Вы находитесь на странице: 1из 20

Impact of infrastructure on logistics management

Rashmi Bhurani 9 Darshini Bhuta - 10 Harsh Chabbra 11 Kuntal Chowdhary 12

Group 3 Date: 21.12.12

Impact of infrastructure on logistics management


Table of Contents
Introduction ......................................................................................................................................3 Roads: ...............................................................................................................................................4 Extracting more from existing assets: ....................................................................................................... 7 Challenges:................................................................................................................................................ 7 Opportunities: ........................................................................................................................................... 7 Ports:.................................................................................................................................................8 Development needs: .................................................................................................................................. 8 Challenges:.............................................................................................................................................. 10 Opportunities: ......................................................................................................................................... 10 Rails: ............................................................................................................................................... 12 Challenges of Rail Transport: ................................................................................................................. 16 Railways see scope for greater logistics play:......................................................................................... 17 Conclusion: ...................................................................................................................................... 19 References:...................................................................................................................................... 20

Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management Introduction


Logistics in India
India has hardly been able to position itself on the economic market despite its favorable location between Asia and Europe and a populace of 1.21 billion. The World Bank in its Global Logistics Report, 2007 has ranked India 39 among 150 countries in terms of logistics performance with its future potential. India needs an integrated infrastructure and logistics policy to keep up the growth of its gross domestic product. The components of logistics costs have been indicated below. As observed, transportation occupies the major chunk f costs and need to be controlled to improve logistics.

Infrastructure development is a critical enabler to economic growth. Logistics infrastructure, covering the road, rail, waterways and air network of a country, is the backbone on which the nation marches ahead. Although the urgency to develop Indias logistics infrastructure has been realized in the past decade, the task at hand is daunting. Indias logistics infrastructure is insufficient; ill equipped and ill designed to support the expected growth rates of 7 to 8 per cent over the next decade. This expected 2.5-fold growth in freight traffic would further increase the pressure on Indias infrastructure. India has the opportunity to address this issue. Over two-thirds of the infrastructure network capacity of the future has not yet been built. Learning from the past and adopting global best practices, India should pursue a logistics infrastructure strategy that minimizes investment, maximizes cost efficiency, reduces losses for users and is energy efficient. This will need India to build its freight infrastructure in a manner that creates an integrated network across modes and prioritizes high-return programs. In particular, India needs to increase its use of rail, and realize the potential of its waterways. For example, in the normal course, Indias rail share in freight would decline to 25 per cent from the current 36 per cent. This is relative to almost 50 per cent rail share in China and the US, similar continental sized nations.

Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management


If India fails to achieve this, waste caused by poor logistics infrastructure will increase from the current USD 45 billion1 equivalent to 4.3 per cent of todays GDP, to USD 140 billion or more than 5 per cent of the GDP in 2020. If tackled in an integrated and coordinated manner, wastage can be reduced by half, and Indias transport fuel requirement reduced by 15 to 20 per cent. To achieve this objective, India needs to undergo 4 major shifts: Building the right network and ensuring flows on the right mode, comprising an integrated mesh of seven high-density long-distance corridors (rail and coastal waterways), 150 medium-distance rail and road connectors and about 700 last mile links Creating enablers to maximize the efficient use of the network, which includes developing 15 to 20 logistics parks, providing standards for containers and pallets and upgrading the skilled workforce Extracting more from existing assets, for example, by increasing the share of toll plazas with electronic tolling, using stainless steel wagons with higher load carrying capacity, and increasing spend on maintenance of roads Allocating more investment to rail and reallocating within roads and rail, Based on current trends, USD 500 billion is estimated to be spent on logistics infrastructure in the next decade, with roads accounting for more than 50 per cent of the spend and rail for 40 per cent. However, this investment will need to be re-apportioned to support the changes required. The allocation to railways, for instance, needs to increase to more than 50 per cent with large sums spent on building high-density traffic corridors, connectors and last mile links.

To meet these objectives, the infrastructure can be divided into the four modes of transport used in India i.e. Roads, Rails, Ports and Airports. The various objectives, reforms, challenges and way outs can be studied under each.

