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ERASMUS UNVERSTY ROTTERDAM





MSc in Maritime Economics and Logistics.


2005/2006


Growth of Containerization and MuIti ModaI
Transportation in India



by







GIRISH GUJAR.





Copyright Maritime Economics and Logistics.
2





ACKNOWLEDGEMENTS.


This thesis is not a culmination of my efforts done but is a part of an ongoing thought
process. have drawn upon the ideas, thoughts and observations of many individuals.

To begin with must state that this thesis would not have evolved in this form without
the guidance of Mr. Marten Vanden Bossche of ECORYS BV. am deeply grateful for
the painstaking efforts taken by him in guiding me and allowing me to do my internship
with his prestigious Organization. am also grateful to Mr. Simme Veldman of ECORYS
BV for his thoughts and insights.

am also grateful to Mr. Michele Acciaro in providing valuable guidance. The thoughts
of Professor Hercules Haralambides pervade throughout the entire thesis. His
contribution is invaluable.

Lastly must acknowledge the constant support, cooperation and sacrifices made by
my wife Shobha and son Rohan in my endeavor. t was beyond my capacity to fulfill
such an assignment without their help. am grateful to you all.





















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ABSTRACT


This thesis provides the analysis of the Multimodal transportation system in ndia
and identifies the numerous facets of the system and the role of multimodal
transportation in the economic growth of the country. t also highlights the short
comings and challenges ndia is facing because of lack of legislation, policy failures,
nfrastructure limitation, and operational deficiencies and suggests measures for
improving efficiency and operation. The thesis attempts to compare the multimodal
transportation system in ndia with the systems in the developed countries, drawing
examples mostly from northern Europe. The thesis also supports the need for increased
private participation in order to stimulate investment in nfrastructure in the country.

n the 90s ndia began an ambitious program aimed at the transformation of its
economy towards a market driven export oriented system. Since then the economic
growth of the country has been spectacular. The country's foreign trade is more than
500 million tons and it is expected to grow every year at a rate of 12%. This places on
the infrastructure sector significant challenges because in order to sustain such a rapid
growth, the provision of a seamless, cost effective, fully integrated multimodal transport
system seems to be the only feasible possibility. These challenges are not only limited
to massive investment but include also the acquisition of the knowledge necessary to
manage and operating such systems. This will not be possible without the active
participation of the private sector.

Furthermore for these developments to take place a complete revision of the
current pricing policies would be advisable, in order to provide the investors with
reasonable rates of return. Last but not the least a clear government policy vision
should be clearly stated.

The thesis also attempts at establishing a statistical relationship between the GDP
growth rate of the country and the growth rate of throughput. t also analyses other
factors that have an impact on the throughput growth rate. This is done with the aim of
forecasting the growth rate of throughput for the next ten years in order to support the
need for large infrastructure investment in the country.







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ABBREVIATIONS.


AMTO - Association of Multi Modal Transport Operators of ndia.
CFS - Container Freight Station.
CD nternal Container Depot.
CONCOR Container Corporation of ndia Ltd.
ED Electronic Data nterchange.
SC The Shipping Corporation of ndia Ltd.
ASSOCHAM Associated Chambers of Commerce.
NSA ndian National Shipowner's Association.
PA ndian Ports Association.
MANSA Mumbai and Nhava Sheva Ship ntermodal Agents Association.
MTD Multi Modal Transport Document.
MTO Multi Modal Transport Operator.
NVOCC Non Vessel Owning Common Carrier
WB nland Way Bill.
RR Railway Receipt.
TAMP Tariff Authority of Major Ports.











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LIST OF TABLES CHARTS AND ANNEXURES


List of 1ables.

1. Growth oI Global GDP.
2. Growth oI Global Trade.
3. Growth oI Global Throughput.
4. Growth oI Global TEU Capacity.
5. Growth oI Indian Throughput.
6. List oI Principal Imports.
7. List oI Principal Exports.
8. Breakup oI Multi Modal Container Transport
9. GDP oI India at Fixed Prices.
10. Sector Wise Break up oI GDP.
11. Growth oI Foreign Trade, Throughput and GDP.
12. Growth Rates oI Foreign Trade, Throughput and GDP.
13. Forecast oI GDP and Throughput Growth oI India.
14. Adjusted Forecast oI Throughput.

List of Figures

1. Global GDP Growth.
2. Global Trade Growth.
3. Global Throughput Growth.
4. Regional Break up oI Global Container Trade.
5. Growth oI Global TEU Capacity.
6. Growth OI Indian Throughput.
7. Break up oI Principal Imports.
8. Break up oI Principal Exports.
9. Break up oI Multi Modal Container Transport.
10. Growth oI GDP oI India.
11. Growth oI Indian Foreign Trade.
12. Forecasted Growth oI Throughput.

List of Annexures

1. Imports oI Principal Commodities.
2. Exports oI Principal Commodities.
3. Region wise Exports.
4. Annual Container TraIIic oI diIIerent ICDs.
5. Annual Container TraIIic oI diIIerent Ports.
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TABLE OF CONTENTS.

Acknowledgements

Abstract

Abbreviations

List of Tables and Charts.

CHAPTER 1. INTRODUCTION. 8
1.1 Research Methodology. 12
1.2 Problem Definition. 12
1.3 Research Questions. 12
1.4 Research Objectives. 13
1.5 Data Collection.. 13
1. Research Path. 13

CHAPTER II. A GLOBAL OVERVIEW OF
CONTAINERIZATION 14

2.1 Logistics & Supply Chain. 1
2.2 Off Shoring. 17
2.3 Benefits of Containerization. 17
2.4 Freight Structure. 19


CHAPTER III CONTAINERIZATION IN INDIA. 22
3.1 Overview of Indian Foreign 1rade. 24
3.2 Hinterland Development. 27
3.3 Role of Customs in Multi Modal
1ransportation of Containers. 27

3.4 Role of Clobal Multi Modal Operators 29.


CHAPTER IV. RAIL & ROAD TRANSPORTATION. 31
4.1 Rail 1ransportation of Containers. 33
4.2 Role of Concor. 34
4.3 Road 1ransportation of Containers. 35
7

CHAPTER V GROWTH OF INTERNATIONAL TRADE &
MULTIMODAL TRANSPORT. 38
5.1 International 1rade & Infrastructure
Development. 39
5.2 Indian Shipping Industry. 4

5.3 An Overview of Multimodal 1ransport
Infrastructure in India. 41
5.4 Constraints for Crowth of Multimodal 1ransport. 42
5.5 Mindset of Indian Policy Makers. 44

CHAPTER VI. PRIVATE SECTOR PARTICIPATION IN PORT
DEVELOPMENT. 48
.1 A Historical Perspective. 49
.2 Changing Scenario. 52
.3 Private Sector Participation in Port development 53
.4 Current 1rends. 54
.5 Crowth Potential. 55
. Areas of Concern. 5
.7 Criterion for Selection of Promoters. 57
.8 Evaluation of Cains. 58
.9 Externalities. 59
.1 Legislative Measures.

CHAPTER VII INDIAN ECONOMY & GROWTH OF
CONTAINERIZATION. 61
7.1 Overview of Indian Economy. 1
7.2 Main Sectors. 3
7.3 Factors influencing growth of Containerization. 5
7.4 Forecasting growth of Containerization. 7
7.5 Adjusted growth Forecast. 9

CHAPTER VIII GENERAL CONCLUSIONS. 71
8.1 Aecessity for development of Multimodal
1ransport infrastructure 71
8.2 Summary. 72

BIBLIOGRAPHY.

ANNEXURES.


8
CHAPTER I


INTRODUCTION:


ndia is a developing country. After getting independence in 1947bit opted for a
Social Democratic Government. With a predominantly Welfare State outlook it's stated
objective was to uplift its poverty mired citizenry. n its zeal to achieve this objective it
not only ignored but downright sneered at market driven economy. The socialist welfare
state experiment met with disastrous result by 1990 when the country tottered on the
brink of bankruptcy. This state of affairs was reached in spite of the country being a
leading global producer of several products and rich in resources.

The country pulled back from the brink of bankruptcy by instituting economic
reforms which lead to ndia achieving 6-7% GDP growth for the past ten years and
becoming 4
th
largest economy in the world after the US, Japan and China in the
purchasing power parity. Currently in addition to 8% GDP growth rate it has a low
inflation rate along with sustainable fiscal deficits. t is on the threshold of becoming an
economic superpower in the next ten years.

However what could be one of the biggest hurdles in its path to realizing its goal
is the limitations of its infrastructure imposed, by the lack of an efficient integrated
Multimodal Transport capability (Chanda.R. 2002). The infrastructure capability can just
not match the export and manufacturing growth rates. The country's road, rail and sea
transportation system leaves much to be desired and the port infrastructure is
crumbling. (Mukherjee. A and Sachdeva. R., 2003). t is a catch situation as
development does not take place due lack of infrastructure which does not develop due
to lack of financial resources which in turn leads to further lack of development. Several
global corporations are hesitant to invest in ndia for several reasons of which lack of
suitable infrastructure being the most important. (Mukherjee A., 2001). t is the objective
of this paper to analyze the reasons behind this predicament.

Economic Development and Trade Growth.

n the past decade the Global GDP has grown at a steady pace of 3.1% with the
top 12 countries contributing approximately 75% of the total. t can be noticed that the
share of services and merchandise trade in the total GDP is in excess of 50% of the top
12 countries. Considering the fact that over 95% of the global trade is by ships, mostly
containers where general cargo is concerned, then it is possible to conclude that GDP,
Trade and transport have a strong degree of correlation. This growth would not have
been possible without necessary infrastructure required for multimodal transportation.
(Drewry Shipping Consultants & Korea Maritime nstitute Container trades
Dynamism beyond boundaries)

The Asian economy is one of the most dynamic in the world due to high degree of
industrialization programs assisted by foreign investment which manufacturing
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capabilities and stimulated local demand. n the past four decades many national
governments in this region embraced outward oriented growth policies. As a
consequence of which the entire region was transformed from agricultural base to an
industrial one. ndia adopted a similar growth path in 1990.


TABLE I

GROWTH OF GLOBAL GDP


YEAR GDP IN TRILLION USD
1994 31.67
1995 32.06
1996 33.79
1997 34.6
1998 35.89
1999 36.77
2000 37.25
2001 37.9
2002 38.63
2003 39.75
2004 41.36
2005 44.38
(Source: UNCTAD)


FIGURE I

GROWTH OF GLOBAL GDP
0
10
20
30
40
50
1
9
9
4
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
YEAR
I
N

T
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As is well known transportation capabilities have an important role to play in
the facilitation of the global trade. The western developed countries have spent huge
sums of money in building an infrastructure suitable for seamless transportation of
goods and services demanded by industries. Since the inception of globalization in
1990s there has been a shift in the manufacturing base from the developed countries of
Western Europe and United States to the Asian countries, notably China, South Korea,
Taiwan, Malaysia and Thailand where cheap and skilled labor is available in
abundance. Simultaneously the Asian countries have made necessary adjustments in
their processes to provide guaranteed services (Ghosh. B; and De. P., 2001). This has
been possible solely due to comparatively lower costs of logistics which provides a
sustainable competitive advantage in global markets (Ghosh. B; and De. P., 2001). But
due to severe financial constraints it has not been possible for rest of the Asian
countries like Cambodia, Vietnam, Bangladesh, ndonesia, Philippines and ndia to
develop the
necessary infrastructure, especially transportation, in spite of their governments
understanding the importance of infrastructure developments. Hence the potential of
these countries has not been fully realized. (Jeffrey Sachs & Nirupam Bajpai., 2002.
Harvard University)



TABLE II


GROWTH OF GLOBAL TRADE



YEAR IN TRILLION USD
1994 8.6
1995 10.3
1996 11.1
1997 11.4
1998 11.1
1999 11.5
2000 13
2001 12.5
2002 13
2003 15.1
2004 18.2
2005 19.3

(Source:World Bank)




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FIGURE II


GLOBAL TRADE
0
5
10
15
20
25
1
9
9
4
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
YEAR
I
N

T
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The UNCTAD (1995) report has precisely laid emphasis on this fact of both the
manufacturing and transportation industries working in tandem to achieve common
objectives. n addition to this a flexible regulatory system would add to the synergy so
created, resulting in the developing nations in becoming export engines, which would
ultimately result in these countries gaining competitive edge in global markets. The
report also stresses upon the advantages that could be derived by the developing
nations in adopting a multimodal transport system in achieving this objective. The report
further advises these Nations to learn from the experiences of the developed Western
nations in developing their transportation capabilities, lowering logistical costs and
implement superior management practices and work culture.


Such an approach to develop multimodal transport systems would not only lead
to benefits for the service user and provider but also to the respective governments by
way of enhanced revenue generation. This advice was accepted in all earnest by the
Government of ndia which enacted a comprehensive legislation in 1987 culminating in
enactment of the Multimodal Transportation of Goods Act in 1993.



1.1 RESEARCH ME1HODOLOCY

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The available literature on this subject merely describes containerization and
multimodal transport in ndia. t does not analyze the role of containerization in the
growth of foreign trade of the country nor does it attempt to establish a relationship
between the GDP growth and the rise in container throughput. This thesis not only
covers the above mentioned lacunae but also attempts to forecast the growth rate of
containerization in ndia in the next decade. Furthermore this thesis also provides
solutions to the challenges that would be created due to the rapidly rising throughput

The thesis primarily focuses upon hinterland development and generation of
container traffic both export and import. t further observes the movement of these
containers to and fro from the gateway ports. t then tries to establish a relationship
between the GDP growth, foreign trade and container throughput. While doing so it
attempts to identify the problems faced in the movement of containers and tries to find
solutions for these problems.

The thesis will also describe the macro economic background of ndia along with
special characteristics of different regions where the cargo is generated. t will also
focus upon the geographical terrain where the ports are situated and analyze the
reasons for the success and failures of the gateway ports.


1.2 PROBLEM DEFIAI1IOA:

The study focuses on the nternational trade growth of ndia in the past decade
and the contribution of containerization to this growth. t is one of the objectives of this
study to analyze the reasons behind the growth of container throughput. Thus the
problems this thesis undertakes to analyze are as under:

1. dentify and analyze the critical role of containerization in the
growth of nternational Trade of ndia.
2. dentify and analyze the obstacles to the development of multi
modal transport.
3. Ascertain the role of multi modal transport in the future growth
of international trade.

1.3 RESEARCH QUES1IOAS:

The research questions are as follows:

1. What is the impact of growth of GDP on container throughput?

2. What is the role of multi modal transport in the international sea bound trade of ndia.


1.4 RESEARCH OB1EC1IJES:

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There are two main objectives of this research which are as under:

a. Forecast the growth of containerization in the next ten years.
b. Analyze the factors influencing the growth of containerization.


1.5 DA1A COLLEC1IOA:

The primary data on container movement was directly collected from the points of
origin i.e. the respective CDs / CFSs and the Gateway ports along with the data
published by the Commerce and Finance Ministries of the Government of ndia. The
secondary data on Economic growth and nternational trade was obtained from
forecasts and studies published by the World Bank nternational Monetary Fund and
United Nations Economic and Social Committee on Asia and Pacific (UNESCAP) and
Reserve Bank of ndia.


1. RESEARCH PA1H:

The Research study progresses in the following manner.


a. Chapter 2 provides a global overview of containerization.
b. Chapter 3 analyses the growth of containerization in ndia and provides
growth projections.
c. Chapter 4 discusses the problems faced in rail and road transportation
of containers.
d. Chapter 5 elaborates on the role of containerization and multi modal
transportation in the growth of nternational trade.
e. Chapter 6 discusses the role and need of Private sector in the
development of ports.
f. Chapter 7 analyses and forecasts the future growth of containerization
in ndia.
g. Chapter 8 concludes with analyzing the factors that will influence the
growth of containerization.









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CHAPTER II.


A GLOBAL OVERVIEW OF CONTAINERISATION.


it is difficult to imagine globalization taking place without the assistance provided the
freight container. The container has been called the box that makes the world go
round. When it was introduced no one could have imagined how quickly the ocean
freight business would have evolved thanks to the container. Asia particularly China
serves as the world's manufacturing hub separated by the sea to the major
consumption markets of Europe and the USA. This is the basic reason for which the
container market is growing three times as fast as the world economy (Rath, Eric.,
2004). These steel boxes have become the building blocks of the new global economy.


The invention is relatively young. About 50 years ago s on 26
th
April 1956 the first
container ship called "deal X owned by a man named Malcolm MacLean set sail from
Port Newark, New Jersey enroute to Texas. On board there were 58 trailers. n order to
save upon labor and time required to load ships, the Americans came up with the idea
of loading full trailer on a ship was introduced years earlier when he was a trucker. The
trailer became the container. MacLean later founded the Sealand Shipping Company
which was subsequently acquired by the Maersk group in 1999. Another American
called George Sharpe invented the cellular design of the ship. These boxes can carry
just about anything from frozen beef from South America, LCD monitors from
Hongkong, to shoes and toys from China.


There was a growing demand in the western countries for the goods
manufactured in Asian countries. This demand was met by transporting them cheaply in
containers to the consumers by sea. This ever increasing demand led to economies of
scale being realized in manufacturing and transportation sectors. Hence the global
throughput rose consistently over the past decade which can be seen in the table given
below.






