LOG.India April 2010 by Frewin Francis

www.logisticsweek.com

April 2010

Vol. 3 - No.07

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Top Gear Ajay Chopra, the CEO of Drive India Enterprise Solutions Ltd (DIESL), reveals the strategy that has helped his company grow by leaps Page 36 WANTED, â&#x20AC;&#x2DC;MINISTRY OF LOGISTICS 24

CORRIDOR OF CHANGE 48

LAST AMONG EQUALS 52

Hemant Bhattbhatt of Deloitte weighs in on logistics issues

What the Railway Minister intends to do with the DFC

Private ports have done well despite odds. A special report

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DVV MEDIA INDIA Presents The Automotive Supply Chain Industry: A Brave New World (A seminar focussing on the Supply Chain Management of the Automotive and Auto-ancillary Industry of India) The automotive sector has emerged as a strong driver of our economy. Our country has seen the entry of new players thus making the field truly competitive. It is a widely reported fact that India is emerging as a global hub for exports. In terms of exports, India’s auto industry surpassed China’s as Asia’s biggest automobile exporter in the year 2009. The Indian Automotive industry saw an 18 percent growth in 2009 over 2008. Logistics played a very important role in achieving this growth, still there is a lot which needs to be done to make the Supply Chain Management of the Automotive Industry robust. Auto manufacturers, Original Equipment Manufacturers, Tier I and II suppliers face a host of challenges in auto logistics. The year 2009 saw a huge churn in the auto SCM industry and the industry players have wizened up for calculated growth in the years ahead. The seminar will throw spotlight on the current state of auto logistics, needs, issues, process and service imperatives of this sector.

SEMINAR ITINERARY Date: April 9, 2010; Time: 9.45 am - 4.00 pm Venue: Indian Habitat Centre, New Delhi -110003 Session 1

The Changing OEM world map: Imperatives for Indian auto SCM players (Speaker: Amber Dubey, Director-Infrastructure advisory, KPMG India)

Session 2

What do the automakers want? A top down view (Speaker: SK Krishnan, Senior General Manager SCM, Mahindra and Mahindra)

Session 3

The importance of aftermarket in the auto industry (Speaker: G Maheswaran, Market Segment Leader - Automotive and Spare Parts, Miebach Consulting)

Session 4

Innovate or Perish: Cases in Point (Speaker 1: Sanjay Goel, Chairman, GTC Group Speaker 2: Nitesh Prasad, Zonal Head-North, DIESL)

Session 5

The auto sector revival and how to make the best of the upturn (Panel Discussion) For free registration call at 022 28240198 /28375323 or write to abhishek.nanda@dvvmedia.com

Networking Lunch : 12.55 pm – 1.30 pm Networking Tea : 3.30 pm – 4.00 pm  Limited seats

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eDITORIAL

In the Arena

ood luck rarely comes in pairs, and bad luck never comes alone, goes a Chinese saying. I recently got a taste of this truism when I happened to bungle big time at one of the biggest annual events of the industry where I was a moderator and that too, alas, amidst some of the best minds of the supply-chain industry. Do you remember the time when you changed channels when a singer in some reality TV show hit one bad note after another? I was the bad singer in this case (forgot to bring to the stage the profile of the senior-most industry leader in the panel – a most humble man with a terrific sense of humor, the sagacious gentleman volunteered to introduce himself – then I mixed up the cues, asked questions out of turn and context. In short, I stank). The only difference here was that the brave audience held on through this session – not a single guffaw from the audience, no uncomfortable shifting in the seats – while I was at it. Unbelievable! I later figured that the audience stuck it out because they were at Aanand Pandey this event to hear the other panelists, all of whom were industry thought leaders in their Editor own right. And these leaders – naturally with vast experience of handling such mess-ups – salvaged the situation. Eventually, the discussion went well. So well, that the session overshot the time limit by almost an hour and we had to politely turn down a couple of audience queries to bring the session to an end. In sharp contrast, I have hosted discussions where I’ve come off like India’s answer to Larry King, but the whole discussion has turned out to be a damp squib. As R Dinesh, TVS Sons’ joint managing director and one of the aforementioned panelists who saved our day, pointed out to me later, “It is the overall quality and talent of people in any venture that matters. Either way, one individual can’t do much on his or her own. It’s a collective effort.” Indeed! In more ways than one, this incident was a chance reminder to me of how critical talent and the quality of people is, in our industry – more so, when we speak of increasing the share of logistics outsourcing (which was what the said event was about). But before I proceed to make my point, let me put the term ‘talent’ in the right context – in the way companies see it. The best definition of talent was the one I got from Claus E Heinrich, head, global human resources and labour relations, SAP, who once told me during an interview, “Talent, in a company’s context, is an attribute that is a combination of performance and potential.” In India, the demand for outsourcing is increasing at such a scorching pace that 3PLs are not able to keep up. According to recent Assocham figures, 3PL outsourcing is increasing at the rate of 16 to 17 percent per year with 55 percent of the companies currently outsourcing services like SCM and warehousing. Contrast this with a recent estimate from Armstrong and Associates, according to which 77 percent of America’s Fortune 500 companies outsource logistics and supply-chain functions. Another fact: The Global Fortune 500 3PL market was pegged at $200 billion in 2008. India’s 3PL market at $58 million in 2009 is but small change in comparison. And from the talks I have had with managers at various levels in India’s 3PL companies, talent (or the lack thereof) is one of the biggest issues in the way to garnering and managing more business. No need to lose heart though (much like I haven’t, in my small way). The world’s biggest and arguably the best cultivator of talent pool for outsourcing is right next door – India’s IT industry. Some day, our industry’s thought leaders must do a tour (if they haven’t already) of Infosys’s 2,055-crore GEC (Global Education Center) campus at Mysore to get the full import of the currency that IT companies put on nurturing talent. Another cue can be had from Nasscom’s National Skills Registry (NSR), an excellent initiative that works proactively to build confidence among customers about skills and the reliability of workers employed at the outsourcers. But for that to happen, many would say, we would need an apex body like Nasscom first. However, referring to an apex body here would be taking things out of context, which I won’t do in this editorial. I have learnt my lesson.

aanand.pandey@dvvmedia.com INDIA |

April 2010 | www.log-india.com 7

Contents 36 Cover story

34 Opinion

Full Steam

Action or Reaction? Most companies do not plan for contingencies and thus get sidetracked into firefighting instead of looking at the real issues, notes Padmini Pagadala

DIESL has grown at 100 percent, according to the company, at a time when the rest of industry has clocked 12 percent. Company CEO, Ajay Chopra, lets us in on the secret

34 42

Event Report Mergers and Acquisitions Spur Industry The Supply Chain Leadership Council organised an informative summit on the increasing mergers and acquisitions in the industry

42 8

INDIA |

April 2010 | www.log-india.com

ApriL 2010 ADVeRtIseR InDeX BLR Logistiks (I) Ltd. ........................................... 27 Capricorn Logisitcs ............................................. 23 CII Logistics Supply Chain .................................. 45 Excellence Conference 2010 DHL Express....................................................... IFC DP World ............................................................. BC Everest Industries Ltd. ........................................... 3 Exide Industrial.....................................................13 Green Earth Translogistics Pvt. Ltd. ................... IBC IACT Global ......................................................... 47 Infolog Solutions...................................................17 Infolog Solutions.................................................. 59 ISCM ....................................................................19 Jaguar Overseas Ltd. .......................................... 21 Prakash Parcel Services...................................... 21 LMJ Logistics ...................................................... 29 PSB Logistics .......................................................10 Piaggio Vehicles Private Limited ............................ 5 Round The Clock Logistics .................................. 39 Safexpress Pvt. Ltd. .............................................15 Saudi Transtec .................................................... 31 Vijay Logistics ....................................................... 6

48 48 FreiGHt

COrriDOr Corridor of Change The Dedicated Freight Corridor will lead to a spurt in industrial growth

March 2010

www.log-india

.com

MArCH 2010 Vol. 3 - No.06

Rs 100 Germany

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INDIA 2010: The Decade Infrastructurof e In an exclu sive interv iew Kamal Nath , Union Minister of road trans port and highw ays, prom ises swift ramp up of infrastructu re Page 32

looK befo re yoU bUy 26

sIMPly reAd 48

Discerning the goods at the quality of right price calls for skills

52 privAte pOrts

reGULArs news

Capt.Gopinathâ&#x20AC;&#x2122;s autobiography and is riveting is out

The A-lIsT 59

Log.India present s the A-List of the top companies from transport across the country

events

APRIL 2010

Last Among equals

Private ports have added to the significant growth of traffic movement over the years, and are growing at a healthy growth rate of 26.4 percent despite the recession and red tape

INDIA |

April 2010 | www.log-india.com 9

Whatever the destination Whatever the cargo

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< news OPERATIVE INDEX*

Train of Thought

Confederation of Indian Industry.................................. 11 NMDP, TVS Sons Ltd, KPMG, Crisil, Lucas TVS, Aviall India... 12 Mahindra & Mahindra, Navistar, DIESL, Ford, SCI, Age Group, General Motors, Tata Motors .. 14

Reduction of significant wastages in storage as well as in the operations of the existing food supply chains in the country...needs to be addressed. — Finance Minister Pranab Mukherjee in his Budget 2010-11 speech

I’m very clear in my mind: wherever there are land acquisition issues, I will bandon the project instead of trying to struggle with it. If the state governments don’t have the appetite for roads, it’s okay. We go to another state... — Kamal Nath, Union Minister for Road Transport & Highways to the Press

Worldwide our fill rates from our vendors is of the order of 90 pc to 95 pc. In India, we are struggling at 60 pc. So the opportunity of supply chain in India is huge and as a result that leads to overstocking of the warehouses, at the distribution centre and so on. — Raj Jain MD, Wal-Mart India, in Economic Times

Tata Motors, Ashok Leyland, Volvo-Eicher, Blue Dart, Afcons Infra, Shapoorji Pallonji ..........16 TNT Express, Kerry Logistics, TCI, TDL. ................................18 Capricorn Logistics ................19 SSLL, RSWC, Mercator, UPS....20 DPD, NHAI,.............................. 22 Deloitte.................................. 24

All NMDP projects to be implemented by 2011-12: Vasan The two-day CII Institute of Logistics Outsourcing Summit 2010 saw a gathering of thought leaders, including Shipping Minister GK Vasan, who discussed ways to take the logistics outsourcing industry to global standards

Vizhinjam International Sea Port Ltd....... .......................... 26 Railway Industry Association, Aryan Cargo, South Eastern Railway, Kolkata Metro Rail Corp.... ...... 30 Airport Authority of India.......

Ministry of Civil Aviation, National Maritime University....... ........ 33 *Key entities mentioned in the news section

hen the Shipping Minister, the unassuming GK Vasan rose to deliver his opening speech at an industry summit on logistics outsourcing held on March 17 and 18, few expected the slew of far-reaching announcements that were about to come their way. Speaking at the summit held at Hotel Lalit Intercontinental and organised by Confederation of Indian Industry’s Institute of Logistics, the Minister informed the audience comprising manufacturers, logistics service providers, consultants and media scribes that the annual aggregate capacity of ports in India is to see a

Members of the audience in full strength INDIA |

April 2010 | www.log-india.com

< news sharp rise by 2012. He added that the annual capacity of the major ports will increase 74 percent to reach one billion tonnes in the next two years. In 2008-09, the total aggregate capacity of major ports was 575 million tones when the traffic was around 530 million tonnes. By 2013-14 the traffic at major ports is set to reach 674 million tones (source:

capacity push sent positive signals to the leaders of the logistics domain in the audience and the industry at large. Given the stellar performance of non-major ports that are set to outpace the growth of major ports – expected to grow at a compound annual growth rate (CAGR) of 16.3 percent (as against major ports’ 4.9 percent)

ways,” said Vasan. Under the programme, 50 out of 276 projects identified have been completed. “All the NMDP projects will be implemented by 2011-12,” he said.

Luminaries galore The summit was chaired by TVS Sons Ltd Joint Managing Director R Dinesh. In his welcome

Shipping Minister GK Vasan unveils the KPMG report at the summit. (From left to right) Prem K Verma, CEO, TML Distribution Company Limited (TDCL); R Narayanan, Partner, KPMG Advisory Services; GK Vasan, Minister of Shipping, Government of India; R Dinesh, Member, National Logistics Council & JMD, TVS Sons Ltd; K V Mahidhar, Head - CII Institute of Logistics

Crisil Research), hence the billion-tonnage capacity looks very much in pace with the traffic growth. At non-major ports, the capacity would reach 580 mt by the end of the 11th Five Year Plan (2007-2012). “The annual capacity of the major and non-major ports combined will be 1.5 billion by 2012,” said Vasan. With the port traffic at nonmajor ports expected to grow from 231 million tonnes in 2008-09 to 493 million tonnes in 2013-14, according to Crisil, led by high growth in coal and container traffic, Vasan’s announcement about government’s major

INDIA |

– the sector could expect more support from the government. The Minister said his team is considering a proposal for road and rail connectivity to nonmajor ports at a cost of Rs 500 crore. He spoke about the nearterm goals of National Maritime Development Programme (NMDP) -- formulated in 2006 to complement the National Maritime Policy. “We are implementing Rs one-lakh-crore National Maritime Development Programme (NMDP) and out of this Rs 55,804 crore is for ports while remaining will go for shipping and inland water-

April 2010 | www.log-india.com

address, Dinesh complimented Vasan on the notable strides the latter’s Ministry has taken. Dinesh also pointed out why logistics -- and in extension logistics outsourcing – has become key to the industry’s growth in view of rising exim volumes. “Globally, outsourcing has come to be seen as a bad term, a notion that needs to be dispelled. Outsourcing’s relevance to the quality and the volume of service and manufacturing output has but increased exponentially around the world,” he told Log.India on the sidelines of the event. Narayanan Ramaswamy, ex-

ecutive director of KPMG highlighted main points from the study that KPMG has published on the theme of the event. Prem Verma, the chief executive officer (CEO) of Tata Motors Limited Distribution Company Limited (TDCL) emphasised during a panel discussion on best practices in outsourcing that trust, accountability and a keenness to provide the greatest value to companies are traits that distinguish the best service providers from the rest. Dr N Ravichandran, CEO, Lucas TVS, said that companies must plan for the long term before taking short-term actions. He stressed for principals to get buy-in from stakeholders before embarking on outsourcing. He said that companies, when outsourcing, must look to find partners, not just vendors. Sachin Taparia, MD of Aviall India (a Boeing Company) – the Indian arm of Aviall that is the world’s largest provider of aviation and defense aftermarket aircraft parts – pointed out that the Indian defense market is one of the fastest growing in the world, pegged by Boeing to be a $31-billion market in the next 10 years. The Indian aviation, defense and aerospace markets provide big opportunities to service providers and vendors, he said, and outlined challenges like lack of delivery certainty, infrastructure and transparency issues and the startup nature of the industry. The two-day summit saw presentations and panel participation from many more leading companies and industry thought leaders such as Moserbaer India Sr Vice President Vibhas Joshi, Toll Logistics Managing Director Ajit Jangle, Miebach Consulting India Director Bala Ramasubramaniam, to name a few.

