Document of The World Bank FOR OFFICIAL USE ONLY LJ. Z387- Zk) Report No. 4826-IN STAFF APPRAISAL REPORT INDIA NHAVA SHEVA PORT PROJECT February 17, 1984 South Asia Projects Department Pcower and Transportation Division This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY QLUIVALENTS Curreney Unit Rupee (Rs) US$1.00 Rs 9.75 US$0.t0257 Rs 1.00 US$102,56" , Rs 1,0r0 ,000 SYSTEM OF WEIGHTS AND MEASURES: METRIC Metric British/US System I meter (n) 3.281 feet 1 square meter (m2) 10.760 square feet 1 kilometer (km) - 0.621 mile 1 ton-km 0.621 ton-mile 1 passenger-km (pass-km) 0.621 pass-mile GOVERNMENT OF INDIA FISCAL YEAR April 1-March 31 FOR OFFICIAL USE ONLY ACRONYMS AND ABBREVIATIONS AC - Alternating Current BG - Broad Gauge (1.676 m) BMC - Bombay Municipal Corporation BMR - Bombay Metropolitan Region BMRDA - Bombay Metropolitan Regional Development Authority BPT - Bombay Port Trust CFS - Contaiuer Freight Station CIDCO - City Industrial Development Corporation of 1!aharasbtra ci£ - Co8t, insusance, fTeight CY - Container Yard DF - Development Fund dwt - Dead weight tons ER - Econoimic RetuTr ERR - Economic Rate of Returu PCL - Full container loads fob - Free on board GOt - Government of India Cox - Government of Maharashtra CRT - Gross Registered Tons RIPi - Eove (India) Private, Itd. hp - Horsepower hz - Hertz or cycles per second ICB - International Competitive Bidding ICD - Inland Container Depot IR - Indian Railways LCB - Local Competitive Bidding MOST - Ministry of Shipping and Transport NSPT - Nhava Sheva Port Trust NTPC - National Transport Policy Committee HIS - Management Information System OMF - Organization, Management and Finauce PIU - Project Implementation Unit POL - Petroleum, Oils and Lubricants RITES - Rail India Technical and Economic Services RRF - Revenue Reserve Fund SFYP - Sixth Five-Year Plan TEl - Twenty Foot Equivalent Unit MNDP - United Nations Development Program This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. INDIA NHAVA SHEVA PORT PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. TRANSPORT SECTOR ..................................... ......... 1 A. Introduction . ...1....................... 1 B. Transport Planning and Coordination . ............ 3 C. Transport Policy and Investment Allocations ............... 5 ItI PORTS * .........................* * * 7 A . General . . . . . . . . . . . . . . . . . . . . . . . . . . . . * . , * * 7 B. Traffic, Facilities and Operations .... .................... 8 III. BOMBAY METROPOLITAN REGION ......... .......................... 9 A. General .................................................... 9 B. Bombay Port .................................... --. .. ........ 10 C. Nhava Sheva Port Trust ..... . o. ......... .... .............. 11 IV. THE PROJECT ............................ ....... . o ......... . .... 13 A. Background ............. ................................... 13 B. Project Objectives and Concept ..................... 14 C. Project Description ......... . 16 D. Cost Estimates ..- .... ................... . 18 E. Financing Plan ...... # ........ 0....... I-.-..-.--.---- 19 F. Execution of the Project .................. .......... 20 G. Procurement .. **......... ....... *.. ....-..*... 21 H. Disbursements ..... ............... ........ 22 I. Monitoring .. ............................. ............... 23 J. Envizonmental Impact .......... ....................... 24 K. Port Efficiency Indicators ..... 24 The report was prepared by Mrs. I. Bradfield (Economist), E. Frankel (Port Adviser), A. Sabeti (Railway Specialist), J. Sopher (Financial Analyst), and R. Vinekar (Port Engineer). ii Page No. V. ECONOMIC EVALUATION ...................... ... ...... ..... .... * . 24 A* General ........o...,*..,* 24 B. Economic Benefits .................. .. 25 C. Project Costs . .... . .. *a...*.. . ..... .....a...a.. aa.a............. 27 D. Economic Returns, Sensitivity and Risks .................................a 27 E. Unquantifiable Benefits ..................... ...... ..... . 28 VI. FINANCE . . . . ... .. . .. .................*.....*............ 28 A. Introduction - Past and Present Financial Situation ....... 28 B. Financial Resources ....... ... .. .......* ... ....*.. .. *.. 29 C. Pricing . ........... 32 D. Future Finance ....... .......*..*............ ....** 35 B. Sensitivity .3 .*. ,,. ** ,* * * 39 F. Internal Financial Rate of Return........................ 39 VII. AGREEMENTS REACHED AND RECOMMENDATIONS ....................... 39 ANNEXES Annex I - Outline Requirements for a Training Program for the Staff of Nhava Sheva Port ......................... * 42 Annex 2 - Port Efficiency Indicators ........................,... 46 Annex 3 - Traffic Forecast ......*.* ......... ....... .. ... ..... 48 Annex 4 - Economic Analysis Methodology............................ 51 Annex 5 - Selected Documents and Data Available in the Project File.. 53 Annex 6 - NSPT Profit and Loss Statement - Year Ending March 31 ..... 54 Annex 7 - NSPT Cash Flow Statement - Year Ending March 3L ........... 55 Annex 8 - NSPT Balance Sheet - As at March 31 ....................... 56 Annex 9 - NSPT Income Statement Indicators .......................... 57 Annex 10 - NSPT - Assumptions to Financial Projections .... 58 Annex ll - NSPT Internal Financial Rate of Return ........ ............ 67 TABLES Table A - Traffic Handled at Major Ports of India *******............ 68 Table B - Estimated Schedule of Disbursements ....................... 69 Table C - Traffic Projections ......... . . . . . . . . .. ..*. . . . . . . . . . . .......... 70 Table D - Vessel Sizes Assumed and Associated Ship Costs .....e..*e . 71 Table E - Cost Savings Per Ton Due to Larger Vessels ................ 72 Table F - Assumptions in Computing Cargo Delays ..................... 73 Table G - Cost Estimates ........................ .* . . ** . . ..... 74 CHARTS Chart L - Staff of Project Implementation Unit ...................... 76 Chart 2 - Implemeatation Schedule ............ ....................... 77 iii APPENDICES Page No. Appendix A - Organization, Management and Finance (Accounting Studies) 78 Appendix B - Brief Description of Two Technical Assistance Studies ... 82 MAPS World Bank Map No. 17680 World Bank Map No. 17644 World Bank Map No. 17645 INDIA I NHAVA SHEVA PORT PROJECT STAFF APPRAISAL REPORT I. TRANSPORT SECTOR A. Introduction 1.01 India covers an area of about 3.3 million square kilometers and includes parts of the Himalayan mountain system, the Indo-Gangetic plain, and the Deccan plateau of peninsular India. Total population is about 684 million with 23.7% living in urban areas (1981 census) and the remainder in small villages located mainly in the Indo-Gangetic plain, in the basins and deltas of other main river systems, and along the coast. The principal centers of population and economic activity are Calcutta, Bombay, Delhi and Madras. Other main centers are Hyderabad, Bangalore, Ahmedabad and Kanpur. The main agricultural areas are located in the Indo-Gangetic plain. The main coal and iron ore deposits are found in the eastern part of the Gangetic plain, where the majority of steel manufacturing and heavy engineering industries are also located. 1.02 Deliberate government policy, formulated to cope with the con- centration of manufacturing and trading activities in a limited number of centers and the dispersal of the majority of the population in a large number of small villages, has caused rail and road systems to become the dominant modes of transport, with the railway system providing the main trunk services while the highways function primarily as a feeder system to the railways. The traffic using the various transport modes in 1965 and 1981 are Indicated In Table 1.1 below. The data are rough estimates, but suffice to indicate the main features of the system. Traffic figures are rounded to the nearest billion. Table 1.1 Allocation of Traffic by Transport Mode 1964/65 and 1981/82 Billion Ton-km Billion Pass-km Annual GrowTh Mode 1964/65 1981/82 1964/65 1981/82 Ton-km Pass-km Rail 107 174 93 229 2.9 5.2 Road 31 92 76 331 6.6 8.3 Other 12 12 2 2 0.0 0.0 TOTAL 150 278 171 542 3.7 7.5 -2- Agricultural and mineral products account for an estimated 70X of the total revenue freight transport volume. A large part of agricultural production and most mineral freight and manufacturing production have either origin or destination in Northern India, where population and heavy industries are concentrated. The major part of foreign trade is channelled through the ports of Bombay, Calcutta and Madras. 1.03 In a country with the size and diversified economic structure of India, transport plays a vital role. Efficient and reliable transport serv- ices must be provided; given the scarcity of financial resources In the economy, these objectives must be accomplished at minimum cost. Of paramo4nt importance, the vital production activities of the economy must not be hindered by lack of transportation. 1.04 Traditionally, transport has kept pace with economic development in the country. During the late seventies, however, the discipline and morale of labor decreased markedly in both transport agencies and their freight users alike; at the same time, transport infrastructure and facilities were given a lower priority for investment funding than other sectors such as agriculture, energy and industry. Other factors, sueh as substantial increases in the volume of traffic, as well as the railways' inability to quickly adjust to the changed pattern of movement, compounded the severity of the sector's lagging development. As a result, ports (par- ticularly Bombay) and railways, the backbone of the country's system of trade, were unable to cope adequately with traffic demand. The road tran- sport system, never designed to carry sucth large traffic volumes, had dif- ficulty absorbing the traffic which the railways were unable to accommodate; it did so only at high cost to the economy. As a result, shortages of vital commodities such as coal, cement and fertilizer, brought about stoppages and dislocations in critical economic sectors. More recently, however, the system's ability to handle this increased load improved markedly as a result of improved operational efficiencies in the railway and port subsectors. Average ship waitlng time at Bombay Port dropped from 30 to 40 days in mid-1980 to about ten days in 1982. 1.05 The railways have traditionally been the main mode of motorized transport in India. In the early 1950s, the railway was so dominant that its share of motorized land transport was estimated at 90% of total ton-km and 75% of total pass-km. Over the following two decades, freight and pas- senger transport using the highway system increased rapidly while the rail- ways' share declined to 63% of total freight traffic and 41% of total pas- senger traffic. The railways' share of freight traffic declined due to the increasing movement of high-value goods over short and medium distances, where transport by highway has inherent advantages. The rail'ways' share of passenger traffic declined because long-distance passenger traffic has increased at a slower rate than short-distance commuter traffic; except for the dense population centers of Bombay, Calcutta and Madras, short distance commuter traffic can be carried more economically by road. -3- 1.06 Compared with railways and highway transport, shipping plays a lesser though still significant role in the country' s transport system. In 1982, India's national merchant fleet was comprised of 407 vessels (6 million GRT). Of these, 68 (0.3 million GRT) plied coastal routes while 339 (5.7 million GRT) served the overseas trade. The share of India's overseas trade shipped in Indian carriers was 32.8% in 1981 and is expected to increase as a result of the Government of India's (GOI) policy to contract for imports on an fob basis and exports on a cif basis. Coastal shipping traffic, which has averaged about 3.5 million tons per annum during the past decade, has poten- tial for growth if some of the coal, salt and cement currently moved by rail is diverted to coastal vessels; this would not only free rail capacity for better use but also provide needed return cargo for coastal vessels. 1.07 Currently, the other modes of transport have only minor importance as goods and passenger carriers; pipelines account for only about 3% of total freight traffic ton-kms whlle air transport accounts for only about 1% of total pass-kms. These modes, however, provide important specialized serv- ices, and each has considerable scope for expansion because of the size of the country and its geographical features. In fact, projects to expand pipelines for the transport of crude oil, gas and petroleum products are currently being undertaken by GOI. Inland water transport, which has mainly been limited to the North Eastern Region (West Bengal and Assam), Andhra Pradesh, Goa and Kerala, has not been a significant medium for carrying freight. Recently, however, greater attention has been paid to inland water transport because of its potential to reduce ton-km costs, energy consumption and surface congestion. GOI has declared the Allahabad-Haldia stretch of Ganga-Hooghly River as a national waterway. GOI is actively considering the creation of an Inland Waterways Authority of India to regulate and control traffic on national waterways. B. Transport Planning and Coordination 1.08 The Indian transport sector is under the jurisdiction of various ministries: ports, shipping and roads are under the Ministry of Shipping and Transport (MOST); railways are under the Ministry of Railways; civil aviation under the Ministry of Tourism and Civil Aviation; and pipelines under the Ministry of Petroleum. Planning and coordination is undertaken within the context of overall national and regional plans. 1.09 The present Central Government's institutional arrangements for coordinating the transport sector consists of: (a) a Cabinet Committee on Transport and Tourism; 1/ (b) a Secretaries' Committee on Transport, Tourism and Aviation; 1/ (c) a Transport Development Council and an Inland Water Transport Board (for coordinating policies between the Center and the 1/ These committees are standing committees which are not concerned with the day-to-day planning process. They provide a forum for discussion and their recommendations are not binding. -4- States); and (d) an Interstate Transport Committee (for regulating interstate road transport). While railways, shipping and major ports are exclusively under GOl's authority, the Central and State Governments share jurisdiction over highways and road transport, minor ports and inland water transport. 1.10 This organizational structure, which has resulted in insufficient coordination within the transport sector, caused great concern and was the subject of extensive discussions between GOI and the Bank Group for several years. In view of the increasing need to address sector specific issues (such as reducing the sector's consumption of oil as part of a coordinated national effort to reduce oil imports) and formulate investment, pricing and operational policies aimed at minimizing the transport sector' resource cost to the economy, a special study group, the National Transport Policy Committee (NTPC), was created in April 1978. NTPC, assisted by experts provided by the United Nations Development Program (UNDP), undertook a study which was presented to GOI in 1980. The Bank reviewed the study's sugges- tions and recommendations and found that they can provide a sound strategic framework for developing the country's transport sector. The study's prin- cipal recommendations for the port subsector include: (a) planning for port capacity must be undertaken long before congestion actually materializes; (b) specialized facilities (e.g. container handling) must be provided at the major ports and complementary rail and road facilities should be created, in order that the full benefits of containerization be realized; (c) significant additions to Bombay Port's capacity are needed to relieve its congestion. Since such expansion is not feasible in the existing port, Nhava Sheva was identified as the technically suitable site for development of an urgently needed deep-draft port for servicing modern container and bulk cargo vessels; (d) major ports must be provided with adequate broad gauge rail and highway linkages; (e) charges must be sufficient to cover fully each port's opera- tional costs and yield a 12% return; and (f) the Port Trusts should be given greater freedom to manage their facilities. GOl approved main NTPC recommen- dations in a cabinet resolution adopted In March 1982. Implementation of the study's recommendations has begun recently; because the country is so vast and has such a complex government structure, each major transport policy change will be accomplished only after a myriad of difficulties have been overcome. 1.11 Proposals for investments in the transport sector originate from the separate ministries. The Planning Commission assesses these proposals and those which are approved are included in the national plan. The national plan, once formulated by the Planning Commission, must subsequently be approved by the Government and the National Development Council. 1.12 The overall responsibility for transport pricing lies with the Central Government, except for road transport, the responsibility for which is shared among the center, state and local authorities. As a result, road user charges and taxes vary considerably, in terms of both their level and -5- structure, from one state to another. A number of studies I/ have recom- mended improvements to make pricing more efficient, less complicated, las time-consuming, more uniform and more closely related to costs. Some of these recommendations have been adopted, in whole or in part, by a few states; however, a simple standardized system of cost-based prices still appears a distant goal. In contrast, the Rail Tariff Enquiry Committee convened by Government has studied the railways' rate structure and has recommended a number of measures to improve, inter alia, the tariff struc- ture, and many of these have already been implemented. In the port subsec- tor, a recent commission (Ambrose Committee) has studied the various tariffs in use at all the different ports and has made many recommendations aimed at improving their financial position. 2/ COI is currently reviewing the com- mission's report. C. Transgort Policy and Investment Allocations 1.13 GOI's economic objectives for the period 1980-85 were stated in the Sixth Five-Year Plan. The Plan provides for stimutlating economic growth by emphasizing investments in irrigatior, rural development and, electric power. In the current Five-Year Plan, Lhe share of transport in the total plan outlay is only 12Z (Table 1.2), a substantial decline since the peak of 24% during the Second Five-Year Plan period (1956-61). As a result of declining investments in transport since the mid-sixties, capacity con- straints have been experienced by all modes. Railways, ports and major highways are currently at near saturation points with little resilience in the total transport network to cope with sudden and unforeseen demands. In recognition of this problem GOI has adopted a long-term policy of developing the transport sector to meet the increased demand for transport resulting from growth in the economy. This policy would be implemented through (a) increased investments in the highwgy sector with particular emphasis on providing improved facilities in rural areas; (b) improved efficiency of railway transpOrt operations; (c) increaginR the capacitv of container handling facilities at maior pots2; and (d) deconzestint the central business Aistricts of large metropolitan areas. 1/ Motor Vehicle Taxation Enquiry Committee (1950), Wankhede Study Group (1971), National Transport Policy Committee (1980). 2/ The principal recommendation is that tariffs should be sufficient to enable each port to cover its operating expenses including depreciation and yield a rate of return on historically valued assets of 12%. The other recommendations are aimed primarily at furthering that objective. -6- Table 1.2 Public Investment in TransDort Relative to Total Plan Investment (1951-1985) (Rs Million)Ja Plan Period Total Plan Transport Percent Transport 1951-56 (First) 8,540 1,890 22 1956-61 (Second) 17,430 4,130 24 1961-66 (Third) 26,640 6,150 23 1966-69 (Inter) 25,770 4,010 16 1969-74 (Fourth) 28,280 4,510 16 1974-78 /b(Fifth) 40,670 5,800 14 1980-85 (Sixth) 85,450 10,580 12 /a All figures are In 1970/71 prices. lb The 1974-1979 Five-Year Plan was cut short by the defeat of the Congress Government in 1978. 1.14 The allocation of public investment funds for transport between the various subsectors, with the exception of pipelines, is shown in Table 1.3 below. The figures for the period 1951-78 represent actual allocations while the 1980-85 figures represent planned allocations: Table 1.3 Public Investment In Transport Allocated by Subsector UPercent)~ Rail Roads RTCs/a Ports Ships Aviation 1951-56 50 34 0 7 4 5 1956-61 65 20 2 3 5 5 1961-66 67 22 1 5 2 3 1966-69 50 30 5 6 3 6 1969-74 37 34 5 11 6 7 1974-78 38 28 9 11 9 5 1980-85 42 28 10 6 6 8 Average 50 28 4 7 5 6 /a Public Sector Road Transport Corporations, mainly for passenger transport. 