THE INDIAN LOGISTICS SECTOR - 2016

India’s logistics sector is poised for accelerated growth, led by GDP revival, ramp up in transport infrastructure, e-commerce penetration, impending GST implementation, and other initiatives like ‘Make in India.’

This offers opportunities across the spectrum for companies in transportation, storage, distribution, and allied services. Empirical evidence suggests the Indian logistics industry grows at 1.5-2 times the GDP growth. Infrastructural bottlenecks that have stifled sector’s growth and promoted inefficiency are also being addressed by the government.

Building of dedicated rail freight corridors will promote efficient haulage of containerised cargo by rail. Also, setting up of various industrial corridors along the dedicated freight route will metamorphose the warehousing business– from small warehouses spread across the country to large, global-size warehouses concentrated in a few hubs.

The proposed new goods and services tax (GST) regime and e-commerce will alter the landscape in warehousing, supply chain management and third party logistics business. GST implementation will be a game-changing event for businesses and particularly for organized logistics players.

It is stated that the logistics requirement for e-commerce will grow as exponentially as e-commerce.

Indian logistics sector is estimated to have grown at a healthy 15% in the last five years. However, growth in sub-sectors varies, with the lowest being in basic trucking operations and highest in supply chain and e-tailing logistics. Some studies estimate the share of India’s logistics spend in GDP at 13 - 15% (versus 7-8% in developed countries), implying overall size of $180-220 bn (direct costs +wastages from inefficiencies). A comparison with other countries shows inefficiencies are high in the Indian logistics sector.

With the present government thrust and focus on movement of goods by sea, making use of the vast coastline as well as rivers it is envisaged that in time to come the movement of goods by road will be a lot less as compared to today.

Further, considering the government’s plans to link railway network directly to ports, this in turn will increase railway’s shares in logistic movement.

The focused efforts for increasing the ease of doing business in the country will definitely have long term positive impact. The reduction in the cost of doing business is as important as the simplification of processes. Foreign consumption is beyond our control, however domestic consumption substantially depends on the growth of the Indian economy while attention is always on national policies and partially on state governmental actions, all the cutting edge levels of governance, including the local self-government units like Municipalities and Panchayats, have a role in making India business friendly.

Infrastructural bottlenecks across modes (rail, road, waterways) have stifled the sector’s growth. Capacity constraints and inefficiencies can be noted from the high transit time in rail as key train routes operate at >110% utilisation, thus leading to an average speed of 25 km per hour. The road sector is fraught with inadequate and low-quality highway availability, thereby limiting the trucks’ size and impacting economies of operation. Despite being an economical mode of transport, railways have lost market share in freight movement to roads in the last few decades due to capacity constraints. Water transport is 6 - 7% although comparatively low it’s the most convenient and environmental friendly mode compared to the others. Compared to other countries, India’s rail share in goods transport is 35%, which has come down from 60% in 1980s and 48% in 1990s.

Also, low penetration of new technology in the supply chain process is resulting in damage of goods. India has the least warehouse capacity with modern facilities, and given the fragmented industry state (large share with unorganised players), investment in IT infrastructure is almost absent at required scale.

Another key constraint is administrative delays. Despite being a relatively low-cost country, logistics cost in India is higher due to administrative delays and bureaucratic led by paper work—leading to huge inventory investments and wastage—and a complex tax structure.

The maritime and logistics sectors are totally dependent on the rest of the economy, especially the manufacturing and the infrastructure sectors. Of course, the Indian economy does not function in isolation and the economic indicators have been unimpressive throughout the world, even in China. But there are several possible governmental interventions which could make India a better place for business, and a better place to live in.

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MAIB 2014 Report - No Crew Deaths on UK Vessels - An excellent achievement

The Marine Accident Investigation Branch (MAIB) U.K. established in 1989 following the Herald of Free Enterprise disaster, is an independent unit within the Department for Transport in U.K. The MAIB investigates marine accidents involving UK vessels worldwide and all vessels in UK territorial waters. Their job is to help prevent further avoidable accidents from occurring and not to establish blame or liability.

Empowered by the Merchant Shipping Act 1995, it is a government agency headed by the Chief Inspector of Marine Accidents. The MAIB is the marine equivalent of the much older Air Accidents Investigation Branch and the more recent Rail Accident Investigation Branch, all of them report directly to the Secretary of State for Transport.

