hinging upon Hinterland connectivity

With recent government initiatives seeking to enhance the country’s manufacturing prowess, there is a need to assess the factors that would help consolidate India’s port sector as well as assess the need for hinterland connectivity to make the sector competitive.Lionel Alva..

India’s sea ports are responsible for nearly all of the country’s foreign trade. Furthermore, 57 percent of the trade handled by the ports in India is handled at major ports. However, since the turn of the century, India’s major ports have lost out as much as 20 percent of their total cargo to minor ports due to inadequate capacity and longer turnaround time — the time taken to unload and reload freight. It hasn’t helped that the number of minor ports has steadily grown in the past decade and a half.

India has a nearly 7,517 kilometres long coastline and presently has 13 major ports. There are 187 minor ports of which only 61 handle cargo. 95 percent of India’s foreign trade by weight/volume and about 70 percent by value involves transportation by sea. During the first 25 years after independence, aggregate traffic grew modestly from 20 million tonnes in 1950 to 67 million tonnes in 1975, the main commodities handled being crude oil and iron ore.

Consolidation of India’s port sector Ports being capital intensive structures espouse a long gestation period before they start generating revenue. It is therefore essential for any new facility to be flexible to handle any commodity before one can have somewhat settled cargo profile. The dwell time for cargo at the port should be at a minimum.

Furthermore, manning scales at different ports for specific activities such as container handling and stuffing vary widely. For example, for transfer of containers from ships to quay, Calcutta port employs a total of 32 persons as against 12 at Haldia, 15 at Mumbai, 21 at Chennai and 4 at JNPT. Again for container stuffing/destuffing, Calcutta and Mumbai employs 28 persons, Chennai seven and Haldia two for unitised and seven for non-unitised cargo. Such large manning scales result in excessive transaction and manning costs, again making Indian ports highly uncompetitive. “The ports are as efficient as its evacuation infrastructure. Ports are only gateway in the overall logistics supply chain and hence, the cargo should stay for minimum time at the port location. Hinterland connectivity by road and rail is critical for the success of any port project. Also considering the environmental advantages, hinterland cargo movement by water mode is also promoted globally,” observes Atul Kulkarni, an independent maritime consultant. This is especially pertinent in the context that several ports were envisioned 8-10 years ago when the economy was euphoric globally and capital was looking for projects actively. Now, projects need to seek out capital actively. Apart from capital, port infrastructure requires support from the government and other industries. Strategies for port optimisation must also be implemented with caution. Unmesh Abhyankar, CEO, Mundra Port informs, “Strategies have to be in sync with the market conditions and there is no single and unique formula which can guarantee success. Strategies are based on certain inputs and assumptions available with business managers at particular point of time. However, the underlying circumstances can change very quickly making the strategy out of sync. The best way is to remain connected with the market realities and keep on course correcting as the new information or insights become available. “ This kind of coordination from various stakeholders is tough but necessary to make a strategy for port optimisation effective. Government bodies too have taken several steps to alleviate upon bottlenecks for ports. Devendra Fadnavis, chief minister, Maharashtra highlighted at an event, “The Maharashtra government plans to keep a proactive approach and fast-track projects within the state in order to successfully implement the ‘Make in India’ vision of the Prime Minister. The need of the hour is that we provide the necessary framework to speed-up projects in the state, and we are going to do that.” Thus, the consolidation of ports needs to happen sometime soon. The government has already expressed its intent and has certain initiatives in this regard as it has set two port projects on the fast track within the state of Maharashtra. Shriram Ravi Chander, executive director, Krishnapatnam Port Container Terminal (KPCT) said, “The roadmap for us is capacity building, which is an ongoing process. We are now looking at mechanisation and improving the throughput. The structure that we are planning to do is first get all the mechanisation done to give the best quality productivity. We have to look at cargoes for this particular aspect.” There are similar initiatives being undertaken in other parts of the country as well. Some players have capital. Some have cargo. There are a few players who have a proven capability to run a port successfully. These three things - capital, cargo and capability - will come together through consolidation. ‘Make in India’ has been a major declaration. If manufacturing takes off as per government’s vision, it will help bring cargo business to ports.

