Eye on Gwadar, Govt Entrusts Adani With Competing Port in Kerala

The government expects the new ports will save Indian companies hundreds of millions of dollars in transport costs.

New Delhi will grant billionaire Gautam Adani Rs 1600 crores ($240 million) to help build the new port at Vizhinjam. (Photo: Reuters)

Adani Group has started building the country’s first transshipment port, conceived 25 years ago, and the government will construct another Rs 400 crores worth facility nearby to create a shipping hub rivalling Chinese facilities in the region.

New Delhi will grant billionaire Gautam Adani Rs 1600 crores ($240 million) to help build the new port at Vizhinjam, in Kerala to be able to win business from established hubs elsewhere in Asia.

Once Vizhinjam is operational the government will start building the port of Enayam in the neighbouring state of Tamil Nadu, a senior shipping ministry official said. Enayam alone will save more than Rs 20 crores ($200 million) in costs for Indian companies every year, he added.

Lack of Transshipment Ports Costs India a Lot

India’s 7,500-km coastline juts into one of the world’s main shipping routes and Prime Minister Narendra Modi wants to capitalise on that proximity by developing ports that can shift freight on to huge vessels capable of carrying up to 18,000 20-foot containers.

By bringing onshore cargo handling which is currently done at entrepôt in Sri Lanka, Dubai and Singapore, Modi’s government expects cargo traffic at its ports to jump by two-thirds by 2021 as India ramps up exports of goods including cars and other machinery.

The lack of an Indian domestic transshipment port forces inbound and outbound containers to take a detour to one of those regional hubs before heading to their final destination.

New Delhi expects the new ports to save Indian companies hundreds of millions of dollars in transport costs, as well as ease concerns over the growing strategic clout in South Asia of rival China, which has invested hundreds of millions of dollars in Sri Lankan ports at Colombo and Hambantota.

Adani wants the Vizhinjam port, which an arm of his Adani Group to be operational in 2018. The port lies hard by the Gulf-to-Malacca shipping lane that carries almost a third of world sea freight.

But officials acknowledge that it would be difficult for the new ports to win international clients unless they offered discounts.

New Delhi expects the new ports to save Indian companies hundreds of millions of dollars in transport costs. (Photo: iStockphoto)

China’s Menacing Presence

India is worried about China’s expanding reach in the region through port investments in Sri Lanka, Bangladesh and the Maldives. China is also developing Pakistan’s Gwadar seaport as part of a Rs 4600 crores ($46 billion) China-Pakistan Economic Corridor.

China had also wanted to partner with an Indian company to build the Vizhinjam port, but its proposal was rejected by the government on grounds of national security.

India has not banned Chinese firms from investing in its ports, but takes a cautious approach as most ports are also used for “strategic purposes”, said the shipping ministry source.

That is a euphemism for dual-use port facilities that could also be used by naval vessels. The docking of a Chinese nuclear submarine at Colombo’s commercial port in 2014 shocked India’s security establishment and has added urgency to New Delhi’s push to strengthen its port infrastructure.

Vizhinjam port will have dedicated berths for India’s navy and coastguard, according to a government note seen by Reuters.

India is also seeking to extend its commercial and strategic reach as it tries to catch up with China, pledging up to $500 million to develop the Iranian port of Chabahar to give it trade access to Iran, Afghanistan and the hinterlands of Central Asia, now largely blocked by Pakistan.