PGDM-International Business

This document is about ports describing the evolution, functioning and role of ports in international business. In the process it also compares the Indian with the International ports. In the end this document provides the current scenario and the way forward.

Logistics and Ports

Group 3

Group 3: Devarshi Bajpai (03) Parnamoy Dutta (13) Ashish Madnoorkar (23) Nitisha Pagaria (33) Anirudhha Sarawgi (43) Saahil Sinha (53)

Introduction:
70% of the world is covered with water and hence provide an excellent medium of low cost transportation. But for this to happen there is a need for a place where ships or vessels can dock. Thus, a port is a location on the coastline containing one or more harbours where ship can dock and transfer people or goods also referred to as cargo to or from land. But the ever growing rate of globalisation has resulted in enhanced complexity of functioning of ports leading to the need of effective and efficient port management. Lets us look at the evolution of ports.

Evolution of Ports:
First generation port: Junction between sea and inland transportation systems. Main activities in the port region were cargo handling, cargo storage & navigation assistance. Hence there was negligence about important changes in transportation technology. Second-generation ports: The activities in these ports were expanded ranging from packaging, labelling to physical distribution. The second generation ports have a characteristic that freight forwarders and cargo owners had a tighter relationship which was not observed in first generation ports. Third-generation ports: Emergence container transportation & intermodal transport system. The former services function has been enlarged to include logistics and distribution services. Todays port authorities are focusing on efficiency rather than effectiveness. Modern day ports also have customs facilities to enhance international trade.

Major ports in the world:

The handling capacity of ports is measured in terms of TEU (Twenty-foot Equivalent Units). One TEU is a measure of the cargo capacity of a standard intermodal container 20 feet long and 8 feet wide. There is a lack of standardisation with regards to height which ranges between 4 feet 3 inches and 9 feet 6 inches. But the most common height is 8 feet 6 inches.

Container Traffic (in thousand TEUs): Rank 1 2 3 4 5 6 7 8 9 10 30 Port Shanghai Singapore Hong Kong Shenzhen Busan Ningbo-Zhoushan Guangzhou Qingdao Dubai Rotterdam Mumbai Country China Singapore China China South Korea China China China U.A.E Netherlands India 2011
31,740

2010
29,069

2009
25,002

29,940 24,380 22,570 16,170 14,720 14,260 13,020 13,010 11,880 4,320

28,431 23,699 22,510 14,194 13,144 12,550 12,012 11,600 11,140 4,280

25,866 20,983 18,250 11,954 10,502 11,190 10,260 11,124 9,743 4,061

As we know that in recent years China has become the centre of the trade-world and hence justifies the dominance of Chinese ports in the ranking above.

Major Indian Ports:

India has one of the longest coastlines making it one of the biggest peninsulas of the world. There are 13 major ports (12 government and 1 corporate) and 187 notified minor and intermediate ports. Cargo handling is expected to grow at 7.7% till 2013-2014. 60% of Indias container traffic is handled by Mumbai port. TRAFFIC HANDLED AT MAJOR PORTS (IN ' 000 TONNES) PORTS Kolkata Paradip Vizag Ennore Chennai Tuticorin 2011 47545 56030 68041 11009 61460 25727 2010 46423 57011 65501 10703 61057 23787 2009 54219 46412 63908 11500 57491 22011
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Cochin New Mangalore Mormugao Mumbai JNPT Kandla

17873 31550 50022 54586 64309 81880

17429 35528 48847 54541 60763 79500

15228 36691 41681 51876 57291 72225

The targets for few of the Indian Ports as incorporated by the Ministry of Shipping, Road Transport and Highways are as follows: Kandla: world class, multi-cargo, driver of economic growth; Mumbai: leading world class, multipurpose city based port in SE Asia; JNPT: Indias premier container port with integrated logistic services; Kolkata: major sea-river gateway, quality services.

Functions of Ports:
The commercial success of a port could stem from a productivity advantage in traditional cargo-handling services, from value-added services, or from a combination of both. Studies have shown that the most successful ports are those that not only have productivity advantage in cargo-handling, but also offer value-added services.

