Alchemy of Indian Shipping
Article - 15 : week 24
Monsoon Mayhem:
Timely arrival of monsoon brought cheers to our spirits. However the soaring spirit of our foreign trade got a reverse crank from the largest container port in India – Nhava Sheva. Ships compete and chase to kiss the Windows. If you miss the kiss, you could be exiled to Jebel Ali or Mundra. Backlogs pile up in the transshipment ports of Singapore, & Malaysia driving panic and fear in the mind of the shipping lines. Windows shrink and queues lengthen for ships, trains and trailers. Imports are given the paramount priority and exports are treated as scampering little urchins. Ships are forced to leave after offloading all the imports if they are lucky and leave the exports behind. Unfair and punitive charges like shut-outs and storages are torpedoed on to the shipping lines by the terminals. The import pendency slowly and surely strangulate the terminal yards. The rails and roads grind to an unforeseen laxity. The combined effects of benevolent rains, infantile infrastructure and oppressive bureaucracy eats up productivity. That means for the same number of hours in a window we shall have significantly less number of moves compared to normal time This has been happening every monsoon barring the periods of global melt-down's yesteryears.
The question is not about our flailing infrastructure buckling under the rains or about the drop in inevitable productivity. It's about how we react to it. It's about our priorities. It's about our ability to solve urgent problems with urgent means and manage our national credibility and interests.
How do we sacrifice our much needed exports at the cost of imports? Exports can earn us hard money and sustainably support our growth. FDI would loose its luster with a big trade deficit. Albeit imports' significance on our economy, exports can not be snubbed at in a poor economy that has learnt to stand on its own legs. Indian exports have to compete with countries like China or Vietnam. We have heavy odds for our exporters - both from outside and inside. We must realize the importance of exports and put this as our first priority instead of kicking it to to its grave. In other words, the ships calling our ports must load all their exports. Operationally, it is impossible to load the exports unless imports are discharged. One way of doing this is by asking the ships to unload the requisite volume of imports in a nearby port or an underutilized port for further mobilization by coastal shipping, rail or road at the expense of the importer. The terminal should guarantee the bare minimum moves per vessel to the shipping line that should cover all the export bookings and the balance import containers onboard. Or else the imports need to restricted to make way for all the exports. However, the customs and port authorities need to act at tandem to give this legal and operational sanctity. There would be hard resistance to this from shipping lines and terminal operators. However, we need to appreciate the fact that this is an extra-ordinary infrastructural crunch, where our national resources need to support our exports first and imports second.
Article - 14 : week 23
Wisdom Of A National Carrier:
"In the ranking of 12 countries, India has been named as having the most inefficient bureaucracy followed by Indonesia and the Philippines, according to the survey of expatriate business executives conducted by the Hong Kong-based Political and Economic Risk Consultancy (PERC)"
The important point to remember here is that albeit our rotten bureaucracy, we do have brilliant bureaucrats. Some of them are conscientious & austere despite the unthinkable odds. As we have experienced, having great people is not enough if the system is not good enough. Therefore, we need to reflect on our system and its changes rather than find scape goats when things go wrong big time. Sarad Pawar's family owning the IPL's dirty interests or Mahagenco taking 350 crores bribes as today's headlines are mere symptoms of a huge systemic failure.
Air India's plane crashed in Mangalore with many lost lives. Soon after that we have had a handful of near-misses. We witnessed a flash strike by Air India's employees with no justification. We all know the service standards in the national carrier and also know who flies business class in Air India. If that was not worse, the tax payer would be doling out 5500 Crores to cover her losses in 2010. To sum it up, every Indian has to pay to keep our national carrier flying to periodically kill and maim passengers, blacken India's emerging image in the world, to gobble down more tax payers' money in the future, and above all give a third rated service to the passengers who pay and a royal one to those who don't. That being the case with the national carrier, our private airlines have certainly done us proud both internationally and at home, despite the odds. Now let us explore the answer to the question : "Do we need a national carrier ?" Even though the answer is staring us on our wallets, we still chug along the good old corridor of a widening fiscal deficit.
