Saturday, March 18, 2006

Impact of Dematerialisation and Depository


Dematerialisation of shares is an important milestone in the annals of Indian Capital Markets. Understanding and measuring the impact of it on various segments is necessary since it stirred the microstructure of Indian capital markets in general and stock exchanges in particular. Demand and Supply forces determine prices of a product. Liquidity plays an important role in the interplay of demand and supply forces. The impact of dematerialisation on liquidity in the Indian stock exchanges is quantified and analysed. Quality of shares changed for better owing to dematerialisation and thus investors are expected to earn higher returns as a natural step, albeit, for sometime only. Changes in quality of shares are expected to cause changes in demand and supply for shares, which in turn, influences the levels in share prices (volatility). All these three issues are studied in the present paper. Liquidity and returns improved substantially in the post-demat period while volatility was very much below the daily changes permitted.


Dematerialised securities trading, settlement and custody has changed considerably the market microstructure of Indian stock exchanges. Dematerialisation is the process by which "physical certificates of an investor are converted to an equivalent number of securities in electronic form". The converted securities are owned, traded and utilised like physical securities. Order routing, trading and settlement, that is delivery and payment in demat form, changed the way markets started functioning. These changes have brought tremendous impact on the behaviour of investors, stock exchanges, depository participants and custodians.

Generally, an investor would look for more liquidity to less liquidity in a stock. Higher liquidity means lower transaction costs and easy entry and exit options. Therefore, higher liquidity is preferred. Ownership transfer of demat shares is quite fast. Investors would be able to churn their portfolio many a times over, contributing to the increase in turnover and liquidity. This paper attempts to measure post-demat increased level of activity (liquidity). Whenever a new product is made available, there will be an additional demand for that particular product. Dematerialised shares are definitely superior to physical (paper) form of shares. Physical form of shares are fraught with fake, forgery, stolen and duplicate problems. Logically speaking, higher demand should emanate for demat shares, which is expected to push up (pull down to a lesser extent) shares prices resulting in higher returns (lesser losses) to the investors compared to pre-demat period.

This higher demand will continue for sometime (adjustment period lasting, sometimes, a few months) only. Once all investors understand the merits and value of demat shares or when all shares of all stocks are demated, then the superior or higher returns will disappear or will not be there. Some markets are quite quick enough to discount the new information while some other markets take longer time (a few weeks to a few months) to discount the new information. In this period, investors can make abnormal profits. In terms of abnormal returns, dematerialised shares produced positive returns which are significant.

What is Dematerialisation?

Dematerialisation (“Demat” in short form) signifies conversion of a share certificate from its physical form to electronic form for the same number of holding which is credited to your demat account which you open with a Depository Participant (DP).

Dematerialisation is a process by which the physical share certificates of an investor are taken back by the Company and an equivalent number of securities are credited in electronic form at the request of the investor. An investor will have to first open an account with a Depository Participant and then request for the dematerialisation of his share certificates through the Depository Participant so that the dematerialised holdings can be credited into that account. This is very similar to opening a Bank Account.

Dematerialisation of shares is optional and an investor can still hold shares in physical form. However, he / she has to demat the shares if he / she wishes to sell the same through the Stock Exchanges. Similarly, if an investor purchases shares, he / she will get delivery of the shares in demat form.

What is a Depository?

A Depository (NSDL & CDSL) is an organisation like a Central Bank where the securities of a shareholder are held in the electronic form at the request of the shareholder through the medium of a Depository Participant.

If an investor wants to utilise the services offered by a Depository, the investor has to open an account with the Depository through a Depository Participant.

Depository Participant

Similar to the brokers who trade on your behalf in and outside the Stock Exchange; a Depository Participant (DP) is your representative (agent) in the depository system providing the link between the Company and you through the Depository. Your Depository Participant will maintain your securities account balances and intimate to you the status of your holding from time to time. According to SEBI guidelines, Financial Institutions like banks, custodians, stockbrokers etc. can become participants in the depository. A DP is one with whom you need to open an account to deal in electronic form. While the Depository can be compared to a Bank, DP is like a branch of your bank with whom you can have an account.


1. Institutional Structure
There are quite a few institutions that are directly and/or indirectly connected with dematerialised operations of securities. Understanding the inter-linkages and functional responsibilities of these institutions will help us to have correct and holistic perspective about functioning of dematerialisation. The institutions connected with demat operations include; a) Depositories, b) Stock Exchanges (SEs), c) Clearing Corporations (CCs) / Clearing Houses (CHs), d) Depository Participants (DPs), e) Registrars and Transfer Agents (RTAs). Both the depositories NSDL and CDSL are primarily promoted by the two leading stock exchanges viz., National Stock Exchange of India Ltd (NSE) and The Stock Exchange, Mumbai (BSE) respectively. Besides, there are many other institutional promoters in both the depositories. Both are registered as organisations-for-profit and professionally managed. Inter-connectivity between these two depositories has been established, thus DPs and investors can transfer smoothly their shares from one account to another between the depositories. Most of the stock exchanges are connected with the depositories to provide trading in dematerialization segment. Eventually, all the exchanges will be connected to either of or both the depositories. Resultantly, functioning of exchanges altered with the commencement of depositories; shorter trade cycles, negligible bad-deliveries, immediate transfer of beneficial ownership and lower transaction costs. An in-depth study on transaction cost for equity shares in India by Raju (2000) revealed substantial decrease in transaction costs and observed that the dematerialisation as one of the important factor for this trend.

Functioning of clearing corporations / clearing houses materially changed after the entry of depositories; reduced manpower requirements and faster clearing operations. It also helped them to diversify into related businesses such as on-line stock lending. Depository participants are the new commercial intermediaries that sprang up. They interpose between investor and depository. It can be stated that they are the back-bone for the success of dematerialisation. RTAs facilitate dematerialisation and rematerialisation of shares.

2. Market Microstructure
Trading in dematerialised shares brought in many changes to the entire structure of the capital market functioning. With the introduction of demat, stock exchanges switched over (with a choice) from five day accounting period to T + 5 trading and settlement for demat stocks. Even for demat stocks dual settlement is in operation: fixed account period as well as rolling settlement. This partial change to T + 5 rolling settlement system is a major shift in the market. Thus dematerialisation smoothly paved the way for rolling settlement and India joined other developed markets that are following T+ settlement system. In the physical segment there is a long gap between delivery and payment. This gap narrowed down, and it is almost on Delivery Versus Payment basis (DVP). This near real time DVP reduced market risks considerably. Clearing corporations / clearing houses and stock exchanges are able to smoothly coordinate and settle the trades effectively and timely. Clearing corporations / Clearing houses are electronically directly connected to depositories that make settlements faster and easier. Trading in dematerialised shares attracts lesser brokerage and custodial charges, as a result. Reduced transaction costs prompts investors to trade more frequently resulting in higher volumes.

This also makes bid-ask-spreads narrower, which reduces implicit transaction costs.

3. Review of Literature
The usefulness of an event study comes from the fact that, given rationality in the market place, the effect of an event will be reflected immediately in asset prices. Thus the event’s economic impact can be measured using asset prices observed over a relatively short time period. In the academic finance field, event study methodology has been applied to variety of firm specific and economy wide events. The event studies are also used in the field of law and economics by Schwert (1981) to measure the impact on the value of a firm of a change in the regulatory environment. The first published event study is by Dolley (1933) which examined the price effects of stock splits, studying nominal price changes at the time of the split. Over the decades from the early 1930s until the late 1960s the level of sophistication of event studies increased. Mayer and Bakay (1948), Baker (1956, 1957, 1958) and Ashley (1962) are examples of studies during this time period. The improvements include removing general stock market price movements and separating out confounding events. In the late 1960s seminal studies by Ball and Brown(1968) and Fama, Fisher, Jensen, and Roll (1969) introduced the methodology that is essentially still in use today. Ball and Brown considered the information content of earnings, and Fama, Fisher, Jensen, and Roll studied the effects of stock splits after removing the effects of simultaneous dividend increases.

4. Methodology
The event of importance in the present study is the start-date of compulsory dematerialised trading in equity shares. Therefore, task of conducting an event study and identifying the period over which the event started having its impact on various variables are of interest to. In order to measure impact of the event (demat) on the behaviour of various identified variables (liquidity, returns and volatility), there is a need to consider equal lengths of time periods, as much as possible, before and after the event. Therefore, data on various variables before and after the compulsory trading in dematerialised shares are obtained for various lengths. Trading and settlement in shares, for all classes of investors, is made compulsory starting from January 4, 1999 in select group of companies. Thereafter, gradually, more number of companies are added to the list of compulsory demat trading and settlement.

4.1 Data and Sample Characteristics
Demat was introduced in phased manner in India. For different classes (institutional and retail) of investors varying levels (compulsory and optional) of dematerialisation has been introduced at different points of time. Compulsory dematerialisation is one where all classes of investors (institutional as well as retail) need to trade and settle only in demat form with an exception that a small investor has been permitted to deliver in physical form who has 500 or fewer shares. Second category of dematerialisation is only for institutional investors who are required to trade only in demat form but not the small investors. Yet, another class where almost all the investors by their own volition trade in demat form. The study considered the first style of demat (compulsory) for the analysis because in this category all investors are required to trade and settle in the demat form while in other categories exceptions are granted to some classes of investors. If exceptions are granted, then certain classes of investors have options. These investors trade and settle in physical segment also. Trading and settling in physical form, however, distorts the full impact of demat. Owing to this reason, the study did not consider non-compulsory demat trading and settling segments. In order to measure the full impact of demat, it should be applicable to all classes of investors.

4.1.1 Demat Companies
Compulsory trading in the demat form for all classes of investors was introduced starting from January 4, 1999 in a phased manner. In each phase, a number of companies were added to compulsory demat category. In the first phase 12 companies on January 4, 1999, in the second phase 19 companies from February 15, in the third phase 33 more companies from April 5, and in the fourth phase 40 scrips were included with effect from May 31, 1999. Study considered first three phases only starting from January 4, 1999 till April 5, 1999. Further, it is intended to have minimum of six months of post-demat period which will give reasonable number of data points for statistical and econometric analysis. Selection of the companies for the study is made by using random sampling technique.

