V.O.Chidambaranar Port Trust Preparation of Rapid Techno...

V.O.Chidambaranar Port Trust

Preparation of Rapid Techno-Economic Feasibility Report for Development of Colachel Port in Tamilnadu

Final Report (Revised) Dated 14.08.2015

EXECUTIVE SUMMARY

Colachel

RAPID TECHNO-ECONOMIC FEASIBILITY REPORT FOR DEVELOPMENT OF COLACHEL PORT AT TAMILNADU

FINAL REPORT

CP1832-FR-CP-FinalReportRevised-ExecutiveSummary-Ed1.docx

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FINAL REPORT

i

TABLE OF CONTENTS

EXECUTIVE SUMMARY ................................................................................................................. 2

1. INDIA'S TRANS-SHIPMENT TRAFFIC: AN UNADDRESSED OPPORTUNITY ...................................... 2

2. COLACHEL (ENAYAM) IS A SUITABLE LOCATION ..................................................................... 7

3. FIVE KEY IMPERATIVES TO ENSURE COLACHEL'S SUCCESS ..................................................... 11

4. ENAYAM IDENTIFIED AS THE PREFERRED SITE BASIS TECHNICAL EVALUATION ........................... 18

5. DETAILED PORT CONFIGURATION ....................................................................................... 20

6. CONNECTIVITY PLANNING ............................................................................................... 22

7. INITIAL ENVIRONMENTAL EVALUATION ................................................................................ 22

8. COST ESTIMATES .............................................................................................................. 23

9. FINANCIAL FEASIBILITY OF ENAYAM PORT ............................................................................ 24

10. PROJECT STRUCTURE .......................................................................................................... 25

11. IMPLEMENTATION PLAN .................................................................................................... 27

12. CONCLUSION ................................................................................................................. 27

DRAWINGS............................................................................................................................. 29


FINAL REPORT

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EXECUTIVE SUMMARY

1. INDIA'S TRANS-SHIPMENT TRAFFIC: AN UNADDRESSED OPPORTUNITY

Indian ports handled ~10.9 M TEUs of container cargo in 2014. Nearly 75% of this cargo was gateway (7.5 Mn TEUs), while ~25% was trans-shipped (TS) en-route to destination (2.8 Mn TEUs). Currently, all of India's trans-shipped cargo gets handled in ports outside of India. Colombo, Singapore and Klang handle more than 80% of this cargo, while Colombo alone handles around 1.2 Mn TEUs. Figure 1 below gives a detail port wise breakup of India's transhipment traffic.

Figure 1: Key TS hubs for Indian container cargo

India has not been able to create an attractive trans-shipment port alternative that can match the competing international ports on location, draft and overall cost economics. This has been the key reason for losing out on this opportunity to international ports. A compelling case however exists for attempting to change this scenario, mainly because of the following reasons:

1. ~Rs 1,500 Cr of potential port revenue (opportunity) loss per annum

Indian port industry loses out upto Rs. 1,500 Cr of revenues each year on trans-shipment handling of cargo originating / destined for India. This translates into an estimated total loss of Rs. 3,000-4,500 Cr to economy (assuming an economic multiplier of 2 – 3x for ports). The loss is even higher if opportunity to handle cargo emerging from other countries in the region is considered.

2. Inefficient logistics for a large segment of India's EXIM industry situated in South India

Trans-shipment of cargo results in logistic cost inefficiencies for Indian industry (especially from South India) given the extra port handling charges incurred at the trans-shipment hubs. The cost of this additional port handling is to the tune of USD 80-100 per TEU, which would be saved if the container is imported/ exported as direct gateway cargo instead of being trans-shipped. The figure below illustrates this cost inefficiency using an example of cargo movement for a typical exporter from Madurai, T.N. using trans-shipment in Colombo and shipping to Antwerp in Europe.

0

500

1,000

1,500

OtherInternational

Ports

565

Jebel Ali

96

Colombo

1,175

Klang

322

Singapore

627

V.O. CHIDAMBARANAR

CHENNAI

VISAKHAPATNAM

HALDIA

KOLKATA

Mundra

J.N.P.T. Others

COCHIN

Container cargo (in '000 TEUs)

Accounts for ~ 80% of TS cargo

Volume of Indian cargo trans-shipped at different TS hubs

4.9Total cargo

handled(in Mn TEUs)

32.6 10.4 13.6


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Figure 2: Simulation: Transport cost breakup for exports from Madurai district

A significant share of this cargo can be converted to Gateway by strategically locating a port near the Southern tip of India. This could also potentially help in further growth of trade due to improved cost competitiveness.

3. Opportunity to become a large trans-shipment hub for trade between US, EU, Africa and Asia

Container trans-shipment in Asia mainly occurs on three key routes – 1) US/ Europe to/from Far East, 2) Africa to/from Asia primarily Far East , 3) US/ Europe to/from India and Indian sub-continent.. The routes to/from Europe and America are the biggest routes as per current cargo traffic (combined ~60 Mn TEUs). Africa bound traffic although relatively smaller today (~10 Mn TEUs), it is expected to grow at a faster rate (6-7%) over the next few decades.

Figure 3: Route wise Traffic volumes

Currently, Asia has 3 main transhipment port clusters - Middle East Hub, South Asia Hub and S.E.Asia Hub. The following figure describes these clusters and the volume of traffic handled by each.

TS route through Colombo

Cost (in USD / TEU)

Gateway route through Colachel

Cost (in USD / TEU)

Inland Transport Madurai to Tuticorin 70-75 Madurai to Colachel 120-130

Port Charges

Tuticorin handling charge 120-130 - -

Colombo handling charge

75-80Colachel handling charge

75-80

Shipping costsTuticorin to Colombo 8-10 Colachel to Antwerp 65-70

Colombo to Antwerp 65-70 -

Total Overall logistics cost ~350 ~250

Upto 100 USD/ TEU of logistics cost can be saved for Madurai exporters by routing traffic through Indian gateway port

RoutesTraffic Volumes

(in Mn TEUs)Expected traffic

growth (in % YoY)

Europe to/ from Asia1 30 4-5%

North America to/from Asia2 28 4-5%

Africa to/from Asia 10 6-7%

1. Includes Europe to Asia and Europe to India, Indian Sub-Continent traffic 2. Includes . Includes US to Asia and Europe to India, Indian Sub-Continent traffiSource: BCG Analysis, IHS trade data


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Figure 4: Major TS hub clusters in Asia

While, most of the transhipment trade happens in the South East Asian and Middle East cluster, the South Asian location (including Southern tip of India) is in-fact the most efficient location for transhipment of cargo moving to Africa, EU or East Coast of America.

i. Indian-subcontinent to US/ Europe traffic currently trans-shipped in Singapore cluster

Currently, ~70% of cargo from Bangladesh and Myanmar gets trans-shipped in Singapore. A trans-shipment hub at the Southern tip of India can save voyage time by 5-6 days for cargo bound to Africa, EU or East coast of America, resulting in potential cost savings of 12-15%. Currently, only Colombo port is the alternative in the South Asia zone with a capacity of ~5 Mn TEU. Whereas, the South East Asian cluster already handles more than 50M TEUs. Thus, due to this significant scale difference South East Asia continues to be the main aggregation point. Emergence of new hubs such as Colachel and further growth of Indian container cargo traffic can change this scenario in the near future.

