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00:00 Hi, thanks so much for tuning in. You're watching Infravisioning on BQ Prime. My name
00:19 is Alex Matthew. The world today is more connected than it has ever been in the past. But still,
00:27 as we speak, more than 80% of global trade volume is carried out by maritime routes.
00:35 And that's similar to what it has been over the past several centuries. Now, why are we
00:40 talking about this? We're talking about this because we're now in conversation or rather
00:45 India is in conversation to set up an international cargo transshipment port in the Bay of Bengal
00:54 in the Andaman Islands. Why is this significant? What is a transshipment port? To talk about
01:00 all of that, I have with me Vinayak Chatterjee, who is the founder and managing trustee at
01:05 the Infravision Foundation. Thank you so much, Vinayak, for taking the time as always. Let's
01:10 start with what a transshipment port is and then we'll delve into the details of what
01:14 is being proposed in the Andaman Islands.
01:19 So transshipment fundamentally, Alex, means that when you're transferring goods from point
01:27 A to point B, there are often the absence of a direct shipping line. It is just think
01:35 of yourself as a passenger when you take an Emirates flight and you go to Dubai and then
01:40 you catch another flight to somewhere else. You are effectively as a passenger transshipping
01:45 from Dubai Airport, which is a hub of Singapore. Now similarly, in shipping parlance, there
01:51 are often difficulties in getting a container terminal from point A to point B. So what
01:57 you have is an intermediate point where the container changes ships, if I may put it simply.
02:03 The jargon for that is transshipment. Now when you talk of maritime cargo, there's basically
02:07 three types of cargo. There is containers, there is bulk like coal and iron ore and minerals,
02:14 and there is liquid like petroleum and other fuels. Now, specifically today, we are talking
02:19 about India's resolve to have a container transshipment terminal, not a cargo transshipment
02:27 terminal. So we're not talking about liquid, we're not talking about bulk. We're talking
02:31 about an international sized quality container transshipment terminal in the Andaman Islands.
02:37 But over to you.
02:38 Okay. So we've established that this is something that facilitates global trade through maritime
02:43 routes. And I think that example that you've given very nicely elucidates that point. How
02:49 many such terminals exist or how many such transshipment ports exist right now? And what,
02:56 for example, is India using in its trade? What ports are we using?
03:03 See broadly, we are using a few ports surrounding India for transshipment. So effectively what
03:11 it means that we don't have a port large enough for a large vessel. You know, large vessels
03:18 today like Panamax and others carry sometimes over 15,000 containers. So you need to come
03:24 to a port which has that much volume to make the shipping lines operations profitable to
03:29 load and unload. So basically the containers also get agglomerated. So it's a dual function.
03:35 It's agglomerating for volume so that the big ships come and it is also rooting for
03:40 destination where there are intermediate ports. India currently uses on the western side,
03:47 we largely use Dubai. And on the eastern side, effectively we use Colombo, Kelang in Malaysia
03:55 and Singapore. These are the normally used hubs. But remember that not all the transshipment
04:01 is in the region. For example, a ship carrying cargo from the western coast in Mumbai could
04:07 actually go straight up to Rotterdam via the Suez Canal, etc. and transship there in case
04:14 it requires to go to an American port. So not all transshipment happens from Dubai,
04:20 Colombo, Kelang and Singapore. There are other stations where transshipment happens. But
04:25 these four broadly take up the bulk of Indian transshipment.
04:28 Okay. Now, when we're talking about what is being proposed in Andaman, can you take us
04:33 through what that proposal is? And why would it be so significant for India to have its
04:39 own transshipment port?
