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Shipping, Marine & Ports Exposition 2012 Post-Summit Report

June 2012 www.deloitte.com\in

Foreward

The SMP Expo 2012 is a one of its kind international conferences organized by Chemtech Foundation of Jasubhai Shah & Group. 8th February 2012 marked the 38th year of operation of the Chemtech Foundation. The theme for this years conference, Maritime Exposition A Gateway to growth, highlighted the importance of the maritime industry in the development of Indias growth. The conference was visited by several dignitaries representing the government & the private sectors in the Ports & Shipping industry. The conference also brought forth the representation of countries such as Korea & Japan. Deloitte India is proud to be associated with the event as the Knowledge Partner and as part of the association, has published this Post-Conference Knowledge Paper for the Shipping Marine & Ports Exposition 2012. This knowledge papers aims to bring forth the moments experienced and scent of knowledge sprinkled during the conference in the SMP EXPO. This being a Post-Summit Report, it highlights the key points of discussions & presentations addressed by the speakers at the conference. The successive sections will take readers through day 1, 2 & 3 sessions of the conference. We hope that this paper becomes an important way forward to work collectively and face the challenges experienced by the shipping and port industry

Best wishes, Hemant B. Bhattbhatt Senior Director, Consulting Deloitte Touche Tohmatsu India Private Limited

Shipping, Marine & Ports Exposition 2012 Post-Summit Report

Contents
Day 1 Inauguration of the SMP EXPO 2012 Session 1: Shipping a new era Session 2: Future Trends in Shipping Session 3: Panel Discussion: Wither Indian Shipping for the next decade 6 7 11 23 32 34 35 40 44 45 49 55 59 60

Day 2 Session 3: Indigenous Shipbuilding & Naval Construction Session 4: Panel Discussion on Maritime Exposition-A Gateway to Growth

Day 3 Session 1: Regulation & Policy Environment Session 2: Panel Discussion on Connectivity of Rail, Road to Sea Ports Session 3: Reducing Transaction Cost

Contact Deloitte Ofces in India

Shipping, Marine & Ports Exposition 2012 Post-Summit Report

Day 1

Inauguration of the SMP EXPO 2012


The inaugural session of the Conference started with the lighting of the auspicious lamp at the hands of the Chief Guest, Shri K. Mohandas, Secretary, Ministry of Shipping and other dignitaries. The conference was addressed by Mr. Jasubhai Shah, Chairman, Chemtech Foundation Following were the speakers for the inaugural session: Sr. 1 2 Topic Welcome Address Chairman Address Shipping Overview Address by Global Brand Ambassador SMP World Expo 2012 Address by International Guest Keynote Address by International Guest Address by Chief Guest Vote of Thanks Speaker Mr. Jasu Shah Mr. S. Hajara Designation & Company Chairman, Chemtech Foundation Chairman & Managing Director - The Shipping Corporation of India Ltd Chairman Emeritus, IRS and Global Brand Ambassador, Shipping, Marine & Ports World Expo 2012 Director for Boat Affairs Ofce, Shipbuilding & Ship Machinery Division, Maritime Bureau, Ministry of Land Infrastructure, Transport & Tourism, Japan Chairman & CEO, Korean Register of Shipping Secretary of Shipping, Govt. of India Joint Managing Director, Dolphin Offshore Enterprises India Ltd While explaining reasons behind inauguration of the SMP Expo before the Ocean Tech Expo, he praised the industry and government alike by calling it One of the most vibrant and friendly industry. He echoed the views of all dignitaries that the conference can be instrumental in bringing out a roadmap for the industry to chart out its way forward.

Capt. J. C. Anand

Mr. Yoshida

5 6 7

Mr. Oh Kong Gyun Shri. K. Mohandas Mr. Navpreet Singh

Welcome Address: Mr. Jasu Shah The Welcome Man as he addressed himself, Mr. Jasubhai Shah, Chairman, Chemtech Foundation extended a warm welcome to the guests, advisory board members & delegates from the shipping industry from across the globe. Mr. Jasubhai took pride in stating that in its 38th year of operations and after organizing numerous expositions and conferences for various industries, Chemtech Foundation is respected and regarded as one of the leading organizations striving to gather industry intellectuals and players at one place and discuss various issues, share knowledge and advancements made by the countrys shipping industry as a whole.

Chairman Address Shipping Overview: Mr. S. Hajara Mr. S Hajara, the Chairman & Managing Director of Indias largest public sector shipping company, The Shipping Corporation of India, presented the overview & current status of the shipping industry in India. He praised the SMP EXPO and viewed it as having a great signicance on the annual calendar of maritime events. To state in his words, these conferences involving technology & knowledge transfers are important for maritime growth. Mr. Hajara expressed optimism for the shipping industry despite the turbulent times it is presently going through. In his opinion, though demand and supply for trade
Shipping, Marine & Ports Exposition 2012 Post-Summit Report 7

were not evenly matched, and supply far exceeded the demand, this was a time to put all heads together & see how to improve the situation. Initially, high priced estates & high growth in supply of ships were the two primary dangers for the ship owners and shipping companies as the demand for ships outnumbered the supply of ships. Due to this the ship owners faced competition and the rates / tariff dropped. According to Mr. Hajara, the global demand-supply scenario where supply surpasses demand was witnessed from 2008 and is going to be experienced in 2012 as well. Statistics show that in most of the cases like Oil trade & dry bulk trade, the demand falls short of supply by almost 1.5% to 2%. The demand supply for container segment has however remained more or less constant. He added that the Indian scenario however, is moderately better than the global one. India is not only the second fastest developing economy in the world but is also turning out to be a major rening hub with the 4th largest rening capacity and 4th largest imports of crude oil. In the recent past India has witnessed a growth of 8 to 9 % against which the current growth of around 7% seems inadequate. However, the Indian industry must see it as a healthy growth. Containerization is yet another segment, which will be witnessing boost due to India becoming a manufacturing hub. Offshore business also has tremendous potential due to the booming EMP market and therefore all round shipping prospects seem to be bright. Concluding his address, Mr. Hajara said that investments in Indian shipbuilding industry and ports are expected to increase in the coming years owing to 100% FDI being permitted in almost all maritime industry segments, and the steps taken towards towards strengthening the shipbuilding engineering and steel making industries. Trafc at ports is expected to go up to 5 billion tonne by 2030. Indian Maritime Industry thus offers an important opportunity to the investors / stakeholders across the world in addition to the Indian players..

Address by Global Brand Ambassador, SMP World Expo 2012: Capt. J.C. Anand About Capt. Anand: Capt. J.C. Anand rose from the ranks as a Navigating Cadet and eventually became the President of the IRS. Also a ship owner himself, Capt. Anand was elected as President of Indian National Shipowners Association for three successive terms. He was instrumental in establishment of the national ship classication society viz., Indian Register of Shipping. He retired as the Chairman of IRS recently in 2010 and has been appointed as Director in IACS Limited. Address as the Global Brand Ambassador, SMP World Expo 2012: Capt. Anand praised the governments efforts to develop the maritime industry. He substantiated by giving example of how the government spent a fortune for establishing the Indian shipping industry, training of shipping personnel and developing ports and allied sectors. Till today, around 50,000 sea farers have been trained in India who have done India proud. In his words, There is not one country that will not approach us for our sea farers. One of the commendable contributions of the Indian Government towards the development of the maritime industry has been to make loans (covering 90% of the project cost) available at a minimal rate of interest of 4-6% for various segments. This has not been seen anywhere else. According to Capt. Anand, economic ups and downs follow each other and these are the times to synergize and foster team work between stakeholders & the government. The unied growth of the maritime industry cannot be achieved unless it is transparent, clear and not fragmented with personal interests. Indian maritime industry should learn from and share experience with various foreign delegations through conferences such as SMP Expo, especially in technological areas where Indian has a comparative back footing. Capt. Anand was of the opinion that the Ministry of Shipping should work more closely with the Ministry of Finance to be more precise and meaningful in what

is expected of the Indian Government by the Indian maritime fraternity. Introspection, staying united in times of crisis, making proposals to the government & involving them as partners will go a long way in the development of maritime industry. Address by Special Guest: Mr. Yoshida, Japan Mr. Yoshida is the Director for Boat Affairs Ofce, Shipbuilding & Ship Machinery Division, Maritime Bureau, Ministry of Land Infrastructure, Transport and Tourism, Japan. His participation in this capacity made it the Japanese Ship Machinery Industrys rst ofcial participation in an Indian Maritime Industry event. A man of few words, Mr. Yoshida announced Japans deep interest in developing Indian Maritime industry & its resources. Though the current capacity of Indian Shipping tonnage is quite small (only 109 gt in 2010 according to Lloyds), India is poised to grow to No. 1 in the world by the year 2030. Mr. Yoshida echoed the thoughts of all present when he said that growth of the maritime industry is very important for a countrys growth and hoped to hone relations between the shipbuilding and ship machinery industry of two great nations through such conferences and expositions. Keynote Address by International Guest: Mr. Oh Kong Gyun from Korea About Mr Oh Kong-Gyun, Chairman and CEO, Korean Register of Shipping Mr. Gyun, International Guest for the SMP Expo 2012, Chairman and CEO, Korean Register of Shipping represented the Korean Shipping industry. Mr. Oh graduated with Bachelors in Machinery from Korean Maritime University in 1975. He obtained his Post Graduation in Law from the same university in 1975 after which he pursued and successfully completed the Ph.D programme in Maritime Law in 2006. Alongside being the Chairman and CEO of the Korean Register of Shipping, Mr. Oh is also the Vice Chairman of International Association of Classication Societies and

Chairman of Korean Society of Marine Engineering. He has held various management positions in his career in the maritime industry. Address to the Conference: Mr. Oh expressed his sincere gratitude towards Chemtech Foundation for inviting KRS to one of the important events in the maritime industry of India. Mr. Oh touched the point of witnessing the paradigm shift of shipping from the west to east. Importance of Asia in shipping and shipbuilding has risen signicantly in the past 2 decades. Today Asian ship owners control nearly half of the worlds commercial eet and produce nearly 90% of the new building ships in the world. Asian banks are becoming more sophisticated in ship nance and Asian countries are embarking on a voyage where we need to clearly express a louder Asian voice to better position ourselves in the world market. The formation of organizations namely (i) Permanent Secretary for Asian ship owners (ASF), representing Asian ship owner interests in Singapore, (ii) Association of Asian Classication Societies and (iii) Consulted efforts to form and achieve the NGO status in the International Maritime Organization & to support the R&D and other aspects are the three most singular achievements in this direction. More time and work is needed to solidify the internal organization structures and processes. To establish marine insurance companies under a single umbrella would be an initiative which will ensure check and balance in the Asian maritime sectors. Mr. Oh talked about maritime regulations having a profound effect on the operations of maritime & shipping companies. The current IMO discussion about climate change and air emissions is important. Issues like Ballast Water Treatment and ship recycling are also vital for Asian industry. Mr. Oh was positive that through one coherent and strong voice as well as representations made in the

Shipping, Marine & Ports Exposition 2012 Post-Summit Report

Despite the odds, the Indian economy fares well as compared to most other countries. Incidentally, 2011 provided achievement of the Indian Port capacity crossing capacity of 1 billion ton.
international maritime discussions by the Asian countries will help in addressing all these issues and challenges. With this he closed his speech. Address by Chief Guest: Shri. K. Mohandas. Secretary of Shipping, Government of India Shri K. Mohandas Secy. of Shipping As the Chief Guest for the conference, Shri K. Mohandas released the Exhibitors Directory and later addressed the inaugural session of the conference. Mr. Mohandas reiterated the fact that the maritime industry was passing through a difcult phase as the last 2-3 decades have not been very encouraging in terms of trade and the economic shocks have affected all walks of life and philosophy of business. Despite the odds, the Indian economy fares well as compared to most other countries. Incidentally, 2011 provided achievement of the Indian Port capacity crossing capacity of 1 billion ton. Indias control over the global shipping industry is very meagre of around 1% and the tonnage stands at 4%. Mr. Mohandas talked about the proposal for a system under the Ministrys evaluation in which it is proposed that a certain percentage of Indian cargo should be carried by Indian boaters only. It seems quite a feasible and practical option to secure Indian Cargo. Another option of starting a fund for Indian agged ships and development of Indian Cabotage for coastal shipping and related infrastructure such as dedicated minor ports is also being considered. He stressed on the need for developing the shipbuilding industry to take control of the global market share. He also extended thanks to Mr. Oh from KRS for supporting the Indian Maritime Industry when needed. With a positive view towards the future of shipping industry, Shri Mohandas ended his speech This was followed by presenting mementos to the distinguished guests. Vote of Thanks by Mr. Navpreet Singh, Joint Managing Director, Dolphin Offshore Enterprises India Ltd The closure of the inaugural session was addressed by Mr. Navpreet Singh, Joint Managing Director, Dolphin Offshore Enterprises. He extended a vote of thanks to the guests and delegates present in the conference, on behalf of the Chemtech Foundation, for taking out time to attend the conference. Mr. Singh added that a better understanding of where we are today and what the future holds for us is what is wanted of conferences. On the behalf of Chemtech foundation, he acknowledged the sponsors and Chemtech Team who have made contributions and efforts to make the conference successful. He urged all present to participate in the coming sessions to make the conference a success. With this the session ended, followed by a tea break.

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Session 1: Shipping a new era

Session Chairman Mr. Arun Sharma, MD & Chairman, Indian Register of Shipping About Mr. Arun Sharma Mr. Arun Sharma joined the Shipping Corporation of India as a sea going engineer, gradually moving to shore establishment of SCI in 1978. He was Vice President Commercial and Operations with Varun Shipping Company between 1993 and 1999 and the President of Great Eastern Shipping between 2000 and 2006. Mr. Sharma joined the Indian Register of Shipping on 1st September 2011 as MD and Chairman designate. He has been on the board of Indian National Ship-owners Association and South East Asia Committees of various Classication Societies Association for the year 2012. Mr. Sharma was the chairman of the rst session on Day 1 of the conference with the theme for the session being Shipping a new era. Session commencement The session marked the beginning of the technical discussions of the conference. Eminent personalities were present in the forum to discuss new trends in shipping. Session presentation topics and the speakers Sr. 1 Topic Ballast Water Treatment Speaker Mr. Akshay Jain

Mr. Arun Sharma took charge as the session chairman and said a few words on classication and the evolving role of IRS & classication society as a whole. He admitted that ship classication is a challenging job as it has moved from merely being a Register and Evaluator of Ships in 1760 when the class was founded to being Manager of safety and protector of environment as it is today. Even this does not limit the responsibility of the class and now there is still a fundamental change in the role played by the class. Besides becoming a maritime regulator it is becoming maritime innovator to constantly come up with new ideas and technology for overall shipping safety and efciency improvement. He thanked the organizers for the opportunity and with the set of very good presentations lined up, expressed hope that each speaker within the allotted time of 15 minutes will do justice to the presentations on topics allotted to them. This would then be followed by the Question & answer session which will mark the end of the rst session.