TABLE III

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GROWTH OF GLOBAL THROUGHPUT


YEAR THROUGHPUT IN MILLION TEUs
1994 130
1995 145
1996 157
1997 174
1998 191
1999 210
2000 236
2001 246
2002 273
2003 317
2004 360
2005 414

(Source: Drewry Shipping ConsuItants)

FIGURE III

GLOBAL THROUGHPUT
0
100
200
300
400
500
1
9
9
4
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
YEAR
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M
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2.1 LOCIS1ICS & SUPPLY CHAIAIAC.
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At present 9 billion cartons of general merchandise move down the supply chain
every year connecting the manufacturers of array of goods and consumers. t is a
method of coordinating suppliers, retailers and customers resulting in value creation.
Globalization is enabled by supply chaining which further drives up the demand for
cheaper goods manufactured at production centers located at places where cheap and
skilled labor was available. This fact can be explained further as the more these Supply
Chains grow, the more they force the adoption of common standards between
companies (so that every link can interface with the next) the more points of friction are
eliminated and efforts of one company get adopted by the other. Consumers today are
enjoying benefits of more and more variety at lower and lower prices of products as
never before in the history of mankind. This has been enabled largely by
containerization. The success and growth of retail giants like Wal-Mart has largely been
due to the recognition of the importance of logistics and to the improvement of their
supply chain strategies.


nformation technology and digital communications also play a major role in the
Supply Chain. T helps in understanding the tastes of consumers which is converted
into design, manufacture, transport and supply of the desired products. t contributes to
lowering of inventory levels and reducing carrying costs and thus freeing expensive
capital. t is a very transparent process which identifies and eliminates inefficiency
everywhere. Cost cutting is the major driver of supply chain efficiency and leads to the
employment of new technologies in the attempt of reducing labor costs eliminating
errors and speeding up the entire process.


Once the containerized cargo lands at the gateway ports it is transported by rail,
road and waterways to hinterland warehouses / distribution centers. The containers are
stripped and the cargo is stored in these warehouses / distribution centers and is
subsequently transported in assorted lot sizes to the wholesalers and retailers. Time is
of essence in this entire process (Paul, J., 1996). All the parties involved endeavor to
minimize the time factor during which the goods are in their possession. This gave rise
to just in time concept of inventory levels. This results in compressing the time when
the goods leave the factory premises of the manufacturer till the time it is sold to the
final consumer. The cost benefits of this time compression are passed on to the
consumer which in turn offers a competitive edge to the manufacturer. This would not
have been possible without the advantages offered by economics of containerization.





2.2 OFFSHORIAC

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n 1977 the Chinese leader Deng Xiao Ping put China on the road to capitalism by
declaring that "to get rich is glorious. When China opened its tightly closed economy,
companies of the West saw it as a huge new market for their products as China had a
population in excess of a billion people. Some companies set up shop in China to sell
their wares. But because China at that time was not a member of WTO it was able to
raise barriers restricting penetration into its markets. Soon these companies realized
their folly and to make the best of the bad situation they decided to commence
manufacturing activities in China in order to exploit the advantages offered by low wage
skilled worker pool of China. This concept was accepted gladly by the communist
leadership of China (Sachs, J 2001). Once the process began in a range of industries
from consumer electronics to eyeglass frames to auto parts, rest of the companies not
wishing to be left out joined the bandwagon.

By joining WTO in 2001 China assured the foreign companies of protection by
nternational law and Standard Business practices. This greatly enhanced China's
attractiveness as a manufacturing platform. Under WTO rules Beijing agreed to treat
non Chinese firms in the same way as local firms thus opening its own markets to
foreign companies. Bureaucracy was also reduced in the effort to facilitate trade.

The advantage of China lies with its low wage workers and its eagerness to grow.
The huge population with its purchasing power has converted China in to a burgeoning
consumer market. China has more than 160 cities with a population in excess of one
million. China is today considered a threat, customer and an opportunity all at the same
time by the nations of the west.

The more attractive China makes itself for global off shoring the more it spurs on
other low wage nations of Asia like Malaysia, Thailand, Vietnam and ndonesia. While
the developed nations of Asia like Japan, Taiwan, South Korea and Singapore strive
harder to retain their competitive advantage they already have. This makes the entire
region a dynamic growth area which intensely competes with each other to attract
global business by offering best tax breaks, educational incentives and subsidies apart
from their cheap labor.

China has also improved its brand equity by absorbing latest technology and
modern management techniques required to improve its productivity. The resulting loss
of jobs has been compensated by the rising service sector. The Chinese leadership is
encouraging education and training often at institutions all over the world. This is
globalization at its best.

2.3 BEAEFI1S OF COA1AIAERIZA1IOA.

Time and costs are interrelated in the investments of all modes of transport. Each
asset has its own cost depending on capital and revenue expenses. ncrease in asset
utilization with reference to time yields more revenue and hence higher profits
(UNESCAP Rept No 73). Thus with a view to saving cost and time, cargoes / goods are
consolidated and converted into as big a unit as possible. The developed countries of
the west preferred this system thereby increasing productivity by displacing expensive
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labor. Further as unit load becomes bigger, mechanization becomes imperative
involving capital investment. The container serves this purpose perfectly whereby
bigger units of cargoes can be stored and carried in one go.

The container can be classified by raw material (from which it is constructed) or by
its size. Currently the maximum numbers of containers are made of Steel and
Aluminum. The nternational Standards Organization (SO) after conducting a detailed
study of standardized the size of containers to 20' and 40' in length, 8' in breadth and
8
1/2
/ 9
1/2
in height. The internal volume of a Twenty foot equivalent unit (TEU) is 33M
3
.
Containers were also classified by use for example general cargo which does not
require temperature control was called dry cargo container, while the thermal container
designed to carry cargoes requiring temperature control is usually made of Steel and
Aluminum with polystyrene foam insulation. This container was further classified into
Refrigerated, insulated and ventilated types.



The third category of containers are classified under the broad heading of special
containers like open top, bulk, tank, open side, flat racks, car and pen containers to
carry different types of cargoes like grain, cement, liquids, over sized machinery, cars
and live stock.

The most important aspect of containerization is the suitability for door to door
service i.e. a shipment can be made, complete in all respects from the shipper's
premises in one country to the consignee's premises in another country under a single
contract, freight and document which covers transport by all modes like rail, road, ship,
inland waterways and airways. This is termed as Multi Modal or nter Modal transport.


Trade in general and exports and imports in particular have benefited by
containerization and Multi Modal transport in two ways by reduction in costs and
improved customer service (Handbook on Containerization UNESCAP). The cost
saving has been on account of reduced freight, packaging costs, insurance premiums,
warehousing costs and lower inventory in the following manner:

a. Freight rates: They are assessed per container unit, for all kinds of
cargoes popularly known as FAK-Freight of all kinds.
b. Packaging costs: Earlier when general cargo was transported in non
unitized form, weather proof and sturdy packaging was a necessity. But
in container transport this need has been eliminated and package size
has been reduced to optimize container space usage.
c. nsurance premium: Marine risks by way of weather damage, thefts etc
are reduced due to cargo being transported in containers. t results in
lowering of insurance premium.
d. Warehousing costs: Transportation of cargo in earlier era by general
cargo vessels necessitated warehousing at ports of loading and
discharge for storage, sorting, packing, inspection etc. Containerization
has dispensed with such processes leading to cost savings.
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e. nventory costs: Container carriers sail at high speeds and maintain strict
schedules. This allows the exporters and importers to do forward
planning and maintain lower inventory.
f. Customer Service: Containerization leads to better service to customers
in the form of quicker delivery, assured transit times and less damage to
cargoes in transit because container carriers are high speed vessels
which spend less time in ports due to improved efficiency of port
handling equipment.
2.4 FREICH1 S1RUC1URE:

n the past decade containers have been increasingly used for transportation of
almost all types of general cargoes. This has lead to lowering of transportation costs
and has resulted in benefits for all parties involved. Nowadays traders stipulate
transport of cargo in containers as a precondition for commercial contracts. As a result
of this demand the shipping lines have responded by manufacturing different types of
containers like dry van, open tops, ventilated, flat racks, high cube and reefers with the
length being standardized to 20' and 40' and width at 8'.

The freight structure has been mainly determined by three factors, adoption of
trade route, inland mode of transport and the liner conference with minor influences
exerted by freight forwarders, cargo consolidators and in some cases the Non vessel
owning operator (NVOCC). The principle of what the market can bear also plays an
important role. Certain types of time sensitive cargoes like perishables, white goods and
garments attract higher freight while others like scrap, metal waste, steel coils and such
voluminous inexpensive cargoes which cannot afford to pay higher freight are charged
less for the same transportation route. The factor of one way empty container haulage
also affects the freight structure.
TABLE IV

GROWTH OF GLOBAL TEU CAPACITY


YEAR IN '000 TEUs
1994 1483
1995 1590
1996 1747
1997 1930
1998 2170
1999 2363
2000 2437
2001 2564
2002 2726
2003 2905
2004 3036
2005 3220
(Source: Ocean Shipping Consultants)
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FIGURE IV

GROWTH OF GLOBAL TEU
CAPACITY
0
2000
4000
1
9
9
4
1
9
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6
1
9
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2
0
0
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2
0
0
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2
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Series1


Another important factor affecting the freight structure is the detention charge and
the responsibility of causing such detention. A container either loaded or empty gets
detained sometimes by the different parties involved for a variety of reasons like traffic
congestion, non-availability of cargo, custom regulations and so on resulting in rise of
expenses. n some cases the expense is absorbed by the carrier while in the remaining
cases it is passed on to the shipper or the intermediate handling agent. The rising costs
of fossil fuels and port congestion charges are usually borne by the shipper while the
rest are shared between the shipping line and the intermediate handling agent.

There are also other factors affecting the freight structure like demand and supply,
competition amongst the lines, the transportation characteristics of the cargo like
susceptibility to pilferage and damage, the length of the voyage and lastly availability of
infrastructure.

There are three types of freighting arrangements namely a) Commodity box rate
(CBR) b) Freight of all kinds (FAK) and c) tariff rate for less than container load
shipments. The CBR is the most popular, where a single tariff is applicable for a 20'
Container stuffed with a one or similar types of cargos. The shippers derive maximum
advantage of the space available for stuffing keeping in mind the weight restrictions.
The FAK is quoted by the carrier when he is not concerned with the commodity stuffed
inside the containers (provided it is not hazardous or requires special care). Here the
shipper derives maximum advantage by admixing different types of compatible cargoes.
Shippers having small quantities of cargoes are charged a rate depending upon the
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For Evaluation Only.
21
volume and weight of the cargo. n such cases the stuffing / destuffing costs are borne
by the carrier.

The liner conference also fixes minimum freight tariffs that need to be charged by
the member operators. The conference fixes different rates taking into consideration the
commodity transport routes, ports, scope of responsibility accepted by the carrier and
other such mutual contractual terms like free on board (FOB) free along side (FAS) Ex
works (EXW), cost and freight (CFR) etc. These are known as the nternational
Commercial Terms or NCO terms formulated by the nternational Chambers of
Commerce in 1936 and subsequently amended several times in 1953, 1967, 1980,
1990 and lastly in 2000.





























22




CHAPTER III


CONTAINERIZATION IN INDIA


ronically containerization was introduced for the first time in ndian domestic
market way back in 1966 by the ndian railways to provide door to door service to their
customers and attract cargo from roadways. They used containers with a 5 ton payload.
However the nternational Marine Container failed to become popular right up to the late
1980s which in turn affected international trade growth. Hence the necessary
infrastructure required for multi modal transport was never created till it was almost too
late. (Kohli, A, K., 2002)


t was only in 1987 that the Government of ndia realized the importance of
containerization and started constructing a satellite port at Bombay which commenced
operations in 1988 and was christened The Jawaharlal Nehru Port (JNP) after the first
Prime Minister of ndia. Subsequently a Corporation was created by the ndian railways
for inland haulage of containers by rail called CONCOR which constructed the first CD
at Tughlakabad in New Delhi.


ndia acquired its first cellular ship in 1948 with a capacity of 400 TEUs. The first
container was handled at Cochin in 1979 carried by a vessel owned by American
President Lines which also commenced a scheduled service from Bombay followed by
several other foreign companies. The shippers and consignees also responded
positively to this new development and forced the government to make heavy
investments in the infrastructure for growth of containerization in ndia.


Containerization has since grown substantially. ndian ports handled a total of
1,052,000 TEUs in 1993 while it handled 4,637,000 TEUs in 2005, a significant growth
of 400% in 12 years.







23
TABLE V

GROWTH OF INDIAN THROUGHPUT (in MiIIion TEUs)

YEAR THROUGHPUT
1994 1.05
1995 1.25
1996 1.44
1997 1.69
1998 1.89
1999 1.93
2000 2.18
2001 2.88
2002 2.47
2003 3.91
2004 3.36
2005 3.93
(Source: UNESCAP)





FIGURE V


INDIAN THROUGHPUT
0
1
2
3
4
5
1
9
9
4
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
YEAR
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M
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24


3.1 AA OJERJIEW OF IADIAA FOREICA 1RADE


The ndian exports can be classified into three groups as follows:

1. Products like Jewelry, Software, Electronics, Agri products, Processed foods,
Medicines and Personal products.
2. Products like Diamonds, Leather products, Garments, Chemicals, Engineering
goods and Automobile components.
3. Products like Tea, Coffee Jute etc.


With the diversification of ndia's export base the share of manufacturing and
processed goods is increasing. Except for Jute and Tea most of the other products are
exported from the Ports of JNPT and Mundra. While non bulky but valuable products
like polished diamonds, jewelry and cut flowers are exported by air mainly from
Mumbai.


The ndian imports mainly comprise of crude oil and Petroleum Oil products,
sophisticated electronics, high tech engineering capital goods, chemicals, POL
products, edible oil, Newsprint etc. most of these goods are destined for consumption in
the Northern states or western states. A very small percentage is consumed in central
or eastern ndia. The southern states are served mainly by the Chennai port with little
help from Vizagapatnam, Kochi and Tuticorin. (Ministry of Commerce, Government of
ndia)


TABLE VI

LIST OF PRINCIPAL IMPORTS

PRODUCTS PERCENTAGE
PETROLEUM 28
CAPTAL GOODS 10
UNCUT GEMS 9
MACHNERY 7
FERTLSERS 5
NON FERROUS METALS 1
OTHERS 40
(Source: Drewry Shipping Consultants)



25





FIGURE VI


BREAKUP OF PRINCIPAL IMPORTS



28%
10%
9%
7%
5%
1%
40%
PETROLEUM
CAPTAL GOODS
UNCUT GEMS
MACHNERY
FERTLSERS
NON FERROUS




ndia has major trade relations with the United States, EU countries, Persian Gulf
and South East Asian countries apart from China and Japan. Thus it is not
concentrated with a particular global region. Furthermore due to draft restrictions and
lack of suitable infrastructure, the mega carriers of 8000 TEU capacity and above are
unlikely to call at the ndian ports in the foreseeable future and ndian containerized
cargo will continue to be shipped from the ports of Singapore and Salalah / JebelAli.



The ndian foreign trade comprising of both exports and imports will continue to
grow in the next ten years at a healthy pace of 7-8 % with imports having an edge over
exports. As the share of the service sector is continually increasing while the share of
agriculture continues falling, the growth of physical movement of goods will not rise
beyond a certain limit. n other words the ndian economy cannot be compared with
Chinese economy which is driven by the manufacturing industry thus requiring physical
movement of goods and hence bigger infrastructure with large capacities to avail the
benefits of economies of scale.



26





TABLE VII

LIST OF PRINCIPAL EXPORTS


PRODUCTS PERCENTAGE
TEXTLES 25
GEMS & JEWELERY 17
RON, STEEL & ENGG PRODUCTS 16
CHEMCALS 12
LEATHER 5
HANDCRAFTS 3
OTHERS 23
(Source: Drewry Shipping Consultants)



FIGURE VII


BREAKUP OF PRINCIPAL EXPORTS


24%
17%
16%
12%
5%
23%
3%
TEXTLES
GEMS & JEWELERY
RON, STEEL & ENGG
PRODUCTS
CHEMCALS
LEATHER
HANDCRAFTS
OTHERS




27



3.2 HIA1ERLAAD DEJELOPMEA1

The full potential of containerization cannot be realized without hinterland
development. This requires large investments along with subsidized pricing structure to
enable the containers to reach the cargo generating locations cheaply. n ndia fair
quantity of the exports are generated in the northern states of Punjab, Haryana and
Uttar Pradesh which are located far away from the gateway ports of JNPT. Hence the
first nternal Container depot (CD) was created in Delhi followed by depots in Panipat,
Ludhiana, Moradabad, Agra and Moga and a corporation was created by the
Government of ndia called Container Corporation of ndia Ltd (CONCOR) to connect
these CDs to the gateway port by rail in ndia to enable smooth and seamless
movement of containers. Subsequently CONCOR also started constructing CDS and
CFSs in other parts of ndia and at present operates 60 CDs and CFSs all over the
country.

CDs are interfaces between connecting modes of transportation and offer a total
package of activities to handle export and import containers and general cargo flows
between road, rail and waterways in a cost effective manner with intermediate storage
thrown in, along with some value addition services like consolidation of cargo, grading,
sorting, packaging, custom examination etc. The CDs also provide container repair and
cleaning facilities.


3.3 ROLE OF CUS1OMS IA MUL1IMODAL 1RAASPOR1A1IOA OF
COA1AIAERS.

With the advent of containerization in ndia, ndian customs became an important
entity in the transportation chain and new systems and procedures had to be put in
place and constantly fine tuned to adapt with the frequently changing scenario. As
customs duties on export/import goods are a major source of revenue for the
Government of ndia the procedures instituted had to prevent revenue leakage on one
hand while not becoming cumbersome to hinder trade growth on the other hand. At this
point one can say that the custom authorities have succeeded to a great extent in
achieving these objectives. The custom procedures can be broadly divided in to three
areas: a) Export cargo procedures, b) mport cargo procedures, c) Transshipment cargo
procedures.

a) Export cargo procedures: The exporters need to file five copies of
shipping bills in hard and soft format giving necessary details at the CD
itself along with the container number and the port of loading. The cargo
is examined and the duty is assessed by the custom officials present in
the CD who then permit the cargo to be stuffed in to the designated
container and permit its inland transportation to the gateway port. A
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28
copy of the shipping bills is retained by the custom authorities at the CD
itself while handing over remaining copies to the exporter. The exporter
also has to fill and submit along with the shipping bill a GR (Guaranteed
Remittance) form in triplicate indicating the value of export cargo. The
authenticity of the value stated is also verified by the customs who then
forward this form to the Reserve Bank of ndia to ensure receipt of
remittance of the value of goods exported.

