Wednesday, October 29, 2014

Exorbitant Airfare Conundrum: Is Andaman an Alien Territory Within India?

Port Wings Editorial - Issue-11

After the end of World War-II, there were rumours that the Japanese Government, which held the Andaman and Nicobar Islands for three years between 1942-45 and abruptly withdrew after Hiroshima bombings, had strongly demanded the then Indian government to hand over the islands to them to develop it as Japan’s overseas territory.

Though the then Indian government did not budge on the Japanese demand, the exorbitant airfares to Port Blair for the last few years, the capital city of the 572-islands chain in Bay of Bengal, force the people living in India and like to travel there to think Andaman is indeed Japan’s Overseas Territory.

The air tickets that were earlier available at a very nominal rate, sometimes even below Rs. 4000, now cost more than Rs. 10,000/ for one way between Port Blair-Chennai-Port Blair or Port Blair-Kolkata-Port Blair.

Sometimes tickets are available at unbelievable price of Rs. 18,500 to Rs 44,000-which is just too exorbitant for any class of passenger, especially the middle class islanders and tourists.      

According to Dr. Dinesh, the President of Rotary Club of Port Blair and who has taken up the matter of astronomically high airfare between Mainland- Port Blair sector with the Prime Minister of India, notes that stretcher patients referred to either Chennai or Kolkata for further specialized treatment at mainland hospitals are the worst sufferers as they have to pay about Rs. 80,000 to Rs. 90,000 or more for one way airfare.
According to frequent flyers, nowhere in any other part of the country the airfare is so high for a two- hour flight.

The hapless residents of remote Andaman &Nicobar Islands suffer a lot every year during the tourist season (October to March), summer vacations (April to June), festive seasons (Dusshera, Diwali and so on).

Locals in the Island feels that the airlines connecting Port Blair with Chennai and Kolkata should be asked to charge only a flat rate of Rs 4000, which should not exceed beyond that at any given time.

The remote Islands need to be treated at par with the north-eastern states where the airfares are quite reasonable and affordable,” the President of RCPB notes.
Frequent flyers feel that unmindful of the peoples’ anguish, the airline companies are continuing to fleece the passengers on this sector.

Though the A&N Administration is seized of the matter, their hands are totally tied up due to the Island’s Union Territory status.
Will there be a solution soon to the exorbitant airfare Conundrum?

‘Economic Competitiveness Package’ is a matter of high priority at WCO: IFCBA Chairman


Port Wings News Network:

‘Economic Competitiveness Package’ (ECP) is currently a matter of high priority at the World Customs Organization (WCO), Mr. Shantanu Bhadkamkar, immediate past Chairman of Federation of Freight Forwarders Associations In India (FFFAI)  and the Chairman of International Federation of Customs Brokers Association (IFCBA) has said.
In an exclusive interview to Port Wings, the industry veteran spoke on different topics including the current status and future of freight forwarders.


Q. Tell us about the status and prospects of freight forwarding industry in India?

Mr Shantanu Bhadkamkar: Historically, Customs (and therefore Customs Brokers) has played an important role in International Trade. Customs Duty for Import, Export and Transit constituted important source revenue for the governments. The role of Customs has continually evolved -- from being an authority which collects revenue to protection of the domestic Industries and deterrence of smuggling across the borders, the policy and the functional role of customs have changed with time. In recent years, the role has become even wider, with focus on security & border protection on one hand and facilitation global trade on the other, in as much the original role of revenue collection is now only one of the task.
Customs Brokers were traditionally trained to understand and facilitate the compliance of the taxation laws and tariffs, and quantitative controls i.e. the licensing controls. Until about mid 90s the Customs Brokers were primarily concerned with using their expertise for an effective and efficient implementation of qualitative restrictions on the licensing control and tariff matters which include classification of goods and compliance of conditions of appurtenant to the exemption (including partial exemption) of notification.

The Customs Brokers had to be law compliant and yet ensure that their customer were tax efficient and were not excessively adversely affected by the quantitative (Licensing) restrictions. With liberalization, the sovereign boundaries became less relevant for licensing control. The world also saw a huge rise in globalisation wherein most large companies that were already multinational corporations became global corporations; and the companies that were local giants became multinational corporations (interestingly, the freight forwarders also followed the same suit). This has resulted into increased related party transactions; hence, the valuation of goods for purpose of customs duty assumed very high importance. But then the rise in terrorism & the globalization of the terrorist’s threat, the greatest concern of the customs department is border protection, consequently the most important task of the customs department is to ensure Secure Supply Chain.