4.1.2 Control Group of Companies
Another matching sample group of companies is considered for the study. Matching is, generally, done on the basis of relevant parameters. Parameters considered consist of size of company, market capitalisation, paid-up capital/number of shares outstanding, number of shares traded, sales and others. In this study, the most relevant parameter is number of shares outstanding. In order to measure liquidity, returns and volatility, control group of companies on the basis of paid-up capital of the companies is selected. Paid-up capital has direct bearing on the number of shares issued and traded. Thus, it rightly represents liquidity. Paid-up capital is also a size parameter so that it can be used to measure returns and volatilities. Similar econometric analysis is carried out on control group to examine the impact of a non-occurrence of the event on this group. Results of control group and study group are compared and analysed. Analysis throws up impact (in this case demat) or no-impact on sample companies. Control group of companies that are not subjected to the proposed change (in this case dematerialisation). Matching of companies has been done first on the basis of industry classification and then paid-up capital. Companies from demat group and non-demat group are matched on the basis of industry classification and paid-up capital in that order. In many instances, it was always not possible to get two companies having similar paid-up capital (one from demat and another from non-demat group). Then, nearest company in terms of paid-up capital which is closer to demat company, is considered. In some instances, there was no company having paid-up capital closer to demat company's paid-up capital, therefore, for these companies where there is no matching company available. Thus, fewer number of companies are considered in control group for the analysis. Inequality in both the groups in terms of number of companies will not pose any methodological problem since the study is not a cross-sectional comparison.

For the control group also, computation of liquidity, abnormal returns and volatility by using the same methodology as is explained below. Since control group is not exposed to dematerialisation, the companies are free from demat influence. Ceterus paribus, changes in liquidity, returns and volatility should be equal in both the sets. If changes in liquidity, returns and volatility are more in non-control group, than that is recorded in controlled group, then the difference can be attributed to the demat. The hypothesis is that demat has no impact on liquidity, returns and decrease volatility. Absence of positive growth in all the three parameters in controlled group and presence of growth in these parameters in the demat groups clearly indicates that demat does affirmatively influence liquidity, returns and volatility.

Event studies pose certain research methodological challenges as to whether the changes in the behaviour of variables studied are due to, entirely, the impact of the event or there are any other exogenous factors responsible for the change. One way of overcoming of this problem is to construct and observe the behaviour of control group.

4.2 Data and Period
For each company and index, daily closing prices are taken from the National Stock Exchange of India Ltd (NSE) before and after dematerialisation period till October 8, 1999. The study considered a six months pre- and post-demat period for the analysis. The benchmark index considered for the purpose of research analysis is the S&P CNX Nifty. It is quite logical to take S&P CNX Nifty as the reference benchmark since all other relevant data are considered from NSE.

Number of shares traded for each company in pre- and post-demat period are also collected for the same length of the time. Three groups of companies consisting of seven, ten and eleven are selected from the first, second and third groups where compulsory demat trading started form January 4, 1999, February 15, 1999 and April 5, 1999 respectively. Names of the companies are given in Annexure AI. The daily closing stock prices of these companies are collected from National Stock Exchange of India Ltd starting from July 1, 1998 to July 7, 1999 for group 1, from August 17, 1998 to August 10, 1999 for group 2 stocks and for Group 3 stocks the data is collected from October 5, 1998 to October 8, 1999. The benchmark index S&P CNX Nifty data are also collected for the respective corresponding periods. Besides, information on daily trading volumes in quantity and value terms and number of daily trades also obtained for the same periods for all the stocks.

4.3 Liquidity
The data on trading volumes in both value and quantity terms and number of trades are also analyzed to see the impact of dematerialisation. In order to observe whether there is any growth (lack of it) in the number of shares traded in the post-demat period compared to pre-demat period, growth rates are calculated over the pre-demat period.

4.4 Returns
Returns from a company before and after demat should be the same, if demat has no influence on returns. If demat influences them (returns) then there should be abnormal returns. In the following paragraphs, explained methodology, adopted to measure returns, abnormal returns, significance of abnormal returns both for demat and control group of companies. These procedures are advocated by Campbell, Lo and Makinlay(1997) in their seminal work.

4.5. Volatility
Volatility has become a topic of enormous importance to almost anyone who is involved in the financial markets even as a spectator. To many among the general public, the term is simply synonymous with risk. High volatility is to be deplored, because it means that security values are not dependable and the capital markets are not functioning as well as they should. While investor protection and solvency of financial institutions are paramount concerns underlying public regulation of securities markets, it is also evident that the regulatory framework is to a considerable extent based on the premise that unregulated securities markets are fragile and prone to inefficiencies and systemic crises.

The absolute values of closing stock prices are converted into continuously compounded returns. The returns data is analyzed to compute standard deviation for each month starting from the event day for both pre- and post demat periods covering a maximum of six months period. Besides, cumulative standard deviation from the event day for pre- and post-period is also computed. In order to avoid the swings of extreme values three per cent of return observations are eliminated form both the sides of the data.

5. Abnormal Returns
It is well recorded in the literature of financial economics that earning abnormal returns consistently is impossible. There could be some occasions; short periods, during which one can obtain abnormal positive or negative returns. The occasions include macro or micro-economic as well as non-economic shocks. Dematerialisation of shares is one such a micro-economic event. In the present research study makes an attempt to study the possibility of investors earning abnormal returns. Demat stocks are better quality products compared to non-demat stocks of the same company for the reasons mentioned elsewhere.

Therefore, there will be a greater demand for these stocks. Higher demand naturally pushes up share prices resulting in higher positive returns. This is what exactly the study has tried to measure and find out whether there is any positive impact of dematerialisation on returns if so what is the extent of it. Abnormal
returns are measured for the first three months and six months in the case of group I, group II and for group III shares. Since these are expressed in terms of percentages there will not be any problem in interpretation.


Wednesday, March 08, 2006

Tips for GD and PI from IIMC mentorship programme

Some tips for GDs and Interviews
By Jayanti Dutta (IIMC 2005 Batch)


Body Language
# Sit straight backed, feet close together and not crossed.
# While speaking, pointing fingers, pencils/pens, should be avoided.
# While it is OK to gesture with your hands while making a point, avoid waving wildly.
# Good eye contact should be maintained.
# Try to appear formal and polite, but not too rigid. Try to relax.
# Smile :) [not too much!]

# Prepare your subjects thoroughly. While it is not essential to answer every question, you should show a reasonable grasp of your main subjects.
# Read the newspapers regularly so that you are up-to-date with current happenings
# Read at least one business newspaper/magazine. They are not really very difficult to understand. While detailed knowledge may not be required, a grasp of the basics helps.
# For the time being, practice speaking smoothly in English. We tend to mix up other languages when speaking, and don't realize how difficult it is to find the right words when needed.

# Dress in formals.
- Men should dress in formal shirt & trouser and may or may not wear a tie/blazer. Wear sensible shoes, not ones with studs and decorations.
- Ladies can wear Salwar Kameez or Western Formals, wear a saree only if you are very comfortable in it. Try to make your outfit formal looking in terms of colour as well as material. Wear sensible shoes(Even if open they should have straps - no chappals).
# Avoid heavy jewellery as far as possible.
# Hair should be neatly and formally arranged. Men should have facial hair neatly clipped if they have any.
# Carry a folder with multiple flaps. Keep your certificates, photocopies, admit card etc. well ordered, so that you don't have to search for them when asked. Carry a few white sheets and a pen with enough ink, and maybe a spare one...just in case.

Group Discussions

The crucial point to remember here is that a group discussion is not a debate. Hence, aggression is very negative. The main idea behind a GD is to exchange ideas, and listening is as important as speaking.

The topic may be general, abstract or technical. There may also be a case study. Content would differ accordingly.

For technical topics (WTO, GATT, etc), a basic understanding of the issue is sacrosanct. This needs to be supplemented by opinions, observations and speculations.

In case of a general topic, it helps to think laterally. Different dimensions may be introduced when the GD begins to stagnate.

Creative topics are the most interesting and hence the ones candidates are generally uncomfortable with. Here again, lateral thinking helps.

For a case discussion, the best way to start is to identify the problem and state it at the beginning of the GD. As different points of the case are analyzed, conjecture should be avoided. While reasonable guesses may be made, all analysis should be based on data or information contained in the case itself.

Remember that you are allotted points for your contribution to the topic. Avoid statements like "You know, what I feel about the topic in question is that we should take a balanced view"...Long statement, but it means nothing. It may indicate that you don't know what to say, and someone else will take over.

The optimum number of entries in the GD depends on duration and the number of candidates. However, there is no need to monopolize the discussion. It is far more important to be a team person and allow everyone a chance to speak. Basic courtesy does not cease to apply in a GD. It is not essential to contradict another person to prove one's own point. If you don't agree, say what you feel. Never say "You are wrong".

There is no need for the group to come to a conclusion unless specifically directed by the person conducting the GD. Each person must direct his speech to the other members and never to the moderator. It is important to be interested in the proceedings and not sit back when one feels his quota of entries is done with. While making a point, one must be brief and not meander.
This creates an opening for the other candidates to enter the GD. It also makes an impact if one tries to restore order in an otherwise chaotic GD. This illustrates leadership abilities. By a similar logic, taking initiative helps. But while acting as facilitator(only in case the GD become chaotic), make sure that you do not keep talking about maintaining order etc. Get on with the GD. In case the moderator specifically asks someone to act as facilitator( rarely happens) don't take the advantage you have to make your points!

Style of speaking varies from person to person and there is no need to adopt an artificial manner. A relaxed, polite and formal way of speaking makes a good impact. Over animation and excessive rigidity are both to be avoided - try and strike a balance.

1. Some people prefer opening the GD. It's a good bet, but it is also a lot of risk. If you make a good opening, you win the respect of the group for the rest of the GD .Ideally, the opening should give a structured introduction of the topic, substantiated with at the most one example. It should be brief and should never carry a conclusive remark. In a case study, the introduction should strictly be the problem definition and must not include the analysis of the case.

2. Most panels give you a minute or two to think. Use it to write down your points. Don't bother with sentences, note down some keywords.