04:41 Look, let's step back a little and talk about an India which is on its way to become the
04:47 third largest economic power in the world. Surprisingly, it is also a nation that has
04:54 7500 kilometer coastline and 200 ports consisting of major ports owned by the government of
05:01 India, major ports operated by the private sector, and a host of smaller ports dotting
05:07 the Indian coastlines. With this, shall we say, volume of economic power, it has been
05:15 rather paradoxical that India doesn't have its own transshipment terminal. And we are
05:21 using the transshipment terminal of neighbors. Now, it is about, you know, just like in aviation,
05:29 there is much talk about Delhi emerging as a hub. A hub is nothing but a transshipment
05:34 center. So while Delhi Airport, Indira Gandhi and others, Mumbai are gradually emerging
05:40 as aviation hubs, where passengers come in from one airline and move to the other. It
05:45 is about time, in fact, it's past the due date, when India requires to own its own world-class
05:52 transshipment center. It has been discussed for over two decades. But we finally see the
05:56 government, shall we say, enthusiastically moving to locate such a terminal very appropriately
06:03 in the Andaman. But over to you.
06:04 Okay, so what is the cost involved in setting something like this up? And I'm guessing that
06:11 there would be a private player involved in the execution of something like this. But
06:16 I was also reading an article, Vinayak, that you've written, that spoke about the economics
06:21 of this and the fact that once you do set this up, it's not something that is, that
06:28 earns a lot of money. It's not like a regular port from that perspective.
06:32 Yes, you know, a regular port effectively, first of all, has a larger swath of cargo
06:41 that it handles, as I explained before, bulk, liquid and container. So a pure container
06:47 transshipment is first of all focused only on containers. Secondly, it's, you know, in
06:55 a location, most locations of transshipment don't have a natural hinterland cargo. For
07:00 example, in our Andaman location, which by the way is a very good decision, which we'll
07:04 come to later, the location identification is a very good decision, but it is clear that
07:09 Andaman doesn't have a natural hinterland. I mean, it is not like eastern India, where
07:14 huge amounts of coal is being transported or imported or huge amounts of iron ore are
07:19 being exported. Andaman doesn't have a hinterland. So effectively, the operations of the port
07:23 are about receiving a ship, unloading a few containers from that ship that require to
07:29 go to a particular destination, and hopefully a few containers lying on the wharf that's
07:33 come from some other ship, loaded onto a new ship to send onward. So it's just a question
07:38 of loading and reloading from one ship to the other. And the industry experts tell me
07:44 that the cost of a fee charged for a transshipment of a container is about 30% the regular cost
07:52 of it loading or unloading in a port and then sent for onward dispatch, etc. Because there
07:59 are many other issues also of customs, of botting, of various things. Whereas the transshipment
08:04 is purely, as I keep using airline example, you walking in Dubai from terminal A to terminal
08:09 B from gate 40 to gate 56, that's transshipment. So it earns about 30% of the regular container.
08:16 And at the volumes that we are looking forward to in the first decade or more in the Andaman,
08:21 the addressable market is about 3 million TEUs. You know, TEUs is a 20 foot equivalent
08:28 unit, which is basically a 20 foot container, because there are also 40 feet containers.
08:32 So normally the industry operates by defining the market as a 20 foot equivalent unit. So
08:38 the addressable market is about 3 million TEUs, of which obviously we are not going
08:42 to get 100%. There will be containers continuing to go to, you know, to Singapore, to Kelang
08:49 and to Colombo. So the volumes are not sufficient for the scale of development that the government
08:55 of India envisages. That's the issue.
08:57 Okay. So how do you fix that? How do you make it viable?
