Transshipment: India’s Gateway to Global Markets

A transshipment port is a facility that allows for the transfer of cargo between different vessels. It serves as an important node along major global shipping routes. Goods and cargo – originating from multiple ports – can be consolidated and transferred onto larger container ships or bulk carriers for onward transportation to destination markets worldwide.

This transfer of cargo – known as transshipment – enables shipping lines to optimize their networks and vessel deployment. By aggregating shipments from various ports onto a single large vessel, transshipment ports help achieve economies of scale that reduce per-unit transportation costs. They act as vital consolidation and distribution hubs in global supply chains.

India’s Need for Transshipment

India’s heavy reliance on foreign transshipment hubs like Colombo and Singapore is costing its exporters and importers dearly. Each container that is transhipped through these ports incurs an additional expense of $80-100 per TEU. Given the size of India’s international trade– this translates to billions of dollars annually leaving the country as extra logistics costs.

Transshipment activity also allows for cargo consolidation onto very large container ships, which reduces the overall freight rates. However– without a capable transshipment port– Indian shippers have to rely on foreign hubs to access this economy of scale.

Depending so heavily on ports outside India makes the country vulnerable to geopolitical tensions in the regions where these hubs are located. Disruptions at transshipment ports can seriously impact Indian trade.

Earnings from transshipment business also mean greater revenue for port operators and local economies. Major hubs globally earn billions annually just through transshipment activities. Capturing this opportunity will support India’s port-led development and ‘Make in India’ vision.

Reliance on foreign ports also diminishes India’s bargaining power when negotiating transit terms. Developing self-sufficiency in transshipment infrastructure strengthens the country’s role and influence in global trade networks.

Benefits for Traders

Developing a capable transshipment port in India like Vizhinjam will directly benefit the country’s exporters and importers in several ways:

• Lower logistics costs – By consolidating cargo onto large hub-and-spoke vessels at an Indian transshipment port, traders can access significant cost savings in freight rates. This will enhance the competitiveness of Indian goods in international markets.
• Faster delivery times – With shorter deviation routes involving domestic transshipment instead of foreign hubs, cargo can reach its final destination quicker. Time savings translate to reduced inventory carrying costs and improved responsiveness.
• Wider market access – Very large container ships that Indian ports currently cannot handle will call at a port like Vizhinjam. This opens up new direct connections to a greater number of international destinations from India.
• Reliability – Dependence on a domestic transshipment facility mitigates risks of disruptions at foreign ports impacting Indian exports/imports due to issues like geopolitics, natural disasters etc.
• Efficiency – Advanced cargo handling capabilities and world-class infrastructure at the transshipment port will boost productivity and throughput volumes for traders.
• Single window services – A centralized transshipment hub provides ‘one stop shop’ convenience for– logistics, documentation, clearance and related requirements.

Why Vizhinjam is Strategically Advantageous?

Of the various locations proposed as potential transshipment hubs in India, the Vizhinjam site offers several strategic advantages that make it uniquely positioned to meet the country’s needs.

• Proximity to International shipping lane – Vizhinjam is only 7 nautical miles from the vital East-West international transit route. This minimizes deviations for carrier vessels, resulting in significant fuel savings and quick turnarounds.

• Natural deep draft – Its coastal waters provide a depth of 20 meters, allowing accommodation of the world’s largest container ships which is crucial for a transshipment hub. Other Indian ports require extensive dredging.

• Hinterland potential – Situated in Kerala which has strong trade links, Vizhinjam will also be able to handle a portion of Southern India’s local cargo apart from transshipment. This provides a dual revenue stream.

• Infrastructure readiness – The project has received all statutory clearances and is fully funded, with Phase I expected to be functional soon. This puts it ahead of other proposed sites still in planning stages.

• Green credentials – Vizhinjam’s reliance on renewable energy aligns with India’s climate commitments. Its development also causes minimal environmental disturbance.

Impact on the Economy

Vizhinjam’s full development as India’s first transshipment hub is expected to deliver significant economic and social benefits:

• Job creation – Construction and operations will generate thousands of direct and indirect jobs locally. Port-linked industries are also expected to emerge boosting employment.

• Cheaper exports – Lower logistics costs and faster delivery times will enhance the competitiveness of Indian goods overseas– supporting export-led growth nationwide.

• Increased trade capacity – The port’s scale will expand India’s ability to handle larger cargo volumes both for domestic trade as well as transshipment. This fuels greater economic activity.

• Reduced dependency – By developing indigenous transshipment capability, India will lessen reliance on foreign ports that can be unreliable due to external factors. This strengthens trade resilience.

• Sustainable development – As one of the world’s greenest ports using renewable energy, Vizhinjam aligns with India’s climate change commitments and promotes long-term sustainability.

• Regional growth – The port is projected to emerge as a major economic hub in Kerala, attracting industries and supporting the state’s development ambitions. Revenue through taxes would be natural and a Port City is very likely to come up around the harbour.