Neighbours´ envy, India´s pride?

Development of domestic transshipment ports can reduce our dependence on foreign hubs and encourage direct destination cargo.
Vallarpadam in Cochin run by Dubai´s DP World Ltd is slated to have a companion in Vizhinjam near Thiruvananthapuram as the new transshipment facility. While there are varied opinions about the opening up of the second transshipment hub in the country to challenge the growing presence of Colombo, Singapore and Jebel Ali, experts are question¡ing the move as Vallarpadam has failed to realise its full potential despite several sops given by the government, particularly relating to cabotage relaxation and discount in vessel-related charges to wean away cargo from rival Colombo.

Suffering from losses ever since it was set up in 2011, Vallarpadam has not managed to make any concrete inroads into the transshipment business. In the year to March 2014, the International Container Transshipment Terminal (ICTT) at Cochin loaded a paltry 351,000 TEUs of which the transshipment volume was less than 27,000 TEUs. It has a capacity to load one million TEUs a year.

Industry experts have corroborated this fact and lamented the lack of sufficient cargo for the need to set up such a facility. According to them not more than 1.5 million TEUs would be the transshipment cargo from India and that would be predominantly from Chennai. All the major MLOs are now calling at JNPT and Mundra and hence there is little which hits Colombo from the west coast.

So in simple terms, there is not enough cargo to justify a transshipment hub. Vallarpadam is suffering because of this and not being able to take off.

Transshipment woes
About 60 per cent of India´s export and import containers are transshipped through ports like Singapore and Colombo. This transshipment through ports outside the country involves an additional expenditure of $300 per container and an extra 7-10 days of transit time. Efforts are on to suggest ways to increase transshipment cargo movement in the country and reduce instances of containers offloading in Colombo. The Shipping Ministry has asked major ports to give priority berthing to ships operating in the coastal trade-carrying goods from one Indian port to anotherùin a bid to boost coastal shipping. But there are bigger issues that need to be ironed out before.

JNPT Port (Mumbai) that handles half of the country´s water cargo has an average turnaround time of 36 hours-three times that of ports at Singapore, Shanghai, Dubai and even Colombo! While Mundra port in Gujarat has managed to add some sheen to the ports sector in the country as it crossed the 100 million tonnes (mt) mark in cargo handling in a year-a first among India´s ports-in fiscal 2014. Armed with a deep draft (depth), Mundra has the fastest turnaround time for ships among Indian ports of 18-20 hours. Indian government-owned ports, now in existence for more than 50 years, have failed to challenge Mundra´s performance. Kandla port, located 60 km from Mundra, came closest by handling 87 mt of cargo in fiscal 2014. In fact, Ennore, the newest of the ports owned by the Indian government that also started operations in 2001 as Mundra, handles a paltry 27.33 mt of cargo in a year.

A lack of capacity and perennial congestion at
JN port has led to diversion of containers to Mundra port. Mundra´s success is also partly due to the SEZ operating within its premises. While Mundra has become an important and integral infrastructure hub in the west coast of India, others are yet to catch on. Focused interest on coastal shipping and transshipment can help the movement of cargo and also the growth of ports in the country. Only about 8 per cent of India´s domestic cargo is moved by coastal shipping and the move would help facilitate greater activity at each of India´s major ports.

Taking a holistic view, the Indian maritime sector is preparing to unravel a new chapter under the Modi regime with a number of strategic projects waiting to take off. The Sagar Mala initiative, if implemented in the right earnest, will facilitate holistic development of Indian ports. The initiative, according to the Shipping Ministry, will strive to tackle all the challenges by focusing on port modernisation, efficient evacuation and coastal economic development through a structured framework for ensuring inter-agency collaboration and integrated development. It will provide the necessary institutional framework to enable the Central and State authorities to work together for ensuring inclusive growth.

Roadblocks
A Janardhana Rao, Managing Director, Indian Ports Association, calls transshipment a hub & spoke concept. He further explains how smaller feeder vessels bring cargo to these terminals which then gets loaded onto larger ships. Larger vessels bring about economies of scale, and lower the cost of operations for shipping lines, which then translates into lower freight rates for exporters and importers.

