Chapter-1 – INTRODUCTION

1.1 Indian Scenario in Shipping

Maritime transport, which plays a vital role in the development of the country, comprises ports, shipping, shipbuilding and ship repair, and inland water transport systems. According to the Ministry of Shipping, Government of India, approximately 95% of the India’s trade by volume, and 70% by value, is moved through maritime transport. India is among the top 20 leading countries having large number of merchant fleets in the world. The Gross Tonnage (GT) under the Indian flag was 10.1 million GT as of 1.09.2010, with as much as 1029 ships in operation. Ports act as an interface between ocean transport and land transport. India has 12 major ports viz. Kolkata (including Dock complex at Haldia), Paradip, Vishakapatnam, Chennai, Ennore, Tuticorin, Cochin, New Mangalore, Mormugao, Jawaharlal Nehru at Nhava, Mumbai, and Kandla, and 187 minor ports.

Despite recessionary conditions, traffic handled at major ports has grown on an average by 5.7% in the year 2009-10, over the year 2008-09. However, ports like Haldia (-20.4%), Ennore (-6.9%) and New Mangalore (-3.2%) are few of the main ports that witnessed negative growth in 2009-10. Nevertheless, most of the ports have not achieved their target for the year 2009-10. Mormugao (8.5%), Tuticorin (8.1%) Mumbai (2%), Kandla (2%), and Paradip (1.8%) were the only ports which achieved their growth target for 2009-10. Haldia (-22.1%) and Ennore (-14%) were the two ports which showed huge variation in traffic compared to the traffic targeted in 2009-10. It has been the endeavour of Government of India to consistently enhance the cargo handling capacity of the major ports keeping in view the projected traffic for the country. The aggregate capacity in major ports as on 31.3.2009 was 574.77 MTPA. Major cargoes handled at Indian ports include: petroleum products, iron ore, fertilizers & raw materials, coal and containerized cargo. In case of POL, fertilizer and other cargo, Kandla handled the highest traffic.

Shipping is a global industry and its prospects are closely tied with the global economy. Any fluctuation in the global economy has a direct and indirect impact on the shipping industry. The industry is cyclical in nature and is today struggling to navigate through the changing economic context. Supply pressure is making matters worse. Indian shipping industry is also not unaffected by the changing macro -economic factors.

India has one of the largest fleet and is ranked 16th in the world. The total fleet size of the Indian shipping industry is 10 million GT. Still it forms a marginal share of only 1% of the global fleet. On the other hand, India’s seaborne trade has been growing at a rate of over 12% in the last 10 years. Consequently, the share of India’s vessels in carrying country’s cargo has been declining and is currently only around 8%. Above statistics raises serious concerns about the problems faced by the Indian shipping industry. One of the main reasons for the declining share of India’s fleet is the tardy growth in its size. The Indian shipping tonnage needs to grow at a much faster pace and match the growth of country’s seaborne trade. Government of India has envisaged an ambitious plan to grow the Indian shipping fleet from 10 million GT to 40 million GT by the year 2020. Various initiatives are being taken by the government to address the challenges and promote Indian shipping.

1.2 Port Sector in India

Ports provide an interface between the ocean transport and land-based transport. They represent a promising sector for India, given the country’s 7,500 km long coastline, robust economic growth, abundant raw material, cost-competitive workforce and a strategic location on the trade map.

The port infrastructure in India constitutes of 13 major ports and 187 non-major ports. Out of the total non-major ports, only about 48 are operational; while the rest are only fishing harbours. The 13 major ports are administered by the Central Government through the Ministry of Shipping, and non-major ports are administered under respective state governments. The state wise numbers of ports are given hereunder:

Fig 01.Major and Non major ports across the 11 Indian Coastal States and Indian Islands

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Performance

On an average, port traffic grew at 7.66 per cent between 2005-06 & 2010-11. More specifically, non-major ports registered a double-digit growth at 13.55 per cent as against 5.37% per cent growth in traffic at major ports. POL, iron ore, and coal constitute a major chunk of traffic at both major and non-major ports.

Fig 02.India's Port Sector traffic growth (in Mn. tons)

[pic] Source: Indian Ports Association (IPA), Deloitte Analysis

Gujarat has emerged as the leading state in cargo handling. While Kandla port in Gujarat accounted for the highest share (~14 per cent) in major port traffic, non-major ports under the Gujarat Maritime Board collectively boasted the maximum minor port traffic (~71 per cent). This can be attributed to its proximity to the northern hinterland, pro-business government and a dynamic business community.

1.3 Key issues in major ports

Although the sector witnessed significant growth in cargo traffic, it has still not been able to optimize opera-tions owing to technical and institutional constraints as under –

Capacity constraint

As per the latest statistics (2009-10), around 8 of the 12 major ports are operating at more than optimum range of 70-75 per cent utilisation. Further, four of these, namely, Vizag, Tuticorin, Mormugao, & Mumbai ports are experiencing more than 100 per cent utilization. Correspondingly, the average capacity utilization at non-major ports was ~ 77 per cent in 2009-10. This sets the background and imperative for faster development of port projects to ensure smooth flow of traded goods & growth of EXIM trade.

Inefficient cargo handling & low productivity

A study placed in the Parliament in Feb 2010 by the Comptroller and Auditor General of India (CAG) high-lighted that cargo handling services at ports were inef-ficient. A predominant number of berths did not have the dedicated facilities necessary for the quick handling of cargo. Around 55 per cent of the equipment available at all ports, except at the Jawaharlal Nehru Port Trust (JNPT), were running beyond their rated economic lives, resulting in low utilization.

Capacity Utilization at major ports

Consequently, wide variations were observed in effi-ciency among the 12 major ports. The average pre-berthing time on port account varies between 0.4 hours and 23 hours. The average turnaround time also varies between two to five days. In contrast, the turnaround time at globally competing ports like Singapore or Hong Kong is between four and six hours.

Inadequate drafts & poor connectivity with other modes

Future shipping trends point towards larger vessels with a minimum of 6000-8000 TEUs and a few vessels with 12000-14000 TEUs. These future generation vessels would require drafts between 13 to 15.5 m. Due to current draft restrictions, several Indian ports are unable to handle larger vessels typically with more than 9.5 m and 12.5 m draft. This could lead to shipping lines / large shippers moving to other ports. Therefore, there is a need to firm up dredging plans and also improve productivity through removal of constraints like inad-equate infrastructure, absence of seamless connectivity with other modes, etc.

Cumbersome institutional arrangements & other issues

Institutional and regulatory arrangements need to be reviewed to ensure speedy development of ports. Similarly, the procedure regarding environmental clearances needs to be rationalized. Other issues facing Indian ports relate to high cost structures, different tariff setting frameworks for major & non-major ports, port security, land acquisition, etc. Ministry of Shipping is taking various steps to address the aforementioned problems. It has been quite active during the recent few years in promoting the development of Ports sector in India.

Fig 03.Capacity Utilization at major ports

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Source: Indian Ports Association (IPA), Deloitte Analysis

1.4 Demand-Supply scenario of Ports

Indian ports have formulated ambitious plans for development of new ports, augmentation of existing facilities, mechanisation of ports, purchasing of modern cargo handling equipment and improvement in logistics to meet the challenges emerging from the anticipated growth in trade.

The capacity at 13 major ports is likely to increase to 1459.53 million tonnes by 2020. The capacity at non-major ports is expected to increase by 2020 to 1660.02 Million Tonnes. Thus, a surplus capacity of above 25% over the projected demand is targeted by the Indian ports. This will enable the ports to provide berthing facilities on arrival of the ships, thus achieving zero pre-berthing detention for the vessels. The proposed investment during the next ten years is expected to be Rs. 2.77 lakh crore – Rs. 1.09 lakh crore for Major Ports and Rs.1.68 lakh crore for non-major ports.

1.5 Containerization

“Containerization is the transportation of cargo in containers (that can be interchanged between ships, trains, and trucks) with standardized handling equipment, and without re-handling the contents1.” The development of container trade & infrastructure depends upon ports, railways, roads, warehouses, shipping & logistics companies because they are the primary players dealing with containers. The advance-ment in overall trade and benefits due to adoption of containers for transport has brought forward the term “Trading in the Box”.

Some of the advantages of containerization are:

• Reduction in transport time with door-to-door delivery of goods. • Technology adoption due to mechanized handling required for handling containers,

• Optimum utilization of storage & warehousing capacity,

• Effective handling of cargo (especially liquid cargo) with minimal or no damage to goods,

• Skill development of workers for operating containers,

Government of India has taken several initiatives & brought forth policies to increase the utilization of containers by luring various transport sector players to promote the containerization drive. Ports are the primary influence to the containerization movement. Globally the container traffic has grown at around 10% in the past 20 years. The following chart provides a glimpse of the container traffic handled at the major ports in India in the past.

As can be seen in the diagram above, the Container traffic at major ports has almost doubled in the past 5-6 years with an average CAGR of 13.27% p.a.

Estimates suggest that the world container throughput will reach 1 billion TEUs by 2020, which is almost double of the current container traffic. The emerging Asian & African Countries are expected to be the prime movers in achieving this growth. The fact that India is going to be the preferred destina-tion for a Global Manufacturing Hub presents many opportunities for the ports to change their current operation style and be ready for the foreseen surge in demand of handling and faster evacuation of containers. Many investments have been proposed and steps have been taken by various port authorities for attracting the container traffic.

East vs. west coast comparison for development of container ports

The port infrastructure in India constitutes of 13 major ports and 187 non-major ports. Out of the total non-major ports, only about 48 are operational; while the rest are only fishing harbours. The 13 major ports are administered by the Central Government through the Ministry of Shipping, and non-major ports are administered under respective state governments. The state wise numbers of ports are given hereunder:

While the non-major ports contribute significantly to the overall traffic, the containerization traffic mostly belongs to the major ports. Only select non-major / intermediate ports like Pipavav Port, Mundra Port etc. cater to the containerized traffic. In other words, the container infra-structure and trade is largely untapped by the non-major ports in India. The key reasons for it may be the greater drafts required for the large container ships or due to the large investments needed for container-related infrastructure. Dedicated container terminals have been constructed across almost all the major ports to cater to the demand of container traffic. Private players have set up the CFSs/ ICDs in proximity of the major ports. Fig 04. Container Handling Ports - India
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Table 01 - The following table gives the details of some of the major container related investments proposed by Major Ports on West Coast of India:

|Sr. |Project Name |Port Name |Capacity |Project Cost |Status | |
|1 |Container berths & Development of |Mumbai Port |0.80 MTEUs |14610 |Anticipated date of completion is | |
| |Container Terminal berth on BOT basis in | | | |September, 2012. | |
| | | | | | | |
| |Mumbai Harbour. | | | | | |
| | | | | | | |
| | | | | |The date of award of concession | |
| | | | | |was fixed on 15.5.2010. Physical | |
|2 |Development of Berth No. 7 as second |Mormugao |4.61 |4060 |progress of the overall project in terms | |
| |coal handling terminal on DBFOT basis. | |MTPA | |of percentage is 13.75%. Financial | |
| | | | | | | |
| | | | | |progress of the overall project in terms | |
| | | | | |of percentage is 19.62% (Rs. 79.65 cr.). | |
| | | | | | | |
| |Development & Operation of | |Capacity | | | |
| |International Container Transshipment | | | | | |
| | | |addition | |Phase I of the ICTT Project with an | |
| |Terminal (ICTT) at Vallarpadam (BOT | | | | | |
|3 | |Cochin |of 12.5 to |21180 |investment of Rs. 1262 commissioned | |
| |basis by M/s India Gateway Terminal | | | | | |
| | | |40 MMT | |on 11th February, 2011. | |
| |Pvt. Ltd. a subsidiary of M/s. Dubai Ports | | | | | |
| | | |In phases | | | |
| |International) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | |41000 |Likely commission period of Phase – I, | |
|4 |Fourth Container Terminal (DBFOT Basis). |JNPT |6.8 |Phase -1 |is May, 2014. In respect of Phase-II the | |
| | | |MTEUs |27000 |development will be taken up after | |
| | | | | | | |
| | | | |Phase – II |completion of Phase-I. | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
|Sr. |Project Name |Port Name |Capacity |Project Cost |Status | |
|5 |handling facility with a quay length of |JNPT | |6000 |five have collected RFP. The project is | |
| | | |MTPA | | | |
| |330 m. to the north of JNPT. | | | |currently under biding | |
| | | | | | | |
| | | | | | | |
|6 |Development of Container Terminal at |New Mangalore |NA |2697 |No bids have been received on the due | |
| |NMP on BOT basis. | | | |date. The project is under review. | |
| | | | | | | |
| | | | | | | |
| |Development of all weather and Multi | |44.7 | |Share holding pattern approved. | |
| |user Port on BOOST basis by M/s. Amma | |MTPA (1.7 | | | |
|7 | |Maharashtra | |43000 |Environmental clearance awaited. | |
| |Lines Ltd (To become hub port in South | |MTEUs) | | | |
| | | | | |Anticipated date of completion is 2010 | |
| |Asia with draft 20 Mtrs.) | |Container | | | |
| | | | | | | |
| | | | | | | |
| |Development of Mundra port ( South | | | | | |
|8 |port and North port ) for containers, |Mundra |125 |12000 |Capital dredging in progress for south | |
| |LNG, Liquid Bulk, Car Terminal & General |(Gujarat) | | |port. | |
| | | | | | | |
| |cargo. By Mundra port SEZ Ltd. | | | | | |
| | | | | | | |
| |Mechnization of Okhla port by GVK |Okha |9.28 MMTPA | |Pre-feasibility study has been | |
|9 | | |+ |790 |completed. Detailed studies are | |
| |power and Infrastructure Ltd. |(Gujarat) | | | | |
| | | |0625M TEU | |underway | |
| | | | | | | |
| | | | | | | |

Foreign Direct Investment

One of the parameters for judging the maturity of a country’s trade & industry is development of infrastructure. In emerging economies like India, the budgetary allocation for development of infrastructure is structured phase-wise so as to develop the infrastructure as well as do justice to other sectors like education, health, food & nutrition, defense etc. In such cases the investments by FIIs & lending from Multilateral agencies form a major part of the sources of finance for funding the long term and huge capital expenditure involved in the infrastructure sector.

Infrastructure development is of great importance to the containerization drive. The salient points for FDI in transport infrastructure sector are given as follows: • 100% FDI in maritime infrastructure like ports, terminals, jetties, harbors, merchant shipbuilding • 100% FDI in support infrastructure like warehousing, roads, Inland Water Transport, other logistics components

Draft Policy on Private Freight Terminals (PFT)

The New PFT policy aims to stimulate development of privately owned freight terminals on private land for dealing with break bulk goods, parcel traffic and containers. Under this policy PFTs are envisaged to provide goods handling, warehousing and other associated logistics services to rail users and facilitate expansion of third party logistics sector. The terminal can be established on green field as well as brownfield land. The revenue model would involve fee sharing between the Indian Railways and the private operator after 5 years of commissioning the terminal. The private operator will be allowed a wagon freight rebate of 12% rebate for a period of 20 year extendable by another 10 years. The key beneficiaries of this policy would be warehousing and distribution companies, and third party logistic providers. The key benefits of the PFT Policy are:

• The freight operator can carry fertilizers, cement, chemicals, edible oil and petrochemicals excluding gas, auto fuel and kerosene. Relevant to manufacturers of FMCG goods for inbound and outbound logistics or high volume goods manufacturers • Underutilized/ unutilized existing sidings get opportunity for commercial utilization for their facility. • Investors in this scheme will have direct rail access to third party freight forwarding cargo, • If the investing company is a 3PL they can provide value added services or assembly at these locations and charge for the same,

• The contract is long term for a period of 20 years

The key challenges of the PFT Policy are:

• Procurement of greenfield land is time consuming and setting up terminal could take more than 2 year. This results into forfeiture of security deposit • Commercial non-viability of project does not make it an attractive proposition for private siding owners • The clause to change private siding into a brownfield PFT and the minimum land and line requirement to be called a PFT cannot be necessarily followed at the same time. Not all private siding owners would have additional land in the vicinity of the terminal to install a structure

• Policy is still being amended and lack of clarity makes it unattractive to investors.

Introduction of VAT in place of CST

The phasing out of the Central Sales Tax and the introduction of Value Added Tax (VAT) will help facilitate easier movement of goods by containers in the following ways:

• Earlier, several companies felt compelled to set up warehouses in the major states to avoid the tax implications due to CST. However with the introduction of VAT, manufacturers are incentivized to realign their supply chain network by doing away with their many warehouses across the country and concentrating on fewer & bigger regional warehouses. • Thus manufacturers can improve their hub and spoke distribution system, to ensure efficient and safe transfer of goods from point to point and longer distances to travel from the source to the customer which would be easily achieved by containerization movement.

Implementation of VAT is expected to bring in uniformity not only in tax rates, but also in procedures. VAT would also remove the tax-based advantage, which some locations had in terms of setting up a manufacturing unit or a warehouse, while implementation of IT systems would lead to less flow of physical documents and workload. With the introduction of VAT, the business community thus has an opportunity to work in close association with their logistics service providers and put in place a lean supply chain network and improve their supply chain efficiency.

1.6 Hinterland Connectivity for Ports

Over the last two decades, India has seen multifold growth in its maritime sector, both in terms of number of operational ports and cargo volume. During 2009-10, the combined cargo traffic handled by all major and non-major ports was 850 Million Tonnes (MT) - a growth of 15% over the previous year. The government has planned various initiatives like capacity expansion at ports, efficiency improvement, policy measures, etc. to meet the challenge of increasing cargo traffic. Fig 05. Important Inland Water ways in India

Adequate connectivity to the port acts as a catalyst to the growth of a port aiding better performance. Lack of proper connectivity has affected the growth and prospects of many ports. Despite having proper depth and adequate facilities, these ports are stranded for the want of containerized cargo, while the other ports are burdened with an excess they can’t handle. Keeping this in mind, the Government has already passed some regulations regarding the minimum required connectivity to the major ports. For example, the Committee of Secretaries (CoS), Government of India has recommended that a minimum 4-lane road and double line rail connectivity be provided at major ports. Minor ports, which are now showing high growth, also consider connectivity as an important parameter to further growth in business.
Choosing mode of connectivity

The capacity and quality of the existing road/rail connectivity to Major Ports in India requires improvement to enable smooth inflow and outflow of cargo. The projects on rail and road connectivity are implemented by the Railways and National Highways Authority of India (NHAI) respectively, but in several cases, a signifi-cant financial contribution is also made by the ports. To understand the requirements of connectivity, we have to analyze the movement of cargo. The requirement of ideal transport varies for different commodities. For example, coal is preferred to be carried through railway via rakes while petro-products are preferred to be carried through the pipelines or by lorries carrying huge containers so that it is easy for distribution to various users. Fig 06.National highway development project, port connectivity map. The Golden Quadrilateral highway links Delhi-Mumbai-Chennai-Kolkata and major production centers to the ports.

The choice of development of the preferred/required mode of transport depends entirely upon the share of different types of cargo handled by a port. For example, if JNPT specializes in Containers and has a lesser share of POL then its maximum connectivity projects should be focused on the road connectivity, rail connectivity and thereafter pipelines. In addition to cargo-type, the place of delivery of cargo and the feedback from the current and probable customers should also be accounted for while assessing the connectivity requirement. Alternative modes of transport like coastal shipping which is more efficient, eco-friendly and cheaper must also be considered.

