The Chennai Port Trust has decided not to develop a new 4m teu container terminal for at least two years, according to a source quoted by Chennai-based newspaper The Hindu.
The project was approved by the government in 2010 but progress has since stalled due to lukewarm interest from investors.
An industry source in India told CM: “The key reasons for deferring the proposal have been prolonged heavy congestion at the port due to infrastructure scarcity just outside the port, poor response from developers and failure to attract a good bidder.”
Another CM source said that the new project is not viable from a commercial standpoint due to overcapacity in the locality, adding: “Since launching the tender there had only been one bid with low revenue share offered which indicated the low interest in that project. That bid was subsequently rejected by the Port Trust board.”
While the project stalled, Adani has started developing a 1.4m teu capacity terminal at Kamarajar port and has recently acquired a 1.2m teu capacity terminal L&T Kattupali Port. Both terminals are within 35 km of the Port of Chennai.
On top of this, the 1.2m teu capacity Krishnapatnam terminal is in its third year of operations, 180 km north of Chennai. It grew by 56% in 2014-15 and its operators are predicting growth of 56% in 2015-16. When its throughput reaches 800,000 teu, expansion works will start which will bring its capacity to 4.8m teu.
In the face of this competition, the Chennai Port Trust now reportedly favours prioritising the existing terminals at the port, whose combined volumes have been witnessing a slump over the last three years.
Like other major Indian ports, Chennai has also struggled with gate congestion which has caused anger among truckers and resulted in congestion surcharges being applied to shipments for the port and cargo being diverted to rival ports.
Efforts to fix this have been hampered by delays in developing road connectivity between the port and the Maduravoyal district of Chennai as well as delays in the completion of the Ennore-Manali Road improvement project. These delays have been cited as reasons for the lack of government interest in the port.
The port is now attempting to combat gate congestion by allotting six truck lanes at the gate, three for imports and three for exports.