Shipping MRO Services and GST Change

by Naresh Sheth, Partner, NA Shah Associates

INDIA has a 7,500 km long coastline. It is located along the Mediterranean trade route that constitutes of approximately 7-9 per cent of the global trade. Out of India’s total trade, approximately 70% by value and 95% by volume is handled by seaborne transport, according to the Ministry of Shipping. All ships and vessels undergo scheduled and unscheduled repair and maintenance during its entire life time.

India which is favourably located, enjoys low labour cost, qualitative work force and adequate availability of skilled professionals is best to perform ship Maintenance Repair and Overhaul (‘MRO’) services. This labour intensive nature of ship repair industry puts India to great advantage as compared to advanced nations and also neighbouring countries. Still the Shipping MRO industry wasn’t growing. The reason was the high tax rates.

Till 1st June, 2021, MRO services in respect of ships and vessels were liable to GST at 18%. MRO services provided to foreign flag vessels were not treated as ‘export of services’ in spite of receiving consideration in convertible foreign exchange and was attracting GST at 18%.

Exorbitant rate of GST overpowered the labour cost advantage and it made MRO services cost prohibitive when provided on Indian shore. That helped the neighbouring countries like Sri Lanka, UAE, Pakistan and Philippines in getting foreign as well as Indian ships.

The airline industry also faced a similar issue a few days ago but the GST slab was reduced. Acceding to the legitimate demand of ship repair industry, the Government has notified following benevolent changes granting tax relief in respect of ship Maintenance, Repair and Overhaul (‘MRO’) services:

• Notification No. 2/2021 – Central Tax (Rate) dt. 02.06.2021 – Reducing GST rate from 18% to 5% on MRO services in respect of ships or vessels.
• Notification No. 3/2021 – Integrated Tax dt. 02.06.2021 – Changing the place of supply for MRO services provided to foreign flag ships from ‘location where services are performed’ to ‘location of service recipient’.

Both these notifications have come into effect from 02.06.2021 and hence Ship MRO services provided on or after 02.06.2021 is eligible for above tax benefits.

Notification No. 2/2021 – Central Tax (Rate) dt. 02.06.2021:

GST rate for following services is reduced from 18% to 5% w.e.f. 02.06.2021:

 “Maintenance, repair or overhaul services in respect of ships and other vessels, their engines and other components or parts”.

Reduced rate of tax applies only to maintenance, repair and overhaul services in respect of:

• Ships or vessels;
• Engine of ships or vessels; and
• Any component or part of ships or vessels or its engines.

Notification No. 3/2021 – Integrated Tax dt. 02.06.2021:

Place of supply for following services shall be the location of service recipient:

“Supply of maintenance, repair or overhaul service in respect of ships and other vessels, their engines and other components or parts supplied to a person for use in the course or furtherance of business”.

Resultantly, MRO services provided in respect of foreign flag ship and vessel shall qualify as ‘export of services’ as defined u/s 2(6) of Integrated Goods and Services Tax Act, 2017 (‘IGST Act’) provided, consideration for such services is realized in convertible foreign exchange.

GST IMPLICATIONS OF MRO SERVICES PROVIDED ON OR AFTER 2ND JUNE, 2021:

GST implications of MRO services provided on or after 2^nd June, 2021 in respect of ships or vessels are tabulated below:

Ship owner / operator	GST implications
Indian entity	MRO services received in India is taxable at 5%. The ship repairer will be liable to GST under forward charge. Indian entity will be liable to discharge GST at 5% under reverse charge mechanism on MRO services received at foreign ports or dry docks. The ship owner or operator will be entitled to input tax credit (‘ITC’) in both the above cases.
Foreign entity (Foreign flag ship / vessel)	It will be export of service subject to realization of consideration in convertible foreign exchange. Exporter of Ship MRO service has two options provided u/s 16(3) of IGST Act: Export the services without payment of tax (i.e. tax levied is zero).  The exporter following this route can claim refund of unutilized ITC lying in its Electronic credit ledger u/s 54(3) of Central Goods and Services Tax Act, 2017 (‘CGST Act’). Export such services with payment of tax at 5% and claim refund of such tax u/s 54 of CGST Act r.w. section 16(3)(b) of IGST Act. This is done by discharging GST liability through electronic credit balance.  This is ultimately a method of liquidating the accumulated ITC lying in electronic credit ledger. The service provider should file letter of undertaking (LUT) in both the above cases and he should ensure that he realizes consideration in convertible foreign exchange within prescribed time limit.

 Reduction in output tax rate without corresponding change in input tax rates, would result in inverted rate structure for ship repair industry. As a result, the ship repairers would be entitled to claim refund on unutilized ITC in accordance to the provisions of section 54(3)(ii) of CGST Act subject to prescribed conditions and restrictions.

CONCLUSION:

Finally, the Government has acceded to the long-standing demand of ship repair industry. These benevolent notifications will reduce the tax incidence by 13% on MRO services provided to Indian flag ship vessels and by 18% on MRO services provided to foreign ship vessels. This will indeed make Indian ship repairers competitive in global market and will act as a stimulus for Indian ship repair industry. It will bring back the declining industry and in fact increase the employability in this sector. It will also get India a lot of Foreign Exchange and it will add to the total revenue of the country. It may lead us to become the leader in the Mediterranean trade route.

