying Solution conducting Market Comprehensive + Institutional Research Logistics Services Strengthening Project for seamless + Stakeholder service offerings expectations to the customers management Introducing Best-In- Improved organizational Provide Value added Class processes capabilities Services + Process Reengineering + Security Enhancemant + Customer Relationship and Improvement Project Management Project Project + Port Security System + Port Community + Reengineering + IT Security System System Business Process + Restructuring of the IT + Market Offering + Implementing Full Department/Organizatio Expansion Project Scale ERP system n + Simplification and + Employing Activity + Organization redesign Realignment of Based Costing at the and right sizing through current tariff port restructuring and re- structure + Market Offering introduction of VRS + Study for Expansion Project + Market Department identifying + Comparative Study Capacity Building Project strategic of pricing / tariffs of + Building an investments / international ports Engineering management of + Identifying Cost Research Cell cargo handling in other Minor ports Reduction Avenues & + Institutional nearby. Implementing Cost Strengthening Project Reduction Measures

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+ Setting up the Internal Audit Function + Establishing a Consulting Entity

Be seen as employer of choice for upcoming talent

Current Status and Need Analysis Enabling Best-in-class HR practices + Employee Upliftment Project + HR Process Improvement Project + Carry out a need analysis of current + HR Process optimization and potential future employees software + Establishing standard Performance Management System + Employee Upliftment Project + Review and improvement of Promotion and Recruitment policies + Organization redesign + Centralized HR Department Employee Initiative To be recognized as a strong brand + Employee Upliftment Project + Institutional Strengthening Project + Periodically analyzing working climate + Establish an appropriate inter- at the port department Communication + Improving the facilities like drinking Plan water etc for better environment + Conducting Remuneration review + Fulfilling Training requirements of employees

3.4.2 Corporate Planning Capability

Need for establishing a corporate planning capability within the Port Trust

The Chennai Port Trust is expected to embark on a structured process of expansion and financial and management reforms. It has adopted a fresh vision and a business plan for the next 20 years. The achievement of this vision will require effective execution of the business plan. Such effectiveness is achieved by breaking down the process of implementing the long term Business Plan into Short Term Action Plans or Annual Plans. Their progress then needs to be monitored actively.

For the short term action plans supporting the long term business plan to be realistic they will need to be responsive to the changing times and circumstances. CHPT shall need to develop a formal corporate planning capability within the Trust to pursue this

Page 140 of 185 Final Report Business Plan for Chennai Port Trust responsibility on a regular basis. The key attributes that this capability should be able to demonstrate are:

o Understand thoroughly the adopted business strategy, business plan and the action plans and be committed to their realization

o Understand the decision making dynamics within the CHPT

o Ability to track and understand the changes to the business context and business content

o Have a comprehensive understanding of the challenges faced by CHPT

o Willing to be ‘inclusive’ and at the same time ‘forceful’ / ‘persuasive’

o Have a structured and transparent process of developing annual plans and securing the necessary acceptance

o Have a dependable mechanism for monitoring the progress towards implementation of the business plan and receiving feedback

o Have the authority and the mandate to perform these functions

Proposed Specific Actions to set up Corporate Planning Capability

In order to setup this capability at the disposal of the CHPT, it would hence appear desirable to undertake the following steps:

o Constitute a separate section / cell to be in-charge of this role. All the members of the cell need not be full time dedicated to this role but at least the core members of the section must be so dedicated.

o Recruit skill sets required for the Cell and not available internally.

o Through appropriate administrative orders / other suitable mechanism clarify / articulate the Cell’s mandate, key result areas and initial nominees.

o Establish within the Cell a responsibility framework for data collection, progress monitoring, analysis, forecasting, consolidating, planning/integrating etc.

o Establish systems and processes for the Cell to execute its mandate effectively and efficiently

o Develop forms, tools and methods as necessary and to ensure consistency

o Fix intervals, manner and forum for review of the functioning of this Cell

In this section some of these aspects are addressed.

Organization Structure for the start-up Planning Unit

In organization structuring for this Cell one needs to consider the process of ‘slice and dice’. Vertical slicing is to break down the over all mandate from the point of view of functional / technical / disciplinary differentiation, whereas horizontal dicing results into

Page 141 of 185 Final Report Business Plan for Chennai Port Trust separating the responsibility for each segregated function by level of managerial responsibility, degree of judgment in decision making and the abstractness or structured-ness of the issues to be dealt with at that level.

Considering this the following start-up Organization Structure is proposed:

Corporate Planning Cell- ChPT Level Implementation Environmental Analysis, /Section Monitoring & Scanning & Consolidation MIS Research and Strategy Level 0 Board of Trustees Business Level 1 CHPT Chairman Advisory Level 2 Chief Of Corporate Planning Council Level 3 Head –IMM Head –ESR Head - ACS Level 4 Executive- IMM Executive- ESR Executive- ACS Level 5 Pooled Technical & Administrative Assistants (TAA) Level 6 Pooled Technical & Administrative Assistants (TAA)

Reporting Relationships

The Business Advisory Council may be constituted of a cross section of stakeholders including customers, industry associations, citizens’ councils, service providers, industry experts and PPP partners. The Council would provide a reality check on the annual plan and ensure that the Corporate Planning Department (especially the Environmental Scanning and Research section) does not miss out any important development and nor does it give imbalanced treatment to such issues. It would strictly be advisory in nature and not have any formal authority.

At the highest level the Planning Cell would be headed by the Chairman of the CHPT ex- officio. The Cell may initially be constituted of a Chief supported by three Heads of the three technical areas namely:

o Implementation Monitoring & MIS (IMM)

o Environmental Scanning & Research (ESR)

o Analysis, Consolidation & Strategy (ACS)

These Heads may each be supported by a technically competent, professionally qualified Executive. These Executives may draw upon a pool of technical and administrative assistants as necessary. The hierarchical designations that can be used may be drawn from the current organization structure and the parities worked out accordingly.

Job Descriptions (for key personnel to be appointed to the unit) 1. For Chief of Corporate Planning (CCP)

Position Chief Of Corporate Department Corporate Planning Planning (CCP) Cell CHPT Reporting to Chairman Reported by • Head IMM • Head ESR • Head ACS

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KRAs • To ensure that the Annual Business Planning requirements are fulfilled • To drive the implementation of 20 year business plan Responsibilities • He will be responsible for Implementation Monitoring and MIS • He will ensure that CHPT has at its disposal all the market intelligence that is required for it to implement its Business Plan and Strategy • He will ensure that the information from all parts of CHPT is correctly consolidated, analyzed and input into the annual strategic planning process • He will guide the team in the Corporate Planning Cell as its head and address all the knowledge and technical guidance requirements of the cell • He will lead and be primarily responsible for generating the annual plans to meet the requirements of CHPT Qualifications & • Would preferably a qualified management graduate Skill Sets with ‘Strategic Management’ as a specialization from a required reputed tier-1 management school • Should be thoroughly experienced in the process and practice of strategic planning and budgeting • Should desirably (not essentially) have a transport sector / port sector background • Should have worked at senior levels of management for at least 15 years

2. For Head IMM

Position Head IMM Department Corporate Planning Cell CHPT Reporting to Chief Of Corporate Reported by • Executive Planning IMM KRAs • Monitor closely the progress of the various strategic projects undertaken by CHPT pursuant to the Strategy adopted and the Business Plan taken up • Follow-up for data collection and MIS on the project implementation status on a real time basis Responsibilities • To assist the CCP in obtaining a regular dynamically updated account of status of implementation of the Business Plan projects • To follow up for collecting data / statistics and information regarding technical, commercial and managerial aspects of project implementation • To validate the information so received and cross check for accuracy and consistency • To generate the standardized MIS • Any other support that the CCP requires with reference to the working of the CHPT and its operations in general Qualifications & • Should be a management graduate with around 8-10 Skill Sets years of middle management / hands on experience in required Systems Implementation