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< news Company News

M&M to invest Rs 5,000 cr in new plant Pune

ahindra & Mahindra (M&M) is investing Rs 5,000 crore on Phase 1 of its new plant in Chakan near the Pune. Half of the Rs 5,000 crore has already been invested and the remainder would come over the next 3-4 years, bringing the plant’s capacity to 300,000 units. The company has not decided on approval for a second phase, which would take a further three years and would raise the plant’s capacity by another 250,000 units. The new plant has started rolling out its new mini truck Maxximo. Medium and heavy trucks from its joint venture with US-based truck and engine maker Navistar will also roll out from this plant, followed by variants of the Xylo, and its new premium sport utility vehicle scheduled to be launched in 2011. The Scorpio pick-up truck, to

DIESL receives Castrol Award for logistics

Bengaluru

Gopalpur On a roll: Mahindra expects the huge capacity creation to commensurate with market demand be launched in the US this year, will come from its existing plant in Nashik, in Maharashtra. Once Phase II is completed the plant will be enough to serve the needs of Mahindra for at least 10 years, according to a press release. In the initial phase, the new unit with four assembly lines will be making 250,000 utility

Mumbai

INDIA |

vehicles and 50,000 trucks. The project would be funded through a combination of equity and debt provided by the parent company and several of its units. Moreover, compliance with Euro III emission norms could not take place for at least 3-4 months since the fuel for this is not available.

tate-owned Shipping Corporation of India Ltd (SCI) and Shipping Corp of South Africa have begun discussions on setting up a joint venture shipping company. India’s biggest ocean carrier and the South African firm have hired consultancy firm KPMG to draw up the details of the proposed joint venture, including the likely equity stakes to be held by the two parties. Shipping Corp of South Africa is a wholly owned subsidiary of African General Equity Group (Pty) Ltd, or AGE Group. The proposed joint venture shipping company would cater to dry bulk cargo such as coal and iron ore exported from South Africa and the import of liquid cargo.

Ford mulls entering commercial vehicles segment in India

Mumbai rive India Enterprise Solutions (DIESL) has received the Castrol Award 2010 for CFA (Commission & Forwarding Agent) operations. The award was given away by Adnan Ahmad, director (SCM), Asia Pacific, Castrol. Fifteen CFAs were in the fray for the award. DIESL being the highest sales grosser in the North and its customer service in the Industrial and Heavy Duty Market segment led them to achieve this award.

SCI and Shipping Corp of SA in talks for JV

uto maker Ford India, the local arm of Ford Motor Co, has plans to enter the fastgrowing Indian commercial vehicles segment. Commercial vehicles can complement Ford’s plans of being a volume player in India. Meanwhile, Ford India is studying the Indian market and expects to firm up plans by the end of the current year. The company is eyeing the highly utilitarian sub-5 tonne pickup trucks from its Chennai facility. The facility has a capacity to

April 2010 | www.log-india.com

make 200,000 passenger cars and 250,000 engines every year. With a high import duty of 107 percent, it did not make economic sense for Ford to import pickups from Thailand. India’s light commercial vehicles market has been growing in double digits, driven by a rising need for vehicles that can transport people and goods on shorter and congested routes. In the 10 months ended January, the segment, which is dominated by Tata Motors Ltd’s sub-1 tonne Ace, grew 30 per-

cent to 406,019 units. Ford’s rival General Motors India (GM) has recently entered into a collaboration with Shanghai Automotive Industry Corp. to develop and manufacture LCVs in the passenger and goods carrier segment. GM plans to produce the vehicles for Indian and exports markets from its facilities at Talegaon near Pune and Halol in Gujarat. Global auto makers are tapping into India’s commercial vehicles segment encouraged by its growth potential.

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Tata Motors aims to top record Feb sales Mumbai

ndia’s largest commercial vehicle maker, Tata Motors Ltd, is aiming to top its record February sales of 39,205 trucks and buses this month. This year, March sales have been boosted further by the prospect of new emission regulations being imposed from April—which has advanced purchasing decisions—as well as the good performance of export-import, mining and infrastructure sectors. All new vehicles registered in 13 cities from April will have to meet Euro IV emission norms, while the rest of the country will switch to Euro III, according to the new regulations. As the shift will also likely raise vehicle prices, operators of commercial

vehicles have advanced purchases to March. Industry sources indicate that Tata Motors was planning to produce more than 45,000 commercial vehicles in March, up from 29,479 trucks and buses in the corresponding month a year ago. The sales of trucks, a key barometer of economic performance, declined by almost two-thirds after October 2008 as the global economy slowed. But they regained momentum in the second half of 2009 thanks to the economic recovery, and sales are now accelerating. Tata Motors is also expected to hike prices in April; analysts expect the increase to be between 3 percent and 5 percent.

The new emission regulations are expected to boost sales of heavy commercial vehicles and buses

Besides Tata Motors, other commercial vehicle makers such as Ashok Leyland Ltd and Volvo-Eicher Commercial Vehicles Ltd are also betting on the last month of the fis-

Blue Dart eyes regional players for buys Mumbai

lue Dart Express plans to increase exposure in India’s hinterland by targeting smallsize acquisitions of niche regional players. The company is willing to spend Rs 100-150 crore for small-ticket acquisitions but is not in talks with any players at present. The firm is scouting for buys in Madhya Pradesh, Gujarat and North East. Logistics is among the top five sectors which got most investments in 2009. According to analysts, more mergers and acquisitions are likely over the next couple of years as firms expand to keep up with the fast-paced demand of the world’s second-fastest

INDIA |

growing major economy. Economic recovery and greater industrial activity has spurred Blue Dart to raise its capital expenditure by half in 2010. The firm, which follows the calendar year as its fiscal, plans to spend Rs 850-900 million for capital expansion in 2010 compared with 600 million in 2009. Investments will be in transit warehouses and hubs and airport facilities. The company, which runs warehouses on lease, plans to open warehouses in Delhi, Bangalore and Chennai this year. Blue Dart, which gets 83 percent of its revenues from air

April 2010 | www.log-india.com

freight services, operates a fleet of seven aircraft. It has seen positive growth in the first two months of 2010 and expects to see double digit growth of below 20 percent in the fiscal year ending December 2010. Blue Dart saw consolidated revenues falling seven percent in 2009 to about Rs 907 crore. Meanwhile the company is expanding its ground services network, which accounts for about 17 percent of revenue. Blue Dart expects to increase contribution of the ground services segment to its overall revenue to over 30 percent in three years.

cal to make up numbers. According to a supplier, Ashok Leyland plans to make around 9,000 trucks and buses in March against its monthly average of 6,000.

Afcons venture bags Kolkata Metro contract Kolkata

fcons Infrastructure Ltd, belonging to the Shapoorji Pallonji Group, in a 50:50 joint venture partnership with Transtonnelstory Ltd of Russia, has bagged the Rs 938-crore Kolkata Metro contract for constructing a transportation tunnel below the Hooghly riverbed. The project is part of the Rs 4874.58 crore East-West Metro Corridor project. East-West Metro, the country’s first metro transit to pass below a riverbed, will cover a distance of 14.67 km, connecting Howrah with Salt Lake.

< news

TNT Express launches new system for import shipments Bengaluru

NT Express has launched its new worldwide “express import” system which gives customers complete control over their import shipments. This web-based tool lets companies order the collection of import shipments from around 170 countries with quotations and bill-

ing in their local currency to better control shipping costs. TNT’s system enhances its current express import services and is available to all customers regardless of the type or size of their business, and whether they are sourcing f inished goods or spare parts from multiple suppliers

around the world. A unique feature of the system is the option to request a quotation before the booking is completed. This means customers can effectively decide when their import shipment will arrive and at what cost. TNT ships the goods via its ground or air network,

depending on the customer’s budget and timeline requirements. TNT’s express import system not only offers greater control, it is convenient to use and highly automated. The importing customer enters orders online and connects to the sender via email.

Kerry Logistics opens new chemical tank depot in Thailand Bangkok

erry Logistics has strengthened its chemical logistics footprint in Thailand, opening a 10,500 sq m ISO tank depot incorporating a 1,000 TEU storage facility and 8 cleaning bays. The new depot means that Kerry-ITS Terminals is managing a total of 31,500 sq m of depots across Asia including Singapore, China, Vietnam and Thailand. Kerry-ITS total regional storage capacity is now 2,750 TEUs incorporating 40 cleaning bays. “Demand for bulk chemical

The new depot will cater to local corporations

services in Thailand is growing and the new depot will provide a full range of specialist services. The facility is strategically located six kilometers from Laem Chabang Port with direct road access to Bangkok,” said Robert Tan, Managing Director, South Asia. Kerry-ITS Terminal was established in 2009 as part of Kerry Logistics’ business diversification strategy. It offers a range of ISO tank solutions to the chemical industry, and repairing and trading services.

TCI separates real estate and warehousing arm New Delhi

he board of directors of Transport Corporation of India Limited (TCI), India’s leading integrated supply chain and logistics solutions provider, has approved the demerger of its real estate and warehousing undertaking into a new company, TCI Developer’s Limited (TDL). The management believes that its real estate and warehousing undertaking has the

INDIA |

potential to develop the company’s existing real estate into commercial ventures as well as create a focused entity to develop large scale logistics infrastructure projects like multi-modal logistics parks, truck terminals, and free trade warehousing zones. By creating a separate entity, the management intends to provide strategic direction and raise funds for its development

April 2010 | www.log-india.com

plans on the strength of its future profitability and growth plans in the real estate and warehouse construction sector. According to the company, the strategic and financial needs of the real estate and warehousing business are different from that of the logistics business. Investment in real estate and warehousing is more capitalintensive and yields return over a longer period of time in com-

parison to the services model of the logistics business. The book value of the undertaking being demerged comprising properties and investment amounts to approximately Rs 50 crore. The company presently has real estate properties in metropolitan and tier II cities including Delhi- NCR, Chennai, Pune, Nagpur, Bangalore, Ahmedabad and others.

< news

Capricorn Logistics granted ‘Class A License’ to operate in Shanghai Shanghai

apricorn Logistics, a leading logistics and supply chain service provider, was recently granted Class-A license by the ministry of foreign trade & economic cooperation (MOFTEC) in Shanghai to operate as an international freight forwarder in the People’s Republic of China (PRC). Capricorn Logistics already offers extensive coverage in China with its full-fledged operations in Shenzhen and Hong Kong since 2008. The acquirement of this license will further enable Cap-

Capricorn’s new reach will help improve its AsiaPac network

ricorn to strengthen its Asia Pacific network and reach out to its customers by providing them

local know-how and best possible service coupled with highest level of supply chain expertise.

Sheetal Shetty, president of Capricorn Logistics, Hong Kong & China, said, “This license reinforces our ability to fulfill our client’s local logistics requirements through our well-established global network and dedicated service. The license will establish us as one of the few Indian logistics entities with their own operational network in China.” China is one of those commercially lucrative hubs where the multinationals and even small to mid-size firms all over the world are making a beeline for their business.

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April 2010 | www.log-india.com 19

< news

SSLL and RSWC ink strategic partnership Mumbai

n a first of its kind public-private partnership, Shree Shubham Logistics Limited (SSLL), a complete commodity value chain solutions provider having its own strong network of agri-logistics parks (ALPs) has entered into a Memorandum of Understanding (MoU) with Rajasthan State Warehousing Corporation (RSWC), a public sector undertaking in Rajasthan last month. The partnership is expected to benefit thousands of farmers and agricultural commodity traders. With approximately 90 warehouses and an aggregate storage capacity of over 7,60,000 MT spread across Rajasthan, RSWC has been successfully providing storage and preservation services for both agricultural and non-agricultural commodities since the last 51 years. The government of Rajasthan has taken various pioneering initiatives to help farmers of the state. Through

this unique public private partnership RSWC with SSLL will now offer a comprehensive range of services including weighing, cleaning, grading and sorting, procurement, transportation, testing and certification in addition to storage and preservation and arranging finance at reasonable rates thus increasing SSLL’s decision to partner with the public sector RSWC will benefit transparency in the farmers and agri-commodity traders agricultural sector facilitate availability of finance testing and certification laboand giving true value to and evolve various models for ratories. It will provide comour farmers. The main objectives of this the purpose of development of modity funding services to all MoU are to provide better stor- an efficient warehousing facil- RSWC customers through its age facilities to farmers, traders ity with strategic and techno- tie up with various banks/financial institutions. and other market participants. logical support. This arrangement between SSLL will upgrade all the SSLL will manage 38 warehouses of RSWC with a stor- RSWC warehouses with the RSWC and SSLL will provide age capacity of around 405,000 latest technology and equip- integrated services under a sinMT thus providing benefits to ment including electronic gle window to all farmers, tradall commodity stakeholders weigh bridges, warehouse ers and various stakeholders in across Rajasthan. It will also management software and agri-commodity chain.

Appointments

Mercator Lines adds to its fleet Mumbai

ercator Lines Limited, India’s second largest private sector shipping company (in terms of tonnage), has acquired 1993 built MR Tanker of 42,235 DWT. It had acquired a similar type of vessel in December 2009. The cost of acquisition of both the vessels was about Rs 83 crore, which was financed through a mix of

INDIA |

debt and internal accruals. Further, the Singaporebased subsidiary Mercator Lines (Singapore) Ltd has recently contracted to purchase a modern gearless Panamax Dry bulk carrier for approximately Rs 175 crore. The vessel is less than three years old, built in 2007 and has a capacity of about 74,483 DWT.

April 2010 | www.log-india.com

Mark Khambatta is UPS Country Manager UPS has appointed Mark Khambatta as country manager of India. In his new role, Mark hasoverall responsibility for UPS’s express and supply chain operations in India.Prior to this new appointment, Khambatta was country manager for UPS’s supply chain operations in India. He was also previously responsible for managing UPS’s supply chain operations in the Philippines, Guam andSaipan. Simultaneously, UPS has also appointed Vikram Mansukhani as operations manager for its joint venture. In this capacity, Mansukhani has responsibility for the day-today express operations of the company. Prior to his current position, Vikram was the industrial engineering manager for UPS Jetair Express in India where he oversaw the operations infrastructure and network across India.

Turn key construction of industrial plants Turn key construction of industrial warehouses Leasing out of ready to move in warehouses/ service sheds at Kakinada (A.P.) (Specially designed for Oil & Gas companies)

Afghanistan Burkina Faso Guinea

India

Congo

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< news Product and Technology News

DPD unveils intelligent sortation equipment New Delhi

PD has launched a state-ofthe art sorter took place in Russia. The intelligent sortation equipment is unmatched on the Russian express parcel market. As the volumes or parcels and freight delivered by DPD continuously grow, this scheme makes it possible for DPD to operate more effectively, offer high quality of transportation

logistics services and adapt to the dynamic requirements of today’s marketplace. The opening of the new sorter means a significant expansion of DPD’s operations capacity. The number of parcels processed at the central hub daily can be increased by 50 percent. The intelligent control system of the sorter which is run by one operator from a

central programmable logic control unit, allows optimum utilisation of the hub capacity. Due to the automation of parcel scanning, sorting, weighing and measuring operations the deployment of the sorter considerably reduces manual work and nullifies the probability of errors. In 2010, the advanced sorting equipment will help DPD

process over five million parcels at its central hub. The automated sorter and its intellectual control system complying with the industry’s top international standards have been manufactured, installed and put into operation by BEUMER, a worldwide leader in material handling and sorting solutions, a company of a German origin.