Planned Investments in Rail-Road Connectivity:

Keeping in mind the planned capacity expansions and the projected traffic numbers, the Ministry of Shipping has planned various rail-road connectivity projects for the major ports. The following table enlists the phase-wise rail-road projects planned by the Ministry:
| | | | | | |
|Table 02.Phase-wise rail-road projects planned by the Ministry of Shipping | | | | | |
| | | | | | | | | |
| |Number of Connectivity Projects |Investments in Crores | | | |
|Name of Port |Phase 1 + |Phase 2 |Phase 3 |Phase 1 + |Phase 2 |Phase 3 |Total | |
| | | | | | | | | |
|Paradip Port Trust |2 |----- |----- |615.00 |----- |----- |615.00 | |
| | | | | | | | | |
|Visakhapatnam Port Trust |6 |2 |3 |396.00 |150.00 |200.00 |746.00 | |
| | | | | | | | | |
|Ennore Port Limited |3 |1 |----- |576.34 |446.00 |----- |1022.34 | |
| | | | | | | | | |
|Chennai Port Trust |2 |----- |2 |1000.00 |----- |225.00 |1225.00 | |
| | | | | | | | | |
|Tuticorin Port Trust |2 |2 |2 |126.77 |640.00 |300.00 |1066.77 | |
| | | | | | | | | |
|Cochin Port Trust |2 |1 |----- |803.00 |40.00 |----- |843.00 | |
| | | | | | | | | |
|New Mangalore Port Trust |2 |----- |----- |69.55 |----- |----- |69.55 | |
| | | | | | | | | |
|Mormugao Port Trust |----- |----- |----- |----- |----- |----- |0 | |
| | | | | | | | | |
|Mumbai Port Trust |1 |----- |----- |333.00 |----- |----- |333.00 | |
| | | | | | | | | |
|Jawaharlal Nehru Port Trust |3 |1 |----- |681.00 |45.00 |----- |726.00 | |
| | | | | | | | | |
|Kandla Port Trust |3 |2 |----- |45.26 |115.56 |----- |160.82 | |
| | | | | | | | | |
|Port Blair Port Trust |----- |----- |----- |----- |----- |----- |0 | |
| | | | | | | | | |
|Total |27 |12 |7 |4675.92 |2511.56 |725.00 |7912.48 | |
| | | | | | | | | |

Source: Maritime Agenda 2020

It can be seen from the table above that Chennai Port has the maximum allocation of around Rs. 1225 crores while Kolkata Port ranks second with the projected investment of about Rs. 1105 crores. India’s largest container port JNPT, has also decided to invest Rs. 726 crores. City locked ports need to invest in connectivity as they face many constraints for goods movement and this seriously impacts their customers.

Scope for improvement

Lack of proper hinterland connectivity typically results in suboptimal choice of route and mode of transport made by the shipper, leading to time and cost escalations and congestion in the ports due to an inability to move cargo out of the port. It hinders the growth of external trade and therefore affects the development of the entire economy.

Maritime Agenda 2020 has highlighted various steps for avoiding the connectivity crisis. Some of them are listed as under:

• Rail Connectivity Projects: Double line rail connectivity for each major port is preferred. Such projects could be taken up by the Railways and / or on BOT basis and through formation of Special Purpose Vehicles in which the port may be an equity holder. • Road Connectivity Projects: A minimum four lane road connectivity for each major port is a must. Such projects could be taken up through the National Highway Authority of India (NHAI) and / or on Build, Operate and Transfer (BOT) basis and formation of Special Purpose Vehicles comprising of all the stakeholders.

• Viability Gap Funding: For connectivity projects having a lower than prescribed rate of return, budgetary assistance or Viability Gap Funding maybe considered. • National Highways Authority of India (NHAI) shall undertake port connectivity (less than 50 km) projects on BOT basis where possible. Toll rates for highway port connectivity projects shall be established jointly by NHAI and the Ministry of Shipping.

While the suggestions given above are specifically for Major ports, a similar approach towards the state-regulated minor ports would help them in achieving better hinterland connectivity.

1.7 Global Scenario

In 2008, international seaborne trade was estimated at over 8 billion tons of goods loaded, a volume increase of 3.6% over the volume recorded in the previous year. Dry cargo, including bulk, break bulk, and containerized cargo, accounted for the largest share of goods loaded (66.3%), while oil made up the balance. Growth in dry bulk trade is estimated at 4.8% with the five major bulk products, fuelled mainly by the needs of China’s metal industries. From a level of 2.5 billion tonnes in 1970, the volume of sea borne trade in the world has grown over the years crossing 8 billion tons in 2008, witnessing a CAGR of 3.3%. Developing countries accounted for greater share (60.5%) in total goods loaded, as compared to the developed countries, which hold a share of 33.5% in 2008, and the balance being accounted by economies in transition. Within the developing region, Asia displayed a good performance having the highest share (62.3%) in the total goods loaded, followed by Latin America (22.9%). Following the global economic slowdown and sharp decline in world merchandise trade, growth in international trade continued, albeit at the slower rate of 3.6% in 2008 over 2007, as compared to 4.5% in 2007 over 2006 (8168 million tonnes in 2008, 7882 million tonnes in 2007, and 7545 million tonnes in 2006). The level of world fleet also saw a rise in 2009 with the world merchant fleet exceeding 1 billion dwt (dead weight tonnage). The fleet of container-ships increased by 11.9%, reflecting the growing share of traded goods being containerized; the tonnage of oil tankers increased by 2.5%; bulk carriers by 7%; general cargo ships by 3.2%; in the year 2009 over the levels prevailed in the year 2008.

Japan has been topping the list of countries controlling fleets in terms of dwt with 173.2 million dwt and 3720 ships; followed by Greece, with 3064 ships and 169.4 million dwt; and Germany, with 3522 ships and 104.9 million dwt. India was ranked at the 15th position with 963 ships and 15.5 million dwt, a share of 1.4% in terms of dwt. In terms of value of trade, USA is the major country engaged in maritime transport generating 10.68% of world trade in 2008. Other major countries include Germany (8.22%), China (7.91%), and Japan (4.78%). Among the Asian countries, China is the largest trader with large container port traffic and fleet. China International Marine Containers (CIMC) and Singamas are the two largest container manufacturers, which make China dominate in this field also. India is placed at eighteenth position in the world (with a share of 1.45%), and seventh position amongst Asian countries.

1.8 Effects of Global Slowdown

Shipping Industry has been widely impacted given the economic slowdown of 2008 and 2009 which is still continuing. Since the demand for ships / vessels is a derived demand of commodities, the slowdown affected the demand for ships / vessels during this period. This has been evident from the movement of Baltic Dry Index (BDI), which is a daily weighted average of prices of shipping raw materials, and is one of the leading indicators of global economic activity. BDI measures the demand to move raw materials, which indicates production, planning and industrial activity worldwide. BDI reflects the freight cost to transport dry bulk cargoes around the world, mainly raw materials such as iron ore, coal, and grains. The index excludes wet cargoes (such as crude oil carried by tankers) and container business (used mainly to carry manufactured products).

As the global trade shrunk by over 10%, many shipping lines found themselves in a situation of excess capacity (many liners ordered new ships during the economic boom period). Some analysts predicted that at least few shipping lines would go out of business to match with the supply demand situation. However, it is believed that shipping lines, in an informal arrangement, collectively reduced the capacity through ‘slow steaming’ (spending more days in sea, which helped them to save on fuel and reduce capacity). It is estimated that slow-steaming could cut a liner’s capacity by around 5%. It is also believed that some shipping lines have teamed up to levy a voluntary surcharge of US $ 400 per container. Both the Federal Maritime Commission (USA) and the European Monitoring Agency are closely monitoring the developments to see any evidence of price fixing by shipping liners.

Like other economic sectors, maritime transport, which by volume carries over 80% of global trade, has a role to play in addressing formidable challenge of climate change. International maritime transport is playing a part in contributing to climate change, but more importantly, it is also likely to be directly and indirectly impacted by the various climate change factors, such as rising sea levels, extreme weather events and rising temperatures. The wide-ranging impacts of climate change, including that from maritime transport, and their potential implications for trade, economic growth and development, underscore the need to integrate climate considerations into strategies for transport planning and development. Increasingly, it is being recognized that considered and concerted actions are urgently required to ensure effective control of greenhouse gas emissions and to establish the requisite adaptive capacity in the shipping industry, especially in developing countries. Recognizing the importance for the maritime transport sector of contributing to global efforts at reducing emissions of greenhouse gases, IMO’s Marine Environment Protection Committee (MEPC) is considering a number of mitigation measures aimed at reducing emissions of greenhouse gases from international shipping.

1.9 Integration of Shipping Industry with Global Logistics and Supply Chain

Global shipping majors, like other segments of the conventional transport industry, are increasingly getting integrated with the emerging global logistics and supply chain activities, owing to both external and internal dynamics. Many firms are entering into the enhanced canvas of offering logistics solutions, such as door-to-door delivery systems, integrating with rail/road haulage movements of cargo, customs brokerage, cargo consolidation, packaging/ re-packaging, and distribution services, thereby substantially consolidating their market position, and supplementing their ocean freight income. The global shipping industry is thus going through a major redefinition by undertaking logistic integration of their cargo operations. Multi-polarity of trade flows, and the growth in trade volumes of Asian region is expected to impact the world shipping, as profoundly done by liner shipping and containerised cargo some decades ago. One may recall that the earlier phase of trade volume witnessed shipping growth in TransAtlantic and TransPacific routes, and the growing volume of world trade, especially from Asia, is likely to position the Pacific Rim and Indian Ocean Rim routes in the lime light. Ports have been conventionally viewed as provider of omnibus solution to all types of cargo on a common basis. However, the global trend is veering into development of freight specialized ports – such as LNG terminals, container terminals - that involve high capital costs and intensive deployment of cargo handling equipment. Also, there has been a global trend in the port sector towards growing separation of port authority from port operator. The balance of power in the maritime trade, which was traditionally in favour of shipping lines, has been shifting in favour of shipper, whose cargo is being moved. With such emerging trends in port development in the world, shipping companies are expected to change their strategies and offer solutions to suit such trends.

Ports, especially large gateways, are facing a wide array of local constraints that impair their growth and efficiency. Limited availability of land for expansion is one of the most acute problems. This issue is exacerbated by the deepwater requirements for handling larger ships. Port regionalization is required when the ports are not able to handle additional traffic. Port regionalization refers to integration between maritime and inland transport systems, particularly by using rail and barge transportation, which are less prone to congestion than road transportation. Port regionalization and hinterland connectivity has been growing over the years, with the objective of meeting the constraints faced by ports. Port regionalization helps in creating a regional load centre network through joint development of a specific load centre and logistics platform in the hinterland. This has led to the development of corridors leaning on rail or barge services connecting to inland terminal facilities, which act either as satellite terminals, load centers or, less commonly, transmodal facilities. Many port authorities, terminal operators, commercial real estate developers and local/regional governments have been actively involved in the setting of such facilities.

1.10 Major Challenges faced

Tax Burden

According to a Research Paper by Ministry of Finance, Government of India, the shipping industry is facing significant tax burden, though the tonnage tax has been introduced. The paper lists out taxes such as minimum alternate tax, dividend distribution tax, withholding tax liability on interest paid to foreign lenders, withholding tax liability on charter hire charges paid to foreign ship owners, seafarers taxation cost to employers, wealth tax, sales tax, VAT on ships and spares, lease tax on charter hire charges, customs duty on import of certain categories of ships, stores, spares and bunkers, and services tax. The Research Paper is of the view that such tax regime makes Indian ship owners to prefer to own vessels outside India.

Multiplicity of Regulations

Shipping industry, catering to the demand across continents, is regulated by both domestic and international regulations. Internationally, the International Maritime Organisation has a set of rules to ensure safe, secure and efficient shipping, besides the labour standards required for seafarers worldwide. There are also international regulations on operations of ships, such as International Convention for the Safety of Life at Sea, International Convention for the Prevention of Pollution from Ships, Convention on the International Regulations for Preventing Collisions at Sea, International Convention on Loadlines, International Ship and Port Facility Security Code, and International Safety Management Code. There are also international regulations for seafarers, such as International Convention on Standards of Training, Certification and Watch-keeping for Seafarers, and ILO Merchant Shipping Convention. UN Convention on the Carriage of Goods by Sea (called the Hamburg Rules), The UN Convention on International Multimodal Transport of Goods (1980), and the UN Convention on Conditions of Registration of Ships (1986) are some of the other regulations initiated by UNCTAD.

Domestically, there are several acts that regulate the Indian shipping industry, such as: The Merchant Shipping Act (1958), The Inland Vessels Act (1917), The Coasting Vessels Act (1838), and The Multimodal Transportation of Goods Act (1993). Besides, there are also other statutes that govern the shipping industry indirectly. These include: The Indian Ports Act (1908), The Dock Workers (Regulation of Employment) Act (1948), The Seamen’s Provident Fund Act (1966), and The Inland Waterways Authority of India Act (1985). The wider regulatory framework makes stricter entry barriers into the industry, and adds cost to the compliance of such regulations.

Declining Share of Indian Shipping Tonnage in India’s Overseas Trade

Over the years the share of Indian shipping in overseas trade has declined. From 85% in 1981, it has declined to 23% in 2013. As on April 2013, India had 783 vessels under coastal trade, and 356 vessels under overseas trade with a total of 1139 ships in total. High transportation costs, port delays, poor turnaround time of coastal ships on account of over-aged vessels, and inadequate mechanical handling facilities are some of the other reasons for the declining share of Indian shipping tonnage in India’s overseas trade. Continued slippages in the share of Indian shipping in the carriage of India’s overseas trade is in turn causing a drain on precious foreign exchange in terms of payment of freight charges, which could otherwise be used for other high priority imports or for building up indigenous infrastructure. One of the major reasons for the declining share in overseas trade has been the age profile of the shipping vessels in India. Majority of the Indian shipping fleet contains ships which are over 20 years of age. This reduces the competitiveness of Indian vessels as compared to the foreign vessels. The increasing size and sophistication of ships and port facilities require heavy capital investment, which is one of the major problems faced by Indian shipping industry.

Declining Cargo Support

As per the existing Government policy, all import contracts are to be finalized on FOB (Free On Board) basis in respect of Government owned / controlled cargoes on behalf of Central Government Department/State Government Department and Public Sector Undertaking under them, with a view to retain control over shipping arrangements within the country, and for providing cargo support to Indian flag vessels by providing first right of refusal. For meeting the above objective, the policy provides for centralized shipping arrangements through the Chartering Wing (TRANSCHART) in the Ministry of Shipping, Government of India. As regards Chartering of vessel for movement of cargoes on private account, the same are regulated through the Director General of Shipping, by granting permission to private charters after taking into consideration the availability of Indian flag vessels by granting first right of refusal.

Data collated by Ministry of Shipping, Government of India, on Government owned / controlled cargoes handled by the chartering wing of Ministry of Shipping, shows that the share of Indian vessels in moving cargo under TRANSCHART has been declining over the years. Cargo support in favour of national shipping is very important, since reservation of national cargoes for national fleet provides the national fleet with a certain degree of stability in an otherwise violently cyclical market.

Manpower Shortage

One of the major problems faced by the shipping industry is the shortage of manpower. India is not able to provide adequate number of seafarers to man Indian flag vessels. This is mainly because not enough young people seem to find seafaring an attractive and appealing career with many of the officers preferring to sail on-board foreign flag vessels owing to favourable taxation policies. Industry experts opine that over-regulation of the industry, owing to which seafarers have to undertake lots of job responsibility in a very short time, is another reason for declining interest to undertake seafaring as a profession. The only way the shortage of seafarers can be managed is by creating a workplace environment that is attractive to applicants, and corporate values that are aligned to wider social interests. Though the International Labour Organization (ILO), the IMO (the IMO has designated 2010 as the “Year of the Seafarer”), and shipping industry organizations began helping to stimulate initiatives for recruitment into the industry a couple of years ago, it is considered that the ultimate solution lies with the industry itself.

High Port Calling Costs High port charges, like port dues, berth hire, pilotage and cargo-handling charges, in India are also affecting the Indian shipping industry. India is known to be having high ship calling cost as compared to other competitor countries in the region. According to industry sources, port calling costs for a ship that can carry 1,200 standard cargo containers is US $ 19,000(` 8.4 lakh) at Kochi. The rate isUS $ 3,300 in Colombo, Sri Lanka, and US $ 5,700 in Jebel Ali, United Arab Emirates. This makes the Indian ports non competitive compared to other foreign ports. High prices would normally deprive a port, a part of its patronage (vessels and cargo owners), and thus reduce demand for port services.

Congestion in Port and Connectivity with Hinterland

Indian ports are the gateways to India’s international trade, and are handling over 90% of foreign trade. Though the bulk of Indian trade is carried by sea routes, the existing port infrastructure is insufficient to handle trade flows effectively. The current capacity at major ports is overstretched. The major ports together have a capacity of 574.77 million tonnes per annum (MTPA), handling traffic of 560.96 million tonnes during 2008-09, and the capacity utilization during this period was 96.7%. The capacity utiilisation at major ports has been increasing over the years owing to growing trade. During 2001-02 the capacity utilization was 83.6%, which has peaked to 99.7% during2007-08, signifying increasing congestion in all the major ports. Another major challenge faced by Indian shipping industry is the relatively low hinterland connectivity with the ports. Indian ports are finding it difficult to handle additional traffic because of slow evacuation from ports. Therefore, it is important that connectivity of major ports with the hinterland is augmented not only to ensure smooth flow of traffic at the present level but also to meet the requirements of projected increase in traffic. Fig 07. Hinterland Connectivity of Mundra Port [pic]

Chapter – 2 History and Background

5.0 MAERSK Maersk Group consists of a collection of companies operating within two main industries of shipping and energy.

The meaning and origin of the Maersk Group logo

[pic] P.M. Møller (1836–1927), who was a deeply religious Christian, attached a blue banner with a white seven pointed star on both sides of the black chimney on the steamship Laura when his wife recovered from illness. In a letter to his wife, P.M. Møller explained in October 1886, "The little star on the chimney is a memory of the night when I prayed for you and asked for a sign: If a star would appear in the gray and cloudy sky, it would mean that the Lord answers prayers." The same star later became the logo for the Maersk Group.

Maersk Group has four core businesses which include Maersk Line, APM Terminals, Maersk Oil and Maersk Drilling. Through these companies and several others, the group employs roughly 121,000 people, and generated 59 billion US dollars in revenue in 2012. As a group, our business success is built on a number of strengths: oursize and global reach, our financial strength, our talented employees, our time-honoured values, our approach to sustainability and our drive to innovate. Combined, these strengths form a unique platform for our continued success and future growth. A.P. Møller – Mærsk A/S is listed on the Copenhagen Stock Exchange. Shares in the company are divided into A and B shares, with only A shares conferring voting rights. The group currently has some 76,000 shareholder

VALUES It would be difficult to overstate the importance of corporate values at the Maersk Group. Our values are closely linked to our founding family, and have helped us earn and keep the trust and goodwill of customers and business associates across the globe. Our values guide the way Maersk Group employees behave, make decisions and interact with others – whether they work in Beijing, Kazakhstan, Nigeria or Honduras. They unite our global workforce, ensuring a continuity of service and customer experience that can be hard to find these days. CONSTANT CARE TAKE CARE OF TODAY, ACTIVELY PREPARE FOR TOMORROW HUMBLENESS LISTEN, LEARN, SHARE, AND GIVE SPACE TO OTHERS UPRIGHTNESS OUR WORD IS OUR BOND OUR EMPLOYEES THE RIGHT ENVIRONMENT FOR THE RIGHT PEOPLE OUR NAME THE SUM OF OUR VALUES: PASSIONATELY STRIVING HIGHER

BusinessApproach

We pursue profitable business and responsible leadership within our industries

This means we will:

• Increase our profitability by optimizing the risk and reward balance in our business decisions.

