DP World Ports Vallarpadam Container Terminal: The numbers behind point towards another huge scam

By some indications, this is a scam of larger proportions than the Commonwealth Games fiasco. Take a huge unnecessary project, inflate the costs, get your cronies to cover the inflated expenses by bringing in a private player like DP World in this case, and when the project obviously fails, cry wolf, and then get out

We had earlier reported (See: (See: Cochin Port Trust bats for DP World, LBW cabotage ) on how a one-sided contract between Cochin Port Trust and DP World Ports Vallarpadam Container Terminal, its tenant, had sparked off intense lobbying over cabotage rules. Now we dig a little deeper.

Nothing works better towards getting the truth than digging out the dirt by actually going onsite and sifting through the sediment as well as getting a first-hand grip on matters.

So when my reports on the whole Cochin Port Trust, DP World Ports Vallarpadam Terminal and ICTT (International Container Trans-shipment Terminal) at Kochi started doing the rounds (see link above) and were being quoted—amongst other places, at the Ministry of Shipping and elsewhere, I felt it was time to actually go down to Ground Zero and take a look.

Obviously, it is not easy to get an entry into such high-security areas, but then, where there is a will, there is a way, and the report  was too important to be abandoned half-way just because the follow-up needed some solid hard work.
This was not really planned, it was supposed to just be a short detour in life to go back on a ship for a few months, but as things turned out, of all things, I found myself working on a ship, dredging the bottom of the sea right off the Vallarpadam Terminal in Kochi, at times just metres away from the jetty. And more importantly, working with people who knew every inside secret of what was really happening there, and the real games involved. But we get ahead of the report.
Go to Kerala today and talk to most anybody even remotely connected with shipping, and many of them will make it sound as though the removal of cabotage is the ultimate and only way to ensure the development of Kerala, every other logical argument or reason is put aside. And towards that, the reasoning trotted out is that the DP World's Vallarpadam Container Terminal's sheer survival is directly connected to Kerala's industrial development, and that in turn will not happen without cabotage being withdrawn. An issue of national importance and security is to be forsaken because, it is argued by those who push this in Kerala for their UAE-based masters, the commercial and technical importance of Vallarpadam is just too brilliant for the Nation.
That is the major flaw, but like the emperor who wore no clothes, nobody will tell the Chief Minister and his cohorts this. There are those, of course, who know the realities and are now beginning to come out. Speaking to some of them involved the usual "off-the-record" aspect, so, in this article, we present some simple facts, without attributing sources, but which can be easily re-verified.
a) The Vallarpadam Container Terminal even at its best-projected levels will simply not be feasible for 4th Generation and upwards container ships. Third generation container ships are midgets compared to the 6th Generation mainline container ships swinging past through Colombo on their East-West runs. These ships will not be able to enter the Cochin Harbour channel itself, leave alone the Port and the Vallarpadam terminal. A good explanation of the various generations of container ships is given here: http://people.hofstra.edu/geotrans/eng/ch3en/conc3en/containerships.html and you can see that even today, Panamax-sized 3rd Generation ships can hardly call Cochin Port. Still, to give the devil his due, to start with even a 3rd Generation container ship of the 3,000-4,000 TEU (twenty-foot equivalent unit) capacity level at Kochi is very welcome.
To break even, Vallarpadam will need to do between 3 million and 5 million TEUs per annum. As of now, it is doing about 0.3 million through 0.4 million TEUs. Where is this massive jump going to come from? Will shippers from the north suddenly lose interest in Gujarat ports and Mumbai/JNPT to come all the way to Kerala? Will those from the eastern parts abandon Chennai or Tuticorin (or Thoothukudi, as it is called now)? Here's a reality check—which ports are more customer-friendly, and have better rail linkages? The answers are there, clear to see.
b) The Vallarpadam Container Terminal is not going to be commercially feasible as a mainline container port for multiple reasons. For one, the hinterland is seeing development for a variety of reasons—none of which are really industrial—Kerala's economy is growing more due to tourism, remittances and some agriculture than any heavy industries. Sure, there is consumption, but one-way inbound traffic cannot sustain a mainline port—it has to be two-way.

And there is simply not much outward traffic. The terminal, even now, appears to be full of empty containers awaiting repositioning back to the north and west of India, or abroad.
c) Another myth is that Cochin Port is just 10 miles off the main sea-lanes. This would be true for coastal traffic or for ships hugging the Indian coast for whatever reason—mobile phone signal, piracy avoidance, or specifically heading for Indian ports or the Persian Gulf. But a fast container ship with high freeboards and guards on board would use what is called the 8-degree Channel, or other options, well south of Kochi by about 80 miles or even more if it were headed for Colombo, Singapore or Malaysia, to run what is called the "pendulum" between the Red Sea on one side and the Malacca Straits via Colombo on the other.
d) This is not substantiated because like in all things pertaining to shipping, the real numbers never seem to be emanate, but Colombo Port is supposed to be about 2.5 times as efficient in terms of speed of container handling and one-quarter of the price in terms of cost to shipping line, when compared to Cochin Port and its tariff structure.

