VO Chidambaranar (VOC) Port in Thoothukudi plans to have a third container terminal with current handling capacity set to reach its maximum by end of this fiscal at the two private terminals.
However, the Port Trust is in a fix on identifying the right concession model to be offered to the new operator considering that two different models — royalty and revenue share — are already in vogue at the Port.
PSA SICAL Container Terminal, which runs a container terminal since 1992, operates on a royalty-based model while the Dakshin Bharat Gateway Container Terminal (DBGT), operating since 2014, is on a revenue-sharing model. Together, the two terminals are expected to reach maximum capacity of 1.2 million TEUs (twenty foot equivalent units) by the end of this financial year, thus warranting a third terminal.
The Port Trust plans to convert berth no. 9 as a container terminal with a handling capacity of 0.6 million TEUs. The tenth birth has also been identified for possible future container handling with a capacity of 0.88 million TEUs.
The container handling through the VOC port witnessed a CAGR of 8 per cent in last five years to reach volume 0.7 million TEUs on March 31, 2019, and is to handle over 1 million TEUs by the end of next financial year.
Needed for growth
“With two different concession models, the Port Trust tried the own-operate-maintain model but potential bidders preferred the build-operate-transfer model,” said a senior port trust official.
The third container terminal is a must if the VOC port is to grow as a trans-shipment hub as coastal container traffic is poised to grow from Gujarat to the South, especially to interiors of Tamil Nadu and South Kerala.
“Converting the ninth berth into a third container berth is the only option to grow into a 2-million container port in 2023,” said JP Joe Villavarayar of Vilson Shipping, Thoothukudi.
He said that the PSA-Sical berth has draught restriction and length issues, apart from unsettled revenue share disputes for the last 15 years. The second terminal is fully occupied and unable to accommodate two small vessels nor one big vessel because of length, he added.
K Ravichandran, Senior Vice-President, ICRA, said that it is prudent to plan for additional capacity when the capacity utilisation reaches around 60-70 per cent as there will be a lead time of 3-4 years from start to finish a new project. The plan for the third terminal makes sense but there are risks as the Vizhinjam container terminal in Kerala is setting up a greenfield container terminal. Eventually, the capacity at Vizhinjam will rise to 4 million TEUs in phases, which could pose competition to VOC Port container terminals.
Mitigants to this risk would be the well-established infrastructure at the port in terms of evacuation and container freight station network. Prospective bidders will have to consider the imminent competition while committing the revenue share during the concession period, said Ravichandran.