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INTRODUCTION:
It is proposed to study the Costs Of Financing Foreign Currency Versus Indian rupee
term loan to finance the infrastructure project and to ascertain the cheapest mode of financing
for the project.
THEORITICAL BACKGROUND OF THE STUDY:
The rate of interest varies from currency to currency and also the fluctuations in
foreign currency affects the costs of the loan. Hence study is intended to ascertain the costs of
both foreign currency as well as Indian currency loans.
REVIEW OF LITERATURE:
Port Trust financial statement for last 5 years
Administration Reports
Bank interest rates
STATEMENT OF THE PROBLEM:
Port Trust intended to avail the long term loan to finance the infrastructure projects.
OBJECTIVES OF THE STUDY:
Study on Cross Currency Relationship
Study on interest rate of US Market and Japanese Yen Market from those select which
market is better for raising long term loans
Comparing the cost effectiveness of debt servicing in Indian Market, Japanese Yen
Market and US Market.
SCOPE OF THE STUDY:
1
Tuticorin Port Trust is having a plan to raise the finance for the infrastructure project.
The study helps to understand the cheapest mode of financing for the project. In order to
know about the cheapest market the analysis is made.
RESEARCH METHODOLOGY:
DEFINITION :
The research methodology is a way to solve the research problems systematically. In
this study various steps are generally adopted by a researcher in studying the research
problem along with a logic behind them. It is necessary for the researcher to know not only
the research but also methodology.
RESEARCH DESIGN :
Research design is a plan of study for researcher to solve the problem. It is the plan
for collection and analysis of data.
SOURCE OF DATA:
Secondary Data
METHOD OF DATA COLLECTION:
The secondary data was collected from the records of the organization, books, relating
to financial management and web site.
LIMITATIONS OF THE STUDY:
2
The study focuses only on Tuticorin Port Trust . Therefore the result of this research
may not be applicable to any other Organization.
ORGANIZATION PROFILE
HISTORY OF TUTICORIN PORT :
In Literature, the earliest mention has been made in 88 AD in Greek work "Periuplus of
the Erythrean Sea". In AD 124, the earliest reference was made by Ptolemy who has observed -
"Country of Kareoi, in the Kolkhic Gulf, where there is a pearl fishery, Sosikourai and Kolkhoi,
and emporium at the mouth of the river Solan". There is little doubt that Ptolemy's Sosikuorai is
no other place than Tuticorin. From AD 200 to AD 1000, no records pertaining to Tuticorin are
available. However, the Tamil Literature of the period, Thevaram, Seevaha Chinthamani and
Periyapuranam mention the pearls but ignore the source.
James Harnell in his report to the Govt. of Madras has highlighted the Indian Pearl
Fisheries of the Gulf of Mannar discussed about Tuticorin. Although in Tamilnadu, there is a
mention of Ports like Korkai, Puhar etc. Tamil literature and historical records have highlighted
the Pearl Fisheries of Tuticorin and Trading in Pearls. The 7th to 9th Century AD were ruled by
Pandya Kings and 10 to 12 Century AD it was ruled by Chola Kings. There is a mention that
there was a well guarded and natural Harbor where ships could anchor in safety in Tuticorin.
Portuguese, Dutch and British ruled India in different time frame. Portuguese sailed into
Tuticorin in 1532. In 1649, Dutch captured Tuticorin. Many European visitors particularly
English travelers have meticulously recorded their impression of Tuticorin in 17th Century. The
impression recorded by Philip Baldaeus, an English missionary, who visited Tuticorin in 1675
are graphic and valuable. The lucrative pearl fishery that flourished under the Dutch is
vouchsafed by Jean De Lacome. The English East India Company took over the administration
of Tuticorin and its other dependent cities like Kayalpattinam, Punnakayal, Manapad etc. on the
3
1st June 1825.
