container logistics sector - tarragon capital advisors
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INDIA LOGISTICS INDUSTRY
MARCH 2013
CONTAINER LOGISTICS (CONTAINER FREIGHT STATION &INLAND CONTAINER DEPOT) SECTOR
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I.INTRODUCTION (PAGES 3-5) VI.MARKET INFLUENCES(PAGE 37)
II.MARKET OVERVIEW (PAGES7-10), INTRODUCTION TOCFS/ICD (PAGES 11-17)
VII.KEY CHALLENGES (PAGES39-42)
III.PRE-REQUISITES ®ULATIONS (PAGES 19-24)
VIII. COMPETITION (PAGE 44)
IV.GOVERNMENTINITIATIVES (PAGES 26-32)
IX.STRATEGICRECOMMENDATIONS (PAGE 46)
V.FOREIGN INVESTMENT(PAGES 34-35)
X.EXECUTIVE SUMMARY(PAGES 48-53)
INDIAN CONTAINER LOGISTICS (CONTAINER FREIGHTSTATION & INLAND CONTAINER DEPOT) SECTOR
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I.INTRODUCTION : EVOLUTION OF GLOBAL CONTAINERIZATION
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I.INTRODUCTION : EVOLUTION OF CONTAINERIZATION IN INDIA
*TEU - twenty-foot equivalent unit is based on the volumeof an inter-modal container, a standard-sized metal box,
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The logistics industry is extremely fragmented in terms of servicesoffered and each player specializes in a particular sector/s. Eachsuch activity, therefore, represents a unique sub-vertical opportunityin and of itself
I.INTRODUCTION : EXPORT IMPORT FLOW CHART
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I.INTRODUCTION (PAGES 3-5) VI.MARKET INFLUENCES
(PAGE 37)
II.MARKET OVERVIEW (PAGES7-10), INTRODUCTION TOCFS/ICD (PAGES 11-17)
VII.KEY CHALLENGES (PAGES39-42)
III.PRE-REQUISITES ®ULATIONS (PAGES 19-24)
VIII. COMPETITION (PAGE 44)
IV.GOVERNMENT
INITIATIVES (PAGES 26-32)
IX.STRATEGIC
RECOMMENDATIONS (PAGE 46)
V.FOREIGN INVESTMENT(PAGES 34-35)
X.EXECUTIVE SUMMARY(PAGES 48-53)
INDIAN CONTAINER LOGISTICS (CONTAINER FREIGHTSTATION & INLAND CONTAINER DEPOT) SECTOR
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INDUSTRY OVERVIEW
INDUSTRY STRUCTUREPOTENTIAL FOR GROWTH IN EXIM TRADE
II.MARKET OVERVIEW
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II. MARKET OVERVIEW : INDIA LOGISTICS INDUSTRYOVERVIEW
Industry encompasses 5 freight segments Ocean, Rail, Air, Trucking &
Third-Party Services (3PL)
Current size is approx. US$100 bln and is expected to grow at 15 -20%annually to touch approx. US$350 bln by 2015 (source : Fitch RatingAgency); sub-sectors are growing between 30 - 40% per annum
61% and30% of total domestic product is transported via road andviarailrespectively (source : Deloitte, Logistics Sector report, Jan. 12)
The industry employs over forty-five million people (source : Deloitte,Logistics Sector report, Jan. 12)
Organized sector represents only 6% of the total size of the industry.This is projected to grow at a CAGR of 25% over the next 3 years (source: Nirmal Bang Group report, Nov. 11)
The strength of the logistics industry is, undoubtedly, going to be a keydeterminant of Indiasfuture growth
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LOGISTICS INDUSTRY STRUCTURE
INDIANLOGISTICSMARKET
ROADFREIGHT
EXPRESSLOGISTICS
CONTAINERLOGISTICS
LIQUIDLOGISTICS
CONTAINERHAULAGE
CONTAINER FREIGHTSTATION (CFS) ANDINLAND CONTAINER
DEPOT (ICD)
MULTIMODALTRANSPORTOPERATOR
*3PL - Third Party Logistics Services provider provides services such astransportation, warehousing, crossdocking, inventory management,
packing & freight forwarding, etc.