Port Klang, TanjungPelepas

Singapore

Colombo

Jebel Ali

Salalah

~20 MnTEU

~50 MnTEU

~4.5 MnTEU

1. Relay Hub for US East Coast/ Europe to Far East Traffic

2. Relay hub for Africa to Asia traffic

1. TS hub for India & India-sub continent to US East Coast/Europe traffic

1. TS hub for India & India-sub continent to US East Coast /Europe traffic

2. TS hub for US East Coast/Europe to Far East traffic

1 2 3

Indian sub-continent to/from Europe/ West Coast US

Current RouteVoyage time

(in days)Route with

Indian TS hubVoyage time

(in days)

Chittagong to Singapore (feeder)

5-6Chittagong to Colachel (feeder)

4-5

Singapore to Antwerp

25-26Colachel to Antwerp

20-21

Total voyage time 30-31Total voyage time

25-26


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Figure 5: Potential time and cost savings for liners by using Colachel (I)

ii. US/ Europe to Far East traffic currently trans-shipped/ relayed in the Middle Eastern TS hub

US/ Europe to Far East (including China) is the busiest trade route with volumes of ~30 Mn TEUs. Liners have started using the Middle Eastern cluster ports, mainly Salalah and Jebel Ali as relay hubs for this route, with one service bringing cargo from China to Salalah, while another service picks up this cargo and moves to US West Coast. TS port in South India is well placed to attract some of this relay traffic as it will account for ~1 day voyage time saving and 2-3% shipping cost savings.

Port Klang

Singapore

Indian TS Hub

To US/ Europe

From Bangladesh, Myanmar & other Indian subcontinent

Current routesPotential changed routes due to Colachel

Shipping cost savings of 12-15%Time Savings of 5-6 days

Note: % of shipping cost savings calculated only on shipping voyage costs (fuel, opexetc.) and does not include port charges, inland transport charges

Europe/ West Coast US to/from Far East


(in days)Route with


(in days)

Antwerp to Salalah

~16Antwerp to Colachel

~20

Salalah to Shanghai (relay)

~17Colachel to Shanghai (relay)

~12

Total voyage time

~33Total voyage time

~32


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Figure 6: Potential time and cost savings for liners by using Colachel (II)

iii. Africa to Asia (Far East) traffic currently trans-shipped/ relayed in the Middle Eastern TS hub

Africa to Asia trade is expected to grow at a 6-7% rate in the next decade. Currently, most of the traffic gets relayed in Middle Eastern port cluster with the cargo arriving from China and destined to US / EU. A TS hub such as Colachel will once again be an attractive alternative as will result in voyage time saving of3-4 days and potential cost savings of 10-12% for the liners.

Jebel Ali

Salalah

Indian TS hub

To China (Far-East)

From US/ Europe (relayed in ME)


Shipping cost savings of 2-3%Time Savings of ~1 day

Note: % of shipping cost savings calculated only on shipping voyage costs (fuel, opex etc.) and does not include port charges, inland transport charges

Africa to/ from Far East


(in days)Route with


(in days)

Cape Town to Salalah

13-14Cape Town to Colachel

14-15

Salalah to Shanghai (relay)

17-18Colachel to Shanghai (relay)

12-13

Total voyage time

30-31Total voyage time

27-28


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Figure 7: Potential time and cost savings for liners by using Colachel (III)

4. Mitigate risk to Indian trade due to dependence on international ports

The current scenario where 25% of the country's EXIM cargo is trans-shipped at international ports is not ideal since this makes Indian industries vulnerable to increase in costs, potential inefficiencies, congestion issues etc. at these international ports. This creates long term risks for competitiveness of India's trade and thus is another important reason for promoting a TS port in India.

2. COLACHEL (ENAYAM) IS A SUITABLE LOCATION

Colachel's suitability and relative strength as a transhipment location, versus already existing and proposed ports, has been evaluated on four key parameters. These parameters have been identified using learning from successful global trans-shipment hub case examples and from discussions with leading shipping liners and port operators.

1. Proximity to main line routes

The Suez route accounts for a major share of the total global container traffic flows and the mainline vessels use this route for transporting cargo between US, Europe and Asia. Nearly ~80% of India's current container trans-shipment cargo also moves through this route.

Jebel Ali

Salalah

Indian TS hub

To China (Far-East)

From Africa


Shipping cost savings of 10-12%Time Savings of 3-4 days

Note: % of shipping cost savings calculated only on shipping voyage costs (fuel, opexetc.) and does not include port charges, inland transport charges

Summary: There is a strong economic case for developing a new container port in India that can attract Indian and regional trans-shipment traffic back from the current hubs. Annually, ~2.8 Mn TEU of India's traffic gets trans-shipped at Colombo, Singapore, Klang and other foreign ports, which is a significant loss of revenue for Indian ports, builds inefficiencies in logistics and creates risk to country's competitiveness on export trade. India is also losing out on the opportunity to become a large hub for Asia –Africa, Asia-US/ Europe container traffic trade.


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Liners prefer minimum deviation from their routes when selecting a trans-shipment port. As described in the figure below, it is clearly evident that all ports on east and west coasts of India are located at a distance of >1 day of voyage from the shipping route, which makes these locations unattractive for trans-shipment. Colachel is a promising location given it is located on the south-west coast of India at only a~ 14 NM deviation (1-2 hours) from the Suez route. Cochin on the other hand requires a higher deviation of up to 8 hours.

