Easier movement of containers gain traction

The direct-port-delivery (DPD) system, which featured in the World Bank ease of doing business report that put India 30 notches higher, is gaining traction.

Private and less congested container port terminals are also offering the DPD system, which was initially started at the Jawaharlal Nehru and Chennai ports to reduce port congestion. The service allows importers and consignees to take delivery of containers directly from port terminals, without having to park these at a container freight station (CFS), before being taken to the factories. The DPD system was introduced in 2016, spurred by the earlier report of the World Bank on ease of doing business.

“We do have CFS facility at our port,” Vinita Venkatesh, director at Krishnapatnam port's container terminal, told Business Standard, “but we give the importer an option to take direct delivery of the container as it would mean lower cost for the consignee.”

Privately built Krishnapatnam port in Andhra Pradesh’s Nellore district is set to give stiff competition to Chennai, about 180 km away, one of the largest and busiest container cargo port on the east coast.

The Visakhapatnam port is also seeing interest for DPD service this year though it does not face container congestion. “Importers save CFS costs of ~7,000-8,000 a container,” said P L Haranadh, deputy chairman of the port. “Last year, we had just about 2 per cent of container importer cargo going for DPD. This year, it has increased to 17 per cent. Now we are hopeful that we will close this fiscal year above 20 per cent and maintain this momentum over the next two years as well,”

Experts said the DPD system was starting to impact revenues of CFSs near ports. Container hubs would have to rework their business models. CFSs operating near container ports such as the Jawaharlal Nehru port include Allcargo Logistics, Navkar Corporation and Gateway Distriparks.

“CFS companies will have to rework their business models, which means they could focus on more number of smaller clients rather than one large client, to make up for the hit,” said K Ravichandran, senior vice-president and group head, corporate ratings at ICRA.

CFS players would have to differentiate themselves based on service quality or diversify operations to other ports, said Subrata K Behera, manager-ports & containers research at Drewry, an independent maritime research consultancy.

But Prakash Tulsiani, executive director and chief operating officer at Allcargo Logistics, said container freight stations would continue to remain a crucial link in the import-export chain. “Customers are now in need of a portfolio of services — like Customs clearance, sorting, packaging, last-mile delivery, etc — than a pure-play, vanilla offering. Large organised logistics players like ours have the capacity and bandwidth to offer customers a package of fully integrated inventory management services through their CFS facilities.”