Chennai Port, the third oldest major port in the country, started commercial operations in 1880s. And thanks to its geographical location, this artificial all-weather port soon became the ‘Gateway of South India’. However, over a century later congestion and environmental concerns have started hindering its growth. Is there really a way out of the situation for this hub port for containers, cars and project cargo on the east coast?
Sisir Pradhan | April 2016 Issue | The Dollar Business
A port at Chennai was first suggested by Warren Hastings, the first Governor-General of British India, in 1770s when he was posted in this city (then known as Madras). However, the work on the project only began about 70 years later, in 1850s, when the Madras Chamber of Commerce and Industry requested for a pier to berth sea vessels and until 1875 it continued to be one, on open sandy coast swept by storms and occasional monsoons. A full-fledged port started coming into existence only in 1904 when Francis Spring, the then Chairman of Madras Port Trust, created a new north-eastern entrance after closing the original eastern entrance to control the siltation of the channel in front of the basin. Subsequently quays were constructed at regular intervals and the port went on to become the biggest port on the east cost of India.
Further, as energy-starved India continued to rely on import of coal from eastern countries like Indonesia, Australia and South Africa, the port only grew in size and stature. However, come today, and the second busiest container handling major port in the country after Jawaharlal Nehru (JN) Port at Nhava Sheva has become a victim of its own success. Although the rise of Chennai as the manufacturing hub for global automotive giants has helped the port gain ground (in terms of containerised and automobile export shipments) to an extent, the heavy traffic of the metropolis has choked the roads to the port, as a result the container traffic has slowly started moving to other ports. So, while JN Port had handled 4.47 million TEUs of container traffic during FY2014-15, Chennai – with an installed container handling capacity of 1.6 million TEUs (at CCTPL) and 1.5 million TEUs (at CITPL) – handled just 1.55 million TEUs during the same period.
Further, following the ban imposed by the Madras High Court on handling polluting cargoes like coal and iron ore on Chennai Port in 2011, these cargoes have also moved to other nearby ports. Officials at Chennai Port having realised the port’s limitations in handling high volume polluting cargo, invested in a new port (Kamarajar Port) away from the metropolis, at Ennore. But still, Chennai Port, located in one of busiest commercial regions in the country, continues to enjoy the patronage from the business community in South India.
Chennai Port has come a long way since the first major export-shipment of 760 cars (Accent and Santro) by Hyundai Motor India was made in July 2000 to Algeria. While, over time, Hyundai has become one of the largest car exporters from India, with an average shipment of 2-2.5 lakh cars per annum Chennai Port is one of the top ports when it comes to exports of automobiles from India. The central government’s thrust on coastal movement of cargo and relaxation on cabotage law has further strengthened the future growth potential for automobile shipments from the port. In fact, recently, Hyundai shipped 800 cars from Chennai Port to APM Terminals Pipavav in Gujarat. These cars were meant for distribution in the western parts of India.
The port has also started coastal movement of passenger cars and recently Hyundai had shipped 800 cars from Chennai Port to APM Terminals Pipavav in Gujarat.Meanwhile, competition has also come up really strong for the port when it comes to shipping cars overseas. Kamarajar Port at Ennore, which was developed to handle polluting thermal coal imports, has started investing in infrastructure to attract other types of cargo, and as a result the corporate port has overtaken Chennai Port to become the largest shipper of passenger cars in FY2015. Kamarajar handled 2.15 lakh passenger cars in FY2015 as against 1.93 lakh cars handled by Chennai Port during the same period. The reason for Kamarajar gaining traction among car makers is the availability of clean parking area in the port. Also with the port being located outside the busy Chennai metropolis, car carriers can travel faster to the port due to the absence of city traffic.
Chennai Port Has Realised Its Limitations in Handling High Volume Cargo
Competition is expected to intense in near future as Adani Group, operators of India’s largest private port company, has got the mandate from L&T to operate its port at Kattupalli, which is located very close to the Kamarajar Port. Interestingly, Chennai Port also competes with ports at Ennore, Kattupalli and Krishnapatnam for container business.
