“We are focusing on expansion to newer markets, so as to keep us profitable. For the last 2 months, we have spread our wings in Australia and Africa, looking at special containers, one trip opportunities and container trading,” shares Bijoy Paulose, Managing Director, VS&B Containers Group
You are into several aspects of container trade – used container sales, new container sales, domestic and international leasing. So, could you please tell us how the scenario in each of these businesses is?
Since the last nine months, the situation in all aspects of the marine container business have been negatively impacted. The lease rates for containers are under pressure due to lower demand, lower freight rates and poor profitability in almost all the segments our customers serve. The new container prices have also been under constant pressure.
Recently there has been a glut of empty containers and the Government had called off the incentives it had announced for making domestic containers. Is this the end of India’s dream to manufacture containers? Also, how will this Government’s decision impact the investment spirit of businesses who may have planned to venture into container manufacturing?
I also saw the news report that the Government may call off the PLI scheme for domestic container manufacturing. If true, it is indeed a big disappointment. If India is to become a force in container business, be it shipping, leasing, coastal trade etc. local source of container supply would be essential. Even China during the initial stages of the container manufacturing industries had given active support through lower taxes, rates etc. to encourage the growth of container manufacturing. They even had a department in the ministry to ensure one window clearance to container projects, stabilization of pricing.
Though some of the Indian container manufacturers are persisting with the plans to produce containers and at least 4-5 small manufacturers are in operation, the long-term sustenance would mean ramping up the volume and that would certainly be possible only with Government’s support through incentives.
Clearly any Government policy of infrastructure requires a long-term perspective and sustained policy. ‘On today, off tomorrow’ approach will be a serious disincentive and cause wariness for an entrepreneur to venture. We should also look at this in the background that there were container plants in operation across the India 20 years ago, all of whom shut down due to predatory pricing from China and lack of any Government assistance to sustain the industry.
Considering the Government’s target of reaching a port capacity of 10,000 MMTPA by 2047 and becoming a $5 trillion economy, do you see a business case for investing into container manufacturing?
Today more than anytime else , there is indeed a business case for investing in container manufacturing especially as there is a huge growth of exports from the country overall and it could dovetail well with the government push to ‘make in INDIA’ ( and export from India ) .
The fact remains that even now a very large part of container requirements of India are met by imports from China. We are still finding it difficult to give an economical option to business entities, who wish to procure a non-Chinese origin container.
Over time in many locations, we will have export surplus and therefore leading to an opportunity to use locally built containers.
Take for e.g. – Vietnam, where they are now quickly setting up state of the art container manufacturing to absorb the move away from China. This goes with their renewed general export and manufacturing investments.
Earlier there were issues relating to the cost of manufacturing containers in India, availability of raw material, etc. Where are we now? Has there been any improvement on these fronts?
The issues related to the cost of manufacturing in India are still very much relevant. The main component Corten steel is still manufactured by only 2 plants and in very small batches and supply is not assured unless minimum batch sizes are met. The key to develop the container component industry is economy of scale, which can only come from larger container manufacturing capacity and therefore need for the components itself. Ultimately like our domestic car manufacturing – it could end up with exports of components from India
What are your short-term and long-term plans for VS&B Containers group?
We are expecting the current business depression to continue for at least a year. We have therefore started to focus more in terms of expansion to newer markets, so as to keep us profitable. For the last 2 months, we have spread our wings in Australia and Africa, looking at special containers, one trip opportunities and container trading. VS&B has also continued to promote its software company, iInterchange Systems Pvt. Ltd., which has now become a brand to reckon with in niche areas of container leasing, trading and depot management spaces. iInterchange delivers end to business management software solutions for the niche shipping segments.
