The Hindu Business Line : 3 east coast ports told to cut charges for container ships — Bid to wean away traffic from Colombo port

THE Shipping Ministry has directed the major ports of Tuticorin, Chennai and Cochin to cut their vessel-related charges and bring it on a par with the rates prevailing at Colombo port, a move that is expected to trigger a rate war between the three east coast ports and the neighbouring Colombo port which acts as one of the major transhipment hub ports for India's container traffic.

"The reduced vessel-related charges would be applicable only for container ships and that, too, for mainline container vessels of more than 1,800 twenty-foot equivalent units (TEUs) capacity, with international ports of call beyond Singapore or Port Klang on the East and Suez Canal/Cape Town on the West calling at Tuticorin, Chennai and Cochin ports," the order issued by the Ministry on March 3 stated.

The board of trustees of the three respective major port trusts will now have to work out the exact quantum of reduction based on their existing tariffs to bring the rates on a par with Colombo.

The Ministry order aims to wean away India's transhipment traffic from Colombo to the three east coast ports. It is reckoned that 40 per cent of the total container traffic handled by Colombo port is transhipped from India. Out of the 1.7 million TEUs handled by Colombo port, 40 per cent or roughly 750,000-800,000 TEUs is only from India. Apart from Colombo port, India's container cargo is also transhipped from Singapore, Dubai and Salalah Ports to final destinations.

Transhipment results in delay in cargoes reaching their destinations as well as extra costs, eroding India's competitiveness in global trade.

India's Government-owned major ports together handled 3.9 million TEUs during 2003-04, out of which the premier container port, the Jawaharlal Nehru Port Trust (JNPT), accounted for more than 2 million TEUs. As per official estimates, 80 per cent of JNPT's container traffic is shipped directly to destinations while the remaining 20 per cent cargo is again transhipped through Colombo, Dubai, Singapore and Salalah ports.

"The vessel-related charges at Tuticorin, Chennai and Cochin is being cut as Colombo poses the maximum competition to these ports in terms of container traffic," a Ministry official said. The prevailing vessel-related charges at the three east coast ports are very high compared with Colombo. For instance at Chennai port, it is almost double that at Colombo port.

The Ministry says in the short term, the reduction in rates may lead to some shortage of revenue. "But later, it would encourage more and more shipping lines to call at these ports. It is expected that the cost to trade and industry will come down both in terms of reduced needs for transhipment and less ocean freight from Indian ports to destination ports," the official explained.

The steep cut in vessel-related charges, estimated in the range of 75-80 per cent, at each of the three ports will benefit the private container terminals run by P&O Ports at Chennai Port (which has been identified by the Government as a hub port on the east coast) and PSA-SICAL at Tuticorin Port to attract more mainline container vessels to their terminals and beef up traffic. Further, it will also help the international container transhipment terminal being planned at Cochin port with private investments.

But Colombo Port is expected to retaliate by further reducing its costs. "Don't underestimate Colombo, it will fight back," a private terminal operator told Business Line.

The route to Colombo

THE main architect behind the Ministry's decision to lower the vessel-related charges at the three ports to the level of Colombo feels that efficiency, tariffs and the route were the prime reasons why shipping lines preferred Colombo to the Indian ports.

"On the Colombo route, if you are carrying most of the boxes across to the east, any detour that you make means additional time and money. Unless your rates are such that this additional detour costs can be absorbed, it makes no sense for a shipping line to call at either Tuticorin, Chennai or Cochin ports," the Shipping Secretary, Mr D.T. Joseph, told Business Line.

"Actually, the rates should be lower than Colombo and it should absorb the detouring costs. We will move slowly, slowly in this direction," he disclosed.