3. It does not pay to save good points for the end. The GD might end abruptly or there may be too much commotion to make a good impact at the end. Some other candidate may also speak the point before you do. Candidates who have low lung power need to time their entries so that they can get in when there is a trough in the GD. Irrespective of style, shouting should be avoided at all costs. It creates an extremely bad impact on the panel.

4. For candidates who have difficulty speaking - it is important to be heard. Try to get in when the previous speaker stops for breath. A good way to start off is to mention a keyword - which sums up your point - in a raised voice, then to come back to your ordinary voice when everyone is listening. Make it a point to frame your point in your mind before you start, so that you don't dry up in between. Also try to speak in 4-5 sentences. If you say only one sentence, half of it will be lost before people start listening. Also try to start off as soon as you can, but don't appear desperate or uninterested.

5. Summarizing helps. While making a summary, do not include new points. This is also an opportunity to prove your listening skills if you have not spoken much throughout the GD. Panelists tend to ask the not so strong speakers to summarize, which should be fully utilized. A good way to keep track is to keep noting keywords on points that others are making. Start off with "(The group)/(We) agreed..." or "(The group)/(We) (has) discussed..."

6. At the interview, you may be asked about your performance in the GD. If you had dropped technical terms, these may be followed up. In case discussions, you may be asked to further elaborate on a point you made during the GD. One must be prepared for these situations.


There are three aspects to this: Personals, academics and General awareness. The stress on each varies from one institute to another, and sometimes, from one panel to another for the same institute. Ideally, you should give the same weightage to all three.

For personals, everything mentioned in the form is important. Keep photocopies of everything you submit and remember the answers you have written to questions asked about your personal life. Everything has to be substantiated with examples, for instance - qualities you possess, incidents that have made a deep impact on you, and so on. Role model, hobbies, extra curricular activities, motto in life, ethics and values, career goals are also analyzed. The most important thing to remember here is that the panel evaluating you is highly experienced, and trying to be someone you are not will never work.

Think about and frame your career goals(long and short term), beliefs and values, strengths and weaknesses etc. Try not to say anything controversial unless you can justify it. Be sincere.(It helps to write this down and study it, not so that it sounds learned by rote, but to be comfortable with what you want to say). Don't disguise strengths as weaknesses( I am a perfectionist, I am sensitive etc.)

Questions on academics have to be prepared well in advance. The level is typically graduation and after. For people who have been working, a basic understanding of their subject matter is tested and more emphasis is given to their professional career. However, for foreshores, its is very important to know your core subjects thoroughly. While you might not be equally proficient in all your subjects, your principal area of interest cannot be compromised upon.

General Awareness is tested at a very basic level, especially about the corporate world. Since this is where most of you are aspiring to be in, you must reflect an interest to know more about what is happening in corporate India and also globally. Reading a national daily and a business daily is a good way to go about this. Magazines help you to form opinions which you may be asked to share. You must also know about the institute itself and be clear about why you want to be a part of it.

Reaching the venue well on time is important. You should be dressed in formals and carry a portfolio or folder with all certificates and other necessary documents for verification. Also carry a pen and some papers just to be prepared Try and make a note of the headlines of the day. Ease nervousness by talking to other candidates.

During The Interview:
# Be relaxed and confident.
# Don't be too rigid
# It's not important to answer all questions
# Attitude and the way you behave when caught on the wrong foot helps
# Sometimes the panel will try to stress u out, don't get unnerved if the interview seems to be going badly. Panelists may spring a surprise and behave in an unexpected manner (walk round the room), show displeasure and act like they are not interested in whatever you are saying, even remark that you don't know much etc. Don't get affected by all this, these are mostly pressure tactics.
# It is OK to say 'I don't know' sometimes. In fact it is better than bluffing outright.

Typical Questions
# Tell us about yourself. Say the basics of your background in a sentence or two, then move on to something not on your CV/form
# Why MBA. Work out the answer to this one beforehand. Be sincere, don't be flippant
# Why this institute? Find out about the institute. Go through the website/talk to alumni.
# What are your short and long term career goals? Think this one through. Even if the answer is not very technically sound, the panel is basically checking that you have thought about it.
# What are your hobbies? One or two things you are really interested in. The panel may go into details, so try to make it something you know about.
#Have you any questions for us?Have a question ready(should not be about your performance/whether u are selected)

At the end of the day, you are one of the few people to have it made this far. Remember that, believe in yourself and know that you can do it. That's all it takes. All the best!!

Jayanti Dutta is a student of the batch of 2005 at IIM Calcutta. She had final calls from IIMs A, B, C, I ,K ,L, XLRI, IIFT, MDI, XIMB, Symbiosis (all India Top rank)
She did her summer internship at HSBC, London

Friday, March 03, 2006

IAS i.e. UPSC Exam 1998 Interview Question

IAS i.e. UPSC Exam 1998 Interview Question and there Answer given by candidates

..........oh sorry!! IAS Officers now

Q. How can you drop a raw egg onto a concrete floor without cracking it?

A. Concrete floors are very hard to crack! (UPSC Topper)

Q. If it took eight men ten hours to build a wall, how long would it take four men to build it?

A. No time at all it is already built. (UPSC 23 Rank Opted for IFS)

Q. If you had three apples and four oranges in one hand and four apples and three oranges in the other hand, what would you have?

A. Very large hands.(Good one) (UPSC 11 Rank Opted for IPS)

Q. How can you lift an elephant with one hand?

A. It is not a problem, since you will never find an elephant with one hand.
(UPSC Rank 14 Opted for IES)

Q. How can a man go eight days without sleep?

A. No Probs, He sleeps at night. (UPSC IAS Rank 98)

Q. If you throw a red stone into the blue sea what it will become?

A. It will Wet or Sink as simple as that. (UPSC IAS Rank 2)

Q. What looks like half apple?

A: The other half. (UPSC - IAS Topper)

Q. What can you never eat for breakfast?

A: Dinner.

Q. What happened when wheel was invented?

A: It caused a revolution.

Q. Bay of Bengal is in which state?

A: Liquid (UPSC 33Rank)

Q: what is the opposite of Nag panchmi?

A: Nag did not punch me.

Thursday, March 02, 2006

Transparency & active participation of the citizen

Transparency & active participation of the citizen is the core concept of public system

Objective of Transparency & active participation of the citizen

1. Help cities to work on the simplification of laws, rules and procedures within their purview that are easily intelligible to an average person.
2. Assist cities in the development of transparent public procurement processes.
3. Assist cities in holding wide consultations on city budgeting and planning including social and gender budgeting and auditing.
4. Prepare school textbooks that include and promote good civic sense in real terms.
5. Ensure regular audit of the accounts of local bodies.
6. Encourage public-private partnership through legislative and regulatory framework, public education, resource mobilization, good leadership and transparent processes-apply in municipal finance and development work.
7. Reducing municipality of authorities and roles by coordinating city development, integrated city development plans, development activities to involve local bodies.
8. The local bodies need to make public commitments of what services it will provide to the citizen’s as per entitlements, with clear stated information about standards and quality.
9. If the services are not provided there must be clear-cut grievance redressal process.
10. There should be right to information on all matters pertaining to local government.
11. Electoral reforms should be introduced at the local level
12. Transparent engagement of private sector
13. Citizen’s charter should be brought out by all local bodies. Standards of service should be specified.
14. Replication of good practices.

Formation of Local Area Citizens' Committees-

Citizens' participation through the involvement of Community Based Organisations and NGOs in improving the delivery of civic services and improving the urban environment has been encouraged by the M.C.G.M through the various mechanisms and schemes such as Advanced Locality Management (ALM); Dattak Vasti Yojana; Online Complaint Management System (OCMS); adoption of garden and footpaths; construction, operation and maintenance of toilets etc.

Under the ALM set-up local citizens' groups called ALMs interact with M.C.G.M officials once a month in the Ward office. The meetings are normally chaired by Asst. Municipal Commissioner of the concerned Ward and are attended by all Sectional Heads of the Ward. In order to ensure delivery and proper monitoring of quality civic services with the full participation of community, it has been found necessary to further decentralize the monitoring mechanism.

Based on the feedback about the urgent need to strengthen Citizens' participation with greater involvement of elected representatives and voluntary citizens' groups in the improvement of the urban environment and delivery of civic services at the local level, it has now been decided to create a de-centralized mechanism for regular interaction between Voluntary Citizens' Groups, representing a Beat of 3 -5 roads, elected Councilors and Municipal officials by forming Local Area Citizens' Committees taking each Councilor Ward as a unit. This will help to develop proper understanding and co-ordination between Voluntary Citizens' Groups, elected Councilors and Municipal Officials for achieving timely and efficient delivery of municipal services and bringing about a better physical environment at the local level by creating awareness among citizens about their civic rights and responsibilities.

A Local Area Citizens' Committee can be formed at each local level to deal with the following subjects:
1. Cleanliness and Garbage Collection
2. Water Supply and Sanitation
3. Regulation of hawking
4. Safety of pedestrians and parking of vehicles
5. Maintenance of Roads, Footpath and Storm Water Drains, including installation and maintenance of street furniture and bus stops and proper regulation of digging and re-instatement of trenches excavated by utilities
6. Road side and public gardens
7. Disaster Management
8. Any other matter relating to public safety, public health and public amenities and decided by the Committee.

Example: Transparency & Active participation of the citizen

Civic Services And Alms (Advanced Locality Management)
AGNI started out by tackling civic services with the MCGM (Municipal Corporation of Greater Mumbai) and citizen groups. Soon it was facilitating formation of Advanced Locality Management (ALM) groups. An ALM is the MCGM's own framework for citizen participation in civic work. It is meant to provide single window access to all services managed by the Ward Office.

Success stories are numerous eg drains in Kurla left open and uncleared for 30 years which were cleaned; encroachments in Wadala and elsewhere and bad traffic routing. Garbage clearance, water supply, the condition of roads and pavements and illegal building have also been addressed by AGNI JAAGs.

Clean & Green Mumbai
Concerned with the alarming rise in pollution levels, lack of cleanliness and the rapid disappearance of trees and open spaces in the city, AGNI collaborated with college and school students and the Times of India Group to take up Cleaning and Greening Mumbai.