1.15 The railway and road transport subsectors together have received more than 80% of the public investment funds allocated to transport during the past three decades. In early plan periods railways have received an average of about 60% more investment funding than the road and road transport -7- subsectors. In recent Plan periods, ti,> relative balance has changed, reflecting the rapidly expanding role of road transport. The large invest- ment allocations to the port subsector during the 1969-78 period reflects an expansion program, now substantially completed, on the east coast. The Sixth Plan alloaection (1980-85) to the port subsector includes only the cost of land acquisition and engineering services for the construction of a n%!w port at Nhava Sheva, which was approved by GOI in early 1982; the bulk of expendi- ture on the proposed port is expected to be incurred during the Seventh Plan (1985-90). II. PORTS A. General 2.01 Ports in India are divided among those controlled by the Central Government and those controlled by maritime State Governments. The Central Government controls the major ports, including those at Bombay, Calcutta, Madras, Cochin, Vishakapatnam, Paradeep, Mormugao, Kandla, Mangalore and Tuticorin. The major ports are governed by the Major Ports Trust Act 1963; they are allowed little autonomy to make investment decisions and tO manage their labor relations. About 178 ports are administered by State Govern- ment/Union Territories, through varying institutional arrangements, with the help of local advisory bodies. 2.02 Since the mid-1970s India's foreign trade has been marked by a rapid growth of containerJlzed traffic as the container trada began to penetrate the US-Europe-Middle East-Indian Subcontinent routes. Within a short period of six years between 1975/76 and 1981/82 the volume of container cargo increased manifold at Bombay, Cochin and Calcutta despite draft limita- tions and inadequate thore facilities to handle containers at these ports. In Bombay the share of container cargo as percent of total general cargo Increased from almost nothing in 1973/74 to about one-third in 1981/82. Such changes in the maritime transport system require transformation of port terminal facilities to accomplish high-speed cargo handling and the develop- ment of intermodal networks for onward movement of containers to and from inland destinations. The proposed project addresses these requirements. 2.03 The Bank has only been involved in five projects in the Indian port and shipping subsectors, including one shipping project and four port projects. Of the four port projects, two involved Calcutta while the other two involved Bombay and Madras, respectively. The five projects were financed by three IBRD loans and two IDA credits, providing an aggregate of about US$160 million. The last Bank financing for a port project was approved in 1962; since then, the Bank has not participated in port projects, primarily because GOI preferred not to use International Competitive Bidding (ICB) for selecting port construction contractors or for purchasing equip- ment. In recent years, as serious delays were experienced in obtaining deliveries of equipment ordered from domestic factories and as port -8- technology was changing rapidly, GOI's attitude toward using ICB in the port subsector has changed considerably. B. Traffic, Facillties and Operations 2.04 In 1981/82 and 1982/83, the ten major ports serviced 9,315 and 6,639 vessels carrying an aggregate of 88 and 69 million tons of cargo, respectively. Table A itemizes the tonnages passing through each major port. The lower traffic volume for 1982/83 reflects the impact of the recession and decreased trade. The principal cargoes handled at the major ports include crude oil and petroleum, oils and lubricants (POL), iron ore, fertilizers (including raw materials), coal and containerized and break-bulk general cargo. Most major ports have specialized facilities. Bombay, Calcutta, Haldia and Cochin have oil terminals for servicing tankers. Mor=ugao, Madras, Vishakapatnam, Paradeep and Haldia have mechanized berths for loading iron ore. Kandla and Haldia have mechanized berths for discharging fer- tilizers; at Bombay, this commodity is handled using partially mechanized facilities. All the major ports have facilities for handling break-bulk general cargo. The throughput of containerized cargo has grown markedly in recent years; however, until recently none of the major ports, except Haldia, had specialized facilities for handling containers. At present the ports at Bombay, Madras and Cochin are each providing specialized berths with suitable -quipment and back-up facilities for handling containers. 2.05 In order to draw full benefits from the growing trend toward con- tainerization, 00I wishes to promote inland movement of containers. As a result, the Ministry of Railways has developed plans to establish Inland Container Depots (ICD) in Delhi, Ahmadabad, Nagpur and Bangalore. Unit trains carrying containers are expected to run between the major ports and the ICDs. GOI has already made necessary adjustments to allow consignees to obtain customs clearances for the contents of their containers at ICDs; as a result, containers can be transported to and from the ICDs withcat having to be opened at the port. The ICD at Bangalore is already handling containers shipped through the port of Madras. The movement of containers between Bombay and Delhi is now scheduled to begin in March 1984 after a long delay due to opposition from Bombay Port's labor unions. 2.06 During the last decade, congestion was a serious problem at some of the major ports, especially Bombay. A number of factors, such as inade- quate or unsuitable cargo handling equipment, inadequate storage space, insufficient capacity to handle road and rail traffic and poor scheduling of fertilizer vessels leading to bunching, have adversely affected port operations; however, more than any of these factors, labor problems were responsible for many of the operating inefficiencies at the major ports. During the 1970s, a decline in the productivity of dock workers and frequent work stoppages contributed substantially to the increase in waiting and turnaround times for vessels. Recently, labor relations have improved and during the last two years strikes have not beset any major Indian ports with a consequent reduction of congestion. -9- III. BOMBAY METROPOLITAN REGION A. General 3.01 While Bombay is India's second most populated city, it is the country's most important industrial, commercial and financial center. Its high rate of economic development, combincd with high overall levels of employment, have caused Bombay to experience substantial urban growing pains. GOI has a long held national policy of limiting the growth of larger metropolitan areas; within that context, the Central, State and Local Govern- ments have all adopted policies aimed at discouraging new activity within the city while trying to relocate existing activities to the city's environs. 3.07 Although the area of Greater Bombay (the part of the Bombay Metropolitan Region (BMR) falling under the jurisdiction gf the Bombay Municipal Corporation (BMC)), is very large (about 4;8 km ), much of its population and economic activity is concentrated in the old island city at the area's southern flank (Map No. IBRD 17680). The island city is a long and narrow strip demarcated by Colaba Point at the southern tip; Mahim, a Western Railway junction, at the northwest extremity; and Sion, a Central Railway junction, at the northeast extremity. The two north-south railway lines divide the island city into separate functional areas. Residential neighborhoods lie largely to the west of the railway lines; the island's eastern shore is dominated by port-related activities, warehousef and wholesalers. Although the island accounts for only 15.5% (68 km) of the metropolitan area's total land surfaces, it houses 51% of the area's popula- tion (in some districts at very high densities), 71% of the area's employ- ment, including 60% of the area's factory jobs. While sucb concentration is not inherently bad and is typical of many monocentric cities, the narrowness of the southern end of the island and the area's consequent dependence on a very limited number of north-south rail and road arteries have led to a nearly paralytic congestion of the central city and have eliminated most of the options for spatial redistribution within the city itself. 3.03 The existing docks at Bombay Port are located along the island's eastern waterfront near its southern tip. All traffic moving between the port and the mainland must cross bridges about 30-50 kms north of Bombay Port to connect with National Highway 4; these bridges can only be reached by travelling Bombay's entire length through its eastern corridor of city streets, then proceeding along relatively congested semi-urban roadways. Traffic demands on Bombay Island have continued to grow, making road access to the existing port ever more difficult and costly. Shifting certain port activities away from the congested island will not only reduce land access costs, but also remove some of the pressure that would otherwise be exerted on Bombay's road system. These considerations provide good support for GOI's decision to build a new specialized port facility at Nhava Sheva located on the mainland, only 20 kms from National Higlhway 4 in an area where access and service roads can be built cheaply and easily. -10- 3.04 The Bank has participated ift financing three projects aimed at developing BMR, using two IDA Credits (in an aggregate amount of US$225 million) and one IBRD Loan (US$25 million). These projects have emphasized upgrading urban infrastructure, mainly water supply and sewerage and urban transport systems. Th- Bank has now shifted some of its emphasis in an attempt to support the urban poor directly and has recently appraised the Bombay Urban Development Project, which primarily addresses land develop- ment and shelter needs of the urban poor. Future projects will seek to develop light industries in port cities and both agro-processing and market- ing services in small towns. The proposed Nhava Sheva development would enable GOI and the Bank jointly to support the orderly development of an urban center containing considerable job opportunities while, at the same time, relieving some of the pressure on the Bomabay Island city. B. Bombay Port 3.05 Currently, Bombay handles about 16 to 17 million tons of cargo per annum. About eight million tons of dry cargo is moved across the Indira, Prince's and Victoria docks; the remaining cargo is handled at the bunders, which service mainly POL traffic and oceangoing sailboats. The volume of throughput handled at the three docks grew from about five million tons in 1945/46 to about eight million tons in 1980/81, an increase of only 60% during a 35-year period. This slow growth largely reflects the dampening impact of severe congestion and labor problems experienced at Bombay port in the past two decades and GOI's deliberate policy of decongesting Bombay city by diverting traffic to other ports. The volume of throughput handled at bunders, however, increased nearly fivefold from two million tons in 1945/46 to 9.5 million tons in 1980/81; this growth reflects primarily increases in POL traffic after the comnissioning of the oil refineries in the 1950s. 3.06 General cargo is now increasingly containerized. The number of containers passing through Bombay Port has grown from 2,500 per month in 1978 to about 11,000 per month in 1982. Most of the containerized cargo is handled at two improvised berths, which occupy only about ten acres of land at Indira Docks. 3.07 In response to the rapid growth of container traffic in the past few years, the Bombay Port Trust (BPT) has initiated measures to increase the port's capacity to handle ccontainer traffic. Some old transit sheds have been razed to provide larger staging areas. Two container yards have been developed outside the port area and various container handling equipment have been procured. These improvements are, however, intended to meet the short-tenm needs of the existing and expected traffic at Bombay Port in the next few years. Projected container and bulk cargo traffic beyond 1988 would require provision of modern container and bulk haadling facilities which cannot be accommodated at Bombay Port due to draft limitations and the physical constraints posed by the limited land. Moreover, even if improved facilities at Bombay Port could handle additional traffic, its distributional -11- impact on the city streets would be chaotic, seriously straining the capacity of already congested streets. 3.08 For this reason, after many years of internal discussions, GOI approved the development of new port facilities at Nhava Sheva. The proposed site is located along a natural deep-water channel and deep-water berths there could accommodate ships of up to 70,000 dvt. In comparison, the Bombay Docks cannot handle 6hips larger than 22,000 dwt. The proposed site includes substantial undeveloped land which could house large staging and operating areas, and intermodal transport facilities needed to move containers in and out of the port quickly. Also, since Bombay Port has constraints in develop- ing adequate facilities for handling dry bulk cargo, GOI has proposed build- ing speclalized facilities to handle this traffic at Nhava Sheva. Thus, in the long run, GOI intends that Nhava Sheva would handle most containerized and all dry bulk cargo passing through the area while Bombay Port would handle mostly break-bulk cargo, POL and passenger traffic. 3.09 Coincident with developing the proposed project, GOI has been encouraging the development of New Bombay, a satellite city across Thana Creek from Bombay Island, in the immediate vicinity of the proposed project's site. GOI hopes that the Nhava Sheva port would stimulate the development of the satellite city. The City and Industrial Development Corporation of Maharashtra (CIDCO) undertook the initial zoning and planning of the area, including the proposed port. The land use plan that provides for the satel- lite city and the new port, known as the Bombay Metropolitan Regional Development Plan (BNIRDP), has been approved by the Government of Maharashtra (GOM). GOM took this action in the belief that various decongestion measures, including: (a) the relocation of wholesale markets from south to north Bombay; (b) the construction of an east island tollway and truck ter- minal at Wadala-Anik; and (c) the introduction of an area traffic management scheme in downtown Bombay would not, by themselves, be sufficient to contain or decrease urban congestion in the Bombay Island city. GOM has notified for acquisition all land covered by the BMARDP and taken possession of some areas required for the satellite city and the port (para 4.21). 3.10 The proposed project is expected to have an important catalytic impact on the growth of New Bombay which was conceived as a polynuclear population center with separate concentrations at Vashi, Taloja, Belapur, Panvel and Uran. Based on the findings of a study, the port and its related activities in the Uran area are expected to generate about 50,000 new jobs. Thus, the proposed project could result in far more new jobs than any other project under consideration for the vicinity of New Bombay and provide an impetus to relocate government offices and commercial establishments. C. Nhava Sheva Port Trust 3.11 In 1981, MDOST retained Howe (India) Private Limited (HIPI) to develop a Detailed Project Report (DPR) containing the port's schematic plan and estimated costs and benefits. In early 1982, GOI approved the proposed -12- project and MOST was charged with providing the financial and manpower resources for its further development. 3.12 In May 1982, GOI formed the Nhava Sheva Port Trust (NSPT) as an independent agency, with its responsibilities and powers defined by the Major Ports Trust Act 1963, operating under MOST's Jurisdiction. As GOI intended that HIPL continue to conduct the detailed development of the project under MOST's direct leadership, NSPT was furnished with small offices in Bombay and a skeletal staff, and was charged with limited responsibility for overseeing the proposed project's technical preparations, especially those required to secure and develop the site. Since then, NSPT has established a Project Implementation Unit (PIU), staffed with a cadre of top-level professionals to oversee the early stages of project implementation (para 4.19). As of nego- tiations, NSPT had made staffing arrangements for the PIU in a manner satis- factory to the Bank. 3.13 MOST intends that NSPT will remain small (relative to other port organizations in India) during construction and will only expand moderately later when Nhava Sheva becomes an operating port. After Nhava Sheva becomes operational, NSPT will have responsibilty for overseeing the activities of contractors and concessionaires, who will be retained to operate many of the port's ancillary facilities, and for managing the port's finances. NSPT is expected to operate by itself only those facilities and equipment within the port's immediate confines. In this manner, MOST hopes to minimize the amount of personnel on NSPT's payroll and to avoid much of the labor unrest and consequent operating inefficiencies which have gripped other similar organizations within the port subsector. 3.14 At appraisal, MOST agreed that since the Nhava Sheva port will own and operate a capital-intensive facility equipped with sophisticated machinery, the organizational structures in use at other Port Trusts might not be appropriate to NSPT. NSPT will most likely need to develop many new job definitions and descriptions; it may also need to alter hierarchical lines of responsibility. The standard accounting system in use at other Port Trusts may need considerable modifications to adapt it to the more special- ized, highly mechanized operating practices contemplated for NSPT; further- more, NSPT will need new internal systems and procedures for both financial control and management information. At negotiations, NSPT agreed to under- take a comprehensive Organization, Management and Finance (OMP) Study, to be conducted according to terms of reference acceptable to the Bank (Appendix A). The OMF Study's objective would be the development of optimal structures and systems enabling NSPT to function smoothly and efficiently within the conceptual framework intended by GOI (para 3.13). NSPT further agreed that (a) consultants, chosen in accordance with the Bank's procurement procedures, would begin the Study by January 1, 1985; (b) the consultants would complete the Study by January 1, 1986; (c) the Study would then be furnished to the Bank for review and comment; and (d) thereafter, NSPT would implement the Study's recommendations, as approved by GOI. -13- 3.15 At appraisal, questions arose regarding whether NSPT had sufflcient authority to: (a) award contracts involving foreign exchange for timely implementation of the proposed project; (b) hire appropriately qualified personnel; and (c) allow its officers to have spending powers necessary to fulfill their responsibilities. NSPT and MOST furnished the Bank Group with a clear definition of NSPT's powers and responsibilities. At negotiations, following an extensive review of the issues which had been raised, NSPT gave an undertaking affirming that it has sufficient authority and its officers have sufficient powers to enable successful execution of the project and operation of the port. IV. THE PROJECT A. Background 4.01 The three docks at Bombay Port were built between 1894 and 1914. They were designed for handling break-bulk cargo which was then the prlncipal form of cargo moving through the port. Thanks to the foresight of the plan- ners, the port had sufficient surplus capacity so that it was able to cope successfully with the growth of traffic during the next four decades, when tonnages increased but the nature of cargo did not undergo any material change. During the fifties, however, the capacity of the Bombay dock system became strained as Bombay Port began receiving bulk cargo, mainly imported crude ofIl, grain and fertilizer. Bombay Port, originally built to handle mainly break-bulk, found it difficult to cope with bulk cargo. To ease the capacity problems, a new marine oil terminal was built in 1956 at Butcher Island. In 1962 seven berths, partially financed by IDA, were added and GOI believed that these facilities represented the maximum increase possible to the physical berthing capacity of the docks, and any future need for increased capacity would have to be met by developing new facilities at a different site in view of Bombay Port's internal disadvantages of draft and beam restrictions, inadequate staging areas and road and rail accesses to the docks. Accordingly, in 1964 BPT commissioned the preparation of a master plan for the development of alternative port facilities in the Bombay area. After having studied various alternatives, the consultant (Bertlin and Part- ners, UK) recommended Nhava Sheva as the best site for the development of a satellite port. 4.02 The phenomenal growth of container traffic at Bombay Port combined with increased bulk cargo traffic has resulted in Bombay Port's throughput exceeding the dock system's designed capacity. The situation was aggravated by poor port operation and management practices, including (a) contractually agreed low labor productivity; (b) mandatory stuffing and stripping of all containers inside the docks; (c) unsystematic handling of containers; (d) slow clearance of goods from the docks; and (e) high down-time for cargo handling equipment. As a result, the port was beset by heavy congestion during the late 1970s, when the berth occupancy rate exceeded 90% and ship waiting time averaged 40 days with a peak of 70 days. This costly state of -14- affairs persuaded GOI to proceed with a program of modernization and improved operational practices to increase productivity at Bombay Port. At the same time, GOI Tecognized a critical need for the construction of Nhava Sheva Port to accommodate projected future traffic and facilitate the country's foreign trade through the provision of improved qu3lity of transport services and reduced port costs. The services of consultants were thus retained to prepare a DPR (pars 3.11). Between 1982 and 1983, extensive discussions have taken place between GOI and the Bank regarding traffic projections and the project's scope. A more detailed analysis of traffic forecasts was under- taken since then and the originally proposed project was substantially reduced and modified. The traffic projections which form the basis of the proposed project are shown in Table C. B. Project Objectives and Concept 4.03 The proposed project's objective is to accommodate the expected growth in maritime traffic in the Bombay area up to 1992/93 by: (a) provid- ing specialized facilities to handle both containerized and bulk cargo (these cargoes are currently prime contributors to congestion at Bombay Port); and (b) changing from labor-intensive methods of cargo handling to modern high capacity systems, so that benefits from handling larger vessels could be realized. 