01-08-2017

India: Direct port delivery plan threatens container stations

DPD

Top logistics firms, including listed entities that have invested thousands of crores to set up and run container freight stations (CFSs) near India’s container ports, face an uncertain future after the Central government introduced a programme to speed up delivery of cargo containers to importers/consignees to check extra cost and time involved in the clearances.

The so-called direct port delivery (DPD) scheme was introduced at the Jawaharlal Nehru Port and Chennai Port, spurred by a report from the World Bank on ease of doing business.

DPD allows importers/consignees to take delivery of the containers directly from the port terminals and haul them to factories without taking them first to a CFS and from there to factories. An importer is thus assured clearance of cargo in less than 48 hours under DPD as against an average of seven days if routed through a CFS.

A CFS is an off-dock facility licensed by the Customs Department to help decongest a port by shifting containerised cargo and carrying out customs-related activities outside the port area. Due to Customs procedures and space constraints at many of India’s ports, Customs clearance happens at the CFS. JNPT was designed on the CFS model.

In late 2016, the government directed JNPT and Customs to raise the proportion of DPD first from 3 per cent to 40 per cent and later to 70 per cent.

Many players affected

Mumbai-listed firms such as Allcargo Logistics Ltd, Navkar Corporation Ltd, Gateway Distriparks Ltd, Container Corporation of India Ltd (Concor) and Balmer & Lawrie Co Ltd are among the 33 CFSs operating near JNPT. In fact, Navkar went public in 2015 purely on the strength of its CFS business.

Continental Warehousing Corporation (Nhava Sheva) Ltd, which runs a CFS near JNPT, has also filed documents with SEBI for an IPO.

AP Moller Maersk Group A/S, which runs Maersk Line, the world’s top container shipping company, also runs two CFSs near JNPT.

Most of the stakeholders in the export-import logistics chain say that the DPD is an excellent concept, but are critical of the way it is being implemented, mainly because it will hurt their business.

The government has targeted CFSs to fasten import clearances because this intermediary, it feels, takes the longest time, as much as 8-9 days, in completing all procedures. The long cargo dwell time in CFSs automatically adds to transaction costs, says the government.

CFS operators say that the longer dwell time attributed to them is not of their own making. “Importers prefer to keep containers in the CFSs and move them to factories according to their inventory requirements. CFS is the safest and cheapest way of storing containers,” says a CFS executive.

There are some 33 CFSs in Nhava Sheva and another 150 across India. “What’s going to happen to the CFS business, which has seen some Rs. 10,000 crore investment as a sector, generating employment of a couple of lakhs? The government is saying that CFSs are bad and overnight they have to change. It’s become a completely unviable model. So, what do you do with it? How do you re-engineer? Has the government given that a thought,” asks a CFS operator.

Source: The Hindu Business Line 

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