Bangalore: India’s relatively high-cost ports are likely to charge even more as the government takes steps to beef up security following the Mumbai terrorist attacks.

Stacked up: A bird’s-eye view of containers at Jawaharlal Nehru Port in Navi Mumbai. Some say that India will reap the benefits of better security at its ports in the long run—the question is who will bear the cost? Ashesh Shah / Mint

These measures will likely add to port charges, already one of the highest in the region, and could dent India’s competitiveness in the global market, say some shipping experts. India’s ports handle some 95% of the country’s external trade by volume and 70% by value.

Container scanning was inevitable for trade with the US anyway. Under the Greenlane Maritime Security Act, a US law that takes effect in 2012, India would have to install equipment that scans all cargo containers bound for the US or risk being barred from shipping containers to the US.

“India’s port tariffs are higher than other competing ports in South Asia," notes Arvind Mahajan of consultant KPMG Advisory Services Pvt Ltd. “As a result, many big shipping firms prefer not to call at India ports."

However, Shailesh Garg, general manager at the Indian unit of London-based maritime consultancy firm Drewry Maritime Services Pvt Ltd, said that in the long run, “India will reap the benefits of installing scanners and tightening security at its ports."

India spends 13% of its GDP on logistics expenses, against 11% in Japan, 10% in Europe and 9% in the US. This higher percentage is mainly on account of poor logistics infrastructure at ports in the country, which translates into high transaction costs for exports and imports.

For instance, the vessel related charges or so-called marine charges (paid by ships calling at a port) such as port dues, berth hire and pilotage in India for a ship with a capacity to load 2,500 standard cargo containers range from $8,500 (Jawaharlal Nehru Port) to $23,000 (Cochin Port).

That compares with $2,500-3,000 in Dubai and $4,500-5,000 in Colombo.

“Strengthen the security at ports even if it increases costs. Because, the losses could be enormous if anything goes wrong," said an executive at APM Terminals, the container terminal operating unit of Danish shipping and oil conglomerate AP Moller-Maersk A/S. APM Terminals Management B.V. runs a container terminal at Jawaharlal Nehru Port, that handles some 60% of India’s container cargo traffic of about 7.5 million standard containers a year.

Others say that there is no procedure now to scan the inside of a container that comes directly from the factory.

“If someone misuses that (factory), you are in for serious trouble," said Shankar Chatterjee, managing director, India & South Asia of UK-based project logistics firm F.H. Bertling Ltd.

Meanwhile, a major stumbling block is who will bear the cost of bolstering port security.

“Security is something which the government should provide because the security of a nation is the responsibility of the home and defence ministries," insists S.R.L. Narasimhan, secretary, Western India Shippers Association, which represents the country’s exporters and importers in India’s western region.

“The defence budget should be increased to fund initiatives to strengthen port security."

“The cost of scanning a container should be kept at the bare minimum so that the exports are not impacted," said an executive at PSA International Pte Ltd, the world’s second biggest container port operator, which runs a container facility at Tuticorin Port on India’s eastern coast.

Container scanners cost between Rs25 crore to Rs50 crore, depending on specifications.

“Ships waiting for extra time incur demurrage which is ultimately passed on to the shipper, adding to the transaction costs of the exporter," said Priya Safaya Fotedar, director, policy at the Federation of Indian export organizations. Demurrage is a charge imposed for holding a ship beyond its allotted time. It takes about five-seven days for a ship to unload and load container cargo at Indian ports.

That compares with 6-8 hours in Singapore, the world’s largest container port which handled 27.1 million standard containers in 2007.