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• Should have ERP implementation or MIS implementation background • Preferably have Project Monitoring background • Engineer – MBA would be an ideal combination

3. For Head ESR

Position Head ESR Department Corporate Planning Cell CHPT Reporting to Chief Of Corporate Reported by • Executive Planning ESR KRAs • Monitor closely the changes to the variables impacting the key strategic projects • Undertake focused research in the various domains of interest for the strategic planning process at CHPT Responsibilities • To assist the CCP in obtaining a regular dynamically updated account of o Regulatory Framework of the Ports Sector o Supply Chains of the key business segments:
Containers
Automobiles
Cruise o Cargo analysis o Market perception of CHPT service • To track how and when the erosion of competitive edge occurs in cargo planned to be phased out • To study the trends in vessel sizes • To study competition and adjacent ports and their plans / moves • To follow up for collecting data / statistics and information regarding technical, commercial and managerial aspects of project implementation • To remain up-to-date and apprise the CHPT management from time to time on the status of information technology in the ports sector • To identify futuristic business opportunities for CHPT Qualifications & • Should be a Transport Economist with around 8-10 Skill Sets years of middle management / hands on experience in required Market Research • Should have been exposed to Port & Shipping Sector • Should be good at number crunching and statistical analyses

4. For Head ACS

Position Head ACS Department Corporate Planning Cell CHPT Reporting to Chief Of Corporate Reported by • Executive Planning IMM KRAs • To analyze and synthesize the data obtained in respect of CHPT internally and externally from the market • To draw intelligent inferences from the analyses and

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propose optional responses • To develop the annual plans and modify the 20-year strategic plan as necessary in view of the annual plan • To pursue the need for adherence to strategy and avoidance of deviation from adopted strategy during the future annual planning process Responsibilities • To run the process of annual planning exercise through the release of data collection forms and requests, following up for collecting them and validating them • To consolidate the data obtained and perform high level data integrity checks • To develop the draft annual plans • To develop presentations for taking up the annual planning discussions with the Advisory Board, the Trustees and the Chairman • To convene the planning meetings and maintaining suitable documentation • Any other support that the CCP requires with reference to the working of the CHPT and its operations in general Qualifications & • Should be a management graduate with around 8-10 Skill Sets years of middle management / hands on experience in required Strategic Management • Should have Planning experience • Preference may be given to candidates with Project Management experience

5, 6 & 7 For Executive (IMM / ESR / ACS)

Position Executive (IMM / Department Corporate Planning ESR / ACS) Cell CHPT Reporting to Head (IMM / ESR / Reported by • Executive ACS) IMM KRAs • To assist the respective Head as required Responsibilities • Provide hands on support in terms of documentation, report writing, number crunching, presentation design and development to the head • To undertake follow up and emailing for information collection and dissemination Qualifications & • Fresh MBA, Chartered Accountants, Economists Skill Sets • Excellent capabilities in spreadsheet applications required including macro writing, presentation development, word documentation etc • Excellent English (written and spoken) skills

Schedule Of Activities - Initial 12 Months of Operation

We present below a start-up schedule of activities to be performed by the Corporate Planning Cell. This list is by no means exhaustive. It would serve as the initial guide on action and would need to be updated to build on the experience of actual execution.

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Table No- 3.4-1: Corporate Planning Cell’s Schedule of Activities No. Activity Section When Responsible 1. Maintain authorized documentation of the Long ACS On going Term Plan & Vision 2. Maintain authorized documentation of the 7 Year ACS On going Action Plan 3. Maintain documentation of the Annual Plan ACS On going 4. Obtain information and data on progress on IMM January implementation of the Annual Plan and the 7 year action plan 5. Analyze the achievements – under / over along IMM & ACS January with the causes 6. Study the deviations and perform root cause ACS January analysis 7. Meet with concerned departments to understand IMM On going their perspective on performance 8. Review performance on a monthly basis, identify IMM / ACS Every Month the bottlenecks and report 9. Perform a SWOT analysis on a semi-annual basis IMM Semi and track perception of plan progress Annually 10. Communicate internally on the Plan Progress ACS On going 11. Undertake in-depth research on trends in the ESR On going industry 12. Track Competition and emergence of substitutes ESR On going in the multimodal scenario 13. Identify opportunities for business tie-ups, ESR On going strategic alliances, buy-outs, sell-outs etc. 14. Develop in-depth analyses of supply chains of ESR On going key customers touching CHPT 15. Analyze the key customer supply chains and ESR On going locate opportunities for value addition / service cost efficiencies 16. Participate in Conferences / Seminars and build ESR On going knowledgebase on best practices 17. Develop concise and relevant summaries of ESR ESR industry analysis & trends and circulate these to all concerned with Planning and decision making 18. Participate in business planning discussions IMM / ESR/ February / ACS March 19. Consolidate data from departments and develop ACS February business estimates and forecasts bottom up 20. Communicate basis for forecasting and ACS February moderation 21. Moderate the numbers committed by the ACS March departments 22. Undertake mid-term reviews of the progress ACS / IMM October along the annual business plan 23. Till a more formalized MIS becomes available, IMM On going collect manually data on plan achievement and generate decision support reports for executing and monitoring the plan

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The Annual Planning Process

The annual planning process will be kick started by the Corporate Planning Cell (CPC) every year by mid-January. The CPC shall collect data on the actual achievement vis-à- vis the annual plan and hold a presentation to the Business Advisory Council before end of January. This discussion will also cover sufficiently in detail the progress cumulatively achieved till date on the Long Term Business Plan (the 20 year Plan). It will provide an analysis of the key issues and the causes of any underachievement. These may initially be in the nature of some quick hypothesis cursorily validated and yet to be confirmed with detailed analysis. The CPC shall also present its market analysis and the key trends impacting the business.

The key directions for the next years’ plans will emerge from this presentation in terms of the thrust required by the existing initiatives and the need to add new initiatives for the next year. The CPC shall then set about to validate specific market assumptions and the initial hypothesis in terms of correcting the aberrations of the past and making a choice of new initiatives. It will develop a comprehensive bouquet of strategically blended initiatives and design supporting projects. It will review the 20 Year Business Plan and pick up the parts requiring action in that year. It will develop detailed action plans for those projects and identify the needs for project initialization and contracting.

The various initiatives so identified along with the related projects shall then be devolved on to the Owner Departments. CPC will nominate Project Sponsors and develop the ‘statement of special powers’ required by the Project Sponsors (by default these will be the departmental heads, but the CPC should be at liberty to nominate another individual in consultation with the Chairman). The necessary delegation of powers for execution of such projects shall be separately implemented and will be restricted to the execution of those projects. The Project Sponsors shall then pursue the implementation of the Projects.

The CPC shall mandate the reporting requirements from all projects to track and monitor them. The CPC shall have only reporting responsibility for timely completion or meeting of deadlines / budgets. The CPC shall only be responsible for compiling the accurate status and updating the Chairman on a regular (monthly) basis. To this end it will develop suitable MIS formats.

On a continuing basis and to feed the planning process the CPC shall monitor regularly the market developments and competition moves. It shall also track the changing stakeholder interest and update the Chairman. It shall also participate in various seminars / conferences and keep the ChPT management updated on the latest developments in Port Management and Technology. The CPC shall strive to ensure that the ‘futuristic’ edge and flavor required to ChPT’s endeavors is actually brought in through such thought leadership and knowledge management efforts.

