Even as the Chennai Bangalore Industrial Corridor marches down the trail blazed by its predecessor being developed between Delhi and Mumbai, Kerala is sitting out of this golden opportunity even as it possesses the very catalyst which could help hasten the industrial development of South India.
As India marches boldly into 3rd position on World's ranking of economies (measured on Purchasing Power Parity), it's starting to launch a slew of massive infrastructure projects needed to bridge the gulf between infrastructure demand and availability that has been hampering the nation's growth over the past two decades. It's widely recognized that we need to invest upwards of $1 Trillion into infrastructure over the next few years - power, roads, railways, ports, urban infrastructure and so on.
There's a scarily large gap between power generation and demand in almost every single State, including Kerala, and the fragility of the grid was laid bare by the massive blackouts across North India in July, which have the dubious distinction of being the biggest in history. Two of India's industrial powerhouses, Tamilnadu and Andhra Pradesh are crippled by power shortages. And there seems no end in sight despite the half-dozen Ultra Mega Power Plants (UMPPs) coming up near ports and coal mines. The other major enabler of industrial development, logistics, is in a terrible shambles as well with as much as 13-14% of our GDP expended on moving things around compared to 7-8% in most developed nations.
The first steps in the right direction began in 1998 with the National Highway Development Project,
a program of highway-building to rival the interstates in the US and the autobahns in Germany. Over 32,000 Km of highways have been or are being 4/6 laned with a further, with a further 17,000 set to be shortly. The initiative to build giant UMPPs is also promising as is JNNURM. There have also been lots of mis-steps and missed steps, including the National Maritime Development Programme and the usually wayward railway development over the last decade or so. It's clear that we have just scraped the tip of the trillion dollar infrastructure gap iceberg that threatens to scupper our economy. There are many years, perhaps decades of work left to close that gap, not surprising how long it has taken the likes of the US and Germany to build a critical mass of infrastructure. Even China's break-neck campaign to build infrastructure, that our politicians and press love to wax eloquent about, has been in progress since the late 1970s.
Rather than wait for the entire country to reach a truly world-class standard in infrastructure, one approach is to focus on particular areas, to expedite infrastructure development there and to use that nexus to jump-start industrial and economic development. The biggest such initiative thus far has been the Delhi-Mumbai Industrial Corridor (DMIC), a $90 Billion project to develop an logistics-industrial corridor between Delhi and Mumbai.
Industrial Corridors
According to the DMIC website, "Industrial Corridors recognize the inter-dependence of various sectors
of the economy and offer effective integration between industry and
infrastructure leading to overall economic and social development.
Industrial corridors constitute world class infrastructure such as
high-speed transportation (rail, road) network, ports with state-of-
the-art cargo handling equipment, modern airports, special economic
regions/ industrial areas, logistic parks/transshipment hubs, knowledge
parks focused on feeding industrial needs, complementary infrastructure
such as townships/ real estate, and other urban infrastructure along
with enabling policy framework."
The DMIC will be strung along a Dedicated Freight Corridor (DFC), a high-speed, high capacity railway line which will transport cargo up and down the Industrial Corridor in tandem with highways. It will have no less than nine industrial clusters or cities along its length in between Delhi and Mumbai and be spread across the States of Delhi, Haryana, Uttar Pradesh, Rajasthan, Gujarat, Madhya Pradesh and Maharashtra, that together account for more than half of India's population and GDP. A key aspect of the Corridow will be that it will be supported by key ports located in Gujarat and Maharashtra, namely Mumbai/JNPT, Kandla, Mundra, Pipavav, Dahej and Hazira (all but the first in Gujarat). These ports serve as the all-important gateway to bring in raw materials and the energy resources needed for the Corridor and also help to export its products to the rest of the World. And these ports are not created equal, although Mumbai/JNPT and Kandla are called "Major" ports, the action's shifting to the deeper, more efficient, so-called minor ports such as Mundra and Pipavav. The ports are able to out-compete the legacy ports, not just on their deeper drafts but also operational efficiency and relatively congestion-free infrastructural linkages. This is evident across the country, with examples such as Chennai Port and Ennore, and Vizag and Gangavaram. Without cost-effective and efficient logistics support from world-class ports, the Industrial Corridor would not be able to be globally competitive.