• Pursue relationships which are beneficial both to us, our customers, our suppliers and our partners.

• Conduct our operations with excellence.

• Continuously improve our deliverables by including economic, environmental and social aspects in our decisions and actions.

Seek to understand our customers, our supply chains and the societies we operate in.

Your role is to:

• Listen to customers and other stakeholders and learn.

• Have a clear understanding of the value drivers within your area of responsibility and consider the economic, environmental and social impacts of your decisions.

• Be cost-conscious in your daily work – consider that small savings add up.

• Consider tomorrow’s requirements when making business decisions today.

Proactively identify and manage business opportunities and risks within your area of responsibility

Our Brand

We engage with customers, other stakeholders and colleagues to promote and protect our brand

This means we will:

• Engage in dialogue about our role in society, our activities and their impact with relevant stakeholders to promote our brand and name.

• Inform about our goals, operations and performance to create awareness and understanding of our business.

• Communicate the Group’s objectives and priorities to enable our employees to link the Group’s overall aspirations to their own contribution.

• Safeguard the information provided to us by our customers.

Your role is to:

• Consider that your communication may be viewed as a reflection of the entire Group.

• Cascade relevant information throughout the organization within your area of responsibility.

• Engage yourself in necessary and appropriate communication with due regard to confidentiality and respect for others.

• Treat information as an important asset, and protect it in accordance with its sensitivity and irrespective of its origin.

Health andSafety We conduct our business in a safe manner This means we will:

• Promote a culture in which all employees share our commitment to a healthy and safe workplace.

• Manage any health and safety risks connected to our activities and communicate openly about our lessons learnt. We recognize that we work in industries with potential for major accidents, and we act to control and mitigate the risks accordingly.

• Set and comply with our own health and safety standards which will meet or exceed applicable health and safety regulations and relevant standards. Your role is to:

• Keep in mind health and safety at all times.

• Engage actively in improving a safe workplace for yourself and your colleagues.

• Take responsibility of your

own safety, the safety of others and property.

React promptly and appropriately if you experience something that is unhealthy or unsafe.

Legal Compliance We are committed to comply with applicable laws and regulations This means we will:

• Train and support our employees so that our Group is able to conduct our business activities in compliance with relevant laws and regulations and internal rules

• Monitor our compliance with relevant laws, regulations and internal rules.

• Cooperate with public authorities to investigate and resolve problems under appropriate circumstances.

• Promote our views on regulatory matters and policymaking that may affect us.

Your role is to:

• Familiarize yourself and comply with relevant laws, regulations and internal rules.

• Share your knowledge of laws and regulations in the countries in which we operate.

• Legally secure the Group’s assets and interests.

• Respect the legal rights of others.

React promptly and appropriately to illegal actions or business practices.

Our WorkingCulture We provide our employees with opportunities to develop and succeed This means we will:

• Create a working culture which is characterized by our Values.

• Trust and empower our employees.

• Clearly link business results, job performance and rewards.

• Engage our employees, support our employees’ performance, inspire and lead by example. Your role is to:

• Know what you are accountable for and how your performance contributes to the Group’s objectives.

• Understand how you perform.

• Take responsibility for your own development and career progression.

• Contribute to the development and career progression of your colleagues.

• Live our Values at all times.

Maersk Line is a division of the A.P. Moller – Maersk Group, by which we share the same values and business principles. Strong Environmental Performance Through industry leading environmental performance and a focus on increasing the efficiency of our vessel operations Maersk Line will seek to maintain our CO2 advantage in the industry. Priority issues include energy efficiency of charter vessels, innovative ship design, and innovation in container design and innovation.

A Responsible Business Partner Maersk Line will exercise due care to protect our name and our values. Priority issues include responsible procurement, respect for human and labour rights, and protection of the marine environment.

The Preferred Choice for Customers Maersk Line will work to enable transparency and choice for our customers, supporting their efforts to create more sustainable supply chains and partnering on leadership initiatives to create joint value for sustainable profitable growth.

MAERSK Line deals with almost all kinds of cargo in Shipping .

COMPANY DESCRIPTION: Maersk Line is the core liner shipping activity of the A.P. Moller â€" Maersk Group, and the leading container shipping company in the world.

Our mission is simple: understand our clients, their business and markets, and offer second-to-none reliable global ocean transportation service.

Our network is strong, with over 470 container vessels, 1.9 million containers, and 22,000 employees in offices in over 125 countries.

Maersk Line is committed to sustainability and preserving the environment. We continuously protect the environment through the careful use of resources, optimization of operations, and the proper handling of waste streams.

To speed the processing of ocean shipment documentation, Maersk Line offers a suite of e-commerce solutions including advanced Electronic Data Interchange (EDI) and Web-based tools, as well as a partnership with the leading industry multi-carrier platform, INTTRA. Through our e-business solutions, you can quickly, accurately and securely find schedules, view rates, submit your bookings and shipping instructions retrieve bills of lading and track your cargo 24/7. Count on Maersk Line reliability to add value to your ocean supply chain, control costs and improve business performance.

A.P. Moller – Maersk Group (Danish: A.P. Møller – Mærsk Gruppen), also known as Maersk, is a Danish business conglomerate.A.P. Moller – Maersk Group has activities in a variety of business sectors, primarily within the transportation and energy sectors. It has been the largest container ship operator and supply vessel operator in the world since 1996.

1886 - 1945: Beginnings to World War II

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Fig. 14 Mærsk global headquarters, located in Copenhagen, Denmark.

• 1886: Captain Peter Mærsk-Møller buys his first steamship, the British-built S.S. Laura. • 1904: The Steamship Company Svendborg is founded by Captain Peter Mærsk-Møller and Arnold Peter Møller. The company's first ship was the British-built 2,200 tdw cargo steamer Svendborg. • 1912: Steamship Company of 1912 is founded by A.P. Møller. • 1918-1919: A.P. Møller builds his own shipyard, the Odense Staalskibsvaerft near the Odense Canal in the city of Odense. Keels are laid for the first two ships. • May 1920: The newly erected Odense Yard delivers its first ship, the Robert Mærsk. • 1921: Odense Yard delivers its first diesel powered vessel Leise Mærsk to A.P. Møller. • 1926: A.P. Møller enters into the tanker business and orders 5 motor tankers with 8,100 and 11,200 tdw. • 1928: A.P. Møller begins the first liner service under the Name Mærsk Line with 6 motor ships, each 6000-7000 tdw on the Trans Pacific Route Far East - US West coast and via the Panama Canal to Baltimore. • Feb. 1928: A.P. Møller gets its first tanker, the 11.200 tdw motor tanker Emma Mærsk, built by Burmeister & Wain, Copenhagen. • March 1928: Odense Yard builds its first tanker, the 8,000 tdw M.T. Anna Mærsk. • 1930: A.P. Møller becomes the co-owner of the weapons factory Riffelsyndikatet. In the following years he increases his share from 15 to 31.6%, to become the largest shareholder.[2] •

• 1934: Mærsk Line gets the 9,000 tdw cargo motorship Nora Mærsk from Odense Yard, but after 2 years of service it sinks due to a fire in Indonesia. • Dec. 1936: The 16,500 tdw motortanker Eleonora Mærsk is delivered from the Deutsche Werft, Hamburg-Finkenwerder and is the biggest ship of the Mærsk fleet and also the largest single-crew motorship in the world. • 1936: With the M.S. Francine, A.P. Møller gets from Odense yard its first reefer vessel. It is chartered to the J. Lauritzen Company, Denmark. • 1937: Mærsk Line receives two 9,000 tdw motor cargo ships from Bremer Vulkan. The vessels are named Marchen Mærsk and Grete Mærsk. • 1937: Odense Yard delivers two 7,000 tdw white-painted hull cargoships Gudrun Mærsk and Robert Mærsk with reefer capacity. • Feb. 1939: Odense Yard delivers the 9,200 tdw M.S. Laura Mærsk the largest cargo ship to the Mærsk fleet. • Sept. 1939: At the beginning of World War II, A.P. Møller is the second largest shipping company in Denmark with a total of 46 ships. • April 1940: On 8 April 1940, A.P. Møller issues Permanent Special Instruction One to the 36 Mærsk ships on the high seas. Should Denmark become involved in war, all ships were to report directly to the New York office and follow its instructions. No orders from Copenhagen were to be followed if not approved by the New York office. On the next morning, 9 April 1940, Germany invades Denmark and Norway, and Denmark surrenders the same day. On 24 April, Mærsk Mc-Kinney Møller is made a partner in the company, and on 26 April he and his wife leave Denmark. Mærsk Mc-Kinney Møller manages the New York office throughout World War II. • June 1941: The United States takes control of foreign ships and the Mærsk fleet serves in the US Navy for the rest of the war. More than half of the Mærsk fleet is lost during the war.

• 10 May 1943: The Riffelsyndikatet company is sabotaged by members of the Danish resistance. A.P. Møller travels personally to Stockholm and requests of Danish newspaper Politiken's correspondent that he "tells London to put an end to sabotage", which "is harmful to Danish interests".[3] • 22 June 1944: New sabotage action is taken by members of resistance group BOPA, who occupy Riffelsyndikatet and detonate a charge which prevents the resumption of production for the remainder of World War II .

1945 - 1965: Reconstruction following World War II

• June 1945: Mærsk's pre-WWII fleet had been reduced to just seven ships. Another 14 ships remained under the control of the US under the US shipping board until 1946. • 9 Oct. 1945: The "Collaborationist Acts", (in Danish: Værnemagerlovene) III and IV are passed by the Danish Folketing. They demand that profits earned by companies dealing with Germany during the occupation and judged to be excessive, be paid back to the state. Riffelsyndikatet, and other A. P Møller-owned shipping and industrial companies such as the still extant Odense Steel Shipyard and the Bukh Motor Works are fined a total of approximately 10 million Danish kroner (the equivalent of about 150 million in 2004)[4] • 1947-48: A shipbuilding program is started. New vessels are ordered at yards in Denmark, Sweden, Germany, Italy, the Netherlands, Belgium, and Japan. Mærsk also takes over several US war-built ships of the U.S. Liberty and C-1 class and German-designed "Hansa A" and "Hansa B" class. • 1953: Chastine Mærsk becomes the first of 13 motor ships in a new fast cargo ship class. The Mærsk fleet now has the same size as it had before World War II. • 1954: The turbine tanker Regina Mærsk is launched, setting a new size-record for the Odense Yard. It is also the first Mærsk vessel with a blue-painted hull. • 1956: The S.S. Hans Mærsk (built 1916) is sold after 40 years of service in the Mærsk fleet. • 1959: The newly constructed Odense Lindø Yard, located in Munkebo around 10 km away from the old yard, opens. It has two large building docks and begins with laying the keel for two 50,000 tdw tankers. • 1961: The first ships built at Lindø are five 50,000 tdw turbine tankers produced for Standard Oil of California and three for the Mærsk Line. Until 1977, the Yard mostly produced 100,000 tdw tankers. From 1968, 200,000 and 250,000 tdw tankers are produced, from 1971 280,000 tdw tankers, and ultimately 330,000 tdw tankers are produced as well. • 1962: The Danish government grants A.P. Møller a license to search for oil in the Danish part of the North Sea. At the time, almost nobody expects any oil to be found. A new oil company, Mærsk Olie og Gas A/S, is later founded. • 1962 - 1963: Three ships of the Trein Mærsk-class enters service. At the time, they were the company's largest cargo liners. • 1964: Dansk Supermarked A/S is founded. • 1965: A.P. Møller's Odense Yard produces its first product tankers Dangulf Mærsk and Svengulf Mærsk. • 1965 - 1993: Mærsk Mc-Kinney Møller takes the helm.

• 1966: The Bulkcarrier Laura Mærsk (yard no. 177) is the last ship produced at the old Odense Yard. The old yard is closed. • 1967: A.P. Møller produces its first supply vessel, Mærsk Supplier. • 1967 : The Odense Lindø Yard is enlarged with a new 90 x 420 m construction dock with a great gantry crane. This enables the construction of VLCC tankers, later ULCC Tankers, and now Ultra-Post-Panamax container ships. Nov. 1967 - 1969: Mærsk Line produces the last class of seven fast conventional motor cargo vessels, the Cecilie Mærsk-class. At test runs, they reach a maximum of 26 knots. They are used in the Europe-Far East service and in the Trans-Pacific service. In 1974, they are converted tosemi-container ships, and following a large modification programme, as full container ships in 1980. • 1968: Odense Lindø Yard builds its first 200,000 tdw tanker, Dirch Mærsk. • 1969: Maersk Air is founded and begins operations the following year.

[pic] Fig 15. M-class vessel "Maersk Mykonos" at NTB Bremerhaven, July 2006 • July 1971: Odense Yard produces the 283,000 tdw turbine tanker Regina Mærsk, the biggest ship in Europe. • 1972: The first gas tanker for A.P. Møller, Inge Mærsk enters service. • 1973: Mærsk Line adds its first container ship to the fleet, the Japanese-constructed Svendborg Mærsk (1,800 twenty-foot equivalent units (TEU)). • July 1974: Odense Yard builds the turbine tanker Kristine Mærsk (330,000 tdw), the biggest tanker in Europe. Six more vessels of this class are built for A.P. Møller until 1977. • Aug. 1975-1976: Mærsk Line receives nine fast single screw 1,200 TEU turbine container ships, the Adrian Mærsk-class, from the German shipyards Blohm & Voss (Hamburg) and Flenderwerft (Lübeck) for use in the trans-Pacific service. They are designed by United Ship Design & Development Centre in Taiwan. • April 1979: Construction of the new company headquarters at Esplanaden is completed. • 1980: Six Odense built RORO-container ships (Elisabeth Mærsk-class) are added to the Mærsk fleet. • January 1981: Mærsk Line opens its own container service on the Europe-Far East route with the first container ship built at Odense Yard, Laura Mærsk (2,000 TEU). Ten sister ships join the fleet until 1985. • 1988: A.P. Møller opens a container factory in Tinglev, Denmark. • 1988: Mærsk begins a trans-Atlantic container service. • April 1988: Odense Yard produces the Marchen Mærsk (4,300 TEU), the largest containership of the world. Eleven more ships are built between 1988 and 1991. • 1989: Mærsk Line introduces the 45' container as a third standard container size. • 1991-1996: Mærsk and P & O begin a joined global container service. • 1992: The first large gas carrier Inger Mærsk (80,000 cbm) is added to the fleet. • Dec. 1992: Odense Yard produces the world's first double-hull 300,000 tdw tanker, Eleo Mærsk. Until 1995, 5 sister ships are produced for Mærsk Line and 3 additional for Saudi Arabian VELA

1993 - 1999: Bigger and bigger

[pic] [pic] Fig 16. Mærsk Sealand 40' Containers • March 1993: Mærsk Line takes over the EacBen Container Line Ltd. with 9 large container ships. It becomes the largest container line in the world. • Dec. 1995: Hyundai H.I., Ulsan delivers the 4,300 TEU Panamax container ship Dragør Mærsk, the first of a series of 16 ships for Mærsk Line. • Jan. 1996: The world's largest container ship, Regina Mærsk, is delivered from Odense Yard and enters the Europe - Far East liner service. At this time it holds many records: first ship over 6,000 TEU capacity, with a length of 318.2 meters, it is the first container ship over 300 meters; first with 42.80 m breadth and first over 80,000 BRZ and tdw. • May 1996: The Mærsk cooperation of the liner service with P&O is ended and a new global containerservice with Sealand Corporation is started. • Sept. 1997: Odense Yard delivers Sovereign Maersk, the world's first 8,000 TEU and over 100,000 tdw container ship to the Mærsk fleet. It is also 346 meters long; the longest ship in the world at that time. • 31 January 1998: A.P. Møller Group acquires the Volkswerft in Stralsund (Germany) from the German Treuhand for 25 million dollars. The yard is completely modernized, including a large shipbuilding hall and a 230 m (now 275 m length) ship lift to launch the ships. Container ships (2,500 class) are produced for the Mærsk fleet. They have a size of 2,900-3,000 TEU. Supply vessels and cable-laying vessels are also produced.

• February 1999: Mærsk takes control of the Safmarine container line, including the Compagnie Maritime Belge (CMB) with 50 owned and chartered container vessels. • 1999: First vessel from mainland China (People's Republic of China), a 35,000 tdw R-class tanker built at Guangzhou Shipyard International.

1999 - 2005: Mærsk-Sealand

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Fig 17. Maersk Sealand container on a trailer • November 1999: Mærsk buys container shipper Sea-Land Corporation with 70 vessels, container terminals and liner service from the CSX Corporation. The new name of the shipping company is Mærsk Sealand. • June 2001: Mærsk buys the Dutch Smit-Wijsmüller salvage company (including the Esbjerg, Denmark based ESVAGT company) over its subsidiary company A/S Em Z. Svitzer with more than 250 vessels (tugs, barges, offshore and other vessels). The Mærsk group now operates the world's largest fleet of salvage and offshore vessels. • September 2002: Mærsk takes over the shipping liner activities of the Danish shipping company Dampskibsselskabet TORM, which sails from the United States to the Gulf and from the Eastern seaboard of the United States to the west coast of Africa. Within the Mærsk group, the routes are now operated by Safmarine. • 2003: The two holding companies Dampskibsselskabet Svendborg A/S and Dampskibsselskabet af 1912 A/S are merged to A.P. Møller-Mærsk A/S. • March 2003: Odense Yard produces Axel Mærsk, at the time, the world's biggest and longest container ship. It also has the world's largest cargo capacity. It is the first container ship with 352 m Loa. Its width is 42.80 m, it carries 109,000 tdw, with a 12-cylinder HSD-Wärtsilä Sulzer diesel engine, developing 63,000 kW at 100 revolutions per minute – equivalent to 85,500 BHP. Five sister ships are built between 2003-2004 (Anna Mærsk, Arnold Mærsk, Arthur Mærsk, Adrian Mærsk, and Albert Mærsk). • April 2004 : The first LNG-carrier (120,000 cbm) with the name Mærsk Las Raffan from Samsung Heavy Ind. South Korean enters the Mærsk fleet. A sister ship is ordered for 2006. • May - Oct. 2004: Volkswerft builds three containerships of each 2100 TEU for Safmarine. • 2004: The company headquarters at Esplanaden are enlarged and opens in February 2005. • 2004 - 2005: Odense Yard builds its first naval ships with two flex-support-ships (Loa. 137.5 m) for the Royal Danish Navy. • In 2004, the group had revenues of about 157,112 million DKK (21,138 million euros). In 2004, Mærsk made a net profit of DKK 18.4 billion (USD 3.1 billion). It is listed on the KFX-index of the Copenhagen Stock Exchange. In 2004, the company had a 12% share of the world's container shipping market. [1] • March 2005: Odense Yard delivers the Post-Panamax-Containership DAL Kalahari for Deutsche-Afrika-Linien, the first ship which is not built for the Mærsk Group for ten years.

