Diversified cargo: Capacity constraints and way forward
Representatives from industries in Odisha spelled out logistics challenges they face in moving cargo. The panel coincided on the need for an integrated approach for improving end-to-end logistics
Having discussed infrastructure, investment, capacities coming up and connectivity issues in the previous session, the second session of the event moved on to focus more on the operational issues. Where exactly are the problems and how they can be sorted out was the crux of the discussion by the panel which had a balanced mix of service providers and users.
Ports will evolve to become end-to-end supply chain providers, emphasised Subrat Tripathy, CEO, Dhamra Port. “Port infrastructure strengthening is not the exclusive realm of the port. We can’t even take the first baby steps that we are having today if we did not have Dhamra,” said Tripathy, as he took the audience down the memory lane, touching upon the establishment of the first ports in India and Paradip being one among them. “People often talk about competition between Paradip and Dhamra ports, but when we think of infrastructure development in the country the focus should be on complementarity rather than competition,” averred Tripathy.
Hinting at the enabling environment provided by the central government he said, “It just took me a cup of coffee to convince the shipping secretary for fourlaning of Chandikhol- Paradip road to ease cargo movement.” Diverting from road to rail freight, he said, “The need is to restructure the entire railways operations and take it the way European railways have gone. It is not about owning wagons or locomotives, but about ownership of an asset, letting private enterprise come in and run that asset, making decent money rather than focusing on abnormal profits.”
Hinting at the future of ports in the state Tripathy said, “The next level will be about end-to-end logistics, wherein shipping lines will not have to wait for berthing. Elaborating on this aspect Tripathy said, When SAIL moves cargo from Australia to Paradip, the company should have a clear idea of costs involved and the punctuality of time in which the cargo will be delivered.”
PC Choubey, Executive Director, Indian Oil Corporation, touched upon the key aspects of offshore crude oil movement, which is very cost effective and eco-friendly as compared to movement by pipeline or rail. He encouraged establishment of industrial hubs based on synergies – such as the establishment of ancillary industries for oil refineries and petroleum products in Paradip. Earlier the oil major used Haldia Port for oil movement to refineries in the eastern region, but the port charged high wharfage, which became the very reason for IOC to divert its cargo to Paradip Port. The oil industry has so far avoided Paradip Port due to the adverse sea conditions, but IOC has taken the lead and with 57 per cent berth occupancy, IOC is confident of handling 60 million metric tonnes of crude oil at the terminal. “We have plans to supply crude oil to Numaligarh refinery from Paradip,” revealed Choubey.
All the requirements of refineries on the eastern part of India is fed by Paradip. We are planning to expand capacity of Paradip refinery to 25MMT. But the bigger picture is that “I am planning to replicate the industrial structure present in Mundra at Paradip as well.” This will include establishment of pipeline coating and manufacturing plants in Paradip. Another business opportunity he pointed at is for manufacturing marine hoses in India, which are currently imported.
Hinting at cost efficiencies at sea he said, when we move crude oil offshore its cost is only 5 paisa per MT per km, as compared to pipeline which is 1.50 paisa per MT/km and `2.50 per MT/ km by rail. The best mode of transport for moving bulk cargo is through VLCC tankers.
Venkateswara Rao, Head (Outbound Logistics & Shipping Business) Vedanta Ltd, brought to the fore the raw material sourcing woes of the company, as it is forced to import materials from as far as Africa, in spite of presence of mineral reserves in the very state. 50 per cent of the Haldia, Paradip and Vizag ports capacity is used by Vedanta. The company is also India’s single largest container exporter, exporting 50,000 teus. Hinting at the reasons for chosing Odisha for its operations Rao said, 90 per cent of Bauxite reserves are in Odisha, which forms a major raw material for Aluminum. But the company still imports Bauxite from West Africa as the mineral is not being mined in Odisha. In spite of availability of raw material reserves in India, the company has to import from across the globe. Vedanta exports 40 per cent of its output to Asian countries and 25 per cent to Americas and 35 per cent to Europe, but all of this happens through far off ports like Vizag and Haldia. “Vedanta gives commitment from this forum that we will be the first mover if container terminals are developed in Paradip,” announced Rao.
LN Mallik, Executive Director (T&S) SAIL, elaborated on the capacity constraints his company faces on a day-to-day basis. SAIL produces 16 million tonnes of steel and holds a capacity for producing 21 million tonnes of steel. This requires 80 million tonnes of raw material which has to be moved in spite of congestion at ports and shortage of rakes. For instance, Paradip and Dhamra have pre-berthing delays of about 7 days, followed by issues of evacuation and storage. As Gopalpur Port opens up the company is planning to import limestone through the port, while the same is currently being done at Haldia. “It is not only the ports and railways to be blamed. Many manufacturers do not have the capacity to handle different types of wagons and reduce the unloading time,” clarified Mallik. Integration and synthesis of the available infrastructure and resources to improve efficiency is the need of the hour and this can cut down avoidable expenses such as demurrage and waiting charges.
Prashant K Pati, Vice President (Marketing), OSL Group, pointed at the growing hinterland activity in Odisha that promises more cargo for all the three ports in the state. The upcoming coastal highway connecting all the three ports will ensure equitable distribution of cargo to them. Talking about the problems of container imbalance and repositioning he said, it is a global phenomenon as there are no commonly adopted container management strategies by carriers. Suggesting ways for reducing container repositioning cost in Odisha he said, abolition of port entry charges for vessels carrying empties, concessional tariff for empty containers, use IT solutions for flow forecast into the region and triangulating movement by sending empties directly to exporters.
“Infrastructure issues are PAN India and not restricted to any one part of the country. All logistics providers be it shipping lines, CHAs or freight forwarders are using this opportunity,” said Rajiv Ranjan Kumar, CEO, Apeejay Infralogistics Pvt Ltd. Businesses in Odisha are struggling due to lack of container port, sourcing cargo from distant ports such as Vizag or Kolkata. But whether you source from Vizag or Kolkata, the cost remains same. Even if a container terminal is opened at Kalinganagar, the import cost will marginally reduce by 30 per cent because of infrastructure issues, paucity of transportation and unionisation of truck owners. This can be resolved through a concerted effort by government and the industry. Summing up his discussion Rajiv said, as the ports and logistics services increase, the cost will automatically go down and efficiencies will come in with growing Session in progress competition.
