Article - 119 Week 03 | Change The Rules & We Can Change The Outcome

Article - 119   Week 03

Change The Rules & We Can Change The Outcome
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500 CE. Pacific Ocean was criss-crossed with vessels trading within African East coast, Arabia, Persia, India, South East Asia, and China. The Muslim traders were the most dominant and wealthy ones in this ocean trade.  Logs & ivories from Africa, textiles from India, finished silk and porcelain from China, and spices from Indonesia were the commonly traded goods. The Indians were one of the most sought after and skilled & accomplished sailors cum merchants. Even before this period, we would find mention of Indian merchants in the Roman Empire by sea route. They were known for their clever  bargaining skills even then in the Roman Empire. The first English expedition to India via Cape of Good Hope was badly damaged by inclement weather. And there is mention of this Gujarati pilot guide who navigated the partially damaged vessel all the way to Malaya. And not only that, the same vessel managed to subdue and dispossess a Portuguese vessel off  Sumatra, taking back a huge profit of the expedition to England. And that incident gave the English the confidence that they could take on the Portuguese in the East. Even during the Greco-Roman period Indian merchants and mariners were very active in the maritime trade. From skilful navigation in monsoon winds, ship building, ship repairs, to merchandising, Indians had a significant and praise worthy contribution to world shipping.

Unfortunately, the Moguls had no special interest in maritime trade and naval expeditions. And the English always had an upper hand to push their power through because of their fire power in shipping. The East India Company killed any remnant maritime spirit in the Indians by imposing complete monopoly on shipping, to the extent that even the English privateers were restricted with many types of licenses and red tapes. The red tapes and licenses were even more severe on the Indians under the imperial rule. India got independence from the imperial rule. But the severity of the red tapes and licenses continue to stifle our maritime industry even to day. Nearly 65 years after independence. If you are an Indian why do you need a license to export? License to import? License to run an agency? License to clear goods from Customs? A load of licenses to start and run a shipping company? We are drowning under the  heavy ballast of red tapes,  licenses, permissions, NOCs, inspections, approvals, and crude taxations. Until we are liberated, our shipping industry would  look more like an old Soviet sick industry as it does today. The Ghosts of Warren Hastings and his ilk loom large in our executive & administration of the industry. Until the ghost is exorcised, we would be struggling hard both within and outside for a fair share of the fruit, that is legitimately ours - from a rich and proud maritime heritage.

Brgds

Capt Rath

Article - 118 Week 01 Mumbai to Surat

Article - 118   Week 01     

Mumbai to Surat

"NMMC stare at tax losses as city industries eye 'dvpt friendly' Gujarat" - Headline, Times Of India On 6th Jan 2013

Long time ago, Surat was the entrepôt and trading capital of India. The Moguls controlled and ruled the place. Their rule guaranteed safety and security to traders and artisans. They allowed the Portuguese , the British and others to carry on competing and trading. In addition to huge amounts of imports of horses, bullion and export of fine calicoes, the place was used for ship repair and provisioning for both the west bound and the east bound ships to Indonesia and China. On the other hand, Bombay, consisting of many isles, had a small trading post of the Portuguese, prone to the excesses of Maratha attacks and Mogul high-handedness. Even after the British took control of Bombay, trading activities were limited, until the East India Company decided to move its administrative centre & main factory from Surat to Bombay. The Moguls slowly perished. The Marathas were subdued. East India Company had its stable monopoly over the islands. The place grew secure and safe for trading. Traders flocked into the place with all their money. Weavers, artisans, and workers made a beeline for a safe and prosperous, productive and rewarding life. And the rest is history. The trend  continues to be felt, albeit a much slower pace or perhaps a reversal of the trend!

