Indian Maritime Scenario

India holds 17th rank among the world under port sector. The industry has historically
maritime nations in terms of GRT and 15th
position in terms of DWT. The total Indian fleet,
which was hovering around 7.0 million GT for a
long time, registered a sudden surge over the last
two years and reached a historic high when it
crossed the 8.0 million GT mark. This
corresponds, for the last two years, to nearly 14
% growth for the last two years. Today Indian
shipping companies collectively owns about 704
vessels with 8.3 million gross tonnage (GT) or
around 13.75 million deadweight tonnages. This
recent surge is attributable to the remarkable
upswing in the shipping markets globally,
coupled with the supportive measures initiated
by the Indian Government such as the
introduction of tonnage tax and easing of
procedures for acquiring second-hand vessels.
Indian shipping industry contributes
approximately 0.3% to the country’s GDP.
The industry is governed by 3 separate
Acts viz. The Merchant Shipping Act, 1958, The
Inland Vessels Act, 1917 and The Coasting
Vessels Act, 1838. While most of the vessels are
registered under Merchant Shipping Act and
dealt with in the sector, smaller barges and
coastal vessels are governed by the latter two
Acts, and Lighterage or barging industry comes
catered to only domestic shipping requirements,
although the private sector companies like Great
Eastern Shipping Company and Essar Shipping
are increasingly getting involved in international
cross trade. Notwithstanding this focus on Indian
trade, Indian ship owners’ share in the country's
overseas trade is hardly 30 per cent in volume
terms. In value terms, it is much lower to a
meager 12 per cent of India's total overseas
shipping bill of USD 5.0 billion due to negligible
share of Indian ship owners in the trade of high
value goods like general cargo and containers.
Shipping is not just about vessels and tonnage.
Shipping capabilities of a nation are not solely
measured in terms of the quantum of tonnage
under control. In knowledge based economy, soft
intangible parameters like human capital,
information technology and expertise are
becoming increasingly important giving rise to
innumerable opportunities. India has already
become the source of quality seafarers to global
ship owners. Indian shipping firms can capitalise
on the inherent IT skills of Indians to play a
pivotal role in IT activity involved in
international shipping and the country may come
up as a business center for information
processing requirements of the international
ship owners.

Management

Ship management is the business of manning, equipping, provisioning and maintaining a ship.
It broadly includes technical, commercial, and crew management of ships. Maintenance, dry-docking
and technical upgradation of ship is the responsibility of technical management. Commercial
management involves decisions regarding vessel deployment and sale and purchase while, crew
management takes care of recruitment and selection of technical, deck side officers and ratings
people.

Ship management industry has evolved in India to cater to the manning requirements of various
foreign shipowners operating in open registries. Presently, around 200 ship management firms are
operating in India, of which majority are of foreign origin. Traditionally, Indian seafarers, specially
the officers, are in great demand in the global seafaring market due to their high technical
qualification, English speaking ability and low cost. This has attracted a large number of foreign ship
management firms to take the advantage of recruiting Indian seafarers and resulted into opening up
of branch offices of major foreign firms like, Barbar Ship management and Univan Ship management
in India. Major shipping lines like Mitsui OSK have also opened their liaisoning offices, while many
shipping lines have appointed their agents for the ship management in India.
On the contrary, most of the Indian shipowners usually do not outsource the manning function to ship
management agencies and have strong inhouse team to carry out those functions. Major Indian
shipowners like Shipping Corporation of India, Great Eastern Shipping Company and Varun Shipping
have their own training institutes to train their personnel.
Looking at the prospects of ship management firms in India, it has been observed that high wage level
of Indian seafarers vis-a-vis Chinese, Ukrainian, Russian, East European countries and others is
forcing the ship owners to search for easily available alternatives, in their cost reduction strategy.

Classification and Survey

Ship survey concentrates on ship classification societies that register the ships under a particular class
and flag. The technical rules, regulations, standards, guidelines and associated surveys and
inspections covering the design, construction and through-life compliance of a ship's structure and
essential engineering and electrical system are the main concerns of the classification societies.
International Maritime Organization (IMO), through their various conventions requires
certification that the above mentioned elements are satisfactory for the service for which the ship is
intended. To attain the highest structural and engineering standards in the merchant ships,
classification societies form the basis on which the statutory certification is issued. It also provides the
technical support, compliance verification and research and development. Classification of ships
includes three stages of verification: During construction, to ensure that the approved plans are
followed, approved material and components are properly installed, good workmanship practiced and
applied, and the rules adhered to.

