India’s logistics infrastructure: Is it adequate to meet growth aspirations?

GDP revival, ramp-up in transport infrastructure and e-commerce penetration coupled with exports will definitely boost transport and logistics sector
The future of the transport and logistics industry in India is well-placed to meet growth aspirations. The Emerging Market Survey, 2013, conducted by Transport Intelligence (Ti) ranks India as the second most attractive logistics market in the future after China. Led by GDP revival, ramp-up in transport infrastructure and e-commerce penetration, India’s logistics sector is already witnessing accelerated growth.
Road aheadIndia is a tipping point with respect to manufacturing and service. “With the government’s push for “Make in India”, the manufacturing sector is poised to change,” says Rahul Mathur, Vice President – Operation, ColdEX. “Along with that, the push for better connectivity means that the logistics infrastructure market is ready for an accelerated growth rate. Indians are the largest car buyer groups and coupled with the rising ability to pay, along with the need for better services, the logistics service market is looking for an accelerated growth.”
Gautam Dembla, Director and CEO, Spear Logistics, believes that building of dedicated rail freight corridors should promote efficient haulage of containerised cargo by rail. Setting up of various industrial corridors along the dedicated freight route will metamorphose the contract logistics business as well – from small warehouses spread across the country to large, global-size warehouses concentrated in a few hubs.
The spurt in e-commerce is also helping the logistics footprint boost, and one can imagine the kind of reach this would require to service customers in various nooks and corner of the country. “Domestic consumption coupled with exports will definitely augment corresponding activity in transport and logistics sector,” adds Mr Mathur.
High demand: an opportunity or a challengeAs per a McKinsey study, inefficiencies in logistics infrastructure cost the Indian economy an extra $45 billion, about 4.3 per cent of the GDP, every year. It warns that a 2.5 times growth in freight traffic demand by 2020 (compared with 2010 levels) will  put further stress on India’s infrastructure. Such high demand prospects can be an opportunity or a challenge for logistics industry players in India.
Just think, 10-15 years back there was no concept of BOT or PPP model of infrastructure. It was the government who decided what to build, where to build and how to build. Today private players are taking that part of what, where and how to build through PPP. As the logistics infrastructure bottleneck intensifies, private players will be ready to take risks and reap profits.
“I see it more of an opportunity than a challenge (initial roadblocks to new opportunities),” says Mr Mathur. “High demand, therefore, can be an opportunity and the policy framework can only help in fostering it. The only challenge would the ease with which all this can be executed within the timeframes.”
India continuingly has been dropped on the World Bank’s Logistics Performance Index (LPI). The time has come India should focus to ensure a much more balanced and economical mix of transportation modes.
In India, inter-regional transfer is happening mostly by road and rail. India has also a vast network of rivers. “Interlinking of rivers or something on those lines can greatly reduce the cost of logistics which will then lead to a further cycle of growth leading to infrastructure development leading to growth,” explains Mr Mathur. “It will also reduce the load on existing networks. High-speed dedicated rail corridors, separately for freight and people, can greatly improve transportation times.”
It is surprising that a vehicle has to wait at inter-state borders for clearance given the complex tax regime. GST implementation is another matter of great importance for this country. The turnaround times have to reduce considerably and efficiency on account of multi modal transport availability coupled with simplified tax regime will only help in a balanced and economical development.
Mr Dembla feels that India’s logistics hubs need to be better formed and connected with their consumption centres. “Just by having a good port or airport and non-existent roads to access them defeats the purpose,” he opines. “We increasingly see that access to and from cities which are huge consumption centres by themselves are a major bottleneck.”
He puts own some ideas as  to how India should ensure a much more balanced and economical mix of transportation modes. His four-point guidelines are:l Improve physical infrastructure and transportation capacity-related constraints by enhancing terminal and route infrastructure for various modes of transport.l Develop Dedicated Freight Corridors and improving rolling stock quality and quantity to enhance rail transportation  usage.l Develop new air cargo hubs near major airports for  proper handling of perishable and fragile commodities.l Streamline processes across government bodies, thereby reducing stoppages and touch points of cargo movements and increase speed.
Adopting coordinated approach A large part of the logistics network that India needs has yet to be built. To achieve that, India needs to adopt a coordinated approach that aligns the development of each transport mode. According to Mr Mathur, “The land bill reforms have to fructify so that one has access to creating the logistics network in parts that still remain underdeveloped.”
In addition, India’s economy is a factor of the road and transportation network. Out of 4,245,429 km of total road network about 47,900 km of National Highways is 4 lanes or 6 lanes. Hence, India needs to convert existing NH to 8 lane, which is an imminent task. “We feel that there has to be a common platform between integrated projects where in various ministries come under one roof to ensure that inter-modal network in strengthened and projects are approved and monitored,” explains Mr Mathur.
According to Mr Dembla, “Logistics infrastructure covering road, rail, waterways and air network forms the backbone of the economy. An ideal situation would be to have adequate infrastructure capacity riding on which the various modes could form a logistics chain for seamless flow of goods and services.”
In India, however, we always play catch up and never really do. By the time we have the infrastructure in place, it is time to expand it further. “Our quadrilaterals in most high economic zones are already choked,” opines Mr Dembla. “We need to think and plan ahead, much ahead.”He also talks about couple of priorities that take the sector forward. These are:l An industry status and an integrated policy, including separate regulatory authority for the logistics sectorl Increased focus on multimodal transportation: The country’s network of roads, rail and waterways will be insufficient as freight movement is set to increase about threefold. Since a large part of India’s future logistics network is still to be built, some thought needs to be given to the interim. Interconnectivity among different modes needs to be made better.l Develop special warehousing zones which are well-connected to business and consumption centres.l Long-term planning and financing for the sector
Increase rail’s shareThe share of India’s freight transported by rail would decline to 25 per cent, from the current 36 per cent. By contrast, rail accounts for almost 50 per cent of freight movement in China and the United States. No doubt India needs to increase rail’s share to its freight. “Dedicated high-speed freight corridors can help railways get back it share of freight,” explains Mr Mathur. “Also other methods of double stack containerisation movement can help improve utilisations and freight share. Modes need not be competitive with each other, but they can also be collaborative (trucks piggyback on wagons).
However, with new initiatives taken by the Railway Minister to start the Logistics Corporation as a joint venture or a public-private partnership across 28 cities should take care of many bottlenecks. According to Mr Dembla, “What is crucial is the coordination that needs to happen among various departments such as the metropolitan, state and highways authorities to have access to and from rail terminals. Till we do not have coordination with the various departments we cannot expect this trend to change.” We all hope that railway will play a key role in India’s growth story in next decade.

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