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Sailing into uncharted waters: Why ports need to identify role in logistics network

Greater autonomy at the operating level could help improve efficiencies. At the same time, a central body that coordinates planning and investments for the sector can possibly help in resource raising, planning and prioritising projects in the context of a vision for the overall logistics network.

The COVID-19 pandemic has disrupted supply chains, and created bottlenecks and congestions at key nodes of India’s logistics system. In the short-term, demand shocks and supply chain disruptions have led to an estimated 22% contraction in volumes handled at major ports in April and May.

Even prior to COVID-19, the sector’s landscape was witnessing challenges. The relative position between ports had changed – non-major ports saw freight growth at a ten-year CAGR of 10.64% by 2018, compared to 2.79% for major ports. The growth rate for cargo handling at the major ports had dropped to 0.82% in FY20, as against 2.90% in the prior financial year.

Capacity utilisation at major ports had come down (estimated at less than 50% in FY19), average vessel turnaround times was estimated at 60 hours in 2019 and logistics costs for first-mile and last-mile freight movement were generally considered sub-optimal, primarily due to the sub-optimal hinterland modal share.

Logistics and trade flows today have evolved into networked, multi-dimensional processes – comprising fixed facilities, moving units as well as systems and processes – aimed at enhancing operational efficiency and economic value. Even as the sector looks to recover, post-COVID ports need to focus on key themes for creating an enduring proposition and thriving thereafter. Three such broad themes could be: (1) identify their role in an integrated and efficient logistics network for the country; (2) strengthen institutional capacity for project preparation & execution as well as efficient operations; and (3) leverage technology to streamline interfaces and enable smooth operation of the eco-system.

First, sector capacity and its augmentation needs to be seen in the context of the transportation and logistics network – with focus on origin/destination points for freight flows, and efficient multi-modal logistics in the hinterland. In this context, overall success is likely to be inter-dependent on enhancing the railways’ share of freight traffic as well as looking at options for inland waterway transportation. Another area could be improvement in connectivity between ports through coastal movements.

Second, while the Sagarmala Programme was focused on the four pillars of port modernisation, port-led industrialisation, port connectivity enhancement, and coastal community development, the government is now correctly looking at strengthening institutional capacity for project preparation & execution through a number of initiatives. These include creation of a centralised ‘National Port Authority of India’ for project structuring and procurement, the Major Port Authorities Bill (2020) to provide major ports with autonomy in determination of tariff as per market principles, and corporatisation of major ports.

Greater autonomy at the operating level could help improve efficiencies. At the same time, a central body that coordinates planning and investments for the sector can possibly help in resource raising, planning and prioritising projects in the context of a vision for the overall logistics network.

Third, a key focal point for unlocking value could be upgradation of technology at ports as well as in the larger eco-system. The Indian Ports Association is conceptualising the upgradation of the port community system (PCS) to PCS 2.0 to provide a single interface for trade related information, and provide additional modules like track-and-trace, freight booking, etc.

As management of costs becomes even more important in the post-COVID scenario, ports could consider further leveraging data analytics and other solutions. In addition, GIS based solutions that use spatial and cargo flow data for decongestion of bottlenecks and scheduling, could improve the utilisation of the overall logistics network and help rationalise additional investment requirements.
Source: Financial Express

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