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4 Detailed Action Plan

In continuation to section 2.4 of this report which talks about translating strategy into projects, please find below the detailed action plan indicating the time frame estimated tentatively for each project. The time plan below illustrated all infrastructure and organization improvement related projects with their start and end quarters.

Infrastructure Related Projects:

S. No. Project Description 1st Phase 2nd Phase 3rd Phase 4th Phase

Client Related Projects

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Client Related Projects

Developing Multilevel car parking facility 1 clubbed with passenger cruise facility

2 Development of Container Terminal-3

Converting existing Iron Ore Berth to a 3 Container Terminal facility: Container Terminal-4

4 Construction of Container Terminal 5

Converting Tondiarpet Housing colony 5 into an Off-Dock facility for containers

Public Related Projects

Ennore-Manali Road Improvement 1 Project (EMRIP)

2 Dedicated Elevated Corridor on NH-4 from Port to Maduravoyal

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S. No. Project Description 1st Phase 2nd Phase 3rd Phase 4th Phase

Client Related Projects

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Connecting Off Dock facility at 3 Tondiarpet Housing Colony to Port with Shuttle Railway

Organization Related Projects

It is learnt that almost all most of the organization improvement related projects are to be taken up in the first phase for equipping the port for the better future. The figure depicts the year-quarter wise action plan for all such projects.

07-08 08-09 09-10 10-11 Sl. No. Project Description 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Marketing related projects

1. Marketing Department Capacity Building Project

2. Customer Relationship Management Project

3. Market Offerings Expansion Project

System and IT related Projects

4. Restructuring of the IT Department Organization

5. Process reengineering and Improvement Project

6. Activity Based Costing

7. Security Enhancement Projects

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HR Projects

8. Organization Re-design and Right-sizing

9. Employee Upliftment Project

10. HR Process Improvement Project

Port Development Projects

11. Identifying Cost Reduction Avenues and Implementing Cost Reduction Measures

12. Efficiency Improvement Project

13. Institutional Strengthening Project

14. Corporate Social Responsibility Project

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5 Financial Aspects 5.1 Overview of Investments Based on the Proposed Business Plan recommendations, the total funding requirement of the Port in the next 20 years is given below: Table No- 5.1-1: Total Funding Requirements Proposed Projects Funds required (approx) INR 30,471 mn. Client Investment Projects and Public Investment Projects suggested by Deloitte INR 200 mn. Organizational improvement projects suggested by Deloitte INR 3,400 mn. Current Capital Works planned by ChPT* INR 33,871 mn. Total * Source: ChPT Mgmt/Appendix B of 2005-06 Administrative Report

Further elaboration for the funding strategy suggested to be adopted by ChPT is given in the table below: Overview of Investments (Rs. Million) Table No- 5.1-2: Overview of Investments Sr Year Description Client Related Public Related No Investments Investments Organizational ChPT Govt BOT Govt Improvement Support ChPT Support Projects 1 2007- Multilevel Car - - - 08 Parking and 1,333 Cruise Terminal 2 2007- Dedicated - - - 08 Elevated 200 200 Corridor – Madhuravoyal 3 2007- Ennore - - - - 08 Manali 38 Expressway 4 2007- Various - - 08 508 11 5 2008- Development NA NA 09 of Container 1,000 Terminal 2 6 2008- Various 09 576 6 7 2009- Various - - 10 678 1 8 2010- Various - - 11 1,201 1

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9 2011- Various 12 678 10 2012- Converting - - 13 Tondiarpet 50 452 Housing colony into an Off-Dock container stacking facility 11 2017- Development - - 18 of Container 1,000 1,630 5,521 Terminal 3 12 2019- Development - - 21 of Container 2,000 9,290 Terminal 5 13 2021- Reclamation 22 20 14 2022- Iron Ore - - - 23 Berth 7,495 Conversion Total 9,045 1,630 22,758 238 200 19

As will be seen from the above, the BOT model has been recommended for bulk of the major projects proposed followed by internal accrual and then other available sources. Reasons for the same have been highlighted in the section in Financial Strategy.

It will also be observed that quite a large part of the financial commitments are taking place in the first Phase of the Business Plan. The Financial Projections however show that ChPT’s financial position in these years will be strong enough to meet these requirements. 5.2 Approach for Financial Projections Approach followed for Financial Projections is given below:

Stage 1: Financial Statement Analysis

The first stage in financial forecasting was developing a basic understanding of ChPT’s Financial Statements. This was carried out in the Interim Report, wherein, as part of ChPT’s internal assessment, a detailed trend analysis was presented for ChPT financial position and performance.

Stage 2: In Depth understanding of Financial Statement Elements

After developing the first level understanding of ChPT’s financial statements and its performance over past few years, the next step was to develop a deeper understanding of the nature of each of the elements of ChPT’s Balance Sheet and P&L Accounts. Being a Government Sector entity, accounting policies and practices of ChPT are also different from commercial accounting principles to a limited extent. These policies/procedures

Page 152 of 185 Final Report Business Plan for Chennai Port Trust were also discussed and understood. The understanding was developed through the following methods:

o Personal Interactions: Deloitte’s team members had detailed personal interactions with senior and middle level managers in ChPT’s Accounts/Finance Department. Questionnaires were prepared and responses recorded.

o Documentation: Apart from the publicly available documents like Administration Report, financial elements were analysed through study of supporting schedules and groupings to the financial statements, costing statements, MIS report etc.. A product wise Cost Sheet was also developed.

o Inputs from Industry Experts: for certain items, the nature of the element was understood through interactions with industry experts within the Deloitte team.

Stage 3: Deciding the Key Projection Drivers for each Element

After developing a sound understanding of each of the elements of ChPT’s financial Statements, Key Projection Drivers were arrived at for each of the elements. Key Projection Drivers are the factors which will determine the forecast figures for each of the elements. The Key Projection Drivers arrived at are given in the table below: o For Profit & Loss Account Table No- 5.2-1: Profit & Loss Account – Projection Drivers Particulars Sub - category Projection Drivers

Port Dues - Category wise (i.e. port dues, storage etc.) average revenue per ton of Other Dues relevant cargo ascertained from revenue data for past four years Stevedoring Revenue - Where the revenues are not being charged as per the tonnage, GRT of Storage ships and number of ships calling ascertained Wharf Handling - Rates so identified have been adjusted for inflation. However given the likely competitive scenario, rates have not been just marginally. - Rates so arrived at have been multiplied with projected traffic for each category to arrive at total revenue under each revenue category

Concession Fees Lease Rentals + - Cargo projected for existing container Share in revenue terminal plus four more proposed terminals - Concession fees calculated based on:

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Particulars Sub - category Projection Drivers
Average revenue per container to be earned by the concessionaire
Likely Revenue Share of ChPT
Likely area of each terminal
Lease rentals as per present tariff levels - Revenue per container adjusted for inflation. However given the likely competitive scenario, rates have not been just marginally.

Other operational Finance Income - Revenue calculated based on past income growth trends in this category. - Interest is not included in this income and has been shown separately in the P&L Account

Salaries - Number of Employees in each year was forecasted based on assumptions for employees expected to retire each year, new recruits and employees opting for VRS schemes proposed to be introduced periodically - Average Salary per employee in 2005-06 was ascertained the same was increased each year during the forecast period by an average rate. Additional increase has been assumed in two years where Central Government’s periodic Pay Commission revisions are expected to be implemented. - Total Salary is a product of the forecast number of employees and average salary for each year.