Periodic surveys are carried out to ensure the continued compliance of rules after the construction
of the ship. These include various surveys of hull and machinery on a continuing basis. Existing ships
can be classified, which are not built under the supervision of the particular classification societies
only after ensuring their quality standards according to the standards of that classification society. In
India, Indian Register of Shipping (IRS) has the authority to carry out surveys for the Assignment of
International Load Lines, issue of Cargo Ship Safety Construction and the International Oil
Prevention certificate. Indian Government had made it mandatory for the Indian flag vessels from
the mid 1990s to get the International Load Line certification only from IRS. Dual classification has
become a common aspect for Indian vessels. In fact, Indian shipowners prefer to classify their vessels
under the foreign classification society because IRS may not be able to provide international service as
several of these ships are operating on international routes. Further international acceptability of IRS
classification is a major issue since IRS is not a fulltime member of International Association of
Classification Societies and acts as an associate. To overcome this, IRS now has entered into
agreements of mutual cooperation with all major International Classification Societies with
arrangement of survey across the world.

Offshore

The offshore industry comprises of support services to the exploration and production (E&P)
activity of oil and gas in offshore areas. The offshore industry comprises of support services to the
exploration and production (E&P) activity of oil and gas in offshore areas. The industry includes a
wide array of activities ranging from drilling rigs, marine construction, port support / terminal
services to development of oil field and production of support facilities. The history of offshore oil
exploration and production, commonly known as E&P activity started long back in 1920 with the
introduction of an oil derrick placed on a wooden platform for drilling in Mississippi delta area in the
United States. Over the years, the global offshore industry has developed significantly through
increasing applications of technology and carries out the explorations in the most adverse conditions.
Contrary to global scenario, offshore industry in India has started of late in the 1970s with the finding
of oil in Bombay High region. In the initial years, the offshore industry in India was supported by
support vessels owned and operated by foreign offshore service providers. However, from the mid
1980s Indian shipping companies started participating in the industry with long-term chartering of
various tugs by Oil and Natural Gas Corporation (ONGC) of India. Presently, a handful number of
Indian offshore service providers like the Shipping Corporation of India, Great Eastern Shipping,
Essar Shipping, Varun Shipping and others are involved in the offshore business, serving to the
domestic industry demand. The sector is dominated by ONGC, which is the largest owner of offshore
fleet in India as well as the biggest client to other service providers.

Global and domestic Indian offshore drilling activities are at an all time high. The limited supply of
rigs globally has led to increase in the day rates. Recently Transocean, a global rig owner, got its
contract for four rigs renewed with ONGC for three years at day rates of US$ 147,500 from earlier day
rates of approximately US$ 60,000. With limited supply, the day rates are expected to soar up further.
The increasing day rates and expanding oil and gas exploration in domestic Indian offshore sector will
increase the revenue of drilling companies. Approximately 60% of the drilling rigs present in India are
foreign owned. Currently, the domestic companies like Aban Loyd and Jindal Drilling are aggressively
expanding. However, their percentage share in offshore drilling may not go up as demand for drilling
rigs is also soaring up and may not be matched by domestic supply. With the liberalisation policy
taken up by the Government of India, entry of major foreign exploration and production majors,
namely Enron Oil & Gas, Cairn Energy, Hardy Exploration and Production has increased significantly
in recent times resulting into a rise in opportunity for offshore sector.

In regard to the increasing demand for crude oil, Government is giving more emphasis on exploration
and production activities in deepwater blocks. The recent awarding of 25 out of 48 oil blocks by the
Union Government of India through the New Exploration and Licensing Policy (NELP) has boosted
the prospects of the Indian offshore sector and would give rise to significant number of new
opportunities in the near future.

