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					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 2 EXECUTIVE SUMMARY ........................................................................................................ 7 MAJOR RESULTS AND CONCLUSIONS........................................................................... 24 PORT DESCRIPTION ................................................................................................................ 24 INTRODUCTION ..................................................................................................................... 24 PORT INFRASTRUCTURE ........................................................................................................ 24 PORT’S NAVIGATIONAL AND HARBOR DETAILS .................................................................... 27 PORT TRANSPORTATION SYSTEM ......................................................................................... 28 INTERNAL PORT TRAFFIC...................................................................................................... 29 ASSESSMENT OF HANDLING OPERATIONS ............................................................................ 30 STORAGE CAPACITY ............................................................................................................. 31 MARINE SERVICES ................................................................................................................ 32 CARGO HANDLING EQUIPMENTS .......................................................................................... 32 COMPETITIVE POSITION ........................................................................................................ 33 THREAT OF NEW ENTRANTS ................................................................................................. 35 RIVALRY AMONG EXISTING PLAYERS .................................................................................. 36 BARGAINING POWER OF SUPPLIERS...................................................................................... 39 BARGAINING POWER OF PORT USERS................................................................................... 40 THREAT OF SUBSTITUTES ..................................................................................................... 41 HINTERLAND CONNECTIVITY................................................................................................ 42 HINTERLAND MAPPING FOR CHENNAI .................................................................................. 42 ROAD CONNECTIVITY ........................................................................................................... 43 RAIL CONNECTIVITY ............................................................................................................. 47 CARGO FORECAST .................................................................................................................. 50 COMMODITY ANALYSIS ........................................................................................................ 50 MARKET DRIVERS................................................................................................................. 54 DEMAND FORECASTING ........................................................................................................ 55 TARGETED TRAFFIC VOLUMES ............................................................................................. 59 CAPACITY AND BOTTLENECK ANALYSIS .............................................................................. 68 CAPACITY ANALYSIS ............................................................................................................ 68 LAND USE PLAN ...................................................................................................................... 83 ORGANIZATIONAL ISSUES...................................................................................................... 88 SWOT FOR CHENNAI PORT AS A WHOLE ............................................................................. 93

2.1 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.1.6 2.1.7 2.1.8 2.1.9 2.2 2.2.1 2.2.2 2.2.3 2.2.4 2.2.5 2.3 2.3.1 2.3.2 2.3.3 2.4 2.4.1 2.4.2 2.4.3 2.4.4 2.5 2.5.1 2.6 2.7 2.8 3

BUSINESS PLAN ELEMENTS .............................................................................................. 96 DEVELOPING THE VISION AND MISSION ............................................................................... 99 STRATEGIES .......................................................................................................................... 101 INTRODUCTION ................................................................................................................... 101 FUTURE INDUSTRY SCENARIOS .......................................................................................... 102 PROCESS OF FORMULATION OF SCENARIOS ........................................................................ 103 PROCESS OF FORMULATION OF STRATEGIES ...................................................................... 106 FUNCTIONAL STRATEGIES .................................................................................................. 110 SELECT PROJECTS INCLUDING MOTIVATION ..................................................................... 124 PLAN OF ACTION TO IMPLEMENT STRATEGY .................................................................... 136

3.1 3.2 3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 3.3 3.4

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3.4.1 3.4.2 4 5 5.1 5.2 5.3

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

DETAILED ACTION PLAN................................................................................................. 148 FINANCIAL ASPECTS......................................................................................................... 151 OVERVIEW OF INVESTMENTS .............................................................................................. 151 APPROACH FOR FINANCIAL PROJECTIONS ........................................................................ 152 PROJECTED FINANCIAL STATEMENTS ................................................................................ 159

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

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MTS MT MP NCR NH NHAI O-D POL PPP PSA ROB RMG SAIL SBM SEZ SPM SQ SPV SWOT UP TAA TPP teus TISCO VRS WQ

Multi Trailer System Million Tonnes Madhya Pradesh National Capital Region National Highway National Highway Authority of India Origin - Destination Petroleum, Oil & Lubricants Public Private Partnership Port of Singapore Authority Rail Over Bridge Rail-Mounted Gantry Steel Authority of India Limited Single Buoy Mooring Special Economic Zone Single Point Mooring South Quay Special Purpose Vehicle Strength - Weakness - Opportunities - Threats Uttar Pradesh Technical & Administrative Assistants Tiruvottiyur -Ponneri -Pancheti Twenty Foot Equivalent Units Tata Iron and Steel Company Limited Voluntary Retirement Scheme West Quay

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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 (ORIGINAL)................................................................58 TABLE NO- 2.4-4: CONTAINER TRAFFIC GROWTH (FINE-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 PostPanamax 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

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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

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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 Trend Analysis

Commodity Analysis for future focus

Demand Forecast Multiple Regression Analysis

ChPT’s targeted Traffic

Adjustment towards Competitors Impact

Fine tuning by qualitative 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 Coal Iron Ore POL Containers Automobiles Passengers Growth Rates 10% 8% 5% 15% 12% 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 Demand Forecast in Mtpa Share for competitive Port Targeted Traffic ChPT (in Mtpa) 7.00 1.43 2017 14.07 0 2022 28.31 0 2027 56.93 0

It does not impact our strategic conclusion

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 Demand Forecast in Mtpa Share for competitive Port 15.50 2017 22.77 2022 33.46 2027 49.16

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 Demand Forecast in Mtpa Targeted ChPT Traffic (in Mtpa) 17.03 15.00 2017 21.73 15.00 2022 27.73 20.00 2027 35.39 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 32.18 6.36 4.8 21.02 1.31 2017 56.72 6.36 9.6 40.76 2.55 2022 91.34 6.36 19.2 65.78 4.11 2027 134.21 6.36 19.2 108.65 6.79

Demand Forecast in Mtpa Share for Tuticorin Port Likely share for Ennore Port Targeted ChPT Traffic (in Mtpa) Targeted ChPT Traffic (in Mteu )

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

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

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: COMMODITY Containers (in Mtpa) Containers (in Mteu ) Iron Ore (in Mtpa) Coal (in Mtpa) Automobiles (in ’000 Nos.) Passengers (in Nos.) POL (in Mtpa) General Cargo (in Mtpa) TOTAL in Mtpa Capacity Analysis The assessment of maximum possible port capacity and the infrastructure development required is performed with respect to four following basic parameters: o o o o Ground Storage Area, Requirement of berth length, Hinterland connectivity, No. of vessel and their sizes 2012 21.02 1.31 11.08 1.43 202.7 129,132 15.00 15.76 64.29 2017 40.76 2.55 11.65 0 357.2 164,808 15.00 8.77 76.18 Year 2022 65.78 4.11 0.00 0 629.5 210,342 20.00 8.77 94.55 2027 108.65 6.79 0.00 0 700.0 268,455 20.00 8.77 137.42

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

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

No. of Berths Available Existing Terminal length 885 Equivalent No of Berths* 3.22 No of Berths additionally required

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C1 C2 D D1 D2 E E1 E2

Berth length to be 58.80 1061.59 developed Equivalent No of Berths* 0.21 3.86 Total additional Berths possible to be developed Total proposed berth length 800.00 1455.00 Equivalent No of Berths* 2.91 5.29 Net deficit in development of additional Berths Net deficit in total length of -744.78 -503.58 Berth (in m) Net deficit in no of Berths -2.70 -1.43

2265.00 8.24 2668.00 9.70 -282.67 -1.47

3533.75 12.85 2668.00 9.70 848.29 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

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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. No 1. Projects

Infrastructure Projects (Client Related) 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 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 Creation of New Cruise Terminal clubbed with a multi level car parking facility Developing a Off-Dock facility at Tondiarpet Housing Colony 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.

2. 3. 4. 5. 6.

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Sl. No

Projects

Infrastructure Projects (Client Related) 6.3 6.4 7. Strengthening of berthing face to handle ships requiring depths of 14 m Conversion of a portion of Marshalling Yard into container storage yard

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 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 Reclamation of Timber pond as storage yard for General Cargo Reclamation of Port Basin for container storage yard Reclaiming land near Gate no.1 to the north of Bharathi Dock adjacent to eastern breakwater. Ennore-Manali Road Improvement Project (EMRIP) Dedicated Elevated Corridor on NH-4 from Gate-10 at Port to Maduravoyal Connecting Off Dock facility at Tondiarpet to Port with Shuttle Railway. Organization Improvement Related Projects

8.

9. 10. 11. 12. 13. 14. Sl. No 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Marketing Projects Marketing Department Capacity Building Project Customer Relationship Management Project Market Offerings Expansion Project Restructuring of the IT Department Organization Process reengineering and Improvement Project Activity Based Costing Security Enhancement Projects Organization Re-design and Right-sizing Employee Upliftment Project HR Process Improvement Project

System and IT related Projects

HR Projects

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Port Development Projects 11. 12. 13. 14. Identifying Cost Reduction Avenues and Implementing Cost Reduction Measures Efficiency Improvement Project Institutional Strengthening Project 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 The process of Strategy formulation has been elaborated in the diagram alongside. The Strategy Formulation process first entails the Business Strategy to be formulated followed by functional strategies. Process followed: 1. Identification of the Business Segments: A customers.
Internal Analysis (SWOT Analysis, Stakeholder Analysis)
Insights

Key Uncertainties
Future Industry Scenarios

External Assessment (PESTLE Analysis, 5 Force Analysis, Traffic/Demand Analysis)

Pre-determined Forces

Business Strategy
Thrust Areas

Functional Strategy
Finance, IT, HR

IRR, NPV, Feasibiliy Business Plan Projected Financials

Projects & Action Plan

business segment is a combination of a product / service and its key / target

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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 No. 1. 2. 3. 4. 5. 6. Customers Shipping Lines/ IPLSP* Shipping Lines Shipping Lines / General Public General Public PS Units Service / Product Container Handling Ship Repair Facilities Cruise Facility Marina Facility Liquid Cargo (POL) Handling Bulk Cargo (Iron Ore) Handling Bulk Cargo (Coal) Handling Automobile Handling Desalination facilities Engineering Consultancy services Break Bulk and Strategic Posture Reserve Shape Adapt the the to the Right to Future Future Play √ √ √ √ √ √ √ √ √ √ √

Public Sector / Private Sector Units / IPLSP 7. Public Sector / Private Sector Units / IPLSP 8. Companies 9. Local Govt. Bodies 10. Other Ports 11. Public Sector / Private

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Sector Units / IPLSP 12. Other Ports 13. Acquisition of Minor Ports 14. Other Ports

Project Cargo Handling Marine Services Investment 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 o Financial Strategy 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 Statement Analysis

Understanding Key Elements

Discussions with ChPT and Industry Experts Preliminary Financial Strategy

Deciding Projection Drivers

Financial 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 o Financing Working Capital requirements 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 4000 2000 0
20 1 0 2 00 8 2 01 1 2 01 3 2 01 4 2 01 6 2 01 9 2 02 2 2 02 4 2 02 5 2 02 7 20 1 5 20 1 8 20 2 1 20 2 3 20 2 6 20 0 7 20 0 9 20 1 2 20 1 7 20 2 0

R . inM n s illio

Ye ar
Total Operating Revenue Operational Net Earnings before Depreciation, Interest & Tax Net Earnings Total Operating Costs Net Earnings before Tax

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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 40000 20000 0
20 26
20 27

R . in M n s illio s

20 24

20 25

20 06

20 07

20 08

20 09

20 10

20 11

20 12

20 15

20 16

20 17

20 18

20 19

20 20

20 21

20 22

20 23

20 13

20 14

Ye ar
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 R . inM n s illio 60000 50000 40000 30000 20000 10000 0
20 06 20 07 20 09 20 10 20 11 20 08 20 12 20 13 20 17 20 18 20 22 20 26 20 14 20 15 20 16 20 19 20 20 20 21 20 23 20 24 20 25

Yea r 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

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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, competitive pricing, safe and secure
Figure 2.1-1: Location of Chennai Port with other major ports

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.

N

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

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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Final Report Business Plan for Chennai Port Trust 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

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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 offdock 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 (60acre) 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

Bargaining Power of Suppliers

Competitive rivalry within the industry

Bargaining Power of Customers

Threat of Substitutes
Figure 2.2-1: Porter 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 pressures from various service provides like stevedores, CHA, concessionaire. The relations with labour unions are under good balance under present circumstances. However, they do possess lot of bargaining power. However, this scenario may change if initiates action to solve existing labour issues Labour issues faced by CCTPL will impact future plan of becoming a hub port The agreements with concessionaires provide them the power to enforce fulfillment of obligations of ChPT The contractors do possess certain bargaining power due to cartelization among them Bargaining power of service providers Contractors/ equip. suppliers Concessionaires Labor unions Chennai port enjoys monopoly because of location committed investments by users. The new port facility requires huge investment and long gestation period Proactive measures by nearby major ports and minor ports to attract customers through efficient services and modern technology. Increasing containerization and upcoming projects through the international shipping route in the Indian Ocean is increasing the international competition Chennai port presently has a monopoly due to geographical advantage Chennai has a First Mover Advantage and has an established base of customers All the ports in the southern Indian peninsula have smaller hinterland to serve and large number of upcoming ports, resulting into greater competition Better infrastructure and efficiency by minor, major & international ports likely to put pressure All the competing ports are planning for port based SEZ and also trying grab other cleaner cargo like auto export, container cargo, project export, etc. Bargaining power of port users Cargo traffic enablers Importers/ exporters, CHA Shippers, steamer agents

Threat of New Entrants New port facilities planned by minor and major ports Sethusamundram Project

Potential of new ports or service providers

Ability to control negotiations by the threat of curtailing / cancelling services

Rivalry among existing competitors Better tariff terms Better efficiency Better connectivity

Size & importance of the port user to the port

Chennai port has negligible threat from competing transport modes like rail/road congestion. In fact, there is a possible opportunity for promoting coastal trade. Substitutes for principal cargo unlikely Principal Cargo can shift to other ports Minerals export cargo (iron ore, manganese) might also face reduction because of government policy to impose restrictions on minerals export to avoid domestic shortage.

Ability to utilize other ports or other sources of supply

Potential for global substitute Other sources of supply Substitute products Opportunity – Positive/ neutral impact

Increasing containerization and rise in variety of break bulk cargo, project export, auto exports, etc. provide avenue for diversification Monopoly status Chennai port is the entry point of sea trade & generates employment for local community, giving bargaining power to ChPT Chennai port is dependent on few port users for its cargo like iron ore, coal & POL Enabling policies of state Govt. to promote captive ports leading to increased bargaining power User friendly attitude and efficient services by competing ports coupled with probable decrease in hinterland transport costs

Terminology:

Threat - Negative impact

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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 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 renewed focus to the development of these nonNew Mangalore Our analysis suggests that nonAzhikkal major ports in the hinterland Beypore area of ChPT are fast moving Cochin Alappuzha forward to grab traffic by Vizhinjam providing special service options major ports. 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 Colachel Vizag Kakinada Krishnapatnam Ennore Chennai Pondicherry Cuddalore Nagapattinam Tuticorin Tirukkadaiyur
Figure 2.2-3: Upcoming non-major

Major Port Minor Port

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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 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 increasingly overlaps as one move from the north to the south; this is depicted in the adjacent figure.
Captive hinterland Secondary hinterland Ennore

Figure 2.2-4: Southern Indian peninsula

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 Chennai Berths Main berth types 24 Coal, iron ore, POL, General Cargo 885m long, 13.4m deep Tuticorin Port 11 Dry bulk, oil & coal Ennore Port 2 Coal Cochin Port 10 General cargo, liquid bulk, POL, fertilizer 573m long, 12.5m deep Vizag port 26 POL, iron ore, general cargo, fertilizer, LPG 451m long, 15m deep New Mangalore Port 13 General Cargo, POL, iron ore

Container terminal

Storage facility

172 acre owned port, 200 acre & 14000 KL of liquid by private parties

370m long, 10.7m deep 137 acre inside security wall, 2158 acres outside the main gate 6 electric wharf cranes, 4 lift trucks 2 shore gantry type grab, 1 mobile hopper, 6 temp. hopper

Cargo handling equipments

1 floating crane, 12 electric wharf cranes, 3 mobile cranes, 3 gantry cranes, 29 fork lift trucks

14 acre of covered area, 25 acre of open area, 125400 tons of liquid cargo by private parties 12 electric wharf cranes, 2 mobile cranes, 26 fork lift trucks, 1 floating crane, 9 transfer cranes, 2 mobile cranes, 2 gantry cranes

300 acres, 2 Mt of various cargo storage owned by private parties

20 acres, 64000 tons of cargo storage by private parties

25 electric wharf cranes, 4 mobile cranes, 15 fork lift trucks, 92 top lift carrier

3 electric wharf cranes, 2 mobile cranes, 7 fork lift trucks

Flotilla

7 tugs, 3 pilot launches, 4 mooring launches

5 towing tugs, 2 pilot launch, 2 floating cranes, 4 barges & lighters

3 tugs, 2 pilot launches, 3 mooring launches

3 barges, 3 mooring launches, 2 floating cranes, 4 pilot launches

5 pull tugs, 3 pilot launches, 4 mooring launches

Other facilities

Mechanized ore handling facility Water supply & bunkering Crude oil handling

Mechanized ore handling facility, raw fertilizers, crude oil and liquid chemicals

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Final Report Business Plan for Chennai Port Trust Tuticorin Port Ennore Port New Mangalore Port

Chennai facility

Cochin Port

Vizag port 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,

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

Figure 2.3-1: Hinterland Map

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 highdensity 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 NorthSouth 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 ChennaiKolkata stretch under Golden Quadrilateral till Dec 2006 is depicted in figure 2.3-3.

Figure 2.3-3: Status of ChennaiKolkata 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 ChennaiMumbai 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 o

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.

o o

Improvement and widening of TPP road 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

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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
Thiruvottriyur 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 intermodal 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)

1999Commodities
POL Growth% over last year % share Iron Ore Growth% % share Fertilizers Growth% %share Raw Fertilizers 1.84 0.47 16.53 0.69 26.84 6.19

20002001
8.69

20012002
8.51

20022003
8.92

20032004
9.48

20042005
11.7

20052006
13.21

2000
10.05

-13.53 21.08 6.82 10.18 16.55 0.48 -30.43 1.16 0.43

-2.07 23.57 7.44 9.09 20.60 0.49 2.08 1.36 0.32

4.82 26.48 7.94 6.72 23.57 0.42 -14.29 1.25 0.28

6.28 25.82 8.92 12.34 24.30 0.38 -9.52 1.04 0.32

23.42 26.71 9.6 7.62 21.92 0.55 44.74 1.26 0.32

12.91 27.96 9.46 -1.46 20.02 0.71 29.09 1.50 0.36

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1999Commodities
Growth% % share Thermal Coal Growth% % share Cooking Coal Growth% % share Containers Growth% % share Others Growth% % share Total Growth% Containers (teu) Growth% Cars Growth% 17.15 37.44 10.63 6.42 1.10 3.98 24.65 0.41 1.26 9.23

20002001
-8.51 1.04 11.67 26.44 28.31 0.53 29.27 1.29 5.99 50.50 14.53 6.61 2.96 16.04 41.22 10.10

20012002
-25.58 0.89 7.19 -38.39 19.91 0.52 -1.89 1.44 5.86 -2.17 16.23 5.78 -12.56 16.01 36.11 -12.40

20022003
-12.50 0.83 2.68 -62.73 7.96 0.98 88.46 2.91 7.22 23.21 21.44 5.24 -9.34 15.56 33.68 -6.73

20032004
14.29 0.87 1.86 -30.60 5.07 1.34 36.73 3.65 8.63 19.53 23.51 5.78 10.31 15.75 36.71 9.00

20042005
0.00 0.73 1.99 6.99 4.54 1.32 -1.49 3.01 9.86 14.25 22.51 8.46 46.37 19.32 43.80 19.31

20052006
15.63 0.78 1.91 -4.02 4.04 1.26 -77.13 2.67 11.76 19.27 24.89 8.58 100.94 18.16 47.25 7.88

2000

321960

352307 9.43 5260

344528 -2.21 4635 -11.88

424665 23.26 8432 81.92

539265 26.99 39868 372.82

616530 14.33 83121 108.49

734778 19.18 102692 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

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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 200506. 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 Government Policies Population Location Industrial Development Economies: Global & National TRADE & Exchange Rates Historical Linkages Human Resource Labour Oriented Cost driven Productivity led Quality focus Unionism Adaptability Professional pool Hinterland Connectivity Urban conurbation Road access Air & Rail Connectivity Waterway possibilities

Port Sector Drivers Administered Commodity Driven Trade Oriented Facilitating Role Public-Private Partnerships

Activities Agriculture Focused Import Substitution Manufacturing Assembling Export Oriented Consumer driven Weather windows Technology Drivers Equipment

Hinterland Resources Minerals Rain-Fed Agriculture Plateau –less mountainous

Island Trade Coastal Trades Cruising Ship Repair Facilities

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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 o Major Commodities Other Commodities

Major Commodities: This Group consists of the following commodities: o o o o o Coal Iron Ore POL Containers Automobiles

For these major commodities, demand forecast has been derived using a combination of two methods: o o Regression Analysis for quantifiable factors 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 o

Inadequate inland supply of coal 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 o

Slow liberalization in mining 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 infrastructurehousing 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 o o India’s Gross Domestic Product % (GDP) Growth in Iron Ore handled by all major ports 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 o o India’s Gross Domestic Product % (GDP) (Factor X1 in regression analysis) Growth in POL handled by all major ports (Factor X2 in regression analysis) 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 o o o Eventual shortage of availability of Crude Oil Drop in consumption given the rise in prices Controls through pricing when the price surges further 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 o o o Total traffic of Indian major ports Container traffic trends in India Containerization of break bulk cargo Manufacturing growth rate

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Qualitative Factors: o o Hinterland Connectivity 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 2007-12 2012-17 2017-22 2022-27

Southern India’s Container Traffic Growth % 16.30 11.80 10.38 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 2007-12 2012-17 2017-22 2022-27

Southern India’s Container Traffic Growth % 15% 12% 10% 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 Coal Iron Ore POL Containers Automobiles Passengers 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

2007-12 10% 8% 5% 15% 12% 5%

2012-17 10% 8% 5% 12% 12% 5%

2017-22 10% 8% 5% 10% 12% 5%

2022-27 10% 8% 5% 8% 12% 5%

Commodity Fertilizers Grains & Sugar Engineering Goods Other Minerals Steel Products Consumer Products SEZ Products

Growth Rates (%) 4% 4% 10% 8% 8% 15% 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 Demand Forecast in Mtpa Share for competitive Port Targeted Traffic at ChPT (in Mtpa) 5.60 2017 9.02 2022 14.53 2027 23.41

Even if other ports attracts some of this traffic, it does not impact our strategic conclusion 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

Year 2006 -07 2007-08 2008-09 2009-10 2010-11 2011-12

Growth (in %) 10% 10% 10% 10% 10% 10%

Demand Forecast ( in MT) 3.48 3.83 4.21 4.63 5.10 5.60

Traffic Forecast (in MT) 1.43 1.43 1.43 1.43 1.43 1.43

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Year 2012-13 2013-14 2014-15 2015-16 2016 -17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27

Growth (in %) 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%

Demand Forecast ( in MT) 6.17 6.78 7.46 8.21 9.02 9.92 10.92 12.01 13.21 14.53 15.99 17.58 19.34 21.28 23.41

Traffic Forecast (in MT)

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 200708 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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Final Report Business Plan for Chennai Port Trust Table No- 2.4-9: Calculations for Targeted Traffic for Iron Ore

IRON ORE (in Mtpa) Year Demand Forecast in Mtpa Share for competitive Port Targeted Traffic Volume at ChPT (in Mtpa) 2012 15.50 2017 22.77 2022 33.46 2027 49.16

Even if other ports attract some share of this traffic, it does not impact our strategic conclusion

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

Year 2006 -07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016 -17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27

Growth (in %) 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%

Demand Forecast ( in Mtpa) 10.55 11.39 12.31 13.29 14.35 15.50 16.74 18.08 19.53 21.09 22.78 24.60 26.57 28.69 30.99 33.47 36.14 39.04 42.16 45.53 49.17

Traffic Forecast (in Mtpa) 10.66 10.76 10.87 10.98 11.09 11.20 11.31 11.42 11.54 11.65 8.00 6.00 4.00 2.00 0.00

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

Table No- 2.4-12: Year-wise Targeted Traffic for POL

Year 2006 -07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016 -17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 D. Containers

Growth (in %) 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5

Demand Forecast ( in MT) 13.34 14.01 14.71 15.44 16.21 17.03 17.88 18.77 19.71 20.69 21.73 22.82 23.96 25.15 26.41 27.73 29.12 30.58 32.10 33.71 35.39

Traffic Forecast (in MT) 13.34 14.01 14.71 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 20.00 20.00 20.00 20.00 20.00 20.00

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

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

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Final Report Business Plan for Chennai Port Trust Table No- 2.4-14: Year-wise Targeted Traffic for Containers

Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27

Growth (%) 15 15 15 15 15 12 12 12 12 12 10 10 10 10 10 8 8 8 8 8

Demand Forecast ( in Mtpa) 18.40 21.16 24.33 27.98 32.18 36.04 40.37 45.21 50.64 56.72 62.39 68.63 75.49 83.04 91.34 98.65 106.54 115.06 124.27 134.21

Share for Tuticorin Port 3.94 4.54 5.22 6.00 6.36 6.36 6.36 6.36 6.36 6.36 6.36 6.36 6.36 6.36 6.36 6.36 6.36 6.36 6.36 6.36

Likely share for Ennore Port

Traffic Forecast (in Mtpa) 14.46 16.62 19.12 21.99 21.02 23.92 27.29 31.17 35.64 40.76 44.51 48.83 53.77 59.40 65.78 73.09 80.98 89.50 98.71 108.65

4.80 5.76 6.72 7.68 8.64 9.60 11.52 13.44 15.36 17.28 19.2 19.2 19.2 19.2 19.2 19.2

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

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Final Report Business Plan for Chennai Port Trust Table No- 2.4-16: Year-wise Targeted Traffic for Automobiles

Year 2005-06 2006 -07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016 -17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 F. For Passengers

Growth % 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12 12

Demand Forecast 102.7 115.0 128.8 144.3 161.6 180.9 202.7 227.0 254.2 284.8 318.9 357.2 400.0 448.1 501.9 562.0 629.5 705.1 789.7 884.4 990.6 1109.5

Traffic Forecast 102.7 115.0 128.8 144.3 161.6 180.9 202.7 227.0 254.2 284.8 318.9 357.2 400.0 448.1 501.9 562.0 629.5 700.0 700.0 700.0 700.0 700.0

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

Year 2005-06 2006 -07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Growth % 5% 5% 5% 5% 5% 5% 5% 5% 5%

Demand Forecast (in Nos) 96360 101178 106237 111549 117126 122982 129132 135588 142368

Traffic Forecast (in Nos) 96360 101178 106237 111549 117126 122982 129132 135588 142368

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2014-15 2015-16 2016 -17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 G. Abstract

5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%

149486 156960 164808 173049 181701 190786 200326 210342 220859 231902 243497 255672 268455

149486 156960 164808 173049 181701 190786 200326 210342 220859 231902 243497 255672 268455

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

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

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 o o o Ground Storage Area, Requirement of berth length, Hinterland connectivity, 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. No 1

Commodity Iron Ore

Berth Dedicated berth in Bharathi Dock Dedicated berths in Jawahar Dock

Storage facility Sufficient storage facility available for the projected traffic. Sufficient storage facility available for the projected traffic for only 1.43 MT Multi-level car parking facility recommended as a part of the Business Plan. None required Back up area on western side of Jawahar Dock (behind JD 1, 3 and 5) made available for general cargo. Proposals provided for reclamation of Boat Basin and Timber Pond for additional storage area

Connectivity Rail

2.

