Container traffic in Indian ports has risen from 0.2 per cent in 1981 to 20 per cent in 2010-11. The total container throughput in FY2011 stood at over 9.4 million TEUs, witnessing a growth of 13 per cent over the previous year. The global average of containerisation is 60-70 per cent, which is much higher than India's level of 25 per cent but it is growing at 12-15 per cent. Experts say this growth is not matched by logistics infrastructure for seamless and efficient hinterland movement.
Ajay S Mittal, CMD, Arshiya International, which is setting up Free Trade Zones in Mumbai and other locations.
Lars Sorensen, South Asia CEO, Damco, AP Moller-Maersk's logistics unit that is acquiring and seeking Indian partner, rather than growing organically in freight forwarding and warehousing.
NN Kumar, Dy Chairman, JNPT, the largest container movement port in India
Praful Tayal, CMD, Central Inland Water Corporation Limited (CIWTC)
SS Kulkarni, Secretary General, Indian Private Ports & Terminals Association.
S Varadarajan, CEO, Shreyas Relay Systems, a multimodal logistics operator.
Vineet Agarwal, Joint MD, TCI, a logistics provider that recently invested in a JV with CONCOR in Infinite Solutions, which provides intermodal logistics, which will see a huge growth with containerisation.
What are the major trends in containerisation and the infrastructure surrounding it over the past year?
While many major ports in India are expanding their capacity, increasing draft to accommodate bigger vessels, and opening transhipment terminals, India also needs hub ports to reduce feeding time and cost as well as for transhipment revenues to stay in India. The real bottleneck in container traffic is the movement from port to domestic tariff area (DTA). Lack of supporting infrastructure like logistics parks, Free Trade Warehousing Zones (FTWZs), consolidation hubs for efficient movement by rail, dependency on inefficient road transportation are areas that need to be addressed. A lot of serious private players are investing in this space and are also open for public private partnership (PPP). The unorganised and fragmented nature of this sector is also aggravating the woes and can only be addressed through a joint public-private effort.
The major change in the trend of containerisation in the form bulk to containers of the commodities like pharmaceutical, cotton, machine parts, fruits, onion, chemicals in tank containers and vehicles are also diverted into containers instead of Ro-Ro.
The growth in container traffic during the financial year 2010-11 is 5.13 per cent over the previous year. JN Port handled 4.27 million TEUs of container traffic during the financial year 2010-11 surpassing the previous annual container handling of 4.06 million TEUs during 2009-10.
The containerisation trend in India is still not at international levels. Currently, only about 45 to 50 per cent of cargo is containerised, whereas internationally it over 75 per cent. If we look at international cargo, nearly 9 million TEUs move via sea route in India while only about 125,000 containers per year move via sea for domestic cargo. The domestic cargo in containers using coastal is increasing at just about 10-12 per cent. We believe that the domestic growth rate of containerisation would increase and catch up to the international growth rates in the coming years.
The past year has seen significant change in exim traffic over various ports of India, where overall growth was a mere 1.57 per cent for financial year ending March 2011, owing to labour strikes and issues of congestion. Trends show that private ports are doing brisk business on the back of better infrastructure and space.
While no specific trends have been observed, in spite of the slowdown of economy in the last two years container movement/handling continued to register a 12-15 per cent growth. This perhaps indicates that containerisation in India is witnessing both organic as well as inorganic growth. Organic growth would be the general growth in trade volumes and inorganic growth represents more and more cargo getting containerised.
Considering the Inland Water Transport (IWT) sector, containerisation in the river transport has yet to commence in a commercially proven and planned phase. In the early 1980s, the IWT barges of CIWTC had transported about 3,500 TEUs from the Haldia Dock Complex to the riverine port of Calcutta covering a distance of about 100 km, (later on this stretch was declared as a part of National Waterways-I (NW-I) by the then regulatory body of Government of India, newly formed Inland Waterways Authority of India (IWAI) in FY 1985-86. It is relevant to know that the Government of India had already thought of containerisation in the IWT sector as early as three decades ago, no container has been handled at the Tea Transit (TT) Sheds during the last 25 years at India's largest Riverine terminal of India, Kolkata. And the Riverine Terminals located at Patna and Guwahati have yet to commence handling containers.
