Kerala Port PPP – Market Study

Final Report

November 2010

Prepared for:

International Finance Corporation

By:

Drewry Shipping Consultants Ltd Drewry House, Meridian Gate – South Quay 213 Marsh Wall, London E14 9FJ

Tel: +44 (0) 20 7538 0191 Fax: +44 (0) 20 7987 9396 E-mail: [email protected] www.drewry.co.uk

This report is for the sole use of the purchaser and is not to be copied or distributed outside of the client organisation. Kerala Port PPP – Market Study Contents

Contents

Page No.

Abbreviation 1-2

Section 1. Executive summary 3-12

Part – I Container Traffic Analysis

Section 2. Kerala economy overview 14-26 2.1 Overview 15 2.2 Sectoral distribution of GSDP 16 2.3 Key industries 17 2.4 Infrastructure 19 2.5 Export and Import 20 2.6 Socio-economic scenario 23 2.7 Future development of Kerala’s economy-Key growth drivers 24 2.8 Investment Promotion 24

Section 3. Historic container traffic analysis 27-46 3.1 Container Traffic Growth in India 30 3.2 Regional container traffic trend in India 31 3.3 Growth of container volumes – key growth factors 32 3.4 Historic container traffic – Equipment size analysis 38 3.5 Line wise container traffic share in India 39 3.6 Major container shipping trade lanes in South Indian Ports 43

Section 4. Hinterland mapping 47-70 4.1 Karnataka 48 4.1.1 Key cargo centres 49 4.1.2 Industrial infrastructure 52 4.2 Tamil Nadu 54 4.2.1 Key cargo centres 55 4.2.2 Industrial infrastructure 63 4.3 Kerala 65 4.3.1 Key cargo centre 67 4.3.2 Industrial infrastructure 70

Section 5. Port infrastructure 71-107 5.1 Competing port facilities 74 5.2 Projected development of container handling capacity at ports in India 75 5.3 Capacity projects at upper West Coast ports 83 5.4 Capacity projects at Greater Mumbai ports 85 5.5 Capacity projects at lower West Coast ports 87 5.6 Capacity projects at lower East Coast ports 89 5.7 Capacity projects at central East Coast ports 92

5.8 Capacity projects at upper East Coast ports 94 5.9 SWOT analysis of port facilities in Lower West & Lower-East India 96 5.10 Port competitive analysis 98 5.10.1 Rail and road connectivity analysis 99 5.10.2 Existing Connectivity at Indian ports 101 5.10.3 Future connectivity projects at Indian ports 102 5.10.4 Port efficiency 105 5.10.5 Competitive benchmarking of Vizhinjam’s competing Ports 105 5.10.6 Relationship of port operators with shipping lines and logistic companies 107

Section 6. Transhipment traffic analysis – Indian Subcontinent 108-134 6.1 Historic development of Indian subcontinent container traffic 111 6.2 Gateway volumes 116 6.3 Transhipment volumes 119 6.4 Regional capacities and facilities in the region 122 6.5 Ship size limitations at competing ports 126 6.6 Comparison of transhipment tariffs 127 6.7 Comparative hub port economics 128

Section 7. Gateway container traffic forecast - India 135-169 7.1 Development of Indian container port market 136 7.2 Indian container port market forecast 2010 – 2044 141 7.3 Share of North West coast regions in India’s forecasted traffic 148 7.4 Share of Lower West & East coast regions in India’s forecasted traffic 154 7.5 Share of Central and Upper East coast regions in India’s forecasted traffic 160 7.6 Gateway container traffic forecast for Vizhinjam port 164 7.6.1 Perceived advantages and disadvantages of Vizhinjam port 168

Section 8. Transshipment container traffic forecast - Indian sub-continent 170-205 8.1 Colombo – Competitive profile 171 8.1.1 Colombo – SWOT Analysis 174 8.2 ISC Transshipment traffic forecast methodology 175 8.3 ISC Transshipment traffic forecast – main assumptions 175 8.4 ISC regional gateway (import-export) volumes forecast 177 8.5 Target market for Colombo & Vizhinjam – 2010-2044 188 8.6 Vizhinjam transhipment traffic forecast – 2010-2044 195 8.7 Vizhinjam Container traffic forecast by container size 202

Section 9. Vizhinjam vessel traffic forecast 206-210

Part – II Bulk & Non-Cargo Traffic Analysis

Section 10. Coal traffic forecast 212-220 10.1 Coal import: Hinterland analysis 213 10.2 Logistics cost analysis 217 10.3 Coal traffic forecast 219

Section 11. Steel scrap traffic forecast 221-223

Section 12. Fertilizer and FRM 224-232 12.1 Introduction 225 12.2 Historical analysis 225

Section 13. Chemicals and Petro products 233-256 13.1 Chemicals 234 13.1.1 Historical analysis 234 13.1.2 Hinterland mapping 236 13.1.3 Key Findings 236 13.1.4 Traffic at competing ports 237 13.1.5 Competitive port infrastructure 239 13.1.6 Forecast traffic for Vizhinjam Port 242 13.2 Petroleum products 243 13.2.1 Historical analysis 243 13.2.2 Petro products traffic at competing ports 245 13.2.3 Hinterland mapping 247 13.2.3.1 Refineries along western coast of southern India 247 13.2.3.2 Product pipelines in southern India 248 13.2.4 Competitive analysis for movement of petro products traffic 249 13.2.5 Key findings 252 13.2.6 Traffic forecast 253

Section 14. Edible oil and DOC 257-263 14.1 Indian Edible oil and DOC Industry 258 14.2 Edible oil traffic in Kerala 260 14.3 Competitive analysis 261 14.4 Edible oil traffic and DOC Traffic Forecast for Port till 2043-44 261

Section 15. Timber 264-270 15.1 Overview 265 15.2 Hinterland mapping 267 15.3 Traffic forecast 268

Section 16. Raw Cashew 271-277 16.1 Introduction 272 16.2 Hinterland analysis 273 16.3 Competitive analysis 275 16.4 Raw Cashew import forecast 276

Section 17. Coastal Shipping 278-284 17.1 Introduction 279 17.2 Existing coastal/rail/road movement in the hinterland of Vizhinjam port 280 17.3 Coastal traffic forecast 282

Section 18. Cruise market 285-290 18.1 Overview 286 18.2 Advantages for local economy 287 18.3 Potential for Vizhinjam 287 18.3.1 Market Estimation 288

Section 19. Ship repair market 291-297 19.1 Overview 292 19.2 Ship Repair Market 292 19.2.1 Market drivers 293 19.2.2 Scheduled and unscheduled demand 293 19.3 Factor influencing capture rates for a yard. Scheduled and unscheduled demand 294 19.4 Types of repair dock 294 19.5 Repair yard basic needs 295 19.6 Opportunities for Vizhinjam 296 19.6.1 Infrastructure requirement 296

Part – III Tariff and Revenues Forecast & Port Strategy

Section 20. Competitive positioning and marketing 299-317 20.1 Strategy development approach 300 20.2 Port characteristics 300 20.2.1 Proposed port infrastructure (Based on Techno-economic feasibility report prepared by L&T Ramboll) 300 20.2.2 Hinterland of Vizhinjam port 301 20.3 Business environment: Emerging opportunities 302 20.4 Competitive analysis 303 20.4.1 Porter’s Analysis 303 20.5 Positioning Strategy for Vizhinjam 306 20.5.1 Competitive advantage/disadvantage for Vizhinjam 306 20.6 Potential opportunity and core strategy 307 20.6.1 Potential opportunity for Vizhinjam port 307 20.6.2 Core Strategy 307 20.6.3 Port configuration for Vizhinjam multipurpose port 309 20.7 Ownership model 312 20.7.1 Ownership Model for Vizhinjam 313 20.8 Partnership and alliance 313 20.8.1 Role of Government 315 20.9 Marketing strategy 316

Section 21. Tariff and Revenue forecast 318-351 21.1 Indian port tariff overview 319 21.1.1 Upfront tariff setting for PPP projects 320 21.2 Tariff for Container handling 320 21.2.1 Vessel related charges (VRC) for container vessels 321 21.2.2 Ports - container related tariffs 324 21.2.3 Royalty terms 326 21.2.4 Terminal storage charges 327 21.2.5 Terminal pricing & container volume demand 329 21.3 Revenue forecast for Vizhinjam from Container operations 330 21.4 Components of tariff: bulk cargo 335 21.4.1 Vessel related charges (VRC) 335 21.4.2 Cargo related tariffs 338 21.4.3 Tariff forecast 342 21.5 Revenue Forecast: Other than container handling 344 21.6 Total revenue from all port operations 347 21.7 Revenue from CFS operations 348

Annexure 352-357

Annexure 1 Port dues charges at select ports in India 352 Annexure 2 Comparison of berth hires fee at select ports in India (In US$/GRT/hr) 353 Annexure 3 Comparison of pilotage & towage fee at selected ports in India 354 Annexure 4 List of organisations contacted during market survey 355-357

Tables

Table 2.1 Sectoral distribution of GSDP 16 Table 2.2 Sector wise annual growth rate 17 Table 2.3 Key industrial clusters in Kerala 18 Table 2.4 Commodity-wise Export through Kochi Port 2002- 03 to 2008-09 20 Table 2.5 Commodity-wise Import through Kochi Port 2002- 03 to 2008-09 21 Table 2.6 Export of Cashew Kernels: Kerala and India (2003-04 to 2007-08) 21 Table 2.7 Export of Cashew nut shell Liquid – Kerala & India (2003-04 to 2007-08) 21 Table 2.8 Import of Raw Cashew nuts: Kerala (2002-03 to 2007-08) 22 Table 2.9 Export of Coir and Coir Products from India during 2005-06 & 2008-09 22 Table 2.10 Item wise Exports of Marine Products from Kerala during 2005-06 and 2007-08 23 Table 2.11 Birth & Death Rate and Life Expectancy in Kerala 23 Table 2.12 Investment completed between March 2004-June 2009 25 Table 3.1 Existing & proposed container handling ports in India 28 Table 3.2 Port clusters in India & hinterland served 29 Table 3.3 Traffic pattern of Indian container handling ports 1998 - 99 to 2008 - 09 34-35 Table 3.4 Estimated share of container traffic per port, 1998 - 99 to 2008 - 09 36-37 Table 3.5 Equipment size wise container traffic at Indian major ports 38 Table 3.6 Trade lane wise growth rate in India 40 Table 3.7 Trade lane wise market share in India for loaded containers 41 Table 3.8 India – World – Base volume estimate for 2008 43 Table 3.9 Portfolio of liner services at large Southern container handling ports (Jan’10) 44 Table 3.10 Trade lane wise break up of port traffic – South India 45 Table 3.11 Trade lane wise market share in South India for loaded containers 46 Table 4.1 Total Karnataka Loaded container traffic handled (export + Import) 49 Table 4.2 State-wise coffee production in 2008-09 (Est.) 49-50 Table 4.3 Break-up of traffic handled by ICD Whitefield 51 Table 4.4 Estimated loaded container traffic flow in Karnataka (FY08) 52 Table 4.5 a. List of functional SEZ in Karnataka as on August 4, 2009 52 b. List of proposed SEZ 53 Table 4.6 Loaded container traffic handled in Tamil Nadu (export + Import) 55 Table 4.7 Commodity wise traffic break-up of Coimbatore, 2008 56 Table 4.8 Estimated break-up of traffic handled at CFSs in Chennai (Jan-Jul09) 58 Table 4.9 Share of major export/import commodities handled at Chennai 59 Table 4.10 Estimated loaded container traffic flow in Tamil Nadu (FY08) 62 Table 4.11 a. List of functional SEZ in Tamil Nadu as on August 4, 2009 63-64 b. List of proposed SEZ 64-65 Table 4.12 Commodity-wise container traffic through Kochi in FY 2008 & FY 2009 66 Table 4.13 Import and export of Cashew – Cochin Port 66 Table 4.14 Loaded container traffic (export + Import) in Kerala 67 Table 4.15 Estimated loaded container traffic flow in Kerala (FY08) 69 Table 4.16 List of functional SEZ in Kerala as on August 4, 2009 70 Table 5.1 Existing and proposed container ports in India 72

Table 5.2 Overview of ports and facilities handling containers at the end of 2008 - 09 74 Table 5.3 Development of capacity at Indian container handling ports FY09 to FY21 77-79 Table 5.4 Capacity share of Indian container handling ports, FY09 – FY21 80-82 Table 5.5 Road distance between cargo centers and ports 103 Table 5.6 Road haulage cost advantage/disadvantage for Vizhinjam port 104 Table 5.7 Port performance indicators for competing facilities in South Indian region 105 Table 5.8 Vizhinjam’s port’s competitive analysis 106 Table 6.1 Development of ISC container port volumes by country, 1997-2008 (teu) 114 Table 6.2 Development of ISC container port volumes by port, 1997-2008 (teu) 115 Table 6.3 Development of net ISC gateway (import-export) volumes, 1997-2008 117 Table 6.4 Share of net ISC gateway (import-export) volumes (exc. Sri Lanka), 1997-2008 117 Table 6.5 Estimated direct call v. feeder split of ISC gateway volumes 118 Table 6.6 Development of transhipment volumes at ports within the ISC region, 1997-2008 (teu) 120 Table 6.7 Development of total ISC-related transhipment volumes at hub ports, 1997-2008 (teu) 120 Table 6.8 Matrix of hub port estimated transhipment volume by ISC feeder region, 2008 121 Table 6.9 Comparison of key factors of regional hub ports competing with Vizhinjam, 2008 123-124 Table 6.10 Comparison of key factors of gateway ports competing with Vizhinjam, 2008 125 Table 6.11 Comparison of key factors of spoke/feeder ports competing with Vizhinjam, 2008 125 Table 6.12 Container ship size limitation at competing ports 126-127 Table .6.13 Comparison of typical selected container transhipment tariffs, mid sized operator 128 Table 6.14 Colombo/Vizhinjam v, Singapore: Selected spoke port distances 129 Table 6.15 Colombo/Vizhinjam v, Dubai: Selected spoke port distances (nautical miles) 130 Table 6.16 Shipping network cost analysis 132-134 Table 7.1 Development of total Indian general cargo and container market (FY00 – 09) 138 Table 7.2 Development of estimated share of total Indian break-bulk and container traffic per region, FY 2000- 2009 139-140 Table 7.3 High case scenario: India’s container traffic forecast 145 Table 7.4 Base case scenario: India’s container traffic forecast 146 Table 7.5 Low case scenario: India’s container traffic forecast 147 Table 7.6 Growth of gateway container traffic in North West coast of India – High case 151 Table 7.7 Growth of container traffic in North West coast of India coast of India – Base case 152 Table 7.8 Growth of container traffic in North West coast of India coast of India – Low case 153 Table 7.9 Growth of container traffic in Lower West & East Coast of India – High case 157 Table 7.10 Growth of container traffic in Lower West & East Coast of India coast of India – Base case 158 Table 7.11 Growth of container traffic in Lower West & East Coast of India coast of India – Low case 159 Table 7.12 Growth of container traffic in Upper & Central East Coast of India – High case 161 Table 7.13 Growth of container traffic in Upper & Central East Coast of India coast of India – Base case 162 Table 7.14 Growth of container traffic in Upper & Central East Coast of India coast of India – Low case 163 Table 7.15 Gateway container traffic forecast for Vizhinjam port 169 Table 8.1 Development of container volumes in Colombo and share of traffic between terminals 172 Table 8.2 Forecast ISC region gateway volumes, 2010-2044 179 Table 8.3 Forecast net ISC gateway (import-export) volumes by market area, 2010-2044 179-180 Table 8.4 Forecast split of ISC gateway traffic by sub-region, 2010-2044 181 Table 8.5 Forecast net ISC gateway volumes by type of traffic, 2010-2044 182

Table 8.6 Breakdown of forecast gateway teu, Pakistan, 2010-2044 183 Table 8.7 Breakdown of forecast gateway teu, west coast India, 2010-2044 184 Table 8.8 Breakdown of forecast gateway teu, south coast India, 2010-2044 185 Table 8.9 Breakdown of forecast gateway teu, east coast India, 2010-2044 186 Table 8.10 Breakdown of forecast gateway teu, Bangladesh, 2010-2044 187 Table 8.11 Forecast volumes of ISC transhipment activity at hub ports, 2010-2044 189-191 Table 8.12 Forecast volumes of ISC transhipment activity by ports for hubs outside the ISC region, 2010-2044 192-194 Table 8.13 Projected transhipment traffic of ISC feeder volumes by port via Vizhinjam to 2044 – Base case 197 Table 8.14 Projected transhipment traffic of ISC feeder volumes by port via Vizhinjam to 2044 – High case 198 Table 8.15 Projected transhipment traffic of ISC feeder volumes by port via Vizhinjam to 2044 – Low case 199 Table 8.16 Projected Vizhinjam container traffic 2014- 2044 200-201 Table 8.17 Vizhinjam container traffic 2014- 2044 by Equipment size – Base Case 203 Table 8.18 Vizhinjam container traffic 2014- 2044 by Equipment size – High Case 204 Table 8.19 Vizhinjam container traffic 2014- 2044 by Equipment size – Low Case 205 Table 9.1 Summary of current vessel sizes calling at ISC ports 208 Table 9.2 Potential future vessel sizes calling at Vizhinjam port 208 Table 9.3 Potential future vessel sizes calling at Vizhinjam port – Base case scenario 210 Table 10.1 Import of coal: All India 213 Table 10.2 Coal handled at Indian ports in the hinterland 214 Table 10.3 List of cement plants in the primary and secondary hinterland 215 Table 10.4 Distance matrix of key cement plants 216 Table 10.5 Cement production and consumption of Kerala 216 Table 10.6 Logistics cost estimation for competitive port 218 Table 10.7 Coal traffic forecast for Vizhinjam Port 219-220 Table 11.1 Steel scrap consumers in the hinterland 222-223 Table 11.2 Steel scrap handled at Indian ports in the hinterland 223 Table 12.1 Indian fertiliser industry at a glance -Nutrient wise 225 Table 12.2 Fertiliser consumption forecast for India 226 Table 12.3 Fertilizer consumption in Vizhinjam’s hinterland - 2008-09 227 Table 12.4 Fertiliser industry in Vizhinjam’s hinterland 228 Table 12.5 Fertiliser imports in Vizhinjam’s hinterland 230 Table 12.6 Road distances from competing ports in the hinterland (Km) 230 Table 12.7 Fertiliser imports forecasts for Vizhinjam 231 Table 13.1 Performance of Indian Chemicals and Petrochemicals Industry 235 Table 13.2 State wise share of Chemicals Industry (2006-07) 235 Table 13.3 State wise share of Petrochemical Industry (2006-07) 235 Table 13.4 Chemical traffic at competing ports* 238 Table 13.5 Competing port’s chemical traffic as compared to India’s traffic 238 Table 13.6 Comparison of infrastructure details at competing ports 239 Table 13.7 Road distance matrix 240 Table 13.8 Comparison of road transportation costs 241 Table 13.9 Forecast chemical and petrochemical traffic for Vizhinjam Port 242-243 Table 13.10 Growth of Indian petroleum industry at a glance 244 Table 13.11 Trends in petro products traffic at competing ports* 245 Table 13.12 Trends in LPG traffic at competing ports 246 Table 13.13 List of existing product pipelines in Southern India 248 Table 13.14 List of proposed product/gas pipelines in Southern India 248

Table 13.15 Comparison of transportation costs at supply points from normal sources vis-à-vis Vizhinjam Port 251 Table 13.16 Total petro products sales across India 254 Table 13.17 Total petro products sales across Kerala 255 Table 13.18 Petro products traffic forecast for Vizhinjam Port 255-256 Table 14.1 Historical analysis of Edible Oil and DOC trade 258 Table 14.2 Per capita edible oil consumption 258 Table 14.3 Edible Oil Imports at various Ports 259 Table 14.4 DOC exports from various Ports 259 Table 14.5 Road distances from competing ports in the hinterland (Km) 261 Table 14.6 Edible oil import traffic forecast for Vizhinjam Port 262 Table 15.1 Production, trade and consumption of all timber by India 266 Table 15.2 Timber traffic at ports in the hinterland 268 Table 15.3 Timber traffic forecast for Vizhinjam 269 Table 16.1 Import of Cashews: India 272 Table 16.2 Export of cashew kernels from Kerala and India 272 Table 16.3 Cashew area, production, and yield 273 Table 16.4 Cashew processing units in India - 2005-06 273 Table 16.5 Kerala’s share in cashew import 274 Table 16.6 Distance matrix for Cashew processing units 274 Table 16.7 Inland Logistics cost of raw cashew import 275 Table 16.8 Inland Logistics cost of raw cashew import 275 Table 16.9 Raw cashew import forecast 277 Table 17.1 Existing coastal/rail/road movement in the region 280 Table 17.2 Movement of cement into Kerala 282 Table 17.3 Movement of rice into Kerala 282 Table 17.4 Total movement of wheat into Kerala 282 Table 17.5 Coastal traffic forecast: Vizhinjam port 284 Table 18.1 District wise break-up of tourists in Kerala in 2008 286 Table 18.2 Cruise vessels traffic forecast 290 Table 19.1 Ship repair infrastructure, revenue and direct expenses 297 Table 20.1 Port configuration and estimated cost of berths and cargo handling equipments 310 Table 20.2 Summary of revised cost estimates by L& T Ramboll 312 Table 20.3 Comparison of port ownership models 313 Table 21.1 Port dues at Vizhinjam’s competing ports 322 Table 21.2 Berth hire charges at Vizhinjam’s competing ports 322 Table 21.3 Pilotage & Towage fee at Vizhinjam’s competing ports 323 Table 21.4 Total Port disbursement fee at Vizhinjam’s competing ports 323 Table 21.5 Comparative container handling charges 325 Table 21.6 Royalty terms for major container terminals 327 Table 21.7 Free periods and storage rates for export teu at selected ports 328 Table 21.8 Cost analysis for export shipment from India to US East Coast 329 Table 21.9 Tariff forecast for vessel related charges 333 Table 21.10 Tariff forecast from container handling charges 334 Table 21.11 Revenue forecast for Vizhinjam 335 Table 21.12 Light dues Indian ports 336 Table 21.13 Port dues at competing ports of Vizhinjam 337 Table 21.14 Berth hire charges at competing ports of Vizhinjam 337 Table 21.15 Pilotage & Towage fee at competing ports of Vizhinjam 337 Table 21.16 Total Port disbursement fee at competing ports of Vizhinjam 338 Table 21.17 Total cargo handling charges for various commodities 340-341 Table 21.18 Vessel related tariff forecast: Vizhinjam Port 342

Table 21.19 Cargo related tariff forecast: Vizhinjam Port 343 Table 21.20 Revenue from Cargo related charges : Bulk handling at Vizhinjam Port 344 Table 21.21 Revenue from Vessel related charges : Bulk handling at Vizhinjam Port 345 Table 21.22 Sources of Revenue from bulk handling and cruise vessels at Vizhinjam Port 346 Table 21.23 Total revenue from all sources (Container + other operations) 347 Table 21.24 Traffic & Revenue Forecast from CFS operations at Vizhinjam – Base Case Scenario 350-351

Figures

Figure 2.1 Economic profile of Kerala 15 Figure 2.2 Industry attractiveness matrix for Kerala state 26 Figure 3.1 India’s historical container traffic growth rate (FY 99 – FY 09) 30 Figure 3.2 Region-wise share of container traffic 31 Figure 3.3 Key growth factors 33 Figure 3.4 Trade lane wise port throughput share in India – loaded boxes (2008) 40 Figure 3.5 Market share of major shipping lines in India- 2008 42 Figure 3.6 Market share of the major shipping lines on Southern coast of India 45 Figure 4.1 Coffee producing States/Districts and current share of ports 50 Figure 4.2 CFS clusters in Chennai region 60 Figure 5.1 Existing and proposed container handling ports in India 73 Figure 6.1 Gateway and hub container ports serving the ISC region 113 Figure 7.1 General cargo growth in India (FY2000-09) 136 Figure 7.2 Indian GDP and General cargo traffic: Estimating the trend line 141 Figure 10.1 Cement plants in primary and secondary hinterland 214 Figure 12.1 Vizhinjam’s hinterland for fertilizer consumption 228 Figure 12.2 Proposed Gas connectivity to fertilizer Industry in the hinterland 229 Figure 13.1 Primary and secondary hinterland mapping 236 Figure 13.2 Product pipelines in Southern India 249 Figure 13.3 Major economic supply zones for Vizhinjam Port 250 Figure 14.1 Change in Edible oil traffic after ban in Kerala 260 Figure 15.1 Share of timber traffic by ports in the hinterland 267 Figure 16.1 Hinterland of Vizhinjam port for Raw Cashew 275 Figure 17.1 Development of traffic : Coastal vs Exim 279 Figure 17.2 Indian coastal shipping – Constraints & Impediments 279 Figure 17.3 Coastal Shipping potential 281 Figure 18.1 Break-up of foreign tourist arrival in 2008 287 Figure 18.2 Potential cruise routes 289 Figure 20.1 Existing Fishing Harbour at Vizhinjam 300 Figure 20.2 Proposed Vizhinjam port location 300 Figure 20.3 Hinterland of Vizhinjam 302 Figure 20.4 Porter’s Frame Work 303 Figure 20.5 Key Landlord functions 313 Figure 20.6 Port related activities beyond landlord function 314 Figure 20.7 Exports from functioning SEZs 316

Abbreviation

AMR South American ANZ Australia & New Zealand AP Andhra Pradesh APMT A P Moller Terminals BOOT Build Own Operate Transfer BOT Build Operate Transfer CAGR Compounded Annual Growth Rate CBM Cubic Meter CEC Central East Coast CFR Cost and Freight CFS Container Freight Station CHA Customs Handling Agent CMA Cement Manufacturer’s Association CONCOR Container Corporation of India CSH Common Secondary Hinterland CWC Central Warehousing Corporation DFC Dedicated Freight Corridor DGCIS Directorate General of Commercial Intelligence and Services DMIC Delhi Mumbai Industrial Corridor DOC De-oiled Cake DPW Dubai Ports World DWT Dead Weight Tonnage EAF Eastern Africa EIA Environment Impact Assessment EUR Europe FC Financial Closure FCL Full Container Load FDI Foreign Direct Investment FEA Far East Asia FFE Forty Foot Equivalent Unit FOB Free on Board FY Financial Year GDP Gross Domestic Product GM Greater Mumbai GOI Government of India GoK Government of Kerala GPL Gangavaram Port Ltd. GRT Gross Registered Tonnage GSDP Gross Domestic Product GTIL Gateway Terminals India Limited GW Giga Watt HDS Haldia Dock System ICD Inland Container Depot IGF Intra Gulf INR Indian Rupee INSA Indian National Ship owner’s Association IPA Indian Ports’ Association ISC Indian Subcontinent JNPCT Jawaharlal Nehru Port Container Terminal

Con’td

JNPT/JNP Jawaharlal Nehru Port Trust JV Joint Venture KDS Kolkata Dock System KINFRA Kerala Industrial Infrastructure Development Corporation Km Kilo Metre KPCL Krishnapatnam Port Corporation Limited KSCDC Kerala State Cashew Development Corporation LCL Less than Container Load LEC Lower East Coast LNG Liquefied Natural Gas LoA Letter of Assurance LOA Length Overall LWC Lower West Coast MbPT Mumbai Port Trust MCA Model Concession Agreement MICT Mundra International Container Terminal MMB Maharashtra Maritime Board Mn Million MPTA Mumbai Port Trust Act Mt Million Tonne MTPA Million tonnes per annum MW Mega Watt N&NW North & North West NAM North America NH National Highway NHAI National Highway Authority of India NMPT New Mangalore Port Trust NSDP Net State Domestic Product NSICT Nhava Sheva International Container Terminal POL Petroleum & Other Lubricants PPP Public Private Partnership PSA Port of Singapore RFQ Request for Qualification SAF Southern Africa SAGT South Asia Gateway Terminal SEZ Special Economic Zone SPV Special Purpose Vehicle SSI Small Scale Industries TAMP Tariff Authority for Major Ports TEU Twenty Foot Equivalent Unit THC Terminal Handling Charges TNEB Tamil Nadu Electricity Board UEC Upper East Coast USD US Dollar VCT Vishakha Container Terminal VLCC Very Large Crude Carrier WAF Western Africa WPI Wholesale Price Index YOY Year on Year

1. Executive summary

Introduction

International Finance Corporation (IFC) is advising Government of Kerala (GoK) on structuring and implementation of a Public Private Partnership (PPP) project for development of Vizhinjam port. IFC and GoK are interested in the evaluation of the market potential for cargo handling at the proposed new port and the opportunity for private sector participation in the project development and implementation.

Objective of the study

GoK is keen to develop Vizhinjam port on the PPP model and its main objectives include:

• Development of modern deepwater port facility to improve the state’s transport infrastructure.

• Facilitating trade and attracting investment in the state.

• Promoting private sector participation in port and transport sector.

Approach

The aim of the study is to assist in assessing the market feasibility of the proposed new port at Vizhinjam and to provide an investment grade market study. To achieve this Drewry has provided:

• Historical traffic analysis to understand the regional trade and commodity profile.

• Hinterland analysis to map the key consumption and production centres (Cargo centres).

• Container and bulk traffic forecast for the hinterland for 30 years.

• Container transhipment market analysis and traffic forecast.

• Analysis to assess the port competitive environment.

• Identifying key advantages and disadvantages of Vizhinjam port.

• Assessment of share of competing ports and Vizhinjam port in the expected traffic for different cargoes over the forecast period.

• Tariff review and analysis.

• Strategy for capturing potential container and bulk traffic over the forecast period.

Project overview

Phase 1 Phase 2 Phase 3 FY 14-20 FY 21-FY 30 FY 31-FY 44

Terminal Year Base Case Traffic

Gateway Container Traffic (mn Teu) 0.1 0.4 0.8 Transshipment container Traffic (mn Teu) 0.7 1.3 2.1 Bulk Traffic (mn Tons) 0.6 1.3 2.6 Cruise vessels (no.) 30 60 120

Sub Total excluding cruise (million tonnes)* 12.5 25.7 43.5

Port Configuration (No. of Berths to be added)

No. of Container Berths 2 2 3 No. of General Cargo Berths 1 - - No. of Cruise Berth 1 - 1 No. of Liquid Berth - 1 -

Sub Total 4 3 4

Estimated Investment (Mn USD)**

Infrastructure 110.3 46.2 178.8 Superstructure 14.0 9.6 52.7 Land Reclamation 43.1 30.3 98.7 Berth and Equipments 169.7 213.6 399.6

Sub Total 337.1 299.7 729.8

PV of estimated investment (@10%)** 337.1 153.8 144.4

Estimated cumulative revenue for each phase 188.3 965.6 3,826.7 from all sources in base case (USD Million) **

PV of estimated revenue (@10%)** 119.0 279.3 358.0

Note: * 1 Container = 14.5 tonnes (Base Case) ** Provisional Estimate Source: Drewry Research, IFC, L& T Ramboll Techno-commercial Feasibility Report

Key Findings of the study

Economy

• The economy of Kerala registered a steady growth of 8% between 1999-00 and 2007- 08.The secondary sector registered the highest growth rate of 17.9% as compared to the tertiary sector (9.6%) and primary sector (2.5%) in 2007-08 over preceding financial year. As a result the share of secondary sector has gone up from 20% in 1999-00 to 28% in 2007-08 at the expense of fall in share of primary sector. However, service sector has maintained its dominance, accounting for 58% share in NSDP in 2007-08.

• Coir, Cashew nut processing, Seafood, Tourism, IT and ITES are major industries of Kerala.

• Kerala has received around USD 1.4 billion of investment over the last 5 years with service sector accounting for more than 50% of the total investments made, followed by manufacturing and construction sector at around 22% and 12% respectively.

Container

Historic container traffic analysis

• Container Ports in India can be divided into following 6 clusters

Upper West Coast – Ports in Gujarat

Greater Mumbai region- Ports in Mumbai and southern Maharashtra

Lower West Coast – Ports in Goa, Karnataka and Kerala

Lower East Coast- Ports in Tamil Nadu, Pondicherry and Krishnapatnam

Central East Coast- Ports in Andhra Pradesh (excluding Krishnapatnam)

Upper East Coast – Ports in Orissa and West Bengal

• Indian container traffic has grown at an average growth rate of 14% over the past ten years primarily driven by growth in hinterland traffic. Currently, top 3 container ports i.e. JNPT, Chennai & Mundra control almost 77% of India’s container traffic.

• Vizhinjam port falls in the lower west coast region which has lost market share in the overall gateway container traffic handled in India because of higher growth and containerisation in other regions.

Hinterland Analysis

• Kerala’s containerised commodities are primarily coir, rubber, cashews and other agricultural goods. The primary hinterland of Vizhinjam would be the state of Kerala whereas secondary and distant hinterland would be the cargo centres which are contested by existing container handling ports in Southern India. Vizhinjam port has a distance/cost advantage for cargo centres in Southern Kerala vis-à-vis Cochin and Tuticorin ports. These regions would therefore be the core of the gateway target market.

Competitive analysis

• Vizhinjam port faces stiff competition from existing and upcoming facilities in the region which share a large common hinterland. The current supply demand scenario in lower west coast suggests underutilisation of existing capacity. The expected traffic growth in the region is unlikely to absorb new capacities, thus this problem is likely to continue over short and medium term.

Transhipment traffic analysis – Indian Subcontinent

• The Indian subcontinent (ISC) gateway container volumes have increased from 4.3 Mn Teu in 1997 to 14.7Mn Teus in 2008. The west coast of India contributes the largest share (50%) of container traffic in the region. Almost 66% of the gateway traffic is served through feeder services and rest 31.5% is carried on mainline vessels in the region.

• Colombo is the largest transhipment hub for ISC traffic in the region and handles around 35% of the total ISC transhipment traffic, 4.1% of the transhipment volume is handled by ports within the ISC while almost 61% of the balance transhipment traffic of the region is handled by hub ports outside ISC, namely Singapore, Salalah, Jebel Ali, etc.

• The west coast of India and Pakistan combined provides the largest container traffic market in the region. Lines have increased direct calls to these ports and transhipment incidence in these regions has steadily decreased over the years. Currently, an estimated 12-15% of the total traffic of this region is a potential transhipment target market.

• Currently, transhipment traffic volumes from south India and east coast of India are 60% and 70% respectively of the gateway traffic. Similarly, around 95% of Bangladesh’s gateway traffic is transhipped at various hub ports in the region.

• Vizhinjam port faces competition for a transhipment market not only from the port of Colombo but also from major transhipment hubs outside the ISC region. However, the east coast of India, Bangladesh and south coast of India will be the target market of transhipment traffic for Vizhinjam.

Gateway container traffic forecast

• Lower west coast region would have a small share of 12% in the Indian gateway container traffic primarily due to low container traffic development in the immediate hinterland of the region.

• Vizhinjam is most likely to attract gateway container traffic from its immediate hinterland which it shares with the Cochin port.

• In the three growth scenarios, namely, high, base and low case, the gateway container traffic in the period 2014-44 at the proposed Vizhinjam port is forecast to grow from approximately 38,000 Teu to 0.92 Mn Teu, 0.76 Mn Teu and 0.72 Mn Teu respectively.

Transhipment Traffic forecast

• Colombo port is the primary competitor for Vizhinjam port for the transhipment market.

• Current market dynamics suggest that it is only the ISC transhipment traffic market that can be catered to by the port.

• The gateway traffic for ISC region in the base case scenario is estimated to grow from 12 Mn Teus in FY 10 to 120 Mn Teus in FY44. However, the total share of feeder traffic is estimated to decrease from 30% to 16% during the same period.

• The total available feeder market is expected to increase from 7.2 mn Teu in FY10 to 38.7 Mn Teu by FY44. The current share of Colombo in this market is approximately 38%.

• Market share in the transhipment market is driven by total network costs. Vizhinjam will have to offer rates that are lower than those applicable at Colombo in order to secure share. This will depress profitability and attractiveness to private sector operators.

• The share of hub ports outside ISC in the overall ISC transhipment market is expected to decline from 60% to 50% by FY 44, while the combined market share of Vizhinjam and Colombo is likely to increase to around 44% over the same period.

• In base case scenario (which assumes that Vizhinjam is price competitive), Vizhinjam’s transhipment traffic is expected to reach 2.0 million Teus by FY 44, whilst in high case this is likely to be around 3.0 million Teus.

• Total container traffic in base case scenario for Vizhinjam port is expected to increase from 0.15 million Teus in FY14 to 2.8 million Teus in FY44. It is estimated the total number of container vessel calls would increase from 2 calls/week in 2014 to 19 calls per week in 2044.

Container traffic forecast

3,000

2,500

2,000

1,500 '000 Teu '000

1,000

500

0 FY14 FY16 FY18 FY20 FY22 FY24 FY26 FY28 FY30 FY32 FY34 FY36 FY38 FY40 FY42 FY44

Gateway Transhipment Total Source: Drewry Research

Dry Bulk Traffic

• The potential for coal traffic at Vizhinjam port is very low mainly because of scanty presence of coal consumers in the hinterland. There is no existing or planned thermal power plant and integrated steel plant in the hinterland. Cement plants are the largest coal consumers in the region. However, these are in proximity of two competing ports.

As a consequence, in base case scenario coal traffic is expected to be stagnant in the forecast period at around 0.14 million tonnes.

• Fertilizer plants in Kerala and Tamil Nadu are operating at around 30% utilisation rate. This utilisation rate is expected to improve significantly after their connectivity to under construction gas grid, resulting in reduction in demand for imported fertilisers. Under the base case scenario, Vizhinjam port is likely to attract 540,000 tonnes of cargo in the terminal forecast year. A major share of this cargo is likely to be diverted from Tuticorin port.

Liquid Bulk Traffic

• Owing to negligible presence of chemical and petrochemical industries, around Vizhinjam, limited volume of the traffic is expected to move to Vizhinjam Port. In the base case scenario, the potential for chemical cargo at Vizhinjam Port in FY 2013-14 is forecast at 6,000 tonnes in 2013-14. This is estimated to rise to 72,000 tonnes in 2043-44.

• Currently, petroleum product demand in the primary hinterland is mainly being served by Kochi, New Mangalore and Tuticorin Ports. It is estimated that with required infrastructure development, Vizhinjam Port could take around 15.0% of the petroleum product imports handled by competing ports. Total petroleum product traffic is expected to rise steadily over the forecast years, reaching slightly above 1.0 million tonnes FY 44.

• Few national and international firms engaged in the storage business of liquid bulk (petro products and LPG) have shown interest in putting up tanks at Vizhinjam Port. It has not been taken into account for traffic forecast due to lack of sufficient information.

• Potential for Edible oil traffic at Vizhinjam port is very limited, as the key importers are concentrated in the Ernakulam and Kozhikode district. In the base case scenario, Vizhinjam port is estimated to attract approximately 25,000 tonnes in the terminal year of forecast.

General Cargo

• There are over 200 saw mills spread across Kerala and parts of Southern Tamil Nadu. Currently, these saw mills are importing timber at Mangalore, Cochin and Tuticorin Ports. At the terminal forecast year, hinterland timber traffic is estimated to reach over 1 million tonne. With efficient cargo handling facility and adequate storage space, Vizhinjam is expected to take around 10% share of the total traffic in the hinterland, which would roughly give it a volume of 100,000 tonnes.

• Kerala accounts for more than over 50% of raw cashew imports in India. Vizhinjam is quite strategically located close to major cashew processing clusters in Kerala. It has Kollam to its north at a distance of 80 kms and Nagercoil to its south at a distance of 63 km. Currently, most of the requirements of raw cashew imports in this region are met through Tuticorin and Cochin port respectively. By virtue of its locational advantage Vizhinjam port can become a good alternate port for handling break bulk shipments of raw-cashew from Africa. In a base case scenario, it is estimated that Vizhinjam port can attract raw cashew traffic of around 133,000 tonnes in 2043-44 in break-bulk vessels.

Coastal

• As Kerala is not self sufficient in cement, rice, wheat and construction materials like marbles and tiles, these commodities are transported from northern part of the country via rail and road. The issues like fragmented market, multiple handling, more time taken in transit, requirement of door to door services, and lack of return cargo are some of the factors which may hinder surge in coastal shipping. But with policy changes coastal shipping is expected to take off from northern ports to southern ports of Karnataka and Kerala. According to the Drewry estimate, coastal traffic of cement is expected to grow at a CAGR of 7% from 51.8 thousand tonnes in 2007-08 to 505.5 thousand tonnes in 2043-44.

Bulk Traffic forecast

1,200 1,051 1,000

800 674 600 536 498

'000 Tonnes '000 400 318 173 147 141 141 200 141 133 104 90 86 72 64 49 27 18 11 6 0 0 0 0 Timber Fertilizer Edible Oil Coal POL Chemical Raw Cement cashew

2013-14 2028-29 2043-44

Source: Drewry Research

Cruise

• Considering the past trends and the market potential, Vizhinjam port can expect to handle around 30-35 cruise vessel calls/ annum in the initial years of operations, which could eventually increase to around 120-130 calls per annum in the long run. Further, if Vizhinjam can develop adequate port and supporting infrastructure then it may be considered by some of the big operators also and that can assist in attracting some of the larger ships having capacity in the range of 2,000-3,000 passengers.

• Cruise tourists have high disposable income and propensity to spend on leisure activities and shopping. As per industry estimates, average passenger spend per port is around USD 100-120. This will give general boost to the local economy

Ship repair

• The key determinant of shiprepair demand is the shipping that is active within the vicinity of the proposed yard. Vizhinjam location means that it potentially will benefit from traffic calling at ports on the lower west coast of India. Additionally, Vizhinjam will have considerable shipping passing through main East –West shipping route.

• Vizhinjam is between two already established repair facilities i.e. Dubai and Singapore. To compete with established repair facilities Vizhinjam will have to establish trained and motivated workforce with superior independent inspection /quality control department.

• With increasing global fleet size demand for ship-repairs is expected to grow thus providing new opportunities for existing and new ship-repair yards. However, the competition is quite intense. Yard which can offer shorter repair duration at a competitive price will enjoy a competitive advantage. To effectively compete with the existing facilities in the region and to provide a good alternate for the vessels in the target market, Vizhinjam may have to opt for at least 2 graving docks capable of handling Panamax vessels along with 4 land berths.

Strategy development approach

Competitive analysis

Vizhinjam port will face intense competition from the existing ports in the region and will have to adopt proactive strategies to attract cargo from its immediate and secondary hinterland. Similarly, for container transshipment traffic, Vizhinjam port will be in direct competition with Colombo port. .The competitive scenario in which the Vizhinjam port will operate can be broadly described as follows:

Intense Rivalry among the existing players

Strong threat of a new entrant

Medium threat of substitute

Strong Bargaining power of users

Moderate Bargaining power of service providers

Positioning Strategy for Vizhinjam

To mitigate market and financial risks Vizhinjam Port should differentiate its services by developing a modern and efficient Multipurpose Port for handling container and general cargo traffic along with non-cargo vessels. The port development plan should provide the flexibility of expansion in the future on the basis of the growth in traffic and demand from various users. The proposed positioning strategy is aimed at addressing some of the following key issues:

• Alternate gateway port to serve shippers in the hinterland. Multipurpose port provides the flexibility to handle optimum cargo mix to maximize traffic volumes and revenue.

• Impetus for economic development in the Southern Kerala.

• Port infrastructure to complement local economic activities and to provide opportunities for additional direct and indirect employment for the local population.

• Limiting the initial capital expenditure on port infrastructure and superstructure thereby reducing risk.

Core Strategy

Considering both obvious and latent traffic potential, Vizhinjam Port’s core strategy could include the following:

• Develop an efficient multi-purpose port to provide container and bulk/general cargo handling infrastructure.

• Tap general cargo and container traffic being generated in the immediate and secondary hinterland by delivering reliable efficient cargo handling services.

• Strategic partnership with key players like shipping lines, terminal operators, service providers, shippers.

• Leveraging proximity to East-West shipping route for attracting transhipment container traffic at Vizhinjam port subject to profitability.

• Establish new cruise terminal to attract potential cruise vessel traffic.

Ownership Model for Vizhinjam

• Landlord port model has gained popularity and have proved to be quite successful. Some of the leading ports like Rotterdam, Antwerp and Singapore have adopted this structure and have benefited from public-private partnership. This assists in attracting necessary private investments in port development and also results in higher efficiency in port operations. Considering this, Vizhinjam port can also adopt a ‘Landlord’ model for development of a proposed multi-purpose port. As a Landlord port Vizhinjam port is expected to perform following functions :

Development and maintenance of marine infrastructure

Marine services

Harbour Master

Berth construction and concession

Some of the potential partners for Vizhinjam port development could include the following:

Industry Players: terminal operators, shipping lines

Government

Banks and Financial Institutions (including port infrastructure funds)

International Development and multilateral financial institutions

Tariff and Revenue

• In India, there are primarily three components of port tariff, namely vessel related charges (Port Dues, Berth Hire, Pilotage and Towage and Light Dues), cargo related charges (Wharfage, Stevedoring/cargo handling charges), and miscellaneous charges (lighthouse charges etc.).

• Based on shipping line network cost estimates, Drewry suggests that Vizhinjam offer a container transhipment tariff at 60% of the current published tariff being levied for container operations at the Colombo port. As the traffic builds up, Vizhinjam port can review the tariff and reduce the margin of discount offered vis-à-vis Colombo port.

• Suggested bulk cargo and vessel related charges at Vizhinjam Port are in line with the prevailing tariff at Tuticorin port.

• Annual tariff escalation is based on 60% of estimated WPI. Based on this the total revenue from all sources is estimated to go up from USD 9.65 million in 2013-14 to USD 407.59 million in 2043-44. This assumes base case traffic scenario for all the cargoes and that all the services are provided by one entity.

Part – I Container Traffic Analysis

2. Kerala economy overview

This section presents the overview of the economy of Kerala including industrial development, infrastructure, and social development.

Key findings

• Kerala has been on a steady growth path registering a CAGR of 8%, consequently increasing its share in the national economy to over 4.4% in 2007-08 from 4.0 % in 1999-00.

• The secondary sector registered the highest growth rate of 17.9% as compared to the tertiary (9.6%) and primary sector (2.5%) in 2007-08 over preceding financial year.

• The contribution of tertiary sector has gone up from 29% in 1960 to over 58% in 2007-08. Therefore, from an economy driven by primary sector in 1960, it has become a service oriented economy.

• Major industries: Coir, Cashew nut processing, Seafood, Tourism, IT and ITES.

• Major export commodity: Sea Foods, Coir Products, Coffee, Tea, Cashew Kernels, and Spices.

• Major import commodity: Fertilizers & Raw materials, Iron, Steel & Machinery, Raw Cashew nut, Food grains, and Newsprint.

2.1 Overview

Kerala has been on a steady growth path registering a CAGR of 8%, consequently increasing its share in the national economy to over 4.4% in 2007-08 from 4.0 % in 1999- 00.

Figure 2.1 Economic profile of Kerala a. Growth of NSDP at factor cost (INR Million) b. Structure of the economy

1,200,000 12%

1,000,000 10%

800,000 8% 15%

600,000 6%

400,000 4%

200,000 2%

0 0% 58% 27%

Pr imar y

1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Secondary Tertiary State domestic product (INR Million) Annual grow th rate (Right axis) Share in NDP of India (Right axis)

c. Share of various industries

26%

2% 3% 69%

Mining & quarrying Manufacturing Construction Electricity,gas and Water supply

Source: MOSPI

2.2 Sectoral distribution of GSDP

During 2007-08, the contribution from primary, secondary and tertiary sectors to the Gross State Domestic Product (GSDP) at constant (1999-2000) prices, constituted 15%, 26.8% and 58.2% respectively. At current prices the primary, secondary and tertiary sectors contributed 16.8%, 26.4% and 56.8% respectively to the GSDP during the same financial year. While analysing the sectoral distribution of sate income it is seen that the contribution from primary sector is decreasing and secondary sector slightly increasing. But tertiary sector remained almost same level of about 58 percent in the last three years. The details of sectoral distribution of GSDP with percentage during the last three years are given in the following Table 2.1.

Table 2.1 Sectoral distribution of GSDP INR Million

At Current Prices At Constant Prices Sector 2005-06 2006-07 2007-08 2005-06 2006-07 2007-08 GSDP % GSDP % GSDP % GSDP % GSDP % GSDP %

Agriculture & Allied 1,699 13.5 1,956 13.7 2,165 13.3 1,458 14.1 1,498 13.1 1,518 12.0 Activities Forestry & Logging 150 1.2 168 1.2 186 1.1 127 1.2 139 1.2 146 1.2 Fishing 248 2.0 264 1.9 273 1.7 147 1.4 155 1.4 157 1.2 Mining and 70 0.6 82 0.6 114 0.7 48 0.5 54 0.5 71 0.6 Quarrying

Sub Total: Primary 2,168 17.4 2,471 17.3 2,739 16.8 1,781 17.3 1,846 16.1 1,892 15.0

Manufacturing 1,010 8.1 1,198 8.4 1,372 8.5 806 7.8 914 8.0 1,014 8.0 Electricity gas & 242 1.9 260 1.8 282 1.7 194 1.9 199 1.7 209 1.6 Water supply Construction 1,735 13.9 2,120 14.9 2,628 16.2 1,493 14.5 1,770 15.5 2,162 17.1

Sub Total: 2,987 24.0 3,577 25.1 4,283 26.4 2,493 24.2 2,883 25.2 3,385 26.8 Secondary

Transport, Storage 1,269 10.2 1,412 9.9 1,595 9.8 1,237 12.0 1,397 12.2 1,620 12.8 and Communication Trade, Hotel & 2,605 20.9 2,935 20.6 3,326 20.5 2,085 20.2 2,298 20.1 2,501 19.8 Restaurant Banking and 601 4.8 712 5.0 801 4.9 532 5.2 638 5.6 668 5.3 insurance Real estate 1,245 10.0 1,413 9.9 1,622 10.0 909 8.8 1,023 8.9 1,159 9.2 ownership, Business, Legal Public 612 4.9 715 5.0 783 4.8 491 4.8 562 4.9 592 4.7 Administration Other Services 952 7.7 1,012 7.1 1,094 6.7 781 7.6 804 7.0 828 6.5

Sub Total: Tertiary 7,284 58.7 8,199 57.6 9,220 56.8 6,035 58.5 6,723 58.7 7,369 58.2

Total GSDP 12,439 100.0 14,247 100.0 16,241 100.0 10,308 100.0 11,452 100.0 12,645 100.0

Source: Department of Economics and Statistics

In a nutshell, as an economy develops the share of tertiary sector increases with the fall in the share of primary sector. Kerala has witnessed this pattern of growth. The contribution of tertiary sector has gone up from 29% in 1960 to over 58% in 2007-08.

The disaggregated analysis of growth at constant prices reflects that the secondary sector (17.9%) in Kerala grew at the highest rate as compared to the tertiary (9.6%) and primary sector (2.5%). In terms of current prices as well, secondary sector recorded the highest rate of growth 19.7 per cent in 2007-08.

Table 2.2 Sector wise annual growth rate

At Current Prices At Constant Prices (1999-00)

2006-07 2007-08 2006-07 2007-08 2005-06 2005-06 (P) (Q) (P) (Q)

Agriculture & Allied Activities 12.5 15.2 10.7 3.5 2.7 1.4 Forestry & Logging 12.5 12.1 10.5 1.6 9.7 4.7 Fishing 36.8 6.5 3.2 -4.3 5.5 1.0 Mining & Quarrying 50.7 16.6 39.8 46.0 12.4 31.5 Primary Sector 15.8 14.0 10.8 3.5 3.7 2.5 Manufacturing 10.6 18.6 14.6 6.9 13.5 10.9 Electricity, Gas & water supply 11.3 7.4 8.4 7.7 2.7 5.0 Construction 22.7 22.2 24.0 22.4 18.5 22.0 Secondary Sector 17.4 19.8 19.7 15.8 15.7 17.4 Transport, Storage and 7.5 11.3 13.0 9.7 13.0 16.0 Communication Trade, Hotels & Restaurant 16.2 12.7 13.3 12.0 10.2 8.8 Banking, Insurance and Real Estate -0.4 18.4 12.5 5.9 19.9 4.7 Real estate ownership, Business, 16.5 13.5 14.8 11.1 12.6 13.3 Legal Public administration and other 3.5 16.8 9.6 1.1 14.3 5.5 services Other services 3.3 6.3 8.1 1.2 3.0 3.0 Tertiary sector 10.2 12.6 12.5 8.4 11.4 9.6 GSDP 12.8 14.5 14.0 9.2 11.1 10.4

Source: Department of Economics and Statistics

2.3 Key industries

The small scale industries in Kerala contribute around 40% to industrial production and 35% to exports. Around 0.2 million working small scale industries (SSI) were registered in Kerala as of March 2008. The number of large and medium undertakings as of March 2009 was 730, with around 80% in the private sector. Kerala’s traditional industries include handloom, cashew, coir and handicrafts.

Table 2.3 Key industrial clusters in Kerala

District Industries

Kannur Handlooms, Power, Bedi Allepey Coir products Idukki Agriculture and Forest Based Thiruvananthapuram Handlooms Thrissur Power Looms, Handlooms, textile, Timber, tile Palakkad Power Looms, sericulture Kollam Cashew Processing units, Minerals and Mining Kozhikode Rubber Wayanad Minerals and Mining Kottayam Rubber, food products, engineering Ernakulam Information Technology

Coir Industry Coir industry is a traditional, labour intensive, export oriented and agro-based cottage industry. Coir fibre is extracted from the outer cover of the coconut - coconut husk. Kerala is the largest producer of white fibre and other States like Tamil Nadu, Karnataka and Andhra Pradesh are producing brown fibre. Coir Industry is one of the major traditional industries in Kerala, giving employment to 0.383 million workers and 76% of them are women. Coconut is a major cash crop in Kerala and it has a great influence on the economy. 30% of land is under coconut cultivation.

The exporters of Coir products can be categorized into two categories - manufacturer exporters and merchant exporters. The merchant exporters are exporting coir products sourced from other units. The Coir industry depends heavily on the export market. USA is the biggest importer of Coir Products from India, followed by UK, Germany, Netherlands, Spain, Italy, Canada, France, Australia and Belgium. The export market of Coir and Coir Products from India during 2007-08 was 187,566.74 tonnes valued at INR 5,928.8 million as against 168,754.75 tonnes valued at INR 6,051.65 million in 2006-07.

Cashew Industry The total export of cashew kernels from India during 2007-08 was 11,4340 MT, valued at INR 2289 million in comparison with the export of 118,540 MT cashew kernels valued at INR 24550 million during 2006-07. Details of export of cashew kernels from Kerala and India from 2000-01 to 2007-08 are given in Table 2.6 and 2.7. The Kerala State Cashew Development Corporation (KSCDC) and Cashew Workers Apex Cooperative Society (CAPEX) are the two State agencies engaged in the cashew processing sector in Kerala. KSCDC owns 30 cashew factories spread out in the districts of Thiruvananthapuram, Kollam, Alappuzha, Thrissur and Kannur. In KSCDC there are about 15,000 workers and majority of them are women. KSCDC exports cashew kernels and cashew shell liquid. Raw nuts are mainly imported to supplement the local availability (See Table 2.8). CAPEX is the apex society of cashew workers primary societies with headquarters at Kollam. The Society owns 10 factories. There are about 4,000 workers and 225 staff under this apex society. CAPEX incurred a loss of INR 41.78 million in 2007-08 while it was INR 61.56 million in 2006-07.

Tourism industry Tourism industry plays a very vital role in Kerala’s economy and contributes almost 8% to the state GDP. In 2008, the foreign exchange earnings from tourism grew by 16.1% to USD 750 million.

Kerala, promoted as “God’s Own Country” is blessed by nature with diverse geographical features like beaches, hill stations, backwaters, national parks & wild life sanctuaries. Its unique culture and traditions, coupled with its varied demography has made Kerala one of the most popular tourist destinations in the world.

In addition to traditional sectors, Kerala has also emerged as centre for IT industry. The state has Technopark at Tiruvananthapuram and Infopark at Kochi. A cyber park at Kozhikode is under construction. In addition to this the state has private IT parks also like smart City –Kochi, L&T Park and Muthoot Park.

Kerala Industrial Infrastructure Development Corporation (KINFRA) KINFRA, the premier Industrial Infrastructure development agency of the State has been following a conscious effort towards developing industrial infrastructure in the State, specifically aimed at economic development by setting up industrial parks/Townships/Zones etc which provide all facilities required for entrepreneur for starting industries in the thrust sectors identified in the Industrial Policy.

New Projects of KINFRA

• Electronics Park in 450 acres of land in Mangaswaram, Kasargode district

• Industrial Park in 100 acres of land in Ottappalam, Palakkad District

• Expansion of Textile Centre at Nadukani, Kannur,

• Food Processing Park in 50 acres of land at Konni in Pathanamthitta District

• Footwear Industrial Park in 50 acres of land at Kozhikode.

Kinfra has Industrial Park in various parts of Kerala with 313 operating units and an investment of Rs.668 crores and provided employment to 19304 persons during the period under review.

2.4 Infrastructure

Road Network in Kerala Kerala had a total road length of 173,592 km during 2007-08 where as the total road length during 2006-07 is 162,149 km showing an increase of 7.06 %. Road density in the state during 2007-08 was 446 km/100sq.km and is much more than the road density over the previous year (417km/100sq.km).

Railways in Kerala There are 2000 Railway stations in Kerala. This extensive network connects places both within and outside the state of Kerala. Local train services and long distance express trains ply all over the state making it a convenient and quick method of transport. Long distance trains connect the state to major Indian cities like Kolkata, Coimbatore, Chennai, Hyderabad, Mumbai, and New- Delhi. They also connect Jammu and Kashmir and the North-East.

The entire length of the rail route is around 1,148 km and covers 13 Railway routes within its fold. The Railways in Kerala connect it to other states, the Kollam-Madurai and the Shornur-Erode Railway lines are important rail routes. The Railway divisions at Thiruvananthapuram, Palakkad and Madurai, jointly carryout transport operations in Kerala.

Kerala Port Sector Along its coastline of 585 km Kerala has one major port at Cochin and 17 non major ports. The non major ports are under the administration of Government of Kerala. Government of Kerala intends to provide a boost to coastal shipping with the development of ports, which will ease the burden on the heavily congested highways in the State apart from savings in transportation cost. Government, besides acting as a catalyst for establishment of ship repair and ship building industries, would also encourage other port based industries contributing to the development of ports. Kerala government is in the process of modernizing ports at Azhikkal, Beypore and Alappuzha.

2.5 Export and Import

Kerala exports cashew, coir and coir products, tea, marine products and spice oils, pepper and oleoresins. With the surge in growth of IT and ITES firms, software export has also gaining momentum in recent years.

Kerala has a share of over 60% in cashew exports from India (Table 2.6 and 2.7). Its share has been declining mainly on account of fall in domestic production of raw cashew. As a consequence its reliance on imported raw cashew from African countries has increased. It is evident from the Table 2.8. The import of raw cashew has increased at a CAGR of 8% in the last five years. In 2007-08 total import of raw cashew was over 372,497 tonnes.

As pointed our in the previous section Cochin is the major gateway for international trade from Kerala. Table 2.4 and 2.5 presents commodity-wise traffic handled at Cochin port.

Table 2.4 Commodity-wise Export through Kochi Port 2002- 03 to 2008-09 Tonnes

Sl. 5 yr 6-yr Commodity 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 No. CAGR CAGR

1 2 3 4 5 6 7 8 9 10 11 1 Tea 104 87 87 32 89 71 69 -7% -7% 2 Cashew Kernels 85 89 92 81 68 77 57 -2% -6% 3 Sea Foods 84 102 104 100 109 109 90 5% 1% 4 Coir Products 99 114 88 73 108 124 79 5% -4% 5 Spices 46 25 25 65 37 49 33 1% -6% 6 Coffee 115 119 115 69 92 94 64 -4% -9% 7 Miscellaneous 1,592 2,020 2,643 2,499 2,971 3 2 -72% -66%

Total 2,125 2,556 3,153 2,920 3,474 3,490 2,710 10% 4%

Source: Annual Administration Report, Cochin Port Trust

Table 2.5 Commodity-wise Import through Kochi Port 2002- 03 to 2008-09

Sl. 5 yr 6-yr Commodity 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 No. CAGR CAGR

1 2 3 4 5 6 7 8 9 10 11

1 Fertilizers & Raw materials 631 504 566 727 640 447 569 -7% -2% 2 Foodgrains - 5 6 2 182 10 - - - 3 Iron, Steel & Machinery 231 61 76 308 340 291 192 5% -3% 4 Newsprint 41 67 47 407 123 150 145 30% 24% 5 Cashewnut 260 309 280 316 320 325 315 5% 3% 6 Miscellaneous 9,737 10,075 9,980 9,210 10,206 11,041 11,564 3% 3%

Total 10,899 11,022 10,957 10,969 11,810 12,264 12,784 2% 3%

Source: Annual Administration Report, Cochin Port Trust

Table 2.6 Export of Cashew Kernels: Kerala and India (2003-04 to 2007-08) (Quantity in MT and Value in Rs. Millions)

Kerala* India Share of Kerala

Quantity Value Quantity Value Quantity Value 2003-04 68,119 12,050 100,828 18,040 68% 67% 2004-05 79,950 17,160 126,667 27,090 63% 63% 2005-06 74,376 16,230 114,143 25,150 65% 65% 2006-07 72,860 15,050 118,540 24,550 61% 61% 2007-08 69,298 13,950 114,340 22,890 61% 61% 4-year CAGR 0.4% 3.7% 3.2% 6.1% -2.7% -2.3%

* Export through Cochin Port. Source: The Cashew Export Promotion Council of India

Table 2.7 Export of Cashew nut shell Liquid – Kerala & India (2003-04 to 2007-08) (Quantity in MT and value in Rs. Millions)

Kerala* India**

Quantity Value Quantity Value 2003-04 6,784 670 6,926 700 2004-05 6,674 660 7,474 790 2005-06 5,834 600 6,405 710 2006-07 3,736 570 6,139 1,030 2007-08 5,410 740 7,813 1,200 4-year CAGR -6% 3% 3% 14%

* Export through Cochin Port ** Various custom houses Source: The Cashew Export Promotion Council of India

Table 2.8 Import of Raw Cashew nuts: Kerala (2002-03 to 2007-08) (Quantity in MT Value in Rs. Millions)

Quantity Value

2002-03 249,970 7,720 2003-04 294,552 9,090 2004-05 283,149 10,550 2005-06 306,765 11,350 2006-07 322,443 9,720 2007-08 372,497 10,710 5-year CAGR 8% 7%

Source: The Cashew Export Promotion Council of India

India accounts for more than two-thirds of the world production of coir and coir products. Kerala is the home of the Indian coir industry, particularly white fibre, accounting for 61 per cent of coconut production and over 85 per cent of coir products. Not more than 50 per cent of the coconut husk is used in the coir industry.

Table 2.9 Export of Coir and Coir Products from India during 2005-06 & 2008-09

2005-06 2006-07 2007-08 2008-09 CAGR Items Qty Value Qty Value Qty Value Qty Value Qty Value (Tonnes) (Rs. m) (Tonnes) (Rs. m) (Tonnes) (Rs. m) (Tonnes) (Rs. m)

Curled Coir - - 1,804 20.8 1,280 15.2 1,438 22.4 - - Coir Fibre 1,553 19.6 9,357 107.6 11,102 122.4 19,444 239.1 132% 130% Coir Rugs & 1,243 73.0 488 32.9 178 13.4 64 6.8 -63% -55% Carpets Coir Pith 53,444 387.3 67,153 538.2 83,613 638.5 96,996 846.2 22% 30% Coir Rope 163 7.0 154 6.9 372 14.0 370 16.5 32% 33% Coir ( other 123 7.5 119 6.6 119 5.8 57 1.9 -23% -37% source) Coir Yarn 9,583 301.9 9,691 316.2 8,407 266.7 5,335 192.6 -18% -14% Coir Geo- 2,512 114.1 3,045 133.5 3,365 144.5 3,252 159.1 9% 12% textiles Handloom 42,516 2,669.9 42,986 2,737.1 40,917 2,430.0 35,553 2353.8 -6% -4% Mat Powerloom 1,610 102.7 246 16.9 75 5.3 54 4.0 -68% -66% Mat Tufted Mat 19,671 1,160.6 29,017 1,821.3 33,950 1,991.1 33,689 2,259.8 20% 25% Handloom 2,916 191.3 3,642 2,35.5 3,014 187.9 2,368 171.7 -7% -4% Matting Powerloom 156 11.9 105 8.5 116 8.8 88 8.5 -18% -11% Matting Rubberised 537 37.7 947 69.8 1,120 85.2 1,223 117.5 32% 46% Coir

Total 136,027 5,084.5 168,755 6,051.7 187,629 5,928.8 199,931 6,399.7 14% 8%

Note: Kerala contributes around 85% of coir products. Source: Directorate of Coir Development, Tiruvananthapuram.

During 2007-08 the export of marine products from Kerala were to the tune of 100,318 tonnes valued INR 14,309.4 million which accounted for a share of 18.52% in quantity and 18.78% in value of marine products export from India. The export details of marine products from Kerala compared to all India in quantity and value for the last five years are given in Table 2.10. A decline was observed in quantity and value of marine products exported from Kerala during 2007-08 compared to previous year. Frozen shrimp was the main item exported followed by frozen cuttle fish, squid, frozen fish etc.

Table 2.10 Item wise Exports of Marine Products from Kerala during 2005-06 and 2007-08

2005-2006 2006-07 2007-08 CAGR US$ Qty US$ Qty US$ Qty Quantity Value (Million) (Tons) (Million) (Tons) (Million)

Frozen Shrimp 30,012 136 29,413 143 26,566 136 -6% 0% Frozen fish 22,464 25 28,036 34 30,946 49 17% 39% Frozen Cuttle Fish 193,116 57 21,294 80 20,484 94 -67% 28% Frozen Squid 16,068 43 16,508 49 11,486 40 -15% -4% Dried items 148 1 116 1 73 0.8 -30% -19% Live Items 235 4 177 3 185 4 -11% 6% Chilled items 1,291 5 2,112 8 1,682 8 14% 26% Others 7,777 14 10,960 23 8,897 25 7% 32%

Total 271,111 286 108,616 340 100,319 356 -39% 12%

Source: MPEDA

2.6 Socio-economic scenario

The per capita income of Kerala was USD 1,040 in 2007-08, compared to all India average of USD 850. Distribution of households by socio-economic classification (SEC) shows that Kerala has a higher percentage of households with education, as compared to the all India average. The literacy rate in Kerala is the highest among Indian states. About 91% of population in Kerala is literate, compared to the all India average of around 65%. In terms of ownership of household goods like four wheelers, consumer goods and other amenities such as electricity, Kerala is better placed, compared to the all India average. Kerala state has low death rate and declining birth rate, resulting in slowdown in the population growth rate.

Table 2.11 Birth & Death Rate and Life Expectancy in Kerala

Kerala All-India

Birth Rate* 14.7 23.1 Death Rate* 6.8 7.4 Infant mortality rate** 13 55 Life expectancy at Birth-Male (Yrs.) 71.3 62.3 Life expectancy at Birth-Female (Yrs.) 76.3 63.9

Note: *Per thousand persons, ** Per thousand live births Source: Economic Review of Kerala, 2008

2.7 Future development of Kerala’s economy-Key growth drivers

As per Industrial and commercial policy (2007), the government of Kerala is focussing on modernizing the traditional industries, providing good infrastructure, optimum use of natural resources and attracting private capital on mutually beneficial terms. The objective is to promote Manufacturing, Agro Processing, Health Services and Knowledge based industries and services.

For promoting industrial development and the overall regional growth the state government has adopted an integrated approach to develop required infrastructure. The major proposed plans include:

• Mega Industrial Parks: Kerala Industrial Infrastructure Development Corporation (KINFRA) to develop mega industrial parks in selected thrust sectors i.e. Textile, Food Processing.

• Industrial Townships: Industrial townships would be industrial areas providing required support and infrastructure.

• Special Economic Zone: Product specific SEZs, including service SEZs. The plans are to set up SEZs at Kozhikode, Kannur, Kasrgod and Malappuram.

• Industrial corridors : Following are the proposed industrial corridors in Kerala:

IT and ITES corridor from Kazhakuttom to Kovalam and From Kazhakuttam to Kollam along NH Bypass.

Biotechnology and Hitech electronics corridor along seaport-airport at Kochi.

Food Processing and Textile corridor from Kanjikode to Walayar along NH at Palakkad.

• Sector Specific Industrial Parks. KSIDC to facilitate setting up of electronics hub. In addition to this, industrial park in selected thrust sectors.

2.8 Investment Promotion

The Kerala state government wants to encourage investments on mutually beneficial terms to accelerate the growth of the Kerala’s economy. The government wants to attract both domestic and foreign investments. Kerala has received INR 62,470 million (around USD 1.4 billion) of Investment over the last 5 years. However, the amount of FDI inflow in the state is still very low, accounting for less than 0.3% of total FDI inflow into India in rupee terms. Service sector has registered a strong inflow of investments in Kerala, accounting for more than 50% of the total investments made, followed by manufacturing and construction sector at around 22% and 12% respectively.

Table 2.12 Investment completed between March 2004-June 2009

S.No. State Investment Investment Index

1 Gujarat 124,112 1.00 2 Maharashtra 105,465 0.85 3 Andhra Pradesh 99,915 0.81 4 Tamil Nadu 56,666 0.46 5 Karnataka 52,250 0.42 6 Delhi 49,644 0.40 7 Orissa 49,325 0.40 8 UP 42,881 0.35 9 West Bengal 37,452 0.30 10 MP 30,440 0.25 11 Haryana 27,951 0.23 12 Chhattisgarh 27,131 0.22 13 Uttaranchal 25,190 0.20 14 Rajashtan 22,922 0.18 15 Himachal Pradesh 16,102 0.13 16 Jharkhand 15,567 0.13 17 Punjab 14,630 0.12 18 J&K 10,470 0.08 19 Bihar 9,686 0.08 20 Kerala 6,247 0.05 21 Sikkim 2,901 0.02 22 Assam 2,340 0.02 23 Goa 2,046 0.02 24 Puducherry 937 0.01 25 Meghalaya 870 0.01 26 Chandigarh 516 0.00 27 Tripura 258 0.00 28 Manipur 25 0.00 29 Arunachal Pradesh 15 0.00 30 Mizoram 15 0.00 31 Andman & Nicobar 7 0.00 32 Nagaland - 0.00

Figure 2.2 Industry attractiveness matrix for Kerala state

High Coir Tourism

Food Processing IT & Electronics Sericulture Handloom

Medium

Policy Thrust Thrust Policy Marine Products

Rubber Spices

Low Medium High

Factor Advantage Source: IBEF

3. Historic container traffic analysis

Objective

To assess:

Container traffic growth rates across India

Port wise traffic share & growth

Equipment size wise container traffic in India

Major container trade lanes from India

Key Findings

• Container traffic has grown at an average growth rate of 14% over the past ten years. The top three ports in terms of market share are JNPT, Chennai & Mundra having market shares of 52%, 15% & 10% respectively, thus controlling over two third of the total container traffic handled in India. The average share of the container traffic of Maharashtra & Gujarat ports has risen from 64% in FY99 to 68% in FY09.

• Imports have grown at a faster pace when compared to exports volumes in India. Therefore, the share of imports (loaded) in overall trade has increased from 44% in FY 2002 to 51% in FY 2009. In terms of number of boxes; Indian ports have continuously witnessed a higher throughput of teu as compared to FFEs. Port throughput of overall number of teu (loaded) in both exports and imports has been approximately twice the number of FFEs handled in India. With the rise of imports in India in both teu and FFE, the share of empty containers has reduced over past few years.

• Far East Asia, Europe, Middle East & North American trade lanes have 31%, 27%, 17% and 13% market share of the overall container traffic from India. Southern Indian ports has almost similarly market share of container trade lanes.

Conclusion

Vizhinjam falls in the lower west coast region which has lost market share in the overall gateway container traffic handled in India. Chennai and Tuticorin are the only ports other than North Western coast ports which have been able to maintain their market share in the overall traffic of the country. Import traffic in India is fuelling container traffic growth in the country and is primarily being received from China and other Far East Asian countries.

India has a mix of older, traditional container handling ports, such as Mumbai on the west coast, Kolkata on the upper east coast and Chennai in the lower east coast and newer, better equipped facilities at location like Mumbai (JNPCT, NSICT), Mundra and Pipavav on the upper west coast. This transition is result of the Indian government initiative to involve the private sector through BOT schemes and privatisation for infrastructure development. The most noteworthy example of this initiative has been the development at Jawaharlal Nehru Port (JNP) of the Nhava Sheva International Container Terminal (NSICT). Now the government has similar plans for the development of port sector and it will definitely benefit the container ports of India.

Moreover, many new ports are also now emerging to take advantage of the growth of containerisation throughout India as it continues to penetrate the general cargo and break bulk markets. There are an increasingly higher number of ports either currently handling container traffic or looking to do so in the next few years. Table 3.1 provides geographical location within India of ports that are currently handling container traffic, together with proposed new ports that are expected to be developed and will be operational during the course of the current decade.

Table 3.2 gives an overview about container handling facilities and the various hinterland served by these ports. The graphic representation is not binding and signifies the gateway ports utilised for moving major share of container traffic generated from these states.

Table 3.1 Existing & proposed container handling ports in India

Coast / Region Port Coast / Region Port

Upper West Coast Kandla Upper East Coast Kolkata Mundra Haldia Pipavav Paradip Dighi* Kulpi* Positra* Dhamra* Hazira*

Greater Mumbai Mumbai Central East Coast Visakhapatnam JNP Gangavaram Rewas* Machilipatnam* Dighi* Kakinada

Lower West Coast Mormugao Lower East Coast Tuticorin New Mangalore Chennai Cochin Ennore* Vizhinjam* Krishnapatnam

Note: * Proposed Source: Drewry Research

Table 3.2 Port clusters in India & hinterland served

Port Clusters Upper West Greater Lower West Lower East Central East Upper East States Coast Mumbai Coast Coast Coast Coast

Haryana 9 9

Punjab 9 9

HP 9 9

NCR 9 9

Uttar Pradesh 9 9

Uttaranchal 9 9

J&K 9 9

Rajasthan 9 9

Madhya Pradesh 9 9

Gujarat 9 9

Maharashtra 9

Karnataka 9 9 9

Tamil Nadu 9

Andhra Pradesh 9 9 9

Kerala 9

West Bengal 9

Orissa 9 9

Chhattisgarh 9 9 9

Jharkhand 9

N E States 9

Bihar 9

Nepal 9

Uttarakhand 9

Goa 9

Source: Drewry Research

However, the port clusters could / do attract limited traffic from primary hinterland of other port clusters. For example, Nhava Sheva port attracts some container traffic from the lower Andhra Pradesh which falls within the primary hinterland of the Chennai port.

As per table 3.1, Upper West Coast ports which include ports of Pipavav, Kandla and Mundra share a common hinterland with the Greater Mumbai ports. However, it’s the Greater Mumbai ports which control a significant chunk of the volumes generated from this region. Almost 68% of the total Indian traffic is handled at these two port clusters however it’s the Greater Mumbai ports which handle 53% of that traffic. In terms of total traffic generated by the North Western hinterland of India, almost 79% of that traffic is handled by

Greater Mumbai ports, particularly Nhava Sheva port. The major gateway ports are Nhava Sheva, Mundra, Pipavav, Kandla and Mumbai. Nhava Sheva is the largest container handling facility in the region followed by Mundra. The high volumes handled by Nhava Sheva are primarily due to the existing soft infrastructure (CFSs, Warehouses, CHAs, Shipping Line agencies etc.) and copious amounts of captive cargo.

Southern India shares it container traffic with multiple port clusters. This is primarily due to the reason that with the exception of Chennai. Central East Coast which includes only the Visakhapatnam port currently, serves limited volume generated from its primary hinterland of Orissa, Upper Andhra Pradesh and to some extent from NCR and Chhattisgarh.

3.1 Container Traffic Growth in India

In mature container markets, the container traffic primarily grows because of generic increase in import and export volumes of containerisable cargo. However, in a developing country such as India, the growth of container traffic is also dependent on the increasing level of container penetration (i.e. the share of general cargo that is moving within containers).

Container traffic in India has achieved a CAGR of around 14.6% over last 10 years, while annual average growth rate over the last five years hovered around 13.7%. In 2002-03 major ports in India accounted for almost 99% of the container traffic. However, over the last five years the container traffic at minor ports in India has increased considerably and it accounted for almost 12.7% of the total container traffic handled in 2008-09. This increase in minor ports share can primarily be attributed to growth registered by Mundra port.

Figure 3.1 India’s historical container traffic growth rate (FY 99 – FY 09) (‘000 Teus)

8.0 30% 25.66% 7.0 25% 21.45% 6.0 18.63% 17.31% 20% 5.0 13.39% 16.54% 12.71% 15% 4.0 11.68% 11.66% 10% 3.0

2.09% 5% 2.0 Container Throughput (Mn) Throughput Container 1.0 0% -0.89% 0.0 -5% FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

India Traffic (Teu) Grow th (Right axis)

Note: Container traffic includes transhipment traffic Source: Drewry Research

Last 8-9 years have witnessed increasing private participation in container terminal operations with P&O Ports (now DP World) leading the way at NSICT, Mumbai. The participation of private operators in container trade resulted in greater efficiency and competition in the sector, thus acting as catalyst in the growth of container volumes at Indian ports.

3.2 Regional container traffic trend in India

Table 3.3 and 3.4 provide an overview of growth of container trade in India over the course of past 10 years. This helps to highlight which ports and regions are handling the highest proportion of container traffic as part of the process of identifying national container port trends.

Using Indian Ports Association statistics, based on Indian financial year of April to March, Table 3.3 identifies that since 1998-99 container traffic has risen from around 1.9m teu to almost 7.5 m teu by 2008-09. Looking at this impressive growth on a year-on-year basis double-digit figures has been common place over the course of this period, with particularly high growth enjoyed in 2006-07 (25.6%). However, global economic recession that set in late 2007 had an adverse impact on global container traffic including India. This was evident in the fall of container traffic in India by almost 1% in FY 2009. The ongoing financial year 2010 is worse with country reporting a decreasing in container traffic by almost 9% from Jan-Sep 2009 over the same period last year.

However, in terms of historical data and current performance amongst its peers, it’s the performance of Mundra which is worth mentioning. Mundra has recorded the highest growth in the past two years of its operation and has in fact exceeded the volumes handled by the other competing ports which have been in operation for a longer duration of time.

Figure 3.2 Region-wise share of container traffic

70%

60%

50%

40%

30%

20%

10%

0% FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

Upper Wes t Coas t Gr eater Mumbai Low er West Coast Low er East Coast Central East Coast Upper Eas t Coas t

Source: Drewry Research

Although growth rates of Pipavav in the past two years have been impressive, in absolute terms, volumes still seem to be marginal, as compared to Mundra, which has handled more than four times the volumes handled at Pipavav in 2008-09.

The growth in the container traffic has been one of the strongest in upper west coast region, where the average annual increase was 32.9% between 1998-99 and 2008-09. Ordinarily this growth would be regarded as good but it is primarily the Mundra port which has contributed high volume to the cluster.

Share of JNP has risen from 34.67% in FY99 to 52.4% in FY09. The percent share of total traffic is lower compared to 57.2% registered during FY04; however it continues to maintain its market share over the past three years. This downward slide in JNP’s market share can largely be attributed to current capacity constraint which JNP is facing, coupled with shift of cargo to new facilities at Mundra and Pipavav.

Inter port competition on the west coast of India is expected to intensify further, which could lead to slow but steady decline in JNP’s market share over next 10 years. Although the immediate effect of this situation has been Mumbai’s (MbPT) share of the Indian box traffic, falling from 26.4% in FY98 to almost 1.2% in FY08. The share of Mumbai port declined due to increasing competition from JNPT, lack of capacity and infrastructure at Mumbai port and the growth of mainline callers generally reducing the requirement for small feeders with shallow draft.

In the overall terms the total share of the upper west coast and the Greater Mumbai region has increased from 64.3% in 1998-99 to 68.1% by 2007-08. The share of upper west coast has increased from mere 3.3% in 1998-99 (only Kandla) to over 14.5% in 2008-09. The greater Mumbai region during the same period has lost its market with its share in 2008-09 declining to 53.6% after reaching a peak of 63.4% in 2002-03. Among the other four regions, there are individual ports which are doing well in percentage terms because of small base traffic but in absolute terms JNP is the clear leader.

Main ports in the other three regions are Cochin in the lower west coast doing 0.26 Mn teu in 2008-09, registering a CAGR of 7.3% between FY99 and FY09. Tuticorin and Chennai in the lower east coast have managed an annual average growth of around 16.0% and 15.0% respectively over the same period. At central and upper east coast, Visakhapatnam and Kolkata ports have registered an impressive growth of 20.2% and 10.4% respectively, but on a very small base.

3.3 Growth of container volumes – key growth factors

Growth in the Indian container industry can largely be attributed to robust economic growth and increasing penetration of containers into the general cargo market. It is been argued that new privatised facilities might have improved the growth further. Although this is a valid argument, but there are a number of factors which works simultaneously for a higher sum total growth and just better facility would not guarantee higher traffic volume. More important is perfect mapping of container demand with the supply of better quality and efficient support infrastructure facilities at the right location. For example, Tuticorin port has not been able to realise its full potential despite the presence of a global port operator like PSA due to lack of hinterland infrastructure and weak immediate hinterland. On the other hand JNP has been able to attract traffic away from the traditional gateway port of Mumbai (MbPT) by providing and developing better infrastructure and higher efficiency. JNP has acted as a catalyst in boosting container throughput on the west coast of India and has maintained a growth rate better than the national average.

Figure 3.3 Key growth factors

In the nineties ever since deregulation and liberalization, global trade growth in India has accelerated. As a result there has been a high rise in the merchandise trade. Based on the current rate of growth of merchandise and services trade, it is expected that India’s share in world trade covering merchandise plus services sector may cross 2% in 2009. players like Wal-Mart, Tesco, Auto-makers, Textile manufactures etc. have outsourced their manufacturing and sourcing to various countries including India. This has resulted in increased volumes of containers traffic at Indian ports. Some of the key growth factors for container trade in India can be summarized as follows:

• Growth in trade of Readymade garments, textiles, handicrafts, leather products, auto components, electrical and electronic goods, engineering goods, processed and packaged food and agri exports.

• Development of infrastructure i.e. new container terminals, Inland Container Depots (ICDs), rail and road, etc. has resulted in a higher penetration of container in the break bulk cargo segment thus helping in the growth of container trade.

• Increasing investment and growth witnessed in the industrial / manufacturing sector.

• Lower tariff barriers and changing trade policies of India

Thailand –India Free Trade Agreement.

Comprehensive Economic cooperation Agreement between India and Singapore.

Table 3.3 Traffic pattern of Indian container handling ports 1998 - 99 to 2008 - 09 (In teu)

Port 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR (10 Yr) CAGR (5 Yr)

Upper West Coast

Kandla 63,436 79,089 91,534 125,363 157,264 170,035 180,517 148,624 177,787 165,092 138,000 8.08% -4.1% Mundra 0 0 0 0 0 48,000 212,000 289,117 571,356 711,552 777,109 74.5% Pipavav 12,000 15,000 18,000 25,000 89,000 159,013 195,311 181,651 58.8%

Sub-total 63,436 79,089 91,534 137,363 172,264 236,035 417,517 526,741 908,156 1,071,955 1,096,760 32.98% 36.0%

Greater Mumbai

Mumbai 509,310 429,448 321,419 254,309 213,109 196,500 218,524 156,122 138,201 117,596 92,000 -15.73% -14.1% JNP 669,108 889,978 1,163,048 1,573,677 1,929,531 2,268,989 2,371,338 2,666,703 3,298,620 4,059,841 3,955,558 19.45% 11.8%

Sub-total 1,178,418 1,319,426 1,484,467 1,827,986 2,142,640 2,465,489 2,589,862 2,822,825 3,436,821 4,177,437 4,047,558 13.13% 10.4%

Lower West Coast

New Mangalore 0 98 1,891 3,929 6,043 6,927 8,943 9,646 17,290 21,460 28,555 32.7% Cochin 128,912 130,057 143,091 151,829 165,687 169,965 185,175 203,037 226,806 253,715 260,000 7.27% 8.9% Mormugao 4,047 6,635 6,220 9,151 9,129 10,365 10,180 9,241 13,242 14,027 14,000 13.21% 6.2%

Sub-total 132,959 136,790 151,202 164,909 180,859 187,257 204,298 221,924 257,338 289,202 302,555 8.57% 10.1%

Lower East Coast

Tuticorin 99,512 136,612 156,978 213,509 212,925 253,880 307,310 321,060 377,102 450,398 439,000 16.00% 11.6% Chennai (Madras) 282,662 321,854 352,178 344,532 425,413 539,528 616,512 734,815 885,422 1,128,108 1,143,000 14.99% 16.2%

Sub-total 382,174 458,466 509,156 558,041 638,338 793,408 923,822 1,055,875 1,262,524 1,578,506 1,582,000 15.26% 14.8%

Table 3.3 (cont’d)

Port 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR (10 Yr) CAGR (5 Yr)

Central East Coast

Visakhapatnam 14,307 20,427 20,232 21,517 21,507 20,441 45,149 46,747 55,769 71,120 90,000 20.19% 34.5%

Sub-total 14,307 20,427 20,232 21,517 21,507 20,441 45,149 46,747 55,769 71,120 90,000 20.19% 34.5%

Upper East Coast

Paradip 0 0 0 451 2,440 4,500 2,281 3,417 2,476 4,188 2,000 -15.0% Kolkata 132,000 147,305 138,123 98,007 105,885 122,419 159,242 203,481 239,431 297,287 302,000 8.63% 19.8% Haldia 28,000 28,325 50,882 93,010 117,138 136,657 128,113 110,319 109,638 128,118 127,000 16.32% -1.5%

Sub-total 160,000 175,630 189,005 191,468 225,463 263,576 289,636 317,217 351,545 429,593 431,000 10.42% 10.3%

India container 1,931,294 2,189,828 2,445,596 2,901,284 3,381,071 3,966,206 4,470,284 4,991,329 6,272,153 7,617,813 7,549,873 14.61% 13.7% total

Growth 2.09% 13.39% 11.68% 18.63% 16.54% 17.31% 12.71% 11.66% 25.66% 21.45% -0.89%

Source: Drewry Research

Table 3.4 Estimated share of container traffic per port, 1998 - 99 to 2008 - 09 (%age)

Port 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Upper West Coast

Kandla 3.3% 3.6% 3.7% 4.3% 4.7% 4.3% 4.0% 3.0% 2.8% 2.2% 1.8% Mundra 0.0% 0.0% 0.0% 0.0% 0.0% 1.2% 4.7% 5.8% 9.1% 9.3% 10.3% Pipavav 0.0% 0.0% 0.0% 0.4% 0.4% 0.5% 0.6% 1.8% 2.5% 2.6% 2.4%

Sub-total 3.3% 3.6% 3.7% 4.7% 5.1% 6.0% 9.3% 10.6% 14.5% 14.1% 14.5%

Greater Mumbai

Mumbai 26.4% 19.6% 13.1% 8.8% 6.3% 5.0% 4.9% 3.1% 2.2% 1.5% 1.2% JNP 34.6% 40.6% 47.6% 54.2% 57.1% 57.2% 53.0% 53.4% 52.6% 53.3% 52.4%

Sub-total 61.0% 60.3% 60.7% 63.0% 63.4% 62.2% 57.9% 56.6% 54.8% 54.8% 53.6%

Lower West Coast

New Mangalore 0.0% 0.0% 0.1% 0.1% 0.2% 0.2% 0.2% 0.2% 0.3% 0.3% 0.4% Cochin 6.7% 5.9% 5.9% 5.2% 4.9% 4.3% 4.1% 4.1% 3.6% 3.3% 3.4% Mormugao 0.2% 0.3% 0.3% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% 0.2% 0.2%

Sub-total 6.9% 6.2% 6.2% 5.7% 5.3% 4.7% 4.6% 4.4% 4.1% 3.8% 4.0%

Lower East Coast

Tuticorin 5.2% 6.2% 6.4% 7.4% 6.3% 6.4% 6.9% 6.4% 6.0% 5.9% 5.8% Chennai (Madras) 14.6% 14.7% 14.4% 11.9% 12.6% 13.6% 13.8% 14.7% 14.1% 14.8% 15.1%

Sub-total 19.8% 20.9% 20.8% 19.2% 18.9% 20.0% 20.7% 21.2% 20.1% 20.7% 21.0%

Table 3.4 (cont’d)

Port 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Central East Coast

Visakhapatnam 0.7% 0.9% 0.8% 0.7% 0.6% 0.5% 1.0% 0.9% 0.9% 0.9% 1.2%

Sub-total 0.7% 0.9% 0.8% 0.7% 0.6% 0.5% 1.0% 0.9% 0.9% 0.9% 1.2%

Upper East Coast

Paradip 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1% 0.1% 0.0% 0.1% 0.0% Kolkata 6.8% 6.7% 5.6% 3.4% 3.1% 3.1% 3.6% 4.1% 3.8% 3.9% 4.0% Haldia 1.4% 1.3% 2.1% 3.2% 3.5% 3.4% 2.9% 2.2% 1.7% 1.7% 1.7%

Sub-total 8.3% 8.0% 7.7% 6.6% 6.7% 6.6% 6.5% 6.4% 5.6% 5.6% 5.7%

0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% India container total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Source: Drewry Research

3.4 Historic container traffic – Equipment size analysis

Table 3.5 shows the equipment size wise traffic break-up for the Indian ports over the past eight years. The container traffic break-up has been shown in two sizes namely, teu (Twenty Foot Equivalent Units) and FFE (Forty Foot Equivalent Units). Although there are container sizes which are larger than an FFE, however due to limited number of those units in circulation in India they have been reported under FFE units itself.