[pic]

Fig 18. 9500 TEU container ship Gunvor Mærsk of the Gudrun Maersk class

[pic] Fig 19. Maersk Line Feeder for the Mother ship

• 11 May 2005: Mærsk announces plans to purchase the rival shipping company P&O Nedlloyd for 2.3 billion euros (USD 2.96 billion). Some analysts believe the purchase is inspired by the undercapacity in the world container market. World trade is currently growing faster than ships are being built. By buying another large company, Mærsk will be able to expand its capacity by a third. With this purchase, Mærsk will be by far the largest single shipping company and the largest container line in the world with more than 550 vessels. From 11 May to 24 June 2005, Mærsk acquired 19.4% of Royal P&O Nedlloyd stocks. • June, 2005: Odense Yard produces the Gudrun Mærsk for the Mærsk fleet, again setting a world record for biggest and longest container ship. It will serve on the Europe–Far East liner service. • 29 June 2005: P&O sells its last 25% share of Nedlloyd stocks to A.P. Møller and the two Scandinavian banks Danske Bank and Nordea. • 29 June 2005: A.P. Møller subsidiary Norfolkline acquires the Irish sea ferry operator Norse Merchant Ferries with 9 ships. • 30 June 2005: A.P. Møller-Mærsk agrees to sell Maersk Air to Fons Eignarhaldsfélag, Iceland. • 11 August 2005: A.P. Møller-Mærsk announces that the purchase of Royal P&O Nedlloyd N.V. has been completed. The company will be merged with Mærsk-Sealand. Royal P&O Nedlloyd has a fleet of 162 container vessels with 460,203 TEU. From February 2006, the new company will be named Mærsk Line. P&O Nedlloyd Logistics and Mærsk Logistics will be merged under the name Mærsk Logistics. • May 2006: The Volkswerft Stralsund delivers the first of a series of seven very fast 29 kn 4250 TEU Panamax Container ship, the Maersk Boston. • 12 August 2006: Maersk again breaks the world record for largest container ship with the 11,000 TEU Emma Mærsk built at Odense Steel Shipyard. • 3 March 2007: Evelyn Mærsk launched, joining sister ships Emma Mærsk, Elly Mærsk, Eleonora Mærsk, and Estelle Mærsk. • 8 January 2008: Maersk Line, the container shipping division of the A.P. Moller - Maersk Group, announces details of its new streamLINE strategy to drive the turnaround of the business and return to sustainable profitability. There will be a reduction of 2-3,000 positions worldwide, along with a reduction in the number of regional organizations. • February 2011: Maersk announced orders for a new "Triple E" series of containerships, which would be the world's largest (at 18,000TEU), with an emphasis on lower fuel consumption.

Financials

Maersk Line is a division of the A.P. Moller – Maersk Group. The results are published every Quarter and available on the group website, maersk.com.Annual Results - Container shipping and related activities

|Net revenue (USD million) |Net result (USD million) |
|2013 |2012 |2013 |2012 |
|27,118 |25,108 |461 |-553 |

Highlights for the Group 2013 [pic]

[pic]

Fig 20. Maersk and MSC Growth over the Years

[pic] Fig 21. Market Share of Different Shipping Companies

[pic] Fig 22. Top 10 Shipping Lines and their Market Share

5.1 Samsara Shipping Pvt. Ltd.

About Organization

Samsara is a well-recognized leader in shipping service sector with its main focus on technological innovations and social responsibility. Helping to preserve the environment is important in our commitment to being a responsible, global corporate citizen. We constantly strive to anticipate the rapidly changing needs of our clients and to develop new services to meet those needs.

The People Samsara is committed to diversity in a working environment where there is mutual trust and respect and where everyone feels responsible for the performance and reputation of our company.

We make an unusual effort to identify and recruit the very best person for every job. Although our activities are measured in billions of dollars, we select our people one by one. In a service business, we know that without the best people, we cannot be the best firm.

We will conduct our operations in accordance with internationally accepted principles of good corporate governance. We will provide timely, regular and reliable information on our activities, structure, financial situation and performance to all our valuable clients.

The Professionalism We stress teamwork in everything we do. While individual creativity is always encouraged, we have found that team effort often produces the best results and we are the firm believers of that. Mandatory internal and external training and development provides the framework for our teams to continually hone their existing skills and learn new ones. We use the latest communication technology and I.T. systems to assist us to provide a service of unparalleled professionalism at all times.

Mission Statement

To serve our customers in a professional, ethical and transparent manner by incorporating and retaining value based systems in technology and human resources, with trustworthy expertise in shipping and related fields. We want to make it big by emphasizing on customer satisfaction factor. Our clients' interests always come first. Our experience shows that if we serve our clients well, our own success will follow. Services

Shipping Agency Services Samsara Shipping represent some of the best shipping lines in the world as their agent.

We offer reliable shipping services in association with our principals.

Our shipping agency services encompass o Container Liner Agency

o Port Agency Dry Bulk & Tankers

o Ro-Ro Shipping

o Feeder Services

o Ship -broking & Commercial Management

o Project Cargo Handling

o Stevedoring Services

o Information Services

o Ship's Husbanding

o Canvassing & Marketing

Container Liner Services • Samsara Shipping represents some of the leading shipping lines as Agents in India.

• As agents for regular container shipping lines, we move beyond port operations and serve the commercials needs of Exporters and Importers in India.

• Our state of the art infrastructure and facilities help provide world class services to our clients.

• Our behalf of the line, we publish their sailing schedules, negotiate rates with customers, collect money, notify customers of arrivals, book cargo and promote the business of the line.

• We serve the containerized trade in India for Europe, Far East and Mediterranian ports.

• Our complete knowledge of the regional markets ensure near complete dominance in trade to the above mentioned sectors.

• Our strong office network across the country and professional manpower ensures compliance to quality standards.

ISO Tank Container & Flexi Tank Services • Samsara shipping represents one of the leading global ISO Tank operator Hoyer Global Transport , as their general agents in India • We provide the best Logical route to efficient Global logistics of Bulk Liquids in ISO Tank Containers and Flexi tanks. • We specialize is carriage of hazardous and non-hazardous bulk liquid shipments in ISO tank containers between India and MiddleEast , Mediterranean , Europe, USA , Far Eastern Ports. • Our strong office network across the country and professional manpower ensures compliance to quality standards. • Our state of the art infrastructure and facilities help provide world class services to our clients. [pic] Fig 23. ISO Tanks

Bulk Agency Services / Tramp Agency Services • We provide agency services and shipping expertise to Ship owners / Operators & Charters. We ensure faster turnaround of vessels, bunker arrangements, stores, spares, repairs, attending to crew etc. We offer a full range of agency services to ship & cargo owners. • As an agent for our principal in the country it is our endeavor to protect the interest of our principal using our state of art network, infrastructure, experience & local knowledge.

• Our network of offices across India comes into action moment we receive an inquiry from principal & ensures fast action on queries.

• We immediately swing into action and carry out all the activities as an extension of principal's office. o Provide a detailed item-wise Proforma D/A along with all explanatory notes for easy understanding. o On getting agency nomination we provide detailed guidelines for the master and the operations staff of the principal. o We lay great emphasis on the continuous and correct reporting to our principals about all activities of the ship in the port. o On vessel's departure, we lose no time in sending departure reports along with all documents such as NOR, SOF, copy of B/L, draft survey report etc. o We take all instructions from our principal in advance in respect of the issue of B/L and guide the master suitably to incorporate necessary remarks in the B/L and SOF.

• We regularly handle both wet & dry cargo ships of all sizes like handy and Handymax, Panamax, Capesize, Minibulkers, Multipurpose Ships, Product Tankers, Aframax and Suezmax Tankers across all Indian Ports and act as Owners protecting agents as well.

• We handle different type of cargoes like Iron Ore, Coking Coal, Industrial Coal, Coke, Rock phosphate, Sulphur, Fertilizers, Agri products and other liquid cargoes. Feeder Services • Samsara Shipping has established it’s competitiveness in providing world class feeder services to it’s clients on behalf of it's principal OSS.

• Our supremacy in providing such services can be owed to our professional manpower and customer focussed approach. Ship Broking Services / Ship Chartering Services

• Ship broking and Chartering is an important part of the business and has been a rapidly developing department in the company. Being active ship agents for years we have considerably extended the range of services offered to ship owners.

• We nurture close relationship with leading ship-owners, operators, traders and co-brokers throughout the world.

• We enjoy strong relationship with Indian shippers & consignees, which ensures cargoes for our principals directly on guided terms & conditions.

• We deal in liquid bulk, dry bulk & general cargo.

• We ensure that principals vessels opening in and around India get the best possible fixtures.

• Whilst handling agency vessels across all ports in India is our core strength, many of these cargoes are also fixed by our Broking team operating out of our Mumbai and Delhi offices.

• Samsara is on the panel of approved Ship Brokers of Transchart, which is the Chartering arm of Government of India for all national Imports & Exports and is a member of BIMCO.

• We are actively involved in all aspects of broking, from spot market fixtures to long term charters and contracts. Ro-Ro Services

• Samsara Shipping has technical expertise in handling Ro-Ro vessels efficiently and economically.

• Our experience also ensures appropriate & accurate segregation of marking of vehicles at different ports.

• Our high-quality services and a pioneering spirit give our customers satisfaction and time to concentrate on their own business

Project Cargo Handling

Handling project cargo requires relevant experience, equipment & manpower.

• We have expertise in handling all types of project cargo.

• We are well equipped with efficient and effective infrastructure facilities to handle all types of project cargoes in India. We have experienced and specialized personnel for project cargo logistics and have access to the full range of material handling equipment such as cranes, lighters, heavy lift trucks for sea and overland operations.

• We deliver on our promises with day-to-day activities that represent value for money, quality, continuity, innovation and maximum reach, offering services that seamlessly combine our expertise and experience in the shipping, logistics and marine fields. Value Added Contracted Services

• Our highly skilled technical staff arranges varied ship husbanding services, which includes fueling of the ship, providing equipment or materials like navigation charts, arranging crew member trips to the doctor, providing fresh water, working with tugs, pilots, paying necessary fees, making arrangements with contractors to do work on the ship and providing food provisions for the crew etc.

• We arrange for ship husbanding through ship chandlers.

• We choose most reliable suppliers based on their past track record & ability to offer quality services to our principals.

Stevedoring & Other Services

• On account of our local relationship we ensure best negotiated deals for our principals, through the best stevedoring companies.

• Our team is committed to ensure that each and every job is handled in a swift and efficient manner, with customer service as our highest priority.

• We also have a panel of approved survey companies to render tally and supervision services in order to avoid claims and disputes. Information Services

• We closely monitor international trade in India and gather information on exports and imports. We provide latest updated market information to our principals.

• We monitor economic and regulatory developments in India, particularly in the fields of shipping and keep our principals fully apprised so that they can efficiently manage their voyage economies.

• We provide exclusively compiled shipping database registers, online shipping information and a tailored research and system development service with a focus on integrating commercial shipping information with customers' specific needs.

Canvassing & Marketing • In local markets, we support our Principals with effective canvassing to secure cargo leads and bookings.

• We provide up to date information on shipping and cargo movements, including in-depth market and competition analysis.

• We provide marketing services such as market research promotion, identification of evolving trends and customer needs, constant focus on competitors' services, rating and performances to maintain leadership, research and implementation of special solutions for particular shipments.

• Our Expert sales & CSU Port Operation, Logistics Documentation & Accounting departments are supported and interconnected by advanced Information Systems.

Address and Authorised paid up Capital
|Company Name |SAMSARA SHIPPING PRIVATE LIMITED |
|Incorporation Date | |
|Registered Address |101/102, TECHNOPOLIS KNOWLEDGE PARK, MAHAKALI CAVE |
| |ROAD, CHAKALA, ANDHERI (E), |
| |MUMBAI- 400 093. |
| |INDIA |
| |Pincode:400038 |
|Industry |Wired Telecommunications Activities |
|Authorised Capital(in Rs.) |35,000,000.00 |
|Paidup Capital |32,210,600.00 |

Financials
| | | | | | |
| | | | | | |
| | | | | |
|1 |Shareholders' funds | | | |
| |a) Share Capital |46,580 |46,580 | |
| |b) Reserves & Surplus |6,15,035 |6,26,852 | |
|2 Non-current liabilities | | | |
| |a) Long- term borrowings |6,82,264 |5,52,578 | |
| |b) Other long-term liabilities |841 |1,002 | |
| |c) Long- term provisions |10,899 |7,744 | |
|3 |Current liabilities | | | |
| |a) Short term Borrowings |45,704 |- | |
| |b) Trade payables |80,358 |60,376 | |
| |c) Other current liabilities |1,20,323 |1,02,003 | |
| |d) Short- term provisions |7,616 |6,680 | |
| |TOTAL EQUITY AND LIABILITIES | | | |
| | |16,09,620 |14,03,815 | |
|B | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| |ASSETS | | | |
| | | | | |
|1 Non-current assets | | | |
| |a) Fixed Assets | | | |
| |(i) Tangible assets |11,50,651 |8,87,160 | |
| |(ii) Intangible assets |3,327 |4,115 | |
| |(iii) Assets Retired from Active use (Prev. yr.Rs. 0.10 lakhs) |47 |- | |
| |(iv) Capital work-in-progress |18,945 |36,199 | |
| |b) Non- current investments |17 |19,236 | |
| |c) Long-term loans and advances |1,67,185 |1,70,501 | |
| |d) Other non-current assets |511 |500 | |
|2 |Current assets | | | |
| |a) Current investments |11,769 |8,231 | |
| |b) Inventories |18,346 |17,745 | |
| |c) Trade receivables |88,641 |78,593 | |
| |d) Cash & cash equivalents |1,26,478 |1,44,241 | |
| |e) Short-term loans and advances |15,468 |19,703 | |
| |f) Other current assets |8,235 |17,591 | |
| |TOTAL - ASSETS | | | |
| | |16,09,620 |14,03,815 | |
| | | | | |

[pic]

5.4 Mediterranean Shipping Company

Mediterranean Shipping Company S.A. (MSC) is to be the world's second-largest shipping line in terms of container vessel capacity. As of May 2013, MSC operates 474 vessels and has a capacity of 2,326,849 twenty-foot equivalent units (TEU).The Geneva-based Swiss company operates in all major ports of the world. MSC's most important port is Antwerp inBelgium.

History

MSC was founded in 1970 as a private company by Gianluigi Aponte when he bought his first ship, Patricia, followed by Rafaela, with which Aponte began a shipping line operating between the Mediterranean and Somalia. The line subsequently expanded through the purchase of second-hand cargo ships. By 1977, the company operated services to northern Europe, Africa and The Indian Ocean. The expansion continued through the 1980s; by the end of the decade, MSC operated ships to North America and Australia.

In 1989, MSC purchased the cruise ship operator Lauro Lines, renamed to Mediterranean Shipping Cruises (MSC Cruises) in 1995, and subsequently increased the cruising business.

In 1994, the line ordered its first newly constructed ships, which were delivered beginning in 1996 with MSC Alexa. They were built by Italian shipbuilder, Fincantieri.

The company today

MSC serves 270 ports worldwide on the six continents. 350 local offices, employing a total of 29,000 people, provide an agency network representation. Vessels with the capacity of up to 13,800 TEU, including one of the largest container ships, MSC Emanuela and her sistership MSC Beatrice. The company remains independent and wholly owned by its president Aponte and his family.

The growth of MSC is fully organic, and not through Mergers and Acquisition.

The line was named shipping line of the year in 2007 for the sixth time in eleven years by Lloyds Loading List, which is an achievement not matched by any other shipping line. The line has just also placed orders for eleven new vessels that will be able to carry up to 15,000 TEUs each, which are some of the largest container vessels in the world.

MSC India's new headquarters building "MSC House" was inaugurated by Diego Aponte in 2008.

Cyprus being the hub of container shipping market, MSC Cyprus new headquarters was inaugurated on 8 April 2009 by Mr. Diego Aponte.

Interlink Transport Technologies Inc. in Warren, New Jersey is a subdivision serving some of the company's IT needs.

|MSC Mediterranean Shipping Company S.A., of Geneva, Switzerland is a privately owned shipping line, founded in 1970, which has |
|rapidly grown from a small conventional ship operator to become one of the leading global shipping lines of the world. |
| |
|During recent years MSC's maritime fleet has expanded substantially to consolidate its position as the 2nd largest carrier in |
|respect of container slot capacity and of the number of container vessels operated. |
|Such spectacular growth has been achieved internally through organic growth rather than through acquisition or merger. |

Fig 24. Quantity of vessels

[pic]

[pic]

Fig 25.Intake capacity

[pic]

[pic]

Fig 26.Quantity of TEU's carried

[pic]

[pic]

CONTAINERS SPECIFICATIONS

IMPORTANT NOTE

The dimensions given are typical sizes and are given only as an indication. MSC accepts no responsibility for variations in dimensions. If the dimensions are critical, please contact your local MSC representative.
GENERALITIES

Table 06.External Dimensions

| |
|Width |
|Height |
| |
|20' Standard |
| |
|6.058 m |
|2.438 m |
|2.591 m |
| |
|20' |
|8' |
|8' 6'' |
| |
|40' Standard |
| |
|12.192 m |
|2.438 m |
|2.591 m |
| |
|40' |
|8' |
|8' 6'' |
| |
|40' High Cube |
| |
|12.192 m |
|2.438 m |
|2.896 m |
| |
|40' |
|8' |
|9' 6'' |
| |

STANDARD CONTAINERS

20' STANDARD STEEL CONTAINER - 22 G1

[pic]

|INTERNAL DIMENSIONS |
|DOOR |
| |
|L |
|W |
|H |
|W |
|H |
| |
|5.898 m |
|2.352 m |
|2.393 m |
|2.340 m |
|2.280 m |
| |
|19' 4 13⁄64 '' |
|7' 8 19⁄32 '' |
|7' 10 7⁄32 '' |
|7' 8 1⁄8 '' |
|7' 5 49⁄64 '' |
| |

Top

40' STANDARD STEEL CONTAINER - 42 G1

[pic]

|INTERNAL DIMENSIONS |
|DOOR |
| |
|L |
|W |
|H |
|W |
|H |
| |
|12.032 m |
|2.352 m |
|2.393 m |
|2.340 m |
|2.280 m |
| |
|39' 5 45⁄64 '' |
|7' 8 19⁄32 '' |
|7' 10 7⁄32 '' |
|7' 8 1⁄8 '' |
|7' 5 49⁄64 '' |
| |

|CUBIC CAPACITY |
|MAXIMUM PAYLOAD |
|TARE WEIGHT |
|MAXIMUM GROSS |
| |
|67.70 m3 |
|28,860 kgs |
|3,640 kgs |
|32,500 kgs |
| |
|2,390.8 Cft |
|63,625 Lbs |
|8,024 Lbs |
|71,650 Lbs |
| |

40' HIGH CUBE STEEL CONTAINER - 45 G1

[pic]

|INTERNAL DIMENSIONS |
|DOOR |
| |
|L |
|W |
|H |
|W |
|H |
| |
|12.032 m |
|2.352 m |
|2.698 m |
|2.340 m |
|2.585 m |
| |
|39' 5 45⁄64 '' |
|7' 8 19⁄32 '' |
|8' 10 7⁄32 '' |
|7' 8 1⁄8 '' |
|8' 5 49⁄64 '' |
| |

OPEN TOP CONTAINERS

20' OPEN TOP STEEL CONTAINER - 22 U1

[pic]

|INTERNAL DIMENSIONS |
|DOOR |
| |
|L |
|W |
|H |
|W |
|H |
| |
|5,902 m |
|2.350 m |
|2.348 m |
|2.340 m |
|2.280 m |
| |
|19' 4 23⁄64 '' |
|7' 8 33⁄64 '' |
|7' 8 7⁄16 '' |
|7' 8 1⁄8 '' |
|7' 5 49⁄64 '' |
| |

|ROOF |
|HEADER |
| |
|Btw Top Rails |
|Btw Top Headers |
|Btw Troughs |
|Btw Stubs |
| |
|W |
|L |
|L |
|W |
| |
|2,252 m |
|5.674 m |
|5.378 m |
|1.640 m |
| |
|7' 4 21⁄32 '' |
|18' 7 25⁄64 '' |
|17' 7 47⁄64 '' |
|5' 4 9⁄16 '' |
| |

