The Hindu Business Line : Vizhinjam container hub viable: Expert

AFTER Vallarpadam, has the proposal for another international container transhipment terminal at Vizhinjam lost its significance, or does it have that extra bit to justify the continuing efforts to get it on stream?

Vizhinjam is still an eminently viable proposition, both in terms of technical and financial parameters, especially looking at the changes the global container traffic scenario is bound to undergo in the long-term, according to Dr Jayakumar, Chief Executive Officer, Vizhinjam International Seaport Ltd and Advisor (Ports) to the Kerala Government.

For one, the country's sea-borne cargo traffic is expected to cross the one-billion tonne mark by 2012. And the booming trade will face port capacity shortage, which is already visible at some of the container terminals in the country, he said in a presentation on Vizhinjam proposal.

The Asian economies in general and India in particular are poised to have high and sustainable growth in the next few decades. In India's case, the removal of barriers inhibiting access to capital markets and capital-intensive investments in the industry has spurred economic growth in the last decade.

The high growth in Asian economies, currently led by China, will mean that the container traffic in the region is set to grow more rapidly than the world average.

By 2011, China will be the world's largest container market, outstripping the US in both imports and exports.

As per the BRIC (Brazil, Russia, India, China) Report by Goldman Sachs, the country's growth rate will be above 5 per cent throughout the next 50 years.

The growth rate for China is projected at 5 per cent up to 2020 and decline thereafter to 3.5 per cent. This clearly augurs well for India, said Dr Jayakumar.

Container traffic has progressed steadily in the country in the last decade, with the compounded annual growth rate (CAGR) at 14 per cent.

The projected CAGR for the next 10 years is 12 per cent. The container throughput is expected to reach 30 million twenty-foot equivalent units (TEUs) in 2033 from 3.9 million TEUs achieved in 2004.

Against this backdrop, the majority of the existing container terminals in the country, located in urban or semi-urban areas, are facing many constraints. These include shallow water depths necessitating continuous dredging, insufficient terminal area, conflict of land use priorities, environmental concerns and navigational problems for large vessels.

The average turnaround time in the ports is three to four days overall and one to three days for container vessels. Besides, the draft restrictions at most Indian ports prevent mother vessels from being received. And, only one or two ports can receive vessels of 4,000-6,000 TEUs vessels, while the others have to be dredged.

According to Dr Jayakumar the general global trend is for the mother vessels to get bigger and call at lesser number of ports. Samsung of Korea has completed the design for 10,000 TEUs vessels and is awaiting orders.

According to Eurogate Terminal, Germany, there will be 10 deep-water ports in the world in the future, of which three will be located in Asia and one in West Asia. At the Asian end, Singapore and Hong Kong are seriously planning for ships of the projected size.

Freight payment as a percentage of total import value in 2000 was 6.21 per cent at the global level, 5.21 per cent for developed countries, 8.83 per cent for developing countries and 11.4 per cent for India. Evidently, logistics cost is higher for India and the country should immediately have an international transhipment hub to improve cost competitiveness, he said. As of now, 80 per cent of the Indian containers are transhipped at Singapore, Colombo and Al-Salalah and the estimated annual loss to India is Rs 1,000 crore. The container throughput of Asian ports is 80 million TEUs (44 per cent of the world throughput) and this is expected to triple by 2010.

The key requirements of an transhipment terminal are its strategic location, potential to reduce total transport cost using "hub and spoke" arrangement, financial savings in terms of lower land values and less need for dredging and the facility to receive higher-capacity vessels to reduce overall fleet costs.

According to a "Vision 2020" study by the National Ports and World Waterways Institute, US, vessels of the size of 13,000-18,000 TEUs will be sailing around the globe in a ring route in the future. They will be calling at a few select ports (pure transhipment terminals) on this or close to the ring route.

The study has predicted that one such port will be at a location close to the southern tip of the Indian peninsula. Vizhinjam is an ideal deep-water location for such a port, he said.

Vizhnijam is close to the international sea route and the east-west shipping axis. It has a natural water depth of 20 metres within a nautical mile from the coast. These apart, there is minimal capital and maintenance dredging requirement, least littoral transport and it is located in such as a way that it can cater to the needs of the west and east coasts in the long run.

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Vizhinjam container hub viable: Expert