aritra gupta

8/2/2019 ARITRA GUPTA

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CONTAINERIZATION AND TRANSSHIPMENT TRADE

- THE INDIAN PROSPECT

A DISSERTATION REPORT SUBMITTED BY:

ARITRA GUPTA

R190307007

MBA- Port & Shipping Management

FOR THE PARTIAL FULFILMENT OF THE AWARD OF THE DEGREE OF

MASTERS IN BUSINESS ADMINISTRATION

IN

PORT AND SHIPPING MANAGEMENT

UNIVERSITY OF PETROLEUM AND ENERGY STUDIES, DEHRADUN


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CONTAINERIZATION AND TRANSSHIPMENT TRADE

- THE INDIAN PROSPECT

A DISSERTATION REPORT SUBMITTED BY

ARITRA GUPTA

R190307007

MBA- Port & Shipping Management

UNDER THE GUIDANCE OF:

Prof. K.V.M.RAO

CENTER DIRECTOR

UNIVERSITY OF PETROLEUM AND ENERGY

STUDIES

RAJAHMUNDRY


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Acknowledgement

I am really obliged to my

guide Prof. K.V.M.RAO, Center Director

University of Petroleum and Energy Studies,

Rajahmundry to provide me with this great

opportunity to work on one of such interestingfield, Competition in the International Shipping-

Indian prospect. I am also indebted for his

personal attention and being patient with me.

Without his faith in me, this paper would nothave possible.


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Contents

1) Executive summary2) Introduction to shipping industry3) Contribution of shipping to the world economy4) Containerization5) World container growth6) Containerization in India7) Potential of container trade in India8) Drivers of container traffic9) Trade Trends in India10) Transshipment hub in India11) Potential hub ports12) Associated factors for transshipment hub

a) Hinterland connectivity

b) Railway evacuation

c) Road connectivity

d) Coastal shipping and inland waterways

e) ICDs/ CFSs infrastructure

f) Information Technology

g) Leasing and Manufacture

13) Conclusion14) References


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Executive summary

India has 12 major and 187 non-major ports along its 7517 km coastline. Cargo traffic

handled by Indian ports in 2006-07 was 649 metric ton, of which 80 metric ton (6.0

million TEUs) was the container traffic. The compounded annual growth rate (CAGR)

of container traffic for the past five years (2002-07) was 22.9 per cent. This was higher

than the worlds average for the same period.

Trade growth, penetration of containerization, and hub and feeder service structure are

the drivers of the container traffic growth. Indias export import growth has grown

around 24 per cent during 2002-07. Its impact on container traffic growth could be

higher, since a greater share of trade is moving towards finished goods requiring

containerization. Presently, containerized cargo represents about 30% by value of

Indias external trade, and this proportion is likely to grow as containerization

increasingly penetrates the general cargo trades and increases its share from thecurrent 68 per cent to nearer international levels of around 75-80 per cent [World

Bank, 2007]. Considering various growth scenarios and studies, it appears that

international trade growth and penetration would result in 21 million TEUs by 2015-

16.

Looking at the container traffic growth in the past few years, there seems to be scope

for hub operations in India, possibly one each on the east and west coast. As per the

projections made by a study of the Jawaharlal Nehru Port Trust, 9 million TEUs of the

Indian traffic of 21 million TEUs will be hubbed in 2015-16 [JNPT, 2006]. If 50 percent hubbing were to take place in India, then 4.5 million TEUs will be hubbed in

India, implying transshipment handling of 9 million TEUs. This requires port handling

capacity of 30 million TEUs, with 9mTEUs as transshipment at hub ports.

Further, shipping trends will play an important role in deciding whether the Indian

ports have potential for hub operations. Hinterland connectivity is a critical area to

ensure a seamless flow of containers and improved port productivity. Currently, 30%

of the traffic is expected to move hinterland by rail and the remaining is expected to

move entirely by road, mostly to nearby CFSs, and some to the interior Inland

Container Depots (ICD). There are also issues with respect to evacuation of containers

from ICDs. There is a lot of road based congestion due to insufficient infrastructure.

Interfacing with customs is another issue.


