DPD has been introduced to cut down the dwell time and transaction cost by moving the containers direct from the port to the customer instead of routing them via CFS. But CFS operators claim they are well equipped to dispatch cargo quickly and do not add to the logistics time and cost. While DPD will surely dent their business, to sustain CFSs will have to align with the changing patterns of the trade and be open to functioning as warehouses as well for customers to store cargo
Direct Port Delivery. Much debated and much contended, yet little done. The dialogue on direct port delivery first began last year when the Ministry of Commerce listed a slew of measures to be taken by the government and trade to ensure easier ways of doing business in India. For this, finished goods and raw materials have to reach their destinations faster. One of the suggested approaches by which goods or cargo could reach the end user or the manufacturing-processing unit faster is by clearing them out of the ports as quickly as possible. That is by reducing dwell time and transaction cost. And so it is toward this end that the Direct Port Delivery system was initiated after the Ministry of Commerce sent out a note asking all major ports and private terminals to extend this facility at their ports. In the past, import containers were sent to Container Freight Stations (CFS), a couple of days after they were unloaded from a vessel. Further, depending on the completion of import procedures and clearances with shipping lines, custom house agents, customs, consignees and CFS operators, the cargo was then delivered to the end user after an average dwell time of 9-10 days. With DPD, importers can avoid these obstacles and import containers can be delivered to the end user directly from the port with an average dwell time of 1.5 days. The DPD system evolved mainly to improve the time and cost cycles on the import side for our export cycles are in tandem with the global parameters.
The Jawaharlal Nehru Port Trust, being India’s largest container port by volumes handled issued a trade notice as early as February last year allowing all its Accredited Client Programme, or ACP clients to opt to take delivery of their cargo directly at the port than at a container freight station. ACP clients come under the programme that was introduced by the Customs in 2005 to grant assured facilitation at all the EDI enabled customs stations to importers who are found to be highly compliant to be exempt from the routine examination. These clients also can avail an additional four percent duty waiver because of the scale of their business. Any customer who was importing cargo worth more than 10 crore, paying customs duty of `1 crore and filing at least 300 B/Ls annually would be eligible for the ACP initiative. Then too, the cargo would go to a designated CFS and the client could delivery from the facility. However out of the total 170 odd registered clients, only 40 to 50 importers signed up for this scheme and far fewer continued to avail this scheme until 2016.
This was, therefore, the government’s first attempt to implement DPD. The next directive came of course, from the government last year after India’s ranking in the ease of doing business index remained at 143, far lower than any of the other developed economies. And to the government’s credit, it conducted many a workshop to create awareness and stressed on importers to avail this facility. The JN Port was asked implement this scheme immediately as over 55 percent of India’s container traffic passes through this port. Port officials say 778 importers of over 4,000 agencies have already availed this facility and are currently taking delivery of their goods at the port directly. Private terminals operating at the same port too kick started offering this facility too. But pray, why then is there so much disease and confrontation from the trade on this issue?
First the concerns raised by the container freight stations. The CFS Association, the nodal body for all the freight stations says the DPD system might dent their business with most cargo owners moving out their wares from the port directly. They argue that the freight stations are well equipped to dispatch cargo quickly thus aid in reducing the dwell time. Also, when JNPT was conceptualised, it was designed to function around the container freight station model after the Mumbai Port Trust could no longer handle box cargo for want of space and larger volumes of bulk and break bulk cargo being handled. So, when importers of container cargo moved to JNPT and the ACP programme was introduced, cargo was evacuated far quickly than it was at the Mumbai port. For an ACP client, who needed no inspection and assessment, movement of cargo out of the port was swift as the Customs would provide him an Out of Charge or OOC certificate once he produced the Bill of Lading and cargo is moved to the CFS. This process helped in bringing down the dwell time significantly from 20 days earlier to about 6.8 days currently. Of this too, about 25 per cent of the cargo is cleared in the first two days, about 35 per cent of it in the next five days. So, roughly about 60 percent of the cargo gets cleared in the first one week. The balance cargo might take longer because it could be nominated cargo or could also be in the high sea sales category. Such cargo might continue to remain at the CFS as it would be a cheaper and safer option for the importer to store his wares for a ground fee at the station.