4.04 The Bank Group's involvement in the proposed project is justified for two reasons. First, the proposed port will make extensive use of modern technology, in terms of both design concepts and equipment, for the efficient handling of containers and bulk cargo, thus affording India an opportunity to realize full benefits of containerization and increased port productivity through high speed cargo handling. Second, for operation and management of the new port, the recently established port authority will have to arrange for training staff at all levels and for introducing the right types of systems and procedures. The Bank Group, with its broad-based experience, can assist NSPT to select and introduce appropriate technologies and promote institutions suitable to operate a first specialized modern port in India. GOI has specifically sought the Bank Group's financial assistance having recognized the advantages of receiving such technical inputs under the project. 4.05 The approach selected for the proposed port involves constructing offshore berths for handling containerized and bulk cargo (fertilizers and foodgrains) in Nhava Creek. This configuration was selected after HIPL studied four alternative layouts: (a) an offshore scheme with container and bulk berths located off Sheva Island; (b) an offshore scheme with bulk berths off Sheva Island and container berths off Nhava Island; (c) a tidal dock; and (d) an impounded dock. The recommended offshore design selected correspond- ing to (a) above has the inherent advantage of providing 13.4 m berthside depth of water at the least cost, In terms of new facilities and equipment, capital and maintenance dredging, and construction time. The general layout of the port and the facilities proposed under the project are shown in Map . No. IBRD 17645 and No. IBRD 17644. -1 5- 4,06 The container berths would be equipped with modern wharf gantry cranes. A container yard (CY) equipped with yard gantry cranes would be located on shore immediately behind the container berths. These two areas will be connected by access bridges. Railway sidings could be extended close to the CY so that full container loads (FCL) for inland destinations can be dispatched to the ICDs by unit trains. The Container Freight Station (CFS) would be located outside the port area about 8 km from CY. NSPT will lease operation of the CFS to selected concessionaires, who would provide the necessary equipment. During negotiations, agreement was reached that NSPT would examine, in consultation with the recently established Major Ports Reform Committee, the desirability of leasing CFS to private operators and prepare, by SeptembeT 30, 1986, a detailed plan for the operation of CFS. 4.07 The bulk berths would be equipped with continuous and grab unloaders (650 m3 per hour), a conveyor belt system, covered and open storage areas and a bagging facility. Most of the time, these berths would handle fertilizers and fertilizer raw materials; occasionally, however, this facility would also be used for unloading grain. In order to enable switch- ing between these two commodities, facilities for washing the unloaders and conveyor belts would be provided. 4.08 The success of the proposed port depends on efficient inland tran- sportation of containers. GOI recognizes the importance of establishing ICDs linked to the ports by reliable unit train service. So far, IR has begun a unit train operation to haul containers between the Guntur/Annapathi ICD and Madras Port. A limited unit train service between the Bangalore ICD and Madras is also in operation. However, the unit train which was to have begun regular hauling of containers between Bombay and the Delhi ICD in April 1982, is now expected to begin in March 1984. After a long delay and lengthy discussions, a combined transport document (CTD), published by G01, has finally been accepted by three Indian and two foreign shipping companies. This is a major breakthrough in facilitating multimodal movement of export/import of goods in containers on the basis of a single contract (CTD) to and from the interior of the country or ICDs. The railways are expected to play a major role in the movement of containers from the major ports to various ICDs. At riegotiations, GOI undertook to develop and review by March 1985 an action plan of future railway operations, including operations within the port and more broadly along the main trunklines to ICD at Delhi. It also assured that the operating plans would encompass necessary up-to-date equip- ment and that the review would include identification of appropriate facilities and equipment to enable the I1 to carry anticipated traffic from Bombay/Nhava Sheva ports to inland destinations. GOI confirmed that NSPT would participate in such review and would retain the asrvices of appropriate specialist advisors, if deemed necessary. 4.09 Unless adequate utility services, including water supply and sanitation, electric power and telecommunications faci'lities, are provided on time, project construction will suffer and the operating port will not be able to provide adequate service. The concerned State and Central Government agencies, namely, the Maharashtra State Government, the Maharashtra Water Supply and Sewerage Board, the Maharashtra State Electricity Board and the Post and Telegraph Department, have all agreed to provide their services and have estimated the cost to NSPT of installing the necessary facilities. GOM and NSPT have Indicated that installation of these facilities would begin soon. In view of the importance of timely provision of these services for which separate agencies are responsible, it is necessary to monitor the progress of these works. At negotiations, agreement was reached that by June 30, 1984, GOI will appoint a coordinating group consisting of representatives of NSPT and the agencies mentioned above to meet frequently untll the instal- lation of all utilities/services is completed. 4.10 As NSPT will be performing a wide variety of functions requiring modern machinery, the comprehensive training of inexperienced staff at all levels is critical to the proposed project's ultimate so.ccess. MOST and NSPT recognize this need and agree in principle that the proposed project should include a well-designed program to provide extensive formal and practical training to a large number of personnel. In addition to classroom work, large numbers of staff should have an opportunity to receive hands-on train- ing at a similarly equipped terminal. For the execution of the proposed training program (Annex 1), the preferred approach would be to have a qualified expert or agency to design the training program and to entrust to an advanced port abroad the responsibility for providing both the formal and practical training covering operations, maintenance and management. At negotiations, NSPT and GOI agreed to implement a training program satisfac- tory to the Bank Group. 4.11 In addition to training, NSPT will need extensive technical assis- tance to perform an OMF Study (para 3.14), prepare a Container Operations Manual and conduct a survey to refine traffic forecasts for Nhava Sheva Port in order to identify long-term needs for inland linkages (road, rail) and related facilites necessary for onward distribution of goods (Appendix B). Adequate provision has been included in the project for these studies. At negotiations, NSPT agreed that the terms of reference for the studies would be acceptable to the Bank Group, and the selection of the consultants for the technical assistance would be made in accordance with the Bank Group guidelines. C. Project Description 4.12 The project will comprise: (a) Civil works: (i) A total of 1180 m of offshore marginal wharf comprising 680 m wharf for handling containers (sufficient to berth one large and two medium-sized vessels) with four access bridges and 500 m wharf for handling bulk materials (sufficient to berth two bulk carriers) with one access -17- bridge; one service berth of 212 m length, with its shoreward face designed for berthing port draft; (ii) Reclamation and levelling of land; (iii) Paved areas for container and railway yard; (iv) Construction of storage buildings for bulk and bagged cargo; (v) Construction of office and other buildings; and (vi) Roads and railway sidings; (b) Dredging - of access channel south of Elephanta Island (c) Plant and equipment Ci) For containers: three wharf gantry cranes, nine yard gantry cranes, 38 tractors, 136 trailers, and one heavy-duty forklift (30 T); (ii) For bulk and bagged cargo: two continuous and two grab unloaders (650 m3/hour capacity each) for fertilizers and an integrated conveyor belt system complete with ancillary equipment such as reclaimers, stackers, bagging machines, wagon loading arms, etc.; and Ciii) For marine services: three tugs, three pilot launches, two mooring laumches, one survey launch and nagivational aids; Cd) Construction of container freight station Ce) Installation of an electrical distribution system, including primary and secondary transformer stations, cables and gear (f) Utilities, services and environmental protection (g) Staff residential colony (h) Technical assistance for (i) a comprehensive staff training program; (ii) an OMF Study; and (iii) a Container Operations Manual; and (iv) Intermodal Transport and Traffic Allocation Study (i) Engineering services for the supervision and coordination of civil, mechanical and electrical contracts. -18- D. Cost Estimates 4.13 The total cost of the project is estimated at US$606 million (excludins NSPT's capitalizable costs for preparing and executing the prToject) with a foreign exchange component of US$224.4 million. Inclusive of estimated interest during construction and front-end fee on IBRD loan, total financing requirements amount to US$722 million with a foreign exchange component of US$225 million. A detailed breakdown of the cost estitates is shown in Table G and a sutmmary is shown in Table 4.1 below: Table 4.1 SummarX of Prolect Costs Rupees Million USS million Local, Foreign Total Local Foreign Total A. Land Acquisition 200.0 - 200.0 20.5 - 20.5 B. Civil Works . 3,508.2 611.8 2,120.0 154.7 62.6 217.3 C. Dredging 59.0 236.8 295.8 6.0 24.3 30.3 D. Plant and Equipment 430.1 688.5 1,118.6 44.0 70.7 114.7 E. Container FTeight Station . 41.5 12.4 53.9 4.3 1.3 5'.6 F. Bulk Storage Facilities 134.6 130.8 265.4 13.8 13.4 27.2 G. Electric Power Distribution 107.8 49.0 156.8 11.1 5.0 16.1 It. Utilities and Services 248.9 9.3 258.2 25.5 1.0 26.5 I. Residential Colony 239.4 - 239.4 24.6 - 24.6 J. Technical Assistance and 29.2 24.4 53.6 3.0 2.5 5.5 Training K. Engineering Services 77.0 25.4 102.4 7.9 2.6 1.0.5 Base Estimate 3,075.7 1,788.4 4,865.1 315.4 183.4 498.8 L. Contingencies Physical 134.5 103.4 237.9 13.8 10.6 24.4 Price 510.9 296.6 807.5 52.4 30.4 82.8 Total Project Cost 3,721.1 2,188.4 5,909.5 381.6 224.4 606.0 M. Interest during Construction 1,124.9 - 1,124.9 115.4 - 115.4 N. Front-end Fee on IBRD Loan - 5.8 5.8 - 0.6 0.6 Total Financing Required 4,846.0 2,194.5 7,040.5 497.0 225.0 722.0 =e=-=; ou=e_s:A SZz== m=C= i3= o -19- 4.14 The base cost estimate was computed using mid-1983 prices after completion of final design. Duties and taxes, estimated at US$76 million, are included in the base estimate. The base cost reflects current pricee for material and labor, and prices cited in bids received recently for com- parable work and equipment. The provision for contingencies allows for (a) physical variation of 8% in civil works and engineering services and 15% in dredging; (b) annual price escalations in foreign costs of 6% in 1983/84, 7.5% in 1984/85 and 7% in 1985/86-1987/88; and (c) annual price escalations in local costs of 8% in 1983/84, 7.5% in 1984/85, 7.0% in 1985/86, and 6% in 1986/87-1987/88. The estimate for the training program, which covers train- ing of about 700 employees at all levels, provides for 144 man-months of expatriate and 120 man-months of regional specialist's services, at US$12,000 and US$5,000 per man-month, respectively, and for 200 overseas fellowships at US$6,000 each and local training of 500 employees at US$3,000 each. The provision for technical assistance for studies includes 42 man-months of expatriate specialist services at US$12,000 per man-month. The provision for engineering services is based on the contract agreement reached with HIPL. E. Financint Plan 4.15 The local costs of the project would be met mostly from funds which NSPT intends to borrow from BPT and GOI. External financing is expected to cover the full foreign costs and a small amount of local costs. Proposed funding by the Bank Group would cover 47% of the estimated project cost, net of taxes and duties. During negotiations, GOI expressed its intention to seek cofinancing of about US$80 million for dredging and some items of equip- ment. The sources of funds for the proposed project are as illustrated in Table 4.2. Table 4.2 Financing Plan for the Project (US$ Million) Bank Group - US$250 million Bombay Port Trust - US$205 million GOI & Co-financier - US$267 million Total US$722 million 4.16 GOI would be the Borrower and the the proceeds would be on-lent to NSPT under terms and conditions satisfactory to the Bank (para 6.07(b)). The BPT funds would be lent directly to NSPT with GOI serving as guarantor. NSPT will borrow the remaining funds needed to complete the project from GOI under a separate loan carrying terms satisfactory to the Bank Group (para 6.08(c)). Satisfactory completion of the arrangements for the BPT loan, the on-lending of Bank Group finance and the GOI balance loan would be conditions of effec- tiveness of the proposed financing. -20- F. Execution of the Proiect 4.17 NSPT will be responsible for implementing the proposed project in accordance with the provisions of a Project Agreement to be executed by NSPT and the Bank Group. 4.18 The consultants (HIPL) who carried out both the feasibility study and the final engineering of the proposed project, have been retained by NSPT to prepare bid documents, assist in evaluation of the bids, supervise the contractors and provide general assistance to NSPT. During negotiations, NSPT assured that it shaLl, from time to time, review the scope of the serv- ices needed for any additional work in consultation with the Bank and would retain short-term technical advisory services, as and when needed, to augment staff with the requisite skills for implementing the project. NSPT also ensured that the staff to be appointed by HIPL in senior supervisory posi- tions shall have satisfactory qualifications and experience. 4.19 NSPT has established a PIU to coordinate and monitor the execution of the proposed project and to supervise HIPL (para 3.12). The PIU reports directly to NSPT' Deputy Chairman. The PIU's organization chart is ehown in Chart 1, and all the positions have been filled. 4.20 In order to minimize the incidence of administrative delays to the proposed project, GOI has constituted a seecial committee including the secretaries of the Ministries of Finance, Shipping and Transport, Railways, Commerce and Planning; this committee has been empowered to make whatever administrative and policy decisions necessary for resolving inter-agency problems promptly. MOST has the authority to advance up to Re 50 million to NSPT for preliminary expenses related to.the proposed project. A further advance can be arranged if NSPT needs to spend more than that amount prior to finalizing the project financing arrangements, 4.21 Initiation and implementation of the proposed project depend criti- cally on lSPT's timely acquisition of land. In this regard, it has started proceedings under the Lasd Acquisition Act (LAA). NSPT plans to acquire the land required for the proposed project iu three phases. Because the compensa- tion negotiated for the privately-owned land was much higher (about Rs 40,000 per acre) than what had been estimated earlier, MOST had to seek the approval of the Public Investment Board (PIB) and the Cabinet before directing GOM to take possession of the land and then transfer it to NSPT. Cabinet approval has been obtained, and Phase I land acquisition for about 820 hectares of the main port area (staging areas for the container and bulk berths, the con- tainer yard, and the road and rail access) has been completed. During Phase II, about 420 hectares (for the CFS) will be acquired; and during Phase III, some 412 hectares (for the residential area) will be acquired. During nego- tiations, agreemernt was reached with NSPT that phases II and III of the land acquisition program shall be completed by June 30, 1984 and December 31, 1984, respectively. -21- G. Procurement 4.22 Procurement arrangements are summarized in Table 4.3 below: Table 4.3 Procurement Arrangements (Estimated Cost in US$ Million) Procurement Method Total Project Element ICB LCB Other NA Cost Land Acquisition - - - 25 25 Civil Works 265 - - - 265 (110)/a (110) Dredging - - 36/b - 36 Bulk handling equipment and storage facilities 101 - - - 101 ( 60) - - - (60) Container freight station - 7 - - 7 - ( 3) - - (3) Container handling equipment 45 - - - 45 ( 30) - - - (30) Workshop equipment 8 - - - 8 g 4) _ _ - C 4) Floating crafts 18 - - - 18 ,. ( ~~~~~~~~~~~11) - - -(11) Electrical works 19 - - - 19 C 6) - - - ( 6) Residential colony - 30 - - 30 Utilities, services and environmental protection - 32 - - 32 - ( 6) - - (6) Technical assistance and training - - 8 - 8 - - ( 8) - (8) Engineering services - - 12 - 12 - - (12). - (12) Total 463 69 56 25 606/c (221) ( 9) (20) - (250) /a Figures in parentheses indicate proposed financing by the Bank. /b To be arranged after securing financing by a co-lender (para 4.26). _c Excluding interest during construction and Front-end Fee on IBRD loan. -22- 4.23 Procurement for the main civil works contract., after prequalifica- tion of bidders, would follow the Bank Group's guidelines for ICB. Pre- qualified local contractors would be given a preference of 7-1/2., in accord- ance with the guidelines. Dredging is a likely candidate for parallel financing by a co-lender (para 4.15); however, in case it is not co-financed, procuremsnt wouLd follow ICB after prequalification. Contract for the CFS would be procured through Local Competitive Bidding (LCB) satisfactory to the Bank. Railway works would be carried out by IR through force account. Minor civil works, utilities and services, the aggregate value of which shall not exceed US$15 million equivalent, would be executed through LCB contracts or force accourt. All procurement of equipment would follow ICB without pre- qualification. A preference equal to the lesser of 15% of cif cost or cus- toms duties and taxes would be allowed for locally-manufactured equipment. All Bank Group financed contracts with estimated value exceeding US$5.0 million for works and US$500,000 for goods would be subject to prior review, resulting in coverage of about 80% of the estimated value of such contracts for works as well as goods. Other contracts will be subject to selective post-award reviews. NSPT has already appointed HIPL, the consultant who produced the feasibility study, to complete the proposed project's detailed engineering, prepare the bid documents and supervise the contracts. The terms and conditions of their appointment are considered satisfactory. Con- sultants for technical assistance and training would be selected in accord- ance with the Bank Group's guidelines. R. Disbursements 4.24 Although the average implementation period for transport projects in South Asia, according to actual disbursement profiles, is about seven to eight years, the proposed project will most likely be completed in a shorter period. GOI is anxious to complete the project as quickly as possible in order to alleviate the severe congestion, resulting from port traffic passing through city streets, in downtown Bombay. Also, by adding substantial capacity, GOI would reduce the likelihood of a new wave of extreme conges- tion, with its detrimental effects on India's foreign trade at Bombay Port. According to the Critical Path Method network prepared by NSPT's consultants, the completion of berth construction and the supply and installation of container and bulk handling equipment are estimated to take about three years from the start of the civil works contract, scheduled for September 1984. This construction and equipment will be procured according to ICB and con- tractors, using modern equipment and work methods, will implement these works. Should completion be delayed by as much as a year, for whatever reason, the proposed project could still be completed within four years. The project implementation schedule shown in Chart 2 reflects completion of the proposed project within four years, i.e., by September 1988. During nego- tiations, the implementation schedule was discussed and agreed by NSPT. 4.25 The proceeds of the proposed Bank Group lending would be disbursed according to Table 4.4. During negotiations, it was agreed, at the request -23- of the Indian delegation, that in the earlier stage of project implementa- tion, the disbursements against civil works would be made at a higher per- centage (70%) in order to enable NSPT to meet the larger foreign exchange payments expected for the ICB contracts for such works. Table 4.4 ProRosed Use of Proceeds of the Bank Group Financing I. Civil and Allied Works (a) 70% of total cost (b) 22% of total cost II. Equipment and 100% of foreign exchange expenditure Floating Craft for imported goods 1002 of ex-factory cost for locally-manufactured goods 70% of total cost for imported goods procured locally. III. Technical Assistance, 100% of total cost Training and Engineering Services 4.26 Disbursements in accordance with Table 4.4 would cover US$199.6 million of foreign exchange cost (including front-end fee) and US$50.4 mil- lion equivalent of local cost. It is expected that the shortfall of US$26 million in foreign cost financing would be made up or likely exceeded by the contribution of the co-lender. In the unlikely event that suitable cofinanc- ing is not available, the gap in the foreign exchange resource would be closed by reducing or eliminating the Bank Group financing of local costs. An estimated Schedule of Disbursements, based on Table 4.4 and the Project Implementation Schedule (Chart 2), is presented in Table B. As the project implementation will likely be completed by September 30, 1988, March 31, 1989 would be the closing date for the proposed Bank Group financing. 