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TRANSPORT AND LOGISTICS

Water
Transportation
in India

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Introduction
Water is a critical mode of transportation
for any economy. Although it is a
cost-effective and environment-friendly
mode of transport, its share in the modal
mix in India is significantly less than that in
developed countries. Domestic shipping
provides significant fuel and cost savings
over road and rail transport and, thus,
offers several opportunities to meet the
demand for bulk transportation to
nearby areas and along the coast, which is
highly relevant for India. However, its low
penetration in the country is a result of the
long period it takes to transport goods, the
unavailability of return cargo, lack of
awareness of its benefits and various
regulatory policies.

This document highlights the

opportunities for water as a mode of
transportation in India as well as its
challenges, with an emphasis on coastal
shipping and the inland water transport
system.

Coastal shipping
Coastal shipping plays a significant role
in the development of domestic industry
and trade due to its environment-friendly,
cost-effective and fuel-efficient services. It
is highly relevant for India, since the
country has a long peninsular coastline.
In recent years rising delays and costs
due to high road and rail congestion has
been driving companies to considered
coastal shipping to transport their goods.
However, Indias coastal shipping potential
continous to be significantly underutilised
when compared with other emerging and
developed countries.

KPMG in India analysis

At 7 percent, the share of coastal shipping

in India in overall cargo movement is low
compared to that of the United States and
some European and Asian countries. This
can be largely attributed to insufficient
infrastructure and the absence of
favourable policies in India, which are
driving the sector in developed countries.
For instance, the European Union
introduced the Marco Polo scheme, which
is aimed at decongesting roads to
incentivise shippers who shift cargo from
roads to rail, short-sea shipping routes or
inland waterways. The first phase of this
initiative lasted from 20032007, and it is
currently in its second phase.1

Comparison of coastal shipping penetration in the movement of domestic cargo

(2012)

Source: EXIM India, Marco Polo, CII Logistics, Reuters, KPMG in India Analysis

State governments in India are introducing

schemes to promote coastal shipping.
For instance, the Kerala Government has
initiated a scheme to promote coastal
shipping for cargo generated out of the

state. This is a step in the right direction

and is likely to influence national policy
on coastal shipping, which may lead to
coastal shipping becoming an alternative
transport mode in the long run.

Coastal shipping case study : Kerala

Objective

Incentives
Incentive of INR1 per tonne per km
will be provided.
For example, if 1 tonne cargo is
transported from the Jawaharlal
Nehru Port Trust (JNPT) to Vizhinjam
and the distance is 1,085 km, the
incentive provided will be at the rate
of INR1 per tonne per km moved
along the coast of Kerala. In this case,
this amount will be about INR540 per
tonne.
The state government has currently
allocated INR0.03 billion toward the
Coastal Shipping Promotion Fund
(CSPF), which, when fully grown, will
have a corpus of INR3 billion.
Coastal vessels will enjoy discounts
in port charges.

Soft loans will be provided to

purchase vessels at an interest rate
of 2 percent for up to 40 percent of
the vessels cost and at a rate of 10
percent for up to 80 percent of the
vessels cost.
Proposed activities include the
development of infrastructure at minor
ports.

The government has identified four

types of cargo for coastal shipping
construction materials, food grains,
LPG and vehicles. Kerala receives
these from other states by road or
rail. The government prefers to
receive them via ships.
The target is to divert at least 20
percent of the cargo currently moved
by road to coastal shipping by 2015
and 40 percent by 2020.
The operationalisation of CSPF
depends on the constitution of the
Kerala Maritime Board, which will be
the implementing agency of the fund.
Beneficiaries
Service providers who operate ships.
Status
The scheme has been operational since
March 2013.