Roads

NHAI modifies net worth criteria for projects New Delhi

here will be changes in the bidding parameters for projects to attract participation from large and foreign firms soon implemented by the National Highways Authority of India (NHAI). The changes, which include higher net worth requirement for mega projects, also encourages large firms to have more equity stake in the special purpose vehicle (SPV) that will execute the project. In the revised norms, NHAI has increased the net-worth required for participating in projects over Rs 2,000 crore. At present, the net worth clause was flat 25 percent of the total project cost for all the projects. Now, the NHAI has proposed that projects with a total cost of Rs 2,000 crore to Rs 3,000 crore will attract a total net worth criteria of Rs 500 crore plus 50 percent of the cost above Rs 2,000 crore. So, for bidding for a project with estimated cost of Rs 2,800 crore,

INDIA |

the bidder’s net worth has to be Rs 900 crore. The criteria becomes further stringent for projects of above Rs 3,000 crore, where the concessionaire has to have a net worth of Rs 1,000 crore plus 100 percent of the cost above Rs 3,000 crore. NHAI has also decided to count the technical and experience score of companies only to the extent of their equity participation in the bidding consortium. This is aimed at discouraging the current practice where many smaller Indian firms tied up with large, foreign firms while bidding for large projects only to beef up the technical score. The technical score of only those firms will be counted who have over 26 percent equity participation in a project. Additionally, the financial closure criterion has also been made more stringent for large projects. If a company has two projects of over Rs 3,000 crore

April 2010 | www.log-india.com

Financially sound companies have a better chance of bidding for large infrastructure projects

for which it has not attained financial closure, then it cannot bid financially for new projects. NHAI had recently introduced the financial closure criteria where in it barred companies from bidding for new projects if they had not attained financial closure for over three projects. For example, companies such as Larsen and Toubro Ltd, with a net worth of around Rs 12,500 crore in 2008-09, and

the IVRCL group with a combined net worth of around Rs 4,500 crore, will be able to participate in projects above Rs 3,000 crore. Financial closure has at times taken more than a year, leading to delays and cost escalation. The new norm will make it difficult for smaller players to take large projects, which may, eventually, stretch their financial and technical capabilities.

< news

Wanted, a ‘Ministry of Logistics’ Hemant Bhattbhatt, Transportation Leader, Deloitte (India), explains the importance of integrating processes to improve efficiencies, in an interview with Jayashree Kini Mendes

Hemant Bhattbhatt Transportation leader, Deloitte, India

he market for manufacturing is looking up. But logistics is groaning under the strain. End users say low cost and low investment leads to slow turnaround time in delivery. What are the steps needed to improve this? There are twin forces at work – the growth of the demand for logistics support owing to growth in the manufacturing activity and the increasing expectations of the users of logistics services that contribute to the increasing pressure on the sector. Both are irreversible and welcome trends that the logistics industry will have to adjust to. Indian competitiveness in global markets is predominantly based on ‘price’ and the edge is owing to the low cost of manufacture. In its obsession with costs, scant attention has been paid to issues like standardisation of material handling equipment and storage facilities, enhanced usage of web based technologies and GPS,

INDIA |

manpower training etc. The approach has been more tactical and less strategic. The initial focus has been on transportation infrastructure improvement and rightly so. However as the economy matures, we now need to shift our attention to the other parts of the logistics industry and adopt a more holistic view of the situation. A huge integrator is ‘meaningful, real-time, accurate information’. Especially there is a need for creation of ‘transparent spot markets’ that can address the market imperfections arising from lack of information on options available in terms of service and cost, which often weds service users to service providers into unhappy marriages. Such competition will deliver efficiencies, lower costs and improve turnaround times. A lot will need to be done to better the lot of the unorganised sector’s extremely micro-enterprises, like truckers, constituting the spine of the supply-chains. The continuous power imbalance vis-à-vis service users that these constituents have suffered has come back to haunt the users in the form of poor service and slow pace of technology adaptation. The market for expert 3PLs holds huge promise. Companies need to move from a low cost internal 2PL model to a complex and competitive 3PL model? Do you foresee this happening? How can it be done? HB: Such market shifts can happen only when significant value addition is clearly experienced.

April 2010 | www.log-india.com

The 3PL model in its effective form is more than just an assembly of capabilities to handle all aspects of the supply chain like transportation, material handling, storage and paperwork. It is more about the ‘logical’ part rather than the physical part. Clients need the assurance that there is either a cost advantage, or a value added advantage or both to patronise 3PL’s in big way. Service providers’ capabilities in creatively and efficiently handling the ‘end to end logistics’ challenges of clients and the ability to demonstrate the superiority of their suggestions through quick and structured options analysis would go a long way in convincing companies to shift from 2PL models to 3PL models. The more sophisti-

cated 3PLs have already recognized that while infrastructure and assets are important they are not the end-all. Key to their growth is building supply chain design capabilities and they are wisely investing in. A huge chunk of manufacturers are dismissive of using rail as a viable option to move goods in the near- to medium-term. What are the issues here that need to be rectified? HB: Several issues – cost, security, timeliness and above all meaningful accountability/ recourse. With the industry corridors being executed it would not be honest to dismiss rail as a viable option and I can foresee the same sceptics lining

Continued on pag 26

Industry Events and Association Activities Logistics & Supply Chain Excellence Conference 2010 23 April 2010 Maple Hall, Hotel Express Residency, Vadodara CII is organising the first edition of Logistics & Supply Chain Excellence Conference 2010 on April 23, 2010 at Maple Hall, Hotel Express Residency, Alkapuri, Vadodara. The conference focuses on the problems experienced and challenges faced by end users of supply chain and logistics services. It will address key areas of developing efficient supply chains, ways to effectively deal with interplay of logistics functions, emerging trends

in logistics management, practical and implementable solutions for the issues identified by participants and offer valuable insights through interaction with subject matter experts. The event will mainly focus on users of logistics services, and will endeavour to explore options and find practical solutions to the issues identified by the user fraternity through discussions as well as a survey of user industry. An interactive approach and higher emphasis on greater interaction between participants and experts is also on the anvil. Deloitte has chosen to partner CII as its official knowledge partner and TransREporter and Log.India are the official publication partners.

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< news Continued from page 24 up to set up industries alongside to benefit from the development. I take the dismissal as an indication of exasperation of the industry. Rail can never beat road transportation so far as last mile connectivity is concerned. Where it can is handling bulk, providing timeliness and safe/ secure transportation. The subsidisation of passenger transport at the cost of cargo can be addressed by increasing private participation. What are the changes needed to improve road transport to bring in efficiencies? HB: The road sector suffers from a preponderance of the ‘unorganised players’ in service provision, multi-tolling stoppages, stateto-state restrictions, frequent detentions for checking, poor

infrastructure for drivers, lack of standardisation of storage, handling and transport equipment among others. Setting-up of ‘Transport-nagars’, introduction of e-tolling/smart cards, transporter registration for stoppage free carriage across state borders, creation of ring roads etc. are the different changes that can bring in efficiencies. I would very much like to see a ‘Ministry of Logistics’ emerge with an overriding charter to coordinate and dovetail the initiatives of the ministries of different modes of transport from an end user perspective. How can companies develop an efficient supply chain, while managing current functions? HB: Focus on core competence, select good 3PLs with excellent

supply chain design capabilities, and keep revisiting the design for optimisation. Of course depending on the scale in-house logistics also makes sense. Companies should monetise the different non-monetary benefits they receive from alternative logistics solutions and then make sharper comparisons in making a choice. It is also critical to integrate procurement-to-despatch processes. A lot of predictability in terms of timing of logistics needs would result from a superior integration of the functional silos existing in these companies and their breakdown for handling logistics would help companies develop efficient supply chains. Deloitte (India) is the official knowledge partner to the Logistics & Supply Chain Excellence Conference 2010

Ports

Andaman & Nicobar port proposal gets Centre’s approval Chennai

he Andaman and Nicobar (A&N) will become India’s 13th major port with the Union Cabinet clearing this proposal of the Shipping Ministry. The approval came within a record seven months of submission. The A&N set of ports will be declared as a major port with the establishment of the Andaman and Nicobar Port Trust with its headquarters at Port Blair. All the provisions of the Major Port Trusts Act, 1963, will be extended to the port trust. Accordingly, the Port Management Board will be disbanded and transferred to the proposed A&N Port Trust. The Andaman and Lakshadweep Harbour Works will be bi-

INDIA |

furcated and transferred a part of its establishment to the port trust and to take consequential actions with reference to the above declaration. When the UPA Government came back to power last year, the Shipping Ministry’s 100-day agenda included the proposal to make A&N as a major port. The A&N islands are a chain of Islands measuring over 900 km from north to south. Out of the total 572 small and big islands only 36 are inhabited. In 1952 the port limits were extended to five ports of A&N Islands of Mayabunder, Port Blair, Eliphinstone Harbour, Car Nicobar and Nancowary.

April 2010 | www.log-india.com

However, till mid sixties there were hardly any port facilities available at these ports in real terms. In 1981, the Centre initiated action to reorganise port setup and a Port Management Board for Administration and Management of Ports & Harbours in A&N Islands was constituted. The Port Management Board manages 23 ports spread across the islands and out of those 23 ports 9 ports are declared as wharfage ports and cargo-related charges are levied. In all the nine cargo handling ports vessels between 5 metre and 9 metre draft are berthed and provided with required port facilities. The establishment of the

Work on Vizhinjam port to start this year Thiruvananthapuram

ork on the proposed Vizhinjam international transhipment container terminal is expected to start this year. An investor’s meet is anticipated to take place soon to discuss implementation of the project. The state government is confident of identifying an investor by NovemberDecember 2010, following which the construction of the port would formally start. The government has committed to develop the basic infrastructure, which includes rail and road connectivity to the port site, and has set aside Rs 450 crore for the purpose. Related work would be undertaken by a separate company, the Vizhinjam International Sea Port Ltd (VISL).

Major Port Trust will provide more power to the trust to help commercial development and tourism, and attract more foreign direct investment in the islands. Being strategically located in the international shipping route, the Andaman and Nicobar is potentially seen as a major maritime region. Also, the region has close proximity to service volumes of cargo and large vessels for the neighbouring ASEAN countries’ ports.

< news Railways

Adopt cost-sharing model for Rly projects, States told Hyderabad

he Union Minister for State for Railways, KH Muniyappa flagged off the SecunderabadHazrat Nizamuddin Duranto Express last month. At the event, the minister affirmed that most of the requests made by the state government have been approved, barring the funding for the multi-modal transport system, which is pending. However, an approval for this can be expected in the near future if the state agrees to share costs. He also mentioned that the minister has requested other states to emulate the Andhra Pradesh model of sharing costs of some of the projects. This, he said, would ensure that long pending projects are completed on time in other states as well, which have otherwise been held up for want of adequate funds. Expounding the example of Andhra Pradesh, he said that it was only when the state agreed

to share costs of projects that it was allocated significantly higher number of projects. The Railways is exploring more projects under the cost sharing basis. In the Union railway budget this year, an allocation of Rs 1,124 crore has been made for 12 projects in Andhra Pradesh, thus reflecting a significant jump in allocations. The Railways along with the state will take up survey of more projects and expedite their implementation and also come forward to establish port connectivity to Vodarevu and Nizapatnam ports. Considering the large gap between the demand and availability of funds, the cost sharing projects and projects under the public private partnership (PPP) mode were given top priority, according to the minister. The approval to establish a wagon manufacturing facility in Hyderabad is significant

Sharing resources and and costs can hasten execution of projects

for the state. The state has also received all the assurances for necessary support including allotment of land for the manufacturing facility. The Union minister expressed his concern in the delay in implementation of various projects. In terms of the budget allocations, it is for the first time that a state has secured such a large

share of railway projects. With Andhra Pradesh keen to add more railway lines to the network, the state government believes that a railway line holds the key to accelerate development and present business opportunities in places where the line passes through. Apart from helping people with connectivity, it will add to trade and commerce.

Freight corridor may have to take route diversion New Delhi

ndian Railways may have to rework sections of the route alignment of its Rs 50,800-crore dedicated freight corridor project to avoid acquiring land from those who are not ready to part with it. This follows the Railway Minister, Mamata Banerjee’s firm stand on not forcibly taking over land from owners. The Railway Ministry has asked the Dedicated Freight Corridor Corporation (DFCCIL) to re-examine the route for certain sections of land for which

INDIA |

the Section 20E notification has already been issued. This notification is issued for ‘declaration of acquisition’ by the Union Government under the Indian Railways (Amendment) Act 2008. The amendment, which gives the Railways special powers to take possession of land, was essentially brought in to hasten the land acquisition process for key projects. The 20E is an important milestone as it allows the Railways to enter land acquisi-

April 2010 | www.log-india.com

tion and take steps required to build, maintain and manage the project. The Railways, then, pays compensation to the owner and closes the deal by taking possession of the land. For the dedicated freight corridor, the Railways needs to acquire about 11,535 hectares across six-seven states, out of which the 20E notification has already been issued for about 6,000 hectares. The estimated cost of the freight corridor project has escalated to about Rs 50,800 crore

according to 2009 prices from the initial estimates of around Rs 22,000 crore few years ago. Officials are yet to ascertain the extent to which this “reexamination” exercise will hit the project in terms of change in route length and cost. The dedicated freight lines cover about 3,289 route km on two corridors — Eastern Corridor (1,806 km) from Ludhiana to Dankuni; and Western Corridor (1,483 km) from Jawaharlal Nehru Port, Mumbai to Tughlakabad/Dadri

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< news

UK rail sector keen to partner Indian Railways Kolkata

ast month, the Federation of Indian Chambers of Commerce and Industry - Eastern Region organised an interactive seminar and invited Railway Industry Association (RIA) to become a partner in the Indian Railways’ bid to be a key player in the country’s growth. Tim Gray, International Business Development Director, RIA, led the visiting 10-member delegation supported by the UK Trade and Investment. The UK industry has much to offer as technology and expertise as its strengths and it’s looking for right opportunities. RIA has 160 firms as members representing, among others, passenger train manufacturers, signalling and telecom firms, track renewal contractors, rolling stock leasing companies, component manufacturers and consultants and specialist service providers such as asset management and maintenance, R&D, safety and risk, economic planning and

commercial and project management. The delegation had a meeting with the senior officials of Kolkata Metro Rail Corporation. AP Mishra, general manager, South Eastern Railway, told the visiting delegation that PPP (public-private partnership) models were receiving a good deal of attention of the Indian Railways in implementation of various projects such as dedicated freight corridor, world-class stations, commercial utilisation of surplus lands, setting up of special purpose vehicles and joint ventures for the manufacture of locos, coaches and wagons, operation of container trains, construction of inland container depots and container freight stations, rail side warehouses, infrastructure projects such as port connectivity, freight terminals, logistics parks, doubling and gauge conversion projects and even for hospitality and tourism projects.