The new initiatives such as KYC (Know Your Customer norms), C-TPAT (Customs – Trade Partnership Against Terrorism), AEO (Authorized Economic Operator), WCO’s (World Customs Organization) SAFE Framework of Standards including interregional initiatives for smart and secure trade lanes&World Customs Organization's (WCO) Customs Guidelines on Integrated Supply Chain Management (ISCM Guidelines)… is a paradigm change in the focus of the key function of the customs, it has also meant a big change in the service profile of Customs Brokers. Customs Brokers therefore have to work to build its capabilities to different factors & standards and develop new skill sets. The Customs brokers now are required to increase the exposure& response system to the international developments.
Almost the Customs Brokers of earlier years were single location operator, today many operate at multiple locations. Some are national operators and also have overseas offices. Similarly many customs brokers have diversified into asset based and non-asset based vertical integration. IT penetration in this industry is very high, though it is a resource starved industry.

Q. Tell us about the objectives and role of International Federation of Customs Brokers Association (IFCBA) in enhancing the industry?

SB: The Customs National Administrations of almost all the countries work closely with the National Customs Brokers Association & other stakeholder trade bodies.  The interaction includes the implications of various regulations & rules on the EXIM Trade, effectiveness of the implementation, practical difficulties, field experience, understanding the changes in international supply chain and business needs etc.; in case of the national associations of customs brokers the discussions in addition include the regulations for licensing the Customs Brokers.
Incidentally, Customs Administration is one of the most accessible government departments, there’s an institutionalized mechanism for meetings such as Permanent Trade Facilitation Committee (PTFC) & Open House Meetings with Trade Representatives / Importers and Exporters.  The EXIM Trade is seriously lacking in taking the full benefit of these forums, and it seems only the Customs Brokers associations take serious interest in these facilitation forums.
The World Customs Organisation (WCO) was established in 1952 as Customs Coordination Council (CCC), today WCO memberships comprises of 179 Customs Administrations across the globe representing 98 % of the global trade. WCO has played an important role in stimulating the growth of legitimate international trading and combating fraudulent activities.
WCO promotes honest, transparent and predictable customs environment which is a pre-requisite for a reliable and evolved international trade.The partnership approach championed by the WCO is one of the keys to building bridges between Customs administrations and their partners. By promoting the emergence of an honest, transparent and predictable Customs environment, the WCO directly contributes to the economic and social well-being of its Member countries. The WCO has devoted a great deal of attention to improving the quality, relevance and availability of its capacity building activities which led to the development of the WCO Capacity Building Programme.
The WCO Research Paper Series covers a broad range of Customs and international trade related topics including revenue collection, supply chain security, trade facilitation, performance measurement, informal trade practices, and the environment. The WCO has taken number of initiatives to enhance the dialogue with the private sector which includes establishment of ‘Private Sector Consultative Group (PSCG)’ which compose of international trade related business from around the world.  PSCG provides professional advice to WCO. 
‘International Federation of Customs Brokers Association (IFCBA)’ is a member of PSCG and presently IFCBA chairs this prestigious group. IFCBA has recently made presentation to the ‘Permanent Technical Committee (PTC)’ of WCO on ‘Facilitation of SME Sector’ & the ‘Economic Competitiveness Package’ (ECP). The ECP is currently a matter of high priority at the World Customs Organization (WCO). Economic competitiveness starts with trade facilitation, and is one of the WCO’s key objectives.
IFCBA has been invited as an observer by the United Nations Commission on International Trade Law (UNCITRAL) to attend the session of the UNCITRAL Working Group IV (Electronic Commerce), IFCBA will also make a presentation during the session.

