Mr. Jayyannt Lapsiaa, President, AILBIEA: The dependency on liquid bulk imports at the moment is very high, so the government is identifying which products are flooding the market and imposing restrictions. So, the dependency on imports will come down in the coming years gradually.
Corona virus pandemic has impacted virtually every business segment. How has been the liquid bulk trade during the first half of this year?
Liquid bulk trade has been no exception. There has been a massive slowdown in liquid bulk trade especially during April, May and June. Indeed, the global commodity trade covering energy products, metals, agricultural products started to slow down from January itself because the Covid 19 virus was actually in place since December in other countries, and as we all know, China is the mover and shaker of the global commodity market. The pandemic hit many countries including USA and Europe and India faced a national lockdown since March 23rd this year.
Business were shuttered, transportation came to a standstill and for some time, even port operations were hampered as adequate labour was not available. So, liquid bulk trade faced the lower import and export volumes and the impact was to the extent of about 15% downwards. So, liquid bulk has also been impacted nonetheless.
Globally, crude oil prices have hit historic low due to low demand and storage issues. Does this have any impact on your industry?
Yes, it does has because most of the liquid bulk chemicals are off shoots of crude oil that is petrochemicals and various other chemicals and unfortunately in this pandemic, China was one of the significant importers of these petrochemicals. So that has had its adverse impact. And the global markets also underwent tremendous depression due to the pandemic. So, there was a volatility in pricing and even the stocks which were held by many of the leading players globally, they found it very difficult to offload. So, there was a sort of panic and a chaotic situation. Indian buyers were at a loss and at a cross roads, as to, from where to source and how to store and how to implement. Imports were necessary. There are certain chemicals which are basic lifeline of our industries. So, to that extent the chaos, even today, it prevails; but I think slowly it is settling down.
What could be the future scenario? What are you expecting in the coming months?
In the coming months, I think water will find its own level, things will get back to normalcy. Because liquid bulk, whether you take crude oil, edible oil, petrochemicals, chemicals or supri-oils – the dependency on them as far as India is concerned is still very much high. So, India cannot do without imports of liquid bulk. Though they may phase out, like for edible oils, we have now stopped importing palm oil and palm products because government has imposed duties on them. So, people have gone for soya bean oil. Likewise, in chemicals, certain chemicals, certain strictures have been imposed in the form of BIS conditions and what not. So, government is also doing its studies. You know detailed studies as to which chemicals have been produced in India and which are flooding the market….so, they can easily iron those out and restrict the imports to only to fewer items. So, the dependence on import over the years – it won’t happen say in another 3, 4 months, but I think a year or two down the import dependability on liquid bulk cargo will certainly come down.
Let us talk a bit about operations side. In one of your previous discussions, you had mentioned the need for according top priority to the liquid bulk consignments and Customs and ports. So what are the challenges your members usually face at ports?
Unfortunately, the saddest part even today, despite last 15 years of knocking at the doors of CBI, SC and telling them that liquid bulk is a totally different segment; you can’t treat liquid bulk on par with a containerized cargo. The entire dynamics of liquid bulk operations are totally different. And liquid bulk is a very highly sensitive commodity because it involves and carries the tag of demurrage which payable in precious foreign exchange.
Now if there is a delay in the berthing of a vessel and delay in the evacuation of cargo and the vessel has to wait, the country loses foreign exchange and today we are talking of demurrages which are ranging from $30,000 to $45,000 per day. Now, this can be avoided. So, the board has to develop and devise schemes for ensuring that liquid bulk cargos are expeditiously assessed and cleared, which was happening in the 80s. In the 80s during the manual bridging before the EDI, the board then, the central board of excise and customs then, actually they were sensitized of this importance and they had given directions to all field formulations that liquid bulk should be cleared within 30 minutes of the documents presentation.
But nowadays, they feel that it should be on par with containerized cargo. On one hand, the government is trying to ensure that the foreign exchange reserves are preciously been guarded and on other side, you are wasting these reserves by paying demurrages, so government should wake up, the board should wake up, financial minster should realize that before you come out with any schemes, any of the initiatives which are actually based on a common premise that import means, it encompasses liquid bulk, it encompasses project imports, containers..no it is wrong.
When you devise any new initiatives like they came out with a faceless scheme, they have come out with various other initiatives, its good, we are not against the initiatives, but my only appeal to them is before you come out, at least write to the liquid bulk association and find out how the initiative is going to impact you. Then we can give them the feedback, because in the past they had come out with initiatives and we had to run to them saying that these initiatives will actually be detrimental to liquid bulk and then they had to rectify. So the government should realize that liquid bulk is not just crude … HPCL, BPCL, Indian Oil. But Now we are in the era where the crude oil components is only about 35% to 40%, while 60% is other imports, private imports. So government should wake up to this reality.