On the container reaching the gateway port the shipping bills are
endorsed by the port custom authorities and are then handed over to the
respective shipping lines, permitting loading of the containers to the
vessels. As and when the container is loaded on to the vessel the
shipping line prepares and submits an Export manifest in hard and soft
format giving all details to the port customs who after verifying the details
stated in the manifest subsequently inform the CD customs of the
loading details of the said container. The GR form is then endorsed by
the CD custom authorities and returned to the exporter to enable him to
submit the same documents to the banks and obtain his dues presenting
the letter of credit given to him by the consignee.

n order to promote exports the Government of ndia has waived excise
duty levied on the goods manufactured within the country and exported.
The exporter on submitting the proof of goods exported to the excise
department is reimbursed the duty paid by him earlier. The Government
of ndia has also exempted income tax on foreign remittances to
enhance its foreign currency reserves and ensure inward remittances of
value of cargo exported from the country.

b) mport Cargo Procedures:
Prior to the physical arrival of imported cargo the importer needs to
obtain permission from Reserve Bank of ndia to import and remit the
necessary foreign currency abroad to the shipper. On obtaining such
permission the physical shipment of cargo in a container is effected by
loading the container on a vessel owned / operated by a specific
shipping line. t then becomes the responsibility of the shipping line to
submit an mport document giving necessary details with the custom
authorities who will then allow that the containers is unloaded from the
vessel at a specified port of discharge.

Depending on the contract of affreightment between the shipper and the
shipping line evidenced by the bill of lading the importer or his agent or
the shipping line itself obtains transshipment permit from the customs
allowing the container to be transported by rail or road to the CD located
closest to the factory / warehouse of the importer.

The movement of containers from the gateway port to the interior is a
special facility. The shipping line or the transporters, need to execute a
29
suitable bond undertaking to bear the custom duty liability on shortages
that may occur during the transit.

On reaching the respective CD the shipping line submits the container
along with the necessary documents and the transshipment permit to the
CD custom authorities who after verifying the integrity of the seals
affixed on the doors of the container allow the destuffing of the cargo.
The cargo is either destuffed or warehoused in the CD itself or is
destuffed in the presence of the custom officials and loaded on to a truck
trailer or is restuffed in to the same container which is then loaded on to
a truck trailer for onward transport to the factory / warehouse premises of
the importer. The CD customs ensure the receipt of the cargo according
to what is mentioned in the import document filed and transshipment
permit that has been filed by the shipping line.

c) Procedure for Transshipment containers: Transshipment means shifting
of cargo from one vessel to another vessel for transport to the final
destination. f the cargo discharged in the country is not meant for
consumption within the country then such cargoes do not attract
customs duty.

Some of the ndian ports also serve as the gateway ports for land locked
countries like Nepal and Bhutan. They also service to some extent the
nternational trade of Bangladesh where the mainline operators do not
call.

n the case of transshipment a transshipment permit (TP) is prepared
and submitted by the shipping line to the custom authorities who then
allow such containers to be discharged at a specific port either to be
loaded on to another vessel for onward transportation to its final
destination or on to truck trailer or railway wagon for inland
transportation. n such cases a transit bond needs to be furnished by the
transporter to the tune of 300% of the CF value. The ports of Kandla,
Chennai, Kochi and Haldia handle fair quantity of such transshipment
cargoes.

3.4 ROLE OF CLOBAL MUL1IMODAL OPERA1ORS.

ndian shipping companies are relatively small both in terms of vessels and
in terms of cargo transported with the sole exception of the state owned The
Shipping Corporation of ndia. t is a strange fact that in spite of a lot of
encouragement and assistance provided by the Government of ndia, ndian
shipping companies carry less than 5% of the total ndian container trade
amounting to approximately five million TEUs. (ndian Ports Association)

Almost the entire containerized foreign trade of ndia is handled by foreign
shipping companies like Maersk, Mediterranean Shipping Company (MSC),
30
Evergreen, NYK, MOL, Hapag Lloyd and APL to name a few. These shipping
lines have been operating in ndia through their agents for the past 35-40 years.
t was only in the 1990s after the institution of the economic reforms process
that these companies established ndian subsidiary companies registered in
ndia. n the process they not only served the ndia foreign trade but they have
also managed to control completely the ndian market.

t was again a foreign company namely, P & O Ports (now a part of the
Dubai based DP World) which imitated the port privatization process by
obtaining the first private terminal contract at JNPT in 1998 followed by Chennai
and Mundra. The APM Terminals (part of the Maersk group) followed up by
obtaining another terminal at JNPT and Pipavav. With the opening of the rail
container transport sector almost 14 foreign companies have been awarded
licenses to transport containers by rail thus ending the monopoly of CONCOR.
Some of the foreign shipping companies notably Maersk and APL have also
entered the warehousing and distribution sectors by opening their own CDs at
JNPT and New Delhi.

At present these foreign shipping companies are offering total logistics
solutions to the ndian industry by way of their expertise and experience
gathered globally over the years. t is very unlikely that an ndian shipping
company will challenge their position in the near foreseeable future as they
neither have the necessary resources nor the expertise. (Hariharan, K.V., 2002)



















31




CHAPTER IV


RAIL AND ROAD TRANSPORTATION.

nland transportation of containers is the biggest challenge faced by
multi modal operators in ndia. Presently about 40% of the containers are
moved by railways with the remaining percentage by roadways with no
usage of inland waterways.

ndian Railways was the legacy of the British Raj created over 150
years ago. With regards to the roadways one can stretch the period back to
the 13
th
century or even earlier when the rulers like Ashoka and Sher Shah
Suri created the Grand Trunk road stretching right across the breadth of
ndia. But the modern roadways were only created by the British rulers with
large capacity increases done by the Government of ndia after
independence. (Chandra R, 2002)

These road and rail networks were created when containerization
and globalization were at their starts hence it is not surprising that they are
unable now to cope up with the strain deriving from containerized global
cargo. Any improvements will require large investments which the
Government of ndia is unable to do due to financial constraints. On the
other hand the private sector is keen to provide financing to infrastructure
investment provided the Government guarantees them normal returns.

ndian Railways began operations in ndia in 1853 just 15 years
after the steam engine was invented in Great Britain. t was slowly extended
to all parts of ndia especially in those areas where the British ruled directly
like Bombay, the United Provinces, Central ndia, Bengal and Madras. This
was done with the purpose of helping British Trade and Commerce. t is
worth noting that as much as 80-85% of the existing rail infrastructure was
created by the British in pre-independence ndia which was subsequently
modernized and increased after independence. (Mukherjee. A., 2002)

Today ndian Railways have excellent coverage in with almost all
parts of the country. t carries both passengers and freight in a cost effective
manner. The Railways subsidize certain classes of both passenger and
freight traffic by charging higher rates to other classes which they can bear
to pay. n addition to this as it is entirely owned by the Government of ndia it
has complete monopoly on rail movement and owns huge real estate assets
32
which it can use as it desires. The primary motive of the Railways is not
profit but to provide service. t employs almost two million people and owns
huge tracks of prime land all over the country. The ndian Railways have
also spawned commercial set ups like Railtel in the telecommunications
sector, ndian Rail Tourism and Catering Service (RTCS) in the hospitality
sector and RTES in the Engineering Consultancy sector to exploit new
opportunities arising in these fields.

TABLE VIII

BREAK UP OF MULTIMODAL CONTAINER TRANSPORTATION
(in MiIIion TEUs)

YEAR BY RAIL BY ROAD
1994 0.36 0.68
1995 0.45 0.8
1996 0.53 0.9
1997 0.64 1.04
1998 0.73 1.13
1999 0.77 1.16
2000 0.88 1.29
2001 1.16 1.71
2002 1.04 1.43
2003 1.64 2.26
2004 1.37 1.98
2005 1.72 2.21
(Source: Ministry of Surface Transport)


FIGURE VIII

MULTIMODAL TRANSPORT
0
0.5
1
1.5
2
2.5
1
9
9
4
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
YEAR
I
N

M
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I
O
N

T
E
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s
BY RAL"
BY ROAD

33


4.1 RAIL 1RAASPOR1A1IOA OF COA1AIAERS.

ndian Railways first started container transportation in January 1966
to provide door to door integrated intermodal service. The containers with a
pay load of just 5 tons were loaded and sealed in consignor's godowns and
delivered to consignee's godowns using both rail and road transport. t
resulted in reducing risk of loss, damage and pilferage apart from saving on
packing costs. This service was essentially meant for the domestic market
and this experience helped them subsequently to provide multimodal
transportation of SO containers. The actual job of Railway haulage was
conducted by ndian Railways. The railways transported the containers by
rail for CONCOR at below market price allowing CONCOR to make profits
which were reinvested in setting up CDs and CFSs on railway owned lands
leased to CONCOR. By refusing to transport containers by rail for any other
organization the ndian Railways thus made CONCOR a monopoly.

While accepting containers for rail transportation from various shipping
lines CONCOR in turn issued a Rail Receipt (RR) on behalf of ndian
Railways which is a negotiable document. The shipping line in turn issues a
combined transport document (CTD) or Bill of Lading to the consignor. The
RR is also known as nward Way Bill (WB). CONCOR has submitted a bond
to the customs as a security against revenue leakage and for allowing them
to transport containers to and from the gateway ports to the hinterland. On
arrival of the containers at their destination as the case may be, the
respective shipping lines surrender their WB and obtain delivery of their
containers. The WBs are covered under the ndian Railways Goods
Transportation Act whereby the liability of CONCOR is limited to Rs. 50/- per
kg or actual value of goods whichever is lower.

However due to the high demand and several infrastructural
bottlenecks mostly the absence of dedicated freight corridor reserved for
container traffic the ndian Railways are unable to provide pre-fixed
scheduled service by means of which the containers from CDs can directly
be connected to the sailings of specific ships from gateway ports, nor can
they guarantee fixed transit times. (Ahuja Karan., 2001)

Another problem faced by the shipping lines is the lack of movement
of imports to certain CDs like Amingaon and Moradabad where only exports
are generated. Hence empty containers have to be moved free of cost to
these locations. n such cases CONCOR stuffs these SO containers owned
by the shipping lines with domestic cargo and earns freight while charging
the line a discounted rate maintaining it advantageos for the line to
reposition the empty boxes.


34
The design of the container flat cars is also being altered to allow
them to carry heavier payloads at high speeds and wherever possible
containers would be transported in double stacks. This experiment was
successfully conducted between CD Jaipur and the gateway port of
Pipavav. Another problem in hinterland transportation by railways is that the
ndian railway network presents technical discontinuities. Certain routes
have a smaller gauge of 1.00 meter that is being slowly converted to the
broad gauge of 1.67 meters that is used throughout the country. These
discontinuities impede universal rail connectivity and hence containers have
to be routed over longer routes. The structure of numerous overhead bridges
as well as rail bridges also needs to be altered to enable movement of heavy
loads at high speeds. This also applies to railway tunnels. Several trunk
routes are electrified while the rest are still dependent on diesel locomotives.
This also results in slowing down smooth operation as the electric
locomotives have greater power than the diesel operated locomotives and
can pull heavier loads at greater speeds.

4.2 ROLE OF COACOR.

With the advent of containerization in ndia, a separate corporation under the
ndian railways was created as an autonomous public sector undertaking on 1
st
March
1988 with the basic objective to provide multi modal transport logistics in a cost
effective and efficient manner in order to facilitate the nation's foreign trade. n 1994 it
transported 0.36 million TEUs and grew at a rate of 15.2% and presently transports
over 2.2 million TEUs per annum (CONCOR Annual Report of 2005) and till recently
had a total monopoly control over rail movement of containers.

CONCOR has also set up bonded warehouses at various CDs where import
cargoes are stored under custom bond and is cleared on part basis by the importer on
payment of custom duty. CONCOR also transports Petroleum Oil and other liquid bulk
products in its own tank containers in the domestic market along with other general
cargoes.

CONCOR has installed a sophisticated container cargo logistics system in the CDs
owned by it and interconnected with each other with multi user LAN network. t has also
purchased over 5000 container flat wagons and several container handling equipments
with a World Bank loan of about 94 million USD. The Government of ndia subsequently
sold part of its equity in CONCOR in the open market and its share is traded on the
major stock exchanges in ndia.

CONCOR has also entered into several joint ventures with Shipping Lines, State
Warehousing Corporations and Terminal Operators to offer Multi Modal Logistics and
Consultancy Services. They have an excellent vendor development program whereby
they have financed their own vendors to buy expensive handling equipment and the
loan amount is deducted in monthly installments from their bills. This has lead to
creation of committed and loyal vendors. CONCOR has also completely outsourced the
road transportation activity which has enabled them to concentrate on its core rail
35
transport activity and consolidating its status as a market leader as multi modal logistics
operator.

CONCOR has recently entered in to another joint venture with Hindustan
Aeronautics Ltd to offer air cargo transportation services. An Air Cargo Terminal at
Nasik in Maharashtra has been taken over which would be converted in to an Air Cargo
Hub and is expected to commence operations in December 2006.

CONCOR plans to extend the coverage of its services countrywide by building
additional terminals. t is also in the process of acquiring additional rolling stock to
increase frequency of service. t has invested in modern information technology
systems to provide information in real time to its customers. t is also beginning to
provide third party logistics (3PL) services and has plans to set up Distriparks, Freight
and Trade Development centers to offer total logistics solutions.

As stated earlier CONCOR faces a high demand for movement of
containers and due to unavailability of sufficient flat cars, the demand cannot
be satisfied promptly. This resulted in many shipping lines being dissatisfied
with the service of CONCOR. As a consequence the Government decided
recently to end the monopoly of CONCOR in the transportation of
containers by rail and to grant access to the container rail transportation to
other commercial organizations with the necessary experience and financial
standing. n addition a feasibility study has been conducted on the
construction of a dedicated freight corridor between Delhi and Mumbai and
Delhi and Kolkatta and work is expected to commence in the near future.
The equity stake of the Government of ndia in CONCOR would be partially
sold to raise necessary resources for construction of the freight corridor.
(CONCOR Annual Report)

The last major problem faced in rail transportation of containers is
non availability of sufficient container handling equipment at the CDs and
CFSs as they are not only capital intensive but are also expensive and
difficult to maintain. As such overhead gantry cranes are not manufactured
in ndia and have to be imported. These cranes become economically viable
only if sufficient volume is generated at the CD/CFS. This result in increase
of turn around time consumed to discharge and load a train at the CD. The
problem is further aggravated due to the mushrooming of CDs and CFSs at
various locations, thus resulting in dilution of volumes available for handling
at the locations. (Aserkar Ravi., 2003)


4.3 ROAD 1RAASPOR1A1IOA OF COA1AIAERS

Presently in spite of several shortcomings and bottlenecks the roadway
system continues to carry over 57% of the total container traffic and
continues to grow at a rate of 11.4% (Ministry of Surface Transport-2005)
which is not a desirable situation at all for several reasons. The first reason
36
is that ndian roadways are just not capable of withstanding the heavy
demand placed on them. This results in congestion and mounting expenses.
As it is the ndian roads are in a poor condition and rapidly deteriorating
when heavy loads are placed on them. Secondly ndian roads traverse
through hills and mountain passes and cross several bridges built over
rivers, streams and creeks. This requires the truck trailers to have sufficient
horse power engines and well maintained trailer systems to carry heavy
loads efficiently over long distances. Unfortunately this is not the case in
ndia, thus resulting in frequent breakdowns and long congestions and heavy
expenditure apart from pollution and health hazards. Thus neither the roads
network nor the truck trailers are capable of handling container transport. (9
th

Five Year Plan Government of ndia)

Thirdly ndian roads are not priced correctly (Sachs.J 2004). A few
toll roads have developed recently but the experiment is yet to prove
successful. t remains to be seen whether the revenue generated can
provide sufficient returns on the capital invested and whether it can be used
for maintaining the roads. A massive road development programme
connecting the four Metros has been undertaken with the help of private
sector but is unlikely to be completed within the scheduled time period and
the earmarked budget. Whether this road network assists in easing the
unbearable strain placed upon the roadway system as a whole remains to
be seen. Furthermore whether this road network would be priced efficiently
is also an important question otherwise in no time the entire system would
disintegrate in to pieces.

Though economically priced the Railways have not been able to
attract freight from the road network mainly due to insufficient connectivity
and its failure to maintain scheduled transit times apart from insufficient
supply of container wagons and poor customer service (Kohli. A. K. 2003).
Though most of the CDs and CFSs are connected by rail network yet the
dependency on road transport has not been reduced. The custom authorities
too are quiet reluctant to permit usage of roadways for inland transportation
of containers due to risk of pilferage and smuggling. With the advent of
terrorism this risk has increased manifold. Yet due to lack of other
alternatives they have permitted some movement of containers with surprise
checks in between the transit.

Another hindrance in seamless movement of containers is the Octroi
tax which is a tax imposed by local municipal authorities especially where
inter-state movement is concerned. t impedes smooth movement of goods
and adds to delays and expenses. The need for abolition of Octroi has been
emphasized by several committees and Trade Associations (Peters H.J.
2003). The central Government of ndia responded by abolishing Octroi in
Delhi and Union Territories. The state governments have been urged to
abolish Octroi and finding alternate sources of revenue to compensate the
loss. But the major opposition comes form the municipalities and local
governing bodies for whom it is a major source of income.
37

Another problem requiring attention is the need to rationalize the Motor
vehicle tax structure and reduced multiplicity by centralized tax collection.
The National and Zonal permit scheme was formulated with the single point
taxation as its major objective with simplified procedures. However this
scheme is yet to be implemented. The usage of multi axle vehicles also
needs to be encouraged which can result in fuel efficiency and increase in
load carrying capacity of the vehicles especially of heavy containers
(UNESCAP, Rept No 74). t also exerts lesser stress on the road network. t
is pertinent to note that one of the most important causes of road damage is
improper axle load of trucks. n order to achieve this objective the Motor
Vehicle tax structure needs to be rationalized which is currently based upon
the number of axles.

