NICMAR

DEVELOPMENT STRATEGY FOR NEW CHENNAI

MULTIPURPOSE TERMINAL

By
Pratima Parab

271221

Chinmai Rao

271251

Anvesh Reddy

271256

PGP ACM 27th Batch

(2013- 2015)

Under the Guidance of

Prof. A. Purandare

A Thesis submitted in partial fulfillment of the Academic

requirements of the Post Graduate Programme in Advanced
Construction Management
(PGP ACM)

ACKNOWLEDGEMENT

We are thankful to NICMAR, for giving us an opportunity to the thesis in partial

fulfilment of Post Graduate Programme in Advanced Construction Management (PGP
ACM).
We profoundly express our gratitude to our guide Prof. A. Purandare, NICMAR, Pune
for providing us the necessary wholehearted guidance and valuable suggestions
throughout the research period without which the endeavor would not have been possible.
We are also thankful to our Dean - PGP, Dr. Anil. Agarwal for providing us the
necessary information and valuable suggestions throughout the research period. We
sincerely thank our beloved, Head - ACM Prof. Smitha Yadav, thesis coordinator Prof.
Samir Jain for their constant support during the course of thesis work.
We thank NICMAR library officials and computer lab officials for their help from time to
time. We thank one and all who helped us in the research.

Date:

PratimaParab - 271221
Chinmai Rao - 271251
Anvesh Reddy - 271256
PGP ACM 27th Batch (2013-2015)
NICMAR Pune

DECLARATION

We declare that the project thesis entitles Development strategy for new Chennai
multipurpose terminal " is bonafide work carried out by me/us under the guidance of
Prof. A. Purandare, further we declare that this has not been previously formed the basis
of award of any degree, diploma, associate-ship or other similar degrees or diplomas, and
has not been submitted anywhere else.

Date:
Place: Pune

Pratima Parab - 271221

Chinmai Rao - 271251
Anvesh Reddy - 271256
PGP ACM 27th Batch (2013-2015)
NICMAR Pune

CERTIFICATE

This is to certify that the project thesis entitled Development strategy for new
Chennai multipurpose terminal " is the bonafide work of Pratima Parab, Chinmai
Rao and Anvesh Reddy in partial fulfilment of the academic requirements for the award
of Post Graduate Programme in Advanced Construction Management (PGP ACM). This
work is carried out by them, under my guidance and supervision.

Date:
Place: Pune
Guide
Prof. A. Purandare

Head ACM
Prof. Smitha Yadav

Port Development Strategy (2013-2015)

CONTENTS
CHAPTER 1
INTRODUCTION
1.1) BACKGROUND.10
1.2) OBJECTIVE13
1.3) SCHEME OF STUDY.13
1.4) METHODOLOGY..14
1.5) SCOPE OF WORK..14
1.6) LIMITATION..14

CHAPTER 2
LITERATURE REVIEW
2.1) HONG KONG AND SHANGHAI PORTS:
CHALLENGES, OPPORTUNITIES AND GLOBAL
COMPETITIVENESS ...15
2.2) ECONOMIC DEVELOPMENT POSITION PAPER ON
PORT EXPANSION .15
2.3) THE COMPETITIVENESS OF GLOBAL PORT CITIES:
THE CASE OF THE SEINE AXIS ...16
2.4) STRATEGIC PORT DEVELOPMENT:
IDENTIFYING A DEVELOPMENT APPROACH ...16
2.5) LINER SHIPPING MARKETS, NETWORKS AND STRATEGIES THE
IMPLICATIONS FOR PORT DEVELOPMENT ON THE WEST COAST OF
SOUTH AMERICA: THE CASE OF CHILE ......17
CHAPTER 3
CONTRACTS
3.1) INTRODUCTION18
3.2) CONCESSION ARRANGEMENTS ...19

National Institute Of Construction Management & Research

Port Development Strategy (2013-2015)

3.3) LEASEHOLD AGREEMENTS...21

3.4) CONCESSION AGREEMENTS .24
3.5) MASTER CONCESSION29
3.6) BOT ARRANGEMENTS.29
3.7) MANAGEMENT AND O&M CONTRACTS.37
3.8) CONCLUSION.39

CHAPTER 4
PPP MODELS
4.1) INTRODUCTION40
4.2) MANAGEMENT CONTRACTS.41

4.2.1) SUPPLY OR SERVICE CONTRACT .41

4.2.2) SUPPORT MANAGEMENT ...42

4.2.3) OPERATIONAL MANAGEMENT .42

4.3) TURNKEY ..43

4.4) AFFERMAGE/LEASE 43
4.5) CONCESSIONS ..44

4.5.1) FRANCHISE 45

4.5.2) BUILD OPERATE-TRANSFER .45

4.6) PRIVATE OWNERSHIP OF ASSETS ...46

4.6.1) BUILD OWN-OPERATE 47

4.6.2) PRIVATE FINANCE INITIATIVE..47

4.6.3) DIVESTITURE .48

4.7) TOP PREDOMINANT PPP MODELS IN INDIA..48

4.8) POTENTIAL RISKS OF PUBLIC PRIVATE PARTNERSHIPS...52
4.9) CONCLUSION.54

National Institute Of Construction Management & Research

Port Development Strategy (2013-2015)

CHAPTER 5
MARKETING
5.1) INTRODUCTION55
5.2) CHARACTERISTICS OF PORT SERVICES.55
5.3) FACTORS DETERMINING PORT CHOICE.57
5.4) INTERPORT COMPETITION58
5.5) THE FUNCTIONS OF PORT MARKETING59
5.6) MARKETING RESEARCH IN SEAPORTS.60
5.7) MARKETING MANAGEMENT IN SEAPORTS..................61
5.8) THE IMPORTANCE OF LOGISTICS...63
5.9) DEVELOPING A STRONG MARKET STRATEGY.64

5.9.1) FORMULATING A MARKETING PLAN..64

5.9.2) RESTRUCTURING THE MARKETING CELL..65

5.9.3) DEVELOPING A MARKET RESEARCH CELL66

5.10) CUSTOMER RELATIONSHIP MANAGEMENT .67

5.10.1) CUSTOMER PROFILING AND SEGMENTATION................67

5.10.2) IMPLEMENTING A CRM SOLUTION................68

5.10.3) DEVELOPING PARTNERSHIPS WITH CUSTOMERS..69

5.10.4) PORT COMMUNITY SYSTEM70

5.11) MARKET OFFERINGS EXPANSION PROJECTS.................72

5.11.1) IDENTIFYING COMPREHENSIVE LOGISTICS

SERVICES FOR CUSTOMERS.72

5.11.2) STUDY OF PRICING / TARIFFS OF

INTERNATIONAL PORTS....74

5.11.3) SIMPLIFICATION AND REALIGNMENT OF

CURRENT TARIFF STRUCTURE74

5.11.4) STUDY FOR IDENTIFYING INVESTMENTS /

MANAGEMENT OF OPERATIONS IN OTHER MINOR PORTS..76
National Institute Of Construction Management & Research

Port Development Strategy (2013-2015)

5.12) CONCLUSION...77
CHAPTER 6
USE OF IT
6.1) INTRODUCTION78
6.2) DATA TRANSMISSION IN THE PORT TERMINAL..78
6.3) ELECTRONIC DEVICES IN CONTAINER TERMINALS...80
6.4) MICROWAVE TECHNOLOGY.80
6.5) TAGGING TECHNOLOGY IN TRANSPORTATION OF CARGO
BY RAIL..82
6.6) BARCODE SCANNER82
6.7) RADIO FREQUENCY MICROCIRCUIT SYSTEM .83
6.8) VOICE RECOGNITION TECHNOLOGY..84
6.9) TERMINAL MODEL WITHOUT ELECTRONIC DEVICES...84
6.10) RESTRUCTURING OF THE IT DEPARTMENT...85
6.11) PROCESS RE-ENGINEERING AND IMPROVEMENT PROJECT..86

6.11.1) BUSINESS PROCESS RE-ENGINEERING..87

6.11.2) FULL SCALE ERP IMPLEMENTATION.88

6.12) ACTIVITY BASED COSTING.90

6.13) SECURITY ENHANCEMENT PROJECTS.91

6.13.1) PORT SECURITY SYSTEM..92

6.13.2) IT SECURITY SYSTEM........93

6.14) CONCLUSION...94

National Institute Of Construction Management & Research

Port Development Strategy (2013-2015)

CHAPTER 7
SWOT ANALYSIS
7.1) INTRODUCTION95
7.2) STRENGTHS...95
7.3) WEAKNESSES....95
7.4) OPPORTUNITIES96
7.5) THREATS.96

CHAPTER 8
CONCLUSION97

BIBLIOGRAPHY99

LIST OF FIGURES

1) CHENNAI PORT LAYOUT...10

2) CHENNAI CONTAINER TERMINAL LAYOUT12

National Institute Of Construction Management & Research

Port Development Strategy (2013-2015)

CHAPTER 1
Introduction

1.1) Background

Chennai Port, earlier known as Madras Port, is the 2nd largest port of India and
the largest port on the east coast. It is the 3rd oldest port among other major ports of
India with official port operations beginning in 1881, although from 1639 itself
maritime operations started on an undeveloped shore. It is an artificial and allweather port with wet docks. Once a major travel port, it become a major container
port in the post-Independence era. The port remains a major driving force for the
economic growth of the state, especially for the manufacturing sector boom in
Southern India, and has contributed greatly to the development of the city. It is due
of the existence of the port that the city of Chennai got the title of Gateway of
South India. The port has become a hub port for containers, cars and project cargo
in the east coast of India. From handling a small volume of cargo in the early years
of its existence, consisting mainly of imports of oil and motors and the export of
groundnuts, granite and ores, the port has started handling more than 60 million
tonnes of cargo in recent years.

Figure 1.Chennai Port Layout

National Institute Of Construction Management & Research

10

Port Development Strategy (2013-2015)

Major docks available at Chennai port are as follows1. Ambedkar Dock

a. Total Quay length is around 2.3 Km.

b. It has 12 Berths which generally cater to passengers, cargo and
fertilizer.
c. One berth is presently dedicated to naval vessels.
d. The draft in the dock varies from minimum of 8.5 m for passenger
berth to a maximum of 12 m for general / ore berths.
e. The Entrance channel is 125 m wide.

2. Jawahar Dock

a. Total Quay length is around 1.3 Km.

b. It has 6 Berths which generally cater to food-grains, coal and other
ores.
c. This is a closed dock with basin dimensions of 655 m * 152 m.
d. The draft in the dock varies from minimum of 10.4 m to 11.0 m.
e. In view of the trade requirements and future ship sizes, this dock will
be dredged to a depth of 14 m to enable handling of larger vessels.

Different terminals present at Chennai port are as follows:1. Chennai Container terminal

Chennai Container Terminal (CCT) is the first container terminal in Chennai

port built in 1983.

The container terminal was privatized in 2001 and is operated by DP World

since 30 November 2001 with a capacity of 1.2 million TEUs.

The terminal is capable of handling fifth generation vessels up to 6,400 TEU

and has direct services to China, West Africa, Europe and the United States.

The terminal crossed the "one million TEU" mark in 2007.

In 2011, it handled 1.12 million TEUs.

National Institute Of Construction Management & Research

11

Port Development Strategy (2013-2015)

It enjoys a Quay length of 885 m (2,904 ft) and has 4 berths with an alongside
depth of 13.4 m (44 ft), height (ISLW to Top of Cope) of 34 m (112 ft),
channel length of 6,700 m (22,000 ft) and channel depth of 19.2 m (63 ft).

Figure 2.Chennai Container Terminal Layout

2. Chennai International Container Terminal

Chennai International Terminal Pvt Ltd (CITPL) is the second container

terminal that started operations from June 22, 2009 with berths SCB1, SCB2
and SCB3.

With 35 ha (86 acres) of yard space and three berths with a total quay length
of 832 m (2,730 ft.), the terminal offers an annual capacity of 1.5 million
TEUs

CITPL would be able to accommodate 8,000-TEU v

Vessels with drafts up to 15.5 m (51 ft.).

Reference: http://www.chennaiport.gov.in

National Institute Of Construction Management & Research

12

Port Development Strategy (2013-2015)

1.2) Objective
The aim of this thesis paper is to present following studies: Study of various PPP models involved.
Study of different type of marketing strategies involved.
Study of IT/IS tools and techniques involved in a port operation.
Study of different types of contractual agreements employed.
Study will be conducted on each of the above options. Based on the studies SWOT
analysis would be done.

1.3) Scheme of Study

Chapter1 This is an introduction chapter which gives a basic idea about the
Chennai port. It also highlights the objective of this thesis.

Chapter2- In this chapter, literature review will be carried out. Earlier

researches and papers on the port development strategies will be discussed.

Chapter 3- Various types of contracts involved in port operations and their

significance will be discussed in this chapter.

Chapter 4- In this chapter, various PPP models and their characteristics will be
discussed.

Chapter 5- Marketing strategies and their effect on port development will be

discussed in this chapter.

Chapter 6- Significance of IT/IS tools and techniques will be discussed in this

chapter.

Chapter 7- Results of SWOT analysis is shown in this chapter.

Chapter 8- Conclusion.

National Institute Of Construction Management & Research

13

Port Development Strategy (2013-2015)

1.4) Methodology
This study is conducted through a developers point of view. Following methodology
has been used in this study:

Collecting data from various sources available on the web and also through
library.

Going through and sorting the relevant data.

Using the processed data to do the SWOT analysis.

Drawing conclusion from the analysis.

1.5) Scope of work

There are many different types of development strategies for any infrastructure
project, same is the case with port development. In this study we are going to analyze
different areas in which these strategies are developed. And based on that analyses we
will be trying to establish strength, weakness, opportunity and threats to our premises.

1.6) Limitation
Though efforts are made to correlate the data and parameters precisely but still there
are some chances of deviations, the reasons may be attributed to the following causes:

Constraints in time.

Monetary constraints in collecting the actual data.

Reliability of the data available on the internet.

Unavailability of all and precise data as some of the data is kept confidential
by the company.

National Institute Of Construction Management & Research

14

Port Development Strategy (2013-2015)

CHAPTER 2
Literature Review

2.1) Alexander Mckinnon in his paper Hong Kong and Shanghai ports:
Challenges, Opportunities and Global Competitiveness said that overall
competitiveness of a port can only be assessed through a broad spectrum
analysis involving fields like Economics, Management, Geography and
Transportation logistics. To add to this, modern ports are a complex mixture of
stakeholders, terminal operators, regulatory bodies, logistic companies,
shipping lines etc. He also mentioned that special agreements like closer
economic partnership agreement (CEPA) help in increasing the trade and ease
of doing it leading to the development of the port.

(Reference: Hong Kong and shanghai ports: Challenges, Opportunities and

Global Competitiveness, City University of Hong Kong, June 2011 by
Alexander McKinnon)

2.2) In his paper Economic Development Position Paper on Port

Expansion Dr.Ajiv Maharaj said that emphasis must be placed on coordinate planning. For that he explained there are three critical plans.
Infrastructural plan which should be based on fundamental principles such as
freight modelling, separation of passenger and freight etc. Management and
Operational plan which oversees the operational process and management
efficiency. Economic plan whose purpose is to capitalize on the opportunities
offered by the logistics platform.

(Reference: Port expansion research paper Feb 2013.)

National Institute Of Construction Management & Research

15

Port Development Strategy (2013-2015)

2.3) In their paper The Competitiveness of Global Port Cities: The Case
of the Seine Axis Olaf Merk and Michael Dooms they recommended
following changes as strategies1. Developing commercial pro-active strategies for port. This means
improved data collection and statistics, handling obstacles at national
level, introducing multimodal platforms and encouraging JVs etc.
2. Taking ports as strategic assets in the economic development of the
region. Also developing co-ordinated tourist endeavours. Increasing
number of linkages to the port.
3. Promoting sustainable form of hinterland connectivity.
4. Applying and expanding the knowledge.
5. Focusing on improving the efficiency of governance system.

(Reference: OECD Regional Development Working Papers, 2011/07)

2.4) In his paper Peter Bjerg Olsen Strategic port development:

Identifying a development approach for ports came up with a framework
for port development. His framework is described stepwise below:1. Providing infrastructure and access.
2. Configuration of the port system to support the characteristics of
hinterland by specializing ports resources and infrastructure.
3. Defining the ports functions with respect to specific supply chains.
4. Defining core competencies by investing in cargo of greater strategic
importance.
5. Based on customer reviews, improving existing port services.
6. Introducing value engineering to come up with more port services.

(Reference: Trafikdage p Aalborg Universitet 2012 ISSN 1903-1092)

National Institute Of Construction Management & Research

16

Port Development Strategy (2013-2015)

2.5) In his discussion paper Liner Shipping Markets, Networks and

Strategies The implications for port development on the West Coast of
South America: The case of Chile Gordon Wilmsmeier said path
dependency and contingency are important substances in the evolution of a
port system and its subsystems. Port devolution, competition and hinterland
integration strategies, as well as public planning approval, are determinants in
this context.
(Reference: Discussion Paper 2013 22, Gordon Wilmsmeier, Economic
Commission for Latin America and the Caribbean)

National Institute Of Construction Management & Research

17

Port Development Strategy (2013-2015)

CHAPTER 3
Contracts

3.1) Introduction
One tool available to governments to enhance port proficiency and execution is
contracting out to the private area certain capacities beforehand executed by people in
general port administration. An open undertaking may choose to contract out sure of
its operations through a delicate offer strategy as opposed to directing them in house
when the accompanying circumstances apply:
i.

