Week 17 / Essay 10

Alchemy of Indian Shipping

Article No – 10

Week 16 / Essay 9

Alchemy of Indian Shipping

Article No – 9

the dark head of monopolistic privileges:

The legs of democracy shake when the law of the land condons unjust laws or applies the laws selectively. Port Authorities indulge and scavenge on an excessive economic-rent - with their monopolistic privileges  -  mandated by the government, at a huge cost to the nation. On my last essay it was pointed out that our stevedoring costs in containers is 82% higher than China's and also substantially higher than that of Singapore and Malaysia, albeit our input costs being way lower than theirs. I must stress here on the fact that even the export THC, IHC or stevedorage are subject to an additional pain of 10.2% service tax, essentially fracturing our central policy of boosting exports.

Today, lets talk about the export storage charges in our terminals. These charges are ungodly to our export boosting policies in an insidious design that corrupts our commercial enterprise. For simplicity, we shall take the example of a 20' dry laden box on export from India.

Terminal	Free days	Storage	Shut-out Charges	Service Tax`
GTI	3 Days	3.84$ ~ 11.05$	48.6$+Rs 1770	10.2%
JNP	3 Days	2.76$ ~ 15.34$	35.01$+Rs 1275	10.2%
NSICT	7 Days	2.86$ ~ 11.44$	69.04$+Rs 1339	10.2%

Free time counts from the following day of entry of container till the day of shipment, Sundays and holidays included. The quantum of storage charges and re-nomination charges merit similar comparison with comparable countries - as with stevedoring. The gates are kept open to accept the containers, much before the free time starts. This appears understandable for the up-country cargo arriving before the free-time starts. However, the intent is less altruistic. If the vessel calls exactly in line with its ETA and manages to berth as declared, then the 3 free days can be availed by beating the serpentine queue. If the ETA is delayed or if the berthing is delayed - which happens regularly in Indian ports - the free time is hardly free. Irrespective of the time when the boxes went in, the new cut-off and delayed departure renders the free-time too punitive for the box operator in question - a helpless actor who can be penalized for no fault or negligence from his side.  The next worst thing that can happen is  when the intended vessel fails to call. The carrier arranges alternate vessel. Now, there are two bounties for the terminal - a fat storage bill and shut-out charges. Its a misfortune for the carrier. The carrier abandons its moral responsibility to own up the fat charges. The box operator who is directly billed by the terminal has no where to hide, but to pay up. The shipper refuses to pay this unfair charge, reasonably and rationaly so.  

Under such painful situations, can any one justify 3 days as free time for export cargo? Next comes the unfairness of the quantum of storage per day to as high as 15$ and re-nomination charges to such high numbers. Transportation charges are billed, whether done or not. There is a clear need to rationalize these tariffs scuttling our export enterprise. The last and not the least disturbing element lies in affixing the penalties to the right party. There appear to be four actors in this transaction - the terminal, the vessel operator, the box operator, and the shipper. If at all we have a punitive tariff to fix discipline in our system, the errant party needs to be penalized and the innocent protected. If the the vessel operator fails to bring in the vessel or perform as per his declared intent in time, all consequent charges should be entailed to him. If the delay or breakdown in the port operations are as a result of the negligence, machine failure or ineptitude of the port authorities or the terminal, the charges should be directed to them in all fairness. The gate-in time and cut-off time should be declared by the terminal. No box should be allowed in outside this period, unless specifically authorized by the box operator. The unjust practice of penalizing the innocent party should be brought to a stop to improve the system.

Warm Regards

Capt Rath l Econship

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Week 15/Essay 8

Institutionalist Fundamentalism & our Ports:

 

"Institutionalist fundamentalism is very often implied by the nature of the chosen institution-focused advocacy, even in political philosophy." – Amartya Sen in 'The Idea of Justice'

 

Institutional fundamentalism sits on a set of policies and directives that unduly benefits the institution, rendering itself obese and lethargic, while wrenching a high price from the nation as a whole. Ports are the gateways to a country's commerce and economy. Therefore, a high tariff ruthlessly punctures our export competitiveness – especially in a some what flatter world of today, where we have to successfully compete with the likes of China or Vietnam. We have had the misfortune of dogged degenerative policies on our shipping industry, running us down for centuries, if not millenniums. Such policies of the British at least had a self-serving design and the Nehruvian think-tanks gave them an unthinking validation, much to the detriment of our foreign trade. And our current institutional think-tanks are happily misty-eyed to the ramifications of such exploitative continuity.

 

Let us compare the stevedoring cost of a 20' container with a few other comparable nations. The stevedoring cost, in this case, consists of off-loading at CY, horizontal movement from CY to ship-side and loading of the box by shore-gantry onto the vessel, for a dry non-DG box.