Designation & Company CEO, Vedam Design & Technical Consultancy Private Limited Director, Ship Performance, Wartsila, S.p.A Dipl.-Ing., Naval Architect Vice President, Ship New Building ASEA Germanischer Llyod SE Senior Naval Architect & Master Mariner, Knud E. Hansen A/S, Denmark

2 3

Energy Efciency Design Zero Emission Ship

Mr. Patrick Baan Mr. Holger Jefferies

New Ship Designs for next decade

Mr. Gert Christensen

Shipping, Marine & Ports Exposition 2012 Post-Summit Report

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Ballast Water Treatment Retrotting Challenge Speaker: Mr. Akshay Jain, CEO, Vedam Design & Technical Consultancy Private Limited About Mr. Akshay Jain: Mr. Akshay Jain started his career in New Building Department of OMI Shipping and later founded Vedam design along with his colleagues in 2007. Vedam has been awarded as Fast Growth 25 company by All India Network, initiated in Harvard Business School, USA. Akshay has a B.Tech in Naval Architechture from IIT-Madras and is a Level-1 qualied CFA. He is also a Professional Affairs Secretary in Institution of Naval Architects and is an active member of the Indus Entrepreneurs, Mumbai Chapter and Institute of Directors, Mumbai Chapter. Presentation glimpse: Mr. Akshay addressed the topic Ballast Water Treatment Retrotting Challenge as a very apt & relevant topic in current times for shipping industry. He spoke on the Ballast Water Convention, when it is expected to come into force, treatments and types approved under the convention for treatment of ballast water. Following section gives an overview of the presentation made by Mr. Jain at the SMP Expo 2012 conference. Secretary General IMO 2003 quoted that The introduction of harmful aquatic organisms and pathogens to new environments, including via ships ballast water, has been identied as one of the four greatest threats to the worlds oceans In February 2004, International Maritime Organization (IMO) adopted a convention for the Control & Management of Ships ballast Water and Sediments commonly known as Ballast Water Convention (BWC) The objective of the BWC is to regulate the water and reduce the risk of introduction of non-native species from ships ballast water. It is applicable to all vessels operating in aquatic environment designed to carry ballast water and are entitled to y the ag of a Party to the convention. The BWC regulates the discharge of ballast water either by BW exchange under Regulation D1 or by treating ballast water to meet the certain standards specied under Regulation D2 depending on ships build date and quantity of ballast carried on board.

The convention also issued Guidelines from G1 to G14. The requirement of Ballast Water Treatment comes from the Regulation D2. Following are some guidelines for BWC D2 Regulations for organisms permitted in Ballast Water during discharge Organism category permitted in ballast water during discharge Plankton, >50 m in minimum dimension Plankton, 10-50 m Toxicogenic Vibrio cholera (O1 and O139) Escherichia coli Intestinal Enterococci

Regulation

< 10 cells / m3 < 10 cells / ml < 1 cfu* / 100 ml or less than 1cfu /g (wet weight) < 250 cfu* / 100 ml < 100 cfu* / 100 ml

The BWC sets standards for treatment systems to comply with. The treatment systems must be tested and approved in accordance with IMO guidelines G8 & G9. There are different regulations in place for BWT in various regions and this makes it difcult for shipping companies to comply with all the regulations and provisions. To make it easier for compliance, a uniform set of regulations is being set which is known as Ballast Water Convention, wherein the BW US Regulations play an important role. Under the BW US Regulations, USCG has proposed a regulation to be implemented in two phases: Phase 1 which is same as IMO-D2. Phase 2 which is a 1000 times stringent and if it comes into force then it will be applicable for ships built after 2016 The BWC Entry in Force will be after 12 months after at least 35% of the worlds merchant shipping gross tonnage raties the convention. Following table shows us the status of ratication till date:

Shipping, Marine & Ports Exposition 2012 Post-Summit Report

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States

% Tonnage

States Already Ratied

Required: 30

Required: 35%

Ratied: 33

Ratied: 26.46%

Albania, Antigua and Barbuda, Barbados, Brazil, Canada, Cook Islands, Croatia, Egypt, France, Iran, Kenya, Kiribati, Republic of Korea, Liberia, Malaysia, Maldives, Marshall Islands, Mexico, Netherlands, Nigeria, Norway, Saint Kittsand Nevis, Sierra Leone, South Africa, Spain, Sweden, Syrian Arab Republic, Tuvalu, Lebanon, Trinidad & Tobago

The BWC is not yet ratied however once any of the major states like Gibraltar or Greece raties it, then it would immediately come into force. Implementation of BWC: The BW Convention is dependent on Built date and ballast capacity of the ship, as given in the table below. Applicability of D2 Standards Before 2009 Built Date 3 Categories 2009 2012 After 2012 Ship Type (Ballast Capacity) <1500 CuM & > 5000 CuM 1500 5000 CuM

Each ship being unique, has a different BWT requirement. Even within the same eet it is not necessary to have same BWT for the ships. Following are some of the basic steps which should be followed to select the equipment for BWT. BWT Engineering: Feasibility & Selection of Equipment Installation Location Piping Design Electrical Design BWT Installation: Methodology Execution Project Management BWT Retrot Challenge: The major challenge is that around 60,000 ships are required to be retrotted in a short period of time. Under the existing conditions all the existing ships must start retrotting by 2015. Many ship owners in US and UK have already started with the retrotting exercise. Though the price of equipment has drastically reduced in the last two years, it may see a reverse trend post the ratication as the sudden demand for retrots will cause: Equipment - High Cost / High Lead time / Non Availability Long Class approval time Premium Engineering hours The presentation ended with a sample slide from a presentation by Ministry of Infrastructure and Environment in one of the Ballast Water Conventions, which said Ship owners be prepared, yesterday was better

2 Categories

BWC Implementation Schedule: Ships built in after 2012 etc. should immediately comply with this regulation For ships built between 2009 & 2012 less than 5000 cu M capacity comply immediately and ships with greater than 5000 cu M capacity should comply after 2016. Vessels built in and after 2009 with Ballast capacity less than 5,000 CuM are required to immediately comply with the BWT D2 standards. Deadlines for the implementation of the BWT D2 standards ratication have been missed due to the slow pace of adoption BW Treatment Process: There are two main processes for treatment of Ballast Water namely (i) Filtration i.e. to lter out organisms greater than 50 microns (ii) Disinfection i.e. using chemicals like chlorine or means such as Ultra Violet rays etc. to kill the microorganisms of smaller size by physical disinfection and chemical disinfection.
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Energy Efcient Design by Mr. Patrick Baan Mr. Patrick Baan, Director, Ship performance, Wartsila Italia S.p.A About Mr. Patrick Baan: Mr. Baan started to work for Wartsila in the Netherlands as Application Engineer for four stroke engines in its marine division. In 2002, Patrik was relocated to Wartsila ofce in Italy. After having been responsible for the marine engineering team in Italy he was made responsible for marine engineering for the ship power division. Mid 2009 he started in his current position as Director, Concepts and Solutions Presentation glimpse: Mr. Baan gave a brief introduction of Wartsila Italia and stressed that though shipping is extremely efcient, yet emissions from merchant shipping are going to be the source of concern in the coming future. Statistics from IMO show that while in 2007 and 2011 the shipping emissions equal to 2.7% and 5% of global carbon emissions, it is poised to be around 72% of the total carbon emissions by 2020 if no action is taken. Energy Efcient Designs (EEDs) for ships along with operational care are some of the steps for reducing the carbon emission & saving energy. He presented a typical cost structure of a merchant ship & the factors within the design and operations which have impact on energy consumption. These can be seen in the diagram and the table below:
Typical cost stucture of a merchant ship

Factors impacting energy consumptions:

Design

Operation

Concept, design speed and capability

Environmental conditions

Hull and superstructure

Fleet management, logistics and incentives

Power and propulsion systems

Voyage optimization

Energy management

Energy Efciency Design Index

Energy Efciency Operational Index

Reduction potential 50% compare to average eet 2009

Reduction potential 50% compared to business as usual 2009

Sales Capital costs Cargo handling costs Bunkers Port dues Canal tolls and misc Manning Repairs and maintenance Insurance per annum Administration/Management Stores and lubes

Shipping, Marine & Ports Exposition 2012 Post-Summit Report

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The following diagram shows the energy efciency leavers:

E D C B A
Key highlights of actions taken by IMO on Energy efciency: March 2010 - MEPC actively considers making the technical and operational measures mandatory for all ships irrespective of ag and ownership July 2011 - MARPOL Annex VI regulations adds a new chapter 4 for EEDI and EEOI EEDI entry into force in 2013 for all new ships Entry into force by 2013, IMOX expects EEDI will reduce CO2 from shipping 45 - 50 million tonnes annually by 2020

Fleet energy efficiency optimization l Best vessel for the job l Optimal fleet capacity usage Voyage energy efficiency optimization Navigation Clever routing l Just in time arival
l

Ships energy efficiency optimization Trim optimization l Hull cleaning


l

Poser plant efficiency optimization Advise optimum machinery usage to match required output needs

Machinery efficiency optimization (re) tuning or configuration of the product for operational conditions l Upgrade machinery to higher performance level l Maintain the original performance
l

Energy efcient designs are advantageous since they reduce a lot of carbon emissions and also reduce cost by optimizing the utilization of energy on ships. Mr. Baan reiterated that optimizing the operations of ships by utilizing right ships for right operations and saving of time is also one of the key factors in addition to adopting energy efcient ship designs. Following are some of the points presented by Mr. Baan

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Energy Efcient Design Considerations Sr. Step / consideration Results / energy savings

Optimization of Propeller & Hull Interaction: The acceleration of water due to propeller action has a negative effect on resistance of the ship or appendages. This effect can today be predicted and analyzed more accurately using computational techniques. Advanced propeller blade sections: It improves the cavitation performance and frictional resistance of a propeller blade.

Redesigning the hull, appendages & propeller together improves performance by upto 4% at a low cost. As a result the propeller is more efcient; improved propeller efciency of up to 2%.

Propeller tip winglets: Winglets are known from the aircraft industry. The design of special tip shapes can now be based on computational uid dynamic calculations Propeller nozzle: Installing nozzles shaped like a wing section around a propeller will save fuel for ship speeds of up to 20 knots.

It will improve propeller efciency up to 4%.

Up to 5% power savings compared to a vessel with an open propeller.

Pulling thruster: Steerable thrusters with a pulling propeller can give clear power savings. The pulling thrusters can be combined in different setups. They can be favourably combined with a centre shaft on the centre line skeg in either a CRP or a Wing Thruster conguration. Even a combination of both options can give great benets. The lower power demand arises from less appendage resistance than a twin shaft solution and the high propulsion efciencies of the propulsors with a clean waterow inow. Acceptance of Wartsila Low Loss Concept for power generation & Constant versus variable speed operations Variable speed electric power generation: The system uses generating sets operating in a variable rpm mode. The rpm is always adjusted for maximum efciency regardless of the system load. The electrical system is based on DC distribution and frequency controlled consumers. Reduce ballast & optimize main dimensions Ducktail waterline extension: A ducktail is a lengthening of the aft ship. It is usually 3-6 meter long. The basic idea is to lengthen the effective waterline and make the wetted transom smaller. This has a positive effect on the resistance of the ship. In some cases the best results are achieved when a ducktail is used together with an interceptor. Minimizing resistance of hull openings, Waste heat recovery, use of Natural gas as marine fuel

The propulsion power demand at the propellers can be reduced by up to 15% with pulling thrusters in advanced setups

Can reduce a considerable amount of energy consumption as against the traditional models This reduces number of generating sets by 25%. Optimized fuel consumption, saving 5-10%. Can reduce considerable amount of energy consumption Lower propulsion power demand by 4% to 10%. Corresponding improvement of 3-7% in total energy consumption for a typical ferry. Can reduce considerable amount of energy consumption as against the traditional methods

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Shipping, Marine & Ports Exposition 2012 Post-Summit Report

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Mr. Baan concluded the presentation by saying that the shipping industry has to take responsibility in reducing its environmental footprint. Signicant savings can be achieved in sea transportation by optimizing design & operations of ships. To ensure optimal use of assets, ship performance management should be used by shipping companies. Zero Emissions Ship by Mr.Holger Jefferies Mr. Holger Jefferies, Dipl.-Ing., Naval Architect, Vice President, Ship New building ASEA-Germanischer Lloyd SE About Mr. Holger Holger Jefferies graduated in Naval Architecture and subsequently joined the Engineering Service of Germanischer Lloyd in Hamburg. In 2004, he changed to the Ship Newbuilding Division, Hull Structure Plan Approval and took over the responsibility of the ASEA Shanghai Ofce. He has been in charge of the ASEA Ofces of Germanischer Lloyd in Shanghai, China and Busan, South Korea. In 2009, Mr. Holger was appointed VP of Germanischer Lloyd in charge of Ship Newbuilding in Asia. Presentation glimpse: Mr. Holger thanked the Chairman of the session Mr. Arun Sharma for his brief and warm introduction and then set out on the never before heard venture of Zero Emission Ship. The coming sections outline the important points outlined by him on this special project: Need for the Zero Emission Ship: With expected eet growth to meet world transport demand for the next decades, CO2-emissions from shipping will increase. Even if known and available measures are implemented, shipping will likely not meet the discussed emission targets. At the same time, fuel prices will continue to increase with future oil reserves being more remote and requiring advanced technology. Therefore, it is time to consider novel solutions to enable future zero-emission shipping. GL Strategic Research and Development looks at novel technologies beyond current applications. The presentation outlines a vision for a zero-emission container feeder vessel, possibly operating after 2025.

Solution: Hydrogen as fuel Fuel cell systems using Hydrogen is the answer to all the questions as it can deliver a zero-emission power generation. The new container feeder vessel has fuel cells & special tanks to hold liquid Hydrogen for a typical round trip length in Northern Europe. The vessel would be required to stop every 10 days at an offshore station for bunkering. Overview of technical aspects of the Hydrogenfuelled container feeder vessel The new container feeder vessel is set to target the Northern European trades. It is has a full open-top 1000 TEU intake with 150 reefer slots, 700 TEU @14t Its service speed is 15 knots It is driven by two podded propulsors and thruster for maneuverability and redundancy The vessel will have zero CO2, SOX, NOX and PM emissions The new container feeder vessel runs on liquid Hydrogen. It converges energy into two power generation rooms, forward and aft. It has 5 MW fuel cell systems, with 3 MW battery systems to provide peak power, multiple type C tanks with 920 cubic mt to hold liquid Hydrogen for a ten-day round trip. The bunkering time is estimated at 3 hours with two bunker stations. The fuel for the vessel namely liquid Hydrogen is produced on-site of an offshore wind-energy park. Liquid Hydrogen offshore production potential: In 2020, about 3GW is assumed being delivered from offshore wind energy parks in North Sea area and the German Exclusive Economic Zone (EEZ). Up to 30% of the generated power may not be put into the grid and could be available for Hydrogen production (up to 3600 GWh/a). A 500 MW wind farm may thus produce up to 10,000 tons of liquid Hydrogen (LH2) using its surplus power. This could serve 5 feeder vessels. An intermediate storage of LH2 for up to 10 days requires insulated tanks of up to 5000 cu mts. The costs for LH2 are based on investment for production, liquefaction and storage. Following diagram represents various costs of offshore generated liquid hydrogen.

