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Indian banks’ financing ships for expanding the fleet is going to be bleak especially after PNB fiasco: Mr T Kumaran.

Sagar Sandesh: What is the state of Shipping Industry which had to forgo banking finance for over ten years? 
Mr.T.Kumaran: Bank sentiment is still affected for the last one decade by Loan losses High provision Sales of portfolios
Was the Lehman bros a trigger?
Global bank finances now stands at 2007 levels as on 2017 Dec...I.e. about 390 billion US Dollars by major shipping financing banks. Even though the tonnage grew by 25 per cent for that period Ships are being now being financed more by combination of equity Leasing Institutional funds.
International and European restrictions are also not helping the revival. Though beginning of 2018 some German banks and Japanese banks have started financing. However these shipping banks are quite cautious and seeking safety through known and large clients, higher margins and low finance percentages, as well as stringent terms. The worst affected are the small and medium ship owners. Some rise in earnings and vessel values has given some comfort but not on firm footing. This being the overall scenario, Indian banks’ financing ships for expanding the fleet is going to be bleak especially after PNB fiasco.
SS: What will be the impact of merger of global shipping companies on freight?
Mr.T.K: Consolidation, whether through alliances or mergers and acquisitions (M&A), will continue apace in the container shipping industry into 2018, as companies try to boost market share, improve efficiency, and handle intensifying competition and persistent oversupply
Most of the Shipping companies posted losses in 2016 and we even saw 1 bankruptcy. The lack of sustainable profit levels lead to accelerated industry consolidation. Industry consolidation is an important trend Mergers & Acquisitions as well as Alliances. The container shipping industry is fragmented and consolidation will enable carriers to create economies of scale and to optimize networks. This will in the long-run benefit customers.
Conventional wisdom states choices fosters competition
Competition benefits customers. And the market will play in the most efficient way possible. Major trade routes are where these alliances covering 80 per cent of the world container cargo: Trans pacific, Asia Europe and Transatlantic
Ocean-Alliance : CMA CGM,COSCO OOCL and EVERGREEN ( 323 ships and 3.5 mn TEU)
The Alliance : NYK,MOL, “K” Line, Hapag Lloyd and Yang Ming ( 241 ships and 3.3 mn TEU)
2M Alliance: Maersk and MSC ( 223 ships and 2.4 mn TEUs)
Two more mergers are expected by May 2018. Some are even predicting only handful of companies will be left out by the end of this decade. 
SS: Logistics is emerging as a major industry since manufacturers prefer to hand to mouth existence. Major economic powers like China Japan are constructing a canal dividing Thailand to cut logistics cost. What needs to be done in India considering the fact that Logistics costs is around 14 per cent of GDP. What are the concrete steps India should initiate to cut Logistics cost so that our products become competitive in the global market?
Mr.T.K: This KRA canal across Thailand to reduce 1200 Nautical Miles of sailing distance will benefit both Thailand and China. Currently ships from the far-east Chinese port reach Indian Ocean through Singapore. The KRA canal is being dug across Thailand to reduce the sailing distance resulting in saving in freight costs. The maiden attempt to construct the canal was by the Japanese. Now the Chinese have taken over the work.
 There are groups for and against this project. Will it come through or not, is anybody’s guess. What matters is the kind of thinking to provide logistics by the governments in the competitive global scene. 
The Indian Railway is still a government monopoly. Looking at our own Sethusamudram project stuck even after 12 years after spending more than 1000 crores of tax payer’s money. Recently China launched their China –London rail freight service. Or their Silk route project or their Hambantota port indicates their aggressive approach to facilitate their nation in logistic support of their export goods. Private players have their own limitations in big play in this kind of projects. India’s lack of focus and aggressiveness will affect our export potential and cost effectiveness.
SS:  An Owner of a container terminal was quoted as saying recently that India needs more cargo and not more Port facilities. World over container traffic is picking up. The trend is not visible in India except in select West Coast Ports? What could be the reasons for the low container traffic in Indian ports and how this issue could be addressed?
Mr.T.K: Colombo’s single port total container handled is as much as India’s all ports put together. All the first dozen ports of China are bigger than our largest port JNPT. Our port infra need to be improved keeping with the country’s growth. More export cargo is definitely required. Our Import vs. Export ratio is badly out of proportion. Hence the box rates to India are not favorable as they have to return back with empty boxes. One of the reasons for export is less because of high cost of our product. Our supply chain is not efficient
As of Dec.2017 our ports installed container capacity is:
Total installed capacity – 21 million TEU while Throughput-13.8 million TEU
Only these following Terminals are working at 100 per cent capacity utilization:
Mundra International (MICT)
PSA SICAL Tuticorin
Interestingly all are on the West Coast of India ( though PSA SICAL geographically on the East coast, but can be approached only from the West).