Inadequate draft at Indian ports entails extra time and costs as cargo originating from and bound to India is routed through transshipment ports like Colombo and Singapore. As vessels keep getting bigger, Indian ports need much deeper drafts, which calls for increased investments in capital dredging. ´To push bulk cargo, a deep drafted port is a necessity and which is why we are talking about mega ports and hubs. Our energy requirements are quite high and there lies an opportunity for transshipment in this field. The requirement for a transshipment hub has to be there to capture the large-sized vessels,´ says Rao. He adds, ´Bangladesh is pushing most of its cargo through Singapore in another transshipment activity. So instead of going though Singapore, why can´t we bring it to India? We are examining this opportunity.´

Total volume of capital and maintenance dredging for all ports during the 11th Plan was projected at 675.25 million cubic metres (mcm) and 429 mcm respectively. Against these targets, only 278.93 mcm (41.31 per cent) and 291.63 mcm (67.82 per cent) were achieved. In major ports, the actual capital dredging was only 32 per cent of target. The shortfall has been attributed primarily due to delay or failure in implementing port development projects, financial and environmental constraints, paucity of engineering studies to assess the quantum and type of dredging to be performed, and poor response from bidders to undertake the work.

The bigger picture
While scepticism is high on the viability of having a second transshipment facility at Vizhinjam when Vallarpadam has underperformed, some experts believe that Vizhinjam has an advantage as it will only be catering to the transshipment market. Also, the basic infrastructure at Vizhinjam (with deeper berths) is similar or better than Colombo that can dock mega container ships. Says Adarsh Hegde, Executive Director, Allcargo Logistics Ltd, ´With the new government´s focus on infrastructure, making India a manufacturing hub and leveraging the benefits of coastal shipping as compared to roads and rail, ports like Vallarpadam will soon see full-scale implementation.´ He furtger adde: ´The challenges are more to do with procedural clarity in terms of its operations as well an alignment between all stakeholders.´

Dr Manoj Singh, Adviser (Transport), Planning Commission Currently, Vallarpadam is operating at 50 per cent capacity. The main problem in its development is that is that it is too far away from the major hinterland for containers which is North India. Since land bridging costs are high, containers from North India will prefer to go to Gujarat ports or to JNPT which are around 1000 km closer than Vallarpadam. Similar problem will be there for Vizhinjam. Vallarpadam and Vizhinjam have the advantage of being close to the international sea lanes but both suffer from long distance from the main cargo base in the country. In terms of alternatives to Colombo and Singapore as the transshipment hub in South Asia can be JNPT on the west coast and one of the eastern coast ports, say Vizag or Chennai, with Chennai having the higher probability because of closer proximity to cargo base. But the primary constraints at the Indian ports would be two-fold, namely connectivity by rail and road and draught limitations. At JNPT, dredging is going on so that the draught will become 14 metres very soon. In the next phase, it will be required to be dredged to 17 metres but for this the technical evaluation as still not been done. There is an effort to increase the draught of all Indian ports to at least 14 metres and of a chosen few to 17 metres. For making India a transshipment hub, one or two ports each on the east and west coast should be chosen where draught should be increased to 17 metres and connectivity by road and rail should be greatly improved. Business opportunity will certainly be there in these ports if they are developed as transshipment hubs.

Garima Pant

The key benefits of transporting goods via coastal shipping vis-a-vis road and rail transportation include:
Economical mode
The cost of coast-to-coast transportation of goods by coastal shipping is about 21 percent of that of road transport and 42 percent of that of rail transport.
Lower fuel consumption per tonne of cargo
Fuel consumption by coastal shipping is 4.83gms/tkm, which is 15 percent of consumption by road and 54 percent of that by rail.
Significantly more environment-friendly
Carbon dioxide emission from rail transport is twice that from coastal shipping and six times that from road transport.
Low rate of fatalities
Road and rail movement result in a significant loss of lives in India. It is estimated that one life is lost in a road accident every 3.7 minutes in India.
Source: KPMG in India analysis

The Indian maritime sector is preparing to unravel a new chapter under the Modi regime with a number of strategic projects waiting to take off. The Sagar Mala initiative, if implemented in the right earnest, will facilitate holistic development of Indian ports. The initiative, according to the Shipping Ministry, will strive to tackle all the challenges by focusing on port modernisation, efficient evacuation and coastal economic development.

Garima Pant