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Colombo
port: A cure for India’s Achilles’ Heel
By
a special correspondent
There are several advantages of sitting literally,
at the foot of the Indian sub continent - but none more rewarding
than those Sri Lanka has (or can have) for its Ports. Our
advantages both strategically and logistically have been the
envy of many countries for centuries. It was a key reason
for our colonisation for just about 300 years. During the
last world war the most powerful fleet of the allied forces
was positioned in the Trincomalee harbour for no other reason
than a strategic one. For a small nation like ours a situation
that can without doubt be termed - a blessing from the gods.
Sri Lankan Ports have been India’s Achilles’ heel
for a long time now – the only block that stands between
them and a thriving Shipping and Container terminal industry.
To bypass this issue, they have been trying out all kinds
of solutions, including the vastly controversial attempt to
dredge the Palk Strait, which got their current government
into much trouble with their right wing politicians over Ram’s
bridge, which according to the Hindu Ramayana, exists between
India and Sri Lanka, and would have met with certain destruction
if any digging of the seabed between the two countries commenced.
Whether it exists or not, the relief provided by the Ram Bridge
seems to have lulled us into complacency, and somehow made
our policy and law makers think that India will sit on its
haunches and let Sri Lanka take advantage of what might be
the lynchpin for their further economic development.
Even as we speculate, India has already begun the process
to steal a march on us in the best way possible. Because even
though we have the advantage over our location, can we retain
our hub status without capacity or facilities required by
an ever changing and advancing Industry? India is well aware
that we cannot, and they have seen the huge advantage they
can have over us by offering all that Sri Lanka cannot.
A recent on-line news update in the Lloyds List says that
Chennai’s ambition to replace Colombo as the container
transhipment hub of the Indian sub-continent has gathered
steam with the re-tendering of its 4 million TEU container
terminal project.
According to the report, although the project had only recently
completed the, ‘request for qualification’ stage,
the old tender has been cancelled, and a fresh one, with a
host of amendments, has been floated, escalating the cost
of the terminal by 16% to Indian Rs. 36bn ($857m), from an
earlier estimate of just IN Rs. 31bn, the cash-rich Chennai
Port Trust is confident that it has tripled its stake in the
public-private sector partnership project. In the new project
structure, the Port Trust will construct the Indian Rs. 10
bn breakwater, and will spend another Rs. 6bn in capital dredging,
reclaiming of land and provision of tugs.
Gearing
The news of India gearing itself does not auger well for us
especially on the back of local complacency. The Sri Lanka
the Ports Authority is still dragging its feet on the Colombo
Port’s South Terminal Expansion project, for which bids
were called and cancelled last year, and fresh bids were expected
to be called by end of July 2008.
SLPA’s Chairman, Saliya Wickramasuriya, was earlier quoted
as saying that the Authority had plans to market the proposals
for the new terminal ‘aggressively’ to international
players. In an interview given by him to Containerisation
International last May, Wickramasuriya said “We are now
preparing a new RFP and it will be broad in many ways. With
the new RFP, the concession tender will be re-floated towards
the end of June/early July. If everything goes well, SLPA
will be able to complete the evaluation process by January
and negotiate and finalise the concession by April next year.”
Empty words considering we are now well into August and the
new RFP is nowhere in sight and the contenders are no doubt
cooling their heels waiting for the call.
The Indian threat is very real. Ports on the west coast of
India are already being developed. According to news reports,
the Indian government approved a longstanding project, costing
Indian Rs 8bn, to deepen the harbour and approach channels,
which serve both Jawaharlal Nehru Port (JNP) and Mumbai ports,
to 12.8m. To be completed by 2009, this will enable the port
to receive vessels to a draught of 14m during tidal windows.
A second phase, which has yet to be approved, is targeted
for completion in 2015 and would increase the depth to 15m,
allowing vessels drawing up 14m to call on all tides and those
15m draughts to call during tidal windows.
Apart from the development of the major ports, private participation
for the port infrastructure is also adding up capacity to
capture the transhipment demand in the region. 10km from JNP,
there are plans for a deep-water container terminal in a special
economic zone at the bulk pot of Rewas. India’s Reliance
Group plans to invest US$650m in a facility with 18m depth
and capacity to handle 1m TEU/year in the first phase. Capacity
could be expanded to 4 million TEU/year, and depth could be
increased to 23 meters.
Feeder ports
Indian South-Eastern ports have traditionally been feeder
ports with containers originating or destined for these ports
being transhipped at mainly Colombo and Singapore. The main
reason for the South-Eastern ports not able to serve for the
mainline vessels is due to lack of supporting infrastructure,
and the non-availability of draft.
An online report in the Business Standard of India says, “Since
India does not have any hub port like Colombo to accommodate
bigger vessels, Indian shippers are now incurring an additional
cost as transhipment fee, which is $150 per TEU in Colombo.
India not only can garner a substantial portion of this fee,
but also save a lot of money if the ships are handled at the
Indian ports. If a container is handled in Chennai, a shipper
would save around $400 per TEU.”
If that’s the case, when Chennai fully develops/expands
its port facilities, the shippers may no longer have to pay
these amounts.
According some Indian media reports the Port of Colombo handles
70 percent of their total transhipment cargo. With the development
of the several ports in both the South and West coasts of
India as container ports, the port of Colombo will most likely
lose a major part of that business, which would have a drastic
impact on the Port of Colombo.
With the development of the Ports of Vallarpadam in Kerala,
and Tuticorin and Chennai in Tamil Nadu, Colombo instead of
being a hub port, could well become a feeder port for both
export and import containers. With India speeding up its port
development and interminable delays in our own SLPA’s
infrastructure expansion, the threat of Colombo losing 1/3
of its transhipment cargo to Indian South and West ports looms
large. In terms of numbers, analysts predict we will lose
up to 850,000 TEUs every year with an average transhipment
tariff of US$ 48 per TEU i.e. the resulting direct loss to
the Colombo port will be something in the region of US$ 41
million every year, spelling an even greater loss to the Sri
Lanka’s economy.
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