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LogisticsTimes www.logisticstimes.net
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NDIA'S MOST VALUED LOGISTICS MAGAZINE
November 2013
GUEST COLUMN VINEET AGARWAL
INTERVIEW DR CV ANANDA BOSE
COVER STORY
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Air Cargo: Message from Pink City
Logistics Times
CONTENTS
All about Transportation, Distribution & Infrastructure
Volume 4: Issue No.7 * November 2013 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 Saifi Rakesh Garg
Our Bureau Mumbai
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Bangalore
B Shekhar shekhar@logisticstimes.net N Raju
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raju@logisticstimes.net Sudhir Kumar
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sudhir@logisticstimes.net
Editorial Advisory Board Paul Lim Founder & President, Supply Chain Asia Pawanexh Kohli Principal Advisor, Cross Tree 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
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COVERCargo: FEATURE Air In the Offing: Message 24x7 Helpline for Reefer from Vehicles Pink City Edit Note
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News Briefs
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Report
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16 GUEST COLUMN Vineet Agarwal
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REPORT
Warehousing Rentals
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INTERVIEW DR. C V Ananda Bose
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EVENT Campaign Winner
MEDIA PARTNER
EDIT NOTE
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Quest for wings The present edition in your hands is our 43rd monthly presentation and this is the first time that a cover feature has been extracted out of an event. But as has been the wont of the annual conferences of Air Cargo Agents Association of India (ACAAI) in the past, their 40th convention held in Jaipur last month too presented a micro picture of the air freight transportation sector. Clearly, an irresistible opportunity to converse with so many stakeholders under one roof and then present our own interpretation. Based on my own analysis, if I have to define the underlying sentiment in the air cargo fraternity today, then the most apt term that comes to my mind is – quest for wings. Though it is not precisely the case of derailment, but the drop in demand growth for nearly two years now is a serious immediate challenge. But this is a small quotient of the tale of woes. The real challenges clearly emanate more from the procedural and structural quarters. Exceptions notwithstanding, the industry is plagued by troubles galore on an overall basis. No considerable development in adoption of improved processes, demand for Air Freight Stations (AFS) largely remaining unheard, good intentioned provisions like 24x7 export clearance not meeting with desired results, absence of integrated IT platforms, stakeholders not acting in tandem and designated government agencies not acting fast, connectivity issue being a major constraint at emerging business hubs, no significant expansion of freighter operatoins in the country, India missing the opportunity to at least one of its airports as international cargo hub, etc. The list is simply too long. And what does all of this translate into hard statistic? A country which is inching close to $2 trillion mark in terms of worth of its GDP (recent slowdown notwithstanding) today has a cumulative air cargo base of 2.5 odd million tonnes. Some of the top cargo airports in the world have a better throughput then the volume generated at all Indian airports put together. “ The way our economy has grown, we could ideally have been in the range of 6-7 million tonnes annually by now,� a senior industry representative complained on the sidelines of the convention while explaining how Dubai has grown in last ten years. But does it mean that the air cargo business is slipping into a disaster zone? That may probably amount to jumping the guns. Like other businesses in India, air cargo sector too has its share of challenges which it has to inevitably grapple. Serious stakeholders seem to understand it too well and therefore are not holding themselves back to prepare for a date in not so distant future when this business will really have the support of the wings it is desperately searching for now. Some airports are making major additions to their cargo facility and the government agencies are promising right operational provisions going ahead. In terms of sectoral push, the emergence of India as a new global hub for pharma products clearly augurs well for the air cargo business. Waiting for your response Ritwik Sinha ritwik@logisticstimes.net
LOGISTICS TIMES August 2011
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India not gaining from FTAs In the aftermath of signing 15 regional and bilateral free trade agreements (FTAs) while India’s imports from these countries and regions increased significantly exports to these partner countries either stagnated or registered minimal growth, according to a justconcluded study undertaken by apex industry body ASSOCHAM. “India has signed as many as 15 FTAs including preferential trade pacts, while 19 are under negotiations and eight are in the pipeline but India is still grappling with slow growth of exports and sluggish foreign direct investment (FDI) flows from its FTA partners,” said D.S. Rawat, secretary general of The Associated Chambers of Commerce and Industry of India (ASSOCHAM) while recently releasing a study titled ‘Free Trade
salvage “surplus” capacities through exports and “exploiting” concessional duty rates under trade agreements. Besides, it should be seen that trade agreements do not become a means to fill the country’s short-term supply-deficit through exports made at concessional duty rates as it adds an anti-competitive element visà-vis imports from other countries. Therefore, it needs to be complemented with “specific & time-bound commitment for inflow of Investment”, otherwise the purpose of a Trade Agreement gets defeated, highlighted the ASSOCHAM study. Considering that India’s negotiations for comprehensive FTA with European Union (EU) is at an advance stage,ASSOCHAM has suggested the Ministry of
Agreements: Boon or Bane of India?’ “Out of the seven major trading partners viz., ASEAN (Association of South-East Asian Nations), Indonesia, Japan, Malaysia, Singapore, South Korea and Sri Lanka with whom India has operationalised FTAs, it has trade surplus with only Sri Lanka and Singapore,” highlighted the study prepared by the ASSOCHAM Economic Research Bureau (AERB). Even on the investment front, these free trade pacts have not given any extra edge to India so far as during April 2000-June 2013, India received FDI worth $1.25 billion (bn) and $14.75 bn from South Korea and Japan respectively and this year during April-June, India attracted only $224 million worth FDI from Japan while the figure was $2.23 bn in 2012-13 and $2.97 bn in 2011-12. Considering the negative impact of these agreements on India’s manufacturing sector, ASSOCHAM has suggested that trade agreements should be ‘selfregulatory’ to evade scope of ‘safeguard measures’ and the advanced partners must not be allowed to
Commerce and Industry to from a special team of experts to negotiate FTAs, besides the government should organize FTA outreach programmes to create awareness amid various stakeholders. As the feasibility/joint studies conducted by the government before commencing talks for any FTA form the basis of negotiations, ASSOCHAM has also suggested for broadening the base of such studies and inviting participation from various stakeholders like academicians, representatives of the marginal, small and medium enterprises (MSMEs) and state government officials. Besides, Indian embassies in these countries should also be engaged to gather sensitive information while conducting such studies. So far, India has concluded 10 Free Trade Agreements, 5 limited scope Preferential Trade Agreements and is in the process of negotiating or expanding 17 more agreements. Besides, at least 9 more proposals for FTAs are under consideration and when completed, these agreements would cover over 100 countries spread across 5 continents.
LOGISTICS TIMES November 2013
Challenging time for pharma industry
The Indian pharmaceutical market (IPM) is currently valued at Rs. 72,069 crore as against Rs. 65,654 crore in 2012. Though the market value has seen an increase, the sector overall has experienced a slowdown with its growth going down to 9.8% from 16.6% in 2012. This slowdown can be attributed to the new drug pricing policy and the regulatory interventions over the last year, according to the CII–PwC report, Changing Landscape of Indian Pharma Industry’ which was released recently.
The industry is witnessing additional challenges like delays in clinical trial approvals, uncertainties over the FDI policy, a uniform code for sales and marketing practices and compulsory licensing. The slowdown is also evident from the number of new product launches, which has gone down from approximately 1900 in year 2010 to 1700 in year 2012. The contribution of chronic therapies to the IPM has gone up from 27% in 2010 to 30% in 2013. Chronic therapies (cardio, gastro, CNS and anti-diabetic) have outperformed the market for the past four years and are growing at a rate of 14%, faster than the acute therapies (anti-infectives, respiratory, pain and gynaec) which grew at 9.6%. This essentially translated in an overall slowdown in 2013. According to the report, India is perceived as an attractive destination for clinical trials but has been marred with genuine concerns. The industry is also facing stricter regulations on manufacturing and quality practices in the domestic as well as international markets. Indian companies will have to raise their compliance to US FDA regulations as they drive their major share of exports from the US market.