Removable swing header capable of swinging 90 degs. to either side.

|MAXIMUM PAYLOAD |
|TARE WEIGHT |
|MAXIMUM GROSS |
| |
|28,180 Kgs |
|2,300 Kgs |
|30,480 Kgs |
| |
|62,126 Lbs |
|5,070 Lbs |
|67,196 Lbs |
| |

Top

40' OPEN TOP STEEL CONTAINER - 42 U1

[pic]

|INTERNAL DIMENSIONS |
|DOOR |
| |
|L |
|W |
|H |
|W |
|H |
| |
|12.036 m |
|2.350 m |
|2.348 m |
|2.340 m |
|2.280 m |
| |
|39' 5 55⁄64 '' |
|7' 8 33⁄64 '' |
|7' 8 7⁄16 '' |
|7' 8 1⁄8 '' |
|7' 5 49⁄64 '' |
| |

|ROOF |
|HEADER |
| |
|Btw Top Rails |
|Btw Top Headers |
|Btw Troughs |
|Btw Stubs |
| |
|W |
|L |
|L |
|W |
| |
|2,232 m |
|11.798 m |
|11.512 m |
|1.940 m |
| |
|17' 3 7⁄8 '' |
|38' 8 31⁄64 '' |
|37' 9 15⁄64 '' |
|6' 4 3⁄8 '' |
| |

Removable swing header capable of swinging 90 degs. to either side.

|MAXIMUM PAYLOAD |
|TARE WEIGHT |
|MAXIMUM GROSS |
| |
|26,680 Kgs |
|3,800 Kgs |
|30,480 Kgs |
| |
|58,819 Lbs |
|8,377 Lbs |
|67,196 Lbs |
| |

FLAT RACK CONTAINERS

20' COLLAPSIBLE FLAT RACK - 22 P3

[pic]

|INTERNAL DIMENSIONS |
|BTW HEADERS |
|BTW CORNERS |
| |
|L |
|W |
|H |
|L |
|L |
|W |
| |
|5.96 m |
|2.40 m |
|2.29 m |
|5.85 m |
|5.42 m |
|2.06 m |
| |
|19' 7'' |
|7' 10'' |
|7' 6'' |
|19' 2'' |
|17' 9'' |
|6' 9'' |
| |

|MAXIMUM PAYLOAD |
|TARE WEIGHT |
|MAXIMUM GROSS |
| |
|37,000 Kgs |
|3,000 Kgs |
|40,000 Kgs |
| |
|81,571 Lbs |
|6,613 Lbs |
|88,184 Lbs |
| |

40' COLLAPSIBLE FLAT RACK - 42 P3

[pic]

|INTERNAL DIMENSIONS |
|BTW HEADERS |
|BTW CORNERS |
| |
|L |
|W |
|H |
|L |
|L |
|W |
| |
|11.65 m |
|2.37 m |
|1.96 m |
|12.06 m |
|11.66 m |
|2.22 m |
| |
|38' 3'' |
|7' 9'' |
|6' 5'' |
|39' 7'' |
|38' 3'' |
|7' 3'' |
| |

|MAXIMUM PAYLOAD |
|TARE WEIGHT |
|MAXIMUM GROSS |
| |
|44,650 Kgs |
|5,250 Kgs |
|50,000 Kgs |
| |
|98,436 Lbs |
|11,574 Lbs |
|110,231 Lbs |
| |

REEFER CONTAINERS

20' REEFER STEEL CONTAINER - 22 R1

[pic]

|INTERNAL DIMENSIONS |
|DOOR |
| |
|L |
|W |
|H |
|W |
|H |
| |
|5.456 m |
|2.294 m |
|2.16 m |
|2.290 m |
|2.264 m |
| |
|17' 10 51⁄64 '' |
|7' 6 5⁄16 '' |
|7' 1 3⁄64 '' |
|7' 6 5⁄32 '' |
|7' 5 9⁄64 '' |
| |

NOTE: Inside height is to maxi stowage height.

|CUBIC CAPACITY |
|MAXIMUM PAYLOAD |
|TARE WEIGHT |
|MAXIMUM GROSS |
| |
|28.40 m3 |
|27,540 kgs |
|2,940 kgs |
|30,480 kgs |
| |
|1,002.9 Cft |
|60,715 Lbs |
|6,481 Lbs |
|67,196 Lbs |
| |

40' HIGH CUBE REEFER STEEL CONTAINER - 45 R1

[pic]

|INTERNAL DIMENSIONS |
|DOOR |
| |
|L |
|W |
|H |
|W |
|H |
| |
|11.59 m |
|2.288 m |
|2.40 m |
|2.290 m |
|2.569 m |
| |
|38' 0 19⁄64 '' |
|7' 6 5⁄64 '' |
|7' 10 31⁄64 '' |
|7' 6 5⁄32 '' |
|8' 5 9⁄64 '' |
| |

NOTE: Inside height is to maxi stowage height.

|CUBIC CAPACITY |
|MAXIMUM PAYLOAD |
|TARE WEIGHT |
|MAXIMUM GROSS |
| |
|67.50 m3 |
|29,400 kgs |
|4,600 kgs |
|34,000 kgs |
| |
|2,383.7 Cft |
|64,815 Lbs |
|10,141 Lbs |
|74,957 Lbs |
| |

WORLDWIDE ROUTES

MSC is one of the few carriers able to offer worldwide coverage with one MSC bill of lading, allowing the rapid movement of goods through dedicated transhipment hubs. MSC therefore provides swift connections and efficient on-carriage services.

MSC is the leading provider of direct port calls, serving the 6 continents and calling at 316 ports through 200 direct and combined weekly liner services.

Fig 27. Worldwide Routes [pic]

Mediterranean Shipping Company

Consolidated balance Sheet 2012

|ASSETS | | | |
|1 |Inter-regional |Deep sea shipping |Ship |
| | |Air freight |Plane |
|2 |Short sea |Coastal seas |Ship/ferry |
|3 |Land |River and canal |Barge |
| | |Road |Lorry |
| | |Rail |Train |
| | | | |

Although statistics are patchy, it seems that in 1990 air freight was 31 btm, rail 3,853 btm and sea trade 12,056 btm. In terms of volume this makes shipping roughly four times as important as rail and four hundred times as important as air freight. As we shall see, shipping has, to a large extent, created its own markets by reducing the cost of transport.13

Transport between regions

For most inter-regional cargoes deep sea shipping is the only economic transport between the continental landmasses. It is the main subject of this volume. Traffic is particularly heavy on the routes between the major industrial regions of Asia, Europe and North America. There are about 20,000 ships in this trade, offering services ranging from low cost bulk transport to fast regular liner services.

Air freight started to become viable for transporting high value commodities between regions in the 1960s. It competes with the liner services for premium cargo such as engineering goods, processed textiles, livestock and automotive spare parts. Shipments have grown rapidly, reaching 12.9 btm in 1982, and 31 btm by 1990. Despite this growth, air freight still accounts for only 0.1 per cent of the volume of goods transported between regions. Its contribution has been to widen the range of transport services available by offering the option of very fast but high cost transport.

Short sea shipping

Short sea shipping provides transport within regions. It distributes cargo delivered to regional centres such as Hong Kong or Rotterdam by deep sea vessels, and provides a port-to-port service, often in direct competition with land based transport such as rail. This is a very different business from deep sea shipping. The ships are generally smaller than their counterparts in the deep sea trades ranging in size from 400 dwt to 6,000 dwt, though there are no firm rules. Designs place much emphasis on cargo flexibility.

Cargoes shipped short sea include grain, fertilizer, coal, lumber, steel, clay, aggregates, containers, wheeled vehicles and passengers. Because trips are so short, and ships visit many more ports in a year than deep sea vessels, trading in this market requires great organizational skills. As Tinsley (1984) comments

it requires a knowledge of the precise capabilities of the ships involved, and a flexibility to arrange the disposition of vessels so that customers’ requirements are met in an efficient and economic way. Good positioning, minimisation of ballast legs, avoiding being caught over weekends or holidays and accurate reading of the market are crucial for survival.14

Short sea shipping is subject to many political restrictions. The most important is cabotage, the practice by which countries enact laws reserving coastal trade to ships of their national fleet. This system has operated for many years in the United States and in some countries in Europe.

The inland transport system consists of an extensive network of roads, railways, and waterways. It is linked to the shipping system through ports and specialist terminals.

Competition and cooperation in the transport industry

The companies in the transport system operate in a market governed by a mix of competition and co-operation. In many trades the competitive element is obvious. Rail competes with road; short sea shipping with road and rail; and deep sea shipping with air freight for higher value cargo. However, a few examples show that the scope of competition is much wider than appears possible at first sight.

For example over the last fifty years bulk carriers trading in the deep sea trades have been in cut-throat competition with the railways. How is this possible? The answer is that users of raw materials such as power stations and steel mills often face a choice between use of domestic and imported raw materials. Thus, a power station at Jacksonville in Florida can import coal from Virginia by rail or from Columbia by sea. Where transport accounts for a large proportion of the delivered cost, there is intense competition.

Cost is not the only factor, as shown by the seasonal trade in perishable goods such as raspberries and asparagus. These products travel as air freight because the journey by refrigerated ship is too slow to allow delivery in prime condition. However, the shipping industry has tried to recapture that cargo by developing refrigerated containers with a controlled atmosphere which prevents deterioration, thus permitting them to compete for this cargo.

Although the different sectors of the transport business are fiercely competitive, technical development depends upon close cooperation. Indeed the development of Integrated Transport Systems15 in which each component in the transport system is designed to fit in with the others has been one of the dominant themes of international transport in the last 20 years. There are many examples of this co-operation. Much of the world’s grain trade is handled by a carefully controlled system of barges, rail trucks and deep sea ships. The modal points in the system are highly automated grain elevators which receive grain from one transport mode, store it temporarily and ship it out in another. Similarly, coal may be loaded in Columbia or Australia, shipped by sea in a large bulk carrier to Rotterdam, and distributed by a small short sea vessel to the final consumer. The containerization of general cargo is built around standard containers which can be carried by road, rail or sea with equal facility. Often road transport companies are owned by railways and vice versa.

The driving force which guides the efforts of the transport system is the quest to win more business by providing cheaper transport and a better service. We will explore more thoroughly how the industry does this in section 1.5 below. First, however, we turn to the demand for sea transport.

1.3 The demand for sea transport

The nature of transport demand

The primary task of the shipping industry is to move cargo around the world. Although this is the correct starting point for studying ship demand, as an economic definition it is too narrow. From the customer’s viewpoint, shipping is a service. Saying that the shipping companies move cargo around the world, is rather like saying that restaurants cook food. There are sandwich bars, fast food chains and cordon bleu restaurants. Like the restaurateur, shipping companies provide a variety of services to meet the specific needs of customers. These needs may involve a whole range of factors, of which the most important are:

1. Price: The freight cost is always important, but the greater the proportion of freight in the overall cost equation, the more emphasis shippers are likely to place on it. For example, in the 1950s the cost of transporting a barrel of oil from the Middle East to Europe represented 49 per cent of the CIF cost. As a result, oil companies devoted great effort to finding ways to reduce the cost of transport. By the 1990s the price of oil had increased and the cost of transport had fallen to just 2.5 per cent of the CIF price so transport cost became less important.

2. Speed: Time in transit incurs an inventory cost, so shippers of high-value commodities value speed. The cost of holding high-value commodities in stock may make it cheaper to ship small quantities frequently even if the freight cost is greater. On a three-month journey a cargo worth $100,000 incurs an inventory cost of $2,500 if interest rates are 10 per cent per annum. If the journey time can be halved it is worth paying up to $1,250 extra in freight. Speed may also be important for commercial reasons. A European manufacturer ordering spare parts from the Far East may be happy to pay ten times the freight for delivery in three days by air if the alternative is to have machinery out of service for five or six weeks while the spares are delivered by sea.

3. Reliability: With the growing importance of ‘just in time’ stock control systems, transport reliability has taken on a new significance. Some shippers may be prepared to pay more for a service which is guaranteed to operate to time and provide the services which it has promised.

4. Security: Loss or damage in transit is an insurable risk, but raises many difficulties for the shipper, who may well be prepared to pay more for secure transportation of his product without risk of damage.

Each part of the business provides for a different combination of needs. In studying how this business is carried out, we need to be aware of the different demands which commodities place on the transport system, and to understand how the system has evolved to meet these needs. As we consider the part played by cargoes and ships in the following sections we must not lose sight of the needs of the customers who use the transport system.

What commodities are traded by sea?

In 1995 merchant ships transported about 4 bt of cargo. The trade consisted of many different commodities. Raw materials such as oil, iron ore, bauxite and coal; agricultural products such as grain, sugar and refrigerated food; industrial materials such as rubber, forest products, cement, textile fibres and chemicals; and manufactures such as heavy plant, motor cars, machinery and consumer goods. It covers everything from a 4 million barrel parcel of oil to a cardboard box of Christmas gifts.

The prime task of the seaborne trade analyst is to explain the growth and development of seaborne commodity trades, and to do this each commodity must be analysed in the context of the world economy. Where commodities are related to the same industry it makes sense to study them as a group so that inter-relationships can be seen. For example the crude oil and products are interchangable—if oil is refined before shipment then it is transported as products instead of crude oil. Similarly, if a country exporting iron ore sets up a steel mill, the trade in iron ore may be transformed into a smaller trade in steel products. To show how the various seaborne trades inter-relate, the main seaborne commodity trades are shown in Figure 1.2 arranged into six groups reflecting the area of economic activity to which they are most closely related.16 These groups can be summarized as follows:

1. Energy trades: Energy dominates bulk shipping. This group of commodities, which accounts for 45 per cent of seaborne trade, comprises crude oil, oil products, liquefied gas and thermal coal for use in generating electricity. These fuel sources compete with each other and non-traded energy commodities such as nuclear power. For example, the substitution of coal for oil in power stations in the 1980s transformed the pattern of these two trades. The analysis of the energy trades is concerned with the world energy economy.

FIGURE 1.2 Seaborne trade by economic activity

Source: Compiled by Martin Stopford from various sources

2. Agricultural trades: A total of twelve commodities, accounting for 13 per cent of sea trade, are the products or raw materials of the agricultural industry. They include cereals such as wheat and barley, animal feedstuffs, sugar, molasses, refrigerated food, oil and fats and fertilizers. The analysis of these trades is concerned with the demand for foodstuffs, which depends on income and population. It is also concerned with the important derived demand for animal feeds. On the supply side, we are led into the discussion of land use and agricultural productivity.

3. Metal industry trades: This major commodity group, which accounts for 25 per cent of sea trade, represents the third building block of modern industrial society. Under this heading we group the raw materials and products of the steel and non-ferrous metal industries, including iron ore, metallurgical grade coal, non-ferrous metal ores, steel products and scrap.

4. Forest products trades: Forest products are primarily industrial materials used for the manufacture of paper, paper board and in the construction industry. This section includes timber (logs and lumber) woodpulp, plywood, paper and various wood products, totalling about 145 mt. The trade is strongly influenced by the availability of forestry resources.

5. Other industrial materials: There are a wide range of industrial materials such as cement, salt, gypsum, mineral sands, asbestos, chemicals and many others.

The total trade in these commodities accounted for 9 per cent of sea trade. They cover a whole range of industries.

6. Other Manufactures: The final trade group comprises the remaining manufactures such as textiles, machinery, capital goods, vehicles, etc. The total tonnage involved in this sector accounts for only 3 per cent of sea trade, but many of these commodities have a high value so their share in value is probably closer to 50 per cent. They are the mainstay of the liner trades and their impact upon the shipping industry is much greater than the tonnage suggests.

Viewing the trade as a whole, over 70 per cent of the tonnage of seaborne trade is associated with the energy and metal industries so the shipping industry is highly dependent upon developments in these two industries.

Although these trade statistics help to convey the scale of the merchant shipping business, they disguise its physical complexity. Cargo may appear in any of eighty countries which have maritime trade, for consignment to any other country. Some shipments are regular, others irregular; some are large, others are small; some shippers are in a hurry, others are not; some cargoes can be handled with suction or grabs, while others are fragile; some cargo is boxed, containerized or packed on pallets, while other cargo is loose.

The parcel size distribution function

To explain how the shipping industry approaches the task of transporting this complex mix of cargoes, we need to introduce a concept that is central to the economic organization of the shipping market, the parcel size distribution (PSD) function. A ‘parcel’ is an individual consignment of cargo for shipment. For a particular commodity trade, the PSD function describes the range of parcel sizes in which cargo is transported. If, for example, we take the case of iron ore shown in Figure 1.3, we see that individual shipments ranged in size from under 40,000 tons to over 100,000 tons, with the majority concentrated in the upper size range. A similar analysis for grain in the same figure shows a very different parcel size distribution, with grain shipments concentrating in the under 80,000 ton category, and only a few of over 100,000 tons. In short, for any commodity shipped by sea we must expect to find cargoes appearing on the market in a wide range of parcel sizes.

FIGURE 1.3 Parcel size distribution

Source: Fearnleys, World Bulk Trades

The precise shape of the PSD for each commodity is determined by the characteristics of demand. The market has sorted out the economic balance between large and small parcels. These are all subjects that we discuss more extensively in chapters 7 and 8; for the present, we simply establish the principle that the same commodity may be shipped in many different parcel sizes.

The importance of the PSD function is that it helps to answer the central question ‘which cargoes go in which ships?’ In practice, different sizes of cargo parcel require different types of shipping operation. One important division is between ‘bulk cargo’, which consists of cargo parcels big enough to fill a whole ship, and ‘general cargo’, which consists of many small consignments, too small to fill a ship, that have to be packed with other cargo for transport. Another is between the size of ships used. Some bulk cargoes travel in small bulk carriers, while others use the biggest ships available. Analysis of the range of commodity trades shown in Figure 1.3 shows that each has its own distinctive parcel size distribution, with individual consignments ranging from the very small to the very large.17

For many commodities the parcel size distribution contains some cargo parcels that are too small to fill a ship—for example, 500 tons of steel products—and that will travel as general cargo, and others—say 5,000 tons of steel products—that are large enough to travel in bulk. As the trade grows, the proportion of cargo parcels large enough to travel bulk may increase and the trade will gradually switch from being a liner trade to being predominantly a minor bulk trade. This happened in many trades during the 1960s and 1970s, and as a result the bulk trade grew faster than general cargo trade. Because many commodities travel partly in bulk and partly as general cargo, commodity trades cannot be neatly divided into ‘bulk’ and ‘general’ cargo. To do this it is necessary to know the PSD function for each commodity.

Parcel size and transport mode

The parcel size distribution provides the basis for explaining the micro-economic organization of the shipping market, the main elements of which are summarized in Figure 1.4. Starting at the top of this diagram, world trade splits into large parcels and small parcels, depending on the PSD function of each commodity. Large parcels are carried by the bulk shipping industry and small parcels by the liner shipping industry; these represent the two major segments within the shipping industry.

This distinction may appear slight when put in such abstract economic terms, but there is no doubt about its reality. Bulk and liner shipping are as different in their character as it is possible for two industries to be, as will become clear when we discuss the matter in detail in Chapters 9 and 10. Finally we note that the ships to carry the cargo are supplied partly from fleets owned by the bulk and liner industries, supplemented by vessels obtained from the charter market, as shown at the bottom of the diagram. This distinction between the operation of the vessel in the bulk or liner trade, and its ownership is important.