Source : KPMG in India analysis

Coastal shipping share of domestic cargo (by volume)

Source: CRISIL, Primary discussions, KPMG in India Analysis

The share of coastal shipping in the overall domestic cargo movement is significantly
lower than that in road (57 percent) and rail (30 percent) due to the following reasons:

Low cost of movement by

rail and road

Absence of concessional
finance for the acquisition
of coastal vessels

High operating costs in

coastal shipping

Inadequate facilities at
ports for coastal vessels

The concessional freight that the railways provide on transporting large volumes of
commodities to long distances gives tough competition to coastal shipping.
Further, the subsidy provided on diesel reduces the overall cost of transporting goods by
road. However, the government has recently decided to gradually revoke subsidy and raise
diesel prices to actual market rates.
The absence of concessional and long-duration finance creates significant debt servicing
burden on ship owners. This makes coastal freight uncompetitive vis--vis road and rail
freight.
The typical interest rate charged to coastal ship owners is between 1214 percent annually
for an average period of seven years. This financing structure mandates ship owners to pass
on the effects of high financing cost to end-shippers.
High duties/taxes on bunker fuel increases operating costs, which, in turn, can potentially
drive up freight costs and render coastal shipping uncompetitive vis--vis road and rail
transportation.
Further, the manning scale for coastal vessels is as high as it is for ocean vessels. This has a
direct bearing on operating costs for coastal ship owners.
Long waiting times at major ports and the absence of dedicated berths for coastal shipping
increase the cost of coastal vessels. Waiting time at major ports such as JNPT has been
observed to be significantly high, which results in increased working capital requirement for
coastal ship owners.
Additionally, the absence of quality handling facilities at minor ports creates challenges for
coastal vessel operators. Moreover, connectivity between the hinterland and minor ports is
not as strong as it is for major ports.

Source: KPMG in India analysis

The commodities that coastal shipping

currently handles largely includes bulk
and break bulk cargo. Transporting general
cargo, which falls under the others
category, takes a long time through
coastal shipping as compared to other
modes. Moreover, limited awareness of
return cargo and movement through
containers and coastal shipping has
contributed to low penetration levels.

However, there has been a marginal

increase in this category in the last five
years due to growth in containerised cargo
especially cargo such as marble, tiles,
bentonite and soda ash and an increase
in the movement of project cargo through
coastal shipping.

Cargo mix on coastal shipping (by volume)

Note: Others include automobile, steel, containerized cargo, project logistics, and foodgrains
Source: CII Logistics, Primary discussions, KPMG in India analysis

Coastal shipping is most suitable for bulk-solid and container cargo. However, their
current movement through the coastal route is low. The following table illustrates the
ideal mode of transportation for different types of cargo.
Cargo category and ideal mode of transportation

Source: Primary discussions, KPMG in India analysis

It is important to promote coastal shipping as a preferred mode of transport over road or

rail, especially along specific routes, because of its various advantages. The key benefits
of transporting goods via coastal shipping vis--vis road and rail transportation include:

Economical mode

The cost of coast-to-coast transportation of goods by

coastal shipping is about 21 percent of that of road
transport and 42 percent of that of rail transport.

Lower fuel consumption

per tonne of cargo

Fuel consumption by coastal shipping is 4.83gms/tkm,

which is 15 percent of consumption by road and 54
percent of that by rail.

Significantly more environment-friendly

Carbon dioxide emission from rail transport is twice

that from coastal shipping and six times that from road
transport.

Low rate of fatalities

Road and rail movement result in a significant loss of

lives in India. It is estimated that one life is lost in a
road accident every 3.7 minutes in India.

Source: KPMG in India analysis

The development of coastal industries is expected to facilitate access to ports, which

would, in turn, lead to the optimum utilisation of coastal shipping to transport raw
material and finished goods. The following table presents potential routes to transport
cargo through coastal shipping:
Commodity

Key routes

Mundra Cochin
Cement

Cuddapah - Krishnapatnam - Haldia- Burdwan

Cuddapah - Krishnapatnam - Cochin
Kandla to Mangalore

Fertilisers

Haldia to Vizag
Paradip to Chennai

Commodity

Key routes

Panipat Kandla Mangalore

Food grains

Panipat Kandla Kochi

Panipat Kandla Chennai
Guntur Vizag - Haldia

Steel

Marble

Jamshedpur - Chennai
Rourkela - Chennai
Udaipur Kochi
Udaipur Chennai
Gandhidham Kandla Mangalore