Q. How do you feel about your new role at IFCBA?

SB: My new role of IFCBA is about personal evolution& global professional connect.  During my days as a Managing Committee Member in the Brihanmumbai Custom House Agents Association (BCHAA), as a Chairman of Sub-Committee – Nhava Sheva, the role was to deal with& represent to the local customs administration on the day to day issues of bottlenecks, delays, operational problems. There used to be a continuous interaction with the concerned authorities particularly the Customs authorities, Custodians & Carriers for resolution of problems that can be solved locally. Federation of Freight Forwarders Associations in India (FFFAI) being a national body, the role as an office bearer was more of dealing with policy matters, particularly those related to the formulation of rules and regulations.
We met the authorities for resolution of difficulties due to varied interpretations or difference in interpretation at different locations. The role also involves representation on policy matters related to tariff and non-tariff matters for budget. FFFAI also gave an exposure to International Organisations.
The role in IFCBA however is very strategic and relates to global issues concerning e-commerce and secure supply chain dealt with by World Customs Organisation (WCO), UNCITRAL and such organisations. The difference is therefore two fold i.e. the former role related to skills of dealing with local issues of the members with whom you had direct interactions; the latter deals with global issues and global concerns & one deals with the leaders of National Federation. Local issues being matters of day-to-day concerns which are addressed and dealt with locally, the results are tangible and members can directly perceive the outcome. In case of global policy issues, an individual member is affected indirectly, the issues are of long term perspective and relate to greater commonality of interest (as against affected individual). Hence there is significant change of role, and it makes the role extremely interesting.

Q. As a Chairman of IFCBA, what are your priorities to enhance the role of freight forwarders in the supply chain?

SB: The occupation of Customs Brokers, while being a profession requiring high level of varied skills and wide range of knowledge in rules and regulations, has long been undermined by most as a trade rather than as a high profession. As Chairman of IFBCA, I am committed to work with closely with our Member Associations to strengthen the professionalism, implement IFCBA’s best practices and build the right image of the profession. The IFCBA is privileged to have observer’s status for the various meetings in inter-governmental organizations like UNCITRAL & WCO, and also has a consultative status with important bodies such as World Bank and Asian Development Bank.  Currently IFBCA chairs the Private Sector Consultative Group (PSCG) of WCO.

The IFCBA works to bring about improvements in Customs policies and practices on a global basis. These improvements benefit both customs brokers and their clients. The international trade community depends on the work done by Customs Brokers and the IFCBA serves customs brokers by keeping them at the center of the international trading system.
The IFCBA (International Federation of Customs Brokers Associations) is entering its twenty-fifth anniversary year. As the only global organization representing customs brokers, it will continue to work to enhance the understanding of the customs broker’s role and value in facilitating trade and improving trade efficiency. The IFCBA Board set the Federation’s direction for the coming year, and will focus on themes of leadership through (a) expertise and innovation, (b) promotion of training and education,(c) strengthening the global connections by networking, (d) regional cooperation with members, and (e)cooperation with all other stakeholders on trade facilitation initiatives, including the WTO Agreements on Trade Facilitation.
IFCBA is committed to work with the member associations to strengthen the professionalism in the industry. IFCBA encourages the members to implement the IFCBA best practices and continues to add value to the services rendered by the Customs Brokers, on whom many small and medium sized businesses wholly rely for expertise and experience. The Customs brokers have integrated into global supply chains as experts in logistics and border management, and have made unparalleled contributions towards making supply chains tax efficient, legally compliant, environmentally friendly, safe and secure.

Q. When compared to International practices, where does Indian Freight Forwarding industry stands? & what is your take on improving Indian Freight Forwarding industry on par with the global standards?

SB: India is a country of extreme contrasts, this is something which applies to all the fields of life and it equally applies to Custom Brokers.  While benchmarking with international standards, on one extreme end some Indian Custom Brokers are highly professional, enlightened and carry the ability of global thought leadership; on the other hand, the reverse of the same is also equally true.
FFFAI is a national federation, over the years through its training programs and biennial conventions, has strived to raise the standards not just by adopting best practices but also by global thought leadership and innovation.
There’s a difficulty is setting one global standard as working conditions and ease of doing business in every country is different. The per person productivity and benchmarks for time taken to handle procedures for a consignments of global forwarders is more akin to the Customs Brokers and Forwarders in the country of operation, rather than with their offices in other countries.

Q. What is the status of trained manpower in Freight Forwarding industry globally in general and India in particular? Is there any shortage?