Rlys’ freight revenue up New Delhi

he Railways’ revenues from commodity-wise freight traffic have increased 8.76 percent at Rs 52,036.85 crore in the April-February 2009-10 period. In the corresponding period last fiscal, revenues stood at Rs 47,846.53 crore. In the same period, the Railways carried around 803.50 million tonnes of commoditywise freight traffic, which is an increase of 6.95 percent over the previous year. From the total earnings of Rs 4,798.13 crore from commoditywise freight traffic in February, Rs 1,904.60 crore came from transportation of 33.13 million

tonnes of coal, followed by Rs 651.34 crore from transportation of 10.13 million tonnes of iron ore, Rs 463.31 crore from 7.67 mt cement, Rs. 369.95 crore from 3.69 mt foodgrains, Rs 262.82 crore from 3.09 mt petroleum oil and lubricant (POL). Moreover, Rs 258.05 crore came from 2.35 mt pig iron and finished steel from steel plants and other points, Rs 222.85 crore from 2.91 mt fertilisers, Rs 83.85 crore from raw material for steel plants except iron ore, Rs 240.12 crore from 2.74 mt container service and Rs 341.24 crore from 5.79 mt of other goods.

Rlys hikes freight for ore exports Kolkata

he Railways has increased freight of iron ore for exports by Rs 300 a tonne. The Railway Board has increased the distance-based surcharge on iron ore to be used for other than domestic transportation. The surcharge will now be up from Rs 200 to Rs 500 a tonne irrespective of the distance.

With this hike, the rail freight of one rake of BOX-N wagons, which is generally used to transport bulk materials such as iron ore and coal, will be up by more than Rs 12 lakh. One BOX-N rake comprises 59 wagons and the minimum chargeable rate per wagon is for 67 tonnes.

AIR CARGO

Aryan Cargo eyes China, HK as first overseas routes Hyderabad

ir cargo carrier Aryan Cargo Express (ACE) is launching its scheduled international service in midApril with China and Hong Kong to be its f irst overseas destinations. The company is in the process of obtaining slots in eight destination airports initially, including Japan, Thailand, the

INDIA |

UAE and Italy. It expects to get the clearances for China and Hong Kong airports by midApril, thus enabling them to launch its first scheduled international service. ACE, a subsidiary of the New Delhi-based Aryan Cargo Express & Logistics Ltd, has been granted NOC by the Ministry of Civil Aviation to

April 2010 | www.log-india.com

commence cargo operations from India. Currently operating on some non-scheduled routes, it plans to be a nonintegrated carrier of goods providing airport-to-airport freight transportation, serving destinations in Asia, Africa and Europe. Initially, the cargo airline will be setting up three hubs in Delhi, the UAE

and Bangkok. The airline will deploy a fleet of five leased aircraft during its first year of operation (2010-11), when it expects to notch up cargo revenue of Rs 1,100 crore. It has contracted for lease three Airbus A310300 from Air India – has already received the first of these, while the second is ex-

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< news

Aryan has finally been given the green signal to fly overseas

pected to join the fleet within a week and the third by April, according to a spokesperson

in the company. In addition to these, the airline will be taking on lease

two McDonnell Douglas MD11 aircraft from Boeing Capital, which will join its fleet in June and August this year. While the MD-11s have a cargo carrying capacity of up to 90 tonnes, the A 310s can carry a load of up to 36.5 tonnes. This is sufficient to carry out its first phase of operations. In this phase, it intends to connect SAARC with South East Asia, China and West Asia. In the second phase, the connectivity will extend to Far East, North Africa and AustraliaNew Zealand. The airline is poised to launch international services at a time when cargo traffic is rebounding globally. Going by figures available, the end of 2009 and the beginning of

2010 saw a reasonable upturn in cargo volumes to a level of almost 28 percent higher than the lowest point reached in 2008. Latest figures released by the International Air Transport Association (IATA) show that international cargo demand registered a 28.3 percent improvement with only a 3.7 percent increase in capacity in January. This pushed the cargo load factor to 49.6 percent, which is a significant change from the 40.1 percent recorded in January 2009. The sharp improvement in air freight is being driven by businesses re-stocking depleted inventories. The industry is expected to take delivery of 50 freighters in 2010.

Kolkata airport sees lower cargo imports Kolkata

he cargo import trend at the Kolkata airport has gone downward. The throughput so far in the current fiscal has been lower by more than 12 percent over the same period of last fiscal. The export during the same period was up marginally, by about five percent. In 2007-08 and 2008-09, the growth in import at the airport was highest in the country, around 30 percent annually. However, the export growth was negligible, presumably because of the absence of export-oriented units in West Bengal. The total imports between April and February amounted to Rs 15,432 million tonnes (mt), down from 17684 mt in the year ago period.

INDIA |

The total cargo throughput (export plus import) at the airport during the period dropped by 1269 MT from last yearâ&#x20AC;&#x2122;s traffic of 37728 MT. According to sources, the Airport Authority of India (AAI) cited the lack of industrial activities and the overall economic downturn as the reasons for the drop in imports. Others say, it could be the levy of high customs duty and ban on import of certain products from China also contributed to the drop. The primary items of import this year at the airport were engineering goods and spare parts, particularly for setting up telecom towers, electronic and electrical items and leather goods. On the export front, how-

April 2010 | www.log-india.com

A reduction in duties and lifting of bans on certain imports could help Kolkata airport improve cargo imports

ever, segments such as agriculture and floriculture are picking up. The utilisation of the capacity of the newly installed perishable cargo unit was how-

ever only 20 percent, while the utilisation of the facilities like Automatic Storage Retrieval System and Elevated Transport Vehicle was up to 40 percent.

< news

500 operational airports to take off by 2020 Delhi

he Ministry of Civil Aviation is targeting 500 operational airports by 2020. The government expects an investment of around Rs 40,000 crore to be made in the sector till 2014 for airport development and modernisation, according to a report brought out by Ernst & Young and released at the India Aviation 2010. According to the recommendations in the report, state industrial development corporations could be allowed to either establish or take responsibility to upgrade and make operational airfields in close proximity to the industrial zone. While the traffic to these airfields initially will be limited to corporate aviation, gradually, each airport could formulate a development plan in concurrence with the state government and the AAI. Revenue accrued from corporate airports in the form of landing and park fees may be payable to the corporate with Route Navigation Facility Charges (RNFC) being payable to the AAI.

Quick implementation The report highlights that the global economic crisis also impacted the Indian aviation industry, which negatively hit the revenues of country’s airports as the freight and passenger traffic declined. This compelled the AAI to prioritise the funding of ongoing projects

greenfield Bangalore and Hyderabad airport projects were completed in the first half of 2008, while the modernisation of the Delhi and Mumbai international airports is under way and is scheduled for completion in 2010. The modernisation work at the Chennai and Kolkata airports are expected

On a wing and a prayer: The number of aircraft fleet do not correspond with adequate infrastructure

and defer awarding new contracts. Due to decline in real estate prices, private players also had to revise their funding plans and faced a shortfall in funds. The first phase of the

to be completed in 2010 and 2011, respectively. AAI also plans to develop 35 non-metro airports with an expected expenditure of Rs 6,160 crore. In addition to these (35

non-metro airports), an investment of Rs 100 crore annually has also been projected till 2014 for the upgrade, maintenance and renovation of civil infrastructure at other nonmetro airports. This amounts to an investment of Rs 6,960 crore in non-metro airports, according to the report. The government is also conducting a study to make operational 32 non-operational airports and airstrips in the country. The government is also planning the city-side development of 24 non-metro airports with the involvement of private players. According to the report, the government is focusing on the development of airports in the North-East as well. A total investment of Rs 6,100 crore is envisaged for the development of three airports in this region. Around Rs 3,500 crore will be invested for the development of Paykong Airport in Sikkim, Rs 1,500 crore for Chiethu Airport in Nagaland and Rs 1,200 crore for Itanagar Airport.

Maritime Varsity to come up in Chennai Chennai

he Indian Maritime University will create infrastructure facilities including academic complexes, administrative building, library, hostels and residential accommodation for faculty and staff with the Rs 300 crore allocation received by it from the shipping ministry. A ‘bhoomi pooja’ was performed last month for construction of the university’s academic and administrative complex

buildings at Semmenjeri, near Chennai. Union minister for shipping GK Vasan present at the pooja said the university would be unique in the country and produce ‘high quality’ manpower in the maritime sector not only for India but also for the international requirements. With Chennai as the headquarters, the university was established in November 2008 by an Act of Parliament by integrat-

ing seven government-owned maritime academic institutions. It is understood that the new academic and administrative complex will come up in a year’s time. Of the 300 acres allotted for the campus, the university will utilise 106 acres and the remaining land would be for a National Maritime Complex. The complex will be built on public-private-partnership and will have facilities like maritime INDIA |

museum, international convention centre with 15,000 seating capacity, five star hotel, and a catering college. CORRIGENDUM Kamal Nath’s designation on the cover of LOG.India’s February issue “2010: The decade of infrastructure” should have read Union Minister for Road Transport and Highways. The error is regretted.

April 2010 | www.log-india.com 33

< OPINION

Action or Reaction?

Most companies do not plan for contingencies and thus get sidetracked into ﬁreﬁghting instead of looking at the real issues, notes Padmini Pagadala

I PADMINI PAGADALA General Manager, TPG Consulting, Mumbai

IN THE COURSE of my work I have often run into a particular conundrum: should one plan for the rough road ahead or should one tackle problems as they arise? Wherever I go in the industry, I have noted that the management’s approach to running the business relies on firefighting skills rather than good planning or fi xing the root problem. Somehow we have emerged as experts in ‘making do’, of living with constraints and working round them to get results. Whole organisations seem to promote and reward their executives based on their good firefighting skills rather than their ability to plan the work that needs to be done ahead. To me, it feels that how well you react to a crisis is paid far more attention and given more consideration than how well you have planned to prevent problems or how well you have fi xed your problems.

Planning for problems There are two reasons why businesses are forced to firefight, firstly they don’t plan for

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April 2010 | www.log-india.com

problems and secondly, they don’t fi x the unforeseen problems they didn’t plan for. The first is by far the commonest and hardest thing to do. When one is crushed by stiff timelines it is hard enough to plan for likely scenarios; trying to plan for unlikely scenarios seems like a luxury we cannot afford. Yet we must. One of the noteworthy characteristics of logistics operations – especially in our country which is rapidly changing and growing – is the quality of the contingency plans. Let me show you why. At one site we visited, the performance of the warehouse was limited due to the response time of the computer system. The facility’s throughput had increased 50 percent in two years, but the computer hardware had been programmed for a marginal 10 percent growth. Consequently, the pickers stood around and waited in between picks because no one ever thought the company would ever be so successful! Now money is tight and the business just suffers excessive operational costs if it is unable to cough up the additional

capital needed to replace the computer which could have been easily upgraded when it was originally purchased. So the cost of fulfillment remains high. At another warehouse the aisles, the offices and every nook and cranny in the building had products stuffed into it. When we enquired the reason for the untidy accumulation of goods, the managers indicated that the stores set up to receive the products had not yet opened. No one had thought about developing a contingency plan and in India when things go wrong, we take too long to rectify the messy situation, so the cost of fulfillment remains high. This is evident in most businesses in the country and these problems continue only because most of us get access to the huge sums of money needed to design these networks and buildings just ONCE, and if we don’t plan well it is very difficult to go back and get money later to paper over our mistakes. The better performing businesses will not fall into this trap. This reminds me of a conversation I once had with the trusted aide of a top retail tycoon who has now made forays into many businesses. He told me, “I want you to ‘future proof’ my buildings.” So should we all!

Quick fixes Recently, I heard of a facility that had received huge orders from the market. They thought they were so hard pressed that they merely focused on shipping the orders out. Each day the shipping time would stretch much beyond all deadlines. They were so busy getting orders out that they forgot to fix the fundamental problem. Their warehouse remained unslotted! Every day the pickers would travel to the most inconvenient locations to get the most popular products. So caught up were they in this, that in their minds, time did not allow them to reslot the warehouse. They were merely working round the problem instead of fixing the root cause of the problem. The Japanese automotive industry provides one of the finest examples of how problems should be attended to. In Toyota’s assembly line if there is a problem, the workers stop the entire line. In Japan, a problem on the line results in an incredible flurry of activity. The line workers, the production management and the engineers all get together to assess and then resolve the problem. If the problem is a quality issue, then the line remains down till the issue is resolved. With this approach to problem solving, is it any surprise that the Japanese car quality is the gold standard that other competitors are trying to achieve? If you are so busy tackling a problem and ‘making do’ or working around the problem, success starts getting

defined as ‘making it through the day’. Then when will you start planning improvements and enhancements? If you are going to continue merely working around problems, you will accept these as the cost of doing business and your friends will sorely miss you at the club on weekends. If you are interested in improving performance and having a life, you will take process improvement seriously and seek the root cause for these variations and ensure they are not repeated.

Is firefighting not a skill? While I am NOT undermining the importance of firefighting or your ability to resolve a crisis, my point is that firefighting in itself should not obscure the need to fix the root cause of problems as we find them and— better still—the need to plan in advance for the expected and the unexpected as well. Take the example of our late night workers in the unslotted warehouse– what was required was extra work for a day to re-slot their products rather than firefight every day. While talking about firefighting, an industry colleague argues that “we are a developing nation and sales are as unpredictable as the first rains. If we were to suddenly grow 30 percent overnight, I will break my back to support it.” While I do agree that the customer is king and that demands have to be met, my point is that we can do things differently. So here’s my advice: n Plan for contingencies. Things go wrong all the time. Have a plan B. n Log exceptions when they occur and try to find out their root cause. Working beyond the scheduled hours must be an exception. We need to be honest with the log. n Do NOT take advantage of loyal employees who will jump through hoops to maintain the budget or schedule. How long is it going to take to find willing and capable replacements? n Invest in people /processes even if it doesn’t reduce labour. It will make your labour more content to work for you. n Keep digging to find the root of a problem. n Think about how much you are limiting your growth potential with the current emotional, physical and energy constraints. While we may be excellent firefighters and really hard workers, it doesn’t mean that we shouldn’t plan ahead. We need to set goals, to be proactive and consistent. There may be a lot lost while we get comfortable in being just firefighters. Prevention and proactive planning must be treated more importantly than our ability to firefight. The author can be reached at padminimp@theprogressgroup.com.

INDIA |

April 2010 | www.log-india.com 35

< Cover Story

FULL Steam

DIESL has grown at 100 percent, according to the company, at a time when the rest of industry has clocked 12 percent. Company CEO, Ajay Chopra, lets us in on the secret. By Pamela Cheema

jay Chopra exudes quiet confidence in his vibrant and well-appointed office. The CEO of Drive India Enterprise Solutions Limited is in a genial and expansive mood as he maps the growth of his company. With complete selfassurance, he weaves together and presents the different elements that contributed to the success of his company and made it the lucrative enterprise that it is today. Despite an economic free-fall globally due to one the worst recessions in recent times, DIESL has grown at the astonishing rate of 100 percent in the last three years, while the organised sector of the logistics industry has grown at 12 percent. With sufficient candour, Chopra traces DIESL’s success to “having most things mapped out, knowing our milestones and playing our cards well.”

