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The CFSs role in reducing congestion in Ports cannot be minimized: C.R.Raghavendra

(Interview Continued)

Sagar Sandesh: The  Direct Port Delivery of Imports and Direct Port Entry of Exports is taking off in a big in way in Indian Ports under the ease of doing business  being implemented by the central government. In view of this development, what will be role of container freight stations? Do they have to change their business model and diversify to warehousing and cold storage? With the gradual decline of Container freight stations, are the ports faced with the prospect of revival of congestion?

C.R.Raghavendra: The concept of freight stations to handle EXIM cargo came into being because of governmental policies to reduce congestion in ports and the requirements of the trade.
With the government resorting to direct port delivery of imports and direct Port entry of exports, the capacity utilization of Container freight stations especially around Chennai port has come down by thirty per cent in the last few months. Average turn- over of 30 and odd CFS, around Chennai port is about 2000TEUs a day.                          
Forgoing container freight stations could prove dangerous to the trade. The Ports should not go back to the same situation they faced ten years ago acute congestion. Nor the port should be used as warehouse in the absence of container freight stations. The CFSs role in reducing congestion in Ports cannot be minimized.
After the introduction of DPD and DPE, the government should work closely with the trade to prevent the recurrence of congestion in ports. Otherwise it will have adverse impact on trade and Industry.
The CFS should switch over to other business models like bonded ware housing and repacking of cargo.
The direct port delivery accounts for 40 per cent of the exports in Chennai port. The turn-over may go up to 55 per cent. In nearby Kattupalli port run by the Adanis, the DPD turn over at present is 60 per cent but indications are that it cannot go beyond 80 per cent.
In case of Direct Port Entry of exports, the turn-over of newly set up private ports in the east coast like Katupalli and Krishnapatnam is better.  In Kattupalli port entire exports are through direct port entry which gives the trade cost advantage in operating from that Port. Direct Port Entry is not expected to take off in city centric ports like Chennai or Mumbai since there is no space to store containers inside the port.

SS: What has been the experience of Direct Port Entry and Direct Port Delivery in Ports in developed countries of the west and the east?

CRR: In the developed countries the cargo under this system moves from the port to the ware houses. The ware houses operate at Container freight stations for the manufacturing industry.
In India under the ease of doing business we are stretching the movement of cargo by taking them to the factory gate. If Container Freight Stations go out of business under this impact, there is the threat of congestion recurring at ports if proper planning is not done by the Port administration and the trade.

SS: Coastal shipping has not taken off in India despite various concessions announced by the government. Can you identity the reasons why this has not taken off? What are the obstacles and how they can be got over?

CRR: For coastal shipping to take off in the country, Ministries of Home, Finance and Shipping have to put their heads together and come out with out of the box solutions to help the industry.
The Home ministry needs to tame the immigration officials posted in the East coast ports to remove unnecessary restrictions imposed on shipping activity in the ports in southern India not known for terrorist footprints.
Coastal ship operators operating between east and west coast of the country should be allowed to touch Colombo port to pick up EXIM cargo as well since doing coastal cargo alone is not profitable to vessel operators.
The revenue and shipping ministry should work out the modalities to facilitate the process of a coastal cargo vessel being allowed to enter a foreign port (Colombo) before proceeding to the other coast of the country. The trade in Chennai is pushing this proposal with the customs authorities to allow coastal vessel to carry EXIM cargo as well.

SS: Will this not lead to confusion for handling agencies like Customs and immigration?

CRR: To remove the possible confusion when the scheme is implemented calls for enactment of a law jointly by the Finance and shipping Ministries. There are operational problems which are not insurmountable.
For example Chennai port has no exclusive coastal berth as yet. So the coastal containers also get into the terminal handling EXIM cargo. The differences between the containers carrying coastal and EXIM cargo needs to be earmarked.
The coastal container can be painted in a different color. While the coastal container can be immediately taken out of the port on landing, EXIM Container will follow the EXIM route for clearance from various governmental agencies like customs.
The trade in Chennai is also pressing the customs authorities to allow free movement of empty EXIM Containers from one Indian port to another to carry coastal cargo.
The customs have allowed such a movement of empty containers through a notification issued way back in 2001. Ironically, the notification is yet to be implemented. We have taken up the matter with them and we hope the issue will be sorted out within a few months.
Another problem facing coastal shipping is the practice of customs in allowing transshipment in ports like Mundhra and Krishnapatnam while not providing the same facility in other ports.
For example ports like Chennai, where movement of containers, are electronically controlled, customs declined to give permission for transshipment. This issue has been sorted out with Customs. The customs have given the go ahead for Ports doing manual as well as electronic clearance to conduct transshipment business.
This also removes the confusion among the foreign ship operator about different rules for different ports in the country. However many Indian ports taking up transshipment business will take away the importance of Colombo Port in the near future.
(To be continued)

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