SB: As explained by one of the highly successful NRI businessman: ‘The Indian education system is intensely knowledge & information oriented. The European education system on the other hand prioritises the vocational training. The American education system is enquiry oriented’. As a result of difference in the approach: The Indians, while they focus on graduation degree, are unemployable for the actual job. What they learn is of little help in the job role they perform. The Europeans, as they focus on vocational training, are highly professional and are very proud of their occupation.
Referring to our field, in countries such as Germany, Switzerland and Denmark (and in that order) there’s highly evolved vocational training program for the freight forwarders, and therefore the people trained in those programs are proud of their professions as International Freight Forwarder.  Their pride is not less than any high professionals like medial professional, legal profession…, lacking such professional training in India, Custom Brokers and Indian Freight Forwarding Industry in general has yet to assume the same level of professional pride.  It is therefore either by inheritance or by accident people joins this occupation. Being a Customs Broker or an International Freight Forwarder is never an occupation of choice, let alone an occupation of first choice.
It is our dream to make Customs Broker an occupation of First Choice, and get it the stature of high profession it deserves.
It is estimated that the total shortage of personnel in managerial cadre in logistics segment (both service user and service provider included) in India is about one million professionals. While logistics sector grow at a pace higher than the growth in GDP, there is lack of awareness about the logistics segment in general & logistics industry in particular. It is however a peculiarity of the industry segment that the industry tends to retain the people who join this sector. The diversity of challenges, the global exposure, the width of knowledge and management skills that are required in this industry are unparalleled compared to any other industry. Something which makes the job very interesting, it’s said there’s never a boring day in the life of a logistics professional.

Q. As an important pillar in fuelling economy, what are your expectations from the government of India?

SB: It is often said that three important things Indian economy needs is Infrastructure, Infrastructure and Infrastructure. We can qualify the term infrastructure by three different prefixes, viz Physical Infrastructure (Roads, Bridges, Ports/Airports, Connectivity by rail, coastal shipping & inland waterways, logistics hubs), Regulatory Infrastructure (for facilitation of ease of doing business& reduction in transaction cost) and Talent Infrastructure (availability of skilled personnel).  The industry and trade in this country (and international investors) will be encouraged to invest more in business by superior infrastructure and conducive business environment rather than by incentives, rebates and tax breaks.

Q. What is your assumption on the role of Freight Forwarders in coming years?  

SB: Customers seeking ‘Door To Door Solutions’ or ‘One Stop Solution’ is now things of past, it is a standard of past years. The customers now need greater support from freight forwarders in reducing their total cost, reducing their total time to the market and superior supply chain management, including planning. This requires a partnership approach from both sides.
The paradox is that the service providers have realised this customer need much before the customers. The EXIM or the logistics departments of the importers and exporters, in general, presently do not have goals beyond reducing the transport costs by mechanical negotiations, delaying payments & deducting the vendor’s money for their own faults. There’s a new path to be discovered by both the LSPs and customers.

Q. What is the present status of exports and imports globally?

SB: World Trade Organization (WTO) has been pursuing trade liberalisation initiatives consistently. One of the features of BALI package is that the trade agreement aims at lowering global trade barriers. It also very strongly focussed on trade facilitation by reduction of red tape and streamlining customs procedures. WTO agreement being legally binding, it will open up markets for free access at levels never reached before in any phase of history.The growth in E-Commerce will accelerate it further. As big local suppliers/manufacturers/producers are becoming multinational corporates and multinational corporates are turning into global corporations, it will further increase inter-plant movements.Newer supply chain strategies for shorter time to the market, coupled with growth of e-commerce, will lead to the physical location of production or warehousing becoming less relevant insofar as ordering by the customer is concerned. While there will be slogans for buying goods made in own country, both the international B2C Business & B2B business will see an unparalleled rise in growth in time to follow.