HISTORY OF OLD PORT :
In 1842, a light house was constructed in Tuticorin. Construction of a light house is
one of the important milestone for development of Tuticorin harbor. The planned development
of Tuticorin started in 1868. A pier at a cost of rs.1,200/- was constructed initially. In 1873, earl
Buckingham, during his visit to Tuticorin ordered for strengthening of the pier. In 1887, the
100m pier was doubled. Subsequently, rails were laid to link Tuticorin port with railway station.
In 1894, wooden piers were replaced by steel structure. In 1895, reclamation of the area was
undertaken at a cost of rs.2/- lakhs and a port was built. In 1899, the railway lines were
extended upto the pier in Tuticorin port.
HISTORY OF NEW PORT:
The proposal to construct a deep sea Harbor at Tuticorin was first thought of in 1914, though it
was not pursued due to the outbreak of war. The first proposal was by Sir Wolfe Lyster Barry
and Partners to examine the Prospects of development of the Port. This was followed by
Bristow project in 1920 and Palmer Committee Scheme. It was dropped due to financial crisis.
In 1924, Tuticorin Port Trust Act was passed by the Madras Legislature. In 1929, Sir Bristow
prepared the estimate at Rs.120 lakhs for his scheme and Rs.160 lakhs for Palmer Committee
Scheme. Due to financial constraints again the scheme was abandoned.
In 1954, the Govt. Of India appointed Chatterjee to examine development of Tuticorin
Port. He gave a proposal at an estimated cost of Rs.4.5 crores. In the meanwhile, a committee
was constituted under the Chairmanship of Sir Ramasamy Mudaliar to examine linking up the
development of Tuticorin with the feasibility of connecting the Palk Strait with the Gulf of
Mannar at a cost of Rs.9.62 crores. In 1956, Tuticorin Port Development Council was
constituted consisting of local leaders, business people as members. The committee appraised
Pandit Jawaharlal Nehru and Chairman of the Planning Commission as well as Central and
4
State leaders. Pandit Nehru after patient hearing, caused the Tuticorin Harbor Project at a cost
of Rs.10.27 crores for a 30 ft. Harbor with four alongside berths.
Based on that, M/s.Madhurani and Chacko Committee recommended for development
of Tuticorin. In 1964, Prime Minister Lal Bahadur Shastri inaugurated the construction work of
New Port. On July 11, 1974 Tuticorin Port was declared as a Major Port. In 1974, oil mooring
was installed. In 1975, VOC Berth No.1 & 2 were commissioned and December 1976, VOC
Berth No.3 & 4 were commissioned. The next important landmark was the integration of the
erstwhile anchorage Port and Tuticorin New Harbor into an integrated Port Trust under the
Major Port Trusts Act, 1963 w.e.f. 1st April, 1979. Subsequently, a number of developmental
activities took place matching the spectacular increase in the rate of growth of Traffic. In
11.02.2011, Tuticorin Port was renamed as V.O. Chidambaranar Port by the Central
Government in Honour of the Legendary Freedom Fighter and Patriot of Tuticorin Shri. V.O.
Chidambaranar.
MANAGEMENT:
V.O. Chidambaranar Port Trust is a body corporate constituted under Chapter II, Section
3(1) of the Major Port Trust Act 1963 by the Central Government. The Board of Trustees
appointed by the Ministry of Shipping, Government of India consists of Chairman, Deputy
Chairman and seventeen Trustees. It functions under the administrative control of the Ministry
of Shipping, Government of India.
VISION:
To be the preferred Indian Port
MISSION:
5
Chairman
Deputy Chairman
Mechanical Engineering Department
Civil Engineering Department
Finance Department
Administration Department
Medical Department
Marine Department
Traffic Department
Chief Mechanical
Engineer
Chief Engineer
Financial Adviser & Chief Accounts
Officer
Secretary Chief Medical Officer
Deputy Conservator
Traffic Manager
To provide efficient Seaport and Logistics services of the best value to our customers.