Adani Ports and SEZ Income rose 81% Adani Ports & SEZ Ltd, part of Adani Group, recently announced the financial results for the second quarter and half year ended September 30, 2013. Consolidated total income for the half year increased by 77% to Rs 2,975 crore compared to Rs 1,683 crore in the same period last year. The consolidated EBIDTA increased by 65% to Rs 1,956 crore compared to Rs 1,189 crore in the corresponding quarter last year. The consolidated PAT increased by 38% to Rs.759 crore for half year as compared to Rs 552 crore. The consolidated cargo handled by the company was 54.75 MMT in H1 FY14, an increase of 34%, over same period last year. Consolidated total income for the quarter increased by 81% to Rs 1,407 crore compared to Rs 778 crore in the same period last year. The consolidated EBIDTA increased by 93% to Rs 1,013 crore and the consolidated PAT for the quarter increased by 24% to Rs 342 crore. The consolidated cargo handled by the company was 28.08 MMT in Q2 FY14, an increase of 30%. Adani ports handled 48.21 MMT cargo with 27% growth
in H1FY14 compared to growth of 2% for cargo at all other ports. In case of containers handled 1.04 million TEUs with 22% growth as compared to de-growth by 5% for container volume at all other ports, making it the largest commercial port in India. The company handled 24.62 MMT cargo with 21% growth in Q2FY14 compared to growth of 6% for at all other ports. In case of containers handled 0.56 million TEUs with 33% growth as compared to de-growth by 5% for at all other ports. The port at Dahej continues to perform very well, handling a cargo of 2.48 MMT in Q2FY14, a rise of 112% as compared to 1.17 MMT in corresponding quarter previous year. For H1FY14 cargo handled was 4.70 MMT with growth of 59% compared to corresponding period previous year.The port at Hazira handled a cargo of 0.98 MMT in Q2FY14 and 1.84 MMT in H1FY14, continuing its journey to be a large diversified port, adding to the overall Adani Ports synergy. LOGISTICS TIMES November 2013
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Essar Ports profit up 33%
Essar Ports part of the Essar Group, recently announced its unaudited results for the quarter ended September 2013. According to a company release, Essar Ports’ net profit for Q2 FY14 increased by 21% to Rs. 97.5 crore from Rs. 80.5 crore in Q2 FY13. For H1 FY14, the net profit increased by 33% to Rs 198.9 crore from Rs 149.1 crore in H1 FY13. EBITDA for Q2 FY14 increased by 13% to Rs 324.2 crore from Rs 287.1 crore in Q2 FY13. For H1 FY14, EBITDA increased by 17% to Rs 652.1 crore from Rs 558.4 crore. The company has also reported handling
13.01 million tonnes of cargo during Q2 FY14 as against 12.70 million tonnes handled during Q2 FY13. Speaking on the key highlights for the quarter, Rajiv Agarwal, Managing Director, Essar Ports said: “Our performance is consistent with the growth targets we have set for ourselves and we are confident of delivering good performance in the coming quarters. We will further strengthen our performance once we execute the projects in hand and third party terminals at Paradip and Vizag.” During H1 FY 14, the company has seen a modest increase in cargo handling - 27.08 million tonnes as against 25.36 million tonnes in the corresponding period last year. Essar Ports is one of the largest port companies in India, with a current capacity of 104 MMTPA. The capacity is being expanded to 181 MMTPA over the next few years.
Hybridization Trends in Off-highway Commercial Vehicles Stricter regulations, the increasing importance of fuel economy, and a greater focus on corporate social responsibility by original equipment manufacturers (OEMs) is lending momentum to the global hybrid powertrain market for off-highway commercial vehicles. In fact, hybridization is emerging as a key optimal-cost solution for emission compliance, as well as noise reduction. New analysis from Frost & Sullivan Strategic Outlook of Global Hybridization Trends in Select Offhighway Commercial Vehicle Market, finds that hybrid powertrains are expected to account for 3 percent – or 90,258 units – of the total global off-highway powertrain production in 2018. Asia will emerge as the largest regional manufacturer and consumer, accounting for nearly half the total market. The forklift segment will be the primary beneficiary of hybrid powertrains, accounting for 47.7 percent of the market’s share. Tighter emission regulations across the globe have created a need to use hybrid powertrains in the offhighway commercial vehicle sector. Advances in complimentary technologies, such as power electronics and insulated gate bipolar transistors (IGBTs), will LOGISTICS TIMES November 2013
bring down the cost of hybridization in the long term and boost sale volumes. The emergence of suitable duty cycles – including frequent start/stop and power reversal features – is another key factor supporting the hybridization trend in off-highway vehicles. “Hybridization in the off-highway segment is at its initial phase, but will strengthen in the long term,” said Frost & Sullivan Automotive and Transportation Off-highway Commercial Vehicle Research Analyst. “Stricter legislations expected post 2020 will help present a stronger case for hybridization to achieve fuel efficiency, downsizing, and emission reduction goals.”
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Interim dividend of Rs 38 Million
APM Terminals operated Gujarat Pipavav Port (APM Terminals Pipavav), one of Western India’s fastest growing gateway ports, received an interim dividend of Rs. 38 million (5%) from Pipavav Railway Corporation (PRCL) on the 23rd of October at Mumbai– a historic first for Indian Railway’s flagship infrastructure company under Public Private Partnership (PPP). PRCL is a joint venture company between Indian
Railways and Gujarat Pipavav Port under the PPP model to undertake the, construction, operation and maintenance of the Surendranagar- Gujarat Pipavav Port, rail connectivity project - spanning 271Kms. The dividend cheque for the current financial year was handed over to Dinesh Lal – Director of APM Terminals Pipavav by Pankaj Malviya – Managing Director of PRCL. Earlier in the week PRCL also presented the Railway Minister Mallikarjun Kharge with an interim dividend of Rs. 49 million in Delhi. Steadily increasing traffic at APM Terminals Pipavav, which forms the bulk of PRCL’s traffic, has enabled the company to roll-out its maiden dividend to the stakeholders. PRCL and APM Terminals Pipavav who jointly pioneered double stack container movement in India, upgraded to double stack high cube (9’6”) capabilities in July this year which further enhanced the value proposition at APM Terminals Pipavav, which has had a direct impact on the increase in volumes to and from the port.
DP world to assist KTZ Global marine terminal operator DP World and Kazakhstan Temir Zholy (KTZ), Kazakhstan’s national railway company, has signed an agreement that will see DP World provide management advisory services for the development of the Khorgos Special Economic Zone (SEZ) and Inland Container Depot (ICD). DP World will also provide similar services under a separate contract at the Port of Aktau, Kazakhstan’s main cargo and bulk terminal on the Caspian Sea. The signing was held in Astana on the sidelines of the second international transport and logistics business forum “Kazakhstan - New Silk Way”, with HE Sultan Ahmed Bin Sulayem, Chairman, DP World, and HE Askar Mamin, President, KTZ officiating. The two agreements support Kazakhstan’s plans to transform and modernise its transport and logistics infrastructure to develop its strategic position as part of a New Silk Way rail-land bridge between the manufacturing hubs of China, and consumer markets in Central Asia and Europe. Strategically located on the border with China, the Khorgos SEZ aims to become Kazakhstan’s leading LOGISTICS TIMES November 2013
manufacturing and logistics hub, providing tangible benefits to companies operating within the zone, as well as serving east and west-bound cargo. At the Port of Aktau, DP World will provide similar services including advice on transforming the port into the leading gateway destination for cargo on the Caspian Sea. Speaking on the agreement, HE Sultan Ahmed Bin Sulayem, Chairman, DP World, said: “Khorgos is a major emerging land-based trade hub between Europe and Asia and we are delighted to support Kazakhstan’s vision of establishing a transportation and logistics bridge, working with KTZ as they develop Khorgos and Aktau. We can add real value to the projects with our international experience and expertise in managing both inland container depots and container terminals, ensuring outstanding customer service as demanded in today’s global markets.” Aktau and Khorgos, located on the western and eastern frontiers of Kazakhstan respectively, strategically underpin the country’s economic plans.
New Asia Pacific Center of Logistics Excellence
CEVA Logistics has announced the opening of its first Center of Logistics Excellence in Asia Pacific. situated in Changi, Singapore. This is CEVA’s second Center following the inaugural launch of the concept in Jacksonville, Florida. The Centers demonstrate ‘real world’ logistics innovation through supply chain optimization and enhanced visibility, integrated services and technology solutions to power supply chain efficiency. The Asia Pacific Center of Logistics Excellence will provide insights into CEVA’s unique offerings and solutions
for customers with business in Asia. This is part of an overall strategic investment that CEVA is committing to its fastest growing region. CEVA aims to build a strong knowledge center in Asia, develop supply chain talents, offer best in class technologies and supply chain solutions to strengthen its presence in the region. Asia’s consumers will make up more than half of the world’s middle class by 2020*. This is a significant growth trend that shows increasing urbanization, rising disposal income and in turn, the increased consumption power across Asian countries. Supply chain and logistics companies will help enable this growth, which is why CEVA is increasing its commitment to Asia Pacific through the opening of this Center of Logistics Excellence in Singapore. Peter Dew, Asia Pacific President for CEVA, said: “Singapore is an ideal choice for our Center of Logistics Excellence in Asia as many of our customers’ regional operations are also based out of Singapore. We are excited to establish a Center here, as a knowledge and innovation hub for supply chain excellence and to better support our customers’ growth in this region. Local talent and knowledge coupled with global expertise will position CEVA well in this region to deliver solutions that meet the 21st century supply chain challenges and leverage the significant growth potential of rising intra regional trade.”
