New Indian Port No Threat to Sri Lanka

28th February 2010, www.nation.lk, By Santhush Fernando and Indika Sakalasooriya

Although there had been concerns raised by several quarters in the local shipping industry regarding a possible threat to the Colombo Port posed by the new Cochin International Container Transhipment Terminal (ICTT) commencing operations by end 2010, local shipping industry experts and analysts opine otherwise.

The world’s third-largest container terminal operator- DP World announced recently that the first phase of the LKR 75bn Vallarpadam terminal project will be completed by June and is expected to be commissioned by the end of 2010.

With the need to use international trans-shipment ports diminishing, some shipping industrialists fear that trade from India (which makes up nearly 75 percent of Colombo’s volumes) would drop drastically resulting in the Colombo Port losing its main revenue source.

However, speaking to The Nation Economist, a spokesperson for the Ceylon Association of Ship’ Agents (CASA) said that the Cochin port did not pose a threat to Sri Lanka as India’s growth potential was tremendous.

“We don’t consider it as a threat. India keeps on growing and Indian ports cannot handle current volumes let alone future growth in volumes projected. When you take current productivity levels of Indian ports, they don’t pose a threat to us, not for at least the next ten to fifteen years,”

Asked whether reduced prices of the Cochin Port would have any bearing on Colombo’s prices, he said that prices depended solely on the operator’s choice and a port’s productivity.

“Prices are left for operators to decide. The price depends on the stability of a country and a port’s productivity. There are lightening strikes in ports all over India. However, there will be competition. Even if lines pull out from Sri Lanka they will come back. Furthermore, with the Hambantota Port coming into operation, Sri Lanka can widen the scope of its shipping sector to include bulk and bunkering operations.

He added that the Chairman of India’s Port Authority (SLPA), who recently visited Sri Lanka, too had confirmed that the new port would not pose a threat as India’s volume projections showed immense potential which its domestic ports were unable to handle.
Another top official from the Sri Lanka Ports Authority (SLPA) also opined that given the geopolitical situation in Kerala where Cochin is located, there won’t be any substantial impact to the terminal operations in Sri Lanka.

A source at South Asian Gateway Terminal, Sri Lanka’s only privately owned terminal operator, said that they too are confident that ICTT is unlikely to pose any threat as India’s containerised trade volumes are increasing dramatically, evidently beyond their capacity.

However, an analyst, who also preferred anonymity, said that around 75 percent of the cargo handled by these two companies are transhipments from India.
“With the ICTT coming into operation there can be an impact in the short term. But with business activities in India growing at such a pace, even the ICTT may not be able to meet up the capacity,” she added.

Official statistics showed that container throughput at India’s 11 major ports grew 19.03 percent year-on-year for the fiscal year 2008. The 11 major ports - Mumbai, Kolkata, Paradip, Vizag, Ennore, Chennai, Tuticorin, Kochi, Mangalore, Mormugao and Kandla handled 6.60 million TEUs in the 12 months up to March 2008. If the current growth rate of 19% is kept to India’s container throughput it is estimated to hit some 21 million TEUs per year by 2016, an authoritative international website said (PortWorld.com)

According to another report, ‘container cargo represents only about 30% by value of India’s external trade-pale when compared with the global containerised cargo average of 70-75%.’