3PL*
II. MARKET OVERVIEW : INDIA LOGISTICS INDUSTRYSTRUCTURE
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Containerized logistics account for only 15% of Indias EXIM tradecompared to a global average of around 70% (source : Motilal Oswal, Onhigh Ground, Oct. 12). Containerized volumes are expected to touch 15million TEUsby 2015 for export and import (source : Subhashish Ghosh,Managing Director, APM Terminals)
Logistics costs in India are 13% of GDP much higher when compared toother economies (source : World Bank Report 10) arising mainly frompoor infrastructure facilities (leading to a higher turnaround time) andhigh costs of administration
Emergence of organized retail in India, increase in foreign trade, and rise
in status of India as a global manufacturing hub will lead to up-gradation/further development of infrastructure. Emerging MarketSurvey 11 (Transport Intelligence) re-confirms the view of India as one ofthe potentially strongest growth markets globally for the logisticsindustry
II. MARKET OVERVIEW : POTENTIAL FOR GROWTH IN EXIMTRADE
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The Indian logistics sector was valued at around $100 billion in 2012, ofwhich EXIM containerized logistics accounted for about 15 per cent
CFSs accounted for 40% andICDs for 60% of the container loads
CFS/ICD facilities have been rising (as seen on the next slide)due to increase in port traffic, increase in containerization levels, morecustom clearance activities in CFSs/ICDs, higher margins in comparison to
other logistical activities and construction of Dedicated Freight Corridor
II.MARKET OVERVIEW : INTRODUCTION TO CFS/ICD
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MARKETSIZE
FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
FISCAL YEAR
II. MARKET OVERVIEW : CFS/ICD SUBSECTOR GROWTHTREND
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II.MARKET OVERVIEW : INTRODUCTION TO CFS/ICD -DIFFERENCE BETWEEN CFS & ICD
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ICD CFSLOCATION
In the interiors, awayfrom the servicing ports
It is an off dock facilitylocated near theservicing ports
FUNCTIONLargely deals with fullcontainer load which isaggregated for onwardmovement to or fromthe ports
Deals with break-bulkcargoorigination/terminatingin the immediatehinterland of a port;also serves as adestination for customsrelated activities
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INTERMEDIATESTORAGE FACILITIES
Provide storage between various transportation modes as well as storage of
EXIMProvision for storage of Reefer Containers (which require refrigerationservices) and hazardous cargo
RECEIPT/DELIVERYOF CONTAINERS
Weighing and inspection of cargo/packages and damages, etc.Transportation and receipt of import containers from the port, and
movement of export containers to the port
CONSOLIDATIONAND
DISTRIBUTION OFCARGO
In the case of LCL* cargo wherein cargo/containers cannot be received ordelivered directly to the consignee, then, in that event, cargo stuffing ordestuffing for LCL
DEPOT FUNCTIONS Storage of empty containers and temporary storage of loaded containers yetto be dispatched from the facilities
II.MARKET OVERVIEW : INTRODUCTION TO CFS/ICD SERVICES OFFERED BY CFS & ICD (1/3)
*Less than Container Load (LCL) is a service offered by freight forwardingcompanies, allowing shippers to book only part of a container. This is usefulwhen a shipment cannot fill up a container, but you would still like to get
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PORTDECONGESTION
Provide backup facilities for the portContainers, therefore, do not congest the port (prior to customs inspection and
loading on to the ship for onward delivery to the customer)
REDUCINGREDUNDANCIES
Reduce the cost of container logistics by providing the function ofconsolidating/stuffing cargo of exporters
Cargo transportation by road /rail to and from gateway port
CONTAINERHANDLING
Transportation by road, rail and barges to a CFS/ICD container yardTo and from transportation of containers under bond between ICDs/CFSs andports as well
developed multi-modal transport systems
PHYSICALDISTRIBUTION
Distribution of finished productsValue added services such as packing/repacking/tagging, etc.
II.MARKET OVERVIEW : INTRODUCTION TO CFS/ICD SERVICES OFFERED BY CFS & ICD (2/3)
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ONE STOP LOGISTICS &CUSTOMS SOLUTION
ICD/CFS aid in the containerization functionFacilitate stuffing/de-stuffing, transportation, customs clearance,warehousing, handling, storage and repairs of containers
CUSTOMS CLEARANCE
Custom's clearance activities at CFS/ICD help decrease the dwelltime of
containers saving costCustoms examination and stuffing of export cargoDe-stuffing of import cargoStorage of container (import loaded)Checking container sealsAssessment and valuation of cargo
OTHER FACILITIES
