Business Times

Pros and cons of moving to Hambantota

Focus on vehicle imports
By Sunimalee Dias

Business at the Colombo port is likely to go down further with vehicle imports expected to shift to Hambantota from next year. Authorities are keen on gradually shifting to Hambantota with ships made to call at the new port in the future.

However, the necessary infrastructure vastly lacking due to transporting of these vehicles to Colombo and ensuring these are in good condition prior to providing the warranty, becomes a crucial factor.

In the wake of the industry raising their voice over concern of costs running into millions should they be forced to make a move of this nature,authorities believe at some point in time in the greater need for development a process needs to be initiated. The Business Times takes a closer look at workings of the current process in vehicle imports.

Purchasing a vehicle

Initially importers will purchase the vehicles directly at the auctions (in Japan) or through a dealer following which Letters of Credit (LCs) are opened. This will then commence the process involved in shipping the product to the desired port of call. The bank related documents already processed will be submitted to Customs for clearing purposes that will take about 4-5 days with the clearing agent to get them out of the port.

However, some importers state that they are able to clear their vehicles even within 2-3 days.
Following this process these imported vehicles are then sent to the respective workshops on car carriers located in close proximity to the Colombo port.

At this point the engineers of the importers stationed at these workshops will carry out the Pre-Delivery Inspection (PDI) required to send to the principles who will then initiate the warranty period commencing from this point in time.

The lapse of any of these processes after importation can cause a problem to the importer as they will have to bear the cost of any loss incurred on any damage to vehicle or usage prior to carrying out the PDI. This will also have an impact on the PDI, importers observe.

Once the PDI is carried out the vehicles are then sent to the respective showrooms and onto the provinces around the country at which locations buyers are able to purchase their vehicle.
This is the process carried out currently at the Colombo port.

Problems Encountered

Delays however at the Colombo port due to congestion have caused authorities to insist on gradually shifting the importation of vehicles to Hambantota. This presumed congestion at the port that authorities claim is due to the increase in volume of vehicle imports to the country since November 2010 has been rejected by both importers and the shipping industry.

SLPA Chairman Dr. Priyath Bandu Wickrama had noted that construction work for expansion of internal roads has caused increased congestion at the port. But the industry notes that the congestion at the port is due to “inefficiency” and added that this is mainly due to lack of productivity.

It was pointed out that currently Sri Lanka Ports Authority (SLPA) is doing only 18 moves per hour whereas ideally it should be doing at least 30 moves per hour. In this respect, industry analysts observe that this could then result in more ships leaving at double quick time.

Over the last 2-3 years there has been a drop in productivity observed at the port with the industry noting that it has now “reached a point beyond redemption.” Previously SLPA was doing about 22-23 moves per hour when SAGT was doing about 25-28 moves per hour. But today SLPA is doing only 18 moves per hour, which has been the occurrence since the last two years.

Further, productivity levels at the port have evidently slowed down and this is clearly noted with SAGT doing 2.1 million TEUs per year with a quay length of 980 metres while SLPA with a quay length of 2100 metres comes out with only 2.2 million TEUs.

Tomorrow’s reality

Authorities, however, argue that it’s the current congestion at the port that has led to the gradual shifting of the vehicle imports to Hambantota. Dr. Wickrama notes that while they understand the concerns of the vehicle importers there is a need to shift the vehicle shipments to Hambantota. SLPA is likely to conduct further meetings with vehicle importers and shipping agents and car carrier agents.

This is expected to ensure that the sector will be ably assisted in the future when the shifting takes place. Initially the operations will ensure that importers will have to drive down to Hambantota to bring down their vehicles to carry out PDIs although Dr. Wickrama noted that at some stage the importers will have to shift all their operations to the Southern port.

While the state has no plans to close the Colombo port operations for vehicle imports it was pointed out that those willing to shift can do so. This would mean importers will be compelled to transport their vehicles from Hambantota to Colombo via road through the use of car carriers.

This would require an increased number of car carriers and importers note that in order to carry out a PDI at the port it would result in a huge cost to their businesses. But, importers query as to who will bear the losses and costs incurred if they should move to Hambantota.

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