2/3/2012

February 21, 12

Production Vs Import - DAP

LOGISTICS ISSUES IN IMPORT OF

FERTILISERS/RAW MATERIALS

D.V. Chalapathi Rao

DGM-Imported Fertilisers
Coromandel International Limited

Production Vs Import - Complex Production Vs Import

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Import DAP

Total available stocks 16.17 lakhs including ports & bulk at plants
Total Finished fertilizer import increased from 165 lakh mt
To 216 lakh mt during 2010-11 April to Jan 11-12 Period: DAP Production increased by 5%, Imports dropped by 9% ,
Sales dropped by 20% & Closing stocks increased by 1053%

Complex DAP + Complex

Total available stocks 35.24 lakhs including ports & bulk at plants

Dec,11 Total available stocks 15.86 lakh mt including ports & bulk at plants
DAP + Complex : Production dropped by 4%, Imports increased by 24%,
April to Jan : Complex production dropped by 8%, Imports increased by 265%, Sales dropped by 10% and closing stocks increased by 646%
Sales increased by 2% and Closing stocks increased by 529%

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MOP STRUCTURE OF PRESENTATION

Indian Ports Scenario

Railways Infrastructure in India

Roadways infrastructure in India

Third Party Logistics (3PL)

Logistics Issues Facing Sea, Rail

and Road Transport

April to Jan : MOP imports dropped by 32%, Sales dropped by Way Forward
37% and Closing stocks increased by 26%
10

PORTS CURRENT SCENARIO

11 12

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PORTS CURRENT SCENARIO PORTS CURRENT SCENARIO

CAPACITY UTILISATION Traffic handled at Indian ports (both

major and non-major) has increased

Traffic handling capacity of major
Figure: Major ports, capacity utilization, FY06-FY10 at a CAGR of 9.1% from 578.7 million
ports has increased at a CAGR of
tonnes in FY06 to 818.7 million
7.1% from 456.2 million tonnes in
tonnes in FY10.
FY06 to 599.3 million tonnes in

FY10. In FY10, traffic grew by 10.9% y-o-

y, driven largely by substantial growth

During this period, most ports
of non-major ports.
operated at 90% capacity, thus

exerting pressure on the

countrys limited infrastructure.

13 14

COMMODITY TRAFFIC PROJECTIONS

PORTS CURRENT SCENARIO
2007-08
COMMODITY COMPOSITION

In FY10, petroleum, oil and lubricants

Figure: Traffic handled at major ports, by commodity, FY09-FY10, in %
(POLs) have dominated the traffic mix 2025-26

at major ports with a 31.2% share,

followed by containers and iron ore.

In FY10, major ports witnessed a

2011-12
sharp revival in raw fertilizers, iron
TOTAL
ore and container traffic, while traffic

for POLs and finished fertilizers

declined
Values in million tonnes
15 16

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FERTILISERS MOVEMENT - PROJECTIONS

SWOT INDIAN PORTS
WEAKNESSES
Old infrastructure
STRENGTHS Limited depth
Old and inefficient cargo handling
High growth systems
High market share Poor hinterland connections
Financial means available Rigid institutional framework
Most ports available at strategic High tariffs
locations Overstaffing
Lack of capacity

OPPORTUNITIES

Introduce competition THREATS

PPP other than BOT
Port reform: more autonomy Bureaucracy
Invest in infrastructure/lower Time
costs for port users
Invest in total transport chain
Training, IT

17 18

KEY OPERATIONAL PARAMETERS FREIGHT RATES

6.0

Kolkata
Avg Turnaround Time (in days)

5.0
Pre-berthing waiting hours are Haldia
4.0 Paradip
substantially high at major ports Visakhapatnam
3.0
Chennai
since they operate at close to their 2.0 Cochin
JNPT
max. capacity. 1.0
Mumbai
Kandla
Turnaround time across all major 0.0
FY08 FY09 FY10

ports has increased steadily due to

30.0
limited IT application and time
Avg Output per Ship Berth-day (in

Kolkata
25.0
inefficiency. Haldia
20.0 Paradip
000' tonnes)

Avg. output per ship berth has also Visakhapatnam

15.0
Chennai
increased, driven by handling of large 10.0 Cochin
ships. 5.0 JNPT
Mumbai
0.0
Kandla
FY08 FY09 FY10

19 20

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Port Operations
CAPACITY EXPANSION PROJECTS
- Schematic -

Vessel dwell time in port Turnover ratio of goods Losses of goods

external port logistics external

Rake Availability
/priorities/loading time

Rail Transport
Inbound Warehouse Outbound
Shipping
logistics logistics logistics
Road transport

