containerization infrastructure in india 1402_final

8/22/2019 Containerization Infrastructure in India 1402_Final

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February 2012

www.deloitte.com/in

ational conference on

Container Infrastructure in India 2012

Background Paper


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ContentsIntroduction 1

Policies & Trends in Containerization 5

Container Infrastructure Development at Ports 11

Container Movements in India, Way of Transportation & Challenges 14

Container Freight Stations & Inland Container Depot Infrastructure 20

Container Rail operations 29

Bibliography & References 34

Contact 35


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National conference on Container Infrastructure in India 2012 Background Paper 1

IntroductionContainerization is the use of containers to unitize cargo for transportation, supply and

storage. Container logistics thus incorporates supply, transportation, packaging, storage, and

security together with visibility of container and its contents into a distribution system from

source to user.

Ports, railways, roads, warehouses, shipping & logistics companies, by virtue of being the

primary players dealing with containers are also the key contributors to the development of

container trade & infrastructure.

The advancement in overall trade and benefits due to adoption of containers for transport has

brought forward the term Trading in the Box. Containerization thus, in trade terms, is thedriver of various players towards util izing containers for transporting goods between various

places and by various modes of transport.

There are various container types catering to different needs:

General purpose dry cargo containers for boxes, cartons, cases, sacks, bales, pallets,

drums in standard, high or half height

High cube purpose container, which is a 40- foot container of 9' 6" height. It is

recommended for light voluminous cargoes which would otherwise not fit in a normal 8'

height container

Refrigerated or reefer containers

Open top containers for bulk minerals, heavy machinery

Open side for loading oversize pallet

Flush folding flat-rack containers for heavy and bulky semi-finished goods, out of gauge

cargo

Platform or bolster for barrels and drums, crates, cable drums, out of gauge cargo,

machinery, and processed timber

Insulated Containers for perishable goods (fruits, vegetables etc) which require protection

from temperature change without necessity of refrigeration.

Ventilated containers for organic products requiring ventilation

Tank containers for bulk liquids and dangerous goods

Rolling floor for difficult to handle cargo

Collapsible or folding flat rack containers

Bulk containers for grain, fertilizers, chemicals etc in bulk. It is fitted with manholes to

facilitate bulk cargo through gravity.

Garment containers are fitted with hangers to help loading a large number of garments in

hangers inside the container.

Pen container for cattle or livestock. It has netted windows on the side or ends to facilitate

ventilation. On the lower part of the side walls it has cleaning and drainage outlets.


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The advancement in overall trade and benefits due

to adoption of containers for transport has brought

forward the term Trading in the Box.

Containerization thus, in trade terms, is the driver

of various players towards utilizing containers.


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The advantages of containerization are well known throughout the industry. Few of them are:

effective handling of cargo (specially liquid cargo),

minimal or no damage to goods,

optimum utilization of storage & warehousing capacity,

technology adoption due to mechanized handling required for handling containers,

skill development of workers for operating containers,

reduction in transport time,

door-to-door or end-to-end delivery of goods etc.

Additionally, containers enhance the effectiveness of overall supply chain mechanism in the

trade.

The abundant opportunities offered by containers lure various transport sector players to

promote the containerization drive. Government of India has taken several initiatives & brought

forth policies to increase the utilization of containers.

Containers & Ports

Ports are the primary influence to the containerization movement. The following chart provides

a glimpse of the container traffic handled at the major ports in the past .

2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

2010-

11

Container Traffic (in MT) 61.98 74.44 92.27 93.14 101.24 114.05

Growth in Container

Traffic (in %)20.10% 23.95% 0.94% 8.70% 12.65%

0

20

40

60

80

100

120Container Traffic at Major Ports (in MT)

The Container traffic at major ports has almost doubled in the past 5-6 years

Container traffic at major ports shows growth at an average rate of 13.27%

per year

Globally the container traffic has grown at around 10% in the past 20 years

This showcases the consolidated position of Indian container industry vis--

vis the world


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According to estimates, the world container throughput will reach 1 billion TEUs by 2020, which

is almost double of the current container traffic. The emerging Asian & African Countries are

expected to be the prime movers in achieving this growth. Most of the shipyards are filled with

orders for container ships of over 10,000 TEUs capacity. These container ships will form the

major part of the world maritime fleet in the coming years.

India is going to be the preferred destination for a global manufacturing hub. This fact presents

many opportunities for the ports to change their current operation style and be ready for the

foreseen surge in demand of handling and faster evacuation of containers. Many investments

have been proposed and steps have been taken by various port authorities for attracting the

container traffic.

Containerized Cargo Commodities

The major cargo commodities that get containerized are garments, electronic goods, agro

products, cotton yarn, machinery/parts, granite products, coir products, leather products and

jute products. Indian ports have also been seeing many hitherto break bulk cargoes like rice,

maize, glass, granite, garnet sand, sugar, soya, cement and flowers now moving in containers.

Some break-bulk cargo such as banana, cotton and green coffee beans have become

permanent container fixtures, while others such as pulp, lumber, cocoa and onions migrate

from container to ship holds and back to containers, according to the rise and fall of box rates.

Even iron ore has been successfully exported from Chennai in containers. All this points to a

steady move towards containerization for value added benefits. The main beneficiary would be

the container shipping industry and container terminals.

In addition, with regards to the cost economics, the handling cost is lower for containerized

cargo as opposed to break bulk leading to containerization of minerals exported. With 40 per

cent more imports than exports, incoming containers wait for repositioning to other locations.

Container lines, instead of spending on shipping out empties, offer good deals for shippers to

specific locations as a result of which soya, sugar, steel plates and agricultural products havegone the container way.


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Policies & Trends in

ContainerizationThe success of any sector or industry depends on both private players and the Government

Authorities. Accordingly, the success of the infrastructure sector or containerization as a sub-

set cannot be attributed to efforts of single side. Policies and regulations thus play an important

part for the development of container infrastructure. The following section provides an

assessment of the salient features of various policy & regulations affecting the development of

container infrastructure and in turn growth of container movement in India.

Policies affecting Containerization

Foreign Direct Investment

One of the parameters for judging the maturity of a countrys trade & industry is development of

infrastructure. In emerging economies like India, the budgetary allocation for development of

infrastructure is structured phase-wise so as to develop the infrastructure as well as to do

justice to other sectors like education, health, food & nutrition, defence etc. In such cases the

investments by FIIs & lending from multilateral agencies form a major part of the sources of

finance for funding the long term and huge capital expenditure involved in the infrastructure

sector.

While relaxing the norms for foreign investments in India in 1992, Indian government also

considered the infrastructure requirements and thus opened the infrastructure sector for

investments.

Infrastructure development is of prime importance to the containerization drive. In the transport

infrastructure sector, there are no restrictions on investment. Following are the salient features

of FDI policy on transport infrastructure sector:

100% FDI in maritime infrastructure like ports, terminals, jetties, harbors, merchant

shipbuilding

100% FDI in support infrastructure like warehousing, roads, Inland Water Transport, other

logistics components

Draft Policy on Private Freight Terminals (PFT)New PFT policy supersedes the Old PFT policy. The policy aims to stimulate development of

privately owned freight terminals on private land for dealing with break bulk goods, parcel traffic

and containers. Under this policy PFTs are envisaged to provide goods handling, warehousing

and other associated logistics services to rail users and facilitate expansion of third party

logistics sector. The following are some of the salient features of the PFT policy.