The surest way to to bring a city down on its knees is by blocking its sea ports and airports. In a war, the Generals do that to their enemy as an offensive strategy. In our case, our city is being slowly, insidiously and undramatically choked in its ports and airport. The process is so slow that we hardly notice it and we get used to the pain over time. We hardly complain. Some thing like a slow poisoning. You won't know the damage until it is so pervasive and extensive that it is too late to remedy. Mumbai is no more a secure and safe place for business, trading and shipping. It is particularly punishing its business people, and the common workers, artisans, and the middle class. The old port is practically abandoned by the users due to the excesses of corruption, archaic rules, rent seeking monopoly interests, and hostile unions. The new Terminals of Nhava Sheva built as a substitute to Mumbai Port, and to handle larger volumes of containers & conventional cargo have floundered. Callous administration, shoddy regulations, conflicting and ambiguous contracts under BOT deals, wide spread corruption, sky rocketing land prices, unfair government deals in acquiring land for port building, excessive lock outs by belligerent Union workers, and hopelessness are the order of the day. Safety, security, and stability is menacingly questionable. Excessive taxes on businesses, goods, services, and workers has rendered the place gloomy. Land grabbing by politicians & their fronts has driven lopsided developments and kept basic infrastructure fragile and stagnant, while keeping the home prices sky high as a result of restricting basic infrastructures to small pockets. The city is anaemic  under a dying sea port and a choking airport. Capital and skill are the hapless victims. They are seeking an alternative to run to. And Surat (Gujarat) appears to be that alternative. With a pro-business climate the place is inviting investment and skill. Gujarat ports are simply world class in productivity and capacity. Connectivity by rail to Delhi and other ICDs goes uninterrupted despite the hegemony of government controlled CONCOR.  No strikes or lockouts. Roads and infrastructures are being built rapidly.  As of now, Surat appears to be sprinting back to regain its past glory at the expense of a consumptive Mumbai.

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Brgds

Capt Rath

Article - 116 Week 47 Big Ports & Small Users

Article - 116 Week 47  

Big Ports & Small Users

We have heard the same noise from the top. Especially so when there is a change of guard. It's all about increasing the port capacity to some staggering numbers. In reality we see all our capacities being abysmally under-utilised. Big ports, big management teams, big Unions, big BOTs, big regulators, and big rules have reduced the end users to smallness of comical insignificance. Under utilisation of port capacities, drops in exports, and imports do not logically call for mindless expansion of capacity. What it calls for is an introspection on the pain points of the industry and try to eliminate them. There are two principal reasons why logic is being sacrificed and mindless capacity expansions are being espoused. First is a straight line thinking of extrapolating the past into the future, without paying a hoot to the present. Second is building big projects to generate big political incentives. It's a 'monkey see monkey do' syndrome of mimicking the capacity building madness of China to justify clever political ideas of generating dirty wealth.

Our ancient labour laws are killing the manufacturing industries. Our ports are hostage to hostile and greedy unions and political meddling. We still inherit mountains of archaic laws to stifle free trade with outside. Our bureaucracy is being pampered into being more and more obstructionist and rent seeking in dispositions. Infrastructure leading to the ports are being paralysed from time to time, by various rent seeking  mobs at the behest of political outfits. The genuine investor is being made to bleed, while the shadow investors of political big daddies are given the full freedom to perpetuate their monopoly on roadways. Under such gruelling atmosphere, Potential with a capital 'P' would never become a possibility, even with a small 'p'. Only a fool would build a bigger house, when his very premises are being systematically squatted and squandered. We hope and pray that our leaders look into the real problems rather than seek solace in an illusive capacity building madness. Having said that, I do not propose that capacity building is a bad thing at all. All I say is that it's a bad priority on the face of things today. The things that need urgent fixing.

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Brgds

Capt Rath

Article - 115 Week 45 The Tears & The Fears Of Onions

Article - 115 Week 45  

The Tears & The Fears Of Onions

Indian Onions are scary. They threaten Politicians, worry common man, drive farmers to extreme desperation, and above all make our container industry tango to the whimsical bans & restrictions on exports. Governments have fallen in the past due to wild price rises on onions and farmers have been financially ruined with abysmal drop in prices. And today the ghost of the past looms large on politics. Reason and good economics have taken the back seat. Draconian, pedestrian, and restrictive legislations are the order of the day. 

