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

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

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 interesting field, Competition in the International ShippingIndian prospect. I am also indebted for his personal attention and being patient with me. Without his faith in me, this paper would not have possible.

Contents 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) Executive summary Introduction to shipping industry Contribution of shipping to the world economy Containerization World container growth Containerization in India Potential of container trade in India Drivers of container traffic Trade Trends in India Transshipment hub in India Potential hub ports 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) 14) Conclusion References

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 the current 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 201516. 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 per cent 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.

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.

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

Source: UNCTAD, Review of Maritime Transport 2008

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 capitalintensive 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 unloading cargoes. 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.

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.

World container growth

Type-wise Distribution of World Container Carrying Vessels
1980 Vessel type Fully Cellular Multi- purpose Others TOTAL No. of Ships 831 1,279 455 2,565 No. of Ships (%) 32.4 49.9 17.7 100.0 Capacity (TEU) 799,101 489,533 248,314 1,537,948 Capacity (%) 52.3 31.5 16.2 100.0

2007 Vessel types Fully Cellular Multi-purpose Others TOTAL No. of Ships 4,040 3,119 1,490 8,649 No. of Ships (%) 46.7 36.1 17.2 100.0 Capacity (TEU) 9,858,547 1,177,334 833,080 11,868,961 Capacity (%) 83.1 9.9 7.0 100.0

Source: (CI Magazine, 2007)

There has been a polarization towards fully cellular ships at the expense of multi-purpose/semi-containerships. These ships have an advantage over other 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% in 2007. In terms of world container capacity, in 1980, fully cellular ships accounted for 52.3% share. This increased to 83.1% by 2007.

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

2007 Size (TEU) 8000 + 5000 - 7999 2000 - 4999 Below 2000 TOTAL No. of Ships 117 417 1,301 2,204 4,040 No. of Ships (%) 2.9 10.3 32.2 54.6 100 Capacity (TEU) 1,011,867 2,484,406 4,175,063 287,211 9,858,547 Capacity (%) 10.3 25.2 42.3 22.2 100

2007 (Order book) Size (TEU) 8000 + 5000 - 7999 2000 - 4999 Below 2000 TOTAL Source: CI Magazine, 2007 No. of Ships 162 170 436 413 1,181 No. of Ships (%) 13.7 14.4 36.9 35.0 100 Capacity (TEU) 1,511,883 1,042,383 1,575,309 516,097 4,645,672 Capacity (%) 32.5 22.5 33.9 11.1 100

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.

Containerization in India and its potential

India has 12 major and 187 non major ports along its 7517 km coastline. The compounded 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) terminal development 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 200506 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 the current 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.

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
US$ b Growth (%) 4.4 4.8 3.8 8.5 7.5 9.0

Exports
US $ b 44.1 44.0 53.0 63.9 83.5 102.7 Growth (%) 20.1 - 0.4 20.6 20.5 30.7 23.0

Imports
US$ b 50.1 51.6 61.7 78.2 108.0 133.4 Growth (%) 0.5 3.0 19.7 26.7 38.1 23.5

2000- 01 2001-02 2002-03 2003-04 2004-05 2005-06 Source: CMIE, 2007

409 441 467 554 633 725

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% to nearer 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.

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 (%) 2005 2015 2005 2015 Kolkata 4.4 8.5 8 4 Paradip 0.0 0.1 0 0 Visakhapatnam 0.6 12.9 1 4 TOTAL 5.1 21.1 9 8 Chennai 9.9 25.3 17 10 Cochin/ 5.5 46.3 10 17 Tuticorin New 0.1 0.4 0 0 Mangalore Mormugao 0.1 0.4 0 0 TOTAL 15.6 72.4 27 27 Mumbai 31.3 116.7 54 44 Gujarat 6.1 57.5 11 22 TOTAL 37.4 174.2 64 66 GRAND TOTAL 58.1 267.5 100 100 Increase 2015/2005 1.9 4.3 20.1 4.2 2.6 8.4 2.6 3.0 4.6 3.7 9.4 4.7 4.6