Schiphol maintains cargo growth The growth in cargo throughput at Amsterdam Airport Schiphol continued throughout the third quarter, which was up 2.6% on 2012 at 383,780 tonnes. The quarter marked a return to the growth shown in the first quarter. A strong September, up 3.9% at 130,631 tonnes, brought the total for the first nine months of 2013 to 1,120,389 tonnes – a growth of 1.6% on 2012. Asia continued in the top slot, with N. America retaining second position. Schiphol tonnages have shown growth in 5 out of 9 months this year. Freighter movements continued to show a slight decline, down 0.2% to 1,334 in September, and 1.4% below 2012, at 11,447 for the year to date. Says Schiphol’s Senior VP Cargo, Enno Osinga: “These are pleasing figures. The general trend is positive. This
is a strong performance for a major European gateway which reflects the determined efforts of the airlines, our own team and the logistics community to continue optimizing service standards and driving growth at Amsterdam Airport Schiphol.” LOGISTICS TIMES November 2013
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Responding to festive demand
Vineet Agarwal JMD, TCI
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Festive season is when retailers do most of their annual sales, making it a busy period for retailers who anticipate healthy consumer demand during the period. Given the urgency attached to the spike in consumer demand during festive season, each organization, large and small plan, prepare, implement and oversee their supply chain strategies to handle peak demand. Retailers also renovate stores and prepare their staff to effectively manage spike and troughs in consumer demand cycles. Planning and managing sales becomes a full time activity for retailers during this period. Supply chain has assumed critical role in modern day retail due to benefits it offers in effectively managing fluctuating consumer demand. Its’ role has become even more critical due to intense competition and growth of the e-retailers. To address this, retailers are now increasingly demanding Supply Chain Solutions services apart from general logistics services to effectively plan and execute their festive season supply chain. This has led to the logistics sector witnessing a spike of 10-15% in volume. The Logistics sector is fully geared to cater to the increased demand for logistics and supply chain services. It is playing the role of key enabler for retail sectors to meet increased customer demand through assets like trucks, temperaturecontrolled trailers, warehouses, and distribution centers. Some logistics firms are also sourcing vehicles from the market to meet sudden volume increase and the sector may witness freight rate hike by 5% owing to higher demand. The freight rates
typically see an increase of around 4-5% during this time due to the increase in demand. Another major problem faced during this time is of driver shortage which can lead to stalling of vehicle. Diesel and input prices have also been frequently increasing and these too impact the overall pricing. The increase in diesel prices has impacted freight rates by 5-6% in the last one year. Seasonal and local movements (like sugarcane at this time) can also lead to shortage of vehicles. 3PL service providers like TCI, are known for their ability to provide quick and reliable delivery, and have proven expertise in careful coordination and transportation management. TCI which manages a fleet of 7000 trucks is well placed to address sudden uptick in demand during the festive season and is expecting 10-12% business growth in the cargo segment . The company is playing a significant role in managing stocks apart from helping retailers in efficient inventory management thus reducing wastage of goods through reverse logistics services (i.e. returnable packing on the inbound side and warrant returns for outbound to retailers). Due to sustained investment in IT software, the company has been able to anticipate customer need ahead of time. It is providing customized solutions to retailers and has emerged as their logistics partners. Logistics service providers are also sourcing vehicles from the market to meet sudden increase in demand for logistics services for goods like consumer durables, electrical appliances,
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apparels, foot-wears, garments, gift items, mobile handsets, pooja material, dry fruits, corporate gifts, furniture & home décor etc. This surge in demand is in line with the findings of Assocham survey which predicts 40% increase in demand for chocolates and around 25-30% increase in demand for dry fruits as a gift item. This demand rise is being witnessed across India especially from North and West to all other parts of the country. Identifying the latent consumer need for the logistics services during the festive season, logistics firms are increasingly offering their services to end customers directly. These services are not only innovative in nature but also signifies shift in trend in the logistics industry which is from Business to Business to Business to Consumer. One such example is the ‘Anmol Rakhi’ service initiated few years ago by TCI XPS, the express delivery service division of TCI. This service has been a huge hit among customers due to the convenience it provides to customers to send a Rakhi to loved ones across 13,000 locations in India and 200 locations abroad within 24-72 hours with a click of a mouse button or just by calling a toll free number. Services like international air express service to deliver traditional India sweets overseas during Diwali along with gifts are being offered / ` 25 t Sq f ds ar Onw
Key Trends: Logistics sector is witnessing a spike of 10-15% in volume during this festive season. Major movement of cargo is from North and West to all other parts of India. Assocham survey predicts 40% increase in demand for chocolates and around 25-30% increase in demand for dry fruits as a gift item during the festive season. by other logistics players. It is basically targeting at the growing number of Indian families who have relatives and friends living abroad, as well as corporates who wish to send their associates abroad a traditional Diwali gift pack. The service providers take care of everything from procuring the fresh or canned mithai, providing robust packaging, managing all relevant documentation and custom clearances and fast and safe shipment. Logistics players, besides, expanding their service network and offering range of services to accommodate rising demand are undertaking sustained branding exercise. This is to increase brand visibility and build credibility. Firms are also offering special discounts of up to 10% on select service offerings as a run up to Diwali to increase demand.
With the slowdown in the economy, the prominence of the festive season has increased further. Banks extend loans at cheaper rates to boost sales of white goods and automobiles further. Higher disposable income due to good monsoon is also likely to boost consumption further especially in the hinterland thus increasing the demand for the logistics services. Retailers stocking products at their warehouses or are using warehouses of logistics firms in anticipation of higher demand. Demand for logistics services is already at a high during this festive season and with the evolution of retail landscape this demand is going to grow on a sustained basis. And the sector, on the back of scale, investment in technology, manpower training and state-of-the-art assets is all set to play its destined role in the retail sector growth in India.
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We aim to double our revenue
Central Warehousing Corporation (CWC) is a PSU accorded with Mini-Ratna status which has been in existence for over 50 years now. The key mandate of the corporation is to provide logistics support to the agricultural sector. In an exclusive conversation with Ritwik Sinha, the recently appointed chairman of the corporation Dr. C V Ananda Bose explains the challenges which the company is grappling with while balancing its mandated social role and the rules of business pragmatism. Edited Excerpts: Central Warehousing Corporation (CWC) has over five decades of history and it is a major player when we talk of foodgrain storagea storage capacity of over 10 million tonnes and over 460 warehouses spread all across the country. And then there have been moves to LOGISTICS TIMES November 2013
develop strength in providing warehousing facilities for nonfood commodities as well. At the same time, if we look at past 15-20 years many private players have also emerged in the warehousing space catering mainly to the demand generated by a rise in consumerism. My first question
to you is: how do you assess the positioning of CWC in the market today? CWC is clearly one of the key players in the field of warehousing in the country. In terms of storage capacity, it is next only to Food Corporation of India (FCI). In fact, warehousing has received an impetus in the country in the context
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of National Food Security Act. It is no secret to anybody that the spurt in agricultural production in the country does not have the support of adequate storage capacity. It is true of warehouses in general and cold storages in particular. In fact, whenever there is the case of surplus in agricultural production, we come across crisis of storage. And open air storage invites a lot of criticism.
