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*
to shipper enthusiasm for
sourcing and tapping domestic consumers,
India has generally played second-fiddle to
China. T hats changing. China is still the
world-beater when it comes to manufacturing
for consumers from North America to Europe,
but India is catching up.
Chinas aging workforce and its demands
for higher pay and promised pensions, together
with a general restructuring of the economy

Logistics accounts for approximately 18 percent

of Indias GDP, about the same as China. The far
more efficient U.S. logistics industry accounts
for just 8.5 percent of GDP.
Global consulting firm McKinsey & Co.
estimates waste caused by poor logistics costs
India approximately $45 billion a year, or
4.3 percent of GDP.
India needs to quickly develop its infra
structure if it is to attract foreign investment
and become a world-class
exporting hub, CRISIL, a
P u b lic a n d p riv a te in te re s ts a r e in v e s tin g
unit of credit evaluator Stan
b illio n s o f d o lla rs in p o r t a n d o th e r
dard & Poors, said in a recent
trade analysis.
in fra s tru c tu re to im p ro v e e ffic ie n c y
Containerized trade in
India has risen at a com
a n d a ttra c t m a n u fa c tu rin g
pound annual grow th rate
of approximately 10 percent
By Bency Mathew
over the past decade and is
forecast to continue growing
at a similar pace or faster
as it moves further into the middle-income as global demand rebounds and Modis flagship
bracket, is making room for competition in Make in India program gathers momentum.
Indias 12 major ports and more than 200
manufacturing for international consumption.
At the same time, India Prime Minister Nar- minor ones generally lack scale, draft, modern
endra Modi is putting a more business-friendly equipment, mechanization and efficient cargo
face on India, helping to attract the likes of elec handling processes. Last-mile links, defined
tronics manufacturers Foxconn and Apple, and in this case as about 100 kilometers (about 60
pushing domestic production. Although India miles) within destination and which should
hasnt delivered that domestic production as efficiently connect ports with industry clusters
promised, its GDP growth of 7.6 percent last and other production locations such as mines
year outpaced Chinas rate of 6.9 percent, and and consumption centers, are generally poor
or, in many cases, absent. This is identified as a
shows few signs of slowing.
The manufacturing sector accounts for just major source of bottlenecks, poor service levels
15 percent of GDP in India, well below that of and high logistics costs overall, each the bane of
East Asian countries, including South Korea global shippers.
and China, where its about 30 percent. While
it vies for a larger presence in global politics FOR PORTS, HELP IS ON THE WAY
The governments national Sagar Mala portand military might, India wants to be a bigger
producer. It wants to double its exports and modernization program aims to address these
emerge as a formidable player in global trade issues and reduce logistics costs to 10 percent of
GDP by providing infrastructure that can move
in five years.
India is working to increase the share of goods to and from ports quickly, efficiently and
manufacturing as a percentage of GDP and we cost effectively. Inland areas around the ports
are seeing a shift in the attitude of global manu will be industrialized and lead economic trans
facturers toward the country, said Rajiv Biswas, formation of the countrys coastal regions that
chief economist for the Asia Pacific at IHS, the already account for more than 60 percent of
national GDP.
parent company of The Journal of Commerce.
Technology-based initiatives to enhance
productivity at key port gateways are also under
LOGISTICS BREAKS THE BANK
T ran sp o rtatio n in fra stru c tu re sh o rt way. For example, Jawaharlal Nehru Port Trust,
falls and factors such as stubborn red tape the countrys biggest container port, recently
and protectionism mean logistics costs often introduced a radio-frequency identificationunderm ine m anufacturings com petitive based container-tracking service that allows
ness. Shippers moving containerized goods in exporters and importers to track goods in tran
and out of India often face congestion, unpre sit through the port to inland container depots,
dictable labor, too few ports able to handle container freight stations and to end-users.
Its expected to reduce lead times for conmega-ships and weak hinterland connections.