Investigations are thorough but are strictly limited to establishing cause, promoting awareness of risks and preventing recurrence. Reporting of accidents to the MAIB is mandatory for all commercially operated vessels in UK waters and for all UK registered vessels worldwide. The MAIB receives between 1000 and 2000 incident reports annually of which 30 to 50 become full investigations with published reports. The choice of which accidents are investigated is made on the basis of the scope of the safety lessons which may be learned as a result of the investigation. The reports do not apportion blame and do not establish liability.

In 2014 the Marine Accident Investigation Branch received 1270 reports of accidents of all types and severity which led to 31 separate investigations being launched.

Recently, MAIB has published their annual report for 2014. The highlights of the report are given below:

• For the fifth year in succession no UK merchant vessel of > 100gt was lost;

• The overall accident rate for UK merchant vessels > 100gt was unchanged from 2013 at 88 per 1000 vessels;

• There were no crew deaths on UK merchant vessels >100gt in 2014 and a review of available records from the last 50 years shows that this has never happened before;

• The average number of deaths over the last 10 years is 4 per year

Several maritime countries, including India, have a marine accident investigation branch either as an independent unit or within their maritime administration and carry out marine accident investigations in a similar way.

Major IMO Conventions (SOLAS, MARPOL, LOAD LINES, STCW, etc.), ISM Code/Safety Management System, National and Classification requirements aim towards minimizing loss of life, personal injury, loss and damage to property (ship and cargo), accidents, pollution incidents and hazardous occurrences, and thereby build-up a good safety culture throughout the world fleet. The shipping industry is continually striving for achieving zero accidents and in spite of good efforts, this may not be possible as something, sometimes does tend go wrong.

The MAIB (UK) 2014 report states that there were no crew deaths on UK merchant vessels > 100gt, and that this has never happened before for the last 50 years. This indeed is laudable. Further, that for the fifth year in succession no UK merchant vessels of > 100gt were lost, is also a very good record. 

The afore-said highlights of the MAIB (UK) 2014 report is good encouragement for the rest of the world’s shipping industry to strive even harder towards the goal of zero accidents.

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Accidents at sea due to misuse of alcohol

Misuse of alcohol by some seafarers has been an age old problem. Long voyages away from home, family and friends, monotony, lack of social interaction, isolation, etc. makes some seafarers get addicted thus dependent upon the soothing effects of alcohol. A seafarer under the influence of alcohol is a hazard for the safety of ship and personnel.

Incorrect use of alcohol directly affects the fitness and ability of a seafarer to perform watch keeping and other duties making accidents much more likely.

In recent years this problem has been addressed by putting stringent restrictions on the consumption of alcohol through STCW, ILO, OCIMF, ISF, INTERTANKO, Flag and Port States, ISM/SMS shipboard manuals, etc.

Accordingly, some companies have introduced a zero alcohol policy, whereas other allow restricted intake (0.04% blood alcohol level, about 2 units) during periods more than 4 hours before reporting for watch or duty.

The afore-said alcohol policy has had the desired effects and accidents due to misuse of alcohol have reduced, but still there are a few accidents taking place probably due to ineffective implementation on such ships.

In a recent case investigated by MAIB(UK), in the early hours of 18 February last year the Scotish village of Kilchoan was disturbed by the sound of metal grinding against rocks, a vessel sailing from Belfast to Skogn, Norway had missed a course change at a waypoint and crashed into the rugged coastline near Mingary Pier, having narrowly missed another outcrop of rocks.

Half an hour later the master advised Stornoway Coastguard that there was no damage, no pollution and there were no injuries, however when the Tobermory lifeboat reached the stricken vessel, it was clear that the situation was more serious. The vessel’s hull had been breached, an engine room sludge tank was filling with water and the steering gear was damaged. As the ship came off the rocks, 25 tonnes of marine gas oil (MGO) spilled into the Sound of Mull.

MAIB found that the root cause was alcohol - specifically, the half litre of rum that the chief officer had consumed in his cabin, prior to going on watch. This led to missing an important course alteration at a way point and grounding thereafter.

The company has taken corrective and preventive measures in their fleet to enhance compliance with SMS with particular emphasis on control of alcohol consumption and bridge resource management.

