Port & Logistics

Port & Logistics

Core & Infrastructure Industries

GDP Growth

Development of Port Sector in India

Indias has around 7517 km of natural peninsular coastline strategically located on the crucial East-West trade route, which links Europe and Far East. The coastline has 12 major ports and about 187 other minor and intermediate ports. Most of the major ports have been established in the last few decades of post independent economic planning, while two of the older major ports like Kolkata and Mumbai were established more than hundred years back during the British colonial rule The development of the port sector in India till recently has been exclusively responsibility of the Central government and had grown into a natural public Private sector Participation now.

Public Private Partnership in Port Sector

POLICY 100% FDI under the automatic route is permitted for port development projects 100% income tax exemption is available for a period of 10 years Tariff Authority for Major Ports (TAMP) regulates the ceiling for tariffs charged by Major ports/port operators (not applicable to minor ports) A comprehensive National Maritime Policy is being formulated to lay down the vision and strategy for development of the sector till 2025 Projects developed through PPP Significant investment on BOT basis by foreign players including Maersk (JNPT, Mumbai) and P & O Ports (JNPT, Mumbai and Chennai), Dubai Ports International (Cochin and Vishakhapatnam) and PSA Singapore (Tuticorin) Minor ports are being developed by domestic and international private investors: Pipavav Port by Maersk and Mundra Port by Adani Group (with a terminal operated by P & O), Gangavaram under construction by Consortium lead by DSV Raju

Port & Economic Devlopment

IMPORTANCE OF PORTS IN ECONOMIC DEVELOPMENT Infrastructure is understood as an important input for industrial and overall economic development. While this is certainly true, there is no clear definition of infrastructure according to the current usage of the term in India. As per the Economic Survey, the following sectors constitute infrastructure (Economic Survey 2000-2001, p. 171): (a) Power: Electricity generation; (b) Coal production; (c) Petroleum production: crude oil and refiner y throughput; (d) Cement production; (e) Railways: Revenue-earning goods traffic and passenger kms; (f) Ports: Cargo handled at major ports; (g) Civil Aviation: Cargo and passengers handled at Airports Authority of (h) Roads: Length of roads and length of National Highways; and India (AAI) airports; (i) Telecommunications: New telephone connections approved

Importance of Ports
Ports Today Are dynamic nodes in the Supply chain involving complex international production / distribution network; Have become Integrated Transport Centers and Logistics platforms for International trade, and Stimulate Trade and Regional development Developed under Land-lord Port and Private Port Model in India Opportunities for Private Sector to either act as Port Operator at Major Ports or Port Developer at minor Ports.

Future Growth estimation of Ports in India

Cargo handling at all the ports is projected to grow at 7.7% p.a. till 2013-14 with Minor ports growing at a faster rate of 8.5% compared to 7.4% for the Major ports Traffic estimated to reach 960 million tonnes by 2013-14 Containerized cargo is expected to grow at 17.3% over the next 9 years The New Foreign Trade Policy envisages doubling of Indias share in global exports in next five years to $150 billion Growth in merchandise exports projected at over 13% p.a. underlines the need for large investments in port infrastructure Investment need of $13.5 billion in the major ports under National Maritime Development Program (NMDP) to boost infrastructure at these ports in the next nine years Source: www.investmentcommission.in

Divya Bhaskar Guj News paper report dtd 5/2/2013

12 Major Ports & 187 Minor ports

Future ?
Future of Indian Ports ?

Will Indian port sector really see the emergence of private sector as a major player in the port sector in the future? Will major ports be fully corporative, and bring about greater rationalization and transparency in functioning? Are minor ports in India poised to take a lead over performance of major ports? Is there enough room for new green field port projects in Indian port sector? Several of these questions loom large, as the Indian port sector is increasingly coming under the impact of wide ranging port reforms and private sector investments, in line with larger transformations underway in many global ports. The development of the port sector is important to development of maritime trade is an axiom that no nation can afford to ignore in todays globalised world. This was equally true in the distant past, when maritime nations undertook extensive overseas maritime explorations and trade to set their mark on global economic history.

Some Key Issues for Green Field Port Projects

Issues to be considered before Project Development of Ports Environmental Clearance Land Acquisition Commercial Viability Hinterland Connectivity- Rail/Road Exit of foreign partners due to delays Financial closure not being achieved Litigations

Traffic At Major Port

Capacity Utilization

TRAFFIC HANDLED AT MAJOR PORTS

(DURING APRIL TO DECEMBER, 2012* VIS-A-VIS APRIL TO DECEMBER, 2011)

(*) TENTATIVE
PORTS APRIL TO DECEMBER TRAFFIC 1 KOLKATA Kolkata Dock System Haldia Dock Complex TOTAL: KOLKATA PARADIP VISAKHAPATNAM ENNORE CHENNAI V.O. CHIDAMBARANAR COCHIN NEW MANGALORE MORMUGAO MUMBAI JNPT KANDLA TOTAL: 2012* 2 8666 20198 28864 40749 44201 12212 39896 20951 14893 27025 14918 44090 47977 69497 405273 2011 3 9392 24427 33819 40500 52646 10392 41940 20853 14872 24233 28337 40217 49489 60910 418208

