India Faces Container Shortage Hindering Trade Growth: Key Factors and Government Initiatives

India Faces Container Shortage Hindering Trade Growth: Key Factors and Government Initiatives

Sub: Eco

Sec: External Sector

• Overview of Container Shortage:
  • India’s Rapid Trade Growth relies heavily on containerized transport.
  • A significant logistical bottleneck exists due to the insufficient production of containers in India.
• Importance of Containers in Trade:
  • Seamless Transportation: Containers can be transported via rail, ship, and road without disturbance.
  • Efficiency: Standardized dimensions and cargo capacities reduced transportation time and port delays, revolutionizing global trade.
  • Globalization: Containerization is crucial for swift trade movements, enabling the seamless flow of goods internationally.
• Current Scenario in India:
• Container Handling Capacity:
  • India’s container market is expected to more than double from 11.4 million TEU (twenty-foot equivalent units) in 2023 to 26.6 million TEU by 2028.
  • Manufacturing Output: India produces 10,000 to 30,000 containers annually, which is only a fraction of the projected demand.
• Comparison with China:
  • China manufactures 2.5 to 3 million containers per year.
  • Cost of Production: In India, it costs ₹3,500 to ₹4,800 to produce one container, compared to ₹2,500 to ₹3,500 in China.
  • Leasing Dependency: Due to low domestic production, India leases containers mostly from China.
• Impact of Container Shortage:
  • Freight Rates: Shortage often leads to increased freight rates.
  • Port Congestion: Limited containers cause congestion at Indian ports, preventing them from becoming hub ports.
• Shift of Mother Ship Traffic:
  • Colombo, Dubai, and Hong Kong attract mother ship traffic instead of Indian ports.
  • Short Distance Feeder Vessels: Indian shippers rely on short distance feeder vessels, leading to higher tariffs.
• Global Disruptions:
  • West Asia Crisis: Disruptions like the Russia-Ukraine war have led to port closures, route changes, and increased insurance costs, further raising freight rates.
  • Piracy: Increased piracy has also elevated freight costs.
  • Longer Voyages: Circumnavigating Africa lengthens voyages by 10 to 15 days, affecting container availability.
• Government Initiatives to Address Shortage:
• Make in India Initiatives:
  • Promote Indigenous Production: Encouraging domestic production of container boxes through Public-Private Partnerships (PPP) between the Container Corporation of India and private players.
  • Incentives: Providing direct subsidies and viability gap funding to support private production.
  • Production Linked Incentives (PLI): Implementation of PLI schemes to boost container manufacturing.
• Additional Measures:
  • Reduce Charges: Lowering repositioning and storing charges for empty containers to ease shortages.
  • Enhance Container Yard Capacities: Expanding container yard capacities at Indian ports to accommodate more containers.
  • Cost Reduction: Ensuring that scaled-up production costs align with global levels.
  • GST Relaxation: Relaxation of GST for manufacturers of raw materials needed for container production to reduce input costs.
  • Support for Shippers: Incentivizing Indian shippers to use Indian-made containers and facilitating long-term contracts with domestic manufacturers to build market confidence.
  • Mandate Usage: Mandating the use of Indian-made containers to boost domestic demand.
  • Tracking and Tracing: Developing a Unified Logistics Interface Platform and Logistics Data Bank to track and trace containers, reducing turnaround time and easing shortages.
• Expected Outcomes:
  • Increased Production: Boosting container manufacturing to meet the projected demand.
  • Economic Growth: Facilitating swift transport of goods, thereby supporting trade growth and economic expansion.
  • Employment Generation: Creating direct employment opportunities in the manufacturing and logistics sectors.
  • Global Competitiveness: Enhancing India’s position as a competitive hub in the East-West trade route.
• Expert Insights:
  • Experts emphasizes that there is a critical need for container production to support India’s trade ambitions.
  • Strategic Location: Despite being at a strategic location, the container shortage hampers Indian ports from attracting mother ship traffic.