Nevertheless, a container terminal jetty to handle the TEU containers has already been built at Narayanganj in Bangladesh. The handling equipment/cranes are yet to be positioned. Also, a container handling terminal is proposed to be built at Ashuganj in Bangladesh, whose design has been finalised. With all-year operations, this terminal will facilitate multi-modal transportation while connecting Indian mainland to Tripura and Mizoram.
Thus the major trend in the recent years has been a change in the mindset to introduce the containerisation on the rivers.
Which sectors are seeing the most growth in container movement?
India burns nearly $2.5 billion worth of fuel on account of trucks standing idle on state check-posts. Inadequate capacities in hinterland transport lead to higher costs and delays on account of sub-optimal mode choices, circuitous routing and congestion in the hinterland transport links.
Containerisation is driven and determined predominantly by the industry, its commodities and the specific transport challenges and costs associated with it. Various industries have adopted containerisation quickly due to its safety and efficiency, for example apparels/garments and consumer goods. However, commodities like coal, petrochemicals, etc, continue to be transported in bulk primarily due to their voluminous nature.
Railway has seen a major growth in containerisation amongst the three sectors mentioned. A higher growth rate in railway freight movement through containerisation is emerging because of increasing privatisation in the segment with large private players entering the fray.
Waterways and railways are the major sectors that are seeing maximum growth in container business. The growing Indian sectors offer tremendous scope and opportunity. Sectors like textile, engineering, auto, and retail have been growing phenomenally and will contribute to further growth of containerisation in the country.
In 2005-06, the share of rail traffic at Major ports was 28.61 per cent compared with 79.31 per cent of road. In 2010-011, the share of rail traffic is reported to be marginally lower at 27.32 per cent as compared with 72.68 per cent of road share.
All the three sectors, ie, roadways, railways, and waterways, are not comparable with each another and not competing. However, containerisation is yet to penetrate the IWT sector in India as well as to and from Bangladesh, thus the “most growth” becomes relative: while in terms of percentage, the movement of containers by IWT may show the highest percentage of growth, in real terms it may not be so. However, such IWT movement may be a big step for the future.
How do you expect containerisation to impact the diminishing share of rail logistics?
Rail freight traffic over the past five years has grown at a CAGR of around 7 per cent, while the container traffic moved by rail has increased at a much higher CAGR of around 15 per cent. Today, the share of domestic cargo moved by rail has increased to 30 per cent from 10 per cent five years ago.
A positive step by the government in this direction was the Private Container Train Operator (PCTO) Policy, aimed at drawing private investments in this area. Following the policy, 15 private companies took up licences in this space and invested heavily. However, post-PCTO government policies have not been supportive and proper framework needs to be laid out to win confidence of the private players in this space and bring about the desired investments.
The container traffic from Northern India is a major contributor to Indian export/import trade. Presently, due to lack of capacity, high cost rail is not a major player in handling the trade. However, the preferred logistics solution is rail due to safety and fast mobility. With growth in containerisation, the share of rail traffic will further increase touching 35-40 per cent. But to attract traffic, Railways need to take certain proactive measures, such as:
(i) Revive short haulage of cargo traffic, which has been discontinued in the past. This can be commenced once the Dedicated Freight Corridors (DFCs) are completed. This will help in attracting the traffic moved through road transport and decongest the road network and also will be useful to address the environmental issues which will go a long way. (ii) Introduce tariff restructuring and re-engineering of transport policy to lure lighter traffic away from road.
What are the major issues in privatisation of container infrastructure? Has it really taken off the way it should have?
It is difficult to procure the land to construct ICDs/DCTs and the available unused railway sidings are entangled in bureaucratic complexities. The government should itself or under PPP model set up a network of common user rail integrated terminals. In addition, the government should also speed up the allocation of unused railway sidings to private players, so that they get a level playing field with state players. Haulage and access charge payable to the Indian Railways, which is almost 70 per cent of their opex cost is a big burden for private players. Capacity utilisation on domestic routes, or the ability to generate full loads at regular intervals, is low, so also is the absence of long term/take or pay contracts with big size customers.