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April 2010 | www.log-india.com

On being quizzed about the phenomenal growth rate, he reveals that his “competitors focused on asset creation and thus became asset heavy, while we remained asset light because we structured everything in keeping with a shaky economy. This gave us energy and nimbleness. We are also attached to the telecom, retail, chemical and plastics industries which are growing fast and that helped us to grow fast too.”

New avatar DIESL was incorporated as DriveIndia.com Limited in December 2000. Thereafter the company handled the e-commerce business of Tata Interactive Systems. In April 2007, the company which had already entered the logistics sector, switched to its present name. With its stellar performance in the Indian logistics sector, DIESL is

AJAY CHOPRA, CEO, Drive India Enterprise Solutions Limited We are constantly adding to our growth with interests in areas like telecom and retail and all this contributes to our 100 percent growth

g to reas this t

Photos: Krishanu Chatterjee

< Cover Story now eyeing the international market in what may well be a reprise of its superb record in the domestic logistics segment. Though the corporate remains intensely focused on the newly resurgent Indian market, it is assessing and quietly formulating plans to make forays into the international market. “We are thinking of the Asia-Pacific region which could be our biggest gateway after India,” ruminates Chopra, toying playfully with one of the pens on his desk, “as well as Africa, where the Tatas have a presence in autos, mines, minerals and telecom.” Though DIESL’s plans have not yet

Though the corporate remains intensely focused on the Indian market, it is formulating plans to make forays into the international market

crystallised, the company could have a business presence in various countries beginning with South Africa and swinging upwards in a wide arc through the African continent, barring nations which are conventionally considered high-risk. Despite its growth, DIESL plans to stay the course as an asset light company with no investment in brick and mortar properties, but offering excellent services to its clients. Tata Realty and Infrastructure Ltd (TRIL), the infrastructure arm of the Tata Group, may invest in numerous logistics parks across the country “and we may use their facilities, but we are clear that our business model will remain the same, no building of properties, with only an offer of excellent services to our customers,” says Chopra firmly.

Establishing agri-parks With an eye on the latent and untapped potential of the country’s rural markets, DIESL is planning agriparks to cater to this sector. Since Photo: Ramlath Kavil

agriculture and allied services contribute 17 percent to the country’s GDP, the nascent rural sector contains the seeds of explosive growth. While the major Indian metros have always been on the radar of economists, the rural areas have been largely ignored. “What is actually required is bringing together people who deal in seeds, fertilizers, chemicals, tractors, water pumps and their spare parts, in short, anything required by the rural sector,” says Chopra enthusiastically. “In fact, one could create an entire logistics sector which could cater to the rural areas and this would lead to economies of scale.” For the last six months the corporate has been discussing these proposals with various constituents and has received an encouraging response. The company has planned four agri-parks; two such facilities will be established in the north and south of the country in the first two quarters of 2010, while the remaining facilities will be established later in the eastern and western parts of the country. However, the concept of bulk logistics receives a cold shower from Chopra. “We are only interested in a single window to the farmer,” he emphasises, “and maybe this could be a natural progression to agriwarehouses, to things that farmers need, not produce.”

Mature LSP

Goods stored at the DIESL warehouse, Bangalore

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April 2010 | www.log-india.com

As DIESL matures slowly, but surely as an LSP, it is acquiring an enviable list of customers from the clutter of road companies and MNCs (some of whom have a worldwide presence) within the country. “Some of our clients have never believed in outsourcing, but they are now giving us their custom,” says Chopra with pride. “After their entrée, the rest of the industry will just follow suit.” However, despite being a Tata company, DIESL does not have ex-

< Cover Story

The DIESL warehouse at Bangalore

clusive rights as a logistics service provider to cater to other corporates in the Tata Group like Tata Motors or Tata Chemicals. According to sources in the Tata Group, in keeping with the group’s principles of maintaining professional excellence, DIESL has to leverage its skills and raise it to a new bar to be continually present on the list of major LSPs which service various group companies. “We are a very young company, just about six or seven years in the industry,” says Chopra. “Group companies like Tata Motors and Tata Steel have huge expectations. Of course, we are constantly adding to our growth with interests in areas like telecom

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April 2010 | www.log-india.com

and retail and all this contributes to our 100 percent growth.”

Finessing of skills Steady growth requires finessing of skills. Indian logistics consists largely of manual operations, with less than optimum automated solutions. In an effort to impart global standards to its deliverables, DIESL is restructuring its services in warehousing and value-added services to offer international solutions. The corporate will offer ‘track and trace’ solutions as well as seamless integration from the pick-up point to delivery. To strengthen its services, DIESL has established its distribution wing, Connect, which

spans 4,000 cities and safely delivers goods in more than 85 percent of the country’s districts. “In the next one year we aim to deliver goods in 100 percent of the country’s districts,” says Chopra with quiet determination. The company has established storage and distribution centres in every state from Srinagar to Kochi and Gujarat to the north-east and the Connect brand aids in distribution to facilities in these multifarious states.

Needed, benchmarks But despite transformational advances, quality is not on tap in the Indian logistics industry. Reality gives a hard knock to the high ideas

CSR: What DIESL is up to

lesser known fact about the company is that in keeping with the spirit of the Tata group, it has been involved with a number of Corporate Social Responsibility (CSR) activities for long. Here are some of the notable initiatives: Humanitarian logistics: Humanitarian logistics pertains to organising delivery and warehousing of supplies during natural disasters or complex emergencies to the affected area and people. DIESL is doing the following things in this area: a. The company has partnered with Tata Institute of Social Sciences (TISS) to conduct training and courses in Disaster Management Logistics for their citizen volunteers. As a part of this project, employees of DIESL develop the course material, audio visual aids, and presentations and form the core faculty of the program. b. DIESL is putting operational plans and networks in place, which will be set in motion during disasters. Community development programs for truck drivers: The company has

Photo: Ramlath Kavil

and principles often articulated privately and at seminars within the industry. Chopra who refuses to dress up facts, agrees that no benchmarks exist within the industry. To institute benchmarks both within the company and the industry and rescue the logistics business from its own mediocrity, three or four years ago DIESL created Project Caliper which is a quality programme run by its Business Excellence Team. “We want to be trail blazers and are looking for industrial benchmarks, even international standards, against which we can compete, especially in receipting and order fulfilling,” explains Chopra.

The programme enables DIESL to assess the performance of its warehouses across the country through a unique quality audit module which comprises of 156 questions. The module has been devised to ensure minimum error and appears to have achieved its goal of excellence in performance, for DIESL today is an ISO 9000-2001 certified company. “We got the certification in just a year which is a record,” says Chopra proudly. “Most LSPs don’t even ask for certification, but we tried hard to get it because we wanted to prove our worth to ourselves.”

Social responsibility The corporate’s areas of interest have expanded to include specific commitments in the sphere of corporate social responsibility like healthcare, education, employment opportunities for its workers, re-

taken up the cause of health, hygiene and awareness among truck drivers. From its 176 warehouses across India, the company runs ‘Community Labs’ where it imparts training to truck drivers. These labs are equipped with audio-visual equipment, where every truck driver associated with DIESL in the area has to mandatorily participate in awareness programs for AIDS, other STDs, road safety, and traffic regulations. Education: Through a not-for-profit organization called the Akanksha Foundation, DIESL is currently enabling education for over 3,000 children at 62 centers, 4 kindergarten centers and two schools. Plant a sapling program (PASP): In one of this program’s initiatives, DIESL planted and distributed 2,400 free saplings to people in and around its corporate and regional offices and warehouses on January 26, 2010. As part of its ‘environment sustainability’ activities, the company is also involved in rain water harvesting.

ducing carbon emissions and disaster logistics. At a health camp at Bhiwandi, near Mumbai, the company invited packers from every industrial unit in the area to attend the camp. In the newly emerging field of disaster logistics, the company is exploring options of collaborating with experts who are adept at disaster recovery. Even more importantly, DIESL supported the launch of the India International Logistics Forum which was established recently to resolve the challenges facing the logistics industry. Just ascending the development curve is not enough. Corporates like DIESL have realised that once a business is on the fast track, companies must pool their stellar knowledge resources, strengthen the logistics industry, indeed even society at large, and together catalyse its growth. INDIA |

April 2010 | www.log-india.com

< EVENT REPORT

Date : March 4, 2010 Event: Private equity, mergers and acquisitions in logistics Organiser: Supply Chain Leadership Council Location: Regus Business Centre, Bandra-Kurla Complex, Mumbai

INDIA |

Mergers and Acquisitions Spur Industry The Supply Chain Leadership Council organised an informative summit on the increasing mergers and acquisitions in the industry writes Pamela Cheema

April 2010 | www.log-india.com

he Supply Chain Leadership Council organised a summit on ‘Private equity, mergers & acquisitions in logistics’ on March 4 at Mumbai. The summit was a forum for a debate on the future of private equity investments in the logistics sector in India and the numerous mergers and acquisitions that are expected in this sector in the near future. Over a 100 private equity investors, logistics companies’ promoters, CEOs, investment bankers and dealmakers attended the conference. The speakers at the conference included Manish Saigal, executive director and head of transportation and logistics, KPMG, Dinesh Tiwari, executive director, JP Morgan, Chetan Dikshit, director, Rothschild, Sumir Chadha, MD, Sequoia Capital, Vishal Sharma, MD and CEO, Tuscan Ventures, Rahul Shah, partner & director, Investments, Aditya Birla Private Equity, K Mukundan, director, UTI Infrastructure PE fund, Prasad Gadkari, principal, IDFC PE, Vikram Utam Singh, executive director and head, markets and private equity, KPMG, Ashit Desai, executive director, AllCargo, Shankar Chatterjee, MD, (India and south Asia), Bertling Logistics, Ajit Jangle, MD and CEO, Toll Logistics

India, Puneet Agrawal, director, Delhi Assam Roadways and Gautam Dembla, director (operations), Spear Logistics.

Rich pickings in industry Mergers and acquisitions have been sparked off globally by Warren Buffet’s November 2009 $26 billion acquisition of the Texas based rail road company, Burlington Northern Santa Fe. After this acquisition Buffet declared, “Transportation is fundamental. And there’s a lot of money to be made.” Worldwide, investors are now emulating Buffet’s example and eyeing rich pickings in the logistics sector. Since 2005, the transportation industry has witnessed innumerable mergers and acquisitions totaling $79 billion. According to Prequin, a consultancy for alternative investments , 258 firms or about 5 percent of corporates globally, have evinced an interest in the logistics sector. Industry sources believe that mergers and acquisitions are slowly increasing in India and are expected to grow significantly towards the end of the year. VCCircle points out that January 2010 saw as many as 29 domestic deals worth $2303 million as compared to 14 transactions worth $589 million in January

(L to R) Dinesh Tiwari, executive director - JP Morgan PE, Vishal Sharma, MD & CEO - Tuscan Ventures, Manish Saigal, executive director and head – transportation & logistics, KPMG

The supply chain industry is broken up among various intermediaries. There has been consolidation among freight forwarders and shipping lines and this has created a power imbalance for the intermediaries — Ashit Desai executive director, AllCargo Global Logistics 2009. The sectors most favoured by investors are telecom, logistics, insurance, banking and finance. Manish Saigal, executive director and head-transportation and logistics, KPMG, India, mentioned at the summit that although “growth will not touch 2007 levels, it will certainly approach it.” The logistics sector embraces many sub-sectors like shipping, ports, warehousing, express courier and supply chain consulting. These diverse sectors have their own growth and profitability levels. The industry is highly fragmented, with just a few players controlling more than 10 percent of the market. During the recession which has singed most players globally, industry has realised that the only way to survive is to be profitable and grow.

Market resurgence In his presentation, Saigal of KPMG pointed out that “there is resurINDIA |

April 2010 | www.log-india.com 43

< EVENT REPORT gence in domestic sectors like retail and manufacturing which is driving volume growth again. EXIM is estimated to grow at 15 percent per annum, while private investments are expected to drive modern warehousing, better transportation and technology adoption. The regulatory changes that the government is making, like GST, which will be introduced soon and government incentives to infrastructure developers like tax breaks and incentives are driving private participation, efficiency and improvement.” Saigal remarked that the government’s spending on infrastructure is significant as in the “11th Five Year Plan Rs 14,000 billion is earmarked for investment in this sector. Of this, 27 percent or Rs 3750 billion is earmarked for development in roads, rail, aviation and port projects.” He also noted that mergers and acquisitions were occurring in certain sectors in the logistics industry like shipyards, cold chains, freight forwarding, shipping, warehousing, ports and transportation.

Increasing mergers and acquisitions Ashit Desai, executive director, AllCargo Global, dispensed good advice both about mergers and acquisitions and private equity in the industry. He disclosed that his company was a global logistics service provider with business verticals which include containerised cargo consolidation, container freight stations and warehousing. The company has 126 offices in 58 countries and employs 632 people in India and 1647 employees abroad. Giving an overview of the industry, Desai emphasised that the “supply chain industry is broken up among various intermediaries. There has been consolidation among freight forwarders and shipping lines and this has created a power imbalance for the intermediaries.” Due to fragmentation, many intermediaries are left with few choices, either buy and consolidate or be bought out by other companies. Desai cautioned that if you are buying other companies “you must buy only

at an acceptable price, be prepared to walk away from the deal, buy at the right time and court for a long time if required.” Ajit Jangle, managing director of Toll Global Logistics (India) which has acquired more than 50 companies in a span of a few years remarked that his company was keen on acquiring numerous logistics companies in India “provided the fit and price is right.” Vishal Sharma, MD and CEO, Tuscan Ventures, presented a lucid picture of the changing fundamentals of private equity globally. He described a new business environment where investment models “will increasingly lean towards performance based valuations and structures that will give funds several options to cut losses at every stage of an investment.”According to him, new models of investment will emerge where investors will be able to manage execution as well as risk. In his view, large sector agnostic funds will increasingly invest with smaller sector funds to be able to control their exposures.

Why merge and acquire

Industry stalwarts discussing M&A – (L to R) – Gautam Dembla, director (operations) - Spear Logistics; Ajit Jangle, MD & CEO - Toll Global Logistics; Prasad Gadkari, principal – IDFC PE; Puneet Agarwal, director, Delhi Assam Roadways; Rahul Shah, partner & director (investments), Aditya Birla PE; and Sankalpa Bhattacharjya, associate director, KPMG

INDIA |

April 2010 | www.log-india.com

What makes companies merge and acquire? Shankar Chatterjee, MD (India and south Asia), Bertling Logistics, tried to answer this question in a candid and expansive presentation. He stated bluntly that mergers and acquisitions especially in third world countries were done to acquire more money “because companies simply need money to grow.”After mergers, companies also absorbed best managerial practices along with global reach. However, mergers faced many challenges, among them foreign investments and remittance laws, unfriendly government attitudes to foreign investors, rigid customs laws and difficulties in the transfer of human capital. But Chatterjee stated firmly that mergers and acquisitions were ben-

INDIA

< EVENT REPORT eficial for Indian companies as it brought India closer to the world, created a brand with a global or local partner and reflected a paradigm shift from an ownership driven company to a professional company. It also offered diverse and better career opportunities in the country.

