Together, for a better future: Maersk Line

Steve Felder of Maersk Line on how cabotage law reform and government vision for the shipping industry will fortify Indian port’s global competitiveness.

 

By Nidhi Raj Singh

 

Maersk Line, one the world’s largest container shipping companies, is upbeat about new reforms and developmental work undertaken by the shipping ministry. Steve Felder, Managing Director-India, Sri Lanka, Bangladesh, Nepal, Bhutan and Maldives tells us about the long-standing relationship this company headquartered in Denmark has with India, and how India is poised to become a shipping giant. Excerpts:    

 

Has the bunker price surge this year affected your business? What long-term impact will it have on the industry?
The shipping industry is highly exposed to the fluctuations in the price of oil, bunker fuel too. Since the beginning of this year, and in particular since April, bunker price has increased sharply, reaching the highest level since 2014. With the bunker price currently exceeding $440/tonne in Europe, the bunker cost increase is more than 20 per cent since January. Due to the rapid and very significant increase in bunker price this year, we can confirm that Maersk Line has introduced an Emergency Bunker Surcharge (EBS) globally, including India, with effect from June 1, 2018 (FMC-regulated contracts from July 1, 2018) in order to ensure a continued sustainable service to our customers.

This May, the Indian government relaxed the Cabotage laws. What reforms can the logistics sector see?
We welcome the relaxation of cabotage legislation in India, and applaud the leadership of Nitin Gadkari, Minister for Road Transport & Highways, Shipping and Water Resources. Indian ports are currently unable to compete with the likes of Colombo, Salalah, Singapore and Jebel Ali. More than 30 per cent of Indian container traffic is transshipped at ports outside India. In fact, 78 per cent of cargo originating from or destined to the east coast of India is transshipped at ports outside India. We, therefore, believe this reform will be an enabler to enhancing India’s global competitiveness by bringing greater competition in the coastal feedering market, and enable Indian ports to equitably compete for transhipment traffic. Government will, however, have to fast track the development of a viable transshipment port, and deepen the draft at certain ports to handle larger vessels.

 

What are the points that leave more to desire when it comes to doing business in India? What impetus do you think the government should provide the industry in near future?
The Government of India has clearly recognised the importance of alleviating trade bottlenecks, as evidenced by large infrastructure initiatives such as Sagarmala project, expansion of inland waterways, dedicated freight corridors, logistics hubs, and the development of smart cities. However, more can be accomplished, starting with taking inspiration from government’s Digital India project and speeding up the pace of implementation of Single Window Systems to enable efficient Customs clearance. There are currently insufficient capabilities for Electronic Data Interchange (EDI), which means that certain actors in the supply chain are unable to interact with the Port Community System (PCS) efficiently. The improvement of infrastructure around the ports, including upgrade of rail connectivity and road development can be sped up. It will also reduce the congestion and improve ease of operations. Education and training in the logistics sector, which is currently under-represented in the formal education system, can also be scaled up. 

 

The Indian shipping industry has recently seen some significant growth. How do you see Indian ports fairing in the current global scenario?
If we consider that only a decade ago, many Indian ports such as Nhava Sheva and Chennai were perpetually congested with structural lack of capacity, the picture is very different today. The expansion of some major ports such as Nhava Sheva and Mundra, coupled with various productivity improvements, a gradual improvement in infrastructure, and the introduction of new non-major such as Kattupali, Krishnapatnam and Paradip have created a situation of balanced capacity, in fact over-capacity in some areas. That being said, it is worth mentioning that according to the World Bank, India must invest in connectivity to the ports, especially road and rail infrastructure. There is sufficient port capacity available right now, what is not available is sufficient multi-modal connectivity to existing ports. About 69 per cent of the Indian population resides in the hinterland, and inland markets are growing at higher pace than coastal markets. When Maersk Line first entered the Indian market in 1990, the need for investments in building port capacity and connectivity was high. Our Group met the challenge through our investment in two APM Terminals facilities, GPPL in Pipavav and GTI in Nhava Sheva, as well as our Inland CFS and ICD portfolio. Maersk Line called in several smaller ports, in order to improve connectivity and make these markets viable. Today, we see a significant opportunity to lower the cost of trade. Our own research shows that a 10 per cent reduction in logistics costs has the potential to generate additional exports of up to 5-8 per cent in four important sectors: agriculture, textile, pharmaceuticals and automotive.

 

Where does India stand in the Maersk global outlook? 
India’s economy continues to grow and we remain confident of its growing role in global trade. As a global integrator of container logistics, Maersk Group remains committed to partnering with India in its transformation, through strategic investments in lowering costs of trade for Indian businesses. For example, we are investing in facilitating capital for Indian small and medium costumers. According to a report by the Ministry of Micro, Small and Medium Enterprises, these companies account for 40 per cent of India’s total exports and are an important part of the Government’s Make in India vision.Secondly, piloted in India, Maersk Trade Finance is now operating in six countries. We offer post shipment export finance solutions in India and since 2017, have disbursed over $100 million to our customers here. In the next 12 months, we will lend another $200 million to Indian businesses. We have recently inaugurated a cold storage and distribution facility near Chennai, to cater for perishable goods. Although it comes at a higher cost, Maersk Group remains fully committed to responsible ship recycling, not least in Alang, India, where our local engagement has made a very concrete positive change in a short period of time, enabling yards to compete not only on price but also on social and environmental standards. Indians are also the second largest nationality employed on our vessels globally. India is home to Maersk Group’s largest global service centre operations, employing over 8,000 professionals handling service delivery and business relationships.

 

Are there new collaborations in the pipeline between Maersk and Indian companies?
India is an innovative country with a high level of tech savvy population. We are working with a number of our customers on Blockchain solutions, to simplify and secure their supply chains, and reduce the amount of paperwork. Damco, our logistic brand, is about to launch in India and pilot from its new digital platforms, Twill. In addition, we have established a Digital Center of Excellence in Bengaluru to support our global digital drive and confront our toughest operational and commercial challenges, thus, leveraging Indian talent. 

 

 

Managing Editor

Nidhi Raj Singh is the Managing Editor of L'Officiel India. You can find her hidden behind a book when she is not writing or taking photos.