'Major Port' in Great Nicobar Island: A Byproduct of 'Make in India' Syndrome?

Our climate change coverage needs your ideas, insights, and support as we cover the biggest crisis of our times. Become a member – and empower our stories.It looks as if the Government of India has made up its mind to make Galathea Bay in the Andaman and Nicobar Islands an international transshipment hub despite many an informed commentators repeatedly highlighting its negative impact on the environmental and tribal well-being. On 6 September, the government designated Galathea Bay on the Great Nicobar Island as a 'Major Port'. The proposed International Container Transshipment Terminal project, along with an international airport and a township for 3.5 lakh residents – both presumably to service the port and cater to mass tourism – will cost the government Rs 44,000 crore and will be developed under a public-private partnership model.But before India makes such a large investment of public wealth in this project, we need a satisfactory answer to the question – Will the port be worth the damage it is likely to cause?Book Excerpt: What Everyone Gets Wrong About Nicobar's Indigenous CommunitiesThe Great Nicobar Island boasts a dense Cretaceous era rain forest, many unique endemic species of flora and fauna, and endangered tribes of humans in small, scattered settlements. This very bay is the nucleus of the eponymous Galathea National Park. It is the largest nesting ground of the unique and vulnerable Giant leatherback turtles – the largest turtle species on this globe. In the project's environmental impact assessment report and the Union Minister of Environment, Forest and Climate Change's justifications, one is presented with a lot of colourful statistics and charts, broad assumptions and fond hopes – none of which seem to be informed by the ground realities of such a proposal, especially in terms of what international shipping truly entails.It looks as if the Government of India asked the consultants to substantiate its move with a positive forecast. The assessment itself has more holes than Swiss cheese.In international shipping, 'transshipment' involves transferring cargo from one mode of transport to another at an intermediate location or hub. This process is in place for various reasons like consolidation of cargo at major hubs for efficiency, cargo splitting, and switching transportation modes.The justification for this new transshipment port would have to necessarily consider a few factors: Is transshipment a growing or declining trend?What are the trends in the shipping industry now, given the emergence of newer technology and capabilities of modern long-distance-worthy vessels? Is there a large enough hinterland around the port for goods containers to originate from, other than its transshipment capability?What other long-established ports are available in this marine region or vicinity. When compared to those, what are the pros and cons of this port? Are there other inducements for ships to use those pre-existing ports? Can this new port offer the same in the short term to gain usage in a highly competitive and cost-driven industry? India has a vast coastline on both the Bay of Bengal as well as on the Arabian Sea. However, despite a few natural harbours and many constructed ports, it suffers the disadvantage of inadequate depth for bigger ships (for example for fifth generation container ships of 24,000 TEUs size) to come alongside or dock.Second, international mainline ships operating between the Far East and Europe on the one side, and the east Coast of the USA on the other, have to deviate substantially to call at Indian ports. While there is adequate inducement (cargo) from the west Indian ports of JNPT (Jawaharlal Nehru Port) and Mundra for shipping lines to offer direct turnaround service to Europe and the USA, many other ports like Mangalore and Cochin on the west coast do not generate enough volume to justify a call for a direct ship. For the cargo emanating from these ports, the preferred port of transshipment has mainly been Colombo for containers destined for Europe, the USA, and ports in the Far East. Dubai is the preferred port of transshipment for ports in Iran, and Iraq, as well as for other Middle Eastern or Red Sea ports and even some African ones. Colombo started as a transshipment port in 1980 when the European Consortium (a large consortium of shipping companies led by P&O Container Line) started the first Bay of Bengal feeder service on our east coast (including Bangladesh) to connect main line ships at Colombo to the West and East. In due course, the feeder business was taken over by third parties and they became common carriers to all mainline services. Colombo has continued to flourish, and continuous expansion of port facilities has been ongoing. Singapore is also connected with feeder lines to our east coast ports. If these foreign ports have given and continue to give good service, one may ask why a new port for transshipment is being proposed for India. This is the same syndrome as 'Make in India' since Indian