The Centre has scrapped plans to build a container transshipment hub near Kanyakumari through the public, private, partnership (PPP) route following opposition from local fishermen groups.
On February 22, Centre-owned VO Chidambaranar Port Trust (VOCPT) floated an expression of interest (EoI) from port developers and shipping lines to build the 6.5 million twenty-foot equivalent units (TEU’s) capacity transhipment hub, based on a direction from the ministry of ports, shipping and waterways.
Potential bidders were given time until March 20 to file their expression of interest.
However, on March 15, the District Collector of Kanyakumari wrote a letter to VOCPT, conveying that he had received representation from local fishermen groups raising their concerns over the EoI for the container transshipment hub.
“The fishermen groups told the District Collector that they will go for agitation if the EoI for the container transshipment hub is not scrapped. They didn’t want the hub to come up in that location,” a government official briefed on the development said.
On March 18, the ministry “advised VOCPT to cancel the EoI floated for the development of a transshipment hub near Kanyakumari”.
“The project file has since been closed”, the government official said.
Centre makes a fresh attempt to build transhipment port at Kanyakumari
Political reasons
In July 2016, the Union Cabinet accorded in-principle approval for building a new major port at Enayam (westward to Coalchel and located between Helen Nagar and Melakurumbanai village) in Kanyakumari in three phases with an investment of ₹27,570 crore to handle 127 million tonnes (mt) of cargo a year.
But, following resistance from local fishermen groups, a new site which is closer to Kanyakumari, nestled between Kovalam and Keelamanakudi villages, was identified to minimise opposition to the project.
The decision to scrap the EoI has political overtones.
The defeat of Bharatiya Janata Party’s Pon Radhakrishnan from the Kanyakumari Lok Sabha seat in the 2019 polls dashed the prospects of the planned mega port project in the district that was pursued by the junior shipping minister in the first NDA government led by Narenda Modi.
Radhakrishnan is now contesting in the by-elections to the Kanyakumari seat following the death of Congress Party’s H Vasanthakumar who defeated him in the 2019 polls.
Adani’s Colombo entry turns India’s transshipment ambitions on its head
A port consultant said the site identified near Kanyakumari to dilute local opposition could suffer from viability issues because a similar facility is being constructed by Adani Ports and Special Economic Zone Ltd (APSEZ) just a few kilometers away at Vizhinjam near Thiruvananthapuram in Kerala.
The scrapping of the planned hub near Kanyakumari is a blessing in disguise for VOCPT which has been harbouring transshipment ambitions for long.
This received a boost from the PM’s announcement at the opening of the Maritime India Summit on March 2.
“We will take further steps to make VOCPT a big transshipment port on the East Coast,” Modi said.
“We have always proposed the need for developing VOCPT as a transshipment port. There is a clear direction now with the Prime Minister’s announcement,” a VOCPT official said.
Container volumes
Container volumes handled at Indian ports in FY19 hit 16.5 million twenty-foot equivalent units (TEUs), according to the Ministry of Shipping.
Of this, 4.1 million TEUs or 25 per cent of Indian originating and destined container traffic were transhipped in foreign hubs such as Colombo, Singapore, Port Klang and Jebel Ali, benefiting foreign government coffers at the expense of cost and time inefficiencies for Indian exporters and importers.
Colombo Port dominated the market for transshipment of Indian containers, catering to 2.5 million TEUs or 60 per cent of the 4.1 million TEUs. In fact, Indian transhipment containers account for 45 per cent of Colombo’s total container transhipment volume of 5.6 million TEUs. Other transhipment hubs such as Singapore, Port Klang and Jebel Ali accounted for the balance 1.6 million TEUs.
VOCPT currently has two container terminals with a capacity to handle 1.17 million TEUs. The two terminals handled 803,719 TEUs in FY20, recording a strong 9 per cent YoY growth in container traffic, setting itself up as a strong candidate to be declared as India’s transshipment hub.
VOCPT has drafted a road map for the port’s transition into a transshipment hub by 2025.
This involves converting berth No 9 into a PPP run container terminal to handle 0.6 million TEUs with an investment of ₹480 crore.
Further, berths 1,2,3 and 4 are planned to be converted into container terminals to handle 1.76 million TEUs with an investment of ₹2,696 crore.
Another 4.1 million TEUs capacity will be created in the port’s outer harbour with an investment of ₹3,744 crore.
Currently, nearly 75 per cent of India’s transshipped container is handled at ports outside India, resulting in $80-100 per TEU higher cost to exporters and importers.
With 75 per cent of the country’s transshipment cargo being handled at international ports, it makes Indian industries vulnerable to increase in costs, logistic inefficiencies, congestion issues, and creates long term risks for India’s trade competitiveness, according to the Maritime India Vision 2030, a ten-year blueprint drafted by the Ministry of ports, shipping and waterways.
The share of Indian cargo transhipped in Indian ports should be raised to over 75 per cent from about 25 per cent by 2030 to save the extra port handling charges incurred at the transshipment hubs, the document said.