Dry Bulk Cargo Movement: Challenges Facing Indian Port Sector
G S Rathod, Deputy Secretary, Mumbai Port Trust

Demand for dry bulk trade has been increased gradually by demand for natural resources and energy on the back of high economic growth in emerging countries. As an emerging developing economy, the article summarises the challenges ahead for India port sector to sustain the growth in seaborne trade and the initiatives that will carry forward the momentum for the future aspect.

There is nothing particularly new about bulk shipping. Cutting transport cost by carrying cargo in shiploads is a strategy that has been around for millennia. The grain fleet of ancient Rome, the Dutch ‘Flyboats’ of 16th century, and the 19th Century Tea Clippers are all examples. Commercially, the bulk shipping industry which has an important place in the Shipping Industry of the 21st century has its roots in the 18th Century coal trade between North England and London (Stopford, 2009).

Dry Bulk Cargo Movement
Talking about the issues concerning dry bulk cargo movement, it is imperative to bear in mind the main characteristics of bulk commodities which influence their suitability for transport in bulk.

Bulk commodities are; (i) traded in large volume (ii) of consistent granular composition and hence can be easily handled with automated equipments such as grabs and conveyor and (iii) low value high volume commodities.

These characteristics emphasise the need to move the bulk cargo as cheaply and efficiently as possible. In this context the major issues to be considered in movement of Dry Bulk across the world are; (i) gaining maximum economy of scale by using bigger ships (ii) reducing the number of times the cargo is handled (iii) making cargo handling operation more efficient and (iv) reducing the size of stocks held.
This, in turn, calls for efforts from all the main participants of bulk transport system i.e., the cargo owners, the commodity traders, the ship owners and bulk operators including the ports.

Seaborne Trade & Economy Growth
Demand for seaborne trade is potentially influenced by the world economic growth and industrial production, which is not always symmetrical (Shipping Insight, October, 2010). Since summer of 2003, demand for dry bulk transport had been high supported by demand for natural resources and energy on the back of high economic growth in emerging countries (Hono. 2009, 30). With nearly 95 per cent in 2008, the shipment of coal, iron ore and grain reflected the most important shipping demand in dry bulk trades.

According to Fearnley´s trade and shipment figures, iron ore trade represented largest share of trading volume of all major dry bulk commodities at 40.6 per cent followed by coal with 39.3 per cent and grain with 16.3 per cent (ISL Shipping Statistics and Market Review, Vol. 53 No. 4, 2009).

Sustained global economy and industrial production from first quarter of 2005 to third quarter of 2008 had held the freight market higher, but with negative growth rate from fourth quarter of 2008 following economic crisis, the market crashed in 2009 to a historically low point (Shipping Insight, October, 2010).

Global Scenario
Consumption of coal is anticipated to remain almost at current levels in North America and rest of the World for the period beyond 2015. But considering that demand for coal is linked to need for energy consumption, market for coal is projected to grow consistently in non-OECD Asia to register growth from 80 quadrillion Btu to 140 quadrillion Btu in volume from present level by 2035. This will be primarily to meet the energy demand (http://www.eia.doc.gov).

India Prospective – Challenges Ahead
This assumption is corroborated by the fact that performance of major ports in handling major bulk commodities in the year ending 31.03.2014 has been encouraging. The volume of cargo handled by twelve major ports last year grew by 1.78 per cent, reversing two consecutive years of decline. Strong coal shipment through the twelve major ports played a big part in reversing two years’ of decline in cargo volume. The thermal coal handling grew by 22.09 per cent to 71.6 million ton from 58.6 million ton as power stations imported more coal. Similarly, coking coal shipment jumped around 18 per cent to 33.1 million tons from 28 million ton a year ago (Daily Shipping Times).