Salient Features Beneficiaries / Key stakeholders

PFTs are envisaged to provide goods

handling, warehousing and other associated

logistics services to rail users and facilitate

expansion of third party logistics sector

Warehousing and distribution

companies

Subsidiaries and joint ventures of

private companies


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The revenue model involves fee sharing

between the Indian Railways and the private

operator after 5 years of commissioning the

terminal

The private operator will be allowed a

wagon freight rebate of 12% rebate for aperiod of 20 year extendable by another 10

years

The terminal can be done on green field and

well as brownfield land

Investors

3 party logistic providers

Benefits Challenges

The freight operator can carry fertilizers,

cement, chemicals, edible oil and

petrochemicals excluding gas, auto fuel and

kerosene. Relevant to manufacturers of

FMCG goods for inbound and outboundlogistics or high volume goods

manufacturers

Investors in this scheme will have direct rail

access to third party freight forwarding

cargo,

If the investing company is a 3PL they can

provide value added services or assembly

at these locations and charge for the same,

The contract is long term for a period of 20

years

Underutilized/unutilized existing sidings get

opportunity for commercial utilization for

their facility

Procurement of greenfield land is time

consuming and setting up terminal

could take more than 2 year. This

results into forfeiture of security deposit

Commercial non-viability of project does

not make it an attractive proposition for

private siding owners

The clause to change private siding into

a brownfield PFT and the minimum land

and line requirement to be called a PFT

cannot be necessarily followed at the

same time. Not all private siding owners

would have additional land in the

vicinity of the terminal to install a

structure

Policy is still being amended and lack ofclarity makes it unattractive to investors

Cabotage Policy & Coastal shipping recommendations (from Draft new

policy)

The Cabotage Policy checks the coastal trade of a country. Few countries practice absolute

Cabotage law while others practice a tailored one. In India, the Cabotage Policy is not

absolute. It is regulated through provisions of Sec. 406 & 407 of the Merchant Shipping Act,

1958.

The Draft Coastal Shipping Policy submitted to Ministry of Shipping for approval recognizes

that due to lack of containerization & restrictions on feedering of the cargo under the current

Cabotage policy, a considerable part of Indian cargo for transshipment through containers gets

diverted to Colombo, Singapore & Jebel Ali Ports.


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Key recommendations under the Coastal Shipping policy for container trade boost

Opening up of foreign flag vessels will boost containerization and requisite infrastructure &

practices.

To develop a Freight Exchange for India centric international container trade later

extendible to coastal operations. Doing this will lead to an e-market for supply of freight and

corresponding tonnages to cater to such trade. Shippers can access the database andbook cargo against the capacity. This facility is proposed to be also available for

containerized cargo originating from select CFS/ICDs.

Policy to Permit Various Operators to Move Container Trains on Indian

Railways

This policy was formulated to permit rail linking of Inland Container Depots (ICDs) by private

parties other than CONCOR and allowing them to move container trains on the same lines as

CONCOR for both international and domestic traffic. Following are the salient features of the

policy:

Sr. Policy Heads Features

1. Eligibility

1.1 General The scheme is open to all registered Indian

public/private sector companies/persons either

individually or in joint venture. It will include Indian

registered companies of foreign entities

1.2 EXIM Traffic The prospective operator should have a suitable

access to a rail linked ICD with adequate handling

capacity in the hinterland / inland location for handling

of container trains

OR

The operator should enter into an agreement with an

existing rail ICD operator/rail terminal operator for

using his facility for container train operations, within

six months of obtaining in principal approval from

MOR.

OR

The operator gives an undertaking that he will

develop his own ICD with rail facility within a period of

three years from the date of in principal approval to

operate container trains.

1.3 Domestic Traffic The prospective operator should have a suitable

access to two rail linked ICDs with adequate handling

capacity in two hinterland/inland locations for

handling of container trains

OR

The operator should enter into an agreement with an

existing rail ICD operator/rail terminal operator for

using his facility at two locations for container train

operations, within six months of obtaining in principal

approval from MOR

OR


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The operator gives an undertaking that he will his

own ICD with rail facility at two locations within a

period of three years from the date of in principal

approval to operate container trains

1.4 Should be engaged in any of

the following services

Transport

Trade and Commerce

Infrastructure

Handling of Goods / Cargo

Port / Land Terminal operations

Logistics

Warehousing

Manufacturing

Leasing

2. Regulation of Rail

Container Operations

In order to regulate the entry of new rail container

operators on lndian Railways (IR) network, various

routes have been grouped into four categories largely

based on the existing as well as anticipated traffic

volumes on different rail corridors serving gateway

ports. These categories are as follows:

2.1 Category I: JNP/Mumbai

Port - National Capital

Region Rail Corridor and

beyond

This category includes all existing/future ICDs serving

JNP/Mumbai Port in National Capital Region like

Tughlakabad, Dadri, Gurgaon, etc. This will also

include all destinations reached via National Capital

Region like Dhandari Kalan, Moradabad etc. This

category will also include all domestic traffic

2.2 Category II: Rail corridors

serving JNP/Mumbai Port

and its hinterland in other

than National Capital Region

and beyond

This category includes all existing/future, ICDs

serving JNP/Mumbai Port at locations other than

those covered in category I. This category will also

include all domestic traffic except on category I routes

2.3 Category III: Rail corridors

serving the ports of Pipavav,

Mundra, Chennai/Ennore,

Vizag and Kochi and their

Hinterland


these ports. This category will also include all

domestic traffic except on category I routes

2.4 Category IV: Rail corridors

serving other ports like

Kandla, New Mangalore,

Tuticorin, Haldia/Kolkata,

Paradip and Mormugao and

their hinterland and all

domestic traffic routes


these ports. This category will also include all

domestic traffic except on category I routes


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3. Financial Capability

3.1 In case of an individual or a single company, either the turnover or the net worth

should be a minimum of Rs 100 crore

3.2 In case a number of companies form a consortium for the purpose of operatingcontainer trains, each constituent member should have either annual turnover or net

worth of at least Rs 50 crore

3.3 Companies which have been declared sick under SICA Act will not be eligible to

participate in the proposed scheme either singly or in association with the other

companies for container train operation

4. Approval Process

4.1 If the proposed operator has to set up a new ICD then for rail linking an Inland

Container Depot (ICD) he must obtain the requisite permissions from the concerned

authorities of the Government of India for setting up and operating the ICD within six

months

4.2 The proposed operator should submit his request in, writing to MOR indicating therein

his legal identity, intended, scope of operations for the next five years atleast, proof of

complying with various eligibility criteria indicated in this' policy, and willingness to

abide by the terms and conditions laid down in the policy and as amended from time to

time

4.3 Based on the documents furnished and clarification, if any, Railways will give their in

principle approval. In case the prospective operator fails to indicate his readiness to

operate his container trains to Railway's satisfaction within 3 years of grant of in

principle approval it will be deemed to have lapsed unless prior extension is given by

railways at its sole discretion

4.4 Before actually commencing operations, the operator will enter into an agreement with

the Railways containing the detailed operating and accounting procedure: including

the ownership of the new lines/assets and other relevant details. The agreement will

have provision for suitable arbitration procedure for resolving any dispute.

