Raja Simhan T. E.

Norasia as a shipping line focused on the East-West trades before being acquired by the Compañía Sudamericana de Vapores (CSAV), a Chilean shipping company, in 2000. Founded in 1872, and with revenues of $2.1 billion in 2003, CSAV is one of the oldest shipping companies in the world. The company provides container and specialised cargo services (bulk, reefer and vehicles) and operates over 90 vessels on a global basis. An aggressive shipbuilding plan is in place for delivery of 22 large container ships between 2004 and 2007. Most of these new ships are for Norasia services.

Till a year ago, Norasia was a small player in India, and had no direct shipments from the country. All movements from India were transhipped through ports in Sri Lanka, Singapore and Malaysia. However, it has introduced new vessels and services directly touching India. With the increased direct presence in India, Norasia has been ranked number one in the European trade from Tuticorin, within the top three from Kochi, Chennai and Gujarat and in the top five from Mumbai, Kolkata and North India (Delhi, Ludhiana, Moradabad and Gwalior).

In an e-mail interview with Business Line, Mr Vikas Khan, President & CEO of Norasia Container Lines Ltd, shares his views on the shipping sector and company's plans in India.

Excerpts from the interview:

How long has Norasia been in India?

Norasia has been in India since 1993. We initially operated fairly small volumes served via transhipment. From 2002 Norasia started direct calls in India. Today, we have two direct weekly services from the Far East, and one direct weekly service to North Europe.

What is your volume in India?

The volume is around 11,000 TEUs (twenty foot equivalent units) a month (annualised over 130,000 TEUs). We currently enjoy a 10 per cent market share on India/Europe trade, and 5 per cent on Asia/India trade lane.

In February you announced the commencement of your own agency in India. What does this mean to your business and to customers here?

It means improved customer service and commitment. India is high on our priority, and an owned agency is the first step towards our increasing commitment to Indian trade. We have also established a back-office in India, which performs certain administrative and planning functions for Norasia, covering our entire European and Asian operations.

We expect Indian trade with the world to grow dramatically in the next years, and Norasia is part of the transport infrastructure needed to support this growth. Simultaneously, India offers us other opportunities and advantages, particularly in human resource and infrastructure development, which we will be targeting as well.

Do you plan to deploy additional services in the country?

Norasia has good quality direct services from India to Europe and from Far East, and as a result a fair share of the Indian market on these sectors. Our mid-term targets are to provide equally good direct services connecting the Indian market to the US and East-Africa.

What changes have you seen in the last few years in Indian shipping, especially in the container sector?

There have been several welcome changes in the Indian maritime sector. First, there has been an improvement in efficiency due to introduction of private entrepreneurship in container terminals, warehouses and distribution centres.

Privatisation levels have increased, although at a terribly slow pace, and we saw an increase in foreign direct investment in the inland logistics, warehousing and distribution areas. However, international business has changed so much in the last few years that although the changes on the Indian scene may be considered unprecedented and groundbreaking, in macro terms the changes were insufficient, inadequate and late.

Where is the growth in cargo volumes coming from?

Growth in cargo volumes from India has been the largest in non-traditional trade lanes, especially to the US, Far East and East-Africa.

The changes of the last few years were not commensurate with the demands of the times. Not only the ports but also the entire transportation infrastructure were taken by surprise and were unable to cope with this growth.

Indian ports have been under serious pressure to deal with this unexpected growth, and I must say that after a brief period of service failure, all ports, especially Nhava Sheva International Container Terminal, responded admirably to at least stem the flood, and cope reasonably well with existing volumes. This was a huge effort to counter the effects of inadequate long-term planning in the past and, I hope, a lesson for planning the future.

Could you draw a parallel between India and China in the maritime sector?

Each country has its own environment, which needs unique solutions. China's container throughput (import and export) in 2004 was over 50 million TEUs (excluding Hong Kong) compared to 4 million of India. Any comparison is pointless.

One must compare to learn: China has a long coastline like India. In 1994 very little of China's exports went out on a direct call. Today over eight ports can boast of direct calls by long-haul mainliners. On the other hand, only three ports handle 80 per cent of India's container exports.

I believe that India should work towards developing secondary ports into primary ports. This will improve efficiency of transportation from point of production to destination: shortest possible distance on land, maximum by sea. But this will need the kind of infrastructure development that China has accomplished.

Additionally, India also has the potential of being the regional transhipment hub by providing a more efficient service to cargo producers.

What are the issues that need to be focused on for growth in the maritime sector?

Infrastructure. Privatise, incentivise and fast-track infrastructure development in its entirety. In 21st Century business, each area (country, if you like) benefits by what it brings to the consumer's table — key strengths minus key weaknesses. Among India's key weaknesses is transport infrastructure.

The existing rail and road infrastructure forces cargo to move in and out of only a few major ports. This system is rife with a host of inefficiencies, each adding its contribution to delivery cost and time, the two main measures of transportation, which have an immediate and fundamental impact on competitiveness of Indian goods abroad, and cost of foreign goods in India.

I realise that infrastructure development takes time, but I am not convinced that it is being fast-tracked enough. If Indian manufacturers can produce goods of a quality and cost acceptable to international buyers, the transportation chain too must provide low-cost, high-quality facilities; otherwise, these contracts will be lost, and buyers will move to competing areas.

We live in a highly competitive world, and every component of the chain must work with high efficiency for the whole to be successful. As globalisation matures, the production of goods and services moves increasingly to places where cost/quality optimisation is maximum. And as globalisation progresses (slowly overcoming various trade barriers) this trend will continue.

The ultimate consumer, the one who pays the bill, must be satisfied because he has choices from all over the world. Transportation costs today are so low that the distance between locations of production and consumption are of minor consequence. Of greater importance are logistics, inventory management and warehousing. Case in point: One of the largest volumes of commodities moving by containers from Europe to the US is bottled drinking water.

What are your comments on the privatisation in India, especially in the southern ports of Chennai, Ennore and Kochi?

The advantage of privatisation is that the consumer has a choice, and the service provider who gives the best quality service at the lowest cost will win! In an open market, we are all in the same game: compete, to win or die.

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