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INTEVIEW Shailendra Kumar

November 2012

QUICK CHAT Lars Sorenson

IN THE NEWS â‚Ź 100 mn investment

Big Debate

Cold Chain

Will it Come Out of Cold?

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Logistics Times

CONTENTS

All about Transportation, Distribution & Infrastructure

Volume 3: Issue No.7 * November 2012 Editor in Chief

Raj Misra rajmisra@logisticstimes.net

Editor

Ritwik Sinha ritwik@logisticstimes.net

Sub Editor

Neha Richariya

Photographer

Mohit Malik

Designer

Kausar Syed

Circulation & Distribution Legal Advisor

Kamruddin SaiďŹ Rakesh Garg

Our Bureau Mumbai

Rahul Kumar rahul@logisticstimes.net B Shekhar

Bangalore shekhar@logisticstimes.net N Raju Chennai

raju@logisticstimes.net Sudhir Kumar

Hyderabad

sudhir@logisticstimes.net

Editorial Advisory Board Paul Lim Founder & President, Supply Chain Asia Prof. Samir Srivastava Associate Professor, IIM-Lucknow Prof. Akhil Chandra Institute of Logistics & Aviation Management Ramesh Kumar Member, National Committee on Supply Chain & Logistics, Govt. of India

Marketing & Sales Kalika Singh Ph: 011-22478538-39, 9891007542 Email: advt@logisticstimes.net Printer & Publisher Deepa Misra for

E-77, West Vinod Nagar, Delhi -110092 Tel: +91 11 22478538-39, Fax: +91 11 22471764, Mumbai: +91 9322811550 Printed at Personal Graphics & Advertiser Pvt. Ltd. Y -22, Okhla Industrial Area-II, New Delhi-110020

www.logisticstimes.net

24 BIG DEBATE

Cold Chain: Will it come out of cold?

Edit Note

08

News Briefs

10

Product

48

Event

51

32

18

INTERVIEW

POLICY WATCH

Shailendra Kumar Head, NCCD

14 IN THE NEWS

€100 mn investment

UPA-2 IN A HURRY

39 REPORT

Ship Breaking Industry

45 QUICK CHAT

Lois Sorenson CEO, DAMCO (SA)

EDIT NOTE

8

Pain and promise in cold chain For majority of critics and observers of Indian agri-business particularly perishables, ‘criminal wastage’ is the term they mostly use to define the state of the affairs of this business. And there hardly seems to be any exaggeration in their prouncement.

Just imagine- 30-40% of your earnings slipping out of pockets just because you consistently fail to fix its porousness. At the root of the problem, of course, lies an extremely poor cold chain infrastructure network in the country. It’s a problem not only of colossal scarcity (the government itself admits that as against the present requirement of 61 million tonnes of cold storage capacity, the actual availability is to the tune of 29 million tonnes) but also of outdated management. More than anything else probably, a very strong element of casualness in running and operating cold chains is the biggest pain point today.

In this edition, we turn our focus on cold chains and there are two strong elements which have been put together to draw the big picture. Firstly, in association with apex knowledge chamber ASSOCHAM, we organised a big debate session inviting some senior representatives from cold chain industry to discuss the sub-plots of this story mired in sluggishness. And secondly, there is an exlusive interview of Shailendra Kumar, Head, National Centre for Cold-chain Development (NCCD) – an agency which has been formed by the government and is slated to assume the responsibility of a regulator for cold chains eventually. This is the first lengthy interview which head of NCCD has given to any publication after the agency became functional this July. The no-hold-barred conversation with him was critical in the sense that cold chain development in this country would be guided by NCCD now and hence while presenting the state of affairs of cold chain in this edition, we have a lot to underline in the futuristic sense.

On a cumulative basis, both big debate and the exclusive interview with Shailendra Kumar has brought forth the pain (which are in galore) and the promises (which are presently hazy…nevertheless they are not non-existent altoghther) in no uncertain terms.

The summing statement could well be: the business needs a complete overhaul of the mindset of the stakeholders to assume a viable avatar. Technological upgradation is a must, intelligent subsidisation is the need of the hour, empowering farmers is imperative, consumers interest has to be preserved, big retailers have to show a big heart to create robust forward-backward linkage platform, etc. Leaf through the cover piece of this edition and you would probably get a sense of new possibilities which await Indian cold chain business going ahead. Of course, this would entail all stakeholders to think and do things afresh. Old patterns simply won’t work any longer if we want our perishable businesses to provide yields attuned to their potential. Here, it would also be interesting to watch how NCCD’s own story unfolds in the future in terms of steering cold chain development story. We would obviously be keeping a close watch.

Waiting for your feedback Ritwik Sinha ritwik@logisticstimes.net LOGISTICS TIMES August 2011

NEWS BRIEFS

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Modest recovery expected in manufacturing

FICCI’s latest Quarterly Survey on Manufacturing projects a modest recovery in manufacturing sector growth in quarter three of 2012-13 (October-December 2012-13). Though the growth is expected to be low but some recovery is expected as overall business environment improves with announcement of number of reform measures by the Government. However, most of the important sectors like Automotive, Capital Goods, Metals and Chemicals continue to expect subdued growth outlook for quarter 3.

According to FICCI’s Survey, which drew responses from 364 manufacturing units and associations, modest recovery in Q-3 for manufacturing sector is expected as demand conditions reflected in order books show a marginal improvement. According to the survey, around 45% respondents felt that they expect the production to be higher in Q-3 vis-à-vis last year as compared to 44% and 46% in previous two quarters of current financial year.

Quarter

Q-3 (2012-13) Q-2 (2012-13) Q-1 (2012-13) Q-4 (2011-12)

% of Respondents Expecting Higher Production in the Respective Quarter visà-vis last year 45% 44% 46% 36%

Source : FICCI Survey FICCI survey noted that while the demand conditions remain subdued but a marginal improvement has been seen in Q-3 for 201213 as compared to Q-2 of 2012-13. In Q-3 of 2012-13, over 33% respondents reported higher order books for October-December 2012-13 as compared to 31% in Q-2 2012-13. The outlook is also borne out by the fact that recently both IIP and Index of Eight Core Industries have shown some upturn in growth. Manufacturing sector grew by 2.9% in August 2012 after registering negative growth for two consecutive months of June and July 2012. Similarly, the index of eight core industries witnessed a growth of 5.1% in September 2012 as compared to the growth of 2.5% in September 2011, showing some signs of turn around.

LOGISTICS TIMES November 2012

In terms of capacity addition, around 33% respondents reported plans for capacity addition in next six months as compared to 28% in the previous survey. However, except a few sectors like leather where majority of the firms plan to add new capacities, in other sectors only very few companies have any new capacity addition plans. This indicates that investment will not pick-up at least in next two to three months.

Sectoral Growth Based on expectations in different sectors, the survey pointed out that five out of twelve sectors were likely to witness low (less than 5%) growth and four sectors to witness moderate growth (less than 10% and greater than 5%) in Q-3. The sectors which are likely to witness low growth are chemicals, textiles, machine tools, metals and automotive. Sectors such as tyre, ceramics and electronics are likely to witness strong growth of more than

10% in Q-3.

Growth expectations for Q-3 2012-13 compared with Q-3 2011-12 Sector Chemicals FMCG & Food Electronics Textiles Capital Goods Steel & Metals Automotive Cement Leather & footwear Tyre Machine Tools Ceramics

Growth Expectation Low Moderate High Low Moderate Low Low Moderate Moderate High Low High

Note: Strong > 10%; 5% < Moderate < 10%; Low < 5% (Source: FICCI Survey) FICCI’s latest quarterly survey gauges the expectations of manufacturers for Q-3 (October-December 2012-13) for major sectors such as textiles, capital goods, metals, chemicals, tyres, cement, electronics, automotive, leather & footwear, machine tools, FMCG & Food, Ceramics etc.

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Asia’s rising share in F&B

The share of Asia Pacific region in the global food and beverages (F&B) industry’s value is projected to increase from 31.5% in 2011 to 34.2% by 2015, according to an ASSOCHAM-TechSci study on Food Processing recently released by the Secretary Rakesh Kacker, Ministry of Food Processing Industries in a function in New Delhi.

While releasing the study at the ASSOCHAM Food Processing and Agri Business summit Kacker highlighted the growing demand for food and beverages in emerging mar-

kets which are present in Asia Pacific and Latin America are set to make positive impact on global processed market. The developing countries in Asia Pacific region such as India, China and Indonesia are likely to drive the sales of processed food in Asia, Kacker added.

“With the opening up of new markets for farmers and other agri-business entrepreneurs due to globalization has led to the increase in food trade including the processed food.

The factors such as increasing income, faster urbanization and trade liberalization have been driving the demand for processed food and high value primary products across the globe”, Kacker said.

On the occasion, Sanjeev Chopra, Joint Secretary, Department of Agriculture & Cooperation emphasized on the development of cold chain infrastructure for the growth of India food processing and agribusiness industry. The absence of cold chain infrastructure which includes both warehouses and transportation facilities is resulting in huge wastage of agricultural products.

Food processing outpaces agriculture If there is one sector that has been growing faster than agriculture as well as manufacturing sectors, has the potential to create jobs in the rural areas, bridge the gap between the price paid by the consumer and that received by the farmer and create value addition and earn foreign exchange by export of valueadded farm produce, it is the Food Processing Sector. In addition, this sector does not only remain a bridge between farmers and entrepreneurs, it converts the farmer into an entrepreneur.

This was stated by the Agriculture and Food Processing Industries Minister, Sharad Pawar after inaugurating NIFTEM, a world-class institution in food processing sector, at Kundli, Haryana, recently. Haryana Chief Minister, Bhupinder Singh Hooda, Minister of Water Resources Harish Rawat, Ministers of State Tariq Anwar and C D Mahant, Member of the Planning Commission, Arun Maira, and local Members of Parliament and Legislative Assembly were also present on the occasion.

While highlighting the huge potential of this ‘sunrise sector’,

Pawar also spoke about the challenges the sector faces and how NIFTEM will help the sector to grow. “Though a sunrise sector, it is facing various bottlenecks like lack of infrastructure, packaging and grading centres quality control and testing facilities. However, I consider, lack of human resource as one of the most important impediments in the development of this sector. Many entrepreneurs meet me and tell how difficult it is to get skilled manpower to work.

It is in this background, the foundation of NIFTEM was laid. This institute is expected to bring a pioneering work in development of Human Resource in the food processing sector,” he said.

Pawar said that NIFTEM will provide one-stop solution to the food processing sector. He elaborated: “Besides developing world class managerial talent and advanced knowhow in the area of food science, food technology and management, it will function as a knowledge repository in the food processing domain, conduct frontier area research for development of the sector and facilitate business incubation services. The Institute will offer high quality education, research and management programme specific to the food industry, provide referral advice on food standards, disseminate knowledge on the food sector and provide business incubation facility.

The Institute will also provide other core activities to bridge the skill gap between demand and availability, provide complete spectrum of consultancy services to food processing industries, strive for promoting Innovation in the sector and work for upgradation of SME clusters.”

LOGISTICS TIMES November 2012

NEWS BRIEFS

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Most used logistics technologies End users of logistic services in India ranked time (94 percent) and cost saving (90 percent) as the top two reasons for using logistics technologies.

T h e y select their technolog y service provider (TSP) based on the three main criteria of - match with industry needs, reputation, and cost of technology.

New analysis from Frost & Sullivan Strategic Analysis of Logistics Technology Usage Trends in India, finds that about 72 percent of companies in key end-user industries of logistics services use at least one logistics technology, ranging from a basic technology like bar coding to an advanced technology like radio frequency identification (RFID).

