Logistics cos building bridges across links

and ships to airlines, Indian transportation players too, are increasingly looking at vertical integration as a panacea to competitive woes.

“We have to ensure that our trains are full and we can do this if we have our own container ports and shipping lines. This way, the entire logistics link belongs to us,” said Concor MD Rakesh Mehrotra. “Customers are increasingly demanding single window transportation solutions and we have to be in a position to provide the forward and backward linkages they require.”

To supply such linkages, Concor is mulling options to enter the seaways business, which may include taking up all port operations for coastal vessels or only taking up rail interface for such vessels at port terminals and providing hinterland connectivity. It may also pick up equity stakes in sea-faring vessels to get its foothold into the space.

To take the link backwards, the government-owned Concor has already forayed into the container port business by taking a 26 per cent stake in Gateway Terminals India Pvt Ltd, which runs India’s largest container port — Jawaharlal Nehru Port. The company plans to pick up equity stakes in three more ports under the Gujarat Maritime Board, and is also keen on taking its cold-chain business countrywide in the next one year.

On the other end of the spectrum are shipping lines like APL and Maersk. Last year, APM Terminals, the port operating arm of the Denmark-based AP Moller-Maersk group, signed an agreement with Gujarat Pipavav Port (GPPL) to develop the port of Pipavav into a world-class one, for which it would invest Rs 1,272 crore over three years. The company would add another Rs 4,000 crore at the port over the medium term.

With GPPL having a joint venture with the Indian Railways to develop and operate the 271-km broad gauge rail line between Surendranagar and Pipavav port, the Maersk-promoted APM has also managed to get an indirect toe-hold into the railway operations space. Having recently developed a container freight station within the ICD complex at Dadri near New Delhi and with plans to pick up stakes in other ICDs across the country, Maersk seems to have its vertical integration strategy firmly in place.

“Rather than outsource parts of the logistics chain to government players, it is preferable to have a vertically integrated chain that can help the company guarantee its turnover time,” said Harsh Shrivastava, vice president (business development and marketing) at infrastructure consultancy firm Feedback Ventures.

However, not everyone is enthused about such integration forays. “Vertical integration masks inefficiencies in those links of the logistics chain that are working sub-optimally. Such moves are only another way for these mega companies to forge their position and create monopolies,” said K L Thapar, director of the Asian Institute of Transport Development, which will soon be holding a ‘Regional Seminar on Intermodal Logistics’ to discuss such issues.

Sailing into new waters

• PSU Concor, primarily into rail haulage of container cargo, plans to enter shipping business in next two years.

• Also plans to pick up equity stakes in three upcoming ports in Gujarat

• Will take cold chain business nationwide shortly; share of rail freight to topline likely to fall from 80% currently to 60%

• Shipping giant Maersk moving inland; picked up a stake in Pipavav Port

• Also has a stake in the Pipavav railway line

• Increasing its presence in ICDs like Dadri near New Delhi