Breakbulk Bottleneck: Trade Seeks More Facilities from Chennai Port


Port Wings News Network:

While the Chennai Port management has contained the congestion of container trailers to a certain extent, sudden increase in breakbulk activities has forced the authorities to burn midnight oil to overcome congestion caused by heavy vehicles carrying breakbulk cargoes including steel coils.
Though the Port authorities are happy that the cargo handling is growing steadily after months of negative growth, taming the bottlenecks emerging after the surge in breakbulk should be the priority for the port, say the trade.
According to sources, Chennai Port is witnessing steady growth in the last few months and recently the port has successfully handled three fertilizer-laden vessels at a time. Besides, low port charges have made Chennai a major destination for import of steel coils by different companies.
According to a regular importer, since the port has attracted more breakbulk cargo in the last few months, it is time for the authorities to put in place certain mechanism to overcome the growing congestion of heavy vehicles carrying break-bulk cargo.
“At one point of time few days ago, fully-laden vehicles were seen on serpentine queue near Gate no-10 for hours and not even a two-wheeler was able to move across the road,” he added.
The main reason for the congestion is the existing ban on movement of heavy-vehicles through Gate No-10 imposed by the Tamil Nadu government due to security reasons.
As per the government’s movement restriction order, heavy vehicles can use the Port’s Gate-10 only between 11PM and 5 AM everyday.
Besides, the trade also asked the Port management to come out with a permanent plan for evacuating steel coils from the port round-the-clock.
Speaking to Port Wings, Mr I Jeyakumar, Deputy Chairman, Chennai Port Trust, said that the port management are exploring every available option to reduce the internal congestion.
Though the permitted timing for Gate 10 now is 11 PM to 5 AM, the port management could take up extension of timing from 10 PM to 6 AM with the state government if demand arises,” he added.
On a question about seamless movement of Steel coil rolls, Mr Jeyakumar said, “For a time being, we can arrange movement of steel-coil-loaded trucks through Zero Gate in temporary basis and plans to utilize Gate 2-A for movement of breakbulk cargo laden vehicles in future.” 
If needed, the port management could also devise plan for mass evacuation of steel coils through railway mode, he added.

Thursday, October 23, 2014

Time for Schools of Excellence in Maritime Education: Dr P Vijayan


Port Wings News Network:

The need of the hour is to start Schools of Excellence as much as possible in every year of maritime education, Dr. P. Vijayan, the First Vice-Chancellor of the Indian Maritime University and now the Director of IMU’s Chennai Campus, has said.

In an exclusive interview to Port Wings, Dr Vijayan said that more researches has to be taken up and funding for such research studies should be liberal. He also spoke elaborately on the present and future of Maritime Education and Training.


Q: Tell us about the background and objective of formation of Indian Maritime University?
Mr Vijayan:  The Maritime Industry was longing for a University to take care of maritime studies, training, research in the fields of Ports, maritime history, maritime law, security, transportation, environmental studies and other related fields and their dreams came true by the formation of the Indian Maritime University (IMU).  Broadly the objectives of IMU were to facilitate and promote maritime studies, training and research and to promote advanced research in the above field and be a pioneer in the maritime sector.

Q.As a first Vice Chancellor of IMU, how do you see the growth of maritime education over the years?
PV: After the invent of IMU, the growth of maritime education is more organized and that is the crave of the industry.  New areas and new specialization like maritime law and ship repairs were included in the maritime education stream and management programmes were started on port and shipping and logistics to give more focus from management perspective of the maritime industry.

Q. How does Maritime education, which is a niche area, evolved over the years?

PV: Initially, maritime education was more of a training started with 3 months and then the training was extended upto one year.  Only diplomas were offered. Later the diploma courses have become graduation programmes and researches and post graduation programmes relating to maritime field has evolved which is need of the industry with huge opportunities in the maritime field in the country.

Q. Given the huge demand for trained Indian seafarers abroad,   what are the opportunities available for students studying in IMU?
PV: This is once again demand and supply. When the maritime industry is out of recession the companies go for massive recruitment as seafarers.  Coming to IMU, number of leading shipping companies is recruiting students from IMU due to the fact that IMU is a central University and even it has international recognition. Around 30 of our students of the Management and Law departments are placed in reputed companies abroad as Dubai Ports, Jurang Port, Maersk Lines etc.

Q. What is the current status of employment for seafarers in India?
PV: Most of the higher rank seafarers have lot of opportunities both domestic and international and the lower rank of seafarers the employment depends on case-to-case basis. Taking stock of the situation we have transformed the Diploma in Nautical Science to a degree level so that there is an alternate available for the students to take up jobs other than seafaring.

Q. How do you see the growing challenge to Indian domination in seafaring from Philippines and other smaller countries?
PV: Indian seafarers are highly educated, better quality of education and can speak good English compared to other third world countries.

