CENTRUM 2007
CONTAINERIZATION BUILDING GLOBAL TRADE COMPETITIVENESS
Prof. G Raghuram Indian Institute of Management Ahmedabad
EXIT
G Raghuram, IIMA
Outline
Potential of Container Traffic Drivers of Container Traffic Potential Hub Ports in India Hinterland Connectivity Other Issues Concluding Issues
CENTRUM 2007
G Raghuram, IIMA
Potential of Container Traffic
Where are we?
Year National GDP US $b1 2000-01 2001-02 2002-01 2003-04 2004-05 2005-06 2006-07 409 441 467 554 633 725 827 Growth2 (%) 4.4 4.8 3.8 8.5 7.5 9.0 9.3 Container Total 000 TEUs 2468 2886 3366 3900 4502* 4998* 5964* Growth (%) 13.0 16.9 16.6 15.9 15.4 11.0 19.3
CENTRUM 2007
1At current market prices 2At factor cost (constant prices) *Includes traffic from Mundra and Pipavav G Raghuram, IIMA
Potential of Container Traffic
Where are we?
Top Seven Indian Container Ports Ports 2006-07 JNPT 3298 Chennai 798 Mundra 393 377 Tuticorin 240 Kolkata Cochin 227 Kandla Total of Above Top Seven World Container Ports Ports Singapore Hong Kong Shanghai Shenzhen Busan Kaoshiung 177 Rotterdam 5510 Total of Above CENTRUM 2007
(000 TEUs)
1 2 3 4 5 6 7
2006 24792 23230 21710 18468 12030 9774 9690 119694
G Raghuram, IIMA
Drivers of Container Traffic
CENTRUM 2007
International trade growth Penetration of containerization Hub and feeder service structure
G Raghuram, IIMA
International Trade Growth
Year National GDP Growth2 (%) 4.4 4.8 3.8 8.5 7.5 9.0 9.3 Exports Growth (%) 20.1 -0.4 20.6 20.5 30.7 23.0 Imports Growth (%) 0.5 3.0 19.7 26.7 38.1 23.5
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US $b1 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 409 441 467 554 633 725 827
US $b 44.1 44.0 53.0 63.9 83.5 102.7
US $b 50.1 51.6 61.7 78.2 108.0 133.4
[CMIE, 2007] 1At current market prices, 2At factor cost (constant prices) G Raghuram, IIMA
Penetration of Containerization
Currently, containerized cargo represents about 30% by value of Indias external trade. This proportion is likely to grow as containerization increasingly penetrates the general cargo trades and increases its share from the 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 India trades in include engineering goods, agricultural commodities, textiles and readymade garments, pharmaceutical products (bulk formulations) and machinery (auto and electronic).
G Raghuram, IIMA
CENTRUM 2007
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International trade growth and penetration, being the basic demand drivers, will result in the 21 m TEUs by 2015-16 at 15% growth rate Given recent trends, growth rates could be higher upto 20%
G Raghuram, IIMA
Container Traffic Projections
30.0 25.0 15.0% CAGR 17.3% CAGR 19.7% CAGR
30 mTEUs 25 mTEUs 21 mTEUs
CENTRUM TEUs m 2007
20.0 15.0 10.0 5.0 0.0 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15
Year
By 2011-12, container traffic is expected to cross 13 mTEUs and by 2015-16, 25mTEUs
G Raghuram, IIMA
15-16
Hub and Feeder
CENTRUM 2007 Overall port traffic will increase depending on the amount of increased hubbing that will take place in India. Each Indian TEU hubbed in an Indian port will add two 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 as a negligible activity over the next decade, though there would be potential to be exploited in the long term.
G Raghuram, IIMA
Direct and Hub Shipments
Per cent
CENTRUM 2007
JNPT Share of Container Traffic Direct Through Hub 55 80 20
Other Ports 45 13 87
Total 100 50 50
G Raghuram, IIMA
Hub and Feeder
CENTRUM 2007 As per as is projections, 9m TEUs (43%) of the Indian traffic of 21 mTEUs will be hubbed in 2015-16. Of the hubbed traffic, 0.95 m TEUs (11%) will be hubbed in India, implying a transhipment of 1.9 mTEUs. This is conservative. Hubbing in India can and should develop. If 50% hubbing were to take place in India, then 4.5 mTEUs will be hubbed in India, implying transhipment handling of 9m TEUs. About 7 more mTEUs will need to be handled at hub ports. This requires port handling capacity of 30 mTEUs, with 9 mTEUs as transhipment at hub ports.
G Raghuram, IIMA
Hub and Feeder
CENTRUM 2007 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
G Raghuram, IIMA
Drivers of Container Traffic
CENTRUM 2007
Given the above three drivers of container growth, it appears that 30 mTEUs, including 9 mTEUs of transhipment, is likely to happen by 2015-16 and we need to get prepared for that. Thus, out of 21 mTEUs of Indian traffic, 12 m TEUs would go direct, 4.5 mTEUs would go to foreign ports for hubbing, and 4.5 mTEUs to Indian ports for hubbing.