Figure 8: Deviations from the mainline route to Indian ports

2. Availability of deep draft

Global vessel sizes have significantly increased in the last decade and most main liner vessels have capacities of 10,000 TEUs and above, with the largest vessel reaching a capacity of 18,000 TEUs. Hence, availability of adequate draft has become an important factor in attracting shipping lines. The current Indian ports which are <1 day distance from main route have insufficient drafts to attract mainline vessels. Cochin has 14.50 m draft and Tuticorin has only 14.10 m draft. Only one terminal (CICT) has draft of 18 m (with dredging) in Colombo. Colachel on the other hand has a natural deep draft of ~20m which makes it feasible for the largest vessels to call the port. Minimal need for maintenance dredging also gives Colachel a cost edge over Colombo.

3. Scale of operation and port capacity

Shipping liners keep a long term view when deciding their preferred trans-shipment (TS) port given the costs of re-configuring existing route networks. Scale and assurance of traffic are two important factors that influence this decision. A quick scan of the successful TS ports in the region show that all of them have planned capacities of more than 10 Mn TEUs. The following figure illustrates the capacity of key nearby TS ports.

CochinTuticorin

Chennai

JNPT

Colachel

~1.5-2 days

~4-6 hours

~1-2 hours

~1 – 1.5 days

~2-4 hours

Krishnapatnam

~1.2 – 1.6 days

Suez Route for US/ Europe to Far East trade

Colombo

Zone with <1 day of deviation

~1 hour


FINAL REPORT

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Figure 9: Existing & planned capacities of TS ports

1. TS hubs create value by aggregating cargo from sub scale routes to larger parcel sizes and balance

import / export traffic for long routes. Scale in operations ensures better optimization of parcel sizes 2. Scale also enables use of bigger feeder vessels and dedicated runs thus reducing feeder costs 3. Scale brings down overhead costs and allows port to become more competitive on pricing 4. Scale aids in faster development of the port ecosystem and in-turn allows for associated companies to

attract talent

Colachel has 10 M TEUs capacity (assuming no coal handling capacity) due to its 4km long shoreline which provides sufficient scale for the port. This capacity can be further expanded to ~18 M TEUs (post phase III of the port).

In order to realize full benefits of scale, it is recommended that only one transhipment port project be considered, atleast till the available capacity is fully utilized.

4. Assurance and support of Gateway traffic

Presence of significant assured Gateway cargo is often a big factor in liners' decision to move to a new location since it brings down the volume risk. This also becomes a key differentiator as it drives higher scale of operations for the liners and allows them to combine their gateway traffic with trans–shipment traffic without need for a feeder movement.

Colachel has high potential for gateway cargo given its proximity and access to hinterland comprising of T.N. (primary hinterland) and also parts of Kerala, Karnataka and A.P. (secondary hinterland). The hinterland currently generates 2.3 Mn TEUs of container cargo (2014). Out of this, 60% of cargo is currently trans-shipped through foreign ports. A large share of this traffic could be re-directed as gateway through Colachel given better logistic cost economics. Colachel is expected to convert up to 40-50% of the hinterland TS traffic to Gateway. The following figure illustrates the same.

In Mn TEUs SingaporePort

KlangTanjungPelepas

ColomboHam-

bantotaGalle

Jebel Ali

SalalahPort

Abdullah

Current capacity ~32 Mn ~16 Mn ~9 Mn ~5 Mn 0 0 ~15 Mn ~5 Mn ~20 Mn

Planned capacity 1 50 Mn 30 Mn NA 13 Mn 20 Mn 10 Mn 19 Mn 8 Mn 25 Mn

1. Planned capacity includes existing capacityNote: Planned capacity based on announcements and press release from the port authorities; can vary significantly from actual capacity expansion implemented


FINAL REPORT

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Figure 10: TS traffic converted to gateway traffic through Enayam

Cochin has limited hinterland cargo from Kerala and requires interstate transport for access to T.N. hinterland. Long delays in interstate checkpoints (e.g. delays in Walayar can be as high as 18-24 hours) have made it infeasible for T.N. exporters/ importers to use Cochin for shipping. Colombo, has limited gateway cargo and >70% of its current traffic is TS traffic. A port at Colachel would aggregate the hinterland traffic wherever logistics costs are to its favour.

5. Ease of doing business

High productivity and reliability is critical for main liners given an hour lost on a vessel can result in losses of $5000 – 8000. Productivity and reliability in turn depends on design of the port and efficiency of the port labor. As per the shipping operators, freight forwarders and the inland logistics providers interviewed during the study, labour scenario in T.N. is viewed as more stable especially in comparison with Cochin and the state of Kerala. Labour strikes in Kerala have affected operations in Cochin port (4,152 man days have been lost in Cochin port last year). Further, flash strikes in districts also create difficulties for transporters.

Vizhinjam is another location proposed as trans-shipment hub in the same region. Basis feasibility reports on Vizhinjam, it appears to have very similar characteristic on draft and proximity to routes. Though, it will probably be at a disadvantage on gateway support and ease of doing business due to its location in Kerala (similar to Cochin). Further, Vizhinjam may have constraints on scale compared to Colachel which has 10M TEUs capacity due to the 4km long shoreline available in the Enayam site.

Economic simulation: ~ 30 % cost savings for cargo from Madurai district

0

200

400

600

Transport cost per TEU (in USD)

Madurai-Coalchel-Europe

246

Madurai-Chennai-

Colombo-Europe

509

Madurai-Cochin-

Colombo-Europe

383

Madurai-Tuticorin-Colombo-

Europe

354

-31%

TS in Colombo

TS in Colachel

Port handling costInland cost Shipping Cost

Potential to convert 40-50 % of TS traffic from South Indian ports to gateway

Port in hinterlandTS cargo (in '000 TEUs)

% of TS converted to direct cargo

CHENNAI 810 20-40%

V.O. CHIDAMBARANAR 433 >90%

COCHIN 204 >90%

Chennai

TuticorinColachel

Cochin

Contour of indif ferenceIllustration

Note: New Mangalore not considered for analysis as there is is no TS container cargo from New Mangalore

Area span where gateway through Colachel is more economical than TS through Colombo or other hubs

Krishnaptnam


FINAL REPORT

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3. FIVE KEY IMPERATIVES TO ENSURE COLACHEL'S success

While, there are clear advantages that Colachel enjoys as a potential trans-shipment location as discussed in the previous section, it will still be difficult for Colachel to compete and win traffic from Colombo and other competing ports, given their strong incumbent position. Colachel's success to a great extent will depend on its ability to convince a major shipping liner to become anchor client and re-route its traffic from the competing ports. As mentioned earlier, liners take a long term view and consider several factors while deciding their preferred port of call. As part of the study, the consultants have spoken with multiple leading shipping liners, leading Indian and International port operators and also studied in detail how other major container ports in the world have fared to understand the key factors for convincing liners to move traffic to a new port. Basis these discussions, the following five 'must have' or imperatives have been identified for ensuring success.