(IN ' 000 TONNES) % VARIATION AGAINST PREV. YEAR TRAFFIC 4 -7.73 -17.31 -14.65 0.61 -16.04 17.51 -4.87 0.47 0.14 11.52 -47.36 9.63 -3.06 14.10 -3.09

Ports & Logistics

Logistics Management Function

Logistics is the process of movement of goods across the supply chain of the company. This process is consist of various functions, which have to be properly managed to bring effectiveness efficiency in the supply chain of organization. The major logistical functions are:

1. Order processing: 2. Warehousing: 3. Inventory Management: 4. Transportation: Multimodal

5. Information: 6. Facilities:

ANNEXURE: ICRAS Portfolio of Rated Port Sector Entities

Company

Ratings Outstanding* Port Companies LAA@ and A1+@ LA (Stable) LA (Stable) LA- (Stable) and A2+ LBBB (Stable) LBBB+@ and LBBB@ LBBB(Positive)

Mundra Port and Special Economic Zone Limited Ennore Port Limited Mormugao Port Trust Kakinada Seaports Limited Krishnapatnam Port Company Limited The Dhamra Port Company Limited Adani Petronet (Dahej) Port Private Limited Port Terminal Operators TM International Logistics Limited Chennai International Terminals Private Limited Nhava Sheva International Container Terminal Private Limited Terminal Private Limited Mundra International Container Terminal Private Limited Sical Iron Ore Terminals Limited International Seaports Private Limited Vizag Seaports Limited Private Limited

IrAA- (Stable) [ICRA]AA (SO) (Stable) and [ICRA]A1 LA+ (Stable) and A1+ Chennai Container LA (Stable) and A1 LA (SO) (Stable) and A2 [ICRA]BB+ (Negative) and [ICRA]A4+ Haldia LBBB+ (Stable) and A2+ LBBB- (Stable) Ennore Tank Terminals A4+

THE INDIAN LOGISTICS SECTOR

The World Bank, in a recent survey Connecting to Compete: Trade Logistics in the Global Economy, has developed a Logistics Performance Index (LPI) that can serve as a benchmarking tool for measuring performance of businesses along a countrys logistics supply chain. The Bank study asserts that countries that are able to connect to the global logistics web would not only have access to vast new markets but also remain a part of the global trade growth. The report avers that it is not the income of nations but their undergoing trade expansion that determines their logistics efficiency.

LPI SCORES
Country
USA UK Singapore India China Mexico

LPI Score
3.85 3.84 4.19 3.67 3.64 2.64

Logistic Cost / GDP

Country India U.S. Europe Japan China Logistics Cost/GDP 13 % 9.9 % 10 % 11.4% 10.2 %

World Bank Report

As per the World Bank's report on the Logistics Performance Index, a 0.5 per cent decrease in logistics cost leads to 2 per cent growth in trade and a 40 per cent increase in the range of products that get exported out of the country.

What is LPI/LPS

Market Potential
SIZE OF THE LOGISTICS MARKET IN INDIA:

Indian Supply Chain and Logistics Industry is more than USD 100 Billion in size and is the backbone of Indian Economy. Our industry is growing at a rate of 8-10% annually and has been a crucial contributor in the growth and development of the Indian economy. In the near future, Traditional Logistics services like Transportation and Warehousing would continue to growth at a good rate. However, the big ticket growth would come from the Value Added Logistics services in the near future. At present, Outsourced Logistics accounts for only one-third of the total Logistics market in India, which is a significantly lower proportion vis--vis the developed markets. Growth in this industry is currently being driven in India by over USD 300 billion worth of infrastructure investments, the phased introduction of VAT, the development of organized Retail and Agro-processing industries, along with a strong manufacturing growth. In addition, we expect strong Foreign Direct Investment inflows in the Indian markets, which would lead to increased market opportunities for providers of Third-Party Logistics in India. Therefore, India possesses substantial opportunities for growth in the Supply Chain & Logistics industry in the coming years, notwithstanding the temporary jolt due to the economic slowdown.

Share of Logistic Cost

Share of Logistics cost in total sale for various industries: Name of Industry Percentage share of Logistic cost in Total sale Cement Steel F&B FMCG Durable Apparel Auto 15% 6% 5% 4% 4% 3% 3%

Manufacturing Hub
India becoming a manufacturing hub: The world over, India is being recognised as a destination for outsourcing of custom-based, high-technology manufacturing activities. According to Confederation of Indian Industries (CII), India will emerge as one of the global 'manufactured product' outsourcing hubs and reach revenues of approximately US$ 50 billion by 2015. In order to remain cost-competitive, contract manufacturers will be required to provide integrated logistics solutions that will bolster the cost savings potential of the outsourcing initiative. The increasing trend of outsourcing will, in turn, drive strong demand for logistics solutions in the country.