OUR VALUES:
Total Satisfaction of customer
Partnership with stakeholders
Commitment to Quality and Team work
Fairness accountability and Transparency in work
Consideration for social and natural environment
Value addition through Productivity , Safety and Security
ORGANISATION STRUCTURE
DETAILS OF DEPARTMENTS
6
Chairman
Deputy Chairman
FA&CAO
DC
HM
PILOT
ME
AS
FA&SO
Sr Se Asst
SB
OPIC
TM
DTM
DTM DTM
CME
AS
JAO
SE
EE
AEE
AE
EE-MM
AE
AEE
Dy FA&CAO
AO
JAO
CAO
JCAO
CE
SE SE
EE EE
AEE
AE
SECY
DS
AS
DD
SA
DPO
DPA
MR
ISOCELL
CORE GROUP
ACDITOR
ORGANISATION CHART OF TPT
7
Financial Adviser & Chief Accounts Officer
Deputy F.A. & C.A.O.
AO Revenue
P.A. to HOD
Junior Stenographer
AO Pay Bill
AO Works
JAO On-line /
Investment
AO Materials
Head clerk
General Section
AO Pension
CAO Cost
JAO System Audit
AO On-line & ISO
AO Cash
JAO Estt
AO IAU
JAO Revenue
II
JAO Revenue
JAO Pay
JAO Works
JAO Materials
Head Clerk
Pension
JAO Budget
JAO Cash
Internal Audit
JAO Costing
FINANCE DEPARTMENT
ORGANISATION CHART
1. FA & CAO (Financial Advisor and Chief Accounts Officer)
8
Overall control of Accounts Departments.
2. Dy. FA & CAO (Deputy Financial Advisor and Chief Accounts Officer)
To Assist the FA & CAO in all financial matters.
3. CAO (Cost Accounts Officer)
Preparation of scale of rate and budget for various services.
4. JCAO (Junior Cost Accounts Officer)
Assisting the CAO in all his works.
5. AO (Accounts Officer)
Processing of proposals and settlement of bills.
6. JAO (Junior Accounts Officer)
Initial scrutiny of proposals and bills.
FUNCTIONS OF FINANCE DEPARTMENT :
The Finance Department was started with effect from 1st April 1973 headed by the
Financial Advisor & Chief Accounts Officer. The EDP (Electronic Data Processing) center
formed in September 1980. It is functioning under the Financial Advisor and Chief Accounts
Officer.
The Finance Department Comprises of the following sections.
1. Accounts, Audit and Budget Section 2. Cash, 3. Costing, 4. Pension, 5. Advance, 6. Payable,
7. Investment and corporate Tax, 8. Revenue – I, 9. Revenue – II, 10. Materials, 11. Work
section, 12. Establishment section, 13. General, 14. Internal Audit, 15. Zone-B Accounts.
FUNCTIONS:
Maintaining the accounts of the Board
Preparation of Budget estimate
Preparation of Administration Report
Scrutiny of work estimates and maintenance of work accounts
Cash management and investments of Trust’s money
9
Payment of bills for works done by controctors and supply of stores
Payment of monthly salary and personel claims of officers, staff and workers
Repayment of loan
Payment of professional Tax
Preparation of cost statement
Preparation of cost sheet
Calculation of machine hour rate
Review of memorandum of association
Review of performance budget
Granting the following advances
House building advance
Conveyance
Marriage Advance
Tour Advance
Leave travel, tour advances
Quarterly review memorandum of understanding
Preparation of monthly and annual report
Receipt an accounting of cheques / demand drafts received from departments rendering
services
Checking of documents and vessel accounts
Settlement of accounts, billing and refunds
DUTIES AND RESPONSIBILITIES:
Planning and mobilizing and monetary resource for meeting expenditure of the board.
Planning the investment of the surplus funds of the port.
Preparing the port of schedules of employees.