As stated earlier the road network is in poor condition due to
cumulative neglect especially of state highways and district feeder roads.
The roads need to be repaired and upgraded on war footing. t needs to be
recognized that road characteristics like asphalted concrete mix, premix
carpet, soling and roughness etc affect the cost of operations of vehicles and
with the global fuel prices shooting up, the situation can spin out of control.
The improvement of road condition can result in major fuel cost savings. n
order to improve the road infrastructure the Government of ndia has created
a National Highways Authority. The road bridges which constituted an
important part of the road network system also need to be upgraded to carry
heavier loads. The drivers of heavy vehicles also need to be imparted
necessary training especially regarding safety and precautions to be
observed to reduce road accidents. Proper guidelines need to be evolved to
transport containers in a safe manner especially regarding proper stowage
of cargo and securing of containers. The vehicles should also be inspected
periodically to ensure proper maintenance.

Last but not the least is the need to highlight private sector
participation because the Government just does not have the necessary
resources to achieve the stated objectives
(Sachs. Jeffrey. Dr and Bajpai, Nirupam., 2004). There is a wide scope in
both rail and road networks for the participation of the private sector. But the
Government should recognize the need for making the opportunities
sufficiently attractive to entice the private sector in investing their funds as
well as their expertise in building and operating such projects.







38




CHAPTER V

GROWTH OF INTERNATIONAL TRADE AND MULTIMODAL
TRANSPORT.

ndia's nternational trade has grown substantial in the past decade (imports have
grown from 13 billion USD to 110 billion USD while exports have grown from 34 billion
USD to 81 billion) and containerization and multi modal transport has played a major
role in driving this growth especially of manufactures and Agriculture produce
(Containerization has also grown from 11 million TEUs to 4.4 million TEUs in the same
period). This is the state of affairs despite a container penetration ratio of 56%. The
manufacturing centers of ndia are situated far away from the gateway ports. Majority of
ndia's export cargo generation takes place in the Northern states of Punjab and
Haryana, Delhi and Uttar Pradesh which are situated far away from the ports of
Mumbai, JNPT and Mundra where the mainline vessels call. Though ndia's
nternational trade has grown manifold yet its share in the global nternational trade has
remained under 1%. This failure has been primarily due to two factors. Firstly the
myopic policies and priorities of the Government of ndia driven by the need to protect
the interests of the urban consumer by controlling the prices and secondly due to the
cussed policies of the developed countries of the west chiefly United States to protect
the interests of the rural farmers by offering huge subsidies. t is an irony that such
economic policies are being followed in the very countries that gave birth to the
founders of the modern economic theory viz Adam Smith and Ricardo. Both of them
must be turning in their graves.

The manufacturing centers of ndia are situated far away from the gateway ports.
The majority of ndia's export cargo generation takes place in the northern states of
Punjab, Haryana, Delhi and Uttar Pradesh which are situated far away from the ports of
Mumbai, JNPT and Mundra where the mainline vessels call. Though ndia's
international trade has grown yet its share in the global nternational trade had
remained under 1%. This failure has been primarily due to two factors. Firstly the
policies and priorities of the Government of ndia have been driven by the need to
protect the interest of the urban consumer by attempting to control prices. Secondly, the
policies of the developed countries of the west primarily the United States are aimed at
protecting the interests of their local farmers by subsidization of production.
ndia is primarily an agriculture based economy where more than 70% of its vast
population is employed in the agricultural sector. n addition to this the agricultural
activity is dependant to a great extent on monsoon rains and less on irrigation except in
Punjab and Haryana. n spite of such circumstances ndia is a major producer of almost
all kinds of agricultural and animal products and is a net exporter. Thus ndia could
become the bread basket of the world if it was allowed to freely access the global
39
market (Agriculture Task Force Report Government of ndia 2002). On the other
hand ndian high technical content manufactures are inferior compared to those of
developed countries. n the recent WTO talks the developed countries lead by the
United States insisted on ndia to lower its custom duties to their products while refusing
to reduce subsidies to their own farmers.
Despite the inability of ndian and western policy makers to reach an
agreement, ndian foreign trade continues to grow at a healthy pace of 10-12% and will
continue to do so. Taking into consideration the above mentioned fact containerization
and multi modal transport will have no option but to keep pace with the growth of
nternational trade of ndia.

As stated earlier the majority of ndian general cargo is originated mainly in the
northern regions with smaller amounts being generated in rest of the country though
considerable exceptions are the western states of Gujarat and Maharashtra along with
the southern states of Tamilnadu and Karnataka (ASSOCHAM REPT 2003). The rest
of the country does not contribute to the nternational trade activity. This happens
despite several CDs and CFSs are set up in states like Bihar, Orissa, Bengal and
Andhra Pradesh where significant cargo generation just does not take place.

5.1 IA1ERAA1IOAAL 1RADE AAD IAFRAS1RUC1URE DEJELOPMEA1.

Presently the foreign trade of ndia is in excess of 500 million tones (both
imports and exports) and is targeted to rise yearly by 10-12%. This places a challenge
on ndian infrastructure, which is already under strain to sustain this pace of growth in
trade. This calls for additional effort to modernize the crumbling infrastructure which is
characterized by obsolete equipment, hierarchical and bureaucratic management
structure, labor intensive institutions which are not consistent with government
objectives of trade growth. Even if the government has earmarked significant (but
insufficient) resources, it remains to be seen whether they could be adequate and
properly used, taking into consideration the past history of cost over runs, delays and
corruption during the construction of mega projects. Similarly considering that the
bureaucracy is reluctant to give up control of infrastructure, it would also become
another impediment to attract much needed private capital.

The Government of ndia has targeted 8% GDP yearly growth rate which
would be unattainable without simultaneous without growth in nternational trade which
in turn needs to be facilitated by modern and efficient infrastructure (Ministry of
Commerce Government of ndia). Such an infrastructure can only be available with
the active assistance and participation of the private sector. The private sector will only
be interested if guaranteed returns are assured; this is exactly what the government
needs to do viz; to attract private investment and participation by making necessary
changes in their policies.

ndia has a fairly balanced international trade with exports lagging slightly
behind imports. n order to promote export growth the government has announced a
slew of incentives like no tax on export earnings, exemption of customs duty on
imported machinery for exports oriented enterprise, setting up of special economic
40
zones (SEZs) and several others (UNESCAP REPT NO 74 2003). Such steps have
resulted in merchandise exports growing by excess of 10% consistently and are
currently to the tune of 80 billion USD whereas the Chinese exported goods worth 564
billion USD for the same period. n spite of this growth ndia's share of global export
trade is less than 1%. ndia will have to make much more efforts similar to the ones
made by the Chinese to further penetrate the global markets. The Economic Survey of
ndia indeed admits that single most important reason for stagnant share of global
export markets has been lack of modern infrastructure to facilitate nternational trade.

Another important factor that needs to be focused upon is the fact that only
71.3% of exports and 42.6% of imports are containerized (Shashi Kumar. N., - 2003). n
addition about 70% of the total containerized trade moves through the 3 major ports of
JNPT, Mundra and Chennai (with the bulk of the trade passing through JNPT) and the
balance 30% being shared between the remaining 9 major ports. This results in
congestion at JNPT and under utilization of capacity at the other major ports. t also
causes over stress on the Delhi-Mumbai rail and road network. This imbalance has
been partially corrected by some cargo of JNPT and Mumbai being diverted to the
newly commissioned ports of Mundra and Pipavav in Gujarat, while some cargo of
Chennai might be diverted to the recently privatized terminals of Valarpadam in Kerela
near Kochi and Vishakhapatnam. But the swift annual growth of 10% easily consumes
the additional capacity generated in this way.


5.2 IADIAA SHIPPIAC IADUS1RY.

ndia is strategically located close to the Trans Pacific and Europe Far
East liner shipping routes and the intra Asia North South trade lanes. Almost all global
shipping lines have their presence in ndia to exploit the growing market opportunities
and derive advantage of the strategic location. The National shipping line Shipping
Corporation of ndia (SC) has one of the largest fleets in the world. ndian Officers and
Seamen are employed globally. Several training institutes for Officers and Seamen
have been set up by the Government as well as by Shipping Companies. n addition to
this the Government has promoted and developed several ship building and repair
yards to promote growth of the shipping industry. An ndian classification society called
The ndian Register of Shipping was also set up to help the trade. ndia also has one of
the biggest ship breaking facilities in the world located at Alang in the state of Gujarat
on the west coast.

t must be acknowledged that the shipping industry in ndia has always been
fully liberalized with no restrictions on the entry of private sector companies. On the
contrary every possible effort has been made to help the private sector to progress in
this industry by the Government both financially and fiscally (Hariharan. K.V.Dr 2002).
Several policy changes were legislated towards achieving this objective. Presently
ndian shipping industry comprises of a few large and medium size shipping companies
dominated by the state owned Shipping Corporation of ndia and a host of private
players. On the eve of independence ndian shipping comprised of only 60 vessels with
gross tonnage of 0.192 million tons which has grown to 612 vessels with gross tonnage
41
of 7.96 million tones in 2005. This is well short of the proposed growth target of 9 million
gross tons. This has resulted in the national flag carriers loosing market share to foreign
shipping companies. This has been in spite of the Government providing all possible
incentives like reserving government cargoes for ndian vessels and providing cheap
capital as well as tax waivers. However it must be stated that policy changes in
relaxation of cabotage laws did affect the shipping industry adversely.

Yet these measures did little to increase the role of the national shipping industry
and revive the recessionary trends. n addition to this the industry on its own has not
been able to attract equity capital from the market. One of the major reasons for this
difficulty is non receipt of tax benefits available to export oriented industries. This is so
despite the fact that not only the shipping industry earns foreign exchange for the nation
but also saves foreign exchange which would have been payable to foreign carriers. To
summarize it can be said the ndian shipping industry has not been able to exploit the
opportunities accorded by the policies of liberalization of the Government of ndia. n the
recent past the government had also proposed to sell a majority stake of its holdings in
the Shipping Corporation of ndia which eventually was shelved due to political
opposition and unattractive offers.

Presently the ndian liner shipping trade is dominated by host of foreign carriers
notably Maersk, Mediterrnean Shipping Company (MSC), Evergreen, American
President Lines (APL) and China Ocean Shipping Company (COSCO) who have
formed ndian subsidiaries. Various alliances and consortiums have been formed by the
companies with others to exploit the ndian shipping market. Some of these companies
have also managed to obtain long term contracts to manage port terminals,
warehousing complexes and transport containers by rail from the gateway ports to
hinterland destinations.


5.3 OJERJIEW OF MUL1IMODAL IAFRAS1RUC1URE IA IADIA.


Unlike Europe, ndia does not enjoy an efficient inland waterway
system or an extensive coastal short sea transport so almost the entire domestic
transportation is conducted by rail and road networks. ndia has a long coastline of
7000 kilometers served by 12 major ports under the central government jurisdiction and
181 minor ports under the respective state control. A major plan is underway to revamp
and develop the ports. Though containerization was introduced in ndia in 1980s the
container penetration ratio is only 43% (UNESCAP REPT NO 74 2003) which is far
less as compared to the develop countries. The hinterland penetration is also not very
significant. n spite of ndia having an extensive road and rail network connecting the
gateway ports to hinterland destinations the coefficient of connectivity is low and has to
be improved upon.


Though ndia has 14,500 kilometers of navigable waterways large cargo
vessels are unable to use them due to insufficient draught. Furthermore as these rivers
42
are extensively used for irrigation and electricity generation the capacity for cargo
transportation is severely restricted even further. The nland Waterways Authority of
ndia (WA) was set up in 1984 to develop, maintain and administer the waterways
while The Central nland Water Transport Corporation (CWTC) was set up to
undertake freight transport. However less than 1% of the domestic cargo is moved via
this mode which the policy makers wish to improve upon. (Narayan Rangraj and G.
Raghuram 2003)


The Multimodal Transportation of Goods Act (MTGA) was enacted in 1993 by
the Government of ndia with an objective to facilitate the movement of goods from any
location within the country to any place outside ndia. t allows the road, rail, inland
waterways, deep sea and non vessel owning container carriers (NVOCC) to register as
Multimodal Transport Operators (MTO) with the Director General of Shipping and can
issue a multimodal transport document (MTD) which replaced the earlier combined
transport document (CTD) as a basic document which would be treated as a negotiable
instrument for documentary credit by the Banks. Presently there are about 190
registered Multimodal Transport Operators.



5.4 COAS1RAIA1S FOR CROW1H OF MUL1IMODAL 1RAASPOR1A1IOA.


A 1995 United States Department of Transportation study had described a
model for analyzing and evaluating constraints of multimodal transportation which were
divided into Operational, nstitutional, Regulatory, Financial and nfrastructure sectors.
An attempt will be made in this thesis to apply the same parameters of the model in
ndian context. (Shashi Kumar N Dr. 2004)

RECULA1ORY COAS1RAIA1.

The focus of this particular constraint is the lacunae in The Multimodal
Transportation of Goods Act enacted in 1993 which are as follows:

a. The Air Freight operators are excluded from this Act.
b. The MTO license needs to be renewed annually.
c. Higher liabilities for the operator.

Apart from the above mentioned problems there are a variety of minor issues
rendering the MTGA ineffective and hence only few MTOs offer the MTD which lacks
credibility amongst foreign buyers of ndian goods.



43

OPERA1IOAAL COAS1RAIA1S.

This constraint highlights the absence of modern equipment, bad infrastructure
and reliable transport services from the gateway ports to hinterland destinations which
result in expensive delays and higher costs of land leg logistics resulting in loss of


competitive edge of ndian products. Due to unpopularity of the MTD the operators
continue to issue mode specific documents like the Bill of lading for the sea leg and
lorry or railway receipts for the land leg of transport. However these separate
documents do not provide a legal regime for uniform liability nor are they negotiable.
Hence most of the ndian exports move on FOB basis. (Shashi Kumar N. 2004)


Several CDs lack adequate export facilitation agencies and phytosanitary
certificate issuing authorities. Neither do all the CDs offer export promotion schemes
DEEC (Duty exemption entitlement certificate) or the DEPS (duty exemption passbook
scheme). There is no rational logic displayed in posting adequate custom officials nor
are all the CDs connected by railways necessitating use of congested roadways (Kohli.
A.K., 2003). The rail corridor from Delhi to Mumbai is under severe strain due to
insufficient capacity and a dedicated freight corridor is being planned with Japanese
financial assistance but is not expected to become operable in near future. Even
sufficient railway flat cars for container transportation are not available and are being
ordered nor are the rail track strong enough to carry heavy loads at high speeds. The
users of the rail services expect better frequencies, assured transit times, reliability,
security, door to door, cost effective and better customer service. (Sachdeva R. 2003)



The coastal and short sea shipping network is conspicuous by its absence. The
vessels are old and poorly equipped. n spite of demand the growth of coastal shipping
is restricted due to inadequate finance and poor returns. The attitude of the custom
authorities is also not very helpful as they are more enthusiastic to curb smuggling and
revenue leakage. The custom procedures are crying for over haul on urgent basis.
There is also dire need to streamline documentation procedures. Development of
coastal shipping will relieve stress from the congested road networks.


IAS1I1U1IOAAL COAS1RAIA1S.


t is well known that ndian bureaucracy is very rigid and reluctant to give up
controls, the regulations and laws are cumbersome which add to delays and expenses.
There are several central ministries regulating the transport sector with over lapping
powers in addition to state and local government bodies adding their bit to the chaos.
44
For example an exporter has to process at least 50 documents and receive 15
approvals before he can export his goods. A single window clearance system is the
need of the day in addition to electronic data processing.




IAFRAS1RUC1URAL COAS1RAIA1S.


There is urgent need for developing the National Roads highway network,
conversion of narrow gauge rail tracks and dredge the inland waterways. The capacity
of the major and minor ports needs to be increased as well. Presently ndia does not
possess a single deep draught nodal hub like Salalah or Singapore. All ndian exports
and imports are transshipped from Colombo, Singapore or Salalah which adds to the
costs and delays. This problem is expected to aggravate further with the introduction of
Suez and Mallacca max vessels with larger capacity in near future. There just are not
any terminals which can handle such vessels. t results in increment of cycle time of
ndian cargoes rendering them uncompetitive in the global supply chain. The ndian
ports are operating beyond their capacity and need to develop urgently by attracting
private investment. (Haralambides, H and Behrens, R., 2003)


The container traffic has grown many folds in the past two decades and is
expected to grow by at least 10% per annum to 600 million tones by end of the current
financial year. This growth can only be handled if massive development program of
infrastructure development is under taken on war footing and necessary investments
are made. ndia has partially privatized the ports of Kandla, JNPT, Mumbai, Kochi,
Chennai and Vishakhapatnam and allowed the development of Greenfield ports at
Mundra and Pipavav on the west coast of Gujarat in the private sector. New ports are
also being planned at Gangavaram, Dhumra and Kulpi on the east coast. (ndian
Maritime Sipping Consultants Report on Port Privatization 2003)


FIAAACIAL COAS1RAIA1S.

ndia has been a socialist country with a welfare state. This results in
subsidized pricing of infrastructure. n addition to this the tax base of ndia is very
narrow hence revenue generation is not satisfactory. Furthermore due to centralized
planning model industrial growth is stifled. The agriculture sector is hampered by
dependency on annual monsoon rainfall and lack of irrigation and satisfactory pricing
mechanisms. All these factors place heavy financial constraints on the state. To further
aggravate the problem infrastructure development receives low priority.

45
The only solution out of this quagmire is to allow private investment to invest in
infrastructure development, permitting a reasonable a reasonable rate of return.