The above accident is a good lesson to be learnt by all companies to once again review the implementation and effectiveness of their SMS alcohol policy in the interest of safety on board and to further enhance safety culture.

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‘CABOTAGE’

The Indian Cabotage rules are contained in Sections 406 and407 under Part XIV of the Merchant Shipping Act 1958 (The Act). In summary, pursuant to these Sections only Indian flagged vessels or vessels chartered by an Indian citizen or company, operating under a license granted by the Director General of Shipping (Director General), can carry cargo from one Indian port to another Indian port. Foreign flagged vessels are permitted to carry cargo only if Indian flagged vessels are not available after attaining due permission from DG Shipping. 

Marine transport in India has evolved considerably over the past few years to become an integral component of India's economic development. Fuelled by the strong growth of its domestic industry, India is rapidly cementing a position as a key player in the maritime sector globally. 

The country's focus on strengthening the domestic maritime industry, and its role in supporting broader economic goals, is highlighted in the National Maritime Agenda (the Agenda) developed by the Indian Ministry of Shipping and Transport. Among other things, a key objective of the Agenda is for India's total foreign trade to account for 5% of global market share by the year 2020. This target is in line with the present Government's wider policy of economic reforms, including the recently released Foreign Trade Policy that, along with a range of reforms of export policy and procedure, includes a commitment to nearly exports by 2020 to $900 billion. 

Traditionally the movement of goods by sea in India has reflected relatively higher total annual imports compared to total exports. India's Total Import from April-2014 to March-2015 was approximately 450 Billion USD 

Industry bodies such as the Indian National Shipowner’s Association (INSA) have suggested that the absence of a regime that supports absolute Cabotage in India is a major reason for low investment in coastal shipping. Consequently INSA has opposed any relaxation of current Cabotage law by arguing that this move would potentially undermine the position of the domestic shipping industry in coastal trading. 

However, recent economic reforms have triggered a high rate of economic growth in India in which has, in turn, significantly increased demand for the transportation of goods. As demand is mostly serviced by rail and/or road transport systems, shipping transport services merely 8 - 9% of total current demand. 

In coastal shipping, the passage of goods in both directions is not equal. This leads to imbalance; the cargo movement pattern is dependent on the production and availability of goods, demand and the distance separating production centres from the points of destination of those good. 

In its opposition to any proposed relaxation of Cabotage in India, it is noted that there is no level playing field between the foreign lines and Indian shipping lines which are subject to tax, duty on bunker charges, domestic customs issues, etc.

It appears that the solution to this quandary is likely to come from seeking a balanced solution; the Indian government reportedly plans to seek a relaxation of the Cabotage rules whilst avoiding undue hardship to the Indian shipping sector, possibly by providing tax, duty and cargo incentives to them. In the context of India's wide-spread economic reforms, such a move could form the next step in sustainably expanding India's role in coastal shipping considering the government’s thrust in enhancing this sector.

It is apparent that coastal shipping will be integral to the growth of the Indian economy generally and also specifically towards the achievement of the nation's ambitious trade targets.

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‘The Rough Road of Steel Scrap Prices’

At the beginning of 2016 the scrap steel and iron prices have reached multi year lows, and some markets are even lower than back in 2008 when the overall markets collapsed. Since then the prices have dropped even lower!! In the past year and half the overall global demand for metals has dipped way down below what we have seen not only in copper prices, but steel, aluminum, stainless, and almost all other metal prices decrease significantly. The market is in a large flux right now and because of the world supply and demand for both the finished metal and its raw materials, there is not a lot of room for people to see the prices going up anytime soon. 

Scrap metal prices are a function of the price of finished steel. In 2015 US scrap export volumes dropped sharply by 15% mainly due to markets in Turkey, Middle East and Asia opting to purchase (cheap) billets from China instead of scrap. This has resulted in global scrap prices remaining under pressure which has continued during the first two months of this year albeit with the billet-scrap price advantage reducing. The recent gains in iron ore prices may produce modest gains in scrap prices. 

One good indicator of the market is the price of oil. The sharp drop of the oil prices has affected the economy of many countries as well as the demand of many industries. Hence we will be hard pressed to see the market improve in the near term though the Brent crude has recently shown some resilience and in fact a small bounce. Until we have situations like oil prices are leveling out, China cutting back on their steel manufacturing capacities, general improvement in world trade, etc. we may not see firmer prices. The US Presidental election has also to be factored in. 