1. Provide assurance of sufficient feeder capacity and cost efficient network

As per the traffic projections for trans-shipment traffic at Colachel Port, a feeder network with capacity of ~27,300 TEUs for a weekly service would be required in 2025. Currently, the capacity of Indian feeder network for a weekly service is ~5,100 TEUs, which is expected to grow to only ~8,300 TEUs by 2025.

Figure 11: Indian feeder capacity available vs. requirement for Colachel

Clearly, the Indian feeder network will be insufficient to serve the needs of Colachel Port and it will be difficult to expand the capacity of Indian feeder vessels aggressively to meet requirement. This will become an important roadblock in making liners to move traffic to Colachel.

8,3005,100

27,300

0

10,000

20,000

30,000

20252015

TEUs for weekly service

-70%

Indian Feeder capacity

Demand at Colachel Port

Indian feeder network will only be able to serve ~30% of Colachel's demand in 2025

Summary: Colachel appears to be an attractive and potentially the strongest option amongst all available and proposed port options in South India. It's proximity to the mainline route (only 1-2 hours of travel), availability of natural deep draft of 20 m and a relatively better perception on labour and ease of doing business makes it the best bet for the trans-shipment port location. Further, better draft versus Colombo and potential for significant gateway cargo from hinterland also gives Colachel an edge over Colombo.


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To overcome this constraint, relaxation of Cabotage law will be required to attract international feeder networks to Colachel. The most suitable option is to completely relax Cabotage for container vessel movement in India, potentially around the time when the port is ready for operations. As shown in the below graph, Cabotage restriction on container vessel only serves to protect 0.6 Mn of coastal traffic as the trans-shipment traffic is anyways catered by the international feeder network even today. The other option is to relax Cabotage for Colachel specifically.

Figure 12: Cabotage relaxation for Colachel

2. Ensure all port related logistic costs to be cheaper than Colombo (atleast for initial ~5 years)

The table below compares the port charges at Vallarpadam Terminal, Cochin Port with the competing Trans-shipment ports in the region.

Vallarpadam

(Cochin) Colombo Singapore Klang

Vessel Related Charges - Liner 8 9 6 6

Vessel Related Charges - Feeder 5 2 2 2

Cargo handling charges 149 86 122 84

Service Tax (14%) 21 - - -

Total 183 97 130 92

Table 1: Comparison of Port charges for competing trans-shipment ports

In order for Colachel Port to be successful in attracting traffic, it is critical to not just match the port charges with competing ports, especially Colombo Port, but also to charge lower than Colombo Port for a few years. It is important to give discount over and above the port charges of Colombo Port for the following reasons:

2.8

0.6

0

10

8

6

Coastal

Transhipped

7.5Gateway

in Mn TEU

Protected by cabotage

Adverse effect of cabotage

Unaffected by of cabotage

India's Container traffic

Within container, effectively 0.6 M TEUsprotected by cabotage

Recommendation: Relax cabotage only for container ships

• Cabotage restriction protects only 0.6M TEUs of coastal traffic

• Cabotage relaxation will not have any major impact on the Indian shipping operators


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To make it economically viable for shipping lines to invest in capital cost of shifting existing operations (building facilities/ infrastructure for employees, office buildings etc.)

Provide economic incentive for liners to shift and incur the cost of re-configuring their routes

To negate the impact of 7-14% volume-based discounts at Colombo port for main lines

To counter the cost of additional shipping time of 1-2 days for feeder traffic to east coast of India

It is recommended that a minimum discount of 15% on the port charges of Colombo Port may be given for trans-shipment traffic for a time period of 5 years to establish minimum scale of traffic in Colachel. Further, it is recommended that either the service tax may be waived off or the discount on port charges may be increased to offset the additional cost of service tax at Colachel Port.

3. Reducing complexity and time delays in the customs approval process

Customs clearance process in Indian ports is perceived to be more complex and time consuming as compared to global ports. This is one of the reasons for high turnaround time and cargo lead times in India. The following table compares the custom process and it's perception versus the competing trans-shipment ports. In terms of customer's perception of customs process India ranks a lowly 78.

Figure 13: Comparison of customs process benchmarks

Performance IndicatorsIndian ports

Klang SingaporeJebel

AliColombo

Average number of documents for Import

10 4 3 5 7

Average number of documents for Export

7 4 3 3 7

Average number of signatures required for Import

27 5 3 3 10

Average number of signatures required for Import

22 3 3 3 13

Rank as per perception of customs process

78 14 1 3 72

Clearance Lead Time in days for Import

2 1 1 2 2

Clearance Lead Time in days for Export

2 1 2 2 2

Source: World Bank Study - World Development Indicators 2015


FINAL REPORT

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Figure 14: Custom process flow

Cargo leaves CFS

Owner

Sh

ip O

per

ato

rC

ust

om

s O

ffic

ial

Cu

sto

ms

Ho

use

Ag

ent

CF

S

IGM files in ICEGATE

Application for IGM amendment

submitted

Supporting proof acquired from origin point

IGM Verified Cleared? Inward entry issued

Rummaging of vessel by customs officer

Vessel Clearance provided

Cargo Unloaded

Delivery Order issued

Form 13 filled for gate

clearance1

Cargo transported

to CFS

Selected cargo

weighed & scanned

Selected container

opened for physical

verification

Cargo cleared &

Out of charge issued

Cargo reached

destination

Customs assessment done (duty &

documentation verified)2

Cargo selected for physical verification

i

ii

iv

iii

Yes

No

Ship leaves port of loading

Ship leaves the port of

discharge

BOE filed online at ICEGATE

Declaration form printed and signed

Printed copies of supporting document submitted to

Customs, CFS, Port

Additional forms submitted to FSSAI, Min of Agri etc. for clearance (depends

on type of cargo)

Form 13 cleared by customs at

Port Gate

Cargo Moved out of port

Normal time = 1 day Reported delays of upto 12-14 days

Normal time = 0.5 hour Reported delays of upto 2-3 hours

Normal time = 1 dayReported delays of upto 2-3 days

Normal time =1-2 hours

Reported delays of upto 6 hrs


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Four key issues in the custom process (figure above) have been identified through discussions with customers, Container Freight Station (CFS) agents, liners and port operators:

i. Complex and time consuming process for rectifying errors in Import General Manifest (IGM)

Complex form with >80 inputs that often (~10% as reported by users) results in clerical errors.