G Raghuram, IIMA
Potential Hub Ports in India
CENTRUM 2007
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
G Raghuram, IIMA
CENTRUM 2007
G Raghuram, IIMA
Potential Hub Ports in India
CENTRUM 2007
Readiness West Level High JNPT, Mundra, Pipavav Kandla, Mumbai South East
Cochin, Chennai
Visakhapatnam
Medium Low
Tuticorin New Mangalore, Mormugao Kolkata, Haldia, Paradip
[CRISIL, 2006]
G Raghuram, IIMA
Maximum Draft
S No 1 2 Container Terminals JNPT Chennai Tuticorin Mundra Kolkata Cochin Mumbai Kandla Haldia Pipavav Visakhapatnam New Mangalore Mormugao Paradip Draft (meter) 12.5 13.4 10.8* 17.5* 7.5* 12.5 10.7 11.7 10.0 12.5* 15.0 10.5 12.5 11.5
G Raghuram, IIMA
CENTRUM 2007
3 4 5 6 7 8 9 10 11 12 13 14
[World Bank, 2007; *Port Website, 2006]
Potential Hub Ports in India
CENTRUM 2007
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, and can 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 hinterland potential.
G Raghuram, IIMA
Hinterland Connectivity
30% of the traffic expected to move hinterland by rail 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 empty containers 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
G Raghuram, IIMA
CENTRUM 2007
Rail Evacuation
For 21 mTEU, at 30% movement by rail, and 90 TEU per train, 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). Double stack 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. G Raghuram, IIMA
CENTRUM 2007
Road Evacuation
CENTRUM 2007
Beyond just the four laning of highways, expressway connectivity to the ports to service major flows would be 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.
G Raghuram, IIMA
Coastal Shipping and Inland Waterways
Feedering is synonymous with coastal shipping. 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.
G Raghuram, IIMA
CENTRUM 2007
ICD/CFS Infrastructure
CENTRUM 2007
Location and access, giving consideration to distance to manufacturing units, and local connectivity with minimum traffic interference. CIDCO land around JNPT is inappropriately priced. Customs and bonded warehouse. Idea of FTWZ is good. Rail connection to gateway ports Parking spaces and maintenance facility
G Raghuram, IIMA
Other Issues
Information Technology (IT)
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Domestic Traffic Location Policy of Industries Including SEZs Regulation
G Raghuram, IIMA
Information Technology
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RFID, GPS, EDI, Knowledge Products, Standards
Domestic Traffic
18% of CONCOR Traffic is domestic Customized (out of the BOX thinking!) Eg: Autos
G Raghuram, IIMA
Location of SEZs
(as on November 30, 2007) CENTRUM 2007
Coastal Manufacturing Services Total 48 31 79
Non-Coastal 37 75 112
Total 85 106 191
G Raghuram, IIMA
Regulation
Licensing
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Competition
Security
Operator, and operations
Port Tariffs
Is TAMP required for Container activity?
Shipping Line Conferences
Competition Commission
Customs
G Raghuram, IIMA
Regulation
Cabotage
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Feedering?
Environment and Conservation
Role of Conservator?
Safety Quality of Service Dispute Resolution
G Raghuram, IIMA
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.
G Raghuram, IIMA
CENTRUM 2007
Port-wise Container Traffic
2006-07
S No Port Operating Company 1. Port 2. DP World 3. AP Moller/Concor 1. DP World 2. PSA International/SICAL DP World PSA International/SICAL Port DP World/Concor ABG AP Moller Port Port DP World Port Port Port Total (000 TEUs) 3298 %
2005-06
Total (000 TEUs) 2667 %
JNPT
55.3
53.4
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2 3 4 5 6 7 8 9 10 11 12 13 14
Chennai Mundra* (MPSEZ) Tuticorin Kolkata Cochin Kandla Pipavav* Mumbai Haldia Visakhapatnam New Mangalore Mormugao Paradip Total
798 393 377 240 227 177 135 128 110 50 17 12 2 5964
13.4 6.6 6.3 4.0 3.8 3.0 2.3 2.1 1.8 0.8 0.3 0.2 0.0 100.0
735 299 321 203 203 148 86 156 110 47 10 9 4 4998
14.7 6.0 6.4 4.1 4.1 3.0 1.7 3.1 2.2 0.9 0.2 0.2 0.1 100.0
[CI Magazine, 2007; Indian Infrastructure, 2007; IPA, 2006] *Non-major and private ports, both under GMB
G Raghuram, IIMA
Port-wise Container Traffic
CENTRUM 2007
A second container terminal at MPSEZ is nearing completion for operations. Hazira port in Gujarat, owned by Shell Gas BV is being developed and will be operated by PSA for 1 mTEU per annum, Dholera Port, owned by JK Group and Adani Group will develop a container terminal, Maroli port in Gujarat has tendered for bidding for a container terminal, An off-shore container terminal (700 meters) at MPT for 0.8 m TEUs, to be developed by Gammon and Dragoddar
G Raghuram, IIMA
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 an international 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.
CENTRUM 2007
G Raghuram, IIMA
Concluding Issues
Currently we have 30 (?) berths. While 70 is a target, market forces will drive the actual berth development. Finance does not seem to be an issue. There is not enough focus on scale of container terminals. This is necessary to drive down costs. Tendering and bidding should be done in a time definite manner.
CENTRUM 2007
G Raghuram, IIMA
Concluding Issues
Indian infrastructure for logistics is poor compared to world class and at best reactive to demand. There is need for continued focus on quality infrastructure development with speed. Commercialization and private involvement through PPP contracts is the key for building global trade competitiveness through containerization.
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G Raghuram, IIMA
CENTRUM 2007
THANK YOU
EXIT
G Raghuram, IIMA