Social Charges & - Contributions to retirement benefit Pension Payments schemes have been made based on recommendations in a recent actuarial valuation report, - Contributions have been made as a percentage of Total Salary costs determined earlier - This category also includes ex-gratia payments made to employees assumed to opt for VRS during the forecast period

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Particulars Sub - category Projection Drivers

Running Costs Operating - The starting point for forecasting Expenses running cost was determination of past operating cost ratios - Maintaining these ratios, based on forecasted revenues, operating costs were forecasted. - These costs were then adjusted based on expected inflation rates

Administrative Costs Admin & Mgmt - Trends in administrative costs in past overheads few years was ascertained and expressed as a percentage of running costs. - This percentage was used to forecast administrative costs. - The cost so arrived at was increased depending on new BOT projects being commissioned

Other Costs Estate Rentals - Estate rental expenses as a related, Finance percentage of rental revenues was expenses other identified and the same ratio was than Interest used for future projects. - Other expenses were forecast based on their respective past trends - Expenses were also adjusted for inflation

Depreciation - Depreciation for assets currently with ChPT was calculated based on government notified rates/useful lives for these assets. - For assets to be procured, depreciation has been calculated on Straight Line Method at government notified rates/useful lives for the relevant category of assets.

Interest Interest Expense - Average rate of interest paid on loans outstanding at present was calculated - Interest at the rate so determined was calculated for principal outstanding at the beginning of each year - For new loans to be taken, interest has calculated based on prevalent

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Particulars Sub - category Projection Drivers market rates.

Interest Income - For funds invested at present, average rate of interest earned over past few years was calculated. - Interest was calculated at the above rate for general reserve funds available with the Port at the end of each year.

Tax - Tax has been calculated as a percentage of profits based on currently prevalent tax laws o For Balance Sheet Table No- 5.2-2: Balance Sheet – Projection Drivers Particulars Sub – category Projection Driver

Fixed Assets - Fixed Asset figures have been arrived at based on assets currently with ChPT and assets to be procured by ChPT during the forecast period from internal accruals and/or external funding. - Fixed assets have been depreciated each year based on calculations explained in the row for depreciation in the table above.

Current Assets Interest Accrued - The ratio of interest accrued to total on Investments annual interest income in the past few years was ascertained - The ratio so arrived at was used for projecting year-on-year balance in accrued interest on investments

Stores Material - Ratio of stores material to total running costs was identified and the same was used to project stores inventories - Given that bulk of the operations are to be undertaken on BOT basis in the forecast years, stores inventory has been projected to decrease in the later years of the forecast period

Sundry Debtors - Ratio of debtors to concerned

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Particulars Sub – category Projection Driver revenue categories was arrived at and the same was used to debtors at the end of each year

Loans and - Loans granted at present, their likely Advances repayment and likelihood of new loans to be granted in the forecast period

Liquid means Cash & Bank - This represents available liquid funds Balances with ChPT after all expenses and investments.

Investments - Funds like pension, gratuity, provident fund etc as well as general reserve funds are invested in various Government Securities and Fixed Deposits. - Of the total funds available under each of the above heads (i.e. pension, gratuity etc.) in past few years, trend analysis of amounts usually invested in the Govt Securities/FDs was determined - Amounts available under each of the above heads during the forecast years was determined after taking into account contributions, additions and expenses during each of the forecast years. - Based on recent trends determined earlier, of the total amounts available, specific percentage has been assumed to be invested in Gov Securities/FDs and are consequently shown under this account head.

Equity - The Government Grants given till date have been reclassified as Equity

Reserves Capital Reserve - Capital Reserve is an account head created to ascertain assets acquired/constructed by ChPT from internal accruals. The amount is equal to total acquisition/construction costs of fixed assets less outstanding loans - Amounts in Capital Reserve have been forecasted assuming that the current accounting practice will

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Particulars Sub – category Projection Driver continue

Revenue Reserve - Revenue Reserve mostly consists of General Reserve which, in turn, is made up of net surplus after all appropriations year-on-year. - Other Revenue reserves are certain specific reserves for employee welfare, insurance etc. Current policies for contributions to these reserves have been assumed to remain in force during the forecast period.

Statutory - There are two statutory reserves to Reserve which amounts have to be appropriated by ChPT every year - Current policies for contributions to these reserves have been assumed to remain in force during the forecast period.

Provisions Retirement - Provisions mostly consist of Benefits related contributions to retirement benefit liabilities schemes. Contributions have been made based on recommendations in a recent actuarial valuation report. - Contributions have been made as a percentage of Total Salary costs determined earlier

Tax provision - Tax provision has been made based on currently prevalent tax law

Short term Liabilities - Short term liabilities consist of mostly of salary payable and various miscellaneous payables. - Given the wide multitude of payables and also since a large part of the payable amount consists of salary payable, trend analysis of short term liabilities’ vis-à-vis total salary expenses in past few years was conducted and short term liabilities have been forecast based on this trend.

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Stage 4: Preparation of Financial Model

The Final stage in financial forecasting was preparation of the Financial Model. While preparing the Model, the following fundamental principles were adhered to:

o Simplicity: Given the fact that the Model is to be reviewed and further utilised by ChPT personnel in the coming years when Deloitte may not be available to resolve any queries that may arise and also since the concerned personnel may not have the expertise in extremely complex Models and formulae, the Model has been kept as simple and straight-forward as possible.

o Comprehensive: The Model adheres fully to the format provided by the Central Advisor and is, therefore, comprehensive in its coverage. Within each major category i.e. revenues, each of the sub-elements have also be calculated and forecasted.

o Realistic: Assumptions and calculations in the Model have been sought to be as realistic as possible to ensure future utility of the Model.

o Flexible: Since the Model is to be utilised and reviewed each year by ChPT it was very important to make the Model as flexible as possible so that effects of actual happenings in the future years can be captured and forecast figures can be changed in those year. The basic idea was to make modifications to the Model as easy and convenient as possible to facilitate easier scenario analysis and resultant decision making.

o Capacity Building: The Model contains detailed instructions for review by ChPT so ensure that ChPT is able to understand the Model calculations and functionality and that from the next year onwards, review and consequent changes in the Model can be carried out easily by ChPT. 5.3 Projected Financial Statements The projected financial statements include the projected balance sheets, profit-loss account and cash flow statements and well defined key figures. These financial statements are an outcome of a comprehensive Financial Model which is being submitted separately as a soft copy deliverable. In the subsequent sections we have explained the following: - Key Assumptions used in preparing the Financial Model - Key Outcomes i.e. Projected Balance Sheet, Projected Profit & Loss Account and Projected Cash Flow Statement - Analysis of Outcomes (including well defined key ratios)

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Key Assumptions used for Building the Financial Model

A Fixed Assets

- The Depreciation has been provided on SLM basis based on the estimated useful life of the assets.

- The estimated useful life of the existing block of assets will not be reviewed/changed in future.

- The Estimated useful life of the new assets which has been considered for depreciation is given below:

Asset Type Useful Life Capital Dredging 20 Building, Sheds & Other Structures 20 Wharves, Roads & Boundaries 20 Floating Crafts 20 Railway and Rolling Stock 20 Docks, Seawalls, Piers & Navigational Aids 20 Cranes & Vehicles 20 Plant and Machinery 20 Installation for Water, Electricity, Telecom Systems & Fire 20 Fighting Oil Pipeline Installations 20 Ore Handling Facilities 20 Container Handling 20

B Capital Work in Progress

- Capitalisation policy will be as follows: Capitalisation Policy Years over which capitalisation is spread CWIP Addition of Sanctioned Projects (as per the 5 capital works section of the administrative report for 2005-06) CWIP Addition of New Projects (proposed by 1 Deloitte) Capitalisation of CWIP 1

- The balance in the CWIP account as on 31.3.06 shall be capitalised in 2006-07.

C Loans & Advances

- Additions/Reductions in loans and advances will continue as per past years' trends.

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D Inflation & Tax Rates

Rate of Inflation 4% Inflation rate for revenue 1% Rate of Tax 33.66%

E Reserves

- The interest earned and expenditures for the General Insurance Fund, Family Security Fund and Employees Welfare fund will continue as per past years' trends.