Flow of materials

Truck Availability & Truck

Time per stock removal
waiting time

21

KEY CHALLENGES PORTS IN INDIA MARITIME RISK

Total Losses* per thousand vessels by age

Infrastructure capacity 8 4.5

limitations
In general higher age of the vessel
7 4
pertains to higher risk Average Total
Losses 3.5
Poor road network Inadequate 6
Oil Tankers
within the port IT implementation 3
5 Bulk Carrier
Lower losses for very old vehicles
Other Vessels 2.5
KEY stem from the fact that insurance 4
CHALLENGES 2
contracts of very old vehicles
3
Inadequate cargo- include high deductible excess 1.5
Inadequate navigational
handling machinery 2
aids and facilities amounts resulting in under- 1
/machinery
declaration of accidents to insurers 1 0.5

Poor hinterland 0 0
connectivity < 5 Yrs 5-10 Yrs 10-15 yrs 15-20 yrs 20-25 Yrs >25 Yrs
Source: LMIU

23 24

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STRUCTURE OF PRESENTATION
MARITIME RISK
One of the worlds oldest crime against Indian Ports Scenario
sea trade, i.e., PIRACY has re-emerged
and flourished in recent years
Railways Infrastructure in India
Insurance costs for companies have
surged upto 300 times
Roadways infrastructure in India

Security against Piracy Third Party Logistics (3PL)

20 naval vessels operating in
Gulf of Aden to keep pirates Logistics Issues Facing Sea, Rail
away and Road Transport
$7 12 billion: Economic cost
Way Forward
for global trade in 2010

FAI Training programme, Kochi 21st February, 12 25 26

TYPES OF RAKES
RAILWAY INFRASTRUCTURE INDIA
4th largest (63000 km) in the world

Carries 396btkm/year Type of Rake Capacity

Network is spread over 7000 stations in (MT)
CLOSED
14 zones
BCX / BCXC/ BCXR / 55.5
SHORTCOMINGS BCXT / BCXN
Only 25% of network double or BCN 60.0
multi-track
BCNAHS 61.0
Freight trains run at average 23
BCNA 63.0
kmph
Poor average annual output per BOXNHA 60.0
freight wagon (1 million tkm) OPEN/FLAT
Freight tariff one of the highest in BOXNHA 60.1
the world used to cross -subsidize BOXN 58.81 + 2
passenger fares BOXNHS 58.81 + 2

27 28

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STRUCTURE OF PRESENTATION
ROADWAYS INFRASTRUCTURE INDIA
Indian Ports Scenario
Second largest road network in the world
with 3.32 million km of road length carrying
Railways Infrastructure in India
1442 btkm/Year

Roadways infrastructure in India

Third Party Logistics (3PL)

Logistics Issues Facing Sea, Rail

and Road Transport

Way Forward

29 FAI Training programme, Kochi 21st February, 12 30

ROADWAYS - LOGISTICS EFFICIENCY STRUCTURE OF PRESENTATION

Indian Ports Scenario

Railways Infrastructure in India

Roadways infrastructure in India

Third Party Logistics (3PL)

Logistics Issues Facing Sea, Rail

Source: KPMG Report Logistics in India Part I
and Road Transport

Way Forward

31 32

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THIRD PARTY LOGISTICS (3PL)

THIRD PARTY LOGISTICS (3PL)
3PL imply that one company acts as an agent to look after the logistics
aspect of another company or group of companies Reasons for Logistics Outsourcing Less than 55% of Indian companies
subscribed to 3PL, compared to more than
Indias 3PL sector represents 3% of the countrys total logistics spend Logistics cost reduction 80.6 75% globally
Focus on core competencies 76
Indian 3PL is expected to grow at around 20% per annum in next 3-5 years About 57% of the companies plan to
Improved customer services 71.3
outsource reverse logistics within the next
Practice in India reveals that warehousing and outbound Improve return on assets 68.2 5 years
To increase inventory turn 60.6
transportation, custom clearing and forwarding are the most frequent
Productivity improvement 56.6 54% plan to outsource inventory
outsourced activities management
Imbibe more flexibility in operations 46.1

Activities such as packaging, fleet management and consolidation have Access to emerging technology 45.3
53% order processing
Access/expansion to unfamiliar market 35.9
started gaining attention for outsourcing Diverting capital investment 24.5 More than 50% have outsourced activities
like transportation, warehousing &
0 20 40 60 80 100
customs clearing/forwarding
Percentage of respondants

33 FAI Training programme, Kochi 21st February, 12 34

CROSS COUNTRY COMPARISON STRUCTURE OF PRESENTATION

Country Comparison - 3PL Indian Ports Scenario

Japan, 9.1 Railways Infrastructure in India

Logistic Cost/GDP % Roadways infrastructure in India

Europe, 3.5

% Share of 3PL

US, 5.6
Third Party Logistics (3PL)