Roads:
The most important mode of transportation in India is Road, and this dominance arises from decades of poor supporting infrastructure development on the coastal, pipeline and air transportation side. Despite having one of the worlds largest rail networks, Indias share of cargo transported by rail has declined steadily from over 85 percent in the 1950s to around 30 percent presently. It is due to the poor quality of service (including last mile access solutions), driven largely by the historic monopoly of the government in this vital mode of transportation, as well as massive investments in road highway projects over the past six decades which have enabled trucks to reach hitherto unconnected parts.

Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management

Despite the recent privatization of the container rail industry, road transportation continues to grow and gain share from rail albeit at a slower pace.

Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management


Despite this growth, the road transportation sector faces many challenges. The industry is highly fragmented, and with low entry barriers, it has seen significant commoditization leading to intense competition among truckers who find their realizations and margins continuing to be squeezed progressively. These challenges have led road transporters to adopt various de-risking strategies, and this creates an opportunity for foreign players to partner with leading Indian road transportation companies on this transformation journey. Consider the case of a Company ABC Ltd. Situation ABC Ltd is one of the largest cargo transportation companies in Asia and handles over 5.5 million tonnes of cargo annually. The company operates a fleet of over 3,000 trucks, moving 15,000 consignments daily, and has a client base of 150,000, which includes a number of top 500 Indian companies. Complication ABC Ltd was faced with declining margins in its traditional FTL business and despite its scale and customer relationships, it was unable to resolve this problem. The company faced intense competition from both large FTL competitors who constantly negotiated bargains with their larger customers to wean away those accounts, and from smaller fleet owners whose lower-cost structures and scant regard for regulations allowed them to undercut prices to smaller and midtier customers. Resolution ABC Ltd diversified into other segments of logistics, which offered higher margins as well as better control over cargo, leading to improved customer stickiness. The company moved into the express logistics segment and offered single window, time-bound, door-to-door distribution services to LTL customers across India. It also ventured into 3PL supply chain solutions, with a focus on key industries, such as automotive, retail, telecom and pharmaceuticals this allowed ABC to offer solutions to customers rather than just services. Further, the company set up a global freight forwarding and customs clearing presence with branches across India and key international locations and this helped the company originate cargo more effectively. ABC was also one of the first entrants into the small but highly profitable businesses of cold chain and coastal shipping in India. The companys transformation was supported by selective acquisitions across these new business segments and selective tie-ups with global partners including a leading Japanese conglomerate. Key Reforms: Road developments that would improve logistics include: 1. National expressways: This includes constructing expressways of 100 to 300 km stretches that factor in expected increases in traffic by 2020. While currently 5 to 7 expressways are likely to be built by 2020, ideally, the number of expressways should be increased to over 20 by 2020. Expressways should include high-traffic routes such as Nasik-Shirpur and Ghaziabad-Bareilly. 2. Last-mile roads: Creating a dedicated last mile program with over 750 last-mile links to connect in particular port and railway terminals to production and distribution centers.
6 Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management


3. Technology adoption like national electronic tolling: This entails standardizing technology for nationwide electronic toll collection (ETC) in future contracts and establishing a nationwide clearing house with set norms and service standards to facilitate transactions, thereby reducing waiting time and improving service levels. Extracting more from existing assets: India needs to use its existing logistics infrastructure and equipment better. Measures to this effect include better maintenance of roads, rail tracks and rolling stock; unlocking the capacity of the rail network by accelerating the implementation of automatic block signaling, moving to lower tare load wagons, improving the efficiency of scheduled rake maintenance operations; and enhancing road efficiency through electronic tolling systems on highways. These measures could unlock 5 to 10 per cent of freight capacity with much lower investments than is needed for new infrastructure creation. Challenges: The road transport cost comprises of vehicle operating cost and road related cost. The vehicle operating cost on Highways, which is major component of the total transport cost, is entirely dependent on the condition of the roads. In order to reduce this total transport cost it is essential to maintain the roads at a good level of service. The existing NH network is under severe strain due to rapid traffic growth, overloading of vehicles and the Governments inability to provide the required funds for maintenance of National Highways. Apart from funds, other factors as cited in the report of the working group include outmoded system of gang labor, weak planning, scheduling and monitoring of maintenance operations, inherent deficiencies in structural thickness, lack of attention of drainage and poor enforcement of legal axle load limits which have hastened the process of decay of the NH network. Hence there is a need to deploy proper management for maintenance of National Highways. On an average, the kilometer range per Commercial Vehicle per day in India is 240280, as against 680-700 in the developed countries. Opportunities: Delhi-Mumbai Industrial Corridor is a mega infra-structure project of USD 90 billion with the financial & technical aids from Japan, covering an overall length of 1483 KMs between the political capital and the business capital of India, i.e. Delhi and Mumbai. A MOU was signed in December 2006 between Vice Minister, Ministry of Economy, Trade and Industry (METI) of Government of Japan and Secretary, Department of Industrial Policy & Promotion (DIPP). A Final Project Concept was presented to both the Prime Ministers during Premier Abes visit to India in August 2007.

Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management


Finally Government of India has announced establishing of the Multi-modal High Axle Load Dedicated Freight Corridor (DFC) between Delhi and Mumbai, covering an overall length of 1483 km and passing through the six States - U.P, NCR of Delhi, Haryana, Rajasthan, Gujarat and Maharashtra, with end terminals at Dadri in the National Capital Region of Delhi and Jawaharlal Nehru Port near Mumbai. Distribution of length of the corridor indicates that Rajasthan (39%) and Gujarat (38%) together constitute 77% of the total length of the alignment of freight corridor, followed by Haryana and Maharashtra 10% each and Uttar Pradesh and National Capital Region of Delhi 1.5 % of total length each. This Dedicated Freight Corridor envisages a high-speed connectivity for High Axle Load Wagons (25 Tonne) of Double Stacked Container Trains supported by high power locomotives. The Delhi - Mumbai leg of the Golden Quadrilateral National Highway also runs almost parallel to the Freight Corridor. This corridor will be equipped with an array of infrastructure facilities such as power facilities, rail connectivity to ports en route etc. Approximately 180 million people, 14 percent of the population, will be affected by the corridors development. This project incorporates Nine Mega Industrial zones of about 200-250 sq. km.; high speed freight line, three ports, and six airports; a six-lane intersection-free expressway connecting the countrys political and financial capitals and a 4000 MW power plant. Several industrial estates and clusters, industrial hubs, with top-of-the-line infrastructure would be developed along this corridor to attract more foreign investment. Funds for the projects would come from the Indian government, Japanese loans, and investment by Japanese firms and through Japan depository receipts issued by the Indian companies. This high-speed connectivity between Delhi and Mumbai offers immense opportunities for development of an Industrial corridor along the alignment of the connecting infrastructure.

Ports:
Ports provide an interface between the ocean transport and land-based transport. Indias port infrastructure constitutes of 12 major ports (Kandla, Mumbai, Jawaharlal Nehru, Mormugoa, New Mangalore, Cochin, Tuticorin, Chennai, Ennore, Vishakhapatnam (Vizag), Paradip and Kolkata including Haldia and around 187 non-major ports. Of the non-major ports, only around 48 are operational; rest is only fishing harbors. Development needs: Indias port infrastructure constitutes 11 major ports, 1 corporate port &187 non-major ports. Of the non-major ports, only around 48 are operational; rest are only fishing harbors. Around 7 of the 12 major Indian ports are operating at more than 100 per cent capacity, as against an optimum range of 70-80 per cent utilization. Further, available data show a drastic decline in augmented capacities at major ports during the last four years. While there was a 14.8 per cent increase to 456.2 Million MT in major port capacity during 2005-06, the year 2006-07 saw capacity additions decline to 10.6 per cent.
8 Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management

During 2007-08, new capacity additions were limited to 5.4 per cent and they are projected to further decline to 4.4 per cent in 2008-09.

Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management


Challenges: Lack of proper facilities, deeper drafts, good connectivity and necessary equipment / technology has contributed to high logistics costs. At present, a lot of time is wasted because of pre-berthing delays. The average turnaround time of vessels at major Indian ports ranges from 1.77 days to 4.82 days. Dwell time for EXIM containers at Indian ports is between 1-3 days compared to less than a day at Singapore. Larger vessels, having the potential to cut substantial cost, are unable to call at Indian ports due to limited draft. The draft available at international ports ranges from 12 m to 23 m whereas, in India except for a handful of ports like Kandla, Mundra, Ennore, Gangavaram & Krishnapatnam, other ports have an average draft ranging from 8m to 12m This issue will be partly addressed with the commencement of operations at the much awaited International Container Transshipment Terminal at Vallarpadam, Cochin Port. Port development is further bogged down by the need for getting multiple clearances. Multiple agencies are involved in granting approvals to port projects. These involve project appraisal by the Planning Commission, Law Ministry, and Ministry of Finance. This preliminary process of consultation among inter-ministerial groups, prior to Cabinet approval is inherently time consuming. To add to the concern, the National Maritime Development Programme (NMDP) is progressing at a slow pace with many project delays and cost escalations. So far, only 41 of the total 253 port projects and 5 of the 111 shipping projects have been completed. Other issues facing Indian ports relate to port security, and land acquisition particularly for non-major ports. Also, port projects typically suffer from delay in environmental clearances, which on an average take approximately a year and a half for each project. Going forward, these issues will need to be addressed on a proactive basis. Further, due to global meltdown reduction in trade has resulted in decline in cargo traffic. As a consequence, recently awarded port projects may find it difficult to achieve financial closure. While publicly funded port projects will stay relatively unaffected, private sector port projects would face difficulty in raising funds.

Opportunities: On the positive side, with the Government encouraging private participation in port development, non-major ports have begun contributing significantly to the economy. The relative share of non-major ports has grown from 26 per cent to 28 per cent in the four years since 2004-05. While the total capacity of non-major ports in 2008-09 is estimated at 228.3 Million MT, the corresponding total cargo handled was 220 Million MT. The new Governments ambitious agenda to award 6 concessions for ports and initiate for 20 others through PPP totaling to more than Rs. 3300 crore, within a span of 3 months, is being regarded as a welcome move. Players with ports as their core business can now invest in strengthening their back-end and soft infrastructure such as connectivity linkages and alliances as well as initiatives for productivity improvements, service augmentation and customer development. Foreign and private equity investments in Indian ports in recent times reflect a strong faith in Indias port sector and suggest the inflow of more such funds in the forthcoming period.
10 Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management

PSA also has a stake in ABG Kandla Container Terminal, which is the concessionaire for Kandla Port. Dragados & Gammon collaborating to develop the Mumbai Offshore Container Terminal is yet another case of foreign investment. The concept of port-based SEZs is fast catching up amongst Indian investors ever since the successful launch of Mundra Port SEZ. It establishes that credible port infrastructure is no more value adding, but imperative for development of globally competitive hubs of economic activity and thereby promoting international trade.

11

Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management

Rails:
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. The Railways in India provide the principal mode of transportation for freight and passengers. The growth of Indian Railways in the 155 years of its existence is phenomenal. It has played a crucial role in the economic, industrial and social development of the country. The Railways record for about 2.30% of the GDP and employs approx. 1.5 million people directly. Indian Railways run over 63,273 km, of which 28.6% is electrified with a fleet of 8,330 locomotive units, 53,555 coaches and 2,04,034 wagons as on March, 2008. The freight segment accounts for about 70% of the revenue. The freight capacity has increased from 521 mn tons in 2003 to 779 mn tons in 2009. In India, the most significant way of transportation is Road (~62%). This supremacy arises on account of poor infrastructure growth in other ways of transport such as air (< 1%), coastal, pipeline etc. India is having world largest rail network, yet Indias contribution of cargo transported by rail has decelerate from 85 percent in 1950 to ~ 30 percent in 2010. This is on account of miserable quality of services as well as huge investment in road highway projects over the past six decades. There are a total of 17 zones divided in accordance with various administration jurisdictions.
12 Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management


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. 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-SuratVadodaraAhmedabad-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:

13

Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management

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 domestic traffic on Indian Railways Improve quality of service to customers containerized

14

Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management


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 Rail Transport (Freight) Market-Value Chain

for Rs 10 crores

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). 15 Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management


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.

