India’s rapid trade growth is
planned around containerized transport of goods. But there’s a key logistical
bottleneck. India just does not make enough containers. The container can be
seamlessly multimodal – rail, ship and road. It has revolutionized world trade
by rapidly cutting transportation time, port delays and so on. It can be said that the untold story of
swift trade movements that have enabled globalization is actually the
containerization of goods. India has sought to increase container handling
capacity in various ports to boost exports. Ambitious new ventures such as the
Vadhavan and Galathea Bay ports as well as the multimodal India Middle East
Europe Economic Corridor are built around containers.
India’s container market is
expected to more than double from 11.4 million TEU in 2023 to 26.6 million TEU
by 2028. One 20-ft container box is equivalent to 1 TEU. India manufactures around 10,000 to 30,000 container boxes a year and
this production can therefore support only a fraction of the projected
doubling. China, in comparison, manufactures 2.5 to 3 million container boxes
per year. In India, it takes $3,500 to $4,800 to make
one container whereas in China it costs $2,500 and $3,500. India therefore has
to lease the container boxes, mostly from China. All our plans for ramping up
trade are put at risk by inadequate container production within India. Shortage of containers often jacks up
freight rates in the country. Congestion at Indian ports mounts.
Indian ports are at a strategic
location on the East-West trade route but cannot aspire to be hub ports because
of container shortage. As a result, Colombo, Dubai and Hong Kong draw mother
ship traffic, not Indian ports.
Indian
shippers are forced to depend on short distance feeder vessels where the
providers of containers do not see much business and profits. This in turn,
leads to higher tariff for our shippers.
The crisis in West Asia often casts a shadow on ship traffic through Suez
Canal. Circumnavigating Africa lengthens voyages by 10 to 15 days and container
availability takes a hit as a result. The
Russia-Ukraine war has led to closure of some ports, changes in routes and
insurance costs, as well as enhanced container freight rates. Piracy has
also increased freight costs. In these conditions, it makes sense to build a
large and secure supply of container boxes.
The government has come up with
Make In India initiatives to promote indigenous production of container boxes
either in PPP mode between the Container Corporation of India and private
players or by directly incentivizing private production. Direct subsidy and
viability gap funding are two support measures available with the government.
A
few more measures can help. Reduction in charges
of repositioning and storage of empty containers, a short-term measure, can
help to ease the shortage of containers. Enhancing container yard capacities at
Indian ports can promote business.
The key would be to ensure that
when scaled up, the cost of production comes down to global levels. The government has mulled Production Linked
Incentives (PLI) but they need to be implemented…Incentives to Indian shippers
using Indian containers and facilitating long-term contracts between shippers
and Indian container manufacturers can build market confidence.
Mandating
the use of Indian-made containers enhances domestic demand resulting in better
prospects for the sector. The development of a
tracking and tracing mechanism of containers through a Unified Logistics
Interface Platform (ULIP) and Logistics Data Bank (LDB) by the government can
reduce the turnaround time of export containers and ease their shortage.