Logistic Logic – An India – China comparision
April 18, 2016

— By Charmaine Mirza JNPT - Hindu Business Line

China has swept the shipping industry off its feet in a massive tsunami wave of dominance over Asia’s waters. In comparison, India’s harbours are barely a drop in the ocean.

As the Chinese economy starts to lose steam, the mandarin sea dragon is huffing and puffing to stay on top of the wave – even as the Indian ocean-crocodile starts to snap its jaws. Even as we conclude the Maritime India Summit, Jawaharlal Nehru Port Trust (JNPT) in Mumbai, is ramping up productivity. Currently one of the largest port facilities in the country, JNPT had a record number of container lifts in 2015-16 as compared to previous years.

In contrast, China’s shipping industry is flailing badly, and ruthlessly crashing its shipping rates to do whatever it takes to maintain its flagship status. So do Indian ports really hold a strategic advantage over mainland China’s anchorages? Inchin Closer takes a closer look from the crow’s nest to analyze the situation and weigh the options based on the following:

1. Shipping Costs Some Chinese players are even paying shippers to send container-loads of goods, as exports from China dwindle in volume. While this certainly gives the shipper a short-term advantage, how long can such firecracker tactics be sustained before they fizzle out? Compared to China, shipping from India currently costs more – owing to three major factors:

  • Substantial port fees and double taxation at a national and state level
  • Slower turn-around times – E.g. 36 hours in Mumbai vs. 12 in Shanghai on average, according ASSOCHAM
  • Union disputes and labour inefficiencies, which have riddled India’s ports in 2015.

2. Land-side logistics Currently Door to Port (FOB) Services in Shanghai are almost half of those in Mumbai – which makes one seriously consider the economies of scale of exporting out of China versus India. But there’s a catch. When you consider Door to Door (DAP) Services, China is still more price competitive, but the gap narrows dramatically. Depending on where the consignment is headed, the additional time taken to ship out of China may counter the price advantages. For example, a shipment from Mumbai to Southampton takes only eighteen days, versus thirty from Shanghai.

3. Domestic economy Also keep in mind that it really depends on what you are exporting out of China and from where. Rising labour costs, a demand for better wages and work conditions, and adherence to environmental laws, have made several companies with factories on the coast, consider moving inland. But goods located in hinterland factories have to first be shipped by river to Chinese port zones, which may take a week or longer. Indian infrastructure is lacking as compared to China. China has more paved tolls, less tolls, and less impediments in road transportation. India is also much more vocal than China on issues like labor rights and wages and environmental norms – which makes for a healthy society, but a slower assembly line.

But despite all these factors, the tide may just be turning a little in India’s favour for she is ramping up her ports. The already deepened fair-way at JNPT, the soon to be implemented Sagar Mala road to port connectivity in Mumbai, and doubling the size of the port facility at Mundra in Gujarat, will cut down the logistic hours required to transport goods from the interiors to the coast, and realize India’s potential to turn into a trans-shipping hub in Asia. Smart seafarers from the mainland, are already harbouring Chinese ports in South Asian waters in India’s neighboring countries such as Pakistan and Sri Lanka. India will have to eke every drop out of her ocean-space to remain competitive and keep China at bay. So will India’s crocodile jaws slay the Chinese dragon’s fire, or simply snap at its heels? The Chinese no doubt will continue to remain a powerful force in Asia’s waters. But to dismiss India as a piece of flotsam is a mistake.

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