Taking into consideration the above facts it can be concluded that ndia has
indeed recognized the importance of integrated transport systems and has taken
several measures to get its act together. However the pace of development of
infrastructure does not match the pace of economic growth. Due to fragmented polity
the will to pursue economic reforms with vigor and purpose is lacking. There is no
consensus about economic development policies. While private investment appears to
be the only source of finance but the scope of such schemes is unclear. The
international business community far more clarity and commitment to development of
infrastructure otherwise they will scout for better opportunities elsewhere.

There is no doubt that ndia has the necessary potential in transportation and
logistics management, but it is unrealized due to lack of proper direction. The policies
too lack vision and foresight and the attitude of the government appear to be
lackadaisical. The basic multimodal motto of "Don't stop the Box appears more like a
mirage in the ndian cont

5.5 MIADSE1 OF IADIAA POLICY MAKERS.

According to Bardhan.P, to understand the mindset of the ndian Policymakers
it is imperative to understand the circumstances and the factors that have influenced its
creation. f these factors are not properly understood there exists a danger of arriving at
wrong conclusions. Some of these factors are listed hereunder.

t should be understood that ndia till recently was never a single National entity.
t was a loose conglomeration of princely states, kingdoms and principalities
which were perennially at war with one another. t was the British Government
who welded the sub-continent land mass into a single entity in 1857, after it took
over the responsibility of administering the country from the erstwhile British
East ndia Company. Even then they did not administer the entire company
directly. Part of the administration was left to the princes and kings who
accepted the sovereignty of the British Government. A uniform legal framework
was conspicuous by its absence. This situation continued to exist right until ndia
obtained its independence in 1947.
The ndian society continues to be divided horizontally by religion, caste, tribes,
language and culture, while it is divided vertically by ncome, Education and
technology. This results in creation classes of people as diverse and disparate
as possible with their vested interests in conflict with others. Hence it is almost
impossible to achieve complete consensus on any policy issue.
Historically ndia never was a democracy and nor was it a theocracy either. t
can be called secular only because the state does not profess nor promote any
religion. But occasionally it is forced to interfere into religious conflicts with a
motive to contain, rather than resolving them least it is accused of prejudice and
bias. The government is very apprehensive of such conflicts being converted
into full crisis.
46
The policy makers of immediate post independence ndia who wrote the
constitution and created the political framework, were just not up to the task.
They were old, inexperienced and had spent years in British jails. They had no
training in economic discipline. Due to the British Rule they were also highly
prejudiced and suspicious of the market economy of the west. Thus the
constitution while setting lofty objectives of welfare state did not specify the
means to achieve them. Hence even today the policy makers try to reconcile the
economic objectives with those of welfare state.
After the death of Mahatma Gandhi in 1948, there was a total dearth of
nationally acceptable leader with the necessary credibility and stature who could
pull the country out of the morass and set it on the path to economic and social
progress. This situation exists even today.
The partition of the country left deep psychological scars on the mindsets of the
leaders of both the countries namely ndia and Pakistan. The accompanying
bloodshed and untold human suffering destroyed the capacity of the political
leadership to trust each other nor did the future covert and open conflicts help in
removal of suspicions. Hence both the countries spend significant amount of
resources, energy and time in checkmating the progress of each other.
Basically ndia is an agricultural economy with over 70% of its populace
engaged in some form of agricultural activity. Unfortunately agriculture cannot
be a highly profitable business and the share of Agriculture in the Nation's GDP
is under 25%. n addition ndian agriculture is extremely vulnerable to the
vagaries of the south west monsoon rains resulting in production glut and the
bottom falling out of the market or severe shortages due to deficient rainfall.
Though some steps have been taken to increase production by use of fertilizers,
high yield seeds and irrigation, the situation is far from satisfactory. Presently
one can notice a tragic scenario with the government warehouses overflowing
with buffer food stocks on one hand which end up getting rotten and consumed
by rodents, and starvation deaths on the other hand due to non existent
purchasing power. Thus due to the pre occupation of our politicians with
agriculture the industrial and services sector is by and large left to fend for itself.
t might be surprising to know that only 2.31% of the population (Ministry of
Finance, Department of ncome Tax) of the country pays income tax in spite of
liberalization and introduction of economic reforms. Even more surprising is the
fact that less than one percent of the population account for more than 50% of
the contribution to the national exchequer. Thus the only other source of income
for the government is customs and excise duties on imports and manufactured
goods respectively. Hence any increase in rates of taxes or duties is self
defeating and renders ndian products expensive. The government has also
committed to reduce custom tariffs as per WTO requirements. Hence it is
making desperate attempts to increase revenue by increasing the tax base and
prevention of leakage without much success as yet.
While considering infrastructural investments the policymakers focus primarily
upon employment generation. ndia being a democracy the policy makers are
elected every five years. Due to the rising expectations of the population it has
become increasingly difficult to be re-elected for the incumbents without
displaying some visible performance benefiting the voters. n addition to this the
47
policy makers also attempt to obtain pecuniary benefit for themselves and the
political setups to which they belong as elections are expensive propositions.
Hence in the absence of any such benefits the politicians are unlikely to execute
any projects in a hurry.
Another factor that needs to be taken in to account is the fact that in quite a few
instances the Government in the provinces and the Central Government at New
Deli hail from different political parties and indulge in creating obstacles for each
other. This results in non implementation of certain infrastructure projects and
policies and thus impedes economic growth.






























48



CHAPTER VI



PRIVATE SECTOR PARTICIPATION IN PORT DEVELOPMENT.

An analysis of global urban growth and development would arrive at a conclusion
that ports infrastructure and safe harbors have played a very critical role in their growth.
For example, Singapore, Hong Kong, Dubai, New York, London, Rotterdam, Antwerp,
Hamburg, Pusan, Shanghai and so on. t is quite obvious that these cities would not
have grown and prospered if they were not graced with natural harbors and Ports
infrastructure.

Ports are similar to gateways through which the trade of the nation flows. They
play an important role in the economic progress of a nation, especially in the age of
globalization where international trade assumes critical importance. Efficient Port
infrastructure is the key to the success, considering the fact that 90% of the
international trade is transported by sea. The ports not only earn revenue for the nation
by facilitating trade but also generate employment and provide value added services.
On the other hand non availability of such infrastructure can be a demotivating factor in
attracting investments both foreign and domestic. (Ray.A 2005)

ndia is graced with a long coastline of 6217 Kms with 12 major ports apart from
180 minor ports of which 15 can be developed. The combined throughput of the 12
major ports was 360.28 Million Tones having a total value of 300 Billion USD. Due to
consistent growth of Gross Domestic Product in the past few years the demand for
ports infrastructure has far outpaced supply by 400% in containers and 250% in Bulk. n
order to overcome this hurdle land and assets required to handle the cargo have been
estimated and quantified. The blue print for development of ports and hinterland
infrastructure for seamless logistics market integration has been prepared and a
comprehensive Maritime policy has been announced. (UNESCAP Rept No 74 2003)

A nation's economic progress is gradual and goes through several stages such as
pre- industrial to transitional before maturity. The demands of a nation also vary
depending on the stage of economic growth. ndia's economic growth is currently at the
transitional stage where the demand for shipping is growing day by day. Thus rendering
investment opportunities in shipping sector maximum growth potential. The ndian ports
are emerging as nodal hubs and are gradually integrating into global shipping channels.
(Mukherjee.A and Sachdeva .R 2003)

n this era of fast paced globalization the ports assume critical importance and it
is imperative that ndian ports are developed to enable ndia to integrate itself in to
49
global economic activity. Ports are complex interface between sea and land and
necessitate understanding of construction technology, environmental hazards, trade
patterns and shipping economics to unlock their potential. Unlike other sectors ports are
spherical in terms of growth and demand. They act as catalyst in development of
industrial complexes and economic zones and influence urban growth. (Ray.A 2005)




.1 A HIS1ORICAL PERSPEC1IJE.


As is well known ndia is an ancient civilization and has been engaged in
maritime commerce for the past 2500 years. ndia had extensive trade links with south
East Asia and the Middle East apart from a vibrant ship building industry tradition. The
flagship of Lord Nelson in the battle of Trafalgar was built in Bombay by the Wadias in
1815. About 10% of global trade was handled by Surat in 1850. The Dutch, English,
French and Portuguese owned warehouses and colonies for over 300 years in various
parts of ndia where they stored their goods.

However due to the sad experience of colonization by the British, ndia after it
became independent in 1947 opted for import substitution and self reliance socialist
trade policy, thus discouraging international trade in general and neglected the ports
infrastructure sector in particular.

The ports are governed by The Government of ndia directly through the Port Trust
Authorities vide the ndian Ports Act 1908 and the Major Ports Act 1963. The Ports real
estate and its movable assets were the property of the Government of ndia who also
employed the labor and carried out maintenance operations. The tariffs were fixed by
the Government of ndia through the aegis of Ministry of Shipping and Transport. The
minor ports were governed by respective state Maritime Boards. These ports had
maximum draught of 5-12 meters.


50

MAP OF INDIA DEPICTING MAJOR PORTS

(ndian Ports Association)

51




A list of major ports is given hereunder:

West coast East Coast

1. Kandla Kolkatta
2. Mumbai Haldia.
3. Nhava Sheva Paradeep
4. Mormugoa. Vizagapatnam
5. Mangalore. Chennai
6. Kochi. Tuticorin.

Minor Ports:

1. Jamnagar Kakinada
2. Bhavnagar Nagapattinam
3. Sikka Gangavaram
4. Navlakhi Kulpi
5. Porbunder Dholra
6. Hazira
7. Pipavav
8. Mundra
9. Dahej
10. Karwar
11. Valarparam.

As the ports were not considered profit oriented but rather service oriented, this
led to poor port productivity, thus rendering the ndian exports expensive. Even today
after a lot of restructuring the freight component of ndian exports is as high as 20% of
its price. Some indicators of port productivity in 1990 are given hereunder.

1. Average labor productivity 1400T/Employer
2. Average Vessel Turnaround time 11.9 days
3. Average Berth Productivity 4700T/day
4. Average Berthing delays 4.7 days.
5. dle Berth time 30%
6. Crane Productivity 11 TEU/hr.

t is ironical to note that even then the ports made a profit of 12 billion
rupees, most of which was earned as rent of their real estate used for non port activities
and demurrage rather than from operations. Even today the ports own huge tracts of
expensive land and are thus very wealthy bodies. Furthermore the income of ports is
tax exempt and also manages to receive budget allocations from the Central
Government. The cost of handling cargo is still prohibitively expensive and the port
productivity is still poor.
52

Hinterland development goes hand in hand with port development. The hinterland
development in ndia did not exist. The Rail and Road connectivity was poor. Container
Freight Stations and nternal Container Depots did not exist. Hence cargo was trucked
all the way to the ports and stored in warehouses located inside and adjacent to ports
and the cargo was handled manually. The cargo too was not unitized. The cargo
handling cranes were also of the ancient make with capacity of 3 tones only and they
were over 300 years old.

The legal framework too was very inadequate. There was very low use of
electronic data interchange and most of the records were manually maintained and the
old system was dreadfully slow. The customs laws and regulations strangled the
system and were fertile breeding grounds for corruption. The ports lacked dry docking
and ship repair facilities. At the most some minor repairs could be carried out. Even
today the capacity of ndian dry docks does not exceed 50000 DWT. The nearest major
dry dock facility is in Dubai and Colombo.

There were several ndian shipping companies before 1990 viz, The Shipping
Corporation of ndia, Scindia Steam Navigation Company, Great Eastern Shipping
Company, Dempo Steamships, Damodar Shipping Corporation, Chowgule Steamships,
Essar Shipping Company, Varun Shipping Corporation, etc. The poor productivity of the
ndian ports, the socialist mindset of the Government, the non competitive expensive
ndian goods and discouragement of import goods led to most of the ndian shipping
companies going bankrupt and closing down. The downfall of ndian shipping industry
was triggered by the downtrend of the shipping markets and the oil crisis in the 1980s.

The situation was ripe for a crisis which happened in 1991.


.2 CHAACIAC SCEAARIO:

According to Dr. Jeffery Sachs the fall of the Berlin wall triggered the advent of
globalization and end of the socialist dream leading to the USSR breaking up. USSR
was the biggest trading partner of ndia and patron. The end of the Russian empire
resulted in ndian commerce and industry being hit severely. ndia was almost bankrupt
with foreign currency reserves just sufficient to pay for two weeks of imports.

The Middle East oil crisis triggered growth of ship sizes dramatically to achieve
economics of scale. However due to lack of adequate draft and lack of hinterland
infrastructure these ships could not enter ndian ports resulting in ndian commerce
being affected adversely and compounding the crisis. The ndian policy framework was
also another hindrance. (Shashi Kumar. N 2004)

The Government of the day recognizing the severity of the situation introduced
revolutionary reforms in 1991 right across the board in all infrastructure sectors such as
power generation, roads, telecommunications, air transportation, banking, finance and
53
ports. t was also realized that it was impossible to develop infrastructure facilities
without private sector participation. (Mukherjee. A and Sachdeva. R 2003)

One of the reasons why the infrastructure sector was reserved for the public
sector was because earlier only the Government could afford to invest in such capital
intensive projects where the returns on capital were low and the gestation periods were
long. However the scenario changed when the capital stock markets got a boost due to
institution of reforms in the financial sector. Another reason was that only the
Government had necessary experience to handle such large capital intensive projects
as they had the managers who had obtained such experience during the Second World
War. But over the period the private sector managers also started receiving training
usually abroad. (Ray.A 2005)

n order to achieve this objective the Government of the day had to legislate new
laws diluting their own equity either in open markets or to strategic partners. Thus the
ndian Ports Act and the Major Ports act were amended and the suggestions made by
the World Bank were incorporated into the Acts whereby the Government could invite
investors to participate in port infrastructure development or manage the assets owned
by the port on contract basis. n this manner the port became landlord and owner of
assets while the operating control was handed over to the private operator on a Build,
Own and Transfer basis for a long term period of 30 years.

t was decided that the private sector participation will be on the basis of open
competitive bidding and the evaluation criterion would be on the basis of maximum
realization to the port using Net Present Value and discounted Cash Flow Technique.
The port would not be giving any financial guarantees either for financial returns or the
traffic. Furthermore the port would continue to fix tariff ceiling which would be revised
periodically. At the end of the lease period the assets would revert back to the owners.



6.3 PRIVATE SECTOR PARTICIPATION IN PORT DEVELOPMENT

1. Berths leased out for 10 years at Haldia for import of coking coal and export of
iron & steel material.
2. Berths leased out for two years at Mumbai for handling containers.
3. A consortium led by P&O Australia is setting up a $200 million Container
terminal on BOT basis at Jawaharlal Nehru Port.
4. Coal Jetty at Mumbai by Tata Electrics.
5. Agreement signed at Mormugao Port for re- construction of two berths for
handling Coal.
6. Provision of equipment, operation and maintenance of container terminal at
Tuticorin Port
7. Construction and management of two coal berths at New Mangalore Port.
8. Extension of container and LNG terminal at Cochin
54
9. A captive jetty for fertilizer raw materials commissioned at Kandla and two oil
jetties under construction.
10. ntegrated 5 berth chemical terminal at Jawaharlal Nehru Port
11. Captive facilities for handing coal, liquid bulk, etc. at Greenfield port of Ennore
under construction near Chennai.
12. Development of captive port facilities proposed for petroleum crude, LPG, LNG
at Haldia, Paradip, Visakhapatnam, Mangalore, Tuticorin, Cochin.
13. Two Multi-purpose berths each at Haldia and Vizag

.4 CURREA1 1READ:

The following areas were identified for Privatization:

a) Leasing of existing assets of the Port.
b) Constitution of new assets.
c) Leasing of cargo handling equipment and floating crafts.
d) Pilotage.
e) Captive facilities for port based industries.
f) Greenfield project development.

n addition to this the government of ndia has taken steps to make necessary
policy changes in the areas of documentation for seamless Multi Modal transportation
like through Bills of lading. n addition to this tax and fiscal incentives vide budgetary
supports would be provided for infrastructure investments. New projects would also be
initiated for providing better connectivity between east and west coast of ndia. To
reduce cost of sea transportation involved in going around Sri Lanka the blue print of
the Sethusamudran project has been prepared which will involve dredging and
deepening of the Palk Straits to allow ships to pass through them. The need to develop
inland water transportation and coastal shipping has been encouraged to provide
efficient alternatives to Rail and road transport which is very costly and leads to heavy
pollution. Additional budgetary support would be provided to improve road connectivity
in order to decongest container traffic inside the ports.

Another area of concern was labor reforms. As ndian port labor was expensive
as well as inefficient legislation has been proposed to be initiated to provide easy lay
offs, retrenchment and higher working hours, providing training for value addition and
providing social security benefits. However no reforms in this sector have been
legislated as yet.

Some efforts have also been made in scrapping old and inefficient equipment
and replacing the same with new ones. Special attention has also been given to
widening of roads network, laying of additional rail lines, construction of nternal
Container depots, Freight Stations and Harbor Terminals. Railway wagons capable of
carrying heavy container loads with automatic locking systems of latest designs have
been manufactured to transport containers over long distances in shortest time period.
55
nvestments have also been made in cargo handling equipment at various internal
depots.

All these efforts have resulted in growth of cargo traffic in all major ndian ports
except Kolkatta and Mumbai by over 47% in the past ten years. The cargo volume has
grown considerably in the ports of Nhava Sheva , Vishakhapatnam, Kandla and
Chennai while the ports of Mangalore, Cochin and Tuticorin have shown modest
growth. However except for JNPT the handling cost per tonne has increased at all the
ports. JNPT handled maximum number of containers while Vishakhapatnam handled
minimum. The pre berthing delays had also reduced with improvement in turn around
time of vessels.

t should also be understood that though all major ports handle containers
except for JNPT, rest of the ports are not container ports. Some ports like Mormugoa,
Paradeep, Mangalore and Vishakhapatnam are essentially bulk cargo ports designed to
handle iron ore while Kandla, Mumbai, Tuticorin, Haldia and Mumbai were designed to
handle general cargoes and hence have inherent limitations.