With the recent blast at Beirut port, the world woke up to the risk of storing hazard chemicals. What is the situation at Indian ports?
In India also, I think we are sitting on a ticking bomb. See, we have been dealing at various ports and I don’t see any such major precautions or preventions being taken. Hazardous cargos are being unloaded. In Mumbai, they have a separate port for discharging hazardous chemicals. But after discharge what’s next? What should be the government’s role? There has to be a holistic approach between the port and the governments. Here the port may discharge the cargo, you may have a separate thing, but when it transits through the port and a city, you must have separate lines, separate roads.
Once the hazardous goods in liquid bulk land in storage tanks, the exit and the gateway point is through the main artery of the city. So, the tankers are carrying these ticking bombs through the arterial roads. So government should step in and make some concrete plans whereby there are different exit routes for liquid tankers whereby they don’t actually mingle or get into the city at all. Out and out they move, now this happens at almost all the ports. In India we haven’t seen a major accident as happened in Beirut but minor accidents do happen out of hazardous cargo leaking on the road, but which are forgotten. For a moment, there is big hue and cry and the government knee jerk reaction by banning movement of chemicals. I think banning or taking a retrograde step is not a solution. The major solution lies in creating a separate infrastructure for transportation, storage and handling which is the need of the hour.
You just mentioned a while ago about the storage. What are the opportunities in the bulk liquid storage infrastructure in India. Any new facilities are coming up? How is the situation?
New facilities are not coming up for the simple reason that land is at a very premium price. To get land in and around port area is absolutely difficult. Earlier, it was easier and now with the land acquisition by various other industries and builders, the land around the port area is very very scarce. So, suddenly over a period of over 10-15 years, the hope and potential for tank farms to be created near the port areas is getting more and more diminished, unless somebody is willing to give away the land which is bought for industrial purpose.
Whichever new generation ports have come up like Pipavav, Krishnapatnam and Hazira they already had land and were designed for liquid bulk. But now you cannot add capacities there as surrounding lands have already been taken over by several other industrialists. But the scope and potential is tremendous for liquid bulk, and India’s dependence on liquid bulk will never cease, come what may.
The government of India is considering import restrictions on some chemicals and also anti-dumping duty on some more. So what does it mean to your industry?
It means a lot. I think there are some ill-founded conceptions in the ministry of chemicals and fertilizers. They have been misguided by some vested interests. Now, simple analysis if you do, you take cargos like methanol or acetone, the production in India is only about 1.5 lakh tonnes, whereas the demand is 20 lakh tonnes. The gap is huge. Likewise, there are other chemicals also where the demand and supply gap is so yawning and huge that survival of these industries is purely on imports.
Now suddenly the ministry of chemicals and fertilizers announces to ban chemical imports or impose various restrictions which doesn’t make sense. How will the government supplement the shortfall? By imposing restrictions of BIS standards on reputed overseas suppliers who are of high standards, how does it help? In what way is it going to help by imposing the BIS standard? On one hand, this government said that we will do away with license raj, we will do away with intervention of government officials and bureaucrats. And now they are directly interceding and intervening into the system, which we feel is unfair. We have written to the ministry and even to PMO that before you impose such restrictions please consult with the associations and the major importers, who actually contribute significantly towards the economy of the country by producing critical chemicals. Get from them the basic facts and figures and then take a judicious call. But it cannot diminish the fact that yes, there is a gap of nearly 80% between certain chemicals and still you are imposing restrictions, which means we are just hitting the nail in the coffin for the industry.
In this pandemic, how do you expect the BIS officers to go overseas, inspect the factories and issue the BIS registration which takes almost 6 months. Currently, many foreign countries have even imposed restrictions on travel.
The government has announced that from September 1st, the BIS will be applicable. But how will an overseas fellow come here and get himself registered. So, I think for an another year, up to 31st December 2020, government should let things lie low. Whatever decisions you want to take, call a meeting in the first week of January with the industry. The government can call each industry, understand them, get the figures from the horse’s mouth.
Another angle to the story is with the geopolitical tensions between India and china, petrochemical imports are seeking alternate sources of cargo. Is this feasible?
No, at the moment it seems very difficult. But at the same time, we have no options. The cascading impact of this virus thanks to China, will last for another 6 months and its high time the entire world, not only India, stop imports from China. Yes, it is going to impact. Undoubtedly, our industry will be adversely affected and impacted by not importing from China because they are the largest source of some chemicals but then somewhere, sometime, you have to start looking elsewhere and maybe try for an alternate. China is not the ultimate.