CARGO HANDLING AND PROFITABILITY

A study of Visakhapatnam Port Trust

Project report submitted in partial fulfillment of the requirements for the award of the degree of

MASTER OF COMMERCE
By TADIKONDA SANTOSH Regd.No.2055655085 Under the Guidance of Dr.A.NARASIMHA RAO M.com, Ph.D, AICWA Associate Professor

DEPARTMENT OF COMMERCE AND MANAGENT STUDIES ANDHRA UNIVERSITY VISAKHAPATNAM

2005 2007

DECLARATION
I hereby declare that the project report entitled Cargo Handling and Profitability: A study of Visakhapatnam Port Trust submitted by me is a bonafide work done by me and is not submitted earlier to any other university / institution for the award of any degree / diploma.

Visakhapatnam Date:

(T.SANTOSH)

ACKNOWLEDGEMENTS
With immense pleasure and deep sense of gratitude, I express my indebtedness to my project guide Dr. A. Narasimha Rao, for giving valuable guidance in completing this project. I also express my thanks to Prof. D. Prabhakara Rao, Head of the department, DCMS, A.U. for permitting me to carry out this project wok. I express my deep sense of obligation to the management of the Visakhapatnam Port Trust for giving me an opportunity to under go field training in their esteemed organization. In this regard I express my heartful thanks to K.Rathna Kishore, Chairman, VPT. K.Venkata Swamy, ATM, Visakhapatnam Port Trust for their kind cooperation to complete my project work. I say heartful thanks to Mr.Ramalingeswara rao, AQF, for giving his cooperation and help to complete my project work. Finally, I thank all the office staff of DCMS, A.U. Parents, Family members and friends for giving time-to-time information and help in doing this work.

TADIKONDA SANTOSH

CONTENTS

CHAPTER I: -

Introduction A. Need and importance of foreign trade in Indian economy B. Need and importance of ports C. Classification of ports D. Role of ports E. Development of ports The present study A. Visakhapatnam Port Trust Profile B. Genesis C. Details of fishing harbour D. Other important details of VPT E. Business goals and Aims of VPT F. Need for the study G. Objective of the study H. Methodology I. Limitations Cargo Handling and Profitability A. Cargo Handling B. Traffic information system C. Traffic growth D. Exports E. Imports F. Profitability Summary and Suggestions A. Summary B. Suggestions

CHAPTER II:-

CHAPTER III:-

CHAPTER IV:-

Bibliography

CHAPTER - I

CHAPTER - I
INTRODUCTION

Cargo handling means exports, imports and transshipment of Agro, food grains, liquid bulk and others. After the advent of liberalization, privatization and globalization of Indian economy, external trade is the buzzword in the economic scenario. Since 90% of the world trade is done through sea route, ports are the major channels for exports and imports in India Visakhapatnam Port trust is standing number one in cargo handling.

In international trade as in all other economic activities, it is the individual economic subject who buys and sells, pays and is paid, grants and receives loans, and in short carries on the activities which taken as a whole constitute international trade.

In foreign trade some countries are linked together much more closely than others. There are countries exchange only commodities. The inter dependence between debtor and creditor countries is appreciably closer with a common currency or a common banking system. The best example of countries having common currency, customs union, common monetary policy, and common policy of mobility of factors of production is the European economic council(EEC). There are various other economic unions, which enable the member countries to over come the trade restrictions, trade barriers and to have effective foreign trade. Finally international trade is the exchange of goods and services between two or more countries.

A. NEED AND IMPORTANCE OF FOREIGN TRADE IN INDIAN ECONOMY

In the pre-independence regime, in the period of British rule, the pattern of foreign trade was typically colonial. India was a suppliers of foodstuffs and raw materials to the industrialized nations particularly England. To the large extent the imports are manufactured goods.

