10-member inter-ministerial body to improve logistics chain

The Cabinet has constituted a 10-member inter-ministerial committee to rationalize processes and develop cross-cutting strategies to reduce time and costs across the entire logistics chain, official sources told Business Recorder.

Secretary, Maritime Affairs Division, in his presentation to the Cabinet on rationalization of port charges said that in order to appreciate the issue of the charges at the port in its true perspective, all contributory factors may be looked at holistically, which include port, terminal, shipping line and shipping agent. The port charges have direct linkages with the performance of customs, port authorities and interplay of implementation of trade policy. Further, for the consignee, the regulations of the provincial government, State Bank and logistic chain also play a crucial role.

He said despite development of Port infrastructure and services KPT have not increased its tariff since 1994 and PQA since 1992. KPT has reduced its charges three times since 2003 (25% to 30%). PQA has reduced its charges three times since 2005 (25% to 30%). PQA has implemented the decision of CCoE and issued notification for discontinuation of Channel Development Cess (CDC) on LNG ships reducing its revenue by 15% (approx, amounting to Rs 1.8 billion per annum).

Port charges are divided into Wet Charges & Dry Charges. Wet charges are port dues, pilotage & tugging charges and ship berthing (quay wall charges). Dry charges are wharfage (one time charge – per ton/TEU based).

Pakistani ports in comparison with Colombo/Jebel-Ali/Singapore Ports is not relevant, because of the nature of operations, volumes and business dynamics (transshipment hubs). Mumbai, Twenty-Foot Equivalent Unit (TEU) Rs 5.1 million , Singapore- Rs 37.2 million, Jeblel Ali- Rs 14.2 million, Colombo- Rs 7.2 million, KPT- Rs 2 million and PQA- Rs 1.5 million.

Comparison with Hinterland Ports: Pakistani ports having hinterland support are based on import/export driven volume similar to hinterland ports. Such port’s charges are 40 % higher than the charges of KPT & PQA. Mumbai TEU charge in 2019 were – Rs 5.1 million, Mundra – Rs 4.7 million, Abu Dhabi – Rs 2.7 million, Kandla – Rs 0.5 million and KPT- Rs 2 million.

Generally, Port charges contribute minimal to the overall cost to consignee. For comparison, data is as under for one TEU: (i) shipping line charges ( Shanghai to Karachi) $ 2200( Rs 336,600 @ Rs 153/ per US$;(ii) shipping agent charges $ 150( Rs 22,950);(iii) terminal charges $ 100 ( Rs 15,300);(iv) port charges ( pilotage/tuggage, wharfage, berthage & port dues) $ 20( Rs 3,050). Total one TEU charge is $ 2470 (Rs 377,900).

In Pakistan LNG charges are $ 494,208 per vessel, Hizra port, $ 211,341 and Mundra port $ 311,084. PQA has eliminated the CDC which has drastically reduced the cost. PQA is relatively new entrant in establishing terminals, thus has to recover initial infrastructure. PQA is in the process of further reduction in the LNG Tariff and Chartered Accountant firm is being hired

Congestion at Ports: in neighbouring countries, containers’ average stay at port before delivery (Dwell Time) is 12 hours in UAE. In Pakistan average Dwell Time is 143 hours (around 6 days) thus exceeding free days; abandoned containers require auction, which occupy 20% of terminal yard’s capacity (around 10,000+ containers remain out of circulation).

The government has installed scanning facilities long ago in container terminals to eliminate physical examination; however, these scanners are yet to be operationalised.

Ministry of Ports and Shipping recommended that a Cabinet Committee on Transportation & Logistics may be formed consisting of all relevant Ministries. The idea was discussed and tentatively agreed in ECC meeting. This will ensure that required and productive steps are discussed to address the transportation & logistics sectors in the country.

Rationalization of port charges to be done in regional context through international consultant to be hired by ports jointly, requiring in depth study to attract shipping, increase volume of cargo & encourage transshipment.

On Charges adjustment, MoMA recommended that initially dry storage charges at KPT & PQA may be decreased; and FBR to auction all containers and remove from port premises. FBR will commit timeframe for reduction in container dwell time from 07 to 03 days.

Some of the members observed that contrary to the comparison presented, the businessmen repeatedly complain that Pakistan’s port charges were the highest in the region. Maritime Affairs Division explained that it was not only the port charges but other costs, such as delayed release of consignments by the Customs, which inflate the cost to consignee. It was suggested that a Cabinet Committee be constituted to look at entire logistic chain and recommend rationalization of costs.

The Cabinet took note of the presentation by the Maritime Affairs Division, on steps being taken to reduce port charges, and decided to constitute a Cabinet Committee on Transport & Logistics, in terms of Rule 17(2) of the Rules of Business, 1973, to recommend steps to make transport and logistics sector globally competitive. The Composition of the Committee is as follows: (i) Minister for Maritime Affairs (Chairman); (ii) Minister for Communications; (iii) Minister for Railways; and (iv) Minister for Aviation.

The following will be invited as special invitee: (i) Adviser to the Prime Minister on Commerce & Investment; (ii) Special Assistant to the Prime Minister on Revenue; (iii) Special Assistant to the Prime Minister on Power & Petroleum; (iv) Secretary, Finance Division; (v) Secretary, Maritime Affairs Division; and (vi) Chairman, FBR.

Following will be the Terms of Reference (ToRs) of the committee: (i) oversee the implementation of national transport and logistics policies; (ii) rationalize processes and develop cross-cutting strategies to reduce time and costs across the entire logistics chain. Enhance connectivity through synchronization of various modes of transport (land, sea and air); and (ii) FBR to auction and remove all containers from Port premises at the earliest for optimum utilization of terminal yard’s capacity.

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