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Introduction to shipping industry

Globalizations of markets worldwide,international economic integration, removal of barriers to business and

trade have greatly increased the necessity of transportation. It is the most

important link in the supply chain and is responsible for any kind of

competitive advantage.

Within transportation, the shipping industry is intricately linked to the

world economy. It operates in a high competitive business environment that

is more liberalized than any other industry. Over 90% of world trade is

carried by the international shipping industry. The intercontinental trade,

bulk transport of raw material, import and export of goods, would not be

possible without the shipping industry. Ships are high value assets and

operations of merchant ships generate an estimated income of

approximately US$500 billion in freight rates. There are around 50,000

merchant ships trading internationally, transporting various types of cargo.

The world fleet is registered in over 150 nations, and manned by over a

million seafarers of virtually every nationality.The world trade kept on growing and the shipping industry catered all its

needs. The shipping industry, like any other industry, has its business

cycles. A period of boom is always followed by a period of recession.

Lately, every sector in the shipping industry has suffered from the recent

world recession.


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Contribution of shipping to the world economy

The international shipping industry is responsible for the carriage of 90% of world

trade and is the life blood of the global economy. Without shipping the import and

export of goods on the scale necessary for the modern world would not be possible.

Half the world would starve and the other half would freeze! However, the growth

potential of the shipping industry is directly dependent on growth in world output,

world trade, and world maritime trade. In 2007, world output was 32,932 ton-miles, as

compared with a growth of 31,447 ton-miles in 2006, primarily driven by higher

growth in emerging economies.. The increase in trade was driven by high oil and

metals. In 2007, oil trade increased to 12,440 ton-miles from just 9898 ton-miles in

2002.

World seaborne trade in ton-miles, selected years(Billions of ton-miles)

Source : UNCTAD maritime report

a Includes wheat, maize, barley, oats, rye, sorghum and soya beans.

b Includes iron ore, coal, grain, bauxite/alumina and phosphate


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Source: UNCTAD, Review of Maritime Transport 2008


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Containerization

Containers are standardized rectangular boxes used for the transport of marine cargo.

Since 1960, the ocean transportation of general cargo or freight has undergone a

revolutionary technological change. The innovation was containerizationthe

development of standard marine cargo containers for consolidating packages into units

of interchange between ships, docks, trucks, and railcars, and the development of

special ships and handling systems to transport these containers at sea. This innovation

brought economies of scale to marine cargo-handling operations, introduced capital-

intensive processes to the labor-oriented stevedoring tasks, reduced cargo theft and

damage, reduced the time a ship spent in port, and provided the means for efficient

intermodal transport of cargoes.

Some 50 years ago, on April 26, 1956, the first container ship owned by a man named

Malcolm McLean set sail from Port Newark, New Jersey, en route to Texas. On board

were 58 trailers. The American had come up with the idea years earlier, when he was a

trucker watching bales of cotton being hauled by sweating laborers. The trailer became

the container. McLean later founded the Sealand shipping company, which was

acquired by the market leader Maersk in 1999.

Basic to the change to containerization was a new approach to loading and unloadingcargoes. Instead of using nets or slings to lift individual bales, boxes, sacks, or pallets

of cargo in and out of the ship's holds, the new systems employ standard cargo

containers and special handling equipment to place the containers aboard. The

containers are loaded or stuffed at an inland factory or terminal and usually are never

opened until they reach their ultimate destination. The ship carrying these containers

becomes an extension of a trucking line or a railroad.

The essence of this technology is the moving of containerized cargo by more than one

mode of transport without the need for intermediate reloading. The containers can be

moved to the ship via regular highway trailers or trailer chassis or by flatbed railcar or

rail piggyback. Once at the marine terminal, they can be lifted or rolled on the ships.

Upon arrival at the discharge port, all land and water modes are again available to

move them, with cargo undisturbed, to the consignee.


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Containers are undoubtedly the most successful innovation in the freight transport

sector in the last thirty years. More than five million freight containers are now in

service throughout the world. This became possible principally through the

international standardization.


