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It is not the number of ports but efficient handling of cargo that matters to the trade: Jayaraman Krishnan

Interview contd…

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.

The then President Pranab Mukherjee and PM Narendra Modi  launching Goods and Services Tax (GST) at midnight, at the special ceremony in the Central Hall of Parliament in New Delhi.

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 challenges.
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 achieved instantly.
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 at Chennai.
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 be dampener.
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 containers.

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 discounted rates.
Commercial viability due to late start and lack of railway connectivity will affect the prospects of the proposed transshipment terminal at Colachel.
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 major ports.
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.

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