Table 3.5 Equipment size wise container traffic at Indian major ports

Import Export Total EXIM Traffic Year Loaded Empty Total Loaded Empty Total Loaded Empty Total

FY 2002 492,980 222,599 715,579 680,896 24,406 705,302 1,173,876 247,005 1,420,881

FY 2003 561,172 282,840 844,012 823,461 20,098 843,559 1,384,633 302,938 1,687,571

FY 2004 670,504 276,628 947,132 892,715 30,187 922,902 1,563,219 306,815 1,870,034

FY 2005 773,989 222,909 996,898 914,810 47,304 962,114 1,688,799 270,213 1,959,012

FY 2006 939,810 172,154 1,111,964 993,983 85,895 1,079,878 1,933,793 258,049 2,191,842 teu FY 2007 1,081,325 275,179 1,356,504 1,220,790 84,972 1,305,762 2,302,115 360,151 2,662,266

FY 2008 1,388,371 277,454 1,665,825 1,440,100 129,391 1,569,491 2,828,471 406,845 3,235,316

FY 2009 1,360,586 274,995 1,635,581 1,377,156 153,745 1,530,901 2,737,742 428,740 3,166,482

CAGR 15.6% 3.1% 12.5% 10.6% 30.1% 11.7% 12.9% 8.2% 12.1%

FY 2002 248,713 78,746 327,459 280,008 39,047 319,055 528,721 117,793 646,514

FY 2003 263,852 106,894 370,746 341,394 30,839 372,233 605,246 137,733 742,979

FY 2004 330,840 129,213 460,053 415,326 33,012 448,338 746,166 162,225 908,391

FY 2005 413,039 124,022 537,061 461,079 55,736 516,815 874,118 179,758 1,053,876

FY 2006 485,716 131,304 617,020 528,181 65,484 593,665 1,013,897 196,788 1,210,685 FFE FY 2007 562,842 168,471 731,313 624,145 83,630 707,775 1,186,987 252,101 1,439,088

FY 2008 715,244 176,619 891,863 720,441 122,231 842,672 1,435,685 298,850 1,734,535

FY 2009 713,265 164,916 878,181 676,594 155,848 832,442 1,389,859 320,764 1,710,623

CAGR 16.2% 11.1% 15.1% 13.4% 21.9% 14.7% 14.8% 15.4% 14.9%

FY 2002 990,406 380,091 1,370,497 1,240,912 102,500 1,343,412 2,231,318 482,591 2,713,909

FY 2003 1,088,876 496,628 1,585,504 1,506,249 81,776 1,588,025 2,595,125 578,404 3,173,529

FY 2004 1,332,184 535,054 1,867,238 1,723,367 96,211 1,819,578 3,055,551 631,265 3,686,816

FY 2005 1,600,067 470,953 2,071,020 1,836,968 158,776 1,995,744 3,437,035 629,729 4,066,764

FY 2006 1,911,242 434,762 2,346,004 2,050,345 216,863 2,267,208 3,961,587 651,625 4,613,212

TOTAL IN IN teu TOTAL FY 2007 2,207,009 612,121 2,819,130 2,469,080 252,232 2,721,312 4,676,089 864,353 5,540,442

FY 2008 2,818,859 630,692 3,449,551 2,880,982 373,853 3,254,835 5,699,841 1,004,545 6,704,386

FY 2009 2,787,116 604,827 3,391,943 2,730,344 465,441 3,195,785 5,517,460 1,070,268 6,587,728

CAGR 15.9% 6.9% 13.8% 11.9% 24.1% 13.2% 13.8% 12.1% 13.5%

Source: Drewry Research

Above table shows the container traffic break-up by container size at the Major Ports in India over the period FY 2002 to FY 2009. It is evident from the table above that imports have grown at a faster pace when compared to exports. Therefore, the share of imports (loaded) in overall trade has increased from 44% in FY 2002 to 51% in FY 2009.In terms of number of boxes; Indian ports have continuously witnessed a higher throughput of teu as compared to FFEs. The port throughput of overall number of teu (loaded) in both exports and imports has been approximately twice the number of FFEs handled in India.

With the rise of imports in India in both teu and FFE, the share of empties has changed drastically over the years. In terms of teu, the overall share of empties imported into India has reduced from 31% in FY 2002 to 17% in FY 2009. The share has been calculated by dividing the empties (teu) imported by total imports (teu) in India. Similarly, in terms of FFE the share has decreased marginally from 24% in FY2002 to 19% in FY2009. On the other hand, share of export of empties in teu has increased from 3% to 10% while for FFEs it has increased from 12% to 19% over the same time period.

3.5 Line wise container traffic share in India

For the sake of simplicity and understanding the flow of cargo to various destinations across globe through India, various shipping routes have been consolidated under the following trade lanes in alphabetical order:-

AMR Americas (Central America, East & West Coast of South America)

ANZ Australia & New Zealand

EAF East Africa

EUR Europe ( Mediterranean, Red sea ports and North Europe)

FEA Far East Asia ( China, South East Asia and Far East countries)

IGF Intra Gulf ( Middle East and Indian Subcontinent)

NAM North America ( East & West coast of US and Canada)

SAF Southern Africa ( South Africa, Indian Ocean Islands and southern African countries)

WAF West Africa

The top four trades in India, viz. Far East Asia (31%), Europe (27%), Intra Gulf (17%) and North America (13%) constitute almost 90% of the total container traffic in India. The continuous growth of volumes on these trades in India have resulted in most of shipping lines employing direct mother vessels calls to the Indian ports primarily to Nhava Sheva, Mundra and Chennai. With the exception of Far East trade, head- haul volumes for most of the shipping lines are exports from India. However, for trades on the FEA route, imports into India constitute the head haul trade.

Figure 3.4 shows the estimated share of loaded volumes share (export and import) from India for 2008:

Figure 3.4 Trade lane wise port throughput share in India – loaded boxes (2008)

2% 4% 13% 3% 1% 2%

17%

27%

31%

SAF WAF AMR ANZ EA F EUR FEA IGF NA M

FEA – Far East Asia; EUR – Europe, IGF – Intra Gulf, NAM – North America, SAF- South Africa, WAF – West Africa, EAF – East Africa, ANZ – Australia & New Zealand, AMR – South America Source: Compiled by Drewry

Table 3.6 below shows the growth of loaded volumes (export & import) in India. The data excludes restow, empty repositioning and transhipment incidences.

Table 3.6 Trade lane wise growth rate in India

Average Growth Rate Export Share of Import Share of Trade Lane (2005-08 est) Total Trade Volume Total Trade Volume

AMR 21% 30% 70%

ANZ 15% 48% 52%

EAF 22% 24% 76%

EUR 13% 43% 57%

FEA 38% 64% 36%

IGF 18% 28% 72%

NAM 7% 43% 57%

SAF 14% 47% 53%

WAF 12% 51% 49%

Total Loaded 20% 47% 53%

FEA – Far East Asia; EUR – Europe, IGF – Intra Gulf, NAM – North America, SAF- South Africa, WAF – West Africa, EAF – East Africa, ANZ – Australia & New Zealand, AMR – South America

Source: Compiled by Drewry

Table 3.7 Trade lane wise market share in India for loaded containers

Trade Lane Export Import Total

FEA 21% 43% 32%

EUR 28% 25% 27%

IGF 23% 10% 17%

NAM 14% 12% 13%

WAF 3% 4% 4%

AMR 4% 2% 3%

SAF 2% 2% 2%

EAF 2% 1% 2%

ANZ 1% 2% 2%

Grand Total 100% 100% 100%

Far East Trade

This is the largest trade lane in India with 32% of the cargo moving in this corridor. It is also the fastest growing trade lane with import to export ratio at 0.56, the FEA trade is highly dominated by container import volumes into India as almost 64% of the volumes on this lane constitutes import cargo. The trade is also the highest constituent of container import volumes into India with almost 43% of India’s total container imports falling under its purview. Imports from Far East Asian countries into India have increased steadily over the past few years. According to the data received from Ministry of Commerce & Trade, in dollar terms, the share of imports of Far East Asian countries into India’s total import basket (minus petro & petro products) has increased from 23.1% to 42.2% in FY 2008. The average growth rate of value of imports over the past seven years has been 31.8%.

China, South Korea, Malaysia, Singapore, Thailand, Japan and Indonesia are the major countries involved on this trade lane. Primary export commodities are cotton yarn, textiles, food products, steel, stones and seafood, whereas major import commodities are machinery, chemicals, electrical & electronic goods, steel, automobile & auto components, fabrics, newsprint and paper. . With strong competition amongst shipping lines and high repositioning costs of containers, this is one of the low yielding trades from India.

Europe Trade

This is the second largest trade lane in India with 27% of the overall containerised cargo moving in this corridor. 43% of the overall cargo is westbound trade i.e. exports while import cargo is also significant with approximately 25% of the overall imports into India falling under its purview. The major export commodities are garments, apparel, steel, food products and chemicals while major import goods are paper and chemicals. Western Europe & Scandinavian countries along with Russia are the major countries involved in this trade lane. The trade lane had been growing at an average growth rate of 16-18%

over the past few years however due to current recession in the market it is estimated that this trade lane is most likely to grow at 6-7% in 2009.

North America Trade

As per industry estimates, this is one of the most profitable trades from India. 43 % of the total volumes on the NAM trade are head haul (export) with cargo primarily headed for US East Coast ports. Textile, Apparel and Chemicals are the major commodities exported in this sector while paper, paper related products, and machinery and chemicals are primary import commodities.

Intra Gulf

This is the fourth largest constituent of Indian container trade. 28% of the IGF trade comprises export volumes. The major export commodities are frozen food, processed agri products, tea & general cargo while major import goods are paper, food products, scrap and chemicals. The major countries on this trade are UAE, Saudi Arabia, countries in the Persian Gulf and Sri Lanka in the Indian subcontinent.

In line with its global leadership position, Maersk Line is the largest market share holder in India too. Its sister company Safmarine holds another 3%, which means that the A.P. Moller Group together commands a 19% market share. Hence, the group is in a strong position to change the fortunes of any container terminal in the Indian subcontinent with considerable volumes under its control.

Figure 3.5 Market share of major shipping lines in India- 2008

16%

34% 10%

8% 2% 3% 7% 3% 3% 3% 4% 7%

MA ERSK APL HL CMA MSC NY K CSAV-NOR SCI EMIRA TES SAFMARINE KLINE OTHERS

Source: Compiled by Drewry

As per table 3.8, container volumes on the China-India trade constitute the largest chunk of cargo on this trade followed by United States. While, Indo-China trade is primarily imports into India, NAM trade on the other hand is export oriented trade.

Table 3.8 India – World – Base volume estimate for 2008

S. No. India - World Base Volumes Per Cent Share 1 China 13.1% 2 United States 12.7%

3 United Arab Emirates 4.8% 4 Great Britain 4.2% 5 Germany 4.2%

6 Korea 3.4% 7 Belgium 3.0% 8 Netherlands 2.9%

9 Sri Lanka 2.9% 10 Italy 2.6% 11 Malaysia 2.6%

12 Singapore 2.5% 13 Thailand 2.5% 14 Saudi Arabia 2.2% 15 Japan 2.1% 16 Spain 1.9% 17 Indonesia 1.8% 18 Others 30.7%

Source: Compiled by Drewry

3.6 Major container shipping trade lanes in South Indian Ports

Table 3.9 below shows the portfolio of mainline services catering to Far East, Europe, Middle East and Africa from the Southern coast of India. The capacity deployed for Far- Eastern trade is the largest amongst the four trade lanes primarily due to high import volumes from China which provide critical mass for shipping lines to deploy mainline services. The Far-East trade alone comprises of 46% of the traffic from Chennai followed by Vizag wherein the Far-East trade accounts for 45% of total traffic. Overall the Far- Eastern Trade from South India comprises of 35% of the total traffic from all ports in South India. The Europe and Gulf trades account for 25% and 16% traffic volume of South India respectively.

As of January 2010, a total of 41 mainline vessels currently call ports in the Southern coast of India with a total shipboard capacity of 79,320 teu.

Table 3.9 also provides number of feeder services from ports in southern India. It can be seen that Chennai has the largest number of feeder services fourteen in all along with a few break bulk mainline services, which have not been listed here. Further, Tuticorin and Cochin have eight and six feeder services respectively, a high number of feeder services are deployed at Tuticorin due to draft restrictions, which prevents large mainline services to call directly and therefore most cargo is sent to Colombo via feeder vessels.

Table 3.9 Portfolio of liner services at large Southern container handling ports (Jan’10)

Mainline Services as of Jan 2010

No. of Min Size of Max Size of Total Capacity Service Name Region(s) Covered Vessels Vessel (teu) Vessel (teu) (teu)

Chennai

Austral-India 2 973 973 1,946 Far East-Ind Sub-Far East

New Nemo 12 2,478 2,826 33,315 Europe-Far East-Ind Sub-Europe

Indfex 2 5 2,082 2,824 12,269 Far East-Ind Sub-Far East

MSS 3 1,133 1,560 4,243 Far East-Ind Sub-Far East

RTC 3 1,054 1,498 3,793 Far East-Ind Sub-Far East

Eur-ME-India 3 662 2,226 4,618 Europe-MidEast-Ind Sub

ACS 4 1,740 2,174 8,262 Far East-Ind Sub-Far East

TCX 1 932 932 932 Far East-Ind Sub-Far East

Total 33 69,378

Cochin

GIA 3 1,742 2,135 5,619 Far East-Ind Sub-Africa

Total 3 5,619

New Mangalore

Conti Lines 3 771 835 2,377 Europe-MidEast-Ind Sub-Africa

Austral-India service 2 973 973 1,946 Far East-Ind Sub-Far East

Total 5 4,323

Feeder Services as of Jan 2010

Chennai 12

Cochin 6

Tuticorin 8

New Mangalore 2

Source: Compiled by Drewry

Trend of containerised trade along Southern India is similar to the trend pan India i.e. Far East trade lane has the largest share (35%) among other trade lanes. Table 3.10 shows the trade lane wise share of containerised cargo movement from five major container handling facilities located on the Southern coast of India.

Table 3.10 Trade lane wise break up of port traffic – South India

Trade Lane Chennai Cochin Mangalore Tuticorin Vizag South India

FEA 46% 17% 21% 12% 45% 35%

EUR 23% 24% 29% 32% 25% 25%

IGF 12% 28% 6% 25% 12% 16%

NAM 11% 12% 10% 16% 12% 12%

WAF 2% 11% 30% 6% 2% 4%

AMR 2% 2% 0% 4% 1% 2%

ANZ 2% 2% 1% 2% 0% 2%

SAF 1% 3% 0% 2% 1% 1%

EAF 1% 1% 3% 2% 1% 1%

Grand 100% 100% 100% 100% 100% 100% Total

Figure 3.6 Market share of the major shipping lines on Southern coast of India

16% 37% 8%

6% 3% 5% 3% 3% 4% 4% 5%

MA ERSK APL HL CMA MSC EMC NY K HMM PIL SCI TA L OTHERS

Source: Compiled by Drewry

Table 3.11 Trade lane wise market share in South India for loaded containers

Trade Lane Export Import

FEA 26% 44%

EUR 30% 20%

IGF 20% 13%

NAM 15% 9%

WAF 2% 7%

ANZ 2% 2%

SAF 1% 2%

AMR 3% 2%

EAF 1% 1%

Total 100% 100%

Source: Compiled by Drewry

Table 3.11 above shows the share of total export and import per trade lane on the Southern coast of India. European trade has the largest export market share with almost 30% of total exports from South India followed by the Far Eastern and intra gulf trade. Far East Asian trade continues to dominate the import volumes from South India with almost 44% of the total imports of this region falling in this trade lane.

4. Hinterland mapping

Objective

To identify:

Primary, secondary & distant hinterland

Container traffic potential for each hinterland

Key Findings

• Tamil Nadu, Andhra Pradesh, Karnataka and Kerala are the four major south Indian states in decreasing order of total container traffic potential which contribute container traffic to the ports on the lower east coast and the lower west coast of India. Ports on lower east coast are attracting traffic from Tamil Nadu, Karnataka and Andhra Pradesh. The Cochin port is attracting container traffic from Kerala and limited volumes from south Karnataka and Coimbatore in Tamil Nadu.

• Kerala’s containerised commodities are primarily coir, rubber, cashews and other agricultural goods. It is an import dominated state with a share of almost 55% of loaded container traffic. Almost 40% of the container traffic is generated from the southern districts of Trivandrum, Allapuzha, Kollam and Kanyakumari and rest is situated closer to the Cochin port.

• Chennai & proposed Ennore port have the proximity to the biggest and fastest growing cargo centres in Southern India. Cochin port has both distance and cost disadvantage to the primary hinterland of Chennai & Tuticorin ports. The average container traffic growth rate in Kerala is smaller compared to growth rate witnessed in Karnataka, TN and AP.

Conclusion

The primary hinterland of Vizhinjam would be the state of Kerala whereas secondary and distant hinterland would be the cargo centres which are contested by existing container handling ports in Southern India. Vizhinjam port has distance/cost advantage for cargo centres in Southern Kerala vis-à-vis Cochin and Tuticorin ports.

Hinterland of the proposed port has been segregated into three categories, viz, primary, secondary and distant hinterland. This segregation is essentially an identification of the major markets which could be served by the proposed Vizhinjam port. The primarily hinterland mainly consists of cargo centres in the state of Kerala and adjoining areas in the Tamil Nadu. The primarily hinterland of the proposed port of Vizhinjam would overlap with the existing hinterland of the port of Cochin and Tuticorin.

The secondary hinterland consists of cargo centres in southern Karnataka and Tamil Nadu. This hinterland is currently being served by the New Mangalore Port and Chennai. The distant hinterland includes Maharashtra, other parts of Karnataka, Tamil Nadu and Andhra Pradesh. This is a vast hinterland which is served by multiple ports including JNPT on the West coast of India.

Existing and proposed ports and key cargo centres

4.1 Karnataka

The economy of Karnataka has grown at a CAGR of 5.5% during 1999-2000 to 2007- 098whereas the share of Karnataka in India’s NDP has come down close to 5% during the same period. Non-metallic metal products and basic metal & alloy industries are the prime movers of Karnataka’s economy. Rubber, plastic, and Paper and paper and paper products are other important growing industries of Karnataka.

Table 4.1 Total Karnataka Loaded container traffic handled (export + Import)

Share of Karnataka Karnataka Loaded Traffic in India’s Total Container Traffic Year Potential (TEU) (Direct to Traffic (Via ICD) Port) Export Import Total Export Import Total

FY06 3.61% 2.73% 3.19% 76,039 53,595 129,633

FY07 3.61% 2.72% 3.19% 94,690 63,710 158,399 17% 83%

FY08 3.6% 2.8% 3.2% 109,527 82,218 191,745

4.1.1 Key cargo centres

Chikmagalur/Hassan/Mysore

Coffee production of India is concentrated in Southern states of Karnataka, Tamil Nadu and Kerala. Chikmagalur, Hassan and Mysore districts are major coffee producing region in India, accounting for more than 70% of Indian coffee production. Accordingly, it also contributes large volumes for coffee exports, primarily shipped out from Cochin port. Around 80% of the coffee export from India is destined to Europe including Russia and other CIS countries.

Historically, Cochin Port has been handling significant volume of coffee exports and accounted for almost 60% of the total coffee exports from India, whilst Chennai and Mangalore port handled around 25% and 10% respectively. However, over the last couple of years, New Mangalore port has been making serious efforts to attract coffee exporters from Karnataka state by leveraging its proximity advantage. This shift in traffic is a direct loss for Cochin port. Similarly, Chennai port has also increased its share in coffee exports and currently handles more than 30% of coffee exports from the southern region.

Table 4.2 State-wise coffee production in 2008-09 (Est.)

State/ Total Production Share in National District (Tonnes) Production

Karnataka

Chikmagalur 71,750 24% Coorg/Mysore 114,370 39% Hassan 28,050 10%

Sub total 214,170 73%

Kerala

Wyanaad 47,510 16% Travancore 7,815 3% Nelliampathies 1,875 1%

Sub total 57,200 20%

Table 4.2 (cont’d)

State/ Total Production Share in National District (Tonnes) Production

Tamil Nadu

Pulneys 5,825 2% Nilgiris 5,200 2% Shevroys 3,100 1% Coimbatore 2,500 1%

Sub total 16,625 6%

Others 5,005 2%

Total 293,000 100%

Source: Coffee Board

Cochin has a proximity advantage over Chennai for coffee moving in from major coffee producing regions in Kerala. While main coffee producing regions in Karnataka and Tamil Nadu are also closer to Cochin or almost equidistant from Chennai and Cochin, therefore offering no major advantage to Chennai port in terms of inland haulage cost and time.

Some of the major factors, which made Cochin a major coffee export centre, are:

• Proximity to major coffee producing regions in South India.

• Cochin port provides the facility of self sealing of containers, which results in reduction in the overall documentation and administration costs.

• Limited frequency of container vessels at Mangalore port coupled with inadequate infrastructure.

• Shipping lines calling at Cochin port provide LCL Bill of lading, which is a big help for small shippers and exporters.

Figure 4.1 Coffee producing States/Districts and current share of ports

New Mangalore- 21% Chennai-31%

Cochin- 45% Tuticorin-3%

Source: Drewry Research

Around 60% of coffee export is nominated and shippers have to choose the shipping line nominated by the importer. Coffee is a very sensitive cargo; therefore, all the major coffee exporters prefer factory stuffing to minimize any kind of damage and pilferage of cargo. Further, this helps in avoiding the additional costs, which exporters have to incur for utilizing the services of any ICD/CFS. CFSs in the Chennai region have not been able to attract coffee exporters, as most of the facilities lack suitable warehousing facility. One of the major requirements for coffee warehousing is be to have a proper humidity control mechanism to protect the cargo from any possible damage.

Bangalore

Bangalore is the main cargo aggregation centre in Karnataka. Major commodities handled in this region are RMGs, Stones, Coffee, Pharmaceuticals, Electronic goods, Auto components and Machinery. Concor has one of the largest ICD at Whitefield, Bangalore. CWC started its ICD operations in Bangalore in 2001. However, this facility has not been able to attract major volumes, as shippers prefer to use Connor’s ICD, which provides direct rail link to Chennai and JNP. In FY 2008, these two ICDs together handled around 60,000 teu with Concor’s facility accounting for almost 95% of the traffic.

Export containers handled at ICD Whitefield primarily includes stones, household items, gherkins, coffee, and other heavy goods like machinery etc, whilst imports are dominated by machinery, furniture, electrical and electronics and waste paper. Bangalore region is generating additional traffic of around 70,000 teu which is directly handled at the port or various CFSs located in Chennai. Chennai port handles almost 90% of Bangalore’s traffic followed by Tuticorin, which handles around 5% and the remaining traffic is shared by JNP and Cochin port.

Table 4.3 Break-up of traffic handled by ICD Whitefield

Exports Teu Imports Total

Household 24.4% Machinery/Spares 12.4% Granite Prods/Blocs 9.1% Furniture 7.6% Gherkins 8.8% Electrical Goods 7.3% Coffee 6.7% Household 5.0% Food Stuffs 6.2% Chem. Non-hazardous 4.4% Machinery/Spares 6.1% Paper 3.9% Electronic Goods 5.6% Accessories 3.8% General Cargo 5.4% Electronic Goods 3.2% Electrical Goods 4.9% Steel Products 3.2% Pharmaceuticals 2.2% Batteries 3.0% Steel /Metal Products 2.2% General Cargo 2.9% Garments 2.1% Personal Effects 2.2% Accessories 1.5% Granite 3.0% Glass Products 1.2% Metals 2.0% Automobiles 1.6% Newsprint 2.0% Slate/Stone Products 1.2% Cables 1.9% Chem. Non-hazardous 0.9% Glass Products 1.8% Madeups/Textile 0.8% Fabrics 1.5% Medical Equipments 0.4% Cartons 0.8% Plastic Products 0.3% Aluminum Products 0.8%

Source: Compiled by Drewry

Mangalore

The Mangalore region generates limited container traffic. In 2007-08, New Mangalore Port handled around 28,555 teu, most of which were generated by the local industries based in Mangalore and the adjoining regions. The traffic generated in this region is mainly of coffee, cashew nut and auto parts. Chikmagalur and Kushal Nagar are coffee generating areas and Mangalore district produces cashew nut. This increase in traffic during past couple of years could largely be attributed to the efforts made by the port to lure increasing number of containers from Kushal Nagar region.

Apart from port’s traffic, Mangalore region is also generating additional traffic of around 6,000-8,000 teu per annum, which is handled at JNP and Cochin. The only mode of transportation for the movement of containers is road from this region. New Mangalore Port has one CFS, operated by CWC. However, this CFS has not been able to attract any significant traffic from the hinterland.

Table 4.4 Estimated loaded container traffic flow in Karnataka (FY08)

Share of Gateway Ports Ratio Share Direct Sr. Export Import Total/ Location (Export to by to Port JNPT/ No. (Teu) (Teu) Annum Chennai Mangalore Cochin Import) ICDs Share Mumbai

1 Bangalore 75,920 56,990 57:43 132,910 46% 54% 80% 20% 0.00% 0.00%

2 Mangalore 14,186 10,649 57:43 24,835 0% 100% 10% 0% 60.00% 30.00%

3 Chikmaglur/Hassan 13,709 10,291 57:43 24,000 0% 100% 0% 80% 20% 0%

4 Others 5,712 4,288 10,000

Source: Drewry Research

4.1.2 Industrial infrastructure

Table 4.5 a. List of functional SEZ in Karnataka as on August 4, 2009

Export Projection Name of the SEZ Set up by Location Type 2008-09 (INR Cr)

Adarsh Prime Projects Notified Operational Special Devarabeesanahalli, IT/ITES 225 Economic Zones Bhoganahalli and Doddakanahalli,

Bagmane Construction Notified Operational Special Bangalore North, IT/ITES Economic Zones

Biocon Limited. Notified Operational Special Anekal Taluk, Bangalore, IT/ITES 284.48 Economic Zones

Cessna Garden Notified Operational Special Bangalore, Karnataka IT/ITES 600 Developers Pvt. Ltd. Economic Zones

Table 4.5 cont’d a. List of functional SEZ in Karnataka as on August 4, 2009

Export Projection Name of the SEZ Set up by Location Type 2008-09 (INR Cr)

Divyasree (Shyamaraju) Notified Operational Special Kundalahalli IT/ITES 245 Economic Zones Krishnarajapuram,Village,

Global Village SEZ Notified Operational Special Pattengere/Mylasandra Village IT/ITES (Tanglin Development Economic Zones Ltd.)

Information Technology Notified Operational Special Bangalore IT/ITES 317 Park Ltd. Economic Zones

Infosys Technologies SEZ Notified Operational Special Bangalore IT/ITES 94.32 Mangalore Economic Zones

Manyata Embassy Notified Operational Special Bangalore IT/ITES 268.98 Business Park Economic Zones

Primal Projects Private Notified Operational Special Bangalore IT/ITES UI Economic Zones

Suzlon Infrastrucutre Ltd. Notified Operational Special Hi-tech and 4738.5 Economic Zones engineering realted

WIPRO Limited Notified Operational Special Doddakannelli Village, Varthur IT UI Economic Zones Hobli,Electronic City, Bangalore

WIPRO Limited(SR) Notified Operational Special Doddakannelli Village, Varthur IT UI Economic Zones Hobli,Electronic City, Bangalore

Note: UI under Implementation Source: Government of India

b. List of proposed SEZ

Name of the Developer Type Date of Notification

HCL Technologies Ltd. IT/ITES 549(E) dt. 10th April'07

Infosys Technologies Limited IT/ITES 671(E) dt. 26th April'07

Karnataka Biotechnology and Information Technology Bio-technology dt. 22nd June'07 Services (KBITS)

Food processing and related M/s Karnataka Industrial Area Development Board 573(E) dt. 12th April'07 activities

Primal Projects Private Limited IT/ITES dt.29 August 2007

Source: Government of India

4.2 Tamil Nadu

Tamil Nadu has the advantage of being a coastal state. The share of Tamil Nadu in total export earnings of India is approximately 10%.

Some of the major imported commodities from Tamil Nadu are as follows:

• Electrical machinery, equipments and parts thereof sound recorders and reproduces TV image

• Natural or cultured pearl, precious or semi precious stones, metals & precious metals and articles thereof

• Iron and steel

• Organic chemicals

• Vehicles other than Rly. or tramway, parts & accessories thereof

• Plastic and articles thereof

• Pulp of wood or other fibrous cellulosic Material, paper and paper board

• Articles of iron & steel

Some of the major export items are as follows:

• Vehicles other than Railway tramway rolling stock and parts and accessories thereof

• Footwear

• Cotton

• Raw hides, skins and leather

• Fish and crustaceans molasses and other aquatic invertebrates

• Salt, Sulphur plastering materials lime and cement

• Organic chemicals

• Tobacco and manufactured tobacco substitutes

• Pharmaceutical products

• Other made up textiles, articles sets, worn Clothing and worn textile articles

• Rubber and articles thereof

• Articles of leather, saddler and travel goods, handbags etc.,

It is estimated that Tamil Nadu accounts for 16% of the total number of factories in the country. It also has a well-developed manufacturing sector with a high value addition in the factories. Manufactured goods have a dominant market share in total industrial output in the state.

Table 4.6 Loaded container traffic handled in Tamil Nadu (export + Import)

Share of Tamil Nadu Total Tamil Nadu Loaded Traffic Container Traffic in Total Traffic Year Potential (TEU) (Direct to India’s Loaded Traffic (Via ICD) Port) Export Import Total Export Import Total

FY06 11.21% 14.95% 13.02% 235,927 293,363 529,290

FY07 11.17% 15.15% 13.04% 292,604 354,667 647,271 4% 96%

FY08 11.3% 15.3% 13.2% 343,226 455,017 798,244

Source: Compiled by Drewry

4.2.1 Key cargo centres

Coimbatore

Coimbatore is the second largest city of Tamil Nadu and one of the fastest growing cities in India. Coimbatore is one of the highest revenue earning districts in Tamil Nadu. Agriculture is still the major occupation in the district. Cotton textiles, electric motors, pumps, automobile spares, iron & steel and castings and tea form major exports from Coimbatore. Along with the nearby town of Tirupur, Coimbatore has one of the highest concentrations of textile activity in India. It is also a major centre for manufacturing of motor and pumps and supplies more than 60% of India’s requirement and has a monopoly in the wet-grinder segment. In the auto ancillary sector, Maruti Udyog and Tata Motors source up to 30% of automotive components from Coimbatore. New companies have come up to produce automobile components for tier-I manufacturers. Larsen and Tubro (L&T) plans to set up an engineering facility in Coimbatore.

Coimbatore city has two ICDs operated by Concor and CWC along with one private CFS operated by Chettinad Logistics. These three CFSs together handle around 11,000 export teu and around 1,500 import teu annually. In addition to the ICD’s traffic, Coimbatore region generates additional traffic of almost 25,000 teus per annum for export, which is directly handled at gateway ports. Similarly, Coimbatore region is receiving additional import traffic of around 4,800 teus per annum through various gateway ports. Table 4.7 provides Coimbatore’s estimated commodity wise break-up of container traffic. Currently, no ICD, including Concor, is providing rail transportation from Coimbatore. Therefore, the entire ICD traffic from the region is moving by road. Cochin Port is around 250 Kms from Coimbatore and is the natural gateway port for the region. Therefore, the entire ICD traffic from Coimbatore is handled at Cochin port. CONCOR is currently developing rail connectivity to its facility in Coimbatore servicing Cochin port. The rail service is expected to be operational by 2010.

Table 4.7 Commodity wise traffic break-up of Coimbatore, 2008

Exports Teu Imports Teu

Textile Machinery 6,000 Synthetic Yarns 1,000

Castings & Forgings 6,000 Machinery 500

Pumps/Machinery 3,500 Cotton 1,000

Yarn 600 Others 500

Tea 3,000

Others 500

Total 19,600 3,000

Source: Compiled by Drewry

There is a significant volume of export traffic (around 55%), which is moving from Coimbatore directly to various gateway ports. Tuticorin port handles around 60% of this direct export traffic, whilst Chennai and Cochin ports account for 30% and 10% respectively. Similarly, Chennai port handles around 50% of direct import traffic of Coimbatore and the remaining is almost equally shared between Tuticorin and Cochin. Some of the key reasons for this direct movement are:

• Proximity to key gateway ports makes direct movement to ports quite economical.

• Due to imbalance in EXIM trade, ICDs have to bring in empties from ports, resulting in additional repositioning costs.

• Container handling charges inside the port are lower, compared to ICDs in Coimbatore.

• Quick and efficient processing of custom documents at gateway ports.

Tirupur

Tirupur is part of Coimbatore district and is a major garment export centre of India. It has two private road linked ICDs managed by Lemuir Group and Indev, along with one small ICD facility of Concor. The three ICDs together handle around 15,000 teu of garment exports, whilst imports were limited to less than 1,000 teu per annum. Tirupur is currently generating around 120,000 teu of garment exports per annum of which 80% is handled at Tuticorin Port, whilst Chennai accounts for almost 15% of this traffic. The remaining traffic is shared between, Cochin and JNPT. Entire container movement from/to Tirupur is by road.

Tirupur has the largest knitwear industry and around 55% of India's total knitwear exports come from Tirupur. For the past six years, there has been a phenomenal change in technology and large number of sophisticated computerized machines, full fledged processing units, individual machines, compacting machines and other machinery required in knitwear manufacturing have been imported. Also the rich availability of raw materials, being in close proximity to Coimbatore, which is a major centre of cotton spinning industry in the country allows Tirupur to access its basic raw materials quickly and as and when required.

Cochin is the closest of all the ports, still shippers in Tirupur prefer Tuticorin because of the availability of direct service to hub ports in Europe and USA. Further, it is cheaper and faster to ship containers through Tuticorin via Colombo, Compared to Cochin and Chennai. Garment exporters also feel that, Tuticorin is a customer friendly port and is quite flexible in accommodating last minute containers.

However, with the commencement of scheduled weekly mainline service between Cochin and the US east coast, Tuticorin will face intense completion from Cochin port. Shippers in Coimbatore and Tirupur will be inclined to use the new service from Cochin, as it will not involve any transhipment at Colombo and will also result in reduction of one day in transit time.

Chennai

Chennai has a diversified economic base. The main industries are automobile, software services, hardware manufacturing and financial services. Other important industries include petrochemicals, textiles and apparels.

Some of the major companies per industrial sectors in Chennai are as follows,

S.No. Industrial Sector Companies

1. Electrical & Dell, Nokia, Motorola, Cisco, Samsung, Siemens, Flextronics, electronics Foxconn

2. Auto & auto Hyundai, Ford, Mitsubishi, BMW,TVS, Wheels India Ltd, Ashok components Leyland, Caterpillar, Royal Enfield, TI Cycles, TAFE, Dunlop, MRF, Mahindra & Mahindra, Apollo Tyres

3. Chemicals Chennai Petro Chemicals Limited (CPCL), Manali Petro Chemicals Limited, Madras Refineries Limited (MRL), Petro Araldite, Orchid Pharmaceuticals

Multinational corporations like Dell, Nokia, Motorola, Cisco, Samsung, Siemens, Flextronics and Foxconn have or are in the process of setting up Electronics / Hardware manufacturing plants in the Sriperumbudur electronics SEZ. Ericsson and Alcatel have research and development facilities in the city while Texas Instruments' R&D facility is in the pipeline.

Some of automotive multinationals that have set up operations in the state are leveraging their plants as global sourcing hubs. Hyundai Motors has made Chennai a global production base for the compact car segment. Banking on its successful Indian operations, Hyundai has invested US$ 220 million approximately, in its Chennai plant in order to increase its production capacity. Hyundai has a global strategy to gradually shift the export base from South Korea to India to capitalize on lower shipping costs to Europe and Latin America and reduce delivery cycle times.

Ford Motor Company has made its plant in the state as a sourcing base for its mid-size cars. Owing to the cost advantage in India, Ford is also sourcing auto components for its US, European and Chinese operations from the state.

Other major manufacturing facilities range from small scale manufacturing to large scale heavy industrial manufacturing, petrochemicals and auto ancillary plants. Chennai is a textile industry hub with a large number of apparel industries located in the Ambattur-Padi industrial zone in the northern suburbs of the city. The city also has a large leather apparel and accessory industry. SEZ's for apparel manufacture and footwear are under construction in the southern suburbs of the city.

Chennai has approximately 23 CFSs, which handle export and import containers for Chennai Port. As per the latest estimates (2007-08) these facilities are handling around 700,000 teu per annum. Out of the total traffic handled by various CFSs, around 45% originates and comes from other cargo centres located in the primary, secondary and distant hinterland of Chennai port. Therefore, Chennai cargo is around 385,000 Teu while hinterland outside Chennai contributes close to 275,000. Some of the main cargo centres, using CFS facilities in Chennai, are Bangalore, Coimbatore, Hyderabad and Tirupur. Table 4.8 lists the key cargo centres and the volume of traffic moved to Chennai.

Table 4.8 Estimated break-up of traffic handled at CFSs in Chennai (Jan-Jul09)

S.No, CFS Export Import Total Teus

1. A.S. Shipping. 16,571 17,748 34,319 2. All Cargo 6,564 20,634 27,198 3. Balmer & Lawrie 2,631 14,312 16,943 4. Binny 6,947 1,704 8,651 5. Chandra Shipping 1,998 791 2,789 6. Concor 14,370 9,649 24,019 7. Continental 385 5,680 6,065 8. CWC - M 49,928 62 49,990 9. CWC - R 1,239 - 1,239 10. CWC - V 908 5,470 6,378 11. D.R. Logistics 6,026 1,437 7,463 12. E.C.C.T. 1,314 16,468 17,782 13. GDL 7,021 24,898 31,919 14. German Express. 4,207 11,833 16,040 15. I.C.B.C 2,964 2,726 5,690 16. Kailash 10,579 3,907 14,486 17. Sanco 6,027 21,959 27,986 18. Satva 929 26,293 27,222 19. Satva Vichur 586 7,383 7,969 20. Sical 4,281 32,580 36,861 21. Sun Global 2,880 1,100 3,980 22. Triway 1,346 13,459 14,805 23. Viking 4,523 1,810 6,333 24. Visrutha 4,115 1,923 6,038

TOTAL 158,339 243,826 402,165

Source: Compiled by Drewry

Table 4.9 Share of major export/import commodities handled at Chennai

Exports Teu Imports Teu

Glass 3% Chemicals 13%

Auto/Machinery Parts 6% Paper Pulp 4%

Dried Flowers 5% Scrap Metal 5%

Tyres 3% Paper 10%

Chemicals 8% Furniture 10%

Garments 8% Toys 1%

Granites 10% Pulses 3%

Agri Products 13% Pet Scrap 3%

Electrical Goods 3% Electrical Goods 4%

Mango Pulp 2% Electronics 8%

Others 38% Machinery 10%

Yarn/Fibre 1%

others 27%

Note: Based on estimates gained during field survey

Source: Compiled Drewry

With the steady increase in the container throughput, Chennai port is finding it difficult to accommodate additional containers for custom clearance and documentation within the port limits. Therefore, now all the factory stuffed export containers moving directly to port have to go through on wheel inspection at one of the CFSs in Chennai. Exports of garments, tobacco, marine products, leather products, tyres, etc. form a significant proportion of Chennai’s container traffic. These commodities are very sensitive to adverse climatic conditions and any exposure to dust, heat and other pollution could result in severe damage to these products. Therefore, exporters prefer factory stuffing, instead of using any CFS facility, which generally fail to provide dust free and clean environment for handling of such sensitive and high value goods.

Most of the CFSs in Chennai are located in its northern region in “Cluster 1”, less than a sixth are in close proximity to the CCT/Chennai port in “Cluster 2”. Pedestrians, the public transport system, commercial vehicles, two-, three- and four-wheelers share the same access road to the port from these CFSs which is also the only access road for containers entering the Chennai port. Therefore, there is frequent congestion on the road which affects the evacuation and arrival of containers at Chennai container terminal.

Figure 4.2 CFS clusters in Chennai region

CLUSTER 1 Ennore Port

CCTL CLUSTER 2 CLUSTER 3

CHHENAI CITY MAP

Source: Drewry Research

Pondicherry

Over the last couple of decades, Pondicherry has developed its infrastructure and has also provided incentives, concessions and tax holidays which have served as a basis for industrial growth in the Union Territory and which can aid growth in the future. Part of the higher growth rate of industry could be attributed to the liberalization process. Major export commodities from Pondicherry includes textile and readymade garments, Metal products, Food products, Paper and Printing products , Auto components and Electronic goods.

Currently, Pondicherry region is generating around 5,000 teu per annum. Pondicherry has two private ICDs. However these facilities have not been able to attract significant volumes, as most of the shippers prefer to handle their containers at Chennai port. This allows shippers to get duty drawbacks and other incentives in much lesser time compared to containers handled at ICDs. Pondicherry is just 150 km from Chennai Port, which makes the road transportation quite feasible and economical for importers and exporters. Further, most of the CHAs, consolidators and other service providers are based in Chennai and prefer to do all the documentation and inspection at Chennai.

Tuticorin

Tuticorin has eight CFSs in addition to the ports own facility. CFSs operated by Concor, CWC and private players handle around 40,000 loaded teu per annum, of which almost 50% traffic comes from cargo centres located in the secondary hinterland. Additionally, Tuticorin region is generating around 96,000 teu per annum, which are handled directly at Tuticorin Port. Tuticorin has rail links with various cargo centres in the hinterland but more than 90% of the traffic moves by road. Major commodities imported/exported in Tuticorin region are Chemicals, Marine products, Wood and wood product, Metal scrap, raw cashew, Stones, etc.

Over the last two years, Tuticorin port has been able to attract large volume of containers from Tirupur and other garment and textile export centres in the hinterland by providing direct services to North America (INDAMEX and IAX). However, owing to draft restrictions and other operational issues, these stopped calling at Tuticorin and are moving directly to JNPT. However, garment exporters still preferred Tuticorin as it is cheaper to feed containers from Tuticorin to Colombo, compared to Chennai and Cochin. Further, Tuticorin is seen as a customer friendly port showing lot of flexibility in accepting containers, which are delayed due to various operational reasons.

Karur

Karur is famous for its textile industry and the region generates around 15,000 teu of traffic, which primarily includes textile and furnishings. Due to its proximity to the Tuticorin port, almost 80% traffic from the region moves through this port, whilst the remaining traffic is shared between Chennai and Cochin.

Madurai

Madurai is an important industrial zone in Tamil Nadu and is known for Cotton garments, Handloom weaving, Spices and Food products etc. It is just 135 Kms. from Tuticorin port. It had one Concor’s ICD, which provided rail and road link to Tuticorin and Chennai Port.

However, due to very poor response from the local exporters, Concor has suspended its EXIM operations for the time being. Proximity of the Tuticorin port and road transport being cheaper and quicker, shippers prefer to directly handle their cargo at the port. Further, exporters are able to process their documents within a week and are able to avail various benefits available under export promotion schemes, whilst it took much longer if the containers were handled at ICD.

Madurai as a region generates around 15,000 teu per annum, which includes around 6,000 teu of textile and garment exports. Tuticorin port handles around 80% of region’s traffic while Chennai Port, which is around 450 Kms away from Madurai, handles the remaining traffic.

Salem

Salem is famous for its steel and steel products. It has one private CFS operated by Sanco Limited, which handles around 1,200 export containers of Salem Steel annually. In addition to this, Salem region generates around 13,000 additional teu annually. Salem is almost equidistant from Chennai, Cochin and Tuticorin. However, around 70% of traffic from Salem moves through Chennai, whilst remaining traffic is shared between Cochin and Tuticorin.

Table 4.10 Estimated loaded container traffic flow in Tamil Nadu (FY08)

Share of Gateway Ports Ratio Direct Sr. Export Import Total/ Share by Location (Export to to Port No. (Teu) (Teu) Annum ICDs Import) Share Tuticorin Chennai JNP Cochin

1 Chennai 127,090 272,175 40:60 399,265 0% 100% 100%

2 Coimbatore 25,063 11,928 68:32 36,991 40% 60% 35% 15% 15%

3 Tirupur 94,325 44,890 68:32 139,214 10% 90% 80% 15% 2% 3%

4 Tuticorin 47,659 45,362 51:49 93,021 0% 100% 100%

5 Karur 9,951 3,552 74:26 13,502 0% 100% 80% 10% 10%

6 Salem 7,463 7,103 51:49 14,567 10% 90% 10% 70% 20%

7 Hosur 14,926 14,207 51:49 29,133 15% 85% 100%

Others 16,750 55,800 72,550

Source: Drewry Research

4.2.2 Industrial infrastructure

Table 4.11 a. List of functional SEZ in Tamil Nadu as on August 4, 2009

Export Projection Name of the SEZ Set up by Location Type 2008-09 (INR Cr)

Arun Excello Infrstructure Notified Operational Special Vallncheri and IT/ITES UI Economic Zones Potheri Chengalpet Taluk, Kancheepuram District

Cheyyar SEZ Notified Operational Special Cheeyar Footwear 105.6 Economic Zones

Coimbatore Hitech Infrastrure Notified Operational Special Coimbatore IT/ITES UI Pvt. Ltd. Economic Zones

DLF Infocity Developers Notified Operational Special Manapakkam & IT/ITES UI Economic Zones Mulivakkam

Electronics Corporation of Notified Operational Special Kancheepuram, IT/ITES UI Tamil Nadu Economic Zones

ETA Technopark Private Notified Operational Special Old IT/ITES UI Economic Zones Mahabalipuram Road, Navallur Village, Chengalpet Taluk, Kancheepuram District

ETL Infrastructure Services Notified Operational Special Tambaram Taluk, IT/ITES UI Pvt. Ltd. Economic Zones Kancheepuram

Flextronics Technologies Notified Operational Special Sriperumbudur, Electronics Hardware 384.85 Economic Zones Kancheepuram, and related services

Hexaware Technologies Notified Operational Special SIPCOT IT Park, IT/ITES UI Economic Zones Old Mahabalipuram Road, Siruseri

Mahindra City SEZ (Auto State Government/Pvt SEZ/ Auto ancillary ), T. Nadu approved before SEZ Act 2011

Mahindra City SEZ (IT), T. State Government/Pvt SEZ/ IT/Hardware and Nadu approved before SEZ Act Bioinformatics 2010

Mahindra City SEZ (Textiles), State Government/Pvt SEZ/ approved before SEZ Act 2012

Table 4.11 cont’d a. List of functional SEZ in Tamil Nadu as on August 4, 2009

Export Projection Name of the SEZ Set up by Location Type 2008-09 (INR Cr)

MEPZ Special Economic Central Government: Multi product 3000 Zone

Nokia SEZ State Government/Pvt SEZ/ Sriperumbudur Apparel and fashion 15060.39 approved before SEZ Act accessories 2013

Shriram Properties and Notified Operational Special Chennai, Tamil IT/ITES UI Infrastructure Private Limited Economic Zones Nadu

State Industries Promotion Notified Operational Special Oragadam Electronic Hardware Corporation of Tamil Nadu Economic Zones

State Industries Promotion Notified Operational Special SIPCOT Industrial Electronics of Telecom Corporation of TN Economic Zones area hardware and support Sriperumbudur, services including trading and logistic activities

Suzlon Infrastrucutre Notified Operational Special Coimbatore Hi-tech engineering 1082.08 Economic Zones

Tata Consultancy Services Notified Operational Special Siruseri and IT/ITES Economic Zones Egattur, Chennai

Note: UI: Under Implementation

Source: Government of India

b. List of proposed SEZ

Name of the Developer Type Date of Notification

Bannari Technoparks Pvt. Ltd. IT/ITES 634(E) dt. 23rd April'07

Cognizant Technology Solutions India Pvt. Ltd. IT/ITES Dt.17th December, 07

DLF Infocity Developers (Chennai) Ltd. IT/ITES 1978(E) dt. 16th Nov.'06

Electronics Corporation of Tamil Nadu IT/ITES 563(E) dt. 11th April'07

Electronics Corporation of Tamil Nadu IT/ITES 564(E) dt. 11th April'07

Electronics Corporation of Tamil Nadu IT/ITES Dt.12th February, 08

Foxconn India Developer Private Limited IT and electronics hardware Dt.5th December 07

Hexaware Technologies Limited IT/ITES 1388(E) dt. 31st Aug'06

Hacciendaa Infotech and Realtors Private Limited IT / ITES 567(E) dt. 11th April'07

New Chennai Township Private Limited Engineering sector including auto dt. 28 September, 07 ancillaries

New Chennai Township Private Limtied Multi Services Dt.23rd November 07

SNP Infrastructure Pvt. Ltd. IT/ITES Dt.12th February, 08

Name of the Developer Type Date of Notification

Span Venture Pvt. Ltd. IT/ITES dt. 10th July, 07

State Industrial Promotion Corporation of Tamil Nadu Footwear Dt.7th February, 08

State Industries Promotion Corporation of Tamil Nadu Leather sector Dt.27th November 07

Syntel International Private Limited IT/ITES 1291(E) dt. 11th Aug.'06

Tata Consultancy Services Limited IT 1103(E) dt. 17th Jul'06

True Developers Pvt. Ltd. Electronics Hardware and IT/ITES Dt.20th November 07

Velankani Technology Parks Pvt. Ltd. Electronics hardware and software and Dt.11th December 07 ITES

Zillion Estates Pvt. Ltd. IT/ITES 709(E) dt. 3rd May'07

Source: Government of India

4.3 Kerala

Kerala has been on a steady growth path registering a CAGR of 8% during 1999-2000 to 2007-08, consequently increasing its share in the national economy to over 4.0% in 2007- 08 from 3.8% in 1999-2000. Like national economy of India, Kerala’s economy is also primarily on service sector with secondary sector contributing only 27%. Kerala’s traditional industries include handloom, cashew, coir and handicrafts. As of March 2009, there were 730 large and medium industrial undertakings in Kerala, of which 600 units are in the private sector. The small scale sector contributes 40% to industrial production and 35% to exports.

Cashew industry is also one of the major industries contributing to container trade in the state. The Kerala State Cashew Development Corporation KSCDC and Cashew workers' Apex Cooperative Society (CAPEX) are the two State agencies engaged in the cashew processing sector in Kerala. KSCDC exports cashew kernels and cashew shell liquid. Raw nuts are mainly imported to supplement the local availability. KSCDC and CAPEX have approximately 40 factories across the state with more than 90% them concentrated in Kollam district. However, it is only a minuscle share of the total cashew processing units based in the state

Major export commodity: Sea Foods, Coir Products, Coffee, Tea, Cashew Kernels, and Spices.

Major import commodity: Fertilizers & Raw materials, Iron, Steel & Machinery, Cashew nut, Food grains, and Newsprint.

Table 4.12 Commodity-wise container traffic through Kochi in FY 2008 & FY 2009 (Quantity in M.T)

Commodities 2008-09 2007-08

Export

Cashew kernels 56,967 77,458

Coir Products 78,563 124,213

Pepper 27,336 41,415

Sea foods 90,286 108,653

Tea 68564 71742

Turmeric 3,748 5,035

Coffee 63,130 94,386

Chemicals 60,697 48,557

Miscellaneous 650,717 632,291

Total Exports 1,100,008 1,203,750

Y-O-Y Growth -8.6%

Imports

Machinery 5,495 12,633

Cashew nuts 314,831 325,014

Chemicals 60,685 114,700

Miscellaneous 1,470,794 977,481

Total Imports 1,851,805 1,429,828

Y-O-Y Growth 29.5%

Total Traffic 2,951,813 2,633,578

Y-O-Y Growth 12.1%

Source: Cochin Port Trust

Table 4.13 Import and export of Cashew – Cochin Port INR Cr.

Import of Raw Cashew Nuts Export of Cashew Kernels

Quantity Value Quantity Value

2001-02 191,579 502 54,717 971

2002-03 249,970 772 66,859 1,217

2003-04 294,552 909 68,119 1,205

2004-05 283,149 1,055 79,950 1,716

2005-06 306,765 1,135 74,376 1,623

2006-07 322,443 972 72,861 1,505

CAGR 11% 14% 6% 9%

Source: Cashew Export Promotion Council, Kochi.

Table 4.14 Loaded container traffic (export + Import) in Kerala

Share of Kerala Kerala Loaded Traffic in India’s Total Container Traffic Traffic Year Potential (TEU) (Direct to (Loaded) (Via ICD) Port) Export Import Total Export Import Total

FY06 3.79% 2.08% 2.96% 79,692 40,810 120,502 FY07 3.37% 1.88% 2.67% 88,283 44,072 132,355 0% 100% FY08 3.0% 1.8% 2.4% 89,878 52,743 142,621

Source: Compiled by Drewry

4.3.1 Key cargo centre

Wayanad

Wayanad is characterised by the cultivation of perennial plantation crops and spices. The major plantation crops include coffee, tea, pepper, cardamom and rubber. Coffee based farming system is a notable feature of Wayanad which is also one of the largest export commodities from this district. Coffee is grown both as pure crop and as mixed crop along with pepper. Pepper is grown largely along with coffee in the north eastern parts of the district, especially in Pulpally and Mullankolly areas. Coffee in Wayanad (66,999 ha.) shares 33.65% of the total cropped area in the district and 78% of the coffee area in the state. Other major crops are rubber (63,015 ha.), coconut (59,452 ha.), cardamom (38,348 ha.), tea (31,792 ha.) cassava and ginger.

As per recent estimates, approximately 5% of the total traffic in the state of Kerala is generated in the Wayanad district.

Kannur

Textiles, rubber and coir are the important traditional industries in the district. The textile industry is largest amongst all three sectors with an estimated 40% of all SSI units in the districts active in this sector. The region contributes around 3-5% of the total containerised trade in the state.

Trichur

Trichur (Thrissur) contributes around 10-15% of the container traffic generated in the state of Kerala. Thrissur is one of the most important industrial centres of the state of Kerala. The district is dominated by industries in textile, timber, coir, fishery, agriculture industries, and tiles sector.

Amongst all these sectors tiles, textile and timber are the most important industries in the district. Some of the major textile mills in the city include Alagappa Textiles, Kerala Lakshmi Mills, Cotton Mills, Rajgopal Textiles, Kunnath Textiles, Vanaja Textiles and Sitaram Spinning & Weaving Mills.

Alappuzha

Alappuzha (Alleppey) is well known as a significant commercial and trading centre of Kerala. Allapuzha is primarily known for the export of spices, coconut oil, pepper, arecanut, fibre, coir yarn, sugar and cardamom.

Alappuzha is the major production centre of coir and coir products in the State. There are about four thousand production units including a few large factories for coir in the district. There are at present 15 mechanised looms too. There are 41 cooperative societies in the coir sector. There is a central coir marketing society for the export of the produce of primary societies. The Hindustan Coir Ltd. is one of the major exporting units from the city.

Quilon/Kollam

Cashew processing and coir production are major industrial vocations in Kollam (Quilon).Handloom industry, clay and wood based industries also contribute to the industrial advancement of the region.

Kollam is known as the major cashew processing centre in the state of Kerala with almost 90% of the cashew processing is done in the region. The Kerala State Cashew Development Corporation (KSCDC) is the largest processor of cashew nut in the world. At present, it has 34 factories.

Apart from cashew processing, there are 17 large, and one medium scale industries in the district, of which, two are Central Government undertakings namely, the Indian Rare Earths, Chavara and Parvathi Mills Ltd., Kollam.

Kerala Ceramics Ltd., Kundara, Travancore Plywood Industries, Punalur, Kerala Electrical and Allied Engineering Company, Kundara, Kerala Premo Pipe factory Chavara, Kerala Minerals and Metals Limited, Chavara, United Electrical Industries Kollam and the Kerala Agro-Fruit Products, Punalur are Kerala Government owned companies. Other major industries in private/cooperative sector are Aluminium Industries Ltd., Kundara, Thomas Stephen & Co., Kollam, Floorco Paravur, Cooperative Spinning Mill, Chathannur and Punalur Paper Mills, Punalur. About 1963 SSI units have been registered in the district.

Trivandrum –industrial goods, handloom

Industrial goods and handloom are major commodities in Trivandrum which contribute containerised trade in Kerala. The industrial scenario in Trivandrum is dominated by oil mills, cashew factories, cotton textiles, saw mills, printing units, rubber industrial units, chemical units, match factories and general engineering units. There is an industrial estate at Pappanamcod and handloom weaving is prevalent at Balaramapuram, Amaravila, Kulathur and Chirayinkeezhu, which are located in the suburbs of the city.

The major companies in the district are Travancore Titanium Products Ltd (TTP), English Indian Clays Limited, Kerala Automobiles Ltd and Hindustan Latex Limited.

Kozhikode (Calicut)

Kozhikode district represents one of the industrially advanced areas of the state, with many small scale industries along with a limited number of large scale companies. Some of the more important large and medium scale industries are textiles rayons, grade pulp,

soap, cosmetics, oil, wheat flour, steel products, tiles, sea food processing and pharmaceutical companies. There are approximately 20 large and medium scale industrial units and 18,000 SSI units in the district.

Another major industry is the tile industry. With major factories mostly concentrated at Feroke-Cheruvannur area, which is rich in quality clay deposits. The tiles produced in the region have both domestic as well as export market.

Cochin

Traditionally, Cochin is the major business and trading hub in Kerala handling major commodities like coconut, tea & coffee, rubber, coir, cashew and spices. Therefore, the Cochin port handles large volumes of these commodities for both export and import. As per last estimate, 60% of the FY 2008 cashew volumes were handled at the Cochin port in India. A large number of cashew processing units are based in Cochin & adjoining regions (Tiruvananthapuram, Kollam, Alappuzha, Thrissur and Kannur). Therefore, Cochin handles large volumes of imported raw cashew nuts for processing and re-exports.

Currently, Cochin port is served by one CFSs and one Concor’s rail terminal. One of the CFS is located at Rajiv Gandhi Container terminal and is managed by the port, whilst one is managed by Kerala State Warehousing Corporation and the remaining two facilities are managed by private CFS operators. In all, these four facilities handle around 30,000 loaded teu per annum. Concor’s siding provides rail link to various cargo centres located in the immediate and the secondary hinterland.

Table 4.15 Estimated loaded container traffic flow in Kerala (FY08)

Share of Gateway Ports Ratio Share Direct Sr. Export Import Total/ Location (Import to by to Port No. (Teu) (Teu) Annum JNPT/ Export) ICDs Share Chennai Mangalore Cochin Mumbai

1 Cochin 14,075 15,247 1.08 29,322

2 Wayanad 2,053 8,210 4.00 10,263

3 Kannur 5,747 5,982 1.04 11,729

4 Trichur 10,116 11,875 1.17 21,992 0% 100% 0% 0% 0.00% 100.00% 5 Allapuzha 3,225 12,902 4.00 16,127

6 Kollam 12,433 11,025 0.89 23,458

7 Trivandrum 10,556 7,037 0.67 17,593

8 Others 9,676 6,451 0.67 16,127

Source: Drewry Research

4.3.2 Industrial infrastructure

Table 4.16 List of functional SEZ in Kerala as on August 4, 2009

Export Projection Name of the SEZ Set up by Location Type 2008-09 (INR Cr)

Cochin Port Trust, Notified Operational Special Puthuvypeen Port UI Economic Zones Based Cochin Port Trust, Notified Operational Special Port Ui Vallarpadam Economic Zones Based Cochin Special Central Government: Cochin, Multi 2000 Economic Zone product Electronic Technology Notified Operational Special Trivandrum IT/ITES 79.83 Park Economic Zones Infopark Notified Operational Special Kochi IT/ITES 110.4 Economic Zones

Note: UI under Implementation

Source: Government of India

5. Port infrastructure

Objective

To identify

Competing port infrastructure for container handling facilities in India

Container handling capacity expansion plans

Port competitive analysis

Key Findings

• Currently, ports in Gujarat and Maharashtra have the highest container handling capacity in India with almost 68% of the total handling capacity in India available at these ports. As per the recent capacity expansion plans, most of the capacity is being developed at the lower east coast with share of the region estimated to grow from 16% to 26% over the next decade. With the commissioning of Vizhinjam and expansion of Cochin port, the estimated share of lower west coast ports is likely to grow from 6% to 8% during the same period.

• Chennai is the top port in south India in terms of various port attractiveness, parameters discussed in the chapter followed by Cochin & Tuticorin which share similar measure of port attractiveness.

Conclusion

Vizhinjam faces stiff competition from existing and upcoming facilities in the region which share a common market. The current supply demand scenario in lower west coast suggests high underutilisation of existing capacity. Therefore with addition of new capacities in the region and historic traffic growth rates suggest that this region would continue to face problems of unutilised capacities in terms of gateway traffic handled by the ports.

Table 5.1 and Figure 5.1 provides geographical location of ports in India that are currently handling container traffic, together with proposed new container ports that are expected to be developed and will be operational during the course of the current decade.

Table 5.2 gives an overview about container handling facilities at various ports in India.

Table 5.1 Existing and proposed container ports in India

Coast / Region Port Coast / Region Port

Upper West Coast Kandla Upper East Coast Kolkata Mundra Haldia Pipavav Paradip Dighi* Kulpi* Positra* Dhamra* Hazira*

Greater Mumbai Mumbai Central East Coast Visakhapatnam JNP Gangavaram Rewas* Machilipatnam* Dighi* Kakinada

Lower West Coast Mormugao Lower East Coast Tuticorin New Mangalore Chennai Cochin Ennore* Vizhinjam* Krishnapatnam Pondicherry Karaikal

Note: * Proposed Source: Drewry Research

India now has a mix of government and private container ports/terminals, which are actively involved in container handling. This is result of the Indian government initiative to involve the private sector through BOT schemes and privatisation for infrastructure development. The most noteworthy example of this initiative has been the development of two new terminals at Jawaharlal Nehru Port (JNP). Among the private ports, Mundra has emerged as a leading container handling facility and has gained significant market share over the last few years. Now the government has similar plans for the development of port sector and it will definitely benefit the container ports of India. Moreover, many new ports are also now emerging to take advantage of the growth of containerisation throughout India, as it continues to penetrate the general cargo and break bulk markets. There are an increasingly higher number of ports either currently handling container traffic or looking to do so in the next few years.

Figure 5.1 Existing and proposed container handling ports in India

Kandla Mundra Kolkata Positra

14% (69%) Haldia

Pipavav Hazira Kulpi

Dhamra 6% (78%) Upper West Coast Paradip

Upper East Coast Mumbai JNP 55% (102%) Rewas Dighi Visakhapatnam

Greater Mumbai Gangavaram Kakinada

Machilipatnam 1% (29%)

Mormugao Central East Coast

Krishnapatnam Ennore 4 % (44%) Chennai Puducherry Mangalore 21% (99%) Lower West Coast

KarikalLower East Coast Vallarpadam Cochin Tuticorin

Vizhinjam Market Share (Capacity Utilised)

Proposed

Existing

Source: Drewry Research

5.1 Competing port facilities

Table 5.2 Overview of ports and facilities handling containers at the end of 2008 - 09 (In ‘000 teu)

2008/09+ 2008/09 Capacity Quay Yard Water Depth Terminal No. of Quay Port Landlord Throughput Estimated Capacity Utilization Length Area Range Operator Cranes (Teu) (Teu) (%) (m) (ha) (m) Upper West Kandla* Public ABG/PSA 138 300 46% 545 2 40 10 Mundra Private DPW 718 900 80% 632 6 32 15-17.5 Mundra Private MPSEZ 60 500 12% 631 4 24 15-17.5 Pipavav Private APMT 182 750 24% 735 6 25 12.5 Greater Mumbai Mumbai (Bombay)** Public Govt Of India 92 500 18% 656 2 & ships gear 4 8.8-9.1 JNPT Public Govt Of India 1,063 1,200 89% 680 8 35 12-13.5 NSICT Public DPW 1,427 1,200 119% 600 8 30 12-13.5 GTI Public APMT/Concor 1,462 1,400 104% 712 10 52 12-13.5 Lower West Mormugao*** Public MPT 14 50 28% 902 1 mobile crane & ships gear 5 14-May Cochin Public DPW 260 500 52% 414 2 7 10.7 New Mangalore*** Public Govt Of India 29 50 58% 1,313 3 mobile cranes & ships gear 10 7-10.5 Lower East Chennai Public DPW 1,143 1,200 95% 885 7 18 13 Tuticorin Public PSA/SICAL 439 400 110% 370 2 8 11.9 Central East Vishakapatnam Public DPW/ULAI 90 200 45% 449 2 10 10.2 Upper East Kolkata Public ABG/PSA 302 300 101% 780 2 mobile cranes & ships gear 34 8.3-12.2 Haldia Public Govt Of India 127 300 42% 218 Ships gear Paradip*** Public Govt Of India 2 50 4% 250 Ships gear 2 11.5-12.2

* New facility has started operations ** Includes boxes handled at general cargo berths. *** No dedicated container handling facility. Source: Drewry Research

5.2 Projected development of container handling capacity at ports in India

In addition to assessing the development of cargo, it is also essential to look at the container port capacity that will be made available to the shippers in future. This analysis has to be done on three different levels i.e. at individual port level, at regional level and within India as a whole.

Table 5.3 provides a breakdown of known or proposed expansion plans within the Indian container port market and an increase in container capacity by 2020-21. In overall terms, container handling capacity in India is set to increase from over 9.6m teu per annum in 2008-09 to around 38.1 m teu per annum by 2020-21, reflecting an annual average growth of almost 11.9% per annum. Of the five individual port regions contributing towards this increase, upper west coast ports are expected to increase at an annual average rate of around 11.2% per annum, as the container capacity in the region increases from 2.4m teu per annum in 2008-09 to 8.8 m teu per annum by 2020-21. The greater Mumbai region during this period is expected to grow at a rate of around 9.4% as the capacity is expected to increase from 4.3m teu in 2008-09 to 12.7m teu in 2020-21.

In the region of lower east coast, Chennai and Ennore are the main ports which will boost the capacity. At present, the envisioned growth in this region is 16.3% up to 2020-21. The capacity is likely to increase from 1.6m teu in 2008-09 to 9.8m teu by 2020-21.Capacity growth in the ports located on the central east coast of India between 2007-08 and 2020- 21 could be around 14.7% mainly because of proposed new container terminals at Gangavaram. The total capacity in the region is expected to increase from 0.25m teu in 2008-09 to 1.3m teu 2020-21.

The upper east coast is expected to witness some new capacity addition with growth rate of 11.7%. Even this rate will be possible only if the known development plans related to Dhamra and Kulpi will come into play. The expected time of commissioning of Dhamra is 2013-14 i.e. three year after the completion of their first phase while Kulpi is expected to be operational by 2016-17. The overall capacity is likely to increase from 0.65m teu in 2008-09 to almost 2.45m teu by 2020-21.

Most of the ports, which currently do not have any immediate expansion plans have capacity in terms of land and waterfront and these ports can leverage these key infrastructure for implementing any new container handling capacity over short and medium term. For example, many proposed Greenfield ports have expressed interest in container handling capabilities but without any concrete plan in terms of infrastructure, cost estimates and time scale. Thus these announcements are not under consideration in this study else it would inflate the total capacity to a large extent.

Table 5.4 provides an indication of the current and future share of the total Indian container market capacity held by each terminal, port and region. On a regional basis, the share of upper west coast ports is likely to decrease from almost 25% in 2008-09 to 23% by 2020- 21, at the same time, for ports in Greater Mumbai region share may decline from 44% to 33% in 2008-09 to 2020-21 in Indian containers port market. Combined container handling capacity of ports located in the upper west coast and Mumbai region will decrease to 56% by 2020-21, compared to 69% in 2008-09.

The expected capacity expansion in upper west coast and Greater Mumbai region clearly indicates that these two regions are likely to dominate the Indian trade over long term period. This dominant share of the upper west coast and the Greater Mumbai region again

emphasize the fact that the ports in these locations will continue to target rich hinterland of north and north western India to feed their growing appetite.

The ports in lower west coast of India currently accounts for almost 6% of India’s container handling capacity. This region’s share will steadily increase to 8% by 2020-21. This growth can be primarily attributed to capacities at Vallarpadam in Cochin and Vizhinjam. DP World currently manages the existing terminal at Cochin; however it would transfer its operations to the new terminal upon its completion. Thus the overall percentage of ports in west coast of India will be around 64.% by 2020-21, compared to 75% in 2008-09.

In the current scenario, ports in the lower east coast are likely to gain market share. The share of container port capacity in the region is likely to increase to 26% by 2020-21, compared to around 16 % in 2008-09. The major growth centres would be Chennai, Ennore and Krishnapatnam, while Tuticorin and other proposed new facilities are likely to provide limited additional capacities.

The container handling capacity in central east coast region is likely remain around 3% by 2020-21. Similarly, the upper east coast region is likely to maintain its share, with container handling capacity decreasing from 7% in FY 2009 to 6% till 2020-21. The new major container handling facilities expected in the region are proposed container terminal at Dhamra and two new multipurpose berths at Paradip port.

Table 5.3 Development of capacity at Indian container handling ports FY09 to FY21 (‘000 teu)

Port Terminal FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 CAGR

Upper West Coast

Kandla KPT/ABG-Voltri 300 300 300 300 300 300 300 300 300 300 300 300 300 0.0% Mundra MICT 900 900 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 2.4% Mundra MPSEZ 500 750 750 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 6.8% Mundra (South Basin) New Terminal 1,200 1,200 2,400 2,400 2,400 2,400 2,400 2,400 Mundra total 1,400 1,650 1,950 2,300 2,300 3,500 3,500 4,700 4,700 4,700 4,700 4,700 4,700 10.6% Pipavav GPPL 750 750 750 750 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 3.2% Hazira* Hazira 500 500 750 750 1,200 1,200 1,200 1,200 Positra* Positra 500 500 1,000 1,000 1,500 1,500

Sub-total 2,450 2,700 3,000 3,350 3,700 5,400 5,400 7,350 7,350 8,300 8,300 8,800 8,800 11.2%

Greater Mumbai

Mumbai Ballard Pier/Indra Docks 500 500 500 500 Mumbai Offshore Terminal 500 500 750 750 750 1,100 1,100 1,100 1,100 Mumbai total 500 500 500 1,000 1,000 1,000 1,250 1,250 1,250 1,500 1,500 1,500 1,500 9.6% JNP JNPCT 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 0.0% JNP NSCIT 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 0.0% JNP APMT/Concor 1,400 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 2.1% JNP Proposed 330m-BOT basis 600 600 600 600 600 600 600 600 600 JNP 4th Terminal Phase 1&2 1,500 2,200 2,200 3,700 3,700 4,400 4,400 JNP total 3,800 4,200 4,200 4,200 4,800 4,800 6,300 7,000 7,000 8,500 8,500 9,200 9,200 7.6% Rewas* New Development 500 750 1,000 1,500 1,500 1,500 Dighi * New Development 500 500 500 500 500

Sub-total 4,300 4,700 4,700 5,200 5,800 5,800 7,550 8,750 9,500 11,500 12,000 12,700 12,700 9.4%

Table 5.3 (cont’d)

Port Terminal FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 CAGR

Lower West Coast

New Mangalore NMPT 50 50 50 50 250 250 250 500 500 500 500 500 500 21.2% Cochin RGT 500 - - Cochin Vallarpadam 750 750 1,000 1,000 1,000 1,000 1,000 1,500 1,500 1,500 1,500 1,500 Cochin total 500 750 750 1,000 1,000 1,000 1,000 1,000 1,500 1,500 1,500 1,500 1,500 9.6% Mormugao MPT 50 50 50 50 50 50 5050 50 50 50 50 50 0.0% Vizhinjam* 500 500 1,000 1,000 1,000 1,000 1,000 1,000

Sub-total 600 850 850 1,100 1,300 1,800 1,800 2,550 3,050 3,050 3,050 3,050 3,050 14.5%

Lower East Coast

Tuticorin Berth 7 (PSA/SICAL) 400 400 400 400 400 400 400 400 400 400 400 400 400 0.0% Tuticorin Berth 8 200 400 400 400 400 400 400 400 400 Tuticorin total 400 400 400 400 600 800 800 800 800 800 800 800 800 5.9% Chennai (Madras) CCTL 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 0.0% Chennai (Madras) 2 nd Container Terminal 750 750 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Chennai (Madras) Mega terminal 1,200 1,200 1,200 2,400 2,400 2,400 Chennai total 1,200 1,950 1,950 2,200 2,200 2,200 2,200 2,200 2,200 3,400 4,600 4,600 4,600 11.8% Ennore 1,500 1,500 1,500 2,400 2,400 2,400 2,400 2,400 Puducherry* Proposed 250 250500 500 500 500 500 500 Karaikal * Proposed 250 250 500 500 500 500 500 500 Krishnapatnam New development 250 250 500 500 1,000 1,000 1,000 1,000

Sub-total 1,600 2,350 2,350 2,600 2,800 5,250 5,250 6,000 6,900 8,600 9,800 9,800 9,800 16.3%

Table 5.3 (cont’d)

Port Terminal FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 CAGR

Central East Coast

Vishakapatnam VCT 200 200 300 300 300 300 300 300 500 500 500 500 500 7.9% Gangavaram * Proposed 200 200 200 500 750 750 750 750 Kakinada 50 50 50 50 50 50 50 50 50 50 50 50 50 0.0%

Sub-total 250 250 350 350 350 550 550 550 1,050 1,300 1,300 1,300 1,300 14.7%

Upper East Coast

Paradip PPT 50 50 50 50 50 200 200 400 400 400 400 400 400 18.9% Dhamra Proposed 500 500 500 750 750 750 750 750 Kolkata KDS 300 300 500 500 500 500 500 500 500 500 500 500 500 4.3% Haldia HDS 300 300 300 300 300 300 300 300 300 300 300 300 300 0.0% Kulpi * Proposed 500 500 500 500 500

Sub-total 650 650 850 850 850 1,500 1,500 1,700 2,450 2,450 2,450 2,450 2,450 11.7%

India container total 9,850 11,500 12,100 13,450 14,800 20,300 22,050 26,900 30,300 35,200 36,900 38,100 38,100 11.9%

Note: * Doubtful capacities – Capacities although announced may not adhere to the scheduled commissioning deadline

Source: Drewry Research

Table 5.4 Capacity share of Indian container handling ports, FY09 – FY21

Port Terminal FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Upper West Coast

Kandla KPT/ABG-Voltri 3% 3% 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% Mundra MICT 9% 8% 10% 9% 8% 6% 5% 4% 4% 3% 3% 3% 3% Mundra New Terminal 5% 7% 6% 8% 7% 5% 5% 4% 4% 3% 3% 3% 3% Mundra (South Basin) 0% 0% 0% 0% 0% 6%5% 9% 8% 7% 7% 6% 6% Mundra total 14% 14% 16% 17% 16% 17% 16% 17% 16% 13% 13% 12% 12% Pipavav GPPL 8% 7% 6% 6% 7% 5% 5% 4% 4% 3% 3% 3% 3% Hazira Shell 0% 0% 0% 0% 0% 2% 2% 3% 2% 3% 3% 3% 3% Positra Reliance 0% 0% 0% 0% 0% 0%0% 2% 2% 3% 3% 4% 4%

Sub-total 25% 23% 25% 25% 25% 27% 24% 27% 24% 24% 22% 23% 23%

Greater Mumbai

Mumbai Ballard Pier/Indra Docks 5% 4% 4% 4% 0% 0% 0% 0% 0% 0% 0% 0% 0% Mumbai Offshore Terminal 0% 0% 0% 0% 3% 2% 3% 3% 2% 3% 3% 3% 3% Mumbai total 5% 4% 4% 7% 7% 5% 6% 5% 4% 4% 4% 4% 4% JNP JNPCT 12% 10% 10% 9% 8% 6% 5% 4% 4% 3% 3% 3% 3% JNP NSCIT 12% 10% 10% 9% 8% 6% 5% 4% 4% 3% 3% 3% 3% JNP APMT/Concor 14% 16% 15% 13% 12% 9% 8% 7% 6% 5% 5% 5% 5% JNP Proposed 330m-BOT basis 0% 0% 0% 0% 4% 3% 3% 2% 2% 2% 2% 2% 2% JNP 4th Terminal Phase 1&2 0% 0% 0% 0% 0% 0% 7% 8% 7% 11% 10% 12% 12% JNP total 39% 37% 35% 31% 32% 24% 29% 26% 23% 24% 23% 24% 24% Rewas New Development 0% 0% 0% 0% 0% 0% 0% 2% 2% 3% 4% 4% 4% Dighi 0% 0% 0% 0% 0% 0% 0% 0% 2% 1% 1% 1% 1%

Sub-total 44% 41% 39% 39% 39% 29% 34% 33% 31% 33% 33% 33% 33%

Table 5.4 (cont’d)

Port Terminal FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Lower West Coast

New Mangalore NMPT 0.5% 0.4% 0.4% 0.4% 1.7% 1.2% 1.1% 1.9% 1.7% 1.4% 1.4% 1.3% 1.3% Cochin RGT 5% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Cochin Vallarpadam 0% 7% 6% 7% 7% 5% 5% 4% 5% 4% 4% 4% 4% Cochin total 5% 7% 6% 7% 7% 5% 5% 4% 5% 4% 4% 4% 4% Mormugao MPT 0.5% 0.4% 0.4% 0.4% 0.3% 0.2% 0.2% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% Vizhinjam 0% 0% 0% 0% 0% 2%2% 4% 3% 3% 3% 3% 3%

Sub-total 6% 7% 7% 8% 9% 9% 8% 9% 10% 9% 8% 8% 8%

Lower East Coast

Tuticorin Berth 7 (PSA/SICAL) 4% 3% 3% 3% 3% 2% 2% 1% 1% 1% 1% 1% 1% Tuticorin Berth 8 0% 0% 1% 2% 2% 1% 1% 1% 1% 1% 1% Tuticorin total 4% 3% 3% 3% 4% 4% 4% 3% 3% 2% 2% 2% 2% Chennai (Madras) CCTL 12% 10% 10% 9% 8% 6% 5% 4% 4% 3% 3% 3% 3% Chennai (Madras) 2 nd Container Terminal 0% 7% 6% 7% 7% 5% 5% 4% 3% 3% 3% 3% 3% Chennai (Madras) Mega terminal 3% 7% 6% 6% Chennai total 12% 17% 16% 16% 15% 11% 10% 8% 7% 10% 12% 12% 12% Ennore 0% 0% 0% 0% 0% 7% 7% 6% 8% 7% 7% 6% 6% Puducherry Proposed 0%0% 0% 0% 1%1% 2% 2% 1% 1% 1% 1% Karaikal Proposed 0% 0% 0% 0% 1% 1% 2% 2% 1% 1% 1% 1% Krishnapatnam New development 0% 0% 0% 0% 0% 1% 1% 2% 2% 3% 3% 3% 3%

Sub-total 16% 20% 19% 19% 19% 26% 24% 22% 23% 24% 27% 26% 26%

Table 5.4 (cont’d)

Port Terminal FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Central East Coast

Vishakapatnam VCT 2% 2% 2% 2% 2% 1% 1% 1% 2% 1% 1% 1% 1% Gangavaram Proposed 0% 0% 0% 0% 0% 1% 1% 1% 2% 2% 2% 2% 2% Kakinada 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Sub-total 3% 2% 3% 3% 2% 3% 2% 2% 3% 4% 4% 3% 3%

Upper East Coast

Paradip PPT 1% 0% 0% 0% 0% 1% 1% 1% 1% 1% 1% 1% 1% Dhamra Proposed 0% 0% 0% 0% 0% 2% 2% 2% 2% 2% 2% 2% 2% Kolkata KDS 3% 3% 4% 4% 3% 2% 2% 2% 2% 1% 1% 1% 1% Haldia HDS 3% 3% 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 1% Kulpi Proposed 0% 0% 0% 0% 0% 0% 0% 0% 2% 1% 1% 1% 1%

Sub-total 7% 6% 7% 6% 6% 7% 7% 6% 8% 7% 7% 6% 6%

India container total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Source: Drewry Research

5.3 Capacity projects at upper West Coast ports

Kandla

Kandla handle various commodities in addition to containers, most notably fertilisers, granite, crude & POL, general cargo, timber and steel. ABG Heavy Engineering was awarded the mandate to develop and operate a container terminal at Kandla port. ABG has tied up with PSA which has 49% stake in the ABG Kandla Container Terminal. The new container terminal which started operations in 2006-07 is intended to handle 0.5m teu each at berth number 11 and 12 of Kandla port. The container terminal has witnessed mixed fortune in terms of container handling during past couple of years with the container throughput registering an increase of around 19.6% in 2006-07 but a subsequent decrease of volume in 2007-08 and 2008-09. It was expected that the new container terminal will result in higher container throughput at Kandla port. However, increasing competition from Mundra Port and lack of container train services has hampered the expected growth in container traffic.

Kandla is known to have a number of different strategies in the form of short, medium and long-term plans. The port has a long term strategy to increase its draft to handle large size vessels. On the logistics front, Kandla stands to benefit from the Samakhiali-Palanpur railway line conversion in which the port has invested Rs 540 million ($1.1mn). This new railway connectivity will improve Kandla’s connectivity to large northern India hinterland by 130 km. Kandla also stands to benefit from its primary hinterland which is an upcoming industrial belt.

Mundra

Mundra port is located on the west coast of the Gulf of Kutch and is a multipurpose facility handling dry and liquid cargoes, fertilisers, ores and containers. Mundra International Container Terminal (MICT) owned and operated by DP World became operational during 2003 and has shown a strong growth over this period with traffic in 2006-07 and 2007-08 increasing to 571,336, and 711,552 teu respectively. However, on account of general slowdown in trade, the container throughput remained almost stagnant, with total traffic estimated at 718,000 teu in 2008-09. In 2007, Mundra Port commissioned its second terminal with Mundra Port & SEZ being the terminal operator; however volume at the terminal hasn’t picked up well with the second terminal handling close to 60,000 teu in 2008-09.

With the commissioning of the second terminal the port capacity has been further increased by half a million teu which could be further augmented to 1.2 million teu Mundra port has a big advantage of having a draft of 13.5m in channel and 17.5m at berths. Mundra also has huge land available to develop wide network of CFSs and other support infrastructure. In addition to this, port has plans to develop a new basin (South Basin) for additional cargo berths, including containers. The expected container handling capacity of the new terminal is likely to be in the range of 2.5-3.5 m teu. However, this would be developed in phases and the phase 1 is expected to be commissioned by 2013-14.

The port has advantage of being closer to various cargo centres in the northern hinterland, as compared with ports in the Greater Mumbai region. To take advantage of this proximity and to facilitate the cargo growth, the port has privately developed 57 km rail line linked to the national grid and is also well connected to the national highway network.

The port is also developing an SEZ within its vicinity area which originally was to cover 13,000 hectares. However, with the recent changes in policies, the size of the SEZ will have to be less than 5,000 hectares. The first phase of SEZ includes development of only 2,500 hectares leaving vast scope for further development.

Pipavav port

Pipavav is located in the Saurashtra region in the state of Gujarat on the northern shore of the Gulf of Cambay. The current port was incorporated as one of India’s earliest private ports (in 1992) and this facility is now operated by APMT. The port is safe guarded by natural break waters and has wave height of up to 0.5m for most of the time. The port has taken up the initiative to increase its draft from 12.5m currently to 14.5m. The project is expected to be completed in financial year 2009-10.

Initially, container operations were undertaken using one mobile harbour crane used in tandem with ships gear (where ever possible). However, the Port of Pipavav has now provided 735m of quay length for container handling along with six quay cranes for operations at the container berth. The total container handling capacity of the existing terminal is estimated at around 0.75mn teu. The port has further ordered for 2 new quay cranes and 6 RTGs to be commissioned in FY10. The development activities are expected to raise the container handling capacity to 1.1mn teu in next two – three years. The port further plans to develop additional container handling capacity by developing a berth of approximately 365m length by 2013. This proposed expansion depends upon approval from the Gujarat Maritime Board.

To take care of its rail connectivity, the Pipavav port has launched a special purpose vehicle called Pipavav Rail Corporation Limited (PRCL) with the Ministry of Railways as its partner. The port has developed three rail sidings inside the port limit in close proximity to the warehouses and the berth for efficient and speedy handling of cargo.

Hazira port

As per recent developments, Hazira Port Private Limited, which is a subsidiary of Anglo- Dutch Shell and Total of France, is planning to develop a container and general cargo terminal at Hazira. The company has earmarked an initial investment of about Rs 13-14 billion ($277-298mn) for the project. Hazira is located just 193 km north of Mumbai and is close to the main Indian trading route i.e. N.H.8 linking JNP/Mumbai with the northern cargo-generating states. The Hazira port also has the advantage of being located very close to the main rail corridor running between Delhi and Mumbai and has the potential to become an appealing port of call for container vessels. While initial carrier inertia could slow the port’s hopes to attract significant container cargo to its new facility; this is likely to only be a short-term concern. The port is easily accessible already and connectivity to the hinterland by road and rail can be improved to a large extent with slight up gradation and some new links.

However, the proposed new terminal has already been delayed by 2-3 years. In a recent development, The Adani promoted Mundra Port and SEZ Ltd (MPSEZL) has been awarded the Letter of Intent (LoI) for development of non-LNG port facilities at Hazira.

Positra

Positra port was promoted by SKIL Infrastructure with a planned investment of around 1,200 crore. Subsequently, Reliance Ports and Terminals have picked up 90% stake in the project. As per the initial plans the port will have a draft of 16m and phase 1 development would include a container terminal of 1.5m teu capacity. In addition to this port is also likely to have a shipyard and SEZ. The container terminal at Positra is expected to compete for Northern hinterland traffic with other ports in the region for which the port is planning to provide adequate rail and road connectivity. However, like many other Greenfield projects, the commissioning of the proposed new port could get delayed. Considering this, we estimate that the new port is unlikely to be commissioned before 2015-16.

5.4 Capacity projects at Greater Mumbai ports

Mumbai (Bombay)

The Port of Mumbai (MbPT) has traditionally been the principal gateway for trade moving to/from India. However, the port currently handles more bulk cargo and the share and volume of containerised cargo has been constantly decreasing. Water depth is a major limiting factor at Mumbai, with draft restricted to a maximum of only 9.7m and in many places this falls to 9.1m. The growth of competing facilities in the region continues to have a detrimental effect on Mumbai and it is noticeable that the port’s container traffic has fallen from 0.58mn teu in 1996-97 to less than 0.1mn teu in 2008-09. This reflects a trend that is set to continue over the short and medium term if the port fails to augment its container handling facilities. Part of the problem is the port’s insufficient (and inefficient) infrastructure, especially compared to other newer and more advanced regional ports.

The port trust has taken initiatives to re-establish itself in the container business. The port is going ahead with an offshore container terminal project, which initially is expected to take over the current container traffic of the port. The license agreement, between the Mumbai Port Trust (MbPT) and Indira Container Terminal Private Limited (ICTPL), promoted by Gammon India Ltd and Dragadoss SPL, Spain has been signed for the construction of offshore container terminal (OCT) on build, operate, transfer (BOT) basis.

As part of the agreement, the port’s existing container terminal has already been handed over to ICTPL, Officially, the new terminal is due to start operation in December 2010. However, as per our estimate, the new offshore terminal is unlikely to be commissioned before 2011-12, although the port has been aggressively promoting this project.

Rail and road connectivity projects, namely, Vadala-Kurla dedicated rail freight corridor project and Eastern Express Freeway project, would be part of the container terminal to facilitate faster and efficient movement of container traffic in and out of port. However, the port authorities would be required to resettle and rehabilitate about 3,000 slum-dwellers before the work on the dedicated railway freight corridor starts.

Jawaharlal Nehru Port (JNP)

JNP is one of the relatively new major ports in India on account of having only been commissioned in 1989. The port is also a good example of public and private partnership as both the Jawaharlal Nehru Port Trust (JNPT) and Nhava Sheva International Container Terminal (NSICT) have operating facilities in JNP. APMT is the second private terminal

operator at the port which is operating the third container terminal, “Gateway Terminal India Pvt. Ltd” (GTI).

