Sagar Sandesh: Logistics is emerging as major industry as
the manufacturing working on thin margins is keen to cut costs at all levels.
What needs to be done in India to cut costs considering the Logistics cost is
as high as 14 per cent of the GDP according to Shipping Minister Nitin Gadkari.
Mr. Jeyaraman Krishnan: I am yet to see a proper
statistical document on how the government arrived at the logistics cost at 14
per cent. I will now give hard economic facts to disprove this contention.
India is not a major exporter of high value added goods. We are at the
basic raw material and intermediates in so far as our exports go where the unit
costs are low. You cannot compare the logistics cost of India with that of
countries in the West which deal with high value goods as their exports.
So you have to revisit the theory that 14 per cent logistics in India
acted as a disincentive to our exports.
Citing an example he said the lorry load of mangoes from Salem to
Chennai costs in terms of freight at Rs 14,000.
The value of the mangoes is Rs three lakhs.
The same mango processed as pulp is valued at Rs thirty lakhs and can
be transported at the same cost of Rs 14,000 which is what the western nations
do as value added exports.
SS: What are the steps the
government should take to cut logistics costs so that our exports become
competitive in global markets?
Mr. JK: The introduction of Goods and Services tax is a step in the right
direction. It is major initiative to bring down transit time and transit costs.
The abolition of check posts in the state borders have helped to reduce the
transit time for the trucks. Since the abolition of check posts the average
working time of the trucks have increased to seventy five kilometers per hour
from around 50 kilometers.
We expect the petroleum products be brought under the purview of GST
which will help the transport sector to bring down the freight costs. Today
fuel is a major component in transportation cost. Tax on fuel is a cost imposed
on the user. The GST will bring down the
incidence of taxation.
The government needs to introduce larger dose of technology in Weather
Forecasting, Traffic Management and Traffic Compliance to ensure Indian roads
are safe to travel. Accidents in Indian roads are one of the highest in the
World. Technology should provide answer to the problem.
SS: Coastal shipping has
not taken off despite several concessions offered by the government. Can you
identify the obstacles and how they can be overcome?
Mr. JK: City based ports are not
going to help the growth of Coastal Shipping because of traffic and congestion
We have to look at minor ports which have direct connectivity to the
National Highways and not congested with urban populace for efficient operation
of coastal port. In Coastal
transportation, time is the essence. The trade has every reason to believe that
when the road transport is giving me an efficient service why I should switch
over to Coastal shipping. Therefore I must benchmark myself with the competitor
the road sector.
So unless the Coastal shipping bench marks itself with the efficiency
offered by the road and rail sector, success may be hard to attain. Either I match it or exceed it but falling
short is not going to help divert the cargo because coastal shipping is at a
disadvantageous position due to lack of last mile connectivity. It is port to
port transport and has to fall back on road or rail connectivity.
One possible solution could be roll on roll off vessels where the
trucks loaded at Kandla Port comes to Visakhapatnam port and drives down.
You need a jetty at least forty miles away from the city. You don’t
need cranes. We need to think big to achieve results. The country has an
unparalleled Coast line of over three thousand kilometers and very few
countries have this facility. You need to leverage it to your advantage. Trucks
roll into ships in United Kingdom ports and roll out in French ports. This is a
common phenomenon in European ports.
I would identify five ports in the East coast and five ports in the
West coast which have no connectivity issues but away from major cities and
declare them the coastal ports of the country. I will create a necklace of
ports as Dedicated Costal Ports of the country. As ro-ro vessel will be pressed
into service there is no need for cranes.
The Konkan Railway Corporation has been implementing this mode of
transportation in a limited way for the past several years. Trucks load into
the wagons at Navi Mumbai and get off at Railway stations in Northern
Karnataka. This is called piggy back riding and the last mile connectivity is
SS: An owner of a Container Terminal was quoted
recently as saying that India needs more cargo and not more ports. World over
the container traffic is picking up but the trend is not visible in Indian
ports barring the ones in the West coast. What could the reason for the low
container traffic in Indian ports and how this trend could be reversed?
Mr. JK: It is not the number of
ports but efficient handling of cargo that matters to the trade. It is the
better turn-around of vessels in existing ports that gives the efficiency. If
there are no berthing delays turn-around is faster in the existing ports, then
the efficiency improves.
So the port’s efficiency has to improve, turn round time has to
improve and the connectivity has to improve instead of investing in new ports.
SS: Not long ago Chennai
port was only facility for entire Southern India. Now there are four ports
around the city competing for cargo from the same hinterland. How is the
competition from private ports impacting the fortunes of Chennai Port.? Chennai
port is already feeling the pinch as some of the liner vessels have switched
over to Kattupalli port. Can Chennai port diversify its Operations to get more
business? If so what are the areas the
port could go in for? Can bunkering and
cruise shipping be an option for the port?
Mr. JK: Being over hundred year
old port, Chennai port has its own advantages. With the dusty coal traffic
shifting to nearby Ennore port, Chennai port has to brand itself as a Clean
Port and start attracting Agricultural Cargo.
The port has to construct silos to handle Agriculture cargo. Once you
develop Silos in the port premises, bagging opportunities will be available.
The port should also try to increase its share of automobile exports. The port
has the first mover advantage in automobile exports.
Bunkering, Yes. Ships can shift from Singapore port to start bunkering
Cruise shipping in the East coast is seasonal and the turbulent North
East monsoon during the peak tourist season around Christmas and New Year could
Instead of looking for international cruise shipping, Chennai Port
could introduce Catamaran service from Chennai to Puducherry, Tuticorin, Puri
in a twelve hour day service. You must build a robust domestic tourist circuit
before going into cruise tourism.