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No gain saying that we have to find a way out of it. And this is a momentous task which government agencies alone can’t do. So this is an area where I find somekind of handholding is necessary between government and non-government entities. Fortunately for this country, private players are also coming up in the warehousing sector in a big way. In the agricultural sector, the
cost of storage is equally important as the availability of storage. So we have to lay equal emphasis on the cost reduction of storage and increase the capacity simultaneously in this country. In this context, CWC has to play a very important role along with emerging players in the warehousing sector. As per an estimate, presently
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55 percent of your storage capacity is utilized for food items. Would you like to see reduction in this ratio? There is no conscious plan as such. By and large, the present ratio will probably remain because our main focus is on food items though there could be slight variation every now and then depending upon the demand situation in the market. How do you assess Food Security Bill? Is it a good news for you or will it put additional pressure on CWC? Certainly, it is going to put additional
said we are going to respond to the emerging demand in the market in every sector. And alongwith diversification, we would like to lay emphasis on modernization and introduction of new technology in food storage. I know your inning at the helm of CWC has just commenced. But tell me, what are those near run milestones which CWC would like to change? When I say near run, I am broadly asking for next two years’ scenario. We have a clear roadmap and in the
We have a clear roadmap and in the next two years, our intention is to double our turnover. Presently, it is over Rs 1400 crore. pressure but there are two views on that. Firstly, the new problems thrown up in the process of implementation of this bill have to be seen. But there is another side to it also. When the food distribution picks up, we hope the need to store foodgrains over a longer period of time may not be there. So it will be balanced out somewhere. But in our long term perspective, we find that the National Food Security Act and its implementation will throw more requirements for storage in this country. Will it force you to expedite your expansion plans in someway? That is one positive factor as the bill would give a fillip to our expansion programme. But as I LOGISTICS TIMES November 2013
next two years, our intention is to double our turnover. Presently, it is over Rs 1400 crore. So when we say we want to double our revenue, it means that our activities in different sectors that we have embarked upon have also to double. In some cases, in fact, it has to go beyond that. And to achieve this, what kind of expansion you will have to undertake in midtier infrastructure assets? For instance, you have over 460 warehouses with a storage capacity of over 10 million tonnes. What kind of expansion you would look here? I wouldn’t specify any particular number. But given our broader objective, we will have to necessarily increase the number of warehouses
with us – either directly owned or taken on lease. This will also take into the account certain variables in the field. For instance, we have yet to make an assessment of the impact made by the private players in different pockets of the country. Our primary purpose is to see that adequate storage space is created in the country wherever it is required. As a strategic move, we will now be focusing on those states and regions of the country which are currently under-served as far as warehousing facilities are concerned. For example, Bihar and Jharkhand where we find there is a tremendous gap in the demand and supply of storage space. So we will take these two states and certain areas in some other states which are inadequately served by CWC and other warehousing service providers. Its going to be a selective approach for expansion. Do you really face any competition at all given your decades long existence and your expertise in foodgrains where private players hardly have any interest? We have a national role to play. But at the same time, we also have a business mandate. We are a public sector organization which has to work without budgetary support. So we would like to marry both these priorities. We have to improve our business without sacrificing the mandate which is given by the nation. So all our approach would be tailored towards this particular manadate. We do not look at private players as competitors. We find that the private players are there to supplement the efforts of CWC. Some recent reports suggest that you are quite keen to pick up strength in the cold chain sector. What precisely is the plan there? The cold chain facilities in our
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country are grossly inadequate. Just to cite an example, lets take the case of horticulture sector. Statistics may differ but 40-50 percent of the total horticulture produce in this country are wasted. This probably amounts to Rs 50,000 crore every year. Naturally we have to provision for facility enhancement in the cold chain business. Having said that, the priority of CWC is not cold chain. The development and maintenance of cold chain would be part of our diversification programme. Last year, VRS scheme was announced by CWC for a particular section of employees. Are you trying to become a lean organization? Any concept of effective professional management will lay emphasis on lean structure. In keeping with the needs of the time, CWC will focus on going lean. But at the same time, we have a certain commitment with our employees. So rest assured, we are not going to have a fundamentalist approach in becoming lean. There again we will aim to strike a balance – the leaning exercise in CWC will always be undertaken with a human face. You emphatically underlined that you have a national role to play and we know that you have a fair degree of presence in the hinterland. In that context, how would you explain your engagement with the rural India and the farmers community in particular? CWC’s actual focus is on rural India. And it stems from our primary concern relating with the foodgrains and agricultural produce. As we know it generally happens that in rural India during the harvesting period, the farmers are often forced to indulge in distress sale of their produce mainly because there aren’t enough storage space close to their LOGISTICS TIMES November 2013
location. And that is an area where CWC is trying to provide support to the farmers. In fact, in the rural pockets where we are strongly positioned, we are providing that essential link between the producing farmers and the consumer market. This is a very important role for us and expanding it further is our core agenda. Is it true that your role in the rural India economy has become more prominent ever since that Negotiable
than others in next two-three years? We do not envisage a quantum jump but a phased progression in te verticals we are operating. And a logical progression to achieve the targets whould entail initiating modernization, application of technology and diversification in a big way. They would be based on sound business principles and in alignment with our national mandate. And this national mandate comes into the sharp focus in the wake of implementation of the
Our primary purpose is to see that adequate storage space is created in the country wherever it is required. As a strategic move, we will now be focusing on those states and regions of the country which are currently under-served Warehousing Receipt (NWR) scheme has been allowed? Yes. NWR is something which has come as an answer to the basic post-harvest need of the farmer. This financial instrument indeed helps the farmer in every way. And CWC is a major player in providing the facilities for that and making this operational. One final point. You explained your core operational strength and also other verticals which are coming up. Do you envisage any particular vertical emerging more formidably
National Food Security Act. So I would say that implementation of the act and the issues which will be thrown up in the process will determine the future course of action. But apart from that, we may also indulge in some storage management consultancy business like many other PSUs in their respective domains. We are seriously considering this proposition. There is also a need of a specialized agency for financing in this sector. The focus on financing of the storage space is yet to emerge strongly. But this clearly is an area where more attention is required.
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LOGISTICS TIMES November 2013
COVER STORY
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Air Cargo: Message from Pink City
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Cyclical blip apart, air cargo fraternity emphasized the pressing structural bottlenecks at ACAAI annual convention in Jaipur last month. The challenges are manifoldinfrastructure, processes, lack of agility in some quarters, stakeholders not being in alignment, etc – which on a cumulative basis have ensured that air cargo business does not get equipped with wings which could make it fly high. The central message, of course, is for better bonding among all stakeholders. Ritwik Sinha reports‌ LOGISTICS TIMES November 2013
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A
well-stretched out convention running into more than half a dozen business session over two days does have the tendency to play out extreme sentiments. And this is probably what precisely unfolded at Pink City’s Marriott Hotel last month, the stage for Air Cargo Agents Association of India (ACAAI) 40th annual convention. On one hand while some speakers emphasized on the huge potential theory, a leading participant while making his presentation from the
in between. No doubt, the business is not in its pink of health with a lean demand spell prolonging beyond the expected threshold. According to government statistics, freight traffic handled by Indian airports fell down by 3.9 percent from 2.279 million tonnes in 201112 to 2.191 million tonnes during 2012-13 (refer to the graph). And performance in the current fiscal so far also does not have much to enthuse the industry. But then this cyclical blip is just a part of the story. The larger part comprises a long litany of woes ranging from lack
pushing the business to move full throttle. Not to forget the government bit though nobody would say it openly. Agency like Air Cargo Logistics Promotion Board supervised by Ministry of Civil Aviation is broadly believed to have contributed nothing significant so far to bring in the desired changes ever since its constitution. At the end of the day, the larger sense which emerged out of ACAAI convention could be deciphered as- the industry is moving at a slow pace and needs more attention and a fresh push with all stakeholders
dias chose to equate the condition of the business with the projection of a three-wheeler vehicle laden with a volume of goods fit enough for a truck. The import of the message: its an over-burdened business forced to move at snail’s pace. Sitting in the audience and trying to objectively draw a sense, you would have wondered – does it really reflect the reality? The truth probably lies somewhere
of required infrastructure thrust, absence of integrated IT platform, good-intentioned provisions like 24x7 customs clearance of exports cargo not yielding desired results, imposition of cumbersome taxation procedure, etc. And then in a more macro sense, there are issues like the country having missed the bus to develop an international air cargo hub and poor connectivity to emerging locations not exactly
being in conjunction.
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The capacity issue
An economy which is inching closer to $2 trillion mark in terms of cumulative worth of GDP (fumbling in growth rates in last couple of years nothwithstanding) has a cargo base in the range of 2.5 odd million tonnes (both international and domestic) much lower than what is handled at the
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top notch airports in the world (see the comparison chart). Now is it because of lack of capacity? This does not seem to be the thinking within the government circle after a spate of greenfield and brownfield developments in last ten years in the country. “ I don’t think physical infrastructure is a constraint. There are airports where capacity utilization is low. May be the facilities are not that modern and we still need to bring in better processes,” opined S Machendranathan, Special Secretary/Adviser, Ministry of Civil Aviation. But S L Sharma, the newly appointed president of ACAAI, does not totally subscribe to their theory. “Sufficient capacity theory is half truth. Downturn in throughput does not mean that airport handling capacity is underutilized. It would be interesting to compare the throughput per square meter at Indian airport cargo processing areas with those of other Asian airports,” he told Logistics Times (refer to his interview). The industry seems particularly peeved with the fact that no concrete initiative has been set afoot to ensure that a network of air freight stations (AFS) is established at strategic locations in the country. A popular concept in the developed markets, the facility which means creating processing node for freight close to the transit point has by and large been a non-starter and the air cargo sector is believed to have failed to emulate the success of the container freight station (CFS) in the maritime industry. “ We have to think big on AFS. At our airports, we should make it in a modular fashion. Airports, in fact, can join hands with AFS developers,” said Amber Dubey, Head- Aviation, KPMG India.
