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India‘s Infrastructure - Trends, Projections, Requirements
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Index – Key Areas
A Snapshot Projections by 2020 Mega trends in logistics Improving Multimodal Transport Systems Benchmarks Conclusions
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Strengths Big potential market Sustainable economic growth Western judicial system (case law) English – Business language Large number of graduated job seekers
Weaknesses Very low per capita income Lack of adequate infrastructure Bureaucracy – red tape Prevailing underground economy Low educational level Lack of skilled labour
Opportunities Growing middle-class with increasing demand Industry needs modernisation Private sector investments Low cost labour India becomes global player
Threats Judicial system slow Strong Government interference on economy High real estate costs – land acquisition Powerful unions High attrition rates
A Snapshot by the end 2012/2013 Good News – Bad News
Source: GTAI 10/2012
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Rupee crashes! • makes Exports more competitive
High Manufacturing costs in India! • makes import of capital goods attractive
Domestic demand is slackening! • domestic manufacturers turn to exports
Red Tape increases in India! •
A consumption economy thrives on imports & exports
I see Risk… You see Opportunity
Bad news … may be good for logistics Risk or Opportunity?
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Open Retail & Aviation to FDI
Clarify Unfriendly Tax Provisions
Reduce Subsidies on Diesel, Petrol, LPG
Clarify Environmental & Land Acquisition
Policy
Increase FDI in Insurance &
Pensions
Issue new Bank licenses
Reduce Subsidies on Fertilizer and
Kerosene
Kick-start pending infrastructure projects
&
ReeeeeeeeeeeeeeeeeeeeeeeeeeeedDDDDDDDDDDDDDDDDi
I
A Snapshot by the end 2012/2013 Need for Policy Announcements to Lift the Mood
Source: Waco-System 22 OCT 2012
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Projection by 2020 India’s Rapid Growth Requires a Strong Logistics Industry
GDP could increase from
1,7 to 30 trillion USD,
with production of
physical goods
increasing by factor 8-10
times
Energy consumption expected to
double. India needs 20
billions tons of coal by 2030 of which 75%
need to be transported – 30% trough
ports
Crude steel production expected to increase by
factor 4 between 2007
and 2030.
Demand for cement to double by
2030
Agricultural output to
increase from current 207
million tonnes to 295 million
tonnes by 2020
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Projection by 2020 India’s Rapid Growth Requires a Strong Logistics Industry
Container traffic
expected to increase from
existing 8 million to 15 Millions TEUS
in the next 3-5 years
Overall EXIM cargo of
Indian ports to increase to around 1,500 million tons by
2015
Finished consumer goods –
Indian made and imported – transported
to middle-class consumers is
likely to increase by 4
times
Modern warehousing
space is expected to increase to around 100 million sq.ft.
by 2015
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Mega Trends in Logistics in India Three Key Areas Affecting Type and Nature of Logistics
1 Changing demographics Rapid urbanization Cost effective ways to serve the needs of changing urban/industrial centres
2 Evolving requirements of trade Sophistication, modernization, clustering of manufacturing activities
3 Evolving inter-modal mix of commodities Bulk commodities to be moved across India more rapidly, safely and efficiently
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Mega Trends in Logistics in India Three Key Areas Affecting Type and Nature of Logistics
“It is estimated that India’s transportation and logistics bottlenecks hinder its GDP growth by approximately 2 per cent.”
(Business India – 22 July 2012)
“What is usually missed out is the realisation that we in India have one of the lowest transportation and warehouse costs in the world. The total logistics cost are driven by inventory and other losses due to inefficiency and poor business practices. In the US these costs account for 25 per cent of logistic costs, whereas in India they account for over 55 per cent of costs.”
Mahendra Agarwal, MD, Gati-KWE
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Mega Trends in Logistics in India Changing Demographics – Rapid Urbanization
Increasing migration towards urban areas expected
60% of India’s urban population will be concentrated in 25-30 urban clusters
Urbanization and clustering will lead to specialized agglomerations and satellite cities to serve these clusters
Source: National Transport Development Policy Committee – Delhi, February 2012
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Mega Trends in Logistics in India Changing Demographics – Rapid Urbanization
Key action points
Long term
Cargo Routes for speedy access Intra-city transportation Sea container, air cargo and truck
offloading facilities > Inland Container Depots
Short term
• Designated areas for warehousing • Link to rail systems
Source: National Transport Development Policy Committee – Delhi, February 2012
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Mega Trends in Logistics in India Evolving Requirements: Sophistication and Modernisation
Existing infrastructure will become obsolete due to the “exploding” trade volume
Introduction of international standards will push forward competitive service-oriented environment
Source: National Transport Development Policy Committee – Delhi, February 2012
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Mega Trends in Logistics in India Evolving Requirements: Sophistication and Modernisation
Key action points (examples)
Efficient warehouse management systems
Go-down to replaced by larger modern warehouses
Added value services – cold chain warehousing, packaging, track-and-trace- services
Source: National Transport Development Policy Committee – Delhi, February 2012
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Mega Trends in Logistics in India Multi-Modal and Intermodal Transportation: Getting the Mix Right
Misuse of transportation mode for the wrong type of commodity.