The capacities can be performed at a value that is generously lower than the
expense of directing them in general society segment.

ii.

There is a substantial field for focused offering.

iii.

Government arrangement is to exchange step by step certain noncore exercises

of general society segment to the private area.

Contracting out, in any case, ought to be taken care of with alert as it includes a few
dangers:
i.

If the quantity of potential bidders is restricted, an important examination of

the offers may impractical.

ii.

Potential bidders may structure a cartel or overall intrigue when offering for an
agreement.

iii.

Contracting out may make a restraining infrastructure for those exercises,

which would be in opposition to general society interest, unless there is a
fitting administrative oversight system.

Likewise inside the structure of commercialization, a different contract for the

administration of the general population port power or open terminal administrator
may be recompensed. Utilization of such an apparatus may be fitting in situations
where a port power has encountered poor administration for a developed time of time;

National Institute Of Construction Management & Research

18

Port Development Strategy (2013-2015)

the money related state of the port power needs to be considerably enhanced with a
perspective to its corporatization or privatization at a later stage on terms great to the
service of fund of the nation concerned; or the port power would by and large
advantage from the presentation of private administration.
The standard practice is for the legislature to concede to an administration contract
with a private part administrator. The administrator consents to utilize the current port
staff and to give satisfactory and effective administration to all clients. This previous
prerequisite (maintenance of existing staff), on the other hand, regularly rises as the
fundamental explanation behind the disappointment of administration contracts (for
instance, the Port of Mombasa). The administration organization may be saddled with
overabundance work and work costs that can't be maintained in a focused business
sector.
An administration contract is normally gone into for a tagged period, for the most part
somewhere around three and five years. Upon termination of the agreement period, it
might either be recharged or recompensed to an alternate gathering. An administration
contract might likewise be utilized as a venturing stone around the conceding of a
more far reaching concession. It is vital when going into an administration get that the
legislature or service has the privilege to force monetary punishments or end the
agreement on the off chance that the private administrator does not meet defined least
levels of productivity, money related execution, or throughput.

3.2) Concession Arrangements

In concession agreements, governments are still broadly included in port
administration, primarily through open proprietor port powers. In the meantime, the
part of private undertaking in the area will keep on growing. Administration and
device ports will steadily vanish and be changed into proprietor ports; sometimes,
completely privatized ports will develop. For landowner ports, open bodies will hold a
definitive responsibility for (particularly arrive), however will exchange a significant
piece of the budgetary and operational dangers to the private division. Governments
will act essentially as controllers and area designers, while private firms will accept
the obligation regarding port operations. The principle lawful instrument used to

National Institute Of Construction Management & Research

19

Port Development Strategy (2013-2015)

attain to this realignment of open and private segment parts and obligations is a
concession.
Concessions are generally utilized as a part of the port segment today. A port
concession is an agreement in which a legislature exchanges working rights to private
venture, which then takes part in an action dependent upon government support and
subject to the terms of the agreement. The agreement may incorporate the recovery or
development of framework by the concessionaire. These attributes recognize
concessions from administration contracts toward one side of the change range and
exhaustive port privatization on the other. Concessions, by allowing governments to
hold extreme responsibility for port area and obligation regarding permitting port
operations and development exercises, further allow governments to protect open
investments. In the meantime, they diminish legislatures of considerable operational
dangers and money related troubles.
There are two fundamental types of concession utilized as a part of ports today: rent
contracts, where an administrator goes into a long haul rent on the port area and
normally is in charge of superstructure and supplies, and concession contracts, where
the administrator takes care of venture expenses and accept all business dangers. Such
contracts are regularly consolidated with particular financing plans, for example,
BOTs.

Lease contracts and concession contracts have the same important attributes:

The government or open port power passes on particular rights to a privately

owned business.

They have a characterized term (10-50 years).

They are topographically delimited.

They specifically or certainly designate monetary and operational dangers.

(Reference: Port Reform toolkit, module 3, www.ppiaf.org)

National Institute Of Construction Management & Research

20

Port Development Strategy (2013-2015)

3.3) Leasehold Agreements

Landowner ports infer a significant piece of their salary from leases. Commonly, just
land or stockroom offices are rented. Compartments may be incorporated or rejected
from the lease rent. In the event that avoided, the port power gathers and keeps all
income got from berthing expenses. There are two essential manifestations of leases
most normally being used today: level rate and imparted income leases. Both sorts of
leases can be utilized for multiuser and also single-client (committed) terminals or
billets.
Level rate leases give the renter the privilege to utilize an altered resource for a
particular time of time in return for occasional installments of a settled sum. On
account of an area rent, this can be an altered installment every year every square
meter. Lease rates may fluctuate relying upon the level of port site improvement (for
instance, unpaved versus cleared land or area with or without structures). The
fundamental playing point of this manifestation of lease is that the lease rent is known
to both sides ahead of time. The level rate rent likewise gives to the tenant the best
impetus to completely utilize the accessible limit of the terminal.
The primary attributes of the flat rate lease are:

A particular whole of cash is paid every square meter of port region for a
particular time of time.

In standard, the lease speaks to a reasonable come back to the port power on the
estimation of the property.

Lease instalments may be balanced for expansion over the life of the lease.

To set lease installments at the correct level, the port power must have the capacity to
estimate precisely the level of business (and, henceforth, the wear and tear on port
base and the activity from which the tenant will advantage). It ought to likewise
attempt to evaluate the genuine estimation of the area (for instance, in its best option
utilize) and endeavor to recuperate this quality through the expected level of business
executed by the tenant. Since the renter must make the same lease installment paying
little heed to the income his business creates, he has a solid motivator to make full
National Institute Of Construction Management & Research

21

Port Development Strategy (2013-2015)

utilization of the rented land and structures. A level rate lease is frequently the
favored type of lease for a port whose essential target is to boost throughput and
profits to the neighborhood economy.
In an imparted income rent, the lessor likewise provides for the tenant the privilege to
utilize an altered resource for a settled period in return for a variable measure of cash.
With an imparted income rent there is a base installment paying little heed to the level
of movement, yet no greatest installment. The fundamental qualities of the imparted
income lease are:

A least level of compensation.

No secured greatest level.

Maximum pay relies on upon the offices limit.

Minimum pay may not completely cover the investment and amortization of the
lessor (port power) for the lease range.

An imparted income lease speaks to genuine associations between the port power and
the renters. Under this plan, the port must precisely focus the base lease installment,
thinking seriously about its money related commitments, its own estimates of
movement volumes, and its statutory and business resistances for danger. When least
throughput levels are achieved, the renter and the port impart the profits getting from
any extra movement. The imparted income lease is the main approach in which the
port power can augment incomes, business levels, and throughput. Alongside this
potential for included prizes, then again, come included dangers.
Potential lease accomplices for a port power are:

Terminal administrators.

Cargo taking care of organizations.

Dedicated terminal administrators and transportation lines.

Forwarding operators.

Inland transport administrators.

National Institute Of Construction Management & Research

22

Port Development Strategy (2013-2015)

Today it is progressively basic for transportation lines to rent terminals from port
powers. For these leases to succeed for all gatherings, be that as it may, two key
conditions ought to exist: the delivery line renter ought to produce an expansive
volume of load at the port (that is, it ought to be a significant client), and the port
ought to have extra offices of the same sort rented to the transportation line to avoid
making a restraining infrastructure (a community office ought to be accessible).
On the off chance the port does not have other comparative offices (and different
clients), the production of a syndication may clash with the hobbies of both the port
and the national economy. In this appreciation, the accompanying focuses ought to be
remembered:

Shipping lines might, anytime, diminish, reroute, or inside and out end their
administrations as a consequence of changes in monetary conditions or moves in
examples of exchange. A remarkable sample of this is the crossing out of the
round-the-world administration of United States Lines in the 1980s.

Shipping lines frequently union or go into participation understandings

(partnerships) with other delivery lines. Such practices may bring about changing
cruising timetables or the foundation of unique ties with different ports.

Shipping lines may revamp their cruising timetables for reasons of inner strategy.

Marking a lease contract with a working organization may be less hazardous than
with a transportation line on the grounds that the working organization generally does
not depend on an agreement with one single client, however will spread the dangers
and shield its business engages by having contracts with a few customers, and on
account of an agreement with a mainly fused port administrator, ought to a lawful
(contract) issue emerge, it is for the most part simpler to uphold liens and different
measures expected to constrain lease agreeability than on account of an organization
whose home base is in an alternate nation.
Which type of lease is to be favored? All in all, one may infer that if the port's central
destinations are to augment throughput and give greatest profits to the neighborhood
economy through expanded vocation, a level rate lease may be best. This is regularly
the situation when a port is recently settled and needs to build up its business. Then

National Institute Of Construction Management & Research

23

Port Development Strategy (2013-2015)

again if the port's main target is to amplify incomes, with a starting need to sponsor
the terminal resident, the imparted income lease may be the ideal decision.
(Reference: Port Reform toolkit, module 3, www.ppiaf.org)

3.4) Concession Agreements

A proprietor port generally does not include itself straightforwardly in port operations.
Rather, private port administrators and administration suppliers direct their business
autonomously and contend in the business. The port power goes about as a
nonpartisan proprietor advancing the port all in all. Together, they speak to the
hobbies of the whole port, with the port power in the number one spot.
Relations between the port power and the private part cover two zones: Business
relations built basically with respect to concession and lease understandings and
relations focused around the general population oversight capacities of the port power,
for example, requirement of port standing rules, risky merchandise regulations, and
vessel administration.
Relations between landowner port powers and private port administrators have gotten
to be progressively intricate, and the arrangements of obligations have further moved.
One of the esteemed gimmicks of a proprietor port is its reasonable division of
obligations. Each one gathering is uniquely mindful of its rights, liabilities, and
monetary obligations. Additionally, numerous governments today are trying to
decrease their budgetary inclusion in ports and to utilize private sources to back new
port improvement, including development of essential base, for example, quay
dividers. This suggests not just an expanded part for the private area in port
advancement,

additionally

expanded

money

related

presentation.

In

such

circumstances, a straightforward and direct rent contract frequently is not sufficient to

cover all obligations and liabilities. Subsequently, a more intricate contractual
relationship, a concession understanding, has been produced.
The essential destination of concession agreement is to exchange speculation costs
from the legislature to the private area. Concessionaires are obliged to develop and
restore framework and work an office or administration for a settled number of years.
Concessions may be positive, when a concessionaire pays the administration for
National Institute Of Construction Management & Research

24

Port Development Strategy (2013-2015)

concession rights, or negative, when the legislature pays a concessionaire for the
administrations it gives under the agreement.

The advantages of concessions in the port area include:

Better and more proficient port administration (particularly port operations)

performed by private administrators.

Avoidance of the disadvantages connected with syndications through the

consideration of nitty gritty concession conditions.

The application of private funding to socially and monetarily alluring activities,

authorizing government stores for other need undertakings.

Under certain circumstances, the production of new income streams for

governments. The exchange of dangers for development, fund, and operation of
the office to the private segment.

The fascination and utilization of outside venture and innovation.

Disadvantages connected with concession contracts include:

The requirement for proceeding with close government regulation and oversight.

The framework obliges a lawful system that allows exchange of area rights to a
private gathering.

Winning offers are some of the time focused around implausible money related
projections, putting the manageability of the concession agreement in risk.

The danger that a concessionaire won't legitimately keep up the offices under
concession, returning them to the legislature in terrible condition, or the risk that
the concessionaire and the port power differ on the operational requirement for
and monetary plausibility of basic speculations.

Concession understandings are frequently created as a piece of a BOT plot and speak
to particular agreement between a legislature or port power and the extraordinary
reason organization (SPC) secured by the concessionaire to do development and
operation of a port improvement venture. Under concessions, a definitive

National Institute Of Construction Management & Research

25

Port Development Strategy (2013-2015)

responsibility for influenced resources is held by the national or nearby government,

or by the port power. In the meantime, a piece of the business dangers of giving and
working the advantages is exchanged to a private concessionaire.

In agreements including a SPC, a port power ought to guarantee that:

The SPC gives sufficient administration all through the term of the concession.

The SPC watches important wellbeing and ecological security guidelines.

The charges collected on port clients are sensible and don't imperil the focused
position of the port.

The SPC performs fitting upkeep and repair of all resources for guarantee that on
their return toward the end of the concession, the port power gets an operational
extend and offices in great working request.

The port power may (contingent upon legitimate strictures) hold a monetary
enthusiasm for the SPC made by the concessionaire, or it may not. In the event that
the port power picks not to partake monetarily in the SPC in charge of building up the
port resources under a concession contract, then its part as an autonomous and fair
open element does not fundamentally change. The main genuine change is in the shift
in obligation regarding speculations from the port power to the concessionaire.

On the off chance that a port power not just goes into a concession concurrence with
the SPC, additionally takes part in the organization as a shareholder, then the port
power's part changes all the more significantly. By contributing danger capital, the
port power gets to be all the more specifically included in port operations. Now and
again this circumstance is denied by law (Poland). In the event that the wander has a
restraining infrastructure in the port, (for example, having the main holder terminal),
the circumstances may be adequate, in spite of the fact that a clash of premium may
emerge between the parts of port power as a financial specialist and as the controller
of the syndication. In the event that the wander contends with different terminals in

National Institute Of Construction Management & Research

26

Port Development Strategy (2013-2015)

the port, on the other hand, investment of the port power in the SPC will offer climb
to a genuine clash of premium and will undermine its free, impartial position.

Contingent upon the particular circumstance, a concession understanding may

comprise of a blend of agreement including:

A leasehold concession to non-developed area, the formal archive under which

the port power concedes the SPC ownership of the concession territory.

A terminal access agreement, which controls the SPC's right to gain entrance to
the concession territory, furthermore the right to gain entrance by the port power
to the region.

A port administrations agreement, which directs the procurement by the port

power to the SPC of different port administrations, for example, pilotage, towage,
and digging.

A support's immediate agreement, which is an understanding between the

administration or port power and the SPC managing the issue of rivalry.

A configuration contract between the SPC and a specialized expert for the outline
of new offices (the port power generally has no immediate control over who does
the configuration work or the terms of arrangement, however frequently holds the
privilege to audit any configuration).

A building contract between the SPC and a development organization for

development or advancement work (with the port power normally practicing
some manifestation of value control).

Financing records drawn up between the SPC and its loan specialists to give fund
to port improvement; a port power may give fractional financing.

An administration contract between the SPC and its picked administrator

(working organization) for procurement of administration administrations in
working the port.

For the most part, an average concession understanding will obviously set out the
terms identifying with:

The area, offices, and freight taking care of gear included in the concession.

National Institute Of Construction Management & Research

27

Port Development Strategy (2013-2015)

The useful necessities of the port or terminal, the proposed configuration answer
for any development, the development program, and time timetable, including
turning points.

Rights and obligations of the concessionaire and port power (concession support)
as for the fruition of the development program.

Human assets improvement and the livelihood of previous port power workers, if
appropriate.

Activities allowed to be done in the concession zone.

Equal access to basic zones in the port.

Payment of expenses, eminences, incomes, and group (lease rental) to the port
power.

Maintenance prerequisites for base, superstructure, and now and then supplies.

Termination of the concession.

Return of area, offices, and supplies after the concession period has lapsed.

Other issues as may be needed.

