The working group report

ANNEXURE - A

Development of Minor Ports under National Maritime Development Project (NMDP)

Sr. No.	Name Of Minor Port	Estimated Cost	Funding Pattern		Year of Project Preparation	Year of Completion	Project Approval Authority
		Rs. Crore	Budgetary Support	State Govt.
1.	Gopalpur (Orissa)	35.00	13.00	22.00	2006-07	2011-12	EFC / PIB / CCEA, as the case may be.
2.	Azhikkal (Kerala)	30.00	10.00	20.00	2006-07	2011-12
3.	Malpe (Karnataka)	200.55	70.00	130.55	2006-07	2011-12
4.	Dharamtar (Maharashtra)	484.56	132.00	352.56	2006-07	2011-12
5.	Magdalla (Gujarat)	50.31	18.00	32.31	2006-07	2011-12
6.	Cuddalore (Tamil Nadu)	569.00	200.00	369.00	2006-07	2011-12
7.	Gangavaram (A.P.)	150.00	58.00	92.00	2006-07	2011-12
	Total:	1519.42	501.00	1018.42

Report

of

the Sub-Group

(MULTIMODAL TRANSPORTATION)

set up by

the Working Group on Shipping

&

Inland Water Transport

for

the Eleventh FIVE-YEAR Plan

(2007-2012)

PRESENTED BY

JOINT SECRETARY (SHIPPING)

MINISTRY OF SHIPPING, ROAD TRANSPORT & HIGHWAYS

DEPARTMENT OF SHIPPING

PARIVAHAN BHAVAN

NEW DELHI - 110 001.

Preface
1. The Ministry of Shipping, Road Transport and Highways – Department of Shipping vide their letter no. SY-11018/3/2006-SC dated 22.06.2006, set up a Sub-Group (Multimodal Transportation) of the Working Group on Shipping and IWT under the Chairmanship of the Joint Secretary (Shipping) with the terms of reference as follows:
Terms of Reference

• 
  To review the position with regard to Multimodal transportation of goods in the country and suggest measures for its promotion.
  

2. The Composition of the Sub-Group is as under:

1.	Joint Secretary (Shipping), Department of Shipping	Chairman
2.	Representative of Department of Commerce	Member
3.	Deputy Secretary (MM), Department of Shipping	Member
4.	Representative of Deptt. of Road Transport and Highways	Member
5.	Representative of Ministry of Railway	Member
6.	Representative of Ministry of Civil Aviation	Member
7.	Representative of IWAI	Member
8.	Representative of DG Shipping	Member
9.	Representative of FICCI	Member
10	Representative of CII	Member
11.	Representative of Federation of Indian Exporters’ Organisation	Member
12.	Representative of Reserve Bank of India	Member
13.	Representative of CONCOR	Member
14.	Representative of the Association of Multimodal Transport Operators of India	Member
15.	Representative of Western India Shippers’ Association	Member
16.	Representative of Eastern India Shippers’ Association	Member
17.	Representative of INSA	Member
18.	Director (LandPS), SCI	Member / Convenor

3. The Sub-Group held the first meeting on 08.08.2006 for deliberating on the various issues and opportunities with regard to the multimodal transportation scenario in the country and relevant developments in the international context, and has obtained the inputs, views and comments from its members through periodic communications and extensive correspondence; and the Report of the Sub-Group is a culmination of these efforts.

*********

Report of the Sub-Group (Multimodal Transportation) of the

Working Group on Shipping and IWT for Eleventh Five Year Plan (2007–2012)
1. Development of Multimodal Transport – An International Perspective
1.1 The developed economies of the world have witnessed an increasing thrust towards containerisation over the past five decades, which eventually became one of the key drivers for growth of multimodal transport sector in those countries. There were, however, several other drivers and factors as well that have impacted the growth of Multimodalism globally such as, the remarkable growth and development of ‘mega container ships’, aided by technological advances in shipbuilding and design enabling the building of larger and faster ships capable of carrying various types of finished, semi-finished goods and even raw materials in Containers, the development of modern cargo handling systems and superior rail / road infrastructure, the on-going process of globalization, development of web-based IT & Communication systems, the emerging field of Logistics & Supply Chain Management etc.
1.2 Factors Impacting Multimodalism

