Tuesday, August 18, 2015

Sitting on a Marine Superhighway....Why Vizhinjam Makes All the Sense in the World!

First of all, a hearty round of congratulation to those of us who were looking forward to the landmark Vizhinjam deep-water container transshipment terminal and port project coming to fruition, for now the long-delayed enterprise has the best possible backer in India at the moment, albeit after a two decade long gestation period. Kudos to Chief Minister, Oommen Chandy, and Trivandrum MP, Dr. Shashi Tharoor, for showing extreme persistence and patience in getting the project through some very troubled political waters.

 That said, while one would expect everyone in Trivandrum and Kerala to be in support of a project that can and will change the economic face of the State and even of India as a whole, that is unfortunately not the case. A plethora of articles and reports have flooded the print, video, online and social media channels, questioning the project's viability, the very need for it and the massive harm it will supposedly wreak on the environment and the livelihoods of "tens of thousands" of fisher folk in the vicinity.

I will not do any favors to these malicious articles by providing links to them here but I am sure all of you have come upon at least one of them in the last few weeks. Surprisingly the nay sayers have ranged from lawyers without a cause to religious leaders who should find better ones to speak about, all united by two elements - a hatred for the Vizhinjam project and the utter lack of any knowledge about whatever they spout in objection to the port.

Let's take the high road here and examine a few key tenets of their arguments based on cold, hard data. Firstly, they claim that Vizhinjam will not be able to attract sufficient traffic to be viable, apparently not enough ships pass by close enough to Vizhinjam to consider stopping at the port, despite the fact that anyone looking out to sea from a high enough vantage point in Trivandrum can see a near continuous procession of ships sailing past. Secondly, the opponents of the project claim that the livelihoods of tens of thousands of fisherfolk will be utterly decimated by the above said non-existent ships entering and exiting the port. Thirdly, they claim that the utter failure of the Vallarpadam container terminal in Ernakulam bodes ill for the prospects of Vizhinjam as a transshipment terminal. Important sounding arguments indeed, let's take a look at their veracity.

To help us accomplish this, I am going to lean on a marine location system called the Automatic Identification System (AIS), which identifies and tracks the location of ships using a combination of other ships, AIS stations and satellites. AIS data for the Kerala coast is available in real-time on a map via MarineTraffic.com and other similar services. It's conveniently available on an iPhone app and has fascinated me over the last few weeks as I have been glued to it in preparation for putting this post together.

Here's what it looks like.







Now, it's common knowledge that a number of shipping lanes converge close to Vizhinjam - the one along India's West coast, the one connecting the East and West coasts, Malacca to the Persian Gulf and Malacca to Suez. The last two account for almost a third of the world's shipping traffic.

Now in case, someone's wondering if there are actually any ships sailing close to Vizhinjam, despite the aforementioned ease of looking out the window and seeing them sail past, here's a screenshot of what's typically out there.


Each of those arrows is a ship, the red ones being tankers of all types, carrying oil, liquefied natural gas (LNG) and LPG (a.k.a. cooking gas) while the green arrows indicate dry cargo carriers, ranging from container ships to bulk cargo (coal, iron ore etc) carriers and even car transporters.

Typically, there are a few supertankers or, to be more precise, Very or Ultra Large Crude Carriers, either carrying crude oil from the Persian Gulf to the Far East (Singapore, China, Japan, Korea etc) or returning to pick up more. There're also tankers carrying refined oil products and LNG. 

However, Vizhinjam being conceived as a container transshipment terminal, we are most curious about container ships at the moment. And there are dozens of them sailing past, including a very healthy number of what are referred to as Ultra Large Container Vessels (ULCVs), behemoths that carry 16,000 containers or more, up to 19,000, at a time. Belonging to the world's top container lines such as APM Maersk, MSC and CMA CGM, these giants are typically plying on the Malacca - Gulf and Malacca - Suez (and thence on to Europe) routes and usually pass within 100 nautical miles of Vizhinjam, which is only about 5 hours worth of sailing time at typical cruising speed.

So, yes, the ships are out there. And, yes, with 21 meters of natural draft, the Vizhinjam port can handle the biggest of them with fully loaded drafts of around 16 meters. This is much more than can be said of most of India's other major container ports, with the exception of Mundra and Pipavav. But those ports are more than 1000 miles from the Malacca - Suez shipping lane and would need at least 2 additional days of sailing to reach. Given the rapidly growing volume of export-import cargo volume of the world's third largest economy and soon-to-be-largest population, it makes eminent sense for the giant vessels, also (affectionately) called "mother ships" to drop off and pick their boxes at Vizhinjam and have them transported to and from other ports via smaller feeder vessels which can enter much shallower ports like Ernakulam or Tuticorin.

