Once considered an indomitable empire, ICD Nagpur has lost charm in the last few years. What is to blame? A sheer fall in exports volume or some weakness within? The Dollar Business travels to ICD Nagpur to unearth factual causes behind the ports fall from glory and the road ahead of this once-popular dry port.
Niladri S. Nath | February 2017 Issue | The Dollar Business
We entered Nagpur through Wardha Road where the sight of the ongoing Metro Railways construction gave us a quick impression that the city was fast catching up with the times. But we weren’t surprised! After all, Nagpur is the hometown of Devendra Fadnavis, Chief Minister of Maharashtra and Nitin Gadkari, Union Minister of Road Transport and Highways.
Nagpur is known by several names. Some call it the Orange City, others call it the Tiger Capital of India. But for us, Nagpur is the logistics hub of central India and a major commercial center. The city is strategically positioned in the middle of the country with all the characteristics that are required to cater to logistics needs of central India and beyond. But what is interesting about Nagpur is that this tier-2 city has three inland container depots (ICDs) – two privately owned and one managed by Container Corporation of India Ltd. (CONCOR). This speaks volumes about the city’s logistical and infrastructural strength. The huge projects undertaken by Maharashtra Industrial Development Corporation (MIDC) around Nagpur and the region’s capacity to produce coal, cotton and rice inspired the setting up of three ICDs. Aren’t three ICDs too many for Nagpur?
All containers from or to ICD Nagpur are now
routed through JNPT Mumbai.
As we approached Nagpur, rows of motionless trailers on the road side greeted us – we were almost there! The first thought that occoured was that like most other ICDs located within city limits in India, ICD Nagpur must have its share of disadvantages due to congestion. Interestingly, the ICD was originally set up outside the city limits. But as the residential areas expanded, the ICD started facing many restrictions, one of which was that no trailer movements were allowed from 6 am to 11:30 am and 4 pm to 9 pm.
As we proceeded further we came to face with a newly constructed two-storey building – the ICD’s administrative complex. There were also two old building – one where the custom house agents (CHAs) sit and the other occupied by the Customs Department.
As soon as we entered the new two-storey building, we were greeted by Ganish Tawale, a Senior Executive at ICD Nagpur. Without wasting much time, he took us straight to the container depot – the action zone. The depot is divided into several sections and is spread across 38 acre. However, activity was minimal, except for a few reach stackers busy piling up the containers. For the record, the ICD has six reach stackers, one forklift with a 10 metric tonne (MT) capacity, two hydra cranes of 12 MT capacity and five forklifts of 5 MT capacity.
Nevertheless, the frequent overlapping noises from the reach stackers and moving trailers, which are a part of a 13-trailer-fleet for internal movement of containers, told us that the depot could come alive any
Containers stacked at ICD Nagpur. Exports have
been surpassing imports at this ICD, and at
times there is a shortage of containers.
minute. We continued our tour and came across railway tracks that connect the ICD to JNPT (Jawaharlal Nehru Port Trust) in Mumbai. Tawale told us that ICD Nagpur runs two rakes daily to JNPT. According to him, all containers from or to ICD Nagpur are now routed through JNPT, but with only a 65% occupancy on an average.
Adjacent to the depot were two transit houses of 2,000 sq.mt. and 1,875 sq.mt., one for exports and the other for imports, respectively. And in the adjoining area, was a bonded warehouse of 275 sq.mt. and two railway sidings of 800 mt. each. Anup Kumar Satpathy, Chief General Manager – Central Region, CONCOR, informed us that rice constitutes 50-55% of the cargo profile of the ICD and the rest comprises of tower parts, yarn from Indo Rama Synthetics, manganese dioxide, etc.
We spent a few hours touring the depot and on our way back we noticed some construction work in progress within the premises. The construction work is intriguing as the administration is planning to relocate the ICD to Multi-modal International Cargo Hub and Airport at Nagpur (MIHAN) in the near future.
The following day, we met Abhishek Jha, Director of Glocal ICD, popularly known as Butibori ICD as it mostly caters to the companies at Butibori, an industrial area set-up by Maharashtra Industrial Development Corporation (MIDC). Meeting Jha gave us great insights into operations at ICD Nagpur as he has also been operating as a CHA at ICD Nagpur. According to him, ICD Nagpur was extremely trade-friendly when it started its operations but matters went out of control after 2007. The ICD’s container handling capacity (about 4,500 TEUs a month then) was in perfect balance initially. But soon came a time when it started handling 8,000 containers a month because of the growing exports from the region. And ever since, ICD Nagpur has turned monopolistic in attitude and approach.