Arguing for the importer, the CFS man says the cargo owners should be given an option to clear and claim his cargo at his will. “The importer should be allowed to claim his cargo from the container freight station at his will. Most cargo owners pay the customs after recovering revenue from sales made in small tranches and clear the next batch of cargo paying up the customs duty,” said one of the members of the CFS Association. Also, the port has designated Speedy Container Freight Station as the nominated station for all cargo left unclaimed within 48 hours to be taken there. This move has left the CFS and the importers in the lurch as they reckon the choice has to be left to the importer to choose from a large option of CFSs. Moreover, if the customer does not have the option of storing his goods at a CFS, he will have to pay perhaps a similar sum to a yard for storing his goods and transporting them thereon. This may lead additional costs if the goods have to be transported to a long distance yard instead of a CFS close by.
The world today has coalesced to be a customer’s market place. And for him to win the game, time and cost savings have to be made as primal offerings. In a complex market when every stakeholder’s needs demand attention, collaborative working and consistent solutions will be in the best offering to the trade. India is now transforming in to a free market place and every customer or service provider should be given the option of working with who he chooses. Ports and CFSs should remain facilitator and the Customs can do better in terms of providing a more secure environment for trade.
With these norms in place, the number of customers opting for DPD was about four per cent until December last year. However, with government efforts and the cooperation of the trade, the number has now gone up to 15 per cent. The Prime Minister’s Office has in fact asked the ports to take this figure up to 40 per cent for India to be able to improve its ranking globally. To achieve this magical number, the ports will have to take the CFSs in to confidence and work in tandem than in silos. Anwar Javed, Vice President, Continental Warehousing Corporation says, “The freight stations are not against the DPD model. We would like to be equal stakeholders in the nation’s progress. However, we would like the port and customs authorities to take us into confidence and implement rules that favour the entire ecosystem.”
The CFSs, the states had created as an extended arm of the terminal. So, the Association has made a representation for the OOC to be issued at the container freight station which is also a bonded area and customs officials could clear cargo upon inspection. “We would like the government to be like the big brother here and allow us all to function as a unit in helping to meet the goal,” he says. He argues most CFSs clear cargo from the port within the free period and perhaps gains little in storing the cargo in his stack house longer.
The Port, however, think the CFS model is now redundant and does not lead to as much of time and cost savings as the cargo takes up to nine days to be cleared from the CFS once it leaves the port premises. Neeraj Bansal, Deputy Chairman, JNPT lists his areas of concern. The first is the time taken for the cargo to reach its hinterland, which approximately has been pegged at nine to ten days. Second, he draws to attention the economic cost involved in the trader taking delivery directly at his factory than move its cargo from the container yard in the port to the CFS and from there on to his factory after almost two weeks. By opting for DPD, he says the customer can cut down on multiple movements to and from the CFS. Bansal says, “In the DPD model, the customer gets to save on logistics cost, ground rents, handling costs and seven days of unproductive detention.” For any customer who would like to avail a longer credit period, the port is willing to make an exception in his favour, Bansal says. The port aims to create a platform for those who would like to avail the DPD facility. “The port has not issued single circular that would injure the interests of the trade. The port is only acting as a facilitator in offering a platform for those who would like to conduct business.”
To be in the business, CFSs have to align with the changing patterns of the trade and be open to functioning as warehouses as well for customers to store cargo. The port, on its part, is also introducing various measures to ensure the DPD initiative is successful. We handle more than 20,000 teus through the DPD model that accounts today for about 15 per cent of total cargo handled. Similar to the rebates offered to the trade for using rail transport within the systems, using parking areas right outside the port premises, the port is planning to introduce a transport system to deliver all cargo of the DPD customers to their factories directly. The port, he says, is aiming to bring in more transparency in the process. “The port is not designed for the DPD model. So, at the port we are trying to provide a logistics switch to efficiently offer DPD as a model,” Bansal says. Transporters shall be identified after a tender for particular routes and ACP or DPD customers can align with these vendors per the routes. Their cargo will then be loaded on to the trailers and dropped off at the factory. The transport rates will be pre-determined thus leading to an efficient model. “Such an out of box idea is required for an out of the box situation,” Bansal says mentioning this can turn in to an Uber model where the trucks can perform multiple tasks. They could pick up import cargo from the port, pick up a repositioning empty from an export house and also pick up export cargo on the said route from a factory. This, he says, will help in the trucks also being optimally utilised bringing down the wastage in transportation. The port is now in the process of preparing the ground for a tender before transporters are invited to participate in the bids. At the moment, the trade Bansal says, is supportive of this model of transport.
It may be a few months before the new transport model is put to test to check its efficiency in operating in such as complex system and perhaps a circular from the port would all it would take for the new transport system to be in place. But for a model like direct port delivery to work, it would take much more than just circulars from the regulators.