Improve logistics, enhance export

Embedded in India’s growth story in recent years were the elements of its export success, though the foreign trade front has of late been the Achilles heels of the Indian economy, hamstrung as it were, by tepid external demand. 

This is exacerbated by domestic constraints of considerable importance that range from raw material availability at international prices to poor infrastructure, both physical as also export, besides the exorbitant transaction cost to trade and industry.

Even in a strong and competitive item like garments, the Indian industry is outwitted by later comers like Bangladesh and Vietnam in recent years so much so that still the domestic textile industry is struggling against archaic labour laws and antiquated machinery that make the modest export target a mirage.

It is also true that ever since the NDA government took office in May 2014, there has not been a single month in which the country’s exports showed bounce and rise. On the other hand, exports had been registering persistently poor performance month after month. 

The Minister of State for Commerce and Industry, independent-charge, Nirmala Sitharaman has not distinguished herself in retrieving the losing ground of India’s exports in the global trading arena as her team of officials too remained clueless to the slide on the foreign trade front.

Although the new foreign trade policy had been unveiled providing a package of new incentives and a spate of export promotion schemes, the situation remained dim and the outlook grim for the country’s foreign trade. What is required is a frontal attack on improving the export competitiveness so that a measure of confidence can be secured before long. 

In the country’s foreign trade, logistics play a crucial role particularly the movement of import and export cargoes within and out of the nation for cost-effective and swift delivery so that real time gains can be counted upon by exporters. 

That container movement of cargo is indispensable to ensuring a smooth and seamless flow of merchandise goods in and out of the country can hardly be gainsaid. But what is less appreciated is the looming threat to free and fair movement of cargo in cross-country movements and also for outbound and inbound movement of Indian goods and foreign goods into the country.

Recently, a complaint has been lodged against Danish conglomerate AP Moller-Maersk Group’s Indian subsidiary Gateway Terminals India Pvt Ltd (GTIPL) for using its “dominant position” at the Jawaharlal Nehru Port to dictate prices by circumscribing competition in the Container Freight Station (CFS) markets.

 Incidentally, the Danish major has wide-ranging interests across the logistics supply chains that encompass ports, CFS, and shipping. The complaint is lodged by a policy advisory society Indian Competition Review (ICR) on public interest issues before the Competition Commission of India (CCI).

ICR, specialising in competition-related abuses and consumer interests, alleges that the Danish group does so by bundling services with some CFS—either operated by the group or those with which it has tie-ups, compelling shipping lines to use these CFSs even if they are priced higher. Such a gratuitous move by APM Terminal hampers competition in the CFS market, particularly when it is not regulated by the port tariff regulator. 

Even as JN Port handles over 50 percent container traffic among major ports in India, GTIPL handles a lion’s share of 45 percent of containers handled at JN Port, the ICR said in its complaint adding further that container terminal services and services offered by CFS are quite distinct and cannot be clubbed together to form a single product.

 It is further pointed out that end user of services at a port—receipt and dispatch of cargo, stuffing, and CFS—is an importer who imports goods with no say in the selection of the terminal or the CFS. Since shipping lines are forced into selecting either Maersk or particular CFS, there is an adverse impact on competition amongst the rest of the players offering CFS services, even when their services are competitively priced.

Interestingly, it needs to be noted that Pipava Port (GPPL) has been in the thick of news regularly for some time now as it is being hailed to be a model port for other minor ports in the country to evolve on its lines to attract a large volume of business. 

But precious little is known that a majority of the traffic coming to Pipavav is actually being diverted by GTIPL to its private port at Pipavav, known as APM Terminal Pipavav so as to garner gargantuan benefits to the detriment of other market players.

It is also contended that even by dint of being a dominant player in the container terminal services market at JNPT, the Danish major’s subsidiary in India cannot make monopoly profit since the tariff cannot be raised without orders of TAMP. Hence, the only way out for GTIPL was to coerce the shipping lines to sign a minimum guarantee agreement with its CFS, known as the APMT CFS, to provide minimum import support, in the absence of which the CFS can slap penalty. 

In the market with a larger number of CFS operators and offering discount services, APMT CFS merrily imposes a penalty on shipping lines! This conduct of GTIPL to restrict the provision of CFS services by other CFS operators is tantamount to abuse of its dominant position along with other market-distorting abuses, the ICR has alleged. 

Exporters and importers pay through their noses in the absence of a proper mediator or neutral umpire who can threaten monopoly firms with penal provisions of the laws of the land so that the transaction cost to trade is reduced.

It is further pointed out by the complainant in its CCI submission that the Comptroller and Auditor General of India in a report in December 2015 on PPP projects, tabled in Parliament, highlighted GTIPL dominance, while regular compilation of ships visiting JNPT and Pipavav meticulously tracked by the complainant corroborates instances of abuses by the dominant firm. 

With India’s export competitiveness at stake, the logistics at various ports do matter in the scheme of things so that any unchecked abuses do not complicate further and blunt the competitive edge of Indian exporters. Hence, the CCI can take an early call to institute a probe and review the conduct of the concessionaires at the ports so that any entrenchment of monopolistic market dominance is diluted to ensure free and fair trade in the field, policy wonks caution the authorities.