Mukt Shabd Journal ISSN NO : 2347-3150

International Container Transshipment Terminal, :

Milestone to Inclusive Growth

Emilson .V.V Research Scholar, Dept. of Applied Economics, Cochin University of Science and Technology, - 682022 Abstract

International Container Transshipment Terminal, Vallarpadam is one of the prestigious projects introduced by the Govt. of is now in economic progress. Apart from some minor issues the project has opened up ample opportunities in the economy in different ways. This study has been attempted to bring out the opportunities, issues and challenges associated with the terminal. The proper guidance and timely interventions of the government will definitely boost the business activities and profitability of the terminal to a great extent thus Indian economy can enjoy various benefits from port sector.

Key Words: International Container Transshipment Terminal, Vallarpadam; Development; Port Based Special Economic Zone; Growth; Opportunities; Socio-Economic Status; Draft; Cabotage Law; Environmental Pollution; Land Price; Rehabilitation.

Introduction

The started in the 3rd millennium Before the Common Era (BCE) after the Indus Valley Civilisation. India is a major maritime nation by efficacy of its long coast line of around 7517 Kms on the western and eastern shelves of the mainland and also along the islands, set with 13 major and 187 non-major ports, strategically located on the world’s shipping routes, its long tradition of seafaring with a large pool of trained maritime personnel, and its dynamic and rapidly globalizing economy with a vast potential to expand its participation in trade and development.

India, one of the dynamic economies in the world with a massive market, a billion plus population and strong Gross Domestic Products (GDP) growth rates of over 9 per cent for three consecutive years up to 2007. However, due to the global break-down and recession, the GDP growth slowed down to 7.4 per cent in 2009. But, with global recovery under way and backed by

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strong decisive policy responses, the economy performed better in 2010 and achieved growth rate of 10.4 per cent. After recovering in 2010, GDP growth slowed down to 7.2 in 2011 and 6.5 in 2012 then to the decade's low of 3.2 percent in 2013. It picked up marginally to 4.7 percent in 2014. It is likely to grow between 5.4 percent and 5.9 percent during 2015. In 2016 it reached at 7.6 per cent and slowed down to 6.7 in 2017, due to shocks of "Demonetisaton" in 2016 and introduction of Goods and Services Tax in 2017. As forecast made by many global institutions, India along with China will lead Asia’s economic expansion in the near future.

Ports play a crucial role in the overall economic development of the country. About 85 per cent by volume and 75 per cent by value of the country’s international trade is carried on through maritime transport. Development of India’s ports and trade related infrastructure will continue to be critical to sustain the success of accelerated growth in the Indian economy. Despite record growth rates, the merchandise trade intensity of India’s GDP is still below 43 per cent. This indicates that there is still a lot of untapped potential for trade growth, and consequently the demands on the country’s ports and trade infrastructure will continue to mount as trade diversifies and grows. Hence, there is a need to expand the Country’s ports in a timely and efficient manner.

India’s ports comprise of 13 major ports (12 Government-owned and one private) and around 187 notified minor and intermediate ports along the coast and islands. The Major Ports are under the Union List (Schedule VII) while the Non-Major Ports are under the Concurrent List (Schedule VII) of the Constitution of India. The 13 major ports are administered by the Central Government under Ministry of Shipping. The remaining ports which are referred to as Non- major ports are administered by the nine maritime States and three Union territories within their respective coastlines.

During financial year 2018, cargo traffic at major ports in the India was reported at 679.36 million tonnes (MT). In financial year 2019 traffic has increased 2.90 per cent year-on-year to 699.05 million tonnes. Cargo traffic at non-major ports was estimated at 491.95 million tonnes financial year 2018 and grew at 9.2 per cent CAGR between financial year 2007-2018. The major ports had a capacity of 1,452 million tonnes by financial 2018 end. The Maritime Agenda 2010-20 has a 2020 target of 3,130 MT of port capacity. The government has taken several

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measures to improve operational efficiency through mechanisation, deepening the draft and speedy evacuations.

The Ministry of Shipping, Government of India has commenced many path-breaking measures to attain the desired objective of transforming Indian Ports into world class facilities suited to the requirements of the future economy of India, which will enable enhanced private investment, improve the service quality and promote competitiveness, apart from achieving the expansion of capacities in the country. Such measures include formulation of Maritime Policy, revision of various operational policies, preparation of Perspective Plans for the major ports, commissioning of two more major ports one each on the East Coast & the West Coast, introduction of Port Community System (PCS), paperless regime, etc.

