Export Cycle Of A Shipping Line Economics Essay

Shipping Industry has always been subject to vagaries of different factors, such as, ocean monsoon, political and economical factors etc. Nowadays when the world economy is undergoing recession, its all the more necessary to study this integral line of transportation, which connects the globe through water.

The objective of the project undertaken was to study the problems of the upcountry exporters with particular reference to ICD. When in late 70’s and early 80’s, the concept of “containerized cargo” and “delivery at doorstep” started getting popular the world over, a need was felt to set up an Inland Container Depot to cater to the needs of trade and industry of the Northern part of India.  With this background in mind and with a view to bringing the facilities of transportation and Customs clearance of import and export cargo at the doorstep of importers and exporters, an Inland Container Depot was set up at Pragati Maidan in 1983 under the control of an Assistant Collector of Customs.  Indian Railways were nominated the custodian of the goods.  In 1984, a Container Freight Station (CFS) was also opened at Patparganj, which was an extension of ICD, Pragati Maidan, and Central Warehousing Corporation was nominated as its custodian.  This was a new experience for the trade and industry of North India and the institution of ICDs caught their imagination.  Soon, the importers/exporters who earlier used to clear their goods from one of the ports, started using ICD: Pragati Maidan and CFS : Patparganj for the clearance of their import and export goods.  In 1988, a public sector enterprise, M/s. Container Corporation of India Ltd. (CONCOR) was set up which took over the responsibilities of custodian from Indian Railways for ICD: Pragati Maidan.  Within a decade of its inception, the volume of work at ICD had increased to such an extent that it became difficult to handle it at Pragati Maidan.  It was then decided (in 1983) to shift the venue of ICD from Pragati Maidan to its present location i.e. at Tughlakabad.  In 1995, the CFS : Patparganj was upgraded to a full fledged ICD with C.W.C. continuing as custodian of the goods.  Movement of containers by road was also permitted in addition to the movement of containers by rail through Tughlakabad. 

Almost all commodities are being imported through ICD, major items being machinery, electronic goods, plastic, chemicals, motor vehicles and parts and metal and metal scrap.  On export side major items being exported through ICD are leather garments and leather products, readymade garments, machinery, agricultural products especially rice

The project was majorly focused on ICD and the problems faced by the exporters with reference to the ICD.

OBJECTIVE

To study the problems of the upcountry exporters with particular refrence to ICD

To study the workings of the study.

To study the role of ICD in India.

To study the role of Multimodal Transport Operators in the International Trade transactions.

METHODOLOGY

DATA SOURCE:

The data was collected from primary and secondary sources.

Primary data was collected through interactive sessions with exporters & importers, Export & Import managers, Commercial managers, Managing Directors, General Managers, Logistics managers and Supply chain managers.

Secondary data was collected from internet, EXIM newsletter, Libraries and FIEO’s directory.

RESEARCH APPROACH:

The approach adopted was survey of exporters and interactive sessions with various people. The presidential areas that were surveyed include Okhla Industrial area, NOIDA, Udyog Vihar, and Global Business Park etc.

RESEARCH INSTRUMENT:

Research instruments used were interactive sessions with various executives.

CONTACT METHOD:

Personal interviews were used to collect information because they are more authentic and the researcher can easily know and describe the attitudinal behavior of the respondents, which cannot be done by using other survey methods

LINER REPRESETATION

THE LINER INDUSTRY’S CHALLENGE:

There is no doubt that the challenges and opportunities facing the container liner shipping business get bigger as each year passes. As the years after 1999 passed half the way the future of those companies involved in providing container transport services seemed to hinge on two massive opportunities or challenges’ securing cost advantage and satisfying the need of customers. The consensus is that failure to seize either or both of these opportunities will ultimately condemn carriers, whatever their specialist niche or global coverage to commercial oblivion in a trading environment that each year becomes ever more competitive.

The first analysis of the containerization international, published in May 1983 entrants which do not figure in the latest 1998 ranking, are Wilhelmsen Lines, Polish Ocean Lines, Hoegh Lines and Star Shipping, all of which unlike US Lines, are still operating.

Number one shipping line, Maersk was ranked fifth in 1983, Mediterranean Shipping Co., fourth in the year was nowhere to be seen. Of course, back then Nedloyd and P&O (then called OCL) were listed separately, as were APL and CGM, while the companies, which have recently acquired them, respectively NOL and CMA, did not even make the top 20 in 1983. Neither did Ships, Safmarine/CMBT, nor any of the South Korean carriers.

What was also different was the number of non-cellular vessels and converted to cellular ships 1983 stop carriers had deployed. Only just over half their fleet in terms of TEU capacity were purpose-built, fully cellular ships. Also, most of their ships were less than 2,000 TEU, the notable exception being those of US Lines. It had 14*4, 4,148 TEU ships in the pipeline.

Capacity growth is largely attributable to expansion by leading players. For, such is the maturity of the market and so high the price of entry that the days of major new operations appearing on the scene are long since gone. The problem of underutilization of assets also exists. This problem doesn’t vary only from trade to trade, but also from route segment to route segment. Similarly its impact on pricing is patchy. Container liner services’ rates continue to decline in real terms in many markets, despite considerable improvements in the level and range of services being offered by carriers. Some analysts suggest that rate levels will soon start to edge up in certain trades as careers seed to recoup the substantial investment they have made in vessels, boxes and information systems. It is argued that there is a limit to how long they can continue to survive in such tight margins.

However, a rise in rates presupposes a level of discipline among carriers, which the industry has rarely displayed, often preferring instead to try and secure volume by buying market share. And with the conference system in terminal decline in the face of shipper and regulatory antipathy, there are few structures left to encourage price discipline with in the industry.

Carriers will also continue to secure cost advantage by forming strategic alliances with other operators. Such partnerships are now a recognized means of achieving better results for carriers and their customers. On most trades such arrangements are now the norm and barring any regulatory ruling which might impede their progress they will continue to flourish.