Hence 2016 is expected to be a tough year for the steel, scrap steel and commodity markets in general and not many pundits are betting on a sharp turn around.

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Revival of INSTC – ‘An Opportunity for India in Central Asia’

The International North South Transport Corridor (INSTC) is an ancient trade route that connected South Asia with North Europe for centuries. This route was used by European, Indian, Russian and other foreign traders. Thousands of Indian traders have used this route to reach out to central Asian markets from 15th to early 19th centuries.

 The modern day International North South Transport Corridor (INSTC) is a multi-modal trade transport network that includes rail, road, and water transport from Mumbai in India via Bandar Abbas in Iran to Moscow and in St. Petersburg in Russia. It addresses the need for greater economic and energy cooperation between South, Central, West Asian and Northern European region.

The INSTC envisages movement of goods from Mumbai (India) to Bandar Abbas (Iran) by sea, from Bandar Abbas to Bandar-e-Anzali (an Iranian port on the Caspian Sea) by road, and then from Bandar-e-Anzali to Astrakhan (a Caspian port in the Russian Federation) by ship across the Caspian Sea, and thereafter from Astrakhan to other regions of the Russian Federation and further into Europe by Russian railways.

The successful activation of the corridor will help connect India to Russia within 16-21 days at competitive freight rates leading to development of trade on the INSTC.

The INSTC was initiated by Russia, India and Iran in September 2000 to establish transportation networks among the member states and to enhance connectivity with the land locked region of Central Asia. The agreement was ratified by all the three signatory states and has been in force since May 16, 2002.

Later on, the INSTC was expanded to include eleven new members, namely: Republic of Azerbaijan, Republic of Armenia, Republic of Kazakhstan, Kyrgyz Republic, Republic of Tajikistan, Republic of Turkey, Republic of Ukraine, Republic of Belarus, Oman, Syria, Bulgaria.

The Foreign Trade Policy of India, 2015-20, has highlighted the importance of the International North-South Transport Corridor (INSTC) in expanding India’s trade and investment links with Central Asia.

The strategic significance of INSTC for India is immense:

 a. The INSTC has particular economic and strategic relevance to India given the increasing regional ambitions of China through its One Belt, One Road Initiative. The proposed INSTC trade corridor could help India secure its interests in Central Asia and beyond.

b. India is expected to negotiate a comprehensive economic partnership agreement with the Eurasian Economic Union, which consists of Belarus, Kazakhstan, Kyrgyzstan and Russia, with Armenia likely to join. This agreement would help India expand its economic, trade and investment opportunities in this region.

c. At present, India has to depend on the routes through China and Europe to reach out to Eurasia, which are long, expensive and time consuming. Therefore, we are in need for a route which would be relatively shorter, cheaper and, more importantly, safer and well secured. It is estimated that the INSTC can reduce time and cost of container delivery by 30-40 per cent.

d. From India’s point of view, this corridor would help India to reach out to Central Asia and Russia, and enable transportation of goods at cheaper cost to the European markets. In addition, Indian exports could potentially get a competitive advantage due to lower cost and less delivery time.

At present, India, with the help of Russia and Azerbaijan, has successfully tested the main routes of the North South International Transport Corridor in order to assess its cost-effectiveness and the possibility of Indian companies using the route for trade with former Soviet republics.

A lot of work still has to be done to revive this ancient trade route in a modern way with multi-modal transport. We are looking forward to participate in this alternative trade route by providing a transport logistics service for the benefit of International and Indian trade to/from central Asia and North Europe.

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‘ROLE of CFS in INDIA – Import & Export’

All Cargo imported into the country or exported out of the country by sea, air, land or rail routes are governed by the provisions of the Customs Act, 1962 and other laws of the country related to the country. Customs ensures that the import and export of goods are in compliance with the Customs Act and other laws in force. Accordingly, customs procedures are intended to provide definite, predictable methods by which the goods can enter the country and get cleared on payment of applicable import duties, fulfilling the requirements of the law of the land.