• Updated on 7 July 2021.

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Online Arbitration and Conciliation Proceedings

By M. A. Bhaskarachar, Former CMD, Kamarajar Port Limited, Arbitrator and Conciliator

Major Ports like many other sectors is embroiled in many disputes with contractors. Conventional dispute resolution mechanisms entail significant time and cost due to time involved in travel to the place of arbitration by the Parties, arbitrators and their support staff,  lodging and boarding and conference room  arrangements at hotel and logistic processes attributable to physical face to face meetings.

In order to conserve the time, cost, efforts and resources involved to resolve the issues, we may consider leveraging on options available today with the intelligent use of smart technology.

In the recent times, working from remote locations, working from home (WFH) and online meetings happening on digital platforms are becoming common.

Even the Courts of law have resorted to conducting hearings online. Increasingly, the Governmental institutions have begun transacting business online. All these have improved the ease of doing business and transformed the paradigm of work leading to significant savings in travel, and other related costs. In addition, these new working processes help to optimise the time and productivity and quality of work for resource persons.

Recently, in one of the conciliation proceedings where I am involved the proceedings, were conducted completely online using digital platform. Members from four different cities could participate and conclude the proceedings successfully although it was the first such occasion online.

Taking the cue from the success in such on line events, it is perhaps time that we consider the option of conducting most of the upcoming hearings under Arbitration and Conciliation Act online and of restricting physical face to face meetings to the bare minimum.

 Digital Platforms available for conducting online arbitration

There are several online digital platforms including Zoom, Google Meet, Skype, Microsoft Teams and others for conducting online meetings. So, this may not be an issue going forward.

Preconditions for going online in arbitration and way ahead:

To take this online idea forward, we need only the consent of the Parties to the arbitration and Parties are likely to opt online considering the substantial benefits of going online.

The relevant legal provision relating to place of arbitration in the Arbitration and Conciliation Act 1996 are produced below:

Section 20. Place of arbitration. — (1) The parties are free to agree on the place of arbitration. (2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. (3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.

Further the place of arbitration as agreed upon by the parties can be Seat of Arbitration for the purpose of deciding the jurisdiction. Online hearings may not have bearings on agreed seat of arbitration.

In case there is a need to amend the rules, it should be done in order to cope with the need of the hour.

For more details, contact the author at bhaskarachar@gmail.com (mobile: 956603344)

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Latest Seafarers Happiness Report Paints Optimistic Picture Across the Shipping Industry

Chennai:

Port Wings News Network:

After concerning reports earlier in the year, the latest Seafarers Happiness Index report has shown a marked improvement in happiness levels amongst seafarers across all sectors of the industry.

The index, undertaken by The Mission to Seafarers and supported by leading P&I insurer the Shipowners’ Club, is a gauge for measuring the feelings and experiences of seafarers across the global maritime industry. Conducted every quarter, in the latest report overall seafarer happiness has risen from 6.27/10 to 6.59 – a very promising sign for the industry.

Happiness regarding interaction with other crew members has also increased notably, up to 7.28 from 6.85 last quarter. This is one of the highest figures provided in the five years since the report began and suggests a growing sense of comradery amongst seafarers.

The latest report, which covers the third quarter of the year also saw a record number of participants engaging with the Seafarers Happiness Index. This is encouraging as it suggests that more seafarers see the value in having their voice heard on a global platform.

HAPPINESS AMONGST SEAFARERS ONBOARD CRUISE AND FERRY VESSELS

After findings from the second quarter of the year showed happiness amongst seafarers onboard cruise and ferry vessels to be 15% lower than other vessels, it is very encouraging to see that happiness levels in this sector leapt up a full point to 6.3/10. It is hoped that this indicates an improvement in working conditions, while the pressures from a busy summer season are also likely to have eased.

Steven Jones, Founder of the Seafarers Happiness Index, commented: “The Mission to Seafarers has been contacted by several cruise ship operators following the release of the last report. It is a very positive sign to see the results from the index being taken seriously by the industry. Hopefully, some of the insight we provided has contributed to this improvement in seafarers’ sentiments about life at sea, although there is no room for complacency on any of the barometers of happiness used by the index.”

Louise Hall, Director – Loss Prevention at the Shipowners Club commented: “The positive results from this quarter’s Seafarers Happiness Index demonstrates the effectiveness of this initiative, and its associated outreach projects, in improving the quality of life for those at sea.

“The index is providing a more accurate image than ever before of the conditions across the global fleet. With record numbers of seafarers participating in the survey and engaging with the research, we have been able to identify more ways to support our Members in prioritising the health and wellbeing of their crew.”

While results across the board were generally very positive, the anecdotal evidence from seafarers identified a number of ongoing concerns. The impending IMO 2020 sulphur cap appears to be a source of stress for many seafarers. The report indicates that there is a widespread fear of blame for non-compliance, suggesting that some seafarers don’t feel prepared for the cap, which comes into effect in the New Year. Many participants reported concerns that discrepancies in data, in addition to tougher inspection regimes, could result in seafarers facing prosecution by authorities.