Container infrastructure includes Container Freight Stations (CFSs), ICDs, logistics parks, FTWZs, rail infrastructure and last mile connectivity. Investments are also needed to develop rail linked CFSs/ICDs, logistics parks, and FTWZs for quick evacuation from ports and also for value addition/consolidation before organised shipment.
JNPT was the first major port that encouraged private participation in the ports sector by development of its first private container terminal, Nhava Sheva International Container Terminal (NSICT), in 1999 on PPP mode, and subsequently another private container terminal, Gateway Terminals India (GTIPL), was developed in the year 2006. This brought in international container handling practices to India and over a period of time, methodology and process for privatisation of container handling capacity on PPP mode was evolved. Presently, the entire framework of bidding process including Model Concession Agreement is in place. With active participation of Maritime Boards of some coastal states, the process of privatisation of quay side container infrastructure has taken off in a big way. However, there are still major constraints and issues like delay in statutory clearances, TAMP guidelines, labour laws and lack of inbuilt dispute resolution mechanism in the PPP process.
Privatisation of container infrastructure in India was a welcome step but did not take off the way it was projected mainly because of the ambiguity in policies. The whole idea of granting private licences was to invite investments in infrastructure development and creation of more logistics terminals to handle additional rolling stock, but investors stopped short of investing in logistics parks and hubs, thereby putting additional burden on Railways network, who in turn, issued new guidelines putting financial burden on already burdened investors.
We need more private container freight stations in and around the port, feeder operators with cooperation of Custom House agents, and facilities in the port.
How much do you envisage will the logistics industry stand to gain when seamless connectivity is achieved from ports to hinterland and markets?
With seamless connectivity and integration of both the industries, there will be a quantum jump in the volume and the level of trade. The dwell time inside/outside the port and road congestion will reduce, while turnaround time of trucks will improve. Similarly, with the introduction of deeper draft container transhipment terminal, the transaction cost of TP containers will be reduced. Though it is difficult to predict a specific percentage by which the cost will be reduced, saving by improvement in connectivity and introduction of transhipment hub within the country will be substantial.
As per the industry figures, the logistics costs in India are about 12-13 per cent of the GDP as compared with the global average of 6-7 per cent. These are high figures and in the long run and for the planned proliferation of the Indian logistics industry, these costs have to come down. Amongst the many factors that play a role in contributing to cost additions such as infrastructure, IT, tax regime and others, absence of seamless connectivity between various logistic hubs is an important factor that can surely be not overlooked.
Currently, Indian companies spend about 14 per cent of its total cost on logistics whereas international level this is about nearly 8-9 per cent. India can save up to 5 per cent on its logistic cost if we have better connectivity from ports to hinterland. This has to be addressed by improving efficiency.
A container transshipment terminal (CTT) is a great step forward by the government. As a direct benefit of this move, we believe that India ports can retain higher percentage of freight movement and prevent the business going to ports in neighbouring countries.
The logistics spend has tripled from Rs 450 billion in 2003 to Rs 1,350 billion in 2011 with road and rail accounting for more than 90 per cent of the spend. Logistics cost, as it is, is high in India at 13-14 per cent of the GDP as against 9-10 per cent in the developed economies. Any plugging-in of inefficiencies will therefore benefit the trade highly. As far as transhipment of Indian boxes is concerned, according to the statistics provided by IPA, currently 70 per cent of the exim traffic is direct-destination and only 25 per cent is transshipped at foreign ports, and the balance 5 per cent is domestic/coastal.
In the IWT sector there is still time to gauge the gain as the container movement has yet to start. But all signs of development in this direction are very positive, including development of five Container Handling Jetties at Diamond Harbour, about 80 km downstream from Kolkata Port, for which RFQ has already been published. 90 per cent evacuation of the containers from Diamond Harbour to Kolkata Port is proposed to be undertaken by the IWT mode.
How professional is our container packaging, handling and sorting?
