Adani's Ascension as India's Premier Port Operator

🔍Insights

Nadeesh Kareemdathil, Apoorva Bajj

Dec 20, 2023 — 3 min read

Adani's Ascension as India's Premier Port Operator

The initiation of operations at Adani Port's Vizhinjam transshipment terminal marks a significant milestone for both the Adani Group and India. This development signifies a pivotal advancement in the ongoing evolution of the Vizhinjam Port project, with full-scale commercial operations slated for the upcoming year. Positioned strategically along the southwestern coast, Vizhinjam Port is poised to bring about a transformative impact on the nation's port infrastructure, specifically tailored for accommodating ultra-large ships.

Adani Ports has firmly established itself as India's premier port operator, commanding 24% of the nation's port capacity and boasting an integrated transportation system ensuring efficient coal shipping and reduced ship turnaround time. Overseeing a total of 14 ports and terminals, the Adani Group manages a quarter of all cargo passing through India’s ports, reflecting remarkable expansion along the country's coastline, as reported by The Indian Express.

In the last decade, Adani Ports has witnessed a nearly fourfold increase in total cargo handled, reaching 337 million tonnes in FY23. This remarkable growth, with a compounded annual growth rate of 14%, significantly outpaces the industry's 4%. Notably, excluding Adani’s share results in a meager industry growth rate of 2.7%.

The group's market share in total cargo handling has nearly tripled, rising from approximately 9% in 2013 to around 24% in 2023, while central government-controlled ports have seen a decline from 58.5% in 2013 to about 54.5% in 2023. Adani's market share among non-Union government-controlled ports has surpassed the 50% mark, establishing it as a formidable competitor to the Union government’s portfolio of over 12 ports.

Revenue of Adani Ports and Special Economic Zone Limited From Financial Year 2015 to 2023

The establishment of Adani's transshipment ports marks a transformative moment for India's maritime sector. It goes beyond mere cost reduction, aiming to create a self-sufficient and flourishing ecosystem that will benefit the entire nation. - Dr. Amitabh Kumar, Director, Centre for Policy Research.

A noteworthy aspect is the shift in market share, where Adani Group's rise from 9% to 24% in ten years has come at the expense of Union government-controlled ports, whose cargo share has declined.

A decade ago, in FY13, Adani Group's ports business handled around 91 million tonnes, constituting merely 10% of the cumulative cargo volumes handled by all ports, while over 23% of the cargo volumes were managed by all minor ports. The designation of a port as "minor" is unrelated to its size or cargo volumes but refers to its non-governmental control. In FY23, the Adani-owned Mundra Port, categorized as a minor port, outperformed all 12 Union government-owned ports by handling 155 million tonnes of cargo.

The advantages extend well beyond immediate cost savings. The transshipment port industry is projected to create 700,000 jobs directly and indirectly, leading to increased government revenue through taxes and port fees, fostering investments in infrastructure and social welfare initiatives.

Despite these achievements, India faces challenges in integrating into the global value chain due to poor shipping connectivity, as highlighted by the Reserve Bank of India in a 2022 report. The container traffic in India was a mere 17 million TEUs in 2020, a stark contrast to China's 245 million TEUs.

The Adani Group continues its global expansion, extending from Indian ports to investments in Haifa Port (Israel) and Colombo (container terminal), aiming to provide a global transport utility solution. The company is actively exploring opportunities on a global scale, with a particular focus on Asia, Africa, and other markets.

Adani's vision holds the potential to propel India into the top echelons of maritime nations. The economic and strategic implications are vast. - Captain Vivek Verma, Senior Advisor, Ministry of Shipping.

Certainly, the journey is not without its challenges. Environmental apprehensions related to port construction and potential debt burdens on Adani Group companies have been voiced. Effectively addressing these concerns through sustainable practices and prudent financial management is imperative for the enduring success of this initiative.

Remarkably, the Adani Group has achieved rapid growth in various sectors. It holds the position of the largest private-sector airport operator in India, overseeing eight airports. Additionally, it has emerged as the country's largest cement manufacturer and private-sector thermal power producer.