Three musts for Vallarpadam terminal to work

There are three things that make a container transhipment hub work, says Mr Anil Singh, who heads DP World operations in the Indian subcontinent. They are: cost parity, expertise in handling containers and exemption from cabotage. Mr Singh should know; his company, the Dubai-government owned port terminal operator — one of the largest in the world — is all set to start its transhipment hub at Vallarpadam, off the coast of Kochi, in Kerala. And he has been entrusted with the task of making it work.

Mr Singh has been extremely busy the past few weeks, making arrangements for D-day. Based in Mumbai, the local headquarters of DP World, he had to make several trips to Dubai, Delhi and Kochi to ensure that everything is on schedule for the commissioning of the terminal on February 11.

“Vallarpadam was, in a way, our entry point to India. It was a bold step. We stuck our neck out, because it was a dream project of Kerala and the people of Kerala have longstanding relations with Dubai,” said Mr Singh. (The other terminals DP operates in India came through the acquisition of P&O Ports subsequently.)

It is a prestigious project for DP World, which already operates four port terminals in India and handles more than 45 per cent of the country's 9-million-TEU container traffic.

Cost savings

According to him, Vallarpadam will save the country Rs 700 crore a year by way of transhipment costs, which Indian shippers incur currently at neighbouring ports. No wonder, the Prime Ministers of both India and Dubai are expected to grace the occasion of the commissioning the transhipment terminal — the first to operate in a special economic zone (SEZ). Mr Singh spent half an hour talking to Business Line over breakfast one early morning, outlining how the new terminal scores on the three counts that, according to him, will make a it a success.

First, cost parity. It simply means competitive terminal handling charges. There are two types of charges; port-related and vessel-related. DP World can ensure competitive port charges. However, the vessel-related charges are decided by the Kochi port, which is the owner of the land and waterfront.

“We have an understanding with the port trust to ensure that Vallarpadam is competitive in terms of user charges. It is a commitment.

“Mind you, we will not be competing with our counterparts in India. We will be competing with neighbouring Colombo. Our charges should be internationally competitive to attract mainline vessels,” he pointed out.

But, for the government-owned Kochi port, which is already running at a loss, honouring its commitment (to reduce vessel charges) would be an onerous task. The second factor is efficiency in handling containers. To ensure this, the port should have the best equipment, experienced people and capability in terms of deep draught (depth of water) required for large vessels.

Draught depth

“We have bought the best equipment. We have people with experience in operating international transhipment hubs. But we need a minimum 14.5-metre deep draught to bring in mother vessels. This is what we were promised (by Kochi port). Today, what we have is draught of 13 metres; this is a big concern for us,” lamented Mr Singh.

According to him, dredging is the responsibility of the Kochi Port. This has been delayed. “We were ready to start operations last year itself. But dredging got delayed. We need to attract large vessels. Say, 6,000 TEUs and above. What will we tell our (shipping) lines. We have started operations but we cannot accommodate you?”

Mr Singh's plan is to shift the container operations from the existing terminal at Kochi port (Rajiv Gandhi terminal, which DP World took over as part of the contract) to Vallarpadam and start handling smaller ships of 2,000-2,500 TEUs.

“We hope the port will be able to complete the dredging soon, so that we can really start transhipment.”

Cabotage relaxation

The third, and most important, pre-condition is relaxation in cabotage.

This means allowing foreign lines to operate feeder services to and from Vallarpadam. This is important to ensure faster delivery of cargo.

Under the cabotage regulations foreign flag vessels are currently not allowed to operate along the Indian cost.

“We were told it (the relaxation of rules) is coming. But nothing has happened so far; we hope it will change soon” Mr Singh said.

Apparently, there has been strong opposition from domestic shipping lines, which feel that the easing of cabotage norms will be detrimental to the growth of Indian coastal shipping.

Bur Mr Singh thinks otherwise. “They are taking a short-sighted view. The transhipment hub will only help coastal shipping to grow. This will eventually help domestic lines, which are not prevented from operating feeder services. When you are handling an additional two million TEU cargo, that will create opportunity for everyone”

Asked for how long the cabotage must be relaxed, he says: “It should be at least for five years. Less than that will not work, for shipping lines need to plan and change their networks.

If the rules are relaxed only for two or three years, no lines will come. Vallarpadam will remain empty,” says Mr Singh.

So, all the three conditions that are crucial for Vallarpadam to click are yet to be put in place, though it has the potential to become a major international transhipment hub.

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