Q. What is your expectation from the Government of India to improve quality of maritime education in the country?
PV: The need of the hour is to start Schools of Excellence as much as possible in every year of maritime education. More researches has to be taken up and funding for such research studies should be liberal.  Research manuals, literatures on maritime education should be done by more research scholars, teachers, and experts from the industry taking cases from India as well as abroad. Implementation of these researches in the maritime field should be done with fair field and no favour.  The maritime education can be implemented right from the elementary level.

Q. A few developed nations, who have good base for maritime education and training, possess their own fleet of training ships for cadets. What is the condition in India?
PV: Possession of own fleet for training of cadets is on cards. 

Q. In your view as an experienced hand in the sector, how is the Indian shipping industry doing now?
PV: The Indian shipping industry is doing well and is on a roller-coaster mode.  More industries from the west are coming to India and lot of exports are taking place from India, after liberalization Indian shipping industry has gone tremendously well and when we can convert rail road cargo into sea mode and coastal movement takes place there will be phenomenal growth in the trade. 

Q. The domination of world’s top crew supplying nation is in danger after growing shortage of trained hands. What are the measures IMU taking to improve it?
PV: We have a state-of-the-art curriculum and technology. We are more indigenous and in my view there may not be shortage of trained hands in India.  However we are taking strenuous efforts to provide world class training from the level of cadet upto research scholar.

Q. After the introduction of Diploma in Nautical Science (DNS) course by IMU, the university invited wrath from private institutions. What is the real issue in it?

PV: This is not true. In fact all private institutions that were offering maritime courses are affiliated to IMU and they look upon IMU as academic head for their programmes.

Wednesday, October 8, 2014

Lack of Cooperation from Tamil Nadu Govt kills Centre’s projects: Trivedi


Port Wings News Network:

In a federal setup like India, we (Centre) can only make repeated requests to the state governments to support Centre-initiated projects and we cannot wage a war against them for not heeding to our requests, Dr. Vishwapati Trivedi, I.A.S., Secretary, Ministry of Shipping, has said.
Speaking to Port Wings on the sidelines of the launching of a new vessel service by the Shipping Corporation of India (SCI) from Chennai to Yangon (Myanmar) at Chennai Container Terminal on Oct 3, the Shipping Secretary spoke on various issues pertaining to Shipping Ministry.


Q: Why the congestion at Chennai Port is still continuing?

VT: The port in Singapore, though located in the city, has better road and bridge connectivity and manages the inflow and outflow of vehicles easily. Unless until the connectivity projects like EMRIP and Maduravoyal Elevated Road are completed, the Chennai Port would continue to suffer in congestion.

Q. What is the present status of revival of coal handling at Chennai Port?

VT: Since the Madras High Court banned the handling of dusty cargoes like Iron ore and Coal few years ago, the port has suffered heavily on its revenue. The case is still pending in the Supreme Court. Hence, the port can’t decide on it as of now.

Q: Why the Indian Maritime University’s headquarter still in the dark despite completion?
VT: It is mainly because of lack of cooperation from the Tamil Nadu government.

Q: On IMU issue, the state govt blames that the Ministry of Shipping for the whole mess, what is your opinion on that issue?
VT: Their contention of not obtaining proper approval for IMU HQ building construction does not hold any ground, as the building has been fully constructed and now awaiting for other amenities like electricity and approach roads, which are to be provided by the state government to make it fully functional.

Q: After the new government in Centre, is there any change of mind on the Sethu Canal project?
VT: We are aware of the whole issue surrounding the Sethu Canal Project. New government and the Shipping Minister are also seized of the matter. They will take a decision on the future of the project very soon.

Q: Given the age-old demand for such service, will the Shipping Ministry launch a passenger service from Chennai to Yangon?
VT: We have already done some study about starting a passenger service between Chennai and Yangon, as most of the expatriates from Yangon lives in and around Chennai.  However, new avenues like this would be fully explored in future.

