The Hindu Business Line : Karaikal port: Viability hinges on connectivity

Those who are optimistic about the project note that all the arguments about ‘lack of load’ ignore the fact that the region will develop as a consequence of the port coming up.

M. Ramesh

When the massive Beluga Fanfare unloaded its cargo — two 400-tonne Liebherr cranes — and put them on the newly-built concrete quay at Karaikal last month, it marked a renaissance of the region’s maritime trade. In the ancient Tamil era, two ports close to Karaikal — Tranquebar and Poompuhar — played key roles in Tamil history.

The background literature provided by the promoters of the Karaikal port, Marg Ltd, lists 19 entities that have signed, or are about to sign, expressions of interest for using the port. The cargoes of all these entities add up to 26 million tonnes, giving the port and its financiers a big thumbs-up.

Indeed, there is compelling economic logic to the port. It is the only deepwater port (with a draft of 18 metres, eventually) on the 650-km coastline between Chennai and Tuticorin. The promoters of the port set great store by this fact and point to the great convenience and cost benefits that the port will bring its users in the hinterland. The port is being positioned as one that will be appropriate for bringing in coal to the cement and power companies in the region—indeed, all but three of the 19 EoIs are for bringing in coal.

Therefore, the Karaikal Port looks like a winner of a project, but there is only one problem. Many of the companies on the EoI list, including the in-business cement companies, say they are not too keen on using the port. In fact, even if they were, they would constitute a tiny fraction (less than 1 million) of the port’s projected capacity.

demand scenario

Is there enough demand for the port’s services? Is the Karaikal port viable? First of all, ask the pessimists, where is the load? One industry expert pointed out that for a port to be viable, at least half of its capacity should be assured by customers within a 200 km radius. Such an area around Karaikal boasts of no major industrial activity.

The power projects — well, we know about power projects. There is doubt whether they will come up at all. The Ultra-Mega ones usually come with a captive port. To build a port with power projects as potential customers, say some experts, is not wise.

As regards cement companies, they say their arrangements with Chennai and Tuticorin ports are working fine, because the trucks that bring in the coal from the ports also take back the cement on their return. They do not appear to be too enthusiastic about the Karaikal port.

On the other hand, those who are optimistic about the project, note that all these arguments about ‘lack of load’ ignore the fact that the region will develop as a consequence of the port coming up. Infrastructure gets ahead of development and pretty soon, development will catch up.

Two aspects important

Mr Sudhir Rangnekar, former Managing Director of Sical Logistics and an old hand in the shipping industry, points out that India’s coastal trade is hardly 10 per cent of the country’s total trade, as against 35 per cent of China, 15 per cent of the US and 45 per cent of Europe. Because there is a major thrust given to ‘short sea shipments’, coastal trade is bound to grow exponentially, Mr Rangnekar says. He is sure ports like Karaikal will have a good future in the long run.

Mr Rangnekar observes that much would depend upon two aspects — connectivity and marketing. Ginger up connectivity, make sure that what comes in ships is delivered at the door-step, you have yourself a good deal. There are many services that Karaikal can offer — it can position itself as a ‘project carrier’, or a port where massive equipment (such as cranes) can be brought in. It can be a repair dock, at least for smaller ships. It should create these facilities and market them well, he says.

The port can also attract business by being more efficient. Not being burdened with legacy labour, it can indeed be so, an aspect that was underlined by Mr G. R. K. Reddy, Chairman, Marg. In fact, a part of the proposed Rs 1,600-crore Phase-II of Karaikal port development, is to be spent on mechanisation. Mr Reddy promises nil waiting time at anchorage and 3.5 days of vessel turnaround time, compared with six days at Chennai or Tuticorin.

Industry watchers say Mr Reddy, they say, is an excellent networker. It is well within his capacity to catalyse the development of the port’s catchment area, such as bringing in an SEZ project, said a source close to Mr Reddy.

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