Development needs The existing railway network is crippled by capacity constraints and is inadequate to meet the potential demand of cargo transportation. The ambitious project of railway freight corridor should address the capacity constraint. The work for the dedicated freight corridor (DFC) ( which has been renamed as Diamond Freight Corridor in the recent Rail Budget) , envisages construction of dedicated freight lines along the eastern and western sides of India covering 2,739 km . Once commissioned, the DFC along with the feeder routes will ensure the availability of sufficient capacity in the face of rising demand. It is expected to increase average speeds to over 100 kmph, reduce transit time by half and also reduce the cost of operations. The project is expected to reach completion by 2016-17. Challenges of Rail Transport: In comparison with countries like USA, Russia and China, the cost of transport per tonne per kilometer in India is very high almost three times that of China. The railways have the potential to bring down the freight cost to greater extent with favorable commercial characteristics, dense and long-distance freight lines and strong flows of bulk products. The slow pace of progress in network expansion and modernization of existing facilities in the rail segment coupled with poor customer service has resulted diversion of freight traffic even bulk items such as steel and cement to the road sector. The market share of Indian Railways in total freight traffic has been falling consistently. Some of the reasons for that are highlighted below. As per the white paper published by the Rail Ministry , its average lead of freight traffic, its asset utilization figures like NTKM (Net Tonne Kilometer) per wagon day, its manpower productivity etc. are much lower compared to countries like China, Russia and USA. While there has been some effort on the part of government to augment the Rolling Stock, there also has been significant emphasis on better utilization of the existing ones. It is commonly known that IT can be leveraged to improve the utilization of existing stock. This has failed to happen in India. A pilot project is being carried out to improve the Central and Zonal computer systems the implementation of the project however is still to see light. Freight trains travel on the same tracks as passenger trains at an average speed of 25 kilometers per hour causing considerable delays in transportation. Of course there are many other challenges

16

Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management


like wagon utilization, multi-modal transport, etc. Also, the public private partnership (PPP) model has been working better but is restricted to a few biggies owing to high entry barrier. However, the government has been active in taking steps to expand connectivity and regain the market share of freight business. Just by improving wagon utilization, the Railways have achieved a significant reduction of freight cost. Dedicated Freight Corridor Corporation of India (DFCCIL) has been established as a Special Purpose Vehicle under the Ministry of Railways to set up Dedicated Freight Corridors. In the first phase, DFCCIL will be undertaking construction two such corridors Western and Eastern DFCs - across a total 2800 route km. This is likely to drive the establishment of industrial corridors as well as logistic parks along its route. With the proposed dedicated East-West corridor, goods trains are expected to ply at speeds of around 100 km/h.

The Railways are also carrying the additional burden of sixth pay commission recommendations. The Railways have to pay Rs.6,600 crore in arrears alone to the employees besides the increased salary burden of about Rs. 7,000 crore in the F.Y 09-10. About 60% of the arrears on account of pay commission has to be paid in 2009-10. This has coincided with the economic slowdown which has affected earning. In two years, the Railways have to pay Rs. 28,000 crore towards salary and arrears. The two factors have led to an increased operating ratio of 92.5%. Some of the other challenges facing the Railways are professionalizing its cadre, giving up tradition of hierarchies which its departments signify, bonding the various depts. into a cohesive unit flexible to cope up with the fast changing environment, cutting cost, yielding economies, reducing tariffs and benchmarking performance with comparable systems abroad. The logistic sector would be greatly benefitted and achieve higher efficiency if the Indian Railways is successful in implementing its plans for improved speed of freight trains, upgradation of rolling stock, improved signaling and communication, setting up additional container depots and rationalization of the freight rates to remove distortions. Restructuring and corporatization of the railways will go a long way in meeting the formidable challenges of the future Railways see scope for greater logistics play/Opportunities & Future Planning: Indian railways, slowly but surely, is in the process of integrating its various systems and service components to play a dominant role in the logistics and supply chain business in the country. The leading passenger and cargo mover is undoubtedly the best-suited Indian entity for the job as it has the necessary wherewithal at its disposal. The world's fifth largest railway network, the railways has 114,500 km of total track over a route of 65,000 km and 7,500 stations. It roughly carry over 30 million passengers and 2.8 million tonnes of freight on a daily basis. The world's second largest commercial or utility employer, with more than 1.36 million employees, the organization can boast of having a rolling stock of over 240,000 freight wagons, 60,000 coaches and 9,000 locomotives. According to a senior railway officer, the railways also have 4.2 lakh hectares of land, 2300 goods sheds, dedicated parcel services and freight services.
17 Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management