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World container growth

Type-wise Distribution of World Container Carrying Vessels

1980

Vessel type No. of Ships No. of Ships (%) Capacity (TEU) Capacity (%)

Fully Cellular 831 32.4 799,101 52.3

Multi- purpose 1,279 49.9 489,533 31.5

Others 455 17.7 248,314 16.2

TOTAL 2,565 100.0 1,537,948 100.0

2007

Vessel types No. of Ships No. of Ships (%) Capacity (TEU) Capacity (%)

Fully Cellular 4,040 46.7 9,858,547 83.1

Multi-purpose 3,119 36.1 1,177,334 9.9

Others 1,490 17.2 833,080 7.0

TOTAL 8,649 100.0 11,868,961 100.0

Source: (CI Magazine, 2007)

There has been a polarization towards fully cellular ships at the expense ofmulti-purpose/semi-containerships. These ships have an advantage overother types due to guided and fast loading. In 1980, the share of fully

cellular ships to the total ships was 32.4% which increased to 46.7% in2007. In terms of world container capacity, in 1980, fully cellular shipsaccounted for 52.3% share. This increased to 83.1% by 2007.


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Size-wise Distribution of Capacity and Share of Fully Cellular Fleet

2007

Size (TEU) No. of Ships No. of Ships (%) Capacity (TEU) Capacity (%)

8000 + 117 2.9 1,011,867 10.3

5000 - 7999 417 10.3 2,484,406 25.2

2000 - 4999 1,301 32.2 4,175,063 42.3

Below 2000 2,204 54.6 287,211 22.2

TOTAL 4,040 100 9,858,547 100

2007 (Order book)

Size (TEU) No. of Ships No. of Ships (%) Capacity (TEU) Capacity (%)

8000 + 162 13.7 1,511,883 32.5

5000 - 7999 170 14.4 1,042,383 22.5

2000 - 4999 436 36.9 1,575,309 33.9

Below 2000 413 35.0 516,097 11.1

TOTAL 1,181 100 4,645,672 100

Source: CI Magazine, 2007

Economies of scale have dictated an upward trend in sizes of container ships in

order to reduce costs. 8,000+ TEU ships currently account for only 2.9% of the

total ships and 10.3% of the capacity of the fully cellular fleet. However, 13.7% of

the fully cellular fleet ships booked in 2007 are of 8,000+ TEUs which will

account for 32.5% of total ship capacity.


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Containerization in India and its potential

India has 12 major and 187 non major ports along its 7517 km coastline. Thecompounded annual growth rate (CAGR) of container traffic in TEUs for the

period 2001-06 was 15.1%, which is higher than the worlds average for this

period. Given the growing economy and international trade, a lot of future

potential is seen in this sector. This however would be contingent on the maritime

sector being equipped to take the challenges emerging from (i) large shipping

vessels and deeper draft at ports (ii) hub and feeder operations at ports and along

the coast respectively (iii) hinterland connectivity between port and Inland

Container Depot (ICD)/Container Freight Station (CFS) and (iv) terminaldevelopment on ports and in the hinterland. Other issues relate to use of

Information Technology (IT) and better systems to coordinate with bodies like

customs and industrial location policy (especially with respect to Special

Economic Zones (SEZs).

India handled 649 million tons in 2006-07 and 569 million tons of cargo traffic in

2005-06. The total container traffic in 2006-07 was 80.0 million tons and in 2005-

06 was 67.1 million tons. In terms of Twenty-foot Equivalent Units (TEUs), it was

6.0 million TEUs in 2006-07 and 5.0 million TEUs in 2005-06. Considering thecurrent Compounded Annual Growth Rate of 15.1%, the container traffic after 5

years is expected to be 10.0 million TEUs and after 10 years (2015-16) will be 20.3

million TEUs. As part of the study conducted by i-maritime and IPA (in May

2006), the container traffic will be 20.9 million TEUs (low estimate) and 24.1

million TEUs (high estimate) in 2015-16. As per the National Maritime

Development Program (NMDP) forecast, container traffic would increase at 18.3%

per annum over the decade 2004-14 and major ports would have 72% share. At this

rate of growth, 26.8 million TEUs will be the traffic in 2015-16.


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Drivers of Container Traffic

A) International trade growth:

Indias export earnings in 2005-06 topped US $102 billion, recording a 23%

growth over the previous year. Indias import value in 2005-06 reached US $133

billion, recording a growth of 23% over the previous year. The export to GDP ratio

reached 14%, while the import to GDP ratio reached 18% in 2005-06. The table

gives a clear idea of the growth in Indian trade.