Although NSICT has been operating only since 1999, it overtook JNPT’s own terminal- JNPCT in its second year of operation and reached 1mn teu mark in 2002-03. On the other hand, GTI which was expected to reach 1.3mn teu by 2011 has already reached its capacity in 2008-09. Currently all three terminals are handling more than a million teu per annum.

As a consequence of the opening of NSICT, the share of container traffic at Nhava Sheva port showed a significant shift of traffic towards NSICT in the initial years. Although both the operators have identical facilities the productivity offered by NSICT has been an instant success in luring container traffic away from the state-operated terminal. The third container terminal at JNPT has been developed and operated under a 30 year BOT concession agreement by GTI, a consortium of APM Terminals and Concor. The new terminal has a total berth length of 712m with alongside draft of 13.5m. GTI has eight post Panamax cranes with total handling capacity of around 1.3mn teu per annum.

Following are the other developmental works at JNPT:

• Further extension alongside existing NSICT berth by 330m increasing the capacity by 0.6mn teu.

• The port is also planning to develop fourth container terminal in two phases. The Board of Trustees of the port have approved to develop the fourth terminal on BOT basis. Draft Request for Qualification is prepared, after approval of the Board the same has been submitted to the Shipping ministry for approval.

• Deepening and widening of main harbour channel and JNP channel. Presently the port can handle vessels with draft of 12.5m using tidal window, so deepening of channel is very important as container ship sizes are increasing to achieve economies of scale and to accommodate increasing volumes.

• The port is well connected to N.H.4, N.H.17 and S.H.54. Now the port has formed a special purpose vehicle with National Highway Authority of India and CIDCO to strengthen its port network. The main task under this activity is to increase the number of lanes of state as well as national highways along with providing some new link for the evacuation of cargo from the port.

• Apart from the above the port is also actively strengthening roads which are inside as well as outside the port. The port is also deploying additional facilities like machineries and equipments and developing its back up facilities for the terminals it has planned.

The delay in implementation of 330m terminal and dredging is putting immense pressure on the existing terminals, which are already operating at maximum capacity. Therefore, JNP needs to expedite the implementation of its new capacity augmentation projects to maintain its market share over short and medium term.

Rewas Port

The second new development on the west coast of India, the Rewas port project represents a Build Own Operate and Transfer (BOOT) agreement between privately owned Rewas Port Ltd and Maharashtra Maritime Board. The port is located 10kms south

of JNP. The proposed new port at Rewas has plans to have dedicated, specialised container terminals. On paper, this project certainly has a lot of positives. In addition to the size of the facility it has potential to be developed as a deep draft port. The Rewas port is located near Mumbai region and can drive some benefit from the container traffic being generated in this immediate hinterland to provide initial momentum to the port. Further, proposed major SEZs in Mumbai and Navi Mumbai area, could also add to the existing cargo base in the region.

However, the implementation of the port has been delayed due to various factors. Some of the issues leading to delays are:

• Dispute between Mumbai port and Rewas Port on payment of royalty for the right of seaway. Part of the approach channel of Rewas port passes through the Mumbai port territorial water.

• Delay in transfer of land notified for the project.

• Delay in implementation of SEZ project.

Further, in phase I, Rewas port will have to develop a proper road and rail network to leverage its proximity to Mumbai and to facilitate efficient flow of traffic between various cargo centres and the proposed new facility. In addition to this phase 1 development would involve significant dredging. As per the initial estimate the dredging volume could be around 120 million cubic meters, which could be India’s largest dredging project. The port plans to have 14.5m draft in phase 1, which will subsequently be increased to 20m.

Dighi Port

Dighi port is proposed to be developed as a multi – purpose port. The plan suggests that port may develop a container terminal in Phase 2. However, there are no details available about proposed capacity, infrastructure, likely operators etc. The phase 1 development has already been delayed by 1-2 years. As per Drewry’s assessment, Dighi port is unlikely to have any significant presence in container trade over next 6-7 years.

5.5 Capacity projects at lower West Coast ports

Mormugao

Mormugao Port is a well-established port; it is primarily an iron ore exporting facility. Container handling activities at the port represent a very nominal part of its current operations. There are various initiatives underway at the port, although these are not necessarily just to improve its container handling capabilities. The major container handling related initiative at Mormugao port is to construct a cruise vessel cum container berth at Baina. The berths are proposed to be constructed through private participation. The request for qualification for BOT operator has been issued.

One area where the port has been active recently is with regard to its rail facilities. It has been modernised and brought to the same gauge as the National Indian Railway Network. Although this was primarily to support the movement of the port’s dominant cargo i.e. iron ore, container traffic can very well utilise the same facility.

Cochin

Cochin Port is located in the state of Kerala, 930 km south of Mumbai. It is a diverse port handling a mix of containers, general cargo, dry cargo and liquid bulk commodities. Current container activity is undertaken at the Rajeev Gandhi Terminal, which handled around 0.25mn teu in 2007-08, compared with a design capacity of around 500,000 teu per annum.

Cochin port is developing an International Container Transhipment Terminal (ICTT) at Vallarpadam Island. The planned capacity of the ICTT is 3mn teu and for this Cochin port has signed an agreement with DP World (DPW) in February 2005.

As per the plans, the Government has handed over the existing Rajiv Gandhi Container Terminal (RGCT) at the port to DP World for handling container cargo. Once commissioned, DPW will shift operations from RGCT to ICTT, irrespective of the traffic volumes. Though DPW container operation will transfer RGCT back to the Port Trust after it commences operations its ICTT, the Government has undertaken not to set up a competing facility to provide comfort to the investor. DP World will have complete monopoly over container cargo handling at the Kochi Port until throughput reaches 2.5mn teu at ICTT.

New Mangalore

Located in Karnataka state, New Mangalore is 170 nautical miles south of Mormugao port & 191 nautical miles north of Cochin port. It is a diverse port handling with a range of different cargoes. Its imports include wooden logs, fertilisers, sugar, liquid ammonia, crude & petro products, while export traffic comprises of iron ore concentrates, iron ore pellets, granite and plywood.

The port has 13 berths and not a single one is specially earmarked for container cargo. In fact, the port discontinued the container service to start again only in 2000 after an agreement with local shippers that the port will get at least 500 container per month. In 2008-09 the port handled around 29,000 teu, which is a miniscule amount. To further facilitate container trade, New Mangalore port has invited RFQ for development of container terminal on BOT basis. Given the current schedule, the new terminal should be commissioned by 2012-13.

Vizhinjam

Vizhinjam, a natural port, is in Tiruvananthapuram district of Kerala state and is just 10 nautical miles away from the international shipping route. The proposed site at Vizhinjam for developing a port has a natural draft of more than 20 m. It is expected that the functioning of Vizhinjam port will boost the trade and commercial activities.

The site offers the following unique advantages:

• Proximity to international shipping route and East-West shipping axis.

• Availability of 20m contour within a nautical mile off the coast.

• Minimal littoral drift along the coast and therefore minimizing the requirement for any maintenance dredging.

However, the immediate hinterland of Vizhinjam is very limited and majority of this could be overlapping with the hinterland of other competing ports in the region. Further, before development of a port, Government will have to plan and invest significant sum for providing basic infrastructure in terms of road, rail and other social amenities.

5.6 Capacity projects at lower East Coast ports

The main ports in the lower east coast of India are Chennai, Tuticorin, and Ennore. These ports are working on various plans to increase container handling capacity by creating new berths and investment in new handling equipments at existing terminals.

Chennai

Chennai, on the lower east coast of India, is a well-established multipurpose port handling in excess of 50m tonnes per annum across a variety of liquid/dry bulk and general cargo, covering everything from newsprint, to forest products to iron/steel.

In terms of container handling activities, the port awarded a terminal operating concession to DP World in November 2001. Currently, Chennai has berth length of 890m for container handling along with rail mounted quay crane and 16 rubber tyre gantry cranes. A further 350m of quay is expected with capacity eventually reaching an estimated 1.2-1.3mn teu per annum. However, this additional quay length is dependent on the shifting of iron ore cargo from Chennai to Ennore. One of the main concerns of Chennai port has been the congestion within city limits, which hinders smooth movement of containers to/from the port. This coupled with incidences of disruption of work because of labour related issues has resulted in port congestion and severe delays in the past and has also resulted in a shift of traffic to competing ports.

The Chennai port has awarded its 2nd container terminal to PSA. This terminal is aimed at providing an alternative handling facility to shippers in the region and to enhance the service standard. The quay length of the 2nd terminal will be up to 826m consisting of East Quay and South Quay-III. Around 400m of this quay length can be dredged to a depth of 13.5m, which is expected to handle fourth generation vessels. The estimated capacity of this terminal is 1mn teu per annum.

Chennai Port Trust has invited requests for qualification from prospective developers for the mega container terminal that would be set up on BOT basis. The mega terminal will have two new breakwaters with a total length of around 4 km continuous quay length, 18m alongside depth, basin area of 300 hectares and back up area of 100 hectares. The terminal can handle ultra large container ships of over 15,000 teu. The technical feasibility and financial viability reports for the terminal have been prepared. The capacity of the terminal is expected to be 4-5 mn teu per annum.

The terminal is expected to begin operations in the 12th Plan period (2012-17). As per Drewry estimates, the terminal is most likely to begin operations by 2015-16, provided two land-side infrastructure projects namely, widening of road that connects to the port and elevated corridor projects are implemented.

Ennore

Ennore port is about 24km north of Chennai Port along the coast line in the State of Tamil Nadu, India. It is the 12th major port and the first Corporatised Port in India. Ennore Port

was originally conceived as a satellite port of Chennai, primarily to handle thermal coal to meet the requirement of Tamil Nadu Electricity Board (TNEB). The scope was expanded taking into account subsequent developments such as the plan of Government of Tamil Nadu to set up:

• A 1,880 mw LNG power project in association with a Private consortium.

• A large Petro Chem Park.

• A Naphtha Cracker Plant.

In the long term scenario, the Chennai port primarily wanted to handle containerised cargo and shift a major portion of its bulk cargo to the Ennore port. This was the rationale behind planning of berths for coal (for users other than TNEB) Iron ore, LNG, POL, Chemical and other liquids and Crude to serve various industries that would come up in the proposed Petro Chem Park. These factors have contributed to the evolution of Ennore Port as a multi-functional energy port.

However, Ennore Port Limited has plans for the development of a container terminal on BOT basis for handling around 1.5-2.5m teu. The proposed new facility will have a draft of 15m and could have a quay length of 1,000m and backup area of 50 ha. Ennore port had floated an RFQ document for development of container terminal at the port and had received good response with 53 global and domestic companies buying the document. Out of these 22 companies/consortia presented their documents and the following 6 (Six) applicants were short listed as per the RFQ provisions for the next stage of bidding:-

• APM Terminals BV.

• Consortium of Group Maritime TCB, S.L, Obrascon Huarte Lain S.A (OHL S.A), GE Mauritius International Holdings and Eredene Capital PLC,

• Consortium of Gammon Infrastructure Projects Limited, Dragadoss Servicios Portuarios Y Logisticos and Leighton Contractors (India) Private Limited,

• Consortium of Nippon Yusen Kabushiki Kaisha, Evergreen Marine Corp (Taiwan) Ltd, Hyundai Merchant Marine Co. Ltd. and Zim Ports (2006) Ltd.

• Consortium of Larsen & Tubro Limited and John Keells Holdings PLC.

• Consortium of Sterlite Industries (India) Limited, EUROGATE GmbH & CO KGaA KG and Mota-Engil, S.G.P.S, S.A.

In a recent development, few consortia which had not been selected for the final RFQ process had filed a petition in the High Court challenging the final selection process. The high court has passed on a verdict in the favour of the litigants and has directed Ennore Port Ltd to reconsider its decision after it admitted petitions by five groups that challenged their exclusion from the bidding. Due to the ongoing legal tangle the project implementation is expected to get delayed and is now expected to be commissioned by 2013-14.

Tuticorin

The Port of Tuticorin is located on the lower east coast of India in Tamil Nadu state on the west side of the Gulf of Mannar and represents good geographical location with minimum

deviation in relation to the main East-West trading routes. The port has two designated berths for container operations, Berth 7, in which PSA Corp is a major shareholder and Berth 8 which remains a port trust facility. There are also general cargo berths with a limited container handling capacity.

The Container vessels calling at the Tuticorin port are primarily feeder vessels with limited lines offering direct service. The port has initiated a proposal for deepening of the harbour basin and channel to handle vessels up to 12.8m draught (i.e. from 10.7m to 12.8m) to meet out the future Container traffic and to attract more main line vessels. To get a laden draft of 12.8m, the Harbour Basin has to be dredged to a depth of 14m and the approach channel has to be dredged to a depth of 14.6m. The port also has to take steps to strengthen its connectivity by rail and road. Although, Golden Quadrilateral will bring the road to the port’s door step, but from there on the connectivity has to be improved to cater to the local traffic.

Despite various marketing efforts and the involvement of PSA Corp, container traffic growth has been slow to materialise. The port is planning to develop berth 8 as 2nd container handling facility. However, nothing much has happened on the project as the potential investors would thoroughly like to examine the future growth prospects in view of the slow traffic build up at the existing terminal. Whilst, Tuticorin is competitive due to its location (especially in order to appeal to transhipment container operators) as a gateway facility to rival the likes of Chennai and other ports in South India, it has not yet been overly successful, a position that seems unlikely to change in the near future.

Puducherry

Pondicherry Port is being developed by the consortium comprising Subhash Projects and Om Metals. As per the terms, the port developer will share 2.65% of annual operating gross revenues with the Puducherry government. As per the plan the port will have general cargo berths, bulk cargo berths, liquid terminal and container berths.

Two berths for the container terminal have been fixed in the DPR for the first phase development and one additional berth in the fourth phase of port development. The port is targeting to have 0.5mn teu capacity in phase 1, which could be an increase of around 1m teu, when the terminal operates at full capacity in Phase 4. The port would target Tamil Nadu as its hinterland and will largely compete for cargo moving from central and southern Tamil Nadu. The key cargo centres would include Salem, Coimbatore, Madurai and Tirupur. This means that Apart from Chennai and Ennore, the new container terminal will face stiff completion from Cochin and Tuticorin.

Karaikal

Karaikal port, being developed by Marg group, is located 250km south of Chennai port and 360km north of Tuticorin port. The first phase of the port is expected to start operations in 2009, with two common berths to handle coal and general cargo. The two berths will have a depth of 14m, enabling handling of ships with a cargo carrying capacity of 60,000 tonnes. In the second phase, the plan suggests that depth at the channel and at the berth will be increased to 16m, allowing ships with a cargo carrying capacity of 100,000 tonnes.

The port plans to have an exclusive berth to handle container cargo in the second phase of its development, which will primarily target the hinterland currently being served by Tuticorin, Cochin and Chennai. The new terminal will also compete with proposed container terminal at Puducherry. However, there are no details available about the

proposed container handling infrastructure to be developed at Karaikal. As per Drewry estimate, the new terminal is unlikely to be commissioned before 2013-14

5.7 Capacity projects at central East Coast ports

Visakhapatnam

Located in the northern part of the state of Andhra Pradesh, Visakhapatnam has a very limited presence in Indian container market. However, the port wants to position itself as a major container gateway for various cargo centres in the East and North India. A new container terminal was commissioned in June 2003, known as Visakha Container Terminal (VCT). This is a joint venture between the DPW and United Liner Agencies of JM Baxi & Co., which was awarded a 30 year BOT contract to operate this new terminal.

VCT is the deepest operational terminal on the East coast with a permissible draft to accommodate main line vessels of 14.9m draft. The terminal has a dedicated rail facility to handle full rake of 45 wagons. The port has road connectivity with NH 5 which allows attracting cargo from the immediate hinterlands. The rail connectivity is also good and port has received cargo from its secondary hinterland, Delhi and Raipur. However, the container traffic has shown a steady increase over the last three years. In 2008-09 VCT handled 90,000 teu compared to 71,120 teu in 2007-08. This represents a strong Y-o-Y growth albeit on a very small base. The port has rail link with ICDs at Hyderabad and Nagpur but so far VCT has not been able to attract significant volumes from these hinterland and is unable to promote itself as an alternate to JNPT and Chennai. Even, terminal’s efforts to divert traffic from northern hinterland have not yielded desired results.

Gangavaram

Gangavaram Port is being developed to cater to the present and future requirements of industries located in the hinterland and the proposed Special Economic Zone, which shall be located at a distance of 20kms from the port. Gangavaram Port Limited (GPL), a special purpose company was promoted by a consortium of D.V.S. Raju and Dubai Ports for developing and operating Gangavaram Port. Subsequently, Malaysian firm Integrax Berhad has replaced DPW and has acquired 20% stake in Gangavaram port. The new port is being developed as all weather, deepwater, multi-purpose world-class port facility. The Port development master plan has been finalized keeping in view the design vessel size of 300,000 dwt. The main features of the port are:

• Breakwaters providing complete protection to berths from waves and swell to facilitate all weather port operations.

• Navigation channel providing adequate maneuvering area for large vessels.

• Dry Bulk and General Cargo berths for handling iron-ore, coal, limestone, alumina, iron-steel products, food grains, etc. and liquid bulk jetties for handling POL cargo.

• Marine Oil Terminal consisting of Single Point Mooring, sub-sea pipeline and Crude Oil Tank farm.

• Provision for developing full-fledged container terminal.

• Provision for building dry dock for large vessels.

• Adequate backup area for developing stacking yards, covered storage sheds, container yard, container freight station etc.

• Rail and road access up to the stacking yards, storage sheds and container yard.

The Port initially envisages handling dry bulk and general cargoes. Initially the depth at iron-ore berth will be limited to 20mt, sufficient to accommodate cape size vessel of 200,000 dwt, but subsequently it will be increased to accommodate vessels of 300,000 dwt.

A four-lane expressway of 3.8 kms is being developed by Government of Andhra Pradesh to connect port with NH 5 running from Chennai to Kolkata. A Greenfield alignment of around 10 km connects the new port to the main broad gauge line of Chennai/Vishakhapatnam/Howrah rail corridor, thus giving access to various cargo centres in northern and southern India.

Considering the development plans, it is expected that Gangavaram port will not have a dedicated container terminal in phase 1 but the port can develop a dedicated container terminal in phase 2.

Kakinada

The port of Kakinada is situated on the east coast of India almost midway between Kolkata and Chennai close to the entrance of the Kakinada River. The port facilities were privatised in 1999 under an operate-manage-share-transfer scheme to Cocanada Port Co Pvt Ltd, a consortium in which Precious Shipping, SSA and Konsortium Logistics Berhad were all members. However, with SSA pulling out of the deal, citing delays to construction as the main reason, the consortium was renamed Kakinada Seaports Pvt Ltd.

Although this facility is modern (especially when compared to Kolkata) and can offer better container handling infrastructure, it has struggled to attract significant volume or shipping line customers, with shippers and the ocean carriers preferring to utilise the established gateways of Kolkata/Haldia to the north and Chennai in the south.

Krishnapatnam

Krishnapatnam Port Company has been awarded the 50 year BOOST concession by the Andhra Pradesh Government to develop the existing minor port into a modern deep draft multipurpose port. Krishnapatnam port development plan includes:

• Approximately 10.8 Kms of quay length.

• Deep draft of 14-19 meters.

• Hinterland connectivity by rail and road.

• Ancillary port services.

Phase 1 development includes development of iron-ore and coal berths with a capacity to handle vessels of up to 65,000 dwt. The iron ore berths were commissioned in 2008. In the phase 1, port has developed 23 km rail line to connect Krishnapatnam port to the existing

Venkatachalam siding on the main north-south rail route. Simultaneously, Krishnapatnam Port Company is planning to develop a container terminal designed to handle post Panamax vessels. Port is also implementing a rail project, which includes laying of 114 km long railway track to connect Obulavaripalli in Cuddapah district to provide direct rail connectivity for iron ore movement from Bellary district.

Krishnapatnam is well located to attract traffic from Southern and Northern Districts of Karnataka and Northern districts of Tamil Nadu. It can also become a natural gateway for key cargo centers like Hyderabad, Guntur and Cuddapah in Andhra Pradesh.

5.8 Capacity projects at upper East Coast ports

Paradip

The port of Paradip serves the eastern and central hinterland and primarily deals in dry bulk cargo. The port has a draft of 13m and has 14 berths. The port has dedicated coal and iron ore handling berths and handles limited container volumes on account of lack of demand coupled with limited container handling facilities. However, now the port has invited bids for development of multipurpose berths to handle clean cargo including containers. The new berths are part of development of southern dock complex. This new facility is likely to provide container handling capacity of around 0.4-0.5mn teu per annum. The ports hinterland will primarily include Orissa and Chhattisgarh. Currently, new increased investments in steel, mining and associated sectors in port’s hinterland are expected to boost to container traffic. However, Paradip can face stiff completion from exiting ports like Visakhapatnam and Haldia/Kolkata and new proposed ports like Dhamra.

Dhamra

Dhamra port is being built under the Build Own Operate Transfer (BOOT) plan by the L&T and Tata joint venture company and is located between Paradip and Haldia port on the upper east coast of India. It is expected to have a draught of 18 metres. Phase-I, includes two fully mechanized berths of 350 meters each for handling imports of coking coal, steam/thermal coal, limestone and export of iron ore. The estimated capacity of Phase-I is 25 million MT per annum. A railway line connecting the port to the Howrah-Chennai mainline is also being constructed. Phase-I is expected to be ready for commercial operation by mid of 2010.

While phase-I is primarily aimed at dry bulk cargo, the second phase is likely to have dedicated container handling berths with adequate infrastructure. The Plan suggests that the port will have the facilities for handling clean cargo like steel and containers in the southern part of the port. The port will serve Orissa, Jharkhand and southern part of West Bengal. Dhamra port can attract traffic from key cargo centres in east India which currently have no option but to use inefficient Kolkata and Haldia ports. Dhamra’s ability to handle deep draft vessels could result in substantial savings for exporters and importers in the region.

Kolkata/Haldia

Kolkata port is a riverine port with two docks-Kolkata and Haldia. This is a major commercial hub of East India and generates significant volume of containers. It is the natural gateway port for land locked states in east India and neighbouring countries like

Nepal and Bhutan. It is a preferred port for Nepal cargo, as Concor has a dedicated rail service between KDS and Nepal.The port has limited competition in the region in terms of container handling facility which helps it in achieving dominant market share.

Being a riverine port, it has a shallow draft of around 7m limiting the size of vessels which could be handled thus resulting small parcel sizes and higher shipping freight rates. The facility requires significant investment in annual maintenance dredging to maintain the minimum draft, the major reason being heavy silting problem at the port. The port’s container handling facility provides limited mechanisation which leads to lower productivity and slower turnaround of vessels.

Kulpi

Kulpi, located 78 km south of Kolkata is the new proposed Greenfield container port being built under the BOOT plan. The new port is projected to handle 1 million tonnes of cargo per annum. The port is proposed in the Kulpi Economic Zone which is proposed to combine all weather port facilities, environment-friendly ship breaking yard, and an industrial park as a single integrated hub.

Dubai-based DP World, world’s fourth largest port operator, took over the greenfield Kulpi Port project as part of its acquisition of P&O in February 2006. The first phase of development was proposed to have a 450m quay while the second phase would add another 450m. DP World's partners in Kulpi Port are Indian firm MKJ Enterprises and the West Bengal Industrial Development Corporation (WBIDC).

Currently, the development is being held up in the absence of an agreement between the Bengal government and the Calcutta Port Trust (CPT), the custodian of Bengal’s two existing ports. A memorandum of understanding was signed between the CPT and the state government for Kulpi in 2001. The memorandum has to be converted into a formal agreement. Also, relocation and rehabilitation of local population affected by the project had turned into a major political issue which is another major reason for project delay.

5.9 SWOT analysis of port facilities in Lower West & Lower-East India

Lower West Coast Strengths Weaknesses

Plans to develop a new cruise cum container Limited container volumes and capacity – no berth. known future expansion plans for this traffic all boxes are handled at general cargo berths only. Mormugao State government providing incentives to Small immediate hinterland limits growth various industries, which could boost prospects for container traffic. container traffic.

Exim trade is again unbalanced with more of Competition from Ports in Mumbai. import than export.

Land and water front available for Limited container traffic in the immediate development of dedicated container terminal. hinterland. New Mangalore

Good road and rail links and connected to Competition from new developments at Cochin. Goa and Mumbai by Konkan Railway. Exim trade is only 74% balanced indicating more of export than import.

Major trade and commercial hub of Kerala, Large common hinterland shared by Chennai providing significant volumes. and Tuticorin.

Privatisation of existing container terminal Inadequate rail connectivity hampering cargo expected to result in higher growth in movement from secondary hinterland. container traffic. Cochin Plans to develop deep draft container terminal Kerala state is not one of the favoured at Vallarpadam, which will be competing with destinations for new investments, thus limiting Colombo for transhipment traffic. future cargo growth in immediate hinterland.

Frequent strikes and labour unrest results in delays and congestion.

Natural draft of up to 23 metres and can The rail and road network has to be developed. accommodate ships with displacements of up The port is 8-10 NE km away from N.H.47 to 300,000 tons, with little or no dredging. connecting Salem to Kanyakumari and the southern railway BG line (Tiruvananthpuram- Nagercoil).

Closer to the main international shipping lanes Connectivity development may cause some re- Vizhinjam than any other current port in India. locations issues.

Requires very little maintenance dredging, Too far from main cargo hinterland of north due to its sheltered location. No mangrove, west India, can initially cater to only peninsular sand dunes and fishing zones within the India’s cargo. region.

Greenfield development will be quite expensive, affecting economic viability of the project.

Cont’d

Lower East Coast Strengths Weaknesses

Traditional gateway port in the region. Still need to improve overall productivity.

DPW as terminal operator. Not very cordial relationship between port labour and terminal operator.

Large local hinterland, well-served by CFS Draft not adequate to handle main line vessels. facilities. Good road and rail links with hinterland. Chennai (Madras) Existing industries like Auto, textile, IT & Congestion in Chennai city resulting in major delays Electronics in expansion mode thus in evacuation of containers. Chennai has restriction promising increasing container volumes. on Truck movement during day time.

Second container terminal by PSA to Delay in implementation of elevated corridor project. provide additional handling capacity. Plans to develop a new mega container terminal.

Adequate land and waterfront available for Will have to compete with Chennai for container future expansion. traffic.

Proximity to Chennai provides access to Rail and road network needs to be augmented for strong hinterland and other supporting handling containers. infrastructure like CFS, CHA’s, Ennore warehouses etc.

Away from the city congestion, good Delay in project implementation. alternate to Chennai port.

15m draft for handling modern container vessels.

Good geographical location, offering Draft inadequate to handle mainline vessels. minimum deviation from main East-west shipping route.

Experience and expertise of PSA Corp. Weak immediate hinterland, thus largely dependent Tuticorin Sethu Samundram canal expected to on common secondary hinterland. boost coastal traffic. Expected increase in competition from Cochin.

Planning to develop a second container Will have to make huge investments in dredging to terminal to provide additional capacity. increase the existing draft at the port.

Proposed draft of 14.5 can facilitate Small immediate hinterland, generating limited handling of post-panamax container container traffic. vessels,, giving completive edge over Tuticorin.

Proximity to Southern Tamil Nadu Intense competition from Chennai and proposed hinterland. Ennore container terminal.

Puducherry Away from the city congestion can provide Large common secondary hinterland shared by an alternate to Chennai port. multiple ports.

Lack of supporting infrastructure like CFSs, CHAs, and logistics players could result in lower market share.

Needs to develop last mile rail and road connectivity to effectively evacuate container traffic.

Cont’d

Lower East Coast Strengths Weaknesses

Proposed draft of 14.5 can facilitate handling Limited container traffic generated in the of post-panamax container vessels,, giving immediate hinterland. completive edge over Tuticorin.

Proximity to Southern Tamil Nadu hinterland. Intense competition from Chennai and proposed Ennore container terminal. Karaikal Large common secondary hinterland shared by multiple ports.

Lack of supporting infrastructure like CFSs, CHAs, and logistics players could result in lower market share.

5.10 Port competitive analysis

Ports compete with each other on various parameters in their endeavour to attract greater volumes. With increasing privatisation and emergence of global terminal operators, competition is visible both at the global and regional level. In the current trading environment, most of the world’s leading liner companies are taking steps to improve their margins, both by raising freight rates and slashing their operating expenses. However, given the historic nature of the business and the changing supply-demand scenario, cost- reduction has been the key agenda for most of the companies involved.

Hence, port user charges, especially those relating to the vessel, are important in this context and a port/terminal with a lower tariff structure is, therefore, in with a good chance of securing new business.

However, price alone will not force the issue. Any reputed large carrier for instance, will want to be certain that the infrastructure, cargo-handling equipment and terminal management methods are all in place not only to ensure a smooth transfer of the business but consistently reliable and efficient service thereafter. Without this, a carrier’s operating expenses would rise and customer service could be destroyed with the result that shippers switch to using other carriers, thereby threatening cash flow and revenues.

Taking these issues fully into account, a port user would probably apply the following set of criteria in choosing its port/terminal:

Port infrastructure

• Container handling capacity.

• Number of quay cranes.

• Depth in the channel and alongside berths.

• Effective rail and road infrastructure for efficient evacuation of containers.

• Adequate storage area and CFS facilities.

Port efficiency

• Pre berthing delays.

• Average turnaround time of the ships.

Relationship of port operator with users

• Influence of port operators on the shipping lines and their ability to attract cargo.

• Stake of shipping lines/logistics companies in port operating company.

• Relationship with logistics companies and freight forwarders.

Deviation from main trade routes

• Deviation from the international trade routes.

• Impact of deviation on the total shipping costs.

Tariff levels

• Traffic levels at competing ports.

• Flexibility to change vessel and cargo related charges.

• Volume discounts and other incentives.

Hinterland connectivity cost

• Proximity to cargo centres.

• Cost in terms of money and time to transport cargo/containers between various cargo centres in the hinterland and gateway ports.

• Frequency of rail service and availability of trailers for road movement.

• Level of rail and road congestion.

5.10.1 Rail and road connectivity analysis

The competitive positioning of a port is greatly dependent upon good rail and road connectivity from the port to cargo centres at key hinterland locations. A good level of hinterland connectivity helps to reduce the inland transportation cost and transit time, which thereby results in an overall reduction of logistics costs, making the port’s position more favourable. Ports in the Southern India share a limited common hinterland among themselves. Hence, in what is going to be a competitive environment, the port(s) that integrate a greater rail and road network would leverage their competitive positioning to achieve an accelerated growth of container traffic.

The section focuses on the current road and rail connectivity of existing ports in Southern India and ongoing/proposed projects to improve both rail and road connectivity to these ports. The rail and road connectivity projects are being undertaken under the port connectivity programmes. The tables below provide overview of current status of port connectivity projects in India and new projects being undertaken/proposed to improve connectivity to these ports.

5.10.2 Existing Connectivity at Indian ports

Port Road Rail

Chennai a. Chennai is connected to NH-5, NH-4 and NH-45. Port is linked to Southern Railway network via Chennai Beach Railway which connects ChPT Station to Southern parts of Tamil Nadu and via Royapuram which connects Southern Railway Trunk line to Kolkata, New Delhi, Bangalore, Coimbatore etc. Ennore a. Ennore port is connected to three national highways NH-4, 5 & 45 which a. Ennore Port is connected by rail via two stations within Chennai connect it to rest of India. namely, Attipattu and Attipattu Pudunagar. b. Ennore is currently connected to these national highways through Port Access Road; the NCTPS approach road, TPP road, the Inner Ring Road and the Chennai bypass. Tuticorin a. 2-lane NH-45 B Tuticorin to Ettaiapuram- Aruppukottai-Madurai Port is connected by broad gauge (BG) rail link with major cities b. 2-lane NH-7 Tirunelvei to Madurai-Erode, Salem and Bangalore like Tirunelveli in the west, Nagercoil and Trivandrum in the south c. 2-lane NH7A, Tuticorin to Tirunelveli. and Madurai, Trichi, Chennai and Bangalore in the north. Port is also linked to ICDs at Madurai, Tirupur, Karur, Salem, Coimbatore, Chennai and Bangalore. Cochin The present road connectivity of the Port is through two bridges – one each Port is served by a single line 8 km long section of broad gauge, on Mattanchery channel and Ernakulum Channel linking the Port to mainland. which branches off at Ernakulum from the main line from Shornur- There is also a link road between the Wellingdon Island and NH-47 bypass. Trivandrum. New Mangalore Port The present road connectivity of the Port is through NH-48 (Bangalore- New Mangalore Port Trust (NMPT) is served by a Broad Guage Mangalore), NH-17 (Cochin-Goa-Mangalore) and NH-13 (Sholapur- line which is connected with Southern part of the country through Mangalore). Mangalore, Kerala State and Chennai. The Konkan Railway linking Mangalore with Mumbai is in operation and it is connected to northern part of the country.

5.10.3 Future connectivity projects at Indian ports

Port Road Rail

Chennai a. Expansion of Chennai-Ennore port connecting road b. Chennai Port-Maduravoyal elevated corridor” which is supposed to provide direct connectivity for container trailers from outside the city to the Chennai port without entering the city roads. This would be a dedicated elevated expressway from southern gate of the port to Maduravoyal leading to the National Highway 4. Ennore a. TPP road and the NCTPS road are being widened and strengthened as a a. Ennore port is developing the rail connectivity in phases. In four lane road Phase-I, connectivity is to be provided for the coal and iron ore b. a separate road link of 21Km length is being developed which would be the stack yards and Phase-II, connectivity to the container terminal access to the road from its northern side. The road is called Northern port b. Ennore Port has planned to spend around Rs 2.2 Billion, as access road which would connect NH5 and would be a four lane road. its share in cost, towards developing a new 88-km broad gauge railway line between Atthipattu in Thiruvallur district of Tamil Nadu to Puthur in Chittor district of Andhra Pradesh. Tuticorin a.NH-7A (Tuticorin - Tirunelveli section) b. 4-laning of NH 45B Cochin a. NHAI is implementing a project for four laning of 10.40 km stretch of NH-47 Rail connectivity between Idappalli and ICTT, Vallarpadam – from km 348/382 to km 358/750 linking of track between Idappalli and Vallapadam (excluding b. 4-Lane NH connectivity to Vallarapadam. Idappalli yard and including yard arrangements at Vallapadam). New Mangalore Port NH-17 (Suratkal-Nantur Section), NH-48 (Padil Bantwal Section) km 348/382 - km 358 750 Including 5 Major Bridges

Table 5.5 Road distance between cargo centers and ports (Km)

Road Distance (Kms) Distance Adv/Disadv Road Distance (Kms)

City State Chennai Chennai Tuticorin Cochin Vizhinjam Mangalore Tuticorin Cochin Vizhinjam Mangalore /Ennore /Ennore

Wayanaad Kerala 616 557 271 478 271 (138) (79) 207 0 207 Kannur Kerala 642 720 299 506 299 (136) (214) 207 0 207 Trichur Kerala 632 477 86 289 86 (343) (188) 203 0 203 Alleppey Kerala 726 285 51 162 51 (564) (123) 111 0 111 Kollam Kerala 738 201 135 80 135 (658) (121) (55) 0 (55) Trivandrum Kerala 798 209 204 14 204 (784) (195) (190) 0 (190) Kottayam Kerala 666 252 62 185 62 (481) (67) 123 0 123 Pallakad Kerala 569 386 141 349 141 (220) (37) 208 0 208 Calicut Kerala 684 545 206 411 206 (273) (134) 205 0 205 Mangalore Karnataka 678 764 447 660 - (18) (104) 213 0 660 Bangalore Karnataka 331 581 533 733 347 402 152 200 0 386 Cochin Kerala 684 304 - 215 447 (469) (89) 215 0 (232) Pondicherry UT 165 459 591 663 643 498 204 72 0 20 Chennai Tamil N - 579 684 783 678 783 204 99 0 105 Coimbatore Tamil N 491 352 193 414 449 (77) 62 221 0 (35)

Tuticorin Tamil N 579 - 304 194 764 (385) 194 (110) 0 (570)

Karur Tamil N 400 270 290 433 520 33 163 143 0 (87)

Madurai Tamil N 444 135 270 295 629 (149) 160 25 0 (334)

Salem Tamil N 326 378 358 526 500 200 148 168 0 26

Note: Figures in red show disadvantage for Vizhinjam port Source: Compiled by Drewry

Table 5.6 Road haulage cost advantage/disadvantage for Vizhinjam port (Rs.)

Road Distance (Kms) Distance Adv/Disadv Road Distance (Kms)

City State Chennai Chennai /Ennore Tuticorin Cochin Vizhinjam Mangalore /Ennore Tuticorin Cochin Vizhinjam Mangalore

Wayanaad Kerala 21,560 19,495 9,485 16,730 9,485 4,830 2,765 (7,245) 0 (7,245) Kannur Kerala 22,470 25,200 10,465 17,710 10,465 4,760 7,490 (7,245) 0 (7,245) Trichur Kerala 22,120 16,695 3,010 10,115 3,010 12,005 6,580 (7,105) 0 (7,105) Alleppey Kerala 25,410 9,975 1,785 5,670 1,785 19,740 4,305 (3,885) 0 (3,885) Kollam Kerala 25,830 7,035 4,725 2,800 4,725 23,030 4,235 1,925 0 1,925 Trivandrum Kerala 27,930 7,315 7,140 490 7,140 27,440 6,825 6,650 0 6,650 Kottayam Kerala 23,310 8,820 2,170 6,475 2,170 16,835 2,345 (4,305) 0 (4,305) Pallakad Kerala 19,915 13,510 4,935 12,215 4,935 7,700 1,295 (7,280) 0 (7,280) Calicut Kerala 23,940 19,075 7,210 14,385 7,210 9,555 4,690 (7,175) 0 (7,175) Mangalore Karnataka 23,730 26,740 15,645 23,100 - 630 3,640 (7,455) 0 (23,100) Bangalore Karnataka 11,585 20,335 18,655 25,655 12,145 (14,070) (5,320) (7,000) 0 (13,510) Cochin Kerala 23,940 10,640 - 7,525 15,645 16,415 3,115 (7,525) 0 8,120 Pondicherry UT 5,775 16,065 20,685 23,205 22,505 (17,430) (7,140) (2,520) 0 (700) Chennai Tamil N - 20,265 23,940 27,405 23,730 (27,405) (7,140) (3,465) 0 (3,675) Coimbatore Tamil N 17,185 12,320 6,755 14,490 15,715 2,695 (2,170) (7,735) 0 1,225

Tuticorin Tamil N 20,265 - 10,640 6,790 26,740 13,475 (6,790) 3,850 0 19,950

Karur Tamil N 14,000 9,450 10,150 15,155 18,200 (1,155) (5,705) (5,005) 0 3,045

Madurai Tamil N 15,540 4,725 9,450 10,325 22,015 5,215 (5,600) (875) 0 11,690

Salem Tamil N 11,410 13,230 12,530 18,410 17,500 (7,000) (5,180) (5,880) 0 (910)

Source: Compiled by Drewry

5.10.4 Port efficiency

The performance of a port is a definitive indicator of the container business handling capacity at the facility and is one of the major factors of port attractiveness for liner companies. Table 5.7 provides an overview of the operating performance of some of the competing ports in the South Indian region for year 2008-09. Chennai, Tuticorin, Cochin and New Mangalore ports are currently operational on the southern coast of India.

It can be seen that vessel turn-around time is high at Chennai and New Mangalore ports as compared to Tuticorin and Cochin. Chennai is the poorest performer in terms of both vessel turn around and average pre berthing time in the region. This is in spite of the fact that it the largest port in the region and caters to the biggest and fastest growing hinterland in South India. The port also has a high berth occupancy rate however it’s the Tuticorin port which seems to be most congested with almost 110% of berth occupancy rate.

Table 5.7 Port performance indicators for competing facilities in South Indian region

Ports Chennai Tuticorin Cochin Mangalore

Average Pre-berthing time (hrs.) 21.20 11.04 13.07 4.80 Vessel turn around (days) 2.50 1.23 1.19 1.90 Capacity utilisation (%) 95% 110% 52% 58% Crane productivity (moves/hrs) 26 27 26 n.a CY productivity (teu / hectare pa) 63,500 54,875 37,143 2,900 Average parcel size (tonnes) 25,315 12,795 9,281 4,975 Average parcel size (teu *) 1,875 948 687 369

*Note: 1) Crane productivity data based on market survey 3) Chennai data contains only the DPW container terminal Source: Indian Ports Association / Complied by Drewry

5.10.5 Competitive benchmarking of Vizhinjam’s competing Ports

Vizhinjam port is primarily competing with Chennai, Tuticorin, Cochin and for its containerised cargo; however the port is also competing with international ports like Colombo, Dubai and Singapore for international transhipment traffic. Vizhinjam would primarily erode market share of Cochin port due to the availability of similar hinterland and positioning itself as an ideal gateway port compared to Cochin for the southern Kerala cargo which contributes around 40% of the Kerala traffic. Table 5.8 provides a comparative analysis of Vizhinjam based on seven parameters of port & terminal performance measure. The comparison is qualitative and is primarily based on interview from various stakeholders in the container business. The ports have been rated from 1 to 5 on the basis of various parameters with 1 as a poor rating increasing to 5 as an excellent rating. Each parameter has been assigned a weightage which represents the importance of that factor in terms of port attractiveness for shipping lines and shippers.

The various aspects of container handling infrastructure which have been considered as follows:-

Container Handling Infrastructure

Available quay length, yard area and number quay cranes available with the terminal.

Rail/Road Connectivity

It takes into consideration the dedicated rail sidings available for container transportation to/from the terminal and the frequency of rail services to various hinterlands. Road connectivity factor shows the strength of the port in terms of dedicated road with commensurate length and width for container evacuation.

Draft

The all time available draft at the seaport.

Mainline Vessel Services

The number and frequency of mainline vessel calls at the terminal.

Turnaround time for vessels

Turnaround time is the average time taken for a vessel to complete its operation at the port and move forward to next destination on its voyage.

Location

Proximity of the port to its hinterland

Parcel Size

The total numbers of containers that a vessel loads and unloads during a port call.

Table 5.8 Vizhinjam’s port’s competitive analysis

Weightage Factors Chennai Cochin Tuticorin Mangalore Colombo Dubai Singapore

15% Container Handling 3.0 2.0 2.0 1 3 5 5 Infrastructure 20% Rail/Road Connectivity 2.0 3.0 2.0 2 3 5 5 12% Draft 3.0 2.0 2.0 2 5 5 5 12% Mainline Services 2.0 1.0 1.0 1 5 5 5 15% Turnaround time for 3.0 4.0 4.0 2 4 5 5 vessels 20% Location 4.0 2.0 3.0 1 5 4 5 6% Average Parcel Size 3.0 3.0 3.0 2 5 5 5

100% Average Score 2.9 2.4 2.4 1.5 4.2 4.8 5

Note: 1 = Poor, 3 = Average, 5 = Excellent Source: Drewry Research

5.10.6 Relationship of port operators with shipping lines and logistic companies

The ownership pattern of a port can play a key role in attracting shipping lines to a new port. Major shipping lines like Maersk, MSC and APL control a significant market share and a decision by them to shift from one port to another could result in a major change in market shares of competing ports in the region. Major shipping lines are also looking for strategic partnership with ports to have better control over port operations and to provide more reliable and cost effective service. This trend is clearly evident in international and Indian scenario:

• Shifting of Maersk from Dubai to APMT’s container terminal at Salalah.

• Shifting of Maersk from Singapore to Tanjung Pelepas in Malaysia.

• A P Moller – Maersk group starting its own container terminal at Nhava Sheva.

In the Indian scenario, APMT, owns and operates the port of Pipavav as well as JNP’s third container terminal GTI along with Concor. GTI enjoys an advantage over competing facilities due to its relationship with Maersk, the largest shipping line in the world and for Indian container traffic. GTI benefits from the inland infrastructure that its strategic partner Concor owns. Additionally, it directly benefits from Maersk’s high market share in India.

However, such a relationship sometimes acts as a barrier for attracting other major shipping lines at APMT’s facility, as most shipping lines consider APMT and Maersk as one entity and fear that APMT may be biased towards Maersk. Even in non APMT terminals Maersk has a tendency to negotiate with terminal operators for berthing priority over all other lines, guaranteed access to a minimum number of cranes and automatic adjustment of handling rates to the lowest negotiated by any other shipping line.

In such a scenario, port operators like DP World, PSA and others could leverage their independent status to attract all shipping lines, as they provide the required confidence regarding equal consideration of trade interest to each of the users.

On the North Western coast of India APMT owns/operates two container terminals and is predominantly supported by Maersk Line in terms of its container throughput. The port of Pipavav till mid 2008 was only supported by Maersk Line volumes and was not able to attract other shipping lines. Kandla port also enjoys good support from Maersk Line which is the largest operator at that port. The shipping line is understood to enjoy favourable tariff at the Kandla port. Mundra on the other hand, has been predominantly supported by MSC which has been the largest contributor of container volumes at the port. As per unofficial reports, MSC is expected to shift its calls from the MICT terminal at Mundra to the Adani terminal which is the second container terminal at the port on account of favourable tariff terms offered by the port operator.

6. Transhipment traffic analysis – Indian Subcontinent

Objective

To identify

Mainline & feeder volumes generated by ports in the ISC

Total available transhipment market of the ISC

Share of ISC ports in the transhipment traffic

Share of hubs outside the ISC in handling region’s transhipment traffic

Hub port economics

Key Findings

• The ISC gateway container volumes have increased from 4.3 Mn Teu in 1997 to 14.7Mn Teus in 2008. The west coast of India contributes the largest share (50%) of container traffic in the region. Almost 2.5% of the total gateway traffic is regional ISC traffic, 66% of the gateway traffic is served through feeder services and rest 31.5% is carried on mainline vessels in the region. Colombo is the largest transhipment hub for ISC traffic in the region and handles around 35% of the total ISC transhipment traffic, 4.1% of the transhipment volume is handled by ports within the ISC while almost 61% of the rest transhipment traffic of the region is handled by hub ports outside ISC, namely Singapore, Salalah, Jebel Ali, etc.

• Although, the West coast of India and Pakistan combined provide the largest container traffic market in the region, the share of feeder services in these regions has steadily decreased over the years. Currently, an estimated 12-15% of the total traffic of this region is a potential transhipment target market. On the other hand, the share of container traffic from Bangladesh has a potential transhipment market as high as 95%, 70% in the case of east coast of India and 60% for the south coast of India.

Conclusion

Vizhinjam port faces competition for a transhipment market not only from the port of Colombo but also from major transhipment hubs outside the ISC region. However, the east coast of India, Bangladesh and south coast of India may be a target market of transhipment traffic for Vizhinjam.

Transhipment takes various forms. The traditional and most easily identifiable occur where export cargo is taken by feeder vessel or cargo ferry from one country to another, usually in the same continent, for onward shipment on another vessel to a third port usually in another continent. Import cargo follows the reverse process. This type of transhipment can be controlled by either the shipping line or by the shipper.

Line transhipment arises from co-ordinated schedules of mainline and feeder vessels controlled by the line. Shipper transhipment is more opportunistic, exploiting the services of different lines or modes to reduce transit times or costs. A different form of transhipment, relay - is wholly controlled by the individual shipping line, consortia or alliance concerned. This involves cargo carried on one main line vessel relayed to another main line vessel at a hub port. An example would be cargo from East Africa to North America, being carried on a mainline vessel on the trade leg from East Africa to Europe, and then transhipped to another mainline vessel on the trans-Atlantic trade leg. Co- ordination of sailing schedules and concentration of calls at one port are needed to make this operation efficient and attractive to shippers. While all transhipment is more sensitive to port costs and efficiency of handling than direct cargo, relay traffic is particularly sensitive, as the range of ports which can act as a hub can extend over a wide area.

Transhipment is referred to as Hub-Spoke Network in shipping parlance. As the name suggests, a marine hub-and-spoke network consists of a central “hub” port, and a series of “spokes” serving regional “feeder” ports. Accordingly, commodities are transported via hubs, to feeder ports, and onwards to their final destinations, or vice versa.

Hub Without a hub, or series of hubs, there is no hub-and-spoke network. A “hub port” is one where commodities, arriving on large vessels (typically 4000+teu (Twenty-food Equivalent Unit) container vessels), are transhipped for onward shipping via smaller vessels to various destination ports. Sometimes, also, cargo is transhipped or “relayed” to other mainline services using similar-sized vessels, at a hub. International examples of hub ports include Colombo, Singapore, Algeciras, and Freeport where in each case, there is significant such transhipment activity.

Hub vs. Gateway Ports A distinction should be made between hub and gateway ports. A hub often has a relatively small local cargo base, is located close to main shipping routes and features feeder service(s) to other ports. Gateway ports, on the other hand, tend to have a local or captive market and also focus on intermodal connections and gate activity. A port can be both a hub and gateway port, though in these cases, gateway activities are generally considered of most importance to ports given the higher volume of gateway vs. hub traffic handled. Nevertheless, the point remains that gateway and hub ports are not mutually exclusive.

Feedering Feedering involves the movement of commodities (typically containers) from a hub port to a regional feeder port via marine transport, or vice versa.

There are two types of feeder service:

• Common user services are provided by independent, third-party carriers that serve a number of clients. Some also carry regional cargo as well, usually starting by making use of empty containers being repositioned. Some regional carriers also carry feeder cargo.

• Dedicated feeder services are operated by the mainline carriers themselves (e.g. Maersk, Orient Overseas Container Line (OOCL), Mediterranean Shipping Company (MSC), and CMA/CGM). These types of service can serve as an alternative to a direct call by a large vessel or result from volumes on a common user service growing to the point of justifying a dedicated feeder service.

There can also be joint services between common user and dedicated feeder operators. One benefit of both types of feeder service is that they create access to new markets not necessarily serviced by direct calls.

The sizes of feeder ships vary, but they typically carry less than 1,500 teu. Average sizes can range from 510 teu in the Middle East to 920 teu in the Indian sub-Continent. Dedicated feeders range from 980 teu in the Middle East to 1,470 teu in Africa. In North Europe, the average is 620 teu for common carriers and 1,060 teu for dedicated vessels. Typical speeds for a feeder-type vessel are 15.5 knots. It is important to note that the time savings with faster vessels often does not justify the additional fuel costs resulting from faster speeds.

Most feeder operators charter rather than own vessels. This allows for maximum flexibility and effective capacity utilization since vessels can easily be downsized or upsized according to market conditions. Where cabotage is not an issue, this is easily done because vessels are “traded” on an open market and are readily available.

Pure Transhipment Hubs “Pure” hubs are ports with a transhipment incidence of over 80 percent. In the Mediterranean, pure transhipment hubs are with little or no gateway business. The best example may be the Medcenter Container Terminal in Gioia Tauro, located on the tip of mainland Italy. It has a transhipment incidence of over 95 percent.

As with gateways, hubs can only develop where shipping lines call. Without the critical mass of volume resulting from shipping line calls, there is no opportunity to develop a hub. As such, potential hubs must first be assessed from the perspective of shipping lines. Secondly, a good hub candidate must also be well placed to lend itself to feeder services (without spokes, a hub is irrelevant). Accordingly, a good hub port candidate must provide a combination of the following attributes (in no particular order):

• Location on main east-west or north-south shipping routes • Minimal deviation from main shipping routes

• Distance savers compared with direct services

• A location within easy access of feeder ports

• Situated on the coast with easy approach from open sea and deep fairways

• Ample berthing facilities capable of handling post-Panamax vessels

• High productivity and low handling costs

• Ability to serve large number of markets

• 24/7 operations

• Absence of cabotage restrictions, which could otherwise limit viability of feeder services

Driven by the business interests of shipping lines, hubs are more likely to develop and succeed where the above conditions are in place. Attempts to develop hubs where these conditions are absent (in whole or in part) are likely to prove problematic and unsustainable.

The success of a hub is inextricably linked with the success of feeder services emanating from the same hub. The success of a hub is contingent on a critical mass of feeder cargo that can be cost-effectively transhipped at hub ports and transported via feeders to other regional markets not served directly by major shipping lines. Without critical mass, there is no hub, without a hub; there is no hub-and-spoke network. Critical mass for hub-and-spoke transport, in turn, is driven by shipping lines.

In the above section, some of the factors attracting shipping lines to hub ports have been discussed. One of the important factors is proximity of the hub to major shipping lanes, requiring little deviation, thereby leading to time savings and lower costs for shipping lines.

Equally important is the commercial viability of feeder services linking the hub to other regional markets. Key enabling conditions for commercial viability are a critical mass of feeder traffic from/to a hub with consistency and reliability of volumes, the competitive advantage of the sea route relative to alternative rail and road routes, and flexibility to “right-size” ships to respond to the market.

6.1 Historic development of Indian subcontinent container traffic

Figure 6.1 provides a map of the significant ports both within the ISC region and those located outside the region, but involved in serving it. The two main types of port are:

• Transhipment hubs (which serve the ISC region).

• Gateway ports (which handle import-export traffic). These can be further sub-divided into direct call ports and feeder (spoke) ports.

For completeness, Figure 6.1 also shows new and proposed hubs as well as gateway ports in the region.

Table 6.1 shows the development of container port volumes in the ISC region over the last 11 years. Total volumes in the region have grown by 11.3% per annum on average, reaching almost 11.7 million teu in 2008, up from 4.4 million teu in 1997. Within this figure, Pakistan, India and Bangladesh have outperformed the region’s average growth rate, whilst Sri Lanka has lagged some way behind, growing at only 7.4% p.a. CAGR. There are several reasons for this:

(a) The Sri Lankan economy has not grown as fast as other economies in the region, so import-export (local) traffic through Colombo has not grown as fast as in other ISC countries.

(b) Anecdotal evidence suggests that there has been a tendency for Sri Lankan export cargo to increase in value more so than in volume.

(c) Transhipment traffic at Colombo did not grow in the period 1997-2002, largely due to capacity constraints and service level issues, as well as competition from other hub ports and from direct calls ports within the ISC region such as Karachi and JNPT. It

should be noted though that the capacity and service level issues at Colombo have changed significantly in the last few years, and that growth has now returned to Colombo transhipment volumes.

Table 6.2 breaks down the figures into individual port volumes. The fastest growing ports in the region have been Port Qasim in Pakistan and JNPT in India. JNPT in particular has rapidly emerged to become the largest container port in the region, accounting for 28% of the ISC region’s throughput in 2008.

Figure 6.1 Gateway and hub container ports serving the ISC region

Fujairah Pakistan Khor Fakkan Gwadar Dubai Haldia Kandla India Kolkata { Kulpi Bangladesh Karachi U.A.E. Hazira Port Qasim {{ Dhamra Sohar { { Dighi Chittagong Mundra { Gopalpur Rewas { Oman Pipavav { Paradip Visakhapatnam { JNPT { Gangavaram Mumbai Kakinada Salalah { Yemen Krishnapatnam Mormugao

{ { Ennore Aden New Mangalore

Chennai Cochin { { Sri Lanka Colachel Vizhinjam Colombo Tuticorin Malaysia Port Klang Transhipment hub { Gateway port Singapore New or potential port Tanjung Pelepas

Singapore

Source: Drewry

Table 6.1 Development of ISC container port volumes by country, 1997-2008 (teu)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 CAGR

Pakistan 608,065 666,568 696,649 774,943 850,000 942,892 1,071,169 1,342,535 1,568,613 1,760,430 1,908,000 1,987,000 11.4%

India 1,769,746 1,919,847 2,278,466 2,517,341 2,809,600 3,364,607 3,642,955 4,353,046 4,959,504 5,728,888 7,306,707 7,978,555 14.7%

Sri Lanka 1,687,184 1,714,077 1,704,387 1,732,855 1,726,616 1,764,717 1,959,354 2,220,573 2,455,329 3,079,132 3,381,693 3,687,338 7.4%

Bangladesh 300,476 345,327 392,137 456,007 486,289 526,353 624,087 684,000 783,353 882,411 958,020 1,069,999 12.2%

Total 4,365,471 4,645,819 5,071,639 5,481,146 5,872,505 6,598,569 7,297,565 8,600,154 9,766,799 11,450,861 13,554,420 14,722,892 11.7%

Note: Includes some estimates

Source: Drewry

Table 6.2 Development of ISC container port volumes by port, 1997-2008 (teu)

CAGR 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1997-2008

Pakistan Karachi 555,347 505,413 527,473 615,024 650,000 715,892 738,610 848,000 1,024,482 1,126,930 1,250,000 1,300,000 8.0% Port Qasim 52,718 161,155 169,176 159,919 200,000 227,000 332,559 494,535 544,131 633,500 658,000 687,000 26.3% India Mumbai 601,289 509,310 507,269 427,591 254,309 213,142 230,193 217,455 218,724 156,122 138,201 111,176 -14.2% Kolkata/Haldia 95,937 118,055 160,242 183,517 186,820 214,655 259,076 288,000 313,000 336,000 387,539 453,000 15.2% Cochin 100,000 128,912 130,057 133,178 151,800 163,242 165,687 185,000 193,000 217,000 245,000 270,000 9.4% New Mangalore 0 0 0 0 3,929 6,043 6,526 6,927 9,000 16,000 19,000 27,500 n/a Pipavav 0 0 0 1,000 15,089 17,891 19,322 66,962 84,353 120,000 192,017 194,937 n/a JNPT 504,149 669,108 889,978 1,124,723 1,462,061 1,946,000 2,001,023 2,300,000 2,580,000 3,096,000 3,888,706 4,184,770 21.2% Kakinada 35,000 40,000 45,000 50,000 50,000 0 0 0 0 n/a Kandla 75,000 65,000 75,000 75,000 117,250 140,000 166,750 170,035 181,000 164,000 172,000 155,000 6.8% Chennai 256,485 274,950 321,960 352,307 344,532 424,665 493,000 600,000 735,000 765,000 1,060,239 1,201,247 15.1% Mundra 0 0 0 0 0 0 20,000 177,896 289,117 450,000 680,221 840,658 n/a Paradip 0 0 0 0 0 0 0 1,771 3,000 3,150 5,000 2,000 n/a Tuticorin 88,769 99,512 128,533 149,793 202,293 213,509 253,880 300,000 307,310 0 0 Visakhapatnam 13,117 15,000 20,427 20,232 21,517 25,460 27,497 39,000 46,000 353,616 450,398 456,217 16.0% Sri Lanka Colombo 1,687,184 1,714,077 1,704,387 1,732,855 1,726,616 1,764,717 1,959,354 2,220,573 2,455,329 3,079,132 3,381,693 3,687,338 7.4% Bangladesh Chittagong 300,476 345,327 392,137 456,007 486,289 526,353 624,087 684,000 783,353 882,411 958,020 1,069,999 12.2%

Total 4,365,471 4,645,819 5,071,639 5,481,146 5,872,505 6,598,569 7,297,565 8,600,154 9,766,799 11,450,861 13,554,420 14,722,892 11.7%

Note: Includes some estimates Source: Drewry

6.2 Gateway volumes

The throughput figures in the preceding tables include transhipment activity, primarily at Colombo, but also at JNPT, where some limited transhipment also takes place. Table 6.3 shows the development of volumes in the region excluding transhipment volumes, i.e. the figures show the net gateway (import-export) traffic volumes.

As can be seen, average growth in import-export traffic in the region has been 12.9% p.a. in the last 11years. The west coast of India has shown the strongest growth, nearing 15% p.a., whilst Sri Lanka has seen a more modest 6.7% p.a. growth rate.

Total gateway traffic reached 11.6 million teu in 2008, up from 3.1 million teu in 1997. Excluding Sri Lankan local traffic, which is captive to Colombo, the total market potential for Colombo to compete is currently around 8.1 million teu. A significant proportion of this volume though is shipped direct to and from ports such as JNPT, and therefore not available for Colombo to tranship.

Table 6.4 shows the development of market share for each of the main sub-regions of the ISC (excluding Sri Lanka). The aim of this table is to show the relative importance of the sub-regions which make up Sri Lanka’s target transhipment markets. On this basis, the west coast of India now accounts for almost half of the region’s gateway traffic, with the south and east coasts accounting for another 22%. It is significant to note that the south and east coasts of India, along with Bangladesh represent the main target markets for Colombo. Collectively these regions accounted for almost one third of the ISC gateway traffic in 2008, equivalent to 3.7 million teu.

For Colombo, a critical factor is the proportion of ISC gateway traffic which is shipped on direct services vs. the proportion which is fed and transhipped. Table 6.5 summarises the estimated split by these categories, for each main ISC sub-region. Besides “deep sea” traffic (which in this analysis is defined as any cargo originating in or destined for any country outside of the ISC region), there is also an element of intra-ISC traffic, i.e. trade between ISC countries. This would for example include goods manufactured in Sri Lanka and exported to Bangladesh. Additionally these volumes are estimated to account for a very small proportion of total activity, no more than 2.5% of port volumes in each region.

For deep sea traffic, ports in Pakistan and the west coast of India have a high proportion of traffic moving via direct call services. On the west coast of India, analysis of direct services calling at JNPT, Mundra and Pipavav suggest that in total, 85% of volume now moves on direct services. This is a considerable difference from 10 years ago. For Pakistan the position is similar, although not quite as pronounced. These changes have meant that volumes carried on direct services have grown at a much faster rate than those on feeder services.

Elsewhere in India, the situation is somewhat different. On the south and east coasts, the smaller volumes involved, and the less developed nature of the ports mean that feedering remains the dominant means of serving these areas. Nevertheless, both have seen an increasing proportion of direct services, with changes of this nature particularly evident at Tuticorin and Chennai.

Bangladesh meanwhile has seen little change over the last 11 years, with virtually all cargo being fed, largely due to inadequate port facilities and shallow water.

Sri Lanka of course sees all of its local cargo moving on deep sea direct services.

Table 6.3 Development of net ISC gateway (import-export) volumes, 1997-2008 (teu)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 CAGR Pakistan 605,337 663,664 693,479 771,517 846,330 938,768 1,066,608 1,336,085 1,558,846 1,746,117 1,891,057 1,968,596 11.3% West coast India 1,127,295 1,173,604 1,380,079 1,512,416 1,682,876 2,133,433 2,234,825 2,774,948 3,176,657 3,772,845 4,746,609 5,270,156 15.1% South coast India 186,041 225,520 255,420 279,545 350,423 372,627 415,006 478,550 490,543 556,302 678,455 707,813 12.9% East coast India 397,811 445,101 544,459 602,630 599,199 660,656 775,012 922,321 1,087,233 1,141,836 1,504,221 1,719,893 14.2% Bangladesh 300,476 345,327 392,137 456,007 486,289 526,353 624,087 684,000 783,353 882,411 958,020 1,069,999 12.2% Sri Lanka 453,852 522,793 511,618 552,075 531,559 545,653 589,533 689,435 739,574 751,308 845,423 921,835 6.7%

Total 3,070,811 3,376,010 3,777,193 4,174,191 4,496,675 5,177,490 5,705,071 6,885,339 7,836,207 8,850,820 10,623,786 11,658,293 12.9%

Note: Includes some estimates Source: Drewry

Table 6.4 Share of net ISC gateway (import-export) volumes (exc. Sri Lanka), 1997-2008 (teu)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Pakistan 23.1% 23.3% 21.2% 21.3% 21.3% 20.3% 20.9% 21.6% 22.0% 21.6% 19.3% 18.3% West coast India 43.1% 41.1% 42.3% 41.8% 42.4% 46.1% 43.7% 44.8% 44.8% 46.6% 48.5% 49.1% South coast India 7.1% 7.9% 7.8% 7.7% 8.8% 8.0% 8.1% 7.7% 6.9% 6.9% 6.9% 6.6% East coast India 15.2% 15.6% 16.7% 16.6% 15.1% 14.3% 15.2% 14.9% 15.3% 14.1% 15.4% 16.0% Bangladesh 11.5% 12.1% 12.0% 12.6% 12.3% 11.4% 12.2% 11.0% 11.0% 10.9% 9.8% 10.0%

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Note: Includes some estimates Source: Drewry

Table 6.5 Estimated direct call v. feeder split of ISC gateway volumes

1997 2008 CAGR Pakistan Deep sea via direct calls % 25.0% 80.0% Deep sea via feeder calls % 72.5% 17.5% ISC intra-regional traffic % 2.5% 2.5% 100.0% 100.0% Deep sea via direct calls (teu) 151,334 1,574,877 23.7% Deep sea via feeder calls (teu) 438,869 344,504 -2.2% ISC intra-regional traffic (teu) 15,133 49,215 11.3% West coast India Deep sea via direct calls % 30.0% 85.0% Deep sea via feeder calls % 67.5% 12.5% ISC intra-regional traffic % 2.5% 2.5% 100.0% 100.0% Deep sea via direct calls (teu) 338,188 4,479,633 26.5% Deep sea via feeder calls (teu) 760,924 658,769 -1.3% ISC intra-regional traffic (teu) 28,182 131,754 15.1% South coast India Deep sea via direct calls % 16.0% 38.0% Deep sea via feeder calls % 81.5% 59.5% ISC intra-regional traffic % 2.5% 2.5% 100.0% 100.0% Deep sea via direct calls (teu) 29,766 268,969 22.2% Deep sea via feeder calls (teu) 151,623 421,149 9.7% ISC intra-regional traffic (teu) 4,651 17,695 12.9% East coast India Deep sea via direct calls % 16.0% 27.0% Deep sea via feeder calls % 81.5% 70.5% ISC intra-regional traffic % 2.5% 2.5% 100.0% 100.0% Deep sea via direct calls (teu) 63,650 464,371 19.8% Deep sea via feeder calls (teu) 324,216 1,212,525 12.7% ISC intra-regional traffic (teu) 9,945 42,997 14.2% Bangladesh Deep sea via direct calls % 5.0% 5.0% Deep sea via feeder calls % 92.5% 92.5% ISC intra-regional traffic % 2.5% 2.5% 100.0% 100.0% Deep sea via direct calls (teu) 15,024 53,500 12.2% Deep sea via feeder calls (teu) 277,940 989,749 12.2% ISC intra-regional traffic (teu) 7,512 26,750 12.2% Sri Lanka Deep sea via direct calls % 97.5% 97.5% ISC intra-regional traffic % 2.5% 2.5% 100.0% 100.0% Deep sea via direct calls (teu) 442,506 898,789 6.7% ISC intra-regional traffic (teu) 11,346 23,046 6.7% ISC total Deep sea via direct calls (teu) 1,040,469 7,740,139 20.0% Deep sea via feeder calls (teu) 1,953,572 3,626,697 5.8% ISC intra-regional traffic (teu) 76,770 291,457 12.9%

Source: Drewry Research

Overall this means that of the 11.6 million teu of gateway port traffic in the ISC region in 2008, estimated 7.7 million teu is shipped on direct services and 0.3 million teu is intra-ISC traffic, leaving almost 3 million teu which is fed to and from hub ports. This translates into almost 6 million teu of hub port transhipment activity.

6.3 Transhipment volumes

Hub port transhipment activity within the ISC region is dominated by Colombo, as Table 6.6 shows. JNPT has a modest amount of transhipment, but is hampered by factors such as lack of available capacity, high port costs and Indian cabotage laws. Besides these two ports, collectively the remaining ports in the region see a nominal amount of transhipment activity. Overall transhipment volumes at ports within the ISC on an average have grown by almost 8% p.a. since 1997.

Colombo is not the only hub port serving the ISC region. Competition is faced from a range of ports from Aden in the west to Singapore in the east. Table 6.7 shows the breakdown of estimated ISC-related transhipment traffic, which in 2008 equated to just less than 7.2 million teu of hub port activity. Of this figure, Colombo accounted for traffic of 2.7 million teu, having a market share of 38% of the total transhipment traffic. Other “hubs” within the ISC region (mainly JNPT) handled 0.24 million teu of transhipment. The majority of activity, representing 4.2 million teu in 2008, was spread amongst hub ports outside the ISC region.

Table 6.8 provides a matrix of the estimated 2008 transhipment volumes at each hub serving the ISC, broken down into three ISC sub-regions. Colombo, due to its location within the ISC region, is able to compete for most, if not all ISC feeder traffic. However, the split of the port’s transhipment volume across each region is not even, due to a large extent because the Pakistan and west coast India trades are largely served by direct calls. As a result, the east coast India and Bangladesh are much more significant to Colombo, accounting for an estimated two thirds of total transhipment in 2008. In fact, Colombo’s share of the Bangladeshi feeder market is quite small, with most feeder services linking Chittagong with the South East Asian hubs. As a result, the east coast of India is of critical importance to Colombo. Due to its proximity, Colombo also plays a key role in transhipment to/from the south Indian ports of Tuticorin, and to a lesser extent Cochin.

For hubs outside of the ISC region, the general rule is that those located in the Middle East are best placed to compete for Pakistan and west coast India transhipment, whilst those located in South East Asia are best placed to compete for east coast India and Bangladesh transhipment.

Colombo’s main competitors for Pakistan/west coast India transhipment volumes are Dubai, Salalah and Khor Fakkan, in addition to JNPT. For east coast India and Bangladesh transhipment volumes, the most significant competing hubs for Colombo to contend with are Singapore, Port Klang and Tanjung Pelepas. The main competitors for south coast India transhipment volumes are Dubai and Singapore.

Table 6.6 Development of transhipment volumes at ports within the ISC region, 1997-2008 (teu)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 CAGR

Colombo 1,233,332 1,191,284 1,192,769 1,180,780 1,195,057 1,219,064 1,369,821 1,531,138 1,715,755 2,327,824 2,536,270 2,765,504 7.6% JNPT 50,415 66,911 88,998 112,472 166,092 185,519 204,429 157,877 175,770 214,963 326,593 225,481 14.6% Other ports 10,914 11,615 12,679 13,703 14,681 16,496 18,244 25,800 39,067 57,254 67,772 73,614 18.9%

Total 1,294,660 1,269,809 1,294,446 1,306,955 1,375,830 1,421,079 1,592,494 1,714,815 1,930,592 2,600,041 2,930,634 3,064,599 8.1%

Colombo transshipment 73.1% 69.5% 70.0% 68.1% 69.2% 69.1% 69.9% 69.0% 69.9% 75.6% 75.0% 75.0% incidence

Note: Includes some estimates Source: Drewry

Table 6.7 Development of total ISC-related transhipment volumes at hub ports, 1997-2008 (teu)

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 CAGR Total ISC feeder volumes at hubs 3,907,144 4,076,997 4,440,985 4,687,138 4,830,892 5,222,660 5,484,423 6,091,480 6,450,459 6,652,772 7,270,162 7,253,393 5.8% Of which: Colombo 1,233,332 1,191,284 1,192,769 1,180,780 1,195,057 1,219,064 1,369,821 1,531,138 1,715,755 2,327,824 2,536,270 2,765,504 7.6% Other ISC "hubs" 61,329 78,525 101,677 126,175 180,773 202,015 222,673 183,677 214,837 272,217 394,365 299,096 15.5% Hubs outside ISC 2,612,484 2,807,188 3,146,539 3,380,182 3,455,062 3,801,581 3,891,929 4,376,665 4,519,867 4,052,731 4,339,527 4,188,794 4.4% Market shares Colombo 31.6% 29.2% 26.9% 25.2% 24.7% 23.3% 25.0% 25.1% 26.6% 35.0% 34.9% 38.1% 35.0% Other ISC "hubs" 1.6% 1.9% 2.3% 2.7% 3.7% 3.9% 4.1% 3.0% 3.3% 4.1% 5.4% 4.1% 4.1% Hubs outside ISC 66.9% 68.9% 70.9% 72.1% 71.5% 72.8% 71.0% 71.8% 70.1% 60.9% 59.7% 57.7% 60.9% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Note: Includes some estimates

Table 6.8 Matrix of hub port estimated transhipment volume by ISC feeder region, 2008

Khor Tanjung Port (‘000 teu) Aden Salalah Fujairah Dubai JNPT * Colombo Singapore TOTAL Fakkan Pelepas Klang

Pakistan and west coast India 21 408 209 8 1,066 269 564 75 38 198 21

South coast India ** 0 0 0 0 34 6 752 0 6 29 0

East coast India and Bangladesh 0 10 0 0 22 24 1,449 553 270 1,239 0

TOTAL 21 419 209 8 1,123 299 2,766 628 314 1,466 21

Estimated split for each hub

Pakistan and west coast India 100.0% 97.5% 100.0% 100.0% 95.0% 90.0% 20.4% 12.0% 12.0% 13.5%

South coast India ** 0.0% 0.0% 0.0% 0.0% 3.0% 2.0% 27.2% 0.0% 2.0% 2.0%

East coast India and Bangladesh 0.0% 2.5% 0.0% 0.0% 2.0% 8.0% 52.4% 88.0% 86.0% 84.5%

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.00% 100.0% 100.0% 100.0%

Market shares by region

Pakistan and west coast India 0.7% 14.3% 7.3% 0.3% 37.3% 9.4% 19.7% 2.6% 1.3% 6.9% 100.0% South coast India ** 0.0% 0.0% 0.0% 0.0% 4.1% 0.7% 90.9% 0.0% 0.8% 3.5% 100.0%

East coast India and Bangladesh 0.0% 0.3% 0.0% 0.0% 0.6% 0.7% 40.6% 15.5% 7.6% 34.7% 100.0%

* Plus transhipment volumes at other Indian ports

** Cochin and Tuticorin

Source: Drewry

6.4 Regional capacities and facilities in the region

Tables 6.9 - 6.11 give detailed information about facilities and capacities available at the ports currently competing with Colombo. Clearly, the largest port in terms of throughput, Singapore also gives largest facilities in the region, with longest quay length of 13,800 meters and deepest draft of 16.7 meters (in fact at Jurong container terminal rather than PSA). Singapore also has 180 gantry cranes installed, at all its terminals collectively, which is the highest number among the competing ports.

Port Kelang stands second both in terms of quay length (5,313 meters) and capacity (9m teu) and is currently running at 88.6 percent of utilisation. In terms of the utilisation level among the transhipment hubs, Khor Fakkan seems to be quite tight, running at 100 percent of capacity in 2008, with container throughput of 2.1m teu.

Among the gateway ports (other than Indian), Karachi is running at over 82 percent utilisation.

Table 6.9 Comparison of key factors of regional hub ports competing with Vizhinjam, 2008

2008 2008 Estimated Quay Yard Water Terminal Utilisation No. of Port Terminal Landlord Operator Throughput Capacity Length Area Depth Operator (%) Cranes ('000 teu) ('000 teu) (m) (ha) (m)

Aden (ACT) Aden Container Terminal Public Private DPW (under 425 600 70.9 700 5 35 16 negotiation)

Ma'alla Terminal (berths 1-2) Public Private DPW 67 150 44.7 375 2 7.5 11

Aden total 492 750 65.6 1,075 7 42.5

Colombo South Asia Gateway Terminal Public Public SAGT 1,726 1,800 95.9 940 10 12 12-15 Jaya Container Terminal Public Private SLPADPW 1,880 2,100 89.5 1,646 14 45.5 12-15

United Container Terminal Public Public SLPA 81 400 20.3 590 4 1.5 9-11

Colombo total 3,687 4,300 85.7 3,176 28 59

Dubai Jebel Ali and Port Rashid Public Private DPW 11,827 13,750 86.0 5,626 72 190 12.8-17

Khor Fakkan Khor Fakkan Container Terminal Public Private Gulftainer Company 2,102 2,100 100.1 1,060 16 30 15

Salalah Salalah Port Container Terminal Private Private APMT 3,068 4,000 76.7 1,236 20 54 18

Port Kelang Kelang Multi Terminal (Westport Public Private HPH 4,631 5,000 92.6 2,600 36 65 16 Terminal B07-B10) Northport (prev. Kelang Public Private Northport Malaysia 3,343 4,000 83.6 2,713 27 92 18 Container Terminal) Bhd.

Port Kelang total 7,974 9,000 88.6 5,313 63 157

Table 6.9 (cont’d)

2008 2008 Estimated Quay Yard Water Terminal Utilisation No. of Port Terminal Landlord Operator Throughput Capacity Length Area Depth Operator (%) Cranes ('000 teu) ('000 teu) (m) (ha) (m)

Singapore Jurong Port Private Private Jurong Port Pte Ltd 973 1,600 60.8 1,300 18 7 16.7 Brani Private Private PSA 6,060 6,250 97.0 2,630 31 79 15 Keppel Private Private PSA 6,070 8,400 72.3 3,220 36 96 14.6 Pasir Panjang Private Private PSA/COSCO/MSC 11,255 12,750 88.3 4,330 67 164 16

Tanjong Pagar Private Private PSA 5,560 6,000 92.7 2,320 28 84 14.8

Singapore total 29,918 35,000 85.5 13,800 180 430

Tanjung Pelepas PTP Private Private APMT 5,466 8,000 68.3 3,600 40 110 16

Fujairah Fujairah Container Terminal Public Private DPW 36 585 6.2 1,055 6 24 10.5-12.5

Source: Drewry Research

Table 6.10 Comparison of key factors of gateway ports competing with Vizhinjam, 2008

2008 2008 Estimated Quay Yard Water Terminal Utilisation No. of Port Terminal Landlord Operator Throughput Capacity Length Area Depth Operator (%) Cranes ('000 teu) ('000 teu) (m) (ha) (m)

Karachi Karachi International Container Public Private Hutchison Port 658 800 82.2 973 4 21 12 Terminal (KICT, West Wharf) Holdings Pakistan International Container Public Private Pakistan International 392 450 87.1 600 6 22 13.5 Terminal (East Wharf / Berths 6-9) Container Company General Cargo Terminal Public 250 300 83.3 2

Karachi total 1,300 1,550 83.9 1,573 12 43

Port Qasim Qasim International Container Public Private DPW 687 800 85.9 600 6 24 11 Terminal (QICT)

Note: Other key gateway port in the region is JNPT which has been covered in detail in the previous sections Source: Drewry Research

Table 6.11 Comparison of key factors of spoke/feeder ports competing with Vizhinjam, 2008

2006 2006 Estimated Quay Yard Water Terminal Utilisation No. of Port Terminal Landlord Operator Throughput Capacity Length Area Depth Operator (%) Cranes ('000 teu) ('000 teu) (m) (ha) (m)

Chittagong Chittagong Container Terminal/General Cargo Public Public Public 1,070 1,100 97.3 900 4 20 9.1 Berth

Note: Other key spoke/feeder ports include Cochin, Kandla, Kolkata, Mundra, Pipavav, Tuticorin, Chennai and Chittagong which have been covered in detail in previous sections Source: Drewry Research

6.5 Ship size limitations at competing ports

Shipping lines today are vying to deploy large vessels on main trade routes to achieve more economies of scale, which makes draft availability and other support infrastructure present at the port an important criterion for selecting it as a hub port, or a direct call port. Table 6.12 gives an idea about estimated ship size limitation, in terms of teu, at each of the competing ports covered in this study.

The basic parameters used to assess the maximum sized ship which can be accommodated in each port are water depth alongside the berth and crane outreach. In some ports, there is sufficient water depth for a certain size of ship, but the cranes are not big enough, and vice versa, so the lowest common denominator applies. In reality, a number of other factors are at work to determine what sized ship can be accommodated including:

Whether the ship is on its maximum draft when calling

How many cranes of a certain size a terminal has

The depth of the channel

The size of the turning basin

The length of the berth length

The height of the cranes

Table 6.12 Container ship size limitation at competing ports

Maximum Maximum Maximum Water Depth Port Vessel Size Crane Outreach Notes Alongside (Teu) (Rows) (M)

Aden 8,500 16 18 Sufficient water depth to handle largest vessels afloat, but not cranes

Chennai 5,000 13.4 20 Large cranes but limited by draft

Chittagong 2,000 9.1 13 Panamax cranes but ship size limited by draft

Cochin 4,500 12.5 13 Near Panamax draft

Colombo 10,000 15 19 Confirmed by port

Dubai 11,000 15 22 Large cranes, but draft means very largest ships could not call fully loaded

Fujairah 9,500 15 18

JNPT 6,500 13.5 20 Confirmed by port. Large cranes but limited by draft

Kandla 1,500 10.7 n/a No gantries

Karachi 5,000 13.5 20 Only one crane of 20 rows outreach

Table 6.12 (cont’d

Maximum Maximum Maximum Water Depth Port Vessel Size Crane Outreach Notes Alongside (Teu) (Rows) (M)

Khor Fakkan 9,500 15 20

Kolkata 2,500 12 13 Confirmed by port

Mundra 8,000 17.5 20 Maximum ship size as per port’s website. Draft and crane size suggests vessels larger than 8,000 teu might be feasible

Pipavav 6,000 12.5 18 Confirmed by port

Port Klang 10,000 16 22 Draft and cranes are sufficient for largest ships afloat but port states that 120,000 dwt is the maximum ship size which can be accommodated

Port Qasim 5,000 11 18 Note: Fully loaded Panamax could not access due to draft limitations

Salalah 13,500 16 22 Based on estimated “true” size of “Emma Maersk” class vessels

Singapore 13,500 16.7 22 Ditto

Tanjung Pelepas 13,500 16 22 Ditto

Tuticorin 5,000 10.7 13 Note: Fully loaded Panamax could not access due to draft limitations

Source: Drewry Research

Clearly, Salalah, Singapore and Tanjung Pelepas offer the most capable facilities for large size container ships, with Colombo currently in the second tier bracket, along with Dubai and Port Klang.

6.6 Comparison of transhipment tariffs

Table 6.13 provides a comparison of indicative transhipment tariffs at the various hub ports in the region, plus an indication of what some of the gateway ports charge. These tariffs are based on anecdotal evidence obtained from shipping lines and are believed to be representative of actual prices being paid by medium sized carriers. Every effort has been made to try and ensure that the comparison is like for like, i.e. tariffs covering both moves of a cycle, clarification of whether the tariff is per box or per 20ft/40ft, how empties are charged, whether ancillary services such as lashing/unlashing are included etc. However, it must be kept in mind that an element of uncertainty must always exist when access to actual contracts is not available.

As can be seen, Colombo is very competitive in price terms, broadly on a par with Middle East and Malaysian hubs. Singapore has an average rate of US$100-110 per box per cycle. At least one of these contracts not only combines the 20'/40' rate into a single rate per box, but also includes items such as berthing/unberthing, free ratios, shut-outs,

dangerous goods surcharge etc. These items probably equate to at least an extra 5% discount. It should also be noted that the above mentioned rates are separate from the JV deals which PSA has done. The MSC deal, which has a JV of 28 years with PSA, is understood to have very a competitive structure and rates

Gateway ports which carry out transshipment as an add-on to their main business generally charge higher prices than dedicated hubs. However, the exception is JNPT which has the lowest transshipment tariffs in the region. Its actual transshipment activity is limited though, due to lack of capacity, its location and Indian cabotage laws.

Table .6.13 Comparison of typical selected container transhipment tariffs, mid sized operator

Port US$ Per 20' US$ Per 40' Notes

Aden 100 140 Includes lashing/unlashing Colombo 60-70 100-110 Dubai 70-80 100-110 Karachi 100-150 125-175 Khor Fakkan 80 115 Prices shown are for full boxes. Empties approx 30% less Mundra 70 140 Nhava Sheva (JNP) 55-75 80-150 Prices shown are for full boxes. Empties approx 15% less Port Kelang 65-75 100-115 Includes lashing/unlashing Salalah 80 115 Prices shown are for full boxes. Empties approx 20% less Singapore (PSA) 100-115 100-115 Tanjung Pelepas 65-75 100-115 Tuticorin 15-20 30-40

Note: Typical contract price per cycle ($). Source: Drewry Research

6.7 Comparative hub port economics

Singapore and Dubai in particular command substantial shares of ISC transhipment traffic even though theoretically this traffic could equally be routed via Colombo. However, there are strong reasons why this is not the case. In simple terms, location is a key determinant of the competitiveness of the region’s transhipment ports. The extent of the deviation from the East-West shipping route for the mainline vessel, plus the distance from each hub port to the various spoke ports will play a large role. However, a number of other factors will also come into consideration for any particular shipping line weighing up hub port alternatives including:

• The nature of the mainline service (i.e. way port service passing through the region or an end-to-end service starting and finishing in the region).

• Implications on the size and number of ships required to be employed throughout a carrier’s global network.

• Implications on overall cargo transit times.

• Container transhipment charges at hub port.

• Hub port costs (e.g. port dues, tugs, pilotage etc.).

• Feeder costs, range of outports served and frequency.

• Port productivity, reliability and vessel waiting times.

• The size of the market share of the carrier weighing up the hub port option.

• Specific political and commercial reasons (e.g. NOL/APL’s Singaporean ownership previously meant that the PSA run Aden facility would have been seen as a preference port of call).

• The origin/destination distribution of cargo amongst the various parts of the region.

• The volume of cargo for each particular part of the region.

A combination of the use of varying hubs on different strings may well be the most cost effective hub and spoke option, although this may not allow the full network advantages to be realised (i.e. reducing the number of mainline ships and/or upgrading mainline vessel size).

Feeder costs are an area that is one of the most important factors in the equation when determining the relative attractiveness of various hub ports. However, whilst feeder rates should be primarily a function of distance, several other factors will have a bearing. For example the extent of competition between rival feeder operators on any particular route will affect prices, as will the volume of cargo moving on that route (more cargo in theory allowing larger and hence cheaper feeder vessels to be deployed). Singapore in particular benefits in this respect due to its sheer scale of operations, handling four times more transhipment volumes than its next largest rivals.

Tables 6.14 and 6.15 show the distances between Colombo, Vizhinjam, Singapore, Dubai and selected spoke ports. As can be seen, relative to Dubai, Colombo/Vizhinjam is only in a superior location for the likes of Mumbai. Ports further west are closer to Dubai. This, amongst other things, is one reason why the west coast of India is not a stronghold for Colombo/Vizhinjam .On the east coast, Colombo/Vizhinjam score better, being closer to the main spoke ports in all cases. However, the difference varies, with the advantage over Singapore most pronounced for Chennai. For Kolkata and Chittagong, the difference in distance only accounts for an extra day’s sailing or so at most. This negative factor for Singapore can be offset by factors such as frequency of service, connectivity at Singapore and feeder freight rates.

Table 6.14 Colombo/Vizhinjam v, Singapore: Selected spoke port distances (Nautical miles)

Chittagong Kolkata Chennai Singapore 1494 1636 1586 Colombo 1287 1228 590 Vizhinjam 1462 1404 765 Colombo advantage +207 +408 +996 Vizhinjam advantage +32 +232 +821

Source: Drewry Shipping Consultants Ltd

Table 6.15 Colombo/Vizhinjam v, Dubai: Selected spoke port distances (nautical miles)

Karachi Kandla Mumbai Dubai 709 912 1121 Colombo 1334 1244 881 Vizhinjam 1143 1052 689 Colombo advantage -625 -332 +240 Vizhinjam advantage -434 -140 +432

Source: Drewry Shipping Consultants Ltd

Table 6.15 provides an indication of Colombo/Vizhinjam’s competitive position relative to Singapore, Dubai and Salalah on the basis of the theoretical cost of serving a number of regional spoke ports. The analysis has been developed by estimating feeder costs (based on distance, fuel costs and vessel operating costs), mainline vessel costs (based on deviation distance to each hub, and port access costs) and transhipment costs (for a full cycle).

It must be noted that this is a theoretical exercise, as feeder costs in particular are not only driven by the calculated operating cost, but also by factors such as the extent of competition between feeder operators, port delays at hub and spoke ports served, and the size of vessels deployed (which are a function not only of the size of the feeder flow on a particular route but also the extent to which there is consolidation of feeder operators on each route). Nevertheless, the analysis still gives a good indication of where the relative strengths and weaknesses of each hub port lie.

When compared with Singapore, the estimated total cost of transhipment and feeding favours Colombo/Vizhinjam in all cases. However, for west coast ISC ports the comparison is largely academic, as Singapore is at too much of a disadvantage in distance terms. When looking at east coast ISC ports, especially Chittagong and Kolkata, Colombo’s advantage is minimal. This is especially the case given the much greater connectivity at Singapore, and the greater competition between feeder operators. For this reason, Singapore is able to successfully compete with Colombo for these feeder markets.

The table below provides an estimate of network cost for a shipping line to transport cargo through a hub and spoke network. Various scenarios have been drawn to calculate costs incurred by a shipping line to transport a given parcel size of containers from lower east and west coast of India & Colombo. In all these scenarios, the average port dues and container handling charges at the Vizhinjam port has been assumed to be equal to the fee charged by Colombo. For gateway traffic, Vizhinjam is competing with Southern coast Indian coasts. Therefore, Vizhinjam is assumed to have matched THC charged by the Cochin port which is USD60/Teu. As per our primary survey, Colombo offers a minimum of 20% discount on its card rate to most of the large shipping lines.

Scenario 1 This is the current scenario wherein Chennai, Tuticorin and Cochin are feeder ports in the overall network with Colombo as the hub port. In this case, a large mother vessel calls Colombo port with a gateway traffic of 2000 Teu in addition to feeder traffic from Chennai (2000 Teu), Cochin(1200 Teu) and Tuticorin (1600 Teu). Hence, by calling at the port of

Colombo the overall parcel size handled by a mainline vessel is 6800 Teu. Here the overall network cost per Teu incurred to shipping lines is approximately USD 156.6.

