Has ease of doing business remained only a slogan? - Part 1

In the first part of the two-part series, we look at reforms at JNPT

The customs department at India’s largest container port wants importers and exporters to complete their paperwork in a day, from the current average of a week. It is a massive exercise. 

However, business leaders feel the department has set too many stiff conditions, while the local people are concerned the rush will kill off their employment with the port. 

The project to speed transactions at Jawaharlal Nehru Port Trust (Navi Mumbai) means a lot for India’s progress on the global Ease of Doing Business (EDB) ranking. It is not only about paperwork. It is also about making faster than now the 17,000-odd container trucks that ply daily on the 12-km road up to the towering Customs House and the three terminals beyond. 

The easier customs clearance drive, Direct Port Delivery or DPD, aims to cut the time cargoes spend at the port, which handles 55 per cent of India’s container traffic. The World Bank’s latest EDB report calculates an imported item spends up to 307 hours at Nhava Sheva (the port), against an average of nine hours for the OECD (developed) country grouping. The port charges are consequently 80 per cent more than what it costs to import a good into an OECD nation.

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Both the road project, to be expanded to 12 lanes, which will more than double their carrying capacity, and the same-day customs clearances are projects being monitored by the Prime Minister’s Office (PMO). 

“We are clearing more than 80 per cent of the cargo on self-assessment. Under DPD, we can extend this to ensure containers are cleared from the port on the same day these are unloaded from the ships,” says John Joseph, chief commissioner of customs at Nhava Sheva. He has support from JNPT deputy chairman, Neeraj Bansal, who says quite a bit of the delay was also due to trucks congesting the roads, with long tailbacks that even cluttered the National Highways. “Earlier, business paid clearance money to get parking near the terminal, ahead of their rivals,” he claims. CCTV on the roads and parking terminals have taken care of those, he says. 

Obstacles and issues

The delays by customs agents and on the port roads had, therefore, created a flourishing local economy. Once containers are unloaded from a ship, they travel to the 34 freight stations, littered all around the port in a radius of 20 km. There, agents take time to organise long-haul trucks and space on the roads to exit the port. Each of these stations abut a village on the way to the seaport. Stacks of container pile up at these stations, basically open mud flats, at times ringed with a sagging tin boundary.

These villages live on the income provided by these stations, run by private agencies on behalf of the customs department. The locals find employment either as agents of the customs brokers who manually inspect and clear the containers or as drivers of the trucks which bring the goods to the stations or at the food stalls that feed these armies of people. Faster clearance from the ports mean these livelihoods could collapse.

Joseph says many of the importer companies have also used the delay in customs to shield their inefficiencies. On Diwali last year, Joseph wrote individually to each of the largest 500 importers of the country, nudging them to use the new facility. For each company, he added a sheet showing the savings they would make in the process. “As a paradigm shift, customs will trust stakeholders and and perform less or no inspections…DPD would ensure direct movement of goods from wharf to warehouse, or vice versa.” 

As a next step, he plans to make it compulsory for the companies to avail of the scheme and move cargo out immediately from the port area. The roads are getting ready and should become access-controlled before 2019. Both changes need to move simultaneously. The port didn’t envisage the explosion in container traffic and has only limited space for rail tracks or for cranes to manoeuvre among the container heaps to load and unload cargo. “DPD is the biggest challenge JNPT is now dealing with, to cut costs,” Bansal says. 

The container forwarding stations had filled in the shortages but are now the chief bottlenecks. A World Bank team in 2016, measured the time automobile spare parts took to leave from these container forwarding stations to assess JNPT.

Ahead

Pankaj Chaddha, chief executive of Jyoti Steel Industries, says the terms for migrating to DPD are tough. “We want to migrate but the rules say a company should not have a pending showcause notice from the department.” The vice-chairman of Engineering Export Promotion Council says there should be relaxation offered on a case by case basis or very few will qualify for the signature scheme. He agrees the costs for parking cargo at the container stations near the ports drive up costs “but JNPT never thought through the employment issue. It is a major concern”.

Vijay Singh Chauhan, commissioner of customs, says his department wishes to make more than 40 per cent of the importers and exporters move to the DPD platform in a few more months. “It is less than four per cent at present but we are ready to move them as on yesterday,” he says. The target of 40 per cent has been set by the PMO. Minister for transport, highways and shipping, Nitin Gadkari ascribes these costs as reasons “why we are not competitive” globally.

Already, beyond the wetlands at JNPT, the ministry of shipping has begun to develop a Special Economic Zone. A fourth terminal with an area almost as big as JNPT is coming up next to the SEZ to handle 10 million tonnes of cargo annually (JNPT handles 45 mt). There is feverish pace of work but plenty of it is mechanised. No wonder the locals met Joseph recently to voice their fears. Leaders from each political party land up at JNPT to give them support—there was been more than one rally in January to demand employment security for the people. The huge roads coming up all over the port and the DPD will drive them out of business, they feel.

The commerce ministry has already instructed there should be no more container stations outside the ports. As productivity soars at JNPT, the challenge for Joseph is to ensure these blowbacks not derail what his team and he have assiduously built up.