Pretrip trials of Reefer Containers to check if refrigeration equipment isfunctional
Cleaning services, maintenance and repair services for containers,container handling equipment, refrigeration equipment, road chassis
II.MARKET OVERVIEW : INTRODUCTION TO CFS/ICD SERVICES OFFERED BY CFS & ICD (3/3)
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GrowthDrivers
Streaming ofIndirect Tax
Structure
Increased Demandof 3 PL Services
Investment inTransportationInfrastructure
Infusion ofQualified Work
Force
Recognition oflogistics
management as astrategic tool
Globalization ofManufacturing
Sectors
II.MARKET OVERVIEW : INTRODUCTION TO CFS/ICD GROWTH DRIVERS
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I.INTRODUCTION (PAGES 3-5) VI.MARKET INFLUENCES
(PAGE 37)
II.MARKET OVERVIEW (PAGES7-10), INTRODUCTION TOCFS/ICD (PAGES 11-17)
VII.KEY CHALLENGES (PAGES39-42)
III.PRE-REQUISITES ®ULATIONS (PAGES 19-24)
VIII. COMPETITION (PAGE 44)
IV.GOVERNMENTINITIATIVES (PAGES 26-32)
IX.STRATEGIC
RECOMMENDATIONS (PAGE 46)
V.FOREIGN INVESTMENT(PAGES 34-35)
X.EXECUTIVE SUMMARY(PAGES 48-53)
INDIAN CONTAINER LOGISTICS (CONTAINER FREIGHTSTATION & INLAND CONTAINER DEPOT) SECTOR
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The proposal for setting up such facilities includea feasibility report, land consideration, design and layout as well asequipment consideration which is examined by the InterMinisterialCommittee (IMC), Ministry of Commerce, on the basis of certain guidelineswhich are highlighted in subsequent slides
III.PRE-REQUISITES & REGULATIONS
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FEASIBILITY REPORT
The facility must be economically viable for : users, railways for full trainmovements in case of ICD, other transport operators and shipping linesTariff rates levied by operators for ground rent, cargo storage, loading andunloading, and transportation of containers to ports are also consideredMinimum level of traffic volume (twoway) is:
ICD 6,000 TEUs/yr
CFS 1,000 TEUs/yr
LAND REQUIREMENT Outside limits of major cities: minimum of 3 acresInside city limits /port area: minimum area of 1 acre
InterMinisterial Committee (IMC), Ministry of Commerce, is theregulatory authority which monitors the growth of CFSs/ICDs
IMC comprises representatives from the Department of Revenue,Ministry of Surface Transport, Ministry of Railways and the Ministry ofCommerceThe Committee considers the proposals submitted by public andprivate sector entrepreneurs for setting up of new ICDs/CFSs at differentcenters in the country and monitors their progress
III.PRE-REQUISITES & REGULATIONS : GUIDELINES (1/2)
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DESIGN AND LAYOUT
Design and layout should be stateof theart, equipped withmechanical/electrical facilities of international standardsThe layout should allow smooth flow of containers, cargo and vehiclesthrough the ICD/CFS and it should take into account initial volume ofbusiness, estimated volume in 10 years and the type of facilitiesexporters would require
EQUIPPING CFD/ICD
The ICD/CFS should plan for the most modern handling equipmentfor loading, unloading of containers from rail flats, chassis, theirstacking, movement, cargo handling, stuffing/de
stuffingPlayers interested to set up a rail based ICD must haveinfrastructure facilities including land, track, handling equipment forcontainers, maintenance of assets including track, rolling stock, etc.An uptodate inventory control and tracking system to locatecontainers/cargo
III.PRE-REQUISITES & REGULATIONS : GUIDELINES (2/2)
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PROPOSALSThe Inter-Ministerial Committee considers and clears on merits the proposals for setting up ICD/CFSState Governments/Customs/Portsview will also be taken as and when needed
APPLICATIONApplication accompanied by 10 copies of feasibility reports should be submitted in enclosed form to the
Infrastructure Division in the Ministry of Commerce, Udyog Bhavan, New Delhi
SECOND COPY OF
APPLICATION
A separate copy of the application is needed to be sent to the jurisdictional Commissioner of CustomsCommissioner of Customs will send his comments to the Ministry of Commerce and the Central Board ofExcise & Customs (CBEC) within 30 daysIf the project is planned in a port town, a copy of the proposal should also be sent to the concerned PortAuthority who would give their comments within 30 days to the Ministry of Surface Transport and theMinistry of Commerce
BEFORE
APPLICATIONFILING
Applicants need to become familiar with the statutory Customs requirements regarding Bonding, TransitBond, Security Insurance and other necessary procedural requirements and cost recovery charges to bepaid before filing the application
III.PRE-REQUISITES & REGULATIONS : APPROVALPROCEDURE OF CFS/ICD & ITS IMPLEMENTATION (1/3)
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ON RECEIPT OF
PROPOSALS
