Shipping containers, made in India – how Modi’s government aims to reduce reliance on China’s ‘monopoly’

New Delhi: To reduce its dependence on China, the Modi government is working on a comprehensive plan to manufacture maritime-grade containers in India that includes providing production incentives (PLIs) to local companies, it has learned. ThePrint.

There has been a huge shortage of shipping grade containers around the world during the Covid-19 pandemic. The shortage had resulted in shipping lines phenomenal increase in container freight rates around the world, who badly affected India Export Import Supply Chain.

Currently, only a few small domestic companies manufacture containers that provide rail-based services, but the number is miniscule. The Container Corporation of India Limited (CONCOR), a Public Sector Enterprise (PSU) under the Ministry of Railways, is India’s largest container fleet operator with 37,000 containers. But the entire fleet for the domestic segment is imported from China, which has a monopoly in the sector.

For the domestic segment alone, CONCOR has a requirement approximately 50,000 containers over the next three years.

CONCOR, which last year placed orders for the manufacture of 8,000 containers with national companies, has just placed a second order for another 10,000 containers from a company based in Bhavnagar.

To study the problem and develop a plan to create maritime grade container manufacturing capacity in India, an inter-ministerial group set up on the instructions of the Prime Minister’s office in June has now recommended a series of measures, including the granting of LIPs to indigenous container manufacturing companies.

“The draft LIP is ready and is being circulated for inter-ministerial consultations,” a senior government official, who declined to be named, told ThePrint.

The interministerial committee which includes officials from the Ministries of Shipping, Steel and Trade, as well as representatives from CONCOR and the National Industrial Corridor Development Corporation (NICDC) also looked at issues such as the availability of the specified grade of steel needed to manufacture containers, the rise of inspection panels and agencies to certify domestically produced containers.

The committee’s recommendations and the actions taken by the respective agencies so far have been saw again by Railway Minister Ashwini Vaishnaw, Shipping Minister Sarbananda Sonowal and Health Minister Mansukh Mandaviya on August 15.

During interactions with industry stakeholders, the committee was informed that a specific type of steel is used to manufacture containers, but currently there is no Indian standard available for the same.

“You need the specified Corten-A steel to make containers. The committee has taken up the matter with the Bureau of Indian Standards (BIS), which has now issued an Indian standard, which is equivalent to the specifications for Corten-A steel,” an official, who was part of the committee, told ThePrint .

The Ministry of Steel is also in talks with steel fabricators to register with BIS and obtain a license to roll steel to specified standards. Also, on instruction from the committee, the Director General (Navigation) increased the panel of inspection and certification bodies from two to six.

These agencies certify the containers according to the ISO standard test.


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A long way to go to become a container hub, according to industry experts

While India has paved the way for mass manufacturing of required international quality containers at reasonable rates, industry experts believe that India still has a long way to go before becoming a hub for the export of these containers.

Experts have said that government support in the form of PLIs is essential if India is to speed up container manufacturing, but that is not all. The government should consider having its own shipping company to complete the supply chain integration.

Naresh Kumar, Director, Kalyani Cast Tech Pvt. Limited, a container manufacturing company, said that today containers are either owned by shipping lines or large leasing companies. “There are no shipping lines in India. Only a tiny number of containers belong to India and 98.99% of containers in India are made in China. This is an area where India should contribute given the growth of our exports.

Kumar added that if India is to become a container hub, it must cater to the exim (import-export) market and the domestic market is fragile.

Dr A Sakthivel, President of the Federation of Indian Export Organizations, agrees. “Shipping lines will always be in demand because we need to export as much as import. Once we have our own shipping company, the demand for containers will come automatically. The government should encourage private companies to come forward and set up shipping lines as well as get into container manufacturing,” he told ThePrint.

Shailesh Garg, director of Drewry Shipping Consultants Limited, said India needs to see how the global market works: “Currently it’s really a monopoly and getting into it is a challenge. We can probably try to break it by reducing prices.

“The problem is that we are on the higher side of the cost and if we are to become competitive then how much subsidy can we provide, will the steel companies in India increase the supply of the required steel? and incentives does the government give and third, if we make 1,000 to 5,000 containers a year, how are we going to compete on economies of scale?” he said.

Garg further said that India has started thinking about it (container manufacturing) as a reaction to the shortage of containers encountered during the pandemic. “But if we don’t do it the right way, it could die out again like it used to. Accelerating container manufacturing is good, but India should also think about supporting and promoting its own container fleet,” he added.

Prior to 2020, shipping lines, Garg continued, were under financial strain and faced sluggish demand, leading to limited investment in their container inventory. “The two or three container manufacturing companies in China were operating at 50-60% capacity due to low demand from shipping lines. Thus, inventory was also limited to cope with the sudden increase in demand observed in the second half of 2020, associated with supply chain bottlenecks. This has led to container shortages in key markets and impacted the entire container supply chain. »

But in the past two years, shipping lines and leasing companies have placed more orders to build up their inventory, and more containers have been built. “Additionally, the easing of supply chain constraints has also helped. Now the general situation has improved,” he said.

Chinese container-making firms are also operating at full capacity and shipping companies could slow the curb on new orders given the expected slowdown in global trade, Drewry’s director explained. “So the question is who will buy these containers if India makes them? Therefore, we need to take a more holistic view if we are to seriously promote container manufacturing and compete globally.

Kumar, quoted earlier, said that if India is to compete with China, the government will have to give the PLI like China does. “Our rates are high compared to China. The Chinese government grants 15% PLI to container manufacturers. India will also need to create the right ecosystem for the private sector to enter. Unless our rates are competitive, why is anyone coming to buy containers from us? »

“Container manufacturing is a $9-10 billion industry. India should aim for at least 9-10% share initially,” he added.

(Edited by Theres Sudeep)


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