In the short time since it was conceptualized, the DMIC/DFC project has achieved significant progress. About 80% of the 10,000 hectares private land needed for the axial DFC has been acquired, in addition to nearly 6000 hectares already available with the Government. The Japanese International Cooperation Agency has sanctioned a nearly $4 Billion loan for the DFC, in addition to a $5 Billion loan for the DMIC. Tenders for construction of the DFC are expected to be awarded in 2013. The much bigger DMIC is also making progress with the Japanese again playing the role of international sponsor but the project will take longer to fructify because of its sheer scale and because of the challenges in acquiring the much bigger swathes of land needed for it.
In the meantime, in addition to the Eastern DFC project spanning Delhi to Calcutta, the proposal for a Chennai Bangalore Industrial Corridor (CBIC) has come to the fore in recent months, with the Japanese again plan the role of the prime movers. South India, especially Chennai and Bangalore, play host to a large number of Japanese companies. Chennai alone hosts nearly 30% of all Japanese firms operating in India. The Japanese have committed to be an anchor investor in the CBIC project, and the project may be expanded in scope in response to requests from the Governments of Andhra Pradesh and Karnataka to extend it to the deep-water Krishnapatanam Port and Chitradurga.
Kerala has a unique opportunity to tap into industrial development on a scale hitherto unseen in the State (for reasons such as our population density and lack of natural resources) and a scale that would be impossible on our own. What can Kerala offer, given the fact that we are dwarfed on the industrial front by the other three South Indian States and that we have little or nothing to offer in terms of natural resources or land? Well, in one word - Vizhinjam.
Vizhinjam and a South Indian Industrial Corridor
The current dispensation of the CBIC has access to a clutch ports on the East Coast - Chennai, Ennore, Kattupalli and Krishnapatanam, not to mention Vizag and Gangavaram. Almost all of these have at at least 14 m of draft with Krishnapatanam and Gangavaram stretching that to 18 m, placing them at the top of ranks of the deepest ports in India. However, these ports are located hundreds of miles and days of sailing from the main shipping lanes. This means that while terminal services (where all the cargo is to be delivered to/picked up from one port) will call at this ports, they may be inefficient propositions for mainline container services which seek to maximize efficiency of their huge carry capacities (now routinely over 10,000 TEUs and headed towards 18,000 TEUs). This makes the East Coast ports, especially the ones in Andhra Pradesh poor candidates to become transshipment hubs or ports of call for the largest and most efficient of container ships. This is obviously where Vizhinjam comes in.
As we have discussed many a time, Vizhinjam is an ideal transshipment hub where giant container ships can drop off and pick up their multi-thousand TEU loads and then have the containers moved on to their final destinations or vice-versa by smaller feeder vessels. In this way, while the entire trip can be made by ship, the bulk of the journey (to and from the transshipment hub) can be accomplished on the biggest, most cost-effective vessels. However, if a sufficient hinterland connectivity can be provided to and from Vizhinjam, the port could actually service faraway points in the hinterland without transshipment. Which is why our plan to expand the potential of the project had efficient road and rail hinterland connectivity as a key recommendation.