Salt

Gandhidham Kandla - Kochi

Tuticorin - Haldia
Tuticorin - Paradip
Vellore Chennai Paradip Bhubaneswar

Sugar

Vellore Chennai Haldia Kolkata

Belgaum - Mangalore Kandla - Ahmedabad
Pune - Chennai

Automobiles (# of cars)

Pune Kochi
Gurgaon - Kochi

Tiles

Morbi Mundra - Chennai

Morbi Mundra Mangalore - Bangalore

Source: KPMG in India analysis

While coastal shipping of containerized

cargo plays a relatively small role and is
restricted to the transportation of tiles,
marble, white goods and chemicals, there
is an opportunity to transport agricultural
goods currently transported through
bulk, break bulk or rail modes through
coastal shipping, especially along the west
coast.

Coastal shipping seems to be an effective

option to transport goods from the
majority of ports on the west and east
coasts. Some prominent coastal shipping
routes include Chennai to Chittagong/
Yangon through Haldia/Kolkata,
southbound cargo from Pipavav/Mundra
to Kochi and other ports, and inland and
coastal movement in and around Goa.

Inland water transport

The share of Indias inland water
transport (IWT) cargo traffic to the
logistics market is significantly lower
at 0.5 as compared to
China at 8.7 percent, the US at 8.3
percent and Europe at 7 percent.
However, the Indian IWT landscape
holds immense potential due to its
characteristic advantages over other
modes of transportation, especially
for bulk movement.
India has about 14,500 km of
navigable inland waterways, of
which 5,200 km (36 percent) of
major rivers and 485 km (3 percent)
of canals are conducive to the
movement of mechanised vessels.
Among these navigable waterways,
five National Waterways (NWs)
NWs 1, 2, 3, 4 and 5, spanning approximately 4,400 km have been
outlined as potential inland
waterways at the Ganges and
Brahmaputra rivers, the West Coast
Canal, the Godavari and Krishna
rivers, and the East Coast Canal,
respectively. NW 6, which stretches
across 121 km, has been proposed
on the Barak River.

Note : the aobve image is for indicative pupose only

Source: Inland Waterways Authority of India (IWAI), Inland Water Transport Potential for use in
movement of fertilizers report, 28 January 2010, http://iwai.gov.in/misc/PPTtoMinofFertilizers28110.pdf;
KPMG in India analysis

Parameters

IWT

Rail

Road

Energy efficiency: 1 horsepower (HP) can

move what weight of cargo (kg)?

4,000

500

150

Fuel efficiency: 1 liter of fuel can move

how much freight (ton-km)?

105

85

24

Equivalent single unit carrying capacity

1 barge

15 rail
wagons

60 trucks

Air pollution

Low

Medium

High

Land acquisition

Low

High

High

Capital required

Low

High

High

Note: the information is for indicative comparison only

Source: Inland Waterways Authority of India (IWAI), Inland Water Transport Potential for use in
movement of fertilizers report, 28 January 2010, http://iwai.gov.in/misc/PPTtoMinofFertilizers28110.pdf;
KPMG in India analysis

IWT is gradually showcasing its advantage over road and rail, especially for bulk
transportation (coal and cement) and project-related over dimension cargo (ODC).
Following are some flagship examples that
partially or completely employ IWT as a
cost-effective transport option:
Cement from Farakka to Nabadweep,
Bhagalpur and Patna
Hot-rolled (HR) coils from Kolkata to
Tripura via Ashuganj
Project cargo for planned hydel power
projects in Arunachal Pradesh

Coal for thermal power plants on the

Ganges and the Brahmaputra
Food grains from Kolkata to Tripura via
Ashuganj and within Assam
Fertiliser movement on the Ganges
Iron-ore shipments in the Goa region
Transportation of coal for the National
Thermal Power Station (NTPC)
Farakka project
Transportation of fly ash from West
Bengal to Bangladesh

Outlook
Indias water transportation remains largely untapped and underutilised despite its highgrowth potential. However, this is likely to change as policymakers have recently shifted
their focus toward developing infrastructure for this segment. For coastal shipping to
realise its full potential, it is important that issues, such as the development of routes,
capacity addition by port operators, and shipping lines and incentives for shippers and
ship owners, are addressed. The Ministry of Shipping can foster the growth of the coastal shipping segment by reducing port duties and developing coastal-specific non-major
ports and supporting infrastructure.