Strategies for success Chetan Dikshit, director, Rothschild, presented a lucid paper both on the key drivers of growth in the Indian economy and a segmental analysis of strategies of success in warehouse services, logistics parks, trucking and container rails. He was optimistic about the growth of the GDP, emphasising that long term macro forecasts remained unaltered and that growth rates for the period up to 2020 would remain 8 percent per annum. While offering strategies for success in warehouse services and logistics parks, he pointed out that “a company must acquire land at optimum distance from the highway to reduce acquisition and expand service offerings beyond freight forwarding, for example, short-haul trailer connectivity. One should also focus on building relationships with key industries like electronics,

One of the participants at the summit

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April 2010 | www.log-india.com

Only three out of 100 deals are successfully concluded in the industry — Vikram Utam Singh executive director and head – PE & Markets, KPMG

IT, telecom and auto component manufacturers.” He also suggested that these services establish an anchor client base with corporates like banks and telecom companies and also build networks through franchisee models. Dikshit believed that trucking and container rails could focus on contract logistics and exploit profitable short/medium haulage routes. He

also opined that a dedicated freight corridor should be built, containerisation should be increased and rail operations should be integrated with logistics services like terminals, trucks and warehousing. Another speaker from KPMG, Vikram Utam Singh, executive director and head, markets and private equity, cautioned the logistics industry to check their PE readiness before sealing a deal. He disclosed that only three out of 100 deals are successfully concluded in the industry. He advised the industry to check key criteria like scale, management bandwidth, transparency and exit potential before investing in private equity.

Growing challenges The director of UTI Infrastructure PE fund, K Mukundan, also spoke of the challenges that the industry has to surmount to grow. Discussing the vulnerabilities of the logistics industry, he indicated, among other things, its weak last mile connectivity and limited access to capital which has stunted its growth. “Companies should try to gain scale through mergers, acquisitions and JVs with other players. They should also aim at backward and forward integration,” said Mukundan. He also discussed emerging trends in the industry where integrated players with a presence in the core services of warehousing, CFS/ ICD, port services and container logistics would benefit the most as the logistics industry consolidates. He noted with approval the huge investments the industry is making in technology, web based tools and the development of multi-modal logistics parks near DFCs. He was also optimistic about the potential of the logistics industry in the near future. While the crippling recession appeared to have retarded industry’s growth to a significant extent, the mood at the logistics summit was positive and full of hope for the future.

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< industry update

The Dedicated Freight Corridor is our prime minister's dream project. I am concerned about the pace of progress and DFCCIL will be revamped within a short span of time to ensure timely implementation of the project. We will implement it in time." â&#x20AC;&#x201D;Mamata Banerjee, Indian Railway Budget speech, February 24, 2010

Corridor of Change The Dedicated Freight Corridor will lead to a spurt in industrial growth writes Frewin Francis

INDIA |

April 2010 | www.log-india.com

Source: dfccil.org

n February 24th, 2010 the railway minister, Mamata Banerjee, presented the railway budget and announced that an energetic and accelerated approach was required for the Dedicated Freight Corridor (DFC) which is planned in the country. The Freight Corridor is planned on the north-south, east-west, east-south and south-south corridors along with a Golden Rail Corridor with high-speed passenger lines. Pointing out the shortage of wagons during the railway budget presentation, the railway minister has now set a target of procuring 18,000 new wagons in the FY 201011. This new development ought to interest firms like Alstom, Bombardier Transportation, Siemens Railways, Titagarh Wagons, Texmaco and BEML.

Dedicated western corridor

Planning the Corridor The railway budget for 2010-2011 also announced that 10 new auto ancillary units would be set up and 80,000 new wagons would be required when the ministry achieved its target of laying 25,000kms of railway lines in the next ten years. All this would be accomplished along with the establishment of door-to-door freight services and the promulgation of the Golden and the Western rail corridor services. In addition, 15,000 kilometres of optical fibre cables (OFC) will be laid through public private partnership (PPP) to cover the entire railway network. While presenting the budget, the minister also announced that proposals for public-private partnerships would be cleared within 100

days and a special task force would be set up for clearing all investment proposals to speed up implementation of projects. The private sector has also been urged to invest in projects ranging from multi-level parking facilities, multiâ&#x20AC;&#x201C;modal logistics parks, auto hubs, highspeed train corridors and rolling stock units.

Generous budgetary allocation The finance minister, Pranab Mukherjee, while presenting the finance budget allocated 46 per cent of the total plan outlay or a gener-

Proposals for PPP would be cleared within 100 days and a special task force would be set up for clearing all investment proposals ous share of Rs.1.73 lakh crore, to the infrastructure sector which includes roads, ports, airports and railways in 2010-11. This, in turn, should ease the setbacks suffered by the Dedicated Freight Corridor Corporation of India to a considerable extent. With a major portion of the Delhi-Mumbai Industrial Corridor (DMIC) passing through Gujarat, there is a need for the construction, upgrading and doubling of the spurs connecting the Dedicated Freight Corridor with the ports and industries of Gujarat. According to sources in the railway ministry, goods traffic has been the mainstay and has also filled the coffers of the Indian railways. About 80 per cent of the railwaysâ&#x20AC;&#x2122; revenue originates from freight traffic alone. The railways have registered a substantial increase INDIA |

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< industry update

The DFC will have stateof-the-art construction technology, upgraded transport systems and a substantial increase in wagon axle load to achieve significant reduction in unit cost of rail transport The vision The Dedicated Freight Corridor Corporation of India Limited (DFCCIL) was formed as a registered company under the administrative control of the ministry of railways on October 26, 2006. The initiative was conceptualized and announced by Lalu Prasad Yadav, the then railway minister, in his budget speech in February 2006. The objective to develop dedicated freight corridors across the country defines an important point for the Indian railways that runs mixed traffic across its wide network. The necessity for freight corridors arose due to over- saturation and excessive line capacity utilisa-

INDIA |

April 2010 | www.log-india.com

Source: dfccil.org

in the goods loading segment and the construction of the Dedicated Freight Corridor will vastly expand the market of the railways with more goods being carried across the country. Setting up of freight terminals by the Indian railways is an ongoing process which is dependent on traffic requirements. Discussions have been held with concerned state governments for the development of multi-modal logistics parks alongside the Dedicated Freight Corridor and at strategic locations under the public-private-partnership mode.

Dedicated eastern corridor

tion of the existing trunk routes of Howrah-Delhi on the eastern corridor and Mumbai-Delhi on the western corridor. With utilisation levels of 115 percent-150 percent, the Dedicated Freight Corridor was considered necessary and hence it is being developed in phases. The eastern and western corridors are being developed as phase Ia, Ib and II and phase I, II and III respectively. Both corridors are expected to be fully functional along the entire planned length by 2017.

State-of-the-art technology The DFC will have state-of-the-art construction technology, upgraded transport systems and a substantial increase in wagon axle load to achieve significant reduction in unit cost of rail transport. Volume and speed will be achieved by virtue of the DFC being dedicated to freight trains. The Dedicated Freight Corridor Corporation of India Limited (DFCCIL) has been mandated to develop multi-modal logistics parks at four locations, namely Rewari, Ahmedabad, Kanpur and

Navi Mumbai subject to viability. The Container Corporation of India (CONCOR), a public sector undertaking under the ministry of railways, also has plans to establish multi-modal logistics parks at several locations depending on business requirements. When established, the eastern corridor of the DFC will cater to a number of requirements such as coal for the power plants in the northern region of U.P., Delhi, Haryana, Punjab and parts of Rajasthan. The freight corridor will also carry finished steel, food grain, cement, fertilisers, general goods and limestone from Rajasthan to steel plants in the east. Presently, most of the traffic on the western corridor comprises of containers from JNPT and Mumbai Port in Maharashtra and ports of Pipavav, Mundra and Kandla in Gujarat destined for inland container depots located in northern India, especially at Tughlakabad, Dadri and Dandharikalan. Besides containers, other commodities moving on the western freight corridor are petrol oil lubricants, fertilizers, foodgrain, salt, coal, iron steel and cement.

Linking commercial activity The Eastern Corridor will traverse 6 states and include a double-line electrified traction corridor from Sonnagar on the east central railway to Khurja on the north-central railway (820 Km), Khurja to Dadri on the NCR double-line electrified corridor (46 Km) and single-electrified line from Khurja to Ludhiana (412 Km) on the northern railway. The total length works out to 1279 Km. Due to unavailability of space along the existing corridor, particularly near important city centers and industrial townships, the alignment of the corridor may take a detour to bypass Mughalsarai, Allahabad, Kanpur, Etawah, Tundla, Hathras, Aligarh, Hapur, Meerut, Saharanpur, Ambala, Rajpura, Sirhind, Doraha and Sanehwal. Since the origin and destinations of traffic do not necessarily fall on the DFC, a number of junction arrangements have been planned to transfer traffic from the existing Indian railway corridor to the DFC and vice versa. The junctions on the Eastern Corridor are planned at Sonnagar, Ganjkhwaja, Mughalsarai, Jeonathpur, Naini/Cheoki, Prempur, Bhaupur, Tundla, Daudkhan, Khurja, Kalanaur, Rajpura, Sirhind and Dhandarikalan. The Western Corridor will cover a distance of 1483 km of double-line electric (2 X 25 KV) track from JNPT to Dadri via Vadodara-AhmedabadPalanpur-Phulera-Rewari. In addition, a single-line connection of 32km from Pirthala junction station (near Asaoti on the DelhiMathura line) to Tughlakabad is also proposed to be provided. Alignment has been kept parallel to existing lines, except that a provision of detour has been made at Diva, Surat, Ankleshwar, Bharuch, Vadodara, Anand, Ahmedabad, Palanpur, Phulera and Rewari. There

will also be a short section interlinking the two corridors at Dadri.

Cost and land acquisition overruns However, the freight corridor project has faced it own share of problems with a cost blow-out and delays due to land acquisition. For the dedicated freight corridor, the railways need to acquire about 11,535 hectares across six or seven states. But the government has not yet acquired most of this land, although a 20E notification has been issued for the acquisition of 6,000 hectares in the first phase.

The proposed eastern corridor of the DFC will be advantageous to the business communities of West Bengal, Jharkhand, Bihar and Punjab since goods would be carried to their destination on a priority basis. Moreover goods trains are expected to run at 100 kmph on this corridor. Also, iron, coal, cement and other minerals will be sent on this corridor from Jharkhand, Bihar and West Bengal to other parts of the country. Similarly, these states receive a large part of their products from Punjab and Haryana to cater to the needs of the resident business community.

The freight corridors will encourage the development of SEZs along its path. SEZs are being offered tax rebates, fiscal incentives and land at subsidised rates. The freight corridors will greatly boost industrialisation and economic growth The Indian railways has approached the World Bank for financing 725 km of the Mughalsarai-Khurja portion of the eastern corridor and Asian Development Bank for 426 km of the KhurjaLudhiana portion. Meanwhile, the western corridor of the Dedicated Freight Corridor will be funded in cooperation with the Japan International Cooperation Agency (JICA).

Symbiotic relationship The freight corridor has huge commercial advantages for the country. In Punjab and Haryana, manufacturers of steel, leather, sports goods, utensils, textiles, cycles, automobile ancillaries, tractor manufacturers and the agriculture sector will be benefitted most by this project.

The freight corridors will also encourage the development of special economic zones (SEZs) along its path. With SEZs in India being offered tax rebates, fiscal incentives and land at subsidised rates. The freight corridors will greatly boost industrialisation and economic growth. Also the SEZs will promote investment from domestic and foreign sources. The Dedicated Freight Corridor has a bright future in India. Not only will it aid in the speedy transport of food and goods right through the country, it will also be a catalyst for industrial growth in the form of logistics parks and industrial corridors which will be established along the length of the corridor, thus leading to a spurt in Indiaâ&#x20AC;&#x2122;s industrial growth. INDIA |

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< Special report

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Last Among Equals Private ports have added to the significant growth of traffic movement over the years, and are growing at a healthy growth rate of 26.4 percent despite the recession and red tape, reports Jayashree Mendes and Frewin Francis

Photo: Ramlath Kavil INDIA |

April 2010 | www.log-india.com 53

< Special Report

he idea of having private ports alongside India’s coastline started in the 1980s and gathered momentum rapidly after the central government enacted major economic reforms in the 1990s. The need for private ports were felt as the government-run ports were saddled with obsolete technology, displayed intermittent delays in loading, suffered constant congestion at ports amounting to delays, and had low connectivity to the hinterland. “But as government activities go, most officials were okay with that. As long as the government maintained its hold over the largest trading infrastructure, it could continue to run its course,” says KP Daroowala of Mumbai Maritime

Industrial licensing was done away with thus making it possible for individual states to attract business and investments through new policies. The economic policies of 1991 also allowed businesses to go to states of their choice. In 1992, the Pipavav port was the first private port to take shape in India. Since then there has been no looking back. Development of ports have been rapid across India thus taking the total to 187 minor ports, of which 10 are private ports. Moreover, with global trade volumes growing, the growing multi-polarity of trade f lows was expected to impact world shipping as profoundly as liner shipping and containerised cargo had done almost five decades ago.

Against all odds

The development of the Pipavav port was a signal for other investors to consider investing in private ports

While it is only since 1998 that the government has realised the importance of developing private ports, they need to offer a clear logistics advantage in terms of access to hinterland, rail-road connectivity, and facilities for cargo. Despite a line-up of investors who are keen to enter this infras-

truture arena, investors in private ports still have to bear the brunt of unexpected delays in approvals and availability and quality of infrastructure, say port consultants. “The development of the Pipavav port was a signal for other investors to consider investing in private ports infrastructure. But even after all these years, notwithstanding the number of ports that have come up, there are interminable delays to allotting permits, and long-drawn discussions on the years it can be allowed to operate. In spite of the hurdles, private ports continue showing a healthy bottomline and seem to garner continuous business. This was vindicated going by a report brought out in early 2010 by the government of India on the status of ports. According to the report, minor ports have seen an increase in traffic in the first half of 200910. In the same period, major ports buckled under the global meltdown in cargo traffic, while minor ports (including private ports) saw an increase in traffic to the tune of 26.4 percent. Sector experts attribute this good showing to the efficient

Private Ports: Milestones Consultancy, an independent ports consultant. Much before the economic liberalisation could unfold, Gujarat with its typical business acumen set up Gujarat Maritime Board in 1982 – a first for the state. It was also the first state in the country to take the lead in boosting up its ports infrastructure -- although simultaneously a small state like Goa had already laid the cornerstone -- to harness ports and international trade as vehicles for economic development. It was the economic liberalisation of 1991 that changed the entire investment horizon for India.

