Bangalore: Big container ships are yet to start services from the country’s first international container trans-shipment terminal, or ICTT, at Vallarpadam in Cochin port, three months after the Rs 1,800 crore facility was opened, because of inadequate depth and a restrictive law.
The terminal, designed to load one million standard containers in its first phase, was built to cut India’s dependence on neighbouring hub ports— Colombo in Sri Lanka, Singapore, Salalah in Oman, Jebel Ali in Dubai, and Tanjung Pelepas and Port Klang in Malaysia—to haul container cargo.
But a delay in deepening its channel, essential so that large ships can dock there, and a so-called cabotage law that restricts the operations of foreign ships in the country, are hurting the terminal’s operations, said people involved in India’s overseas trade.
This comes at a time when Sri Lanka is expanding the container loading capacity at Colombo port, Vallarpadam’s main rival, with the help of Chinese funds.
A container trans-shipment terminal acts like a hub to which small feeder vessels bring cargo, which are then loaded on to larger ships and taken to final destinations.
These large vessels, which cannot dock at smaller terminals because of their size, lower costs for shipping lines because of their scale of operations, eventually translating into lower freight rates.
Foreign shipping lines that operate in India have sought a relaxation of the cabotage law to allow them to carry cargo between Indian ports. India’s coastal trade is reserved for locally registered ships; foreign ships can be hired only when Indian ships are not available.
“The (Vallarpadam) ICTT can develop as a trans-shipment terminal for the subcontinent only if foreign flag vessels are permitted to carry export and import transshipment containers from any of the Indian ports to the ICTT or vice-versa,” said Dinesh Gautama, vice-chairman of the Container Shipping Lines Association, a body representing foreign container shipping firms operating in India.
The shipping ministry has been discussing a possible relaxation of the law with stakeholders for several months but the Indian National Shipowners Association is opposed to the idea. “It is under examination,” said Rajeev Gupta, a joint secretary in the shipping ministry.
Even if the law were modified, it would serve little purpose at this point as the Vallarpadam terminal is not ready yet to handle large ships.
The Union government-controlled Cochin port was contractually bound to give a depth of 14.5 metres to DP World Pvt. Ltd, the operator of ICTT, to help the Dubai-based firm bring bigger ships.
The Rs 550 crore channel deepening work at the Vallarpadam terminal, funded entirely by the government, was to be completed by 31 October.
But Cochin port had to cancel the channel deepening contract given to Jaisu Shipping Co. Pvt. Ltd after the firm slipped on the completion schedule and abandoned work, said M. Guruprasad Rai, Cochin port’s chief engineer. “The port went out of its way in giving many relaxations to Jaisu; we did our best, Jaisu did its best, but things did not come out best,” Rai said.
“In today’s market, where freight rates have fallen by as much as 40% over the last two years, the only way to attract a mainline service is to make it conducive for larger ships to call at the ICTT,” said Gautama. “But if you don’t give a good draft (depth), there is no point in inviting bigger container ships to start services from ICTT.”
India’s exporters and importers incur extra costs of at least Rs 1,000 crore a year on transshipment of containers via ports outside the country, according to the shipping ministry. In fact, India’s traders pay an additional Rs 600 crore every year to ship their containers via Colombo alone.
Using the Vallarpadam ICTT rather than ports outside India will save local traders as much as $300 (Rs 13,500) a container, and up to eight days in transit time, said a spokesperson for DP World.
“India’s exporters and importers had hoped that once the ICTT starts operations, they could save on transshipment money and transit time,” said Hari Menon, a general manager looking after the operations of logistics firm Clearship Group in Cochin. “But as of now, nothing is there; the ICTT is operating just like any other container terminal in India.”
The Cochin port has hired Mercator Lines Ltd to undertake the unfinished channel deepening work, now expected to be completed by September, Rai said.