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The success story of Adani's Mundra Port in Gujarat, in terms of efficiency, technology and management, should be replicated at Vizhinjam to ensure that this ambitious project does not fail, say Shehzad Poonawalla and Riya Sinha.
Much euphoria over the deal for developing a trans-shipment port in India at Vizhinjam, reminiscent of when former Prime Minister Manmohan Singh inaugurated India’s first trans-shipment port at Vallarpadam, as part of Cochin Port Trust in 2011. Today, the international container trans-shipment terminal at Vallarpadam is in a dismal state as it struggles to get ships to call on the port despite being operated by Dubai Ports World, one of the leading global port operators.
Vallarpadam is far from an anomaly in the larger picture of the ports sector in India. Our 13 major ports need serious infrastructure and policy reforms if they are to compete with leading ports of the world, apart from the already growing competition from over 180 minor ports. The absence of an efficient trans-shipment terminal further compounds this problem by adding trade costs.
Currently, 62 per cent of India’s trans-shipment cargo is handled by Colombo, Singapore and Jebel Ali. Of this, 16 per cent of India’s container trans-shipment cargo is handled at Colombo. Trans-shipment through other countries, apart from adding to cost, also increases transit time of cargo by five-seven days. Apart from this, India also needs to consider the growing presence of China in the region’s ports through investments in Colombo Port (Sri Lanka), Gwadar Port (Pakistan) and Chittagong Port (Bangladesh).
Any trade embargo at Colombo will be inimical to India’s trade. It is imperative that India improves its port infrastructure from the economic and geo-strategic standpoint and towards this, the first and most important step is the development of a sustainable trans-shipment facility within the country. This will not only help in faster movement of cargo to other ports within the country, but can also double up as a trans-shipment hub to the nearby ports of Bangladesh and Pakistan, thus giving us the strategic edge.
This will not be without its own share of problems. Serious policy reforms are needed to support such a facility in India. Cabotage (transport of goods or passengers between two places in the same country by a transport operator from another country) is one issue. While India did allow movement of foreign flagged vessels from one port to another for three years (2012-15) as a measure to facilitate trans-shipment through Vallarpadam, such a provision is not made at other major ports of India. Also, the customs regime in India is deterrent to trans-shipment.
Central and state governments also need to stop acting as roadblocks for each other, especially when it comes to allocation of land. Infrastructure deficits at the ports such as low depth (draft), low level of mechanisation and inadequate hinterland connectivity will also need to be addressed. This shows the need for holistic development at ports if India has to meet targets of increased trade set in the Maritime Agenda 2020 through mega hubs like trans-shipment ports.
The government has planned ambitious Sargarmala and Bharatmala projects to enhance connectivity within the country through development of coastal shipping and highways, respectively. Dedicated Freight Corridor is also needed to ease connectivity, enabling faster movement of cargo throughout the country. For a port like Vizhinjam, this connectivity in the form of roads and railways will be the biggest challenge.
Indian ports need to keep up with the changing trends in international trade to become competitive. Ports all over the world are handling container ships of 16,000 TEUs (twenty-foot equivalent units, or or the size of a standard 20-feet long container), while Indian major ports still accommodate a maximum of 9,000 TEUs. Average turn-around time of a vessel from an Indian port is one day, while its four-six hours in the case of Singapore. Even today, some of the major ports handle cargo manually, adding not just to cost but also delayed evacuation of cargo from ports. Either the ports function much lower than their actual capacity, or handle higher volume of cargo than their capacity, leading to congestion due to infrastructural deficits.
It is important that any new port is built on the lessons of deficits faced by the existing ones. While building a port is an easy task, sustaining it is the biggest challenge. Approximately Rs 450 crore (Rs 4.5 billion) is the annual cost of dredging in India at one major port, a sum that needs to be regularly invested if India wants the mainline vessels to call on its ports.
Mechanisation and evacuation infrastructure require additional investments. This should be done through the PPP model at ports for terminal handling on design, build, finance, operate and transfer basis. Vallarpadam lagged behind when it came to managing finances, and the Cochin port had taken the herculean task of dredging upon itself, which it was later unable to maintain.
Lessons can be learnt from India’s largest private port, Adani's Mundra Port in Gujarat, which carries out maintenance dredging throughout the year to ensure the presence of adequate draft of 17.5m, the highest in the country. It is hoped that the success story at Mundra port, in terms of efficiency, technology and management shall be replicated at Vizhinjam to ensure it does not become another Vallarpadam.
Despite the lackadaisical performance of Vallarpadam, voices have come out in favour of Vizhinjam Port, including organisations like Theeradesha Vikasana Ekopana Samithi, Valiyathura, Our Lady of Good Voyage Church, and particularly Thiruvananthapuram MP Shashi Tharoor, who has been toiling day and night to make this a success. After using the social and mainstream media to educate people on the urgent need of this key infrastructure for Kerala and India, Tharoor has also tried to give the development of the port a "human face" by personally chairing meetings with Vizhinjam Jama'ath over their grievances regarding compensation packages for mussels fishermen. He took businessman Gautam Adani along to meet locals and assured them of jobs at the port. These steps were essential to bring the people 'on board' with this project.
Very recently, at the inauguration of the Vizhinjam port, where a huge crowd turned out, Tharoor managed to bring some key people from the political spectrum 'on board' too on some key issues concerning this port. Flanked by Kerala Chief Minister Oomen Chandy, leaders of local Kerala Congress, socio-political representatives , entrepreneur Gautam Adani and Minister of Road Transport and Highways Nitin Gadkari, Tharoor discussed road connectivity between the port and NH47 and elicited favourable responses from the stake-holders. Tharoor is trying to ensure that a bypass road to Tamil Nadu is built and access to the port is assured.
Thus, notwithstanding the boycott by the archaic Left parties, the 25-year old dream of Thiruvanthapuram is now becoming a reality.
What also came as an 'early Christmas' gift as a result of the constant efforts put in was the announcement that the project would get a viability gap funding of Rs 790 crore (Rs 7.9 billion) each from the central and state governments to make the port commercially feasible. Gadkari also declared cabotage exemption to the Vizhinjam container trans-shipment terminal project.
But let's be very clear that ports like Colombo, Dubai and Singapore, which have always benefited because India did not have this infrastructure, will not watch idly even as they lose business worth thousands of crores. It would not be mere speculation to suggest that artificial roadblocks will be created, using opportunistic political forces within the state, funded by cash-rich foreign sources. This has happened in other projects across India and should be factored in the overall strategy to ensure that our 25-year old 'national dream' is realised.
Development of this deep-water, all-weather port is good news for India’s trans-shipment business, a project which had been delayed for 25 years and should have been developed instead of Vallarpadam. At a time when revolutionary changes are being made in international maritime trade, there is an urgent need for India to make fundamental infrastructural and policy reforms in this sector. Development of other major ports must run parallel to the development of this new trans-shipment hub at Vizhinjam. The leadership and socio-political collaboration shown at Vizhinjam needs to be replicated and sustained. If the government and private sector can continue to collaborate in taking the right steps, an 'ocean' of opportunities lies before us.
Shehzad Poonawalla is the founder of Policysamvad, and Riya Sinha (@riyas927), a masters in international relations, is a research assistant at the Bureau of Research on Industry and Economic Fundamentals (BRIEF), New Delhi.