10
Examining the feasibility and economic viability of major projects.
Examining commenting upon involving financial implications.
Preparation of Final accounts.
Managing the working capital.
Increasing the liquidity of cash.
Initiating, examining proposals for revision of tariff whenever considered necessary.
Ensuring that the revenue due to the port by way of providing services are collected
correctly and promptly.
SOURCES OF INCOME:
The TPT earns from the following main charges levied on cargo and vessels.
Pilotage fees
Port dues
Warf age
Demurrage
Cranage charges
Rental Charges
Railway service charges
Towage and mooring charges
Bunkering charges
Interest on Investment
Profit on sale of obsolete or worn out assets etc
NATURE OF EXPENSES :
11
The Trust Board incures on the following expenses
Opening cargo handling equipments
Port security
Interest on loan
Stores and stationary
Water and Electricity
Maintenance and repair
Administrative expenses
PRINCIPAL COMMODITIES:
IMPORT :
POL Products, phosphoric Acid, Liquid Ammonia, EDC, Vinyl chloride Monomer, plan
oil, LPG, Fertilizer and Fertilizer raw materials, coal and coke, Raw cashew, Timber logs,
pulses, copper concentrate, soda Ash, Iron pellets and Lime stone.
EXPORT :
Salt, limonite sand, Garnet sand, Wheat, Rice, Sugar, Cement, Construction Materials, Granite
Stone, Feldspar, caustic soda lye.
MARKET POTENTIAL:
Thanjavur Spinning Mill Limited
Coimbatore Polytex Private Limited
United Granites (P) Limited
Sterlite Industries (India) Limited
M.S Exports Chennai
Seshasayee Paper & Boards Limited Chennai
Sri Jayajothi & Co Limited
12
Sree Ayyanar Spinning
Sudhan Spinning Mills Private
Craftsman Automation Private Limited
ADVANTAGES:
Strategically located very close to the East-West International Sea- route.
Well connected by broad gauge rail and road with all Major cities and all ICDs.
Commissioning of Berth No.7 by the Port of Singapore Authority as a container
Terminal with modern equipment and State of Art Technology.
12.80m draught.
Round the clock operations.
Night navigations.
Adequate covered and vast open storage area.
Open lands in the Port area suited for locating Port based industries.
DESCRIPTION OF VARIOUS FUNCTIONAL AREAS
BRIEF DESCRIPTION OF SERVICES OFFERED BY THE PORT:
The main services offered by the Port are:
1) VESSEL RELATED SERVICES:
13
FUTURE PLANS
Tug Services
Berths
Pilotage Services
VHF Services (Communication Services)
2) CARGO RELATED SERVICES:
Admission of Cargo
Storage of Cargo
Handling of Cargo
Transit Shed
Warehouses
Open storage area
Wharf Cranes
Top Life Trucks
3)MISCELLANEOUS SERVICES:
Settlement of Bills
Electrical supply
Fire services
Read
THE FOLLOWING ARE THE SERVICES RENDERED BY VARIOUS
DEPARTMENTS:
1) TRAFFIC DEPARTMENT:
Berthing plan and monitoring performance at the Berthing cell
Processing of applications and collection of Cargo related charges at Central
14
Documentation Centre
Admission and delivery of Cargo at green Gate
Provision of open and covered space for storage of Cargo
Berth operations at various Berths , Wharves and Jetties
Providing equipment and space for container handling and storage
Co-ordination with shipping control
Allotment of open area , Issue of licenses at TM’s office
Documentation and finalization of vessel accounts at the documentation unit in
the office of the ATM
Compilation and analysis of statistical data in the SRO’s office
2) MARINE DEPARTMENT:
Vessel Related Charges
Pilotage
Operation of Floating crafts
Provision of tug assistance for towing
Fire fighting
Pollution control
Collection of Meteorological Data
3) MECHANICAL ENGINEERING DEPARTMENT:
Operation and maintenance of mechanical equipments used for cargo handling
and container handling
Supply of power to refer container and dock area
Uninterrupted power supply to the Port area
Analysis of performance of various mechanical/electrical appliances
Custody of stores and disposal of the surplus and un-serviceable plant and stores
of all the departments
Maintenance of floating crafts
15
Hiring of Tugs , water barges and other communication equipments