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Costs of offshore generated liquid Hydrogen 16.000 14.000 12.000 10.000 $/t LH2 8.000 6.000 4.000 2.000 0 1.000 2.000 3.000 6.000 7.000 4.000 5.000 Full equivalent operating hours per year 8.000 = 1.35$

Source: Potenziale der Wind - Wasserstoff - technologie, LBST, April 2010

At 4000 h/a production, we estimate a price of up to 7500$/t LH2. This includes production, liquefaction and storage on-site.

Historic and predicted fuel prices LNG Zeebrugge (w/o distribution) 80 70 2010 $/mm BTU 60 50 40 30 20 10 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 May 2011 LH2 North Sea (lower extimate) MGO Rotterdam (delivered) LH2 North Sea (upper extimate)

Sources: GL Research, bunkerworld, apxgroup, x-rates, LBST wind hydrogen study

According to the above graph, it is realistic to assume that LH2 will not be competitive compared with LNG driven vessels. Cost is quite high but it could become answer to our questions and could become commercially viable too.

Installed power and liquid Hydrogen tank capacities At design draft of 8m, the vessel will sail with 15 knots running on 4000 KW. Installed power of 5000 KW and an equivalent full ten-day operation, the amount of Hydrogen needed is 920 cu mts with the fuel cell system operating at 55% efciency. Based on the study

Shipping, Marine & Ports Exposition 2012 Post-Summit Report

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for LNG-fuelled container feeder vessel in 2009, GL estimated that around 6% of the TEU capacity needs to be sacriced for the Hydrogen fuel tanks. Investment for LH2-fuelled container feeder vessel The LH2-fuelled container vessel has signicant higher investment costs than a traditional design of similar size. Where an HFO fuelled vessel will require an invest-

ment of USD 22 mn, the hydrogen LH2-fuelled vessel required around USD 35 mn. This additional investment is required mainly for the type-C tanks (37%), the fuel cell systems (57%) and the battery system (6%). Data from the 2009 LNG-fuelled feeder study and from the GL market study on fuel cell systems were used as principal source to estimate the costs.

MGO-fuelled Fuel consumption Fuel price 2020* Equiv. full op days Annual fuel costs Other costs Total capital required Lifetime Interest Annuity Total costs 19, 38 40 1728 270 9, 04 1,43 25, 11 25 5,00% 1,7 8 12, 25

LH2-fuelled 5,56 65 7800 270 11,72 1,43 39, 51 25 5,00% 2, 80 15, 95 m$/year m$/year t/day $/mmBTU $/t days/year m$/year m$/year m$ years

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According to Mr. Holgers, the LH-2 fuelled container vessel will be competitive only after 2020 when the MGO prices are expected to rise steeply due to high demand. At that time Hydrogen Fuel can be considered to be a lucrative fuel option. The following graph shows chart for the same:

for the LH2-fuelled container feeder vessel are about 30% higher. The vessel will run on liquid Hydrogen produced by offshore wind farms. The cost of offshoreproduced LH2 could match MGO-levels (compared by energy content) after 2020 at current LH2 production cost estimates. The LH2-fuelled vessel may become an

Annual cost for container feeder vessel MGO-fuelled 18 16 14 12 10 8 6 4 6 2 0 500 1000 LH2-fuelled (lower estimate) LH2-fuelled (upper estimate)

m$

MGO historic high: 1319 $/t, June 2008

1500 $/t MGO

2000

2500

Mr. Holgers concluded the presentation by creating a vision for a zero-emission container feeder vessel. A set of fuel cell systems, batteries & pressurized tanks facilitate a ten-day round trip at 15 knots. Investment costs

economically attractive alternative when MGO prices increase beyond 2.000 $/t. The presentation ended.

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Session 2: Future Trends in Shipping


Session Chairman: Mr. A. Banerjee, Chief Surveyor, Directorate General of Shipping About Mr. A. Banerjee: Mr. Banerjee is an Extra First Class in Engineering Certicate of competency (Motors) and M.Sc from Malamo, Sweden. Mr. Banerjee has been in Directorate General of Shipping since 2009. He has been associated with IMO for many projects. Session Commencement: Mr. Banerjee thanked the announcer for the kind words and took on his responsibility as the session chairman. In addition to mentioning the time restriction to the fellow speakers, he presented a very comprehensive view of global & Indian shipping scenario in a very lucid manner. The topic Future Trends in Shipping is of relevance and importance to the maritime industry. He praised Capt. Anand, Mr. Soli Engineer and others present for their association, experience, knowledge & contribution to the shipping industry. The current time is a vibrant time and there are many developments happening today. Some of the major changes are that the nancial and economic equations in the world are changing and the trade is shifting from the North West to the South East. The Brazil, Russia, India & China (BRIC) countries are commanding increasing presence in global trade. Vessels which once considered traversing the Suez Canal are now thinking to travel Cape of Good Hope. Thus there is a paradigm shift taking place. Cheap oil has become a history. The implication of a 10% rise in fuel price is that it causes one container to shift from point A to point B at an expense of more than 4%. This affects the ship owners, charterers and clients at the same time. The other topics like zero emissions, carbon footprints, environmental sustenance and corporate social responsibility are coming up as challenges before the shipping industry. The container industry considers 3 Es while ordering container ships they are Economies of Scale, Energy Efciency and Environmental Improvements. Other cause of concern giving the world a loss of US $7 bn dollars a year is the maritime piracy. The costs of litigations, naval forces, operational costs due to re-routing of ships etc. are to be borne by the shipping industry as a whole. With many regulations coming up in the maritime industry, each regulation tightens the noose and ships have to operate in volatile and unpredictable market. Having set the tone for further discussions and presentations, Mr. Banerjee called upon various speakers to enlighten the industry audience and delegates with their knowledge. The session chairmans knowledge in each of the areas, his brief explanation of the subjects before the actual presenter and the way he involved the audience and presenters alike in the discussions was highly commendable.

Following is the table listing the presentations which followed the session chairmans speech: Sr. 1 2 3 4 Topic Ship Recycling Ship Recycling Coastal Shipping A Growth Driver for India Role of Shipping in LNG Transportation Shipping Finance The Way Forward Speaker Mr. Pravin Nagarseth Mr. Dilip Mehrotra Mr. S.K. Shahi Capt. B.B. Sinha Designation & Company President, Iron & Steel Scrap & Ship Breakers Association Dy. Chief Surveyor cum Senior Dy. DG (Tech.), DG of Shipping CMD, SKS (Ship) Ltd. Sr. Vice President (Specialised Vessel Cell), The Shipping Corporation of India Ltd. Senior Advisor, Finance, SKIL Infrastructure

Mr. Sudipan Bhaduri

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Ship Recycling by Mr. Pravin Nagerseth Mr. Pravin Nagarseth President, Iron & Steel Scrap & Ship Breakers Association About Mr. Nagarseth Mr. Pravin Nagerseth continues as President of Iron Steel Scrap & Ship breakers Association of India since 1991. He is in ship breaking and steel scrap activity since 1965. He represents the Association in India on various Committees including Ferrous Scrap Committee under Steel Ministry. He had presented papers at various International seminars and workshops. He was elected as the Chairman of the Federation of Ship recyclers Association of the three countries (Bangladesh, Pakistan and India) for the rst year. Presentation glimpse: Mr. Nagarseth introduced the conference to some main issues and presented some perspectives on benets, environment and regulations for the ship recycling operations. In his words, Ship recycling is the same as Ship breaking as nearly 90% of the output of ship breaking is either recycled or re-used Ship Recycling is a must for ship owner as the ship loses its commercial life in about 25 years. The only ecofriendly way to replace the ship is by recycling it in the shipbreaking yards. Around 4% of world eet has to get recycled every year. Ship recycling is an ecofriendly and time saving method of shipbreaking. It saves four times nonrenewable natural resources like iron ore, coal etc. and generates almost no solid waste. Not only is it environment oriented, but also helps in generating employment to workers. Production of 1 ton of steel from ship breaking provides employment of 4 man days. It saves energy as it does not require electric power or water in its processes. The land required for total yard is about 100 acres only. A mere capital investment of Rs. 150 crore can produce about 4 million tonnes of steel. Even the Supreme Court has taken a strong stand to enforce environment friendly mining leading to closure of number of mines. Import of coking coal has become expensive and thus imports of steel scrap in form of ships for demolition should be encouraged.

The ship recycling industry supplies substantial quantity of re-rollable and steel melting scrap for scrap based re-rolling mill and induction and arc furnace. It is viable where scrap based re-rolling mills are operative. More than 90% of the ship recycling in the world is taking place in India, Bangladesh, Pakistan, China and Turkey Ship recycling conversion from ship to scrap costs about Rs. 3,000/ton. Direct rolling of re-rollable scrap saves one process of melting and thus helps the industry to increase the availability of such semi-nished material India is one of the leading ship breaking countries in the world. Although it had lost its premier position to Bangladesh during the last few years, in the current year it has again recaptured the premier position in ship breaking. Mr. Nagarseth further briefed about some national and international regulations affecting ship breaking industry and also pointed out the unnecessary involvement of IMO into making guidelines for areas not covered under its jurisdiction. He also pointed out instances of regulations set by the European Union which were not successful in some countries. Owing to time decit, Mr. Nagarseth quickly summed up his extensive presentation by talking about the future of shipbreaking in India and once again handed over the oor to the session chairman. Environmentally sound and sustainable Ship Recycling by Mr. Dilip Mehrotra Mr. Dilip Mehrotra,Deputy Chief Surveyor cum Senior Deputy DG(Tech),Directorate General of Shipping About Mr. Mehrotra Mr. Dilip holds Mechanical Degree from Regional Enginering College, Rourkela and M.Sc. Degree in Maritime Safety Environment Protection from World Maritime University, Malmo, Sweden. He is currently working as Dy. Chief Surveyor at the DG Shipping, Mumbai. He is a qualied lead auditor for International safety Management audits. He has presented papers at various regional seminars as a representative from India.

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Presentation glimpse: Mr. Dilip thanked the chairman and reected his memories of the MEPC convention wherein the previous speaker Mr. Nagarseth had contributed much to the ship recycling convention. India played a major role in the MEPC convention preparation. Mr. Dilip informed the delegates that the main countries in ship recycling are Pakistan, Bangladesh, China & Turkey. During his visit to ship recycling facilities in China and Turkey he noticed that the Indian facilities at Alang were at par with those in China and Turkey. The only difference being the need for improvement in labour conditions in Alang. As known by many, there are various methods of ship recycling the primary being (i) Tidal Beaching Method: as practiced in Bangladesh, India, and Pakistan, provides 65% or more of the worlds recycling capacity in GT terms, (ii) Non Tidal beaching Method: as practiced in Turkey, provides about 2% of the worlds capacity, (iii) Alongside : as practiced in China, provides around 31% of the worlds capacity and (iv) Graving dock or dry-dock: used in very limited cases. International Maritime Organization plays an important role in the development, promotion and regulation of the shipping industry as a whole. A convention called the Hong Kong Convention or HKC was passed at one of the diplomatic conferences held at Hong Kong, China. Mr. Dilip explained briey the process followed by the IMO for passing of any convention and then highlighted the main points of the HKC convention. The HKC Convention is also called Convention on Safe and Environmentally Sound Recycling of Ships and is applicable to Ship Yards & Manufacturers, Owners / Operators of: (i) Newbuilds > 500GT, (ii) Existing Ships > 500GT, (iii) New installations on ships > 500GT, (iv) Ship recycling facilities India played a major role in the conference by contributing paper on bleaching. In the words of Ex-Secy General IMO If India was not there, the conference would have been a op

Mr. Dilip explained the structure of the convention and its salient features. The overall structure of the HKC / International Convention for the Safe and Environmentally Sound Recycling of Ships can be seen below:

Preamble

Explicit amendment procedure

Articles "establish the main legal mechanisms"

Regulations - "contains techinical requirements" Tacit amendment Chapter 1 Chapter 2 Chapter 3 Chapter 4 procedure Appendices - "contains forms for certicates etc"

Guidelines - "mainly procedures to assist the requirements" The structure of the convention includes: 21 Articles, establishing the main legal mechanisms 25 regulations, containing technical requirements, divided in four chapters: General (regulations 1-3) Requirements for ships (regulations 4-14) Requirements for ship recycling facilities (regulations 15-23) Reporting requirements (regulations 24-25) 7 appendices, with lists of Hazardous Materials, forms for certicates etc. Separately, 6 non-mandatory guidelines are currently being developed providing clarications, interpretations, and uniform procedures for technical issues arising from the provisions of the Convention. Following table summarises the schedule for development of the guidelines associated with the HKC

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MEPC Session: Date (for 2012 the dates are tentative):

MEPC 59 July 2009

MEPC 60 March 2010

MEPC 61 Sept-Oct 2010

MEPC 62 July 2011

MEPC 63 March 2012

MEPC 64 October 2012

Guidelines for the development of the Inventory of Hazardous Materials (Inventory Guidelines)

Adopted MEPC.179(59)

Revised MEPC.197(62)

Guidelines for safe and environmentally sound ship recycling (Facility Guidelines)

Planned adoption

Guidelines for the development of the Ship Recycling Plan (SRP Guidelines)

Adopted MEPC.196(62)

Guidelines for the authorization of Ship Recycling Facilities (Authorization Guidelines)

Planned adoption

Guidelines for survey and certication

Develop and then refer to FSI 20 (end March 2012) (or FSI 21?)

Adoption?

Guidelines for inspection of ships

Develop and then refer to FSI 20 (end March 2012) (or FSI 21?)

Adoption?