After the independence, the colonial pattern of trade had to be changed to suit the needs of a development economy which decided to embark on a programmed of development is required to extent its productive capacity at a fast rate. For this imports of machinery and equipment that cant be produced in the initial stages at home are Essential. Such imports that either help to create new capacity in some lines of

production or enlarge capacity in other liner production are called developmental imports. There are the imports required for setting up of the steel plants, the locomotive factory, the hydroelectric projects etc.,

A developing country like India that sets in motion the process of industrialization at home requires the import of raw materials and intermediate goods so as to properly utilize the capacity created in the Country. These imports which are made in order to make a full use of the productive capacity. These imports are virtual for a developing economy. Heisted, these imports a developing country is also required to import consumer goods, which are in short, supply at

home. Such imports are anti-inflationary because they reduce the scarcity of consumer foods. India has imported food grains in post independence period, which helped to arrest the rise of prices at home.

There fore, it is inevitable that during the early years of development. Imports have to be increased at a very faster rate. It is natural that the balance of trade in such a situation will turn heavily against the developing country. This necessitates the enlargement of exports to meet the growing foreign debt in view of inelastic imports; a developing country must increase its exports. Traditionally India has been the exporter of foodstuffs and raw materials. As economic development precedes the raw materials exports generally decline because their demand increases at home to meet the requirements of growing domestic industries. With fast growing population, the surplus of food grains available for exports either dwindles, or is turned into a deficit. Consequently a developing economy is required to find new commodities and new market in which it can sell its manufactures. Foreign aid is important for an under developed country but trade is more significant.

B. NEED& IMPORTENCE OF PORTS:

The oceans and seas present on the earth. Through called with different names are nothing but a single / solid mass of water in the medieval times. The different continents have no connections what so ever as was evident from history. But the existence of sea

traffic for transport purpose was also evident from the history itself. During the changed times, man became more interested about the other lands and began exploring through the available mode of transports viz., bats etc., and started journeys on sea. Thus, after finding new settlements, etc. thus only the Dutch, Portuguese, French and British people have entered our country for business initially and later established their regime in our country.

But for the sea routes, the aforesaid nations could not have entered India. Although in the beginning, the places where boats and other mode of sea transport touch the land were primitive and in the changed scenario, provision of better amenities started that was the beginning of establishment of ports.

As of now, though the importance of passenger traffic through sea route had diminished to some extent, for cargo movement, sea routes are only alternative between the continents / countries. A countrys economy is more or less dependent on import / export and to maintain the economy, sea trade is essential. For developing sea trade, ports are very essential to handle the imports /exports. The facilities available will help the ports grew and in turn through this growth the hinterland of the particular port will grow. Thus, the port had pivotal role in a nations economical development.

C. CLASSIFICATION OF PORTS Port of India is classified into three categories: -

1. Major ports 2. Intermediate ports 3. Minor port Technically speaking a major port is the one, which haled not less than Haifa million tones of cargo annually and which possesses labor and other Facilities to receive ships of 4000DWT or more

An intermediate port is one, which handles not less than 1500 tones of Cargo annually and which is independent from the point of view of passenger Traffic, defense and customers.

A minor port is one which handles not less than 500 tones of cargo annually and which is not considered as port from any point of view of Passenger traffic, defense and customers. A minor port is one, which handles not less than 500 tones of cargo annually and which is not considered as port from any point of view. There are 30 intermediate ports and 140 minor ports approximately, in India a part from Minor ports.

Major ports in India:

1. Mumbai 2. JNPT 3. Mormugao 4. Cochin 5. Kandala 6. Chennai 7. Encore 8. Visakhapatnam 9. Paradeep 10. Kolkata 11. Tuticorn 12. New mangalore

D. ROLE OF PORTS:

The port industry plays a major role in the nations economy. After the advent of liberalization, privatization and globalization of India economy, external trade in the buzzword in the economic scenario. The exports and imports shoe the favorable and unfavorable trend in the economy by way of balance of trade..

When the exports are greater than imports it results in favorable balance of trade or if the vice versa occurs, it results in unfavorable balance of deficit. Indias balance of trade has always been in deficit. This is because imports are increasing because of pressure from development plans and requirements on the other hand cost of production, pressure of domestic demand, supply constraints, low quality.

In order to strike a balance of trade the government implements the imports substitution and export promotion strategy. That is why the present trade policy is known as export led strategy or export and production oriented import j- export policy.

