The Union cabinet on Tuesday cleared several proposals including the construction of a strategic port in Tamil Nadu to counter Colombo.

The in-principle approval for setting up a major port at Enayam near Colachel in Tamil Nadu is aimed at making India a destination on the global east-west trade route.

The Enayam project will cost around Rs.27,000 crore and will be undertaken in three phases. The cabinet cleared an expenditure of Rs.6,575 crore for phase one.

The proposed port at Enayam has advantages over the nearby Colombo port as the former has a natural deep draught of about 20 metres as compared to 18 metres in Colombo, making it feasible for larger vessels to call at the Indian port. Besides, in Colombo there is only one terminal with an 18 metre draught.

“Enayam has 10 million TEUs (twenty foot equivalent units) capacity which can be further expanded to 18 million TEUs in future by converting the breakwater into a container handling berth,” said a senior shipping ministry official on condition of anonymity.

He added that the Enayam port would also hold strategic importance for India as it will act as a major gateway container port for Indian cargo that is presently trans-shipped outside the country.

To develop the port, a special purpose vehicle (SPV) will be formed with initial equity investment from the three major ports in Tamil Nadu—V.O. Chidambaranar Port Trust, Chennai Port Trust and Kamarajar Port Ltd. The SPV will develop the port infrastructure including dredging and reclamation, construction of a breakwater, ensuring connectivity links, etc.

Currently, around 78% of the traffic from the east coast ports is trans-shipped. There are only a few ports in south India that have a draught to match global cargo handling efficiencies and function as a trans-shipment hub.

Given the steady increase in mainline vessel sizes, liners prefer calling at ports that have draughts that are at least 18 metres. Due to this, 1.8 million TEUs of India’s current trans-shipment traffic gets handled in Colombo, Singapore and Klang (Malaysia).

Out of this 66.6% is handled at Colombo port alone. The exporters and importers in south India incur an additional charge of Rs.5,000-Rs.6,000 per TEU because of the added leg of trans-shipment. Approximately 2.7 million TEUs of India-destined containers in 2013-14 were trans-shipped at international ports, adding large costs to the economy and resulting in Indian ports losing as much as Rs.1,500 crore per year in business. The cabinet also cleared a proposal to increase foreign investment in Axis Bank to 74% from 62%.

“With the approval, foreign direct investment to the tune of Rs.12,973.14 crore will be received in the country,” a cabinet statement said.

(Live Mint)