4.5 The scheme will be open for one month every year.

5. Registration Fee At the time of submission of request to run container

trains every applicant would be required to deposit a

nonrefundable registration fee of Rs 50 crore for

applying for all categories of routes including category

I and Rs 10 crore for each individual category of

routes except category I. Applications only for

category I routes will not be accepted

The registration fee of applicants who are not found

eligible will be refunded without any interest

6. Modalities of Granting New

Licenses

In case the successful operator opts for category I, he

will get a flexible permission to run trains between

any pairs of points in the entire country. This will

include permission for all other categories also. In

case the operator applies for a particular category

(except category I), he will get permission to run

trains between any pairs, of points in that category


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only for EXIM traffic and in domestic traffic for all

routes, except those in category I.

There will be no limit on number of trains on any of

the routes.

7. Period of Validity of Permission for Operating Container Trains

7.1 The validity of permission will be for a period of 20 years from the date of operation of

container trains by the operator. The permission can be extended by 10 years to the

same party after expiry of the validity of permission subject to satisfactory performance

and on payment of the fee as applicable at that time, which will be decided by Railway

Board

An operator will be permitted to exit from the market or transfer the permission to

another operator for container train operational subject to the latter fulfilling the

selection criteria and subject to prior approval of the Ministry of Railways.

This permission will however, be granted only one year after rail borne container traffic

has commenced from his ICD

Impact of VAT

The phasing out of the Central Sales Tax (CST) and the introduction of Value Added Tax

(VAT) will tend to facilitate movement of goods by containers. CST compelled companies to

set up warehouses in the major states to avoid the tax implications. VAT would encourage the

manufacturers to realign their supply chain network by doing away with their many warehouses

across the country and concentrating on fewer & bigger regional warehouses. Manufacturers

would also be improving their hub and spoke distribution system, which would entail efficient

and safe transfer of goods from point to point. It can easily be achieved by containerization

movement. Hence a steady increase in the containerization of cargo even for domestic

movement is expected.

Implementation of VAT is expected to bring in uniformity not only in tax rates, but also

procedures. VAT would also remove the tax-based advantage, which some locations had in

terms of setting up a manufacturing unit or a warehouse, while IT Enabling of documentation

would lead to less flow of physical documents and workload. With the introduction of VAT, the

business community thus has an opportunity to work in close association with their logistics

service providers and put in place a lean supply chain network and improve their supply chain

efficiency.


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Container Infrastructure

Development at PortsPorts provide an interface between the ocean transport and land-based transport. Indias port

infrastructure constitutes of 13 major ports and 187 non-major ports. Of the non-major ports,

only about 48 are operational; while the rest are only fishing harbors.

While the non-major ports contribute significantly to the overall traffic, the containerization

traffic mostly belongs to the major ports. Only select non-major / intermediate ports like

Pipavav Port, Mundra Port etc. cater to the containerized traffic. In other words the container

infrastructure and trade is untapped by the non-major ports. The reason for it may be the drafts

required for the large container ships or due to the major investments required to be done in

the containerization process.

Dedicated container terminals have been constructed across almost all the major ports to cater

to the demand of container traffic. Private players have set up the CFSs/ICDs in proximity of

the major ports.

The growth of container traffic is primarily dependent on items like capital & engineering

goods, textiles and food items which are transported in containers. The various major ports

have proposed to invest in infrastructure for development of containerized traffic. The following

table gives the details of some of the major container related investments proposed by Major

Ports:

Sr. Project NamePort

NameCapacity

Project Cost

(in Mn)Status

1 Construction of two New

Off-shore Container

berths & Development

of Container Terminal

berth on BOT basis in

Mumbai Harbour.

Mumbai

Port

0.80

MTEUs

14610 Anticipated date of

completion is

September, 2012.

2 Development of Berth

No. 7 as second coal

handling terminal on

DBFOT basis.

Mormu-

gao

4.61

MTPA

4060 The date of award of

concession was

fixed on 15.5.2010.

Physical progress ofthe overall project in

terms of percentage

is 13.75%. Financial

progress of the

overall project in

terms of percentage

is 19.62% (Rs. 79.65

cr.).

3 Development &

Operation of

International Container

Transshipment Terminal

Cochin Capacity

addition

21180 Phase I of the ICTT

Project with an

investment of Rs.

1262 commissioned


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NameCapacity

Project Cost

(in Mn)Status

(ICTT) at Vallarpadam

(BOT basis by M/s India

Gateway Terminal Pvt.

Ltd. a subsidiary of M/s.Dubai Ports

International)

of 12.5 to

40 MMT

In phases

on 11th February,

2011.

4 Development of Second

Container Terminal

(CITPL) on BOT basis.

Chennai - 4920 Project facilities and

services were

completed &

commercial

operation has

already been

commenced on

22.9.09.

5 Construction of

Container Terminal on

BOT basis

Ennore 18.0

MTPA

14070 Preliminary works

are going on and

expected to be

completed in 2013-

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6 Development of Multi-

Purpose berths to

handle clean cargo

including container on

BOT basis

Paradip 5.0

MTPA

3873 Letter of Award has

been issued to the

H1 bidder i.e.

Consortium of

Sterlite Leighton

@ 23.4% revenue

share to the port. In

the meantime,

Sterlite Leighton

has sought time till

30th June, 2011 to

complete all

formalities on the

SPV and have

requested Port for

expediting

Environmental &

Forest clearance

7 Fourth Container

Terminal (DBFOTBasis).

JNPT 6.8

MTEUs

41000

Phase -1

27000

Phase II

Likely commission

period of Phase I,is May, 2014. In

respect of Phase-II

the development will

be taken up after

completion of

Phase-I.

8 Development of

standalone Container

handling facility with a

quay length of 330 m. to

the north of JNPT.

JNPT 10.0

MTPA

6000 Out of seven

shortlisted

applicants five have

collected RFP. The

project is currently

under biding


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NameCapacity

Project Cost

(in Mn)Status

9 Development of

Container Terminal at

NMP on BOT basis.

New

Mangalor

e

NA 2697 No bids have been

received on the due

date. The project is

under review.

10 Development of Mega

Container Terminal on

BOT basis.

Chennai 4.0

MTEUs

36860 Invitation of RFQ

process completed.

Ministrys approval

awaited for issue of

Bids to the

prequalified RFQ

applicants.

11 Conversion of berth No.

8 as container terminal

on BOT basis.

Tuticorin 7.2

MTPA

3122 Awaiting Ministrys

approval on

restriction of

Monopoly policy

decision. Likely

commission period

is December 2011

12 Development of all

weather and Multi user

Port on BOOST basis

by M/s. Amma Lines Ltd

(To become hub port in

South Asia with draft 20

Mtrs.)

Maharas

htra

44.7

MTPA

(1.7

MTEUs)

Container

43000 Share holding

pattern approved.

Environmental

clearance awaited.

Anticipated date of

completion is 2010

13 Development of Mundra

port ( South port andNorth port ) for

containers, LNG, Liquid

Bulk, Car Terminal &

General cargo. By

Mundra port SEZ Ltd.

