23/04/2016
Earlier this month, I had an opportunity to visit the site of the Vizhinjam port project, along with Planning Board Vice Chairman K.M. Chandrasekhar and Chief Secretary P.K. Mohanty. It was heartening to see that Kerala’s most ambitious infrastructure project is not only on track, but making rapid progress toward the goal of making it operational in 1,000 days.
The Adani group won the Vizhinjam transshipment project last year after so many years of uncertainties. Even after the project was signed, there were attempts to undermine the port, which has the potential to bring significant economic benefits to Thiruvananthapuram as well as Kerala. One perennial question about the viability of Vizhinjam is linked to the Vallarpadam transshipment terminal in Kochi, which has struggled to increase traffic and container volumes ever since it started about five years ago. Skeptics have been saying that if Vallarpadam, operated by Dubai’s DP World, couldn’t pull it off, how can Adani make Vizhinjam work?
An artist's impression of the Vizhinjam port
I want to emphasize here that Vizhinjam is no Vallarpadam and such concerns are unfounded. If Vallarpadam is struggling to boost its volumes, it’s largely because DP World is not having enough spillover business to pass on to its Kochi terminal. For the Dubai port operator, Vallarpadam is just another small operation, and it seems they aren’t really focused on boosting the fortunes of this facility. Also, a serious issue that has affected the performance of Vallarpadam is that you need to carry out dredging through the year to make the Kochi channel navigable. Even though the cost for this is borne by the Cochin Port Trust, it indirectly adds to the costs of Vallarpadam and could affect its ability to compete with ports like Dubai and Colombo in terms of pricing.
What works in favor of Vizhinjam is that it’s going to be the mother port for the Adani group which already operates nine ports in India. They will aim to bring all major ships to Vizhinjam, and from here, smaller feeder vessels will operate to other ports including their own. My understanding is that the Adanis have already started talking to shipping lines to get large mother vessels to Vizhinjam when the port is ready. The advantage for Vizhinjam is that it has a natural deep draft that allows the entry of larger container ships without having to dredge. Besides, the facility is close to the international sea route. To start with, Vizhinjam will have the capacity to handle two large container ships. Eventually, as many as five ships can dock at the terminal, making Vizhinjam competitive to take on neighboring Sri Lankan ports.
There were also some criticisms about the viability gap funding that the state and federal governments have agreed to pay for the project. I would say the current model is far better than the conventional methods of awarding such infrastructure projects, because now the spending from the state for the project is capped. Earlier, the investments from private operators would have a ceiling, and the spending from the government was left open. The current model would also induce the private operator to complete the project as early as possible, as delays would only be adding to their costs.
When the port is completed, the benefits for Thiruvananthapuram will be substantial. A port of such scale would pave the way for so many other businesses and industries such as ship maintenance and repairs, supplies for vessels, bunkering for fuel etc. There are also plans to build a cruise line terminal in future. If that happens, we won’t have enough hotels in the city to accommodate tourists.