SYNOPSIS ON

INDIAS DRY BULK OCEAN TRADE: SCOPES & RISKS

SUBMITTED IN PARTIAL FULFILMENT FOR THE AWARD OF DEGREE OF MASTERS IN BUSINESS ADMINISTRATION IN INTERNATIONAL BUSINESS MANAGEMENT

GUIDED BY: PROF. T.S. MARWAH

SUBMITTED BY: RUCHIR JAIN

UNIVERSITY OF PETROLEUM AND ENERGY STUDIES COLLEGE OF MANAGEMENT AND ECONOMICS STUDIES

INDIAS DRY BULK OCEAN TRADE: SCOPES & RISKS

STATEMENT OF THE PROPOSAL

PROBLEM STATEMENT Indias Dry Bulk Ocean Trade: Scope & Risks is the research work that deals with different aspects of Indias dry bulk ocean trade that not only takes in account various scopes of the industry but also the risks involved in the current scenario.

BACKGROUND For delivery of goods, the four basic modes of transport are ocean, air, rail and road. Globally, the railway and road networks are largely used for domestic movement of goods while shipping is primarily used for transporting goods in large quantities between nations. Shipping Industry is probably the most cyclic of all industries. Being a global industry, it is affected by a whole gamut of factors which range from world economic condition, political events, natural disasters to age of existing vessels, new vessel delivery schedules, availability of ship building slots with ship yards, government regulations etc. Dry bulk cargo constitutes of two main commodities: iron ore and coal. Iron ore trade is largely driven by the demands of the Chinese steel industry. Chinese iron ore demand remained strong in past decade. As around 80% of Indias iron ore exports are to China, the trade volumes arising out of India will also depend, to some extent, on the prospects of Chinese steel industry. As the Asian countries are putting up new coal based power stations; the demand for coal is expected to remain steady. Indias coal demand is expected to increase because of the capacity additions in the power, cement and steel sector. The Indian coal trade is expected to grow at a CAGR of 8.52% till 2014 to reach 135.9 Mn tonnes.

Iron ore exports from India to East Asia India exports around 30 million tonnes of iron ore annually, 70 per cent of which is directed toward Japan, China and South Korea. Iron ore exports are predominantly made on a f.o.b. basis, implying lack of opportunity for Indian

INDIAS DRY BULK OCEAN TRADE: SCOPES & RISKS ship-owners. It should be noted that globally iron ore shipments are made in large Capesize and Panamax vessels. These vessels, however, constitute a small portion of the Indian fleet. Exports from the ports of Mormugao, Chennai and Visakhapatnam are in such vessels while from New Mangalore and Paradip they are carried out in ships of Panamax vessels of upto 65,000 DWT, due to draft restrictions. Handymax vessels are deployed on a triangular route to carry coking coal from Australia and then iron ore to Japan followed by ballast to Australia on return. Coking coal imports from Australia to Visakhapatnam, Paradip and Haldia India imports around 10 million tonnes of coking coal, chiefly from Australia, by Handymax vessels for consumption by public sector steel majors like SAIL & RINL and Tata Steel. Indian shipowners, led by SCI, have a share of 4 million tonnes. Coking coal imports by Tata Steel are however made in Panamax size vessels of foreign flag. India imports around 5 million tonnes of fertilizer and 3 million tonnes of rock phosphate and sulfur, hiefly in small size Handymax and Handysize vessels. Imports are made nearly at all the major ports of the country, of which, more than 60 per cent of the imports are routed through the East India ports. While previously Transchart used to play a major role by making around 50 per cent of the shipping arrangements for fertilizer imports, its role has come down substantially over the past few years, primarily because major portion of imports are carried out by private companies nowadays. Better infrastructure facilities at ports such as JNPT, have led to prospects of future fertilizer imports being made in Panamax vessels to capitalize on economies of scale.

MOTIVATION/NEED FOR RESEARCH As India makes a transition from an import-substitution closed economy model to an outward-oriented trade regime, the importance of shipping, as an enabler of trade and economic growth cannot be over emphasized. A large amount of investments have been made in the last decade to augment port facilities in the country, and equally massive investments in road and rail networks, the shipping sector has received least attention from both investors and government bodies.

INDIAS DRY BULK OCEAN TRADE: SCOPES & RISKS This has led to following scenarios: Suboptimal realization of benefits from investments in ports as domestic shipping infrastructure is unable to keep pace with demand. Sidelining of the domestic industry by foreign players as the government gradually reduces fiscal, regulatory and other support. This would be a natural outcome of demand from shippers for lower costs and greater efficiency as they also face greater competition in both local and international markets. On the brighter side, new opportunities are opening up for the sector. Trade volumes - both overseas and coastal - are rising very fast. Opportunities in specialized sectors like LNG, Dry bulk, etc. are also arising. Integrated logistics and multimodal transportation are opening up new businesses for shipping companies. Against this background I believe, Indias Dry Bulk Ocean Trade: Scopes & Risks will give an overview of the industry and the changing business environment in which it operates.

