FCC

Odisha compensates MSC $200/box for Paradip Port volume shortfall

2024-02-19

In a pioneering initiative aimed at attracting container lines and facilitating trade, the Odisha government, led by Naveen Patnaik, has agreed to provide viability gap funding (VGF) to the Mediterranean Shipping Company S.A. (MSC), the world's largest container line. Under this scheme, if the export-import volumes during a ship call at Paradip Port fall below the minimum guaranteed level of 250 twenty-foot equivalent units (TEUs), the state government will compensate MSC with $ 200 per TEU.

A TEU is the standard size of a container, commonly used to measure capacity in the container business.

According to a senior official from the Odisha government, "If MSC manages to load/unload 250 TEUs during a call at Paradip Port, then no payment is required. However, for any shortfall below 250 TEUs, such as if the ship loads/unloads 230 TEUs, the state government will compensate the line through viability gap funding of $ 200 per TEU."

The agreement, initiated on 16 February, was formalised through a memorandum of understanding between Geneva-based MSC and the Odisha government.

The objective is to revitalise Paradip Port. The state government aims to reduce dependence on Visakhapatnam and Kolkata Ports for transporting export-import cargo, which is currently expensive. The official emphasised the importance of utilizing Paradip's deep draft port and enhancing trade opportunities.

Notably, the Odisha government is offering incentives to a container line to initiate services from Paradip, one of the 12 major ports owned by the Union government, making this effort unique. Despite previous unsuccessful attempts by the Paradip Port Authority to engage container lines for EXIM services, the government remains committed to making Paradip Port a vibrant hub. In 2020, Regional Container Lines (RCL) initiated a service from Paradip Port, but it was discontinued after a few calls.