Mundra

(Gujarat)

125 12000 Capital dredging in

progress for southport.

14 Mechnization of Okhla

port by GVK power and

Infrastructure Ltd.

Okha

(Gujarat)

9.28

MMTPA

+

0625M

TEU

790 Pre-feasibility study

has been completed.

Detailed studies are

underway

From the table above we can see that the major ports in India have already endeavored to

adopt containerization and reap its benefits. The ports in India have taken steps to ensure that

we just not do the bare minimum but go ahead by leaps and bounds.


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Container Movements in

India, Way of Transportation

& ChallengesTransportation infrastructure works as a catalyst for the economic betterment of any country.

Better transportation network in a country leads to faster movement of goods and services,

resulting into higher turnover of goods and increase in GDP.

Connectivity to the hinterland is of prime importance to boost the container trade. Adequately

planned schedules, well synchronized intermodal network and availability of end-to-end

connectivity to the prime destinations or consumption centers improve the distribution network

and reduce the transit times.

Roads and railways form an invaluable part of the connectivity network of the Indian Transport

System. IWT in India is not well developed and is also not available for the last mile

connectivity. Thus Indian goods transport has to rely a lot on the roads and railways for the

end-to-end delivery of goods.

Government of India has taken up the challenge to form a dedicated network of highways and

railway lines through various schemes and plans. The Expressway and the Golden

Quadrilateral are some of the examples of the highways network development initiatives while

the Dedicated Freight Corridor is representative of the efforts by the Ministry of Railways.Additionally, Indian Railways and the Railway Ministry have set out quite a few policies like

Private Freight Terminals policy etc. for enabling the container infrastructure setup.

The Great Indian Roads:

India is a country having one of the largest road network of approximately 42.36 lakh kms.

However the quality of the road infrastructure is inferior as compared to other countries.

Analysis of the transport budgets of some states shows that the amount of money allocated to

the sustenance of the existing road network far surpasses the allocation to the new road

development. In some regions, it is almost double the budget for new works. Despite this, the

quality of the roads and their actual life expectancy is far less than expected..

As per the Road Transport & Highways Department around 60% of the total freight and around

87% of passenger traffic is carried by Indian roads. The traffic forecasts show that the road

traffic is expected to grow at a rate of around 8-10%.


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The Indian Roads Network is divided into the following major heads:

As indicated, NHDPis a single multi-crore project with several phases. The completion of these

phases will be a landmark achievement in the road transport network.

The following table shows the current status of the NHDP projects started by NHAI & GOI:

Overall Status, Length Completed As On 31.12.2010 Of Different Phases Of NHDP

Phases Total Length

(in km)

Length Completed

(in Km)

Likely date of

Completion

I - GQ,EW-NS corridors,

Port connectivity & others

7,498 7384 -

II - 4/6-laning North

South- East West

Corridor, Others

6,647 4934 Dec -2010

III - Upgradation, 4/6-

laning

12,109 1968 Dec-2013

IV- 2- laning with paved

Shoulders

20,000 - Dec- 2015 (as per

financing plan)

Indian Roads

Expressways National State Highways District Roads Rural Roads

6-lane highway.

A shoulder-typeextra lane isgiven on bothsides

Currentlyconnects tomajor cities.

Total length ofan Expressway

is around 200km

Design Speed isaround 120 kmsper hour

Plans for direct /indirectconnectivity toExpresswaysfrom variousPort are on-going

Total length ofExpressways +National

Highways =70934 kms

They connectstate capitalswith nationalcapital & majorports

Carry around40% of totalroad traffic

NHAI is theresponsibleauthority for

theirdevelopment &sustenance

NHDPprogramme byCentral Govt.proposes 4phaseddevelopment ofthe overall roadinfrastructure.

Connect withthe statecapitals,NationalHighways,Districtheadquarters,major citiesand non-majorports

These are

funded throughthe statebudgetallocations

Total length ofstate highwaysis 1,54,522

Connects thetowns &productioncenters withstate highways& villages tothe towns &cities

Total length =25,77,396

These roadsform around35% of thetotal lengthof the roadsin India

Total lengthof rural roadsis 14,33,577kms


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Grant to StateGovernmentsand UTs forState Roads

12%

Grant to States& UTs for

Roads of ICEI1%

NationalHighways

52%

Rural Roads29%

Railways6%

Allocation from CRF

V - 6-laning of GQ and

High density corridor

6,500 443 Dec-2012

VI - Expressways 1000 NIL Dec-2015

VII - Ring Roads,Bypasses and flyovers

and other structures

700 km of ringroads/ bypass+

flyovers etc.

NIL Dec-2014

Source: Annual Report of MORTH, 2010-11

The following table represents the allocation from the Central Road Fund under various heads

for the year 2010-11. We can clearly see that the National Highways (including Expressways)

allocation clearly outclasses the other allocations.

Sr. Allocation Head Amount (In Cr.)

1 Grant to State Governments and UTs for State Roads 1893.75

2 Grant to States & UTs for Roads of Inter-state Connectivity &

Economic Importance

210.42

3 National Highways 7848.98

4 Rural Roads 4434.12

5 Railways 876.73

Total 15264.00

It is noteworthy that most of the projects under NHDP are proposed to being developed in

association with private players / developers on PPP basis. While developing such an

extensive network of highways across India, many restraints and challenges are faced by both,

the government as well as the private players. The common yet key challenges raising their

hood against the advancement of the road network have been summarized below:


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Sr. Challenges Details

1 Land acquisition: There has been inordinate delay in acquisition of land in some

States mainly due to procedural formalities, court cases and

lack of full co-operation from the State Governments

concerned

2 Environment and

Forest Clearances

There have been considerable delays in getting the forest

clearance both at the Central and State level

3 Clearances of

Railways for ROB

designs

Rail Over Bridges (ROBs) and Rail under Bridges (RUBs) had

to be constructed to make the NHDP free from level crossing

on Railways. Obtaining the clearances/approval from the

Railways involves co-ordination with several Departments

within Railways and it takes a long time to get the necessary

approvals

4 Shifting of Utilities Shifting of utilities of different types e.g. electric lines, water

pipelines, sewer lines, telecommunication lines which were tobe completed with the assistance of the concerned utility

owning agencies took a considerable time

5 Law and order

problems

In many States, works have been affected because of adverse

law and order conditions and activities of anti-social groups. In

addition, the stoppage of works by the local population

demanding additional underpasses / bypasses, flyovers, etc.

was also frequent.

6 Poor performance by

some contractors

Performance of some of the contractors has been very poor.

Cash flow problem has been one of the major reasons for poor

performance. The termination of such contracts often results in

long-drawn litigation and further delays in completion of works

Source: Annual Report of MORTH, 2010-11

Addressing the above bottlenecks will expedite the development of the road network & other

untouched areas of technological innovations for road safety and sustainable transport.

The Indian Railways:

Indian Railways is the 5th largest network in the world. The only nations ahead of India in

terms of the Railway infrastructure are the United States, Russia, Canada and China. The total

length of Indian Railway is around 63,327 kms out of which 41% is electrified.

