Global Trade & International BusinessChallenges of Maritime Trade for India Sunil Garg B. Tech. M. Tech. MBA Industry Consultant & Management Professor (IB, SCM & Strategy) ISCEA Advisory Board Member, USA E-mail: firstname.lastname@example.org
Global Trade - IB A must to alleviate national poverty Facts• In the beginning of 1800 century India’s share in world trade was 20% which is now less than 2%.• India’s most of the trade was through sea route from the ports in Gujarat, Mumbai, Goa, Cochin, Madras, Pondicherry , Calcutta, Dhaka, Karachi ...• Till the beginning of the 20th Century, "the brightest jewel in the British Crown" was India that was named as ‘Golden Bird’ (Soney Ke Chidia)
Importance of Ports• Historically: Port cities have been the centers of trade, industry, banking, finance, education, good public administration, food, health and tourism.• When oil and gas is discovered close to ports, they become ‘Energy Cities’ and have a string of oil companies lining up at the shore.• Around 95% of India’s external trade by volume and 70% by value takes place through see route (Ports).• India’s present ports handling capacity of around 960 million tones need to be tripled to 3 billion tones by 2020 to avoid delays and to meet the expected growth of traffic and sustenance of International Trade.
Port Cities• London, San Francisco, Rotterdam, Singapore, Hong Kong, Sharjah: all are centers of global trade and tourism.• Sharjah ports has established itself as a major gateway within the Arabian Gulf. Khalid Port in Sharjah has contributed to the unprecedented growth of Sharjah’s economy, can handle a wide variety of tonnage, has a dedicated Container Freight Station and Trans-Shipment Hub, which are constantly modernized and upgraded for services and efficient operations by mechanization. Port services ranges from general, reefer, dry, liquid and bulk cargo to container, oil and offshore support services. Including alongside cold stores, customs bonded and transit warehouses, open storage area and competitively priced haulage. Motivation levels of staff support the efficiency of work resulting in friendly, prompt and excellent service to customers.• Port of Colombo has set a record by handling 4 million TEUs [Twenty Foot Equivalent Units] of containers as against less than 7 million TEUs by all major Indian ports for fiscal 2009 – 10. (JNPT – 3.2, Chennai – 1.12, Kolkata – 0.39, Tuticorian – 0.34, Cochin – 0.21 million TEUs).
Ports of India Gateway to Business Opportunity• Ports are not just for docking, loading and unloading stations.• India has taken too long to realize the importance of the ports.• Apathy for the ports and not developing and using the costal line became the biggest bottleneck to maritime trade with history of inefficiencies in port management as restricted access for Global Trade from Indian.
Ports of India - Strength• Extensive Coastline: Surrounded by Arabian Sea in the west, Bay of Bengal in the east, and Indian Ocean in the south, length of total coastline of India is 7000 km long.• Excellent Geographic Location (a gold mine): geographical proximity to important shipping routes – manufacturing giant China on the right, surrounded by hyperactive South-Asian economies, India could be a focal point of huge market for trade and services through see-routes.
Ports of India - Opportunities• Immense Potential: Costal, export oriented, manufacturing industries, ship-building, ship-breaking, ship-repairs and other business, generating employment both directly as well as through ancillary activities. Most of these are labour intensive and especially relevant for India.• Potential of Costal Shipping: Blessed with a very long coast line India has yet to exploit this cheap mode of transport to remove the bottlenecks in the existing transport network.• Big potential for transportation of minerals, coal, raw- materials for industry and distribution of agriculture produce with distinct cost advantages of transportation cost and time.
Ports of India - Weakness• Development of port infrastructure in India is way behind with other ports across the world.• Lack of mechanization, scar trained operators, over dependence on manual labour.• Ports congestion, poor connectivity and accessibility, lack of adequate facilities.• Cost-inefficient and non-competitive cargo operations have resulted in higher logistics costs.• Series of policy announcements made by the Government in last 20 years lacks implementation or slow pace of execution. Earlier there was not adequate responsiveness about importance of ports.
Ports of India - Weakness• Capacity of various ports including Mumbai has already been exhausted and now capacities of other ports like JNPT are on the verge of exhaustion.• Turnaround time at ports in India is one of the biggest handicaps.• Shipping lines avoid touching ports in India because of the long waiting time and inefficient port services.• Efforts for development of inland water ways lack results.
Ports of India - Threats• Past record of delayed planning and slow implementations.• Lack of qualified and trained technical/commercial staff, and skilled labour.• Labour disputes, mafia problems, slow-downs and corruption.• Lack of clarity in the qualification and bidding criteria for contracts.• Delays in the actual award of the projects to private partners even after the MoU.• Political interference, bureaucratic delays and erroneous HR policies.• Increasing pirate attacks in see closer to India from Somali coast. Cargo ships transiting the Indian ocean will have to pay higher insurance premiums of war risk cover.
Mafia Problem – Holding a Ship By a Port MafiaBlackmail to MMTC
Recent Policy Initiatives• Process of port reforms has started; Government has undertaken expansion and modernization of ports on a priority basis in its five-year plan allocations in 2007 and is expected to invest more than USD 9.7 billion by the year 2015.• Additional capacities expected to come up outside Union government’s control.• 100% FDI has been permitted for port development projects and 100% income tax exemption is provided for a period of 10 years for port development projects.
