The shipping industry is still under recession and the worst-hit appears to be the dry bulk rates

with Baltic Index hovering over the 600+ level. Are there any chances of an early recovery? Sunil
Thapar, CEO of Allcargo Shipping Co, a leading Indian logistics company, says growth in the
sector will depends on the revival of Chinese and European markets. Thapar, who has been in the
shipping industry for more than four decades, headed the bulk and tanker division of the public
sector Shipping Corporation of India before joining Allcargo a year ago.
In a conversation with BusinessLine, Thapar spoke about the potential of coastal shipping in
India, impact of GST on the logistics sector and the Allcargos plans to expand the shipping
business. Edited excerpts:
When do you expect a recovery in the freight market?
As you know, there are several factors like economic slowdown, oversupply of ships and changing
trade pattern that continue to push the freight rates down. The present circumstances worldwide
have put many of the bulk ship operators to bleed as they procured many ships during the good
times.
The shipping industry is cyclic in nature, witnessing ups and downs in its fortunes. However, the
recession this time lasted for a longer period. Today, the Baltic Dry Index is hovering at 600+
level from 11,000+ level in May 2008, which shows that the shipping market has not improved in
the last eight years.
The growth in the sector will depend on the revival of Chinese and European markets. It may take
time, though there could be temporary spike in rates.
What about the growth potential of coastal shipping in India?
Coastal shipping is the buzzword in Indias logistics sector due to its cost-effectiveness and ecofriendliness. Today only about six per cent of the domestic cargo is moved by coastal shipping
despite its price advantage in moving cargo to longer distance. Roads are cheaper for cargo
movement up to 500 km, railway network will benefit goods movement up to 1,500 km, and
beyond that, coastal shipping is the ideal mode.
However, coastal shipping in India is facing stiff competition from the aggressive road and rail
sectors due to good infrastructure improvement in highways and a pro-active policy of railways
with abundant rake availability. Though there has been a volume wise growth in coastal mode, its
share in the overall cargo remains the same.
Globally, the logistics cost is only 3-4 per cent against the sale price of goods, while in India it is
14-15 per cent. This is because of various tax structures in different states coupled with the
inefficiency in the system. This needs to be tackled. Besides, the geographical structure of India is
also adding to the cost of coastal ship movement from west to east. Once the cargo movement
becomes cheaper, it will automatically bring down the prices of several commodities.
Right now, thermal coal is the major chunk of the volume moved through coastal shipping. The
reduction in the transportation cost will benefit utility industries. Once these rates decline,
automatically the cost of power will be cheaper and benefit consumers in a big way.
Keeping this in mind, the government is now targeting coal movement through coastal shipping
route by offering incentives to shippers as part of reducing the cost. The authorities have also
identified 12 other commodities, which are eligible for incentives to be routed through coastal
shipping.

The Kerala government has already chalked out plans to promote coastal shipping.
Your views?
Kerala has the maximum number of inland waterways, which is a good advantage. The inland
water transportation in the State is well advanced, but it is confined only to a localised movement
without any connection to sea route. The State has to promote both the means to take full
advantage of the benefits of coastal shipping.
What will be the impact of GST on the logistics sector?
GST is a welcome move as far as the logistics industry is concerned, but it all depends on the rate
of taxation. If the tax rate is below 20 per cent, the transportation cost will be lower and help
increase more volumes. This will benefit the sector.
However, nothing has been finalised so far on the tax structure and we hope that the rates will be
below 20 per cent.
What are Allcargos plans to expand shipping service? Will you be acquiring more
tonnage?
We have already streamlined our services. However, the prolonged downward trend in global
shipping has forced the company to be cautious on ship acquisition plans. We have plans to
acquire two more ships. We are keeping an eye on the market and will enter once the situation
becomes conducive. The market must be favourable for any investments, as the industry is yet to
recover from the recession that began in 2008.
The billion-dollar Allcargo is said to be looking at doubling the business by 2020.
What would the plans to achieve this growth?
The company has drawn up definite plans, which include enhancing the existing business of CFS,
ICD facilities, expanding shipping services and exploring growth potential in related areas.