Kr­ish­na­p­at­nam port adopts ag­gres­sive pric­ing strat­egy

Business Standard - - ECONOMY - ADITI DIVEKAR

Ag­gres­sive mar­ket­ing is help­ing the con­tainer ter­mi­nal at the pri­vately-built port of Kr­ish­na­p­at­nam in Andhra Pradesh’s Nel­lore district be­come a bright spot on the east coast.

Amid the re­gion’s low ca­pac­ity util­i­sa­tion, the Navayuga Engi­neer­ing-op­er­ated ter­mi­nal raised its mar­ket share to seven per cent in FY17 from four per cent in FY16. “Cargo in AndhraTe­lan­gana and north and east Kar­nataka, which is cur­rently go­ing to other ports (like Chen­nai), have an in­stant cost ad­van­tage on dis­tance if they switch to Kr­ish­na­p­at­nam. So, the first leg of our mar­ket­ing strat­egy is to bring this to the notice of cargo own­ers of this re­gion,” Vinita Venkatesh, di­rec­tor at the port’s con­tainer ter­mi­nal, told Busi­ness Stan­dard.

Chen­nai is among the largest and busiest ports on the east coast for con­tainer cargo. Dur­ing FY15-17, the through­put of con­tainer ports on the east coast has moved in a nar­row range of 3.1-3.9 mil­lion TEU, with util­i­sa­tion at 42- 48 per cent. Kr­ish­na­p­at­nam saw port util­i­sa­tion of 21 per cent in FY17 and is ex­pected to see 45-50 per cent this year.

“We are aim­ing to hit 500,000 TEU this year from 255,436 TEU last year, a dou­bling of cargo,” said Anil Yend­luri, di­rec­tor and chief ex­ec­u­tive of­fi­cer.

The CVR Group-pro­moted com­pany is also of­fer­ing a price which is a siz­able dis­count to oth­ers in the re­gion, the sec­ond leg of its mar­ket­ing strat­egy. “Our pric­ing is cost-based, not mar­ket-based. Since we have our own in­fra­struc­ture | | from ware­hous­ing, trans­porta­tion and cus­toms li­cences, our price model is con­nected to the cost we in­cur, not de­mand and sup­ply. The idea is to of­fer a price point which is com­mer­cially and eco­nom­i­cally ra­tio­nal for cargo own­ers to con­sider us,” Venkatesh ex­plained, with­out di­vulging dis­count de­tails. “Our price of­fer­ings are help­ing cus­tomers bring down their to­tal lo­gis­tics cost by 30 per cent.”

It is also looking at draw­ing in large ship­ping lines, which typ­i­cally pre­fer large city- con­nected ports. And, looking for new types of cargo — it has brought in ce­ment, cot­ton yarn and shrimp.

“With the kind of cost­based pric­ing Kr­ish­na­p­at­nam is pro­vid­ing, its prof­itabil­ity could be lower but sus­tain­abil­ity would be higher, de­spite the heavy dis­counts it is of­fer­ing as com­pared to its com­peti­tors,” said Subrata Be­hera, man­ager of port & con­tainer re­search at Drewry Ship­ping Con­sul­tants.

Chen­nai, be­ing a ma­jor port, has its pric­ing based on the Tar­iff Au­thor­ity for Ma­jor Ports (TAMP) reg­u­la­tions, and does not en­joy the flex­i­bil­ity a pri­vate port does, said in­dus­try ex­perts.

“Even if Chen­nai of­fered a cost-based pric­ing struc­ture, its price point would have still been higher than Kr­ish­na­p­at­nam, given the roy­alty com­po­nent that gets added to Chen­nai’s cost, apart from other items,” said an ex­pert, on con­di­tion of anonymity.

With more pri­vate port con­tainer ca­pac­ity com­ing up on the east coast, it is per­haps time that gov­ern­ment-owned ports be­come vo­cal about the need for more pric­ing power.

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