Source: ET Infra
In a first such scheme to attract container lines and facilitate trade, the Odisha government led by Naveen Patnaik has agreed to pay Mediterranean Shipping Company S.A, the world’s biggest container line, $200 per twenty-foot equivalent unit (TEU) as viability gap funding (VGF) if the export-import volumes during a ship call at Paradip Port falls below the minimum guaranteed level of 250 TEUs.
“If MSC manages to load/unload 250 TEU’s during a call at Paradip Port, then we will not have to pay anything,” said a senior official with the Odisha government.
“But, for any shortfall below 250 TEU’s, for example, if the ship loads/unloads 230 TEU’s, then for 20 containers, the state government will compensate the line through a viability gap funding of $200 per TEU,” the official said.
Geneva-based MSC and the Odisha government signed a memorandum of understanding on 16 February to set the scheme in motion.
“We want to make Paradip Port vibrant. Our exporters and importers are dependent on Visakhapatnam and Kolkata Ports for transporting EXIM cargo and its quite expensive. It is also not good for a state which has a deep draft port at Paradip. It should not happen to the trade,” the Odisha government official said.
Interestingly, it is the Odisha government that is incentivising a container line to start services from Paradip.
Paradip Port Authority has been engaging with container lines to start EXIM services from the port without success. In 2020, Thailand-based Regional Container Lines (RCL) started a service from Paradip Port but discontinued after a few calls.
Currently, Dubai-based Transworld Group is running container services from Paradip Port, but it is only a coastal service linking the ports of Cochin and Chennai. India’s second biggest state-owned port by volumes handled is not connected with overseas destinations either through a mainline call or a feeder service due to lack of volumes.
During a trade meet held by the Odisha government last year, importers/exporters from the eastern state complained that they were forced to route their container cargo either through Visakhapatnam or Kolkata/Haldia Ports because container lines were not calling Paradip Port.
Following this, the state government agreed to extend viability gap funding to container lines to help launch services from Paradip Port.
MSC was picked to start services through an Expression of Interest process in which RCL, Singapore’s Ti2 Logistics Pte Ltd and Unifeeder A/S, a multi-regional feeder ship operator owned by Dubai’s D P World Ltd, also participated.
In its offer, MSC said it was ready to link Paradip with overseas ports if a minimum of 250 TEUs was available per call. However, in case the volumes fell short of 250 TEU’s, the liner sought a VGF of $200 on each container below the minimum level.
“This is the first time a state government has come out with such a scheme to help the industry/trade reduce their logistic costs. Let us see how it works,” said a Paradip Port official.
MSC, according to the Odisha government official, plans to start a feeder service linking Paradip with Colombo in Sri Lanka, a regional transhipment hub, from where the containers will be put on its mainline vessels and hauled to final destinations in Europe and U.S. and vice versa.
To start with, the service will run every ten days and depending on the volumes, it could be converted into a weekly service, an official said.
The service will call at the Paradip International Cargo Terminal Pvt Ltd, a multipurpose terminal run by J M Baxi Ports and Logistics Ltd that handles clean cargo including containers at Paradip Port.
If Paradip International Cargo Terminal is not able to provide berthing to MSC ships, then the port authority will handle containers from one of its berths, the official said.
Paradip International Cargo Terminal will complete five years of operations on 31 March this year, thereby ending the five-year exclusivity period granted to it by the port authority for handling clean cargo including containers at the port.
“Then, Paradip Port Authority can also handle clean cargo including containers at the port on its own,” said a source.
The Odisha government is also keen on a service linking Paradip with the Far East and has offered the “same agreement” to RCL for running a service connecting destinations including China, Japan and Thailand.
During the EoI process, RCL offered a plan to connect Paradip with Port Klang in Malaysia, from where the containers will be put on mainline vessels and shipped to final destinations in the Far East.
RCL has offered to start a service from Paradip if a minimum of 180 export TEU’s are available for a trip, with a viability gap funding of $200 for each container short of the threshold.
The state government, according to the official, considered the RCL offer also, so that connectivity to both sides (Europe/U.S. and the Far East) are available.
“In principle, it has been agreed. RCL has been given a draft copy of the MoU, incorporating the same terms we have offered MSC. They are yet to respond,” the Odisha government official added.
