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The reliability of ship schedules remains a major problem for the industry : Capt Achanta Sivakumar

Sagar Sandesh:  Any idea why Adani is not operating his ContainerTerminal at Kamarajar port even after one year after it had been commissioned? Do you believe that some concessions in vessel related charges given in Chennai port are the real reason for the Adani group not going the whole hog in Ennore?.

Capt Achanta Sivakumar:  Yes, but I have been informed that very soon, the vessels calling ENNORE Terminal will be given discounts on marine tariff, basis certain volume commitment. That will give a level playing field for ADANI as the terminal operator.
Captain talks on shipping, flow of facts
Captain S K Achanta, Managing Director, Pan Asia Logistics Private Limited said this in an informal chat with Sagar Sandesh last month. In this brief chat, he dealt with the What needs to be done to shore up the coastal shipping service, state of the international shipping industry and how to attract ships to east coast ports which are working  at fifty per cent of their capacity.

Coastal shipping

  There has been a huge gap between the governmentís policies and their implementation on the ground. This is because the industry is not fully involved in the policy making of the government. If I from the industry give an opinion on an issue, I (the industry) should be given the responsibility to execute it.
When the coastal shipping policy was formulated a few years ago, coastal shipping operators approached the government seeking special favors. They include subsidy on diesel for operating coastal ships. Government ruled it out on the ground that they do not subsidize diesel for truck operators performing the same job of transporting goods by road.
In a number of countries especially in United States, European Union or Japan, Coastal ships do not need pilots to maneuver ships to enter Ports. The Master of the ship who is familiar with the Port basin terrain takes the ship into the Port without the assistance from the Portís Pilots. There will be tremendous saving in transportation Costs if the services of the Portís Pilots are dispensed with.
Full fledged Logistics set up
The coastal operator should have a full fledged Logistics set up including a fleet of trucks for handling cargo at ports, reliable ship schedules and the ability to deliver cargo at the doorstep of the industry.The reliability of ship schedules remains a major problem for the industry. While the road is able to ensure reliable supply chain, coastal shipping is yet to evolve itself on the cost and reliability factors. Despite tremendous odds Indian entrepreneurs are pushing for coastal cargo.
Six years ago a small container ship used to carry 400 containers weighting 12,000 tones. Today, even the smaller ships, volumes have gone up to 30,000 containers. The coastal cargo is heavy on an average 24 tons per containers. The cargo includes tiles, steel and cement. The coastal volumes have gone up over the years not because of the sops offered by the government. The container terminals who handle coastal cargo charge almost the same rates as international boxes.

Separate ports for coastal shipping

According to him the coastal shipping needs a separate port as exclusive berths announced by the government is inadequate. The satellite ports exclusive meant for handling coastal cargo should be setup near major ports so that the coastal port can share the infrastructure Logistics of major ports and the hinterland.
If the coastal shipping has to be viable the costs offered by the coastal operator should be at least fifty per cent cheaper than road. At present the costs is cheaper by 30 per cent.

Crew membersí pay

Coastal ship operators are unable to attract talent since the crew members operating in coastal circuit need to pay income tax on the emoluments drawn by them. Crew operating on foreign vessels and international routes are exempt from paying income taxes. More over coastal operators are not able to match the salaries offered by major shipping lines. While oil tankers offered a salary of 16,000 US dollars per month, in container vessels the salary is around 12,000 to 14,000 US dollars per month
Coastal shipping also calls for development of massive infrastructure in the ports. The countryís regulatory body, Directorate General of Shipping did not have the manpower for regulatory work and conduct inspections. There is a need to outsource the Indian Register of Shipping. Give the responsibility to the private sector but not the authority he said.
Main line vessels not attracted to the East Coast Ports
On why main line vessels do not get attracted to the east coast ports but make a bee line to JNPT and Mundra and other ports in Gujarat to handle the requirements of the country he said it has got to with the  geographical location of the ports in Western India..
The private port Krishnapatnam has not earned profits not because of lack of effort on the part of the Port administration. The mainline vessels moving from China to Dubai prefer to unload cargo at JNPT or Gujarat Ports as the said ports fall in the east west trade route rather than take diversions deep into the east coast,.
To Sail to East coast ports like Chennai or Visakhapatnam, the mainline vessels need to take lot of diversion and the cargo available in these ports are not commensurate with the cost of diversion. Some vessels do come to East coast port as a sop to the International container terminals operating in Chennai.

Southern states need massive industrialization
Southern states like Tamil Nadu Andhra Pradesh need to reinvent themselves and undertake massive industrialization of the area. This is the only way to attract ships to the East Coast through adequate cargo.
The recovery of the Indian shipping industry affected by economic down turn for the past ten year is not any time now since the problem of excess capacity remains. Still lots of ships are in order in major ship yards.

Size of the ships

Size of the ships has also gone up to 20,000 TEUs. The number of TEUS deployed, are far in excess of available cargo. While operating costs of ships have gone up, a 14,000 TEU capacity vessel on an average carried 7000 TEUs in international trade routes. While small vessels have perished due to lack of business, there is over capacity with global shipping companies..The fact of the matter is that the shipping industry does not create demand. We are only transporters if cargo is available, Cap Achanta said.
Chinaís exports volumes have come down due to lack of global demand. Currently South American countries are buying goods from China. So there is some demand for ships in this trade route. The ocean freight rates has nose-dived to such an extent that vessels carried containers from JNPT to Dubai without charging freight during May this year. They were charging 50 US dollars per TEU in this route during the previous months.
In the case of freight rates from Chinese ports to JNPT, the shipping companies charged 175 US dollars for a 20 foot containers and 200 US dollars for 40 foot containers while the break even rates are 500 and 900 US dollars respectively.

More mergers

In the shipping industry there are more mergers than acquisitions. Number of operators has come down. The consolidation phase has been on for the past two years. Top twenty shipping companies few years ago, have become Top Ten now. Three leading Japanese companies KL, NYK and MOL have merged. He saw no significant improve in prospects of the international shipping industry in near term. .
Long term the industry will go the E Commerce way. Ships will become mere platforms of the E Commerce industry in the long run and assist the process of consolidation and aggregation of cargo.
The US E Commerce Major is planning to tie up with FEDEX to enter the Shipping sector shortly. Amazonís chairman Jeff Bezoz had made an announcement in this regard recently..The liquid and dry bulk cargo will however remain out of the purview of the e commerce industry.
Captain Achanta who has worked in Chennai for over twenty years sees no hope for the Chennai port. Both the container terminals in Chennai will close down once Adanis start operations from the Kamarajar port Ennore. Chennai port has already lost dry bulk cargo as well as car carriers.

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