The ₹7,056 crore outer harbour container terminal project at the VOC Port in Thoothukudi received a setback with the two bids - of Vedanta Ltd and the less known Premier Science and Technology FZE - rejected due to lack of experience with the two companies in the sector. Large companies, including Adani Group and JSW, not showing interest in the Request For Qualification has raised eyebrows on the project’s viability.

Sources said considering there is not much of a hinterland to support the future container traffic growth, and the presence of neighbouring ports like Vizhinjam and Vallarpadam, there is scepticism if the new project could annually handle 4 million TEU (twenty foot equivalent unit). Thus, investing ₹7,056 crore may not give returns. An investment of around ₹4,000 crore for 2-3 million TEU capacity would be ideal, they added.

Almost seven months have been lost since the Request for Qualification (RFQ) tender was issued. The entire process needs to start afresh in the project, which includes two container terminals in the outer harbour, including the dredging and construction of a breakwater at the port. The project was conceived for VOC port to become a major container transshipment hub and to compete for box traffic with neighbouring Colombo.

In February, the project was kicked off decade after inception with Prime Minister Narendra Modi laying the foundation stone.

A source in Thoothukudi said prominent terminal operators have not applied because some of them considered that the total project cost may be a higher than what was projected.

Jagannarayan Padmanabhan, Senior Director and Global Head of Transport, Logistics and Mobility, CRISIL, says that developers seek balanced risk-sharing and realistic returns when bidding on infrastructure projects. It’s crucial that critical project parameters closely reflect actual conditions to make the project feasible and attractive.

When expected returns fall short, mechanisms like VGF, extended concession periods, or a moratorium on royalty payments can serve as “sweeteners.” These adjustments help align the risk-reward balance, making the project more financially viable and encouraging developer participation.

VGF provides a one-time grant to support projects with high capital expenditure, while a longer concession period allows developers more time to recoup their investment. A moratorium on royalty payments can ease initial financial burdens, enhancing project attractiveness and sustainability in the long term, he said.

The VGF support was ₹1,950 crore with the Centre’s contribution being 20 per cent and 6.64 per cent from the sponsoring authority, according to sources.

Ennarasu Karunesan, a global maritime expert and International Association of Ports and Harbours’ Regional Head for India, sys that it is time for VOC Port to explore partnerships with global port operators. “VOC Port needs to walk the talk,” he said.

VOC port possesses all the essential parameters of a successful transhipment hub. These include a robust EXIM cargo base, excellent connectivity via road, rail, coastal, and air routes, an established cargo flow system for South India, and a vast container ecosystem comprising Container Freight Stations landmass and with an Unique Viability Gap Funding (VGF) proposition.

The port’s emergence as a Green Energy Hub, leveraging abundant renewable energy sources, adds significant value. To capitalise on these strengths, Karunesan recommends that the port collaborate seamlessly with international players to secure a suitable partner. By doing so, the port can overcome current challenges and unlock its full potential, solidifying its position as a key player in India’s maritime landscape, he added.

Considering that mega projects like green hydrogen are proposed at Thoothukudi, the project should have flexibility to add future terminals and handle multipurpose clean cargo, said a source in Thoothukudi.

Related Topics