While there has been much attention given to the financial impact of IMO 2020 on shipowners, this evidence shines a light on the day-to-day pressures on those serving at sea and the need for governments and shipowners to prepare seafarers for the change. The report indicates that the companies investing more resources into training have happier crews – highlighting the importance of seafarers feeling confident in their own abilities and with the responsibilities placed upon them by new regulations.

Understandably, salaries also play a significant role in helping seafarers to feel stable in their careers. Whilst youngest seafarers appear to be the happiest – reflecting enthusiasm about seeing new parts of the world, with a very high 7.9/10 – many reported that low wages were making them question their future careers. This is concerning for the future of the maritime industry, with the potential for a ‘talent-bleed’ if seafarers are lost to other industries.

Happiness amongst those aged over 45 showed a marked turnaround in this quarter, reaching an impressive 7/10. While a number of seafarers declared their pride in working at sea, budget cuts were a common concern with no seafarers feeling “wealthy” in their home nations. This indicates that although life at sea is a cheerful one, the practicality of wages may not support the career choice in the long-term.

Overall, this report has shown a more promising set of results as we approach the end of 2019. It would appear that industry-wide changes in attitudes could influence widespread progress in 2020, and there is a strong sense that some of the improvements that The Mission and others have been advocating may be gaining traction.

 

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“Coastal Shipment Will Bring Twin Advantages,” Says Kakinada Sea Ports COO Muralidhar

Chennai:

Port Wings News Network:

From the port sector, we are focusing to enhance co-efficient in ‘Coastal Shipment’ mainly will bring twin advantages of reduced costs and bringing coastal ports into proximity and releasing pressure on Rail & Road systems, which can be used for alternate sources of economy and facilitate passenger services, said Mr. M.Muralidhar, Chief Operating Officer, Kakinada Sea Ports Ltd.

In an exclusive interview to Port Wings, Mr Muralidhar, said, “But by and large, still the evacuation mode is based on Indian Railways which have exclusive opportunity. This gives Railways a unique advantage to decide tariffs based on their ideology which sometimes differs with ‘Unique Selling Proposals’ of Ports which is a debatable point.”

Excerpts of the interview…

Q: Tell us about the background and Kakinada Port?

M Muralidhar: “Historically Kakinada operating with Anchorage port since last 150 years plying with barges to load mid-sea anchored vessels. Government of Andhra Pradesh kick started the development of Kakinada Deep Water Port in 1987 & completed by 1997 with the support from Asian Development Bank to develop Berths -3 Nos (610Meters) Artificial breakwater of 1020 meters, and Navigational channel of 6.0 Kms with depth of 9.5 meters allowing ships to call with 20,000DWT.”

“In line with GOI policy to develop privatized ports either Brown field or Green field ports across the country was adopted by Govt of Andhra Pradesh. AP Government has finalised global tender for privatation and awarded concession to Kakinada Seaports Ltd in 1999 under Maintain-Built- Operate & share transfer of KDWP.”

“Incidentally Kakinada Seaports Ltd is the first operating private port of KDWP in Govt of Andhra Pradesh in 1999. By 2018, KDWP developed & progressed by bounds and leaps with the vision of management of KSPL and reached with multi-dimensional operating facilities – Berths (Main berth–7 berths – 1910 Meters), Multipurpose berths (4 berths – 780 Meters), Offshore supply vessels berths (6 berths), Floating Dry dock & Afloat ship repair facilities at port with navigation channel –12 Kms with 15.00 Meters Draft.”

“KDWP operates permitting fully loaded Panamax and Cape size vessels compatibility with vessels upto LOA: 295 meters, Beam: 45 meters & Draft -14.5 meters. KDWP boats of many mechanised handling facilities with — Coal conveyor systems, Fertilizer conveyor systems & Alumina conveyor systems.”

“Offshore supply vessels base facility-port serves standalone facilities for offshore oil and gas exploration activities in Krishna- Godavari basin by operators ONGC, RIL , cairn , etc”

Kakinada Container Terminal

“Container Terminal – Kakinada Container Terminal is located in East India’s agricultural & commodity hinterland which exports containerable products like rice sugar maize seafood and paper products. A Special Economic Zone set up by GMR group is just located 25 KM away from this terminal .The other advantage of this terminal that closest to an Amaravati – the new capital of Andhra Pradesh. Presently, Maersk , MSC , BLPL and Maxicon Lines are operating and connecting to across the globe via Colombo by feeder vessel which is being called on weekly every Tuesday by Far shipping.”

“Apart from, a coastal service to Cochin and Port Blair is being called by Shreyas and TCI Seaways respectively on monthly. BLPL is calling a direct service to Yangon on demand. Many new investments are in line up as per state government sources.”

Q.As a Container Terminal In-charge, how do you see the growth of private ports over the years?

MM: “Private ports are having bright future & opening new challenges and shall surpass business volumes over Major ports and emerge as gateways for customer centric business models. Though a tough competition has been from Major ports on tariff, the private port can still compete with them by augmenting productivity.”