Big container ships passing by? Check. Capability to handle them? Check.

Now this also puts paid to the claim that the traffic to the port will jeopardize the lives and livelihoods of tens of thousands of fisherfolk and also destroy the ecological balance in the area. Tens of thousands of ships and over a Billion tons of crude oil pass by every year, Vizhinjam or no Vizhinjam. When the port is operational, two or three ships a day will divert from the shipping channel to enter the port through a well marked approach channel. Hardly any difference from what's happening now. In fact, with the port's marine traffic control, equipped with marine radar and satellite positioning systems, in operation, fisherfolk will be even more safer, not less so. As for the marine life in the seas around Vizhinjam, they are no more likely to be mowed down by a ship with the port as now.

Vizhinjam needs minimal capital dredging to bring its basin and approach channel to a 21 - 23 meter minimum depth and almost no maintenance dredging to maintain that depth. This is probably a first in the annals of deep water port construction, especially in India where most ports struggle to maintain even a 12 meter draft. Hence the volume of dredged material generated during the construction and operation of the port, often the cause of environmental damage, will be negligible.

Now one wonders why all these supposed "activists" who're crying foul of the supposed environmental impact of the Vizhinjam port turn a blind eye to the mind boggling volume of muck being dumped by dredgers struggling to maintain even a 14 meter draft at the ailing Cochin Port. By the port's own admission, 21 Million cubic meters of silt has to be dredged out of the harbor and approach channels at the loss-making port to maintain just about half the draft that Vizhinjam will have, sans dredging. Isn't that all of that muck (enough to reclaim approximately one square kilometer - 250 acres of land every year off Vizhinjam!) doing ANY ecological damage? Of course it is. Do those dredgers and ships (relatively small ones, of course!) running through the Mattancherry fishing harbor pose risks to the lives and livelihoods of fisherfolk? Yes, they do. But then only Trivandrum seems infested with "activists", such as the ones found hugging random trees on roadsides (mind you, only trees that can be easily reached by air-conditioned cars from their air-conditioned homes). Maybe it's because the State Capital is a good place to live in or maybe it's because many of these pseudo environmentalists are bankrolled from the place where they are dumping all the silt into the sea.

Now that points one and two have been demolished and disposed off safely in deep water, let's look at point three.

It's based on the utter failure of the Vallarpadam container terminal and it goes that if a container facility 220 Km to the North is at risk of being abandoned by its operator, how can Vizhinjam work? Apparently, DP World is seriously giving up the ghost on its congenitally crippled venture in Cochin which has not only failed to record any significant traffic growth from the time DP World took over the former Rajiv Gandhi container terminal a long time ago. Indeed, its cranes probably spend more time serving as back drops for malayalam movies or rests for the sea gulls than handling containers.

So does it bode ill for Vizhinjam? No it does not. The reasons are simple enough for even the most feeble minded self-styled port expert to comprehend. Vallarpadam failed to take off because of three primary reasons. First, it has struggled to achieve any sort of pragmatic draft because Cochin is a estuarine port, beset by chronic siltation as explained above. It claims to have a 14 meter draft but has been caught out on this multiple times. First, the ship bringing the giant ship-to-shore (STS) cranes to Vallarpadam itself had to wait three weeks out at sea because of insufficient draft, then an LNG tanker calling at the moribund terminal at Puthuvypeen suffered the same fate and most recently, the launch of India's first indigenous aircraft carrier from the Cochin shipyard was delayed apparently because the gates of the shipyard could not be opened because of siltation. In short, Cochin is no longer viable as a hub port in an age where ships are so much bigger than when it was conceptualized in the early part of the last century. Today, container ships with capacities of 5,000 TEUs, that need 12 -14 meters of assured draft are being pushed into feeder routes by the flood of newly built behemoths with capacities of over 10,000 TEUs that now dominate the main shipping lanes, Cochin is best suited to be a feeder port to Vizhinjam, that can serve hinterland cities such as Coimbatore and Bangalore.

The second issue is evident from the difference in traffic density near Cochin and that near the tip of the peninsula, where Vizhinjam is located.



A closer inspection usually reveals that none of the giant container ships or supertankers that pass close to Vizhinjam on their way to or from the Malacca Straits, Suez or the Persian Gulf pass close to Cochin as they veer off towards the East heading to or coming from Suez or the Straits of Hormuz (the Persian Gulf). Thus ships have to make a significant additional deviation to call at Vallarapadam, more so than at Colombo, Tanjung Pelapas or Vizhinjam. With each ULCV carrying up to half a Billion dollars or more of cargo, the shipping lines are loathe to divert them off the most direct route and lose time getting the cargo from the producers to the consumers.

