Mundra benefiting the most from India’s transshipment reform

      11/13/2018

Ocean carriers to/from India say their transshipment handling increased 20 percent in October versus September, thanks to the cabotage relaxation, and the non-government owned port of Mundra has benefited particularly well, due mainly to its price advantages regarding major public counterparts.

India's Container Shipping Lines Association (CSLA) — representing foreign carriers — has estimated October incremental transshipment gains at 56,257 TEU, compared with 47,000 TEU in September.

That projected volume is broken down as follows: laden containers — 38,955 TEU, or 69 percent; and empty containers — 17,302 TEU, or 31 percent.

Further, the group believes member lines would have, in the normal course of events (meaning with cabotage restrictions), opted to transship those containers via foreign hubs as follows: Colombo (Sri Lanka) — 23,065 TEU (41 percent); Singapore — 12,376 TEU (22 percent); port Klang (Malaysia) — 6,188 TEU (11 percent); and others — 14,627 TEU (26 percent).

With the cabotage relaxation, implemented May 21, foreign-flag carriers can transport laden export/import containers for transshipment and empty containers for repositioning between Indian ports without any specific permission or license, unlike earlier when domestic carriers had a monopoly over that trade segment. The reform is essentially intended to decrease logistics costs, as foreign transshipment through the use of feeder networks has been a heavy burden for exporters/importers battling weak demand and intense competition.

CSLA’s year-to-date (May-October) estimates indicate an additional transshipment volume of 160,723 TEU at Indian ports, with laden movement pegged at 92,811 TEU, or roughly 58 percent, and empty volume at 67,912 TEU, or 42 percent.

Although that uptrend is a positive sign and supports a robust GDP growth forecast for the emerging market economy, the cabotage-aided transshipment performance at major, public ports thus far has been below expectations. A study found that Mundra represented 30,226 TEU out of 53,856 total TEU of laden transshipment movement projected to have been generated during May-September. In contrast, Jawaharlal Nehru Port Trust (JNPT), Chennai, Visakhapatnam, and Cochin — four key major ports that have held high growth expectations from that reform — collectively handled just 6,940 laden TEU in the same period, industry statistics show.

What’s more, Hazira, another Adani Group-operated minor facility on the west coast, is said to have garnered a good portion of that transshipment increase — accounting for 4,565 laden TEU in the May-to-September period. Located about 120 nautical miles north of JNPT, Hazira has generated healthy growth as carriers increasingly use multiple west coast port calls to maximize liftings. The other factor driving growth of private terminals in Gujarat is their closer proximity to northern corridor — creating rail cost advantages over JNPT.

That transshipment trend analysis corroborates what some stakeholders had earlier argued — that the abolition of restrictive cabotage rules would essentially favor privately operated, minor ports, thanks to their price and infrastructure advantages, rather than government-run major ports, which are hamstrung by lower productivity, as well as tariff and other administrative regulations.