Due to the oil crisis and intermittent of Suez canal due to middle east wars the
shipowners had no other alternative but to increase the size of the vessels which sailed
round the cape of good hope to avail the economies of scale. This meant none of these
ships which had drafts exceeding 14 meters could berth at any of the major ports of
ndia which had severe draught restrictions. This resulted in making the ndian exports
more expensive as they required transshipment and creation of hub ports. Even today
larger vessels of 4000 TEUs capacity cannot visit ndian ports.

n order to modernize the ndian ports the Government of ndia had no other
option but to opt for private investment which they did by amending the existing
regulation by delegislating in the parliament. They initially created a centralized
Directorate of ndian ports to implement the privatization plans. The blue print for doing
so began with identification of the area where private participation was necessary. The
methodology, criterion and parameters for doing so were also laid down and
privatization began in earnest 1993 by privatizing the port of Ennore near Chennai. A
separate tariff authority for major ports (TAMP) was created in 1991 to set ceiling on
port tariff and regulating competition.

.5 CROW1H PO1EA1IAL:

The revolutionary reforms undertaken in 1990s by the Government of ndia
resulted in a substantial growth of ndian economy giving rise to fast growth of
international trade, both exports and imports. Thus the demand for efficient port
infrastructure with greater capacities was generated. This demand had to be met with to
avoid missing the bus. This was initiated by the Government of ndia by entering into
several joint ventures and creating (SPVs) Special Purpose Vehicles with several global
operators like APM Terminals, Dubai Port Authority and P & O Ports. A special
corporation called the Container Corporation of ndia Ltd with monopoly to carry
containers by rail to various inland destinations was created in 1989.
56



Just recently permission has been given to several private operators to run
container trains between ports and inland container depots. Similarly joint venture
projects have been initiated to build marine constructions like breakwaters and
deepening and dredging of approach channels. Several green field ventures are also on
the drawing board for the ports of Ganagvaran, Dhanra, Kulpi, Rewas and Kaikinada.
With regards to hinterland development several joint ventures have been entered into to
set up special economic and free trade zones at various locations in the country like
Positara, Haldia and Kandla.

Captive port facility like Dahej have been created and developed to handle
chemicals and other concentrates with British Petroleum (BP). A cold storage chain has
also been created in joint venture with an American partner. Dry cargo and grain
handling facility has been created at Jamnagar with Cargill. Several minor ports under
the authority of respective state maritime boards like Jaigarh, Dharamtar and Dabhol
are also being developed to handle special cargoes like LNG and low grade coal to run
power generation stations.

Once all these projects come on stream it will impart a substantial boost to the
economic growth of ndia resulting in the country achieving set targets of higher
economic growth of 8.5%. t will also help ndia to become part of global supply chain
and also open its markets to foreign goods leading to higher quality of life for its
citizenry and means of livelihood. t will attract more investments in other areas of
economic activity.

ndia is primarily an agricultural economy and produces large quantity of food
stuff and with right combination of technology for food processing and preservation,
logistics and unrestricted entry to global markets it could lead to ndian agricultural
products getting fair prices thus resulting in reduction of poverty which could lead to
decongestion of urban population centers.


. AREAS OF COACERA:


Though it is quite obvious that private sector participation in port infrastructure is
necessary not only for purpose of investment but also for managerial and technical
expertise necessary to realize the potential of the natural resources, yet there are some
areas of concern.

One of the key areas is the diverse cultures, objectives and mindsets in which the
Government and private sector operate. t will make the working together of two diverse
partners rather difficult and lot of compromise, understanding and patience would be
necessary. t would also be necessary to lower the macro growth targets to more
realistic levels especially as there are various other uncontrolled variables that influence
57
the growth of trade, cargo flows and inter modal dynamics of supply chain
management.

Similarly it is difficult to predict growth of traffic and throughput with a comfortable
degree of certainty. The same also goes for return on investments and payback period
considering the long gestation periods of such projects. Considering the fact that the
Government controlled Tariff Authority would set ceilings on port traffic and regulate
competition amongst port, it is difficult to state whether ports could obtain revenues they
deserve for providing better quality of service.

The financial arrangement between the port authorities and private promoters of
revenue and cost sharing could also come under strain in changing political
environment where several contradictory vested interests come into play. t could lead
to misunderstandings, suspicions and leading to breakup of partnerships and litigation,
especially in the light of the fact that the partnership is not between equal partners.

There are several risks involved which are inherent to such kinds of joint
ventures. Given the fact that such projects have to depend on other external factors like
the hinterland, the rail network and congestion of road traffic. Sometimes such a project
could fail due to port connectivity not being efficient. The hinterland development is
definitely within the control of one of the partners which is the Government of ndia.

Last but not the least is the legacy of labor rules which is again the
responsibility of the Government. ndian labor is infamous for its low productivity,
efficiency and high cost. Furthermore this labor is unionized and can become an
albatross around the neck of the new joint ventures causing them to fail. Hence
Government has to take care of this legacy.

.7 CRI1ERIOA FOR SELEC1IOA OF PROMO1ERS

We have to understand that it is very easy to legislate changes in the policy
and invite private participation but it is very difficult to achieve the stated objectives of
such joint ventures if sufficient planning is not undertaken to demarcate clearly the
responsibilities and liabilities of the various participants of the joint venture. t will also
be necessary to clearly state the penalties for failing to achieve the stated targets and
the objectives/targets that need to be achieved.
n order to do so it is necessary to clearly state the criterion for selection of promoters.
Furthermore the procedure for selection of promoters/investors should be absolutely
transparent to ensure against levying of allegations of corruption and favoritism. This
process of selection of promoters / investors and stipulating the criterion for selection
was laid down in the policy paper on privatization of ports in ndia, some of which are
listed below:
One of the basic criteria is of course the ability to raise the necessary capital i.e. the
promoter should provide evidence of possession of necessary capital/assets reserves.
Next, the investor should possess experience of handling such type of projects i.e. he
should have the necessary vision and should have the patience and be capable of
withstanding the long gestation period. He should be aware that he will have to interact
58
with several Government agencies and it requires a long time and perseverance to
obtain the necessary permissions from several government agencies. He should also
develop a large customer network and should be capable of attracting traffic. He should
have at his disposal some cargo handling equipment or should be capable of deploying
some at short notice.

Similarly the same criteria was laid down for the role of regulatory authority. The
relevant shipping ministry and the various state maritime boards were considered
suitable for playing the role of regulatory authority. t was assumed that such bodies
would have developed the necessary understanding of port dynamics necessary to
successfully interact with joint venture partners to make the venture a commercial
success. t is imperative for the authorities to set unambiguous benchmarks to compare
performance. The authorities should also be capable of analyzing the risks involved in
such ventures especially regarding security and should jointly evolve necessary
procedures to reduce them.

The financial institutions like banks should also examine meticulously the risks
involved before funding such ventures. They should be capable of providing flexible
terms of finance and again have the patience for withstanding long repayment periods,
usually of 20 years or more.

.8 EJALUA1IOA OF CAIAS:

t has been noticed from the few specific cases that the joint venture
partnerships in port infrastructure development are not only workable but are
immensely successful to the extent that one begins to doubt whether the benchmarks
were kept too low due to lack of confidence. The joint ventures of port of Mundra,
Pipavav, Nhava Sheva and Chennai have proved extremely successful. t has resulted
in the targets being surpassed well within the time period and the returns on
investments have been quite attractive. The values of the port assets have multiplied
manifold within few years. Furthermore the original developers of the ports of Mundra,
Pipava, Nhava Sheva and Chennai have sold their stakes in the joint ventures to global
companies like APM Terminals and Dubai Ports at prices which have multiplied their
investments several times.

Similarly companies like Gateway Distriparks of Singapore have benefited
handsomely by investing in warehousing, multi modal transportation and distriparks. t
has also resulted in generation of employment opportunities for the local population and
has resulted in appreciation of real estate several times over.

t has also attracted foreign direct investment in several Greenfield projects. The
banks and the financial institutions are also keen to participate in such large
infrastructure projects.

Today the government of ndia is of the opinion that the market potential of the
port infrastructure sector is in excess of USD 50 Billion. t has not only resulted in
attracting more investors eager to invest in such projects but have also resulted in the
59
licenses attracting much better prices for example, APM Terminals which managed to
get the license for development of the third terminal at Nhava Sheva agreed to share
33% of its revenue with the port authority.

n response to the government of ndia's change in policy for permitting private
sector operators to run container freight trains from Gateway ports to hinterland depots.
Several operators have applied for permission and three operators have been granted
licenses to do so. As such this sector is going to see rise in revenue and traffic.

Thus the experiment of port sector joint ventures has been proved a success
resulting in benefit for the nation.

.9 EX1ERAALI1IES:

The development of port infrastructure has given rise to both positive and
negative externalities. Though there has been an increase in the international trade of
ndia which has had a positive impact on the GDP growth, employment, and
government revenue, road and rail infrastructure conditions etc. Yet, there have been
some negative results too such as increase in urban population, pollution, heavy
congestion of road and rail traffic, delays, displacement of local populace, rise in crime
rate, heightened security concerns etc.

n order to mitigate these externalities both the government and the private
sector involved in the development of port infrastructure have taken measures such as
providing employment for project affected people, free medical and education benefits

t is obvious that due to the private sector participation in the development of
port infrastructure projects there has been substantial improvement in the performance
parameters of the ports. Traffic has increased by over 40%, the turn around time of the
vessels, the pre berthing delays, berth and crane productivity have improved. However
ndian ports continue to be expensive when compared to ports like Dubai, Singapore
and Hong Kong due to poor labor productivity. Furthermore the improvement is only in
selective ports like JNPT, Mundra, Pipavav, Dahej and Ennore. Ports like Mumbai,
Kandla, Mormugoa, Mangalore, Cochin, Paradip, Chennai, Vishakhapatnam and Haldia
have yet to show improvement. Private sector participation has been invited in several
major and minor ports infrastructure development projects which have yet to bear fruit.

The Government of ndia has to accelerate the pace of reforms which should
be progressive, facilitative and encourage investment. This will result in transformation
of markets. t will result in growth and availability of clusters of private companies
engaged in construction, port management, finance, shipping, engineering, design and
so on. There is also a need to diversify the basket of assets to minimize risks. Technical
know how also needs to be imported from developed countries who have the necessary
experience of running such a complex industry whose performance has a bearing on
the overall development of the country. t should also be acknowledged here that the
complex interaction between performance of ports and economic growth is not yet well
understood.
60

ndia also has to explore possibilities of emerging as hub and transshipment
ports flanking the east/west trade route. Tariffs and costs should be lowered
significantly while providing the highest level of service. n order to do so the private
sector investment should be availed of by addressing their fears and concerns.

.1 LECISLA1IJE MEASURES.

n order to achieve stated objective of nternational trade growth and improve
the environment in a way that it can contribute to growth the Government of ndia
undertook legislative reforms as the following cases:

1. The Major Port Trust Act, 1963 was amended to enable corporatization of
existing port trusts.
2. The nland Waterways Authority of ndia (WA) has been set up to coordinate
and implement various central schemes for development of nland Waterways
for transportation of cargoes. New nland water transport policy was announced
to attract private sector.
3. The Private sector participation and joint venture guidelines have been
formulated.
4. Full tax benefits under section 33A of the ncome tax Act have been restored to
promote investment in vessels. Depreciation rates for ships increased from 20%
to 25%. Procedure for purchasing second hand ships abroad liberalized.
5. The Suppression of Unlawful Acts against safety of Maritime Navigation and
Fixed Platforms on Continental shelf Act has been exacted to counter terrorism.
6. The Merchant shipping act amended to incorporate conventions and protocols
recommended by MO.
7. The Multi Modal Transport of Goods Act 1993 amended to simplify procedures.
8. The monopoly of CONCOR in transportation of containers by rail was ended
and private sector invited to offer such service.
9. A decision to disinvest 51% Government equity in the state owned Shipping
Corporation of ndia.
10. Policy guidelines for setting up of Special Economic Zones announced and
licenses granted to several companies.
11. Stringent requirements of submission of security deposits for transportation of
containers to and from gateway ports to hinterland CDs relaxed for public
sector undertaking.
12. The cabotage law has been relaxed thus permitting foreign shipping lines to
operate feeder service between ndian ports.
13. The National Highway Act 1956 has been amended to enable private
participation and allow collection of toll. t also facilitates speedy acquisition of
land for highway development.
14. Permission has been granted to private sector to set up Greenfield port projects
at Dahej in Gujarat, Kakinada and Gangavaram in Andhra Pradesh and Dhumra
and Kulpi in west Bengal.


61





CHAPTER VII.


INDIAN ECONOMY & GROWTH OF CONTAINERISATION


7.1 OJERJIEW OF IADIAA ECOAOMY


TABLE IX


GDP OF INDIA IN USD BILLIONS AT FIXED PRICES

YEAR 1984 1994 2003 2004
GDP 206.5 322.6 600.7 694.7

(Source: Ministry of Finance, Government of ndia / Dept of Economic Affairs)


Economists from all over the world have conducted studies of various
aspects of the ndian Economy and have envisaged ndia becoming an economic
powerhouse in the next two decades along with China. For over a century the United
States have been the largest economy in the world. However since the onset of the
Globalization in the 1990s there has been a shift in the focus from United States and
Western Europe to Asia and the Far East. The western European countries have seen
the decline in global GDP share by 5% followed by United States and Japan with a
decline of 1% each. This slack as been made up by the rising share of ndia and China
in the manufacturing, industries and service sectors. t has been forecasted that the
share of United States in the world GDP will reduce further from 21% to 18% and that of
ndia will rise from 6% to 11% and will become the third pole in the global economy
after United States and China by 2025. By the ndian economy will be almost 60% the
size of the US economy.





62


FIGURE X

Growth oI GDP oI India
GDP N BLLONS OF RUPEES
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
YEAR

N

B

L
L

O
N
S

O
F

R
S

(Source: Reserve Bank of ndia)


As ndia prepares itself for becoming an economic superpower it as to overcome
institutional and infrastructural bottlenecks inherent in the system. nfrastructure is
critical to sustain economic growth. Currently ndian economy is facing various
obstacles which make it difficult to sustain the economic momentum. n order to realize
its potential it needs to undertake the following remedial measures.

1. Simplification of procedures and relaxing entry barriers.
2. Checking population growth and improving per capita income which is only 2310
USD per annum.
3. Boosting Agriculture growth by diversification and development.
4. Expanding industrial base by at least 10% to enable it to integrate with world
economy.
5. Developing world class infrastructure.
6. Allowing Foreign nvestment into more areas
7. Empowering the population through education and improving health care.

A growth rate of above 8% was achieved by the ndian economy with inflation rate of
just 2.34%. There are several factors responsible for this robust performance especially
the ndian service sector growth which compensated for the fall of agricultural sector
from 9% to just 1.1%. The weak US Dollar was also helpful and partially offset the rising
costs of crude oil. A strong Balance of Payments position saw Foreign currency
63

reserves rising above the 100 Billion mark. This has been chiefly due to the rise in
export remittances

and foreign capital inflows. The downward trend of interest rates also helped economic
growth. During the past two decades the stock market index has more than doubled,
thus assisting capital formation.


7.2 1HE MAIA SEC1ORS OF IADIAA ECOAOMY.


Agriculture.


Just above 60% of the population depends for its subsistence on agriculture which
is extremely vulnerable to the vagaries of South West Monsoon. Hence it displays
an impressive growth performance of 9.1 % in 2003-04 and falls to 1.1% in the
following year due to deficient rainfall. ndia is not only one of the top leading
producers of several agricultural products but also has the maximum livestock
cattle. t also has the privilege of having highest quantity of land under irrigation. n
spite of these impressive figures the contribution of ndian agriculture sector has
seen a steady decline in the past twenty years from a high of 35% in 1984 to a low
of 19% in 2004 accompanied by a growth spate of suicides by ndian farmers. There
are several reasons for this statement ranging from poor rainfall, lack of investment
in agriculture, government policies designed to check inflation and rising food prices
to global agricultural production and highly subsidized farming sector of the
developed countries. (Jalan.,B 2005)



Several solutions to this problem have been suggested by experts and economists
like giving higher priority to livestock, horticulture, cultivation and organic farming
and inland fisheries. (Agriculture Task Force Report 2002) The Government of
ndia as well as the private sector has indeed started taking keen interest in rural
infrastructure development and instituting legislative reforms in areas like greater
outlays for irrigation, water conservation, crop insurance and availability of cheap
capital for agriculture while acceleration in agriculture growth to 7-8% is not beyond
imagination but it will be possible to achieve such sustainable growth only if
necessary measures are taken on an emergency basis.






64

ManuIacturing & Industry.

The fall in contribution of agricultural sector to the Gross Domestic Product of
ndia was not compensated by the industrial and manufacturing sectors. Their share
has remained practically unchanged for the past twenty years at about 25% and
15% respectively. Yet there has been a steady growth of about 6-7%. The growth
was aided by rising contribution of mining and electrical power generation. The
textile

industry is the largest in terms of providing employment and as created 12 million
new jobs. With the phasing out of quota regime under MFA this industry is poised
for growth. The Automobile industry has demonstrated the inherent strengths of
ndian labor and is one of the two sunrise industries, the other being
pharmaceuticals.

ndia's WTO involvement in the past decade has encouraged the growth of
pharmaceutical industry. Apart from manufacturing of drugs the industry has been in
the forefront of Research & Development of generic drugs. t will grow at a greater
speed once intellectual property protection laws are implemented earnestly. ndia
then could be a global hub for Research & Development based clinical research.
The growth of industries and manufacturing sectors can be accelerated further by
improvement of infrastructure particularly power generation, labor reforms and
simplifying procedures for foreign direct investments. t will not only help in growth of
GDP but will also assist in employment generation.


