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TRANSCRIPT
International Conference
“Role of Maritime Industry” in Make in India
Connectivity and
Ports
Knowledge Paper
January 2016
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Foreword ........................................................................................ 3
Introduction ................................................................................... 4
Key Issues and Recommendations ............................................. 5
Summing Up ............................................................................... 12
Contents
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Foreword
Efficient and smart transport networks will act as catalyst in growth of country.
Even though, India has the second-largest road network in the world, spanning
about 4.7 million kilometers and third largest rail network in the world which spans
more than 65,808 kilometres, India’s logistics cost is one of the highest in the
world and transport networks of our nation are facing various issues like
congestion, poor quality, inadequate infrastructure, under investment, low
intermodal connectivity including integration of various networks for smart and
smooth flow of goods. Inadequate logistics infrastructure and poor transport
network has a direct implication on competitiveness of our Industry. For success
of “Make in India” program, global competitiveness of Indian traders is essential.
Adequate connectivity and efficient transport networks will play a significant role
in realisation of actual goals of “Make in India”.
Keeping this in view, Bombay Chamber of Commerce and Industry Trust for
Economic & Management Studies (BCTEMS) in association with Deloitte is
bringing out this Knowledge Paper presenting connectivity issues amongst
various components of transport.
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Introduction
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Global competitiveness of the Indian Manufacturing Sector is very essential for the
country’s long term growth. The Indian logistics cost is one of the highest in the world1.
Logistics cost in developing countries are 6 per cent to 8 per cent of the total value of
goods whereas logistics cost in India is about 14 per cent of the total value of goods.
India spends much more than developed markets in terms of logistics costs and it is
primarily attributed to inadequate connectivity and associated infrastructure.
Cost implications of inadequate connectivity on export competitiveness of
Indian traders
According to the World Bank (Doing Business 2014), the cost of doing international
trade, in terms of time, cost and documentation to export or import products, ranks
India at 132nd position out of 189 countries. In comparison, the overall rank for
Singapore was 1, followed by Korea at 3, Malaysia at 5, Thailand at 24, Indonesia
at 54, and China at 74, thus putting the East Asian competitors much ahead of India.
Results indicate that the costs of exporting a container (TEU) are US $1170 for India
and US $ 620 for China. It takes thrice as long for India to export as it does for
Singapore, and five times as long as it takes Singapore to import goods. 40 per cent
of the total logistics cost is incurred on transportation of the goods.
Many exporters located at Pune (Maharashtra) are exporting goods from Mundra,
whereas nearest port to Pune is JNPT. Transportation cost to JNPT is about
Rs.12,500 per TEU on other-hand, transportation cost to Mundra is around Rs.
43,750 per TEU. The primary reason for exporting from Mundra is high amount of
congestion at JNPT. Due to poor road infrastructure at JNPT, trailer carrying
container has to wait for more than 42 hours outside the port gate and even then,
many times container misses the vessel. To avoid this, exporters, are exporting
goods from Mundra port by incurring high cost on transportation.
It is direct loss to Indian merchants, which can be prevented by improving the road
infrastructure at JNPT. The presently high levels of logistics costs are affecting the
competitiveness of Indian merchants.
1 Source: World Bank Study - Doing Business, 2014
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Key Issues and
Recommendations
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The components of connectivity include road network, rail network, coastal
shipping, inland waterways transportation, intermodal connectivity and maritime
connectivity. India faces several challenges in terms of developing connectivity
infrastructure to support a transport system that will meet its needs over the decade.
The challenges can be handled by Integration of decision making process and
preparation of the integrated holistic plan that will enable the development process
and improves the connectivity. Connectivity plays a significant role in development
of the economy by facilitating smooth flow of the EXIM trade. A holistic approach
consisting of following points will help in developing, integrating and improving the
connectivity
1. Road Network
India has the second-largest road network in the world, spanning about 4.7 million
kms. Roads constitute the most important component of transport network in the
country. About 60% of the country’s total freight traffic and 80% of its total
passenger traffic1 is transported using this network. National and state highways
taken together constitute about 6% of the total road network; however, they account
for almost 40% to 50% of the total traffic. Existing road network has many
challenges which can be tackled by taking appropriate actions.
