A turning tide for ICTT following the political turmoil in Sri Lanka

The transshipment port at Kochi sees opportunity in the Sri Lankan crisis to attract more cargo from Colombo

Back in 2011, when then Prime Minister Manmohan Singh inaugurated the country’s first International Container Transshipment Terminal (ICTT) at Vallarpadam, one of three islands that form part of Kochi, he called it one of the “most well-located ports” in India. The port, he hoped, would reduce expenditure and transit time for Indian containers, which are heavily dependent on the giant transshipment ports such as nearby Colombo.

Yet a decade later, India continued to rely heavily on Colombo: 60 per cent of the country’s transshipment cargo is handled by the Sri Lankan port. It is, in fact, India-linked cargo that contributes the lion’s share of Colombo’s transshipment volume.

Now the economic and political turmoil in Sri Lanka has triggered hopes that the ICTT at Kochi may come as an alternative for the busiest port in Southeast Asia. Though all the ports in the region — including Chennai, Ennore, Mundra and VO Chidambaranar Port in Thoothukudi — have seen a 5-10 per cent bump in business on account of the diversion of goods from Colombo, it is the ICTT that is likely to benefit the most, being the only transshipment terminal in the region. Based on another estimate, around 50,000 twenty-foot equivalent units (TEUs) of cargo are likely to get diverted to Indian ports.

In a transshipment terminal, cargo or container is moved from one vessel to another while in transit to its final destination. Driven by the turmoil in Colombo, the ICTT saw an increase of 62 per cent in traffic to 13,609 TEUs in March 2022, compared to 8,394 TEUs in March 2021. This is still small, given that at its peak Colombo handled 4.6 million TEUs of Indian cargo itself, before the pandemic.

“Kochi is a natural alternative to Colombo now. In recent times, we have seen considerable diversion of transshipment traffic from Colombo to Kochi. There are vessels that are skipping Colombo cargo, because of the longer time taken for transshipment,” Cochin Port Trust Chairperson M Beena had told Business Standard.

An official source, however, said the rise in transshipment container traffic is something that the port is seeing for the last two years and is not a new trend. The transshipment container traffic in Kochi saw an increase from 36,183 TEUs in 2019-20 to 86,000 TEUs in 2020-21 and 156,000 TEUs in 2021-22. Before the Covid-19 pandemic, in 2018-19, it was 30,159 TEUs. The port authorities are considering its marketing efforts — reaching out to exporters, shipping companies and business communities — as another major reason for the current spike in traffic.

“The fact that we are able to attract traffic from Sri Lanka is positive. Kerala by itself has no cargo origination. If you had a place with a good amount of hinterland cargo, it would have been more stable. The crisis indeed is an opportunity,” said Jagannarayan Padmanabhan, director, transport and logistics, at CRISIL. Experts say that compared to other transshipment ports in India, such as Nhava Sheva off the coast of Mumbai, the advantage of Cochin is its proximity to international shipping routes.

Many, however, view the bump in traffic from Colombo as temporary; they think even existing traffic may get hit once the Vizhinjam container transshipment port being built by Adani Ports and Special Economic Zone Ltd (APSEZ) becomes fully operational. The first container ship is expected to dock at the Vizhinjam terminal in December and may be operational next year.

“Sri Lanka is a temporary relief for the port. When Vizhinjam comes, this cargo will shift there,” said P M Mohammed Haneef, working president, Cochin Port Staff Association. He added that the terminal is dependent on Indian traffic. “To tide over this crisis, the port has already given huge sops for shipping companies. For instance, for vessel-related charges, an 86 per cent concession is given by the port,” Haneef added.

Given such steep discounts, why would shipping companies switch to Vizhinjam port? That’s because it has a natural seawater depth of around 20 metres. And the deepening of the approach channel is a major issue the Cochin Port Trust and its operator DP World Ltd are facing. There were plans to increase the depth to 16 metres from 14.5 metres so that bigger ships can dock. The target is to attract at least 3 million TEUs of Indian origin cargo that is transshipped through the Colombo Port.

But Haneef added that though the government is spending a good amount of money on dredging, there has been little progress. “Even after 11 years, it is struggling to get traffic,” he said. Part of the reason is that turnaround times are still not at global standards. For the ICTT it is 20 hours, which is better than Colombo’s current three days, but that’s only because the latter is facing a shortage of both labour and diesel. In normal times, the turnaround time at Colombo used to be 0.86 days compared to an average of 2.16 days in key Indian ports.

The Sri Lankan port is expected to take at least a year or more to come back to normalcy and its higher turnaround time and congestion are becoming a cause of concern for importers and exporters. Whether the Cochin port authorities can cash in on this weakness for long-term growth remains an open question.