Why India Needs Transshipment Ports — Infravisioning With Vinayak Chatterjee

Vinayak Chatterjee: Yes. A regular port, first of all, has a larger swath of cargo that it handles as I explained before, bulk, liquid and containers. So, a pure container transshipment is first of all focused only on containers. Second, it is in a location, most locations of transshipment don't have a natural hinterland cargo. For example, in our Ahmedabad location, which by the way, is a very good decision, which we will come to later. The location identification is a very good decision, but it is clear that Ahmedabad doesn't have a natural hinterland and it is not like eastern India, where huge amount of coal is being transported or imported or huge amount of iron ore is being exported. Ahmedabad doesn't have a hinterland.

So effectively, the operations of the port are about receiving a ship, unloading a few containers from that ship that are required to go to a particular destination and hopefully a few containers ... that come from some other ship, loaded on to a new ship to send onward. So it is just a question of loading and reloading from one ship to the other. And the industry experts tell me that the cost of a fee charged for a transshipment of a container is about 30% the regular cost of it loading or unloading in a port and then sent for onward dispatch, etc., because there, there are many other issues also, of customs, and various other things. But transshipment is, for example, you walking in Dubai from terminal A to terminal B—from gate 40 to gate 56. That is transshippment. So, it earns about 30% of the regular container. And the volumes that we are looking forward to, in the first decade or more in the Andamans, the addressable market is about 3 million TEUs. A TEU is a 20-foot equivalent unit, which is basically a 20-foot container because there are 40-feet containers also. So, normally the industry operates by defining the market as a 20-foot equivalent unit. Of the addressable market of about 3 million TEUs, obviously you are not going to get 100%. There will be containers continuing to go to, you know, to Singapore to Klang and to Colombo. So, the volumes are not sufficient for the scale of development that the government of India envisages and that is the issue.

Vinayak Chatterjee: So, I have done some thinking on the subject myself and spoken to experts to figure out the viability, etc. So, what I actually feel is that the transshipment terminal at Ahmedabad from India's own needs, needs to be done.

It needs to have a vision larger than just a container transshipment terminal for the simple reason that we are very much in the middle of a very important east-west trade route. That is point number one. Point number two is that there are geopolitical interests in this region of the world, there are superpowers with their navies, etc., playing around. And finally, it cannot remain a transshipment port forever in its life. We also have to see the development of Andamans in a rather larger perspective.

And therefore, a way to conceive this is to actually see the transshipment terminal as the sea of a bustling port city in Galathea Bay, which is in the Great Nicobar Islands, and gradually have a master plan that contains within itself everything, obviously to support a transshipment terminal. It will require a housing colony, a renewable power plant, roads, some degree of social and recreational infrastructure, and an airport. All these are required, but the vision is a little larger, to see if it can also become a busting port city with equal weightages to transshipment, commerce, as well as a certain degree of social habitation. You can have a huge number of tourist resorts, housing, and the whole area developed.

And for this purpose, I suggest a three-stage financial plan. I will keep it short. First, the port—the transshipment and allied stuff—is expected to take about Rs 20,000 crore. That is clearly unviable. You have to reduce the capital expenditure of whoever is the private sector winner. So, a 40% viability gap fund that clearly gives Rs 8,000 crore capital grant upfront. That leaves Rs 14,000 crore as the capex budget over the years for the terminal operator to spend. Secondly, the government can take on many of the activities through public expenditure which cannot earn revenue. Things like dredging ... roads, stuff like that the government can do for the larger good of that area of Andamans, because we owe it to them.

Finally, there is what I would call the embedded profits over the years in development rights. The person who wins the terminal should be given an opportunity to get a return on his capital by ancillary activities, of resorts, casinos, cruise terminals, etc. So, it is a three-stage approach.

Vinayak Chatterjee: We have already faced headwinds. You know, there are many nature and conservation organisations that have voiced their concerns over what they call the disturbance to a eco-sensitive region. You know, there is endangered fauna, there is the felling of 8,00,000 trees, and there are some very protected tribal communities there, like the Shompen tribe and the Nicobarese. So, it is a fragile ecosystem, both in terms of humans, as well as flora, and fauna. Now, this is a classic debate between development and conservation. And we have seen it play out across the country and it is bound to happen for any major infra project. Therefore, the intelligent thing is to make intelligent trade-offs and suggest ameliorating conditions. So what has happened is, the government has taken cognisance of these concerns, their legitimate concerns and a special committee has been appointed by the green tribunal to review the total conditionalities of the green approval. And they, have actually given in-principle approval, but it comes with a whole lot of conditionalities which talk about addressing the concerns in as sensitive and humane away as possible to protect the environment and yet get some crucial infra development going in that part of the Bay of Bengal, which is equally important. So, it is the classic debate between development and the ecosystem.