The number of export houses has increased tremendously in the recent years. The main reason for the mushroom growth of export houses does the government of India provide the various facilities to them. They generally collect orders in foreign markets, purchase the goods in India market, process them in accordance with the standards and supply them to the imports. Thus, they deal in various lines and on large scale.

Therefore, they also enjoy various advantages of large-scale economies. Such as:

1. They can avail themselves of various economies of scale in transportation, bulk purchasing warehousing and other areas related to physical distribution. 2. They can take advantage of export finance available at confessional rates from the various commercial banks and exports import bank. 3. They are in a position to employ qualified, experienced and specialized staff to look after the complicated task of customs, legal problems and documentation. 4. As they export different items on large scale, they can bargain with large trading companies in foreign markets on equal footings, this increased bargaining power enables them to earn higher profits. 5. They can achieve economics in promotion efforts by using the most effective advertising and publicity media and by participating in my trade fair and exhibitions. 6. They undertake to bear many of the risks inherent in international trade mainly because of the fact that they export a wide range of products to different world markets. The loss incurred by the export of one product may be absorbed by the profits earned by other products.

Thus, the export houses enjoy large-scale economics in export of the goods. Though, export houses enjoy a number of facilities provided b the government and economies of scale, they still face certain reasonable difficulties in carrying out their export commitments. The federation of Indian export organizations had setup a working group on the roll of export promotion councils and exports houses. In its report, the working group pointed out various difficulties faced by the export houses including lack of quality

control, non adherences to delivery, manufacturing specifications and standards by the industrial units, high prices, absolute designs, desire of units to exporter directly. Preference to sell goods in domestic market, as prices in deistic markets are higher, lack of technical experts etc.

Export houses and small scale industrial units must establish on enduring relationship, so that the small units may concentrate on the problems of production and the exporting houses on the problems of exporting marketing. Export house should provide package of assistance to their supporting manufacturers in respect of market surveys supply of raw materials, quality control and product development and acceptance.

E. DEVELOPMENT OF PORTS

Shipping companies are the major victims of this bottleneck. Delayed clearing at the at the ports leads to increase in cost for the, affected bottom-line of the company. The problems associated with Indian Ports are lack of adequate capacity compared to the traffic growth (against a traffic of 25 line tons in 1997-98 capacity stood at 215 Mt), port labor productivity leading to poor turnaround of ships, lack of modernization and lack of adequate drafts to receive ships of large size.

The capacity requirement of ports at the end of the ninth plant (2001-02) is estimated to be 424 million-ton. This indicates a huge gap to be bridge. Apart of that Gap is expected to be met by increasing productivity. Hence to improve Productivity the up

gradation of the easing cargo handling equipment is Necessary; ports can be turned into specific commodity handling centers. To make such ports operationally efficient, corporation of major ports is expected to be undertaken. The new encore port, JNPT and halide ports are expected to be run on this basis. Similarly it is considered important to firm joint Venture with foreign ports or between Indian ports.

Apart from improving productivity, mechanization, training of port Personnel, the multiplication of agencies at port has to be eliminated for unified cargo handling labor. The beginning has already been made at Mumbai and Some other ports by merging dock labor board with port trusts. Development of minor ports is also considered essential. The central government will provide technical assistance to the state government for development of minor ports.

Finally, attempts are made to attract private investment for development of ports. The government has issued detailed guidelines to ensure transparency and uniformity in private sector participation.

Visakhapatnam port is one of the major ports in the Eastern Sea Ports situated in between Calcutta and Madras ports it has acted as a catalyst in the process of industrialization of its hinterland along with other ancillary industries. The port plays a dynamic role in fostering, accelerated development in the region and has contributed significantly to the national development.

The Visakhapatnam Port situated to Degrees and the port was created by nature of Dolphin nose will and well protect the port from cyclones. Since the port is 10 neautic mails in side the coastline.

So, keeping in view the importance of imports & exports through sea- route and the role played by the ports, Ive chosen this topic entitled cargo handling and profitability for my study as Visakhapatnam port trust stands number one in India in cargo handling.