Ministry of Commerce takes action on receipt of the proposal to get comments from jurisdictional Commissioner
of Customs and other concerned agencies within 30 daysA copy of the proposal should also be sent to Zonal Railway Manager, under intimation to the Ministry ofRailways when neededAnother copy of the proposal is to be submitted to the IMC Members for advance actionIMC expanded to take decision within six weeks of the receipt of the proposal under normal circumstances
ON ACCEPTANCEOF
PROPOSALS
A Letter of Intent (LOI)will be issued to the applicant on acceptance of a proposal
On acceptance of LOI, the applicant may initiate steps to create infrastructure
EXTENSION
REQUIREMENTS
The applicant is required to set up the infrastructure within 1 year from the date of approvalMinistry of Commerce may grant an extension of 6 months keeping in view the justification given by applicantAfterward, a report would be submitted to IMC to consider extension for a further 6 monthsIMC may consider extension or it may withdraw the approval granted
AFTER RECEIPTOF
APPROVAL
The applicant need to send quarterly progress report to Ministry of Commerce after receipt of approvalThree formats for sending the quarterly/ annual report needed to be submitted to Department of Commercethrough electronic mode as well as through hard copy
III.PRE-REQUISITES & REGULATIONS : APPROVALPROCEDURE OF CFS/ICD & ITS IMPLEMENTATION (2/3)
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FINAL CLEARANCE
Final clearance and Customs notification will be issued ONLY after the applicant has put up the required infrastructuremet the security standards of the jurisdictional Commissioner of Customsprovided a bond backed by bank guarantee to the Customsposted Customs Staff after some time from CBEC
VIOLATION OF
CONDITIONSThe approval, which is given initially for 5 years, is subject to extension, or, subject to cancellation in case ofviolation of the conditions of approval
REVIEW Inter-Ministerial Committee may review working of the ICD/CFS
III.PRE-REQUISITES & REGULATIONS : APPROVALPROCEDURE OF CFS/ICD & ITS IMPLEMENTATION (3/3)
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I.INTRODUCTION (PAGES 3-5) VI.MARKET INFLUENCES
(PAGE 37)
II.MARKET OVERVIEW (PAGES7-10), INTRODUCTION TOCFS/ICD (PAGES 11-17)
VII.KEY CHALLENGES (PAGES39-42)
III.PRE-REQUISITES ®ULATIONS (PAGES 19-24)
VIII. COMPETITION (PAGE 44)
IV.GOVERNMENTINITIATIVES (PAGES 26-32)
IX.STRATEGIC
RECOMMENDATIONS (PAGE 46)
V.FOREIGN INVESTMENT(PAGES 34-35)
X.EXECUTIVE SUMMARY(PAGES 48-53)
INDIAN CONTAINER LOGISTICS (CONTAINER FREIGHTSTATION & INLAND CONTAINER DEPOT) SECTOR
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IV.GOVERNMENT INITIATIVES : INVESTMENT INLOGISTICS INFRASTRUCTURE
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SR. PORT NAME YEAR SUCCESSFULBIDDER
REVENUE SHARE
1 JN PORT TERMINAL 2 1997 P & O Ports (DPWorld)
33.00%
2 CHENNAI PORT (TERMINAL1)
2001 P & O Ports (DPWorld)
37.10%
3 COCHIN PORT 2004 P & O Ports (DPWorld)
33.30%
4 JN PORT TERMINAL 3 2004 APM Terminals Concor
35.50%
5 KANDLA PORT 2006 PSA ABG 48.99%
6 CHENNAI PORT (TERMINAL2)
2007 PSA 45.80%
7 MUMBAI PORT 2007 Gammon
Infrastructure
35.00%
8 ENNORE PORT 2010 Group MaritimTCB
39.99%
9 JN PORT TERMINAL 4 2011 PSA ABG 50.82%(Residing and
to be
Retendered)
IV.GOVERNMENT INITIATIVES : CONTAINER TERMINALPRIVATIZATION
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ICD FACILITIES
9 railway sidings are provided in JN Port for
handling container train
About 51 ICDs offers the JN Port with gatewayconnectivity
About 80% of total ICD traffic is handled at themajor ICDs located in New Delhi, Ludhiana,Sabarmati, Dadri, Nagpur & Hyderabad
CFS FACILITIES
25 CFSs having capacity of 2.48 mn TEUs per yearsupports the JN Port
Around 10 more CFS projects having capacity of 2mn TEUs per year are also coming up
In Apr 1999, Nhava Sheva International Container
Terminal (NSICT), the first PPP Port Project in India,had been commissioned
In Oct 2002, a consortium of Bharat PetroleumCorp. Ltd.& Indian Oil Corp. Ltd had commissioned a LiquidCargo Terminal on Build Own Transfer (BOT)basis
In Sep 2002, JNPT had commissioned ShallowDraught Berths to handle feeder containervessels and dry bulk cargo vessels
In Aug 2004, JN Port had signed an agreementwith Maersk
CONCOR consortium (GatewayTerminals India Pvt. Ltd.) to convert a BulkTerminal into a 3rd. Container Terminal on a
BOTbasis which became fully operational inOct, 2006
IV.GOVERNMENT INITIATIVES : LOGISTICS SUPPORT ATJNPT PORT INDIAS LARGEST CONTAINER PORT
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PROJECTS TILL 2020
DEEPENINGOF
CHANNEL /BERTHS
ETC.
CONSTRUCTION/
RECONSTRU
CTION OFBERTHS /JETTIES
ETC.
PROCUREMENTOF
EQUIPMENTS
ETC.
RAIL /ROAD
CONNECTIVITY
WORKS
OTHERWORKS TOTAL
OngoingProjects
No. of Project - - 3 2 6 11.0
EstimatedCost.
(INR bn)
- - 1.5 4.0 1.9 7.4
Phase I
(2010
2012)11th5 yr.
Plan
No. of Project 1 2 1 1 7 12.0
EstimatedCost.