In any case, the relationship between the corporate entities that operate Colombo Port and Cochin Port are deep to say the least, and they can easily play one off against the other if required. However, as of now, Colombo has dozens of cranes and over six deepwater jetties, while Cochin has only four cranes and two jetties-of which one jetty, the eastern one, is surrounded by extremely shallow water where the port appears to have now realised that the bottom is rock & shale, which will have to be cut out and then dredged. At a very high cost.
e) There has been constant dredging of silt going on for years in Kochi harbour now, and a short stint onboard one of these dredgers reveals that it would be a joke, if it were not for the fact that it is the taxpayer who is paying for this joke. Literally, these dredgers are in the hands of bandicoots and bedbugs, who simply transport some silt and more water from the port to the dumping ground about 10 miles outside, but probably in the interest of prolonging their engagement, are playing some really stupid games which consist of the same silt, sediment and water going in and out of the port. A bit too technical to explain—but you can imagine the process is akin to taking water from Cochin Port, dumping it into the Arabian Sea, and then coming back for more.
f) The side-effect of these silt- and water-movement games is what is known as the 'littoral' effect. This is impacting the beaches, and especially the strips near, for example, Fort Cochin and the famous fishing nets. These areas are being effected, as well as the beaches in and beyond the gut which leads to Vypeen (one of the islands that form part of the city of Kochi), and Fort Cochin. There is every chance that after the beaches, which have already been eroded, the next to go will be the beachfront properties themselves. Either that, or look for huge expense in building retaining walls, rising waters due to climate change adding to the complications.
g) Kochi Refineries Limited (KRL) realised this years ago, its report on this exists and was ignored by the powers-that-be when greedily swallowing the bait for Vallarpadam of heavy capital expense and all that went with it, and so it decided to move out of Cochin Port. Since it made for almost 90% of the revenue and movement, it was persuaded to stay back, and at a huge cost—a new tanker & gas terminal which could easily have been an offshore SBM (Single Buoy Mooring) anywhere along the coast, with deepwater, is coming up along the northern shore outside Kochi harbour. Needless to say, more dredging and port works, as well as deepening of the channel is going to be in order here too—when there were ample less environmentally-sensitive spots all along the Kerala coast which could have been made into deepwater ports for tankers and gas carriers, at much lower cost and disruption.
For some people I spoke to, the whole DP Ports/Vallarpadam Terminal is a scam of larger proportions than, for example, the CWG scam. Take a huge unnecessary project, inflate the costs, get your cronies to cover the inflated expenses by bringing in a private player like DP World in this case, and when the project obviously fails, cry wolf, and then get out.

Whether it is really a huge scam or not, time only will tell, but as of now, the taxpayer has largely paid the bill for a port terminal going nowhere.
The bets are out in Kochi, the money is on DP World likely abandoning the Vallarpadam project and leaving the Government of India with a huge bill paid for a terminal that is going nowhere, and continuous high-cost maintenance dredging at great environmental cost a side-effect. The whole noise about cabotage is just humbug dreamt up to divert real attention.
If anything, a full & proper enquiry should be done on how this
high-cost white elephant came into being in the first case. There is room for good Kerala cuisine in Tihar Jail, too.
In the next article, we will come up with a detailed analysis of the few numbers available for this project.
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Why are overage ships with improper documents being chartered for Indian ports?

1 decade ago
Hi malQ,

I'm disappointed in knowing about increasing cost of dredging in ICTT area. I have to agree on this alone. Apart from that I don't agree with ur claim that lack of Rail-Road connectivity is the real reason for ICTT's current mess.
The function of ICTT is just tranship containers from mother ships calling @ it to smaller ships which would take them to other ports were it is intended to as you said the might metros wherever in India. Only a small portion need to be taken on road or rail to say may be a Bangalore or Coimbatore. No one will insist on transporting containers intended for places like Punjab or Delhi or somewhere in North via roads from Kochi, rather they will be transhiped from Kochi to nearby ports like Mumbai or port. See all job is to substitue the work done by Colombo even they don't have expressways and freight trains connecting to Indian ports.
Its for the greater good of nation! NONE of INDIA's existing ports will anyway suffer due to ICTT @ Vallarpadam. Its only going to benefit through lesser transport time & cost saved.
Ok I agree if u say Kochi may still not match with Columbo with craines or freight stations (more stations are coming up fasts) or with the pace or even what you claim of it can't take a 4th gen ship of full capacity. Well this is the beginning Columbo/ Dubai/Singapore have been enjoying the India market from ever since it's there its got the advantage all the money is flowing which we could have saved.
Joby Mathew
1 decade ago
This is a different perspective on the Terminal and and its development. Its good that the there is an alternate to jingoistic and subjective news reports.