So fas as container shipping goes, onion is one of the cargo that helps reposition containers from export deficit ports in India to our richer neighbourhood - at throw away freights. With free flow of exports of onions both farmers and container shipping attain some level of stability and predictability. The export freight on onions may be very low, but the repositioning of the containers helps reduces the costs for the shipping lines, while the artificially low freight helps our farmers' competitiveness.  The costs of storage, idling equipments, & dead space on feeder ships are saved. This cost saving is indirectly passed on to freight rates on both imports and exports. The invisible hands of Adam Smith's free market does it in the background. Any obstructionist move by the government policy on free exports of onions, results in throttling the margins of the farmers, increasing the costs of shipping lines and related industries, and above all puts large stamps of unreliability on Indian supplies to overseas buyers. In fact, the objective of keeping prices of onions low for the domestic consumers by such obstructions is an illusion and adversely affects the very purpose. Such artificial depression of the price hits farmer hard. He bears losses and avoids growing them in future. Such massive abstaining of farmers for this crop, results in scarcity and price spikes. Such a situation has driven the prices so high that government has been forced to allow free imports of onions to cool the prices at home with huge forex losses. Keeping onions freely exportable and importable, will keep our farmers in a stable state to grow more. Wild fluctuations in prices will not happen. There will be a cost advantage to the shipping lines that would pass down to our other exports and imports costs. There would be no need for the government to intervene or fabricate stories to cover up for the wild spikes. The traders are so many in number that it is impossible for them to act in tandem to hoard for profiteering. Only in a controlled market, when the traders realise that price are going to go up because imports and exports are not free, there would be the tendency to hoard. Freedom boosts productivity. Restrictions boosts poverty.

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Brgds

Capt Rath

Article - 114 Week 43 Mate’s Receipt – A Ghost Document

Article - 114 Week 43 

Mate's Receipt – A Ghost Document

Long long time ago, the person responsible for loading & securing  goods on board a ship was called  'mate'. He saw the goods with his own eyes. He would issue a receipt for such goods. And that was looked upon as authentic and nonpartisan. The Bill of Lading was prepared and issued by the Master on the basis of this document. These days, 'mate' is commonly known as Chief Officer. On container ships, he facilitates the loading of the sealed boxes. The boxes are filled by the shipper. The contents of the box are certified by the Customs Officials on a document known as 'Shipping Bill' in India. The box travels hundreds and at time thousands of miles under Customs seal & bond to the port. Then the box is stored inside the Port premises until the vessel arrives.  And before our Chief Officer could wink , the same is loaded on the vessel as per the plan prepared by some one sitting as far away as Timbuktu. The 'mate' has absolutely no clue as to what could be inside the mystery box – nor does he care, unless it has some nuisance value on the ship's operations or safety.

Let's follow the shipping bill. This document is made just before the cargo is stuffed inside the box. The customs watch the cargo go in as per the shipping bill. Then it is sealed. At various stages of movements the custom's officials stamp them along to authenticate progress. Then the box is loaded on the ship. The final thing is to certify that – the said box is loaded on the vessel and the vessel has left the port. This is where the catch lies. The customs need the 'Mate's Receipt' to make a notation of same on the Shipping Bill. As described above, our Chief Officer is completely clueless on what goes inside thousands of such boxes being loaded and even unsure if all the planned boxes are loaded by the Port in the first place. So nailing responsibility on Mate's Receipt (issued by the box operator's agent on behalf of the Mate) is an extremely unreliable act. The correct source of this information lies with the Port or its nominated surveyor – not a Mate who is no more to be seen on the scene after the vessel sails and glaringly innocent of such information. That authentication only leaves him or his agent as a scapegoat if things go wrong.

It's time we stop this archaic, irrelevant, and witch-hunting system of pinning responsibility on a ghost's agent and loads of meaningless duplicity. Shipping bill and EGMs are contextually one and the same thing. A few additional information and authentication by the Carrier's agent on the Shipping Bill would render it to be the  'Export Manifest'. This simplification, would make a big dent on the much talked about 'transaction costs' on exports in our country.

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Brgds
Capt Rath

Article - 113 Week 42 Import Process With A Big Hole

Article - 113 Week 42

Import Process With A Big Hole

Imagine 100 containers in the middle of Mumbai. Loaded with deadly explosives. The remote trigger is in the hands of a terrorist. One click & boom! I am not talking about a Bollywood movie or sensationalising triviality. I am talking about real life situation in our industry.