Procedural Issues
There probably seems to be no dearth of examples that procedural problems are aplenty for the air
Top 10 airports in India by Freight traffic (2012-13) Freight
No
Airports
1
Chhatrapati Shivaji Intl. Airport (BOM), Sahar / Vile Parle, Mumbai
635,163 (657,470)
2
Indira Gandhi International Airport (DEL), Palam, Delhi
546,311 (568,355)
3
Chennai International Airport, (MAA),Meenambakkam, Chennai
315,879 (357,191)
4
Bangalore International Airport, (BLR), Devanahalli, Bangalore
226,548 (224,949)
5
Netaji Subhash Bose Intl. Airport, (CCU) , Dum Dum, Kolkata
123,491 (125,593)
6
Rajiv Gandhi Intl. Airport, (HYD) Shamshabad, Hyderabad
79,236 (78,099)
7
Sardar Patel International Airport,(AMD) Hansol, Ahmedabad
48,175 (31,757)
8
Cochin International Airport (COK) Nedumbassery, Kochi
46,906 (42,706)
9
Pune International Airport (PNQ) Lohegaon, Pune
19,861 (24,134)
10
Goa International Airport (GOI) Dabolim, Goa
4,952 (6,170)
All India
2,191,191 (2,279,987)
Figures in bracket are for 2011-12
cargo business. And even some of the good-intentioned provisions have not produced the desired results because the stakeholders are not acting in tandem. Take the example of 24x7 customs clearance of export cargo which was launched with much fanfare early this year. But it has hardly made a difference. “Other than New Delhi, this remains a nonstarter as 24x7 has been ushered in without any clear manadate for all stakeholders. The initiative entails that all support agencies – both
Traffic (tons)
Source: PIB
government and others- have to be available on a round the clock basis. But airline offices, clearing agents, plant quarantine, animal quarantine/wildlife department, handicraft council officials are not available on 24x7 basis and thus the scope to utilize this measure is very limited. Shortages of custom officials at some airports also add to the problem,” Sharma pointed out. In fact, this was a major issue which came up for discussion at the ACAAI convention and government functionaries too LOGISTICS TIMES November 2013
COVER STORY
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OPINION
A tale of missed opportunity Let’s face the reality. Air cargo day. Just imagine the kind of business in many ways is the capacity creation they have case of lost opportunities here. done on the world network. That too despite the fact India They are now expanding in could have reaped advantage Latin America. Not a single of its critically positioned in the Indian carrier has talked of trade lane from east to west aggressively going into Latin and west to east. And that we America- another big market. had the chance to develop We all ship via Europe or the a vibrant hub-spoke model US to Latin Amercia. There covering air cargo linked should have been direct businesses in South Asia and connection by now. Radharaman Panicker beyond. I have no hesitation in CEO, Cargo Service Center India Look at Vietnam which is emphasizing that a major becoming a big manufacturing bane for Indian air cargo hub. Look at booming market of Thailand or operators has been their too much US and a much nearer market of Bangladesh which Europe centric approach. And that is where today boasts of garment manufacturing I endorse the idea of FDI in civil aviation. If capacity much larger than India. What are our Indian players do not have the capacity the carriers serving there? Nobody. Look at to take risks in setting up new networks, we Sri Lanka and Pakistan. Those are all under- need to allow foreign investors to come in. served markets as far as air cargo capacity But those deals should be India-centric and and the larger connectivity with the world not the way it has happened between Jet is concerned. Myanmar is another example. and Etihad. That would rather take the traffic But none of our carriers looked at the big away from the country. picture. In my view, we could have easily We certainly had the chance to develop become a regional hub but we did not an international cargo hub- at least one provide any connectivity. These places need of our airports should have assumed that to be connected. There is some effort in Delhi avatar. But it again appears out to be a trying to ship goods from Bangladesh to missed opportunity now. Today any Indian Delhi and there move on other international carrier or airport is connected to 80-90 carriers. But unless there is a base carrier destinations. That is the optimal limit (Delhi). connecting Dhaka to Delhi and then move But this report card will not give you the on to other destinations, the bigger benefits required clout. Furthermore, those networks will not be accrued. are not connected by Indian carriers but We have certainly missed opportunities other carriers who fly out of India. Indian emerging out of the Look East policy which carriers are typically connected with 30-35 the government had initiated. Here we have destinations. With that you can’t build the the vibrant example of Emirates. What did kind of network which is a pre-requisite to they do? They carefully picked up markets develop a cargo hub. So we have missed of the future and one of them was India. the opportunity to develop a cargo hub They built the volume here from India and and now the option available to us is to then they started going more expansively to develop India-centric opportunities because destinations in the US and Europe. Today manufacturing capabilities are going to come they operate A-380 into New York thrice a up in the future. We are unfortunately not
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factoring them in drawing our future plans. All talks of a developing a hub is meaningless without giving any consideration to the kind of inward connectivity we need to grow the market within the country. 2.6 million tonnes is just peanuts for a country of the size of Emirates global expansion has contributed immensely in Dubai India. We should usually becoming a leading cargo hub be doing something in the range of 8-9 million tones on an all India basis. Its just that it has not marketed this business well. that for some reason or the other, we are not We have not campaigned well to convert getting the mix right. Cargo industry too is sea-cargo into air cargo which was a big responsible to a certain extent in the sense opportunity.
admitted that the initiative needs more fine tuning for the desired results. “ I would admit that 24x7 clearance provision has not been an outright success. To make it work, we need all stakeholders to come together. As far as customs is concerned, we are committed to get the best out of it,” Pawan Kumar Jain, Commissioner (customs), Jaipur said. With security being a major issue, India too like many other countries has introduced Authorised Economic Operator (AEO) programme ( an AEO is defined as “a party involved in the international movement of goods in whatever function that has been approved by or on behalf of a national Customs administration as complying with WCO or equivalent supply chain security standards) which is gradually being implemented at the airports in the country. But according to Bharat Thakkar, Immediate Past President of ACAAI, AEO regime implemented in the country lacks clarity. “ AEO procedures are not clear. It has emerged from CTPAT, US. CTPAT is just concerned about the safety and security and does not
include financial issues. AEO is still to evolve Indian Airports Vs The Best here,” he explained. Equally baffling for the cargo fraternity is the new provision of self-assessment of duty to be levied on operators. “CBEC two years back shifted the onus of classification and duty assessment on to the importer/ exporter. Earlier, it was the responsibility of the department. Nobody is happy about it since customs tariff has 9000+ entries, exemption notifications abound and there are hundreds of anti-dumping duties,” explained J Krishnan, Past President, ACAAI in a comprehensive presentation turning out to be major bane. And made during the convention. this is somewhat symptomatic of that larger state of neglect and lack of agility resulting in network not Connectivity and Hub From the perspective of the end- being developed for seamless flow. user industry which is thriving on Take the case of pharma industry, exports and relying on the air cargo clearly the star item of India’s mode to a considerable extent, air export basket today (nearly the lack of direct connectivity is 20 percent share in India’s air LOGISTICS TIMES November 2013
COVER STORY
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OPINION
We need to get our basics right Pharma products, as we all the products which will have to know, today has become be sent by the air route will keep the major component of air on mounting. cargo flowing out of India and To make most of the emerging majority of air cargo operators opportunity, we need to get out will tell you that it will continue basic rights in terms of creating to sustain that position for many right kind of environment for years to come. Today, it is the seamless flow of pharma products most vibrant component of from Indian manufacturing Ryan Viegas India’s export basket shipped via centres. And here not everything VP (Supply Chain) Watson Pharma air route. An industry estimate is hunky dory. For instance, Goa broadly underlines the figure of around 20 today has as many as 25 major manufacturing percent share for pharma products shipped units and most of them are export-oriented but through airways to other countries. accessing direct air route for every unit is not an Now the moot issue is: are stakeholders doing option readily available to them. There is only enough to ensure that they make most of the one international airline operating out of there opportunity provided by the pharma sector? I which is Qatar Airways. In a place like Goa, would say some changes have been initiated the capacity needs to be enhanced significantly primarily by the big forwarders. For instance, and we certainly need to have more than one the big players clearly have a dedicated “ life airline to take pharma products out of Goa. sciences “ vertical today and they are attentive to No doubt, Goa Airport has certainly improved the specific needs of pharma and the healthcare customs facilities in recent years and that could industry. They have a clear understanding that make the task of pharma exporters easier if requirements of pharma and the healthcare more air cargo capacity is put in. But because sectors are different from other commodities of very low aircraft capacity, many of us have that are part of their services’ kitty. The fact of to move our products from our manufacturing the matter is: India is increasingly becoming sites to Mumbai airport by road. the global production base of many pharma To cater to the growing pharma industry in multinationals. The highest number of US FDA Goa, we need direct flights from the location approved sites, outside of the US is in India and or connectivity via Mumbai for international this simply means a great opportunity for every destinations with the guarantee that temperature stakeholder including those who are on the variance should not come into the play. At the supply chain side. Simply put, the opportunity transition points, the concerned authorities to move products from India to the US is handling the cargo physically should be aware extremely high. Similarly, there is also a great of the sensitivity of the product. Believe me, lack opportunity to move pharma products made in of training is a serious issue when it comes to India to European markets, Brazil, South Africa personnel physically handling the product on or even Australia. I am not saying all pharma the ground. Temperature variance is something products will move by air. But the volume of the pharma industry can’t afford.