Q: Elaborate us about the “Make in India “initiatives for shipyards to make LNG ships?
VT: The building of three liquefied natural gas (LNG) carrier ships of the proposed nine to be acquired by the Gas Authority of India Ltd (GAIL) would be done in India. These highly technical and expensive projects which would cost around Rs 1,500 crore each, has been assigned to Cochin, Kattupalli and Pipavav Shipyards in India, while the rest of the six would be built in somewhere else, while all are expected to be operated by the Shipping Corporation of India.

Wednesday, October 1, 2014

Emergence of Bangladesh is a major concern to Tirupur garment exports: Sakthivel


Port Wings News Network:

The emergence of Bangladesh is a major concern to Tirupur garment exports, Mr A Sakthivel, President, Tirupur Exporters Association (TEA) has said. In an exclusive interview to Port Wings, TEA president shared his views on the growth of Dollar City over the years, emergence of Bangladesh and China in garment exports, and the need for more infrastructure facilities to keep Tirupur as world’s top garment export destination.
Excerpts of the interview…

Q: Tell us about your growth and the industry you are representing?
Mr A Sakthivel: Tirupur, a knitwear hub and a natural cluster, is exporting knitwear garments globally and Tirupur export turnover was US $3 million in 1984 and now recorded US $3 billion in 2014 in 30 years.

Q: As the president of the influential Tirupur Exporters Association, how do you think about the extra responsibility?

AS: I see the position of President of Tirupur Exporters’ Association as an opportunity to serve the industry I belonged and the society I live. I could say that TEA is my breath and TEA is in my blood. As always, I will put all my hard work to elevate this Industry to more greater levels in the years to come. If anyone ask the turnover of my company, I proudly say Rs.18,000 Crores and I cannot separate myself from this industry.

Q. Over the years, Tirupur developed as a cosmopolitan area in the state with the arrival of labours from different parts of the country. How is the present condition of labour crisis here?

AS: The labour shortage issues have not been fully solved despite arrival of unskilled 
labours mostly from northern part of the country. In fact, due to the shortage of labour, exporting units are hesitant to take more orders since the meeting of delivery schedule will become a problem.

Q. In the country, in particular in Tamil Nadu, Tirupur is an economic hub. How is the support from both Centre and State for the growth of the region?

AS: As far as the support from Centre is concerned, we used to get positive measures through the schemes announced in Foreign Trade Policy. Under Market Linked Focus Product Scheme, we used to get 2% of FOB value of exports as duty credit scrip for the exports made to EU, US (MLFPS), 3% duty credit scrip for the exports made to specified African, Latin American countries, 2% duty credit scrip on the incremental growth during the year, 3% interest subvention on packing credit and we have now requested to increase the percentage and also continuance of interest subvention with retrospective effect from 1st April 2014.
We get Value Added Tax (VAT) refund for the taxes paid to the inputs as input tax credit from the State government. We have already requested the State government for contribute for construction of working women hostels in five places in Tirupur.  State government has promised to support for the same.

Q. Tell us about the volume of business generated in the region and what are the targets in coming years?

AS: The exports from Tirupur was  in the range of Rs. 12,000 crores to Rs. 13, 000 Crores in the past four years and against this, last year, 2013 – 14, Tirupur exports clocked Rs.18,000 Crores with the growth rate 15% in terms of Dollar and 30% in terms of Rupee. We have set a target of doubling our exports from the current level in next three years and with the ongoing export trend, I am certain that the target could be reached with the continuance of Schemes under Foreign Trade Policy and 3% Interest subvention on packing credit with retrospective effect from 1st April 2014.  

Q: During summer, frequent power cuts affect the whole trade. What could be done by the state government to overcome the issue?

AS: The power cut is one of the adverse factors for exporting units which increase the cost of production and also create problems in maintaining the delivery schedule. We have been requesting the state government to keep a special consideration for Tirupur exporting units and exempt from power cut by installing a dedicated feeder giving continuous power supply as like provided to Multi National Companies.  

Q. What are the logistical options available for exporters from Tirupur, like port connectivity?

AS: Tirupur is exporting garments through VOC Port (Tuticorin Port) (60%), Chennai Sea and Air port (35%), Cochin and other ports (5%). We have also been facing problems in ports due to non acceptance of the containers reaching after 5 pm and only feeder vessels are coming to VOC Port and it has to catch mother vessel in Colombo Port.