Mr. Dilip quickly summarized the session by listing out some critiques against the convention and brieng about Indian contribution to the recycling industry. Coastal Shipping A growth driver for India by Sarvesh K. Shahi Mr. S. K. Shahi - CMD, SKS (Ship) Ltd About Mr. Shahi Mr. Sarvesh Kumar Shahi has trained in Training Ship Rajendra as cadet ofcer. In 1985, he ventured into the shipping business with one vessel as a partnership company which went on to grow and now has more than 30 vessels operating in India for various lighterage operations for bulk cargo, POL products etc. He has presented papers at various national and international conferences. He has served as a Member of the National Shipping Board of India. He is the Director of Indian National Ship Owners Association. Presentation glimpse: There have not been many changes in the coastal shipping regime except the various taxes added for operations of coastal vessels and the more and more

preference for large carriers over coastal ships as the former can offer more revenues. The beginning of Indian Maritime industry can be traced back to 3000 years but the modern maritime industry began in 1840 with the establishment of Bombay Steam Navigation Company. The other notable steamers were the Tata Line in 1894, the Swadesh Company in 1906, the Bengal Steamship Company in 1907 and the Scindia Steam Navigation Company in 1919. After giving a statistics on the Indian coastal vessels and Gross Tonnage he highlighted various positive points of Coastal shipping including the current proportion of cargo transport through various means of transport, the cost savings by coastal shipping and the benets on environment due to reduction of emissions and other factors found only in coastal shipping. While he emphasized the fact that the optimal mix of coastal shipping, inland water transport, road and rail will provide an efcient transport infrastructure with mobility, exibility and cost efciency, in his view adequate investments have not been made for developing coastal shipping as compared to the other

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transport infrastructure. Lack of policy measures, unfriendly attitude of major ports towards the coastal ships and lack of dedicated ports / jetties for coastal operations are the primary reasons for the lack of domestic cargo movement. Mr. Shahi presented the views of the coastal shipping companies and ship owners & listed their expectations & support required from the government. Following section enlists a few of them: Construction of exclusive 200 mts long coastal jetty in each and every major port outside the EXIM area free of custom formalities, DLB etc. facilitated with modern equipments to handle containers & heavy cargo Second preference to coastal vessels in berthing facilities and tariff charges as per tariff guidelines Developing nancial institutions to fund coastal shipping vessels and operations Understanding and granting difference between the repair charges for foreign going vessels and coastal vessels and availability of dry dock for repairs To evolve a case for providing tax concessions both for fuels, spares and import of vessels as already the coastal ships pay a lot of tax. Building a separate cadre of sea farers for coastal shipping with qualications different from those for ocean going vessels as the lack of availability of qualied ofcers who prefer going on foreign vessels has caused a concern in the coastal shipping companies In the Union budget 2005, Tonnage Tax has not been forwarded to coastal ships. This acts as a further disincentive for investment in coastal tonnage. Tonnage Tax should also be extended to coastal eet. If the income tax benets are extended to the seafarers, manning coastal vessels, it will attract good ofces & sailors. Industries situated within 50 kms of sea should be mandated to use coastal vesselsor at least 10% of cargo produced by the industries Formulation of separate coastal tariff should be done in order to reduce the handling cost of cargo Reduction in the survey fees, vessel survey in maximum 2 visits by surveyor

Availability of long term funding of 25 years with 90% LTV at the rate of 6% interest Availability of bunker on credit and berth at arrival, port dues not to exceed 50% of freight and a welcome attitude by ports and port ofcials towards coastal vessels will go a long way in assisting the development of coastal shipping Possible policy initiatives which can be given to encourage the coastal shipping were also presented in the conference some of which are already discussed above and others are mentioned below: Strict implementation of CABOTAGE Laws. Exempt Custom Duty on import of coastal vessels, spares & bunker fuels Design specications for Coastal Vessel. To improve connectivity between ports and the road/ rail network One Time Service Tax for coastal operations. Increase in Marine Training Colleges with affordable fees. Mr. Shahi expressed his trust that the Government appreciated the role played by coastal shipping in the movement of cargoes and will through promotion and development of coastal shipping ensure the smooth ow of cargo to the hinterland of India. Role of Shipping in LNG Transportation by Capt. B. B. Sinha Capt. B.B. Sinha Senior Vice President, (Specialized Vessel Cell), The Shipping Corporation of India About Capt. Sinha Capt. Sinha is a Senior VP with the SCI. After passing out of training ship Rajendra in 1976, he joined SCI as a Cadet where he rose to the rank of Master & commanded various types of ships. He made the transition from sea to shore in 1994 joining SCIs head Quarters at Mumbai as a Marine Superintendent. He has wide & varied experience in break bulk, container, offshore, bulk, gas & chemical tanker shipping both in technical and commercial operations. He was SCIs representative in USA and has represented SCI on various trade bodies and committees. Presently he is working as a Senior V.P. in Bulk & tanker division of SCI looking after Bulk & specialized vessel cell. He has been associated with LNG business of SCI since 2008.

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Presentation glimpse: Captain Sinha gave an excellent presentation on the technical aspects of LNG transport in a very crisp and simple manner. The key points of the presentation were focused on the introduction of the concept of LNG transportation to the delegates present in the conference. LNG is a gas which when in liquid state is 1/600th of the volume of its equivalent gaseous state at atmospheric pressure and ambient temperature. The transportation of LNG on ships is when it is near its boiling point. Other properties of LNG are (i) nil solubility in water (ii) high dielectric power (iii) low conduction of electricity (iv) Nontoxic, colorless & odorless. There are some risks associated with LNG like the damage caused to the living tissue if it comes in contact with LNG, metals lose their ductility and causes brittle fracture of many materials. Due to these risks, the construction of LNG ships is done by using the metals and technology suitable to LNG, which also becomes the cause for the increase in cost. Due to the growing demand of natural gas in India the LNG as a fuel is going to rise. Capt. Sinha further explained the LNG value chain and gave details on the types of ships used for LNG transportation namely (i) Moss Type (II) Membrane type. Moss type

Conservatism, strong tendency to favour ship owning companies established in LNG shipping, politics, nationality of shipping company and ag state, custom built specications for customers who take them on 20-25 years charter and absence of pools / associations for LNG transportation. LNG shipping is a very capital intensive segment wherein the standard ship costs approximately USD 220 million. Typically the vessel is built on long term charter for specic requirements due to which its revenues are xed in advance for a long period of time while the operating expenses vary from time to time. Thus creating a negative case for the LNG transport business. Currently globally around 362 ships carry the role of LNG transporters out of which almost 36% are Moss type, 61.4% are Membrane Type and 2.6% are independent (IHI & CSI). This eet is projected to go up to 408 ships by the year 2014. There are many factors driving LNG ship charter rates such as ship price, yard availability, standard specication, nancing rate achieved based on project merits, promoters nancial standing & experience, international nancial market conditions, importing countrys rating, ship size, type of propulsion & containment etc.

Membrane type

The journey of LNG transport dates back to 1917 where it rst began in West Virginia in USA, followed by 1959 in UK. The typical commercial characteristics of LNG shipping industry are:

The future of LNG shipping is seen to be dynamic. New LNG Ships are being ordered, ship owners conrming advance bookings of LNG ship charters for long term contracts where they carry only the residual value / scrap

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value risk, & 20 year old vessels becoming available for short term trades are some of the indicators. Capt. Sinha further explained the future developments in the LNG shipping such as FSRUs, On-board regasication units and Floating LNG units and their advantages and operational specications. He then spoke about the foray of SCI in LNG Shipping. SCI has entered in this segment in 2001 along by forming a consortium with other partner rms in this segment. SCI currently owns and manages 3 LNG carriers from Qatar to India on long-term charter of 25 years to Petronet LNG Limited. SCI visualizes being a major player in the eld of energy transportation by sea. It intends to participate in the upcoming Kochi project and plans to enter into strategic alliance in all the future LNG projects coming up on the Indian Coast. Capt. Sinha concluded the session by mentioning of SCIs future plans. Shipping Finance by Mr. Sudipan Bhaduri Mr. Sudipan Bhaduri, Senior Advisor (Finance), SKIL Infrastructure Ltd., Mumbai About Sudipan Bhaduri Prior to joining SKIL Infrastructure, Mr. Bhaduri worked as a General Manager at State Bank of India. He has worked in various important assignments in Corporate Accounts Group and Mid Corporate Group for 12 years in SBI. He has a vast experience of exposure in shipping and shipyard functioning. Mr. Bhaduri headed the Overseas Branch of SBI for 3 years which has the only Shipping Division of SBI. Presentation glimpse: Shipping nance by the virtue of being a singular topic was one of the most sought after topic by the conference attendees. Mr. Sudipan gave a simple and lucid explanation of the various facets of shipping nance and various sources from which the nances could be obtained. He also recommended the way forward for the industry, banks and nancial institutions to start considering nancing of shipping as a viable and prot-

able business venture. The gist of the presentation made by Mr. Sudipan is outlined below. The basic characteristics associated with the shipping industry are: Capital intensive facing volatility in market, Cyclical in nature Contains provision of international services and thereby the involvement of currencies other than the domestic currency. As far as India is concerned the options available for the Indian Shipping industry are: 1. Equity Finance: Owners equity and IPOs till now hardly 10 shipping sector companies have been able to access this mode and through IPOs 2. Mezzanine Financing: Private Placement Currently no public banks provide nance through this mode. The players open for funding the shipping companies by this mode are private parties 3. Senior Debt: Bonds, Commercial Banks, Loans, Infra Debt funds 4. Lease: Financial and operating lease Mr. Sudipan highlighted that the shipping companies depend on the traditional approach of debt nance for raising funds. Usual modes like External Commercial Borrowings, Foreign Currency Loans, Rupee Term Loans Letters of credit etc. are backed by collaterals, mortgages, assignment of income and insurance and personal guarantees. Shipping companies look for funding where they have: Low equity contribution and high return on investment Minimum collateral against loans / debts Maximum loan period to match life of assets, balloon and bullet terms Cheap nance by the way of low interest rates Fast response time to loan applications, advises on better source and newer nancial products tailored to match their needs Minimum documentation to avoid loss of time The obvious mismatch between the lender-borrowers expectations from each other is the root cause for the high cost nance available to shipping companies.

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Some other problems associated with ship nance include: Lack of expertise with Indian banks to assess shipping projects Finance is made during boom period leading to over supply Financing is made without time chartered contracts This breaks link between Demand & Supply No system of forecasting shipping cycles in banks appraisals. Banks generally dont give loans beyond 8 years Shipping sector is not given infrastructure status Prohibits long term nancers and take out nance No secondary market for institutional investors, insurance companies and pension funds After explaining the challenges faced by the shipping industry for raising nance and the reasons for such phenomenon, Mr. Sudipan laid some steps to dissolve the differences so as to address the shipping nance in a more organized way. Following are some of the suggested steps: Sophisticated products Securitization, Credit Derivatives should be innovated which can cater specically to shipping needs Venture Capital funds should take interest in the profitable business of shipping Maritime joint ventures should be made between various banks and insurance companies to facilitate the nancing of maritime projects and ship nance Adoption of Mezzanine Finance by the institutions and shipping companies Shipping Sector be accorded infrastructure status Develop Secondary Market for such debt instruments and loans so that it attracts the private players due to easier liquidity Banks should go for more syndication of loans to reduce risk Mr. Sudipan closed the session with a positive outlook towards shipping nance.

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Session 3: Panel Discussion: Wither Indian Shipping for the next decade
Session Chairman: Mr. A. Banerjee, Chief Surveyor, Directorate General of Shipping The panel discussion was proposed for the topic Wither Indian Shipping for the Next Decade. The panelists included Mr. A. Banerjee, Mr. Dilip Mehrotra, Mr I.N. Bose, Mr. Soli Engineer & Mr. J.N. Das. The panelists presented their views in a short span of 2-3 minutes each and then the oor was opened to questions and answers. The observations of Retd. Commander Pirman, Ofcer from Navy, and currently the HOD, Naval Architecture at University at Chennai on the lack of R&D efforts in shipping industry and absence of any government body or NGO for monitoring the efforts made in these directions was commended by the session Chairman Mr. Banerjee. The Commander was invited to the D.G. Shipping to work on assignments & volunteer the efforts to track them. Introduction to the panelists: Mr. A. Banerjee: Chief Surveyor, Directorate General of Shipping Mr. Banerjee is an Extra First Class in Engineering Certicate of competency (Motors) and M.Sc from Malamo, Sweden. Mr. Banerjee has been in Directorate General of Shipping since 2009. He has been associated with IMO for many projects. Mr. Dilip Mehrotra: Deputy Chief Surveyor cum Senior Deputy DG (Tech), Directorate General of Shipping Mr. Dilip holds Mechanical Degree from Regional Enginering College, Rourkela and M.Sc. Degree in Maritime Safety Environment Protection from World Maritime University, Malmo, Sweden. He is currently working as Dy. Chief Surveyor at the DG Shipping, Mumbai. He is a qualied lead auditor for International safety Management audits. He has presented papers at various regional seminars as a representative from India. Mr. J.N. Das, Director, The Shipping Corporation of India Limited Jnanendra Nath Das is Former Member of the Board of Directors at SCI-Forbes Ltd. and was on the Board
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of Directors of the Standard Steamship Owners and Indemnity Association (Bermuda) Ltd. Mr. Das joined SCI after graduating from DMET. He worked as Technical Manager & Assistant General Manager in Bulk Carrier & Tanker Division. Thereafter, grew up the hierarchy across the organization and was appointed as General Manager in Bulk Carrier (Tech) Dept. and later General Manager (SVC) consisting of LPG, LNG and Chemical Tankers Mr. Soli Engineer, Executive Director, Great Offshore Limited Mr. Soli Engineer has four decades of experience in the shipping and offshore sectors. He is associated with the offshore sector, ever since the time of conceptualization of the offshore oil eld services business in 1978, under the auspices of The Great Eastern Shipping Co. Ltd. In 2009 was appointed as Executive Director at Great Offshore Limited Mr. Indra Nath Bose, GM (Quality, Safety & Training), the Great Eastern Shipping Co. Ltd. Mr. I.N. Bose is a member of the governing board and Chairman of the Academic Council of Great Eastern Institute of Maritime Studies. He has been representing India at Marine Environment Protection Committee (MEPC) and Diplomatic Conferences of International Maritime Organization for more than a decade. He has been closely associated with the development of measures for reduction of Green House Gas from ships at national and international levels as INSA representative. He was a member of the Market Based Measures Expert Group of IMO Discussion: The format of the discussion was that each of the panelists would speak on the topic one by one and would be supplemented by a quick question answer session. During the discussions a variety of interesting facts and experiences were shared by the experts. The suggestions and discussions ranged from competitive pricing of global ships, high bunker fuel costs, IMO coming down with regulations on sulfur w.r.t. fuels, the challenges for containers trade in India due to nonoperations of big size ships having container capacity of 18000 TEUs along the Indian Ports.