Scenario 2 This is a hypothetical situation wherein the same network is replicated at Vizhinjam. The port costs for Vizhinjam have been estimated to be equal to Colombo’s tariff rate, which is almost one third of the port tariff charged by India ports. The container handling charges for Vizhinjam is equal to Cochin’s tariff as Colombo’s container handling charges are higher.

In this case, Vizhinjam would not be able to attract gateway container traffic from Colombo as it is served by large mainline vessels and the cost of transhipment from Colombo to Vizhinjam would be very high. Therefore, the total parcel size is reduced by 2000 Teu to 4800 Teu in the case. Here the overall cost per Teu for a shipping line is USD 160 which is only USD 3 higher than scenario 1. So even though, Vizhinjam matches Colombo costs but still looses on Colombo volumes and is costlier by USD 3/Teu.

Scenario 3 This is a hypothetical situation wherein Vizhinjam is the hub port while Tuticorin & Cochin’s cargo is transported on a truck to the port.

Scenario 4 The network in scenario 1 is replicated with Cochin as the hub port

Scenario 5 Cochin is a hub port however Chennai & Tuticorin cargo is transported via land to the port of Cochin

Scenario 6 The network cost of transhipment of ISC cargo through Salalah

Scenario 7 The network cost of transhipment of ISC cargo through Singapore

In all the scenarios, it is evident that in order to have a parcel size of 6800 Teus and serve markets of Colombo, Chennai, Tuticorin and Colombo, a hub-spoke network through Colombo is the cheapest option for a shipping line.

Our analysis suggests that only if Vizhinjam port provides discounts as high as 40-50% of the tariff charged by Colombo port, then the overall network cost for scenario 2 would be cheaper by 15% as compared to overall network cost in scenario 1.

Table 6.16 Shipping network cost analysis

VIA COLOMBO

Domestic Cargo Feeder cost Mainline vessel cost Transshipment cost Total cost (per Teu) Parcel Size Total Cost MAA 0 103 3.35 74.00 180.18 2000 360,366 TUT 0 44.0 3.35 74.00 121.33 1600 194,135 COK 0 95 3.35 74.00 172.81 1200 207,378 CMB 148 0 3.35 0.00 151.35 2000 302,706 156.56 6800 1,064,584

VIA VIZHINJAM

Domestic Cargo Feeder cost Mainline vessel cost Transshipment cost Total cost (per Teu) Parcel Size Total Cost MAA 0 111.2 5.2 74.0 190.46 2000 380,915 TUT 0 42.2 5.2 74.0 121.44 1600 194,306 COK 0 82.5 5.2 74.0 161.79 1200 194,144 CMB 0 164.3 5.2 74.0 243.57 0 - 160.28 4800 769,365

Note: No hinterland traffic for Vizhinjam

VIA VIZHINJAM (road transfer of Cochin & Tuticorin cargo) Inland Haulage THC(VZM) Feeder cost Mainline vessel cost Transshipment cost Total cost (per Teu) Parcel Size Total Cost MAA 0 111.2123 5.2 74.0 190.46 2000 380,915 TUT 93 61 - 5.2 - 160.11 1600 256,173 COK 110 61 - 5.2 - 176.12 1200 211,350 CMB 0 164.3 5.2 74.0 243.57 0 - 176.76 4800 848,438

Note: No hinterland traffic for Vizhinjam Inland haulage is incremental cost of trucking to VZM

Table 6.16 (cont’d)

VIA Cochin

Domestic Cargo Feeder cost Mainline vessel cost Transshipment cost Total cost (per Teu) Parcel Size Total Cost MAA 0 127.3 14.4 75.7 217.47 2000 434,943 TUT 0 71.3 14.4 75.7 161.46 1600 258,342 COK 61 - 14.4 - 75.82 1200 90,979 CMB 0 186.4 14.4 75.7 276.60 0 - 163.39 4800 784,263

VIA Cochin (road transfer of Chennai & Tuticorin cargo)

Inland Haulage THC(COK) Feeder cost Mainline vessel cost Transshipment cost Total cost (per Teu) Parcel Size Total Cost MAA 447 61 - 14.4 - 522.54 2000 1,045,073 TUT 174 61 - 14.4 - 250.15 1600 400,233 COK - 61 - 14.4 - 75.82 1200 90,979 CMB 0 186.4 14.4 75.7 276.60 0 - 320.06 4800 1,536,285 Note: No hinterland traffic for Vizhinjam Inland haulage is incremental cost of trucking from Coimbatore to VZM wrt to TUT & COK

VIA SALALAH

Domestic Cargo Feeder cost Mainline vessel cost Transshipment cost Total cost (per Teu) Parcel Size Total Cost MAA 0 162.0 14.66 61.50 238.12 2000 476,230 TUT 0 82.1 14.66 61.50 158.26 1600 253,210 COK 0 170.3 14.66 61.50 246.42 1200 295,710 CMB 0 344.2 14.66 61.50 420.31 2000 840,618 SLL( other Transshipment) 0 0 14.66 61.50 76.16 4000 304,629 SLL(Hinterland) 128 0 14.66 0 142.66 1600 228,252 193.44 12400 2,398,649

Table 6.16 (cont’d)

VIA SINGAPORE

Domestic Cargo Feeder cost Mainline vessel cost Transshipment cost Total cost (per Teu) Parcel Size Total Cost MAA 0 164.3 16.16 115.0 295.42 2000 590,837 TUT 0 68.5 16.2 115.0 199.62 1600 319,393 COK 0 143.7 16.2 115.0 274.85 1200 329,819 CMB 0 243.6 16.2 115.0 374.75 2000 749,501 SIN( other Transshipment) 0 - 16.2 115.0 131.16 4000 524,652 SIN(Hinterland) 115 - 16.2 - 131.16 1600 209,861 219.68 12400 2,724,063 Note: No hinterland traffic for Vizhinjam

Note: CMB- Colombo, SIN-Singapore, SLL-Salalah, COK-Cochin, MAA- Chennai, TUT- Tuticorin, VZM-Vizhinjam All costs in USD & volume in Teu Source: Drewry Research

7. Gateway container traffic forecast - India

Objective

To identify Methodology for forecast and main assumptions

Gateway traffic forecast - India

Gateway traffic forecast – Regional port clusters

Gateway traffic forecast - Vizhinjam

Key Findings

• In the base case scenario, India’s GDP is expected to grow at 6.4% over the forecast period FY 2010-2044. During this period, India’s container’s gateway traffic is forecast to grow at 7.5. % p.a. from 7.9 Mn Teu in FY 10 to 91 Mn Teu in FY 44. North West India would continue to dominate the container traffic handling volumes with estimated 60% of the forecast traffic in FY44 handled at Maharashtra and Gujarat ports. The central & upper east coast would have a market share of 8%, a slight increase from 7.1% share in FY09. The share of Lower west & lower east coast ports in India is likely to increase from 25% in FY09 to approximately 32% in FY 44.

• Tamil Nadu would be the largest contributor of container traffic, followed by Andhra Pradesh, Karnataka and Kerala respectively in descending order. Therefore, the lower east coast traffic would have a dominant share in the region with approximately 88% of the container traffic handled by ports it that cluster. While, Lower west coast region would have a small share of 12% in the overall traffic primarily due to low container traffic development in the immediate hinterland of the region.

• Vizhinjam is most likely to attract container traffic from its immediate hinterland which it shares with the Cochin port. During the forecast period, with increasing in mainline calls due to increasing transhipment traffic, it is estimated that the port would gain market share in secondary hinterland currently served by Tuticorin and Chennai.

Conclusion

In the three growth scenarios, namely, high, base and low case, the container traffic at the proposed Vizhinjam port is forecast to grow from approximately 25,000 Teu in FY 2014 to 0.73 Mn Teu, 0.62 Mn Teu and 0.57 Mn Teu in FY 2044 respectively.

7.1 Development of Indian container port market

The Indian general cargo markets i.e. break bulk cargo and containerised cargo has witnessed some spectacular growth in recent years. The compounded annual growth rate over the period of last nine years i.e. from 1999-00 is 12.5%. Important to note here, is that the break-bulk cargo during the said period has increased at 6.3% whereas the rate of increase of the containerised cargo is 15.9%. The unprecedented growth in containerised cargo has really made possible the overall growth rate of 12.5% per annum.

As per the India Ports Association (IPA) data and Drewry estimates, in FY2009, general cargo constituted of 105.9m tonnes of containerised cargo and 34.1m tonnes break-bulk cargo. The penetration level has been continuously increasing over the years and now stands at 75.7%, while the average weight of container is still quite high, compared to the global average of 9.0 tonnes/teu and stands close to 14.5 tonnes/teu.

Figure 7.1 General cargo growth in India (FY2000-09)

120.0 75.7%80% 74.1% 69.1% 105.9 67% 68% 104.4 70% 100.0 64% 59% 61% 59% 57% 83.2 60% 80.0 50% 67.0 57.7 60.0 40% 50.0

Million Tone Million 41.6 30% Rate Growth 40.0 36.4 37.2 36.6 31.9 32.0 34.1 28.3 28.2 28.7 27.6 20% 21.1 21.7 23.4 20.0 10%

0.0 0% FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 Breakbulk Containerised * Penetration (%)

Source: IPA, Drewry

The major reason of high average weight per teu for containers in India is the profile of the commodities handled in containers in India. Some of the major heavy commodities moving in containers in India are machinery, spares, steel & metal products, grains, stones, sugar, paper & paper products, etc. The high average weight of these commodities and their share in the overall commodity profile of goods carried in containers in India have resulted in high average weight per Teu.

Table 7.1 shows the historical data of container traffic generated in India. The definition of general cargo encompasses data reported by the IPA under containerised tonnage and break bulk tonnage. Therefore, the sum of total tonnage handled at all ports in India for both container traffic and break bulk traffic provides the final figure for general cargo tonnage handled in India.

Break bulk tonnage encompasses commodities which have potential to be containerised in future. The current penetration level as per IPA statistics has reached 75.7% growing steadily from 57% in fiscal year 2000. The penetration level is calculated by dividing the total containerised tonnage by the total general cargo tonnage handled in India.

Thus, penetration level has been calculated on the break bulk commodities excluding dry and liquid bulk tonnage handled in India. Drewry is of the opinion that commodities handled in dry and liquid bulk do not provide scope for future containerisation, therefore they are excluded while calculating the penetration levels in the country. For example, certain commodities like maize, flat rolled steel coils, scrap; granite, etc have traditionally been transported as break bulk cargo. However, in recent years, owing to changing shipping business dynamics, like multiple consignees with requirement of small volumes and increasing bulk vessel freight rates have resulted in conversion of a certain portion of these commodities from break bulk to containers. These commodities still continue to move in large volumes as break bulk cargo.

Drewry assumes that the current container penetration levels in India would continue to grow, encompassing more break bulk commodities in its fold and has potential to reach up to 80% in the future. This assumption has also been utilised in developing the container forecast model which has been discussed in greater detail in the later sections.

Table 7.1 Development of total Indian general cargo and container market (FY00 – 09) (‘000 tonnes)

CAGR FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY09 '00-'09

All ports

Break-bulk 21,055 21,707 23,405 28,299 28,162 28,698 31,957 37,173 36,575 34,085 5.5% Containerised * 27,640 31,873 36,380 41,572 49,984 57,722 66,981 83,170 104,377 105,936 16.1%

Total 48,695 53,580 59,785 69,871 78,146 86,420 98,937 120,343 140,952 140,022 12.5%

Penetration (%) 57% 59% 61% 59% 64% 67% 68% 69.1% 74.1% 75.7%

Gateway teu (inc. empties) 2,165,041 2,445,744 2,732,337 3,194,037 3,758,183 4,308,824 4,807,434 6,056,894 7,266,146 7,320,662 14.5% Gateway teu (loaded) 1,804,370 2,011,430 2,215,627 2,583,987 3,086,167 3,616,992 4,066,500 4,961,929 6,026,522 6,008,762 14.3% Growth % (gateway teu inc 13% 12% 17% 18% 15% 12% 26% 20% 1% empties) Ave. weight/teu 12.8 13.0 13.3 13.0 13.3 13.4 13.9 13.7 14.4 14.5 Ave. weight/ loaded teu 15.3 15.8 16.4 16.1 16.2 16.0 16.5 16.8 17.3 17.6

Transshipment teu 23,162 24,654 168,945 187,034 207,694 161,755 185,179 215,259 351,667 225,826 28.8% Total teu 2,188,203 2,470,398 2,901,282 3,381,071 3,965,877 4,470,579 4,992,613 6,272,153 7,617,813 7,546,488 14.7% Growth % 13% 17% 17% 17% 13% 12% 26% 21% -1% Transshipment incidence (%) 1.0% 5.8% 5.5% 5.2% 3.62% 3.71% 3.4% 4.6% 3.0%

Note: * Excludes transhipment

Source: Compiled by Drewry, derived from Indian Ports Association data

Table 7.2 Development of estimated share of total Indian break-bulk and container traffic per region, FY 2000- 2009

CAGR FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY09 '00-'09 Total Indian cargo figures Total General Cargo tonnage 48,695 53,580 59,785 69,871 78,146 86,420 98,937 120,343 120,343 140,952 12.5% Gateway teu (loaded) 1,804,370 2,011,430 2,215,627 2,583,987 3,086,167 3,616,992 4,066,500 4,961,929 6,026,522 6,008,762 14.3% Gateway teu (empty) 360,671 434,314 516,710 610,050 672,016 691,832 740,934 1,094,965 1,239,624 1,311,900 15.4% Transshipment teu 23,162 24,654 168,945 187,034 207,694 161,755 183,895 215,259 351,667 225,826 28.8% Total teu 2,188,203 2,470,398 2,901,282 3,381,071 3,965,877 4,470,579 4,991,329 6,272,153 7,617,813 7,546,488 14.7%

Upper west coast port figures Total General Cargo tonnage 7,982 9,719 12,166 14,637 8,004 17,685 20,532 29,254 32,261 32,125 16.7% Gateway teu (loaded) 56,976 66,026 95,597 120,063 168,052 324,580 402,328 684,237 849,171 813,614 34.4% Gateway teu (empty) 23,209 25,508 41,766 52,201 67,839 93,047 124,413 223,919 222,784 282,765 32.0% Transshipment teu 0 0 0 0 0 0 0 0 00 0 Total teu 80,185 91,534 137,363 172,264 235,891 417,627 526,741 908,156 1,071,955 1,096,379 33.7%

Greater Mumbai port figures Total General Cargo tonnage 21,744 23,429 27,040 30,129 36,013 37,614 42,965 50,761 60,701 57,843 11.5% Gateway teu (loaded) 1,095,670 1,228,508 1,340,256 1,591,996 1,873,393 2,062,651 2,292,900 2,698,143 3,225,508 3,199,174 12.6% Gateway teu (empty) 200,604 256,435 319,238 364,248 384,912 365,771 350,277 523,715 625,336 620,059 13.4% Transshipment teu 23,152 24,376 168,494 186,396 207,184 161,440 179,648 214,963 326,593 225,481 28.8% Total teu 1,319,426 1,509,319 1,827,988 2,142,640 2,465,489 2,589,862 2,822,825 3,436,821 4,177,437 4,044,715 13.3%

Lower west coast port figures Total General Cargo tonnage 2,795 3,206 2,892 3,438 3,469 3,546 3,607 23,128 28,861 31,250 15.6% Gateway teu (loaded) 94,458 109,117 116,265 132,775 141,199 155,890 170,689 1,046,912 1,321,243 1,324,193 14.4% Gateway teu (empty) 39,701 42,085 48,216 47,994 45,363 48,278 48,272 215,612 236,263 257,728 16.7% Transshipment teu 0 0 428 90 510 315 2,963 23,128 28,861 31,250 15.6% Total teu 134,159 151,202 164,909 180,859 187,072 204,483 221,924 1,046,912 1,321,243 1,324,193 14.4%

Table 7.2(cont’d)

CAGR FY 00 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY09 '00-'08

Lower east coast figures

Total General Cargo tonnage 8,505 10,531 11,189 12,949 14,425 17,082 19,382 23,128 28,861 31,250 15.6% Gateway teu (loaded) 394,211 429,368 476,816 528,447 662,821 782,275 896,060 1,046,912 1,321,243 1,324,193 14.4% Gateway teu (empty) 64,255 79,688 81,220 109,343 130,587 141,547 159,815 215,612 236,263 257,728 16.7% Transshipment teu 0 0 0 548 0 0 0 0 21,000 0 -

Total teu 458,466 509,056 558,036 638,338 793,408 923,822 1,055,875 1,262,524 1,578,506 1,581,921 14.8%

Central east coast figures

Total General Cargo tonnage 1,613 1,370 1,383 2,467 2,137 1,650 1,938 2,460 2,840 2,942 6.9% Gateway teu (loaded) 14,057 13,347 15,833 14,113 13,625 33,194 32,150 39,049 50,274 65,195 18.6% Gateway teu (empty) 6,370 6,885 5,684 7,394 6,816 11,955 13,313 16,720 20,846 22,929 15.3% Transshipment teu 0 0 0 0 0 0 1,284 0 0 0 -

Total teu 20,427 20,232 21,517 21,507 20,441 45,149 46,747 55,769 71,120 88,124 17.6%

Upper east coast figures

Total General Cargo tonnage 5,542 4,573 4,477 5,366 6,066 6,553 7,934 9,254 11,406 10,814 7.7% Gateway teu (loaded) 148,998 165,064 170,860 196,593 227,077 258,402 272,373 301,256 367,155 378,229 10.9% Gateway teu (empty) 26,532 23,713 20,586 28,870 36,499 31,234 44,844 50,289 62,438 53,554 8.1% Transshipment teu 10 278 22 0 0 0 0 0 0 0 -

Total teu 175,540 189,055 191,468 225,463 263,576 289,636 317,217 351,545 429,593 431,783 10.5%

Note: Includes some estimated figures and some totals have been rounded to nearest point

Source: Compiled by Drewry

7.2 Indian container port market forecast 2010 – 2044

Ports’ market share & their hinterland

All ports on the Western and Eastern coasts have potential to attract a certain proportion of overall cargo from their hinterland. However, overall traffic varies for each region and port due to factors such as the size of hinterland, port connectivity, quality of service available at the port etc. The sum total of container traffic emanating from these regions should be equal to the total potential size of the Indian port market. It is, therefore, necessary to first establish the overall Indian container market potential which subsequently is sub divided in to potential of each region and their ports.

Historical data & correlation

Using port statistics supplied by the Indian Ports Association (IPA) and Drewry estimates, Drewry’s forecasting methodology highlights the size of the potential market available to each region. It is done by initially establishing a statistically significant correlation between the Indian GDP and general cargo tonnage throughput in India. General cargo tonnage has been used rather than overall port tonnages, in order to exclude dry and liquid bulk cargoes.

On plotting the data of GDP and general cargo tonnage FY 2005 onwards, it is noted that there is a strong positive correlation between GDP and general cargo traffic. This relationship has been used for forecasting future Indian general cargo tonnage, based on assumptions for future Indian GDP.

Figure 7.2 Indian GDP and General cargo traffic: Estimating the trend line

180,000 FY 2010 160,000

140,000 y = 5.55x - 43,129 120,000 R2 = 0.9729

100,000 FY 2005

80,000

60,000

40,000 General Cargo ('000 Tonnes) ('000 Cargo General 20,000

- - 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000

GDP at factor cost at FY 2000 prices (Rs Bn)

Source: Drewry Research

High, Base & Low case scenarios

Three scenarios viz. high, base and low case, have been drawn from FY 2008 to FY 2044 with respect to various estimated India’s GDP growth rates. The base case scenario is based on estimated GDP growth rate as per current forecasts by the International Monetary Fund. On the other hand high and low case scenarios take an optimistic and pessimistic view on the estimated growth rate, respectively.

India had been witnessing high economic growth rates over the past few years, which resulted in sustained increase in the overall trade and containerised traffic. However, the recent economic downturn has resulted in reduced container traffic over the past year. The trade, however, is expected to recover during financial year 2011.

Thus, India seems to be in a position to witness healthy economic growth rate in the post economic meltdown scenario. India’s GDP is significantly dependent on the agricultural sector and could fluctuate from year to year depending on the monsoon apart from global economic conditions. Therefore, it is difficult to assume a very high GDP growth rate for India over the extended period.

Drewry has estimated three different economic growth scenarios for India during the forecast period. In the base case scenario, India’s GDP growth rate is based on IMF’s estimates for country’s economic growth during the same period. The estimates were published by IMF in April 2010. Future economic growth rates are expected to taper down from growth levels forecast during the short term (IMF forecasts), thus decreasing gradually over later years during the forecast period. In the high case, economic growth rate is estimated to be 30 basis points higher than growth rate in each financial year in the base case scenario. In the low case, growth rate has been estimated to be 20 basis points lower than the growth expected in the base case for each financial year.

Therefore, in high case scenario, India’s GDP is expected to grow at a CAGR of around 6.9% over the forecast period FY14 to FY44. The base case scenario envisages relatively modest growth rate, particularly, in the latter half of the forecast period. The average annual growth of GDP in base case scenario is estimated to be around 6.6% per annum over the forecast period. Under low case scenario, the average annual growth rate of Indian GDP over the forecast period has been estimated at 6.4% to reflect a more pessimistic scenario of the Indian economy. Some of the key factors, which are expected to provide boost to the Indian economy are:

• Infrastructure investment & development.

• Changing trade policy, which are expected to provide greater emphasis on export led growth.

• Increasing role of industrial sector.

• Development of SEZs, primarily focussing on port based industry and export market.

• Rising consumer spending and the expected growth in the retail sector.

Container penetration levels

Drewry’s research regarding the subject of container penetration which has involved the interpretation of Indian Ports Association data concluded that a period of recent growth had been boosted by rapid containerisation of general cargo which has increased from 60.0% in FY01 to around 75.7% in FY09. The current penetration levels are amongst the highest across the globe and are expected to stay around 77% over the forecast period in the base and low case scenarios. However in the high case scenario, it is expected to increase further up to 78% by the end of the forecast period.

The forecast Indian general cargo tonnage is converted into containerised tonnes using an assumption on container penetration. The next stage involves converting the tonnage into Teu units using an assumed average weight per teu. The current average weight per teu is estimated at 14.5 tonnes, which is equivalent to the average weight of gateway teu (including empties). Drewry estimates the current average weight per teu to remain stable at 14.5 tonnes/teu over the forecast period in the base and low case scenario. However, in the high case scenario, it is estimated that the average weight per teu is likely to reduce to 13.5 tonnes/teu during the forecast period.

Indian container volume forecast

Table 7.3 is the projected Indian container traffic using a high case scenario. Here, the total hinterland container market (gateway traffic) is projected to achieve a CAGR of around 8.0% and total container traffic is expected to increase from almost 7.3m teu in FY 2009 to over 109.4 Mn teu by 2043-44. This growth reflects the gradual increase in container penetration to 78%. Table 7.4 provides the projected Indian container traffic in the base case GDP growth scenario. It shows, the total hinterland container market will grow by an average of 7.5% per annum, from 7.3m teu in FY09 through to nearly 91.0m teu by FY44. This growth reflects the gradual increase in container penetration to 77% and a steady rise in the transhipment incidence across the region.

Table 7.5 is the projected container traffic for India based on a low case GDP growth scenario. Here, the total hinterland container port traffic is projected to increase from almost 7.3m teu in FY09 to nearly 85.0m teu by FY44, which reflects an average annual growth of 7.2% per annum.

As per Drewry, the most likely scenario to occur is the base case, wherein the Indian container traffic is estimated to grow at a CAGR of 7.5%.

The matrix below would summarise the overall forecast methodology for container volumes adopted by Drewry:

Step Methodology

1 Estimate linear equation with GDP at factor cost at constant independent variable and General Cargo as dependent variable. This is estimated using econometric method of simple linear regression technique using data from FY05 to FY10.

2 Estimate three Indian GDP growth rate scenarios till FY44. Based on the economic growth rate estimation, we derive the high, base and low growth scenarios.

3 Forecast general cargo volumes till FY44 based on the estimated linear equation in all the three scenarios.

4 Estimate growth in container penetration level over the forecast period (similar penetration level estimated for all 3 scenarios).

5 Derive containerised tonnage based on container penetration level estimated till the forecast period.

6 Estimate average weight per teu over the forecast period. Equal average weight per teu taken for all scenarios.

India Container Volume Forecast 7 Forecast container tonnage converted into twenty foot equivalent units (teu) volumes based on average weight per teu to arrive at gateway teu (both loaded & empty containers included).

8 Transhipment volume share is estimated over the forecast period. The percent share of transhipment volume is estimated for the overall container volume expected to be handled at the port (hinterland + transhipment, loaded + empty).

9 India’s container volume is forecast, adding volumes derived through step (7) & step (8).

10 Derive current market share of overall container volumes handled at various port clusters for gateway traffic handled in India (step-7) and estimate future market share of the region over the forecast period. The market share is estimated based on economic development in region, new ports, expansion of current facilities, rail & road connectivity project, hinterland container volume estimation and primary & secondary survey results.

11 Gateway container volumes for each region derived for the forecast period based on estimated market share of the region.

12 Transhipment volume share is estimated over the forecast period. The percent share of transhipment volume is estimated for the overall container volume expected to be handled at the port (hinterland +

Region-wise– Volume Forecast transhipment, loaded + empty).

Table 7.3 High case scenario: India’s container traffic forecast

Real GDP Indian General cargo Container Penetration Containerised Tonnage Gateway Teu Year GDP Growth Annual Growth (Constant Prices) ('000 tonnes) (%) ('000 tonnes) (Inc. empties)

FY09 33,394 6.7% 140,022 75.7% 105,936 7,320,662 0.8% FY10 35,865 7.4% 150,663 75.7% 113,987 7,920,761 8.2% FY11 38,985 8.7% 173,436 75.7% 131,217 9,049,425 14.2% FY12 42,389 8.7% 192,342 75.9% 145,988 10,068,124 11.3% FY13 45,920 8.3% 211,959 76.0% 161,089 11,264,977 11.9% FY14 49,771 8.4% 233,354 76.0% 177,349 12,489,354 10.9% FY15 53,950 8.4% 256,564 76.3% 195,759 13,883,595 11.2% FY16 58,470 8.4% 281,676 76.3% 214,919 15,351,332 10.6% FY17 63,323 8.3% 308,635 76.3% 235,488 16,941,599 10.4% FY18 68,502 8.2% 337,405 76.3% 257,440 18,655,096 10.1% FY19 74,036 8.1% 368,149 76.5% 281,634 20,557,214 10.2% FY20 79,944 8.0% 400,965 76.5% 306,738 22,554,263 9.7% FY21 86,243 7.9% 435,955 78.0% 340,045 25,188,502 11.7% FY22 92,951 7.8% 473,223 78.0% 369,114 27,341,761 8.5% FY23 100,089 7.7% 512,873 78.0% 400,041 29,632,689 8.4% FY24 107,675 7.6% 555,013 78.0% 432,910 32,067,413 8.2% FY25 115,728 7.5% 599,748 78.0% 467,803 34,652,105 8.1% FY30 164,595 7.3% 871,208 78.0% 679,542 50,336,444 7.7% FY35 225,457 6.3% 1,209,302 78.0% 943,256 69,870,806 6.5% FY40 291,881 5.3% 1,578,292 78.0% 1,231,068 91,190,212 5.5% FY44 348,728 4.3% 1,894,083 78.0% 1,477,385 109,435,904 4.4% CAGR 6.9% 7.7% 7.8% 8.0%

Source: Drewry Research

Table 7.4 Base case scenario: India’s container traffic forecast

Real GDP Indian General cargo Container Penetration Containerised Tonnage Gateway Teu Year GDP Growth Annual Growth (Constant Prices) ('000 tonnes) (%) ('000 tonnes) (Inc. empties)

FY09 33,394 6.7% 140,022 75.7% 105,936 7,320,662 0.8% FY10 35,865 7.4% 150,663 75.7% 113,987 7,920,761 8.2% FY11 38,878 8.4% 172,838 75.7% 130,764 9,018,239 13.9% FY12 42,155 8.4% 191,045 75.9% 145,003 10,000,192 10.9% FY13 45,540 8.0% 209,851 76.0% 159,487 10,999,088 10.0% FY14 49,223 8.1% 230,310 76.0% 175,035 12,071,396 9.7% FY15 53,208 8.1% 252,444 76.3% 192,615 13,283,799 10.0% FY16 57,507 8.1% 276,324 76.3% 210,835 14,540,349 9.5% FY17 62,107 8.0% 301,880 76.3% 230,334 15,885,136 9.2% FY18 67,000 7.9% 329,063 76.3% 251,075 17,315,539 9.0% FY19 72,212 7.8% 358,016 76.5% 273,882 18,888,441 9.1% FY20 77,758 7.7% 388,820 76.5% 297,447 20,513,615 8.6% FY21 83,651 7.6% 421,558 76.9% 324,178 22,357,089 9.0% FY22 89,907 7.5% 456,312 76.9% 350,904 24,200,246 8.2% FY23 96,541 7.4% 493,165 77.0% 379,737 26,188,776 8.2% FY24 103,569 7.3% 532,202 77.0% 409,796 28,261,769 7.9% FY25 111,004 7.2% 573,505 77.0% 441,599 30,455,103 7.8% FY30 155,681 7.0% 821,692 77.0% 632,703 43,634,665 7.4% FY35 210,261 6.0% 1,124,885 77.0% 866,162 59,735,284 6.2% FY40 268,352 5.0% 1,447,586 77.0% 1,114,641 76,871,813 5.2% FY44 316,952 4.0% 1,717,565 77.0% 1,322,525 91,208,644 4.1% CAGR 6.6% 7.4% 7.5% 7.5%

Source: Drewry Research

Table 7.5 Low case scenario: India’s container traffic forecast

Real GDP Indian General cargo Container Penetration Containerised Tonnage Gateway Teu Year GDP Growth Annual Growth (Constant Prices) ('000 tonnes) (%) ('000 tonnes) (Inc. empties)

FY09 33,394 6.7% 140,022 75.7% 105,936 7,320,662 0.8% FY10 35,865 7.4% 150,663 75.7% 113,987 7,920,761 8.2% FY11 38,806 8.2% 172,440 75.7% 130,463 8,997,448 13.6% FY12 42,000 8.2% 190,181 75.9% 144,348 9,955,009 10.6% FY13 45,289 7.8% 208,452 76.0% 158,423 10,925,754 9.8% FY14 48,860 7.9% 228,294 76.0% 173,504 11,965,759 9.5% FY15 52,718 7.9% 249,723 76.3% 190,539 13,140,594 9.8% FY16 56,872 7.9% 272,797 76.3% 208,144 14,354,755 9.2% FY17 61,308 7.8% 297,439 76.3% 226,946 15,651,446 9.0% FY18 66,015 7.7% 323,591 76.3% 246,900 17,027,595 8.8% FY19 71,019 7.6% 351,385 76.5% 268,810 18,538,588 8.9% FY20 76,330 7.5% 380,891 76.5% 291,381 20,095,269 8.4% FY21 81,963 7.4% 412,179 76.9% 316,966 21,859,709 8.8% FY22 87,929 7.3% 445,321 76.9% 342,452 23,617,372 8.0% FY23 94,241 7.2% 480,387 77.0% 369,898 25,510,202 8.0% FY24 100,912 7.1% 517,447 77.0% 398,434 27,478,200 7.7% FY25 107,955 7.0% 556,569 77.0% 428,558 29,555,745 7.6% FY30 149,996 6.8% 790,108 77.0% 608,383 41,957,464 7.2% FY35 200,681 5.8% 1,071,671 77.0% 825,187 56,909,451 6.0% FY40 253,696 4.8% 1,366,171 77.0% 1,051,952 72,548,414 5.0% FY44 297,349 3.8% 1,608,669 77.0% 1,238,675 85,425,872 3.9% CAGR 6.4% 7.2% 7.3% 7.2% Source: Drewry Research

7.3 Share of North West coast regions in India’s forecasted traffic

The Northern and Western states of India are essentially served by the ports located on the West coast of India. At present major container handling facilities serving this hinterland are ports in Maharashtra (Mumbai and JNPT) and in Gujarat (Pipavav, Kandla and Mundra). The Northern and Western States, such as Uttar Pradesh, Rajasthan, Delhi, Punjab, Haryana, Madhya Pradesh, Gujarat and Maharashtra are highly industrialised and also have a significant share of Indian agriculture output.

Ports on the upper west coast (Gujarat) and in the Greater Mumbai region share a very large common secondary Northern hinterland, which accounts for almost 52% of the traffic handled in these two regions. Therefore, future traffic growth factors and market dynamics in these two regions are quite similar. The combined hinterland of the ports in these regions can be termed as North & North West (N&NW) hinterland. During the last decade, share of N&NW region within India’s total container traffic has hovered around 67%. The apportionment of future container traffic that could be handled by various gateway ports in the upper west coast and the Greater Mumbai region from these ports in the coming years is largely dependent on the following.

Main factors that would assist in the growth of traffic volumes from ports in the N & NW region

Large Population & industrial base –

Northern States, which have the largest share in the hinterland traffic, are likely to dominate future trade also due to large population and agricultural/industrial base in states like Punjab, Haryana, Delhi, Uttar Pradesh and Rajasthan.

High share of NW India in major export commodities

Readymade garments, Textile, Handicrafts, Leather products, Auto components, Electrical and electronic products, Engineering goods, Processed and packaged food and Agri – exports are the major export commodities moving in containers from India and Northern States have a major share in the production of these commodities. Some of the leading production centres are Delhi, Karnal, Ludhiana, Kanpur, Agra, Moradabad, Jaipur, Kota, Pune, Aurangabad, Surat, Vapi and Mumbai.

Proposed SEZ

Proposed development of large SEZs in Haryana, Gujarat and Mumbai region is likely to provide boost to industrial development in the region and in the immediate hinterland of ports in Gujarat and Mumbai.

Maharashtra

Maharashtra State is highly industrialised and has a strong agricultural base too. Therefore, it alone contributes 19.28% share of JNPT and Mumbai container traffic. Maharashtra is likely to maintain its share in the future N&NW traffic too.

New capacity projects

New additional container handling capacity in the region would result in a higher penetration of container in the break bulk cargo segment thus helping in the growth of

container trade. Further, development of new ports in Gujarat would provide new gateways for hinterland traffic thus reducing pressure on existing infrastructure at JNP and Mumbai.

New rail-road connectivity projects

The hinterland connectivity of ports in the N&NW region is currently being upgraded. Ports in this region will be able to provide good connectivity by road/rail and this would assist in the movement of containers from large secondary hinterland. One of the major projects which are most likely to increase container handling capacity in the region is the Dedicated Freight Corridor project. This project is most likely to decrease inland haulage and transit time for containers originating from the northern hinterland of India.

Delhi Mumbai Industrial Corridor

With a view to optimize on the enhanced connectivity being offered for freight movement, Government of India has further proposed “Delhi Mumbai Industrial Corridor (DMIC) along the alignment of Western Dedicated Freight Corridor (DFC) between Delhi and Mumbai.

The proposed high-speed connectivity between Delhi and Mumbai offers immense opportunities for development of an Industrial corridor along the alignment of the connecting infrastructure. A band of 150 km (the influence region) has been chosen on both sides of the freight corridor to be developed as the Industrial Corridor. The vision for DMIC is to create strong economic base in this band with globally competitive environment and state-of-the-art infrastructure to activate local commerce, enhance foreign investments and attain sustainable development. In addition to the influence region, DMIC would also include development of requisite feeder rail/road connectivity to hinterland/markets and select ports along the western coast.

Impact of Far Eastern trade dominance

Almost 46% of the total far eastern volumes (export & import included) are handled at the North Western coast of India. The lower east coast ports which constitute Chennai & Tuticorin handle around 40% of the Far Eastern container trade from India, approximately 8% by upper east coast ports of Kolkata & Haldia and rest by other ports in India. This is the largest trade in India which is also growing at a considerable pace. Thus, North Western coast ports which maintain a large market share in these trades might maintain their overall market share in future too.

Recently, a separate strategy has been proposed to convert the east coast of India as the proposed hub of Far Eastern trade volumes. The idea is to drop/pick far eastern container volumes from these hubs which are later shifted to northern hinterland by rail or road. The shipping lines in such a scenario would save around 1,000 nautical miles in distance traveled and around 3 days of transit time. However, due to various market dynamics, this concept has failed to become a realistic scenario.

Some of the major bottlenecks in implementing this idea are as follows:

This is a highly import dominated trade with imports accounting for over 70% of the container traffic on this trade. Thus the ships which are calling at the eastern coast ports do not have sufficient return cargo to justify the port call. Currently, vessels serving the Far East – Middle East trade, call South Asian ports in the return leg of their voyage. In such

rotations they call Western India coast ports loading containers for Far East destination as well as other trades which require transshipment from Colombo, Singapore or Tanjung Pelepas.

Existing and upcoming ports on the east coast of India for proposed inland connectivity to northern hinterland resulting in higher costs compared to benefits.

The upper east coasts like Visakhapatnam & western coast port like JNPT are equidistant from northern hinterland. However, unlike the western coast port like JNPT, Mundra or Pipavav, the central east coast ports do not have a strong hinterland. Thus, these ports would primarily depend upon far eastern trade import volumes to northern hinterland while it would not have any export traffic in return. Recently, Boxtrans started train services from Delhi to Visakhapatnam to cater to the far eastern trade volumes. The company couldn’t sustain the high cost of inland haulage to transfer container between Visakhapatnam and Delhi. This was primarily due to the reason that there was low potential of export boxes from Delhi to Vizag and it only carried empties from Delhi to Visakhapatnam port in the return leg.

Ocean freight rates from West India coasts are equal or cheaper to Far East destinations/origins.

Threats to the development of traffic at N&NW ports

As discussed earlier port connectivity with the hinterland is a major determinant in the volumes that are handled by the port. Therefore, if the proposed projects for overcoming the current logistics bottlenecks are delayed then it could impede the expected growth in container traffic in the region.

• Development of new container handling facilities is expected to result in realignment of traffic. Currently, there is a small volume of traffic that is generated in Southern and Central India and is moving to ports on the West coast especially to JNPT. With the improvement of facilities in the South, this traffic is likely to realign to their respective nearest gateway ports.

• Delay in implementation of new container handling facilities could lead to congestion and add to the overall shipping and logistics costs.

• Drewry is of the view that N&NW hinterland will maintain its dominance in Indian container traffic. However, considering the changing trade dynamics and developments in Southern states, the share of N&NW hinterland could decline from the present levels of around 67.6% to around 60.0% over the forecast period.

• As per Drewry, the most likely scenario to occur is the base case, wherein the North Western India container traffic is estimated to grow at a CAGR of 7.1%. The total traffic is estimated to grow from 5.0m teu in FY09 to 54.0m teu in FY44.

Table 7.6 Growth of gateway container traffic in North West coast of India – High case

Total Indian Gateway Share of Share of Upper Share of Greater Traffic of NW Annual Traffic of Upper Annual Traffic of Greater Annual Year Traffic (teu) NW West Coast Mumbai (Teu) Growth Rate West Coast Growth Rate Mumbai Growth Rate FY09 7,320,662 67.1% 22.3% 77.7% 4,915,613 -0.1% 1,096,379 2.3% 3,819,234 -0.8% FY10 7,920,761 67.6% 27.0% 73.0% 5,352,635 8.9% 1,446,857 32.0% 3,905,779 2.3% FY11 9,049,425 67.4% 25.0% 75.0% 6,099,313 13.9% 1,524,828 5.4% 4,574,485 17.1% FY12 10,068,124 67.3% 26.5% 73.5% 6,775,848 11.1% 1,795,600 17.8% 4,980,248 8.9% FY13 11,264,977 67.2% 28.0% 72.0% 7,570,064 11.7% 2,119,618 18.0% 5,450,446 9.4% FY14 12,489,354 67.0% 29.0% 71.0% 8,367,867 10.5% 2,426,682 14.5% 5,941,186 9.0% FY15 13,883,595 66.8% 30.0% 70.0% 9,274,242 10.8% 2,782,272 14.7% 6,491,969 9.3% FY16 15,351,332 66.5% 31.0% 69.0% 10,208,636 10.1% 3,164,677 13.7% 7,043,959 8.5% FY17 16,941,599 65.7% 32.0% 68.0% 11,130,630 9.0% 3,561,802 12.5% 7,568,829 7.5% FY18 18,655,096 65.5% 33.0% 67.0% 12,219,088 9.8% 4,032,299 13.2% 8,186,789 8.2% FY19 20,557,214 65.5% 34.0% 66.0% 13,464,975 10.2% 4,578,092 13.5% 8,886,884 8.6% FY20 22,554,263 65.5% 35.0% 65.0% 14,773,042 9.7% 5,170,565 12.9% 9,602,477 8.1% FY21 25,188,502 65.4% 36.0% 64.0% 16,473,280 11.5% 5,930,381 14.7% 10,542,899 9.8% FY22 27,341,761 65.3% 37.0% 63.0% 17,854,170 8.4% 6,606,043 11.4% 11,248,127 6.7% FY23 29,632,689 65.2% 38.0% 62.0% 19,320,513 8.2% 7,341,795 11.1% 11,978,718 6.5% FY24 32,067,413 65.1% 39.0% 61.0% 20,875,886 8.1% 8,141,595 10.9% 12,734,290 6.3% FY25 34,652,105 65.0% 40.0% 60.0% 22,523,868 7.9% 9,009,547 10.7% 13,514,321 6.1% FY30 50,336,444 60.0% 45.0% 55.0% 30,201,866 5.9% 13,590,840 8.3% 16,611,026 4.0% FY35 69,870,806 60.0% 45.0% 55.0% 41,922,484 6.5% 18,865,118 6.5% 23,057,366 6.5% FY40 91,190,212 60.0% 45.0% 55.0% 54,714,127 5.5% 24,621,357 5.5% 30,092,770 5.5% FY44 109,435,904 60.0% 45.0% 55.0% 65,661,542 4.4% 29,547,694 4.4% 36,113,848 4.4% CAGR 8.0% 7.7% 9.3% 6.8%

Source: Drewry Research

Table 7.7 Growth of container traffic in North West coast of India coast of India – Base case

Total Indian Gateway Share of Share of Upper Share of Greater Traffic of NW Annual Traffic of Upper Annual Traffic of Greater Annual Year Traffic (teu) NW West Coast Mumbai (Teu) Growth Rate West Coast Growth Rate Mumbai Growth Rate FY09 7,320,662 67.1% 22.3% 77.7% 4,915,613 -0.1% 1,096,379 2.3% 3,819,234 -0.8% FY10 7,920,761 67.6% 27.0% 73.0% 5,352,635 8.9% 1,446,857 32.0% 3,905,779 2.3% FY11 9,018,239 67.4% 25.0% 75.0% 6,078,293 13.6% 1,519,573 5.0% 4,558,720 16.7% FY12 10,000,192 67.3% 26.5% 73.5% 6,730,129 10.7% 1,783,484 17.4% 4,946,645 8.5% FY13 10,999,088 67.2% 28.0% 72.0% 7,391,387 9.8% 2,069,588 16.0% 5,321,799 7.6% FY14 12,071,396 67.0% 29.0% 71.0% 8,087,835 9.4% 2,345,472 13.3% 5,742,363 7.9% FY15 13,283,799 66.8% 30.0% 70.0% 8,873,577 9.7% 2,662,073 13.5% 6,211,504 8.2% FY16 14,540,349 66.5% 31.0% 69.0% 9,669,332 9.0% 2,997,493 12.6% 6,671,839 7.4% FY17 15,885,136 65.7% 32.0% 68.0% 10,436,535 7.9% 3,339,691 11.4% 7,096,843 6.4% FY18 17,315,539 65.5% 33.0% 67.0% 11,341,678 8.7% 3,742,754 12.1% 7,598,924 7.1% FY19 18,888,441 65.5% 34.0% 66.0% 12,371,929 9.1% 4,206,456 12.4% 8,165,473 7.5% FY20 20,513,615 65.5% 35.0% 65.0% 13,436,418 8.6% 4,702,746 11.8% 8,733,672 7.0% FY21 22,357,089 65.4% 36.0% 64.0% 14,621,536 8.8% 5,263,753 11.9% 9,357,783 7.1% FY22 24,200,246 65.3% 37.0% 63.0% 15,802,761 8.1% 5,847,021 11.1% 9,955,739 6.4% FY23 26,188,776 65.2% 38.0% 62.0% 17,075,082 8.1% 6,488,531 11.0% 10,586,551 6.3% FY24 28,261,769 65.1% 39.0% 61.0% 18,398,412 7.8% 7,175,381 10.6% 11,223,031 6.0% FY25 30,455,103 65.0% 40.0% 60.0% 19,795,817 7.6% 7,918,327 10.4% 11,877,490 5.8% FY30 43,634,665 60.0% 45.0% 55.0% 26,180,799 5.6% 11,781,360 8.0% 14,399,440 3.7% FY35 59,735,284 60.0% 45.0% 55.0% 35,841,170 6.2% 16,128,527 6.2% 19,712,644 6.2% FY40 76,871,813 60.0% 45.0% 55.0% 46,123,088 5.2% 20,755,390 5.2% 25,367,698 5.2% FY44 91,208,644 60.0% 45.0% 55.0% 54,725,186 4.1% 24,626,334 4.1% 30,098,853 4.1%

CAGR 7.5% 7.1% 8.7% 6.2%

Source: Drewry Research

Table 7.8 Growth of container traffic in North West coast of India coast of India – Low case

Total Indian Gateway Share of Share of Upper Share of Greater Traffic of NW Annual Traffic of Upper Annual Traffic of Greater Annual Year Traffic (teu) NW West Coast Mumbai (Teu) Growth Rate West Coast Growth Rate Mumbai Growth Rate FY09 7,320,662 67.1% 22.3% 77.7% 4,915,613 -0.1% 1,096,379 2.3% 3,819,234 -0.8% FY10 7,920,761 67.6% 27.0% 73.0% 5,352,635 8.9% 1,446,857 32.0% 3,905,779 2.3% FY11 8,997,448 67.4% 25.0% 75.0% 6,064,280 13.3% 1,516,070 4.8% 4,548,210 16.4% FY12 9,955,009 67.3% 26.5% 73.5% 6,699,721 10.5% 1,775,426 17.1% 4,924,295 8.3% FY13 10,925,754 67.2% 28.0% 72.0% 7,342,106 9.6% 2,055,790 15.8% 5,286,317 7.4% FY14 11,965,759 67.0% 29.0% 71.0% 8,017,058 9.2% 2,324,947 13.1% 5,692,111 7.7% FY15 13,140,594 66.8% 30.0% 70.0% 8,777,917 9.5% 2,633,375 13.3% 6,144,542 7.9% FY16 14,354,755 66.5% 31.0% 69.0% 9,545,912 8.7% 2,959,233 12.4% 6,586,679 7.2% FY17 15,651,446 65.7% 32.0% 68.0% 10,283,000 7.7% 3,290,560 11.2% 6,992,440 6.2% FY18 17,027,595 65.5% 33.0% 67.0% 11,153,075 8.5% 3,680,515 11.9% 7,472,560 6.9% FY19 18,538,588 65.5% 34.0% 66.0% 12,142,775 8.9% 4,128,544 12.2% 8,014,232 7.2% FY20 20,095,269 65.5% 35.0% 65.0% 13,162,401 8.4% 4,606,841 11.6% 8,555,561 6.8% FY21 21,859,709 65.4% 36.0% 64.0% 14,296,250 8.6% 5,146,650 11.7% 9,149,600 6.9% FY22 23,617,372 65.3% 37.0% 63.0% 15,422,144 7.9% 5,706,193 10.9% 9,715,951 6.2% FY23 25,510,202 65.2% 38.0% 62.0% 16,632,652 7.8% 6,320,408 10.8% 10,312,244 6.1% FY24 27,478,200 65.1% 39.0% 61.0% 17,888,308 7.5% 6,976,440 10.4% 10,911,868 5.8% FY25 29,555,745 65.0% 40.0% 60.0% 19,211,234 7.4% 7,684,494 10.1% 11,526,740 5.6% FY30 41,957,464 60.0% 45.0% 55.0% 25,174,478 5.4% 11,328,515 7.8% 13,845,963 3.5% FY35 56,909,451 60.0% 45.0% 55.0% 34,145,671 6.0% 15,365,552 6.0% 18,780,119 6.0% FY40 72,548,414 60.0% 45.0% 55.0% 43,529,048 5.0% 19,588,072 5.0% 23,940,977 5.0% FY44 85,425,872 60.0% 45.0% 55.0% 51,255,523 3.9% 23,064,985 3.9% 28,190,538 3.9%

CAGR 7.2% 6.9% 8.5% 6.0%

Source: Drewry Research

7.4 Share of Lower West & East coast regions in India’s forecasted traffic

Ports on the Lower West Coast (LWC) and in the Lower East Coast (LEC) region share hinterland spread amongst the southern states of India. These states contribute around 25% of the total container traffic generated in India. This region is witnessing a lot of activity in the maritime and industrial growth sector. There have been several new port projects which have been announced or commissioned particularly on the Lower East Coast of India along with massive investments in the manufacturing sector.

The southern states of India are essentially served by ports located on the lower coast of India. At present major container handling facilities serving this hinterland are ports in Tamil Nadu (Chennai & Tuticorin) and in Kerala (Cochin). Amongst the southern states of India in order of industrialisation Tamil Nadu leads all the states followed by Andhra Pradesh, Karnataka and Kerala in descending order. These states also contribute heavily through their agricultural output.

Mormugao port has been included amongst the ports in lower west coast region. However, the extent of industrialisation and containerisation potential for the state of Goa is limited compared to other ports in the cluster. New Mangalore port, one of the three ports in the lower west coast port clusters has taken rapid strides in increasing its container throughput recently. However, it suffers from low industrial investment and major productions centres in its immediate hinterland. This has reduced the port attractiveness of this facility wherein shippers prefer other facilities.

Development of the Vallarpadam terminal and the proposed Vizhinjam port are two of the significant infrastructure development to cater to container trade in the Lower West coast region. These new facilities could significantly impact the overall direction and dynamics of the container trade in the region.

However these two ports have a major drawback in terms of limited primary hinterland which is the state of Kerala. Vizhinjam in particular lies in the southern most tip of Kerala which is neither closer to major cargo generating areas of Tamil Nadu nor Kerala. However, some of the cargo centres in the southern Kerala like Kollam, Tiruvananthapuram and Allapuzha contribute around 40% of the overall container traffic generated in the state. The proximity of this port to these cargo centres could be an incentive to attract container traffic from these regions however much depends on the infrastructure facilities like availability of CFSs, CHA, warehouses, trailers are competitive prices, range of services at the port, etc, in order to attract this hinterland traffic.

Drewry estimates that if developed the Vizhinjam port could attract transhipment traffic due to its proximity to the main Asia-Eur trade lane, though volumes might be limited due to competition. The proposed port is located ideally with negligible deviation from Colombo and main shipping route. Such mainline calls at the port could attract traffic not only from its immediate hinterland but also from distant cargo centres. However, the above mentioned factors are very significant in terms of attracting shipping lines and cargo owners to the port.

Traffic share distribution between Lower East coast and Lower West coast ports

Drewry has forecast combined traffic of the LEC & LWC coast ports as they share a common hinterland which includes cargo centres in Karnataka, Andhra Pradesh, Tamil Nadu & Kerala. Historically, ports on the LEC namely Chennai & Tuticorin have performed

much better compared to the ports on the LWC region. This is primarily because the major cargo centres having large volumes of container traffic are situated in the immediate hinterland of the LEC ports, particularly in Southern Andhra Pradesh, Tamil Nadu and eastern Karnataka.

On the other hand, ports in the LWC have relatively sparse hinterland with paucity of industrial development in their vicinity, particularly Kerala. Several issues like labour problems, low industrial growth, poor road and rail connectivity have resulted in lower traffic growth at these ports. The commodity profile of most of these ports are dominated by agricultural commodities which have low growth rate and typically ship from the nearest available port due to sensitivity to cost of transportation.

Inspire of proposed development of the Vallarpadam terminal and proposed Vizhinjam port the LEC coast may not witness high hinterland volumes primarily due to the reasons discussed above. Although, these facilities may in themselves be world class facilities however stiff competition from other ports in the region coupled with low cargo in the immediate hinterland is likely to cause slow gateway traffic growth in these regions.

The new container handling facility at Cochin, the Vallarpadam terminal, is planning to attract cargoes from secondary hinterland like Bangalore & Coimbatore which have traditionally shipped through Chennai &Tuticorin respectively. In spite of Cochin port being closer to these cargo centres vis-à-vis competing ports in Tamil Nadu, the shippers have continued to ship their cargo through their traditional ports.

Therefore, Drewry estimates that with the inception of the Vallarpadam terminal, the Cochin port may be able to attract limited traffic from these cargo centres in the short run. However in the long run with the development of new terminals at Chennai, Ennore, Krishnapatnam and probably Karaikal coupled with high concentration of industrial facility which contribute significantly to the container traffic in the Southern states, the shipping lines would continue to provide wider range of services at the LEC ports as compared to the LWC ports. Therefore, LEC ports might witness an increase in their share in total traffic in the short run however in the longer run the LEC ports may consolidate their position as the preferred gateway ports for South India.

Main factors that would assist in the growth of traffic volumes from ports in the lower east & west coast region

• New investment in augmenting/developing container handling capacity. Additional container handling capacity would result in a higher penetration of container in the break bulk cargo segment thus helping in the growth of container trade.

• New investments are primarily taking place in the state of Tamil Nadu and in the immediate hinterland of existing Chennai port. The likely increase in container traffic due to increase in manufacturing activities and export oriented units in the region would most probably benefit Chennai and upcoming Ennore port.

• Chennai region has a high concentration of various allied infrastructure required for container traffic development in any area. This region benefits from existence of various CFS, CHAs, forwarders and warehouses which are further augmenting their capacity to handle the increasing traffic from the region.

• Proposed port based SEZs are likely to provide boost to industrial development in the region and the immediate hinterland cargo contribution.

• The hinterland connectivity of ports in the region is currently being upgraded. Ports in this region will be able to provide good connectivity by road and rail. This would assist in the movement of containers from the large secondary hinterland.

• Several auto companies which have export focus like Hyundai, Renault and Nissan have shifted manufacturing base in the immediate hinterland of the Chennai port. Such industries lead to development of several smaller firms providing raw material and other finished products to such companies and in turn lead to higher container traffic.

• The development of container handling facility at Cochin port by DPW is most likely to increase container traffic in the short run in the lower west coast of India.

• Mainline vessel calls at Kerala ports could attract traffic from their secondary hinterland cargo centres like Bangaluru, Coimbatore & Tirupur.

Threats to the development of traffic at Lower east & west coast ports

• Delay in implementation of the proposed and planned projects for overcoming the current logistics bottlenecks at Chennai and Ennore port. The increasing bottlenecks might force some companies to shift manufacturing base at other locations.

• Competition from JNPT and other ports in the North West region.

• High cost of developing infrastructure for the Vizhinjam port.

• Poor road/rail connectivity in the state of Kerala.

As per Drewry, the likely scenario is the base case, wherein the Lower East & West Coast of India gateway container traffic is estimated to grow at a CAGR of 8.3%. The total traffic is estimated to grow from 1.8m teu in FY09 to 34.2m teu in FY44.

Table 7.9 Growth of container traffic in Lower West & East Coast of India – High case

Total Indian Gateway Share of Share of Share of Traffic of Annual Growth Traffic of LWC Annual Growth Gateway Traffic of Annual Growth Year Traffic (teu) LW&LEC LWC LEC LW&EC Rate (teu) Rate LEC (teu) Rate FY09 7,320,662 25.8% 16.1% 83.9% 1,885,142 2.3% 303,221 6.3% 1,581,921 1.6% FY10 7,920,761 24.8% 16.1% 83.9% 1,966,125 4.3% 316,546 4.4% 1,649,579 4.3% FY11 9,049,425 25.4% 16.5% 83.5% 2,298,554 16.9% 379,261 19.8% 1,919,293 16.4% FY12 10,068,124 25.3% 16.8% 83.2% 2,547,235 10.8% 427,936 12.8% 2,119,300 10.4% FY13 11,264,977 25.3% 17.0% 83.0% 2,850,039 11.9% 484,507 13.2% 2,365,532 11.6% FY14 12,489,354 25.4% 17.2% 82.8% 3,172,296 11.3% 545,635 12.6% 2,626,661 11.0% FY15 13,883,595 25.5% 17.5% 82.5% 3,540,317 11.6% 619,555 13.5% 2,920,761 11.2% FY16 15,351,332 25.7% 17.8% 82.2% 3,945,292 11.4% 702,262 13.3% 3,243,030 11.0% FY17 16,941,599 26.4% 18.0% 82.0% 4,472,582 13.4% 805,065 14.6% 3,667,517 13.1% FY18 18,655,096 26.5% 19.0% 81.0% 4,943,600 10.5% 939,284 16.7% 4,004,316 9.2% FY19 20,557,214 26.5% 19.5% 80.5% 5,447,662 10.2% 1,062,294 13.1% 4,385,368 9.5% FY20 22,554,263 26.5% 20.0% 80.0% 5,976,880 9.7% 1,195,376 12.5% 4,781,504 9.0% FY21 25,188,502 26.6% 20.0% 80.0% 6,700,141 12.1% 1,340,028 12.1% 5,360,113 12.1% FY22 27,341,761 26.7% 20.0% 80.0% 7,300,250 9.0% 1,460,050 9.0% 5,840,200 9.0% FY23 29,632,689 26.8% 20.0% 80.0% 7,941,561 8.8% 1,588,312 8.8% 6,353,249 8.8% FY24 32,067,413 26.9% 20.0% 80.0% 8,626,134 8.6% 1,725,227 8.6% 6,900,907 8.6% FY25 34,652,105 27.0% 19.0% 81.0% 9,356,068 8.5% 1,777,653 3.0% 7,578,415 9.8% FY30 50,336,444 32.0% 15.0% 85.0% 16,107,662 11.1% 2,416,149 11.1% 13,691,513 11.1% FY35 69,870,806 32.0% 12.0% 88.0% 22,358,658 6.5% 2,683,039 6.5% 19,675,619 6.5% FY40 91,190,212 32.0% 12.0% 88.0% 29,180,868 5.5% 3,501,704 5.5% 25,679,164 5.5% FY44 109,435,904 32.0% 12.0% 88.0% 35,019,489 4.4% 4,202,339 4.4% 30,817,150 4.4% CAGR 8.0% 8.8% 7.9% 9.0%

Source: Drewry Research

Table 7.10 Growth of container traffic in Lower West & East Coast of India coast of India – Base case

Total Indian Gateway Share of Share of Share of Traffic of Annual Growth Traffic of LWC Annual Growth Gateway Traffic of Annual Growth Year Traffic (teu) LW&LEC LWC LEC LW&EC Rate (teu) Rate LEC (teu) Rate FY09 7,320,662 25.8% 16.1% 83.9% 1,885,142 2.3% 303,221 6.3% 1,581,921 1.6% FY10 7,920,761 24.8% 16.1% 83.9% 1,966,125 4.3% 316,546 4.4% 1,649,579 4.3% FY11 9,018,239 25.4% 16.5% 83.5% 2,290,633 16.5% 377,954 19.4% 1,912,678 15.9% FY12 10,000,192 25.3% 16.8% 83.2% 2,530,049 10.5% 425,048 12.5% 2,105,000 10.1% FY13 10,999,088 25.3% 17.0% 83.0% 2,782,769 10.0% 473,071 11.3% 2,309,698 9.7% FY14 12,071,396 25.4% 17.2% 82.8% 3,066,135 10.2% 527,375 11.5% 2,538,759 9.9% FY15 13,283,799 25.5% 17.5% 82.5% 3,387,369 10.5% 592,790 12.4% 2,794,579 10.1% FY16 14,540,349 25.7% 17.8% 82.2% 3,736,870 10.3% 665,163 12.2% 3,071,707 9.9% FY17 15,885,136 26.4% 18.0% 82.0% 4,193,676 12.2% 754,862 13.5% 3,438,814 12.0% FY18 17,315,539 26.5% 19.0% 81.0% 4,588,618 9.4% 871,837 15.5% 3,716,781 8.1% FY19 18,888,441 26.5% 19.5% 80.5% 5,005,437 9.1% 976,060 12.0% 4,029,377 8.4% FY20 20,513,615 26.5% 20.0% 80.0% 5,436,108 8.6% 1,087,222 11.4% 4,348,886 7.9% FY21 22,357,089 26.6% 20.0% 80.0% 5,946,986 9.4% 1,189,397 9.4% 4,757,589 9.4% FY22 24,200,246 26.7% 20.0% 80.0% 6,461,466 8.7% 1,292,293 8.7% 5,169,173 8.7% FY23 26,188,776 26.8% 20.0% 80.0% 7,018,592 8.6% 1,403,718 8.6% 5,614,874 8.6% FY24 28,261,769 26.9% 20.0% 80.0% 7,602,416 8.3% 1,520,483 8.3% 6,081,933 8.3% FY25 30,455,103 27.0% 19.0% 81.0% 8,222,878 8.2% 1,562,347 2.8% 6,660,531 9.5% FY30 43,634,665 32.0% 15.0% 85.0% 13,963,093 10.8% 2,094,464 10.8% 11,868,629 10.8% FY35 59,735,284 32.0% 12.0% 88.0% 19,115,291 6.2% 2,293,835 6.2% 16,821,456 6.2% FY40 76,871,813 32.0% 12.0% 88.0% 24,598,980 5.2% 2,951,878 5.2% 21,647,103 5.2% FY44 91,208,644 32.0% 12.0% 88.0% 29,186,766 4.1% 3,502,412 4.1% 25,684,354 4.1% CAGR 7.5% 8.3% 7.3% 8.4%

Source: Drewry Research

Table 7.11 Growth of container traffic in Lower West & East Coast of India coast of India – Low case

Total Indian Gateway Share of Share of Share of Traffic of Annual Growth Traffic of LWC Annual Growth Gateway Traffic of Annual Growth Year Traffic (teu) LW&LEC LWC LEC LW&EC Rate (teu) Rate LEC (teu) Rate FY09 7,320,662 25.8% 16.1% 83.9% 1,885,142 2.3% 303,221 6.3% 1,581,921 1.6% FY10 7,920,761 24.8% 16.1% 83.9% 1,966,125 4.3% 316,546 4.4% 1,649,579 4.3% FY11 8,997,448 25.4% 16.5% 83.5% 2,285,352 16.2% 377,083 19.1% 1,908,269 15.7% FY12 9,955,009 25.3% 16.8% 83.2% 2,518,617 10.2% 423,128 12.2% 2,095,490 9.8% FY13 10,925,754 25.3% 17.0% 83.0% 2,764,216 9.8% 469,917 11.1% 2,294,299 9.5% FY14 11,965,759 25.4% 17.2% 82.8% 3,039,303 10.0% 522,760 11.2% 2,516,543 9.7% FY15 13,140,594 25.5% 17.5% 82.5% 3,350,852 10.3% 586,399 12.2% 2,764,453 9.9% FY16 14,354,755 25.7% 17.8% 82.2% 3,689,172 10.1% 656,673 12.0% 3,032,499 9.7% FY17 15,651,446 26.4% 18.0% 82.0% 4,131,982 12.0% 743,757 13.3% 3,388,225 11.7% FY18 17,027,595 26.5% 19.0% 81.0% 4,512,313 9.2% 857,339 15.3% 3,654,973 7.9% FY19 18,538,588 26.5% 19.5% 80.5% 4,912,726 8.9% 957,982 11.7% 3,954,744 8.2% FY20 20,095,269 26.5% 20.0% 80.0% 5,325,246 8.4% 1,065,049 11.2% 4,260,197 7.7% FY21 21,859,709 26.6% 20.0% 80.0% 5,814,683 9.2% 1,162,937 9.2% 4,651,746 9.2% FY22 23,617,372 26.7% 20.0% 80.0% 6,305,838 8.4% 1,261,168 8.4% 5,044,671 8.4% FY23 25,510,202 26.8% 20.0% 80.0% 6,836,734 8.4% 1,367,347 8.4% 5,469,387 8.4% FY24 27,478,200 26.9% 20.0% 80.0% 7,391,636 8.1% 1,478,327 8.1% 5,913,309 8.1% FY25 29,555,745 27.0% 19.0% 81.0% 7,980,051 8.0% 1,516,210 2.6% 6,463,841 9.3% FY30 41,957,464 32.0% 15.0% 85.0% 13,426,388 10.6% 2,013,958 10.6% 11,412,430 10.6% FY35 56,909,451 32.0% 12.0% 88.0% 18,211,024 6.0% 2,185,323 6.0% 16,025,701 6.0% FY40 72,548,414 32.0% 12.0% 88.0% 23,215,492 5.0% 2,785,859 5.0% 20,429,633 5.0% FY44 85,425,872 32.0% 12.0% 88.0% 27,336,279 3.9% 3,280,353 3.9% 24,055,926 3.9% CAGR 7.2% 8.0% 7.1% 8.2%

Source: Drewry Research

7.5 Share of Central and Upper East coast regions in India’s forecasted traffic

Ports in the central and upper east coast region primarily serves states of Andhra Pradesh, Orissa, Jharkhand, Chhattisgarh, West Bengal and North East sates of India. Kolkata/Haldia also acts as gateway ports for neighbouring countries like Nepal. The current share of ports in this region is around 7%, which is largely dominated by Kolkata and Haldia. Other active container port in the region is Visakhapatnam port, handling less than 0.1m teu. The limited share of these ports in India’s container trade reflects that the container traffic in the hinterland is quite limited. One of the reasons for this trend is the industries in the hinterland are largely dependent on bulk imports and exports. Some of the key industries in the region are steel, aluminium, cement, mining and thermal power. While major export commodities generated are iron ore, other minor minerals, steel, granite and agri products, imports largely includes liquid bulk, coal, limestone, steel, food grains, timber logs.

The container trade in the region is likely to witness a robust growth over the forecast period. However, the overall share of the region in Indian container trade is unlikely to change. The major factors expected to contribute to the growth in container trade in the region are:

Main factors that would assist in the growth of traffic volumes from ports in the central & east coast region

• Growth in steel and mining industry in the hinterland.

• Development of the new container handling facilities facilitating containerisation in the hinterland.

• Ports in the upper east coast region are likely to maintain a dominant share in the region. However, development of Dhamra container terminal may result in shift of container traffic from Kolkata/Haldia ports. Cargo centres in Jharkhand, Orissa and Chhattisgarh region could move to the proposed deep draft container port at Dhamra. Further, the limited capacity at Kolkata and Haldia ports would force the users to look for alternate gateway ports for efficient handling of containers.

Threats to the development of traffic at Central and Lower east coast ports

• Delay in implementation of the proposed mega steel plants in the region.

• Competition from the ports in the lower east coast like Ennore, Krishnapatnam and Chennai.

• Delay in commissioning of the new proposed container terminals, leading to capacity constraint in the region.

As per Drewry, the likely scenario is the base case, wherein the Upper & Central East Coast of India container traffic is estimated to grow at a compound average growth rate of 7.6%. The total traffic is estimated to grow from 0.5m teu in FY09 to 7.3m teu in FY44.

Table 7.12 Growth of container traffic in Upper & Central East Coast of India – High case

Total Indian gateway Share of Share of Share of Traffic of C&UEC Annual Growth Traffic of CEC Annual Growth Traffic of UEC Annual Growth Year Traffic (teu) C&UEC CEC UEC (teu) Rate (teu) Rate (teu) Rate FY09 7,320,662 7.1% 16.9% 83.1% 519,907 3.8% 88,124 23.9% 431,783 0.5% FY10 7,920,761 7.6% 16.3% 83.7% 602,000 15.8% 98,000 11.2% 504,000 16.7% FY11 9,049,425 7.2% 17.2% 82.8% 651,559 8.2% 112,068 14.4% 539,491 7.0% FY12 10,068,124 7.4% 17.5% 82.5% 745,041 14.3% 130,382 16.3% 614,659 13.9% FY13 11,264,977 7.5% 20.0% 80.0% 844,873 13.4% 168,975 29.6% 675,899 10.0% FY14 12,489,354 7.6% 22.0% 78.0% 949,191 12.3% 208,822 23.6% 740,369 9.5% FY15 13,883,595 7.7% 24.0% 76.0% 1,069,037 12.6% 256,569 22.9% 812,468 9.7% FY16 15,351,332 7.8% 26.0% 74.0% 1,197,404 12.0% 311,325 21.3% 886,079 9.1% FY17 16,941,599 7.9% 26.0% 74.0% 1,338,386 11.8% 347,980 11.8% 990,406 11.8% FY18 18,655,096 8.0% 25.0% 75.0% 1,492,408 11.5% 373,102 7.2% 1,119,306 13.0% FY19 20,557,214 8.0% 25.0% 75.0% 1,644,577 10.2% 411,144 10.2% 1,233,433 10.2% FY20 22,554,263 8.0% 25.0% 75.0% 1,804,341 9.7% 451,085 9.7% 1,353,256 9.7% FY21 25,188,502 8.0% 25.0% 75.0% 2,015,080 11.7% 503,770 11.7% 1,511,310 11.7% FY22 27,341,761 8.0% 25.0% 75.0% 2,187,341 8.5% 546,835 8.5% 1,640,506 8.5% FY23 29,632,689 8.0% 25.0% 75.0% 2,370,615 8.4% 592,654 8.4% 1,777,961 8.4% FY24 32,067,413 8.0% 25.0% 75.0% 2,565,393 8.2% 641,348 8.2% 1,924,045 8.2% FY25 34,652,105 8.0% 25.0% 75.0% 2,772,168 8.1% 693,042 8.1% 2,079,126 8.1% FY30 50,336,444 8.0% 25.0% 75.0% 4,026,916 7.7% 1,006,729 7.7% 3,020,187 7.7% FY35 69,870,806 8.0% 25.0% 75.0% 5,589,664 6.5% 1,397,416 6.5% 4,192,248 6.5% FY40 91,190,212 8.0% 25.0% 75.0% 7,295,217 5.5% 1,823,804 5.5% 5,471,413 5.5% FY44 109,435,904 8.0% 25.0% 75.0% 8,754,872 4.4% 2,188,718 4.4% 6,566,154 4.4% CAGR 8.0% 8.2% 9.6% 7.8%

Source: Drewry Research

Table 7.13 Growth of container traffic in Upper & Central East Coast of India coast of India – Base case

Total Indian gateway Share of Share of Share of Traffic of C&UEC Annual Growth Traffic of CEC Annual Growth Traffic of UEC Annual Growth Year Traffic (teu) C&UEC CEC UEC (teu) Rate (teu) Rate (teu) Rate FY09 7,320,662 7.1% 16.9% 83.1% 519,907 3.8% 88,124 23.9% 431,783 0.5% FY10 7,920,761 7.6% 16.3% 83.7% 602,000 15.8% 98,000 11.2% 504,000 16.7% FY11 9,018,239 7.2% 17.2% 82.8% 649,313 7.9% 111,682 14.0% 537,631 6.7% FY12 10,000,192 7.4% 17.5% 82.5% 740,014 14.0% 129,502 16.0% 610,512 13.6% FY13 10,999,088 7.5% 20.0% 80.0% 824,932 11.5% 164,986 27.4% 659,945 8.1% FY14 12,071,396 7.6% 22.0% 78.0% 917,426 11.2% 201,834 22.3% 715,592 8.4% FY15 13,283,799 7.7% 24.0% 76.0% 1,022,852 11.5% 245,485 21.6% 777,368 8.6% FY16 14,540,349 7.8% 26.0% 74.0% 1,134,147 10.9% 294,878 20.1% 839,269 8.0% FY17 15,885,136 7.9% 26.0% 74.0% 1,254,926 10.6% 326,281 10.6% 928,645 10.6% FY18 17,315,539 8.0% 25.0% 75.0% 1,385,243 10.4% 346,311 6.1% 1,038,932 11.9% FY19 18,888,441 8.0% 25.0% 75.0% 1,511,075 9.1% 377,769 9.1% 1,133,306 9.1% FY20 20,513,615 8.0% 25.0% 75.0% 1,641,089 8.6% 410,272 8.6% 1,230,817 8.6% FY21 22,357,089 8.0% 25.0% 75.0% 1,788,567 9.0% 447,142 9.0% 1,341,425 9.0% FY22 24,200,246 8.0% 25.0% 75.0% 1,936,020 8.2% 484,005 8.2% 1,452,015 8.2% FY23 26,188,776 8.0% 25.0% 75.0% 2,095,102 8.2% 523,776 8.2% 1,571,327 8.2% FY24 28,261,769 8.0% 25.0% 75.0% 2,260,942 7.9% 565,235 7.9% 1,695,706 7.9% FY25 30,455,103 8.0% 25.0% 75.0% 2,436,408 7.8% 609,102 7.8% 1,827,306 7.8% FY30 43,634,665 8.0% 25.0% 75.0% 3,490,773 7.4% 872,693 7.4% 2,618,080 7.4% FY35 59,735,284 8.0% 25.0% 75.0% 4,778,823 6.2% 1,194,706 6.2% 3,584,117 6.2% FY40 76,871,813 8.0% 25.0% 75.0% 6,149,745 5.2% 1,537,436 5.2% 4,612,309 5.2% FY44 91,208,644 8.0% 25.0% 75.0% 7,296,692 4.1% 1,824,173 4.1% 5,472,519 4.1% CAGR 7.5% 7.6% 9.0% 7.3%

Source: Drewry Research

Table 7.14 Growth of container traffic in Upper & Central East Coast of India coast of India – Low case

Total Indian gateway Share of Share of Share of Traffic of C&UEC Annual Growth Traffic of CEC Annual Growth Traffic of UEC Annual Growth Year Traffic (teu) C&UEC CEC UEC (teu) Rate (teu) Rate (teu) Rate FY09 7,320,662 7.1% 16.9% 83.1% 519,907 3.8% 88,124 23.9% 431,783 0.5% FY10 7,920,761 7.6% 16.3% 83.7% 602,000 15.8% 98,000 11.2% 504,000 16.7% FY11 8,997,448 7.2% 17.2% 82.8% 647,816 7.6% 111,424 13.7% 536,392 6.4% FY12 9,955,009 7.4% 17.5% 82.5% 736,671 13.7% 128,917 15.7% 607,753 13.3% FY13 10,925,754 7.5% 20.0% 80.0% 819,432 11.2% 163,886 27.1% 655,545 7.9% FY14 11,965,759 7.6% 22.0% 78.0% 909,398 11.0% 200,067 22.1% 709,330 8.2% FY15 13,140,594 7.7% 24.0% 76.0% 1,011,826 11.3% 242,838 21.4% 768,988 8.4% FY16 14,354,755 7.8% 26.0% 74.0% 1,119,671 10.7% 291,114 19.9% 828,556 7.7% FY17 15,651,446 7.9% 26.0% 74.0% 1,236,464 10.4% 321,481 10.4% 914,984 10.4% FY18 17,027,595 8.0% 25.0% 75.0% 1,362,208 10.2% 340,552 5.9% 1,021,656 11.7% FY19 18,538,588 8.0% 25.0% 75.0% 1,483,087 8.9% 370,772 8.9% 1,112,315 8.9% FY20 20,095,269 8.0% 25.0% 75.0% 1,607,622 8.4% 401,905 8.4% 1,205,716 8.4% FY21 21,859,709 8.0% 25.0% 75.0% 1,748,777 8.8% 437,194 8.8% 1,311,583 8.8% FY22 23,617,372 8.0% 25.0% 75.0% 1,889,390 8.0% 472,347 8.0% 1,417,042 8.0% FY23 25,510,202 8.0% 25.0% 75.0% 2,040,816 8.0% 510,204 8.0% 1,530,612 8.0% FY24 27,478,200 8.0% 25.0% 75.0% 2,198,256 7.7% 549,564 7.7% 1,648,692 7.7% FY25 29,555,745 8.0% 25.0% 75.0% 2,364,460 7.6% 591,115 7.6% 1,773,345 7.6% FY30 41,957,464 8.0% 25.0% 75.0% 3,356,597 7.2% 839,149 7.2% 2,517,448 7.2% FY35 56,909,451 8.0% 25.0% 75.0% 4,552,756 6.0% 1,138,189 6.0% 3,414,567 6.0% FY40 72,548,414 8.0% 25.0% 75.0% 5,803,873 5.0% 1,450,968 5.0% 4,352,905 5.0% FY44 85,425,872 8.0% 25.0% 75.0% 6,834,070 3.9% 1,708,517 3.9% 5,125,552 3.9% CAGR 7.2% 7.4% 8.8% 7.1%

Source: Drewry Research

7.6 Gateway container traffic forecast for Vizhinjam port

Gateway traffic is the generic hinterland traffic expected to be attracted by the port. The current hinterland for the proposed Vizhinjam port has been segregated into primary, secondary and distant hinterland. This segmentation is based on the proximity of the port with its cargo centre and current dynamics of container trade movement from these regions to the competing ports. The hinterland has been defined as under wherein the major cargo centres have been listed along with the total container traffic potential (teu, FY08) for both export and import cargo generated from the area:-

Primary Secondary Distant Traffic Traffic Traffic Location Location Location Potential Potential Potential Tuticorin Bangaluru Tirupur Chikamagalur/Hasan Coimbatore Mangalore Kerala 146,610 Salem 390,719 Chennai 997,085 Other Karnataka Hosur Other TN Karur Mormugao

The rate of growth of industrialisation, investments, infrastructure investments and container traffic are highest in the distant hinterland followed by secondary and then primary hinterland of the port. The ports serving this hinterland particularly in the lower east coast region are in advanced state of available infrastructure and investments to attract burgeoning traffic from these cargo centres. Therefore, by the time of it’s expected commissioning Vizhinjam port would have to face stiff competition from these ports to attract container traffic.

Primary Hinterland

Kerala would be primary hinterland for the proposed Vizhinjam port. Despite Vizhinjam’s proximity to the southern part of Tamil Nadu, which anyway does not contribute significantly to the overall container traffic in the state, expected container traffic would be of little significance. There are few pockets of industrial zones in the region but they are located closer to the Tuticorin port and are likely to generate traffic for Tuticorin port which has demonstrated decent service standards over the years. Therefore, it may act as secondary hinterland for the proposed Vizhinjam port, shared by Tuticorin port.

Within Kerala, few cargo centres like Tiruvananthapuram, Allapuzha, Kollam and Kanyakumari in Tamil Nadu contribute around 40% of the overall container traffic generated in the state. Currently, this traffic is served by Cochin port to a large extent and Tuticorin port has a limited share. Drewry estimates that this could possibly become the primary hinterland for the port and is most likely to initially contribute to the container traffic generated from its hinterland. With the exception of Allapuzha, Vizhinjam has distance advantage in terms of other competing ports in the region namely, Tuticorin and Cochin. Allapuzha has a high concentration of cashew traffic in the state and a significant volume is moving from Tuticorin. Therefore, in a scenario when Vizhinjam is operational it is most likely that feeder/mainline vessels which are serving cashew trade through Tuticorin is most likely to shift to the port.

However, it is to be noted that this is not a critical mass that would suffice for mainline/feeder vessel traffic to the port. Cochin & Tuticorin has significant other traffic

which provides incentive for a shipping line to call at this port coupling additional traffic from these Southern Kerala destinations. Therefore, Drewry estimates that the traffic diversion from these competing ports comes with a rider that Vizhinjam is able to attract mainline vessel calls, in this case, the transhipment traffic.

The other cargo centres in the primary hinterland are situated closer to the Cochin port which has a significant advantage in terms of proximity to these regions. Most of these cargo centres lie in the Northern part of the state and contribute additional 60% of the traffic. However, as majority of the traffic at Cochin is still served by feeder vessels, there could be an incentive for these shippers to shift to Vizhinjam swapping feeder services at Cochin to mainline calls at the Vizhinjam. However, as Vallarpadam terminal is vying to establish itself as the transhipment hub and is in advanced stage of negotiating with shipping lines to attract mainline calls, Cochin port has the benefit of first mover advantage over other ports.

In the base case scenario, Drewry estimates that the Vizhinjam would be able to attract 40% of the available market of the primary hinterland.

Secondary Hinterland

Secondary hinterland is actually the common hinterland shared between Chennai, Tuticorin and to a little extent by the Cochin port. The current estimates suggest that the total traffic generated from this region is close to 400,000 Teus per annum.

The major cargo centres in this hinterland are Tirupur, Coimbatore and Tuticorin and its adjoining areas. In spite of the proximity of Coimbatore and Tirupur to Cochin vis-à-vis Tuticorin port, almost 80% of the traffic is moving to Tuticorin. There are several reasons like poor road/rail connectivity to the Cochin port from this region, low port / container handling charges at Tuticorin, cheaper transport charges, etc. Major commodities that are being shipped from this region include garments and textiles which are very time bound cargo. One of the salient points that came up during the primary survey was that the Tuticorin port accepts containers till two hours prior to the vessel sailing time. This along with several other customer friendly incentives provided by the port has resulted in large volumes of this cargo centre moving to the Tuticorin port.

Therefore, Vizhinjam would have to face stiff competition from Tuticorin, Chennai and Cochin ports to wean away container traffic from this region. Drewry estimates that in the base case scenario, Vizhinjam would be able to take 5% market share in the secondary hinterland.

Distant Hinterland

The cargo centres in the distant hinterland are primarily being served by the Chennai port. With the inception of Ennore port, the container handling capacity in the Chennai region would be doubled in the first phase itself. The market sentiments in the region are very positive about the impact of Ennore port in attracting container traffic to the region. This can be gauged by the fact that most the new CFSs are being planned near the Ennore port. Chennai port is facing massive problems in terms of last mile connectivity by road to the port; Ennore is most likely to alleviate this problem.

Drewry estimates that Vizhinjam would not be able to attract any traffic from this hinterland.

Road / Rail Connectivity & its impact on container traffic

In the current scenario, major cargo centres for the LEC coast and LWC ports are situated within 350 km radius, therefore road connectivity plays a very important role in port attractiveness. It is estimated that economic feasibility of rail transfer of container traffic is inversely proportional to distance from the port. The minimum distance considered for viable rail connectivity is considered to be 500 Km in the current trading conditions in India. Chennai is the only port in the region which attracts significant rail traffic; however the share of container traffic from rail is estimated to be around 10-15% of the overall traffic.

With the exception of Chennai and adjoining cargo centres in that region, most of the cargo centres in the entire hinterland for the Vizhinjam port lie within 500 Km radius. Therefore, road transport would play a critical part in attracting container traffic from these regions.

However, for an economically viable road transport service, the transporter should have return cargo from the destination along with quick turnaround time from the port. This is one of the critical factors which would impede market share growth of Vizhinjam in the secondary and distant hinterland along with north Kerala cargo in its primary hinterland.

The case of Coimbatore/Tirupur cargo moving to Tuticorin port is a pertinent example in such a scenario. In spite of being closer to the Cochin port, it is costlier to transport container from Coimbatore/Tirupur to Cochin as compared to the Tuticorin port. The current estimates suggest that the shipper has to pay an additional Rs 2500/3000 for a return trip movement to the Cochin port. This is due to the reason that there is no/limited return cargo from Cochin to these regions which are highly export dominated. Therefore the turnaround time and overall transportation cost is higher for this movement. This issue combined with delay at Kerala-Tamil Nadu border crossing and poor road connectivity (single lane roads on large stretches) add to the overall cost of transportation from Tamil Nadu to Kerala.

Other issues

• Commodity profile The major commodities contributing to the container traffic in the state of Kerala is agricultural goods. Being low priced, these commodities are price sensitive and hence limited incentive for the shipping. Therefore they would continue to utilise facilities which are closest to their production centres. It would be prudent to conclude that these commodities would continue to move through the ports in Kerala. However, the average growth rate of these commodities is lower as compared to other goods like textile and industrial commodities. Therefore, the average growth of container traffic in the primary hinterland of the Kerala would be low.

• Equipment imbalance Due to the commodity profile, Kerala exports large volumes in forty foot containers. However limited imports occur in the same box size which makes a case for positioning empty containers in the region. The share of empties traffic in overall container traffic of the Cochin port has been consistently 40% over the past decade. This is an incremental cost for the shipping lines which affects the overall cost of shipping containers from these ports.

• Business Environment One of the major problems in attracting investments in Kerala has been the frequent labour problems in the state. One of the most pertinent issues that have been reported by shipping community in terms of the functioning at the Cochin port has been labour problems and inflexible work culture. For example, vessel cut off time at Tuticorin is two hours prior to departure which is unimaginable at the Cochin port, similarly labour problems are much less frequent in other states as compared to Kerala. Although, the situation has been changing over the past few years, however this remains a major cause of concern for international trade traffic development at Kerala ports.

• Soft infrastructure This is a critical issue in terms of attracting container traffic at a port. Availability of soft infrastructure like CFS, warehouses, offices of custom handling agents, transport service providers, cargo handling equipments outside port area, etc, significantly impact container traffic at a port. A pertinent example in this case has been the port of Pipavav. The port has not been able to attract container traffic at it’s in its initial years despite having a respectable hinterland support from the largest container liner service provider in the world, Maersk Line. The port lacked in soft infrastructure like availability of CFSs which help consolidation / deconsolidation of cargo, custom clearing activities and warehousing facilities, apart from rail/road connectivity which was another major issue. However, after significant investments in rail/road connectivity and soft infrastructure, the container traffic has improved over the years; however Mundra which made rapid investments in such support facilities gained immensely, taking a massive share of the North West Indian container traffic.

Chennai port has around 28 CFS, Tuticorin has eight and Cochin has one such facility. Similarly, the concentration of container service providers like offices of shipping lines, staff strength, logistics service providers and CHAs is very high at the LEC ports as compared to the LWC region.

As discussed earlier, Chennai port has emerged as the largest container handling facility on the East Coast and has been registering a robust growth over last five years. However, increasing traffic at Chennai container terminal has resulted in a severe capacity constraint coupled with logistics bottlenecks within the city limits.

Shipping lines hold a mixed response to the development of the second container terminal at Chennai. While the lines feel that the volumes generated in the region demands additional facilities, there are also certain infrastructural issues that need to be considered. The lines also believe that the existing terminal (CCTL) will not be able to handle the increase in container traffic, which is expected in next ten years, and that the region should have other alternative ports to share the expected growth in the trade. Considering that Chennai handles more than 50% of the traffic in the region, any new port, which is able to cater to the growing hinterland, will have significant hinterland traffic available to make the new port project viable.

7.6.1 Perceived advantages and disadvantages of Vizhinjam port

Advantages

• Proximity to main shipping route: Vizhinjam has only 7 nm deviation from the main Asia-Eur trade lane which is one of the largest trade lanes for container shipping in the world with high container traffic moving on East-West corridor.

• Draft: Vizhinjam has one of the largest natural draft across container handling ports around the world. The natural draft would save expenses for dredging in terms of both capital outlay and maintenance. Such draft is capable of accommodating largest container vessels which are currently operational.

Disadvantages

• Location: In spite of being closest to the main container shipping trade lane, the port does not has a significant hinterland volume which could provide critical mass required for shipping to start liner services from the port.

• Port Competition: Once commissioned the port would face intense competition for hinterland traffic from currently existing ports like Chennai, Cochin and Tuticorin along with new facilities which are up-coming on the lower east coast of India. The target market is shared by many facilities which have a first mover advantage over the Vizhinjam port.

• Supporting infrastructure: Vizhinjam lacks supporting infrastructure like CFS, warehouses, etc. which are essential to support container traffic at the port.

Market perception (based on primary survey in Cochin)

• Container traffic growth in the primary hinterland of the port is limited therefore the new facility would not result in incremental cargo from Kerala.

• The port is likely to attract container traffic from southern Kerala districts, namely, Allapuzha, Trivandrum, Kanyakumari and Kollam.

• The proposed port would have strong competition from Tuticorin and Cochin and would be very difficult to attract gateway traffic from the immediate hinterland of these regions.

• The development of traffic at Vallarpadam terminal will show the direction in which future container traffic at Vizhinjam port is likely to growth.

• Good rail & road connectivity to the port is prerequisite for attracting container traffic growth at the proposed port.

• Inland transportation costs should be competitive vis-à-vis transportation costs to the current facilities.

• Soft infrastructure like availability of CFSs, warehouses, logistics service providers, etc is of vital importance for port attractiveness.

Main assumptions for hinterland traffic forecast for Vizhinjam port

• The first phase of the Vizhinjam port would be operational by FY 2014.

• Ennore port would be operational by FY 2014.

• Chennai mega terminal to be commissioned for operation in FY2017.

• Tuticorin port likely to augment its container handling facility in the latter half of 2010- 2020, however it is expected that the port would lose its market share over the forecast period.

• Chennai port with second terminal is most likely to reach its operational peak by FY 2015 which would pave way for the mega terminal. Ennore port is most likely to benefit during this period.

• Cochin is currently one of the costliest ports in India in terms of total port charges. Drewry estimates that these charges would not reduce significantly by FY14.

• It is assumed that approach roads would be constructed to connect the proposed Vizhinjam port.