Coal

3.

Automobiles

4 5

POL General Cargo

Dedicated berth recommended on North Quay in Ambedkar dock Dedicated berth available Currently being handled at Ambedkar and Jawahar Dock. It is proposed to shift general cargo to Jawahar Dock to the extent of capacity of 3 berths

Rail for Thermal coal and Road for coking coal Road.

Pipeline Road / Rail

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

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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. No 1

Particulars 2007-12 Cargo volume to be handled (in Mtpa) Cargo volume to be handled (in Mteu) Total Storage area Requirement 21.02

Year 2012-17 40.76 2017-22 65.78 2022-27 108.65

2

1.31

2.55

4.11

6.79

3

48.66

94.34

152.27

251.50

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. No A B C

Particulars Storage area required Storage area available Storage area gap to be bridged

Year 2007-12 48.66 25.06 23.60 2012-17 94.34 25.06 69.28 2017-22 152.27 25.06 127.21 2022-27 251.50 25.06 226.44

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. No A

Particulars 2007-12 No. of Containers to be handled (in Mteu) 1.31

Year 2012-17 2.55 2017-22 4.11 2022-27 6.79

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B C D E

Total Storage area Requirement (ha) Storage area available (ha) Storage Area Gap to be Bridged (in ha)

48.66 25.06 23.60

94.34 25.06 69.28

152.27 25.06 127.21

251.50 25.06 226.44

Planned Projects and corresponding Backup Storage Area conversion Area to be developed is shown in Drawing-1

E1. Container Terminal-2 35.00 35.00 35.00 35.00

E2. Container Terminal-3 Area to be developed is shown in Drawing-2 E3. Container Terminal-4 Area to be developed is shown in Drawing-3 E4. Container Terminal-5 Area to be developed is shown in Drawing-3 F Total additional storage area possible to be developed (ha) Net deficit in storage area required which can not be bridged 0.00 0.00 18.82 18.82 0.00 0.00 29.67 29.67 0.00 24.87 24.87 24.87

35.00

59.87

108.36

108.36

G

-11.40

9.41

18.85

118.08

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 Sr. No 1 2 3 4 5 6 7 8 9 Year Particulars Cargo to be Handled (in Mtpa) Total No of Mteu No. of Vessels Average parcel size (approx teu's) Average length of berth required No. of days at berth per ship No of Berths required Total length of berths No of Berths of average 275.00 length 2006-07 16.00 1.00 592 1,700 200 1.4 2.8 564 2.1 20072012 21.02 1.31 900 1,500 200 1.6 4.7 944 3.4 20122017 40.76 2.55 1,350 1,900 250 1.7 7.8 1947 7.1 20172022 65.78 4.11 1,800 2,300 350 1.5 9.0 3150 11.5 20222027 108.65 6.79 2,525 2,700 350 1.5 12.6 4419 16.1

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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Final Report Business Plan for Chennai Port Trust Table No- 2.5-7: Bridging Gap for Requirement of Berths

Available/ Additional Berths Sr. No A A1 A2 B B1 Particulars No. of Berths Required Total length of berths required No. of Berths Required of average length 275.0 m No. of Berths Available Existing Container Terminal No. 1 having 4 berths of 200.00 m length each No of Berths of equivalent length of 275.00 m Total length of Berths required to be developed No of Berths of equivalent length of 275.00 m required to be developed 885 885 885 885 885 20072012 944 3.4 Year 201220172017 2022 1947 7.1 3150 11.5 20222027 4419 16.1

2006-07

564 2.1

B2 C. C1

3.22

3.22

3.22

3.22

3.22

No of Berths additionally required -320.63 58.80 1061.59 2265.00 3533.75

C2

-1.17

0.21

3.86

8.24

12.85

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 Terminal3. 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 Sr. No A A1 Particulars 20072012 Year 201220172017 2022 20222027

2006-07

Berths to be additionally provided Total length of Berths to be additionally -321 59 1062 2265 3534

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developed (in m) No of Berths of equivalent length of 275.00 m to be developed

A2

-1.17

0.21

3.86

8.24

12.85

B B1

Berths to be newly developed Container Terminal-2 Proposed Berth length 0.00 800.00 800.00 (in m) Proposed No. of 0.00 2.91 2.91 Berths Container Terminal-3 Proposed Berth length 0.00 0.00 655.00 (in m) Proposed No. of 0.00 0.00 2.38 Berths Container Terminal-4 Proposed Berth length 0.00 0.00 0.00 (in m) Proposed No. of 0.00 0.00 0.00 Berths Container Terminal-5 Proposed Berth length 0.00 0.00 0.00 (in m) Proposed No. of 0.00 0.00 0.00 Berths Total additional Berths possible to be developed Total proposed berth length (in m) Total no. of proposed berths (each 275 m) Net deficit in total length of Berth (in m) Net deficit in no of Berths 0.00 0.00 800.00 2.91 1455.00 5.29 800.00 2.91 800.00 2.91

B2

655.00 2.38

655.00 2.38

B3

360.00 1.31

360.00 1.31

B4

853.00 3.10

853.00 3.10

C C1 C2 D D1 D2

2668.00 9.70

2668.00 9.70

Net deficit in development of additional Berths -320.63 -1.17 -744.78 -2.70 -503.58 -1.43 -282.67 -1.47 848.29 3.15

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

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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 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Average Rail 8.10% 4.70% 5.60% 6.40% 5.80% 6.40% 6.20% IMPORT 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Average 7.30% 5.60% 5.50% 11.80% 5.90% 7.00% 7.20% 92.70% 94.40% 94.50% 88.20% 94.10% 93.00% 92.80% Road 91.90% 95.30% 94.40% 93.60% 94.20% 93.60% 93.80%

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Final Report Business Plan for Chennai Port Trust Table No- 2.5-10: Avg. Modal distribution for Import & Export of Containers

Rail Export Import Average 6.20% 7.20% 6.70%

Road 93.80% 92.80% 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 OffDock 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

Description For Coal Total coal transported using rails in 2005-06 (in MT) Quantity of Coal being transported in one wagon (in Tonnes) Therefore, total number of wagons being handled per annum to handle coal (in numbers) Number of wagons per rake (in numbers) Total number of rakes per annum for transporting coal (in numbers) Total number of rakes per annum for transporting container (in numbers) Quantity of containers per rake (in teu) Additional Quantity of containers, which can be handled (in teu)

Calculation of rail capacity which can be released

4,572,500 60 76,208 58 1,314 1,314 45

59,127

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For Iron Ore Total iron ore transported using rails in 2005-06 (in MT) Quantity of iron ore being transported in one wagon (in Tonnes) Therefore, total number of wagons being handled per annum to handle iron ore (in numbers) Number of wagons per rake (in numbers) Total number of rakes per annum for transporting iron ore (in numbers) Total number of rakes per annum for transporting container (in numbers) Quantity of containers per rake (in numbers) Quantity of containers, which can be handled by shifting iron ore (in teu) Phase-4 as shown in the Table No- 2.5-12.
Table No- 2.5-12: Calculation of increased rail capacity

8,949,394 60 149,157 58 2,572 2,572 45 115,725

These above additional capacities will increase the present rail capacity for containers in

Sr. No 1

2

3

4

Particulars No. of containers presently being handled by rail Additional capacity created by shifting Coal & Iron Ore Additional capacity created by developing an OffDock facility at Tondiarpet Housing Colony Total Nos. of containers which can be handled using rail links (in teu)

20052006 49,420

20072012 49,420

Year 20122017 49,420

20172022 49,420

20222027 49,420

0

0

0

174,852

144,000

144,000

144,000

144,000

193,420

193,420

193,420

318,852

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. 1 2 3 4 5

Phase 2005-2006 2017-2012 2012-2017 2017-2022 2022-2027

Rail mode 6.73% 11.98% 7.59% 4.70% 5.42%

Road mode 93.27% 88.02% 92.41% 95.30% 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

Sr. No 1 2 3 4

Particulars Total Number of Mteu to be handled % traffic to be transported by rail mode % traffic to be transported by road mode Traffic in Mteu to be handled by road per annum Traffic in teu to be handled by road per day (assuming 300 working days per annum) Traffic in teu to be handled by road per hour (assuming 18 working hours per day) Total no. of lanes for container movement No. of Trucks/ teu to be handled per lane/hour on the port gate No. of trucks which are to be handled at any gate with 4 lane (2 inbound + 2 out bound) Average no. of trucks which can be handled per lane No. of trucks which can be handled on any gate Net Deficit (9-11) in Nos

20072012 1.31 11.98 88.02 1.16 3855

Year 201220172017 2022 2.55 7.59 92.41 2.35 7846 4.11 4.70 95.30 3.92 13060

20222027 6.79 5.42 94.58 6.42 21408

5

214 8.0 27 107 50 200 -93

436 8.0 54 218 50 200 18

726 12* 60 242 60 240 2

1189 12* 99 396 60 240 156

6 7 8

9 10 11 12

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

Sr No 1 2 3

Particulars No. of Cars expected to be handled No. of cars transported in one trailer Total No. of trailers required for

20072012 202,696 6 33,783

Year 201220172017 2022 357,219 629,542 6 6 59,537 104,924

20222027 700,000 6 116,667

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4

5 6 7

transporting forecasted nos. of cars Total numbers of trailers to be handled by road per day (assuming 345 working days per annum) Number of trailers to be handled by road per hour (assuming 20 working hours per day) No. of dedicated lanes for car trailer movement No. of trucks to be handled per lane/hour at the port gate

98

173

304

338

5 1 5

9 1 9

15 1 15

17 1 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 8000 teu and above 6000 teu 4000 teu 2000 teu 1500 teu 1000 teu and below Total No. of container Vessels Average Parcel size in Teu Total No. of teu

2007-12 0 0 75 300 350 175 900 1800 1620000

2012-17 0 0 200 550 400 200 1350 2000 2700000

2017-22 0 50 350 750 500 150 1800 2300 4140000

2022-27 75 150 500 1200 500 100 2525 2700 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 o o o Capacity Capacity Capacity Capacity against against against against storage space= 3.60 Mteu berths requirements= 4.62 Mteu connectivity= 4.11 Mteu 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 Containers (in Mtpa) 2012 21.02 2017 40.76 2022 65.78 Restricted to 57.6 4.11 Restricted to 3.6 0.00 0 629.5 210,342 20.00 8.77 94.55 Restricted to 86.37 2027 108.65 Restricted to 57.6 6.79 Restricted to 3.6 0.00 0 700.0 268,455 20.00 8.77 137.42 Restricted to 86.37

1.31 Containers (in Mteu) Iron Ore (in Mtpa) Coal (in Mtpa) Automobiles (in ’000 Nos.) Passengers (in Nos.) POL (in Mtpa) General Cargo (in Mtpa) 11.08 1.43 202.7 129,132 15.00 15.76

2.55 11.65 0 357.2 164,808 15.00 8.77

TOTAL

64.29

76.18

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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 No2.6-1 below:
Table No- 2.6-1: Identified Development plans under Land Use Plan

Sr. No 1.

Land Use Plan (LUP) No. Attached Land Use Plan

Identified development plans

Phase

Period

Color shown in LUP

2.

3.

4.

5.

Container Terminal-2; broadly includes; - 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. Peripheral Road Development from Gate-1 to Gate-10 to Container Terminal-2 Conversion of a portion of Marshalling Yard into container storage cum railway yard Developing a Flyover on southern side of the port connecting container terminals to Gate no. 10 Creation of New Cruise Terminal clubbed with a multi level car parking facility Strengthening of berthing face at JD2, JD4 & JD6 to handle ships requiring depths of 14 m Developing a Off-Dock facility at Tondiarpet Housing Colony

Phase-1

20072012

=

6.

7.

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8.

Attached Land Use Plan

9.

10.

11. Attached Land Use Plan

12.

Development of Container Terminal-3; broadly 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. Conversion of a portion of Marshalling Yard into container storage yard Phased development of Fishing Harbour as container storage facility Development of Container Terminal-4; broadly includes; - Conversion of Iron Ore berths into container berths, - Conversion of back-up storage area for iron ore into container storage yard. 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

Phase-2

20122017

=

Phase-3

20172022

=

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13. 14.

15. Attached Land Use 16. Plan

Conversion of existing CFSs into container storage yard Phased development of Fishing Harbour as container storage facility Reclamation of Port Basin for container storage yard Reclaiming land near Gate no.1 to the north of Bharathi Dock adjacent to eastern breakwater.

Phase-4

20222027

=

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 o o Direct Import and export cargo potential without competition pressures No hinterland connectivity issues 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.

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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 esupport 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. No. 1.

Function HR

Organizational issues Ageing workforce, surplus labor, need for retaining existing and attracting new talent, and addressing employee related problems on

Organizational reforms required. Organizational reforms require a comprehensive look at current organizational structure & design, and structure of the current remuneration policies, The Organizational design also emphasizes on reduction in workforce

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remuneration and work conditions.

numbers and increased salary and 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 Processes and IT Support

Cumbersome business processes and procedures, reduced work efficiencies due to manual processes, and inadequate IT security and capabilities to manage IT Infrastructure.

Organizational reforms such as business process re-engineering, renewed focus on current Implementation of port automation software, Implementation of IT Security systems and enhancing the IT organization are some of the steps that can address these issues.

3.

Marketing

Lack of a market and customer driven approach and providing logistics services support.

Since marketing has never been a focus area for ChPT, 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 customer care, customer profiling & segmentation, and developing partnerships with key customers.

4.

Financial management

Issues in Financial management relate to high operational costs, and resultant perceived high tariffs.

Chennai Port would need tom identify and implement cost reduction measures to ensure that its operational costs are reduced. This will facilitate a 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 Dedicated facilities for handling all major cargo types Good multimodal connectivity First Mover advantage and an established base of customers Long term agreements with users like CPCL and Hyundai Best location on the East Coast for cruise operations in view of good air connectivity and proximity to cruise destinations like Bangkok/ Pattaya/ Singapore/Malaysia/ Indonesia / Andaman & Nicobar ISO 9001: 2000 compliant port ISPS Compliant port Good IT implementation, web enabled port-user interaction Good labour relations Uninterrupted pilotage operations Port trust has diverse representation of different interest groups Port’s own training institute Sufficient reserves & surplus Good traffic growth and revenues in recent years

Congested approach road Traffic evacuation not allowed during the day time Restricted land availability Higher tariffs for use of plants & equipments Sub-optimal usage of rail connectivity Exposure to dust & saline environment, requiring higher maintenance expense Perceived need for improvement in service levels to retain existing clients, avoid them being lost to other ports and for developing new ones Efficiencies lower and tariffs levels higher than those in international ports in the region like Singapore, Colombo, Hong Kong and Dubai Ageing workforce Need for additional environment / pollution management Surplus labour of about 600 in different departments Restriction on investment of surplus fund to government securities and nationalized banks fixed deposits High turnover among skilled staff in

•

• • • • • • • • •

•

• • • •

•

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Sufficient working capital to meet its current obligations
•

marine department like pilots and 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 Threats
•

• •

Opportunities
•

Positive economic environment in the years to come with an anticipated 7% GDP growth rate, stable inflation and foreign exchange rates and rising international trade Increasing containerisation and good forecasted demand with strong business potential Strong forecasted growth in automobile exports Increased ship sizes Increasing automation Possibility to tap other sources of revenue:
• • • •

Competition from major ports specially from Ennore and Tuticorin port Competition from minor ports mainly from Krishnapatnam Expected ban on export of minerals Loss of lucrative cargo like coal & iron ore Increase in awareness among common public about environmental issues There are too many gates providing access to port, increasing vulnerability and efforts to maintain security High possibility of reduction in government funding

• • • •

•

• • • •

•

Ship Repair facilities and services to Ship Owners 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-publicpartnerships 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 o o Preparing a list of ChPT’s Stakeholders Conducting interviews with Key Stakeholders 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,

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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 Rank 1 Rank 2 Rank 3 Rank 4 Rank 5

Strengths Monopoly because of geographical location Management Response Nothing Industrial growth in the port's vicinity 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 Rank 1 Rank 2 Rank 3 Rank 4 Rank 5

Weaknesses Road Connectivity / Traffic Congestion / Evacuation Problem Low Labour Productivity Land / Storage space constraints High service charges / Avoidable overheads 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

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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 Port Trustees Constraint imposed - Ensure adherence to provisions of Major Port Trusts Act, 1963 - Ensure fiscal and corporate governance - Maintain and raise profitability - Maintain and raise profitability - Ensure performance of duties by sub-ordinates - Personal and professional growth

Port Management Employees Shipping lines Stevedores, steamer agents, C&F agents, CHAs, CFS, ICD, Importers, Exporters Container Terminal Public Authorities Citizens, Environment Groups

-

Personal and professional growth Adequate Channel depth Minimum pre-berthing detention and turnaround time Lower Tariffs Lower Tariffs Efficient procedures Co-operative employee attitudes Efficient handling equipments and other infrastructural facilities Hinterland Connectivity Adequate Channel depth Adequate storage facilities and hinterland connectivity Adherence to Concession Contract terms Adherence to applicable Laws Contribution to economy (local and national) Pollution control Corporate Social Responsibility 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

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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
Statement To become the best among all ports in all aspects Our Remarks – Vague expression of Intent – Too wide a canvas to enthuse action – More like a mission than a vision – Does not enjoy a proper connect with the vision identified above − Duplication with the first statement − Emphasizes only one dimension of the overall vision Clear Forward Call to Unifying looking Action theme

X

√

X

X

Empower employees for shouldering higher responsibilities resulting in job enrichment and job satisfaction To become the best port in environmental management and in controlling pollution

√

√

X

X

√

√

√

X

Mission Statement:
Table No- 3.1-2: Evaluation of ChPT’s existing Mission Statement
Statement Strive to achieve excellence in port operations through dedicated, loyal and committed workforce to enhance customer satisfaction Strive for continual improvement at all levels by enhancing skills, knowledge and enthusiasm to meet the needs of the changing world Strive to achieve maximum value addition through the most effective use of resources Our Remarks – Why ‘Strive to?’ Mission is a call ‘TO DO’ – Duplication with vision statement – Why ‘Strive to?’ Mission is a call ‘TO DO’ – Vague expression of Intent – Why ‘Strive to?’ Mission is a call ‘TO DO’ – Vague expression of Intent Connect Specific with guide to Comprehensive Vision action

X

√

X

X

X

X

X

X

X

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 choices in the face of multiple alternatives, about making the right decisions. It is about identifying strategic options, and choosing and implementing them in a manner that leads to the achievement of the stated objectives within the planning horizon. It often involves sacrificing some immediate gain for a future long term advantage, something tangible for

Internal Analysis (SWOT Analysis, Stakeholder Analysis)
Insights

Key Uncertainties
Future Industry Scenarios

External Assessment (PESTLE Analysis, 5 Force Analysis, Traffic/Demand Analysis)

Pre-determined Forces

Business Strategy
Thrust Areas

Functional Strategy
Finance, IT, HR

IRR, NPV, Feasibiliy Business Plan Projected Financials

Projects & Action Plan

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 o critical uncertainties 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 number of variables to permute and combine. Hence from the list of Key Uncertainties we have picked up the top two uncertainties for the purpose of a scenario development: o Reduction in Iron Ore Export / Coal imports o Key Stakeholder support
Figure 3.2-2: Scenario Matrix
Restricted Iron Ore Exports Severe Restrictions Poor Key Stakeholder Support Good No Restrictions Scenario-2 Scenario-1

Scenario-3

Scenario-4

Combinations of these two Key uncertainties give rise to four probable scenarios as tabulated below: For developing forecasts, we have identified: o o Base Case Scenario – Most Likely Scenario 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 o Restricted iron ore exports 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 o There are no restrictions on iron ore exports 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

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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 o There are restrictions on iron ore exports 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-àvis 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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Final Report Business Plan for Chennai Port Trust Table No- 3.2-1: Business Segments vis-à-vis the Strategic Posture

Business Segment No.
15. 16.

Customer Shipping Lines Integrators/Port Logistic Service providers Shipping Lines Shipping Lines General Public General Public Public Sector Units Public Sector / Private Sector Units Integrators/Port Logistic Service providers Public Sector / Private Sector Units Integrators/Port Logistic Service providers Multinational National Companies Local Govt Organizations Other Ports

Service / Product Container Handling Container Handling Ship Repair Facilities Cruise Facility Cruise Facility Marina Facility Liquid Cargo (POL) Handling Bulk Cargo (Iron Ore) Handling Bulk Cargo (Iron Ore) Handling Bulk Cargo (Coal) Handling Bulk Cargo (Coal) Handling Automobile Handling Desalination facilities Engineering Consultancy services Break Bulk and Project Cargo Handling Break Bulk and Project Cargo Handling Marine Services Investment Providing BOT services

Strategic Posture Shape Adapt to Reserve the the the Right Future Future to Play √ √ √ √ √ √ √ √

17. 18. 19. 20. 21. 22.

23.

√

24.

√

25.

√

26.

√ √ √

27. 28.

Public Sector / Private Sector Units Integrators/Port 30. Logistic Service providers 29. 31. 32. 33.

√ √ √ √ √

Other Ports Acquisition of Minor Ports Other Ports

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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

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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

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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

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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 o o o Infrastructure Strategy Port Management Strategy Systems and Information Technology Strategy 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

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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 o Review and redesign of the Organization structure 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 Client Investment Projects and Public Investment Projects suggested by Deloitte Organizational improvement projects suggested by Deloitte Current Capital Works already sanctioned/planned by ChPT* Total
* Source: ChPT Mgmt/Appendix B of 2005-06 Administrative Report

Funds required (approx) INR 30,471 mn. INR 200 mn. INR 3,400 mn. INR 33,871 mn.

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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 o Financing Working Capital requirements 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

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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 Project SPVs Elevated Corridor and EMRIP Projects are road connectivity projects which, effectively, will be the lifeline of ChPT in the 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 Land Reclamation

ChPT due to capacity constraints. 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 connectivity projects

If apart from the above two connectivity projects, Rail 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 Projects

ChPT traffic ultimately depends on the economic 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. No 15.

Projects

Project Phase Phase-1

Phase Period 20072012

Motivation

Infrastructure Projects (Client Related) Development of Container Terminal-2; which would include; 1.5 Conversion of EQ & SQ3 berths into container berths, 1.6 Reclaiming land at the area north of sand screen, 1.7 Conversion of a portion of coal yard into container storage yard. 1.8 Conversion of a portion of Marshalling Yard into container storage cum railway yard This project is already underway during the preparation phase of this Business Plan. This container terminal project was conceived by the port 2-3 years back to augment its container handling capacity from the existing 0.8 Mteu to 1.7 Mteu. The project has already been awarded to a private container terminal operator recently on a BOT basis and a concession period of 30 years. The private operator is expected to commence operation at this terminal by the end of next two years. This terminal is situated in Dr Ambedkar Dock on the east quay. This shall provide additional berthing face of 880 m and storage facility of around 35 ha. This business plan covers the details of this container terminal in the proposed land use plan. The existing container terminal, presently being operated by CCTL,

16.

Peripheral Road Development from Gate-

Phase-1

20072012

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Sl. No

Projects 1 to Gate-10 to Container Terminal-2

Project Phase

Phase Period

Motivation 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.

17.

Developing a Flyover on southern side of the port connecting container terminals to Gate no. 10

Phase-1

20072012

As indicated in item-2 above, a new perimeter road connecting the eastside terminals to a new proposed 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. Export of cars has grown by manifolds in the last few years. Starting from a nil base, last three/ 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

18.

Creation of New Cruise Terminal clubbed with a multi level car parking facility

Phase-1

20072012

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Sl. No

Projects

Project Phase

Phase Period

Motivation 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. Average modal transportation by rail is observed to be only around 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

19.

Developing a Off-Dock facility at Tondiarpet Housing Colony

Phase-1

20072012

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Sl. No

Projects

Project Phase

Phase Period

Motivation 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 Container Terminal-3; which would include; 6.5 Conversion of JD2, JD4 & JD6 berths into container berths, 6.6 Conversion of balance portion of coal yard into container storage yard. 6.7 Strengthening of berthing face to handle ships requiring depths of 14 m 6.8 Conversion of a portion of Marshalling Yard into container storage yard

Phase-2

20122017

By the end of Phase-2, the targeted container volume at the port may go upto 1.6 Mteu. This volume shall be dealt with existing container terminal and second container terminal already in offing. Total area requirement to handle 1.6 Mteu is estimated to be around 60 ha which is expected to be fulfilled by 25 ha of existing area and additional 35 ha of second terminal in offing. It is expected that the targeted container volumes at port may reach 2.5 Mteu and first & second terminals would not be able to accommodate this additional volumes. This additional container volume of 0.9 Mteu shall require additional berthing 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. No

Projects

Project Phase

Phase Period

Motivation terminal is conceptualized by converting existing berths JD-2, JD4 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. The targeted cargo forecast indicates that the three terminals shall not be able to meet increasing requirements after Phase-2 i.e. year 2016-17. As presented in section 1.4 of this report, existing container terminal (CCTL) together with proposed container terminal -2 on east quay and container terminal-3 in Jawahar Dock shall be able to meet the terminal requirements upto 2.5 Mteu. But it is forecasted that by the end of Phase-3, total traffic requirement may go upto 4.1 Mteu. Total additional area requirement to handle this increased capacity of 1.7 Mteu is estimated to be around 58 ha. The berthing length which shall additionally be required to cater this increased container volume is around 1200 m. Understanding this need, another two container terminals are conceptualized by converting existing iron ore berth and west quay in Ambedkar Dock into container handling facilities as Container Terminal -4 & 5. The shift of iron ore facility is also envisaged due to likely depletion in present boom and possibility of a ban on iron ore export due to major thrust on requirement of iron ore for domestic steel plants. We also envisage the need of higher drafts in the Phase-3 as it is expected that ships requiring higher drafts in the range on 15-16 m may also arrive the port. As the present available draft in front of iron ore

21.

