Transshipment Ports: India’s Aspirations, Efforts and Issues

Transshipment refers shipment of containers to an intermediate destination for loading to other ships bound to other destination. It is a normal part of international business and is done every day to change the means of transport in multimodal transport and consolidate smaller shipments into a large shipment or vice versa.

The container transshipment terminal is like a hub where smaller vessels bring cargo from all around; and then this cargo is loaded into larger ships for final destinations. Transport via large ships brings down the cost due to economy of scale. Since large ships cannot reach at all / smaller ports due to their weight, special transshipment deep ports are needed for this purpose.

Why India needs Transshipment ports?

India’s ports are located either on east coast or at west coast. The most ports at west coast are “gateway ports”, they are able to send cargo directly to destinations and thus don’t need transshipment facilities that much. However, Eastern Coast, most of the business is dependent on transshipment facilities. Since we don’t have well developed transshipment ports, we need to rely on such ports located in other countries for that purpose. Currently 25% of India’s cargo containers are being sent to such facilities in Colombo, Singapore, Port Klang {Malaysia}, Salalah port {Oman} and Jebel Ali {Dubai} for transshipment. Out of this, only Colombo only accounts for around 11%. Use of foreign transshipment ports raises costs and competitiveness of India’s business.

This raises questions –why we cannot develop such ports in India? What are government efforts so far? And where we are lagging behind?

Government Efforts So Far

We note that only a few ports in South India have enough water depth to match global cargo handling efficiencies and function as transshipment hubs. Successive governments in India have tried to develop transshipment ports but so far the progress is dismal. Due to policy paralysis, India has also lost the opportunity to become a large hub for Asia–Africa, Asia-US/ Europe container traffic trade. Currently, the country has only one transshipment facility as Vallarpadam Terminal at Cochin port. In July 2016, the Union Cabinet had approved construction of a new port at Vizhinjam in Kerala. This port is to be built by Adani Ports and Special Economic Zone Ltd (APSEZ) at the cost of Rs. 24969 crore in 3 years.

Another such port is Colachel International Seaport or Enayam port near Kanyakumari in Tamil Nadu for which the Union Government has given in principle approval. This Rs. 28000 crore port is to come up on land which includes 500 acres of land reclaimed from the sea. Vizhinjam and Enayam ports are located only 30 kilometers from each other. All these have same objective, to bring back transshipment of India and Indian sub-continent to an Indian port.

Assessment of Competition

Currently, Singapore is the busiest trans-shipment port in the world, while Colombo is among top 15. As discussed above, Colombo is a hub for transhipments from India and accounts for India’s 10-11% cargo business. The country annually pays Rs. 1500 crore for transshipment to these ports. Further, in Hambantota in the south of Sri Lanka, China has built a sea port & airport. China is also developing Pakistan’s Gwadar seaport as a part of China-Pakistan Economic Corridor.

Performance of Vallarpadam Terminal

India’s Vallarpadam terminal has been struggling so far and has not been able to cause even a scratch on the back of Colombo. This is mainly because of these reasons: Firstly, a depth of 14.5 metres at Vallarpadam is insufficient to attract big mainline ships with a capacity to carry over 10,000 TEUs. {TEU= Twenty-foot equivalent unit, or the size of a standard cargo container}. Secondly, this terminal was stung by India’s red tape. It started in 2011 but took several years to ease rules and allow foreign flagged container ships to ply between Vallarpadam and other Indian ports carrying export-import containers.

What should be done?

During all these years, Colombo has become much stronger while Vallarpadam has struggled. The development of two new ports raises hope of India’s rise in transshipment field.  Enayam and Vizhinjam’s business proposition is that they can complete for a share of the world’s transshipment cargo since India lies nearly at the mid-point of the east-west trade. However, transshipment is totally a cost game. India will not only need fast track development but also need to be competitive in rates to compete with Colombo. The government will also need to further relax the cabotage rules and attract Indian containers trans-shipped through foreign hub ports to Indian ports.