How does Maritime sector, which is a niche area, evolved over the years?

MM: “The Maritime sector of Ports emerged as competing two arms between Major Ports and Private ports leading the Export/Import commerce driven with ideology riding the infrastructure facilities at ports to deliver tailor made solutions with competing tariffs. KDWP emerged as Multiproduct port facilities with tailor made solutions to meet customer needs. The need of the day and way ahead over the years is the solution through ‘Multi-modal transport services’. This paves way for the huge infrastructure facilities developed over the port sector can leverage dispatching multimodal services to optimize solutions to meet customer needs.”

Given the huge demand for best facility for cargo evacuation, what are the opportunities available for ports/terminals to garner captive cargo?

MM: “From the port sector we are focusing to enhance co-efficient in ‘Coastal Shipment’ mainly will bring twin advantages of reduced costs and bringing coastal ports into proximity and releasing pressure on Rail & Road systems which can be used for alternate sources of economy and facilitate passenger services. But by and large still the evacuation mode is based on Indian Railways which have exclusive opportunity. This gives Railways a unique advantage to decide tariffs based on their ideology which sometimes differs with ‘Unique Selling Proposals’ of Ports which is a debatable point. Should the policy  to decide connecting hinterland industries to closest Port as gateway will open huge opportunities in  ‘Coastal Shipments’ and also result in long haulages of rail & road saving fuel and carbon footprint.”

What is the current status of cargo segment moving via East Coast to various countries?

MM: “The Port is positioned with vibrant facilities to compete with shipments Coastal or Exim cargoes East or West. The port is ideally located at the rice bowl of India and other agri-commodity as well. KDWP is well poised to serve the commerce going towards West, especially Colombo-Andamans- Bangladesh – Myanmar & Singapore. At our port, we are looking towards the promising sectors of Food grains- Rice, maize, Aqua products- Fish & shrimp, Sugar, paper industry, and Granite industry has huge potential connecting to Far East destinations.”

How do you see the growing challenge to Indian port sector from private ports?

MM: “Across the sector, all ports have established huge infrastructure capacities presently operating at 50-60% operating levels and have huge opportunities to serve industry in coming years. The major  challenges are still in road & rail connectivity areas, And, the wish to establish ‘Dedicated Freight Corridor, and North – South/East-West pipe line connectivity’s area long way to realize.”

What is your expectation from the Government of India/ State Government to improve quality of maritime trade in the country (like tax relaxation/cabotage)?

MM: “Ports to be declared as EXIM transit areas and minimize intervention with outside agencies and avoid intervention with numerous acts of industries, factories, transport, Excise, pollution, mining ,metrology ,labour depts. Etc.. &  to be dealt through a single window system of an agency to oversee activities in port area. Tax incentives to port facilities & especially dredging costs are prohibitive need to be incentivized. If a uniform policy to evolve lorry rates based on distance only across the ports sector will give more transparence and cost effectiveness to clients. Our government should attract more investments to augment the hinterland potential so that the port utilization would be much viable as there are many private ports are in line up. The government should strive consistently to develop the coastal business which will enable the port to utilize more effectively.”

A few developed nations in Europe and Asia have good base for maritime trade. What is the condition in India?

MM: “As we are progressing in the Eco system of Indian Sub-Continent has a miles to cross and compare the other countries but observing the developments in a decade in Indian ports sector has achieved commendable growth & facilitations. Especially, govt policy of easing ‘Cabotage policy & accommodating customs norms’, opens horizons for foreign ships to develop container business connecting the coastal ports and neighboring ports.”

In your view as an experienced hand in the sector, how is the Indian shipping industry doing now?

MM: “Indian shipping industry is progressing in right direction to hit the bull’s eye on achieving the panoramic vision of India connecting ‘Multimodal services’ delivers ‘Doors step Delivery’ to customers is not a long time to wait to achieve glorious scenario competing with developed nations of the globe.”

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WTO Downgrades Outlook for Global Trade as Risks Accumulate

New Delhi:

Port Wings News Network:

Trade will continue to expand but at a more moderate pace than previously forecast. The WTO anticipates growth in merchandise trade volume of 3.9% in 2018, with trade expansion slowing further to 3.7% in 2019. The new forecast for 2018 is below the WTO’s 12 April estimate of 4.4% but falls within the 3.1% to 5.5% growth range indicated at that time. Trade growth in 2018 is now most likely to fall within a range from 3.4% to 4.4%.

Some of the downside risks identified in the April media statement have since materialized, most notably a rise in actual and proposed trade measures targeting a variety of exports from large economies. The direct economic effects of these measures have been modest to date but the uncertainty they generate may already be having an impact through reduced investment spending. Monetary policy tightening in developed economies has also contributed to volatility in exchange rates and may continue to do so in the coming months.

WTO Director General Roberto Azevêdo said: “While trade growth remains strong, this downgrade reflects the heightened tensions that we are seeing between major trading partners. More than ever, it is critical for governments to work through their differences and show restraint. The WTO will continue to support those efforts and ensure that trade remains a driver of better living standards, growth and job creation around the globe.”