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export). Ryan Viegas, VP (Supply Chain & Procurement), Watson Pharma who was a major speaker at the convention rued the fact that a pharma hub like Goa does not have much to boast about in terms of air connectivity with the importing destination. “ There are minimal international air services from major pharma hubs like Goa. There is no major freighter company moving from point to point. Why can’t we encourage more freighter companies to improve their network in the country?” (refer to his opinion piece) “No international cargo company or integrators have made India their hub. Dubai is now at sixth spot on the list of top ten cargo airports in the world. It wasn’t there in the list ten years back. But Emirates fast growth has helped. There was, in fact, a holistic planning behind it- something which is completely missing here. We may already have missed the opportunity to develop an international air cargo hub despite so much of investment in airport infrastructure here,” Radharamanan Panicker, CEO, Cargo Service Center India underlined. (refer to his opinion piece).
Positive Indications
But despite strong irritants, the major consolation comes from the fact that leading players in the game are not holding back their plans to prepare for a future wherein this business may really find wings. Said Kapil Saraf, Senior VP, Hindustan Cargo, “ Global spend in healthcare is going to increase and India can be a major beneficiary since it is fast emerging as a pharma hub. We certainly need better cold chain facilities. Textiles and apparels exports too are projected to grow at 6 percent in the medium term despite losing advantage to countries like Bangladesh and Vietnam. There is also a strong possibility that demand
Quotes Gallery “I don’t think physical infrastructure is a constraint. There are airports where capacity utilization is low. May be the facilities are not that modern and we still need to bring in better processes.” S Machendranathan, Special Secretary/Adviser, Ministry of Civil Aviation. “We have to think big on AFS. At our airports, we should make it in a modular fashion. Airports, in fact, can join hands with AFS developers.” Amber Dubey, Head- Aviation, KPMG India. “I would admit that 24x7 clearance provision has not been an outright success. To make it work, we need all stakeholders to come together. ” Pawan Kumar Jain, Commissioner (customs), Jaipur. “Global spend in healthcare is going to increase and India can be a major beneficiary since it is fast emerging as a pharma hub. Textiles and apparels exports too are projected to grow at 6 percent in the medium term despite losing advantage to countries like Bangladesh and Vietnam.” Kapil Saraf, Senior VP, Hindustan Cargo, “Despite all odds, this year alone we have initiated 24x7 operations, new export unitization terminal, dedicated export bonded and heavy cargo terminal, priority handling for express shipment apart from launching India’s first airport cargo community portal.” Manoj Singh, VP (Cargo),MIAL “Cargo is a top notch priority in our vision 2020. We are developing RGIA cargo village which will have an exclusive terminal for pharma products. And we have also embarked on an ambitious plan to establish India’s first airport based Free Trade Zone,” Hemanth DP, COO, GMR Hyderabad International Airport Performance benchmarking is easier said than done because there are many stakeholders. However, we are mandated to set up performance standards and in the due course of time some parameters will evolve.” Alok Shekhar, Secretary, Airports Economic Regulatory Authority (AERA) “With competition becoming fiercer, businesses collapsing, ethics being compromised and change in the rules of communication, the way forward for our industry is to work in tandem by taking into confidence all stake holders and address all existing issues and arrive at a seamless flow process.” Bharat Thakkar, Immediate Past President, ACAAI “CBEC two years back shifted the onus of classification and duty assessment on to the importer/exporter. Nobody is happy about it.” J Krishnan, Past President, ACAAI
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of Indian products via-a-vis China would go up because of better quality.” This certainly is not a statement reflecting unwarranted optimism. Some noticeable steps have been set afoot on the ground in anticipation of demand scaling up in the future. Take the case of Mumbai airport which is being believed to be the most constrained airport in the world in terms of land availability. “ Despite all odds, we have been consistently improving the air cargo facilities. This year alone we have initiated 24x7 operations, new export unitization terminal, dedicated export bonded and heavy cargo terminal, priority handling for express shipment apart from launching India’s first airport cargo community portal,” Manoj Singh, VP (Cargo ),MIAL informed the gathering. As a result of the new additions, the dwell time for imports have come down to 8 hours from 10 hours and for exports, it has declined from 1.5 days to 1 day. Hemanth DP, COO (Hub Development, Cargo, Free Trade Zone), GMR Hyderabad International Airport (which has emerged as a major exports hub for pharma) had a similar story to share. “Cargo is a top notch priority in our vision 2020. We are developing RGIA cargo village which will have an exclusive terminal for pharma products. And we have also embarked on an ambitious plan to establish India’s first airport based Free Trade Zone,” he underlined. From the airline side, major international carriers like British Airways represented at the event by Pravin Singh, Area Commercial Manager (South Asia) made it clear that there is no let up in their plans to enhance their India centric capacity. “ From this winter, we are increasing our frequency to 55 per week to India. This would mean more belly space. In an overall sense, IG Cargo has plans to heavily invest in developing new products over the next five years. That would include strengthening our e-platform.” Alok Shekhar, Secretary, Airports Economic Regulatory Authority (AERA) too had some assuring words for the air cargo fraternity in terms of bringing in some concrete guidelines for performance standards. “ Performance benchmarking is easier said than done because there are many stakeholders. However, we are mandated to set up performance standards and in the due course of time some parameters will evolve.” These are clearly some of the indicators which underline that there could be some critical trigger for structural growth of the business in not so distant future. LOGISTICS TIMES November 2013
“Air Cargo continues to remain neglected”
S L Sharma, the newly appointed ACAAI President, explains to Logistics Times the key issues which the new managing committe will take up in the near run. Edited excerpts: How serious do you reckon is the present slowdown?
As far as air exports is concerned, slowdown is indeed very deep and all commodities except pharma has seen drop in tonnages in the range of 10 to 40 percent. None of the airports have witnessed a growth in their throughput. In fact, many have seen a reversal in growth. But I expect the business sentiments to improve in next one year. I am still hopeful that the air freight business will see a growth in the range of 5-7 percent in this fiscal. And the reason behind this optimism is slight improvement in the US markets. Surprisingly, import scenario in European markets like Spain has also begun improving. Other strong markets in the continent like Germany and France seem to be generating demand on a steady basis. Do you somewhat feel that air cargo business continues to remain a neglected segment on a broader basis? You talk to any average air cargo operator and you will find him to be besieged with this feeling.
There are two important issues to analyse this factor. Firstly,the financial equation prevailing in the market. The financial situation of an average operator is very tight. If you talk about the structure of the freight and bifurcate it in two parts: one is the actual freight and the other part is surcharge. Today, you would find that the actual freight rate is 20 percent and remaining is the surcharge. This is seriously affecting the yields. Plus, the average credit period which used to be 30 days has now gone up to 90 days. So for 60 days, you are paying money from your own pocket. Small operators who have no backing from the banks and financial institutions have a big problem in meeting the commitments to the carriers since the return has gone down, commission too is on a decline and the
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risk factor has gone up. The second part is most of the small operators are not in a position to provide the kind of services quality which customers have begun to demand these days. But in a general way, I do agree with the perception that air cargo has always been a neglected segment especially when we compare it with the passenger business. Efforts to streamline the processes have been there but they have broadly been half hearted initiatives. Process inefficiencies add to the delays and hence stunt the efficiency of cargo operations. At Jaipur convention, some of the government functionaries pointed out that capacity is no longer the issue. Do you subscribe to this theory?
