Why Vallarpadam terminal languishes

Even after the relaxation of Cabotage rules, Vallarpadam international container transhipment terminal has not been able to attract more cargo.

Against the target of one million teus (twenty-foot equivalent units) a year, the average throughput was only about three lakh teus. The maximum throughput achieved was 3.5 lakh teus in a year, of which the transhipment volume was less than 27,000 teus. This year, till July, the terminal handled 2.20 lakh teus. The management expects the volume to pick up and the end the year may end with 3.7 lakh teus.

Cabotage relaxation allowed foreign shipping lines to operate feeder service from and to the port. This was expected to attract more mainline ships to call at the port. The dismal performance of the transhipment hub has become a matter of concern, not only for Kochi Port and the terminal operator, DP World, but for all the stakeholders as well.

The ₹3,500-crore project, intended to reduce India’s dependence on overseas transhipment hubs such as Colombo and Dubai, failed to meet this objective.

Inaugurating the terminal in February 2011, former Prime Minister Manmohan Singh had described Vallarpadam as a ‘milestone in India’s logistics infrastructure development’. However, the euphoria died down when teething troubles hit port operations.

The Centre had spent ₹1,617 crore to provide infrastructure support including road and rail connectivity, while terminal operator DP World invested close to ₹1,600 crore to set up other infrastructure. Kochi was chosen as the ideal location for India’s first transhipment terminal, citing several favourable parameters, the most important being proximity to international shipping routes.

Initially, the main reason given for the terminal’s sluggishness was the low draft in the basins and Cabotage restrictions. However, relaxation in Cabotage laws last December, permitting foreign lines to carry containers from and to Vallarpadam, seems not to have made any impact on performance.

Shipping circles point out that factors such as recession in the industry post 2009, lack of interest from mainline shipping lines, labour problems, absence of sufficient cargo support, higher cost of road transport to the ICTT and expansion of the Colombo Port have all impacted the Vallarpadam ICTT’s performance.

A section of port users believe the terminal was also impacted by the high rates charged by the operator. Vallarpadam is costlier than Colombo Port. A top official in Kochi Port said the controversies over jurisdictional control over the ICTT between the Customs and SEZ authorities in the early days also affected transhipment cargo clearance. It took a long time to settle the issue.