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India: Corona-hit maritime and logistics sectors seek rescue package as trade slows; Indian ports declare force majeure

India: Corona-hit maritime and logistics sectors seek rescue package as trade slows

India’s maritime industry, the backbone of the export-import trade, is seeking a relief package from the government to deal with a looming crisis as the coronavirus pandemic takes a toll on the global economy.

Industry executives say that the devastation brought on by the pandemic has had a “disastrous effect on almost all container terminals, bulk cargo terminals, container freight stations (CFS) and inland container depots (IDCs) across India”.

“While industries such as hospitality, airlines and tourism have come under stress, we are underestimating what is going to happen to the ports and logistics sectors in the country. It is going to completely collapse in the next two to three months,” said the managing director of a port logistics company.

“The government should recognise that the industry will go through a severe Black Swan event and support the sector. Ports and related logistics segments are an essential service; it’s a large employer and there needs to be continuity,” he added.

“Ports and logistics are a high-risk industry and the pain will be massive,” he said.

Ports, given its interface with other countries on trade, has been hit by a steep drop in volumes owing to disruptions in global supply chain and uncertainty prevailing on how long it will continue.

The volume decline, combined with delay in collection of dues from customers, are driving the maritime industry to the brink of default in payment of statutory dues, dues to port trusts, dues to banks and financial institutions, payment of salaries and wages to employees and contractual workers and default in payments to suppliers including small and medium enterprises.

The difficulties faced by the industry are extremely severe and cannot be eased without the support of the government, said a spokesman for the Indian Private Ports and Terminals Association (IPPTA).

The short-term (90 days) relief sought by the marine and logistics industries include moratorium on payment of interest and principal amount to banks /FIIs, waiver of interest and penalty on non-payment of GST, TDS and other taxes, and instructions to insurance companies to treat COVID–19 as a natural disaster and process the insurance claims on the basis of Business Interruptions (BIs).

Banks/FIIs should be directed to disburse funds under the sanctioned facilities, where it is pending for minor paper work.

The marine and logistics operators are also seeking waiver on payment of revenue share/royalty, land lease payments to major port trusts and minimum guaranteed throughput (MGT) obligations in their PPP contracts for a period of 180 days till August.

Port concessions, they argue, should be extended by years ― to 32 years from 30 years.

Cargo terminal operators have also urged major port trusts to hike the discount in vessel-related charges (VRC) by an extra 20 per cent over the prevailing levels.

Major port trusts should allocate suitable land adjacent to the existing terminals for storage of empty containers, free of cost, for 90 days. “There is a huge imbalance in the availability of empty containers and enough empty inventories are required to support exports,” the IPPTA spokesman said.

Funding to ports and logistics sectors should be treated as priority sector lending by Indian banks, and interest rates for setting up new port projects / completion of on-going port projects be cut by 200 basis points, besides reducing the rate of interest on term loans by 100 basis points.

The government should reduce GST rates for ports and logistics sectors to 12 per cent, the lobby group said, adding that GST input credit be allowed on constructions of immovable port and logistics infrastructure projects.

Given the uncertainty in export-import trade, increased focus should be lent to movement of cargo by the coastal route. “It requires a national policy on coastal container movement in a time-bound manner,” IPPTA added.
Source: The Hindu Business Line

Indian ports declare force majeure
Jason Jiang March 26th, 2020

Several major Indian ports, including those operated by Adani Ports, the country’s largest private port operator, have declared force majeure as the country started a three-week lockdown in an attempt to contain the spread of the coronavirus.

India’s shipping ministry has issued a letter allowing ports to consider the coronavirus pandemic as valid grounds for invoking force majeure on port activities and operations. The decision follows the government of India announcing a nationwide lockdown on March 24 and will affect all 1.3bn of its citizens.

Adani Ports has declared force majeure at its facilities in Mundra, Tuna and Dhamra.

“In view of the COVID-19 pandemic, port hereby notifies the force majeure event, wherein port will not be responsible for any claims, damages, charges, etc whatsoever arising out of and /or connected to the above force majeure event, either directly or indirectly, which without any limitation would include vessel demurrages, inter alia due to pre-berthing or any other delays of whatsoever nature and accordingly the discharge rate guaranteed under the agreement shall also not be applicable for all vessels to be handled at port for any delay or disturbance in the port services during the force majeure period,” Adani Ports announced.

Adani Ports added that port services are categorised as essential services and the group is endeavouring to continue port operations with the support of government authorities to protect and secure the supply chain of industries.

Gujarat Maritime Board (GMB), the port operator in the Gujarat state, said in a release that the port has been ordered to remain closed until March 31 and as a result the ports have declared force majeure for all its contracts, deliverables, promises, assurances, events and occurrences.

“GMB will review the present notification of force majeure from time to time and till such time as a written notification of cessation of force majeure is issued, the present intimation shall stand,” GMB said.

The commodity trading activities at Indian ports are expected to be severely disrupted by the force majeure events.

Market intelligence consultancy Argus Media reported that coking coal imports to India have begun to be affected by the coronavirus outbreak as berthing and uploading activities are halted at some major ports including Gangavaram, Mormugao and Kakinada.

According to a Reuters report, Indian LNG importers Petronet LNG, Gujarat State Petroleum, and GAIL have all issued force majeure notices as gas demand slumps. This comes after a similar move by Chinese LNG importers last month.

India is the fourth largest LNG importer in the world, accounting for around 7% of the global LNG imports.

According to Eastport R&S, the nationwide lockdown is expected to hurt India’s palm oil imports with refineries, land transportation, and port operations all impacted. India shipped in over 9m tonnes of palm oil last year, making it the world’s largest importer by a large margin.

“Eastport R&S would highlight there is significant downside risks to estimates of estimates of palm oil import losses, given the uncertainty regarding how demand will hold up during the lockdown period, and whether or not it will be extended,” Eastport R&S said.

“India in particular is a country which is significantly reliant on imports, in particular of energy – oil, gas, coal, but also on everyday manufactured goods (cloths, electronics, machinery) which are to a large proportion imported from abroad. Hence any significant restrictions on port operations or on customs operation would first of all be very damaging to India itself,” said Ralph Leszczynski, head of research at shipbroking house Banchero Costa.

“More widely, any significant restrictions on imports to India would have an impact on coal trades from Indonesia, Australia and South Africa. And on crude oil, LNG and LPG imports to India, which are primarily sourced from the Middle East,” Leszczynski added.

From a liner perspective, Andy Lane, head of Singapore-based CTI Consultancy, reckoned the force majeure news out of India was likely to result in greater costs.

“Where ports are either closed or congested, liners will then need to over-carry imports and discharge them elsewhere for transhipment and later shipment back to their destination ports. Additional costs, and containers detained for longer will be the outcome. The inability to lift exports can have negative impacts on load factors and utilisation,” Lane told Splash today.