It is basic practice that amid development, the concessionaire and the port power
utilize a free test certifier to affirm that all work has been done in congruity with the
necessities of the concession agreement. Upon the reappearance of offices, the SPC
ought to be obliged to complete any work expected to bring them up to a conceded to
standard. Likewise, procurements must be incorporated to investigate offices and
distinguish any insufficiencies.
A concession agreement for a Greenfield task is less entangled than the takeover of a
current terminal or port. In such a case, no faculty or existing offices are obtained by
the SPC. On the other hand, a terminal access agreement still must be drawn up
between the administration or port power and the SPC to cover such things as the
building of access streets and rail, the procurement of water and power, and different
offices.
(Reference: Chapter 19, Concession agreements as port governance tools, Theo
Notteboom)

National Institute Of Construction Management & Research

28

Port Development Strategy (2013-2015)

3.5) Master Concession

In a few cases, port change is actualized through an expert concession contract,
which empowers a private administrator to do a number of the port capacities. This
kind of agreement has once in a while been utilized, yet it is an alternative. More
often than not, the main decision is between giving a full ace concession, in whatever
structure, and executing a landowner port structure containing general society port
power and private terminal administrators. The decision between the two choices
impressively impacts further port privatization process. At the point when picking an
expert concession, the legislature leaves the unbundling of port exercises for an
expansive part in the hands of the concessionaire. It may likewise be normal that
conservation expenses coming about because of giving a concession would basically
be borne by the administration.
The legislature ought to permit the concessionaire enough opportunity to structure its
business as indicated by its own prerequisites; generally the activity does not bode
well. Absence of opportunity will bring down the concessions appeal. To make an
expert concession alluring for a private financial specialist, the concessionaire ought
to be permitted to unbundle the port business in the way it supposes fit. Then again,
presenting a landowner port framework will oblige an a great deal more dynamic part
for the legislature in organizing the different concessions of terminal and marine
exercises, and in addition rearranging the port power.
(Reference: Chapter 19, Concession agreements as port governance tools, Theo
Notteboom)

3.6) BOT Arrangements

A landowner port power is ordinarily in charge of building fairways, quay dividers,
and terminal zones. Such development is normally focused around a port expert
arrangement and completed in close conference with the future administrator. Once in
a while development of such offices has effectively begun before understandings have
been closed with the prospective administrators. This may be the situation when the
business sector interest is solid and the port power is certain of discovering customers
and is readied to take the danger that port limit will go unused. Generally speaking,
National Institute Of Construction Management & Research

29

Port Development Strategy (2013-2015)

port powers ought to allow private administrators to fund the vast majority of the
extra limit (counting the quay divider development). The port power can then focus
on access framework and defensive works identifying with port augmentation and on
remodel ventures. Port powers might now and then experience issues accumulating
the speculation stores from duty or held benefits. In such cases, they have looked to
procure supports either from an IFI, (for example, the World Bank) or from private
giving establishments. For particular port offices, for example, compartment or mass
terminals, private financing can be organized through a concession understanding as
depicted previously. BOT plans are a specific manifestation of concession intended to
build private budgetary cooperation in the formation of port base and superstructure
without changing the landowner structure of the concerned port.
At the point when outlining BOT plans, it is essential to consider painstakingly which
parts of the port can be concessional and which parts ought to stay with the port
power. For the most part, BOT plans can be connected to all benefits that can be
misused as a different business. Key among these are:

Fairways and channels: This a piece of the port foundation can be concessional
under a BOT plan to require the concessionaire to dig and keep up the fairway
(and, alternatively, to work helps to route) for a pointed out period amid which it
gets a pay from vessels utilizing the fairways under a concurred passage
framework.

Terminals: BOT plans are normally connected to particular terminals. There are
numerous cases of such terminals, for example, the previous P&O terminal at
Nhava Sheva, India; the South Asia Gateway Terminal at Colombo; the Aden
Container Terminal; and the Port of Buenos Aires, Argentina.

Entire port complexes: A BOT organized as an expert concession contract could

cover a whole port complex containing different terminals. Here, the SPC (or port
administrator) accept true the part of a proprietor port power for the advantages it
has consented to build. The expert concessionaire then offers subleases of
different terminals to outsiders. Such a plan can approach extensive privatization.

National Institute Of Construction Management & Research

30

Port Development Strategy (2013-2015)

The main genuine refinements are that under a BOT and expert concession, the
exchange of benefits is interim and the concessionaire has no administrative
obligation regarding marine security, environment, or vessel movement
administration. There are no cases of successful usage of this sort of BOT expert
concession plan, yet new enactment in Madagascar accommodates one
concession global, which is the identical to an expert concession for little ports of
neighbourhood investment.

Other port resources can't be effortlessly concessioned as individual things. The most
essential of these are resources, for example, jetties, wharfs, joining channels,
intraport streets, and other normal ranges. These benefits, then again, can be a piece of
an expert concession understanding or an exhaustive privatization plan.
A deliberately created concession is key to the execution of a BOT plan. The
concession contract gives the concessionaire the privilege to run the office (with
constrained and obviously characterized government oversight) and gain a business
quantifiable profit. The concession or BOT understanding, with the obliged
marketable strategy, will set out assessments of the imaginable incomes, costs,
obligation reimbursement, and benefit for the SPC. This data is important to evaluate
the venture's budgetary suitability and its obligation reimbursement limit. Numerous
arranged BOT tasks fizzle on the grounds that their terms are arranged without
considering whether the venture is bankable. Governments regularly attempt to
arrange a BOT course of action at an early stage in the undertaking arrangement
cycle, before the full extent of the task is known and before an administrative
oversight administration has been chosen. While this may create huge incomes for the
administration in the short run, it may saddle the concessionaire with an impossible
to- complete undertaking. There are numerous variations of BOT-like plans,
including:

Build-own-work (BOO): Full privatization of the terminal in light of the fact

that the port area and the offices based on it are not come back to the
administration or port power.

National Institute Of Construction Management & Research

31

Port Development Strategy (2013-2015)

Equip-work exchange (EOT): Port framework as of now exists, yet

superstructure is supplied by the SPC.

Build-exchange work (BTO): New port offices are specifically exchanged to the
capable power (government or port power) promptly after development. Under
BTO plans, the responsibility for resources being financed has been an issue for
loan specialists who oblige resource based guarantee to secure bank advances.
With BTO plans, the main insurance is the concession contract itself, which may
be inadequate. BTO plans are important in nations where lawful strictures don't
allow private responsibility for port foundation (for instance Croatia, Italy, Costa
Rica, and the Republic of Korea).

Build-own-work exchange (BOOT): Ownership of area and offices passes on to

the concessionaire, yet is exchanged over at a conceded to cost toward the end of
the concession period.

An exceptional case is the wraparound BOT (WBOT); this plan is utilized as a part of
the instance of extension of an administration possessed port office by the private
segment, which would hold title to the development just. Under such a plan, the SPC
would:
Operate the whole port office under an undertaking advancement agreement.
Manage the administration possessed segment under an administration contract.
Expand the office under a BOT contract.

Much of the time, the administration adequately turns into an accomplice in a BOT
plan by putting resources into specific parcels of the base. Private gatherings have all
the earmarks of being hesitant to put resources into essential port base, not just in light
of the fact that it makes it more hard to value utilization of framework in a way that
allows the concessionaire to understand a sensible profit for the venture, additionally
in light of the fact that these benefits are to a great extent stable and have no similar
option utilization. Political flimsiness, change of control, anti-privatization kickbacks
(nationalization), unforeseen new expense regulations, and other administrative
activities could make extensive BOT plots significantly less alluring.

National Institute Of Construction Management & Research

32

Port Development Strategy (2013-2015)

(Reference: Chapter 19, Concession agreements as port governance tools, Theo

Notteboom)

Far reaching port privatization has, up to this point, been created just in the U.K.
furthermore in New Zealand. By and large offer of port area joined with an exchange
of conventional open port errands, for example, wellbeing and ecological oversight
(for instance, harbormaster's undertakings), remains an exemption. Different nations
have presented noteworthy privatization plans, however generally as for port and
terminal operations.
Extensive port privatization regularly requires the order of new laws, both to manage
the exchange of possession and capacities from people in general to the private
segment and to characterize the fringe between redrawn open and private obligations
and errands. Such enactment ought to build:
Authority for the port power to secure another successor organization or
organizations to assume control over all or piece of the power's business.
The right of the successor organization to issue offers, either to the power or to an
outsider.
The time and way for offering or generally appropriating the shares to outsiders,
and in addition for an instalment to the successor organization from the returns of
the deal.
The fundamental power and components required for the administration to shape
and direct the privatization.
A collect on the returns of the transfer of shares of the successor organization (in
the U.K. this toll was situated at 50 percent of the net returns of the deal).
A collect on benefits accumulating to the successor organization as an aftereffect
of the transfer of port area exchanged under the privatization plan (in the U.K.
this toll was situated at 25 percent of the benefit amid the initial five years, 20
percent amid the following two years, and 10 percent amid the most recent three
years of the duty period).
Provisions for the exchange of port power staff to the successor organization (for
instance, the number and classifications of work force, pay rates, advantages, and

National Institute Of Construction Management & Research

33

Port Development Strategy (2013-2015)

benefits rights) or their release (for instance, partition bundle, retraining

remittance, rehiring inclination).
Terms for the exchange of open errands, for example, supports to route, pilotage,
treatment of hazardous products, and assurance of the earth to the successor
organization or other substance.
The charge administration appropriate to the successor organizations.
Authority for the administration to disintegrate the port power once it is fulfilled
that the targets of the empowering enactment have been met and to exchange all
remaining property, rights, and liabilities to the successor organization

(Reference: Chapter 19, Concession agreements as port governance tools, Theo

Notteboom)

Privatization enactment may incorporate extra components, contingent upon the

neighborhood circumstance, the structure of the previous port power and the
particular legitimate, institutional, and financial circumstance in the nation concerned.

In the U.K., the profits of far reaching port privatization frequently referred to are:

The era of income for the treasury.

The capacity of privatized organizations to broaden their organizations.

Greater access to capital markets.

The evacuation of confinements on speculation and obtaining.

The presentation of new modern relations rehearses.

A more business and entrepreneurial methodology to administration of the

business.

Greater rivalry.

These gimmicks, it was contended, would bring about upgrades to the port
framework's monetary and operational execution. Note, nonetheless, that not the
majority of the aforementioned profits are because of complete privatization; other
port changes may create comparative advantages.

National Institute Of Construction Management & Research

34

Port Development Strategy (2013-2015)

A dominant part of oceanic countries considers exhaustive privatization to be

contradictory with national and territorial hobbies. Particular reasons why
governments and port powers have avoided seeking after full privatization are
different, yet regularly incorporate one or a greater amount of the accompanying:

An open imposing business model can undoubtedly turn into a lasting private
restraining infrastructure.

The macroeconomic profits of expansive port edifices to the territorial and

national economy are seen to be undermined by far reaching privatization.

The threat of biased treatment of clients.

The hazard that, by and by, privatization may undermine rivalry.

Fear of overinvestment in and duplication of devoted terminals for significant

customers, which could unbalance interest for extra open transport base.

Neglect of the port's open administration capacity.

Reluctance of guilds to surrender government assurance and their apprehension

of losing employments.

Reluctance of open powers to lose political control, including support.

Reluctance of open powers to lose salary produced by the port business.

After more than 10 years of experience, a few conclusions can be drawn concerning
the U.K's execution of far reaching privatization. For the most part, the U.K. model of
port privatization is very controlled by variables and ideological contemplations that
are novel to the British experience. Notwithstanding, it gives the idea that:

The valuation of port resources sold to private gatherings was judgmental on the
grounds that there was no settled business amid the time of privatization.
Consequent exchanging of port shares recommends that the first costs were just
25 percent of their actual business esteem.

Ports were sold at fundamentally marked down costs. Reduced deals

(notwithstanding the decision that 50 percent of the deal returns from transfer of
Trust Ports ought to be come back to the purchaser) fundamentally decreased the
first obligation of the new port organization. Certain privatized Trust Ports,

National Institute Of Construction Management & Research

35

Port Development Strategy (2013-2015)

thusly, acknowledged high benefits (as high as 20-30 percent of turnover) to the
detriment of port clients and citizens. Albeit hard to demonstrate, privatization
through a concession, instead of altogether deal, would likely have raised
extensively bigger incomes for the general population treasury.

Transfer of port administrative capacities to the private area has raised genuine
issues. The new privatized ports are basically automatic and have minimal
impetus to shield and upgrade interport rivalry. The main thrust behind the new
port managers is corporate investment as opposed to open premium. The inquiry,
then, is who secures the general population interest?

In terms of speculations and benefits, privatized U.K. ports have shown

improvement over the as yet existing open ports. Privatization prompted an
infusion of money, yet just for acquiring existing resources. Previous Trust Ports
guaranteed that ventures were hampered by money related organizations
searching just for fleeting returns.

The valuation of port resources sold to private gatherings was judgmental in light
of the fact that there was no settled business amid the time of privatization.
Resulting exchanging of port shares proposes that the first costs were just 25
percent of their actual business sector esteem.

Ports were sold at essentially reduced costs. Reduced deals (notwithstanding the
decision that 50 percent of the deal returns from transfer of Trust Ports ought to
be come back to the purchaser) altogether decreased the first obligation of the
new port organization. Certain privatized Trust Ports, thusly, acknowledged high
benefits (as high as 20-30 percent of turnover) to the detriment of port clients and
citizens. Albeit hard to demonstrate, privatization through a concession, as
opposed to inside and out deal, would most likely have raised significantly bigger
incomes for people in general treasury.

Transfer of port administrative capacities to the private division has raised

genuine issues. The new privatized ports are basically automatic and have
minimal motivating force to shield and improve interport rivalry. The main thrust
behind the new port managers is corporate investment instead of open premium.
The inquiry, then, is who secures people in general investment?

In terms of ventures and benefits, privatized U.K. ports have shown improvement
over the as yet existing open ports. Privatization prompted an infusion of money,

National Institute Of Construction Management & Research

36

Port Development Strategy (2013-2015)

yet just for acquiring existing resources. Previous Trust Ports guaranteed that
ventures were hampered by money related establishments searching just for
transient returns.

The cancelation of the National Dock Labor Scheme had a more significant
impact on work steadiness than the offering of port area.

Where terminals were at that point secretly worked (landowner ports), offering
the hidden port area had little effect. Case in point, port area at Dover (a previous
Trust Port) or Portsmouth (a civil port) did not influence port yield in light of the
fact that port operations in both ports were at that point in private hands.

Some nationalized and Trust Ports were sold under an M (E) BO plan to previous
open authorities. These directors procured godsend benefits by offering their
shares at a later date.

There are constrained potential outcomes for port urban areas to redevelop out of
date port area. Then again, arrive hypothesis by privatized ports has turned into a
reality in light of the fact that more seasoned port offices are regularly arranged
close to the profitable land of downtown areas.

The U.K. experience, along these lines, has yielded exceptionally blended results and
gives few contentions supporting complete privatization (the offer of port land and
exchange of all open capacities to the private segment) when other, less radical
changes can accomplish the same destinations.
(Reference: Port Reform toolkit, module 3, www.ppiaf.org)

3.7) Management and O&M contracts

The expression "management contract" has been connected to cover a scope of
agreement from specialized help contracts through to full operation and support
agreement along these lines it is hard to make speculations regarding them. The
principle regular peculiarities are that the recompensing power captivates the foreman
to deal with a scope of exercises for a generally brief time period (2 to 5 years).
Administration gets have a tendency to be undertaking particular and enter instead of

National Institute Of Construction Management & Research

37

Port Development Strategy (2013-2015)

yield centered. Operation and support agreements may have more yields or execution
necessities.
The easiest administration contracts include the private administrator being paid an
altered charge by the granting power for performing particular assignments - the
compensation does not rely on upon gathering of levies and the private administrator
does not commonly assume the danger of advantage condition. Where the
administration contracts get to be more execution based, they may include the
administrator assuming more hazard, even danger of advantage condition and
substitution of more minor segments and gear
Key Features:

Contractor to deal with a scope of exercises;

Generally short term, normally for two to five years;

Traditionally been supported as transitional courses of action for bringing the

private area into overseeing base yet more term operation and upkeep assentions
are getting to be more regular in the water and vitality areas where more far
reaching support by the private part through a lease, afterimage or concession
plan in these "crucial administrations" is considered to be too politically delicate
or unrealistic;

Commonly found in the water segment and, to a more constrained degree, vitality
area;

Limited potential for upgrades in productivity and execution albeit more refined
administration contracts (which are regularly called operation and upkeep
contracts) may present a few motivators for proficiency or enhanced bill
accumulation, by characterizing execution targets and basing a parcel of the
compensation on their satisfaction (and cover longer time periods);

Operator is generally paid an altered charge to cover its staff and costs. There
may additionally be an execution based expense and sold harms for inability to
accomplish execution parameters;

Operator may be obliged to gather bills for the utility and may acknowledge some
gathering hazard regarding execution principles however is unrealistic to gather
bills all alone benefit;

National Institute Of Construction Management & Research

38

Port Development Strategy (2013-2015)

Can be valuable where state of advantages is questionable where the private part
would be unwilling to acknowledge more far reaching danger;

Some might likewise incorporate commitments on the private administrator to

work and keep up the benefits, at times stretching out to bearing the expense of
routine substitution of little, low esteem parts of gear. Such gimmicks oblige
additionally observing to guarantee that the yields are being attained to and
typically include higher foundation costs;

Operating assentions are additionally typical in connection to BOT/ concession

game plans, with the concessionaire sub-getting the operations period of the
admission to an administrator;

Usually no exchange of workers to the foreman - the builder will simply include a
layer of administration over the current utility structure. This regularly causes
issues if the staffs of the utility still look to the honouring power, their head
honcho, for guidelines. Implementation of control by the private operator may
also be difficult.

(Reference: Port Reform toolkit, module 3, www.ppiaf.org)

3.8) Conclusion
From the points discussed and highlighted in this chapter we can say that contracts is
one of the most effective tools to increase the quality and efficiency of ports services
and products. Since port management is a broad field no one type of contract
agreement can be said to be the best, instead, different types of contract agreements
are used for different purposes and places. Key to effective port management and
development is usage of right agreement at the right place.