On the backdrop of recent organised 1st ‘Annual Conference on the Outlook for India’s Seaborne Dry Bulk Trade’, it was expected that coal mining in the country is likely to increase from 120 million tons to over 200 million tons soon and that by 2020, India hopes to achieve steel production of 200 million tons surpassing Japan and US, one of the major concerns raised in this conference was whether the Indian Ports are equipped to meet the projected rise in the dry bulk trade as many of them lack facilities to handle the dry bulk cargo and the documentation and other procedures are time consuming (www.maritimeprofessional.com).

Though India is seemed as second most attractive logistics market after China, issues such as shortage of skilled manpower, poor adoption of technology with higher cost and lower capabilities are believed to have hampered the pace for development. Quoting McKinsey study, Deloitte said, inefficiencies in logistic infrastructure cost the Indian economy an extra USD 45 billon, 4.3 per cent of the GDP every year. This study also warns that 2.5 times growth in freight traffic demand by 2020 will strain India’s infrastructure further. Highlighting the challenges faced by each of the segment of logistics infrastructure: Road, Railway, Port and Air Cargo, the report concludes that the sector should look into following key aspects namely, (i) capacity creation and efficiency improvement and (ii) use of private sector investments to bring in both, funds and best practices.

Looking Forward
The planning Commission has budgeted for an initial logistics infrastructure investment of Rs 4.1 Trillon over the 12th Five Year Plan (2012-2017) period, which is double of what was proposed under 11th Five Year Plan (Daily Shipping Times).

Talking about the ports, the Port Authorities are one of the most important stakeholders in the supply logistics chain, whose performance is a key factor in determining the efficiency of the system. There is a vast difference in the quality of infrastructure and superstructures, characterised by state-of-the-art facilities ably supported by the IT infrastructure, available at International Ports and at the Indian Ports.

Successful international ports are characterised by optimised business process flows complemented by electronic information exchange amongst the stakeholders through the latest information technology, higher levels of mechanisation, huge volumes of cargo and vessel traffic, intermodal connectivity and vast space for storage and processing. Another key feature of international ports is the presence of huge industrial complexes within the port premises. As a result, the growth of both, the port and industries complement each other.

An Inter-Ministerial Group set up to study the ‘Cargo dwell time’ in Ports few years back had identified following major issues facing Indian Port Sector, which hold good till today and need to be addressed on priority viz. (i) low level of mechanisation leading to handling of cargoes by conventional means resulting in higher turn around time of the vessel (ii) Cargo is handled manually with high manning scales for loading & unloading resulting in low productivity. Multi-skilling is more or less absent (iii) Labour force is not conducive and receptive to mechanisation (iv) Major Ports in the country are not working 24x365 on account of statutory holidays, time lost during shift change overs etc (v) Safety regulations further restrict the handling of certain commodities only during daylight hours like hazardous cargo and over-dimensional project cargoes (vi) In city locked ports, restrictions imposed by local bodies affect free movement of heavy vehicles carrying cargo. Cargo laden vehicles are prohibited to commute on the city roads during daylight hours, thereby restricting the movement of cargo in and out of the port. (vii) Cargo handling agents do not engage high performance equipments for the discharge/loading of cargo from vessels to cut cost. This results in poor performance of vessels at berth. (viii) To take advantage of freight earnings, agents hire very old vessels, especially for bulk cargoes, like fertilisers, that are equipped with poor quality and low performance gears resulting in a very low discharge/loading rate. Instances of the ship gears crumbling while in operation at berth are not uncommon (www.infrastructure.gov.in).

To cope with the burgeoning traffic of international trade, the Government has undertaken several initiatives to bring the port sector at par with global standards. Efforts are underway not only to create additional capacity but also to increase the efficiency of the existing capacity in the sector. What is needed is optimisation of cargo handling systems and equipment, better maintenance scheduling, 24x7 working at ports, augmenting capacities at ports, improving labour productivity, strengthening roads to and within the ports, implementing EDI/ERP, single window environment for port users, and simplification of procedures.