Major Traditional Functions:

Within the port system, one or more organizations have the following roles:

Regulator of economic activity and operations Regulator of marine safety, security, and environmental check Planning for future operations and investments Operation of nautical services and facilities Market and promote port services and economic development Cargo handler and store manager Providers of ancillary activities

The ports providing traditional services in the bottom left corner of the matrix are indistinguishable from their competitors. The viable option for such ports is to move to the right hand side of the matrix, toward productivity-advantage leadership, or to move upwards, towards value-added service leadership. Perhaps it is for this reason that many ports in developing countries still concentrate on improving their productivity with regard to traditional port functions and not value added functions. The advanced ports around the world have continuously emphasized the function of logistics centres mainly due to the high degree of global production and the need for value added logistics services.

The Value Added Logistics services (VAL) activities:

Receiving goods, breaking shipments, preparing for shipment and returning empty packaging. Regular storage, distribution and order picking. Countrylizing and customizing, adding parts and manuals. Assembly, repair and reverse logistics. Quality control and testing of products. Installing and instruction. Product training on customers premises.
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Indian Ports
India has a strategic location on the East-West trade route that links Europe and the Far East. India has a long coastline, spanning 7516.6 kilometres that forms one of the biggest peninsulas in the world. It has 13 major ports (12 government and 1 corporate) and 187 minor and intermediate ports. The major ports are governed by the Ministry of Surface Transport (MoST) and the minor/intermediate ports are under the administrative control of the State Government. Major ports like Kandla port, Mumbai port, Jawaharlal Nehru port, Cochin port, Mormugao port and New Mangalore port are located on the west coast of India Tuticorin port, Chennai port, Vishakhapatnam port, Paradip port, Kolkata port and Haldia port are located on the east coast of India Adani port is the major private port located in the gulf region (Gujarat)

The major ports have undergone many ups and downs in the growth pattern of traffic during the last five decades. The table below represents the progress made by major ports in India. The overall Compound Annual Growth Rate (CAGR) of traffic at major ports from 1950-51 to 2009-10 has been 5.80%, and during the post-liberalization period i.e., from 1991-92 to 2009-10, the CAGR reported was 7.31%. The CAGR for traffic growth at major ports for the last five years was 7.28%, whereas it was 10.73% if the traffic is taken for the three years before the global economic recession from 2008-09 to2009-10, this is the highest growth rate since 1960.

Infrastructure & Investments in Indian Ports:

A country's Infrastructure depends a lot on its Port and Shipping Industry as it is a major contributor in its economy. Ports facilitate Exports and Imports of goods. Along with building ports, a country should also look upon the complementary facilities required (such as trade barriers, Policies, Labour availability, etc). All the investment in the Indian Ports are done by the government and hence under direct control of the Central Government. This method of Control is according to the norms of the Ministry of Shipping. Considerable Improvements have been recorded due to newly implemented reforms. But, the performance of Indian Ports is still below the level of other ports in the World or in Asia for that matter.

Reasons and Effects:

Unproductive utilization of the real berth abilities. Labor-intensive and low use of Machines. Hence the turnaround time is higher. Improvement can be made by adopting Mechanized process. High handling costs for containers. Bringing mother container ships at Indian ports, this adds the transport costs of exports and imports of Goods. Draft limitations, resulting in slow turnover time.

Due to the Increasing Demand (projection says there will be a increase in Container traffic) in this sector, it becomes important for Indian Ports to increase capacities through investments from Private as well as Public Sector.

The performance of major Indian seaports:

The contribution of operating performance indicators and physical facility related indicators in the overall performance of ports as shown in Figure.

Cargo Traffic:
While Vishakhapatnam Port is leading with about 56.39 MT of Cargo traffic, Mumbai, Chennai and Kandla have given a very tough competition. Kolkata, Cochin and Tuticorin and handling a lower level of Cargo as the Congestion level at these ports is very high. They are not even handling 20 MT of Cargo traffic which is less than 50% of what Vishakhapatnam is handling.

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Vessel Traffic:
When it comes to Vessel Handling, Mumbai ports and JNPT are the leaders. They are closely followed by Vishakhapatnam, Chennai and Kandla. Infact, lately Kandla port has been handling more vessel traffic as compared to JNPT. Kolkata and Mormugaon ports are the 2 ports with relatively low traffic handling capabilities.

