Adani's port projects catch a tailwind

Capacity constraints at Chennai Port and the promise of quick turnaround are drawing the attention of large shipping lines to its newly opened container terminal at Ennore

The new container terminal at the Kamarajar Port that became operational in October has come as a relief both for traders and shipping lines alike. Within a span of 30kms, they now have three ports —Chennai, Ennore and Kattupali —and four container terminals to choose from, which compete with one another for traffic.

This is a sea change from the time when shipping lines had to jostle for berthing slots at Chennai Port and spend two to three days anchored in the sea if they missed their allotted slot. The congestion not only increased their turnaround time but also inflated their charter rates. 

The terminal and the Kattupali port are being developed by Ahmedabad-based infrastructure conglomerate Adani Group. Katupalli was acquired by Adani from Larsen &Tubro earlier this year for Rs 19.5 billion. An additional investment of Rs 500 billion has been envisaged to develop and expand its handling capacity to 259 million tonnes from the existing 24.65 million tonnes. To this end, a revised master plan has been submitted to the government.

Beyond easing traffic at the Chennai Port, Ennarasu Karunesan, CEO for Southern Ports, Adani Ports & Special Economic Zone, says, Kattupali is being designed to handle everything from bulk cargo to containers under one roof.

“The key would be efficiency backed by technology, congestion-free flow of traffic and enough backyard space for trade,” he says. “Even if the ships come late they can berth, unlike in other ports.”

The container terminal is already being seen as a viable alternative to Chennai. Late last month, the world’s largest shipping line Maersk's container vessel Leonidio berthed at the Adani Ennore Container Terminal inside the Kamarajar Port in Ennore . It marks a complete shift in operations to Ennore from Chennai where its container ships have been calling since 2003.

“Port Ennore has the potential to be the new gateway of South India, and we are geared up to support our local customers to move their cargo to and from markets around the world. In addition to no commodity restrictions at Ennore, Maersk can provide seamless end-to-end solutions from here,” says Steve Felder, managing director for South Asia, Maersk.

“As global trade increases, so does the congestion at existing ports. There comes a point when moving to a new port becomes inevitable, which is why we are shifting operations from Chennai to Ennore,” a Maersk spokesperson said.

With its shorter turnaround time by one to two days and tie-ups with inland container depots, ports and feeder operators, Ennore could give a tough fight to Chennai.

Over the next few months, industry representatives expect more volumes may switch over to Adani's Ports. Over 60 per cent of the container freight stations in the Chennai cluster are in close proximity to Ennore and Kattupalli, and that makes shifting to the new ports easier. 

The ports are part of Adani’s cluster-based approach towards India's maritime transport. With four ports (including one container terminal) on the West Coast and four ports (including one container terminal) on the East Coast, the group now has 10 strategically-located ports along the Indian coastline. This, especially on the East Coast, would lead to improvement in efficiency and cost savings for the trade in the longer run, says industry representatives.

“The capacity constrains at Chennai Port and the fact that the Krishnapattinam Port may take time to lure large vessel operators, Ennore and Kattupalli have the opportunity to wean away volume from Chennai Port," says G Raghushankar, chairman, logistics committee, South India Chamber of Commerce and Industry.

Industry expects the new ports to intensify competition, increase efficiency, and reduce transportation costs once the operators have recovered their initial investment. This is crucial to reducing the logistical gaps with China if India is to become an export hub.

R Shankar, CEO, TVS Logistics expects supply chain costs including that of inventory to come down once the ports become fully operational. De-bottlenecking the existing ports will increase the throughput time for manufacturers and boost their overall capacity for exports and imports.

Although manufacturers are yet to derive any direct cost benefit by trading via Kattupalli or Ennore terminals, there are indirect savings in terms of shorter turnaround time.

Raghushankar says scaling down handling tariff should be easier for private ports as they are not under any regulator. “While undoubtedly efficiency and effectiveness are important considerations, costs, too, have a major impact in Exim trade,” he says. 

The Adani group's foray into South India started in 2016 with the acquisition of Katupalli, near Chennai, and the award of deepwater container terminal project at Vizhinjam in Kerala. 

Karan Adani, CEO, Adani Ports, believes this will mark a new chapter in trade for Tamil Nadu. 

The port also sits well with his plan to develop it as an alternative to Colombo, or Singapore as a trading hub. Currently, due to limited depth and handling facilities at Indian ports, bulk of India's cargo is routed via Singapore or Colombo, adding time and expense.

J Krishnan, former chairman of expert committee on logistics at the Madras Chamber of Commerce and Industry and the former Trustee of Chennai Port Trust, says, "The port terminal operations are not standalone business and can be a serious long term player in the global trading network". Vizhinjam in Kerala, once operational, will compete directly with Colombo, Singapore, Salalah as a transshipment hub.

A V Vijayakumar, chairman of the Federation of Freight Forwarders Association of India said an alternative facility to an existing/congested approach road normally decongests the connectivity and enhances the supply chain efficiency. When such a facility is created by established organisations like Adani the confidence level and comfort zone of the industry is doubled. There could a concern on commercials which market forces might stabilise over time.