Supplier

Operation of the vessel needs various consumables in the form of bunker, lubricants, fresh
water, stores and others. Ship chandeliers provide food and provisions to the ship for the next journey
in the sea. It also arranges for the services of the doctor, washer man and others when the ship is at
port. The shipping agent of the company or the ship manager normally arranges for the ship
chandelier to serve its client. Increasingly these shipping agents and ship managers are entering into
the field of supplies. Ship has to have the adequate supply of fresh water on it, which they purchase on
the port they visit. Many of these fresh water suppliers own the barges to supply water for the vessels
like tankers, which does not come inside the port for berthing. The vessels at the Lighterage port also
take services from the fresh water supplying barges. The industry of ship suppliers is highly
fragmented with a significant number of small companies active in this sector. Various other sectoral
players like dredging companies, shipping agents, ship managers, stevedores etc. are also entering
into the business of ship suppliers to leverage on their experience and good contacts within the
shipping industry. We believe that the large companies with the standardized services can create its
own place in the market by applying proper marketing strategy and branding and grading the services
to assure high standard. As number of ships visiting at the Indian ports have increased over the years
and is likely to be increased in the future, the market for these services is bound to grow giving the
scope to new suppliers. However, bunker and lubricant supply to the ship is dominated by the large
sized players like Castrol, Shell, Indian Oil Corporation and other public limited companies. These
companies supply bunker or lubricant to the ship owner either directly or through their agents.
 Logistics
Container Lines

'Containerisation', the term very familiar to present day shipping industry was a completely
unknown concept a few decades back. It was Malcom McLean,owner of a huge trucking company in
USA, who first conceived the idea of containerisation by transporting containers through 'Ideal - X' in
1956 and initiated a revolution in the history of shipping industry. Over the years, the industry has
created a separate identity within the shipping world through continuous development and Maersk
Lines, P&O Nedlloyd, Sealand Services (CSX), APL and others have come up as international major
serving customers all over the globe.
The growth of containerisation in India has been slow and steady. The formation of
Container Corporation of India (CONCOR) as an autonomous body under the Ministry of Railways
in 1988 boosted the efforts at increasing containerized traffic in the country. Over the years, volume of
container traffic has experienced continuous growth and crossed the 2.0 million mark in last fiscal by
registering a volume of 2.22 million TEUs in 1999-2000 at the major ports of India. A significant
number of international container lines are active in India making business through their own office
or through selected agents. Amongst the Indian shipping companies, only 'The Shipping Corporation
of India' is active in the international liner business. It has tied up with ZIM Navigation of Israel and
Yang Ming Line of Taiwan to provide services on international routes. Of the 12 major ports of the
country, Jawaharlal Nehru Port (JNP) and Mumbai Port have established as the gateway ports for
container traffic to India having a combined market share of around 60% of the total container traffic.
Lack of adequate infrastructure in form of container handling equipment, Container Freight station
(CFS) network and rail network in other ports have led to concentration of container traffic at
Mumbai and JNP. However, substantial investments have been made in recent times by private sector
in the ports of Tuticorin and Cochin to overcome the backlog. Liberalisation and privatisation policy
taken up by the Government has resulted into the commissioning of new ports like Adani and Pipavav.
While PSA Corporation of Singapore is active in Tuticorin port, Chennai and Cochin ports are planning
to rope in Dubai port authority (formerly P&O Ports) for development and management of their
container terminals. International liner major Maesrk-Sealand has acquired Pipavav from PSA and has
started container terminal at JNP.
Reviewing the development of liner business since its inception across the world, it has been
observed that container shipping would be the most imperative choice for movement of dry cargo in
the coming years and liner business is likely to take a crucial role in promoting the prospects of
shipping industry. Following the global trend, Indian ports are also geared up to take the role of a hub
port by developing necessary infrastructure to attract large size mother vessels. Taking the advantage
of long coastline of India, CONCOR is contemplating to start coastal movement of container vessels.
Looking at the overall aspect of the industry, it can be concluded that future of container liner
business would be bright enough.

