Adani Ports justifies move to levy extra costs from CFS operators at Hazira

Adani Hazira Port Pvt Ltd (HPPL), a unit of Adani Ports and Special Economic Zone Ltd (APSEZ), has justified its move to levy extra charges from container freight station (CFS) operators at the port located in Gujarat from Friday, saying it was aimed at recovering the rising costs associated with multiple shifting of containers triggered by higher volumes and more CFSs starting operations.

In the current fiscal, the monthly container volumes at Hazira Port, according to APSEZ, have increased from 52,000 twenty-foot equivalent units (TEUs) to 70,000 plus TEUs.

“To cater to the enhanced number of direct port delivery (DPD) customers and faster delivery of cargo, the port is facing challenges in providing separate stacking yards to the respective CFS’s. Further the number of CFS’s in Hazira region has increased, putting more pressure on the already stretched capacity of the port. These developments have led to multiple shifting of containers, adding to the cost of handling. The port has to deploy more equipment, manpower to meet the requirements of the trade. The development of infrastructure in terms of additional stackyards has been started in right earnest. The enhanced cost of delivering cargo to CFS’s has been levied through this advisory,” Adani Hazira Port said in a 6 September communication to the Container Freight Stations Association of India (CFSAI), which has demanded a roll back of the extra levy.

In a 25 August Customer Advisory, Adani Hazira Port said it will collect extra charges of Rs2,500 for a 20 ft container and Rs4,000 for 40 ft and 45 ft boxes from CFS operators when import loaded containers are taken to a CFS as nominated by the shipping lines.

The World Bank in its ‘Ease of Doing Business’ report wrote that in the ports sector, logistics cost in India was one of the highest.

According to Adani Hazira Port, the additional cost was making Indian exports globally uncompetitive.

The World Bank and the Central Board of Indirect Taxes and Customs (CBIC) have identified the present model of CFS’s as the main reason for the higher cost.

“This model is not only adding significant cost but also increasing the detention time of cargo in the CFS’s and both these factors lead to higher transaction costs in India,” the port operator wrote in the communication.

Since 2015, the CBIC has introduced reforms to facilitate early release of cargo from the custom bonded areas which has led to significant reduction in document processing time and clearance of cargo. CBIC has migrated to the trust regime and physical inspection of container cargo is significantly reduced. There is more focus on intelligence, state of the art scanners and technology (reduced human intervention) to clear the cargo before the vessels berth at ports, it noted.

In order to supplement the efforts of the Union government and the CBIC, ports have adopted global standards of efficiency in operations and cargo handling. To further reduce the transaction cost in EXIM trade, the CBIC is promoting Direct Port Delivery (DPD) and Direct Port Entry (DPE) to bypass the existing expensive model. These two initiatives have helped in cutting the transaction costs.

To align with the Gol and CBIC initiatives, Hazira Port has adopted Direct Port Delivery and Direct Port Entry initiatives.

Currently, 18 percent of the import cargo at Hazira Port is cleared under the DPD model compared to some 65 percent at Jawaharlal Nehru Port near Mumbai.

“The unproductive shifting of container cargo from one custom bonded area to another custom bonded area adds no value to the trade but solely increases the transaction costs. To overcome this, initiatives like DPD and DPE need to be promoted through world class port infrastructure, state of art scanners and on-dock facilities,” Adani Hazira Port said.

With Hazira Port clocking significant growth in container cargo volumes along with DPD volumes during the current fiscal, “the port intends to aggressively pitch to significantly increase DPD and DPE share to provide economic benefits to the trade”.

Historically the growth of CFSs in India was primarily due to poor port infrastructure and delay in custom clearances which led to inordinate delay in clearing cargo from the custom bonded areas.

“Now, as the ports are geared up to meet all the requirements of regulatory agencies and trade within the port area, it’s high time that greater focus is given to DPD and DPE,” Adani Hazira Port said, adding that these initiatives along with the requisite infrastructure will help in reducing cost for the EXIM trade.