It is a year now since the country’s first ever international
container transshipment terminal went on stream at Vallarpadam. Around
Rs 3,500 crore has been invested in the project that is yet to make any
substantial revenue.
Massive container-laden ships were supposed to use the terminal, but that has not happened. Growth in container traffic between February 2011, when the terminal was commissioned, and January 2012, was a mere five per cent.
A meeting last month, convened at the behest of the Prime Minister, tried to find ways to make the terminal remunerative. It may take a long time for the initiatives to fructify as there are a series of regulatory hindrances and procedural issues to iron out first.
During the meeting, the shipping ministry pointed out that most of the country’s container traffic was being transshipped at the hub port of Colombo and other important transshipment ports like Singapore, Dubai and Salalah. Shifting operations to the Vallarpadam terminal would reduce the number of days taken to export or import consignments to seven and also cut the transportation cost of each container by $300.
In the first phase, the terminal was expected to handle 1 million TEUs annually, but this is far from being the case. From the time the terminal was operational, till January this year, the total containers handled was 3,32,841 TEUs against 3,16,882 during the same period last year. Colombo handles 4.1 m TEUs.
While those at the Cochin Port, which as per the agreement would receive 33.3 per cent of the revenue share, and those within DP World that operates the terminal, say that these are teething troubles, they admit that exporters and importers here prefer Colombo, Salalah, Singapore or Dubai from where to ship their goods even though it adds to their costs.
It was admitted at the meeting that a more user-friendly environment should be created to push up transshipment cargo to over 80 per cent from the current seven per cent of capacity.
Mr Krishna Prasad, the CEO of the Indian Gateway Terminal Pvt Ltd, a subsidiary of Dubai Ports World, said, “The ICTT is positioned as the ideal transshipment hub for India due to its proximity to the East-West sea routes.
An efficient logistics hub ensures the free movement of goods, which is most important to attract larger volume of business. Transshipment ports like our own facility Jebel Ali, as well Hong Kong and Singapore, have been successful because of prompt handling of cargo and simple procedures.
The government needs to ensure that if ICTT wants to compete with the rest of the world, it needs to be able to function as an effective transshipment hub. And this may require a change in mindset and current policies and procedures.”
Mr Prasad is more specific about what needs to be done to get a good return on the huge investment that has been made.
There has to be a relaxation in the cabotage law that does not allow foreign flags to carry containers from Kochi to other ports in the country. “Also, there has to be more focus on creating support infrastructure outside the terminal like container freight stations, warehouses, barges etc. These need to grow, not to mention efficient and hassle-free procedures for movement of containers at ICTT by better use of EDI and IT systems,” he adds.
The notification of the terminal area as a special economic zone is one reason for the procedural wrangles that occur.
Some time ago, 60 containers were cleared for export from Tuticorin, but a few had to be offloaded after Cochin customs failed to give port clearance to the vessel. The shipping department had taken objection to this.
Then, nearly two months ago, the Directorate of Revenue Intelligence had to withhold a container of red sanders that was being illegally exported.
These kinds of problems have led to spats between departments that the PMO is now trying to iron out.
The shipping department argues that a SEZ framework was essential for container transshipment. But the Customs Act of 1962 came much before the transshipment operations and so has no provision for international transshipment. It also claims that a SEZ area is outside the customs territory of the country. Containers are cleared by the customs or the excise department outside the SEZ and let in.
And hence the area within the SEZ handles only customs-cleared cargo, leaving little space for the customs, it is argued.
However, the finance ministry is firm on its stand that customs should be given space within the area.
The revenue department has been told to prepare a proposal that provides for customs officers to work on deputation to the SEZ. But, then, officials point out, this would have to apply to all SEZs and Vallarpadam cannot be treated separately.
As the wrangling between the finance and commerce ministries continues, it could take some time before the terminal really begins to earn its keep.
Massive container-laden ships were supposed to use the terminal, but that has not happened. Growth in container traffic between February 2011, when the terminal was commissioned, and January 2012, was a mere five per cent.
A meeting last month, convened at the behest of the Prime Minister, tried to find ways to make the terminal remunerative. It may take a long time for the initiatives to fructify as there are a series of regulatory hindrances and procedural issues to iron out first.
During the meeting, the shipping ministry pointed out that most of the country’s container traffic was being transshipped at the hub port of Colombo and other important transshipment ports like Singapore, Dubai and Salalah. Shifting operations to the Vallarpadam terminal would reduce the number of days taken to export or import consignments to seven and also cut the transportation cost of each container by $300.
In the first phase, the terminal was expected to handle 1 million TEUs annually, but this is far from being the case. From the time the terminal was operational, till January this year, the total containers handled was 3,32,841 TEUs against 3,16,882 during the same period last year. Colombo handles 4.1 m TEUs.
While those at the Cochin Port, which as per the agreement would receive 33.3 per cent of the revenue share, and those within DP World that operates the terminal, say that these are teething troubles, they admit that exporters and importers here prefer Colombo, Salalah, Singapore or Dubai from where to ship their goods even though it adds to their costs.
It was admitted at the meeting that a more user-friendly environment should be created to push up transshipment cargo to over 80 per cent from the current seven per cent of capacity.
Mr Krishna Prasad, the CEO of the Indian Gateway Terminal Pvt Ltd, a subsidiary of Dubai Ports World, said, “The ICTT is positioned as the ideal transshipment hub for India due to its proximity to the East-West sea routes.
An efficient logistics hub ensures the free movement of goods, which is most important to attract larger volume of business. Transshipment ports like our own facility Jebel Ali, as well Hong Kong and Singapore, have been successful because of prompt handling of cargo and simple procedures.
The government needs to ensure that if ICTT wants to compete with the rest of the world, it needs to be able to function as an effective transshipment hub. And this may require a change in mindset and current policies and procedures.”
Mr Prasad is more specific about what needs to be done to get a good return on the huge investment that has been made.
There has to be a relaxation in the cabotage law that does not allow foreign flags to carry containers from Kochi to other ports in the country. “Also, there has to be more focus on creating support infrastructure outside the terminal like container freight stations, warehouses, barges etc. These need to grow, not to mention efficient and hassle-free procedures for movement of containers at ICTT by better use of EDI and IT systems,” he adds.
The notification of the terminal area as a special economic zone is one reason for the procedural wrangles that occur.
Some time ago, 60 containers were cleared for export from Tuticorin, but a few had to be offloaded after Cochin customs failed to give port clearance to the vessel. The shipping department had taken objection to this.
Then, nearly two months ago, the Directorate of Revenue Intelligence had to withhold a container of red sanders that was being illegally exported.
These kinds of problems have led to spats between departments that the PMO is now trying to iron out.
The shipping department argues that a SEZ framework was essential for container transshipment. But the Customs Act of 1962 came much before the transshipment operations and so has no provision for international transshipment. It also claims that a SEZ area is outside the customs territory of the country. Containers are cleared by the customs or the excise department outside the SEZ and let in.
And hence the area within the SEZ handles only customs-cleared cargo, leaving little space for the customs, it is argued.
However, the finance ministry is firm on its stand that customs should be given space within the area.
The revenue department has been told to prepare a proposal that provides for customs officers to work on deputation to the SEZ. But, then, officials point out, this would have to apply to all SEZs and Vallarpadam cannot be treated separately.
As the wrangling between the finance and commerce ministries continues, it could take some time before the terminal really begins to earn its keep.
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