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.

24

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.

25