One of the advantages of such alliances is that thy enable participants o improve the coverage and service frequency they an offer their customers. Such considerations assume greater importance as lines seek to be more responsive to the needs of their customers. Increasingly operators are becoming less asset-focused and more customer-driven. This presents a host of opportunities for an industry which has only relatively recently realized it is in the service business. For the global operators the challenge is to think globally, but at the same time act locally, by providing services which are appropriate for local as well as global shipping needs.

WORKINGS OF SHIPPING LINE

Contract of shipment

Booking space in a ship.

Getting confirmation from the agent.

Picking up of the cargo (according to the terms of the shipment).

Warehousing, if required.

The carrier issues the bill of lading when he receives the goods.

Ones the ship sails the master informs the agent.

Informing the principal about the shipment.

Delivery according to the terms of shipment.

Export Cycle Of A Shipping Line

Shipping line negotiates freight terms, etc with the client and upon finalization of deal; client agrees to use MISC for export shipment. The client then approaches the Shipping Line. Operations office/counter at the ICD for the allotment of the container. Container is allotted to the client upon the presentation of a copy of shipping bill/invoice. There are three modes of operation.

Factory stuffing:

If the container is being taken to the factory for stuffing, the client organizes his own transportation and removes the container for house stuffing.

After stuffing, the central excise puts a seal in the container and Line seal is also put by the shipper.

The container is moved to ICD, where a customs inspection takes place, and after inspection Customs seal is put.

After the sealing, the container moves to the railhead for further movement to Nhava Sheva.

ICD stuffing:

The cargo is brought to the ICD by the shipper and a container is allowed based on shipping bill a container is allotted.

Cargo is stuffed at ICD and after the seals are put in the container, the container moves to the railhead for further movement to Nhava Sheva.

CFS stuffing:

The cargo is brought to the CFS by the shipper.

After the customs formalities, the container is stuffed by the shipping line.

After stuffing, a line seal and customs seal is put, and the container is moved to ICD railhead for further movement to Nhava Sheva.

Many a times the shipper stuffs the container in his factory and instead of bringing it back to the ICD, hands it over directly to Nhava Sheva. Customs inspection of seal is done at Nhava Sheva.

Last but not the least payment is collected from the concerned shipper.

FLOW CHART OF THE EXPORT CYCLE OF A SHIPPING LINE

EXPORT

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FACTORY STUFFING

ICD STUFFING

CFS STUFFING

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BROUGHT TO FACTORY FOR STUFFING BY SHIPPER

CARGO IS BROUGHT TO ICD AND CONTAINER IS ALLOWED AGAINST S/B

CARGO IS BROUGHT BY THE SHIPPER TO THE CFS

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CENTRAL EXCISE AND LINE SEAL BY SHIPPER

CARGO STUFFED AT ICD

CONTAINERS STUFFED AFTER CUSTOMS FORMALITIES BY S/L

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CONTAINER BROUGHT TO ICD & AFTER CUSTOMS INSPECTION SEAL IS PU

PUTTING OF SEALS

PUTTING OF LINE & CUSTOMS SEAL

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CONTAINER MOVED TO RAILHEAD

CONTAINER MOVED TO RAILHEAD

CONTAINER MOVED TO ICD RAILHEAD

ICD TUGLKABAD

When in late 70’s and early 80’s, the concept of “containerized cargo” and “delivery at doorstep” started getting popular the world over, a need was felt to set up an Inland Container Depot to cater to the needs of trade and industry of the Northern part of India.  With this background in mind and with a view to bringing the facilities of transportation and Customs clearance of import and export cargo at the doorstep of importers and exporters, an Inland Container Depot was set up at Pragati Maidan in 1983 under the control of an Assistant Collector of Customs.  Indian Railways were nominated the custodian of the goods.  In 1984, a Container Freight Station (CFS) was also opened at Patparganj, which was an extension of ICD, Pragati Maidan, and Central Warehousing Corporation was nominated as its custodian.  This was a new experience for the trade and industry of North India and the institution of ICDs caught their imagination.  Soon, the importers/exporters who earlier used to clear their goods from one of the ports, started using ICD: Pragati Maidan and CFS : Patparganj for the clearance of their import and export goods.  In 1988, a public sector enterprise, M/s. Container Corporation of India Ltd. (CONCOR) was set up which took over the responsibilities of custodian from Indian Railways for ICD: Pragati Maidan.  Within a decade of its inception, the volume of work at ICD had increased to such an extent that it became difficult to handle it at Pragati Maidan.  It was then decided (in 1983) to shift the venue of ICD from Pragati Maidan to its present location i.e. at Tughlakabad.  In 1995, the CFS : Patparganj was upgraded to a full fledged ICD with C.W.C. continuing as custodian of the goods.  Movement of containers by road was also permitted in addition to the movement of containers by rail through Tughlakabad. 

ICD : Tughlakabad (TKD) caters to the need of importers and exporters based in Northern India.  It is situated near Okhla Industrial Area and is spread over 44 hectares of land.  It has three storied Administrative block housing Offices of Customs, CONCOR, Bank, Shipping Lines, CHAs and Surveyors.  Four full length rail lines are available in the Customs area which bring the containers by train from Gateway ports such as Mumbai, Nhava Sheva, Chennai, besides bringing the containers by road from other ports such as Haldia, Calcutta and Kandla, etc.  ICD:TKD is equipped with most modern facilities such as rail mounted gantry of 40 metric empty lifting capacity, rubber tire diesel powered cranes, billoties and lift trucks, etc.  two covered sheds, one for import and another for export with a total area of 16,000 sq. mts. has been provided in the Customs area for stuffing and de-stuffing of import and export  goods.  With these ultra-modern facilities, ICD:TKD, New Delhi, has developed into the largest hub of multi-modal centre in the Indian sub-continent.  Containers meant for ICDs: Patparganj, Faridabad and Gari Harsaru are first brought at TKD by rail and then transported to their respective destinations. 