Year National GDP Exports Imports

US$ b Growth (%) US $ b Growth (%) US$ b Growth (%

2000- 01 409 4.4 44.1 20.1 50.1 0.5

2001-02441 4.8 44.0 - 0.4 51.6 3.0

2002-03 467 3.8 53.0 20.6 61.7 19.7

2003-04 554 8.5 63.9 20.5 78.2 26.7

2004-05 633 7.5 83.5 30.7 108.0 38.1

2005-06 725 9.0 102.7 23.0 133.4 23.5

Source: CMIE, 2007


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B)Penetration of containerization:

Presently, containerized cargo represents about 30% by value of Indias external

trade, and this proportion is likely to grow as containerization increasingly

penetrates the general cargo trades and increases its share from the current 68% tonearer international levels of around 75-80% [World Bank, 2007]. Of the principal

commodities that India trades in, the commodities that are containerized include

engineering goods, agricultural commodities, textiles and readymade garments,

pharmaceutical products (bulk formulations) and machinery (auto and electronic).

With increased penetration, and growth in Indias trade, container traffic is

projected to grow from 4.5 in 2005 million TEUs per annum to around 21 million

TEUs by 2015 [World Bank, 2007].

C) Hub and feeder:

Given the container traffic growth in the past few years, there seems to a scope for

hub operations in India, possibly one each on the east and west coast. The absence

of a hub port means that a significant share of containers leaving an Indian port

goes through a feeder, transshipment and mainline movement. This implies

additional delay due to the feeder voyage from India to the hub port and then at the

hub port while it waits for the mainline ship to call. This has been resulting in

delay of anything between 40 hours to 50 hours at an extra cost of at least US $70

per TEU [Business Line, January 28, 2004].

In the absence of a hub port in India, a majority of the country's containers are

currently transshipped through other ports i.e. Colombo (just south of India),

Singapore (east), Dubai and Salalah (west). Handling these through the Indian

transshipment terminal would result in savings of between Rs 6,000 and Rs 16,000

per TEU for the Indian exporter.

The advantages of having a hub port in India would be:

- Feedering time to other ports would reduce.

- The revenue from the transshipment remains with India.

- Marine side traffic from and to the hub port will move faster and cheaper.


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TRADE TRENDS IN INDIA

While container traffic has grown across the country, the growth has not been

uniform. The bulk of the demand originates in the north-western hinterland which

accounts for close to 70% of the container cargo in the country. The western ports

catering to this vast hinterland have experienced a container traffic growth rate of

16.9% between 2000 and 2005 and western ports handled roughly 3.1 million

TEUs in 2005. JNPT near Mumbai alone accounted for over 55% of the containers

handled in the country. The Southern hinterland is the next largest, accounting for

roughly a quarter of the container demand, and traffic there grew at an average of

13.9% per annum during 2000-05. Based on the growth and industrialization trends

in these regions of the country, it is unlikely that a major shift in the relative size of

these regional shares will occur in the near term. The table below shows the

projected growth of traffic in the Indian ports:

Region Port cluster Traffic ( MT) Share (%) Increase

2015/20052005 2015 2005 2015

EASTERN

Kolkata 4.4 8.5 8 4 1.9

Paradip 0.0 0.1 0 0 4.3Visakhapatnam 0.6 12.9 1 4 20.1

TOTAL 5.1 21.1 9 8 4.2

SOUTHERN

Chennai 9.9 25.3 17 10 2.6

Cochin/Tuticorin

5.5 46.3 10 17 8.4

NewMangalore

0.1 0.4 0 0 2.6

Mormugao 0.1 0.4 0 0 3.0

TOTAL 15.6 72.4 27 27 4.6

WESTERN

Mumbai 31.3 116.7 54 44 3.7

Gujarat 6.1 57.5 11 22 9.4TOTAL 37.4 174.2 64 66 4.7

GRAND TOTAL 58.1 267.5 100 100 4.6


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Traffic handled in the major ports

(During April to March, 2008 VIS--VIS April to March 2007)