The updated trade forecast is based on expectations of world real GDP growth at market exchange rates of 3.1% in 2018 and 2.9% in 2019. This implies a ratio of trade growth to GDP growth of 1.3 in both years.

Trade policy measures are far from the only risk to the forecast. Developing and emerging economies could experience capital outflows and financial contagion as developed countries raise interest rates, with negative consequences for trade. Geopolitical tensions could threaten resource supplies and upset production networks in certain regions. Finally, structural factors such as the rebalancing of the Chinese economy away from investment and toward consumption are still present and could weigh on import demand due to the high import content of investment. Overall, risks to the forecast are considerable and heavily weighted to the downside.

In the first half of 2018, world merchandise trade was up 3.8% compared to the same period in the previous year. Exports of developed economies rose 3.5% during the same period while shipments from developing economies increased by 3.6%. On the import side, developed economies recorded year-on-year growth of 3.5% in the first half of 2018 while developing countries registered an increase of 4.9%. Imports of developed economies have generally been flat in 2018 while exports of developing economies plateaued similarly.

All geographical regions recorded positive year-on-year trade growth in both exports and imports in the first half of 2018, but some regions performed better than others. North America saw the fastest export growth during this period at 4.8%, followed by Asia at 4.2% and Europe at 2.8%. Exports of Other regions (comprising Africa, the Middle East and the Commonwealth of Independent States including associate and former member States) increased by 2.7% while those of South America were up 1.1%. Asia had the fastest import growth (6.1%) followed by South America (5.5%), North America (4.8%), Europe (2.9%) and Other regions (0.5%).

Prices of energy commodities including oil have risen 33% for the year-to-date through August compared to last year, boosting export revenues of commodity exporters. This has not yet translated into strong import demand in resource-rich regions, as one might expect. Meanwhile the US dollar has appreciated by 8.4% in real effective terms since January of 2018.

The downward revision to the trade forecast is consistent with the WTO’s World Trade Outlook Indicator (WTOI), which has signalled slowing trade momentum since the first quarter of 2018. The WTOI combines several leading indicators for trade into a single composite indicator. Components include container port throughput, air freight shipments, export orders, automobile sales and trade in electronic components and raw materials. The export orders component, derived from purchasing mangers’ indices, has fallen from 54.1 in January to 50.3 in August, just above the baseline value of 50.0 separating expansion from contraction.

A separate indicator of economic policy uncertainty is based on the frequency of keywords related to uncertainty in press reports (Chart 4). The index value rose from 113 to 227 between January and July before falling back to 205 in August. Although uncertainty has eased slightly recently, it remains higher than during the global financial crisis of 2008. To the extent that economic uncertainty deters investment it can have a negative impact on trade since capital goods tend to have high import content.

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Indian Major Ports Face Bleak Future Without Captains for Months

Chennai:

Port Wings News Network:

Out of 12 major ports dotting across the east and west coasts in the country, six are without a full-time chairman for months. And the delay in appointing a regular chairman for these ports is affecting the prospects of these facilities, say port users.

Government of India through its Ministry of Shipping manages 12 major ports – Deendayal (Kandla), Jawaharlal Nehru (Nhava Sheva), Mumbai, New Mangalore, Mormugoa, Cochin, V O Chidambaranar (Tuticorin), Chennai, Kamarajar (Ennore), Vishakapatnam, Paradip and Kolkata.

Of them, Deendayal, JNPT, New Mangalore, Cochin, Chidambaranar, and Kamarajar ports are without a regular chairman for months.

TEMPORARY ARRANGEMENT

The Ministry of Shipping recently announced appointment of chairman-in-charges for three Major Ports – Cochin, V O Chidambaranar (Tuticorin) and Kamarajar (Ennore).  As per the order Mr P Raveendran, Chairman of Chennai Port Trust, given an additional charge as CMD of Kamarajar Port Ltd. Likewise, Mr Venkata Ramana Akkaraju, Deputy Chairman of Cochin Port Trust, entrusted with additional charge as Chairman, Cochin Port Trust.

Besides, Mr Rinkesh Roy, Chairman of Paradip Port Trust, has been given additional charge as Chairman of V. O. Chidambaranar Port Trust.

STATUS OF PORTS WITHOUT CHAIRMAN

Kamarajar Port, the only corporate port under the administrative control of the Ministry of Shipping and located at Ennore near Chennai in Tamil Nadu, is without a regular chairman and managing director (CMD) since August 2017.

As the then chief M A Bhaskarachar retired on July 31, 2017, government had advertised for the post and proceeded with selecting a new chairman. However, Cyril George, Deputy Chairman of Chennai Port, approached the Madras High Court and delayed the process as his application was rejected by the selection committee. The court ordered the committee to examine Cyril George’s application for the post. And since then, the selection process is on and on, for the last 11 months.

Initially, Rinkesh Roy, Chairman, Paradip Port, took charge as the in-charge CMD of the port and very recently, the Ministry appointed P Raveendran as in-charge until a new CMD is appointed.

Similarly, chairman post in V O C Port is also lying vacant since August 2017.  After the retirement of Chandrabose, Deputy Chairman of the port Natarajan took over the additional responsibility for some months.