Developing Holistic & Integrated Approach: India should develop holistic
plan at national level to design a hierarchical network compose of transport
networks which should have access and adaptability for inter-modal shift.
Formulation of integrated highway development plans at National and State
Level is important.
Formulating Road Development & Maintenance Program: Improvement of
quality of roads is the basic requirement. India has the second-largest road
network in the world, spanning about 4.7 million km (March, 2015). As on March
2015, the share of the National Highways and motorways is about 2% but it
carries 40% to 50% of the total traffic. Moreover, only 24% of the highways have
four lanes2. Average speed of trucks on Indian roads is about 20 km per hour
v/s 45 to 50 km per hour in developed countries. Quality of the roads directly
impact the speed of transportation. Therefore it is important to carve out road
development and maintenance program at National Level and State Level.
2 Source: Report of the Working Group on Central Roads Sector
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Developing Last Mile Connectivity: Last mile connectivity of the ports is major a challenge. For instance, Jawaharlal
Nehru Port, India’s largest major port in container handling with a share of more than 50%, has only one approach
road for container traffic, which results in massive congestion. It is observed that at times these trailers carrying
containers for JNPT have to queue up for more than 48 hours. Likewise, Chennai Port, the busiest container port on
east cost of India, lacks a dedicated access road and exit gate and has inadequate road conditions within the port.
Developing last mile connectivity of the ports is very important to improve the overall connectivity and it should be
dealt forthwith by increasing private participation. In some ports, private players have taken the lead in developing last
mile connectivity. For Instance, Pipavav is located adjacent to the NH 8E. The port has built an 11 km connecting
highway and formed a JV with the Indian Railways (the Pipavav Rail Corporation Ltd) which has built a 271 km rail link
to the main grid at Surendranagar.
On March 25, 2015, GoI has approved setting up a special purpose vehicle (SPV) for all major ports to provide last-
mile rail connectivity. Idea is to create port infrastructure Vikas Nigam Private Limited with equity participation from
major ports. The company will construct, operate and maintain rail and road infrastructure to facilitate last mile
connectivity. This will help in improving the linkage of ports with the hinterland.
Facilitating New Connectivity Projects: According to the recommendation of the National Transport Development
Policy Committee; every port must have a minimum two lane road connectivity. Every port where rail cargo is handled
the requirement is a two lane road connectivity and a single line rail connection up to a capacity of 5 million tonnes per
annum and for a port handling cargo volume more than the threshold of 5 million tonnes per annum the requirement is
a double line rail connectivity and four lane road connectivity. However, various ports in India are yet to develop
adequate connectivity network to comply with the recommendation of the committee. It is essential that national and
state governments should support development of transport networks at the ports by timely approvals and assistance
in land acquisition and other important aspects.
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Expanding Expressways and National Highways: Expansion of expressways and national highways should be
undertaken based on potential future requirements. Today, only 2% of the roads carry majority of the freight traffic.
This need to be addressed with comprehensive planning and time based programs. Roads should be considered as
part of integrated multi-modal system of transport where the existing network of National Highways and State Highways
may be extended in line with the economic growth of the country.
Removing Bottlenecks: Identification of major bottlenecks in road network and removing it by taking appropriate
actions and development of adequate road side infrastructure for freight movers/ truck operators is important to
improve the quality of transportation. Non-availability of essential road side infrastructure such as repair shops,
washrooms parking bays etc. leads to unfavorable conditions for the transporters and drivers, thereby resulting in
delay of cargo transportation.
Improving Inter Departmental Coordination and Project Monitoring: Improving inter departmental coordination for
fast approval of the road projects and allocating more investments for development of the efficient and smart transport
network is required. Delays in project time schedule often lead to cost overrun which can be avoided by stringent
monitoring of project schedule and adhering to timelines.