(INR bn)
8.0 47.0 1.1 2.8 35.8 94.7
Phase I(20122017)
12th5 yr.Plan
No. of Project - 1 5 1 3 10.0
EstimatedCost.
(INR bn)
- 26.0 1.9 0.5 90.2 118.5
Phase I(2017
2020)13th5 yr.
Plan
No. of Project - - 1 - - 1.0
EstimatedCost.
(INR bn)
- - 0.2 - - 0.2
TotalProjects(Ongoing+ New)
No. of Project 1 3 10 4 16 34.0
EstimatedCost.
(INR bn)
8.0 73.0 4.7 7.3 127.8 220.8
JNPT shall be raising bonds aggregating to Rs. 2,000 crores in FY13
IV.GOVERNMENT INITIATIVES : PLANNED INVESTMENTSON PROJECTS JN PORT (2010-2020)
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CONTAINERTERMINAL
BERTH EXTENSIONDEDICATED
FREIGHT CORRIDORDEEPENING AND
WIDENING
4th Container Terminalwill be developed onDesign, Build, Finance,Operate, Transfer(DBFOT) basis
Phase I:Length 1,000 MtrsCapacity 2.4 mn TEUsCost: INR 40.6 bn
Phase II:Length 1,000 MtrsCapacity 2.4 mn TEUsCost: INR 26.4 bn
5th Mega ContainerTerminal at Nhava
Island with capacity of 10mn TEUs at planning stage(source : The EconomicTimes 13/2/2013)
Project of extension ofberth by 330 mtrstowards North byDBFOT basis withestimated cost of INR 6bn to increase capacity
by 0.8 mn TEUs p.a.
Already awarded
Deepening andwidening of MumbaiHarbour and JN Portchannel is in theProcess
Phase
IVessels upto 14 mdraught (ie.6000TEUs)using tidal window canbe handledEstimated cost: INR13.47 bnAssuredDepthbasisdredgingExpected completion by201314
With an estimated costof INR 281.81 bn, thegovernment hasapproved the dedicatedmultimodal high axleload freight corridor in
the Eastern andWestern corridors
Study being undertakenfor 4 more freightCorridors in high freightdensity area of GoldenQuadrilateral (6,000 kms)
IV.GOVERNMENT INITIATIVES : EXPANSION PROJECTS JN PORT (1/2)
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CONTAINER HANDLINGEQUIPMENT
ROAD CONNECTIVITY PORTBASED SEZ
Additional containerhandling equipment willbe acquired
New 3 Rail MountedQuay Cranes (RMQCs) asreplacement of old 3RMQCs of 1989 wascommissioned in Aug2011
3 Super Post PanamaxRMQCs for MCB and
shifting of old RMQCsfrom MCB to SDB is to becommissioned
Special Purpose Vehicle(SPV) is formed withNational HighwaysAuthority of India (NHAI)
and City and IndustrialDevelopmentCorporation ofMaharashtra (CIDCO) toimprove the roadConnectivity
Estimated cost: INR 35.7bn
Work Completion: about95%
Port Based Multi ProductSEZ will be developed whichhas received its approvalfrom Ministry of Commerce
and Ministry of Shipping inMar, 2010
Phase
1:Area:277 ha on PortslandInvestment: about INR 55bn on PPP basisConsultants : IL&FS IDC
IV.GOVERNMENT INITIATIVES : EXPANSION PROJECTS JN PORT (2/2)
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Deepening and Widening ofMumbai Harbour ChannelandJN Port Channel in PhaseII
Improvement of services atNhava Island area includinga mega 5th ContainerTerminal
Joint Venture withHindustanOrganic Chemicals Ltd.(HOCL)
Tenders fromconsultants across theworld have been invitedfor preparation offeasibility report, detailedproject report andproviding PMC services
Tenders from across theworld have been invited bythe port for appointmentof consultants forstudying feasibility,preparation of master planand DPR for the 5thContainer Terminal
Duration of theassignment: 2 yrs and 3months
700 acres of M/s. HOCLland to be developed asSEZ, FTWZ, ICD etc.