- Interest earned for Loss in Wages Compensation funds will continue as per past years' trends.

- Fund Contributions will be as follows: Fund ChPT Employee Contribution (Rs) contribution (Rs) General Insurance Fund 10000000 p.a. Not Applicable Family Security Fund 1800000 p.a. 16 per employee p.m. Loss in Wages Compensation 100000 p.a. 2 per employee Fund p.m. Employee Welfare Fund 37500000 in Not Applicable 2006-07 - Increasing by 4% every year Reserve for Replacement, 520000000 p.a. Not Applicable Rehabilitation, Modernization of Fixed Assets Reserve for Development, 520000000 p.a. Not Applicable Repayment, Contingencies

- Expenses from Loss in Wages Compensation Fund will be as follows:

2007-08 to 2011-12 Rs. 500000 p.a. 2012-13 to 2016-17 Rs. 1000000 p.a. 2017-18 to 2018-19 Rs. 500000 p.a.

- Expenses from other Funds will continue as per past years' trends will added outlays for inflation.

- For Capital Reserve, contributions to and deduction from the reserve balance will be based on current accounting practice

F Loans

- The amount in Rs. to be repaid every year for the existing loan is assumed to be the same as that in 2005-06 i.e. Rs. 25055300

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- Interest on the existing loan is assumed to be @ 11%

- No new loans assumed in the forecast period.

G Fund Applications

- The Fund mix in terms of Investments, Fixed Deposits and Bank Balances has been assumed to continue as per past years' trends.

H Short Term Liabilities

- From the year of implementation of new BOT projects, Deposits/Advances to be received assumed to be 10% of Project Costs.

- The year-on-year decrease/ reduction in the Deposits/ Advances on Opening Balance is assumed to be 5% of opening balance.

- The balance of Creditors for Stores, Accrued Expenses, Misc. creditors and credit balances will continue as per past years' trends.

I Interest Income & Interest Accrued

- The Interest received for each year and the interest accrued but not received will continue as per past years' trends.

- For calculation of Interest, it has been assumed that the General Reserve Fund balance as on 31.3.03 is the same as the balance as on 31.3.04.

J Retirement Benefits

- The interest earned and expenditures for Pension Fund and Gratuity fund will continue as per past years' trends.

- The contributions to the Funds have been calculated as under:

Pension Fund 26.10 % of salary Gratuity Contribution 3.01 % of salary Provident Fund Contribution 6.00 % of Basic Salary & DA

- The new employees shall not be eligible for Pension & Gratuity.

K Miscellaneous Provisions

- Miscellaneous provisions mostly consist of Salaries payable

- Provisions to be calculated at 10% of Salary

L Salary Costs

- The average salary costs have been taken based on 2005-06 figures.

- Year-on-year increase in the average salary costs per employee is as follows:

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Year Ended 2008 to 2012 to 2023 to 2007 2011* 2022** 2010 2021 2027 % Increase 5 5 25 5 25 5 * Effect of 6th pay commission ** Effect of 7th pay commission

- In 2006-07,number of employees as on the beginning of the year have been assumed to retire 2 % of employees at the beginning of the year

- In subsequent years, the number of employees assumed to retire 105 % of employees retired in the previous year

- Years in which Voluntary Retirement Schemes are to be introduced and number of employees opting for VRS are:

2011-12 15% of employees at the beginning of the year 2016-17 15% of employees at the beginning of the year 2021-22 15% of employees at the beginning of the year

- New employees recruited each year 10% of old employees retiring each year

- New Employees retiring each year 5 % of employees at the beginning of the year

- The total salary costs have been bifurcated as under:

Basic Salary 100.00 % Dearness Allowance 48.00 % HRA 30.00 % Others 5.00 % Total Salary 183.00 %

- In case of opting for VRS, the retiring employees shall be paid a VRS compensation of Rs. 500000

M Equity

- The Government Grants received by ChPT till date have been assumed to be the equity of the Port and hence have been reclassified accordingly.

N Concession Fees

- Concession Fees includes only Lease Rentals and Share in Revenue of Operators. The upfront premium which is also received in such cases has been ignored.

- Assumptions for revenue calculations are as under:

See next page

Facility Revenue Revenue Maximum Land Lease Commence- Share % per Capacity Area Rent# ment of TEU* (TEUs)** (sq operations

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mtrs.) Terminal 1 37.32% 2700 1100000 250600 3800 Already commenced Terminal 2 45% 2700 900000 350000 3800 2007-08 Terminal 3 17.50% 2700 600000 248700 3800 2017-18 Terminal 5 17.50% 2700 900000 188200 3800 2017-18 Terminal 4 20% 2700 900000 296700 3800 2022-23 (Ore Berth Conversion) Off Dock 0%++ 1200 144000 90000 2000 2012-13 * At 2005-06 prices. This shall be adjusted by inflation.

** For Terminal 1, cargo traffic shall be handled @ 80% in the first year of projections and then shall increase @ 10% every year. For other Terminals, cargo traffic shall be handled @ 60% in the first year of operations and then shall increase @ 10% every year. For the Off Dock facility, cargo traffic shall be handled @ 50% in the first year of operations and then shall increase @ 5% every year.

# Lease Rent p.m. per 100 sq mtrs in Rs. ++ Feasibility study and industry analysis indicates that for this Project, unless charges are borne by ChPT and are not passed on to the customers, will become commercially unviable. Hence it is assumed that ChPT will pay handling charges to the BOT operator.

O Administrative Costs

- Administrative costs have been assumed to depend on Running costs and assumed to continue as per past years' trends.

P Debtors

- Debtors have been assumed to depend on Revenues other than Cargo Handling and assumed to continue as per past years' trends.

Q Stores

- Stores have been assumed to depend on Running costs and assumed to continue as per past years' trends.

R Revenues

- Traffic forecasts & GRT forecasts given by Deloitte’s traffic experts taken for revenue calculations.

- Wherever the revenue is charged on the basis of tonnage, the average rate per ton has been assumed to continue as per past years' trends.

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- Where revenue is charged on a different basis like GRT of ships, the average rate has been calculated on the basis of the rates given in the Schedule of Port Charges and this rate has been assumed to continue in the forecast period.

- Revenue per ton/per GRT assumed to increase by 1% p.a.

- Exchange rate used for conversion: 1 USD = Rs. 45

S Running Costs

- Running costs have been projected based on past years' trends.

- Costs assumed to increase by 4% p.a. on account of inflation.

T Other Costs

- Other costs (of soft projects - organisational improvements) have been assumed to be apportioned equally over their expected years of incurrence.