An even closer inspection of the ships located close to Cochin usually reveals three or four dredgers of the Shipping Corporation of India hard at work dumping all of those millions of cubic meters of muck into the sea. It'd also reveal that most ships that call at the port are a fraction of the size of those that could call at Vizhinjam. The only time a VLCC/ULCC comes close to Cochin is to unload its cargo at a floating Single Point Mooring (SPM) facility located 19 kilometers off shore

Yes, a ship that can easily call at Vizhinjam has to unload 19 kilometers outside Cochin Port to avoid running aground. That says it all, doesn't it?

So, in short, Vallarpadam has been an abject failure because it was built in the wrong place. Had the container terminal been built first at Vizhinjam, it'd have been giving Colombo, Tanjung and Singapore a run for their money now, instead of meekly accepting feeder services to and from these ports. The failure of Vallarpadam only means one thing for Vizhinjam, it should have been built twenty years ago!

Now that we have put all of the propaganda against Vizhinjam to rest (at least for the logically inclined among us), there're a couple of additional points that I have long since theorized but which I have confirmed from looking at the literal traffic jam of ships off the coast of Trivandrum.

Firstly, a significant portion of the dry cargo ships passing by us are bulk carriers headed to or from Mundra, where Adani Ports operates the world's biggest coal import terminal capable of handling a mind-boggling 60 Million tons a year - almost three times as much as the whole of Cochin port can. With its draft of about 19 meters, Mundra can handle Capesize bulk carriers of 180 - 200,000 DWT. Vizhinjam can handle even bigger ships of 250,000 or even 300,000 DWT. I know that Vizhinjam has been marketed as a "clean, green" port and coal is a dirty word in more than one sense, especially among environmentalists, but I strongly believe that there exists a strong case for either a Ultra Mega Power Plant (most likely to be located in Tamilnadu of course, because of a dearth of land in Kerala) or a coal transshipment terminal or both. The coal transshipment terminal can unload 250,000+ DWT ships and load the coal on to smaller Handymax and Panamax ships that can service shallower ports like Mangalore, Cochin or Tuticorin. Coal terminals need not be "dirty", the modern ones like the EMO in Rotterdam maintain high environmental protection standards.



The same holds true for LNG, Vizhinjam is the closest port in India to emerging sources of LNG such as Australia, Mozambique and Angola, and hence the best location for an LNG terminal and LNG-fueled power plant.

And finally (yes, I am done!), with thousands of ships of various sizes going past every year, one would think that Vizhinjam might be a good location for a pit-stop for ships. Ship repair and maintenance and bunkering (refueling and provisioning ships) are two activities that come to mind. It still boggles the mind that the Kerala Government preferred the shallow harbor at Azhikkal instead of Vizhinjam or nearby Poovar for a ship repair/building yard but it seems that saner minds may finally be prevailing in this regard. Currently the yards at Singapore and Dubai dominate the ship repair business in the Indian Ocean area. Since most repair and maintenance is done when ships travel empty after delivering their cargo, Vizhinjam is well placed to repair the thousands of ships that are traveling back from the Far East and to the Gulf. One hopes that the Government will incentivize the business by offering attractive tax breaks and so on. This should also be done for bunkering services, where small tankers can refuel ships passing close to the coast.

Strangely enough, I had made many of these arguments and then some in a post written almost exactly four years ago. You can skim through it for further business areas that could be developed at Vizhinjam.

In short, I hope that all of you consider the prospects of Vizhinjam with your own eyes and minds, and try your best to dispel the unsubstantiated arguments against it by a cliche of self-proclaimed "experts" and the vested interests that back them, some closer to home than others. The proof is right out there, literally sailing past your eyes.

18 comments:

  1. Ajay, what do you think about the deal itself? If the advantages of the port are as you suggest, then why were there so few bidders? And why are the terms of the deal so much in Adani's favour?

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    1. Well, the answer is simple, there's only one credible private port developer in India that can handle a project of this magnitude and hence they were the only bidders. A transshipment terminal is incredibly complex to operate and only a handful of operators around the world can manage a project like Vizhinjam, Adani Ports has proved their mettle by developing Mundra into India's second busiest and fastest growing container port. They have strategic partnerships with both MSC and CMA CGM, two of the world's largest container lines and this is precisely what Vizhinjam needs to compete with the likes of Colombo, Tanjung and Salalah. The concession agreement signed with Adani Ports has the standard terms offered to all bidders, so nothing special was offered to them.

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    2. Just simple .. Centre wont give final nod & NOC for any bidders other than Adani.. Thats why nobody came to submit bids.. Kerala govt got no other option than accepting their bid..!