“Among all logistics the technologies, 89 percent of endusers industries perceive enterprise resource planning

systems as the most effective technology and bar coding comes in a close second at 88 percent,” said Frost & Sullivan’s Transportation & Logistics Programme Manager, Srinath Manda. “Hence, these two are the most used logistics technologies in India.”

Only a quarter of the current non-users of logistics technologies intend to use them in the near future. Among these prospective users, transportation management system (TMS) emerged the most popular choice with 27 percent of responders declaring that they are likely to purchase this technology. However, several end users claim that TSPs fail to meet the desired levels in the areas of customization, integration of the entire end-user supply chain with the solution, ease of upgrades, and postimplementation support.

To resolve these issues, TSPs should rework on their product development and customer satisfaction approach to provide well-defined yet customized solutions, which are easily upgradable. “TSPs also need to offer/implement solutions that integrate multiple functions/departments involved in the supply chain of a client organization, thereby creating a seamless flow of information and communication management for clients,” noted Manda. “Apart from these, the solution providers need to improve their commitment levels to existing customers through regular follow-up and support services.”

New Terminal at JNPT

DP World further strengthened its relationship with India’s premier gateway port, Jawaharlal Nehru Port, early this month with the ceremonial presentation and formal acceptance of the Letter of Award by DP World Chairman HE Sultan Ahmed Bin Sulayem for the 330 metre new terminal project and port Chairman Shri L Radhakrishnan. The ceremony was also attended by other senior members of the Jawaharlal Nehru Port Authority and DP World.

Once constructed, the new terminal will add 800,000 TEUs (twenty foot equivalent container units) of container capacity to the port, and help ease congestion, as the port is currently LOGISTICS TIMES November 2012

operating beyond capacity. The terminal is expected to commence operations in 2015.

HE Sultan Ahmed Bin Sulayem, Chairman, DP World, said: “We are very pleased to have the opportunity to further develop Jawaharlal Nehru Port and contribute in a very direct way to the growth of India’s economy by improving the efficiency of the supply chain for importers and exporters. We thank the Jawaharlal Nehru Port Authority for the trust placed in us and we look forward to a growing cooperation.”

Mohammed Sharaf, Group Chief Executive Officer, DP World, said: “There is a need to develop infrastructure in India, and DP World is privileged to be a partner in providing world class facilities for India’s traders. Being one of the strongest emerging economies in the world, with a burgeoning middle class population, India offers immense potential for growth in the maritime sector. With the 330 metre project, DP World will contribute even more to India’s growth offering our customers the ability to grow and expand their business in India.”

The new container terminal has been awarded for a 17 year concession period. It will have 17 hectares of yard and a draft of 13.5 metres, and will be equipped with four rail mounted quay cranes and 12 rubber tyred gantry cranes.

Essar Shipping half yearly result

Essar Shipping Limited (ESL) announced its financial results for the half year and quarter ended September 30, 2012 recently. The company has reported a net profit at Rs.17.91 crore in H1FY13 as against a loss of Rs.66.82 crore in H1FY12. Revenue increased by 35% to Rs.1723.13 crore in H1FY13 as against Rs.1280.11 crore in H1FY12 and EBITDA increased to Rs.470.24 crore in H1FY13 as against Rs.261.92 crore H1FY12, registering an increase of 80%.

In terms of performance specifically in Q2 FY 13, the company has reported revenue increase of 31% to Rs.797.95 crore as against Rs.609.81 crore in the corresponding quarter last year. EBITDA increased to Rs.218.18 crore in Q2FY13 as against Rs.85.93 crore Q2FY12, registering an

increase of 154%. On an overall basis, the company has shown a net loss of Rs.35.99 crore in Q2FY13 as against a net loss of Rs.85.65 crore in Q2FY12.

In terms of vertical performance, a company press release has underlined that the shipping business registered revenue of Rs.368.66 crore in Q2FY13, up 24 % from Rs.296.28 crore for the Q2FY12. For half year, the business registered revenue of Rs.827.29 crore in H1FY13, up 38 % from Rs.598.91 crore in H1FY12.

Oilfields Services revenue increased by 394% to Rs.165.65 crore in Q2FY13 from Rs.33.36 crore for Q2FY12.The business registered revenue of Rs.338.16crore in H1FY13, up 193% from Rs.115.37 crore in H1FY12.

The logistics business revenue clocked Rs.263.66 crore for Q2FY13 against Rs.280.27crore for Q2FY12. For half year the business registered revenue of Rs.555.57 crore in H1FY13, down 2 % from Rs.565.82 crore in H1FY12.

During the quarter, the company also sold 1983 built ships MV Govind Prasad and MV Mahavir Prasad during the quarter thereby reducing the average age of the fleet to 13.5 years.

Commenting on the results A R Ramakrishnan, Managing Director- Essar Shipping Limited said, “Whilst these are challenging times for the shipping industry, the company is endeavouring to post positive performance with its focus on long term contracts. The oilfields services business continues to maintain its strong performance and is expected to contribute positively to the business”

Blue Dart sales at Rs. 417.31 crores

Blue Dart Express Limited, South Asia’s premier integrated transportation, distribution and logistics company, today declared its financial results for the third quarter (Q3) ended September 30, 2012, at its Board Meeting held in Mumbai late last month.

The company posted Rs 32.20 crores profit after tax for the quarter ended September 30, 2012. Net sales from operations for the quarter ended September 30, 2012 stood at Rs 417.31 crores, an increase of 7.32% over the corresponding quarter of the

previous year.

Anil Khanna, Managing Director, Blue Dart Express Limited said, “Blue Dart will continue to focus on customer expectations, superior services and stakeholder & employee expectations. Our endeavour has always been to set the benchmark for express services in India. We believe that even as the Indian economy fights for its former glory, Blue Dart is well positioned to enhance its role as a trade facilitator in Blue Dart country.”

LOGISTICS TIMES November 2012

NEWS BRIEFS

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IN THE NEWS

14

€100 mn investment In a significant development last month, DHL Supply Chain announced fresh investment of 100 million Euro in the Indian market in the coming years. The investment would be primarily routed to spruce up unit’s warehousing and transportation strength in the country. Or as Vikas Anand, COO emphasises – “ to stay ahead of the curve in a fast growing 3PL market.” In an e-mail response to Logistics Times, Anand provides details of new investment plans: Of the four units of DHL operating in India, DHL Supply Chain of course is the newest one. To begin with, give me a sense of its evolution here in India and the scale it has attained during its brief journey?

DHL Supply Chain is the youngest of all DHL entities in India. However, we have grown as a pan India player within a span of 15 years. The unit which was established in 1997 today has a workforce of over 5000 personnel, over four million square feet of warehouse space by way of 103 warehouses in more than 50 cities in the country.

We are moving around two million shipments annually, registering 8000 line hauls per month, 18 transport branches and nearly 70 customers.

Now you have annouced a major investment plan amounting to 100 million Euro in India. What is the timeline for this investment?

Secondly, can I get a sense of the investments which DHL Supply Chain has made in India so far?

We have been in investment mode and have already invested in two world class Multi Client sites (MCS) warehouses which have become functional in 2012 with total foot print of 7.5 lakh sq.ft.

In addition, we presently have two sites under construction with a footprint of more than 1 million sq ft. One site will GO live by Jan 2013 and other LOGISTICS TIMES November 2012

one by Q2 2013. Furthermore, three sites with footprint of 1 Million Sqft are under planning phase with Go Live dates of QTR 3 2013 and QTR 2 2014 respectively. By October 2012, we have already set up 18 out of the 30 planned FTL transport branches across India. We have also invested in further expansion of technologically advanced DHL own transport fleet on Indian roads. On technological upgradation front, we are setting up all integrated IT solutions(WMS,TMS,O2C,visibilit y). Our control tower in Mumbai has already become functional and the ones which will come up in Delhi and Bangalore will be ready by QT1, 2013.

To give a boost to our expansion plans, we have hired more than 1000 staff in

2012 taking the strength to 5000.

By when can we expect these eight Multi-Client sites get in the up and running mode?

Timeline has already been indicated in the previous response. In addition to them, we will set up further sites by Q4 2015 and undertake expansion of the current sites, which will be done in a planned manner.

Your fleet expansion plan which has been indicated – will it continue to be rooted in that asset light model philosophy?

It is, in fact, a combination of both.

We have been investing and continue to invest in vehicles to support our

15

large customers and branch network.

Additionally line haul will be done between various MCS where we shall invest in higher capacity vehicles.

You have indicated that DHL Supply Chain will need nearly 10k workforce in next three years.

However, talent crunch is a major issue in the Indian market. We know that you have a dedicated Gurukul programme. But will that be sufficient to meet with your requirements?

Gurukul (our Operations Simulation Programme is one of the many talent development programmes we have invested in and embarked upon. We have also created training programmes targeting a number of roles.

In addition to Gurukul, we have the following programmes running for talent development in India: Supervisory skilled training for supervisors Site Manager Programme (SMP) for site Managers Emerging Leaders Programme for Young Talent In addition to all these Programme we are also providing opportunities to our workforce in key foreign markets. We are involved in Talent Exchange programme within South and South East Asia & APAC where Indian staff gets the opportunity to work in large retail , auto , consumer durables, technology , pharma etc warehouses for a period of six months and more.

You are expanding your warehouse base, tending to augment your fleet size and the broader idea is that you would like to enhance your speed to market capabilities. However, India is a market where cost to market dynamics largely determine the operations of supply chain firms.

How will you respond to it?

I think we need to redefine the concept of logistics cost. Our Supply Chain teams look at end to end costs

including inventory carrying,returns, obsolescence, etc. Our optimization programmes ensure we take away waste from the supply chain costs and one of the key benefits is Speed to Market.

We shall optimize costs and create Speed to Market based on the following: DSC MCS aimed at streamlining warehousing at key strategic locations and establishing key transport branch network operations across the country DSC MCS designed as per DHL Global Standards State of Art racking and traffic management for seamless flow Improved infrastructure quality with operational excellence Consolidation of synergies for transportation and warehouse operation Create economies of scale synergies for cost and forecasting Infrastructure improvements beginning to change fundamentally the network solutions currently in vogue â&#x20AC;&#x201C; e.g. faster/ reliable transit times resulting into consolidation of distribution points After this announcement of a major investment, can it be concluded that you have no desire for any inorganic expansion in the Indian market. Not, at least in the medium run.

India is a very exciting market where these investments are aimed at improving our share of wallet with our existing customers and aggressively gain market share by acquiring new customers in the near and medium term. However in the longer term, if an exciting M & A opportunity comes our way, we shall evaluate and take a call.

Again, with this kind of investment, are you looking at becoming a pan-India supply chain player in the true sense of the term by 2015?

We already are a PAN India player with presence in more than 50 cities having

100 plus warehouses. We are providing warehousing,transport plus value added services like D2M, technical repairs, kitting /co packaging services all India basis across various sectors like retail, consumer, healthcare, automotive, fashion, technology etc. Our strategy by 2015 is to become investment of choice, provider of choice and employer of choice in the Indian market place. We have already made substantial progress towards that.

Lastly, a small point on timing of this announcement. Just prior to your announcement, the Indian government gave green signal to some big, bang reform measures which of course would eventually lead to expansion of the market. Have these new measures especially FDI in MBR propelled you to finally go all hog in India?