Development of Container Terminal-4; which would include; 21.1 Conversion of Iron Ore berths into container berths, 21.2 Conversion of back-up storage area for iron ore into container storage yard. 21.3 Conversion of existing CFSs into container storage yard Development of Container Terminal-5; broadly includes; 22.1 Conversion of WQ1, WQ 2, WQ 3, WQ 4 & CB berths into container berths, 22.2 Reclamation of a small amount of water front on west quay to create additional back-up land 22.3 Strengthening of berthing face to handle ships requiring depths of 14 m 22.4 Dismantling of warehouses and passenger terminal at west quay, Ambedkar Dock

Phase-3

20172022

22.

Phase-3

20172022

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Sl. No

Projects

Project Phase

Phase Period

Motivation berth is around 17.4 m, this shall be a perfect match to this future requirement.

23.

Reclamation of Timber pond as storage yard for General Cargo

Phase-4

20222027

With west quay in Ambedkar Dock proposed to be converted in to a 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. With west quay in Ambedkar Dock proposed to be converted in to a 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. The port trust has already proposed reclamation of approx 60 ha of land on eastern breakwater near fishing 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

24.

Reclamation of Port Basin for container storage yard

Phase-4

20222027

25.

Reclaiming land near Gate no.1 to the north of Bharathi Dock adjacent to eastern breakwater.

Phase-4

20222027

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Sl. No

Projects

Project Phase

Phase Period

Motivation 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 Improvement Project (EMRIP) Phase-1 20072012 In view of the improving the port’s connectivity on the Eastern 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: - 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 After assessing the connectivity of Chennai city with the status of Golden Quadrilateral and NS &EW corridor, we can reasonably consider that Chennai city is expected to have better connectivity to the National and

27.

Dedicated Elevated Corridor on NH-4 from Gate-10 at Port to Maduravoyal

Phase-1

20072012

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Projects

Project Phase

Phase Period

Motivation 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 facility at Tondiarpet Housing Colony to Port with Shuttle Railway.

Phase-1

20072012

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.

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Sl. No

Organization Improvement Related Projects Marketing Department Capacity Building Project

Motivation

Marketing Projects 15. Since marketing has never been a focus area for ChPT, 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 customer care, customer profiling & segmentation, and 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 will help identifying what other logistics services support could be provided and whether the Port can address its limitations of being a city based port and therefore restricted land availability. These projects are required to address specific organizational issues such as Cumbersome business processes and procedures, reduced work efficiencies due to manual processes, and inadequate IT security and capabilities to manage IT Infrastructure. A complete change over in terms of business process reengineering is required. There is a need for renewed focus on current Implementation of port automation software, Implementation of IT Security systems and enhancing the capabilities of the IT organization.

16.

Customer Relationship Management Project

17.

Market Offerings Expansion Project

Systems and IT projects 18. Restructuring of the IT Department Organization Process reengineering and Improvement Project Activity Based Costing

19.

20.

21.

Security Enhancement Projects

HR Projects 22. Organization Re-design and Right-sizing These projects address some of the critical 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 Organizational envisage a comprehensive look at 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

23.

Employee Upliftment Project

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24.

HR Process Improvement Project

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.

Port Development Projects 25. Identifying Cost Reduction Avenues and Implementing Cost Reduction Measures Efficiency Improvement Project Institutional Strengthening Project These projects address organizational issues in Financial management relate to high operational costs, and resultant perceived high tariffs. Some of these projects also address other concerns related to the lack of an internal audit function in the Port, the need to have a stronger stakeholder relationship management process and the need to have an appropriate communication framework with internal and external entities. 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 off a consulting entity in the port domain.

26.

27.

28.

Corporate Social 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 projectso o o o Construction of office complex for Container terminal services - completed Modernization and extension of Quay- completed Development of Open storage yard behind WQ berth Modification of iron ore Berth- completed

Wharves, Roads and Boundaries

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o

Ennore Manali Expressway

Floating Crafts o o Purchase of new FC Thangem Procurement of bullard pull tugs

Docks,Seawells, Piers Jetties & Navigational Aids o o o o Extension of SQ-III berths- completed Construction of naval berths- completed Deepening of Ambedkar Basin and Entrance channel- completed 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 o o Improvement of oil handling facilities at Bharathi dock Study on modernization of fire fighting system 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 o o

Installation of a Windmill operated power generator Construction of a Marina Annexing of the existing Fishing harbor after construction of a new fishing harbor

o o

Development of an EPZ near fishing harbor 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

o

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

o

Taking environment conservation related initiatives Taking Community welfare related initiatives Attract and retain clients through a powerful customer focused approach Know your customers Build Market Sensing Capabilities Collaborate with customers Provide Value added Services Be seen as employer of choice for upcoming talent Current Status and Need Analysis Enabling Best-in-class HR practices

o

-

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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/Subprojects

Foresee future trade requirements and provide required infrastructure facilities
Creating the Infrastructure for future trade + Augmenting Container handling capabilities by converting facilities being used by other cargo commodities in to container terminals + Development of Container Terminal-2 broadly includes- Conversion of EQ & SQ3 berths into container berths, - Reclaiming land at the area north of sand screen, - Conversion of a big portion of existing coal storage yard into container storage yard. + Development of Container Terminal-3 broadly includes- Conversion of JD2, JD4 & JD6 berths into container berths, - Strengthening of berthing face to handle ships requiring 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 + Ensuring Port Connectivity Ennore-Manali Road Improvement Project (EMRIP) + + + + + + + Shore protection work along the Ennore coast; Four laning of the Ennore Express way; Improving the Tiruvottiyur Ponneri Panjetti (TPP) Road; Improving of MORR and Inner ring road and Rehabilitation and Resettlement of Project affected families

Dedicated Elevated Corridor on NH-4 from Port to Maduravoyal Designating personnel to ensure quick completion of connectivity projects

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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 related initiatives + Corporate Social Responsibility Project + Developing an Environment Management Plan + Periodic assessment of Environment Impact of Chennai Port’s activities + Creation of Green area / belt inside the port premises Taking Social & Community welfare related initiative + Corporate Social Responsibility Project + Contribute certain portion of capital expenditure required to create a secondary care hospital + May contribute towards setting up of vocational training school for providing education to poor and 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 + Customer Relationship Management Project + Profiling and segmenting Customer portfolio + Implementing a Client Relation Management “CRM” Solution Institutional Strengthening Project + Stakeholder expectations management Introducing Best-InClass processes + Process Reengineering and Improvement Project + Reengineering Business Process + Implementing Full Scale ERP system Employing Activity Based Costing at the port Market Offering Expansion Project + Comparative Study of pricing / tariffs of international ports Identifying Cost Reduction Avenues & Implementing Cost Reduction Measures + Build Market Sensing Capabilities Market Department Capacity Building Project + Formulating a Marketing Plan + Restructuring the marketing cell + Developing a cell specifically for conducting Market Research + Collaborate with customers Customer Relationship Management Project + Developing partnership with the key customers Market Offering Expansion Project + Identifying Comprehensive Logistics Services for seamless service offerings to the customers Provide Value added Services + Customer Relationship Management Project + Port Community System Market Offering Expansion Project + Simplification and Realignment of current tariff structure + Study for identifying strategic investments / management of cargo handling in other Minor ports nearby.

+

+

Improved organizational capabilities + Security Enhancemant Project + Port Security System + IT Security System Restructuring of the IT Department/Organizatio n Organization redesign and right sizing through restructuring and reintroduction of VRS Market Department Capacity Building Project + Building an Engineering Research Cell Institutional Strengthening Project

+

+

+

+

+

+

+

+

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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 + Employee Upliftment Project + Carry out a need analysis of current and potential future employees + Enabling Best-in-class HR practices HR Process Improvement Project + HR Process optimization software + Establishing standard Performance Management System Employee Upliftment Project + Review and improvement of Promotion and Recruitment policies Organization redesign + Centralized HR Department To be recognized as a strong brand + Institutional Strengthening Project + Establish an appropriate interdepartment Communication Plan

+

+ Employee Initiative + Employee Upliftment Project + Periodically analyzing working climate at the port + Improving the facilities like drinking 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

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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 o Understand the decision making dynamics within the CHPT Ability to track and understand the changes to the business context and business content o o o Have a comprehensive understanding of the challenges faced by CHPT Willing to be ‘inclusive’ and at the same time ‘forceful’ / ‘persuasive’ 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 o Recruit skill sets required for the Cell and not available internally. 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 o Develop forms, tools and methods as necessary and to ensure consistency 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

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

Business Advisory Council

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 exofficio. The Cell may initially be constituted of a Chief supported by three Heads of the three technical areas namely: o o o Implementation Monitoring & MIS (IMM) Environmental Scanning & Research (ESR) 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 Reporting to Chief Of Corporate Planning (CCP) Chairman Department Reported by Corporate Planning Cell CHPT • Head IMM • Head ESR • Head ACS

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KRAs

• • • •

Responsibilities

•

•

• Qualifications & Skill Sets required •

• • • 2. For Head IMM Position Reporting to KRAs

To ensure that the Annual Business Planning requirements are fulfilled To drive the implementation of 20 year business plan 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 Would preferably a qualified management graduate with ‘Strategic Management’ as a specialization from a 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

Head IMM

Responsibilities

Qualifications & Skill Sets required

Corporate Planning Cell CHPT Chief Of Corporate Reported by • Executive Planning IMM • 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 • 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 • Should be a management graduate with around 8-10 years of middle management / hands on experience in Systems Implementation Department

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• • • 3. For Head ESR Position Reporting to KRAs

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

Responsibilities

Qualifications & Skill Sets required

Corporate Planning Cell CHPT Chief Of Corporate Reported by • Executive Planning ESR • 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 • 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 • Should be a Transport Economist with around 8-10 years of middle management / hands on experience in Market Research • Should have been exposed to Port & Shipping Sector • Should be good at number crunching and statistical analyses Department

Head ESR

4. For Head ACS Position Reporting to KRAs Corporate Planning Cell CHPT Chief Of Corporate Reported by • Executive Planning IMM • 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 Department Head ACS

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• •

Responsibilities

•

• • •

• •

Qualifications & Skill Sets required

•

• •

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 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 Should be a management graduate with around 8-10 years of middle management / hands on experience in 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 Reporting to KRAs Responsibilities Executive (IMM / Department Corporate Planning ESR / ACS) Cell CHPT Head (IMM / ESR / Reported by • Executive ACS) IMM • To assist the respective Head as required • 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 • Fresh MBA, Chartered Accountants, Economists • Excellent capabilities in spreadsheet applications including macro writing, presentation development, word documentation etc • Excellent English (written and spoken) skills

Qualifications & Skill Sets required

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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No. 1. 2. 3. 4.

Activity Maintain authorized documentation of the Long Term Plan & Vision Maintain authorized documentation of the 7 Year Action Plan Maintain documentation of the Annual Plan Obtain information and data on progress on implementation of the Annual Plan and the 7 year action plan Analyze the achievements – under / over along with the causes Study the deviations and perform root cause analysis Meet with concerned departments to understand their perspective on performance Review performance on a monthly basis, identify the bottlenecks and report Perform a SWOT analysis on a semi-annual basis and track perception of plan progress Communicate internally on the Plan Progress Undertake in-depth research on trends in the industry Track Competition and emergence of substitutes in the multimodal scenario Identify opportunities for business tie-ups, strategic alliances, buy-outs, sell-outs etc. Develop in-depth analyses of supply chains of key customers touching CHPT Analyze the key customer supply chains and locate opportunities for value addition / service cost efficiencies Participate in Conferences / Seminars and build knowledgebase on best practices Develop concise and relevant summaries of industry analysis & trends and circulate these to all concerned with Planning and decision making Participate in business planning discussions Consolidate data from departments and develop business estimates and forecasts bottom up Communicate basis for forecasting and moderation Moderate the numbers committed by the departments Undertake mid-term reviews of the progress along the annual business plan Till a more formalized MIS becomes available, collect manually data on plan achievement and generate decision support reports for executing and monitoring the plan

Section Responsible ACS ACS ACS IMM

When On going On going On going January

5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

IMM & ACS ACS IMM IMM / ACS IMM ACS ESR ESR ESR ESR ESR

January January On going Every Month Semi Annually On going On going On going On going On going On going

16. 17.

ESR ESR

On going ESR

18. 19. 20. 21. 22. 23.

IMM / ESR/ ACS ACS ACS ACS ACS / IMM IMM

February / March February February March October On going

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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-àvis 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 2007 Client Related Projects Client Related Projects 1 Developing Multilevel car parking facility clubbed with passenger cruise facility 1st Phase 2008 2009 2010 2011 2012 2nd Phase 2013 2014 2015 2016 2017 3rd Phase 2018 2019 2020 2021 2022 4th Phase 2023 2025 2026 2024

2

Development of Container Terminal-3

3

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

4

Construction of Container Terminal 5

5

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

Public Related Projects 1 2 Ennore-Manali Road Improvement Project (EMRIP) Dedicated Elevated Corridor on NH-4 from Port to Maduravoyal

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S. No.

Project Description 2007 Client Related Projects

1st Phase 2008 2009 2010 2011 2012

2nd Phase 2013 2014 2015 2016 2017

3rd Phase 2018 2019 2020 2021 2022

4th Phase 2023 2025 10-11 4 1 2 3 4 2026 2024

3

Connecting Off Dock facility at 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.
Sl. No. Project Description 1 Marketing related projects 1. Marketing Department Capacity Building Project 07-08 2 3 4 1 08-09 2 3 4 1 09-10 2 3

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. 7.

Activity Based Costing 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. INR 200 mn. INR 3,400 mn. INR 33,871 mn.

Client Investment Projects and Public Investment Projects suggested by Deloitte Organizational improvement projects suggested by Deloitte Current Capital Works planned by ChPT* 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 No

Year

Description

Client Related Investments Govt ChPT BOT
Support

1

200708

2

200708

3

200708 200708 200809 200809 200910 201011

4 5

Multilevel Car Parking and Cruise Terminal Dedicated Elevated Corridor – Madhuravoyal Ennore Manali Expressway Various Development of Container Terminal 2 Various Various

1,333

Public Related Investments Govt ChPT Support -

Organizational Improvement Projects -

-

200 200

-

-

38 -

-

-

508 NA 1,000 NA

11

6 7 8

576 678 Various 1,201 -

6 1 1

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9 10

201112 201213

Various 678 Converting Tondiarpet Housing colony into an Off-Dock container stacking facility Development of Container Terminal 3 Development of Container Terminal 5 Reclamation Iron Ore Berth Conversion 50 452 -

11

201718 201921 202122 202223

1,000 1,630 5,521 2,000 9,290

-

12

-

13 14

20 7,495

-

-

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

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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 Port Dues Other Dues Stevedoring Revenue Storage Wharf Handling

Sub - category

Projection Drivers - Category wise (i.e. port dues, storage etc.) average revenue per ton of relevant cargo ascertained from revenue data for past four years - Where the revenues are not being charged as per the tonnage, GRT of ships and number of ships calling ascertained - 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 + Share in revenue

- Cargo projected for existing container 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 income

Finance Income

- Revenue calculated based on past 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 & Pension Payments

- Contributions to retirement benefit 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 Running Costs

Sub - category Operating Expenses

Projection Drivers - The starting point for forecasting 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 overheads

- Trends in administrative costs in past 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 related, Finance expenses other than Interest

- Estate rental expenses as a percentage of rental revenues was identified and the same ratio was 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 Fixed Assets

Sub – category

Projection Driver - 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 on Investments

- The ratio of interest accrued to total 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 Advances

- Loans granted at present, their likely repayment and likelihood of new loans to be granted in the forecast period - This represents available liquid funds with ChPT after all expenses and 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.

Liquid means

Cash & Bank Balances

Investments

Equity

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

Reserves

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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 Reserve

- There are two statutory reserves to 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 Benefits related liabilities

- Provisions mostly consist of contributions to retirement benefit 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 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.

Short term Liabilities

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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 Capital Dredging Building, Sheds & Other Structures Wharves, Roads & Boundaries Floating Crafts Railway and Rolling Stock Docks, Seawalls, Piers & Navigational Aids Cranes & Vehicles Plant and Machinery Installation for Water, Electricity, Telecom Systems & Fire Fighting Oil Pipeline Installations Ore Handling Facilities Container Handling B Capital Work in Progress Capitalisation policy will be as follows: Capitalisation Policy Years over which capitalisation is spread 5 20 20 20 Useful Life 20 20 20 20 20 20 20 20 20

CWIP Addition of Sanctioned Projects (as per the capital works section of the administrative report for 2005-06) CWIP Addition of New Projects (proposed by Deloitte) Capitalisation of CWIP C -

1 1

The balance in the CWIP account as on 31.3.06 shall be capitalised in 2006-07. 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 Inflation rate for revenue Rate of Tax 4% 1% 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 General Insurance Fund Family Security Fund Loss in Wages Compensation Fund Employee Welfare Fund 37500000 in 2006-07 Increasing by 4% every year Reserve for Replacement, Rehabilitation, Modernization of Fixed Assets Reserve for Development, Repayment, Contingencies Expenses from Loss in Wages Compensation Fund will be as follows: 2007-08 to 2011-12 2012-13 to 2016-17 2017-18 to 2018-19 Rs. 500000 p.a. Rs. 1000000 p.a. Rs. 500000 p.a. 520000000 p.a. Not Applicable 520000000 p.a. Not Applicable ChPT Contribution (Rs) 10000000 p.a. 1800000 p.a. 100000 p.a. Employee contribution (Rs) Not Applicable 16 per employee p.m. 2 per employee p.m. Not Applicable

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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G -

Interest on the existing loan is assumed to be @ 11% No new loans assumed in the forecast period. 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 Gratuity Contribution Provident Fund Contribution 26.10 % of salary 3.01 % of salary 6.00 % of Basic Salary & DA

The new employees shall not be eligible for Pension & Gratuity. Miscellaneous Provisions

K L -

Miscellaneous provisions mostly consist of Salaries payable Provisions to be calculated at 10% of Salary 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 % Increase

2007 5

2008 to 2010 5

2011* 25

2012 to 2021 5

2022** 25

2023 to 2027 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 2016-17 2021-22 15% of employees at the beginning of the year 15% of employees at the beginning of the year 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 Dearness Allowance HRA Others Total Salary 100.00 48.00 30.00 5.00 183.00 % % % % %

-

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 Share %

Revenue per TEU*

Maximum Capacity (TEUs)**

Land Area (sq

Lease Rent#

Commencement of operations

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mtrs.) Terminal 1 Terminal 2 Terminal 3 Terminal 5 Terminal 4 (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. 37.32% 45% 17.50% 17.50% 20% 2700 2700 2700 2700 2700 1100000 900000 600000 900000 900000 250600 350000 248700 188200 296700 3800 3800 3800 3800 3800 Already commenced 2007-08 2017-18 2017-18 2022-23

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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.

S T -

Revenue per ton/per GRT assumed to increase by 1% p.a. Exchange rate used for conversion: 1 USD = Rs. 45 Running Costs Running costs have been projected based on past years' trends. Costs assumed to increase by 4% p.a. on account of inflation. 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 Assets Fixed Assets Current Assets Investments Liquid Means Total Assets Equity & Liabilities Equity Reserves Total Own Equity Provisions Long term loans Short term Liabilities Total Equity & Liabilities 6020 5316 21834 498 33668 7601 6451 21226 450 35728 Mar-09 7863 6483 23039 510 37896 Mar-10 8595 6569 24516 554 40235 Mar-11 8776 6983 27003 639 43401 Mar-12 8293 7120 29289 720 45423 Mar-13 7814 7269 32749 851 48684 Mar-17 5958 9097 49196 1497 65748 Mar-22 3878 12334 73640 2500 92352 Mar-27 2129 14241 109783 4077 130229

237 16290 16527 14561 186 2393 33668

237 17617 17854 15223 161 2489 35728

237 19031 19268 15905 136 2586 37896

237 20574 20812 16606 111 2705 40235

237 22519 22757 17448 86 3110 43401

237 24208 24445 18042 61 2875 45423

237 26338 26576 18817 36 3255 48684

237 37635 37872 21746 0 6129 65748

237 59360 59597 25052 0 7703 92352

237 93080 93317 27222 0 9690 130229

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Projected Profit & Loss Account (Rs. in millions)
Mar-07 Revenue Port Dues Other Dues Stevedoring Revenue Storage Wharf Handling Concession Fees Total Operating Revenue Expenses Salaries Social Charges & Pension Payments Running Costs Administrative Costs Other Costs Total Operating Costs Operational Net Earnings before Depreciation, Interest & Tax Depreciation Net Earnings before Interest & Tax Interest Income Interest Expense Net Earnings before Tax Tax Net Earnings APPROPRIATIONS Loan Repayments Contributions to Employee Welfare Schemes rehabilitation, modernisation of Fixed Assets Contribution to Reserve for Development, repayment of loans & contingencies Balance transferred to General Reserve 25 49 520 520 110 25 51 520 520 208 25 52 520 520 290 25 54 520 520 416 25 56 520 520 812 25 58 520 520 551 25 59 520 520 989 0 67 520 520 1993 0 79 520 520 3362 0 94 520 520 6777 1423 601 315 214 1278 1011 4842 Mar-08 1534 649 332 225 1340 1134 5213 Mar-09 1656 698 349 237 1406 1260 5607 Mar-10 Mar-11 Mar-12 Mar-13 Mar-17 Mar-22 Mar-27 1794 714 368 250 1469 1272 5867 1926 899 389 264 1533 2136 7147 1845 903 297 202 1292 2273 6811 1946 909 281 191 1257 2436 7020 2457 1017 299 204 1336 2779 8092 3245 1057 166 114 786 3386 8753 4248 1448 142 98 794 4052 10782

1727 502 561 421 0 3210

1778 515 617 463 108 3482

1828 529 680 511 58 3605

1876 542 741 555 10 3723

2288 659 845 643 10 4445

2078 1156 811 620 0 4666

2111 596 945 719 0 4371

1979 950 1263 955 0 5147

1989 764 1611 1216 0 5579

1022 190 2325 1743 0 5280

1632 297 1335 533 23 1845 621 1224

1731 392 1339 676 21 1995 672 1324

2001 416 1585 554 18 2122 714 1408

2143 469 1674 655 15 2314 779 1535

2702 498 2204 722 12 2914 981 1933

2145 483 1663 870 9 2523 849 1674

2650 479 2171 1021 7 3185 1072 2113

2945 452 2493 2180 0 4673 1573 3100

3174 417 2757 3998 0 6755 2274 4481

5501 304 5197 6728 0 11925 4014 7911

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Projected Cash Flow Statement (Rs. in millions)
Mar-07 Source of Funds Net Earnings Increase in Dedicated Reserves/Funds Depreciation Cash Flow Loans Total Source of funds Use of Funds Asset acquisition Investments Increase in Working Capital (see note 1) Repayment of Loans Total Use of Funds Balance Flow of Funds (see note 2) Liquid Means Opening Balance Liquid Means Closing Balance Increase / (Decrease) Liquid Means 1,175 692 297 2,164 2,164 Mar-08 1,273 717 392 2,381 2,381 Mar-09 1,355 741 416 2,512 2,512 Mar-10 1,481 764 469 2,714 2,714 Mar-11 1,877 909 498 3,284 3,284 Mar-12 1,616 666 483 2,765 2,765 Mar-13 2,054 852 479 3,385 3,385 Mar-17 3,033 670 452 4,154 4,154 Mar-22 4,402 757 417 5,575 5,575 Mar-27 7,817 443 304 8,565 8,565

508 1,827 (407) 25 1,953 211 287 498 211

1,973 77 355 25 2,429 (48) 498 450 (48)

678 675 1,073 25 2,452 60 450 510 60

1,201 598 845 25 2,670 44 510 554 44

678 891 1,604 25 3,199 85 554 639 85

761 1,899 25 2,684 81 639 720 81

1,106 2,122 25 3,254 131 720 851 131

904 3,139 0 4,042 112 1,337 1,449 112

20 1,404 3,932 5,355 220 2,291 2,496 205

2,071 6,125 8,196 369 3,700 4,068 369

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Detailed Outcome Analysis
Balance Sheet - Assets
Overview of Assets

120000 100000 Rs. in Millions 80000 60000 40000 20000 0 2007 2012 2017 Year
Fixed Assets Current Assets Investments Liquid Means

2022

2027

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 projections show an increase in the period of 2006-07 to 2010-11. These represent the capitalization of existing projects in pipeline and also the capitalization of the costs towards the Multilevel Car Parking. After 201011 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
Year Fixed Assets Rs in million 10000 8000 6000 4000 2000 0 2007 2012 2017 2022 2027 Overview of Fixed Assets

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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 & Advances, Stores, Debtors and Interest two steep rises in the adjacent graph represent the equity contribution to BOT operators amounting to Rs.1000 million in 2016-17 and Rs.2000 million in 2020-21. Other
Rs. in m illio n 16000 14000 12000 10000 8000 6000 4000 2007 2012 2017 Year Current Assets 2022 2027 Overview of Current Assets

Accrued income. The

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 constitute of more than 80% of the 2026-27 and consist of long term investments and fixed deposits. They increase from Rs.21,834 million in 2006-07 to Rs.1,09,783 million
Investments Rs. in million Overview of Investm ents

120000 100000 80000 60000 40000 20000 0
2007 2012 2017 Years 2022 2027

total assets as on

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 Re le vant Fund Balance s 100% %C position om 80% 60% 40% 20% 0% 2007 2012 2017 Ye ar General Reserve Pension Fund Provident Fund Gratuity Fund Other Funds 2022 2027

Liquid Means Liquid Means consist of mainly Bank Balances.
Rs. in million 5000 4000 3000 2000 1000 0 2007 2012 2017 Year Liquid Means 2022 2027 Overview of Liquid Means

These balances have been projected to show a steady increase over the projection period. These funds are stated to be used for 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 Rs. in Million 60000 50000 40000 30000 20000 10000 0 2007 2012 2017 Year Equity Reserves Provisions Long term loans Short term Liabilities 2022 2027

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 remains stagnant at Rs.237 million throughout the projection period. No contributions are expected to be made towards the equity of the port. This is because the port is expected to fund its requirments through a mix of internal sources and PPP.
Equity Rs. in million 250 Overview of Equity

