New Delhi: To reduce its dependence on China, the Modi government is working on a comprehensive plan to manufacture shipping grade containers in India, which includes giving production link incentives (PLIs) to indigenous firms, ThePrint has learned.
There was a severe shortage of shipping grade containers globally during the COVID-19 pandemic. Shortage resulted in shipping lines Unprecedented increase in container freight rates around the world, which badly affected India’s Export Import Supply Chain.
At present, only a few small domestic firms manufacture containers that serve on rail mode, but the numbers are very small. Container Corporation of India Limited (CONCOR), a Public Sector Undertaking (PSU) under the Ministry of Railways, is India’s largest container fleet operator with 37,000 containers. But for the domestic segment, the entire fleet is imported from China, which has a monopoly in the sector.
For the domestic segment alone, CONCOR has Demand of about 50,000 containers over the next three years.
CONCOR, which placed orders for manufacturing 8,000 containers from domestic companies last year, has now second order For another 10,000 containers from a firm based in Bhavnagar.
An inter-ministerial panel set up on the directions of the Prime Minister’s Office in June to study the problem and plan capacity building for manufacturing shipping grade containers in India has now recommended a number of measures, including granting PLIs to indigenous shipping grade containers. Firms manufacture containers.
“The draft PLI is ready and in the process of being circulated for inter-ministerial consultations,” a senior government official, who did not wish to be named, told ThePrint.
inter-ministerial committee , Which includes officials from the Ministries of Shipping, Steel and Commerce as well as representatives from CONCOR and the National Industrial Corridor Development Corporation (NICDC). , Issues such as availability of specific quality steel required for manufacturing of containers, preparation of panels for inspection and agencies to certify indigenously manufactured containers were also looked into.
Recommendations of the committee and action taken so far by the agencies concerned: reviewed On 15 August by Railway Minister Ashwini Vaishnav, Shipping Minister Sarbananda Sonowal and Health Minister Mansukh Mandaviya.
During interaction with the industry stakeholders, the committee was informed that a specific type of steel is used for making containers, but at present there are no Indian Standards available for the same.
“You need specified Corten-A steel for manufacturing of containers. The committee took up the matter with the Bureau of Indian Standards (BIS), which has now issued an Indian standard, which is equivalent to the Corten-A steel specifications,” an official, who was part of the committee, told ThePrint.
Ministry of Steel is also in talks with steel manufacturers to get themselves registered with BIS and get license to roll steel as per specified standards. Similarly, on the directions of the committee, the Director General (Shipping) has increased the panel of inspection and certification agencies from two to six.
These agencies certify containers as per ISO standard testing.
Read also: Disbursement approved in PLI scheme for large scale electronics manufacturing
Industry experts say the road to becoming a container hub is long
While India has set the ball rolling for mass manufacturing of shipping grade containers of required international quality at reasonable rates, industry experts believe that India has a long way to go before it becomes an export hub for such containers. is to be decided.
Experts say that if India wants to accelerate container manufacturing, then government assistance in the form of PLI is necessary, but it is not enough. The government should think of having its own shipping line to complete the integration of the logistics chain.
Naresh Kumar, Director, Kalyani Cast Tech Pvt. Ltd., a container manufacturing firm, said that today, containers are owned by either shipping lines or large leasing companies. “There is no shipping line in India. Only a small number of containers are owned by India, and 98.99% of the containers in India are manufactured in China. This is one area where India should contribute considering the growth in our exports.”
Kumar further said that if India wants to become a container hub, it has to cater to the EXIM (export-import) market, and the domestic market is fragile.
Federation of Indian Export Organization President Dr A Sakthivel agreed. “Shipping lines will always be in demand as we have to import as well as export. Once we have our own shipping line, the demand for containers will come automatically. The government should encourage private companies to come forward and set up shipping lines as well as manufacturing containers,” he told ThePrint.
Drew Shipping Consultants Ltd director Shailesh Garg said India has to look at how the global market operates: “Currently, it is very monopolistic and entering it is a challenge. We can probably try to break that by cutting prices.”
“The problem is we are on the high side of cost and if we have to be competitive, how much subsidy can we give, are the steel companies in India going to increase the supply of essential steel? What subsidies and incentives are the government offering and third, if we manufacture 1,000-5,000 containers per year, how are we going to compete on economies of scale? ” They said.
Garg further said that India started thinking about it (manufacturing containers) as a response to the shortage of containers during the pandemic. “But if we don’t do it the right way it can die again like it did before. It is okay to accelerate container manufacturing, but India should also think about supporting and boosting its container fleet, “They said.
Prior to 2020, shipping lines, Garg continued, were under financial strain and facing sluggish demand, and this limited investment in their container inventory. “Two to three container manufacturing companies in China were operating at 50-60 per cent of their capacity due to low demand for shipping lines. Therefore, inventory was also limited to take care of the sudden increase in demand seen in the second half of 2020 coupled with supply chain constraints. This led to shortage of containers in key markets and affected the entire container supply chain.”
But over the past two years, shipping lines and leasing companies have placed more orders to build up their inventory, and more containers have been built. “Further, easing supply chain bottlenecks has also helped. Now the overall situation has shown improvement,” he said.
Drewry’s director explained that Chinese container manufacturing companies are also operating at full capacity, with shipping lines likely to slow new orders given the expected slowdown in global trade. “So the question is, who will buy these containers if India manufactures them? Therefore, if we want to seriously promote container manufacturing and compete on a global scale, we need to take a more holistic approach.
Kumar, quoted earlier, said that if India has to compete with China, the government will have to give PLI like China is giving. “Our rates are higher than in China. The Chinese government is giving 15 percent PLI to container manufacturers. India also has to create the right ecosystem for the private sector to come. Unless our rates are competitive, why would anyone come to us to buy containers?
“Container manufacturing is a $9-10 billion industry. India should initially target at least 9 to 10 per cent stake.
(Edited by Therese Sudeep)
Read also: India should aim to bring down logistics cost to single digits at the earliest: PM Modi