The direct port delivery (DPD) scheme has resulted in a heated debate and garnered much interest in the past one year. Introduced by the Central Board of Excise and Customs (CBEC), the Ministry of Finance, the DPD scheme aims to promote trade facilitation and ease of doing business in India. Under the scheme, containers are moved directly from the port to the customer premises instead of directing them to container freight stations (CFSs) to reduce the transaction time and costs associated with export-import trade. It comprises authorised economic operator (AEO)- and non-AEO-based DPD.
Implementation so far
In February 2016, the country’s largest container handling major port, the Jawaharlal Nehru Port Trust (JNPT) issued a trade notice allowing all its Accredited Client Programme (ACP) clients to opt to take delivery of their cargo directly at the port rather than at a CFS. Before the issue of the trade notice, 11 agencies were availing of the DPD facility from the Jawaharlal Nehru Port Container Terminal (JNPCT). Since then, 794 have registered for availing of the DPD facility.
As a part of the latest development to promote DPD, the Jawaharlal Nehru Customs House (JNCH) has decided to accord priority to DPD status holders with regard to the assessment of the bill of entry. Also, since February 14, 2017, permission for handling DPD containers has been extended to 21 CFSs, as against only one CFS, Speedy Multimodes, earlier.
Total DPD volumes handled by the importer directly at JNPT stood at 18,310 twenty-foot equivalent units (TEUs) in May 2017, compared to only 6,850 TEUs in April 2016. The share of DPD in total import volumes at JNPT stood at 27.76 per cent in May 2017. Meanwhile, 13-16 per cent of all import cargo at Chennai port is being cleared under DPD, with the automobile sector accounting for a major share. At present, about 200 top importers are eligible for the DPD option at the port. Reportedly, these top 200 importers handle around 60 per cent of the import cargo at Chennai port.
Slower-than-expected take-off
Overall, the response to the DPD scheme has been mixed. Supporting the DPD initiative, Ravinder Johal, chief executive officer, DP World Nhava Sheva, says, “The results of this scheme have been witnessed in the rapid growth in volumes and increase in customers opting for DPD at our terminals. Efficiency in operations has led to a quantum increase in DPD volumes by more than 130 per cent in 2017. DPD customers have been allotted a separate yard, which can also be used as a storage point resulting in reducing the warehousing costs for the customers.”
However, the DPD volumes still remain quite low. Ports are still struggling to attract more clients to the scheme. In the DPD Interactive Meet held on January 6, 2017, Anil Diggikar, chairman, JNPT, pointed out, “From 60-odd clients registered as AEOs last year, the number has gone up to 778. The concern is that there are still very few takers. The port was at 5 per cent (the share of DPD containers in the total number of import containers) instead of the targeted 40 per cent (December 31, 2016).”
The reasons are many. Since DPD requires the clearance of a large number of containers at the port, speedy cargo evacuation is one of the major issues. According to industry stakeholders, currently ports do not have adequate capacity to support the DPD initiative. Direct delivery from ports is likely to further increase the problem of congestion at ports, causing adverse effects on dwell time and cost.
For instance, DPD clients at JNPT have increased from 60 to almost 800 at present, putting pressure on yard space and equipment. The terminals have neither adequate infrastructure nor the equipment to handle massive container volumes.
“The concept of DPD is based on the hypothesis that CFSs add to costs and time. By eliminating the need for a CFS, the various facilities are uncertain about the future of their business. For example, there are approximately 30 CFSs at JNPT/Navi Mumbai that may have limited use after the full-scale implementation of DPD. The demand for CFSs may reduce leading to excessive CFS capacity. Therefore, the coexistence of CFSs and DPD is a challenge that may need to be adequately addressed,” says Jaideep Ghosh, partner and sector head, transport and logistics, KPMG India.
The lack of standardised procedures for DPD across ports is another area of concern, and inhibits the speedy adoption of the scheme. As per JNCH, DPD containers should be evacuated from the terminal within 48 hours of arrival, failing which the containers are moved to one of 21 designated CFSs. On the other hand, at Chennai port, the containers are allowed to stay at the wharf for 72 hours. Also, there is no officially designated CFS at the port for the evacuation of DPD containers post the free period. Further, shifting charges on a per move basis are payable for DPD containers at private terminals at JNPT, whereas no such charges are levied at Chennai port.
