Lankan Economy Focus: The Impact of Vizhinjam Port on the Sri Lankan Economy

By Romesh Chandiram, Founder & Group Chairman, RSL Freight Group

As someone who has spent nearly three decades in the shipping and logistics industry, I have seen Sri Lanka’s rise as a key transshipment hub in South Asia. The emergence of Vizhinjam Port in Kerala, India, is a strategic move that will undoubtedly reshape regional shipping dynamics, but the story is more nuanced than a simple threat to Sri Lanka’s dominance.

Sri Lanka’s Legacy and the Vizhinjam Challenge

Sri Lanka, and especially Colombo Port, has long been the primary gateway for Indian transshipment cargo-handling around 70% of it, which significantly contributes to our GDP, foreign exchange earnings, and employment in logistics. The opening of Vizhinjam, strategically located on the world’s busiest shipping route between the Strait of Malacca and the Suez Canal, is India’s answer to reducing its reliance on foreign transshipment hubs like Colombo.

Vizhinjam’s deep natural draft, advanced automation, and proximity to Indian ports make it attractive for shipping lines. Its vessel-related charges are substantially lower-about $10,000 for a 30,000 DWT ship compared to $21,000 at Colombo-making it a cost-effective alternative. For India, this could mean saving an estimated $220 million annually in transshipment fees, a sum that currently benefits Sri Lanka.

Short-Term vs. Long-Term Impact

In the short term, Vizhinjam will not instantly dethrone Colombo. The port is still under development, and from my own visits, I can say its infrastructure and accessibility are not yet on par with Colombo’s mature operations. It will take years for Vizhinjam to attract the same level of shipping traffic and operational scale. Colombo’s established reputation, strategic partnerships, and ongoing expansion projects-like the Colombo Port City-still give us an edge.

However, the competitive landscape is changing. As Vizhinjam scales up, there is a real risk that some Indian transshipment cargo will be redirected, potentially reducing container volumes, port revenues, and jobs in Sri Lanka’s logistics sector.

How Sri Lanka Can Respond

I believe Sri Lanka’s response should be proactive, not defensive. We must:

• Upgrade Port Infrastructure: Modernize facilities, automate operations, and improve turnaround times to match or exceed Vizhinjam’s efficiency.

• Enhance Value-Added Services: Offer services that make Colombo and other Sri Lankan ports indispensable to shipping lines, such as efficient customs, quality bunkering, and ship repair.

• Attract Global Investment: Liberalize port operations and create investor-friendly legal frameworks to bring in international capital and expertise.

• Leverage Our Strategic Location: Sri Lanka’s geographic advantage remains unmatched. We should capitalize on this by developing a network of ports-Trincomalee, Hambantota, and others-connected by efficient rail and road links, making the country a true logistics hub, not just Colombo-centric.

• Promote Collaboration: Rather than seeing Vizhinjam solely as a rival, explore opportunities for collaboration and regional connectivity, creating spillover benefits for both countries.

  
  

The Bigger Picture: Competition as a Catalyst

Competition from Vizhinjam is not just a threat: it’s a wake-up call. If we adapt, innovate, and invest wisely, Sri Lanka can retain its status as a premier transshipment hub. Our legacy, location, and adaptability are our greatest strengths. The key is to act decisively, attract the right partners, and deliver world-class service.

Conclusion

Vizhinjam’s rise will change the balance of maritime trade in South Asia, but Sri Lanka’s ports-especially Colombo-can remain competitive if we embrace change. By focusing on efficiency, value addition, and strategic partnerships, we can turn this challenge into an opportunity for growth and modernization.