States Initiatives• Costal states now involved in setting up of new ports and capacities, Gujarat, Maharashtra and Tamil Nadu already have maritime boards and state cabinets of Kerala, Karnataka and Orissa have cleared the formation of maritime boards.• De-centralized maritime boards will be able to take decision faster, streamlining port activities and will be better equipped to implement development projects connected with ports.• State governments will try to create investment friendly environments for public-private partnership projects in port development.
Greenfield Port Ventures Challenges• Already a number of corporate like Reliance, Ambuja Cements, Narmada Cements, Magdaila Shipbuilding Yard, Vipul Ship Yard, Larson & Toubro, Hindalco, Essar Spong, Kribcho, NTPC, etc have come up with their own Jetties for their own cargo movement. Also a few more expected to join the fray.• Efficient functioning, capacity utilization and maintenance of services.• Road / Rail connectivity a big issue for these private ports.• Inability to obtain the requisite clearances on time and financial constraints of the promoters, delays on account of problems faced in land acquisition; issues of local protest and resistance.
Administrative Challenges• Swift clearances, empathetic administration and speedy implementation.• Standardization of bidding documents to ensure uniformity and transparency in award of projects.• Rate of proposal-to-implementation conversion is low.• Delays in the development and implementation phase.• Land acquisitions and environmental concerns.• Up-scaling of cargo may be affected by delays in connectivity projects viz. road and rail network.• Tariff setting mechanism.
Technology - Challenges Mechanization & Efficiency is the key• Single Window Clearance: Electronically networked with end- to-end services from birth allotment, stevedoring to custom documentation, no multiple interfaces of CHA and industry friendly custom and port procedures.• Mechanization: conveyors, stackers, reclaimers, ship loaders, wagon tipplers; tugs and dredgers all are meant to run the port at peak efficiency.• Transit Storage, warehousing, material tracking, road and rail connectivity.• Surveillance and Security systems of high level
Operation - Challenges• Container Freight Station (CFS) within port limits for consolidating, stuffing, de-stuffing cargos moving to and from hinterland.• Communication: Port Community System – for interaction, data sharing and avoiding duplication among terminal operators, ship agents, transporters, cargo agents, freight forwarders, etc.• Dock Aid System: for avoiding accidents while berthing vessels, Oil Spill Detection with need for avoiding human intervention.• Trained and Skilled Operators / manpower.
Maritime Developments in Gujarat• Gujarat Maritime Board has succeeded to bring private investment of around Rs. 25,000 crore till now.• In 2010 – 11, total private investment Rs. 2,035 crore.• Plan to develop a port base city at Mundra for urbanized development of coastal region.• Adani Hazira Port for development of bulk/general cargo terminal at an estimated cost of Rs. 2,250 crore.• Essar Bulk Terminal for deepwater captive jetty at Rs. 1,700 crore.• Reliance Ports & Terminals to invest Rs. 2,500 crore.
Strategies for Indias Foreign Trade• Globalization has changed the rules and character of international business.• More and more MNCs would launch operations from India.• Low labor cost advantage of India will diminish in 7-10 years period from now.• Indian firms therefore would have to think in terms of labor productivity rather than merely low cost of labor and evolve as World-Class Organizations (WCO).
Criterion for a WCO• Concept of labor productivity rather than cost.• Collaborations – integrating suppliers and customers as partners.• Brand India marketing approach – Internet, Social Media and Search Engine Marketing for global branding.• Need for innovation - add new products/features to at least 1/3rd of existing product portfolio, every year.• Investment in technology and domestic R&D from 5-20% of turnover or projected turnover.• Acquisitions and strategic alliances needed abroad• High turnover ratio of inventory.
Criterion for a WCO• Spend at least 50 % of total time in value addition component of manufacturing or service activities.• Be a slim organization – Lean Management (TPS).• Delivery commitments - at least 95% on time every time.• Development of human resources for appropriately trained and skilled staff.• Global managers have to work with Japanese, French, Chinese, German and all sorts of other nationalities. Knowledge of English is not sufficient – knowledge of Spanish, French, German, Mandarin, Russian and their culture awareness would also require.• Special focus for SME exporters to sustain themselves in globalised market.• Try to be among top 5 competitors in your product/activity area globally.
Supply Chain & Logistics Management• Seamless flow of inbound and outbound cargos – essence of efficiency and productivity.• Information flow, coordination between port administration, customs, document processing, CHA, shipping company agents, stevedores, transporters, security, warehousing, cargo tracking, etc• Electronic networking of agencies working at the port, EDI, dissemination of information to customers and all stack holders.
Global Business ProcessFunctioning of three macro processes and communicate with each other through TMF SRM ISCM CRM Design Collaboration Strategic Planning Market Source Demand Planning Sell Negotate Supply Planning Call Center Buy Fulfillment Order Management Supply Collaboration Field Service TMF Transaction Management Foundation
Lean Management (TPS)Optimization of:• Costs• Quality• Lead Time• Resources• Customer RequirementsElimination of Wasteful Activities:Waste VolumeReduction in Cost
Enterprise Systems Technologies for Managers Learning Management Systems (LMS)Collaboration Cloud Computing