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Financial Model Outcomes

Projected Balance Sheet (Rs. in millions) Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-17 Mar-22 Mar-27 Assets Fixed Assets 6020 7601 7863 8595 8776 8293 7814 5958 3878 2129 Current Assets 5316 6451 6483 6569 6983 7120 7269 9097 12334 14241 Investments 21834 21226 23039 24516 27003 29289 32749 49196 73640 109783 Liquid Means 498 450 510 554 639 720 851 1497 2500 4077 Total Assets 33668 35728 37896 40235 43401 45423 48684 65748 92352 130229

Equity & Liabilities Equity 237 237 237 237 237 237 237 237 237 237 Reserves 16290 17617 19031 20574 22519 24208 26338 37635 59360 93080 Total Own Equity 16527 17854 19268 20812 22757 24445 26576 37872 59597 93317 Provisions 14561 15223 15905 16606 17448 18042 18817 21746 25052 27222 Long term loans 186 161 136 111 86 61 36 0 0 0 Short term Liabilities 2393 2489 2586 2705 3110 2875 3255 6129 7703 9690 Total Equity & Liabilities 33668 35728 37896 40235 43401 45423 48684 65748 92352 130229

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Projected Profit & Loss Account (Rs. in millions) Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-17 Mar-22 Mar-27 Revenue Port Dues 1423 1534 1656 1794 1926 1845 1946 2457 3245 4248 Other Dues 601 649 698 714 899 903 909 1017 1057 1448 Stevedoring Revenue 315 332 349 368 389 297 281 299 166 142 Storage 214 225 237 250 264 202 191 204 114 98 Wharf Handling 1278 1340 1406 1469 1533 1292 1257 1336 786 794 Concession Fees 1011 1134 1260 1272 2136 2273 2436 2779 3386 4052 Total Operating Revenue 4842 5213 5607 5867 7147 6811 7020 8092 8753 10782 Expenses Salaries 1727 1778 1828 1876 2288 2078 2111 1979 1989 1022 Social Charges & Pension Payments 502 515 529 542 659 1156 596 950 764 190 Running Costs 561 617 680 741 845 811 945 1263 1611 2325 Administrative Costs 421 463 511 555 643 620 719 955 1216 1743 Other Costs 0 108 58 10 10 0 0 0 0 0 Total Operating Costs 3210 3482 3605 3723 4445 4666 4371 5147 5579 5280 Operational Net Earnings before Depreciation, Interest & Tax 1632 1731 2001 2143 2702 2145 2650 2945 3174 5501 Depreciation 297 392 416 469 498 483 479 452 417 304 Net Earnings before Interest & Tax 1335 1339 1585 1674 2204 1663 2171 2493 2757 5197 Interest Income 533 676 554 655 722 870 1021 2180 3998 6728 Interest Expense 23 21 18 15 12 9 7 0 0 0 Net Earnings before Tax 1845 1995 2122 2314 2914 2523 3185 4673 6755 11925 Tax 621 672 714 779 981 849 1072 1573 2274 4014 Net Earnings 1224 1324 1408 1535 1933 1674 2113 3100 4481 7911 APPROPRIATIONS Loan Repayments 25 25 25 25 25 25 25 0 0 0 Contributions to Employee Welfare Schemes 49 51 52 54 56 58 59 67 79 94 rehabilitation, modernisation of Fixed Assets 520 520 520 520 520 520 520 520 520 520 Contribution to Reserve for Development, repayment of loans & contingencies 520 520 520 520 520 520 520 520 520 520 Balance transferred to General Reserve 110 208 290 416 812 551 989 1993 3362 6777

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Projected Cash Flow Statement (Rs. in millions)

Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-17 Mar-22 Mar-27 Source of Funds Net Earnings 1,175 1,273 1,355 1,481 1,877 1,616 2,054 3,033 4,402 7,817 Increase in Dedicated Reserves/Funds 692 717 741 764 909 666 852 670 757 443 Depreciation 297 392 416 469 498 483 479 452 417 304 Cash Flow 2,164 2,381 2,512 2,714 3,284 2,765 3,385 4,154 5,575 8,565

Loans ------Total Source of funds 2,164 2,381 2,512 2,714 3,284 2,765 3,385 4,154 5,575 8,565

Use of Funds Asset acquisition 508 1,973 678 1,201 678 - - - 20 - Investments 1,827 77 675 598 891 761 1,106 904 1,404 2,071 Increase in Working Capital (see note 1) (407) 355 1,073 845 1,604 1,899 2,122 3,139 3,932 6,125 Repayment of Loans 25 25 25 25 25 25 25 0 - - Total Use of Funds 1,953 2,429 2,452 2,670 3,199 2,684 3,254 4,042 5,355 8,196

Balance Flow of Funds (see note 2) 211 (48) 60 44 85 81 131 112 220 369

Liquid Means Opening Balance 287 498 450 510 554 639 720 1,337 2,291 3,700 Liquid Means Closing Balance 498 450 510 554 639 720 851 1,449 2,496 4,068 Increase / (Decrease) Liquid Means 211 (48) 60 44 85 81 131 112 205 369

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Detailed Outcome Analysis

Balance Sheet - Assets

Overview of Assets

120000

100000

80000

60000

Rs. in Millions in Rs. 40000

20000

0 2007 2012 2017 2022 2027 Year

Fixed Assets Current Assets Investments Liquid Means

The above graph shows the total picture of the assets of ChPT over the projection period. Investments show a very high increase and form more than 80% of the total assets as on 2026-27. Current Assets and Liquid Means also show a steady increase throughout the 20 year period. Fixed Assets (net block) shows a steady fall in the latter years as no significant capitalizations are projected. Detailed analysis of each item has been done below.

Fixed Assets Fixed Assets Overview of Fixed Assets projections show an increase in the 10000 period of 2006-07 to 8000 2010-11. These 6000 represent the 4000 capitalization of Rs in million 2000 existing projects in 0 pipeline and also the 2007 2012 2017 2022 2027 capitalization of the costs towards the Year Multilevel Car Fixed Assets Parking. After 2010- 11 no significant capitalization has been projected (just some small projects which are not material enough to increase the net block) as all the other proposed projects have

Page 169 of 185 Final Report Business Plan for Chennai Port Trust been stated to be undertaken on BOT basis and hence the operators shall be responsible for incurring the costs.

Current Assets Current Assets consist of Loans & Overview of Current Assets Advances, Stores, Debtors and Interest 16000 Accrued income. The 14000 two steep rises in 12000 the adjacent graph 10000 represent the equity 8000 Rs. in m illion contribution to BOT 6000 operators amounting 4000 2007 2012 2017 2022 2027 to Rs.1000 million in 2016-17 and Year Rs.2000 million in Current Assets 2020-21. Other items such as debtors have been projected to show a steady increase, while stores have been projected to show a significant fall over the projected period due to the increased operations on BOT basis.

Investments

Investments Overview of Investments constitute of more than 80% of the 120000 total assets as on 100000 2026-27 and consist 80000 of long term 60000 40000

investments and Rs. in million 20000 fixed deposits. They 0 increase from 2007 2012 2017 2022 2027 Rs.21,834 million in Years 2006-07 to Investments Rs.1,09,783 million in 2026-27. This significant rise is on account of high surplus generated by the port each year which in turn are invested. Although investments are maintained for both general purposes as well as specific purposes (like pension fund, etc), the increase is mainly observed in the general funds. This is because a large part of the operations of the port are stated to be undertaken on BOT basis and hence no significant amounts are needed for capital assets. This can be evidently seen from the second graph given below where general reserve funds increase from 34% to 74% over the projection period.

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Total Relevant Fund Balances

100%

80%

60%

40%

% Composition % 20%

0% 2007 2012 2017 2022 2027 Year

General Reserve Pension Fund Provident Fund Gratuity Fund Other Funds

Liquid Means

Liquid Means Overview of Liquid Means consist of mainly Bank Balances. 5000 These balances 4000 have been 3000 projected to show 2000 a steady increase million in Rs. 1000 over the projection 0 2007 2012 2017 2022 2027 period. These Year funds are stated to be used for Liquid Means working capital requirements. They show an increase from Rs.498 million in 2006-07 to Rs.4077 million in 2026-27. Like investments, the high surplus each year is the key contributor to its rise.

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Balance Sheet - Liabilities

Overview of Liabilities

100000

90000

80000

70000

60000

50000

40000 Rs. in Million Rs. 30000

20000

10000

0 2007 2012 2017 2022 2027 Year

Equity Reserves Provisions Long term loans Short term Liabilities

The above graph shows the total picture of the equity and liabilities of ChPT over the projection period. As evident reserves show a significant rise and constitute more than 70% of the total equity/liabilities. Provisions also show a steady rise on account of the increase in the retirement benefit liabilities. While equity remains constant throughout the 20 year period, long term loans have been projected to gradually reduce. Short term liabilities show some rise in the latter years. A more detailed analysis of each item has been done below.