DHL Supply Chain is strongly committed to investing in markets of growing importance. We are looking at 2015 and beyond, where indicators show India, and other emerging markets are expected to be the key drivers of growth. Hence, with these investments in India, we are taking one more step in the right direction to pursue DHLâ&#x20AC;&#x2122;s global strategy.

The key drivers for the investment announcement which we have made are : 3PL market is growing much faster due to increased outsourcing. 3 PL market growth @ 21% is much higher than growth in logistics market @ 10%.

3PL will account for 13% (EUR 4.4bn) of total logistics market in 2015 from the current low of7% Due to maturing customer needs, the 3PL market growth is much faster than total logistics market growth As a global organization we see tremendous scope for organized 3PL market growth in India.

Hence this investment is planned ahead of the curve.

LOGISTICS TIMES November 2012

PROJECT LOGISTICS

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Driving power project in AP backyard “It’s a project which clearly reflects our growing expertise in managing, complicated infrastructure logistics projects. It almost amounts to executing a difficult logistics piece in forest, far away from populated pockets,” says Hitesh Athawasya, Zonal Head (South),

LOGISTICS TIMES November 2012

DIESL. The project entails laying 400 KVA of power cable within a radius of 400 kms which will pass through, Atmakur, Poduthur (Near Nellore) and Nandiyal (About 250 Kms from Hyderabad)and a larger chunk of this route is forest area. To undertake the

logistics requirements of this massive project, the executioner of the project Tata Projects (TPL) - an engineering, procurement and construction (EPC) contracting company – appointed DIESL, as their logistics partner; and as Hitesh underlines different pieces

PROJECT LOGISTICS

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of this complicated project is falling in place on the ground.

DIESL is currently supporting the back end supply chain for commissioning of towers all through the selected route to put in place a 400 KVA of power line. The supply chain includes managing inventories likecables, steel, tower parts, cementandearth work material.“The project involves dealing with huge inventory. TPL has various suppliers and we receive materials from them and ensure its storage. There are different specifications of tower sizes and, therefore, suitable arrangements have been made to ensure efficient handling of different categories which we receive,” Hitesh informs.

Creating large scale dedicated storage units in areas close to forest has been quite an exercise but Hitesh asserts the company has succefully executed it on the basis of some meticulous planning.

“We have created three warehouses to cater to this project. These are open units and on a cumulative basis occupy something close to 30 acres of land.

All the units operate 24x7 and with security being a key concern here, we have made adequate arrangements with barbed wire fencing, elevated security platform, flood light arrangementetc.,”

he adds.

Hitesh,underlines the strategic DIESL’s supply chain partnership for importance of the project in these this project commenced in August words, “In terms of size, this clearly and the company has hired scores of is one of the biggest logistics we have transmission & distribution (T & D) executed. We clearly want to be in the professionals to ensure precision of vanguard of supply chain management the highest order. “There are about 15 in large scale infrastructure projects- a supervisors to man these three units segment which will be growing rapidly and they have mostly been pulled from in the coming years and this project power industry,” Hitesh points out. He could well speak volumes about our is also quick to assert that DIESL has capability,” he sums up. managed to add the expected value as -LT Bureau a logistics partner in the execution of this massive Doing it right in AP jungle project. “We are barely four Receipt – Materials are received from months old in terms of various location through Purchase Order Unloading - Unloading the material at a partnering the execution particular site within the plant of this project as logistics Storing - Storing the materials till the time associate, but the initial it is consumed at the site results are encouraging. We Issue – Issue the material as per the have managed to ensure Project requirement / as per the direction lower inventory holding of Site Engineer cost, faster turnaround Accounting – Ensuring Deliveries note of inventory where it is from RSP and MMR submitted with required, rationalization Finance with 7 days of material receipt of space and resources, Inventory Management – Reconciliation and in developing for Consumables done once in a month Management of short/Damage effective stores and yard &Insurance:Managing and recording management model to shortage and damage. File Insurance as fulfill and meet the KPIs and where applicable. of Commissioning the electrical towers.”

LOGISTICS TIMES November 2012

POLICY WATCH

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UPA-2 IN A HURRY “I am aware that we are working against the political calendar…I have no doubt that, in the time that is available to us, each one of you will bring your best efforts to complete the unfinished task before us...”

Manmohan Singh at Council of Ministers Meeting (1st Nov’12)

Himanshu Shekhar

The political count-down for the next general elections seems to have begun.

At least that is the political message the Prime Minister conveyed in his opening statement (quoted above) at the full council of ministers meeting on 1st November. After a major cabinet reshuffle exercise aimed at refurbishing the falling image of his government, Prime Minister Manmohan Singh was visibly tense at this meeting.

Only 18 months are left of UPA-2’s tenure and he knows that the time available to perform and execute important poll promises UPA-2 made in 2009 is limited. And so he categorically sent this message across to all his 77 ministers: “…while we need not be unduly gloomy about our prospects, we certainly need to redouble our resolve to meet the challenges before us”.

Finance Minister P Chidambaram was more frank in his assessment of the challenges on the economic front. In his presentation before the council of ministers, he warned that if urgent corrective steps were not taken on the economic front then India faced the danger of slipping into junk grade on creditworthiness. He urged his ministerial colleagues to collectively take steps to control government expenditure, especially subsidies.

LOGISTICS TIMES November 2012

This straight talk followed a broad restructuring of the Manmohan cabinet which saw a few Congress stalwarts shunted out of the government. 17 new faces were inducted and five junior ministers were elevated to higher ranks in the government. The cabinet rejig reflected the growing clout of Rahul Gandhi in the Congress hierarchy. It was an attempt to give a new face to UPA 2 and re-energize the Manmohan government. The Prime Minister wanted to restructure the functioning of his government by roping in new faces who could bring in new ideas.

But the reshuffle annoyed a few senior ministers and serious questions were raised about some of the changes effected in key infrastructure ministries.

The decision to shuffle out Jaipal Reddy from the Petroleum Ministry created a controversy as it happened in the backdrop of his tiff with the Reliance Group. Corporate Affairs Minister Veerappa Moily was moved to replace him at this high-profile ministry while Sachin Pilot was promoted and shifted to take Moily’s place in the Ministry of Corporate Affairs. Jyotiraditya Scindia was given charge of the Power Ministry after elevating him as Minister of State (Independent Charge). In a surprising development, the Surface Transport and Highways Minister CP Joshi failed to keep charge of the Ministry of Railways as Pawan Bansal was roped in from Ministry of Water Resources and Parliamentary Affairs to hold the reigns at the politically crucial Rail Bhawan.

The biggest cabinet reshuffle was followed by a rally at the historic Ramlila Maidan in support of the decision to allow FDI in Multi-Brand Retail. This is the first time the Congress party has gone to the streets in open support

of economic reforms. Ironically, the Gandhi family did not openly support Narasimha Rao’s effort to reform the Indian economy in 1991 when Dr Manmohan Singh was the Finance Minister. But the rally in Ramlila Maidan was an attempt to explain the rationale behind some difficult and bold economic decisions Manmohan government has taken in recent months like allowing FDI in several crucial sectors like retail, civil aviation and broadcasting, revising the price of diesel and putting an annual cap on the subsidized LPG cylinders.

It followed the series of big bang reform initiatives aimed at overcoming the growing perception of policy paralysis in the functioning of the government. UPA 2’s big push to kickstart the economy in Sept-Oct finally seems to have had some impact. The official data released by the Ministry of Commerce and Industry on 31st October shows that eight core industries (Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Cement, Steel and Electricity) registered a modest growth rate of 5.1% in September, 2012.

This was a jump from 2.3% growth rate registered in August this year and 2.5% in the same month last year. Incidentally this is the highest growth rate in eight core industries in the last seven months. In this period Coal production registered a growth of 21.4% in September 2012. It had grown at a negative growth of -18.2% in September, 2011. Similarly, refinery products, fertilizers and cement have also shown marked improvement this September compared to last year.

But the larger challenges remain. Other key infrastructure sectors have not shown much improvement despite

21

repeated efforts to revive the growth sentiment in this sector. This is largely because bottlenecks continue to hurt fresh investment in this key sector.

PM underlined the challenges in detail in his address to the full council of ministers: Remove constraints like fuel supply agreements, security and environmental clearances which deter or slow down investment, Growing gap between demand and supply of energy must be addressed, Economic Growth is declining, exports are not growing, Need to cushion the domestic economy from developments in the international economy, Fiscal deficit is too high. It is a deterrent for domestic and foreign investment, Create a conducive environment to realize an investment of 1 trillion dollars in infrastructure sectors (12th Plan Period) But there are challenges on other

Decline in economic growth rate poses new challenges for the government. To cope with this challenge, serious efforts are on to follow a fiscal consolidation plan with specific targets in next five years. front too. The Kelkar Committee appointed by Finance Minister too has categorically asserted the need to take radical measures to address the challenges economy was facing.

The major suggestions of Kelkar Committee are: Take corrective steps otherwise the fiscal deficit may rise to 6.1% of GDP, Transition to Goods and Services

Falling Growth Forecast (2012-13) in % Budget PMâ&#x20AC;&#x2122;s EAC Fin Ministry RBI Crisil Citi

: : : : : :

7.35-7.85 6 5.5-6 5.8 5.5 5.4

LOGISTICS TIMES November 2012

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Tax (GST) and a quick review of the Direct Taxes Code (DTC) is important, Take administrative measures to improve tax collection, Rationalize national schemes, control and monitor expenditure, Consider new models of disinvestment, disinvest residual stake in companies privatised earlier.

Then, the issue of high interest rates too continues to haunt the industry.

Industry associations favour a cut in interest rates so that companies can make new investments to boost growth. They are desperately waiting for the government and RBI to take steps to bail it out of the crises they find themselves in today.

For now, the challenge is to show results on the ground. The Finance Minister recently admitted that the economic growth rate could dip to a low of 5.5% in 2012-13. This assessment is much below what government had claimed in this year’s budget. In fact, it is lesser

than 6.5% which was the growth rate last year.

Decline in economic growth rate poses new challenges for the government. To cope with this challenge, serious efforts are on to follow a fiscal consolidation plan with specific targets in next five years. The Finance Ministry wants that the burden of fiscal correction must be shared, fairly and equitably, by different classes of stakeholders.

In recent weeks, the government has also initiated new measures to introduce a cash subsidy scheme so that the benefit of subsidy reaches directly to the poor and it is not diverted or misused. The broad idea is to prune the growing subsidy bill.

But tackling the issue of oil subsidy would be difficult. The decision to cap subsidized LPG cylinders has already become controversial. Analysts say BJP was successful to a very large extent in its effort to make it a poll issue in recently concluded assembly polls in Himachal Pradesh. If the results go

against the Congress then the pressure would increase from within the party to reverse this decision. A section of the party already wants that the annual cap on subsidized cylinders be increased from 6 to 9 before the Gujarat elections.

As the UPA 2 enters the last 18 months of its tenure, the Prime Minister knows he is running a minority government which is at the mercy of both Mulayam’s Samajwadi Party (SP) and Mayawati’s Bahujan Samajwadi Party (BSP). The forthcoming winter session of parliament starting on 22nd November would be a test-case to judge how far UPA 2 can manoeuvre support in favour of reforms and cobble up numbers for its own survival.

Adversaries of UPA 2 are already plotting to isolate the government during this session. To ward off any such challenge, the prime minister will have to control the discontent within UPA 2 and keep both SP and BSP in good humour!

(Author is a senior journalist working with NDTV)

LOGISTICS TIMES November 2012

BIG DEBATE

24

Pawanexh Kohli

Sanjay Sharma

Cold Chain

Will it come out of cold?