Anand Verma, President of Shipliners Association of Nagpur, was another prominent figure in the industry who we met the same day. He seconded Jha and rued, “With the progress of the trade, we expected CONCOR to enhance the infrastructure at ICD Nagpur to cater to the growing demand. But, that intent was missing.” Jha went on to share the history and added, “The ICD authorities even went to the extent of taking unilateral decisions and indirectly deciding the volume of business a CHA should handle. They forced CHAs to use their trailers and the CHAs had no other option but to work their business around limited resources.”
The President of Nagpur Custom House Agents Association, Sudhir Agarwal, had a similar story to share. “The ICD took advantage of its position and started to impose some arbitrary charges (or non-productive charges) and restrictions. The authority made the hiring of CONCOR-accredited trailers compulsory for importers and exporters. It also imposed documentation charges of up to Rs.1,200 for each 20-feet container and Rs.2,400 for each 40-feet container, depending on the distance,” he told The Dollar Business. In his words, the distances were divided into two segments – short lead, within 100 km, and long lead, more than 100 km.
According to almost all of them, ICD Nagpur even found new ways to make more money. For instance, it imposed higher ground rent charges than other ICDs in the region. “ICD Nagpur until recently was charging Rs.3,000-4,000 ground rent per container. To avoid this rent, importers used to process the Customs-clearance in Mumbai and transport the cargo by road,” added Agarwal. Even shipping lines were charging a higher rate of inland haulage, which only added to the woes of the exim fraternity.
Nevertheless, the foreign trade fraternity found sympathetic ears in the corridors of power and that brought an end to the monopolistic empire of ICD Nagpur. Unfortunately, enough damage had already been done to the business. Exporters had moved out of the ICD in search of greener pastures. “Transport costs contribute to a large share of the FOB value while operating from a landlocked ICD like Nagpur. So, when the rail freight cost went up by 20% and road freight came down due to lack of business and decrease in diesel price, exporters of price-sensitive commodities such as rice and yarn started booking trucks because even a price difference of $4 per metric tonne (MT) becomes a decisive factor in the international market,” said Agarwal. And to add to the misfortune of exporters, the global economic slowdown followed soon.
"The ICD is expected to move to the modern Mihan facility very soon"
The result of all this was that the business went down at ICD Nagpur. On one hand, exporters turned their backs on ICD Nagpur while on the other hand, there was mounting pressure from private ICDs in the region. Eventually, ICD Nagpur was compelled to implement some corrective measures. The ICD, it seems, had learn a lesson the hard way. One major trade-friendly measure that ICD Nagpur has taken, to undo the damage, in the recent past is the waiver of ground rent (that was earlier levied on trailers) for 45 days. This has resulted in reducing the road transport cost to ICD significantly. The new policy now allows private trailers to operate inside the yards without any extra charge. It has also started reaching out to rice exporters to bring back the volumes and is even planning to build plug-in refrigeration facilities for orange exporters. The authority is also trying hard to attract Food Corporation of India (FCI) cargoes for strategic reasons. ICD Nagpur faces a shortage of containers for exports due to a lack of import volumes. To counter this challenge they plan to route FCI cargoes from places such as Delhi, Punjab, Uttar Pradesh and Rajasthan to Nagpur, and then use the containers for exports. The Chief Customs Commissioner’s Office (Nagpur Zone) has also chipped in to add efficiency to the cargo movement by introducing Single Window Interface for Facilitating Growth (SWIFT), integrated risk management system, Customs Clearance Facilitation Committee, etc., among other measures. Alongside, authorities at ICD Nagpur are working towards relocating the facility to the Multi-modal International Cargo Hub and Airport at Nagpur (MIHAN), which prompted us to visit the new site.
A reach stacker in action (piling up empty containers) inside ICD Nagpur.
The next day we made an early appearance at MIHAN. The property is located adjacent to Nagpur airport and spreads across 109 acre of land. Workers were in action, laying railway tracks (that connects the place to Khapri railway station), constructing buildings and warehouse, etc. “There are many state-of-the-art facilities at MIHAN and it will change the image of ICD Nagpur once it becomes operational,” said Jiternda Jalan, Senior Manager - Logistics, KEC International Ltd., a Mumbai-based engineering procurement and construction (EPC) major having an office in Nagpur.
The project, though delayed, is likely to become operational in the next couple of years. We also managed to catch a glimpse of a reach stacker in operation, in a small container yard.
