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The integrationist

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The new head of India’s Essar Shipping comes with many years’ experience of ports, logistics and the group’s value chain. Richard Clayton, of Fairplay, travels to Mumbai to meet him

August 19, 2011 Bookmark and Share  
AR Ramakrishnan, who is to be appointed managing director of Essar Shipping, didn’t begin his working life in shipping. After graduating with a degree in mechanical engineering, adding an MBA from the Indian Institute of Management, the country’s premier business school, he spent 12 years at Godrej, the Indian agri-care to security group.

Joining Essar Group as a business analyst in the chairman’s office in 1992, Ramakrishnan still praises his mentor for teaching him “everything I know about shipping”. If nothing else, he has a fascination for the dynamism of the industry and remains greatly encouraged by the family culture that permeates the Essar Group. “We are a large conglomerate on a global scale,” he told Fairplay in Mumbai last week, “with commitment and world-class skills in all our businesses.”

At the end of 1994, he joined the management team of Essar Shipping as general manager (commercial), progressing within five years to chief operating officer, before becoming CEO. Essar later combined shipping with its ports and logistics interests, giving Ramakrishnan the title of wholetime director for the maritime division.

He fully supports the need to separate shipping from ports. “This allows both parts to grow at the right pace, with the right management focus,” he said. Investors have expectations. This will help them to see where the money is going.

Ramakrishnan would have been just as satisfied with the ports as with shipping. He is currently a director on the board of the Indian National Shipowners Association, an alternate director on the board of BIMCO and has served for a total of eight years on the board of trustees of Chennai Port Trust and New Mangalore Port Trust, two of the country’s major ports.

Our conversation begins with the strengths and weaknesses of India’s port operations, his vision for ports closely linked to industrial production, ports as the environmentally acceptable way to transfer cargo along the Indian coast and ports as the last-mile connection to the country’s economic growth.

He is under no illusions about the government’s bureaucratic ways hindering port expansion or about Delhi’s lack of a national strategy for shipping. “We are trying to get ministers to think about cabotage – with or without local participation – or a policy of cargo support to ensure energy security.”

Strategic cargoes could be carried on ships under national control and flying the Indian flag, he suggested. Instead “we have issues over service tax on transactions, loading tax, taxation on seafarers’ income… In many other countries, transport is seen as a critical sector of the economy. What is the policy here?” he asks, not seeking an answer.

“What’s the long-term national strategy – is energy security a policy?” Ramakrishnan and other senior members of the owners’ association have tried to explain to the government what other countries are doing, but it’s clear to him that the key ministries in Delhi are finance, energy and commerce. Shipping falls under the transportation ministry and its calls for the government to work across ministries to enable the Indian economy to grow do not seem to have been heard.

As a member of the National Council for Transportation of the Confederation of Indian Industy and a representative on a number of expert groups constituted by the shipping ministry itself, Ramakrishnan has long had access to the parent ministry, but his vision of a healthy, supported shipping industry playing its part in building an Indian economic powerhouse is not shared by the politicians.

Still, there’s much work to be done in the day job. Ramakrishnan’s tenure as chief operating and chief executive officer at Essar Shipping saw his team win awards for ‘Most Quality Conscious’ and ‘Safest’ Indian shipping company, each on two occasions between 2003 and 2006, and in a change to the award title in September 2007 Essar lifted the award for ‘Safety and Most Environmentally Conscious’ operator.

This was no passing recognition for a job well done: Ramakrishnan believes passionately that shipowners and operators “need to be at the top of what they are doing”, which includes “complying with regulations ahead of time” and building long-term relations with the P&I club, bunker supplier and shipyard. The first 19 years of his time at Essar have taught him the value of solid professional relationships in the maritime sector.

It’s a more traditional, conservative attitude that welcomes the industry’s dynamism but handles it carefully. “We don’t speculatively buy ships; we are responsible to stakeholders and lenders. We will take on an asset if we can write down the debt quickly. We’ll bring in partners if they can work closely with us.” He told Fairplay of the experience in shale gas activity with energy company ONGC, and drilling with oilfield services company Schlumberger in Vietnam. Schlumberger’s positive feedback clearly made a good impression on Ramakrishnan.

His background in the ports sector will be a real advantage for the shipping division he has been tasked with growing. For many years the two elements worked closely together within the Group and nothing has changed other than in corporate structure, he said. Essar Shipping will continue to regard its role as providing cost-effective transport to the oil and gas, steel and projects divisions. “It’s a big advantage to have Group cargo, but I still need to ask how can I maximise my earnings, whether I should take third-party cargo or look at triangulation, and whether I should bring in outside assets to cover either or both of these.”

From the relative safety of a presence within what will become one of the world’s top 10 steel companies, backed by an aggressive vision for oil and gas exploration and fortified with a clearer investment focus for the shipping and ports sectors of the Essar Group, Ramakrishnan is confident about future growth. Shipping is part of a value chain linking coal mines with steel production and retail that guarantees business as national economic demand grows. It’s a calm and cool reflection, relayed to Fairplay as Mumbai swelters outside.

In the spotlight: AR Ramakrishnan
Current position:MD Essar Ports
Education:MBA, Indian Institute of Management
2011Managing director, Essar Shipping
1999Chief operating officer, Essar Shipping
 Chief executive officer, Essar Shipping
 Director Essar Ports Shipping & Logistics
1994General manager (commercial), Essar Shipping
1992Business analyst in chairman’s office, Essar Group
1980Marketing and sales at Godrej, India
Signs of a quality operator: While Ramakrishnan was COO/CEO, Essar was:
2007Awarded ‘Safest and Most Environmentally Conscious Indian Shipping Company’
2006Awarded ‘Ship of the Year’ (Indian flag in foreign trade) for VLCC Smiti
 Awarded ‘Most Quality Conscious Indian Shipping Company’ for 2005
 Awarded ‘Safest Indian Shipping Company’ for 2005
2005Awarded ‘Safest Indian Shipping Company’ for 2004
2003Awarded ‘Most Quality Conscious Indian Shipping Company’ for 2002
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