1. 
   Shipping
   

Modern ocean transport ships and especially Container Ships have had a profound impact on modern society. The sheer variety of goods on display at the supermarket, including tropical fruits and non-seasonal produce are all available because of economic and efficient shipping. The container speeding along the highways could have been loaded and sealed up three weeks earlier in Japan and its contents could be in the supermarkets tomorrow. All these activities and businesses are made possible by modern, efficient and reliable container shipping systems combined with land based infrastructure, which enable goods to be sourced from all over the world, in the expectation that they will be delivered precisely when they are needed, by a delivery system that has large fast container ships at its centre.

1.2.2 Economies of Scale and Globalisation

1. 
   The size of ships has been dictated firstly by the strength of materials, secondly by the abilities of shipbuilders and thirdly by the constraints of size in ports or canals. In modern times, technical limitations on the size of ships have all but vanished. Economies of scale, facilitated by technical progress in ship and machinery design saw the size of ships leap rapidly over the years. Bigger ships were found to be highly cost effective, with the unit costs of carrying cargo in large vessels being far less than in smaller craft. For example, large Ships carrying as much as four times the cargo compared to a smaller vessel could be built for only twice the cost and their daily operating costs might also be only twice that of the smaller ship.
   

2. 
   Thus, both trade and shipping lines preferred to deploy ships as large as possible, and the process has continued in virtually every sector of the shipping industry including Container shipping, Dry bulk trade, Crude Oil & Petroleum Products trade etc. Side by side, with the trend of globalisation integrating various national economies world over, the growing competitive pressures on trade demanded solutions that would optimise the total cost of transportation / supply chain. The ever increasing demands of the consumers need to be fulfilled in terms of reliability, price and integrity / quality of the goods delivered. Thus, the increasing trade (cargo) volumes on the one hand, and the growing pressures to offer efficient & cost-effective transportation & logistics services on the other, together provided an impetus to the development of multimodal transport system. Moreover, development of modern cargo handling & transport technologies, Management Systems and a supportive business environment ushered in Multimodalism in a big way in the developed world.
   

2. Overview of Multimodalism in India

2.1

In India, Multimodalism is still in a nascent / preliminary stage as the country has been rather slow in going in for containerisation in a major way. However, growth in containerisation has accelerated in the nineties with the liberalisation of the Indian economy, which brought rapid growth in industry and trade. The increasing freight transport intensities, especially the volume of container traffic in EXIM trade between the hinterlands and the sea ports gave an added impetus to Multimodal Transportation in the country.

2.2 However, presently such heightened transport intensities are facilitated by logistics systems that are perceived to be less efficient and inadequate in terms of cargo carrying capacity (for both rail and road networks), which have adversely affected the development of true multimodal transport / logistics value chains, depriving the Indian trade of the benefits of seamless flow of goods and resulted in higher transaction costs for Indian Shippers / Consignees / Trade.
2.3 The increase in containerisation in the future would, inter alia, depend upon the pace of industrialisation, and the recent impetus to industrialisation and the advent of manufacturing hubs / Special Economic Zones etc., are expected to propel the demand for containerisation and multimodal transport in the country. According to an estimate, the share of containerised cargo in India’s total general cargo trade is expected to increase to around 73% by the year 2011-12 from the present level of 45%. With its unique and crucial role in making exports and imports not only competitive but also facilitating their delivery to the door of the final receiver / consignee, Multimodal Transportation is set to occupy “centre-stage” in the whole gamut of logistics services that support Trade and Industry.
2.4 It is, therefore, difficult to over emphasise the importance of multimodal transportation in a country as vast as India. The sheer size of the country, the distances that cargo must travel and the various modes of transportation on offer, make the presences of an cost effective and efficient multimodal system a key input in the development of a seamless mode of transportation that does not require an exporter or importer to devote large amount of time over transport arrangements / formalities. The presence of an efficient, truly integrated multimodal transport system will, thus, enable the exporter or importer to freely concentrate on the core areas of concerns such as productive efficiency, time to market etc.

