For growth, think ‘in’ the container
Can multimodal logistics be the magic pill to change the way cargo is transported, serving as an enabler of business? Promoting containerisation is an essential step but there are challenges on the way.
Indian logistics industry has a long way to go, be it any mode of transport. However, with the regular transportation modes reaching their limits, there is a pertinent need to explore the potential that the multimodals offer in an era that demands an efficacious and highly competitive supply chain network.
The growth of multimodal logistics is driven by the need of customers to move cargo from hinterland to the door of a customer under a single contract. To keep the momentum of economic growth, the Indian government has recognised the value of multimodal logistics under the Sagarmala programme, to benefit containerised cargo movement in the country. Therefore, containerisation is considered to be one of the most vital factors of today’s multimodal transportation as the purpose is to gain flexibility on road, rail and sea. In India, it is growing at a fast pace, and will boost the growth of multimodal transportation. As part of the national perspective plan, prepared under the Sagarmala Programme of the Ministry of Shipping, seven Multimodal Logistic Parks (MMLPs) were proposed in Madhya Pradesh, Chhattisgarh, Rajasthan, Odisha, Telangana, Uttarakhand and West Bengal. This will have advantages for the transportation of containerised cargo, say experts.
According to Vivek Kele, President, AMTOI, “The current size of India’s annual containerised EXIM cargo is approximately nine million TEUs, of which, a million are TEUs transshipments containers and Mty containers. Balance is equally divided between import and exports, of which, apex 50 per cent cargoes comes from various ICDs to the gateway ports. This entire cargo moves by either rail or road or a combination of both before commencing sea voyage or post sea voyage for import cargoes. Hence, the size of multimodal logistics for EXIM cargo in India is approximately four million TEUs. We have had 18 continuous months of drop in exports, however the port’s volumes are marginally up by four per cent, which means that there is an increase in imports. So we can say that the current growth rate is apex two per cent, which is likely to increase in the coming years.”
Commenting on the growth of the multimodal transportation in the country, Anil K Gupta, Chairman and Managing Director, CONCOR, says, “Containerisation is witnessing a healthy growth in our country with 11.97 million TEUs getting handled at all ports in 2015-16, a growth of 3.83 per cent over 11.53 million TEUs in 201415. Looking at the historical data, logistics, as an industry, has grown at a CAGR of 9.7 per cent between 2010 and 2015. Currently, its size is estimated at approximately US$130 billion (contributing to roughly seven per cent of the GDP). With growth in infrastructure investments, trade and domestic demand being the key drivers, it is envisaged that the industry will grow at a CAGR of 8.6 per cent between 2015 and 2020. This appears as a modest projection because the key drivers do not consider the contribution
Containerisation is considered to be one of the most vital factors of multimodal transportation as the purpose is to gain flexibility on road, rail and sea
India can make in the development of economic capabilities of other underdeveloped frontier nations,” says Shantha Martin, CEO-ISC, Middle East, Africa and East Med, Allcargo Logistics.
“The growth in multimodal logistics is led by ocean exports. The three key growth initiatives of government of India, viz the ‘Sagarmala Port Led Development’, ‘Make in India’ and ‘Target of breaking into top 50 in the ranking of World Bank for ease of doing business’, have created optimism in the manufacturing sector and in the logistics sector. It is anticipated that the implementation will be swift and efficient,” informs Shantanu Bhadkamkar, Managing Director, ATC Global Logistics.
“Multimodal transportation is the future of Indian logistics industry as conventional transportation modes have already reached their limits, creating clear room for exploring the potential that multimodals offer highly competitive and effectual supply chain network. Multimodal not only fastens the transit of goods but also reduces the disadvantages of aloofness from markets,” stressed Ajay Khosla, DGM-Delhi and Uttranchal, Jaipur Golden Transport. Containerisation essential
Focusing on containerisation, Harpreet Singh Malhotra, Managing Director, Tiger Logistics, shares, “It is estimated that while outsourced logistics accounts for 54 per cent of total logistics spending in India, organised players have a share of only 10 per cent. In road transportation, which accounts for the biggest portion (36 per cent) of logistics spending, 74 per cent of operators are small time players owning a single vehicle. In outsourced warehousing, 92 per cent of players are from the unorganised sector.” “By means of containerisation, multimodal operators extend the privilege of efficient time and cost saving logistics. The best part is that carrier does not have to possess all the means of transport and the carriage can be performed by sub-carriers and yet the entire carriage can be executed by a single multimodal transport operator (MTO),” notes, Rajiv Sachdeva, Managing Director, Rahat Continental.
According to R Jayakumar, Chairman, Jayem Logistics, “Many manufacturing and logistics companies have benefited from containerisation and their dependency has gone up as it provides seamless and cost effective alternative.”
“Currently in India, we have achieved approx 50 per cent containerisation and need to reach the level of 70-80 per cent, which the developed countries have already achieved,” informs Kele.
“The advent of containerisation along with initiatives from the government such as passing of Multimodal Transport Act in the Parliament in 1993, to the recent ‘to be implemented’ Goods and Services Tax, have helped the country to progress towards an integrated transport system,” feels Naresh Gehaney, Vice President–Air Freight, Haiko Logistics. “In order to achieve US$200 billion by the year 2020, the country will need to make effective use of its strengths in IT and look out for collaborations with experts in this field.”
However, Malhotra believes, “Containerisation would have helped in inland waterways but then India has not developed its inland waterways sufficiently enough. As containerisation has a key role to play, so its penetration should be increased. As government alone cannot meet these objectives, it needs to encourage private participation through PPP mode.”
Realising the potential of railways, Gupta says, “Containerisation is indeed the most important factor of multimodal transportation as it reduces the chances of theft, damage and pilferage. The containerised rail movement is environment friendly transport besides being fuel efficient.” Gehaney shares, “Given India’s size, rail transport is often a cheaper option for all cargo over medium and long distances, especially if the cost of inter-modal transfers can be reduced.” Bottlenecks
India is among the fastest growing economies in the world, but its logistics infrastructure remains woefully inadequate to meet demands generated by industrial growth. Road and port infrastructure in this country is not up to international standards. There are other problems too.
“The Customs Act is 50 years old and has not simplified anything. Regulations and paperwork make it difficult for multimodalism to take off in India. While technology can help a lot, customs are unwilling to use such technology. Secondly, port gates are crowded because customs want to see every small paper before allowing the box to go in or out. Since multimodal logistics is a newer concept, there are lot of obstacles in the legal framework that the stakeholders face. Multimodal logistics faces constraints in enabling smooth and seamless operations and is left at the mercy of reluctant regulatory and bureaucratic mechanisms,” notes Malhotra.
“The imposition of service tax on ocean import freight has given a huge setback to Indian freight forwarders, and even Indian shipping lines. This is a clear case of double taxation. It will in addition lead to increase in transaction cost and compromise ease of doing business. Ultimately, it will result
The Customs Act is 50 years old and has not simplified anything. Regulations and paperwork make it difficult for multimodalism to take off
into conversion of all the contracts for imports into India from exworks/FOB/FCA to CIF/DDU. This means the Indian importer will lose the control on deciding the import freight by exercising his choice of routing and service provider. The control will shift to the shipper in the exporting country. The business currently being generated by Indian forwarders will consequentially move to the foreign freight forwarders. It is pertinent to note that the ocean freight is not subjected to such tax or similar tax anywhere in the world. For the shipping lines, MTOs and freight forwarders in India, it will be a big setback who had worked hard post-liberalisation to gain the control of the transportation of