An Inland Container Depot is a rail linked depot which is more than 200 kms from the port ?

1. “DRY PORT AS A LINK IN THE SUPPLY CHAIN, ITS ROLE IN INTEGRATED INTERMODAL LOGISTICS AND ECONOMIC DEVELOPMENT’’ 22nd October,2013 SajalMittra - Director, Blupith Consultancy Private Limited BLUPITH CONSULTANCY PRIVATE LIMITED

2. THE GREAT DEBATE: DEFINITION OF AN ICD AND A CFS • An Inland Container Depot is a rail linked depot which is more than 200 kms from the port ? • It has an export and import shed and therefore has customs or is a custom notified area. Logically it has a Container Freight Station within its boundary ? • Is any rail linked facility an ICD whether it has a CFS or not? Logically then, can an ICD or CFS function independently ? • A rail linked facility is an ICD and road linked facility is a CFS ? • The debate raged between the Indian Railways on one hand and the Ministry of Finance (Customs) on the other. BLUPITH CONSULTANCY PRIVATE LIMITED

3. THE GREAT DEBATE: DEFINITION OF AN ICD AND A CFS • Functionally there is no distinction between an ICD/CFS as both are transit facilities, which offer services for containerization of break bulk cargo and vice-versa. • These could be served by rail and/ or road transport. • An ICD is generally located in the interiors (outside the port towns) of the country away from the servicing ports. CFS, on the other hand, is an off dock facility located near the servicing ports which helps in decongesting the port by shifting cargo and Customs related activities outside the port area. • CFSs are largely expected to deal with break-bulk cargo originating/terminating in the immediate hinterland of a port any may also deal with rail borne traffic to and from inland locations. • Keeping in view the requirements of Customs Act, and need to introduce clarity in nomenclature, all containers terminal facilities in the hinterland would be designated as " ICDs". BLUPITH CONSULTANCY PRIVATE LIMITED

4. THE GREAT DEBATE: DEFINITION OF AN ICD AND A CFS An Inland Container Depot / Container Freight Station may be defined as :         A common user facility with public authority status equipped with fixed installations and offering services for handling and temporary storage of import/export laden and empty containers carried under customs control and with Customs and other agencies competent to clear goods for home use, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export. Transhipment of cargo can also take place from such stations. BLUPITH CONSULTANCY PRIVATE LIMITED

5. INITIAL OBSTACLES Custom’s jurisdiction issues -loss in local revenue. Earnings would shift to Delhi. Custom House Agents-reduction in business. Alternate options. Freight Forwarders-reduction in business. Monopoly status diluted. Shipping Lines-increased turn round of containers & re-positioning costs. Break bulk trucking fleet-reduced cargo off-take. BLUPITH CONSULTANCY PRIVATE LIMITED

6. THE SITUATION AS IT WAS THEN - 1 BLUPITH CONSULTANCY PRIVATE LIMITED

7. EXISTING PROBLEMS FACED BY COMPANIES INVOLVED IN EXPORT/IMPORT • Break bulk cargo prone to damages/pilferage. • Industrial base very far from ports . • Un-predictability of transit time from production area to port CFS . • All relevant import/export agencies based in port area-no control over cargo of companies. • Total dependency on freight forwarders and custom house agents. • Due to un-predictability large cases of shutout of containers. • Delayed payment from banks by 7 to 10 days due non-availability of ‘shipped on board’ certificate. BLUPITH CONSULTANCY PRIVATE LIMITED

8. THE SITUATION AS IT WAS THEN - 2 BLUPITH CONSULTANCY PRIVATE LIMITED

9. INTERESTED PARTIES AT THAT POINT OF TIME • Railways-new stream of traffic and its Public Sector Undertaking-Container Corporation of India AND LATER ON: • The large business houses/companies based in northern India. BLUPITH CONSULTANCY PRIVATE LIMITED

10. CLEAR BENEFITS OF DRY PORTS/ICD’S • Concentration points for long distance cargoes and its unitisation • Service as a transit facility. • Customs clearance facility available near the centres of production and consumption • Reduced level of demurrage and pilferage. • No Customs required at gateway ports. • Issuance of through bill of lading by shipping lines, thereby assuming full liability of shipments. • Reduced overall level of empty container movement. • Competitive transport cost. • Reduced inventory cost. • Increased trade flows. BLUPITH CONSULTANCY PRIVATE LIMITED