PORTS

April to March % variation against

Previous year trafficTraffic

2008 2007

KOLKATA

A) KOLKATA DOCK SYSTEM 13741 12596 9.09

B) HALDIA DOCK COMPLEX 43541 42454 2.56

TOTAL KOLKATA 57282 55050 4.05

PARADIP 42438 38517 10.18

VISAKHAPATNAM 64597 56385 14.56

ENNORE 11563 10714 7.92

CHENNAI 57154 53414 7.00

TUTICORIN 21480 18001 19.33

COCHIN 15810 15257 3.62

NEW MANGALORE 36019 32042 12.41MORMUGAO 35128 34241 2.59

MUMBAI 57039 52364 8.93

JNPT 55756 44815 24.41

KANDLA 64893 52982 22.48

TOTAL 519159 463782 11.94

Source: INDIAN PORT ASSOCIATION


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EXPECTED CONTAINER TRAFFIC IN VARIOUS ZONES OF INDIA

A) WESTERN PORTS CONTAINER TRAFFIC:

Ports in the western region (Mumbai and Gujarat clusters) are expected to continue

to dominate Indias container trades, handling at least two-thirds of the container

throughput in the country in 2014-15. This forecast of market share reflects the

proximity of western ports to major manufacturing and consumption centers in the

north-western hinterland, and their access to the extensive container services

circulating in the Arabian Sea area. While the regional shares of traffic remain

relatively stable, there could be a significant shift in the division of traffic handledamong the ports in the region.

JNPT is forecasted to remain Indias major container port, but it is expected to face

increasing competition from ports in the Gujarat region. The private ports of

Mundra and Pipavav in Gujarat have already made significant in-roads into the

container traffic of the northwestern hinterland and other Gujarat ports have similar

plans. Connectivity issues for the Gujarat ports are being resolved through various

innovative public-private partnership arrangements for road and rail connectivity.

So the current JNPT/Mumbai 57% share of container traffic will likely be eroded

as competition in the region increases. However, while JNPs market share may

decline, the absolute volume of cargo will continue to increase and is expected to

almost quadruple over the period to 2015.

B)SOUTHERN PORTS CONTAINER TRAFFIC:

Traffic through southern ports is expected to increase more than four-fold between

2005 and 2015, with a market share of 27%. The NMDP traffic projection for these

ports is even more bullish, envisaging the four southern ports of Cochin, Tuticorin,

Chennai and Ennore handling 4 million TEUs in 2011-12, or 32% of the total

throughput in Indian ports. The forecasts implicitly assume that hinterland

connectivity of these ports will be improved in a timely manner.


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Traffic growth at Cochin will be dependent on the development of the International

Container Transshipment Terminal (ICTT) at Vallarpadam. The recent acquisition

of P&O Ports by Dubai Ports World gives the latter control of ICTT as well as

Colombo Port which is an established transshipment terminal with major

expansion plans of its own. Developments are also planned at Tuticorin where thePort of Singapore has the concession for container terminal development. All of

these facilities coming on stream should create the conditions for strong

competition in the transshipment business and provide shippers with adequate

options for efficient container services.

C)EASTERN PORTS CONATAINER TRAFFIC:

Ports in the east are handicapped in so far as container traffic is concerned due to:

1) a limited manufacturing base, 2) distance from the main international shipping

routes, and 3) poor connectivity to the markets and manufacturing centers of

northern India. The latter could be corrected with infrastructure improvements but

the former two are more difficult constraints. Consequently, container traffic at the

eastern ports show limited potential overall. Among eastern ports, however,

Visakhapatnam port shows high growth primarily due to the fast developing state

of Andhra Pradesh in its hinterland and its growing consumer economy.

While some Eastern ports would appear logical gateways for containers movingbetween India and the far-east, it is often more economical to service this trade

using the west coast ports which have better access to the mainline container

services in the Arabian Sea. Another factor affecting the availability of direct

shipping services from the east coast to the Far-east is the systemic imbalance of

empty containers heading east from the Gulf countries which results in low freight

rates on exports from India to the Far-east. Consequently, east coast ports are

expected to continue to rely on feeder services to hubs such as Colombo and

Singapore which will allow them to take advantage of this systemic imbalance.