Enhancing connectivity It is important to note that hinterland connectivity by road and rail is critical for success of any port project. “Inland is where the action is today in India. Increasing containerisation of cargo and introduction of new policies will provide further impetus to growth here. Hinterland development, operating efficiencies at optimum costs and enhanced services - the Container Freight Station (CFS) business will witness a transformation. A hub and spoke model for container transportation closer to facilities is expected to develop,” asserts R K Sreedhar, MD & CFO, APM Terminals India Pvt.Ltd. Also considering the environmental advantages, hinterland cargo movement by water mode is also promoted globally. Sreedhar adds, “An integrated multimodal transport network is the most critical factor for companies to successfully execute their supply chain processes both domestically and internationally. With the manufacturing hubs in India located deep in the hinterland, multimodal logistics will help reduce transit times, logistics costs and address the congestion especially on roads – the overburdened transport modes.” A crucial element of the success of the ports sector in India shall hinge upon intermodal connectivity and the ability to derive cargo from the hinterland. A well-connected port can help development initiatives such as ‘Make in India’ take off. Furthermore, several types of manufacturing units would only be viable if they have an accessible port. Kulkarni adds, “Location and the hinterland connectivity are the two most critical factors for economic viability of sea ports. The ships are getting bigger and bigger resulting in emergence of strong “Hub and Spoke” arrangement of ports globally. Ports need deeper draughts to allow higher capacity ships to call which provide economies of scale to EXIM trade.” For decades, India’s ports have suffered from chronic under-investment and a lack of strategic planning, including inadequate linkages to railway and road transport networks. Abhyankar adds, “Seaports are an important component of entire logistics value-chain for international trade. Like any other industry, the economics of a sea port is affected by internal as well external factors. Seaports cater to derived demand and therefore are more influenced by external factors than internal factors.“ The result is that for key parameters like turnaround time, Indian ports have an average of 84 hours. Ports like Singapore and Hong Kong need just seven hours. In this regard, certain ports like KPCT are also highly efficacious. Recently, KPCT launched a weekly dedicated rail service in association with CONCOR providing the fastest transit from the inland container depot (ICD) in Whitefield, Bangalore bringing significant advantage to the importers and exporters around the city of Bangalore. The train service has a maximum carrying capacity of 90 TEU each way and reduces the transportation time from 24-36 hours taken by road to just 18 hours. In addition, it also helps customers to save between $100–$150 on each container. Therefore, with the objective of emphasising upon port connectivity while improving the efficiency of Indian ports, the government’s Maritime Agenda 2020 mandates the minimum required connectivity to major ports as four-lane approach roads as well as double line rail connectivity. The central outlay for road and rail connectivity for the 13 major ports is an ambitious Rs 7,912 crore. Of this, Rs 4,675 crore was to be spent in the period 2010-12 while Rs 2,511 crore was earmarked for the 12th Five Year Plan period (2012-17). Maritime boards in coastline states would help execute these policies and coordinate the development of private sector intermediate and minor ports. Chander informs, “Currently handling 41 million tonnes, Krishnapatnam Port has also emerged as the largest non-major port in South India and the second largest in India. The throughput of the port has also grown significantly by 60 percent in the last fiscal.” Separate budgets are being drawn up by states to connect the non-major (intermediate and minor) ports they own. Bhushan Patil, Trustee, Jawaharlal Nehru Port Trust (JNPT) speaks about JNPT’s connectivity plans, “Rs. 3,000-crore plan to convert the existing four-lane, 45-km road connecting JNPT and the hinterland of Maharashtra into a 10-lane road is in the works. Eight of the 10 lanes will be for trucks and other vehicles, while the other two will be elevated roads for mass rapid transport vehicles, meaning buses.” To enhance its connectivity, JNPT has recently signed a Letter of Intent (LoI) with major UK ports operator, Peel Ports, who own the Port of Liverpool. Mark Whitworth, CEO, Peel Ports said, “The UK and India are natural partners to collaborate and learn from one another. We are facing many similar challenges in supply chain distribution and connectivity. At Peel Ports, we are realising our own ambitious plans in the creation of Liverpool2, a £300m container terminal that will allow some of the world’s largest vessels to call closer to the heart of the UK marketplace.”