Maintenance of Telephone exchange and other communication equipments
Maintenance of Fixed fire fighting system
4) MEDICAL DEPARTMENT:
Provides medical treatment to all the employees and dependents, retired
employees and their spouses
Emergency services is related round the clock in the casualty blocks of the Port
Hospital even to general public other than the employee of the port , apart from
the regular outpatients timings of the hospital
All possible surgeries are done by the specialists in the fully air conditioned O.T
All normal and complicated deliveries are also conducted round the clock in port
hospital
Medical facilities are also given to SCL , Dock Safety , Educational Agency ,
CISF , Harbour Post Office , TNMA , RAO , CHLP , Southern Railway
Employees
The dispensary wing of the Medical Department , situated in town area ,cater to
the medical needs of the port employees and dependents and retired employees
and spouses , residing in Tuticorin Town
First Aid Services provided at Voc wharf and Additional Berth
5)CIVIL ENGINEERING DEPARTMENT:
Maintenance of wharf structures
Maintenance of wharf areas
Maintenance of warehouses and transit sheds
Maintenance of roads
Marine Survey
Maintenance of all buildings (Residential and Non-residential ),roads in Harbour
16
Estate
Providing infrastructure facilities (Construction of buildings , berths , dredging ,
laying of roads etc.,)
6)FINANCE DEPARTMENT’S PLAN COVER:
Receipt and accounting of cheques/demands drafts received from Departments
rendering services
Checking of documents relating to vessel related services , cargo related services
and other services
Settlement of Bills
Preparation of Budget and control of expenditure
7)ADMINISTRATION DEPARTMENT’S PLAN COVER:
Conducting Board Meetings and HODs’ meeting
Looking after the Establishment matters of the all Officers of Port
Ministerial Staff Recruitment ,Promotion and Establishment matters
Follow up of Legal and Disciplinary proceedings
Public Relations , Industrial Relations and Public Grievances
Framing of Recruitment Rules and Policy Decisions
Co-ordinating with other Departments in Ministry/other Official correspondence
Hindi Cell is functioning under Administration Department
Training of personnel
Central Industrial Security Force Correspondence/IPA correspondence
8)EDP PLAN COVER:
Providing EDP support to all Departments
17
QUALITY MANAGEMENT SYSTEM (ISO 9001:2008):
V.O.Chidambaranar Port Trust has the proud record of adhering to International
Standards of Infrastructure and Operation. It was the first Major Port in India to implement a
Quality Management System when the concept of ISO was new in the Port sector. Its efforts
were rewarded in 1996 when accreditation to the then ISO 9002:1994 Standard. The Quality
Management System practiced in the Port assiduously since 1996 has helped in orientation of its
procedures, processes and policies towards meeting the twin objectives of streamlining its
functioning to achieve optimal customer satisfaction. The Port was certified adhering to the
revised standard in April, 2003 and subsequently under ISO 9001:2008 in April, 2009.
QUALITY POLICY:
"To ensure customer satisfaction through continual improvement of facilities and services
for maritime trade at optimum cost"
ENVIRONMENTAL MANAGEMENT SYSTEM (ISO 14001 : 2004):
The Port, as part of its commitment to fulfill its obligations to the Society on
Environmental Management, implemented an Environmental Management System under ISO
14001: 2004 Standard from July, 2003.
ENVIRONMENTAL POLICY:
“V.O. Chidambaranar Port is committed to Environmental safety in its activities through
implementation of Environmental management System for continual improvement & Legal
Compliance” The Port's Environmental Policy conveys its commitment to introduce and
continually improve an efficient and sustainable Environmental System conforming to legal
requirement, promoting maritime trade with sustainable pollution control and reduction of waste
and creation of environmental awareness in the Port community.