Later, the government appointed I Jeyakumar, chairman of Mormugoa Port as chairman-in-charge. And recently, the Ministry appointed Rinkesh Roy, Chairman of Paradip Port, as its in-charge chairman.

Local EXIM community has been questioning the inordinate delay in appointing a regular chairman for VOC Port.

And Cochin Port too shares a similar story. After Paul Antony completed his tenure as chairman in Cochin more than a year ago, no one has been appointed for the post. And recently, government appointed Venkata Ramana Akkaraju, Deputy Chairman of the port, to hold additional charge as Chairman.

Other ports like JNPT, New Mangalore and Deendayal also has similar stories, as they are also without a regular chairman for months and managed by in-chargers.

According to port users, the role of chairman is considered as important in the development of any ports. A regular chairman will help the port in fishing out issues that affect their growth and solve them immediately. For the others, the additional charges mean just an additional work.

Without a regular chairman, these six ports are liable to slow down in their approach towards growth and decision making will be stretched for months. Every port has its own problems that need to be solved immediately to remain on course of development.

Efficiency in management will suffer: Union leader R.Santhanam

Speaking to Port Wings, R. Shanthanam, President, Indian Major Port Officers Association, said, “We have filed a complaint to the Prime Minister of India Office (PMO) on the issue and requested the PMO to look into the overall implications. We have also apprised the PMO about the demerits of not having a regular chairman in these ports, which will not only affect the growth of any port, but also affect the moral of the head of the departments, other officials and the whole work force in those facilities. It is important to have chairman at all the major ports to essentially to meet the day-to-day challenges in improving business in the face of competition from non-major ports (private ports).”

“A delay in appointing chairmen for one or two months can be taken as a realistic administrative practice. But, having them vacant for more than a year is something we unheard of. Therefore, we appeal to the Ministry of Shipping to take immediate steps and appoint chairmen in all six ports.”

DELAY IN APPOINTMENT OF TRUSTEES

Speaking to Port Wings, Rajasekar, President, Tamil Chamber of Commerce, said, “There is also a delay in appointing trustees in all the ports. They are very important members of the authority to run the show in every port. These trustees help the chairman to take decision on many important issues. So, the Ministry of Shipping should also think of appointing trustees at the earliest to create a business-friendly environment in every port.”

DELAY DUE TO UNAVAILABILITY OF QUALIFIED PERSONNEL: MINISTER PON RADHAKRISHNAN

Speaking to Port Wings, Pon Radhakrishnan, Minister of State, Shipping, said, “Many people including the EXIM community have been questioning me about the long delay in filling up vacancies of chairman post in these ports. We cannot choose anybody in a hurry to lead these ports and then change them frequently. The delay is mainly due to our increased focus on selecting a qualified hand to head those ports. To run the port operations smoothly, we have also given additional powers to those in-charge chairmen. They can take all the executive decisions in the interest of their respective ports. Therefore, I will not accept the allegation that the delay is hampering port’s growth. We cannot fix a time-frame for selecting a chairman for any port.”

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Disruption Challenges Faced by Online Logistic Start-ups

By Samir Lambay, CEO and Director of FreightCrate Technologies Pvt. Ltd.

In the recent years, digitisation has led to disruption of major industries and sectors, transforming business processes and functions. Logistics, however, has been one of the least impacted sectors. This is slowly changing as the next generation entrepreneurs from the freight forwarding community are taking up the challenge of disrupting the sector through innovative digital solutions.With a fresh focus on organising the sector, streamlining pricing and operations and introducing automated and transparent processes, the new age digital logistics start-ups are bringing in a fresh wave of reforms, even as the sector continues to hold on to the set systems and processes of the past.Some key challenges that start-ups in logistics are facing, include:

Transition from Offline to Online: 

For decades, the logistics sector has been dominated by cumbersome manual processes where export/import managers have been required to compare individual email quotes and conduct lengthy negotiations over the phone. This has led to a large task force that is not digitally savvy. Apart from quotations and negotiations, shipping updates and operations are also dependant largely on telephonic conversations with multiple contact persons.

As a result, these systems and processes have been deeply ingrained as a set way of functioning.This has made it difficult for online logistics start-ups to push their digital platforms even though they offer online freight rates for easy comparisons and shipment management on a single dashboard. However, the quick proliferation of web and mobile consumer apps in day to day servicesmay help accelerate the digital adaptability of the task force.

Pre-existing Business Relationships:

Just as in most B2B industries, the logistics sector in India has also been functioning on strong interpersonal relationships. Loyal and long standing relationships between logistics providers and clients are often difficult to break, despite having access to more efficient online freight service offerings. Additionally, lengthy credit periods are difficult to turn down for most businesses, even when receiving discounted prices. Having said that, several online logistic start-ups are now forging newer and mutually beneficial relationships with clients, by illustrating to customers how access to all-inclusive freight pricing and schedules and transparent shipping updates allows them to save time and make more efficient decisions while reducing logistics costs for their businesses.