There are a total of 17 zones divided in accordance with various administration jurisdictions.

Each of these zones is responsible for the operations, management & sustenance of the

subdivisions and the railway tracks coming under its jurisdiction.

Almost 72.5% of total railways length is single line and is utilized by passenger as well as

freight trains. The sharing of railway sidings amongst the passenger and freight trains causes

disruption in the smooth functioning of the trains. Long waiting time and uncertainty of arrival

are the two primary reasons for the delay in time of freight goods.

For augmenting the rail transport capacity and to meet the growing demand of the freight

traffic, the Indian Railways planned the Dedicated Freight Corridors which will cater to only the

freight traffic.


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Dedicated Freight Corridors were proposed to be developed on the Eastern (Ludhiana in

Punjab to Dankuni near Kolkata 1839 kms) and Western (from JNPT to Tughlakhbad and

Dadri in Delhi 1534 kms) Corridors.

Of the two, the Western Corridor is specifically dedicated to the container traffic requirements

for the existing as well as emerging ports of Gujarat, Maharashtra and northern hinterland. The

Western corridor route comprises of following main destinations: JNPT-Surat-Vadodara-

Ahmedabad-Palanpur-Ajmer-Rewari. It is proposed to be an electrified automatic double line

corridor except for a patch of 32kms from main corridor to Tughlakabad where it will be a single

line link.

DFCCIL a SPV, is specifically created for implementation of these project.

The salient features of these two corridors can be given as:

Features Western Corridor Eastern Corridor

Route Description JNPT-Ahmedabad-

Palanpur-Rewari-

Tughlakabad / Dadri

Dankuni-Gomoh-

Sonnagar- Mughalsarai-

Kanpur- Khurja-Ludhiana

Route Kilometre 1534 1839

No. of lines Double (Single-

Tughlakabad-Pirthala)

Double (Single Khurja-

Ludhiana)

Signaling Automatic signaling with 2

kms spacing on double

line. Absolute block

system on single line

Automatic signaling with 2

kms. Spacing on double

line. Absolute block system

on single line

Traction Electrified (2x25 KV AC) Electrified (2x25 KV AC)

Axle loads 25 Tonne (sub-structure of

bridges fit for 32.5 tonsaxle load)

25 Tonne (substructure of

bridges fit for 32.5 tonneaxle load)

Speeds 100 kmph 100 kmph

Traffic projections (2021-22) 128 million tonnes (6

million TEUs), (264 trains)

144 million tons (160 trains)

Feeder Routes 1516 Km 3071 Km

Total Cost [Current excluding cost

escalation, Taxes, Insurance,

IDC, Private Investment and Cost

of Land (Rs.4200 Cr.)]

Rs. 22,956 crore Rs. 23,605 crore

Source: DFCCIL

The Western Corridor has been divided into two phases. Phase 1 consists of section from

Rewari to Varodara (approx. 950 kms) and the Phase 2 consists of section from JNPT to

Vadodara and Rewari to Dadri (approx. 584 kms). JICA will be funding the development of

both sections to the extent of 80%. Its investment in Phase 1 is INR 21,000 crore and in Phase

2 is 11,500 crore. So far the civil contract for the two packages has been initiated in March

2011. The main loan agreement for Phase 2 is aimed to be signed by March 2012. Inspection

and visits from the JICA Contact Mission is on-going.

Additional 54 major and important bridges are planned to be developed on the Western

Corridor between Vaitarana-Bharuch sections. This will be funded by the Indian Railways.

Overall these projects are proposed to be completed by 2016-17.


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Container Freight Stations &

Inland Container Depot

InfrastructureCFS and ICDs form a key part of the logistics industry infrastructure. CFSs are also termed as

Dry Ports in Western Countries.

A CFS/ICD/Dry Port can be defined as Common user facility with public authority status

equipped with fixed installations and offering services for handling and temporary storage of

import/export laden and empty containers carried under customs control. Transshipment of

cargo can also take place from such stations.

Distinction between CFS & ICDs

In terms of functions there is no particular distinction between a CFS and an ICD. Both

cater to the transit facilities offering containerization of break bulk cargo and vice-versa.

These are served by rail and road transport.

ICDs are generally located in the interiors or outside the port towns of country, distant from

the ports. CFS on the other hand are off-dock facility located near the port area. CFS are

largely expected to deal with break bulk cargo originating / terminating in the immediate

hinterland of port. They also deal with rail borne traffic to and from inland locations

Considering the requirements of the Customs Act, and need to introduce clarity in

nomenclature, all containers terminal facilities in the hinterland are designated as "ICDs".

Functions & benefits of CFSs/ICDs:

Functions:

The primary functions of ICD/CFS may be summed up as under:

a. Receipt and dispatch/delivery of cargo.

b. Stuffing and stripping of containers.

c. Transit operations by rail/road to and from serving ports.

d. Customs clearance.

e. Consolidation and desegregation of LCL cargo.

f. Temporary storage of cargo and containers.

g. Reworking of containers.

h. Maintenance and repair of container units.

Benefits:

The benefits as envisaged from an ICD/CFS are:

Concentration points for long distance cargoes and its unitisation.

Service as a transit facility.


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Customs clearance facility available near the centres of production and consumption

Reduced level of demurrage and pilferage.

No Customs required at gateway ports.

Issuance of through bill of lading by shipping lines, hereby resuming full liability of

shipments.

Reduced overall level of empty container movement.

Competitive transport cost.

Reduced inventory cost.

Increased trade flows.

Drivers & Challenges for the development of CFS / ICDs

The CFS/ICDs investments are lucrative investment avenues as they provide, high margins in

comparison with other logistics activities while the entry barriers and overall development

scope far more exceeds the other logistics services lines of business. The following table

analyzes the above discussed point.

Road

Freight

Express Coast-o-

coast

Container

Haulage

CFS / ICD MTO

Scenario Mature Growth Growth Growth Capital

Intensive

Growth Mature

Entry Barrier Low High High High Medium Low

Growth 5-10% 20-22% 15% 20% 35% 10-15%

EBIDTA

margins

3-5% 8-10% 25% 30% 40% 4-6%

The operations of the ICDs/CFSs revolve around the following centers of activity:

1. Rail siding (in case of a rail based terminal): The containers are loaded on and

unloaded from rail wagons at the siding through overhead cranes and / or other lifting

equipments.

2. Container Yard: Container yard occupies the largest area in the ICD.CFS. It is stacking

area were the export containers are aggregated prior to dispatch to port, import containers


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are stored till Customs clearance and where empties await onward movement. Likewise,

some stacking areas are earmarked for keeping special containers such as refrigerated,

hazardous, overweight/over-length, etc.

3. Warehouse: A covered space/shed where export cargo is received and import cargo

stored/delivered; containers are stuffed/stripped or reworked; LCL exports are

consolidated and import LCLs are unpacked; and cargo is physically examined by

Customs. Export and import consignments are generally handled either at separate areas

in a warehouse or in different nominated warehouses/sheds.

4. Gate Complex: The gate complex regulates the entry and exit of road vehicles carrying

cargo and containers through the terminal. It is place where documentation, security and

container inspection procedures are undertaken

Steps for setting up of a CFS / ICD:

The Ministry of Commerce, Government of India has issued guidelines for the setting up of the

CFSs/ICDs in India. These guidelines are summarized in the coming sections.