4.27 An mnount of up to US$1.0 million is proposed to be retroactively financed under the loan for expenditures incurred after June 1, 1982, to meet some of NSPT's costs of engineering and technical assistance services and training related to project preparation and implementation. During nego- tiations, disbursement schedule was discussed and agreed with NSPT. I. Monitoring 4.28 To enable the Bank Group to monitor implementation of the proposed project, NSPT should: (a) furnish quarterly progress reports, with the -24- contents and presentation to be agreed prior to the effectiveness of the proposed financing; (b) maintain separate accounts fully detailing expendi- tures incurred for the proposed project (as well as proper accounts of all of NSPT's financial activities), with provision for audit of the separate project accounts by a satisfactory independent auditor; and (ce) prepare a project completion report within siX months of the closing of the proposed financing. At negotiations, NSPT agreed to the aforementioned monitoring program. J. Environmental Impact 4.29 The proposed project is not expected to have any significant adverse impact on the environment. Neither construction of the marine struc- tures, the dredging of the access channel south of Elephanta Island, nor the disposal of the dredged spoil at selected rounds (selected on the basis of hydraulic studies), should adversely affect either the natural flows or the scouring of sediment in Bombay Harbor. Such causes of water pollution as either run-off of spilled bulk fertilizer from the terminal, disposal of shipbound and terminal sewage, or disposal of oil-y bilge water would be neutralized through suitable facilities being provided under the project. Because most of the bulk handling facilities will be enclosed, fertilizer and sulfur dust are not likely to escape into and thereby pollute the ambient air. At points where fertilizers and sulfur are transferred between facilities in the open, the use of shrouds and cyclone separators should reduce emissions to acceptable limits. Because it is located 8 kms away from the port and separated from it by a hill and a green belt, the residential colony should be effectively shielded from any residual dust emanating from the bulk berths. K. Port Efficiency Indicators 4.30 In the interest of operating efficiency and good management, NSPT should compile data, at least quarterly, relating to the following: (a) operational efficiency; (b) personnel productivity; (c) dwell time of cargo; (d) turn-around time of vessels; and (e) berth occuparncy. Some target efficiency indicators are presented in Annex 2. At negotiations, NSPT under- took to begin regular computation of efficiency indicators in a manner acceptable to the Bank Group within three months of the facilities at Nhava Sheva becoming operational. V. ECONOMIC EVALUATION A. General 5.01 The project provides five types of quantifiable bonefits: (a) savings resulting from reduced ship waiting time; (b) reductions in cargo handling costs; (c) savings (per ton of goods carried) resulting from using larger vessels; (d) reduced cargo transit time; and (e) reduced cargo losses. -25- The contribution of each benefit stream to the present value of the project benefits (using a discount rate of 12%, the estimated opportunity cost of capital in India) Is shown in Table 5.1 below.. Table 5.1 Percentage Contribution to the Present Value of_ProJect Benefits (Discount Rate =12%VG) Benefit.s Percent Reduced Ship Waiting Times 34,7 Savings in Cargo Handling Costs 21.2 Savings from Using Larger Vessels 39.9 Reduced Cargo Delay 2.5 Reduced Cargo Loss 1.7 100.0 The methodology for calculating each individual cost and benefit stream, together with the traffic projections (Table C), which underlie the economic evaluation, is described in Annexes 3 and 4. B. Economic Benefits (a) Reduced Ship Waiting Time 5.02 The proposed port's most important benefits are the large potential savings that could result by substantially reducing the time ships spend waiting for a berth in Bombay. This is especially true for bulk carTiers and general cargo vessels. As the volume of traffic through the Bombay port complex increases, congestion would worsen and the costs related to waiting time would increase exponentially. By providing new port facilities, the proposed project would reduce ship waitiing time, thereby considerably redue- ing the associated costs to vessels. The savings resulting from reduced queueing time are estimated at Rs 185 million in 1988; they increase to Rs 728 million by 2000. A comparison of the type of vessels expected to call at Bombay Port if the proposed project is not built and those vessels which could be accommodated at Nhava Sheva, together with the estimated daiLy cost of keeping them in port, is presented in Table D. In computing savings resulting from reduced ship waiting times, 25% of the cost of total port time has been excluded from the computation since, on the average, this much time is required for piloting, docking and waiting for a high tide, whether a ship -26- has to wait for a berth or not. Thus only the cost of ship waitlng in excess of 25% of ship's port time has been accounted for. 5.03 Most of the container ships benefiting from the project would be foreign-owned; therefore, tariffs for using the facilities provided under the proposed project would be structured to permit recovery of a reasonable share of the estimated benefits resulting from the reduced ship waiting time. In the case of bulk cargo, vessels are mostly chartered. Therefore, full benefits would accrue to the country. The economic analysis is based on the assumption that only 50% of the savings resulting from reduced ship waiting time would be realized in the first year and that this percentage would increase to 100% by the fifth year of port operations at Nhava Sheva. In the long run, due to sufficient competition among container and bulk carriers, the proposed project's benefits would accrue to the port users in the form of reduced shipping costs. The importer would then benefit from the lower total cost of goods and would pass these savings on to the local economy, while the exporter would enjoy the benefits of improved service resulting from increased competitiveness. A sensitivity analysis shows that, even if only 75% of these benefits are realized by the Indian economy, the economic rate of return (ERR) of the project would be higher than the opportunity cost of capital (para 5.09). (b) Faster Cargo Handling 5.04 By installing container cranes and bulk loaders and conveyors at Nhava Sheva, ships could turn around much faster at Nhava Sheva than at Bombay Port, which uses older, slower techniques for loading and unloading ships. The benefits resulting from faster cargo handling are computed by comparing the cost of turnaround time for vessels calling at Bombay Port with the cost incurred for turning around at Nhava Sheva. Annex 4, Section (B) presents a comparison of the sizes of ships carrying dry buLk and containers which are likely to call at both Bombay Port and Nhava Sheva as well as the number of estimated ship calls and the assumed cargo handling rates for each port. In the case of containers, as the benefits resulting from reduced ship turnaround time would accrue mostly to foreign-owned ships, the same assump- tions were used for transferring these benefits to the Indian economy as for the case of the reduction in ship waiting time (para 5.03). (c) Larger Vessels 5.05 The benefits of larger vessels are accrued in the form of lower costs per ton to carry cargo on the larger vessels which would call at Nhava Sheva as compared with the smaller ships which call at Bombay Port. Only the voyage cost savings are included in the calculation of benefits. The sizes of ships currently calling at Bombay Port are relatively small due to draft limitations and slow ship turnaround time. The average sizes of bulk car- riers and container ships calling at Bombay Port are 16,800 dw't and 15,000 dwt, respectively, as compared with the 22,000 dwt and 20,000 dwt vessels that Nhava Sheva will service in 1988. By 1996, Nhava Sheva is expected to be able to accommodate 30,000 dwt bulk carriers and 28,000 dwt container -27- ships. The cost per ton of saving,, derived separately for bulk commodities and containerized cargoes, is shown in Table E. (d) Reduced Cargo Delay (Time Value of Cargo) 5.06 The modern facilities provided under the project, including the transit sheds, container freight station, railway flatcars, and containers and hopper wagons, would reduce considerably the transit time for cargo at Nhava Sheva as compared with the transit time at Bombay Port. In the opening year the average saving of transit time for bulk cargo and containers has been estimated conservatively at eight days and three days, respectively. These values for bulk and containerized cargo are shown in Table F. The potential saving for bulk commodities amounts to about Rs 3.9 per ton, while the similar saving for containerized cargo is about Rs 8 per ton. (e) Reduced Cargo Loss 5.07 The mechanized handling facilities planned for Nhava Sheva would prevent much of the loss and damage to cargo currently being expeTienced due to manual handling of cargo at Bombay Port. Losses of fertilizers, foodgrains and containerized cargoes would be reduced significantly. However, the economic analysis was based on a more conservative assumption that cargo losses would amount to about 0.4% of the estimated value of total throughput. Applying this percentage to the projected tonnage and the estimated value per ton of both containerized and bulk cargoes yields the annual savings. C. Project Costs 5.08 The proposed project's economic costs include the cost of civil works, equipment, related engineering services, land acquisition and physlcal contingencies. The foreign exchange cost has been shadow priced at 1.25 to adjust for the relative value of the Rupee. Taxes and duties have been excluded. D. Economic Returns, Sensitivity and Risks 5.09 The proposed project's estimated ERR is 20%. If only 75% of the ship-related benefits are taken into account, the ERR would decrease to 15%. If the costs increase by 15% or 25%, the ERRs would be 18% and 16%, respec- tively. If the costs increase by 15% while the benefits decrease by the same amount, the ERR still yields an acceptable 15%. If the project is Imple- mented over a six-year period and benefits delayed by two years, the ERR would be 17%. The switch value analysis indicates that if the costs increase by 40%, the net present value (NPV) (discounted at 12%) becomes zero. The risk analysis undertaken yields a 4% probability of a zero NPV (12% ERR), a better than 25% probability of an ERR over 20%, and a mean ERR of 18%. The detailed calculations are available in the project file (Annex 5). -28- E. Unquantifiable Benefits 5.10 The quantifiable benefits implied in the ERR do not take into account substantial benefits that could be obtained under the proposed project. Without the project the port-generated traffic expected in Bombay would severely strain the already congested city streets (para 3.03), adding enormous costs to the economy. Such congestion costs that would be avoided with the provision of new port facilities at Nhava Sheva have not been quan- tified. Nor have the benefits of relief in the central city that would result from the relocation of existing warehouses, wholesalers and other port-related activities from Bombay to Nhava Sheva been quantified. Similarly, the benefits of the catalytic role that Nhava Sheva Port would play in supporting GOI's policy of developing a secondary growth center at New Bombay in the immediate vicinity of Nhava Sheva have not been quantified, even though the new port would provide considerable employment opportunities during and after construction. Furthermore, the proposed project reinforces GOI efforts to establish new industries In the hinterland of Nhava Sheva; the effects of this GOI policy have not been quantified. In view of these unquantified benefits and the acceptable ERRs obtained under various assump- tions (para 5.09), the project is well-justified. VI. FINANCE A. Introduction - Past and Present Financial Situation 6.01 NSPT was formed in May 1982 (para 3.12) and, therefore, does not have a financial history. For the time being, MOST is meeting NSPT's expen- ses from its own budget. The vast majority of those expenses are being met from an advance of Rs 50 million which GOI has made available specifically for the development of the proposed project. The nominal remainder, which could not properly be considered as development expenses, is being met from MOST's administrative budget. NSPT will have to account for these defrayals of administrative expenses as though they were grants. The accumulation of these defrayals, which could reach as high as Rs 25.7 million by the end of FY87, will constitute NSPT's paid-in capital. 6.02 NSPT has a well-qualified Finance Manager. During this development period and later during construction, he will head a small staff concerned primarily with allocating costs and paying bills. Prior to the port's com- missioning, NSPT will use GOI's standard system of accounting for the port subsector. This system is satisfactory for the construction period; however, both NSPT and the Bank Group were concerned that the system may need modification to optimize its usefulness to an operating port charged with monitoring the financial performance of a wide variety of specialized, highly-mechanized operations. At negotiations, NSPT undertook to develop, as part of the OMF Study (para 3.14), an accounting system related to the one currently in use in the port subsector, appropriately tailored to NSPT's -29- expected operational requirements; the new system would be introduced into operations prior to the port's commissioning. 6.03 Indian ports have their annual accounts audited by GOI's Controller and Auditor General. NSPT agreed to have its annual accounts audited and to furnish them, together with the audit report, to the Bank within nine months of the close of each financial year. ln its current skeletal posture, NSPT does not have an internal audit department and does not contemplate having one during the early stages of project implementation. The OMF Study will be expected to recommend an appropriate organization structure for an internal audit department, together with job manuals specifying the scope of respon- sibility for the department as a whole and for individuals working within the department. B. Financial Resources 6.04 Throughout most of the period FY84-FY88, NSPT will confine its activities almost exclusively to project implementation. As a result, NSPT's financing plan for this period, as displayed in Table 6.1, vill relate closely with the financing plan for the project (para 4.15). MOST will very likely meet NSPT's nominal operating, working capital and liquidity require- ments during this period from its own operating budget (para 6.02). 6.05 During the first half of FY88, while the finishing touches are being applied to the civil works, NSPT will begin receiving and servicing ships. During the second half of FY88, construction wlll have been completed and the pace of port operations is expected to accelerate. Financially, however, NSPT will show a full year's construction combined with an abbreviated year's operations in FY88. This anomaly results from several accounting conventions including (a) recognizing the cost of each discrete segment of construction when it is billed, normally a number of weeks after that segment has been completed; (b) recognizing the cost covered by reten- tion payments after the contractors have been released from further liability, about six months to oue year after the conclusion of heavy con- struction; and (c) recognizing operating revenues and costs as incurred. 6.06 Because of these accounting conventions which apply only to FY88, the financing plan for the FY84-FY88 period indicates that 3.6% of NSPT's financing requirements would be met from internal sources of cash. This internally generated cash cannot he used to finance the project; however, it will finance the working capital that NSPT needs to open its operations and the reserve needed to cushion the severe cash flow constraints expected in FY89 and FY90. -30- Table 6.1 NSPT'S Finarcing Plan for FY84-FY88 (RS Million) FY84-88 % Funds Requited Proposed Project /a 5,950.3 80.8 Interest during Construction 1,124.9 15.3 Working Capital Increases 81.5 1.1 Cash Increases 209.8 2.8 Total Requirements 7,366.5 100.0 Sources of Funds Cash Generated Internally 265.7 3.6 On-lent Bank Group Finance /b 2,914.8 39.6 Bombay Port Trust Loan /c 2,351.4 31.9 Subord. GOI Balance Loan Jd 1,808.9 24.6 Paid-In Capital 25.7 0.3 Total Sources 7,366.5 100.0 /a This figure differs from the one presented in Table 4.2 because it includes NSPT's overhead incurred during the perlod in connection with the proposed project, the assets and liabilities whereof are only being transferred to NSPT's accounts in PY84. /b Includes Rs 2,437.5 million in principal and Rs 477.3 million in accrued interest. Xc Includes Rs 2,000.0 million in principal and Rs 351.4 million in accrued interest. /d Includes Rs 1,512.7 million in principal and Rs 296.2 million in accrued Interest. 6.07 GOI has been planning to finance the proposed project entirely with long-term debt, This financing pattern is consistent with clearly defined GOI policies, which preclude the use grants or equity investments for financ- ing projects in the port subsector. GOI expressed its intention that NSPT obtain loans from three distinctly separate sources to meet the proposed project's Rs 5,950.3 million investment requirement: (a) BPT would lend NSPT Rs 2,000 million. The loan, carrying an interest rate of 10%, would be extended for 15 years, including five years of grace on both Interest and princlpal repayments (interest would accrue during the grace period); -31- (b) The Bank Group would make available Rs 2,437.5 million (US$250 million) to GOI. In turn, GOI would on-lend the proceeds to NSPT for 25 years, including five years of grace on interest and principal repayment, at 11.5% per annum (interest would accrue during the grace period); and (c) GOI would lend the balance of the funds needed to implement the proposed project, estimated at Rs 1,512o7 million, to NSPT for 25 years, including ten years of grace on interest and principal repaymenits, at 10.25% per annum (interest would accrue during the grace period). This loan would be subordinated to both the on-lent Bank Group financing and the BPT loan meaning that, in any year when NSPT fails to realize cash flow sufficient to meet its full debt service requirements, it will meet in full its obligations relating to the other two loans prior to servicing the GOI balance loan. 6.08 Because NSPT is a semi-governmental body created by government order and not a company registered under the Indian Companies Act, it cannot enter into a formal loan agreement with GOl or BPT. In lieu of formal agree- ments, GOI will create a Financing Arrangement which would cover all of NSPT's funding requirements. Conclusion of a satisfactory Financing Arrange- ment is a condition of loan effectiveness. 