2. Railway Network
Indian Railways (IR) network spans more than 65,808 kilometres, making it the world’s third largest rail network. It is the
largest passenger carrier and the fourth largest rail freight carrier in the world. Indian Railways has suffered from significant
under-investment as a result of which the network expansion and modernization has not happened which has led to
congestion on the existing railway network. A massive infrastructure expansion and decongestion program along with
enhancement of terminal capacity would substantially improve the service delivery. Some of the suggestions under this
category includes:
Initializing Private Investment in Railways: This would include: (1) Formation of Project Specific Special Purpose
Vehicle (SPVs) having equity and debt financing, (2) Developing more network on Build Own Transfer (BOT) basis,
and (3) Develop private railway for Public Private Partnerships (PPP) terminals, wherein the project is funded as part
of the port project.
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Formulating of Project Specific SPV: Improve last mile connectivity of the ports and Industry clusters by
private participation and formation of project specific SPV. For new ports last mile connectivity of the port should
be integrated with the port project itself and developing last mile connectivity should be responsibility of the
bidder.
Developing Proposed Dedicated Freight Corridors & Allied Infrastructure: Fast tracking the construction
of proposed six dedicated freight corridors is utmost important. Private sector involvement and easy access to
funding and effective monitoring of the progress of the projects can expedite the construction of the projects.
Development of Logistics Park and terminals at various locations and integration of railways with these logistics
parks is also very essential for smooth movement of the goods. Logistics parks can be developed on PPP basis.
Augmenting Capacity of Existing Network: Capacity augmentation on the entire route to prevent bottlenecks
including intensive utilization of the existing network by introducing double stack trains, wagons with higher axle
loads and strengthening track and bridges for 25 tonnes axle load.
Developing Allied Infrastructure: Encouraging opening up of new terminals and multi modal logistics parks
and facilitating integration of railways with other modes.
3. Coastal Shipping & Inland Waterways Transport
Coastal Cargo handled at Indian Ports in 2013-14 is about 154 million tonnes. In last 5 years, coastal cargo has grown
with compounded annual growth rate (CAGR) of only 0.3%. Modal share of coastal shipping in domestic cargo
movement in India is just 2% as against US (15%) and E.U. (43%). Inland waterways is one of the most economical,
fast and environment friendly modes of transportation. A modal shift from the roads and railways to Inland waterways/
coastal route can help reduce the congestion on the roads and railway network. It is also important to integrate coastal
shipping with various modes/ networks for efficient and smooth transfers of the goods. Any mode/ network will not work
efficiently in isolation therefore integration of various modes and networks is very important. Potential of coastal shipping
and Inland Waterways Transport (IWT) has not been optimally utilized till date although various State Governments has
developed independent policies to develop coastal shipping in the respective states.
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However in absence of National level holistic transportation policy the actual benefits of coastal shipping will not be
realized. Following issues can help in improvising the same:
Developing of Dedicated Infrastructure for Coastal Shipping: Development of Infrastructure including
dedicated jetties for coastal shipping at all ports and develop shipbuilding capacity of Indian shipyards by
devising incentives and other tax relaxation for coastal Vessel
Human Resource Development: Trained man power shortage for coastal issue is one major challenge which
industry has been facing from long time. Human resource development for coastal shipping needs to be taken
up and at the same time benefits extended to international seafarers should be given to workforce working on
coastal routes.
Developing Fiscal and Monetary Incentives for Coastal Shipping: Indian Shipping should be brought on to
an International level in terms of fiscal and monetary incentives, access to domestic or international funding,
taxation, regulatory limitations etc. Incentives such as Fiscal incentives, freight subsidies and tonnage tax for
inland vessels can help Inland waterways in becoming more competitive.
Creating Holistic & Integrated Approach: Coastal shipping and IWT should be essential and integral part of
Integrated Transport policy.