Port & Logistics Contribution

MARINE: Marine transport sector contributes over 0.2% to the countrys GDP at constant prices (1999 - 2000 prices) & Thereafter over 0.35%. Transport sectors contribution to the GDP has been firming up over the last couple of years, mostly because of the growing economic activities in the country. Shipping industry plays a significant role in the Indian economy. India has 12 major and 187 minor/intermediate ports along its coastline of around 7,517km. The fleet strength at the end of December 2006 was 774 vessels with 8.42m Gross Registered Tonnage (GRT). Ports serve as the gateways to the international trade in India. Major ports in India together have handled 463.84m tones of cargo in 2006-07, a growth of 9.51% against the same period of the previous year. The petroleum-oil-lubricants (POL) accounted for 33.38% of the total traffic at major ports during April-March 2007, while iron ore constituted 17.37%, coal 12.98%, container traffic 15.84%, fertilizer 3.04%, and others 17.49%. According to the Planning Commission, Indias shipping fleet strength will be increased up to 15m GRT (as per the 3rd target) by the end of 2011-12, with an estimated investment of US$17.7 billion. The port throughput will increase up to 1,008m tones, growing at a CAGR of 10.96% from 2007-08 to 2011-12.

Logistic Potential
Despite problems, The Indian logistics industry is growing at 20% vis--vis the average world logistics industry growth of 10 %. Many large Indian corporate such as Tata and Reliance Industries have been attracted by the potential of this sector and have established logistics divisions. Large express cargo and courier companies such as Transport Corporation of India (TCI) and Blue Dart have also started logistics operations.. Since logistics service can be provided without assets, there is growing interest among entrepreneurs to venture into this business. Indian shippers are gradually becoming more aware of the benefits of logistics outsourcing. They are now realizing that customer service and delivery performance are equally important as cost to remain competitive in this global economy. The Indian economy is growing at over 8% for the last couple of years (compared to the world GDP growth rate of 3%), which implies more outputs and more demand for specialized logistics services. The Indian government has focused on infrastructure development. Examples include the golden quadrilateral project, east-west and north-south corridors (connecting four major metros), Free Trade and Warehousing Zones (FTWZ) in line with Special Economic Zones (SEZ) with 100% Foreign Direct Investment (FDI) limit and public-private partnerships (PPP) in infrastructure development. It is expected that infrastructure development would boost investments in the logistics sector. In India, 100% FDI is allowed in logistics whereas in China, until recently, foreign investment was not allowed in domestic logistics. Almost all large global logistics companies have their presence in India, mainly involved in freight forwarding.

An Industries View
According to a report by Cushman and Wakefield, real estate consultants, Indian logistics industry is expected to grow annually at the rate of 15 to 20%, reaching revenues of approximately $385 bn by 2015. Market share of organized logistics players is also expected to double to approximately 12% during the same period. The report said about 110 logistics parks spread over approximately 3,500 acres at an estimated cost of $1 bn are expected to be operational and an estimated 45 mn sq ft of warehousing space with an investment of $500 mn is expected to be developed by various logistics companies by 2012.

Port & Logistics ( Service Marketing )

8 Ps Analysis:
8 Ps Represents- meeting customers need strategically & Profitably in competitive environment. 1p: Product Element: Port & Logistics offers their Services in time, pickup, handling, packaging and delivering as product. Adding the value by packaging. 2P: Place & Time: when & where to deliver, method and channel employed as multimodal transportation system. Use of Information technology for tracking and decoding. 3p: Pricing includes FOB/C&F/CIF etc basis for export consignment and for Domestic it can be Ex Works or FOR or Door delivery basis. Highly dynamic strategy varies firm to firm and customer to customer. 4p: Promotions: 3PL & 2Pl logistic providers, shipping and Forwarding agents, Govt. Authorities provide information related to trade and practices to educate consumers about services and its benefits. 5P: Process: Ports issues guidelines about process formalities to be completed by customers and Logistic Providers for smooth and fast services at dispatch points. 6P: Physical environment: In General Port and Logistic providers offers necessary convenient environment to customers by providing Buildings, Interior, equipment, staff members uniform to indentify them, printed materials etc to create positive impact. 7P: People: Port and Logistic sector employ more than 10 million people across India. As there are scope of massive growth in future, will attract huge employment. 8P: Productivity and Quality: The Productivity of the sector is measured by Revenue earn per Unit of weight per person and per unit of Volume per person. The measure of Productivity of this service sector is crucial challenging and demanding varies across customer segment.

Disclaimer: The presentation has been made based on data available from various web site and govt sources. The presentation team do not take any guarantee for authenticity . The user may varify before using for any commercial purpose.

Reference: Economic Survey of India www.nic.in Ministry of Transports Kandla port Trust Indian Port Association Confederation of Indian Industries (CII) Indian Institute of Material Management World Bank Report on Indian logistics Asian Developement Bank Report on Indian Logistic Sector www.narendramodi.in ( report on port sector) Director General of shipping. www.investmentcommission.in