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To my knowledge it will take at least five years for the freight rates to stabilize: C.R. Raghavendra, General Manager K Line

Mr.C.R. Raghavendra General Manager K Line and Vice President of Chennai Ennore Steamer Agents Association
Interview with Mr C.R.Raghavendra

Sagar Sandesh: What is the state of the shipping Industry reeling under the impact of Global recession for the last ten years? Mergers have taken place among the shipping companies to cut costs. What has been the impact of mergers on the freight market? Your views, on the future of the industry, in near and long term.                                                                                                                          C.R. Raghavendra: Mergers and consolidation that has taken place in the Shipping industry during the last two years has withdrawn certain percentage of tonnage and reduced capacity of the industry, which was freely available before mergers took place.
Supply was more and demand was less for the last five years and freight rates nose-dived. The trend will gradually change. Equations may change because of mergers and take-over of shipping companies. In this process the freight rates may stabilize over a period of time.
Freight rates have currently touched the rock bottom. For example the cargo movement from India to Far-East is currently taking place on nil freight basis. Shippers do not have to pay money for the transport of goods in this sector. The traffic in this sector is only the relocation of the empty containers rather than earning from such movement.
From the beginning it is one sided flow of cargo in the Gulf sector from India. Movement of goods takes place between India and Gulf and in the reverse direction there is only flow of petroleum, petroleum products and natural gas.
India used to do lot of exports to European Union. With the failure to conclude the trade treaty with EU despite protracted talks, Indian exports to EU have fallen sharply. Exports to United States have also seen a downward trend. The main reason for the downward trend in exports to US and EU could be because either these countries have become self sufficient or they are buying goods from other countries on a competitive basis.
To my knowledge it will take at least five years for the freight rates to stabilize. The rates have currently touched the rock bottom. From now on, the freight rates only need to rise.
This is the right time for shipping companies to think twice before increasing their capacity or go in for consolidation. Joint venture or partnership proposals in a few services can wait till things move forward.
But the industry needs to take care of the impact of Monopoly and Restrictive trade practice regime that might be unleashed on them.
SS: What will be the impact of the on- going trade war between United States and China on trade from India. Will movement of goods from some destinations suffer and some others prosper because of the war?
CRR: A large proportion of Indian exports comprise of raw materials and therefore we do not get impacted by the on-going trade war between US and China. Moreover Indian volumes are not that huge to take hit by the tussle.
The question is who is going to buy the raw materials from India, US or China that will decide the issue. At present Indian exports are more to China compared to United States. This is not likely to get affected.
But what happens to imports we are getting from US and Europe and a good portion of the Indian exports to both the countries is not clear. Whether the segment will be affected by the trade war, only time alone can answer.
In over all terms Indian trade is not likely to be affected by the on-going trade war. ON which trade route is likely to get a big hit because of the trade war, it is too early to make a pronouncement.
SS: Chennai Port had the country’s  first container terminal way back in 1980.The port had installed two container terminals before the turn of the century when container terminals started springing up in West Coast ports. But the west coast ports, in particular JNPT, Mundra and some other ports in Gujarat have become leaders in the last ten years while the terminals in Chennai are working to fifty per cent of the capacity. How did this happen?
CRR: In the 1980s and 1990s there was lot of container movement by rail from Chennai to National Capital Region and other parts of North India which have emerged as the manufacturing base of the country. My own company K line used to send three to four freight trains per week from Chennai to Delhi. Since the passenger trains got precedence over freight trains in Delhi Chennai railway corridor, dispatch of goods got delayed. The number of freight trains gradually slowed down and when JNPT set up a dedicated rail corridor, container movement from Chennai to Delhi virtually ended.
Meanwhile the west coast port of JNPT which had set up the container terminal in late 1990s, learnt lessons from Chennai experiment, had a freight corridor sanctioned from JNPT to Delhi nearly fifteen years ago. A dedicated railway line was set up to move the freight trains from JNPT to Delhi and the containers reached the destination within 48 hours. Mundra Port in Gujarat has also established a dedicated corridor to Delhi a few years ago.
Another dedicated corridor is being set up from JNPT to Delhi with Japanese assistance which means a second railway line exclusively for freight trains. 
In any case the distance between JNPT Mundra Ports to National capital region, Northern and central India is shorter than Chennai and hence the container traffic is bound to increase in the sector in the coming years,
With freight movement from Chennai to National capital region Northern India and Central India declining, the Ports in peninsular south India had to remain content with movement of cargo in Chennai Bengalure and Mangaluru and the region below. The hinterland became limited.
Besides, too many ports have come up in this region vying for the same hinterland. These ports can be reached by overnight sailing. The rail connectivity from these ports to Northern and central India where the manufacturing base is situated is woefully inadequate.
The cargo from far eastern countries and China meant for Nagpur and Hyderabad started moving to JNPT and Mundra ports since the main line ships found it not feasible to take a diversion of 2.5 days of sailing to come to Chennai. Instead the far-east cargo meant for central Indian cities also moved to JNPT and Gujarat ports, even though it meant some extra sailing time. They did not mind a circuitous sea route to reach JNPT since cost of transport by Sea is cheaper than by road.
Moreover the west coast ports also offered attractive return cargo. The cargo exchange was better in west coast ports rather than the ones in the east coast. Barring Tamil Nadu, there is no manufacturing state in southern India. While Karnataka and Telangana have service Industry, Andhra Pradesh is an agrarian state. Chennai is the lone port in the east coast which has connectivity to a limited extent compared to the ports in the west coast.
It is time government implements a dedicated freight corridor from Chennai to Delhi via Nagpur. The corridor will be useful in another five years when the West North corridor gets choked.
( To be continued)

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