A whole lot of goods are purchased by Indian entities from overseas. Millions of containers are entering as imports in a year. 'A' sells (Overseas Seller)- 'B' buys (Indian buyer)- 'C' carries (Shipping Line) – 'D' handles the imports(Agent) – 'E' declares the goods to Customs (Sub-agent or Surveyor) – 'F' moves the cargo on land (Bonded Transporter) – 'G' stores (CFS, ICD, Port) the goods in containers for delivery to 'B'. Interestingly & dangerously, 'B' is a silent sleeper until he wakes up to claim his cargo after paying the duty. He could sleep for months to years to even infinity. 'E' on behalf of 'D' declares the details of the incoming goods and identity of 'B' etc . You call it IGM. 'C' has no knowledge about the identity of 'B' – except as declared by 'A'. 'C' has extremely limited control on what 'A' puts inside his box, in a foreign land with alien laws & practices. 'B' could be a fiction or could choose to be a fiction at the time & place of his choice. Our Customs Laws are ruthlessly merciless towards 'D' for any slight. 'D' has to declare the IGM 48 Hrs (On behalf of 'C') before vessel arrival, while 'B' could be sleeping in Honolulu. Be it missing a 'comma' in the IGM or a thermonuclear bomb as cargo – 'D' shall be pulverised to shreds by the Indian Authorities.

The solution needs no rocket science. It needs plain common sense. 'B' must have a face and 'B' must declare what he is bringing, before the goods land in India. Until 'B' has a face and he is made to own up his goods before they arrive on our shores, we are just sitting ducks, praying to God almighty that this never happens.

Brgds  

(Capt Rath) Skype Gtalk MSN :  psrath

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Article - 112 Week 40 | God's Advocate In General Average

Article - 112 Week 40 |    

God's Advocate In General Average 

Extraordinary expenses, peril, common adventure, and many such porous and subjective words are cleverly woven to make ransom look like a lollypop. You pay a carrier to carry your cargo. The carrier goofs up and the vehicle catches fire. Then the carrier proves that God was responsible for the disaster, by weaving such clever words. He calls it "General Average" and arm-twists  you to pay - to both douse the fire and repair all the damages caused in the fire and the delays. And that is known gloriously as International Law in shipping.

 

Think of one of those silly mob movies. The Don kidnaps a few rich kids. Then he calls the rich Dads and gives them the bad news in an emotionless threatening drone. Then you see a lot of tears, howling, wailings, and the desperate prayers. Anxiety levels soar.  All eyes on the silent phone box. A second call comes with the sad cry of a kid. Then the Don drones at the rich  Dads to fax him their latest IT returns. A fax machine in Dubai purrs into life. A long wait of another two days. A demand for ransom comes in. The richer Dad pays more as per Don's justice system. Next call specifies the time and vicinity for the ransom collection. Ransom is collected. Then the Police enters.

Shippers load cargo on board M.V. Amsterdam Bridge from Nhava Sheva. The ship loads and leaves port. There is a fire on board ship. The 'Hows' and the 'Whys' are unknown to outside. The owner of the ship declares 'General Average'. The shippers panic and howl. The ship owner appoints smart lawyers as Adjusters. Shippers are instructed to send their Commercial Invoices & Packing Lists to determine the value.  The adjusters will see the value and send demand notes to the shippers. The full amount will be cost plus to cover more costs for the ship owner. The shippers would pay the demand amounts and sign a Bond. The Bond is cleverly worded by very smart lawyers to take away any possibility of recourse by the shippers. Then the cargo would be released at any point of choice by the owner.

Unfortunately, there are many small shippers in a container ship carrying thousands of boxed cargo, who are victims of this extortion. It's nearly impossible for them to join hands together to hire smart & expensive lawyers to prove that it was not God who set the ship on fire. In case God still escapes unblemished, the law stipulates that the owner of the vessel shall not be responsible for the mistakes of his employees and therefore it would tantamount to an act of God. Under such damning conditions, who will be God's advocate?

Brgds  

(Capt Rath) Skype Gtalk MSN :  psrath

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