Road and Rail Connectivity proposal for Vizhinjam
This is the first reason to establish a South Indian Industrial Corridor (SIIC) with Vizhinjam as its southern anchor port, in association with Tuticorin. With its 18 m draft easily scalable to 25 m, Vizhinjam is future-proof in terms of handling the biggest ships in the world, including the 18,000 TEU Triple-E ships that Maersk is currently building. It can also handle the biggest supertankers, dry-bulk carriers and LNG tankers out there as well. The way the CBIC is currently planned, almost all the traffic to and from it would be handled by the Chennai cluster of ports together with Krishnapatanam. While this may justify mainline container calls, together with calls at Mundra/Pipavav but overall it would be a far less ideal choice because these ports would be far less efficient than Vizhinjam at transshipment to other South Indian ports like Tuticorin, Ernakulam and Mangalore, and thus less likely to challenge Colombo's current dominance, at least in the foreseeable future. With its location at the top of the sub-continent Vizhinjam is ideally positioned to service both the West and East coasts and thus offers the most efficient option to aggregate loads meant for ports along both coasts, an advantage hitherto enjoyed by Colombo enabling it to out-compete deeper, bigger ports such as Singapore, Salalah and Dubai for Indian cargo. Vizhinjam can bring this same advantage to the SIIC, but on Indian soil!
The second reason that the SIIC makes even more sense that the more limited CBIC proposal is because it allows for a much larger industrial base to be tapped, rather than just that present in the Bangalore-Chennai-Cuddalor belt. An SIIC can tie together the entire industrial heartland of Tamilnadu, including well established clusters such as Salem, Coimbatore, Tirupur, Erode, Karur, Tirunelveli, Sivakasi and Tuticorin, and would be anchored by deep water ports at either end. Such a combined corridor would encompass nearly 50% of the over $400 Billion GDP of the four South Indian States.
The third reason answers those of who may ask why this cannot be done within Kerala, so that our own State can maximise the benefit from Vizhinjam for which the State Government is shouldering 75% of the cost. The simple fact is that Kerala simply does not have the land to support such a large industrial super-cluster. Even the much smaller industrial cluster projects, trumpeted at Emerging Kerala, will need extensive land acquisition, including agricultural land/wetlands, and wide-spread displacement of people. With plenty of land available along its length in Tamilnadu, the SIIC would be unhindered in its growth.
Proposed alignment of the South India Industrial Corridor
(Industrial nodes are marked in Red; Ports in Blue)
There are two possible alignments between Chennai and Trivandrum to be considered. The first is Chennai-Tiruvannamalai - Trichy - Dindigul - Madurai - Tirunelveli - Trivandrum, with a link to Tuticorin. The second is Chennai - Tiruvannamalai - Salem - Erode/Tirupur - Coimbatore - Dindigul - Madurai - Tirunelveli - Trivandrum, again with a link to Tuticorin. The second alignment also brings the Palakkad industrial region, on the Kerala side of the border near Coimbatore, into play as a beneficiary. The first alignment follows the existing Chennai - Trivandrum railway line via Trichy. Indeed, the best option would be to have both alignments developed simultaneously.
Corridor Infrastructure
As with the DMIC project, the core of the SIIC has to be a high-capacity freight transport system, preferably rail-based because rail transport is more cost-efficient and environmentally friendly. The existing rail lines can be beefed up with two additional dedicated tracks capable of supporting high speed passenger (150-200 Km/hr) and heavy-weight freight trains. Or a completely new rail alignment can be developed depending on the availability of land, with the latter opening up the option of developing new industrial clusters in areas with low density of population.
The recent decision of the Union Cabinet to allow private investment in enhancing rail capacity along mainlines in addition to building spur lines for factories, power plants, ports and mines, will be a key enabler of the construction of the rail infrastructure. The keen interest shown by the Japanese to fund the CBIC project will surely extend to the much larger and more rewarding SIIC project as well. Other multinational institutions such as the World Bank and the ADB can be roped in as well, in addition to private investors.