CHAPTER - II

CHAPTER II

A. VISAKHAPATNAM PORT TRUST PROFILE

Visakhapatnam port trust, safe in the protective shadow of the dolphins nose hill and the rose hill promontories, and located almost midway between Calcutta and Chennai, on the east cost of India in Andhra Pradesh, has been serving a vast rich hinterland since 1933. One of the 11 major ports in the country, the port which lies at a latitude of 17 N and longitude of 83 18E had had a long tradition of maritime trade with Europe and the Middle East since the beginning of this century.

The port today services the export and import requirements of six steel plants Bhilai, Bokaro, Rourkela, Durgapur, and Visakhapatnam in the public sector and the TISCO plant in the private sector. It also serves a host of public and private sector companies in the field of fertilizers, aluminium, heavy machinery besides export of petroleum, manganese ore, crude oil, food grains etc. the port, which will handle 34.50milliontones by the year 2002.

B. GENESIS:
Before the construction of the madras harbor there was no part of the hole of the East Cost of India offering shelter for shipping Visakhapatnam his in the center of the Cost line.

Following its contact with a large productive area, rich in minerals in the center of India, the proposal for a port in this part of country was noted as early as in 1858 in a report of a British survey party. This was underlined is an 1877 report titled Vizag the port of Central Provinces (1877).

However it was only in 1914 that the Bengal Nagpur Railway initiated a plan for utilizing the extensive area of swamp divided from the sea by the spit of land on which the Visakhapatnam town stands. The waterways were to be dredged out and rocks were to be removed to serve for the entry of the ships. The credit of first putting forward this scheme goes to Sir.John Wolfe Barry and partners, consulting engineers of the railways. The construction of the harbor at the month of River Meghadrigedda was adopted in 1922. It was decided that the work should be carried out by the government of India, through the Railway Board, the connection with the Bengal Nagpur Railway being maintained by the appointment of the agent of the railways as ex-office administration officer of the harbor.

The port was opened to ocean going vessels in 1933. The port was built as a mono commodity port mainly for manganese ore exports. The first commercial vessel S.S.Jala Durga Of the India steam Navigation Company entered the port in October 1933.

Meanwhile the port administrative, which was under the Bengal Nagpur Railway in 1933 padded through different department and ministries of the Government of India till its transfer to the port trust in February 1961 under the major port, trust Act, 1963.

Planned development of port began with the five-year plans introduced by pundit Jawaharlal Nehru. Substantial investments were made in the successive years and the port facilities were expanded and modernized to meet the requirements of the trade.

C. DETAILS OF FISHING HARBOR:

The Visakhapatnam fishing harbor occupies a prime place in marine exports. This modern fishing harbor was constructed in an area of 24 hectares with a draft of 7.5 meters was commissioned during April 1978. Initially it was designed for landing and berthing of 15 fishing trawlers and 160 mechanized Boats. At present it can accommodate about 56 trawlers and 300mechanized boats.

D.

Other Important Details of VPT:

i.. Environmental protection:

Visakhapatnam port, while achieving highest traffic growth is maintaining harmony between development and environmental protection. The port has initiated several measures for environmental protection. The measures are as follows: construction of a sewage treatment plant and tree plantation. In coordination with the department of inorganic and analytical chemistry, AU, VPT monitors air and water environments in and around port area monitoring quality of drinking water, harbor water quality.

ii. Environmental Cell. a.. VPT-Committed to human welfare:

The Visakhapatnam port trust is an organization with a human heart. It believes that people are its most valuable assets. This corporate philosophy has enabled it to extend a helping hand to the general public in times of need. Some of the welfare activities undertaken by the port are as follows: Housing-2083 housing quarters to its employees 220 quarters to CISF, Police and Audit personnel. Schools, Colleges Recreation clubs Visakhapatnam sports council Medical facilities

b. Social Welfare Measures:

VDLB is one of the tops most organization providing maximum social welfare measures to the workers. General provident fund Pension Gratuity Free medical treatment 688 Quarters have been constructed in kailasapuram housing colony.

