Economic Advantages of International Container

Transshipment Terminal, Vallarpadam

* Shaju Mathew
** Dr. Joy Joseph Puthussery

Abstract

Out of 78 million tons of cargo, only 38 million tons is being containerized in India.
Hence, there is a huge loss in terms foreign exchange revenue. This paper aims to analyze
the economic advantages and infrastructural development in the port area due to the
commissioning of VCTP. It is expected that there will be an annual economic savings to
the tune of Rs.600 crores, when the port becomes fully operational. The ICTT facility
would make the export-import trade more competitive in the international market and
consequently it would increase the export trade and would result in the industrial growth
of this region. ICTT, Vallarpadam also benefit the state of Kerala by providing an
additional employment opportunity of half a lakh and it will boost the development of
port based industries. The proposed NH connectivity and Rail connectivity will ensure
high quality land access to the port area which will in turn brighten the developmental
potential of these areas. Cochin is a major tourist attraction centre. Without disturbing
environment, the area can be fully utilized for adventure tourism. There is a huge
potential for hospitality industry which comprises hotels, hostels, public houses, resorts
etc. The strategic advantage in establishing Vallarpadam terminal is its ‘East-West’ route.
VCTP will handle the bulk of the cargo from this terminal, which is now transshipped via
Dubai, Colombo and Singapore. The completion of the ICTT project will reduce
container traffic and save time. The completion of such projects will surely be helpful in
placing the Indian maritime industry on the global map.

International Container Transshipment Termina

Transshipment means shipment of goods via intermediate destination. For generation,
Cochin has been the ideal place for international trade. India is committed by the
development of Container Terminal in Vallarpadam, the country’s first global hub
terminal, to avoid transshipment of Indian containers through the adjacent foreign
*Asst. Professor of Commerce, Panampilly Memorial Govt. College, Chalakudy
**Reader, P.G Dept. of Commerce, Bharatha Mata College, Thrikkakkara

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port like Colombo and Singapore. Cochin is said to become key player in shipping. One
of the essential requirements of these hub ports is that it should be adjacent to the trunk
sea trade route for the minimum diversion of the mother vessels so as to reduce its
unproductive voyage and port time. Once complete, Vallarpadam is likely to gift India
one of the best hub ports in the world. The port of Cochin is leveraging its strategic
location at the cross roads between East and West to establish the first Container
Transshipment Terminal of India. Vallarpadam is a part of the existing Cochin Port.
Vallarpadam Container Terminal Project (VCTP) will be a unique project in
infrastructure, especially to boost containerization in India. VCTP was inaugurated by
Prime Minister Dr.Manmohan Singh on Feb 16, 2005. It is expected to be one of the
largest single operator transshipment terminals in India.

The Proposed location of the new terminal is Vallarpadam, which is an island and has no
link to the network of National Highway and Railways. Therefore, Port Trust is obliged
to provide Rail connectivity and NH connectivity and execute capital dredging for
providing deep and wide approach channel and deep basin in front of the terminal for
receiving large size container vessels of TEUs capacity with a drift of 14.5m. The project
envisages development of facilities for handling mother container ships of 8000+ TEU
capacities. This will be a state of the terminal with an annual capacity of 3million TEUs.
The project is a PPP venture with India Gateway Terminal Private Ltd (DP World) as the
BOT partner.

Milestones
The project is implemented on BOT and the BOT contract commenced with signing of
license agreement between Cochin Port Trust and M/S IGT Pvt Ltd, a subsidiary of M/s
Dubai Port World (DPW) on Jan 31st, 2005.

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As per the terms of licensed agreement, the existing Rajiv Gandhi Container Terminal
(RGCT) of the Port was taken over by IGT on 1st April, 2005 for operation by them till
commissioning of the new terminal Vallarpadam.

Environmental Clearance for the terminal construction for ICTT and SEZ status to the
project are were obtained on November 9th, 2006 and November 2nd, 2006 respectively.
Contract for the first phase development of the terminal with 600m berth has been
awarded by IGT on November 22nd, 2007 for a contract value of about US Dollar 150
million. Construction work commenced on Dec 15th, 2007 and is in progress. Here, the
CPT acts as the land lord and gets one third of the revenue from IGT Pvt Ltd.

Objectives of the Study

The main objectives of the study are:

a) To study the economic advantages of ICTT

b) New business possibilities in the SEZ taking advantage of ICTT

Benefits to Cochin Port Trust

The major benefit of ICTT is that the volume of the containers handled will increase.
Foreign investment will increase and will multiply the economic activities of the region
several times. It also acts a catalyst for economic development. The new terminal will
make Cochin a key centre in the shipping world reducing India’s dependence on foreign
ports to handle transshipment. For the proposed activities to be competitive
internationally, it is necessary that all possible concessions and available to SEZ
developers are extended to Probable developer of Cochin Port SEZ.
There are two types of infrastructure to be maintained:-

A) External infrastructure:-
Three major external infrastructures that are to be maintained are capital dredging, Rail
connectivity and NH connectivity:

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 a) Rail connectivity: To a length of 8.86 km from Edappilly to Vallarpadam. The
estimated cost is RS.246 crores.
b) Four lane NH connectivity: It comprises roads and bridges to a length of 17.2 km
from Kalamassery to Vallarpadam.
c) Capital dredging: Deeper and wider channels and berth basins for handling
8000+TEU capacity vessels requiring 14.5m drift by undertaking the required
capital dredging works.