6.09 At postappraisal, GOI agreed, in principle, with the Bank Group's suggestion that due to the substantial interest in the proposed project, a component of co-financing would be sought for the project. At negotiations, GOI gave an undertaking to seek parallel financing of about US$80 million for dredging and procurement of some items of equipment. The proceeds would be on-lent to NSPT, either as a component of the subordinated GOI balance loan, or on even more concessionary terms. As a result, the FY84-FY88 financing plan presented in Table 6.1 remains a good projection of NSPT's sources and application of funds for the period, the introduction of parallel financing notwithstanding. At negotiations, GOI agreed that it will make available to NSPT all financing necessary to complete the project, including all foreign exchange not covered by the Bank Group's or the co-lenders' financing. 6.10 NSPT's financing plan depends entirely on debt financing because GOI has clearly stated policies which preclude the use of grants or equity to finance projects in the port subsector. Normally such a flnancing plan would cause serious concern, especially because of its impact on the capital structure of a fledgling implementing agency like NSPT. The heavy debt service burden requires NSPT to generate substantial cash flow in accordance with a fixed schedule; yet NSPT cannot be assured of realizing sufficient revenues to meet that debt service burden, especially in the early years of port operations. As a result, NSPT might lack the resilience needed to maintain its financial viability in case of unexpected negative developments. 6.11 In fact, NSPT's principal lender, GOI, is also its owner. Aware and concerned about NSPT%s weak capital structure, GOI has granted a highly -32- concessionary ten-year grace period on its balance loan and has indicated that it might extend by two years the grace period for servicing the on-lent proceeds of the Bank Group's financing. Although the BPT loan will contain only a five-year grace period, BPT does function under the authority of MOST, NSPT's parent ministry; thus, BPT would have little option but to extend the grace period, if necessary. In short, all of NSPT's lendeTs are sensitive to NSPT's expected cash flow constraints. The subordination of the GOI balance loan allows it to be considered as in lieu of equity. Also, at negotiations, GOI agreed that NSPT maintain its tariff at satisfactory levels (para 6.23). Thus, the Bank Group can accept NSPT's proposed financing plan for the period FY84-FY88. C. Pricing 6.12 As NSPT does not (and will not, for at least another 42 months) have an operating history, few conclusions can be reached regarding its pricing policy, except that it will be deriving a pricing structure especially tailored to the facilities and services which the proposed project is provid- ing. 1/ The resultant tariff will need to reflect the following concerns: (a) it will need to be competitive, offering clear economic and financial incentives to attract the type of traffic which it has been designed to service while discouraging the port'B use by other less desirable vessels; (b) it should have a revenue generating potential sufficient to cover operating expenses and meet NSPT's projected heavy debt service burden; and (c) its components should bear a close relationship to the costs, so as to discourage institutionalizing inefficiency. At negotiations, NSPT agreed that its tariff wouild satisfy these objectives (para 6.23). For appraisal purposes, to test the financial viability of the project, assumptions with regard to pricing, which may be more conservative than is warranted based on expectations of NSPT's operating effectiveness and the competitive environment, were made. The discussion which follows describes in detail the basis of those pricing assumptions. 1/ Under the Major Ports Trust Act, NSPT (or, for that matter, any other Port Trust) has the responsibility for determining its own pricing. Once the Board of Trustees approves a proposal to adjust the Port Trust's tariff structure, it puts that proposal before MOST, which has the authority to approve, reject, or recommend adjustments to the proposal; still, the initiatlve with regard to pricing rests with the Port Trust itself. -33- 6.13 In the early stages of port operations, when NSPT will need to emphasize developing its clientele, it will be competing directly with BPT to attract fully containerized cargo and some bulk cargo. As BPT iB an estab- lished facility already enjoying comfortable working relationships with the area's shipping agents, freight forwarders and other cargo handlers, NSPT will have to prove that it can provide better service at lower cost to the shipper; consequently, even though NSPT expects to provide users with sub- stantially better service, its rateB could not be projected to exceed those which BPT will be charging for similar services. 6.14 In PY82, the last year for which complete data were available, BPT and affiliated concessionaires were realizing average revenues for con- tainerized cargo of about Rs 36/ton from vessel charges and about Rs 149/ton In consignee charges. In addition, BPT was charging consignees an average of about Rs 65/ton for stuffing and stripping of containers; however, that component of revenue Is not germane to this analysis since NSPT will emphasize the development of FCL traffic, and since LCL consignees will pay stuffing and stripping charges to the concessionaire operating the CFS and not to NSPT. Thus, in PY82, BPT and affiliated concessionaires were realiz- ing revenues of about Rs 185/ton for services, comparable to those which NSPT plans to provide, related to the handling of containerized cargoes. 6.15 During the last year, BPT undertook a tariff review. As a result, on August 8, 1983, its Board of Trustees approved a proposal to increase all berthing and some wharfage charges by an average of 110%. While the details of the proposed increase are not yet available, MOST affirms that it will add about Re 25/ton realizable from vessel charges and about Rs 45/ton realizable from consignee charges to revenues expected from containerized cargoes. Thus, BPT and affiliated cencessionaires would probably be realizing revenues of Rs 255/ton for services, comparable to those which NSPT plans to provide, related to the handling of containerized cargoes. MOST approved this proposal in October 1983. 6.16 In FY82, for fertilizers received in bulk, BPT was realizing aggregate revenues of about Rs 120/ton, composed of about Re 36/ton in vessel charges and about Rs 84/ton in consignee charges. 1/ The tariff increase will likely add another Rs 25/ton in vessel charges and about Rs 5/ton in consignee charges. Thus, BPT may now expect to realize revenues of about Rs 150/ton for bulk fertilizer. 6.17 BPT will be implementing these higher prices in FY84. Yet, NSPT will not begin receiving ships or handling cargo until FY88. Inflation of about 30% is projected for the interim pL:riod. If the real value of the new charges is to be maintained into FY88, BPT and affiliated consignees should be realizing revenues of about Re 330/ton for services, comparable to those 1/ Exclusive of charges for bagging. -34- which NSPT plans to provide, related to the handling of containerized cargo and about Rs 195 per ton for bulk fertilizer. 6.18 For projecting NSPT's revenues in FY88, pricing levels of Re 300/ton for containerized cargo and Rs 162/ton for bulk cargo were assumed. These conservativ- levels are projected even though NSPT expected to handle its throughput much wore efficiently than BPT. These prices should,re6ult in highly significant financial incentives for desired carriers and shippers to call at Nhava Sheva. Between FY88-FY91, due to NSPT's heavy cash- flow requireaents to meet debt service, regular increases maintaining the real value of NSPT's containeri2ed cargo tariff were assumed; thereafter, con- tainerized cargo rates were held constant until FY94 when an increase of about 3% was assumed. The bulk rate was held constant between FYJ8 and FY93; an increase of about 11% was assumed to go into effect in FY94. These latter increases are needed to enable NSPT to generate additional cash for servicing the GOI balance loan, payments against which are scheduled to begin in FY94. This pricing structure should be high enough so that NSPT ran meet its heavy cost of borrowing In the early years; in later years, when inflation causes the impact of operating costs to increase and the impact of debt service to decrease, the tariff may even decrease in real terms. Table 6.2 illustrates these aggregate pricing levels for containerized and bulk cargoes, expressed In both current terms and constant FY84 values: -35- Table 6.2 Aggregate NSPT Price Lievels Containerized and Bulk Cargoes F'188-FY96 (Rs/Ton) FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 Inflation index /a 1.34 1.42 1.51 1.60 1.70 1.80 1.91 2.02 2.14 Containerized Cargo Current Price 300 318 336 350 350 350 360 360 360 Constant FY84 Price 235 234 233 229 216 203 198 187 176 BPT FY84 Price /b 255 255 255 255 255 255 255 255 255 Bulk Cargo Current Price 162 162 162 162 162 162 180 180 180 Constant FY84 Price 127 119 112 106 100 94 99 93 88 BPT FY84 Price /c 150 150 150 150 150 150 150 150 150 /a The inflation index for FY84 1.03. lb The tariff increase, approved by BPT's Board of Trustees on August 8, 1983, is expected to increase revenues for comparable services to about Rs 255/ton. ic The tariff inerease, approved by BPT's Board of Trustees on August 8, 1983 Is expected to increase revenues for bulk fertilizer to abcut Rs 150/ton. D. Future Finance 6.19 Complete projections of NSPT's financial performance for the period FY84-FY96 are displayed in Annexes 6 to 9. These projections are based on assumptions detailed i Annex 10. The most salient highlights are shown in Table 6.3. -36- Table 6. 3 NSPT Ftnancial Highlights FY88-Ey96 (Rs Million) Year Ended March 31 FY88 FY89 FY90 FY91 PY92 PY93 FY94 PY95 FY96 Containerized Cargo (million tons) 0.780 1.400 1.700 1.900 2.200 2.500 3.000 3.500 4.000 Bulk Cargo (million tons) 1.000 2.452 2.604 2.756 2.908 3.060 3.279 3.496 3.715 Container Revenue 234.0 445.2 571.2 665.0 770.0 875.0 1,080.0 1,260.0 1,440.0 Bulk Revenue 162.0 397.2 421.8 446.5 471.1 495.7 590.2 629.3 668.7 Total Operating Revenue 436.0 882.4 1,039.0 1,157.5 1,287.1 1,423.6 1,723.1 1,942.2 2,169.5 Direct Expenses d 173.2 198.9 214.8 230.7 248.9 278.5 331.2 358.7 411.6 General & Administrative 4.3 8.8 10.3 12.3 14.1 16.2 20.2 23.7 27.6 De--eciation 173.3 173.3 173.3 173.3 173.3 1'9.0 190.2 190.2 206.3 Operatit4s Surplus 85.2 501.4 640.7 741.2 850.8 950.0 1,181.5 1,369.6 1,524.0 Intereat Chargeable 338.4 792.0 791.3 790.5 789.7 788.6 787.5 743.9 696.0 Net Revenues (240.6) (278.4) (134.8) (21.4) 109.7 226.4 436.6 687.7 883.2 Cash from Internal Sources 271.1 686.9 829.8 942.5 1,072.7 1,194.0 1,414.3 1,621.9 1,785.6 Less: Met Debt Service 0 797.1 797.1 797.1 797.1 797.1 1,208.0 1,208.0 1,208.0 Less: Working Capital Increase 77.9 41.2 16.3 13.3 14.5 18.9 37.6 23.7 31.8 Internal Cash Generation 193.2 (152.6) 15.2 130.9 259.9 383.8 108.4 329.9 485.5 Capital Works 1,153.9 0 0 0 0 231.8 458.5 0 657.2 External Financing 1,153.8 0 0 0 0 0 0 0 0 Cash Change for Year 193.1 (151.4) 16.2 132.1 261.1 146.2 (289.8) 390.2 (114.4) Invested Cash Balance 209.8 58.4 74.8 206.9 468.0 614.2 324.4 714.6 603.2 Retained Earnings (246.0) (524.4) (659.2) (680.6) (570.9) (344.5) 92.1 779.8 1,663.0 Working Ratio 40.7 23.5 21.7 21.0 20.4 20.7 20.4 19.7 20.2 Operating Ratio 80.5 43.2 38.3 36.0 33.9 33.3 31.4 29.5 29.8 ROR on Historically Valtned Assets (Z) 2.5 7.4 9.6 11.5 13.5 15.2 18.5 21.3 23.2 ROR on Revalued Assets (Z) 2.5 7.0 8.5 9.4 10.3 10.8 12.5 13,6 14.0 Debt Service Coverage - 0.8 1.0 1.1 1.3 1.4 1.1 1.3 1.4 BEST COPY AVAILABLE -37- 6.20 As illustrated in Table 6.3, NSPT can expect significant accrual deficits in the four years FY88-FY91. NSPT is projected to approach the break-even point in FY91 and show significant profitability thereafter. On a cash flow baais, NSPT will realize a deficit of cash for internal uses only in FY89. 1/ This discrepancy arises because, between FY88 and FY93, NSPT will haves Lo charge interest on the GOI balance loan to operations, even though this interest will not'be payable in cash but will instead be added to the principal of the loan. Thus, NSPT's FY88, FY0D and FY91 income statement deficits result from non-cash expenditures and shouJ3d not cause concern. Even the larger FY89 deficit, which is coincident with a casb flow shortfall, should not cause much concern; in FY88, NSPT is expected to build a cash reserve sufficient to weather a bad year in FY89 and provide still additional cushion for any unexpected setbacks in FY90 and FY91. 6.21 NSPT's projections show low working and operating ratios for the period. This results from assuming prices which are high relative to operat- ing costs; 2/ however, NSPT will need the revenue to generate cash reserves sufficient to meet net annual debt service requirements of about Rs 797 million during the FY89-FY93 period and Rs 1,208 million thereafter. In fact, this faverable projected financial performance depends critlcally on the confluence of three events: (a) NSPT must complete construction in accordance with the project implementation schedule. This would permit NSPT to operate, developing its clientele and a substantial reserve of cash, for one full year before it must begin servicing its debt. NSFT's significant projected cash flow deficit for FY89 underscores the importance of an early effective beginning of operations. A delay of one year in completing construction is expected to result in NSPT facing a cash shortfall of about Rs 590 million. A second year's delay is expected to increase the shortfall to about RB 750 million; 1/ The projections show NSPT also realizing cash flow deficits in FY94 and FY96. Should its traffic grow as projected, NSPT plans to add to its facilities in those years. Because it is projecting having substantial reserves of invested cash, NSPT is planning to finance these investments entirely from those funds. Should NSPT be unable to finance these investments using its own resources, it can either postpone the work or borrow the necessary funds. 2/ These ratios also suggest higher operating efficiencies than normal in the Indian port subsector. The proposed project will provide the facilities and training so that the assumed efficiencies are attainable; however, should these efficiencies prove elusive, the assumed pricing structure contains scope for increases as needed (Table 6.2). -38- (b) NSPT's traffic must develop as projected. Should the traffic not develop, due either to NSPT's failure to deliver efficient service, or to conditions beyond NSPT's control, NSPT will face a fixed schedule of debt service payments without the necessary cash flow or reserves. Should traffic develop 25% more slowly than projected, NSPT would be expected to achieve financial viability only in FY95 or FY96, rather than in FY90 as projected herein; and (c) NSPT must maintain both the revenue generating potential and .-he competitive advantage of the assumed pricing structure, at least until it has developed cash reserves sufflcient to counter thie constraints caused by its highly leveraged capital structure. 6.22 GOI and NSPT both need to establish a program for addressing the immediate and urgent cash flow consequences, should the aforementioned risks materialize. In either event, NSPT should still be generating revenues sufficient to enable comfortable coverage of its operatinig costs; however, it will need relief from its considerable debt service burden. To address these risks, MOST has already sought the cooperation of NSPT's lenders to assure that grace periods are either long enough or flexible enough (para 6.11) to permit relaxing the debt service burden should construction take longer or traffic develop more slowly than expected. These particular steps, which effectively allow NSPT to schedule its debt at a time when it can quantify and resolve its shortcomings, should be sufficient to assure NSPT's financial viability under most eventualities. In addition, MOST can, and is willing, to support NSPT in periods of weakness. At negotiations, GOI undertook that It will make cash advances available to NSFT to cover cash flow deficits. So that NSPT does not regard this undertaking of support as license to spend without regard for efficiency or cost-consciousness, MOST has developed a procedure which will become part of the budget process for predetermining GOI's financial relief to NSPT as a function of shortfalls in traffic. At negotiations, GOI undertook to follow this procedure. 6.23 In view of BPT's tariff increase which MOST has recently approved, conditions appear favorabe for NSPT to be able to charge competitive prices and still realize satisfactory financial performance. At negotiations, NSPT agreed that, beginning in FY90, it will maintain its tariffs at levels which would enable realization of revenues sufficient to cover all operating costs and debt service, and provide as much contribution to futur.e investment in expansion of capacity, as is reasonably possible under competitive condi- tions. NSPT also agreed that its tariff structure would be derived so that activities would be priced in relation to their costs under conditions of reasonably efficient operations. Due to the expected intense competition between NSPT and BPT for traffic, which competition would undoubtedly have an important bearing on NSPT's level and structure of prices, NSPT was not asked to agree to specific rate of return targets; still, it would be expected to realize reasonable rates of return with general ranges being agreed peri- odically at tariff reviews between NSPT and H4OST. Finally, NSPT agreed to endeavor to achieve operating ratios of 1.0 In FY88 and 0.6 in FY89. -39- 6.24 The projections show that if NSPT complies with the agreement regarding tariffs outlined In the preceding paragraph, it will be realizing rates of return exceeding 9% on notionally revalued assets after FY90 (Annex 8). This performance wouLd be satisfactory. GOI does not generally accept the practice of asset revaluation. In this case, this practice is not criti- cal given that NSPT will not be owning old, undervalued asseLs during the foreseeabLe future. Also, the practice is not essential given that no agree- ment relating fiiancial performance to asset value is contemplated. 6.25 Throughout the projection period, NSPT will need to generate sub- stantial cash to cover its annual net debt service. At negotiations, NSPT agreed that it will not incur any debt, other than that included in the Financing Arrangement in order td complete the project, exceeding US$10 million equivalent in any single year or US$30 million equivalent In the aggregate, unless the internal cash generation during .the previous 12 months exceeds 1.2 times the expectedlmaximum debt service reiquirement. E. Sensitivity 6.26 NESPT's financial performance is most sensitive to NSPT's completion of construction on schedule (para 6.21). Failure to do so would prevent NSPT from realizing the cash reserves needed to, overcome the cash flow constraints expected in FY89 and FY90. GOI has addressed this problem by asking NSPT's lenders to provide either long or flexible grace periods on debt service (para 6.08). Though not as seriously, NSPT's financial performance is sensi- tive to traffic developing as forecast (para 6.21). GOI has addressed this problem by developing a procedure for providing NSPT with financial support directly tied to levels of traffic (para 6.22). NSPT's financial performance is also sensitive to the adequacy of its pricing structure. This problem is being addressed by the tariff agreements reached at negotiations (paras 6.23 and 6.25). F. Internal Financial Rate of Return 6.27 The proposed project's internal financial rate of return, through the financial year 2013, is projected at about 12.1. lhis was computed by equating the expected capital and recurrent cost streams with the revenue stream associated with the proposed facilities (Annex 11). Capital costs do include expected additions and replacements, as well as major maintenance to the facilities being provided under the proposed project. VII. AGREEMENTS REACHED AND RECOINENDATIONS 7.01 During negotiations, the following agreements and understandings have been reached with GOI/NSPT: -40- (a) NSPT would undertake a comprehensive OMF Study, in accordance with terms of reference satisfactory to the Bank Group, and would implemenlt the Study's recommendations acceptable to GOI (paras 3.14 and 6.02); (b) NSPT confirmed that it hse, sufficient authority and powers for timely execution of the project and operation of the port (para 3.15); (c) NSPT/GOI would examine, in consultation with the Major Ports Reform Committee, the desirability of leasing a substantial portion of CFS to the private sector and prepare, by September 30, 1986, a detailed plan for the operation of CFS (para 4.06); (d) NSPT/GOI confirmed that the IR would commence operating unit trains between Bombay and New Delhi in March 1984; (e) NSPT/GO1 would, by March 1985, prepare and review an action plan for railway operations within the port and along the main trunkline services to Delhi in order to equlp IR with adequate plant/equipment facilities and modern rolling stock to carry Bombay/Nhava Sheva port traffic (para 4.08); (f) G01 would establish, by June 30, 1984, a coordinating group consisting of representatives of GOM, NSPT, the Maharashtra Water Supply and Sewerage Board, the Maharashtra State Electricity Board, and the Post and Telegraph Department to monitor the progress on the provision of the utility services to Nhava Sheva Port (para 4.09); (g) NSPT would (i) implement a training program satisfactory to the Bank Group; (ii) prepare a Container Operations Manual; and (iii) carry out a survey to refine traffic forecasts and select consultants for technical assistance and training in accordauce with the Bank Group's guidelines (paras 4.10 and 4.11); (h) GOI would on-lend the proceeds of the Bank loan to NSPT under terms and conditions satisfactory to the Bank (paras 4.16 and 6.07 (b)) and terms for the remaining loans would be satisfactory to the Bank (paras 4.16 and 6.07 (c)). Satisfactory completion of the arrangements for the BFT loan, the on-lending of Bank Group finance, and the GOI balance loan would be conditions of effectiveness of the proposed financing; (i) GOI would seek cofinancing for dredging and some items of equipment amounting to about US$80 million (para 4.15); -41- (j) NSPT would review the scope of the services needed for any additional work in consultation with the Baak and would retain short-term technical services, as and when needed, and would ensure that the staff to be appointed by IIPL in senior supervisory positions shall have satisfactory qualifications and experience (para 4.18); (k) NSPT would complete its (i) Phase II of the land acquisition program by June 30, 1984, and Cii) Phase III of the program by December 31, 1984 (para 4.21); (1) NSPT would (i) furnish quarterly progress reports; (b) maintain separate project accounts; and (c) prepare a project completion report (para 4.28); (m) NSPT would begin regular computation of efficiency indicators in a manner acceptable to the Bank Group within three montbs of the facilities at Nhava Sheva becoming operational (para 4.30); (n) INSPT would furnish to the Bank Group its audited stat'ements of annual accounts, together with audit report within nine months of the close of each financial year (para 6.03); (o) GOI would undertake to make available to NSPT ways and means advances to cover cash flow deficits, as necessary (para 6.22); (p) NSPT would, beginning in FY90, maintain its tariffs at levels which would enable realization of revenues sufficient to cover all operating costs and debt service, and also yield a reasonable contribution to future investment for expansion of facilities; and structured in such a way, as to be related to costs under conditions of efficient operations (para 6.23); and (q) NSPT would not incur any debt (other than that required for - completing the project) exceeding US$10 million equivalent in any single year or US$30 million equivalent in the aggregate, unless the internal cash generation during the previous 12 months exceeds 1.2 times the expected maximum debt service requirenents (para 6.25). 