SS: With the introduction of Direct Port Delivery
of imports and Direct Port entry of exports gaining ground most of the major
ports, what do you think is the future of Container Freight Stations and Inland
Container Depots? The government has decided that no more fresh licenses will
be issued for CFSs. Do they have to change their business model and enter into
areas like Ware housing and Cold Storage Chains?
Mr. JK: Container freight stations also need to move up the Value Chain in
order to remain in business. They should offer a basket of services like e
packing, storage and distribution and other value added activities
SS: How is the evacuation in the Chennai Port? Has it improved
after the partial commissioning of the Ennore Manali Road Improvement Program
(EMRIP) ? The resumption of work in the Chennai Port Maduravoyal Elevated
Corridor is taking its own time though the Tamil Nadu government has cleared
the scheme over a year ago. I am told now that Naval and Coastguard officers who
are housed on the Marine Beach adjoining the Port are raising some objections
to the project on the grounds of Security. How will this delay
affect the functioning of the two Container Terminals in Chennai Port?
Mr. JK: The EMRIP project has brought down the delays considerably in the
Chennai port. It used to take three to
four days for entry and exit from the Port. Now it hardly takes eight to ten
hours on an average for the trucks to enter and exit the port after completing
the loading or unloading operations.
The Navy and Port authorities have recently reached an agreement on
the landing point of the Elevated Corridor on the port side near the War
Memorial. The landing point of the 25 kilometer Chennai port Maduravoyal
elevated corridor is on the defense land. The Port has agreed to give the Navy
alternate land and an agreement to this effect was reached a few days ago.
Now all the major obstacles in resuming the project which got stuck
midway nearly six years ago have been addressed successfully. It is now up to
the National Highway Authority of India to take the initiative hopefully the
work will get resumed. The Trade in Chennai hopes for the early resumption of
work on the project which will provide good connectivity for evacuation of
Summary of the Interview ( 3 & 4)
Krishnapatnam and Katupalli Ports will be the beneficiaries of the
government decision to relax cabotage laws and do well in transshipment
business. VOC port too would get a slice of the business due to proximity to
Colombo Port..Chennai port is not customer friendly and therefore is likely to
lose out in the competition. Though transshipment business has taken off in
Indian ports after the relaxation of cabotage laws, it is carried out at a very
Commercial viability due to late start and lack of railway
connectivity will affect the prospects of the proposed transshipment terminal
Having been a victim of oil blockade during the Bangladesh war when
United States persuaded the Oil Marketing companies like ESSO and Shell to stop
supplies of petroleum products to India,
we need to consider the Sethu-Ship- Canal project as a deterrent against
foreign incursions and blockades. There needs to be a trade-off between
National Security and economic costs while implementing the project in the
interest of security of the country. Some sort of handholding by the government
is needed to make the project a success.
The abolition of check-posts in the state borders following the
implementation of Goods and Services Tax has increased the transit time of
lorries to 75 kilometers per hour compared to 40 kilometers. Government needs
to introduce larger dose of technology in Weather Forecasting, Traffic
Management and Traffic compliance, Steps also need to reduce accidents in the
country which are highest in the world.
On Coastal Shipping which has not taken off in the country despite
several concessions announced by the Shipping Ministry, he said the government
should zero in for minor ports with decent connectivity to the National
Highways instead of taking up project in
Unless Coastal shipping benchmarks itself with the efficiency offered
by the road and rail sector, success may be difficult to achieve. Either I
match it or exceed it but falling short is not going to help to divert the
cargo to this mode of transport, he said..
Identify five ports each in the East and West coast with no
connectivity issues and not located near major cities and declare them the
coastal ports of the country. Create a necklace of ports and call them
dedicated coastal ports and use RO RO vessels where the truck load into the
vessel for transportation within the country. The vessel also provides the last
mile connectivity which this mode of transport does not provide.
On prospects for Chennai port following intense competition from
private ports in the neighborhood, he
said with the exit of dusty cargo like Coal to the nearby Ennore port, declare Chennai as clean port and try to
attract agricultural products. Construct silos so that bagging is done within
the port, expand automobile export business and enter into bunkering business.
The Port should Introduce
Catamaran service to other parts
of the country and attract domestic tourists. Cruise shipping is not suited
because the port gets affected by the turbulent North East monsoon coinciding
with peak cruise season around Christmas.
With the implementation of Ennore-Manali Road Improvement Program,
congestion issue in Chennai port has been resolved. The cargo could enter the
port and complete the business in eight to ten hours as against 4 to five days
a few years ago. Another good news is that all the obstacles to the Elevated
Corridor project between Chennai port and Maduravoyal, a distance of 25 kilometers have been
removed. The project work will get resumed
in a month or two.
On the state of the global shipping industry he said the industry is
not out of the doldrums and still faced both economic and technological
challenges. At the culmination of the consolidation process, the industry would
see five or six large players emerging in operating shipping companies. The
process will take 2 to five years from now according to him.
The freight rates are not likely to go up in the near future he said.
Europe which supplies goods to China to help manufacture products to
the US market will be the victim of the on-going trade war between United
States and China. Europe will be indirectly hit by the war and that is why more
than US, there is resistance in the
Continent against the War,
India will be a beneficiary of the war. Chinese have already started
sourcing Soya from Maharashtra which they never did before the war. Indian products
will soon replace US exports to China in agriculture and processed food.