W HEN IT COMES

10

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COVER STORY

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COVER STORY

tainer movement, help alleviate congestion

at th e p o rt and ultim ately lower tran sac
tion costs for shippers and consignees due
to improved predictability and optimization
of cargo flows.
A n o th er factor ex acerbating In d ias
need to revamp its supply chain systems is
rapid e-commerce grow th. According to a
recent study by the Associated Chambers
of Commerce and Industry of India, online
shopping in India is expected to grow at a
com pound annual g ro w th rate of about
35 p ercent over the next five years, w ith
th e value of e-com m erce m erch an d ise
approaching $100 billion.
Indias 12 major ports dot the 4,600-mile
coastline from Kandla on th e w est coast to
K olkata-Haldia on the east coast. Besides
reporting directly to the M inistry of Ship
ping, these ports are regulated by the Tariff
Authority for Major Ports, or TAMP, requir
ing them to document and justify their tariff
proposals in public hearings set up by the
regulator from time to time.
If India succeeds in its export-led growth
endeavor, the countrys external trade will
multiply in the coming years. Given that, New
Delhi will have to build more large ports to
meet expected growth.
Following liberalization of the Indian
econom y th a t began in th e early 1990s,
m ajor state ports opened th e doors to for
eign investm ent in new term inal projects
via public-private partnerships. But capacity
expansion and the development of support
infrastructure, especially railroad connec
tivity, hasnt kept pace w ith grow th in cargo
volumes, causing port congestion and supply
chain bottlenecks.

JNPT, w hich handles about 60 percent

of Indias containerized freight moving via
m ajor ports and about 40 percent of the
countrys overall containerized ocean trade,
frequently faces congestion brought on by
volume surges, labor troubles, long truck turn
times and intermodal bottlenecks. Container
term inals at Chennai have long struggled
w ith lengthy truck lines and excessive turn
times, dragging down grow th at the coun
trys busiest east coast container harbor.
SMALLER PORTS PROVIDE A SOLUTION

Shipper and ocean carrier concerns have

proved to be a boon to some of the privately
operated m inor ports, w hich have ample
capacity and m odern infrastructure. The
effectiveness of non-major ports in meeting
the grow ing volume of cargo traffic in the
backdrop of saturation of existing capacities
at the major ports cannot be overlooked,
the M inistry of Shipping said in its fiscal
2014-2015 port performance analysis report.
Recognizing the importance of non-major
ports, m aritim e states have launched ini
tiatives for their development through the
participation of the private sector. This has
led to significant grow th in cargo handled
by non-major ports in the past few years.
Notable minor container ports are Mundra, Pipavav, H azira, K rishnapatnam and
Kattupalli.
Statistics show the overall market share
of major public ports has fallen from 76.4 per
cent in fiscal 2000-2001 to about 55 percent
in fiscal 2014-2015. By contrast, so-called
minor ports have jacked up their share of the
countrys seaborne trade from 23.6 percent to
45 percent in the same period.

Mundra, about 300 nautical miles from

JN PT, is Indias biggest non-governm ent
cargo complex. Quick turn times on the back
of modern infrastructure and dedicated rail
highway connectivity have made Mundra an
attractive alternative p ort option for ocean
carriers and northern India hinterland ship
pers upset over chronic delays at JNPT.
As a result, M undra recorded a 17 per
cent year-over-year increase in its container
volumes last fiscal year, com pared w ith a
m ere 0.5 percent grow th for JNPT, statis
tics show.
Signs of change are emerging for Indias
major ports, too. The reform ist Modi gov
ern m en t, in office since M ay 2014, has
demonstrated a strong intent to upgrade and
modernize public ports, and said it plans to
more th an double the countrys overall port
capacity from 1.4 billion tons to 3 billion tons
over the next 10 years.
As p art of its efforts to transform major
ports run by boards of trustees, the govern
ment soon will move new legislation to make
all major ports independent companies with
more operational and financial autonomy.
Im portantly, th e change w ill allow these
state ports the freedom to fix their service
rates. To level the competitive balance w ith
smaller counterparts, th e p o rt tru sts cur
rently cant adjust pricing, which fall outside
TAMPs purview.
PRIVATIZATION FACES RESISTANCE

The draft law released in June for pub

lic com m ent includes a provision allowing
major ports to raise funds by issuing bonds
and se cu ritie s. T h a t could be a gam echanger because these public p o rts have

INDIA PORTS VOLUME

lllllllllllllillllllllllllllilllllilllllllllillllllllllllllllllllllllllllllllllllilllllllillllllllllllllllllllllllllllllllllllllllllllilllllllllllllllllllllllllllllllillllllllllllllllllllllllllllllllllllllllllllllllllllilillllllllllllllllilllllllllllll

In m illio n s o f tons and m arket share, fiscal 2000-2001 to 2014-2015

1 ,2 0 0

................................................................................................... ......................

M a jo r Ports V o lu m e

N o n -M a jo r Ports V olum e

M a jo r Ports Percent Share

N o n -M a jo r Ports Percent Share

......... ........................ .......... ................................................ .... ........... .... ...................................... .............................................. .........

