Filled with controversy, ambition, and, quite literally, a sea of challenges, the saga of Enayam Port in Tamil Nadu reads like a maritime fable. This proposed major international port, officially named the Enayam International Container Trans-shipment Terminal, has been a subject of debate since the 1990s when the idea for a port near Enayam was floated in order to boost industrial growth. Fast forward to the present day, almost two decades later the project was resuscitated when the Union cabinet approved the construction of a new trans-shipment port.
According to the initial studies done, the Enayam could handle larger container vessels with a draft of 16 meters, and the project blueprint suggested it to be completed in 3 phases with an estimated total cost of INR 27,570 crore, including the reclamation of an 840-acre land from the sea through dredging.
However, experts from the maritime industry have raised some red-flags on the project. At the heart of their concerns is the proximity of Enayam to existing trans-shipment ports – the Vallarpadam port in Cochin and the Vizhinjam port in Trivandrum.
According to these experts, Enayam will be the third major trans-shipment port in the region, raising questions about its sustainability with two established competitors nearby. Mr. K. Ravichandran, the Executive Vice President & Chief Rating Officer at ICRA Ltd., an independent credit-rating agency, astutely pointed out that having three major ports close to each other looks difficult from a sustenance point of view.
The Kerala government has also expressed its discontent, given Enayam’s close proximity to the Vizhinjam trans-shipment port, which is financed privately by the Adani Ports and Special Economic Zone Ltd. (APSEZ). Furthermore, Vizhinjam is about 225 kilometers away from the government-owned Vallarpadam port, where DP World has operated India’s first container trans-shipment terminal for six years. Despite its potential, the Vallarpadam trans-shipment port is currently operating at only 49% of its total installed capacity.
This concern for sustenance also highlights a broader issue in the global shipping industry – oversupply. It has been a difficult time post-COVID for container companies as the current container rates fail to provide profitable margins. Moreover, shipping liners have also been carefully managing costs in this environment. So taking a reality check, it is quite arguable that the region needs 3 trans-shipment ports at such close proximity to each other. What should also be considered is that the existing ports of Vallarpadam and Vizhinjam will take a minimum of 5-10 years to make any difference in the country’s trans-shipment business.
Apart from these points of concern from industry experts, the proposed port at Enayam is facing headwinds from the local fishing community as the dredging and reclamation activities will negatively impact their livelihoods. The coastal stretch where Enayam port is proposed has a fisher population of 1,101 per square kilometer. More than one lakh fishers are dependent on the sea for their livelihood.
Despite these obstacles, the concept of a trans-shipment port remains crucial for India’s trade ambitions. In 2016, Indian ports handled around 11.3 million TEUs (twenty-foot equivalent units) of containers, with approximately 25% being trans-shipped en route to other destinations. Larger vessels, with capacities often exceeding 10,000 TEUs and sometimes reaching up to 18,000 TEUs, necessitate deep-draft ports, typically with depths ranging from 18 to 20 meters, to berth and manage containers efficiently.
Stiff competition from Colombo, Singapore, and Klang and a reliance on foreign trans-shipment port handling charges lead to added costs resulting in an annual loss of approximately INR 1,500 crore for the Indian port industry. Furthermore, this added cost is transferred to shippers, who pay an extra USD 80-100 per TEU when their cargo is trans-shipped, a cost that could be avoided if the containers were imported or exported directly from an Indian port.
The Enayam port holds the promise of transforming India into a substantial trans-shipment hub for trade between the US, EU, Africa, and Asia. Estimates say that Enayam has the potential to reduce the voyage times for cargo destined for Africa, the EU, or the US East Coast by 5-6 days, resulting in cost savings of 12-15%. Also, projections based on traffic flow data indicate that Enayam could handle 12.9 million TEUs by 2040, with a mix of gateway and trans-shipment cargo.
Despite the potential benefits, Enayam Port’s path forward is fraught with obstacles. It must address numerous challenges to attract major shipping liners and compete effectively with established trans-shipment hubs like Colombo. For instance, the port must keep port-related logistics costs lower than those at Colombo. Customs approval processes need streamlining and shortening. The number of forms and signatures required for an import at an Indian port significantly exceeds those at international ports like Colombo. Fast and efficient clearance is essential to entice shipping liners. Finally, the success of the Enayam port is intricately linked to the development of last-mile road and rail connectivity.
With the Enayam port at a crossroads, the question lingers: Will India invest thousands of crores in a third port in the region, or is this project destined to sail into uncertain waters?