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Govt to fund channel deepening work at Cochin Port to support transhipment amid Sri Lanka crisis

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NEW DELHI : The Ministry of Ports, Shipping and Waterways (MoPSW) has agreed to fund a Rs300-crore plan through the Sagarmala programme to deepen the channel of India’s only International Container Transhipment Terminal (ICTT) at Vallarpadam in Cochin Port run by Dubai’s D P World to help dock bigger ships.

“We are planning to spend Rs 300 crore under the Sagarmala programme to deepen the channel draft to 18 metre from 14.5 metre,” a senior official at MoPSW said. The channel deepening work is expected to take about a year, he added.

The move to deepen the channel is part of a coordinated effort by the Centre and the Cochin Port Authority to bolster the prospects of ICTT by taking advantage of the economic crisis in Sri Lanka and make India a container transhipment hub.

Some 3 million twenty-foot equivalent units (TEUs) of Indian origin destined cargo containers are routed via Colombo Port – a regional box transhipment hub – every year, entailing extra time and costs for the country’s exporters and importers.

In April, Cochin Port Authority decided to shift to a cargo-based discount scheme from a call-based rebate in vessel-related charges for ships calling at ICTT, which ran for many years.

Previously, the port authority offered concession in vessel related charges to container ships based on the number of calls they made in a year. Vessel-related charges comprise port dues, berth hire and pilotage and are collected by the port authority.

The new discount scheme will support even ad-hoc calls made by mainline ship operators at ICTT by skipping Colombo, which were not eligible for the rebate under the earlier scheme.

Lack of deep draft and the high vessel-related charges at Cochin Port have been cited for ICTT’s inability to achieve the objective for which it was conceived: to cut India’s dependence on Colombo to send and receive container cargo.

A proposal submitted by the Cochin Port Authority on the channel deepening work almost a year ago was under the consideration of the Sagarmala Development Co Ltd.

The port authority had asked the Sagarmala Development Co to provide the fund for the channel deepening work as a “grant”.

“Otherwise, it is a non-starter. If the money is not disbursed as a grant, Cochin Port Authority will have to recover the expenditure by pricing it into the vessel-related charges collected from ships calling at the port, making the marine charges more expensive. This, in turn, will make Cochin Port less competitive compared to Colombo,” an official with the Cochin Port Authority, said.

Globally, dredging costs are funded by government grants to keep the vessel-related charges at competitive levels.

From a contractual point of view, the Cochin Port Authority is only mandated to give a channel depth of 14.5 metre to ICTT, as per a concession agreement signed between the state-owned port authority and Dubai government-owned D P World.

“Cochin Port Authority has given this depth, but 14.5 metre is not sufficient in the present situation to attract bigger ships,” said the port official. “There is no way we can wean away bigger ships from Colombo Port to Cochin with 14.5 metre draft,” he said.

“From a larger national point of view, channel deepening is necessary to accommodate bigger ships,” the port official added.

Besides, the time has come for D P World to embark on capacity expansion as the ICTT handled 7,36,000 TEUs in FY22, translating into a capacity utilisation of more than 70% for the 1 million TEU capacity terminal.

A capacity utilisation of 70% is considered an ideal level for a cargo terminal to operate in the port industry globally, without congestion.

While the capacity expansion would take a while, deepening the channel can be implemented quickly to capitalize on the opportunity, the official mentioned earlier said.

The port authority eventually plans to deepen the channel to 20 metre depending on the build-up of traffic.

In FY22, the transhipment volumes handled at ICTT rose 80% to a record high of 1,56,159 TEUs out of the total of 7,36,000 TEUs handled at the ICTT on the back of new services and ad-hoc calls.

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