A NEW DAWN
There is no doubt that ICD Nagpur has a huge potential as it is strategically located. While Ajni Railway Station is just 2 km away, Dr. Babasaheb Ambedkar International Airport is around 5 km away from ICD Nagpur. The facility is also well-connected with the Ring Road, which connects to NH 6 (Mumbai-Kolkata) and NH 7 (Varanasi-Kanyakumari). And then Nagpur lies in the golden quadrilateral corridor of India, which means ICD Nagpur has all it requires to regain its lost glory, provided it earns its trust back. The ICD hasn’t performed well in the last few financial years. The cargo volume dropped from 97,145 TEUs in FY2014 to 92,771 TEUs in FY2015 and to just 86,890 TEUs in FY2016. The ICD’s FY2014 revenue target was Rs.486 crore, which it missed by a huge margin. The target for FY2015 was brought down to Rs.320 crore, and it managed to generate Rs.339.82 crore. The target for FY2016 was a modest Rs.347 crore and it achieved Rs.357.68 crore. The revenue target for FY2017 is Rs.365 crore, but as of December 2016 the ICD had achieved only Rs.274.66 crore. The ICD might not meet its current target, but all is not lost. Agarwal, as a final note, painted a positive picture by saying, “Under GST, manufacturers and exporters will look for strategic locations where they can stock and distribute goods efficiently and cost effectively, and Nagpur will fit the bill perfectly.” The city has also witnessed a flurry of activities. For instance, while home-grown Patanjali is planning to set up a manufacturing base in the city, Future Group is strengthening its regional distribution centre at Nagpur. Even MIDC is relentlessly working towards converting Butibori into an industrial cluster.
Boxes are being stacked to be transported at a warehouse in ICD Nagpur.
The ICD is expected to move to the state-of-the-art MIHAAN in the next
In fact, in recent years, many new industries have made Butibori their home. While business has been modest at best, officials we met were optimist that ICD Nagpur has what it takes to reach new heights. All it needs to do is play to its locational advantage and be a little service-oriented to attract business and win over exporters.
Anup Kumar Satpathy, CHIEF GENERAL MANAGER – CENTRAL REGION, CONTAINER CORPORATION OF INDIA LTD.CONCOR)
TDB: ICD Nagpur recently reduced transportation costs and waived off ground rent charges for 45 days. While welcoming the moves, stakeholders associated with the ICD say that competition from private ICDs has forced such decisions. Your comments.
Anup Kumar Satpathy (AKP): There are two sides to a story. Sometimes, one needs to address the scenarios arising out of competition. Since I took charge of ICD Nagpur, I felt the need to take some initiatives to retain and grow the business here.
As a matter of fact, one needs to understand that Nagpur is not an industrially developed region and hence, the cargo profile is limited. Geographically, it is a completely land-locked area. Hence, our responsibility to provide an efficient and cost-effect mode of transportation to the gateway ports always assume greater significance and we are trying to fulfil that responsibility. Also, I would like to make it clear that private ICDs are not a competition for us, on various counts.
TDB: Traders accuse you of being profit oriented. Your comments.
AKP: I can assure the trade that CONCOR doesn’t believe in earning extra profits. However, it must be remembered that we have some pay-out obligations to road transporters, trailer owners, handling contractors, etc., for which we have to charge some fee to ICD users. Along the process, we would like to stay profitable by providing an efficient and transparent modes of transportation to our clients. And lest we forget, we’re a government body and we are cuffed to an extent unlike the private players.
TDB: It has been alleged that ICD Nagpur is adopting a monopolistic attitude. How do you react to that?
AKP: Traders will always opt for a cheaper option – that is the fact. If someone equipped with a deep pocket offers various incentives, a share of business will certainly go there. But, ICD Nagpur will remain the most efficient ICD in the central India region. One can always blame the market leader in absence of competition, but I think we should look forward and not fret over the past.
TDB: Rice is the main cargo for ICD Nagpur, but ICD Raipur has been taking away a share. Have you taken any initiative to bring back business?
AKP: As mentioned earlier, we have drastically cut down the local road transport rate and waived off ground rent for 45 days. Earlier we used to receive various commodities by road including finished products from the engineering industry. We are now trying to bring them back by offering a good rate along with flexibility in operations and reduced handling changes. Also, recently, we have had a meeting with rice exporters from the region.
Sudhir Agarwal, PRESIDENT - NAGPUR CUSTOM, HOUSE AGENTS’ ASSOCIATION
TDB: How do you view the functioning of ICD Nagpur?