 

			After Service Tax	Average
GTI	INR 4,632	$104	$116
NSICT	INR 3,454	$77	$87	$95
JNPT	INR 3,336	$75	$84
	(1) & (4)	Labour	Land Cost*	Standard	Max	DisC*
Country	Determinant 1 & 4	Determinant 2	Determinant 3	Tariff	Rebates	Tariff	Taxes
India	**	Very Low	Extremely Low	$95	0%	$95	S* Tax
China	**	Higher than India	Higher than India	$55	5%	$52	No Tax
Singapore	**	Extremely High	Extremely High	$100	30%	$70	No Tax
Malaysia	**	Higher than India & China	Low	$65	10%	$59	No Tax
India's tariff is higher than China by 82%                              *  DisC – Discounted Stevedorage India's tariff is higher than Singapore by 36%                       *  Max – Maximum rebate, depending on contracted volume India's tariff is higher than Malaysia by 62%                         * S* - Service tax on export THC or stevedoage

 

There are four major cost determinants in this composite stevedorage:

 

(1)    : Terminal equipments like Gantries, RTGs, & Top-lifters etc

(2)    : Cost of labour and skill

(3)    : The initial land cost at the time of building/dredging of the terminal.

(4)    : Cost of capital (Interest) in building the terminal.

 

Later appreciation of the value of the land should not be factored. The higher value of port land is simply because of the building of the terminal. So justifying a higher tariff on account of this determinant is both flawed and insidious.

Cost of equipments and capital is almost same for most countries in a flatter world. We can not consider import tariff or any levy by the government as a differentiator, because the amount lands up back in the treasury anyway. Cost of skill and labour is the lowest in India compared to today's China and Malaysia and the cost in Singapore is incomparably high. Cost of land (initial) in Nhava Sheva is way too low compared to Singapore and China.

 

In spite of having the best cost advantages in India, why is our stevedoring cost a galloping 82% higher than China? 36% higher than Singapore? 62% higher than Malaysia?

 

If we are fooled into paying 82% more to the MNC port operators and government run JNP – compared to China - who is stealing our money? No matter who steals our money, our exports and imports shall stay burdensome for us. Our exporters and importers shall continue to pay the price. Blind privatisation is akin to the cruel commercial exploits of British East India Company of yore. To err is human and to continue erring is the insignia of Indian administration. The solution lies in being aware of this form of institutional fundamentalism and bringing in changes to our institutional set-ups.

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----- Original Message -----

From: Capt Rath

To: Kamal - Marex Bulletin

Sent: Tuesday, March 30, 2010 3:17 PM

Subject: Week 13/Essay 6

Article No – 6

 

The Red Monster:

 

India is one of the Greenest nations living on thrift and vegetables. Even today, the durations of power failures dwarf the periods when you actually get them, barring a handful of places. Wonder why we get screamed at by the media, to observe Earth Hour by switching off lights, while the giant SUVs of the US or the hungry factories of China keep drilling big holes on our stratosphere. This may be all symbolic. However, the Red Monster (Red Tape of Indian administration & bureaucracy) that keeps gnawing at our guts of growth – especially Indian shipping industry – is an over-powering brutal truth.

 

It's time we observe a Red Day to rally against this Red Monster that keeps wasting us from within, rather than running gung ho over the Green Enchantress. The Red Monster works its way with layers of half-truths

 

-         Remote & fuzzy admission of market reality through committee reports or internal dossiers, those hide more and reveal less.

-         Ostensible policy measures not addressing the reality, but addressing populism.

-         Pretentious rules and regulations supporting various narrow interest groups in the guise of congruence with Policy.

-         Diverting attention or placing the blames on outside elements for the failures. Validating forcefully through committee reports when required.

-         A state of denial. Comparisons with self in a typical solipsistic bent of mind, while ignoring the outside changes.

 

Our inherited imperial bureaucracy smudges the facts that our country has the best possible elements to house the world shipping. It taxes our industry punitively in the name of generic tax system, when Panama stares us on our eyes. It tightens our Maritime Training system exceeding the grudging standards of STCW and Manila stares us on our faces. CDCs are made harder & exceedingly expensive to get for the seamen. Some one else gets our jobs.  It mimics Joan's Act blindly, in the name of protecting domestic tonnage. It taxes the seafarer's wages on its own flag, while making it free on foreign flags. Its 10.2% service taxes on lease-incomes on ship-owning or container owning makes them prohibitive. Its monopoly and taxes on bunkers makes places like Singapore and Fujairah thrive at our cost. It breaks its head to build bigger port capacities, Sethusamudrams or funding SCI (Our national white elephant) to buy expensive ships to siphon money out of the projects, while letting our industry crawl on its wounded knees. No doubt we need bigger port capacity to sustain our growth. The question is who is going to use them? We are purchasing our national shipping needs from foreign companies with hard currency and not giving export status to our shipping. The tyranny of the Red Monster goes endless. We are chasing the Green Enchantress with borrowed money from the west and allowing the Red Monster to cripple us and our industry. It would be a grand day, when we observe a symbolic Red Day to bring in public & media awareness about this insidious Red Monster.

 

Warmest Regards

Capt Rath

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