Equity Equity of the port Overview of Equity remains stagnant at Rs.237 million 250 throughout the projection period. No contributions are expected to be made towards Rs. in million the equity of the 200 port. This is 2007 2012 2017 2022 2027 because the port Years is expected to fund its Equity requirments through a mix of internal sources and PPP.

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Reserves

As mentioned Overview of Reserves earlier, reserves constitutes more 100000 than 70% of the 80000 total equity/ 60000 liabilities of the 40000 port by the end of Rs. in million in Rs. 20000 the projection period. Substantial 0 2007 2012 2017 2022 2027 increase in the Year reserves can be observed on Reserves account of the significant rise in % Composition of Reserves the revenue balances. Revenue 100% Reserves increase 80% from Rs.3,892 60% million in 2006-07 40% to Rs.55,146 20% % % Composition million in 2026-27. 0% This rise is 2007 2012 2017 2022 2027 attributable to the Year high amounts of Capital Reserve Statutory Reserve Revenue Reserve surplus which are generated by the port each year and which get transferred to the revenue reserve. The rise is steeper after 2016-17 as three container terminals to be set up on BOT basis commence their operations during this period. The second graph evidently shows this. This reduction in the balance of the revenue reserves in the initial 5 years is on account of the funding of the assets from it. Other reserves such as capital reserve has been projected to remain stable after 2015- 16 as the loans are expected to be fully repaid and no significant fixed asset capitalizations are projected. Statutory reserves show a steady rise as yearly contributions have been projected to be made to these reserves under statutory obligations. Its balance increases from Rs.4,111 million in 2006-07 to Rs.24,911 million in 2026-27.

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Provisions

Provisions largely Overview of Provisions consist of retirement benefits related 30000 liabilities and show 25000 an increase from Rs.14,561 million in 20000 2006-07 to

Rs. in million 15000 Rs.27,222 million in 2026-27. This is 10000 largely on account of 2007 2012 2017 2022 2027 the increase in the Year pension fund Provisions liabilities which increase from Rs.12,949 million to Rs.26,167 million in the projection period. This is because with the increase in the number of existing employees retiring over the projection period, this balance is bound to increase as the existing employees are eligible for pension. Other benefits such as provident fund and gratuity show a fall over the 20 year period as there is a significant fall in the number of employees.

Long Term Loans No additional funding from loans has been Overview Long term loans projected for the port. 250 Hence the current loan 200 has been projected to be repaid by the year 150 2014-15. After that 100 most projects have million Rs.in 50 been envisaged to be 0 2007 2012 2017 2022 2027 undertaken on PPP Year basis, any equity contribution/ loans if Long term loans required has been assumed to be made by the port out of its own internal sources. Hence the port is not expected to have any borrowed funds after the year 2014-15.

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Short Term Liabilities Short term liabilities Overview of Short term Liabilities show a rising trend throughout the 12000 projection period with 10000 significantly steep 8000 rises in 2015-16 and 6000 4000

2020-21. This is on in million Rs 2000 account of projected 0 deposits expected to 2007 2012 2017 2022 2027 be received from BOT Year operators to the tune Short term Liabilities of Rs.1027 million in 2015-16 and Rs.2141 million in 2020-21. Other major contributor to the increase in the short term liabilities is the tax provision which shows an increase with the increase in profits each year.

Profit and Loss Account

Overview of Profit & Loss Account

14000

12000

10000

8000

6000

Rs. in Million in Rs. 4000

2000

0 2007 2012 2017 2022 2027 Year Total Operating Revenue Total Operating Costs Operational Net Earnings before Depreciation, Interest & Tax Net Earnings before Tax Net Earnings

The above graph gives the overall picture of the profitability of the port over the projection period. As evident the operating revenues show an increasing trend, while the related operating expenses are comparatively constant and actually decline towards the last 5 years of the projection period. Hence, the net operating profits which largely show an increasing trend show a significant rise after the year 2022-23. As a significant amount is expected to available in the form of investments, interest income will further contribute to increase the profits. This is evident as the earnings before tax show a significant rise throughout the 20 year period and eventually rise above the operating

Page 175 of 185 Final Report Business Plan for Chennai Port Trust revenue figures. Net earnings grow more or less in the same lines as the earnings before tax. A more detailed analysis of the revenues and expenses has been given below.

Profit and Loss Account - Revenues

% Composition of Revenue

100%

80% 60%

40% 20% % Composition % 0% 2007 2012 2017 2022 2027 Year

Port Dues Other Dues Stevedoring Revenue Storage Wharf Handling Concession Fees

This chart shows the % composition of revenues and is followed by the Detailed analysis of each revenue stream is given below.

Port Dues

Port dues largely Overview of Port Dues show an increasing trend except in 4500 4000 2011-12 and 2021- 3500 23 period. These 3000 reductions are on 2500 2000 Rs in million in Rs account of the 1500 decrease in the 1000 2007 2012 2017 2022 2027 general cargo traffic Year in 2011-12 and the gradual reduction in Port Dues the iron ore traffic prior to the conversion of iron ore berth into a container terminal in the year 2022-23. Port dues are expected to increase after 2022-23 with commencement of operations at 2 container terminals.

Overview of Other Dues Other Dues On the lines of Port 1600 1400

Dues, Other Dues 1200 too show a very high 1000 rising trend with 800 Rs in million in Rs substantial rises in 600 400 2010-11, 2017-18 2007 2012 2017 2022 2027 and 2022-23. In Year

Other Dues

Page 176 of 185 Final Report Business Plan for Chennai Port Trust each case the rise is on account of the increase in container traffic on account of the commencement of operations of a new container terminal (i.e. Container terminal No.2 in 2010-11, Container terminal No.3 in 2017-18 and Container terminal No. 4 & 5 in 2022-23).

Stevedoring Revenue Stevedoring revenue is Overview of Stevedoring Revenue largely dependant on the tonnage of iron, 500 400 coal and general 300 cargo. Since there is a 200

substantial reduction million in Rs 100 of general cargo traffic 0 in 2011-12 there is an 2007 2012 2017 2022 2027 evident reduction in Year this revenue. Also Stevedoring Revenue after year 2018-19 the iron ore traffic gradually phases out and hence there is a constant decrease in the stevedoring revenue over this period.

Storage Revenue Overview of Storage Storage fees can be 300 attributable to 250 commodities like 200 containers, iron ore 150 and general cargo. million in Rs 100

Hence it shall also 50 show the same trend 2007 2012 2017 2022 2027 as stevedoring Year revenue and the Storage reasons for its reduction will remain the same as those explained in the above case.

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Wharf Handling Revenue Wharf Handling revenue show a largely decreasing trend. Significant fall can be seen in 2011-12. This is on Overview of Wharf Handling account of the reduction in the 1600 general cargo traffic. 1400

A further reduction 1200 can be seen in the 1000

period of 2018- million in Rs 800 2022-23. This is on 600 account of the 2007 2012 2017 2022 2027 phased reduction of Years the iron ore traffic. Wharf Handling The increase after that year is due to the increase in the container traffic and marginally on account of general inflation.

Concession Fees Concession fees show a very Overview of Concession Fees substantial increase 4500 over the 20 year 4000 period. This is 3500 3000 obvious considering 2500 2000 the strategy of the 1500 port of conduct most million in Rs 1000 500 of its projects on 0 BOT basis, which 2007 2012 2017 2022 2027 leads to concession Year revenue in the form Concession Fees of share in revenue and lease rentals. The share of concession fees to in the total revenue also rises from around 21% to 38% over the projection period due to this reason. The 3 significant rises in the years 2010-11, 2017-18 and 2022-23 are on account of the commencement of operations of new container terminals during these years.