Sufficient capacity theory is half truth. Downturn in throughput does not mean that airport handling capacity is under-utilized. It would be interesting to compare the throughput per square meter at Indian airport cargo processing areas with those of other Asian airports. Handling of cargo is very physical at Indian airports and the benefits of shipper built ULD are yet to gain wide usage. Cargo processing centres are archaic and have not really evolved. Here, sea cargo facilities are far superior. Every agency involved in the supply chain is vehemently holding on to its turf and have lost sight of overall efficiency a drastic re-engineering of the processes can bring about. The government has allowed 24x7 cargo operations at a select list of airports but this does not seem to be making any difference. What are the factors for results not matching the expectations on this front?
Other than New Delhi, this remains a non-starter as 24x7 has been ushered in without any clear manadate for all stakeholders. The
initiative entails that all support agencies – both government and others- have to be available on a round the clock basis. But airline offices, clearing agents, plant quarantine, animal quarantine/ wildlife department, handicraft council officials are not available on 24x7 basis and thus the scope to utilize this measure is very limited. Shortages of custom officials at some airports also add to the problem. How serious is this self-assessment issue?
This change in statute has gone mostly un-noticed by the trade and the custom brokers. Self assessment shifts the entire onus of correct tariff classification onto the exporter/importer and given the fragmented and semi-organised nature of the exim trade this move has emerged as a fresh bottleneck. I wish this was firstly introduced for the organized sector with a threshold limit. Intricate knowledge on classification requires technical personnel which only a large enterprise can afford. Pharma has clearly emerged as the main commodity for your line of business. But do you notice matching infrastructure (like cold chain) also coming up at key locations?
Hyderabad airport has emerged as the forerunner to facilitate the pharma exports. Other airports clearly need to improve the seamless cold chain. Availability of ADC on a 24x7 basis remains high on the wish list for speedier clearances. This must be enabled to ensure there are no delays. Why do you think the long-pending issue of creating more Air Freight Stations (AFS) continues to remain unresolved?
As stated earlier, the reluctance of
airport operators is the main reason for the still born status of AFS. The misconceived notion of loss in revenue has done much harm to improve the air supply chain efficiency. A practical solution can be a JV between the airport operators and AFS stations so that this notional revenue leakage can be addressed. Have we missed the opportunity of developing our airports as key cargo hub- at least one of them?
Lack of clear policy to realign our regulatory processes and absence of domain knowledge on cargo and cargo related activities in MoCA has led to our neighbouring countries emerge as hub airport to service cargo originating from/to India. But even then, it may not be too late to develop an Indian cargo hub provided there is a conscious integrated effort on the part of all stakeholders. Finally, what would be the broader agenda of ACAAI’s new managing committee which is spearheaded by you? What are the key issues you will be addressing?
The first issue, of course, would be demanding better infrastructure for our business. I am confident the government can help us on this front. Air Freight Stations would be a key agenda for us and there could even be dedicated dry ports for us. Another important area we would be focusing on is further simplification of customs procedure. An integrated IT platform for all stakeholders is a must. The crucial issue here is how will we push these issues to their imagined logical ends? Here while on one hand we would be striving to enhance our engagement with Air Cargo Logistics Promotion Board (at least one monthly meeting with them to raise our issues), simultaneously we would also develop close linkage with mainline industry bodies like CII, FICCI, FIEO, etc.
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Subdued growth in rentals
Noted real estate research and consultancy firm CBRE released its "India Logistics Market View Report(H2 2012)" last month. The
LOGISTICS TIMES November 2013
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report highlights the warehousing rental trends in important locations in the country which were in a subdued zone in the stated period. Here is the first part of the report...
LOGISTICS TIMES November 2013
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I
ndia’s economic growth declined to about 4.5% during the quarter ending December 2012, accompanied by persistently high inflation and declining industrial growth. The Index of Industrial Production(IIP) contracted by 0.6% in December compared to 0.1% contraction in the month of November due to poor performance of manufacturing and mining sectors and decline in production of capital as well as consumr goods. However, the Economic Survey 2013-14 indicated that the economy is headed for a moderate acceleration in the coming few months, which is expected to have a positive impact on the logistics and industrial sectors as well. The Central Budget 2013-14 also provided an impetus to the logistics sector by allocating INR5,000 crores to NABARD (National Bank for Agriculture and Rural Development) for the development of cold storage
LOGISTICS TIMES November 2013
facilities, warehouses and logistics across the country. This fund in gallocation is expected to further promote the growth of multimodal logistics parks and backend storage infrastructure in the country. The logistics market witnessed restrained demand during second half of 2012 and the trend is expected to continue over the next few months. Built-to-Suit(BTS) facilities continued to remain the preferred mode of expansion for majority of the corporates. Additionally, contribution by foreign investors through merger sand acquisitions and private equity funds is expected to enhance the growth of this sector in the ner future. Private player sare increasingly look ingat developing warehousing spaces across the country. Regions such as Gurgaon, Chennai, Hyderabad, Pune and Kolkata are witnessing launch of large scale supply in the warehousing and logistics space, which is expected to provide
numerous expansion options to occupiers in the coming two to three years. Limited supply and enhanced demand in Panvel (Mumbai) led to a sharp increase in rental values by 13-14%, compared to the first half of 2012. Values appreciated by 5-7% in North Chennai and in Komp ally and Medchalin Hyderabad. Marginal rental increment of 2-3% was also witnessed in Western Chennai and NH-2 in Kolkata. Micro-markets that led rental correction in cluded Gurgaon/NH-8(NCR), Pimpri in Pune and NH-6 in Kolkata. Compared to the previous review period, transaction closures were limited in the second half of 2012. However, going forward, as the economics sentiment improves and occupiers begin expanding their footprint across the country, demand levels (and consequently absorption) are expected to rise gradually across most leading logistics and warehousing hubs of the country.
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NATIONAL CAPITAL REGION (NCR) Market Summary Gurgaon,NH8 (Haryana) is one of the largest warehousing markets in the country and offers connectivity to commercial, industrial and warehousing hubs in South and West India. The market is amongst the most preferred locations in NCR forsetting up mother warehouses for distribution across North India.While the market is expanding geographically with new developments coming up in remote locations, rental values remained largely stable during this review period. Kundli,NH-1 Haryana is a key logistics destination, primarily serving Haryana and Punjab. Due to its proximity to the North of Delhi it acts as a regional base for occupiers who have their manufacturing setups in Himachal Pradesh and Uttaranchal. The market is expected to gradually expand along the upcoming Kundli Manesar Palwal(KMP) Expressway. With the KMP Expressway coming up, the reisa possibility of consolidation in th is region as unit sare likely to prefer locating on routes which by-pass Delhi. Themicro-markets of Hassangarh and Saidpur are offering quality assets at lower rentals, keeping the rentals stable in this region during the review period. However, there is a possibility of an increment in the near future, largely on account of the extent of growth opportunities available for occupiers in this micro-market. NH-91,NH-24,NH-58 and Noida (Western Uttar Pradesh) primarily cater to the distribution requirement to the states of Uttar Pradesh and Uttaranchal. A number of new developments are coming upon NH-24 which is being evaluated by occupiers as analternative to the much congested NH-58. Reduced demand levels during the second LOGISTICS TIMES November 2013
half of 2012 led to astagnation in rental values. Outlook The market observed subdued demand levels during the second half of 2012 and the trend is expected to continue over the next 2-3 months. All major expansion and relocations plans have been put
on hold by occupiers on account of ambiguity on the implementation of Goods and Services Tax (GST) and a “wait and watch� strategy has been adopted. This region is likely to observe addition of new warehousing supply in the coming few months, largely led by small, individual developers.