Almost all commodities are being imported through ICD, major items being machinery, electronic goods, plastic, chemicals, motor vehicles and parts and metal and metal scrap.  On export side major items being exported through ICD are leather garments and leather products, readymade garments, machinery, agricultural products especially rice

The ICD Tughlakabad is the largest dry port in South Asia and the leading centre for importers and exporters of the Northern Region.  This ICD began functioning at Tughlakabad in 1993, prior to which it was located at Pragati Maidan.  The Custodian of this ICD is Container Corporation of India Ltd (CONCOR), which is the Public Sector Undertaking.  CONCOR are also the carriers, through rail, of import and export containers between ICD Tughlakabad and the Gateway Ports of Mumbai, Nhava Sheva and Chennai.  This ICD is the focal Port for the ICDs at PPG,  Faridabad and Garhi Harsaru and the movement of the containers between the ICDs to and fro takes place by road.  The Customs area houses two covered Sheds, one for import and the other for exports.  The main CONCOR building houses the administrative staff of Customs and CONCOR as well as the offices of CHAs and Shipping lines.  The staff working at ICD Tughlakabad is the regular Departmental staff and not on cost recovery basis.  The traffic as well as the revenue from this port has been going up over the year which can be seen in the charts below:

Containers Handled:

CONTAINERIZATION INFRASTRUCTURE IN INDIA

Worldwide, the containerization of cargo has steadily been gaining popularity because of the several advantages it provides to manufacturers and exporters. Some of these are listed below:

Lower transit time

Safety of cargo from pilferage and in-transit damage

Ability to avoid sales tax and Octroi checks at each state border crossed.

In India, however, the proportion of total internal trade that is containerized is still quite insignificant. The total annual volume of internal trade is estimated to be 650 million tonnes, of which 250 million tonnes are moved by rail and the remaining 400 million tonnes by road. The volume of containerized cargo movement is less than 5 million tonnes (of which 3-4 million tonnes are handled by the railways). There is thus substantial potential for growth in the containerization sector.

CONTAINER CORPORATION OF INDIA

The Container Corporation of India, or CONCOR, was established in 1987, under the Ministry of Railways. Its stated objectives were to promote containerization and thereby boost India’s domestic as well as international trade. CONCOR is the monopoly service provider for containerization via railways.

Present infrastructure

Since taking over the Railways container handling facilities, CONCOR has developed a vast network of container terminals at prime locations across India. It has 31 Exim terminals. While most CONCOR terminals are rail linked, road is preferred in some cases depending on local conditions. (E.g.: some hubs like Tughlakabad are fed by satellite locations like Agra and Panipat by road).

Growth

As a pioneer in this field of containerized transportation, CONCOR has grown impressively since it was established in1987. The cargo throughput has grown from only about 74,890 TEUs in 1990-91 to over 8,01,000 TEUs in 1998-99. In the first ten years of its existence, its throughput has seen an average growth of 20% per annum.

EXIM traffic

Only about 30% of port traffic originates from and terminates at places within 300 km from the port. The remaining 70% is to and from the hinterland, representing a potentially large demand for CONCOR’s services. CONCOR provides transport linkages between ports and the hinterland. Regular container trains are run to and from ports to CONCOR terminals in the hinterland. Some of these terminals are also served by road.

Future Terminal Development plans

Plans are afoot to embark on a large-scale terminal development programme. Region-wise plans have been drawn up. The 31 existing Exim terminals are to be increased to about 50 by 2002-03. CONCOR would then be located in almost all cargo receiving/generating areas of the vast hinterland. Terminals would also be expanded. Presence in the hinterland as also in the port towns would tie up both end-points of the shipment route, facilitating control over the entire logistics chain.

3800 high-speed flat wagons are being procured with the help of a US$94 million World Bank loan. These wagons will be put to use in all EXIM streams and subsequently in domestic streams. As these container trains will run at the speed of mail/express trains, the transit time between ports and hinterland will be substantially reduced.

WORKINGS OF ICD IN INTRNATIONAL BUSINESS

ICD is a common user facility with public utility authority status, equipped with fixed installations and offering services for handling and temporary storage of any kind of good (including containers) carried under Customs Control and with Customs and other agencies competent to clear goods for home use, warehousing, temporary admission, re-exports, temporary storage for onward transit and out right exports.

Facilities at a dry port :

Export and import warehouse: They are used for international trade and are located near dry ports. They are provided transit storage facilities for goods awaiting onward movement; separate provisions for break bulk, packaging inspection of goods, marking, etc.

Container handling equipment for ISO container.

Container yard (storage place of containers)

It is provides space of offices of the shipping agents, customs clearance and freight forwarder agents, banks,road vehicles operators(transporter), packing service, consolidation service, fumigation, weightage of cargo and marshalling and train information service etc.

Export procedure :

Export of goods from India moving in containers is usually done through road and rail from ICD to Gateway ports.

Types of shipping bill:

White shipping bill (for duty free goods)

Green shipping bill (for duty drawback)

Blue shipping bill (for duty entitlement passbook scheme)

Yellow shipping bill (for eatable goods. It depends on goods)

GRI (Guarantee Remittance Forms)

This is prepared in duplicate, the original is retained by the customs and the duplicate is sent to the RBI by the customs after processing of documents and finalization of shipping bill.

Type of bill of entry:

White bill of entry for home consumption goods.

Blue bill of entry for goods are to be deposit in a customs bonded warehouse

Green bill of entry fro goods are cleared from the customs bonded area

Yellow bill of entry for eatable goods.

Concept of customs :

Custom procedure through out the world is similar so it is a valuable e source of assistance of administration involved in the modernization of National Customs Legislation. Hence allowing easy identification of out of date procedure

Customs Act as a requirement for a financial guarantee to be established in the transit country by the party responsible for transit operation to meet possible claims by the customs.

Customs also acts as a watchdog as it physically examines the goods being exported or imported out/in the country for their quality and also appropriateness.

SHIPPING POLICY OF DEVELOPING COUNTRIES

Globalization of trade and industrial production on the scale presently observed is not only affecting maritime transport in different ways, but has also been decisively shaped by shipping developments. Globalization in the widest sense has dramatically changed the demand for transport and related services and has forced all transportation companies to better adapt the services rendered to the requirements of the trading community. At the same time, important technological developments in maritime transport created the precondition for the expansion of world trade based on an intensified international division of labor.