Congestion - Conundrum at Play
Port stakeholders have time and again requested for a dedicated road freight corridor to bypass the city traffic while moving in and out of the port. National Highways Authority of India (NHAI) was assigned the project to build an elevated four lane link road from the port to Maduravoyal, a locality in west Chennai, on BOT basis at an estimated investment of Rs.1,815 crore. But that didn’t take off really well. The proposal was to start the road from inside the port and run up to Maduravoyal for a length of about 19 kms along Cooum River bank up to Koyambedu and along National Highway No. 4 thereafter. While construction was in progress, a stop work notice was issued by the state Public Works Department in March 2012 stating violation of certain conditions. NHAI filed a writ petition before the state High Court challenging the order. The High Court gave a verdict in favour of NHAI, but the state government challenged the verdict in Supreme Court in April 2012 and the case is still sub-judice.
Engineering project cargo being towed by tugboats. The port now has 3 docks, 24 berths and draft ranging up to 16.5 metres
While trade bodies in general declined to comment on the issue as the case is sub-judice, the general sentiment is that the objection to the project is a result of the political rivalry between two major parties in the state. Till the Supreme Court comes out with its verdict, the connectivity problem remains.
Giving details of the ordeal faced by locals and the trade, J. Krishnan of S. Natesa Iyer & Co. and General Committee Member of the Madras Chamber of Commerce and Industry says that the administration has failed to check growth of human habitat around the port, which has led to a growth in traffic near the port. Further, due to the assemblage of cargo trailers on the roads leading to the port, frequent instances of violent confrontation between the truckers and locals are also being reported on a regular basis.
Meanwhile, NHAI has taken up a project to construct a road to connect Chennai and Kamarajar ports, which is expected to ease congestion on port approach roads in the city. However, the trade fraternity is unhappy with the progress of the project and feels that “the road construction work is going at a snail’s pace and the implementing authorities need to speed up the project to ease congestion.”
A few stakeholders believe that construction of dedicated roads is not a complete solution to the traffic congestion problem. They feel that authorities also need to come up with scientific and innovative ways to regulate traffic, for instance, development of parking areas outside the port so that trailer traffic can be regulated in accordance with the speed of cargo handling operations inside the port.
Chennai Port has an installed container handling capacity of 3.1 million TEUs, and in FY2014-15 it handled 1.55 million TEUs.
Some stakeholders, on condition of anonymity, blamed the faulty BOT (build-operate-transfer) policy of the port for congestion and, in turn, for a fall in port’s performance. They say over a period of time container traffic has increased in the region. However, when the two private players were roped in to start mechanised container operations on BOT basis, it was decided that private operators will pay a certain royalty to the port based on the number of containers moving through the port. However, if the container traffic crossed a fixed number, the private operators were supposed to give a concession on tariff to port users. “And it is due to this clause that the private operators are deliberately slowing down the container handling operations so that they don’t lose out on revenue,” they say. Further, according to them, BOT contracts are allocated to private operators on long-term basis ranging from 30-50 years and the trade and economic conditions could go through lot of changes during these years. Hence, they believe, the government should keep the option open to amend the BOT contract, particularly revenue sharing arrangement and tariff structure, at regular intervals as per prevailing market conditions.
Most Trade Related Agencies Are Located in The Vicinity of the Port Helping Ease of Business
However, a senior official of CITPL, to whom The Dollar Business spoke to, refuted the allegations that CITPL is deliberately slowing down container handling operation to gain tariff advantage. She claimed that there are no financial or tariff advantages for the terminal in slowing down operations and that there is no clause to reduce charges (based on volume increase or decrease) in the notified tariff or in the licence agreement that CITPL has signed with the port. She also said, “the rebate we provide to a client is discussed and signed on a case to case basis. It has nothing to do with the contract. A terminal’s performance is measured by the volume it handles and the operator would never like to be seen as a non-performer.”
The Burden of Legacy
Like most of the major ports in the country, which have come up before the 90s, this port too has a huge burden of excess manpower and related financial stress. However, despite all odds, the biggest advantage for Chennai Port is that most of the trade-related agencies, both government and private such as Customs, freight forwarders, Assistant Drug Controller, etc., have their offices located in the vicinity of the port. Considering this, exporters and importers still prefer this port as it saves them time.
