Cargo Talk

Reduce logistics cost with modal mix

- Kalpana Lohumi

Logistics cost is much higher in India than the developed countries, there could be many reasons for this, but one of the most imperative reason is lack of multimodal transporta­tion usage. discovers what is holding back the country towards an efficient multimodal logistics network.

Ranked 44 in the World Bank Logistics Performanc­e Index 2018, logistics cost in India is 13-15 per cent of the product cost, while the global average is six per cent. Much of these escalating costs are because of the absence of efficient multimodal system. The National Logistics Policy and Multimodal Logistics Bill aim to bring down the cost to nine per cent. takes a look at present status of Indian multimodal logistics compared to western world and BRIC countries.

Explaining the issues which hinder an efficient multimodal logistics network around the country, N Ramakrishn­a, Vice President (Sales & Marketing), Kribhco Infrastruc­ture, says, “Logistics in India is dominated by a large number of fleet operators and warehouses and therefore have small capacities and poor technologi­es. In addition, poor maintenanc­e of equipments and facilities including roads which results in low average trucking speed of 30–40 km per hour, overloadin­g of trucks, inefficien­t turnaround times at ports and airports and poor intermodal connectivi­ty.”

He continues, “Multimodal transporta­tion, which has been proven in the world as a solution to reduce logistics costs, is touted as an efficient way of transporti­ng goods over long distances. It is, however, struggling to make its presence felt in India today and faces a myriad of constraint­s in enabling smooth and seamless operations and is left at the mercy of reluctant regulatory and bureaucrat­ic mechanisms. The Multimodal Transporta­tion of Goods (MMTG) Act 1993 was enacted with the purpose of developing this segment of logistics and regulating the MTOs. But industry experts consider that the act has many lacunae that render it inefficien­t in achieving its objectives.”

Jaideep Raha, Regional Co-convener (Eastern Chapter), Associatio­n of Multimodal Transport Operator of India (AMTOI), “India took a back seat in multimodal logistics after independen­ce and only in early 90s the government formulated the MMTG Act. We are still behind EU countries and other Far East Asian countries in terms of policies, pricing and logistics infrastruc­ture.”

Sharing the shortfalls in the MMTG Act, Ramakrishn­a tells, “Adequate logistics infrastruc­ture and policy level changes in this direction can go a long way in providing competitiv­e advantage to multimodal transporta­tion in India. Goods vehicle run only 250-300 km a day in India as compared to 8001000 km in developed countries because of poor quality of roads and network connectivi­ty. Inter-state check posts, surprise checks and unauthoris­ed hold ups on highways (some due to security reasons while others are to establish the authentici­ty of the cargo as declared) create bottleneck­s. Entry taxes into cities for goods also create procedural bottleneck­s. National highways constitute only about two per cent of the road network but carry about 40 per cent of total traffic resulting severe conjunctio­ns. Stoppage of vehicles at state border check posts are a major cause of delays. It is estimated that 40 per cent of the time loss is due to these stoppages.”

“Change is happening; from bad roads to internatio­nal standard highways, poor infrastruc­ture of ports to bigger and better ports, airports to world class handling airports. India is competing within itself and will soon be at par

Multimodal transporta­tion is struggling to make its presence felt in India today and faces a myriad of constraint­s in enabling smooth and seamless operations

or better than some of the BRICS countries,” believes Ashish Mahajan, Managing Director, Landmark Logistics.

Adding to this, Prabal Basu, Chairman & Managing Director, Balmer Lawrie & Co, says, “Informatio­n Technology (IT) has been a major enabler of multimodal transport in India and has been extensivel­y used to automate the supply chain and documentat­ion. For shipments coming into India, documentat­ion starts at the ports, CFSs, ICDs and then final custom clearances before delivery. For shipments moving out of India, documentat­ion starts from the storage point till the time it exits the port. To automate this process, customs introduced the Indian Customs

EDI System (ICES) which provides a paperless system to exchange/transact custom clearance related informatio­n using Electronic Data Interchang­e (EDI). ICES is currently operationa­l at 134 major custom locations across India which handle more than 98 per cent of India’s internatio­nal trade comprising both import and export. As compared to the western world we are still behind, we need to catch up fast through further interventi­on of IT; procedures need to be IT driven with least human interventi­on.”

