CHAPTER 4 TRAFFIC POTENTIAL AT

4.1 Introduction

The major Port of handles most of the State‟s sea borne traffic. The State ports do not play much significant role. Beypore/, Azhikkal and Vizhinjam are the three active state ports in the state. Main drivers for any port development are the maritime transportation needs of industries (such as Coal for Thermal power plants, Iron ore for Steel plants, fertilizers raw materials, agriculture commodities etc.), development of maritime industries such as ship-repair, ship building or ship breaking yard. It has been brought out in Appendix 2 that in future there is only one FDI coming up in for setting up a textile factory. Hence there is little scope for generation of port traffic for Beypore port. Ports are also needed for water borne passenger traffic - ferrying or tourism purposes. 4.2 Key Issues Examined The Consultants have examined the potential for the State run ports, (i) to act as Regional Growth Centres; and (ii) to support major port in reducing pressure. These aspects are briefly discussed in the following paragraphs. 4.2.1 Ports as Regional Growth Centres:

(a) Nature of Traffic at Existing Other State Ports 40 other ports out of a total 200 ports handle some traffic of significance. The main cargoes passing through the active minor ports considering all scenarios are crude, POL products, fertilizer import, iron ore and oil cake exports, coastal movement of clinker and occasional import of food grains/palm oil, etc. Very little local/rural produce is shipped from the immediate hinterland of any of the minor ports. As the neighbouring areas tend to produce similar type of goods, there is little scope for trade between them and whatever small amount of trade takes place, it moves through road. (b) Past Trends in Minor Port Traffic Minor ports have not shown any rapid growth in traffic since 2000. Apart from some state ports handling commodities take fertilizers, iron ore, oil cakes, some food grains/palm oil etc. and, containers, crude and POL products are new cargos at the state ports in Gujarat because of two refineries set-up there, for which dedicated ports have been developed in the recent past. Reliance refinery with

expected capacity of 64 MTPA is the largest refinery in India serviced by a non- major state port in Gujarat. (c) Experience Experience globally confirms that where rail and road transport facilities are developed, the scope of minor ports in stimulating local economic activity is limited. In most countries, only bulk cargo such as coal, cement, fertilizer and petroleum products are carried by coastal ships, where as general cargo/agricultural products from the immediate hinterland are moved by road or rail. (d) Link between Ports and Economic Development Port is a vehicle for economic development but not necessarily an initiator. This fact is evident from the growth of traffic at non-major ports since 2000 when state port traffic in maritime states rose to 64 million ton from about 35 million ton from the previous 3 years (1997-1999) mainly due to setting up of port traffic generating industries in Gujarat, Maharashtra and other states. The implementation of Policy of Openness of Indian Economy‟ around 1991, started showing its effect around 1996-97 onward. The objective of setting up of new refineries, power plants, steel mills in maritime states was mainly to reduce the transportation cost of the inputs/outputs. Further implementation of SEZ policy has also boosted the growth in the port traffic. The conclusion, therefore, is that development investment in non-major ports does create or generate marginally economic gains. Substantive development could be justified only if one or more of the following conditions exist:

(i) organic growth of traffic beyond the capacity of the existing facilities (ii) concrete plans to set up industrial plants for which special port facilities is required (iii) clear evidence that saving in user costs will be realized to justify the investment.

4.2.2 Reduction of Pressure on Major Ports Almost all major ports have large urban centres with high population densities. For effectively reducing pressure on these centres, it is necessary to shift major activities along with man power associated with it to other locations. Such attempts in the past have had very little success in decentralization because of social and other factors, level of comparable facilities in new centres. On this analogy the minor port can serve as

transfer points only if facilities of comparable level to those at the major ports stand provided.

4.2.3 Development of fishing harbour and Passenger / Tourist/ Facilities at Minor Ports Combining commercial and fishing activities with fishing, passenger/tourist facilities at a minor port is advantageous mainly due effecting economies of sharing infrastructural development costs relating to sheltered harbour, access channel, inland links etc. For this reason, development of fishery facilities in commercial ports is already taking place.

4.2.4 The development of state ports should be based on the traffic demand arising from existing or planned port based activities.

4.2.5 Beypore to be developed for ‘What Ship Sizes’ This basic issue need to be reproduced and a strategy formulate based on a review of vessel calls at the Indian west coast ports to ascertain the size wise (DWT) distribution of vessels most likely to trading in the area. During 2008-09, 10574 vessels called at the West Coast ports. The size distribution is given in Table 4.1.