Engineering project cargo is one of the major cargo types handled by the port.
The port being one of the oldest ports in the region has developed an eco-system and a number of mainline vessels call on the port on regular basis. The port has also filed a report on dust-free handling of coal following the direction of the Supreme Court in March 2015. The cargo, which was once a major source of revenue for the port, is likely to come back to the port if all goes well and if the apex court decides in favour of the port.
Chennai Port has had a long and rich tradition of success since its inception and has been contributing to the region’s growth for more than 130 years now. So, it will be tough for anyone to completely nullify the importance of the port. But then, expectations are also high and the port needs to live up to its commercial legacy of the bygone era. “But can it?” is one big question that only Chennai Port authorities can answer!
“Dedicated jetty is being developed to handle coastal cargo”
TDB: You have additional charge as Chairman of Chennai Port Trust. Why are there so many major ports running without full-time Chairmen?
M. A. Bhaskarachar (MAB): It was a decision made by the central government that I take charge of Chennai Port in addition to Kamarajar Port. The government is taking action to fill up the positions and except for a few ports, most of major ports have full-time chairmen. Sometimes it is difficult to find a right candidate who meets all the parameters required to head a seaport and in such a scenario it is required to re-advertise and reconvene the SSC (Services Selection Committee). This, at times, takes time and the appointment gets delayed, otherwise the government believes in a proactive approach to fill up vacant positions on a proactive basis.
TDB: What are the major issues at Chennai Port that you would like to address on a priority basis?
MAB: The biggest challenge for Chennai Port is traffic congestion on the roads that connect the port to the national highway. It was not properly co-ordinated or regulated because of involvement of various agencies like container freight stations, terminal operators and traffic police. Although all the agencies are trying to establish a proper co-ordination to ease the congestion but the congestion issue is yet to be completely resolved. We have devised a mechanism with the support of city police that all trailers will move only in one row and no over-taking will be allowed. A single window system has been devised where all statutory documents like port entry pass and Customs will be checked and in case any cargo carrier fails to submit all the documents, the trailer will be turned back. Earlier truck operators used to join the queue and unnecessarily create blockades awaiting for their documents. A 24/7 monitoring of traffic has been put in place which has helped in resolving the congestion issue to a large extent. Now as only one row of trucks have been allowed, it leaves space for general traffic to move.
The next major problem has been mechanisation of cargo handling operation. Mobile Harbour Cranes (MHCs) were pressed into service through PPP mode but the cranes have not been in operation due to opposition from local stevedores. The entire process of allocation of the contract has been done through a transparent tendering process and yet stevedores filed cases in court to stop use of MHCs. Now the cranes are in operation and ships have started to come back to the port. Meanwhile, dredging work is being carried out to increase draft inside the port and only 5-10% of the work is still pending which we are hopeful will be completed in a few days. Once the dredging is completed, the draft will increase to 14.5-15 metre which will allow bigger vessels, and even gearless vessels, to sail in. A contractor involved in dredging was slapped with a termination notice due to delay in completion of the work. The entire process of re-tendering and reallocation of work would have taken a minimum 6 months time. Hence, after assuming charge, I withheld the termination order and asked the contractor to bring in one more dredger and finish the work. The work is going on and we are hopeful it will be completed as per the decided timeline.
TDB: What is the status of the appeal that the port had made before the Supreme Court of India to restart coal handling operations?MAB: The case has been referred by the Supreme Court to the Empowered Committee for review. We have submitted a report before the committee that the port will install advanced cargo handling facility to handle coal without creating much dust and pollution. We are expecting a verdict on the matter before March 31.
TDB: Handling of polluting cargo has already been stopped at Mumbai Port. How will you ensure pollution-free operation in a metropolis like Chennai?
MAB: We will not move coal by road, it will be transported by train. If coal is moved from the ship to the storage yard and further loaded onto the rail rakes through closed conveyor belts, there is very little chance that it will create pollution. We expect to start with 3-5 million tonnes of coal per annum.
TDB: What are the expansion and investment plans for the near future?
