Transshipment Port

Why in the News?

India recently inaugurated its first cargo ship at the Vizhinjam International Transshipment Deepwater Multipurpose Seaport in Kerala, marking a significant milestone in India's port infrastructure development.

More on the News

• Ownership: The port is owned by the Government of Kerala.
• Functionality: Designed primarily for container transshipment as well as multi-purpose and break-bulk cargo.
• Development Model: Built using the landlord port model with a Public-Private Partnership (PPP) on a Design, Build, Finance, Operate, and Transfer (DBFOT) basis. In this model, the port authority regulates while private entities handle operations.

What is a Transshipment Port?

• Definition: A transit hub where cargo from one ship is transferred to another on the way to its final destination. This often involves moving smaller parcels of cargo to larger vessels capable of traveling to distant ports.

Significance of India as a Transshipment Hub

• Revenue Generation:
• Current Situation: India loses $200-220 million annually as its transshipment cargo is handled at foreign ports.
• Potential: The new port aims to recapture this revenue by handling more transshipment cargo domestically.
• Reduced Logistic Costs:
• Efficiency: Improved port operations and logistics are expected to lower shipping costs.
• Performance: Average turnaround time for Indian ports has improved but still lags behind global standards (2.1 days in India vs. 1.04 days globally).
• Stimulating Economic Growth:
• Impact: The port is anticipated to enhance foreign direct investment, save foreign exchange reserves, and boost trade.
• Allied Businesses: Growth in sectors like ship repair, warehousing, and bunkering around the port.
• Self-Reliance:
• Strategic Importance: Reducing dependency on foreign ports, especially amid increasing Chinese influence in the Indian Ocean under the Belt and Road Initiative.
• Integration with Global Value Chain:
• Current Challenge: India's poor shipping connectivity has hindered its integration into the global value chain, with a current global trade share of about 2%.

Challenges in Developing Transshipment Ports

• Insufficient Natural Depth:
• Issue: Major Indian ports have depths of 10-14 meters, while a transshipment hub needs 20 meters.
• Distance from International Shipping Lines:
• Issue: Indian ports are often located far from major global shipping routes.
• Labor Issues:
• Problems: Frequent labor strikes, inefficiencies, and disparities in skill levels affect port productivity.
• Other Issues:
• Funding and Land Acquisition: Challenges in securing funding and delays in land acquisition.
• Logistics and Connectivity: Inefficiencies in logistics and connectivity.
• Competition: Intense competition from foreign ports such as Colombo, Dubai, Singapore, and Jebel Ali.

Steps Taken

• Maritime AmritKaal Vision 2047:
• Key Initiatives:
• Deeper Drafts: Increasing draft depths to 18-23 meters for larger vessels.
• Transshipment Hub: Developing major hubs to capture global shipping traffic.
• Vessel Charges: Lowering vessel-related charges to enhance cost-effectiveness.
• Private Sector Participation: Encouraging private investment through PM Gati Shakti – NMP and asset monetization plans.
• New Developments:
• International Container Transshipment Terminal: Under development at Galathea Bay (Great Nicobar) and Vallarpadam (Cochin).
• Tariff Guidelines, 2021:
• Flexibility: Allowing market-determined tariffs for PPP operators to foster competition and rationalize logistics costs.

Way Forward

• Infrastructure Investment:
• Focus: Implement modern cargo handling techniques to increase capacity, particularly for dry cargo.
• Public-Private Partnership (PPP) Projects:
• Action: Rationalize taxes to attract foreign shipping companies and set up a single-window system for PPP project approvals.
• Skill Development Initiatives:
• Programs: Launch targeted training for local workforce.
• Centers: Establish Centers for Coastal and Inland Maritime Technology with IITs/NITs/IIMs for applied research and development.
• Competing with International Ports:
• Strategy: Focus on cost efficiency, turnaround time, and customer service to enhance competitiveness.
• Coastal Zone Management Plan (CZMP):
• Preparation: Develop CZMPs considering future construction requirements and environmental clearances.