Steps / Phases Particulars / details

1 Feasibility Study A feasibility study must precede the setting up of all

ICDs/CFSs and copy of the report should invariably

accompany the application for setting up such a facility.

Data for carrying out analysis could be from secondary

sources and field observations, structured over time and

space.

Prior discussions must be held with exporters, shipping

lines, freight forwarders, port authorities, concerned

Commissioners of Customs/Excise etc., and their point of

view fully reflected in the report

2 Analysis of traffic flows The analysis of traffic flows between centres of production &

ports shall be analysed with reference to the following:

Commodities

Directional-split (Imports/Exports)

Proportions of less-than-container load (LCL) & full-

container-load (FCL)

Forecast of future growth.

Modes of transport available.

Possible reduction in tonne per kilometre or

Box per kilometre costs

3 Assessment of economic

viability

The facility should be a viable unit for various stakeholders like

the railways, transport operators, seaports, shipping lines,

freight forwarders etc. the guidelines stipulate certain minimum

amount of traffic (measured in TEUs) for the facilities to be set

up. The following are the suggested indicative norms which

form a part of criteria for the approval of CFSs/ICDs of at any

location across India:

For ICD 6,000 TEUs per year (Two way)

For CFS 1,000 TEUs per year (Two way)

4 Land Requirements The minimum area requirement for a CFS is 1 hectare and for

ICD 4 Hectares. There is however, a clause, which allows the


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CFSs/ICDs to be setup on a smaller than recommended area

considering the technological upgradation and other features

which could justify the demands

5 Design & Layouts CFS/ICDs are primarily designed for the reduction of

congestion at ports and other facilities of transport and

therefore must be designed in such a way which optimizes the

usage of the facility, reduces the congestion at ports and

minimizes the transaction time for transport of cargoes etc.

The design & layout should be well equipped with

mechanical & electrical facilities, preferably of international

standards.

The design must support the smooth flow of containers,

cargo & vehicles

The design should be prepared taking into consideration

the estimated first 10 years volume and type of facilities

the exporters require

The broad design should encompass features like railsiding, container yard, gate house, security features like

boundary wall, fencing, pavements, office building and

public amenities

The perimeter fencing and lighting must meet the

standards required by Custom Authorities

The administration building should be focal point of the

production & production & processing of all documentation

relating to handling of cargo & containers and its size shall

be determined by needs of occupants

Sanitation and food service facilities should also be

accounted for.

Good communication systems with EDI connectivity is alsoessential

The following infrastructure should however be available at

CFS/ICDs:

Provision of standard pavement for heavy duty equipment

for use in the operational and stacking area of the terminal.

In cases where only chassis operation is to be performed,

the pavement standard could be limited to that of a

highway.

Office building for ICD, Customs office and a separate

block for user agencies equipped with basic facilities.

Warehousing facility, separately for exports and imports

and long term storage of bonded cargo.

Gate Complex with separate entry and exit.

Adequate parking space for vehicles awaiting entry to the

terminal.

Boundary wall according to standards specified by

Customs.

Internal roads for service and circulating areas.

Electronic weighbridge.

Computerized processing of documents with capability of

being linked to EDI.

6 Equipments The ICD/CFS would select most modern handling

equipment for loading, unloading of containers from railflats, chassis, their stacking, movement, cargo handling,


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stuffing/de-stuffing, etc.

Following minimum equipment should be made available

at ICDs/CFSs (Reach stacker may not be mandatory):

Dedicated equipment such as lift truck (front end loader,

side loader or reach-stacker), straddle carrier, rail mounted

yard gantry crane, rubber tyred yard gantry crane, etc. of

reputed make and in good working condition (not more

than 5 to 8 years old) and equipped with a telescopic

spreader for handling the 20 ft and 40 ft boxes. The

equipment must have a minimum residual life of 8 years

duly certified by the manufacturer or a recognized

inspection agency. An additional unit of equipment should

be provided when the throughput exceeds 8000 TEUs per

annum or its multiples for lift truck based operations.

Terminals resorting to purely chassis-based operations do

not require dedicated box handling equipment. However,

chassis-based operations should be restricted to CFSs

proposed to be set up near ports.

Small capacity (2 to 5 tonnes) forklifts must be provided for

cargo handling operations in all terminals.

The main function of an ICD/CFS being receipt, despatch

and clearance of containerised cargo, the need for an up-

to-date inventory control and tracking system to locate

containers / cargo is paramount.

Each functional unit of the facility (e.g. siding, container

yard gate, stuffing/destuffing area, etc.) should have up-to-

date and where possible on-line, real time information

about all the containers, etc., to meet the requirements of

customers, administration, railways etc.

As far as possible, these operations shall be through

electronic mode

7 Tariff Tariff structure and costing is supposed to be worked out

along with the feasibility study and information should be

provided with the application

Source: Ministry of Commerce Website


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Procedure for setting up of CFS/ICDs & implementation

1. Proposals for setting up ICD/CFS will be considered and cleared, on merits, by an

Inter-Ministerial Committee for ICDs/CFSs, which consists of officials of the

Ministries of Commerce, Finance (Department of Revenue), Railways and Shipping.

Views of the State Governments as necessary would be obtained

2. Application 10 copies in enclosed form should be submitted to the Infrastructure

Division in the Ministry of Commerce, Udyog Bhavan, New Delhi. Application must

be accompanied by 10 copies of feasibility reports mentioned in the guidelines

3. The applicant should also send a separate copy of the application to the

jurisdictional Commissioner of Customs. The Commissioner of Customs will send

his comments to the Ministry of Commerce and the Central Board of Excise &

Customs (CBEC) within 30 days. In case, the project is planned in a port town, a

copy of the proposal should also be sent to the concerned Port Authority who

would furnish their comments within 30 days to the Ministry of Surface Transport

and the Ministry of Commerce

4. The applicants are also requested to familiarize with the statutory Custom

requirements in relation to Bonding, Transit Bond, Security Insurance and othernecessary procedural requirements and cost recovery charges payable before filing

the application

5. On receipt of the proposal, the Ministry of Commerce would take action to obtain

the comments from the jurisdictional Commissioner of Customs and other

concerned agencies within 30 days. Wherever necessary, a copy of the proposal

should also be sent to Zonal Railway Manager, under intimation to the Ministry of

Railways One copy of the proposal would also be made available to the IMC

Members for advance action. The decision of the IMC would be taken within six

weeks of the receipt of the proposal under normal circumstances

6. On acceptance of a proposal, a Letter of Intent will be issued to the applicant, which

will enable it to initiate steps to create infrastructure7. The applicant would be required to set up the infrastructure within one year from

the date of approval. The Ministry of Commerce may grant an extension of six

months keeping in view the justification given by the party. Thereafter, a report

would be submitted to IMC to consider extension for a further (final) period of six

months. The IMC may consider extension or may submitted to IMC to withdraw the

approval granted

8. The applicant, after receipt of approval, shall send quarterly progress report to

Ministry of Commerce. Three formats (given as annexure I to III) for sending the

quarterly/ annual report shall have to be submitted to Department of Commerce

through electronic mode as well as through hard copy

9. After the applicant has put up the required infrastructure, met the securitystandards of the jurisdictional Commissioner of Customs and provided a bond

backed by bank guarantee to the Customs, final clearance and Customs notification

will be issued

10. The approval will be subject to cancellation in the event of any abuse or violation of

the conditions of approval

11. The working of the ICD/CFS will be open to review by the Inter Ministerial

Committee

Source: Ministry of Commerce Website


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The CFS & ICDs are amongst the most rapidly growing segments of logistics industry in India.

