By:

Amitesh Tyagi

Aniruddha Ray

Pervinder Singh Chawla

Saurav Chaudhuri

CONTAINERIZATION Building Global Trade Competitiveness

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 steel intermodal containers (also 'shipping containers', 'ISO containers' etc). Containers are built to standardized dimensions, and can be loaded and unloaded, stacked, transported efficiently over long distances, and transferred from one mode of transport to another—container ships, rail and semi-trailer trucks—without being opened. The system was developed after World War II, led to greatly reduced transport costs, and supported a vast increase in international trade.’

ISO Standard for containers: a. Five common standard lengths: 20-ft, 40-ft, 45-ft, 48-ft and 53-ft b. Capacity is expressed in TEU – Twenty-feet Equivalent Units c. Height is not considered for expression d. 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, CSCL In India – Shipping Corporation of India

PLAYERS IN THE CONTAINER SUPPLY CHAIN

CARGO SHIPS CARGO SHIPS FREIGHT TRAINS FREIGHT TRAINS

INLAND CONTAINER DEPOT INLAND CONTAINER DEPOT TRUCKS TRUCKS

CONTAINERIZATION IN INDIA

Some 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

a. Indian exports reached $102 Billion in 2005

b. Indian imports increased to $133 Billion in 2005

c. Both record a growth of 23% over previous year

d. Greater share of trade moving towards finished goods (hence requiring more containerization)

e. Target set for $500 Billion exports. Achievable by 2014.

a. Indian exports reached $102 Billion in 2005-2006

b. Indian imports increased to $133 Billion in 2005-2006

c. Both record a growth of 23% over previous year

d. Greater share of trade moving towards finished goods (hence requiring more containerization)

e. Target set for $500 Billion exports. Achievable by 2014.

a. Total tonnage handled in all major ports in India combined equaled 92247 Tons in 2008

b. This was a growth of 25.6% over the previous year.

c. Principal commodities in India’s trade include engineering goods, agricultural commodities, textiles and readymade garments, pharmaceutical products and machinery.

d. India’s container traffic projected as 21

a. Total tonnage handled in all major ports in India combined equaled 92247 Tons in 2008-09

b. This was a growth of 25.6% over the previous year.

c. Principal commodities in India’s trade include engineering goods, agricultural commodities, textiles and readymade garments, pharmaceutical products and machinery.

d. India’s container traffic projected as 21 mTEUs by 2015.

a. Growing traffic builds a strong case for hubs in India mainly one in East and West Coast

b. Current Colombo, Dubai and

c. Potential savings for exporters with hubs in India between Rs. 6000 and Rs. 16000 per TEU

c. Two handlings required currently – one at same hub and another at feeder hub

(More details follow)

a. Growing traffic builds a strong case for hubs in India – mainly one in East and West Coast

b. Current transhipments happen in Colombo, Dubai and Salalah

c. Potential savings for exporters with hubs in India between Rs. 6000 and Rs. 16000 per TEU

c. Two handlings required currently – one at same hub and another at feeder hub

(More details follow)

INTERNATIONAL TRADE GROWTH

PENETRATION OF CONTAINERIZATION

HUB AND FEEDER SERVICE STRUCTURE

EXPLORING HUB AND FEEDER MODEL IN INDIA

CURRENT STATE

• Insufficient Traffic

• Cabotage Law

• Insufficient infrastructure including draft requirement for a mainline ship

Reasons for Hubs not

evolving in India • Feedering time from other ports reduces

• Revenue from transshipments remains within India

• Savings for the exporters per unit TEU

• Marine side traffic from and to hub port would move faster and cheaper

Advantages of a hub port in India

IN FAVOR OF HUB AND FEEDER MODEL IN INDIA

•Per World Bank Study, the western region (Mumbai and Gujarat) can handle 66% container throughputs for the country, 27% can be handled in southern region and balance at eastern region

Indian Sub-Continent Peninsular Advantage

•The sizes of the large mother vessels are increasing from 6000-8000 TEU to 12000-14000 TEU requiring fewer trips by present 4000 TEU ships as feeders

•Port infrastructure needs to be scaled up to handle the new emerging standards of the vessels

Shipping Trends

• India is growing at 7-8% CAGR.

•The exports of finished groups are growing

•Government is realizing the need for more and more PPP opportunities for an effective port management system

Emerging India

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 Ports

A key requirement for an effective hub port is a deep draft so that large vessels can navigate 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 and west coast. Colombo, the closest competitor, has a draft of 16 meters* and the proposal is to raise it to 23 meters* Based on the evacuation capabilities and the draft available criteria, the paper rightly points out the 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 that it can deepen channel up to 14 meters. There is also a growing competition among Indian ports with the 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 traffic inflow 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 is concerned as is quoted in the paper. Containers bound to countries such as China and Japan also prefer JNPT over others for this reason Gujarat ports despite better draft suffer from lack of sufficient hinterland connectivity leading to costlier transports 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 priority over 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. Some projects 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 etc need astute traffic planning else situations of congestions are possible

JNPT advantage JNPT has a double line connectivity while Pipavav and Mundra have single track diesel connectivity However, JNPT hinterland connectivity is reaching its peak capacity JNPT is considering barges and double stacking to remove capacity constraints JNPT has signed an MoU for partial funding of a road expansion project Mundra and Pipavav are also persuading government for additional focus on hinterland connectivity

TOWARDS HUB AND FEEDER MODEL IN INDIA: Potential Hub Ports (Hinterland Connectivity) 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

CAPACITY UTILIZATION OF RAILWAY SECTIONS

Other 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

Potential Hub Ports (Hinterland Connectivity) And Other Considerations

TOWARDS HUB AND FEEDER MODEL IN INDIA: Potential Hub Ports (Other Issues)

IT Infrastructure Standardization , network and information sharing and knowledge products requires policy and governmental interference to build more robustness and effectiveness around the IT systems. Usage of GPS and RFID should be introduced

Domestic Traffic More focus needed towards the domestic traffic as well Opportunity for customized containerization possible with domestic traffic encouragement

Leasing 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 countries

Location 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 a country 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 are the 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

THANK YOU