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.

Cargo Talk - - Front Page - KALPANA LOHUMI

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

Manag­ing Direc­tor Tiger Lo­gis­tics

Pres­i­dent AMTOI

Chair­man and Manag­ing Direc­tor CONCOR

CEO - ISC, Mid­dle East, Africa & East Med, All­cargo Lo­gis­tics

Manag­ing Direc­tor ATC Global Lo­gis­tics

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