Bouncing Back

Key trends and outlook for the port industry

At a time when the maritime industry was suffering from weak domestic performance and foreign trade difficulties, the Covid-19 pandemic created new hurdles. While the industry has begun to show signs of recovery since June 2020, the rate of recovery will be determined by a variety of factors, including domestic industrial activity and global economic developments. Going forward, growth is expected to be driven by the government’s plans to develop new greenfield ports and waterways, and modernise existing ports. Industry experts offer their perspective on current events and the sector’s future prospects…

How has customer experience at Indian ports evolved overtime?

Shantanu Bhadkamkar, Managing Director, ATC Global Logistics

Traditional international ports, such as Mumbai, op­erated through direct contact with customs brokers, who warehouses inside the port to cart the cargo for export or clear the cargo for im­port. The port interacted with the cargo interest daily on a real-time basis.

Containerised ports, such as JNPT, on the other hand, operate on a new model that allo­ws connectivity to 34 port-based container freight stations (CFS) and 47 inland container depots (ICDs) across the country. Therefore, the cargo interest has only an indirect interaction with the port, a model suitable for containerised cargo transportation.

Most major and non-major ports are inc­reasingly adopting a landlord model. Under this model,  the ports do not perform cargo handling operations. Instead, the ports ad­opt a public-private partnership (PPP) model to develop port terminal(s) and give the independent terminal operator operational freedom.

The role envisages port-led Indu­s­triali­sation in creating a much broader ecosystem going beyond the logistics industry to cover all the services and manufacturing sectors that can benefit from proximity to ports.

Sunil Vaswani, Executive Director, Container Shipping Lines Association (India)

India’s port sector has gr­o­wn by leaps and bou­n­ds. Since Nhava Sheva fi­r­st surfaced, a lot has changed. The Jawa­harlal Nehru Port Trust (JNPT) has transfor­med into a full-fledged container terminal. The terminals have evolved with time. The container freight sta­tion model ensures that ports are not congested with cargo. Improved systems too have en­sured greater transparency. The sector is looking forward to a strong community structure that ensures the participation of all stakeholders, resulting in inc­rea­s­ed digitalisation and productivity. How­ever, there is still potential for im­provement in a number of areas. For example, productivity in global ports is as high as 35-40 moves per crane per hour, whereas productivity in Indian ports is still just 25 mo­ves per crane. Overall, on both the west and east coasts of India container ports have un­der­gone a paradigm shift. These efforts are likely to ca­talyse rapid transformation of India in be­coming a global manufacturing hub.

What are some of the unresolved issues and how can these be tackled?

Shantanu Bhadkamkar

A revenue-sharing model was envisaged for PPP 30 years back. It was perhaps appropriate for the then circumstances for privatisation initiatives. However, many lessons have since been learned in India and worldwide. Experience de­mons­trates that the ports (or any strategic natio­nal resource) have an economic and strategic po­tential that a simplistic revenue-generating model can not unlock to its optimal potential.

To develop a solid growth-oriented PPP strategy and project governance skills, at the outset, we should give up the obsession with so-called global best practices. It takes 5-10 years to conceive and execute a world-class project. It takes another 5-10 years for the rest of the world to take serious note of the potential. The copycat approach impairs our ability to think, let alone come out with innovative ideas. Furthermore, the so-called best practices become outdated by the time we consider them for adoption. As such those successfully adapting them have moved on for newer ideas and solutions.

The effective use of digital technologies and solutions can aid in the improvement of the port logistics system’s efficiency. Today, the logistics business is 50 per cent  cargo handling and 50 per cent  exchange of information (and data) using digital platforms. The digitalisation of the port community is a significant step forward. How­ever, every department and every sector de­veloping its own (independent) portal is a matter of concern.

Rather than relying on PPP or revenue generation models, the government should entirely develop and manage the National Digital Portal exclusively. It should invest well to develop a unified digital platform. Ports are strategic for building a national multimodal digital portal for all logistics and, therefore, should be at the core of the development plan.

Sunil Vaswani

Digitalisation is essential for success and transparency, and having a standardised process for all ports would make the process significantly smoother. Although each port is different and thus some differences in the system are bo­und to be there, a system that is largely standardised, both in terms of port operations as well as customs regulations, would be helpful for the ease of doing business. At the same time, it is rather commendable that while global ports struggled during the pandemic to handle the increased volumes and remained congested, Indian ports did not face any such pro­blems. It must also be noted that during the year 2021, the shipping lines repositioned 1.85 million TEUs of empty containers into the country to help meet the export demand. Be­sides, the shipping lines introduced several new services to global destinations, which increased the we­ek­ly capacity by 35,000 TEUs. All these inc­reased volumes were handled by the Indian ports. How­ever, as mentioned earlier, uniform and updated systems and regulations across all the ports would indeed be helpful. This would also enable Customs and related agencies to promptly auction the cargo from long standing containers and release the containers to the shipping lines for exports. As a matter of fact, customs should auction the cargo during the very first or second auctions as long as their revenue is recovered, rather than wait for four or more auctions, which delays the process by several months or even years. Alternatively, car­go sho­uld be destuffed and stored in some warehouses or CFSs and the containers should be immediately to the shipping lines for exports. While on the one hand, the shipping lines are repositioning empty containers into the country at a huge cost to meet the export demand, on the other, several thousand containers are lying uncleared for several months or even years without the cargo being auctioned. It is also proposed that dredging be conducted to deepen the drafts and the latest generation of quay cranes be deployed to enable larger vessels to call at Indian ports. Also, vessel and container related charges at Indian ports are substantially higher than those at neighbouring ports. There are also issues of dual charges that need to be add­re­ssed. The latest generation of key cranes should be deployed at ports. Indian vessel-related cha­rges are over 400 per cent higher, making it ex­tre­mely difficult to br­ing new vessels or services into the country. Charges for containers are also do­uble of tho­se at neighbouring foreign ports. The handling cost per unit at Indian ports is the­re­fore more than double of that at foreign ports.

What are the new and emerging requireme­nts?

Shantanu Bhadkamkar

A PPP model designed for growth and efficiency will call for more significant investment by multimodal logistics infrastructure developers in port technologies to lower the service cost, increase efficiency, and improve reliability. Fin­ancial investments in efficient systems and pro­­cesses to reduce costs and enable the inves­tors to pass over the benefits from increased efficiency and production to the customer will demand a new model for PPP or even government investments in growth and efficiency-driven sustainable commercial ventures.

To ensure a significant change in the current ecosystem, we need to establish new standards and address all the issues strategically and proactively. A root cause analysis of reduced yield of infrastructure investors demonstrates that ease of doing business, improved efficiency and reduced cost structures are often to the detriment of the honest infrastructure investor. It is necessary to have a balanced approach.

Sunil Vaswani

In today’s world, connectivity is the most critical concern. Roads, railways and ports are all witnessing an increase in cargo. Railways are the industry’s backbone, and connectivity via railways has been vastly enhanced. However, costs have risen significantly. As shipping has shifted from port to port to door to door, logistics costs have risen.

What are the changes that have taken place due to the development of greenfield ports?

Shantanu Bhadkamkar

One of the most significant benefits greenfield ports provide is freedom from the baggage of legacy issues. Some improvements can be seen in overcoming the barriers resulting from so-called social relations. Further, the current port system and connectivity, frozen in segmented transport infrastructure, is challenging to change. Green­field ports should compulsorily envision a multimodal connectivity approach for an end to end logistics solution. The vision should include projecting the ports as the na­tion’s brand ambassadors to seek investments in every target sector for increa­sed efficiency and productivity.

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