1. 
   Review of the 10^th Five Year Plan (2002-2007)
   

1. 
   Cognisant of the tremendous potential of multimodal transportation, the Government had constituted a Sub-Group on Multimodal Transportation of the Working Group on Shipping for the preparation of the 10^th Five Year Plan to review the position with regard to multimodal transportation of goods in the country and suggest measures for its promotion. The Sub-Group deliberated at length on the various issues connected with multimodal transport, the lacunae and hindrances affecting it and submitted various suggestions and recommendations for the consideration of the Government in its Report covering areas such as amendment of the Multimodal Transportation of Goods (MMTG) Act, 1993, evolving a suitable mechanism for Co-ordination of various agencies / entities involved in multimodal transport and issues relating to infrastructure & operational aspects. Informatively, several initiatives and measures have been taken by the Government in the above mentioned areas for alleviating the problems / bottlenecks experienced in the Indian Multimodal Transport Sector. It may be mentioned in this regard that further amendment to the MMTG Act, 1993 as amended in 2000, is under active consideration with the Ministry of Shipping as indicated below.
   

1. 
   include the import leg after the goods have landed in India,
   

2. 
   make the Act applicable to domestic multimodal transportation,
   

3. 
   a person registered to carry or any person who commences the business of Multimodal Transportation shall quote the registration number on every Multimodal Transport Document (MTD) and produce the proof of registration to the custodian concerned,
   

4. 
   the prescribed MTD so issued may be negotiable or non-negotiable at the option of the consignor,
   

5. 
   only the recognised transport document like Bill of Lading or MTD would be allowed in order to avoid illegal transportation / contracts of carriage.
   

During the last two years i.e. from January 2005 to December 2006, a total 141 number of MTOs (Multimodal Transport Operators) have been registered under the MMTG Act, 1993.

2. 
   While various initiatives and steps have been taken by the Government, it may be mentioned that in order to realise the full potential of multimodal transport, further initiatives and improvements would be required in terms of simplification / harmonisation of the regulatory & administrative framework / liability regime, increased private sector participation, development of port infrastructure, connectivity, logistics services, etc. In light of the above imperatives, the Sub-Group (Multimodal Transportation) of the Working Group on Shipping & IWT for the 11^th Five Year Plan has reviewed the prevailing position with regard to multimodal transportation of goods in the country, identified the relevant issues / problems and has made appropriate recommendations for promoting Multimodal Transportation as brought out in this Report.
   

2.5 Prevailing Multimodal Scenario in India

1. 
   Documentation
   

In the early years, the Foreign Exchange Dealers Association of India (FEDAI), on the basis of International Chambers of Commerce (ICC) Rules, were accepting only Ocean Bill Of Lading issued by Carriers as a negotiable document; and did not recognize the Freight Forwarders or Multimodal Transport Operators (MTO) as Carriers. With the enactment of Multimodal Transportation of Goods Act (MMTG ACT) of 1993, MTOs can now issue their own document viz. Multimodal Transport Document (MTD).

2.5.2 In consonance with the prevailing international trends, Indian legislation on Multimodal Transport permits all transporters including Freight Forwarders to operate as MTOs subject to the conditions laid down in the MMTG Act, 1993. Apart from the obvious advantages of Multimodal Transport, the MTD, being negotiable on issuance after receipt of cargo at an inland point, allows the inland shippers to realise their moneys swiftly by negotiating the MTD with the Banks.
2.5.3 MTOs offer the flexibility for providing customised solutions to meet the varying needs of shippers / consignees adopting various modes of transport and bringing greater efficiency and cost effectiveness in international transportation. Value-added services are thus provided at the origin / destination such as Delivery of Goods on either “Destination Duty Paid” (DDP) basis or “Destination Duty Unpaid” (DDU) basis; warehousing; preponement / postponement and kitting etc. Multimodalism thus optimizes the whole operation by maximising efficiency in carriage of goods, achieved through door-to-door delivery under a single Contract.

