Infravisioning: Why India Needs Transshipment Ports?

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00:00 Hi, thanks so much for tuning in. You're watching Infravisioning on BQ Prime. My name

00:19 is Alex Matthew. The world today is more connected than it has ever been in the past. But still,

00:27 as we speak, more than 80% of global trade volume is carried out by maritime routes.

00:35 And that's similar to what it has been over the past several centuries. Now, why are we

00:40 talking about this? We're talking about this because we're now in conversation or rather

00:45 India is in conversation to set up an international cargo transshipment port in the Bay of Bengal

00:54 in the Andaman Islands. Why is this significant? What is a transshipment port? To talk about

01:00 all of that, I have with me Vinayak Chatterjee, who is the founder and managing trustee at

01:05 the Infravision Foundation. Thank you so much, Vinayak, for taking the time as always. Let's

01:10 start with what a transshipment port is and then we'll delve into the details of what

01:14 is being proposed in the Andaman Islands.

01:19 So transshipment fundamentally, Alex, means that when you're transferring goods from point

01:27 A to point B, there are often the absence of a direct shipping line. It is just think

01:35 of yourself as a passenger when you take an Emirates flight and you go to Dubai and then

01:40 you catch another flight to somewhere else. You are effectively as a passenger transshipping

01:45 from Dubai Airport, which is a hub of Singapore. Now similarly, in shipping parlance, there

01:51 are often difficulties in getting a container terminal from point A to point B. So what

01:57 you have is an intermediate point where the container changes ships, if I may put it simply.

02:03 The jargon for that is transshipment. Now when you talk of maritime cargo, there's basically

02:07 three types of cargo. There is containers, there is bulk like coal and iron ore and minerals,

02:14 and there is liquid like petroleum and other fuels. Now, specifically today, we are talking

02:19 about India's resolve to have a container transshipment terminal, not a cargo transshipment

02:27 terminal. So we're not talking about liquid, we're not talking about bulk. We're talking

02:31 about an international sized quality container transshipment terminal in the Andaman Islands.

02:37 But over to you.

02:38 Okay. So we've established that this is something that facilitates global trade through maritime

02:43 routes. And I think that example that you've given very nicely elucidates that point. How

02:49 many such terminals exist or how many such transshipment ports exist right now? And what,

02:56 for example, is India using in its trade? What ports are we using?

03:03 See broadly, we are using a few ports surrounding India for transshipment. So effectively what

03:11 it means that we don't have a port large enough for a large vessel. You know, large vessels

03:18 today like Panamax and others carry sometimes over 15,000 containers. So you need to come

03:24 to a port which has that much volume to make the shipping lines operations profitable to

03:29 load and unload. So basically the containers also get agglomerated. So it's a dual function.

03:35 It's agglomerating for volume so that the big ships come and it is also rooting for

03:40 destination where there are intermediate ports. India currently uses on the western side,

03:47 we largely use Dubai. And on the eastern side, effectively we use Colombo, Kelang in Malaysia

03:55 and Singapore. These are the normally used hubs. But remember that not all the transshipment

04:01 is in the region. For example, a ship carrying cargo from the western coast in Mumbai could

04:07 actually go straight up to Rotterdam via the Suez Canal, etc. and transship there in case

04:14 it requires to go to an American port. So not all transshipment happens from Dubai,

04:20 Colombo, Kelang and Singapore. There are other stations where transshipment happens. But

04:25 these four broadly take up the bulk of Indian transshipment.

04:28 Okay. Now, when we're talking about what is being proposed in Andaman, can you take us

04:33 through what that proposal is? And why would it be so significant for India to have its

04:39 own transshipment port?