B) Internal infrastructure:-
a) Development of site: By filling the land with soil
b) Business and commercial complex: The proposed area contains business centers
and commercial complex. The business centers include port office, banks,
communication centers and internet café. The commercial complex includes
various shops, canteens and health club. These need not be developed by CPT.
Complex will be self supported and can be developed under BOT scheme.
c) Effluent treatment Plant: Each SEZ developers should be directed to collect
industrial effluents accumulated and it should be insisted that proper treatment
and disposal system are installed. Collection and treatment of effluents shall be
monitored by Zone administration. Since the units are very close for backwaters,
strict norms should set for the discharge of effluents to water bodies.
d) Security Compound wall: Total length is equivalent to 10 km approximately
constructed by CPT. Additional walls are constructed by respective developers.
e) Communication facilities: Telephone exchange will be constructed.
f) Zone administration Complex: Township administrator’s office, Development
Commissioner’s office, Finance department, Administrative department, Estate
department, Office of chief security officer, Customs Department, Conference
rooms and banking facility.
g) Educational and housing: Sufficient area has been earmarked for some limited
housing which will be leased to the developers for constructing multistoried
housing complex.

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h) Entertainment and open area: Golf course and tourism related activities include a
marina which will be self supportive and will encourage tourism, especially
Cruise tourism. The Marina and golf course shall be developed under BOT and
the maintenance of open area shall be entrusted to them.

Economic Advantages of ICTT

The ICTT at Vallarpadam is both advantageous to the nation and State. DP World
handles the container terminal of CPT. Likewise; the new terminal will also be
handled by DP World for 34 years. At the time of commencement of commercial
operation at the new terminal, the operator is obliged to provide a berth length of
600m with adequate equipment and handling capacity of 8000TEUs. The competitive
position of the Port of Cochin in the highly competitive market of container
transshipment will be significantly increased.
Advantages of the Project to the nation
1) A substantial portion of country’s container traffic can be handled through this
transshipment terminal, which is transshipped through Columbo, Dubai and
Singapore.
2) This could result in savings to the tune of Rs.6000 to Rs.16000 per container to
the Indian Exporters. The anticipated traffic that would have the benefit on the
fully developed stage is to the tune of 1 million containers reckoning the
minimum saving of Rs.6000 per container; the annual anticipated economic
saving is to the tune of Rs.600 crores. As this savings is in the freight cost and
container handling cost in the third country foreign port, this savings can also be
reckoned as savings in foreign exchange.
3) With reduced transportation cost, the Indian produce will become more
competitive in the international markets which consequently increase the foreign
trade volume.
4) Economic utilization of the cargo carrying capacity of Indian railways and
National highways since a substantial volume of containers will be transported
between hinterland and port by land mode.

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Advantages of the project to the State of Kerala
1) Additional employment opportunities
2) The project will ensure regional development
3) Facilitate investment flow
4) Development of port based industries
5) Transform Cochin into an economic hub.
6) Save feedering cost of seaborne trade of Kerala and consequent increase in trade
volume.
Findings
The establishment of ICTT project would boost the proposed port development
schemes and the industrial and other regional developments in and around Cochin:

1) The provision of deep and wide channels through capital dredging contemplated
under ICTT would ensure world class marine access.
2) The NH connectivity, the alignment of which passes through the scatted islands
on the outskirt of the city, which has tremendous tourist potential, would catalyst
the development of these islands.
3) The proposed NH connectivity and Rail connectivity will ensure high quality land
access to the port area which will in turn brighten the developmental potential of
these areas.
4) The ICTT facility would enable the dispensation of transshipment of Indian
containers which would result in savings of transportation cost. This would make
the export-import trade more competitive in the international market and
consequently it would increase the export trade and would result in the industrial
growth of the region.
5) The proposal to locate the processing zone of port based SEZ adjacent to ICTT
area would minimize the operational cost connected with transportation storage,
customs formalities on goods.
6) The project will also generate direct and indirect employment opportunities. Due
to a container, six persons would get employment directly and indirectly. Thus, a
half a lakh will be employed within three years.

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 7) From the increased export there will be flow of foreign exchange.
8) By the way of modern facilities and increased revenue, it benefits CPT
Suggestions

As a suggestion, I would like to suggest promotion of tourism at Vallarpadam. Cochin is

a major tourist attraction centre. Some area close to the terminal is covered with
mangroves where the govt. has asked to construct green belt. Without disturbing the
environment, the area can be fully utilized where adventure boating is possible.
Also hospitality industry is one of the growing industries in the world comprising of
hotels, restaurants, hostels, public houses, resorts etc. Here, hospitality can be brought out
enabling the tourists to visit the container terminal and understand the port operations
also. Hosing facilities can also be provided near back waters.

The continuous and consistent labour problems should be addressed and modern
technology should be used so as to make the port profitable.

Conclusion

The container terminal on an area of 115.25 hectares is a prime project with stand-alone
capacity to support the entire common infrastructure without which any other
development cannot be fructified. The BOT contact for the establishment of ICTT with
assurances for extending all supports for providing the common infrastructure facilities is
a gift. The project can reduce the dependence of India on foreign ports for transshipment.
Dr.Manmohan Singh said “the project would be a role model for private-public
partnership, blending efficiently private sector managerial efficiency and marketing
acumen with public sector capital and infrastructure planning”. Vallarpadam Container
Terminal will be India’s first ever ICTT

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References
• Administrative report of CPT for 2008-09
• Feasibility report of KITCO
• www.cochinport.com
• www.maritimegateway.com
• www.igtpl.com
• www.maritime-executive.com/article
• www.pppindia.com
• www.financialexpress.com/news