cargoes contribute so much to these ports, we must start thinking as to why we should not have our own transshipment port, whatever the cost or risk?Unfortunately, since mainland Indian ports neither have sufficient draught nor a location on the main east west sea route, therefore the protagonists seem to be searching for an Indian port meeting both these criteria – and have struck upon fragile Great Nicobar. The international shipping industry has its own logic that will defeat such simplistic plans. The freight rates which Indian exporters and importers pay are not always related to direct costs.Many other factors like the export-import balance of a port and its region, container availability, size of ships, demand-supply fluctuations, among others, govern the rates. Therefore, any concept of saving or making money by having an Indian transshipment port is at best a fantasy. Colombo has served Indian trade for the last 45 years with both cost and operational efficiency. There were no disruptions even when the country went through political turmoil. In addition, Colombo port’s newest container terminal has been awarded to an Indian company for construction and operation, given that India has a good relationship with Sri Lanka. Tuticorin Port, which is a great export gateway for south peninsular India, is only a few hours by sea to Colombo, and this gives immediate land-based connection to Indian exporters, cutting supply chain time. Cargoes bound from Indian east coast or westerly ports would not go all the way east to Great Nicobar, but logically to much closer Colombo. If we were to concede the West bound cargo to Colombo, the bulk of the cargo from and to eastern Asia is related to the massive movements to and from China. Direct vessels to China cover both Indian coasts and do not require transshipment. Even Kolkata, which was not earlier directly connected to China despite seeming proximity, is now connected by Pacific International Line service, with land-based feeder facilities easily servicing our eastern hub.This is not the first attempt by India to develop a transshipment terminal. The International Container Transshipment Terminal at Vallarpadam in Cochin was built for Rs 3,200 crore and was commissioned in 2011.The terminal has struggled over the years to attract transshipment cargo, and it has taken 13 years to achieve the volume of a mere 750,000 TEUs against an installed capacity of 5.5 million TEUs – that too mostly gateway exports rather than transshipment as conceived, thus proving a colossal waste of money and effort.Since Cochin offers direct services to East Africa, West Africa and Dubai, some transshipment cargoes are attracted to Cochin. But it is estimated that such quantity is only a very small percentage of containers compared to those moved through Colombo, Singapore, Dubai or Salalah. There is yet another deep-water container port in advanced stages of development at Vizhinjam near Thiruvananthapuram in Kerala, which has been forced through, despite much local opposition at an eye-watering cost of Rs 28,500 crore of taxpayer money. It is too early to guess how much and what type of traffic it would attract. Unfortunately, Kerala’s densely populated shore does not afford great road or rail connectivity. Hence, transshipment, if at all it happens through Vizhinjam, would be by sea-based feeders from other ports which could easily continue to Colombo with more connections.The success of the ports and terminals depends on its convenience to exporters and importers, as well as the major shipping lines. So, major question marks already hover over this yet unbuilt chimaera. Given that modern-day ships are capable of covering a very long range, transshipment in the Indian vicinity would be largely for goods produced in this nation or subcontinent alone. As ships get bigger, the smaller ships are deployed in other less busy routes: these smaller ships are the ones that serve the Indian west coast to European or Mediterranean ports, the USA and China.These are ships of 8,000 to 10,000 TEU size, thereby reducing the need of transshipment. It is possible the turnaround location of these ships may at best become Vizhinjam, instead of the current JNPT, thereby bringing goods from southern states which are attracted to direct shipping availability. So far, we have concluded: Direct ships are covering the most significant Indian ports. Transshipment traffic is reducing given modern ship technology. Colombo is as good as – if not location-wise – and otherwise better than any Indian port as a consolidation hub. The main intent of the Great Nicobar terminal seems to be to get the main line i.e. the bigger ships to call there. However, it is rather doubtful whether there will be enough cargo inducement for main line operators to add an additional port, in addition to Singapore, which is imperative to call at since located right on the sea lane which aggregates containers from a large number of countries. Since the ships must deviate over a few hours of sailing time from the established sea lane to divert to Great Nicobar