Vallarpadam ICTT Cochin could achieve only 50 per cent utilization.
India’s export to Western countries like United States and European Union is 72 per cent of the total export of the country. Hence it is obvious more containers are being shipped out from the West Coast. However India’s imports are more from East as compared to West. India is one of the fastest growing economies in the world. We need to address our growing requirement of containers keeping this in mind. Out export growth needs to be addressed to address this mismatch.
SS: Logistics is emerging as a major industry since manufacturers prefer to hand to mouth existence. What are the concrete steps India should initiate to cut Logistics cost so that our products become competitive in the global market?
Mr.T.K: India’s international logistics performance Index (LPI) is 35 in 2016 as compiled by World Bank. No doubt we are moving forward in our Quality of trade and infrastructure, Competence and quality of logistics service, Efficiency of customs And Ease of arranging competitive price on the port end.
Whereas our Domestic LPI needs lot of improvement. All our container transport happens through roads as our railway freight rates are very high and unreliable scheduling. Our infra does not permit all our freight trains to deploy double stack containers. The last mile connectivity is very poor and pushes the cost of export and import high. Unless our supply chain efficiency is improved, our cost advantage not going to improve. About over 30 per cent of respondents in World Bank domestic LPI answered that solicitation of informal payments (bribes) needs to be addressed.
In Chennai, the ambitious Chennai port-Maduravoyal infra project got stalled for six years for trivial reasons. The movement of Containers inside the port is too congested. It takes more than a day to move a container into the port covering a distance of about 8.7 km. We are not going to be competitive this way. 
To give an example pulses move from Yangon to Singapore and then to Chennai or Mumbai covering a distance of 2600 Nm to Chennai and 3500 Nm to Mumbai. We, at Gati provided direct Yangon to Chennai direct service covering a distance of 990 Nm only thereby saving fuel and time. However when we wanted to send the containers from Chennai Port to Nagpur where major tur(Arhar) millers are situated, it was a difficult task though we could finally tie up with Concor and move the containers. Even now these pulses move from Yangon to Singapore and then to Chennai/Mumbai. India imports over 1 million tones of pulses from Myanmar. Naturally the end product cost to the consumer for all these delays will be high. (This year Govt. has put a cap on the quantity).
SS:  Coastal shipping has not taken off in India despite several concessions offered by the Shipping Ministry. Can you identify the obstacles and how they can be overcome?
Mr.T.K: We have heard every year how India is having 7500 Nautical miles of coast line.
Now Sagarmala project. Also how sea borne traffic is cost effective and with less carbon foot print
If that is the case why is that the two Ro-Ro services transporting cars from Chennai port to the Ports in the Gujarat coast failed recently?
European Union has 70,000 Nautical miles of Coast line and 1200 commercial ports. They have developed a comprehensive successful port policy including all stake holders.  
No doubt ports need to be improved and modernized along with providing connectivity. What about the ships that are going to use these ports. We still have 1958 Merchant Shipping Act with some amendments to govern these ships. This act has even now has some regulations of British Era. Coastal ship officers and crew still have to go through immigration while signing off in some of the ports. We do not see Airline pilots go through this procedure when they fly from Chennai to Mumbai and getting down. At every port coastal ships have to go through port health approval for no reason. There are endless vows of the small coastal ship owners, who are at the mercy of regulators at every level.
Our coastal shipping is not cost effective. Coastal ship owners are small ship owners. Finances for these ships are hard to come by from the banks. We are trying to man the vessels with the main fleet officers and crew which is not cost effective. We failed to create a separate coastal shipping entity. There is no one to help them. They do not have power lobby like road transport sector. Unless these basics are addressed we are long way from realizing some improvement.
All port related tariff are based on foreign going vessels with some discount. This is not going to work.  All policies should aim at reducing cost and time for the user. Can our coastal ships full fill JIT (just in time) supply chain concept 24x7.
One of the best coastal projects that have happened in India is Tamil Nadu coal movement from Odisha and Haldia for their Thermal plants for the past five decades.  Only that the cost angle is skewed since the user is State government. 
The author last worked as President of Gati coast to coast, a Shipping Division of Gati. 
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