They call it a â&#x20AC;&#x2DC;case of criminal wastage.â&#x20AC;&#x2122; For harshest of critics, no other term best defines the state of Indian agri-business particularly perishables. And rationale is simple: despite being second largest producer of fruits and vegatables in the world, every year 30-40% of produce go down the drain for want of efficient supply chain models comprising a robust cold chain storage infrastructure.

LOGISTICS TIMES November 2012

Ritwik Sin

wik Sinha

25

Ajay Chopra

B D Narang

But is it a permanent evil we are forced to live with? Or with transformation happening across various other sectors and businesses, cold chain units too would eventually come out of the cold. ASSOCHAM and Logistics Times recently organised a round table discussion to unravel several sub-plots of this story.

The participants were: Pawanexh Kohli, Chief Advisor, National Centre for Cold-chain Development (NCCD) & Principal Advisor of CrossTree; Sanjay Sharma, MD, Global Agrisystem; B D Narang, Former Chairman, Oriental Bank of Commerce(OBC) and Ajay Chopra, MD, Competent Agri Solutions. The discussion was modeated by Editor of this publication, Ritwik Sinha. Here is the abridged version of the discussion: LOGISTICS TIMES November 2012

BIG DEBATE

26

Ritwik Sinha (RS): Let me extend a very warm welcome to all of you for this edition of our big debate series. In today’s session we are going to focus on the state of the cold chain in the country. Let me come straight to the point and it’s a question open to all of you. The government recently submitted a statistics in Rajya Sabha which underlines the demand and supply gap vis-à-vis cold chain infrastructure in the country. The demand is something like 61 million tonnes but as against that the cold chain storage capacity is only 29 million tonnes. I don’t want you to present a long historical perspective of how cold chain has evolved in the country. But yes, I would like to understand from you what has really happened in last ten years in terms of cold chain infrastructure development. And my rationale for this is simple: in last ten years especially in the first part of last one decade, India has witnessed the best GDP growth phase since independence. The two cyclical slowdown spells since 2008 notwithstanding, many sectors and businesses have attained new scale in the country. Given this kind of equation, one would like to believe that cold chain sector would also have benefitted to some extent, some positive rub off may have happened.

Pawanexh Kohli (PK): In last ten years, we have definitely seen the emergence of modern, cold chain distribution hubs at some places. There has been a significant modernisation drive which we have noticed in this business and is well evident in the ramp up of distribution hubs and reefer trucks fleet of many operators. The focus of the government in recognising cold chain as one of the most effective and the most necessary supply chain tools for handling of food chain and towards national food security has clearly happened in last ten years. Earlier the cold chain was only a small infrastructure story and they were built at the back end for the easiest of cold chain products which was potato, and for a select group of marine products and dairy. If you consider the case of potatoes in India, then I would say that they were never really part of a cold supply chain. They were stuffed into a cold storage but they were never pre-cooled, were never subjected to an extended cold chain process and exited the cold chain warehouse and moved to the open market.

So they were never formative to that complete cold chain.

For dairy products, the process was simple. Milk would be collected, cooled and moved under insulation, quickly processed and then pushed back in the market. But the scene is changing now. There has been a huge amount of growth, awareness and development in last ten years and now it is at the tipping point to move into the new orbit and display the real benefits.

Sanjay Sharma(SS): You began the discussion by quoting a particular statistics. Let me add to that. Out of the 29 million tonnes of cold storage capacity we have, 24 million tonnes is purely for potatoes. So what we are talking about LOGISTICS TIMES November 2012

is remaining five million tonnes for everything else. That practically means we have a demand of 32 million tonnes for products other than potato and, therefore, we can take care of only 15 percent of the actual requirment. And I would even question this demand figure of 61 million

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In last ten years, we have definitely seen the emergence of modern, cold chain distribution hubs at some places. There has been a significant modernisation drive which we have noticed in this business and is well evident in the ramp up of distribution hubs and reefer trucks fleet of many operators.

- Pawanexh Kohli tonnes. Furthermore, we have a very inefficient system for meat production and distribution. Barring dairy products probably, we have got very inefficient and very unhygienic cold chain system for every other category of products. If we consider poultry and meat as case in point, we probably

27

require something like five million tonnes of cold chain capacity for these two segments alone. Our Food Safety Act is slated to bring some critical changes in the future and one of them would be prohibitng slaughtering in the cities. One can imagine the kind of slaughtering which is happening in

❞

In India when a client comes to you with the intention to own and operate a cold chain unit, he doesn’t know his own requirements in precise terms. He simply can’t make specifications himself for plant and machinery. By and large, he is looking at availing benefits out of government subsidy schemes.

- Sanjay Sharma the cities and kind of pollution it is creating in the sewerage system. If that has to be controlled then the slaughtering has to be shifted outside the cities and this would entail changing our production system for meat products. Simply put, it would create a mommoth demand for the cold chain.

Point is: efficient cold chain system is increasingly becoming the sheer necessity of our food market in the country which would force us to develop it a little more aggressively. If we take the demand and supply of food and vegetables in the country, we have very low tolerance for two kinds of situation – low production or over production. One example I often quote is: during the National Democratic Alliance (NDA) regime, a very serious onion crisis had happened.

But do you know this crisis had happened just because of a meagre production differnece of 10 percent even as the price had skyrocketed to around Rs 75 per kg? So a small 10 percent shortfall in prodution can create a serious crisis in our society. Similarly, if there would be 10 percent excess production, it could lead to another kind of crisis. Actually, the crisis is not because of production and demand-supply gap. The crisis is because of inefficient distribution system which we have. We do not have effective storage mechansim for preservation of perishables and make them reach to the consumers when it is needed. So that is the distortion or the gap which need to be filled.

Now coming to the developments in last ten years, forget about the statistics and numbers. There has certainly been some significant qualitative difference which has happened in cold chain development here. Previously the technology which was extensively used was 100 years old punkha system of cooling (it is still used for potatoes). The big, modern handling system, the airflow control, temperature and humidity control, etc. were not too much in practise. I must appreciate and congratulate the National Horticulture Board (NHB) to have taken initiative (I would not say they have created perfect systems) to set up standards. And why it was important is something I am emphasising from my experience of dealing with clients as an agri-business consultant. In India when a client comes to you with the intention to own and operate a cold chain unit, he doesn’t know his own requirements in precise terms. He simply can’t make specifications himself for plant and machinery. By and large, he is looking at availing benefits out of government subsidy schemes. If you quiz him on possible marketing or sourcing model for his project, he does not have a clue. Similar trend is evident when it comes to choosing technology. He might be knowing some equipment guys and he will tell them to make cold storage. Here what NHB standards have done is: they have educated people on the technology and standards they need to adopt. And this is a significant difference. Today even for potatoes we are deploying advanced technologies.

I will give more marks to technological changes which have happened than the quantitative change in terms of bridging the gap between demand and supply.

RS: So you are saying very subtly advanced technologies or processes have found their way in cold chain operations in the country. But am I wrong in my assessment that these LOGISTICS TIMES November 2012

BIG DEBATE

28

might have been adopted by a select few?

SS: Select few yes, if we look at the overall numbers. There are 6000 cold storages and only 200 can be called modern.

But if you make the same comparison of potatoes vs others which I made, the new cold storages could be 200 and out of that 180 are with modern technologies. Point is: people are now aware. They know that technology is available and the world of difference it can bring to their operations.

PK: Technology is adopted by a progressive user. And when he does that, there are scores of others who would like to emulate. And why do they emulate? Not purely for imitationâ&#x20AC;&#x2122;s sake but more because of the reason that they realise the importance of technology today. The old equations for running cold storages hardly exist any more â&#x20AC;&#x201C; free electricity, cheap diesel, etc. The cost of running a cold storage has gone up significantly. So technology adoption has become necessary to make your operations viable. You invest in technology because your operating cost would come down and long term sustainability would improve, as well as to safeguard your cargo. All this has happened in last ten years. In fact, in the same period many business dynamics have changed. Technology has become cheaper, its viability improved because operating costs came down, adoption became easier because you had examples around you. And this has inspired a lot of existing units who have gone for upgradation. Techonological upgradation could be in terms of insulation, handling systems, machinery, monitoring mechanism- all that has happened in last ten years.

B D Narang (BDN): I am pretty impressed with what previous speakers have highlighted. I think time has really come to get started in a big way on cold chains and for this it is imperative to prepare broad project reports for handling temperature controlled products. The focus should be on mutli-commodity cold chain system. I fully agree with the onion crisis example cited by Sanjay. The problem was not with the level of production but rather with logistical arrangements. We have a large variety of very expensive, high valued products and it is no secret to anybody that they should be preserved for longer duration. Just to cite an example, lichi has shelf life of only 15 days and the product is available for one month only. With little input, the shelf life of this product can be increased to five-six months. With good cold chain system, we are told the shelf life of apples can be increased to a year. As I said earlier, the onion crisis had happened because for 27 days transport wagons were not available at the source hubs. If in Nasik or Jalgaon market, you have the product in abundance but there is no storage and transportation facility, then the crisis is bound to happen.

My suggestion is if we can involve experts and prepare draft project reports focusing on areas of abundant production, it would be a great help. My own experience says that when it LOGISTICS TIMES November 2012

â?&#x17E;

Bankers have never considered cold chain a promising business. Now the question is why? Traditionally, it has been set up by entrepreneurs mostly in mandi locations. And they have not been looked upon as entrepreneurs who would tend to think on scientific lines.

- B D Narang comes to cold chain management, we are by and large living in the past. Many of the stakeholders in this business in different parts of the country might not even be aware of what changes have happened in last ten years. I think, draft reports can help them a lot in terms of getting abreast with the contemporary trends. Most of the cold chains which are being put up today are already outdated. My feeling is most of the entrepreneurs who are willing to put up a cold chain project are not aware of the developments which have taken place in last ten years in technology. Earlier we used to call it cold storage, now we are calling it temeperature controlled. What does it mean?

29

have already come out which promulgate the modern type of units.

RS: Mr. Narang, I would like to have a specific bankers’ perspective from you. Has the banking system in general ever considered cold chains a business segment which has potential?

BDN: No. That has never been the case. Now the question is why? Traditionally, it has been set up by entrepreneurs mostly in mandi locations. And they have not been looked upon as entrepreneurs who would tend to think on scientific lines. So what has happened- most of them took subsidies and there have been scores of cases where cold chain units were abruptly closed. You may ask why? Well, the answer is: the viability of their business models never emerged. Second point I would like to emphasise when you say that the government is providing adequate subsidy is that the nature of the subsidy should be tweaked - from capital subsidy to running subsidy so that those cold storages can function.The benefit really lies in running it in a very scientific manner.

❞

Its true that many front running entities of India Inc. got on to multibrand retail bandwagon. But firstly I think, not that kind of demand really emerged for multi-brand retail especially in terms of emerging with its own distinguishable identity when it comes to their perishable offerings.

- Ajay Chopra That some changes have clearly unfolded. Let us pick up ten products and prepare draft reports on them so that the future entrepreneurs should know the options available to them. It would encourage the existing unit holders also to graduate to more modern units.

PK: I think, what Mr. Narang is saying has already started happening on the ground. These days cold chains are usually set up with government subsidies and the Government subsidies are promoting multi-commodity cold chains and not single commodity units. Standards and specifications

SS: Mr. Narang presented some interesting points and I would like to add to that. Enhancement of shelf life which you stressed upon, I agree with it but I would rephrase it differently. What does enhancement of shelf life means? It means that there is an even distribution for a longer period.