Besides, it has a proven IT infrastructure, including freight operating information system. If integrated, a world-class supply chain system can be created. For example, three schemes have been formulated in the recent past. One is for private freight terminals, second for auto logistics hubs and, third for cold chain hubs. For all the three the Railway Board has issued policy circulars. Private players have been bought in to fill in gap. Railways as an organization should keep the core activity, that of running the trains. Perhaps, nobody could do that well. At the same time, they should very quickly embrace lot of private players from areas where they are not competent. They should go for large number of PPPs. Others should not take the experiences of 16 private players, who have jumped on to the bandwagon to move containers by rail when the railways announced privatization of the service, as an example. There is the need for a change in the mind set for PPPs to deliver the goods. Normally in government parlance, anybody who gets associated with it is a private fellow. You call him a private contractor and treat him like one. But in PPP it should be different as he is partner. So there need to be a change in mindset of the railways management. Besides, they will have to understand that private trains should also run on their rails. The railways seem to be aware of the need for such a change. According to an officer from the railways, the Lucknow-based Indian Railway Institute for Transport Management, for example, has incorporated special courses for officers to prepare them for PPPs. Private rail transportation should have grown five times than it is at present. Giving the railways' take on the issue, a few reasons are: 1. Every private operator had promised that they would invest in sliding infrastructure within one year or so. They have not done that yet. They should have also gone very aggressive in marketing their services. It was expected that they would be very market savvy and succeed in bringing lot of traffic from road to rail. But that did not happen. If they have to poach into Indian railways' traffic for cargo it is not a game for anyone. If railways carry 900 million tonnes of traffic, container traffic is only about three million tonnes that cannot be given priority. Being part of the government, they have to see the total economy. They have to give priority to petrol, cement, and coal and not to containers. Naturally one cannot change the priorities over night for moving the boxes. Chocked rail lines have also contributed to the private players' worry. PPP is an evolving business. It will eventually evolve into a better business.

The rail container policy announced in January 2006 allows private companies to undertake container transportation by rail. As many as 16 licenses have been issued for operating container trains. In the recent budget announcement, it was indicated that the Railways were working out the details of a premium service for movement of containers with assured transit periods for time-sensitive cargo. Permission has also been provided to container train operators to access private sidings to help attract piecemeal traffic that are at present not being carried by railways. The railways have also chalked out plans for a freight related revamp in partnership with the private sector. The partnership involves redevelopment of dilapidated goods sheds and freight

18

Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management


terminals into stateof-the-art logistics parks. The railways would hand over the damaged property on a long term lease to a private player for development, operation and maintenance on a revenue sharing basis. Indian Railway Catering and Tourism Corporation (IRCTC) have already been mandated to develop catering services, budget hotels and food plazas at major stations through involvement of private entrepreneurs. IRCTC intends to take up around a hundred such budget hotel projects in the next five years with Public Private partnership. 20 such concessions have already been awarded. Some of the proposals that have been mentioned in the recent budget that offer opportunities to various private parties include: Multi-functional complexes having shopping facilities, food stalls, budget hotels to be constructed at 50 railway stations serving centres of pilgrimage, tourist and industry Private ownership of special purpose rolling stock for commodities and private operation of freight terminals will be encouraged Mega logistic hubs being planned alongside Eastern and Western Dedicated Freight Corridors

Conclusion:
The logistics industry will continue to be the focal point of strategy formulation, operational excellence and information technology to make maximum contribution in value creation for customers. Globalization, consolidation, technology advancements and outsourcing have only led to growth in the logistics services market and this industry will continue to evolve in the coming years. With logistic services getting more complex and value added services becoming an important component of logistics service proposition there is a need for efficient supply chain management and tracking software. Technology not only helps to deliver quality services to the customer but also helps companies to integrate and consolidate their supply chains on a real time basis. The challenge today faced by the industry is standardization and adoption of technology infrastructure. Apart from the various challenges highlighted, the biggest challenge is to form an integrated network in order to minimize the overall cost. However, with continued efforts towards investment in infrastructure, these challenges can help improve efficiencies. Building logistics infrastructure and integrating different modes of transport into a seamless network is critical. Businesses are bound to benefit from an enhanced logistics industry
19 Group 3 Date: 21.12.2012

Impact of infrastructure on logistics management


and this will, in turn, boost the economy.

References:
1. www.pwc.com/India 2. McKinsey & Company Building India 3. Deloitte - Logistics and infrastructure, Exploring opportunities 4. Transportation and Logistics 2030 5. KPMG Logistics in India 6. DEssence consulting Study of Logistics in India 7. http://logisticsmanagementandsupplychainmanagement.wordpress.com/2007/05/23/impa ct-of-transportation-infrastructure-on-logistics-in-india/

20

Group 3 Date: 21.12.2012