Logistics

Vallarpadam forgotten, it’s Vizhinjam now

N.K. Kurup | Updated on January 24, 2018

The Kerala Government appears to be all set to choose a developer for Vizhinjam port. The Rs 6600-crore project to convert the minor port near its capital Thiruvanathapuram to a major transhipment hub, has reportedly received all clearances and the tender for awarding the contract is scheduled to be opened next week.

The project has apparently become more attractive with the Centre agreeing to consider viability gap funding, which could be up to 20 per cent of the project cost. In addition, the State will also chip in with a similar amount.

The promoters of the project seem to be upbeat as five parties including private port majors such as Adani and Essar group have reportedly shown interest in the project.

Good news for politicians of all hues in Kerala, who can now stake claim to garner credit. Four years ago, they celebrated the commissioning of the country’s first international container transhipment terminal at Vallarpadam near Kochi, not that far from Vizhinjam. The project with investments of over Rs 3,500 crore has been struggling to survive, but none of them seem to bother about it. For them, Vallarpadam is now someone else’s baby.

Sadly, they are oblivious to what’s at stake. Through Cochin port the Centre would have invested much more in Vallarpadam than what the port operator DP World, Dubai, did. The stake of the State Government, if not in terms of investment, but by way of infrastructure support, is no less. But neither the Centre nor the State seems to be concerned about the dismal show of the terminal, which was showcased as a major project that will transform the entire port city of Kochi.

From day one, Vallarpadam had to face a sea of woes. While some are due to the inherent weakness of the project, others were created by vested interests and bureaucracy. What brought the port to such a pitiable condition, however, is the apathy on the part of decision makers in the government.

Today, the terminal handles hardly any transhipment cargo, with capacity utilisation less than 30 percent. A significant recovery in the near future seems remote. Even after lifting the Cabotage restrictions, the port failed to attract mother ships.

Normally, the experience of a neighbourhood project would be a lesson for others trying to take up similar projects. Promoters of Vizhinjam seem to be over-confident of its potential. Of course, the port has its plus points. It has the natural advantage of deep draft capable of handling large vessels. It means no recurring cost of dredging as in the case of Kochi port. The port is closer to the international shipping route. Unlike Vallarpadam, which being part of the Major Port of Cochin is subject to tariff regulations, Vizhinjam will be a private port with freedom to set own charges.

Obviously, Vizhinjam will be competing with Vallarpadam from day one. Both would be depending on Indian cargo now being transhipped through Colombo port—a well established transhipment hub. When an experienced port operator like DP World finds it tough to get mainline ships to Kochi, one can well imagine how competitive the business will be for a new port.

Will both terminals survive? What is the guarantee that Vizhinjam will not face the same fate as Vallarpadam? Or will the former beat the latter and be successful? Only the time will tell.

This is not to argue against Vizhinjam, but to highlight the fundamental flaws in the country’s port development policy. First, the government or its private partner at Vallarpdam failed to foresee the limitations of the project. Second, there is no serious effort as yet to rectify the limitations and resolve the problems that is hurting its performance. Third, there is no system to ensure that the same mistake is not repeated.

Published on January 20, 2015

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