According to importers, they do not get access to the storage facility that the CFS provides, which, in turn can be used as a buffer for better inventory management at their own premises. “Indian importers are a mix of large- and small-scale importers. Ports tend to provide two-three free days for container storage. CFSs, on the other hand, may provide 10-15 days of free container storage. Therefore, large-scale customers are likely to benefit from DPD as they have the requirement of large consignments and have developed facilities at their premises to store containers. However, small-scale customers are not equipped with the same and neither is the rate of utilisation of import cargo very high”, adds Ghosh. Importers will be keenly watching the impact of the DPD scheme on the ground before committing to it.
Further highlighting the issues in the implementation of DPD, Captain Ravi Chander, country head, ports and coastal shipping, Continental Warehousing Corporation (Nhava Sheva), NDR Group, points out, “While the process is good and emulates international practices,
we have to exercise caution by maintaining efficiency. Unlike ports in Europe, we are not straddle-carrier operated; we have yard operations with rubber-tyred gantry cranes which means that the average stack height is much higher and deliveries require multiple housekeeping moves. Major ports under the Tariff Authority for Major Ports may find the process remunerative but it would be difficult to cater to customers with small lot sizes. When 70 per cent of CFS volumes will take up the DPD route, terminals will have to allocate more yard space for DPD deliveries and slow operations will choke the delivery points.”
Also, sometimes there is inadequate transport service to relatively remote areas where plant premises are located. In this case, it gets difficult to take delivery of the entire consignment from the port. Reportedly, Voltas has put in a request to move out of the DPD scheme due to space constraints at its Pantnagar plant.
“For an AEO client, DPD is an accrued benefit. However, not all AEO clients require DPD for every consignment. Thus, there is confusion among shipping lines with respect to the destination of containers. It can potentially cut the time between a shipment landing at the port and reaching a factory,” says N.Ramakrishna, general manager, marketing and sales, Kribhco Infrastructure Limited.
Critical factors for DPD success
Bringing this initiative to fruition will necessitate eliminating all the bottlenecks that discourage stakeholders from using this scheme. A centralised portal for DPD on the CBEC website can be explored to bring in some clarity on the policy as well as operational aspects of direct delivery. The portal can act as a single point for obtaining solutions to regular queries and clarifications regarding the scheme, such as documentation requirements, free period for holding containers, etc.
“Standardisation of procedures, tariffs, free time, etc. should be given top priority and electronic methods for filling various documents should be streamlined. This will help in handling the current traffic in a better way. But the real challenges will be in scaling up. Multiple moves in the import delivery yard cannot be avoided. In such cases, the stacking height will have to be reduced. Ports will require greater yard space and an organised delivery system. Today, it is ACP clients whose cargo undergoes limited examination. In future, the requirement for examination will be more. The number of scanners, more sophisticated scanners for avoiding physical examination totally (unless there are discrepancies), faster scanning and multiple scanner delivery lanes should be planned at ports,” says Captain Chander.
DPD is here to stay. The business model of CFSs will need to be relooked at to ensure their viability and sustainability. Even if DPD becomes widespread, there will still be services such as the consolidation of the less-than-container-load cargo, where CFSs could be useful. For this, CFS operators will have to devise new strategies. There is also a need for adequate communication between the relevant authorities and the DPD scheme users to update the latter on the benefits of and the continuous changes being made to the scheme, in order to make the process user-friendly.
Other measures that are required for the success of the scheme are an improvement in gate and evacuation infrastructure, the procurement of new equipment, the upgradation of port infrastructure in terms of bonded warehousing and custom facilities, etc.
“A wider acceptance of the DPD model can eliminate the add-on intermediaries in exim logistics and the need for a CFS in the vicinity of a port. The DPD model will facilitate ease of doing business in the logistics industry through the reduction of dwell time at the port,” says Ramakrishna.
In conclusion, the DPD scheme is no doubt an important measure for promoting the ease of doing business in the country. However, complementary growth in infrastructure still holds the key to translating these prospects into reality in the coming years.