For any typical crop, we can consider 45 days harvesting spell – 10 days are lean, 25 days good and then again 10 days turn out to be lean. So even during those 45 days, there would be spells of shortages. Secondly and equally important is the issue of geographic distribution to a longer distance.

Today 25 percent of tomato coming from Nasik to Delhi goes waste. But this can be saved if its transportation, cold storage, sorting and packaging processes are undertaken scientifically.

PK: Cold chains connect markets to source. They are not typically to prolong or delay reaching the market but intended to continually feed into the market. Yes, in the case of some particular products where production is limited to a certain season, cold storage can come into the play to enhance their longevity. Otherwise, it’s a chain which happens to be temperature and environment controlled. It does not merely mean reduction in temperature to preseve something.

Handling, air flow, ambient parameters - these are critical paramters. It’s clearly a misnomer and some stakeholders unfortunately have this erroneous assumption that if you open a cold storage, it can dramatically extend seasons for all kind of perishables. Please keep in mind it is a cold SUPPLY chain!

RS: Pawanexh haven’t we already started talking about products, even perishables being season agnostic?

LOGISTICS TIMES November 2012

BIG DEBATE

30

PK: Its simply because the supply chain extends the season by another few weeks or the product can be put in the frozen mode by applying different processes.

Some of the products can be extended beyond season even, as they are not fresh. You see, there are different types of cold chains.

You look at fish and mutton- they are season agnostic. There could be three-four months when there is no harvesting in the sea. Yet because fish is something which goes in deep freeze mode â&#x20AC;&#x201C; in something like -18 degree storage environment, the product may be already dead the cold storage has got nothing to do with the product. It mostly enables the preservation by countering external microbial attack. Not the case with the majority of fresh perishables.

RS: Let me move onto another critical issue. Anil, you largely come from retail background having served in companies like Mother Dairy, Subhiksa and Reliance.

Now it is generally believed that organised retail helps in shaping up modern supply chain including the cold infrastructure part. We are keeping the FDI element out for a while here and focus on specific timeline which I mentioned while kicstarting this discussion. The post-2000 scenario has again been a spell which gave a significant boost to organised retail with some of the giants of India Inc. jumping on the bandwagon. But going by the popular perception, not much has happened in terms of creating a robust backend platform including the cold chain. What could be the reason?

SS: I think what we require from organised retailers in the country is a mindset which consistently looks at quality with a religious bent of mind. There is no difference between what a push cart seller offers and what is offered at a modern retail outlet.

RS: Are you saying that the boom spell which we witnessed in organised retail in the last decade, players ended up focusing more on quantity?

SS: Exactly. And competing with push cart sellers they resorted to the mind set that the product will ultimately find its market irrespective of its quality.

RS: But does that also hold true for companies like Reliance and Aditya Birla group?

PK: I think, the other panelist has said it all when he said Indian mindset was to look at the balance sheet every day. It simply means there was no strategy. If you want to enhance the value, get recurring improved price realisation, you have to have consistent quality as your strategic agenda.

But if every day you are testing your balance sheet, then with such tactics not much will happen. At best, you will end up doing pilot projects without making much mark.

You need to have a wholesome strategy. If you have a cold storage close to the city, it has to be a distribution hub. Something at the backend or something at the staging area - somewhere close to the port waiting for capacity movement on ship or train or anything becomes a storage node which in turn serves as part of the complete supply chain. There is no such thing as building somewhere in isolation, out in the boondocks and then pretending it to work properly as a cold chain. Where it has been done right, you would find customers are paying for it, the customers now want quality!!.

AC: Absolutely. They are always looking at the margins. It has typically been the problem of the mindset.

(Full discussion would appear in India Logistics & SCM Yearbook, 2013)

Anil Chopra (AC): Its true that many front running entities of India Inc. got on to multi-brand retail bandwagon. But firstly I think, not that kind of demand really emerged for multi-brand retail especially in terms of emerging with its own distinguishable identity when it comes to their perishable offerings. And secondly: Indian enterpreneuers who really strived to make a mark somehow could not give up his habit of looking at his balance sheet constantly. They did not display the appetite which is typically required to play long term game.

LOGISTICS TIMES November 2012

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LOGISTICS TIMES November 2012

INTERVIEW

32

â&#x20AC;&#x153;We have a mammoth task in handâ&#x20AC;?

On 9th of February 2012, the Indian Government approved the setting up of a National Centre for Cold-chain Development (NCCD). This decision was taken at the Cabinet meeting held in New Delhi under the chairmanship of Prime Minister Manmohan Singh. As a result, the NCCD kickstarted with its first public interface, a Roadmap Conclave on 17th of July 2012. The broad idea before NCCD, which is slated to assume the role of a nodal support agency and regulator, is to push for structured growth of cold chains in the country going ahead. In an exclusive interview, Shailendra Kumar, Director NHM (Ministry of Agriculture) and head of NCCD explains to Ritwik Sinha the near and medium run roadmap for the new agency: LOGISTICS TIMES November 2012

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The kind of gap which exists between the requirement of cold chains in this country and their actual availability is huge and its no secret to anybody. You have National Horticulture Board (NHB) which has been working in the direction to reduce this gap for quite sometime and in all fairness some obersvers do believe that it has been doing a good job. But now you have formed a dedicated agency â&#x20AC;&#x201C; National Centre for Cold-chain Development (NCCD). I would like to understand the precise agenda of this body. How it is going to be different from what you have been doing under National Horticulture Mission?

Horticulture Mission has primarily been a centrally sponsored scheme to provide assistance to different kinds of stakeholders in horticulture business

including cold chain and cold storages. NCCD is primarily a regulatory body which will be providing standards and protocols in India to the cold storage and related infrastructure which is not available till now. The second issue is what kind of standards Indian cold chain should have? The basic idea is: the standards set by us should result in consumer friendly and suitable to agro-climatic conditions of the country. To achieve this objective, we would be initiating a certification and accredition programme. We need to ascertain that operators follow right maintenance standards even after getting the initial certification.

So there should be an accreditation process, a 3-star to 5-star grading kind of system. NCCD will also be looking

into the human resource development concerns. We have been interacting with stakeholders in the industry and there seems to be problems galore on the HR front â&#x20AC;&#x201C; both in quantitative and qualitative sense. Just to cite a small example, we have been told that reefer van drivers stops his engines when he goes for his lunch and dinner. But the LOGISTICS TIMES November 2012

INTERVIEW

34

moment he powers off in this fashion, it adversely affects the cooling of produce inside the vehicle. So the point is: even in reefer transportation sector, you require trained and aware drivers.

We, in fact, require trained personnel in large numbers all across the cold value chain. We are in all likelyhood to have FDI in multi-brand retail. The demand for the trained manpower in horticulture business could grow manifold. It is very interesting to note that in our engineering colleges, referigeration is not a separate wing. Perhaps, except for IIT, Chennai no other institution runs a course in referigeration. We are looking at creation of nearly 300 lakh metric tonnes capacity in next few years over and above the existing 290 lakh metric tonnes capacity. But without trained personnel, this story would not move forward coherently in qualitative sense.

NCCD has just started its journey and you explained the challenges.

Just tell me, how mammoth is the task?

It’s a huge task. First task, of course, is to map all existing cold chain assets, including storages. We have no idea of the precise volumumetric capacity of these units in the country and more importantly how many of them are actually functional? There is a rough data available of 2010 on availability of cold storages in India, but we are not very sure how many of them are actually up and running in the real sense of the term. Recently, I had some interaction with Potato Cold Storage Owners Association from Agra and they told us that many units have turned NPAs and banks are after their lives and, therefore, the government should provide some relief. If this is the situation in Agra, then the same situation could be in Bihar which is having power problems and there could be many other parts in the country where cold storages are in trouble and increasingly becoming non-fucntional because of various reasons. So this is the first task for us – to map the cold storage network in the country. National Horticulture Board LOGISTICS TIMES November 2012

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First task, of course, is to map all existing cold chain assets, including storages. We have no idea of the precise volumumetric capacity of these units in the country and more importantly how many of them are actually functional?

has already undertaken this mapping exercise. Once we have the required information, we would be in a better position to startegise future course of action in this regard. Then we have to evolve a mechanism through which these units get benefited through NCCD. We are consulting with experts as how it can be done and how all cold chain owners can be made beneficiaries of NCCD. The other unique trend which we are noticing is that almost 90 percent of cold storages in the country are owned by operators who do not have agri-business as their mainstay.

Nothing suprising, the cold storage largely remains an infrastructure piece in isolation in the whole supply chain.

It is not integrated and the operators are not concerned about the farmer’s or consumer’s plight. Perishables are supposed to move to best market in particular seasons. But this is not happening. This is the situation even as the government is doling out huge subsidy by way of bearing 40 percent of the cost of setting up a cold storage.

Broadly, this works out to be Rs 6000 per metric tonne and this is huge support. Just imagine if a person is setting up a cold storage of 5000 metric

tonne capacity, his project cost is Rs 3 crore and straight away he can ask for Rs 1.20 crore subsidy. Going forward, we need to evolve an intelligent subsidy mechanism. Operators seeking subsidy should furnish the details about their business models. If they do not have a sound business model, why should government subsidy be made available?

So its another focus area for NCCD: non-productive and unviable units which have no model for backwardforward linkages should be discouraged.

Time has come for integration of cold chain units with efficient supply chain models. It has to be integrated in a manner that cost to consumers should be reduced and returns to farmers should improve.

Do you ever get besiged by the feeling that you have almost started on point zero? Or National Horticulture Board has set up a basic platform as far as developing a robust cold chain network in the country is concerned.

I don’t think we are starting from point zero. In certain areas we have definitely not made huge gains and much of this

is owed to the fact that farmers are not organised in our country. But there are pockets where the industry players have managed to make inroads and things have started happening in terms of cold chain integration resulting in effective supply chain in those areas.

It has happened in Punjab to a certain extent, Uttrakhand and mostly in and around big consumption centers in Andhra Pradesh, Maharshtra, Gujurat, etc. However, when it comes to the country as a whole, I can very safely say that 75 percent of farmers are not part of what we understand as efficient supply chains. In that sense, the task is huge. While a mammoth undertaking, it is gloriously motivating too!

NCCD governing council has 22 members cutting across the entire spectrum of stakeholders from the public as well as private sector dealing with agri-business. I would like to specifically understand from you, the kind of representation the state governments have on this board because this would be very important.

At the board level, the state governments’ representation is there to the extent that the representatives of the best performing states in the cold chain sector have been involved. But taking all states on board at this juncture is neither desirable nor expected. This council requires to be small at this stage to create an effective platform which should ultimately act as a catalyst. However, as we move forward, the representation at this level can be further increased. On the other hand we have large numbers of members in various categories. Each such member group also elects representation at the council. This member representation on the council ranges from asset owners and service providers to individuals of high repute.

You spoke about setting up basic standards and certification and accredition which will be tools to

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Operators seeking subsidy should furnish the details about their business models. If they do not have a sound business model, why should government subsidy be made available?

Non-productive and unviable units which have no model for backward-forward linkages should be discouraged.

shape a regime of basic standards.

Will you make it mandatory?

Not immediately but yes, after induction and after suitable industry familiarization, it has to become mandatory at some point of time in future. You look at the seriousness of our problem. 80 percent of our farmers are not in a position to export their produce due to presence of residual chemical more than the prescribed limit. We are using insecticides, pesticides and fertilisers without actually thinking whether final product will remain healthy or not. The second part is when they are stuffed into the cold storages, no scientific method is applied to stack them there and give them proper fumigation so that it not only enhances its freshness and longevity but the product remains healthy for human consumption. When we are applying our persihables and eatables with various chemicals and preservatives, we are just not thinking about consumers. Another important point we need to look into is: are we really sensitive to the issue of extent of cooling required for different produce?