To regulate and to exercise effective control over import and export activities, goods are allowed for import/export at notified places under section 7 of the Customs Act, 1962. Custodians are appointed under section 45 of the Customs Act, 1962 for safe storage of goods till they are cleared for home consumption or warehoused. Clearance of goods involves classification, assessment, examination and payment of Customs duty on imported cargo on the basis of Bill of Entry presented by the importer or his authorized agent. The Central Board of Excise and Customs (CBEC) have prescribed the procedures through notifications, rules, regulations and circulars which are implemented by field formations. These are updated and modified according to the need, demands of trade and to improve the efficiency of the system.

CFS is a place where containers are stuffed, de-stuffed and segregation of export/import cargo takes place. With the growing volume of international trade, the need for expeditious clearance of goods at the port within the minimum possible time has been gaining importance. This is more so when the ports are facing congestion at their premises. Further, for optimal utilization of existing infrastructure (space, equipment), the goods that land at ports need to be evacuated straight away without any loss of time. Accordingly the concept of Container Freight Stations, (CFS) has grown in importance along with the development and growth of ports.

A CFS is an extended arm of Port/ ICD where import/ export goods are kept till completion of their examination and clearance. The imported goods can be immediately shifted from the port to CFS which also helps in the reduction of port congestion. All the activities related to clearance of goods for home consumption, warehousing, temporary admissions, re-export, temporary storage for onward transit and outright export and transshipments takes place from such stations. 

Therefore, clearance of goods from CFS is an important point of consideration for trade in respect of export/ import Cargo as it is the final Customs contact point.

The goods received at ports are brought to CFS and stacked for customs and examination for deliverance to consignee. In respect of import consignment, the Steamer Agents/liners/ Importers desiring to take the consignment to CFS, file Import General Manifests in the port. After obtaining the permission from the AC/DC, the Container moves to CFS under Customs escort or under bond and bank guarantee. The CFS allow de-stuffing of the goods. The CHA / importer files the Bill of Entry at Customs House and then Customs formalities of assessment, examination and payment of duty are completed. Thereafter, Customs gives “Out of Charge” and the Custodian releases the goods from CFS by issuing a Gate-Pass.

In respect of exports, the goods are brought directly to CFS under a Shipping Bill. The export cargo in Less than Container Load (LCL)/ Full container Load (FCL) is received by the Custodian of CFS for safe custody. After stuffing of the goods, Container/ Customs Bonded Truck (CBT) is sealed by the Custom Officer and the same is removed from CFS for export through the terminal.

The Inter Ministerial Group (IMG) noted that the Department of Revenue has already taken certain significant steps in the area of facilitation of the trade and simplification of procedures. There is a permanent Action Group on Trade Facilitation which recommends simplification of customs procedures leading to reduction of dwell time in cargo clearances. This group also provides inputs for Trade Facilitation Negotiations at the WTO  The Action Group has since its inception, made The recommendations on which the CBEC has already issued instructions with the overall objective of reduction in dwell time and simplification of procedures:-

1. Direct clearance facility of containers from the ports, without the need for transshipping them to CFS/Customs areas provided to Importers availing Green Channel facility.
2. Reducing procedural formalities at airports by dispensing with the permission required from Customs for palletization of cargo.
3. Imposing penalty on incorrect and incomplete filing of import manifest/ report with the objective of reducing dwell time of cargo.

The overall goal should be to release about 70% of the consignments on the basis of system appraisal and without examination of the cargo. This should be achieved within six months of the full implementation and should be monitored by the CBEC. Regular periodic monitoring should be done by CBEC for further enhancing the facilitation measures.

A faster delivery system needs to be put into place by creating a separate area in the port premises clearly earmarked for immediate delivery of cargo to the specified accredited importers. The proposed arrangement would enable accredited importers to move out their containers without necessarily going through a C.F.S.

Thus, the recommendations made by the Inter Ministerial Group (IMG) in the present report will bring about an efficient and facilitative environment for expeditious Customs clearance of cargo.

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Piracy on the high seas - Its impact on trade and business

For many people, the phrase maritime piracy evokes images of a one-eyed sailor drinking rum and singing obscene songs. For some younger people, piracy may bring to mind the picture of Hollywood actor Johnny Depp, wearing a headband in a scene from the film Pirates of the Caribbean.

However Maritime Piracy is not just an action movie. It is the practice of attacking and robbing ships at sea. The UN Convention on the Law of the Sea defines piracy as “illegal acts of violence or detention” committed on the high seas against ships or aircraft. Piracy is a serious problem and it poses a real threat not only to the safety of vessels and their crews, but also to the economies of affected countries.