Primary Benefits of Ports

Jobs, labour income, business earnings and tax revenues generated by the port construction and operation activities are the major direct regional benefits of ports.

Secondary Benefits of Ports

When it’s initial generated labour income, business earnings and tax revenues are subsequently or partially spent in the region. These expenditures include; Restaurants, or entertainments and professional services will generate additional labour income, business earnings and tax revenues within the region. This process will lead to second or third or further rounds of spending. When the re-spending is used up, the total labour earnings, business earnings and tax revenues in the region will have increased by more than their initial amounts by a factor greater than one(i.e. by the multiplier co-efficient).

An increase in total spending in the region will be the combination of initial spending and secondary spending. Thus the secondary benefits of generated jobs, labour income, business earnings and tax revenues from the spending and re-spending are termed as indirect regional spending benefits of the port.

The volume of above mentioned benefits will be reduced if there are any regional leakages. If, in construction or expansion of a port, workers may be employed and materials purchased are lost to other regions. At the same time the direct benefits of the port will be less, if the recipients of

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labour income and business earnings from operation of the port are not residents of the region. When direct benefits are lost, indirect or secondary benefits will also be lost beacause the latter occur from the former. From this it is clear that if the port’s direct benefit income and business earnings are not spent in the region then the corresponding indirect benefits from the expenditures will be zero.

Tertiary Benefits of Ports

Besides the direct and indirect benefits of a port, the port may also create tertiary benefits. Port’s tertiary benefits arise from improvement in the region’s transportation because of the existence of the port. If the port’s region is fledged with good rail, road and trucking services probably it will help the reduction in transit times for cargo movements within the region, which may increases in the accessibility of shippers to regional, national and international markets. But this may be adversely affected when there are any sorts of highway congestion.

International Container Transshipment Terminal (ICTT), Vallarpadam

In 2004, Dubai Ports (DP) World got the permission to operate the Rajiv Gandhi Container Terminal and to develop the International Container Transshipment Terminal at Vallarpadam. DP World is a market leader in Indian container terminal operations and has the largest portfolio of ports along the Indian coastline including terminals in Gujarat (Mundra), Maharashtra (Nhava Sheva,) Tamil Nadu (Chennai), Andhra Pradesh (Vishakapatnam) and a state of the art transshipment facility in (Vallarpadam). ICTT, the first trans-shipment terminal in India is part of the Trust in Kochi, in the state of Kerala and also the first container terminal to operate in a Special Economic Zone.

Cochin Port is located close to the East-West trade route, just eleven nautical miles away from the direct Middle East – Far East sea-route. No other Indian port enjoys such a strategic geographic proximity to the major maritime sea routes. DP World Cochin is the natural gateway to the vast industrial and agricultural produce markets of the South & West of India. The hinterland of the port includes the state of Kerala and parts of Tamilnadu and Karnataka. Improved road and rail connectivity have substantially reduced the transit time and logistics cost making Cochin Port a preferred gateway for exports & imports from to the hinterland.

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International Container Transshipment Terminal (ICTT), Vallarpadam is the largest single operator container terminal in India with 115.25 ha of land area. The Ministry of Commerce, India has notified Vallarpadam, an Island in Kochi as an international transshipment hub of India. The port is operated by DP World. DP World operates five container terminals in India with a total capacity of 4.8 million TEUs, a container rail service across the country and container freight stations.

The first phase of the Vallarpadam terminal was commissioned on 11th February 2011. As per the condition in the concession agreement Cochin Port Trust was handed over the existing Rajiv Gandhi Container Terminal under BOT contract with India Gateway Terminal Private Limited (IGT), a subsidiary of Dubai Ports World for a period of thirty years. The expected investment is around 2,300 crores. With the support of the government, the port is providing additional road connectivity from the Vallarpadam Island to the National Highway 47. The port is also providing rail connectivity from Vallarpadam to the National Rail Grid. The project area falls within the newly declared Port Based Special Economic Zone (PBSEZ). In the final fully developed stage the terminal will have a capacity of four million Twenty foot Equivalent Unit (TEU) and a berth length of 1800m with a permissible draught of 14.5 m for deep-sea vessels. The permissible draught of 14.5 m will allow for vessels of up to 8000+ TEU capacity. The application of IT plays a crucial role at the terminal. Its state-of-the-art IT infrastructure, technology and support have been specifically tailored to facilitate the smooth flow of traffic and transactions keeping the trade in in mind.