18
ISPS CODE COMPLIANCE:
"V.O.Chidambaranar Port Trust is committed to provide a safe and secure working
environment to all its employees, Port Users and ships and its personnel; this will be achieved by
establishing and maintaining the required security measures to prevent unlawful acts against
people, cargo and marine assets".
PORT ORGANIZATION IN INDIA:
Ports are meant to provide sea-borne vessels some basic services such as dock, harbour
or berth facilities and landing facilities for the passangers and cargo. Apart from this ports
provide the basic services in the form of cranes, warehouses and labour for cargo handling.
The main activities of the port relate to
Maintenance of port approaches, navigable channels and along side berths,
dredging, conservancy, hydrographic surveys.
Light houses and light vessels under the port.
Pilotage, towage, berthing & unberthing of visiting ships.
Handling ware housing & transportation of goods in port area.
Civil, mechanical & electrical engineering and Maintenance of harbour crafts &
plants.
Fire- fighting & fumigation.
Storage
Medical, welfare & housing services.
Management of port properties & estates.
STATE WISE NUMBER OF PORTS
WEST COAST
19
Gujarat (40 Ports)
Maharastra (53 Ports)
Goa (5 Ports)
Daman & Diu Port (2 Ports)
Karnataka (10 Ports)
Kerla (13 Ports)
Lakshadweep Islands (10 Ports)
EAST COAST
Tamilnadu (15 Ports)
Pondichery (1 Port)
Andhra Pradesh (12 Ports)
Orissa (2 Ports)
West Bengal (1 Port)
Andaman & Nicobar Islands (23 Ports)
THE ASIAN AND GLOBAL SCENARIO
World trade has shown a relentless spiral upwards ,especially in the new economy In 2002 the
world seaborne trade stood at 5.9 Billion tonne of goods loaded worth nearly 6 Trillion US$ .The
total value of World merchandise export was 7.3 Trillion US$ in 2003(World trade Report 2004)
..
The cargo volume is estimated to be increasing at 3.7% and containerization at 7%.
(source :World watch Institute). 90% of World cargo is now containerized.
Asia-North America trade is expected to grow at the rate of 5.1% per annum over the next
decade for the West bound trade while the growth rate for the East bound trade is expected to
grow at 5.7% per annum .In the Asia-Europe trade East bound and West bound trade is expected
20
to grow at the rate of 7.7% per annum upto 2011.As far as Intra-Asia trade is concerned the
ESCAP study have found that the rate of growth will be at 7.6% per annum upto 2011.
Asian countries are significant world players in many sectors of maritime transport .They
account for about half of the crews, two thirds of global port operators 83% of container ship
building and 99% of demolition .28 of worlds largest liner shipping companies are based in Asia.
Containerized trade of South and East Asian countries is forecasted to expand at an annula rate
of 11% from 2005 fuelled by the strong Intra-Asian trade ,as well as Chinese exports to North
America and Europe. Container Transshipment through existing and also new Hub ports in Asia
has continued to expand. In 2004 the worlds six largest container ports and 20 of the worlds top
30 were located in Asia.
According to Korea Maritime Institute the Chinese container traffic will increase to 130 million
TEUs by 2011 and in all probability Shanghai will emerge as the largest port in the world.
According to ESCAP study the total volume of containers transshipped within the ESCAP
region will increase from the present 47 million TEUs to 64 million TEUs by 2011 and the share
of transshipment in total port volume will increase to 30% in 2011.This study has also found that
there is scope for 9 global scale transshipment ports to come up in ESCAP region – each
handling in excess of 3 million TEU of transshipment each year.
Eurogate terminal ,Germany estimates that future will see 10 deepwater ports ,three of which
will be located in Asia and one in middle-east .