And there are a host of such issues which we are broadly ignoring. For

instance, what kind of insulation and other infrastructure for cooling the operator is supposed to have in his unit; the power consumption issues; and how chloro-fluoro carbon pollution can be controlled. You can afterall cause damage to the environment also. So all these things need to be put in black and white and the industry needs to adopt and popularize. If we have to develop our agri-business to the extent that our products are not questioned on varied quality parameters in other parts of the world, then we need to have a set of standards. We have to be holistic across all aspects of development – process, produce, practise and environment.

So that compulsory accredition would happen after sometime.

Can you give a timeline… may be after two-three years?

I am not in a position today to give you exact timeline at this developmental stage. But this would eventually happen in coming years in consultation with all stakeholders.

You seem to be very enthusiastic with FDI allowed in multi-brand LOGISTICS TIMES November 2012

INTERVIEW

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retail. My question to you is: there are already over half a dozen big domestic corporate houses who have made a mark in this kind of retailing. They have broadly evolved in last ten years or so but there is a general accusation against them that they have failed to put in required investment in preparing a robust backend platform which could have benefitted the state of cold chains in the country as well. What in your opinion could be the reason?

I actually can’t answer why they have failed. But I can definitely say that in any sphere of life, competition always creates better choices for consumers.

In food retail value chain, there are two major players who find themselves at problems all the time. One is farmer as producer and then consumer who is paying the price. If you bring considerations of these two in alignment with each other while establishing a supply chain mechanism, I don’t see any reason for failure. We can say that the impact which was expected in the retail supply chain has perhaps not taken place. We still have farmers saying that same mango which fetches Rs 10 at the farm gate is sold at Rs 120 per kg in a market like Delhi. Thus, consumer is paying a huge amount – almost ten to twelve times what the producer is actually getting for certain produce and both of them are extremely unhappy. It is expected that if more players join in the multi-brand retail bandwagon, the supply chain integration exercise would get a fresh impetus and would improve.

Secondly, if there is a condition that a sizeable amount of your investment would go into the backend, it means post harvest to the market supply chain process would be strengthened. The perishables would be handled in a better way and this is what we are expecting.

However, this is not something which would happen overnight. We feel that things will start changing in and around biggest consumption centers initially. It will not happen straightaway at small LOGISTICS TIMES November 2012

❞

We are in communication with Corporate Affairs Ministry trying to evolve modality so that farmers’ organisations can be registered under Companies Act. What we are saying is that at village level, let’s organise farmers as Farmer Producer Organisations (FPOs).

villages and sleepy towns but in the long run, they would also be benefited.

It could play out like the telecom revolution or other sectors which went into a high-growth trajectory.

In last 20 years in India, we have seen some new sectors have suddenly become hot and one of the major contributory factor has been the emergenece of new age enterprenuers pushing those domains. My question is: what does NCCD intend to do to draw new enterprenuers to agri-business - more specifically in cold chain business? You have already highlighted the serious structural issues.

The first and the foremost idea is to organise farmers. We are in communication with Corporate Affairs Ministry trying to evolve modality so that farmers’ organisations can be registered under Companies Act. What we are saying is that at village level, let’s organise farmers as Farmer Producer Organisations (FPOs). Similarly we can create Farmer Aggregator Organisation (FAOs). That means the pre-harvest upto harvest operations and post-harvest operations will be handled by the famers themselves. Some of the members of the farmers’ fraternity at the village level can work as producers and others

can become logistics suppliers and aggregators. We know that if farmers’ organisations will start setting up cold storages, the subsidy level will go up.

But this would mean a more targeted approach in improving agri-production, establishment of more cold chain units and all related logistics requirements before market. Cold storages should be actually owned by farmers which has not happened in the country. It has gone to the people who do not have much at stake with the produce, unlike the producer farmer. This needs to be changed and FPOs & FAOs would eventually have to tie up with retail chain owners Credit is a major issue for cold chain segment. How will you deal with this issue?

Credit issue is a major area of concern for us also. FIs are ready to give you loan for buying a car but not for agribusiness. But GOI is facilitating credit infusion through NABARD and other FIs and the quantum is jumping every year. We believe these agencies can also financially assist FPOs and FAOs. For last two year a special RIDF window (Rural Infrastructure Development Fund) has been created with NABARD for both cold and dry warehousing.

An allocation to the tune of Rs. 7000 crores has been exclusively made for this purpose over last 2 years!

REPORT

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Ship Breaking Industry:

Key Trends and Credit Implications Leading credit rating agency ICRA has recently released a report on trends in ship breaking business â&#x20AC;&#x201C; a segment where India has a significant presence. The report underlines a busy spell for stakeholders in ship breaking business in the medium run. However, serious competition seems to be emerging from China.

Excerpts from the report: BACKGROUND Ship dismantling (also referred to as ship breaking or ship recycling), is an activity which involves deriving value from the materials and equipments comprising end of life ships. The fundamental driver of the ship breaking activity is the fact that ships undergo a large amount of wear and tear during their lifespan which typically averages a few decades, and after the threshold levels are reached, ship dismantling makes more economical sense than repairing and refitting. The scrap metal obtained on dismantling is sold directly or is melted down and re-used for making steel rods/bars which find application in the construction industry while the equipments (engines, mechanical parts or furniture) are generally refurbished and reused.

Currently the ship breaking industry is dominated by South Asia particularly India, Bangladesh and Pakistan, which according to latest available statistics, together account for close to 67% (during CY11) of the global ship recycling market in terms of LDT1 broken. Apart from these, significant recycling activity also takes place in China (21% during CY11) while Turkey and other countries account for the balance 12% (during CY11) of the market. The dominance of the Asian countries in ship breaking activity has been driven by their lower manpower cost and relatively less stringent environmental and health regulations vis-Ă -vis western countries. Further, India, Bangladesh and Pakistan by virtue of their naturally favourable tidal conditions are able to use the beaching2

technique for ship breaking which is less capital intensive and hence more cost effective vis-Ă -vis the advanced dry dock method. This has further enabled these countries to become the preferred ship dismantling destinations.

In India, ship breaking yards are present in Gujarat, Maharashtra and West Bengal. However, majority of the ship breaking activity is concentrated in the Alang and Sosiya yards in Gujarat with Alang alone accounting for more than 90% of the ships dismantled in India. The ship breaking industry in India was present only in a very limited form till the early 1990s with about 72 plots existing at Alang. However, post liberalization in 1991, the ship breaking industry started growing rapidly following the increased domestic steel requirements LOGISTICS TIMES November 2012

REPORT

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particularly from the large number of rolling mills that were set up at the same time. The Gujarat Maritime Board (GMB) issued a large number of licenses for plots and as per estimates there are currently close to 160 plots for use as ship recycling facilities having a maximum capacity of about 4.58 million tonnes per year of steel scrap production (Source: GMB). The volume and number of ships dismantled has been on an increasing trend and as per industry sources, more than 400 ships were dismantled in FY 2011-12 in India.

KEY TRENDS & CREDIT IMPLICATIONS Demand for ship dismantling inversely correlated to freight rates; Challenging market conditions for the ship-owners has resulted in significant increase in tonnage dismantled.

The supply of old ships for recycling is inversely correlated to the freight rate of shipping vessels which in turn is a function of the global demand for seaborne transport and supply of new vessels. This is in contrast to the performance of the ship building industry which is directly correlated with the freight rates. Driven by increased demand for maritime transportation, the LOGISTICS TIMES November 2012

freight rates, as reflected by the Baltic Dry Index3 (BDI), reached a peak value of 11,793 in May 2008. In order to cater to this strong demand, even older ships were kept into operations resulting in higher average operating life and the orders for new ships also witnessed an increment.

The result was a drop in the number of vessels scrapped globally to around 500 to 800 ships per annum from a historical average of 1000 to 1100 ships per annum.

However, post 2008, following the deterioration in the global economic situation; the demand for maritime transportation witnessed a decline resulting in a crashing of freight rates and significant pressure on the financial performance of shipping companies. The companies which had acquired large tonnage during the boom period were the worst affected and being barely able to recover the operating cost of vessels preferred to go in for dismantling of fleet. Accordingly the ship breaking industry, confirming the inverse relationship with the freight rates, peaked in 2009 with about 1,300 ships being scrapped globally during that year. Although the BDI has improved moderately after the trough witnessed in 2009, freight rates still continue to be low due to vessel supply

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LOGISTICS TIMES November 2012

REPORT

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SUMMARY OPINION The global shipping downturn and weak macro-economic headwinds since 2009 have facilitated the growth of the ship breaking industry with there being an increase in the supply of ships to be scrapped. India, with its natural geographical advantage of a high inter-tidal gradient, favourable weather conditions and low manpower costs, has emerged as a leader in terms of both volume and number of ships broken. Further, the relatively less stringent regulations related to environment and human health hazards has also aided the growth of the ship breaking business in India.

With the outlook on international shipping freight rates being subdued over the near to medium term and large tonnage expected to come on stream post 2012, the ship breaking industry is expected to continue witnessing a steady supply of vessels for demolition over the medium term. Significant improvement in the global economic scenario resulting in a pick-up in freight rates could present a downside for the ship breaking industry.

However the pace of any such positive development is likely to be moderate and to that extent the supply risk appears to be limited over the near to medium term. At the same time, any further deterioration in the macroeconomic scenario and shipping freight rates could provide additional boost to the volume of ships available for dismantling.

The ship breaking industry is dominated by a few Asian countries namely India, Bangladesh, Pakistan and

LOGISTICS TIMES November 2012

China owing to certain natural, regulatory and cost advantages.

The competitive intensity in the business is high owing to low entry barriers with respect to capital and technical intensity.

In ICRAâ&#x20AC;&#x2122;s view some of the key factors which determine the relative competitiveness of ship breaking activity in various countries include the government policies/regulations with respect to environment and human health hazards of ship breaking, import duty structure, currency movements and local steel demand.

The Indian ship breakers have

witnessed a healthy growth in operating income in recent years due to increased availability of ships for dismantling.

Profitability margins in the business are inherently thin due to the low value additive and highly competitive nature of business and have come under further pressure in the recent past owing to steep rupee depreciation which has increased the cost of purchase of ships coupled with decline in realisations of the end product, i.e. steel melting scrap, due to slowdown in steel consuming sectors.

Regulatory risk remains high for the ship breaking business.

The Supreme Court of India has recently passed an order requiring stricter implementation of ship breaking norms in view of the environmental and health hazards. This as well as any other proposed regulation could entail event based risks for Indian ship breaking operatorsâ&#x20AC;&#x2122; and may affect their competitiveness against players in other competing countries.

In ICRAâ&#x20AC;&#x2122;s view any further depreciation in INR, decline in steel prices or increase in interest costs would be some of the key downside sensitivities affecting

the business and financial risk profile of the Indian ship breakers.

ICRA also notes that Indian ship breakers have a high reliance on non-fund based facilities like import letter of credit (LC) which are used for funding the purchase of ships. In comparison, their fund based facilities are rather limited which exposes them to a risk of liquidity crisis in case of significant delays in the ship breaking process which may take place at the approval level, before beaching or during demolition.

This coupled with the other risk factors as summarized above have resulted in a weak credit profile for ship breakers and ICRA expects this to continue going forward as well.

43

glut and accordingly ship breaking activity continues to be sustained at robust levels.