The project began with a two-day workshop at Lonavala involving 150 College students and programme officers besides AGNI volunteers. A "Clean and Green Mumbai" week was conceived and launched at a mass meeting. Volunteer groups were set up in 11 Wards to spread awareness before a cleaning, greening and vermi-composting operation in and around Mumbai.

Swachchha Mumbai Abhiyaan
AGNI has been actively involved in formulating and implementating this ongoing program of the MCGM, launched on 15th August 2002.

A core group of senior MCGM officers and AGNI members formulated an action plan based on data about waste generation, collection and disposal. AGNI-JAAGs promoted community participation and media notice. AGNI and MCGM organised a sensitization workshop for civic staff and AGNI. Volunteers were mobilised by AGNI at Ward level to join MCGM 'Nuisance Detector' teams and monitor clearing of garbage. Information on garbage clearance timings, control room numbers etc was spread by AGNI volunteers, who also found sponsors for litterbins and security guards.

Girgaum Chowpatty Beach Project
AGNI - JAAG in D Ward helped evolve a plan to accommodate bhelpuri stall owners on Girgaum-Chowpatty beach after courts had held the area to be recreational and for citizens. Where were stall owners to go? AGNI participated in site visits, court hearings and numerous discussions with civic authorities. Architect and urban planner Rahul Mahrotra designed a solution. It has been implemented by a court-appointed committee on which AGNI is represented.

Air Transport


Transport of men, mail and materials through a vehicle in the air from one place to another is referred to as Air transport. The vehicle in case of air transport is termed as Aircraft. Aircraft is a vehicle operating primarily in the earth's atmosphere but at appreciable distances above the ground.

The growth of air transport has modified the travel habits of million of people and has influenced socio-political and economic life of the people in many countries. These effects have been made possible not only by the rapid technological development of the aircraft but also by the introduction of uniform navigational and communication facilities throughout the world by steady advance in air flight safety. The progressive evolution of international air agreements, regulation, rules of flight, conduct and regulatory agencies together provide a worldwide code of civil aircraft operation.

Characteristic of Air Transport

1. Air transport by nature provides the speediest mode of transport service. The aircraft need to fly above a certain limit of speed due to the basic aerodynamic principle. Speed is the greatest merit of air transport over land or sea transport. Air transport has brought the World closer and in fact the people can reach the other parts of the World within the shortest possible time. Air Transport is used as a very efficient means for speedy transport of men, mail and goods.

2. This mode of transport does not encounter the geographical barriers of earth's surface like mountains, hills, deserts, rivers, etc. and this allows the air transport to provide gradually faster services. It has also the advantages of linking remote and inaccessible areas across the mountains, oceans, deserts and dense forests.

3. Aircraft usually follow Great Circle routes. Great circle routes are the shortest routes between two points. But at times due to political restrictions great circle routes are not followed. Availability of full load traffic is also essential for the aircraft to follow great circle route. If traffic is not available then a longer route is followed by the airlines. On account of security reasons of various countries the aircraft has to change their routes.

4. Weather conditions playa vital rol~ in air transportation. The meteorological elements have significant impact on aviation. The sub-tropical belts of high pressure are the most favorable and in most places, almost ideal areas for aviation. Development of air transport requires better landing equipment in the airports for safe landing of aircraft. Technological improvements and aids like radar, de-icing device, beacons for night flying and many other help in developing the air transport.

5. The rate of depreciation and obsolescence of aircraft is high. The price has to be paid for the rapid technological change in the aircraft manufacturing industries. A major check is also required after twenty thousand air-borne hours, after which the aircraft is said to be in a mint condition. The cost of this check is very high. Moreover, Digital Flight Recorder readout is mandatory every month.

6. The nature of air transport operation required that a major portion of work force acquire job or industry specific skills, through experience or training.

Socio Economic significance:

(a) It facilitates links to inaccessible areas. The air transport aids the land transport in the economic development of areas where other means of transport is practically absent. In regions where road cannot be constructed or land transportation links cannot be established, this mode of transport is to be pressed into service because of necessity. Settlement in various mining areas or in the snow-fed areas is only possible because of air transportation links.

(b) Helps to expand geographical market. Air transport has prompted a number of industries to expand their geographical markets and introduce "just-in-time" innovative distribution technique. The globalization of production market has contributed significantly the growth of air transport. Now the supply of international market is provided by some three hundred airlines.

(c) It creates consumer market. Despite the fact that air transportation has been expensive, all the nations have. utilized every opportunity in developing this mode of transport. The development of civil aviation has been due to the desire to have well-organized air-routes to reach the consumer market. Air cargo has created new markets and has contributed notably to the development of international trade in certain high cost commodities.

(d) It helps to increase military importance. Aircraft are not merely the carrier of goods or passenger or mail but they are also used as the weapons of war. They maintain a system of high-speed transportation requirement of the government and of essential industry in war as well as in peace. The most important advantage military aviation derives from civil aviation is in the development of airways, air navigational aids and ground organization. The military importance of air transport generally prompts the governments to attach more importance for the development of this sector. Air transport serves the boarder areas to strengthen national security.

(e) It creates employment. Air transport industries also create employment opportunities. Development of civil aviation offers jobs in its different segments of operation. Skilled and unskilled persons can be employed in a larger scale with better co-ordination of road and air transport.

if) It provides faster relief operations during flood, cyclone, drought and other natural calamities. When all the land routes of a particular place is cut-off due to natural and other calamities, air transport is the only means to connect that area. Air surveys can also be undertaken to know the topography of a region by using helicopters. At the time of draught, artificial rain can also be affected by air-crafts.

(g) It assists to increase foreign exchange reserve. A national airline can help in saving foreign exchange. Receipts from foreign travelers, export freight and airport expenditure by foreign airlines provide revenues of great value in terms of foreign exchange for many airliners. The wide-ranging opportunities offered by long-haul aircraft attract tourists. Its related economic benefits are enjoyed by smaller and less developed. countries. Economic gains are achieved by the use of air transport, as a stimulant to trade, tourism and industry and the location of one or more international airport terminals in the vicinity of a capital city is a factor critical to national growth.

(h) It assists in developing international tourism by offering attractive travel package to the travelers. The hotel industry can grow with the development of better airport facilities and frequencies of air services. The growth of floriculture industries is possible because of fast transportation facilities thorough air services. Speedy deli very of these types of products is required because of its perishable nature and air-transport fulfills this condition.

(i) Air transport reduces the transit time of transportation, which is vital to boost economic activities. Trading, commercial and official activities can be done at the quickest possible time because of availability air transport. Better international understanding is essential for the welfare of the human race. This requires frequent visit of top dignitaries of a country to the other country to assemble in an international summit and this is possible because of availability of air transport. Air transport offers substantial savings in time over long distances and plays an important role in areas where surface transport is not adequate.

Limitation of Air Transport Services

(i) Air services are affected by adverse weather conditions. Weather condition of a region plays an important part in setting up an airport. In earlier days of air transport, this natural factor played an important role. However, with the development of air flight technology, the airplane can fly at a higher level, thus avoid the weather hazard. Further, development of radio technology, introduction of modern technical equipment for night flying, considerably reduced the weather hazards. However other Weather hazards such as cloud, fog, smoke, dust storm, which either interfere with visibility or affect performance of the air transport service.

(ii) Obsolescence in case of aircraft is high. The rate of obsolescence and depreciation in respect of aircraft is very high. Cost of replacing the outdated aircraft requires appropriation from profit each year to reduce burden on the management of the airlines.

(iii) Not popular for bulk freight transport. As regards freight, it is a popular means of transport, except for commodities of high value per unit of weight, like costly medicines, perishable product and electronic products, etc. The commodities, which can withstand high transport cost, are generally transported by air. It also cannot provide doorstep services or direct connectivity to consumption points.

(iv) It is not economical over short distance. Air transportation is unable to be advantageous or economical over short distances. It is because of this unavoidable limitation that all domestic airlines run for short distances have either been abandoned or are heavily subsidized by Governments.

(v) Air transport is capital intensive. Air transport development requires huge capital investment. Modem traffic control building has to be constructed for safe landing of aircraft. Provisions for ground facilities like air traffic control, radio and meteorological services with modem technical equipment is essential for air transport development. A large area is required for the construction of aerodrome to accommodate large sized aircraft and this requires sizable investment. An aircraft is costly to manufacture, costly to operate and costly to maintain. It needs very high consumption of energy per unit of weight carried.

(vi) Legal restrictions. Many countries imposed several legal restrictions on the foreign airliners in the interest of their own national unity and peace.

(vii) High freight cost. Air transport can only be availed by rich and affluent class of the society because of its high freight cost. This means only the privileged class of the society can avail this opportunity. Air transport, presently is a luxury in the developing countries. Only a small fraction of the total population uses this service.

(viii) Small carrying capacity. Its cargo and passenger carrying capacity is low as compared to road, rail and water transport.

(ix) Air travel is risky. The chances of breakdown due to various factors are high and the chances of survival in case of any accident during the journey are very remote.

Element of Air Transport
There are three elements in air transport i.e
(i) Airway
(ii) Aircraft service
(iii) Airport.


All aircraft's follow chartered routes marked by modern mechanical devices such as beacons and radio beams. They are controlled by control towers that know the speed, altitude and location of the planes at all times. Air flights are undertaken on carefully undertaken routes as per predetermined timetable and controlled from the air terminals.


Commercial air transport is divided into:

(a) Scheduled airlines, and
(b) Non-scheduled airlines.

(a) Scheduled airlines. These provide transport facilities between a given number of points according to a pre-determined routes and time. Scheduled airlines facilities can further be classified into three principal services:

(i) Long distance or intercontinental services.
(ii) Medium distance or regional service.
(iii) Local or inter urban services.

For scheduled air services, the privilege of operating commercial services through or into a foreign country can be divided into:

(i) privilege of flying across a country non-stop,
(ii) privilege of flying across with a stop for technical purposes only,
(iii) privilege of bringing in a discharging traffic from the home state of aircraft or airline,
(iv) privilege of picking up of traffic for the home state of aircraft with privilege of picking up traffic for or discharging traffic from third states in the territory of the state granting the privilege.

(a) Non-scheduled airlines. This offer transport facilities under charter contracts or according to the demands of traffic i.e., they can be hired for special journeys. In many advanced countries, private companies offer Charter flights to passengers during the holiday season.

