freight logistics & intermodal transport: implications for

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  • Institute for Studies in Industrial Development4, Institutional Area Phase II, Vasant Kunj, New Delhi - 110 070

    Phone: +91 11 2676 4600 / 2689 1111; Fax: +91 11 2612 2448E-mail: info@isid.org.in; Website: http://isid.org.in

    Institute for Studies in Industrial DevelopmentNew Delhi

    175Working PaperDecember 2014

    Arvind Kumar

    FREIGHT LOGISTICS & INTERMODAL TRANSPORTImplications for Competitiveness

    About the Institute

    The Institute for Studies in Industrial Development (ISID), successor to the Corporate Studies Group (CSG), is a national-level policy research organization in the public domain and is affiliated to the Indian Council of Social Science Research (ICSSR). Developing on the initial strength of studying Indias industrial regulations, ISID has gained varied expertise in the analysis of the issues thrown up by the changing policy environment. The Institutes research and academic activities are organized under the following broad thematic areas:

    Industrialization: Land acquisition, special economic zones, encroachment of agricultural land, manufacturing sector, changing organized-unorganised sector relationship, rise of service economy in India, training and skill formation etc.;

    Corporate Sector: With special emphasis on liberalization-induced changes in the structures of the sector, corporate governance, individual firms/groups, emerging patterns of internationalization, and of business-state interaction;

    Trade, Investment and Technology: Trends and patterns of cross-border capital flows of goods and services, mergers & acquisitions, inward and outward FDI etc. and their implications for Indias position in the international division of labour;

    Regulatory Mechanism: Study of regulatory authorities in the light of Indias own and international experience, competition issues;

    Employment: Trends and patterns in employment growth, non-farm employment, distributional issues, problems of migrant labour and the changes in workforce induced by economic and technological changes;

    Public Health: Issues relating to healthcare financing, structure of health expenditure across states, corporatisation of health services, pharmaceutical industry, occupational health, environment, health communication;

    Media Studies: Use of modern multimedia techniques for effective, wider and focused dissemination of social science research to promote public debates;

    Other Issues: Educational policy and planning, role of civil societies in development processes etc.

    ISID has developed databases on various aspects of the Indian economy, particularly concerning industry and the corporate sector. It has created On-line Indexes of 210 Indian Social Science Journals (OLI) and 18 daily English Newspapers. More than one million scanned images of Press Clippings on diverse social science subjects are available online to scholars and researchers. These databases have been widely acclaimed as valuable sources of information for researchers studying Indias socio-economic development.

  • FREIGHT LOGISTICS AND INTERMODAL TRANSPORT

    Implications for Competitiveness

    ArvindKumar

    InstituteforStudiesinIndustrialDevelopment

    4,InstitutionalArea,VasantKunjPhaseII,NewDelhi110070Phone:+911126764600/26891111;Fax:+911126122448

    Email:info@isid.org.in;Website:http://isid.org.in

    December2014

    ISIDWorkingPaper

    175

  • Institute for Studies in Industrial Development, 2014

    ISID Working Papers are meant to disseminate the tentative results and findings obtained from the ongoing research activities at the Institute and to attract comments and suggestions which may kindly be addressed to the author(s).

  • CONTENTS

    Abstract 11. Introduction 22. LogisticsCost,StructureandFreightFlows 3

    LogisticsCosts/GDPRatio 43. MarketConditionsforLogisticsDevelopment 74. StructureofLogisticServiceProviders 8

    IntegratedTransportandLogisticsServices 105. StructureandCompositionofFreightFlows 11

    CompositionofFreightFlowshasImplicationsforLogisticCosts 13TransportEfficiencyandCosts:ImplicationsforLogistics 13

    6. TimeCostofTransport 16 CostofDetentiononInterstateCheckPosts 177. RoleofMultiAxleVehicle(MAV) 188. EfficiencyofIndiasPortSector 199. DraftandVesselsize 2010. CargoEvacuationbyTransportModes 2011. HubandSpoke 21 12. DevelopmentofIntermodalTransportandKeyIssues 2113. NeedforanAlternativetoPureRoadTransport 2214. TrendsinIndiasIntermodalTransport 23

    EconomiesofIMT 24ProblemsinIntermodalTransport 25BarrierstoIntermodalTransport 26

    15. ConceptofDryPort 2716. ContainerFreightStations(CFS)/InlandContainerDepots(ICD) 29

    NumberandGeographicalspreadofICDs/CFS 29PricingandStructureofCFS 30

    17. Conclusion:NeedforaCoordinatedApproachtoIMT 32References 33

  • ListofBox(s)Box1 CategoriesofLogisticServiceProviders 9Box2 BenefitsofIntermodalTransport 24ListofFigure(s) Figure1 TheRelationshipbetweentheLPIandtheLevelofLogisticsCosts 7Figure2 ElementsofLogisticCostinIndia 14ListofTable(s) Table1 India:StructureofLogisticsSectorinTermsofGDP 5Table2 LogisticsPerformanceIndex(LPI):Scores 6Table3 TradingAcrossBorders 7Table4 LevelofInventoryHoldinginManufacturingSector 10Table5 ModalSplit:InterregionalFreightFlows 11Table6 ModalMix(BTKM):Rail,RoadandWaterborne 12Table7 FreightYieldsinMajorEconomies 12Table8 LogisticsCostfortheMovementof20FeetTEU 15Table9. TransitTimeforVariousTripLengths 17Table10 MajorPorts:SelectEfficiencyIndicators 20Table11 NumberofContainersEximandDomesticHandledbyCONCOR 23Table12 InlandContainerHandlingFacilitiesinRepublicofKorea 31