11. CUSTOMER FEEDBACK “Currently we export from Sonepat through TKD, Dadri and Loni. But after KMP, it would be sensible to use NH 8 ICDs. It would be economical and would reduce issues related to inter-state operations” - Rice Exporter, NH1 “Tried exporting through ICD Jaipur and Rewari, but were disappointed with their services. We currently use ICD TKD but would be open to use a facility in Neemrana if there’s : easy availability of empty containers (presence of large no. of liners) and reduced transit times.” - Textile Manufacturer, Neemrana “We use ICD Bhiwadi as it is the most economic option. We would prefer Neemrana over Patli as it is located on the highway, we need an assurance of fast disposal of containers.” - Large Tyre Exporter, Bhiwadi “80-90% of our exports go directly to CFS at JNPT. We do not mind paying 15% extra as haulage charges, but cannot compromise on timely delivery. The proposed ICD should ensure faster clearance” - Large Garment Exporter, Gurgaon BLUPITH CONSULTANCY PRIVATE LIMITED

12. CUSTOMER FEEDBACK “At present, we do factory stuffing. However, once volumes double, we would prefer ICD stuffing which is not possible at TKD. At the proposed ICD, we would require sufficient warehousing space to cater to imports of steel cases, stuffing 500 bikes a day and storing those containers. Other requirements would include EDI facility and efficient rail services” Automobile Manufacturer, Manesar “As services, we would require hanging facility for about 15,000-20,000 pieces, warehousing space for both stuffing and de stuffing, round the clock container handling service and efficient rail services” - Garment Manufacturer “We choose an ICD based on the services it can provide. Apart from the regular ICD services of faster clearance, provision of VAS would attract us towards using a particular facility. Fumigation is to name one” - Leading Rice Exporter, NH 8 BLUPITH CONSULTANCY PRIVATE LIMITED

13. GROWTH ALONG MULTIPLE ARTERIAL AXES LEADING OUTWARDS FROM DELHI HAS PROPELLED NCR AS A KEY ECONOMIC HUB Delhi • State’s GDP grew at an impressive CAGR of 10.27%. • The manufacturing sector contributes ~12% GSDP • The per capita income of Delhi is more than double than that of the national average JAMMU & KASHMIR PUNJAB HIMACHAL PRADESH • State’s GDP recorded a CAGR of 12.73% between 1999-00 and 2005-06 touching USD 22.4 bn • Secondary sector (manufacturing) contributed 34% • The state accounts for production of 65% of passenger cars and motor cycles, 50% of tractors and refrigerators • Industrial investments ~Rs 35,000 cr over last 6 years • The eight districts falling within NCR contribute more than 65% to the state’s production: • Faridabad (30%), Gurgaon (27%) HARYANA Haryana NH1 Axis NH24 Axis RAJASTHAN NH2 Axis NH8 Axis UTTAR PRADESH Industrial investments of ~ Rs 70,000 cr. in the last six years • NOIDA, Ghaziabad, Greater NOIDA, Bhiwadi and Alwar are major industrial areas within NCR • The major industries include Electronics, Leather and Footwear, Automotive and Engineering Rajasthan & UP Source: IBEF Reports BLUPITH CONSULTANCY PRIVATE LIMITED

14. TRADE IN THE REGION IS BALANCED Export volume ~ 5,800 TEUs p.m. Import volume ~ 6,350 TEUs p.m. Rice, tyres, textile & garments and auto & auto components are the key commodities exported Auto & auto components, metal & metal products and electrical & electronic items are the key commodities imported BLUPITH CONSULTANCY PRIVATE LIMITED

15. DEVELOPING AN ICD AND ITS JUSTIFICATION • For the ICD/CFS to be successful, reduction in total transport cost is a prime criterion, as there is a possibility of marginal increase in total handling cost per box on origin to destination basis • . This underlines the need for sound economic justification for setting up ICD/CFS through a carefully evaluated traffic likely to be handled at the proposed facility.  • A survey/feasibility study must precede the setting up of all ICDs/CFSs and copy of the report should invariably accompany the application for setting up such a facility. • Data for carrying out analysis could be from secondary sources and field observations, structured over time and space. The latter is more realistic and truthful. • Prior discussions must be held with exporters, shipping lines, freight forwarders, port authorities, concerned Commissioners of Customs/Excise etc., and their point of view fully reflected in the report. BLUPITH CONSULTANCY PRIVATE LIMITED

16. DEVELOPING AN ICD AND ITS JUSTIFICATION • The facility has to be economically viable for the management and attractive to users; to the railways for full train load movements; to other transport operators; to seaports; to shipping lines; to freight forwarders etc. & must have certain minimum amount of traffic. The prospective entrepreneurs are, therefore, strongly advised to study very carefully the viability of the project from the container traffic availability point of view. • In the background of growing international trade, the infrastructure facility may have to precede the actual generation of demand. This is particularly important as such facilities have a long gestation period for being fully operationalised. BLUPITH CONSULTANCY PRIVATE LIMITED