2000-

2001-

2002-

2003-

2004-

2005-

2006-

2007-

2008-

2009-

2010-

2011-

2 01 2-

2013-

2 01 4-

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2 01 2

2013

2 01 4

2015

80%

Source: Indian Ports Association

12

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I N D I A S R A IL P U S H
FOR IN D IA N SH IP P E R S , tru c k in g is h is to ric a lly th e p re fe rre d m o d e o f tra n s p o rta tio n to and
fr o m th e in te rio r, even o n lo n g d istances. T h a t tre n d 's u n lik e ly to change s ig n ific a n tly in th e
c o m in g ye a rs, la rg e ly because o f severe b o ttle n e c k s th a t tie u p cargo.
Data c o lle c te d b y T he Jo u rn a l o f C o m m e rce s h o w in la n d c o n ta in e r v o lu m e s to a n d fro m
m a jo r p o rts in fis c a l 2014-2015 to ta le d n e a rly 5.5 m illio n 2 0 -fo o t-e q u iv a le n t u n its , o f w h ic h
tru c k s h ip m e n ts a cco u n te d fo r as m u ch as 4.7 m illio n , o r 85 pe rce n t.
D o ttin g th e in te rio r a re in la n d c o n ta in e r d e p o ts, o r ICDs. In a d d itio n to p riv a te ly ru n in la n d
te rm in a ls a n d p o rt-s id e ra il-h a n d lin g fa c ilitie s , s ta te -o w n e d in te rm o d a l ra il o p e ra to r C o n ta in e r
C o rp o ra tio n o f In d ia o p e ra te s 6 4 te rm in a ls n a tio n w id e an d is w o rk in g to ad d fiv e fa c ilitie s in
th e n e x t t w o ye a rs. In tra ffic te rm s , th e la rg e st are D e lh i (th re e te rm in a ls ), L u d hian a , Jaipur,
Jo dhpur, A h m e d a b a d , B an g a lo re a n d H yd e ra b a d . C o n co r h a n d le d n e a rly 2.5 m illio n TEUs o f
e x p o rt- im p o rt c a rg o in fis c a l 2015-2016, d o w n 6 p e rc e n t ye ar-over-year.
In a d d itio n to C oncor, a b o u t 20 p riv a te c o n ta in e r ra il o p e ra to rs o ffe r in te rm o d a l se rvices on
v a rio u s ICD ro u te s, th a n k s to th e p riv a tiz a tio n o f ra il fre ig h t o p e ra tio n s in th e m id -2 0 0 0 s .
A lh o u g h m a jo r p o rts have had siza b le p riv a te in ve stm e n ts fo r th e d e v e lo p m e n t o f ca rgoh a n d lin g fa c ilitie s d u rin g th e p a st tw o decades, th e c o u n try 's ro a d , ra il an d in la n d w a te rw a y
system s have s u ffe re d fro m ye a rs o f ne g le ct a n d u n d e rin v e s tm e n t, a d d in g to fre ig h t dela ys a nd
lo g is tic s costs.
To w o o m o re tru c k sh ip p e rs to th e ra ils, th e g o v e rn m e n t is in ve s tin g a g g ressively in n e w
p o rt-ra il c o n n e c tiv ity p ro je c ts . To speed th e process, it has set u p a sp e c ia l-p u rp o s e c o m p a n y In d ia n P o rt Rail - in v o lv in g e q u ity p a rtic ip a tio n fro m m a jo r p o rts a n d In d ia n R a ilw a ys. In a July
press release, th e M in is try o f S h ip p in g sa id In la n d P o rt Rail has a p p ro v e d 22 p o rt-ra il p ro je c ts ,
in v o lv in g a to ta l e stim a te d co st o f 20 t r illio n rup e e s ($3 b illio n ). O f th e se, th re e p ro je c ts w o rth
3 87 m illio n rup e e s ($5 .8 b illio n ) are u n d e rw a y a t th e p o rts o f V is h a k h a p a tn a m a nd C hennai.
C o n co r a lso has in tro d u c e d re lia b le , tim e -d e fin ite in te rm o d a l ra il services c o n n e c tin g C hen
n a i to D e lh i a n d B a n galore, an d is w e ig h in g p la n s to o p e ra te s im ila r services lin k in g o th e r ke y
p o rts w ith h in te rla n d s to d riv e up ra il ca rg o .