Then comes the next question. Do we need a national sea carrier? It's true that our national sea carrier does not kill or maim passengers. However, it does things far more comically wasteful and adds it fair share to the fiscal deficit. A half measure is no measure in a situation like today. Partially selling some shares in SCI is as good as a bout of confused cries from the stark & hard reality. The flight of fantasy needs a stop & majority stake needs to be sold to Indian players. Ten years back, the BJP government dared. Today the current government has proved its spinelessness on an issue, that has far reaching ramifications in the future of our nation. Governments can do business - look at Singapore or Dubai. However, I claim that our government can not do business. The system sucks and no one dares this system no matter how rotten it appears. Politicians in general and Congress in particular have this sinful infatuation to maintain status quo on our bureaucratic system, while apparently striving for better governance. The truth is bad bureaucracy and good governance can not co-exist. A bureaucracy that espouses discretion, unaccountability, lack of trust in the form of checks and balances, and above all murkiness of policies can in no way permit decent governance, leave alone the job of doing business. We too appreciate the fact that such a bad bureaucracy suits the political parties and the bureaucrats to suck money & power out of the system for themselves. So could they let go so easily? Therefore it makes more sense to disinvest the majority stakes in SCI - sooner the better.
Article – 13 : Week 22
A Thing Called Service:
Every one claims for a higher quality of service while trying to sell. Little do they realize that most of the time they have been innocently trained and instructed to sell a disservice. This issue pervades most of our service industries including shipping. Does service mean keeping the client just informed on all stages of the undertaking, even when the information given is coloured ? Recently we had applied for an internet connection from Airtel's. The sales person sermonised like a parrot, their high standard of service in comparison to MTNL. We booked the service one month in advance and paid too. When day came for installation, the same sales people refused to take the calls and passed them from desk to desk. Our official complaint was duly registered and regular SMSs were sent with apologies for a week, followed up by telephone calls from the Call Centers informing us that we were being attended and served - while nothing in ground could help our end. On one lazy Saturday, one engineer from Airtel visited our office and left in five minutes with an explanation that there was line laid till our premises. This week long delay paralysed our business. We had to approach the right guy in MTNL with the right amount of bribe and the internet connection was installed the very same day. So much for Airtel's (a private entity) service and so efficient was our usual Chai Pani way that our belief system was shaken for good.
In our shipping industry in India, a similar virus has infected most of our sales drives. Tall promises, meaningless frequent follow-up calls, half truths, naked lies, and finally passing the blame to another agency or body out side the reach of the client is termed as good service. This is how the sales and the customer service personnel are trained. The end result is a third class service culture in a third world country. The real meaning of service must be articulated by the organisation. Once articulated it must be put into practice as a way of life. Service means delivery of a service as promised during the sales deal conclusion - better still if the service rendered is better than what is promised. Frequent telephone calls or SMSs are meaningless, if the information passed is wanting in truth or is a cover up for any shortcoming. The client needs to be told the truth no matter what the short term ramifications are entailed. Admission of a service problem is the beginning of the solution cycle. Any attempt to dampen or cover up just prolongs mediocrity and rigidity of culture that refuses to budge - even when the alarm bells scream. Therefore, good service quality refers to competence on delivery as promised or even better than what is promised while constantly increasing efficiency levels by admission of the fault lines & banishing them with appropriate action, as they emerge. This is where, our shipping industry must look at. Any organisation that promotes quality in service, shall be a leader in its niche.
Article – 12
BOT'S BUTT:
"India's population: 1950 – 350 millions: 2000 – 1 billion: 2015 – 1.2 billion (Official)
India's urbanization : 1950 – 18% : 2008 – 30 % (350 million people) & 2015 – 37%
Throughput of containers in India: 1993 – 1 million TEUs : 2005 – 4.6 million TEUs (More than 400% growth) : 2008 – 6.6 million TEUs & Projected to 21 million TEUS in 2016"
Population growth, urbanization, and GDP growth have a profound and catalytic influence on the container throughputs in India, as seen from the above numbers. However, if infrastructures including port, terminals, transport and shipping do not catch up to facilitate the growth, the numbers could tell different tales. The policies are directed at creating such facilitations - albeit half-hearted - by bringing in foreign companies. That's most welcome. We have seen the miracles done in Nhava Sheva and Chennai. We need little more than these islands of miracles to jump our holistic capacities from a struggling 7 million TEUs of today's to 21 million TEUs in 2016.
