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G Raghuram, IIMA

CONTAINERIZATION

BUILDING GLOBAL TRADE

COMPETITIVENESS

Prof. G Raghuram

Indian Institute of Management

Ahmedabad

EXIT
http://quit/


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Outline

Potential of Container Traffic

Drivers of Container Traffic

Potential Hub Ports in India

Hinterland Connectivity

Other Issues

Concluding Issues


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Where are we?Year National GDP Container Total

US $b1 Growth2 (%) 000 TEUs Growth(%)

2000-01 409 4.4 2468 13.0

2001-02 441 4.8 2886 16.9

2002-01 467 3.8 3366 16.6

2003-04 554 8.5 3900 15.9

2004-05 633 7.5 4502* 15.42005-06 725 9.0 4998* 11.0

2006-07 827 9.3 5964* 19.3

1At current market prices2At factor cost (constant prices)

*Includes traffic from Mundra and Pipavav


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Where are we?

119694Total of Above5510Total of Above

9690Rotterdam

377Tuticorin

7

9774Kaoshiung

177Kandla

6

12030Busan

227Cochin

5

18468Shenzhen

240Kolkata

4

21710Shanghai393Mundra323230Hong Kong798Chennai2

24792Singapore3298JNPT1

2006Ports2006-07Ports

Top Seven World

Container Ports

Top Seven Indian

Container Ports

(000 TEUs)


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Drivers of Container Traffic

International trade growth

Penetration of containerization

Hub and feeder service structure


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Penetration of Containerization

Currently, containerized cargo represents about30% by value of Indias external trade.

This proportion is likely to grow ascontainerization increasingly penetrates thegeneral cargo trades and increases its share fromthe current 68% to nearer international levels of

around 75-80% [World Bank, 2007]. Traditional bulk cargoes like cement and

foodgrains are also getting containerised.

Principal containerized commodities that Indiatrades in include engineering goods, agriculturalcommodities, textiles and readymade garments,

pharmaceutical products (bulk formulations) andmachinery (auto and electronic).


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International trade growth and penetration,

being the basic demand drivers, will resultin the 21 m TEUs by 2015-16 at 15%

growth rate

Given recent trends, growth rates could be

higher upto 20%


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Container Traffic Projections

By 2011-12, container traffic is expected to cross 13 mTEUs and by 2015-16, 25mTEUs

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mT

EUs

15.0% CAGR 17.3% CAGR 19.7% CAGR

30 mTEUs

25 mTEUs

21 mTEUs


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Hub and Feeder

Overall port traffic will increase depending on the amountof increased hubbing that will take place in India.

Each Indian TEU hubbed in an Indian port will addtwo more TEU handlings at the hub port.

Neighbouring country traffic hubbed in an Indian port will

also add two more handlings. However, we view this asa negligible activity over the next decade, though therewould be potential to be exploited in the long term.


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Direct and Hub Shipments

JNPT Other Ports Total

Share of

Container Traffic

55 45 100

Direct 80 13 50

Through Hub 20 87 50

Per cent


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Hub and Feeder

As per as is projections, 9m TEUs (43%) of the Indiantraffic of 21 mTEUs will be hubbed in 2015-16. Of the

hubbed traffic, 0.95 m TEUs (11%) will be hubbed inIndia, implying a transhipment of 1.9 mTEUs.

This is conservative. Hubbing in India can andshould develop. If 50% hubbing were to take place inIndia, then 4.5 mTEUs will be hubbed in India, implyingtranshipment handling of 9m TEUs. About 7 more

mTEUs will need to be handled at hub ports. Thisrequires port handling capacity of 30 mTEUs, with 9mTEUs as transhipment at hub ports.


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Hub and Feeder

The reasons for a hub port not evolving in India are

insufficient traffic cabotage law

insufficient infrastructure including draft requirement for a

mainline ship

The advantages of having a hub port in India would be

feedering time to other ports would reduce the revenue from the transshipment remains with India

traffic from and to the hub port will move faster and cheaper


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Drivers of Container Traffic Given the above three drivers of container growth, it

appears that 30 mTEUs, including 9 mTEUs oftranshipment, is likely to happen by 2015-16 and weneed to get prepared for that.

Thus, out of 21 mTEUs of Indian traffic, 12 mTEUs would go direct, 4.5 mTEUs would go to

foreign ports for hubbing, and 4.5 mTEUs to Indianports for hubbing.


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Hub ports in India should aim for at least 16 meter draft

and feeder ports upto 12 meter draft.

Criteria Strategic location Potential to reduce total transport cost

Significant originating/terminating traffic

Land availability and lower land values Less need for dredging

Facility to receive higher capacity vessels


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Readiness

Level

West South East

High JNPT, Mundra,

Pipavav

Cochin, Chennai Visakhapatnam

Medium Kandla, Mumbai Tuticorin

Low New Mangalore,

Mormugao

Kolkata, Haldia,

Paradip

[CRISIL, 2006]


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Maximum DraftS No Container Terminals Draft (meter)

1 JNPT 12.5

2 Chennai 13.4

3 Tuticorin 10.8*4 Mundra 17.5*

5 Kolkata 7.5*

6 Cochin 12.5

7 Mumbai 10.7

8 Kandla 11.7

9 Haldia 10.0

10 Pipavav 12.5*11 Visakhapatnam 15.0

12 New Mangalore 10.5

13 Mormugao 12.5

14 Paradip 11.5

[World Bank, 2007; *Port Website, 2006]


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Based on commercial criteria, JNPT. Infrastructurally, it does not

have the draft nor the evacuation capability for future growth.

Mundra is better placed as far as draft and evacuation is

concerned. However, investments are on the anvil for JNPT.

