Transshipment hubs are ports that are connected to both destination and originating ports. At present, about 75 per cent of India’s transhipped cargo is handled at ports outside the country. Of this, Colombo, Singapore and Klang handle over 85 per cent of the total cargo. Colombo Port, which handles over 45 per of the total volume, leads the pack. As a result, domestic ports suffer a loss of $200 million-$220 million of potential revenue each year on transhipment of containers originating from India and destined for foreign ports.
Due to the absence of transhipment hubs, South Indian ports suffer loss in business in comparison to the international ports of Singapore, Klang and Colombo. However, Kolkata is an exception, as it transports substantial volumes from/to these international hubs. Further, additional port handling charges lead to logistics cost inefficiencies for the Indian ports sector. Thus, in order to improve logistics, enhance efficiency, and lower risks to the country’s export competitiveness, the government is prioritising the development of transshipment hubs in India.
Update on key projects
In April 2024, the Ministry of Ports, Shipping and Waterways approved Vizhinjam Port to operate as India’s first transshipment port. Recently, in September 2024, the port berthed its fifth ship, MSC Kayley, with a 16.5 metre draft. Another ship, MSC Suape VII, will soon anchor at the port. With a total of five ships from the Mediterranean Shipping Company having berthed at the port, Vizhinjam is on its way to establishing itself as a key transhipment hub, positioning India on the global shipping map. Phase I of the project is expected to be commissioned by December 2024.
The central government has recently notified that the international transhipment hub at Galathea Bay in the Great Nicobar Island will be developed as a major port. The strategic location of Galathea Bay is a huge advantage to export-import trade as it lies on international shipping route. Post this, Indian ports will be able to attract more transshipment cargo. To be developed at an estimated cost of Rs 440 billion, the upcoming port will have a capacity of 16 million twenty-foot equivalent units (TEUs). The port project will be developed in four phases. Phase I will involve construction of breakwaters, dredging, reclamation, berths, storage areas, building and utilities, procurement and installation of equipment, and development of a port colony with core infrastructure. The estimated cost and capacity of Phase I is Rs 180 billion and 4 million TEUs respectively. It is expected to be completed by 2028.
Looming challenges
The ports in India have insufficient draft which makes it less appealing for large size vessels. Besides, ports on the east and west coasts are at a distance of over five hours of voyage from the international shipping route, this makes these locations unattractive for transhipment as compared to Colombo, which is at 0.5-1 hours of voyage from the shipping route. The transshipment and vessel-related charges are also higher at domestic ports. The main reasons for this are berth hire charges, which are more than 3.7 times, and pilotage and tug charges, which are over five times on average vis-à-vis global ports.
The way ahead
As per the Maritime Amrit Kaal Vision 2047, the percentage of Indian cargo transhipment handled by the domestic ports is expected to increase from 32 per cent currently to 95 per cent and the percentage of global transhipment volume handled by the domestic ports is expected to increase from 0.8 per cent at present to 10 per cent. Also, there are plans to develop islands as transshipment free trade zones. The free trade zones comprise warehouses that are deemed foreign territories/ports/warehouses for storage and other value-added activities. At present, there are no free trade zones in India, neither on the mainland and nor on islands.
Going forward, India needs to develop world-class infrastructure to accommodate large mainline vessels. Also, first- and last-mile road and rail connectivity to transshipment ports need to be strengthened to smoothen cargo movement. The productivity and reliability of port operations for container handling remain critical to minimise the vessel turnaround time.
Sidra Siddiquie