• The port would gain 40% market share of the primary hinterland and limited share of secondary shared hinterland over the forecast period. The cost of inland haulage and availability to competing ports would result in a maximum cap to the total market share available to the propose facility.

• The port is assumed to attract mainline vessel services for Indian subcontinent transhipment traffic which would provide economies of scale in terms of critical mass available to shipping lines.

Table 7.15 Gateway container traffic forecast for Vizhinjam port

Year High Base Low

FY 2014 27,129 26,221 25,992 FY 2015 38,566 36,900 36,502 FY 2016 50,986 48,293 47,676 FY 2017 66,727 62,566 61,646 FY 2018 82,796 76,851 75,573 FY 2019 100,131 92,002 90,298 FY 2020 106,562 96,921 94,944 FY 2021 133,958 118,900 116,255 FY 2022 149,116 131,983 128,804 FY 2023 167,372 147,920 144,087 FY 2024 181,799 160,224 155,782 FY 2025 197,183 173,301 168,183 FY 2030 339,476 294,278 282,967 FY 2035 471,218 402,863 383,805 FY 2040 614,999 518,434 489,276 FY 2044 738,050 615,123 576,123 CAGR 11.6% 11.1% 10.9%

Source: Drewry Research

8. Transshipment container traffic forecast - Indian sub-continent

Objective

To forecast

Gateway container traffic in ISC countries Transshipment container traffic generated from ISC Estimated share of hub ports in the target market Transshipment traffic forecast for Vizhinjam port Total traffic forecast for Vizhinjam including gateway & transhipment Equipment wise container traffic forecast at Vizhinjam

Key Findings

• Colombo port is the primary competitor for Vizhinjam port for transhipment market and the current market dynamics suggest that it is only ISC transhipment traffic market can be catered to by the port. The estimated gateway traffic in the base case scenario is estimated to grow from 12m teu in FY 10 to 120m teu in 2044.The total share of feeder traffic is estimated to decrease from 30% to 16% during the same period. Therefore, the rate of growth of transhipment traffic would reduce compared to what has been witnessed so far.

• The total available feeder market is expected to increase from 7.2m Teu in FY2010 to 38.7m Teu by 2044. The current share of Colombo in this market is approximately 38%. As Vizhinjam is targeting the same market, the estimated share of Vizhinjam/Colombo is likely to increase to 44.2% by FY 2044. The share of hub ports outside ISC in the overall ISC transhipment market is estimated to reduce from 60% to 50% during the same period; remaining traffic would be handled by other hubs in ISC.

Conclusion

In the high base and low case scenario , the transhipment traffic in million at Vizhinjam is forecast as follows:-

2014 2044 High 0.12 3.15 Base 0.11 2.05 Low 0.11 1.88

The total container traffic in million Teu, in the high, base and low case scenario , at Vizhinjam is forecast as follows:-

2014 2044 High 0.15 4.07 Base 0.15 2.82 Low 0.15 2.60

This section provides the methodology for deriving forecast gateway traffic at ISC ports through to FY 2044. Gateway (import-export) container volumes have been forecast from both a top down and bottom up approach. Overall volumes for the ISC region have been forecast based on the combined economic activity of the region. This approach has then been utilised to derive overall forecast for each country and sub-region of the ISC.

For understanding the origin/destination of transhipment volumes from the ISC region, the region has been segregated into six sub regions. The segregation would assist in understanding the share of deep sea via direct calls, deep sea via feeder calls and ISC intra-regional traffic share from these sub-regions. The overall traffic generated through deep sea via feeder calls would be the target market for ports vying for transhipment traffic share in the Indian subcontinent region.

Region Ports (proposed & existing)

Pakistan All ports in Pakistan West coast India All ports north of the New Mangalore port on the west coast of India South coast India All ports lying between and including Cochin & Tuticorin East coast India All ports north of the Tuticorin port on the east coast of India Bangladesh All ports in Bangladesh Sri Lanka All ports in Sri Lanka

8.1 Colombo – Competitive profile

Colombo is the sole competitor of the proposed Vizhinjam port in the transhipment container traffic market of the Indian sub-continent. The port is located on the west coast of Sri Lanka at latitude of 60 – 57’ N and a longitude of 790 – 51’ E. Futile to say, that it is not only the principal port of Sri Lanka but also the largest transhipment hub in the ISC region. It is ideally located on the main east west shipping lanes running from Europe to the East and the Far East, Europe to the Australasia through Singapore and from India’s West Coast to the East Coast. The deviation from the main sea route is only around 8 hours. There are three container handling terminals at port of Colombo – Jaya Container Terminal (JCT), South Asia Gateway Terminal (SAGT) and Unity Container Terminal (UCT).

Current handling capacity at the port is around 4.2m teu, which, with the development of the South Harbour, can be increased to 15-16 million teu per annum. In 2008, Colombo port registered a throughput of 3.6 million teu. The port has shown CAGR of 8% in throughput over the last 10 years. Around 75% of the total container volumes at port of Colombo consist of transhipment traffic from India.

The port lost its market share during mid-2000 when it was unable to handle increasing transhipment traffic from the ISC region. Hub ports outside ISC region like, Singapore, Salalah, Jebel Ali, etc were the major beneficiary of Colombo’s loss of market. However, with the commissioning of the South Asia Gateway Terminal and increase in draft, the port has rapidly regained its market share.

Furthermore, in view of strong growth registered by ISC traffic, the port has heavily invested in increasing its container handling capacity in future. One of the biggest and audacious projects is the development of the Colombo South Harbour.

The proposed Colombo South Harbour will be located west of the present south west breakwater in an area of approximately 600 hectares. The proposed harbour will have 4 terminals of over 1,200m in length each to accommodate three berths alongside depths of

18m and provision to deepen to 23m to accommodate deeper draft vessels of the future. The channel width of the harbour is to be 560 m and depth of 20m, with harbour basin depth of 18m and a 600m turning circle. The capacity expansion project is expected to increasing container handling capacity of the port from 4.0m Teu to approximately 12.0m Teu. The project has a capital outlay estimate of around $ 800m, wherein around $ 300m has been provided by the Asian Development Bank, and $ 180m by Sri Lankan Government and rest by private players. Hyundai Engineering & Construction Co is the contractor of the project. As per latest estimates, the overall project has progressed at around 20% completion stage.

A brief profile of the current operational terminals is as follows:

South Asia Gateway Terminal (SAGT)

South Asia Gateway Terminal (SAGT) is a joint venture company involving international terminal operator Dubai Ports World (DPW), AP Moller and Evergreen, with the Sri Lanka Ports Authority (SLPA) having a minority stake. SAGT took over operation and management of Queen Elizabeth Quay (QEQ) in the port of Colombo in 1999, emerging as first modern private container terminal in Sri Lanka. Phase 1 of the SAGT project was completed in early 2002, with 340 meters of quay length and depth alongside of 15 meters. Similarly Phases 2 and 3 were completed in mid 2002 and 2003, with a total quay length of 940 meters and total handling capacity in excess of 1 million teu.

As shown in Table 8.1 SAGT registered a container throughput of 1.88m teu in 2008, as compared to 1.7mn in 2007, witnessing a growth of 6% over the last year. The terminal has recorded a CAGR of 19.6% in container volumes in the last 10 years. The share of SAGT in total throughput of Colombo has been quite steadily increasing from 19 percent in 1996 to 51% in 2008.

Table 8.1 Development of container volumes in Colombo and share of traffic between terminals (‘000 teu)

SAGT % JCT/UCT* % Colombo SAGT SLPA Year Volumes Growth Volumes Growth Total Share Share 1996 250 - 1,041 - 1,291 19% 81% 1997 325 30% 1,362 31% 1,687 19% 81% 1998 312 -4% 1,402 3% 1,714 18% 82% 1999 200 -36% 1,504 7% 1,704 12% 88% 2000 301 51% 1,432 -5% 1,733 17% 83% 2001 330 10% 1,397 -2% 1,727 19% 81% 2002 558 69% 1,182 -15% 1,740 32% 68% 2003 625 12% 1,335 13% 1,960 32% 68% 2004 898 44% 1,300 -3% 2,198 41% 59% 2005 932 4% 1,522 17% 2,454 38% 62% 2006 1,335 43% 1,744 15% 3,079 43% 57% 2007 1,770 32.6% 1,835 5.2% 3,605 49% 51% 2008 1,880 6.2% 1,807 -1.5% 3,687 51% 49%

* Figures of JCT includes that of UCT also Source: Drewry Research

An overview of SAGT confirms the following key points:

Annual capacity of 1,800,000 teu per annum.

Total quay length of 940 meters.

6 Super post-Panamax quay cranes.

3 post- Panamax quay cranes.

28 rubber tyred gantry cranes.

45 terminal tractors.

15m dredged water depth.

Jaya Container Terminal (JCT)

Jaya Container Terminal (JCT) at port of Colombo is operated by Sri Lanka Port Authority (SLPA), and has been working at high utilization levels in recent years. The current theoretical capacity at JCT is around 2.2m teu comprising of 6 berths, with a total quay length of 1,646 meters. JCT offers a alongside depth of 8-15 meters, sufficient to handle current large size vessels, the terminal is equipped by 6 Super post-Panamax and 8 post- Panamax gantry cranes. JCT has suffered from low productivity in recent years, although performance levels have increased significantly in the face of competition from SAGT.

There are also other factors that make the terminal seem unattractive, especially compared to some of the regional competition:

Congestion and waiting time for berths.

Labour problems.

Due to above mentioned bottlenecks; the share of JCT in the total traffic of port of Colombo has been quite steadily decreasing. As shown in table 8.1, in 1996 JCT had a major share of traffic at around 81% which fell to 49% in the year 2008. Recent increase in the share of SAGT plus improvements in productivity have helped JCT to ease the congestion problem at its terminal, which now can utilize the spare capacity in attracting new business. The terminal is also expected to increase its current capacity of 2.2m teu to 2.6m teu by 2010.

Unity Container Terminal (UCT)

Unity Container Terminal (formerly known as North Pier), operated by Sri Lanka Port Authority acts as a satellite terminal for JCT having an annual handling capacity of 400,000 teu. UCT has two berths totalling 340 meters quay of length and water depth alongside ranging from 9 to 11 meters. It is equipped with 3 Panamax gantry cranes and 8 rubber tyred gantry cranes.

8.1.1 Colombo – SWOT Analysis

Strength

Excellent location for major East-West trade axis.

Successful introduction of private investors.

Concrete plans to increase capacity.

Competitive transhipment tariffs.

Attained strong growth over past decade.

Large captive container traffic generated from its hinterland.

Rapidly gained market share once capacity was increased.

Weakness

Higher country risk than some competitors.

The port uses only one entrance channel and has just single turning basin, which can lead to delayed arrivals and departures.

Labour problems can affect port productivity.

Old port, infrastructure, constrained by city.

Opportunity

Geographical locations of large Indian ports make Colombo an ideal transhipment option to shippers.

Trade growth in ISC, which directly affects traffic at Colombo.

Proposed Colombo Port Expansion Program (CPEP) can give boost to container traffic with increased capacity and faster vessel turnaround times.

Congestion at Indian ports benefits Colombo.

Threats

Port of Kelang and Tanjung Pelepas have cheaper tariffs.

Development of deep draft ports in ISC, particularly in India.

8.2 ISC Transshipment traffic forecast methodology

Step Methodology

1 Forecast total gateway traffic volumes for each of the country in the Indian subcontinent. India’s traffic is derived from forecast in the previous section. Container traffic forecast for Bangladesh, Pakistan and Sri Lanka have been forecast based on their historical share in overall container traffic in the ISC region, their container traffic / GDP multiple and future estimated GDP growth rate of each country.

2 Estimate share of deep sea via direct calls, deep sea via feeder calls and intra regional traffic in the overall gateway traffic of each country.

3 The total deep sea via feeder calls traffic provides the potential target market of container transhipment from the Indian sub-continent region

4 Forecast estimate share of available target market for Vizhinjam/Colombo port, other hub ports within the ISC region and hubs outside ISC region

5 Forecast estimated transhipment traffic handled by hub ports outside the ISC region.

6 Estimate the share of deep sea via feeder calls traffic from each of the gateway ports in the ISC region

7 Estimate share of Colombo/Vizhinjam ports for potential transhipment traffic from each of gateway ports based on total available market derived through step-4.

8 Formulate assumptions that would provide guidance for future estimated market share of Vizhinjam port in the common target market for transhipment traffic available for Colombo & Vizhinjam port

9 Forecast transhipment traffic for Vizhinjam based on available target market and estimated share of Vizhinjam port during the forecast period.

8.3 ISC Transshipment traffic forecast – main assumptions

Share of feeder traffic from ISC countries

With the exception of Bangladesh, the share of feeder traffic has been consistently been decreasing over the past decade. The increasing container traffic throughput has resulted in the feeder services to the ISC ports being replaced by main line services, especially on the West coast of India and Pakistan.

Drewry assumes that the feeder market share would continue to diminish over the forecast period. However, due to its geographic location and growth rate in container traffic, Bangladesh, Central & upper east coast of India would continue to have a large share of its gateway traffic handled by the feeder services.

Bangladesh in particular, provides a large share of available feeder traffic from the ISC region, due to its perennial draft problems, frequent labour strikes and poor operational efficiency. Currently, almost 95% of the container traffic from Bangladesh is served through feeder vessels. Drewry assumes that during the forecast period, with the proposed development of deep offshore container terminal by 2018-19 and increasing container traffic, the overall share of container traffic handled by feeder services from Bangladesh is likely to reduce from 95% to 70%.

Share of ISC countries in the overall container traffic

India would continue to dominate the overall traffic generated from the ISC region, particularly West coast of India. The current estimated share of India in overall container traffic handled in the ISC region is 66%. Drewry estimates that this share is likely to go up to 76% over the forecast period.

Other countries in the ISC region are expected to loose market share in the overall container traffic. This is not due to decreasing container traffic in the region but due to less than average growth rate anticipated to be witnessed by the Indian ports.

Target Market

The target transhipment traffic market available for the proposed Vizhinjam port is share of feeder traffic generated from the ISC countries namely, India, Pakistan, Bangladesh & Sri Lanka. Currently, Colombo is serving as transhipment hub for the same market and Drewry assumes that both of these ports will be competing for the same target market. Colombo/Vizhinjam would not be able to cater to transhipment traffic market of other Asian countries like in the Middle East and South East Asia.

Share of transhipment hubs in the ISC container traffic

As per the current market dynamics of transhipment traffic handling in the ISC region, Drewry has classified such hub ports into three categories, namely Colombo/Vizhinjam, other hubs ports in the ISC region and hub ports outside ISC region.

Historically, hubs outside the ISC region, namely Jebel Ali, Singapore, Tanjug Pelepas, etc have had a major share of transhipment traffic generated from the ISC region. However, Colombo had traditionally been handling around 30% of the overall market. However with increase in congestion at the port in mid-2000 and lack of container handling infrastructure, the port rapidly lost its market in the overall business. The estimated share fell from 30% to almost 23% by 2002. However, with the development of its captive hinterland traffic and large investments in container handling infrastructure at the Colombo port, its share has steadily increased to almost 38% by 2008.

Drewry estimates that with increase in mainline call incidences at the gateway ports in the ISC along with decreasing dependence on hubs outside ISC region, the share of Colombo/Vizhinjam in the available target market is likely to increase over the forecast period.

Target Market & West bound trade

Drewry assumes that a major share of target market for transhipment traffic would be contributed by the South & East Indian ports along with Bangladesh. The majority of this traffic would be westbound trade serving major trade lanes from ISC to Europe and North America.

There would be high incidence of mainline vessels at West coast of India and Pakistan and due to geographical disadvantage of serving West bound traffic of these ports through Colombo/Vizhinjam, the target market would exclude the volume generated from this region.

8.4 ISC regional gateway (import-export) volumes forecast

The scale of the ISC region’s import-export teu traffic defines the underlying size of the potentially available transhipment market for Colombo & Vizhinjam. The ISC region’s total gateway container port activity has been forecast based on historic share of net gateway traffic amongst the defined six sub-regions in the table above. The west coast, south coast and east coast India gateway traffic has been forecast on the basis of total gateway teu forecast for India as discussed in the previous section.

Drewry has estimated future share of container traffic of other countries in the ISC on the basis historic growth rates of net gateway volumes in the countries and estimated economic growth over the forecast period. As can be seen, in Table 8.2 average growth of 12-13% per annum is forecast for the period to 2015, dropping to 7.7-8.8% in the medium term and 5.0-5.5% in the long term. The compounding effect of forecasting for a 30 year period means that in absolute terms, there is a significant difference in the three scenarios by 2044. In the base case, total gateway volumes in the region are projected to reach almost 120 million teu by 2044, up from 12 million in 2010.

Table 8.3 breaks down the total ISC gateway traffic into the main sub-regions/countries. India will naturally remain the largest market by a considerable margin, and is also expected to show the strongest growth, along with Pakistan. Sri Lanka’s growth in gateway cargo is expected to be much more modest, as detailed in tables below.

Having broken down the gateway traffic into countries/sub-regions, in order to separately identify the available transhipment market for Colombo it is then necessary to break the volumes down further to distinguish between gateway volumes which will move on direct mainline services and gateway volumes which will move via feeder. Table 8.4 shows the forecast split of port traffic in percentage terms. These projections have been developed based on an assessment of past trends, plus, in the short to medium term, consideration of port development projects in India in particular which will facilitate direct call services. At the same time, the influence of the deployment of larger ships on east-west services passing through the region has been weighed up. This has a counterbalancing effect as these ships will continue to rely on feedering and transhipment to fill them at ports such as Colombo. On balance, there seems little doubt that the proportion of volumes moved via direct call services will increase in all cases. However, Pakistan and the west coast of India are already at high levels of direct calls, and so there is limited scope for this to increase.

The south and east coasts of India are currently at much lower levels of direct call incidence, assessed at 39% and 30% respectively in FY 2010. Port developments on these coasts, plus overall growth in the market are expected to result is a much higher proportion of direct call traffic in future, although this will take time to emerge.

Bangladesh meanwhile has very little direct call traffic. Within the forecasting model it is assumed that, in time, port facilities are improved and that a deep water facility is developed in the country. However, the extent of deviation involved in accessing Chittagong means that feedering is expected to remain a key part of serving the country in the long run.

The overall effect within the ISC region of these projections is that direct calls are expected to increase from the current estimated 67.5% of the total port traffic to 81.4% by 2044. Even though the feeder share is declining in the forecast, overall feeder traffic volumes still grow, because the overall market is growing. Table 8.5 shows the resulting volumes for the

ISC region split into direct call, feeder and intra-regional traffic. Whilst overall gateway volumes are projected to grow by 12.2% per annum in the period 2010-2015 in the base case scenario, within this, direct call volumes show a 13.8% p.a. growth whilst feeder volumes are at 8.1% p.a. This same differential in growth rates is also particularly evident in the medium term through to 2025.

Tables 8.6 to 8.10 show the forecast gateway volumes split into direct and feeder traffic on a sub-region by sub-region basis. As can be seen, the development of feeder traffic in the base case for the period from 2010 to 2015 ranges from a low of 1.7%-3.4% p.a. for Pakistan and the west coast of India, 10.3% p.a. for east coast India, 5.8% p.a. for the south coast and 10.7.% p.a. for Bangladesh. However, Bangladeshi feeder growth rate increase to only 3.6% p.a. for the period 2015-2025 as it is assumed that deep water facilities are finally developed in the country. During the same time period, growth rates for Pakistan and the south and east coasts of India are around 5-6% p.a. but the west coast feeder traffic growth rate climbs to 8.1% per annum. This is because the west coast, already at a high proportion of direct calls, rapidly reaches a ceiling in the proportion of direct calls. As a result, the strong growth this coast is expected to experience flows through similarly to direct calls and feeder calls in the medium term.

Table 8.2 Forecast ISC region gateway volumes, 2010-2044

CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on

Base case 11,943 13,574 14,861 16,265 17,772 21,220 31,751 45,525 63,808 84,073 101,456 119,978 12.2% 7.9% 5.2% High case 11,943 13,621 14,962 16,658 18,387 22,404 32,196 51,943 73,810 98,616 120,353 143,954 13.4% 8.8% 5.5% Low case 11,943 13,543 14,794 16,157 17,616 20,949 31,045 44,099 61,243 79,945 95,750 112,371 11.9% 7.7% 5.0%

Source: Drewry Research

Table 8.3 Forecast net ISC gateway (import-export) volumes by market area, 2010-2044 (‘000 teu)

BASE CASE

CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on

Pakistan 2,020 2,282 2,484 2,702 2,935 3,462 5,021 6,971 9,452 12,033 14,116 16,573 11.4% 7.3% 4.7% West coast India 5,397 6,132 6,790 7,457 8,161 9,760 14,781 21,190 28,394 38,011 46,495 55,167 12.6% 8.1% 5.2% South coast India 732 841 913 1,008 1,064 1,220 1,815 2,536 3,057 3,203 3,679 4,160 10.7% 7.6% 2.6% East coast India 1,791 2,046 2,298 2,534 2,847 3,561 5,761 9,048 15,389 21,623 26,698 31,882 14.7% 9.8% 6.9% Bangladesh 1,076 1,195 1,294 1,406 1,524 1,791 2,565 3,490 4,614 5,700 6,505 7,581 10.7% 6.9% 4.2% Sri Lanka 927 1,079 1,084 1,158 1,242 1,427 1,808 2,290 2,903 3,504 3,964 4,616 9.0% 4.8% 3.8%

Total 11,943 13,574 14,861 16,265 17,772 21,220 31,751 45,525 63,808 84,073 101,456 119,978 12.2% 7.9% 5.2%

Table 8.3 (cont’d)

HIGH CASE

CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on

Pakistan 2,020 2,290 2,501 2,767 3,036 3,655 5,657 7,954 10,933 14,115 16,745 19,884 12.6% 8.1% 4.9% West coast India 5,397 6,153 6,836 7,637 8,443 10,304 16,653 24,177 32,845 44,586 55,156 66,191 13.8% 8.9% 5.4% South coast India 732 844 919 1,032 1,101 1,288 2,045 2,893 3,536 3,757 4,364 4,991 12.0% 8.4% 2.9% East coast India 1,791 2,053 2,313 2,595 2,945 3,759 6,491 10,323 17,801 25,363 31,671 38,253 16.0% 10.6% 7.1% Bangladesh 1,076 1,199 1,302 1,440 1,577 1,891 2,890 3,982 5,337 6,686 7,716 9,096 11.9% 7.7% 4.4% Sri Lanka 927 1,082 1,091 1,186 1,285 1,507 2,037 2,613 3,357 4,110 4,702 5,538 10.2% 5.7% 4.0%

Total 11,943 13,621 14,962 16,658 18,387 22,404 35,772 51,943 73,810 98,616 120,353 143,954 13.4% 8.8% 5.5%

LOW CASE

CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on

Pakistan 2,020 2,277 2,473 2,684 2,909 3,417 4,909 6,753 9,072 11,443 13,322 15,522 11.1% 7.0% 4.5% West coast India 5,397 6,117 6,759 7,407 8,089 9,635 14,452 20,526 27,253 36,144 43,880 51,669 12.3% 7.9% 5.0% South coast India 732 839 909 1,001 1,055 1,204 1,775 2,456 2,934 3,046 3,472 3,896 10.5% 7.4% 2.5% East coast India 1,791 2,041 2,287 2,517 2,822 3,515 5,633 8,764 14,770 20,561 25,196 29,861 14.4% 9.6% 6.7% Bangladesh 1,076 1,192 1,288 1,396 1,511 1,768 2,508 3,381 4,428 5,420 6,139 7,100 10.4% 6.7% 4.0% Sri Lanka 927 1,076 1,079 1,150 1,231 1,409 1,768 2,219 2,786 3,332 3,741 4,323 8.7% 4.6% 3.6%

Total 11,943 13,543 14,794 16,157 17,616 20,949 31,045 44,099 61,243 79,945 95,750 112,371 11.9% 7.7% 5.0%

Source: Drewry Research

Table 8.4 Forecast split of ISC gateway traffic by sub-region, 2010-2044

FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 Pakistan Deep sea via direct calls % 81.0% 82.0% 83.0% 84.0% 85.0% 87.0% 88.0% 88.0% 88.0% 88.0% 88.0% 88.0% Deep sea via feeder calls % 16.5% 15.5% 14.5% 13.5% 12.5% 10.5% 9.5% 9.5% 9.5% 9.5% 9.5% 9.5% ISC intra-regional traffic % 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% West coast India Deep sea via direct calls % 86.0% 87.0% 88.0% 89.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% 90.0% Deep sea via feeder calls % 11.5% 10.5% 9.5% 8.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% ISC intra-regional traffic % 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% South coast India Deep sea via direct calls % 39.0% 40.0% 42.0% 44.0% 46.0% 51.0% 57.0% 62.0% 67.0% 72.0% 76.0% 80.0% Deep sea via feeder calls % 58.5% 57.5% 55.5% 53.5% 51.5% 46.5% 40.5% 35.5% 30.5% 25.5% 21.5% 17.5% ISC intra-regional traffic % 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% East coast India Deep sea via direct calls % 30.0% 32.0% 34.0% 36.0% 38.0% 42.0% 50.0% 55.0% 60.0% 65.0% 69.0% 73.0% Deep sea via feeder calls % 67.5% 65.5% 63.5% 61.5% 59.5% 55.5% 47.5% 42.5% 37.5% 32.5% 28.5% 24.5% ISC intra-regional traffic % 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% Bangladesh Deep sea via direct calls % 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 25.0% 30.0% 30.0% 30.0% 30.0% 30.0% Deep sea via feeder calls % 92.5% 92.5% 92.5% 92.5% 92.5% 92.5% 72.5% 67.5% 67.5% 67.5% 67.5% 67.5% ISC intra-regional traffic % 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% Sri Lanka Deep sea via direct calls % 97.5% 97.5% 97.5% 97.5% 97.5% 97.5% 97.5% 97.5% 97.5% 97.5% 97.5% 97.5% ISC intra-regional traffic % 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% ISC total Deep sea via direct calls % 67.5% 68.6% 69.5% 70.5% 71.4% 72.5% 75.7% 77.0% 77.4% 78.9% 80.1% 81.4% Deep sea via feeder calls % 30.0% 28.9% 28.0% 27.0% 26.1% 25.0% 21.8% 20.5% 20.1% 18.6% 17.4% 16.1% ISC intra-regional traffic % 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%

Source: Drewry Research

Table 8.5 Forecast net ISC gateway volumes by type of traffic, 2010-2044 (‘000 teu)

BASE CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Total net ISC gateway volumes 11,943 13,574 14,861 16,265 17,772 21,220 31,751 45,525 63,808 84,073 101,456 119,978 12.2% 7.9% 5.2% Of which: Deep sea via direct calls 8,058 9,308 10,322 11,462 12,697 15,394 24,041 35,034 49,368 66,286 81,301 97,610 13.8% 8.6% 5.5% Deep sea via feeder calls 3,587 3,926 4,168 4,397 4,630 5,295 6,917 9,353 12,845 15,685 17,619 19,368 8.1% 5.9% 3.9% ISC intra-regional traffic 299 339 372 407 444 531 794 1,138 1,595 2,102 2,536 2,999 12.2% 7.9% 5.2%

HIGH CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Total net ISC gateway volumes 11,943 13,621 14,962 16,658 18,387 22,404 32,196 51,943 73,810 98,616 120,353 143,954 13.4% 8.8% 5.5% Of which: Deep sea via direct calls 6,723 7,740 8,058 9,340 10,392 13,137 21,972 34,405 49,412 69,119 91,391 111,768 14.3% 10.1% 6.4% Deep sea via feeder calls 3,635 3,627 3,587 3,940 4,196 4,791 6,792 9,385 13,153 17,041 20,260 22,669 5.7% 7.0% 4.8% ISC intra-regional traffic 266 291 299 341 374 460 738 1,123 1,604 2,209 2,863 3,447 11.6% 9.3% 6.1%

LOW CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Total net ISC gateway volumes 11,943 13,543 14,794 16,157 17,616 20,949 31,045 44,099 61,243 79,945 95,750 112,371 11.9% 7.7% 5.0% Of which: Deep sea via direct calls 8,058 9,287 10,276 11,385 12,586 15,198 23,506 33,937 47,383 63,031 76,729 91,422 13.5% 8.4% 5.4% Deep sea via feeder calls 3,587 3,917 4,149 4,367 4,590 5,228 6,763 9,060 12,329 14,915 16,628 18,140 7.8% 5.7% 3.7% ISC intra-regional traffic 299 339 370 404 440 524 776 1,102 1,531 1,999 2,394 2,809 11.9% 7.7% 5.0%

Source: Drewry Research

Table 8.6 Breakdown of forecast gateway teu, Pakistan, 2010-2044 (‘000 teu)

BASE CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 1,636 1,871 2,062 2,270 2,494 3,012 4,418 6,135 8,318 10,589 12,422 14,584 13.0% 7.4% 4.7% Deep sea via feeder calls 333 354 360 365 367 363 477 662 898 1,143 1,341 1,574 1.7% 6.2% 4.7% ISC intra-regional traffic 50 57 62 68 73 87 126 174 236 301 353 414 11.4% 7.3% 4.7%

Total 2,020 2,282 2,484 2,702 2,935 3,462 5,021 6,971 9,452 12,033 14,116 16,573 11.4% 7.3% 4.7%

HIGH CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 1,636 1,878 2,076 2,325 2,581 2,872 4,978 7,000 9,621 12,421 14,735 17,498 11.9% 9.3% 4.9% Deep sea via feeder calls 333 355 363 374 380 384 537 756 1,039 1,341 1,591 1,889 2.9% 7.0% 4.9% ISC intra-regional traffic 50 57 63 69 76 83 141 199 273 353 419 497 10.6% 9.1% 4.9%

Total 2,020 2,290 2,501 2,767 3,036 3,340 5,657 7,954 10,933 14,115 16,745 19,884 10.6% 9.1% 4.9%

LOW CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 1,636 1,867 2,052 2,255 2,473 2,973 4,320 5,943 7,983 10,069 11,723 13,659 12.7% 7.2% 4.5% Deep sea via feeder calls 333 353 359 362 364 359 466 642 862 1,087 1,266 1,475 1.5% 6.0% 4.5% ISC intra-regional traffic 50 57 62 67 73 85 123 169 227 286 333 388 11.1% 7.0% 4.5%

Total 2,020 2,277 2,473 2,684 2,909 3,417 4,909 6,753 9,072 11,443 13,322 15,522 11.1% 7.0% 4.5%

Source: Drewry Research

Table 8.7 Breakdown of forecast gateway teu, west coast India, 2010-2044 (‘000 teu)

BASE CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 4,642 5,335 5,975 6,637 7,345 8,784 13,303 19,071 25,555 34,210 41,846 49,650 13.6% 8.1% 5.2% Deep sea via feeder calls 621 644 645 634 612 732 1,109 1,589 2,130 2,851 3,487 4,138 3.4% 8.1% 5.2% ISC intra-regional traffic 135 153 170 186 204 244 370 530 710 950 1,162 1,379 12.6% 8.1% 5.2%

Total 5,397 6,132 6,790 7,457 8,161 9,760 14,781 21,190 28,394 38,011 46,495 55,167 12.6% 8.1% 5.2%

HIGH CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 4,642 5,353 6,015 6,797 7,599 9,274 14,988 21,759 29,560 40,127 49,640 59,572 14.8% 8.9% 5.4% Deep sea via feeder calls 621 646 649 649 633 773 1,249 1,813 2,463 3,344 4,137 4,964 4.5% 8.9% 5.4% ISC intra-regional traffic 135 154 171 191 211 258 416 604 821 1,115 1,379 1,655 13.8% 8.9% 5.4%

Total 5,397 6,153 6,836 7,637 8,443 10,304 16,653 24,177 32,845 44,586 55,156 66,191 13.8% 8.9% 5.4%

LOW CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 4,642 5,322 5,948 6,593 7,280 8,672 13,007 18,473 24,527 32,530 39,492 46,502 13.3% 7.9% 5.0% Deep sea via feeder calls 621 642 642 630 607 723 1,084 1,539 2,044 2,711 3,291 3,875 3.1% 7.9% 5.0% ISC intra-regional traffic 135 153 169 185 202 241 361 513 681 904 1,097 1,292 12.3% 7.9% 5.0%

Total 5,397 6,117 6,759 7,407 8,089 9,635 14,452 20,526 27,253 36,144 43,880 51,669 12.3% 7.9% 5.0%

Source: Drewry Research

Table 8.8 Breakdown of forecast gateway teu, south coast India, 2010-2044 (‘000 teu)

BASE CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 286 336 383 443 489 622 1,035 1,572 2,048 2,306 2,796 3,328 16.9% 9.7% 4.0% Deep sea via feeder calls 428 484 507 539 548 567 735 900 932 817 791 728 5.8% 4.7% -1.1% ISC intra-regional traffic 18 21 23 25 27 30 45 63 76 80 92 104 10.7% 7.6% 2.6%

Total 732 841 913 1,008 1,064 1,220 1,815 2,536 3,057 3,203 3,679 4,160 10.7% 7.6% 2.6%

HIGH CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 286 338 386 454 506 657 1,166 1,794 2,369 2,705 3,317 3,993 18.1% 10.6% 4.3% Deep sea via feeder calls 428 485 510 552 567 599 828 1,027 1,079 958 938 873 6.9% 5.5% -0.8% ISC intra-regional traffic 18 21 23 26 28 32 51 72 88 94 109 125 12.0% 8.4% 2.9%

Total 732 844 919 1,032 1,101 1,288 2,045 2,893 3,536 3,757 4,364 4,991 12.0% 8.4% 2.9%

LOW CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 286 336 382 440 485 614 1,012 1,523 1,966 2,193 2,639 3,117 16.6% 9.5% 3.8% Deep sea via feeder calls 428 482 504 536 543 560 719 872 895 777 746 682 5.5% 4.5% -1.3% ISC intra-regional traffic 18 21 23 25 26 30 44 61 73 76 87 97 10.5% 7.4% 2.5%

Total 732 839 909 1,001 1,055 1,204 1,775 2,456 2,934 3,046 3,472 3,896 10.5% 7.4% 2.5%

Source: Drewry Research

Table 8.9 Breakdown of forecast gateway teu, east coast India, 2010-2044 (‘000 teu)

BASE CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 537 655 781 912 1,082 1,496 2,881 4,976 9,233 14,055 18,422 23,274 22.7% 12.8% 8.5% Deep sea via feeder calls 1,209 1,340 1,459 1,558 1,694 1,976 2,737 3,845 5,771 7,027 7,609 7,811 10.3% 6.9% 3.8% ISC intra-regional traffic 45 51 57 63 71 89 144 226 385 541 667 797 14.7% 9.8% 6.9%

Total 1,791 2,046 2,298 2,534 2,847 3,561 5,761 9,048 15,389 21,623 26,698 31,882 14.7% 9.8% 6.9%

HIGH CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 537 657 787 934 1,119 1,579 3,245 5,678 10,680 16,486 21,853 27,925 24.1% 13.7% 8.7% Deep sea via feeder calls 1,209 1,344 1,469 1,596 1,753 2,086 3,083 4,387 6,675 8,243 9,026 9,372 11.5% 7.7% 4.1% ISC intra-regional traffic 45 51 58 65 74 94 162 258 445 634 792 956 16.0% 10.6% 7.1%

Total 1,791 2,053 2,313 2,595 2,945 3,759 6,491 10,323 17,801 25,363 31,671 38,253 16.0% 10.6% 7.1%

LOW CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 537 653 778 906 1,072 1,476 2,816 4,820 8,862 13,365 17,385 21,798 22.4% 12.6% 8.3% Deep sea via feeder calls 1,209 1,337 1,452 1,548 1,679 1,951 2,676 3,725 5,539 6,682 7,181 7,316 10.0% 6.7% 3.6% ISC intra-regional traffic 45 51 57 63 71 88 141 219 369 514 630 747 14.4% 9.6% 6.7%

Total 1,791 2,041 2,287 2,517 2,822 3,515 5,633 8,764 14,770 20,561 25,196 29,861 14.4% 9.6% 6.7%

Source: Drewry Research

Table 8.10 Breakdown of forecast gateway teu, Bangladesh, 2010-2044 (‘000 teu)

BASE CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 54 60 65 70 76 90 641 1,047 1,384 1,710 1,951 2,274 10.7% 27.9% 4.2% Deep sea via feeder calls 995 1,105 1,197 1,300 1,410 1,657 1,859 2,356 3,114 3,847 4,391 5,117 10.7% 3.6% 4.2% ISC intra-regional traffic 27 30 32 35 38 45 64 87 115 142 163 190 10.7% 6.9% 4.2%

Total 1,076 1,195 1,294 1,406 1,524 1,791 2,565 3,490 4,614 5,700 6,505 7,581 10.7% 6.9% 4.2%

HIGH CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 54 60 65 72 79 95 722 1,195 1,601 2,006 2,315 2,729 11.9% 28.9% 4.4% Deep sea via feeder calls 995 1,109 1,205 1,332 1,459 1,749 2,095 2,688 3,602 4,513 5,208 6,139 11.9% 4.4% 4.4% ISC intra-regional traffic 27 30 33 36 39 47 72 100 133 167 193 227 11.9% 7.7% 4.4%

Total 1,076 1,199 1,302 1,440 1,577 1,891 2,890 3,982 5,337 6,686 7,716 9,096 11.9% 7.7% 4.4%

LOW CASE CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on Deep sea via direct calls 54 60 64 70 76 88 627 1,014 1,328 1,626 1,842 2,130 10.4% 27.6% 4.0% Deep sea via feeder calls 995 1,103 1,191 1,292 1,397 1,635 1,818 2,282 2,989 3,658 4,144 4,792 10.4% 3.4% 4.0% ISC intra-regional traffic 27 30 32 35 38 44 63 85 111 135 153 177 10.4% 6.7% 4.0%

Total 1,076 1,192 1,288 1,396 1,511 1,768 2,508 3,381 4,428 5,420 6,139 7,100 10.4% 6.7% 4.0%

Source: Drewry Research

As the east coast of India is Colombo/Vizhinjam’s most important feeder market, Tables 8.11 and 8.12 provide a further breakdown of the forecast volumes. Market shares and volume have been projected on the basis of existing ports (and expansions thereof e.g. Kolkata/Haldia/Kulpi) and new/emerging ports grouped into two categories – those near Chennai and Visakhapatnam, respectively. It seems likely that Chennai and nearby ports will continue to be the main focus of container traffic on the east coast.

8.5 Target market for Colombo & Vizhinjam – 2010-2044

In view of the analysis in the previous section, the summation of container traffic on deep sea via feeder calls is the total available target market for Colombo and the proposed Vizhinjam port. Thus the total available market for both these transhipment hubs is the estimated traffic on deep sea via feeder calls from Bangladesh, Pakistan and peninsular India. Dynamics of the transhipment traffic would produce a certain share of traffic Colombo & the proposed Vizhinjam port, other ISC ports (like JNPT, Chennai, Mundra, etc) and other international ports outside ISC.

Average growth rates in total transhipment volumes in the base case scenario are 6.7% p.a. for the period 2010-2015, decreasing to 5.8% per annum for the period 2015-2025 and then 4.3% per annum thereafter. In the high and low case scenarios, growth rates vary accordingly (slightly more or less than the base case respectively). However, due to the compounding effect over the long period of time of the forecast (30 years), these differences lead to a wide variation in absolute volumes under each of the scenarios by the end of the forecast period.

In FY10, there is an estimated 7.1 million teu of transhipment of ISC cargo at the various hub ports competing for this business. Colombo, after strong growth in 2006, commands approximately 38% share. In 2011, this share is expected to increase further on the back of continued strong growth in activity at South Asia Gateway Terminal (SAGT), Colombo, which is already evident. This growth in Colombo’s market share is at the expense of competing hubs located outside of the ISC region. In the medium term, Colombo’s market share is expected to strengthen a little further. The market share of “hubs” located within the ISC region is expected to grow, as Indian ports such as Cochin, JNPT, Chennai and Vizhinjam can be expected to carve out a share. Established ports such as JNPT, Chennai & Ennore might also be able to increase their share if capacity allows. It is not possible to say at this stage exactly what share each of these ports will gain, as in a number of cases the timing and scale of these developments is unconfirmed.

Table 8.12 shows the forecast breakdown of ISC transhipment volumes by hub port for those hubs located outside of the ISC region. In general there is no indication than any of the established hubs will cease to be involved in serving the ISC region, or will lose their market shares to any significant extent. As a result, ports such as Singapore, Klang and Dubai are expected to remain key players. Middle Eastern hub such as Dubai and Khor Fakkan, however, are expected to lose market share a little, as a result of the potential emergence of new hub ports in the Middle East, notably the Hutchison operated Sohar terminal which is newly opened.

Table 8.11 Forecast volumes of ISC transhipment activity at hub ports, 2010-2044 (‘000 Teu)

BASE CASE

CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on

Total ISC transshipment 7,173 7,853 8,335 8,793 9,261 9,941 13,115 17,506 24,375 30,434 35,237 38,736 6.7% 5.8% 4.3% volumes at hubs

Of which: Colombo/Vizhinjam 2,740 3,000 3,184 3,447 3,723 4,121 5,698 7,738 10,774 13,452 15,575 17,121 8.5% 6.5% 4.3% Other ISC "hubs" 294 322 350 413 482 547 787 1,050 1,462 1,826 2,114 2,324 13.2% 6.7% 4.3% Hubs outside ISC 4,139 4,531 4,797 4,929 5,052 5,274 6,629 8,718 12,139 15,156 17,548 19,290 5.0% 5.2% 4.3% Market shares Colombo/Vizhinjam 38.2% 38.2% 38.2% 39.2% 40.2% 41.5% 43.5% 44.2% 44.2% 44.2% 44.2% 44.2% Other ISC "hubs" 4.1% 4.1% 4.2% 4.7% 5.2% 5.5% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% Hubs outside ISC 57.7% 57.7% 57.6% 56.1% 54.6% 53.1% 50.6% 49.8% 49.8% 49.8% 49.8% 49.8%

100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Note: Transshipment traffic estimates calculated by double counting the target market traffic Source: Drewry Research

Table 8.11 (cont’d)

HIGH CASE

CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on

Total ISC transshipment 7,173 7,880 8,392 9,006 9,582 10,390 14,419 19,919 28,119 35,598 41,800 46,477 7.7% 6.7% 4.6% volumes at hubs Of which: Colombo/Vizhinjam 2,740 3,010 3,206 3,530 3,852 4,369 6,409 9,003 12,710 16,090 18,894 21,008 9.8% 7.5% 4.6% Other ISC "hubs" 294 323 352 423 460 509 721 996 1,406 1,780 2,090 2,324 11.6% 6.9% 4.6% Hubs outside ISC 4,139 4,547 4,829 5,048 5,227 5,512 7,289 9,919 14,003 17,728 20,817 23,145 5.9% 6.1% 4.6% Market shares Colombo/Vizhinjam 38.2% 38.2% 38.2% 39.2% 40.2% 42.1% 44.5% 45.2% 45.2% 45.2% 45.2% 45.2% Other ISC "hubs" 4.1% 4.1% 4.2% 4.7% 4.8% 4.9% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% Hubs outside ISC 57.7% 57.7% 57.6% 56.1% 54.6% 53.1% 50.6% 49.8% 49.8% 49.8% 49.8% 49.8%

100.0% 100.0% 100.0% 100.0% 99.6% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Note: Transshipment traffic estimates calculated by double counting the target market traffic Source: Drewry Research

Table 8.11 (cont’d)

LOW CASE

CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on

Total ISC transshipment 7,173 7,834 8,297 8,735 9,180 9,834 12,847 16,989 23,438 28,994 33,255 36,280 6.5% 5.6% 4.1% volumes at hubs Of which:

Colombo/Vizhinjam 2,740 2,993 3,170 3,424 3,690 4,076 5,454 7,339 10,125 12,526 14,366 15,673 8.3% 6.1% 4.1% Other ISC "hubs" 294 321 348 411 477 541 899 1,189 1,641 2,030 2,328 2,540 13.0% 8.2% 4.1% Hubs outside ISC 4,139 4,520 4,775 4,896 5,008 5,217 6,494 8,461 11,672 14,439 16,561 18,067 4.7% 5.0% 4.1% Market shares Colombo/Vizhinjam 38.2% 38.2% 38.2% 39.2% 40.2% 41.5% 42.5% 43.2% 43.2% 43.2% 43.2% 43.2% Other ISC "hubs" 4.1% 4.1% 4.2% 4.7% 5.2% 5.5% 7.0% 7.0% 7.0% 7.0% 7.0% 7.0% Hubs outside ISC 57.7% 57.7% 57.6% 56.1% 54.6% 53.1% 50.6% 49.8% 49.8% 49.8% 49.8% 49.8% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Note: Transshipment traffic estimates calculated by double counting the target market traffic Source: Drewry Research

Table 8.12 Forecast volumes of ISC transhipment activity by ports for hubs outside the ISC region, 2010-2044 (‘000 Teu)

BASE CASE

CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on

Singapore 1,449 1,586 1,679 1,725 1,768 1,846 2,320 3,051 4,249 5,305 6,142 6,752 5.0% 5.2% 4.3% Port Klang 310 340 360 370 379 396 497 654 910 1,137 1,316 1,447 5.0% 5.2% 4.3% Tanjung Pelepas 621 680 720 739 758 791 994 1,308 1,821 2,273 2,632 2,894 5.0% 5.2% 4.3% Dubai 1,101 1,201 1,266 1,296 1,324 1,376 1,697 2,223 3,095 3,865 4,475 4,919 4.6% 4.9% 4.3% Fujairah 8 9 10 10 10 11 13 17 24 30 35 39 5.0% 5.2% 4.3% Khor Fakkan 203 220 230 234 237 245 292 379 528 659 763 839 3.9% 4.5% 4.3% Salalah 410 446 470 481 490 509 623 815 1,135 1,417 1,641 1,804 4.4% 4.8% 4.3% Aden 17 18 19 20 20 21 27 35 49 61 70 77 5.0% 5.2% 4.3% New hubs 21 32 43 54 66 79 166 235 328 409 474 521 30.8% 11.5% 4.3%

Total 4,139 4,531 4,797 4,929 5,052 5,274 6,629 8,718 12,139 15,156 17,548 19,290 5.0% 5.2% 4.3%

Note: Transshipment traffic estimates calculated by double counting the target market traffic Source: Drewry Research

Table 8.12 (cont’d)

HIGH CASE

CAGR CAGR CAGR (‘000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on

Singapore 1,449 1,591 1,690 1,767 1,829 1,929 2,551 3,472 4,901 6,205 7,286 8,101 5.9% 6.1% 4.6% Port Klang 310 341 362 379 392 413 547 744 1,050 1,330 1,561 1,736 5.9% 6.1% 4.6% Tanjung Pelepas 621 682 724 757 784 827 1,093 1,488 2,100 2,659 3,122 3,472 5.9% 6.1% 4.6% Dubai 1,101 1,205 1,275 1,328 1,369 1,439 1,866 2,529 3,571 4,521 5,308 5,902 5.5% 5.8% 4.6% Fujairah 8 9 10 10 10 11 15 20 28 35 42 46 5.9% 6.1% 4.6% Khor Fakkan 203 221 232 240 246 256 321 431 609 771 906 1,007 4.8% 5.3% 4.6% Salalah 410 448 473 492 507 532 685 927 1,309 1,658 1,946 2,164 5.4% 5.7% 4.6% Aden 17 18 19 20 21 22 29 40 56 71 83 93 5.9% 6.1% 4.6% New hubs 21 32 43 56 68 83 182 268 378 479 562 625 31.9% 12.5% 4.6%

Total 4,139 4,547 4,829 5,048 5,227 5,512 7,289 9,919 14,003 17,728 20,817 23,145 5.9% 6.1% 4.6%

Note: Transshipment traffic estimates calculated by double counting the target market traffic Source: Drewry Research

Table 8.12 (cont’d)

LOW CASE

CAGR CAGR CAGR ('000 teu) FY10 FY11 FY12 FY13 FY14 FY15 FY20 FY25 FY30 FY35 FY40 FY44 2010- 2015- 2025 2015 2025 on

Singapore 1,449 1,582 1,671 1,714 1,753 1,826 2,273 2,961 4,085 5,054 5,796 6,324 4.7% 5.0% 4.1% Port Klang 310 339 358 367 376 391 487 635 875 1,083 1,242 1,355 4.7% 5.0% 4.1% Tanjung Pelepas 621 678 716 734 751 783 974 1,269 1,751 2,166 2,484 2,710 4.7% 5.0% 4.1% Dubai 1,101 1,198 1,261 1,288 1,312 1,362 1,663 2,157 2,976 3,682 4,223 4,607 4.3% 4.7% 4.1% Fujairah 8 9 10 10 10 10 13 17 23 29 33 36 4.7% 5.0% 4.1% Khor Fakkan 203 219 229 233 235 243 286 368 508 628 720 786 3.6% 4.3% 4.1% Salalah 410 445 468 477 486 503 610 791 1,091 1,350 1,548 1,689 4.2% 4.6% 4.1% Aden 17 18 19 20 20 21 26 34 47 58 66 72 4.7% 5.0% 4.1% New hubs 21 32 43 54 65 78 162 228 315 390 447 488 30.5% 11.3% 4.1%

Total 4,139 4,520 4,775 4,896 5,008 5,217 6,494 8,461 11,672 14,439 16,561 18,067 4.7% 5.0% 4.1%

Note: Transshipment traffic estimates calculated by double counting the target market traffic Source: Drewry Research

8.6 Vizhinjam transhipment traffic forecast – 2010-2044

Table 8.13 shows a more detailed breakdown of a key element of Vizhinjam’s forecast transhipment volumes, this being the south and east coasts of India, Bangladesh, west coast of India and Pakistan. The first three feeder areas currently account for almost 75% of Colombo’s transhipment activity.

In order to generate Table 8.13, the base case forecast scenario has been used. Forecast feeder volumes into and out of Bangladesh are identified in previous tables of this report. The total available market for Colombo and Vizhinjam of this business has been projected forward from an estimated 20% in 2010 rising to a ceiling of 27.5% by 2017. This allows the forecast target market for Colombo and Vizhinjam of Bangladesh’s volumes to be identified.

Forecast southern Indian feeder volumes are identified in Table 8.15. These have been split into volumes specific to Cochin, Tuticorin and other Ports, this being new ports as yet not certain. Whilst it is not clear which of these projects will proceed, it is likely that something will happen, and so a generic category has been used. Cochin’s share of southern Indian feeder traffic is projected to decline over time, as the new development at Vallarpadam attracts direct calls. Tuticorin is expected to continue to account for the largest share of southern Indian feeder volumes, although the newly emerging ports are expected to be mainly feeder ports, at least to start with. The total share of Colombo and Vizhinjam of these feeder volumes by port has then been assessed, and in all cases it is at a high level due to the geographical advantage that Colombo/Vizhinjam has when acting as a hub for southern Indian ports. This allows forecast of total available market for Colombo & Vizhinjam for the southern Indian feeder volumes to be projected by port.

Forecast total volumes by port for the east coast of India are identified in tables below. For each port, an assessment has been made at to what level of this traffic is feeder, now and in the future. Collectively this provides the basis for the summary in tables below. Having identified the feeder traffic for each port, Colombo & Vizhinjam’s share of this traffic has been projected. This allows forecast Colombo/Vizhinjam east coast Indian feeder volumes to be projected by port. The rest of the ISC feeder volume has been attributed to the West coast of India and Pakistan.

All of this analysis is summarised in Table 8.16. There are several important points to note:

• It must be noted that the analysis presented in Table 8.13-8.15 becomes increasingly speculative as we go towards the end of forecast the further ahead you look as the capacity of ports (and indeed their very existence in the case of new ports) becomes less and less clear.

• Some generic port groups have been used for the east coast in particular, i.e. the volume is expected to move through ports in a general area, but it would be spuriously accurate to try and attribute volumes to specific ports as the scale and existence of specific ports cannot be predicted in the long term.

• Feeder volumes at Cochin and Chennai are not expected to show large growth in the long term, as direct services are expected to become the dominant way of serving these ports. This is also expected to be the case at Kolkata/Haldia/Kulpi, but to a lesser extent as even the new facilities at Kulpi will be draft restricted.

• As the overall Indian container market grows, new spoke ports are expected to emerge, and it is these that are expected to account for the majority of feeder traffic. In time, several of these grow to the point where direct calls are expected to be viable, and so the cycle moves on.

• Paradoxically, in the long run, the west coast of India becomes an increasingly important source of Colombo’s transhipment volumes. This is because most ISC sub- regions reach a point where direct services dominate. From this point onwards, the main feeder markets directly reflect the size of the overall sub-market (rather than being skewed by the direct calls vs. feeder balance in each sub-region). The west coast of India is expected to remain the largest overall container market in the region, and so in the long run will be the largest feeder market. This is of course significant for Colombo’s long term marketing strategy.

Finally a common target market has been identified for both Colombo and Vizhinjam which would be jointly contested by these ports. As per Drewry estimates and after detailed primary survey of top liner service providers in the region, Vizhinjam would not be able to take dominant share of this market due to following reasons :-

• The tariff charged by Colombo is almost one third of tariff charged by Indian ports. The port further offers discount to major shipping line on the card rate. As discussed in section for hub port economics, the average cost per Teu for transhipment through Vizhinjam is costlier compared to Colombo, even when it matches port tariff charged by Colombo. Therefore Drewry estimates if Vizhinjam has to compete with Colombo and attract any minor share of total traffic, then it would have to provide at least 40- 50% discount on the card rate offered by Colombo for both vessel and cargo related charges.

• Colombo has as large hinterland market as the size of market handled by the Chennai port. Therefore, if shipping lines move their services from Colombo to Vizhinjam, they would lose share of large available hinterland market. The cost of feedering Colombo traffic to the Vizhinjam port is very high; therefore it is not economically feasible to continue such operations.

• The immediate hinterland of Vizhinjam is very small therefore it would not be able to provide critical mass to immediately start transhipment activities replicating current services available at Colombo.

• It might be a possibility that shipping lines which have smaller share in the hinterland traffic of Colombo would shift some of their services to Vizhinjam.

• Also, there might be limited services which pick up limited cargoes from Colombo and primarily use the port to offload/load ISC transhipment cargo.

• Therefore Drewry estimates that Vizhinjam’s share in the total available traffic would be limited and have an upper cap of around 12%. However in the high case scenario it has been increased to 15%.

Table 8.13 Projected transhipment traffic of ISC feeder volumes by port via Vizhinjam to 2044 – Base case

Summary of Colombo/ Vizhinjam Feeder Target FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY25 FY30 FY35 FY40 FY44 Market

South coast India Cochin 175,325 156,112 113,434 119,320 125,503 133,492 137,699 179,215 184,025 164,250 158,186 145,595 Tuticorin 262,987 289,921 340,301 357,959 376,508 400,476 413,098 537,646 552,076 492,751 474,557 436,786 Other ports (e.g. Colachel)0 00000000000 East coast India Chennai 342,993 353,698 364,654 386,112 398,887 406,092 439,360 658,455 1,174,031 1,365,456 1,365,456 1,365,456 Other nr. Chennai (e.g. 0 136,912 195,577 261,090 324,460 384,732 436,621 389,100 598,937 1,107,070 1,665,946 2,142,474 Ennore, Krishnapatnam) Visakhapatnam 50,817 58,288 62,750 71,927 76,480 77,356 78,243 93,384 133,279 163,600 154,180 135,913 Other nr. Vizag 0 0 5,341 6,009 13,243 14,445 15,817 22,794 39,359 49,818 60,070 67,909 Paradip/Dhamra 5,098 8,804 13,912 18,456 77,252 101,118 129,174 302,603 472,162 529,835 555,049 551,241 Kolkata/Haldia/Kulpi 304,896 357,599 302,813 309,546 257,272 260,930 233,076 205,890 175,249 175,095 215,708 194,494 Bangladesh Chittagong/Mongla 359,496 398,410 438,977 481,851 498,975 505,961 508,848 620,318 810,633 1,022,878 1,207,408 1,407,149 Sub-total 1,501,612 1,759,743 1,837,758 2,012,269 2,148,580 2,284,601 2,391,938 3,009,405 4,139,751 5,070,753 5,856,561 6,447,017 West coast India & 359,834 300,527 420,724 408,755 410,073 411,468 457,219 859,442 1,247,090 1,655,187 1,930,825 2,113,589 Pakistan Total feeder volumes 1,861,445 2,060,270 2,258,482 2,421,024 2,558,653 2,696,069 2,849,157 3,868,846 5,386,841 6,725,940 7,787,386 8,560,605 Transshipment volume 3,722,891 4,120,540 4,516,963 4,842,048 5,117,306 5,392,138 5,698,314 7,737,693 10,773,681 13,451,880 15,574,772 17,121,211 Vizhinjam's Traffic 111,687 185,424 271,018 363,154 460,558 566,174 683,798 928,523 1,292,842 1,614,226 1,868,973 2,054,545 Forecast Vizhinjam's market share 3% 5% 6% 8% 9% 11% 12% 12% 12% 12% 12% 12% in available market

Source: Drewry Research

Table 8.14 Projected transhipment traffic of ISC feeder volumes by port via Vizhinjam to 2044 – High case

Summary of Colombo/ Vizhinjam Feeder Target FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY25 FY30 FY35 FY40 FY44 Market

South coast India Cochin 181,395 163,160 119,760 127,255 135,212 145,286 151,397 203,913 212,289 192,119 187,650 174,691 Tuticorin 272,093 303,012 359,281 381,765 405,635 435,857 454,192 611,738 636,868 576,358 562,950 524,074 Other ports (e.g. Colachel) 0 0 0 0 0 0 0 0 0 0 0 0 East coast India Chennai 354,868 369,668 384,992 411,791 429,745 441,969 483,067 749,197 1,354,349 1,583,893 1,583,893 1,583,893 Other nr. Chennai (e.g. 0 143,094 206,485 278,454 349,561 418,722 480,056 442,722 690,927 1,294,911 1,976,251 2,570,629 Ennore, Krishnapatnam) Visakhapatnam 52,576 60,920 66,250 76,711 82,396 84,190 86,026 106,253 153,749 191,359 182,898 163,074 Other nr. Vizag 0 0 5,639 6,409 14,268 15,722 17,391 25,935 45,404 58,271 71,259 81,480 Paradip/Dhamra 5,274 9,201 14,688 19,683 83,229 110,052 142,024 344,304 544,681 619,735 658,434 661,401 Kolkata/Haldia/Kulpi 315,452 373,745 319,702 330,133 277,175 283,983 256,262 234,263 202,165 213,300 273,228 251,200 Bangladesh Chittagong/Mongla 371,943 416,399 463,460 513,897 537,576 550,662 559,467 705,803 935,136 1,196,433 1,432,304 1,688,355 Sub-total 1,553,603 1,839,200 1,940,258 2,146,098 2,314,797 2,486,443 2,629,883 3,424,129 4,775,569 5,926,379 6,928,866 7,698,798 West coast India & Pakistan 372,292 345,266 488,916 496,409 505,979 515,744 574,799 1,077,474 1,579,221 2,118,768 2,518,026 2,804,954 Total feeder volumes 1,925,896 2,184,466 2,429,174 2,642,507 2,820,776 3,002,186 3,204,681 4,501,603 6,354,790 8,045,147 9,446,892 10,503,752 Transshipment volume 3,851,791 4,368,932 4,858,347 5,285,013 5,641,551 6,004,373 6,409,362 9,003,206 12,709,579 16,090,294 18,893,784 21,007,505 Vizhinjam's Traffic Forecast 115,554 196,602 291,501 396,376 507,740 630,459 769,123 1,350,481 1,906,437 2,413,544 2,834,068 3,151,126 Vizhinjam's market share in 3% 5% 6% 8% 9% 11% 12% 15% 15% 15% 15% 15% available market

Source: Drewry Research

Table 8.15 Projected transhipment traffic of ISC feeder volumes by port via Vizhinjam to 2044 – Low case

Summary of Colombo/ Vizhinjam Feeder Target FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY25 FY30 FY35 FY40 FY44 Market

South coast India Cochin 173,791 154,429 111,986 117,564 123,416 131,019 134,891 173,923 176,952 156,480 149,289 136,364 Tuticorin 260,686 286,796 335,957 352,693 370,247 393,058 404,674 521,769 530,855 469,441 447,867 409,093 Other ports (e.g. Colachel ) 0 0 0 0 0 0 0 0 0 0 0 0 East coast India Chennai 339,991 349,885 359,999 380,432 392,254 398,570 430,400 639,011 1,128,905 1,308,131 1,308,131 1,308,131 Other nr. Chennai (e.g. 0 135,436 193,080 257,249 319,064 377,606 427,717 377,610 575,916 1,054,699 1,572,251 2,006,638 Ennore, Krishnapatnam) Visakhapatnam 50,372 57,659 61,949 70,869 75,208 75,923 76,647 90,626 128,156 155,861 145,509 127,296 Other nr. Vizag 0 0 5,273 5,921 13,023 14,178 15,495 22,121 37,846 47,461 56,692 63,603 Paradip/Dhamra 5,053 8,709 13,734 18,184 75,968 99,246 126,540 293,666 454,014 504,771 523,832 516,291 Kolkata/Haldia/Kulpi 302,228 353,744 298,948 304,992 252,994 256,097 228,323 199,810 168,513 162,150 194,171 172,579 Bangladesh Chittagong/Mongla 356,350 394,115 433,373 474,762 490,677 496,589 498,471 601,999 779,474 974,490 1,139,502 1,317,933 Sub-total 1,488,471 1,740,773 1,814,300 1,982,666 2,112,851 2,242,285 2,343,158 2,920,535 3,980,630 4,833,483 5,537,243 6,057,929 West coast India & 356,685 297,287 415,354 397,155 379,821 360,970 383,659 749,116 1,081,965 1,429,308 1,645,891 1,778,521 Pakistan Total feeder volumes 1,845,156 2,038,060 2,229,654 2,379,821 2,492,672 2,603,255 2,726,817 3,669,651 5,062,595 6,262,791 7,183,134 7,836,450 Transshipment volume 3,690,312 4,076,119 4,459,309 4,759,642 4,985,343 5,206,510 5,453,634 7,339,303 10,125,190 12,525,582 14,366,268 15,672,900 Vizhinjam's Traffic 110,709 183,425 267,559 356,973 448,681 546,684 654,436 880,716 1,215,023 1,503,070 1,723,952 1,880,748 Forecast Vizhinjam's market share 3% 5% 6% 8% 9% 11% 12% 12% 12% 12% 12% 12% in available market

Source: Drewry Research

Table 8.16 Projected Vizhinjam container traffic 2014- 2044 (teu)

High Base Low Year Gateway Gateway Gateway Gateway Transshipment Total Gateway Transshipment Total Gateway Transshipment Total (Loaded) (empty) (empty) (empty)

FY 2014 27,129 11,627 115,554 154,310 26,221 11,238 111,687 149,146 25,992 11,139 110,709 147,841 FY 2015 38,566 16,528 196,602 251,697 36,900 15,814 185,424 238,139 36,502 15,644 183,425 235,572 FY 2016 50,986 21,851 291,501 364,338 48,293 20,697 271,018 340,007 47,676 20,433 267,559 335,667 FY 2017 66,727 28,597 396,376 491,700 62,566 26,814 363,154 452,534 61,646 26,420 356,973 445,038 FY 2018 82,796 35,484 507,740 626,020 76,851 32,936 460,558 570,345 75,573 32,388 448,681 556,642 FY 2019 100,131 42,913 630,459 773,503 92,002 39,430 566,174 697,607 90,298 38,699 546,684 675,681 FY 2020 106,562 45,670 769,123 921,356 96,921 41,538 683,798 822,256 94,944 40,690 654,436 790,071 FY 2021 133,958 44,653 940,484 1,119,095 118,900 39,633 725,414 883,947 116,255 38,752 693,045 848,051 FY 2022 149,116 49,705 1,120,117 1,318,938 131,983 43,994 775,489 951,467 128,804 42,935 739,592 911,330 FY 2023 167,372 55,791 1,198,329 1,421,492 147,920 49,307 828,503 1,025,730 144,087 48,029 788,777 980,893 FY 2024 181,799 60,600 1,272,637 1,515,036 160,224 53,408 877,433 1,091,065 155,782 51,927 833,804 1,041,514 FY 2025 197,183 65,728 1,350,481 1,613,392 173,301 57,767 928,523 1,159,591 168,183 56,061 880,716 1,104,960 FY 2026 220,660 73,553 1,447,038 1,741,252 193,398 64,466 992,161 1,250,025 187,339 62,446 939,335 1,189,121 FY 2027 246,285 82,095 1,553,054 1,881,434 215,261 71,754 1,061,912 1,348,928 208,132 69,377 1,003,514 1,281,023 FY 2028 274,470 91,490 1,665,149 2,031,108 239,236 79,745 1,135,426 1,454,408 230,887 76,962 1,071,008 1,378,857 FY 2029 305,448 101,816 1,783,611 2,190,876 265,508 88,503 1,212,867 1,566,878 255,771 85,257 1,141,954 1,482,982 FY 2030 339,476 113,159 1,906,437 2,359,071 294,278 98,093 1,292,842 1,685,212 282,967 94,322 1,215,023 1,592,312 FY 2031 365,409 91,352 2,014,779 2,471,541 315,894 78,973 1,362,582 1,757,449 303,196 75,799 1,278,223 1,657,219 FY 2032 389,489 97,372 2,110,048 2,596,909 335,774 83,944 1,423,043 1,842,761 321,677 80,419 1,332,456 1,734,553 FY 2033 415,086 103,771 2,208,697 2,727,554 356,847 89,212 1,485,438 1,931,497 341,231 85,308 1,388,295 1,814,833 FY 2034 442,295 110,574 2,310,779 2,863,647 379,185 94,796 1,549,785 2,023,766 361,918 90,479 1,445,746 1,898,143 FY 2035 471,218 117,804 2,413,544 3,002,567 402,863 100,716 1,614,226 2,117,804 383,805 95,951 1,503,070 1,982,826 FY 2036 497,083 124,271 2,494,853 3,116,207 423,778 105,945 1,663,904 2,193,626 402,969 100,742 1,546,403 2,050,114 FY 2037 524,319 131,080 2,577,618 3,233,017 445,739 111,435 1,714,263 2,271,437 423,053 105,763 1,590,203 2,119,019 FY 2038 552,999 138,250 2,661,842 3,353,090 468,799 117,200 1,765,298 2,351,296 444,101 111,025 1,634,462 2,189,588

Table 8.16 (cont’d)

High Base Low

Year Gateway Gateway Gateway Gateway Transshipment Total Gateway Transshipment Total Gateway Transshipment Total (Loaded) (empty) (empty) (empty)

FY 2039 583,199 145,800 2,747,309 3,476,308 493,011 123,253 1,816,859 2,433,123 466,159 116,540 1,679,038 2,261,737 FY 2040 614,999 153,750 2,834,068 3,602,816 518,434 129,608 1,868,973 2,517,015 489,276 122,319 1,723,952 2,335,547 FY 2041 648,485 162,121 2,921,881 3,732,486 545,128 136,282 1,921,476 2,602,886 513,503 128,376 1,769,054 2,410,932 FY 2042 677,092 169,273 2,997,493 3,843,858 567,551 141,888 1,965,572 2,675,010 533,603 133,401 1,806,192 2,473,196 FY 2043 706,930 176,732 3,073,930 3,957,592 590,871 147,718 2,009,944 2,748,532 554,467 138,617 1,843,438 2,536,522 FY 2044 738,050 184,513 3,151,126 4,073,689 615,123 153,781 2,054,545 2,823,449 576,123 144,031 1,880,748 2,600,902 CAGR 11.6% 9.7% 11.6% 11.5% 11.1% 9.1% 10.2% 10.3% 10.9% 8.9% 9.9% 10.0%

Note: transhipment traffic includes double incidence

Source: Drewry Research

8.7 Vizhinjam Container traffic forecast by container size

Table 8.17 to 8.20 provides container traffic forecast for the Vizhinjam port by equipment size -20’ & 40’ container units. The assumptions for arriving at the equipment split are specified below.

Loaded-Empty Ratio In terms of either loaded or empty boxes, a single rate tariff is charged for all transshipment traffic in most of the hubs around the globe. However, terminal handling charges for gateway traffic has varying rates for loaded and empty box handling. Therefore, an estimate of loaded-empty ratio is pertinent only for revenue estimates from gateway traffic.

In case of Vizhinjam, gateway container traffic forecast, it has been estimated that initially with a low base of volumes from the hinterland, the port would witness high share of empties in the initial years. The share of empty boxes has been estimated based on current share of empty handled at the Tuticorin & Cochin ports. Both of these ports have had witnessed a large share of empties in the overall traffic in the initial years however it has gradually declined over the past few years. Still, the average share of empties at these ports is amongst the highest in the country.

The share of empties in the overall traffic in all three scenarios has been assumed as follows:-

Period Empty Share

201-2020 30% 2021-2030 25% 2031-2044 20%

Equipment Size Ratio A large share of transshipment traffic would be contributed by Indian ports. Therefore, the equipment size split, i.e. 20:40 ratio is most likely to be similar to gateway traffic in India. The current 20/40 split for gateway traffic at Indian ports is as follows:-

Equipment Size Share

Teu 30% Ffe 25%

However, as the gateway traffic would be generated from common hinterland currently being served by the Cochin and Tuticorin port, the 20:40 ratio for gateway traffic is assumed to have the ratio being witnessed at these ports.

Cargo Equipment Size Share Loaded Teu 56.4% Ffe (x2) 43.6% Empty Teu 63.3% Ffe (x2) 36.7%

Table 8.17 Vizhinjam container traffic 2014- 2044 by Equipment size – Base Case

Year FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY25 FY30 FY35 FY40 FY44

Gateway Traffic

Gateway Loaded 20' 14,789 20,812 27,237 35,287 43,344 51,889 54,663 97,742 165,973 227,215 292,397 346,929 40' 5,716 8,044 10,528 13,639 16,754 20,057 21,129 37,780 64,153 87,824 113,019 134,097 Total Loaded Traffic (Boxes) 20,505 28,856 37,765 48,927 60,097 71,946 75,792 135,521 230,125 315,039 405,415 481,026 Total Loaded Traffic(Teu) 26,221 36,900 48,293 62,566 76,851 92,002 96,921 173,301 294,278 402,863 518,434 615,123 Gateway Empty 20' 7,114 10,011 13,101 16,973 20,849 24,959 26,293 36,566 62,093 63,753 82,042 97,343 40' 2,062 2,902 3,798 4,920 6,044 7,235 7,622 10,600 18,000 18,481 23,783 28,219 Total Empty Traffic (Boxes) 9,176 12,912 16,899 21,894 26,892 32,194 33,915 47,167 80,093 82,234 105,825 125,562 Total Empty Traffic (TEU) 11,238 15,814 20,697 26,814 32,936 39,430 41,538 57,767 98,093 100,716 129,608 153,781 Total Gateway Traffic (Boxes) 29,681 41,768 54,664 70,820 86,990 104,140 109,708 182,688 310,218 397,273 511,240 606,588 Total Gateway Traffic(TEU) 37,459 52,715 68,990 89,380 109,787 131,432 138,458 231,067 392,371 503,578 648,042 768,904

Transshipment Traffic Transshipment Traffic 20' 53,684 89,127 130,268 174,555 221,373 272,140 328,677 446,307 621,422 775,900 898,347 987,545 40' 29,001 48,149 70,375 94,299 119,592 147,017 177,560 241,108 335,710 419,163 485,313 533,500 Total Transshipment Boxes 82,685 137,276 200,643 268,854 340,965 419,157 506,237 687,415 957,132 1,195,063 1,383,660 1,521,045

Total Transshipment Teus 111,687 185,424 271,018 363,154 460,558 566,174 683,798 928,523 1,292,842 1,614,226 1,868,973 2,054,545

Table 8.18 Vizhinjam container traffic 2014- 2044 by Equipment size – High Case

Year FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY25 FY30 FY35 FY40 FY44

Gateway Traffic Gateway Loaded 20' 15,301 21,751 28,756 37,634 46,697 56,474 60,101 111,211 191,464 265,767 346,859 416,260 40' 5,914 8,407 11,115 14,547 18,050 21,829 23,231 42,986 74,006 102,726 134,070 160,895 Total Loaded Traffic (Boxes) 21,215 30,159 39,871 52,181 64,747 78,302 83,332 154,197 265,470 368,492 480,929 577,155 Total Loaded Traffic(Teu) 27,129 38,566 50,986 66,727 82,796 100,131 106,562 197,183 339,476 471,218 614,999 738,050 Gateway Empty 20' 7,360 10,462 13,832 18,102 22,461 27,164 28,909 41,606 71,629 74,570 97,324 116,796 40' 2,134 3,033 4,010 5,248 6,511 7,875 8,380 12,061 20,765 21,617 28,213 33,858 Total Empty Traffic (Boxes) 9,493 13,495 17,842 23,350 28,973 35,039 37,289 53,667 92,394 96,187 125,537 150,655 Total Empty Traffic (TEU) 11,627 16,528 21,851 28,597 35,484 42,913 45,670 65,728 113,159 117,804 153,750 184,513 Total Gateway Traffic (Boxes) 30,708 43,654 57,713 75,530 93,719 113,341 120,621 207,864 357,864 464,680 606,466 727,810 Total Gateway Traffic(TEU) 38,756 55,095 72,837 95,324 118,280 143,044 152,232 262,911 452,634 589,022 768,749 922,563

Transshipment Traffic

Transshipment Traffic 20' 55,542 94,499 140,114 190,524 244,052 303,039 369,690 649,127 916,355 1,160,103 1,362,234 1,514,632 40' 30,006 51,051 75,693 102,926 131,844 163,710 199,717 350,677 495,041 626,720 735,917 818,247 Total Transshipment Boxes 85,548 145,551 215,807 293,450 375,896 466,749 569,407 999,804 1,411,396 1,786,824 2,098,151 2,332,879 Total Transshipment Teus 115,554 196,602 291,501 396,376 507,740 630,459 769,123 1,350,481 1,906,437 2,413,544 2,834,068 3,151,126

Table 8.19 Vizhinjam container traffic 2014- 2044 by Equipment size – Low Case

Year FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY25 FY30 FY35 FY40 FY44

Gateway Traffic Gateway Loaded 20' 14,659 20,587 26,889 34,768 42,623 50,928 53,549 94,855 159,593 216,466 275,952 324,934 40' 5,666 7,958 10,393 13,439 16,475 19,685 20,698 36,664 61,687 83,669 106,662 125,595 Total Loaded Traffic (Boxes) 20,326 28,545 37,283 48,207 59,098 70,613 74,247 131,519 221,280 300,135 382,614 450,529 Total Loaded Traffic(Teu) 25,992 36,502 47,676 61,646 75,573 90,298 94,944 168,183 282,967 383,805 489,276 576,123 Gateway Empty 20' 7,051 9,903 12,934 16,724 20,502 24,497 25,757 35,487 59,706 60,737 77,428 91,172 40' 2,044 2,871 3,749 4,848 5,943 7,101 7,467 10,287 17,308 17,607 22,446 26,430 Total Empty Traffic (Boxes) 9,095 12,773 16,683 21,572 26,445 31,598 33,224 45,774 77,014 78,344 99,873 117,601 Total Empty Traffic (TEU) 11,139 15,644 20,433 26,420 32,388 38,699 40,690 56,061 94,322 95,951 122,319 144,031 Total Gateway Traffic (Boxes) 29,421 41,318 53,966 69,778 85,543 102,211 107,470 177,293 298,294 378,480 482,487 568,130 Total Gateway Traffic(TEU) 37,131 52,146 68,109 88,065 107,961 128,998 135,635 224,244 377,289 479,756 611,595 720,154

Transshipment Traffic Transshipment Traffic 20' 53,214 88,166 128,606 171,584 215,665 262,771 314,564 423,328 584,017 722,471 828,641 904,007 40' 28,748 47,630 69,476 92,695 116,508 141,956 169,936 228,694 315,503 390,299 447,655 488,370 Total Transshipment Boxes 81,962 135,796 198,082 264,279 332,173 404,727 484,500 652,022 899,520 1,112,771 1,276,297 1,392,378 Total Transshipment Teus 110,709 183,425 267,559 356,973 448,681 546,684 654,436 880,716 1,215,023 1,503,070 1,723,952 1,880,748

9. Vizhinjam vessel traffic forecast

Objective

Forecast Vessel traffic at Vizhinjam in base case scenario

Vessel size estimate at Vizhinjam port

Estimated parcel size during the forecast period

Key Findings

• Colombo & Vizhinjam are wayport calls on mainline services currently serving on the Asia –Europe trade lane. As per current service profile, Colombo is a wayport for most of the services on the East-West trade lane. This implies that although it has mainline calls at the port, it is neither starting nor ending point on a service route. Therefore, the average parcel size required for a mainline vessel is approximately 40- 50% of the overall capacity.

Conclusion

As per forecast in the base case scenario, it is estimated the total number of vessel calls would increase from 2 calls/week in 2014 to 19 calls per week in 2044.

The container traffic forecast in the previous sections would provide guidance to the expected vessel traffic at the Vizhinjam port over the forecast period. The size of the vessels would depend upon the anticipated vessel size deployed on the East – West trade lane during the forecast period and it would also depend upon the parcel size, i.e. container traffic generated by the port.

The indication of parcel size is the average container traffic available for a feeder vessel and a mainline vessel. The size of vessel deployed would determine the average number of vessels required to handle the container traffic at the port.

The ISC region is served by a multitude of different carriers, services and vessel sizes. The three main distinctions are:

• Wayport services – mainline vessels making calls at ISC ports as part of services “passing through” the region. In general, these are east-west services looking to add ISC cargo to supplement the volumes being carried on an end-to-end basis (e.g. Europe-Far East). The majority of these wayport calls are made at Colombo as opposed to other ports in the region. The size of ships deployed on these services is determined by the size of the end-to-end trade rather than the size of the ISC trade.

• Direct call services – mainline vessels operating end-to-end services which start/end in the ISC and/or Middle East. Ship size on these routes is more a function of the size of the ISC trade.

• Feeder services linking ISC spoke ports with regional transhipment hubs.

Having described these distinctions, it is important to note that in practice, the reality is more complex than this. For example, there are feeder services which call at several hub ports, and so in theory have the potential to carry local intra-regional cargo as well as deep sea cargo. Likewise there are services linking South East Asia with the Middle East which call in the ISC. These services could carry deep sea cargo transhipped at, say Singapore to, say JNPT, as well as carrying Singapore-UAE trade and Singapore-ISC trade.

Table 9.1 provides an indication of the current maximum and average ship sizes calling at ISC ports for each of the three main categories. Not surprisingly, the wayport calls yield the biggest ships, given that these vessels are on the second largest deep sea route in the world (North Europe-Far East). However, Colombo does not see calls by the very biggest ships which are passing its door. This is due to the current limitations of the port in terms of draft, access and handling speeds/turnaround times. Nevertheless, Maersk S-class vessels on the AE8 string are currently calling, and they are of 8,450 teu in size. It is interesting to note is that the gap between the size of the largest ship calling at Colombo, and the typical average sized ship is very large. After the Maersk S-class vessels, the next largest ships currently calling are typified by the 6,700 teu units for MSC, and after that, the size steps down again. The gap between Maersk vessels and the rest is perhaps a reflection of how much bigger than other operators Maersk is (in terms of market share and volumes carried).

It is interesting to note that at the moment, the largest vessels deployed on direct calls at ports such as JNPT are not much smaller that the largest wayport callers that Colombo sees. It is also noteworthy that, as with Colombo, the typical average sized ships calling at JNPT are much smaller than the largest. Feeder vessels are of course much smaller, with

their size driven partly by the volumes on the particular route served, but more so by port limitations at spoke ports.

Table 9.1 Summary of current vessel sizes calling at ISC ports

Largest Vessel Typical Average Type of Service (Teu) Sized Vessel (Teu) *

Wayport calls at Colombo 8,450 ** 3,800-4,500

Direct calls (at ports such as JNPT) 6,250 *** 2,100-3,350

Feeder 2,113 700-1,100

* Typical average vessel size varies according to trade lane ** Maersk S-class vessels on AE8 string *** Maersk K-class vessels on ME1 Europe service Source: Drewry

In terms of forecasting ship size, it is not possible to use a methodology which relates the size of ship to the size of the trade. This is because the ISC is served in numerous ways by a complex network of services comprising end-to-end services from the likes of Asia, North America and Europe, wayport calls on east-west services, plus of course the Arabian Gulf is rolled into the service patterns in almost all cases. As a result, it is not possible to gain a clear picture of the way in which the size of ships calling at the likes of JNPT has developed in relation to the volume of cargo being carried. However, it is clear that ship sizes have increased significantly in the last few years. The Europe trade route has seen the least increase in average ship size, but this can be at least partly explained by the fact that historically, this route has always been one of strong volumes and large consortia. In the North American trades, the upsizing of vessels is largely due to the inclusion of calls at ports such as JNPT on pendulum services, i.e. services serving a much larger market than just the Middle East/ISC. Far East services to and from the Mid East/ISC have seen a similarly dramatic upsizing, and this is mainly due to the rapid growth in Far East trade in the last few years which has spawned a number of new and upgraded direct services.

Drewry estimates that in view of its parcel size and anticipated size of vessels deployed on the East-West trade lane, the estimated size of mainline & feeder vessels deployed at Vizhinjam would be as follows,

Table 9.2 Potential future vessel sizes calling at Vizhinjam port

Largest Vessel Typical Average Sized Vessel** Type of Service (Teu) (Teu)

Mainline vessel 12,000 6,000-9,000

Feeder vessel 3,000 1,000-1,500

Following assumptions have been taken into account to calculate the anticipated volumes available for mainline and feeder vessels.

Feeder – Mainline Ratio

The feeder versus mainline ratio at the proposed Vizhinjam port would be in same line as currently being witnessed at the Colombo port. Currently, with the exception of intra- regional traffic, the entire gateway traffic of the Colombo port is handled on the mainline vessels. Drewry estimates a similar profile of vessels calling at the proposed Vizhinjam port.

As the transshipment traffic forecast has been done by double counting the container handling incidence at the Vizhinjam port, Drewry assumes the share of mainline-feeder traffic at the port to be as follows:-

• Transshipment traffic would be brought in by feeder vessels to the port.

• Entire gateway traffic of the port and transshipment volume would be carried on the mainline vessels.

Capacity Deployed for Feeder – Mainline Vessels

• Feeder vessel capacity deployed has been taken into account considering an average capacity utilisation from 80-100% for services deployed. For. Eg. A container vessel of 600 Teu capacity can have a parcel size of 1000 Teu with 500 Teu export moves and 500 Teu of import moves.

• As per current service profile, Colombo is a wayport for most of the services on the East-West trade lane. This implies that although it has mainline calls at the port, it is neither starting nor ending point on a service route. Therefore, the average parcel size required for a mainline vessel is approximately 40-50% of the overall capacity. For example, if a 6,000 Teu vessel calls at the Colombo port then the average parcel size expected would be close to 2,400 Teu – 3,000 Teu per call. This could be 2,000 export moves and 1,000 import moves for a 3,000 Teu parcel size.

Table 9.3 below shows the expected vessel traffic anticipated at the Vizhinjam port during the forecast period in the base case scenario.

Table 9.3 Potential future vessel sizes calling at Vizhinjam port – Base case scenario

Vessels Calls per Week Gateway Traffic Transshipment Traffic on Feeder Traffic on Mainline Parcel Size Feeder Parcel Size Mainline Year 600 1000 1500 6000 9000 (Teu) Traffic (Teu) Vessels (Teu) Vessels (Teu) /Week / Week Total Teu Teu Teu Teu Teu FY14 37,459 111,687 55,843 93,303 1,074 1,794 0.00 1.00 1 0 2 FY15 52,715 185,424 92,712 145,427 1,783 2,797 1.00 1.00 1 0 3 FY16 68,990 271,018 135,509 204,498 2,606 3,933 2.00 1.00 2 0 5 FY17 89,380 363,154 181,577 270,957 3,492 5,211 2.00 1.00 2 0 5 FY18 109,787 460,558 230,279 340,066 4,428 6,540 2.00 2.00 2 0 6 FY19 131,432 566,174 283,087 414,519 5,444 7,972 2.00 2.00 2 1 7 FY20 138,458 683,798 341,899 480,357 6,575 9,238 2.00 3.00 2 1 8 FY21 158,533 725,414 362,707 521,240 6,975 10,024 2.00 3.00 2 1 8 FY22 175,977 775,489 387,745 563,722 7,457 10,841 2.00 3.00 0.00 3 1 9 FY23 197,226 828,503 414,252 611,478 7,966 11,759 1.00 3.00 1.00 3 1 9 FY24 213,632 877,433 438,716 652,348 8,437 12,545 1.00 3.00 1.00 3 1 9 FY25 231,067 928,523 464,262 695,329 8,928 13,372 1.00 3.00 1.00 3 2 10 FY26 257,864 992,161 496,081 753,945 9,540 14,499 1.00 4.00 1.00 3 2 11 FY27 287,015 1,061,912 530,956 817,971 10,211 15,730 1.00 4.00 1.00 3 2 11 FY28 318,981 1,135,426 567,713 886,695 10,918 17,052 1.00 4.00 1.00 3 2 11 FY29 354,010 1,212,867 606,434 960,444 11,662 18,470 0.00 4.00 2.00 4 2 12 FY30 392,371 1,292,842 646,421 1,038,792 12,431 19,977 0.00 4.00 2.00 4 2 12 FY31 394,867 1,362,582 681,291 1,076,158 13,102 20,695 0.00 5.00 2.00 4 2 13 FY32 419,718 1,423,043 711,522 1,131,239 13,683 21,755 0.00 5.00 2.00 4 2 13 FY33 446,059 1,485,438 742,719 1,188,778 14,283 22,861 0.00 5.00 2.00 5 2 14 FY34 473,981 1,549,785 774,893 1,248,874 14,902 24,017 0.00 6.00 2.00 5 2 15 FY35 503,578 1,614,226 807,113 1,310,691 15,521 25,206 0.00 6.00 2.00 5 2 15 FY36 529,723 1,663,904 831,952 1,361,675 15,999 26,186 0.00 6.00 2.00 5 3 16 FY37 557,174 1,714,263 857,132 1,414,306 16,483 27,198 0.00 5.00 3.00 5 3 16 FY38 585,998 1,765,298 882,649 1,468,647 16,974 28,243 0.00 5.00 3.00 5 3 16 FY39 616,264 1,816,859 908,430 1,524,693 17,470 29,321 0.00 5.00 4.00 5 3 17 FY40 648,042 1,868,973 934,486 1,582,528 17,971 30,433 0.00 5.00 4.00 5 3 17 FY41 681,410 1,921,476 960,738 1,642,148 18,476 31,580 0.00 5.00 4.00 6 3 18 FY42 709,438 1,965,572 982,786 1,692,224 18,900 32,543 0.00 5.00 4.00 6 3 18 FY43 738,588 2,009,944 1,004,972 1,743,560 19,326 33,530 0.00 5.00 4.00 7 3 19 FY44 768,904 2,054,545 1,027,273 1,796,177 19,755 34,542 0.00 5.00 4.00 7 3 19

Part – II Bulk & Non-Cargo Traffic Analysis

10. Coal traffic forecast

This section intends to estimate the coal traffic potential for Vizhinjam port by locating coal consumers like thermal power plant, integrated steel plant, cement plant and other small coal consumers in the hinterland.

Key findings

• Kerala does not have any coal-fired power plant and integrated steel plant, thereby making it potentially smaller importer of both non-coking and coking coal.

• The power demand in Kerala is met by hydel power plants, wind power plants and diesel-based thermal power plants. With expected commencement of Kochi LNG in 20011-12 and pipeline connectivity with Krishna-Godavari basin also becoming a reality, there has been increased focus on construction of gas-based power plants. Therefore, coal import requirement of Kerala is expected to come down considerably.

• Vizhinjam does not have much competitive advantage for any cement plant. At best it can be port of second choice. Added to this, it is notable that coal consumption of the cement plants is generally very low. It is in the region of 14%-20% of the clinker production capacity. i.e. for every tonne of clinker (Clinker is grinded along with gypsum to make cement) produced, coal required is between 140-200 kg depending on calorific value and characteristics of the thermal power plant.

• Total clinker production capacity in the primary and secondary hinterland is 5.32 million tonnes.

• There are no cement plants in the primary hinterland of Vizhinjam port. Despite that with proper rail and road connectivity, coal importers may still use Vizhinjam port as the existing ports like Cochin and Tuticorin may have infrastructural constraints leading to some sporadic coal cargo.

• In base and high case scenario, total coal traffic at Vizhinjam port is estimated to be stagnant at 0.14 and 0.71 million tonnes respectively.

