APM Terminals India, a part of the global ports and terminal operator APM Terminals, has over years become a force to reckon with in the Indian port operations landscape. Ajit Venkataraman, Managing Director, APM Terminals India Pvt. Ltd., in an exclusive interaction with The Dollar Business talks at length about the future of India’s container trade, and discusses the factors impacting its growth in the country.

TDB EDIT BUREAU | November 2016 Issue | The Dollar Business

TDB: As an industry insider, what is your perception of the overall business environment for container trade in India as well as the entire South Asia?

Ajit Venkataraman (AV): The vast untapped potential that this region holds for growth will enable the container and logistics industry to find new opportunities even under tough market conditions. As per the latest government figures, major ports in India have witnessed a positive growth of 6.2% in the first quarter (April-June) of FY2016 as compared with the corresponding period last year. This is in stark contrast to what we see in other major economies.

Container traffic too is up by 19.6% over last year, which is a very good sign of the industry’s health in India. The container trade in India is strongly interconnected to the EXIM trade of the country. And the growth of container traffic would be driven by three key factors: international trade growth; expansion of containerisation; and hub and feeder service structure.

The biggest challenge in container trade however is the lack of infrastructure. Logistics cost as a proportion of gross domestic product (GDP) is as high as 15% for India, which compares unfavourably with most other peers. Moreover, estimated wastage due to poor logistics is also as high as 4%. In addition, only 30% of cargo (by value) is containerised – which is both an opportunity and challenge.

India primarily deals in finished goods such as automobiles, capital and engineering products, textiles and chemicals and there is scope for many more commodities to be containerised. The introduction of GST is also expected to give a fillip to this trade. GST will speed up investments in infrastructure and help reduce costs of logistics, which in turn will benefit customers. Unproductive transit delays as well as regulatory hurdles will be curbed through new tax regine, thus reducing the final price of goods.

TDB: How do you plan to leverage your rich experience in handling automotive cargoes?

AV: India is among the top five automotive markets in the world, in the context of sales. The growth of the Indian automotive market is expected to be robust in the coming years as well. In FY2015, about 31% of small cars sold globally were manufactured in India.

In a nutshell, the automotive industry is expected to be a critical sector in India’s trade and has the potential to contribute over 12% to India’s GDP and create about 65 million jobs by 2020. We will continue to serve the auto sector in India through our customised service offerings. Our in-depth understanding of customer requirements has helped us to work with global majors such as Volvo Cars, Volkswagen and Mercedes.

TDB: Are you expanding your portfolio of services? Do you have plans to scale up your operations in India’s east coast as well?

AV: Including container freight station (CFS) services, we have a wide portfolio which also includes the container services division providing services such as empty depots, garment-on-hanger (GOH) fabrication, flexi tanks, pre-trip reefer inspections, container body repairs (including heavy body) and reefer machinery repairs. We also provide ancillary services such as warehousing, transportation, palletisation, labelling, packaging, etc. And these services do form an integral part of the end-to-end solutions we provide to our customers.

APM Terminals Inland Services, South Asia operates three facilities in western India through Nhava Sheva in Mumbai. The facility in Dadri, in North India, is a joint venture with Container Corporation of India (CONCOR), and serves the market there. It also offers specialised solutions for the retail apparel industry including GOH fabrication of containers, GOH on wheel facility and specialised warehouses for ensuring dust, and rework free delivery of garment consignments, in line with standards of global retail apparel brands. In the South, we serve our customers through facilities in Kochi and Tuticorin.

With the increasing number of ports in eastern India, there is more opportunity to provide services in that region. Our Chennai CFS has now proactively sought Customs’ permission, which was granted, to handle bonded LCL ( Less-Than-Container-Load) consignments destined not just for Chennai, but all locations across India.

TDB: A.P. Moller-Maersk Group has a strategic advantage of having an end-to-end presence in the logistics value chain. Does this translate to any benefit, in terms of tariff and time taken for shipment?

AV: All group entities operate individually, and independently of each other, and focus on delivering their own efficiencies across the value chain. APM Terminals Inland Services in India provides first mile and last mile connectivity and enables efficient evacuation of containers from terminals in a reliable manner through careful planning and superior execution. Taking advantage of a wide customer base, we triangulate container movement. This reduces the logistics cost for end customers and reduces environmental impact.

We have also set up inland container depots (ICDs) in the hinterland, functioning as the link between key manufacturing and consumption centres across India. Our container freight stations (CFSs) are spread across key growth centres of India, ensuring the exporters and importers can avail of services of global standards.
 
TDB: In recent times, competition in the container business on the east coast of India in general, and Chennai in particular, has increased. In such a scenario, how should the trade look at APM Terminals Inland Services South Asia’s recent association with Volvo for a dedicated warehouse facility in Chennai?

AV: I believe competition is good and augurs well for the general trade environment. With our presence in Chennai, we are very strategically located near the Chennai Port, Kamarajar Port and Kattupalli Port.

Our exclusive agreement with Volvo Cars in Chennai isn’t actually a product of increasing competition, but is an output of the customer-centric approach that we employ.