Changes in the provision of shipping services have been brought about by market driven forces, but their realization was largely made possible through policy reforms. Countries have relaxed or removed protective legislation and have started a process of renegotiating or renouncing bilateral agreements providing for market access restrictions. In parallel there has been a general move towards privatization of state-owned shipping companies and the opening of the market for shipping and related services to private sector competition. These policy reforms have been the more remarkable as shipping has been generally considered a strategic industry and lines a national asset. Liberalization of market access has led to increased competition among shipping lines and to greater commercial flexibility with regard to capacity management, pricing and entry into trade routes. At the same time, however, liberalization has also provided the basis for concentration processes, which perpetually change the structure of the industry.

A policy Environment Conducive to the Development of Shipping Markets:

In order to ensure that development objectives are being met, Governments must give higher priority to transport issues, must review and revise the regulatory framework to allow greater participation of the private sector, introduce reform measures to make providers of transport service more responsive to user demands, streamline administrative procedures, introduce a system of transport performance indicators, promote the use of information technology and strengthen training programs in this sector. At the international level, it is important that policies and regulatory regimes be harmonized and Governments be assisted in devising the necessary policy measures required to ensure that transport supply capacities in developing countries be created or strengthened and to ensure that traders be placed in a position to effectively take advantage of transport opportunities offered in liberalized and globalized ocean transport markets. While general frameworks are being elaborated at the global level, it is also important that parallel efforts are pursued by governments towards market and policy reforms in the context of regional integration arrangements.

Policy Principles:

Problems faced by developing countries relate both to supply-side dynamics and to protection of users’ interests in transport markets.

In many developing countries shipping and transport were considered to be strategic industries calling for public ownership in line with generally pursued economic policies. In order to increase the efficiency of the sector in general, programs of commercialization, privatization and liberalization have been set in motion. These programs are an integral part of a policy reform program which involves a shift in policies away from market access restrictions to a fleet development policy based on strengthening of commercial capabilities of national service suppliers and to support policies increasing the competitiveness of the maritime services sector. This shift is important to note, as it underlines the fact that shipping policy is not only a matter of market access policy. Market access is only one facet, with others, such as policies relating to fleet development and sector efficiency being equally important. This aspect is particularly relevant as it shows the need to complement WTO negotiations in the context of GATS. At the same time, developing countries need high-level and specific advice both in negotiating and implementing liberalization instruments.

Liberalization and privatization are the two main pillars of maritime policy reform programs of developing countries. While restructuring of State-owned companies is necessary to ensure market orientation, it may not be a sufficient condition for successful privatization. Support measures need to be put in place that would give a concrete meaning to the notion of progressive liberalization. These measures would aim at improving the capabilities of developing countries’ operators to produce transport services and to create a level playing field enabling operators to compete successfully in the new transport markets.

For developing countries to gain or to maintain a significant position as producers of transport services in a competitive environment, where ownership and nationality are o longer central elements, it is crucial, that competitive and exportable services be produced that can be offered in an increasingly international market. In order to arrive at such a situation it is essential that policies are being pursued that aim at capacity building and removing obstacles for national operators. These policies of competitiveness and thereby of raising the efficiency are intrinsically linked to liberalization processes. At the same time it is important that local suppliers benefit from an environment that creates a level playing field and gives them a reasonable chance of success. This need for a level playing field, however, is not to be confused with a call fro restrictive or discriminatory measures that would impede on the freedom of choice of the users of transport services. It does, however, call for a certain amount of harmonization of the administrative and regulatory environment, such as conditions for ship registration, taxation, labor movement, etc.

Modern and efficient ports are necessary and powerful tools of facilitating and fostering trade and development and more so at a time of globalization of trade. Nowadays, ports must offer efficient and reliable services to ships and cargo, including communication systems, documentation and customs procedures, to allow the timely flow of goods through the transport chain. To assist in this flow, some countries have developed distribution or logistics centers in the port areas, which are used for the storage, preparation and transformation of cargo. Therefore, ports are no longer simply a place for cargo exchange but are a functional element in the dynamic logistics chains through which commodities and goods flow. An efficient transport system is also a prerequisite to attract foreign direct investment. Ports can be crucial element in developing a competitive advantage for a country and therefore Governments and port authorities need to adopt suitable port policies to allow the nation to reap this potential benefit. It is of the greatest importance that an environment is created where Governmental and intergovernmental activities on the legislative, regulatory and institutional fronts are discussed with the inputs of all users.

Market Access Policies-National Policies and GATS:

Maritime Transport-

The successful employment of larger vessels and fleets, be they single company fleets or joint ones in the consortia or other cooperative arrangements is dependent on the existence of and the unimpeded access to sufficiently large cargo flows. Such flows rarely exist in bilateral trades but can only be assured by a mix of home and cross trades. Rationalization of services thus achieved requires planning security based, inter alia, on a predictable regulatory policy framework. A high degree of liberalization of trade in maritime services and the existence of multilateral rules establishing the framework within which lines operate are clearly in the interest of these service providers. Similarly, the extension of activities into logistics services requires access to inland transport and so-called auxiliary services, either as service providers or as users with guaranteed and unconditional access to such services, which might raise a great deal of opposition. The General agreement on Trade in Services (GATS) partly addresses these issues in the sectoral agreement on maritime transport.