The debate about Cabotage being good or bad was still carried on in this session and Mr. J. N. Das voiced his support to the implementation of Cabotage Policy. According to him if Cabotage was that bad a rule then why would the USA, UK, China still persist with it. The Cabotage is a tool by which a country can secure its trade & cargo for its own shipping industry and prevent it from being carried away by foreign agged ships. Insurance and re-insurance business needs to ourish in order to make Indian Shipping competitive and to acquire nancing at competitive costs. The shipyards that have now focused on Shipbuilding should shift their focus on ship repairs too. Already excess supply of ships causes problems due to which the new ships business may take a turn. Ship repairs on the other hand are required for every existing and running ship and after almost every voyage. It has much larger potential than other areas like shipbuilding. Government should take interest in advancing soft term loans to shipping companies in India. It should follow the model of DBS bank in Shanghai, China which promoted the shipping operations.

Competitive pricing of charters is also affected by the differences in safe manning levels of Indian and Foreign ships. While the foreign ships have safe manning level of 7 persons, the Indian ships have manning level of 14 persons which increases the cost substantially. This should be reconsidered by the Ministry and the industry. A need for building LNG Bunker fuel terminals all over the coast of India may be witnessed owning to the direction of the choice of fuel. Managing costs of operations of ships is an important challenge faced by the shipping industry and the plethora of regulations lined up will only add to the costs of operations. Regulations for low sulfur fuel, ballast water treatment, bunkering operations, electronic chart display etc. will have a profound impact on the way shipping industry operates today. Thus the panel discussions ended with a note on the way forward and the topics of concern for the shipping industry. It listed out various issues to be considered by various sections of the industry to make Indian shipping successful in the coming turbulent times.

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Day 2

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Session 3: Indigenous Shipbuilding & Naval Construction


Developments in Design of Dry Docks for Ship Repair & Shipbuilding Speaker: Gary Courtnadge - Director, Shipyard Advisory Group, Royal Haskoning, UK About Mr. Gary Courtnadge: Gary Courtnadge is a chartered civil engineer with over 30 years of experience in civil and structural engineering, particularly in managing the shipyard procurement and construction process for clients. He has worked extensively on maritime projects throughout the UK and overseas. He has worked extensively on naval base and dockyard facilities, working on numerous projects for the UK Ministry of Defence. Presentation glimpse: The presentation focused on advances in design which are now being applied in new and existing yards to reduce capital cost and improve efciency. Examples of proven innovations were also provided. Summary of topics discussed are listed as follows: Dry Dock Construction Mr. Courtnadge explained that the size and depth of dry docks is continually increasing. The typical length is 400m; widths are 66m, 80m and 125m; and depth is up to 16m. The cost of a dry dock depends on its size, site conditions, form of construction and extent of marine construction. There are 3 types of graving docks: Gravity Docks Anchored Docks Drained Docks Dock oors are bearing either on the ground or on piles. Dock walls are constructed using: steel sheet piling mass concrete reinforced concrete constructed in the dry concrete caissons placed in the wet diaphragm wall construction There are three different types of dry dock constructions to counteract hydrostatic uplift: Gravity docks Designed using weight of oor/walls, traditionally used for small docks or naval docks comprising altars High cost due to large concrete quantities Anchored docks Dock oor held down by ground anchors or tension piles Can be costly Anchors and piles have been known to fail due to corrosion Drained docks Where there is low ground permeability, use sub-oor drainage system, usually with cut-offs Porous concrete layer and collector drains, connected to pump house Pumps remove seepage water to relieve uplift pressure Pressure relief system also installed Dock gates Dock gates are designed to suit the purpose and size of the dock. Gates are traditionally designed to span or arch across dock entrances. But wide docks make spanning difcult. For very wide entrances, gates are designed to stand by weight, cantilever or propping. Types of dock gates Floating Caisson gates Hinged Mitre gates Flap gates Sliding Dock and Lock Entrances Lift Out Modular design Several developments and innovations in Dry Dock Design were discussed in areas such as: Gravity Dock Gate Pump Syphonic Discharge Use Of Submersible Pumps For Dock Dewatering Contaminated Water Removal Dock Flooding Valves Dock Entrance Silt Jetting Removable Dock Blocks Open Trunnion Hinge for Flap Gates Gate Meeting Face Material

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Implications of the NATO Naval Ship Code Speaker: R Simpson, Lloyds Register Presentation glimpse: Mr. Simpson began the presentation by describing the limitations of Commercial Ship Safety Regulation for Naval vessels and the justication for having a Naval Specic Safety Regulation. The history of the ANEP 77 NATO Naval Ship Code was discussed. The speaker elaborated upon the challenges of Goal Based Safety Regulation- such as the various perspectives to be considered even for dening the word Safe. He talked about how prescriptive standards are often seen as constraining innovation. The Vee Model of Naval procurement was discussed followed by role and function of naval authorities and the challenges faced by stakeholders. The differences in Contracting Arrangements between Commercial practice and Naval practice were brought to light. The key points brought out in the presentation are as follows: The Naval Ship Code provides a mechanism for navies to demonstrate: effective safety management system, compliance (AFARP) with international conventions (safety and environmental); and preserves a navys exemption to deliver military effect. Shipbuilders/ ship repairers and supply chain intermediaries need to understand the role of classication in commercial shipping. Naval authorities have signicant responsibilities to facilitate the adoption of the Code. Adoption of commercial standards in naval operations requires deepening and widening of internal expertise. The role of standards is also to act as repository of lessons learned. Ship repair Industry Challenges Speaker: Mangala P. B. Yapa, Managing Director/ Chief Executive Ofcer, Colombo Dockyard PLC. Presentation glimpse: Mr. Yapa discussed the characteristics of the ship repair industry, key criteria which dene a good ship yard and the key challenges faced by the industry. They are elaborated as under:

The characteristics of the ship repair industry are: Capital Intensive Large Infrastructure is needed for dry/oating docks, cranes, workshops, equipment for large volumes of work. Labour Intensive since wide range of competencies are needed along with high-level of tacit knowledge Technology which needs consistent updating & ability to manage in a wide-spectrum Heightened demand for logistics Systemic approach - QMS, HES Waste management - IMO, SOLAS and local regulations High working capital requirements Cyclical in nature The criteria of a Good Shipyard are: Zero tolerance to Safety and Quality Deciencies Commitment to consistent Productivity Improvement Transforming to a Learning and Knowledge Organisation Demonstrate Professionalism and avoid corruption Give Value for Money Long-term Partnership vis a vis short-term price gains The key challenges faced by the ship repair industry are: How to adjust during Boom and Dips is the biggest challenge! CAPEX for expansion & ROI is a huge challenge Labour How to adjust? Subcontracting? How about Quality, HES? Permanent employees where to get trained employees? How to attract young blood to the industry Salaries: cannot be adjusted according to volume! Unfair practices Poaching of performing employees Unethical behaviours of people with responsibility Price wars, Undercutting Collusion between Yards and Responsible Ofcers at the other end Risk Management High value assets of customers are being repaired & any damage would result in heavy compensation. Complex ships: performance needs to be guaranteed.

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Heavy OPEX Requirements Credit and Debt Management Claims Management Need to work/understand a wide range of customersfrom very large eet owners to small timers Developments in Naval Ship Construction Company: Cmde. K. Subramaniam Chairman & MD, Cochin Shipyard Limited (CSL). Presentation glimpse: The existing defense ship yards in India are MDL, GRSE, GSL and HSL. However the global recession in commercial shipping has now forced all the commercial yards (like CSL, ABG, Bharti, L&T, Pipavav, etc.) to also look at Defense orders. Cmde. Subramaniams presentation tracked the Naval ship construction processes at CSL in the following three phases: a) CSL Pre 2000 Phase From Inception till early 2000 CSL was only building large merchant vessels (Bulk Carriers/ Tankers) - only 1 or 2 vessels per type. The Building cycle was long, marked with low efciency and high costs, as compared to competitors in Japan/ Korea. The major factors responsible for the delay were: Design with Generic equipment Procurement not focused/ more procedural Detailed design/ engineering which can effectively start only after procurement nalization Planning which goes out of control because of design/ equipment delays/ lack of equipment info b) CSL Transition Phase Main equipment was nalized concurrent with Shipbuilding contracts. CSL targeted medium size vessels and hence was able to produce larger numbers of ships. The detailed engineering time reduced drastically due to the following: Packaging of equipment from specialist vendors Outsourcing part detailed engineering Availability of binding data early in the project Equipment procurement focused on project time frames

Thus planning could be done much better and it resulted in all round feel good factor which also improved morale in the construction phase. CSL delivered a 6 Vessel series ahead of schedule thus earning a bonus. However project nancials were still a concern since contracts were secured at low prices c) CSL Consolidation Phase CSL focused on High End Specialized Vessels - Offshore Vessels with special requirements like: Diesel Electric systems with full IAS Clean Design requirements Comfort accommodation (Box in box concept, Low Noise, Vibration etc) Carriage of Low ash liquids Ergonomic bridge design DP II system Conventional merchant vessel IHOP methods were tweaked to adapt to the above special requirements. CSL went for partnerships with major specialist rms and continued with part detailed engineering outsourcing. d) Present day CSL Today CSL is the only yard in India to handle the Commercial orders and Naval orders simultaneously in an efcient and competitive manner. CSL has bagged the MoU excellence award in Transport Sector for three consecutive years. Its present orders consist of: Indigenous Aircraft carrier for Indian Navy Fast Patrol Vessels (20 nos) for Indian Coast Guard PSVs/ AHTSs for Export/ SCI (10 nos) Final suggestions offered by Cmde. K. Subramaniam for efcient Naval Shipbuilding were: Rationalize equipment system specications. Rationalize inspection and approval process in equipment procurement. Series construction of warships. Leverage COTS procurement of equipment.

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Coal transportation by inland waterways Speaker: R. P. Khare, Chief Engineer, IWAI Presentation glimpse: Mr. Khare began his presentation stating that coal is the largest commodity by volume moving on waterways. USAs thermal power plants use waterways for > 20 % of coal transportation, Germany - 45%, China - 17%, but for India its practically nil. This is especially startling because India accounts for the fth largest or 8% of coal reserves in the world. He elaborated that IWT (Inland water transport) is the most fuel efcient, most environmentally friendly, has the lowest operating cost and is the safest option compared to rail and road transport. While road & rail are stretched to limits, waterways in India have huge unutilised capacity. The Ganga river can transport 36,000 tonnes (=3600 trucks) every day; while Brahamaputra can transport many times more. IWT also requires minimal land acquisition compared to road and rail transport. If Indian Economy is expected to grow @ 9%, then the Power Sector and hence coal requirements (which is the main source of energy) must also grow @ 9%. Growth of installed capacity in India is more than the production of domestic coal; thus making import of coal inevitable. CEA has also issued advisory for designing new boilers suitable for blending ratio of 30:70 (imported coal: domestic coal) or higher, hence imported coal will surely play a key role in generating thermal power in India in the future. According to Mr. Khare, the existing bottlenecks in coal transportation in India are: Railway Congestion Shortage of rakes Shortage of bottom opening wagons Railway network has its own limitations in terms of zonal capacities, inter-zone re-deployment of rakes, etc. Shortage of domestic coal Port congestion Low draft at some ports like Haldia

Because of the above listed factors, overdependence on railways needs to be reduced but shifting it to road transport is not an alternative since it would be less efcient and more costly. IWT is a realistic supplementary option, especially for imported coal. The role of IWAI is to develop infrastructure and regulate movement on National Waterways (NWs). 3 NWs have already been developed while two more NW (4 & 5) were declared in 2008. One more NW declaration is in-process. Other waterways need to be developed by States. There is 14,500 km of potential waterways in India. With so many waterways available, their non-utilization for transportation of coal is a great opportunity loss for the country. There is huge potential for coal movement through Ganga & Brahmaputra Rivers - about 10-15 MMT of imported coal and between 5 -10 MMT of domestic coal. A like quantity of return cargo in the form of y ash may also become available. Merry go round of over 500 IWT vessels may be required in next 2-5 years. Its a possible win-win situation for all stakeholders. IWAI is geared to provide assured navigation channel with night navigation aids in three NWs. With 10-11 TPS (Thermal Power Stations) already in the vicinity of NW-1 and 10 more coming up; the speaker shared that it will be unfortunate if we still do not use IWT for coal transportation thereon. Railways can simply not meet this demand, and if waterways are not used then power generation will suffer. The success of the Haldia to Farakka TPS coal transportation project is keenly awaited and many see it as a potential trailblazer. The key to this project was long term cargo assurance by NTPC. Mr. khare suggested that similar long term cargo commitment from shippers and assured waterways from IWAI would incentivize the private sector to come forward to invest in vessels and even infrastructure on case to case basis.