  • FREIGHTLOGISTICSANDINTERMODALTRANSPORTImplicationsforCompetitiveness

    ArvindKumar*

    [Abstract:Indiasplacementbehindmanyofitslogisticscomparatorsraisesconcernsonthestateofpreparednessofthecountrytoprovidethedesirablelogisticsenablingenvironmenttoserveaneconomywhichisexpectedtogrowintherangeof8percentto9percentoverthemediumterm.Inadequatelogisticsinfrastructureandsupplychainproceduresmaybecomeaseriousbottleneckinpreventingtimelydeliveryofgoodsandgeneralcargotothemainports.The focusof thispaper is to (a) lookat the statusof Indias transport sectorand logisticssystem and how it functions, and (b) offer recommendations on how to improve Indiaslogistics system. The regional distribution of gains from reform is an important issue.Transportdistanceswithin Indiaareconsiderableandwithoutcosteffective transportationand logistics,thegains fromtradecouldbedistributedunevenlyacrossdifferentregionsofIndia.Forinstance,goodsproducedintheWesternorSouthernregionsofIndiadestinedforuse/consumptionintheEasternorNorthEastregionstobecosteffectivecouldusetransportcombination of rail, road, inlandwaterways or coastal shipping. Thiswould help reducedependence on road transport. Lack of an integrated transport policy and skewed freightmodalstructurecanpenalizeindustrialproducts.TheappropriationofFDIbyafewStatesintheWesternandSouthernregionsreflectstosomeextenthightransportcostsinotherregionsof the country.Thedifferent levels of infrastructure amongst thevarious regions arewellrecognizedasasourceofvariationinregionalperformance.Transportefficiencyislow.Thecostofrailandcoastalshippinginthecountryishigherthanmanyeconomies.Eventheroadcostsandtransittimeacrossdifferentmodesarehighandunpredictable.Partly,itisbecauseof the differing average speeds ofmovement across the variousmodesRail, Road, andCoastalShipsarelowerthanthoseinmoreefficienteconomies.Theothertypeofefficienciesarisedue tohigh turnaround time of railwaywagons/trucks ,pre berthingdetention time,container/bulkhandlingratesofequipmentattheports,inadequaterailinfrastructure.Logistic deficienciesmust be tackled by policymakers in order to successfullymove itsindustriesupthevaluechain.Otherwise,withthedispersalofmanufacturingactivitiesintothe interiors and further away from its seaports, Indias already high logistics costwill

    * (IES Retd), Former Senior Adviser (Transport Research), Ministry of Road Transport and

    Highways; and,Member, TariffAuthority forMajor Ports,Ministry of Shipping.An earlierversion of thepaperwaspresented in theNationalConference on Indias Industrialization:HowtoovercometheStagnation?organisedbytheISID,duringDecember1921,2013.

  • 2

    escalatefurther,puttingthecountryatacompetitivedisadvantage.LogisticscostinIndiaiscomparatively high, and is estimated to be around 11 per cent of the nationalGDP andinventoryholdings fororganizedmanufacturingcomprisearound18percentof thevalueaddedoftheorganizedmanufacturing.Areductioninlogisticscostsbyevenonepercentagepointwill result innoteworthy savings annually.Besides, significant benefits can also bereaped through the multiplier effect of having a better logistics infrastructure, thusaccelerating Indias economicgrowth.Transportand logistics scene in the country revealsthat despite substantial improvement of national highway network and addition to portcapacity,thegapbetweenIndiaandEastAsiancountriesinthedomainoflogisticsefficiencypersistswhichprovidesimmensescopeforimprovement.Indias transportmodalmix isheavily skewed towards road freightwith all its attendantnegative externalities. This provides ample scope for rebalancing the modal mix to cutlogisticscosts.Definingandenforcingrules formultimodaltransportoperationswhich fostercompetition,promoting the standardizationof equipmentand electronicdata interchange formats,andestablishing an effective conflict resolution mechanism would help promote multimodaltransport. Important constraints impeding costeffective transport options and reducedlogisticscostsincludemissinginfrastructureandoutdatedinterstatecheckposts.Therearetwomainreasonswhymultimodaltransport(MMT)needstobeakeyelementofanystrategy in India.One,MMT impacts internationalcompetitivenessofgoodsexportedandregio

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