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INDIA LOGISITCS INFRASTRUCTURE

& LOGISTICS SCENERIO

by Rajeev K ChopraPresented at “Seminar on India”

At Bangkok in February 2008 Organized by Department Of Export Promotion, Thailand

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INDIA - Logistics Infrastructure & Logistics Industry Scenario

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Geography Of India

Gati HO

CHENNAI

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India’s Advantage

One of the fastest growing economies of the world.

One quarter of the world’s youth live in India.

54% of the Indian population is less than 25 years of age.

2nd largest English speaking workforce.

Focus on Higher Education.

Second largest pool of technically qualified knowledge workers.

IPR laws in place.

There are more IT engineers in Bangalore (150,000) than in Silicon Valley (120,000).

GE, Microsoft, IBM, Cisco, Intel, GM, Astra Zeneca, Motorola etc. , All have their R&D Centres here.

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India’s Advantage

Strong GDP growth

Economic liberalisation and relaxed FDI norms

Growth in Retail, Agri, Pharma, Automobile, FMCG, Textile sectors.

Opportunity to reduce logistics cost.

Infrastructure development.

Investment in logistics by Companies.

Change in tax laws –VAT/CST.

Industry moving toward outsourcing logistics

Moving toward shift to organised players

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India’s Economy & Logistics Industry

India’s GDP is USD 750 billion and would touch USD 1.4 trillion in the next two decades (as per Goldman Sach). Currently it is 10th largest economy

23%51%Service 17%28%Manufacturing 60%21%Agriculture

Work ForceEmployment

Contribution to GDP 

Logistics Spend is currently 13% compared to 8.7% of US.Enough Scope to reduce the Logistics Spend which would require growth of 3PLs and 4PLs and improvement in Infrastructure

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Logistics Industry - Dynamics

Transport Express Shipping Supply Chain

Industry Scenario

Mature, Fragmented, Low barriers to entry

Growth, niche, high entry barriers

Growth, high entry barriers

Nascent, knowledge based, very high barriers

Industry Growth 5-10% 15-20% 10-15% 50%+

Customer requirements

Low cost, non-time sensitive

Cost efficiency, high time sensitive

Scheduled Services

Cost optimisation, Value driven, Single window solutions

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35%

25%

14%

11%

9%

6%

0% 10% 20% 30% 40%

Transportation

Inventories

Losses

Packaging

Handling &Warehousing

Customers' Shopping

Elements of Logistics cost

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Road Network – Current Status

Road Network has grown 8 fold (1950 - 2004) to 3.31 Million Kms.

National Highways form only 2% of the network, but carry 40% of the total traffic

Only 2-3 % of NH & SH are 4 lane, 15% are single lane

85% of passenger and 70% of Freight Moves through Road.

Commercial vehicles ply on an average 300 km per day, compared to 600-700 km in developed nations.

INDIAN ROAD NETWORK

Type of Road Length in KMsNational Highways 65569State Highways 131899Major District Roads 467763Villages and Other Road 2650000Total 3315231

source: www.nhai.org

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National Highway Development Project (NHDP), US $13 billion, 1998-2007 . Four/six laning of the highway connecting Bombay, Delhi, Calcutta and Chennai (Golden Quadrilateral)

5846 KMS

North-South and East-West corridors (NS-EW), Kashmir to Kanyakumari and Silchar to Porbandar.

7300 KMS

Target Completion date is December’07

National Highways – Plan & Current Status

Road Network – Current Status

Delhi

Kolkatta

Chennai

Mumbai

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Out of 65,569 Km of National Highways, about 25,000 Km are under severe strain due to High volume of traffic.

Slow speeds, traffic congestion, high wear and tear of vehicles are some of the problems

Estimated loss due to lack of an efficient highway system – Rs. 20,000 cr./Year.

Once completed ,the Golden Quadrilateral will result in a saving of Rs.8000 cr./Year ( as per world bank report)

Estimated Savings – On completion

Road Network – Current Status contd..

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Lost share to Road in freight movement Rail Traffic Expected to touch 624 mn tonnes up from 473.5 million in 2000-01

68% Revenue of Railway comes from Freight 89% of its freight is commodities like coal, fertilizers, cement, petroleum products, food grain, finished steel, iron ore and raw material to steel plants

High Density Network (HDN) connecting Bombay, Delhi, Calcutta and Chennai

Carries 65% of the total rail freight traffic and 55% of passenger traffic

Container movement is done through CONCOR (1.7Mn TEU) Till recently ICD was monopoly of CONCOR. Recently has been privatized

Railways – Largest Network in Asia

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Sea Ports – Current Status

Vast coastline of 7,517 kms

12 major ports and 184 other ports (minor and intermediate)

95% of Foreign trade by volume & 75% by value.

Tonnage handled increased 16 fold (in last 50 years) to 453 million Tonnes

Port- Hinterland connectivity- a major issue

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Airports – Current Status

Tonnage handled increased 16 fold (in last 50 years)

255, 665 Tons of Domestic & 616,317 Tons of International cargo handled in 2003-04

For Cargo, India follows Open Sky Policy

The four metro Airports handle 70% of the Air cargo Traffic – Congestion?

Privatization of Airports

Most of the domestic air cargo movement takes place in passenger planes – Scope of Freighter

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Setting up of NHAISetting Up of IRMP ( Integrated Railways Modernization Plan)Privatization of ICDProposal of setting up a NMDP (National Maritime Development Programme) for improving Port Infrastructure.Capacity Expansion of Delhi/ Mumbai Airport; Setting up of International Airports at Bangalore/ Hyderabad.Most Infrastructure projects are through Public- Private partnership.

100% FDI Allowed for Port, Greenfield Airports, Road .

“Initiative taken by Government will usher in a more efficient and cost competitive Logistics Service Market”

Government Initiatives

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Logistics In India

Current Logistics services and challanges

Piecemeal outsourcing

No industry focus – Segmentation would be the next key thing!

Improving capability and experience

Improving level of supply chain expertise

Unorganised players

Govt. Policies-Consider logistics as Industry.

Infrastructure, no urgency

Transportation

High fragmentation (87 % of trucks with owners having 10 trucks or less)

Complex value chains with many intermediaries

(Shipper - Transporter - Broker - Financier - Truck Driver / Owner)

Lack of focus on time-sensitivities

Poor utilization of assets

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Warehousing • Fragmentation amongst small C & F agents• Primitive storage & material handling practices in most warehouses• New systems and material handling equipment suppliers establishing base

Logistics In India

Information Management • Low data connectivity across plants, warehouses, transporters and supply

chain partners

• New entrants with Logistics systems and equipment now establishing service offerings.

Changes in VAT regulations will unleash massive savings opportunity

• Changes in VAT regulations will trigger massive consolidation process in number of warehouses, releasing a massive savings potential.

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Increase in trend for outsourcing of Logistics Function.

International Logistics players now expanding their base in India

Service providers are investing heavily in creating infrastructure to bring efficiency in operations

Service Providers efficient infrastructure has direct co-relation in

reducing the customer’s cost

Current Logistics Industry Scenario

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Current Logistics Industry Scenario contd…

Planning, Procurement

Inventory Management, Distribution and

Packaging,

Transportation, Warehousing

Logistics

Consultative + Compliance

ComplianceRegulatory

Bonded, Distribution Solutions

Express/ TruckingTransportation

Inventory Management, Stock and fulfillment

Space ProviderWarehousing

GPS/ GIS/ Dynamic Routing

Track and TraceDocket Tracking

FutureTodayServices

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THANK YOU