As economic growth boosts trade in India, Asia’s second fastest growing economy, the country’s ports are struggling to attract bigger, mainline vessels to carry cargo, particularly those moved in steel containers. Bigger ships that can carry larger quantities of cargo cannot call directly due to a lack of adequate draft or depth at the berths and channels.
With the exception ports such as those located in Kandla, Mundra and Ennore, Indian ports have an average draft ranging from 8m to 12m. In comparison, the draft available at international ports ranges from 12m to 23m, which enables them to handle even new generation container vessels of over 10,000 twenty-foot equivalent unit (teu) capacity and tankers. A teu is the standard size of a container and is a common measure of capacity in the container business.
India’s merchandise exports have almost doubled in just three years to $100 billion (Rs4.1 trillion) in 2005-06. The economy is much more export-oriented. India’s export mix is also moving up the value chain to include increasing volumes of higher value products needing containerization. About 95% of India’s trade by volume and 70% by value moves by the sea route. “We need ships that can load more cargo. This means large ships that require proper draft to come in,” says Shankar Chatterjee, managing director (India & South Asia) at global project forwarding firm Bertling Logistics Pvt Ltd.
The share of containerized traffic rose from about 11% to 16% over the last five years and is expected to climb further to 23% by 2010-11. “Long-term growth can only be supported by deployment of bigger vessels, maintaining economies of scale,” says Julian Michael Bevis area line and operations manager (South Asia) at the world’s largest container shipping line Maersk Line.
But, Indian ports are far from being able to receive bigger vessels that can load and unload cargo. “The main problem is draft,” says Kenneth Glenn president, South Asia and managing director, APL (India) Pvt. Ltd, the container transportation arm of Singapore-government owned shipping firm Neptune Orient Lines. “Some of the ships that we operate are so big they don’t have the right depth at Indian ports to come calling,” says Chatterjee. Indian ports accumulate silt very fast and requires dredging throughout the year to receive ships.
Jawaharlal Nehru Port (J.N. Port) in Mumbai, India’s biggest container port, is restricted in terms of draft. Currently, it can handle only up to 3,000 teu capacity vessels from a depth or draft of 12.5m. This, in itself, is difficult and the port manages it by ensuring that these ships enter it at high tide when the depth is more.
J.N. Port also handles bigger vessels, but these enter after off-loading some of their cargo elsewhere to reduce the weight and, in turn, the draft requirement. This under-utilization of capacity is a loss to shipping lines. The port plans to deepen the channel to 14m from the existing 12.5m to enable 6,000 teu capacity vessels to berth. But there is little possibility of improvement even by 2009 or 2010, says Bevis.
J.N. Port’s problem has been compounded by the fact that it is not on the main international shipping route, requiring ships to take a detour. J.N. Port handled 3.3 million teus or 61% of the containers handled at all the 12 Union-government run major ports in the 12 months to March 31, 2007. Tuticorin Port, India’s third biggest container port, proposes to develop a second container terminal with private investments that will have a draft of 10.5m. “Do you want boats to come or ships to come?” asks S. R. Ramakrishnan managing director, PSA-SICAL Terminals Ltd, which runs the lone container terminal at Tuticorin Port in response to these plans. PSA-SICAL is a joint venture between world’s second biggest container port operator, Singapore government-owned PSA Corp., and local firm SICAL Logistics Ltd.
In comparison, Singapore port, which is situated along the world’s busiest maritime route and is considered the hub port of Asia, has a maximum draft of 16m. There are no draft restrictions in the channel and the biggest ships in the world can visit Singapore at any point of time.
Dredging the channel of a port for maintaining the depth and also to increase the depth requires huge investments. Typically, 30% of the cost of developing a port goes towards dredging. “ Who’s going to pay for that?” asks Glenn. At international ports, the government bears the cost of dredging and maintenance of channels.
An inter-ministerial group set up by the prime minister’s Committee on Infrastructure has recommended that as a national policy, a minimum draft of 14m may be developed in all the berths of major ports. The group headed by the shipping secretary A.K. Mohapatra has suggested that the government bear the cost of developing the minimum draft.
“Restrictions of draft at various ports seriously impede the ability to handle vessels of a standardized international scale. A minimum draft of 14m will give the major ports the capability to handle post Panamax size ships for carrying dry bulk cargoes like iron ore and coal as well as mainline mother vessels for containers,” the group said in a recently submitted report. Panamax carriers are ships that can sail through the Panama Canal with capacity to carry dry bulk cargoes of up to 75,000 tonnes.
A deep draft port will be of great advantage for freight sensitive cargoes like iron ore and coal as such cargoes can move on bigger vessels, thus lowering the incidence of sea freight on the landed cost.
At Paradip Port on the east coast, coal cannot be imported on fully-loaded Panamax vessels due to draft restrictions for such ships. “As a result, coal has to be shipped to Paradip only on several Handymax carriers that can load only up to 55,000 tonnes, thus requiring more trips which leads to extra costs for the importer,” says T.V. Shanbhag, who headed the government’s chartering wing Transchart from 1995-2005. Bigger vessels that can carry more volumes of cargo are exerting pressure on the port infrastructure. Cost-effecacy will be essential to prevent Indian cargo from being dependent on foreign ports.
Bevis says that terminal capacities need to be enhanced by providing a 15-16m draft, among other things, so that direct mainline vessels can call, thus reducing India’s dependence on neighbouring transhipment ports such as Colombo, Singapore and Dubai for shipping cargoes. In the absence of adequate draft for bigger vessels to berth at ports, cargo originating from India is first shipped on smaller, feeder vessels to one of these transhipment ports from where it is hauled on mainline vessels to final destinations. And cargo bound for India are first shipped on mainline vessels to one of the transhipment ports from where it is moved to India on feeder container ships.
This entails extra time and costs, two key ingredients that reflects India’s competitiveness in the global market. Transhipment takes extra travel time of four-five days for goods to reach final destination, besides entailing additional costs for sending the cargo to transhipment ports.
According to the shipping ministry, India’s foreign trade incurs an additional expenditure of more than Rs1,000 crore a year in foreign exchange in transhipment of cargo outside the country. “Container business is a very high turnover business. With deeper draft, we can bring bigger vessels which will bring efficiencies to the port and provide economies of scale,” said Bevis. But, a few disagree. Ganesh Raj, senior vice-president and managing director, sub-continent at D.P. World, the Dubai government-owned and world’s third biggest container terminal operator says that while draft is important, “it is not a big factor that influence container trade.”
“Some of the container ships of 5000 teu capacity do not need a draft of more than 12.5-13m to call. Colombo, which has made a name as a transhipment port, handles 5000-6000 teu capacity ships from a depth of 13-14m. It all depends on the business model,” says Raj.
According to former shipping secretary M.P. Pinto, better infrastructure does not mean handling the biggest ships in the world. “The battle is not going to be fought on the port front. The battle is going to be fought on the land side,” he says, emphasizing the need to set up good rail and road connectivity to the country’s hinterland for moving the cargo arriving at the ports and for moving the cargo originating from the interiors to the ports for onward carriage by sea.