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Transshipment hub in India

Ports are classified as major and minor. It is very difficult to define transshipment

ports in these terms as they target mostly international traffic. The qualities which

these ports possess make them distinct from traditional ports. Transshipment ports

have highly specialized infrastructure facilities for handling different types of

freight and act as switching points for cargo carried by deep-sea vessels operating

on trans-continental trade routes. The ratio of transit cargo handled by these ports

is very high, compared to locally bound cargo. Such ports, therefore, need to be

adjacent to international shipping lines and possess deep draft to accommodate

large vessels.

A look at the shipping routes for Asia-Pacific and Atlantic Rim distinctly

underlines the unique location advantages India possesses. Most of the major ships

carrying cargo between America and East Asia, between East Asia and Africa, and

between Europe and East Asia pass via Indian territorial waters. Most of theseships either break their bulk at Colombo, or at Hong Kong/Singapore.

A hub port levies a transshipment fee per container which varies according to the

competitiveness of the port. This is $150 in Colombo and $130 in Dubai and

Singapore. India can not only garner a substantial portion of this fee but also save a

lot of money if her ships break their bulk at Indian ports. A single container

transshipped from Colombo port to Cochin incurs an expense of $1,200. If it was

directly landed at Cochin it would cost only $400. Eighty per cent of Indian

containers are transshipped at Colombo, Singapore and Dubai, and Indian ships

account for 60-70% of Colombos traffic.


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Moreover, with changing technology, bigger single-engine vessels (Post

Malaccamax and Post-Panamamax) are becoming popular due to economies of

scale. Concept designs for ships up to 18,000 TEUs already exist and by 2011 a

total of 490 such large container vessels will be seaborne. Typically a vessel

greater than 6,000 TEUs in size requires water depth greater than 16 meters which

has to be artificially created in most transshipment hubs. Before moving further, it

is imperative to understand the complex series of activities carried out in a typical

transshipment port, and the privatization possibilities in each of them. Each port

activity needs to be analyzed separately and proper contracts need to be drawn.

This calls for public-private partnership with detailed specifications for each

activity, and a tendering process which should be started once the port has started

working in its earnest.

For implementing such complex contracts, changes in government regulations

become critical. The current port laws, which are either governed by the Indian

Port Act, 1908 and the Major Port Trust Act 1963, or by Dock Workers

(Regulation of Employment) Act 1948 for labor issues, need to be modified.

Guidelines should be laid down for corporatization process, decentralization of

activities in a port and promotion of competition in activities like bunkering. Laws

should also allow a free labor market to develop with a judicial body for grievance

redress. The two main approaches of tariff determination in the Indian context are

cost-based and market-based pricing and are implemented by the Tariff Authority

for Major Ports (TAMP). However, the regulations are often ambiguous as pointed

out in a World Bank report that states, with limited powers vested in TAMP by

law, inadequate definition of its role and functions as a regulator of tariffs, and

limited professional and industry-specific resources, this regulator faced significant

challenges in discharging its primary responsibility of ensuring fair prices and a

level playing field for all users and service providers at the major ports.


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Potential hub ports in India

Given the reality of transshipment and Feedering, it is important to focus on few

ports on both the coasts with deep draft. The key requirements of a transshipment

terminal are its strategic location, potential to reduce total transport cost using hub

and spoke arrangement, financial savings in terms of lower land values, less need

for dredging and the facility to receive higher-capacity vessels to reduce overall

fleet costs. The following Table shows the container traffic handled at ports

(including the non-major ports of Mundra and Pipavav) in 2006-07 and 2005-06.