A key hurdle to the industrial of South India has been the acute energy shortage facing the region in the recent past. Already reeling under a 20% power deficit, the rapidly growing South will suffer worse shortages as capacity addition is well behind demand. For example, till date only one UMPP - the long-suffering Reliance project at Krishnapatanam - has been awarded yet, compared with two (Tata Power and Adani) just at Mundra Port in Gujarat! The SIIC would be a disaster if this crisis is not resolved quickly. One pragmatic solution would be to harness the world's fastest growing energy source, no not solar or wind, but natural gas that is rapidly breaking down the bastions of the reigning energy kings, coal and oil. Spurred by massive gas discoveries in the US, Australia and East Africa, natural gas is likely to become the fuel of choice for power generation and industrial uses across the world. Global prices are beginning to match those of coal on an energy equivalent basis and short of nuclear fusion being discovered in the next few years, it seems inevitable that natural gas import (India's domestic supplies are limited and even those have been under-performing) has to be an integral component of the development of industry anywhere in the country. Liquified Natural Gas (LNG) is the preferred mode of import and needs the establishment of LNG import terminals which receive giant tankers carrying the liquified gas, re-gassify it and store it before it is distributed via pipeline or sent to a power plant. Currently, the only LNG terminal in South India is the long delayed and yet-to-be commissioned Petronet terminal at Ernakulam. This project is currently starved of demand because its pipeline has not been able to make much headway through densely populated Kerala and because its anchor customer, NTPC, pulled out.
This much is clear, as is the opportunity to develop an LNG import terminal as part of the Vizhinjam project. As one of the very few ports in India capable of handling the world's biggest LNG tankers, the recently commissioned Q-max class, Vizhinjam can import natural gas in greater volumes and consequently at cheaper rates, than any other Indian port. As mentioned in the discussion on Vizhinjam's masterplan, the port is also closest to emerging LNG sources in Australia and East Africa, not to mention potential imports from the US and Russia (via the Straits of Malacca). Building a high-capacity gas pipeline along the SIIC will enable distribution of natural gas to industries and power plants along the Corridor. A pipeline from Chennai to Tuticorin, planned as an extension of the Kakinada-Chennai gas pipeline had been awarded to Reliance, but the contract was recently terminated owing to non-performance. This idea can be revived and the gas can be used to directly fuel industries such as fertilizer, textile and cement manufacturing as well as to set up de-centralized generating facilities and Combined Heat and Power (CHP) systems. Energy can also be transmitted as electricity, by locating one or more large gas-fired power plants near Vizhinjam and transmitting the power along high-capacity lines built along the Corridor. Gas-fired power plants are very compact and very efficient. Even with the land constraints around Vizhinjam, a 2000 MW plant is quite possible since it would need less 100 acres of land. If we consider using 260,000 ton capacity Q-Max ships to import the LNG, Vizhinjam could easily include a 10 Million tons/year import terminal with just a single berth located near the South end of the breakwater.
The LNG terminal is mentioned (as a non-container berth) in the lower right corner
To put a 10 Million tons/year LNG terminal into perspective, it's about as much LNG import capacity exists in all of India as of today or it can generate nearly 10,000 MW of power, nearly 3 times as much as Kerala needs today.
In short, the inclusion of Vizhinjam in a possible SIIC project will be a strategic advantage enabling it to not only compete with the DMIC for investments from national and global firms but also to make it truly world-class and able to compete with upcoming and established industrial clusters across the world in places from China to the Middle-East to the US.
In return, Vizhinjam will get access to world-class connectivity that links it to an extensive hinterland that encompasses over half of South India that will enable it to more quickly realize its potential to be a world-class hub port. It will help the port diversify beyond container transshipment, to cargoes such as LNG. Of course, consolidating the LNG demand in the densely populated Southern districts of Kerala and the industrialized southern districts of Tamilnadu would easily justify an LNG terminal on its own, albeit a smaller one. This will generate more direct and indirect employment from the port, especially if a logistics/industrial cluster can be developed close to the port, even if at a smaller scale than would be possible in the wide open spaces in Tamilnadu.
One thing is very clear, Kerala is much better off being a partner and investing in an industrial corridor of this kind rather than on day dream projects that would probably end up costing as much and not return a single bent nickel in the end. But then we need to convince decision-makers who cannot even see the value of the Vizhinjam project itself and have very publicly chosen to consign it to the last rows of the priority list, buried well below "dream projects" and barrels of pork for their constituencies.
A tall task, but the only really lost cause is the one left unpursued!