Without airports there can be no aeronautics as both are inter-dependant. An airport is any space, strip or ground adopted and used primarily for the purpose of take off and landing of an aircraft. An airport can be defined as one or more runways for aircraft together with associated terminals and buildings where passengers and freight are transported and processed, domestic and International Airports are considered to be large complex industrial enterprises (Airstrips or Aerodromes do not meet this definition).

Airports act as a forum for different functions and related activities that combine to facilitate air transport traffic and the interchange between air and surface transport. An aerodrome is described by the International Civil Aviation Organization as a defined area on land or water (including any building, installation and equipment) intended to be used either wholly or in part for the arrival, departure and movement of aircraft. Airfield is used in reference to small aerodromes, generally without hard runways or facilities of handling large transport aircraft or their passenger or cargo.

Elements of an Airport

Following are the four principal elements of a major airport:

(i) Airport management and control. The airport management and control function embraces the day-to-day operation and long-term planning of the airport, the terminal, runway and taxiway system, local air-traffic control, the lighting, navigational and aircraft approach guidance system, as well as fire-fighting, fuel supply and all ancillary services including custom facilities.

(ij) Passenger and cargo terminals. The passenger and cargo terminals provide for handling passengers, baggage and cargo and the related activities.

(iii) Runway, taxiway and apron system. The runway, taxiway and apron system are required to meet the needs of the aircraft for landing and take off, for positioning correctly for these maneuvers, for aircraft location to receive and discharge loads and for the operating and servicing crews to work.

(iv) Airport services. Airport services related services related to the airport comprise the apron (the part of the airport surface adjacent to the terminal, the handling of aircraft, passenger baggage, cargo, aircraft fuel supply, aircraft catering and engineering services.) Ground related services include passenger terminal catering and the concessionaire facilities within the terminal and the car parking and the garage arrangement in the airport terminal area for the travelling public and the airport staff.

Functions of Air Port
For historical, legal and commercial reasons the activities performed within an airport vary among countries and often among airports within the same country. In many developing countries, the airport functions are owned and operated by a government entity; whereas in many industrialized country ownership functions are privatized. Thus, airport services and facilities can be classified into following categories:

(a) Essential operational services and facilities. Such services are primarily concerned with ensuring safety of aircraft and airport users. This includes air traffic control (ATC) services to facilitate the approach and landing of aircraft, meteorological services, telecommunications, police and securities, fire and ambulance services (Including search and rescue) and runway and building maintenance. These facilities or services are generally provided by the airports themselves or by local or central government departments. The cost of such services differs among airports.

(b) Traffic Handling Services. Numerous services relating to traffic handling have to done at airport. These are commonly termed as ground handling activities. These include cleaning, provision of power, fuel and processing baggage and freight. Other ground handling facilities are more specifically traffic related and cover the various stages of processing Passengers, baggage and freight through terminals and unto aircraft.

Economies of Air Transport

The operating result in an airline is the difference between the operating revenue and operating expenses. The operating cost per unit capacity, i.e., available Ton Kilometres (A TKM) is called 'Unit Cost' and operating revenue per unit capacity utilized, i.e., one revenue ton kilometer (RTKM) is called 'yield'. The total operating cost, hence, is a product of capacity and unit cost and the total revenue is a product of capacity utilized and the yield. These relationships are expressed as under:

Operating expenses = A TKM x Unit cost
Operating Revenue = RTKM x Yield
= (ATKM x Load Factor) xYield.

The expenses of air transport industry can be grouped as under;

(i) General Expenses -These expenses include maintenance of airport building and space, maintenance of air-terminal facilities, advertisement expenses, establishment expenses of general maintenance staff. These are generally fixed in nature.

(ii) Flying Expenses -These expenses includes cost of aircraft, fuel expenses, salary cost of operating crew. These are generally variable in nature.

Documents of Carriage

Passenger Ticket. For the carriage of passengers, the carrier must deliver a passenger ticket, which must contain the following particulars:
(i) The place and date of issue.
(ii) The place of departure and of destination.
(iii) The agreed stopping places.
(iv) The name and address of the carrier or the carriers.
(v) A statement that the carriage is subject to the rules relating to liability contained in the First Schedule to the Convention.

Luggage Ticket. A luggage ticket must be made out in duplicate, one part for the passenger and the other part for the carrier.
It must contain the following particulars:
(i) The place and date of issue.
(ii) The place of departure and of destination.
(iii) The name and address of the carrier or carriers.
(iv) The number of the passenger ticket.
(v) A statement that the delivery of luggage will be made to the bearer of the luggage ticket.
(vi) The number and weight of the packages.
(vii) The amount of the value declared in accordance with the Rule 22(2).
(viii) A statement that the carriage is subject to the rules relating to liabilities.

Air Consignment Note. The consignor has to prepare Air Consignment Note and hand over the goods to the carrier in three parts. The first part shall be marked 'for the carrier' and shall be signed by the consignor. The second part shall be marked 'for the consignee' and shall be signed by the consignor and by the carrier and hall accompanies the goods. The third part shall be signed by the carrier and handed by him to the consignor after the goods have been accepted.

The Air Consignment Note shall contain the following particulars:-

(a) The place and date of its execution.
(b) The place of departure and of destination.
(c) The agreed stopping place subject to change by the carrier if necessary.
(d) The name and address of the consignor.
(e) The name and address of the consignee,
(f) The name and address of the first carrier.
(g) The nature of goods.
(h) The number of packages the method of packing and the particular marks or numbers upon them.
(i) The weight, the quantity, the volume and dimensions of goods.
(j) Apparent conditions of goods and of the packing.
(k) The agreed freight, the date and place of payment and the person who is to pay it.
(l) If the goods are sent for payment on delivery, the price of the goods and if the case so requires, the amount of expense incurred.
(m) The amount of the value declared in accordance with the rule 22(2).
(n) The number of parts of the air consignment note.
(0) The time fixed for the completion of the carriage and a brief note of the route to be followed, if these matters have been agreed upon.
(P) A statement that the carriage is subject to the rules relating to liability contained in the scheduled.

Liability of the Carrier. According to Rule 17, the carrier is liable for damage sustained in the event of death or wounding of a passenger or any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on board the aircraft or in course of any of the operations of embarking. According to rule 18(1), the carrier is liable for damage sustained in the event of the destruction or loss of, or of damage to, any registered luggage or any goods, if the occurrence which caused the damage so sustained took place during a carriage by air. As per Rule 19 and Rule 20(1), the carrier is also liable for damage occasioned by the delay in carriage by air of passengers, luggage or goods. BQt this liability seizes if the carrier proves that he has taken all necessary measures to avoid the damage. If the carrier proves that the damage was caused by or contributed to by the negligence of the injured person, the court may exonerate the carrier wholly or partly from his liability.

History of Civil Aviation

The history of civil aviation in India began in December 1912. This was with the opening of the first domestic air route between Karachi and Delhi by the Indian state Air services in collaboration with the imperial Airways, UK, though it was a mere extension of London-Karachi flight of the latter airline. Three years later, the first Indian airline, Tata Sons Ltd., started a regular airmail service between Karachi and Madras without any patronage from the government.

At the time of independence, the number of air transport companies, which were operating within and beyond the frontiers of the company, carrying both air cargo and passengers, was nine. It was reduced to eight, with Orient Airways shifting to Pakistan. These airlines were: Tata Airlines, Indian National Airways, Air service of India, Deccan Airways, Ambica Airways, Bharat Airways and Mistry Airways.

In early 1948, a joint sector company, Air India International Ltd., was established by the Government of India and Air India (earlier Tata Airline) with a capital of Rs 2 crore and a fleet of three Lockheed constellation aircraft. Its first flight took off on June 8, 1948 on the Mumbai (Bombay)-London air route. At the time of its nationalization in 1953, it was operating four weekly services between Mumbai-London and two weekly services between Mumbai and Nairobi. The joint venture was headed by J.R.D. Tata, a visionary who had founded the first India airline in 1932 and had himself piloted its inaugural flight.

Significance of Air Transport
Air transport is the most modern, the quickest and the latest addition to the modes of transport. Because of speed with which aeroplanes can fly, travel by air is becoming increasingly popular. As far as the world trade is concerned it is still dominated by sea transport because air transport is very expensive and is also unsuitable for carrying heavy, bulky goods. However, transportation of high value light goods and perishable goods is increasingly being done by air transport.

Nationalization of Airlines
The soaring prices of aviation fuel, mounting salary bills and disproportionately large fleets took a heavy toll of the then airlines. The financial health of companies declined despite liberal Government patronage, particularly from 1949, and an upward trend in air cargo and passenger traffic. The trend, however, was not in keeping with the expectations of these airlines which had gone on an expansion spree during the post-World War II period, acquiring aircraft ad spares.
The Government set up the Air Traffic Enquiry Committee in 1950 to look into the problems of the airline. Though the Committee found no justification for nationalization of airlines, it favored their voluntary merger. Such a merger, however, was not welcomed by the airlines.

Foreign Airlines
Foreign airlines carrying international passenger traffic to and from India existed long before Independence. Their operations are governed by bilateral agreements signed from time to time between the Government of India and the governments of respective countries. In 1980-81, the number of such airlines was 35. It rose to 49 in 1996-97.

The share of foreign airlines in India's scheduled international traffic has increased. In 1971, their share was 55.58 per cent which went up to 65 per cent and declined to 58 per cent during 1972-75. It fell to 55.72 per cent in 1976 and further to 55.02 per cent in 1977. Between 1978 and 1990 it gradually increased and rose to 75.93 per cent. In 1996, the share was nearly 72 per cent.

Open-Sky Policy
The Open-sky policy came in April 1990. The policy allowed air taxi- operators to operate flights from any airport, both on a charter and a non charter basis and to decide their own flight schedules, cargo and passenger fares. The operators were, however, required to use aircraft with a minimum of 15 seats and conform to the prescribed rules. In 1990, the private air taxi-operators carried 15,000 passengers. This number increased to 4.1 lakh in 1992, 29.2 lakh in 1993, 36 lakh in 1994 and 48.9 lakh in 1995.