Congestion mismatch amongst various modes
Inefficiencies cost and time
Source: National Transport Development Policy Committee – Delhi, February 2012
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Mega Trends in Logistics in India Desired State of Logistics Infrastructure in India
Multimodal Freight Corridors Logistics Parks in Remote Areas Vessels Multimodal Logistics Parks Pipelines Roads Ports Economic Trade Zones
Source: National Transport Development Policy Committee – Delhi, February 2012
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Enabling multimodal transport Benefits of Network with Planned Overlaps
Optimal utilization of logistics infrastructure: Reduction of fuel requirements by 15-20 %. Reduction of logistics expenditure between 0.5 and 2 % of GDP
Increase utilization of railways for cargo movements from 30% to 60%
Increase utilization of pipelines from 55% to 80% (intern benchmark)
Enhance combined share of long coastline and inland waterways from 8 to 15%
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Enabling multimodal transport Coastal Shipping, Inland Water Transportation, Ports
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Enabling multimodal transport Coastal Shipping, Inland Water Transportation, Ports
Adequate supply of vessels
Improve availability of port infrastructure at viable pricing
Skilled manpower Maintenance of
important waterways and navigational aids
Reduce bunkering costs (20-30% above global average)
Key Issues
Investment for domestic cargo corridors
PPP for additional smaller berths
Increased capacity of carriers handling bulk cargo. Government incentives for investors
Increase average vessel sizes
Related Issues Policy Changes
Allowing international capacity for domestic and EXIM cargo
Fixed time single window approval policies
Take the load off the road – RORO jetties
Extend port network for EXIM traffic with simplified handling procedures
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Enabling multimodal transport Pipelines
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Enabling multimodal transport Pipelines
Existing Pipelines highly underutilized
No return of “empties but ideal for uni-directional traffic
Extension of National Pipeline Grid along with the National Electricity Grid
Key Issues
Scope to transport upstream and downstream products in the same pipeline system (e.g. crude oil, gasoline)
Related Issues Policy Changes
“Common Carrier” classification in line with international practices
Standard tariff system levied to all users
Fiscal and tax incentives for potential investors
Single Window Clearance System for setting up new pipeline systems
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Enabling multimodal transport Rail
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Enabling multimodal transport Rail
Increase of track length
Increase average speed for cargo trains
Customization of wagons for specialized cargo
Key Issues
Introduction of service level agreements
Development of interconnected dedicated freight corridors
Set-up Multimodal Parks
Introduction of modern wagons
Encourage leasing and supply of wagons
Related Issues Policy Changes
Freight-market benchmarked tariff structures to reduce over-utilization of road traffic
Commodity based pricing
Enhance privatisation drive
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Enabling multimodal transport Roads
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Enabling multimodal transport Roads
Paved road-density low, share of highways only 15% of which 0,5% have 2/4 lane traffic
Inadequate structures reduce load per axle
Road Safety - Accident rate one of the highest in the world
Key Issues
Promotion of private fleet exchanges
Improvement of off-road infrastructure (truck stops, rest rooms)
Related Issues Policy Changes
Improvement of new composite fee regime for national permit
Reliable Commercial Vehicle Driver Training Schools
Usage of Route Vehicle Intra State Movement in city distribution
Harmonization/standardization of road containers
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Enabling multimodal transport Air
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Enabling multimodal transport Air
Domestic air cargo market underserved (1 cargo airline only)
Ensuring availability of co-located warehouse and storage facilities
Scope for improving the speed of evacuation of air cargo in line with international turnaround times
Key Issues
Co-location of shippers, forwarders, agents, express operators, carriers and customs in integrated cargo villages
Air Cargo Hubs with strong intermodal facilities in BOM/DEL/NAG/PNQ/BLR
Integrated common user cargo warehouse facilities
Related Issues Policy Changes
Grant permission to stakeholders to set up off airport private bonded facilities.
Note: Although air cargo represents only a small percentage of India’s trade volume it however includes vital commodities to cater for the social needs, for the manufacturing sector and overall consumption.
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Introduction of Benchmarking Key Benchmarks to Monitor Processes
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Cost related
Efficiency
Safety and environment
Main Areas
Lack of benchmark identification concerning transportation and logistic systems
Lack of adherence to existing benchmark specifications
Existing systems need to be upgraded
Related Issues Examples
Turnaround time for ships at ports
Service level commitments for railways
Turn around commitments by customs and excise
Waiting time control at collection points
Introduction of Benchmarking Key Benchmarks to Monitor Processes
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Conclusions “A Wish List” – Recommendations to Improve the Status Quo
Connect industrial hubs and new urban centres with distribution hubs
Create policy changes for each mode of transport by increasing investment
Channel commodities movements to the appropriate mode of transport
Engineer the overlap of cargo networks, insuring intersections being close to production centres
Harmonize and streamline processes across government bodies
Collect data comprehensively to support planning and investment decisions
Decongest airports and seaport by shifting clearance activities away to inland locations
Set benchmarks and standards. Drive for uniformity of warehouses, storage and transportation equipment
Set safety, health and environmental standards
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Acknowledgements
Bernhard Steinrücke, Director General, Indo-German Chamber of Commerce, Mumbai
Carsten Hernig – Regional Director South Asia and Middle East, Lufthansa Cargo AG
Cyrus Guzder, Chairman, AFL Private Limited, Mumbai
CII, Confederation of Indian Industry CII Institute of Logistics
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Thank you for your kind attention
Werner Heesen Consulting GmbH Gartenweg 8 55246 Mainz-Kostheim/Germany
Tel/Landline + 49 6134 729507 MD/Owner Margret Heesen Email: [email protected] www.heesen-consulting.com