Port and Auxiliary Services:

Modern and efficient ports are necessary and powerful tools for facilitating and fostering trade and development and more as at a time of globalization of trade. Nowadays, ports must offer efficient and reliable services to ships and cargo, including communication systems, documentation and customs procedures, to allow the timely flow of goods through the transport chain. To assist in this flow, some countries have developed distribution of logistics centers in the port area, which are used for the storage, preparation and transformation of cargo. Therefore, ports are no longer simply a place for cargo exchange but are a functional element in the dynamic logistics chains through which commodities and goods flow. An efficient transport system is also a pre-requisite to attract foreign direct investment. Ports can be crucial element in developing a competitive advantage for a country and therefore Governments and port authorities need to adopt suitable port policies to allow the nation to reap this potential benefit. It is of the greatest importance that an environment is created where Governmental and intergovernmental activities on the legislative, regulatory and institutional fronts are discussed with the inputs of all users. Port infrastructure developments, for example, involve a closely coordinated partnership between the private and public sectors. Governments should therefore crate a sound, market-orientated framework that will set the stage for private sector investment and in this way sent the “right” message to the business community on the future course of market liberalization. World trade and international transport are highly competitive and the same environment exists in ports. To survive and prosper in such circumstances, port management needs to be flexible, proactive, autonomous and accountable for its operational and financial performance. Ports are often a place in which international market forces interact with national economies and in which the ability of the public sector to cope with them is tested. Governments have to steer a careful course to meet these challenges in order to take advantage of opportunities created by international trade and technological development while taking into consideration the level of social and economic development of the country.

In the interest of efficiency, there is a need for Governments to review the institutional structure of their ports to see if the present structure is adequate fro this new environment, notably when export led development strategies are pursued. If restructuring or change is required to make the port more responsive to the market, there will be a need to revise or create a comprehensive legal framework which may influence ports to allow more efficient development and operation, oriented to free market forces. Port authorities need to be pro-active, which implies a degree of autonomy, in order to play an important role in fostering trade and thus modern management techniques should be used and commercial disciplines adopted. This will improve efficiency in the transport chain, which can result in the capture of new markets for export goods.

While these changes will facilitate the changeover from a public utility to a commercial service approach in ports, there are other areas where the impact of liberalization will be felt more immediately. As in the case of shipping services, ports and auxiliary service providers that are still enjoying monopolistic positions will see these eroded and will have to face competition not only from national private sector suppliers but also fro powerful multinational companies. In the specific area of cargo handling services, which includes activities exercised by stevedoring companies and terminal operators, this liberalization is already taking place in quite a few countries-with or without a GATS Agreement. Privatization and the liberalization of market access in the provision of port services have also been instrumental for the development of transshipment operations on the scale observed today. At the same time, this phenomenon underscores the importance of a joint approach to liberalization of shipping and port services.

With the trend for mergers and acquisitions amongst the carriers likely to continue, there will also be a trend towards alliances or mergers of the global terminal operators. The coming years will see growing competition as more and more port authorities welcome private investment.

The impact of liberalization on ort operations is considerable. Not only are ports increasingly being subjected to inter-port competition, a development observed for some time now particularly in containerized trades, but also to intra-port competition, a phenomenon previously unknown in many ports. While some countries have gone quite a way in opening ports and auxiliary services sectors to foreign suppliers, others have taken a somewhat more timid approach. Thus numerous countries still maintain public service port operations or restrict private sector participation to national interests.

Multimodal transport:

Market access in the field of multimodal transport is a particularly contentious issue when it comes to establishing a policy framework favoring the development of logistics services. Given the way liner shipping is develop8ing into door-to-door and logistics services, operators clearly look at the reduction or elimination of access restrictions and thus at the need to include MT operations in the liberalization process. The difficulties encountered with this issue in the context of the GATS negotiations raise doubts, however, whether multinational service suppliers will be able to benefit from a more open market regime n the near future. Resistance against progressive liberalization of the supply of multimodal transport might prevail because of the widespread concern that this may open up the inland transport sector to GATS coverage. Consequently, countries that did make conditional commitments on multimodal transport in their draft schedules chose to limit their commitment to liberalizing the access to these services. As far as large liner shipping operators are concerned, particularly those that have chosen to invest in inland transport of containers and not to subcontract inland haulage this option is rather disappointing and far from satisfying their specific requirements.

GROWTH PROSPECTS OF INDIAN SHIPPING

The National Shipping Board (NSB) has been inexistence since 1959 and has served as a vital link between he shipping industry and the policy makers. It is a high level statutory body to advise the Central Government on all matters relating to Indian Shipping and such other matters arising out of the Merchant Shipping Act as the Central Government may refer to it for advice. Given its widely representative composition and depth of experience, indeed it is uniquely placed to fulfill these important roles. During most of its existence, it has played a significant role in promoting the development of Indian Shipping by focusing the attention of Government and other concerned agencies on several important problems faced by the Shipping Industry and by making proposals and recommendations of their redressal. However, in recent years, I am told the importance of the Board has somewhat waned. The breadth and depth of the expertise represented in the Board could certainly be made greater use of by all the concerned interests, including the Government.

Apart from the Government, I would like also to urge the shipping industry to avail of the widely representative structure and collective expertise of the Board by referring important matters of concern to it for advice and consideration. The effectiveness of the Board is to a considerable extent determined by the importance and recognition accorded to it by the Government and industry.

The decision making process of the Government could be speeded up if grater weightage is given to the recommendations of the Board. Due to the representation of all concerned interests on it, the shipping sector, as also the concerned ministries and other Government bodies protracted interministerial consultations and cross-references can be obtained.

On our part, I am sure all the members of the newly constituted Board would impart a renewed sense of enthusiasm and purposefulness to the deliberations of the Board.

In the present era of globalization, liberalization of the economy and the WTO, Indian trade and shipping has become all the more important. Worldwide trade is expected to grow substantially as nations develop their comparative advantage and move away fro the self-reliance towards greater interdependence. In this context, I am sure the Board can contribute significantly in creation of a conducive environment and an appropriate regulatory regime of spurring faster growth of this sector. The Board can help not only in removal of any impediments in the way of faster growth, but also suggest suitable incentives and policies for promotion of he shipping industry.

Jawaharlal Nehru Port is a fast growing port with a potential to develop into a container hub port on the Indian Peninsula. During the last few years, it has achieved an ever-increasing traffic throughput. The port has taken up an ambitious development of container transshipment in western India.