The 1996, private air taxi operators carried 49.08 lakh passengers which amounted to a 41.14 per cent share in the domestic air passenger traffic. Seven operators viz NEPC Airlines, Skyline NEPC, Jet Air, Archana Airways, Sahara India Airlines, Modiluft and East West Airlines have since acquired the status of scheduled airlines. Besides this there were 22 nonscheduled private operators and 34 private operators holding no-objection certificate in 1996. The number of plus 120 category aircraft in the private sector was 34 and the total fleet strength was 75 in June, 1996. Two out of seven scheduled air taxi operators suspended their operations in 1996 because of the non-availability of aircraft.

Development of Civil Aviation

The repeal of the Air Corporation Act from 1 March 1994 enabled private operators to provide air transport services.

Six operators were given the status of scheduled operators on 1 February 1995.

Currently there are five international airports and 87 domestic airport in the country with 28 civilian enclaves for defence purposes.

The Airport Authority of India plans to invest Rs 35,000 million for the construction and up gradation of airports.

Budgetary support of Rs 485.50 million was allocated to AAI in 1996-97.

In august 1996, in a major policy decision, the government allowed the private sector to set up air cargo complexes in a bid to ensure smooth movement of export cargo.

Domestic and foreign investors including NRIs have been invited to participate in the development of infrastructure support at select airports.
With a market share of 43% Indian airlines is the biggest player in aviation.
Rs 24,710 million have been marked for development of the civil aviation sector in the annual plan for 1997-98.

The Indian Air cargo Market

The growth of air cargo in India has also been manifold though it might not have kept pace with the progress made all over the world. Table 1 shows how both international and domestic air cargo traffic has increased, reflecting an overall year on year growth.

Table 1: Trends in cargo traffic at five international airports in India.
(Figures in '000 tonnes)
Period - International Cargo - Domestic Cargo - Total - Percentage Increase
1972-73 - 47.4 - 33.6 - 81 -
1982-83 - 165.4 - 84.6 - 250 - 209%
1992-93 - 300.5 9- 0.9 391.4 - 56.56%
1999-2000 - 494.2 - 183.0 - 677.2 73%
(Source - Transport India 2000)
Future Outlook of the Industry

Future projections reflect that the air cargo industry both in the domestic sector and the international sector will continue in its upward trend of growth. Fig.1 reflects that the domestic air cargo will continue at a somewhat steady rate of growth whereas the international air cargo movement as illustrated in Fig.2 shows a steeper rate of growth indicating that international air cargo trade will flourish at a higher rate of growth.

Good governance is all about simplifying life


Recently the terms "governance" and "good governance" are being increasingly used in development literature. Bad governance is being increasingly regarded as one of the root causes of all evil within our societies. Major donors and international financial institutions are increasingly basing their aid and loans on the condition that reforms that ensure "good governance" are undertaken.


The concept of "governance" is not new. It is as old as human civilization. Simply put "governance" means: the process of decision-making and the process by which decisions are implemented (or not implemented). Governance can be used in several contexts such as corporate governance, international governance, national governance and local governance.

Government is one of the actors in governance. Other actors involved in governance vary depending on the level of government that is under discussion. In rural areas, for example, other actors may include influential land lords, associations of peasant farmers, cooperatives, NGOs, research institutes, religious leaders, finance institutions political parties, the military etc. The situation in urban areas is much more complex. Figure 1 provides the interconnections between actors involved in urban governance. At the national level, in addition to the above actors, media, lobbyists, international donors, multi-national corporations, etc. may play a role in decision-making or in influencing the decision-making process.

Good Governance

Good governance has 8 major characteristics-

It is participatory, consensus oriented, accountable, transparent, responsive, effective and efficient, equitable and inclusive and follows the rule of law. It assures that corruption is minimized, the views of minorities are taken into account and that the voices of the most vulnerable in society are heard in decision-making. It is also responsive to the present and future needs of society. Good governance is an ideal which is difficult to achieve in its totality. Very few countries and societies have come close to achieving good governance in its totality. However, to ensure sustainable human development, actions must be taken to work towards this ideal with the aim of making it a reality.

India needs today is good governance, which is possible if sensitive human beings hold the reins of power. Good governance will only help the nation achieve progress in every field. India's a lone bronze at Athens Olympics was the result of bad governance. Is it not a national shame to win one bronze from the population of one billion? There are a number of examples like this where we have failed. Amidst globalization, good governance will only propel us towards success. The nation can still pin its hope on the large section of middle class for its development.

Globalization as a phenomenon has touched India in very limited ways.

The Government's unwillingness to de-bureaucratize is partly responsible for this. If some sectors of the economy have made progress then it is in spite of the government rather than because of it.

The levels of portfolio investment have remained nearly the same between 1992-93 and 1996-97. Portfolio investment by foreign institutional investors has not increased from the levels achieved in 1993-94. The positive effect of opening up the economy to FDI has been negated by India's apprehensions about foreign ownership, even partial ones. Bureaucratic factors and a crippling lack of infrastructural facilities make India unattractive for FDI. A World Bank survey in 1998 placed India at the bottom in a group of 53 emerging economies, in terms of quality of overall infrastructure facilities. Therefore, relative to its position in the world economy and financial markets, India has regressed from its position in 1990-91!

India has roughly 25 per cent of the developing countries population and it receives merely 2.17 per cent of FDI. While China, with roughly the same population and a Communist regime to boot, receives 16 times more FDI than India. Clearly, India is neither connected to global capital markets nor is it considered a potential home by global capital in search of higher value in emerging country markets. Policy announcements, in late 1998 and early 1999, that the Government would enlarge the automatic approval list of FDI, simplifying procedures have been entangled in bureaucratic lengthy procedure. The proposed change of Foreign Exchange Regulation Act into Foreign Exchange Management Act may help in reducing controls.

Example - Good governance is all about simplifying life

What Wipro has generated in a single day, through exports, was more than what India does in one month. It can cover India's fiscal deficit in 22 days to a month. It was regretted that it was not a public sector company. If it was so, it would have added enough to its market cap to not only wipe out India's fiscal deficit, but to turn it into a decent surplus.

The market cap of the top two stocks Wipro and Infosys which stands at $62 bn (Rs 2,69,370) is much more than the GDP of Pakistan at $55 bn for the current year. The combined m-cap of the BSE ($ 275 bn) now stands at almost 62 percent of India's projected GDP for the current year ($443). The combined market cap of BSE is on its way to matching India's GDP. The top five stocks in terms of m-cap account for more than 20 percent of India's GDP and 35 per cent of BSI's m-cap. In the US, Microsoft with the highest m-cap of $495 bn, accounts for just four percent of NYSE's capitalisation and less than six per cent of the US GDP. The combined m-cap of three other stocks Zee, HLL and HCL Tech at almost $ 34 bn (Rs 1,46,716 crore) is just a shade off India's total forex reserves of $ 34.9 bn. The market cap of the BSE, $ 275 bn, is much more than the total time and demand deposits lying with the banks, $204 bn. The market cap of Wipro ($46.8 bn) alone is much more than the total currency (notes and coins in circulation) with the public ($44 bn) in India.

The chief reason for this quick progress on the info technology sector is that there are no inspectors monitoring info technology (at present anything between 60-65 Inspectors visit any manufacturing industry ostensibly to ensure compliance to various norms, rules, regulations and laws, but actually to collect bribe). Had the bureaucracy had come to know earlier about the progress, they would have put the brakes on it straightaway. The rationale of bureaucracy is that how can any sector of the economy claim progress, without being obstructed by it. Info technology companies have progressed because there were no inspectors or their superiors to be pandered to. He also said that the government had created IT Department. The bureaucrats are likely to create a mess of it. This sector progressed without bribing anybody because no licenses and permits had to be taken. One may not totally agree, with the assessment. But the fact remains, that in many areas, the Government instead of becoming catalytic agent to the progress was doing actually the opposite, through its cutting edge levels functionaries. The biggest danger faced by the economy is from within. The danger is in the form of sabotage by graft, self-defeating leaks, which need to be plugged in. It is more so in the case of export promotion schemes. In the case of duty draw back, the duties are expected to be refunded to the exporters by the customs. Corrupt officials conniving with the exporters for over invoicing the value of the export, costs the Government heavily. This way, the value increases, and the Government shells out, several times the actual sum due. The passing of the export bills is a gold mine.

Unfortunately, in the present scenario, corruption is not a stigma. A decade ago, a corrupt official would have been looked down on by all. It was a kind of an informal disapproval, which was more effective than any punishment. At present, corruption is accepted as a part of life and no disapproval of any kind is attached to it. Apart from this, the procedures for complaining and taking action are tardy and lengthy, that the affected persons find it to be a waste of time. In any case, the businessmen pass on the increased cost to the customers or realize it from the Government by either not paying duties or taxes. There is a need to have a valuation list of exports and exporters, so that the black sheep, thriving in the liberalized regime are exposed and dealt with strictly. Another suggestion is that only officers of proven integrity and honesty should be appointed to head sensitive divisions. The Heads of this Divisions should be at the public counters, where public come in contact with the Department, themselves by surprise at least twice or thrice a month. This way, they will become aware of the problems not only of the public but also their own. They will know a; first hand, where the bottle necks lie and what can be done to rectify the situation.

Computerization, with the facility, to access the files, only by the next senior officer, at any time, will help in curbing malpractices. But success of the system will depend upon entering the information in the computer. Computer, by itself, cannot abolish corruption or increase efficiency. It is only an aid and a tool to efficiency. If tire entry itself is not made properly or only made after accepting a bribe, the position will not improve. More important than the computer is the man behind it. Man behind the machine wilt work better, faster and efficiently only, if he knows that quick retribution will follow, if he is found working only for speed money and not for speed. The best safeguard for the public will be, not to put up with injustice and corrupt practices but to protest against it. Unless the citizen's work for a Government that works transparently and honestly, the situation will not alter. There is a price tag on everything and nothing comes cheap in life. There are no free lunches. More than anything the Government should learn a few lessons from the IT sector, where without any licenses, quotas, permits or permissions; it has progressed beyond the wildest expectations. It is time to simplify laws rules and regulations to the utmost point of transparency, so that people work for the progress of the country

Water Transport

Nature-and Significance

Water transport is considered as a portent of modem civilization, a source of employment and an active agent of progress and the development. Water transport is the oldest and cheapest form for moving goods from one place to another place. It operates on natural tracks and hence does not require huge capital investments in the construction and maintenance of waterways. The path is provided by nature and less investment is required in laying down the track and its maintenance. This mode of transport has the largest carrying capacity and suitable for transport of bulk goods over long distance.

