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Sunday, April 11, 2010

MAJOR FIRE AT THUGLAKABAD - WHAT IS ICD AND CFS

Not a good news for Traders and certainly not one for the Insurers (Marine with its razor thin premium !) On 10th April 10, a major fire broke out at ICD Tughlakabad, near Delhi. The fire was brought under control after more than three hours of efforts and cargo worth crores stand destroyed.




As you travel to Delhi and getting anxious to reach the destination, if you had travelled by GT Express spending close to 36 hours on train, you would be passing through no. of local stations Palwal, Faridabad, Tughlakabad -- (you see lot of containers on side stacked one on the other) may not attach much of importance to this – the transportation hub of Delhi and other northern states close by. This is the Inland Container Depot, a dry port at that.


One will easily understand that goods imported or exported pass through a Sea port or airport. Most of the cargo is containerized and sent through sea ports and goods imported or exported attract customs duty as defined under the Customs Act 1962.


Goods in olden days reached the ports from where they were loaded on the ships – ‘free on board’. With the liberalization of economy and the growth in volumes paved way for creation of additional infrastructure to handle them. With the widespread industrialization and economic growth, the importers / exports in hinterland found it difficult to move them to a gateway port for clearance and there was need for decongesting the accumulation at one place. All activity cannot occur in the port and off dock facility located in proximity to the port were created to decongest the Port by shifting the cargo and custom related activities in Port area. Most of the consolidation into containers and breaking bulk activities occur here, as also Custom examination by the authorities.


Whilst these lay exclusively in the Port cities, the need for similar facilities in hinterland, paved the way for Inland Container Depots (ICD) where stuffing / destuffing activities could take place. In all such approved places, customs clearance by the Custom authorities takes place.
It has been a long way to the present day set up. The formation of ConCor as an autonomous body under Ministry of Railways in 1988 boosted the efforts at increasing containerized traffic and over the years it has really taken of. Apart from the major ports, many smaller ones including some managed by private has sprung up. These CFS/ICDs act as interface for sea borne trade movement.
Though the storage in these user facilities are only temporary in nature, there could always be huge accumulation of stocks, bad exposure for the Insurers and Reinsurers. These facilities are primarily meant for receipt and dispatch/ delivery of cargo and the activities include – stuffing, stripping of containers, transit operations by rail / road to and from serving ports, customs clearance, consolidation and de segregation of LCL cargo, temporary storage of cargo and containers, reworking of containers, at some places – maintenance and repair of container units.
                                                 (Photo courtesy : dinamalar tamil daily)
With this introduction, you can easily understand the bustling activity that usually occurs in an ICD. It is reported that the blaze started around 0545 hours on 10/4/10 in an export warehouse at the ICD and quickly spread to the cargo stored there for completion of customs formalities and other procedures. More than 30 fire tenders were deployed to bring the flames under control, the sources said, adding that no one was injured in the fire. It is reported that paper and other kinds of packaging material used to pack the export consignments was one of the factors that led to the quick spread of the flames.


There were no human casualties and a high level inquiry stands ordered to ascertain the cause of fire. Some reports suggest that handicraft products worth crores of rupees were destroyed. An unconfirmed report citing Export Promotion Council for Handicrafts put the loss @ Rs.60 crore. ICD Tughlakabad is always over congested with almost 400 containers at any point of time. Garments, industrial products, handicrafts, leather goods, medicines and other miscellaneous items form part of these and depending on the cargo inside, the container could be worth anything from 10 lakh to 1 crore.


It is apprehended that records related to export orders had also been destroyed in the blaze; these documents are required for incentives. Whilst the adequacy of facilities and fire fighting techniques is not the best, some authorities immediately went on record stating the need for immediate settlement by the Insurers. Many a times, such fires are occasioned by poor quality loose hanging electrical fittings which are not properly maintained. If the reports that close to 200 TEUs were damaged is to be believed the loss could be much higher.


Concor is set to resume work on Monday at an alternative warehouse. The PSU reportedly has fully insured its warehouse, cargo and wagons with New India. The cargo owners would still prefer making claim on their own insurers and such Insurers then perhaps proceed on recovery from the Concor and its Insurers on the principle of subrogation and bailment.


This would add to the burden of Insurers and for the exporters though they could claim indemnity, they could face failure to meet their obligations, loss of market and loss of commercial profit.


With regards - S Sampathkumar.

PS : (added on 13/4/2010)
The loss at Thuglakabad occurred at ICD which is of CONCOR. Goods pertaining to various Firms stand destroyed in the fire. By natural justice, they are entitled to indemnity from the ICD where the goods were entrusted. This is simply the bailment. Insurers are also entitled to recovery from the custodian, after they settle the claims with their insured.


Mostly marine policies could be invoked as these goods would have been insured from warehouse to warehouse. However, there could be fire policies covering the goods at storage points also.


Though this sounds goods in theory, the actual recovery could be too difficult or simply not obtainable as CONCOR by way of their incorporation comes under the Indian Railways Act and restricts their liability for loss, damage for general goods not exceeding the invoice value subject to a max of Rs.50/- per kg unless the value is declared. This is a measly amount - but as could be seen this more directly applies to consignments handed over to CONCOR for carriage.


More importantly there are immunities or exceptions whereby they assume no responsibility for loss, destruction, damage or deterioration or non delivery arising from : Act of God, Act of war, Act of public enemies, ....... natural deterioration or wastage in bulk or weight due to inherent defect, quality or vice of goods, latent defects and Fire, explosion or any unforeseen risk.



It is to be seen legally whether there could be distinction between the goods entrusted for carriage and goods held in their custody as bailee as in the latter, they are mere custodians in the period awaiting transit. However, going by the Indian Contract Act, the bailee would be liable only for negligent acts and the loss occurring due to their negligence will have to be proved.


Looks the end of the road for cargo owners and Insurers, not only due to utopian rules but more to mere acceptance by the parties concerned without ever challenging, nay willing to see what they have been contracting !!

2 comments:

  1. this is really a nice blog with informative posts. thank you for such a efforts.

    ReplyDelete