2006- 07 2005-2006

Sr. No. PORTS OPERATING COMPANIES TOTAL

(000 TEUs)

% TOTAL

(000 TEUs)

%

1. JNPT 1. Port2. DP World3. AP Moller/ CONCOR

3298 55.3 2667 53

2. CHENNAI 1. DP World2. PSA International/SICAL

79813.4 735 14

3. MUNDRA DP World 393 6.6 299 6.0

4. TUTICORIN PSA International / SICAL 377 6.3 321 6.4

5. KOLKATA PORT 240 4.0 203 4.1

6. COCHIN DP World / CONCOR 227 3.8 203 4.1

7. KANDLA ABG 177 3.0 148 3.0

8. PIPAVAV AP Moller 135 2.3 86 1.7

9. MUMBAI PORT 128 2.1 156 3.1

10. HALDIA PORT 110 1.8 110 2.2

11. VISAKHAPATNAM DP World 50 0.8 47 0.9

12. NEW MANGALORE PORT 17 0.3 10 0.2

13. MORMUGAO PORT 12 0.2 09 0.2

14. PARADIP PORT 02 0.0 04 0.1

TOTAL 5964 100.0 4998 10

Source: CI Magazine 2007, IPA 2006.


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The following table provides a comparative analysis of various ports in terms of

their physical and efficiency parameters for hub operations:

HUB OPERATIONS READINESS

READINESS LEVEL WESTERN INDIA SOUTHERN INDIA EASTERN INDIA

HIGH JNPT, Mundra,Pipavav.

Cochin, Chennai Visakhapatnam

MEDIUM Kandla, Mumbai Tuticorin

LOW New Mangalore,Mormugao

Kolkata, Haldia,Paradip

Source: CRISIL, 2006

The readiness level is based on the maximum vessel size at berth, high speedequipment, average turnaround time, average pre-berthing time and average parcel

size. From the above table, we can deduce that, JNPT, Mundra, Pipavav, Cochin,

Chennai and Visakhapatnam are best suited to become hub ports in India.

About 50% of the containers exported through Indian ports are transshipped at

some point prior to reaching their overseas destination. Approximately 30% of

containers are transshipped in either Colombo or Singapore/Klang and another 5%

in Dubai or Salalah. About 50% of the container traffic is not transshipped and

moves on the same vessel to the final destination port. In the case of JNPT, thisproportion is above 80%. Of Indian containers transshipped in Singapore/Klang,

Chennai and Kolkata account for 68%, while for Colombo the eastern and southern

ports account for 87%.


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ASSOCIATED FACTORS FOR A TRANSSHIPMENT

HUB

A)Hinterland connectivity:

Hinterland connectivity is probably the most critical area to ensure a seamless flow

of containers and improved port productivity. It is an essential part of a world class

logistics system that India needs to develop with a strategic focus. JNPT is the

most efficient container port in the country and is the preferred port for a majority

of the countrys container traffic, presently accounting for about 55% of the total.

For example, if a consignment has to go for Delhi, then customers prefer JNPT.

The reason behind this is shown in the following table:

PORT DISTANCE FROM DELHI ( Km) RAIL TRANSIT TIME(Hrs)

JNPT 1388 48

MUNDRA 1295 80PIPAVAV 1333 70

VISAKHAPATNAM 1700 67

CHENNAI 2100 90

Source: World Bank study 2007

As shown in the table, even though the Gujarat ports are located a little closer, they

take almost twice as long to reach. The east coast ports not only take much longer,

but also cost more than twice as much in inland haulage charges. These differences

restrict competition, and JNPT therefore enjoys a dominant position on account of

both its better overall shipping service offerings and its superior hinterland

connectivity. The Gujarat ports on the other hand, continue to lose out to JNPT due

to their relatively poor connectivity, despite enjoying a closer proximity to the

north-western hinterland which generates a majority of the container traffic.


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B) Rail Evacuation:

Currently, 30% of the JNPT traffic is expected to move hinterland by rail and the

remaining moves entirely by road, mostly to nearby CFSs, and some to interior

ICDs. Rail capacity is barely sufficient for current demand. CONCOR monopoly

has been a deterrent to quality service. This has seen competition growth and

private participation in the rail evacuation system. Various private players are

getting involved in the system of railway evacuation of cargo. Examples of private

players are, Adani Logistics, Hind Terminals and MSC Agency, container rail road

services (DP World), SICAL Logistics etc. The Tughlakabad-JNPT (Delhi-Mumbai) line, one of the most highly trafficked corridors in the country. Presently,

less than one-third of the containerized cargo in this corridor is being carried by the

Railways.

