The Hindu Business Line : To be a global shipping player, India needs infrastructure

The Transworld Group of Companies, with operations in India, South-East Asia, West Asia, Europe, the UK and the US, owns and operates 25 ships with 1,250 employees. The group also has the distinction of "containerisation" of India. Founded by the late R. Sivaswamy in 1977, the $200-million group is managed by his sons, Mr Ramesh S. Ramakrishnan, Chairman (operating from Dubai), and Mr Mahesh S. Iyer, Managing Director (operating from Singapore). The brothers spoke to Business Line recently on trends in global containerisation and the group's interests.

Excerpts from the interview:

Could you comment on the global trends in containerisation after 9/11?

Ramesh: The 1999 South-East Asian financial crisis affected the whole world, including container shipping. The effect was similar in 2001, when the US was attacked. Any crisis that hits other regions, including South-East Asia, the rebound is a bit slow. However, when something happens to the US, the rebound is fast.

For instance, when one compares the situation in 2001 with that of 2003, there has been a tremendous growth in container shipping not only in the number of ships, but also in cargo volume in the last two years. This triggered tremendous space pressure, both in the Atlantic and trans-Pacific routes. If one looks at the supply versus demand, there is an acute requirement today for space despite gigantic ships coming in, and the situation will continue to be the same till 2006-07. Various studies show that the growth and demand are going to be tremendous.

What could be China's influence?

Ramesh: China is just one factor. In January and February, the China factor softened a little. Even after discounting the China factor, the India factor or any other factor, the likelihood of business to grow remains stronger, and this will manifest in terms of freight and the rates. One can tend to believe that the rates will go up, and the supply will be rather short in terms of demand. The rates are stable, and we are going to see what it (the rates) was in the past. The business in container, tanker and bulk carriers are strong, and will remain stronger for the next two-three years.

It is said that China and the US were responsible for the current bull run in the maritime industry? How is the situation with developing countries like India?

Ramesh: There is a relevance to India in the global maritime trade. By 2012, India should have a throughput of 16 million TEUs (twenty-foot equivalent units). To support that, the need of the hour is to have additional container terminals.

The country should have adequate terminals, terminal operators and space for the cargo to multiply and the growth to be faster. Today, we do not have sufficient space to take care of the country' trade requirement.

Port terminals are a necessity, no matter where they come up. Both the Indian coasts should have ports, including private facilities, to ease the pressure on supply of space, and attract large players.

If there is no cargo, what is the need to build more infrastructure?

Mahesh: With the government's initiative to promote exports to 12-15 million TEUs, we need to plan for the future. China's growth in the last five years has been substantial.

It not only concentrated on the Shenzhen port, near Hong Kong, but also created infrastructure all over the country, including Shanghai. China today handles about 50 million TEUs a year in throughput, and it is a major supplier to the world. This growth was mainly because of good infrastructure support. This is what is required in India, to become a global supplier.

What should be done to make this (like China) happen in India?

Mahesh: We have everything, in terms of people, information technology and banks (to issue letter of credit). In China, everything is happening from either Singapore or Hong Kong. We are way ahead in all these areas when compared to China. But we are getting pulled back because of infrastructure.

How would the tonnage tax help ship-owners like you?

Ramesh: Any ship-owner will benefit in the tonnage tax regime. The Transworld group has Indian flag shipping, Shreyas Shipping, to focus on coastal container feeder service. Tonnage tax will create a level playing field for Indian ship-owners. Over a period there can be certain lacunae and lack of clarity. But the government has taken it seriously, and it will add to a company's profit and to the country's tonnage.

Being a strong player in the Indian coastal shipping, how do you look at the Sethusamudram canal project?

Ramesh: Coastal shipping will find a lot more benefits, including transhipment of boxes between Indian coasts when the project comes up. It will save a lot of time and cost with ships avoiding going around Sri Lanka. We are looking forward to the completion of the project. It will enable coastal shipping between the two Indian coasts, right from Kandla to Kolkata, and vice versa through the Palk Straits at a much lower cost.

Could you tell us how the charter rates have been in the last few months?

Ramesh: The charter rates have been going up in the last few months. As ship owners we always believed in adding up assets. Last year, we added six ships in to our fleet. We have now ships of 1,100 TEUs and 1,200 TEUs capacities. We are doing in excess 350,000 TEUs (feedering alone) a year.

Would you go for large container ships?

Ramesh: We have not achieved our best in the existing areas, and need to do a lot more. We have certain investment plans and encourage more assets in terms of procuring ships and assets. We have expanded our operations, and continue to explore new opportunities in shipping, including foraying into chemical carriers and tankers.