Coal is one of the most important sources of energy, satisfying over 55% of energy needs of the Indian economy. Coal demand in India originates mainly from power utilities, steel plants, cement industries and many other small sectors like sponge iron units, pig iron producers and fertiliser etc. The power sector is the biggest consumer of coal in India accounting for more than 70% of coal demand. It is followed by Iron & Steel (9%) and Cement Industry (5.4%). The coal requirement of power sector is met by domestic production and import from Indonesia, South Africa and Australia. On the other hand integrated steel plants rely mainly on imported coal due to lack of availability of high grade coking coal domestically.

10.1 Coal import: Hinterland analysis

India imports both non-coking and coking coal to meet the supply deficit. Non-coking coal import into India is mainly driven by the coast-based thermal power plants whereas coking coal is imported by the integrated steel plants. In India, aggregate coal import has grown at a CAGR of over 20% in the last five years with non-coking coal surpassing coking coal in 2004-05 and growing at a CAGR of 32% in the same time period. The demand for non- coking coal has grown tremendously mainly because of rapid growth in independent power producers setting thermal power plants in the coastal areas.

There are three major competing ports in the primary and secondary hinterland of Vizhinjam port namely Tuticorin, Cochin and New Mangalore. Coal imports at Cochin and Tuticorin ports are mainly non-coking coal, the demand for which primarily originates from the thermal power plants in the region. Besides thermal power plants Tuticorin especially benefits from the captive industries in the adjoining areas namely Southern Petrochemicals Industries Corporation (SPIC), Sterlite, Tuticorin Alkali Chemicals, Kilburn Chemicals and Dharangdhara Chemical Works (DCW). On the other hand, Cochin port is served by relatively small consumers of coal in the region namely cement plants and re-rolling mills. This causes lower volume of coal imports through Cochin port (See Table 10.2).

Table 10.1 Import of coal: All India (In million tonnes)

Coal 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR

Coking Coal 12.99 16.93 16.89 17.88 22.03 24.00 13.06%

Non-Coking Coal 8.69 12.03 21.7 25.20 27.77 35.00 32.13%

Coke 1.89 2.84 2.62 4.69 4.25 2.00 1.14%

Total import 23.57 31.8 41.21 48.80 54.05 61.00 20.95%

Source: Ministry of Coal, GOI

Table 10.2 Coal handled at Indian ports in the hinterland (In tonnes)

Port 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR

Cochin 142,410 209,972 198,863 218,968 246,185 258,590 13%

Tuticorin 5,266,000 5,374,000 6,146,000 5,608,000 6,112,000 5,713,000 2%

New Mangalore 94,000 315,000 513,000 1,047,000 1,691,000 1,929,000 83%

Source: IPA, Port trust website

Kerala does not have any coal-fired power plant and integrated steel plant, thereby making it potentially smaller importer of both non-coking and coking coal. Moreover, lower part of Tamil Nadu also does not have any such industries which might be a likely user of the proposed Vizhinjam port.

The power demand in Kerala is met by hydel power plants, wind power plants and diesel- based thermal power plants. With expected commencement of Kochi LNG in 20011-12 and pipeline connectivity with Krishna-Godavari basin also becoming a reality, there has been increased focus on construction of gas-based power plants. Therefore, coal import requirement of Kerala is expected to come down considerably.

Therefore, in effect cement plants are the only important coal consumer, which may use the proposed Vizhinjam port. Figure 10.1 and Table 10.3 shows the existing cement plant in Tamil Nadu and Kerala.

Figure 10.1 Cement plants in primary and secondary hinterland

1 Grasim South, Reddipalayam 2 India Cements – Dalavoi, Trichy Ennore 3 Madras Cements, Alathiyur 14 Chennai 4 Tamil Nadu Cement, Ariyalur 1 5 Dalmia Cement, Dalmiapuram 2 11 6 Chettinad Cement, Karur 3 12 7 Chettinad Cement, Karikalli 13 4 Karikal 8 Tamil Nadu Cement, Alangulam 6 5 9 Madras Cements, R.S. Raja Nagar

7 10 India Cements – Sankarnagar, Tulaiyuth 9 8 11 India Cements, Sankaridurg Kochi 15 10 12 ACC Ltd., Madukkarai

Vizhinjam Tuticorin 13 Malabar Cements, Palghat 14 Ultra Tech Cement Ltd., - ARCW (G), Arakonam 15 Malabar Cements (G), Alappuzha

Note: G: Grinding Unit Source: CMA

Table 10.3 List of cement plants in the primary and secondary hinterland

Annual Annual Installed Installed Current Name of Cement Cement Clinker S.No. Type Location State Source of Company Capacity Capacity Coal (Million (Million Tonne) Tonne)

1 Malabar Cements Ltd* Integrated Palghat Kerala 0.42 0.59 Domestic coal Cement Plant

2 Malabar Cements Ltd. Grinding Unit Allapuzha Kerala 0.20 - (G)

3 The India Cements Integrated Tulaiyuth, Tamil Nadu 1.80 1.71 Imported coal Ltd.-Sankar Nagar Cement Plant Tirunelveli

4 Tamil Nadu Cements Integrated Alangulam Tamil Nadu 0.40 0.38 Domestic coal Corp. Ltd. Cement Plant

5 Madras Cements Ltd. Integrated R.S. Raja Nagar, Tamil Nadu 1.80 1.71 Imported coal Cement Plant Coimbatore

6 Chettinad Cement Integrated Karaikal Tamil Nadu 1.20 1.14 Domestic coal Corporation Ltd. Cement Plant

7 Chettinad Cement Integrated Karur Tamil Nadu 0.60 0.57 Domestic coal Corporation Ltd. Cement Plant

Total integrated cement plant 5.60 5.32

Grinding Unit 0.20

Note: The plants of million tonne and above capacity operated at an average utilisation of 97%.

* Produces Clinker for Allapuzha unit as well

Source: CMA

Table 10.4 presents distance of various cement plants from the existing and proposed port. It is evident from the Table that Vizhinjam does not have much competitive advantage for any cement plant. At best it can be port of second choice. Added to this, it is notable that coal consumption of the cement plants is generally very low. It is in the region of 14%- 20% of the clinker production capacity. i.e. for every tonne of clinker (Clinker is grinded along with gypsum to make cement) produced, coal required is between 140-200 kg depending on calorific value and characteristics of the thermal power plant. It means that a cement plant with a million tonne clinker production capacity needs coal to the tune of around 12-17,000 tonnes per month. This may not be an economical size of coal cargo when the coal is imported from South Africa, Indonesia or Australia. As the coal consumption is low, cement plants prefer to import coal via traders. They generally act as consolidators for minor coal consumers. As the traders consolidate coal for small consumers and import it via the ports nearest to the largest consumer, Vizhinjam might not be a preferred port as most of the cement plants are located in the central and northern part of Tamil Nadu and upper region of Kerala (see Figure 10.1).

Table 10.4 Distance matrix of key cement plants

Road Name of S.No. Cement Type Location State Road Distance from Company Tuticorin Karaikal Vizhinjam Chennai Cochin

1 Malabar Integrated Palghat Kerala 412 443 349 569 141 Cements Ltd. Cement Plant

2 Malabar Grinding Allapuzha Kerala 279 576 162 752 52 Cements Ltd. (G) Unit

3 The India Integrated Tulaiyuth, Tamil Nadu 57 457 151 631 289 Cements Ltd.- Cement Tirunelveli Sankar Nagar Plant

4 Tamil Nadu Integrated Alangulam Tamil Nadu 134 409 192 583 307 Cements Corp. Cement Ltd. Plant

5 Madras Cements Integrated R.S. Raja Tamil Nadu 393 433 418 537 215 Ltd. Cement Nagar, Plant Coimbatore

6 Chettinad Integrated Karaikal Tamil Nadu 286 259 404 412 328 Cement Cement Corporation Ltd. Plant

7 Chettinad Integrated Karur Tamil Nadu 297 226 433 312 326 Cement Cement Corporation Ltd. Plant

Source: CMA and Drewry

Table 10.5 Cement production and consumption of Kerala (Million tonne)

Percentages Percentages Cement Cement Cement Year Capacity to All India to All India & Clinker Production Consumption Total Total Export

2004-05 0.62 (0.40) 0.56 (0.44) 6.13 -

2005-06 0.62 (0.39) 0.68 (0.48) 6.5 -

2006-07 0.62 (0.37) 0.62 (0.40) 6.98 -

2007-08 0.62 (0.31) 0.57 (0.34) 7.13 -

2008-09 0.62 (0.28) 0.60 (0.33) 7.89 -

CAGR 0.0% 1.4% 5.2%

Source: CMA

10.2 Logistics cost analysis

Logistics cost analysis has been done for two competing ports namely Cochin and Tuticorin. It has been compared with the proposed port at Vizhinjam for which no port cost has been included. The infrastructure for Vizhinjam has been assumed to be better than the existing ports. For example the coal discharge rate assumed to be between 50,000 to 60,000 tonnes per day as compared to the discharge rate of around 10,000 tonnes per day for competing ports. The discharge has been assume dot very high as at lower handling rate Vizhinjam port will not be competitive. The assumptions are listed below and the cost break-up has been presented in Table 10.6.

It is evident from Table 10.6 that Vizhinjam Port will have cost advantage of USD 1 per tonne over Cochin Port for the coal consuming locations which are around 100 km from Vizhinjam and 50km from Cochin and Tuticorin. It is assuming that Vessel related and Cargo related costs are nearly same as that of Cochin port. If Vizhinjam port can offer some discount then total cost can be further lowered. On the other hand, for distance disadvantage of around 100 km Vizhinjam may offer cost advantage of around USD 5 per tonne as compared to Cochin Port with similar assumptions. For distance disadvantage of over 200 km Vizhinjam will have cost disadvantage of over USD 5 per tonne. It implies that Vizhinjam Port will be able to compete with the neighbouring ports only if it offers zero tariffs to the coal importers.

Assumptions Total cost estimated for Vizhinjam Port is without total port disbursement (vessel related and cargo related exception being light dues) Load Port Richards Bay Coal Terminal A vessel is chartered on time charter basis Vessel size (dwt) 60,000 GRT of the vessel 35,411 Cargo size (tonnes) 57,000 Tc rate (USD) 22,500 Inland cost per tonne per km 2 Exchange rate (INR/USD) 45 Design Speed (kn) 15 No. of hours in a day 24 MFO (tpd) - sea, loaded 34 MFO (tpd) - sea, ballast 31 MDO (tpd) - sea, loaded 1.7 MDO (tpd) - sea, ballast 1.7 MDO (tpd) - port (working cargo) 1.9 MDO (tpd) - Canal transit, loaded 22 MDO (tpd) - Canal transit, ballast 22 Price of MDO (USD per tonne) 664 Price of MFO (USD per tonne) 511 Light dues (INR per tonne) 8

Table 10.6 Logistics cost estimation for competitive port

Cost heads Unit Cochin Tuticorin Vizhinjam* Distance between Load and NM 2,880 2,880 3,607 3,607 3,556 3,556 Discharge port Sailing time (days) Days 8.0 8.0 10.0 10.0 9.9 9.9 Charter hire-Sailing USD 180,000 180,000 225,438 225,438 222,250 222,250 Charter hire-Sailing USD per tone 3.2 3.2 4.0 4.0 3.9 3.9 Fuel Consumption (tonnes) MFO-Loaded Tonnes 272 272 341 341 336 336 MDO (tpd) - sea, Loaded Tonnes 14 14 17 17 17 17 MDO (tpd) - port (working cargo) tpd 18 14 11 9 2 2 Fuel Cost MFO-Loaded USD 138,992 138,992 174,078 174,078 171,617 171,617 MDO (tpd) - sea, Loaded USD 9,030 9,030 11,310 11,310 11,150 11,150 MDO (tpd) - port (working cargo) USD 11,985 8,989 7,191 5,993 1,438 1,027 Total Fuel Cost USD 160,008 157,011 192,579 191,380 184,205 183,794 Fuel cost USD per tonne 2.8 2.8 3.4 3.4 3.2 3.2 Coal Discharge rate tpd 6,000 8,000 10,000 12,000 50,000 70,000 Port operations No. of days required to discharge Days 9.5 7.1 5.7 4.8 1.1 0.8 Average pre-berthing time Hours 12.0 12.0 26.0 26.0 4.0 4.0 Average non-working time at berth Days 2.1 2.1 0.7 0.7 0.5 0.5 Total no. of days in port operations Days 12.1 9.8 7.5 6.6 1.8 1.5 Total charter hire-Port operations USD 273,150 219,713 168,825 147,450 40,650 33,321 Total charter hire-Port operations USD Per tonne 4.8 3.9 3.0 2.6 0.7 0.6 Inland cost USD per tonne From Point A 50 2 2 2 2 2 2 From Point B 100 4 4 4 4 4 4 From Point C 200 9 9 9 9 9 9 From Point D 300 13 13 13 13 13 13 Port Cost Vessel Related Light dues USD 10,133 10,133 10,133 10,133 10,133 10,133 Port dues USD 7,259 7,259 7,132 7,132 Pilotage and Towage USD 30,984 30,984 11,445 11,445 Berth Hire USD 28,097 21,072 24,221 20,184 Cargo related Wharfage USD Per 1.2 1.2 0.8 0.8 tonne Stevedoring USD Per 3.9 3.9 5.8 5.8 tonne Vessel and Cargo related cost USD per tonne 6 6 8 7 Total cost from the point of consumption (USD) From Point A 50 19 18 20 20 10 10 From Point B 100 22 21 22 22 12 12 From Point C 200 26 25 27 26 17 17 From Point D 300 31 29 31 31 21 21

Source: Drewry Research

10.3 Coal traffic forecast

Assumptions:

• No major coal-fired thermal power plants are expected in the hinterland of Vizhinjam port.

• No integrated steel plants are expected to be built in the hinterland of Kerala as it does not have any advantage of either access to the primary raw materials iron ore, and limestone or fuel coking coal.

• Gas-based power plants are expected to be built in Kerala with increased availability of gas through Kochi LNG plant and gas pipeline from Krishna-Goadavari Basin.

• For every tonne of clinker production the coal requirement is assumed to be 170 kg.

• It assumed that the cement plants with maximum distance disadvantage of around 200km may use Vizhinjam port.

• Low case: Coal traffic is assumed to be zero as Vizhinjam has distinct disadvantage of around 100 to 200 km consequently increased cost of INR200 to 400 per tonne at Vizhinjam as compared to Cochin and Tuticorin.

• Base Case: Despite distinct disadvantage, the importers of coal may still use Vizhinjam port provided Vizhinjam can provide higher discharge rate (as compared to discharge rate of 6,000 to 8,000 at Cochin and 10,000 to 12,000 tonnes per day) as many a times the nearest may have traffic congestion.

Table 10.7 Coal traffic forecast for Vizhinjam Port (Million tonne)

2009-10 2013-14 2018-19 2023-24 2028-29 2033-34 2038-39 2043-44

Capacity Integrated Cement Plants- 5.34 5.34 5.34 5.34 5.34 5.34 5.34 5.34 Clinker production capacity

Other industries 0.1 0.28 0.28 0.28 0.28 0.28 0.28 0.28

Coal Requirement Integrated Cement Plants- 0.91 0.91 0.91 0.91 0.91 0.91 0.91 0.91 Clinker production capacity

Other industries 0.18 0.50 0.50 0.50 0.50 0.50 0.50 0.50

Low Case Coal Integrated Cement Plants- 000000 0 0 traffic forecast Clinker production capacity

Other industries 0 0 0 0 0 0 0 0

Total 000000 0 0

Table 10.7 (cont’d)

2009-10 2013-14 2018-19 2023-24 2028-29 2033-34 2038-39 2043-44

Base Case Coal Integrated Cement Plants- 0.09 0.09 0.09 0.09 0.09 0.09 0.09 0.09 traffic forecast Clinker production capacity

Other industries 0.02 0.05 0.05 0.05 0.05 0.05 0.05 0.05

Total 0.11 0.14 0.14 0.14 0.14 0.14 0.14 0.14

High Case Coal Integrated Cement Plants- 0.45 0.45 0.45 0.45 0.45 0.45 0.45 0.45 traffic forecast Clinker production capacity

Other industries 0.09 0.25 0.25 0.25 0.25 0.25 0.25 0.25

Total 0.54 0.71 0.71 0.71 0.71 0.71 0.71 0.71

Source: Drewry Research

11. Steel scrap traffic forecast

This chapter looks at steel scrap traffic potential at Vizhinjam port.

Key findings

• Steel Rerolling mills are the consumers of steel scrap in Kerala.

• The steel requirement of Kerala is largely met from the Palghat-Coimbatore steel rolling mills cluster, which houses around 200 re-rolling mills spread across the four states of Tamil Nadu, Andhra Pradesh, Kerala, Karnataka & Pondicherry. This is around 141 kms from Cochin and 348 km from Vizhinjam.

• Vizhinjam has a distinct disadvantage in terms of attracting traffic mainly stemming from cost disadvantage of around INR 400 per tonne assuming ceteris paribus.

• Therefore, it is not expected that steel scrap will be imported through Vizhinjam port except some sporadic cargo as a result of heavy congestion at Cochin.

Kerala does not have any iron ore deposit or any associated raw material deposit leading to lack of development of integrated steel plant. Consequently, with the increasing requirement of steel in the country and limitations of the main steel producers to meet this growing demand, the secondary steel sector has emerged as an alternative and viable source to meet the future steel requirements. Steel re-rolling is the most popular method of producing finished steel. Almost all steel products made from steel are finished in the re- rolling. Steel re-rolling mills use steel scrap. Therefore, Vizhinjam Port can attract steel scrap to the requirement of re-rolling mills.

The steel requirement of Kerala is largely met from the Palghat-Coimbatore steel rolling mills cluster, which houses around 200 re-rolling mills spread across the four states of Tamil Nadu, Andhra Pradesh, Kerala, Karnataka & Pondicherry. This is around 141 kms from Cochin and 348 km from Vizhinjam. Consequently, Vizhinjam has a distinct disadvantage in terms of attracting traffic mainly stemming from cost disadvantage of around INR 400 per tonne assuming ceteris paribus. At Cochin port total port cost (Vessel related and Cargo related) of import is around INR 370 per tonne. Even if Vizhinjam reduces its tariff to zero, still importers of steel scrap will be at disadvantage as they will have to incur cost of around INR 30 per tonne over above Cochin port cost. Given this scenario it is not expected that steel scrap will be imported through Vizhinjam port.

Table 11.1 Steel scrap consumers in the hinterland

Name of the company Location A.P. Steel re-rolling mill ltd. Palakkad Agni rerollins p. Ltd Palakkad Agni steels p. Ltd. Ingur Bannari amman steels (p) ltd. Palakkad Beepath casting pvt ltd Palakkad Bhoopathy steels (p) ltd. Palakkad Cps steel India pvt. Ltd Palakkad Gasha steels pvt. Ltd Palakkad Hadeed steels (p) ltd Palakkad Jaishankar steels (p) ltd Aluva Janatha steel mills p. Ltd. Calicut K.R. Alloys ltd Thilangad, palakkad Kairali steels & alloys p. Ltd Palakkad Kaypee metals & alloys (p) ltd Kollam Key yem steel re-rolling mill Kannur Kizhakkethil steel rolling mill Kotayam Koyenco iron & steel co. P. Ltd. Calicut Kuttippulan iron & steel company p. Ltd Palakkad Lal steels (p) ltd. Palakkad M.A. Steels (p) ltd Palakkad M.S. Steel re-rolling mills (p) ltd. Mannarkkad steels pvt. Ltd. Palakkad Marutham steel industrial pvt. Ltd Palakkad Metrolla steels ltd. Ernakulam Minar alloys & forgings pvt. Ltd Palakkad

Table 11.1 (cont’d)

Name of the company Location Minar ispat pvt. Ltd. Calicu Oavai alloys & steel p. Ltd Tiruchengodu P.P.S steels (kerala) pvt. Ltd Kanjikode P.V.H. Steel p. Ltd. Calicut Palakkad steels rolling mill Palakkad Paragon steels pvt. Ltd. Unit ii Palakkad Peekay re-rolling mills p. Ltd Calicut Premier alloys Palakkad Premium ferro alloys ltd. Cochin Prince firified steels (p) ltd Kannur Prince rolling pvt. Ltd. Palakkad Prince tmt steels (p) ltd. Palakkad Pvh re-rolling mills Calicut Scot free steels ltd. Palakkad Shastha steels pvt. Ltd Palakkad South malabar steels & alloys p. Ltd Palakkad Southern ispat ltd. Palakkad Sri padmabalaji steels (p) ltd Palakkad Steel max rolling pvt. Ltd Palakkad Sun ferromet p. Ltd Kasargod Surabhi seteel casting p. Ltd. Palakkad Surabhi steel rolling mills pvt. Ltd Palakkad Suryadev alloys & power p. Ltd. Vishakapatnam T.N. Auto & general engg. Co. P. Ltd Wadakkanchery Utility alloys p. Ltd. Kerala Vanchinad forgings (p) ltd Kanjikode World wide iron & steels pvt. Ltd Palakkad district

Source: United Nations Development Programme

Table 11.2 Steel scrap handled at Indian ports in the hinterland (In ‘000 tonnes)

Port 2006-07 2007-08 2008-09

Cochin 121 103 91

Source: Department of Statistics, Cochin Port trust

12. Fertilizer and FRM

This chapter looks at the over all scenario of fertilizer imports in India. It also takes a closer look at the demand of fertilizers and factors that may influence the import of fertilizers oil in southern states of India, especially in Kerala and Tamil Nadu. Then we derive the fertilizer traffic at the proposed Vizhinjam port under three scenarios – low, base and high.

Key findings

• India produces a large chunk of its Urea demand, however raw materials and intermediates for the same are largely imported. As for potash (K), since there are no viable sources/reserves in the country, its entire requirement is met through imports.

• India’s fertilizer production in 2008-09 declined to 32.9 million tonnes, whilst the fertilizer imports increased to almost 14.3 million tonnes. This included imports of 6.9 million tonnes of Urea, 2.7 million tonnes of DAP, 4.4 million tonnes of MOP and 0.3 million tonnes of MAP.

• Despite being the third largest producer of fertilizers, India is still far from being self reliant to meet its fertilizer needs. Historically, India has been an importer of fertilizer. Over last decade, India’s fertilizer production has remained almost stagnant.

• As per our discussions with the various industry players and sector specialists, fertiliser industry in India is going through a tough phase and the production capacity is not increasing due to unavailability of economically viable feedstock.

• Fertilizer plants in Kerala and Tamil Nadu are only operating at around 30% utilisation rate. Once this utilisation rate goes up, after their connectivity to under construction gas grid, demand for imported fertilisers may come down drastically in these states.

• As per the base case forecast, fertiliser traffic is expected to reach up to 540,000 tonnes by the terminal year of forecast period.

12.1 Introduction

Agriculture provides for the livelihood of about a third of India’s population. Its contribution to India’s GDP is approximately 20%. All the five-year plans drafted by the Government of India in the past have laid significant emphasis on self-sufficiency and self-reliance in food grains production. Relentless efforts in this direction have resulted food grains production increasing from 52 million tonnes in 1951-52 to about 230.78 million tonnes in 2007-08.

As of now, the country has achieved near self-sufficiency in production capacity of urea with the result that India could substantially manage its requirement of nitrogenous fertilizers through the indigenous industry. Similarly, adequate indigenous capacity has been developed in respect of phosphate fertilizers to meet domestic requirements. However the raw materials and intermediates for the same are largely imported. As for potash (K) since there are no viable sources/reserves in the country, its entire requirement is met through imports.

12.2 Historical analysis

Despite being the third largest producer of fertilizers, India is still far from being self reliant to meet its fertilizer needs. Historically, India has been an importer of fertilizer. Over last decade, India’s fertilizer production has remained almost stagnant (See Table 12.1). Unavailability of raw materials has proven to be a major hindrance in increasing production of phosphate (P) and potassic (K) fertilisers. In the absence of commercially viable potash extraction in the country, the entire demand of potassic fertilizers is met through imports. Further, the current pricing policy and increasing input costs have also discouraged development of new production capacities, especially the availability of raw materials and feed stock have proved to be a major hindrance.

Table 12.1 Indian fertiliser industry at a glance -Nutrient wise (Million tonnes)

All India Consumption Nutrient wise All India Production Nutrient wise Year Deficit N P K Total N P Total 2000-01 10.9 4.2 1.6 16.7 10.9 3.7 14.7 -2.0 2001-02 11.3 4.4 1.7 17.4 10.7 3.8 14.5 -2.8 2002-03 10.5 4.0 1.6 16.1 10.5 3.9 14.4 -1.7 2003-04 11.1 4.1 1.6 16.8 10.6 3.6 14.2 -2.6 2004-05 11.7 4.6 2.1 18.4 11.3 4.0 15.3 -3.1 2005-06 12.7 5.2 2.4 20.3 11.3 4.2 15.5 -4.8 2006-07 13.8 5.5 2.3 21.7 11.5 4.4 16.0 -5.7 2007-08 14.4 5.5 2.6 22.6 10.9 3.7 14.6 -8.0 2008-09 15.1 6.5 3.3 24.9 10.9 3.4 14.3 -10.6 CAGR 4.1% 5.6% 9.8% 5.1% 0.0% -1.1% -0.3%

Above Table depicts nutrient-wise production and consumption Source: Fertilizer Association of India

Primarily, India produces nitrogenous fertilisers but has to rely largely on imported raw material for production of phosphate fertilisers, while potassic fertilisers are not being produced in India at all. As per the provisional estimates, India’s fertilizer production in 2008-09 declined to 32.9 million tonnes, whilst the fertilizer imports increased to almost

14.3 million tonnes. This included imports of 6.9 million tonnes of Urea, 2.7 million tonnes of DAP, 4.4 million tonnes of MOP and 0.3 million tonnes of MAP. This shows that import is now around 44% of the total production.

As per our discussions with the various industry players and sector specialists, fertiliser industry in India is going through a tough phase. Despite growing demand, the production capacity is not increasing due to unavailability of economically viable feedstock.

Table 12.2 Fertiliser consumption forecast for India (Million tonnes)

Total Products Annual N K2O P2O5 (N,K,P) (All Fertilisers) Growth

2008-09 15.1 3.3 6.5 24.9 52.3 10.4% 2009-10 15.6 3.0 7.0 25.6 53.8 2.8% 2010-11 15.9 3.1 7.3 26.3 55.2 2.6% 2011-12 16.3 3.3 7.6 27.2 57.2 3.6% 2012-13 16.8 3.5 7.9 28.2 59.2 3.5% 2013-14 17.2 3.7 8.3 29.2 61.2 3.5% CAGR 2.7% 2.1% 4.9% 3.2% Source: Fertilizer Association of India

Currently, urea is imported by fertilizer manufacturing and marketing companies through three canalizing agencies i.e. Indian Potash Limited (IPL), Minerals and Metal Trading Corporation (MMTC) and State Trading Corporation (STC). Canalising agencies and Department of Fertilizers decide about the port of unloading for Urea imports, whilst for other fertilizers the decision is taken by the importers i.e. Fertilizer manufacturing and marketing companies. The port is primarily chosen on the basis of its proximity to the actual consumption centres and the available infrastructure for handling and storing fertilisers.

As per Drewry’s discussion with the Fertiliser Association of India, Vizhinjam port under the current circumstances does not offer any significant advantage over the other competing ports in the region. One of the reasons for this is the port is sandwiched between two major ports –Cochin and Tuticorin- which already have sufficient capacity to handle more fertilisers. Also, Vizhinjam offers distance advantage for a very limited territory which is not amongst the highest fertilizer consuming areas in the hinterland. Table 7.3 gives district wise break of fertilizer consumption in Kerala and Tamil Nadu.

Table 12.3 Fertilizer consumption in Vizhinjam’s hinterland - 2008-09 (tonnes)

Nutrients (N,P,K) Consumption All Fertilizer Consumption Kerala Allapuzha 14,363 31,599 Ernakulam 25,615 56,353 Idukki 26,769 58,892 Kannur 13,242 29,132 Kasargode 4,888 10,754 Kollam 9,536 20,979 Kottayam 35,663 78,459 Kozhikode 16,635 36,597 Malappuram 16,031 35,268 Palakkad 40,671 89,476 Pathanamthitta 8,554 18,819 Tiruvananthapuram 8,202 18,044 Thrissur 22,584 49,685 Wayanad 18,144 39,917 Total 260,897 573,973

Tamil Nadu Ariyalur* 10,576 23,267 Coimbatore 75,020 165,044 Cuddalore 52,154 114,739 Dharmapuri 19,000 41,800 Dindigul 40,413 88,909 Erode 87,576 192,667 Kancheepuram 40,398 88,876 Kanyakumari 12,277 27,009 Karur 16,159 35,550 Krishnagiri 8,519 18,742 Madurai 64,853 142,677 Nagapattinam 35,296 77,651 Namakkal 18,755 41,261 Nilgiris 10,063 22,139 Perambalur* 18,544 40,797 Pudukottai 42,697 93,933 Ramanathapuram 15,057 33,125 Salem 86,048 189,306 Sivagangai 18,519 40,742 Thanjavur 67,614 148,751 Theni 23,807 52,375 Thoothukudi 19,490 42,878 Tiruchirapalli 113,266 249,185 Tirunelveli 65,692 144,522 Tiruvallur 39,659 87,250 Tiruvannamalai 63,317 139,297 Tiruvarur 42,483 93,463 Vellore 61,699 135,738 Villupuram 73,822 162,408 Virdhunagar 22,451 49,392 Total 1,265,224 2,783,493

Source: The Fertiliser Association of India

Figure 12.1 Vizhinjam’s hinterland for fertilizer consumption

Kochi

Tuticorin Vizhinjam Primary hinterland

Secondary hinterland Source: Drewry Research

Table 12.4 Fertiliser industry in Vizhinjam’s hinterland (‘000 tonnes)

Installed Capacity Production State Plant Location Main Products Utilisation (As on (2008-09) 01.11.2009) Kerala FACT Udyogamandal AS 228.0 128.7 56.4% APS 148.5 115.8 78.0% Kerala FACT I Cochin* Urea 330.0 0.0 0.0% FACT II Cochin APS 485.0 489.2 100.9% Tamil Nadu MFL Manali Urea 486.8 408.0 83.8% UAP, NP(APS)/NPKs 840.0 0.0 0.0% Tamil Nadu SPIC Tuticorin Urea 620.0 0.0 0.0% DAP, NP(APS) 606.1 6.2 1.0% Tamil Nadu TACF Tuticorin ACI 105.0 0.0 0.0% Tamil Nadu Coimbatore Coimbatore SSP 48.0 21.9 45.6% Pioneer Fertilizers Tamil Nadu Coromandel Ranipet SSP, NP(APS) 132.0 89.9 68.1% International

Total 4,029.4 1,259.7 31.3%

Currently, most of the fertiliser industry is using Naphtha as the feedstock. However, the Government of India is making efforts to provide relatively cheaper feedstock in the form of natural gas to the fertilizer industry. Table 12.4 lists major fertiliser industry in Tamil Nadu and Kerala along with their production for 2008-09. As evident in the Table the utilisation rate of these plants are abysmal at 31%, collectively.

While natural gas is a cheaper feedstock for the fertilizer industry, its availability in India at competitive rates is a cause of concern. Steps are being taken to address the issue. Figure 7.2 shows the gas connectivity network to various fertiliser units in the region. Government’s plan is to make the KG basin Gas available to fertilizer units. As depicted in Figure 7.2, the gas would be transported to Manali, Tamil Nadu and Tuticorin via the proposed pipeline. Also, there is 2.5 million tonnes per annum capacity LNG terminal coming up in Kochi which will supply Gas to FACT I, which is currently under hibernation.

Figure 12.2 Proposed Gas connectivity to fertilizer Industry in the hinterland

Kakinada

Bangaluru Mangalore Manali

Approved RGTIL Udyogamandal Approved GAIL Kochi LNG Terminals

Urea plants Tuticorin

Once all the fertilizer plants get access to the natural gas, utilisation rate of these plants will go up by several notches and may even touch 100% in the next five years, which indeed is the most likely scenario. In that case the reliance on imported fertiliser will also come down drastically as the area under cultivation is not increasing at a brisk pace and that is likely to keep a check on the growth of fertiliser consumption in the hinterland.

Table 12.5 Fertiliser imports in Vizhinjam’s hinterland (‘000 tonnes)

Primary Competing Ports Secondary Competing Ports Year Kochi Tuticorin Chennai New Mangalore Fertilizers FRM Fertilizers FRM Fertilizers FRM Fertilizers FRM 2000-01 52 630 423 791 686 472 172 217 2001-02 28 577 332 884 460 714 198 252 2002-03 107 517 284 776 459 534 248 197 2003-04 97 534 147 880 420 422 249 152 2004-05 101 403 182 854 412 470 239 112 2005-06 71 495 297 944 572 411 354 215 2006-07 81 646 484 1167 701 414 662 227 2007-08 79 561 678 825 654 380 972 286 2008-09 83 364 1098 850 585 266 831 279 CARG 6.0% -6.6% 12.7% 0.9% -2.0% -6.9% 21.8% 3.2%

Source: The Fertiliser Association of India

Over the last eight years, fertilizer imports at various ports serving Vizhinjam’s primary hinterland have registered an average annual growth of 6%. This is well below the growth in overall supply demand gap in the country. Fertiliser imported at Cochin and Tuticorin largely serves Kerala and Tamil Nadu only due to their geographical positioning.

Table 12.6 Road distances from competing ports in the hinterland (Km)

Location Kochi Tuticorin New Mangalore Vizhinjam Ernakulam 6 422 450 221 Kozhikode 206 537 252 414 Tiruvananthapuram 204 218 655 16 Kollam 135 210 585 80 Pathanamthitta 129 204 568 139 Allapuzha 51 294 501 164 Kottayam 62 260 512 172 Idukki 99 311 552 244 Tirunelveli 280 65 730 146 Kanyakumari 295 134 750 81

As per Drewry’s assessment, Vizhinjam’s location may not allow it to serve a large exclusive geographical area in terms of providing imported fertilizer at logistically competitive rates. Table 12.6 gives a snapshot view of road connectivity to various competing ports in the primary as well as secondary hinterland.

One aspect that may work in favour of Vizhinjam port vis-à-vis competing ports in the region is if Vizhinjam port could develop a fertilizer bagging plant as well along with all other facilities required for fertiliser handling. None of the competing ports in the region has a fertiliser bagging plant on site and this could be an incentive for fertiliser importers to get their cargo at Vizhinjam port.

Based on the scenarios discussed in the above paragraphs, Table 12.7 provides the forecast fertilizer import volume for Vizhinjam port. The fertilizer traffic over the next two decades at Vizhinjam could increase significantly as importers are keen to shift to the new proposed facility if it provides efficient cargo handling and storage facility. According to

major importers in the hinterland, for attracting fertilizer imports, Vizhinjam should provide the following:

• Deep draft of around 13-14 meters to facilitate handling of Panamax vessels. • A dedicated bagging plant on in the port area. • Good storage facilities. • Adequate rail and road connectivity for speedy evacuation of cargo. • Adequate cargo handling equipments to achieve a daily discharge rate of around 10- 12 thousand tonnes. • Ensuring that no contamination/damage takes place due to other dirty cargoes.

Table 12.7 Fertiliser imports forecasts for Vizhinjam (Million tonnes)

Consumption Production Share of imports Vizhinjam's Share in Total Vizhinjam's in Immediate Year Deficit Imports in the Hinterland Import Volume and Secondary Installed % Utilisation Production Quantity Hinterland Capacity Share Low Base High Low Base High

2008-09 3.1 4.0 31.0% 1.2 1.9 60% 1.1 0.0% 0.0% 0.0% 0.00 0.00 0.00 2009-10 3.3 4.0 31.0% 1.2 2.0 50% 1.0 0.0% 0.0% 0.0% 0.00 0.00 0.00 2010-11 3.4 4.0 31.0% 1.2 2.2 50% 1.1 0.0% 0.0% 0.0% 0.00 0.00 0.00 2011-12 3.6 4.0 40.0% 1.6 2.0 50% 1.0 0.0% 0.0% 0.0% 0.00 0.00 0.00 2012-13 3.7 4.0 50.0% 2.0 1.7 50% 0.8 0.0% 0.0% 0.0% 0.00 0.00 0.00 2013-14 3.8 4.0 70.0% 2.8 1.0 50% 0.5 0.0% 0.0% 2.0% 0.00 0.00 0.02 2014-15 3.9 4.0 80.0% 3.2 0.7 40% 0.3 0.0% 0.0% 2.0% 0.00 0.00 0.01 2015-16 4.0 4.0 85.0% 3.4 0.6 40% 0.3 0.0% 0.0% 5.0% 0.00 0.00 0.03 2016-17 4.2 4.0 85.0% 3.4 0.8 40% 0.3 0.0% 2.0% 5.0% 0.00 0.02 0.04 2017-18 4.3 4.0 85.0% 3.4 0.9 40% 0.4 0.0% 2.0% 5.0% 0.00 0.02 0.04 2018-19 4.4 4.0 85.0% 3.4 1.0 40% 0.4 0.0% 2.0% 5.0% 0.00 0.02 0.05 2019-20 4.5 4.0 85.0% 3.4 1.1 40% 0.4 0.0% 2.0% 5.0% 0.00 0.02 0.05 2020-21 4.5 4.0 85.0% 3.4 1.1 40% 0.5 0.0% 2.5% 5.0% 0.00 0.03 0.06 2021-22 4.6 4.0 90.0% 3.6 1.0 40% 0.4 2.0% 5.0% 10.0% 0.02 0.05 0.10 2022-23 4.7 4.0 90.0% 3.6 1.1 40% 0.5 2.0% 5.0% 10.0% 0.02 0.06 0.11 2023-24 4.8 4.0 90.0% 3.6 1.2 60% 0.7 2.0% 5.0% 10.0% 0.02 0.06 0.12 2024-25 4.9 4.0 90.0% 3.6 1.3 60% 0.8 2.0% 5.0% 10.0% 0.03 0.07 0.13 2025-26 5.0 4.0 90.0% 3.6 1.4 60% 0.9 2.0% 5.0% 15.0% 0.03 0.07 0.21 2026-27 5.1 4.0 90.0% 3.6 1.5 60% 0.9 2.0% 10.0% 15.0% 0.03 0.15 0.23 2027-28 5.2 4.0 90.0% 3.6 1.6 60% 1.0 5.0% 10.0% 15.0% 0.08 0.16 0.24 2028-29 5.3 4.0 90.0% 3.6 1.7 60% 1.0 5.0% 10.0% 15.0% 0.09 0.17 0.26 2029-30 5.4 4.0 90.0% 3.6 1.8 60% 1.1 5.0% 10.0% 15.0% 0.09 0.18 0.28 2030-31 5.5 4.0 90.0% 3.6 1.9 60% 1.2 5.0% 12.5% 20.0% 0.10 0.24 0.39 2031-32 5.7 4.0 90.0% 3.6 2.1 70% 1.4 5.0% 12.5% 20.0% 0.10 0.26 0.41 2032-33 5.8 4.0 90.0% 3.6 2.2 80% 1.7 5.0% 12.5% 20.0% 0.11 0.27 0.43 2033-34 5.9 4.0 90.0% 3.6 2.3 90% 2.1 5.0% 12.5% 20.0% 0.11 0.29 0.46 2034-35 6.0 4.0 90.0% 3.6 2.4 90% 2.2 5.0% 12.5% 20.0% 0.12 0.30 0.48 2035-36 6.1 4.0 90.0% 3.6 2.5 90% 2.3 5.0% 12.5% 20.0% 0.13 0.32 0.50 2036-37 6.2 4.0 90.0% 3.6 2.6 90% 2.4 5.0% 12.5% 20.0% 0.13 0.33 0.53 2037-38 6.4 4.0 90.0% 3.6 2.8 90% 2.5 5.0% 12.5% 20.0% 0.14 0.35 0.55 2038-39 6.5 4.0 90.0% 3.6 2.9 90% 2.6 5.0% 12.5% 20.0% 0.14 0.36 0.58 2039-40 6.6 4.0 90.0% 3.6 3.0 90% 2.7 5.0% 12.5% 20.0% 0.15 0.38 0.60 2040-41 6.8 4.0 90.0% 3.6 3.2 90% 2.8 5.0% 15.0% 20.0% 0.16 0.47 0.63 2041-42 6.9 4.0 90.0% 3.6 3.3 90% 3.0 5.0% 15.0% 20.0% 0.16 0.49 0.66 2042-43 7.0 4.0 90.0% 3.6 3.4 90% 3.1 5.0% 15.0% 20.0% 0.17 0.51 0.69 2043-44 7.2 4.0 90.0% 3.6 3.6 90% 3.2 5.0% 15.0% 20.0% 0.18 0.54 0.71 CAGR 2.36% 3.00% 1.83% 1.13% 2.98%

Assumptions for Low case scenario

• The average annual growth rate for fertiliser consumption in the hinterland over the forecast period would remain at 2.3%. It is assumed that the existing plants will have limited additional capacity to increase the production.

• No major Greenfield projects would come up in the region, however, increase in production may still be lagging growth in consumption thus increasing the demand for fertiliser imports in the hinterland.

• Market share of Vizhinjam port would remain at 5%, whilst the remaining traffic will be handled at Kochi, Tuticorin and New Mangalore.

Assumptions for Base case scenario

• No major Greenfield projects would be implemented, however, increase in production may still be lagging growth in consumption thus increasing the demand for fertiliser imports in the hinterland.

• Market share of Vizhinjam port would increase to 15%, whilst the remaining traffic will be handled at Kochi, Tuticorin and New Mangalore.

Assumptions for High case scenario

• No major Greenfield projects would be implemented, however, increase in production may still be lagging growth in consumption thus increasing the demand for fertiliser imports in the hinterland.

• Market share of Vizhinjam port would increase to 20%, whilst the remaining traffic will be handled at Kochi, Tuticorin and New Mangalore.

13. Chemicals and Petro products

This chapter looks at the over all scenario of seaborne trade in chemicals and petro products in India. It also takes a closer look at the demand for chemicals and petro products in southern states of India, especially in Kerala. Then the chapter tries to project chemical and petro products’ traffic at the proposed Vizhinjam port under three scenarios – low base and high.

Key findings

• Chemical absorption as well as supply points in Kerala has been found to be limited. Kochi Port is meeting the demand of Kerala at present.

• Chemical traffic at Vizhinjam Port is expected to be 6,000 tonnes in the base case in 2013-14. During final years of the forecast, it is expected to be around 72,000 tonnes – reflecting a CAGR of 8.7% for 2013-14 to 2043-44.

• Kochi Port is serving the Kerala for petro products. However, LPG is imported largely at Mangalore Port and is moved to different consumption points in Kerala by rail and/or by road.

• On account of well developed storage and handling infrastructure at competing ports and lack of industrial consumption centres in the narrow hinterland of the Vizhinjam Port, POL traffic forecast for Vizhinjam Port has been more on the conservative side.

• Under the base case scenario, POL traffic, excluding LPG, at Vizhinjam Port is expected to be around 64,000 tonnes in 2013-14, which is expected to touch 1,051,000 tonnes in 2043-44.

• It is expected that LPG storage and handling facilities would be operational at Kochi Port by 2012; LPG inflow at Vizhinjam Port has not been taken into account. Industry sources revealed that they would prefer rail/road movement from Kochi Port to different consumption points down south from Kochi Port rather than to spend on building LPG storage and handling infrastructure at Vizhinjam Port.

• A few of the world’s leading tank farm owners have expressed interest in building tank farms at Vizhinjam Port once basic infrastructure comes up at the Port.

13.1 Chemicals

13.1.1 Historical analysis

• India’s Chemical Industry is concentrated largely in the western part of the country, mainly in the states of Maharashtra and Gujarat, while on eastern part it is concentrated in West Bengal and Tamil Nadu.

• The Indian chemical sector accounts for about 17.6% in the output of manufacturing sector, around 14.0% in total exports and 8.0-9.0% in total imports of the country. However, India constitutes a relatively small portion of the global market with 1.9% of global sales and 1.5% of international trade.

• Though India is the 12th largest chemical producer, low per capita consumption and infrastructural bottlenecks have prevented the full realization of the existing potential. The Chemicals industry in India is fragmented with few large companies dominating the market play, which is plagued by regional imbalances.

• The Indian chemical and petrochemicals industry produces a wide range of products. Due to their price competitiveness and large domestic market, this sector has tremendous potential for growth in the coming years and given facilitative environment, it could emerge as a major foreign exchange earner.

• The snapshot of the Indian chemical and petrochemicals industry is illustrated in the Table 13.1.

• It can be observed, that the production of petrochemicals is growing at a CAGR of 7.6%, as compared to chemical production which has been growing at a CAGR of 5.8% from 1999-00 to 2005-06.

• On the contrary, chemical consumption is growing at a CAGR of 7.1% as compared to the petrochemical consumption, which is growing at a CAGR of 6.1%.

• Petrochemical exports have shown an impressive growth rate of 27.0% over the period 1999-06. However, more than 90% of these exports occur on the west coast of India, with Reliance alone accounting for the major chunk.

• Expressed in Rupee terms, while India’s exports reflected a CAGR of 20.8% p.a. during 2002-2009, chemical exports surged by 20.1% p.a. During the same time period, petrochemical exports witnessed a CAGR of 14.7% p.a.

• Share of chemicals in total exports expressed in Rupee terms was 9.2% in 2008-09, while it was 1.7% for petrochemicals.

Table 13.1 Performance of Indian Chemicals and Petrochemicals Industry (‘000 tonnes)

Chemicals Petro Chemicals Production Imports Exports Consumption Production Imports Exports Consumption

1999-00 5,455 464 233 5,686 4,817 772 239 5,350 2000-01 5,709 370 327 5,752 5,663 423 544 5,542 2001-02 5,963 743 277 6,429 6,235 689 702 6,222 2002-03 6,612 725 435 6,902 6,553 714 972 6,295 2003-04 7,066 930 478 7,518 7,006 818 1,037 6,787 2004-05 7,375 914 1,201 7,088 7,349 828 1,270 6,907 2005-06 7,641 1,530 581 8,590 7,467 1,167 1,005 7,629

CAGR 5.8% 22.0% 16.4% 7.1% 7.6% 7.1% 27.0% 6.1%

Source: Ministry of Chemicals and Fertilisers

• Kerala accounted for 2.8% of Chemical production in India in 2005-06, while only 0.6% of petrochemical production. Tamil Nadu, on the other hand, accounted for 6.0% of the total chemical production and approximately 2.5% in petrochemical production in the same fiscal year.

Table 13.2 State wise share of Chemicals Industry (2006-07)

States Share Gujarat 51.4% Maharashtra 7.5% Uttar Pradesh 7.5% Tamil Nadu 6.0% Punjab 4.3% Rajasthan 4.2 % Madhya Pradesh 3.8% Andhra Pradesh 3.6% Kerala 2.8% Other states and Union Territory 8.8%

Source: Ministry of Chemicals and Fertilisers

Table 13.3 State wise share of Petrochemical Industry (2006-07)

States Share Gujarat 61.9% Maharashtra 14.8% West Bengal 10.7% Uttar Pradesh 4.2% Tamil Nadu 2.5% Haryana 1.7% Andhra Pradesh 0.8% Dadar & Nagar Haveli 0.7% Punjab 0.6% Kerala 0.6% Other states and Union Territory 5.1%

Source: Ministry of Chemicals and Fertilisers

13.1.2 Hinterland mapping

• Chemical and petrochemical industries in Tamil Nadu are located primarily in Chennai, Cuddalore and Tuticorin. Major upcoming projects are also either located at these locations or are clustered around these major manufacturing hubs.

• Major chemical and petrochemical manufacturing units are located in and around Kochi and Ernakulam in Kerala. Planned capacity additions are also being envisaged primarily in and around port city of Kochi.

Figure 13.1 Primary and secondary hinterland mapping

Kochi

Tuticorin

Vizhinjam Primary hinterland

Secondary hinterland

13.1.3 Key Findings

• In India, the major sea ports used for importing chemicals are Visakhapatnam, Kakinada, Chennai, Cochin, Kandla, Mumbai and Nhava Sheva.

• It is noted that the majority of chemical imports for industries in the hinterland are coming at Kochi, Chennai and Tuticorin.

• The quantum of traffic at competing ports (Kochi, Chennai and Tuticorin) and inputs from industry sources suggest that only chemical imports are significant, while exports are insignificant relatively.

• Chemical imports at Chennai are largely meant for consumption at local industries near Chennai (like Manali Petrochemical Ltd.), with a small share being transported to Drug and Pharmaceutical companies near Hyderabad. But imports are mainly in containerised form.

• Manali, in the outskirts of Chennai, has emerged as a major petrochemical complex in Tamil Nadu. Chennai Refinery Limited has given rise to many petro-based units using refinery feedstock for the manufacture of a large number of petrochemicals like polyols, nylon chips, and polybutanes as well as fertilizers in and around Chennai. Major chemicals and fertilizer plants have also been established at Cuddalore and Tuticorin. Upcoming projects like, Nagarjuna Refineries at Cuddalore, Ennore LNG terminal and Petchem Park being developed by TIDCO, etc., are also close to Chennai, Ennore or Tuticorin port(s). It is unlikely that the existing or planned projects in this region shift their port base to any other port than they are currently using.

• Imports into as well as exports of chemicals from Kerala has been very limited historically. Most of the refineries and petrochemical units (such as HOCL, Kochi Refinery, Fertilizer and Chemicals Travancore Limited, etc.) are located in and around Kochi and/or Ernakulam, which are being served by Kochi port at present. In fact, major upcoming projects in this sector can easily be served by Kochi port because of their close proximity. Even quantity demanded by Kerala Metals and Minerals Limited located near Kollam are not sizeable (like 24,537 tonnes per annum of Hydrochloric Acid, 8,043 tonnes of liquid chlorine in containers, etc.), and are being met through containerised cargoes largely.

• Manufacturing sector in Kerala is being dominated by rubber, coir and agro- processing industries. Key thrust areas for future development for Kerala government is on services sector in general and IT/ITES and tourism sectors in particular. At the same time, tourism is a major revenue earning source for the Kerala government, and so there seems to be clear policy hindrance in developing chemical and petrochemical industries in the State. Land availability and environmental issues also seem to be a big hindrance in the development of large scale industries.

13.1.4 Traffic at competing ports

• It can be observed from Table 13.4 that over the period of six years chemical imports from Kochi port has shown a CAGR of 20.8% (though with yearly fluctuations), while exports reflect a CAGR of 16.1%. Chemical cargo unloaded at Kochi Port constituted a mere 0.9% of the total cargo imported (including coastal cargoes) at the Port; while cargo loaded was 1.4% of the toal outflow.

• Chemical traffic at Chennai Port, on the other hand, has shown CAGR of 6.3% in chemical imports during 2001-08, while exports declined over the years to nil in 2007- 08. In spite of healthy CAGR, chemical imports accounted for only 0.6% of the total import at the port (including coastal traffic) in 2007-08; while exports from the Port came down to zero. Coastal traffic inflow at Chennai port was 0.4% of the total coastal traffic in 2007-08, but loading was nil during the same year.

• Chemical imports at Tuticorin has been declining since 2001-02 and was nil during the last two reported years in Table 13.4. Exports picked up slowly to peak in 2008 with zero imports in between during 2005-07.

• In 2007-08, Chennai had the highest import volume followed by Kochi, while Tuticorin led in exports among competing ports, including coastal movements.

• Chemical exports and imports at competing ports, including coastal movements, have been less than 1.0% of the total cargo imported on these ports during 2001-08; except for exports touching 1.2% of the total cargo exported from these ports in 2007-08.

Table 13.4 Chemical traffic at competing ports* (‘000 tonnes)

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Import Export Import Export Import Export Import Export Import Export Import Export Import Export

Kochi 37 20 54 22 18 33 23 64 26 46 0 181 115 49 Chennai 139 56 169 54 151 0 205 22 275 42 261 25 200 0 Tuticorin 156 57 102 37 101 82 78 70 5 73 0 0 0 367

*Including coastal movements.

Source: Transport Research Wing, Department of Shipping; Ministry of Shipping, Road Transport and Highways.

Table 13.5 Competing port’s chemical traffic as compared to India’s traffic (‘000 tonnes)

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Total Import 2,342 1,193 2,713 3,047 3,121 3,657 5,958 Total Export 309 370 320 444 457 934 1,215 Total India traffic 2,651 1,563 3,033 3,491 3,578 4,591 7,173

Total Imports at competing ports 332 325 270 306 306 261 315 Total Exports at competing ports 133 113 115 156 161 206 416 Total Traffic at competing ports 465 438 385 462 467 467 731

Share of competing ports

Import Share 14% 27% 10% 10% 10% 7% 5% Export Share 43% 31% 36% 35% 35% 22% 34%

Total Share 18% 28% 13% 13% 13% 10% 10%

Source: Basic Port Statistics of India, IPA and Port Websites

13.1.5 Competitive port infrastructure

Port side storage and dispensing facilities are of utmost importance for handling both chemical and petrochemical traffic. Kochi, Chennai and Tuticorin ports have extensive tank storage facilities, with various private operators maintaining the facility. Indian Molasses Company (IMC) is a leading operator of tank storage facilities at these ports. Kochi Port has a separate pipeline laid for handling chemicals at tanker berths.

Kochi Port Trust has floated a tender for allotment of water front land of 9.6 hectare (~23.6 acres) situated in Puthuvypeen SEZ area for construction of tank farms as well as for petroleum and petro-products, including gases, storage facilities on 30 years lease basis.

Chennai Port can cater to tankers with draft up to 16.0 meters with two dedicated all- weather berths.

Apart from the existing facilities, the Tuticorin Port Trust has planned to create additional infrastructural facilities for the port-based industries and services such as thermal power station, oil refinery, container terminal and cold storage plant. It has planned to allot around 150 acres of land at Hare Island located within the port for companies to set up large facilities.

Table 13.6 Comparison of infrastructure details at competing ports

Maximum Approx. Number of Permissible Road Rail Storage Ports Berths Type Draft Connectivity Connectivity Capacity Available (m) (Tons.)

Kochi 3 All-weather natural 10.0 Connected to NH-49, Connected to South and Port NH-47A and NH-17. Central Railways

Chennai 2 Deep Draft Port-All 16.0 Connected to NH-4 Broad gauge connection 141,600 Weather and NH-5

Ennore 1 (temporary Deep Draft Port 15.0 Connected to NH-4, Connected to Chennai- - facility) NH-5 and NH-45 Kolkata broad gauge line

Tuticorin 1 Artificial deep-sea 10.9 Connected to NH- Well connected by - harbour 45B and NH-7A broad gauge rail

Source: Port Statistics

All of the competing ports are well connected by rail. All of the competing ports are well connected by road to national highways.

Table 13.7 Road distance matrix (KMS)

Tuticorin Vizhinjam Kochi Chennai (Thoothukudi)

Tiruvananthapuram 16 218 204 798 Kollam 80 570 737 135 Pathanamthitta 139 522 129 658 Kottayam 62 260 666 172 Thrissur 86 503 632 293 Kozhikode 206 595 684 414 Madurai 137 356 290 282 Dindigul 200 324 258 281 Sivaganga 176 306 240 330 Virudhunagar 104 435 369 316 Tirunelveli 65 541 474 280 Kanyakumari 134 541 548 295 Ramanathapuram 129 359 209 384

Source: Drewry Research

• The distance matrix above explains that Vizhinjam Port has limited distance advantage over Kochi, Tuticorin and Chennai Ports for supply points in Kerala and Tamil Nadu. Any chemical cargo required by Tiruvananthapuram, Kollam, Tirunelveli and Kanyakumari will be served better by Vizhinjam Port – which however are having very few players requiring chemicals to be imported and distributed from Vizhinjam Port.

For the purpose of study, it will be suffice if the transportation cost (for the most economical mode of transportation available) is compared at some selected consumption centres from normal sources of supply vis-à-vis Vizhinjam port. To avoid cumbersome calculations, it can safely be assumed that the basic c.i.f. price, taxes and insurance are the same for all of the port locations considered here.

• A comparison has been made in transportation costs (not the absolute price) for chemical supplies by road ex Vizhinjam port compared with road supplies ex Kochi, Chennai and Tuticorin ports. Road loading/unloading charges have not been considered for this comparison as they are likely to be the same at various junctions. Road freight is considered to be an average Rs.2.50/mt/km in Southern India.

• Inter-state sales tax issues have not been considered since they are likely to be rationalised and may not have an impact on the subsequent analysis.

Table 13.8 Comparison of road transportation costs (Rs. /mt)

Distance Cost Delivery Point Available Ports Mode (Km) (Rs/mt/km)

Tiruvananthapuram Vizhinjam 16 Road 39 Tiruvananthapuram Kochi 204 Road 509 Tiruvananthapuram Tuticorin 218 Road 544 Tiruvananthapuram Chennai 798 Road 1,996

Kollam Vizhinjam 80 Road 200 Kollam Kochi 135 Road 337 Kollam Tuticorin 210 Road 525 Kollam Chennai 738 Road 1,844

Pathanamthitta Vizhinjam 139 Road 347 Pathanamthitta Kochi 129 Road 323 Pathanamthitta Tuticorin 204 Road 510 Pathanamthitta Chennai 658 Road 1,645

Allapuzha Vizhinjam 164 Road 410 Allapuzha Kochi 51 Road 128 Allapuzha Tuticorin 294 Road 735 Allapuzha Chennai 726 Road 1,815

Kottayam Vizhinjam 172 Road 430 Kottayam Kochi 62 Road 156 Kottayam Tuticorin 260 Road 651 Kottayam Chennai 666 Road 1,664

Tirunelveli Vizhinjam 146 Road 365 Tirunelveli Kochi 280 Road 701 Tirunelveli Tuticorin 65 Road 163 Tirunelveli Chennai 642 Road 1,604

Kanyakumari Vizhinjam 81 Road 202 Kanyakumari Kochi 295 Road 738 Kanyakumari Tuticorin 134 Road 335 Kanyakumari Chennai 715 Road 1,788

Source: Drewry Research

• The transportation cost as mentioned in Table 13.8 shows that cost (Rs/mt/km) for moving chemicals to various consumption centres in southern tip of India up to Kanyakumari and Tirunveli in Tamil Nadu as well as northern districts in Kerala up to Kottayam will be the cheapest from Vizhinjam Port as compared to Tuticorin and Chennai Ports. However, due to cost advantages, Alappuzha will be better served by Kochi port.

13.1.6 Forecast traffic for Vizhinjam Port

General Assumptions:

• It is assumed that chemical traffic at competing ports (Cochin, Chennai and Tuticorin) will grow at the present CAGR of 8.0% till 2015 in the base case.

• Thereafter, chemical traffic at competing ports is likely to increase at a lower CAGR (5.0% till 2024-25), given no new planned capacity additions for that period. It has been assumed that Vallarpadam SEZ near Kochi and Manali chemical and petrochemical complex near Chennai would have attained their full potential till then.

• The growth in traffic at competing ports is likely to slow down further over the rest of the forecast period with increases in the baseline, and so CAGR for rest of the period has been toned down to 3.0%.

• In the base case scenario, Vizhinjam has not been considered to be a source and/or destinations for major chemical cargoes because the narrow hinterland has been found to be devoid of any major supply or absorption points at present. Moreover, there is no planned major industrial build-up in the near future. Therefore, share of chemical traffic moving away from competing ports to Vizhinjam has been raised gradually from 0.5% during initial years of forecast to 2.0% during final years.

• In the high case scenario, it has been assumed that chemical traffic at competing ports could grow at a rate of 10.0% till 2014-15. The rate of growth is expected to slow down to 7.0% per annum thereafter till 2024-25. For the period 2025-44, CAGR is assumed to be 5.0%.

• In the high case scenario, it is expected that, at best, 4.0% of the chemical traffic at competing ports could move to Vizhinjam Port – that too during final years of forecast.

• In the most pessimistic case, it is expected that traffic at competing ports would grow at a CAGR of 6.0% till 2014-15, which is expected to slow down to 3.0% for the forecast period 2015-16 to 2024-25. Thereafter, it has been assumed to grow at a CAGR of 1.0% for the rest of the forecast period considered. In the low case scenario, it is expected that not more than 1.0% of the total chemical traffic at competing ports would move to Vizhinjam Port during final years of forecast.

Table 13.9 Forecast chemical and petrochemical traffic for Vizhinjam Port

Table 13.9 (cont’d)

Forecast Forecast Forecast Forecast Forecast Chemical Traffic Chemical Chemical Traffic in Chemical Traffic Chemical Traffic at Competing Traffic at Year India at Vizhinjam - at Vizhinjam - Ports Vizhinjam - (in '000 tonnes) - Base Case Low Case (in '000 tonnes) - High Case Base Case ('000 tonnes) ('000 tonnes) Base Case ('000 tonnes) 2022-23 18,163 1,851 15 20 11 2023-24 19,071 1,944 16 21 11 2024-25 20,024 2,041 16 22 12 2025-26 20,625 2,102 17 24 12 2026-27 21,244 2,165 17 25 12 2027-28 21,881 2,230 18 26 12 2028-29 22,538 2,297 18 27 12 2029-30 23,214 2,366 19 29 12 2030-31 23,910 2,437 24 38 16 2031-32 24,628 2,510 25 39 16 2032-33 25,366 2,585 26 41 16 2033-34 26,127 2,663 27 43 16 2034-35 26,911 2,743 27 46 16 2035-36 27,718 2,825 42 72 25 2036-37 28,550 2,910 44 75 25 2037-38 29,407 2,997 45 79 25 2038-39 30,289 3,087 46 83 25 2039-40 31,197 3,179 48 87 26 2040-41 32,133 3,275 65 122 35 2041-42 33,097 3,373 67 128 35 2042-43 34,090 3,474 69 135 35 2043-44 35,113 3,578 72 142 36

Source: Drewry Research

13.2 Petroleum products

13.2.1 Historical analysis

Historically, India has been a major importer of energy sources (primarily hydrocarbons). This is to fulfil the huge gap between the domestic consumption of petroleum products and domestic production of crude oil.

• While India was a major importer of petroleum products till the year 2000, it became a net exporter of petroleum products in 2001 as domestic product supplies outpaced domestic demand. During the period 2000-08, consumption of petro products in India increased at an average growth rate of 3.9% per annum. In contrast, crude oil consumption increased at a CAGR of about 5.7% over the same period, suggesting that new domestic refining capacity additions have resulted in higher throughputs, in turn boosting product exports from the country.

• Various refinery start-ups and capacity expansions of the existing refineries (like the commissioning of Reliance’s 33.0 mtpa refinery at Jamnagar in Gujarat in 2001, enhancing Kochi Refinery capacity by 2.0 mtpa, etc) have not only helped to bring down the product import levels drastically since then, exports have picked up by a CAGR of 20.3% during 2000-08.

Table 13.10 Growth of Indian petroleum industry at a glance (Million tonnes)

Item 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR

Reserves (recoverable)

Crude Oil 703.0 732.0 741.0 733.0 739.0 786.0 756.0 725.0 769.0 1.1%

Consumption

i) Crude Oil1 103.1 106.5 110.6 118.7 127.4 130.1 146.6 156.1 160.8 5.7% ii) Petroleum 100.1 100.4 104.1 107.8 111.6 113.2 120.8 129.0 133.4 3.7% Products2

Production

i) Crude Oil 32.4 32.0 33.0 33.4 34.0 32.2 34.0 34.1 33.5 0.4% ii) Petroleum 99.6 104.3 108.7 117.6 118.6 119.8 135.3 144.9 150.5 5.3% Products

Imports & exports

i) Gross Imports Crude Oil 74.1 78.7 82.0 90.4 95.9 99.4 111.5 121.7 128.2 7.1% Petroleum 9.3 7.0 7.2 8.0 8.8 13.4 17.7 22.5 18.3 8.9% Products

ii) Exports Petroleum 8.4 10.1 10.3 14.6 18.2 23.5 33.6 40.8 36.9 20.3% Products

iii) Net Imports Crude Oil 74.1 78.7 82.0 90.4 95.9 99.4 111.5 121.7 128.2 7.1% Petroleum 0.9 -3.1 -3.6 -6.7 -9.4 -10.0 -16.0 -18.3 -18.7 Products

* Provisional, 1 In terms of refinery throughput, 2 excluding RBF, Reserves as on 1st April of initial year

Source: Basic Statistics, Ministry of Petroleum

• India’s crude imports increased at an annual average rate of 7.1% during the period 2000-08 to 128.2 million tonnes.

• During 2000-08, India’s recoverable oil reserves increased by about 66.0 million tonnes (up 9.4% over 2000-01) and crude oil production was up 3.4% during the same period, to 33.5 million tonnes.

• Over the period 2000-08, consumption of petro products in India increased at an average growth rate of 3.7% per annum.

• India’s product exports have increased at an average rate of 20.3% over the past eight years. With a total planned refining capacity of about 44.7 mtpa scheduled to be added by 2013, petroleum product exports from the country are anticipated to rise steadily over the next few years, with a similar trend projected in the case for crude imports.

13.2.2 Petro products traffic at competing ports

Table 13.11 depicts the changing trend in the import and export of petro products at various competing ports in Kerala, Tamil Nadu and Karnataka.

Table 13.11 Trends in petro products traffic at competing ports* (‘000 tonnes)

Ports (Petroleum Import/ 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR Products) Export

Kochi Import 1,192 1,018 872 776 421 882 905 700 1,255 0.6% Export 1,026 748 918 1,259 1,843 1,775 1,968 1,834 1,010 -0.2%

Subtotal 2,218 1,766 1,790 2,035 2,264 2,657 2,873 2,534 2,265 0.3%

Tuticorin Import 399 373 423 499 626 645 612 252 362 -1.2%

Export 0 0 0 0 13 9 15 87 0 88.4%

Subtotal 399 373 423 499 639 654 627 339 362 -1.2%

New Mangalore Import 209 578 774 523 376 589 493 377 334 6.0%

Export 3,370 2,758 4,411 6,238 7,842 8,403 7,831 7,168 6,970 9.5%

Subtotal 3,579 3,336 5,185 6,761 8,218 8,992 8,324 7,545 7,304 9.3%

Chennai Import 1,466 1,284 1,457 1,343 976 855 1,047 1,257 1,589 1.0%

Export 771 931 953 1,310 2,164 2,421 2,021 1,623 1,848 11.5%

Subtotal 2,237 2,215 2,410 2,653 3,140 3,276 3,068 2,880 3,437 5.5%

Ennore Import 0 0 0 0 104 244 188 319 241 23.4%

Export 0 0 0 0 0 0 0 0 0

Subtotal 0 0 0 0 104 244 188 319 241 23.4%

Total petro Import 3,266 3,253 3,526 3,141 2,503 3,215 3,245 2,905 3,781 1.8% products on Export 5,167 4,437 6,282 8,807 11,862 12,608 11,835 10,712 9,828 8.4% competitor ports

Total petro products traffic 8,433 7,690 9,808 11,948 14,365 15,823 15,080 13,617 13,609 6.2% (Imports+Exports)

* Excluding LPG

Source: Major Ports of India, IPA

Table 13.12 Trends in LPG traffic at competing ports (‘000 tonnes)

LPG Import/Export 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR Kochi Import 0 0000005 7 Export 0 0000005 7

Subtotal 0 00000010 14

Tuticorin Import 62 56 68 59 104 120 111 121 141 10.8% Export 0 0000000 0

Subtotal 62 56 68 59 104 120 111 121 141 10.8%

Ennore Import 0 0000000 0 Export 0 0000000 0

Subtotal 0 0 0 0 0 0 0 0 0

Chennai Import 0 0000000 0 Export 0 0000000 0

Subtotal 0 0 0 0 0 0 0 0 0

New Import 960 1,004 945 1,026 1,231 1,200 1,241 1,443 1,567 6.3% Mangalore Export 0 0000000 0

Subtotal 960 1,004 945 1,026 1,231 1,200 1,241 1,443 1,567 6.3%

Total LPG at Import 1,022 1,060 1,013 1,085 1,335 1,320 1,352 1,569 1,715 6.7% competing ports Export 0 0000005 7

Total LPG (Imports+Exports) 1,022 1,060 1,013 1,085 1,335 1,320 1,352 1,574 1,722 6.7%

• Total petro product traffic (excluding LPG) at competing ports increased at an average annual growth rate of 6.2% during the period 2000-08, vis-à-vis the growth in product exports which increased at a CAGR of 20.3% during 2000-08.

• New Mangalore Port exported 65.2% of the total exports (excluding LPG) originating from competing ports in 2000-01, which has increased to 70.9% by 2008-09. According to industry sources, New Mangalore Port has been catering to various markets down south, especially for LPG.

• While product exports from Kochi Port increased at a CAGR of 11.5% during 2000-06, volume declined thereafter sizeably. Imports, on the other hand, declined gradually till 2004-05, but gathered momentum thereafter showing a CAGR for 2000-08 at 0.2%.

• Tuticorin Port has been engaged largely in importing petro products since 2000-01, importing around 9.6% of the total imports exhibited by the competing ports.

• Chennai Port has been witnessing a mixed trend in the trade pattern of petro products (excluding LPG) – while imports registered a CAGR of 1.0% during 2000-01 and 2008- 09; CAGR witnessed in exports was 11.5%.

• Ennore port started handling petroleum products in 2004-05, importing a total cargo of 241,000 tonnes in 2008-09 as against 104,000 tonnes imported during the first year.

• LPG traffic at competing ports as well as inputs from industry sources reveal that only New Mangalore and Tuticorin ports have been serving the major parts of Kerala, Karnataka and Tamil Nadu. While imports of LPG at these ports are significant, exports are nil during the time period considered. LPG imports at New Mangalore Port showed a CAGR of 6.3% during 2000-01 and 2008-09, while Tuticorin registered a CAGR of 10.8% during the same time period. New Mangalore Port has been handling more than 90.0% of the total LPG imports at all competing ports taken together, while export from the Port has been nil during the period under consideration.

• Kochi Port has been importing and exporting petro products (excluding LPG) in almost equal proportions. Only recently Kochi has been seen involved in LPG handling – that too in negligible amounts.

• Kochi Refineries Ltd (KRL) has set up a Single Point Mooring System (SPM) as captive reception for the import of Crude oil. The facility is capable of receiving very large crude carriers (VLCCs) of 300,000 dwt or more as it is having a draft of 30 meters. The SPM is connected by a pipeline of 19.5 km to tank storage facilities at Puthuvypeen. The SPM permits crude carriers to remain moored during virtually all wind and wave conditions. The SPM is connected to the shore by a 48 inch pipeline that runs to a 300,000 tonne storage facility. The total area of the facility is 70 hectares, which provides room for expansions up to the double of existing storage capacity.

• IOC is developing LPG storage facility at Panampilly village near Vallarpadam in Kochi at a cost of Rs.170 crores. It will have a throughput of 600,000 tonnes per annum (two tanks each of 15,400 tonnes to start with) and will be operational by 2012. Spread over 37 acres, new tanks could be developed in future as and when required. This could possibly enhance LPG imports at the Port sometime after 2012.

• Chennai Petroleum Corporation Ltd (CPCL) has decided to put up a SPM for receiving crude oil at Ennore, paving way for VLCCs to cater to their needs.

13.2.3 Hinterland mapping

13.2.3.1 Refineries along western coast of southern India

There are a total of two refineries installed along the western coast of southern India that runs through the shores of Karnataka and Kerala. Mangalore Refinery and Petrochemicals Ltd. (MRPL) with current capacity of 9.7 mtpa was commissioned in 1988 in Mangalore. Kochi Refinery Limited (KRL), a unit of Bharat Petroleum Corporation Limited (BPCL), was set up in 1966 at Kochi and is having a capacity of 7.5 mtpa, with further 2.0 mtpa planned to be added soon.

There is no refinery in the hinterland of Vizhinjam Port at present, nor is there any planned in the near future.

As of now, all the refineries in the region import crude through nearest dedicated ports and have no incentives to bring in any cargoes from Vizhinjam port as it would be uneconomical prima facie.

13.2.3.2 Product pipelines in southern India

Unlike crude oil, petroleum products can be transported using various means depending on the volume and the distance over which it has to be transported. Bulk transportation of petroleum products is either through pipelines or through rail wagons, while retail transport i.e., from the depot to the selling point, is generally via road tankers. In India at present, about 30.0% of the total transportation of petroleum products is through pipelines, about 40.0% move through rail, around 12.0% through coastal tankers and rest are moved by road.

Table 13.13 List of existing product pipelines in Southern India

Capacity Length Company Name (Mtpa) (Km)

HPCL Visakhapatnam-Vijayawada-Secunderabad 5.38 572 IOCL Chennai-Trichy-Madurai 0.48 683 Petronet Kochi-Coimbatore-Karur 3.30 292 Petronet Mangalore-Hasan-Bangalore 2.30 361

Source: Basic Statistics, Ministry of Petroleum

Table 13.14 List of proposed product/gas pipelines in Southern India

Capacity Length Planned Company Name (Mtpa) (Km) Commission Date

IOCL Chennai-Chittor-Bangalore n/a 290 2008 GTICL* Kakinada-Vijayawada 0.14 126 n/a GTICL Chennai-Vellore-Bangalore- 1.18 540 n/a Cuddapah GTICL Goa-Hyderabad 1.98 660 n/a Essar Oil Goa-Hubli-Guntakkal n/a 389 n/a Essar Oil Goa-Gulbarga n/a 473 n/a n/a Chittor-Cuddapah-Kurnool n/a n/a n/a

* GTICL: Gas Transport & Infrastructure Co. Ltd. (a wholly owned subsidiary of Reliance Industries Limited) Source: Drewry Research

No product pipeline projects are proposed in the hinterland as of now.

Figure 13.2 Product pipelines in Southern India

Source: Drewry Research

13.2.4 Competitive analysis for movement of petro products traffic

For the purpose of study, the economic supply zones for petro products from Vizhinjam Port are considered to be the districts of ldukki, Kottayam, Allapuzha, Pathanamthitta, Kollam and Tiruvananthapuram in Kerala; as also districts of Kanyakumari and Tirunveli in Tamil Nadu. Demand in these regions is currently being met through supplies from Kochi, New Mangalore and Tuticorin ports.

The secondary hinterland could be extended to Virudhunagar, Madurai, Rammanathpuram, Sivaganga and Dindigul districts of Tamil Nadu and Palakkad as well as Malappuram districts of Kerala. Though absence of industrial demand could possibly deny any large scale pull from these districts, domestic as well as automobile demand would still be there to cater.

Figure 13.3 Major economic supply zones for Vizhinjam Port

Kochi

Tuticorin

Vizhinjam

Source: Drewry Research

For the purpose of study, it would suffice if the transportation cost (for the most economical mode of transportation available) is compared for rail and road movement of cargoes unloaded at Vizhinjam Port. To avoid cumbersome calculations, it can safely be assumed that the basic c.i.f. prices, taxes and insurance are same for all of the port locations considered here.

A comparison has been made in transportation costs (not the absolute price) for product supplies by road/rail ex Vizhinjam Port compared with rail supplies ex Kochi, and Tuticorin ports. Transportation costs for such purpose of study have been calculated based upon the below mentioned assumptions on road/rail/pipeline freights:

• Rail loading charges at Kochi, Tuticorin and Vizhinjam ports have been considered to be Rs.125/mt.

• Freight charges for moving a tonne of petro products up to a distance of 100km has been considered to be Rs.2.0/mt/km, for distances up to 200km to be Rs.1.6/mt/km, and for distances up to 300km it has been considered to be Rs.1.5/mt/km.

• Cost of pipeline transportation has been ignored in view of absence of pipelines in the hinterland.

• Rail/tanker unloading charges have not been considered.

• Road freight ex Vizhinjam Port has been taken to be Rs.2.50/mt/km.

• Tanker loading charges at Vizhinjam Port has also been considered as Rs.125/mt.

• Inter-state sales tax issues have not been considered since they are likely to be rationalised.

• It has been assumed that loading point for rail transportation is adjacent to the Vizhinjam Port.

Table 13.15 Comparison of transportation costs at supply points from normal sources vis- à-vis Vizhinjam Port

Transportation Loading Transportation Transportation Nearest Transportation Distribution Mode of Distances Cost in Charges Cost in Costs (in Port/ Costs (in Centres Transportation (in Km.) Rs./mt/km by in Rs./mt Rs./mt/km by Rs./mt) by Terminal Rs./mt) by Rail Rail by Rail Road Road

Tiruvananthapuram Kochi Road/Rail 204 1.5 125 427 2.5 509 Tiruvananthapuram Tuticorin Road/Rail 218 1.5 125 448 2.5 544 Tiruvananthapuram Vizhinjam Road/Rail 16 2.0 125 156 2.5 39

Kollam Kochi Road/Rail 135 1.6 125 334 2.5 337 Kollam Tuticorin Road/Rail 210 1.5 125 436 2.5 525 Kollam Vizhinjam Road/Rail 80 2.0 125 283 2.5 200

Pathanamthitta Kochi Road/Rail 129 1.6 125 326 2.5 323 Pathanamthitta Tuticorin Road/Rail 204 1.5 125 427 2.5 510 Pathanamthitta Vizhinjam Road/Rail 139 1.6 125 340 2.5 347

Allapuzha Kochi Road/Rail 51 2.0 125 226 2.5 128 Allapuzha Tuticorin Road/Rail 294 1.5 125 561 2.5 735 Allapuzha Vizhinjam Road/Rail 164 1.6 125 380 2.5 410

Kottayam Kochi Road/Rail 62 2.0 125 248 2.5 156 Kottayam Tuticorin Road/Rail 260 1.5 125 511 2.5 651 Kottayam Vizhinjam Road/Rail 172 1.6 125 392 2.5 430

Tirunelveli Kochi Road/Rail 280 1.5 125 540 2.5 700 Tirunelveli Tuticorin Road/Rail 65 2.0 125 254 2.5 163 Tirunelveli Vizhinjam Road/Rail 146 1.6 125 352 2.5 365

Source: Drewry Research

Advantages

• Road as well as rail supplies ex Vizhinjam port are expected to be competitive for Tiruvananthapuram and Kollam due to its close proximity to the port.

• Pathanamthitta could attract petro products from Vizhinjam, provided the port and vessels related charges have cost advantages over Kochi Port.

• Tirunelveli and Kanyakumari seem to be other two districts in the primary hinterland which could have advantages in absorbing supplies from Vizhinjam Port by replacing Tuticorin.

• Close proximity to international shipping route could help in the development of transhipment hub for crude and product cargoes at Vizhinjam Port. In fact, some big international players have expressed interest in developing transshipment facilities in the area. At the same time, one national player has showed interest in developing bunkering facilities (or, multi utility liquid tanks, to be precise) if the port gets developed.

Disadvantages

• The biggest disadvantage of Vizhinjam Port seems to be its proximity to a well developed Kochi Port. Having single point mooring facility where VLCCs can discharge, crude cargo can be discharged directly into pipeline which runs to the refinery. Handling as well as storage facilities are well developed which is being expanded currently at Kochi Port. Presence of extensive tank farms also poses a great challenge in attracting petro products traffic at Vizhinjam Port. Moreover, narrow hinterland also poses a downside risk for the development of Vizhinjam Port.

• Lack of refinery in the hinterland could restrict imports of crude petroleum into the Port. This being said, exports of petro products would also have to be discounted till the time any refinery comes up in the hinterland.

• Due to close proximity to international shipping route, Vizhinjam Port could have been an ideal location for very large crude carriers as well as very large gas carriers to discharge cargoes. But delays in the development of the Port have jeopardised this possibility. Until tank farms and adequate storage facilities are developed, this seems a remote possibility. Moreover, industry sources indicated the lack of adequate hinterland an additional bottleneck.

• IOC seemed keen on developing LPG storage facilities at Vizhinjam Port earlier, but it has shifted to Kochi due to delays in port development. This could possibly mean that LPG imports could be discounted while calculating for future cargo potential for Vizhinjam Port.

13.2.5 Key findings

• As per Drewry’s discussion with key industry players, the market for petro products including LPG is growing at a rate of around 3.0% to 5.0% in the hinterland at present.

• As per Drewry’s discussions with industry officials, IOCL has ‘Hospitality Agreements’ under which they receive product supplies from KRL for distribution at their retail pumps. Bulk of the product demand in southern region is met by such agreements between oil majors. Moreover, IOCL is currently importing and exporting majority of

its products through Kochi and New Mangalore ports. Responses from BPCL (having a share of 50.0%-55.0% in Kerala) also indicate hospitality agreements between BPCL and other oil majors to cater demand in the southern region.

• IOCL is importing LPG largely at New Mangalore Port for distribution to Tamil Nadu and Kerala in addition to Karnataka. It is developing two tanks of 15,400 MT capacities each (estimated throughput expected to be 600,000 MT per annum) for LPG storage at Kochi which is expected to be operational by 2012. Capacity could be enhanced in future as and when required.

• Lack of catalytic cracker units could also prove to be a bottleneck in the growth of traffic for petro products at the Port. Not much imports could be envisaged as absorption points using petro products as feedstock would be almost nil in the region.

• Also, current location of diesel/naphtha based power plants in Kerala can easily be served by Kochi Port due to their close proximity to the Port.

• One of the world’s leading international service providers of liquid bulk storage facilities has expressed interest in setting up storage terminal at Vizhinjam Port. It is expected that this terminal will be having storage facilities for petro products to start with, and storage capacity as well as commodity basket could be enlarged as the business expands. This seems to be in line with strong growth in demand for storage facilities across the globe, as also it could be aimed at catering to large and rapidly growing emerging economies in Asia-Pacific, including India. Also, one of the leading domestic players in the petroleum sector has shown interest in developing bunkering facilities at the Port, once it gets developed.

13.2.6 Traffic forecast

Three scenarios, namely base case, low case and a high case have been created to estimate future petro products traffic for Vizhinjam port. The underlying assumptions with key sensitivities are mentioned below:

Underlying assumption for traffic projections at Vizhinjam Port

• Only hinterland demand has been considered for traffic forecast purposes.

• CAGR for petro products traffic in India during the period 2000-08 stood at 6.7%. For traffic forecast, however, weighted average of CAGR (equal to 8.7%) of imports and exports was maintained for traffic forecast till 2015 – weights being share of exports and imports in the total traffic in 2008-09.

• Forecast growth rate in total traffic handled at all ports in India has been mellowed down after every five years, and brought down to 2.5% during last five years of forecast.

• Due to lack of refining capacity in the hinterland and no such plans envisaged so far, only imports coming at Kochi and Tuticorin ports have been considered significant for Vizhinjam Port traffic forecast (as Vizhinjam Port is not expected to attract New Mangalore traffic in future).

• Only domestic and automobile consumption of petro products have been found to be significant in the hinterland.

• Cumulative traffic at Kochi and Tuticorin has been found to grow at a CAGR of 0.05% during 2000-08. For traffic forecast, weighted average has been used for forecast till 2015. Thereafter, due to higher refinery throughput in KRL as well as improved infrastructure facilities at Kochi Port could see increased exports as well as imports at the port. Beyond 2012, therefore, rate of growth has been escalated to 7.0% till 2014- 15. For forecast beyond 2014-15, growth rates have been toned down after every five years and brought down to 2.0% during final years of forecast.

• It is expected that due to lack of infrastructure facilities and narrow hinterland, forecast traffic handled at Vizhinjam Port could witness a slow start. For base case traffic forecast, share of import traffic moving away from competing ports to Vizhinjam Port could vary from a low of 3.0% during initial years of forecast to a high of 15.0% during final years of forecast.

• In the high case scenario, Vizhinjam Port has been assigned 5.0% of the import traffic handled at competing ports during initial years of forecast to 20.0% of the traffic handled at Kochi and Tuticorin ports by 2043-44.

• In the most pessimistic scenario, share of import traffic handled by competing port moving to Vizhinjam Port has been reduced to 1.0% during initial years of forecast, which has been raised to 20.0% in 2043-44.

• For the assessment of traffic forecast for Vizhinjam Port, possible development of tank farms in the area has not been taken into consideration as these projects are yet to be finalized.

• Also, due to adequate development of LPG handling and storage facilities at Kochi Port, LPG traffic has been discounted for traffic forecast for Vizhinjam Port as Kochi Port would cater the hinterland quite easily once these facilities become on-stream.

Table 13.16 Total petro products sales across India (‘000 tonnes)

Year Total Sales

2000-01 106,974 2001-02 107,705 2002-03 111,776 2003-04 115,991 2004-05 120,171 2005-06 122,353 2006-07 131,669 2007-08 140,697 2008-09 145,312 CAGR 3.9%

Source: Basic Statistics, Ministry of Petroleum

Table 13.17 Total petro products sales across Kerala (‘000 tonnes)

2007-08 2008-09

Light Distillates

Petrol 547 608 Kerosene 223 219 LPG 526 527 Naphtha 398 609

Middle Distillates

Diesel 1,485 1,655 ATF 213 229 LDO 1 1

Heavy ends

Black Oil 289 379 Bitumen 113 143 Lubes 38 168 Other Minor Products 100 125

Total 3,932 4,663

Table 13.18 Petro products traffic forecast for Vizhinjam Port ('000 tonnes)

Forecast Forecast Forecast Forecast Total Forecast Petro Petroleum Petroleum Petroleum Petro Product Product Imports Year Product Traffic at Product Traffic at Product Traffic at Traffic at all at Competing Vizhinjam Port - Vizhinjam Port - Vizhinjam Port - Ports Ports Base Case High Case Low Case

2013-14 72,234 2,121 64 106 21 2014-15 78,543 2,269 68 113 23 2015-16 85,404 2,428 121 194 97 2016-17 92,865 2,598 130 208 104 2017-18 100,977 2,780 139 222 111 2018-19 109,797 2,974 149 238 119 2019-20 119,388 3,182 159 255 127 2020-21 124,761 3,373 253 337 270 2021-22 130,375 3,576 268 358 286 2022-23 136,242 3,790 284 379 303 2023-24 142,373 4,018 301 402 321 2024-25 148,780 4,259 319 426 341 2025-26 154,731 4,429 443 664 443 2026-27 160,920 4,606 461 691 461 2027-28 167,357 4,791 479 719 479 2028-29 174,051 4,982 498 747 498 2029-30 181,013 5,182 518 777 518

Table 13.18 (cont’d)

2030-31 187,349 5,311 797 1,062 531 2031-32 193,906 5,444 817 1,089 544 2032-33 200,693 5,580 837 1,116 558 2033-34 207,717 5,719 858 1,144 572 2034-35 214,987 5,862 879 1,172 586 2035-36 220,362 5,980 897 1,196 598 2036-37 225,871 6,099 915 1,220 610 2037-38 231,518 6,221 933 1,244 622 2038-39 237,306 6,346 952 1,269 635 2039-40 243,238 6,473 971 1,295 647 2040-41 249,319 6,602 990 1,320 660 2041-42 255,552 6,734 1,010 1,347 673 2042-43 261,941 6,869 1,030 1,374 687 2043-44 268,489 7,006 1,051 1,401 701

Source: Drewry Research

14. Edible oil and DOC

This chapter looks at the over all scenario of edible oil imports and DOC exports by India. It also takes a closer look at the demand of edible oil in southern states of India, especially in Kerala and Tamil Nadu. Then we derive the edible oil traffic at the proposed Vizhinjam port under three scenarios – low, base and high.

Key findings

• India is second largest edible oil importing country in the world after China. It imported about 6.1m tonnes in the year 2008-09.

• The edible oil import traffic of various competing ports in Vizhinjam’s immediate hinterland contributes merely 3.3% of total Indian edible oil import traffic.

• In 2008-09, Kerala Government banned the imports of all types of crude edible oil in its effort to secure the interest of local coconut farmers. However, the ban had little impact on the operations of edible oil refineries as they began importing cargo at New Mangalore Port.

• India is the fifth largest producer and fourth largest exporter of DOC. DOC export volumes are largely governed by the global demand and price in competing countries. Moreover, the monsoon along with input prices also affects the supply and of DOC. In 2008-09, India exported 5.4m tonnes of DOC, recording a CAGR of 19% in the last five fiscal years.

• While Kandla is the most prominently used ports for DOC, export volumes at competing ports in Vizhinjam’s hinterland have been nil over the last five years.

• In the base case scenario, Vizhinjam port may attract 30,000 tonnes of edible oil traffic in the terminal forecast year.

14.1 Indian Edible oil and DOC Industry

India is second largest edible oil importing country in the world after China. India imported about 6.1m tonnes in the year 2008-09. Crude edible oil has around 75% share in India’s total edible oil imports. This is largely consumed by various edible oil refineries located within port limits or in very close proximity of ports. The edible oil export in Indian primarily includes castor oil.

Domestic oilseeds production in India has shown a very erratic growth and has recorded a CAGR of 1.3% over the past decade. Income and population growth and key changes in trade policies are important contributors to India's increasing edible oil consumption and imports. Since there has been a continuous demand in excess over domestic supply of edible oils, import of edible oils has been resorted to for more than two decades to make this item of mass consumption easily available to consumers at reasonable prices.