7.02 Retroactive financing up to US$1.0 million should be provided for eligible expenditures incurred by INSPT after June 1, 1982 for engineering services, technical assistance and training (paTa 4.27). 7.03 Satisfactory completion of agreements for (a) on-lending of Bank Group's financing; (b) BPT loan; and (c) the balance loan from GOI should be a condition of effectiveness of the Bank GrDup's lending. 7.04 The proposed project provides a suitable basis for a Bankl loan of US$250.0 million equivalent to the Government of India. -42- Annex 1 Page 1 of 4 INDIA NHAVA SiEVA PORT PROJECT Outline Requirements fOT a Training Program for the Staff of Nhava Sheva Port The training concept for this port is based on a multi-step selection, introduction, practical training, test and evaluation approach which could be prepared in consultation with a modern port abroad. (a) Selection of candidates based on review of experience, qualifications and tests or interviews; (b) Development of formal training courses, including training material; (c) Formal in-class training by lectures and discussions including homework assignments; (d) Case studies and/or problem-solving sessions using actual situations reports, problem statements, etc.; (e) Practical or Hands-on training. Here we expect trainees to be paired with an experienced person performing his/her designated job in a realistic day-to-day environment. Practical or hands-on training may not necessarily involve actual decision-making or equipment operation by trainees, but should allow for trainees presence in the decision-making or operating environment to allow him/her to accurately observe and learn how operational and other decisions are made. A detailed record of problem statements, information availability and use, basis for decision and results of decision will be designed so that trainees are forced to study problems, think problems through, and rationalize the decision process. &s part of the practical or hands-on training, there will be a periodic review of problem-solving during which trainees will analyze problems, develop step-by-step solutions and a rationale for their proposed approaches. (f) Test aad Evaluation of trainees progress and cotpetence. Periodic tests and evaluations are suggested: (i) during and at the end of the formal in-class training; (ii) during and at the end of the practical or hands-on training; and (iii) final competence test on return to Nhava Sheva in the actual Nhava Sheva operating environment. The above tests and evaluations will be simple tests of competence designed to assure that the trainee will be able to perform his assigned duties reliably and effectively. -43- Annex 1 Page 2 of 4 NSPT shall seek assistance of modern port/agency in the designing of the training program. It shall seek collaboration of modern ports/agencies for training of its staff as envisaged in this annex. Program Elements 1. Port Management Training of Middle and Upper Management staff would involve course work at an established port management training institute followed by practical experience management with the assistance of other advanced ports. This training vill be in the following major areas: (a) Port Management (b) Port Administrative Management (c) Port Personnel Management (d) Port Accounting Management (e) Port Management Services Management (f) Port Security Management (g) Computer Center Management and Operations (I) Management Information Systems Management and Operations (i) Statistical and Accounting Service Management and Operations 2. Operations Management Training of operations management staff such as traffic, maintenance, terminal, etc., would involve formal course work and hands-on exercises followed by management practice with assistance from other advanced ports employing similar equipment. The following major areas of training are involved: (a) Traffic Management (b) Bulk Terminal Management and Operations (c) Container Terminal Management and Operations (d) Maintenance Management and Operations This program will be designed for department heads and senior profes- sional staff. 3. Operations and Maintenance of Equipment TraininR Training in the operation and maintenance of computer, equipment and complex machines will consist of course work with practical exercise, hands-on training in a class environment followed by field training under -44- Annex 1 Page 3 of 4 actual operating conditions at cooperating ports. The major training components are each divided into: - Design of equipment - Operations of equipment - R.outine service requirements of equipment - Fault detection and fault diagnosis of equipment - Operating procedures - Operating methods - Controls and manual overrides - Equipment check out and tests - Information input and output - Interface of other equipment and operations - Work and operating rules - Skill development and human factors training The major training components are: (a) Computer operator training (b) Bulk terminal equipment operator training (c) Bulk terminal control operator training (d) Container crane operator training (e) Front/side loader operator training (f) Transtainer operator training (g) Maintenance machinery and test equipment operator training 4. Basic Technician Training Program Training of basic operating skills and procedures for simple technical and operating tasks would require little classroom work and would involve mostly on site, hands-on training. This training will be given at Nhava Sheva or nearby domestic ports employing the same or similar equipment. It will be composed of training components for: (a) Fork lift operations training (b) Tractor trailer operations training (c) Bulk conveyor operations training (d) Bagging operations training (e) Gate control operations training (f) Basic tool machines operations training (g) Fueling operations training (h) Container inspection operations training -45- Annex 1 Page 4 of 4 Program and Budget 1. The final number of staff to go through the formal training will be determined upon completion of the detailed training program referred to in paragraph 9 of the Agreed Minutes. In addition to the formal training program, there will be informal training, and orientation activities for NSPT's and other agencies' staff as part of the overall training needs of the project. 2. For budgeting purposes, the overall technical assistance and training program has been divided into three groups: Group A - Management and operations training for senior and supervisory levels to be met through local and overseas training facilities at advanced ports and ports-related institutions; Group B - Basic technician training to be arranged locally; and Group C - Preparatory and technical visits, expatriate and local specialist services for engineering, commissioning, operation and consult- ancy services under the project. 3. The average unit costs of the various requirements described above are estimated to be US$6,000 per person each for training of Group A, US$3,000 per person for Group B and technical advisory services at US$12,000 per man/month for expatriate and US$5,000 per man/month for local specialists. 4. The initial estimated number of staff in the training program for categories A and B above are expected to be between 700-900 out of which about 200 are expected to be trained overseas. 5. The estimated total costs of technical assistance and training is about US$5 million. -46- Annex 2 Page 1 of 2 INDIA NHAVA SHEVA PORT PROJECT Port Efficiencl Indicators Data to be Collected 1. In order that Port Efficiency Indicators may be computed on a regular basis, the following data should be collected beginning not more than three months after the port becomes operational. (a) For each ship serviced at the port; (i) date and time of arrival at the port; (ii) name, dead weight tonnage, length and draft on arrival; (iii) date and time of arrival at berth and identification of berth assigned; (iv) date and time of departure from berth; tv) periods for which ship is idle at berth and reasons therefor; (vi) tonnage and bulk commodity/tonnage and number of containers (20 ft., 40 ft., and TEU) discharged or loaded; (vii) number of shifts and overtime worked; (viii) number of gangs and gang size employed in each shift; (ix) type, number, and shift of cargo handling equipment requested: (x) type, number, and shift of cargo handling equipment available. (b) For each transit shed and storage area; Ci) tons of cargo/TEU of container cleared within free period; (ii) tons of cargo remaining uncleared for more than 2, 4, and 8 weeks; (iii) TEUs of full containers remaining uncleared for more than 2, 4, and 8 weeks; (iv) TEUs of empty containers remaining uncleared for more than 2, 4, and 8 weeks. 2. From the above data the following indicators should be derived eacb quarter and compared with the targets shown in the last column below: Target to be Achieved a) Throughput per Total tonnage/TEU handled by Bulk Cargo: 7000 tons Ship per Shift number of shift worked. Containers: 300 TEU -47- ANNEX 2 Page 2 of 2 b) Labor Productivity Total ton/TEU bandled divided Bulk Cargo: 500 tons tons/TEU per net by total gang time (including Containers: 25 TEU Gang Hour overtime) less stoppage not attributed to the gang (e.g., weather, cargo/equipment not available, etc.) Bulk cargo containers. c) Equipment Pro- Total tons/TEt handled Bulk Cargo: 500 ton ductivity Tons/ divided by shift + overtime Containers: 25 TEU TEU per Hour hours less stoppages not attri- buted to the equipment or its operators (e.g., weather cargo not available, etc.) d) Average Dwell Ton/TEU-days in storage beyond Bulk Cargo: 7 days Time free period divided by total Import tonsfTEUs stored. Containers: 7 days Export Containers: 10 days e) Equipment Avail- Equipment hours supplied 85 per cent ability divided by equipment hours requested. f) Average ship Total time between arrival Waiting time and berthing of all ships divided by number of ships berthed. g) Average service Total time (days) at berth Container Vessel: 1 day time (days) (including berthing and un- Bulk Vessel: 3 days berthing time) of all ships divided by number of ships, h) Berth occupancy Average service time (days) Container Berths (3): multiplied by number of 65% ships, divided by number of Bulk Berths (2): 60% berths times the operating days. -48- Annex 3 Page 1 of 3 INDIA NHAASHEVA PORT PROJECT Traffic Forecast The traffic projections were made for fertilizers, containers, foodgrains, sugar and oil cakes which are expected to be handled by the Bombay Port complex. The traffic analysis was then undertaken by examining the flow of major commodities, identifying their origins and destinations and by devising estimates of future demand for throughput of such com- nodities. On the basis of this analysis, the traffic allocation was made to Bombay and Nhava Sheva on the assumptions that: (i) all fertilizer and fer- tilizer raw materials would be handled at Nhava Sheva; (ii) fully cellular container vessels would use Nhava Sheva, while Bombay will continue to handle cargo by combo ships and general cargo vessels carrying containers; (iii) foodgrain imports expected intermittently would be accommodated at Nhava Sheva; and (iv) all break-bulk cargo, oil cakes and sugar will be handled at Bombay. The resulting traffic forecast for Nhava Sheva is summarized in Table C. (a) Fertilizers and Raw Materials Throughput A comparison of the forecasts for fertilizer consumption and produc- tion made in 1978 (based on 1976 data) with the actual achievements observed in the six-year period 1976-81, indicated an overall five-year lag by extrapolation, 1982/83 projections would only be expected to occur in 1987/88. Keeping this reality in mind, available data and studies undertaken by the Bank's Fertilizer Division and Consultants, RITES (India) have been examined. The conclusion is that after 1987/88 Maharashtra and its neighbor- ing areas will have a surplus of urea in suffi,cient volume to supply the deficit areas in the hinterland of Nhava Sheva and, therefore, no urea imports would be needed through the port. The current and projected fer- tilizer production capacity was determined by identifying the location of existing and future plants (with expected date of completion), rated capacity of the plants, actual output, source of major inputs, and destination of outputs in the hinterland of Nhava Sheva. The results of this review indi- cated that only phosphoric fertilizer will continue to be imported through Nhava Sheva after 1988, with such imports projected to grow from 380,000 tons in 1988 to 620,000 in 1995. -49- Annex 3 Page 2 of 3 Based on a conservative assumption that as much as a two-year delay would occur in the completion of planned (sanctioned) public fertilizer plants, the requirements for phosphate rock input were determined. The publicly-operated fertilizer plants comprise 70% of total manufacturing capacity, operated at 49% utilization in recent years. After allowing for the domestic production of phosphate rock in Rajastan, the import require- ments have been derived, (b) Container Traffic Among the majo. commodities expected to be handled at Nhava Sheva, container traffic is the most difficult to project. Containerization of general cargo moving through Bombay has increased rapidly Over the last ten years from practically none to 131,900 TEUs, or 34% of total general cargo handled at Bombay, in 1981/82. Of the containerized cargo, 19% was destined to or originated from locations oitside the greater Bombay area. About 30% of the containerized cargo to and from the greater Bombay area was handled in less-than-container loads (LCL). The volume of general cargo flow through Bombay Port, on the other hand, has remained level at about 4 to 5 million tons. per year. A significant proportion of container traffic will continue to be carried by general cargo, combi, or coastal/feeder vessels. Most, if not all, of this traffic will continue to use Bombay Port because the ships will require both general cargo and container handling services and because the shipment sizes will be too small to Justify occupation of deep-draft main line container berths at Nhava Sheva. However, feeder vessels which collect or distribute main line containers would use Nhava Sheva. These conclusions were derived after analyzing available data from the Bombay Port Trust reports and projected traffic demand on the liner routes by major shipping companies. (c) Foodgrain Throughput The management of foodgrain stocks by the Government of India has been effective in reducing large foodgrain import requirements in recent years. An analysis of foodgrain production and consumption indicates that a bulk handling capacity of about 450,000 to 600,000 tons per annum of foodgrain is required at Nhava Sheva in every two or three years. This means that Nhava Sheva would need a capability for the intermittent bulk handling of foodgrains at a rate of about 20,000 tons per day. (d) Forecasts of Sugar Throughput A review of India's sugar exports over the period 1977-1980 indicates that only in 1978 and 1979 did total sugar exports exceed 600,000 tons. Furthermore, except for a steady annual tonnage of about 25,000 to the United -50- Annex 3 Page 3 of 3 Kingdom, all sugar exports were destined to developing countries like Egypt, Indonesia, Sri Lanka, Sudan, Bangladesh, Afghanistan, China and Yemen, most of which do not have deep-draft port facilities. An analysis of projections of world sugar demand and supply similarly indicates that the world sugar market will continue to suffer from a large oversupply resulting in low prices at least until 1990. In the past, the major importers of India's sugar had relied on sources other than India. These findings led to the conclusion that there is a very small probability that sugar exports (and imports) through Bombay-Nhava Sheva would exceed 300,000 tons per year in the foreseeable future. Even at this level, such sugar exports would be destined to countries without port facilities to handle bulk sugar or deep-draft vessels. Even when destined to ports where larger vessels could be accommodated, the export sugar would most likely be shipped in smaller vessels, as part-load shipments or as general cargo due to the small shipment quantities and comparatively short distances involved. In fact, such smaller vessels would benefit little from a deep draft, mechanized loading facility. On the basis of this analysis, therefore, justification for mechanized handling of sugar at Nhava Sheva cannot be made. (e) Oil Cake Throughput Traditional exports of oil cake to OECD nations have declined seriously, reportedly due to a contamination problem and the availability of alternative sources of protein, such as fish meal, at lower cost. On the other hand, domestic consumption of oil cake has increased greatly ln recent years. Oil cake exports in 1980 and 1981 were primarily destined for the USSR and Eastern European countries. Oil cake shipment sizes have been small, and most oil cake exports (which fell from 458,000 tons in 1980 to 343,700 tons in 1981) have moved on small vessels, mainly through the ports in Gujarat. The available data suggest that efforts to reduce India's dependence on edible oil imports through greater oilseed production and processing may, in the future, increase the availability of oil cake export. Given the uncertainties of such long-term developments, the present forecast assumes that oil cake exports through Bombay will remain at their current negligible level. -51- Annex 4 Page 1 of 2 INDIA NHAVA SHEVA PORT PROJECT Economic Analysis Methodology (A) Ship Waiting Times The shi? service times for the mix of ships and tonnages were calculated for the with and without cases, and the time values were com- puted based on the weighted average cost per day in port for the mix of ships postulated (Table D). Ship waiting time costs have been computed by dividing projected traffic volumes in any given year by the 1981/82 traf- fic volume and then multiplying this ratio by the product of 1981/82 excess ship waiting times and average ship port costs. The excess ship waiting times in 1981/82 do not take into account 25% of ship's port time (not counting waiting time for a berth) since this much waiting period is required for piloting, docking, etc., with or without the project. (B) Faster Cargo Handling The faster cargo handling benefits are computed by comparing the difference in the cost of turnaround time at Bombay and Nhava Sheva based on the estimated unloading rates at these ports. The ship sizes, the handling rates and the number of TEUs per ship arrival are estimated as follows: Faster Turnaround Bulk Carrters 1988 Ship Size Bombay - 16,800 dwt Nhava Sheva - 22,000 dwt Traffic 1988 - 1,950,000 tons Unloading Rates Bombay 1,000 tons/day Nhava Sheva 8,000 tons/day - -52- Annex 4 Page 2 of 2 Faster Turnaround Container Ships 1988 TEU/Ship Arrival Bombay 180 Nhava Sheva - 300 Handling Rates Bombay 8 TEU/hour (average) Nhava Sheva - 20 TEU/hour (average) Total TEU in 1988 - Nhava Sheva - 169,000 (C) Larger Vessels The trend towards replacing smaller ships by larger ones has been taken into account in arriving at the average size of ships that are expected to call at Bombay and Nhava Sheva, as contained in Table D. By multiplying the potential cost savings per tons of cargo (Table E) by the estimated bulk and container traffic, the benefits of larger vessels have been computed. (D) Avoidable Cargo Delay and Loss Table F contains the assumption regarding the extent of avoidable cargo delays and losses for bulk and container traffic and their monetary values. The interest rate of 12% is used, and the foreign exchange cost has been shadow-priced at 1.25. -53- Annex 5 INDIA NHAVA SHEVA PcRT PROJECT Selected Documents and Data Available in the Project File 1. Interim Report on Nhava Sheva Project - HIPL, May 1981 2. Detailed Projecr Report on Nhava Sheva Project - HIPL, Pbvember 1981 Volume I Main Report Volume II Environmental Impact Volume III Traffic Forecasts Volume IV Financial and Economic Evaluation 3. India Containerization Study - RPT Economic Studies Group, August 1979 4. .Bombay Port Trust - Master Plan - Bertlin and Partners, 1968 Volumes I, II, and III 5. Report of Ntional Transport Policy Committee - Pande Committee Report, 1980 6. Report of the Working Group on Containerization, 1978 7. Report on Congestion at Bombay Port - Mehta Committee, 1978 S. Review of DPR Proposals - Chung Kek Choo, 1982 9. Review and Evaluation Traffic Projection of DPR - Revis, July 1982 10. Revised Traffic Forecast - Frankel, March 1983 11. Computer Printouts for ERRs, Sensitivity and Risk Analyses -54- Anneix rNDIA OOIAVA SI8EVA PORT PR0JVCT tOSfl pyotit & Loss 8"t&tm" - IeN ng1 O4anh 31 FY84 FY05 FY86 FY87 FY88 FY89 FY00 FY91 FY92 FY93 FY94 FY95 FYF6 TRAFFIC C ILLtON TONS) CONTAI.NER-'ED CAROl 0.8 1.4 1.7 1.9 2.2 7. 