09:00 So what I've done some thinking on the subject myself, spoken to experts, figured out, you
09:06 know, the viability, etc. So what I actually feel is that the transshipment terminal at
09:10 Andaman from India's own needs, needs to be done. It needs to have a vision larger than
09:18 just a container transshipment terminal. So the simple reason I'll add is that we are
09:24 very much in the middle of a very important East-West trade route. That's point number
09:31 one. Point number two is that there are geopolitical interests in this region of the world. There
09:37 are superpowers with their navies, etc., playing around. And finally, it cannot remain a transshipment
09:46 port forever in its life. We also have to see the development of Andaman in a rather
09:51 larger perspective. And therefore, a way to conceive this is to actually see the transshipment
09:57 terminal as the seat of a bustling port city in Galatea Bay, which is in the Great Nicobar
10:05 Islands, and gradually have a master plan that contains within itself everything, obviously,
10:11 to support a transshipment terminal. It will require a housing colony, it will require
10:16 a renewable power plant, it will require roads, it will require some degree of social and
10:21 recreational infrastructure, it will require an airport. All these are required, but the
10:25 vision is a little larger to see if it can also become a port city, a bustling port city
10:32 with equal weightages to transshipment, commerce, as well as a certain degree of social habitation,
10:41 where you can have a huge number of tourist resorts, housing, and have the whole area
10:49 develop. And for this purpose, I think a three-stage financial plan, and I'll keep it short, such
10:55 as itself. First, the port is expected, the transshipment and allied stuff is expected
11:02 to take about 20,000 crores. That's clearly unviable. You've got to reduce the capital
11:06 expenditure of whoever is the private sector winner. So a 40% viability gap fund that clearly
11:12 gives 8,000 crores capital grant up front. That leaves 14,000 crores as the CAPEX budget
11:19 over the years for the terminal operator to spend. Secondly, the government can take on
11:24 many of the activities through public expenditure, which cannot earn revenue. Things like dredging,
11:29 breakwater, roads, you know, stuff like that the government can do for the larger good
11:35 of that area of Andaman, because we owe it to them. And finally, there is what I would
11:41 call the embedded profits over the years in development rights. The person who wins the
11:45 terminal should be given an opportunity to get a return on his capital by ancillary activities
11:51 of resorts, casinos, cruise terminals, etc. So it's a three-stage approach. But back to
11:57 you.
11:58 No, okay. So that is a proposal to make this viable. And to close this out, there are still
12:04 some thorny issues in terms of the Aboriginal population of those regions and they are protected
12:13 tribes, right? And also I would think that, and you pointed this out in your article,
12:18 you've spoken about the fact that this would require deforestation and these are again
12:23 protected ecologies. Are we likely to face headwinds from those issues?
12:31 We have already faced headwinds. You know, there are many, many nature and conservation
12:38 organizations that have voiced their concerns over what they call the disturbance to a sensitive
12:49 eco-region. There is endangered fauna, there is the felling of 800,000 trees, and there
12:56 are some very protected tribal communities there, like the Champagne tribe and the Nicobarites.
13:02 So it's a fragile ecosystem, both in terms of humans as well as flora and fauna. Now
13:09 this is the classic debate between development and conservation. And we've seen it play out,
13:16 you know, across the country for any major infra project. It is bound to happen. And
13:21 therefore the intelligent thing is to make intelligent trade-offs and suggest ameliorating
13:26 conditions. So what has happened is the government has taken cognizance of these concerns, they
13:31 are legitimate concerns, and a special committee has been appointed by the Green Tribunal to
13:37 look at it, to review the total conditionalities of the Green approval. And they have actually
13:42 given in-principle approval, but it comes with a whole lot of conditionalities, which
13:46 talk about addressing the concerns in as sensitive and humane a way as possible to protect the
13:53 environment and yet get some crucial infra development going in that part of the Bay
13:59 of Bengal, which is equally important. So it's the classic debate between development
14:04 and the ecosystem.
14:05 Now certainly, so there is a trade-off as always. But thanks so much for joining and
14:10 for explaining the concept of transshipment terminal or transshipment port and how big
14:16 this could be in fact. Always a pleasure speaking with you Vinay.
14:20 Thank you. Thanks Alex.
14:22 Alright viewers, there you have it. Conversation about this proposed major project. Let's see
14:27 how this pans out. In the meanwhile, you'll find a lot more on the website bqprime.com
14:32 and on all of our social media platforms. So do stay tuned.
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