Why India Needs a Deep-Water Transshipment Port

TL;DR

India needs a domestic transshipment port to reduce reliance on Colombo, Singapore, and Dubai, retain up to $200–220 million in annual cargo-handling revenue, and protect trade from diplomatic or security disruptions. Kerala’s planned port is positioned 10 nautical miles from a major international shipping route and could accommodate vessels carrying 20,000–24,000 TEU.

Transcript

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Key Insights

• Transshipment is the transfer of cargo from smaller feeder vessels to large ships that consolidate goods from multiple locations before continuing to distant markets. The additional stop can still reduce total delivery costs because the long-distance portion of the journey benefits from greater carrying capacity.
• TEU is a measure based on the volume of a 20-foot container. Large container vessels carrying more than 10,000 TEU provide cost savings of at least 30% per TEU compared with smaller ships carrying fewer than 4,000 TEU, according to the figures presented.
• India has no transshipment hub, while China has more than six and major global hubs operate in Singapore, Shanghai, Busan, and Dubai. Consequently, 62% of Indian transshipment cargo is handled by foreign ports, including Colombo, Singapore, and Jebel Ali.
• Foreign transshipment dependence costs India up to $200 per TEU and causes Indian ports to lose approximately $200–220 million in potential annual cargo-handling revenue. A domestic hub is expected to save about ₹1,000 crore per year while creating an opportunity to earn foreign currency from other countries.
• Trade security is weakened when Indian cargo depends on facilities and carriers outside the country. Diplomatic tensions or increasing Chinese influence through the Belt and Road Initiative could disrupt services, leaving Indian importers and exporters exposed even when their goods and overseas customers are available.
• India’s fireworks industry demonstrates the commercial consequences of inadequate port capacity. Sivakasi produces roughly 90–95% of Indian fireworks and receives orders from Russia and Poland, but shipments must travel through Colombo, where Chinese ships reportedly refuse Indian fireworks cargo.
• The Kerala port is located only 10 nautical miles from the international shipping route connecting Europe, the Persian Gulf, and the Far East. That route accounts for 30% of world trade, allowing vessels to call at the port without making a substantial diversion from their itinerary.
• The port’s natural depth enables accommodation of vessels far larger than those served by existing Indian ports. Its waterway can be expanded to 24 meters, supporting ships of 20,000–24,000 TEU and up to 400 meters long, while the cited capacities of other Indian ports range from 4,500 to 8,000 TEU.

Questions & Answers

Q: What is a transshipment port and how does it work?

A transshipment port is a hub where cargo moves between vessels rather than traveling entirely on one ship. A smaller feeder vessel first carries containers from the origin to the hub. The containers are then loaded onto a larger ship that combines cargo from many smaller vessels and transports it to a distant market, improving efficiency through scale.

Q: Why can transshipment reduce international shipping costs?

Transshipment can reduce costs because it allows large vessels to carry consolidated cargo over the longest part of a journey. Ships carrying more than 10,000 TEU provide savings of at least 30% per TEU compared with smaller vessels carrying fewer than 4,000 TEU. Those scale benefits can outweigh the cost and time of transferring containers at an intermediate port.

Q: Why does India need its own transshipment hub?

India needs a domestic hub to retain cargo-handling revenue, reduce foreign-exchange spending, provide services to other countries, and limit exposure to overseas disruptions. Indian ports currently lose approximately $200–220 million in potential annual revenue from cargo originating in or destined for India. A domestic facility is expected to save about ₹1,000 crore each year.

Q: How dependent is India on foreign transshipment ports?

India has no transshipment hub, and 62% of its transshipment cargo is handled through foreign facilities such as Colombo, Singapore, and Jebel Ali. The transcript also states that more than 80% of India’s transshipped cargo enters through Colombo and Southeast Asia. This arrangement costs India more than $200 million annually and makes trade dependent on foreign infrastructure.

Q: Why is Kerala suitable for a deep-water transshipment port?

The Kerala location combines access to a major shipping corridor with favorable natural depth. It is only 10 nautical miles from the international route connecting Europe, the Persian Gulf, and the Far East, which accounts for 30% of world trade. Its waterway can also be expanded to 24 meters below sea level, allowing very large vessels to dock.

Q: What size ships could the Kerala port accommodate?

The planned Kerala port could handle ships carrying 20,000–24,000 TEU and measuring as much as 400 meters long. By comparison, the capacities cited for existing Indian ports are 5,000 TEU at Chennai, 4,500 TEU at Kochi, 8,000 TEU at Mundra, and 6,500 TEU at JNPT in Mumbai.

Q: How could the port improve India’s trade security?

A domestic transshipment port would reduce the risk created by relying on foreign hubs and carriers for essential cargo transfers. Diplomatic tension with countries hosting those facilities could place Indian trade in danger. The transcript also identifies growing Chinese influence through the Belt and Road Initiative as a security concern, even if India maintains friendly relations with Sri Lanka.

Q: How does inadequate port capacity affect Indian exporters?

Inadequate capacity forces exporters to send goods on smaller vessels to foreign hubs before they can join large international ships. Sivakasi, which produces roughly 90–95% of India’s fireworks, receives orders from Russia and Poland but must route shipments through Colombo. Chinese ships there reportedly refuse Indian fireworks cargo, preventing exporters from capturing available overseas demand.

Summary & Key Takeaways

• Transshipment transfers cargo from smaller feeder ships to larger vessels that consolidate goods from multiple origins. Although this adds an intermediate stop, large ships carrying more than 10,000 TEU can lower the cost per container by at least 30% compared with vessels carrying fewer than 4,000 TEU, improving trading efficiency.

• India has no domestic transshipment hub, so 62% of its transshipment cargo is handled through foreign ports such as Colombo, Singapore, and Jebel Ali. This dependence costs foreign exchange, forfeits cargo-handling revenue, creates exposure to diplomatic tensions, and can prevent Indian exporters from reaching international buyers when foreign carriers reject their goods.

• Kerala’s planned deep-water port is suited to transshipment because it lies only 10 nautical miles from an international route connecting Europe, the Persian Gulf, and the Far East. Its natural waterway can be expanded to a depth of 24 meters, enabling it to handle 20,000–24,000 TEU ships up to 400 meters long.