C) Road Evacuation:

To provide for the road based evacuation, while the National Highways

Development Programme is providing inter-regional connectivity with some

success, not all port based connectivity projects have been successful. Three such

project contracts were recently annulled. Beyond just the four laning of highways,

expressway connectivity to the ports to service major flows would be essential. In

terms of local road connectivity around ports and ICDs, there is no explicit

planning for consequential trailer movements for empty containers and empty

trailer movements. Similarly, there is no planning for trailer parking, maintenance,

facilities for drivers etc. These could lead to avoidable congestion and first/last

mile problems. Hence we can see that road evacuation is a very important aspect,

which needs to be understood before planning a transshipment hub.


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D) Coastal Shipping and Inland Waterways:

The potential of coastal shipping and inland waterways is untapped and needs to be

developed to lessen the load on the railways and road networks and bring down the

costs since cost of cargo movement by sea is significantly less than the cost by

road and rail. Feedering from an Indian transshipment port would naturally be a

coastal movement. The possibility of a dedicated sea corridor with inter-portconnectivity needs to be explored. Integration with coastal and inland water

transport for evacuation needs proactive consideration.

E) ICD/ CFS Infrastructure:

Given that ICD/CFS business is open to anybody, there would not be a concern

regarding the supply. The concepts of SEZs and Free Trade Warehousing Zones

would only further facilitate such infrastructure. The conditions imposed on theprivate rail container operators reinforce the same direction.

However, the following would need intervention:

Location and access, giving consideration to distance to manufacturing units,

local connectivity with minimum traffic interference.

Customs and bonded warehouse.

Rail connection to gateway ports.

Parking spaces and maintenance facility.


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F) Information Technology:

While IT use for container logistics would be commercially driven, policy and

industry level interventions would be necessary to develop standards, networking

and information sharing, and even knowledge products. Technologies such as

Radio Frequency Identification Device (RFID) and Global Positioning System

(GPS) should be leveraged to achieve effectiveness and efficiency.

G) Leasing and Manufacture:

Availability of containers, wagons, tractor/trailers and cranes as support equipmentis critical. India does not have enough manufacturing base for such equipment.China is currently the world leader in this domain. There is big opportunity forIndia to develop a manufacturing base, not only to cater to our requirement, butalso for the export market.In the context of containers, leasing by non-shipping line owners has been

leveraged internationally for efficient use of containers. However, the share of the

leased fleet has dropped from 50% in 1981 to 40% in 2006. With better IT for

container tracking, the leased fleet has utilizations over 90%, with the cost of

leasing showing a decreasing trend.


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CONCLUSION

Based on the above analysis, the following issues need consideration:

Landlord port with privately operated terminals would be the way forward.Existing ports should be empowered with this system. There should be clear delineation of roles between landlord and operator. The public port authority will focus more on: Landlord functions such as long-term planning, infrastructure development,

asset management.

Regulatory functions such as maritime safety, environment protection andfair competition, and

Co-ordination function such as coordination among governmental agencies,maritime organizations, decision-making authorities and planners of thecity, under the commonly shared long- range policy and planning

Facilitation/promotion function such as provision of port EDI, inter-portcooperation and strategic marketing

There is not enough focus on scale of container terminals. This is necessaryto drive down costs. This would be possible with increase in container trade.

Tendering and bidding should be done in a time definite manner. Thereshould be a flexible framework in place for terminal development by privateparties under a landlord port. There are significant beauracratic delays (e.g.second terminals in Tuticorin and Chennai). Labor is not always in favor andneeds to be dealt with.

Global tendering would be essential to get the most competitive supply. Up coming hub ports like Vizhinjam International Container Port, Kerala

have to be completed according to international standards and in quick time.


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References:

1)www.google.com

2) World report 2007

3)www.wikipedia.com

4) Containerization International, May 2007

5) Indian Port Association

6) CRISIL, 2006

7) The Economic Times (16th

October, 2007)

8) Indian brand equity foundation, January 2007

(www.ibef.org)

9) CMIE 2007
http://www.google.com/http://www.google.com/http://www.google.com/http://www.wikipedia.com/http://www.wikipedia.com/http://www.wikipedia.com/http://www.ibef.org/http://www.ibef.org/http://www.ibef.org/http://www.wikipedia.com/http://www.google.com/

aritra gupta

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