Amendment allowed only by ship operator through a written application. The process can take upto 12-14 days and during this time the container lies with the port or with CFS.

Customs require verification from the port of landing before changes can be made

Proposed solution: Amendment process can be made simpler by allowing amendment applications online and identifying set of non sensitive fields (non cargo related) that can be edited online and without need for submitting additional documents or requiring port of landing verification.

ii. Significant documentation burden for Bill of Entry (BoE) and opportunity for digitization:

BoE requires 12-15 accompanying documents and physical copies needs to be submitted to multiple agencies e.g. FSSAI, Ministry of Agriculture etc. (estimated 120 – 150 printouts required)

Most of these forms ask for same information e.g. both packing list and invoice have data fields on consignee name, address, description of cargo (weight, dimension, quantity) etc.

Online ICEGATE system currently has limited provisions for attaching supporting documents.

Proposed solution: Simplify by combining and reducing number of forms/ fields required. e.g. Singapore have combined documents like invoice and packing lists. Also, develop ICEGATE into a single window platforms for seamless sharing of information with all stakeholders e.g. Dubai Trade and the Mirsal 2 system implemented in Jebel Ali

iii. Allowing parallel loading/ unloading while vessel rummaging can save 2 – 3 hours delay

Often, 2 – 3 hours delay occurs in loading/ unloading as the process cannot be initiated until the rummaging and clearance given by custom officer. In many leading ports such as Singapore, Customs allow the process to start in parallel, thus saving the time delay.

Proposed solution: Allow loading/ unloading of containers in parallel with rummaging process

iv. Implementation of OCR technology versus Form 13 submission process will reduce wait times at gates

In ports where en block movement has been identified e.g. JNPT, gate movement of goods requires submission of Form 13 by CFS agent and approval by customs officer. This often leads to congestion of up to 12-18 hours at the gates.

Use of technologies like OCR can help do away with the paper form submission process, while still allowing for tracking of vehicles & containers in and out of the port.

4. Ensure evacuation speed by establishing last mile road and rail connectivity with the port (for gateway traffic)

Enayam (site for Colachel port) is at a distance of 11.7 km from NH 47 that connects to both T.N. and Kerala. NH 47 further connects to NH 7 which is the main arterial route and along which most of the hinterland


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industries are located. Developing a road connection with NH 47 has been identified as the fastest and cost efficient way of connecting the port with the hinterland.

The map below shows the existing highways and the status of their upgradation projects. NH 7 is an important corridor, which would connect the port to the hinterland industries and the Nanguneri SEZ. In order to establish connectivity with NH 7, it is vital to complete the development of the greenfield 4-lane NH-47 and the last mile connectivity to the NH-47, with the support of NHAI and State Government.

Figure 15: Road connectivity

As for rail connectivity, closest station to Enayam is Eraniel (around 10 kms off from the port site). The best option is to establish 10 km of railway track between Eraniel and Enayam to connect the port to the railway network.

The existing rail network and the ongoing rail connectivity projects are described in the map below.

National Highway 71. Current status: Four Lane

(minimum congestion)2. Future Plan : Not required3. Implications for Enayam:

Road connects key industrial hubs of Tirunelveli including Nanguneri SEZ)

Critical to connect Enayam to NH 7 through NH 47

National Highway 471. Current status: Two Lane

(problems with congestion)2. Future Plan : Four lane road

planned• TN stretch: Greenfield

project of 55 km (Kanyakumari to Kadayal ); tender to be released in 2-3 months

• Kerala stretch: In planning stage

3. Implications for Colachel: Closest highway from Enayam

Most feasible option for connecting to Enayam;Critical to develop both T.N. &Kerala stretch in time

East Coast Road1. Current status: ~60 km of 2

lane, ~60 km of <2 lane2. Future Plan : 764 km of 4

lane proposed by the state3. Implications for Enayam:

Option to connect to other ports and industrial hubs on the east coast

Plan to develop 11.7 km four- lane road connecting the port with NH 47; investment requirement of ~Rs. 150 crores


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Figure 16: Rail connectivity

Connectivity to Enayam port is contingent on the following projects being completed in time before Colachel becomes operational.

1. Four laning of NH 47 – both in T.N. and in Kerala 2. Road connectivity between Enayam and NH 47 (~11.7 km road stretch) 3. Doubling of railway line between Eraniel and Tirunelveli 4. Rail connectivity between Enayam (location of Colachel port) and Eraniel (~10 km railway stretch)

Connectivity needs to be established before the port gets operationalized. This would require collaboration with all relevant authorities – Indian Railways, NHAI, State Govt., local administration along with the port administration.

5. Make one of the top liner(s) anchor investor in the port for phase 1

Past examples of successful TS hubs like Tanjung Pelepas in Malaysia has shown that having a shipping liner as anchor investor in the port (Maersk in case of Tanjung) is eventually the determinant of success. Making the liner invest in the port makes them a stakeholder in the port's success and thus incentivizes them to move their existing traffic and establish a minimum scale of operation. The liners are also increasingly quite keen to operate from a port where they have investments due to the following reasons:

Ability to influence port planning decisions and port operations

Ability to take long term bets while planning routes/ vessel commissioning decisions

Improved overall cost economics and flexibility on pricing

Given, the main competitor for Colachel will be Colombo, it is important to attract one of the top 3 liners (by volume) to move to Colachel. The following table illustrates the liner capacity distribution in the TS hubs in the region. The top 3 liners are Maersk, MSC and CMA CGM. Maersk has a minority stake in SAGT in Colombo, while the others do not have any stake in Colombo. Thus, Colachel has an opportunity to bring one or more of them on-board as the anchor client. However, it should be noted that liners would only be open to investing in the project only when they are convinced on the earlier mentioned imperatives and see substantial progress on physical infrastructure development for the port.

Eraniel

NanguneriSEZ

Enayam

TuticorinTirunelveli

Proposed Rail Line

Existing Single Rail line

Existing Double Rail line

• ~10 km rail line to be constructed to connect with the existing line at Eraniel to Tirunelveli

• Investment requirement of ~Rs. 70 crores

The existing ~65 km double line connecting

Tuticorin and Tirunelveli

The existing ~90 km single line connecting, Eraniel and Tirunelveli

has been proposed to be doubled in the existing

budget


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Figure 17: Share of liners in the region (by volume)

4. ENAYAM IDENTIFIED AS THE PREFERRED SITE BASIS TECHNICAL EVALUATION

In order to select the most optimal site for port development, an exhaustive study of the region has been conducted and four potential sites have been selected for detail evaluation – Kanyakumari, Manavakakurichi, Colachel and Enayam given similar distances from the main line and similar draft availability. The following figure shows their location on the coastline of the south-west coast of T.N.