The increasing container traffic at ports needs the support infrastructure which can

accommodate the traffic volumes of the containers. CFS & ICDs provide a safe investment

segment with lot of returns. CFS / ICDs being the supporting infrastructure for the port

development and port traffic fall under the direct trade segment of the ports. Thereby this is

also a lucrative sector for investing the reserve funds / acquiring stake in the development of

support infrastructure by ports.

Container Terminal projects like Vallarpadam ICTT, Ennore Contaner Terminal and Chennai

Mega container Terminal offer huge untapped opportunities to logistics players. These

container terminals are proposed to add a capacity of around 9 milling TEUs by 2020 and thus

boost the demand for CFS/ICDs in the adjacent areas to the ports.

According to a study the 3 million TEU capacity of Vallarpadam is supposed to create demand

for above 20 CFSs in the region. JN Port is currently the highest container traffic port and the

growth of container is still expected to grow at exhoribant rates. In addition, Kandla port and

Chennai Port also handle sizeable volume of containers. Mundra port (APSEZ) witnessed the

handling of above 1 milllon TEUs last year (2010-11), which has surpassed again this year.

The following table gives the list of ICDs/CFSs approved by the IMC which are under

implementation or functioning. In total there are around 247 CFS/ICDs in India and by far the

Tamil Nadu (60 in No.) ranks first according to number, followed by Maharashtra (48 in No.)

and Gujarat (33 in No.).

States wise number of registered CFSs/ICDs

Andhra Pradesh 13

Bihar 1

Chandigarh 1

Chhattisgarh 1

Goa 1

Gujarat 33

Haryana 9Himachal Pradesh 1

Jharkhand 1

J&K 2

Karnataka 8

Kerala 11

Maharashtra 48

Madhya Pradesh 7

Orissa 2

Pondichery 2

Punjab 7

Rajasthan 10

Tamil Nadu 60

Uttar Pradesh 18

West Bengal 11

Total 247

Source: Ministry of Commerce, GOI website.

Complex procedures and systematic flow of goods needs to be planned out for the smooth

functioning of the CFS. The flow of goods is also affected by the type of weather, type of cargo,

frequency of the flow of goods, container handling facilities, time required for stuffing &

destuffing of containers etc. In the Indian scenario this complexity goes up higher than normal

and is the main cause of delays in delivery of goods. The ports as well as CFSs operators have


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came to a conclusion that IT inclusion and IT communications technology & infrastructure can

enable them to effectively utilize their current capacities.

For any business to be successful, it must generate revenues and profit for the investors /

stakeholders. In CFS business, there are various segments which are the key revenue

generating centers. Following is a brief on few important revenue generating facilities / services

offered by CFSs.

Centers Status / remarks

Warehousing Bonded Warehouses are typically used by the Custom Handling Agents

& shipping companies

This segment, though important does not comprise a lucrative growth

sector within the CFS functions

Handling It is dependent on the volumes of containers handled in a CFS

It is usually outsourced to other specialized firms providing equipment,

facilities and skilled manpower for the same

The more efficient the handling of the containers, lesser the dwell time

and more is the volume. This increases the revenue generation of the

CFSs. Companies with efficient container handling systems and

suitable technologies can work wonders

Rent CFS charge rent for the ground on which containers are kept. Usually

the rent is based on incremental basis. It is minimum for first few days,

and increases thereafter as the number of storage days increases. This

increase in rent varies from time to time and from cargo to cargo.

Though the ground rents are an important source of revenue for the

CFSs, they are primarily kept as a negative covenant. As the rentincreases, the profitability of the owner of cargo decreases due to which

the owners prefer to evacuate the containers as soon as possible.

The rent is directly associated with the number of containers and as the

container turnover increases, so does the overall rent receipts.

Maintenance &

Repair

The rise of container traffic is also determined by the type of services

offered for the cleaning, maintenance and repair of the containers.

This is a relatively unchartered area as there are quite a few players

specifically providing these services for the containers.


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Container Rail operationsIt has been reiterated for quite some time that better connectivity of the hinterland and the ports

is the key to achieving the set ambitious growth targets for the development of the ports and

related infrastructure and thereby achieve the desired economic development.

Various ways and means have been adapted for achieving these goals. Development of

supporting infrastructure like CFS/ICDs, warehouses, mechanization of the ports, smooth data

flow system and containerization initiatives are quite a few of them.

The CFSs/ICDs function as dry ports or substitute arm which act in the capacity of the ports to

reduce the congestion at the seaports. Connectivity of railways is one of the key to success of

the containerization movement.

Indian Government, realizing the business potential for the container rail operations and its

strategic importance to the Indian companies, invited the players to take a stake in the

container rail operations. Privatization of container rail operation enticed 16 players. According

to the Indian Railways, private players would serve to:

Increase Indian Railways market share of container traffic

Provide incremental capacity to cater to the exponentially growing containerized traffic in

India

Ensure speedy clearance of export/ import of containerized traffic

Substantially increase containerized domestic traffic on Indian Railways

Improve quality of service to customers

These players offered integrated value added logistics solutions with last mile connectivity to

ports with a possible modal shift from road to railways. Most private players expect a return of

above 15% for investing in a business line so as to justify the investment decisions and cater to

their financing plans. Utilization and efficiency along with lower turnaround time are extremely

critical to generate returns of higher required returns.

Indian Railway has set up categories and recommended fees structure for these privatized

railway operators according to their areas of operations and needs. Indian Railways has given

licenses to private players, which allows them to offer container train movement by rail. The

private players can either take an all India license for Rs 50 crores or a route-specific license

for Rs 10 crores.

The following Table gives the areas of operation and registration fee for each category as was

announced in the final policy:

Category Areas of Operations Registration

Fee (Rs. In

Crores)

I JNP/Mumbai Port - National Capital Region rail corridor

and beyond.

This category will also include all domestic traffic

50


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II Rail corridors serving JNP/Mumbai Port and its hinterland

in other than National Capital Region and beyond.

This category will also include all domestic traffic except

on category I routes

10

III Rail corridors serving the ports of Pipavav, Mundra,

Chennai/Ennore, Vizag and Kochi and their hinterland.


on category I routes.