Table 4.1 Vessels calling at West Coast Ports (2008-09)

Break Bulk Cargo Vessel 2008 - 09 Particulars Kandla Mumbai JNP Mormugao NMP Cochin West „000 DWT Vessels (Kochi) Coast Ports NUMBER OF VESSEL CALLS 0-10 121 231 8 3 24 44 407 10-20 141 198 9 2 22 12 362 20-30 127 142 1 2 24 3 275 30-40 33 31 1 3 68 40-50 13 53 1 67 50-80 13 17 30 80+ 0 Total 448 672 18 8 70 63 1209 PERCENT OF VESSEL CALLS 0-10 27.0 34.4 44.4 37.5 34.3 69.8 33.7 10-20 31.5 29.5 50.0 25.0 31.4 19.0 29.9 20-30 28.3 21.1 5.6 25.0 34.3 4.8 22.7 30-40 7.4 4.6 12.5 4.8 5.6 40-50 2.9 7.9 1.6 5.5 50-80 2.9 2.5 2.5 80+ Total 100 100 100 100 100 100 100

Ship calls (percentagewise) to West Coast Ports by relatively smaller sized ships which mostly carry break bulk cargo are noted as follows:  33.7% of the vessels were up to 10,000 DWT (Draft 8 m).  about 29.9% of the vessels were in the range of 10 to 20,000 DWT (Draft 10 m).

Thus about 64% of Break Bulk Vessels calling at West Coast ports are below 20,000 DWT.

From the above it could be concluded that in absence of any specific industry coming up in Beypore region BB vessels larger than 10 to 15,000 DWT vessels cannot be envisaged now at Beypore Port. Hence, Beypore port development could be based on the assumption, also considering berth length and draft limitations inside the harbour area, to cater for a maximum of 10,000 DWT size vessels in fully loaded condition and occasionally, partially loaded larger vessels with 8 m restricted draft even in the range of 20 ~ 30,000 DWT in size.

4.2.6 Traffic Presently Handled at Beypore Port

In 2008-09, about 120,000 Tons of cargo was handled here (comprising 11,300 T of Hydrocarbons, 18,560T of Soda Ash, 11,830T of Cement, 25,010T of metal / Iron & Steel products, 18,100T of Food grains & Misc. cargo 35,290 T). All cargo movements were through coastal vessels. Cargo shipment such as POL Products, LPG & household goods for are presently handled at Beypore Port.

4.3 Methodology for Traffic Assessment

There are mainly two methods of traffic estimation, namely – Assessment by mathematical methods & by end user Method. Mathematical Models It has been established all over the world that port traffic has a direct co-relationship with the GDP of the country. Various mathematical models have been deployed to assess growth of traffic at a port. Past traffic data is analyzed using different models to establish a relationship between the traffic & other economic indices. A pictorial presentation of the above is given in Fig. 4.1.

End User Method Forecasting techniques using mathematical models are based on past data and the trends. It has limitations, these do not take into account the effects of special happenings/economic developments in the hinterland. In order to estimate the traffic

more realistically – end user method is employed where special economic development activities are considered to assess the impact on port traffic. In this method the needs of port users/stakeholders are assessed and analysed. The pictorial presentation is given in Fig. 4.2.

In any process of traffic estimation for a port delineation of the hinterland of port, the economic activities historical (time series) therein and special events/planning a prognosis are studied. In case of Kerala ports immediate hinterland in Kerala and South Western India extended hinterland could be considered as the economic activities of the region. In this context, the and were studied and are placed as Appendix 2 & 3.

FIG. 4.1 METHODOLOGY TO ESTIMATE TRAFFIC

MATHEMATICAL MODEL

Models Used are -

 Traffic with GDP Growth o Linear Regression o Power Function  Growth Model  Time Trend Analysis

Estimate BB Traffic at All Ports in India

Traffic for Traffic for All Ports Kerala Ports Elsewhere

Traffic for Traffic for Kochi Port Other Kerala State Ports

Traffic for Beypore Port

METHODOLOGY TO ESTIMATE TRAFFIC FIG. 4.2 POTENTIAL

END USER METHOD

Review Economy of Kerala Interview/Meeting/Discussi State - ons with Users -  IOCL (POL & LPG)  Future Plans for Industries  HPCL  Transport Sector  Indian Timber Merchants  Power Sector Association  Proposed FDI  Lakshadweep Co-  Agriculture operative Federation  PWD of Lakshadweep  Flour Mills  Steel Mills  Port Officials Identify Users of Beypore Port

Estimate/Discuss Traffic Potential/ Usage of Beypore Port in Future

Traffic Forecasting

4.3.1 Traffic potential Assessment

Initially the consultants considered be the districts of Kozhikode (KKD), Wayanad (WYN) & (MLPM) as the primary hinterland and districts of Palakkad (PLKD) & (KNR) & other districts of Kerala as the immediate secondary hinterland and estimated the future traffic potential for Beypore(see Fig 4.3) The Draft Feasibility Report was prepared . The traffic potential given in the DFR was the expected cargo that could be handled at Beypore to ensure the concept and design have commercial viability. For sustained viability most of the developments proposals were proposed on the south side of the river. The emphasis was to grow on innovation, achieve functional convergence between forecast/ logistic/ inventory and identification of value chains. Success of the port will depend on developing Unique Selling Points (USP) & suitable marketing instruments for attracting the traffic.