Developing IWT Allied Infrastructure: Development of adequate Infrastructure for IWT operations is very
essential to boost the development of IWT. It should include development of adequate navigational depths in
rivers, adequate air draft required for navigation and Development of night navigation, development of ship
repair facilities etc.
Integrating Transport Network: Modal integration is the key to the successful penetration of inland waterways
system in the transport market. Modal Integration can help in faster and reliable cargo movement. There is an
urgent need to augment the much required infrastructure for modal integration of inland waterways with roads
and railways with adequate evacuation infrastructure. Policy promoting modal integration can bring in the much
needed push required by Inland waterways.
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CONNECTIVITY AND PORTS
Supporting Freight Agreement for IWT & Coastal Shipping: Freight agreement can ensure that vessels
have freight both ways by identifying corridors, commodities being transported and the cargo interests
involved and building a consensual agreement through incentives.
Developing Awareness Programs: Awareness programs need to be developed to spread cognizance
among the cargo owners about coastal shipping and IWT. Awareness need to be spread among the cargo
interests on the possibilities that Inland waterways has to offer and the role it can play in faster and seamless
movement of cargo across the supply chain.
4. Intermodal Connectivity
Inter-modal transport essentially refers to Interlinking different modes of Transportation. It means door to door
movement of goods by a single transport operator. It involves the transportation of freight in a container or a vehicle
using multiple modes of transportation - rail, ship or truck, without any handling of the freight itself when changing
modes. It helps in make the transport network more efficient, effective and competitive
Use of Technology: Implementation of Information Technology (IT) systems for real time monitoring of
goods. The implementation of effective IT systems provides many benefits like optimization of yard space,
Minimization of non-productive activity, maintenance of truck/train turnaround times, improvement of
utilization of the existing infrastructure, reduction of vehicle and train turnaround times.
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CONNECTIVITY AND PORTS
Introducing Smart Network Program: Integration with Programs like Make in India, Smart Cities,
Economic Corridors, Dedicated Freight Corridors, etc. Initiating smart network program at national level will
help the development of intermodal connectivity
5. Maritime Connectivity
The infrastructure at the ports and their maritime connectivity has a significant Influence on India’s export and import
and also the competitiveness of Indian importers and exporters at the global level. Good maritime connectivity is of
immense importance to maintain the required seamless access to global markets. In order to develop seamless
maritime connectivity, we recommend following:
Developing and Modernizing Ports: Modernization of existing port and developing new ultra-modern port
with state of the art technology and capacity enhancement of existing ports. It is essential to construction of
new berths and terminals; expansion of existing berths at ports, installation of new and modern cargo
handling equipment’s, deepening draught in ports to handle larger vessels, installation of Vessel Traffic
Management System (VTMS) for smooth movement of vessels, implementation of Web-based system for
smoothing the processes.
Benchmarking: Benchmarking the existing ports to the international standards, so that the existing ports
can be strengthened to international standards. Benchmarking is one of the key requisite for a port expansion
plan as it provides an overview of the port’s performance with respect to the industry standards. The
indicators of selected international ports should be analyzed for benchmarking of the port operations.
Strengthening Regional Cooperation: Improving commercial relationships and developing trade
agreements with various organization/ countries/ regional corporations will help in developing the trade
connectivity. Accession to the International conventions, strengthening regional cooperation and
coordination among various countries and stakeholders and financing cross-border transport projects will
help in enhancing the regional maritime connectivity.
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XX \ Summing Up
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India needs to formulate a holistic approach and integrated plan that will help
in improving the connectivity amongst various components of transport.
Current and future needs of exiting network must be assessed to reach more
desirable, effective and efficient transport system.
Connectivity plays an important role in development of the economy and
facilitating trade, however a holistic approach is required to develop and
improve the connectivity. Development of smart, efficient and inter-linked
transport network will play a vital role in making “Make in India” a success.
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