Private submission

01.10.2019
Logistics Draft Policy of Government of India

Whitepaper:
Preamble:

Port led development of shipping we believe is the key to halving Indian logistics costs so as
to be in line with OECD / G20 countries. This should enhance competitiveness of Indian
business. Water borne transport is the oldest and most efficient transportation of people and
goods but unfortunately it has been neglected. It is of most welcomed development that the
current Government is taking concrete steps to correct the anomaly. This white paper suggests
for discussion at PMO convened meeting of Secretaries on 3rd October to finalize draft logistic
policy. We believe this is linked to Indian Shipping, Sagarmala, changing scenario of recent
reforms such as digitization, GST, impact of low sulphur fuel oil, etc.

Discussion:

1) Documentation, delivery order etc. charges by shipping lines which generate revenue to
run the entire office needs to be curbed and rationalized using ITES ( EDI ICEGATE PCS1x)
online facilitation, removing layers of people between importer exporter forwarder and
cargo. Documentation charges should be eliminated as they have no justification. This is
just another way for lines/agents to generate more revenue. The charges are
disproportionate to the work done. On a LCl container, the documentation charges could
very well be more than the ocean freight as there are several bills of ladings in one
container.

2) One of the low hanging fruits is cutting major costs of documentation charges collected by
shipping companies / agents. These charges are basically invalid and in any case way
above the actual costs. Terminal handling charges often attract volume discounts but not
passed down which is also adding to logistic costs. Vessel related charges tend to be very
high due to overloading of capital and maintenance dredging costs to provide good depth
of water for conduct of business by modern shipping. A possible solution to this approximate
annual cost of Rs. 800 Cr could be a dredging cess by cargo basis per Mt or TEU in the
 hands of the central Government to give to ports by turn every year. Dredging for river
depths is essential ingredient of logistics, dredging and coastal shipping policy.
Together with embankment solutions there is need to find solutions to maintain dredging
depths much of the year. Construction industry is crying out for virgin sand and may be
willing to partner in dredging facilitation without cargo or shipping bearing the cost of
dredging. Similarly, use of water for navigation should get equal importance with use of
water for drinking and irrigation. Hence, in the context of logistics there is needed to avoid
making low bridges over navigable national waterways. Tariff Authority for Ports, if at all
necessary, should be on the lines of IRDA, TRAI not like TAMP for major ports only,
because ports, water front is national property that should benefit the water borne trade.

3) Trucks that made e.g. Mumbai / Chennai trip in five days now take 2 days due to GST and
eliminated waiting time at toll naka but no evidence of passing down benefit to cargo
movement. Less number of trucks now does more output than before. There is therefore
opportunity to make better first last mile connectivity; faster and cheaper.

4) In giving concession to private terminal operators, Government ports take about 35 % of

revenue. The terminal operator is required to make expenses and make profit out of
remaining 65 %. So if the operator makes 20 percent profit, then it means that actual cost
of handling is below 45 %. Thus Govt. Ports should reduce their revenue share to reduce
transaction costs. Government ports should charge only lease rent for the land / water front;
not charge as landlord. Govt. Ports when giving concession agreement do not invest in the
development of the Port / terminal and therefore only land lease / rent should be the norm
like it is for other Govt. lease land, for. E.g. Principal Plots, scrapyards, salt pans, waste
disposal areas outsourced. Ports in general should tailor their charges according to value
addition, productivity, efficiency, so that overall ship related and cargo related charges are
competitive to contain logistics cost. Similarly, Service agreements and tenders should be
business like to get PPP going for mutual benefit.

5) Increase direct delivery from Ports so as to reduce logistics cost and increase efficiency,
particularly with respect to time element.