4. 
   However, in spite of the enactment of the MMTG ACT, the progress of Multimodal Transportation in India has been rather slow. It is observed that the proportion of traffic moving between gateway ports and inland centres, Inland Container Depots (ICD) / Container Freight Stations (CFS) has been comparatively small - only about 32%. Out of the total traffic handled by ICDs & CFSs, ICDs share is almost 28% and CFSs about 72%.
   

2.6 Concentration of Traffic on West Coast

Presently, around 60% of the country's container traffic is routed through Nhava Sheva (JNPT) in spite of many difficulties and against various odds. The container terminals at this port are working well above their planned capacity despite the bad approach roads, congestion at terminals, reduction in the available draft due to siltation etc. But despite such odds, there are many shipping lines that are prepared to start new services from the port, but are unable to get a window for berthing. JNPT was and continues to remain the only port in the Public Sector, which was exclusively developed to cater to burgeoning container traffic on a dedicated basis having facilitative Customs & port procedures, equipment, connectivity to hinterland, EDI and many other trade friendly measures. Such trade facilitative measures have not been implemented with such vigour at other Indian ports, contributing to the increasing concentration of container traffic on the West coast.
2.7 Notwithstanding its many merits and advantages, there are several problems that have hindered the growth of Multimodalism in our country, mainly relating to lack of adequate / efficient port Infrastructure, hinterland connectivity and lacuna in Port – Rail – Road interfaces as also Institutional & Legal Issues. Despite its amendment in the year 2000, certain shortcomings still remain in the MMTG Act. For instance, the Liability regime is not fully clarified. As regards the Customs and other concerned authorities also, although several measures have been taken to simplify / streamline procedures and reduce documentation, more efforts are required in this direction. The various issues / constraints affecting Multimodalism, and suggestions / recommendations for promoting Multimodal Transportation of goods in the country are highlighted in the succeeding paragraphs.

3. 
   Issues / Constraints Affecting Multimodal Transportation in India
   

The progress in respect of Multimodalism in India, if evaluated on the basis of factors that have been responsible for its growth in the Western / developed world, would point to certain lacunae in the Indian context as described below.

3.1 Infrastructure

3.1.1 Container Shipping

The inadequacy of port infrastructure / superstructure would rank high as the major constraint, which has slowed down the growth of Indian container shipping sector. Skewed allocation of resources in the past has adversely affected the development of Indian Ports and Shipping sector (average investment in Shipping sector per Plan period was about 5% as against 51% for Railways & 32% for Road sector); and the earlier protected Indian industry / markets and low export growth had also not forced the Indian Ports sector to commit resources to keep pace with technological changes and management systems being adopted internationally. During 2005-06, cargo handled by major ports was 423.41m tonnes, while total capacity was 440.2m tonnes, which indicates about 96% of port utilisation.
3.1.1.1 There is a definite trend globally of rapid rise in the size of containerships, but, unfortunately, most of the ports in India are not in a position to receive these bigger vessels and have reached their maximum utilisation levels. There is, thus, an urgent need to enhance port capacity both in terms of infrastructure i.e. by increasing the available drafts, lengthening / strengthening quays, modifying channel depths, widening turning basins etc., along with the requisite superstructure i.e. staging / back-up areas (container yards, storage & transfer areas, operational buildings etc.), container equipment (container cranes, gantry cranes, reach stackers, straddle carriers / heavy fork trucks, etc.), value addition facilities such as warehouses, assembly, packaging facilities, logistics / distribution parks etc. Besides, it is also imperative to enhance / create the much needed road / railhead / short sea (coastal shipping) connectivity for the Indian ports to handle the projected container traffic in India as well as to relive (decongest) the enormous pressure that would be brought to bear on the already over burdened seaside / landside infrastructure.
3.1.2