FIGURE 1.4 Transport of bulk and general cargo

Source: Martin Stopford, 1997

Definition of ‘bulk cargo’

There is a long history of carrying cargo in shiploads—Roman grain ships, tea clippers, bulk timber and the fleets of colliers in the nineteenth century are examples—but bulk shipping did not develop as the major sector of the shipping industry in the decades following the Second World War. A fleet of specialist crude oil tankers was built to service the rapidly expanding economies of Western Europe and Japan, with smaller vessels for the carriage of products and liquid chemicals. In the dry bulk trades, several important industries, notably steel, aluminium and fertilizer manufacture, turned to foreign suppliers for their raw materials and a fleet of large bulk carriers was built to service the trade. As a result, bulk shipping became a rapidly-expanding sector of the shipping industry and bulk tonnage now accounts for about three-quarters of the world merchant fleet.

Most of the bulk cargoes are drawn from the raw material trades such as oil, iron ore, coal and grain, and it is common to describe these as ‘bulk commodities’ on the assumption that, for example, all iron ore is shipped in bulk. In the case of iron ore this is a reasonable assumption, but many smaller commodity trades are shipped partly in bulk and partly as general cargo; for example, a shipload of forest products would be rightly classified as bulk cargo but consignments of logs still travel as general cargo in a few trades. There are four main categories of bulk cargo:

• Liquid bulk requires tanker transportation. The main ones are crude oil, oil products, liquid chemicals such as caustic soda, vegetable oils, and wine. The size of individual consignments varies from a few thousand tons to half a mt in the case of crude oil.

• The ‘five major bulk’ covers the five homogeneous bulk cargoes—iron ore, grain, coal, phosphates and bauxite—which can be transported satisfactorily in a conventional dry bulk carrier or ’tweendecker stowing at 45–55 cubic feet per ton.

• Minor bulks covers the many other commodities that travel in shiploads. The most important are steel products, cement, gypsum, non-ferrous metal ores, sugar, salt, sulphur, forest products, wood chips and chemicals.

• Specialist bulk cargoes includes any bulk cargoes with specific handling or storage requirements. Motor vehicles, steel products, refrigerated cargo and special cargoes such as a cement plant or prefabricated building fall into this category.

Definition of ‘general cargo’

The transport of general cargo is a very different business. General cargo consists of consignments of less than ship or hold size and, therefore, too small to justify setting up a bulk shipping operation. In addition there are often high-value or delicate cargoes that require a special shipping service and for which the shipper requires a fixed tariff rather than a fluctuating market rate. There are no hard and fast rules about what constitutes general cargo—boxes, bales, machinery, 1,000 tons of steel products, 50 tons of bagged malting barley are typical examples. The main classes of general cargo from a shipping viewpoint are:

• Loose cargo individual items, boxes, pieces of machinery, etc., each of which must be handled and stowed separately. All general cargo used to be shipped this way, but now almost all has been unitized in one way or another.

• Containerized cargo standard boxes, usually 8 feet wide, often 8 feet 6 inches high and 20, 30, or 40 feet long, filled with cargo. This is now the principal form of general cargo transport.

• Palletized cargo cargo packed onto a pallet for easy stacking and fast handling.

• Pre-slung cargo small items such as planks of wood lashed together into standard-sized packages

• Liquid cargo travels in deep tanks, liquid containers or drums.

• Refrigerated cargo perishable goods that must be shipped, chilled or frozen, in insulated holds or refrigerated containers.

• Heavy and awkward cargo large and difficult to stow.

Until the mid-1960s most general cargo travelled loose and each item had to be packed in the hold of a cargo liner using ‘dunnage’ (pieces of wood or burlap) to keep it in place. This labour-intensive operation was slow, expensive, difficult to plan and the cargo was exposed to the risk of damage or pilferage. As a result, expensive cargo liners spent two-thirds of their time in port and cargo-handling costs have escalated to more than one-quarter of the total shipping cost.18 As the volume of cargo increased, liner operations found it increasingly difficult to provide the service that shippers required at an economic cost and their profit margins were squeezed.19

The shipping industry’s response was to ‘unitize’ the transport system, applying the same technology which had been applied successfully on the production lines in manufacturing industry. Work was standardized, allowing investment to increase productivity. Since cargo handling was the main bottleneck, the key was to pack the cargo into internationally accepted standard units which could be handled quickly and cheaply with specially designed equipment. At the outset many systems of unitization were examined, but the two main contenders were pallets and containers. Pallets are flat trays, suitable for handling by fork-lift truck, on which single or multiple units can be packed for easy handling. Containers are standard boxes into which individual items are packed. The first deep sea container service was introduced in 1966 and in the next twenty years containers came to dominate the transport of general cargo, with shipments of over 50 million units per annum.

Chapter-4 – PROBLEMS AND PROSPECTS OF SHIPPING INDUSTRY

The study covers the following objectives:

• To find the position Indian Shipping industry has in the budding service sector.

• To assess the determinants of Export and Import Trade.

• To find out the challenges Shipping is facing and will face in coming days.

• The impending opportunities in the Shipping Sector.

• Balance of Trade and how it affects the Economy as a whole

• To evaluate the impact of Shipping Trade on the Economy.

2.0 The Problem Statement

• Shipping Industry is one of the oldest and budding industries in the world. Its contribution to the society and the whole world economy is phenomenal. In today’s highly competitive and global environment, we propose to find its position in sector it belongs – Service Sector. • Strategies and challenges that the shipping industry is facing and will face in future, and the proposed solutions. • The variables which are affecting the Export/Import in India • The effect of the Shipping trade on the Indian Economy.

2.1Position of Indian Shipping in Service Sector

The new buzz word is competition. Like everything else, India's shipping industry is grappling with the demands of a liberalized era as it enters the new millennium. With a fleet that has remained largely traditional, local shipping companies are no longer finding it worth their business to carry on in the manner they have been. They know they need to change, and change fast. The entire pattern of cargo traffic has changed. It was all well in the past under a protected environment. Then, a "tonnage" committee decided for them what was the type and size of ships they should buy. For the rest, the vessels acquired through government subsidy were freed from the need to seek out cargo. The cargo was assured to them. Things have changed. Even state-owned enterprises have begun commissioning foreign ships to bring in government imports. What used to be captive business has been denied to domestic lines. Figures would show that the share of local shipping companies in national cargo is no more than a third. Foreign companies must be a happy lot, for sure. A major chunk of India's sea-borne cargo is accounted for by crude and petroleum products. However, new trends have begun to show up in the pattern of movement of the cargo, thanks largely to the de-regulation in oil sector over the past year. The new regime has meant that crude carriers are no longer guaranteed fixed freight rates. They were long used to such payments, whatever be the market ups and downs. Consider another aspect. Several new refineries have been commissioned. India has become a new key destination for crude supply. At the same time, the refineries are now free to opt for foreign lines to bring in crude. There have also been cut-back in imports of petroleum products because of higher production by domestic refineries. With it, the need for transportation has been reduced as well. Local shipping companies have also a new competitor to reckon with in the shape of a large upcoming pipeline network. Opportunities for coastal transportation are bound to be severely restricted by this development. On the other side, there are newer shipping opportunities in the horizon as well. Plans are on to import liquefied natural gas (LNG) on a large scale to feed India's future power and fertilizer projects. The moves involve a huge volume of business for the shipping industry. They may be worth several billion dollars. On a recent count, there were 20 potential projects on the anvil. They required 30 million tons of LNG imports a year, according to estimates. Currently, India does not import LNG nor does it have a sophisticated carrier to bring in the imported fuel. One such ship could cost around $200 million. Can the Indian companies pool the resources, strike deals with foreign partners and ensure they do not miss out on a golden opportunity? As the country's largest line the Shipping Corporation of India (SCI) for one has decided that transportation of energy is going to be the major thrust area in the years to come. Shri P K Srivastava, chairman SCI, estimates that India will have around 10 LNG (Liquified Natural Gas) carriers by the year 2010. "Of these, SCI will own and operate four to five vessels," he said recently. Typically, LNG business involves long charter of 20 years and more. What could be more lucrative to shipping companies? The prospect has attracted several global players into India. The State-owned SCI itself has made the foray by joining a Mitsui OSK-led consortium in Japan which is building a LNG vessel dedicated to long-term India charter. Currently, SCI is restructuring its business strategy. It is common knowledge that the government is set to dilute its stakes in the company to below 51 per cent. The government now holds 80 percent equity in the national carrier. Apart from SCI, Varun Shipping Company in the private sector has also announced plans to focus on LNG transportation in a big way. The company has a fleet of three LPG (liquefied petroleum gas) carriers. It has chosen US-based American Marine Advisors (AMA) to tie up funds for the proposed LNG shipping. In varying degrees, other Indian lines are also interested in LNG transportation but they cannot simply afford the carrier. Nor have they experience in handling this hazardous cargo. The Shipping Secretary Shri R Vasudevan, has made it known that the Government will soon decide on a policy framework for LNG transportation business. India may well have lessons to learn from the experience of Japanese and Korean models As of now, foreign lines are welcome to partake of the LNG business. However, they will be required to take Indian players as equity partners and transfer technology to the locals. Adopting a different strategy, the country's leading Essar Shipping Ltd (ESL) is set to revamp its fleet with new focus on capesize bulk carriers, Suezmax tankers and very large crude carriers (VLCCs). It is in the process of phasing out smaller vessels from its fleet of 36 ships. Currently, the Indian fleet has just one VLCC but SCI which owns it is seeking to park it off eastern Haldia port in West Bengal as a floating platform for crude storage. But ESL has its own reasons for the proposed acquisition of two new VLCCs as well as two second-hand capesize vessels. Buying VLCCs accords with plans of the oil industry to import 82 million tons of crude in 2001-2, rising to 130 million tons in 2006-7.

The role of seaborne trade In economic development

The idea of shipping as the catalyst of economic development is not new. Adam Smith, often regarded as the father of modern economics, saw shipping as one of the stepping stones to economic growth. In chapter 3 of The Wealth of Nations, he argued that the central economic force in a capitalist society is the division of labour, and the extent to which this can be practised depends crucially upon the size of the market. A business working in a country town without links to the outside world can never, he argued, achieve high levels of efficiency because its very small market will limit the degree of specialization.

Adam Smith saw shipping as the source of cheap transport which can open up wider markets to specialization, by offering transport for even the most everyday products at prices far below those that can be achieved by any other means. This proved to be a profound insight. Economic development has gone hand in hand with sea trade for sound economic reasons, a process which Adam Smith explains in the following way:

As by means of water carriage a more extensive market is opened to every sort of industry than what land carriage alone can afford it, so it is upon the sea-coast, and along the banks of navigable rivers, that industry of every kind naturally begins to subdivide and improve itself, and it is frequently not until a long time after that those improvements extend themselves to the inland parts of the country…a broad wheeled wagon attended by two men and drawn by eight horses in about six weeks time carries and brings back between London and Edinburgh nearly 4 tons weight of goods. In about the same time a ship navigated by six or eight men, and sailing between the ports of London and Leith, frequently carries and brings back 200 ton weight of goods. Since such, therefore, are the advantages of water carriage, it is natural that the first improvements of art and industry should be made where this conveniency opens the whole world to a market for the produce of every sort of labour.6

Technology has moved on since Adam Smith wrote these words in 1776, and the economically developed countries now have a massive inland transport infrastructure, but technology in the shipping industry has more than kept pace. Since the mid-1960s, two dramatic developments in the economic organization of the shipping business—unitization and bulk shipping—have played a major part in opening up a truly global market for both manufactures and raw materials.

The cost of sea transport

The shipping industry has been so successful at exploiting these technical developments that the cost of sea transport has hardly increased. Coal and oil cost little more to transport in the mid-1990s than in the late 1940s (Figure 1.1). In 1950 it cost about $8 to transport coal from East Coast North America to Japan.9 In 1996 it costs $12.7. Along the way there were seven market cycles, peaking in 1952, 1956, 1970, 1974, 1980, 1989 and 1995, but the average transport cost was $10.9 per ton. The cheapest year for shipping coal was 1972 when it cost $4.5/ton, while the most expensive was 1980 when it cost $24/ton. The oil trade shows the same long-term trend, with transport costs fluctuating between fifty cents and one dollar per barrel. The highest cost was during the 1956 Suez crisis when the cost went up to $2.1 per barrel. In four years, 1949, 1961, 1977 and 1994 it fell to $0.5 per barrel.

FIG 08. Transport cost of oil and coal 1950–95

Shipping—how many markets?

To understand the economic mechanisms that have brought about these changes one must step warily. While the shipping market is in some senses a single economic unit, there are important subdivisions. We have already referred to the liner and bulk industries, and probably the most striking aspect of the shipping business to an outsider is the totally different character of the companies in these sectors. Liner companies and bulk shipping companies belong to the same industry, but they seem to have little else in common, a fact we shall discuss more extensively in later parts of the book. The Rochdale Report commented on these divisions within the industry as follows:

Shipping is a complex industry and the conditions which govern its operations in one sector do not necessarily apply to another; it might even, for some purposes, be better regarded as a group of related industries. Its main assets, the ships themselves, vary widely in size and type; they provide the whole range of services for a variety of goods, whether over shorter or longer distances. Although one can, for analytical purposes, usefully isolate sectors of the industry providing THE INTERNATIONAL TRANSPORT SYSTEM

particular types of service, there is usually some interchange at the margin which cannot be ignored.

This suggests that there are several important ground rules for approaching shipping economics. First, it emphasizes the importance of the commercial divisions within the shipping market—the liner business carries different cargoes, provides different services and has a different economic structure from bulk shipping. Second, it acts as a reminder that shipping is in another sense a single market. Some shipping companies are active in both the bulk and liner markets and many ships are designed to operate in several different markets; indeed, this is one of the important shipowning decisions that we shall discuss in chapter 7. Consequently, we cannot afford to treat the market as a series of isolated compartments. We must recognize that, particularly in a depressed market, owners can move their investment from one market sector to another in order to avoid problems.12 As a result supply/demand imbalances in one part of the market can ripple across to other sectors.

The final point is that, however hard we might try to develop the analysis in economic terms, shipping is an international business and the economic forces that make it so significant in economic terms also make it the subject of national and international political intervention. The Rochdale Report concluded its definition of the shipping industry with the comment that ‘Most of the industry’s business is concerned with international trade and inevitably it operates within a complicated world pattern of agreements between shipping companies, understandings with shippers and policies of governments.’ Such matters cannot be ignored. Since the mid-1960s the maritime industry has seen an escalation of political involvement, ranging from the efforts of the Third World countries to gain entry to the international shipping business through the medium of UNCTAD, to the subsidizing of domestic shipbuilding; the regulation of liner shipping and the increasing interest in safety at sea, pollution, and crew regulations. Just as these subjects cannot easily be understood without some knowledge of the maritime economic framework within which the game is being played out, an economic analysis cannot ignore the political influences on costs, prices and free market competition. These are all subjects that will be discussed in some detail in later chapters. In this chapter we shall concentrate on discussing the shipping market as a whole. The aim is to show how the different parts and institutions within the shipping market—the liner business, bulk shipping, the charter market, etc.—fit together, and to examine the basic principles of how freight rates and ship prices are determined. From this foundation we discuss the components of the market in greater detail.

2.2 The Determinants of Export/Import In India and World

India's trade has generally grown at a faster rate compared to the growth of GDP over the past two decades. With the liberalization since 1991 in particular, the importance of international trade in India’s economy has grown considerably. As a result the ratio of international trade to GDP has gone up from 14 per cent in 1980 to nearly 20 per cent towards the end of the decade of 1990s. Given the trends of globalization and liberalization, the openness of Indian economy is expected to grow further in the coming two decades. The more exact magnitude of India's trade in 2020 and its proportion to India's national income would be determined by a variety of factors. Many of these factors are in the nature of external shocks and are beyond the control of national policy making. One illustration is the recent surge in the crude oil prices in the international market to unprecedented levels that have impacted the country’s imports in a significant manner. In addition, the implementation of various WTO agreements are likely to affect the India's trade. India's trade is also likely to be affected by various bilateral/ regional preferential trade arrangements that have been concluded and those that might take shape in the coming years.

The factors affecting Exports are classified into three, namely:

• factors affecting the demand for India's exports of goods and services;

• factors affecting the supply of India's exports of goods and services; and

• Factors affecting the demand for India's imports.

Factors Affecting the Demand for Exports

There is a multitude of factors that are likely to affect the demand for India's exports of goods and services as seen below.

Growth Performance of World Economy and Key Trading Regions

The growth rates of the world economy and world trade do influence the overall demand for India's exports. For instance, the rates of stagnation in the growth rate of world trade in the period since 1996 have affected the growth of India's exports. Some broad correspondence between the growth rates of world trade and Indian exports is evident from Figure 1. Depending upon the intensities of India's trade relations the growth prospects in these specific regions may also affect the demand for India's exports. The regions which may be particularly important for India's exports include North America, the European Union, Middle East, East and Southeast Asia and South Asia. Therefore, it will be important to watch the growth outlook and projections for these regions.
World Output and Trade at the Turn of the Century and the Outlook The world economy in 2000 seems to have fully recovered from the slow down of 1998-1999 on account of the East Asian crisis. The estimated world output growth of 4.8 percent in 2000 is highest since 1988 and of world trade at 12.4 percent is highest of the past 25 years (Table 1,). The impressive recovery of the world economy and world trade in the early part of 2000 generated optimism all around as countries expected to benefit from favourable spillovers in the form of rise in demand for their exports. However, the optimism has proved to be short lived. It has been partly tarnished somewhat by the crude oil prices hitting the roof in the third quarter of 2000 and adversely affecting the outlook of many regions besides raising the threats of inflation in different parts of the world. Furthermore and more importantly, the emerging trends confirm that a trend of slow down was set in the US economy in the third quarter of the 2000. Hence, fears of a hard landing of the US economy in 2001 have continued to grow. A scenario of hard landing of the US economy in 2001 is thus likely to short-circuit the rebound of the world economy of 1999-2000, even though the major European Union economies are improving their performance. The Japanese economy continues to remain sluggish.
The slow down of the US economy has a compounded effect on the growth of the world economy by adversely affecting the demand for the products of partner countries as well. As a result the growth rate of world output is likely to slow down in 2001 from the levels reached in 2000 to 3.2. The world economy is expected to pick up moderately to 3.9 per cent in 2002. The effect of the impending slow down is more severe on the growth rate of world trade which is likely to reduce by nearly half from the rate achieved in 2000 to around 6.5 per cent in 2001 and 2001. In the light of recent trends, the outlook for the world economy and trade growth over the next ten years could be taken at 3 and 6 per cent respectively. Table 03: Annual Growth Rates of World Output and World Trade
| |1991 |1992 |1993 |1994 |1995 |1996 |1997 |
| | | | |Projections (12/00) |Projections (05/01) |
| |1998 |1999 |2000 |2001 |2002 |2001 | |2002 |
| | | | | | | | | |
|World |2.6 |3.5 |4.8 |3.4 |3.2 |3.2 | |3.9 |
| | | | | | | | | |
|United States |4.4 |4.2 |5.0 |3.2 |2.9 |1.5 | |2.5 |
| | | | | | | | | |
|European Union |2.7 |2.6 |3.4 |3.2 |2.8 |2.4 | |2.8 |
| | | | | | | | | |
|Japan |-2.5 |0.8 |1.7 |2.1 |2.2 |0.6 | |1.5 |
| | | | | | | | | |
|Developing Countries |3.5 |3.8 |5.8 |5.0 |4.8 |5.0 | |5.6 |
| | | | | | | | | |
|Developing Asia |4.1 |6.1 |6.9 | | |5.9 | |6.3 |
| | | | | | | | | |
|East Asia 5* |-8.2 |6.7 |6.9 |5.5 |5.1 |3.4# | |4.7# |
| | | | | | | | | |
|South Asia |5.6 |5.7 |6.4 |5.5 |5.5 |5.6 | |5.9 |
| | | | | | | | | |
|Middle East | |0.8 |5.4 | | |2.9 | |4.6 |
| | | | | | | | | |
|Latin America and the |2.0 |0.2 |4.1 |4.1 |4.3 |3.7 | |4.4 |
|Caribbean | | | | | | | | |
|Sub-Saharan Africa |2.0 |2.3 |3.0 |3.4 |3.7 |4.2 | |4.4 |
| | | | | | | | | |

WTO Agreements

Since the implementation of the Final Act of the Uruguay Round in 1995, the WTO Agreements have become important factors in determining the patterns of world trade. Their full impact is not yet obvious as many provisions of these agreements are yet to be implemented because of the transition period provided. Most of the remaining provisions of the WTO agreements would be implemented in the coming five years. Therefore, the patterns of trade in 2020 would have to be speculated keeping in mind the impact of full implementation of the WTO agreements. Some of the agreements which are likely to affect India's exports are the following.