Comparison of Indian ports with international ports:

1. Indian Ports: 12 major ports, 1 corporate port 2. All ports are managed by Port Trust of India. 3. The major ports together have a capacity of 215 million metric tonnes. Jawaharlal Nehru Port is 30th on world list having 4.53 million tonnes capacity whereas worlds top 15 ports have more than 10 million tonnes handling capacity. 4. Several major ports lack sufficient draft for large crude tankers. Large vessels are berthed at Colombo, Singapore, or Dubai, and cargo is shipped to India later in smaller vessels, thereby escalating the freight cost.

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5. Weak hinterland connectivity is a challenge for most Indian ports, reducing accessibility. 6. For all Indian ports infrastructure is a major issue. 7. Average ship turnaround is 4.72 days where as many international port has turnaround time as less as 0.8 days. 8. Average ship birth output is 4249 tonnes. 9. The performance of Indian ports does not compare favourably with that of efficient international ports on three important parameters- capacity, productivity and efficiency. 10. In international terms, labour and equipment productivity levels are still very low due to the outdated equipment, poor training, low equipment handling levels by labour, uneconomic labour practices, idle time at berth, time loss at shift change and average age of labour. 11. International ports like Shanghai has unmanned automatic container yard, wireless control system and infrastructure which enable it to handle 31.74 million metric tonne with turnaround time of 18 hrs. 12. Key enablers for International ports to achieve high efficiency are: Infrastructure and Information technology Skilled labour Investment Effective policy implementation

Challenges & way ahead for Indian ports:

India is facing a serious deficit in port infrastructure. Lack of proper connectivity has affected the growth and prospects of some of our ports: Lack of proper hinterland connectivity results in suboptimal choice of route and mode of transport made by the shipper, this leads to escalation of time and cost and congestion in the ports owing to the inability to move cargo out of the port. Issues inside the port Roadways within the port Port gate entry
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 Shortage of storage space Insufficient cargo handling equipment, etc have already taken a toll of business The lack of containerization and Cabotage Law which bars the foreign vessels from carrying cargo between Indian ports because of which a considerably large part of Indian cargo for trans-shipment through containers gets diverted to Colombo, Singapore and Jebel Ali Ports. It was found that the average berth time for containers at major ports is 1.88 days for unloading and 3.78 days for loading. In a sharp contrast, the time taken by Singapore port for the same work is 0.6 days. Shipping lines avoid touching ports in India because of the long waiting time and heavy congestion. The capacity of various ports in Mumbai has already exhausted and now capacities of other ports like JNPT are on the verge of exhaustion. The long turnaround time at ports in India is one of the biggest handicaps in the logistics service. Operational problems arise due to frequent breakdowns and lack of modern equipments. Inadequate dredging and container handling facilities. Labor unrest. Facility of night navigation and pilots. Delays are also caused by stakeholders like shipping and clearing agents, customs clearance, transporters and other parties who responsible for various pre-and postshipment activities. The draft availability at international ports ranges between 12m and 23m, except for Kandla, Mundra and Ennore ports, which are newer ports inIndia; while other Indian ports have an average draft ranging from 8m to 12m. Hence, they are not able to handle modernized new generation container vessels which invariably impact the overall port performance and development.

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Opportunities for Indian Ports:

90% of Indias trade by volume (and 68% by value) takes place through water transport. Hence, Government is making immense efforts for the development of port infrastructure. Committee of Secretaries, Government of India, has recommended that a minimum 4lane road and double line rail connectivity be provided at major ports. More than Rs 18,000 crores is being spent now at various major ports all over India, which will take them on par with new modernized private ports in a couple of years. Maritime activity was mostly under the control of the Government, but the scenario has now changed with the gradual privatization of development and operation of ports Apart from the 12 major ports 184 small ports have also been developed. The Government has undertaken expansion and modernization of ports on a priority basis in its five-year plan allocations in 2007 in continuance with its initiatives in upgrading India's infrastructure and is expected to invest more than USD 9.7 billion by the year 2015. 100% FDI has been permitted for port development projects. 100% income tax exemption is provided for a period of 10 years for port development projects. The overall port capacity in the country is expected to grow at a CAGR of 13.3% from 1,020 million tonnes in FY11 to 3,130 million tons in FY20. The capacity at non-major ports is projected to expand at a faster CAGR of 18% during FY 2011-20 and the capacity at major ports is expected to grow at a CAGR of 9.5% during this period. At the beginning of the financial year (2010-11), the Ministry of Shipping fixed a target of 21 projects under PPP for the major ports out of which two projects have been awarded so far at Tuticorin Port and Ennore Port.

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