Sudhir Agarwal (SA): To begin with, ICD Nagpur is the biggest ICD in the central India region. And it is because of Container Corporation of India Limited (CONCOR) that our business exists in Nagpur. Earlier ICD Nagpur was only focussed on earning profits. Initially, even some of the officials were not friendly towards traders. They arbitrarily imposed charges on private trailers, ground-rent, etc., because of which traders left the ICD when they found a better option. Communication was also a key problem. When ICD wanted to communicate with its clients and stakeholders, it would issue circulars immediately and do whatever it could to send the message across. On the contrary, when somebody from the trade tried to communicate with ICD officials, they turned a deaf ear. We protested these unfriendly moves, but they weren’t willing to listen to us and most issues remained unaddressed.
TDB: What other challenges do you face while operating at ICD Nagpur?
SA: There is disequilibrium between exports and imports volumes – exports dominate the trade. Most shipping lines such as Maesrk, MSC, USC, CMA CGM, etc., bring empty containers from Mumbai and the northern part of the country to ICD Nagpur. And because there are costs involved in such movements, the shipping lines recover the costs by increasing the terminal handling charges (THC), making THC at IDC Nagpur one of the highest in the country. I think ICD Nagpur’s authority lacks maneuverability. It usually takes a lot of time to make decisions due to its multi-layered, decision-making model. In the logistics industry one has to plan ahead and take quick decisions. Dealing with private ICDs is easier because one can get in touch with decision makers directly and they take quick decisions. They even create special tariffs for exporters and CHAs.
TDB: Do you think GST will work in favour of ICD Nagpur?
SA: Nagpur has tremendous potential to become a logistics hub. Earlier, companies used to set up warehouses in various states depending on the tax structures. This scenario will change after the implementation of GST. Now, they will look for a location from where they can provide the most efficient and cost-effective solution to stocking and distributing. And Nagpur will fit the bill perfectly.
TDB: Any suggestions for officials at ICD Nagpur?
SA: The role of any logistics organisation is to offer time-bound and efficient solutions at a minimum cost, which is expected of ICD Nagpur. The officials at ICD need to work towards improving the infrastructure and their outlook to offer a better service. I think, when the ICD shifts to MIHAN, things will improve. Also, we expect the ICD to be a transparent organisation and accept criticism.
A.K.Pandey, CHIEF COMMISSIONER, CUSTOMS, CENTRAL EXCISE AND SERVICE TAX, NAGPUR ZONE
TDB: What initiatives have the Customs Department taken up to facilitate export and import from ICD Nagpur?
A. K. Pandey (AKP): We have taken up a series of initiatives to add momentum to the business. To start with, Assistant and Deputy Commissioners have become more accessible to CHAs and exporters. We have implemented a participatory trade facilitation model, under which a Customs Clearance Facilitation Committee (CCFC) has already been set up, headed by the Chief Commissioner of Customs. All stakeholders in the EXIM trade are part of the committee.
On the operations front, we have successfully introduced Single Window Interface for Facilitating Trade (SWIFT). Earlier, CHAs used to file several separate declarations to regulatory agencies such as FSSAI, Directorate of Plant Protection, Quarantine and Storage, Animal Quarantine and Certification Services, Central Drugs Standard Control Organisation (CDSCO), etc. But, with SWIFT, exporters can file a centralised declaration and obtain the clearance online.
We have also introduced an integrated risk management system, which is a kind of an invisible corridor capable of monitoring 22 risk parameters. Once each document – be it a bill of entry for imports or a bill of shipping for exports – passes through that system, the system screens the document and decides whether the consignment needs to be examined. In case the system selects a document for examination, it also decides the number of packets to be examined.
Some eligible exporters and importers have been made authorised economic operators. These members enjoy deferred duty payment facilities. Now, we require only three documents – electrical declaration, invoice-cum-packing list and the bill of lading. Apart from these, facilities such as full transferability of duty credit scrips, excise duty exemptions under the advance authorisation scheme are also available.
TDB: What challenges is the Customs Department currently facing?
AKP: Any organisation, which has been assigned to regulate the export-import business, always faces two types of challenges. One, it should facilitate the trade, but should not lose track of a section of traders – those who take undue advantage of those facilitation processes. The second challenge is to reduce the dwell time. Currently, we are clearing 90% of the total imports cargo and 78% of the exports cargo within 24 hours. We are working towards achieving 100% clearance within 24 hours.
TDB: ICD Nagpur’s functioning has been criticised by various stakeholders. What’s your opinion?
AKP: I would not like to comment on that! All I can say is that, of late, CONCOR has been extremely cooperative. Having said that, ICD Nagpur faces challenges because it is located away from the manufacturing zone. Once it relocates to MIHAN, things will improve.