Agreement on Textiles and Clothing

The Agreement on Textiles and Clothing (ATC) proposes to phase out the MFA quotas imposed by the developed countries on the imports of textiles and clothing from developing countries over a period of 10 years ending on 31st December 2004. Given the fact that India has substantially fulfilled her quota for the products coming under MFA, it may appear that the phasing out of these quotas would help in the expansion of exports. However, the impact of the phase out is likely to be a mixed bag. This is because with MFA phase out, Indian exporters would be competing directly with other exporters of textiles and garments such as China, Korea, Taiwan, Pakistan, Thailand, Turkey, Mexico, Hong Kong, Indonesia, Macau, Philippines, Sri Lanka, Bangladesh, among others. Therefore, while ATC provides an opportunity to Indian exporters to expand their exports of textiles and garments by removing the quota restrictions, it also poses a challenge of increased international competition. Some of them will enjoy preferential access to the importing countries due to their least developed country (LDC) status such as Bangladesh.

There are apprehensions on the full benefits of phase out being available to developing countries. As such the schedule of the phase-out has been back-loaded over a ten-year long phase-out period. The industrialized countries may use other protectionist measures such as anti-dumping to prevent market access after the phase-out of quotas. A large number of textiles and clothing products already face tariffs in the range of 15 to 30 per cent in the Quad countries (World Bank, 2000). Some attempts of restricting them with anti-dumping duties have already been made against these exports including those from India.

Another factor that will affect the competitiveness of Indian exports of textiles and garments in the post-MFA regime is the availability of trade preferences to emerging competitors of India. For instance, Mediterranean countries such as Turkey, Cyprus and Malta and Central and Eastern European countries enjoy free trade agreement with the European Union ahead of their full membership. The Caribbean countries enjoy a similar preferential access to the United States market under the Caribbean Basin Initiative (CBI). Mexico enjoys a privileged access to the North American Market as a member of NAFTA. These trade preferences have already resulted into diversion of trade in textiles and clothing to these countries. For instance, Mexican exports of clothing to the United States have grown at the rate of 27 and 15 percent in 1998 and 1999, respectively with the growth rate of exports to Canada in these years being 30 percent and 26 percent, respectively. Similarly, exports of clothing from Bulgaria, Hungary, Poland, Romania, Turkey to the European Union in 1998 have grown at 26 percent, 14 percent, 11 percent, 23 percent and 11 percent, respectively (WTO, 2000).

The ability of Indian exporters to take advantage of phase out the MFA quotas by 2004 will depend upon a number of factors such as their ability to enhance overall international competitiveness with productivity and efficiency improvements, quality control, ability to quickly come up with new designs, ability to respond to changes in consumer preferences rapidly and the ability to move up the value chain by building brand names and acquiring channels of distribution to more than outweigh the advantages of her competitors. The reservation of the garment industry for small-scale sector has affected capital investment, modernization and automation in the sector in the country. Although the small sector operation has imparted flexibility, it has prevented exploitation of economies of scale and scope by the Indian industry. The new Textiles Policy takes care of some of the concerns. It remains to be seen if the Indian industry will be able to exploit the opportunities provided by the increased market access with the MFA phase-out.

2.3Problems faced by Shipping Sector and Solutions

The wide range of taxes falling on shipping business can be major burden. Industry volatility and complex rules can make it difficult to manage the group’s taxation. A flexible, efficient structure and well understood procedures are essential.

The shipping business is capital intensive: technical and environmental developments trigger an ongoing need for investment. Tax optimized financing models help lower the cost of capital investment. Managing the workforce and meeting employer compliance obligations at the lowest cost has become increasingly challenging, as shipping companies and groups become more global through Alliances and mergers.

Proposed Solutions Global Compliance - The combination of dedicated teams with state of the art software tools allows us to offer you enhanced control of your compliance globally, efficiently and cost effectively, making us a leading provider in corporate tax, VAT, sales tax and payroll compliance. Tax risk management Tax risk management should be on the Boardroom agenda. Lowering the cost of capital – Managing risks related to Tax can help to considerably bring down the capital cost. Shipping being a capital intensive industry needs to focus on the issues. Country specific Regulations – The shipping companies should be aware and take steps regarding regulations which change from country to country.

2.4 Balance of Trade and How it Affects the Country’s Economy

The commercial balance or net exports (sometimes symbolized as NX), is the difference between the monetary value of exports and imports of output in an economy over a certain period, measured in the currency of that economy. It is the relationship between a nation's imports and exports. A positive balance is known as a trade surplus if it consists of exporting more than is imported; a negative balance is referred to as a trade deficit or, informally, a trade gap. The balance of trade is sometimes divided into a goods and a services balance.

The balance of trade forms part of the current account, which includes other transactions such as income from the net international investment position as well as international aid. If the current account is in surplus, the country's net international asset position increases correspondingly. Equally, a deficit decreases the net international asset position.

The trade balance is identical to the difference between a country's output and its domestic demand (the difference between what goods a country produces and how many goods it buys from abroad; this does not include money re-spent on foreign stock, nor does it factor in the concept of importing goods to produce for the domestic market).

Measuring the balance of trade can be problematic because of problems with recording and collecting data. As an illustration of this problem, when official data for all the world's countries are added up, exports exceed imports by almost 1%; it appears the world is running a positive balance of trade with itself. This cannot be true, because all transactions involve an equal credit or debit in the account of each nation. The discrepancy is widely believed to be explained by transactions intended to launder money or evade taxes, smuggling and other visibility problems. However, especially for developed countries, accuracy is likely.

Factors that can affect the balance of trade include:

• The cost of production (land, labor, capital, taxes, incentives, etc.) in the exporting economy vis-à-vis those in the importing economy; • The cost and availability of raw materials, intermediate goods and other inputs; • Exchange rate movements; • Multilateral, bilateral and unilateral taxes or restrictions on trade; • Non-tariff barriers such as environmental, health or safety standards; • The availability of adequate foreign exchange with which to pay for imports; and • Prices of goods manufactured at home (influenced by the responsiveness of supply) In addition, the trade balance is likely to differ across the business cycle. In export-led growth (such as oil and early industrial goods), the balance of trade will improve during an economic expansion. However, with domestic demand led growth (as in the United States and Australia) the trade balance will worsen at the same stage in the business cycle.

Monetary balance of trade is different from physical balance of trade (which is expressed in amount of raw materials, known also as Total Material Consumption).

Since the mid-1980s, the United States has had a growing deficit in tradable goods, especially with Asian nations (China and Japan) which now hold large sums of U.S debt that has funded the consumption. The U.S. has a trade surplus with nations such as Australia. The issue of trade deficits can be complex. Trade deficits generated in tradable goods such as manufactured goods or software may impact domestic employment to different degrees than trade deficits in raw materials. Economies such as Japan and Germany which have savings surpluses, typically run trade surpluses. China, a high-growth economy, has tended to run trade surpluses. A higher savings rate generally corresponds to a trade surplus. Correspondingly, the U.S. with its lower savings rate has tended to run high trade deficits, especially with Asian nations.

Trade Balances' effects upon their nation’s GDP

Annual trade surpluses are immediate and direct additions to their nations’ GDPs.

To some extent exports’ induce additional increases to the GDPs that are not reflected within the export products’ prices; thus trade surpluses contributions to their GDP are generally understated.

Products’ prices generally reflect their producers’ production supporting expenditures. Producers often benefit from some production supporting goods and services at lesser or no cost to the producers.

For example governments may deliberately locate or increase the capacity of their infrastructure, or provide other additional considerations to retain or attract producers within their own jurisdictions. Nations' schools’ and colleges' curriculums may provide job applicants specifically suited to the producer’s needs; or provide specialized research and development. Nations’ entire productions contribute to their GDPs but unless those goods and services are entirely reflected within globally traded products, theses other export supporting productions are not entirely identified and attributed to their nations’ global trade and they do additionally contribute to their nation's economy.

Annual trade deficits are immediate and indirect reducers of their nations’ GDPs.

Trade deficits make no net contribution to their nations’ GDPs but the importing nations indirectly deny themselves of the benefits earned by producing nations; (refer to “Annual trade surpluses are immediate and direct additions to their nations’ GDPs”). Among what’s being denied is familiarity with methods, practices, and the manipulation of tools, materials and fabrication processes.

The economic differences between domestic and imported goods occur prior to the goods entry within the final purchasers' nations. After domestic goods have reached their producers shipping dock or imported goods have been unloaded on to the importing nation’s cargo vessel or entry port’s dock, similar goods have similar economic attributes.

Although supporting products not reflected within the prices of specific items are all captured within the producing nation’s GDP, those supporting but not reflected within prices of globally traded goods are not attributed to nations' global trade. Trade surpluses' contributions and trade deficits' detriments to their nation's GDPs are understated. The entire benefits of production are earned by the exporting nations and denied to the importing nation.

2.5 Limitations of the study:

1. The study will be limited to Indian ports (mainly Mumbai, Kandla,Vishakapatnam and Chennai) as most of the activity happens here. 2. The research will find the major problems faced by the Shipping trade and try to give solutions for them. 3. The study is limited to Secondary data available with Indian Government and the shipping companies focused upon and will suffer from disadvantage of data not being specifically collected for the purpose.

Fig 09. Types of Sources of Data [pic]

Chapter-3 RESEARCH METHODOLOGY

3.0 Methodology The research Methodology used will be Descriptive and Causal studies.

Descriptive Research Descriptive research does not fit neatly into the definition of either quantitative or qualitative research methodologies, but instead it can utilize elements of both, often within the same study. The term descriptive research refers to the type of research question, design, and data analysis that will be applied to a given topic. Descriptive statistics tell what is, while inferential statistics try to determine cause and effect. The type of question asked by the researcher will ultimately determine the type of approach necessary to complete an accurate assessment of the topic at hand. Descriptive studies, primarily concerned with finding out "what is," might be applied to investigate the following questions: Do teachers hold favorable attitudes toward using computers in schools? What kinds of activities that involve technology occur in sixth-grade classrooms and how frequently do they occur? What have been the reactions of school administrators to technological innovations in teaching the social sciences? How have high school computing courses changed over the last 10 years? How do the new multimediated textbooks compare to the print-based textbooks? How are decisions being made about using Channel One in schools, and for those schools that choose to use it, how is Channel One being implemented? What is the best way to provide access to computer equipment in schools? How should instructional designers improve software design to make the software more appealing to students? To what degree are special-education teachers well versed concerning assistive technology? Is there a relationship between experience with multimedia computers and problem-solving skills? How successful is a certain satellite-delivered Spanish course in terms of motivational value and academic achievement? Do teachers actually implement technology in the way they perceive? How many people use the AECT gopher server, and what do they use if for? Descriptive research can be either quantitative or qualitative. It can involve collections of quantitative information that can be tabulated along a continuum in numerical form, such as scores on a test or the number of times a person chooses to use a-certain feature of a multimedia program, or it can describe categories of information such as gender or patterns of interaction when using technology in a group situation. Descriptive research involves gathering data that describe events and then organizes, tabulates, depicts, and describes the data collection (Glass & Hopkins, 1984). It often uses visual aids such as graphs and charts to aid the reader in understanding the data distribution. Because the human mind cannot extract the full import of a large mass of raw data, descriptive statistics are very important in reducing the data to manageable form. When in-depth, narrative descriptions of small numbers of cases are involved, the research uses description as a tool to organize data into patterns that emerge during analysis. Those patterns aid the mind in comprehending a qualitative study and its implications.

Most quantitative research falls into two areas: studies that describe events and studies aimed at discovering inferences or causal relationships. Descriptive studies are aimed at finding out "what is," so observational and survey methods are frequently used to collect descriptive data (Borg & Gall, 1989). Studies of this type might describe the current state of multimedia usage in schools or patterns of activity resulting from group work at the computer. An example of this is Cochenour, Hakes, and Neal's (1994) study of trends in compressed video applications with education and the private sector. Descriptive studies report summary data such as measures of central tendency including the mean, median, mode, deviance from the mean, variation, percentage, and correlation between variables. Survey research commonly includes that type of measurement, but often goes beyond the descriptive statistics in order to draw inferences. See, for example, Signer's (1991) survey of computer-assisted instruction and at-risk students, or Nolan, McKinnon, and Soler's (1992) research on achieving equitable access to school computers. Thick, rich descriptions of phenomena can also emerge from qualitative studies, case studies, observational studies, interviews, and portfolio assessments. Robinson's (1994) case study of a televised news program in classrooms and Lee's (1994) case study about identifying values concerning school restructuring are excellent examples of case studies. Descriptive research is unique in the number of variables employed. Like other types of research, descriptive research can include multiple variables for analysis, yet unlike other methods, it requires only one variable (Borg & Gall, 1989). For example, a descriptive study might employ methods of analyzing correlations between multiple variables by using tests such as Pearson's Product Moment correlation, regression, or multiple regression analysis. Good examples of this are the Knupfer and Hayes (1994) study about the effects of the Channel One broadcast on knowledge of current events, Manaev's (1991) study about mass media effectiveness, McKenna's (1993) study of the relationship between attributes of a radio program and it's appeal to listeners, Orey and Nelson's (1994) examination of learner interactions with hypermedia environments, and Shapiro's (1991) study of memory and decision processes. On the other hand, descriptive research might simply report the percentage summary on a single variable. Examples of this are the tally of reference citations in selected instructional design and technology journals by Anglin and Towers (1992); Barry's (1994) investigation of the controversy surrounding advertising and Channel One; Lu, Morlan, Lerchlorlarn, Lee, and Dike's (1993) investigation of the international utilization of media in education (1993); and Pettersson, Metallinos, Muffoletto, Shaw, and Takakuwa's (1993) analysis of the use of verbo-visual information in teaching geography in various countries. Descriptive statistics utilize data collection and analysis techniques that yield reports concerning the measures of central tendency, variation, and correlation. The combination of its characteristic summary and correlational statistics, along with its focus on specific types of research questions, methods, and outcomes is what distinguishes descriptive research from other research types. Three main purposes of research are to describe, explain, and validate findings. Description emerges following creative exploration, and serves to organize the findings in order to fit them with explanations, and then test or validate those explanations (Krathwohl, 1993). Many research studies call for the description of natural or man-made phenomena such as their form, structure, activity, change over time, relation to other phenomena, and so on. The description often illuminates knowledge that we might not otherwise notice or even encounter. Several important scientific discoveries as well as anthropological information about events outside of our common experiences have resulted from making such descriptions. For example, astronomers use their telescopes to develop descriptions of different parts of the universe, anthropologists describe life events of socially atypical situations or cultures uniquely different from our own, and educational researchers describe activities within classrooms concerning the implementation of technology. This process sometimes results in the discovery of stars and stellar events, new knowledge about value systems or practices of other cultures, or even the reality of classroom life as new technologies are implemented within schools. Educational researchers might use observational, survey, and interview techniques to collect data about group dynamics during computer-based activities. These data could then be used to recommend specific strategies for implementing computers or improving teaching strategies. Two excellent studies concerning the role of collaborative groups were conducted by Webb (1982), and Rysavy and Sales (1991). Noreen Webb's landmark study used descriptive research techniques to investigate collaborative groups as they worked within classrooms. Rysavy and Sales also apply a descriptive approach to study the role of group collaboration for working at computers. The Rysavy and Sales approach did not observe students in classrooms, but reported certain common findings that emerged through a literature search. Descriptive studies have an important role in educational research. They have greatly increased our knowledge about what happens in schools. Some of the important books in education have reported studies of this type: Life in Classrooms, by Philip Jackson; The Good High School, by Sara Lawrence Lightfoot; Teachers and Machines: The Classroom Use of Technology Since 1920, by Larry Cuban; A Place Called School, by John Goodlad; Visual Literacy: A Spectrum of Learning, by D. M. Moore and Dwyer; Computers in Education: Social, Political, and Historical Perspectives, by Muffoletto and Knupfer; and Contemporary Issues in American Distance Education, by M. G. Moore. Henry J. Becker's (1986) series of survey reports concerning the implementation of computers into schools across the United States as well as Nancy Nelson Knupfer's (1988) reports about teacher's opinions and patterns of computer usage also fit partially within the realm of descriptive research. Both studies describe categories of data and use statistical analysis to examine correlations between specific variables. Both also go beyond the bounds of descriptive research and conduct further statistical procedures appropriate to their research questions, thus enabling them to make further recommendations about implementing computing technology in ways to support grassroots change and equitable practices within the schools. Finally, Knupfer's study extended the analysis and conclusions in order to yield suggestions for instructional designers involved with educational computing

Causal Research Design Casual research design is the study that explores the effect that one things has on another thing. The research is done in a thorough way that shows the effect that each variable has on the each thing. An example of this research can begin with a clothing store that sells jeans and the store changing the color of the jeans to white. As the managers of the company are trying to make this decision, they may casually research how this decision can impact their sales and their business in the future. If they go through with it, their decision may help them make more money or less. This can impact sales, profits, and their future.

1. Hypotheses

• Shipping industry is facing problems due to increase in fuel rates globally and the increase in building material costs (Steel and Aluminum). • Shipping has been given a status of an industry but little efforts are being expended to expedite its growth in India. • The Imports are far greater than Exports leading to Trade Deficit widening over the years.

The Hypotheses was based on the following facts and figures, and will be tested in the due course of the Research.

Current Macro-Economic Picture of India

When trying to understand macro economic situation in India over time, one can observe two major points. The independence in 1947, and the economic liberalization in the early1990s. Independence from the United Kingdom paved the way for a self-sufficiency drive and led to indigenization of many basic industries. Major industrial and economic reform was introduced in 1991 to correct continuing high inflation, high fiscal deficits, and foreign exchange shortages. However the immediate cause for the reform was an economic crisis due to: (1) the collapse of the Soviet Union, then India’s largest trading partner, and (2) the sudden drying up of both the domestic and West Asian markets due to the Gulf War, and (3) the spurt in the price of oil, the single largest import commodity for India. As a result, balance of payments became almost unmanageable; the current account deficit nearly doubled in the last half of the 1980s; likewise, the debt service burden rose to nearly 30% of export earnings in 1990 to 1991. In mid-1991 India negotiated a structural adjustment loan with the International Monetary Fund (IMF) that provided a mechanism for liberalizing and reforming its economic system.