HOCLs land is 30 kmsfrom port and is connectedby road and rail with JNPT
IV.GOVERNMENT INITIATIVES : PROJECT IN PROGRESS JN PORT
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I.INTRODUCTION (PAGES 3-5) VI.MARKET INFLUENCES
(PAGE 37)
II.MARKET OVERVIEW (PAGES7-10), INTRODUCTION TOCFS/ICD (PAGES 11-17)
VII.KEY CHALLENGES (PAGES39-42)
III.PRE-REQUISITES ®ULATIONS (PAGES 19-24)
VIII. COMPETITION (PAGE 44)
IV.GOVERNMENT
INITIATIVES (PAGES 26-32)
IX.STRATEGIC
RECOMMENDATIONS (PAGE 46)
V.FOREIGN INVESTMENT(PAGES 34-35)
X.EXECUTIVE SUMMARY(PAGES)
INDIAN CONTAINER LOGISTICS (CONTAINER FREIGHTSTATION & INLAND CONTAINER DEPOT) SECTOR
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AUTOMATIC ROUTE (AR)
GOVERNMENT ROUTE (GR)
Foreign investors do not need any approval fromReserve bank of India or Government of India
Foreign investors need to take prior approval fromGovernment of India through Foreign investmentpromotion Board (FIPB) for all activities notincluded in AR
ROUTES OF FOREIGNINVESTMENT IN INDIA
ROUTES PERMITTED AND EXTENT OF FDI ALLOWED IN PORTS & HARBOURS SEGMENT (EFFECTIVEFROM APR 1, 2010)
TYPES OFINDUSTRIES
APPROVAL ROUTE RESTRICTIONS
Ports and Harbours Automatic Route with 100 FDIallowance
Allowed under the AR for :Leasing of existing assets of portsConstruction and maintenance of assets such as container terminals, bulk /breakbulk / multipurpose and specialized cargo berths, warehousing, CFS,storage facilities and tank farms, carnage / handling equipment, setting up ofcaptive power plants, dry docking, and ship repair facilitiesLeasing of equipment for port handling and leasing of floating craftsCaptive facilities for port based industries
V. FOREIGN INVESTMENT (1/2)
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Investing in Greenfield core infrastructure projects,such as ports
Setting up wholly owned subsidiaries, representativeoffices, project office, branch office or joint ventures
FOREIGN INVESTORS CHANNELFOR ENTRY IN INDIA
WITH 60 DEALS IN 2006
11, PE, M&A (BOTH INBOUND AND OUTBOUND) IN CONTAINER BUSINESS HAS SHOWNA CONSISTENT GROWTH
SOME RECENT INBOUND M&A TRANSACTIONS IN INDIA
ACQUIRER TARGET YEAR SEGMENT
DP World Chennai Container Terminal 2008 Ports
Eredene Capital Ennore Container Freight Station 2008 Ports
Blackstone Group Lp Gateway Rail Freight Ltd 2009 Rail
PSA International Chennai Container Terminal 2010 Ports
RECENT DEVELOPMENTS
Infrastructures Kerala Ltd (INKEL), Bahrainbased VKLGroup and resort chain Mfar Hotels & Resorts Ltd
MIV Logistics Private Limited 2012 New CFS will be setup with INR 650 mninvestment
Mergers & Acquisitions in India
V. FOREIGN INVESTMENT (2/2)
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I.INTRODUCTION (PAGES 3-5) VI.MARKET INFLUENCES
(PAGE 37)
II.MARKET OVERVIEW (PAGES7-10), INTRODUCTION TOCFS/ICD (PAGES 11-17)
VII.KEY CHALLENGES (PAGES39-42)
III.PRE-REQUISITES ®ULATIONS (PAGES 19-24)
VIII. COMPETITION (PAGE 44)
IV.GOVERNMENT
INITIATIVES (PAGES 26-32)
IX.STRATEGIC
RECOMMENDATIONS (PAGE 46)
V.FOREIGN INVESTMENT(PAGES 34-35)
X.EXECUTIVE SUMMARY(PAGES 48-53)
INDIAN CONTAINER LOGISTICS (CONTAINER FREIGHTSTATION & INLAND CONTAINER DEPOT) SECTOR
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Strong growth Higher margins in comparison with other logistics activities
ROAD
FREIGHT
EXPRES
S
COAST-TO-
COAST
CONTAINER
HAULAGE (RAIL)
CFS/IC
D
MTO
SCENARIOMature Growth Growth
Growth
capitalintensive
Growth
Mature
ENTRYBARRIER
Low High High HighMediu
mLow
GROWTH 510% 2022% 15% 20% 35% 1015%
EBIDTAMARGINS 3
5% 8
10% 25% 30% 40% 4
6%
Firms are keen on capitalizing on the growing demand for ICD/CFS segment and areinvesting towards the same
Between 20152018, 50 more facilities are expected at an investment of INR 75 bn
COMPANY LOCATIONGateway Faridabad, Ludhiana
Allcargo Goa, Bangalore, Nagpur, Hyderabad, Hazira
ConcorRourkela, Durgapur, Kuder, (Gujarat), Madhosingh (Rajasthan), Baddi (HP),Khemli (Rajasthan)
Inlogistics Sahnewal (Ludhiana, Punjab)
RMaritime Hazira, Rewari, Modinagar
VI. MARKET INFLUENCES
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I.INTRODUCTION (PAGES 3-5) VI.MARKET INFLUENCES
(PAGE 37)
II.MARKET OVERVIEW (PAGES7-10), INTRODUCTION TOCFS/ICD (PAGES 11-17)
VII.KEY CHALLENGES (PAGES39-42)
III.PRE-REQUISITES ®ULATIONS (PAGES 19-24)
VIII. COMPETITION (PAGE 44)
IV.GOVERNMENT
INITIATIVES (PAGES 26-32)
IX.STRATEGIC
RECOMMENDATIONS (PAGE 46)
V.FOREIGN INVESTMENT(PAGES 34-35)
X.EXECUTIVE SUMMARY(PAGES 48-53)
INDIAN CONTAINER LOGISTICS (CONTAINER FREIGHTSTATION & INLAND CONTAINER DEPOT) SECTOR
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Transport related challenges - In India nearly 61% of the cargo is movedby road, 30% by rail and 9% by airways, pipelines and inland waterways.