Although the issue of piracy recently rather dropped out of the top headlines, the world’s oceans have certainly not become any safer. On the contrary, the level of risk remains high, especially around the coasts of Africa and in the Singapore Straits.  For example in the Horn of Africa, despite a strong presence of naval forces patrolling in the Gulf of Aden and the adjacent Indian Ocean; merchant navy vessels are regularly attacked and hijacked. Of 445 attacks reported globally in 2010, 219 were attributed to Somali pirates. 49 of these were successful hijacking. Yet the waters of Somalia are far from being the only piracy hotspot for International Shipping. Vessels also fall prey to attacks especially off the coast of Nigeria, Indonesia, Malaysia, Bangladesh and in South China Sea.

Though the attacks may differ in location, method and impact, they all share a common trait which is they have become a problem of ‘International Politics’. There are 2 reasons:

1. Shipping routes form arteries of global economy accounting for over 80% of International trade.  So violent attacks here have the potential to cause real harm
2. Piracy touches directly on elementary interests of all trading nations. Security problems on land are increasingly linked to questions of maritime security in the global context.

The spectrum of options is broad and advise is offered to ship owners and masters in constantly being reviewed and Best Management practices guide compiled by IMO and the shipping industry. Measures adopted include registering vessels, planning the transit through the high risk areas around Somalia with national and international authorities that have forces deployed to the region, developing an internal emergency plan to provide an effective response. 

Since the west coast of India is also vulnerable to the long range activities of the Somali pirates, constant vigilance has been enforced.  This however does not prevent random acts of stealing on vessel at anchor which can be considered as piracy on a reduced scale. 

But piracy is not the only security threat at sea. Piracy has drawn attention to wider problems of maritime insecurity, such as trafficking and smuggling of humans, weapons and narcotics, and illegal and unregulated fishing activities. Hence, the attention currently being given to the fight against piracy could be used as a stepping stone by the international community to create sustainable institutions of maritime security. The Indian Government is particularly concerned about the transit of vessels along its coast especially after the Nov 2008 Mumbai terrorist attack where the terrorist landed in the city from the sea.

International institutions are crucial for counter-piracy efforts, but they require long-term and multinational commitment. The African Union has already declared that its objective is to implement the African Maritime Security Strategy by 2050. Among the strategy’s goals are to “ensure security and safety of maritime transportation systems,” and to “prevent hostile and criminal acts at sea, and to coordinate/harmonize the prosecution of the offenders.”

It is a long-term strategy, but without a doubt concerted action is needed now to stop piracy in West and South Africa before it deteriorates and spreads to other coastal areas. 

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Crude Oil exports from U.S. - A recent welcome development!

Mineral oil, now known as crude oil was accidently discovered in Pennsylvania (US) in 1848. The first oil well was drilled in the same location in 1859 and commercial production commenced in 1860. Exports of crude oil by sea commenced in 1861, when a wooden hulled sailing ship, “Elizabeth Watts” carried a full cargo of oil and economic development US became the largest consumer of crude oil (in barrels) from US to UK across the Atlantic.

With industrialization and economic development US became the largest consumer of crude oil. For over a century, US were both an exporter and importer of crude oil, but owing to its high domestic consumption has been a new importer.

Exporting domestically produced crude oil made US an important participant in the global crude oil market, which sets crude prices. This ended in the 1970’s when, in response to the 1973 oil embargo crises, a ban on domestic oil exports was imposed.

Since then, the ban has continued and with growing domestic consumption, declining production for decades, the dependence on imports increased, and made exports unthinkable. Developments of new technology, horizontal drilling and hydraulic fracturing have squeezed torrents of oil from shale rock deep underground. This has resulted in production of more oil in 2013 than ever before and production surpassed imports for the first time in over two decades.

In June 2015, US surpassed Russia and Saudi Arabia to become the world’s biggest producer of crude oil and gas. The next logical step was obviously to lift the ban on exports. However on account of high domestic consumption, US still will be an importer of oil though imports have reduced by about 50% over the last five years.

Now in a historic move considered unthinkable even a few years ago, US has lifted a 40 year ban (1970’s) on export of crude oil and exports of crude oil have commenced. This would be beneficial for energy deficient countries, such as China, Japan, Korea, India, etc. as it would provide one more source for crude oil imports and also have a moderating and stabilizing effect in global oil prices in the long term.