ICD / CFS

Integrated Logistics

The term logistics is defined as "the process of planning, implementing and controlling of the
efficient, cost effective flow and storage of raw material, in-process inventory and finished products
and related information from the point of origin to the point of consumption as per customer
demand".
The entire process involves a large number of activities to be done in accordance with user
requirement and requires proper integration of different activities, which would lead to the smooth
flow of operations across the value chain. Integrated logistics co-ordinates all the logistical activities
taking place in a value chain to provide optimum benefit to the user. Amongst the international
shipping companies, APL is the pioneer to enter into the field of integrated logistics services way
back in 1979. Looking at the success of APL concomitant to growing industry demand, other shipping
companies follow the suit. Major companies like Maersk, P&O and others have started providing
integrated logistics service by extending their service chain through land and air and making an
optimal co-ordination of all the services. The concept of integrated logistics service is new to the
context of Indian industry. In India, traditional transport companies, courier companies and freight
forwarders have emerged as integrated logistics service provider by leveraging on their existing
infrastructure and experience. They not only provide the prime functions like transportation,
warehousing, packaging, clearing and forwarding but also handle other activities like order
processing, sales tax and excise duty documentation, invoicing, collection of bills, inventory
management, and others.
In India, the market for logistics service providers is highly fragmented. While most of the
existing players are performing various functions of logistics, providing integrated logistics service for
any kind of commodity has become the industry demand. Chennai-based South India Corporation
Agency Limited (SICAL) has established itself as the integrated logistics service provider for TNEB by
coordinating all the logistical functions involved in the transport of thermal coal from coal rich states
of Orissa, Bihar and West Bengal to Chennai through multimodal transport. With the strategies taken
up by traditional industrial firms to reduce operational costs and enhance value addition throughout
the value chain, importance of integrated logistics has got a new dimension. Outsourcing of logistics
service to specialized service provider having considerable expertise over the industry becomes the
trend. This has led to a flow of European logistics service providers to India having significant domain
knowledge and technology resulting into a high degree of competition in the domestic market. Overall
the role of integrated logistics services is expected to increase in the new economy leading to
betterment of value chain.

Transportation

Transportation, an indispensable component of economic progress, is an essential and major

sub function of logistics, creating time and place utility in goods. It serves as the backbone of supply
chain management. Though traditionally, transportation involves physical movement of goods,
however, in the new economy era, it is largely influenced by information and communication
technologies with the focus being on knowledge of customer needs and value added services in order
provide maximum benefits to user.
Globally, transportation sector accounts for around 3 to 5 percent of GDP. The demand for
transportation industry is directly proportional to the growth of the economy, mobility of population
and other related factors. As per the World Bank's estimate, a unit increase in GNP in India generates
an increase of 1.5 times in freight transport demand. The rapid economic growth on the onset of the
liberalisation in the last decade has substantially increased the potentiality of transportation in India.
To cope with the expected rise in demand, huge investments have been made in the last few years.
Opening up of Indian economy has opened the doors for private sector participation; however, the
response level is not at par with the expectations. Estimated increase in the output of the basic
industries is likely to create substantial demand for bulk transportation. With the expected annual
growth of Indian economy likely to cross 6 percent mark in near future, transportation demand is also
likely to rise substantially and estimated to become double in next ten years. Though traditionally,
transportation industry is classified on the basis of the involvement of different modes viz. road, rail,
sea, air; here we are concentrating on inland movement, which includes road, rail, inland water and
pipeline transportation.

Warehousing

Traditionally, warehousing involves the storage of raw material, work-in-process inventory or

finished goods in a covered space in the most suitable way for a specific time period. It also adds
temporal and spatial significance to the value of the commodity. With the growing importance of
logistics and supply chain management throughout the world, warehousing has emerged as one of the
vital component of the supply chain.
Globally, the USD100 billion warehousing industry has undergone significant changes in the last
decade owing to the growth in world trade and expansion of international markets as well as
increasing application of new technology. Internationally, warehousing industry is classified into
three different type’s viz. public warehousing, private warehousing and Contract warehousing.
Of these, contract warehousing, which has dedicated customers with long-term agreement, is the
fastest growing segment of the industry internationally and is expected to grow at a rate of 12-15
percent over the next couple of years.
In India, warehousing industry is mostly dominated by State Warehousing Corporations and
public sector undertakings viz. Central Warehousing Corporation (CWC), Punjab State Warehousing
Corporations (CONWARE) and others. CWC, the largest warehouse operator in India, operates across
the country through 444 warehouses and provides storage capacity of 7.3 million tons for a wide
range of products. Warehousing activities of CWC include food grains warehouses, custom bonded
warehouses, container freight stations, inland clearance depots and air cargo complexes. Ports act as
the interface for seaborne trade movement. Most of the major ports of the country provide
warehousing facilities to users through its own warehouses and also by privately-owned warehouses
located within or outside the port arena. Increased liberalisation of the economy has boosted private
sector participation in ports.
Looking at the future of the warehousing industry, it has been observed that technology is
likely to play a major role through the increasing applications of Internet. Information technology is
likely to play a key role in determining the competitiveness of the industry.

© 2006. i-maritime. All rights reserved. http://www.imaritime.com/

Compiled By: Sarath Chandran P ( mailsarathchandran@gmail.com)