The landmass in the world is connected with various waterways through ocean. Due to thais connectivity the water transport is considered as the best means for transport of bulk commodities. This form of transport is extensively used for the international trade. Ocean transport is favorable because of geographical fact that the oceans and seas are interconnected. British Empire could establish several colonies all over the world due to its well-developed, well-equipped overseas water transport system. Water transport can easily carry goods and commodities of low values and high volume. After discovery of various ocean routes, the economic importance of these routes has been increased significantly. Oceans are considered to be the cheapest and the safest highway to carry passenger and cargo. Water transport can be classified into Inland water transport and Ocean transport.

Inland Water Transport

Transport by rivers, canals and lakes are referred to as 'Inland Water Transport'. Inland Waterways have greatly expanded during 20th century in many countries of the world. It is playing an important role in internal trade and commerce in many countries. Inland waterways may be natural such as navigable rivers or lakes or maybe artificial such as canals. Many rivers provide natural waterways, which can be used for providing transport services through small boats as well as big barges. River transport was one of the oldest modes of transport. It played a very important role prior to the development of modern means of land transport. It provides transport facilities to inaccessible forest areas and other natural regions not connected by roads.

Canals are artificial waterways basically made for irrigation or 'navigation or for the both. Canals can be used as waterways for inland water transport, but huge amount of capital investment is required in the construction and maintenance of such man made artificial waterway. The cost of canal transport is higher than that of the river transport. Apart from this, providing adequate water in the canal to facilitate movement of big boats is considered as a big problem for this mode of transport. Natural lakes provide transport facilities to its coastal areas. Although, the distance covered by lake-transport is less, it provides low cost transport facilities to the areas connected by the lakes.

Advantages of Inland Water Transport

1. Inland water transport is the cheapest mode for certain kind of traffic both for long and short hauls provided the points of origin and destination are located on waterfront and no trans-shipment of goods is involved.

2. It is also one of the most efficient modes of transport from the point of view of energy consumption.

3. It can provide immediate access wherever water exists without requiring investment in line haul capacities as in other mode of transport.

4. Inland water transport is a labor-intensive mode and generates more employment per rupee of investment than any other mode and so particularly benefits weaker section of society.

5. It provides transport for heavy, bulky, non-perishable and low-grade traffic with a low price relative to weight where speed is not an important factor.

6: It provides economical means of transportation of minerals and other bulky dry and liquid raw materials for industries.

7. Being gift of nature, the waterways require no investment for its maintenance.

8. In mountain areas, inland water transport provides excellent service for downhill movement of goods and passengers.

Limitations of Inland Water Transport

(i) This form of transport is slow as compared to other forms of land transport.
(ii) Navigable waterways are not perennial in nature in many areas.
(iii) Transport activity becomes very much-limited in polar region because freezing of water may cause hindrance.
(iv) Heavy capital investment is also required in construction maintenance and dredging operation of canals.
(v) Climatic factors exercise greater influence in case of inland water transport than in any other mode of transport i.e., the routes are often blocked by ice in winter.
(vi) This form of transport can be used where speed and time are not important. Perishable products cannot generally be transported by inland water transport for a longer distance.

National Waterways, The Government of India has so far identified ten important waterways for declaring them as 'National Waterways'. Three out of these ten waterways have already been declared as National Waterways.

The details National waterways are as follows:

(a) National Waterway No.l-(Allahabad and Haldia 0,620 km) stretch of the Ganga-Bhagirathi-Hoogly river system). Cargo Transportation in the stretch Haldia- Farakka- Patna are being carried out by the Central Inland Water Transport Corporation (CIWDC) and by Goa Barge Owners' Association.

(b) National Waterway No.2 (891 km. The Sadiya-Dhubri stretch of the river Brahmaputra). The CIWTC is operating cargo services between Calcutta and Guwahati. ' .

(c) National Waterway No.3 The Kollam-Kottapuram stretch of West Coast Canal (168 km) along with Champakara Canal (14 km in Kerala). Keral Shipping and Inland Navigation Corporation, ABC and Sons and Hindustan Petroleum Corporation Limited operate cargo services in this waterway.

The responsibility of development and maintenance of National Waterways rests with the Inland Waterways Authority of India.

Charter of Functions of Inland Waterways Authority of India (164)

(i) To carry out economic surveys to assess future traffic potential on main rivers, feeders and creek routes.
(ii) To draw program of river canal conservancy works, including river training works and provision of navigational aids.
(iii) To draw programs of dredging requirements and priorities for efficient maintenance of existing navigable waterways and for revival of dead and dying rivers, channels or canals for navigation.
(iv) To develop, maintain and operate inland river ports landing ghats and terminal facilities in such ports or ghats. .
(v) To maintain pilotage and hydrographic survey services.
(vi) To disseminate navigational and meteorological information including publication of river charts. ,
(vii) To carry out removal of wrecks and obstructions in navigable waterways.
(viii) To fix maximum and minimum fares and freight rates for inland water transport on behalf of the government.
(ix) To approve timetables for passenger services.
(x) To ensure coordination of inland water transport with other forms of transport, with major sea ports and with industries, trade and agriculture interests for optimum utilization of the available transport capacity.
(xi) To conduct research in matter relating to inland water transport including development of : (a) craft design, (b) techniques of towage and (c) landing and terminal facilities.
(xii) To arrange program of technical training for inland water transport personnel.
(xiii) To maintain liaison with the shipyards and ship repairing industries to meet the requirements of the inland water transport fleets, repairs and new constructions.
(xiv) To register country boats and mechanized crafts and issue of certificate of fitness for vessels plying on waterways.
(xv) To issue permit for license for right of operations.
(xvi) To issue certificate/license for various categories of crew of inland vassals.
(xvii) To perform any other functions related to IWT assigned by the government.

Ocean Transport

Navigation through the open sea is known as ocean or sea transportation. Navigation along indented or broken coastline is known as coastal shipping. Coastal shipping is synonymous with domestic shipping by sea between two points in the same country. Ocean transportation is in fact an extension of coastal shipping to wider expanses of water. So, as far as the transportation of goods is concerned inland water transportation and the coastal shipping are of national and intra-regional importance. Ocean transportation is very significant and vital for the growth of international trade. Ocean transport has its origin in the beginning of human civilization. It is considered as an indispensable means for development of foreign trades. It has brought different parts of the world closer for developing one big world market. On account of its operation in natural ocean tracks, this form of transport generally requires no infrastructure investment for providing transport facility.

Coastal Shipping

Coastal shipping is the most energy efficient and comparatively cheaper mode of transport for carriage of bulk traffics over long hauls, particularly when the origin and destination of a traffic stream is located along the coast. It is ideally suited to carry long distance bulk cargo and passenger traffic, especially for destinations located on the waterfront. Coastal shipping can, play an important role in integrated transport network of the country, particularly when inland modes are strained.

Factors determining Ocean routes

Generally ocean going ships follow well-defined routes. They in general follow Great Circle Route i.e. the shortest distance between two points. However at times they have to choose different routes because of physical and economic considerations. The factors responsible for such deviation are as follows:

(a) Suitable weather conditions. The route should be free from storm and fog. Although strong against wind is not a problem for smooth sailing of the ships, it is desirable to sail the ship with wind from economical point of view as it saves fuel cost. Foggy and stormy and icy coast area should be avoided as far as practicable for undertaking commercial shipping.

(b) Deep Waters. Shipping in shallower water should be avoided. Deepness of the water is a pre-requisite feature for smooth sailing of the ship. While choosing a route dangerous shoals and other perils which may endanger the safety of the ship and carrying cargo should be avoided in this route.

(c) Availability of Harbors and Ports. The presence of good ports and harbors with quick loading and unloading facilities are also responsible for choosing a particular route by the transporters.

(d) Availability of full load of traffic. The economies of shipping transport deals with Ship carrying large volume of traffic. Unless full load of traffic is guaranteed, the shipping companies may face loss. Hence they always try to choose a particular route when full load of traffic is guaranteed not only on out-ward journey but also during the return journey.

(e) Availability of cheaper route and fuel supplies. Ships generally use those canal routes where dues are comparatively less. Further availability of fuel supplies and ship maintenance facilities at different ports encourages the shipping companies to choose a particular route.

(f) Shipping Services. The shipping services are organized according to the nature and requirements of goods traffic in International trade, which provides the demand for such services. World trade can be classified in to two broad categories, bulk and non-bulk depending on the type of cargo. Bulk Cargoes include liquid bulk like petroleum and dry bulk like ores, fertilizers, food grains, etc. Traffic in non-bulk category is composed of manufactured, semi-manufactured, process and semi-processed goods and materials moving in cases, packages, parcels, bales etc. These items are generally referred to as “general merchandise” in shipping parlance. So availability of both types of cargo makes a route commercially viable.

Basic Type of Ships (176)

(a) Single Deck Vessels
Such vessels have one continuous deck, which means easy access with one hatch for each hold. The hatch is an opening in a ship's deck. Hatches are used for lowering and taking out large object into and out of the cargo hold of a ship. Many single desk vessels have large hatches and some are known as “self trimmers" because of the provision for the cargo to flow into all corners of the held. These types of vessels are suitable only for heavy bulk cargoes like grain, iron ore, coal etc.

(b) Twin Deck Vessels
Such vessels have additional decks (twin deck) below the main deck, running the full length of the vessel. These vessels are suitable for general cargo. The space is divided into separate tiers and the decks eliminate the risk of cargo damage by preventing too much weight to be put on the cargo at the bottom.

(c) Shelter Deck Vessels
These vessels have additional deck above the main deck's shelter deck, which provides more under deck- space for carrying light cargoes. The shelter deck vessels may be a close type or open type. The difference relates to the measurement of a ship.

(d) Other Types of Vessels
(i) Unitized cargo ships and specialized vessels. These type of vessels include pallet vessels, barge carriers, container ships, RO/LO ships, OBOs, gas carriers, wood carriers, car carriers, oil tankers, refrigerator ships etc.