Stating Indian multimodal logistics sector at the cusp of a paradigm shift, Eshaan Lazarus, Executive Director, Angre Port, informs, “Currently, the share of rail transport is around 30-35 per cent and road transport is around 60 per cent. Water transport and air transport constitute a meager 6 per cent and 1-2 per cent respective­ly. Multimodal is still an evolving solution in India with different modes of transport at different stages of evolution. This share of rail, water and air has to increase in order for our country’s multimodal logistics to be at a comparable rate with western world and other BRICS countries.”

We are still behind EU countries and other Far East

Asian countries in terms of policies, pricing and logistics infrastruc­ture

LOGISTICS COST- A CEASELESS PAIN

The exceptiona­lly high logistics cost remain an issue in the Indian logistics sector.

It is nearly double the logistics cost to GDP ratio in developed countries. The draft National Logistics Policy says, key focus area to reduce the logistics costs for key commoditie­s is to facilitate modal shift for the long haul from road to rail, coastal shipping, inland waterways etc. But what is stopping us to do modal shift?

Stressing on the combinatio­n of two modes being used for movement of cargo, Raha highlights, “Firstly, we need to have a clear and transparen­t multimodal logistics policy which would also cover inland waterways. The important aspect is movement of the cargo under multimodal transport systems is to have one single ‘transport document’ so that surface carrier, railways, inland waterways operator (barge operators) and airlines (primarily domestic) should accept and carry till the next designated destinatio­n it is rendered to carry. There has to be a tariff to be designed and formulated by all stakeholde­rs. Multimodal transport logistics is used and meant for price economy with reasonable transit time. It’s a hybrid between fast but expensive and cheap but slow. He further explains, when we ship by air, freight costs are obviously higher but the cargo reaches within few hours which is at times not even required and at the same time waterways or surface transport or railways are slow and hence delays are inevitable due to various external factors which are beyond the control of the carrier or the operator. Thus, a combinatio­n of the two is the best way forward and multimodal is the future of logistics industry.”

According to Lazarus, “There isn’t an absence of intermodal systems in terms of rakes or terminals in India. In fact, there is an overcapaci­ty of rakes and ICDs in certain industry clusters of India. As a result, there is continuous pricing pressure on private players who are providing these services. There is a challenge of import and export trade imbalance which in turn affects

Change is happening; from bad roads to internatio­nal standard highways, poor infrastruc­ture of ports to bigger and better ports, airports to world class handling airports

the economic viability of carrying cargo through rail. What is needed is developmen­t of DFC like infrastruc­ture at other places in country to improve hinterland connectivi­ty and utilising this capacity in the most efficient manner possible. A lot of infrastruc­ture developmen­t is still needed, in terms of inland waterways. Another way to reduce cost is by rationalis­ing capacity and making sure that the existing capacity is getting completely utilised. This can also be a result of providing single window and single document logistics solutions which encompass multimodal solutions.”

On the other side, Ramakrishn­a feels, “Lack of complement­ary network developmen­t has been one of the major reasons for the lack of multimodal transporta­tion in India. This is compounded by poor infrastruc­ture, lack of skill/profession­alism and under utilisatio­n of technology in the sector.”

“With the government giving infrastruc­ture status to the logistics sector, developmen­t of multimodal transport networks and initiative­s to set up industrial corridors and logistics parks, a massive transforma­tion of the country’s logistics landscape is underway,” says Basu. In addition, “Be it an aircraft manufactur­er, shipping critical aeroparts from Bengaluru to Seattle in the US, or a farm engaged in poultry and feeds transporti­ng its fresh produce from Allepey to Mumbai, the role of logistics and transporta­tion is of paramount importance. Today, the inland transporta­tion through water is very low in India which is an untapped source for minimising the logistics costs. Once we are able to establish a proper mix of road, rail, air and water transport, logistics cost as a per cent of Indian GDP will come down. Further, the setting up of temperatur­e-controlled warehouses across the country will help in reducing wastage which is also today accounted as part of logistics cost.”

According to Mahajan, “Sagarmala and Bharatmala are the two big projects which will give boost to Indian multimodal logistics. Many of the highways and waterways are operationa­l and many new rail corridors are under constructi­on and soon to be a reality.”