TRANSPORT AND LOGISTICS

Container Freight
Station and
Inland Container
Depots

kpmg.com/in

Introduction
Indias GDP has grown progressively over
the past two decades due to a
combination of factors, including the
export-import (EXIM) trade volume, which
has been increasing at a higher rate than
the GDP. This has driven growth in
container traffic, as shippers are
increasingly digressing from general or
bulk shipping to container transport. Rising
containerisation levels for erstwhile
break-bulk commodities have increased
Indias share in global container traffic.
Growth in containerised cargo traffic has
facilitated the development of container
freight stations (CFS) and inland container
depots (ICDs), which have emerged as
important components of the EXIM value
chain. The CFS phenomenon, which is
largely unique to India, plays an important
role in decongesting container traffic at
ports, adding value to container trade and
enhancing ports operating efficiency. ICDs
cater to the hinterland cargo traffic from

various clusters due to increased industrial

growth over the past few years. Strong
growth prospects and healthy profit
margins continue to drive investments in
the CFS and ICD segments.
This document aims to provide a
comprehensive analysis of the container
infrastructure market in India.

Container market in India

The growth of Indian container traffic has outpaced global growth rates, thus increasing
Indias share in global container trade. Container traffic in the country has grown at a
CAGR of 15 per cent as compared to eight per cent globally, driving its share of global
container traffic from 0.6 per cent in 1991 to 1.8 per cent in 2012.

India: Container Traffic

Note: Year stands for the financial year ending March

Source: Indiastat, IPA, KPMG Analysis

At USD 8.3 trillion, Chinas

GDP is approximately 4.5
times that of Indias (by
value). In comparison,
Chinas container traffic is
estimated at 140 million
TEUs while that of India
is estimated at 10 million
TEUs, reflecting a 14
times rise in container
volumes

Global benchmarking of containerisation levels

Source: IPA, Drewy, KPMG analysis

Containerisation levels in India have risen

in the past due to the increased
containerisation of commodities, such
as electronics, textiles and automobiles.
While there is significant potential to
further increase overall containerisation in
the country by strengthening presence in

agricultural commodities such as rice,

maize, and sugar, which are still
transported in bulk it is expected to
grow further on the back of enhanced
infrastructure in the form of ports, CFS and
ICDs.

Container terminals at
Indian ports
With container traffic expected to increase at a CAGR of 67 per cent over the next five
years, several major and non-major ports aim to increase container handling capacities to
cater to growing container traffic and maintain healthy utilisation levels.
The following figure exhibits the state of container traffic at select Indian ports.

Note: Overall west coast port capacity by 201718 is estimated to be ~17.2 mn TEUs and ~9.8 mn TEUs for east coast

those along the south and east coasts

(~44 per cent). Going forward, capacity
addition and growth in traffic across ports
are expected to translate into increased
growth.

Capacity utilisation at ports along the west

coast is higher than the pan-India average.
A comparison of utilisation across coast
lines suggests that ports along the west
coast are utilised more (~64 per cent) than

2012-13

2017-18

West

10.3

15.9

South

6.5

9.9

East

1.2

2.2

Total

18

28.0

Source: KPMG in India analysis

EXIM container supply

chain in India
CFS and ICDs continue to be attractive segments and constitute a growing assets
category in the EXIM supply chain due to heightened trade with emerging countries,
improved technological capabilities, favourable policies and high profitability. Though CFS
and ICDs collectively represent 13 per cent of the total market size, they account for
about 26 per cent of total profitability.

EXIM supply chain

Source: KPMG in India analysis

Container freight station and

inland container depot
The CFS/ICD market is integral to logistics
sector infrastructure. ICDs are also known
as dry ports, as they cater to hinterland
container traffic. Estimated at INR45 billion
in FY13, CFSs and ICDs generate about
two-thirds of their revenues from ground

handling and transportation activities,

while ground rent accounts for the rest.
Imports contribute as much as 72 per cent
of the total CFS/ICD market, with CFS
accounting for about 67 per cent of import
revenues.