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Ship inspection by high-flying robots! Drone-based remote structural surveys could cut costs and save valuable time

During ship construction and thereafter during the operational life of a vessel, a number of inspections and surveys are required to be carried out. In this regard, a recent innovation is described below.

Unmanned aerial vehicles (UAVs) are increasingly being used for a variety of tasks in the maritime industry to save time, money and, wherever possible, to increase operational efficiency.

With shipbuilders, for example, continually looking for cost-saving innovations and new ways to speed up production, UAVs - more commonly referred to as drone technology - potentially provide a cost-effective solution for many aspects within the construction and maintenance processes.

Ship surveys and inspection work are the type of tasks which could be performed by UAVs and pioneering demonstration tests have recently been carried out in a Polish shipyard to gauge the capability of drones for this essential work. This latest use of ever-evolving drone technology has taken place at the Remontova ship repair yard and involved a flying robot inspecting internal spaces on a ship following an overhaul.

The inspection was carried out on the chemical and product tanker CPO Japan. Conducted by the DNV GL classification team based in Gdansk, Poland, camera-equipped drones were used to visually check the condition of remote structural components through a video streamed to a tablet which was also recorded for review and documentation. One surveyor operated the drone while a second checked the video feed in real time.

The drone was able to access all areas inside the vessel's cargo tanks and, with its powerful headlight and high-definition camera, successfully produced video footage considered to be good enough quality-wise for initial inspection purposes. Traditional close-up surveys may still be required if any structural damage is detected.

According to the surveyors managing the technology demonstration tests, the UAV was remarkably stable in confined spaces as it produced the necessary visual inspection material. Its stability was such that it even managed to rest against the bulkhead while hovering. Contact with the tank wall is possible because of the special frames which protect the propellers.

"We have been looking at ways we could help our customers by accelerating the survey process," says Cezary Galinski, manager of the DNV GL maritime classification flying squad in Gdansk. "Camera-equipped drones are now much more widely available and affordable, and by using them for a first screening we can identify areas that require closer inspection quickly and without extensive staging which can be both costly and time-consuming."

Visual inspection by drones may also prove to be very useful in helping to remove the need for more detailed, hands-on inspections, such as ultrasound thickness measurements, which would avoid the time-consuming and costly expense of erecting scaffolding.

We compliment the team of DNV GL and Remontova shipyard, Poland for the above innovation and look forward to the benefits that would accrue to the shipping industry in savings in time and cost, and enhancement of safety during inspections and surveys.

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“Green” ship recycling yards at Alang…

The recycling industry has changed dramatically over the last few years. It has developed from being a shameful part of our business to being an area that most modern owner wants to be proud of – in the same way they are proud of the standard of their ships in operation. This change has come in part due to the constant focus from environmental groups and the media and has been made possible with a will to change the international legislation governing this area. In a competitive world, the responsibility we have towards our environment cannot be shouldered by some ship owners alone – it must be a common effort from all players in the industry.

The Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships was adopted by the International Maritime Organization (IMO) in May 2009.

The Convention regulates the design, construction, operation and preparation of ships to allow for safe and environmentally sound recycling. It will also provide strict guidelines for the operation of ship-recycling yards. The Convention dictates that vessels must carry an Inventory of Hazardous Materials (IHM) on-board. Ship-recycling yards will be required to provide a detailed ship recycling plan before work can commence. Member-states will be asked to ensure that facilities under their jurisdiction comply with the Convention.

Green Ship Recycling services is specially designed for the socially responsible ship owners who demand a demolition process that offers safe working environment at the yard, together with safe removal and disposal of hazardous materials on board. The process of green recycling is tedious and requires proper planning and preparation. "Pre-cleaning" is the first requirement prior demolition. Pre-cleaning is the safe removal of all hazardous materials and wastes such as asbestos, fuel oils and lubes, cable insulation and other PCBs, deck coverings and insulation materials, gases and refrigerants (CFC), paints and thinners, stores and spares, fire alarm sensors and radioactive materials and all other hazardous and potentially hazardous materials. An IHM or Green Passport is the pre-requisite prior to the vessel moving to the recycling facilities.

