Containerization and India - Status

CONTAINERIZATIONBuilding Global Trade Competitiveness By: Amitesh Tyagi Aniruddha Ray Pervinder Singh Chawla Saurav Chaudhuri

DISCUSSION POINTSWhat is containerization?Players in the container supply chainContainerization in IndiaHub and Feeder Possibility in India Additional focus on JNPT

WHAT IS CONTAINERIZATION?As per Wikipedia: ‘Containerization is a system of freight transport based on a range of steelintermodal containers (also shipping containers, ISO containers etc). Containers arebuilt to standardized dimensions, and can be loaded and unloaded, stacked, transportedefficiently over long distances, and transferred from one mode of transport to another—container ships, rail and semi-trailer trucks—without being opened. The system wasdeveloped after World War II, led to greatly reduced transport costs, and supported a vastincrease in international trade.’ISO Standard for containers:a. Five common standard lengths: 20-ft, 40-ft, 45-ft, 48-ft and 53-ftb. Capacity is expressed in TEU – Twenty-feet Equivalent Unitsc. Height is not considered for expressiond. Maximum gross mass for 20ft is 24000 kgs and for 40-ft is 30,480 kgs.Some big names in Container Transport:NYK Line, Evergreen Marine, CMA-CGM, Maersk Line, MSC, Hapag-Lloyd, APL, Hanjin,CSCLIn India – Shipping Corporation of India

PLAYERS IN THE CONTAINER SUPPLY CHAIN CARGO SHIPS FREIGHT TRAINSINLAND CONTAINER DEPOT TRUCKS

CONTAINERIZATION IN INDIASome numbers about Sea Transport in India:• Sea Transport carries 95% of India’s exports by volumes and 70% by value• India has 12 major ports and 187 non-major ports along 7517 km coastline• Capacity handled in 2008 is 9.1 mTEU and expected to reach 21.0 mTEU by 2014 Drivers of Container Traffic INTERNATIONAL TRADE PENETRATION OF HUB AND FEEDER SERVICE GROWTH CONTAINERIZATION STRUCTUREa. Indian exports reached $102 Billion a. Total tonnage handled in all major a. Growing traffic builds a strong casein 2005 2005-2006 ports in India combined equaled for hubs in India – mainly one in Eastb. Indian imports increased to $133 92247 Tons in 2008 2008-09 and West CoastBillion in 2005 2005-2006 b. This was a growth of 25.6% over b. Current transhipments happen inc. Both record a growth of 23% over the previous year. Colombo, Dubai and Salalahprevious year c. Principal commodities in India’s c. Potential savings for exporters withd. Greater share of trade moving trade include engineering goods, hubs in India between Rs. 6000 andtowards finished goods (hence agricultural commodities, textiles and Rs. 16000 per TEUrequiring more containerization) readymade garments, pharmaceutical products and c. Two handlings required currently –e. Target set for $500 Billion exports. machinery. one at same hub and another atAchievable by 2014. feeder hub d. India’s container traffic projected as 21 mTEUs by 2015. (More details follow)

EXPLORING HUB AND FEEDER MODEL IN INDIACURRENT STATE Reasons for • Insufficient Traffic • Cabotage Law Hubs not • Insufficient infrastructure including draft requirement for a mainline shipevolving in India • Feedering time from other ports reducesAdvantages of a • Revenue from transshipments remains within India • Savings for the exporters per unit TEUhub port in India • Marine side traffic from and to hub port would move faster and cheaper

IN FAVOR OF HUB AND FEEDER MODEL IN INDIA Indian Sub- Continent • Per World Bank Study, the western region (Mumbai and Gujarat) can handle 66% container throughputs for the country, 27% can Peninsular be handled in southern region and balance at eastern region Advantage • The sizes of the large mother vessels are increasing from 6000- 8000 TEU to 12000-14000 TEU requiring fewer trips by presentShipping Trends 4000 TEU ships as feeders • Port infrastructure needs to be scaled up to handle the new emerging standards of the vessels • India is growing at 7-8% CAGR. • The exports of finished groups are growingEmerging India • Government is realizing the need for more and more PPP opportunities for an effective port management system

TOWARDS HUB AND FEEDER MODEL IN INDIA:POTENTIAL HUB PORTS – KEY REQUIREMENTS STRATEGIC LOCATION POTENTIAL TO REDUCE TOTAL TRANSPORTATION COST COST SAVINGS OWING TO LAND VALUES LESSER DREDGING REQUIREMENTS FACILITY TO RECEIVE HIGHER CAPACITY VESSELS AND THUS REDUCE OVERALL FLEET COSTS

TOWARDS HUB AND FEEDER MODEL IN INDIA: Potential Hub PortsA key requirement for an effective hub port is a deep draft so that large vessels cannavigate easily in the water and hence provide cheaper and higher quality service. The busiest port JNPT has a draft of 12.5 meters while Mundra has highest of 17.5 meters. The range of drafts in India are from 7.5 meters to 15 meters with an even spread on the east andwest coast. Colombo, the closest competitor, has a draft of 16 meters* and the proposal is to raise it to 23meters* Based on the evacuation capabilities and the draft available criteria, the paper rightly points outthe following:  Mundra is the best option purely based on the draft criteria  JNPT is best fit with the hinterland connectivity initiatives that are on the anvil  Vishakhapatnam is the best option for hub on the eastern side of the peninsula Further, the business plan of JNPT points out that the port is planning to intensify dredging so thatit can deepen channel up to 14 meters. There is also a growing competition among Indian ports withthe private players getting in the port management through PPPs.* Port website