Traditionally, supply chain optimisation has focused solely on container utilisation, mode conversion and optimal routing. However, any efficient supply chain must master the logistics network as well as packaging optimisation. These concepts have been well implemented in the western world but are yet to be popular in the developing world. However, we do see increasing awareness amongst customers to optimise their entire supply chain right from cargo pickup at origin to cargo delivery at destination.
In western markets, more and more handling activities such as de-stuffing and distribution are designed to meet the mechanised and automated cargo handling methods. Increasing usage of pallets, slip sheets and technologies like RFID, bar codes help minimise manual handling of cargo. These are yet to be fully adopted in India, where most of these processes are still done manually.
Today, service providers like us can help the customer relook at the entire cargo handling processes including package optimisation, supply chain health check including cost, product flow and lead time, supplemented by high-level process mapping. These are some of the proven solutions that can modernise the cargo handling processes and at the same time result in significant logistics cost savings for the customer.
Moving containers required modifications to ships, rail cars and truck chassis so that the boxes can be locked down and, usually, stacked. In addition, investment is required in specialised equipment and infrastructure at marine terminals for transferring containers back and forth from ship to railcar and truck. Containerised movement are generally door-to-door, so the company handling it should be well equipped to package the items so that it goes safe through all the modes of transport and reaches with minimum damage possible. Labelling and sorting the goods according to their SKUs help them at the unloading site. This further helps in stacking them and transporting to other nodal locations, if required.
Cargo load planning and maximising container utilisation are areas Indian logistics companies need to master. Another area of concern is the need to minimise the time and expense of shifting containers between modes.
Equipment manufacturers of reach stackers, forklifts, tractor trailers, cranes etc are seeing increase in demand with the increase in the need in the industry. We would need more of these players and skilled labours in the industry now.
What kind of safety measures and risk management measures are warranted in the Indian container industry that are applied around the world but not really in vogue in India? What auditing systems are required?
To give security cover to entire operation, long-term measures are taken such as, induction of CISF at port, scanning of consignments, installation of radioactive detectors, etc. Similarly, from safety point of view, physical infrastructures and SOP for handling hazardous consignment were developed and notified. Our port is fully ISPS compliant but still we have to go a long way in achieving international standards of safety and security. Due to lack of seamless connectivity, it has not been possible to track a particular container right up to the doorstep of a user. Thus, there is a gap in the audit trail of container movement. There is also an issue in scanning of all incoming import containers. Presently, containers are scanned randomly by Customs as a security measure.
The logistics industry is prone to cargo thefts which results in loss to the customer. The main reason for occurrence of thefts is the loopholes in the way the cargo is handled right from the point it is loaded at the factory onto the container or the truck. To counter this menace, logistics service providers need to be sure of the various points where theft can occur and then work as per a Standard Operating Procedure (SOP) in consultation with other stakeholders and ensure that the SOP is strictly followed. Also, certain practices that can be adopted to reduce incidences of theft can be â€“ provision of an escort during cargo movement, using GPS fitted trucks for vehicle tracking, using sophisticated means to seal the container, sudden checks of the cargo loaded vehicle during the transit. On top of all these, monitoring cargo movement through IT (visibility management) can prove to be an effective tool to reduce risk and provide customers with the latest and up-to-date knowledge of their cargo. This can also help in quick decision making in case of exceptions arising out of some conflicts such as port strikes, natural calamities, equipment failure, vehicle damage and others.
Logistics service providers should be able to provide services which integrate their IT systems with their customers so that seamless transfer of latest information can take place. The logistics service provider's performance should be measured by key KPIs as detailed in the service level agreement. This makes it easy for both the parties to review the level of service delivered by the service provider.
One of the key problems Indian logistics sector faces is the overloading of cargo on roads. This is a serious issue which compromises the safety of our people and also roads and infrastructure. There is an urgent need for stricter norms and regulations by statutory authorities. The regulations are in place but the implementation of the same need to be monitored better. Also we need to have to scanning of cargo to avoid any unwanted cargo seeping in and out of India. Our coasts have to be protected well and very strict norms have to be set for plying ships in Indian waters. It is better we leave Indian coasts for Indian ships so that government can have strict controlling norms to regulate their activities.