Whilst in the recycling facility, the acceptable approach is "Demolition" which is the actual cutting up of the ship’s steel structure in blocks of manageable sizes. The correct trimming and steel cutting including the removal arrangements are critical. The blocks with oil content and machinery are placed in special areas on shore with proper drainage and containment arrangements. Firefighting procedures and evacuation routes are manned properly.

The process of Pre-Cleaning and Demolition are fully documented in a 'Green Recycle Plan' - a document developed using the IHM or Green Passport with inputs from yard. This plan has to be prepared in advance and is vital towards green recycling.

Two ship-breaking yards from Alang in Gujarat have become the first ship recycling facilities in entire South Asia to be issued Statements of Compliance (SoC) by Japan’s leading classification society, ClassNK, for taking steps for safer and greener ship recycling. This certification comes at a time when most shipbreaking yards at this recycling unit near Bhavnagar have been battling issues of pollution and contamination for last three decades. Overall the companies feel that Class NK certificate holders from Alang will be given priority when they will go for buying ships.

The main objective is to implement a proper health, safety and environmental approach towards ship recycling. It is hoped that Ship Owners and Ship Breakers work in tandem to implement this project thus ensuring a better and healthier living for future generations.

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DNV GL Approves First Polar Code Compliant Vessel

DNV GL and the Danish Maritime Authority have confirmed that the AHTS Magne Viking, owned by Viking Supply Ships, is in compliance with the IMO Polar Code – an industry first for the classification society.

 The 85-meter (280-foot) Magne Viking, built in 2011, is a high Ice-classed AHTS vessel capable of operations in harsh environment offshore regions, as well as Arctic/Sub-Arctic operations.

Ships operating in the Arctic and Antarctic are exposed to a number of unique risks. Poor weather conditions and the relative lack of good charts, communication systems and other navigational aids pose challenges for mariners. The remoteness of the areas makes rescue or clean-up operations difficult and costly. Cold temperatures may reduce the effectiveness of numerous components of the ship, ranging from deck machinery and emergency equipment to sea suctions. When ice is present, it can impose additional loads on the hull, propulsion system and appendages.

A risk-based approach to regulation is well-established now at IMO and has been incorporated into the Polar Code.

Based on long experience from Arctic operations in low temperatures and ice covered waters, Viking Supply Ships saw value in the Polar Code and decided to implement it early on. The process has included upgrades to the vessel and equipment as well as providing the required documentation.

 The International code of safety for ships operating in polar waters (Polar Code) covers the full range of design, construction, equipment, operational training, search and rescue and environmental protection matters relevant to ships operating in the inhospitable waters surrounding the two poles.

The IMO Polar Code is mandatory for all SOLAS vessel entering Arctic and Antarctic waters from 1 January 2017. The Code is an add-on to existing IMO codes where the main requirements are related to safety (SOLAS) and protection of the environment (MARPOL).

The Code will require ships intending to operate in the defined waters of the Antarctica and Arctic to apply for a Polar Ship Certificate, which would classify the vessel as Category A ship - ships designed for operation in polar waters at least in medium first-year ice, which may include old ice inclusions; Category B ship - a ship not included in category A, designed for operation in polar waters in at least thin first-year ice, which may include old ice inclusions; or Category C ship - a ship designed to operate in open water or in ice conditions less severe than those included in Categories A and B.

The issuance of a certificate would require an assessment, taking into account the anticipated range of operating conditions and hazards the ship may encounter in the polar waters. The assessment would include information on identified operational limitations, and plans or procedures or additional safety equipment necessary to mitigate incidents with potential safety or environmental consequences. Ships will need to carry a Polar Water Operational Manual, to provide the Owner, Operator, Master and crew with sufficient information regarding the ship's operational capabilities and limitations in order to support their decision-making process.

The chapters in the Code each set out goals and functional requirements, to include those covering ship structure; stability and subdivision; watertight and weather tight integrity; machinery installations; operational safety; fire safety/protection; life-saving appliances and arrangements; safety of navigation; communications; voyage planning; manning and training; prevention of oil pollution; prevention of pollution from noxious liquid substances from ships; prevention of pollution by sewage from ships; and prevention of pollution by discharge of garbage from ships.

The Polar code regulation will be implemented through a new SOLAS registration 4, chapter XIV, “Safety Measures for Ships Operating in Polar Waters”, and by amendments to the MARPOL Convention.

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