The Hindu Business Line : Competition from Chennai, Kochi

"WE NEED to create and encourage competition among ports, and the fittest will survive. We need to take a professional decision, not a political decision," Mr T. R. Baalu, Minister for Shipping, Road Transport and Highways, said recently in Madurai. He was responding to a reporter's query on the impact of the Vallarpadam container terminal on Tuticorin and Chennai ports — both have private container terminals run by PSA-Sical and P&O Ports respectively.

But, according to an industry source in the port city of Tuticorin, the coming up of a new terminal in Vallarpadam, on the west coast, is causing jitters in Tuticorin and Chennai.

A major reason being that Tuticorin, Kochi and Chennai ports share the same hinterland in the South (such as the textile belts of Karur, Salem and Tirupur), for containerised cargo, and any major development in one of the ports would impact the other two. Being closer to international sea lanes, Kochi has locational advantages compared to its two neighbours, the source said.

The estimated Rs 3,000-crore Vallarpadam Container Transhipment Terminal project got a further boost when the Finance Minister, Mr P. Chidambaram, in his Budget speech, said that the Government would facilitate the construction of the terminal on a build-operate-transfer (BOT) basis.

At present, because of inadequate draft and cargo handling infrastructure, and partly due to locational disadvantages, mainline vessels often skip Indian ports. Containers from India are carried to their final destination after transhipment at Colombo, Dubai and other ports, he said.

India's container traffic more than doubled in the last six years to 38.90 lakh TEUs (twenty foot equivalent units) in 2003-04 compared to 18.91 lakh TEUs in 1998. The Nhava Sheva port handled 22.7 lakh TEUs in 2003-04, followed by Chennai with 5.4 lakh TEUs. The Kolkata port handled 2.6 lakh TEUs and Tuticorin 2.5 lakh TEUs.

According to an industry source in Tuticorin, with little progress in industrial development in the southern hinterland, the impact is going to be felt more on Tuticorin, as Kochi will take away a major portion of the cargo. Kochi will also have the advantage of having direct calls by main line container vessels, the source said.

A similar sentiment was echoed in Chennai. There is no point in having container terminals in every State. The Centre should invest and build additional capacity in the existing ports rather than create new terminals, said an industry source.

A report prepared in 1998 said that the Kochi port could handle container traffic of about a million TEUs in 2008-09 and 1.36 million TEUs by 2013-14. The port handled 1.7 lakh TEUs in 2003-04. The projections were based on several assumptions, which have, however, undergone drastic changes during the past five years.

This includes increase in the size of the largest container vessels afloat, capacity augmentation of various ports in and nearby India and commissioning of the Konkan Railways, says information on Kochi Port Trust's Web site.

An industry source in Tuticorin feels that one important factor that could go against Kochi is on the labour front. Unions in Kerala are strong and there could be frequent work stoppages, strikes and demands.

An international terminal, which needs to work 24 hours a day, seven days a week and 365 days a year, cannot afford to have frequent stoppages. Incidentally, the private container terminal in Chennai port is facing delays in clearing cargo following labour problems, the source said.

Asked for his reaction to the Vallarpadam project and its effect on the Tuticorin port, Mr N. K. Raghupathy, Chairman, Tuticorin Port Trust (TPT), said that Chennai, Tuticorin and Kochi ports share the same hinterland as far as containerised cargo is concerned.

Any development in one of these ports will affect the other two. But experience has shown that Tuticorin has several advantages, including excellent levels of productivity, good industrial relations and existence of international standard container terminal. "I do believe that these advantages will continue to be enjoyed by Tuticorin port," he said. "In any case, we are not going to sit idle when better facilities come up in neighbouring ports."

It will take at least five years for the Vallarpadam project to come through, and by then the Tuticorin port will be well geared to meet any competition, he said. The TPT, on its part, plans to increase the draft in the port to 12.8 metres. With the existing 10.7 metres the port is bringing in main line vessels up to length of 270 metres, which not many ports in the country do, he said.

It will be some time before Kochi starts taking away cargo from Tuticorin. Going by the current traffic, the Tuticorin port could handle over three million TEUs in the next three years. The port will require Rs 360 crore investments on infrastructure development. For the anticipated container traffic alone, the required investment could be about Rs 40 crore in the next couple of years, the TPT chairman said.

On its part, the Tuticorin Hub Port Development Council is aggressively taking up with the Centre the issue of making Tuticorin a hub port in the region. The Council feels Tuticorin has the potential to be a major port in the region.

The advantages of Tuticorin include direct main line calls to Europe and the US that provide shorter and firm delivery. Indian exporters, according to a Council member, also save on additional transhipment cost at international ports.