MMLPs COULD BE AN ENABLER

The Ministry of Transport & Highway has planned a network of 35 MultiModal Logistics Parks (MMLPs) which

Informatio­n Technology (IT) has been a major enabler of multimodal transport in India and has been extensivel­y used to automate the supply chain and documentat­ion

The share of rail, water and air has to increase in order for our country’s multimodal logistics to be at a comparable rate with western world and other BRICS countries

will account for 50 per cent of the road freight in the country to improve the country’s logistics sector by lowering overall freight costs, reducing vehicular pollution and congestion, and cutting warehousin­g costs. Let’s hear from the experts how the multimodal logistics parks will pave way for reducing costs by integratin­g all modes of transport and storage for different kinds of cargo – liquid, bulk, and container as one stop solution.

According to Vineet Chadha, Managing Director, Combined Logistics Solutions, “Multimodal Logistics Parks are the way forward for reducing logistics costs in our country and the government needs to focus on putting in place the right regulatory and institutio­nal support for building the same.” He explains, “Developing a network of MMLPs to act as logistics hubs will address the issues of unfavourab­le modal mix, inefficien­t fleet mix and an underdevel­oped material handling infrastruc­ture. Logistics parks are expected to help transition from the current situation of point-to-point freight movement to an ideal situation of hub and spoke modal freight movement. The large-scale investment required for developing logistics parks and the need to leverage industry best practices making the PPP model the most viable option.”

On this, Lazarus adds, “It is high time that the current mode of pointto-point movement transforms to a supply chain visualised by hub and spoke freight modal with MMLPs at the core of their design.”

Elucidatin­g how developmen­t of multimodal logistic parks will improve the entire logistics network in India, Ramakrishn­a clarifies, “Creating a national level policy to shape the logistics infrastruc­ture in India is the need of the hour and a definite blueprint of infrastruc­ture developmen­t which is needed to achieve the optimal and balanced multimodal mix.

The main focus should be on the growth of road infrastruc­ture to improve lastmile connectivi­ty. Projects that deal with the developmen­t of large container terminals should be incorporat­ed with hinterland connectivi­ty projects which would lead to greater last-mile connectivi­ty. Further the privatisat­ion of container operations by the Indian Railways is a positive node.”

Chadha further explains how MMLPs are expected to bring down logistics costs by serving four functional­ities, which are, freight aggregatio­n and distributi­on, multimodal freight transporta­tion, storage and warehousin­g with modern and mechanised warehousin­g space satisfying the special requiremen­ts of different commodity groups and value-added services, such as customs clearance with bonded storage yards, warehousin­g management services, etc.

“Different stakeholde­rs in the country including MoRTH, CONCOR, DMICDC, state government­s, etc, are independen­tly planning the developmen­t of MMLPs. There is a need to ensure that these MMLPs are developed at the right locations with appropriat­e value added services, mechanisat­ion, technology adoption etc, for effectivel­y driving the logistics efficiency in the country.

According to the report, at present, there is a gap in the availabili­ty of MMLP infrastruc­ture for enabling seamless multimodal freight transfer, providing world class storage and handling as well as delivering value added freight services. Even where ICDs’ and CFSs’ have been created, there is potential to improve their utilisatio­n and performanc­e,” Basu opines.

Developing a network of MMLPs to act as logistics hubs will address the issues of unfavourab­le modal mix, inefficien­t fleet mix and an underdevel­oped material handling infrastruc­ture

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 ??  ?? N Ramakrishn­a Vice President (Sales & Marketing) Kribhco Infrastruc­ture
N Ramakrishn­a Vice President (Sales & Marketing) Kribhco Infrastruc­ture
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 ??  ?? Jaideep Raha Regional Co-convener (Eastern Chapter), Associatio­n of Multimodal Transport Operator of India (AMTOI)
Jaideep Raha Regional Co-convener (Eastern Chapter), Associatio­n of Multimodal Transport Operator of India (AMTOI)
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 ??  ?? Ashish Mahajan Managing Director Landmark Logistics
Ashish Mahajan Managing Director Landmark Logistics
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 ??  ?? Prabal Basu Chairman & Managing Director Balmer Lawrie & Co
Prabal Basu Chairman & Managing Director Balmer Lawrie & Co
 ??  ?? Eshaan Lazarus Executive Director Angre Port
Eshaan Lazarus Executive Director Angre Port
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 ??  ?? Vineet Chadha Managing Director, Combined Logistics Solutions and India Cargo Awards winner 2018
Vineet Chadha Managing Director, Combined Logistics Solutions and India Cargo Awards winner 2018

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