At Asian end ,following ports are seriously planning for this size
.1.Singapore 2.Hongkong 3. ? Can it be Vizhinjam .
Where do Indian Container Ports get placed in comparison with the top thirty Container Ports in
2004? The only Indian container port namely the JN Port in New Mumbai which appeared at the
30th position in 2003 does not figure in top thirty container ports in 2004 despite handling 2.36
million TEUs registering a growth of 8.62% over 2003.
It has, however, managed to get placed at the 31st position ahead of Salalah in Oman (2.28
million TEUs) and Colombo in Sri Lanka (2.22 million TEUs). Honkong and Singapore have
maintained the world’s No: 1 and No: 2 positions by handling 21.93 million TEUs and 20.60
21
million TEUs registering a growth of 7.3% and 13.8% respectively.
The Chinese ports of Shanghai and Shenzhen come to the 3rd and 4th positions by handling 14.5
million and 13.65 million TEUs respectively by registering a growth of 29%. Bussan in South
Korea and Kaochsiung in Taiwan maintained the 5th and 6th positions by handling 11.4 million
and 9.7 million TEUs respectively. Rotterdam in Netherlands, Los Angeles in the US and
Hamburg in Germany occupied the 7th, 8th and 9th positions respectively.
Dubai Ports Authority moved up to the 10th position displacing Antwerp in Belgium with an
impressive 24.8% rise to 6.42 million TEUs (Source: Containerization International, London).
The performance figures of the top ten container ports reveal that the top six container ports are
from the Asian region. The eight Chinese ports among the top 30 container ports together
handled about 70 million TEUs-about 35% of 196 million TEUs handled by all the top 30
container ports. According to the Korea Maritime Institute Chinese container traffic will increase
to 130 million TEUs by 2011 and in all probability Shanghai will emerge as the world’s largest
container port by 2011.
An analysis of the modern trends in containerization in India reveals that the annual average rate
of growth of containerization for the whole period from 1990-1999 was 13.7%. In the first five
years from 2000-2004 the growth rate worked out to 13.91%. India’s container traffic which was
3.90 million TEUs in 2003-2004 is likely to rise to 4.5 million TEUs in 2004-2005 including the
traffic handled in Mundra and Pipavav ports which represent an increase of about 15.38%.
The Japan International Consulting Agency (JICA) has assumed a growth rate of 16% and
estimated that India’s box traffic would reach 10 million TEUs by 2010 with the western region
accounting for 70% of the container traffic. Since a 7 to 8% growth in India’s GDP is now
considered achievable for the next ten years a 14% growth in container traffic annually could be
expected for the period 2005-2015. Based on such assumptions India’s container traffic will rise
to 8.66 million TEUs by 2010 and 16.68 million TEUs in 2015.
Does India have enough capacity to handle the projected traffic? The current capacity available
22
at Indian major ports for container traffic is estimated to be around 4 million TEUs. The traffic
handled in the current year has already exceeded the available capacity and this was the main
reason why most container terminals at Indian major ports experienced congestion. The two
additional terminals to be created at the JN Port, the new off-shore terminal being planned in
Mumbai, expansion of the Chennai, Tuticorin and Vishakapatnam terminals, the new terminals
to come up in Kandla, Cochin etc… in the next five years can at best add another 4 million
TEUs. This should suggest that by 2010 while the traffic will reach 8.66 million TEUs the
capacity is likely to be only 8 million TEUs indicating a short fall. One of the conclusions of the
latest port sector report 2004 of Drewry Shipping Consultants, London is that in the Asian region
demand will outstrip supply within five years unless additional projects are brought to fruition.
An ESCAP study on port development strategies has concluded that in order to handle the
anticipated port container traffic in 2011 the south Asian region alone will require about 40
berths.
