The recent dictum by Prime Minister’s office to major ports to ensure 40 per cent of import containers to be delivered to customers directly has made CFS operators anxious about their existing investment and future role in logistics. In the process to rationalise logistics cost, often the fees involving cargo clearance through CFS were under scrutiny for some time. While the trade in general is optimistic about the development but the decision leaves certain questions unanswered! The December deadline is being seen too hurried, and there is no elaboration about the future role of CFSs, and also the shipping lines, who dictate the tariff, have been kept out of the ambit of the reformation.
Clarifying the stand of CFS operators, Ashutosh Jaiswal, President (Eastern Chapter), National Association of Container Freight Stations, said, “Ports like Kolkata used to handle just 2.6 lakh teu till 2008, however after CFS came into the picture the cargo volume has increased to 5.9 lakh teu. The government has set a target to deliver 25 per cent of cargo through DPD by December 31 and 40 per cent till end of FY2017 for Kolkata. If the government is serious about bringing down logistics cost and improve on ‘ease of doing business’ then DPD facility should be extended to all instead of only 40 per cent of importers. The reason is major port infrastructure is not capable of delivering 100 per cent DPD. The decision is made in the vested interest of few private terminals who want to do away with CFSs.”
Moreover, the government has not done anything about incentives charged by shipping lines, which is the root cause of the problem. The DPD model will particularly affect cargo clearance for ports located inside congested cities like Kolkata and Chennai. Furthermore, a lot of cargo clearance related activities like clearance from Drug Controller and plant quarantine are done at off the dock facilities, said Jaiswal.
J Celestine Villvarayar of Tuticorin-based Vilsons CFS looks at the bigger picture and hopeful that though in the short-term DPD will affect CFSs but in the long term it will increase throughput for ports which will be beneficial for CFSs.
“CFSs can reinvent their business and value addition and containerisation of export cargo will increase at CFS. DPD is still at a very nascent stage but as the trade gets aware of its benefits they will adopt it.”
However, Villvarayar is doubtful about ports being able to deliver 40 per cent of cargo through DPD by December. He said, “It will take at least a year’s time to achieve 25-30 per cent of DPD at Tuticorin. Unlike JNPT, other major ports have to upgrade their infrastructure to make DPD a reality. Customs compliance is a very major element for delivery of cargo directly at port or at CFSs. The infrastructure needs to be in place for assessment of cargo by Customs and other statutory agencies unless which DPD can’t be a reality. There are variety of cargo like scrap that needs to be physically examined, and Customs will have to comply to their laws. Hence, the nature of cargo will also determine the percentage of cargo cleared through DPD at a port ”
Notably, V.O.C. Port at Tuticorin had issued a trade notice in July to increase the share of DPD consignment to 25 per cent by September but so far DPD volume has not taken off at the port significantly. DPD consignment accounts for less than 1 per cent of total cargo at the port. It is time India should learn from neighboring ports like Colombo which has regulations in place to curtail the way liners operate there. While government looks to bring down unit cost for EXIM cargo but it is not possible until the incentives charged by liners are not hold back. There should be some regulation to bring in transparency in the charges levied by liners to make DPD a success.