From being a favourite whipping boy some three years ago, blamed for India’s high logistics costs, container freight station (CFS) operators have suddenly become a messiah for the government, by helping ports from getting choked as importers fail to clear cargo for reasons that can be attributed to the lockdown.
Import laden containers arriving at a port are typically moved to nearby CFS, an industry practice designed to de-congest the ports. Sometime in 2006, the government introduced the direct port delivery (DPD) system, whereby import containers are delivered directly to pre-approved clients at the port itself, thus reducing cargo dwell times and cost for shippers.
The CFSs were hit by lower volumes, as a result. But the coronavirus outbreak has reversed that trend; though the CFS operators are being squeezed from both sides – by the government and the importers.
Since March 22, 34 CFSs servicing Jawaharlal Nehru Port Trust (JNPT) have evacuated some 100,000 containers from the five container terminals operating at the port. Of this, 25,000 containers have been cleared by the importers from the CFSs, leaving a backlog of 75,000 containers that have to be cleared.
Sensing that the lockdown restrictions were pulling down DPD clearances from the port, the authorities pushed CFSs’ to evacuate the boxes; they performed this task, overcoming many challenges and hurdles along the way.
No easy task
“Getting trucks, drivers, surveyors, labour, reach stacker, RTG crane operators was a mammoth task, but we managed by paying extra money and incentivising, entailing additional cost,” said the chief executive officer of a CFS serving JNPT.
With their own equipment operating at less than 30 per cent due to driver, operator and labour shortages, the CFSs’ even hired equipment from the market by paying a higher price, to ensure smooth operations.
The Government kept pushing the CFSs’ to offer more free days to importers. Though they couldn’t afford it, the CFSs granted waivers from charges for the first few days, hoping that the importers will come forward and evacuate.
“Despite these offers, very few importers came forward to take deliveries during the lockdown. While others, under the guise of difficulties, kept pressing for demurrage or ground rent waivers from the custodians,” he said.
Waivers proving ‘counterproductive’
CFSs aver that the advisories from various authorities to grant waivers are turning out to be “counterproductive”.
“CFSs are being pressurised to offer waivers despite huge increase in costs. We are in a dilemma,” the managing director of another CFS said.
CFS operators say that their facilities are full to the brim and further movement will be hampered if boxes are not cleared quickly. Evacuation from terminals will stop and port ground rent will be passed on to CFSs’ by the shipping lines.
Most of the CFSs, despite additional costs being saddled on them due to non-clearance by importers, have already given a 10-day waiver on ground rent, besides some additional concessions being given by them, he said.
“A majority of the importers are being facilitated by CFSs. However, a section of importers who are making no efforts to take deliveries are approaching authorities for blanket waivers. Any blanket waiver will encourage them not to come forward. They will choke the CFSs and then the ports and bring the trade to a standstill. This will nullify the efforts taken by the authorities to keep the EXIM supply chain going,” the CEO said.
“Surprisingly, some authorities are blaming and threatening to penalise if waivers are not provided to the importers. It seems like the government has been over-powered by the importers, and have no say against the non-performance of importers,” he said.
“The benefit of the mutually agreed final waiver between CFS and the importer for late clearance should go directly to the importer through a credit note from the CFS to the importer’s account directly,” he added.