MAB: There are no expansion plans for the time being but we will focus more on improving our productivity. We are going to have a common railway yard to handle all varieties of cargo and the rail yard will be connected to the main rail line. The Chief Commercial Manager of Southern Railway had visited the port few days before the Rail Budget and informed us that an auto rail hub is proposed at Walajabad, on the outskirts of the city. A stockyard is being developed at the auto hub where all vehicles for export will be assembled and from there it will be moved directly inside the port by rail which will help faster and congestion-free movement.
We have reduced charges for the container trade, and vessel-related charges have been reduced for all vessels and there has been a hefty reduction on charges for mainline vessels. We have fully waived off rail side container handling charges inside the port area. We have asked CONCOR to bill the loading and unloading charges on the port.
TDB: What support do you expect from the government?
MAB: We are constructing a coastal jetty which is being developed with financial support from the central government. The government has asked all the major ports to develop exclusive berths to handle coastal cargo where ships will have a separate dedicated entry to the berths. It will not involve any Customs-related formalities which will definitely ease entry and exit of cargo.
“There is a need for periodical reassessment of BOT contracts”
TDB: What improvements, in terms of service and infrastructure, would you like to see at Chennai Port?
K. V. V. Giri (KVVG): From the point of view of service quality, the port is comparatively good. But still there are some issues. Though container handling operations have been privatised, the trade is facing difficulties due to congestion, particularly on approach roads to the port. The port’s main access gate road is also very narrow. Moreover, the pace of container handling operations by private container terminal operators – Chennai International Terminals Pvt. Ltd. (CITPL), owned and managed by PSA International, and Chennai Container Terminal Pvt. Ltd. (CCTPL) – is slow. CITPL has been facing labour issues for the last three months. We, as a trade association, have written a letter to CITPL seeking clarification, however we are yet to receive any response. For the development of the port, they should learn from private terminals like Krishnapatnam and Adani. Chennai Port Trust should make a clear, brief and open statement to all stakeholders regarding the available infrastructure and what needs to be done to help the trade. The congestion issue with regard to container cargo can definitely be resolved. Our past President P. S. Krishnan is a trustee of the Port Trust. He has devoted time and resource for the development of the Port. The association has discussed with all stakeholders and the city police to find ways to ease traffic congestion.
TDB: The port officials say that since the elevated four lane link road from the port to Maduravoyal couldn’t be completed, congestion continues to be an issue. Do you agree?
KVVG: We should look at ways to optimise the performance of the port with the available infrastructure. Last year we conducted a study to evaluate the performance of the terminal based on various parameters like time required to transport containers to terminal, dwell time, and average time required to load and unload a container. We found that there is a scope for reduction in dwell time. Containers have to pass through two gates to enter the private terminals – CITPL or CCTPL. Terminal operators should construct a separate road to drive out empty trailers from the terminals. It can be a permanent solution to the congestion problem generated by container carrier traffic. The general understanding is that the private terminal operators have signed a BOT agreement with the Port Trust, according to which if the containers handled at the terminal crosses a certain volume they have to pay an incentive to the Port. This is the reason why they are deliberately not focusing on increasing the container volume. As President of CHA association, I would request Port Trust to revisit the contract signed with private operators. Earlier, we used to get container related clearance inside the port area but it led to multiple problems and delays. But now there are 32 container freight stations located in the region to take care of paper work and other statutory clearances, hence the terminal operators should send off trailers without much delay but there seems to be some procedural issues that slow down the handling process. The BOT agreement was signed about 15 years back and the trade has gone through a lot of change in these years. Hence, the port authorities should evaluate the contract to suit the current requirements of the trade. The port should allow usage of available land to construct a trailer parking yard.
TDB: Despite all these challenges how has the port managed to remain the second highest container handling major port in the country?
KVVG: The reason is Custom House in Chennai provides ADC (Assistant Drug Controller) clearance apart from other allied agencies also being based out of the city. This provides the convenience of obtaining all required clearances in one location. Customs has also become very proactive now. The department has introduced single window clearance, which brings on board an average of 44 agencies involved in clearing of a consignment from the Customs. Ministry of Finance has launched a pilot project based on an online platform and once it is implemented the processing time will reduce further.
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