I am no expert on port and ship matters, but a bit of research on the net brought out an interesting news. Please see this link http://www.joc.com/port-cochin-handles-r.... According to this (and according to the Terminal Website), a a 4th gen post panamax ship called on the Vallarpadam Terminal. So maybe not all is lost.

It was good to understand the dredging issues and the associated cost but then isn't it also true that the benefit to Kochi, Kerala and ultimately India is not only revenue from the terminal or port, but also from associated business that a large port brings?

I don't think anyone in Kochi or Kerala expects the state to industrialize because of the Terminal but certainly there is improved infrastructure (witness new roads and bridges connecting the island to the city) and improved commercial activity.

Lets hope the loss on account of dredging will be offset by other gains to the city and the state.
Replied to Joby Mathew comment 1 decade ago
Thank you for writing in, Joby - yes, the MAERSK SEMBAWANG did make one call to Cochin, but she came in very "light" or partially loaded, and not on a typical mainline voyage. A loaded 4th generation ship would be another issue - in "light" condition, even a bigger 5th or 6th generation ship could come to Cochin, but what would it achieve?

The bigger issue here is that it is being projected as though it is only cabotage which is ruining the operational issues of Valarpadam - when it is a host of other parameters and aspects, all linked to terrible planning.

Nobody doubts that better infrastructure yields results - but there has to be some thought applied behind it, before putting public money on the spending block.

Humbly submitted/VM
1 decade ago
As a avid watcher of major dredging and port projects in India, I can assure you that more than any financial scam, Vallarpadam ICTT mess is due to shoddy planning and no foresight.

There were many study reports available on the silting pattern in the Kochi harbour. Difficulties in maintaining deeper dredged levels could have been easily identified at the planning stage itself. Now after the ICTT is inagurated, Kochi Port has formed a team to study this aspect. SInce Maintenance Dredging is in the scope of the Port, they will never be able to make any net profit from this PPP project. Moreover, DP World will also claim for idling charges on account of delay in maintenance dredging. Anyway, completion of the ongoing Capital Dredging is itself doubtful.

The Cabotage issues are all secondary.
Replied to Prakash comment 1 decade ago
Thank you, Prakash, for your comments.

Those in governance and spending public money do not have the luxury or excuse of losses thanks to shoddy planning and no foresight - though rightly pointed out as the reasons by you.

I was able to study the silting patterns, as well as the total lack of any sort of supervision or accountability wrt the capital dredging currently underway at Cochin Port, in some detail. There is also the simple fact that despite everything, the old school types onboard modern dredgers are still proceeding with the "number of trips" rather than "amount of sediment" method for production, with little control or expertise ashore to correct this. Furthermore, quietly releasing some amount while in channel itself to prevent muddying the vessel due to rolling as well as to reduce dumping time, and then carrying some amount back to reduce dredging time, appears to be an accepted practice with all the Dredger Masters there.

The cabotage issue is simply an eyewash.

Humbly submitted/VM
Replied to malQ comment 1 decade ago
Thanks. Watch this space for another major blunder being committed at JNPT capital dredging project of 40 km channel. The work involves large quantity of rock blasting in busy channel. FYI, Maharashtra state is blessed with 20 m waters hardly 3 km from coast in Sindhudurg district. They can easily build a ICTT which can take 6G container vessels. But the politicians are more keen on 2G, 3G, CWG and real estate scams.
Replied to Prakash comment 1 decade ago
Thank you for writing in, Prakash, and yes, you are correct, the whole Mumbai/JNPT dredging project is going to be another spending fiasco.

The Indian Navy has already moved much of its West Coast resources to Karwar. New ports like Mundra in Gujarat as well as other ports in Kutch and Khambat as well as Saurashtra coast have natural deep water access - likewise Gangavaram in AP and maybe Dhamra in Orissa. They also have better rail and road connectivity.

World over, old port cities are losing their ports, whether it is London or New York, to other activities. But here, we keep trying to flog the same old same old, when the rules of the game have changed.

The result is increasingly evident - more commercial traffic through the heart of cities like Mumbai and Chennai (Kolkata Port has more or less died a natural death anyways) and a high-c0st white elephant of a container terminal in Cochin.

Thanks again for writing in/vm
Replied to malq comment 1 decade ago
Mr. Jose Paul, ex-Chairman, Mormugao Port Trust has written a nice article on 25.12.2011 in Business Line. He has written that Cochin Port's loss will increase to Rs. 232 cr compared to Rs. 86 cr. thanks to ICTT.

JNPT price bids will be opened next week. As the tender conditions are ridiculously put, this tender also likely to be discharged.
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