Creating Value for Logistic Service Providers (LSP’s):

Since the benefits of digitisation and organised logistics are yet to make their way into mainstream logistics business, getting LSP’s on-board is equally as challenging as getting importers/exporters on-board a digital platform. With a largely experienced task force that has, for decades, been successfully growing and shaping the sector through trusted processes, the transition to a digital framework is met with scepticism. Hence, even though customers cannot make efficient decisions due to lack of information such as total freight cost, schedules and multiple carrier options, the LSP’s are yet to take a step to move to an online platform that will help them share complete online freight quotes to their clients. Through a collaborative approach and creating a win-win business opportunity for LSP’s and a committed service oriented approach for importer/exporters, online logistics start-ups are trying to address the issue effectively.

Cessation:

While the shift from offline to online is imperative, the logistics sector is a marred by multiple limitations that can slow down the process. With a calculated and transparent approach to accelerate growth, new age online disrupters in logistics need to address limitations faced by all stakeholders involved, and help them see value in the transition. Through consistent and result oriented strategies coupled with adequate technology support, logistics in India is slowly but surely transforming into a dynamic sector poised for exponential growth.

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Will the implementation of the Sulphur Cap 2020 be delayed?​

By Mr. Kim Yeon-tae, Executive Director, Korean Register ​

Two of the most discussed issues in the international maritime industry in recent years have been the implementation of Ballast Water Management Convention (BWMC) and the approaching Sulphur Cap 2020.

PROLONGED MARITIME DOWNTURN

The prolonged maritime downturn of the last decade combined with the substantial capital expenses required to meet the requirements of both conventions have raised serious concerns among maritime stakeholders and have led to heated debates at IMO meetings, with many calling for the postponement of their implementation.

The first convention to allow postponement was the BWMC. The two-year postponement of the installation of the Ballast Water Management System (BWMS) was agreed at the 71st Marine Environment Protection Committee (MEPC 71) which took place in London in July 2017. As a result of the many obstacles to the effective implementation of the BWMC, such as the lack of facilities to install BWMS onboard, the application of NEW G8 and USCG Type Approval, the decision was made to postpone its implementation.

However, this decision means that the early movers – i.e., those shipping companies which had already installed BWMS on board their ships in accordance with the convention – are having to face many more hurdles such as non-compliance with the requirements of USCG type-approval, etc., whereas those who decided to wait and see – can now benefit from installing a more reliable system with a proven track record.

EYES OF THE MARITIME INDUSTRY ARE TURNING TO THE GLOBAL SULPHUR CAP

Now the eyes of the maritime industry are turning to the global Sulphur Cap which will come into effect in 2020. But, there is a significant doubt across the industry that the convention will actually come into effect in 2020, as currently scheduled.

With less than two years left before the sulphur convention comes into force, it is evident that the relevant parties are far from being fully prepared. For example, the IMO regulations, which are relevant to the convention, in terms of how to apply and implement the convention, have still not been finalized.

The majority of shipping companies have still not made up their minds on what measures they will be taking, to comply with the convention. The refineries, on the other hand, are not expected to be able to produce a sufficient amount of low sulphur fuel oil (LSFO) for ships, in time. These factors are similar to those faced by the industry when it came to complying with the BWMC, and so many in the industry have voiced a need to postpone the implementation of Sulphur Cap 2020.

However, I think there is very little chance that the implementation of the global Sulphur Cap 2020 will be postponed, for the following reasons.

It is anticipated that there will be a regional shortage of LSFO after 2020. However, if LSFO is not available at the place of bunkering, under MARPOL Annex IV/18.2, the ship is simply allowed to be exempt from compliance with the Sulphur Cap 2020 regulation. Therefore, a shortage of LSFO will not be a legitimate excuse for postponement.

Some ships will be fitted with Exhaust Gas Cleaning System (EGCS) to comply with the Sulphur Cap 2020. The availability of EGCS may not fully meet the demand before the year 2020. In such cases, a ship will be allowed to use LSFO until it is equipped with an EGCS.

In the last two IMO meetings, the 4th Pollution Prevention Response (PPR) held in February 2017 and the 71st MEPC, several member states highlighted their concerns regarding the difficulty of implementing the global Sulphur Cap, but they were excluded from discussions. It’s likely to be difficult for IMO member states to re-submit the same proposal in future committee meetings.

Furthermore, to amend the conventions, the proposal must not attract objections from more than one-third of the contracting Governments. At the moment the number of member States that have ratified MARPOL Annex IV is eighty-nine (89), and the number of states objecting the postponement of implementation is likely to be more than thirty (30). With the EU member states objecting, the likelihood of postponing the implementation of the Sulphur Cap 2020 convention seems very low.

Above all, if the implementation of Sulphur Cap 2020 is postponed once again after the BWMC, IMO will lose public confidence and face a significant obstacle to the smooth implementation of any future conventions. In reality, the chances of postponing the Sulphur Cap 2020, are very, very small.

 

The Korean Register is an IACS member classification society established in 1960 with the purpose of promoting safety of life, property and the protection of the marine environment.

KR currently classes an international fleet of 3,032 vessels totalling 69 million GT. It is headquartered in Busan, South Korea and operates a network of 66 offices around the world. It is authorized to perform statutory and certification services in 78 countries.

