The story of Mundra

The basic idea of ports is very simple. A ship comes, it docks, unloads the cargo, refuel itself, load cargo for another destination and sails back. In this process, the ports have multiple revenue streams to earn money by providing docking services like tugs, pilotage and stevedoring, and charging for cargo management and ship servicing and overhaul, all of this fit as per the size and weight of the vessel. They offer warehousing, stocking and very rarely manufacturing as well (Kandla port from 1965). Then the real point comes as to what did Adani do that his ports business grew so big that it has spread over 12 ports and has the biggest port in terms of volume at Mundra taking over even giants like Mumbai’s Jawaharlal Nehru Port?

https://www.eatmy.news/2022/09/gautam-adani-two-turning-points-in-my.html

The story goes back when Adani was in the business of import export of the polymers after the liberalization of the import norms. He faced extreme difficulties in the shipping of his product. He often would struggle in getting a ship to export his items or importing the coal of his power business. He wanted to venture into the business of Infrastructure and ports. Mumbai and Kandla were being delayed where he was already incurring losses. So, when Gujrat government decided to privatize the Mundra port, Adani seized the opportunity in 1998. The port started with a private public partnership where the Gujrat government and Adani and the port operated under the name of Gujrat Adani port Ltd. The port started operation by 2001 and subsequently Government started divesting from the company from 25% to 11% to 8.85% to 0% by 2006. In the meantime, infrastructure started developing at the port and newer operations started where in 2001 itself, Guru Govind Singh Refineries Ltd started its crude handling there and by 2002 Indian Oil set up a single Mooring point for the crude handling at Mundra. By the end of 2002, Mundra-Adipur railway was also established thereby establishing rail link. An extension of national highway 8A was also attached to the Mundra port to provide roadway connectivity to the national highway web.

https://www.youtube.com/watch?v=OJDh18fQ2VY

Though the rise was already good but the real game changer came in 2005, when Government of India passes Special Economic Zones act. Mundra Special Economic Zone ltd and Adani Chemicals were amalgamated with the company and Mundra port and Special Economic zone ltd was formed. The company acquired over 6000 hectares of land in Mundra and transformed it into a Special economic zone which had direct railway link to mainland. It simultaneously established Adani logistics in 2006 made specifically for end-to-end logistical services. End-to-end logistical service is wherein a company offers an integrated process where the raw material is processed, stored and supplied to the end customer. So, if we take the example of fertilizers, which we import in huge quantities, fertilizers will come from outside in a ship, it will be taken off the ship, stored in a warehouse, get processed and packed all inside the special economic zone, and then start its journey to supply chain via the trains connecting from inside the SEZ or trucks plying on the highway connected to it. Now along with the end-to-end logistics offered, the SEZ is treated as a foreign land for trade, where a company is not charged with any tax or charge. So ABC company bringing fertilizer can bring the raw material of fertilizers, process the material, make the final product as fertilizer, pack it and then take it out in the market, paying the taxes on the final product only, that too during the sale of the same. No custom or import duty is levied on the raw material here. There are many more financial benefits, for example the a company operating in the SEZ is on a tax holiday for 15 years where it pays no Income tax on export income. This acted very well in attracting huge companies in the system. With a Special economic zone attached to port and end to end logistical services, Mundra became a cash cow. It became India’s largest multi cargo port and SEZ, now operating in everything from chemicals to fertilizers to Agri based products to coal and crude. Companies like Jindal, Welspun, GSPC gas, Tata power, Britannia and many such big names are operational inside the SEZ of Mundra and are reaping heavy benefits of cutting the cost and setting up manufacturing units inside the SEZ itself, therefore reducing the transportation cost of raw materials, cutting on import duties and taxes as the SEZ are considered to be foreign land in terms of trade. Today Mundra port alone is the largest Coal importer in the world.