Cargo Talk

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.

- 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

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 ?? Managing Director Tiger Logistics ??
Managing Director Tiger Logistics
 ?? President AMTOI ??
President AMTOI
 ?? Chairman and Managing Director CONCOR ??
Chairman and Managing Director CONCOR
 ?? CEO - ISC, Middle East, Africa & East Med, Allcargo Logistics ??
CEO - ISC, Middle East, Africa & East Med, Allcargo Logistics
 ?? Managing Director ATC Global Logistics ??
Managing Director ATC Global Logistics

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