Figure 18: Proposed alternative locations and layouts.

8%

MSC 11%

Maersk 15%

% share of TS hubs in the region (by Vol)

4%NOL

4%Hanjin

PIL 4%

MOL 4%

COSCO 4%

OOCL 5%

Evergreen 6%

CMA-CGM

Summary: Key imperatives required for ensuring success of Colachel port 1. 15% lower cost vs. Colombo through lower port charges and potential waiver of service tax 2. Simplification of customs processes – IGM amendment process to be simplified, all documentation

(including BoE declarations) to be migrated to EDI, 3. Cabotage to be waived on container vessels movement in India; and at the minimum for Colachel

port 4. NH 47 to be made four lane, connections to NH 47 and Eraniel train station to be established 5. One of the top 3 liners to be brought in as an anchor investor for the port

All of above are 'must haves' and planned well before operationalizing the port


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Amongst the four options Enayam emerges as the best option on the basis of ease of construction and expansion, connectivity, environmental issues and maintenance overhead. A qualitative assessment of the four locations is summarized in the following table:

Traffic potential for the proposed port has been simulated (table below) basis scenarios of India container growth and trade growth on existing and emerging routes. The projections have been developed assuming all the pre-requisites laid out in the previous section will be achieved and implemented in time. It also assumes a slow ramp up of traffic as a new port typically takes 5-7 years to reach a stable traffic share on the target routes. Further, the estimates do not take into account any potential change in traffic due to new ports in the region that may come up in the future. The port authority should re-assess the traffic scenario as plans of new container ports in the region (ports in Hambantota in Sri Lanka, Male in Maldives etc.) and capacity expansion of current ports (e.g. Colombo) are confirmed.

Enayam Colachel Manavalakurichi Kanyakumari

Population Density

Low Very high High Very high

Accessiblity& maneouverability

Good vessel operability High vessel operability High vessel operability Good vessel operability

Expandability Easy to expand, even beyond phase 3

Difficult to expand Difficult to expand Easy to expand

Environmental & social impact

Low impact High impact Medium impact Medium impact

Impact of tourismand housing

Low impact; shoreline free of houses

High impact on housing High impact on housing High impact on tourism

Hinterland Connectivity

Longer distance to NH -7 and rail line



Best connectivity to NH 7 and rail line

Recommended option


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Figure 19: Traffic Estimates

5. DETAILED PORT CONFIGURATION

The port development has been planned in three phases and the details on the port specifications for all 3 phases is summarized in the below table.

Description Units Phase 1

(2018-2020) Phase 2

(2021-2025) Phase 3

(2026-2030)

Container Terminal Capacity TEU 1,606,590 5,623,064 8,032,949

Bulk Capacity (coal) M. Ton 0.00 3.30 6.60

Berths (total) m 1,400 3,800 5,400

Container m 800 2,800 4,000

Multipurpose m 400 400 400

Ancillary vessels m 200 200 200

Solid bulk m 0 400 800

Terminals/Yards/Areas Ha 93 249 379

Container Ha 41 133 228

Container CargoBase Case

units 2020 2025 2030 2035 2040Gateway in Mn TEU 1.0 2.1 2.9 3.9 5.0 Trans-shipment in Mn TEU 0.7 2.8 3.9 5.2 8.0 Total 1.7 4.9 6.7 9.1 12.9

Aggressive Caseunits 2020 2025 2030 2035 2040

Gateway in Mn TEU 1.1 2.4 3.4 4.7 5.8 Trans-shipment in Mn TEU 0.9 3.5 5.2 8.8 13.1 Total 2.0 5.9 8.6 13.5 18.9

Conservative caseunits 2020 2025 2030 2035 2040

Gateway in Mn TEU 0.9 1.6 2.1 2.8 3.7 Trans-shipment in Mn TEU 0.5 2.0 2.6 3.3 4.2 Total 1.4 3.5 4.7 6.1 7.8

Bulk Cargo (Coal)units 2020 2025 2030 2035 2040

Base Case in Mn MT - 3.3 6.6 9.9 9.9 Aggressive Case in Mn MT 6.6 23.1 26.4 29.7 29.7 Conservative Case in Mn MT - - - - -


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General services & multipurpose Ha 19 19 19

Solid bulk terminal Ha 0 9 20

Industrial area Ha 33 88 112

Breakwaters m 4,639 7,237 8,904

Rubble mound m 2,133 2,842 3,402

Vertical m 2,506 4,395 5,502

Dredging and reclamation

Dredging Cu.m 6,819,280 13,151,903 14,973,161

Reclamation Cu.m 3,303,993 12,866,152 19,261,679

Figure 20: Project phasing details (Cumulative figures)

The layouts for the same can be found in the figure below. The layout earmarks 2X400 m berths for handling of coal. These are polyvalent berths which can be converted to container berths during phase 2 and 3 if required to increase the capacity of the port to 10 Mn TEUs.

Figure 21: Enayam port layout


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6. CONNECTIVITY PLANNING

The following linkages have been preliminarily designed:

Railway: A new double-track railway which connects to the existing railway has been planned. It is almost 10 km long, with a maximum slope of 0.12%, and a minimum radius of 500 m.

Road: A four lane road will connect the port with the National Highway NH-47. It has a length of 11.8 km, a maximum slope of 5 % and a minimum radius of 300.

These linkages run almost perpendicular to the shore, within the Vilavancode Taluk of Kanyakumari District and they cross several villages of that taluk. Specifically, the villages of Karungal, Keezhkulam, Paloor, Kylliyoor and Nattalam will be affected.

The following table shows the initial rough estimates of the impacts of land acquisition for the railway and road links at each of the affected villages:

VILLAGES ROAD LINKAGE RAILWAY LINKAGE

Length (m) Area (Sq.m) Length (m) Area (Sq.m)

Karungal (TP) Midalam 390 23,400 - -

Keezhkulam 2,765 165,900 3,813 152,500

Paloor 3,084 185,000 3,136 125,400

Kylliyoor 1,711 102,700 795 31,800

Nattalam 3,843 230,600 2,242 89,700

TOTAL 11,793 707,600 9,986 399,400

Figure 22: Rough impact estimates on land acquisition

As stated before, the layout and, in turn, the affected villages, lengths and areas can be modified in latter phases of the project, when the design will be optimized.