Total CFS/ISD Market (INR Billion)

Figures for FY13; H&T refers to handling and transportation; rent is ground rent
Source: CRISIL Research

Decreasing container volumes and dwell

time, as well as rising competition, are
expected to lead to a decline in the CFS/
ICD market in FY14. However, the industry
is projected to grow by 56 per cent (in

terms of value) and 910 per cent (in terms

of volume) over the next five years, as
the economy is expected to recover after
FY14.

Traffic at CFS/ICDs

Source: KPMG in India analysis

The following table provides a comparison between the CFS and ICD segments in terms
of profitability and regulatory tailwind.
CFS

ICD

Profitability

EBITDA margins: 2550%

RoCE: ~2030%
Average realisation per
TEU: INR5,500

EBITDA: 2040%
ROCE: 2025%
Realisation per TEU:
INR4,5008,000

Regulatory tailwind

Government intends to
introduce direct port
delivery, but there are
some infrastructural
constraints.
CFS are currently not
treated as an
infrastructure play
there are limited benefits
for developers.

Presently, CTO haulage

charges are severely
affecting domestic (DRH)
volumes.
Customs clearance
efficiency is a key
differentiator, which can
be limiting at times.

About 30 major EXIM container movement clusters exist in the Indian hinterland with
the northern region accounting for about 1012 such clusters, followed by 810 and 46
clusters in the western and southern regions, respectively.

Source: KPMG in India analysis

Mega trends
Growth: A strong correlation exists
between economic growth and the
trade and logistics sector, which fosters
port volume, including container
volume.
Dispersal: Warehousing facilities, which
are closer to production, consumption
and multi-modal hubs, are expected
to increase. This is because traditional
warehouses could face competition
from modern warehousing assets
and eventual extinction following the
implementation of the new taxation
regime Goods and Services Tax (GST).

Scale: Container-oriented assets (ICDs,

FTWZs) are expected to improve and
increase with new planned assets
of more than 50 acres in size unlike
traditional players, which have a typical
size of 2030 acres. These operations
are expected to receive further impetus
following the heightened demand for
low-cost superior services.
Service reorientation: Next-generation
assets will likely be accompanied by
improved transportation, storage and
value-added services (VAS). Shifts
in container rail movement, road
transportation, warehousing and
value-added services are likely to
accelerate further as container assets
become increasingly complex.

Critical success factors

Source: KPMG in India analysis

Outlook
Growth of the container traffic movement in India largely depends on global economic
conditions and rising containerisation. This association is likely to continue driving
investment opportunities in the CFS/ICD segments. To sustain their growth, it is
important for all CFS/ICD operators to enhance integration with other stakeholders
within the EXIM supply chain for the seamless movement of container traffic, thereby
enabling Indian ports to achieve superior operating standards. Moreover, increased
investments from private players, along with intensified competition, is expected to
encourage operators to develop innovative and customised solutions.

TRANSPORT AND LOGISTICS

Freight
Forwarding
in India

kpmg.com/in

Introduction
Indias foreign trade, which grew at 18
percent from USD 86 billion in FY 2000
to USD 791 billion in FY13, has created
growth opportunities in a variety of fields.
Some of the trends that have emerged
due to high growth in foreign trade include
the emergence of Export-Import
(EX-IM)-focused manufacturing and
consumption locations within India, a shift
in global trade patterns in Asias favour,
and rapid change in the commodity mix. In
addition to contributing to Indias economic
growth, these trends have facilitated the
evolution of the logistics sector. As a result
of this increased international trade, freight
forwarding has become an increasingly
important component of the supply chain.

Freight forwarding companies in India have

traditionally focused on activities such as
freight arbitrage and customs house
brokerage. However, the evolving
requirements of end users, the enhanced
use of technology, growth across key
segments and the growing need for
integrated services has driven this
community to expand its services to
end-to-end logistics solutions, including
warehousing, distribution and other
value-added
services.
This report considers freight forwarding as
ocean and air transportation and provides
in-depth analysis of the sector in India.