FIG. 4.3

During the presentation of the Draft Report & the meeting with the GoK on 5 to 7th March 2010 in Beypore & Kozhikode the consultants were asked to develop a scenario in which port facilities be developed on the north side of the river as the land on the south side was earmarked for the Defense Ministry. Further the consultants were asked to moderate the traffic potentials so as to be able to develop the port facilities on the north of the river, at the existing port location as the availability of land on the north side of river is restricted . Moreover the area is thickly populated so the full

development cannot be accommodated here. Cargoes like POL & LPG cannot be handled here. Further the proposed development of the port at Azhikkal in Kannur(adjacent) district in north of Beypore & in in south of Beypore will have impact on the traffic expected at Beypore .

Based on the discussions the consultants have re-assessed the traffic potential for another scenario of where development is not permitted on the south bank of the river. So the Beypore traffic potential is assessed for:

 SCENARIO 1 - . With port development on both north and south the south of river (earlier DFR ) and probability of other nearby ports coming up being doubtful.

 SCENARIO 2 - No development permitted on the south of the river and also distinct possibility of Azhikkal and Ponnani Port are developed.

 SCENARIO 3 - Development of a Jetty for Lakshadweep Authority at Beypore The following section gives the traffic estimation for Section A and the same is followed by the Section B (as presented in DFR)

4.4. Traffic Potential

4.4.1 Approach I – Mathematical Models

Macro Analysis of Break Bulk Cargo at All India level Since the Kerala ports in the past have been handling only break bulk cargo, a review of break bulk cargo at All Indian Ports, vis-à-vis, Kerala Ports and Karnataka ports was carried out over the years from 2001 to 2008 the break bulk cargo handled at All Indian Ports and Kerala ports are shown in Table 4.2 below.

Table 4.2: Break Bulk Traffic trends at All India, Kochi, Kerala State Ports & Karnataka Ports

Year BB Traffic (MTPA) % Share of in AI( BB)

(AI) ports Kochi Kerala Kerala (Total) Kerala (Total) (Total) Kerala Kerala All India Kerala & Kerala & Kerala Karnataka Karnataka Karnataka Karnataka State Ports State Kerala State State Kerala 2001 62.0 1.0 0.160 1.157 2.087 3.244 1.87 3.37 5.23 0.26 2002 66.9 1.0 0.128 1.110 1.991 3.101 1.66 2.98 4.64 0.19 2003 78.4 0.8 0.089 0.913 2.009 2.922 1.16 2.56 3.73 0.11 2004 84.3 0.8 0.060 0.909 4.044 4.953 1.08 4.80 5.88 0.07 2005 97.4 0.7 0.084 0.831 4.582 5.413 0.85 4.70 5.56 0.09 2006 100.1 0.9 0.135 1.015 5.342 6.357 1.01 5.34 6.35 0.14 2007 127.3 1.0 0.173 1.182 8.179 9.361 0.93 6.42 7.35 0.14 2008 138.4 0.7 0.147 0.818 11.02 11.84 0.59 7.96 8.55 0.11 2009 124.5 0.7 0.122 0.857 7.25 8.11 0.69 5.82 6.51 0.10 CAGR 2001-09 9.1 -3.7 -3.3 -2.0 16.8 12.1 2004-09 8.1 -1.7 15.3 -1.2 12.4 10.4

Source: Major Port Profile, IPA; Port Dept., Kerala

Considering All India scenario of break bulk traffic handled at different port, Kerala ports has declined from 1.87% in 2001 to 0.59% in 2008, the share of Kerala & Karnataka together has shown an increasing trend from 5% in 2001 to 8.5% in 2008. This trend has occurred mostly as other ports in the West Coast have enhanced their capacity relatively faster. The redeeming feature to note is that in absolute terms in last four years from 2004 the break bulk traffic at Kerala State Ports has shown some increasing trend. The annual compounded growth has been very high (25.1% p.a.).

Growth of Break Bulk cargo-All Ports in India The consultants have used the following models

 Time trend Analysis - Port traffic (BB) & time  Growth Method - Port traffic (BB) & the achieved growth over the past  Regression Analysis - Port Traffic (BB) & GDP