Visakhapatnam is the most viable port for hub operations on the

eastern coast. It is in the centre of the Indias eastern coast, andcan even service Bangladesh and Myanmar. It has a natural water

depth of 20 metres within a nautical mile. The sea drift there is

such that maintenance dredging requirements are less. Chennai

ofcourse currently has the commercial advantage.

Vallarpadam and Vizhinjam are possibilities from the South

but may not work on commercial criteria, due to less hinterlandpotential.


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Hinterland Connectivity

30% of the traffic expected to move hinterland byrail

The remaining moves entirely by road, mostly to

nearby CFSs, and some to interior ICDs

Roads around ports dont explicitly plan for

consequential trailer movements for emptycontainers and empty trailer moves (recent studies

show that these could be as high as six to seven

movements per TEU) Coastal and IWT are untapped for hinterland

connectivity


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Rail Evacuation

For 21 mTEU, at 30% movement by rail, and 90 TEU pertrain, over 190 trains would need to run per day.

(Currently, about 40 trains are running per day, over 25 of

which are on the JNPT Tughlakabad corridor). Doublestack would ease this to about 120 trains per day. About

35-45% of these would be on the stretch near JNPT,

picking up an additional 25-30% from the Gujarat ports.

PPP model with ports and related stake holders should be

used for rail capacity development. Kutch Railway

Corporation and Pipavav Railway Corporation are

examples. The DFCCIL should evolve appropriate

models, based on past experience and future

requirements.


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Road Evacuation

Beyond just the four laning of highways, expressway

connectivity to the ports to service major flows wouldbe essential. The currently envisaged future phases of

NHDP do not provide for this.

PPP model for roads around ports can be used with

ports and ICD/CFS operators as the stake holders. A

need for immediate attention would be the ICD at

Tughlakabad.


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Coastal Shipping and Inland

Waterways

Feedering is synonymous with coastalshipping. The possibility of a dedicated sea

corridor with inter-port connectivity needs to

be explored.

Integration inland water transport, especially in

back water and tidal regions for evacuation,and consequent location of facilities, needs

proactive consideration.


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ICD/CFS Infrastructure

Location and access, giving consideration to distanceto manufacturing units, and local connectivity withminimum traffic interference. CIDCO land aroundJNPT is inappropriately priced.

Customs and bonded warehouse. Idea of FTWZ isgood.

Rail connection to gateway ports

Parking spaces and maintenance facility


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Other Issues

Information Technology (IT)

Domestic Traffic

Location Policy of Industries Including SEZs

Regulation


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Information Technology

RFID, GPS, EDI, Knowledge Products,Standards

Domestic Traffic18% of CONCOR Traffic is domestic

Customized (out of the BOX thinking!) Eg:

Autos


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Location of SEZs(as on November 30, 2007)

Coastal Non-Coastal Total

Manufacturing 48 37 85

Services 31 75 106

Total 79 112 191


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Regulation

Licensing

Competition

Security

Operator, and operations

Port Tariffs

Is TAMP required for Container activity?

Shipping Line Conferences Competition Commission

Customs


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Regulation

Cabotage

Feedering?

Environment and Conservation

Role of Conservator? Safety

Quality of Service Dispute Resolution


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Concluding Issues

For 30m TEU, as per normal international

standards, we need 30 km of berth length. By JNPT standards, this could be as low as 15

km.

At around 70% of JNPT standards of

occupancy, we need 21 km.

At 300 mts per berth, this translates to 70

berths.

Port wise Container Traffic


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Port-wise Container Traffic2006-07 2005-06

S No Port Operating CompanyTotal

(000 TEUs)

%Total

(000 TEUs)

%

1 JNPT

1. Port

2. DP World

3. AP Moller/Concor

3298 55.3 2667 53.4

2 Chennai1. DP World

2. PSA International/SICAL798 13.4 735 14.7

3Mundra*

(MPSEZ)DP World 393 6.6 299 6.0

4 Tuticorin PSA International/SICAL 377 6.3 321 6.4

5 Kolkata Port 240 4.0 203 4.1

6 Cochin DP World/Concor 227 3.8 203 4.1

7 Kandla ABG 177 3.0 148 3.0

8 Pipavav* AP Moller 135 2.3 86 1.7

9 Mumbai Port 128 2.1 156 3.1

10 Haldia Port 110 1.8 110 2.2

11 Visakhapatnam DP World 50 0.8 47 0.9

12 New Mangalore Port 17 0.3 10 0.2

13 Mormugao Port 12 0.2 9 0.2

14 Paradip Port 2 0.0 4 0.1

Total 5964 100.0 4998 100.0

[CI Magazine, 2007; Indian Infrastructure, 2007; IPA, 2006]

*Non-major and private ports, both under GMB


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Port-wise Container Traffic

Rewas container terminal in Maharashtra is being

developed by Reliance Logistics Investment Dighi container terminal in Maharashtra is being

developed by Balaji Infrastructure Project Ltd

Vizhinjam in Kerala is being tendered for aninternational container transshipment terminal (in

competition to Vallarpadam in Cochin), and

A 0.5 mTEU per annum container terminal at Kulpi

in West Bengal is being developed by DP World.


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Concluding Issues

Currently we have 30 (?) berths. While 70 is atarget, market forces will drive the actual berthdevelopment.

Finance does not seem to be an issue.

There is not enough focus on scale of containerterminals. This is necessary to drive down costs.

Tendering and bidding should be done in a timedefinite manner.


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Concluding Issues

Indian infrastructure for logistics is poor

compared to world class and at best reactive todemand. There is need for continued focus on

quality infrastructure development with speed.

Commercialization and private involvementthrough PPP contracts is the key for building

global trade competitiveness throughcontainerization.


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