Logistics Issues Facing Sea, Rail

China, India, 1.8 and Road Transport

0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 Way Forward

35 36

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ISSUES - PORTS ISSUES - PORTS

Suspended particulate matter (SPM)

use of electrostatic
Raw material movement precipitator, green belts, wind
from ports barrier

Tanks for liquid cargo Pipeline maintenance Hazard

free, strict norms to be followed

Cities have engulfed areas

around ports transport by Investment environment high
pipelines is recommended interest rates

Development space provision at

ports (20% buffer)

FAI Training programme, Kochi 21st February, 12 37 FAI Training programme, Kochi 21st February, 12 38

ISSUES - PORTS ISSUES - RAILWAYS

Loading and unloading at ports Open wagons for sensitive cargo
Most bulk handling at ports
controlled by labour unions
Increase in axle capacity without
carrying out increase in infrastructure
Poor output

Solution lies in mechanization Demurrage 24 hrs unloading &

and palletisation
Ports should have bulk packing &
stacking facilities at site
loading facility at both ends should
be provided
Provision of mechanical unloading
equipment

FAI Training programme, Kochi 21st February, 12 39 FAI Training programme, Kochi 21st February, 12 40

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STRUCTURE OF PRESENTATION
ISSUES - ROAD TRANSPORT
Indian Ports Scenario
No uniform freight rate / MT / km

Re-imbursement is given by Govt. Railways Infrastructure in India

60% of actual loss

Escalation formula of freight by road Roadways infrastructure in India

should be fixed
Encouragement of 65 MT trucks for Third Party Logistics (3PL)
bulk transfer
Logistics Issues Facing Sea, Rail
Packaged Commodities Act to be and Road Transport
modified to permit various kinds of
bags, i.e., 1 MT, 0.5 MT, 50 kg, 25 kg
and 10 kg Way Forward

FAI Training programme, Kochi 21st February, 12 41 42

WAY FORWARD FOR LOGISTICS INLAND WATERWAY TRANSPORT

3PL should be encouraged Europe = 500 Million Ton
Palletisation needs to be improved United States= 800 Million Ton
China= 1300 Million Ton
Infrastructure investment for tank farms required
India= ?
Explore bulk movement to Buffer warehouses (outside port) 30
25 Euro
Unloading facility at railheads should be made a 24 hr. service 20 per 1000
Axle load to cross 4000 MT 15 tkm
10
Human handling at loading & unloading to be reduced 5
0
National Authority to fix freight rates for trucks across country WATER RAIL ROAD
Accidents Noise Pollutants
Climate Change Infrastructure Congestion

43 44

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RAIL-PORT SYNERGY CONNECTIVITY TO HINTERLAND

Doubled line connectivity to all major ports is recommended
Deeper draught/bigger vessels &
higher Axle load/heavier trains

Some initiative has already been taken in this direction. Eight

Abolish interchange & enforce
pooling of rakes double lining projects are sanctioned / ongoing (961 Km , Rs.2014

Upgrade sidings to Full Rake and EOL Cr) & five new (263 km, Rs.944 Cr.) projects expedited.
concept

Benchmark Port handling system Faster action and close coordination between two ministries is
with International norms to improve
productivity 65 km of privately developed rail required
network, capable of taking double- decker
container rakes at Mundra Port

45 46

AGILE PORTS - POWER OF IT

To summarise

Port congestion
pre- PPP for minor/major

berthing delays, high port (existing & new)
turn around time of infrastructure
vessels development
Scarcity of labour
Mechanization for speed
delay in Standardization, in operations
dispatch Improve rake availability,
Transport bottlenecks
encourage road
Delayed evacuation movement (Policy)

FAI Training programme, Kochi 21st February, 12 47 48

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GLOSSARY OF TERMS

EXW FCA FAS FOB CFR CIF CPT CIP DAF DES DEQ DDU DDP
Free Free Cost Carriage Delivered Delivered
Ex Free Cost & Carriage Delivered Delivered Delivered
SERVICES Alongside Onboard Insurance Insurance Ex Quai Duty
works Carrier Freight Paid To At Frontier Ex Ship Duty Paid
Ship Vessel & Freight Paid To Duty Paid Unpaid
Packing Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Loading
Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Charges
Inland
Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Freight chalapathiraodv@coromandel.murugappa.com
Terminal
Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Charges
Insurance Buyer Buyer Buyer Buyer Buyer Seller Buyer Seller Seller Seller Seller Seller Seller
Loading On
Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller
Vessel
Freight Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller
Arrival
Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller
Charges
Duty &
Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Buyer Seller
Taxes

Delivery To
Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller
Destination

49 50

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