B e n c y M a th e w

Existing and planned, in m illions o f tons

A d d itio nal Capacity
P orts

E xis ting capacity

O ngoing expansion

from

M aster P u n s

P rojected
C apacity

KANDLA

121.4

MUMBAI

4 4 .5

2 9 .5

4 .0

4 8 .5

JNPT

7 9 .4

6 0 .0

4 5 .0

124.4

MORMUGAO

4 3 .8

0.0

3 5.0

7 8 .8

ENNORE

37.0

4 2 .0

3.0

8 2 .0
9 8 .0

24.5

5 5.0

185.9

CHENNAI

8 6 .0

0 .0

12.0

T U T IC O R IN

4 4 .6

3 8 .9

3 0 .6

75.2

N E W M ANG ALO RE

77.8

6.7

5.5

9 0 .0

C O C H IN

49.7

4.1

2 .0

51.7

V IS A K H A P A T N A M

9 6 .8

3 8 .8

8 .0

143.5

P A R A D IP

119.8

6 5 .6

6.10

195.4

K O L K A TA

7 0 .9

10.8

12.0

3 2 0 .9

222.1

T O T A L C A P A C ITY
Source: India M inistry o f Shipping

8 7 1 .5

8 2 .9

1 ,4 1 4 .5 0

been struggling to find the funding to move

forward on major expansion plans.
But it rem ains to be seen how the gov
e rn m e n t tack les th e tra d e u n io n s and
political opponents. The governm ent was
forced to backtrack on a previous port priva
tization plan following staunch resistance
from various labor groups, which resulted in
a nationwide dockworker strike last Septem
ber. The labor unions fear th e port reform
program will lead to total privatization and,
in turn, a loss of jobs and social security for
the workers.
On the investm ent front, New Delhi is
working harder than ever. The government
is seeking to mobilize private investments
w o rth som e $ 6 0 billion for in fra s tru c
tu re upgrades, including co nstruction of
new deep-sea ports, p o rt m odernization
and hinterland connectivity, and another
$100 billion to w ard po rt-led in d u stria l
development th at encompasses setting up
of industrial clusters and multimodal logis
tics solutions.
The government is focusing intensely on
the construction of two deep-sea greenfield
ports, one at Enayam on the southeast coast
and the other at Vadhavan in M aharashtra
on th e w est coast, w ith public and private
investments.
This m onths fast-tracking of a Cabinet
nod, in principle, for Enayam reflects the
high priority New Delhi accords to its trans
shipment ambitions.
Colombo, Singapore and P o rt K lang
account for approxim ately 75 p ercen t of
transshipped cargo from India. To reverse
this trend, India needs to develop a container
port located near the global east-west ship
ping route with adequate draft, large scale of
operations and access to a large hinterland,
a government paper said.
Colombo h an d led ab o u t 1.2 m illion
TEUs of Indian transshipm ent cargo in fis
cal 2014-2015, up from 652,000 TEUs the
prior year. The Sri L ankan p o rt enjoyed
the largest share, 48 percent, of transship
ment volume off Indias shores for the year.
Singapore claimed a 22 percent share and
Port Klang in Malaysia, 10 percent.
Enayam will be a dedicated container
handling facility, w ith volumes projected at
1.7 million TEUs by 2020,4.9 million TEUs
by 2025 and 6.7 million by 2030, according
to feasibility reports.
Vadhavan is about 120 miles n o rth of
Jawaharlal Nehru. The new satellite port is
essentially intended to ease growing pressure
on JNPT, which is working close to capacity
and has little room for expansion after PSA
International completes a facility that will add
4.8 million TEUs of capacity in two stages.

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COVER STORY

Besides targeting northw estern hinter

lands, Vadhavan likely will tap into spillover
cargo from JN P T w hen th a t p ort reaches
capacity, thereby preventing a potential
mass shift of cargo to private rivals, espe
cially M undra and Pipavav.
Another port project stirring up consid
erable interest is V izhinjam International
Container Transshipm ent Terminal, which
is being built by Adani Ports. V izhinjam s
1 million-TEU first phase is scheduled for
completion in 2018. It comes w ith several
attractions, including a deep draft that can
go up to 72 feet w ith minimal dredging and
proxim ity to th e m ain east-w est interna
tional shipping route.
Much of Vizhinjams success as a tran s
shipm ent hub, however, w ill depend on
hinterland access, which is sorely lacking at
this stage. In a push for the project, Shipping
M inister Gadkari recently agreed to con
sider granting a waiver to Indian cabotage
law that would help it lure mainline carriers.
Even if it gets that, however, there is an
em erging school of thought that, w ith the
government pushing ahead w ith Enayam to
rival Colombo, Vizhinjam, located less than
30 nautical miles away, will face an uphill
struggle to make an impact on the transship
ment front.