National Institute Of Construction Management & Research

39

Port Development Strategy (2013-2015)

CHAPTER 4
PPP Models

4.1) Introduction
"An association between the general population and private parts with clear
concurrence on imparted goals for the conveyance of open framework and/or open
administrations."
"Open Private Partnership implies a course of action between a government/ statutory
element/ government possessed element on one side and a private part substance on
the other, for the procurement of open resources and/or open administrations, through
investments being made and/or administration being embraced by the private area
element, for a detailed time of time, where there is decently characterized designation
of danger between the private area and the general population element and the private
substance gets execution connected installments that adjust (or are benchmarked) to
tagged and foreordained execution measures, measurable by general society element
or its illustrative."
There is no single PPP engagement show that can fulfil all conditions concerning a
venture's area setting and its specialized and money related gimmicks. The most
suitable model ought to be chosen taking into account the nation's political, legitimate
and socio-social circumstances, development of the nation's PPP market and the
budgetary and specialized gimmicks of the undertakings and areas concerned." This
has prompted advancement in the engagement models.
The PPP models shift from fleeting basic administration contracts (with or without
venture prerequisites) to long haul and exceptionally perplexing BOT structure, to
divestiture.
These models differ chiefly by:

Ownership of capital assets

Responsibility for investment

Assumption of risks

National Institute Of Construction Management & Research

40

Port Development Strategy (2013-2015)

Duration of agreement.

The PPP models can be ordered into four general classifications in place of for the
most part (yet not generally) expanded contribution and presumption of dangers by
the private area. The four general categorizations of support are:
-

Supply and administration contracts

Turnkey ventures

Lease

Concessions

Private ownership of assets

(Reference: www.pppinindia.com, ppp models)

4.2) Management Contracts

An administration contract is a contractual course of action for the administration of a
part or entire of an open endeavor by the private segment. Administration contracts
permit private segment aptitudes to be brought into administration configuration and
conveyance, operational control, work administration and supplies acquisition. In any
case, people in general segment holds the responsibility for and supplies. The private
part is given tagged obligations concerning an administration and is by and large not
asked to accept business hazard. The private builder is paid an expense to oversee and
work administrations. Typically, installment of such expenses is execution based.
Generally, the agreement period is short, normally two to five years. At the same time
longer period may be utilized for expansive and complex operational offices, for
example, a port or air terminal.
There are a few variations under the administration contract including:
4.2.1) Supply or Service contract:
Supply of gear, crude materials, vitality and power, and work are ordinary samples of
supply or administration contract. A private concessionaire can itself go into various
supply or administration contracts with different elements/ suppliers for the supply of

National Institute Of Construction Management & Research

41

Port Development Strategy (2013-2015)

supplies, materials, power and vitality, and work. Non-centre exercises of an

association (open or private, for example, providing food, cleaning, therapeutic, gear
taking care of, security, and transport administrations for staff can be embraced by
private division administration suppliers. Such a plan is otherwise called outsourcing.
Some type of permitting or working understanding is utilized if the private area is to
give benefits specifically to clients of the foundation office. The principle motivation
behind such permitting is to guarantee the supply of the significant administration at
the sought level of amount and quality.

4.2.2) Support Management

Resources support contracts are extremely prevalent with transport administrators.
Some of the time supplies merchants/suppliers can likewise be captivated for the
support of benefits acquired from them.

4.2.3) Operational Management

Management contracts of real transport offices, for example, a port or airplane
terminal may be helpful when neighborhood labor or mastery in running the office is
constrained or when initiating another operation. Administration contracts are
additionally truly normal in the vehicle part for giving a portion of the non-transport
components of transport operations, for example, the ticketing arrangement of open
transport and reservation frameworks. Operational administration of urban transport
administrations can likewise be contracted out to the private area. In the least difficult
sort of agreement, the private administrator is paid a settled expense for performing
managerial assignments. More perplexing contracts may offer more prominent
motivating forces for proficiency change by characterizing execution targets and the
charge is situated partially on their satisfaction.
(Reference: PPP in Ports, by A. K. Mohapatra, Secretary, Dept. of Shipping)

National Institute Of Construction Management & Research

42

Port Development Strategy (2013-2015)

4.3) Turnkey
Turnkey is a conventional open division acquirement model for base offices. By and
large, a private builder is chosen through an offering procedure. The private builder
outlines and assembles an office for a settled charge, rate or aggregate expense, which
is one of the key criteria in selecting the winning offer. The builder expect dangers
included in the configuration and development stages. The size of speculation by the
private part is by and large low and for a short-term. Ordinarily, in this kind of game
plan there is no solid motivating force for ahead of schedule fruition of a task. This
kind of private segment interest is otherwise called Design-Build.
(Reference: PPP in Ports, by A. K. Mohapatra, Secretary, Dept. of Shipping)

4.4) Affermage/Lease
In this class of plan an administrator (the leaseholder) is in charge of working and
keeping up the framework office and administrations, yet by and large the
administrator is not needed to make any vast speculation. Notwithstanding, regularly
this model is connected in mix with different models, for example, fabricate restore
work exchange. In such a case, the agreement period is for the most part any longer
and the private division is obliged to make a critical level of venture. The courses of
action in an affermage and a lease are very much alike. The distinction between them
is specialized. Under a rent, the administrator holds income gathered from
clients/clients of the office and makes a determined lease expense installment to the
contracting power. Under an affermage, the administrator and the contracting power
offer income from clients/clients. Taking after Figure demonstrates the regular
structure of an affermage/lease contract. In the affermage/lease sorts of game plans,
the administrator takes lease of both framework and gear from the legislature for a
concurred time of time.
By and large, the administration keeps up the obligation regarding venture and hence
bears speculation dangers. The operational dangers are exchanged to the
administrator. Notwithstanding, as a component of lease, a few resources may be
exchanged on a changeless premise for a period which broadens over the monetary
life of advantages. Altered offices and area are rented out for a more extended period
National Institute Of Construction Management & Research

43

Port Development Strategy (2013-2015)

than for portable resources. Area to be produced by the leaseholder is generally

exchanged for a time of 15-30 years. It might be noted here that if the advantages
exchanged to the private division under a lease understanding are compelled in their
utilization to a particular capacity or administration, the estimation of benefits is
needy upon the income capability of that capacity or administration. On the off
chance that advantages are exchanged to the private part without confinements of
utilization, the advantage worth is related with the ideal utilization of the advantages
and the incomes that they can create.
(Reference: PPP in Ports, by A. K. Mohapatra, Secretary, Dept. of Shipping)

4.5) Concessions
In this type of PPP, the Government characterizes and gifts particular rights to an
element (generally a privately owned business) to assemble and work an office for a
settled time of time. The Government may hold a definitive responsibility for office
and/or right to supply the administrations. In concessions, installments can happen
both ways: concessionaire pays to government for the concession rights and the
legislature might likewise pay the concessionaire, which it gives under the consent to
meet certain particular conditions. Generally such installments by government may be
important to make ventures economically suitable and/or decrease the level of
business danger taken by the private segment, especially in the beginning years of a
PPP program in a nation when the private part might not have enough trust in
undertaking such a business wander. Run of the mill concession periods go between 5
to 50 years. It might be noted that in a concession model of PPP, a SPV may not
generally be fundamental. Concessions may be honored to a concessionaire under two
sorts of contractual game plans:

Franchise

BOT sort of agreement

National Institute Of Construction Management & Research

44

Port Development Strategy (2013-2015)

4.5.1) Franchise
Under a franchise course of action the concessionaire give benefits that are
completely detailed by the franchising power. The private division conveys business
dangers and may be obliged to make ventures. This type of private area investment is
verifiably famous in giving urban transport or rail administrations. Establishment can
be utilized for courses or gatherings of courses over a touching territory.

4.5.2) Build Operate-Transfer

In a Build-Operate-Transfer or BOT (and its different variations specifically BuildTransfer-Operate (BTO), Build-Rehabilitate-Operate-Transfer (BROT), Build-LeaseTransfer (BLT)) sort of game plan, the concessionaire embraces speculations and
works the office for a settled time of time after which the possession returns again to
the general population area. In this sort of plan, working and venture dangers can be
significantly exchanged to the concessionaire. On the other hand, in a BOT kind of
model the administration has unequivocal and certain unforeseen liabilities that may
emerge because of advance assurances gave and default of a sub-sovereign
government and open or private substance on non-ensured credits. By holding
extreme proprietorship, the administration controls arrangement and can distribute
dangers to those gatherings best suited to shoulder them or uproot them. In a BOT
concession, frequently the concessionaire may be obliged to build an unique reason
vehicle (SPV) for executing and working the undertaking. The SPV may be structured
as a joint wander organization with value cooperation from numerous private part
parties and general society division. Notwithstanding value cooperation, the
administration might likewise give capital stipends or other budgetary impetuses to a
BOT venture. BOT is a typical type of PPP in all segments in Asian nations. An
expansive number of BOT port and street activities have been executed in the district.
Under the Build-Rehabilitate-Operate-Transfer course of action, a private designer
manufactures an extra to a current office or finishes a mostly fabricated office and
rehabilitates existing resources, then works and keeps up the office at its own
particular danger for the agreement period. BROT is a famous type of PPP in the
water area. A key refinement between an establishment and BOT sort of concession is
that, in an establishment the power is leading the pack in pointing out the level of
National Institute Of Construction Management & Research

45

Port Development Strategy (2013-2015)

administration and is readied to make installments for doing as such, whilst in the
BOT sort the power forces a couple of fundamental prerequisites and may have no
immediate monetary obligation.
(Reference: PPP in Ports, by A. K. Mohapatra, Secretary, Dept. of Shipping)

4.6) Private ownership of Assets

In this type of interest, the private part stays in charge of outline, development and
operation of a framework office and now and again people in general area may give
up the privilege of responsibility for to the private segment. It is contended that by
conglomeration

configuration,

development

and

operation

of

framework

administrations into one agreement, essential advantages could be attained to through

making of collaborations. As the same substance constructs and works the
administrations, and is paid for the fruitful supply of administrations at a predefined
standard, it has no impetus to decrease the quality or amount of administrations.
Contrasted and the conventional open division obtainment model, where
configuration, development and operation angles are typically divided, this type of
contractual understanding decreases the dangers of expense overwhelms amid the
outline and development stages or of picking a wasteful innovation, since the
administrator's future income rely on upon controlling expenses. General society
area's fundamental points of interest lie in the help from bearing the expenses of
configuration and development, the exchange of specific dangers to the private part
and the guarantee of better extend outline, development and operation.

There can be three principle sorts under this structure:

Build-Own-Operate kind of plan

Private Finance Initiative (a later development)

Divestiture by licence or sale

National Institute Of Construction Management & Research

46

Port Development Strategy (2013-2015)

4.6.1) Build Own-Operate

In the Build-Own-Operate (BOO) sort and its different variations, for example,
Design-Build-Finance-Operate, the private segment constructs, claims and works an
office, and offers the item/administration to its clients or recipients. This is the most
well-known type of private investment in the force segment in numerous nations. For
a BOO force extend, the Government (or a force dissemination organization) might
have a long haul force buy understanding (normally known as off-take agreement) at
a concurred cost from the undertaking administrator. In numerous regards, permitting
may be considered as a variation of the BOO model of private investment. The
Government stipends licenses to private endeavors to give administrations, for
example, altered line and portable telephony, Internet administration, TV and radio
telecast, open transport, and cooking administrations on the routes. Nonetheless,
permitting may additionally be considered as a type of "concession" with private
responsibility for. Authorizing permits focused weight in the business sector by
permitting different administrators, for example, in versatile telephony, to give
contending administrations. There are two sorts of permitting: amount authorizing and
quality authorizing. By setting breaking points through amount authorizing, the
legislature has the capacity moderate rivalry between administration suppliers and
conform supply between one territory and other. Quality permitting nonetheless, does
not put any confinement on number of suppliers or the measure of administration
delivered however points out the quality of service that needs to be given. The
legislature may get a charge and a little impart of the income earned by the private
division under the permitting course of action.

4.6.2) Private Finance Initiative

In the Private Finance Initiative (PFI) model, the private segment like the BOO model
forms, claims and works an office. In any case, people in general segment (not at all
like the clients in a BOO model) buys the administrations from the private part
through a long haul agreement. PFI ventures in this manner bear direct money related
commitments to government in any occasion. What's more, unequivocal and certain
unforeseen liabilities might likewise emerge because of advance assurances gave to
banks and default of an open or private element on non-ensured credits. In the PFI
National Institute Of Construction Management & Research

47

Port Development Strategy (2013-2015)

model, resource proprietorship toward the end of the agreement period could possibly
be exchanged to the general population part. The PFI show additionally has numerous
variations. The annuity model for financing of national parkways in India is a sample
of the PFI model. Under this plan a chose private bidder is honored an agreement to
build up a segment of the parkway and to keep up it over the entire contract period.
The private bidder is remunerated with settled semi-yearly installments for his
interests in the venture. In this approach the concessionaire does not have to endure
the business dangers included with task operation. Aside from building financial
foundation, the PFI model has been utilized likewise for creating social framework,
for example, school and healing facility structures, which don't create direct
"incomes".

4.6.3) Divestiture
This third sort of privatization is demonstrate from its exceptionally innocence. In
this structure a private element purchases a value stake in a state-claimed endeavor.
Nonetheless, the private stake might suggest private administration of the
undertaking. Genuine privatization, then again, includes an exchange of deed of title
from general society segment to a private undertaking. This may be carried out either
through out and out deal or through open floatation of shares of an already
corporatized state undertaking. Full divestiture of existing base resources is not
exceptionally regular. Nonetheless, there are numerous samples of incomplete
divestiture.
(Reference: Observations on PPP models in Ports Sector, by Dr. Sheila Farrell,
Imperial College, London)

4.7) Top predominant PPP models in India are as per the following:

BOT-Toll (Build Operate Transfer Toll) -The private element meets the
forthright cost of configuration, development and repeating cost on operation and
upkeep. The Private substance recoups the whole cost alongside the enthusiasm
from gathering of client usage amid the concurred concession period. Capital

National Institute Of Construction Management & Research

48

Port Development Strategy (2013-2015)

mixture is accessible from the general population substance. A danger offering

model is prevalent in this model.

BOOT (Build Operate Own Transfer) -This engagement model is like the
"Assemble Operate Transfer" model with the exception of that the private
element needs to exchange the office once again to people in general division. In
BOOT show the administration concedes a private element to back, outline,
fabricate and work an office for a particular time of time before the exchange.
This is a variety of the BOT model, with the exception of that the responsibility
for recently assembled office will rest with the private party and amid the time of
agreement. This will bring about the exchange of the vast majority of the dangers
identified with arranging, configuration, development and operation of the task to
the private element. General society segment substance will however contract to
"buy" the merchandise and administrations delivered by the task on commonly
concurred terms and conditions.The office constructed under PPP will be
exchanged again to the administration division or org toward the end of the
agreement period, by and large at the lingering quality and after the private
element recoups its venture and sensible return consented to according to the
agreement.

Joint Venture (JV) - In a PPP plan regularly followed in our nation, (for
example, for air terminal improvement), the private division body is urged to
structure a joint wander organization (JVC) alongside the taking an interest open
area office with the last holding just minority offers. The private area body will
be in charge of the outline; development and administration of the operations
focused for the PPP and will likewise acquire a large portion of the venture
prerequisites. The general population division accomplice's commitment will be
by method for settled resources at a foreordained worth, whether it is area,
structures or offices or it may add to the shareholding capital. It might likewise
give confirmations and insurances needed by the private accomplice to raise
reserves and to guarantee smooth development and operation. General society
administration for which the joint wander is made will be given by the element on
certain pre-set conditions and subject to the obliged quality parameters and
National Institute Of Construction Management & Research

49

Port Development Strategy (2013-2015)

particulars. Cases are worldwide airports (Hyderabad and Bangalore), ports and
so on.

Management Contract (MC) -An administration contract is a contractual plan

for the administration of a part or entire of an open endeavour by the private
division. Administration contracts permit private division abilities to be brought
into administration outline and conveyance, operational control, work
administration and gear obtainment. Nonetheless, the general population area
holds the responsibility for and supplies. The private segment is given indicated
obligations concerning an administration and is by and large not asked to expect
business hazard. The private builder is paid an expense to oversee and work
administrations. Typically, instalment of such expenses is execution based.
Normally, the agreement period is short, regularly two to five years. Anyway
more period may be utilized for huge and complex operational offices, for
example, a port or airplane terminal.

BOT Annuity (Build Operate Transfer Annuity)-This model however is

internationally acknowledged one helps not have out of the Planning Commission
of India. If there should be an occurrence of annuity model, the expense of
building the substance is paid to the private element or the engineer every year
after the beginning business operations of the office.

DBFOT (Design Build Finance Operate Transfer) -These are different

varieties of PPP and as the classifications highlight, the private party expect the
whole obligation regarding the configuration, build, fund, and work or work and
keep up the venture for the time of concession. These are additionally alluded to
as "Concessions". The venture will recuperate its speculations (ROI) through
concessions conceded or through annuity instalments and so on. It might be noted
that the greater part of the task dangers identified with the configuration,
financing and development would stand exchanged to the private accomplice.
General society part may give sureties to financing offices, help with the securing
of area and support to get statutory and ecological clearances and regards

National Institute Of Construction Management & Research

50

Port Development Strategy (2013-2015)

furthermore guarantee a sensible return according to created standards or industry

hone and so on. All through the time of concession.