10

IV Rail corridors serving other ports like Kandla, New

Mangalore, Tuticorin, Haldia/Kolkata, Paradip and

Mormugao and their hinterland and all domestic traffic

routes.


on category I routes

10

Since then, 14 new players, including Concor, have joined the fray. Of these players, 10 hold a

pan-India license while four have opted for a route-specific license, which entitles them to

operate only on NCR-JNPT route

List of private licensed container freight train operators:

Sr. Name of Company Promoter Group Category

License Fee

Paid (Rs.

crores)

1 Adani Logistics Adani Group I 50

2 Central Warehousing

Corporation

PSU under the Ministry of

Consumer Affairs & Public

Distribution

I 50

3 CONCOR I 50

4 Emirates Trading

Agency

Emirates Trading Agency I 50

5 Gateway Rail Freight Gateway Distriparks I 50

6 Hind Terminals &

MSC Agency

Hind Terminals, Mediterranean

Shipping Company

I 50

7 India Infrastructure &

Logistics

APL India, Hindustan

Infrastructure Project and

Engineering

I 50

8 Container Rail Road

Services

DP World I 50

9 Reliance

Infrastructure

Leasing

Reliance (ADAG) I 50


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10 SICAL Multimodal

and Rail Transport

SICAL Logistics Ltd. I 50

11 Delhi Assam

Roadways

Delhi Assam Roadways IV 10

12 Innovative B2B

Logistics Solutions

Bagadiya Shipping and Bothra

Brothers (P) Ltd.

IV 10

13 Boxtrans (India)

Logistics Services

J.M. Baxi & Co. IV 10

14 Pipavav Rail

Corporation

Gujarat Pipavav Port Limited III 10

Source: Various sources

Looking at the licenses granted to the Rail Freight Operators, we can see that maximum

operators focus on the western corridor for JNPT-NCR route. This also sets tone for us toconfirm the proposed growth after implementation of the western corridor of the DFC

Interestingly, even though the transport through railways is quite cost effective, the railways

handle quite less amount of the cargo as compared to the roads.

To attain the target volumes of the container rail operators and to attract the volumes to

container segment, the provision of reliable, regular and integrated services is necessary along

with the last mile connectivity. Seamless transportation of goods is indeed the need of the

hour.

Proponents of privatization in the rail freight operations are also of the view that seamless

logistics can be achieved by the integrated hub-and-spoke model. The hub and spoke model

proposes to integrate various hubs by railway while the door-to-door delivery is given by the

road transporters.

Features of Rail Freight Operations

Capital Intensive industry: Players have to invest into creation of an asset base comprising

of rakes, terminals (ICDs/ rail sidings), containers, container handling equipment, etc.

Higher utilization and turnaround time: the average turnaround time in the domestic freight

typically stands at 3-4 trips (to and fro) in a month per rake, while turnaround times for

EXIM is around 7-8 trips (to and fro).

Sidings are required for success of the hub-and-spoke model. The rail sidings/ ICDs act as

a hub for the rail connectivity. The hubs can also be utilized to provide value added

services such as warehousing, packaging, repairs, cleaning maintenance etc.

Longer gestation periods along with promise of higher returns in the long time: A research

summarizes that on a base of 40 rakes and 4 ICDs at critical locations an operator has the

ability to generate above 14%. Still further gains can be achieved through faster turnaround

and usage of technology for operations.


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Risks faced by Rail Freight Operators

Risks and Operational hurdles faced by the Rail Operators

Risks

1. The financial performance of the operators is dependent on the utilization of the facilities.Considering this, the relative low handling of traffic will have a material impact on the

profitability

2. The turnaround time of the related CFS / ICDs have great impact on the turnaround of the

railway operator. Thus the business is in turn affected due to lower turnaround times

3. Availability of land for railways entails a great cost socially as well as economically. It

includes the excessive intervention and clearance from the Forest & Environment,

rehabilitation requirements and costs. These can hamper the project even if the location is

at an extremely strategic geography

4. Cost control for the capital expenditure is not possible. The operators have very limited

control over the largest cost component namely the rail haulage. The increase in the rates

on ad-hoc basis by Indian Railways is also a point of concern

5. So far, there is no independent arbitrator for dispute resolution between IR and the rail

operators. This is also a risk due to which many private players may back up from

investing in the facilities

Challenges

1. Maximum traffic is witnessed on the JNPT-NCR route.

2. Unreasonable haulage charge hikes by the railways are a cause of concern. This causes

much trouble as there is less time for the operators to absorb the charges in the view of

growing competition

3. Mismatch in the turnaround times due to congestion and lack of proper facilities for

loading and unloading of containers

4. Danger lies in the fact that the shift of cargo from road to rail may take some time which

may cause disruptions in the profitability and viability of the overall rail operations


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Risk and return go hand in hand. We first accounted for the risks & challenges associated with

the rail operations business. However, we must not fail to appreciate the advantages that one

can gain by applying the newer methods of rail transport. The following table details the

advantages of private rail transport over the road transport:

How does Private Rail Transport fare over Road Transport some findings!

1. Containerization brings the benefits of road transport to rail transport with respect to

flexibility and the size of cargo

2. Cargo such as iron & steel, electronic equipment, auto components, textiles, leather,

chemical, paper, yarn, metals, etc can be containerized and moved by container rail

operators through rail

3. A research reveals that over a distance of 1,000 km, freight costs are lower 20-25% for

cargo transported via the rail route

4. Heavy cargo preferred over light cargo load for rail movement. containers having lower

weight tend to become expensive to move by rail vis--vis road and vice versa

5. Companies can benefit through the Economies of scale on container rail movement. A

single rake can handle around 2,400 tonnes of cargo, while a single truck has the capacity

to carry 16-20 tonnes. Thus, to carry 2,430 tonnes, a road operator will require

approximately120 trucks.

6. Cost per ton for movement lower by above 35% as compared with roads

7. Transport via road entails additional time lapse in loading/unloading the containers as well

as more handling charges. This boosts efficiency with respect to time & stops pilferage &

other losses to a considerable extent

8. The railways are handled by a single operator due to which it is easier to for the materials

handling / logistics departments to maintain contact and stay updated about the exact

location and status of the containers. This also helps in reducing the documentation andpaperwork while ensuring the accuracy of the same.


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Bibliography & References1. Maritime Agenda : 2010 2020, Ministry of Shipping, Government of India

2. Deloitte Research

3. Observer Research Foundation's Issue brief - India's coastal security challenges & policy

recommendations, August 2010

4. Working paper on Policy for Indias Services Sector, Ministry of Finance

5. Times Shipping Journal, various issues

6. Scheme and Guidelines for Financial Support to Public Private Partnerships in

Infrastructure

7. Investment in Infrastructure during the 11th Five year Plan, Secretariat for Infrastructure,

GOI

8. PPIAF, Port Reform Toolkit

9. Report of committee on Rail-Road Connectivity of Major ports

10. Review of Marine and Coastal Policies in India, By Dr. Sangeeta Sonak, Prajwal Pangam,

Asha Giriyan

11. Recent news articles

12. Websites of

a. Ministry of Shipping, Govt. of India

b. Indian Ports Association (IPA)

c. Inland Waterways Authority of India (IWAI)

d. IBSA

e. Press Information Bureau (PIB)

f. Shipping Biz360


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ContactDeloitte IBK Media

Hemant B. Bhattbhatt

Senior Director

Deloitte Touche Tohmatsu India Private

Limited

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Besant Road, Worli, Mumbai 400 030,

India

Direct: +91 (22) 6619 8612

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Anita Verma

Conference Director

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Nityanand Nagar,Ghatkopar (W),

Mumbai - 400 086, India

Tel: +91 (22) 2500 6681

Email: [email protected]


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