Making Kochi port as prosperous as Colombo

The first international container trans-shipment terminal in Vallarpadam was inaugurated by the Prime Minister of India and dedicated to the nation on February 11, 2011. The Central Government has spent a huge amount of money — approximately Rs 2,500 crore — for providing the road and rail connectivity, apart from providing a deepened and widened approach channel for permitting large mother vessels to call at Vallarpadam.

The initial teething troubles are yet to be overcome and it is hoped that Cochin Port Trust will be able to permit vessels drawing a draught of 14.5 m to call at Kochi, at least by the end of this year.

Assuming that it happens as promised, will Vallarpadam terminal take off as planned and soon emerge as a competitor to Colombo? This is unlikely to happen in the near future. Why?

COLOMBO PORT

The container traffic at Colombo port in the calendar year 2009 was 3.46 million TEUs. In 2010, the traffic increased to 4.10 million TEUs — an increase of 18.9 per cent. In 2009, Colombo was placed at the 30th place, among the top 30 container ports globally. In 2010, it notched up two places to remain at 28{+t}{+h} place.

The largest container port in India, namely the Jawaharlal Nehru Port, though placed at the 25{+t}{+h} position, could grow only at the rate of 10.9 per cent during 2010 — lower than that of Colombo.

How does Colombo handle such significant volume of container traffic and continue to remain at the 28{+t}{+h} place? Does Sri Lanka produce enough volumes of export–import cargo to feed and sustain this port? No. The value of Sri Lanka's exports and imports in 2010 was $8.3 billion and $12 billion, respectively. Exports amount to 20 per cent, while imports amount to 30 per cent of Sri Lanka's GDP.

The value of India's exports and imports in 2010-2011 is $250.5 billion and $ 380.9 billion, respectively. When India's export-import trade grows by 30 per cent, Colombo's container traffic seems to increase by approximately 20 per cent.

How does it happen? It happens because 79 per cent of Colombo's total container traffic represents cargo trans-shipped from Indian ports. Is it not in India's national interest that we make a determined effort to develop ICCT at Kochi to stop this flow of cargo to Colombo at an increased cost to Indian shippers?

LESSONS FROM MALAYSIA

How did the Malaysian Government develop its port of Tanjung Pelepas in competition with the then-largest container port, namely Singapore? The Malaysian Government, under the leadership of Dr Mahathir Mohamad, then prime minister, launched a strong campaign that Malaysian cargo should be shipped, as far as possible, from Malaysian ports.

The Government went ahead and opened the port of Tanjung Pelepas in 2000, just 50 nautical miles from Singapore, on its own territory.

Approximately 1,000 acres of land were acquired and made available to the PTP at a concessional rate and on long lease. The Government further permitted a Public-Private Partnership model of port development, by which the APM terminal was allowed to take equity up to 30 per cent.

Since 80 per cent of the total traffic of Singapore was trans-shipment cargo, the Malaysian Government believed that by offering a higher service quality, superior performance and lower port tariff, PTP should be able to attract traffic from Singapore.

The policy succeeded, and within a span of ten years, PTP handled 6.2 million TEUs in 2009, 6.53 million TEUs in 2010, and got itself placed at 17th place among the top 30 container ports.

RELAXING CABOTAGE LAW

The Central government has the power under Section 407 of the Merchant Shipping Act, 1958, to permit relaxation, by which containerised cargo can be carried by both Indian and foreign shipping lines. The relaxation is sought for only in respect of containerised cargo, the percentage of which, in the total cargo handled at Indian ports, is unlikely to exceed 15 per cent.

The Central Government could make it clear that, while carriage of cargo along the coastal ports by Indian vessels is in national interest, it is equally in national interest to see that Colombo is not allowed to flourish at the expense of Indian ports.

Therefore, any policy change that the Government might make to attract that 79 per cent of cargo getting diverted to Colombo from Indian ports should also be seen in the best national interest.

While it is true that Indian coastal container shipping lines would be thrown open to competition with foreign shipping lines, Indian shippers would certainly stand to gain by lower freight rates, enhanced shipping services, greater frequency of sailing opportunities which, in turn, will help Indian exporters penetrate non-traditional markets in Asia and Latin America.

CAG REPORT suggestions

A recent CAG report suggests that Indian shipping's contribution to overseas trade, which was 61 million tonnes or 14 per cent of the global trade in 2005-2006, has come down to 50 million tonnes or 8 per cent of the global trade now, whereas India's overseas trade has been growing faster.

This has happened because India didn't have adequate shipping tonnage, more so in the container trade, so that Indian shippers have to rely heavily on foreign shipping services. What is important for the Government now is to see that more shipping services and opportunities are made available to Indian shippers, involving both Indian and foreign shipping lines in the overseas and coastal sectors.

PANEL REPORT

The Parliamentary Standing Committee of Transport, Tourism and Culture, in its 170{+t}{+h} report on modernisation of major ports, presented to the Rajya Sabha recently, has suggested review of Cabotage restriction and is urging the Governmentto take a decision in consultation with all the stakeholders, keeping in view the larger interest of the country's trade, as well as that of the Vallarpadam ICTT.

Sector-specific exemption can be granted, even in the Indian context, as in the case of Malaysia. The Malaysian Government has relaxed their Cabotage law specifically to help Malaysian shippers. It has given exemptions only for seven sectors, specifically mentioning the ports between which the exemption is granted.

Similarly, the Central Government could consider granting exemption to non-Indian ships from the provisions of the Merchant Shipping Act, 1958, in respect of the transport of containerised trans-shipment cargo for sectors between ICTT Kochi and Tuticorin, ICTT Kochi and New Mangalore, ICTT Kochi and Mormugao, ICTT Kochi and Jawaharlal Nehru Port, ICTT Kochi and Mundra, ICTT Kochi and Chennai and ICTT Kochi and Vishakhapatnam, for three years.

After assessing the impact of relaxation, a decision could be taken, if further extension should be granted or not.

(The author, a former Acting Chairman, JN Port, Mumbai, is a visiting professor, Manipal University. >blfeedback@thehindu.co.in and >drjospaul@rediffmail.com )

COMMENT NOW