04:41 Look, let's step back a little and talk about an India which is on its way to become the

04:47 third largest economic power in the world. Surprisingly, it is also a nation that has

04:54 7500 kilometer coastline and 200 ports consisting of major ports owned by the government of

05:01 India, major ports operated by the private sector, and a host of smaller ports dotting

05:07 the Indian coastlines. With this, shall we say, volume of economic power, it has been

05:15 rather paradoxical that India doesn't have its own transshipment terminal. And we are

05:21 using the transshipment terminal of neighbors. Now, it is about, you know, just like in aviation,

05:29 there is much talk about Delhi emerging as a hub. A hub is nothing but a transshipment

05:34 center. So while Delhi Airport, Indira Gandhi and others, Mumbai are gradually emerging

05:40 as aviation hubs, where passengers come in from one airline and move to the other. It

05:45 is about time, in fact, it's past the due date, when India requires to own its own world-class

05:52 transshipment center. It has been discussed for over two decades. But we finally see the

05:56 government, shall we say, enthusiastically moving to locate such a terminal very appropriately

06:03 in the Andaman. But over to you.

06:04 Okay, so what is the cost involved in setting something like this up? And I'm guessing that

06:11 there would be a private player involved in the execution of something like this. But

06:16 I was also reading an article, Vinayak, that you've written, that spoke about the economics

06:21 of this and the fact that once you do set this up, it's not something that is, that

06:28 earns a lot of money. It's not like a regular port from that perspective.

06:32 Yes, you know, a regular port effectively, first of all, has a larger swath of cargo

06:41 that it handles, as I explained before, bulk, liquid and container. So a pure container

06:47 transshipment is first of all focused only on containers. Secondly, it's, you know, in

06:55 a location, most locations of transshipment don't have a natural hinterland cargo. For

07:00 example, in our Andaman location, which by the way is a very good decision, which we'll

07:04 come to later, the location identification is a very good decision, but it is clear that

07:09 Andaman doesn't have a natural hinterland. I mean, it is not like eastern India, where

07:14 huge amounts of coal is being transported or imported or huge amounts of iron ore are

07:19 being exported. Andaman doesn't have a hinterland. So effectively, the operations of the port

07:23 are about receiving a ship, unloading a few containers from that ship that require to

07:29 go to a particular destination, and hopefully a few containers lying on the wharf that's

07:33 come from some other ship, loaded onto a new ship to send onward. So it's just a question

07:38 of loading and reloading from one ship to the other. And the industry experts tell me

07:44 that the cost of a fee charged for a transshipment of a container is about 30% the regular cost

07:52 of it loading or unloading in a port and then sent for onward dispatch, etc. Because there

07:59 are many other issues also of customs, of botting, of various things. Whereas the transshipment

08:04 is purely, as I keep using airline example, you walking in Dubai from terminal A to terminal

08:09 B from gate 40 to gate 56, that's transshipment. So it earns about 30% of the regular container.

08:16 And at the volumes that we are looking forward to in the first decade or more in the Andaman,

08:21 the addressable market is about 3 million TEUs. You know, TEUs is a 20 foot equivalent

08:28 unit, which is basically a 20 foot container, because there are also 40 feet containers.

08:32 So normally the industry operates by defining the market as a 20 foot equivalent unit. So

08:38 the addressable market is about 3 million TEUs, of which obviously we are not going

08:42 to get 100%. There will be containers continuing to go to, you know, to Singapore, to Kelang

08:49 and to Colombo. So the volumes are not sufficient for the scale of development that the government

08:55 of India envisages. That's the issue.

08:57 Okay. So how do you fix that? How do you make it viable?

