Container Freight Station (CFS) operators at Jawaharlal Nehru Port are converting their facilities into unnotified warehouses mainly because of continued lower volumes - a result of increased traction of direct-port-delivery (DPD) scheme introduced by the port. “Allcargo (Logistics Ltd) has already converted one of its CFSs into an unnotified warehouse and some more operators like Gateway Distriparks could follow this route,” sources close to the development told Business Standard. “It will help the operator lower its costs by almost 15 per cent, which is a significant cost saving especially when volumes are dropping continuously,” sources added. Allcargo Logistics, part of Avvashya Group, has two facilities - JNPT1 and JNPT Annex, spread over a total area of 68 acres at the port. Of this, JNPT1 occupies 22 acres, while JNPT Annex with 45 acres has only 23 acres developed as the CFS facility. “Over the last six to eight months, we have converted a part of JNPT1 facility into an unnotified DPD yard, which will cater to storing DPD cargo that does not need customs monitoring,” informed executive director and chief operating officer Prakash Tulsiani without revealing how much portion of the facility has been unnotified. CFS facilities have to be custom notified and hence charge a premium over warehouses which are unnotified. Labour costs are also lower at unnotified warehouses compared to a CFS, which brings down the overall cost of the facility. “Converting part of JNPT1 into unnotified warehouse has lowered our revenues by 2-3 per cent, our costs have also come down by a similar percentage,” said Tulsiani. While Allcargo Logistics has no plans to unnotify its second facility, JNPT Annex, Tulsiani does not see more portion of JNPT1 facility come under unnotified warehouse category as of now. “We are changing our facilities depending on client-based needs. Earlier we were catering only to shipping line containers but now we have pure DPD cargo, third-party nomination, shipping line container as well DPD—CFS requirement,” Tulsiani explained. “Moreover, JNPT terminal four is also coming up and hence CFS requirement remains. Due to this, there are no plans to convert JNPT Annex into an unnotified warehouse,” he added. Meanwhile, Gateway Distriparks with two CFSs could also be contemplating unnotification of one of its 40,000 square meter warehouse in coming months. “One of Gateway Distriparks' CFS is on a long-term lease, which is due to renewal in next 4-5 years. We could think of getting it out of customs notification.
We are currently in the wait-and-watch mode,” said a source close to the development on condition of anonymity. Another CFS operator, Navkar Corporation, however, seems to be relatively in a sweet spot mainly because of its railway connectivity. “There has been no impact of DPD traction on our revenues. Due to our rail connectivity, which makes transportation cost one-third compared to that of via road, our hinterland deliveries directly from the port remains intact,” said Aneesh Maheshwari, chief financial officer of Navkar Corporation. The company has three facilities at JNPT spread over 85 acres. Of this, 48 acres is already unnotified and hence is already being used for DPD storage and delivery. "There is no change in our business model even after DPD traction since we had already factored in the possibility of CFS elimination," he said. Globally, no port has a CFS industry catering to storage of cargo. All across the world, cargo is directly delivered from the port to the final destination. According to the JNPT website, the share of DPD volume handled in December 2017 has gone up to 36 per cent from 27 per cent in February of the same year. The domestic CFS industry is structured in a manner where nearly 60 per cent of their clients are importers which use their facilities for longer duration of about 8-10 days while the balance is housed by exporters where the cargo is for a much shorter duration. With importers increasingly availing of the DPD service, it is this major portion of CFS operators’ revenue volume that is taking a hit. JNPT has close to 35 CFS operators comprising listed as well as several unlisted entities.
*Allcargo converting portion of JNPT1 to unnotified warehouse
*Allcargo to save 2-3 per cent cost on conversion to unnotified warehouse
*Gateway Distriparks contemplating shift to unnotified warehouse in coming months
*Navkar Corporation keeps business model unchanged
Source: Business StandardPrevious Next