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April 2010 | www.log-india.com

n The

economic liberalisation of 1990s gave a boost to private ports infrastructure n In 1992, Pipavav Port was the first private port to come up in India n In the first half of 2009-10, private and minor ports saw an increase in traffic to the tune of 26.4 percent n Construction of ports is a permissible activity under CRZ Notification, 2008, subject to obtaining prior environmental clearance from the Ministry of Environment & Forests n The Maharashtra government plans to develop 85 small ports, of which 57 will be built on a PPP model n Annual aggregate capacity at major ports is expected to increase by 74 percent to reach one billion tonnes by 2012. Minor ports will see an increase in capacity to 575 million tonnes. n The finance ministry has issued a diktat to the shipping ministry to stick to model concession agreement thus demonstrating approval of PPP model

administration at private ports. “Private sector involvement has benefited the sector vastly. They bring with them efficiency, create healthy competition, are price competitive, offer better facilities, and overall have a good proposition to offer to all,” says Rahul Chaturvedi, CEO of i-maritime Consultancy Pvt Ltd, a maritime, port and shipbuilding consultant, offering finance, port and shipping consulting services. Despite the private ports' efficient run, experts say this segment suffers from red tape. “Developing a port requires clearances from the Coastal Regulation Zone (CRZ) and an environmental clearance from the central government. This is a most cumbersome proc-

Private sector involvement increase competition, are price competitive, offer better facilities, and have a good proposition to offer

The Regulatory Milieu

ariffs at major ports are fixed by the Tariff Authority of Major Ports (TAMP). Private ports are allowed to fix their own rates. In the recent past, TAMP has come under severe censure in the media for being unable to stop malpractices at ports. TAMP is soon expected to be replaced by a new regulatory body, Major Ports Regulatory Authority, which will have all the powers of a civil court. The new regulatory body is expected to be more powerful than TAMP and will not act as a mere tariff regulatory body. Major Ports Regulatory Body will be entrusted with powers to investigate and inspect account

books of the 12 major ports as well as private operators. It will also have the right to punish offenders with fines up to Rs one crore. It will also settle disputes between the port management and operators using the facilities and services of the port. With capacities at ports expected to almost double by 2012, a simultaneous justification is required in rationalisation of port tariffs. The existing regime of cost-plus returns on capital employed (ROCE) needs to be reviewed and revised in favour of a competitive, forward-looking tariff regime.

ess. Sometimes, even after reaching financial closure, the private company finds that an environmental clearance has not been given,” he says. According to Daroowala, “Environmental clearances can take as long as 2-5 years. A few months ago, the environment ministry instructed its committee to suggest

changes in the draft Coastal Management Zone notification, 2008 and introduce a legislation to deal with the growing number of ports sprouting along the coastline.” “In Maharashtra’s case, this (red tape) does not commensurate with the government’s own decision two years ago to develop 85 small ports, of which it planned to give out 57 to the private sector or build it on a public-privatepartnership (PPP) model,” says Chaturvedi. He added that with an exponential growth in traffic expected, there is a dire need to increase capacity at private ports so as to meet demand. Meanwhile, sources indicate that the state government had appointed a small private consultancy firm to conduct a feasibility study. The 57 ports would likely have included commercial ports, jetties and shipyards, of which some 20-odd will be shipyards, something the state is in dire need of. Currently, ships in need of repair have to make their way to Gujarat shipyards. Chaturvedi of i-maritime Con-

Activity at private ports is expected to reach an exceptional 500 million tonnes by 2012 INDIA |

April 2010 | www.log-india.com 55

< Special Report sultancy adds a word of caution here: “Fifty-seven private ports in Maharashtra are not feasible. In the first place, they will all be vying for the same business and hinterland traffic. Also, most of them will simultaneously want to build a power plant and jetty.” Recently, according to reports, the ministry of shipping has banished the idea of allowing development of ports and instead consider expanding capacities at existing ones. An official in the Indian Ports Association, on condition of anonymity, says, “We understand that capacities will have to be expanded to accommodate the large scale growth in ports activity that

The finance ministry has asked the shipping ministry to stick to the MCA so that projects can be awarded quickly

is expected. However, it is the techniques of handling future expansion in capacity that we will look at.” Techniques here could imply development of railway tracks and roads leading to the port, more container yards, improved private facilities along the river bank, addition of new berths, creation of deeper drafts, and mechanisation projects. Understandably, maritime states like Gujarat, Maharashtra, etc have also chalked out plans to develop projects to expand their port capacities considerably. Under the National Maritime Development Programme (NMDP) of the shipping ministry, minor port projects worth Rs 5,163 crore are

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Glossary Major port: Any port administered by the Centre is a major port irrespective of its cargo and passenger handling capacity. Minor ports: fall in the concurrent list of the Constitution and the responsibility for their development and management rests with the state concerned.

likely to come up.

Ineffective governance At the CII’s Logistics Outsourcing Summit organised last month in Delhi, the Minister of Shipping GK Vasan, said that the annual aggregate capacity at major ports would increase by 74 percent to reach one billion tonnes by 2012. As for the nonmajor ports, the capacity is expected to increase to 575 million tonnes. Building up such capacity calls for quick sanctions of projects. “Projects can get sanctioned and construction can start only if the contractor has been chosen within the rounds of bidding,” says Manoj Shahu employed at the commercial department at Gangavaram Port in Visakhapatnam and in-charge of preparing bid documents. “Most of the times the modalities of bidding are not handled well. Even at the RFQ (request for quotations) stage or the prequalification stage, companies are rejected if their foreign JV partner is not suitable to the state government.” A common grouse is that the maritime boards of the states are not proactive in getting investors to the port. Some port states do not even have a maritime board in place. What makes it worse for the investors is the fact that the land they are bidding for to build a private port may already harbour minor port(s) and usually some of these do not even come under the

Private port: The private port developer owns all the port assets and operates all the services. There are very few ports where the port operator owns the port and sea front and these are only made available on long-term lease basis. These ports have been developed as private services port model.

ambit of receiving environmental clearance procedures under the Environmental Protection Agency. “There are several dozens of minor ports interspersed along India's coasts that are lined up for development, without regard for environment or traditional livelihoods,” says Shahu. In order to avoid delays in award of port projects, the finance ministry has asked the shipping ministry to stick to the basic framework of the bid document, also called the model concession agreement (MCA). With as many as 20 projects worth Rs 25,000 crore to be awarded this financial year, the Planning Commission has changed its mind of making any changes to the MCA, which could have an adverse effect and keep bidders away. This intervention by the finance ministry is significant considering that it is the ministry that approves public-private partnership projects in infrastructure sectors. However, private port investors are cautious and suspect that with the finance ministry spelling terms to the shipping ministry, there could be last minute changes to bid documents thus sometimes throwing the entire project out of gear. With global economic activity picking up, Indian private ports are gung-ho about prospects and hope to derive some benefits in terms of increase in cargo.

< port profiles

India's Private Ports: Overview There are ten private ports in the country. The following is a compilation of main profiles and specifications — ownerships, cargo capacity, area — of eight big private ports in alphabetical order.

Dhamra Port: Mineral-rich A 50:50 joint venture between L&T and Tata Steel

mouth of river Dhamra in Bhadrak district on BOOST (Build, Own, Operate, Share and Transfer) basis for a period of 34 years, including four years for construction. This lease period Port specifications may be renewed or extended for two additional periods of 10 years Port Area Phase 1 - 300 acres each. The port was developed at a Draft 18m total cost of Rs 2,463 crore. Connectivity to By rail, work for the 62 kilometer rail link The port is situated between hinterland from Dhamra to Bhadrak. By road, connecHaldia and Paradeep and can activity to NH5, by air, Bhubaneswar airport commodate super cape-size vesCargo Capacity 25 mmt for Phase 1 sels up to 180,000 DWT. No of berths 2 What can work to its advanLength and capacity of 350m and combined 25 mmt tage is that Dhamra has access berths to the mineral belt of Orissa, Container vs dry cargo Not operational yet Jharkhand and West Bengal. The master plan of the port provides Availiablity of shipyard? No for a total of 13 berths to handle Attachment to a SEZ or No 83 million tonnes per annum Warehousing facilities consisting of all types of cargo Attachment to a SEZ or No such as dry bulk, break bulk, liqWarehousing facilities

A joint sector between Balaji Infra and Maharastra Maritime Board.

n Q4 2005, Dhamra Port Company Ltd (DPCL) was awarded the concession by the government of Orissa to build and operate a port north of the

uid bulk and containerised cargo in different independent zones. The port can accommodate three rail tracks, a six-lane road and service lines such as transmission lines and pipe lines. The upcoming Dhamra port has kick-started efforts to attract cargo before it starts commercial operations in 2010. Website: www.dhamraport.com

Dighi Port: Taking the challenge

onstruction at Dighi Port is almost complete and the port is scheduled for opening in April 2010.

Port specifications Port Area

1500 Acres of land Phase I

Draft

Phase 1 - 14.5m

Connectivity to hinterland

By road, connected by SH 90,92,96,97,98 to NH 12

Cargo Capacity

30m tonnes

No of berths

Length and capacity of berths

Total quay length - 1600 M -Simple linear quay 950 M

Type of cargo handled

Bulk, break bulk, container cargo, liquid and gas cargo

Availiablity of shipyard

Yes

Availiablity of SEZ

SEZ Notification under process

Availiablity of warehousing facilities

FTWZ notification under process

The port is a joint sector initiative Balaji Infra Projects Limited with the Maharashtra Maritime Board venture under the PPP framework. IL&FS is a codeveloper to the project and holds 20 percent equity in the project company. Dighi Port Ltd signed a 50 years concession agreement in 2002 with the Maharashtra Maritime Board for the development, operations, management, administration, financing & marketing of Dighi Port. The port is located in Rajpuri creek, Raigad District about 45 nautical miles south of Mumbai. Recently the port signed a MoU with the Container Corporation of India (Concor) for providing rail support services. The plan also involves the development of warehousing and distribution services. INDIA |

Balaji Infra has also signed a MoU with Konkan Railway for developing a 45-km rail link so as to access the central hinterland of Maharashtra. The project will entail a cost of Rs 500 crore. Dighi Port project also covers a Multiproduct Special Economic Zone (DSEZ), including a Free Trade Warehousing Zone (FTWZ). Website: www.balaji.co.in April 2010 | www.log-india.com

< port profiles

Gangavaram Port: In expansion mode

DVS Raju Group (59 percent), Andhra Pradesh government (11 percent), Warburg Pincus LLC (30 percent)

he state government of Andhra Pradesh, with an intention to develop the Gangavaram port on public private partnership model, conducted a global bid process and selected the consortium led by DVS Raju, to develop and operate the port. The Rs1,800 crore Phase I of

Port specifications Port Area

2800 acres

Draft

21 metres

Connectivity to hinterland

by road NH5; rail connected to Chennai, Vizag, Howrah rail corridor

Cargo Capacity

Phase I - 35 mtpa

No of berths

Length of berths

242 - 320 mtrs

Type of cargo handled

Bulk, break bulk and project

Availiablity of shipyard

Availability of SEZ

Availiablity of warehousing facilities

Yes

the new private port, located 15km from the centrally owned Vizag port, started commercial operations in 2008. The consortium will handle port operations for 30 years and then hand over the company to the state government. The port was recently in the news when the Gautam Adani-controlled Mundra Port and Special Economic Zone Ltd (MPSEZ) sought to buy Gangavaram port. Last year, Gangavaram Port announced plans to raise Rs 500-700 crore to part-finance its expansion plans. The company, which is working out the modalities, is looking at debt market and internal sources.

The proposed expansion would involve increasing the number of berths, railway sidings and also the storage yards. In another move, the state is contemplating a petrochemical complex at Visakhapatnam that would help Gangavaram to handle more cargo. Website: www.gangavaram.com

Hazira Port: The multi-cargo router

A joint venture between the Royal Dutch Shell Group (74 percent) and Total Group (26 percent)

azira Port was conceptualised to make multi-cargo handling possible. It is connected to the Arabian Sea via the Gulf of Khambhat. Rail connectivity to the port is under progress and alignment has been finalised. Rail connectivity will be done by Rail Vikas Nigam through a special purpose vehicle. Hazira is strategically located to

Port specifications Port Area

65 hectares

Draft

12m

Connectivity to hinterland

By road, NH8 and NH6

Cargo Capacity

11.5 MMTPA

No of berths

1 LNG handling jetty

Length and capacity of berths

LNG handling of 10 MMTPA

Type of cargo handled

LNG

Availiablity of shipyard

Availiablity of SEZ

Availiablity of warehousing facilities

INDIA |

April 2010 | www.log-india.com

capture traffic originating/destined from/for South Gujarat, Western Madhya Pradesh and Northern Maharashtra. Last year, the company finalised plans to develop cargo berthing facilities at Hazira port at an investment of Rs 1,800-2,200 crore. The cargo facilities would be operational in four years. The plans include construction of two berths to receive non-chemical containers and another for speciality chemicals for south Gujarat’s chemical zone in the Vapi-Ankleshwar area. There are plans to increase the liquefied natural gas (LNG) handling capacity at the Hazira port from the current level of 2.5 million tonnes to 3.75 million tonnes by 2009-end. Simultaneously, the Adani Group-promoted Mundra Port and SEZ Ltd (MPSEZL) will invest

at least Rs 1,000 crore in the first phase of development of non-LNG port facilities at Hazira, and commission the port in 2012. The existing NH-6 connectivity to the port is being upgraded through six-laning of the highway. In addition to Hazira, MPSEZL is also setting up cargo terminals at Dahej in Bharuch district of Gujarat and Mormugao, Goa. It is currently scouting for port development operations on the eastern coast of India, South East Asia and Africa. Website: www.porthazira.com

Communications Feature

Infolog: IT Solutions for SCM Logistics is a key component in any enterprise and the backbone for SCM players. The logistics sector is on an upward growth in India, which means IT solutions for Indian logistics needs to be refined. Infolog looks at solutions for customers with a dedicated focus on ROI. The company ensure that it delivers cost-effective, quality software products and services