terminal, it will be uneconomical for big ships, especially given that justifying volumes are highly unlikely with very unlikely feeder calls that far from the mainland.To further justify the creation of the Great Nicobar terminal, the feasibility report contends that containers from Bangladesh and Myanmar would need to travel a shorter distance as compared to Colombo or Singapore. The hope seems to be that in such a case the mainline operator would most likely have the same, or higher, through freight for containers from these countries, making Great Nicobar terminal more viable than Singapore. But this too seems a stretched fantasy. Feeder opportunities also follow main line calls, and hence, are highly unlikely to match the frequency required to maintain supply chains profitably. Most government infrastructure projects are infructuous and highly capital-intensive without producing adequate returns. Not only do precious national resources get wasted, but expenditure is also not prioritised.For example, the Delhi Meerut Rapid Transport system of merely an 80 km length has cost the nation Rs 32,000 crore in investment – an unbelievable and unaffordable Rs 400 crore per km. It is highly doubtful how many takers there will be when the one-way ticket costs Rs 450 for a twice-daily commute. Global CEOs or millionaires, not that Meerut is likely to see many of those, being unlikely to opt for a train over a comfortable car journey with the simultaneously improved highway connectivity. Similarly, the 27.6 km-long Dwarka Expressway between Delhi and Gurugram has been completed at an investment of Rs 250 crore per km. Any amount of toll will not give a return on investment, if at all daily commuters took to using a very expensive route over a slightly slower existing Delhi-Jaipur highway.Container handling alone gives very little value addition. Even counting the revenue from vessels, the Great Nicobar port project, which is supposed to have an investment of Rs 18,000 crore in the first phase to be able to handle 10 million TEUs, on a back of the envelope calculation would require at least 25 million TEUs to break even. That being more than half of the throughput of the long-established Singapore Port with multiple viability factors. And an astounding four times the throughput of JNPT at Navi Mumbai which is the largest container port of India. Great Nicobar Island is supposed to compete with Singapore, Port Klang and Tanjung Pelepas of Malaysia, all with vast productive hinterlands. These countries are gearing up for the future. Singapore is developing Tuas Terminal with a 40 million TEU capacity on its north shore.Malaysia and Thailand are contemplating a land bridge – an exclusive rail and road connection on the chicken neck portions between the Gulf of Thailand and the Andaman Sea.If these come about, and there seem no reasons why they would not, shipping via the Malacca Straits itself, which sees 30 percent of all international shipping traffic pass through, will stand transformed.The reasons seem highly suspect for international shipping to transship at a remote and small island, merely a few hours distance from these massive upcoming facilities, let alone at existing long-established ones. As of today, Singapore’s port offers shipping a lot of value additions. It is the biggest bunkering (fuel supply) port for ships. It offers easy duty-free entry and exit for international goods for ships’ supply. It has great ship repair facilities, including extensive dry docks. It has an offshore supply base and port facilities for such ships, plenty of distribution warehouses, and land connectivity to prosperous and productive Malaysia, and Thailand. It is very difficult indeed to imagine the Great Nicobar port offering such facilities in the near horizon. And any move to offer even a few such possible facilities – most of them being location-wise impossible anyway –would consume even more than the permissible 25 percent of the island allowed as per current Indian environmental rules, spelling further ecocide for this already fragile biosphere. All in all, not only is this Great Nicobar Port fantasy an international ecological disaster but also an unviable project that involves the frittering away of scarce national resources better used elsewhere. (Salem Ganapathi (B.E Mech, MBA-IIMA) is a shipping industry veteran who has been part of senior management at various large international shipping lines and involved with seminal new advancements in Indian shipping for many decades. He has also held senior positions in various logistics industry forums and summits. He is the joint author of “Logistics Management” (Oxford Univ. Press,2015), a comprehensive primer for postgraduate management students.)

BECOME A MEMBER

A 'Major Port' in Great Nicobar Island: A Byproduct of 'Make in India' Syndrome?

When foreign ports are giving good service, one wonders why a new port for transshipment is even needed for India.

Read Latest News and Breaking News at The Quint, browse for more from opinion

Topics: Climate Change Explainer Andaman and Nicobar Island