3.0 3.5 4.0 FERTZLSZERS I PHOSPHATE 0.5 1,2 1.3 1.4 1.5 0.6 1.7 1.8 1.9 SULFUR, 0.2 0.5 0,5 0.5 0.6 0.6 0.6 0.7 0.7 FINISHEDc FERTrLIZER 0.2 0,6 0.6 0.6 0.7 0.7 0.8 0.8 0.P FOUPGRAINS 0.1 0.2 0.2 0.2 0,2 0.2 0.3 O,.: 0.2 SOISTOTAL-RULR CARGO 1.0 2,5 2.6 2.0 2,9 1.1 3.3 I's 3-7 RA7ESCRS/TONI COMH 4m,IF 300.0 319,0 336.0 350.0 350.0 350.0 160.0 160,0 360.0 BULK 102.0 162,0 162.0 162.0 162,0 162,0 18000 180.0 180. RE ENUES CONTAINESIZED CARGO 234d, 445,2 571.2 663.0 770,0 0733.0 1010.0 1260,0 1440.0 DULl. CARGO 162,0 3?7.2 421.8 446.5 971.1 495.7 390,14 629,3 668.7 CFS RENTAL 20.0 40,0 40.0 46.0 46.0 46.0 52.9 S2.9 52.9 60.8 TOTAL OPERATING REVENUE 20.0 436,0 882.4 1039.0 1157.5 1287.1 1423.6 2.723.1 1?42,2 2169.1 EXPEN4SES DIRECT COSTS SALARIES ANM 800E. 22.2 67.0 71.0 75.5 80.0 85.0. 92.2 109.3 01s5. 130.1 REPAIRS AND MAINTENANCE 92.4 97.9 103.8 110.0 116 .6 131.9 156.7 166.1 191.5 POWlER AND FUEL 1.0 12,16 28 .8 34,2 39.3 45 .8 52.9 63.5 75.3 88.1 cFs MfAINTEANCE 0.6 1.2 1,2 1.3 1.4 I'S5 1.6 1.7 2,8 1.9 TOTAL DIRECT COSTS 23.6 173.2 190.9 214,B 230.7 248.9 278,5 331.2 250.7 410.6 SENRAL I ADHINISTRCATID0 0.2 0.2 0.3 1.6 4.3 8.0 10,3 12,3 14.1 16,2 20,2 23.7 27.6 DEPRECIATION 073.3 172.3 073.1 1.73.3 173-.1 179,0 190.3 190,3 206.4 TOTAL OPERATINGS COSTS 0.2 0.2 0,3 25.2 280.8 381.0 299.4 416,3 416.3 0 73.7 541.7 572.7 643.6 OPERATING SURPLUS -0.2 -.0.2 -0.3 .5.2 85.2 500.4 640.6 741.1 so0,s 949,9 1181.5 1369,5 0523.9 NET NON OPEATING RtEVENUES 0.5 12.6 12.2 15.0 28,0 48.6 65.1 42.6 62.1 55.3 INTEREST 14.9 70.1 227.91 465.6 676,7 791.0 791.3 790.5 789.7 788.6 787.5 743.9 696.0 LESS INItERST CAPITALIOER 14.9 78.1 227,9 463.6 1384 INTEREST CHARGEID TO S'ERATIDNS 339.4 792.0 791.3 790.5 789.7 780.6 787,5 743.9 696,0 NET RERIEIUE -0.2 -0.2 -0,3 -4,7 -240,6 -278.4 -134.0 .21,4 109.7 226.4 436.6 687.7 803,2 WSORKINGH RATIO 40.7 23.5 21.7 21.0 20.4 20.7 20.4 19.7 20.2 OPERATIIO RtATIO RO.5 43,2 38.3 36.0 33.1 33.3 30.4 29.5 29.8 RATE OF RETURN 2.3 7,4 9.6 I15 5 13,5 15.2 18,5 21.1 23.2 JanuarY 1984 BESTCOPY AVAILABDLE DLr 1 ijuri FRWVIULRL NEAVA SHEVA PORT PROJECT NSPT Cash Flow Statement - Year EndinR March 31 (Rs MNlliou) FY94 FYBS FY9Y FY97 FY99 FYB9 FY90 FY91 FY92 FY93 FY94 FY95 FI96 INTERNAL GENFRATION CASH AVAILABtE FROM nPERATIONS -0.a -0.2 -0.3 -5.2 258.5 674.7 813.9 914.5 1024.1 1128.9 1371.7 1559.8 1730.3 NET NONOPERATING REVENUES 0.5 12.6 12.2 15.9 28.0 48.6 65.1 42.6 62.1 55.3 tLESS)DEBT SERUICE 797.1 797.1 797.1 797.1 ?97.1 1208.0 1208.0 1208.0 (LESS) NET WORKING CAPITAL INCREASE 3.6 77.9 41.2 16.3 13.3 14.5 18.9 37.6 23.7 31.8 INTERNAL CASH GNERATION -0.2 -0.2 -0.3 -8.3 193,2 -151.4 16.4 132.1 261.1 478.G 168.7 390.2 545.8 PROJECTS TO BE FINANCBEl PROPOSFr, F1DJFCT 293.3 880.0 1760.0 2200.2 816.8 INTEREST DURING CONSTRUCTION 14.9 7B.1 227.9 465.6 33B.4 OM CAPITAL UOtKS I31.8 45G.5 67. 231.8 458.5 ~~657.2 TOTAL CAtITAL REOUIRENETS 308.2 758.1 1987.9 2665.8 1155.2 231.8 458.5 BDAlA TO BE FII&w 309.4 958.3 199B.2 2674.1 962.0 151.4 -16.4 -132.1 -261.1 -146.2 289.8 -390.2 111.4 …----- - -- ----- - --- ---------- -------- ---------… ----- ---- ---- SOURCES OF FINANCING ON-LENT BANK GROUP FUHDS 20.6 331.3 974.1 1238-2 350.6 BOMBAY PORT TRUST LOAN 146.7 340,1 574.0 788.6 502.0 GOVEONNENT OF INDIA LOAN 140.9 286.7 439.8 639.0 302.5 GRANTS I EOUITY 0.2 0.2 0.3 25.0 …- -… - - - - --…-…-…--- ------ --- ---- - ---- ------ - -- -------- - ------ - - -- - - ---- -------- -- -- - TOTAL CAPITAL FINANCINft 308.4 958,3 1988.2 2690.8 1155.1 INDESTED CASH POSITION NET CHANGE FOR YEAR 16.7 193.1 -151.4 16.4 132.1 261.1 i46.2 -299.9 390.2 -111.4 _ _ _ -~~~~~~ ~ --- - - -- - -X- - - - - - - - - -- - - - - - - BEGINNING BALANCE 16.7 Z0?.8 58A4 74.8 206,? 468.0 614,. 324.4 714.6 ENDIN6 BALANCE 16.7 20a.8 58.4 74.8 206.S 468.0 614.2 324.4 714.6 603.2 DEBT SERVICE COVERffiE 61905.7 0.B 1.0 1.1 1.3 1.4 1. 13 1.4 January 19S4 -56- INDIA Annex 8 NHAVA SHEVA PORT PROJECT NSPT Balance SPeat - AI at March 312 .am 19n4 J915 133 197 16 196 199 1991 192 199 1994 19n5 1996 < ASSETS FIXED ASSETS GROSS FIXED ASSETS 7075.2 7075.2 7075.2 7075.2 7075.2 7307.0 7765.5 776.5 3422.7 _ (LESS)ACCIJULATED DEPROCIATION 173.3 344.7 520.0 693.4 W6.7. 1045.7 1236.0 1426,2 1W2,6 _ 7ET FIXED ASSETS IN OPERATION 6901.8 672D.5 6592.1 63 1.3 *4w 6261.2 6529.5 6339.2 67 0.1 WORKS UNDER CONSTRUCTION 293.3 1173.3 2933.3 1133.5 INTEREST CAPITALItE 14.9 93.0 320.9 736.5 WORK IN PROORESS 308.2 1266.3 3254.2 5920.0 CURRENT ASSETS CASH INAiWS 3.9 20.9 33.2 35,3 S .S 41 5 46.4 55-2 59.B 63.6 INVENTORIES 30.3 32.6 34.6 26.7 3.91 43.9 52.2 55.4 43.0 ACCOUNTS RECEIVABLE6 1.7 36.3 73.5 66.6 *6.3 107.3 113.6 143.6 161.B 160.3 INVESTED CASH 16.7 249.8 59.4 74,S 206.9 40.0 614.2 324.4 714.6 603.2 TOTAL CURRENT ASBETS 22.3 305,8 197.7 231.3 37.5 6U.6 323.2 575.4 991.6 916.4 TOTAL ASSETS 309.2 1266.3 3254.2 5942.3 7207.6 696.2 6766.9 670-3 6664.1 70U4.4 7104.9 73W0.6 7706.5 LIASLITtES I EQUITY CURT LlABSL7TtES ACCOUNT PAYABLE 2.0 14.4 16.6 17,9 19,2 20.7 23.2 27.6 29.9 34.3 SHORT TERN tEDITS TOTAL CRRET LIABILITIES 2.0 14.4 16.6 17.9 19.2 20.7 23.2 27.6 29.9 34.3 LONG TU DEBT PROPSE ANW OR30P FSIWICE 20.6 31.19 1326.0 2564.2 3067.9 3022. 2972.5 2916.4 2336.-i 2734.2 2706.5 2619.3 2523.2 _AY PORT TRUST LOAN 146.7 4".8 1060,1 1349.4 24sa.0 229.9 21)0.6 1944.4 173.1 1514.3 L266.5 993.9 64.0 GOOERWT OF INDIA LOA 140.9 427.6 367.4 1506.4 1391.6 2035.7 2299.4 2535.2 2795.1 3061, 29366 201.8 2766.3 TOTAL LONG TErB DEBT 30a.2 1266.3 34.2 n20.0 7413.5 74ee.3 7402.6 7n6 73, 7W.1 .6 -5 5.5 EUSITY PAID Ii COPITAL 0.2 0.4 407 25.7 25.7 23.7 25.7 25.7 25.7' 25z7 25.7 25.7 25.7 RETAIlED EMNINSI -0.2 -0.4 -0.7 -5.4 -246.0 -524.4 -49.2 -0.6 -5.9 -a4.5 92.1 779. 13.0 TOTAL MUITY 20.3 -2k.0.3 -4".7 -3.5 -654.9 45.2 -310,6 117.3 6-5.5 u".t . a.^.......................... i*s.a. as.s.as.aa.s. .s.in* .a.s. i n mSS. .S tuS.a _ TOTAL LIABILITIES I EQUITY 304.2 1266.3 3254.2 5942., 7207o. 6926.2 4734.9 67643 64.1 764,4 7104.9 7W-6 77U.3 .J. a 19..a .s. .a .. ._ _ ._ _ _. January 1934 INDIA NHAVA SHEVA PORT PROJECT NSPT Income Statement Indicators (Assumes Notionally Revalued Assets) (Rs Million) FY99 FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 INDICATORS NET REVENUE -240.6 -288.8 -156.2 -54.5 64,2 167.8 363.7 599.1 111.8 WORKING RATIO 40.7 23.5 21.7 21.0 20.4 20.7 20.4 19.7 20.2 OPERATING RATIO 80.S 44.4 40.4 38.8 37.4 37.4 35.7 34.1 34.6 RATE OF RETURN 2.5 7.0 8.5 9.4 10.3 10.8 12.5 13.6 14.0 January 1984 BEST COPY AVAILABLE -58- Annex 10 Page I of 9 . ,DIA NHAVA SHEVA PORT PROJECT NSPT - AsBUmptions to Financial Projections 1. Income Statements 1.1 Traffic forecast. The traffic figures used are as follows: Table 1 Traffic Forecast (in millions of tons) Year Bulk Container FY88 1.000 0.780 FY89 2.452 1.400 FY90 2.604 1.700 FY91 2.756 1.900 FY92 2.908 2.200 FY93 3.060 2.500 FY94 3.279 3.000 FY95 3.496 3.500 FY96 3.715 4.000 1.2 CFS Rental. These fees were derived based on the CPS returning 12X on assets after deductions for direct maintenance costs, associated general and administrative expenses, depreciations, and interest. The resultant figures were then rounded and are shown in Table 2. Table 2 CFS Annual Rental (in million rupees) Year CFS Annual Rental FY87 20.0 FY88 40.0 FY89 40.0 FY90 46.0 FY91 46.0 FY92 46.0 FY93 52.9 FY94 52.9 FY95 52.9 FY96 60.8 BEST COPY AVAILABLE -59- Annex 10 Page 2 of 9 1.3 Inflation. inflation has been assumed at 7% for the years FY84 through FY86 and at 6% thereafter. 1.4 Operating Costs. All operating costs were derived in constant terms. They were then multiplied by the escalation factors shown in Table 3 which corresponds to the inflation levels assumed and defined above. Table 3 Escalation Factors Year Escalation Faoctora FY84 1.03 FY85 1.11 FY86 1.18 FY87 1.27 FY88 1.34 FY89 1.42 FY90 1.51 FY91 1.60 FY92 1.70 FY93 1.80 FY94 1.91 FY95 2.02 FY96 2.14 FY97 2.27 1.4.1 Salaries and Waxes. The total salaries and wages payable to the various categories of staff and labor have been computed as per the norms indicated by the Ministry of Shipping & Transport. The total salary payable to various grades of staff and labor is given in Table 4. -60- Annex 10 Page 3 of 9 Table 4 Salaries and Wages by Grade (in rupees) Basic salary Allowance Salary per Grade per month x annum I 1,600+ 225 43,200 1I 1,200-1,600 240 40,300 III 500-1,200 300 30,600 IV 0-500 350 10,500 On the basis of the above norms, the salaries and wages have been computed for each year of the project period, then escalated according to Table 3. Table 5 indicates the year by year requirement of labor, the total costs in FY84 prices and the total escalated labor costs. Table 5 Salaries and Wages Grade : I itI III IV Total Escalated Salary/ Rs. 43,200 Rs. 40,300 Rs. 30,600 Rs. 10.500 Amount Amount annum Amount Amount Amount Amount (Rs. (Rs. Year _ No. Rs.Hlns. No. Rs.Mlns. No. Rs.Mlns. Nao. Rs.Mlns. Mlna.) Mlas.) FY87 - - 20.0 22.0 FY88 41 1.8 171 6.9 1018 31.2 962 10.1 50.0 67.0 FY89 41 1.8 171 6.9 1018 31.2 962 10.1 50.0 71.0 FY90 41 1.8 171 6.9 1018 31.2 962 10.1 50.0 75.5 FY91 41 1.8 171 6.9 1018 31.2 962 10.1 50.0 80.0 FY92 41 1.8 171 6.9 1018 31.2 962 10.1 50.0 85.0 FY93 41 1.8 171 6.9 1048 32.1 994 10.4 51.2 92.2 FY94 41 1.8 174 7.0 1209 37.0 1Q86 11.4 57.2 109.3 FY95 41 1.8 174 7.0 1209 37.0 1086 11.4 57.2 115.5 FY96 41 1.8 186 7.5 1285 39.3 1166 12.2 60.8 130.1 1.4.2 Repairs and Maintenance. The cost of maintenance and repairs has been computed taking into consideration the cost to be incurred for maintenance dredging which has been assumed to be Rs. 11.2 million p.a. in FY84 prices and Rs. 15.0 million per year in FY88 prices and the cost of maintenance and repairs of various other facilities is given in Table 6. -61- Annex ,l0 Page 4 of 9 Table 6 Maintenance and Repairs (in FY88 prices) % of Description Capital Cost Land and Land Development 0.1 Jetties & Berths 0.25 Buildings & Others 0.50 Floating Craft 3.0 Plant & Equipment 3.0 Mobile Equipment 4.5 Dredging Rs. 15.0 million per year Thereafter, 6% per year escalation has been considered on all items. 1.4.3 Power and Fuel. The likely consumption of electric power Was computed and multiplied by the rate indicated by the Maharashtra State Electricity Board for supply of bulk power, taking into account fuel costs, adjustments charges and the minimum demand charges to arrive at the cost of electric power. Similarly, taking into account the consumption of POL, the fuel charges were computed on the basis of the prevailing prices in Maharashtra. The power and fuel costs, in FY84 prices for container traffic wre computed to be Rs. 5.60 per ton and for bulk traffic Rs. 5.10 per ton. These charges were thereafter escalated to bring them to FY88 prices and the escalated power and fuel costs applicable in FY88 are given below in Table 7. Table 7 Power and Fuel Costs (in FY88 prices) Costs/Ton of Cargo Description (in Rs.) Containerized Cargo 7.50 Bulk Cargo 6.83 -62- Annex 10 Page 5 of 9 Thereafter, the price of electricity has been escalated by 6% per year. For FY87, a lump sum provision of Re. 1.0 million was assumed to cover power and fuel costs during commissioning. 1.5 Depreciation. Annual depreciation has been computed at 2.45% of gross fixed assets valued at historical cost. 1.6 General and Administrative Expensees. Nominal values have been asaumed in FY84, FY85, FY86 and FY87. Thereafter, general and administrative expenses were assumed at 1% of operating revenue. 1.7 Interest. Interest is computed based on the BPT loan carrying a 10% annual rate, on-lending of Bank Group funds carrying an 11.5% annual rate, and the GOI balance loan carrying a 10.25% annual rate. 1.7.1 Interest char&eable is the interest incurred on all debts after the conclusion of construction (at which point interest can no longer be added to the value of gross fixed assets). 1.7.2 Interest Payable. This represents interest which is actually paid in cash. Between FY89 and FY93, only the interest on the BPT loan and the on-lent Bank Group finaicing will be paid in cash. During that period, the interest on the GOI balance loan will accrue and be added to the principal outstanding. Beginning in FY94, the interest due on all three loans will be payable in cash. 2. Balance Sheets 2.1 Cash in banks - represents two months of direct expenses. 2.2 Inventory represents four months of repairs and maintenance expenses. 2.3 Accounts receivable represents one month's operating revenues. 2.4 Accounts payable represents one month's direct expenses. 2.5 Works under construction represents the accumulation of work completed under the proposed project as at March 31 of 1984, 1985, 1986 and 1987. These amounts together with work completed during the year ended March 31, 1988 become capitalized as one component of gross -63- Annex 10 Page 6 of 9 fixed assets on Hlarch 31, 1988. All additional investments after tlhe project period, namely investments of Rs. 231.8 million in FY93, Rse 458.5 million ia FY94, and Rs. 657.2 million in FY96 are added directly to gross fixed assets in the year those investments are made. 2.6 Interest capitalized consists of all interest accrued on the three long-term loans during the period of construction. In FY84, FY85, FY86 and FY87 this amount is added.to works under construction to provide an aggregate work in process figure. The amount accruable to the project in FY88 is added to FY87 work in progress ant! the amount of work completed in FY88 to provide the opening giross fixed assets entry. 2.7 Long-term debt - All three components of long-term debt include accrued interest during the years FY84, FY85, PY86, FY87 and FY88. Thereafter, interest on the GOI balance loan continues to accumu- late until PY93. In contrast, the decreases in both the on-lent Bank Group finance and the EPT loan reflect the regular repayments being made during those years. 3. Cash Flow 3.1 On lent Bank Group Funds. On the cash flow, this includes both principal and interest accrued to construction during the period FY84-FY88. On the balance sheet, this includes accumulated principal plus unpaid interest for the same period. This loan appears in the statements according to Table 8: -64- Annex 10 Page 7 of 9 Table 8 Details of Onletut Bank-Group Funds (Rs million)(11.5% Interest per Annum) Year Ended Opening Interest Closing 3/31 Drawdown *Balarice Payable Chatgeable Accruable Amortization Balance FY84 19.5 0 0 0 1.1 0 20.6 FY85 .311.0 20.6 0 0 20.3 0 351.9 FY86 882.9 351.9 0 0 91.2 0 1326.0 FY87 1026.7 1326.0 0 0 211.5 0 2564.2 FY88 197.5 2564.2 0 153.1 306.2 0 3067.9 FY89 0 3067.9 352.8 352.8 0 45.1 3022.8 FY90 0 3022.8 347.6 347.6 0 50.3 2972.5 FY91. 0 2972.5 341.8 341.8 0 56.1 2916.4 FY92 0 2916.4 335.4 335.4 0 62.5 2853.9 FY93 0 2853.9 328.2 328,2 0 69.7 2784.2 FY94 0 2784.2 320.2 320.2 0 77.7 2706.3 FY95 0 2706.5 311.2 311.2 D 86.7 2619.8 FY96 0 2619.8 301.3 301.3 0 .96.6 2523.2 3.2 Bombay Port Trust Loan. On the cash flow, this includes both the principal and the interest accrued to construction during the period FY84-FY88. On the Balance Sheet, this includes accumulated principal plus unpaid interest for the same period. This loan appears in the statements according to Table 9: -65- Annex 10 Page 8 of 9 Table 9 Details of Bombay Port Tryst Loan (Rs million)(1O0 Interest per Annum) Year Ended Opening Interest Closing 3/31 Drawdown Balance Payable Chargeable Aecruable Amortization Balance FY84 139.8 0 0 0 6.9 0 146.7 FY85 310.0 146.7 0 0 30.1 0 486.8 FY86 500.4 486.8 0 0 73.6 0 1060.8 FY87 650.2 1060.2 0 0 138.4 0 1849.4 FY88 399.6 1849.4 0 51.2 102.4 0 2351.4 FY89 0 2351.4 235.1 235.1 0 147.6 2203.8 FY90 0 2203.8 220.4 220.4 0 162.3 2041.5 FY91 0 2041.5 204.2 204.2 0 178.5 1863.0 FY92 0 1863.0 186.3 186.3 0 196.4 1666.6 FY93 0 1666.6 166.7 166,.7 0 216.0 1450.6 FY94 0 1450.6 145.1 145.1 0. 237.6 1213.0 FY95 0 213.0 121.3 121.3 0 261.4 951.6 FY96 0 951.6 95.2 95.2 0 287.5 664.1 3.3 GOI Balance Loan. On the cash flow, this includes both the principal and the interest accrued to construction during the period FY84-FY88. On the Balance Sheet, this includes accumuLated principal plus unpaid interest for the period FY84-FY93. This loan appears in the statements according to Table 10: -66- Annex 10 Page 9 of 9 Table 10 Details of GOI balance Loan (Rs million)(10.25% Interest per Annum) Year Ended Opening Interest Closing 3/31 Drawdown Balanice Payable Chargeable Acctuable Amortization Balance FY84 134.0 0 0 0 6.9 0 140.9 FY85 259.0 140.9 0 0 27.7 0 427.6 FY86 376.7 427.6 0 0 63.1 0 867.4 FY87 523.3 867.4 0 0 115.7 0 1506.4 FY88 219.7 1506.4 0 82.8 165.7 0 1891.8 FY89 0 1891.8 0 193.9 193.9 0 2085.7 -FY90 0 2085.7 0 213.8 213.8 0 2299.5 FY91 0 2299.5 0 235.7 ?35.7 0 2535.2 FY92 0 2535.2 0 259.9 259.9 0 2795.0 FY93 0 2795.0 0 286.5 286.5 0 3081.5 FY94 0 3081.5 315.9 315.9 0 95.0 2986.5 FY95 0 2986.5 306.1 306.1 0 104.8. 2881.7 FY96 0 2881.7 295.4 295.4 0 115.5 2766.2 -67- Annex 11 IND IA MHAVA SHEVA PORT PROJECT NSPT Internal Financial Rate of Return (Rs Million - Constant Prices) Year Ended Capital Recurrent Net Cash March 31 Costs Costs Revenues Flow FY84 252.3 0 0 (252.3) FY85 757.0 0 0 (757.0) FY86 1,514.0 0 0 (1,514.0) FY87 1,766.4 17.5 L6.0 (1,767.9) FY88 757.0 142.4 327.1 (572.3) FY89 0 156.7 639.7 483.0 FY90 0 159.0 723.5 564.5 FY91 0 161.2 736.5 575.3 FY92 0 .163.4 790.2 626.8 FY93 128.8 170.1 842.3 543.4 FY94 240.1 187.8 932.5 504.6 FY95 0 193.1 1,010.2 817.1 FY96 307.1 206.5 1,081.9 568.3 FY97 0 210.1 1,152.8 942.7 FY98 456.4 223.2 1,223.8 544.2 FY99 158.1 232.4 1,292.9 902.4 FY2000 0 236.0 1,365.6 1,129.6 FY01 0 240.2 1,436.5 1,196.3 FY02 0 240.2 1,436.5 1,196.3 FY03 0 240.2 1,436.5 1,196.3 FY04 0 240.2 1,436.5 1,196.3 FY05 0 240.2 1,436.5 1,196.3 FY06 0 240.2 1,436.5 1,196.3 FY07 0 240.2 1,436.5 1,196.3 FY08 0 240.2 1,436.5 1,196.3 FY09 0 240.2 1,436.5 1,196.3 FY10 0 240.2 1,436.5 1,196.3 FYI1 0 240.2 1,436.5 1,196.3 FY12 0 240.2 1,436.5 1,196.3 FY13 0 240.2 1,436.5 1,196.3 IFRR 12.1% January J984 -68- Table A INDIA NUAVA SHEVA PORT PROJECT Traffic Handled at Major Ports of India Total Tons No. of Vessels 1981/82 1982-83 1982-82 1982-83 Bombay 19,63.,435 18,028,694 3,557 2,281 Calcutta (including Haldia) 9,750,000 7,517,000 1,146 901 Cochin 5,501,403 4,190,771 918 696 Madras 11,471,050 9,511,162 1,295 1,094 Kandla 9,530,452 9,355,216 562 421 Mormugao 14,887,652 8,306,000 528 294 Visakhapatnam 10,854,000 7,599,00on 563 439 Paradeep 2,167,974 990.605 121 79 Mangalore 1,642,537 1,473,987 254 181 Tuticorin 2,686,048 2,269,714 371 253 Total 88,125,551 69,242,229 9,315 6,639 Source: MOST *.eport 1982-83 January 1984 -69- Table B INDIA NHAVA SHEVA PORT PROJECT Estimated Schedule of Disbursements Fiscal Year Disbursement in US$'000 & Quarter Ending During Quarter Cumulative FY 1985 September 30, 1984 600 600 December 31, 1984 1,400 2,000 March 31, 1985 10,000 12,000 'June 30, 1985 18,000 30,000 FY 1986 September 30, 1985 20,000 50,000 December 31, 1985 20,000 70,000 March 31, 1986 25,000 95,000 June 30, 1986 25,000 120,000 FY 1987 September 30, 1986 25,000 145,000 December 31, 1986 25,000 170,000 March 31, 1987 20,000 190,000 June 30, 1987 15,000 205,000 rUy 1988 September 30, 1987 10,000 215,000 December 31, 1987 8,000 223,000 March 31, 1988 7,000 230,000 June 30, 1988 5,000 235,000 FY 1989 September 30, 1988 5,000 240,000 December 31, 1988 5,000 245,000 March 31, 1989 5,000 250,000 Proposed Closing Date: March 31, 1989 Source: Mission Estimate January 1984 -7- ~Table C INDIA NHAVA SHEVA PORT PROJECT Traffic Prolections (Million Tons) Serial- No. Commodity 1987-88 1992-93 1995-96 2001-01 I Fertilizers, including raw materials: a) Finished fertilizers* 0.38-0.68 0.51-0.91 0.62-1.11 0.99-1.61 b) Rock phosphate 1.10 1.55 1.94 2.28 c) Sulphur 0.47 0.60 0.71 0.98 Total 1.95-2.25 2.66-3.06 3.27-3.76 4.76-5.47 TI Containerized cargo 1.69 2.50 3.55 5.40 III Foodgrains 0.60 0.60 0.60 0.60 (Intermittent) Note: *The composition of the finished fertilizers will be 0.2 million tons of potassic fertilizers (constant) and the balance, phosphatic fertilizers. Source: Mission estimates January 1984 -71- Table D INDIA NHAVA SHEVA PORT PROJECT Vessel Sizes Assumed and Associated Ship Costs (At Nhava Sheva) Bulk Carriers Containership Average Port Average Port Ship Sizes Cost/Day Ship Sizes Cost/Day Year DWT Ks DWT Rs 1987/88 22,000 87,000 20,000 129,000 1988/89 23,000 88,000 21,000 134,000 1989/90 24,000 89,000 22,000 140,000 1990/91 25,000 90,000 23,000 145,000 1991/92 26,000 91,000 24,000 150,000 1992/93 27,000 92,000 25,000 154,000 1993/94 28,0-'l 93,000 26,000 159,000 1994/95 29,000 94,000 27,000 163,000 1995/96 30,000 95,000 28,000 169,000 (At Bombay Without Nhava Sheva) Ship Cost/Day Size Rs Average Bulk Carriers 16,800 DWT 60,000 Average Containership 15,000 102,000 Source: Mlission estimates January 1984 -72- Table E INDIA NHAVA SHEVA PORT PROJECT Cost Savings Per Ton Due to Larger Vessels (In 1983 Rupees) Year Bulk Cargo Container Cargo 1988 (1/2 year) 139 67 1989 300 158 1990 321 185 1991 347 212 1992 370 244 1993 399 276 1994 404 302 1995 422 329 1996 443 350 1997 443 373 1998 443 395 1999 443 43.8 2000 443 441 Source: Mission estimates January 1984 -73- Table F INDIA NHAVA SHEVA PORT PROJECT Assumptions in Computing Cargo Delays Cargo Million Tons (1988) Value/Ton Fertilizers 2.0 Rs 1,200 Foodgrains 0.6 3,000 (intermittent) Containers 1.7 6,500 Time Value of Cargo Fertilizers 8 days of saving 12% interest rate 1.25 shadow price for foreign exchange (8)(1,200)(12)(1.25) - Rs 3.95/ton (365)(100) Foodgrains 3 days of saving 12% interest rate 1.25 shadow price for foreign exchange (3)(3,000)(12)(1.25) = Rs 3.7/ton (365)( 100) Containers 3 days of saving 12% interest rate 1.25 shadow price for foreign exchange (3)(6,500)(12)(1.25) = Rs 8.0/ton (365) (100) Cargo Loss Savings assumed at 0.4% of cargo value Source: Mission estimates January 1984 -74- Table G INDIA Peie 1 of 2 NHAVA SHEVA PORT PROJECT Cost Estimates (8 1983 Prices & Exchange gate US$ R Ra 9.75) ------ Rupees Hillton -------- US$ Million ----------… Tax 6 Duty Tax & Duty Description _uantity Local Forelin Total Comoonent Local_ Forsian Iotal Coaponent A. Land Acquisition 1,185 ha 200.0 200.0 - 20.5 - 20.5 B. Civil Works (i) Filling & levelling 10.79 mill m3 557.4 300.5 857.9 73.0 57.2 30.8 88.0 ttl) Bulk berth (incliding service and port craft berth*) 712 km 121.3 124.4 245.7 35.7 12.4 12.8 25.2 (iii) Bulk berth approach 365 km 16,6 15.2 31.8 4.0 1.7 1.6 3.1 (lv) Container berth 680 kmn 123.4 114.2 237.7 34.9 12.7 11.7 24.4 (v) Container berth approaches 880 km 55,6 39.4 95.0 11.6 5.7 4.0 9.7 (vi) Landing jetty 44 kcs 7.6 - 7.6 0.4 0.8 - 0.8 (vii) Admin. 