With depreciation in the INR as well as increased supply of vessels, the spread between ship purchase price for Indian and Chinese shipbreakers has narrowed significantly.

Further, the quayside4 method employed by Chinese ship breaking yards is considered safer in terms of environment impact.

Ship breaking yards should remain busy in the medium term as the shipping market fundamentals are unlikely to materially improve During the boom period of the shipping industry (CY 2007 and H1 CY 2008), a large number of orders for new vessels were placed and most of these are now lined up for delivery in 2012 and 2013.

However with a sharp correction in the freight market scenario the viability of shipping operations has been significantly impaired and the scenario is not expected to change significantly over the near to medium term. ICRA notes that currently more ships are available for dismantling annually than in the past 20 years and unless global market conditions change dramatically, a significant part of this fleet will go for scrapping. Thus the medium term demand for scrapping is not expected to fall to previous lows even if the global economy picks up.

Indiaâ&#x20AC;&#x2122;s leadership position threatened by increased activities of other Asian peers; China emerging as the major competitor Over the past two decades, India, China, Bangladesh, and Pakistan have emerged as the hubs for ship-breaking, accounting for over 90 per cent of the global ship-breaking activity. As mentioned previously, India, Bangladesh and Pakistan enjoy favorable geographical conditions which enables them to use the more cost effective beaching technique.

Further, India enjoys an edge amongst these countries owing to appropriate wind & tide conditions. In comparison, Gaddani in Pakistan and Chittagong in Bangladesh, the two main other ship breaking centres, are characterised by strong winds and strong tides respectively which make them more suitable for demolition of larger vessels; while in China, ship breaking activity is interrupted periodically during monsoon season due to the tycoons on the seacoast.

While Bangladesh led the global ship breaking activities between 2004 and 2008, the uncertainties due to government interventions have impacted the business in recent years. In the middle of 2009, the Supreme Court of Bangladesh issued a ban on all ship breaking activities for a year on account of environment and health hazards. Though the ban was lifted conditionally in March 2011 after the ship breaking industry took adequate steps to reduce the level of environmental

pollution and accidents, the ship breaking volumes in Bangladesh have remained low with India taking away a large part of the market and emerging as the alternative leading ship breaking destination. The uncertainty regarding the regulations for ship breaking still persists in Bangladesh as the final guidelines for the ship breakers remain to be fully implemented. Further, the import tax of 5 per cent imposed on ships imported for breaking has also contributed to loss of competitiveness for Bangladeshi ship breakers.

China, on the other hand, is emerging as a major ship breaking destination with increased focus of the government on the development of the ship breaking industry. The Chinese ship breaking volumes were constrained in the past mainly due to the premium that the breakers in the Indian subcontinent were able to pay to the ship owners. However, with depreciation in the INR as well as increased supply of vessels, the spread between ship purchase price for Indian and Chinese ship-breakers has narrowed significantly.

Further, the quayside4 method employed by Chinese ship breaking yards is considered safer in terms of environment impact and health hazard for workers vis-Ă -vis the beaching method which is employed by Indian subcontinent players and translates to lower regulatory risk for operations.

The ship breaking industry in Pakistan has grown at a significant pace in the last few years supported by the availability of labour at cheap cost, weak safety & environmental standards, boom in the construction sector and lack of iron ore resources. With the demand for iron and steel from scrapped ships5 continuing to gain traction, Pakistanâ&#x20AC;&#x2122;s ship breaking industry is expected to further grow in scale thus intensifying global competition amongst ship breakers.

(Courtesy: ICRA) LOGISTICS TIMES November 2012

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QUICK CHAT

❞ Improvement in costs and times A lead new association for air cargo business – Air Cargo Forum India (ACFI)came into existence early this month. The forum are important

❞

promises to emerge as an umbrella body bringing together all

stakeholders of the business on a single platform to contribute their bit to improve air cargo logistics. Intially, ACFI would be working to collectively put in place efficient processes at Delhi airport. The forum was unveiled on 10th October in Delhi and on the sidelines of the inaugural session, Ritwik Sinha engaged Pradeep Panicker, President of ACFI for this quick chat:

Lars Sorenson, CEO, DAMCO (South Asia), speaks on evolution of the company in past two years amidst challenging conditions, the broader strategy the company has adopted to consolidate its presence in India and its primary goal of breaking in top three LSP league by 2014: How would you explain the business environment in India in last two years? Since the beginning of this year, we have noticed slowdown in manufacturing. To what extent it has impacted you?

The pervasive nature of the global economic slowdown has impacted most of the growing economies of the world and the effects of the same were visbile in India as well. With India’s economy connected to other countries mainly because of the vast amount of trade

happening between them, a slowdown effect in a particular trading nation will surely have its impact on industries in India as well. Having said that, it should also be noted that, while the global economy struggles to get back on its feet, India on the other hand has increasingly cemented its image of being a trust worthy supplier of manufactured goods to notable players of the world in industries such as automotive, chemical, aviation, retail, apparel and footware, technology, industrial and others. Although the growth in India

has slowed down in the past period, the foundational pillars of India’s economy are still intact and these have helped the country through the rough tides of the global slowdown.

Speaking on the past few months performance, the export related growth has slowed but then the imports primarily driven by domestic demand continue to offer opportunities for logistics players like Damco. Despite a difficult environment this year, Damco has continued to grow its volume numbers in key products. As compared LOGISTICS TIMES November 2012

QUICK CHAT

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to last year we will end up growing our ocean volumes by more than 20% and air volumes by more than 80%.

This growth is coming from both our current customers with whom we enjoy long-term relationships and from new customers. It is always important to show improvements related to costs and lead times to customers in difficult market conditions and leveraging on our global network, we have managed to continue to improve on such key elements. We also believe that our market position has been strengthened over the year and that has led to a significant increase in new customer relationships which we highly appreciate.

How has your own India unit evolved in last couple of years?

In 2010, you were quoted in a report saying that DAMCO Indiaâ&#x20AC;&#x2122;s business would double in next few years. How would you explain your scale of operations today?

Despite the current challenging market conditions, we remain positive about our ability to deliver on our growth strategy in the years to come and thus grow faster than the market. In the last few years Damco in India has delivered as per the plans from 2010 and we expect that to continue. For us growth is not only in terms of the size and numbers but also equally important us is to grow our relationships with our customers and become their trusted partner of choice.

Having said that, our customer centric approach and focus has yielded us the growth metrics that we set out to achieve in 2010. If we look at ocean volumes then they have almost doubled till date from 2010 whereas our air volumes have increased by 75% and all of this has happened in tough market conditions and dwindling international trade. As far as revenue growth is concerned we have grown at around 30% YoY from 2010 which is testimony to the fact that our approach of growing our business by providing cost effective logistics services is something our customers can relate to.

LOGISTICS TIMES November 2012

We have consistently tried to keep pace with the demands of the market and have developed capabilities to provide seamless end to end logistics services to our clients. Guided by this principle we have made significant progress in enhancing our value based product offerings by expanding our door to door concept, warehousing and distribution, trucking and project logistics domain and are already providing such services to some of the large Indian companies in the industry. With an aim to be one of the top three logistics service provider in India by 2014, we are constantly building capabilities helping us to get close to the customers and design customised solutions around their needs and requirements. As far as our operations are concerned we now have a solid network of 25 offices across India enabling us to meet and cater to a variety of customers.

With an employee strength of 500 plus and a back office staff of 200, we have developed a robust organisation in the past few years capable of delivering large complex logistics solutions.

How do you envisage your business evolving here in the near run? There are indications to suggest that from Q3, we might witness a slow but gradual turnaround in manufacturing growth.

Yes, indeed as per the latest available figures the manufacturing growth is gradually climbing up although yet not reached levels where we can safely say that things have totally turned around.

We are closely looking at how the next few quarters pan out and how will our customers in manufacturing domain be impacted from the macro-economic developments. We have always defined our growth parameters by anchoring them with on customersâ&#x20AC;&#x2122; business and have strived to provide them with cost effective services thereby making their logistics operations efficient. Thus a revival in manufacturing growth holds positive significance for us as we have a big portfolio of customers who are into different types of manufacturing.

Meanwhile, our focus will continue to be on getting more close to our customers, understand their requirements from the lens of a 3PL expert and provide them with the logistics services for which they have partnered with us. In the short term we aim to maintain our growth momentum by constantly challenging ourselves to deliver better on each of our customer requirements.

Within Asia, China, of course, is your most important market and DAMCO has acquired a company recently there. Any such plans for India as well in the near to medium run?

Emerging markets will play a key role in Damcoâ&#x20AC;&#x2122;s future success. Our strategy includes a strong focus on high growth markets in Asia, Africa and Latin America. if you look at how our organization is built the majority of our people are employed in these high growth markets, which is also a plus from a cost perspective as it makes us quite competitive. Our position in places like Sub-Saharan Africa, India, Bangladesh, Vietnam, Cambodia, Indonesia and China are relatively speaking quite strong and we will be in a position to assist our customers when they grow in these key markets.

India continues to provide us with attractive opportunities to achieve new levels of growth for our products and services. We feel that there is lot of growth still waiting to happen with many major Indian businesses increasingly outsourcing their logistics activities to capable and globally experienced third party logistic service providers like us.

From a product perspective, we have significant growth plans to increase our air freight volumes, trucking, warehousing and distribution services besides maintaining our leading position in ocean freight and supply chain management services. As far as inorganic growth is concerned we are open if the opportunity is right and it brings additional value to our customers.

e inal 3 nd F ry 201 a r a G u r Feb 9th

MEDIA PARTNER

PRODUCT

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INDIAÊS NO.1 ENTRANCE AUTOMATIONS & LOADING BAY EQUIPMENT COMPANY GANDHI AUTOMATIONS OFFERS DOCK SHELTERS FROM CAMPISA: Cutting off the inside environment from the outside, it is not only useful to the human working conditions.

Avoiding useless wastes means also energy saving, ecologic safeguard, protection of the goods and greater working efficiency.

CAMPISA offers a complete range of Dock Shelters, for every kind of use and environment. Campisa Dock Shelters protect the internal heated environments from the outside cold conditions, the chilled ones from outside heat, and all from rain, wind, snow, dust.

Strong and of good quality , the different models are designed to resist to docking of the vehicles, reducing their impact in different ways : with retractable structures able to absorb the strokes(standard Retractable Dock Shelters, with polyurethane stuffing(cushion dock shelters); closing against the vehicle, as the patented INFLATABLE DOCK SHELTER can grant.

Retractable PVC Dock Shelter The Retractable PVC front panels Dock Shelter is the most popular and used. Thanks to its simplicity, low cost and efficiency, it grants for a constant pay back of the investment. Available for dock level installation, or for ground level installation for the protection of doors without dock. The front panels are made of high resistance black PVC reinforced with a double waving of polyester that works like a spring in order to seal the vehicles of different shapes.

Cushion Dock Shelters, ideal to maintain The „cold chain‰ Thanks to its high insulation factor, the cushion dock shelter is the

ideal solution for controlled temperatures.

The three cushions are made of elastic polyurethane f o a m , covered with PVC coated polyester , supporting the vehicle pressures and perfectly sealing the three sides, including the space between opened rear doors and sides of the vehicle box.

The two v e r t i c a l cushions have continuous overlapped anti-friction limpets allowing for the up and down heavy friction of the vehicle on its suspensions, during the loading. It is available with fixed or adjustable horizontal top cushion, adjustable to the different vehicle heights.