(ii) Roll-on-Roll-off ships (Ro-Ro). Ferries are now employed on a multitude trade routes based on Roll-on-Roll-off concept. This facilitates loading and unloading of all types of cargoes which can be rolled on horizontally including cars, lorries, and other wheeled type of cargoes. Most large Ro-Ro vessels carry their own specially designed cargo handling facilities. This type of cargo handling facilities helps to load and unload a host of non-wheeled commodities such as pallets bundled goods, pre-slung bags and containers. The cargo operations in a RO-RO ship are extremely speedier and are independent of special shore facilities.

(iii) Barge ships. Barge ships are standard sized ships, which can be towed or pushed by tugs into ports and island water ways and which can be hoisted abroad special Barge carriers with adopted equipment for the Sea voyage. Barges are not internationally standardized. Main advantage of the Barge system over other transport system is its reduced dependence on the infrastructure facilities in the ports and on land. Like containers barges can also be prepared specially for transporting various commodities assists for quick turnaround of publisized ships. Various types of barges are Lash, Sea-bee, Bacat, Super sea-bee.

(iv) Cellular ships. Such ships have holds designed to form a series of cells into which the containers are placed.

(iii) Panamax. The bulk carriers with a breadth which can pass through the panama canal ( 106 ft wide) are described as the panamax type. Such bulk carriers carry upto 80,000 tonnes of cargo and are popular as the handi sized bulkers with 10,000 dwt.

(iv) Bulker container carrier. The container or bulker is a recent development. Such ships are also known as "Conbulkers" .

(v) Very large crude carriers (VLCC) Ultra large crude carriers (ULCCs). VLCCs are very large crude carriers with a capacity ranging between 2,00,000 to 3,00,000 dwt., while ULCCs are ultra large crude carriers in the size range of over 3,00,000 dwt.

(e) Multi-purpose Vessels
In recent year's multi-purpose vessels have been developed to cater the need of transporting different variety of cargo. These vessels charge more for transporting than liner vessels, but cheaper than container ships, Ro-Ro vessels and barge ships. These vessels can be classified into four main categories;

(i) Combination General Cargo Liner and Containers. These vessels are designed to accommodate not only containerized cargo but also general cargo.

(ii) Combination Bulk Carriers and Container Vessels. The open hatch nature of many modern bulk carriers also carry containerized cargo. The flexibility of vessels of this type facilitates their use on different route. The hatch is an opening in a ship's deck. hatches are used for lowering and taking out large objects into and out of the cargo hold of a ship.

(iii) BO-RO vessels. There are ships, which can carry RO-RO cargo and containers on the one leg of the voyage and bulk cargo on the return trip.,

(iv) Combination Container and RO-RO Vessel. With the advent of multimodal transport, these vessels are very important. They generally carry container on deck and in the front holds, while rolling cargoes are loaded through Ramps often located in the stern. Ramps are slopping passages connecting two different levels. These are used for movement between decks in RO-RO ships.

Type of Shipping Services

Basically there are three types of shipping viz.
(I) Tramp Shipping or chartering,
(II) Liner shipping, and
(III) Tankers shipping.

According to Rojer Comoy "the tramp is a freight vessel that does not run in any regular line but takes cargo wherever the shippers desire". Tramps are generally chartered for a full and complete cargo. Its main purpose is the carrying of full shipload of cargo of wide variety from many shippers to many receivers. Such ships offer services basically on induction. There is no commitment to provide the service at a fixed rate and according to the schedule. When a tramp ship is engaged for carriage of cargo, it is said to be under charter as either the whole of the bulk or one charterer hires its space. The rates in the tramp market are determined purely by the free interplay of forces of demand and supply.

Nature of Tramp Trade
(a) The market for supply and demand for shipping services of bulk commodities has been traditionally known as the "tramp markets" or "chartered market". Tramp trade refers to the business of hiring out the bulk carriers to carry cargoes of homogeneous variety in large quantities from one port to another. A tramp ship means a ship, which is not committed to any discipline in terms of rates, for its service. Tramps are cargo vessels suitable for movement of bulky goods.

(b) Tramp trade does not have any fixed ports of loading the discharge. There is no periodicity of shipments and tramps are engaged on terms and conditions including freight rates/ hire charges, which is mutually agreed between ship owners and the charters.

(c) Tramp owners are always looking for ports, where profitable cargo is likely to be found. Charters are looking for tramps, which are available for hiring at competitive rates. Freight rate/ hire-charge in tramp trade is generally decided by the loss of supply and demand of tonnage/cargoes and various other technical and commercial factors. Thus, tramp engagement is accomplished without any given set of conditions and rules.


The market for shipping services to transport general merchandise is known as Liner shipping. Liners ships follow certain routes and ply on the advertised dates irrespective of the quantity of cargo they receive for transportation. But, the need to achieve economies in operation, availability of full load of cargo is a necessity. Manufactured and semi-manufactured goods require such shipping services as these goods can be forwarded from one point to another in such a way that the marketing requirements are met at regular intervals. They render speedier shipping services to different markets, at reasonable rates of freight for different items and on a regular basis according to a schedule. There are two types of liner shipping.

(a) Passenger Liners
These liners primarily carry passengers and mails, but may also carry comparatively small cargo. These liners have a fast speed and provide a comfortable service. In order to make better use of capacity; passenger liners employ their vessels for cruises, particularly in the off-seasons.

(b) Cargo Liners
These liners are the ships meant primarily for carrying cargo and at the same time also they carry a few passengers. They also have a rapid speed but are not as spacious as passenger liners. This type of steamer really performs the function of both tramp as well as a liner as it carries large quantities of cargo and limited number of passengers. Some of the ships are specially built and contain facilities of cold storage and refrigeration. These liners are specialised in transporting particular cargo. These liners are equipped with loading and unloading equipment to and from quays or lighters using their own gear exclusively. "'In order to minimize manual handling cost, goods are categorized and classified to meet the requirements of mechanical handling. This can be done by containerization. Palettes or containers provide great ease in handling cargo loads. Both passenger and cargo liners have regular fixed routes, time and rate schedules.

Tankers are the vessels, which are specially designed to carry oil, petrol and such other liquids. Large sized super tankers are now being built to carry petroleum products and other liquid products from the producing area to the area of consumption.

Chartering of Ships
There are various types of chartering of ships for carriage of bulk cargoes.
(a) Voyage charter. In case of a voyage charter:-
(i) A ship is chartered for the shipment of an agreed quantity of cargo from a port to another agreed port or ports.
(ii) The charterer agrees to pay a certain amount known as freight which can be computed either on a lump-sum basis or per ton basis.
(iii) In a voyage charter the owner is not only to meet the running expenses of the ship like officers/crew wages, stores, provisions, insurance etc, but also operating expenses like port charges, light dues, bunker cost etc.
(iv) In voyage charter, normally the cargo expenses are borne by the charter/shipper/receiver and hence the freight rate is expressed on FIO i.e. "Free in and out". In some instances, the loading expenses are to be borne by the ship owner in which case the freight is quoted on "gross load" basis. Sometimes freight is quoted on FIOT i.e. "free in and out trimmed" or FIOST "free in and out spout and trimmed".
(v) The ship owner acts as the carrier and responsible for all expenses in the running and operation of the ship. The charterer pays only the thread charges as agreed upon.
(vi) In a voyage charter a ship is engaged for either a single voyage or for consecutive/round voyages for shipment of an agreed quantity of cargo. The ship owner undertakes to provide the vessel to the charterers for carriage of agreed cargoes from one of the two agreed ports to be discharged at the named port or ports within a certain range at rates and conditions mutually agreed in advance. The ship may be put at the charterer's disposal by letting out its full capacity or part of it. Some times, the ship's capacity may be let out to more than one charterer, in which case the ship owner enters into different agreements with the individual charterer.
(vii) The ship owner under the voyage charter are to direct the master of the vessel to report of the named port for the first loading within a specified time period after the signing of the agreement or at or before an agreed date as stipulated in the agreement. If the vessel does not report for loading accordingly the chatterer may cancel the contract or can claim damage for any consequential loss.

Computation of Freight. For engaging a tramp on voyage basis the chatterer has to pay certain freight. Freight can be computed either on a lump-sum basis or per-ton basis. Thus, where freight payable is on the actual quantity of cargo loaded, freight is calculated on per-ton basis or on dead weight capacity put on a charterer’s disposal. Alternatively lump-sum freight may also be charged.
India’s coastline of about 6,000 km is dotted with 13 major and 185 other ports. Nearly 95 per cent of the country’s foreign cargo (by volume) moves by sea and, therefore, ports/and their development assume an important place in policy making. Development and maintenance of India’s major ports are the responsibility of the Central Government, while Other Ports are in the Concurrent list.

Major Ports

India’s major ports are governed by the Indian ports Act 1908 and the Major Port Trusts Act 1963. The former allow the Statutory to declare any port a major port, define port limit, levy charges etc. while the formation of Port trust Boards and vests the administration control and management of major ports in these Boards.

Development of port after the independence, the development of major ports was taken up in a planned manner. Mechanization and modernizations of cargo-handling facilities at Ports have been a thrust area in recent years, with emphasis on development of dedicated infrastructure. Deepening of ports to receive lager vessels has been another priority area. Vishakhapatnam and Chennai ports have already been deepened.

Name of the 13 major ports

Calcutta, Haldia, Paradeep, Mumbai, Chennai, Cochin, Tuticorin, Jawaharlal Nehru Port at Nhava Sheva, Kandla, Vishakhapatnam, New Mangalore, Marmugao and Ennore Port Trust.
All these major ports are equipped with latest material handling equipment. The capacity of India Ports increased from 20 million tonnes of cargo handling in 1951 to 390 million tonnes as on March 2004. The number of cargo vessels handled at major ports is about 16,000 per annum. Containerization of major ports is increasing rapidly.

Consequent upon adoption of open market economy, Port sector has been opened for private investment. Various areas of Port Functioning such as leasing out existing assets of the port, creation of additional assets, leasing of equipment for port handling and leasing of floating craft from private sector, pilotage and captive facilities for port based industries have been identified for participation/investment by the private sector.