17. FUNCTIONAL ICD – NOT WELL PLANNED BLUPITH CONSULTANCY PRIVATE LIMITED

18. REACH STACKERS BUSY WITH OPERATIONS BLUPITH CONSULTANCY PRIVATE LIMITED

19. RAIL MOUNTED AND RUBBER TYRED GANTRY CRANES IN OPERATION BLUPITH CONSULTANCY PRIVATE LIMITED

20. CURRENT ICD’S IN NCR REGION Panipat Loni Patparganj Gzb/Noida NH-8 Dadri TKD Patli Faridabad Rewari and Bhiwadi BLUPITH CONSULTANCY PRIVATE LIMITED

21. ‘SHIPPERS UTILITY FUNCTION’ • Shipper’s utility function is mainly represented by the total transport logistics cost. • Transport logistics cost influences the final price of the export or the import where the former will affect the competitiveness of Shipper’s goods in world markets. • Total logistics cost of acquiring, shipping and storing the product include: - Inland transport cost - Cargo inspection cost - Commercial fees - Loading/unloading costs - Re-loading & re-handling costs - Ordering costs - Capital carrying costs in inventory - Warehousing costs - Cost of claims - Cost of shelf life - Cost of emergency shipment BLUPITH CONSULTANCY PRIVATE LIMITED

22. ROLE OF ICD IN INTERMODAL LOGISTICS AND ECONOMIC DEVELOPMENT • ICD’S fulfill the distinct requirement of inter-modal container/cargo transport. • Satisfy the Shipper’s demand for a door-to-door service. • Make optimal use of surface transport and help the de-congestion of ports. • Dry ports in the hinterland are expected to offer more favourable conditions to shippers in terms of free time, storage fees, customs services and other administrative and technical operations • Offer easy and safe access to international shipping facilities in the hinterland giving a boost to inland trading. • Assist in the reduction of overall cost of transit cargo to landlocked neighbouring countries. Examples in the case of India are the countries of Nepal and Bhutan. BLUPITH CONSULTANCY PRIVATE LIMITED

23. ROLE OF ICD IN INTERMODAL LOGISTICS AND ECONOMIC DEVELOPMENT Simplified procedures associated with a dry port and containerisation means fewer ships and fewer officials involved in processing the required documentation with fewer control points. Finer tuning of delivery schedules. Encourage the marginal exporter/importer with LCL cargo at a cheaper cost. Shippers evaluate the advantages and drawbacks of alternative hinterland container logistics solutions against their supply chain objectives involving various trade-offs. Shippers point of view of the port inland concept is case specific depending on factors such as the type of goods, the level of inventory holding costs, the service levels and marine pricing structures at marine and inland terminals, the customs procedures and inspection rules, the capacity constraints and the lead time for different operations. BLUPITH CONSULTANCY PRIVATE LIMITED

24. ROLE OF ICD IN INTERMODAL LOGISTICS AND ECONOMIC DEVELOPMENT Intermodal developments in port hinterlands demonstrate that market players are constantly searching for ways to bundle cargo and integrate operations along-with supply chain. Marine terminals are developing a tendency to work together and in a seamless way with systems of re-worked inter-modal facilities in order to increase their productivity and extend their hinterland. Meanwhile marine and inland terminals have begun to play a decisive role in global production-distribution supply chain management strategies. ‘Port regionalisation’ –on going process of close interaction between port maritime systems and inland freight networks. ‘supply chain terminalisation’-process of increased role of terminals in the supply chain strategies of shippers. BLUPITH CONSULTANCY PRIVATE LIMITED

25. ROLE OF ICD IN INTERMODAL LOGISTICS AND ECONOMIC DEVELOPMENT Concepts such as dry port , extended gateway, modal shift, just in time concept and trade facilitation are have gained momentum. Implementation of such concepts suggest a shift to sustainable transparent solutions by the by the extensive use of trains and/or barges. Resulting in relevant benefits to all stake-holders in port hinterland container logistics, representing a significant innovation dramatically changing the layout, flows and scope of logistics networks. DRY PORTS AND EXTENDED GATEWAYS ARE EXPECTED TO CONTRIBUTE TO: Enhance the hinterland accessibility and connectivity of seaports. Relieve congestion phenomena in seaports and over inland transport networks. Promote logistics integration between different types of firms. BLUPITH CONSULTANCY PRIVATE LIMITED

26. EVOLUTION OF THE ICD CONCEPT • ICD Operations led to the facility of factory stuffing/de-stuffing. • Excise sealing concept • Random custom inspection • Model of out-sourcing duty collection to the ICD owner. • Colour coding of cargo, its sensitivity; history of company and type of cargo was developed as a software for streamlining the process of customs inspection. BLUPITH CONSULTANCY PRIVATE LIMITED

27. THE SHIPPER AS HE IS NOW ! BLUPITH CONSULTANCY PRIVATE LIMITED

28. THANK YOU BLUPITH CONSULTANCY PRIVATE LIMITED