This is as compared to a 37% share of road in the USA and 22% in China
Importantrail networks are oversaturated
Rail freight tariffs are high
Transit times are long and uncertain
Rail terminal quality is poor
Lack of flexibility in carrying different types of products
Railway carriage not easy for industries which cannot provide full trainsloads and while road movement preferred to rail, road movement has itsown fair share of issues
VII. KEY CHALLENGES (1/4)
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Inadequate road network coverage
Poor road quality - motorable roads less than 10% of total road network
Expressway network will take time to develop Expandable to 15,000
kms at the end of 13thplan
High level of fragmentation of the trucking industry
Multiple check points
Lack of sustained investment in planned infrastructure such as
warehouse, transport centers, ICDs
State of ICDs/CFSs is poor - Many logistics companies with an interest in
setting up ICDs/CFSs eventually fail to do so, mostly on account of lack of
land available at an appropriate place and at a reasonable price
Existing facilities themselves are plagued with several issues older
facilities are located within city boundaries restricting day movement of
trucks
VII. KEY CHALLENGES (2/4)
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Theapproach roads to the facilities are poor making evacuation of cargodifficult
Most facilities have issues of inadequate parking and lack of available landfor expansion, paving, etc.
State of cold storage is poor Estimates on cold chain facilities in Indiaputs the number of cold storage at around 5,400 with a capacity of 24million metric tons. However, nearly 60% of these facilities are meant forstorage of potatoes
Poor electrical conditions increase cost of operation
Multimodal Logistics parks are yet to take off with emergingrequirements of integrated logistics provision of transportation hub,value addition etc., large logistics parks were sought to be developed.
Consolidation of large land parcels is a significant issue hampering theirdevelopment
State of warehousing is poor warehousing costs are 20-25 % of the totallogistics cost. Most warehouses are not leak proof, not equipped withadequate security systems, racking and other facilities
VII. KEY CHALLENGES (3/4)
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Theonly really large warehousing owners are government agenciesincluding Central Warehousing Corporation and State Warehousing
Corporation
Focus of a significant majority of the government warehouses is foodgrain storage
Land availability for warehousing at an appropriate place and at an
appropriate price is a concern e.g. Delhi alone has a deficit of 9,000acres of land for development of warehousing facilities
ThePorts sector in India also suffers from several issues:
High turnaround times @JN Port is twice that of Colombo &Singapore due to congestion and slow evacuation
Inadequate depth Costal shipping has not taken off
VII. KEY CHALLENGES (4/4)
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I.INTRODUCTION (PAGES 3-5) VI.MARKET INFLUENCES
(PAGE 37)
II.MARKET OVERVIEW (PAGES7-10), INTRODUCTION TOCFS/ICD (PAGES 11-17)
VII.KEY CHALLENGES (PAGES39-42)
III.PRE-REQUISITES ®ULATIONS (PAGES 19-24)
VIII. COMPETITION (PAGE 44)
IV.GOVERNMENT
INITIATIVES (PAGES 26-32)
IX.STRATEGIC
RECOMMENDATIONS (PAGE 46)
V.FOREIGN INVESTMENT(PAGES 34-35)
X.EXECUTIVE SUMMARY(PAGES 48-53)
INDIAN CONTAINER LOGISTICS (CONTAINER FREIGHTSTATION & INLAND CONTAINER DEPOT) SECTOR
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VIII. COMPETITION : MAJOR PUBLIC COMPANIES (SUMMARY)
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CO OG S CS (CO G
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I.INTRODUCTION (PAGES 3-5) VI.MARKET INFLUENCES
(PAGE 37)
II.MARKET OVERVIEW (PAGES7-10), INTRODUCTION TOCFS/ICD (PAGES 11-17)
VII.KEY CHALLENGES (PAGES39-42)
III.PRE-REQUISITES ®ULATIONS (PAGES 19-24)
VIII. COMPETITION (PAGE 44)
IV.GOVERNMENT
INITIATIVES (PAGES 26-32)
IX.STRATEGIC
RECOMMENDATIONS (PAGE 46)
V.FOREIGN INVESTMENT(PAGES 34-35)
X.EXECUTIVE SUMMARY(PAGES 48-53)
INDIAN CONTAINER LOGISTICS (CONTAINER FREIGHTSTATION & INLAND CONTAINER DEPOT) SECTOR
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GREENFIELD ICDs CFSs/ ICDsSUPPLY CHAINMANAGEMENT
Investors should investin greenfield ICDs andexpand existing