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Trade Suggests Options to Erase Congestion Out of Chennai Port

By N Gajendran,  Customs Broker

Chennai

For the past 15 years, the Chennai Port is suffering from continuous congestion in terms of inefficient container handling. Due to that sluggishness, nearby ports are getting more volume and growing rapidly. The current volumes handled by nearby ports are actually the one that moved away from Chennai port due to the heavy congestion.

The Big USA buyers such as ‘Gap Inc’, Walmart and Decathlon do not prefer Chennai Port for their movement mainly due to the port congestion, uncertainty of planned vessel connection, and also inefficiency of operational handling.

With reference to improve productivity in container terminals in the port and to move out congestion from Chennai Port permanently, we, as one of the leading players in the logistics supply chain system, would like to give our suggestions to change the present situation.

The real problems:

According to the trade, total volume of each container terminal in the port is 70,000 TEUs that is 50,000 Units of 20ft and 40ft. There are two operations normally handled at ports. LO/LO  at Port Yard —From and To the Ship and LO/LO  at Port Yard —From and To the Trucks. (CFS/ ICD).

When calculated, that is 50,000 units  X 2 Moves = 1,00, 000 moves by RTG at each terminal. The time taken for handling of each or per box of  20 / 40ft container by RTG at port yard is 15 Minutes which leads to 4 units per hour.

The handling of containers by Per RTG per Day work outs to only 88 Units, that is 4 Units per hour multiplied by 22 hours.  50,000 Units or 1,00,000 moves divided by 30 days = 3333 Moves and 1666 Units per Shift.

Per Shift 10 hrs = 1666 Units divided by 88 Units per Day per RTG= Per Shift requirement is 19 RTGs. Do these terminals deploy adequate RTGs per Shift?

The shortage of required RTGs in the port yard has caused slow handling of containers and ultimately creates congestion. It is the major hindrance to the trade.

HOW TO EASE OUT THE CONGESTION?

Below is the flow chart of the current operation at the Chennai Port.

The containers are unloaded from the Ship by Quay Cranes and loading onto the local Trucks (as inter-carting movement) –unloading in the yard by RTG –Within the 24 to 36 hrs after the unloading operation completed at the Container Yard (CY), the Delivery of containers starts by the CFS Trucks or CFS nominated Trucks.

Normally, the trucks come inside the port either with Export Laden or Empty Containers or as an empty truck to pick up the PNR import Box.

Considering this current practice as unnecessary, we suggest remedial solutions, which all the other ports in our country follow. In other ports, Containers are delivered at Vessel Hook Point. That is, delivery and receipt of containers to / from directly from Ships Hook.

OPERATION AND HANDLING MODE

PNR processing has to be completed in advance that is 24 Hours before the birth of vessel / ship at Dock. Form-13 to be released to respective CFS 24 hrs before vessel berth.

Six hours (6 hrs) before the vessel’s actual berthing, the necessary arrangements and planning should be made to make the trucks to be on the queue near the marked area to pick up the container directly from Vessel Hook Point. To attain such readiness, all the trucks should be provided with Form-13 in hand. Furthermore, with a view to streamline, the truck queue should be arranged in such a way to accommodate more trucks in the following manner in three rows or lanes. It should be like — one row for heavy weight container that is 1 x40 ft or 2x 20ft TEU, another one is for light weight  only 40 ft or 20ft TEU, and the third one should be for inter-carting the non-CFS nominated containers to move to the yard.

When container comes out from the ships released by quay crane, driver of the waiting truck should accept the first available container and move out without any delay. For example, if the container belonged to Triway CFS but the truck standing on the queue to pick up the container is bound for another CFS having Form 13 to Sanco CFS, the driver must hand over Triway Form 13 and carry Sanco CFS container without any objection.

Likewise, all CFS truck or CFS nominated truck should move the container out.

When the Port Out Gate generates the Gate Pass, it should be clearly mentioned the name of the CFS and inform to the Driver to carry to particular CFS. The concerned CFS also should get mail with the full details of Import Container, Truck number.

THE BENEFIT OF THE OPERATION

With this type of movement, the operation cost of Wharf to Yard movement of Rs. 1000/- per TEU could be saved. And more importantly, huge operational cost of equipment and its fuel will also be saved considerably. As such, 50,000 boxes will be moved directly out from vessel point without any hindrance and congestion of trucks.

And, yard operation will be totally 60% free and it will always get large empty space to accept and accommodate more Export-Laden containers. The Port will get an additional capacity to handle three times of current volume. Within the 24 Hrs, all import containers will be moved out directly from the Ship

If the system is followed properly, congestion on road and port will not arise, and it will be over once for all.

The export containers will be moved fast from the yard to the concerned vessel as planned.

If the congestion goes, all export volume from other ports will definitely come back to Chennai Port. Import volume, which we have lost to other ports due to congestion, will also return back for handling here. We can easily say that the Chennai Port will register threefold growth in cargo handling.

Since containers are moved out of the port in shortest time, the port will be able to maintain better and planned connectivity with international route mother vessels.

And, it will give Chennai Port the much-needed grading in trade as committed port. Any incident and accident in the case of containerized cargo, the concerned CFS operators will take care of everything.

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