Timeline

 The construction of Phase- I was commenced in 1st February 2005.  In 16th February, 2005 a concession agreement was signed.  The first train has arrived at the terminal on 9th February 2011.  On February 11th 2011, Dr. Manmohan Singh, Prime Minister of India dedicated the terminal to the nation.  The first containers arrived at the terminal on 12th February 2011.  OEL Dubai was the first vessel arrived at ICTT on 18 February 2011.  In 21 July 2011, MV. Maersk Sembwang the largest vessel handled at ICTT arrived

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Growth Trends During 2013-2018

The terminal recorded a positive growth every year during the period 2013 to 2018. In 2013- 14 the terminal possessed 3 per cent growth. In the year 2014-15, 5 per cent was recorded by the terminal, the highest growth rate so far was in the year 2015-16 i.e. 18 per cent, then it declined to 14 per cent in the year 2016-17 and 13 per cent was recorded in the year 2017-18.

Figure: 1.1

Vallarpadam International Container Transshipment Terminal - Y-O-Y Growth During FY 2013-18 20 18 16 14 12 10 8 6 4 2 0 2013-14 2014-15 2015-16 2016-17 2017-18

Source: Indian Container Market Report 2018

Growth in 2019

The International Container Transshipment Terminal at Vallarpadam has published a 14 per cent growth in the first quarter of 2019, which is higher than the average industry rate of 9 per cent. South India’s premium transshipment container terminal operated by DP World recorded the highest quarterly throughput of over 1.6 lakh TEU and recorded its all-time highest monthly throughput of more than 56,000 TEU in March 2019. The terminal also recorded 48 per cent improvement in transshipment volumes during the first quarter of 2019. This is due to the excellent feeder connectivity the terminal boasts to the major as well as minor ports and inland waterway ports in India.

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Unlimited Opportunities

Ports have a vital role in regional development. The ports create employment, labour income, business gains and taxes. The ICTT, Vallarpadam has also created bundle of opportunities in Kerala economy. The benefits are classified into direct and indirect. The primary benefits arise in the construction and operation field. In Vallarpadam, the initial construction contract of around Rs. 592.5 crore was given to Simplex Consortium, a domestic civil engineering and construction company. More than 10,000 workers were engaged directly and indirectly in the construction works of the terminal and also in the rail and road connectivity to the terminal. So many hotels and restaurants, many business ventures, banks etc. were constructed nearby the terminal area. Thousands of employment opportunities were created in these areas. Container Freight Stations (CFS), Container Storing Yards, Container Repairing Centres are the main business highlights of the terminal. More than 2000 employment opportunities were created directly and indirectly in these sectors.

Improved Socio-Economic Status of People due to Land and Rent Price Hike

Normally every business ventures will bring a boom in the land price. Vallarpadam , Thrikkakara Municipality, Grama Panchayat, Municipality, Cheranalloor Grama Panchayat, Varapuzha Grama Panchayat, Grama Panchayat, Grama Panchayat are the major places where the terminal and its road and rail services exists. By implementing the terminal a huge investment were taken place in these areas and accordingly the price of land increased to a certain level. In 1999, the average price of a land in Vallarpadam was between Rs.1000 - Rs.11,000 for 1 Cent of Land and in 2019 it is between Rs.2,00,000 - Rs.22,00,000. Like the price of land, the rent of land and buildings also increased to a huge level. In Vallarpadam, for a single storied building the average rent charged in the year 1999 was between Rs.800- Rs. 3,500 and in 2019 it was between RS. 5,000 - Rs. 12,000. Thus the socio- economic status of the people improved to a great extent.

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Issues and Challenges Faced by the Terminal

From the beginning onwards the terminal faced many serious issues. Initial problem faced by the terminal was slow pace of construction of rail and road connections to the terminal. Another challenge faced by the terminal was draft depth. The Vallarpadam Terminal has attained a maximum draft depth of 14.5 meter whereas one of the main competitors, the Colombo International Container Terminal has 18 meter draft depth.

The Vallarpadam terminal acts like a hub into which smaller feeder vessels bring container cargo and then gets loaded onto larger ships. Larger vessels bring about economies of scale and lower the cost of operations for shipping lines, which translates into lower freight rates for exporters and importers.

More than half of India’s annual container cargo has been trans-shipped at ports outside the country, mainly at Colombo, Singapore, Salalah and Jebel Ali. This is because India had no port near international sea routes to handle large vessels. Cochin port enjoys nearly the same locational advantage as Colombo, with a mere 76 nautical miles deviation from the main east- west shipping route.

However, locational advantages apart, there were practical difficulties that the terminal faced.

