Driving To Deliver Your Business

Sea change in shipping cargo at Jawaharlal Nehru Port Trust

MUMBAI: The customs department at the Jawaharlal Nehru Port Trust near Mumbai is spearheading a sea change in the operations at one of the most congested, problematic ports in the region, in the process helping it convert into a flagbearer of the Modi government’s motto of ease of doing business.

Leading the movement is John Joseph, chief commissioner at Jawaharlal Nehru Customs House (JNCH). Through measures punitive and inclusive, Joseph has cajoled the biggest corporate names — from Reliance Industries to the Tata group — to adapt to a faster cargo clearance method, Direct Port Delivery[2] (DPD). DPD is a global clearance method wherein cargo is transferred straight from the terminal to place of delivery, instead of initially holding it at a container freight station.

It seeks to cut dwell time to 24 hours, a fraction of what it used to take to put shipments out of charge. If effectively deployed, this means massive savings in logistics costs for importers. To bring companies under DPD, his method ranged from terse letters to CEOs, multiple meetings, issuing more than 150 public notices to even holding cargo at the port till they agreed to fall in line.

The results are in the numbers. Since the beginning of 2017, the volume of container cargo under DPD has been increasing at a quick pace: it more than doubled from a year earlier in January, and grew 690 per cent, 562 per cent and 452 per cent in the following three months. DPD cargo as a chunk of the total shipments the port handled has increased to 30 per cent in April from a minuscule 5per cent in the past eight years.

DPD was introduced in 2008, but never properly implemented. DPD has helped reduce the clearance time for 84 per cent of the bills of entry — these are given once a cargo reaches the port terminal — to less than 24 hours from 3-5 days earlier. The savings for companies is Rs.

10,000-15,000 per container, which means the total annual savings are likely to run into hundreds of crores. What’s more, the timely clearances have led to a big jump in tax revenue. Revenue for the JNPT[3] customs department in April has seen an unprecedented 35per cent year on year increase, almost seven times the usual growth levels.

DPD was first envisaged and loosely implemented in 2008, but few companies adopted it. DPD by global definition seeks to eliminate or modify roles of container freight stations (CFS), warehouselike structures wherein containers are stored before they leave from the port. JNPT, or Nhava Sheva as the port is locally known, has been constructed as a CFS port.

Year after year of using CFS, coupled with the port’s own congestion and logistics problems, had created an informal nexus between shipping lines, terminals, CFS operators and importers. Cargo took up to 8-10 days to clear. Importers began to figure this delay into inventory management routine, letting cargo lie for days in CFSs before taking it.

The decisive push came from the Modi government last year after it ratified the World Trade Organisation’s Trade Facilitation Agreement[4] that aims to expedite movement, release and clearance of goods, including those in transit. What followed was a staunch mandate to bring more cargo under DPD regime as a way of enhancing ease of doing business. Enter Joseph his team in August 2016.

Joseph saw the first step would be to increase the number of accredited importers for DPD. Over a few weeks, the number of companies under the list of Authorised Economic Operators, or companies accredited to use DPD, increased to 778 from about 110. Companies were reluctant in the beginning, said Joseph.

Executives said they would require at last 4-5 months to adapt to the system. “We knew they were just unnecessarily buying time,” he said. Joseph then wrote to about 500 company CEOs detailing each companies’ cargo tonnage imported to JNPT and how much they would save by adapting to the new procedure. “‘If nothing else, use the money for CSR activities but don’t waste it,’ that was the punch line of each letter,” said Joseph.

The letters led to many instant nods. Others were still iffy. In one case, Joseph warned he would write to the Japanese management of a company “in the language they understand” to get them on board.

With other outliers, Joseph threatened to hold cargo at the port, unless they took the DPD route. “That is the amount of pressure we had to put on them.” Inclusion was the other way. The customs department met several stakeholders in multiple meetings and answered queries, said CP Singh, deputy commissioner at JNCH and Joseph’s key aid in DPD implementation. The more than 150 public notices that JNPT sent out on DPD is a record in the port’s history, he said.

The next line of resistance came from shipping lines, terminals and CFS operators. Joseph said shipping lines — “not established ones but smaller non-vessel operating common carrier operators” — and terminal operators introduced arbitrary charges on cargo docking in terminals. Importers began to complain and the customs went after the lines, forcing many to make refunds, said Joseph.

A senior executive at a major terminal operator at JNPT, though, denied allegations of arbitrary charges. “Earlier the importer was milked by every stakeholder down the line. Now he is in the driving seat,” said Joseph.

Joseph’s uphill task is borne out by the JNPT deputy chairman, Neeraj Bansal. “Whenever there are reforms, there is resistance. Implementing DPD was very, very tough.

Please remember every stakeholder had got used to a particular way of working at the port. But it was achieved. The soaring in tonnage under DPD is a testimony to the fact,” said Bansal.

“We haven’t had such a proactive customs department in the history of JNPT.” Bansal said the issues relating to extra terminal charges will now be resolved. The management has proposed all terminals — one run by JNPT itself, the others by DP World and APM Terminals — should charge `1,600-2,300 per container as DPD charges, a fraction of the amount the companies are otherwise saving. “The procedural issues related to DPD have been resolved to a large extent and the whole structure has stabilised a lot,” said a senior executive who looks after port deliveries and clearance at one of India’s largest conglomerates.

He didn’t want his or his firm’s name to be cited. “Every month, we get about 150 containers. Earlier, we used to get about five under DPD. Now almost 40per cent of monthly total containers have come in it,” he said. “After a late start, we were able to clear 95per cent of our containers with DPD last month.

Before April, this was 40-50per cent. Now we want to take all full container loads only via DPD,” said Pramod Sant, head of EXIM, export control and customs at Siemens India. “Customers are seeing massive savings after the implementation of DPD,” said Kruti Jobanputra, executive director at JWC Logistics, a provider of services including container freight stations, freight forwarding and groundhandling.

“Earlier the chunk of cargo under DPD used to be just 15per cent. Now it’s up to 35per cent. That’s enough testament to its success.”

CFS operators have also been included into the procedure. JNPT has designated a single CFS, operated by a company called Speedy Multi-modes, as the default hoarder of uncleared cargo. But an importer can designate any other CFS operator by sending an email for approval from customs.

JNPT has 33 CFS operators including Allcargo Logistics, Ameya Logistics, GDL, and Hind Terminal. “In some cases if project sites are not ready and we have to keep material in bond we are able to use CFS Bonding or use free storage period,” said Sant of Siemens. “Some CFS operators have successfully remodelled their business model to suit DPD and are able to give above value added solutions to importers.” Industry experts concur. “The drive to implement DPD is a progressive move to enhance efficiency of EXIM supply chains and while success has been limited, measured against the initial target of 40per cent by December 2016, the ongoing aggressive push for DPD is a step in the right direction,” said Prahlad Tanwar, director for transportation and logistics at consultant KPMG.

ET View: Corporatise Port Trusts
Shoring up port productivity would boost shipping traffic. The way forward is to systematically improve ship turnaround time with mechanisation and up-to-date systems. But in parallel, we need to structurally overhaul the major port trusts.

The port trusts need to be corporatised and set-up under the Companies Act, so as to function and perform in a business-like manner.

It would then also be possible to gainfully unlock shareholder value, to fund, for example, port revamp and expansion plans.

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References

  1. ^ ports (economictimes.indiatimes.com)
  2. ^ Direct Port Delivery (economictimes.indiatimes.com)
  3. ^ JNPT (economictimes.indiatimes.com)
  4. ^ Trade Facilitation Agreement (economictimes.indiatimes.com)



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