Services.

The service sector has displayed consistent growth pattern since 1995 and almost all
sub sectors like banking, healthcare, insurance, hospitality, air transportation, media
and the most important of all telecommunications and information technology have
contributed to a vast extent to the growth of the ndian economy in the past decade.
This sector as compensated for the decline in the contribution of the agriculture sector
in the country's GDP from 39% in 1984 to 53.3% in 2005. t has resulted in cities like
Bangalore, Pune and Hyderabad finding place in the global map. Several ndian
companies like Tata Consultancy Services, nfosys and Wipro have become household
names due to their remarkable performance in the T sector. Though this sector has
contributed hugely to the ndian economy its performance in the area of employment
generation has not been as impressive.


T enabled services such as Business Processing Outsourcing have been growing at a
rapid pace mainly due to availability of a number of skilled English speaking manpower.
But it is also facing hurdles and difficulties by way of protectionist trend in the United
States. The global market of this sub sector is, to the tune of 200 Billion USD of which
65
ndia's share is less than 4 Billion. Yet this sub sector is poised to grow largely due to
the high quality of output and competitive costs. The tourism industry also achieved
some distinction by servicing over 3 million tourists.

TABLE X


SECTORWISE BREAKUP OF GDP GROWTH

YEAR 1984 1994 2003 2004
AGRCULTURE 35.2 30.4 21 19.6
NDUSTRES 26.2 27.1 26.4 27.3
MANUFACTURNG 16.4 16.9 15.4 16
SERVCES 38.7 42.5 52.5 53.2
(Source: Reserve Bank of ndia)

7.3 FAC1ORS IAFLUEACIAC CROW1H OF COA1AIAERIZA1IOA


An analysis of the growth of international trade and GDP shows that growth
rate of trade is greater than the growth rate of GDP for longer periods of time. One of
the reasons for this difference is low costs of transport. Other reasons are vertical
disintegration of production activities adding extra links to supply chain, outsourcing,
special concentration of production and rationalization of supply base. This impact is
greater in general cargo flows leading to economies of scale.

The factors determining the increase of container throughput concern the
development of:

1. Economic activity.
2. Container penetration.
3. Trade intensity.
4. Shipping systems.
5. Port competition.

A statistical relation was measured between GDP and Throughput. n such a case only
the first three of the above mentioned factors play a role with developments in trade
intensity having maximum impact. This relationship can be stated as under

Throughput (T) = d
0
+(GDP)
d1
where d
0
= constant factor and d
1
= elasticity.

Thus Log (T) = d
0
+ d
1
Log (GDP).

An analysis of the table mentioned below which gives details of ndia's
international trade for the past eleven years indicates a very high level of correlation
between the throughput growth on the one hand and GDP growth and international
66
trade on the other. A statistical relationship (R square and correlation factor) can be
established to measure the interaction between GDP growth and container throughput.

TABLE XI

GROWTH OF FOREIGN TRADE, THROUGHPUT AND GDP

YEAR FOREIGN TRADE THROUGHPUT GDP IN BILLIONS
IN USD BILLIONS IN MILLION TEUs OF RUPEES
EXPORT IMPORT
1994 26.3 28.6 1.052 8592
1995 31.7 36.6 1.257 9233
1996 33.4 39.1 1.444 9939
1997 35 41.4 1.698 10674
1998 33.2 42.3 1.892 11152
1999 36.8 49.6 1.932 11820
2000 44.5 50.5 2.185 12662
2001 43.8 51.4 2.884 13162
2002 52.7 61.4 2.471 13837
2003 63.8 78.14 3.911 14406
2004 79.2 107.06 3.366 15646
2005 80.83 118.95 3.931 16755
(Source: Reserve Bank of ndia, ndian Ports Association and Ministry of Trade and
Commerce)

FIGURE XI

Indian Foreign Trade
0
20
40
60
80
100
120
140
1
9
9
4
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
Year
I
n

U
S
D

B
i
I
I
i
o
n
Export
mport

Correlation factor (GDP:Throughput) = 0.9494 and R square = 0.9014

Correlation factor (Exports:Throughput) = 0.9187 and R square = 0.8441

Correlation factor ( mports:Throughput) = 0.8902 and R square = 0.7925
67

Coefficients
Standard
Error t Stat P-value
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
ntercept -7.89817 0.62455 -12.6462
1.78E-
07 -9.28976 -6.50659 -9.28976 -6.50659
X
Variable
1 2.016087 0.152963 13.18023 1.2E-07 1.675264 2.356909 1.675264 2.356909

X VariabIe 1 Line Fit PIot
0
0.5
1
3.9 4 4.1 4.2 4.3
X VariabIe 1
Y
Y
Predicted Y


While conducting a regression analysis it can be noticed that there is a high degree of
correlation between the Y intercept throughput and the X variable 1 GDP. The predicted
values and actual values almost coincide with each other. The P value is also
significant.
Though there is a very high degree of correlation as proved statistically between the
throughput, GDP and international trade yet there are other influential factors too which
also have a strong impact on the growth rates of throughput such as the policies of the
Government of ndia, Global Trade Patterns, infrastructure development and level of
containerization.

7.4 FORECAS1IAC CROW1H OF COA1AIAERIZA1IOA.

Accepting the validity above mentioned data for the past 12 years, the growth
rates of the throughput, GDP, Exports and mports can be calculated as follows:

TABLE XII

EXPORT IMPORT GDP THROUGHPUT
GROWTH
RATE
10.7 13.8 6.25 12.73

Further accepting the validity of the hypothesis of high degree of correlation
between the growth rates of GDP, Exports, mports and Throughput the elasticity which
is nothing but a ratio of the growth rates of throughput and GDP is determined as
follows:

e = (Throughput/GDP) = 12.73/6.25 = 2.036
68

n order to forecast the growth of throughput till 2020 we accept the validity of the
growth forecast of GDP as stated in the World Bank Report of 6.5% and using the
elasticity ratio of 2.036 given above we can forecast the growth of throughput as
13.23%. Hence the throughput in the year 2020 could be as high as 23.677 million
TEUs
TABLE XIII
Forecasted Growth oI Throughput.

YEAR GDP IN BILLIONS OF RUPEES THROUGHPUT IN MILLION TEUs
2006 17844 4.451
2007 18959 5.016
2008 20144 5.652
2009 21403 6.368
2010 22741 7.176
2011 24162 8.086
2012 25672 9.111
2013 27277 10.266
2014 28982 11.568
2015 30793 13.035
2016 32718 14.688
2017 34763 16.550
2018 36935 18.648
2019 39244 21.013
2020 41696 23.677
FIGURE XII
THROUGHPUT N MLLON TEUs
0
5
10
15
20
25
30
1
9
9
4
1
9
9
6
1
9
9
8
2
0
0
0
2
0
0
2
2
0
0
4
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
2
0
1
4
2
0
1
6
2
0
1
8
2
0
2
0
year
T
h
r
o
u
g
h
p
u
t

I
n

M
i
I
I
i
o
n

T
E
U
s
THROUGHPUT N MLLON TEUs

69
7.5 AD1US1ED CROW1H FORECAS1

The above forecast model however ignores the fact that elasticity will not necessarily
remain as high as it is at present. As economy develops the foreign trade might reach a
saturation point where the law of diminishing returns will kick in at a certain stage. The
elasticity ration will stagnate for a while before sloping downwards gradually.

The reasons for such a statement are numerous some of which are enumerated below:
1. The GDP growth in developed country does not depend upon transportation to
such a large extent as it does presently. This is because as the country
develops, the contribution of agriculture, manufacturing and industry falls while
that of service sector rises. (UNESCAP Rept No 74). This trend is already
exhibited by the ndian Economy.
2. The growth in traffic causes congestions and delays. n addition to this the
limitation of land available for infrastructure development it constrains capacity.
Such capacity increase will lead to a rise in costs.
3. This rise in costs will lead to the products loosing their competitive edge. t will
result in other regions manufacturing similar products at lower costs.

Assuming such a scenario the elasticity ratio might fall from 2.036 at present to 1.75 by
2014 and might further reduce to 1.5 by 2018 and will eventually stagnate at 1.25 by
2025 (S.P.Gupta-Planning Commission Report-2003). Accordingly the adjusted
throughput growth forecast will be as under.

TABLE XIV

AD1USTED GROWTH FORECAST




YEAR GDP IN BILLIONS OF
RUPEES
THROUGHPUT IN MILLION
TEUs
2006 17844 4.451
2007 18959 5.016
2008 20144 5.652
2009 21403 6.368
2010 22741 7.176
2011 24162 8.086
2012 25672 9.006
2013 27277 10.030
2014 28982 11.171
2015 30793 12.442
2016 32718 13.857
2017 34763 15.433
2018 36935 17.189
2019 39244 18.865
2020 41696 20.704
70

ADJUSTED GROWTH FORECAST
0
5
10
15
20
25
2
0
0
6
2
0
0
8
2
0
1
0
2
0
1
2
2
0
1
4
2
0
1
6
2
0
1
8
2
0
2
0
YEAR
T
E
U
s

I
N

M
I
L
L
I
O
N
Series1


Even then it is very obvious that the present infrastructure is unable of handling such a
large demand increase and needs to be developed immediately.




















71



CHAPTER VIII

GENERAL CONCLUSIONS

8.1 AECESSI1Y FOR DEJELOPMEA1 OF MUL1I MODAL 1RAASPOR1
IAFRAS1RUC1URE:

The three most important criterions for success in nternational Trade are Price,
Quality and n Time delivery. t is not possible to meet these criterion without having a
proper logistics and multimodal system. Containerization and multi modal transport form
an integral part of any logistics and supply chain. Everyday new and innovative
methods are discovered and improvisations made in improving the quality of products
while simultaneously lowering the costs. One of the important methods of lowering the
costs is by lowering inventory levels and introducing just in time concepts. Thus ndian
merchandise cannot become competitive without containerization and multi modal
transport.

As stated earlier the ndian policy makers have realized the importance of
containerization and multimodal transport but they face two major constraints while
attempting to realize the full potential of containerization and multi modal transport.

nability to develop the necessary nfrastructure due to lack of financial
resources.
nadequate institutional and legal environment which does not encourage
growth.

Hence unless an awareness is created on the importance of developing
seamless infrastructure for multi modal transport, the potential of the ndian foreign
trade cannot be realized. n this regard nternational organizations like MO, UNCTAD
and WTO have a major role to play in disseminating information and sharing experience
and knowledge. By developing multi modal transport in line with global level ndia can
transport its goods cheaply and efficiently and dovetail itself with the global supply
chain.

ndia also needs to develop a suitable logistic system for economical and
efficient transportation of goods from the manufacturing centers to the distribution
points. t has been estimated that logistics costs including inventory, insurance and
documentation aggregate to about 20% of the final costs of the products and any
inefficiencies and inadequacies have a negative impact on export competitiveness.
ndia exports about 21 million tones of general cargo of which 9 million is containerized
thus leaving scope for further containerization. The main benefits of containerization
can accrue with the setting up of nternal Container Depots (CDs) and Container
72
Freight Stations (CFSs) which will come into existence only if there is sufficient cargo
being generated in the specific area. The CD will in turn act as a catalyst and promote
trade growth in and around the region as cargo will reach the market in a fast, safe and
economically cheap mode. t is also necessary to develop roads and rail network
connecting the CD to the gateway port. The port will become a hub only when the
spokes are connected with the CDs.

However it should be realized that the infrastructure has to be properly priced to
enable it to sustain itself on one hand and also to generate reasonable profit on the
capital deployed in constructing it. At the same time the infrastructure pricing should
also be affordable to the end user. Hence the investments in such projects can only be
long term basis and the cost of capital will have to be well below the market rate. t
should also be acknowledged that the needs and requirements of such infrastructure
will vary greatly in different regions of the country. Hence the capacity of infrastructure
projects should vary if different regions depending on reliable cargo forecast and
feasibility studies by experienced organizations.

8.2 SUMMARY

The gist of the earlier chapters can be summarized as follows:

1. According to the various reports from different sources like World Bank,
nternational Monetary Fund, Asian Development Bank and the Ministry of
Finance the GDP of ndia is projected to grow at a rate of 6-8% in the next ten
years. As seen in chapter V this will have a positive impact on the growth of
container throughput.
2. Other factors like container penetration, trade intensity, foreign direct
investment, rising income levels will also have a strong impact on the growth of
container throughput.
3. Some non quantifiable factors like global political scenario, trade flows,
technological development, competition from other countries, development of
infrastructure that will also have a bearing on the throughput rate.
4. Taking into consideration all these factors it will be reasonable to forecast that
the throughput will grow at a rate of 13-14% in the next 3-4 years and will then
stagnate around 12% for another 3-4 years and then gradually reduce and
stabilize at 9-10%. Thus the container throughput will grow from the current 4-5
Million TEUs to 20 Million TEUs by 2020.
5. Taking into consideration the expected growth of throughput in the coming
years, it is imperative for the country to develop the necessary infrastructure on
war footing. The capacity of the Ports, Roads and Railways needs to be
augmented immediately least they become congested and become bottlenecks
which will lead to loosing out to competition.
6. However the Government of ndia does not have the necessary resources
required to invest in the development of infrastructure. According to the
estimates of the Ministry of Economic Affairs at least USD 150 Billion are
required in the next ten years to develop world class infrastructure. This is well
beyond the means of the Government of ndia.
73
7. Hence there is no alternative but to invite the private sector to invest in the
development of infrastructure. This the private sector will do only if they are
guaranteed assured returns on capital invested. Hence the proper pricing of
infrastructure is imperative, which the Government is unwilling to do due to lack
of political will.
8. As ndia is a large democracy, with the Governments of the past few years
being formed by a myriad collection of political parties, the reform process has
been progressing in fits and starts. t is as if the Government will not undertake
the necessary reforms unless there is a complete breakdown and it is left with
no alternative. Several reforms have been undertaken in this manner. Yet far
more reforms are necessary in the fields of nfrastructure development,
Customs tariffs and procedures, Foreign Direct nvestment, labor and power
generation.
9. Furthermore attention has also to be paid to new problems cropping up like
terrorism, security, environment degradation, ever changing technology and
globalization. f corrective measures are not undertaken, ndia runs the risk of
missing the bus once again.
























74



BIBLIOGRAPHY

"Handbook of International Containerization" United Nations Economic and
Social Committee for Asia and Pacific.(UNESCAP) 1983 TA 1215 E8H3
Rath, Eric "Container Systems" - John Wiley & Sons, New York 1973.
CONCOR Ltd Annual Report of 2003, 2004 and 2005.
P.K.Srivastava 2002 - "The Worst is Over Indian Shipping - Journal of
ndian National Shipowners Association (NSA) Mumbai. Volume V.
Gupta A.K. 2003 "Port Development in ndia Indian Ports - Journal of
ndian Port Association Mumbai Volume X.
Paul Jose Dr., 1997 "Containerization in ndia Exim Review - Mumbai.
Ahuja. K. - 2000 "Growth and development of CONCOR Special issue of The
Link Mumbai -
Kohli.A.K 2002 - "The Future - ndian Port & Shipping, special issue of The
Link - Mumbai
"Development of existing National Highways during 10
th
Five Year Plan A
Report 2004 - Ministry of Surface Transport - Government of ndia.
Jonghe Louis De 2003 - "nfrastructure Challenges in ndia - Special
commemorative issue of The Associated Chamber of Commerce & Industry of
India, (ASSOCHAM) - New Delhi,
Ray. A. S. 2005 - "Managing Port Reforms in ndia Background paper
prepared for the World Development Report.
ESCAP 2005 "Monograph series on managing globalization - Regional
Shipping & Port Development Strategies Container Traffic Forecast United
Nations Economic and Social Committee on Asia & Pacific. (UNESCAP)
ST/ESCAP/2398.
Narayan. R & Raghuram.G 2006 "Viability of nland Water Transport in
ndia Indian Institute of Management Ahmedabad working papers No
2006/04-01
75
Peters.H.J 1990 - " ndia's Growing Conflict between Trade and Transport
ssues and Options Working papers Infrastructure and Urban Development
Department The World Bank WPS 346.
Shashi Kumar. N. Dr 2004 - " The ndian Quagmire An assessment of
impediments to Multimodal Transportation Loeb Sulliman Maine Maritime
Academy
Haralambides. H and Behrens. R. 2000 - "Port Restructure in Global
Economy An ndian Perspective nternational Journal of Transport
Economics, Volume XXV.
Hariharan. K.V.Dr 2001 - "Containerization and Multimodal Transport in ndia
- Shroff Publications, Mumbai.
Aserkar.R 2003 - "Multimodal Transport & Logistics Shroff Publications,
Mumbai.
Sachs.J.D.Dr and Bajpai.N 2000 - " Foreign Direct nvestment in ndia How
can $ 10 Billion of annual inflows be realized- Center for nternational
Development - Harvard University Publications.
ESCAP "Commercial Development of Regional Ports as Logistics Centres
United Nations Economic and Social Committee for Asia and Pacific
(UNESCAP) ST/ESCAP/2194.
Mukherjee. A and Sachdeva. R 2003 - "Maritime and Air Transport Services
ndia's approach to Privatization (UNESCAP) Transport and
Communication Bulletin. No 73.
Rakesh Mohan Committee 1996 "The ndian infrastructure report policy
mperatives for growth and welfare Volume 3.
"ndian Ports an nvestment destination i-maritime consultants.
Sundar. S 1998 "Port restructuring in ndia Tata Energy Research
nstitute New Delhi.
World Bank - 1995 "ndia Port Strategy Report No 14059 N March.
Bardhan.P 1998 "Political Economy of reforms in ndia NCAER Golden
Jubilee seminar Series.