Market size
At INR 494 billion (gross revenue basis), freight forwarding contributes eight percent to
the total logistics revenues in India, as compared to other logistics services such as
transportation (62 per cent) and warehousing (26 per cent). While the freight forwarding
market in the Asia-Pacific region is expected to grow at a CAGR of 12 percent, it is
expected to grow at 14 percent in India to reach INR741 billion by 2016.

Source: Ministry of Commerce, EIU, World Bank, KPMG in India analysis

Note: For FFW market, no custom house agent (CHA) revenues have been considered. Further, the
import cargo market, where the business is controlled by a foreign agent, has not been considered

The air market is marginally larger than the

ocean market (by value), but the latter is
expected to grow at a higher rate in future.
This trend is anticipated due to the gradual
demand shift from air transportation to
ocean and less-than container load (LCL)
shipments, which offers better operating
margins. In recent years, the schedule
reliability and transit options via ocean has
improved significantly, and these factors
combined with innovations such as sea-air/

air-sea products and advanced reefer

technology have created a compelling
case for the transition of certain cargo
categories to ocean that were previously
exclusively moved via air. However, air
continues to be used for the movement of
strategic cargo including high-end,
perishable and time-sensitive cargo categories.

Note: The split above is by value

Source: Ministry of Commerce, EIU, World Bank, KPMG in India analysis

Market structure
With more than 7,000 players, freight forwarding is a highly fragmented and
unorganised sector, where 65-70 per cent of the market is controlled by up to 95 per
cent of the forwarders.

Source Ministry of Commerce, KPMG in India analysis

Freight forwarders traditionally operated

via a global agent network, and this was
largely the norm for medium to small
size freight forwarding companies due
to their several advantages such as local
knowledge and vast geographic reach.
However, in recent years, a gradual shift
has been witnessed in the way freight
forwarders operate. The emphasis
currently has been on setting up ones
own offices across various countries with
the objective of improving cargo control

and enhancing profitability and customer

positioning, a trend especially visible
among large
multinational companies in India.
The volume and mix of air and ocean
freight; value-added services; trade lane
mix; and the share of nominated vs
owned business are some key factors
that determine freight forwarders gross
margins. The following flow chart indicates
factors that may affect gross margins
earned by a freight forwarder.

Factors that affect gross margins

Source: Ministry of Commerce, KPMG in India analysis

Trade lanes
In terms of future opportunity, Western Europe, the Middle East, North America and
intra-Asia (including China) are high-potential markets, while Africa and Latin America are
key emerging markets in terms of growth. Leading commodities traded with
high potential markets include technology, chemicals and auto components, while
commodities traded with high-growth markets primarily include medical aid products.

Source: Ministry of Commerce, KPMG in India analysis

Clusters
There are more than 40 key cargo-generating regions spread across India that contribute
to the countrys container traffic. While each region is distinct in terms of cargo traffic
and the commodities handled, certain regions also have the potential to provide
value-added services such as warehousing and domestic cargo distribution.
The map below outlines the spread of cargo handled by freight forwarders across India.
Regional cargo mix handled freight forwaders air and ocean - FY12

Source: Ministry of Commerce, KPMG in India analysis

Outlook
The growing demand for end-to-end logistics services has, over time, driven the freight
forwarding community to evolve and expand into other segments such as value-added
services and offer ancillary infrastructure services in container freight stations/inland
container depots and warehouses. Players in this segment have seen considerable
change in their operating models, gross margin pressures, a shift in global trade patterns
and uncertainty around long-term freight rates; however, this segment has also seen
significant innovation in product mix, an expansion of service offerings and overall
volume growth, which present new avenues of growth to companies in this space.
In this context, IT is also expected to play an important role in the dynamic freight forwarding business, as it can be expected to facilitate the management of complex
end-to-end services and cargo planning, as well as create a common platform to
integrate all relevant stakeholders.

TRANSPORT AND LOGISTICS

Ports in
India

kpmg.com/in

Introduction
Ports serve as a countrys gateway to
international trade, as they facilitate
complex logistics activities centred on
import-export activities as well as the
domestic movement of cargo. Ports
provide physical infrastructure not only for
the storage and movement of industrial
and agricultural cargo (including coal, ores,
bulk, dry bulk and fertilizers), but also for
various other activities such as the loading
and unloading of cargo and obtaining
clearances from authorities. To effectively
manage certain evolving port activities
which involve optimum resource utilisation
supported by accurate information
progressive technological practices are
being deployed at the port and
ccommunity-level.