After the opening up of the Indian economy for foreign trade and investment since 1991, the world’s second most populated nation, previously unreachable by foreign business, quickly has become a huge source of labor to both produce, and a source of consumers to consume raw materials and finished products. India’s gross domestic product (GDP) has recorded consistent growth after the liberalization to reach a rate of 8% per annum over the last three years in 2006. At the current rate, India’s GDP in nominal terms will reach US$1 trillion by 2011, US$2 trillion by 2020, US$3 trillion by 2025, and US$27 trillion by 2050, becoming the third largest economy after USA and China. It is expected that this growth will be sustained if not improve.

Fig 10.A snapshot of foreign trade of India and China

Fig 11.A snapshot of foreign trade of India and China

Fig 12.Nominal GDP estimates from World Bank and IMF in 2013

The export growth has been on a higher trajectory rising from US$31 billion in 1997 to US$57 billion in 2009 to US$110 billion in 2012, and is expected maintain the momentum in the near future. Estimates by McKinsey predict that India could lift its share in world trade to 3.5% by 2015 from a share of 0.5% in 1997. Further there has been significant increase in foreign direct investment in India as an alternative to China in low cost manufacturing . All this add up to significant growth in container shipping volumes and increased use of raw materials and energy.

There has been very less efforts to develop the industry. It has been badly hit by the current global economic slowdown. However the volumes has been increasing both in Exports and Imports. This has lead to progress but this is not balanced as the Imports have increased far quicker than exports leading to Trade – Deficit.

[pic]

Fig 13. Export Import September 2012 – August 2013

Chapter – 4 REVIEW OF LITERATURE

4.0 Temporal Studies

INTRODUCTION

The comprehensive literature centered on economies pertaining to empirical findings and theoretical rationale tends to demonstrate that development of Shipping Industry is necessary for sustained economic growth and development of any economy in this era of globalization. The reviewed literature is divided under the following heads:

• Temporal studies

• Inter – Country studies

• Information Gaps and Future Research Needs

Temporal Studies

The Government of India paper on advancement of shipping trade gives a close look at how the shipping trade has progressed over the years

1. Importance of maritime transport in economic development and in international trade

Ocean transport or shipping plays an important role in the trade and economic development of nations. In fact, transport, trade and economic development are mutually supportive. The overwhelming share of shipping in the carriage of about 95 per cent in terms of volume and almost two thirds of the total value of international trade establishes its predominance and importance as a mode of international transportation system. The importance of shipping, over the period, has also increased due to the technological developments in transport, especially in terms of containerization culminating in multimodal transportation on door-to-door basis, since majority of the containers move by this mode of transport.

2. Role of shipping in India’s foreign trade and foreign exchange earnings

In case of India, shipping constitutes an essential component of the country’s international trade since about 90 per cent of her overseas trade in terms of volume and about 77 per cent in terms of value moves by sea. In view of the vital role played by shipping industry in furthering the growth of overseas trade, as also as a direct earner and saver of foreign exchange, the Government right from the beginning of planning era in 1950-51 has been endeavoring to build adequate national fleet.

Shipping is a valuable invisible export or foreign exchange earner for any country. Over the period, Indian shipping has improved its foreign exchange flows, as the gross earnings/receipts increased from Rs 26.98 billion in 1991-92 to Rs 57.2 billion in 1999-2000 and the net inflows increased from Rs 15.6 billion to Rs 35.3 billion during the same period. 3. Growth of Indian shipping fleet

Indian shipping fleet which possessed 59 ships with a total tonnage of about 0.19 million GT at the time of independence (August 1947) gradually increased to 0.37 million GT in 1951, i.e., the beginning of the First Five Year Plan. Since then the same registered a remarkable growth till the end of the Sixth Five Year Plan, i.e., 31 March 1985. In the subsequent years, there have been fluctuations in the growth of the shipping fleet as the achievement in terms of fleet size fell short against the fixed target. The target of 9 million GT fixed for Ninth Five Year Plan is unlikely to be achieved since the shipping fleet as on 1 April 2001 was 546 ships aggregating only 6.84 million GT, which is almost the same level as at the beginning of the Plan period.

4. Growth of India’s overseas trade and the shipping capacity

Over the period, the movement of traffic in terms of export and import cargoes has witnessed a remarkable growth increasing from 30 million tons in 1960-61 to 224.6 million tons in 1999-2000, but the capacity of Indian shipping has not shown the corresponding growth, since the same increased from 0.9 million GT to 6.8 million GT during the same period. Consequently, the dependence on the foreign flag ships for the carriage of overseas trade is becoming higher and higher. Over the last 20 years, the share of Indian trade carried in Indian ships has rarely risen above 35 per cent excepting three years, i.e., 1984-85, 1986-87 and 1987-88 when it was 36.0 per cent, 37.8 per cent and 40.7 per cent respectively. Currently, the share of national shipping in the carriage of country’s overseas trade is merely 31.5 per cent and in case of the general cargo, the share is even lower, i.e. only about 8 per cent. Continued slippages in the share of Indian shipping in the carriage of India’s overseas trade is resulting in increasing dependence on foreign flag ships for the carriage of overseas trade and in turn causing a drain on precious foreign exchange in terms of payment of freight charges, which could otherwise be used for other high priority imports or for building up indigenous infrastructure.

5. Availability of international shipping services to trade

The shipping services in India are also patterned similar to the global shipping services, namely, tramps and liners. The types of ships engaged in India’s overseas trade include dry cargo liners, cellular container ships, dry cargo bulk carriers, ore/oil/bulk carriers, oil tankers (product carriers), passenger-cum-cargo vessels, acid carriers, timer carriers, LPG carriers, RoRo ships, OSVs and specialized ships. The shipping industry also caters to the requirements of coastal trade and offshore supply vessels (OSVs) for ONGC and GAIL.

During the last 50 years, India’s overseas trade has expanded considerably both in terms of composi-tion and direction due to the policy of export promotion being pursued by the Government. At the same time, efforts are being made to provide and improve the trade related infrastructure, especially the transport, to facilitate the movement of traffic more efficiently. So far as the movement of traffic by ships to overseas destinations is concerned, both Indian as well as the foreign flag ships operating conference and non-conference liner shipping services have been providing the services either directly or through transshipment arrangements for the general cargo in break-bulk or containerized form. Similarly for the bulk cargo moving either as imports or exports, the services of tramp ships both Indian and foreign usually engaged on chartering basis are available to all the destinations.
6. Port infrastructure for foreign trade

India is served by twelve major ports, handling more than 75 per cent of the total sea borne trade, and a number of small and minor ports, located along country’s coastline. The development of major ports is the responsibility of the Central Government, while the operational and administrative responsibility for the development of the intermediate and minor ports rests with the maritime states under whose jurisdiction they fall, although technical assistance wherever necessary is provided by the Central Government. 7. Port capacity and traffic throughput
| | | | | |
| | | | | |
|Year |Capacity |Traffic |Capacity Utilization | |
| |(In Million Tonnes) |Handled | | |
| | | |(Per cent) | |
| | | | | |
| | | | | |
|1984-85 |132.7 |107.8 |81 | |
|1985-86 |141.9 |119.5 |84 | |
|1986-87 |141.9 |124.4 |88 | |
|1987-88 |141.9 |133.7 |94 | |
|1988-89 |141.9 |146.4 |103 | |
|1989-90 |162.8 |148.4 |91 | |
|1990-91 |162.8 |152.9 |94 | |
|1991-92 |169.2 |157.6 |93 | |
|1992-93 |170.2 |166.6 |98 | |
|1993-94 |170.2 |179.3 |105 | |
|1994-95 |174.0 |197.2 |113 | |
|1995-96 |181.2 |215.3 |119 | |
|1996-97 |219.5 |227.3 |104 | |
|1997-98 |239.5 |251.4 |105 | |
|1998-99 |254.4 |251.7 |105 | |
|1999-00 |254.4 |272.0 |107 | |
|2000-01 |291.0 |281.0 |91 | |
| | | | | |

Table 05. Capacity Utilization at Ports in India

Ever since the beginning of planning era, i.e., 1950-51, expansion of port capacity has been an important aspect of development programmes obviously due to increasing volume of traffic. There has been progressive development towards capacity building during the past decade or so. The table (table 1) in the next page gives the trends in ports capacity, traffic throughput and the capacity utilization from 1984-85 onwards:

The total capacity at the major ports is expected to be 344 million tons at the end of Ninth Five Year Plan (31 March 2002) against the envisaged traffic of about 300 million tons (about 86 per cent capacity utilization), thus bringing a great relief to the existing overworked ports. Besides, the port development projects taken up by the state governments in respect of minor ports and also the establishment of captive ports would boost the capacity expansion programmes in the port sector.

8. Privatization/liberalization of port sector

In order to accelerate the pace of privatization, in line with the overall policy of liberalization of the Government, policy guidelines on private sector participation in port development were issued by the Ministry in 1996. As a result, a substantial capacity, particular container handling facilities funded through private sector funds has been created during the Ninth Five Year Plan.

The port services in India is one of the most liberalized sectors in the world, as most of the port services are now open for private sector participation, including foreigners. The foreign port operators have responded in operation of container terminals. At present, 3 most prestigious container terminals one each in Jawaharlal Nehru, Chennai and Tuticorin ports are being operated by the foreign companies. This has, on the one hand enhanced the capacity of ports, on the other hand has set benchmark for efficiency, leading to much reduced waiting time for ships as also the time taken at the berth has been reduced drastically.

Existing policies/laws/regulations

1.Market access and restrictions on specific trades

Market access, i.e. access to the carriage of cargo traffic assumes a great significance so far as shipping services are concerned. The dearth or denial of opportunity to carry cargo, both bulk as well as break-bulk, even originating in their own countries or belonging to them is one of the most important factors inhibiting participation of mercantile fleet of developing countries. This is primarily due to the terms of trade being used by the major trading partners of the developing countries which are more favourable to them, i.e., buying on FOB/FAS and selling on CIF/CFR basis.

Imposition of restrictions on maritime transport services can adversely affect the price, reliability and quality of these services. These are in fact barriers that limit maritime service suppliers from entering or operating in a market. Such restrictions are imposed by some governments through legislation and regulation. Such restrictions may be discriminatory or non-discriminatory against foreign service suppliers. Cargo support in favour of national shipping is nearly universal, since reservation of national cargoes for national bottoms provides the national fleet with a certain degree of stability in an otherwise violently cyclical market. This stability has an extremely positive impact on the eventual financial strength of national shipping companies and their ability to raise capital competitively. In case of Indian shipping as well, cargo support was made a cardinal principle of national policy which proved to be a great source of strength in promoting the growth of the national fleet. Since the key to cargo support is provided by controlling the terms of shipment to buy on FOB and sell on CIF basis, the Government of India also formulated a policy of FOB/FAS imports and CIF exports in 1957.

The policy of buying on FOB/FAS and selling on CFR/CIF basis in respect of Government cargoes on account of Central Ministries and the Departments/State Governments and its Departments, Public Sector. Undertakings and Projects under them was felt necessary due to a host of factors. For example:

i) Retaining control over shipping,

ii) Providing cargo support to Indian shipping,

iii) Saving outgo of valuable foreign exchange and earning foreign exchange in cross trades,

iv) Controlling freight level and commodity price in national interest, etc. Under this arrangement, the government owned/controlled cargo is channeled by the charting wing of the Ministry of Shipping, called Transchart. As per this policy the first right of refusal for carriage of such cargo was given to Indian vessels.

However, pursuant to the policy of trade liberalization in mid-1991 resulting in decanalization of various items, like rock phosphate, sulphur, ammonia, phosphorus acid, DAP, MOP, etc. and entry of private trade in import of these items, Transchart’s role for making shipments arrangements for the cargoes under reference has been marginalized and the same is likely to further go down in the near future due to the changing pattern of trade in which private sector will be having a greater role to play.

Moreover, the declining share of national carriers in the total overseas trade of the country and remaining within a range of 28 per cent to 35 per cent especially in the post liberalization era clearly reflects that India has not been following strictly any cargo support policy even in respect of cargo being imported or exported by the Public Sector Undertakings, since lately they have been demanding relaxation in the policy of going through Transchart for making the shipment arrangements due to the growing competitive business environment in which now they have to operate.

In the context of market access, it may also be highlighted that the lower share of Indian shipping in the carriage of country’s overseas trade is due to the terms of trade used by India’s trading partners, who, by and large, have been buying and selling goods on terms more favourable to them. Thus from India’s point of view, there is no protection as such for the national carriers and no restrictions for the ships of other countries to carry cargo from Indian ports.

The carriage of coastal trade is governed under the cabotage principle in many countries, developed as well as developing. India too, has a scheme of 100 per cent reservation of coastal trade for the national carriers, since the movement of traffic within a country’s ocean territory has always been considered as part of the internal transport system. However, any dispensation permitting the foreign flag in the coastal trade is given on voyage to voyage basis. 2. Bilateral/unilateral cargo reservation schemes

Bilateral shipping arrangements are considered to be an effective tool to ensure cargo support to the national bottoms and is reportedly used by some of the countries in the world.

Initially, India used to have bilateral trade and shipping agreements with some of the Eastern Bloc Countries and UAE, according to which there was parity (50:50) in terms of sailings and the carriage of trade by the carriers of the respective trading partners. This system proved quite effective in ensuring cargo support for the national carriers and thereby better utilization of ships in the liner trade, especially in case of India. However, due to the changes that have taken place in the economies of those countries, over the period, no such agreements or schemes are currently in force.

3. Subsidies

Some of the developed countries are reportedly extending the facilities of operational and construction subsidies, concessional credits, registration of vessels in open registry countries, tax incentives or assis-tance for shipbuilding or operation costs aiming at the development of shipping activities or sometimes at the maintenance of already established position of their national merchant fleet. For the carriage of donation cargo, not only preference is given to the national ships, but there is also scheme of subsidizing the carriage of such cargo. Non-financial support include measures like cargo reservations and cargo preferences for national carriers.

In India, grant of soft loan funding assistance for ship acquisitions was one of measures taken by the Government for the development of national shipping and for this Shipping Development Fund Committee (SDFC) was set up in 1958. SDFC disbursed large amounts at very attractive rates of interest varying from 3 per cent during 1959 to 1971 to 7.5 per cent from 1980 to 1986. However, SDFC was abolished in 1987 and now no one financial institute has been given an exclusive mandate for financing the shipping sector. Similarly adoption of certain fiscal measures, e.g. additional 1 per cent REP license in case of utilization of national carrier for the carriage, were also directed towards the development of shipping fleet. All schemes have been removed during the past one and a half decades, especially after the introduction of the policy of liberalization. Since the financial support to the shipping industry is almost non-existent, the same has been left with no option but to take care of its requirement through ECBs or such other instruments so far as the raising of funds for acquisition of ships is concerned.

Further, there exists no scheme for subsidizing the national carriers in the carriage of cargo and there is also no cargo preference for them and the trade is thus open for being carried by the ships offering competitive freight rates. Even in case of shipments of Government controlled cargoes or the cargoes traded by the Public Sector Undertakings for which the fixation of ships by Transchart is done, Indian bottoms do not get any price preference, they have to match the lowest price

National (plan/policy) towards liberalization

1. Policy towards liberalization of maritime transport services

In case of shipping and port sectors, especially, the policy has been towards encouraging openness. For example, foreign direct investment (FDI) is permissible up to 100 per cent. Various measures towards liberalization of shipping sector include automatic approval for acquisition of all categories of ships (except crude tankers and OSVs) by private shipping companies, sale of ships for further trading/scrapping to Indian companies within India or abroad, acquisition of replacement tonnage, permitting shipping compa-nies to retain sale proceeds of Indian ships abroad and utilization of the same for fresh acquisition and freedom to charter out Indian ships to foreign shipping companies for employment in international cross trade, on case to case basis.

4.1 INTER – COUNTRY STUDIES UNCTAD (United Nations Conference on Trade and development) in their review paper in 2011 on Review of Maritime Transport have illustrated various issues faced by the Trade.One of the most important issues raised is the development in International Trade. Developments in international seaborne trade The world economic situation has brightened in 2010. However, multiple risks threaten to undermine the prospects of a sustained recovery and a stable world economy – including sovereign debt problems in many developed regions, and fiscal austerity. These risks are further magnified by the extraordinary shocks that have occurred in 2011, which have included natural disasters and political unrest, as well as rising and volatile energy and commodity prices.

Given that for shipping, all stands and falls with worldwide macroeconomic conditions, the developments in world seaborne trade mirrored the performance of the wider economy. After contracting in 2009, international shipping experienced an upswing in demand in 2010, and recorded a positive turnaround in seaborne trade volumes especially in the dry bulk and container trade segments. However, the outlook remains fragile, as seaborne trade is subject to the same uncertainties and shocks that face the world economy. A Report Published by Oxford Economics on “The Economic impact of the UK’s Maritime Services Sector” shows the relation between various variables that affect the economy – The highlights of the paper are -

1. It directly creates 227,000 jobs – The relation between jobs the maritime sector. 2. Contributes £13.1 billion to UK GDP – Contribution to GDP. 3. Generates £3.1 billion to the UK exchequer – Through taxes of employees and trade taxes.

A paper by Sarah Gardner, Matthew Tonts and Carmen Elrick on “A Socio-economic Analysis and Description of the Marine Industries of Australia’s South-west Marine Region” Prepared for the Department of the Environment and Water Resources states that there has been considerable developments in marine tourism and recreation, ship and boat-building, and aquaculture. From a marine planning perspective, it is important to recognise that many of these industries are also dependent on the ecological sustainability of the region’s natural environment. Accordingly, the careful management of the marine environment will help contribute to the viability of the economic and social systems of the region

4.2 Information Gaps and Future Research Needs There are a number of specific limitations with current data sources:

• Time-series data is often difficult to obtain for two main reasons (i) most research is conducted on the basis of one-off cross-sectional analysis; (ii) the terms of reference, research questions or collection and analytical techniques change over time. As such, it is often not possible to provide an analysis of change over time, which is crucial for establishing trends and, potentially, future scenarios.

• Much of the data are available only at a country-wide level, and do not conform to the Globe. In addition, data are often not available at a fine enough spatial scale to establish significant differences between places. This is an important issue given the diverse environmental, economic and social geography of World. There is a need to take these spatial variations into account in the final analysis. In addition to these broader methodological issues, it is clear that a number of specific information gaps exist. These include:

• data on the economic impacts of various commercial uses on local and regional economies, incorporating a consideration of employment and other economic multipliers.

• data on the potential economic and social impacts of new industries in the region

• information relating to the economic and social linkages between different users in theregion, in terms of resource use and employment

• an understanding of the social values of the region, particularly as they relate to marine uses and activities

• analysis of the demographic trends in the region, focusing on future population structures (e.g. age/sex, socio-economic status), migration patterns, and settlement sizes

• scenario analysis with the users of the region to determine future threats.

5.5 Essar Shipping

5.7 Mitsui O.S.K Lines (India) Private Limited

5.8 ABS Marine Services Pvt. Ltd.

5.9 BHN Shipping Company Pvt. Ltd

References

1."Maersk Group home page". Maersk.com. Archived from the original on 12 October 2007. Retrieved 2007-12-04. 2. Mærsk · manden og magten, p. 96 3.Mærsk · manden og magten, p. 98 4. Mærsk · manden og magten, pp. 98-102. 5. "NORDIC ROUNDUP: Maersk Orders 10 Container Carriers - Source - WSJ.com". The Wall Street Journal. 22 February 2011. Retrieved 2011-02-22.

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