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    3. First of all, this is a State Government project and the Center has no jurisdiction on the bid process, other than the grant of VGF, which had already been done before the bids were submitted. Adani Ports is by far India's largest private port operator. The advantages that they hold in terms of their business network and their ability to plan and execute large marine projects is unmatched in India. The same holds true for PSA in Singapore or Hutchinson in Hong Kong. The Government's decision was as logical as can be.

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  2. Excellent analysis.. appreciate your efforts.

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  3. John, I need you to understand that we are living in a complex world where lot of good things do not happen in Kerala, just because there is an international lobby who always manipulate things to enable their own economic growth. Once the Vizhinjam port gets operational, the adverse impact will be on the DP world (UAE), Colombo Port (Operated by Chinese), Port of Singapore and Shanghai Port. I would like to remind you that Singapore relies on container transshipment as the major source of national revenue. Singapore doesn’t have any manufacturing units, and yet they have become one of the richest nations just because of the presence of a port. Same with Dubai, they do not have oil deposits, but the port has enabled it to become a big business hub. The same story in a different script will be applicable in the case of Shanghai port as well.
    We had international groups from China who has earlier bided for Vizhinjam project. Later they had pulled out of this stating lame reason. The writing on the wall is clear; they do not want a port to come in Vizhinjam which would adversely impact the operations of Colombo port owned by the Chinese.

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    1. Alex, the Chinese consortium was led by a shady company called Zoom which repeatedly has tried to throw the wrench into the Vizhinjam project and which has since collapsed amidst investigations into financial fraud, calling the intention behind the bid into question. Anyhow, Chinese firms are barred from bidding for port projects in India, so they'd never have got security clearance from the Government of India.

      If anyone has been trying to sabotage the Vizhinjam project, and there's no doubt there're lot of folks who are, the prime suspects are closer to home than Colombo or Dubai. The greatest sense of panic about the coming of the project has come from Kerala's second city and supposed commercial hub, Ernakulam. Despite the fact that their own port and container terminal are literally sinking into oblivion, a lot of vested interests there would rather sabotage Vizhinjam than try and make their hopeless pet project more competitive.

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  4. Thank you for putting this so beautifully Ajay.. keep up the good work..

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  5. Roads to carry the containers to mainland. Non existant

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  6. T would be good to have a summary at the top of the post covering 1. Top 3 arguments and answers. 2. Short question and answer to explain only critical details. As is, yours is a long post.

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    1. That's a good suggestion, Sunil. I will try to include a headline piece with every longish post. Thanks.

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  7. Thanks, everyone, for your readership, support and feedback. Keeps me going!

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  8. Dear Ajay
    There is no doubt that this will be one of the most successful projects in the country. People know that if you want political publicity, then you should do these kind of protests in the capital city.

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  9. Beautifully written . The only thing I would like to add is the geo-political angle. China recently sent their nuclear equipped submarines to Srilanka twice in last year to warn us. The Modi Govt with its focus on national security will never allow our foreign trade to be dependent on Srilankan ports with Chinese connection. The message was given clearly to Kerala - if you dont want project will move to Tamilnadu. Thats perhaps the reason Chnady was forced to act in the end.
    Ajay , have you also analyzed the impact of road infrastructure ( or lack of it ) on the project. I went to a resort in Poovar last year and I was appalled to see a small two lane road with Welcome board to Vizhinjam project. So does this mean there wont be any evacuation of goods by road ?

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    1. To be honest, Sajith, I don't think the Modi Government is showing any more urgency with regard to Vizhinjam than the previous UPA Governments or the Vajpayee Government did. The need to have a domestic transshipment hub for a nation with significant EXIM volumes is not new. This was evident decades ago, yet successive Central Governments have shown scant regard for the project. Despite what Gadkari was purported to have said about the project moving to Colachel, this was never a Central Government project anyways so he has no jurisdiction to make that threat (other than the VGF worth Rs 800 Crores or roughly 12% of the total project cost, that was granted by New Delhi) and Colachel is in no way comparable to Vizhinjam as a location for a deep water port because of the difference in under-sea topography there.

      With respect to the road infrastructure, the project has direct connectivity to the NH-66 which is now being widened and will feed into the NH system in Tamil Nadu where widening is also set to begin on the final missing piece of the 4/6 lane puzzle - the Kerala/TN Border - Kanyakumari stretch. Rail connectivity again will be southwards because the lines north of Trivandrum are already highly congested. However, rail connectivity is likely to become critical only if Adani Ports decides to build a bulk import terminal at Vizhinjam, which I hope it does, and not so much for a container transshipment facility which will see minimal ingress/egress of containers.

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Thanks for your comment, I will take a look at it and put it up at the earliest.