Inflatable Dock Shelters CAMPISA inflatable Dock Shelter is the best solution for insulating and improving the working environment. It can be rapidly inflated with a fan and it creates a perfect insulation between the vehicle and the loading bay, sheltering from cold, rain, wind and also dust and humidity.

The Dock Shelter is made of

polyester fabric PVC covered, a material resisting to hot temperatures and bad weather conditions.

The Pneumatic Dock Shelter is to be inflated only when the vehicle is in loading position. The fan can be switched off at the end of the operations and the cushion will rapidly retract to let the vehicle go.

Inflatable Shelters provide the most versatile seal available to service the widest variety of truck and trailer configurations.

Contrary to other types of Dock Shelter, the vehicle does not push towards the shelter. Instead the shelter is inflated around the docked vehicle providing complete seaming.

For further details, Contact: Gandhi Automations Pvt Ltd, 2nd Floor, Chawda Commercial Centre, Link Road, Malad(W) Mumbai 400064, Off : 022- 66720200/66720300(200 lines), Fax : 022-66720201, Email :- sales@geapl.co.in, Website : www.geapl.co.in LOGISTICS TIMES November 2012

EVENT REPORT

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India Maritime 2012

G K Vasan, Union Minister for Shipping inaugurated the India Maritime 2012 (Exhibition & Conference) on 17 October at Panaji, Goa, jointly organized by the Ministry of Shipping, Government of India and Federation of Indian Chambers of Commerce & Industry (FICCI). The Government of Goa was the ‘Host State’ for the event.

The theme of the event was ‘Building a global maritime sector’.

On the occasion, the Minister released the FICCI-E&Y knowledge paper on the Indian Maritime sector covering a large number of important areas.

Pradeep K Sinha, Secretary, Ministry of Shipping, Government of India was also present at the event and delivered keynote address.

A ‘Special Session on Investment Opportunities in Goa’ was also organized on 17 October 2012 at Panaji, Goa to showcase the opportunities available for private investors in the state of Goa. The special session was aimed to deliberate on strategies, which would enable the state to attract investment.

India Maritime Conference 2012 was held on 18 October at Hotel Taj Vivanta, Panaji, Goa to discuss some of the critical issues. The conference LOGISTICS TIMES November 2012

focused on procedural bottlenecks and other stumbling blocks in maritime infrastructure development and brainstorm strategy options towards building a globally competitive maritime sector.

Eminent speakers like N Muruganandam, Joint Secretary (Ports), Ministry of Shipping, Government of India; L Radhakrishnan, Chairman, Jawaharlal Nehru Port Trust; S Hajara, Chairman & Managing Director, Shipping Corporation of India; Rajiv Agarwal, Co-Chairman, FICCI National Committee on Infrastructure & MD & CEO, Essar Ports Ltd; Capt B V J K Sharma,

Joint Managing Director & CEO, JSW Infrastructure Limited; Dinesh Lal, Chairman, APM Terminals Mumbai (Gateway Terminals India Pvt Ltd); Cdre K Subramaniam, CMD, Cochin Shipyard Limited; D K Sinha, Deputy Director General, Directorate of Lighthouses and Lightships; Mr Anil Devli, CEO, Indian National Shipowners’ Association and other experts from the maritime sector addressed the conference. On an overall basis, the event played out to be an ideal platform for policy debate, knowledge sharing and showcasing the opportunities in Indian maritime sector.

EVENTS

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PHD hosts RCCI “We should be focused to move ahead from signing MoUs to expedite the practical implementation of the agreed upon issues putting bilateral trade on a fast track”, said Nadeem A. Rauf, leader of the delegation and Vice President, Rawalpindi Chamber of Commerce and Industry (RCCI) lamenting custom clearances and visa sanction as major hurdles in bilateral trade. Rauf was speaking during an interaction between visiting delegates of Rawalpindi Chamber of Commerce and Industry, Pakistan and industry members and associations of Punjab, Haryana, and Chandigarh region. The interactive session was organized by PHD Chamber of Commerce & Industry at PHD House early this month to boost bilateral trade between India and Pakistan and to enlighten the participants about the business & investment opportunities available in Pakistan in various sectors.

Besides Rauf, the visiting nine member delegation included Raja Amer Iqbal, Choudhry Iqbal Ahmed, Khurshid Barlas, Muhammad Aqil Obaid, Tanveer Afzal, Imran Hussain, Muhammad Arshad, and Syed Amir Hamza Gillani. The delegates showed keen interest in defence procurement, air-conditioning, refrigeration, heating, ventilation, pharma, food items, emergency relief services, auto parts, apparels, iron and steel products.

Operation Jagruti

As a part of their continued efforts towards creating awareness regarding AIDS and Road Safety among truck drivers, Tata group’s logistics arm, DIESL (Drive India Enterprise Solutions Limited) conducted another nationwide AIDS Awareness & Road Safety Campaign in September 2012. The initiative, Jagruti, plans to cover 6000 truck drivers across the country by December 2012. The first phase of this ambitious project was driven in North India, in partnership with the NGO - URIDA (Urbo Rural Integrated Development Association) where they reached to more than 2600 truck drivers in 20 days.

The activity in the North was carried out in locations like Punjab Bagh Transport Nagar, Sanjay Transport Nagar, Timarpur Transport Nagar and Azadpur Transport Nagar. 50 employees from DIESL’s North zonal office in Delhi and nearby warehouses volunteered as workshop facilitators and made this event a success.

LOGISTICS TIMES Novemberr 2012 2

EVENTS

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Dr. Logistics A large number of employees of PS Bedi group participated in Great Delhi Run 2012 which was held in New Delhi on 30th September.

The run had started from Jawahar Lal Nehru stadium. PSBediGroup has been participating in the event for last five years.

During the event, the company introduced its official mascot- Dr. Logistics, a reflection of its knowledge based capabilities in providing integrated logistics solutions. The conceptualization of Dr. Logistics arises out of an idea that it has solution or cure for every problem related to logistics. Dr. Logistics turned out to be quite popular among the crowd and stopped at places to encourage and cheer up the participants.

Annual Budget Meet

Bertling Logistics India held its annual budget meet in Mumbai between 17-19 October 2012. With more than 30 members of Bertling India present during the 3-day meet, the sessions reviewed the performance on the year gone by - on the achievements/shortcomings and areas of improvements in the future.

“The coming year presents a unique set of challenges to Bertling India – which is hit by a double whammy of global economic sluggishness and domestic policy paralysis. However this also offers an unique opportunity to grow and to rise above the industry with better services to our clients. I’m confident that together as a team we shall grow and make this our best year ever”, Shankar Chatterjee, MD ( India and South Asia), commented on the occasion.

LOGISTICS LOG OGISTICS TIMES November 2012

Celebrating 60 years of successful Indo-German trade relations

As a part of their continued efforts towards creating awareness regarding AIDS and Road Safety among truck drivers, Tata group’s logistics arm, DIESL (Drive India Enterprise Solutions Limited) conducted another nationwide AIDS Awareness & Road Safety Campaign in September 2012. The initiative, Jagruti, plans to cover 6000 truck drivers across the country by December 2012. The first phase of this ambitious project was driven in North India, in partnership with the NGO - URIDA (Urbo Rural Integrated Development Association) where they reached to more than 2600 truck drivers in 20 days.

The activity in the North was carried out in locations like Punjab Bagh Transport Nagar, Sanjay Transport Nagar, Timarpur Transport Nagar and Azadpur Transport Nagar. 50 employees from DIESL’s North zonal office in Delhi and nearby warehouses volunteered as workshop facilitators and made this event a success.

In the Deutsche Post DHL pavilion, interactive pillars and exhibits gave visitors an impression of DHL’s network in India and around the world: With a digital exhibit following a shipment in India, an informative short film about an Urban Freight Center and an interactive game with the DHL Smart Truck, the companypresented how it can minimizes its most significant impact on the environment – emissions of carbon dioxide (CO2). “Through its environmental protection program, GoGreen, the company is committed to improving the carbon efficiency of its own operations and those of the transportation subcontractors. These efforts will also help to improve the quality of life in megacities,” said Malcolm Monteiro, Senior Vice President & Area director – South Asia, DHL Express.

LOGISTICS TIMES November 2012

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It makes sense to own Assets!

Amit Kumar Head (Logistics) Indo Arya

LOGISTICS TIMES November 2012

I am opening my writing with a disclaimer – “Do not form an opinion unless you read the entire piece.” Folks, we have well understood and widely recognized that supply chain is increasingly becoming an area of core competency and key differentiator in the market place for all kind of companies and having agreed to it my question to you is – Do you want your core competencies or key differentiator or a part of it to be outsourced?

Objection, you may say and I completely buy it. After all, I am making a strategic statement that is against current market command. But do you really think so? If your answer is yes then as you go through my note, you will probably find how market commands are changing albeit slowly but surely and this may turn out to be a mega trend within two years of arrival of GST. Allow me to be more specific and let me single out warehousing space and transportation management for the purpose to put my argument in right perspective.

Take the case of warehousing. Lets say, you need a 50,000 Sq. ft. of warehouse and you have two options. Either you go in the market, do the basic checks and hire it at rate of Rs. 15/sq. ft. ( which is a very moderate rate) and you pay escalation of 8% per annum for the next 10 years. So at the end of 10 years your total payout is Rs.13.03 crore. The second option is: you build a 50,000 sq. ft. warehouse which will roughly cost you Rs 6.5 to 7.5 crore (Rs 1.5 crore/acre and Rs. 700 per sq ft construction cost for a modern warehouse or BTS) and since it is a part of real estate, price will always appreciate. Plus it will always seat in asset column of your balance sheet.

If the idea of assets owning has still not excited you, let me share second example which is related to transportation. Hollandbased CNH, the globally renowned firm in agriculture and construction sector, which was created after merger of New Holland Tractor and Case corporation has operation in more than 170 countries. It is believed to have achieved significant cost saving by managing its transportation themselves against current outsourcing model.

Certainly you cannot start making money from day one and CNH invested money to build IT and transportation capabilities.

But the end result is: CNH has dependable, confident transport wing and started making money from fifth year.

Let me dig little more deeper. I am by no means advocating to own up all assets in supply chain. It is your strategy, future plans and size of the company which should be primary factors in taking a call on asset ownership. We have seen some companies owning up only warehouse and outsourcing its operation and some companies investing in transportation and IT capabilities. It is you, who has to decide what are and to what extent you need to own assets and to identify degree of outsourcing for your firm.

But today outsourcing is the blind run for all kind and type of organization and it is here I could not disagree more with late Steve Jobs of Apple when he says – “ If you cannot compete then copy.” Merely monkeying in logistics is myopic, short term and frustrating and in the long term compounding to this frustration is the fact that we see poorly performing companies employing same set of strategies as industry examples rather than analyzing their own set of DNA and employing strategies which can provide value to their customers and stakeholders. Today is the time of hyper competition wherein you take your eye off from aim and you are off from the race. Your supply chain strategy has to be in right direction to keep you kicking, alive amd ahead.

Before I put curtain to it, let me reaffirm, I am no authority to direct or decide your inscourcing and outsourcing strategies. You are the most appropriate and responsible authority to decide it. Market has space for both types of businesses for instance Nike and IKEA outsource its production while Armani and Tiffany in source its production activity. So you have to chart out your own strategy taking a long term view of your business.

Let me also leave you with an open question on outsourcing - if you outsource your activity, it means there is someone who can manage your transportation and logistics better than you and can still make good money from you and hence my open question is: can you become that agile entity and bring that value to your organization by owning up a part of it? You Decide.

RNI No. DELENG/2011/39329

Regd No.: DL(E)-20/5380/2011-13