Table 14.1 Historical analysis of Edible Oil and DOC trade (Million tonnes)

Edible Oil Deoiled Cake Year Oilseed Edible Oil Domestic Edible Oil Edible Oil DOC Domestic DOC Production Production Consumption Export Import Production Consumption Export 1998-99 24.8 8.0 11.6 0.2 4.4 6.8 3.4 3.4 1999-00 20.7 6.8 10.7 0.2 4.5 6.3 3.6 2.6 2000-01 18.4 6.3 10.6 0.2 4.8 6.2 3.8 2.3 2001-02 20.7 7.0 10.8 0.2 4.4 6.7 3.7 3.0 2002-03 14.8 5.6 10.1 0.2 5.1 6.1 4.2 1.9 2003-04 25.2 7.1 12.4 0.3 4.4 7.2 3.9 3.3 2004-05 34.4 7.2 11.8 0.3 5.0 6.3 3.7 2.7 2005-06 28.0 8.3 12.6 0.2 4.4 7.8 3.4 4.4 2006-07 24.3 7.4 12.1 0.2 4.7 7.4 2.3 5.2 2007-08 29.8 8.7 14.3 0.2 5.6 8.1 2.3 5.4 2008-09 28.2 8.0 15.1 0.3 6.1 8.6 2.3 5.4 CAGR 1.3% 0.1% 2.7% 4.1% 3.3% 2.4% -3.9% 4.8%

Source: Ministry of Consumer Affairs and The Solvent Extractors’ Association of India

Table 14.2 Per capita edible oil consumption (Kg/Annum)

India World 2003-04 11.1 20.11 2004-05 11.4 21.08 2005-06 11.7 22.18 2006-07 11.9 23.03 2007-08 12.5 23.57 CAGR 3.0% 4.0%

Source: Minstry of Consumer Affairs, Govt of India

Table 14.3 Edible Oil Imports at various Ports (‘000 tonnes)

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 CAGR Chennai 571 456 410 471 518 821 7.5% Cochin 131 125 146 90 43 0 -100.0% Haldia 225 275 371 388 513 669 24.4% JNPT 546 600 575 502 582 485 -2.3% Kandla 338 506 745 524 618 659 14.3% Kolkata 607 497 512 511 461 524 -2.9% Mumbai 740 549 395 325 322 420 -10.7% New Mangalore 234 263 332 314 374 477 15.3% Paradip 20 17 43 68 12 32 9.9% Tuticorin 114 116 119 140 121 198 11.7% Vizag 0 0 0 0 0 13 -

Total 3,526 3,404 3,648 3,333 3,564 4,298 4.0%

Source: The Solvent Extractors’ Association of India

• The edible oil import traffic of various competing ports in Vizhinjam’s immediate hinterland contributes merely 3.3% of total Indian edible oil import traffic.

For most oilseeds, Deoiled cakes (DOC) are a by-product of vegetable oil production (soybeans are an exception, DOC being the more valuable end-product). DOC is used mainly as a protein supplement in animal feeds and Soya DOC accounts for around 75% of total world consumption. DOC is also used as fertilisers and soil conditioners in some countries. India is the fifth largest producer and fourth largest exporter of DOC. DOC export volumes are largely governed by the global demand and price in competing countries. Moreover, the monsoon along with input prices also affects the supply and of DOC.

Table 14.4 DOC exports from various Ports (‘000 tonnes)

2004-05 2005-06 2006-07 2007-08 2008-09 CAGR Bedi 338 446 773 736 554 13% Mumbai 502 715 1,082 978 1,051 20% Porbander 0 1 0 0 0 - Bhavnagar 113 87 0 0 0 -100% Kandla 1,432 2,620 2,760 3,240 3,142 22% Kakinada 57 127 270 180 93 13% Vizag 210 433 279 271 290 8% Pipavav 0 0 7 7 0 - Kolkata 0 0 0 31 80 - Chennai 0 0 0 0 9 - Mundra 52 0 0 0 202 40% Others 30 28 9 21 5 -37% Total 2,734 4,457 5,180 5,463 5,426 19%

Source: The Solvent Extractors’ Association of India

• The Table 14.1 depicts, that the average DOC production in India over the last decade has been steadily increasing at a CAGR of 2.4%, while it has shot up in the last five years to approximately 19%. On the contrary, the consumption of DOC over the same period has been going downhill, registering a negative CAGR of 3.9%.

• The DOC export has been hovering around 5.5m tonne mark over the last three years and a CAGR of 4.8% is a testimony to growing production and diminishing domestic consumption.

• While Kandla is the most prominently used ports for DOC, export volumes at competing ports in Vizhinjam’s hinterland have been nil over the last five years.

There are no refining units in the immediate hinterland of Vizhinjam’s hinterland. All the six refineries of note in Kerala are either located in Ernakulam or Kozhikode district which is closer to Kochi port and Beypore port, respectively.

However, with ban on imports of edible oil in Kerala, there is no point discussing the present traffic scenario at ports in Kerala. Unless the state government thinks positively about the revenue potential of ports operating in Kerala, the ban is likely to remain in force, more to please the coconut farmers than to actually safeguard their interest.

14.2 Edible oil traffic in Kerala

Figure 14.1 Change in Edible oil traffic after ban in Kerala

800

600

400

200

Edible oil imports ('000 tonnes) 0 Before Ban (2007-08) After Ban (2008-09)

Cochin New Mangalore Tuticorin

Source: IPA

Figure 9.1 shows how the share of Cochin’s edible oil traffic has been distributed predominantly to Tuticorin port and to a smaller extent to New Mangalore port in 2008-09. With ban in force, Tuticorin and New Managlore port have become the natural choice for refiners to import crude edible oil in Kerala.

14.3 Competitive analysis

Table 14.5 Road distances from competing ports in the hinterland (Km)

Source: mapmyindia.com

The Table 14.5 shows that Vizhinjam port does not provide significant distance advantage over competing ports and various solvent extractors and edible oil refineries will find it advantageous to shift their traffic to Kochi once the ban is lifted. The region where Vizhinjam port offers a distance advantage – Tiruvananthapuram, Kollam and Kanyakumari - does not have any edible oil refinery or any allied units of note.

14.4 Edible oil traffic and DOC Traffic Forecast for Port till 2043-44

Key issues

• Edible oil imports in Vizhinjam’s hinterland during the last four years of import before ban had increased steadily to around 50,000 tonnes in 2007-08. However, ever since the ban had been imposed, there has been no edible oil traffic in the region. Therefore, considering the government policies to safeguard the interest of local coconut farmers, under low case scenario it is assumed that the edible oil imports in Kerala would remain nil.

• Even if the ban is revoked, existing refineries in Ernakulam and Calicut would continue importing edible oil through Kochi and the volume may increase in the future, with increase in refining capacities.

• Vizhinjam’s may attract edible oil traffic if new crude edible oil refineries come up in its proximity i.e., Tiruvananthapuram, Kollam, Kanyakumari and Pathanamthitta. However, as of now Drewry is not aware of any such plans which may come to fruition in the near future.

• DOC production in Vizhinjam’s hinterland, primary and secondary combined, is consumed locally for cattle feed manufacturing. There haven’t been any DOC exports from the region in the recent past.

Table 14.6 Edible oil import traffic forecast for Vizhinjam Port (Million tonnes)

Projected all Import at Share of Vizhinjam Traffic at Vizhinjam

India imports Competing Ports Low Base High Low Base High

2007-08 5.61 0.54 0.0% 0.0% 0.0% 0.00 0.00 0.00 2008-09 6.09 0.68 0.0% 0.0% 0.0% 0.00 0.00 0.00 2009-10 6.33 0.69 0.0% 0.0% 0.0% 0.00 0.00 0.00 2010-11 6.59 0.70 0.0% 0.0% 0.0% 0.00 0.00 0.00 2011-12 6.85 0.72 0.0% 0.0% 0.0% 0.00 0.00 0.00 2012-13 7.13 0.73 0.0% 0.0% 0.0% 0.00 0.00 0.00 2013-14 7.41 0.75 0.0% 0.0% 0.0% 0.00 0.00 0.00 2014-15 7.71 0.76 0.0% 0.0% 0.0% 0.00 0.00 0.00 2015-16 7.94 0.78 0.0% 1.0% 1.0% 0.00 0.01 0.01 2016-17 8.18 0.79 0.0% 1.0% 1.0% 0.00 0.01 0.01 2017-18 8.42 0.81 0.0% 1.0% 1.0% 0.00 0.01 0.01 2018-19 8.67 0.82 0.0% 1.0% 1.0% 0.00 0.01 0.01 2019-20 8.93 0.84 0.0% 1.0% 2.0% 0.00 0.01 0.01 2020-21 9.11 0.86 0.0% 1.0% 2.0% 0.00 0.01 0.01 2021-22 9.29 0.87 0.0% 2.0% 5.0% 0.00 0.01 0.03 2022-23 9.48 0.89 0.0% 2.0% 5.0% 0.00 0.01 0.03 2023-24 9.67 0.91 0.0% 2.0% 5.0% 0.00 0.01 0.03 2024-25 9.86 0.93 0.0% 2.0% 5.0% 0.00 0.01 0.03 2025-26 9.96 0.95 0.0% 2.0% 5.0% 0.00 0.01 0.03 2026-27 10.06 0.96 0.0% 2.0% 5.0% 0.00 0.01 0.03 2027-28 10.16 0.98 0.0% 2.0% 5.0% 0.00 0.01 0.03 2028-29 10.26 1.00 0.0% 2.0% 5.0% 0.00 0.01 0.03 2029-30 10.37 1.02 0.0% 2.0% 5.0% 0.00 0.01 0.03 2030-31 10.52 1.03 0.0% 5.0% 10.0% 0.00 0.03 0.05 2031-32 10.68 1.03 0.0% 5.0% 10.0% 0.00 0.03 0.05 2032-33 10.84 1.04 0.0% 5.0% 10.0% 0.00 0.03 0.05 2033-34 11.00 1.04 0.0% 5.0% 10.0% 0.00 0.03 0.05 2034-35 11.17 1.05 0.0% 5.0% 10.0% 0.00 0.03 0.05 2035-36 11.34 1.05 0.0% 5.0% 10.0% 0.00 0.03 0.05 2036-37 11.51 1.06 0.0% 5.0% 10.0% 0.00 0.03 0.05 2037-38 11.68 1.06 0.0% 5.0% 10.0% 0.00 0.03 0.05 2038-39 11.85 1.07 0.0% 5.0% 10.0% 0.00 0.03 0.05 2039-40 12.03 1.08 0.0% 5.0% 10.0% 0.00 0.03 0.05 2040-41 12.21 1.08 0.0% 5.0% 10.0% 0.00 0.03 0.05 2041-42 12.39 1.09 0.0% 5.0% 10.0% 0.00 0.03 0.05 2042-43 12.58 1.09 0.0% 5.0% 10.0% 0.00 0.03 0.05 2043-44 12.77 1.10 0.0% 5.0% 10.0% 0.00 0.03 0.05 CAGR 2.3% 2.0%

Assumptions

• Edible oil

Nominal growth of 2% assumed for edible oil imports in Vizhinjam’s hinterland.

In high case it is assumed that Vizhinjam port may have around at least one edible oil refineries, generating a combined demand of around 50,000 tonnes of edible oil imports.

Even in the high case Vizhinjam’s share in immediate hinterland traffic is unlikely to exceed 10% subject to commissioning of an edible oil refinery in the proximity of the port.

Base case and high case forecasts have been done on the assumption that at some point in the next quinquennium Kerala Government will revoke the ban on import of edible oil.

• DOC

We do not expect any DOC traffic from the proposed port.

15. Timber

This chapter looks at the over all scenario of timber imports in India. It also takes a closer look at the demand of timber in southern states of India, especially in Kerala and Tamil Nadu. Then we derive the timber traffic at the proposed Vizhinjam port under three scenarios – low base and high.

Key findings

• India is the second largest importer of timber logs in the world after China with imports of 3.5 million tonnes in the calendar year 2008. About 85% timber imported in India is in the form of logs.

• Of the Kerala’s total timber demand, 75% is currently met through imports, sourced primarily from Myanmar, Indonesia and Malaysia. Despite about 28% of Kerala’s total land being forests, state regulations limit harvesting of these forests.

• Timber is imported at New Mangalore, Tuticorin and Cochin ports. Due to lack of ample storage space and high storage cost importers prefer New Mangalore and Tuticorin ports. In 2008-09, together these three ports imported 625,000 tonnes of timber. In the last five years timber imports in the hinterland port have been steady at best, fluctuating between 600,000 to 700, 000 tonnes.

• Timber demand in Kerala for domestic consumption is unlikely to increase drastically over the next couple of decades. In terms of infrastructure, Kerala is one of the most advanced states in the country and domestic consumption may remain steady. However, a host of timber processing units in the state may prosper in the wake of high demand of furniture manufactured in India across the world.

• Under the base case scenario, timber traffic at Vizhinjam port is expected to touch 104,000 tonnes. Since there is not much of an exclusive hinterland for the port, we expect this traffic will mainly be diversion from existing ports on account of better and competitive cargo handling and storage capacity.

15.1 Overview

The consumption of timber and timber products in India has been increasing with increasing population and urbanization, improving standards of living and rising personal disposable incomes, especially in the last decade. At the same time, there is an increasing scarcity of domestic supply and motivation for substitution by non-timber products, especially in some joinery items, given that the production of timber for the market from the largely publicly owned forests has declined over the years.

Even though India is endowed with over 250 commercial varieties of timbers including tropical hardwoods like Teak, Rosewood, Padouk, Red Sanders, Sandalwood, a strict conservation policy prohibits harvesting which makes it a net importer of wood and wood- based panel products. As per ‘The International Tropical Timber Organization’ (ITTO) estimate Indian industrial demand for wood jumped from 58 million cubic meters (mcm) in 2000 to 85 mcm in 2008 and expected to cross 150 mcm by 2018.

India is the second largest importer of tropical logs with imports of 1.8 mcm in 2007, increasing to nearly 2 mcm in 2008, only behind China. India, among producers, is the largest importer of logs accounting for over 91% of total producer imports of 1.9 mcm in 2007.

Indian manufacturers prefer to import timber in log form to feed the domestic industries. Imports are mostly from Malaysia, Myanmar, Indonesia, Nigeria, Ivory Coast, Ghana, Togo, Gabon, Brazil, Panama, Costa Rica, Ecuador and New Zealand. The major ports used for imports are Kandla, Mumbai, Mangalore, Tuticorin, Chennai, Vizag and Kolkata as well as many internal container depots.

Timber is primarily imported in the form of logs, while some portion of it is imported in the form of Sawn Wood and Veneer. Table 15.1 shows the break up of production, trade and consumption of all timber by India. As per the Table below, timber log form the largest chunk of timber imports into India with a share of 77% in 2007 followed by sawn (16%), plywood (7%) and veneer (1%). Domestic consumption has been calculated as the difference of sum of imports & production and exports. India’s production of timber products has grown at the average rate of 8%, while its overall domestic consumption at a higher rate which is 9%. Therefore, it’s evident that timber imports into India have growth at a healthy 15% over the past six years primarily led by log imports. However, sawn timber imports have increased during past couple of years registering an average growth rate of 36% over past six years. Sawn Wood and veneer is transported in containers due to its good quality and high cost.

Table 15.1 Production, trade and consumption of all timber by India (In ‘000 tonnes)

Production Imports Exports Domestic Consumption

Product Species 2004 2005 2006 2007 2008* CAGR 2004 2005 2006 2007 2008* CAGR 2004 2005 2006 2007 2008* CAGR 2004 2005 2006 2007 2008* CAGR

Logs All 16,293 16,565 16,566 16,566 16,566 0.4% 1,855 2,640 2,787 3,323 3,536 17.5% 6 8 13 7 5 -5.1% 18,142 19,197 19,340 19,882 20,097 2.6% C 1,787 2,056 2,057 2,057 2,057 3.6% 287 323 357 566 566 18.6% 4 3 1 0 0 -57.3% 2,070 2,376 2,412 2,623 2,623 6.1% NC 14,506 14,509 14,509 14,509 14,509 0.0% 1,569 2,318 2,430 2,757 2,970 17.3% 2 5 11 7 5 19.3% 16,072 16,821 16,928 17,259 17,474 2.1% Sawn All 9,758 10,564 10,564 10,564 10,564 2.0% 67 54 155 263 241 37.5% 10 11 14 15 23 22.6% 9,815 10,607 10,704 10,812 10,781 2.4% C 6,643 7,071 7,071 7,071 7,071 1.6% 38 20 13 40 17 -18.0% 1 2 0 2 1 7.6% 6,680 7,090 7,084 7,109 7,088 1.5% NC 3,115 3,492 3,492 3,492 3,492 2.9% 29 34 142 224 224 66.2% 9 9 13 13 22 23.6% 3,135 3,517 3,621 3,703 3,694 4.2% Ven All 191 200 200 204 207 2.1% 3 6 11 12 17 56.0% 12 13 16 19 27 22.7% 182 193 195 196 197 2.1% C 77 7 111418.9%2433531.4%9 8 9121820.5%0222157.3% NC 184 193 193 193 193 1.2% 1 3 8 9 13 73.8% 4 5 7 7 9 27.6% 181 191 193 195 196 2.0% Ply All 1,398 1,553 1,539 1,539 1,539 2.4% 14 28 22 38 46 33.8% 35 78 76 84 51 10.1% 1,378 1,503 1,485 1,492 1,534 2.7% C 15 31 17 17 17 3.4% 4 6 12 27 17 40.4% 4 26 16 22 13 35.3% 15 11 14 22 21 8.1% NC 1,383 1,521 1,521 1,521 1,521 2.4% 10 22 10 11 29 30.6% 31 52 60 62 38 5.3% 1,362 1,492 1,471 1,470 1,513 2.7%

Note: C – Coniferous, NC – Non-Coniferous Source: ITTO

The market for timber is mainly driven by the construction and furniture industry. Construction business gives While India has had sustained economic growth over the past decade and a large population, India’s rate of growth in total and tropical log imports has not matched that of China’s. India’s wood processing sector is unlikely to match China’s highly competitive export oriented sector. A number of factors limit India’s wood processing competitiveness including poor infrastructure and barriers to foreign investment.

Major timber handling ports in India on the west coast are Kandla, Mumbai and New Mangalore. On the east coast timber is handled at Calcutta, Chennai, Vizag and Tuticorin. The share of ports in handling Timber volumes in India is stated in Figure 10.1. The furniture industry, one of the prime consumers of timber in India, is highly fragmented and there are no bigger players. Major demand is from the North West clusters of India.

Figure 15.1 Share of timber traffic by ports in the hinterland

800

600

400

200 (import in '000 tonnes) '000 in (import

0 2004-05 2005-06 2006-07 2007-08 2008-09

Coc hin Tuticorin New Mangalore

Since 1996 timber imports in India has grown consistently due to Supreme Court ban on felling of timber in north east region.

Kandla is the leading timber importing port on the west coast. It handles nearly 51% of total Indian timber import. High volume of timber traffic at Kandla is attributed to good handling facilities available at the port along with a well developed trade centre in the vicinity of the port. Additionally, the location of saw mills around Gandhidham, near Kandla has further contributed to increase in imports at Kandla. The services of saw mills are utilised by importers to remove the outer pulp and to convert wood logs into plank.

15.2 Hinterland mapping

Consumption of timber is not concentrated in one area in Kerala. There are at least 200 saw mills which are served through the Tuticorin, Cochin and New Mangalore ports. Table 15.2 gives the timber traffic at these ports during the last five years. While Cochin’s share has been increasing in the last five years, New Mangalore’s has been on decline primarily due to shifting of traffic at Cochin port as it is more cost effective for saw mills in Kerala to import timber at Cochin Port. Despite high cargo handling cost and lack of ample storage space, Cochin provides sufficient cost saving to importers based in Central and Northern Kerala.

As per Drewry’s discussion with industry players in the region, the biggest disadvantage that Cochin port has is its high crane cost and lack of storage space. Currently, besides 40,000 square metres of timber storage space provided by the port, a leading timber handling agency at the port is also using 12 acres of Food Corporation of India’s stack- yard.

Table 15.2 Timber traffic at ports in the hinterland (‘000 tonnes)

2004-05 2005-06 2006-07 2007-08 2008-09 CAGR

Cochin 5 8 31 34 51 78.7% Tuticorin 400 425 452 428 458 3.4% New Mangalore 265 270 230 197 116 -18.7% Total 670 703713 659 625

Source: IPA

15.3 Traffic forecast

• Log imports are expected to keep increasing due to increase in domestic consumption of timber.

• The demand for timber is growing consistently. Even though timber is facing some competition from substitutes like iron, plastics, stones, etc, this is not likely to change the demand pattern of timber products in the long term. However, slow growth in housing sector is also likely to stabilise timber consumption in the hinterland.

• Currently, containerized shipment of logs and Sawn Wood makes around 15% of the total timber imported in India and this share is unlikely to increase due to high duty structure applicable to Sawn Wood and other value added wood products.

Table 15.3 Timber traffic forecast for Vizhinjam (‘000 tonnes)

Projected Projected Market Share Projected traffic at Vizhinjam Forecast Hinterland Year Traffic Low Base High Low Base High

2008-09 625 2009-10 641 2010-11 657 2011-12 673 2012-13 690 2013-14 707 0.0% 0.0% 3.0% 0 0 21 2014-15 725 0.0% 2.0% 4.0% 0 14 29 2015-16 739 1.0% 2.5% 5.0% 7 18 37 2016-17 754 2.0% 2.5% 7.5% 15 19 57 2017-18 769 2.0% 3.0% 7.5% 15 23 58 2018-19 785 2.0% 3.0% 7.5% 16 24 59 2019-20 800 2.0% 3.0% 7.5% 16 24 60 2020-21 812 2.5% 5.0% 10.0% 20 41 81 2021-22 824 2.5% 5.0% 10.0% 21 41 82 2022-23 837 2.5% 5.0% 10.0% 21 42 84 2023-24 849 3.0% 7.5% 10.0% 25 64 85 2024-25 862 3.0% 7.5% 10.0% 26 65 86 2025-26 871 3.0% 7.5% 12.5% 26 65 109 2026-27 879 5.0% 10.0% 12.5% 44 88 110 2027-28 888 5.0% 10.0% 12.5% 44 89 111 2028-29 897 5.0% 10.0% 12.5% 45 90 112 2029-30 906 5.0% 10.0% 12.5% 45 91 113 2030-31 915 5.0% 10.0% 12.5% 46 92 114 2031-32 924 5.0% 10.0% 15.0% 46 92 139 2032-33 934 5.0% 10.0% 15.0% 47 93 140 2033-34 943 5.0% 10.0% 15.0% 47 94 141 2034-35 952 5.0% 10.0% 15.0% 48 95 143 2035-36 962 5.0% 10.0% 15.0% 48 96 144 2036-37 971 5.0% 10.0% 15.0% 49 97 146 2037-38 981 5.0% 10.0% 15.0% 49 98 147 2038-39 991 5.0% 10.0% 15.0% 50 99 149 2039-40 1,001 5.0% 10.0% 15.0% 50 100 150 2040-41 1,011 5.0% 10.0% 15.0% 51 101 152 2041-42 1,021 5.0% 10.0% 15.0% 51 102 153 2042-43 1,031 5.0% 10.0% 15.0% 52 103 155 2043-44 1,042 5.0% 10.0% 15.0% 52 104 156

Source: Drewry Research

Low Case Assumptions

• The hinterland traffic is expected to grow at the rate of 1.5%.

• Vizhinjam port will provide good timber handling facilities and ample storage space at competitive rates.

• Share of Vizhinjam over the forecast period is expected to go up to 5% of the hinterland by the end of forecast period, owing to general port development and increase in timber trade in the hinterland.

Base Case Assumptions

• The hinterland traffic is expected to grow at the rate of 1.5%.

• Vizhinjam port will provide good timber handling facilities and ample storage space at competitive rates.

• The share of Vizhinjam over the forecast period is expected to go up to around 10% of the hinterland by the end of forecast period owing to capacity addition and development of organised timber processing units in the hinterland.

High Case Assumptions

• Vizhinjam is expected to improve its own infrastructure and cargo handling facilities, thereby improving its operational performance. Saw mill owners are expected to shift to Vizhinjam port, mainly from Tuticorin, on account of advanced timber handling facilities and vast storage spaces at competitive prices, consequently leading to increase in timber traffic through the port.

• The potential traffic is assumed to grow at a CAGR of 1.5% over the forecast period.

• Vizhinjam‘s share in the hinterland traffic is expected to increase up to 15% of the hinterland by the end of forecast period owing largely to commissioning of new units in the port proximity.

• Vizhinjam would provide state of the art timber handling facilities at competitive rates. It would also be able to provide adequate storage space and easily accessible custom clearance windows on the port site.

16. Raw Cashew

This section explores raw cashew traffic potential for Vizhinjam port.

Key findings

• India is the largest producer, processor and exporter in the world. India has a share of above 40% in total world export.

• Raw cashew is imported in break bulk vessels as well as containers, whereas cashew kernels are exported primarily through container ships.

• The cashew industry is concentrated in Kerala with around 700 registered processing units, employing around 0.3 million workers. At present, only around 50 per cent of the raw nut requirement of the industry in the country, estimated at over 1.2 million tonnes is produced indigenously. On the other hand, only one-third of the nut requirement for the processing units in Kerala is met by local production. Remaining is imported from the African countries like Ivory Coast, Guinea Bissau, Benin and Tanzania.

• At all India level, Kerala has a share of over 50% in raw cashew imports.

• Vizhinjam is very strategically located for raw cashew imports. It has Kollam to its north at a distance of 80 kms and Nagercoil to its south at a distance of 63 km. Currently, most of the requirements of raw cashew imports of Nagercoil and Kollam is met through Tuticorin and Cochin respectively.

• By virtue of its location on the west coast near cashew processing centres in Kollam and Nagercoil district, Vizhinjam can be an attractive location if it offers discount to such break bulk vessels.

• In a base case scenario, it is estimated that Vizhinjam port can attract raw cashew traffic of around 133,000 tonnes in 2043-44 in break-bulk vessels.

16.1 Introduction

India imports raw cashew primarily from the West African countries to meet the needs of cashew processing units. On the other hand, it exports cashew kernels and cashew nutshell liquid. India is the largest producer, processor and exporter in the world. India has a share of above 40% in total world export.

Raw cashew is imported in break bulk vessels as well as containers, whereas cashew kernels are exported primarily through container ships.

Table 16.1 Import of Cashews: India (tonnes)

Partner % 5-Year Region 2003 2004 2005 2006 2007 2008 Country Share CAGR

Cote d Ivoire Western Africa 77,802 117,685 138,151 196,160 194,543 219,088 33% 23% Guinea-Bissau Western Africa 70,841 81,444 89,078 57,670 111,247 85,444 13% 4% Benin Western Africa 47,084 48,611 55,215 67,391 57,479 84,568 13% 12% Tanzania Eastern Africa 66,638 66,924 46,959 67,652 39,901 65,395 10% 0% Indonesia Asia 50,252 42,914 77,737 43,878 49,109 61,182 9% 4% Ghana Western Africa 31,864 30,600 31,503 47,781 31,080 43,117 7% 6% Mozambique Southern Africa 35,689 42,508 32,213 27,309 22,279 34,785 5% -1% Gambia Western Africa 5,595 8,968 12,498 22,873 22,521 24,095 4% 34% Nigeria Western Africa 22,006 18,821 16,415 21,793 17,804 13,907 2% -9% Other countries 28,976 23,059 24,878 21,864 23,145 24,994 4% -3%

Total World 436,747 481,534 524,647 574,371 569,108 656,575 8%

Source: GTIS

Total cashew import in India recorded 656,575 tonnes in 2008. In the last five year it grew at a CAGR of 8%. On the other hand, cashew kernels export totalled 118,540 tonnes in 2006-07, growing at a CAGR of 3.8%.

Table 16.2 Export of cashew kernels from Kerala and India

Kerala* India Kerala's Share (%) Year Quantity Value Quantity Value Quantity Value (MT) (Rs. Crores) (MT) (Rs. Crores) (MT) (Rs. Crores)

2000-01 49874 1152.36 89155 2049.6 55.04 56.22 2001-02 54717 971.11 98203 1788.7 55.72 62.96 2002-03 66859 1216.96 104137 1933.02 64.2 62.96 2003-04 68119 1204.56 100828 1804.43 67.56 66.76 2004-05 79950 1715.94 126667 2709.24 63.12 63.34 2005-06 74376 1622.82 114143 2514.86 65.16 64.53 2006-07 72860 1504.87 118540 2455.5 61.46 61.29

* Export through Cochin port,

Source: The Cashew Export Promotion Council of India

16.2 Hinterland analysis

Kerala and Tamil Nadu put together contribute 21% of total cashew production and 23% in terms of area cultivated in India.

Table 16.3 Cashew area, production, and yield

2006-07 2007-08 2008-09 2008-09

State % % A P APY A P APY A P APY Share Share

Kerala 80 72 900 84 78 900 70 75 90 8% 11% Karnataka 102 52 700 103 56 710 107 60 720 12% 9% Goa 55 29 690 55 31 700 55 30 700 6% 4% Maharashtra 164 197 1,500 167 210 1,500 170 225 1,500 19% 32% Tamil Nadu 123 60 670 123 65 700 131 68 710 15% 10% Andhra Pradesh 171 99 890 171 107 900 182 112 920 20% 16% Orissa 125 84 860 131 90 860 137 95 865 15% 14% West Bengal 10 10 1,000 10 10 1,000 11 11 1,000 1% 2% Gujarat 4 4 900 4 4 1,000 6 4 700 1% 1% NE States 15 11 700 15 12 750 16 12 750 2% 2% Others 5 2 500 5 2 500 8 3 460 1% 0%

Total 854 620 820 868 665 860 893 695 900 100% 100%

Note: A - Area in '000 Ha. P - Production in '000 MT. APY - Average Productivity in Kg per Hectare Source: Directorate of Cashew nut and Cocoa Development

Table 16.4 Cashew processing units in India - 2005-06

Processing

Processing Utilization (000 MT) States Capacity Units (Nos.) Indigenous Import Total

Kerala 432 700 67 320 387 Karnataka 266 65 45 20 65 Goa 45 21 21 -- 21 Maharashtra* 2,200 20 20 -- 20 Tamil Nadu 4,17 565 294 225 519 Andhra Pradesh 175 95 92 -- 92 Orissa 60 11 11 -- 11 West Bengal 30 8 8 -- 8 Chhattisgarh 3 ------NE States 22 15 15 -- 15

Total 3,650 1,500 573 565 1,138

Note: * Includes 1850 small scale cottage industry

Source: Directorate of Cashew nut and Cocoa Development

The cashew industry is concentrated in Kerala with around 700 registered processing units, employing around 300,000 workers. At present, only around 50 per cent of the raw nut requirement of the industry in the country, estimated at over 1.2 million tonnes is produced indigenously. On the other hand, only one-third of the nut requirement for the processing units in Kerala is met by local production. Remaining is imported from the African countries like Ivory Coast, Guinea Bissau, Benin and Tanzania.

At all India level, Kerala has a share of over 50% in raw cashew imports.

Table 16.5 Kerala’s share in cashew import (%)

% Share Year Quantity Quantity Value

2000-01 152,508 61.2 57.5 2001-02 191,574 53.9 52.9 2002-03 249,931 62.4 62.5 2003-04 294,511 65.1 64.9 2004-05 283,132 48.9 48.3 2005-06 306,730 54.3 52.5 2006-07 322,441 55.0 53.6

Note: Import through Cochin Port, Source: The Cashew Export Promotion Council of India

Vizhinjam is very strategically located for raw cashew imports. It has Kollam to its north at a distance of 80 kms and Nagercoil to its south at a distance of 63 km (See Figure 16.1). Currently, most of the requirements of raw cashew imports of Nagercoil and Kollam is met through Tuticorin and Cochin respectively. Table 16.6 reveals that Vizhinjam has a distinct distance advantage from the two most important cashew processing units - Kollam in Kerala and Nagercoil in Tamil Nadu.

Table 16.6 Distance matrix for Cashew processing units (Km)

Road

Kochi Tuticorin Cuddalore Vizhinjam

Kollam 135 210 636 80 Nagercoil 278 124 579 63

Source Drewry

Figure 16.1 Hinterland of Vizhinjam port for Raw Cashew

Source: Drewry Research

16.3 Competitive analysis

As there is locational advantage, using proposed Vizhinjam port may offer cost savings to the raw cashew importers. The current cost of raw cashew imports is as follows:

Table 16.7 Inland Logistics cost of raw cashew import

Container Transportation Cost INR per Container Kochi Tuticorin Vizhinjam (estimate) Kollam 10,000 26,000 4,000 Nagercoil 27,000 9,000 3,200

Source: Drewry Research Market Survey

Table 16.8 Inland Logistics cost of raw cashew import

Container Transportation Cost INR per Tonne

Kochi Tuticorin Vizhinjam (estimate) Kollam 588 1,529 240 Nagercoil 1,588 529 189

Source: Drewry Research Market Survey

As it is evident from the above Table 16.7 and 16.8, it is amply clear that raw cashew importers will benefit tremendously from the Vizhinjam port.

16.4 Raw Cashew import forecast

As a result of market survey following issues emerged with regard to raw cashew import.

• There has been shift away from break bulk vessels to container vessels for raw cashew import because

there has been tight supply and high chartering cost of break bulk vessels.

there is increased pilferage in break bulk vessels.

containers can be used even for a small volume of cargo (under 100 tonnes) whereas around 5-6000 tonnes of cargo has to be consolidated for break bulk vessels.

There is a loss in break bulk vessels as raw cashew is generally packed in second hand jute bags.

• Going forward containers are expected to be used for import of raw cashew.

As per raw cashew importers, they will be keen to use Vizhinjam Port provided following issues are taken care of by the port authorities:

There is not much unionisation of labour

Availability of local transport

Speedy custom clearance

Availability of storage facilities of containers

Level of terminal handling charges

Assumptions Ratio of domestic production in Kerala to the total Requirement 0.3 Raw cashew per container (tonne) 17 On an average cashew kernel produced is one fourth of raw 0.25 cashew nut processed Capacity utilisation 80% No. of days of operation 330 Raw cashew weight in a bag (kg) 85 Level of containerization 90% It is not a profitable venture to plant cashew as any other cash crops are more lucrative. Therefore, it is expected that there will be increased reliance on imports from Africa

Table 16.9 Raw cashew import forecast

Share of Break Share of Imported Raw Raw Cashew Import Year % Growth Bulk Vessels Container Cashew (tonnes) Volume (teu) (tonnes) Ships (tonnes)

FY14 4 489,740 48,974 440,766 25,927 FY19 4 601,573 60,157 541,415 31,848 FY24 4 731,905 73,191 658,715 38,748 FY29 3 856,716 85,672 771,045 45,356 FY34 3 993,169 99,317 893,852 52,580 FY39 3 1,151,355 115,136 1,036,220 60,954 FY44 3 1,334,736 133,474 1,201,263 70,663

Source: Drewry Research

Raw cashew is imported from east and West Africa through Cochin, Mangalore and Tuticorin ports. By virtue of its location on the west coast near cashew processing centres in Kollam and Nagercoil district, Vizhinjam can be an attractive location if it offers discount to such break bulk vessels. In the past, ports have given conditional offers to such vessels. A case in point is Tuticorin port. It offered 50 per cent rebate in wharfage to the whole quantity of imported raw cashew as break bulk cargo. The concession was extended for storage of raw cashew nut allowing free days from 5 to 10 days. In addition, Tuticorin port offered 10% rebate in the Marine charges to container vessels carrying raw cashew nuts, which make direct calls to Tuticorin Port from Africa provided 80% of container carrying raw cashew nuts are destined for Tuticorin Port, which should be the first Port of Call.

17. Coastal Shipping

This chapter focuses on the potential of Vizhinjam port in attracting coastal traffic. Coastal traffic has been mainly explored considering demand of construction materials like cement, marbles, and tiles.

Key findings

• Coastal shipping in India has remained at a low level. In 2006-07, the share of coastal traffic in total throughput of Indian ports was 20%.

• Dismal growth in coastal shipping and decline in its share in national throughput is the consequence of constraints that it faces in terms of operational, fiscal, institutional and legislative issues.

• As Kerala is not self sufficient in cement, rice, wheat and construction materials like marbles and tiles, these commodities are imported from northern part of the country.

• Fragmented market, Multiple handling, More time taken in transit, Requirement of door to door services, and Lack of return cargo are some of the factors which may hinder surge in coastal shipping.

• According to the Drewry estimate, coastal traffic of cement is expected to grow at a CAGR of 7% from 51.8 thousand tonnes in 2007-08 to 505.5 thousand tonnes in 2043-44.

17.1 Introduction

Exim cargo registered a CAGR of 14% from 2002-03 to 2006-07. During the same period costal traffic has increased at a CAGR of 2%. In this period the share of coastal traffic in total throughput of Indian ports has declined from 28% in 2002-03 to 20% in 2006-07. It is evident from the following figure.

Figure 17.1 Development of traffic : Coastal vs Exim

800 30%

600 25%

400 20% Millions

200 15%

0 10% 2002-03 2003-04 2004-05 2005-06 2006-07

Coastal Cargo Exim Cargo % share of coastal cargo

Source: IPA

Dismal growth in coastal shipping and decline in its share in national throughput is the consequence of constraints that it faces in terms of operational, fiscal, institutional and legislative issues (See Figure 17.2).

Figure 17.2 Indian coastal shipping – Constraints & Impediments

Operational Fiscal Institutional Legislative

Higher manning scales, duty paid No duty concessions – imported spares No independent governing No specific legislation bunkers, stores, spares etc. (40%) bunker (35%) body

No common regulation / No economies of scale, obsolete No concessional finance for ship procedure – especially for tonnage, shortage of Officers acquisition & developing minor ports minor ports

Low productivity at ports – high time Insufficient budget allocations – spent shipping Documentation similar to Tardy implementation of various study group / Competition from road & rail overseas shipping No infrastructure status / tax holidays committees suggestions & services recommendation Needless stringent requirements for Lack of low cost ship repair facilities design/construction Low integration with Inadequate facilities at Ports & Repair problems acute for passenger IWT/Minor Ports Road/Rail Connectivity & high Costs vessels – small / confined space Source: Ministry of Transport, Government of India

Coastal shipping regulation in India “Coastal vessel” means a vessel exclusively engaged in the carriage by sea of passengers or goods from any port or places in India to any other port or places in India subject to production of Coasting license issued under the Merchant Shipping Act, 1958 by the

Competent Authority. Such vessels include the vessels pertaining to Coastguard / Indian navy.

Cabotage Law The coasting trade of India is exclusively reserved for Indian ships and for this purpose a ship chartered by a citizen of India or a company which satisfied the requirements laid down in section 21 of the Merchant Shipping Act, 1958 will be deemed to be an Indian ship. A foreign ship is not allowed to ply in the coasting trade of India except under a license granted by an officer authorized to issue it.

Any party involved in coastal trade in India can employ foreign flag vessels subject to clearance by Indian National Shipowners’ Association (INSA) that no suitable Indian flag vessels are available. Further it should be approved by DG Shipping.

17.2 Existing coastal/rail/road movement in the hinterland of Vizhinjam port

As Kerala is not self sufficient in cement, rice, wheat and construction materials like marbles and tiles, these commodities are imported from northern part of the country (See 17.3 for pictorial representation). The existing movement from the northern part of the country to Kerala has been presented in Table 17.2 to 17.4. Our analysis shows that total logistics cost of transportation will be less if it is moved by coastal shipping. But there are bottlenecks in terms of more time taken and loss in cargo volume because of multiple handling. Moreover, there is also paucity of return cargo. These cargoes can be tapped if considerable cost advantage is given to the break bulk vessels. Rice and wheat

Table 17.1 Existing coastal/rail/road movement in the region

Current Modes of Key Commodities Corridors Transportation

Cement Pipavav – New Mangalore Sea/Rail/Road Pipavav-Cochin Marbles Kishangarh – Cochin Shipping/Rail/ Kishangarh – Bangalore Road Tiles Morbi – Cochin Shipping/Road Morbi – Bangalore Chemicals Vadodara – Cochin Road Vadodara - Bangalore Car Delhi – Cochin Shipping/Road

Source: Drewry Research

Figure 17.3 Coastal Shipping potential

Source: Drewry Research

Table 17.2 Movement of cement into Kerala

Financial Year Maharashtra-Rail Total* (Rail + Road) (tonnes)

FY05 16,385 32,770 FY06 14,863 29,726 FY 07 22,308 44,616

* Estimated Source: DGCIS

Table 17.3 Movement of rice into Kerala (tonnes)

Financial year Maharashtra Haryana Punjab Total-Rail Total* (Rail + Road)

FY05 40,846 51.504 116,518 157,416 524,720 FY06 27,247 80,296 151,758 259,301 864,337 FY 07 7,909 22,303 64,946 95,158 317,193

* Estimated

Source: DGCIS

Table 17.4 Total movement of wheat into Kerala (tonnes)

Financial Maharashtra Haryana Punjab Rajasthan Delhi Total- Total* year Rail (Rail + Road)

FY05 7,026 108,830 55,550 21,180 192,586 641,953 FY06 7,422 141,534 252,008 23,765 424,729 1,415,763 FY 07 2,502 29,032 38,165 28,067 97,766 325,887

* Estimated Source: DGCIS

17.3 Coastal traffic forecast

It is anticipated that there will be a growth in coastal shipping but at a slow pace due to factors mentioned above. Specifically, shipping has following bottlenecks especially for the transportation of marble and tiles.

• Fragmented market so making large consignment is a difficult task, which may be prerequisite for shipping.

• Multiple handling may lead to breakage as domestic cargo is transported in loose (whereas export cargo is transported in wooden crate).

• Time taken may be more than other modes of transportation.

• Nearest port is over 700 km from the production region. The maximum distance between any two points is around 2,500 km. Coastal shipping may not present great benefits.

• Every customer is looking for door to door services. Shipping alone will not be able to provide such a service.

• Lack of return cargo

With the growth in housing sector and industrial development in Kerala, demand for cement, marbles and tiles is expected to be growing. Therefore it is expected that Vizhinjam may be able to attract bulk vessels carrying cement and container vessels carrying marble and tiles.

According to the Drewry estimate, coastal traffic of cement is expected to grow at a CAGR of 7% from 51.8 thousand tonnes in 2007-08 to 505.5 thousand tonnes in 2043-44. The detailed analysis of container trade including marble and tiles have been done in Part I of this report.

Due to dynamic and differential regulation in the transportation of foodgrains across various states, it is difficult to anticipate coastal shipping of rice and wheat. Moreover, the problems with shipping remain the same as that of the tiles and marbles.

Table 17.5 Coastal traffic forecast: Vizhinjam port

Market Size in the Coastal Areas of Total Volume of Coastal Shipping Total Volume at Vizhinjam Port Maharashtra, Karnataka and Kerala % Market Share of Coastal Shipping Year ('000 tonnes) 000 tonne 000 teu and ('000 tonnes) Cement Marble Tiles Cement Marble Tiles Cement Marble Tiles Cement Marble Tiles 2007-08 2,032 1,056 324 51% 17% 10% 1,036.7 180.0 32.4 51.8 0.4 0.1 2013-14 3,459 1,901 617 70% 22% 18% 2,421.6 414.9 111.0 121.1 0.8 0.4 2014-15 3,600 2,053 679 70% 22% 18% 2,519.8 448.1 122.1 126.0 0.9 0.4 2015-16 3,747 2,218 733 70% 22% 20% 2,622.6 483.9 146.6 131.1 1.0 0.5 2016-17 3,900 2,395 791 70% 22% 22% 2,730.3 522.7 174.1 136.5 1.0 0.6 2017-18 4,062 2,587 855 70% 22% 25% 2,843.1 564.5 213.7 142.2 1.1 0.7 2018-19 4,265 2,742 915 70% 22% 25% 2,985.3 598.3 228.7 149.3 1.2 0.8 2019-20 4,478 2,906 979 70% 22% 25% 3,134.6 634.2 244.7 156.7 1.3 0.8 2020-21 4,702 3,081 1,047 70% 22% 25% 3,291.3 672.3 261.8 164.6 1.3 0.9 2021-22 4,937 3,265 1,120 70% 22% 25% 3,455.8 712.6 280.1 172.8 1.4 0.9 2022-23 5,184 3,461 1,199 70% 22% 25% 3,628.6 755.4 299.7 181.4 1.5 1.0 2023-24 5,443 3,669 1,283 70% 22% 25% 3,810.1 800.7 320.7 190.5 1.6 1.1 2024-25 5,715 3,889 1,360 70% 22% 25% 4,000.6 848.8 339.9 200.0 1.7 1.1 2025-26 6,001 4,123 1,441 70% 22% 25% 4,200.6 899.7 360.3 210.0 1.8 1.2 2026-27 6,301 4,370 1,528 70% 22% 25% 4,410.6 953.7 382.0 220.5 1.9 1.3 2027-28 6,616 4,632 1,620 70% 22% 25% 4,631.2 1,010.9 404.9 231.6 2.0 1.3 2028-29 6,947 4,910 1,717 70% 22% 25% 4,862.7 1,071.5 429.2 243.1 2.1 1.4 2029-30 7,294 5,205 1,820 70% 22% 25% 5,105.9 1,135.8 454.9 255.3 2.3 1.5 2030-31 7,659 5,517 1,929 70% 22% 25% 5,361.2 1,204.0 482.2 268.1 2.4 1.6 2031-32 8,042 5,848 2,045 70% 22% 25% 5,629.2 1,276.2 511.2 281.5 2.6 1.7 2032-33 8,444 6,199 2,167 70% 22% 25% 5,910.7 1,352.8 541.8 295.5 2.7 1.8 2033-34 8,866 6,571 2,297 70% 22% 25% 6,206.2 1,434.0 574.3 310.3 2.9 1.9 2034-35 9,309 6,965 2,435 70% 22% 25% 6,516.5 1,520.0 608.8 325.8 3.0 2.0 2035-36 9,775 7,383 2,557 70% 22% 25% 6,842.3 1,611.2 639.2 342.1 3.2 2.1 2036-37 10,264 7,826 2,685 70% 22% 25% 7,184.5 1,707.9 671.2 359.2 3.4 2.2 2037-38 10,777 8,295 2,819 70% 22% 25% 7,543.7 1,810.3 704.8 377.2 3.6 2.3 2038-39 11,316 8,710 2,960 70% 22% 25% 7,920.9 1,900.8 740.0 396.0 3.8 2.5 2039-40 11,881 9,146 3,108 70% 22% 25% 8,316.9 1,995.9 777.0 415.8 4.0 2.6 2040-41 12,475 9,603 3,263 70% 22% 25% 8,732.8 2,095.7 815.8 436.6 4.2 2.7 2041-42 13,099 10,083 3,427 70% 22% 25% 9,169.4 2,200.5 856.6 458.5 4.4 2.9 2042-43 13,754 10,587 3,598 70% 22% 25% 9,627.9 2,310.5 899.5 481.4 4.6 3.0 2043-44 14,442 11,117 3,778 70% 22% 25% 10,109.3 2,426.0 944.4 505.5 4.9 3.1

Source: Drewry Research

18. Cruise market

This section intends to understand the potential for developing a cruise terminal at Vizhinjam port and assess the potential traffic which could be targeted.

Key findings

• Kovalam is a major tourist destination in India. This can be leveraged to attract cruise vessels at Vizhinjam

• High port dues and inadequate cruise vessel and passenger handling facilities are seen as a major deterrent for cruise operators in India

• A marketing and promotion strategy along with world class specialised cruise facilities at competitive port charges can promote cruise tourism at Vizhinjam

• Average passenger spend per port is around USD 100-120. This could bring in revenue of around USD 80-96,000 per vessel call

• Collaborative effort of State government, players in the hospitality industry and cruise operators are a prerequisite

18.1 Overview

Tourism has a very important role in Kerala’s economy and is one of the major tourism economies of the country. Kerala state provides multiple and diverse tourist destinations, which includes beaches, backwaters, hill stations and wildlife sanctuaries. Vizhinjam port is in Kovalam, which is known for its beaches and is very popular among tourists.

Table 18.1 District wise break-up of tourists in Kerala in 2008

No. Districts Foreign Annual Growth Domestic Annual Growth

1 ALAPPUZHA 49,866.0 23.2% 234,700.0 37.5% 2 ERNAKULAM 193,013.0 16.9% 1,509,686.0 36.1% 3 IDUKKI 51,025.0 9.8% 531,970.0 5.3% 4 KASARAGODE 825.0 -5.0% 135,581.0 0.3% 5 KOLLAM 8,728.0 -1.4% 180,943.0 24.3% 6 KANNUR 3,143.0 2.5% 395,121.0 5.3% 7 KOZHIKODE 9,966.0 -0.5% 595,985.0 4.4% 8 KOTTAYAM 27,230.0 -0.5% 230,831.0 21.9% 9 MALAPPURAM 10,166.0 4.1% 323,448.0 3.3% 10 PALAKKAD 785.0 27.6% 324,399.0 2.8% 11 PATHANAMTHITTA 349.0 -36.2% 59,832.0 -1.9% 12 THRISSUR 3,398.0 -26.8% 1,671,174.0 8.1% 13 THIRUVANANTHAPURAM 234,797.0 21.1% 1,102,115.0 16.2% 14 WAYANAD 5,638.0 37.7% 295,465.0 15.3%

Total 598,929.0 16.1% 7,591,250.0 14.3%

Source: Government of Kerala-Tourism Department

The total tourist arrival in Kerala shows that almost 0.6 million foreign tourists arrived in Kerala in 2008, while domestic tourists were close to 7.6 million. Tiruvananthapuram district’s share in foreign and domestic tourist is around 21% and 16% respectively. It is quite evident that Tiruvananthapuram district is a major foreign and domestic tourist destination in Kerala. Vizhinjam is part of Tiruvananthapuram district, and considering the tourism activity and geographical location, Vizhinjam port is well placed to attract cruise vessels.

Figure 18.1 Break-up of foreign tourist arrival in 2008

23.6%

43.9%

8.7%

7.3% 3.5% 5.9% 7.2%

U.K FRANCE GERMANY U.S.A MA LDIV ES SWEEDEN Others

Source: Government of Kerala-Tourism Department

Broader mix of tourists in Kerala shows that Kerala has potential to attract and serve varying tourists needs. However, despite its prominence on the tourist map of India, Kerala is yet to make progress in order to increase its share in Cruise market. Kerala offers a window of around 5-6 months (November to April) for cruise vessel operations and can leverage its climate and culture to promote itself as future cruise destination. Kerala has advantage that it can offer diverse option to interest tourists along with shopping options for handicrafts. Further, Kovalam is also known for its traditional ayurvedic treatment, which is quite popular among foreign and domestic tourists.

18.2 Advantages for local economy

Cruise tourists have high disposable income and propensity to spend on leisure activities and shopping. As per industry estimates, average passenger spend per port is around USD 100-120. The economic benefit from cruise ships would in the form of expenditure made by passengers and crew on various goods and services. This would primarily include:

Shore excursion

Restaurants and hotels

Local transport

Duty free shop

Ship Supplies

Ancillary services i.e. Telephone, internet, medical, customs, etc.

This is likely to create new job opportunities and provide boost to the local economy, which is primarily dependent on tourism industry. In addition to this crew of the ship also spend at

18.3 Potential for Vizhinjam

Cruise industry had recorded an annual average passenger growth rate of 7.4% per annum between 1990 and 2008. Major players in the cruise industry focus on America and European markets. However, they are increasingly looking for alternate destinations in off-

season (winters). India, with its vast coast line and tourist attractions can provide good alternate to global operators, particularly looking at short-duration cruise – (3-6 days).

Cruise tourism in India holds a good opportunity, as increasing number of Indians are going for international cruises. As per market estimates, around 70,000 Indians went for international cruises in 2008-09, compared to around 35,000 in 2003-04. The Y-o-Y growth in the traffic is expected to be around 20-25%. Particularly, first timers from India go to Singapore or Malaysia due to proximity and shorter cruises, compared to America and Europe.

As a cruise destination, Vizhinjam has commercial potential provided it develops an efficient and world class cruise terminal. Currently, Kovalam region has been focusing on general tourism and resort based facilities. However, this could be changed by developing a passenger terminal to attract cruise vessel traffic. It is very important to convince cruise lines that port is committed to develop and provide the required infrastructure and passenger facilities.

It is expected that good infrastructure supported by favorable policies and tariffs can assist in attracting cruise vessels in India. Further, bunker prices in India are almost 33% higher than international prices. To avoid this cruise vessels tend to include Colombo in itinerary.

Vizhinjam, being a minor port have the flexibility of setting up tariff as per the market dynamics and can provide the required infrastructure at competitive tariff. There are number of factors, which a cruise company will consider before committing to a particular port. This primarily includes:

Safe access for the vessel A protected berth Large passenger terminal facilities Transport facilities for excursions Shopping (Duty free shops) and recreational facilities Ship chandler for supplies

18.3.1 Market Estimation

In 2008-09 Kochi port handled 36 cruise ships, compared to 43 in the previous year. In fact, Kochi has been handling cruise vessels despite having limited facilities for passengers and vessel handling. However, to take advantage of increasing number of Indian tourists, cruise line operators have shown interest in Kochi port and have been trying to include it in their itinerary. In 2009, Louis Cruises made Kochi its home port in India for providing weekly cruise itineraries from Kochi to Maldives and Colombo. As per the initial estimate around 60,000 Indian tourists are expected to cruise between December 2009 and April 2010. The first voyage from Kochi commenced on December 02, 2009 to Maldives. Louis Cruises has deployed MV Aquamarine, having a capacity of 1,200 passengers.

However, in January 2010, Louis Cruises India, decided to pull out of Kochi due to high port charges, which were putting immense pressure on operating costs and profitability of the company. As per Louis Cruises, in Colombo, the charge for a day is USD 4,000, while

at Cochin Port per day charges are USD 12,500 (As per CHPT). This is despite Kochi port offering 33.33 % discount on the charges approved by the TAMP. Further, Kochi port was also not levying a passenger fee. It is reported that Louis cruises suffered a losses of around USD 3.5 million due to higher tariff. As per the Louis Cruise, India lacks a proper policy to encourage cruise shipping, which results in higher cost of operations, poor port infrastructure and uncoordinated embarkation procedures. The company had announced to lay-off and relocate 200 crew members hired especially for the cruise operations in India.

Figure 18.2 Potential cruise routes

In the past, Star Cruises faced a similar situation and decided to pull out of Indian market in 2007 after operating for two seasons. Star cruises had deployed Superstar Libra with total capacity of more than 1,400 passengers. In 2007, Indian Ocean Cruises, Indian arm of the Foresight Group launched a new service connecting Lakshadweep, Malabar Coast and Sri Lanka. The vessel deployed ‘MV Ocean Odyssey’ had a limited capacity of around 250 passengers and 120 crew. However, Indian Ocean Cruises also had to stop the services due to high operating costs.

Despite the market potential, Vizhinjam port needs to have a marketing plan to promote Vizhinjam as a cruise destination. This could be achieved through cooperation between various the following agencies:

1. Kerala Government- Tourism department

2. Hospitality industry- Major hotels and resorts

3. International Travel agencies 4. Cruise terminal operators 5. Cruise operators

Considering the past trends and the market potential, Vizhinjam port can expect to handle around 30-35 cruise vessel calls/ annum in the initial years of operations, which could eventually increase to around 120-130 calls per annum in the long run. Further, if Vizhinjam can develop adequate port and supporting infrastructure then it may be considered by some of the big operators also and that can assist in attracting some of the larger ships having capacity in the range of 2,000-3,000 passengers. The estimated cruise vessels call has been presented in Table 18.3.

Table 18.2 Cruise vessels traffic forecast

Cruise Vessels (no. of sailings) No. of Passengers

2013-14 30 24,000 2014-15 30 24,000 2015-16 60 48,000 2016-17 60 48,000 2017-18 60 48,000 2018-19 60 48,000 2019-20 60 48,000 2020-21 90 72,000 2021-22 90 72,000 2022-23 90 72,000 2023-24 90 72,000 2024-25 90 72,000 2025-26 90 72,000 2026-27 90 72,000 2027-28 90 72,000 2028-29 90 72,000 2029-30 90 72,000 2030-31 120 96,000 2031-32 120 96,000 2032-33 120 96,000 2033-34 120 96,000 2034-35 120 96,000 2035-36 120 96,000 2036-37 120 96,000 2037-38 120 96,000 2038-39 120 96,000 2039-40 120 96,000 2040-41 120 96,000 2041-42 120 96,000 2042-43 120 96,000 2043-44 120 96,000

Source: Drewry Research

19. Ship repair market

This section intends to understand key drivers for ship repair market and potential for developing a ship repair yard at Vizhinjam.

Key findings

• Vizhinjam is between two already established repair facilities i.e. Dubai and Singapore.

• To compete with established repair facilities Vizhinjam will have to establish trained and motivated workforce with superior independent inspection /quality control department.

• Typically a yard might expect to capture up to 10% of its target market. However, this could vary according to the trading routes, calling frequency, deviation distances, ownership and competition.

Conclusions

With increasing global fleet size demand for ship-repairs is expected to grow thus providing new opportunities for existing and new ship-repair yards. However, the competition is quite intense. Yard which can offer shorter repair duration at a competitive price will enjoy a competitive advantage. To effectively compete with the existing facilities in the region and to provide a good alternate for the vessels in the target market, Vizhinjam may have to opt for at least 2 graving docks capable of handling Panamax vessels along with 4 land berths.

19.1 Overview

The key determinant of shiprepair demand is the shipping that is active within the vicinity of the proposed yard. Vizhinjam’s location means that it potentially will benefit from traffic calling at ports on the lower west coast of India. Additionally, Vizhinjam will have considerable shipping passing through main East –West shipping route. However, Vizhinjam is between two already established repair facilities. Tanker traffic heading into the AG will probably have completed repairs in Singapore but the dry cargo vessels coming from the AG will probably be in ballast and possible candidates for docking /repairs Thus Vizhinjam could play a role subject to having the required facilities and very competitive rates, comparable to Chinese ship repair facilities.

Tankers upon completion of cargo discharge require between 3-5 days to conduct tank cleaning /gasfreeing. Usually having discharged in Japan/Korea/China the passage to Singapore allows adequate time for cleaning and post repair as they head for AG the passage provides time to test out the system.

Vizhinjam could also similarly position itself and although the passage to loading port is shorter but enough for testing post repairs. But the considerations will be the provision of tank farm and tanker repair reputation. Ship operators decide on the basis of earlier experience, if any, and would like to feel assured that yard is able to keep to and deliver on schedule and budget. For this reason although Japanese yards rates are high but their reputation for delivery on time and per quotation bring in many repeat customers. Other benefit at Japanese yards is that they have highly efficient inspection and quality control department therefore the intensity of supervision requirement is less demanding and the finished product is always excellent. Vizhinjam should emulate the Japanese model, establishing a trained and motivated workforce with superior independent inspection /quality control department.

19.2 Ship Repair Market

Shiprepair opportunities arise from the vessels that trade within the vicinity of the repair yard, however it is the number of different vessels rather than journeys made that are the primary basis for assessing the potential demand. The catchment fleet for the proposed yard therefore has to be estimated through analysis of the shipping traffic statistics to determine a population of vessels trading. The trading patterns of these vessels will have to be examined to form the basis of determining the likely market share that the facility should be able to attract.

A rigorous analysis of the catchment traffic will be to estimate potential capture rates for dockings for a repair yard at Vizhinjam. This could vary and depend on the following factors:

Ship type

Age distribution

Trading patterns

Call frequency

Deviation times

Future trade growth

Docking requirements.

19.2.1 Market drivers

Demand for ship repair is driven by a number of factors:

Global ship fleet age profiles and class requirements.

Damage and incidents repairs.

Port state control and other inspections.

Freight market.

Sale drydockings.

Reactivation.

Trade growth, fleet growth and the regional disposition of trade.

Diversion considerations.

Vessel newbuilding quality.

Demolition market.

Owners'/managers' attitude to R&M.

Ship conversion.

Non-merchant shiprepair yard activities, e.g. the offshore oil industry.

19.2.2 Scheduled and unscheduled demand

Scheduled repairs to merchant ships provide the largest work element. They derive from the need to undertake routine maintenance work and any other work necessary to keep the vessel in a satisfactory, seaworthy condition. The main requirements for this work are set out by the ship’s classification society.

Class Rules require the vessel to undertake periodic surveys – the conditions of which become more demanding as the vessel ages. This work involves drydocking and so, clearly, is a major determinant of shiprepair demand. For most commercial ships today the interval between drydockings averages 2½ years. Owner’s requirements may exceed those of the class society requirements, and hence repair demands reflect class requirements, owner’s maintenance regimes and wear and tear arising from the ship’s operation.

Unscheduled repairs are obviously less predictable. Primarily, they are damage-related – arising from collisions, groundings, etc. – or resulting from the effects of some form of mechanical failure with varying degrees of seriousness. Less serious repairs may be completed by the crew, deferred until the next docking, undertaken in port or carried out by riding squads at sea. The main examples are:

Casualties

Port state control

Sale drydocking

Reactivation

19.3 Factor influencing capture rates for a yard. Scheduled and unscheduled demand

Typically a yard might expect to capture up to 10% of its target market however this could vary according to the trading routes, calling frequency, deviation distances, ownership and competition. Additionally certain ship types have operational criteria or technical complexities that influence their docking decisions. Distances from terminal or calling ports is a key factor, and specifically the deviation distance that would be required to bring the ship from its last port of call (or off its ballast leg routing) into any particular repair yard.

Ships that generally operate in sectors that have one-way cargoes will tend to have ballast return journeys or will tend to operate on a tramp basis. Both of these factors increase the level of competition that may be expected. During ballast journeys the ship will be in an unloaded condition and hence ready for repair at any yard conveniently located to the ballast leg and vessels that are tramping in order to minimise long ballast journeys without income will tend to have a wider geographic coverage and can generally pick up a cargo to discharge and reload close to the selected repair location. Ships operating on liner services are most likely to repair close to terminal ports as they do not have ballast voyages and will be partially loaded at intermediate ports. Container ships, car carriers and some RoRo services are typical of this.

19.4 Types of repair dock

For small ships, there may be repair options using marine lifts, marine railways or slipways but for the larger tonnage -primarily, the ocean-going vessels – there are three primary alternatives, namely:

Graving docks are large, excavated docks built on land and with a gate at the seaward end. The ship enters the dock, the gate is closed and the dock is then pumped dry.

Floating docks are large, open ended, rectangular steel structures which have the capability to lift ships out of the water. They are a saleable asset – there is a sale and purchase market for floating docks and they tend to be the cheapest and quickest means by which a facility can expand its docking capacity.

Shiplifts comprise docking cradles (for ship transfer) on large, normally articulated steel platforms (or marine elevators) which are able to lift ships out of the water and lower them

back in again. Once lifted, the ship is then manoeuvred to one of the several shore positions. The docking cradle and block arrangement has to be prepared specifically for each vessel handled.

Each type of facility is constrained by its dimensions and/or available land area. This will have a bearing on how well the facility can cope with more than one vessel at a time. In addition, there will be a whole host of managerial and logistical elements that will determine the efficiency of the yard or repair facility.

19.5 Repair yard basic needs

The following are some basic needs and issues for an efficient ship repair yard operation:

Water depth in the approaches and in the dock area that allows the handling of the target vessel size.

Deep-water piers are a necessity for “alongside” repairs. The piers will need to be supplied with appropriate cranage, power, water, access, etc.

Good access to – workshops within which tasks such as steel fabrication, machining, pipework and electrical fabrication can be undertaken either for the production of new/replacement elements or to undertake repairs. The capacity for engine and other equipment/gear repairs will be a further consideration.

Good access to storage areas. There will be a further need for outdoor areas for working on ship structures and equipment, dismantling, assembling or re-assembling modules, etc.

There will be other miscellaneous physical requirements – including offices, amenity areas, car parks, vehicle loading/holding/unloading areas, cranes, lighting equipment, power distribution facilities, security fencing, etc.

Facilities such as power, etc. need to be readily available and not subject to disruptions.

In addition to the physical factors, the repair facility will need the following capabilities and characteristics:

The planning and timetabling of ship stemming – the balance between “one-off” owners and owners looking at “block booking” arrangements.

Good relationships with agents, etc.

Workloads in the fabrication shops and the implications for outside assembly spaces.

The supply of steel and other inputs to the workshops.

Store levels, minimum stockholding levels and the speed/ability to re-stock.

Owners’ inputs and/or the need to bring in “obscure” parts (probably sourced from overseas).

Transportation considerations – to the site and within the site.

Relationships with sub-contractors.

Quality control, audit and information flows.

Accounting procedures.

19.6 Opportunities for Vizhinjam

India lacks in good ship-repair facilities and a number of yards in India are predominantly shipbuilding or naval yards, which also undertake some repair of merchant ships. Such yards are not generally preferred by international ship-owners. Many ship-owners in India still prefer to go to yards located outside India e.g. Dubai, Singapore, Colombo. With increasing global fleet size demand for ship-repairs is expected to grow thus providing new opportunities for existing and new ship-repair yards. However, the competition is quite intense. Price is clearly an important criteria but so is duration of repair, as this represents the amount of lost earnings for ship-owners. Therefore, a yard which can offer shorter repair duration at a competitive price will enjoy a competitive advantage. The technical competence and capacity of a yard to undertake different volumes and complexities of repair work will also be significant factors in terms of competition.

Advantages for Vizhinjam

• Proximity to main shipping route.

• Increasing vessel traffic on the west coast particularly for coal and iron ore.

• Passing vessel traffic.

• Expected limited cost of capital and maintenance dredging.

Disadvantages for Vizhinjam

• Strong competition from existing ship repair yards in Arabian Gulf, Sri Lanka and Singapore.

• Limited availability of trained manpower.

• Very humid climate conditions, not very suitable for painting, particularly during monsoon.

• Kerala state perceived as prone to labour problems.

• Needs to upgrade its international air connectivity for prompt imports of machinery and spares.

19.6.1 Infrastructure requirement

To effectively compete with the existing facilities in the region and to provide a good alternate for the vessels in the target market, Vizhinjam may have to opt for at least 2 graving docks capable of handling Panamax vessels along with 4 land berths. Table 19.1 provides the summary of the proposed infrastructure along with expected revenue and capital costs.

Table 19.1 Ship repair infrastructure, revenue and direct expenses

Facility Type -Graving Docks

No. Docks 2 No. of land Berths 4 Capital cost US$ mn 70-80 No. of vessels docked/year 100 Revenue US$ mn 40-50 Direct Costs US$ mn 35-40

The estimated capital cost for developing ship-repair infrastructure largely depends on land acquisition costs and dredging costs. Therefore, any increase in these two cost components can significantly inflate the total project cost.

Part – III Tariff and Revenues Forecast & Port Strategy

20. Competitive positioning and marketing

This section intends to understand the competitive environment of Vizhinjam port and its likely impact on its positioning, port development and marketing strategy.

Key findings

• Vizhinjam port’s hinterland is shared by two existing major ports i.e. Cochin and Tuticorin, therefore inter –port competition is quite intense. Similarly, Colombo is expected to provide stiff competition for transhipment traffic.

• Vizhinjam port could act as catalyst in development of local economy. However, port development at Vizhinjam would entail significant investment in breakwater, dredging and land reclamation.

• In addition to containers, Vizhinjam has potential to attract limited volume of general cargo traffic.

• Potential for developing cruise terminal at Vizhinjam port.

Conclusions

In view of the market uncertainties and competition, it is suggested that port opts for a phased development plan. This provides flexibility for expansion as per the market demand and helps in limiting initial capital investment. Further, a ‘Multi-purpose port’ at Vizhinjam could assist in attracting bulk and general cargo thus providing additional revenue for port. Similarly, common port infrastructure can be used for developing a cruise terminal, which could add to port income and also provide stimulus to local economy.

20.1 Strategy development approach

Assessment of port Assessment of Identification of Formation of characteristics business environment competitive advantage core strategy

Location Existing hinterland Target markets economic activity Hinterland Competitive positioning Identification Developing Development of strategy hinterland economic Marine Access content activity Hinterland Services required Competition and Connectivity capacity Business models Partnerships and Potential alliances opportunities Port master plan

20.2 Port characteristics

Figure 20.1 Figure 20.2 Existing Fishing Harbour at Proposed Vizhinjam port Vizhinjam location

20.2.1 Proposed port infrastructure (Based on Techno-economic feasibility report prepared by L&T Ramboll)

• Port facility

New break-water of around 3.9 kms to be built in phase 1.

20m draft after 1 nm from existing shore.

1km stretch of coast will be reclaimed for the port.

Container yard 6 km inland from the port.

Warehouse 4 km inland from the port.

• Rail connectivity

Nearest railhead 10 km away: Balrampur.

Initially single track connectivity, which is to be expanded to double track later.

Three alternatives available for providing last mile rail connectivity to port.

• Road connectivity

Road connectivity (NH-47) upto Kovalam.

Bypass under construction.

2km stretch to be developed to provide last mile road connectivity.

60m wide stretch of land to be acquired connecting port to bypass.

Initially two lanes, which will be expanded to four lanes.

• Land availability:

15 hectares of backup land is available. Additional 105 hectares to be acquired for Road and Rail development, warehousing, container terminal, truck terminal and resettlement & rehabilitation.

460 acres (173 hectares) will be reclaimed in Phase1 of port development.

• Other information

Main East-West shipping route 13nm away from Vizhinjam Port.

Minor port development in process eg. Azheekkal, Beypore, Ponnani, Alappuzha and Thankasserry.

20.2.2 Hinterland of Vizhinjam port

District Sector Industries

Primary Hinterland Kottayam Agriculture, Manufacturing Rubber, food products, engineering Kollam Mining Minerals and Mining Thiruvananthapuram Textile Handlooms Allepey Handicraft Coir products

Secondary Hinterland Kannur Handloom, Power Handlooms, Power, Bedi Idukki Agriculture Agriculture and Forest Based Thrissur Textile, Ceramics Power Looms, Handlooms, textile, Timber, tile Palakkad Textile Power Looms, sericulture Kozhikode Agriculture Rubber Wayanad Mining Minerals and Mining Ernakulam IT Information Technology

Figure 20.3 Hinterland of Vizhinjam

Kochi

Tuticorin Vizhinjam

Primary hinterland Secondary hinterland

20.3 Business environment: Emerging opportunities

• Policy adopted for setting up of SEZs in Kerala. Twenty-four new SEZs have been approved.

• Policy to attract investments in manufacturing, agro-processing and knowledge based industries and services.

• Support to strengthen and promote traditional industries.

• Incentives to facilitate growth of IT sector through incentives.

• Development of industrial parks and industrial corridors.

Considering the current thrust areas and policies, it seems that traditional industries will continue to play vital role in Kerala’s manufacturing sector. In addition to this, services sector is likely to witness increased investments and growth primarily led by IT sector.

20.4 Competitive analysis

20.4.1 Porter’s Analysis

Like other industries, port sector have also become very competitive over the years. Ports are competing at global and regional scale. This has resulted in improved efficiency, lower port tariffs, value added services like warehousing, increased automation and use of IT for managing documentation and transportation of cargo, etc.

Porter’s Five Forces Model is useful in understanding the key parameters, which shape the competitive scenario for the industry and helps in understanding the impact of each variable. Following are the key market forces, which play an important role in developing a competitive scenario in the port industry.

Figure 20.4 Porter’s Frame Work

Vizhinjam port will face intense competition from existing ports in the region and will have to adopt proactive strategies to attract cargo from its immediate and secondary hinterland. Similarly, for container transhipment traffic, Vizhinjam port will face very stiff competition from Colombo port along with other transhipment hubs outside Indian subcontinent region.

1 Rivalry among the existing players

• Inter port competition ports -: Vizhinjam’s shares a very large common secondary hinterland with two existing ports i.e. Cochin and Tuticorin port. Therefore, the likely competition for Vizhinjam for hinterland traffic is expected to be very intense. Further, these ports have the advantage of existing supporting infrastructure, which is very important for facilitating trade through any port. Similarly, for container transhipment traffic, Vizhinjam has a strong competition from the Colombo port. Colombo is a traditional transhipment hub on East –West Shipping route and primarily serves the Indian sub continent (ISC) market. It is also well positioned to serve the increasing transhipment volumes from the ISC region. All major container shipping lines are already using the Colombo port and see no major advantage in shifting hub port activities to any new port in South India. In absence of any inherent advantage over Colombo, the Vizhinjam port will have to compete very aggressively on price.

• Intra port competition -: Intra port competition is primarily seen when port has multiple terminals and operators for handling similar cargoes. In India this is quite obvious in ports like JNPT, where three container terminals are in direct competition and are targeting the same hinterland and cargo.

2 Threat of new entrant

Any new entrant adds to the existing competition, therefore, it is important to identify the threat of possible new entrants. For a port a new entrant can be in form of a new port in the region, competing for the same cargo or augmentation of facilities and cargo handling capacities at the existing ports. The degree of threat depends on the following key elements:

• Capital Investment: - New port development requires heavy capital investment in civil construction, equipments and development of supporting infrastructure coupled with long gestation period. This acts as a strong entry barrier because any new entrant in the port sector will have to have strong financial resources along with capability to compete with the existing players. Typically, a new entrant is expected to provide efficient services at lower costs.

• Switching costs: The threat of a new entrant increases if the switching costs for various users and service providers are not very high. In such a scenario existing ports can register significant loss in the market share. This is very evident from the example of JNPT, which has taken away the business from Mumbai port.

• Cost advantage: If the new entrant is in a position to provide cost advantage in the form of reduced inland costs, shipping costs, transportation time, higher efficiency i.e. faster turnaround of vessels, deep draft, etc. then the threat of a new entrants increase. However, the existing ports have the advantage of sunk costs, developed supporting infrastructure, investments made by users in the form of warehouses, ICD, CFS, etc. A new entrant would find it difficult to replicate this over short and medium term.

Considering the above points, it can be said that Vizhinjam port faces relatively strong threat of a new entrant is quite strong for both hinterland and transhipment traffic. Commissioning of Vallarpadam terminal in 2010, may assist Vallarpadam in attracting some new main line calls. This could result in partial shift of traffic from common secondary hinterland to the new terminal, as some shippers will prefer direct service, even if it results in marginal increase in inland haulage cost. Similarly, transhipment traffic is also quite price sensitive and the shipping lines can easily shift from one hub to another if it results in reduction in the overall network cost. Colombo is planning to expand its capacity and can increase its overall container handling capacity to around 15-16 million TEUs. In addition to this, development of a Greenfield port in Hambantota is likley to provide scope and infrastructure for developing additional container handling capacity in southern Sri Lanka.

3 Threat of substitute: - Ports are vulnerable to changing production and demand patterns. Vizhinjam port also faces limited threat of substitutes because the demand for various containerised cargo generated in it’s hinterland can fluctuate with changes in the commodity prices and production and consumption patterns. Importers of food products, garments, handicrafts, tea, coffee, etc., enjoy strong bargaining power and flexibility to buy from alternate suppliers from other competing countries. Further, changing production patterns increases the threat of substitute for any port. Manufacturing units in the hinterland can shift to new locations or regions to take advantage of tax incentives, lower cost of production and availability of raw material. This could lead to slower growth in hinterland traffic and underutilization of port infrastructure. Change in technology could also lead to change in demand for certain products. Like synthetic fibers can replace natural fibers i.e. jute, coir, cotton etc.

Similarly, transhipment container traffic growth can get adversely affected by increasing volume of container traffic handled by direct mainline services. It is expected that with growing traffic and improved port infrastructure, Indian ports will be in a better position to attract increasing number of main line calls, thus reducing dependence on feeder operations.

4 Bargaining power of users

Vizhinjam port is expected to operate in a very intense competitive environment thus leading to strong bargaining power of various users i.e. carriers, shippers and tenants. In a competitive environment, users will have alternative facilities and they will be in a position to demand higher efficiency and lower tariffs. This is quite evident at various transhipment hubs where major shipping lines are in a position to negotiate significant volume discount. The changing industry dynamics have also resulted in stronger bargaining power for some of the players. Recent mergers and acquisition in the liner shipping industry has provided significant market share to some players. Thus putting them in a very strong bargaining position with ports and other service providers like transporters, rail operators etc. However, ports can limit the bargaining power of users by entering into strategic partnership with users. Users, having equity stake or strategic partnership in the port tend to invest in the port facilities thus making it difficult for them to shift from the port or terminal.

5 Bargaining power of service providers

Currently bargaining power of service providers at ports is moderate. The most influential lobby is the port labour union because they have a direct control over day to

day vessel and cargo related operations. However, private terminal operators have limited bargaining power because no operator would like to disrupt the normal terminal operations, as it would lead to lower efficiency and can lead to loss of business in the medium and long run. However, if the service providers in the port have a significant market share then they are able to influence users and enjoy relatively stronger bargaining power. In case, individual service providers have a limited market share then they tend to form an association to safeguard their interest and to negotiate with port operators and authorities. These associations can be seen generally at various ports i.e. Association of Custom House Agent, Ship agents Association, Transporters Association, etc.

20.5 Positioning Strategy for Vizhinjam

Considering the tough competition which Vizhinjam port is expected to witness from ports in India and regional hubs like Colombo, it should adopt a suitable positioning strategy to differentiate its services from competitors and to develop an optimum infrastructure to handle available cargo and resulting vessel traffic. Positioning is how you differentiate your product or service from that of your competitors and then determine which market niche to serve. However, ports are part of the service industry where differentiation of the offerings becomes quite difficult and the perceived advantages result in marginal gains. Therefore, Positioning would have to focus more to the perception of the customers than to the product or service differentiation. Some of the key differentiating factors for ports are:

Proximity to hinterland

Good rail and road connectivity

Adequate infrastructure for efficient operations

Experience of operators

Potential for expansion to handle future increase in traffic

20.5.1 Competitive advantage/disadvantage for Vizhinjam

Advantages

Proximity to International (East West) trade lane

Water depth of 20 m within 1 nm from the coast

Limited maintenance dredging

Tariff not regulated by TAMP

Scope of development of tourism infrastructure i.e. cruise terminal

New capacity; congestion free

Disadvantages

Limited immediate hinterland traffic

Large contested hinterland

Need for development of supporting infrastructure

Intense competition from ports in South India and Colombo

High initial capital outlay required for construction of breakwater

Limited land availability leading to significant dredging for land reclamation for port and associated development

Limited potential for expansion of manufacturing sector in the immediate hinterland

Total investment including FDI in Kerala state is lower as compared to the other southern states i.e. Tamil Nadu, Karnataka, Andhra Pradesh

Therefore, considering the overall traffic potential in the hinterland and the likely competition and infrastructure limitations, Vizhinjam port will have to consider a new positioning strategy to maximise cargo throughput and to limit the initial capital expenditure on berths and superstructure. To mitigate market and financial risks Vizhinjam Port should differentiate its services by developing a modern and efficient Multipurpose Port for handling container and general cargo traffic along with non-cargo vessels. The port development plan should provide the flexibility of expansion in the future on the basis of the growth in traffic and demand from various users.

20.6 Potential opportunity and core strategy

20.6.1 Potential opportunity for Vizhinjam port

The market feasibility study has shown potential for container traffic and limited break-bulk traffic at Vizhinjam port. However, the competition is very intense and to tap the potential traffic, Vizhinjam port will have to provide efficient infrastructure at very competitive tariff. Vizhinjam port can also leverage its locational advantage and tap Cruise market, which has a good potential to grow in Southern Kerala. Further, strategic partnerships with key players like cement companies in Gujarat, tank farm companies, cashew processing units in neighbouring districts, etc. can assist new port in attracting additional cargo traffic and to compete with various ports in the region.

20.6.2 Core Strategy

The proposed positioning strategy of developing a ‘Multi-purpose port’ at Vizhinjam port would address some of the following key issues:

• Kerala has a long coastline but is primarily served by just one major port in the state i.e. Cochin. The proposed new port could serve the local economy and provide an alternate gateway port to shippers in the hinterland. However, considering the inter port competition and limited availability of traffic in the immediate hinterland; it is suitable to have a port which provides the flexibility to handle optimum cargo mix to maximize traffic volumes and revenue.

• A new port development could act as a catalyst for economic development in the Southern Kerala hinterland by providing infrastructure for efficient handling of import and export cargo.

• Tourism industry has an important role in the local economy of Southern Kerala. A multi-purpose port with a Cruise terminal is expected to boost tourism industry in the region, resulting in generation of additional direct and indirect employment opportunities for the local population.

• Multi-purpose port development in a phased manner, compared to a mega container/bulk terminal can allow port planners to limit the initial capital expenditure on port infrastructure and superstructure thereby reducing project risk. This could assist in attracting potential investors for Vizhinjam port development.

Considering both obvious and latent traffic potential, Vizhinjam Port’s core strategy could include the following:

• Phase wise development of an efficient multi-purpose port to provide container and bulk/general cargo handling infrastructure.

• Attracting container traffic and general cargo traffic being generated in the immediate and secondary hinterland by delivering reliable efficient cargo handling services and infrastructure at competitive price.

• Strategic partnership with key players like shipping lines, terminal operators, service providers and shippers.

• Leveraging proximity to East-West shipping route for attracting transhipment container traffic at Vizhinjam’s container terminal, subject to profitability.

• Establishing a new cruise terminal to attract potential cruise vessel traffic.

A similar strategy has been adopted by some of the Greenfield ports in India. Mundra and Pipavav port are two good example of such phased development.

Port Development strategy- Mundra Port

Phase1

• Promoting direct port connectivity through own 64Km railway siding

• Leveraging deep draft port to attract larger vessels

• Developing 4 multipurpose berths in Phase 1

• Mechanised break bulk handling equipment

• Promoting coast based industries

• Development of supporting infrastructure like tank farms, warehouses

Phase 2

• Development of dedicated container terminal

• International container terminal operator

• Tie up with international shipping lines to promote container volumes

• Investment in logistics infrastructure i.e. CFS, ICDs, container trains

• Port based steel and power plants

• Port based SEZ

• Single point mooring for handling of liquid bulk

• Investment in RO-RO terminal

Port Development strategy- Pipavav Port

Phase 1

• Initially started with multipurpose berths

• Handled coal, liquid bulk, break-bulk and containers

• Joint Venture with Indian Railways for gauge conversion

Phase 2

• Sold stake to A P Moller and now promoting Pipavav as deep draft container port

• Dredging to have vessel acceptance draft of 14.5 m

• New quay cranes and gantry cranes added to handle containers

• Construction of a new jetty

• Development of supporting infrastructure i.e. CFS, rails sidings, reclamation of additional 70 hectare of land

20.6.3 Port configuration for Vizhinjam multipurpose port

In view of the limited hinterland container and bulk traffic and intense competition for container transhipment business, it is suggested that the new port at Vizhinjam should be developed in phases. This provides the flexibility of adding new capacity as per the market demand and user requirements. Typically, a 30 year port development plan could include 3 phases of development. Phase 1 and 2 will primarily cater to the short and medium term demand, while phase 3 can be designed and developed to handle long term demand.

For assessing the port configuration and development plans for each phase, one has to estimate the requirements of berths and cargo handling equipments to cater to the expected cargo and vessel traffic. The number and size of vessels for different types of cargo would depend on expected parcel size and dimensions of the various types of vessels deployed for handling various types of cargo.

The proposed new ‘Multi-purpose port’ at Vizhinjam could adopt the following development plan to tap the potential hinterland and container transhipment market.

Table 20.1 Port configuration and estimated cost of berths and cargo handling equipments

Length Approximate Cost Estimates No. of Units (m) (USD Million)

Phase 1 (FY 14-FY 20)

Container Berths 2 600 33.1 General Cargo Berth 1 250 13.2 Cruise Berth 1 250 13.2 Equipments Quay Cranes (Post Panamax) 3 18.2 Quay Cranes (Super -Post Panamax) 4 33.1 Mobile Harbour Cranes 2 13.2 Rubber Tyred Gantry Cranes (RTG) 21 39.4 Reach Stacker 3 1.7 Tractor Trailers 42 4.6

Sub Total 169.7

Phase 2 (FY 21-FY 30)

Container Berths 2 600 47 Liquid Berth 1 250 19 Equipments Quay Cranes (Post Panamax) 3 26 Quay Cranes (Super -Post Panamax) 4 47 Rubber Tyred Gantry Cranes (RTG) 21 19 Reach Stacker 3 55 Tractor Trailers 42 2

Sub Total 214

Phase 3 (FY 31-FY 44)

Container Berths 3 800 123 Cruise Berth 1 250 36 Equipments Quay Cranes (Super Post Panamax) 8 91 Rubber Tyred Gantry Cranes (RTG) 21 36 Reach Stacker 3 108 Tractor Trailers 42 5

Sub Total 400

Total 782.9

Source: Drewry Research

The suggested port configuration is based on the traffic forecast, which shows that container traffic would account for almost 90% of the port traffic. The remaining traffic will include bulk and general cargo like coal, fertilizer, timber, petroleum products and edible oil. In addition to this port will have to develop a dedicated cruise terminal to attract potential passenger traffic. The proposed general cargo berth design should provide the flexibility of converting them into container berths in the future.

Proposed container handling capacity in Phase 1 is adequate to handle 1 million TEU per annum, which is more than the expected traffic in the first 5 years. However, this is necessary to build confidence in the market and to attract major shipping lines and shippers. Deployment of cargo handling equipments can be staggerd for each phase. This could be decided on the basis of expected growth in traffic and other operational and financial considerations.

Similarly, a dedicated cruise terminal in Phase 1 is important to promote Vizhinjam as an alternate port for cruise vessels calling Indian coast. Further, a dedicated facility offering efficient service at competitive tariffs would encourage cruise operators who are interested in exploring Indian market but have been reluctant due to absence of a good dedicated cruise terminal.

In Phase 2, a liquid berth has been proposed. However, this will be required only if there are some key users like oil companies, Tank farm companies or private importers/exporters involved in trading and marketing of chemicals and petro products.

In addition to the estimated investment in berths and cargo handling equipments port will also require significant investment in development of the following common user infrastructure for efficient and safe port operations.

Construction of breakwater

Dredging

Land Reclamation

Navigational aids

Port Craft

Utilities

Land acquisition for development of rail and road linkages along with support infrastructure

Table 20.2 provides revised costs based on L&T Ramboll (Techno –commercial Feasibility Report) and IFC estimates for developing common user infrastructure and superstructure at Vizhinjam.

Table 20.2 Summary of revised cost estimates by L& T Ramboll (USD Mn)

Infrastructure* Phase 1 Phase 2 Phase 3

Break Water 99.5 37.4 152.1 Dredging 1.8 2.5 6.1 Other 9.0 6.3 20.5 Sub Total 110.3 46.2 178.8 Superstructure** Internal Transport Linkages 1.4 1.0 3.3 Storage Yards 3.6 3.8 28.9 Utilities 7.4 2.6 17.0 Others 1.6 2.2 3.6 Sub Total 14.0 9.6 52.7 Land Reclamation 43.1 30.3 98.7

Total 167.3 86.1 330.2

Note: * Excluding berthing structures, ** Excluding equipment

Source: L& T Ramboll-Techno –Commercial Feasibility Report-Development of Vizhinjam Port, IFC

L& T Ramboll cost estimates were based on the original plan of developing a mega container transhipment terminal at Vizhinjam. However, the proposed new port development and positioning strategy is quite different and therefore these cost estimates could be reviewed and adjusted as per the new port configuration.

20.7 Ownership model

There are different structures of port ownership, which are influenced by number of factors like socio-economic structure, type of cargo to be handled, location of the port. As per the World Bank definition, port ownership can be divided into following broad categories:

• Public Service Port: These ports are managed by a Port Authority generally working as part of the Ministry i.e. Ministry of Transport and shipping, Ministry of communications etc. Port Authority offers entire range of services required for the port operations. The port owns and operates every asset and employs labour for cargo handling. Most of the major ports in India are still working on the basis of service port model.

• Tool Ports: In case of tool port ownership model, the port authority owns, develops and maintains the port infrastructure and superstructure, including equipments. Port authority usually employs staff to operate all port authority owned equipments. However, cargo handling activities is generally undertaken by licensed private cargo handling agencies by using port infrastructure and equipments.

• Land Lord Port: Land Lord port is a mix of public –private ownership. Under this ownership structure, port authority acts as a regulatory body and as landlord, while port operations are managed by private entities. Many of the big ports across the globe have adopted this model quite successfully. Under this model, port infrastructure is developed by the port authority and is leased to private port operators and users. The port authority invests in dredging, construction of breakwater, quay etc. Private

operator invest in developing and maintaining superstructure required like, quay cranes, fork lifts, mobile harbour crane, support infrastructure like CFS, warehouse, office building etc. In some case private operators may invest in construction of berth also.

• Private Service Port: Under this ownership model, port land and other infrastructure and superstructure are owned by private entity. In some cases, private port owners could also take the responsibility of a port regulator.