6 operational buildings 11,600 n2 11.5 10.5 22.0 3.8 1.2 1.1 2.3 (viii) Maintenance buildings 11,500 m2 11,0 3.0 14.0 1.9 1.1 0.3 1.4 (ix) Electrical buildings 3,650 .2 2.9 0.3 3.2 0.4 0.3 - 0.3 (x) Roads 156.3 - 156.3 7.1 16.0 - 16.0 (xi) Railway sidings 401.9 - 401.9 1.1 41.2 - 41.2 (xii) Paved areas (including land piles) 40.8 4.2 45.0 7.0 4.2 0.4 4.6 (xiii) Fencing and gatea 1,9 _ 1.9 0.1 0.2 - 0.2 Subtotal B 1,508.2 611.8 2,120.0 181.0 154.7 62.6 217.3 18.6 C. Dredging (t) Soft clay 7.65 mill m3 40.3 162.2 202.5 13.0 4.1 16.6 20.7 (it) Underwater rock blasting 0.44 mill m3 18.7 74.6 93.3 5.9 1.9 7.7 9.6 _ Subtotal a 59.0 236.8 295.8 18.9 6.0 24.3 30.3 1.9 D. Plant and Equipment (i) Container handling equipment (a) wharf gantry cranes 3 nos. 47.9 98.0 145.9 41.8 4.9 10.1 15.0 (b) tire mounted gantry cranes 8 nos. 40.6 81.3 121.9 34.7 4.2 8.3 12.5 (e) rail mounted gantry crane I no. 4.9 9.6 14,5 4.2 0.5 1.0 1.5 (d) fork lift truck I no. 1.5 3.1 4.6 1.4 0.2 0.3 0.5 's) tractors 38 nos. 8.1 16.6 24.7 7.5 0.8 1.7 2.5 (f) trailerB 136 nos. 11.7 24.3 36.0 10.8 1.2 2.5 3.7 (g) miscellaneous 4.4 ,B.4 12.8 3.5 0.4 0.9 1.3 Subtotal 0 (i) 119.1 241.3 360.4 103.9 12.2 24.8 37.0 10.7 (Li) Bulk handling equipment (a) marine unloaders 4 nos. 84.2 146.7 230.9 64.7 8.5 15.1 23.6 (b) conveyor system 15.5 nos. 75.1 98,1 173.2 45.3 7.7 10.1 17.8 (e) scraper reclaimers 3 nos. 11.2 20.0 31,2 8.8 1.1 2.1 3.2 (d) bagging machines 30 nos. 11.5 20.7 32.2 9.1 1.2 2.1 3.3 (e) bag lo4der/unloaders 22-nos. 10.7 19.2 29.9 8.5 1.1 2.0 3.1 (f) bag stackers 2 nos. 5.4 9.5 14.9 4.2 0.5 1.0 1.5 (g) front end loaders 8 nos. 4.0 8.0 12.0 3.5 0.4 0.8 1.2 (h) doters 5 noe. 1.5 3.0 4.5 1.4 0.2 0.3 0.5 (i) miscellaneous 11.3 0.5 11.8 1.1 1.2 - 1.2 Subtotal D (ii) 214.9 325.7 540.6 146.6 21.9 33.5 55.4 15.0 (iii) Workshop & miscellaneous equipment 36.2 33.7 69.9 12.0 3.7 3.5 7.2 1.2 (iv) Floating craft & navigational sids (a) tugs 3 nos. 35.0 70.0 105.0 33.6 3.6 7.2 10.8 (b) pilot launcbes 3 nos. 3.0 6.0 9.0 2.9 0.3 0.6 0.9 (e) mooring launches 2 nos. 2.6 5.4 8.0 2.6 0.3 0.5 0.8 (d) survey launch 1 no. 1.7 3.3 5.0 1.6 0.2 0.3 0.5 (e) navigational aids - 17.6 3.1 20.7 2.4 1.8 0.3 2.1 _ Subtotal D (iv) 59.9 87.8 147.7 43.1 6.2 8.9 15.1 4.4 Subtotal D 430.1 688.5 1,118.6 305.6 44.0 70.7 114.7 31.3 RF1T rnDV AIIAII ARI C .75. Table 0 page 2 of 2 up,S Millio…--i ----- UP Mllion --.. --- Tom 4 Duty Tax 6 Duty 2)saeriDtton __e______________- 0uantiSt LWent Foreign aotal Conmonnt Local Foirsin Total Conent E. Container lraisht Station (i) Storage shed 20,000 .2 16.3 10.2 26.5 5,4 1,7 1,1 2,8 (ii) Paved areas 80,000 *2 17.0 - 17.0 1,7 1,8 I'S (Lit) Office butldtng 1,300 .2 2.1 0.2 2,3 0.2 0.2 - 0,2 (iv) Yencing and gStes 2.1 - 2.1 0.2 0,2 - 0,2 Iv) Bonded warehouso S,000 s2 4.0 2.0 6.0 12. 0.4 0.2 0.6 Subtotal E 41.5 12.4 53.9 8.4 4.3 123 5.6 0.9 F. Bulk Storase FaeLlities (i) Bulk storage sheds 98,900 a2 81.9 74.8 156.7 24.8 8,4 7,7 16.1 (ii) Drive houses, gallertes and loading platforms 52.7 56.0 108.7 27,9 5.4 11 21,2 Subtotal F 134.6 130.8 265.4 42.7 13,8 13,4 27,2 4.A 0. Electrical Power Distrlbution (1) Prime power supply 56.2 9.0 65,2 5.2 5.8 0,9 6.7 (it) Transformers 6 switch gear 57.7 2.6 60.3 4.1 5.9 0.3 6.2 (iit) Power and control cables 15.3 30.0 45.3 14.3 1.6 3.0 4.6 (iv) Mliseellaneous 13.6 7.4 21.0 4.0 1.4 0.8 2.2 Subtotal G 142.8 49.0 191.8 27.6 14.7 5.0 19.7 2.9 H. Utilities, Services and Environmental Protection (1) Water supply 8.7 - 8.7 0.4 0.1 - 0.1 (ii) Drainage 4-7.7 47.7 2.4 4.9 4.9 (iiI) Pire fighting 16.7 - 16.7 1.7 1.7 1.7 (Sv) Conmunications 6 lightin8 "7.4 6.6 64.0 S.9 5.9 0.7 6.6 (s) Vehicles 57 nos. 6.8 - 6.8 0.4 0.7 0.7 (vi) Hospital equipment 2.1 - 2.1 0.2 0.2 0.2 (vii) Preliminary works 20.0 - 20.0 1.0 2.0 2.0 (viii) Housing for security force 10,777 .2 17.2 - 17.2 0.9 1.8 1.8 (ix) Site offices and accomodation 13.8 . 13.8 0.7 1.4 1.4 (W) Guest housn 6.7 - 6.7 0.3 0.7 0.7 (xi) Snvironeental protection 16.8 2.7 19.5 1.9 1.7 0.3 2.0 C Subtotal H 213.9 9.3 223.2 15.8 21.9 1.0 22.9 1.6 J2. Residential colon (i) tnfrastructure 68 ha 63.1 63.1 3.2 6.5 6.5 (ii) Buildings 176,570 a2 176.3 176.3 17.6 18.2 18.1 Subtotal J 239.4 239.4 20.8 24.6 24.6 2.1 K. Technical Assistance (1) Training program (a) expatriate advisers 144 a/n 2$12,000 6.6 9.8 16.6 0.7 1.0 1.7 (b) local advisers 120 u/u E 45,000 5.8 5.8 0.6 - 0.6 (c) fellowships 200 nos. 2 6,000 11.7 11.7 1.2 1.2 (d) local training 500 nos 0 3,000 14.6 - 14.6 I.5 _ 1.5 (ti) Studies (a) survey to refine traffic forecests 12 n/m ) 42 m/r (b) container operation manuel 12 2/ ) e (c) organiestion, management, ) S12,000 & finance (OHP) study :8 /s ) 2.9 2.9 4.9 0.2 0.3 0.5 Subtotal K 30.1 24.4 53.6 3.0 2.5 5.5 L. Engineerilnn Services 77.0 25.4 102.4 7.9 2.6 10.5 Base Estimate (raid 1983 prices) 3,075.7 1,788.4 4,865.1 620.8 315.4 183.4 498.8 63.7 H. Contingencies (1) Physical 134.5 103.4 237.9 21.1 13.8 10.6 24.4 (ii) Price 510,9 296.6 807.5 102.7 52.4 30.4 82.8 _ Subtotal 't 645.4 400.0 1,045.4 123.8 66.2 40.0 106.2 12.7 Total Project Cost 3,721.1 2,188.4 5,909.5 381.6 224.4 606.0 R. Interest during construction 1,124.9 115.4 - 115.4 0. Front-end Fee on 18PD Loan - 6.1 6.1 - _ 0.6 0.6 Total Financing Required 4,846.0 2,194.5 7,040.5 744.6 497.0 225.0 772.0 76.4 Sources connultantn & mission estimates January 1984 RFqT p.nPY AVAIIAR LE M n f~~~~~~~~~~(. ___ _ 4 hi S i. -4i-h~~~~~~~~~~~~~~~~~~~~0 j S 28"§__~~~~~ ; 5gal} 1, aii X-R ililF~~~4 0 gSS- 01 | eX o~~71 fX '0: W{ -.77- chart 2 INDIA NELVA SHIVA FORT PEoj3C Iapluantetion Schedule FiecalYear 1 98a4 1 98a5 19 86 I 98 7 1 9a88 198a Loon Approval Loan Effectiveness Freliain*ry Works Invite bids Ecxecutionk Civil, Works Contr-aet Invite bide Open blds Awtead contaotta Execution - -- - -mmU Bul Eadi ngEquipment Invite bids Open bid.s Awiard contract Execut oio -- m m - - - m - m Conitainer Equipment Open bifa, Award contiract-' Execution Conttainer Freight Station Invite bids Open, bids Award contract Execution Worksaop !Suigment Invite bide Open bid. a' Award contract Execution - -m um Residential Colony Invite bids Open bid. AlMrd contract Execut ion - um um MM Electrical Platribution Invite bids Open bid.s Awiard contract Invite bids Open bids Award conttact Execution m Flostinst Craft Invite bids Open bids A,Vard contracta. . . Execution mm Tecniical Assiastanee Appoint Agency for Training Program Extecute Trainking Program- um mum - um m OMiV Study U * U lntermodal Study Containeor Hanual BESTCO&PY HAVAILABLE -78- Appendix A Page 1 of 4 INDIA NHAVA SHEVA PORT PROJECT Organization, Hanagement and Finance (Accounting Studies) Terms of Reference for the Anpointment of Consultants 1. Annointment of Consultants 1.01 The Board of Trustees of the Port of Nhava Sheva proposes to appoint consultants to study and recommend a suitable (i) Management and Organization System, and a ii) Finance and Accounting System. 2. Background Information 2.01 The Board of Trustees of the Port of Nhava Sheva was coustituted in May 1982 under Sections 3(1) of the Major Port Trust Act 1963. The Port Trust at present is headed by a part-time Chairman, Deputy Chairman and three Reads of Department for Civil Engineering. Mechanical Engineering and Finance Wing. By 1984, the Port is to be headed by a full time Chairman and also will have functional wings geared to the construction project. By 1987, the Port is to have full fledged operational departments geared to meet the traffic requirements of an operational port. 2.02 The Port has been conceived to decongest the existing Port of Bombay and to accommodate large-size ships. The cost of the Project is estimated at Re 506 crores, to be partially financed with the aid from the World Bank. During the course of preliminary scrutiny of the Project, the World Bank mission in their Aide Memoire after their visit in October 1982 suggested that the Project Authorities should arrange to undertake studies in regard to: (1) management and organization of the port; and (2) finance and accoutting Annex "A' The object to such studies, and the scope thereof, is detailed in the following pages. rt is proposed to initiate these studies by January 1, 1985 so that the recomendations -79- Appendix A Page 2 of 4 would be available by January 1, 1986 and the study's recomendations would then be implemented as soon as practicable thereafter. 3. Objectiveg 3.01 Manazement and Organization Study An indepth study of the Organization and Management System of the proposed Port, and to make suitable recommendation; 3.02 Finance and Accounting Study Study of the present Finance and Accounting practices followed by Major Ports in India and to make suitable recommendation. It is emphasized that the Nhava Sheva Port will introduce technically sophisticated *ork systems into the Indian Port Sector. It is proposed that Electronic Data Processing Methods be introduced in the areas of Traffic, Finance and Accounting, Cargo Handling, and Container Operations. Any studies that are to be undertaken should take these factors into account. 4. Scope of Work 4.01 1. Management and Organization Study An indepth review of the existing institutional arrangements and the powers, duties and responsibilities of the various author--ties engaged in the planming, design, construction and operation and maintenance of the Port; the consultant shall make recommendations regarding (a) the suitability of the institutional framework, (b) whether adjustments to that framework can improve organizational efficiency; and (c) those improvements necessary to accommodate the expected expansion of the Port's facilities and services. 4.01 2. To study and recommend ozgenization structures, staffing plans and qualifications for each functional department including policies for refresher courses and career developrment. 4.01 3. To study and recommend a program for implementing the recommended changes with timetables broadly divided in' convenient pt-ases. -80- Appendix A Page 3 of 4 ...4.01 4. To study and suggest suitable nanagement information system covering all the aspects of Port Kanagement, e.g., Ci) the Port's budget - its utilization with the Corporate Management and Information System; (ii) the Traffic and Operations Division; (iii) Marine Services Division; (iv) Research and Planning Division; (v) Administration Division; (vi) Engineering Division, and (vii) Use of Computers. 4.01 5. The MIS may be divided into suitable groups relating to: (1) past results, performance, general background and environmental data; (2) current results and performances; (3) future responsibilities and expectation policies and objectives, plans, projects aud performances. 4.02 Finance and Accountni Study 4.02 1. To study existing accounting systems and practices in the Indian ports and to suggest suitable systems based on the following requirements 4.02 2. Monthly/annual report of operational performance review of budget performance variances. 4.02 3. Total planning of cash flow, investment, revenue collection, preparation of budgets, cost controls, control of expenditure, profitability planning, internal audit of accounts, preparation of monthly and annual financial reports tax and duties payments, in general with specific reference to: 4.02 4. Preparation of job manuals 4.02 5. To lay down flow of information and channel of communication between the finance department and the remainder of the Port Trust Management. 4.02 6. Evaluation and recommendations regarding the organization and personnel deployment of the Finance Department. 4.02 7. Double entry accounting, with an integrated general ledger system, in which all finaacial/cost transaction are recorded either in detail or in sumary with supporting documentation where necessary. i- ~~~~~~-81- Appendix A Page 4 of 4 4.02 8. A complete balancing set of accounts sub-divided and maintained in sufficient detail to set forth the financial condition and to ref'.ect the financial operations of each utility. 4.02 9. Segregation of accounts between those relating to current assets and liabilities and those relating co fixed assets and liabilities. 4.02 10. Budgetaryi control of revenue and expenditure with statements reilecting budgetary information. Required statements for presentation to Management and its periodicity with specific refexrence to performance, billings and collection. 4.02 11. Revenues to be classified by detail and sources expenditure classified by activity and object. 4.02 12. Cost accounting for recording all elements of Costs incurred. Separiite records are to be maintaiued of operating and maiataining each item of plant owned or operated by Port Trust. 4.02 13. Inventory accounting of consumable and permanent items kept in stores. 4.02 14. Appropriate coding system based on the final shape uf the recommended accounting structure with a view to putting the system on computer. 4.02 15. Forms and systems design resulting from the requirements of the approved accounting structure. Appendix B -82- INDIA NHAVA SHEVA PORT PROJECT Brief Description of TWo Technical AsBistance StudieEi (A) Container Operations Manual (B) Intermodal Transport and Traffic Allocation Study (A) Container Operations Manual The main objectives of this manual include: (a) providing a detailed analysis of container movements from ship to wharf, storage yard, railway sidiLng, CFS, etc., and recommending specific procedures for ensuring' effec- tive coordinationt between equipmenit operators and other personnel involved in these movements; (b) identifying suitable systems for storage/stacking of containers, which would facilitate quick sorting and retrieval; (c) develop- ing a comprehensive system of documents and procedures for recording of container movements, which would be adaptable for computer applications; td) providing a handy compilation of guidelines, work rules and safety measures to be used by all personnel concerned with container operations at Nhava Sheva; and (a) compiling a manual for operating and. maintaining the major Items of equipment to be purchased and/or instalLed under the project. (B) Refinement of Traffic Forecast: Intermodal Transport and Traffic Allocation Study The justification for the development of a modern'container and bulk cargo port at Nhava Sheva largely lies on the expectation of a substantial volume of cargo originating from and destined for areas outside Bombay. For this reason, parallel development of inland linkages (road, rail, coastal shipping) and related facilities necessary for onward distribution of goods is required. The proposed intermodal transport study will analyze this requirement in the context of intermodal transport options and tradeoffs. The study's objectives include: (i) refining long-term needs for the develop- ment of infrastructure (rail, road, bridges), rolling stock (railway flat cars, hopper wagons), road chassis/trailers and handling equipment required to facilitate throughl movement of containers and bulk commodities from the new port of Nhava Sheva to inland destinations; (ii) determining the loca- tion, size, and timing of investment needed in inter-modal inland container depots which will provide marshalling yards for containers and interface between modes of transport; and (iii) recommending interagency institutional and administrative reforms required for the introductxon of new systems procedures and documentation aimed at facilitating the transfer of containers from one mode to another in order to provide an efficient door-to-door serv- ice. All the organizations involved in the movement of goods in ititerna- tional trade (customs, banks, insurance companies, road haulers, forwarding agents, shipping agents, shipowners, the Railways) will need to review their current systems and procedures with a view toward streamlining the movement of containers through simplified documentation requirements that conform to universally accepted practices. - \PO / }~~~~~~~~\ t 1C + H X C IFJW J ~~~~~~~~~~~~~~~I N C I A "N Io~ §~ -- I,t R4 MNIJ ~nr 511UIJ X t- \ - / \UX 1 1M 1 A~~~~~~~~~~~~~~ ASRI LANKA '~~~~~~~~~~~~~~~~~~~~~~" Proposed Pr Proposed Codie Freight Sttoin (CFS| Aropo..d FortD,p.tA --Proposed Rood -Proposed Roihvodd 0 Prtriu,g Town Wn cm.e - - ~~~MOjoT Highways ., ,!?Vir,o, B{ 257 ;¢ ............ gombay-Island Cisy Bo.ty dory - R X 9ombay Awrooliion Reso. S.aeBoundoriy Borivali~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~ ~~ Budra I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~nnooo BouJ; \&mt' RfARAV _ -. I 0 \ -hS } \1 ° 5 1- IS 20 - Bomboy Metropolitan Regior~ -~- -Store Bounrtiries Jt /d l -&'> N ------- inernationol Boundaies Vasos -< '---XzrS Rivcrs - , t g yBhiwondi - < - '-K - U Ih\ Kdyan °b Ky sol I/-' ':as\nagarji=_ KILOMEtERS BOMBAY NHAVA SHEANV SHEVA PORT PROEC r -_ ¢^ >w\Proposed Contiimer / \o Freightion CFS) N t f .1 - ?i \ x r B Metropolit ~~F_~ C. \! W1 I N D I A BANG\ADESH) -J w _ _ _ \~~~P4Y l,,a~,7' FVVO.d rwend bO1W,eflhOAfnonc ,..dpoo I _l ,~~~~~~~~~~~~~~~~~~~o AO8, MdAAST I¶eAO .' =0 1dflo Fo.OdobI K , f L SRI LANKA 0 7 2P390 00 :METERSC >W:S, /4~~~~~~~~~~~~~~~0 . C < %/ fl~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~d IBRD 17644 DECEMBER 1983 INDIA NHAVA SHEVA PORT PROJECT Proposed Port Facilities Peojerct CoponenhI: Port Area Fences ,\ >n Proposed Port Facilities Pod~~~.nv ~~~ I,. ..'*...~~~~~~ -4------- ~~~~Railrocads r ng A,e,i ~~~~~~~~~~~~~~~~~~~~Service Roads .~~~~. 050 Dimension Lines (millimaters) 'WhIdd B ourndlry of Reclaimed Area// Sto°/ fi 7 SX Sevo Vilicage ~ - - State Boundaries / / International Boundaries / \;~~~~~~~~~' Tr. ,.,.Fk t.) ....... .... Laig 10 < 2unkering Sto.age F.61it y \C~ A ,',,80< W..0 A1 0,., INDIA . NHAVA SHEVA PORT PROJECT General Layout Road and Railway Links Project Components - - - Port Area Fences ' -~ Port Area Facilities Roads - 2 Lane NARAI , ,-- i--Railroads @g Existing Village Existing Roacd SAVARKHAR State Boundories International Boundaries * JASKHAR So/i Pans Soib Pan2s Salt Pans KOIWADA $. .~~~~~~~~~~~~~~~~ Xp N /1 - 1 . SHEVA\VLA / N0 2 1 N ~~~~~~~~~ / I ~~~~~~~~KILOMETER5 ---LI ~Port Areo Fnce / \ 0-.&n_ __C ttA Port Area Facilities Roods 2 Lone \ s~~~~~~~~~~~~~~~~~~~~~~~~SONARI 2 Lane 4 Lone , To Wan KARAL --Railroads gXv~ Existing Village - - S Existing Roo-d SAVARKHARf State Boundaries 2 S Intemationol Boundaries/ ^ 'ASAS / . { \\ } / N~~~~~KLIAD. j 90_ v 0'< ~~~~~~~~~~~~ ~~I N D I A a SHEVA ViLLAGE / 0 1 2BOmay SHrRA LOCATION @> /aning Jetty. r5. , For detail see /5/ID 17644 m- _ 17h .oap has b5ee, p,po,ad by The WIld sw*ns staff ewxdss to, Ihe co otne,cc of m the readfesnd's y aexar the ltemI usa of The World 851* fi athe ktnt&Sbon0' F.nance Copoabon. The d fo1aons uSed and te bmardae shown on gSff mp cb not lW[y on Me pal of The W Bard, an the Unalaionat Fieance yr at sXWna*;t 7 - SRl LANKA Me sgal tatus of erry tealoy a eny earsaW a nowtaco &,ch bor e ds t 90OD 1) .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 .9.0