TOWARDS HUB AND FEEDER MODEL IN INDIA: Potential Hub Ports (Current State of JNPT)Source: Business Plan, JNPT Port Website

TOWARDS HUB AND FEEDER MODEL IN INDIA: Potential Hub Ports (Hinterland Connectivity)Hinterland Connectivity is required for smooth and well coordinated container trafficinflow and outflow from the port. This is important for a port’s position as a hub.Rail Evacuation JNPT enjoys a competitive advantage over the other ports as far as the hinterland connectivity isconcerned as is quoted in the paper. Containers bound to countries such as China and Japan also prefer JNPTover others for this reason Gujarat ports despite better draft suffer from lack of sufficient hinterland connectivity leading to costliertransports to and from these ports both time-wise and money-wise Congestion in the Tughlakabad-JNPT corridor is heavily congested and freight trains get a lower priorityover passenger trains. Suggestion is to explore double stack option in this corridor  However, double stack option feasibility needs to be assessed considering as it increasing the overall height of the train.  China faces a problem of lower electrical transmission lines in its railway network. A similar disadvantage is possible in Indian electrical transmission wiring. Also a review of the heights of road bridges over railway tracks needs to be studied before the double stack can be explore as a viable option.  Some countries have adopted shorter containers for double stacking. Economic viability of this in JNPT and Indian context needs to be analyzed. PPP models have evolved with Kutch Railway Corp and Pipavav Railway Corp.

TOWARDS HUB AND FEEDER MODEL IN INDIA: Potential Hub Ports (Hinterland Connectivity)Road Evacuation More maturity is required in the Indian context as far as the road connectivity goes. Someprojects on port connectivity have been shelved in recent past As mentioned in the paper, the future plans of NHDP are not covering port connectivity Movement of empty trailers, trailer parking around depots, maintenance, facilities for drivers etcneed astute traffic planning else situations of congestions are possibleJNPT advantage JNPT has a double line connectivity while Pipavav andMundra have single track diesel connectivity However, JNPT hinterland connectivity is reaching itspeak capacity JNPT is considering barges and double stacking toremove capacity constraints JNPT has signed an MoU for partial funding of a roadexpansion project Mundra and Pipavav are also persuading governmentfor additional focus on hinterland connectivity

TOWARDS HUBAND FEEDERMODEL IN INDIA:Potential HubPorts (HinterlandConnectivity)a. The traffic from northern part of the country is decreasing due to the increasing infrastructure for other locations.b. JNPT would continue to serve as the port of choice for captive markets. Source: Business Plan, JNPT Port Website

Potential Hub Ports (Hinterland Connectivity) And Other ConsiderationsOther Considerations: Coastal Shipping and Inland Waterways  Integration with coastal and inland water transport for evacuation needs ICD/CFS Infrastructure  Concepts of SEZ and FTWZ would gain more consideration  Local connectivity with minimum traffic interference  Customs and bond warehouses  Rail connection to gateway ports  Parking spaces CAPACITY UTILIZATION OF RAILWAY SECTIONS

TOWARDS HUB AND FEEDER MODEL IN INDIA: Potential Hub Ports (Other Issues)IT Infrastructure Standardization , network and information sharing and knowledge products requires policy andgovernmental interference to build more robustness and effectiveness around the IT systems. Usage of GPS and RFID should be introducedDomestic Traffic  More focus needed towards the domestic traffic as well  Opportunity for customized containerization possible with domestic traffic encouragementLeasing and Manufacture  More encouragement should be given to manufacturing of support elements for the marine supply chain through containerization. This would comprise of containers, wagons, tractors/trailers and cranes  Leasing by non-shipping line owners is a beneficial business model as observed in other countriesLocation of SEZs  Government should be urged to build more and more SEZs near the ports to minimize connectivity requirements

TOWARDS HUB AND FEEDER MODEL IN INDIA: Potential Hub Ports (Other Issues)Regulation – Following should be the focus areas for regulation Licensing Security Port Tariffs Shipping Line Conferences Customs Cabotage (laws that a govern trade or navigation in coastal waters of acountry to operate the air traffic within its territory) Environment and Conservation Safety QoS Dispute Resolution

TOWARDS HUB AND FEEDER MODEL IN INDIA: Potential Hub Ports (Closing Notes from paper)Closing Issues – In line with the industry requirements More PPP models need to be adopted in the sector. Privately operated terminals arethe way forward Roles of landlord and operator should be clearly delineated (JNPT vs JNPCT) Port Authority should focus more on:  Landlord Function  Regulatory Function  Coordination Function  Facilitation/Promotion functions Scale needed to meet better economies Tendering and bidding should be more streamlined and transparent More global tendering should be encouraged Training needs in officials to build a supply chain and marketing mindset Technocrats rather than bureaucrats needed for port management Shipping Line Conferences

TOWARDS HUB AND FEEDER MODEL IN INDIA: MORE ON JNPT VISION STATEMENT

TOWARDS HUB AND FEEDER MODEL IN INDIA: JNPT - IDENTIFICATION OF GOALS

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Containerization and India - Status

by Aniruddha Ray

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