200 2007 2012 2017 Years 2022 2027

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Reserves As mentioned earlier, reserves constitutes more total equity/ liabilities of the port by the end of the projection period. Substantial increase in the reserves can be observed on account of the significant rise in the revenue
% Composition % Composition of Reserves 100% 80% 60% 40% 20% 0% 2007 2012 2017 Year Capital Reserve Statutory Reserve Revenue Reserve 2022 2027
Reserves Rs. in million 100000 80000 60000 40000 20000 0 2007 2012 2017 Year 2022 2027 Overview of Reserves

than 70% of the

balances. Revenue Reserves increase from Rs.3,892 million in 2006-07 to Rs.55,146 million in 2026-27. This rise is attributable to the high amounts of 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 201516 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 consist of retirement benefits related liabilities and show an increase from Rs.14,561 million in 2006-07 to Rs.27,222 million in 2026-27. This is largely on account of the increase in the pension fund 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 projected for the port. Hence the current loan
Rs.in million Overview Long term loans

Overview of Provisions 30000 Rs. in million 25000 20000 15000 10000 2007 2012 2017 Year Provisions 2022 2027

250 200 150 100 50 0
2007 2012 2017 Year Long term loans 2022 2027

has been projected to be repaid by the year 2014-15. After that most projects have been envisaged to be undertaken on PPP basis, any equity contribution/ loans if 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 show a rising trend throughout the
Rs in million 12000 10000 8000 6000 4000 2000 0 2007 2012 2017 Year Short term Liabilities 2022 2027 Overview of Short term Liabilities

projection period with significantly steep rises in 2015-16 and 2020-21. This is on account of projected deposits expected to be received from BOT operators to the tune 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 Rs. in Million 10000 8000 6000 4000 2000 0 2007
Total Operating Revenue Operational Net Earnings before Depreciation, Interest & Tax Net Earnings

2012

2017 Year

2022
Total Operating Costs Net Earnings before Tax

2027

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

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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
% Com pos ition of Re ve nue 100% %C m o itio o ps n 80% 60% 40% 20% 0% 2007 2012 2017 Ye ar Port Dues Storage Other Dues Wharf Handling Stevedoring Revenue Concession Fees 2022 2027

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 show an increasing trend except in
Rs in million 4500 4000 3500 3000 2500 2000 1500 1000 2007 2012 2017 Year Port Dues 2022 2027 Ove rvie w of Port Due s

2011-12 and 202123 period. These reductions are on account of the decrease in the general cargo traffic in 2011-12 and the gradual reduction in 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
Rs in million 1600 1400 1200 1000 800 600 400 2007 2012 2017 Ye ar Other Dues 2022 2027

Dues, Other Dues too show a very high rising trend with substantial rises in 2010-11, 2017-18 and 2022-23. In

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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 largely dependant on the tonnage of iron,
Rs in million 500 400 300 200 100 0 2007 2012 2017 Year Stevedoring Revenue 2022 2027 Overview of Steve doring Reve nue

coal and general cargo. Since there is a substantial reduction of general cargo traffic in 2011-12 there is an evident reduction in this revenue. Also 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 Storage fees can be attributable to commodities like containers, iron ore and general cargo. Hence it shall also show the same trend as stevedoring revenue and the reasons for its reduction will remain the same as those explained in the above case.
Rs in million 300 250 200 150 100 50 2007 2012 2017 Ye ar Storage 2022 2027 Overview of Storage

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Final Report Business Plan for Chennai Port Trust

Wharf Handling Revenue Wharf Handling revenue show a largely decreasing trend. Significant fall can be seen in 2011-12. This is on account of the reduction in the general cargo traffic. A further reduction can be seen in the period of 20182022-23. This is on account of the phased reduction of the iron ore traffic. 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 substantial increase over the 20 year obvious considering the strategy of the port of conduct most of its projects on BOT basis, which leads to concession revenue in the form 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.
Rs in million 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2007 2012 2017 Year Concession Fees 2022 2027 Overview of Concession Fees
Rs in million 1600 1400 1200 1000 800 600 2007 2012 2017 Years Wharf Handling 2022 2027 Overview of Wharf Handling

period. This is

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Final Report Business Plan for Chennai Port Trust

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% % Com oposition 80% 60% 40% 20% 0% 2007 2012 2017 Year Salaries Running Costs Other Costs Social Charges & Pension Payments Administrative Costs 2022 2027

Salaries Although the salaries show an initially increasing trend, with the reduction of employees from 8510 in the beginning of 2007 to just 1316 at the end of the 20 year period, it is bound to show a significant reduction. The steep 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.
500 2007 2012 2017 Year Salaries 2022 2027 Rs in m illiion 2500 2000 1500 1000 Overview of Salaries

number of

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Final Report Business Plan for Chennai Port Trust

Social Charges and Pension Payments These expenses show a steady decrease on account of the contributions to the pension and gratuity fund, which in turn are linked with salary. However the significant increase in the 3 years is on account of the payment of the VRS compensations to the employees opting for the said scheme. Running Costs The running costs show an increasing trend throughout the projection period. Its contribution to the total operating expenses increases from 17% to 44% over the 20 years. This rise is mostly on account of the increase in the port 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.
Running Costs 500 2007 2012 2017 Year 2022 2027 Rs in million 2500 2000 1500 1000 Overview of Running Costs

Overview of Social Charges & Pension Paym ents 1400 1200 Rs in million 1000 800 600 400 200 0 2007 2012 2017 Year Social Charges & Pension Payments 2022 2027

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Final Report Business Plan for Chennai Port Trust

Administrative Costs The administrative costs show a very significant rise year period. This is obvious as with the increase operations of the project on BOT basis, there will be a corresponding effect on the increase
Rs in million 2000 1800 1600 1400 1200 1000 800 600 400 2007 2012 2017 Years Administrative Costs 2022 2027 Overview of Adm inistrative Costs

throughout the 20

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 towards the organizational improvements like
Rs in million 120 100 80 60 40 20 0 2007 2012 2017 Year Other Costs 2022 2027 Overview of Other Costs

Information Technology and Human Resource based projects. These are supposed to be one time improvement costs and are not expected to be incurred

repetitively over the forecast period.

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Final Report Business Plan for Chennai Port Trust

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 Ratio, it measures the extent to which the acquisition of assets has been financed by creditors. The ratio is calculated by dividing total Liabilities with Fixed + Current Assets. Given the steady rise in Assets esp. investments with no corresponding
0.5500 0.5000 0.4500 0.4000 0.3500 0.3000 0.2500 0.2000
07 08 13 14 15 19 20 21 26 20 09 10 11 16 17 18 22 23 12 24 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 25 20 27

Debt to Asset Ratio

Ye ar

debt/other liabilities, this ratio is seen to be steadily declining over the forecast period. Current Ratio Current Ratio determines the working capital position of a firm. In the earlier years, since ChPT is expected to have higher amount of stores etc. with no advances etc. received, Current Ratio is quite high. In the later years, however, current ratio had declined due to a dual effect of reduces stores (due to
0.5000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Year 1.0000 2.0000 2.5000 3.0000

Current Ratio

1.5000

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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Final Report Business Plan for Chennai Port Trust

Fixed Asset Utilisation Ratio Calculated by dividing total operating revenues by Fixed Assets in books, this ratio presents how well assets of an entity are being utilised. Given the fact that most of the operations are slated to be undertaken on a BOT with assets consequently being shown in the BOT operator’s accounts, the ratio shows a substantial rise in the forecast period. The total Asset utilisation ratio, however, shows a steady decline as investments accumulate over the forecast period and revenue, of course, does not rise in the same proportion. The occasional surge in the ratio is because of the fact that in these years, ChPT has been forecasted to
0.1700 0.1600 0.1500 0.1400 0.1300 0.1200 0.1100 0.1000 0.0900 0.0800 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 Year

Fixed Asset Utilization Ratio
5.0000 4.5000 4.0000 3.5000 3.0000 2.5000 2.0000 1.5000 1.0000 0.5000 0.0000
20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18 20 19 20 20 20 21 20 22 20 23 20 24 20 25 20 26 20 27

Year

Asset Utilization Ratio

provide equity/loan contributions to new BOT projects being constructed in these years. Return on Total Assets Return on Total Assets is derived by dividing Profit from Operations by average Total Assets during the year. While the graph shows fluctuations, on an overall basis, the returns has been between 4.5% to 6.5%. The drop in the years 2019 to 2022 is because in these years, the growth in revenue is expected to slow
4.50% 4.00%
07 08 09 10 11 12 13 21 22 19 20 23 24 14 15 16 17 18 25 26 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 27

Return on Total Assets
7.00%

6.50%

6.00%

5.50%

5.00%

Year

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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 that operations are being undertaken increasingly on a BOT Basis wherein revenue rise but there is no corresponding rise in expenses. The slight dip in margins in a few years is due to ex-gratia payments to 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 80.00%

Net Profit Margin

70.00%

60.00%

50.00%

40.00%

30.00%

Concession Fees as a percentage of Operating Revenue Concession fees as a percentage of Operating Revenues show a steep rise in those years where new BOT Projects are being commissioned i.e. in 200910, 2017-18 and 2022-23. In the years subsequent to these, however, the percentage declines as Marine Charges, Stevedoring charges other similar Ports dues are projected to rise at a comparatively higher rate than the rate at which revenues from concession fees is expected to rise in these years.
35.00% 30.00% 45.00% 40.00% 50.00%

Concession Fees as a % to Operating Revenue

25.00%

20.00%
07 11 12 13 17 18 19 20 24 25 26 20 08 14 09 10 15 16 21 22 20 20 20 20 20 20 20 20 20 20 20 23 20 20 20 20 20 20 20 20 20 27

Year

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Final Report Business Plan for Chennai Port Trust

Revenue per Employee Given the fact the employee strength is gradually expected to decrease with a rise in revenue, revenue per employee is expected to rise during the forecast period.
Rs. in Million 9.0000 8.0000 7.0000 6.0000 5.0000 4.0000 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

Revenue per Employee

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Business Plan for Chennai Port Trust Final Report (Annexure)

Above and beyond Creating a bright future

Contents
Annexure -1 Annexure -2 Annexure -3 Port layout Land Use Plan Detailed Project Sheets Planned Client Related Projects Planned Public Related Projects Planned Organization Improvement Related Project Alternative Scenario- Capacity Assessment against storage parameter Alternative Scenario- Iron Ore getting shifted to Ennore Port before

Annexure -4 Annexure -5

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------------- Annexure-1 Port Layout ------------(Attached as dwg file)

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----------- Annexure-2: Land Use Plans ---------(Attached as dwg file)

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------ Annexure-3: Detailed Project Sheets ------

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Detailed Project Sheets
Planned Client Related Projects
Project Title: Developing Multilevel car parking facility for Automobile Export together with passenger cruise facility Engineering Project Type Client Related

Project Owner: General and Technical Description

Multilevel car parking facility No. of cars exported from ChPT in last 5 years are: Year No of cars Growth % 20012002 4635 --20022003 8432 81.92 20032004 39868 372.82 20042005 83121 108.49 20052006 102692 23.55

Export of cars has grown by manifolds. Starting from a nil base, its surge during last three/ four years has been phenomenal. This is in addition to Cars in CKD (knocked down) that are moved in containers. The potential for further growth is enormous, with Hyundai and Ford on expansion spree using India / Chennai as the manufacturing hub. Further additional volumes can be expected from Toyota-Kirloskar, Ashok Leyland etc. Hyundai Motor India Limited (HMIL) aims to export 50 per cent of the cars manufactured in India. Currently one-third of the total production in India by HMIL is exported. HMIL's present capacity at its Chennai plant is 300,000 units per annum and the company is also setting up a second factory with an equal capacity, where mass production is slated to commence in mid-October next year. FORD too will change gear to export in larger numbers. A third autoplant of Malaysian connections is reported to be in the process of setting up. This sector demands clean friendly environment and will nudge out the dirty ones. As elucidate in demand forecast tables, car export is expected to with a growth rate of around 12%. Using this growth rate, annual automobile traffic for the next 10 years is projected (in numbers) as follows: Year Year Year Year Year 2006-07: 2007-08: 2008-09: 2009-10: 2010-11: 115015 128817 144275 161588 180978

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Year Year Year Year Year

2011-12: 2012-13: 2013-14: 2014-15: 2015-16:

202695 227019 254261 284772 318945

Above illustrated automobile volumes would demand a huge space for its safe and clean storage. In order to cater the increasing car volumes, vertical expansion of storage capacity is proposed as an apposite answer. The proposal of vertical expansion is conceptualized as Multi level parking facility. This is expected to provide sufficient storage space and would also be in conjunction with effective utilization of available land. In addition to above proposition, we also propose to clubb this multilevel car parking facility with passenger/ cruise terminal. This shall enable the Port to have both the facilities with available space. We propose to develop a cruise terminal building at ground floor with car parking facility on the floors above the ground level. The traffic forecast analysis indicates that the passenger traffic at the port is expected to grow at the rate of 5% and therefore estimated nos of passengers at the port is calculated as under: Growth Traffic Forecast Year % (in Nos) 2005-06 5% 96360 2006-07 5% 101178 2007-08 5% 106237 2008-09 5% 111549 2009-10 5% 117126 2010-11 5% 122982 2011-12 5% 129132 2012-13 5% 135588 2013-14 5% 142368 2014-15 5% 149486 2015-16 5% 156960 2016-17 5% 164808 2017-18 5% 173049 2018-19 5% 181701 2019-20 5% 190786 2020-21 5% 200326 2021-22 5% 210342 2022-23 5% 220859 2023-24 5% 231902 2024-25 5% 243497 2025-26 5% 255672 2026-27 5% 268455 2027-28 5% 281878 Multi level parking yard is proposed with the parking slots for around

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9000 cars. As per the present practice of parking the cars, ChPT has earmarked an area of around 47700 sqm only for automobile export. But as formulated in land use plan, this facility is proposed to be shifted to a new location near finger jetty on the North Quay in the Dr. Ambedkar Dock. At this new location, area earmarked as per the proposed land use plan is around 36000 sqm. This combined facility shall have a passenger cruise handling capacity of around 36000 sqm with Multi level stacking facility on further floors. This would be a 4 + storied structure with necessary provision of ramps and lifts. Expected Key Benefits 1. Improved utilization of land 2. Release of land for other revenue generating business segments 3. Capability to cater further growth in car exports by consuming less ground space. 4. Friendly and clean atmosphere for car exporters. Estimated Project INR 133.32 Cr. (approx) Cost Net Present Value 1. INR 41.54Cr. (NPV), 2. INR 24.79* Approximately 3. INR 52.14 Cr.** Payback Period 1. 9 years 2. 9 years * 3. 7 years **

1.0 years Project Implementation Period (approx.) Project Returns (IRR), 1. 15.31% 2. 14.08%* 3. 16.08%**

*- Sensitivity Analysis with 10% decrease in projected car export volumes and 10% decrease in tariff charged for parking the car at multi-level parking yard. Sensitivity Analysis with 10% decrease in passengers and 10% decrease in tariff charged for Cruise Terminal. **- Sensitivity Analysis with 5% increase in projected car export volumes and 5% increase in tariff for parking the car at multi-level parking yard. - Sensitivity Analysis with 5% increase in projected passenger and 5% increase in tariff for Cruise Terminal. Conclusion from Given the nature of operations and the IRR of the project and also in Financial view of the relatively limited funding requirements, it is recommended Feasibility that ChPT undertakes this project from its internal accruals. Need of Project Essential

Project Evaluation

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Yes Strategic Feasibility Whether the project is strategic fit in the overall strategy? Whether the project fits with policy guidelines of the central government? Whether the project will help in strengthening the customer base? Whether the project has a potential for private sector participation? Whether the project will be able to attract competent players for patronage? Whether the project requires any budgetary support? Does the project have any adverse environment impacts? If yes; explain. Whether the project will help in creating better public image of the Port? Whether the project will help in serving the customers better? Technical Feasibility Whether the project helps in efficiency improvement? Whether the project will help in improving employee morale? Whether the project helps in better environment management or addressing environmental issues? Whether the in-house skills available for the project? Whether the project can be outsourced or privatised for construction? Whether the Port has sufficient resources e.g. land, funds etc. available for the project? Financial Feasibility Whether the Port can raise debt for the project? Whether the project needs to be financed entirely by internal resources? Whether the project helps in reduction of operation cost? Whether the project helps in realization of growth in revenue? Whether the project itself will be able to serve the liabilities of loans? Project Implementation Schedule (2007-08 to 2026-27) √ NA √ √ √ √ √ √ √ √ √ √ √ √ √ √

No

√ √

√ √

07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

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Project Title: Project Owner: General and Technical Description

Development of Container Terminal-3 Management, Engineering Project Type Client Related

The present Container Terminal with a quay length 885m and backup area was privatized under concession agreement with M/s. Chennai Container Terminal Private Ltd. (CCTL), on BOT basis for 30 year period. CCTL was expected to handle minimum container cargo of 0.8 million TEUs as per the indicated traffic projection and it handled 0.73 million TEUs in the year 2005-06. Development of second container terminal has already been taken up with a view to cater to the growing demand of container traffic. This terminal is expected to handle maximum of 0.8 million TEUs p.a. at its peak operations. As outlined in the section 2.2 of this report, container handling is identified as the most important thrust area for ChPT. To achieve that objective, this project proposes converting the existing berths JD-2, JD-4 and JD-6 into a container terminal with a berthing length of 655 m. The berths are presently being used for handling Bulk, Break-bulk and General Cargo. The above facility is have an extended back up area of approximately 25 ha and is expected to handle a throughput of about 0.6 million TEUs per year. This proposed terminal would involve: - 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. - Strengthening of berths so that dredging can be done to handle ships with draft of 14 m - Conversion of a portion of Marshalling Yard into container storage yard - Conversion of a portion of Marshalling Yard into container storage cum railway yard The present draft is in the range of 10 to 11 m and will be deepened by dredging to –14m. The existing berths are proposed to be shifted eastwards by demolishing and the new container berths will have the width of 55 m in order to accommodate RMQCs. As the berths were constructed about 25 to 30 years ago and were not designed for moving cranes loads of modern RMQC, it would be necessary to assess the theoretical structural strength of the existing berths by detailed engineering and considering the reduction in the strength due to wearing can be estimated. In order to assess the present strength of concrete members, Nondestructive testing (NDT) would need to be carried out and

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accordingly the residual strength of these berths could be ascertained and the design of modified/wider berths could be finalized. While finalizing the design of new berths, provision would be made for possible future dredging to –16 m. For estimating purposes, the widening of the berths are considered to be in the form of a piled structure with RCC deck and suitable fender arrangement will be provided using cell dock fenders. Expected Key Benefits The existing container terminal and proposed second terminal may face saturation in the next 10 years because of growing demand and existing trade pattern. The container handling capacity of the ChPT can be increased through this project with supporting infrastructure like road/rail connectivity and back up space. 3.0 years Estimated Project Cost INR 815.17 Cr.

Project Implementation Period (approx.) Project Returns (IRR) for the BOT Operator,

1. 16.77% 2. 10.84%* 3. 19.84%**

Net Present Value (NPV) for the BOT Operator, Approximately

1. INR 11.6 Cr. 2. INR (75.12) Cr.* 3. INR 58.39 Cr.**

Payback Period for 1. 8 years the BOT Operator 2. 11 years* 3. 6 years** *- Sensitivity Analysis with 10% decrease in tonnage expected to be handled and 10% decrease in revenue per ton. **- Sensitivity Analysis with 5% increase in tonnage expected to be handled and 5% increase in revenue per ton. Conclusion from Financial Feasibility Need of Project Project Evaluation Yes Strategic Feasibility Whether the project is strategic fit in the overall strategy? Whether the project fits with policy guidelines of the central government? Whether the project will help in strengthening the customer base? Whether the project has a potential for private sector participation? √ √ √ √ No The Project appears to be financially feasible and should be taken up on a PPP Basis.

Essential

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Whether the project will be able to attract competent players? Whether the project requires any budgetary support? Does the project have any adverse environment impacts? If yes; explain. Is the project adding any competitive advantage? Whether the project will help in creating better public image of the Port? Whether the project will help in serving the customers better? Whether the project will help in improving employee morale? Technical Feasibility Whether the project helps in better environment management or addressing environmental issues? Whether the in-house skills available for the project? Whether the Port has sufficient resources e.g. land, funds etc. available for the project? Financial Feasibility Whether the Port can raise debt for the project? Whether the project helps in realization of growth in revenue? Whether the project itself will be able to serve the liabilities of loans? Project Implementation Schedule (2007-08 to 2026-27)

√ √ √ √ √ √ √

√ √ √

√ √ √

07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Project Title:

Converting existing Iron Ore Berth to a Container Terminal facility: Container Terminal-4 Management, Engineering Project Type Client Related

Project Owner: General and Technical Description

The targeted cargo forecast indicates that the three terminals will be just meeting the requirements till Phase-2. Therefore there is a need of additional terminals cater increasing containerized volumes. As illustrated in section 1.4 of this report, existing container terminal (CCTL) together with proposed container terminal -2 on East quay and container terminal-3 in Jawahar Dock shall be able to meet the terminal requirements upto 2.5 Million TEUs i.e. by the end of Phase-2. But it is forecasted that by the end of Phase-3, total capacity requirement may go upto 4.1 Million TEUs. In order to cater this increased requirement of 1.7 Million TEUs, Container terminal-4 is proposed by the way of converting the existing iron ore berth into container handling facility. The shift of Iron Ore

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facility is also envisaged due to likely depletion in present boom and possibility of a ban on iron ore export due to major thrust on requirement of iron ore for domestic steel plants. The existing iron ore berth is located in Bharathi Dock, north of existing Container Terminal No-1 i.e. CCTL. The length of the existing iron ore berth with minor extension northwards will be about 360 m. The present available draft in front of iron ore berth is around 17.4 m. As the draft is already 17.4 m and the structure has already been designed for such dredged depth, the assessment of the structure capacity of the iron ore berth is to be made only for the increased wheel load due to operations of RMQCs and the reduction in strength due to ageing. The iron ore berth would be widened to 55m by extension on either side of existing berth or only one side based on the strength of structural elements of RCC deck. It may be necessary to strengthen both pile foundations as well as RCC deck. Since the development is planned in the Phase-3, which will result in substantial reduction in strength, as it would have served for almost 35 to 40 years at the time of conversion. Therefore while estimating of project cost; the major component is considered requiring reconstruction instead of restorative repairs or upgrade. This project comprises of: - Conversion of Iron Ore berths into container berths, - Conversion of back-up storage area for iron ore into container storage yard. - Conversion of existing CFSs into container storage yard It is also proposed that existing CFSs, north of Bharthi Dock to be shifted outside the port premises and this whole area till upper revetment can be used as back-up storage area for this terminal. Expected Key Benefits 1. The existing container terminal and proposed another two terminals may face saturation by the end of Phase-2. The container handling capacity of the ChPT can be expanded through this project to cater increased container volumes and with the availability of 17.4 m draft, the main line vessels can be called at the ChPT. 2. The shifting of iron ore will result in cleaner environment and will considerably reduce dust and pollution, affecting the city population. 3.0 years Estimated Project Cost Approx. INR 749.47 Cr.

Project Implementation Period (approx.) Project Returns (IRR) for the BOT Operator,

1. 20.3% 2. 13.8%*

Net Present Value (NPV) for the BOT Operator, Approximately

1. INR 87.31 Cr. 2. INR (42.77) Cr.*

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3. 23.6%**

3. INR 157.49 Cr.** Payback Period for 1. 6 years 2. 10 years* the BOT Operator 3. 5 years**

*- Sensitivity Analysis with 10% decrease in tonnage expected to be handled and 10% decrease in revenue per ton. **- Sensitivity Analysis with 5% increase in tonnage expected to be handled and 5% increase in revenue per ton. Conclusion from Financial Feasibility Need of Project The Project appears to be financially feasible and should be taken up on a PPP Basis.

Essential

Project Evaluation Yes Strategic Feasibility Whether the project is strategic fit in the overall strategy? Whether the project fits with policy guidelines of the central government? Whether the project will help in strengthening the customer base? Whether the project has a potential for private sector participation? Whether the project will be able to attract competent players? Whether the project requires any budgetary support? Does the project have any adverse environment impacts? If yes; explain. Is the project adding any competitive advantage? Whether the project will help in creating better public image of the Port? Whether the project will help in serving the customers better? Whether the project will help in improving employee morale? Technical Feasibility Whether the project helps in better environment management or addressing environmental issues? Whether the in-house skills available for the project? Whether the Port has sufficient resources e.g. land, funds etc. available for the project? Financial Feasibility √ √ √ √ √ √ √ √ √ √ √ √ √ √ No

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Whether the Port can raise debt for the project? Whether the project helps in realization of growth in revenue? Whether the project itself will be able to serve the liabilities of loans? Project Implementation Schedule (2007-08 to 2026-27)

√ √ √

07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Project Title: Project Owner: General and Technical Description

Construction of Container Terminal 5 Management, Engineering Project Type Client Related

The total container cargo that is expected at Chennai port in the Phase-3 is 4.1 million teu With four terminals in operation; three till Phase-2 & one in Phase-3, there is a need of additional terminal facility to meet this demand. In order to cater this increased requirement of around 0.9 Million TEUs, Container terminal-5 is proposed by the way of converting berths WQ1, WQ 2, WQ 3, WQ 4 & CB in Dr. Ambedkar Dock into container terminal. This project comprises of: - Conversion of WQ1, WQ 2, WQ 3, WQ 4 & CB berths into container berths, - Reclamation of a small area in front of west quay to create additional back-up land - Strengthening of berthing face to handle ships requiring drafts of 14 m The berthing length available at this terminal is 853 m with draft varying from 11m to 12 m. It is observed that, back-up area can be a constraint for conversion of this quay at container berth. In order to deal with this deficiency, we propose to shift the berthing face eastward by reclaiming additional area in front of these West Quay berths of Ambedkar Dock. As also depicted in section 1.4 and 1.6 of this report, an area of around 18.82 ha can be provided at this location and this is expected to increase the overall throughput of the port by about 0.9 million TEUs.

Expected Key Benefits

The existing container terminal and newly proposed terminals may face saturation by phase-3. The container handling capacity of the ChPT can be increased and matched with increased demand of container volumes. 3.0 years Estimated Project Cost INR 1129 Cr.