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Session 4: Panel Discussion on Maritime ExpositionA Gateway to Growth


Moderator: Mr. S. Hajara - Chairman & Managing Director - The Shipping Corporation of India Ltd Panelists: Mr. B. K. Mandal, Director (Finance), The Shipping Corporation of India Ltd. Shri. Deepak Shetty, Joint Director General of Shipping, Directorate General of Shipping Admiral Ajit Tewari, MD-Bengal Shipyard Ltd. & Director-Bharati Shipyard Ltd. Cmde. M. Jitendran Chief Consultant, IRS Mr. M V Ramamurthy, President (Shipping), Reliance Industries Ltd Mr. Navpreet Singh Joint Managing Director, Dolphin Offshore Enterprises India Ltd. Capt Sandeep Kalia- Executive Director-Great Offshore Salvage Services Mr. R. P. Khare, Director-Planning & Coordination, Inland Waterways Authority of India (Potential of Inland Waterways for Coal Transportation) Summary of Discussion: In the panel discussion moderated by Mr. Hajara, several interesting topics were discussed - nancial aspects of growth in shipping were explained by Mr. Mandal, Mr. Deepak Shetty brought in unique and unorthodox prescriptions for issues being faced in the maritime sector, Admiral Ajit Tewari spoke of the challenges being faced in the shipbuilding industry, Mr. Ramamurthy spoke of how every growth plan needs a gateway and how conferences such as the SMP Conference can serve as that gateway for the maritime sector in India, Cmde. Jitendran spoke of the DP3 formula: Design, Planning, Procurement and Process and how shipbuilding industry can leverage them to their advantage even in recession, Capt. Sandeep Kalia focused on the need for better training in Indian shipping, Mr. Navpreet Singh explained with examples the fallacies of Indian rules and regulations, and lastly Mr. Khare spoke of the potential of Inland Waterways for Coal Transportation in India. The key points discussed were as follows: Mr. Mandal (SCI): Financial aspects of growth in shipping Indias gross tonnage of 10.8 million (~1% of world tonnage) is still very less and does not speak well of Indias shipping sector. For the 12th plan which is about to start, many task forces have recommended
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very ambitious targets which estimates suggest would require additional investments to the tune of ~ Rs. 80,000 cr. Given the current market conditions, this would be very difcult because currently no bankers are willing to provide debt to the shipping sector due to liquidity issues. Shipping is a capital intensive industry but capital is not available, interest rates are up and loan tenures have shortened. Mr. Mandal added that it is now more important than ever to look beyond dollar markets and consider different currencies and different loan tenures. To make the Indian shipping sector more attractive for funding, it would need help from government as well in the form of interest subvention / subsidy schemes. The next two years are likely to be very challenging for the Indian shipping sector. Shri. Deepak Shetty, Joint Director General of Shipping, Directorate General of Shipping Mr. Shetty spoke of prescriptions required for non-policy specic issues in the maritime sector. His views were: Indians need to propagate new ideas for the shipping sector, perhaps look at regimes of IPRs (patents, trademarks, copyrights) which can become potential revenue streams. The VC fund source for startups/early-stage companies has grown exponentially from US $300 mn in India in 2010 to a 4 times leap of US $1.45 bn in 2011. It is reective of the ample scope which is available. Technology paradigm shifts are at an average of 18 months. Entrepreneurs and policy makers need to see the changes coming. Business opportunity comes at an intersection between what is available/ known in your industry and what is additionally available in other industries. There is a need to have a think-tank with dedicated research facilities that comes up with prescriptions from time to time and which the industry can propagate. In the Indian shipping industry there is obvious fragmentation with multiple players having divergent interests. Reconciliation of those interests is a huge challenge. There are representative bodies but there is a need for a larger sense of having a confederation that can leverage

the overall macro interests of the industry duly reconciled, and which holds standing with the government to hard drive/ bargain policy changes which are required. Concept of Self-Regulatory Organization (SRO) is needed within our industry to discipline members not punitively but persuasively, only then should we expect assistance from the government. The National Electronic Service Bill has been initiated by the government. Once it is enacted, all government organizations (ministries, PSUs, etc.) would have to enter into MoU with government to set roles, dene services, provide clear timelines, and establish punitive measures for lack of delivery of service. It will help maximize leverage through the electronic medium and hence is expected to lead to a huge paradigm shift in the coming years. Other two very signicant tax changes are also coming up in 2013 Direct tax code and GST. Most of the policy prescriptions and drafts/ guidelines are being put in the public domain for private sector responses. This engagement with stakeholders was an anathema until a few years ago; hence the private sector must interact with the government so that their views get factored into decision making. Admiral Ajit Tewari, MD-Bengal Shipyard Ltd. & Director-Bharati Shipyard Ltd. Today India has around 27 ship yards which is a small number for the size of India. There was a boom and signicant increase in output of shipbuilding industry earlier but today the orders and government support have dried up resulting in a bit of a doldrum in the industry. Shipbuilding is still necessary for development and it is sustainable as an industry by itself. For India to play a global role it has to develop maritime industry and in particular, shipbuilding. Government support is necessary to achieve this but the industry must also improve its own capacity. Since the last 25 years, only Cochin Shipyard (CSL) had a dry dock which could take a 100,000 tonne ship. Today Pipavav Shipyard can do so as well, but India has been left far behind. The sizes of ships worldwide are increasing by the day. There is already an 18,000 TEU ship in commission in the world and experts are talking of 22,000 and 35,000 TEU ships, on design. There is a bulk carrier of 400,000 tonnes in construction which is likely to be commissioned this

year. So there is a move towards larger sized docks and ships which doesnt exist in India. We need government support till we achieve critical mass and friendlier policies. Ship building is a strategic industry- it is labour and capital intensive and acts as a force multiplier for the economy, especially the rural areas because almost all new yards will come up in backward areas. The action plan required for development of Indian maritime sector is given as follows: Declare both shipping and shipbuilding as a strategic industry and give it infrastructure status. Set targets and ensure meeting of those targets. Targets of 2% by 2012, and 7.5% by 2017-18 are achievable but it requires investment (Rule of thumb: per million dwt growth of shipbuilding capacity = ~Rs. 1000 cr.). Hence 7.5% growth in capacity by 2017-18 requires 18-19 million dwt, or Rs. 18000-19000 cr investment. More important however is the need for friendly tax policies. Even today, some changes brought in policies are detrimental to the industry. E.g. Until last year i.e. 2011-12, there was no excise duty on ships built in India but now Indian shipyards have to pay 5% excise duty or if they wont avail of CENVAT duty drawback then they can avail of 1%, but they have to pay duty before they can deliver a ship. Now a new element of service tax will have to be paid. Additionally, there are issues with custom regulations, having bond periods of 1 year when a ship takes 3 years to build; extension on bond periods; if there is increase in bond periods then companies must pay interest on that extra time. These are a burden on Indian ship yards which are already competing against heavy odds from well-set foreign yards from Japan, Korea and China. For capital investment- shipyards have to buy modern equipment, machinery and build infrastructure. Hence they need to have infrastructure status so that they wouldnt be required to pay 35% duty to buy machines for welding, cutting, bending, etc. Indian maritime sector has the required skills but it needs policies in place to make itself sustainable and to add to its development.

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Cmde. M. Jitendran Chief Consultant, IRS With 10yrs experience in ship building (ranging from ship repair, offshore, conversion, training), Cmde. Jitendran proposed the DP3 formula for future growth of our shipbuilding industry: Design, Planning, Procurement and Process. Having mastered these 4 basic skills required in shipbuilding, he says that one can do any job in the world. Any problem can be addressed through this formula. In a downturn, ship yards should leverage on their strengths. Their capacity can be utilized even for diverse sectors efciently and much better than existing practices in India because they could bring in naval architecture techniques. E.g. Cochin Shipyard and others have efciently also built railway wagons, containers and even bridges across lakes/ inland waterways. Many items like pre-fabricated building structures can also be manufactured in a shipyard using the same DP3 strength. It will result in absorption of overheads across sectors, usage of excess capacity and better bottom lines for the shipyard. There is a need to bring in innovativeness and co-ordination amongst us. Capt. Sandeep Kalia- Executive Director-Great Offshore Salvage Services Capt. Kalia focused his presentation on the need for training in Indian shipping industry. His views are encapsulated below:

There is a shortage of trained and skilled personnel to operate high-tech and complex machines. The availability of manpower is plenty but availability of skill is a concern. Many maritime accidents both minor and major have occurred in India. In 80% of those cases, the vessels were equipped with high tech gear but the common factor in those accidents was human error. E.g. while navigating in a channel 50m wide, an error of 5m can lead to disaster. Hence optimum use of equipment and understanding limitations of equipment needs to be emphasized. The key questions which need to be addressed are Has the ISM, ISPS regulations burdened senior ofcers of maritime industry to delegate their paper work to cadets? Did we compromise on on-board training and make this generation of cadets into white-collared paper tigers? Is there no control over trainees passing out of our institutes? There is a need to identify gaps in the existing systems- both in trainees and training systems. Indias coastline has been polluted by oil, chemicals, and containers leaking from damaged and stranded vessels, barges, oil installations and factories. Are we geared to handle a Tier 1 or Tier 2 and higher level oil spill? India is very fortunate to not have witnessed a tragedy comparable to the tragedy at Deepwater Horizon. Our disaster management plan should be ready to manage disasters of such magnitude. The training needs must be addressed urgently for us to continue moving forward.

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Mr. Navpreet Singh Joint Managing Director, Dolphin Offshore Enterprises India Ltd. Indian maritime industry faces 2 main issues: Maritime sector is not given its due importancemust be given infrastructure status Majority of trade worldwide happens by sea. Shipping, ship building, ship repair and ancillary industries provide ample employment opportunities. Setting up of ports, ship repair units, transport hubs and IWT would help in the development of rural areas. Given these reasons, the entire maritime sector is of fundamental importance for India and must be given infrastructure status. Regulations and rules are not always transparent/ logical/ effective E.g. Indian government has provided ship builders a subsidy of 30% to encourage ship building. However the ship builders dont get that benet until many years later only when the ships are delivered. Hence the shipbuilders cannot afford to subsidize the client by 30% until they have received the benet from the government and are thus forced to quote only the cost price, not the subsidized price. Where would they get the funding from to subsidize? If the government does not provide the subsidy in a timely manner, then it does not help the shipbuilder. Another issue is lack of clarity in concepts like Customs duty, service taxes, etc. In the coastal business there are designated areas. Indias territorial right extends

to 12 nautical miles. Economic right in certain areas/ acts/ taxes extends to even 200 nautical miles- thats the Exclusive Economic Zone. In other cases like service and sales tax- its applicable to 12 nautical miles. There is confusion on where taxes should be applied. E.g. If the laying of a pipeline extends beyond its designated area, what portion of that pipeline should be subject to service/sales tax, custom duty, etc.? Because of the lack of clarity, companies end up spending more time ghting litigation with the government than anything else. There are fallacies even in rules, such as Indias safe manning policy. A vessel operating in India has a safe manning requirement of 14 persons. Vessels operating in North Sea where sea conditions are much rougher than what is seen in India have a safe manning requirement of only 7 persons. Why have the differences? If Indian ship owners are expected to compete in the international market, then they have to be cost competitive. If they are required to provide double the crew than their international competitors then it will cost them double the amount of money. More importantly, the offshore vessels have restricted space and restricted number of cabins. If Indian ship owners end up catering to so many more people of their own crew, how many cabins can they offer to the client for offshore work, which is the real reason that the client is hiring the vessel anyways?

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Day 3

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Session 1: Regulation & Policy Environment


Impact of Regulations on PPP Speaker: N.N. Kumar - IRS, Deputy Chairman, Jawaharlal Nehru Port Trust, Mumbai About Shri. N.N. Kumar: Shri. N N Kumar joined Indian Revenue Service in 1984 and worked in the Ministry of Finance and Department of Revenue in various capacities at Mumbai, Delhi, Kolkata, Nagpur, Agra and Aurangabad. He has also headed the units dealing in Administration, Personnel and Vigilance functioning of Income tax Departmental, Delhi. Mr. Kumar has attended the Administration and Management Training Programme organized by the Treasury Department of USA. He has represented the Ministry of Finance in the International Revenue conferences of IRS in USA. Presentation glimpse: Denition of PPP Mr. Kumar explained that Public-private partnership (PPP) is a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies. These schemes are sometimes referred to as PPP or P3. PPP is the preferred route because of its assistance in providing funding resources, better technology and efcient management. Types of PPP The speaker spoke of various types of PPP models which are available worldwide. They are listed below: The PPP models vary from short-term simple management contracts (with or without investment requirements) to long-term and very complex BOT form, to divestiture. These models vary mainly by: Ownership of capital assets Responsibility for investment Assumption of risks, and Duration of contract. The PPP models can be classied into four broad categories in order of generally increased involvement and assumption of risks by the private sector. The four broad categorizations of participation are: Supply and management contracts Turnkey projects Lease Concessions Private ownership of assets Characteristics of PPP Mr. Kumar said that while PPP can follow a variety of structures and contractual formats, all PPPs incorporate the following three characteristics: A contractual agreement dening the roles and responsibilities of the parties. Sensible risk-sharing among the public and private sector partners. Financial rewards to the private party commensurate with the achievement of pre-specied outputs. Controversy around PPP The controversy around PPP is mainly due to the following factors: A common problem with PPP projects is that private investors obtained a rate of return higher than the

1 3 5 7 9 11 13

Concession Model Build-Own-Operate (BOO) Build-Operate-Transfer (BOT) Design-Build-Finance-Operate-Transfer (DBFOT) Design-Build (DB) Royalty or Revenue share method Special Purpose Vehicle (SPV)

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Buy-Build-Operate (BBO) Build-Own-Operate-Transfer (BOOT) Build-Lease-Operate-Transfer (BLOT) Operation License Annuity Method (AM) Finance only

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governments bond rate, even though the income risk associated with the project was borne by the public sector. PPP ignores the position of taxpayers who play the role of equity in this nancing structure. The government debt is cheaper than the debt provided to nance PFI projects, and cheaper still than the overall cost of nance for PFI projects. Making a simple comparison, however, between the governments cost of debt and the private-sector Weighted Average Cost of Capital (WACC) implies that the government can sustainably fund projects at a cost of nance equal to its risk-free borrowing rate. The constraints on public borrowing suggest, nevertheless, that borrowing levels are not currently too low in most countries. These constraints exist because government borrowing must ultimately be funded by the taxpayer. PPP in India The speaker said that the importance of PPP in India is obvious when looking at the current infrastructure decit in areas like highways, ports, airports, railways, power, irrigation and telecom. The government has already undertaken several initiatives to promote PPP and formulated guidelines for appraisal and approval of projects to be undertaken through PPP. He elaborated that a total of 881 PPP projects in India are in progress / awarded / completed at a cost of Rs. 543,045 crores. Road projects account for 53.4% of the total number of projects and 46% by total value. Port projects account for 8% of the total number of projects and contribute 21% by total value. He observed that the potential use of PPPs in e-governance and health and education sectors remains largely untapped across India as a whole, though off-late there have been some activities shaping in these sectors. Across states and central agencies, the leading users of PPPs by number of projects have been Karnataka 104, Andhra Pradesh 96 and Madhya Pradesh 86 projects awarded. Projects awarded to NHAI are about 155 projects. Need for regulation in PPP projects The speaker felt that regulation is needed to protect consumers against monopoly abuse by supplier 46

through excessive charging or in terms of poor service, interruptions in service, etc. Most utility andinfrastructure providers have traditionally been natural or legal monopolies. It is necessary to protect investors and other interests which are deemed important to protect, such as the environment, service standards, consumer services, asset maintenance and replacement, etc. Effective regulation can monitor performance of service provider and reduce asymmetry of information thus providing protection against abuse by monopoly and creating incentives to improve services. The presentation addressed some key questions related to the principles behind designing regulation for PPP projects and powers of regulators which are listed as follows: What entities should be regulated? What activities should be regulated? What are the functions of economic regulation of infrastructure? Should there be more than one entity regulating the sector? How much discretion should the Regulator have? What are the Regulators powers? What recourse is available against Regulatory decisions? What is the source of the Regulators powers legislation, contract? Should the Regulator be independent? Whether over regulation will impact the investment ecosystem? What are the mechanisms for periodical review of service and tariff standard? Mr. Kumar summarized his presentation by noting that PPP is a very effective tool to create infrastructure and services and is playing very important role in developing countries. Regulation in the PPP is very much essential to protect the investors as well as users, and to protect consumers against monopoly abuse. However Regulation is a means to an end and what matters are outcomes and not regulatory rules. The benets of regulation should exceed the cost of regulation Effective regulation can protect against abuse by the monopoly and create incentives to improve services. It helps the end users to get the best services at a reasonable price with improved efciency. Other interests that are deemed important to protect through regulation