Cargo handling at Indian ports has

matured with time, with ports that were
once designed to manage bulk and break
bulk cargo now handle specialised
cargo such as liquefied natural gas (LNG)
and crude oil. A rise in Indias domestic
consumption is expected to increase the
number of high-capacity vessels at Indian
ports, which would require deeper draft
levels and mechanised cargo movement.
This paper aims to highlight the
performance of cargo traffic at Indian ports
and associated issues and opportunities.

Overview
Indian ports have witnessed considerable progress over the last decade, growing at a
CAGR of 8.4 per cent from 384 MMT in FY02 to 934 MMT in FY13. Due to the global
economic slowdown between FY08 and FY13, cargo traffic witnessed a temporary
deceleration; however, cargo traffic across Indian ports is expected to register 1,212
MMT by FY17 at a CAGR of six per cent, with major and non-major ports expected to
grow at CAGRs of five and nine per cent, respectively.1
Traffic handled by major and non-major ports

Source: Indian Ports Association

KPMG in India analysis

Share of major vs non-major ports

Source: KPMG in India analysis

The development of non-major ports due

to growing private-sector participation has
led to a shift of cargo traffic from major
ports, that operate at above-optimum
capacity, to non-major ports.
Consequently, in FY13, the contribution
of non-major ports to total cargo traffic
increased from 28 per cent in FY08 to 42
per cent it is expected to further increase
to 45 per cent in FY17.

Traditionally, major Indian ports have

operated at above-optimum utilisation
levels due to the uneven development of
port infrastructure across the
country. However, as the addition of
handling capacity has gradually outpaced
cargo traffic at ports, capacity utilisation
at major ports has decreased; it declined
from 98 per cent in FY08 to 73 per cent in
FY13; this trend is expected to continue
on the back of a ban on iron ore and global
economic uncertainty.

Capacity utilisation at major ports

Source: Ministry of Shipping, IBEF

Utilisation at major ports, by commodity

Note: capacity as on 31 March 2013; traffic for FY13

Source: Indian Ports Association, CRISIL, KPMG in India analysis

The high rate of capacity addition due to private sector investments and moderate traffic
growth due to a ban on iron ore adversely affected the capacity utilisation of non-major
ports in FY13. Capacity utilisation in FY14 is expected to decline, but it is likely to recover
to optimum levels in three to four years due to an increase in coal imports and container
trade.
Capacity utilisation at non-major ports

Source: KPMG in India analysis, CRISIL, Indian Ports Association

State of Indian ports

Above-optimum capacity utilisation at Indian ports can be partly attributed to inefficient
operational performance and resource utilisation (including equipment and
labour handling). The following table provides a succinct comparison of Indian and
international ports, highlighting significant scope of improvement in the country.
Parameters

Indian ports

International ports

Turnaround time at ports

(hours)

84

Hong Kong and Singapore: 7

Average number of
containers handled per
ship per hour

1523

Draft depth (meters)

914

Colombo: 25
Singapore: 30
1223
Singapore: 35 million
TEUs

Annual container
throughput capacity

JNPT: 4.3 million TEUs

Throughput density
(maximum)

45,000 TEUs per

hectare

170,000220,000 TEUs per

hectare

Maximum crane
productivity per quay
crane per annum

NSICT: 188,000 TEUs

Hong Kong terminal:

272,700 TEUs

Maximum quay
productivity

JNPT: 2,000 TEUs per

meter

Source: KPMG in India analysis

Hong Kong: 23 million

TEUs

Hamburg: 252,200 TEUs

Hong Kong terminal: 3,050
TEUs per meter

Port operations in the

Indian scenario
Ports operations in India lag behind international standards, especially in terms of
adopting new technologies and practices, cargo handling, cargo evacuation, customs
clearance, tracking, hinterland connectivity or innovative logistics practices. Some
operational bottlenecks at Indian ports are highlighted below:

Source: KPMG in India analysis

Global ports
benchmarking
Leading global ports largely conduct business electronically, with minimal manual
intervention. Due to the dynamic nature of international trade, these ports have
continuously evolved their processes and successfully simplified complex and
cumbersome import procedures to meet evolving demand. Globalization and a highly
competitive environment encourage international ports to ensure that their core function
of seaport operations is productive and cost-effective and that the turnaround time of
ships is short.
The following table provides a comparative analysis of the technological capabilities of
Indian and some global ports:

Parameters

Indian ports

Rotterdam port

Singapore port

Electronic data
interface (EDI)

Minimal

Mature (including the

payment process)

Mature (using Portnet)

Enterprise resource planning

(ERP) system

Partial

Mature (use an integrated ERP system, along

with port community systems such as Portnet,
Port Infolink, etc.)

Business rule
and workflow
processes

Manual

Mechanised

Mechanised

*The Rotterdam and Singapore ports have been considered for benchmarking with the worlds most
advanced ports.
Source: KPMG in India analysis

Vision 2020
Under the Maritime Agenda 2020, public-private partnership (PPP) is expected to play an
important role in the ports sector, particularly in the development of non-major ports
private investment is expected to contribute 66 per cent and 98 per cent of total
investments in major and non-major ports, respectively. The development of new major
ports on the east and west coast are expected to reduce the above-optimum capacity
levels at existing ports.
Sources of income for ports

Source: Maritime Agenda 20102020

The contribution of
private sector
investments is
expected to increase
significantly.

Opportunities at ports along

the east coast
Historically, ports along the west coast
have dominated cargo traffic due to their
proximity to Indias major consumption
centres and the industrial belt of
northwest India. Chinas emergence
as Indias leading trade partner, Indias
Look East policy and overcapacity at
the west coast ports provide east coast
ports with significant development
opportunities.

As the contribution of east coast ports

to Indias total trade is expected to
increase from 23 per cent in 2010 to 34
per cent in 2014, the 50 ports along this
coast are expected to drive the sectors
overall growth. The Government of India
(GoI) aims to leverage the Maritime
Agenda 201020 to create additional
port capacity of 900 MMT and invest
INR1,126 billion to boost cargo-handling

Capacity and investment scenario at ports along the east coast

Source: Maritime Agenda 201020; KPMG in India analysis

KPMG in India analysis

capacity at these ports. Non-major ports

are expected to contribute 57 per cent
of total investments in east coast ports
and 46 per cent to total capacity
addition.2

Ports along the east coast, which are closer to the iron ore/coal deposits and power,
steel or fertilizer plants, have traditionally handled bulk commodities, as opposed to
west coast ports, which mainly handle Petroleum, Oil and Lubricant (POL) and container
cargo. Container handling capacity along the east coast ports in India is expected to
increase from 2 million TEUs in 2009 (20 per cent of Indias total container-handling
capacity) to 10.8 million TEU by 2020 (33 per cent of Indias total container-handling
capacity).

Outlook
High investments, increased private-sector participation and stringent regulations are
likely to drive the development of superior ports in India. Similarly, the development of
hinterland connectivity options, enhanced IT support, improved manpower training and
the introduction of advanced online transaction systems can be expected to drive
operational efficiency at Indian ports.
The introduction of a single-window clearance mechanism at central and
state-government levels can encourage greenfield projects, thereby reducing long
gestation periods.
Thus, innovative solutions and a proactive approach are crucial if the Indian ports
sector is to gain a competitive edge, especially as it is more vulnerable to competition
from global players than from other infrastructure sub-sectors. With the GoI striving to
eliminate infrastructural constraints, financial bottlenecks and administrative hurdles and
implement positive measures, the outlook for the ports sector is seemingly positive.

Contact us:

Dinesh Kanabar
Deputy CEO and
Chairman Sales and Markets
T: +91 22 3090 1661
E: [email protected]

Arvind Mahajan
Head
Infrastructure and Government Services
T: +91 22 3090 1740
E: [email protected]

Prahlad Tanwar
Associate Director
Transport and Logistics
T: +91 22 3091 3417
E: [email protected]

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