As p a rt of th a t exercise, m ajor p o rt
authorities have been told to set up elec
tronic gate system s to speed tru ck tu rn
times, move more business processes online,
encourage shippers to use direct port deliv
ery services for th e clearance of im port
freight, apply much lower term inal charges
for traffic handled during non-peak hours,
deploy more container scanners to speed
cargo flows, allocate dedicated parking lots
to smooth drayage operations and improve
port roadways.

the ports fairway to 14 meters. A 2.3 trillionruble ($303 million) investment in a second
phase of dredging to a depth of 15 m eters is
awaiting government approval.
A lth o u g h th e re is a long w ay to go
before the real results are visible, the effort
appears to be bearing fruit, w ith produc
tiv ity and cargo volum es at m ajor p o rts
experiencing healthy pickups in th e past
few months.
JN P T has booked significant gains in
its p ro d u ctiv ity levels in th e firs t fiscal

In addition to JNPT, the ports of Chen

nai and C ochin have in tro d u ced RFID
technology for gate operations. Other state
ports are expected to follow suit soon.

quarter. D etails obtained by The Jo u rn al

of Com merce show average p re-berthing
tim es at th e p o rt fell to 2.06 days from
April to Ju n e from 4.74 days in th e same
period last year. Average gross b erth p ro
ductivity increased from 64.91 moves per
hour to 73.92 moves per hour, w hile aver
age gross cran e p ro d u ctiv ity rose from
20.04 moves per hour to 22.29 moves per
hour, respectively.
The new est p o rt traffic figures show
container volumes at the 12 major ports in
the fiscal first quarter increased 6.2 percent
year-over-year to 2.1 million TEUs.
W ith large global econom ies ex p eri
encing serious challenges from lackluster
economic conditions, Indias grow th indica
tors and reform initiatives should be music
to the ears of private investors betting their
money on port-related infrastructure proj
ects in the country.
F oreseeing th e potential, DP World,
which has term inals at five major port loca
tions in India, unveiled a plan this year to
invest $1 billion in new infrastructure proj
ects in the emerging Asian economy. ioc

THE MARINE HIGHWAY

A nother area to receive a boost under

the Modi adm inistration is development of
marine highways, or container transport via
inland and coastal waterways. Most nota
bly, th e governm ent has lifted cabotage
regulations that prevented foreign-flag car
riers from transporting containers between
domestic gateway ports.
O ther governm ent incentives aim ed
at encouraging coastal shipping include
allow ing a green channel facility for the
clearance of coastal cargo at major ports,
priority berthing of coastal ships at major
ports and a special state-aid program in the
form of grants for the construction of new
infrastructure suitable for handling coastal
vessels at major ports.
T here is a need to encourage coastal
shipping as a viable m ode of bulk freight
transportation as it has just about 3 percent
of share in carrying regional traffic, the
A ssociated C ham bers of C om m erce and
Industry of India said in a recent report.
The government is putting a much big
ger emphasis on automation of port services
and cargo processes as New Delhi aims to
im prove its ran k in g in the W orld Banks
Ease of Doing Business survey. In its last
World Bank survey, India ranked 130th out
of 189 nations.

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ENTERING THE MEGA-VESSEL AGE

The other major problem confronting

these public ports is their inability to handle
the latest generation of mega-ships because
of insufficient channel depths. Im prove
m ents may come on th a t front as well, as
the M inistry of Shipping announced a new
dredging policy aimed at minimizing delays
in aw arding of contracts for capital and
maintenance dredging works at public ports.
Inadequate draft at Indian ports entails
extra tim e and costs as cargo originating
from and bound to India is routed through
tra n ssh ip m e n t p o rts like Colombo, Sri
Lanka and Singapore. As vessels keep get
ting bigger, Indian ports need much deeper
drafts, which call for increased investments
on capital dredging, th e m inistry said in
releasing the policy guidelines.
On th e positive side, JN P T m oved
into an era of m ega-ship calls w ith th e
April 1 b erth in g of th e 13,100-TEU MSC
Cristina, the largest container ship to ever
call Indian shores, th an k s to th e comple
tion of a dredging project th a t deepened

iiiiiiiiiiiiiiiiim iiiiiiiiiiiiiiiiiiiiim iim im im im iiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii

Bency M athew is a Delhi-based correspondent fo r

The Journal o f Commerce. Contact him at
bencyvm athew @ gm ail.com .

JULY 25.2016

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