EASTERN

SOUTHERN

WESTERN

Traffic handled in the major ports

(During April to March, 2008 VIS--VIS April to March 2007)
April to March Traffic 2008 13741 43541 57282 42438 64597 11563 57154 21480 15810 36019 35128 57039 55756 64893 519159 % variation against Previous year traffic 2007 12596 42454 55050 38517 56385 10714 53414 18001 15257 32042 34241 52364 44815 52982 463782 9.09 2.56 4.05 10.18 14.56 7.92 7.00 19.33 3.62 12.41 2.59 8.93 24.41 22.48 11.94

PORTS KOLKATA A) KOLKATA DOCK SYSTEM B) HALDIA DOCK COMPLEX TOTAL KOLKATA PARADIP VISAKHAPATNAM ENNORE CHENNAI TUTICORIN COCHIN NEW MANGALORE MORMUGAO MUMBAI JNPT KANDLA TOTAL

Source: INDIAN PORT ASSOCIATION

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 handled among 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.

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 the Port 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 moving between 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.

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 these ships 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.

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.

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
Sr. No. PORTS OPERATING COMPANIES TOTAL (000 TEUs) %

2005-2006
TOTAL (000 TEUs) %

1.

JNPT

1. Port 2. DP World 3. AP Moller/ CONCOR 1. DP World 2. PSA International/ SICAL DP World PSA International / SICAL PORT DP World / CONCOR ABG AP Moller PORT PORT DP World PORT PORT PORT

3298

55.3 13.4

2667 735

53.7 14.7

2.

CHENNAI

798 393 377 240 227 177 135 128 110 50 17 12 02 5964 6.6 6.3 4.0 3.8 3.0 2.3 2.1 1.8 0.8 0.3 0.2 0.0 100.0 299 321 203 203 148 86 156 110 47 10 09 04 4998 6.0 6.4 4.1 4.1 3.0 1.7 3.1 2.2 0.9 0.2 0.2 0.1 100.0

3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

MUNDRA TUTICORIN KOLKATA COCHIN KANDLA PIPAVAV MUMBAI HALDIA VISAKHAPATNAM NEW MANGALORE MORMUGAO PARADIP TOTAL

Source: CI Magazine 2007, IPA 2006.

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 HIGH MEDIUM LOW Source: CRISIL, 2006 The readiness level is based on the maximum vessel size at berth, high speed equipment, 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, this proportion 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%. WESTERN INDIA JNPT, Mundra, Pipavav. Kandla, Mumbai SOUTHERN INDIA Cochin, Chennai Tuticorin New Mangalore, Mormugao Kolkata, Haldia, Paradip EASTERN INDIA Visakhapatnam

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) 48 80 70 67 90

JNPT 1388 MUNDRA 1295 PIPAVAV 1333 VISAKHAPATNAM 1700 CHENNAI 2100 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.

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 (DelhiMumbai) 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.

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-port connectivity 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 the private 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.

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 equipment is critical. India does not have enough manufacturing base for such equipment. China is currently the world leader in this domain. There is big opportunity for India to develop a manufacturing base, not only to cater to our requirement, but also 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.

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 and fair competition, and Co-ordination function such as coordination among governmental agencies, maritime organizations, decision-making authorities and planners of the city, under the commonly shared long- range policy and planning Facilitation/promotion function such as provision of port EDI, inter-port cooperation and strategic marketing There is not enough focus on scale of container terminals. This is necessary to drive down costs. This would be possible with increase in container trade. Tendering and bidding should be done in a time definite manner. There should be a flexible framework in place for terminal development by private parties under a landlord port. There are significant beauracratic delays (e.g. second terminals in Tuticorin and Chennai). Labor is not always in favor and needs 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.

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