Q. Tell us about Tirupur Exporters Association and its goal?

AS: Tirupur exporters’ Association was setup in the year 1990, currently consisting of 927 exporting units as members and we have recently celebrated our Silver Jubilee inaugural function. Our goal is helping the exporting units for continuous development and doing their business in hassle free manner apart from development of Tirupur city.

Q. In the last few years, Bangladesh has emerged as a big challenge for India in garments export. What has to be done to keep Indian garment sector on top?

AS: Yes, of course the emergence of Bangladesh is a major concern to Tirupur and being a least developed country, they are enjoying tax free benefit in European Union apart from lower labour wages, power cost and bank interest rates. To keep our garment sector on top, we have been requesting the government to enter Free Trade Agreement with European Union and this will put us at par with Bangladesh in this tax related matter.
The cotton and cotton yarn export policy should be framed in such a way that  the Value added sector in textiles should always be ensured that they get continuous supply of yarn at optimum rate.

Q. Tell us about the volume of exports from the region and which are the countries that are regularly import from India?

AS: Tirupur has done Rs.18,000 Crores in 2013-14 and 55% to 60% of our exports destined to European Union countries, 30% to 35% to  USA and the balance to Singapore, China, Australia, South Africa, Russia, Norway, Dubai and south American countries etc.,

Q. In your view, what are the real impediments for growth of the garment sector from the region?
AS: The major impediments are higher bank interest rates, poor infrastructure facilities, increase in wages, archaic labour laws and continuance of policy for a lesser period etc.,

Q. What are the strong measures needed or to be taken up by the Government of India to keep garment sector on top?

AS: The prime importance is that the Central government should expedite for finalization of a Free Trade Agreement with European Union which will help to increase the export by 30% to 40% in European Market. The government should also take initiatives to have a Free Trade Agreement with Canada. The Schemes like MLFPS, FPS, Special Focus Product Scheme, Incremental Incentivisation Scheme should be continued and incentive should be increased to 5% for FPS Special Focus Product Scheme. The bank interest rates on packing credit should be fixed at 7% and export sector should be kept as a separate chapter in monetary policy.

Q. How do you see the Chinese threat to garment sector in coming years?

AS: The Chinese would be no longer be a major threat to garment sector in the coming years since the cost of production in China has already gone up and moreover, the garments sector in China is now facing the shortage of labour as labours are preferring to work in cell phone, telecom and electronic industries.

Q. How is the impact of closure of Dyeing units on garment sector here?

AS: After achieving zero liquid discharge, thanks to Tamil Nadu government, nowhere in the world, the impact of closure of dyeing units has become a thing of past and I can say it is more or less over.  The dyeing units are permitted to increase their operating capacity by Tamil Nadu Pollution Control Board after observing the satisfactory performance of the units. 

Q. As a Tirupur resident, what is your wish and plan for the development of the city?

AS: Tirupur, being connected internationally needs to be technologically advanced place, particularly in the communication and information technology areas. Tirupur requires  better road facilities, construction of flyovers wherever necessary, ESI hospital with good facilities, working women hostel and housing colonies for workers, dedicated power station, Stoppage of major trains in Tirupur. As it has to hope with growing population, we have requested the Central Government to include Tirupur under Smart City Programme.

Q. Tell us about the growth of Dollar City over the years?

AS: Three decades back, in 1984, the exports from Tirupur was less than Rs 10 Crores and when our Association was setup in 1990, the exports was Rs.290 Crores. We set a target of reaching Rs.1,000 crores in five years and due to efforts of our exporters, Rs.1,162 Crores was reached in the year 1993 itself. The exports got doubled in four years and reached Rs. 2,255 crores in 1997. It took another seven years to get doubled in 2004, the last year of dismantling of quota period. After quota dismantling, Tirupur exports was grown up by more than 20% and in 2006 -07, it reached Rs. 11,000 Crores. In 2007-08, due to appreciation of Rupee against Dollar, first time in the history of Tirupur, the export got declined by 10% and achieved only Rs. 9,950 Crores.
In the subsequent years due to recession in Europe coupled with demand compression and other adverse factors like increase in yarn prices, power cost, labour wages, closure of dyeing units, the exports was hovering between Rs.12,000 Crores and Rs.13,000 Crores till 2012-13. Only last year, 2013 -14, the exports got increased and recorded Rs.18,000 Crores.