The most significant technological development in container shipping is the emergence of large-
sized ships. It has two significant effects on international shipping since ship size not only
determines competitive power in the shipping industry but also becomes a major criterion in
determining the size of a port. Many competent and experienced analysts believed that once the
container ship size reached 10,000 TEUs diseconomies of scale would start operating as two
engines would be required to power such huge ships. But, with new developments in engine
design, single engine vessels of 10,000 TEU and above can now be built. The Chinese shipping
line COSCO has ordered on Hyundai Heavy Industries four super-post-panamax ships of 10,000
TEU-each costing about US $ 127 million to be delivered in 2008.
Recent reports suggest that A P Moller-Maersk Odense shipyard in Denmark has plans to build
eight super-post-panamax ships of 13,000 TEU capacity with the new K98 engine. About 123
ships with capacity 8000 Drewry Shipping Consultants have reported that when compared to a
4,000 TEU ship a 10,000 TEU ship results in 37% operating cost savings. A recent ESCAP
study has revealed that by 2011 a total of 490 very large container vessels will be in service
globally out of which approximately 130 will be of 10,000 TEU and above. It has become
increasingly clear now that there are no insurmountable technical barriers to the future increase
23
in size of container ships. Concept designs already exist for ships up to 18,000 TEUs. The limits
to grow, if there are any, will be market driven.
The advent of larger container ships has made large ships the key issue in port development.
What are its implications? The new transshipment container terminal in Vallarpadam is designed
to accommodate container ships up to 8,000 TEU capacity drawing a draught not exceeding 14.5
m. By 2010-11 when Cochin terminal becomes fully operational super-post-panamax vessels of
8,000-15,000 TEU capacity will have already begun their service on the main shipping routes
thereby reducing Cochin terminal’s competitive advantage. India will need a mega container
transshipment terminal in order to capture the transshipment business. For example, 15,000 TEU
vessels would require special berths that would permit them to be worked from both sides. In
addition, mega hubs need a depth of 18-20 m. In such a scenario, Cochin container terminal can
function as a regional logistics and transshipment hub for vessels up to 8,000 TEUs and
Vizhinjam, near Thiruvananthapuram could emerge holding excellent potential to be developed
as a mega transshipment hub for vessels in the range of 8,000-15,000 TEUs.
But this can naturally give rise to a question-will there be enough traffic volumes to support a
regional logistics and transshipment hub in Cochin and a mega transshipment hub in Vizhinjam?
Can two transshipment terminals co-exist and function within a distance of about 200 Kms from
each other? A recent ESCAP study has found that the total volume of containers transshipped
within the ESCAP region will increase from 47 million TEUs in 2006 to 64 million TEUs by
2011 and the share of transshipment in total port volume will increase to 30% in 2011. This
study has also found that there is scope for nine global scale transshipment ports to come up in
the ESCAP region-each handling in excess of 3 million TEUs of transshipment traffic per year.
The mega transshipment port of Tanjung Pelepas, the 16th largest in the world has handled 4
million TEUs. This port is situated only about 150 Kms from the 13th largest port namely Port
Klang in Malaysia which has also handled 5.2 million TEUs. The Chinese port of Ningbo, the
17th largest in the world is situated only 200 Kms away from Shanghai. The new South Korean
transshipment port of Gwangyang is situated only 170 Kms from the 5th largest port of Bussan.
The scale and the volume of container transshipment traffic in the region should suggest that
there is enough room for ports to co-exist and function even in close proximity.
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The Malaysian transshipment port of Tanjung Pelepas which was hardly known in international
shipping in the year 2000 will transform itself into the largest container port in Malaysia in 2005
weathering the increasingly tough competition with Singapore. While Tanjung Pelepas offers 19
m draught alongside Vizhinjam could offer even 20m draught. Endowed with a favorable
geographical location, natural depth of water, green field site and the absence of a regulatory and
bureaucratic regime Vizhinjam can present itself as an excellent site for a mega container
transshipment terminal.
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