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MUMBAI Market Summary Bhiwandi, one of the prominent warehousing hubs is located on NH-3 and provides an easy connectivity to the commercial and manufacturing hubs of Mumbai, Nashik and Thane. It also serves the Northern and Southern regions of the country through NH-8 and NH-4 respectively. Close proximity to Jawaharlal Nehru Port (JNPT) has further enhanced growth prospects for warehousing activity in this region. Adequate supply of skilled and semi-skilled labour from the near by residential are as such as Kalyan and Dombivali is an added incentive. Recent completion of integrated warehousing complexes such as Renaissance Industrial Park and Ksquare (onNH-3 by pass road) offering modern amenities has accentuated Bhiwandi’s growth as a prominent logistics hub in the region. No new major warehousing projects were launched in this micro market over the past six months. Demand was largely led by FMCG companies, online retailers and automobile majors. Rental values maintained stability and were in the range of INR 10-15/sf/month. Panvel (NH-4 and NH-17) was developed as a warehousing hub due to its proximity to the JNPT port and national highways. Majority of the developments in this region are custom bonded warehousing facilities and container freight stations. Limited supply and enhanced demand in this micro market led to increase in rental values by 13-14% during the review period; rents were quoted in the range of INR 18- 23/sf/month. Outlook Absence of new supply in Bhiwandi is likely to result in to marginal appreciation in rental values in the micro-market in the coming few months. Due to its strategic location the micro market would
continue to witness demand from companies keen on serving the Western and Central regions of the contry. Owing to limited supply and increased demand levels, rental
values in Panvel are likely to witness an up ward movement in the near term. (To be concluded in the next edition)
(Courtesy: Courtesy: CBRE, South Asia Asia) LOGISTICS TIMES November 2013
CENTERSATGE
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FEAR OF COALFIRE “I am not above the law of the land. If there is anything that the CBI, or for that matter, anybody wants to ask, I have nothing to hide”. Manmohan Singh, PM On Board A1 (1st Oct’13)
Himanshu Shekhar
On Board Air Force 1 en route to Delhi from Beijing, the Prime Minister put up a brave face as reporters bombarded him with questions about the CBI’s latest probe in the controversial allocation of Talibara coalblock in Odisha to Kumar Mangalam Birla’s Hindalco. Considering that this allocation was done when Manmohan Singh himself held the coal portfolio in UPA-1, the Prime Minister knows the PMO is directly in the line of fire of the CBI investigation. His offer to cooperate in the investigation
dealt with this case. It appears that CBI would decide the future course of investigation after studying the files but the sword is clearly hanging over the PMO. It is significant to note that the Supreme Court is monitoring the CBI investigation of “Coalgate”. But even as CBI plans to take its investigation to the next level, politics on Coalgate is hotting up. The Congress is fearful about political ramifications of the PMO coming directly under CBI’s eye as the BJP is trying hard to make it an
The CBI’s move to broaden the ambit of investigation by registering an FIR against Kumar Mangalam Birla has made the industry jittery too. Industry fears it is just the beginning of a new witch-hunt of corporates. appears to be a well thoughtout political move to silence the opposition parties in the run-up to the politically crucial assembly polls in November-December. But the road ahead doesn’t seem easy. Within days of registering the FIR against Birla and former Coal Secretary PC Parakh, CBI sought all files related with allocation of the coalblock to Hindalco from the Prime Minister’s Office. Considering the sensitivity of the case, the PMO handed over all the files within four days. CBI has also sought details about officials who LOGISTICS TIMES November 2013
important election issue. Addressing a huge rally in Udaipur in Rajasthan, BJP’s Prime Ministerial candidate Narendra Modi hit out at CBI alleging that it was going soft on the Prime Minister: "Allegations have been levelled against the PMO. A senior official (Ex-Coal Secretary PC Parakh) has directly made allegations against the Prime Minister in the Coal scam… Had such allegations been levelled against Vasundhara, Narendra Modi, Shivraj Singh or Raman Singh, the CBI would have put us behind bars within minutes. But CBI is frozen
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as if it has seen a snake". Importantly, the CBI’s move to broaden the ambit of investigation by registering an FIR against Kumar Mangalam Birla has made the industry jittery too. Industry fears it is just the beginning of a new witch-hunt of corporates. In fact, ASSOCHAM went ahead and made public a letter it wrote to Prime Minister against the alleged ‘activism’ of CBI and sought ‘protection’ from ‘baseless’ probes: “We are afraid, if this environment of distrust continues, the decisionmaking will get further hampered and all those big projects recently cleared by the Cabinet Committee on investment will not take off, since they will be stuck again at the implementation stage because of
a demoralised bureaucracy and a shaken entrepreneur.” Significantly, CBI’s decision to broaden the ambit of the investigation in the coal scam comes at a time when the economy is struggling and growth projections are being downscaled. The RBI recently scaled down the economic growth rate in the present fiscal from 5.5% to 5% raising concerns that it would take more time to take the economy back to a higher growth trajectory. RBI’s move comes a few weeks after both World Bank and International Monetary Fund lowered their growth forecasts for India. In fact, while the World Bank has chosen to project 4.7% the IMF has projected 3.75% for India in 2013-14.
As Manmohan Singh enters the last lap of what has been a chequered tenure, he knows time is running out. The declining economic growth rate projections mean the feelgood sentiment Congress wanted desperately to build-up in run-up to next general elections won’t be possible now. With just little over five months left of UPA-2, the CBI’s latest investigation only seems to add one more challenge in Manmohan’s cupboard of woes. Will it cast a shadow on Manmohan Singh’s Prime Ministership and his legacy as India’s longest serving Prime Minister in last three decades? The writer is a senior journalist working with NDTV
LOGISTICS TIMES November 2013
EVENTS
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India Warehousing and Logistics Show 2013, Chennai
India Warehousing & Logistics Show took place from 7-9 November 2013, at Chennai Trade Centre, Tamil Nadu and showcased material handling, warehousing, logistics and supply chain solutions from 110+ participants. The show featured some of the biggest names of the industry and was attended by trade professionals from a variety of industries. The show was held in concurrence with India Cold Storage Show, an event for cold storage industry of India where solutions for cold storage owners were showcased. A joint conference – Warehousing & Cold Storage Conference was held on 8th November and welcomed over 84 delegates. The ‘Annual General Meeting’ of the Association of Cold Storages, Tamil Nadu took place on 9th November and welcomed 60+ members from all parts of Tamil Nadu. Overall, the event laid a strong foundation for India Warehousing Show, a global meeting place for transport and logistics community, which will bring focused audience together for business and networking..
LOGISTICS LOG OGISTICS TIMES November 2013
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LOGISTICS TIMES November 2013
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Rakhi Campaign Winner
FedEx Express has announced the winner of the ‘FedEx Rakhi Offer’ contest. Mandira Bedi, a celebrity from television and film, presented the winner, Pallavi Biswas from Kolkata with air tickets for a round trip enabling Pallavi to visit her brother. The contest launched during the Rakhi offer campaign invited sisters to upload a picture of their most memorable moment spent together with her “true” brother on the FedEx app on Facebook.
Relief for Uttarakhand
APM Terminals India introduced newly installed environmentally advanced sanitary devices in six villages in Uttarakhand damaged by recent natural disaster. The six villages where the bio-toilets will be installed are Sirwa, Dugadda, Durgapul, Bhumia, Bhimal ki Chaloti and Papra in Uttarakhand. The devices are powered by bio-digesters technology which contains bacteria that convert waste into an odorless, colorless, and uncontaminated liquid, which can be discharged into farms and used as organic fertilizer or sent directly into existing sewage lines. LOGISTICS LOGIS ISTICS TIMES November 2013
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LTH-3 regional round in Delhi
The inaugural round of Logistics Talent Hunt 2014, Season 3 was organized by Million-Minds on 12th October 2013 in Delhi. . It was organized in association with Institute of Marketing & Management. It was a daylong event where Aviators, team from IMM was judged the first prize winner, which had made a presentation on ‘Just-in-Time’ concept. The second and the third positions were bagged by Khitij & Brain Stromers, teams from JIMS Kalkaji with presentations on Reverse Logistics and GST and its impact on the Indian Economy.
Social Journalist Award Himanshu Shekar Mishra of NTDV bagged the prestigious Maja Koene Social Journalist Award in a ceremony recently organized in Madurai. The event was organized by the Gandhi Memorial Museum and Centre for Experiencing Socio-Cultural Interaction (CESCI). Himanshu Shekhar Mishra was felicitated for his coverage of the Jan Satyagraha non-violent march taken out by 50,000 people from Gwalior to New Delhi in October, 2012. Himanshu has also been a regular contributor to this magazine for more than a year now primarily writing columns on policy and infrastructure.
LOGISTICS LOGIST STICS TIMES November 2013
RNI No. DELENG/2011/39329
Regd No.: DL(E)-20/5380/2011-13