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Logistics: A much needed transformation

Logistics: A much needed transformation

Among other firsts, Vallarpadam ICTT will also trigger a stream of business activities in its immediate neighbourhood. NA Muhammed Kutty, explains why India's first transhipment terminal will transform the face of the logistics industry.

The biggest advantage of Vallarpadam International Container Transshipment Terminal (ICTT) is its strategic location—within 18 km of the main channel. Ships sail through the Suez Canal from the West down to the Arabian Sea, then turn west again into Dubai for transshipment. The ICTT will help save a needless U-turn for ships en route far east or into the subcontinent.

Cost and time

When a mother ship docks at Vallarpadam, we may not need feeder vessels domestically. The distance from Cochin to Nagpur is around 1,100 km, while that from Mumbai to Nagpur is 900 km. Instead of having to transport goods from a transshipment terminal in Colombo to Mumbai, then transport it across the country, they can be transported directly by road across the country from the ICTT at Vallarpadam. We will be saving around five days in this process, including sailing time of about 10-15 hours, waiting time of four to five days, and so on.

Transportation cost in India is more than two and a half times that in European countries. While it is around 28-30 per cent in India, in Europe it is only 11-15 per cent. One of the factors in the lower cost in Europe is their use of waterways. About 73 per cent of our logistics is by road. Water is the most economical means to transport goods. Introduction of smart services like Roll On-Roll Off (RO-RO) can help reduce costs and time.

Vallarpadam's cost advantages over Dubai or Colombo include warehouse, labour and material cost, and the logistics around the ICTT, therefore, must be strong.

Logistics expansion

If we are looking at growing from one million to five million TEUs in the next five years, I believe the requirement will be more like 50 million TEUs in the time to come. We saw a need for an integrated logistics terminal way back in 2000, and then the container freight station (CFS) in 2007. With the arrival of Vallarpadam, we expect many more container freight stations to develop in the neighbourhood. To augment logistics, we are coming up with a Rs 300 crore Free Trade Warehousing Zone (FTWZ) near Cochin airport. FTWZ has several advantages over a normal CFS: Any cargo that comes in a CFS cannot be held for more than two months because they are liable to be auctioned by the customs. But in a FTWZ, you can hold it for two years and get a further extension of three months. Within that period you can either take it to DTA or you can re-export after value addition (redistribution). For example, we imported forklifts from Japan, but even though they had some stock in Singapore, it took four months for delivery. In an FTWZ, they could stock such equipment here for as long as two years without paying any duty. What we need to do is to get a handle on the national requirements. We are aware of Kerala's requirements, such as spices, but we're now conducting a feasibility study to understand those across the country, so that an FTWZ can be tailormade. Of the 250 acre, we have planned 100 acre for FTWZ, a minimum requirement, and 150 acre for a food park for export. The project will be commissioned in 2012-2013.

Third party logistics

Integration of logistics into the activities of a manufacturing company is often not feasible. Third party logistics can help them focus on the product and not on the logistics. Logistics companies with local knowledge will have an advantage in their linkages with transportation, warehousing and supply chain management. It isn't feasible for a company from Rajasthan to load and unload in Cochin—they should let a logistics company take over.

Providing logical support

Falcon is an NRI-promoted, Rs 30 crore company that owns a 130,000 sq ft warehouse on a 25 acre integrated CFS—the first in the country—for Cochin Port with parking facility, workshop, service station, warehouses, offices for CHS as well as agents, banking facility, accommodation facility and restaurant. Similar facilities are being planned in Chennai, Bangalore and Hyderabad.

The author is Managing Director, Falcon Infrastructures, Cochin. Views are personal.

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