6) Facilitation of JNPT, MbPT, Ghogha Dahej, Vashi Gujarat, across Mumbai harbour ferry,
back waters of Kerala, Vallarpadam Kochi, South India cargo to Assam, Indo-Bangladesh
protocol, NW1, NW2 - 5 inland waterways, regional transport network etc. have a place in
our draft logistic policy.
7) Discourage use of CFS facilities for FCL Containers and let cargo choose CFS that should
be many more duly supported by uniform norms. There should be improvement as a policy
where by transport documents such as B/L are not issued prior to cargo being ready and
shippers given unrealistic targets impinging on logistic costs. Discouraging break bulk
cargo movement in lieu of unitized cargo movement, use of Indian made ISO containers for
domestic use and or making available ISO containers for domestic movement by duty
exemption or otherwise would be welcome policy for reducing logistic costs. Of special
concern is movement of hazardous cargo on road and rail without ISO containers.

8) There is urgent need to reform port formalities so that domestic freight by water moves like
truck moves from place to place. All multi model operators should therefore have some
transparent registration online process. Customs procedures should be made uniform with
least intervention for movement of domestic freight and transshipment freight. Issue of
common areas and entry points in existing ports need to be solved by temporary solutions
of de notifying bonded areas / use of RMS/ RFID / clearly marked cargo not for export
etc. Security concerns if any should be overcome by intelligent solutions so that goal of
lower logistic costs is not overlooked in national interest. For example, congestion alone in
metro areas is estimated to cost India USD 22m annually.

9) Time is of essence in logistics such as JIT, multi modal etc. Integrated transport policy like
in Germany is key to good Logistics – e.g. Frankfurt airport fueling supported by river sea
vessel. We believe broad logistic draft policy should be more use of waterborne transport.
Giving infra status to shipping, incentivizing modal shift of cargo, mercantile marine logistics
fund to begin with Rs. 25000 Cr would be step in the right direction with assured increase
in GDP by 1%. And, reduce inflation by 1% and fuel cost of exchequer by at least a third
and CO2 emission by 5% and substantially reduce cargo theft loss damage while
developing underdeveloped coastal & riverine communities. Improving 100 % FDI, ECB
norms, issue of water bonds like NHAI bonds will be welcome facilitation in the
approved logistics policy.

10) Stopping overloading road rail, applying international norms of HSE to road rail,
discontinuing old inefficient road rail stock, introducing power pack cabin trailer, facilitating
RoRo, landing craft, fast passenger commuter traffic, coastal I V tourism, 25 % assured
long term cargo of PSU, big corporate by water only are constructive suggestions for draft
logistics policy. More importantly, let us have good primary legislation – MS, MPA, IPA, IV
– for Indian entity owned operated managed ships of any Class, any flag any size and any
age provided it adds to safety and efficiency of the Indian fleet focusing on large Indian
shipping - large Indian entity owned operated managed fleet, dry docks, ship repairing, ship
building, marine equipment making to
 Indian standards, shipping services providers here and abroad, practitioners of Blue
Economy and it's role in logistics . Old time port, customs, immigration, CISF, Coastguard
practices should give way to ease of doing business and ease of living. Putting business
and revenue growth first with due regard to safety security pollution prevention that are
substantially equivalent to national and mandatory minimum agreed standards for all modes
of transport - level playing field.

11) There is opportunity to increase fair weather window for sailing given improved Indian coast
weather data, reports, SATCOM, marine radio communication capability,
IRNSS, safety cover of Indian Navy and CG.

In conclusion, lower logistic cost is most essential for made in India, make in India, competitive
exports, cheaper imports, growth in employment, opportunity to retrain suitably excess trained
seafarers by way of logistic skill council thus bringing logistics suitably under organized sector
for sustainable development.

Capt. Sudhir Subhedar, Warden, CMMI

Director, Ocean Sparkle

Former Director Technical Indian National Shipowner’s Association

Past President and CEO, Indian Coastal Conference Shipping Association

9823158057

With inputs from senior industry stalwarts experts: Capt R. G. Khare, Capt. Suresh Amirapu, Dr. V. Trivedi,

Capt. Kiran Kamat, Capt. S. Naphade, Capt. I. V. Solanki , Capt. Ajgaonkar , Capt. Arun Karkare, Capt. Nazir

Upadhye, Mr. Ajoy Chaterjee, Capt. V. Rajgopal, Capt. Anil Singh, Heads of Ports, State Maritime Boards and

my colleagues in CMMI, ICCSA, INSA, OSL, KPMG and Logistics Skill Council.