About 95% of international trades in goods are moved by sea. The unique advantage of sea transportation is its versatility and economy of the scale. This advantage will always remain, as no other mode of transport is capable of moving such large volumes of goods. Like other modes of transport even shipping has been undergoing important technological changes. This has been largely impelled by the economic need of moving large quantities of goods by sea at competitive cost in other words, the need to achieve shorter transit time in movement of goods coupled with lower freight rates. This combined challenge has infact made ships larger, lighter and faster. Ships are specially built for particular trade requirements. They are more powerfully propelled and achieve quicker turnaround imports. In a word, greater commercial efficiency has been the chief drawing force of technological advances in Shipping.

So far as Indian tonnage is concerned, it expanded rapidly till the end of the Sixth Five Year Planed in 1985.it increased from 0.37 Million GT at the beginning of he First Five Year Plan to 6.31 Million GT at the beginning of Seventh Five Year Plan in 1985. However, it declined to 5.9Million GT at the beginning of the Eight Plan. The target tonnage of 7 million GT for the Eight Plan was reached in 1995. The tonnage position as of date is 6.94 million GT. The stagnation in tonnage growth, which is major cause for concern, is due to variety of factors, the most prominent among them being the lack of a level playing field for this internationally competitive industry.

So far as the share of national shipping in India’ overseas trade is concerned, it is common knowledge that this share has been dropping continuously for the last few years. This is perhaps understandable considering that while the overseas trade of the country has increased somewhat rapidly, Indian Shipping has not been able to keep pace with this increas4e in terms of acquisition of additional tonnage. It is in this background that we need to discuss the ” strategy and Approach for the 10th Plan “. The expert Group on Shipping for he 10th Five-Year Plan has recommended that setting specific targets for the tonnage acquisition in each sectors is not the best way to plan for the future of Indian Shipping. The group has also recommended that the role of Government should be to facilitate and create opportunities for the growth through pragmatic policies in consonance with the well-tested models of mature maritime countries. The 10th plan report has already been circulated to all members.

The Indian Government in the recent past has taken several steps to promote the shipping industry. Government has placed import of all categories of vessels under the ” open general license “, thereby no Price Reasonableness Certificate is required and no Technical Clearance is required for vessels below 25 years of age. Indian Shipping companies are permitted to charger out their vessels to foreign companies without prior approval of the Government. In case of sale of vessels to foreign parties ship owners are allowed to retain the sale proceeds aboard (for a period of 6 months) and use them for fresh purchases. Ship owners can liquidate only outstanding loan from the sale proceeds without the approval of the Department of Economic Affairs. The levy of 5% custom duty on ships imported in to India has also been withdrawn for seagoing ships.

So far as international transportation is concerned, coastal shipping is comparatively the cheapest t mode of transport for longer distances. It considerably reduces the congestion on roads and on the rails. It is very suitable for the Indian coast, but has not been exploited due to several reasons like lack of proper fiscal incentives, excessive manning, difficult customs procedures and lack of proper infrastructure needs for coastal trader. However with rapid industrialization, especially along the coast, coastal shipping could emerge as a major potential segment of Indian Shipping.

The growth of containerized traffic has so far been quite slow due to poor handling facilities and efficiencies in the inland transport system. With rapid increase in India’s overseas trade, the level of containerization is likely to record major growth. Indian Shipping companies should exploit this new opportunity by operation feeder vessels till Indian port conditions improve so that thy can receive large sized container ships being operated by global shipping companies.

The reforms initiated by the Indian Government have aimed at achieving faster growth through domestic and foreign investments. The enormous growth in terms of additional capacities being created along the coastline in core industries such as thermal power, refineries, steel and cement, requires movement of large quantities of bulk cargo. This would stimulate corresponding increase in shipping activities in and around the Indian sub-continent. This is expected to yield considerable benefits to the Indian Shipping Industry.

In this connection, Government has constituted committee under the chairman ship of Shri Bongirwar, Chairman JNPT and the report of the committee has already been submitted to the Government.

Indian shipping does not operate in a vacuum. It operates in the highly competitive global shipping market. As such any fiscal measures that reduces the competitiveness of Indian Shipping, act as a serious handicap. Many foreign shipping companies pay zero income tax as their ships are registered in tax havens. Many other foreign companies pay low rate of tonnage tax, which is charged on basis of tonnage under command, and is independent of the profit earned. In the light of various representations received on the need to provide a level playing field for Indian Shipping Industry, the Government of India constituted a committed under the chairman ship of Shri Rakesh Mohan in August 2001 to look into the desirability of introducing a tonnage tax for Indian Shipping and other Fiscal measures necessary to facilitate a steady increase in tonnage so that India continues to grow as a major maritime power. It has recommended that income tax on Indian Shipping Companies be on par with foreign shipping companies. It has also recommended that tax on income of Indian seafarers should be at par with competitors sailing under foreign flags.

As we all know that shipping is one sector, which is truly international, the time has come when Indian Shipping will have to face tougher competition. I am sure that with an appropriate tax regime and stimulate policies, Indian Shipping will make good progress in the coming years.

MULTIMODAL TRANSPORTATION

What is Multimodal Transport?

Multimodal transport means transport of cargo on door-to-door basis i.e. from the premises of the shipper to that of the consignee by more than one mode of transport under a single contract evidenced by a single transport document and through freight rate and a through liability. As the name multimodal transport includes all the possible modes of transport-road, rail, sea, air-under one heading.

The Multimodal Transport Operator (MTO) assumes the responsibility for the execution of the contract and acts as the principal and not as the agent of the consignor or the carriers participating in the transport operations. He makes all the intermediate arrangements fro the through movement of the goods from origin to destination. He also assumes liability for loss of or damage to goods as well as for delay in delivery. The multimodal transport system is intended to do away with all delays and consequent costs incidental to segmented transort, which usually involves several contractors concluded with different carriers on different modes of transport and different levels of liability accepted by each carrier.

The main feature of a multimodal transport system is that when such a door-to-door service is planned and coordinated as a single operation, the burden of documentation and other formalities connected with the conventional segmented transport is reduced to a minimum. Goods moving by multimodal transport are usually containerized since the same ensures greater protection to cargo against damage, pilferage and contamination and obviates the need to unpack and regional-pack the goods at transshipment points.