Project Implementation

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Period (approx.) Project Returns (IRR) for the BOT Operator, 1. 16.3% 2. 10.7%* 3. 19.2%** Net Present Value (NPV) for the BOT Operator, Approximately 1. INR 8.41 Cr. 2. INR (125.62)Cr.* 3. INR 80.73 Cr.**

Payback Period for 1. 8 years the BOT Operator 2. 11 years* 3. 7years** *- Sensitivity Analysis with 10% decrease in tonnage expected to be handled and 10% decrease in revenue per ton. **- Sensitivity Analysis with 5% increase in tonnage expected to be handled and 5% increase in revenue per ton. Conclusion from Financial Feasibility Need of Project The Project appears to be financially feasible and should be taken up on a PPP Basis.

Essential

Project Evaluation Yes Strategic Feasibility Whether the project is strategic fit in the overall strategy? Whether the project fits with policy guidelines of the central government? Whether the project will help in strengthening the customer base? Whether the project has a potential for private sector participation? Whether the project will be able to attract competent players? Whether the project requires any budgetary support? Does the project have any adverse environment impacts? If yes; explain. Is the project adding any competitive advantage? Whether the project will help in creating better public image of the Port? Whether the project will help in serving the customers better? Whether the project will help in improving employee morale? Technical Feasibility Whether the project helps in better environment management or addressing environmental issues? √ √ √ √ √ √ √ √ √ √ √ √ No

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Whether the in-house skills available for the project? Whether the Port has sufficient resources e.g. land, funds etc. available for the project? Financial Feasibility Whether the Port can raise debt for the project? Whether the project helps in realization of growth in revenue? Whether the project itself be able to serve the liabilities of loans? Project Implementation Schedule (2007-08 to 2026-27)

√ √

√ √ √

07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Project Title:

Converting Tondiarpet Housing colony into an Off-Dock facility for containers Engineering Project Type Client Related

Project Owner:

General and Technical Description

Presented below is the statistics on share of transportation modes in the past for containers cargo volume i.e. Rail (RL) and Road (RD)
Year Mode Export: Container % Import: Container % 2000-01 RL 8 7 RD 92 93 2001-02 RL 5 6 RD 95 94 2002-03 RL 6 6 RD 94 94 2003-04 RL 6 12 RD 94 88 2004-05 RL 6 6 RD 94 94 2005-06 RL 6 7 RD 94 93

Average modal transportation by rail is observed to be only around 6.2% for exports and 7.3 % for imports. 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. Though ChPT is connected to its hinterland both by rail and road, there is an immediate need of upgrading the external connectivity to the national highways and the Indian railway network to be able to cope with the future projected traffic volumes. The proposed Off-Dock facility with around 9 ha land at the Tondiarpet Housing Colony (THC) is situated on the eastern side of VOC Nagar railway station. It is an added advantage that the location for the proposed Off-Dock facility is adjacent to the

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southern railway main line running between Korrukupet and Attipattu, which makes it possible to develop the railway line inside the land earmarked for this facility. It is proposed to provide the connectivity from VOC railway station. It is envisaged that ChPT could implement a shuttle railway that could quickly and efficiently move container wagons to this offdock inter-modal container yard located at around 5 km from the Port.

Expected Key Benefits

Potentail improvement in vessel turnaround time. A considerable reduction in terms of likley load on roads Decongest the port area Facilitate ChPT in providing customer friendly logistics solutions 5. Competitive advantage in terms of providing fast evacuation using modern shuttle railway. 1 year Estimated Project Cost INR 49.15 Cr.

1. 2. 3. 4.

Project Implementation Period (approx.)

Project Returns (IRR) for the BOT Operator,

1. 17.4% 2. 11.4%* 3. 20.6%**

Net Present 1. INR 2.43 Cr. Value 2. INR (7.67) Cr.* (NPV) for the BOT 3. INR 7.87 Cr** Operator, Approximat ely 1. 9 years 2. 11 years* 3. 8 years**

Payback Period for the BOT Operator

*- Sensitivity Analysis with 10% decrease in cargo volume to be handled and 10% decrease in revenue per TEU. **- Sensitivity Analysis with 5% increase in cargo volume to be handled and 5% increase in revenue per TEU. Conclusion from Financial Feasibility Need of Project The Project appears to be financially feasible and should be taken up on a PPP Basis.

Essential

Project Evaluation

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Yes

No

Strategic Feasibility Whether the project is strategic fit in the overall strategy? Whether the project fits with policy guidelines of the central government? Whether the project will help in diversifying the customer base? Whether the project has a potential for private sector participation? Whether the project will be able to attract competent players? Whether the project requires any budgetary support? Does the project have any adverse environment impacts? If yes; explain. Is the project adding any competitive advantage? Whether the project will help in creating better public image of the Port? Whether the project will help in serving the customers better? Whether the project will help in improving employee morale? Technical Feasibility Whether the project helps in efficiency improvement? Whether the project helps in better environment management or addressing environmental issues? Whether the department has the skills to construct and operate the project? Whether the project can be outsourced or privatised for construction? Whether the Port has sufficient resources e.g. land, funds etc. available for the project? Financial Feasibility Whether the Port can raise debt for the project? Whether the project needs to be financed entirely by internal resources? Whether the project helps in reduction of operation cost? Whether the project helps in realization of growth in revenue? √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √ √

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Whether the project itself be able to serve the liabilities of loans?

√

Project Implementation Schedule (2007-08 to 2026-27) 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

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Planned Public Related Projects
Project Title: Project Owner: 1. Ennore-Manali Road Improvement Project (EMRIP) Engineering Department Project Type Client Related/Pubic Investment/Organization Improvement

General and Technical Description (details attached)

In view of the increasing traffic at the Port, improvement and strengthening of major road network in Ennore and Manali area is proposed to provide much desired connectivity to the Port from the existing national highways and in order to provide a face–lift to the approach roads to the Port. The Ennore-Manali Road improvement project will consist of the following components: - Shore protection work along the Ennore coast; - Four laning of the Ennore Express way; - Improving the Tiruvottiyur Ponneri Panjetti (TPP) Road; - Improving of MORR and Inner ring road and - Rehabilitation and Resettlement of Project affected families. Manali Oil Refinery road gives access to many major industries and also connectivity between ChPT and Ennore Port. It also connects to Ennore Thermal Power Plant and North Chennai Thermal Power Plant (NCTPP) and other major industries and also to the northern segment of Inner Ring Road (IRR). This road takes off (km 0/000) from Ennore Expressway and ends at TPP Road junction at Km 4/600 near Madras Fertilizers Limited. Total length of this road is about 5.6km long. The northern segment of IRR gives access to many major industries and also connectivity between Chennai and Ennore Ports to all National Highways. It also connects Ennore Thermal Power Plant, North Chennai Thermal Power Plant, other major industries and also the Manali Oil Refinery road to NH network. The project road starts at the junction of Inner Ring Road (Km 17/5) and National Highway No.5 (Km 11/5) near Moolakadai and ends at the junction of Inner Ring Road (Km 25/0) with TPP road at Km 4/800 near MFL. The project details improvement of the 7.5 km long northern segment. Presently the to and fro traffic from the Ennore Expressway to Gate No.1 of ChPT flow is through the entry to the fisheries harbor which is very narrow and creates traffic hold up causing much inconvenience. The road passing through the fishing harbor would also be upgraded under the project. Government had approved participation of ChPT in the Special Purposed Vehicle comprising ChPT, National Highways Authority of India (NHAI) and Government of Tamil Nadu ChPT would be required to contribute Rs.72 crores as equity contribution to the total cost of the Project. ChPT has so far paid Rs.23 crores for the above project. On the Rs 309-crore Chennai-Ennore Port Road Connectivity project,

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shore protection work has been completed and about 80,000 sqm of land has been reclaimed along the Ennore coast, which was in the past affected by sea erosion. Work on 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. Expected Key Benefits Project Implementation Period (approx.) 1. Improved connectivity between ChPT and NH-4 & NH-5 2. Efficient movement of road-borne cargo traffic 2.0 years Estimated Project Cost (details attached) Essential / Desirable Total Cost: INR 309 Cr. Internal Resources: INR 72 Cr.

Need of Project Project Evaluation

Yes Strategic Feasibility Whether the project is strategic fit in the overall strategy? Whether the project fits with policy guidelines of the central government? Whether the project will help in diversifying the customer base? Whether the project has a potential for private sector participation? Whether the project will be able to attract competent players? Whether the project requires any budgetary support? Does the project have any adverse environment impacts? If yes; explain. Is the project adding any competitive advantage? Whether the project will help in creating better public image of the Port? Whether the project will help in serving the customers better? Whether the project will help in improving employee morale? Technical Feasibility Whether the project helps in efficiency improvement? Whether the project helps in better environment management or addressing environmental issues? Whether the department has the skills to construct and operate the project? Whether the Port has sufficient resources e.g. land, funds etc. available for the project? Financial Feasibility √ √ √ √ √ √ √ √ √ √ √ √ √

No

√

√

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Whether the Port can raise debt for the project? Whether the project helps in reduction of operation cost? Whether the project helps in realization of growth in revenue? Whether the project itself be able to serve the liabilities of loans? Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

√ √ √ √

2013-14

Project Title: Project Owner:

2. Dedicated Elevated Corridor on NH-4 from Port to Maduravoyal Engineering Department Project Type Client Related/Pubic Investment/Organization Improvement

General and Technical Description (details attached)

Even after implementation of EMRIP, it is observed that there would be congestion in the Northern corridor due to absence of dedicated link between Maduravoyal and Gate No. 10 of ChPT. The cargo needs to take a detour of almost 30 km, which due to congestion in Northern corridor may increase to 60 km. To avoid this, it is already suggested that a dedicated elevated Expressway be constructed. To expedite the movement of cargo from and to the ChPT, a scheme for providing a dedicated elevated expressway from the southern gate i.e. Gate No. 10 of ChPT to Maduravoyal leading to the NH-4 was formulated at an estimated cost of Rs. 750 cr. This corridor is planned as a four-lane corridor along the Poonamallee High Road. After examining various alternatives, the proposal for a four-lane corridor along Poonamalee High Road has been recommended.

Expected Key Benefits Project Implementation Period (approx.)

1. Improved linkage between ChPT and Maduravoyal 2. Efficient movement of road-borne cargo traffic 2.0 years Estimated Project Cost (details attached) Essential / Desirable Total Cost: INR 750 Cr. (earlier INR 400 Cr.) Internal Resources: Still to be finalized (earlier INR 200 Cr.)

Need of Project Project Evaluation

Yes Strategic Feasibility Whether the project is strategic fit in the overall strategy? Whether the project fits with policy guidelines of the central government? Whether the project will help in diversifying the customer base? √ √ √

No

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Whether the project has a potential for private sector participation? Whether the project will be able to attract competent players? Whether the project requires any budgetary support? Does the project have any adverse environment impacts? If yes; explain. Is the project adding any competitive advantage? Whether the project will help in creating better public image of the Port? Whether the project will help in serving the customers better? Whether the project will help in improving employee morale? Technical Feasibility Whether the project helps in efficiency improvement? Whether the project helps in better environment management or addressing environmental issues? Whether the department has the skills to construct and operate the project? Whether the Port has sufficient resources e.g. land, funds etc. available for the project? Financial Feasibility Whether the Port can raise debt for the project? Whether the project helps in reduction of operation cost? Whether the project helps in realization of growth in revenue? Whether the project itself be able to serve the liabilities of loans? Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

√ √ √ √ √ √ √ √

√ √ √ √

√ √ √ √

2013-14

Project Title: Project Owner:

3. Connecting Off Dock facility at Tondiarpet Housing Colony to Port with Shuttle Railway Engineering Department Project Type Client Related/Pubic Investment/Organization Improvement

General and Technical Description (details attached)

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 20 kilometers from the Port.

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The shuttle railway would use modern container wagons and depending on distance and train speed would shuttle between the offdock inter-modal container yard and the port on a 24/7 basis. Railmounted gantry (RMG) cranes would be used at ChPT and the off-dock terminal to efficiently handle the containers. A large number of trucks would save time and money by using the off-dock container terminal, consequently potential future truck traffic within the Port and through the City could be reduced substantially. The proposed new inter-modal railway yard would allow all terminals to receive containers via the railway system. 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. 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" bonded area 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. Concept for Shuttle Railway: The main purpose of a railway shuttle system is to better utilize valuable ports lands by minimizing the need to store containers for long periods and to reduce future truck congestion within and around the Port. Other objectives are to increase the utilization, productivity and profitability of the truck transport fleet and to reduce the overall cost of importing and exporting goods through the port. The proposed Container Shuttle Railway System is designed to quickly transport import marine containers “in bond” to an off-dock intermodal terminal located close to the Port. Expected Key Benefits i) ii) iii) iv) v) Improved linkage between ChPT and Tondiarpet Housing Colony Fast evacuation of containers from port Considerable modal transport share by rail Decreased load on roads Efficient movement of rail-borne cargo traffic

Need of Project Project Evaluation

Essential / Desirable

Yes Strategic Feasibility Whether the project is strategic fit in the overall strategy? √

No

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Whether the project fits with policy guidelines of the central government? Whether the project will help in diversifying the customer base? Whether the project has a potential for private sector participation? Whether the project will be able to attract competent players? Whether the project requires any budgetary support? Does the project have any adverse environment impacts? If yes; explain. Is the project adding any competitive advantage? Whether the project will help in creating better public image of the Port? Whether the project will help in serving the customers better? Technical Feasibility Whether the project helps in efficiency improvement? Whether the project helps in better environment management or addressing environmental issues? Whether the department has the skills to construct and operate the project? Whether the Port has sufficient resources e.g. land, funds etc. available for the project? Financial Feasibility Whether the Port can raise debt for the project? Whether the project helps in reduction of operation cost? Whether the project helps in realization of growth in revenue? Whether the project itself be able to serve the liabilities of loans? Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

√ √ √ √ √ √ √ √ √

√ √ √ √

√ √ √ √

2013-14

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Planned Organization Improvement Related Projects
The above projects have been broadly categorized below:

Marketing Projects:
The marketing related projects are as explained below: A) Marketing Department Capacity Building Project: This includes following sub-projects: 1. Formulating a Marketing Plan 2. Restructuring the Marketing Cell 3. Developing a Market Research Cell The marketing Department Capacity Building projects would help in strengthening the Marketing Department of ChPT and assist it to address the concerns and issues of their target customers in a planned manner. A properly structured marketing plan can yield numerous benefit s to the organization. It further would help in attracting & retaining customers and ensuring their total satisfaction. A restructured and modern marketing cell alongwith a market research cell would enable ChPT to identify the industry & market trends and upcoming opportunities.. This would ensure attainment of the main objectives of the organization. Each of the projects explained below list down the motivation behind undertaking such projects and gives a glimpse of the key benefits the organization would yield by undertaking them. It An unambiguous marketing plan following the business plan would help in achieving the objectives of the business plan in a systematic, scientific and planned manner.

Sub-Project Name: Sub Project Owner:

Formulating a Marketing Plan

Traffic Department

Sub Project Duration:

3 months

General Description The Marketing strategy requires ChPT to develop a detailed marketing Plan that addresses all the target customer segments in a planned manner. A marketing plan follows an overall business plan. Solid background through customer segmentation and identification of key business segments is the foundation of a well-written marketing plan. Key target segments would be spelled out in the Business Plan and marketing Plan would contain strategies and a list of actions to address these key segments. Sub Project Description: A Marketing Plan is a written document that details the Strategy and actions necessary to achieve a specified marketing objective(s). It can cover one year (referred to as an annual marketing plan), or cover up to 5 years. A formal, written marketing plan is essential; in that it provides an unambiguous reference point for marketing activities throughout the planning period. The Plan would

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contain actions points covering the following areas: 1. Pricing (Tariff) Strategy 2. Promotion Strategy 3. Implementation requirements – Personnel, Finance, MIS Performance measurement criteria (sales, market share, revenue etc.) Key Benefits expected from the Sub Project: A properly structured marketing Plan can yield the following benefits: 1. Decision on whether to consolidate or outsource certain services and support operations 2. Improve workforce planning 3. Increase emphasis on designing for service efficiency and self-service 4. Improve management of partner relationships 5. Improve partnership and collaboration skills of staff 6. Identify new service offerings 7. Identify incentive structures for service development and innovation 8. Implement pricing and affinity programs based on volume and breadth 9. Improve retention and win-back processes 10. Target new geographies 11. Target new segments within current geographies Costs of Implementation Whereas this project can be internally carried out by ChPT Traffic department, they would require external assistance in validating the marketing plan from repute marketing consultants. The costs of such external assistance in validating the marketing plan is estimated at Rs. 0.3 million. Sub Project Dependencies: Customer Segmentation Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub-Project Name: Sub Project Owner:

Restructuring the Marketing Cell

Traffic Department

Sub Project Duration:

Three months

General Description Chennai Port does have a marketing cell. The department is an extension of the

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Traffic department and has limited tools and resources to carry out the marketing function as would be required in the years to come given the competitive scenario. In order to implement the Marketing strategy and marketing plan, there is a need to restructure this cell in terms of strengthening with more resources and skill sets. Sub Project Description: The Project would involve the following activities: 1. Deciding the roles and responsibilities the Cell. 2. Identify the reporting relationships of personnel within the Cell. 3. Train personnel in marketing concepts and marketing tools and techniques 4. Recruit personnel specialized in marketing (if need be) 5. Plan infrastructure requirements and acquire infrastructure like computers, software tools etc. Key Benefits expected from the Sub Project: Given the objective of attracting and retaining customers and ensure Total Customer Satisfaction, a skilled Marketing Cell would be crucial to ensuring attainment of the objective. Benefits expected would be as follows: 1. Implementation of a formal Marketing Plan 2. Introducing improved methods and tools for managing innovation performance 3. Proactive management of transition points (life events, ends of contracts and leases, etc.) 4. Improved tracking of customer interactions (purchases, support requests, etc.) 5. Improved responsiveness to customer requests and inquiries 6. Improved brand strength and good will 7. Improved identification of valuable customer relationships 8. Solicitation and response to customer feedback Costs of Implementation Cost details provided in the next project in conjunction with the project on “Developing a market research cell” Sub Project Dependencies: Customer Segmentation Formulating a Marketing Plan Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

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Sub-Project Name: Sub Project Owner:

Developing a Market Research Cell

Traffic Department

Sub Project Duration:

Six months

General Description: Given the nature of market, it makes sense to have a separate Market Research Cell within the Port to track and identify changes in the market place BEFORE these happen so that the Port can prepare itself for the changes. This Cell can be an extension of the Marketing Cell itself. Chennai Port has adopted the posture of shaping the future in three business segment groups i.e. container handling, automobiles, and cruise operations. The posture requires ChPT to anticipate the future trends and take proactive steps in taking a leadership role in the segment. This cell can keep a track of the activities of the competing ports with and take inform the various authorities about the latest development in the port sector. Sub Project Description: The Project would involve the following activities: 1. Deciding the roles and responsibilities the Cell. 2. Identify the reporting relationships of personnel within the Cell. 3. Train personnel in market research tools and techniques 4. Train personnel in competitor intelligence techniques 5. Recruit personnel specialized in market research (if need be) 6. Plan infrastructure requirements and acquire infrastructure like computers, software tools etc. Key Benefits expected from the Sub Project: Given the objective of attracting and retaining customers and ensure Total Customer Satisfaction, a skilled market research Cell would help Chennai port achieve the following: 1. 2. 3. 4. 5. 6. Improve identification and prediction of industry and market trends Improve R&D capabilities in marketing domain Maintain competitive functionality and value Improve identification of valuable customer relationships Target new geographies Target new segments within current geographies

Costs of Implementation This project will be executed internally by ChPT along with the previous project on restructuring of the marketing cell. For both these projects, The Port will require external assistance in training of marketing personnel which is estimated to cost approximately Rs. 0.5 million. In addition it is estimated that the marketing cell will require computers and other office infrastructure which is expected to cost Rs. 2.5

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million. Sub Project Dependencies: Customer Segmentation Formulating a Marketing Plan Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

B) Customer Relationship Management Project . This includes the following sub projects: 1. 2. 3. 4. Customer profiling and Segmentation Implementing a CRM Solution Developing Partnerships with Key Customers Port Community System

Customer being the backbone of any organization requires strategic management inputs and strategic approach. The Customer Relationship Management Projects would help in identifying various segments of the customers and the revenue generated by them. Customized solution provided on the basis of such segmentation would increase customer satisfaction. Specific marketing plans targeting specific segment of customers help in achieving the planned objectives in a better way Implementation of CRM solution would provide system support to the implementation of the marketing strategy. A focused approach, in identifying a specific segment of customer’s problems, and providing them with a solution would highly increase their satisfaction. Such a strategy would help in increasing potential customers and retaining existing customers. Business objectives can be effectively achieved by considering the customer as a partner in the process of development. This refers to developing a mutually beneficial relationship with the key customers. Long term relationships with key customers help in creating synergies for both the parties in the long run. A port community system would help in providing a Single Window System that enables customers to submit regulatory documents, charges etc at a single location and/or single entity

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Sub Project Name: Sub Project Owner:

Customer profiling and Segmentation

Traffic Department

Sub Project Duration:

1 month

General Description This project will help in identifying the potential customers based on specific segments like type of cargo, the revenue generated through them, the geographic locations of the client and hence customized solutions can be given to them. This will help identifying the customer needs in a better way and will help to improve the port services. Special tariffs for special clients based on revenue generated from them can also be designed. Promotional schemes can be made to target a particular segment. Business segments such as Container handling, automobiles and cruise operations have already been identified as thrust areas where ChPT will focus in the future. These segments have separate customer groups which need to be targeted. Each customer group will require further profiling so that a marketing plan to target these customers could be worked out in detail. Technical Description: Customer Segmenting is the process of dividing the market into segments based on customer characteristics and needs. The main activity segmenting consists of four sub activities. These are: 1. 2. 3. 4. determining who the actual and potential customers are identifying segments analyzing the intensity of competitors in the market selecting the attractive customer segments.

The process of segmentation is distinct from targeting (choosing which segments to address) and positioning (designing an appropriate marketing mix for each segment). The overall intent is to identify groups of similar customers and potential customers; to prioritise the groups to address; to understand their behaviour; and to respond with appropriate marketing strategies that satisfy the different preferences of each chosen segment. This Business Plan Report is expected to contain substantial information to aid this exercise. Key Benefits expected from the Sub Project: Customer segmentation will form the basis for development of the Marketing Plan. Once segmentation is carried out, Chennai Port will have the following information which will drive the formulation of the Marketing Plan: 1. Improved understanding of customer, product and channel profitability 2. Improved tailoring of marketing and advertising approaches to customer segments

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3. Improved ability to identify and assess partnering opportunities 4. Improved understanding of customer needs 5. Improved identification of valuable customer relationships Costs of Implementation This project will be carried out internally by ChPT Traffic department and therefore no specific costs have been identified except for incidental expenses involved in visiting some of the customers, if required Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

Implementing a CRM Solution

EDP Department

Sub Project Duration:

One year

General Description Presently there is no such process / software which help the Chennai port to understand the customer better and provide complete end to end solutions to their problems / issues. So, a gap exists in terms of a systems support for the marketing strategy implementation which is sought to be addressed by implementing a CRM solution. By implementing a CRM solution, customer focus can be better achieved. A CRM solution which covers a call center wherein customers can call up and get their problems addressed immediately or know the status of their consignments will greatly improve customer service levels and help in attracting and retaining customers. Sub Project Description:

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Customer relationship management (CRM) encompasses the capabilities, methodologies, and technologies that support an enterprise in managing customer relationships. The general purpose of CRM is to enable organizations to better manage their customers through the introduction of reliable systems, processes and procedures. A successful CRM strategy cannot be implemented by simply installing and integrating a software package and will not happen overnight. Changes must occur at all levels including policies and processes, front of house customer service, employee training, marketing, systems and information management; all aspects of the business must be reshaped to be customer driven. To be effective, the CRM process needs to be integrated end-to-end across marketing, sales, and customer service. A good CRM program needs to: 1. 2. 3. 4. 5. 6. 7. Identify customer success factors Create a customer-based culture Adopt customer-based measures Develop an end-to-end process to serve customers Recommend what questions to ask to help a customer solve a problem Recommend what to tell a customer with a complaint about a service offering Track all aspects of selling Port’s services to customers and prospects as well as customer support

There are three parts of application architecture of CRM: 1. Operational - automation to the basic business processes (marketing) 2. Analytical - support to analyze customer behavior, implements business intelligence alike technology 3. Collaborative - ensures the contact with customers (phone, email, fax, web, sms, post, in person) Key Benefits expected from the Sub Project: A good CRM program can improve customer service by facilitating communication in several ways : 1. Identify how each individual customer defines quality, and then design a service strategy for each customer based on these individual requirements and expectations. 2. Provide a mechanism to track all points of contact between a customer and the Chennai Port, and do it in an integrated way so that all sources and types of contact are included, and all users of the system see the same view of the customer (reduces confusion). 3. Help to identify potential problems quickly, before they occur. 4. Provide a user-friendly mechanism for registering customer complaints (complaints that are not registered with the Port cannot be resolved, and are a major source of customer dissatisfaction). 5. Provide a fast mechanism for handling problems and complaints (complaints that are resolved quickly can increase customer satisfaction). 6. Provide a fast mechanism for correcting service deficiencies (correct the problem before other customers experience the same dissatisfaction). 7. Use the Internet to engage in collaborative customization or real-time customization.

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The CRM program can be integrated into other cross-functional systems and thereby provide accounting and other information to customers when they want it. Costs of Implementation Implementing a CRM Solution will require the following components to be procured, installed and implemented: Activities Documenting and re-designing customer interface business Procuring a CRM solution (ready made or custom developed) and its implementation Training of employees Establishing a call center (hardware, building and infrastructural facilities) Total Sub Project Dependencies: Customer Segmentation Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 201314 Desirable Estimated costs Rs. 1.0 million

Rs. 4.0 million

Rs. 1.0 million Rs. 5.0 million

Rs. 11.0 million

Sub Project Name: Sub Project Owner:

Developing Partnerships with Key Customers

Traffic Department

Sub Project Duration:

One Year

General description: In view of the intense competitive scenario unfolding before Chennai Port, partnering with customers may just be the most important factor in retaining clients. The term 'customer partnership' should not be taken so much in its legal definition of coownership but rather in its sense of sharing in benefits, profits and losses of Chennai Port. In keeping with the strategy to provide value added services to customers, it is necessary to develop partnership with key customers that can be mutually beneficial

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to both parties. Sub Project Description: Customer partnership is more than "putting customers first", or finding mutually satisfactory solutions to shared problems, or a dedication to excellence in every sale or service encounter. It also requires commitment to forging long-term relationships that create synergies of knowledge, security, and adaptability for both parties. Steps required to build successful partnerships are: 1. 2. 3. Determine what Chennai Port need but doesn’t have: customers, capital, special expertise, products, production capacity, or distribution channels, Determine partners – current or potential - who have what the Port needs, Develop a Plan to approach the partners and initiate a dialogue. The Plan should, of all things, list out things which the Port can offer to the partners.