facilities as theirdemand is increasingdue to rapid growth ofexport and importcoupled with capacityconstraints inmovement andevacuation of cargo
Investors should grabthe opportunity toinvest in CFSs / ICDs in
India as projectedtraffic indicates theneed for at least 40 to50 new rail/roadICDs/CFS across thecountry in next 5
10years
Investors should investto include Supply ChainManagement (SCM)
functions such aswarehousing, C&F andother value addedservices in the businessplan of ICD with a viewto build MegaLogisticsPark
MODERN LOGISTICCUM
TRANSPORT CENTERS
Using the Public PrivatePartnership model,investors should take
initiatives fordevelopment ofintegrated and modernlogistic cum transportcenters across majorlocations in India Further improvedlogistics operations willsubsist with theintegrated development
of warehousing,transportation andtrafficplanning
IX. STRATEGIC RECOMMENDATIONS : ADVICE FOR INVESTORS
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I.INTRODUCTION (PAGES 3-5) VI.MARKET INFLUENCES
(PAGE 37)
II.MARKET OVERVIEW (PAGES7-10), INTRODUCTION TOCFS/ICD (PAGES 11-17)
VII.KEY CHALLENGES (PAGES39-42)
III.PRE-REQUISITES ®ULATIONS (PAGES 19-24)
VIII. COMPETITION (PAGE 44)
IV.GOVERNMENT
INITIATIVES (PAGES 26-32)
IX.STRATEGIC
RECOMMENDATIONS (PAGE 46)
V.FOREIGN INVESTMENT(PAGES 34-35)
X.EXECUTIVE SUMMARY(PAGES 48-53)
INDIAN CONTAINER LOGISTICS (CONTAINER FREIGHTSTATION & INLAND CONTAINER DEPOT) SECTOR
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GOVERNMENTINITIATIVES
FUTURESCENARIO
DRIVERS &CHALLENGES
MARKET
X. EXECUTIVE SUMMARY
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Container cargo traffic is estimated to reach 15 mln TEUs by FY16
ICDs handle 60% of containerized cargo vs. CFSs which handle 40% ofcontainerized cargo
Both ICDs and CFSs provide various services such as cargo consolidation,distribution as well as custom clearance activities
There is likely to be a significant rise in the demand for third party
logistic providers driven by industries like automobile, retail, pharma,etc.
Shift in customer activities outside the Port area, higher margins incomparison with other logistics activities, the construction of a dedicatedfreight corridor are all responsible for driving growth in the
containerized cargo sector
Logistics sector is evolving rapidly and its growth is dominated by theinterplay of infrastructure, technology and new types of serviceproviders
X. EXECUTIVE SUMMARY (1/5)
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The challenges in the sector remain (a) the costs entailed for thedevelopment of a facility, (b) archaic procedures for the movement ofcontainerized cargo, (c) competition from the unorganized sector and, (d)changing government policies on taxation
The Government of India has undertaken various initiatives whichinclude investment in logistics infrastructure (Maritimes States & portsin India, container traffic at Indian ports, logistics support at Indiaslargest port, planned investment and future expansion in projects at JN
Port until 2019-20). The Government is also involved in formulating andchanging government policies on taxation related to the sector
X. EXECUTIVE SUMMARY (2/5)
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The development of CFSs/ICDs has benefited players in theindustry, importers, exporters as well as port authorities
Port authority receives ready
toload
containers thereby raisingports
productivity and profitability
Allows exporters andimporters to lower inventory
costs
Linkage to the port by railresulting in quick transit and
low transportation costs
Ownership/operation by apublic
or private company providesservices at competitive rates
Consolidation of cargo hasallowed for the making of alogistics hub for LCL cargo
Exporter/Importer,Custom HouseAgent, shippingcompanies use
ICD/CFS facilities
X. EXECUTIVE SUMMARY (3/5)
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X EXECUTIVE SUMMARY (4/5) ESTIMATED INVESTMENT
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TYPE OFINFRASTRUCTURE
ESTIMATED NOS./DEMAND IN NEXT 510
YEARS
ICD/FTWZ 50 nos.
AIR CARGO CENTRES 150,000 sq. m.
AGRO WAREHOUSES 35 mln M.T.
INTEGRATED
TRANSPORT CENTRES
15 nos.
X. EXECUTIVE SUMMARY (4/5) : ESTIMATED INVESTMENT FUTURE SCENARIO
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X. EXECUTIVE SUMMARY (5/5) : ESTIMATED INVESTMENT FUTURE SCENARIO
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THANK YOU
CONTAINER LOGISTICS (CONTAINER FREIGHT STATION &INLAND CONTAINER DEPOT) SECTOR