Multimodalism is thus a “system” approach to the transportation of goods from the point of origin to its destination that tends to reduce or elimination interruption in the continuous movement of goods.

Advantages of Multimodal Transport

The main advantages of a Multimodal Transport System are –

Loss of time and risk of loss, damage, pilferage and contamination incidental to conventional segmented transport are reduced to the minimum.

Faster movement of goods reduces the disadvantages of distance from the market and of capital being tied up from the trader’s point of view.

The burden of documentation and other formalities associated with segmented transport is reduced to the minimum.

The resultant cost savings tend to reduce the through freight rates and the cost of cargo insurance.

The consignor has to deal with only one agency viz. the MTO in all matters relating to the movement of goods including settlement of claims.

The through rates offered by the MTO make it easier for the exporter to negotiate sales contracts with foreign buyers on the basis of the delivered prices.

The Multimodal Transport Document issued by the MTO at an inland point enables the exporter to negotiate it with a bank and realize the money for his exports quickly.

The use of multimodal transport helps in reducing the cost of exports and improve their competitive position in the international market.

COMMENTS ON MULTIMODAL TRANSPORT IN INDIA

Shipping

Under the Multimodal Transport of Goods Act of 1993, responsibilities and immunities have to be allocated freely and equitably between various links of tranportation, on one hand and shippers or importers, on the other, so as to insure that it becomes a potent instrument for containing trade logistic costs and thereby strengthen the competitive muscle of India’s export products.

The shortcoming of this Act, as pointed out by the ICC, whose rules for the multimodal transport documentation are widely accepted for international trade related service transactions, relates to the liability regime, which specifies responsibilities for cargo damage or loss. Some sections of the Act impose absolute liability on the carrier beyond the scope of the Hague Visby Rules.

The present Customs permits transshipment of cargoes only at a custom port., notified under the Act, which does not include container freight stations. This results in avoidable bottlenecks.

All the port-related activities such as building and operations of berths and terminals, warehouse, captive power plants and CFSs, handling equipment and ship repair facilities need to be thrown open to the private enterprise under the long term BOLT arrangements.

Permissions to use containers temporarily in domestic transport would save the empty positioning charges, which have to be borne by exporters, and ICDs/CFSs would be less congested with a large number of empty containers. Port congestion, port productivity, lack of autonomy to the ports, limited container handling facilities, poor road and railway network are some of the bottlenecks impeding the growth of Multimodalism in India.

Electronic Data Interchange (EDI) facility is also required to be extended in order to improve the overall services. EDI facilities in all the concerned government departments and other concerned agencies should be provided.

DG shipping should not the Licensing authority for multimodal transport operators separate multimodal transport authority in the nature of a self regulatory body should be created to ensure that trade gets proper services.

Feeder services and NVOCC operators are essential for successfully providing Multimodal transport services. They need to be encouraged. Through successful NVOCC services provided to importers and exporters of small quantities of cargoes could result in fully exploiting multimodal transport operations to the advantage of trade. The trade then would be able to work on a smaller inventories and obtain economic insurance cover besides ensuring timely delivery of cargoes to the buyer.

Partnership firms should be also given an MTO license.

Three major problems encountered by MTOs relate to documents, remittances and legal liability regime.

Level playing field is provided to Indian MTOs. There is an urgent need for a regulated regime and a level playing field, not only on the part of mainline operators, but also feeder service operators, NVOCCs, ports, customs and insurance and other agencies such as rail/road, besides MTO operators and shipping companies.

Certain anomalies need to be rectified so as to ensure that most of the MTOs are able to operate. At present, only 40% of the MTOs who have got licenses are operational.

The multimodal transport authority, which is being formed, must adjust to the needs of shippers and transport operations. The very purpose of multimodal transport will be defeated if all the regulatory bodies do not work in tandem and liabilities proposed to be covered under the Combined Transport Documents (CTD) are along the lines of

Hamburg Rules, which are still to be accepted by many countries involved in international trade. This is as against present Ocean Bill of lading liability covered along

The lines of Hague rules , basically covering limited package liability.

Development of efficient EDP system to linkage ports, customs, MTOs and shipping lines should be developed. Steps should be taken to avoid berthing delays due to port

Congestion, longer port stay, shortage of pilots and tugs, shed congestions and ensure adequate facilities of gears / equipment, for ensuring smooth flow of cargo and infrastructure of rail /road network within docks, draft constraint, constraint of tides, etc.

TRAINING

The MTOs need better training so that proper services are provided to the shippers .

Training is the most vital element for educating persons engaged in multimodal business.

This should cover the whole gamut of multimodal discipline including new entrants , refreshers for existing staff , foundation and induction courses to give appropriate training and specialization to new entrants depending upon their main job.

INCENTIVES FOR SETTING UP MULTIMODAL INFRASTRUCTURE

Income tax exemption should be extended to cost -intensive projects of multimodalism like CFS establishment , handling equipment , handling equipment , trailers and trucks for carrying container ,etc. The present infrastructure covers only projects like ports ,

Leaving multimodal projects and ancillary requirements ,involving huge capital outlays ,high and dry.

Import of handling equipment and spares should be substantially exempted from custom duties. Good quality handling equipment is essential for a world class service and for want of heavy handling equipment being produced in India it is necessary to import them in a big way . The requirement especially at ports and for exports needs is enormous.

For setting up multimodal infrastructure , land be made available at concessional prices .

It is necessary to extend the multimodal concept also to domestic transport with a view to saving fuel as well as providing state of the art facilities for vast inland transport network.

Container hubs, where multimodal facilities and other allied activities could be undertaken under one roof , must be encouraged .This would rationalize and facilitate movement in a big way.

Rail and roads

It sis time to coordinate infrastructure facilities pertaining to rail and roads, so as to meet the growing volume of international traffic and particularly to encourage containerized cargo movement. For the benefit of containerization to be available to exporters and importers, more and more of general cargo should be transported in containers from hinterland to ports for which rail services be used for long line haul traffic and road transport for medium and short haul traffic.