Key Benefits expected from the Sub Project: Given the objective of attracting and retaining customers and ensure Total Customer Satisfaction, customer partnering is likely to be crucial for ensuring retention of clients. Benefits expected are: 1. Improved understanding of customer needs 2. Improved visibility of customer relationships and interactions across all channels 3. Ability to Tailor cross-sell/up-sell offers to customer needs 4. Implementing pricing and affinity programs based on volume and breadth 5. Improve identification of valuable customer relationships Costs of Implementation This is an internal project that will be executed by the Port Senior management in conjunction with the traffic department. No external assistance costs are expected in this project except for incidental expenses. Sub Project Dependencies: Customer Segmentation Formulating a Marketing Plan Importance Essential Desirable

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Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Sub Project Name: Sub Project Owner:

Port Community System

EDP Department

Sub Project Duration:

3 years

General Description Chennai Port already has a Web Based EDI system in place since 2002. We believe that IPA is planning to implement a Port Community System at all major ports. Nonetheless, irrespective of who executes the PCS project and when it is worthwhile to mention that implementation of a PCS would significantly help the Port in maximising customer satisfaction. A PCS links all members of the Port Community including Exporters, Importers, Custom House Agents, Shipping lines, Shipping Agents, Stevedores, Transport operators, Banks, Ports, Terminal Operators, Customs, and Other organizations / companies in the maritime logistics chain. Customer interface improvement has already been identified as a key component of the marketing strategy. Customers are already required to interact with various port authorities at various points of time along with documentation requirements. A common system accessible to all port users and other stakeholders will greatly help streamline customer interface. The PCS will help in implementing a Single Window System that enables customers to submit regulatory documents, charges etc at a single location and/or single entity. Such documents are typically customs declarations, applications for import/export permits, port charges and other supporting documents such as certificates of origin, clearance documents and invoices. Sub Project Description:

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Case Study: At Schiphol Airport allows the electronic submission of the cargo manifest by airlines to Customs. Information is supplied by trade to Customs to the socalled VIPPROG system, which was developed by Customs. The VIPPROG system is an EDI-based network application that allows the electronic transmission of the Freight Forward Message, a standard message defined by IATA that is available in the SITA system of IATA. The information from SITA is transmitted via the privately owned community system ‘Cargonaut’, when the airline has given an authorisation to ‘Cargonaut’ to provide customs with the information. Customs pays ‘Cargonaut’ a fee for use and maintenance of the community system. For Implementation of a PCS, the following needs to be undertaken: Study of business processes System requirement study Design/Procurement of the PCS Pilot, Phased or full implementation and Training

Key Benefits expected from the Sub Project: Following are the main benefits of a PCS to a Port: - Be a single source, integrated and standardized platform for meeting the requirements of all members of community - Function as an e-commerce platform for the members of the community. - Provide adequate, accurate and timely information - Improve the response time of stakeholders to their customers - Improve track and trace efficiency - Provide shipment/ service visibility - Generate alerts about delays or problems - Enable moving towards similar procedures across all communities - Provide for opportunities for re-engineering, adopting best practices - More effective and efficient deployment of resources - Enhanced security - Increased integrity and transparency Benefits for customers would be: Cutting costs through reducing delays Faster clearance and release Predictable application and explanation of rules More effective and efficient deployment of resources Costs of Implementation The Indian Ports Association (IPA) on behalf of all major ports is taking the PCS Project up of implementation. As such, ChPT will require no additional costs other than costs of local level implementation. Since the PCS is still at the design stage, it is difficult to estimate the costs of such local level implementation for ChPT. Sub Project Dependencies: • • • Customer Segmentation Formulating a Marketing Plan Developing the market research cell

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Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

C) Market Offerings Expansion Projects: This include following sub projects1. Identifying Comprehensive Logistics Services for customers 2. Study of pricing / tariffs of international ports 3. Simplification and Realignment of current tariff structure. 4. Study for identifying investments / management of operations in Minor ports

other

These sub-projects would help ChPT in providing more value added services to its customers. It would lead to identification of logistic services it would be able to provide its customer in comparison to the competitors. The projects would also help Chpt to make a rationalized and simplified tariff structure. Assistance of international consultants would help Chpt in structuring their tariffs as per the best international ports in the world. ChPT would be able to evolve various Tariff schemes for customers which would help in retaining them and attracting potential customers. ChPT should identify other minor ports which are geographically well positioned, endowed with good drafts and possibly have good connectivity which can actually help displace the dirty cargo from ChPT and absorb the same or can bring otherwise excluded hinterland within CPT’s reach and possibly from the clutches of competition. Making investment in such minor ports would help ChPT to retain customers once its current capacities in term of its overall available ground storage area and hinterland connectivity constraints Sub Project Name: Sub Project Owner: Identifying Comprehensive Logistics Services for customers

EDP/Traffic/ Engineering

Sub Project Duration:

Six months

As of now the port operations are restricted to a typical port services provider with no customized services. In order to differentiate itself from other ports it has to give its customers something more that what they expect like providing the with a complete logistic solution right from the origin to destination i.e. client door steps. These days, the commercial success of a port could stem from a productivity advantage in traditional cargo-handling service, from value-added service, or from a combination of the two. Shippers and carriers select individual ports not only based

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on their cargo handling service capabilities, but also on the benefits they are capable of “delivering”. Unless a port can deliver benefits that are superior to those provided by its competitors in a functional aspect, port customers are likely to select ports based merely on price. This fact raises the question of how a port can achieve value differentiation. Customers now tend to look at value-added logistics services as an integral part of their supply chain. As a result, ports must attempt to satisfy these needs by offering differentiated services. Sub Project Description: Chennai port should identify comprehensive logistics services that it could offer to its customers. This may include Container Freight Station, Inland Container Depots, Warehouses and Transportation services. This will evolve into a door-to-door comprehensive service of complete logistics chain. The objective would be to guarantee delivery of goods to customers’ premises or from the customers’ premises to the Port. Chennai Port may take up just part of the entire logistics and can have tie ups with specialist companies for the rest of the components of the logistics chain. This tie-up can be either with transport service providers, CONCOR, shipping agents, customer service providers, etc. Key Benefits expected from the Sub Project: 1. Improve pick, pack and ship processes 2. Improve due-date reliability 3. Refine/align logistics and distribution strategies 4. Increase focus on higher-value products and partners 5. Consolidate/outsource logistics and distribution functions 6. Increase use of lower-cost logistics and distribution channels 7. Improve transport and delivery processes/algorithms 8. Improve incentives around inventory/distribution efficiency 9. Improve terms with service providers (transport, warehousing, etc.) 10. Improve integration of business processes across partner networks 11. Broaden product and service offerings 12. Acquire new product and service offerings 13. Offer value-adding product and service bundles 14. Target new segments within current geographies Costs of Implementation The Port’s new market research cell and the traffic department can take up this project internally. Should the market research cell not be in place, ChPT will need to engage a logistics consultant with comprehensive experience in setting up logistics service organizations to advice them in this endeavour. The likely costs of such consultant engagement could be estimated at Rs. 3.0 million Sub Project Dependencies: None Importance Essential Desirable

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Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Sub Project Name: Sub Project Owner:

Study of pricing / tariffs of international ports

Accounts/Traffic

Sub Project Duration:

3 months

General Description: Given the overall strategy to become a hub port for containers on the east coast, it is important to carry out a study of the pricing tariffs of international hub ports, in particular those which are competitive hub ports in the region. Important stakeholder and customer perspective is that Chennai tariffs are high, compared to international hub ports – and this needs to be addressed appropriately by carrying out a comprehensive study. Sub Project Description: This project would require an elaborate profiling of tariff structures of important ports in Asia like Colombo, Singapore, Hong Kong etc. and also of other important ports in the world. The study would also identify how these ports charge tariffs and how these tariffs have been structured. Along with the above, a commodity profile will also have to be built up for each of the Ports above. Key Benefits expected from the Sub Project: This study will help Chennai Port benchmark its tariff and tariff structure those of the best ports in the world. The benchmarking analysis coupled with a commodity comparison will enable the Port to identify areas where tariffs can be rationalized and/or simplified. Costs of Implementation ChPT will need the assistance of an international consultant with experience in port tariffs to carry out a study and submit a report. It is estimated that this would cost Rs. 7.5 Million Sub Project Dependencies: None Importance Essential Desirable

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Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Sub Project Name: Sub Project Owner:

Simplification and Realignment of current tariff structure

Accounts/Traffic

Sub Project Duration:

6 months

General Description: Given the overall strategy to attract more customers for containers, possibly be special tariff schemes, discounts etc. it is imperative for ChPT to offer its tariffs in line with global competitive ports. This will require simplification and re-alignment of the current Tariff structure. Based on the recommendations from the study carried out in the previous project, ChPT will need to rationalize its tariffs accordingly. Sub Project Description: Simplification and realignment of tariffs would mean the following: Reduction of tariffs Exploring avenues to reduce and combine few charges Change in the basis of charging tariffs in certain areas Exploring avenues for charging differential tariffs for certain commodities and customers Steps needed to implement this project would be as follows: Taking inputs from studies of tariffs/tariff structures of international ports Examining tariff levels or competing ports in India and around India Discussions with customers on their experiences and expectations Identifying avenues for reduction, simplification and realignment Designing the new tariff structure Getting the new Tariff approved from TAMP. Key Benefits expected from the Sub Project: Key benefits expected are: Increase emphasis on differentiated products and services Improve focus on price-insensitive customer segments Obtain exclusive agreements with customers Improve use of supply- and capacity-driven promotions Rationalize and/or refocus service portfolios Increase emphasis on differentiated pricing across customer segments (based on customer value, risk, etc.) 7. Increase focus on pricing effectiveness / price optimization 8. Increase use of promotions 9. Improve understanding of customer price sensitivity 10. Improve tailoring of offerings to customer needs 1. 2. 3. 4. 5. 6.

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Costs of implementation This is an internal activity that needs to be carried out by ChPT based on the study carried out in the previous project. No external assistance is envisaged. Sub Project Dependencies: Study of pricing/tariffs of international ports Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

Study for identifying investments / management of operations in other Minor ports Accounts/Traffic Sub Project Duration: 3 months

General Description: A core component of the business strategy is to 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 for the cargo it is constrained to forego. In order to do implement this strategy, ChPt will have to take up a study for identifying opportunities in Tamil Nadu for investments or management of operations. Sub Project Description: In making investments in other ports ChPT should identify ports that : Are geographically well positioned Are endowed with good drafts and possibly good connectivity Can actually help displace the dirty cargo from CPT and absorb the same, thereby helping ChPT to be able to retain its present customers. Can bring otherwise excluded hinterland within CPT’s reach and possibly from the clutches of competition. Are in locations that enable consolidate and coastally trans-ship such cargo to and from ChPT, thereby cutting down supply chain costs and resulting into capture of hitherto inaccessible hinterlands especially in the north. ChPT would also need to develop a strong relationship with Tamilnadu Maritime Board and evince interest in actively promoting minor ports by investing in them. The study will have to delve on each of the above parameters and recommend other ports that

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can be picked up for investments / management of operations

Key Benefits expected from the Sub Project: Key benefits expected are: 1. retain customers, otherwise being turned away due to space and infrastructure constraints 2. Increase emphasis on differentiated products and services 3. Obtain exclusive agreements with customers 4. Improve tailoring of offerings to customer needs 5. Remove the constraint of non availability of space being a city port 6. make investments in the port business instead of other financial investments Costs of implementation Should a market research cell not be in place, ChPT could avail of external assistance to carry out this study. It is estimated that the cost of such an external study would cost approximately Rs. 2.5 million. Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Systems and IT Projects This category includes the following projects:
Project Name: Project Owner: Restructuring of the IT Department Organization EDP Project Duration: Three months

General Description A key element in the Systems and IT Strategy is the revamping of the IT Organization in ChPT. 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. Project Description:

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Organizational Redesign of the IT department will require the following activities: • • • • • Identifying the Key issues facing the EDP Department Determining the current status of the Org. Structure i.e. processes, communications, obstacles etc. Developing the IT Skill matrix and mapping them to the current capabilities in the EDP department. Provide for rigorous and continuous training for all existing EDP department employees in the latest technologies and tools Recruit fresh talented professionals / outsource parts of the IT function depending upon availability of resources.

The IT strategy recommends a higher focus to this function by shifting the IT Department directly under the Chairman. Identify steps and processes that are required for implementing the same. Define the authority and responsibility of the new IT Head and his relationship with other Department heads / senior management of ChPT. Key Benefits expected from the Project: • • Continued and sustained focus on IT in the organization Increased capabilities to develop, maintain IT applications and IT infrastructure on a 24 x 7 basis, such that real time access of customer interface applications is available to all customers and other stakeholders. Ensuring capabilities to manage IT related security and disasters within the organization Improved effectiveness of organizational structures and reporting relationships Improved assignment of accountability and authority

• • •

Costs for Implementation ChPT will need the services of an external consultant for the IT Organization restructuring. This is estimated to cost Rs. 2.0 million approximately Project Dependencies: None Importance Essential Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

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B) Process Re engineering and Improvement Project : This would include the following sub projects 1. Business Process Re-engineering 2. Full Scale ERP Implementation (current implementation and its review) These projects would help in improving efficiency and competitiveness of ChPT and help in cost reduction, provision of quality services in terms of time and efficiency of cargo handling. ERP implementation will help in integrate the financial and customer information, reduce inventory and customize HR information. Sub Project Name: Sub Project Owner: Business Process Re-engineering

Corporate Planning Department

Sub Project Duration:

Six Months

General Description The overriding objective in a BPR is to achieve a step change in performance. BPR is a fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance such as cost, quality, service and speed. Performance improvement relates to internal efficiency and competitive advantage. Internal efficiency is achieved by examining how we can run the business with fewer hand-offs, barriers, formal communications and less waiting time. BPR will help ascertain bottlenecks in the business processes as well as avenues for modifying as well as introducing new processes to streamline port functions. The key objective of the review should be to weed out inefficiency in the processes. Sub Project Description: Activities involved in a BPR Exercise are: 1. 2. 3. 4. 5. 6. Documenting Current Processes Establishing Key Performance Measures Developing and Testing Future Processes Prioritizing and Committing to Future Processes Planning Implementation Implementing Future Processes

Key Benefits expected from the Sub Project: Note: Implementation of Future Processes involves ERP and similar other IT systems quite often. These projects have been explained subsequently. Consequently, benefits expected under this Project are applicable for some of the projects listed subsequently too.

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1. 2. 3. 4. 5. 6. 7. 8. 9.

Improve invoicing / billing processes Improve selection, acquisition and contracting processes Improve processes for managing system operations, maintenance and changes Improve technology and data risk management processes Improve establishment of and adherence to service-level targets Improve real estate design and development processes Improve operational processes (administration, security, and maintenance) Improve recruitment and orientation processes Improve salary and benefits administration processes / increase employee selfservice 10. Improve payroll processes 11. Improve performance assessment processes 12. Provide staff with better HR information and tools 13. Implement/improve port-wide processes and tools for assessing staff performance 14. Consolidate and / or align financial planning, management and reporting functions 15. Strengthen corporate governance structures (composition, selection, roles, etc.) 16. Improve / implement internal control frameworks and policies 17. Improve understanding of regulatory requirements and management of regulatory compliance 18. Improve identification and assessment of risk (strategic, operational, investment, financial, compliance, data/privacy, etc.) 19. Improve breadth, depth, quality and timeliness of managerial information 20. Improve assignment of accountability and authority 21. Improve flexibility of business processes 22. Improve communication and knowledge transfer across organizational boundaries Costs of Implementation Business Process re-engineering will require ChPT to take the external assistance from consultants with BPR experience. This is estimated to cost approximately Rs. 5.0 million. Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name:

Full Scale ERP Implementation (current implementation and its review)

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Sub Project Owner:

EDP

Sub Project Duration:

Two Years

General Description Enterprise Resource Planning systems (ERPs) integrate all data and processes of an organization into a single unified system. A typical ERP system will use multiple components of computer software and hardware to achieve the integration. A key ingredient of most ERP systems is the use of a single, unified database to store data for the various system modules. In a full scale ERP system, the following modules are generally covered: Projects Supply Chain Management Financials Human Resources Customer Relationship Management Maintenance

In order to introduce Best-in-Class processes, an ERP package implementation is required so that IT driven processes are introduced at the Port. This is especially true since the Port’s Vision is to be ‘Futuristic’ port. With the future significantly determined to be more automated than before Sub Project Description: The process of ERP implementation is given below: Business Process Mapping and Re-engineering Deciding functional specifications Designing/Procuring the system Implementation and Training

Note: We are aware that a computerized system on the lines of an ERP system is currently being designed and is being implemented by Chennai Port. The same will need to be reviewed to check its adequacy for the Port’s requirements, both current and future. Since the current implementation is of a customized application, its capabilities to meet future requirements may require additional software development. We also understand that the current implementation has been significantly delayed and has already incurred time and cost over runs. This needs to be kept in mind while reviewing the status of the project and the action plan to be undertaken based on this project. Key Benefits expected from the Sub Project: Five major reasons why Organizations undertake ERP. 1. Integrate financial information— As the Management tries to understand the company’s overall performance, they may find many different versions of the truth. Finance has its own set of revenue numbers, traffic has another version, and the different departments may each have their own version of how much they contributed to revenue. ERP creates a single version of the truth that cannot be questioned because everyone is using the same system. 2. Integrate customer information—ERP systems can become the place where the

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berth is booked by a shipping agent till the goods are dispatched from the Port. By having this information in one software system, rather than scattered among many different systems that can’t communicate with one another, the Port can keep track of services provided more easily. 3. Reduce inventory—ERP helps some of the core processes flow more smoothly and enable better tracking on inventory. That can lead to reduced inventories of the materials used, and it can help users better plan inventory replenishments and reducing inventories at the warehouses. 4. Standardize HR information— especially in organizations with multiple departments and huge staff, HR may not have a unified, simple method for tracking employees’ time and communicating with them about benefits and services. ERP can provide comprehensive HR database. General benefits listed under the BPR project are also applicable here. Costs of Implementation. As indicated above, ChPT is already implementing a customized application for all modules. Hence these costs are not calculated here. However, ChPT will require a comprehensive review to be done on the implementation (post implementation audit). In terms of its status as well as benefits obtained by ChPT on the same. Such a review can also cover coverage of in-built internal controls, access controls, security of the systems and data. Such a review is estimated to cost approximately Rs. 3.5 million. Sub Project Dependencies: Business Process Re-engineering The current implementation of the computerized systems has been going on for almost 2-3 years which is very slow compared to the requirements of the Port. It is important that the contract for this system be completed at the earliest and thereafter a comprehensive review be done to check whether the computerized system has met with the said objectives. The review can establish whether the Port needs to install additional modules / functionality from other ERP packages. Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

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C) Activity Based Costing Sub Project Name: Sub Project Owner: Activity Based Costing

EDP / Accounts

Sub Project Duration:

Six months

General Description Chennai Port is a service organization and it provides services to its customers by rendering a basket of services under various heads. A customer avails of different services based on the commodity being shipped, material handling equipments required and the type of vessel being used to transport the same. Whereas ChPT’s financial and management accounting systems are able to account for costs at the natural objective level of cost classification, these do not support a subjective costs classification by identifying the costs for the actual service rendered. This creates a handicap in terms of deciding the tariff levels for various services. While cost rationalization is one aspect of pricing, identification of proper cost of services is another. It would be important to look at the current costing mechanisms and to assess if there is a need for introduction of more sophisticated costing mechanisms to arrive at the correct cost of providing services. Better costing mechanisms would help arrive at the correct costs for each of the services and would definitely aid proper decision making. Activity-based costing (ABC) is a method of allocating costs to products and services. It is generally used as a tool for planning and control. ABC has been universally recognised as an alternative approach to solve the problems of traditional cost management systems. Traditional costing systems are often unable to determine accurately the actual costs of rendered services. Consequently the management was making decisions based on inaccurate data especially where there are multiple services being offered. One of the key elements of the strategy is to offer competitive tariffs in key business segments and activity based costing will help a great deal in determining the competitive tariffs. Sub Project Description: Instead of using broad arbitrary percentages to allocate costs, ABC seeks to identify cause and effect relationships to objectively assign costs. Once costs of the activities have been identified, the cost of each activity is attributed to each service to the extent that the service uses the activity. In this way ABC often identifies areas of high overhead costs per unit and so directs attention to finding ways to reduce the costs or to charge more for costly services. Steps required to implement an ABC system are: Identification of Activities Determining Cost for each activity Determining cost drivers Collect activity data

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Calculating cost of providing each service Key Benefits expected from the Sub Project: Improved cost accounting and allocation of shared/overhead costs Improved projection of segment results and margins Better decision making in the area of tariff fixing Costs of Implementation The introduction of activity based costing will require ChPT to engage management consultants with activity based costing experience. It is expected that the total cost of ABC implementation for a port of the size of ChPT would be approximately Rs. 5.0 million (Rs. 2.0 million for the concept and design of ABC for ChPT and Rs. 3.0 million for implementation and support for a period of 3 to 6 months. Sub Project Dependencies: Business Process Re-engineering Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

D) Security Enhancement Projects This includes the following sub- Projects 1. Port Security System 2. IT Security System The projects would ensure higher security for ChPT’s and thereby increase stakeholders confidence in it. This is very necessary as ChPT is a public utility and is accountable to the general Public for appropriate safeguard and utilization of its assets. There has also been an increasing concern over security of the IT system. The project implementation would lead to higher security as regards to the IT system of the port and provide the necessary confidence to all third parties dealing with the port on day to day operations to interact electronically on the Port IT systems and the Internet.

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Sub Project Name: Sub Project Owner:

Port Security System

Security

Sub Project Duration:

2 years

General description Given the security perception in the country and given the strategic nature of ports assets, it is imperative that stringent security measures are in place for avoid any security mishaps. Though providing security is not a specific strategic initiative, the absence of security systems can cause havoc to the port’s business if any unforeseen event occurs. In light of the same, it is necessary that appropriate security infrastructure upgrades are carried out in the context of ChPT being a public utility. Sub Project Description: While the Port is ISPS Compliant, we are informed that security from sea-side attacks (if any) can be improved. A security assessment needs to be carried out for identifying the credibility of this perception. If the assessment is valid, then various measures like the following can be put in place: Networked CCTV systems Container and vehicle security/control Perimeter control and intrusion detection Facility controls (quay, office, gate, and yard) Tracking systems (RFID, WiFi and DGPS) Data exchange and mining Cargo and equipment scanning Radioactivity detection devices Narrow and broadband (Wi-Fi) wireless networks Advanced biometric recognition and validation systems

Key Benefits expected from the Sub Project: The main benefit will be increased security measures reducing security concerns and therefore increasing stakeholder confidence in the Port. Costs of Implementation ChPT will need to design and implement a logical security framework to ensure that it is well protected. ChPT will need to hire security consultants who can provide such a framework and help in implementing the same. It is estimated that ChPT will incur a cost of Rs. 5.0 million to get a security assessment and framework designed. The conclusions of that study shall identify the investments required in hard security infrastructure which is difficult to estimate at this point of time. Sub Project Dependencies: None

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Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

IT Security System

EDP

Sub Project Duration:

Six months

General description With greater reliance on IT and ERP systems and the introduction of best-in class IT processes, there would be increased concerns on the IT security and data safety fronts. In the future, increased use of Information Technology tools is a given paradigm and this will also correspondingly increase chances of IT security attacks and loss of valuable MIS information and IT Infrastructure, not to mention loss of valuable business and credibility of the port. ChPT has been implementing an ERP solution for some time now. Once these are implemented, significant operational and MIS data of the Port and its customers will be residing on ChPT servers. ChPT will also be providing EDI and web based connectivity to its customers for accessing and utilizing ChPT services. All of these will have to be well protected from IT attacks and disasters. Being a public utility, ChPT cannot afford to loose valuable business because of systems downtime in the case of manmade / natural disasters. All of this call for a robust IT policy and design and implementation of a disaster management plan Sub Project Description: Various measures like the following need to be put in place: Formulation of an IT Security Policy Formulation of a Disaster Management and Business Continuity Plan Implementation of the IT Security Policy Identifying and developing access controls

Key Benefits expected from the Sub Project: The main benefit will be increased security measures reducing security concerns and therefore increasing stakeholder confidence in the Port. Given the increased use of IT in the Port, the establishment of an IT security Policy will address key concerns amongst the customers in using the Port systems. Costs of Implementation

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ChPT will need to design and implement an IT Security Policy and Disaster Management Plan. This would require assistance from IT Security consultants to assess the current level of security, the risk profile and the development of the above documents. It is estimated that ChPT will incur a cost of Rs. 5.0 million to get an IT security policy and disaster management plan designed. The conclusions of that study shall identify the investments required in IT security hardware which is difficult to estimate at this point of time. Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

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HR Projects
This category includes the following projects : A) Organization Re design and Right Sizing This includes the following sub projects : 1. Organization redesign 2. Restructuring and re-introduction of VRS 3. Centralized HR department Redesign and Rightsizing of the organization would help ChPT to adapt to the changing environment and help in the implementation of prudent organization structure policies Surplus labour has been a major issue with organizations like the Chennai Port, and it has been acknowledged that Chennai Port will have a major problem especially when iron ore cargo is stopped and converted to BOT operated container terminals. This therefore needs to be addressed at the earliest. Introducing VRS would help in addressing this problem to some extent with innovative designs of the retirement schemes the need of the hour. .Already the cost of surplus labour is impacting the profitability of the organization. A centralised HR department will help in decisively implementing the initiatives regarding HR management system, review of HR ,policies, compensation, performance appraisal, etc Sub Project Name: Sub Project Owner: Organization redesign

Departments

Sub Project Duration:

Six months

General Description ChPT is organized as a public sector – cum Government organization. Given the need to be competitive in the marketplace, CHPT will need to re-align its organization structure that can adapt itself to the changing requirements and provide for appropriate flexibility in decision making as well as operations In order to enable implementation of best in practice IT and business processes, the organization structure and hierarchy will require a re-look. Sub Project Description: Organizational Redesign is structuring an organization, division or department to optimize how it provides services to its clients and customers. Following are the main steps in carrying out an Organisation Redesign: Identifying the Key issues facing the Organisation Determining the current status of the Org. Structure i.e. processes, communications, obstacles etc. Determining the characteristics of the new organisation i.e. facilitating interactions, rewards, flexibility, open source, hybrid structures etc. Designing the new structure and implementing though rigorous program management, ensuring stakeholder support, matching of capabilities and culture and considering infrastructure availability.