are: environment, service standards, consumer services, asset maintenance and replacement, etc. Maritime Projects Financing in India Speaker: Mr. Saibal De - Chief Executive, Ports, IL&FS Maritime Infrastructure Company Ltd. About Mr. Saibal De: Mr.Saibal K. De is B. Tech from IIT, Kharagpur and has also done short courses on Project Management and Infrastructure Finance & Project Development from one of the IIMs. He is working in the IL&FS group for the last 12 years, currently designated as Chief Executive Ports, IL&FS Maritime Infrastructure Ltd., based in Mumbai. Prior to this, he was Sr. Vice President at IL&FS Infrastructure Development Corporation Ltd., at locations pan-India. With a total work experience of 30 years, he has been involved in Project Development Activities in the infrastructure sector for private sector participation, for last 14 years, at various States and with experience across sectors. His Marine Infrastructure related experience includes Vizhinjam & Gangavaram Greeneld ports, and advisory services towards other ports in Kerala, Karnataka, West Bengal & Bangladesh. His previous involvement in project development includes development of Industrial parks, SEZ, projects involving real estate products with PPP, including innovative project structures for maximizing value to stakeholders. Presentation glimpse: Mr. De began his presentation noting that maritime projects are capital intensive (especially Greeneld projects), have longer gestation periods and are risk prone investments. Some of their features provided were: Flexible Concession Structures State Support Agreements Risks Implementation, Regulatory Equity Exits He elaborated that over the last decade, with the implementation of a number of port projects by the

private sector, and experience of nancial institutions in nancing, funding for port projects has been on the increase. The Port Sector has witnessed a high interest both from strategic buyers including international liners and terminal operators, as well as nancial suitors like banks, hedge funds and private equity investors Interest rates have been relaxed and loan tenures have increased. The lending rates are in the range of 12-14% with average maturity of 10-12 years. A captive port, where trafc is dedicated, the risk prole of the project is lower. On the other hand, in a multi-user port like a container port, the risk prole is higher, resulting in lower debt equity ratios and higher cost of funds. There has also been a growing trend of inorganic growth through mergers and acquisition of other terminal operators Investment Criteria Mr. De explained that the three key investment criteria in maritime projects are technical viability (looks at adequacy of project conguration, project preparation and capacity / cost estimation); legal and contractual framework (looks at roles & responsibility and exibility in implementation); and return on investment (looks at land acquisition, gestation period, approvals & clearances, protection of lenders interest, minimum guaranteed throughput, tariff xation, revenue share and off-take agreements). The factors to be considered when evaluating these investment criteria are: Technical Viability Planning and Design Sustainability Project Costs Legal and Contractual Framework Project Agreements and Contracts Clearances: Environmental Clearance Return on Investment (ROI) Trafc Projections Cargo Assurance Competing Ports and Sustainability User Fee The project development cycle starting from Project Preparation to Project Implementation to Project Operations was discussed and is given below:

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Project development Project preparation Project impllementation Project operations

Trafc studies Reconnaissance survey Site selection Preliminary viability analysis Surveys and investigations Master plan EIA R&R Clearances and approvals Financial closure

Site clearance Connectivity Selection of contractors/ vendors Construction Planning Scheduling Monitoring Installation and commissioning

Clearance and approvals Marketing Tariff Productivity Services Maintenance

Mr. De suggested that the key project cycle issues are: Approvals delays in getting approvals leads to time & cost overruns. Sometimes there are changes in scope which has a cascading effect on the entire project. Implementation timelines . Actual time taken for implementation exceeds budgeted time. Dredging need for adequate data, avoid repetitions, scope enlargement with change in timelines Cost increases in land procurement Last mile connectivity is often left wanting which affects realization of projected revenues Change in demand due timeline change, competition Inefcient and fragmented logistic systems and supply chain management The speaker also spoke of the development related issues which are: Major Ports (terminals) Domestic and international ports are offering increasing competition Congestion in hinterland connectivity and constraints in cargo evacuation are leading to longer turnaround time for vessels There are several limitations on capacity augmentation Greeneld port development can lead to effective capacity augmentation. However, these have their own challenges which are given as follows: Signicant development costs & risks Cargo critical mass (Hinterland load center vs.
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Transhipment) Clearances and approvals Development of hinterland connectivity and eco- system Going forward in order to address the development and nance related issues, Mr. De suggested that the following steps/ factors should be considered: Development related Risk Mitigation (in project development) Identication and assessment Dening limits Mitigation Measure Formulation of a sustainable project module Providing end to end solutions Long term tie-ups for inland and sea transport Cargo Assurance Timeliness Value Addition Finance related Project funding Viability gap funding Structured nancing Berth Sub-concession Initial moratorium User equity Operational Cargo tie up for quick revenue build up Phased development Innovative ways of connectivity implementation

Session 2: Panel Discussion on Connectivity of Rail, Road to Sea Ports


Moderator: Capt. B.V.J.K. Sharma, JMD & CEO JSW Infrastructure Ltd. Panel Members: 1. Mr. Punkaj Kumar,Vice Chairman & CEO, Gujarat Maritime Board 2. Mr. Subodh Jain - GM, Central Railway, CST Mumbai 3. Mr. Sunil Bhatia, GM Commercial, APM Terminals Pipavav 4. Dr. GYV Victor - Deputy CEO & Member of Board, EADA (Asia, Pacic region) The panel discussion focused on actionable plans for improving port connectivity in India. Some of the key points discussed were related to: Need for integrated logistic environment in India and identication of areas where policy interventions are required Discussion on the innovative actions in the maritime sector being undertaken by Gujarat. Feasibility of PPP model for port connectivity development Discussion for having a station planning authority similar to the existing airport planning authority. Mr.Punkaj Kumar, Vice Chairman & CEO, Gujarat Maritime Board Last-mile connectivity is of immense interest to port players but there are several issues which must be addressed. They are listed as follows: Integrated connectivity Policy planners, developers and stakeholders must learn and have the courage to think big. Discussions are needed about IWT connectivity to port, conveyor belts or gas pipelines and not just road/rail connectivity. Integrated connectivity like Hazira with Surat is needed in our country. Gujarat is working on establishing a 70m wide corridor where road, rail, gas pipeline and if the need arises even conveyor belts can all be placed simultaneously. Such integrated connectivity requires a complete change of mindset in government ministries. Currently neither of the ministries such as Railway, Surface Transport, Energy & Petroleum, Coal & Mines, or Finance can talk independently. There is a need for integrated multi-modal connectivity to ports and some such initiatives have been undertaken in Gujarat. Providing rail connectivity Indian Railways has been the slowest in the postliberalization era, perhaps because they still operate in a monopolistic environment. The unbundling of Railways should have taken place much earlier. The rst private railway was Pipavav Port. Next in line was Kutch Railway Authority: Palanpur to Gandhidam, a 301 km long metre gauge was converted to broad gauge. Gujarat government participated in it as one of the equity partners. This was followed by a third model where Adanis developed a completely private railway line from Aadipur to Mundra. Additionally GMB formed a SPV for conversion of meter gauge to broad gauge from Bharuch to Dahej 64km through SPV board where Gujarat government is a partner with 11% stake. There are ve other port users who are also equity partners along with some of the state governments, PSUs, GMB and RVNL. But this project faced huge cost overruns. The point is that there is a need for more port users to join hands for forming SPVs. There are currently 7 models oated by Ministry of Railways where a railway line can be developed outside the exclusive jurisdiction of Railways. However not many investors are coming forward to take advantage of any of these 7 models because the several issues related with operation and maintenance of such lines are not being addressed by the Ministry of Railways. Indian Railways must be more sensitive to the growing needs and the changing scenario in the port sector and other sectors also, only then will new lines be created at a faster rate. Land acquisition Land acquisition is required for development of any road/rail connectivity, but there are many issues associated with it. There are innovative ways to tackle these issues. The current system is to make a one-time payment of compensation to the farmer and take away his land. Instead an alternative system should be considered of giving part-compensation in the beginning to the farmer and making him a partner in the revenue generated from any commercial activity coming up on his land. Then he will not feel alienated but truly feel part of the development process. This will lead to lesser resistance from farmers to give away their land for rail/ road connectivity. Similar innovations from out-of-thebox thinking are always possible.

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Integration of trade and economic policy with transportation policy In China, the trade and economic policy is in-line with the National Transportation Policy and project implementation schedules are adhered to strictly. In India, the Ministry of Shipping or Ministry of Railways or Ministry of Surface Transport are totally oblivious to the countrys economic policy, or trade policy. So until and unless these policies are integrated, and in China they have done it, there will always be planning-related issues. Trained manpower Indias infrastructure sector which is growing at 9% gets only 10% of the trained, skilled, and certied project managers available in the country. Whereas the IT sector which contributes just 5% of Indias GDP gets 50% of the trained project managers from the market. So the onus is not on the government, but on the infrastructure companies to attract the best project managers. They must improve the work culture within their companies to attract and retain talent. Mr. Subodh Jain - GM, Central Railway, CST Mumbai Mr. Subodh Jain spoke of Indian railways role in the last mile connectivity of ports and further claried the issues raised by the previous panelist, Mr. Punkaj Kumar of GMB. His view points are listed as follows: As far as monopoly is concerned, Railways only has a network monopoly and it does not charge any premium for any private player interested in joining its network, hence it cannot be accused of anti-competitive practices. As far as falling rail share is concerned, that is not much of a concern, because when safety and environmental awareness increases in India at par with the western countries, railways share in transportation will go up. Even today its share is much higher than most of the countries it is being compared to. Regarding the policy and kilometer-age of port connectivity, the problem only comes in when private players want Railways to participate. There is always a policy of private freight terminal where private players can lay private siding to any 100km/120km stretch and connect it to the Indian Railway line. There are no issues with that and Railways does not ask for any guarantees in such cases either. The problem is that ports are not sure of how much trafc will arrive. Hence they dont want
50

to invest in the back-end infrastructure in an aggressive manner. A case in point is Pipavav port which was the rst rail line constructed under the PPP mode. Their projected trafc did not materialize and they could not fulll their trafc guarantee, hence they were asked to pay up. Thus this was a learning process. Next in line was the Kutch Rail Co. It was a very sound business model because the trafc arrived as projected. Thus at the end of the day, if the private players are sure about the trafc, then they should go ahead and ask for a connectivity to a particular station. Under the private freight policy all that they are required to deposit is around Rs. 1 crore (Mr. Jain expressed his uncertainty about the exact gure here) and then they get the rail connectivity. The main problem is land acquisition. Gujarat state is a different ball game and the experience there cannot be replicated in the rest of the country. For the last mile connectivity, most private players come to Railways because they are afraid that they will not be able to acquire land. Another point raised was that there were cost and time overruns in Bharuch-Sangli-Dahej gauge conversion in the line. Since the SPV constructed that line, it is the SPVs fault and Railways cannot be blamed for it since it had only 26% equity stake through RVNL. The private players have the controlling stake and have selected their own MD for execution of the project. By comparison, Railways has completed Pratapnagar - Chotta Udaipur gauge conversion in the same timeframe and at a cost of Rs. 2.6 crore per km. Costs depend upon many factors. There are many different models available, and if the private players have a fair model then the Ministry of Railways would not be averse to it. The decision-making may be slow because every proposal has to be seen in the national scenario to ensure uniformity. If Railways agrees to a project in a particular state in western India, it may have to agree to similar projects in the eastern and southern part of India also. But that is not as big an issue. Another least discussed but serious problem is that if a private player constructs a railway line for port connectivity then very soon there will be demands for running passenger trains on that line as well. Mundra port is

struggling and other private players will struggle too if they dont have an overall view. Its not just about 10 or 20 years, Indian Railways has been in this business since 160 years and has seen the ups and downs. Moderator: Capt. B.V.J.K. Sharma, JMD & CEO JSW Infrastructure Ltd. After Mr. Subodh had spoken, Capt. Sharma explained that in the past even he had dealt with the PPP policy of Indian Railways and faced issues particularly in the private freight terminal policies. Earlier it was a 3 year policy but now there is a new policy under debate. Land acquisition is a challenge because if it is a private freight terminal, land has to be acquired by the private developer. Additionally there is a clause in that policy which says that land development will have to be tendered. This clause makes the port developer vulnerable because in the tender route, a non-serious player may also participate in the bid and still not develop the land. These critical issues are being taken up with the Indian Railways but the serious port developers are very keen on this improving policies relating to last mile connectivity. Another point is that a port is an end-user of the trafc and hence port developers cannot guarantee minimum trafc. All they can hope is that as a city and industries develop around a port that, trafc will come but attaching a minimum guarantee throughput to this connectivity will remain a challenge. But nevertheless there is progress since the Indian Railways has indicated that in another month or so they will nalize this policy. The Moderator then asked Mr. Sunil Bhatia of APM Terminals Pipavav of his experience on connectivity while Pipavav port was being developed and the co-operation that he expects from the authorities. Mr. Sunil Bhatia, GM Commercial, APM Terminals Pipavav Mr. Bhatia expressed that Pipavav is one of the role models in connectivity as it is one of the rst SPVs that went out very successfully. Despite the ups and downs in cargo volumes and the binding agreement which was in place with this SPV, the entire episode should be looked at differently.