 Housing building advances Nine holidays in a year Advance for purchase of vehicles Productivity linked bonus Subsidized canteen Uniforms Recreational facilities Sponsorship to different games and sports.

c. Co-operate objective:
To fulfill its role in the promotion of international trade, particularly of export trade and of economic and industrial development of the hinterland. To anticipate and respond to the economic, trading and technological developments and provide the necessary port and harbor facilities in time. To provide efficient and safe services on water and on shore at optimum cost and ensure quick turn around of ships, rail wagons and road vehicles. To simplify systems, roles and procedures in respect of all port activities leading to optimum utilization of capital, men, material and time. To develop human resources with a view to acquire attitudes and skills required meeting managerial, operational and technological needs. To maintain optimum requirements of human and material resources.

 To evolve a participate style of management resulting is a safe and healthy working environment, increased production and productivity and goodwill amongst all employees. To motivate employees to wards increased productivity through suitable wages incentives and welfare schemes, designed to give the employees and equitable share in the gains of productivity and fair wages. To secure adequate returns on the capital invested and generate internal resources to finance further development. To design a suitable organizational structure under which all employees are enabled to function to the best of their ability and capacity, and the managerial personnel made accountable for achievement of operational and cost objectives. To strive towards improving the quality of life of employees and their families. To minimize the pollution of air and water in the port and harbor area.

E. BUSINESS GOALS AND AIMS OF VPT

Total customer satisfaction. Efficient and reliable transport logistics. Continuous business development. Providing stability and confidence for port customer. Consultative and collaborative approach in operations.

A conductive business environment. Sprit De corps. Best management practices.

F.NEED FOR THE STUDY:

In the process of liberalization, Indian economy has represented it self to the global as ever before. Particularly in exports there was a tremendous rate since 1991. As our foreign trade is increasing from year to year there are many agencies or organizations, which become more active as ever before because off increasing, trade with foreign countries. Ports are one of the Organizations in this process.

Increased demand for shipping cargo for exports as well as for imports made the port busier. This was because of the liberal import export policies. At the same time the competition between the ports has increased. This cause, improved technologies of ports, expansion of the capacity of ports, etc and in turn there have been and increase in cargo handling or traffic handling from one period to other.

At the same time the profitability on handling of various cargoes emerged a need to the low cost operations or full capacity utilization of the available services, and to optimize the cost of handling per ton in one hand the increasing the profitability in other hand. To retain existing users as well as to attract, prospectus users in the keen competition of the port sector.

G. OBJECTIVE OF THE STUDY

Realizing the importance of cargo handling I have done my project work keeping in view the following objectives.

1. 2. 3. 4. 5.

To Study the Organization Profile. To Study Cargo Handling Function in Visakhapatnam Port Trust. To study the Cargo Handling procedure of VPT. To examine the problems of cargo handling in VPT. To examine Cost of Handling Vis a- Vis profitability in cargo handling per ton.

H. METHODOLOGY

The methodology of study explains the process of exports and imports in VPT sources of data are of two types:

(1) Primary Data (2) Secondary Data

This study is of both primary and secondary data. Primary data refers to the first hand information and secondary data refers to the information about industry and already collected data.

Primary data is collected through:

1. Interview various authorities like traffic departments. 2. Interviewing the labour at dock area for finding the problems in cargo handling. 3. Interviewing custom officials. 4. Interviewing various parties associated with exports and imports. a) Exports and imports agencies b) Stevedores etc.

The secondary data is collected from various magazines of port trust. Newspapers and other company published materials.

I. LIMITATIONS

1.

The period of the study is only for about 2 months, which is a major constraint.

2.

Some of the shipping companys executives had been busy due to their vessels being at the port and they could not provide adequate information.

3.

Some of the respondents rejected to disclose relevant information regarding the survey.

4.

Some of the officials were in their meetings and busy attending their work and that resulted in loss of time.

5.

The perceptual bias or attitudes of the respondents may also act as hurdles to the study.

6.

To conformation furnished were taken from the administrative

reports of

the VPT, which is subject to the adequacy of source documents Vs actuals.

CHAPTER - III