Policy rethink and higher volumes to aid container shippers2 min read . Updated: 19 Oct 2018, 07:45 AM IST
The government reportedly is working on a new cargo evacuation scheme wherein the role of container freight station (CFS) operators will increase
A tweak to the policy on how containers are handled at ports is in the works. That could make a significant difference to fortunes of the container freight station (CFS) industry.
The government is reportedly planning to alter the direct port delivery (DPD) scheme. It is working on a new cargo evacuation scheme wherein the role of container freight station (CFS) operators will increase, according to a report in the 7 October edition of The Hindu Business Line.
Under the new plan, a container will be moved to the CFS within 24 hours for further clearances, says the report. The original DPD scheme offers a 48-hour window, which gave importers more time to bypass the CFS. The final details are yet to be announced. Under DPD, an importer can take delivery of the container directly from the ports, instead of routing it through the CFS.
CFS charges and regulations regarding the scope of DPD will determine the financial impact. Even so, the policy rethink should aid companies with sizeable CFS operations—namely Gateway Distriparks Ltd and Navkar Corp. Ltd.
To be sure, while DPD has slowly gained traction, it has not disrupted CFS business volumes in a major way, according to calculations by Antique Stock Broking Ltd and SBICAP Securities Ltd. “DPD activity (imports) improved marginally to an annualized run-rate of ~44% of total imports in September 2018 at JNPT. Although still below the targeted 70%, the DPD impact on JNPT CFS’ volume prospects is lower than expected as ~73% of DPD volume is being carried out at the designated CFS’ instead of at the port itself, minimizing the detrimental volume impact to CFS operators," SBICAP Securities said in a note. JNPT or Jawaharlal Nehru Port Trust is the largest container port in India.
That said, the DPD scheme has improved efficiency (the new policy is said to target lower dwell times) and data shows growing awareness among users even though the majority of the volumes right now are routed through CFS. “Number of agencies registered for DPD now stands at 1,909 versus 1,791 MoM (August), 1,361 in April-18 and 1,149 agencies registered in Oct-17," Antique said in a note.
Seen in this backdrop of growing popularity of DPD, a policy rethink should bring relief to CFS operators. Also, container volumes at major ports are recovering. They increased by around 13% in September compared to a 3% rise in August and 7.7% growth so far this fiscal year. Importantly, traffic at JNPT is gaining traction thanks to the new terminal.
“Based on September monthly data, the monthly run-rate of JNPT’s new terminal has increased steadily to 50,000 TEUs per month compared to around 10,000 TEUs in February 2018," adds SBICAP Securities. “The pick-up in JNPT’s volume growth is likely to be favourable for the CFS ecosystem around the port (Navkar, Allcargo and Gateway, who operate JNPT CFS’) as rail-based evacuation still remains a challenge." TEU is twenty foot equivalent unit.
These factors and the proposed DPD policy signal better times ahead for CFS operators.