Full-year outlook remains negative for Indian port sector: ICRA

October 7, 2020: The credit rating agency ICRA has maintained the outlook for Indian port sector as Negative with volume contraction expected in FY2021.

“The cargo volumes at both major ports and non-major ports have witnessed a steep contraction of 17 percent during 5M FY2021. While the performance has remained subdued during July 2020(9 percent) and August 2020 (9 percent) as well, the pace of decline has moderated for key cargo segments, indicating early signs of a recovery. The non-major ports have witnessed a relatively better recovery and the decline in the month of July and August was at 4 and 8 percent compared to 13 and 10 percent respectively at major ports,” noted the ICRA report.

POL, coal and container segment have witnessed severe contraction with 15, 32 and 19 percent YoY decline during 5M FY2021. While fertilizer and iron ore segment witnessed 5 and 12 percent YoY growth during the period.

Also read: ICRA’s outlook on Indian road logistics industry remains Negative

Delays in Sagarmala projects
Due to the invocation of force majeure clause at major ports, the project implementation of Sagarmala and other projects may witness delays by at least ~6m to 1 year. Further, since the projects are mainly driven by the private sector, given the steep economic contraction, discretionary capex may be further postponed.

SAROD-Ports & Major Ports Bill 2020
There has been traction on the policy front with notification of SAROD-Ports and passage of Major Ports Bill 2020 in September 2020, which should be favourable for reform in the maritime sector. The new act provides more flexibility to Major Ports in financing and tariff decisions, which should aid the sector to attract private sector investment in the medium term. Further, the notification of SAROD-Ports, for faster and cost-effective arbitration to settle disputes, is also a favourable development, although the effectiveness of mechanism remains to be seen.