MTO should be allowed to undertake movement of break bulk cargo as well. CFSs and ICDs facilitate the process of door step export containerization. At the same time it ensures smooth surface tranport of containers carrying custom bonded cargo. In other words, these facilities function as dry ports in the hinterland.

The scale of custroms staff in ICDs/CFSs should be in consonance with the volume of business and procedures for customs is further streamlined. The export certification agencies should be made to open offices in locations where ICDs and CFSs are set up so as to facilitate exports.

Running of schedule container trains like ships would go a long way in facilitating hinterland containerzation and therefore is urgently called for.

In the recent years, railways have shifted from piece meal to train load. This did lead to diversion of less than trainload cargo to road transport. The shift got accentuated further as railways did not take responsibilities for loading/unloading of railway wagons. Efficiencies in transit time for movement of cargo by rail are increased through mechanized handling at rail terminal through dedicated linertrains.

Warehousing

Warehousing is yet another concept, which is increasingly gaining importance in terms of scale and area of operation in the country which can support multimodalism. The Central Warehousing Corporation (CWC) has about 460 warehouses spread throughout the country. The CWC and the CONCOR need to identify ICDs in close coordination so as to reinforce each other. Private sector initiatives in creating warehousing facilities, which are vital in all facets of production, marketing and consumption to be encouraged.

Customs, Insurance and Finance

Customs Act uniformly applies to all ports in India. However Chennai customs allow stuffing/destuffing at privately owned/operated CFSs where as Mumabi customs do not. Reconciliation procedure for the container bond is the same at each Indian Port.

Simplification of customs procedure would help MTOs to expedite the delivery of goods. Customs should propose self-assessment or self-determination and removal of goods to the factory. For underpayment of duty mandatory penalty be imposed. Custom House Agents (CHAs) should form a Council like Bar responsible for disciplining CHAs so that they implement customs functions properly.

FINDINGS

PROBLEMS OF EXPORTERS WITH PARTICULAR REFERENCE TO ICD

In today’s world of growing competition meeting deadlines are very critical. In International Business a combination of all modes of transport to make the delivery at the right time, at the right place at the right cost and keeping in mind the pace at which the product has to be made available is needed and a sound knowledge of the same is also desired. With reference to providng more opportunities for trade, dry port name as ICD was introduced to reach those areas also which were not covered by the ports.

Today the exporter faces n number of problems, few of which are discussed below which were derieved at by the group after personal visits to exporters and ICD-TKD (Tuglkabad).

Every shipping line has a different freight tariff, which is decided by the consortium of which the shipping line is a part. And hence the exporter is a quoted a different rate from a different shipping line.

Cargo/container from a dry port is sent to the coastal port through rail or road, which is called inland haulage charge. This is apart from the freight charges charged by the shipping line. Which is arbitrarily fixed and is not on any basis. This if availed is charged quite high.

Proper care is not executed at the time of the handling the cargo at the ICD. The cargoes in turn get damaged due to the mishandling of the same. Cranes that are used for the purpose are not of good quality and not updated.

A lot of problem is faced by the exporter at the time of consolidation of the cargo in the container. If it is a case of ICD stuffing then the cargo is stuffed in such a manner that it would consume more space than required so that the freight can be increased.

It so happens that many a times the exporter is put in a stiff situations. The containers required by the exporters are not available. In many cases it also happens that the proper size of the container is not available and the exporter has to in urgency to ship his cargo has to send in the lower denomination cargo. Eg. If the requirement is of a 40″ HC, and the same is not available then the exporter has to manage with two 20″ which becomes quite expensive for the exporter.

Great problem is faced because of the improper routing. The exporter has to bear the expenses of this mismangement.

Many a times online or direct service to a port/destination desired by the exporter is not available by the shipping line and the route that is undertaken otherwise is quite a longer one which again enhances the cost of the exporter. Eg. Insurance cost etc.

Services of CONCOR (Container Corporation of India) is not adequate. Connecting trains in CONCOR which is a link between the ICD and the Port are not adequate in number and hence the container has to stand in the ICD till the time the train is made available.

Tracking and tracing of the ocean cargo is not as effective as compared to the AIR transport cargo.

Warehousing problem at ICD. It is not managed efficiently and in a scientific manner.

Custom clearance activity is very complicate, tedious, lengthy and time consuming. It highly depends on the nature of the commodity and unnecessary procedures delay the clearance further. Moreover the corruption makes it all the more clumsy.

BAF and CAF SURCHARGE. These are the contingent charges, which are charged by every shipping line in case of any contingent increase in the bunker charges and the currency fluctuations. Under the non-occurrence of any of the above these charges are not refunded to the exporter.

A lot of inconvience is faced by the exporters of HAZARDOUS CARGO. Many shipping lines are reluctant to deal in such cargoes and if at all they deal they charge exorbitantly high rate.

The TRANSIT TIME as announced by the shipping line is in most cases not adhered too.

Indian ports have serious problem of TRANSHIPMENT since these are not big harbors where mother vessel can anchor them in the port.

Improper understanding of the TERMS AND CONDITIONS of carriage may lead to severe problems since these terms and conditions are very ambiguous and misleading.

Frequent changes in the POLICIES of the Government and the Shipping line causes great problems to the exporter.

IMPROPER HANDLING of the cargo at times leads to the disadvantage to the exporter. Gears that are used are not sufficient in number and in haste the cargo is mishandled.

To elaborate the above point the GEARS that are used are not consistent with the task performed by them.

NOTICE OF READINESS (NOR) is at many cases not consistent with the actual readiness of the vessel/container.

Many ICDs have RAILWAY PROBLEM. Few of them do not have a rail way track due to the lack of infrastructure.

Appropriate containers are not available according to the nature of the commodity.

Maximum problem is faced in the case of DELIVERY ORDER by the shipping line.

ETA(estimated time of arrival) is not in many cases consistent with the actual arrival of the cargo.

STRIKES ICDs and Railways are a big menace for the exporters.

Inherent CORRUPTION in the ICDs and other procedural activities.

Appropriate quality of containers are not received. They are not properly acid washed.

CAN(cargo arrival notice) is not in many cases given at the right time which creates dif