NHAI is currently undertaking a project to expand NH 47. The project is under NHDP-Phase-III and includes four laning of NH 47 from Villukuri to Kanyakumari and four laning of NH 47B from Nagercoil to Kavalkinaru. Currently land acquisition for the project is ongoing. The stretch of NH 47 & NH 47 B from Villukuri to Nagercoil to Kavalkinaru is expected to be the principal evacuation route for the Colachel port. This stretch would connect NH 47 to NH 7 which then would further connect to the key hinterland areas of the port. This stretch is expected to handle approximately ~1 Mn trailers annually (import, export and empty trailers) by 2025 for the Colachel port. To ensure that the road has the capacity to handle the trailer volumes generated by the container traffic in the Colachel port without congestion, the planned road from Villukuri to Nagercoil to Kavalkinaru can be developed as a six lane road under the current road expansion project. This project can further cover the extension of the six lane road till the location of the Enayam port. Requisite land acquisition can be commenced along with the current land acquisition for the broadening of NH 47.

7. INITIAL ENVIRONMENTAL EVALUATION

The Initial Environmental Examination (IEE) deals with the environmental issues related to the project in order to assess the likely impact and determine whether the Project will be environmentally feasible.


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Among the four initially proposed locations, Enayam has lower environmental impacts than the others with respect to dredging, cultural sites and its low impact on property due to its low population. Port expansion will not need a wide extra inland area since the land reclamation area will provide room for port facilities and industries.

Development of the port will accomplish one of the main objectives of the project bringing significant benefits to local people and to the region as a whole and positive impact on the socioeconomic conditions of the project region and the whole Tamil Nadu State.

However, the activities during the construction phase might have some other potential impacts on the socio-economic environment which includes dredging, reclamation, transportation of quarrying materials, construction of terminals and breakwater as well as establishment of labour camps. During the operation phase, the operation of terminals, marine traffic, road & rail traffic and establishment of labour/employee colony might have potential impact on the socio-economic environment of that region. However, as the port is planned to be developed entirely on the reclaimed land, no land acquisition is envisaged for the port development. However, some properties would be directly affected by the implementation of the railway line and road connections.

As for the social compensation and measures, the future Port Authority should initiate many Corporate Social Responsibility (CSR) activities for improving the way of living of people of Colachel-Enayam and other nearby villages in 2.0 km radii area in sectors like fisheries, agriculture, tourism, common infrastructure facilities, educational & medical facilities, sanitation & wastewater treatment, solid waste management, etc. CSR activities should also be planned to achieve environmental standards

A full comprehensive Environmental Social Impact Assessment Study should be carried out in further project development stages, as per the MoEF’s EIA Guidance Manual for Ports and Harbour along with the International Finance Corporation’s (IFC) Performance Standards 2006, Environmental, Health and Safety (EHS) Guidelines for Ports, Harbour and Terminals, and EHS Guidelines for Construction Materials Extraction for obtaining the Clearance from MoEF.

8. COST ESTIMATES

A block capital cost of the project including management consultancy and contingencies for Phase 1, 2 and 3 has been estimated:

ID ITEM PHASE 1

(Rs. Crores) PHASE 2

(Rs. Crores) PHASE 3

(Rs. Crores)

1 PRELIMINARIES 23.63 2.84 2.84

2 BREAKWATERS 1,124.35 611.46 439.15

3 BERTHS 429.18 1,123.25 895.53

4 DREDGING AND RECLAMATION 809.12 1,173.32 638.59

5 YARDS 347.29 633.20 358.67

6 EQUIPMENT 1,247.40 3,209.85 2,025.45

7 BUILDINGS 27.44 17.63 8.81

8 NETWORKS AND UTILITIES 131.04 52.92 35.28


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9 CONNECTIVITY (ROAD AND RAILWAYS) 273.42 0.00 0.00

10 LAND AQUISITION FOR ROAD AND RAILWAYS

70.69 0.00 0.00

SUBTOTAL 4,483.55 6,824.47 4,404.32

11 PMC (7.5%) AND CONTINGENCIES (15%) 1008.80 1,535.51 990.97

TOTAL 5,492.35 8,359.98 5,395.29

Figure 23: Project Capital Cost Estimates (Rs. Crores)

9. FINANCIAL FEASIBILITY OF ENAYAM PORT

The financial viability of the Colachel Port is based on a detailed financial model developed for a period of 30 years. The financial viability of the project has been assessed based on the Discounted Cash Flow (DCF) and Internal Rate of Returns (IRR) method, using the traffic projections, assumptions and inputs based on the industry benchmarks and analysis of Indian and relevant global ports. Some of the key assumptions for the financial analysis are summarised in the tables below:

Phase 1 Phase 2 Phase 3

Cumulative Capacity (Mn TEUs) 1.6 6.4 1 9.6 2 Total Construction Cost (Rs cr) 5,840 10,560 8,569

Figure 24: Phase wise port capacity and project cost

Timelines

Concession Period 30 years

Start Year 2015

Operation Start Year 2018

Concession End Year 2044

Phase 1 2018-20

Phase 2 2021-25

Phase 3 2026-30

Tariff structure

Trans-shipment Traffic As per Colombo Port's Scale of Rates (15% discount provided for the first 5 years)

Gateway Traffic As per Cochin Port's Scale of Rates

Funding structure

Debt 70.0%

Interest Rate 12.5%

1 2 Includes capacity of 400 m(Ph II) and 400 m(Ph III) of polyvalent berth designed for handling bulk with an option to convert into a container berth. Without conversion cumulative capacity are 5.6 and 8 Mn TEU for Ph II and III respectively


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Moratorium 3 years

Repayment Period 12 years

Syndication Fee 1.0%

Cost of Equity 16 -18%

WACC 10.6%

Figure 25: Key assumptions

The key results of the discounted cash flow analysis based on this modelling are following the next table:

The project IRR is above cost of capital, but the equity IRR is lower than the expected cost of equity of 16-18%. In order to make the project financially viable, viability gap funding (VGF) will be required. It has been estimated that a VGF of 20-30% is required to achieve the target equity IRR of 16-18%. In case the loan. The interest rate and debt terms have been used as per the terms of commercial lending by Indian banks for large infrastructure projects. In case, government is able to procure funding from multilateral and bilateral agencies such as ADB, World Bank, JICA etc., the interest rates could be around 1 - 3% and the payback period could be up to 30 years. The VGF required in that case, maintaining equity IRR of 16-18%, will be to the tune of 10-15%. The financial model has been made flexible to adjust the debt-equity ratio and cost of capital.