R.Shanker

General Manager Infolog Solutions Pvt ltd

nfolog Solutions Pvt Ltd, a software firm based out of Bengaluru, caters to the IT needs of the supply chain management industry. Initiated in 2001, the company’s initial focus was providing IT services to group companies. It then moved on to provide services for supply chain management, in the form of products as well as IT infrastructure management. With an interesting range of software products, it caters to servicing various verticals in the logistics industry namely, warehouse management, freightforwarding management, exportoriented units, among others. The company has its branches spread out in Chennai, Mumbai, Delhi and Hyderabad. The clientele encompasses large and well-known Indian and international enterprises. EOSoft: The company’s long familiar product EOSoft also has a strong presence in the industry. A unique web-based application for export-oriented and STP units, it helps in automating and managing regulatory compliance. Companies mainly engaged in segments like EOU/EHTP/STP units can use this application under the 100 percent EOU scheme. It comprises a flexible, user-definable “duty calculator” that eliminates need for frequent changes to the software due to ever changing duty structure. To meet reporting

requirements and to monitor the status of compliance parameters it has various statutory and MIS reports as well as a “live dashboard”. R Shanker, Infolog’s general manager is of the opinion that “though business parks facilitate companies to carry out their business operations with ease, businesses still have to follow various other compliance, regulations and statutory rules of governments, which involve documents and procedures.” He explains, “Compliance and regulations include applications to registrars, approvals and licenses, tax and customs certificates, goods procurements, warehousing and shipments documents and various others. It demands dedicated software solutions, which can facilitate companies to adhere to the compliance and regulations as well as support business operations.” Software offered by Infolog Solutions are: WMSoft: One-of-akind software that helps in controlling inventory management at warehouses. It supports the use of bar code or RF based devices. It also provides visibility to measure the performance of various

activities in the warehouse against set SLAs. FFSoft: A web-based software that enables freight forwarders and their customers, agents and vendors to be integrated into its operations. It offers a total solution to automate needs of freight forwarders. It covers sea-freight and airfreight forwarding operations especially those having multi-company, multi-currency and multilocation facility. RMSoft: is largely for the reverse logistics and the repair industry. Built from the concept of Return Material Authorisation (RMA), it is a transaction whereby the customer of a product arranges to return defective goods to the manufacturer or having the product repaired or replaced. RMSoft provides for standardisation of business processes, inventory and location management. SEZSoft: is an unique software, which is used extensively for managing regulatory compliance for SEZ units, developers and developer-cum-units. A complete web-based application, it helps in managing regulatory compliance operations which is made easy with a set of tightly integrated modules. It provides visibility to compliance parameters

and asset movements as well as measurement of the performance of logistics/compliance/asset management activities against set SLAs. It has a flexible, user-friendly “duty calculator” that eliminates the need for frequent changes to the software due to ever-changing duty structure. G Jagdish, Infolog’s deputy general manager (development) elucidates, “Both SEZSoft and EOSoft are developed on .NET technology and SQL Server Database by our 35-plus software development team.” Infolog recently launched SAAS (software as a service) model to boost sales. According to R Balaji, DGM (sales), customers can purchase and pay for the product on a monthly basis on low recurring amounts. There is no investment required on hardware or application support person or annual maintenance contract. The software is completely hosted module-wise on Infolog’s server. Customers are allocated a specific broadband speed of 5 GB space and a user login id and password. Print outs of reports can be taken at any point of time as the data is stored by Infolog on day-to-day basis. IT infrastructure management is another forte. Infolog also manages three data centres with IP-VPN, leased line for domain hosting, email administration and server maintenance through over 25 offices spread across 20 locations in India. Infolog also offers consultancy and total IT facility management services covering the entire gamut of IT infrastructure like software, hardware, networking, data security and internet connectivity solutions. 59

< port profiles

Karaikal Port: New beginnings

A wholly-owned araikal Port Private Ltd (KPPL) is a wholly-owned subsidiary of Marg subsidiary of Ltd, a leading infrastructure and real MARG Ltd

estate developer along the Chennai IT corridor. Marg Ltd was awarded the port through a tendering process on Port specifications Port Area

604 acres

Draft

14m

Connectivity to hinterland

By road, connected to NH45A, NH-67 and NH-45. By rail, link between Karaikal and Nagore.

Cargo Capacity

Phase 1 – 5.2 MTPA

No of berths

Length and capacity of berths

2 berths of 230m each with a design capacity of 2.6MMPTA

Type of cargo handled Bulk, break bulk, liquid bulk and container Availiablity of shipyard

Availiablity of SEZ

Availiablity of warehousing facilities

Storage facilities present

a Build-Own-Transfer (BOT) basis. Marg Ltd. incorporated a special purpose company - Karaikal Port Private Limited - for implementation and operation of the project. The Karaikal port has been developed as a lagoon type harbour connected to sea by an entrance/access channel protected by short breakwaters. The port is envisioned to be developed in 3 phases with the final phase getting operational in 2016. The primary hinterland consists of districts within 200 km radius of the port. The secondary hinterland consists of districts that are 200 to 400 km from the port, namely Coimbatore, Namakkal, Dindigul, Erode and Salem. There is also the tertiary hinterland, places beyond 400 km. Recently, IDFC Project Equity announced its intention to invest Rs 150 crore in Karaikal port.

In January this year, Karaikal port crossed a milestone when the first train from the port siding was flagged off. The port has a railway siding capable of handling three mt of traffic via rail. As a part of second phase development, the company is building three new modernised berths with conveyor belts to help direct offloading of cargo. The port may also go in for an IPO this financial year. Website: www.karaikalport.com

Krishnapatanam Port: Position of strength

PPP between government of Andhra Pradesh and CVR Group of Navayuga Engineering Company

ocated in the Nellore District of Andhra Pradesh and 180 km from Chennai, Krishnapatanam Port is the first of the state-owned minor ports to be awarded to a private party for development and private operations. Krishnapatanam Port Company Ltd (KPCL) is drawing up plans to

Port specifications Port Area

6500 acres

Draft

14.5m

Connectivity to hinterland

By road, connected to NH5. By rail, a railway via Venkatachalam.

Cargo Capacity

24 mtpa

No of berths

Length and capacity of berths

1100m combined length. Berth 2 for project cargo has a capacity of 12 metric tones/ cbm and the other 5 - 5 mt/ cbm

Container vs dry cargo Containers, Bulk cargo, Break bulk , Petrochemicals and Project Cargo Availiablity of shipyard

Attachment to a SEZ or Warehousing facility is present. Plans Warehousing facilities to develop an SEZ

INDIA |

April 2010 | www.log-india.com

set up a special economic zone on 12,000 acre in its vicinity. The port recently achieved financial closure for its Phase II expansion. The second phase will see inclusion of seven more berths, at an estimated cost of Rs 4,000 crore. A container freight station is also coming up and is expected to be completed by December 2011. A fully mechanised container terminal, an exclusive container handling berth will form part of the Phase II development while a ro- ro (roll on, roll off) jetty will come up on the western side. In Phase three, it is planning to set up a dedicated container yard. In all, the port will have a capacity to handle 60 million tonne of cargo on 42 berths. At the same time, the company is planning to connect all port functions and share data with port users with Enterprise Port Management System.

Connected to NH-5, the port authorities have constructed a dedicated 25 km road to NH-5 and a railway line connecting the Chennai-Howrah broad gauge line near Venkatachalam. Six helipads have also been built. The port has easy access to two major airports at Chennai and Tirupati. The location of the port offers logistical advantage for trade in domestic as well as AsiaPacific and far-eastern regions. Website: www.krishnapatnamport.com

Mundra Port: Signature port Adani Group

n 1998, Adani Group was given 2008.41 hectare of reserved forest land in the Mundra and Dhrab taluka of Kutch district to set up a port and a Special Economic Zone (SEZ) from the state government for Rs 96.59 crore.

Port specifications Port Area

50 acres

Draft

17.5m

Connectivity to hinterland

By road, connected to NH8A.By air, connected to Bhuj & Kandla airports and a private aerodrome. By rail, a 57 km privately owned railway line.

Cargo Capacity

80 mn tonnes

No of berths

Length and capacity of berths

1200m (combined) and 25 m tonnes each

Type of cargo handled

Bulk, break bulk, container, liquid and project cargo

Availiablity of shipyard

Availiablity of SEZ

Yes

Availiablity of warehousing facilities

Yes

Located on the northern coast of the Gulf of Kutch on the west coast of India, the port provides international trade gateway to Europe, Africa, America and the Middle East. Mundra Port and Special Economic Zone Limited (MPSEZ) was incorporated as Gujarat Adani Port Ltd., a joint sector company promoted by Adani Port Limited and Gujarat Port Infrastructure Development Company Ltd. Mundra port offers connectivity by rail, road and air. The port also has its own privately owned railway line and private operational aerodrome. The port possesses 21 closed godowns, 8,80,000 sq m of demarcated open storage space for steel sheets, plate, clinker etc, and 26,000 sq m of open storage alongside rail siding. Other facilities offered by the port are, customs establishment for statutory clearances, MPSEZ container

terminal under SEZ customs and the presence of nationalised and private banks inside the port’s limits. The MPSEZ is India’s largest portled SEZ. Leveraging the advantage of the port, the MPSEZ is being developed over an area exceeding 100 sq km as a privately operated multi product, large format, diversified special economic zone approved by the government of India. Two mega thermal power plants with total capacity in excess of 8600 MW are also being constructed. Website: www.portofmundra.com

Pipavav Port: The early mover APM Terminals (54 percent), part of the AP MollerMaersk Group alongwith other shareholders

argely owned by APM Terminals (54 percent), part of the AP MollerMaersk Group. Other shareholders include New York Life International India Fund (Mauritius) LLC, IDFC Infrastructure Fund, The Infrastructure

Port specifications Port Area

485 hectares

Draft

14.5m

Connectivity to hinterland

By rail, via Surendranagar by Indian Railways and schdeuled services to all major ICD's. By road, NH8E.

Cargo Capacity

Expanded facilities to handle up to 0.60 million TEUs

No of berths

4 and an LPG berth

Length and capacity of berths

1,075 metres used for handling bulk and containerised cargo and an LPG berth with a service deck of 65 metres

Type of cargo handled

Bulk, container, general, and project cargo

Availiablity of shipyard

Yes

Availiablity of SEZ

Yes

Availiablity of warehousing facilities

Warehousing facilities present

Fund of India, IL&FS Trust Company Ltd., Jacob Ballas Capital India Pvt. Ltd., UTI, IDBI, and India Infrastructure Fund. Pipavav Port, India’s first port by the private sector is located on the West Coast of India. The port is in the news as Gujarat Pipavav Port Ltd (GPPL), the port developer and operator, has filed draft papers with capital market regulator Securities and Exchange Board of India (Sebi) and plans to raise nearly Rs 500 crore through an initial public offer (IPO). The company is also considering a pre-IPO placement with various investors, according to the Draft Red Herring Prospectus (DRHP) filed with Sebi. GPPL is principally engaged in providing port handling and marine services for container, bulk and LPG cargo. GPPL is promoted by APM Terminals, which owns 57.9 percent equity interest in the company. APM Terminals INDIA |

took on the operation of Pipavav Port in 2005 and since then the company has invested more than Rs 11 billion in port infrastructure. Pipavav Port is an all weather port with a dedicated container stockyard and warehousing infrastructure. It was the first port in India to receive double stacked containers in March 2006. Pipavav is also connected all the major ICDs in northwest India and Coastal feeder connectivity with southern and eastern ports in India. Website: www.portofpipavav.com The remaining two ports considered under the private category does not find a mention here due to their small-size capacity.

April 2010 | www.log-india.com

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A pril 2010 April 6 and 7, 2010 India Courier Summit Le Meridien, New Delhi India Courier Summit provides an opportunity to service providers of the industry to interact with more than 100 industry professionals from India and overseas. India Courier Summit 2010, an exhibition for the entire gamut of stakeholders of the industry, offers an opportunity to the value partners to showcase new trends and technologies that can add value to the efficient working of the concerned industry. Exhibitors at the summit will comprise vehicle manufacturers, RFID chips and software developers, storage systems dealers, Barcode sensors companies, label manufacturers, weighing machines companies, warehouse suppliers, and Material Handling Equipment manufacturers, among others. Tel: 91 11 46569212 April 8, 2010 Aerodrome India Bombay Exhibition Centre, Mumbai Aerodrome India 2010 is the fourth edition of India’s pioneering and premier international exhibition and business forum on airport infrastructure and operations. The fourth edition follows the earlier three most successful editions in this niche sector, which is witnessing enormous growth owing to the pro-active policies initiated by the Ministry of Civil Aviation. Due to the sustained implementation of Ministry of Civil Aviation’s airport development plan, the Indian civil aviation industry is witnessing modernisation of existing airports / upgradation of smaller airports and development of new airports even as the global economic meltdown has impacted infrastructure development in many other parts of the world. Tel: 080-25547434 STATEMENT ON OWNERSHIP OF THE JOURNAL Form IV (See Rule 8) 1. Place of Publication DVV Media India Private Limited, 3rd Floor, 9, Sona Udyog, Parsi Panchayat Road, Andheri East, Mumbai 400069 2. Periodicity of its publication Monthly 3. Printer’s Name Mustan Sir Saifee Savai, Nationality: Indian, Savai Printers Pvt Ltd, A-661 TTC Ind. Area, Mahape, Navi Mumbai 4. Publisher’s Name Jacob Joseph Puthenparampil, Nationality: Indian, DVV Media India Private Limited, 9, Sona Udyog, Parsi Panchayat Road, Andheri East, Mumbai 400069 5. Editor’s Name Aanand Pandey, Nationality: Indian, DVV Media India Private Limited, 9, Sona Udyog, Parsi Panchayat Road, Andheri East, Mumbai 400069 6. Names and address of DVV Media Group GmbH individuals who own the Nordkanalstr. 36, D-20097 Hamburg Postfach 101609, D-20010 Hamburg newspaper and partners or share holders holding more than one per cent of the total capital. I, Jacob Joseph Puthanparambil, hereby declare that the particulars given above are true to the best of my knowledge and belief. Date: March 31, 2009 Sd/(Signature of Publisher)

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April 2010 | www.log-india.com

April 9, 2010 Auto SCM: A Brave New World India Habitat Centre, New Delhi Log.India is organising a one-day seminar on the automotive supply chain industry, Auto SCM: A Brave New World, on April 9, 2010 at India Habitat Centre, Lodhi Road, New Delhi - 3. Auto SCM will begin its main session with a presentation on “The changing OWM world map: Imperatives for Indian auto SCM players” and discuss the emerging global and domestic map of the automotive and auto-component supply chain sector and the emerging role of SCM players in India. Other topics lined up at the event include: Fresh out of the oven: Lessons from the churn; and Innovate or Perish. Tel:022-28240198 April 30, 2010 Presentation by mumbai’s dabbawalas Bandra Kurla Complex, Mumbai Mumbai’s Dabbawalas will make a presentation at CSCMP Mumbai RoundTable. For further details, Contact: piyushshah@gmail.com April 9-12, 2010 BulkPack Hyderabad International Trade Exposition Centre (HITEX), Andhra Pradesh BulkPack 2010 at Hyderabad to be held from 9-12 April 2010 is the first exhibition and conference in India for the bulk packaging industry. The fair will bring together Indian FIBC manufactures from all over the country. The show will cover various industry segments including rigid metal, plastic & fibre containers, leno bags, wrapping fabric and intermediate bulk containers (FIBCs) etc. Bulk Pack 2010 will provide the industry and all its stakeholders to meet and partake of the emerging opportunities. Bulk Pack 2010 aims to reach the southern markets. Tel: 91 11 29812934/29812834 April 23, 2010 Chemspec India Bombay Exhibition Centre, Mumbai The Chemspec India is organised by D. M. G. World Media at Bombay Exhibition Centre - NSE Exhibition Complex, NSE Exhibition Complex, Mumbai. It proves to be highly effective in acting as the connecting link between domestic & international buyers and sellers from all around the fine and specialty chemicals industry. It is a distinguishable event which is a platform for meeting of agrochemicals intermediates, biocides, cosmetics, colors & pigments, dyestuff intermediates, flavors/fragrances, organic intermediates etc. This is 3 days event which helps in networking with more than 12,000 professionals of different parts of the world. Tel: 44 1737 768611/768111

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