Bangalore: Sensing an increase in demand for coastal shipping, state-owned Container Corp. of India Ltd, or Concor, plans to start such services within a month as part of its expansion strategy, said a top official.
“Short-sea shipping (coastal shipping) is the future. We intend to start regular shipping services on coastal routes within a month,” said H.D. Gujrati, group general manager of international marketing at Concor. With this, the company will be venturing into a business that will widen its reach as a logistics service provider, he said.
New operations: Containers being offloaded from a ship at Jawaharlal Nehru Port Trust in Mumbai. Concor is looking to hire full ships or even buy them in partnership with an experienced firm. (Photo: Ashesh Shah/ Mint)
Coastal shipping is said to be a cheaper alternative to carrying cargo by road or rail. But, despite a 7,517km coastline dotted with 12 major ports and more than 200 smaller ones, India’s coastal shipping has not developed to the level prevailing in other parts of the globe.
Coastal shipping accounts for more than 40% of the trade volumes in the US, China and Europe, but in India, it makes for just 7% of the total domestic cargo transport, according to consultancy firm Ernst and Young.
Concor, 63% owned by the Union government, had started coastal shipping some years ago but had to discontinue the services due to operational and regulatory reasons, said a Concor official, who did not wish to be named.
This time around, Concor is clear about its strategy. “Initially, we will buy slots (space on board a ship occupied by a container) in the coastal ships of firms specializing in this sector. Subsequently, we may hire full ships or even buy ships in partnership with an experienced firm,” Gujrati said.
Concor is negotiating with several firms for a joint venture, but Gujrati declined to give details.
The company simultaneously plans to become a non-vessel operating common carrier, which is an industry term for a cargo consolidator in ocean trade who buys space from a carrier and sells it in parts to small shippers.
The plan, according to Gujrati, would be to haul cargo originating from northern India to either Pipavav or Mundra ports in Gujarat, and ship the containers by sea from there to Kochi in Kerala and other ports, and back.
The company will use the same strategy to ship containers originating from and bound for northern India when an international container trans-shipment terminal at Vallarpadam in the Kochi port starts operations. A container trans-shipment terminal is where cargo is transferred from a big ship to smaller vessels, or vice versa, for its onward journey.
Concor has 15% stake in the Vallarpadam terminal, which is slated to start operations in the first quarter of 2010. The Dubai government-owned global port operator DP World holds the majority 74% stake in the country’s first container trans-shipment terminal.
Concor moved more than 2.4 million twenty-foot equivalent units, or TEUs, in the 12 months to March. Of this, international business accounted for 1.9 million TEUs.
A TEU is the standard size of a cargo container and is a common measure of capacity in the logistics industry.
Currently, Concor does not run trains from its flagship inland cargo terminal at Tughlakabad near New Delhi to Kochi, because of the long distance between the two places and insufficient return traffic which make rail haulage a costly proposition.
“We need a full trainload on the return leg. Otherwise, it will be expensive for us to run the service,” said a Concor official, who declined to be named.
In the absence of adequate traffic on the return leg, Concor will have to move empty containers to places where there is a shortage of containers to load cargo.
This practice, known as repositioning of empty containers, comes with a charge. Concor and other operators have to pay a certain fixed amount to the Indian Railways to reposition empty containers as part of the overall haulage charges fixed by the railways ministry for using its track and signalling infrastructure to run container freight trains.
A government-sponsored study done by information technology services firm Tata Consultancy Services Ltd on the development of coastal shipping in the country says about 4 million tonnes (mt) of cargo a year could be diverted from road and rail to coastal shipping without any increase in freight costs.
The diversion could be as high as 10mt by 2012 if some fiscal concessions are given to the sector, the study said.