The direct port delivery (DPD) scheme that was introduced as a panacea to cut cargo dwell time and costs is set to be dumped, with the government working on a plan to restore the role of container freight stations (CFS) in the evacuation system, a top ministry official said on Friday.
DPD scheme, which was implemented by the government last year with great vigour to promote the ease of doing business and improve India’s ranking in the logistics performance index of the World Bank, had started to hurt the business of CFSs servicing Jawaharlal Nehru Port Trust.
Some of the CFSs, including listed entities, have started shedding staff to deal with the decline in business with one of them even shutting shop last week following an attack on buses carrying employees by a group that were retrenched.
DPD essentially means import containers are delivered directly to pre-approved clients at the port itself instead of waiting in a CFS located outside for clearance, which reduces the cargo dwell time and cost for shippers.
“We are now trying to re-model our cargo evacuation system placing the CFS as the fulcrum of the entire planning,” Shipping Secretary Gopal Krishna said at the annual day of the Container Freight Stations Association of India. “We are going back to the thinking that was prevalent in the late 1980s when this concept started that CFSs should take the burden of being the first recipient of the boxes and thereafter cargo will move,” he stated.
“The plan now is that within 24 hours, a container should move out of the port to a CFS, and as much less regulatory processes should be done in the port as possible. Regulatory and all other processes such as bundling, unbundling and re-positioning of cargo should happen where it was originally meant to be done, that is the CFSs. We had initial discussions with the all the stakeholders in the last ten days, including the shipping lines, shipping agents, forwarders and terminals. There is largely a unanimity that this seems to be the best possible way forward if we have to control the dwell time for exports and imports but largely for imports,” he said.
The challenge, though, is to address the issue of congestion and this can only be done by limiting the number of truck trailers that enter and exit the port.
“Here, there is a possibility of utilising technology by creating a truck trailer market place. Currently, trailers coming from factories carrying export containers to the port goes back empty. So, the idea is that when it comes in, that should be the trailer which should carry back a box to the CFS so that unnecessary movement of trucks doesn’t take place in the port area. That should be the key if large number of containers have to be handled at the port. That will improve the capacity utilisation of the terminals - if the cargo gets moved out of the port limits within 24 hours, the terminals will be able to bring in more ships, they will be able to unload more cargo and load more cargo. Across the stake holder community, everyone feels that there is some bit of benefit for them from this plan,” he said.
The only issue that the government is grappling with, according to Gopal Krishna, is about the liability. “Because, we have trucks coming from far off places carrying export boxes and if we ask the same transporter to carry an import box to the nearest CFS or identified CFS, the issue of liability comes in. So, that’s the single point of challenge that we are now starting to address and I’m sure we’ll be able to address that in the next week or so,” he said.
“If this plan meets the regulatory requirements of the system, then I think we would have probably reached an ideal situation in which cargo gets evacuated from the ports within a very short time,” he noted.
“There was a time when there was a bit of uncertainty in the minds of the CFSs, whether to change the business model (due to DPD) and what will happen to employment. I think, that should get sorted out by what we are now trying to attempt. So, I want to re-assure the CFSs operators that we will try to see that their utility in the system does not diminish, their utility in the system increases, their business grows and they become a very integral part of the system and remain so,” he said.
The rationale behind the introduction of DPD was to hasten the evacuation of cargo from the port, directly to the factories.
“While that seems to be very much a goal that we should aspire for and we also set targets and raised the target for DPD from 40 per cent to 80 per cent, we found after a few months that it was stuck at 40 per cent. And then, when we were again trying to figure out and trying to dissect this number, we found that actually what gets transported directly to the end user is only about 10 per cent, the balance 30 per cent continue to be routed through CFSs,” the secretary said.
The ever-increasing ship sizes was one of the “biggest disruptors” of the maritime sector. When the ship size keeps on increasing, the cargo volume will keep on increasing and the on-shore logistics sector will only be “reactive” to what the off-shore logistics sector will continue to do. This will increase challenges on evacuation of cargo from the on-shore side. “It was then we started re-assessing our thinking, that can we re-think the role and use of CFSs,” Gopal Krishna said.
Initially, JNPT was also trying to take on the burden of transporting cargo containers out of the port; it had even finalised a transport solution which was touted as an innovative model that the port can adopt to quickly evacuate containers to the factories.
“But, that is not the core function of the port. The core function of the port is to quickly unload cargo from the ship and take it out of its precincts as early as possible. And there was a model where we had CFSs in 34 locations which were so easily reachable from where the cargo could be distributed. Thereafter, the ports role end and the regulatory processes of Customs clearance and other things will take over. We thought that this was the time to re-think and consider reverting to the old concept of evacuating containers through CFSs,” he added.