In a significant development leading to the infrastructural growth of the Andaman and Nicobar Islands, the Narendra Modi government has formally recognized Galathea Bay, an international transhipment centre as a ‘major port’. A lot of controversy has been happening over the issue in the past month with the opposition parties led by Congress joining hands with environmental experts claiming catastrophic ecological and human consequences due to the project. However, the government has decided to go ahead with it. It is believed that this action places the Rs 44,000 crore mega project under the administrative control of the Ministry of Ports, Shipping, and Waterways, thus rendering it capable of receiving central funding.

The facility will be developed in four phases, with Phase 1 scheduled to be completed in 2028 and capable of processing 4 million TEUs (twenty-foot equivalent units). When fully developed by 2058, the port is supposed to handle up to 16 million TEUs. This comes one year after the government sought proposals for the transhipment port. For decades, inadequate facilities at India’s ports, along with a lack of deep drafts have hampered maritime logistics. This has lately begun to change, but the absence of a centre for transhipment in the country continues to erode productivity.

Centre notifies Galathea Bay as a 'Major Port'https://t.co/nTJZdEvmMc pic.twitter.com/46mIsB84Ez

— Aashish Chandorkar (@c_aashish) September 6, 2024

What is a transshipment hub and why project at Galathea Bay is important?

As per the reports, almost all major ports on India’s east coast and a few on the west coast lack appropriate depth. Most of these ports have drafts ranging from 8 to 12 meters. In comparison, the depth of berths and waterways in large international ports ranges from 12 to 20 meters, or even higher in some cases. This severely restricts the size of vessels that can enter an Indian port. As a result, relatively small vessels with cargo capacities ranging from 25,000 to 75,000 tonnes, have to operate at these ports disallowing larger vessels, such as Capsize ships, which can carry 165,000 to 180,000 tonnes.

This limitation is becoming more difficult to deal with as the size of boats around the world increases every few years. Transferring a specific cargo or container in a single large vessel is less expensive than transferring it in several smaller ships due to economies of scale, particularly for freight-sensitive goods. Dredging, which is the removal of silt and other material from the ocean floor near channels and ports, can help increase and maintain draft. However, this procedure is expensive, particularly when used to significantly increase a port’s draft, and it has several limits. The other option is transhipment.

Transhipment is the process of unloading goods from one ship and loading them onto another vessel for transport to the final port of discharge. In India, arriving cargo is unloaded from large ships at a transhipment hub and loaded onto smaller ships, which are then transported to ports that cannot accommodate large boats due to their low draft.

Outbound merchandise from Indian ports that cannot handle large vessels is unloaded from small ships at the transhipment hub and transferred to larger ships heading for the destination port. Cargo can travel a significant portion of the journey between the origin and destination ports on a large vessel using this method.

India should no longer rely on foreign ports

At present, Colombo and Singapore, along with certain other important ports in the region, such as Dubai, serve as transhipment hubs for cargo bound for Indian ports. Nearly 25% of all containers coming from India are transshipped through foreign ports. Colombo, Singapore, and Klang (Malaysia), all foreign ports, handle approximately 80% of this.

This reliance on foreign ports is undesirable for a few reasons. According to research on the Ministry of Shipping’s Sagarmala portal, Indian ports lose Rs 1,500 crore in potential revenue each year from transhipment handling of cargo that originates or is bound for India.

As per a report on the Sagarmala portal, this translates into an estimated total loss of Rs 3,000-4,500 crore to the economy (assuming an economic multiplier of 2-3x for ports). The loss is even higher if the opportunity to handle cargo emerging from other countries in the region is considered. Transhipment increases the costs faced by the Indian sector. Besides that, the unavoidable cost of the feeder journey to and from Indian ports to the transhipment hub, and the cost of handling the shipment at the hub (loading and unloading) is also incorporated into the transshipped cargo.

In India, this is paid at foreign ports. If transhipment hubs are constructed in India, much of this will go to Indian ports, resulting in employment development. Further, as Chinese influence grows through enormous investment in port facilities in the Indian Ocean as part of the Belt and Road Initiative, reliance on foreign ports poses a potential national security risk.

The Chinese already operate a portion of the Colombo port, which accounts for more than 40% of Indian transhipment. Beijing operates the International Container Terminals at Colombo Port, contributing to 40% of total container movement in the island country in 2019. It has also spent billions of dollars on port infrastructure, including new business and residential zones known as Port City Colombo.

About the transshipment hub being built at Galathea Bay

Despite India’s public concerns, Sri Lanka has been obliged to make concessions to China, such as allowing its intelligence-gathering ships to dock. With Colombo growing reliant on Beijing for debt relief,  the need for New Delhi to reduce this dependence has never been greater. Galathea Bay on Great Nicobar Island, where the proposed transhipment hub may be built, has a depth of 18 to 20 meters, making it suitable for huge ships. The bay has a rocky floor preferably suitable for the project. 