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Key Benefits expected from the Sub Project: 1. Continued and sustained focus on development initiatives irrespective of stakeholder attitudes 2. Improved ownership of business processes 3. Improved effectiveness of organizational structures 4. Improved assignment of accountability and authority 5. Improved agility and flexibility of organizational structures 6. Improved flexibility of business processes 7. Improved communication and knowledge transfer across organizational boundaries Costs for Implementation ChPT will need the services of an external consultant for the Organization restructuring. This is estimated to cost Rs. 4.0 million approximately Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

Restructuring and re-introduction of VRS HR Department Sub Project Duration: 3 months

General Description VRS (Voluntary retirement Scheme) is a good initiative to address the problem of surplus labour at the Port. It creates a win-win situation for both the employer and the employee. The employee gets the financial benefits associated with the scheme and the employer can reduce its work force and thus reduce its administrative and overhead costs. A VRS scheme was introduced in ChPT in the past but it was not effective and infact it was counter productive as young and skilled labor (who could easily get employment elsewhere) was lost through this initiative. There still remains a need to right size the organisation to reduce administrative overheads and consequently enable overall cost reduction. Sub Project Description: The following plan of action should be followed :

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1) VRS should be aimed at encouraging ageing employees to opt for early retirement. 2) The Scheme should preferably more lucrative than the present scheme in order to ensure a most fair and just compensation for early retirement. 3) Benefits like free medical facilities may be continued for employees opting for VRS. 4) It should, however, be ensure that young and talented people are retained and they are not given a window to exit under the Scheme Key Benefits expected from the Sub Project: 1) It will help the organization to reduce surplus labour 2) The cost associated with the excess labor will reduce drastically. 3) More benefits can be passed over to talented employees and thus it will be easy to retain them. 4) The efficiency of the port operations may improve Costs of Implementation This exercise is best done internally by ChPT senior management with the assistance of an HR professional within the port or from outside. Port officials are best suited to understand the needs of the employees and can appreciate specific issues that these employees have vis-à-vis the Port. Hence no specific costs are estimated for this purpose. Sub Project Dependencies: Organization Re-design Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 □ Desirable

Sub Project Name: Sub Project Owner:

Centralized HR department

Secretary’s Department

Sub Project Duration:

3 months

General Description It has been analyzed that every department has its own HR department, which take care of the needs of the employee of that particular department. So, every HR department has its own procedures and establishment staff to maintain the requisite HR records. The Secretary’s department handles ‘confidential reports (CRs)’ of Heads of Departments. There is a greater need that the HR department should be centralized because the policies and procedures governing the HR

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function should be consistent within all the departments. This will also help to reduce the HR workforce associated with the departmental HR. it has been observed that the overhead expenses for all the segments are stable over the years but the administrative expenses have been rising steadily. There are many ways an HR function can be structured to deliver efficient services. This is often referred to as its 'HR delivery model'. Centralised HR department is one of such delivery models. In this model, The majority of HR support is provided by a central HR team, only low-level administrative activity takes place within individual departments. Sub Project Description: Centralised HR department will involve creation of separate HR department, which will undertake all the new initiatives like HR management system, review of policies and salary, performance appraisal, etc. in addition to carrying out all the existing functions. Key Benefits expected from the Sub Project: The centralised HR department is expected to result in following benefits: 1. Cost reduction and reduction in HR support staff 2. Improvement of functional efficiency and reduction of administrative procedures 3. Better resource and succession planning 4. Centralised and uniform implementation of HR policies and initiatives 5. Increased focus on human resource development and people planning 6. Creating of a specialised department to look into employee issues and support 7. Increase in job satisfaction and confidence among the employees 8. Ability to attract and retain talented people Costs of Implementation This will be an internal activity to be performed by ChPT by pooling establishment staff from respective departments and centralizing them under one department. Except for hiring of HR professionals as permanent employees in the senior management team, no other costs are expected to be incurred. Sub Project Dependencies: Organizational Re-design Importance □ Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

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B) Employee Upliftment Project:
This includes the following subprojects: 1. 2. 3. 4. 5. Training Employees Carry out a Needs Analysis of current and potential future employees Review and improvement of Promotion and Recruitment policies Work Conditions Infrastructure improvement Remuneration review and upgrade

Training is a must in any organization development .It would increase employee efficiency and ultimately lead to improvement in quality and reduction of cost. Carrying out a need analysis of the current and potential employees would help in determining the HR profile. Improvement in promotion and recruitment policy will help in retaining, attracting and motivating excellent employees. Improvement in work infrastructure would boost employee morale and increase their efficiency. Good efficient employees would be attracted and can be retained. Improvement in pay structure would help to retain employees and provide an initiative to give better performance. Sub Project Name: Sub Project Owner: Training Employees

Departments

Sub Project Duration:

3 years

General Description Continuous training is the keystone of the HR Strategy. Significant management skills will need to be imparted to senior and middle management to carry out strategic planning, appropriate decision making and provide leadership to the employees While lot of BPR initiatives would require installation of IT based applications, there are a few areas where improvement is possible even without such efforts. The only thing that would be required would be providing Training to the employees. Sub Project Description: Some of the areas where training will be an ongoing process are: Financial Management Budgeting Strategic Planning Leadership development

Key Benefits expected from the Sub Project: Providing of training to employees in relevant areas will result in following

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benefits: 1. Increase emphasis on generating revenue from company assets 2. Improve investment returns on cash/treasury funds 3. Improve understanding of business unit performance and market values 4. Improve operational processes (administration, security, and maintenance) 5. Strengthen enterprise-wide financial reporting standards 6. Increase focus on business insight and forward-looking information 7. Improve cash/treasury management practices 8. Improve financial risk management processes 9. Improve budgeting and forecasting capabilities 10. Improve skills of financial management staff 11. Improve strategy development capabilities at corporate and business-unit levels 12. Improve leadership and management skills of executives Costs of Implementation. There are 274 class 1 officers and 143 Class II officers. An estimate of Rs. 0.1 million has been taken per employee for continuous training expenses over a period of three years. Hence it is expected that the total cost of training would be approximately Rs. 4 Crores Sub Project Dependencies: Business Process Re-engineering Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

Carry out a Needs Analysis of current and potential future employees Secretary’s Department Sub Project Duration: 3 months

General Description Considering ChPT Hr related issues with reference to an ageing workforce, poor employee morale, and high turnover in certain skilled categories of employees, it is important for ChPT to understand what its employees need and what is required to be done to retain good performers and attract good talent. For this a conscious exercise will need to be done by ChPT to talk to current employees, ascertain requirements and set up an HR function that can cater to these

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requirements. There is an urgent need to build the HR profile of the port in terms of business processes, job description & specification, candidate profile, time and efficiency estimates and employee requirement planning. Sub Project Description: The HR profile can be built by carrying out a HR needs assessment based on assessment of following issues and parameters: 1. How efficient are Chennai Port’s review mechanisms for judging individual and team performance, giving feedback and resolving issues? 2. Does every employee demonstrate commitment to specific objectives, role descriptions and performance criteria tied in to your organization strategies, goals and customer service targets? 3. Has individual and team capability and performance been assessed in detail against existing and future business needs and identified training implemented? 4. Is staff given regular feedback and coaching for continuous improvement? 5. Does your remuneration costs model motivate your staff to work most effectively and achieve their objectives? 6. Are you investing wisely in the right benefits for your people? 7. Are statements regarding terms of employment clearly define pay, benefits, hours, holidays, job content, codes of conduct, procedures, rules, confidentiality, intellectual property protection and other conditions? Do these statements reflect your current needs? 8. Do various departments conduct team meetings, staff briefings, social activities, open-doors, coaching and feedback to help in maintaining staff motivation, competence, commitment and high standards of customer service? 9. Do all the employees and HR department comply with codes of conduct and health and safety policies? 10. Do you have good intentions but find that due to business pressures HR takes lower priority – until ‘people problems’ steal your time and cost you money? Key Benefits expected from the Sub Project: The HR needs assessment is expected to result into following benefits: 1. 2. 3. 4. 5. 6. 7. Improvement of recruitment and orientation processes Consolidation or outsourcing of recruitment functions Integration of HR performance management methods and tools Integration of performance assessment processes into HR policies Identification of learning and development requirements Improvement of HR performance management methods and tools Improve salary and benefits administration processes/increase employee self-service

Costs of Implementation This exercise is best done internally by ChPT senior management with the assistance of an HR professional within the port or from outside. Port officials are best suited to understand the needs of the employees and can appreciate specific issues that these employees have vis-à-vis the Port. Hence no specific costs are estimated for this purpose. Sub Project Dependencies:

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Organization Re-design Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 □ Desirable

Sub Project Name: Sub Project Owner:

Review and improvement of Promotion and Recruitment policies Secretary’s Department Sub Project Duration: 3 months

General Description: Chennai port being a public sector unit has to follow notifications issued by central government even for operational matters like recruitment, backward class reservations, seniority based promotion, appointment, etc. Keeping in mind the requirements of a competitive future, ChPT will have to make drastic changes to its HR Policies, rules and regulations in order to retain, motivate and attract excellent employees. ChPT will need to present to its key stakeholder i.e. the Government about the need for changes in these HR related matters so that operational issues are addressed at the Port level itself. Sub Project Description: In accordance with these notifications, ChPT employees are governed by following regulations: 1. 2. 3. 4. 5. MPT Employees" (Appointment, Promotion, etc.) Regulations, 1977. MPT Employees' (Conduct) Regulations, 1987. MPT Employees' (Classification, Control, and Appeal) Regulations, 1988. MPT (Pay and Allowances, etc.) Regulations, 2001. and other about 15 regulations

Clearly Chennai port needs to revise these regulations to give effect to proposed projects like Business Process Reengineering, Human Resource Management System, and Performance Management System and to be a customer-friendly and futuristic port. Key Benefits expected from the Sub Project: The review and improvement of Promotion and Recruitment policies is expected to provide following benefits to the port: 1. Improvement of recruitment and orientation processes 2. Increased focus on employee retention 3. Integration and policy guidelines for using HR performance management methods and tools 4. Integration of performance assessment processes into HR policies

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Costs of Implementation ChPT will carry out this exercise internally and it is envisaged that no external assistance will be required to carry out this project. Sub Project Dependencies: Organization re-design Importance □ Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

Work Conditions Infrastructure improvement Engineering Department Sub Project Duration: 2 years

General Description: In addition to the improvement in salary and employment policies, working environment around the employee’s work area also plays a major role in efficiency improvement and comfort building. All the employees look for safe and better environment conditions in addition to pay and social benefits. Good working conditions boosts the moral of the employees and improve their efficiency and leading to higher productivity. Working conditions can be improved for taking active and perceptible initiatives for two types of employee categories, i.e. executive and labour. Sub Project Description: For labour, better working conditions will mean safe, clean and non-hazardous working environment. This will require taking of following some of the initiatives: 1. Providing for easy availability of basic needs like food, water, bathrooms, toilets, etc. 2. Dust-free and healthy working environment 3. Easy accessibility to disabled staff 4. Availability of pre-medical care and fire safety 5. Follow best practices and ILO recommendations for working conditions and improvement of safe & healthy environment For executive staff, this will require providing better infrastructure and pleasant environment. This will require taking of following some of the initiatives: 1. Better computers and seating facility 2. Providing for easy availability of basic needs like food, water, bathrooms, toilets, etc.

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3. Easy accessibility to disabled staff 4. Increased aesthetic values of office and working desks Key Benefits expected from the Sub Project: Improvement of working conditions and infrastructure is expected to result in following benefits: Improvement of employee morale and confidence building; Ability to attract and retain qualified and talented employees; Increased satisfaction among the employees; Increase in proactive initiatives by the employees for performance improvement; 5. Improvement of better utilization of organization resources; Costs of Implementation: This project will require enhancements to the office buildings and port infrastructure buildings as well as procurement of office computers etc. A broad level estimate of such changes is made at Rs. 3 Crores. Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 □ Desirable 1. 2. 3. 4.

Sub Project Name: Sub Project Owner:

Remuneration review and upgrade Secretary’s Department Sub Project Duration:

3 months

General Description: In line with the strategy to retain and attract good talent, there is a significant need for a remuneration review and upgrade pursuant to the installation of a performance management system. As the case with other public sector units, ChPT employees are paid as per the salary scales and classes, with fixed annual increments irrespective of the level of performance. In correlation with other departments like HR needs improvement, performance assessment and HR management system, ChPT should establish salary structure considering the cost of living, profit sharing, performance incentive, market salary rate with enough provisions for flexibility and performance linked. Sub Project Description: ChPT can define job specification for a particular activity and required skills for performing the job. ChPT should regularly monitor market conditions of salary

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levels and demand-supply of people having required skills. ChPT should monitor regularly cost of living and other perks and benefits. Considering all the cost and benefit, ChPT can fix the salary structure, which will be revised after particular duration or may be linked to any variable like port’s profit margins, inflation rates and performance level. Chennai Port will have to garner stakeholder support for this initiative. Key Benefits expected from the Sub Project: The activity of remuneration review and upgrade will result in following benefits to the Chennai port: 1. 2. 3. 4. Ability to attract and retain qualified and talented peoples; Increased satisfaction among the employees; Improvement of efficiencies of various functions; Increase in proactive initiatives by the employees for performance improvement; 5. Focus on common driving force among employees for achievement of common organizational goals; Costs of Implementation: This is an internal activity to be conducted by the Senior management of ChPT. At best, ChPT may want to carry out a compensation survey for select skill sets, which is likely to cost Rs. 3.0 million Sub Project Dependencies: Build HR profile of the port Install a Performance Management System Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 □ Desirable

C) HR Process Improvement Project
This will include the following sub projects: 1. HR Process optimization software 2. Performance Management System An IT based HR tool will help in automating the pay process; it will help in gathering cost effectively the employee time/work information and evaluate it. This will help to establish organizational cost accounting capabilities and increase employee participation in benefits programs. The performance Management System will help to determine the extent on which the employees are performing the job effectively.

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Sub Project Name: Sub Project Owner:

HR Process optimization software Secretary’s Department Sub Project Duration: 9 months

General Description: A critical component for implementing some of the HR strategic initiatives is the availability of an IT based tool i.e. Human Resource Management Systems (HRMS, EHRMS). Human Resource Management Systems (HRMS, EHRMS) shape an intersection in between human resource management (HRM) and information technology. Efficient and effective management of the "Human Capital" Pool (HCP) has become an increasingly imperative and complex activity to all HR professionals. The HR function consists of tracking innumerable data points on each employee, from personal histories, data, skills, capabilities, experiences to payroll records. To reduce the manual workload of these administrative activities, organisations began to electronically automate many of these processes by introducing innovative HRMS/HCM technology. Sub Project Description: These systems are characteristically developed around following four areas: 1. The payroll module automates the pay process by gathering data on employee time and attendance, calculating various deductions and taxes, and generating periodic pay-cheques and employee tax reports 2. The time and labour management module applies new technology and methods (time collection devices) to cost effectively gather and evaluate employee time/work information, so as to establish organizational cost accounting capabilities. 3. The benefit administration module permits to administer and track employee participation in benefits programs like healthcare provider, insurance policy, and pension plan and profit sharing or stock option plans. 4. The HR management module is a component covering all other HR aspects from application to retirement. The system records basic demographic and address data, selection, training and development, capabilities and skills management, compensation planning records and other related activities. Key Benefits expected from the Sub Project: By using the internet or corporate intranet as a communication and workflow vehicle, the HRMS technology can convert these into web-based HRMS components of the ERP system and permit to reduce transaction costs, leading to greater HR and organizational efficiency. Through employee or manager selfservice, HR activities shift away from paper based processes to using self-service functionalities that benefit employees, managers and HR professionals alike. Costly and time consuming HR administrative tasks, such as travel reimbursement, personnel data change, benefits enrolment, enrolment in training classes (employee side) and to instruct a personnel action, authorise access to information for employees (manager's side) are being individually handled and permit to reduce transaction time, leading to HR and organisational effectiveness. Costs of Implementation

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Implementing a HRMS Solution will require the following components to be procured, installed and implemented: Activities Documenting and re-designing HR business processes Procuring an HRMS solution (ready made or custom developed) and its implementation Training of employees Hardware and other infrastructural facilities) Total Estimated costs Rs. 1.0 million Rs. 6.0 million

Rs. 2.0 million Rs. 3.0 million Rs. 12.0 million

Sub Project Dependencies: 1. Business Process Re-engineeering 2. Review and improvement of Promotion and Recruitment policies Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 □ Desirable

Sub Project Name: Sub Project Owner:

Performance Management System Secretary’s Department Sub Project Duration:

6 months

General Description: A key motivation issue is the system of rewards based on Performance. ChPT being a Government organization has a traditional system of performance appraisals and payment of rewards. This needs to change if ChPT is to focus o retaining and attracting talent within the organization. Performance Management (Appraisal) System is the human resources activity used to determine the extent on which the employees are performing the job effectively. Performance Appraisal gives the idea of any improvements required where there is the difference between actual and desired results. Sub Project Description: There are following six steps in a typical official (other than an informal performance appraisal system) Performance Management System:

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1. Establish performance standards for each position and the criteria for evaluation 2. Establish performance evaluation policies on when to rate, how often to rate and who should rate 3. Have raters gather data on employee performance 4. Have raters (and employees in some systems) evaluate employees’ performance 5. Discuss the evaluation with the employee 6. Make decisions and file the evaluation Automated Performance Management System may integrate all the modalities of the performance appraisal process like performance reviews, 360˚ feedback, goal management, compensation planning and dashboards & reporting. Key Benefits expected from the Sub Project: The performance management system will be useful in the following HR purposes: 1. Developmental purposes: it helps to clarify the necessity and the effectiveness of the training programs; 2. Reward purposes: helps in determining who should receive rewards and who should be laid off; 3. Motivational purposes: stimulates effort to perform better; 4. Legal compliance: it provides legally defensible reason for making promotion, transfer, reward and discharge decisions; 5. Human resource and employee planning purposes: it serves as a valuable input to skills inventories and human resource planning; 6. Compensation: helps to identify what to pay and what will serve as an equitable monetary package; 7. Communication purposes: the rater and ratee get to know each other through communication; 8. HRM research purposes: it can be used to validate selection tools, such as a testing program. Costs of Implementation: ChPT will require assistance of external consultants for carrying out this project. The cost for such assistance is estimated at Rs. 5.0 million Sub Project Dependencies: Review and improvement of Promotion and Recruitment policies Importance □ Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

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Port Development Projects
This category includes the following projects

A) Identifying Cost Reduction Avenues and Implementing Cost Reduction Measures :
This includes the following sub projects: 1. Identifying Cost Reduction Avenues 2. Implementing Cost Reduction Measures This project will help in Cost reduction of the port. Higher cost is a major constraint in a competitive tariff environment. With the entry of private players in the market who are able to demonstrate cost leadership, it will be very difficult for the Port to continue increasing its tariffs based on a cost push model. Efficiencies in port operations will also have to be equally competitive in terms of cost structures. As competition increases, ChPT will find it increasingly difficult to maintain its high tariffs and thereby its profitability. After identifying the cost reduction measures, a more difficult initiative is to implement these and achieve the reductions in a manner that it shows up in the profit and loss account. Implementation of such measures require organizational will power and the readiness to take tough decisions. Therefore, the implementation process will have to be taken up as a full fledged project, with clearly laid out responsibilities and targets. Sub Project Name: Sub Project Owner: Identifying Cost Reduction Avenues

Accounts / Corporate Planning Department

Sub Project Duration:

Six months

General Description: Given the likely competitive scenario, the possibilities for increasing tariffs further appear to be very unlikely. The only way therefore to increase margins will be to reduce costs. While Chennai has a distinct advantage on having fully depreciated assets, its high administrative overheads are a burden raising total costs. The financial analysis carried out by Deloitte highlights that operating and administrative expenditure as a matter of concern, even though ChPT is in a very good financial position at this point of time. It is important to become lean in terms of costs and identify where the flab has accumulated. Sub Project Description:

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Avenues which could lead reduced costs could be VRS, outsourcing of certain services, utilising leased facilities instead of construction etc. Key steps for identifying cost reduction measures are: Deciding the approach and methodology Reviewing the current costs and cost structure and trends in past few years Identifying the largest cost clusters Generate buy-in from stakeholders on the need for and the nature of cost reduction In-depth study of these cost clusters for identifying cost reduction avenues Discussion on reduction avenues identified and agreeing the methodology for reduction Key Benefits expected from the Sub Project: The key benefits would be Identification of avenues for reduced costs which would lead to higher margins. Providing flexibility for reducing tariffs if necessary, Attracting customers interested in a cost advantage and tie up with them on a long term basis Increased profitability Costs of Implementation The identification of cost reduction measures and its implementation is an activity that will require ChPT to take the assistance of external consultants who are experienced in cost management and who are willing to take a stake in the quantum of costs that will be reduced. Their scope will also include the activity of providing assistance in implementing these cost measures (see next project). The total cost of both these projects is expected to be approximately Rs. 2 crores Sub Project Dependencies: Activity Based Costing Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

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Sub Project Name: Sub Project Owner:

Implementing Cost Reduction Measures

Accounts

Sub Project Duration:

3 years

General Description: The cost reduction measures identified in the previous project will need to be implemented in a phased manner. The impact of these measures is likely to be felt in the following two years and the same therefore needs to be continuously implemented such that these measures get institutionalized accordingly. Sub Project Description: Implementing Cost Reduction measures identified should involve the following steps: Setting objectives for the exercise and target results Identifying owners for each cost reduction measure Implementation the identified measures Periodical Review (if required) for measures implemented Key Benefits expected from the Sub Project: The key benefit would be reduced costs leading to higher margins. In turn it would also help ChPT in becoming more flexible as regards tariffs, entering into long term relationships with customers etc. (benefits outlined in the previous project “identifying cost reduction measures” are also relevant here) Costs of Implementation Costs are already included in the estimate for previous Project on “identifying cost reduction measures” Sub Project Dependencies: Identifying Cost Reduction Avenues Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

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B) Efficiency Improvement Project This includes the following sub projects 1. Current Asset Utilisation Analysis 2. Building an Engineering Research Cell Analysis of utilisation of Assets will help in understanding the manner in which the port assets are utilised. The port will be able to identify where there is over utilisation or underutilisation and plan for asset replacement / modernization. Building an Engineering research cell would help in tracking the upcoming port technologies in.ChPT . The Cell will help in providing data which will help in developing business models, outsource business functions, Reconfiguring facilities and utilization of efficient material handling equipment. Sub Project Name: Sub Project Owner: Current Asset Utilisation Analysis

Engg. Department

Sub Project Duration:

2 months

General Description The Port strategy emphasizes on cost reduction and higher utilization of equipments. In order to do the same, ChPT will need to carry out a detailed asset utilization analysis and identify areas where assets are under-utilized and the steps needed to correct the same Sub Project Description: Current Asset Utilisation analysis would involve a comprehensive listing of all infrastructure and related facilities available with Chennai Port and carrying out a comprehensive analysis on their past and present usage of these assets. Activities to be carried out under this project would be: Develop a comprehensive listing of all infrastructure and infrastructure facilities available with Chennai Port Tracking usage of infrastructure over past few years Identifying whether these infrastructure facilities are likely to be utilised in future keeping in mind traffic trends and Port’s strategy This Business Plan Report is expected to contain substantial information to aid this exercise. Key Benefits expected from the Sub Project: Asset Utilisation analysis is expected to yield the following benefits: Provide a detailed picture of assets being utilized at the Port Identify areas where new infrastructure is required and also where infrastructure is underutilized Costs of Implementation

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This current Business Plan will provide significant inputs to ChPT for this project. All activities identified here can be taken up by ChPT Engineering Department and no external assistance is required. Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

Building an Engineering Research Cell

Engineering

Sub Project Duration:

3 months

General Description: Engineering skills and experience in setting up port operations are considered to be a strength area for ChPT. It is important to build upon this strength and develop capabilities that can help ChPT to be truly a futuristic port in terms of infrastructure and equipments. This will also help ChPT when they undertake other projects such as “management of operations in other minor ports” and providing consultancy services. Sub Project Description: In order to ‘foresee’ trade requirements in so far as equipments / facilities / infrastructure is concerned, it would be worthwhile to look at setting up an Engineering research cell whose mandate would be to carry out the following: track upcoming port technologies infrastructure requirements and developments at competing ports and at leading ports in Asia anticipating trade requirements and carrying out cost-benefit analysis of providing these facilities (along with finance and traffic department) The Cell will work closely with the market research cell. The Project would involve the following activities: Deciding the roles and responsibilities the Cell. Identify the reporting relationships of personnel within the Cell.

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Train personnel in research tools as well as cutting edge engineering concepts and technologies practiced at other ports Recruit specialized personnel (if need be) Plan infrastructure requirements and acquire infrastructure like computers, software tools etc.