09:00 So what I've done some thinking on the subject myself, spoken to experts, figured out, you

09:06 know, the viability, etc. So what I actually feel is that the transshipment terminal at

09:10 Andaman from India's own needs, needs to be done. It needs to have a vision larger than

09:18 just a container transshipment terminal. So the simple reason I'll add is that we are

09:24 very much in the middle of a very important East-West trade route. That's point number

09:31 one. Point number two is that there are geopolitical interests in this region of the world. There

09:37 are superpowers with their navies, etc., playing around. And finally, it cannot remain a transshipment

09:46 port forever in its life. We also have to see the development of Andaman in a rather

09:51 larger perspective. And therefore, a way to conceive this is to actually see the transshipment

09:57 terminal as the seat of a bustling port city in Galatea Bay, which is in the Great Nicobar

10:05 Islands, and gradually have a master plan that contains within itself everything, obviously,

10:11 to support a transshipment terminal. It will require a housing colony, it will require

10:16 a renewable power plant, it will require roads, it will require some degree of social and

10:21 recreational infrastructure, it will require an airport. All these are required, but the

10:25 vision is a little larger to see if it can also become a port city, a bustling port city

10:32 with equal weightages to transshipment, commerce, as well as a certain degree of social habitation,

10:41 where you can have a huge number of tourist resorts, housing, and have the whole area

10:49 develop. And for this purpose, I think a three-stage financial plan, and I'll keep it short, such

10:55 as itself. First, the port is expected, the transshipment and allied stuff is expected

11:02 to take about 20,000 crores. That's clearly unviable. You've got to reduce the capital

11:06 expenditure of whoever is the private sector winner. So a 40% viability gap fund that clearly

11:12 gives 8,000 crores capital grant up front. That leaves 14,000 crores as the CAPEX budget

11:19 over the years for the terminal operator to spend. Secondly, the government can take on

11:24 many of the activities through public expenditure, which cannot earn revenue. Things like dredging,

11:29 breakwater, roads, you know, stuff like that the government can do for the larger good

11:35 of that area of Andaman, because we owe it to them. And finally, there is what I would

11:41 call the embedded profits over the years in development rights. The person who wins the

11:45 terminal should be given an opportunity to get a return on his capital by ancillary activities

11:51 of resorts, casinos, cruise terminals, etc. So it's a three-stage approach. But back to

11:57 you.

11:58 No, okay. So that is a proposal to make this viable. And to close this out, there are still

12:04 some thorny issues in terms of the Aboriginal population of those regions and they are protected

12:13 tribes, right? And also I would think that, and you pointed this out in your article,

12:18 you've spoken about the fact that this would require deforestation and these are again

12:23 protected ecologies. Are we likely to face headwinds from those issues?

12:31 We have already faced headwinds. You know, there are many, many nature and conservation

12:38 organizations that have voiced their concerns over what they call the disturbance to a sensitive

12:49 eco-region. There is endangered fauna, there is the felling of 800,000 trees, and there

12:56 are some very protected tribal communities there, like the Champagne tribe and the Nicobarites.

13:02 So it's a fragile ecosystem, both in terms of humans as well as flora and fauna. Now

13:09 this is the classic debate between development and conservation. And we've seen it play out,

13:16 you know, across the country for any major infra project. It is bound to happen. And

13:21 therefore the intelligent thing is to make intelligent trade-offs and suggest ameliorating

13:26 conditions. So what has happened is the government has taken cognizance of these concerns, they

13:31 are legitimate concerns, and a special committee has been appointed by the Green Tribunal to

13:37 look at it, to review the total conditionalities of the Green approval. And they have actually

13:42 given in-principle approval, but it comes with a whole lot of conditionalities, which

13:46 talk about addressing the concerns in as sensitive and humane a way as possible to protect the

13:53 environment and yet get some crucial infra development going in that part of the Bay

13:59 of Bengal, which is equally important. So it's the classic debate between development

14:04 and the ecosystem.

14:05 Now certainly, so there is a trade-off as always. But thanks so much for joining and

14:10 for explaining the concept of transshipment terminal or transshipment port and how big

14:16 this could be in fact. Always a pleasure speaking with you Vinay.

14:20 Thank you. Thanks Alex.

14:22 Alright viewers, there you have it. Conversation about this proposed major project. Let's see

14:27 how this pans out. In the meanwhile, you'll find a lot more on the website bqprime.com

14:32 and on all of our social media platforms. So do stay tuned.

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