The island borders the East-West Sea Route, one of the world’s busiest maritime commerce routes, and is roughly equidistant from the present transhipment hubs of Colombo, Port Klang, and Singapore. The island is approximately 8 nautical miles away from the route. According to this news report, the shipping diversion time to the proposed port will be less than an hour, while it is four hours to Kochi and eight hours to Thoothukudi. The East-West Sea Route serves some of the fastest-expanding global economies, including Vietnam, Indonesia, Myanmar, and Bangladesh.

It is strategically located near the mouth of the Malacca Strait, which connects the Indian and Pacific oceans. Every year, around 100,000 vessels travel through this tiny stretch of water, accounting for roughly one-quarter of global trade.

The projected port can compete with the Port of Singapore for cargo originating in and headed for Bangladesh and Myanmar. Currently, over 70% of cargo from Bangladesh and Myanmar is transshipped through Singapore. The Great Nicobar Island is closer to Bangladesh and Myanmar than Singapore, reducing the distance travelled on the feeder route to the transhipment hub and so lowering costs.

Why the said project is being opposed

The Indian National Congress, India’s major opposition party, has joined environmentalists and former officials in criticizing the development of the Great Nicobar Island, claiming it could have catastrophic ecological and human consequences. Despite unresolved disagreements over clearances given, the national government is moving forward with the project.

Great Nicobar’s holistic development plan includes building an international container transhipment port along with an airport, gas, and solar power plant, and township on the isolated island costing Rs. 81,000 crore and roughly a million trees.

Legal proceedings in a case challenging the project’s environmental clearance disclosed that the National Centre for Sustainable Coastal Management (NCSCM), an autonomous body assigned to supporting coastal management, concluded that the project no longer fell in a no-go fragile coastal zone, potentially facilitating port development at the hands of the centre. 

Instead of pausing and subjecting the Great Nicobar mega infra project to a thorough review in view of its hugely adverse environmental and humanitarian impacts, the Union Govt has just declared Galathea Bay as a major port to be developed in public-private partnership mode. And… pic.twitter.com/HDEhzVb32g

— Jairam Ramesh (@Jairam_Ramesh) September 6, 2024

A beforehand mapping effort by the NCSCM had discovered that elements of the project, including the port, were located in the ecologically most sensitive CRZ 1A zones, where most development activities are forbidden. The NCSCM’s recent conclusion, however, notes that the project area is located in the CRZ 1B zone, an intertidal zone where ports and harbours are permitted.

Considering the continuing case in the National Green Tribunal, T. K. Ramachandran, secretary of the Ministry for Ports, Shipping, and Waterways, informed the media on August 4th that there was no hurdle in its implementation, and that the government would proceed with the project.

In a letter to Environment Minister Bhupender Yadav on August 10th, Congress leader Jairam Ramesh urged existing clearances for the project should be suspended and thoroughly and impartially reviewed, including by the Parliamentary committees concerned. Ramesh identified various flaws in the procedures that laid the groundwork for the project, including violations in getting approval from indigenous communities.

A petition filed by environmentalists stated that the project violated coastal area laws

In late July, the Andaman and Nicobar Islands Integrated Development Corporation Limited (ANIIDCO) submitted an affidavit to the National Green Tribunal based on which the NCSCM revealed its conclusions. The project’s implementing agency, ANIIDCO, was responding to a review petition filed by Ashish Kothari, an environmental activist.

The petition argued that the project violated the Island Coastal Regulation Zone announcement in 2019 since about seven square kilometres of the project fell in a CRZ 1A region. This includes 0.63 square kilometres of port and port reclamation, 0.6 square kilometres of airport, and the majority, 5.84 square kilometres, of projected townships. The petition asked that the project exclude these areas.

According to the notification, CRZ 1A regions shall be protected from large development since they contain mangroves, corals, coral reefs, and sea grass, and serve as nesting sites for birds, turtles, and other delicate ecosystems. CRZ 1B areas are likewise ecologically fragile, however, they are intertidal zones that allow for the construction of ports and harbours under particular conditions.

Last year, the National Green Tribunal acknowledged that there were some unanswered deficiencies in the government’s approach to the development project. It formed a High Powered Committee (HPC) led by the Union Environment Ministry to review the environmental clearance granted to it. The HPC’s results were never made public for security concerns. However, in its affidavit, ANIIDCO stated that the HPC approved the results of a ground-truthing investigation conducted by the National Centre for Sustainable Coastal Management, which concluded that the project did not fall under the 1A category.

The proposed port can compete with the Port of Singapore for cargo originating in and bound for Bangladesh and Myanmar. Singapore handles more than 70% of all goods from Bangladesh and Myanmar. The Great Nicobar Island is closer to Bangladesh and Myanmar than Singapore, reducing the distance travelled along the feeder route to the transhipment hub and so saving prices.