The Railways is a very important member in the value chain for last mile connectivity, where it has two important resources 1) permanent way and; 2) rolling stock. Private port developers have many areas where capacity utilization is almost close to 100% and many areas where they are still struggling to use what they have developed. E.g. A commodity like fertilizer has concentration of cargo for a port for a few months and in the other remaining months there is no cargo trafc. Private port developers are required to ask Railways for 2 or 3 rakes that they need to push cargo from the port during the months when there is peak trafc, but for the remaining months (which may be around 3 months and possibly even more) they are faced with situations where they dont have any cargo in the port. Hence a lot of work is required to optimize this complete valuechain. An innovative freight system must be developed in collaboration with the Railways to balance out the months having extremely high utilization and the months having extremely low utilization, to optimize the resources which have been developed, since its ultimately a cost in the value chain. Hence its not only the Railways, but a team effort which is needed. Dr. GYV Victor - Deputy CEO & Member of Board, EADA (Asia, Pacic region) Coastal shipping and integrated inland navigation are much cheaper and less polluting than road/ rail transport. They also create many job opportunities. Since they fall under the Ministry of Shipping; hence there can be a single policy to govern the entire cargo evacuation from port. It will be very difcult to have a dedicated rail/road corridor for the existing major ports because of their densely populated locations. Dislodging people in the surrounding areas would require a policy which is coherent and non-conicting between the Surface Transport, the Shipping Ministry, the Road Transport, Railway Ministry and most importantly the Environment Ministry. Without obtaining all the required clearances, having a dedicated road/rail corridor is not possible. However the new ports or private non-major ports which are likely to come up could possibly have a dedicated rail/road corridor. For e.g. Krishnapatnam,

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Mundra, Damra, Karaikal ports, etc. can have dedicated rail/road corridors because right from the inception of the port they have developed different cargo evacuation options where cargo is equally divided amongst the different options. The way forward for Indian maritime sector is to develop coastal shipping, integrated waterways and dry ports wherever possible. Dry ports along with suitable backup and storage areas, would enable easier, faster and more efcient cargo evacuation. Moderator: Capt. B.V.J.K. Sharma, JMD & CEO JSW Infrastructure Ltd. Capt. Sharma requested Mr. Subodh for his comments on the problems faced by port developers with seasonal variation in trafc. Mr. Subodh Jain - GM, Central Railway, CST Mumbai Mr. Jain suggested that regarding the problem faced by private players of seasonal variation in trafc, the Railways being a government entity, also has very limited options available. The moment there is shortage of capacity or shortage of wagon on a particular route then there is a preferential trafc schedule that Railways are required to follow. Thus the most non-important trafc would have to take a backseat. The Railways realizes that that is a problem but there seems to be no solution except generation of additional capacity. Rail infrastructure is very capital intensive and Indian Railways are currently able to operate at low prices only because they over-utilize the available capacity. If Railways creates the infrastructure to fulll the entire demand then the cost of service will go up which will also be a problem. Moderator: Capt. B.V.J.K. Sharma, JMD & CEO JSW Infrastructure Ltd. Capt. Sharma noted that private investments made by container train operators were not doing well and there was also lack of clarity in the wagon investment scheme. Private investment is only allowed in high capacity wagons or specially designed wagons but important cargoes like coal and iron ore are restricted. At the same time the rake availability is not there and there are examples where it is getting rationalized. Private players can only get so many rakes irrespective of their indent spending or demand. Capt. Sharma thus asked

if Mr. Subodh could propose a solution for the big gap between supply and demand of rake availability. Mr. Subodh Jain - GM, Central Railway, CST Mumbai Mr. Jain recognized that two issues needed to be addressed rake availability and wagon investment scheme. Rake availability: Indian Railways has a priority list. Power house coal has rst priority. Similarly fertilizer movement has superior priority and so does export trafc. Hence if a certain DOC cargo is meant for export then it will get the rst rake and other cargo movements will have to wait. There are capacity problems too. Currently there is no capacity for Bangladesh or Guwahati, so there will be restrictions in cargo movement and indents will be kept pending. Thus there are a lot of logistics complications. Wagon investment scheme: Mr. Jain explained that since he did not have rst-hand knowledge of the issues regarding the wagon investment scheme or the improvements required in the scheme, he is not in a position to elaborate on it. But over the last 20 years, he has seen that many different schemes have been tried to improve the situation. He suggested that Railways already provides freight concessions to private players, plus it also owns special wagons capable of carrying restricted commodities. If Railways allowed carriage of restricted commodities to private players, then the government auditors would immediately question the Railways regarding offering of freight concessions and non-utilization of their own wagons. Open forum Question from Mr Rane from Vedanta: Almost all the port tenders are not integrated tenders and they have a distinct missing link rail connectivity. These tenders put the onus on to the BOT operator which is not correct because he then ends up simply toiling around but not achieving much. Integration is very important but somehow we nd that Railways is not joining hands in those tenders to make it a composite tender.

52

Moderator: Capt. B.V.J.K. Sharma, JMD & CEO JSW Infrastructure Ltd. Capt. Sharma explained that as per his understanding, the Ministry of Shipping does not take the clearance from Ministry of Railways before announcing a project. Many sessions in various forums have tried addressing it but the main question which remains is that - who would take the initiative? When private players meet the government departments individually, all Secretaries of those departments sympathize with them but who will take that rst step and go to the other Secretarys ofce, is the key issue. The PMOs ofce, based on priority involved, chairs certain meetings and progress has taken place. The PMOs ofce is ensuring integration for the dedicated freight corridors. But unfortunately that kind of pressure towards integration from the PMOs ofce cannot be forced everywhere. Since Gujarat is a success story in this regard, he requested Mr. Punkaj to throw his opinion on the issue raised. Mr.Punkaj Kumar, Vice Chairman & CEO, Gujarat Maritime Board Mr. Punkaj Kumar explained that for any integration to be successful the integration rst has to come from the mind and only then can it be realized on the ground. Individual/ individual departments should be ready to lose their identity, so that they can merge and then emerge as a bigger identity. The concept of having a single window clearance has been discussed since several years, but the windows have not reduced but infact they have increased. In the Government of India, at one point in time, the Cabinet Secretariat used to be very effective in ensuring co-ordination across departments but his role over the years has diminished. The reason why Gujarat has attracted so much investment is that it truly has a single window clearance system where all departments speak with the same mind. For e.g. 40% of the Delhi-Mumbai Industrial Corridor (DMIC) passes through Gujarat but the PMO expects 60% of the freight and cargo to originate from Gujarat. Gujarat government is still condent that they would be able to achieve it. Gujarat Industrial Development Board has already readied plans to connect DMIC with all non-major ports in Gujarat. They engaged consultants and have the PFRs ready to connect all non-major ports in Gujarat both through road and rail. Feeder railway routes will be developed under the existing policies of the Railways. Thus the intention was never to criticize

the Railways since Gujarat has benetted from their policies but perhaps the path can be made much easier with some changes here and there. Nevertheless the plan is ready. Another area discussed was that NHAI- Pipavav now has a 4-lane road, for Mundra the Gujarat government is planning a 6-lane connectivity, and 4-lane roads for all the ports in Gujarat including smaller ports like Navlakhi or Dahej (they handle ~2-3 million tonnes only). Wherever such connectivity is not present, it would be provided under the annuity scheme either by Road and Transport Department of the State, or wherever if necessity arises, even GMB might provide the same. GMB invested Rs. 50 cr to provide for lane connectivity for Dahej. All these examples demonstrate that an integrated approach is very much possible, provided there is integration at the level of the mind. Moderator: Capt. B.V.J.K. Sharma, JMD & CEO JSW Infrastructure Ltd. Capt. Sharma appreciated Mr. Kumars comments. He also enquired which model did GMB prefer annuity or VGF? Mr.Punkaj Kumar, Vice Chairman & CEO, Gujarat Maritime Board Mr. Kumar said that GMB generally prefers the annuity model. It has been successfully used for most of the multi-lane roads in Gujarat. GMB has plans, PFR, IRR and funding sources ready for providing rail/road connectivity for all ports, even the upcoming greeneld ports like Sinchara, Modwa, Nargol, etc. What GMB has realized is that for shorter routes the private rail model, and for longer routes, SPV model is more workable. Depending on the length of the railway/ road, the particular model becomes more suitable. Moderator: Capt. B.V.J.K. Sharma, JMD & CEO JSW Infrastructure Ltd. Capt. Sharma requested Mr. Subodh to throw light on Station Authority of India. Securing funding is always a problem and Gujarat has used a lot of innovative ways in converting bus stations into a prot making model. Hence if railways are looking at a similar model then the issue of paucity of funds could possibly be addressed.
Shipping, Marine & Ports Exposition 2012 Post-Summit Report 53

Mr. Subodh Jain - GM, Central Railway, CST Mumbai Honorable Minister, Shri Dinesh Trivedi, had engaged some outside experts to advise Railways to generate resources without touching or with minimum impact on fares. The study discovered that the average passenger during his journey spends about 40-50% on fares. The remaining money is spent on coolies, food, water, etc. in/around the stations. So at a national level, without generating any outside activity, the total revenue from all current activities within the station area like advertisements, food stalls, coolie, porter, parcel, etc. works out to 30% of total passenger revenue. That is the scope which has been identied. Thus a plan was conceived to create a Station Authority of India. However, the Cabinet decided that an Authority cannot be established. Hence something along the lines of Station

Corporation Ltd. or a similar entity is likely to be established. It will be responsible for development of stations and will have the revenue model of all non-fare activities. The company will be given the authority to develop further commercial or value-added services like budget hotels in line with passenger requirements. That perhaps may bring down the pressure to increase passenger fares and provide an additional revenue stream for Rail development. Moderator: Capt. B.V.J.K. Sharma, JMD & CEO JSW Infrastructure Ltd. Capt. Sharma concluded the panel discussion by saying that This just goes to show that lot of innovative options are available, we just need to think out-of-the-box.

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Session 3: Reducing Transaction Cost


Modernisation of existing ports and development of new ports Speaker: Mr. Senthil Kumar, Operations Director, Leighton Welspun Contractors Pvt. Ltd. About Mr. Senthil Kumar: Mr. Senthil Kumar commenced his career in 1988 as an Engineer Trainee with Larsen & Toubro and over a period of time has worked with Dodsal, Punj Lloyd, Clough Offshore, JRM and Petrosea Clough. He served the company as a Project Director for the Pipeline Replacement Project-2 of ONGC and spearheaded the task of completing the project. The Project was awarded with various Health, Safety & Environment (HSE) awards for its exemplary HSE standards. He was promoted and designated as Operations Director in Feb 2011. Presentation glimpse: Business Need for Modernisation of existing ports and development of new ports: Mr Kumar noted that in Container cargo handling there is a likely capacity shortfall of 1 million TEUs forecast for 2014. In case of local coal availability, Indias need for coal imports could jump nearly 70 percent in next scal year to 142 million tonnes from 2010/11 forecast purchases. The gap in demand and supply from domestic sources would exceed 200 million tonnes by 2017. Trafc is estimated to reach 877 million tonnes by 2012-13, as against 561 million tonnes during 2010 and containerized cargo , which is @ 7 million TEUs in 2010 is expected to grow at 15.5% (CAGR) over the next 7 years. Indias existing ports infrastructure is not sufcient to handle the expected increased loads. Case for using Steel Sheet Pile in Quay structure: Concerning the economics of steel sheet pile breakwater, quay walls, Mr. Kumar estimates that the cost of construction is reduced by 20%. The advantage of using Steel Sheet Pile in Quay structure is: Provides high resistance to driving stresses. Light weight. Quay wall with Steel sheet piling have excellent stability, especially in areas with earthquakes. Sheet piling is also useful in very soft clay soils that have little or no strength. Steel sheet piling is environmentally friendly. Long service life above or below water with modest protection. 100% prefabricated material, easy to adapt the pile length by either welding or bolting hence excellent quality control. Additionally the presentation also provided illustrations of Economical utilization of sheet piles, Dredging techniques and accuracies, and Advanced reclamation methods. Transhipment potential in India Speaker: Mr. Sunil Bhatia, GM Commercial, APM Terminals Pipavav About Mr. Sunil Bhatia: Mr. Bhatia is a Meritorious Engineer and Master of Management in Logistics and Marketing from IIT Bombay. He is also certied Black Belt in Lean Six Sigma from American Society of Quality. He has an experience of over 22 years in Ports, Shipping, ICD, CFS operations and commercial . Presently he is the Head of Bulk Commercial and Process Excellence with APM Terminals Pipavav, part of AP Moller Maersk group. Presentation glimpse: Mr. Bhatia began his presentation with the current challenges with Ports in India and moved on to the need for Transshipment hubs in India and the container throughput and transshipment throughput seen at Indian ports. Current challenges with Ports in India Mr. Bhatia noted that India has a Coast Line of 7,516 kms which can be optimally utilized. The size of vessels worldwide is increasing to reap the advantage of

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economies of scale but most Indian ports face draught constraint which equips them to cater to only small vessels. There is low level of mechanization and automation, and inadequate hinterland connectivity. Additional and better quality support infrastructure in the form of warehousing facilities / CFS / Customs / Yard, are needed. Trade is growing at much rapid pace as compared to capacity expansion and there is scope for future expansion.

Requirement of Transshipment hubs in India He explained that while the container volume has been growing at 14% CAGR over the past decade, however few ports in India attract direct main line calls. The vessel sizes are increasing as can be seen in the huge capacity of Maersk ships like Triple-E Maersk class, Emma Maersk Class, Regina Maersk class and Sovereign Maersk class:

Big thinking
The capacity of a Triple-Eversel, 18,000 TEU, will set a new world record, Maersk line continues to break its own records and sets new standards for the shipping industry. From Regina Maersk to the Triple-E class, Maersk has designed the largest container vessels in the world since 1996.

2013 Triple-E Maersk Class

10.000 TEU
2006 Emma Maersk Class

15.500 TEU
1997 Sovereign Maersk Class

8.100 TEU
1996 Regina Maersk Class

7.100 TEU
56

There is a requirement for a consolidated cargo hub across existing trade routes. Trade pattern is changing (intraAsian trade is increasing). Transhipment cargo of 1.5 million TEUs originates from India but transshipment is primarily handled at Colombo /Singapore / Salalah. Container throughput across Indian Ports The container throughput across Indian Ports for the last three years is given in the following graphs:
3,810 4,266 3,566 2009 2010 2011 till Oct

1,443 1,314

834 1,150

1,142

453 491

467 515 455

1,108

279 309 274

131 155 139

321

38

427 458 380 39 Tuticorin


29%
29%

56 73 53

Chennai
Source: Drewery Report

Pipavav JNPT

Kandla Kolkata

Mumbai Mundra

New Mangalore

29

Vishakapatnam

Cochin Source: Drewery Report

Similarly East Coast vs. West Coast Container throughput for the last three years is given as follows:
2009 2010 2011 till Oct

28%

28%

72% 2136 TEUs


28% 28%

72% 6443 TEUs

Source: Drewery Report West coast throughput 72%

72% 6443 TEUs

71%

East coast throughput 2136 TEUs Source: Drewery Report

Shipping, Marine & Ports Exposition 2012 Post-Summit Report

100 127 167


71%

57

Transshipment throughput The transshipment cargo from East Coast is given in the table below Port Kolkata Vishakapatnam Tuticorin Chennai Total Trafc YTD Oct11 455.400 167,000 380,300 1,314,200 2,316,900 Percentage of Cargo Transshipped YTD Oct11 100% 56% 26% 31% Volume of Cargo Transhipped YTD Oct11 455,400 93,520 98,878 407,402 1,055,200

Colombo and Singapore handle roughly 1.5 Million TEUs of Transshipment. But the East Coast contributed roughly 1 Million TEUs of transshipment cargo. Lack of direct calls by major liners, lack of availability of optimum draft, low handling capacities and low volumes could be the possible reasons for transshipment across East Coast Ports.

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Contact

About the Authors Hemant Bhattbhatt is a Senior Director in Deloittes India practice. He is the Shipping Practice Leader for Deloitte in India. This Report has been prepared based on inputs & contributions from Shailendra Ranjan, Vaibhav DIxit, Bhavesh Dalal & Kunal Kalele, the team that worked with Hemant on this report.

Hemant B. Bhattbhatt Senior Director, Consulting Deloitte Touche Tohmatsu India Private Limited E-mail: hbhattbhatt@deloitte.com

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