BOO (Build Own Operate) -In a BOO venture, responsibility for task normally
stays with the Private substance. The legislature concedes the rights to outline,
account, manufacture, work and keep up the venture to a private element, which
holds responsibility for task. In BOO the private element is typically not needed
to exchange the office once more to the administration

PPP (Public Private Partnership) -An organization between people in general

and private areas with clear concurrence on imparted targets for the conveyance
of open framework and/or open administrations. There exists decently
characterized designation of danger between the private and general society
elements and the private element gets execution connected instalments that fit in
with determined and foreordained execution models, measurable by the general
population substance or its illustrative.

(Reference: PPP in Ports, by A. K. Mohapatra, Secretary, Dept. of Shipping)

: www.pppinindia.com
: www.ibef.org

Potential Benefits of Public Private Partnerships

Confronting requirements on open assets and financial space, while perceiving the
significance of interest in base to help their economies develop, governments are
progressively turning to the private area as an option extra wellspring of financing to
meet the subsidizing crevice. While late consideration has been centered around
financial leveraging of tasks, governments look to the private part to help them
convey base for various different reasons:

Exploring PPPs as a method for presenting private division innovation and

advancement in giving better open administrations through enhanced operational
proficiency.

National Institute Of Construction Management & Research

51

Port Development Strategy (2013-2015)

Incentivizing the private area to convey ventures on time and inside plans.

Imposing budgetary sureness by setting present and the future expenses of

foundation tasks after some time.

Utilizing PPPs as a method for creating neighbourhood private division capacities

through joint possession with huge worldwide firms, and in addition subcontracting open doors for nearby firms in territories, for example, common
works, electrical works, offices administration, security administrations, cleaning
administrations, support administrations, and so on.

Using PPPs as a method for progressively uncovering state claimed ventures and
government to expanding level of private area cooperation (particularly remote)
and organizing PPPs in a manner in order to guarantee exchange of aptitudes
prompting capacitated elements that can in the end send out their skills by
offering for activities/ joint wanders.

Creating broadening in the economy by making the nation more aggressive

regarding its encouraging base and also giving a support to its business and
industry connected with framework advancement, (for example, development,
supplies, help administrations, and so forth.)

Supplementing constrained open area abilities to take care of the developing

demand for base advancement.

Extracting long haul esteem for-cash through fitting danger exchange to the
private area over the life of the undertaking from configuration/ development to
operations/ support.

4.8) Potential Risks of Public Private Partnerships

There are various potential dangers connected with Public Private Partnerships:

Development, offering and continuous expenses in PPP tasks are prone to be

more noteworthy than for customary government acquisition forms - the
legislature ought to consequently figure out if the more noteworthy expenses
included are advocated. Various the PPP and usage units far and wide have
created strategies for examining these expenses and taking a gander at Value for
Money.

National Institute Of Construction Management & Research

52

Port Development Strategy (2013-2015)

There is an expense connected to obligation While private division can make it

simpler to get account, money might be accessible where the working sources of
funding of the task organization are relied upon to give a quantifiable profit (i.e.,
the expense must be borne either by the clients or the legislature through
appropriations, and so forth.)

Some activities may be less demanding to back than others (if there is
demonstrated innovation included and/ or the degree of the private parts
commitments and risk is unmistakably identifiable), a few undertakings will
create income in local money just (e.g. water tasks) while others (e.g. ports and
air terminals) will give cash in dollar or other universal coin along these lines
stipulations of nearby fund markets may have less effect.

Some tasks may be all the more politically or socially difficult to present and
actualize than others - especially if there is a current open area workforce that
apprehensions being exchanged to the private division, if critical tax increments
are obliged to make the undertaking suitable, if there are significant area or
resettlement issues, and so on.

There is no boundless danger bearing private firms (and their moneylenders)

will be wary about tolerating real dangers outside their ability to control, for
example, swapping scale dangers/danger of existing resources. In the event that
they bear these dangers then their cost for the administration will reflect this.
Private firms will likewise need to realize that the guidelines of the amusement
are to be regarded by government as respects endeavours to build
taxes/reasonable regulation, and so on. Private area will likewise expect a
noteworthy level of control over operations in the event that it is to acknowledge
critical dangers.

Private area will do what it is paid to do and close to that in this manner
motivating forces and execution prerequisites need to be plainly set out in the
agreement. Centre ought to be on execution necessities that are out-put based and
generally simple to screen.

Government obligation proceeds subjects will keep on considering government

responsible for nature of utility administrations. Government will likewise need
to hold sufficient ability, whether the executing organization and/ or through an
administrative body, to have the capacity to comprehend the PPP courses of

National Institute Of Construction Management & Research

53

Port Development Strategy (2013-2015)

action, to complete its own commitments under the PPP understanding and to
screen execution of the private part and uphold its commitments.

The private segment is prone to have more aptitude and before long have leeway
in the information identifying with the task. It is critical to guarantee that there
are clear and itemized reporting prerequisites forced on the private administrator
to lessen this potential lop-sidedness.

A clear lawful and administrative structure is significant to attaining to a feasible

arrangement.

Given the long haul nature of these ventures and the many-sided quality related, it
is hard to distinguish all conceivable possibilities amid undertaking advancement
and occasions and issues may emerge that were not foreseen in the records or by
the gatherings at the time of the agreement. It is probably that the gatherings will
need to renegotiate the agreement to suit these possibilities. It is likewise
conceivable that a portion of the tasks may fizzle or may be ended preceding the
anticipated term of the task, for various reasons incorporating changes in
government approach, disappointment by the private administrator or the
legislature to perform their commitments or in fact because of outer
circumstances, for example, power majeure. While some of these issues will have
the capacity to be tended to in the PPP understanding, it is likely that some of
them will need to be managed during the course of the project.

(Reference: www.ibef.org)

4.9) Conclusion
Private participation in the public sector introduces healthy competition and enhances
the quality of execution in ports. Although to ensure 100% efficient implementation
of PPP models a strong legal and management framework is required but if that is
achieved it can pave way to lot of new projects which earlier were in bottleneck and
will lead to substantial growth of port sector in India.

National Institute Of Construction Management & Research

54

Port Development Strategy (2013-2015)

CHAPTER 5
Marketing

5.1) Introduction

Service marketing has advanced in the past few decades but the port industry has been
largely abandoned as far as marketing is concerned. To understand a port as profitable
enterprise which offers services to international markets, it is necessary to define its
role in the chain of transport and in the macroeconomic purpose of a seaport for the
national economy and the geographical region where the port is located. When
influence upon the region and national economy is concerned, a port has a binary
function, employment and transport.

A seaport has a direct and indirect employment purpose. The high value added which
is produced creates on one hand a significant Income and on the other revenues in
form of taxes for the government. The macroeconomic purpose of the seaport has to
be taken into account mainly in terms of conveyance and port policy.

Transportation plays an important role in the International chain of transport. In this

respect port services are part of the logistics costs for international trade. It can be
stated, that in the chain of transport 5 to 10 percent of the overall costs are port
related. The direct cost benefit proportions in the port, external economies and
diseconomies can disturb the national foreign trade depending on the proficiency of
the seaport.

5.2) Characteristics of Port Services

Port services are categorized by typically exceptional aspects:

I- The most significant aspect of port investment as compared with other Transport
investments is that capital assigned in seaports is very largely permanent which means

National Institute Of Construction Management & Research

55

Port Development Strategy (2013-2015)

if there is a misallocation of capital for investments, a rectification is only possible

after the depreciation period of the investment.

2. Another characteristic is that most of the capital is used for infrastructure and that
the depreciation age and the lifecycle is usually very long. Therefore long-term
planning is needed for long-term investments. In planning normally all main
departments of the seaport have to be involved. The marketing section is therefore of
utmost importance.

3. The product of ports, i. e. port service, cannot be deposited, if there is over

production nor can it be sold from stock if there is an underproduction. This is the
most vital reason why planning and market research activities are unified compared
with other industries.

4. The demand for port services is continuously a derived demand from foreign trade.
Therefore a seaport offers its amenities on various markets which differ very much in
terms of elasticitys of demand and supply. The elasticity of demand is the main
reason for the concentration of competition between seaports.

5. The port's service is only a minor part in the transportation chain from the shipper's
Premises to the receiver's premises. The market situation of a port is a high degree
dependent on the prices and services of the shipping lines calling at the port and the
services and prices of the hinterland transport system serving the port.

(Reference: Pantouvakis, A. M. (2010). Marketing Strategies in Port Industry: An

Exploratory Study and a Research Agenda. American Journal of Economics and
Business Administration , 64-72.)

National Institute Of Construction Management & Research

56

Port Development Strategy (2013-2015)

5.3) Factors Determining Port Choice

In 1977 the Directorate General Transport of the Commission of the European

Communities published a study on port choice factors. According to that study the
factors that mainly impact port choice are:

regularity of the number of departures of regular lines

existing transhipment facilities

Distinct facilities for the handling of specific cargoes

Another analysis, which was made published in 1979. Four hundred and fifty
industrial concerns were consulted on the elements that they thought to be important
in the choice of ports. Most important to them were the following factors

entire cost

port equipment

number of regular lines, volume of traffic

accessory costs

Superiority of port services

The inference was that in many cases the industrial concerns did not have significant
knowledge about port facilities but they were mostly interested in the number of
regular lines and in the total cost involved using the port.

Another study proposes that decision-makers are prejudiced more by the price and
service considerations of the land and ocean carriers than by apparent differences in
the ports of entry and exit. Port infrastructure did not appear to play an imperative role
in the routing decisions made by important groups of independent.
Port competition has been viewed traditionally as a fight to accomplish control over
the hinterland, the region over which port has exclusive or partial supremacy. Another
important issue mentioned in the study was the fact that the choice of port appears to
be based more on the price and quality of service offered by land and ocean carriers.
Port facilities seem to be taken for granted in that its users assume the suitable
equipment is in place The supposition is that the decision-makers' choice of routes is
determined by the transportation costs and service differentials rather than by

National Institute Of Construction Management & Research

57

Port Development Strategy (2013-2015)

appearances of the seaport terminals. Therefore ports should attempt to improve their
land and ocean links. Marketing efforts of ports are likely to have a greater impact on
forwarders and exporters with co-operation of the shipping lines. Benefits of facilities'
improvements are most likely to be realized by shipping companies and only
indirectly inspire trade growth.

5.4) Interport Competition

Interport competition is no longer considered as leadership by a particular country.

Port traffic is determined more by price and facility advantages. However, there is
some evidence that non cost factors play an important role in the general cargo trades.
Trustworthiness, rapidity and worth of service are more important than price. The
most important factors are transport and handling of containers in the port. Security
and the size of the port are of least importance.

Port competition is of a very intricate nature and has transformed since the
introduction of multimodal transport. There is no longer a direct price relation
between a buyer and a port as all port expenses are under the control of the ship
owner. Haulers are not interested in a specific port or its handling abilities as the
multimodal transport operator releases them of this concern. The total distribution
cost affects the ship owners' decisions and they must thus acquire a door-to-door
rather than port-to-port perception. Possible savings in inland transportation costs
encourage container carriers to seek economies of gage in the inland movements of
containers by concentrating the traffic to a limited number of ports, which have higher
access to major inland transportation corridors. Containerization, port concentration
and intermodality have reached a high operational and technical stage and has brought
a substantial change in marketing structure and hinterland relations.

Apart from rivalry with foreign ports, rivalry between ports of the same country and
multimodal transportation chains there is also competition inside ports between cargo
handling companies.
Geographical location as well as the network of connections with hinterland, and the
type of transported cargo influence competition. Even primary hinterlands are shared
National Institute Of Construction Management & Research

58

Port Development Strategy (2013-2015)

with other ports therefore those that have a powerful network of transportation and
logistics stand much better chance in these hinterlands. Maintaining competitive
position requires persistent marketing activities, which influence the marketplace in
order to adjust its desires and necessities to services offered by ports.

(Reference: Booms, B. (1981). Marketing Strategies and Organization Structures for

service firms. Washington State University, School of Business and Economics, 36)

5.5) The Functions of Port Marketing

An active marketing boldness of a port means that it does not wait for potential buyers
of its services but conducts careful market research and makes production, trade and
investment decisions based on it. It also means that the port preserves relationships
directed to potential customers in order to encourage them to buy services offered by
the port.

In order to support this attitude the main aims of port marketing strategy should
include the following:

1. Creating port services in such a way that they meet necessities and
opportunities of the customers or marketplace.
To be able to fulfill this aim the marketing department should conduct an
examination of the situation of the port in the marketplace. This study should
indicate what services potential customers require, what services are offered by
competitors and what can be done to intensify attractiveness and competitiveness
of services offered.

2. Manipulating the market by advertising, public relations, and acquisition, in

other words Generating demand for port services.
For this reason the port customers' inclinations and tastes, trade customs and legal
regulation typical for a particular market must be identified. Sensitive issues such
as exploring possible promotion conditions, defining potential competitors and
their marketing methods, market segmentation according to possibilities and the
National Institute Of Construction Management & Research

59

Port Development Strategy (2013-2015)

opportunities to function in it should be of a great reputation in every marketing

department.

3. Upholding an active sales policy.

Achievement of this aim depends on conducting effective market activates. This
leads to creating and enlarging a group of loyal customers and striking their
relationships with the port, initiating their needs by creating new port services and
differentiation and finally introduction of new methods of distribution.

4. The control and analysis of the properties of marketing activity.

It mainly means evaluation of the variations that appeared in the market as a result
of marketing activities and the change of customers' opinions concerning port
services and image. Information about the changes in the volume and structure of
sales and generated profits and losses is also very important. The analysis results
not only provide assessment of the position in the market in contrast to major
competitors but also enable the making of assumptions regarding up to date
marketing activity and plans for future activities.

5.6) Marketing Research in Seaports

Approaches and practices of marketing research in ports do not differ very much from
methods used in other types of industry. One of them is the well-known SWOT
analysis, which is normally the preliminary point of decision-making process.
Strengths and weaknesses of the port in comparison to the main competing ports
should be analyzed.
The strength of the port may be its expedient geographical location, heavy
industrialized neighborhood, or port's connections with supplementary key business in
the area.
As a weakness we can esteem under competent labour force or distant location from
important industrial centers.
Opportunity may be considered when the port has the area accessible for further
development or is flexible in order to adopt new contemporary technologies.
As far as the threats are concerned the most treacherous are the competitive ports and
growing role of environmental protection.
National Institute Of Construction Management & Research

60

Port Development Strategy (2013-2015)

Another very prevalent type of analysis of port marketing research is analysis

portfolio. The portfolio model, presents in the form of a matrix the internal and
external environment of the port. The matrix is based on the assumption that two
factors, market growth rate and relative market share, and are the critical influences in
determining business success. The BCG portfolio model uses market share as a
substitution for competitive position, and growth rate of a business as a proxy for
market attractiveness. This analysis allows suitable financial assets allocation between
various groups of services in such a way that guarantees long-term profitability.

The results of both analyses are the basics for assessment of predictable changes in
the market in a defined period of time. This evaluation is closely connected with
projecting conditions defining the marketing strategy of the port and should comprise
the changing tendency in supply and demand of port services. It should also consider
the tendency of variations in the levels of prices and market accessibility, and
directions of changes in behavior of competitive ports in this market and finally
economic policy of the competitive countries.

(Reference: Booms, B. (1981). Marketing Strategies and Organization Structures for

service firms. Washington State University, School of Business and Economics, 36)

5.7) Marketing Management in Seaports

The process of marketing management in a seaport is of a multifaceted nature. It

consists of a number of phases appearing in strictly defined order and dependent on
each other. In a correctly applied process of marketing management we can
distinguish the following phases.

1. Identification of the port services

2. Scrutiny of external and internal conditions of ports performance in the
marketplace.
3. Significant aims and strategies of the port.
4. Establishment of strategies and methods of the port performance.
National Institute Of Construction Management & Research

61

Port Development Strategy (2013-2015)

5. Undertaking lively market activities.

6. Regulatory and assessment of the marketing effects and conclusions for the future

Marketing activity plays a crucial role in the process of port development and for that
reason should be considered equally imperative with other functions of management.
In this context marketing is one of the features of economic development of a port and
therefore all port activities should fulfill its requirements.

The accomplishment of marketing management depends very much on accurate

implementation of the mission, which should be understood as the present and future
role of the port in national and international goods' exchange via sea transport, and
also in the national and international transportation system. The management of the
port's mission should have a clear image of the port's future development.

In this respect marketing is a concept of philosophy, which holds all management

functions of a port and hence is a multi- disciplinary approach to commercial
management. Marketing practices or marketing activities are more often associated
with the private sector of the economy; however in practice the techniques are also
applicable to public or semi-public corporations.