The point we are missing by miles is the near-complete vanishing act of our indigenous enterprises in the development of terminals, container shipping and many other key facilities. No nation can script its future growth story on the hired shoulders from outside. The roads need to be opened wide to home entities along with the TNCs (Trans National Companies). We need the TNCs desperately for their capital and expertise. At the same time we need to realise that they can swap, consolidate or sell their Indian interests outside the borders. Such acts can seriously damage competition, free-market, and lead to monopolistic controls on our transnational trade. Managing a port or terminal by a private Indian entity is no rocket science – though a wasteful and expensive task by our Port Authorities. The problem of experience can be easily overcome with drawing of experiences from the current TNC players. More home capital can be constructively garnered on such high yield infrastructure projects, rather than find their way around to Swiss accounts or Mauritius route. While the culture of inducing TNCs should go carefully unabated to hold the bridge in the near future, the local participation need to be gloriously espoused and facilitated in our policies. This combined infusion of expertise and capital can pave the way to the right numbers with a balanced growth.
Then we have the big question of Indian Container Shipping to use these port infrastructures. We could not be building ports, terminals, and facilities for the sole use of foreign shipping lines, as is the current trend of things. We need to have a healthy mix of our own bottoms along with foreign shipping. If SCI is a case of shameful waste of our national resources in the grinds of a wonky system that knows not the know-how of business, the sad story of the private Indian shipping companies is no less than the story of hunger, poverty, and malnutrition in the hands of a dumb & slow system that refuses to comprehend the brutal ground realities of global shipping. The sequence goes some thing like this. We as a poor nation need to import a lot of stuff to build and feed our nation. We are asking foreigners to build and operate our ports on the precondition of paying the highest kick-back (revenue sharing) to the Port Authorities. Then we are laying red carpets to the foreign shipping lines to bring our imports and move our meager containerized exports.
Globalization is a great thing as long as you are a dominant participant in the system. What benefit or glory would you possibly expect when you forget how to build and manage your own ports or carry your cargo in your own bottoms? The direction & path of blind promotion to TNCs is shallow and hollow. The imminent quick results are deceptively pleasant and insidiously decadent. The end result could be as miserable – in shipping sector – as what happened to most of the industries in Argentina in the seventies, after a bout of free market capitalism that did not look into indigenization of industries. It is like the snake – Ouroboros - that devours its own tail.
In this euphoria of growth, we should not get carried away by the cross-border expertise and capital. We need them to supplement our own needs - not overpower them. Let's not forget to build our own ports, shipping, and related expertise and infrastructure in this whirlwind of globalization.
Article No – 11
A Maimed Dream:
Aspirations are the DNA of progress. They push us to think - think to change for new ways. The process kick-starts the flywheel of actions to gather an unstoppable momentum. What happens when we start aspiring?
Indian Shipping is suspended in stagnancy and mediocrity due to the barrenness of aspirations. As an industry we have stopped dreaming – complacent, callous and numb to the acts of foolishness and extortion. We are one of those islands of mediocrity, where the unfit and inept are exiled to lead.
The battle field of our industry is still a virgin land for all our Shipping Ministers. The only visible areas of interests have been on projects where palms are generously doused like Port projects, buying new built-ships for SCI, Sethusamudram, auctioning of Mumbai ports lands, or dredging projects. Projects surely are extremely important for our growth – but what good these projects would do if we don't change our policies and regulations? We have been building bigger ports. Who is going to use them? Not us - may be the ships belonging to the new-age East India Company! New gantries are being purchased for JNP – who is going to use that terminal unless being forced? This situation suits all political leaders and babus - so long as the public attention is not on these rudimentary issues. We know that we have developed a system of governance where there is no such thing as accountability. The system for sure stinks. However, the only time it works is when there is a strong public voice that can leak into the voting electorate.