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Profit and Loss Account - Expenses The below chart shows the % composition of expenses and is followed below by the detailed analysis of each major expense.

% Composition of Expenses

100% 80%

60%

40%

20% % Comoposition % 0% 2007 2012 2017 2022 2027 Year

Salaries Social Charges & Pension Payments Running Costs Administrative Costs Other Costs

Salaries Although the salaries Overview of Salaries show an initially increasing trend, 2500 with the reduction of number of 2000 employees from 1500 8510 in the

beginning of 2007 to Rs in m illiion 1000 just 1316 at the end of the 20 year 500 2007 2012 2017 2022 2027 period, it is bound to show a significant Year reduction. The steep Salaries fall in 2011-12 is on account of a substantial reduction of employees due to VRS. A similar trend can be observed in 2016-17 where a second VRS is proposed. Also projected is a 25% rise in the average salary cost in 2010-11 and 2021-22. This is assuming implementation of Central Government’s Pay Commission Recommendations in these years.

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Social Charges and Pension Payments

These expenses Overview of Social Charges & Pension Payments show a steady decrease on account 1400 of the contributions 1200 1000 to the pension and 800 gratuity fund, which 600 in turn are linked 400 Rs Rs in million with salary. However 200 the significant 0 2007 2012 2017 2022 2027 increase in the 3 Year years is on account of the payment of Social Charges & Pension Payments the VRS compensations to the employees opting for the said scheme.

Running Costs

The running costs Overview of Running Costs show an increasing trend throughout the 2500 projection period. Its 2000 contribution to the total operating 1500

expenses increases million in Rs 1000 from 17% to 44% 500 over the 20 years. 2007 2012 2017 2022 2027 This rise is mostly on Year account of the increase in the port Running Costs and dock activities, which constitute more than half of the running costs and coupled with inflationary pressures. Also contributing to its increase are the running expenses to be paid to the Off Dock Facility at Tondiarpet.

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Administrative Costs

The administrative Overview of Administrative Costs costs show a very significant rise 2000 1800 throughout the 20 1600 year period. This is 1400 obvious as with the 1200 1000 increase operations million in Rs 800 of the project on 600 400 BOT basis, there will 2007 2012 2017 2022 2027 be a corresponding Years effect on the Administrative Costs increase administrative work to be done by the port. This is validated by the fact that the share of administrative costs in the total operating costs increase from a mere 13% to 33% in the 20 years.

Other Costs The other costs represent the costs Overview of Other Costs towards the organizational 120 improvements like 100 Information 80 Technology and 60 Human Resource 40 based projects. Rs in million 20 These are 0 supposed to be one 2007 2012 2017 2022 2027 time improvement Year costs and are not expected to be Other Costs incurred repetitively over the forecast period.

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Analysis of Well Defined Key Ratios (Ratio Analysis) Some of the key ratios have been analyzed and interpreted in this section.

Debt to Asset Ratio

Also known as Debt Asset Debt to Asset Ratio

Ratio, it measures the 0.5500 extent to which the 0.5000 acquisition of assets has 0.4500 been financed by creditors. 0.4000

The ratio is calculated by 0.3500 dividing total Liabilities with 0.3000

Fixed + Current Assets. 0.2500 Given the steady rise in 0.2000

07 08 13 14 5 19 20 21 26 27 009 010 011 01 016 017 018 022 023 024 Assets esp. investments 20 20 2 2 2 2012 20 20 2 2 2 2 20 20 20 2 2 2 2025 20 20 with no corresponding Year debt/other liabilities, this ratio is seen to be steadily declining over the forecast period.

Current Ratio Current Ratio determines Current Ratio the working capital position 3.0000 of a firm. In the earlier years, since ChPT is 2.5000 expected to have higher amount of stores etc. with 2.0000 no advances etc. received, 1.5000 Current Ratio is quite high. In the later years, however, 1.0000 current ratio had declined 0.5000 due to a dual effect of 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Year reduces stores (due to increased BOT operations) and high level of forecasted advances from BOT operators. Nonetheless, Current Ratio is still expected to be at a healthy 1.5 times in the later years.

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Fixed Asset Utilisation Ratio Calculated by dividing total operating revenues by Fixed Fixed Asset Utilization Ratio

Assets in books, this ratio 5.0000 presents how well assets of 4.5000 4.0000 an entity are being utilised. 3.5000 Given the fact that most of 3.0000 the operations are slated to 2.5000 2.0000 be undertaken on a BOT with 1.5000 assets consequently being 1.0000 shown in the BOT operator’s 0.5000 0.0000 accounts, the ratio shows a 2 3 4 5 6 7 007 008 009 010 011 01 01 01 01 018 019 020 021 022 023 024 025 02 02 2 2 2 2 2 2 2 2 2 2016 2017 2 2 2 2 2 2 2 2 2 2 substantial rise in the Year forecast period.

The total Asset utilisation Asset Utilization Ratio ratio, however, shows a 0.1700 steady decline as 0.1600 investments accumulate over 0.1500 0.1400 the forecast period and 0.1300 revenue, of course, does not 0.1200 rise in the same proportion. 0.1100

The occasional surge in the 0.1000 ratio is because of the fact 0.0900 0.0800 that in these years, ChPT 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 has been forecasted to Year provide equity/loan contributions to new BOT projects being constructed in these years.

Return on Total Assets

Return on Total Assets is Return on Total Assets derived by dividing Profit 7.00% from Operations by average 6.50% Total Assets during the year. While the graph shows 6.00% fluctuations, on an overall 5.50% basis, the returns has been 5.00% between 4.5% to 6.5%. The 4.50% drop in the years 2019 to 2022 is because in these 4.00% 4 5 6 7 8 19 20 021 022 023 years, the growth in 2007 2008 2009 2010 2011 2012 2013 201 201 201 201 201 20 20 2 2 2 2024 2025 2026 2027 Year revenue is expected to slow

Page 183 of 185 Final Report Business Plan for Chennai Port Trust down but assets (esp. investments) are expected to grow year-on-year. From 2023 onwards, with the addition of two Container Terminals, revenue are forecast to rise again.

Net Profit Margin Net Profit Margin shows a steady rise reflecting the fact Net Profit Margin that operations are being 80.00% undertaken increasingly on a 70.00% BOT Basis wherein revenue rise but there is no 60.00% corresponding rise in 50.00% expenses. The slight dip in margins in a few years is due 40.00% to ex-gratia payments to 30.00% employees opting for VRS in these years. 20.00% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Year

Concession Fees as a percentage of Operating Revenue Concession fees as a percentage of Operating Concession Fees as a % to Operating Revenue

Revenues show a steep rise in 50.00% those years where new BOT 45.00% Projects are being commissioned i.e. in 2009- 40.00% 10, 2017-18 and 2022-23. In 35.00% the years subsequent to these, however, the 30.00% percentage declines as Marine 25.00% Charges, Stevedoring charges other similar Ports dues are 20.00%

7 08 1 2 3 14 7 8 9 0 21 4 5 6 7 projected to rise at a 200 20 2009 2010 201 201 201 20 2015 2016 201 201 201 202 20 2022 2023 202 202 202 202 comparatively higher rate Year than the rate at which revenues from concession fees is expected to rise in these years.

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Revenue per Employee Given the fact the Revenue per Employee employee strength is 9.0000 gradually expected to 8.0000 decrease with a rise in 7.0000 revenue, revenue per 6.0000 employee is expected to 5.0000 rise during the forecast 4.0000 Rs. in Million Rs. period. 3.0000 2.0000 1.0000

0.0000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Year

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