The following points have to be accepted:

1. Port marketing is heavily prejudiced by frequently changing international trade

practices.
2. The same applies to the varying technologies in the chain of transport. This
comprises hardware and software technologies in particular, and the mounting role of
e-commerce.
3. Interport competition is a further active factor that needs to be observed carefully at
all times.
4. Institutional issues such as taxes, customs duties, subsidies, documentation
requirements and the banking system have a severe inspiration on marketing strategy
especially for seaports offering their services on international markets.

In a buyers" market, a customer-orientated management approach at all levels of the

National Institute Of Construction Management & Research

62

Port Development Strategy (2013-2015)

Organization is crucial for a service industry such as a seaport. Marketing has an

interdisciplinary function in the whole organization, In particular the operational
sector, which preserves everyday contact with the customers or their representatives
and can play critical role in the ports marketing management system.

5.8) The Importance of Logistics

An effective logistics process is crucial to satisfy customers and to gain competitive

advantage. Refining the service quality that the logistics process provides increases
customer satisfaction and builds customer faithfulness. These in turn lead to market
share and margin growths. At the same time, concentrating on true customer needs
eliminates cost for services not valued. Improving the productivity of the logistics
process also lessens cost.
Quality in logistics means meeting customer necessities and expectations including
the following dimensions:

Affluence of inquiry, order placement, order transmission

Appropriate, reliable order delivery and communications

Accurate, complete, undamaged orders and fault free paperwork

Timely and responsive post-sales provision

Accurate, timely generation of transmission of information amongst the

functions of the business and with external parties to support planning,
management and execution of above activities.

Efficiency in logistics means using the combined resources of all participants in the
supply chain in the most efficient way to provide high quality cost effective customer
services.
Significant variations in the transportation and logistics market environment have had
a great impact on the way that carriers and shippers sell, buy and manage
transportation services.

(Reference: Branch, A. E. (1998). Maritime Economics: Management and Marketing,

3rd ed.)

National Institute Of Construction Management & Research

63

Port Development Strategy (2013-2015)

5.9) Developing a strong market strategy

5.9.1) Formulating a Marketing Plan

The Marketing strategy requires ChPT to cultivate a detailed marketing Plan that
addresses all the target customer segments in a deliberate manner. Solid background
through customer segmentation and identification of key business segments is the
foundation of a marketing plan. Key target segments would be spelled out in the
Business Plan and marketing Plan would contain strategies and a list of actions to
address these key segments.

Description:

A Marketing Plan is a printed document that details the Strategy and actions
necessary to achieve a specified marketing objectives.
The Plan would contain actions points covering the following areas:
1. Pricing Strategy
2. Promotion Strategy
3. Implementation requirements Personnel, Finance, MIS
Performance measurement criteria (sales, market share, revenue etc.)

Key Benefits

A properly organized marketing Plan can yield the following benefits:

1. Decision on whether to consolidate or outsource certain services and support
Operations
2. Improve workforce planning
3. Increase emphasis on designing for service efficiency and self-service
4. Improve management of partner relationships
5. Improve partnership and collaboration skills of staff
6. Identify new service offerings
7. Identify incentive structures for service development and innovation
8. Implement pricing and affinity programs based on volume and breadth
National Institute Of Construction Management & Research

64

Port Development Strategy (2013-2015)

9. Improve retention and win-back processes

10. Target new geographies
11. Target new segments within current geographies

5.9.2) Restructuring the Marketing Cell

Chennai Port does have a marketing cell. The department is an extension of the
Traffic department and has imperfect tools and resources to carry out the marketing
function as would be required in the years to come given the competitive scenario. In
order to implement the Marketing strategy and marketing plan, there is a need to
restructure this cell in terms of strengthening with more resources and skill sets.

It should involve the following activities:

1. Deciding the roles and responsibilities the Cell.
2. Identify the reporting relationships of personnel within the Cell.
3. Train personnel in marketing concepts and marketing tools and techniques
4. Recruit personnel specialized in marketing
5. Plan infrastructure requirements and acquire infrastructure like computers, software
tools etc.

Key Benefits

Benefits would be as follows:

1. Implementation of a formal Marketing Plan
2. Introducing improved methods and tools for managing innovation performance
3. Proactive management of transition points (life events, trimmings of contracts and
leases)
4. Improved tracking of customer interactions (purchases, support requests, etc.)
5. Improved responsiveness to customer requests and inquiries
6. Improved brand strength and good will
7. Improved identification of valuable customer relationships
8. Solicitation and response to customer feedback

National Institute Of Construction Management & Research

65

Port Development Strategy (2013-2015)

5.9.3) Developing a Market Research Cell

Given the nature of market, it makes sense to have a separate Market Research Cell
within the Port to track and recognize changes in the market place. Chennai Port has
adopted the posture of shaping the future in three business segment groups i.e.
container handling, vehicles, and cruise operations. The posture requires ChPT to
forestall the future trends and take proactive steps in taking a leadership role in the
segment. This cell can keep a trail of the activities of the opposing ports with and take
inform the various authorities about the latest development in the port sector.

Description:

It should involve the following activities:

1. Deciding the roles and responsibilities the Cell.
2. Identify the reporting relationships of personnel within the Cell.
3. Train personnel in market research tools and techniques
4. Train personnel in competitor intelligence techniques
5. Recruit personnel specialized in market research
6. Plan infrastructure requirements and acquire infrastructure like computers software
tools etc.

Key Benefits:

Given the objective of attracting and retaining customers and ensure Customer
Satisfaction, a skilled market research would help Chennai port achieve the following:
1. Improve identification and prediction of industry and market trends
2. Improve R&D capabilities in marketing domain
3. Maintain competitive functionality and value
4. Improve identification of valuable customer relationships
5. Target new geographies
6. Target new segments within current geographies

(Reference: Branch, A. E. (1998). Maritime Economics: Management and Marketing,

3rd ed.)

National Institute Of Construction Management & Research

66

Port Development Strategy (2013-2015)

5.10) Customer Relationship Management

This includes the following:

1. Customer profiling and Segmentation
2. Implementing a CRM Solution
3. Developing Partnerships with Key Customers
4. Port Community System

Customer being the backbone of any organization requires strategic management aids
and strategic approach. The Customer Relationship Management would help in
identifying various segments of the customers and the revenue generated by them.
Customized resolution provided on the basis of such segmentation would upsurge
customer satisfaction. Precise marketing plans targeting specific segment of
customers help in achieving the planned objectives in a better way.
Implementation of CRM solution would provide system support to the
implementation of the marketing strategy. An intensive approach, in identifying a
specific segment of customers problems, and providing them with a resolution would
highly increase their satisfaction resulting in increase in potential customers and
retaining existing customers.

5.10.1) Customer profiling and Segmentation

This will help in identifying the budding customers based on specific segments like
type of cargo, the revenue produced through them, the geographic locations of the
client and hence customized solutions can be given. This will help recognizing the
customer needs in a better way and will help to recover the port services. Special
tariffs for superior clients based on revenue generated from them can also be
designed. Promotional schemes can be made to aim a particular segment.
Business segments such as Container handling, automobiles and cruise operations
have already been identified as thrust areas. These segments have separate customer
groups which need to be targeted. Each customer group will require further profiling
so that a marketing plan to target these customers could be worked out in detail.

National Institute Of Construction Management & Research

67

Port Development Strategy (2013-2015)

Description:

Customer Segmenting is the process of separating the market into segments based on
customer features and requirements. The main activity segmenting consists of four
sub activities:
1. Defining who the actual and potential customers are
2. Recognizing segments
3. Examining the intensity of competitors in the market
4. Choosing the attractive customer segments.

Key Benefits

Customer separation will form the basis for development of the Marketing Plan.
Once segmentation is carried out the results would be:
1. Improved understanding of customer, product and channel profitability
2. Improved tailoring of marketing and advertising approaches to customer
Segments
3. Improved ability to identify and assess partnering opportunities
4. Improved understanding of customer needs
5. Improved identification of valuable customer relationships

5.10.2) Implementing a CRM Solution

Presently there is no such process or software which help the Chennai port to
understand the customer well and provide complete end to end solutions to their
problems. So, a gap exists in terms of a systems support for the marketing strategy
implementation which is sought to be addressed by applying a CRM solution. By
applying a CRM solution, customer focus can be better accomplished. A CRM
determination which covers a call center wherein customers can call up and get their
problems addressed immediately or know the status of their consignments will greatly
increase customer service levels and help in attracting and retaining customers.

National Institute Of Construction Management & Research

68

Port Development Strategy (2013-2015)

A good CRM program needs to:

1. Identify customer success factors
2. Create a customer-based culture
3. Adopt customer-based measures
4. Develop an end-to-end process to serve customers
5. Recommend what questions to ask to help a customer solve a problem
6. Recommend what to tell a customer with a complaint about a service offering
7. Track all aspects of selling Ports services to customers and prospects as well as
customer support.

Key Benefits

A decent CRM program can improve customer service by facilitating communication

in several ways:
1. Identify how each individual customer defines quality, and then design a service
strategy for each customer based on these individual requirements and expectations.
2. Provide a mechanism to track all points of contact between a customer and the
Chennai Port, and do it in an integrated way so that all sources and types of contact
are included, and all users of the system see the same view of the customer.
3. Help to identify potential problems quickly, before they occur.
4. Provide a user-friendly mechanism for registering customer complaints
5. Provide a fast mechanism for handling problems and complaints
6. Provide a fast mechanism for correcting service deficiencies
7. Use the Internet to engage in collaborative customization or real-time
customization.

5.10.3) Developing Partnerships with Key Customers

In view of the intense competitive scenario partnering with customers may just be the
most important factor. The term customer partnership should not be taken so much in
its legal definition of coownership but rather in its sense of sharing in benefits, profits
and losses. In keeping with the strategy to provide value added services to customers,
it is necessary to develop partnership with key customers that can be mutually
valuable to both parties.
National Institute Of Construction Management & Research

69

Port Development Strategy (2013-2015)

Description:

Customer partnership is more than "putting customers first", or finding mutually

satisfactory solutions to shared problems, or a dedication to excellence in every sale
or service encounter. It also requires commitment to forging long-term relationships
that create collaborations of knowledge, security, and flexibility for both parties.
Steps required to build successful partnerships are:
1. Determine what Chennai Port needs but doesnt have: customers, capital, special
expertise, products, production capacity, or distribution channels,
2. Determine partners current or potential - who have what the Port needs,
3. Develop a Plan to approach the partners and initiate a dialogue. The Plan should, of
all things, list out things which the Port can offer to the partners.

Key Benefits

Given the objective of attracting and retaining customers and ensure Total Customer
Satisfaction, customer partnering is likely to be crucial for ensuring retention of
clients.
Benefits expected are:
1. Improved understanding of customer needs
2. Improved visibility of customer relationships and interactions across all channels
3. Ability to tailor cross-sell/up-sell offers to customer needs
4. Implementing pricing and affinity programs based on volume and breadth
5. Improve identification of valuable customer relationships

5.10.4) Port Community System

A PCS acquaintances all members of the Port Community including Exporters,

Importers, Custom House Agents, Shipping lines, Shipping Agents, Stevedores,
Transport operators, Banks, Ports, Terminal Operators, Customs, and Other
organizations / companies in the maritime logistics chain.
Customer interface enhancement has already been identified as a key component of
the marketing strategy. Customers are already required to interact with various port
National Institute Of Construction Management & Research

70

Port Development Strategy (2013-2015)

authorities at various points of time along with documentation requirements. A

common system accessible to all port users and other stakeholders will greatly help
streamline customer interface.

Key Benefits:

Following are the main benefits of a PCS to a Port:

- Be a single source, integrated and standardized platform for meeting the
requirements of all members of community
- Function as an e-commerce platform for the members of the community.
- Provide adequate, accurate and timely information
- Improve the response time of stakeholders to their customers
- Improve track and trace efficiency
- Provide shipment/ service visibility
- Generate alerts about delays or problems
- Enable moving towards similar procedures across all communities
- Provide for opportunities for re-engineering, adopting best practices
- More effective and efficient deployment of resources
- Enhanced security
- Increased integrity and transparency
Benefits for customers would be:
_ Cutting costs through reducing delays
_ Faster clearance and release
_ Predictable application and explanation of rules
_ More effective and efficient deployment of resources

(Reference: Marketing Communication Strategies for Seaports Jessica J.A. Siep

318556 )

National Institute Of Construction Management & Research

71

Port Development Strategy (2013-2015)

5.11) Market Offerings Expansion Projects:

This includes following

1. Identifying Comprehensive Logistics Services for customers
2. Study of pricing / tariffs of international ports
3. Simplification and Realignment of current tariff structure.
4. Study for identifying investments / management of operations in other Minor ports

These sub-projects would help ChPT in providing additional value added services to
its customers. It would lead to identification of logistic services, it would be able to
provide its customer in comparison to the competitors. The projects would also help
Chpt to make a rationalized and simplified tariff structure. Assistance of international
consultants would help Chpt in structuring their tariffs as per the best international
ports in the world. ChPT would be able to evolve various Tariff schemes for
customers which would help in retaining them and attracting potential customers.
ChPT should identify other minor ports which are geographically well positioned,
endowed with good drafts and possibly have good connectivity which can actually
help displace the dirty cargo from ChPT and absorb the same or can bring otherwise
excluded hinterland within CPTs reach and possibly from the clutches of
competition. Making investment in such minor ports would help ChPTto retain
customers once its current capacities in term of its overall available ground storage
area and hinterland connectivity constraints.

5.11.1) Identifying Comprehensive Logistics Services for customers

As of now the port operations are restricted to a typical port services provider with no
customized services. In order to differentiate itself from other ports it has to give its
customers something more than what they expect like providing them with a complete
logistic solution right from the origin to destination i.e. client door steps. These days,
the commercial success of a port could stem from a productivity advantage in
traditional cargo-handling service, from value-added service, or from a
Combination of the two. Shippers and carriers select individual ports not only based
on their cargo handling service capabilities, but also on the benefits they are capableof
delivering. Unless a port can deliver benefits that are superior to those provided by
National Institute Of Construction Management & Research

72

Port Development Strategy (2013-2015)

its competitors in a functional aspect, port customers are likely to select ports based
merely on price. This fact raises the question of how a port can achieve value
differentiation. Customers now tend to look at value-added logistics services as an
integral part of their supply chain. As a result, ports must attempt to satisfy these
needs by offering differentiated services.

Description:

Chennai port should identify comprehensive logistics services that it could offer to its
customers. This may include Container Freight Station, Inland Container Depots,
Warehouses and Transportation services. This will evolve into a door-to-door
comprehensive service of complete logistics chain. The objective would be to
guarantee delivery of goods to customers premises or from the customers premises
to the Port. Chennai Port may take up just part of the entire logistics and can have tie
ups with specialist companies for the rest of the components of the logistics chain.

Key Benefits

1. Improve pick, pack and ship processes

2. Improve due-date reliability
3. Refine/align logistics and distribution strategies
4. Increase focus on higher-value products and partners
5. Consolidate/outsource logistics and distribution functions
6. Increase use of lower-cost logistics and distribution channels
7. Improve transport and delivery processes/algorithms
8. Improve incentives around inventory/distribution efficiency
9. Improve terms with service providers (transport, warehousing, etc.)
10. Improve integration of business processes across partner networks
11. Broaden product and service offerings
12. Acquire new product and service offerings
13. Offer value-adding product and service bundles
14. Target new segments within current geographies

National Institute Of Construction Management & Research

73

Port Development Strategy (2013-2015)

5.11.2) Study of pricing / tariffs of international ports

Given the overall strategy to become a hub port for containers on the east coast, it is
important to carry out a study of the pricing tariffs of international hub ports, in
particular those which are competitive hub ports in the region. Important stakeholder
and customer perspective is that Chennai tariffs are high, compared to international
hub ports and this needs to be addressed appropriately by carrying out a
comprehensive study.

Description:

This project would require an elaborate profiling of tariff structures of important ports
in Asia like Colombo, Singapore, Hong Kong etc. and also of other important ports in
the world. The study would also identify how these ports charge tariffs and how these
tariffs have been structured.
Along with the above, a commodity profile will also have to be built up for each of
the Ports above.

Key Benefits

This study will help Chennai Port benchmark its tariff and tariff structure those of the
best ports in the world. The benchmarking analysis coupled with a commodity
comparison will enable the Port to identify areas where tariffs can be rationalized
and/or simplified.

5.11.3) Simplification and Realignment of current tariff structure

Given the overall strategy to attract more customers for containers, possibly be special
tariff schemes, discounts etc. it is imperative for ChPT to offer its tariffs in line with
global competitive ports. This will require simplification and re-alignment of the
current Tariff structure. Based on the recommendations from the study carried out in
the previous project, ChPT will need to rationalize its tariffs accordingly.

National Institute Of Construction Management & Research

74

Port Development Strategy (2013-2015)

Description:

Simplification and realignment of tariffs would mean the following:

_ Reduction of tariffs
_ Exploring avenues to reduce and combine few charges
_ Change in the basis of charging tariffs in certain areas
_ Exploring avenues for charging differential tariffs for certain commodities and
customers
Steps needed to implement this project would be as follows:
_ Taking inputs from studies of tariffs/tariff structures of international ports
_ Examining tariff levels or competing ports in India and around India
_ Discussions with customers on their experiences and expectations
_ Identifying avenues for reduction, simplification and realignment
_ Designing the new tariff structure
_ Getting the new Tariff approved from TAMP.