Therefore, it's time we raise our voice to bad policies, regulations, and learn to debate in the open. Our cow-like tolerance is no virtue to prevent us being slaughtered. We must learn to ask hard questions to our polity and administrations. Why don't we have an off-shoring of our flag like Norway or UK if our system has failed us? Why can't we have a system like Singapore? Why are we holding on to Cabotage? Who needs a Sethusamudram? Why is our port tariffs one of the highest in the world? Why are the detention tariffs so high and funds drained out of our country? Why is our shipping agency business fully open to foreign ownership? Why do we have such an inefficient pilotage system? Why do we have to bribe to run our ships if registered in India? There are many such issues, we need to raise in public to bring in awareness. The awareness will force changes and compel us to higher aspirations. Till such time, our muteness to the wrongs shall be nothing short of a sinister self-degeneration.
Article No – 10
Cabotage - the dirty policy:
God is in details. A generic & over-simplified Indian Cabotage Law for its domestic shipping can be nothing short of being ungodly. This macabre simplification of prohibiting foreign tonnage for coastal movement is a twisted travesty of the USA's Joan's Act, without understanding the contexts, compulsions, and the horrendous outcomes of such an Act. Adam Smith, the father of free-market-capitalism, advocated this policy that went in direct conflict with his strong conviction in the invisible hand of the free market - solely to ward off the threat of other European shipping, especially Dutch. This was short-tarnish and playing to the gallery of populism and polity of 18th century Britain when the corn-law was repealed and Britain needed to bolster the strength of Royal Navy.
Are we that bereft of originality of thinking in the 21st century to hold on to such arcane & self-debilitating Act? Many such western advocacies have done India more harm than what the opium trade did to China. At least the opium addiction is a thing of the past in China but in India we continue to be inflicting self-injuries by our addiction to policies such as Cabotage – one of those brown-skinned-white-masked Policies.
Lets imagine ourselves without Cabotage and visualize the direct and indirect benefits along with their possible spin-offs. To understand it better, lets analyze the two scenarios – Pic 1 & Pic 2. There are two reasons for the twisted scenario of Pic-1.
1st : Prohibition of foreign tonnage on the coast.
2nd: Treatment of Indian shipping Industry like a street dog. Once in a while a few crumbs are thrown at our industry to appease a numerically few, while keeping the industry as whole handicapped – as the white colonizers did. The little Indian pays a painful price. Moderate sized ships call only Chennai or Nhava Sheva/Mundra, because ship size depends on the weekly volume a shipping company can gather to and from a port of call. Smaller ships call Kolkata, Haldia, Paradip, Kandla, & Chennai. Shipping is all about scales. Smaller sizes translates to higher costs. As you can see in Pic 1, coastal movement is virtually non-existent. A handful of Indian operators hold on to their small coastal shares like life, with theirs handed folded and knees buckled to the bureaucracy and politicians to prevent any shadow of a competition to eye the pie. That's the status of our coastal shipping.
Lets look at Pic 2 with an open coast. Shipping lines would find it cost saving to bring in large ships to their preferred transshipment port. For simplicity I have shown Chennai as the transshipment, though any port providing better services could qualify for the privilege. The coast will be busy. There will be efficient and frequent connectivities among the ports. A whole lot of domestic cargo would piggy-back ride the exim cargo, decongesting our roads, railways, and cutting down pollutions. Shipping to and from India will be a whole lot cheaper. And Indian ship owning shall boom. Even though the coasts would be open to foreign shipping, the Indian operators shall be the most competitive in their home turf. The larger shipping companies would focus on their long-hauls and buy the coastal movements from the local operators. The local operators would be cheaper and sharper. This scenario will help the Indian operators and to a small extent to the Indian ship owning. Indian ship owning have much bigger sickness beyond the scope of Cabotage to alleviate. However, removal of Cabotage will do no harm and would rather act like a catalyst to force changes for the future of Indian Ship Owning.
To get at Pic2, we need to go slow and easy from Pic1. To go easy and slow we need to look at the details and formulate laws. The regulations to bring in transformation and growth for the Indian shipping industry must come from within – not outside. From within, we need to make smaller and incremental changes into existing regulations, those help Indian ship operations in a positive spirit. As an example, 100% foreign participation should be encouraged into ship owning, ship management, ship building and repairs, while agency business should not be more than 49%. In biddings for terminals, Indian companies should be encouraged by removing the stipulations of previous experiences. Expertise in port sector is easy to borrow or buy, as long as there is an Indian investor with the Capital.