Volvo imports Complete Built-up Units (CBUs) from Europe to India through Chennai Port. Our customised warehouse spread over an area of 1,02,000 sq.ft. of bonded and non-bonded areas, will be able to hold 500 vehicles. We also provide the additional service of distributing the customs cleared vehicles to other parts of the country. We will continue to focus on the automobile sector, whether it’s for customised warehousing, Semi Knocked Down (SKDs), Completely Knocked Down (CKDs) or CBUs.

We are committed to enabling trade across geographies and especially hinterlands, and this service offering is testament to that.

TDB: Your company claims the partnership between APM Terminals Inland Services South Asia and Bhabha Atomic Research Centre (BARC) for the bio-degradation initiative to be an industry first. Can you please elaborate on the project?

AV: At the outset, I would like to clarify that the association for environment friendly in-situ biodegradation is neither a business deal, nor is it exclusive in nature.

This project is a joint collaboration with Bhabha Atomic Research Centre (BARC) to address the long standing need of a safer, more efficient and environment friendly in-situ biodegradation technique for treating perishable cargo. Our team in Mumbai approached Padma Shri Sharad Kale, Scientist and Head (Nuclear, Agriculture and Biotechnology Division) at BARC, to seek his expertise to develop an inoculum (a culture composed of multiple kinds of bacteria) which when introduced to an existing biodegradable material (the container with perishable cargo in this case) enables natural decomposition of the cargo with organic compost as the end product.

The logistics industry, especially CFSs and ICDs, witnesses frequent cases of abandonment of containers carrying perishable cargo such as chocolates, fruits, vegetables, nuts, spices, meat and beverages. In-situ biodegradation enables natural decomposition of stale perishable cargo within the container, right inside of the CFS, as opposed to transporting the container to a specially approved facility with a special incineration machine. This technique is cost-effective and significantly reduces the associated carbon dioxide (CO2) emissions into the environment.

We have shared this knowledge with the Customs and the Container Freight Station Association of India (CFSAI). In fact, some of the neighbouring CFSs have already successfully converted the cargo in their long-standing containers to organic compost.

TDB: In comparison to countries like Sri Lanka, Malaysia, Singapore and China, how have CFSs in India evolved? How would a strong domestic consumer demand and volatile global economy influence container trade
in India?

AV: The definition of a CFS (and thus its chief characteristics) vary with countries, and hence, it wouldn’t be possible or correct to bring a fair comparison of CFSs across countries. In India, CFS is an extension of the port and provides the space and the infrastructure to carry out Customs inspections and other allied activities. Over time, these have evolved into multipurpose facilities offering bonded warehousing, storage, stuffing, de-stuffing and so on.

These play a critical role in enabling trade in India, decongesting container traffic at ports, adding value to container trade and enhancing ports’ operating efficiency. The ICDs play a critical role by connecting the hinterlands to the world.

Sri Lanka, for instance, does not have a concept of a Customs bonded CFS. All Customs-related activities happen at the port itself. Also, container trade in countries like Sri Lanka and Singapore is primarily driven by transhipment activities.

There are many CFSs in China which are specifically advanced in automation in warehousing. They use multiple advanced technologies that have been developed in-house. CFSs in China and Thailand also work with advanced machinery and equipment such as Rubber Tyred Gantry (RTG) cranes for handling containers. Customs clearance is also not as complicated in Hong Kong, Singapore and Malaysia as compared in India.

CFSs in India can be at par with some countries such as Vietnam and Indonesia. But when it comes to trade infrastructure like road and rail network, we are behind countries like China, Hong Kong, Thailand, Singapore, Malaysia to name a few.

India’s trade has so far been reasonably insulated from the high volatility in the global economy. Key imports are being driven by domestic demand, which has remained robust. Exports have been affected due to the global economic slowdown.

Currently India has a containerisation level of just above 50%, while the average containerisation in developed economies is approximately 70%. China’s container traffic is estimated at 150 million TEUs while that of India is estimated at 10 million TEUs, reflecting a 15 times multiple in container volume.

So, I would say there is a huge potential for untapped services to be catered to. Depending on global economic climate, we hope there will be a path of recovery bolstered by good domestic demand and subsequent growth in the next few years.

TDB: Is there anything else that you would like to emphasize?

AV: I would like to emphasize on the critical importance of safety in the logistics and supply chain industry. In general, India’s mindset on safety needs to improve. APM Terminals Inland Services, South Asia is committed to safety in its facilities and across the entire value chain. This focus has led us to enhanced efficiencies. Innovative initiatives such as designated and separate examination and de-stuffing zones enable our customers as well as Customs officers to save time and effort while staying safe at our facilities.

To provide you with a better understanding – we have set a target of a complete man-machine separation in our yards. This is supported by a global study that was conducted to identify the top five causes of accidents and hence focal areas. Typically, both humans and container handling equipment are in the yard simultaneously 24x7. This creates unsafe situations, especially during customs inspection. We have designated a separate area dedicated for inspection, so that people are kept outside the yard and hence ensure safer operations.