The Hindu Business Line : Double whammy for traders

Apart from battling the economic slump, importers and exporters are also being subjected to Customs Department’s delay in handling documents and inadequate infrastructure at Mumbai port.

Amit Mitra

Delays in documentation by the Customs Department and inadequate infrastructure at Mumbai port are putting the squeeze on the margins of liquid bulk importers and exporters, prompting many of them to think about shifting their operations to other ports.

At a time when the economic slowdown and falling prices have impacted importers and exporters of liquid bulk, including edible oil, industrial oils and chemicals, the Customs’ delays have further shrunk margins.

Last week, an importer had to wait for four days before the Customs Department cleared the papers, which cost him about $1,00,000 as demurrage.

“Earlier, our papers were cleared in one day, but today it takes an average of two to three days. For each day’s delay, we have to shell out demurrage between $25,000 and $30,000,” Mr Jayant Lapsia, President of the All India Liquid Bulk Importers and Exporters Association, said.

Liquid bulk constitutes a major slice of the throughput of Mumbai port and diversion of this trade to other ports would have a significant impact on its cargo flow. The port handles about 30,000 tonnes of liquid bulk a month.

Call to Modernise

The association has called for immediate steps to modernise operations at Mumbai port, apart from rationalisation of various taxes and policies.

“India is likely to become a key importer of bio-fuels such as ethanol and bio-diesel. Over the next five to 10 years, India is likely to become a major importer of a wide variety of liquid bulk commodities such as crude oil, vegetable oil, industrial oil and chemicals. In such a scenario, it is imperative for our port infrastructure to be modernised,” Mr Lapsia said.

He felt that octroi levy, sales tax and stamp duty in import and export of cargo and facilitation to the trade by the revenue departments have to be addressed immediately.

Wanted: Demand

As it is, the industry has been hit by a slack in demand for liquid bulk, with prices falling in tandem with the fall in crude oil prices. Mr Lapsia feels that the demand will be low at least for the next six months, hoping that there will be some signs of revival towards the end of 2009.

Companies engaged in developing infrastructure for handling of liquid bulk cargoes are, however, not slowing down their investment plans.

Aegis Logistics, a leading player in this space, for example, has not cut its capital expenditure programme. “We are going ahead with our plans to invest Rs 50 crore every year for the next five years to set up storage tanks for liquid bulk cargoes,” Mr Raj Chandaria, Vice-Chairman and Managing Director of the company, told Business Line.

The company, which has about 2.9 lakh kilolitres of storage place, including 55,000 tonnes at Kochi, will be adding about 50,000 kilolitres of space every year. The company is in the process of setting up a 55,000-KL facility at Haldia, which is expected to be ready in three years.