76









Internet Sites.

http//finmin.nic.in/dept-eco-affairs/index-html.
http//finmin.nic.in/the-mistry/dep-eco-affairs/pppguidelines.pdf.
http//indiabudget.nic.in/es2005-06/
http//goidirectory.nic.in/delhi.htm
http//commerce.nic.in
http//zjdgft.tc.nic.in/trade-notices/tn05-1
http//indianrailways.gov.in/
http//concorindia.com
http//shipping.nic.in
http//sarkaritel.com/ministries/goi/index.htm
http//unescap.org/publications/index.asp
http//rbi.org.in/home













77

ANNEXURE I



MNSTRY OF COMMERCE & NDUSTRY
DEPARTMENT OF COMMERCE
ECONOMC DVSON


MPORT OF PRNCPAL COMMODTES:APRL-MARCH ,2004-
05
____________________________________________
COMMODTES
APRL-
MARCH
2004-2005
. BULK MPORTS 41851
-------------- __________
1 Cereals&preparations 24.87
__________________ __________
a) Rice 0
b) Wheat 0.02
c) Other cereals 1.64
d) Preparations 23.21

2 Fertilizers 1231.08
__________________ __________
a) Crude 221.51
b) Sulphur & Un-roasted 107.66
Pyrites
c) Manufactured 901.91

3 Edible Oil 2393.79
4 Sugar 212.38
5 Pulp & waste paper 473.18
6 Paper board & mfrs. 677.75
7 Newsprint 378.25
8 Crude rubber 394.93
9 Non-ferrous Metals 1253.08
10 Metalliferrous ores & 2370.39
metal scrap
11 ron & Steel 2597.2
12 Petroleum crude & products 29844.1


. PEARLS,PRECOUS &
78
SEM-PRECOUS STONES 9423.45
__________________ __________

. MACHNERY 10709.87
__________________ __________
1 Machine Tools 592.09
2 Machinery other than 6550.64
Electrical
3 Electrical machinery 1144.39
4 Transport Equipment 2422.75

V. PROJECT GOODS 581.7
__________________ __________
V. OTHERS 44500.17
_________ __________
1 Cashew Nuts 391.08
2 Fruits & Nuts 235.31
3 Wool raw 183.82
4 Silk raw 134.59
5 Synth.&reg.fibres 73.49
6 Pulses 382.5
7 Raw Hides & Skins 47.15
8 Leather 205.84
9 Coal,coke&briquettes 2801.45
10 Non-metallic mnl.mfrs. 452.74
11 Other crude minerals 143.48
12 Organic&norganic chmls. 5335.09
13 Dyeing,tanning matrl. 396.38
14 Medicinal&Pharma.prds. 679.14
15 Artf.resins, etc. 1395.94
16 Chemical products 788.09
17 OtherTextile yarn,fabrics,etc 548.64
18 Manufactures of metals 887.16
19 Profl. instruments, etc. 1486.98
20 Electronic goods 9739.04
21 Wood and wood products 846.4
22 Gold & Silver 10824.38
23 Tea 34
24 Wollen Yarn and Fabrics 38.47
25 Cotton yarn and fabrics 187.89
26 Man made f'mnt spun yarn 470.96
27 Made up textile articles 58.85
28 Ready made garments(wov.) 31.89
29 Silk yarn and fabrics 162.75
30 Milk & Cream 2.86
79
31 Spices 125.73
32 Oil seeds 5.69
33 Jute raw 7.08
34 Woollen & Cotton rags 24.08
35 Veg. & animal fats 2.71
36 Cottow raw and waste 244.73
37 Essential oils & Cos.prep 118.72
38 Cement 1.7
39 Computer Soft.physical form 649.56
40 Other Commodities 4353.79
TOTAL MPORTS 107066.11
__________________ __________



























80
ANNEXURE II

MNSTRY OF COMMERCE & NDUSTRY
DEPARTMENT OF COMMERCE
ECONOMC DVSON


EXPORT OF PRNCPAL
COMMODTES:APRL-MARCH,2004-05
(US $ Million)
COMMODTES
APRL-
MARCH
2004-2005
_________ __________
PLANTATONS 621.42

1. Tea 397.09
2. Coffee 224.33

.AGR&ALLED PRDTS 6033.94
__________________ _
1.Cereal 1973.31
_________ _
a) Rice 1478.18
b} Wheat 322.28
c) Others 172.86
2.Pulses 123.26
3.Tobacco 277.48
_________ _
a) Unmanufactured 208.7
b) Manufactured 68.78
4. Spices 399.3
5. Nuts & Seeds 795.22
_________ _
a) Cashew incl. CNSL 522.51
b) Sesame & Niger seed 160.99
c.)Groundnut 111.72
6. Oil Meals 690.11
7. Guergum Meal 145.99
8. Castor Oil 228.85
9.Shellac 36.23
10.Sugar & Mollasses 33.19
11.Processed Foods 719.91
__________________ _
a)Fresh Fruits & Vegetables 361.67
b)Fruits/Vegetable seeds 14.01
81
c)Processed and misc. 344.23
Processed items
12. Meat & Preparations 386
13. Poultry & Dairy Product 149.24
14. Floriculture products 45.68
15. Spirit & Beverages 30.18

. MARNE PRODUCTS 1267.53
__________________ _
V. ORES & MNERALS 4193.44
__________________ _
1.ron ore 2629.52
2.Mica 13.96
3.Processed Minerals 757.31
4.Other ores & Minerals 741.26
5.Coal 51.38

V. LEATHER & MFRS. 2289.23
_________________ _
1.Footwear 825.04
2.Leather & mfrs. 1464.19

V. GEMS & JEWELLERY 13705.44
__________________ _
V. SPORTS GOODS 98.1
_____________________ _
V. CHEMCALS & RELATED
PRODUCTS 12677.21
__________________ _
1.Basic chemls.,Pharma 6697.32
& cosmetics
2.Plastics & Linoleum 2947.42
3.Rubber, glass &
other products 2527.75
4.Residual chemls. &
allied products 504.72

X. ENGNEERNG GOODS 14587.37
MACHNERY 6484.71
Machine tools 162.01
Machinery & nstruments 3493.06
Transport equipments 2829.63
RON & STEEL 3631.2
ron & Steel bar rod etc 383.94
Primary & semi- fnshd iron & steel 3247.26
82
OTHER ENGNEERNG TEMS 4471.46
Ferro Alloys 182.31
Aluminium other than prods. 180.45
Non-ferrous metals 759.95
Manufacture of metals 3279.26
Residual Engineering tems 69.49

X.ELECTRONC GOODS 1804.06
__________________ _
1. Electronics 1755.1
2. Computer Software in 48.96
physical form
X. PROJECT GOODS 49.17
__________________ _
X. TEXTLES 12017.46
_________
1.Readymade garments 6026.39
2.Cotton,yarn,fabrics,
made-ups, etc. 3202.49
3.Manmade textiles
made-ups, etc. 1944.75
4.Natural silk textiles 405.74
5.Wool & woollen mfrs. 66.44
6.Coir & coir mfrs. 101.57
7.Jute mfrs. 270.09

X. HANDCRAFTS 343.47
__________________ _
XV. CARPETS 596.34
__________________ _
1.Hand-made excl. Silk 569.06
2.Mill-made excl. Silk 0
3.Silk Carpets 27.28

XV.COTTON RAW incl. waste 81.12
_______________________ _
XV. PETROLEUM PRODUCTS 6792.14
__________________ _

XV. UNCLASSFED EXPORTS 2089.6
__________________ _

GRAND TOTAL 79247.05
__________________ __________________

83

ANNEXURE III

MNSTRY OF COMMERCE & NDUSTRY
DEPARTMENT OF COMMERCE
ECONOMC DVSON
EXPORTS BY REGONS AND COUNTRES: APRL-MARCH,2004-05
RS. CRORES
COUNTRES/REGONS APRL-MARCH APRL-MARCH Growth Weight
2003-2004 2004-2005

.WEST EUROPE 72382.93 84736.77 17.07 23.80
__________________ _ _ _ _
(a)EU Countries 66370.13 77488.74 16.75 21.76
__________________ _ _ _ _
1.Belgium 8297.56 10972.69 32.24 3.08
2.Denmark 1111.54 1291.27 16.17 0.36
3.France 5885.84 7229.99 22.84 2.03
4.Germany 11692.61 11880.32 1.61 3.34
5.Greece 919.20 1302.44 41.69 0.37
6.reland 693.56 853.58 23.07 0.24
7.taly 7946.88 9708.93 22.17 2.73
8.Luxembourg 65.21 48.58 -25.50 0.01
9.Netherlands 5923.65 6820.85 15.15 1.92
10.Portugal 780.67 928.58 18.95 0.26
11.Spain 4607.02 5904.96 28.17 1.66
12.United Kingdom 13892.31 15926.84 14.64 4.47
13.Austria 488.82 502.67 2.83 0.14
14.Sweden 1010.36 1025.43 1.49 0.29
12.United Kingdom 13892.31 15926.84 14.64 4.47
13.Austria 488.82 502.67 2.83 0.14
14.Sweden 1010.36 1025.43 1.49 0.29
15.Finland 511.32 611.96 19.68 0.17
16.Cyprus 129.59 122.74 -5.29 0.03
17.Malta 541.99 140.60 -74.06 0.04
18. Lithuania 82.36 132.60 61.00 0.04
19. Estonia 27.50 42.11 53.14 0.01
20. Latvia 75.05 70.53 -6.01 0.02
21. Czech Republic 404.46 374.05 -7.52 0.11
22. Slovak Republic 77.44 101.41 30.96 0.03
23. Hungary 422.15 466.09 10.41 0.13
24. Poland 616.70 750.02 21.62 0.21
25. Slovenia 166.31 279.49 68.05 0.08
84

(b)Rest of West Europe 6012.80 7248.03 20.54 2.04
__________________ _ _ _ _
1.Norway 347.79 449.13 29.14 0.13
2.Turkey 2588.63 3091.59 19.43 0.87
3.Switzerland 2067.21 2344.85 13.43 0.66
. EAST EUROPE 555.13 795.06 43.22 0.22
__________________ _ _ _ _
1.Romania 219.61 476.33 116.90 0.13
2.Bulgaria 115.89 107.76 -7.01 0.03
3.Yugoslavia 77.33 40.53 -47.59 0.01

. C..S.& BALTC STATES 4742.97 4662.55 -1.70 1.31
__________________ _ _ _ _
a) Russia 3279.80 2684.33 -18.16 0.75
b) Rest of CS Countries 1463.17 1978.22 35.20 0.56
1. Kazakhstan 343.76 357.37 3.96 0.10
2. Ukraine 506.69 907.67 79.14 0.25
V ASA AND OCEANA 136112.79 168822.80 24.03 47.41
- - - - -
(a).Escap 93899.67 115321.69 22.81 32.39
1.Bangladesh 7998.98 7126.94 -10.90 2.00
2.Nepal 3075.79 3273.06 6.41 0.92
3.Sri Lanka 6061.91 6082.60 0.34 1.71
4.Australia 2684.91 3086.93 14.97 0.87
5.China P.R. 13579.06 20606.84 51.75 5.79
6.Hongkong 14988.52 16405.99 9.46 4.61
7.ndonesia 5179.68 5799.27 11.96 1.63
8.Japan 7854.45 8885.62 13.13 2.50
9.Korea Republic of 3514.65 4325.84 23.08 1.21
10.Malaysia 4102.38 4476.77 9.13 1.26
11.Singapore 9763.93 17053.79 74.66 4.79
12.Thailand 3821.72 3846.44 0.65 1.08
13.Pakistan 1318.52 2271.03 72.24 0.64

(b).Others 42213.12 53501.11 26.74 15.03
__________________ _ _ _ _
1.Saudi Arabia 5161.77 6154.53 19.23 1.73
2.United Arab Emirates 23552.85 31893.01 35.41 8.96
3.srael 3326.80 4447.98 33.70 1.25

V. AFRCA 16947.32 24093.07 42.16 6.77
___________ _ _ _ _
1.Egypt 1688.65 1901.93 12.63 0.53
2.Nigeria 2598.51 2753.39 5.96 0.77
3.South Africa 2478.39 4307.14 73.79 1.21
85

V. AMERCA 61705.00 72707.08 17.83 20.42
_________ _ _ _ _
(a)North America 56305.54 63282.74 12.39 17.77
__________________ _ _ _ _
1.Canada 3507.00 3667.13 4.57 1.03
2.U.S.A. 52798.54 59604.33 12.89 16.74
(b).Latin American Countries 5182.70 9357.25 80.55 2.63
_________________ _ _ _ _
1.Brazil 1266.52 2947.98 132.76 0.83
2.Argentina 401.29 803.17 100.15 0.23
3.Mexico 1215.07 1583.04 30.28 0.44

(c).Rest Of America 216.75 67.09 -69.05 0.02
_____________________________ _ _ _ _
1.Panama Canal Zone 14.71 2.09 -85.78 0.00
2.Peurto Rico 121.46 58.14 -52.13 0.02
3.Turks & Calcos s. 79.38 1.42 -98.21 0.00

GRAND TOTAL 293366.75 356068.88 21.37 100.00





















86

ANNEXURE IV

CONCOR
EXIM HANDLING STATEMENT
APRIL 2005-MARCH 2006
(N TEUs)
TERMINAL EXPORT IMPORT G. TOTAL
NAME TOTAL TOTAL
NORTHERN REGON
TUGHLAKABAD 184894 220951 405845
MORADABAD 20217 20013 40230
PANPAT 1148 1149 2297
DHANDARKALAN 56775 63914 120689
BALLABHGARH 11928 6582 18510
JODHPUR 16094 16104 32198
JAPUR 22726 22656 45382
REWAR 7998 11114 19112
DELH KSHANGANJ 80 80
NR. TOTAL 321780 362563 684343

NORTH-CENTRAL
REGON
DADR 40827 55536 96363
AGRA 4419 4418 8837
GWALOR 4186 3634 7820
KANPUR 11735 11246 22981
RAVTHA ROAD 2890 1890 4780
NC.R TOTAL 64057 76724 140781

WESTERN REGON
MULUND 21334 21334 42668
NEW MULUND 33882 33797 67679
87
NDORE 12512 13053 25565
CHNCHWAD 6519 3826 10345
TURBHE 1178 244 1422
MRAJ 437 437 874
DNODE 36396 58737 95133
RATLAM 7900 8814 16714
MBPT/JNPT 6054 6054 12108
W.R. TOTAL 126212 146296 272508

NORTH-WEST REGON
SABARMAT 50261 45852 96113
VADODARA 6530 7119 13649
KANDLA 765 283 1048
N.W.R. TOTAL 57556 53254 110810

CENTRAL REGON
NAGPUR 25389 27895 53284
AURANGABAD 3153 2083 5236
BHUSAWAL 1648 1525 3173
BHOPAL 52 57 109
RAPUR 168 226 394
C.R. TOTAL 30410 31786 62196

SOUTHERN REGON
TONDARPET 26394 40089 66483
HOM-C 31083 25540 56623
WHTEFELD 30388 37330 67718
COMBATORE 4266 3564 7830
MLAVTTAM 3331 5407 8738
COCHN 2783 1603 4386
MADURA 16 15 31
PONDCHERY 678 331 1009
W.AREA 979 424 1403
TRUPUR 2507 2498 5005
88
S.R. TOTAL 102425 116801 219226

SOUTH CENTRAL
REGON
SANATNAGAR 18217 22918 41135
VZAG 3849 3637 7486
DESUR 371 414 785
SC.R. TOTAL 22437 26969 49406

EASTERN REGON
SHALMAR 61 61
AMNGAON 2356 2341 4697
HALDA 373 75 448
CTK/MJT 2729 8645 11374
TATA 742 122 864
E.R. TOTAL 6200 11244 17444

GRAND TOTAL 731077 825637 1556714


















89
ANNEXURE V
Container Traffic
2003-2004 and 2002-2003 | 2001-2002 and 2000-2001 | 2000-2001 and 1999-2000 |
1999-2000 and 1998-99 | 1998-99 to 1997-98 | Click here for Past Years report
2003-2004 and 2002-2003 figures in 000's)
2003-2004 2002-2003
PORT UNIT
IMPORT EXPORT TOTAL IMPORT EXPORT TOTAL
CALCUTTA
TONNAGE
TEUs
1110
(78)
636
(45)
1746
(123)
924
(66)
574
(40)
1498
(106)
HADIA
TONNAGE
TEUs
839
(54)
1436
(83)
2275
(137)
651
(45)
1199
(72)
1850
(117)
PARADIP
TONNAGE
TEUs
3
(2)
57
(2)
60
(4)

8
(1)
25
(1)
33
(2)
VISAKHAPATNAM
TONNAGE
TEUs
80
(10)
197
(10)
277
(20)
105
(10)
191
(12)
296
(22)
CHENNAI
TONNAGE
TEUs
4522
(282)
4106
(257)
8628
(539)
3682
(217)
3536
(208)
7218
(425)
TUTICORIN
TONNAGE
TEUs
1101
(126)
1586
(128)
2687
(254)
926
(104)
1375
(109)
2301
(213)
COCHIN
TONNAGE
TEUs
1062
(85)
1063
(85)
2125
(170)
996
(80)
1074
(86)
2070
(166)
NEW
MANGALORE
TONNAGE
TEUs
35
(3)
61
(4)
96
(7)
26
(3)
58
(3)
84
(6)
MORMUGAO
TONNAGE
TEUs
41
(5)
62
(5)
103
(10)
29
(5)
61
(4)
90
(9)
MUMBAI
TONNAGE
TEUs
2104
(153)
712
(44)
2816
(197)
2332
(163)
811
(50)
3143
(213)
JNPT
TONNAGE
TEUs
12169
(1,087)
15616
(1,182)
27785
(2,269)
9582
(910)
13282
(1,020)
22864
(1,930)
KANDLA
TONNAGE
TEUs
800
(89)
1604
(81)
2404
(170)
688
(80)
1537
(77)
2225
(157)
TOTAL
TONNAGE
TEUs
23866
(1,974)
27136
(1,926)
51002
(3,900)
19949
(1,684)
23723
(1,682)
43672
(3,366)
90





































91