Key Benefits expected from the Sub Project: The Engineering research cell may be able to provide the Port with crucial data to undertake the following initiatives: Rationalize and/or refocus service portfolios Develop business models with low real estate requirements Outsource business functions Reconfigure facilities / Increase utilization of facilities Increase use of leased real estate Divest low-utilization real estate Increase use of flexible and expandable infrastructure Defer / change timing of capital investments Utilize more efficient material handling equipment Costs of Implementation This project needs to be taken up internally by ChPT and therefore no additional costs are envisaged. Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

C) Institutional Strengthening Project This will include the following sub projects: 1. 2. 3. 4. 5. 6. Study of facilities at top Ports in Asia Stakeholder expectations management Designating personnel to ensure quick completion of connectivity projects Setting up the Internal Audit Function Establishing a Consulting Entity Communication Plan

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The projects will help Chpt provide facilities to match with some of the best ports internationally. Stakeholders expectation management will help in increasing the confidence of stakeholders in the port. This will involve concerted efforts to ensure that stakeholder related issues are identified and addressed appropriately. This will also include designating personnel who will ensure quicker completion of connectivity projects in terms of better liaison with public entities involved in these projects. An internal audit department will help in increasing the focus on the internal controls in the organization and ensure improved assignment of accountability and authority by ensuring a parallel system of checks and balances within the organization. Establishing an consulting entity will strengthen Brand value of the port and increase satisfaction of the high potential employees. Communication plan will ensure that the measures taken by the Port to be an environmentally and socially ‘pro-active’ port are conveyed to and understood by the community and hence will be very helpful in increasing the positive attitude of community towards the Port. Sub Project Name: Sub Project Owner: Study of facilities at top Ports in Asia

Engineering

Sub Project Duration:

1 month

General Description ChPT has taken up a vision to be a futuristic port. In order to translate this vision into a reality, it is important for ChPt to understand the differentials in terms of equipments, infrastructural facilities and service levels vis-à-vis top ports in Asia. This will require a detailed study in the areas where ChPT is focussing on i.e. automobiles, containers and cruise terminals. Sub Project Description: This project would require an elaborate profiling of infrastructure available and facilities provided by important ports in Asia like Colombo, Singapore, Hong Kong, Shanghai and Dubai. The study would also identify how these facilities are provided i.e. by the Ports themselves or through private sector participation. Along with the above, a commodity profile will also have to be built up for each of the Ports above. Key Benefits expected from the Sub Project: This study will help Chennai Port benchmark its facilities with those provided by the best ports in Asia. The benchmarking analysis coupled with a commodity comparison will enable the Port to identify those facilities and infrastructure which

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are being provided by these ports but which are not available with Chennai. Costs of Implementation Assuming a small delegation of 3 – 4 senior management personnel to visit these ports, it is estimated that the costs shall be approximately Rs. 1 Crore. Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

Stakeholder expectations management

Management

Sub Project Duration:

Ongoing

General Description: Chapter 4 on corporate strategy deals extensively with key uncertainties and the emergence of likely future scenarios. The scenarios extensively deal with the positive and negative possibilities of stakeholder support. Whereas good stakeholder support is always welcome, it cannot be guaranteed. To ensure continuous support from the stakeholders, it is important that ChPT manages their expectations effectively. Sub Project Description: Stakeholders are people or groups whose welfare is connected directly or indirectly with the progress of the Port. These may be internal as well as external stakeholders. For continued success of any entity it is important to identify the most important stakeholders and cater to their expectations. This is essential to have their buy-in in all future endeavors of the Port. Steps to be undertaken for this purpose are: 1. Identification of stakeholders. 2. Prioritizing the stakeholders and identifying KEY stakeholders (the Government – in case of Chennai Port). 3. Identifying with requirements and contributions and describing the success criteria for requirements and contributions. 4. Find the stakeholders’ focal areas in terms of risks, finances, time and quality. 5. Identifying the stakeholders’ positions and roles. 6. Designing an action place to address key stakeholders’ requirements

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Key Benefits expected from the Sub Project: The single largest benefit available will be continued stakeholder patronage in all future projects of Chennai Port Trust. This will also improve effectiveness of legislative/lobbying efforts. Costs of Implementation This project needs to be taken up internally by ChPT and therefore no additional costs are envisaged. Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

Designating personnel to ensure quick completion of connectivity projects Management Sub Project Duration: On need basis

General Description ChPT’s corporate strategy hinges critically on the two hinterland connectivity projects envisaged on the north and south of Chennai. Whereas significant progress has been made by the executing agencies with ChPT itself being a stakeholder in these, the timely completion of these projects cannot be guaranteed. On the other hand, non / partial completion of these projects can severely impinge upon ChPT’s business plans. This project therefore demands greater importance, especially in the context of the issues related to stakeholder support as identified in the previous project. Sub Project Description: In case hinterland connectivity (rail / road / pipeline) is not established as per the traffic requirements, it would imperative for Chennai Port to designate a person (preferably at a senior level) with a fixed responsibility to liaise with relevant government authorities and sort out any issues that may be impeding the progress. The concerned professional will also be responsible for identifying alternatives which could be presented to these government authorities for financing / executing the projects in case these are the bottlenecks hampering the

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progress. The concerned professionals will continuously liaise with the executing agencies to ensure that there are no impediments to these projects that can be resolved by ChPT’s intervention. Key Benefits expected from the Sub Project: Ensuring quick completion of connectivity projects. Costs of Implementation This project needs to be taken up internally by ChPT and therefore no additional costs are envisaged. Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

Setting up the Internal Audit Function

Accounts / Secretary

Sub Project Duration:

Three months

General Description A key insight that emerged from the SWOT analysis was the non existence of an internal audit department in ChPT. Though not directly an offshoot of the business and functional strategy, this weakness needs to be addressed by setting up of an independent Internal Audit department reporting directly reporting to the Chairman of the Port. Sub Project Description: Setting up of the Internal Audit function would involve: • • Identifying the role of the Internal Audit function Defining the placement of the Internal Audit function in the overall organization structure and developing the structure of the internal audit department itself. Developing the Audit skill matrix and mapping them to the current capabilities in the Accounts and other departments of the Port. Provide for rigorous and continuous training for all existing EDP

• •

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department employees in the latest technologies and tools • • Recruit fresh talented professionals / outsource parts of the Internal Audit function depending upon availability of resources. Define the authority and responsibility of the new Internal Audit Head and his relationship with other Department heads / senior management of ChPT.

Key Benefits expected from the Sub Project: • • • Continued and sustained focus on Internal Audit function in the organization Increased capabilities to constantly assess and review the existence of internal controls in the organization Provide required level of assurance to all customers and other stakeholders about the effectiveness of internal controls in the organization. Improved assignment of accountability and authority by ensuring a parallel system of checks and balances within the organization.

•

Costs for Implementation ChPT will need the services of an external consultant for setting up the Internal Audit function. This is estimated to cost Rs. 1.5 million approximately Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

Establishing a Consulting Entity

Engineering

Sub Project Duration:

9 months

General Description: The SWOT analysis and strategy development highlights the need to leverage ChPT’s engineering and port management skills by providing consultancy services to other minor and smaller ports. This would also mean that these

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departments would start being a profit center instead of just being a cost center by earning some revenues. Chennai Port has an established track record of executing complicated technical projects. This could be used to set up a Business / Technical Consulting unit on the lines of RITES and Rotterdam Maritime Group. Sub Project Description: The Project would involve the following activities: Deciding the Ports key capabilities Deciding the legal structure of the entity and the roles and responsibilities of the Entity. Identify the reporting relationships of personnel within the Cell. Train personnel in research tools and cutting edge engineering concepts and technologies. Recruit specialized personnel (if need be) Plan infrastructure requirements and acquire infrastructure like computers, software tools etc. Build Market presence Key Benefits expected from the Sub Project: The Consulting Entity will be able to provide the following benefits: Generating additional revenues Strengthening the Brand value of Chennai Port Better work satisfaction for high potential employees Knowledge which can be used by Chennai Port for its own development

Costs of Implementation This project will be executed internally by ChPT. The Port will require external assistance in training of personnel which is estimated to cost approximately Rs. 0.5 million. In addition it is estimated that the entity will require computers and other office infrastructure which is expected to cost Rs. 2.5 million. Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

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Sub Project Name: Sub Project Owner:

Communication Plan

Secretary’s Department

Sub Project Duration:

General Description: The strategy requires that ChPT takes up initiatives like public relations, and build awareness among the community about steps being taken by Chennai Port on various fronts. This should be internally disseminated as well. In such big organizations a systematic communication channel should be established Proper communication channel should be set up between the port authorities & the public in order to make them aware about the activities that have been undertaken by the port to fulfill their social obligations. Sub Project Description: Communication plan gives clearly laid out plan for figuring out how to communicate important messages to key stakeholders of an organization in the most effective way possible. Communications management is the systematic planning, implementing, monitoring, and revision of all the channels of communication within an organization, and between organizations; it also includes the organization and dissemination of new communication directives connected with an organization, network, or communications technology. Aspects of communications management include developing corporative communication strategies, designing internal and external communications directives, and controlling the flow of information, including online communication. The adjacent Marketing Communication Planning Framework provides a framework for creation of an integrated marketing communications plan. The communication plan will provide for communicating the initiatives taken by the port for environment management, social responsibility, city development etc. to general public. Key Benefits expected from the Sub Project: The comprehensive communication plan will ensure that the measures taken by the Port to be an environmentally and socially ‘pro-active’ port are conveyed to and understood by the community and hence will be very helpful in increasing the positive attitude of community towards the Port.

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Costs of Implementation This project needs to be taken up internally by ChPT and therefore no additional costs are envisaged. Sub Project Dependencies: None Importance □ Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

D) Corporate Social Responsibility Project This includes the following sub projects: 1. Assessment of Environment Impact of Chennai Port’s Activities 2. Creation of Green area / belt inside the port premises 3. Social Welfare Initiatives 4. City Development Projects These projects will help in identifying the impact of Chennai Port’s Activities on the Environment. All legal consequences need to be foreseen and well prepared for in terms of environmental compliance. Provisioning of green area / belts will be one of initiatives for environment management and ensure the achievement of strategic objective to “be recognised as an environmentally and socially responsible Port. It would improve the public perception of the port. City development projects will improve the public perception of the port and will surely reduce the resistance, to some extent, against adverse impacts arising due to operation of the port within the city limits. Sub Project Name: Sub Project Owner: Assessment of Environment Impact of Chennai Port’s Activities Marine and Engineering Department Sub Project Duration: 4 months

General Description The environment related compliance is becoming stringent day by day so it is always a better option to have an environment assessment carried out that will assess and regulate the environment issues related to the port and keep a check on the effect of port activities on the environment. The business strategy entails ChPT wanting to be a green and clean port especially in view of it being a city port and the major pollution issues already confronting the port as of

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today. Sub Project Description:
Identification of need for the proposed project Consideration of alternatives Description of the project Description of environmental setting SCREENING
Determination of the type of EIA

Hazardous Cargo

SCOPING
Identification of significant impacts Preparation of TOR for the EIA study

For any port or upcoming project, Environment Impact Assessment is the critical area for deciding on to go ahead for implementing new projects or how to better manage environment issues. Chennai port, due to its location within city limits and handling of dusty cargo, has to give specific importance to Environment management.

Environmental Impact Assessment (EIA) is a management tool for ensuring optimal use of natural Project Rejected Preparation of EMP and Mitigation Safety & DMP resources for sustainable development. EIA' s for ports and harbours is a mandatory requirement as per the Ministry of Environment and Forests (MoEF) EIA notification (1994) and CRZ notification (1991) because The port and harbour projects have following major adverse impacts:
Prediction of impacts Risk Analysis

Baseline evaluation

1. Changes to the flow pattern and resultant coastal erosion / siltation due to the construction of breakwaters and other waterfront structures that obstruct normal flow. 2. Disturbance to the bottom surface and benthic organisms due to dredging and dumping of dredge spoils. 3. Pollution from oil spills during pipeline transfers dismantling operations and oily waste disposal. 4. Risk of oil / hazardous cargo spills from accidents due to collisions, grounding or leakage. 5. Loss of habitats such as mangroves, corals, mudflats etc. Basic components of an EIA study are presented in the diagram1 above. Key Benefits expected from the Sub Project: Environmental Impact Assessments (EIA) identifies potential impacts and proposes actions to avoid, reduce or mitigate them through Environmental Management Plans (EMPs) and/or Standard Operating Procedures (SOPs). The functions of an EIA is to: 1. Identify pre-project environmental status and project activities that may affect the environment, 2. Estimate the impacts of the proposed development, 3. Evaluate the consequences of impacts on human life and environment, 4. Assess the need for alternative actions and remedial measures. EIA’ s result in 1. legal compliance 2. development that is sustainable;
1

Source: “Manual for Environmental Impact Assessment of Ports & Harbour”, National Institute of Ocean Technology, IIT Chennai.

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3. cost savings, and avoiding cost overruns due to wrong site selection / remediation / time delays / 4. public outcry etc; and 5. environmental management and improved environmental performance 6. corporate image 7. EIA therefore shall be viewed as the first step towards commitment to prevention of pollution. Costs of Implementation This project will require the hiring of environment management consultants to prepare the EIA. It is estimated to cost approximately Rs. 5.0 million. Sub Project Dependencies: None Importance Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 □ Desirable

Sub Project Name: Sub Project Owner:

Creation of Green area / belt inside the port premises Administration/ Estate Sub Project Duration: 2 year

General Description: The environment management plan and initiatives for pollution reduction will include creation of green area to counter the adverse environment impacts of ongoing port activity. The green area can be located within the port premises depending upon available land. This will help in environment management and also improve working environment making is more healthy to the port community. Sub Project Description: Chennai port should regularly conduct tree plantation programmes with sufficient awareness about such efforts. Also Chennai port can integrate this project with proposed projects of social welfare initiatives and city development projects. Key Benefits expected from the Sub Project: Provision of green area/ belts will be one of initiatives for environment management. This will ensure the achievement of strategic objective to “be

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recognised as an environmentally and socially responsible Port”. Costs of Implementation This project needs to be taken up internally by ChPT and therefore no additional costs are envisaged. Sub Project Dependencies: None Importance □ Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

Social Welfare Initiatives Engineering Department Sub Project Duration:

Ongoing

General description: One of the mission statements of Chennai port is to act as a catalyst for sustained development of the region. Chennai port also to be recognised as socially responsible organization needs to initiate various actions including social welfare projects, media planning and taking other soft steps to manage these aspects. Sub Project Description: Chennai port need to take initiatives to build following social welfare projects by donating money and promoting the project so as the people take this project as a community development initiative: 1. Hospital for medical facilities: Chennai port may contribute certain portion of capital expenditure required to create a secondary care hospital. Chennai port can create a capital fund to fund annual operating expenses. Chennai port should be initiator of the project and take help of NGOs to gather money or manpower. The hospital should provide medical facilities to economically backward people at lower cost or free. 2. Schools: Chennai port may build a school for providing education to poor and backward people in the immediate vicinity of the port. 3. Vocational training institute: Similar to a school, Chennai port may create vocational training institutes for training of unemployed youth from poor families. For future manpower requirement relating to skills training given by

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the Institute, Chennai port can give preference to students of the institute to be recruited on contract basis. 4. Counseling centre: Chennai port can take initiatives in association with NGOs for promoting and opening up of counseling centre in the region. The centre will provide counseling service to socially and economically backward people in areas like removal of social vices. These centres will also be beneficial for large pool of labor of Chennai port for improvement of their personal / social lives.

Key Benefits expected from the Sub Project: Taking initiatives for implementation of these social welfare projects will improve the public perception of the port in general and will surely reduce the resistance, to some extent, against adverse impacts arising due to operation of the port within the city limits. Costs of Implementation: Since this project is a combination of several sub-projects and is entirely dependant on how ChPT may want to further its social initiatives, no costs have been specifically estimated. Deloitte however recommends that as a matter of prudence and social responsibility, ChPT must, if not more, atleast set aside 1% of their operating surplus every year towards such initiatives. Sub Project Dependencies: None Importance □ Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

Sub Project Name: Sub Project Owner:

City Development Projects Engineering Department Sub Project Duration:

General Description: One of the mission statements of Chennai port is to act as a catalyst for sustained development of the region. Chennai port also to be recognised as a socially responsible organization and responsible citizen of Chennai port needs to initiate various actions including city development projects, media planning and taking other soft steps to manage these aspects. Sub Project Description:

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Chennai port need to take initiatives to build following city development projects by donating money and promoting the project which will increase the visibility of port initiatives for city development and beautification: 1. Park or Garden: Chennai port may contribute towards creation of a park or garden within the city. The existing park may be built on the theme of port project. The park can also give initial briefing of port operations. The park can also serve as a media place for conducting exhibitions or display system for communication to general public about initiatives of the port in city development and social responsibility. Chennai port can take over some existing parks for operation and maintenance. Traffic Junctions: Chennai port can design or build traffic junctions at busy traffic junctions for better traffic management and providing resting facility to traffic police. Creation of facilities at traffic junctions are least cost option for promotion and communication offering highest visibility among general public. These traffic junctions also can be used to communicate about initiatives of the port in city development and social responsibility. Heritage building restoration: Chennai claims to be the ‘city of firsts’. It has many first to its credit due to first capital of British Empire in South Asia region. There are many heritage buildings like Marina seafront, Madras club, Museum Theatre and Connemara Library complex, etc. Chennai port can take up restoration, rehabilitation and improvement of the infrastructure of one or some of the heritage sites of the city. Sea Front Development: Chennai city has the famous Marina beach in the vicinity of the Chennai port. Chennai port can provide another beach for entertainment and pleasure of the citizens of the port. The port’s experience in port side construction esp. passenger terminal & berths and port environment management offers the great skill for creation of such project. Similar to parks and traffic junctions, such projects will be useful for communication and media purpose.

2.

3.

4.

Key Benefits expected from the Sub Project: Taking initiatives for implementation of these city development projects will improve the public perception of the port and will surely reduce the resistance, to some extent, against adverse impacts arising due to operation of the port within the city limits. These facilities also provide means for communicating and awareness building among wider public front about port’s initiatives. Costs of Implementation: Since this project is a combination of several sub-projects and is entirely dependant on how ChPT may want to further its social initiatives, no costs have been specifically estimated. Deloitte however recommends that as a matter of prudence and social responsibility, ChPT must, if not more, atleast set aside 1% of their operating surplus every year towards such initiatives. Sub Project Dependencies: None

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Importance □ Essential Sub Project Phasing 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 Desirable

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--------- Annexure-4 Alternative Scenario ------Capacity Assessment

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Alternative Scenario: Assessment of port’s capacity
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. An analysis of some comparable international container terminals like Centerm Container Terminal at the Port of Vancouver Canada and Terminal System Inc.’s, Vanterm Container Terminal indicates that future throughput capacity can be estimated with a conversion factor ranging between 22,000 teu/ha to 29000 teu/ha. The capacity of the proposed new container terminals at Chennai Port were therefore estimated assuming the factor as 27,000 teu per ha of land near to the upper range as the best case scenario and using 22,000 teu as an alternative scenario. The alternative scenario estimating port’s capacity against the assumption 22,000 teu per ha is presented below. Storage Area Requirement Sr No A B C D E F F1. Particulars Cargo to be Handled ( in MT) Cargo to be Handled ( in teus ) Total storage area requirement (in ha) 20072012 21.02 1.31 59.72 20122017 Year 20172022 65.78 4.11 186.88 20222027 108.65 6.79 308.66 25.06 283.60

40.76 2.55 115.78

F2.

F3.

F4.

Storage Area Gap to be Bridged Storage Area Available 25.06 25.06 25.06 Storage Area Gap to be Bridged 34.66 90.72 161.82 Identified Projects & Associated Storage Area Planned Projects and Storage Area Creation Container Terminal-2 Area to be developed is shown 35.00 35.00 35.00 in Drawing-1 Container Terminal-3 Area to be developed is shown 0.00 24.87 24.87 in Drawing-2 Container Terminal-4 Area to be developed is shown 0.00 0.00 29.67 in Drawing-3 Container Terminal-5 Area to be developed is shown 0.00 0.00 18.82 in Drawing-3

35.00

24.87

29.67

18.82

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G H

Total additional storage area possible to be developed Net deficit in storage area required which can not be bridged

35.00 -0.34

59.87 30.85

108.36 53.46

108.36 175.24

As shown above, the land which can additionally be provided, to cater increasing container traffic, is limited to 108.36 ha. This area of land with existing area of 25.06 ha, presently being used by CCTL, can be aggregated only to 133.42 ha. Now assuming the conversion factor as 22000 teu per ha, the port can cater only around 2.93 Mteu of containers by the end of phase-3.

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--------- Annexure-5 Alternative Scenario ------Iron Ore shifting to Ennore

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Alternative Scenario: Iron Ore shifting to Ennore Port
A scenario with Iron Ore getting shifted to Ennore port by the end of year 2012 is presented below: Given the above assumption, iron ore traffic numbers are expected to cease gradually from 10.66 Mtpa in 2007-08 to zero by the end of 2012. Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016 -17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 Growth (in %) 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% Demand Forecast ( in Mtpa) 11.39 12.31 13.29 14.35 15.50 16.74 18.08 19.53 21.09 22.78 24.60 26.57 28.69 30.99 33.47 36.14 39.04 42.16 45.53 49.17 Traffic Forecast (in Mtpa) 10.66 8.00 5.00 2.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

As the capacity assessment of all the parameters is already done in the main report. As the container terminal-4, which was proposed in phase 3 shall now be required to be taken up in phase-2 itself, the impact of this scenario is assessed below for storage capacity requirement, berth requirement and connectivity: Storage area Sr. No A B C Year 2007-12 No. of Containers to be handled (in Mteu) Total Storage area Requirement (ha) Storage area available (ha) 1.31 48.66 25.06 2012-17 2.55 94.34 25.06 2017-22 4.11 152.27 25.06 2022-27 6.79 251.50 25.06

Particulars

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D E

Storage Area Gap to be Bridged (in ha)

23.60

69.28

127.21

226.44

Planned Projects and corresponding Backup Storage Area conversion Area to be developed is shown in Drawing-1

E1. Container Terminal-2 35.00 35.00 35.00 35.00

E2. Container Terminal-3 Area to be developed is shown in Drawing-2 E3. Container Terminal-4 Area to be developed is shown in Drawing-3 E4. Container Terminal-5 Area to be developed is shown in Drawing-3 F Total additional storage area possible to be developed (ha) Net deficit in storage area required which can not be bridged 0.00 0.00 18.82 18.82 0.00 29.67 29.67 29.67 0.00 24.87 24.87 24.87

35.00

89.54

108.36

108.36

G

-11.40

-20.26

18.85

118.08

This shall not make any impact on the port’s capacity against storage but with this happening, it can be seen that there would not be any land storage constraint untill the end of Phase-2. There is a deficit of around 18.85 ha that too in by the end of Phase-3. The same can be dealt with as proposed in the main report by taking over the fishing harbour available in the near vicinity of the port. Berth Requirement The impact of this change on the berth requirement is assessed below: Berth Requirement Sr No 1 2 3 4 5 8 6 10 Particulars Cargo to be Handled (in Million Tonnes ) Total No of TEUs No. of Vessels AV parecel size (TEU's) Average length of berth required No. of days at berth per ship No of Berths required Total length of berths No of Berths of average 275.00 200712 21.02 1.31 900 1,460 200 1.6 4.7 944 3.4 201217 Year 201722 65.78 4.11 1,800 2,284 350 1.5 9.0 3150 11.5 202227 108.65 6.79 2,525 2,689 350 1.5 12.6 4419 16.1

40.76 2.55 1,350 1,887 250 1.7 7.8 1947 7.1

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11 12 13 13.1 13.2 14 14.1

14.2

14.3

14.4

15 15.1 15.2 16 16.1 16.2

length Existing Container Terminal No. 1 having 4 berths of 200.00 m 885 885 length each No of Berths of equivalent length 3.22 3.22 of 275.00 m No of Berths additionally required Total length of Berths required to 58.80 1061.59 be developed No of Berths of equivalent length of 275.00 m required to be 0.21 3.86 developed Berths to be newly developed Container Terminal-2 Proposed Berth length 800.00 800.00 Proposed No. of Berths 2.91 2.91 Container Terminal-3 Proposed Berth length 0.00 655.00 Proposed No. of Berths 0.00 2.38 Container Terminal-4 Proposed Berth length 0.00 360.00 Proposed No. of Berths 0.00 1.31 Container Terminal-5 Proposed Berth length 0.00 0.00 Proposed No. of Berths 0.00 0.00 Total additional Berths possible to be developed Total proposed berth length 800.00 1815.00 Total no. of proposed berths 2.91 6.60 (each 275 m) Net deficit in development of additional Berths Net deficit in total length of Berth -753.41 741.20 Net deficit in no of Berths -2.70 -2.74

885 3.22

885 3.22

2265.00 8.24

3533.75 12.85

800.00 2.91 655.00 2.38 360.00 1.31 853.00 3.10 2668.00 9.70

800.00 2.91 655.00 2.38 360.00 1.31 853.00 3.10 2668.00 9.70

-403.00 -1.47

865.75 3.15

As can be seen from above calculation, there is no impact on the port’s capacity against change in berth requirement. This scenario only indicated additional surplus of 1.31 berths in Phase-2 i.e. 2.74 against 1.43 berths. Connectivity With Iron ore shifting to Ennore port port’s capacity calculation against connectivity is presented below: Calculation of increased rail capacity Year Sr. 2007201220172022No Particulars 2012 2017 2022 2027 No. of containers 1 49,420 49,420 49,420 49,420 presently being handled by rail

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2

3

4

Additional capacity created by shifting Coal & Iron Ore Additional capacity created by developing an Off-Dock facility at Tondiarpet Housing Colony Total Nos. of containers which can be handled using rail links (in teu)

0

174,852

174,852

174,852

144,000

144,000

144,000

144,000

193,420

318,852

318,852

318,852

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- 1.4-13:
Phase-wise rail and road share

Sr. No. 1 2 3 4 5

Phase 2005-2006 2017-2012 2012-2017 2017-2022 2022-2027

Rail mode 6.73% 11.98% 20.11% 20.22% 5.42%

Road mode 93.27% 88.02% 79.89% 79.78% 94.58%

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- 1.4-14.
Analysis of port’s capacity with respect to road connectivity

Sr. No 1 2 3 4

Particulars Total Number of Mteu to be handled % traffic to be transported by rail mode % traffic to be transported by road mode Traffic in Mteu to be handled by road per annum Traffic in teu to be handled by road per day (assuming 300 working days per annum) Traffic in teu to be handled by road per hour (assuming 18 working hours per day) Total no. of lanes for container movement

20072012 1.61 11.98 88.02 1.42 4735

Year 201220172017 2022 2.54 20.11 79.89 2.03 6783 4.11 20.22 79.78 3.28 10934

20222027 6.79 5.42 94.58 6.42 21408

5

263 8.0

377 8

607 10

1189 12

6 7

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8

9 10 11 12 Note:

No. of Trucks/ teu to be handled per lane/hour on the port gate No. of trucks which are to be handled at any gate with 4 lane (2 inbound + 2 out bound) Average no. of trucks which can be handled per lane No. of trucks which can be handled on any gate Net Deficit (9-11) in Nos Negative (-) deficits indicates surplus

33 132 50 200 -68

47 188 50 200 -12

61 243 60 240 3

99 396 60 240 156

* In this scenario, the need of further expansion of both the gates is envisaged. Addition of 2 more lanes to one of the gates is considered in phase 3 and similarly the addition another 2 more lanes to another gate is considered in phase 4. The table below indicates the analysis of port’s capacity against road connectivity for transporting cars:
Analysis of port’s capacity with respect to road connectivity for transporting cars for exports

Year 2007Sr No 1 2 Particulars No. of Cars expected to be handled No. of cars transported in one trailer Total No. of trailers required for 3 transporting forecasted nos. of cars Total numbers of trailers to be handled by road per day (assuming 345 4 working days per annum) Number of trailers to be handled by road per hour (assuming 20 working 5 hours per day) No. of dedicated lanes for car trailer 6 movement No. of trucks to be handled per 7 lane/hour at the port gate 5 9 15 17 1.0 1.0 1.0 1.0 5 9 15 17 98 173 304 338 33,783 59,537 104,924 116,667 2012 202,696 6 20122017 357,219 6 20172022 629,542 6 20222027 700,000 6

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

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