OBJECTIVES: Study the growth of the dry bulk sector. Address the issue and challenges faced by the Indian Shipping Industry.

INDIAS DRY BULK OCEAN TRADE: SCOPES & RISKS SCOPE OF RESEARCH This dissertation would include various aspects of the Indian dry bulk ocean trade and evaluate the opportunities and risks in the current and the future scenario in the industry. The time duration for collection and analysis of data would be from December 2010 to February 2011. REVIEW OF LITERATURE

The shipping sector plays an important role in Indias economy. Almost90% of the countrys trade by volume is conducted via sea and the country boasts of having the largest merchant shipping fleet among the developing nations. The Indian shipping industry not only transports national and international cargoes, but also provides various other facilities such as ship building, ship repairing, lighthouse facilities, freight forwarding etc. 1 With globalisation and liberalisation, the Indian shipping industry is all set to acquire new dimensions in terms of demand and infrastructural development. In order to resist stiff competition posed by foreign companies, the Indian shipping companies are striving to bring about rapid transformation. The way cargo traffic was handled has changed over the years. Earlier it was under a protected environment where a tonnage committee decided as to what type and size of ships the companies should opt for. Cargo was assured for those vessels which were acquired through government subsidy.2

The Indian shipping industry has been growing in the last two decades; however the competitive position of the Indian shipping industry needs to be strengthened. Government of India has been supporting the growth of the industry through various measures. Government has a role to develop Indian port sector, which would contribute to the growth of the Indian shipping. The players in the shipping and associated sectors have also a role to play for the development of the industry, for it to carve a niche in the world shipping map. Indian shipping industry needs to team up with foreign consortium of fleet owners to tap the growing LNG transportation business. Indian ship builders must focus on benchmarking their own processes to international standards to improve the efficiency, delivery time, price and quality. Innovative financing measures such as German KG model may be adopted to encourage fund flow into this sector. It is therefore essential for India to put together all such

INDIAS DRY BULK OCEAN TRADE: SCOPES & RISKS strategies that would lead to optimal and effective contribution towards developing the shipping industry. 3

RESEARCH METHODOLOGY

Research Design- The research is descriptive as it will be conducted on the basis of earlier research that has been conducted in this area. These former researches will be taken as references to understand the present scenario and the analysis will be done based on the outcomes. Source of Data: This research will be based on Secondary data collected from_ 1. Internet 2. Journals: (e.g. Journal of supply chain management-2002) 3. Conferences: (e.g. International Supply Mgmt Conference-1999, 2004, 2006) 4. Books: (e.g. Purchasing-An integrated Supply Chain Approach by Monczka, Handfield) 5. Magazines Statistical tools- Charts, histograms, pie-charts will be used for data presentation. Tools like Scorecards and Spider Diagrams will be taken as reference for analysis. trent,

INDIAS DRY BULK OCEAN TRADE: SCOPES & RISKS TENTATIVE STRUCTURE / CHAPTER OUTLINE OF THE THESIS

i) Abstract ii) Acknowledgment 2) Chapter 1: Introduction a) Introduction to the topic b) Problems c) Context of Study 3) Chapter 2: Review of Literature a) Literature Review b) Interpretation of the Literature i) Main Streams found in the Literature ii) Main Gaps found from the literature c) Scope for Future Research 4) Chapter 3: Research Methodology a) Research Application and Design b) Data Collection 5) Chapter 4 : Challenges a) Challenges b) Onerous tax regime c) Multiplicity of regulations d) Declining share of Indian shipping tonnage in Indias overseas trade e) Declining cargo support f) Manpower shortage g) High port calling costs h) Ports congestion and connectivity with hinterland i) Underdeveloped coastal shipping j) Steps taken to meet the challenges 6) Chapter 5 Results a) Findings 7) Chapter 6 Discussions and Recommendations 8) Chapter 7 Conclusions and Lessons Learned a) Learning from the Project

INDIAS DRY BULK OCEAN TRADE: SCOPES & RISKS b) Conclusion c) Limitations of the study 1. References 2. Bibliography 3. Annexure BIBLIOGRAPHY 1. Challenges and opportunities for Indias shipping industry. (October 21, 2009) 2. Indian shipping industry report 2000 (http://www.imaritime.com/backoffice/published_files/Shipping_industry_report.pdf) 3. Dry Bulk Trade Outlook http://www.crsl.com/acatalog/Dry_Bulk_Trade_Outlook.html

a. http://www.researchandmarkets.com/reportinfo.asp?report_id=462045&t=t b. http://www.moneylife.in/article/indian-shipping-industry-not-shipshape-despite-50years-of-sci-being-around/20404.html c. http://www.equitymaster.com/research-it/sector-info/ship/