Shipping Ministry Stages A Coup, Develops Thoothukudi VOC Port As Transshipment Hub

On 22 November this year, the V O Chidambaranar Port in Thoothukudi came out with a trade notice that looked like any other. But not many understood the impact it could have on sea freight, especially to the United States (US) from India.

The trade notice said that the port could henceforth be able to handle ships of 14 metres draught at berth number eight, where container vessels are handled. This means that the container terminal at the port can handle ships with a draught level of up to 14 metres.

The port also said it would soon start handling ships of such draught on a trial basis soon. Hitherto, the port couldn’t handle ships whose draught level was over 12 metres.

The notice was some sort of a good tiding for the Taiwanese shipping firm Wan Hai Lines Ltd. It immediately told the port authorities that it would opt for an ad hoc calling of its container mainline or mother vessel with 14 metres draught at the VOC Port.

The authorities agreed, and Wan Hai’s mainline vessel called on at the port on Wednesday (12 December) and is all set for departure on Thursday (13 December). Wan Hai had wanted to test the response of bringing such a huge ship to Thoothukudi and that’s why it opted for an ad hoc call at the port.

The response to Wan Hai’s mainline vessel calling at Thoothukudi has been phenomenal. Why? Let us look at the economics of a mainline vessel calling at any port.

For any mainline vessel calling at any port, it would be beneficial if it can get about 600 containers to make some profit. But getting 400-500, too, would help it break even.

When Wan Hai called on at VOC Port on 12 December, there were 974 containers ready to be shipped to western US from Thoothukudi. Overwhelmed by the response, Wan Hai told the Shipping Ministry that it plans to introduce a weekly service to Thoothukudi to take containers to the western shores of the US.

The Shipping Ministry has staged a coup with this move as it would be a game-changer on the east-west international sea route to the US. This means container goods will go from Thoothukudi to a Chinese port and from there to a western port in the US.

The direct mainline vessel shipping will save 11 days for exporters in the region, especially in Tamil Nadu. So far, to get a consignment from an Indian port to a western port, it would take about 45 days. The introduction of the Taiwanese mainline vessel will help the consignments to reach the western part of the US in 34.

The facility will be a boon to garment manufacturers in places like Tiruppur, Coimbatore, Erode, Palani, and Kumarapalayam – all in western Tamil Nadu. Manufacturing units in Tamil Nadu will also gain with this development. Indian garment manufacturers have a good clientship in the US, like Walmart, Walgreen, Carrefour, Tesco, and others.

The introduction of a mainline vessel will save time and money for exporters. First, a consignment from a place like Thoothukudi will have to be transported in a feeder vessel to major transshipment ports like Colombo or Singapore. From there, it will be transshipped to other ports, thus holding up the consignment for more time.

Such shipping costs at least $50 per container. Then, exporters in Tamil Nadu or Karnataka will opt for Thoothukudi rather than Kochi or its Vallarpadam container terminal. There are a couple of reasons for this.

One, an exporter will have to pay a transport firm carrying the container up and down, transportation charges. This is because transport firms and workers in Kerala don’t allow loading of goods by other state operators. Two, the exporters will save at least four hours of sending consignments to Thoothukudi.

For example, it takes eight hours to take a consignment from Coimbatore to Thoothukudi, a distance of about 360 km with a part of the route being a two-lane road. On the other hand, it takes 12 hours to get to Kochi port from Coimbatore, a distance of less than 200 km.

One of the major fallouts of introducing the mainline vessel from Tuticorin is that it now has the potential to emerge as a major transshipment hub in the region. This, in turn, could affect ports like Colombo, to where many Indian exporters send their consignments for transshipment.

At a video-conference event to inaugurate the calling of the Wan Hai service, Nitin Gadkari, the Union Minister for Shipping and Transport, said the port would become a game-changer in container traffic in South India as it becomes a mainline vessel one.

The minister sees high potential for the VOC Port to become a major transshipment hub in the near future. Perhaps, Wan Hai’s decision to introduce a weekly service is a step in this direction.

There is another story to the VOC Port handling of container vessels. Till now, only feeder vessels called on the port. This is because authorities didn’t allow ships with over 12 metres draught. The draught level of the port is 14 metres.

The Shipping Ministry questioned this policy. It began to look at the feasibility of the port-handling vessels with deeper draught. When it launched its efforts towards this, there was more shock in store.

Till now, authorities would ensure there was a 2 m gap between the bottom of the ship and sea surface. This was much against the practices in some ports like Colombo or Rotterdam, where the gap is only 0.5 m.

The other shocking aspect was the contention of officials that the VOC Port seabed was one of rocks. The problem with such a seabed is that dredging is costlier. It costs Rs 2,500 per cubic feet to dredge such seabeds while the expense to dredge a sandy bed is only Rs 200.

Thoothukudi was found not to be one of rocky seabed but that of sandy bed. This means that the capital investment for dredging would be 10 times lower than the initially estimated cost. The Shipping Ministry went ahead and completed its task of deepening the container terminal and it seems to be paying off.

To attract the mainline vessel, the Tamil Nadu government will offer a 60 per cent concession for vessel-related charges to such ships. The Shipping Ministry is now eyeing an encore at Vallarpadam terminal.

That will see two ports in South India offering mainline vessels facilities to anchor. Tuticorin, however, enjoys an advantage. Sea water on the western coast brings in a lot of sand. This results in ports incurring additional costs in dredging.

Eastern coast ports don’t suffer from such a problem, so they can offer competitive rates to mainline vessels. Perhaps, 12 December could go down as a defining moment for Thoothukudi VOC Port in sea freight history.