What In­dia Needs Now is Fewer Ports, But with Higher Ca­pac­ity

The Economic Times - - Companies: Pursuit Of Profit -

Maersk Line, the world’s big­gest con­tainer ship­per, con­trols 18.9% mar­ket share in In­dia. The com­pany shipped 1.7 mil­lion TEU (twenty foot equiv­a­lent) con­tain­ers to and from In­dia last year. It has a to­tal of 29,943 cus­tomers across sec­tors, a staff strength of 305 and 46 in­land con­tainer de­pots across In­dia, and is acutely aware of the prob­lems fac­ing the coun­try’s ship­ping in­dus­try. In an in­ter­view with ET’s Anir­ban Chowd­hury, its manag­ing di­rec­tor In­dia and Sri Lanka Franck De­de­nis talks about how the govern­ment needs to do much more for In­dia to be on par with global ship­ping in­dus­tries. Edited ex­cerpts.

The govern­ment has been mak­ing a lot of state­ments about the ship­ping in­dus­try, apart from many an­nounce­ments. How much of it is ac­tu­ally doable? A key ob­jec­tive for any govern­ment is to speed up growth. But how can you speed up growth? That’s the key ques­tion. The de­vel­op­ment of trade can as­sist in that. In In­dia, ex­ports as a chunk of GDP isn’t as big as we see in other ma­ture mar­kets. So there's a gap you are clos­ing, which will speed up growth. 7.5% is great, but can you do bet­ter? Of course. So the re­cent state­ments by the govern­ment on ship­ping are good, as it means there’s more recog­ni­tion of the fact that it is a huge en­abler for the growth of the econ­omy.

There have been some steps taken for re­lax­ation of cab­o­tage rules. Are they enough? Some ports can now qual­ify for the re­lax­ation, pro­vided 50% tran­ship­ment is done there. They can ei­ther do it now or call for per­mis­sion that will be given on a yearly ba­sis. But if you look into the de­tails and how the world works, it might be dif­fi­cult to­day for ter­mi­nals (in In­dia) to qual­ify for that 50%. I don’t know any ter­mi­nal that does 50% of tran­ship­ments al­ready. They are very far from that tar­get. If you look at the ma­jor ports, a very lim­ited share of what they do con­sti­tutes tran­ship­ment. Even the tran­ship­ment port of Val­larpadam in Kochi is very far (from reach­ing the min­i­mum tar­get of 50%). Two years ago we did some tran­ship­ment in Vizag but be­cause of lack of ca­pac­ity and re­li­a­bil­ity, we had to go back and tran­ship in Tan­jung Pelepas. So while this is a good step, we still feel it’s a bit strin­gent for ter­mi­nals to qual­ify for that and you need a longer pe­riod of time. We are not sure that it will hap­pen the way the Re­cent state­ments by govt on ship­ping are good, as it means there’s more recog­ni­tion of the fact that it is a huge en­abler for eco­nomic growth re­lax­ation is done to­day. I think we need to go much fur­ther in that di­rec­tion.

What ex­plains the govern­ment’s re­luc­tance or slow pace in do­ing away with cab­o­tage? Of­ten there is a mis­un­der­stand­ing that global ship­ping lines want a re­lax­ation of cab­o­tage rules in In­dia so that they can tap into the do­mes­tic or coastal cargo. That is not the case. Coastal cargo is not some­thing we are look­ing at. We, at Maersk Line, are as­sist­ing the In­dia growth story by link­ing it to the rest of the world. We want tran­ship­ments that are be­ing taken else­where to­day should come to In­dia. We can, then, have ef­fi­cien­cies of scale by hav­ing a hub and spoke model wherein big­ger ves­sels can come and tran­ship in In­dia and go to other ports. If you do that, you can bring goods which are cheaper for con­sumers and for ex­porters to trans­port goods which are more com­pet­i­tive in the global mar­ket. The more ca­pac­ity you have, the more flex­i­bil­ity and bet­ter rates.

ON IN­DIA

There are some who say even with com­plete re­lax­ation of cab­o­tage rules, a lot needs to be done be­fore In­dia be­comes a tran­ship­ment hub. Where do its ports stand? To­day we are not even dis­cussing big scale tran­ship­ment to In­dia. For In­dia to be glob­ally com­pet­i­tive, there are three fac­tors: the ca­pac­ity or the in­fra­struc­ture of the ter­mi­nal. Also, you need small ship­ping lines and feed­ers to be able to take cargo from the tran­ship­ment port to other smaller ports. Then, there are pro­ce­dures and fa­cil­i­ties in terms of cus­toms, etc. You have to tackle all of that. If you can tackle these, I don’t know why In­dia can’t com­pete with global ports.

FRANCKDEDENIS MD, In­dia and Sri Lanka, Maersk Line

A whole lot of port projects are com­ing up. Surely, that would mean more ca­pac­ity... In In­dia, there is a lot of de­mand for ter­mi­nals: con­tain­ers, liq­uid and bulk. And there are a lot of projects. The ques­tion we have to ask our­selves is which model is most ef­fec­tive? Also, not all ports can re­ceive big ves­sels, so you have to limit the size of the ves­sels so that’s an­other ex­tra cost. What is ef­fi­cient in terms of economies of scale is fewer ports with higher ca­pac­ity.

So in­creas­ing ca­pac­ity in a few ports rather than dot­ting the coast­line with ports is the an­swer? It's not like you have to re­duce the num­ber of ports but you don’t have to go to all the ports.

COM­PANY PHOTO

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