10. PROJECT STRUCTURE

As discussed in the previous sections, one of the key imperatives for project success will be to get the right partner on board. Securing a large liner as an anchor investor will be crucial in getting volumes and achieving critical scale of operations. Also, given the need to achieve high productivity, the port should be operated by an experienced and best in class port operator. At the same time, one of the other important objectives for

NPV 380 cr Project IRR 10.8% Equity IRR 11.0%

Profit & Loss Statement

2020 2025 2030 2035 2040

Total Revenue 1,149.1 3,995.9 7,450.9 11,529.8 15,063.1

Total Operating Expenses

675.3 1,877.5 2,715.5 3,873.7 5,747.3

EBITDA 473.8 2,118.3 4,735.4 7,656.1 9,315.8

Total Depreciation (SLM) 478.3 1,483.7 1,651.4 503.4 503.4

EBIT (4.6) 634.7 3,084.0 7,152.7 8,812.4

Total Interest 455.5 847.7 727.9 172.4 0.0

PBT (460.0) (213.1) 2,356.1 6,980.3 8,812.4

Tax payable 0.0 0.0 1,002.3 2,371.6 3,080.4

PAT (460.0) (213.1) 1,353.8 4,608.6 5,732.1


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Government will be to optimize financials and minimize capital cost for the project. Basis, these objective two project structure option have been proposed.

Option 1: Master Concessionaire with a minimum volume commitment: Government could aim to get a master concessionaire upfront with a minimum volume guarantee. This will secure volumes as well as help ensure capital and operational efficiency of the port. The following should be kept in mind while structuring the concession:

Preference to target liners or port operators that can partner with liners and thus offer volume commitment

Prescribe the minimum volume guarantee conditions in the RFP

VGF can be made as the bidding parameter with an upper ceiling prescribed

The concession period for master concessionaire could be fixed as 30 years, with an option to extend the concession up to 90 years in two extensions of 30 years each

Given this is a greenfield project with high perceived risks, the government will have to give firm assurance / commitment on the following, in order to attract target partners

Firm assurance on feeder network availability (potentially through Cabotage law relaxation)

Timely completion of connectivity projects with some financial compensation in case of delays

Financial incentives in order to bring equity IRR to 16% -18% (potentially as VGF of 25-30%)

Assurance on tax/ duty exemptions, required for setting competitive tariffs

It is advisable that the authority engages with a few operators and main liners to understand their risk appetite and willingness to invest and develop the port as a master concessionaire. In case, the interest is not high despite the above mentioned assurances, the government can consider option 2, as described below.

Option 2: Land lord model and private terminal concessions

In case of limited interest from target investors, the government may have to develop the port (common infrastructure) through its own funds to reduce the risk perception. Government should in parallel also engage with liners through road-shows/investor forums and attempt to get assurances of traffic to the port post its construction.

Further, to achieve capital and execution efficiency, an EPC and maintenance contract for development should be considered. Government could also offer a first right of refusal on phase 1 concession to the winner of EPC contract. This may help attract consortiums with participation of port operator / liner companies for constructing the port.

After development of the port, the terminals would be developed by selecting a master concessionaire for each phase.

For timely completion of development of the Colachel port, it is necessary to complete all related infrastructure development and take necessary clearances in the scheduled time. This can prove to be a challenge, given multiple authorities would be involved. Hence, we propose creating a Development and Approval committee to oversee the development phase o the port. The committee will be an authority for driving timely development of port and related infrastructure. There are precedence of creation of similar committees in case of development of SEZ as per the SEZ Act 2005. The composition of the committee would be as follows:


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Committee would be headed by a "Development Commissioner" who should be appointed by Govt. of India and would be of rank of Deputy Secretary or higher.

Committee would be represented by senior officials from the following stakeholders: Govt. of T.N., Indian Railways, NHAI, Customs. There should be provision of adding others if deemed fit.

Designated port authorities for co-ordinating day-to-day affairs

The committee will be responsible for the following:

To ensure co-ordination among all concerned stakeholders

To facilitate single window clearance for all requisite local approvals

Monitor performance of the private developer(s)

The committee, specially the Development Commissioner would need to be empowered adequately to drive the project in an effective and timely manner.

11. IMPLEMENTATION PLAN

The authorities intend to carry out the proposed works in such a way that the terminal should be fully operational by 2018.

The timeline presented here implies dividing the building work into four parts with different contractors; maritime works (breakwaters, berths and dredging & reclamation), land works (yards, networks, utilities and buildings), connections works (road and railway) and container handling equipment.

The following chart shows the proposed planning for works.

Figure 26: Port implementation schedule

12. CONCLUSION

Moving back transhipment of Indian and Indian sub-continent cargo to an Indian port is an important objective for the Government. Colachel (Enayam) appears to be the most suitable location for developing such a


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Transhipment hub. It has the key requisites (draft, proximity to main route, gateway traffic) to attract a large share of cargo moving between Asia and Europe, Africa and East Coast of America. Though, ensuring project success will require a few key imperatives to be achieved:

Feeder network assurance through Cabotage relaxation for container movement in India

Ensuring that port associated charges for trans-shipment are 15-20% lower versus Colombo.

Service tax relaxation on trans-shipment to help achieve 15-20% cost difference versus Colombo

Ensuring high port productivity by implementing proposed port design and automation systems

Simplification of Customs IGM, BoE processes through forms simplification and complete process digitization as done in other countries such as Singapore and Jebel Ali (Misral 2)

Completion of road and rail connectivity projects before starting port operations

Target Master Concessionaire structure to try and secure upfront volume commitment from a major liner (with substantial traffic on the targeted routes)

In case interest from investor / liners is low for taking up project risk upfront, plan for land lord model, whereby offer EPC contract for development and terminal concessions for port operations. Also, offer first right of refusal on terminal concession to incentivize target liners / port operators to join consortium for EPC development.

Consider offering 25 – 30% VGF in order to make equity IRR attractive (16 – 18%)

Further, it vital to take commitment and full participation of the State Government in the project, since, their cooperation would be needed to successfully implement many of the imperatives such as land acquisition and road connectivity.


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DRAWINGS

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