Table 20.3 Comparison of port ownership models

Type Infrastructure Superstructure Port Labour Other Functions

Public Service Port Public Public Public Public Tool Port Public Public Private Public/Private Landlord Port Public Private Private Public/Private Private Service Port Private Private Private Private

Source: World Bank

20.7.1 Ownership Model for Vizhinjam

Landlord port model has gained popularity and have proved to be quite successful. Some of the leading ports like Rotterdam, Antwerp and Singapore have adopted this structure and have benefited from public-private partnership. In India also, most of the Greenfield ports are being developed on this concept. Even all major ports in India, which are governed by Major Port Trust Act, are adopting this model for future development and expansion. This assists in attracting necessary private investments in port development and also results in higher efficiency in port operations. Considering this, Vizhinjam port can also adopt a ‘Landlord’ model for development of a proposed multi-purpose port.

Figure 20.5 Key Landlord functions

20.8 Partnership and alliance

In addition to the landlord functions, there are number of other port related infrastructure and services which could be developed and offered by private entities. These infrastructure and services could be provided within the port limits and also extending to port hinterland. Figure 20.6 provides a set of services and infrastructure requirements, which are beyond landlord functions. Increasing number of ports are now transferring key tasks to private service providers/contractors. This has helped in achieving the following objectives.

Improved infrastructure and better utilisation of capacity.

Increased operational efficiency.

Better allocation of limited public funds.

Figure 20.6 Port related activities beyond landlord function

New Greenfield ports are now being developed as Joint Venture between private investors, port operators and government entities. A very good example of this model is Salalah port in Oman. Salalah Port is operated by Salalah Port Services Company which is a joint venture between A P Moller-Maersk Group and Omani Government. Currently, AP Moller-Maersk Group holds 30% of the equity, through its subsidiary APM Terminals, while Omani Government holds 20%. The remaining shares are with institutional investors and pension funds.

Vizhinjam port can also adopt a similar strategy and opt for a strategic partnership with International port operators, shipping lines, State Government, financial institutions and multilateral funding agencies. Some of the potential partners for Vizhinjam port development could include the following:

Industry Players

Container shipping lines looking for investment opportunities in port sector

Port operators and managers

Logistics companies

Major shippers

Government

Kerala State Government

Central Government

Banks and Financial Institutions

Indian Commercial Banks

Indian Financial institutions

International Development and multilateral financial institutions

20.8.1 Role of Government

• Financial support

Government has an important role in facilitating and developing a Greenfield port particularly in a scenario, where cargo volumes are low and the inter port and inter – regional competition is quite intense. In such circumstances, interest level of private investors and developers is expected to be low. In a low volume – strong competition scenario, the expected revenues from port operations may not be sufficient for full cost recovery and profit margins. In such a scenario, Government may require to provide subsidies and viability gap funding to cover part of the capital expenditure and operating costs.

Considering, the expected low traffic at Vizhinjam port particulary in the initial years of operations, coupled with intense competition, Government may have to consider investing in port infrastructure including construction of berths to attract private port operators.

• Policies to boost economic activity in the hinterland

In a bid to stimulate economic activities in the port hinterland, government can take proactive measures to attract investments in the existing and new industries. One of such measures could be to develop port based SEZs. SEZ’s in India have shown strong growth in exports over the last 6 years. Traditionally SEZs are created as open markets within an economy that is dominated by distorted trade, exchange regulation and other regulatory controls. SEZs are expected to create conducive environment to promote investment and exports. Many developing countries are promoting SEZs with the expectation that they will provide the engines of growth for their national and regional economies Thus the purpose of SEZs are to achieve three-fold objectives of attracting FDI, increase in exports and boost to the regional and national economy.

Figure 20.7 Exports from functioning SEZs

25,000.0 100%

90% 20,000.0 80%

15,000.0 70% 60%

10,000.0 50% USD Million USD

40% Annual Growth 5,000.0 30%

0.0 20% FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

Series2 Series1

Source: Ministry of Commerce

Vizhinjam has limited manufacturing base in its immediate hinterland and the local economy is primarily dependent on service sectors. In such a scenario, a multi-product Special Economic Zone near Vizhinjam could provide boost to the container and break- bulk traffic volumes in the immediate hinterland.

Kerala government has a policy in place to develop SEZs and this can be leveraged to promote a multi-product SEZ at Vizhinjam. Typically a SEZ of around 500 hectares could developed to cater to the following industries

Textile

Engineering

Electronics

Rubber & Plastics

Food Processing/Agro Based industries-Cashew processing, Fish Processing, coir

A port based SEZ can generate additional traffic (both container and general cargo) and this can be treated as captive business for the port. This could also lead to growth in other sectors like bonded warehousing, Free Trade Zones, etc.

20.9 Marketing strategy

Target Market

Based on the core strategy, Vizhinjam port’s target market would include:

• Container traffic generated in the immediate hinterland

• Shipping lines for transhipment container business

• Timber merchants and saw mills in immediate and secondary hinterland

• Fertilizer importers considering alternate ports to serve Vizhinjam’s immediate hinterland

• Cashew processing units in Kollam an other neighbouring districts

• Cruise vessel owners and operators

• Tank farm companies looking to develop petro-product distribution hub in south India

• Cement plants in Gujarat looking for bagging and cruising facility in south India

Objectives

• Communicating to target groups

• Enlarging the general renown of the port

• Highlighting the key advantages and core development plan

• Highlighting the government support and commitment to the project

Promotion

• International shipping conference and exhibitions

• Media advertising

• Port Trips

• Networking with potential strategic partners

21. Tariff and Revenue forecast

This chapter discusses the tariff and revenue related issues for container and bulk handling operations. Further, revenue forecast has also been done in this chapter.

Key findings

• Colombo port provides a minimum of 20% discount on its published tariff rates to the shipping lines. Drewry has assumed any cost deviation in terms of shifting call from Colombo to Vizhinjam based on the premise that the shipping lines are being offered 20% discount on the published tariff rate for both vessel and container handling charges.

• Network cost estimates suggest that in order to provide 10% cost benefit for a shipping line to shift its transhipment hub from Colombo to Vizhinjam, the port has to further provide 30% discount on the Colombo tariff. This implies that Vizhinjam has to offer 60% of the current published tariff for port and container handling charges currently being levied for container operations at the Colombo port.

• Drewry estimates that once the traffic builds up at the Vizhinjam port, then the port can reduce the margin of discount offered vis-à-vis Colombo port.

21.1 Indian port tariff overview

Ports in India are classified as major or minor on the basis of ownership. The Government of India wholly owns the 12 major ports. While the Major Port Trust Act of 1963 governs the eleven Major Ports, the 12th port (Ennore), is the only corporate port that is administered by the provisions of Companies Act. The ownership of the minor (also called nonmajor ports) is essentially under the jurisdiction of the respective Maritime Board of the State Governments.

All services rendered by the Major Ports are payable in accordance with the rates approved by Tariff Authority for Major Ports (TAMP). Minor ports are allowed to fix their own tariff.

TAMP attempts to ensure that pricing systems of a port or terminal are both competitive and efficient. At present, TAMP is primarily following a cost based formula (which generates an assured rate of return) although the overall objective of the regulator is to continue to shift towards market driven competitive pricing.

Unfortunately, TAMP currently does not have sufficient mechanisms to quantify the impact of port inefficiencies, under utilisation of assets including port workers etc. and to estimate its impact on the final total cost, but with continued development it is hoped its structure and mechanism would allow computation of such variables in time.

In 1998 TAMP formed a set of broad guidelines for tariff regulation at major ports which must be adhered to. These consist of the following:

• Port pricing based presently on cost – plus basis, with an assured rate of return (RoR).

• Notification of uniform rates for different ports to be avoided.

• Application of a differential tariff structure, using the marginal cost principle.

• Tariff charges are used for improving the efficiency of port operations.

• Tariff proposals are initiated by the port trusts or by private operators, bulk operators, representative bodies of port users, directly or through the port trust.

• There is consultation with other ports when determining tariffs.

• Tariff revisions are applicable for every two years.

Therefore, the jurisdiction of TAMP covers port operator’s tariffs related to vessel, cargo and leasing of property across port trust and private operating companies. Yet a perceived lack of port competition in the past is one of the main factors that led to highly inefficient port operations and increases in port tariffs which were not justified considering the relatively low value of service delivered by some ports. However, this situation has improved to some degree, mainly through the introduction of private operators and investors at ports and terminals such as NSICT and Pipavav. Hence the chances of creating public monopolies gets reduced and with private terminal operators there is a greater degree of market forces dictating prices with each port fixing its own tariff schedule and accounting procedures.

However, as at present TAMP decides the tariff ceiling for each terminal by allowing for 16 percent return on capital employed. This port tariff-setting methodology has been a contentious issue with terminal operators saying that the present norms do not reward those operators who bring in efficiency.

21.1.1 Upfront tariff setting for PPP projects

The TAMP issued guidelines in 2008 to set tariff for all PPP (Public Private Partnership) projects under BOT/BOOT or any other arrangement for private sector participation under Major Port Trusts Act, 1963.

As per the new methodology proposed, the tariffs charged at major ports would be linked to the efficiency of services provided by the terminal operators or port authorities. The tariffs ceilings would be fixed upfront and then competitive bids invited from companies wanting to operate terminals.

The methodology for arriving at a tariff ceiling would be, initially each of the major port authorities would prepare a normative project report specifying the desired key performance indicators for port services and the costs normally associated with such parameters. The port regulator i.e. Tariff Authority for Major Ports (TAMP), based on these cost norms, would decide the tariff ceilings for terminals of a port.

Tariff caps will be reviewed once in five years to adjust for any extraordinary events. Before reviewing the tariff caps, the norms relating to performance shall be set at progressively higher levels and would take into account the technological developments.

Tariff caps will be indexed to inflation but only to an extent of 60% of the variation in Wholesale Price Index occurring between 1 January 2008 and 1 January of the relevant year. Such automatic adjustment of tariff caps will be made every year and the adjusted tariff caps will come into force from 1 April of the relevant year to 31 March of the following year.

The important point to note here is that this new tariffs/tariff mechanism are not be applicable for operators on already operational terminals because contracts of the earlier operators had different methodology for fixing tariffs.

The minor ports remain free from any intervention of national regulator. However, the port/terminal has to pay the state government or maritime board a water front usage fee.

21.2 Tariff for Container handling

Generally, there are two types of charges that need to be considered, those applicable to the vessel and those relating to the cargo i.e. container itself. However, rather than simply giving a total estimated cost for calling at a facility and discharging/loading container cargo, Drewry has researched some of the components that comprise cost of a port call in India. As such, the following is an indication of some of the type of charges that are levied:

Port dues

Berth hire

Wharfage

Pilotage

Cargo handling charges

Storage charges

Ancillary charges and services

21.2.1 Vessel related charges (VRC) for container vessels

Table 21.1 to 21.4 provide an overview of the range of port dues, berth hire and pilotage & towage fee applicable at competing ports for Vizhinjam in India. In order to draw some useful comparison, Drewry has estimated the cost for port dues, pilotage & towage and berth hire fee using the following data to reflect six different, yet typical, container vessel sizes:

500 teu – 5,000 grt

1,500 teu – 16,000 grt

2,500 teu – 28,000 grt

3,500 teu – 42,000 grt

5,500 teu – 68,500 grt

6,500 teu - 80,000 grt

These vessel size wise calculations have been based on port charges as mentioned in port’s website, which provide overall charges per vessel size to be paid for each vessel call on these ports. In this report, tariffs have primarily been mentioned for loaded 20 feet equivalent units (TEU). However, the tariff conversion for 40 feet containers can be safely assumed as 1.5 times of the 20 feet tariff while tariff for loaded containers (20/40) as 1.2 times of the empty container’s (20/40) tariff.

Table 21.1 Port dues at Vizhinjam’s competing ports (US$ per entry)

Port Due Fee at Indian Ports (US$/GRT) Port 500 teu 1,500 teu 2,500 teu 3,500 teu 5,500 teu 6,500 teu Nonmajor Port Mundra/Adani 778 2,489 4,356 6,533 10,656 12,444 Pipavav 540 1,728 3,024 4,284 6,576 7,680 Average Fee 659 2,108 3,690 5,409 8,616 10,062

Major Port Kandla Port 1,150 3,680 6,440 9,660 15,755 18,400 Mumbai 1,055 3,376 5,908 8,862 14,454 16,880 JNPT 951 30425324 7985 13024 15210 Mormugao 562 1800 3149 4724 7705 8998 New Mangalore 715 2,288 4,004 6,006 9,796 11,440 Cochin 1,280 4,096 7,168 10,752 17,536 20,480 Tuticorin 1,007 3,222 5,639 8,459 13,796 16,112 Chennai 1,150 3,680 6,440 9,660 15,755 18,400 Visakhapatnam 1,255 4,016 7,028 10,542 17,194 20,080 Kolkata /Haldia 1,500 4,800 8,400 12,600 20,550 24,000 Average Fee 1,063 3,400 5,950 8,925 14,556 17,000

Source: Various Port websites

Table 21.2 Berth hire charges at Vizhinjam’s competing ports (US$ per entry for 24 hrs berth stay)

Berth Hire Fee at Indian Ports (US$/GRT/8 Hrs) Port 500 teu 1,500 teu 2,500 teu 3,500 teu 5,500 teu 6,500 teu Nonmajor Port Mundra/Adani 267 853 1,493 2,240 3,653 4,267 Pipavav 252 8061,411 1,999 3,069 3,584 Average Fee 259 830 1,452 2,120 3,361 3,925 Major Port Kandla Port 124 397 694 1,042 1,699 1,984 Mumbai 300 9601,680 2,520 4,110 4,800 JNPT 148 474829 1,243 2,028 2,368 Mormugao 157 1,346 2,355 3,532 5,761 6,728 New Mangalore 84 269 470 706 1,151 1,344 Cochin 259 445780 1,169 2,170 2,534 Tuticorin 76 397941 1,680 2,740 3,200 Chennai 116 370647 971 1,584 1,850 Visakhapatnam 184 275 482 1,210 1,973 2,304 Kolkata /Haldia 100 320 560 840 1,370 1,600 Average Fee 155 525 944 1,491 2,458 2,871

Source: Various Port websites

Table 21.3 Pilotage & Towage fee at Vizhinjam’s competing ports (US$ per entry)

Pilotage Fee at Indian Ports (US$/GRT) Port 500 teu 1,500 teu 2,500 teu 3,500 teu 5,500 teu 6,500 teu Nonmajor Port Mundra/Adani 2,022 6,471 11,324 16,987 27,704 32,356 Pipavav 2,270 7,264 12,712 19,068 31,099 36,320 Average Fee 2,146 6,868 12,018 18,027 29,402 34,338

Major Port Kandla Port 1,940 6,208 10,864 35,386 47,181 52,300 Mumbai 1,733 5,546 9,705 22,040 29,386 32,574 JNPT 1,191 3,810 5,342 8,014 11,433 13,352 New Mangalore 1,600 5,120 8,960 20,352 27,136 30,080 Cochin 2,782 8,902 15,579 35,386 47,181 52,300 Tuticorin 1,364 4,515 916 13,574 22,139 25,856 Chennai 1,345 5,712 14,196 21,294 40,210 46,960 Visakhapatnam 2,786 8,914 15,599 42,921 56,078 61,788 Kolkata /Haldia 3,218 10,296 18,018 24,660 32,875 36,440 Average Fee 1,995 6,558 11,020 24,848 34,847 39,072 Pan India Average 2,023 6,614 11,201 23,607 33,857 38,211

Source: Various Port websites

Table 21.4 Total Port disbursement fee at Vizhinjam’s competing ports (US$ per entry for 24 hours of berth stay)

Port Disbursement Fee at Indian Ports (US$/GRT) Port 500 teu 1,500 teu 2,500 teu 3,500 teu 5,500 teu 6,500 teu Nonmajor Port Mundra/Adani 3,067 9,813 17,173 25,760 42,013 49,067 Pipavav 3,062 9,798 17,147 25,351 40,744 47,584 Average Fee 3,064 9,806 17,160 25,556 41,379 48,325

Major Port Kandla Port 3,214 10,285 17,998 46,088 64,635 72,684 Mumbai 3,088 9,882 17,293 33,422 47,950 54,254 JNPT 2,289 7,325 11,495 17,242 26,484 30,930 New Mangalore 2,399 7,677 13,434 27,064 38,082 42,864 Cochin 4,321 13,444 23,527 47,307 66,887 75,314 Tuticorin 2,447 8,134 7,496 23,713 38,675 45,168 Chennai 2,611 9,762 21,283 31,925 57,548 67,210 Visakhapatnam 4,225 13,205 23,108 54,673 75,245 84,172 Kolkata /Haldia 4,818 15,416 26,978 38,100 54,795 62,040 Average Fee 3,268 10,570 18,068 35,504 52,256 59,404 Pan India Average 3,231 10,431 17,903 33,695 50,278 57,390

Source: Various Port websites

Table 21.4 shows the total port disbursement fee for various vessel types. The port disbursement fee is sum of port dues; pilotage & towage and berth hire charges paid by a vessel owner for a single port call at the mentioned ports.

Charges have been calculated basis vessel sizes varying from 500 to 6,500 TEU, it is expected that this would be initial portfolio of container vessels likely to call Vizhinjam in the first five years.

Port disbursement fee has been calculated as the sum of port due, berth hire and pilotage & towage fee paid by a vessel for any port call in selected ports in India. As per Table 21.4 above, overall tariff at JNPT, which is the premier container handling port in the country, is lowest amongst other container handling facilities in the country.

21.2.2 Ports - container related tariffs

Tariff levels and operating costs are an essential component in the competitiveness of a port. It is important to offer a competitive tariff that may attract potential customers. Since, competitive price provides the impetus to overcome inertia in terms of switching ports. Although, higher tariffs are a hindrance to the growth of traffic but offering much lower tariffs do not necessarily attract a significantly greater volume growth.

The best gauge of the level of charges that the port should levy is available by looking at what other major container handling ports in the region are currently charging. At the same time, it is also essential that the new facility should be able to provide competitive rates for all ancillary and storage charges that are common at any modern container handling facility.

Thus, the overall container handling charges at Indian ports is in range of Rs. 1,900 to Rs. 4,000. Almost all the ports in the vicinity of planned development are charging almost similar rates of container handling. However, as these charges are just a small percentage of overall costs to the shipper. Therefore, the decision to use a particular port depends upon the other logistic cost i.e. inland logistic cost and shipping freight available from a particular port.

Table 21.5 Comparative container handling charges (Rs. /Teu)

Major Ports Minor Ports Service JNPT NSICT GTI Mumbai Vizag. Kolkata Chennai Cochin Tuticorin Avg Fee Mundra Pipavav Avg Fee

Normal-gateway boxes Ship-yard – loaded 2,210 2,788 2,761 2470 3,200 1,827 3,656 2,702 3,910 3,000 3,455 Ship-yard – empty 1,785 2,252 2,230 1970 2,240 1,437 2,651 2,081 3,680 2,500 3,090 Ship- rail yard/ICD–loaded 3,315 4,182 4,142 3,770 1,250 1,319 3,977 3,136 4,370 3,640 4,005 Ship- rail yard/ICD–empty 3,315 4,050 3,611 3,270 1,150 653 2,936 2,712 4,140 3,190 3,665 Yard to truck – loaded 340 428.94 424.8 2,470 0 1,351 684 814 Yard to truck – empty 340 428.94 424.8 1,970 0 351 285 543 Total box cost Ship-road – loaded 2,550 3,217 3,186 2,470 3,200 5,927 3,179 4,340 2,300 3,374 3,910 3,000 3,455 Ship-rail – loaded 3,315 4,182 4,142 3,770 4,450 5,940 3,147 4,661 4,201 4,370 3,000 3,090 Ship-road – empty 2,125 2,681 2,655 1,970 2,240 752 1,789 2,865 2,134 3,680 2,600 4,005 Ship-rail – empty 3,315 4,050 3,611 3,270 3,390 765 1,773 2,824 2,875 4,140 2,600 3,665 Transshipment charges (consolidated ship to CY and CY to ship charges)

1 - 3,000 teu - loaded 2,550 3,540 1 - 3,000 teu - empty 2,210 3,068 3,001 - 6,000 teu – loaded 2,380 3,304 3,001 - 6,000 teu – empty 2,040 2,832 6,001 - 9,000 teu – loaded 2,210 3,068

6,001 - 9,000 teu – empty 1,870 2,596 ports across Thereafter - loaded 2,040 3,115 2,832 2,940 3,780 1,774 3,407 662 3,200 4,050 3,625 Not Calculated due due Calculated Not

Thereafter – empty 1,700 2,700 2,360 2,540 3,780 1,774 2,953 662 slabs in various charges 2,800 2,700 2,750

* Pipavav – consolidated charges for ship-yard-rail/road Source: Compiled by Drewry

As per Table 21.5, it is evident that container handling charges at nonmajor port are higher compared to major ports. This is due to the reason that minor ports do not fall under the purview of TAMP, hence their charges are not regulated. Unlike major ports in India which are governed by TAMP, as a general case of port pricing strategy, port dues are aligned with tariff published by competing ports. In fact, published tariff rates are an effective and flexible marketing tool. These rates are often a starting point for negotiation of a time/ volume agreement, a first or last port of call status agreement, or an increase in throughput from a carrier or shipper. For e.g., in 2005, Chennai Port Trust and Hyundai Motor India Ltd agreed on the terms and conditions for concessional wharfage and marine charges for export of automobiles through the port for a period of 10 years.

Also evident from Table 21.5, the demand seems to be relatively price inelastic (Chennai, JNPT, NSICT, & GTI having a high THC are able to attract considerable traffic at their terminals as they have over a million container throughputs.

With the exception of Pipavav and Mundra all other terminals are on the major ports in India hence their tariff is regulated by TAMP, which constraints them to price beyond the stipulated ceiling. The vessel and cargo related rates have been regulated by TAMP, hence even though there is a tight supply/demand scenario for container handling in India, JNPT has been unable to price accordingly. A request by Chennai Container Terminal operated by DP World for an increase of 14.0% in tariff over the three-year period 2007 to 2009 and to consider an interim relief by giving a hike of 7.5% with an option of coming for a review prior to the end of tariff cycle in case there is drop in volumes was rejected by TAMP. However, the regulator approved of a 10% increase in tariff applicable from August, 2008 which was to be valid till 2009 end. Similarly, Tuticorin had to curtail its container handling capacity in 2008 as its request to increase port tariffs were rejected by TAMP, instead the regulatory body decreased its existing tariff by nearly 34%.

21.2.3 Royalty terms

With participation from private players another factor comes into picture which plays an important role in overall tariff level. This is revenue sharing among the port authority and the private terminal operator. Table 21.6 shows the royalty terms agreed between landlord ports and container terminal operators for some of the concession agreements awarded to private terminal operators. The figures are based on information collected by Drewry from secondary sources.

Table 21.6 Royalty terms for major container terminals

Port Revenue Share Terminal Operator Remarks Start up year

NSICT INR 47* DP World Royalty (per teu ) 1999 Tuticorin - PSA-SICAL Royalty (per teu) 1999

Mundra 10.000% DP World Revenue Share plus 2002 Upfront Payment Chennai (CCTL) 37.128% DP World Revenue Share (on 2002 Gross revenue)+Payment of lease rentals to CHPT VCTPL INR 50* JM Baxi-DP World Royalty (per teu) 2003 Vallarpadam (ICTT) 33.330% DP World Revenue Share plus 2005 upfront payment JNP (GTI ) 35.503% Maersk India/CONCOR Revenue Share 2006 Kandla 48.997% ABG Revenue Share 2007 Mumbai Offshore 35.000% Gammon/Dragados Revenue Share (on 2008 (BPS) 2012 (ICTPL) Gross revenue) (Offshore Terminal) Chennai (CITPL) 45.801% PSA-SICAL Revenue Share 2009 Tuticorin-Berth 8 Bidding in process Upfront tariff 2013 JNPT Bidding in process Upfront tariff 2013- 15 (expected) NMPT Bidding in process Upfront tariff 2013 (expected) Chennai Mega Terminal In process Upfront tariff 2016 (expected)

Source: Compiled by Drewry

It can be seen that there is a wide variation in the revenue share that have been offered by the winner operators to their respective landlord ports. Quite naturally, container terminals that have promised a high revenue share would be less profitable than the others which might have some impact upon competitiveness. Another point to note is that the royalty payments on gross revenue in some cases are based on the higher of actual or guaranteed traffic and TAMP notified tariff. This, in one way, is disadvantageous to the terminal operator, as even if they are charging a lower tariff rates than the TAMP ceiling rates, they would still have to give royalty on the TAMP rates.

21.2.4 Terminal storage charges

All ports generally offer a period of free storage (of a varying length of time) before applying a daily rate (or part thereof) to cover storage of the container. The movement (or indeed lack of movement) of containers is a major problem at ports and terminals in many areas throughout the globe and can be a major cause of congestion (although inefficient handling operations should not be forgotten). Moreover, if a terminal is already busy then the prospect of a number of boxes lingering at the facilities can cause major operational problems for the operator and this fact is often reflected in the rent charges applied. Therefore, storage rent is not only a method of generating revenue but also a deterrent for laggard who intends to use the precious container yard space as a warehouse. Indirectly it also provides impetus to the movement of container by rewarding the efficient shippers.

Table 21.7 Free periods and storage rates for export teu at selected ports (US$/day)

Period of Jawaharlal New Vizag Kandla Mumbai Mormugao Cochin Tuticorin Chennai Occupation Nehru Port Mangalore^

First 7 days Free Free 0.143 Free Free 8 - 15 days 0.5 5 0.143 2.5 2.5 16 - 30 days 1 5 0.143 5 4.9 31 - 45 days 1.5 5 + 50% rise 10 9.9 46 - 60 days 3 5 + 75% rise 10 9.9 61 - 90 days 3 5 + 100% rise 10 9.9 After 91 days 3 5 + 200% rise 10 9.9

0-3 Days Free 0.214* Free Free 4-5 Days 2.7625 0.214 3 Free 6-7 Days 2.7625 0.214 3 0.75 8-9 Days 2.7625 0.214 3 0.75 10-15 Days 2.7625 0.214 3 0.75 16-20 Days 5.525 0.214 6 3 21-30 Days 5.525 0.214 6 5.8 After 30 days 11.05 0.214 12 5.8

1. Figures are based on per day rate or part thereof for laden export box. 2. * - 1 day free period Ports providing

Source: Individual port websites, TAMP/Compiled by Drewry

Table 21.7 compare the free periods and storage rents applied at some ports in India. Almost all the ports on the western coast of India provides some time of free storage specifically for the purpose of customer relations. After the initial period, storage charges in all these ports rises significantly with time. The CCTL facility at Chennai has the highest rate for storage of containers in their yard which reflects their strong opposition to usage of container yard as storage space practice. It is interesting to note that a container that remains at a port after free period will generate a high storage cost irrespective of its contents. Nevertheless, with stress on landside space, terminal operators have little choice other than to charge higher storage rents in order to ensure smooth facilitation of trade.

At present because of excessive demand and competition CCTL evacuates containers from its terminal by rail to Concor’s facility; if the container remains in the yard for more than 3 days, thereby, enhancing CCTL’s relationship with Concor to provide better service at their terminal. A container which goes to the Concor’s yard becomes revenue generating equipment for Concor as well. New Mangalore and Mormugao have no free period for container storage although these ports do not handle significant container volumes.

21.2.5 Terminal pricing & container volume demand

Terminal tariff is not a significant factor in various decision variables which determine the choice of a container terminal by a shipper/consignee. There are other major factors like rail & road connectivity, range of liner services, service levels at the terminal and availability of soft infrastructure around the terminal. This is primarily due to the reason that terminal handling charge (THC) form a minuscule portion of the entire supply chain cost. This point can be explained in greater detail with help of analysis of supply chain cost for an apparel shipment from New Delhi, India to a port on the US East Coast, say, Long Beach. The analysis in Table 21.8 provides in detail the break-up of cost for shipment of a container load of apparel (in a forty feet box) from New Delhi to Long Beach. The figures are based on an analysis conducted by Drewry which shows that the terminal handling charges ( tariff set by a terminal operator) is only 0.07% of the overall cost of a product shipped from India on CIF (Cost, Insurance & Freight) basis.

The change is value of the shipment wouldn’t drastically change the share of terminal handling charges. It might increase it to one percent of the CIF value, however it still remains a very small value in overall supply chain cost which would affect the choice of terminal for a shipper/consignee.

Table 21.8 Cost analysis for export shipment from India to US East Coast

Value Chain Stages US$/FFE of Apparel % of CIF Cost

Raw Material Cost $150,000 49.21% Manufacturer's inventory cost $3,750 1.23% Labour Cost, profit, overheads (excluding FOB cost) $145,850 47.85%

Ex Factory Product Value $299,600 98.28%

Inland trucking charges to ICD $125 0.04% ICD handling charges $65 0.02% Inland transportation cost from ICD to Port by train $820 0.27% Custom Clearance Charges $25 0.01%

Terminal Handling Charge (THC) $200 0.07%

FOB Export Product Value $300,835 98.69%

Cargo Insurance Cost $602 0.20% Ocean Freight $3,400 1.12%

CIF Export Product Value $304,837 100.00%

Note: ICD – Inland container depot at Delhi Source: Drewry Research

Container volume throughput at the GTI terminal (Nhava Sheva Port / JNPT) and Mundra International Container Terminal (Mundra Port) corroborate this fact. It’s primarily the efficiency, connectivity, range of services, location and infrastructure availability at these terminals which have driven container volume growth. GTI had the highest terminal handling charges amongst three existing terminals at the Nhava Sheva port; however the terminal has managed to attract more than a million teu traffic within first three years of

commencing its operation at the port and has reached its container traffic handling capacity ceiling. Similarly, MICT which has the second highest THC amongst the container terminal operators in India is one of the fastest growing container terminals in the country.

Thus, the container volume demand at a container terminal is relatively price inelastic and is determined by other major factors for port and terminal attractiveness. Drewry estimates that in such scenario, Vizhinjam container terminal too can have the same THC as charged by the market. However, overall port dues and turnaround time would be a critical factor.

21.3 Revenue forecast for Vizhinjam from Container operations

This section provides estimate revenue forecast from the container traffic operations at the proposed Vizhinjam port. The revenue forecast has been estimated for traffic generated in the base case scenario from FY14 to FY44.

A detailed analysis of the estimated network cost for shipping lines has been discussed in Section 6. Salient points discussed in that section are reiterated as below:

• As per market reports, Colombo port provides around 20% discount on its published tariff rates to the shipping lines. Drewry has assumed any cost deviation in terms of shifting transhipment hub from Colombo to Vizhinjam based on the premise that the shipping lines are being offered 20% discount on the published tariff rate for both vessel and container handling charges.

• Network cost estimates suggest that in order to provide 10% cost benefit for a shipping line to shift its transhipment hub from Colombo to Vizhinjam, the port has to further provide 30% discount on the Colombo’s tariff. This implies that Vizhinjam has to offer atleast 60% of the current published tariff for port and container handling charges currently being levied at the Colombo port.

• As per primary survey and Drewry estimates, 10% cost benefit is the minimum criteria for Vizhinjam to attract mainline vessel calls at its facilities.

In addition to the take-away from the network cost analysis, following are the assumptions for vessel & container handling forecasts for the Vizhinjam port.

Vessel Related Tariff

• The currently published vessel related tariff charged at Colombo port is USD 0.147 / GT (light dues, entering dues, pilotage (in & out), anchorage) + 0.0022 / GT / hr (berth hire)

• Drewry estimates that as discussed in the network cost analysis above, the Vizhinjam port has to offer 40% discount on the card rate published by the Colombo port.

• It is assumed that the escalation factor for the tariff rate would be 60% of the Wholesale Price Index increase for each year.

• An estimated 5% y-o-y increase in WPI has been estimated over the forecast period. This implies that the WPI is expected to increase 5% every year. Therefore, the net escalation factor for the tariff would be equal to the product of 60% and 5%, i.e. 3% increase in tariff every year.

• It has been estimated that the VRCs at the Colombo port would increase by same escalation factor.

• Drewry estimates that once the traffic builds up at the Vizhinjam port, then the port can reduce the margin of discount offered vis-à-vis Colombo port. The estimated discount offered by Vizhinjam is assumed to decrease in the following term –

Period Proposed Vizhinjam’s Tariff as Percentage of Published Colombo’s Tariff

2014-2017 60% 2018-2025 70 – 78.8% 2026-2044 80%

Container handling charges

• THC charged by Cochin port has been taken as the benchmark for container handling charges for gateway tariff. This is due to the reason that Vizhinjam is competing with Indian ports for gateway traffic. The proposed tariff by TAMP for the Vallarpadam terminal has been taken a benchmark tariff for the Vizhinjam port.

• THC charged by Colombo port has been taken as the benchmark rate for container handling charges for transhipment tariff. This is due to the reason that Colombo is the prime competitor for transhipment traffic for Vizhinjam. Colombo port charges equal tariff for transhipment of laden and empty containers. Also, data received by Drewry from Sri Lanka Port Authority, South Asia Gateway Terminal and few shipping lines suggest that the transhipment tariff ranges from USD 37/55 to USD 44/66 per move for 20 & 40 ft containers respectively for transhipment traffic. Drewry has taken an average rate of USD 41/61.5 respectively as one move transhipment tariff for 20 & 40 ft container boxes respectively.

• It has been assumed that a large share of the traffic at the Vizhinjam port would be generated from Indian ports. As per TAMP guidelines, the coastal vessel get a discount of approximately 40% on the both VRCs and CRCs, however that guideline is binding only on major ports and doesn’t cover minor ports. If Vizhinjam port offers the discount to coastal vessels, then the overall cost benefit for a shipping line would further increase.

• It is estimated that 90% of the revenue generated by a terminal is contributed by container handling charges. The other 10% revenue is generated by miscellaneous services like demurrage, storage, etc.

• Drewry estimates that as discussed in the network cost analysis above, the Vizhinjam port has to offer 40% discount on the card rate published by the Colombo port for transhipment tariff. However, no discount has been assumed for THC charged for gateway tariff.

• It is assumed that the escalation factor for the tariff rate would be 60% of the Wholesale Price Index increase for each year.

• It has been estimated that the CRCs at the Colombo port would increase by same factor.

• Drewry estimates that once the traffic builds up at the Vizhinjam port, then the port can reduce the margin of discount offered vis-à-vis Colombo port for transhipment cargo. The estimate discount offered by Vizhinjam is assumed to decrease in the following term –

Period Discounted Price (vis-à-vis Colombo tariff)

2014-2017 60% 2018-2025 70 – 78.8% 2026-2044 80%

Table 21.9 provides the container tariff forecast for both container handling and vessel related charges at the proposed Vizhinjam port.

Table 21.9 Tariff forecast for vessel related charges (USD)

Fixed Port Charges (per GRT) Dockage (Berth hire charges ) / GRT/hr Discounted Discounted Year Colombo Vizhinjam Price Margin Colombo Vizhinjam Price Margin (%) (%) FY10 0.147 0.0882 60.0% 0.0022 0.0013 60.0% FY 14 0.1654 0.0993 60.0% 0.0025 0.0015 60.0% FY 15 0.1704 0.1022 60.0% 0.0026 0.0015 60.0% FY 16 0.1755 0.1053 60.0% 0.0026 0.0016 60.0% FY 17 0.1808 0.1085 60.0% 0.0027 0.0016 60.0% FY 18 0.1862 0.1304 70.0% 0.0028 0.0020 70.0% FY 19 0.1918 0.1367 71.3% 0.0029 0.0020 71.3% FY 20 0.1976 0.1432 72.5% 0.0030 0.0021 72.5% FY 21 0.2035 0.1501 73.8% 0.0030 0.0022 73.8% FY 22 0.2096 0.1572 75.0% 0.0031 0.0024 75.0% FY 23 0.2159 0.1646 76.3% 0.0032 0.0025 76.3% FY 24 0.2224 0.1723 77.5% 0.0033 0.0026 77.5% FY 25 0.2290 0.1804 78.8% 0.0034 0.0027 78.8% FY 26 0.2359 0.1887 80.0% 0.0035 0.0028 80.0% FY 27 0.2430 0.1944 80.0% 0.0036 0.0029 80.0% FY 28 0.2503 0.2002 80.0% 0.0037 0.0030 80.0% FY 29 0.2578 0.2062 80.0% 0.0039 0.0031 80.0% FY 30 0.2655 0.2124 80.0% 0.0040 0.0032 80.0% FY 31 0.2735 0.2188 80.0% 0.0041 0.0033 80.0% FY 32 0.2817 0.2253 80.0% 0.0042 0.0034 80.0% FY 33 0.2901 0.2321 80.0% 0.0043 0.0035 80.0% FY 34 0.2988 0.2391 80.0% 0.0045 0.0036 80.0% FY 35 0.3078 0.2462 80.0% 0.0046 0.0037 80.0% FY 36 0.3170 0.2536 80.0% 0.0047 0.0038 80.0% FY 37 0.3265 0.2612 80.0% 0.0049 0.0039 80.0% FY 38 0.3363 0.2691 80.0% 0.0050 0.0040 80.0% FY 39 0.3464 0.2771 80.0% 0.0052 0.0041 80.0% FY 40 0.3568 0.2854 80.0% 0.0053 0.0043 80.0% FY 41 0.3675 0.2940 80.0% 0.0055 0.0044 80.0% FY 42 0.3785 0.3028 80.0% 0.0057 0.0045 80.0% FY 43 0.3899 0.3119 80.0% 0.0058 0.0047 80.0% FY 44 0.4016 0.3213 80.0% 0.0060 0.0048 80.0%

Source: Drewry Research

Table 21.10 Tariff forecast from container handling charges (USD)

CHC offered at Cochin Port Gateway Tariff Colombo Port Benchmark discount by Transshipment Rate Vizhinjam for Loaded Empty Tariff Transshipment

Year / Equ. size 20 40 20 40 20 40 20 40

FY10 78.50 117.75 59.00 88.50 82.00 123.00 49.2 73.8 FY14 88.35 132.53 66.41 99.61 92.29 138.44 55.4 83.1 FY15 91.00 136.50 68.40 102.60 95.06 142.59 57.0 85.6 FY16 93.73 140.60 70.45 105.67 97.91 146.87 58.7 88.1 FY17 96.55 144.82 72.56 108.84 100.85 151.27 60.5 90.8 FY18 99.44 149.16 74.74 112.11 103.88 155.81 72.7 109.1 FY19 102.42 153.64 76.98 115.47 106.99 160.49 76.2 114.3 FY20 105.50 158.25 79.29 118.94 110.20 165.30 79.9 119.8 FY21 108.66 162.99 81.67 122.50 113.51 170.26 83.7 125.6 FY22 111.92 167.88 84.12 126.18 116.91 175.37 87.7 131.5 FY23 115.28 172.92 86.64 129.97 120.42 180.63 91.8 137.7 FY24 118.74 178.11 89.24 133.86 124.03 186.05 96.1 144.2 FY25 122.30 183.45 91.92 137.88 127.75 191.63 100.6 150.9 FY26 125.97 188.95 94.68 142.02 131.59 197.38 105.3 157.9 FY27 129.75 194.62 97.52 146.28 135.53 203.30 108.4 162.6 FY28 133.64 200.46 100.44 150.67 139.60 209.40 111.7 167.5 FY29 137.65 206.48 103.46 155.19 143.79 215.68 115.0 172.5 FY30 141.78 212.67 106.56 159.84 148.10 222.15 118.5 177.7 FY31 146.03 219.05 109.76 164.64 152.54 228.82 122.0 183.1 FY32 150.41 225.62 113.05 169.58 157.12 235.68 125.7 188.5 FY33 154.93 232.39 116.44 174.66 161.83 242.75 129.5 194.2 FY34 159.57 239.36 119.93 179.90 166.69 250.03 133.4 200.0 FY35 164.36 246.54 123.53 185.30 171.69 257.53 137.4 206.0 FY36 169.29 253.94 127.24 190.86 176.84 265.26 141.5 212.2 FY37 174.37 261.56 131.06 196.58 182.15 273.22 145.7 218.6 FY38 179.60 269.40 134.99 202.48 187.61 281.42 150.1 225.1 FY39 184.99 277.49 139.04 208.56 193.24 289.86 154.6 231.9 FY40 190.54 285.81 143.21 214.81 199.04 298.55 159.2 238.8 FY41 196.26 294.38 147.50 221.26 205.01 307.51 164.0 246.0 FY42 202.14 303.22 151.93 227.89 211.16 316.74 168.9 253.4 FY43 208.21 312.31 156.49 234.73 217.49 326.24 174.0 261.0 FY44 214.45 321.68 161.18 241.77 224.02 336.02 179.2 268.8

Source: Drewry Research Maritime Services Pvt. Ltd.

Table 21.11 Revenue forecast for Vizhinjam (USD)

Size Vessel Related Container Handling Related Total Revenue PV @ 10%

FY 14 524,866 6,036,466 6,561,331 5,964,847 FY 15 582,633 9,528,691 10,111,323 8,356,466 FY 16 1,130,010 13,649,696 14,779,707 11,104,212 FY 17 1,163,911 18,566,531 19,730,442 13,476,157 FY 18 1,485,536 26,239,055 27,724,591 17,214,790 FY 19 2,399,649 33,257,037 35,656,687 20,127,270 FY 20 2,610,490 39,857,195 42,467,685 21,792,637 FY 21 2,735,163 45,413,533 48,148,696 22,461,722 FY 22 3,591,276 51,230,906 54,822,182 23,249,957 FY 23 3,862,761 57,968,644 61,831,405 23,838,683 FY 24 4,043,868 64,418,154 68,462,022 23,995,521 FY 25 5,343,882 71,500,477 76,844,359 24,484,981 FY 26 5,717,380 80,768,768 86,486,148 25,051,957 FY 27 5,888,902 90,373,488 96,262,390 25,348,896 FY 28 6,065,569 101,035,629 107,101,198 25,639,175 FY 29 7,328,259 112,867,504 120,195,763 26,158,100 FY 30 7,548,107 125,903,747 133,451,854 26,402,738 FY 31 7,920,402 134,802,477 142,722,879 25,669,964 FY 32 8,158,014 146,047,897 154,205,912 25,213,899 FY 33 9,475,161 158,185,740 167,660,901 24,921,725 FY 34 9,918,792 171,284,217 181,203,009 24,486,066 FY 35 10,216,356 185,292,320 195,508,676 24,017,454 FY 36 12,085,870 198,425,473 210,511,343 23,509,519 FY 37 12,543,672 212,442,945 224,986,617 22,841,901 FY 38 12,919,982 227,404,536 240,324,518 22,180,991 FY 39 13,593,368 243,363,587 256,956,955 21,560,090 FY 40 14,001,169 260,390,075 274,391,244 20,929,929 FY 41 15,779,696 278,544,339 294,324,035 20,409,414 FY 42 16,253,087 295,848,511 312,101,597 19,674,700 FY 43 18,181,903 314,183,746 332,365,649 19,047,395 FY 44 18,727,360 333,608,649 352,336,009 18,356,243 Present Value 657,487,397

Source: Drewry Research Maritime Services Pvt. Ltd.

21.4 Components of tariff: bulk cargo

In India, there are primarily three components of port tariff, for bulk vessels namely vessel related charges (Port Dues, Berth Hire, Pilotage and Towage and Light Dues), cargo related charges (Wharfage, Stevedoring/cargo handling charges), and miscellaneous charges (lighthouse charges etc.)

21.4.1 Vessel related charges (VRC)

Vessel related charges like port dues, berth hire and pilotage & towage fee charged by ports, are similar for break bulk and general cargo vessels. These charges, which fall under TAMP guideline for all major ports continue to be denominated in US dollars and

recovered in Indian rupees. In addition, port also collects light dues from ships engaged in international trade arriving at or departing from any Indian Port. Currently it is INR 8/- per NRT. Light dues are charged by the Central Government for providing and maintaining the lighthouses. Therefore, the light dues do not form part of revenue stream for the individual ports in India.

The scope of this section is the vessel related charges for foreign going vessels and coastal vessels.

As per TAMP guidelines, the unit for levying vessel related charges is Gross Registered Tonnage (GRT) of the concerned vessel. In case of port dues and berth hire, there is a single slab of GRT. Pilotage and shifting charges is described in three slabs as mentioned below:

Up to 30,000 GRT

30,001 to 60,000 GRT

Above 60,000 GRT

A reduction of 20% on the unit rate of the first slab is effected for the second slab and a reduction of 30% on the unit rate of the first slab is effected for the third slab on the incremental GRT.

Drewry has identified the following port as providing competitive facilities for the hinterland cargo being targeted by the Vizhinjam port: Cochin, Tuticorin, New Mangalore and other minor ports of Kerala. With the exception of minor port of Kerala, these ports fall under TAMP purview and follow its tariff regulation guidelines. As Vizhinjam Port is being developed by the state government, it will not fall under the purview of TAMP guideline. The published tariff of the major and minor ports has been given in Annexure 1 to 3.

A comparative analysis of port dues, Pilotage & towage and berth hire charges of estimated tariff at Vizhinjam and ports mentioned is required. The analysis constitutes calculation of vessel related charges to be paid by ships of gross registered tonnage of 10,000, 30,000, 50,000 and 70,000. The three major VRCs considered in our analysis are port dues, Pilotage & towage and berth hire. Berth hire charges have been calculated on the assumption of 24 hours berth stay by all vessels.

Table 21.12 to 21.15 provides comparative analysis of port dues, Pilotage & towage and berth hire charged for each vessel size at various ports.

Table 21.12 Light dues Indian ports

USD

NRT 5,000 12,600 28,500 33,700

GT 10,000 30,000 50,000 70,000

Indian Ports INR per GT 8 889 2,240 5,067 5,991

Source: Directorate General of Lighthouses and Lightships

Table 21.13 Port dues at competing ports of Vizhinjam

Foreign Vessel (USD) Coastal Vessel (USD) Port /Vessel GRT 10,000 30,000 50,000 70,000 10,000 30,000 50,000 70,000

Cochin Port 2,050 6,150 10,250 14,350 1,220 3,660 6,100 8,540

Tuticorin Port 2,014 6,042 10,070 14,098 1,167 3,500 5,833 8,167

New Mangalore Port 1,430 4,290 7,150 10,010 516 1,547 2,578 3,609

Azhikkal 619 1,856 3,093 4,331

Average competing 1831 5,494 9,157 12,819 880 2,641 4,401 6,162 Indian ports

Source: Various Port websites, Market Survey

Table 21.14 Berth hire charges at competing ports of Vizhinjam (INR per entry for 24 hours of berth stay)

Foreign Vessel (USD) Coastal Vessel (USD)

10,000 30,000 50,000 70,000 10,000 30,000 50,000 70,000

Cochin Port 1,555 2,506 4,176 6,653 923 1,488 2,480 3,957

Tuticorin Port 456 3,312 6,000 8,400 267 1,920 3,467 4,853

New Mangalore Port 504 1,512 2,520 3,528 299 896 1,493 2,091

Azhikkal 288 864 1,440 2,016

Average competing 838 2,443 4,232 6,194 444 1,292 2,220 3,229 Indian ports

Source: Various Port websites, Market Survey

Table 21.15 Pilotage & Towage fee at competing ports of Vizhinjam

Foreign Vessel (USD) Coastal vessel (USD)

10,000 30,000 50,000 70,000 10,000 30,000 50,000 70,000

Cochin Port 5,738 17,214 26,394 35,000 3,411 10,233 15,694 20,814

Tuticorin Port 2,728 9,387 16,160 22,624 1,580 5,440 9,367 13,113

New Mangalore Port 3,200 9,600 14,720 19,520 1,900 5,700 8,742 11,595

Azhikkal 3,333 10,000 16,667 23,333

Average competing 3,889 12,067 19,091 25,715 2,556 7,843 12,618 17,214 Indian ports

Source: Various Port websites, Market Survey

Table 21.16 Total Port disbursement fee at competing ports of Vizhinjam (on Vessels’ account)

Per entry for 24 hours of berth stay

Foreign Vessel (USD) Coastal vessel (USD)

10,000 30,000 50,000 70,000 10,000 30,000 50,000 70,000

Cochin Port 10,339 28,981 45,496 63,138 6,549 18,492 28,950 40,446 Tuticorin Port 6,194 21,852 36,906 52,257 4,009 13,971 23,342 33,268 New Mangalore Port 6,130 18,513 29,066 40,193 3710 11,254 17,489 24,430 Azhikkal 5236 15,831 25,876 36,815 Average all ports 7,554 23,115 37,156 51,862 4876 14,887 23,914 33,740

Source: Various Port websites

Table 21.16 shows the total port disbursement fee for various vessel types. The port disbursement fee is sum of port dues; pilotage & towage and berth hire charges paid by a vessel owner for a single port call at the mentioned ports.

Total port disbursement presented in the Table 21.16 does not include 12.36% of service tax that is payable by the vessel. The inclusion of this will further inflate the cost.

21.4.2 Cargo related tariffs

Cargo related tariffs (Wharfage and Stevedoring Charges) are the other potential sources of income for the ports. In India, generally, stevedoring is done by the private operators, exceptions being Mundra and Krishnapatnam.

Wharfage

Wharfage is a cargo-related charge to recover the costs associated with the provision of the basic infrastructure and superstructure of the port to facilitate the movement of cargo from shipside to hinterland and vice versa. It includes the costs of providing roadways, railways, quays, parking areas, transit shed facilities etc. This charge is applicable on per unit of export/import cargo handled at the port. However, for container terminals, this charge is included in the published “handling charges”.

Handling/Stevedoring charges

The cargo handling services include the movement of cargo from vessel to storage areas or vice versa within the port, using cargo handling equipments as required. The handling or stevedoring charge is usually levied per freight tonne, cubic metres or teu of cargoes. In some cases cargo handling charges include storage charge as well.

The handling charge for bulk commodities varies from type of commodity and the equipment used to handle the same. There is no standard published card rate for stevedoring commodities, and the same can vary from customer to customer, depending upon the type of services and cargo volume included in the contract. The commodities like coal, iron ore fertiliser, etc. which use mechanised handling equipment generally differ from other commodities using non-mechanised handling equipments.

The base price for handling a commodity is set above the marginal cost involved in handling that particular commodity, which includes labour, equipment, fuel and other miscellaneous costs.

During our field survey and discussions with exporters, importers, stevedoring agents operating in the hinterland, following key variables were identified for calculating handling charges:

• Applicable railway or road freight to/from ports.

• Handling prices at competing port.

• Port users are willing to pay premium for quality of service provided like overall port efficiency and equipments used.

Cargo related charges have been discussed separately for each commodity under review.

Table 21.17 Total cargo handling charges for various commodities (INR/tonne)

Cement Coal Timber Metal scrap Finished Fertiliser Edible oil Chemical

Foreign Coastal Foreign Coastal Foreign Coastal Foreign Coastal Foreign Coastal Foreign Coastal Foreign Coastal

Cochin Port Wharfage 72.8 43.7 56 56 56 33.6 112 67.2 57 34.2 91 54.6 109.2 65.5 Cargo handling 385 385 175 175 450 450 250 250 400 400 0 0 0 charges

Total 457.8 428.7 231 231 506 484 362 317457 434 91 54.6 109.2 65.5

Tuticorin Port Wharfage 35 21 38 38 43 26. 35 2141 24.6 46 27.6 85 51

Cargo handling 160 160 260 260 196 196 charges

Total 195 181 298 298 239 222 35 21 41 24.6 46 27.6 85 51

New Mangalore Wharfage 60 36 25 25 50 30 40 2435 21 50 30 60 36 Port Cargo handling 150 150 100 100 120 120 337.5 351.5 charges

Total 210 186 125 125 50 30 160 144372.5 372.5

Azhikkal Wharfage 75 56

Cargo handling 25 25 charges

Total 0 100 0 81 0 0 0 0

Note: Total cargo handling charges include 'Wharfage' and 'Stevedoring Charges'. The cargo handling charges for Timber for Tuticorin and New Mangalore Port is in INR per cu. m. * Stevedoring charges for coal at Tuticorin port includes storage charge as well. ** Includes bagging as well

Phosphoric acid has been considered for Chemical tariff. Edible oil and chemical does not have any stevedoring charge as it is transported by the pipeline

Source: Port Website and Stevedoring Agents of various ports

Table 21.17 (cont’d)

POL Raw Cashew Cruise

Foreign Coastal Foreign Coastal Foreign Coastal

Cochin Port Wharfage 65 65 49 29.4 250 250 Cargo handling charges 0 0 300 300 - -

Total 65.0 65.0 349 329.4 250 250

Tuticorin Port Wharfage 53.7 53.7 30 18 - - Cargo handling charges 0 0 270 270 - -

Total 53.7 53.7 300 288 - -

New Mangalore Port Wharfage 70 70 35 21 - - Cargo handling charges 0 0 250 250 - -

Total 0 0 285 271 - -

Azhikkal Wharfage ------Cargo handling charges ------

Total ------

Source: Port websites, Drewry

21.4.3 Tariff forecast

Assumptions

• VRC of Vizhinjam Port has been assumed to be equal to that of Tuticorin port as it charges the lowest tariff amongst the competing ports in the hinterland. So for Vizhinjam port to be able to compete with the competing ports, it will have to set tariff near Tuticorin port or below it to divert the cargo from the competing ports.

• Constant WPI of 5% has been assumed throughout the forecast period.

• Tariff escalation is assumed to 60% of the WPI each year.

Table 21.18 Vessel related tariff forecast: Vizhinjam Port

Port dues (per grt) Berth Hire (per grt per hour) Pilotage (per grt)

FY14 0.227 0.002 0.307 FY15 0.233 0.002 0.316 FY16 0.240 0.002 0.326 FY17 0.248 0.002 0.336 FY18 0.255 0.002 0.346 FY19 0.263 0.002 0.356 FY20 0.271 0.003 0.367 FY21 0.279 0.003 0.378 FY22 0.287 0.003 0.389 FY23 0.296 0.003 0.401 FY24 0.305 0.003 0.413 FY25 0.314 0.003 0.425 FY26 0.323 0.003 0.438 FY27 0.333 0.003 0.451 FY28 0.343 0.003 0.464 FY29 0.353 0.003 0.478 FY30 0.364 0.003 0.493 FY31 0.375 0.004 0.507 FY32 0.386 0.004 0.523 FY33 0.397 0.004 0.538 FY34 0.409 0.004 0.555 FY35 0.422 0.004 0.571 FY36 0.434 0.004 0.588 FY37 0.447 0.004 0.606 FY38 0.461 0.004 0.624 FY39 0.475 0.004 0.643 FY40 0.489 0.005 0.662 FY41 0.504 0.005 0.682 FY42 0.519 0.005 0.702 FY43 0.534 0.005 0.724 FY44 0.550 0.005 0.745

Source: Drewry Research

Table 21.19 Cargo related tariff forecast: Vizhinjam Port (USD per tonne, unless otherwise specified)

Cement- Cruise Edible Raw Timber Fertilizer Coal POL Chemical Coastal Vessels (per Oil Cashew Vessels passenger)

2013-14 5.8 11.0 1.2 7.5 1.2 2.1 7.5 4.5 12.5 2014-15 6.0 11.4 1.2 7.7 1.2 2.2 7.7 4.7 12.9 2015-16 6.2 11.7 1.2 7.9 1.3 2.3 8.0 4.8 13.3 2016-17 6.4 12.1 1.3 8.1 1.3 2.3 8.2 4.9 13.7 2017-18 6.5 12.4 1.3 8.4 1.3 2.4 8.4 5.1 14.1 2018-19 6.7 12.8 1.3 8.6 1.4 2.5 8.7 5.2 14.5 2019-20 6.9 13.2 1.4 8.9 1.4 2.5 9.0 5.4 14.9 2020-21 7.1 13.6 1.4 9.2 1.5 2.6 9.2 5.6 15.4 2021-22 7.4 14.0 1.5 9.4 1.5 2.7 9.5 5.7 15.8 2022-23 7.6 14.4 1.5 9.7 1.6 2.8 9.8 5.9 16.3 2023-24 7.8 14.8 1.5 10.0 1.6 2.9 10.1 6.1 16.8 2024-25 8.0 15.3 1.6 10.3 1.7 2.9 10.4 6.3 17.3 2025-26 8.3 15.7 1.6 10.6 1.7 3.0 10.7 6.5 17.8 2026-27 8.5 16.2 1.7 10.9 1.8 3.1 11.0 6.6 18.4 2027-28 8.8 16.7 1.7 11.3 1.8 3.2 11.3 6.8 18.9 2028-29 9.1 17.2 1.8 11.6 1.9 3.3 11.7 7.1 19.5 2029-30 9.3 17.7 1.8 12.0 1.9 3.4 12.0 7.3 20.1 2030-31 9.6 18.2 1.9 12.3 2.0 3.5 12.4 7.5 20.7 2031-32 9.9 18.8 2.0 12.7 2.0 3.6 12.8 7.7 21.3 2032-33 10.2 19.3 2.0 13.1 2.1 3.7 13.2 7.9 21.9 2033-34 10.5 19.9 2.1 13.5 2.2 3.8 13.6 8.2 22.6 2034-35 10.8 20.5 2.1 13.9 2.2 4.0 14.0 8.4 23.3 2035-36 11.1 21.1 2.2 14.3 2.3 4.1 14.4 8.7 24.0 2036-37 11.5 21.8 2.3 14.7 2.4 4.2 14.8 8.9 24.7 2037-38 11.8 22.4 2.3 15.2 2.4 4.3 15.3 9.2 25.4 2038-39 12.2 23.1 2.4 15.6 2.5 4.5 15.7 9.5 26.2 2039-40 12.5 23.8 2.5 16.1 2.6 4.6 16.2 9.8 27.0 2040-41 12.9 24.5 2.6 16.6 2.7 4.7 16.7 10.1 27.8 2041-42 13.3 25.2 2.6 17.1 2.7 4.9 17.2 10.4 28.6 2042-43 13.7 26.0 2.7 17.6 2.8 5.0 17.7 10.7 29.5 2043-44 14.1 26.8 2.8 18.1 2.9 5.2 18.2 11.0 30.4

Source: Drewry Research

21.5 Revenue Forecast: Other than container handling

Table 21.20 Revenue from Cargo related charges : Bulk handling at Vizhinjam Port US dollar

Cement- Edible Raw Cruise Timber Fertilizer Coal POL Chemical Coastal Total Oil Cashew Vessels Vessels

2013-14 - - - 1,052,267 75,963 5,423 367,471 548,141 300,136 2,349,400 2014-15 86,799 - - 1,083,835 83,719 6,032 397,420 587,463 309,140 2,554,406

2015-16 113,989 - 6,567 1,116,350 153,777 6,524 425,716 629,773 636,828 3,089,524

2016-17 119,756 183,254 6,764 1,149,840 169,478 7,055 456,027 675,308 655,933 3,423,416

2017-18 150,979 219,739 6,967 1,184,335 186,782 7,630 488,496 724,321 675,611 3,644,861

2018-19 158,619 248,248 7,176 1,219,866 205,852 8,252 523,277 783,353 695,879 3,850,522

2019-20 166,645 278,721 7,391 1,256,461 226,870 8,925 560,535 847,196 716,755 4,069,499

2020-21 290,365 389,092 7,613 1,294,155 371,544 48,261 600,445 916,243 1,107,387 5,025,105

2021-22 303,562 725,341 15,682 1,332,980 405,652 52,194 643,196 990,917 1,140,609 5,610,134

2022-23 317,359 813,853 16,153 1,372,969 442,891 56,448 688,992 1,071,676 1,174,827 5,955,169

2023-24 497,674 908,399 16,637 1,414,158 483,548 59,886 738,048 1,159,018 1,210,072 6,487,441

2024-25 520,293 1,009,329 17,136 1,456,583 527,938 63,533 790,597 1,253,478 1,246,374 6,885,262

2025-26 541,261 1,117,015 17,650 1,500,281 754,037 67,402 838,745 1,355,637 1,283,765 7,475,792

2026-27 750,765 2,463,696 18,180 1,545,289 807,724 71,507 889,824 1,466,121 1,322,278 9,335,384

2027-28 781,021 2,708,483 18,725 1,591,648 865,234 75,862 944,014 1,585,610 1,361,946 9,932,543

2028-29 812,496 2,969,259 19,287 1,639,397 926,839 80,482 1,001,505 1,714,837 1,402,805 10,566,907

2029-30 845,240 3,246,943 19,866 1,688,579 992,829 85,383 1,062,497 1,854,596 1,444,889 11,240,822

2030-31 879,303 4,428,126 51,154 1,739,237 1,572,270 181,165 1,127,203 2,005,746 1,984,314 13,968,517

2031-32 914,739 4,821,190 52,689 1,791,414 1,659,924 192,198 1,195,849 2,169,214 2,043,844 14,841,060

2032-33 951,603 5,239,212 54,269 1,845,156 1,752,464 203,903 1,268,676 2,346,005 2,105,159 15,766,448

2033-34 989,953 5,683,609 55,897 1,900,511 1,850,164 216,321 1,345,939 2,537,204 2,168,314 16,747,911

2034-35 1,029,848 6,155,870 57,574 1,957,526 1,953,311 229,495 1,427,906 2,743,987 2,233,363 17,788,880

2035-36 1,071,351 6,657,569 59,301 2,016,252 2,052,148 243,471 1,514,866 2,967,622 2,300,364 18,882,944

2036-37 1,114,526 7,190,359 61,081 2,076,739 2,155,987 258,298 1,607,121 3,209,483 2,369,375 20,042,970

2037-38 1,159,441 7,755,987 62,913 2,139,042 2,265,080 274,029 1,704,995 3,471,056 2,440,456 21,272,998

2038-39 1,206,167 8,356,289 64,800 2,203,213 2,379,693 290,717 1,808,829 3,753,947 2,513,670 22,577,325

2039-40 1,254,776 8,993,202 66,744 2,269,309 2,500,106 308,422 1,918,987 4,059,893 2,589,080 23,960,518

2040-41 1,305,343 11,602,518 68,747 2,337,388 2,626,611 327,205 2,035,853 4,390,774 2,666,752 27,361,191

2041-42 1,357,948 12,462,152 70,809 2,407,510 2,759,517 347,131 2,159,837 4,748,623 2,746,755 29,060,282

2042-43 1,412,674 13,373,460 72,933 2,479,735 2,899,149 368,272 2,291,371 5,135,635 2,829,158 30,862,387 2043-44 1,469,604 14,339,302 75,121 2,554,127 3,045,846 390,700 2,430,915 5,554,190 2,914,032 32,773,838

Source: Drewry Research

Table 21.21 Revenue from Vessel related charges : Bulk handling at Vizhinjam Port US Dollar

Port Dues Berth Hire Pilotage Total Vessel Related Charges

2013-14 149,104 131,829 201,964 482,897 2014-15 157,197 149,314 212,926 519,437 2015-16 280,454 184,826 378,772 844,052 2016-17 293,496 204,252 399,628 897,377 2017-18 305,777 226,507 416,870 949,155 2018-19 318,045 249,480 433,953 1,001,477 2019-20 330,951 275,337 451,933 1,058,221 2020-21 491,010 376,825 670,640 1,538,475 2021-22 515,328 446,033 708,130 1,669,490 2022-23 536,431 497,370 738,192 1,771,992 2023-24 562,629 604,403 775,258 1,942,289 2024-25 586,074 672,870 808,705 2,067,649 2025-26 631,827 820,640 872,485 2,324,951 2026-27 678,271 1,319,100 958,982 2,956,352 2027-28 707,123 1,478,227 1,002,275 3,187,625 2028-29 737,404 1,656,376 1,047,780 3,441,560 2029-30 769,192 1,855,626 1,095,623 3,720,442 2030-31 1,053,589 2,942,586 1,496,338 5,492,513 2031-32 1,096,654 3,282,176 1,561,321 5,940,151 2032-33 1,141,684 3,659,351 1,629,398 6,430,433 2033-34 1,188,779 4,077,948 1,700,728 6,967,454 2034-35 1,238,047 4,542,227 1,775,483 7,555,757 2035-36 1,288,389 5,047,250 1,852,203 8,187,842 2036-37 1,341,005 5,606,264 1,932,538 8,879,807 2037-38 1,396,006 6,224,753 2,016,674 9,637,433 2038-39 1,453,514 6,908,764 2,104,807 10,467,085 2039-40 1,513,657 7,664,950 2,197,141 11,375,748 2040-41 1,601,668 10,474,239 2,361,892 14,437,799 2041-42 1,669,349 11,634,508 2,468,333 15,772,190 2042-43 1,740,202 12,915,341 2,579,971 17,235,514 2043-44 1,814,392 14,328,689 2,697,074 18,840,155

Source: Drewry Research

Table 21.22 Sources of Revenue from bulk handling and cruise vessels at Vizhinjam Port US Million Dollar

Total Revenue Cargo Vessel Vessel Related Miscellaneous from Bulk, Break- Present Related Related and Cargo Charges Bulk and Cruise Value @10% Charges Charges Related (Storage etc) Operations

A B C= A+B D E = A+B+D F

2013-14 2.35 0.48 2.83 0.26 3.09 2.81 2014-15 2.55 0.52 3.07 0.28 3.36 2.77 2015-16 3.09 0.84 3.93 0.34 4.28 3.21 2016-17 3.42 0.90 4.32 0.38 4.70 3.21 2017-18 3.64 0.95 4.59 0.40 5.00 3.10 2018-19 3.85 1.00 4.85 0.43 5.28 2.98 2019-20 4.07 1.06 5.13 0.45 5.58 2.86 2020-21 5.03 1.54 6.56 0.56 7.12 3.32 2021-22 5.61 1.67 7.28 0.62 7.90 3.35 2022-23 5.96 1.77 7.73 0.66 8.39 3.23 2023-24 6.49 1.94 8.43 0.72 9.15 3.21 2024-25 6.89 2.07 8.95 0.77 9.72 3.10 2025-26 7.48 2.32 9.80 0.83 10.63 3.08 2026-27 9.34 2.96 12.29 1.04 13.33 3.51 2027-28 9.93 3.19 13.12 1.10 14.22 3.41 2028-29 10.57 3.44 14.01 1.17 15.18 3.30 2029-30 11.24 3.72 14.96 1.25 16.21 3.21 2030-31 13.97 5.49 19.46 1.55 21.01 3.78 2031-32 14.84 5.94 20.78 1.65 22.43 3.67 2032-33 15.77 6.43 22.20 1.75 23.95 3.56 2033-34 16.75 6.97 23.72 1.86 25.58 3.46 2034-35 17.79 7.56 25.34 1.98 27.32 3.36 2035-36 18.88 8.19 27.07 2.10 29.17 3.26 2036-37 20.04 8.88 28.92 2.23 31.15 3.16 2037-38 21.27 9.64 30.91 2.36 33.27 3.07 2038-39 22.58 10.47 33.04 2.51 35.55 2.98 2039-40 23.96 11.38 35.34 2.66 38.00 2.90 2040-41 27.36 14.44 41.80 3.04 44.84 3.11 2041-42 29.06 15.77 44.83 3.23 48.06 3.03 2042-43 30.86 17.24 48.10 3.43 51.53 2.95 2043-44 32.77 18.84 51.61 3.64 55.26 2.88 Total PV of estimated revenue 98.84 Note: Miscellaneous charges are assumed to be 10% of Cargo handling charges as per TAMP document Source: Drewry Research

21.6 Total revenue from all port operations

Table 21.23 Total revenue from all sources (Container + other operations) Million US dollar

Total Revenue Vessel from PV of Total Cargo Vessel Miscellaneous Related and Container, Revenue from Related Related Charges Cargo Bulk, Break- all Sources Charges Charges (Storage etc) Related Bulk and (@10%) Cruise Operations

A B C = A+B D E F

2013-14 7.8 1.0 8.8 0.9 9.65 8.78 2014-15 11.1 1.1 12.2 1.2 13.47 11.13 2015-16 15.4 2.0 17.3 1.7 19.06 14.32 2016-17 20.1 2.1 22.2 2.2 24.43 16.69 2017-18 27.3 2.4 29.7 3.0 32.72 20.32 2018-19 33.8 3.4 37.2 3.8 40.94 23.11 2019-20 39.9 3.7 43.6 4.4 48.05 24.66 2020-21 45.9 4.3 50.2 5.1 55.27 25.78 2021-22 51.7 5.3 57.0 5.7 62.73 26.60 2022-23 58.1 5.6 63.8 6.5 70.22 27.07 2023-24 64.5 6.0 70.4 7.2 77.61 27.20 2024-25 71.2 7.4 78.6 7.9 86.56 27.58 2025-26 80.2 8.0 88.2 8.9 97.12 28.13 2026-27 90.7 8.8 99.5 10.1 109.59 28.86 2027-28 100.9 9.3 110.1 11.2 121.32 29.04 2028-29 112.1 10.8 122.9 12.5 135.38 29.46 2029-30 124.6 11.3 135.8 13.8 149.66 29.61 2030-31 135.3 13.4 148.7 15.0 163.74 29.45 2031-32 146.3 14.1 160.4 16.3 176.64 28.88 2032-33 158.1 15.9 174.0 17.6 191.61 28.48 2033-34 170.9 16.9 187.8 19.0 206.78 27.94 2034-35 184.6 17.8 202.3 20.5 222.83 27.37 2035-36 197.5 20.3 217.7 21.9 239.68 26.77 2036-37 211.2 21.4 232.7 23.5 256.14 26.00 2037-38 225.9 22.6 248.5 25.1 273.60 25.25 2038-39 241.6 24.1 265.7 26.8 292.51 24.54 2039-40 258.3 25.4 283.7 28.7 312.39 23.83 2040-41 278.1 30.2 308.3 30.9 339.16 23.52 2041-42 295.3 32.0 327.3 32.8 360.16 22.70 2042-43 313.6 35.4 349.0 34.8 383.89 22.00 2043-44 333.0 37.6 370.6 37.0 407.59 21.23 Total PV of estimated revenue form 756.33 all sources

Source: Drewry Research

21.7 Revenue from CFS operations

The proposed port Vizhinjam can also develop a port based container freight station (CFS) near its facility. The CFS would be able to provide groupage services of Less than Container Loads (LCL) for exporters as well as de-consolodation services for importers.

The potential market for CFS depends primarily upon

the gateway traffic handled by the port

the commodity profile of cargo shipped in containers

proximity of port to it’s immediate hinterland

ICD facilities at the cargo centers

As discussed in the preceding sections of the report, the proposed Vizhinjam port would primarily attract gateway container traffic from Southern and Central hinterland of Kerala which are currently moving to the Cochin port. Therefore, Drewry has benchmarked proposed CFS operations at the Vizhinjam port against the existing CFS operated by Cochin port.The commodity profile of cargoes generated from these hinterlands is dominated by agricultural commodities like coir, cashew and textile products apart from other goods. These commodities are primarily factory stuffed – destuffed and do not use CFS facilities near the port.

The Cochin CFS operated by the port come under TAMP’s purview. The data published by TAMP with reference to CFS’s operations shows the following figures

Description FY 2007 FY 2008 FY 2009 FY 2010

CFS Traffic (teu) 5,793 5,282 4,761 3,684 Cochin Port Traffic 226,808 253,715 260,473 310,000 CFS Traffic as % of Port Traffic 2.6% 2.1% 1.8% 1.2%

Source: TAMP

Unlike other major container handling ports in India, like JNPT, Mundra and Chennai, container traffic handled at CFS operated by Cochin port has been unable to attract significant traffic. The penetration level for Cochin CFS has been around 2.0% over the past four years. As per our secondary market survey, it is estimated that with addition of container traffic handled by other private CFS operators near Cochin port, the total share of CFS traffic is less than 10%.

The low market share is primarily due to commodity profile of container traffic handled at Cochin wherein a large share of commodities is factory stuffed/ destuffed. It is also assumed that the proximity of these cargo centers to the ports results in cargo owners using their own premises for stuffing/destiffing cargoes. As the inland haulage time for such movements would be very short, the empty containers can be repositioned to the shipping line within a short period avoiding any demurrage / detention charges.

Therefore, in such a scenario, Drewry estimates that the proposed CFS at the Vizhinjam port would face the similar market conditions as the Cochin port.

Therefore, for conainer traffic and revenue forecast for CFS operations at the proposed port are as follows: -

1. Proposed CFS would be developed at one of the available parcel land near the Vizhinjam port

2. Initial market penetration of CFS would map current market penetration of CFSs operating outside Cochin port

3. With increase in gateway traffic, the penetration level of CFS traffic is likely to increase

4. Average revenue earned by Cochin CFS is taken as the benchmark for revenue earned by the proposed Vizhinjam CFS

Description FY 2009 FY 2010

Revenue / Teu (INR) 4,659 5,521 Average Benchmark Revenue (INR) 4,326 Average Revenue (USD) 97.71

5. Vizhinjam CFS would offer 15% initial discount on the total charges paid by users of Cochin CFS. The discount would eventually decrease to 5%

6. Escalation factor taken for revenue growth is 60% of the increase in Wholesale Price Index of India for the relevant years

7. WPI is estimated to growth at 5% per year over the forecast period

8. Currency for revenue forecast is United State Dollar

9. Current exchange rate - 1 USD = INR 44.2763

10. Discount factor taken to calculate present value of future income -10%

The forecast suggests that the market share penetration of Vizhinjam CFS is likely to increase from 5% to 20% over the forecast period. The container traffic handled by the CFS is likely to register 15.8% growth over 30 years increasing from 1,873 Teu to 153,781 Teu over the forecast period.

The present value of total revenue earned by the facility is estimated to be around USD42.1 Million.

Table 21.24 Traffic & Revenue Forecast from CFS operations at Vizhinjam – Base Case Scenario

Gateway Revenue Discount Average Rev / Total Revenue CFS Volume CFS Volume Size Laden +Empty Benchmark Offered Per Teu CFS PV @ 10% (% Share) (Teu) (Teu) (USD/Teu) (%) (USD/Teu) (USD)

FY 14 37,459 5.0% 1,873 129.4 15.0% 110.0 205,979 187,253 FY 15 52,715 5.3% 2,768 133.3 15.0% 113.3 313,488 259,081 FY 16 68,990 5.5% 3,794 137.3 15.0% 116.7 442,705 332,611 FY 17 89,380 5.8% 5,139 141.4 15.0% 120.2 617,610 421,836 FY 18 109,787 6.0% 6,587 145.6 15.0% 123.8 815,352 506,270 FY 19 131,432 6.3% 8,215 150.0 15.0% 127.5 1,047,277 591,160 FY 20 138,458 6.6% 9,138 154.5 14.5% 132.1 1,207,058 619,412 FY 21 158,533 7.0% 11,018 159.1 14.0% 136.8 1,507,785 703,393 FY 22 175,977 7.3% 12,846 163.9 13.5% 141.8 1,821,244 772,385 FY 23 197,226 7.7% 15,088 168.8 13.0% 146.9 2,215,928 854,336 FY 24 213,632 8.0% 17,091 173.9 12.5% 152.1 2,600,231 911,365 FY 25 231,067 8.4% 19,294 179.1 12.0% 157.6 3,040,832 968,903 FY 26 257,864 8.8% 22,692 184.5 11.5% 163.3 3,704,579 1,073,085 FY 27 287,015 9.3% 26,549 190.0 11.0% 169.1 4,489,478 1,182,220 FY 28 318,981 9.7% 30,941 195.7 10.5% 175.2 5,419,464 1,297,377 FY 29 354,010 10.2% 35,932 201.6 10.0% 181.4 6,518,653 1,418,649 FY 30 392,371 10.6% 41,591 207.6 5.0% 197.2 8,203,452 1,623,009 FY 31 394,867 11.2% 44,028 213.8 5.0% 203.2 8,944,524 1,608,751 FY 32 419,718 11.7% 49,107 220.3 5.0% 209.3 10,275,707 1,680,160 FY 33 446,059 12.3% 54,642 226.9 5.0% 215.5 11,776,992 1,750,575 FY 34 473,981 12.8% 60,670 233.7 5.0% 222.0 13,468,342 1,819,985 FY 35 503,578 13.4% 67,228 240.7 5.0% 228.7 15,371,942 1,888,381 FY 36 529,723 14.0% 74,161 247.9 5.0% 235.5 17,466,031 1,950,574 FY 37 557,174 14.7% 81,626 255.3 5.0% 242.6 19,800,833 2,010,291 FY 38 585,998 15.3% 89,658 263.0 5.0% 249.9 22,401,642 2,067,582

Table 21.24 (cont’d)

Gateway Revenue Discount Average Rev / Total Revenue CFS Volume CFS Volume Size Laden +Empty Benchmark Offered Per Teu CFS PV @ 10% (% Share) (Teu) (Teu) (USD/Teu) (%) (USD/Teu) (USD)

FY 39 616,264 16.0% 98,294 270.9 5.0% 257.4 25,296,271 2,122,495 FY 40 648,042 16.7% 108,223 279.0 5.0% 265.1 28,687,074 2,188,184 FY 41 681,410 17.5% 118,906 287.4 5.0% 273.0 32,464,406 2,251,191 FY 42 709,438 18.2% 129,118 296.0 5.0% 281.2 36,310,065 2,288,965 FY 43 738,588 19.0% 139,962 304.9 5.0% 289.7 40,540,563 2,323,321 FY 44 768,904 20.0% 153,781 314.0 5.0% 298.3 45,879,382 2,390,255 CAGR 10.6% 15.8% 19.7% 42,063,054

Annexure 1 Port dues charges at select ports in India (In US$/grt)

New Kolkata/ Port Dues Range Mundra Pipavav Mumbai JNPT Mormugao Cochin Tuticorin Chennai Vizag Mangalore Haldia

Up to 10,000 grt 0.23 0.251

10,001 - 30,000 grt 0.23 0.251

30,000 grt and above 0.23 0.251

up to 40,000 grt 0.108

40,000-50,000 grt 0.102 above 50,000 grt 0.096

Up to 9,999 grt 0.175

10,000 - 19,999 grt 0.175

20,000 - 39,999 grt 0.175

40,000 grt and above 0.175

Up to 3,000 grt 0.149 0.166 0.11248 0.143 0.256 0.106 0.180

3,001 - 10,000 grt 0.211 0.190 0.11248 0.143 0.256 0.106 0.300

10,001 - 30,000 grt 0.211 0.190 0.11248 0.143 0.256 0.106 0.300

30,001 - 60,000 grt 0.211 0.190 0.11248 0.143 0.256 0.106 0.300

60,000 grt and above 0.211 0.190 0.11248 0.143 0.256 0.106 0.300

JNPT port dues includes 39.35% of MPT port dues Source: Individual port websites TAMP/ Compiled by Drewry

Annexure 2 Comparison of berth hires fee at select ports in India (In US$/GRT/hr)

Ports / Vessel Size (GRT) < 3 K 3K to 10K 10K to 15K 15K to 20 K 20K to 30K 30K-40K 40K-50K 50 K to 60K Over 60K

Major Ports

Chennai 0.002890 0.002890 0.002890 0.002890 0.002890 0.002890 0.002890 0.002890 0.002890

Cochin 0.009960 0.006480 0.003960 0.003000 0.003000 0.003000 0.003000 0.003000 0.003960

JNPT 0.003700 0.003700 0.003700 0.003700 0.003700 0.003700 0.003700 0.003700 0.003700

Mormugao 0.003918 0.003918 0.003918 0.003918 0.003918 0.010512 0.010512 0.010512 0.036180

Mumbai 0.007500 0.007500 0.007500 0.007500 0.007500 0.007500 0.007500 0.007500 0.007500

New Mangalore 0.002100 0.002100 0.002100 0.002100 0.002100 0.002100 0.002100 0.002100 0.002100

Kolkata 0.002500 0.002500 0.002500 0.002500 0.002500 0.002500 0.002500 0.002500 0.002500

Tuticorin 0.024000 0.016000 0.021000 0.026000 0.039000 0.042000 0.042000 0.042000 0.042000

Visakhapatnam 0.004600 0.004600 0.002150 0.002150 0.002150 0.003600 0.003600 0.003600 0.003600

Minor Ports

Pipavav 0.005250 0.005250 0.005250 0.005250 0.005250 0.005250 0.005250 0.004960 0.004670

Mundra/Adani 0.007500 0.007500 0.007500 0.007500 0.007500 0.007500 0.007500 0.007500 0.007500

Source: Individual port websites TAMP/ Compiled by Drewry

Annexure 3 Comparison of pilotage & towage fee at selected ports in India (In US$/GRT)

Ports / Vessel < 3 K 3K to 10K 10K to 15K 15K to 20 K 20K to 30K 30K-40K 40K-50K 50 K to 60K Over 60K Size (GRT

Major Ports

Chennai 0.389 0.269 0.31 0.357 0.507 0.507 0.507 0.507 0.587

JNPT 0.2381 0.2381 0.2381 0.2381 0.1908 0.1908 0.1908 0.1908 0.1669

Mormugao 0.25178 0.25178 0.25178 0.25178 0.20142 0.20142 0.20142 0.20142 0.17625

Mumbai 0.6091 0.6091 0.6091 0.6091 0.6091 0.6091 0.6091 0.6091 0.6091

Tuticorin 0.319 0.319 0.342 0.342 0.366 0.378 0.378 0.378 0.378

Visakhapatnam 0.3261 0.3261 0.3402 0.3402 0.3402 0.4896 0.4896 0.4896 0.4896

Kolkata 0.6435 0.6435 0.6435 0.6435 0.6435 19,305+0.5148 per 19,305+0.5148 per 19,305+0.5148 per 34,749+0.45045 per grt above 30001 grt above 30001 grt above 30001 grt above 60k

New Mangalore 0.32 0.32 0.32 0.32 0.32 9,600+0.256* per 9,600+0.256 *per 9,600+0.256* per 17,280+0.224* per grt above 30,000 grt above 30,000 grt above 30,000 grt above 60,000

Cochin 0.5564 0.5564 0.5564 0.5564 US $ 16692+ US $ US $ 16,692+ US $ 16,692+ US $ 16,692+ US $ 30,045+ 0.4451per GRT US $ 0.4451per grt US $ 0.4451per grt US $ 0.4451per grt US $ 0.3895per grt over30,000 GRT over 30,000 grt over 30,000 grt over30,000 grt over 60,000 grt

Kandla Port 0.388 0.388 0.388 0.388 0.388 U.S.$ 11,640 + U.S.$ U.S.$ 11,640 + U.S.$ U.S.$ 11,640 + U.S.$ U.S.$ 20,940 + 0.310 0.310 0.310 U.S.$ 0.271 per grt over per grt over per grt over per grt over 30000 30000 30000 60000 grt

Minor Ports

Mundra/Adani 0.455 0.455 0.455 0.455 0.455 0.455 0.455 0.455 0.455

Pipavav 0.378 0.378 0.378 0.378 0.378 0.378 0.357 0.336 0.336

Source: Individual port websites TAMP/ Compiled by Drewry

Annexure 4 List of organisations contacted during market survey

Sl. Title Name Designation Organisation Location Contact Details Mobile No. Email id Focus No. 1 Ms. C. Premakumari Statistical & Cochin Port Trust Cochin 91-484-2668206 [email protected] Statistics of Research Officer Ext. 2120 Cochin Port 2 Dr. C. Unnikrishnan Jt. Director-SEZ Cochin Port Trust Cochin 91-484-2668153 [email protected] Vallarpadam Nair 3 Mr. Girish Thomas Asstt. Traffic Cochin Port Trust Cochin 91-484-2666475 [email protected] Port Operations Manager 4 Mr. Rajendra P. Traffic Manager Cochin Port Trust Cochin 91-484-2666418 [email protected] Port Operations Paibir 5 Mr. Shankar Manager GAC Cochin 91-484-266 8372 Vallarpadam Narayan 6 Mr P Narayan Director Chakiyat Agencies Cochin 91-484-4261600 [email protected] Container 7 Mr Tony Subin Manager Maersk Line Cochin 91-484-3983500 [email protected] Container 8 Mr T Sivakumar GM-Cochin APL Cochin 91-484-3072966 [email protected] Container 9 Mr Suresh Joseph GM_IGTPL DPW Cochin 91-484-4080201 [email protected] Container 10 Mr Vikramjit Vasuli DGM (Commercial) Hindustan Newsprint Mavelloor, 91 4829 256211 Coal Ltd. Kottayam 11 Mr D. Ashok Kumar Director Adityaa Resources Singapore Coal 12 Mr Md. Ashraf Sales Officer Malabar Cement Walayar 91-491-2862373 Coal 13 Capt. Capt. Ifti Kinship Cochin 91-484-2669256 91-9846036396 Bulk Commodities 14 Mr. Vijay Anand Hari &Co. Tuticorin 91-461-2356706 91-9843421176 Bulk Commodities 15 Mr. AK Bhargava All India Rerollers New Delhi 91-9911173220 Coal Association 16 Mr. Moireen Koya Director-Raw Beepath Casting 91-9447489011 Steel Material Purchase

Annexure 4 (cont’d)

Sl. Title Name Designation Organisation Location Contact Details Mobile No. Email id Focus No. 17 Mr. PK Ahmed Chairman Steel Manufacturers 91-495-2421705 91-9847000202 Steel Association 18 Mr. Salahuddin General Manager Hari &Co. Tuticorin 91-9895701242 Bulk Commodities 19 Mr. Subhash Bathia Ex-IMC Mumbai Petro propducts 20 Mr. Shaji Comercial Manager KSCDC Kollam 91-9847511950 Raw Cashew 21 Mr. Unnitan General Manager Vijalaxmi Cashew Co. Kollam 91-124-2741391 Raw Cashew 22 Mr. S. Senraj Manager St. John Freight Kollam 91-461-2342521 Raw Cashew Muthiah Systems 23 Mr. Shashi Verma Secretary CEPC Cochin 91-484-2778570 91-9447730703 Raw Cashew 24 Mr. Prashanthi Cashew Kollam 91-474-2712666 [email protected] Raw Cashew 25 Mr. Sanjiv Asiatic Export Kollam 91-4742708150 Raw Cashew Enterprises 26 Mr Sumit Kumar BPCL Kochi Refinery 91-484-2821768 Products 27 Capt. Hari A. Variyar Nodal Port Officer Calicut Port Calicut 91-495-2414863 91-9847017168 Minor Ports 28 Mr. Girish Port Officer Azhikkal Port Calicut 91-497-2771413 91-9446732148 [email protected] Minor Ports (Telephonic) 29 Mr. P. Sundaram MD Ananth Oil Extraction Kochi 91-484-2523619 91-9846069800 Edible Oil and Pvt Ltd DOC 30 Mr. P. P. Ashique MD Koyenko Expellers Calicut 91-495-2383811 Edible Oil and (Kerala) Pvt Ltd DOC 31 Mr. A. S. Gopinath MD Oriental Exim Agency Kochi 91-484-3017300 91-9387845000 Timber 32 Mr. Zacheriah COO, IOC Kochi IOC Kochi 91-484-2312741 POL Thomas 33 Mr. P. V. Terminal Manager IOC Kochi 91-484-2666015 91-9447798267 POL Sudhakaran 34 Mr. Anonymous Anonymous BPCL, Kochi Refinery Ambalamugal 91-484-2722061 POL & LPG

Annexure 4 (cont’d)

Sl. Title Name Designation Organisation Location Contact Details Mobile No. Email id Focus No. 35 Capt. Haridas C Port Officer Neendkara Port, Kollam Kollam 91-474-2743825 91-9847147031 Minor Port Nayar 36 Mr. Martin Port Officer Vizhinjam Port Vizhinjam 91471-2480216 Minor Port 37 Capt. Jai Prakash Port Officer Allapuzha Port Allapuzha 91-477-2253213 Minor Port 38 Ms. Ms A M PA to Port Officer Allapuzha Port Allapuzha 91-477-2253213 09447778208 Minor Port Mariyama 39 Dr. Dr Jacob Director, DoP Directorate of Ports Trivendrum 91-471-2324533 09447015560 [email protected] Minor Port Thomas 40 Mr. Mohan B Nair Sr. Engineer (LPG Kochi Port SEZ Vallapardam 91-484-2321614 09447498263 [email protected] Major Port Engg, IOC) 41 Capt. Kapil Kekre GM Strategy Shreyas Shipping & Mumbai 91-22-66220410 09819345821 kapil.shreyas.co.in Shipping Line Logistics Ltd. 42 Capt. D. K. Tewari CEO MSC Mediterranean Mumbai 91-22-66378102 9820124903 [email protected] Shipping Line Shipping Company S.A. 43 Capt. S. P. Rao Chairman SVS Group Mumbai 91-22-67870016 9987525533 [email protected] Shipping 44 Mr. Paresh Shah Vopak Mumbai 91-22-66718884 91-9820059728 Tank Farm 45 Mr. TK Chanda Chief Statistician Fertiliser Association of New Delhi 91-11-26567144 Fertiliser India 46 Mr Prithwijit Maitra GM - Commercial Maersk Line Mumbai 91-22-66237886 [email protected] Container 47 Mr Nagesh Kamath Regional Manager - CMA CGM Mumbai 91-22-39888999 [email protected] Container Equt & intermodal 48 Mr Ivan Saldanha GM - Liner Sales NYK Line Mumbai 91-22-3021 8101 [email protected] Container 49 Mr Ajay Kumar Director Commercial APL Line Mumbai 91-22-29890123 [email protected] Container 50 Mr Neil Abeyratne Country Manager John Keells Logistics Colombo 94-717630524 [email protected] Container