Key Benefits:

1. Increase emphasis on differentiated products and services

2. Improve focus on price-insensitive customer segments
3. Obtain exclusive agreements with customers
4. Improve use of supply- and capacity-driven promotions
5. Rationalize and/or refocus service portfolios
6. Increase emphasis on differentiated pricing across customer segments (based on
customer value, risk, etc.)
7. Increase focus on pricing effectiveness / price optimization
8. Increase use of promotions
9. Improve understanding of customer price sensitivity
10. Improve tailoring of offerings to customer needs

National Institute Of Construction Management & Research

75

Port Development Strategy (2013-2015)

5.11.4) Study for identifying investments / management of operations in other

Minor ports

A core component of the business strategy is to aggressively identify opportunities

and take controlling stakes in other ports to either support the cargo it has decided to
attract or to service at a different location for the cargo it is constrained to forego.

Description:

In making investments in other ports ChPT should identify ports that:

_ are geographically well positioned
_ are endowed with good drafts and possibly good connectivity
_ can actually help displace the dirty cargo from CPT and absorb the same,
Thereby helping ChPT to be able to retain its present customers.

Key Benefits:

1. Retain customers, otherwise being turned away due to space and infrastructure
constraints
2. Increase emphasis on differentiated products and services
3. Obtain exclusive agreements with customers
4. Improve tailoring of offerings to customer needs
5. Remove the constraint of non-availability of space being a city port
6. Make investments in the port business instead of other financial investments.

(Reference: Marketing Communication Strategies for Seaports Jessica J.A. Siep

318556,
Cahoon, S. (2007) Marketing communications for seaports: a matter of survival and
growth. Maritime Policy & Management , 151 168,
Pantouvakis, A. M. (2010). Marketing Strategies in Port Industry: An Exploratory
Study and a Research Agenda. American Journal of Branch, A. E. (1998). Maritime
Economics: Management and Marketing, 3rd ed.)

National Institute Of Construction Management & Research

76

Port Development Strategy (2013-2015)

5.12) Conclusions

The image strategy ports follow depends heavily on the natural factors, the city it
belongs to and the type of port it is. Examining the way ports profile themselves to the
community and the sector reflects the strategy followed.
In this paper we have looked at the web impact, which tells us more about the
awareness of the seaport. We also looked at the marketing communication tools ports
use to give an understanding of the sector and organization.
It is important to note that the image strategy followed has an important effect on the
way the society and the industry sees the particular port. It is thus necessary to make a
sound decision on the strategy chosen. In this paper we have seen two different
strategies; society focused and professional image, chosen by respectively a
specialized and general cargo port. Further research on other ports can identify other
strategies. When a full set of strategies exists a theory can be built for which strategy
to choose in different circumstances.

National Institute Of Construction Management & Research

77

Port Development Strategy (2013-2015)

CHAPTER 6
Use of IT
6.1) Introduction

Information technology has become an essential part of the rapid and accurate transfer
and processing of enormous volumes of data processed in international transport firms
and port organizations. The proper management of systems, which process this
information and communicate it to those who manage port operations, is vital for
efficient transport. This explains why container-tracking systems are given high
priority among operational computer applications in ports. Investigates the importance
of information technology and its role in improving the operational systems in cargo
handling. A computer simulation model is developed to compare two different
operational systems a container terminal equipped with electronic devices versus a
terminal without such devices.

6.2) Data transmission in the port terminal

To shorten time spent by vessels in the terminal requires that special emphasis be
placed on receiving details of containers (e.g. shipment, physical location) prior to the
arrival of the vessel to reduce the stay of a third generation of containership or of a
large vessel at port. Hence, the development of containerization is accompanied by
the application of computerized tele-transmission of manifest and stowage plan details
from the port of loading to the port of discharge. Transmitted data are used to plan
discharging operations, as well as to print required report documentation.

For a container terminal equipped, for example, with ship-torail technique, accurate
and current information on all container operations is vital. A properly-designed,
computerized container control system increases the operating efficiency of the
terminal. However, the main benefits provided by such a system are the following:

faster discharging and loading of containers;

increased productivity through faster turnaround of containers;

National Institute Of Construction Management & Research

78

Port Development Strategy (2013-2015)

better monitoring of the storage of containers (leading to increases in

Stacking area's capacity);

high level of accuracy of information; and

high level of consistency of the information given to various parties in

the chain of transport.

Depending on the number of containers handled, three types of data processing

Systems are also required in port terminals:

off-line central system,

onlinemulti-point system

Online multipoint system with direct telecommunication to yard mobile

equipment.

The first type records the container movements centrally, usually in the
Operation center of the terminal, i.e. the point of loading on train, the length of
transportation and the terminal that the containers are to be unloaded.
Basically, the information is recorded in the computer system rather than using the old
methods of board or card file system. One of the advantages of such a system over a
manual one is that data can be automatically validated during data entry.
The second type consists of a multipoint system giving direct access to the computer
from the points where movements of containers take place (e.g. portto-inland depots).
This system provides updated information on the status of the train/truck such as
travelling time, departure time and the time of arrival at destination. This is the area
that provides necessary information to the freight forwarders.
The third type offers the possibility for communication of yard operations via
computer, particularly between the operator of the crane and container management
personnel. The cabin of the crane operator is equipped with visual display units
(VDU) and simplified keyboards. The driver receives on the VDU an order to move a
container. Confirmation of the execution of the order on the keyboard causes
automatic updating of the container layout. This solution makes it possible to follow
container movements very closely and also facilitates execution of loading or
discharging operations.

National Institute Of Construction Management & Research

79

Port Development Strategy (2013-2015)

6.3) Electronic devices in container terminals

Providing reliable service to the interacting elements of the transportation chain is a

major objective of any container terminal. Within a port community, the effective
flow of information is considered to be an important variable. For example, in an
eight-berth terminal where eight ships are berthed for loading/ unloading some 6,000
containers simultaneously, a highly sophisticated information technology is required
to provide reliable and timely information for hundreds of people within the
port/transport community. Among them are freight forwarders, transport companies,
rail operators, crane operators and container carriers in terminals.
To carry out an effective data management, appropriate electronic devices must be
used. However, despite the fact that several devices are available in the market, they
are not employed in every container terminal. Whilst they can operate as individual
devices in ports and outside terminals (e.g. rail track), they should be integrated to the
port and transport network communications via a computer system. Only a few
international ports have taken maximum advantages of the existing devices to
improve their operational efficiency, minimize terminal congestion and establish a
fully integrated system (World Cargo News, 1997). A brief description of the
following devices aims to explain their importance in container tracking, recording,
movements and segregation of imported/exported containers.

6.4) Microwave technology

Microwave technology is simply employed to track the placing and pick-up of

containers by recording relevant data on tags installed on the containers. In ship-torail direct loading at the terminal, for example, this method would reduce the crane's
waiting time when the spreader is in the ship's hull. This is the area in which
significant ship's time including human resources can be saved or wasted and the
performance of port terminals is appraised. The system is called ``prime mover
tracking system'' (PMTS) which enables the terminal supervisor to track the unloaded
containers at any time while containers are in the terminal. The PMTS enables the
operator to track the containers and feedback the location of the containers to the
central information system where data can be checked. Any difference between the
commanded and the actual slot can be readily spotted when the operator activates the
National Institute Of Construction Management & Research

80

Port Development Strategy (2013-2015)

twist lock (four connecting points on the four corners of the container and the
spreader of the crane). As the container comes off the ship, its identification number is
read and stored in a computer, PC. When the container is loaded on to the terminal
trailer, the ID number is written into a re-writable tag that is then mounted on the
terminal tractor. In the absence of totally reliable, automatic PMTS, it is assumed that
the ID data are input manually to the PC by a checker. The container ID data are
transmitted by wire to a tag-writer installed on the leg of the container crane and then
transmitted to the tag. In this system, no fiber optical or other links between the PC
and the tag-writer are required. The tagal so contains fixed information identifying the
tag itself. When the container carrier arrives at the stacking area, the tag is read by a
tag-reader installed on the leg of the yard crane, connected to a computer on the cabin
of the crane. The actuation of the spreader twist-locks signals the on-board computer
to interrogate the tag reader. The trolley of the yard crane is then driven to the desired
slot. The position of the trolley can be obtained from the PMTS that is accurate to less
than one meter. The on-board computer uses its stored image of the stacking area to
identify where the container has been placed. The data are transmitted via a radio data
link to the central information system and stored in a database. In principle, the tag
could also be mounted on the equipment such as straddle carriers, forklifts, stackers
and intermodal rail wagons. This system facilitates the identification of containers on
the train. The PMTS workstation is connected to the reference station with an
integrated data transceiver. The workstation is a Pentium PC that interrogates the
position data from the container carriers, stores the data, together with heading and
speed and provides indications of status and errors. As stated above, the PMTS is a
new innovation in facilitating the container handling particularly where the large
number of containers should be stacked in terminal. The maximum advantages of the
system can be realized where the container handling is carried out by RTG (rubbertyred gantry) capable of stacking up to eight containers high and nine containers wide.

(Reference: The Port of Los Angeles (Port) Strategic Plan in 2006, Connecting India:
Transport challenges and opportunities. Technical report, Drewry/NOL,
Containerisation International Yearbook. 2005, N. Dekker. Interior motive.
Containerisation International Magazine, March 2005.)

National Institute Of Construction Management & Research

81

Port Development Strategy (2013-2015)

6.5) Tagging technology in transportation of cargo by rail

Recent advances in microwave technology include a tag that allows data read or write.
The tag can contain up to 4,000 characters of data that can be updated by radio signals
broadcaster installed in the terminal or alongside of the train track (e.g. automated
wagonload operations on the New Zealand railway system). The tags can be read
while the train is moving at up to 110km/hr. This system must be modified when the
fast freight trains (160km/hr operate in Japan and Germany) are used for freight
transportation. The antenna used in this system creates an inductive radio frequency
field to activate and receive data from tags. It contains a transmit-coil with associated
tuning and matching components, and a receive-coil. When a consignment is loaded
on the train, the computer will be able to provide relevant information on content of
containers loaded on the train, wagons and destinations. Information is then passed to
the yard staff. Based on this information, a work order is passed to the crew of the
train. As the train leaves the yard, an automated vehicle identification (AVI) reader
reads the tags on each wagon and sends a message to the central computer to compare
the manifest with information in the central computer. At the same time, the wagons
are weighted to check for load discrepancies. Both sets of data are then sent ahead of
the train to the next stop so that the freight forwarders can be advised of arrival.

6.6) Barcode scanner

A barcode scanner would help the customs decide whether physical inspection of
containers is required particularly when several vessels unload thousands of
containers simultaneously. Barcode and optical character recognition are basically
two automatic identification systems. They are environmentally sensitive and
application restrictive. The scanner is easy to use where the ambient light
environment in the container terminal is high. A barcode is ideal, especially for
shipping manifests and outer packing cases or other exposed surfaces. This system is
capable of providing prompt information required by customs when vessels are at
berth. It operates most effectively in a controlled environment particularly when
relatively small amounts of data need to be captured. A barcode scanner is a wireless
scanning technology that communicates with the host computer. In the rough
environment of a port terminal where the visibility of the straddle carrier operator is
National Institute Of Construction Management & Research

82

Port Development Strategy (2013-2015)

minimal (due to the size of the carrier and the position of the driver-approximately 6m
above the ground), this wireless system provides effective services to most terminal
operators and operational systems.

6.7) Radio frequency microcircuit system (RF)

The system was developed to identify the containers when traffic at terminals reaches
the peak. It is not easy to check and control the traffic at a terminal where thousands
of containers are stacked and hundreds of containers are on the move. Container
carriers deliver the stacked imported containers to the quay area and the newly
unloaded containers occupy their slots. The system is ideally suited for operation in a
harsh and outdoor environment. Nonconductive materials such as grime, snow and
rain that intrude between the interrogator and transponder do not appear to affect
operation of the system. The system consists of the reader or antenna (that is buried in
the pavement of the terminal to keep it free from vandalism, accident and weather)
transponders (tags), an interrogator and computer interface tag. RF system offers
high-speed and remote electronic identification of equipment. The heart of the system
is the tag, powered either by a battery or by an RF beam from the antenna. Each tag
can have a unique code that is related to the object to which the transponder is
attached. The electronic components of the transponders are enclosed in rugged
packages that may be as small as a credit card. One application for RF systems is in
monitoring the movement of containers and their status in the terminal. This is the
area

that

assists

the

terminal

operator

to

produce

prompt

reports

for

importers/exporters and other relevant agencies. The system can also track containers
entering and leaving the terminal through the gate or as they pass the scanning points
in the yard.

(Reference: Connecting India: Transport challenges and opportunities. Technical

report, Drewry/NOL, Containerisation International Yearbook. 2005)

National Institute Of Construction Management & Research

83

Port Development Strategy (2013-2015)

6.8) Voice recognition technology

Voice recognition technology (VRT) provides communications between the crane

operator and the ground personnel. This system could be used stand alone or it can be
integrated with other technologies in communications between the crane operator and
on quay personnel during loading and unloading of a vessel. Voice systems use
pattern recognition similar to that in barcode systems. Instead of an image, the
computer recognizes words in a pre-programmed vocabulary. When it is activated,
crane operators speak into a microphone, the machine recognizes words or phrases
and then converts them into electronic impulses for the micro- or host computer. The
high-performance units operate at an accuracy rate of 99.5 per cent. One of the
advantages of the system is message recording. This would assist the terminal
operator in providing the final report on the position of containers loaded on to the
ship. When properly integrated, the system can assist in the automatic capture and
processing of marine terminal data.

6.9) Terminal model without electronic devices

When a ship arrives at the port, it is placed in the queue and remains there (outside the
port facilities) until a berth becomes available. Once a berth is vacant, the pilots and
tugboats escort the ship to the assigned berth. Shortly afterwards the assumed 2,000
containers are unloaded from the vessels by the two gantry cranes. The containers are
carried away by 16 straddle carriers from the quay area to the designated slots (the
allocated area for containers) in the stacking area. Containers normally stay in the
terminal between three to six days for customs inspections. After the completion of
the inspections, containers are loaded on to trucks/trains and taken away from the
terminal. In this operation, cranes frequently stay idle due to:
(1) The quay area being occupied by other containers; and
(2) The crane spreader stay-time in the hull being long due to the discrepancy of the
ship loading plan (the position of containers in the hull).
Straddle carriers also must wait until the isles (the rows allocated for stacking of
containers) are accessible. This normally happens when other carriers use the isles.
Terminal congestion also causes further complications in terms of container
segregation prior to the departure of containers from the terminal since tens of
National Institute Of Construction Management & Research

84

Port Development Strategy (2013-2015)

containers often should be re-shuffled (double handled) to pick up the right container
for delivery. Lack of timely information is the main cause of the quay occupancy,
crane waiting time and waiting time for straddle carriers. Two-way radio is normally
used to provide communications between the crane operators and the ground/vessel
supervisors. Communications between the straddle carrier operators and the ground
supervisor also take place by two-way radio.
The essence and nature of operations are the same as the terminal model without
electronic devices. However, application of electronic devices positively affect,
reduce or eliminate the waiting time of cranes and straddle carriers because:

The crane operator is able to ascertain availability of the quay area, through a
monitor installed in the cabin of the crane, including the exact pick-up time of
container(s) by straddle carrier(s). Communication between the operators of
straddle carriers and the ground supervisor also takes place through the
electronic devices, which provide timely information on the space availability
for the next container.

Terminal isles and the movement of straddle carriers throughout the terminal
can be regularly checked by the straddle operators through computer installed
in the cabin. When a container is picked up by astraddle carrier, the relevant
information of its slot and isle is immediately displayed on the monitor. This
would assist the elimination of the search time of the straddle carrier.

(Reference: The Port of Los Angeles (Port) Strategic Plan in 2006)

6.10) Restructuring of the IT Department Organization

A key element in the Systems and IT Strategy is the revamping of the IT Organization
in ChPT. The SWOT analysis identified some key weaknesses in this component such
as Inadequate IT training, ageing staff in the same IT department age group,
stagnation and need for inducting younger people.

Description:
Organizational Redesign of the IT department will require the following activities:
Identifying the Key issues facing the EDP Department

National Institute Of Construction Management & Research

85

Port Development Strategy (2013-2015)

Determining the current status of the Org. Structure i.e. processes, communications,
obstacles etc.
Developing the IT Skill matrix and mapping them to the current capabilities in the
EDP department.
Provide for rigorous and continuous training for all existing EDP department
employees in the latest technologies and tools
Recruit fresh talented professionals / outsource parts of the IT function depending
upon availability of resources.
The IT strategy recommends a higher focus to this function by shifting the IT
Department directly under the Chairman. Identify steps and processes that are
required for implementing the same. Define the authority and responsibility of the
new IT Head and his relationship with other Department heads / senior management
of ChPT.

