The Hindu Business Line : Question of capacity or efficiency?

The congestion in the country's major ports is increasing. According to the Economic Survey, the average turnaround time for ships in major ports is up at 3.53 days from 3.41 days in 2004-05 and 3.45 days in 2003-04 and the average pre-berthing detention time was much higher at 9.16 hours compared to 6.03 hours and 4.86 hours respectively.

But, then, congestion is a global problem. It is almost impossible to find a major port in any country which does not have ships queued up outside, with shippers and consignees cursing and shipowners smiling. A tour around the world will reveal congestion everywhere — from bottlenecks in the US west coast to crowded anchorages off Australian ore and coal terminals, Chinese ports struggling to get cargo off the dock into interior to pre-berthing detention in Europe.

The picture is more less the same, the difference between ports being one of degree not of kind. Interestingly, the most used ports of the world are not necessarily the top ones for global trade. According to a study by Drewry Shipping Consultants last year, the five leading ports, all having utilisation ratios above 400 per cent, are Nassau (Bahamas), Point Lisas (Trinidad), Freeport (US), Luanda (Angola) and Dan Dong (China).

A STRUCTURAL PROBLEM

According to some international maritime experts, congestion is not a temporary issue but a structural problem which the shippers must learn to handle carefully. There are direct effects of congestion such as delays in unloading cargo from the ships onto docks, then transferring cargo from the dock to hinterland, with waiting times of trucks, trains and barges increasing.

There are also indirect effects. There will be additional costs due to congestion surcharges. The terminal handling costs are on the rise and these are passed on to shippers. Delays cause further capacity restrictions, increasing rates for container shipments. In fact, shippers suffer doubly — higher freight bills as well inefficiency costs. Increased lead time raise capital costs in supply chain.

Congestion often leads to a modal shift. For example, in the Netherlands, the companies that had been using barge and rail freight would often go back to trucks and in the peak season this would mean more road congestion, delay and, therefore, additional costs.

For example, the Haldia dock authorities, faced with acute congestion problem, have urged the operators of feeder vessels loading/unloading less than 100 boxes to shift to Kolkata Dock System or vessels carrying break-bulk cargo to unload into barges at Diamond Harbour anchorage. Such a shift would involve both change of mode as well as change of ports.

RETHINKING STRATEGIES

The congestion may impact industrial manufacturers requiring them to rework their outsourcing strategy. There were reports that US textile producers, faced with import delays caused by an acute port congestion problem, were contemplating relocating production from East Asia to Mexico.

Others mulled shifting production base from East Asia to Eastern European countries. If that happens, affected will be the east-west trade pattern and, with it, the shipping pattern.

At various international conferences and seminars on port congestion, the delegates would often hear all the endemic problems of geography, hydrography, productivity and various other things that would frustrate those who would smooth out the obstacles of the interfaces between land and sea.

The bigger the hinterland that a port serves, the higher the possibility of congestion it faces. Sometimes, congestion and unused capacities go hand-in-hand.

Also, in these conferences, there would be no dearth of solutions, not least from those advocating enormous port and terminal construction programmes. Some feel that the key factor for capacity is the length of the quayline.

However, the addition to capacity could certainly not be the most ideal solution to the congestion problem.

CAPEX NOT THE SOLUTION

Capital expenditure programmes take a long time to implement, from the identification of need to its translation into concrete projects, with long-drawn planning process, and, in a country like India where there are myriad problems of land acquisition, rehabilitation of those to be evicted from land and tackling the increasingly militant and well-organised objections of the environmentalists.

More berths may be needed but then so much more can be achieved more efficiently with what we already have. Better working practices from a more productive workforce would entail value for money than waiting for years for new berths to come on-stream. Equally important is connectivity. All the operational efficiency on the berth is wasted if the shipper fails to take the cargo away.

The ship-owners, chasing their own scale of economies and opting for gigantic ships, would often insist on exclusive terminals but construction of such facilities need not necessarily be the best way of using finite resources. What is critical is achieving efficiency in the whole logistics chain, not solely in ports.

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