Foreign container carriers realised that they could not carry containers either to or from the Vallarpadam facility to any other port in the country, hampering its operations following the February 2011 start. This is because India’s coastal trade is reserved for ships registered in India and foreign ships can be allowed to operate only when Indian ships are not available, after taking a license from India’s maritime regulator, according to a so-called cabotage law. The lack of adequate Indian container ships only added to the woes.

This restriction was one of the main reasons that discouraged mainline foreign vessels from calling at Vallarpadam. To overcome this issue, the cabinet eased the cabotage law in September 2012 despite opposition from local fleet-owners and permitted foreign registered container ships to carry cargo between the country’s ports. The permission though was applicable only to foreign-registered vessels that shipped export and import containers out or in through the container trans-shipment terminal at Vallarpadam. Secondly, the relaxation in cabotage law was

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for a limited period of three years till September 2015, after which it will be reviewed by the government.

The main objective of relaxation in cabotage law was to boost Vallarpadam terminal and to attract cargo originating at and destined for Indian ports, which are mostly being trans-shipped at Colombo and other foreign ports. This initiative was expected to promote trans-shipment of Indian cargo from Vallarpadam and reduce the dependence on nearby foreign ports. Then, a jurisdictional issue occurred. Unlike other ports in India, the Vallarpadam facility operates from a Special Economic Zone (SEZ), which comes under the purview of the commerce ministry, whereas other Indian ports follow procedures framed by the customs department in the finance ministry on clearing cargo. A lack of clarity on procedures between SEZ and customs meant that no trans-shipment happened.

The government finally decided that all trans-shipment at Vallarpadam terminal, located within an SEZ, would follow SEZ procedures. Cabotage was relaxed by India to make India’s first trans-shipment terminal competitive and operationally on par with other trans-shipment hubs in the region. However, the ground reality is that not a single trans-shipment container has moved to or from the facility on the basis of this relaxation.

Price and quality of service is important factor of the performance of container terminals. A vessel should pay USD 80,000 as vessel-related charges at ICTT, Vallarpadam but in Colombo it is less than USD 15,000. The Terminal Handling Charges and other charges in ICTT are higher than other container terminals in India. Lack of proper parking facility for container trucks was a serious issue in the terminal area. Many accidents occurred on the container road due to the reckless parking of container trucks along roadsides. A temporary decision was taken in a meeting convened by the district collector regarding the parking of container trucks. Temporary parking space opened at three locations - BPCL (225 lorries), Arpitha (45 lorries) and Najco (45 lorries) and Cochin Port’s LNG Terminal Road to be used after paying a fee. A permanent solution is a must for container truck parking. Another serious issue regarding the terminal was the road accidents occurred on the container road. According to police, 8 to 10 accident cases are reported every month in this stretch while the number of general diary entries (accidents where no one is injured) is just around 5 to 6 every month. The issue was due to the lack of proper warning mechanism, including reflectors, signage, permanent dividers near the Vallarpadam

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Bridge, illegal parking by containers and lack of ample street lighting at night has resulted in Container Road becoming one of the deadliest areas for passengers. Sea Port is ecologically sensitive because it is at an interface between the land and the sea. Hence, any form of pollution in the port area will certainly have adverse effects on its sensitive ecosystem. Ports have rich habitats that include seabed, estuarine waters, mud flats and wetlands, which are strategic components of natural environment and home for rare marine life. In ports, toxic emissions from cruise and ships pollute water bodies and adversely affect the marine flora and fauna. Vessel sourced pollution is a major source of pollution in maritime ports.

Due to the construction of Vallarpadam Terminal Road/Rail link around 326 families were evicted from 6 islands of , but the rehabilitation continues to languish midway. Recently, the evicted families were given land for housing but there is no road connectivity. Water and electricity connections are not there. So, most families have not constructed houses and are still living in rented accommodations or with relatives.

Conclusions

The important role of a port is to provide safe berthing spot for ships. A good port has the adaptability in handling different types of cargo and it also provides for storage facilities. In addition to its role in movement of goods, ports and associated waterways facilitates commercial activities like fishing, recreation, ferry services and cruise ship industry and generates job opportunities for huge population through different sectors. The International Container Transshipment Terminal, Vallarpadam opened up boundless opportunities in Kerala but the Government should interfere and take necessary steps to tackle various issues surged in this sector to utilise the opportunities on right way.

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References:

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1. economictimes.indiatimes.com

2. http://igtpl.com/

3. http://cochinport.gov.in/

4. https://www.business-standard.com/

5. https://www.scribd.com/

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