Key Benefits:
Continued and sustained focus on IT in the organization
Increased capabilities to develop, maintain IT applications and IT infrastructure on a
24 x 7 basis, such that real time access of customer interface applications is available
to all customers and other stakeholders.
Ensuring capabilities to manage IT related security and disasters within the
organization
Improved effectiveness of organizational structures and reporting relationships
Improved assignment of accountability and authority

6.11) Process Re-engineering and Improvement Project:

This would include the following sub projects:

1. Business Process Re-engineering
2. Full Scale ERP Implementation (current implementation and its review)
These projects would help in improving efficiency and competitiveness of ChPT and
help in cost reduction, provision of quality services in terms of time and efficiency of

National Institute Of Construction Management & Research

86

Port Development Strategy (2013-2015)

cargo handling. ERP implementation will help in integrate the financial and customer
information, reduce inventory and customize HR information.

6.11.1) Business Process Re-engineering

The overriding objective in a BPR is to achieve a step change in performance. BPR is

a fundamental rethinking and radical redesign of business processes to achieve
dramatic improvements in critical, contemporary measures of performance such as
cost, quality, service and speed. Performance improvement relates to internal
efficiency and competitive advantage. Internal efficiency is achieved by examining
how we can run the business with fewer hand-offs, barriers, formal communications
and less waiting time. BPR will help ascertain bottlenecks in the business processes as
well as avenues for modifying as well as introducing new processes to streamline port
functions. The key objective of the review should be to weed out inefficiency in the
processes.

Description:

Activities involved in a BPR Exercise are:

1. Documenting Current Processes
2. Establishing Key Performance Measures
3. Developing and Testing Future Processes
4. Prioritizing and Committing to Future Processes
5. Planning Implementation
6. Implementing Future Processes

Key Benefits:

1. Improve invoicing / billing processes

2. Improve selection, acquisition and contracting processes
3. Improve processes for managing system operations, maintenance and changes
4. Improve technology and data risk management processes
5. Improve establishment of and adherence to service-level targets
6. Improve real estate design and development processes
National Institute Of Construction Management & Research

87

Port Development Strategy (2013-2015)

7. Improve operational processes (administration, security, and maintenance)

8. Improve recruitment and orientation processes
9. Improve salary and benefits administration processes / increase employee selfservice
10. Improve payroll processes
11. Improve performance assessment processes
12. Provide staff with better HR information and tools
13. Implement/improve port-wide processes and tools for assessing staff performance
14. Consolidate and / or align financial planning, management and reporting functions
15. Strengthen corporate governance structures (composition, selection, roles, etc.)
16. Improve / implement internal control frameworks and policies
17. Improve understanding of regulatory requirements and management of regulatory
compliance
18. Improve identification and assessment of risk (strategic, operational, investment,
financial, compliance, data/privacy, etc.)
19. Improve breadth, depth, quality and timeliness of managerial information
20. Improve assignment of accountability and authority
21. Improve flexibility of business processes
22. Improve communication and knowledge transfer across organizational boundaries

6.11.2) Full Scale ERP Implementation

Enterprise Resource Planning systems (ERPs) integrate all data and processes of an
organization into a single unified system. A typical ERP system will use multiple
components of computer software and hardware to achieve the integration. A key
ingredient of most ERP systems is the use of a single, unified database to store data
for the various system modules. In a full scale ERP system, the following modules are
generally covered:
- Projects
- Supply Chain Management
- Financials
- Human Resources
- Customer Relationship Management
- Maintenance
National Institute Of Construction Management & Research

88

Port Development Strategy (2013-2015)

In order to introduce Best-in-Class processes, an ERP package implementation is

required so that IT driven processes are introduced at the Port. This is especially true
since the Ports Vision is to be Futuristic port. With the future significantly
determined to be more automated than before

Description:

The process of ERP implementation is given below:

- Business Process Mapping and Re-engineering
- Deciding functional specifications
- Designing/Procuring the system
- Implementation and Training

Key Benefits:

Integrate financial information As the Management tries to understand the

companys overall performance, they may find many different versions of the truth.
Finance has its own set of revenue numbers, traffic has another version, and the
different departments may each have their own version of how much they contributed
to revenue. ERP creates a single version of the truth that cannot be questioned
because everyone is using the same system.

Integrate customer informationERP systems can become the place where the
berth is booked by a shipping agent till the goods are dispatched from the Port. By
having this information in one software system, rather than scattered among many
different systems that cant communicate with one another, the Port can keep track of
services provided more easily.

Reduce inventoryERP helps some of the core processes flow more smoothly and
enable better tracking on inventory. That can lead to reduced inventories of the
materials used, and it can help users better plan inventory replenishments and
reducing inventories at the warehouses.

National Institute Of Construction Management & Research

89

Port Development Strategy (2013-2015)

Standardize HR information especially in organizations with multiple

departments and huge staff, HR may not have a unified, simple method for tracking
employees time and communicating with them about benefits and services. ERP can
provide comprehensive HR database.

(Reference: Study on status of and challenges before the Indian shipping industry.
Technical report, Tata Energy Research Institute
(TERI)http://static.teriin.org/reports/ rep26/rep26.htm, 2002.
Annual report on Chinas shipping development. Technical report, Ministry of
Communications, Peoples Republic of China, 2004.
Containerisation International Yearbook. 2004.)

6.12) Activity Based Costing

Chennai Port is a service organization and it provides services to its customers by

rendering a basket of services under various heads. A customer avails of different
services based on the commodity being shipped, material handling equipment
required and the type of vessel being used to transport the same. Whereas ChPTs
financial and management accounting systems are able to account for costs at the
natural objective level of cost classification, these do not support a subjective costs
classification by identifying the costs for the actual service rendered. This creates a
handicap in terms of deciding the tariff levels for various services. While cost
rationalization is one aspect of pricing, identification of proper cost of services is
another. It would be important to look at the current costing mechanisms and to assess
if there is a need for introduction of more sophisticated costing mechanisms to arrive
at the correct cost of providing services. Better costing mechanisms would help arrive
at the correct costs for each of the services and would definitely aid proper decision
making. Activity-based costing (ABC) is a method of allocating costs to products and
services. It is generally used as a tool for planning and control. ABC has been
universally recognized as an alternative approach to solve the problems of traditional
cost management systems. Traditional costing systems are often unable to determine
accurately the actual costs of rendered services. Consequently the management was
making decisions based on inaccurate data especially where there are multiple
services being offered. One of the key elements of the strategy is to offer competitive

National Institute Of Construction Management & Research

90

Port Development Strategy (2013-2015)

tariffs in key business segments and activity based costing will help a great deal in
determining the competitive tariffs.

Description:

Instead of using broad arbitrary percentages to allocate costs, ABC seeks to identify
cause and effect relationships to objectively assign costs. Once costs of the activities
have been identified, the cost of each activity is attributed to each service to the extent
that the service uses the activity. In this way ABC often identifies areas of high
overhead costs per unit and so directs attention to finding ways to reduce the costs or
to charge more for costly services.
Steps required to implement an ABC system are:
_ Identification of Activities
_ Determining Cost for each activity
_ Determining cost drivers
_ Collect activity data

Key Benefits:

_ Improved cost accounting and allocation of shared/overhead costs

_ Improved projection of segment results and margins
_ Better decision making in the area of tariff fixing

6.13) Security Enhancement Projects

This includes the following sub- Projects

1. Port Security System
2. IT Security System
The projects would ensure higher security for ChPTs and thereby increase
stakeholders confidence in it. This is very necessary as ChPT is a public utility and is
accountable to the general Public for appropriate safeguard and utilization of its
assets.
There has also been an increasing concern over security of the IT system. The project
implementation would lead to higher security as regards to the IT system of the port
National Institute Of Construction Management & Research

91

Port Development Strategy (2013-2015)

and provide the necessary confidence to all third parties dealing with the port on day
to day operations to interact electronically on the Port IT systems and the Internet

6.13.1) Port Security System

Given the security perception in the country and given the strategic nature of ports
assets, it is imperative that stringent security measures are in place for avoid any
security mishaps. Though providing security is not a specific strategic initiative, the
absence of security systems can cause havoc to the ports business if any unforeseen
event occurs. In light of the same, it is necessary that appropriate security
infrastructure upgrades are carried out in the context of ChPT being a public utility.

Description:

While the Port is ISPS Compliant, we are informed that security from sea-side attacks
(if any) can be improved. A security assessment needs to be carried out for identifying
the credibility of this perception. If the assessment is valid, then various measures like
the following can be put in place:
- Networked CCTV systems
- Container and vehicle security/control
- Perimeter control and intrusion detection
- Facility controls (quay, office, gate, and yard)
- Tracking systems (RFID, WiFi and DGPS)
- Data exchange and mining
- Cargo and equipment scanning
- Radioactivity detection devices
- Narrow and broadband (Wi-Fi) wireless networks
- Advanced biometric recognition and validation systems

National Institute Of Construction Management & Research

92

Port Development Strategy (2013-2015)

Key Benefits:

The main benefit will be increased security measures reducing security concerns and
therefore increasing stakeholder confidence in the Port.

6.13.2) IT Security System

With greater reliance on IT and ERP systems and the introduction of best-in class IT
processes, there would be increased concerns on the IT security and data safety fronts.
In the future, increased use of Information Technology tools is a given paradigm and
this will also correspondingly increase chances of IT security attacks and loss of
valuable MIS information and IT Infrastructure, not to mention loss of valuable
business and credibility of the port.
ChPT has been implementing an ERP solution for some time now. Once these are
implemented, significant operational and MIS data of the Port and its customers will
be residing on ChPT servers. ChPT will also be providing EDI and web based
connectivity to its customers for accessing and utilizing ChPT services. All of these
will have to be well protected from IT attacks and disasters. Being a public utility,
ChPT cannot afford to lose valuable business because of systems downtime in the
case of manmade / natural disasters. All of this call for a robust IT policy and design
and implementation of a disaster management plan.

Description:

Various measures like the following need to be put in place:

- Formulation of an IT Security Policy
- Formulation of a Disaster Management and Business Continuity Plan
- Implementation of the IT Security Policy

National Institute Of Construction Management & Research

93

Port Development Strategy (2013-2015)

Key Benefits:

The main benefit will be increased security measures reducing security concerns and
therefore increasing stakeholder confidence in the Port. Given the increased use of IT
in the Port, the establishment of an IT security Policy will address key concerns
amongst the customers in using the Port systems.

(Reference: Study on status of and challenges before the Indian shipping industry.
Technical report, Tata Energy Research Institute (TERI),
http://static.teriin.org/reports/ rep26/rep26.htm, 2002.
Annual report on Chinas shipping development. Technical report, Ministry of
Communications, Peoples Republic of China, 2004.
Containerisation International Yearbook. 2004.)

6.14) Conclusion

The advancement of information technology provides a wide range of options for the
container terminal operator to automate its information system. Electronic devices
employed in container terminals reduced the manual effort and paper flow, facilitated
timely information flow and enhanced control and quality of service and decision
made. The use of computer simulation has become a standard approach for evaluating
design of complex cargo handling facilities. It enabled us to investigate the behavior
of two different operational systems leading to significant savings derived from the
implementation of electronic devices in port terminals. The importance of information
technology, including the Internet, in supply-chain management, facilitating the
exchange of information in commercial transactions among enterprises and
individuals, and enhancing growth and profitability across the supply chain was also
discussed.

National Institute Of Construction Management & Research

94

Port Development Strategy (2013-2015)

CHAPTER 7
SWOT Analysis

7.1) Introduction
In the following chapter we have carried out SWOT, i.e, Strength, Weakness,
Opportunities and Threat analysis of Chennai Port as a whole. This kind of analysis is
generally carried out before undertaking any big projects or making any big changes
in the existing system to make the change or the new introduction to be more efficient
and effective.

7.2) Strengths

Geographical location and layout

Availability of facilities to handle all major different type of cargo
Connectivity to the hinterland
Strong user base, i.e., long term agreements with users
Location wise best on eastern seacoast for cruise operations
Compliant to ISO 9001:2000 norms
Good labor relations and IT implementation
Training institute owned and run by port authorities
Ongoing mega terminal project
Increase in traffic and revenues over the past few years
Availability of apt working capital to fund current needs

7.3) Weaknesses

Ban on traffic evacuation during day time and congested approach road
Restriction on the availability of land
Requirement of more efficient environment and pollution management
Underutilization of rail network
Need for improvement in service levels to retain users
Surplus amount of labor
High tariff rates
Perceived need for systematic marketing and consumer management

National Institute Of Construction Management & Research

95

Port Development Strategy (2013-2015)

7.4) Opportunities

Positive forecast in economic environment with GDP touching 7%

Strong forecasted demand and increase in containerization
Forecasts showing strong growth in automobile export
Implementation of Public-private models
Improving road connectivity
Forming JVs and strategic investment opportunities with minor and
intermediate ports
Facilitation of cruise tourism

7.5) Threats

Competition coming from major ports especially Tuticorin and Ennore

Competition coming from minor ports especially Krishnapatnam
Forecast of ban on export of minerals

National Institute Of Construction Management & Research

96

Port Development Strategy (2013-2015)

CHAPTER 8
Conclusion

Chennai port enjoys a lot of advantages over other ports such as its location, customer
base etc. But to survive and thrive in this ever changing modern world changes has to
be brought about not only in terms of infrastructure but also in terms of internal
functioning and business processes.
Following are the points which should be considered and kept in mind by the port
authorities in order to maintain its status in the ever increasing competitive world:

Proceeding towards infrastructure development of the port strategically

keeping in mind futuristic needs.

Carefully considering risks borne due to the development of other nearby ports
and using modern risk mitigation techniques to handle them.

Improving the efficiency of port operations using modern IT/IS tools and
techniques and using modern handling equipments and strategies.

Improving hinterland connectivity. Special attention should be provided for a

more efficient usage of railways in terms of connectivity and also port
operations.

Using aggressive yet calculated, modern marketing measures in order to

expand the customer base and also retain the existing ones.

Encouraging private sector participation via various PPP models in the

development of port to ensure healthy competition and also deliverance of
high quality services.

Given the location of Chennai port, focus should be given on the development
of better and more attractive cruise services.

Revision of tariff rates should be done with changing times in such a way that
it proves to be a win-win situation for the customer, labor union and the port
authorities.

National Institute Of Construction Management & Research

97

Port Development Strategy (2013-2015)

In this ever changing world nothing is 100% risk free and forecasts can be relied upon
only up to an extent, by keeping the aforementioned points in view and acting upon
them can significantly reduce the future risks and will provide a strong base in making
the Chennai port one of the most competitive, efficient and well managed port not
only of India but in the whole world.

---------------

National Institute Of Construction Management & Research

98

Port Development Strategy (2013-2015)

Bibliography
Websites

http://ipa.nic.in ( Indian port association)

http://www.chennaiport.gov.in

http://www.scribd.com

http://www.investingintamilnadu.com/india

www.sledeshare.net

www.wikipedia.org

www.internationaltransportforum.org

Journals

1) Hong Kong and shanghai ports: Challenges, Opportunities and Global

Competitiveness, City University of Hong Kong, June 2011 by Alexander
McKinnon.
2) Port expansion research paper Feb 2013
3) OECD Regional Development Working Papers, 2011/07
4) Trafikdage p Aalborg Universitet 2012 ISSN 1903-1092
5) Discussion Paper 2013 22, Gordon Wilmsmeier, Economic Commission for
Latin America and the Caribbean
6) Maritime Policy & Management: The flagship journal of international shipping
and port research(1976 - current)

National Institute Of Construction Management & Research

99

Port Development Strategy (2013-2015)

7) The Way a Third Generation Port Can Boost Local Employment: The Case of
Piraeus by Pardali Angeliki, Associate Professor Department of Maritime
Studies.
8) Benson, D., Bugg, R., Whitehead, G. (1994), Transport and Logistics. N.Y.
9) Castro, V., and Millan C., (1998), Port economic impact: methodologies and
application to the port of Santander. International Journal of Transport
Economics, xxv (2), 159-179.
10) Chang, S. (1978), In defence of port economic impact studies. Transportation
Journal 17,79-85
11) Dekker, T. (1993), Logistics and Transport. ISL, Bremen.
12) Slack, B.(1990), Intermodal transportation in North America and the
development of inland centers. Professional Geographer 42, p. 72-83.
13) Musso, E., Benacchio M., Ferrari C., (2000), Ports and Employment in Ports
Cities. Maritime Policy and Management 2(4), 283-311.
14) Study on status of and challenges before the Indian shipping industry. Technical
report, Tata Energy Research Institute (TERI), http://static.teriin.org/reports/
rep26/rep26.htm, 2002.
15) Annual report on Chinas shipping development. Technical report, Ministry of
Communications, Peoples Republic of China, 2004.
16) Containerisation International Yearbook. 2004.
17) Connecting India: Transport challenges and opportunities. Technical report,
Drewry/NOL.
18) Containerisation International Yearbook. 2005
19) N. Dekker. Interior motive. Containerisation International Magazine, March
2005.

National Institute Of Construction Management & Research

10
0

Port Development Strategy (2013-2015)

National Institute Of Construction Management & Research

10
1