India‘s Infrastructure - Trends, Projections, … Heesen Consulting GmbH LOGISTICS FORUM »MORE THAN CURRY« India‘s Infrastructure - Trends, Projections, Requirements

Werner Heesen Consulting GmbH LOGISTICS FORUM »MORE THAN CURRY«

India‘s Infrastructure - Trends, Projections, Requirements

Werner Heesen Consulting GmbH


Index – Key Areas

A Snapshot Projections by 2020 Mega trends in logistics Improving Multimodal Transport Systems Benchmarks Conclusions

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Strengths Big potential market Sustainable economic growth Western judicial system (case law) English – Business language Large number of graduated job seekers

Weaknesses Very low per capita income Lack of adequate infrastructure Bureaucracy – red tape Prevailing underground economy Low educational level Lack of skilled labour

Opportunities Growing middle-class with increasing demand Industry needs modernisation Private sector investments Low cost labour India becomes global player

Threats Judicial system slow Strong Government interference on economy High real estate costs – land acquisition Powerful unions High attrition rates

A Snapshot by the end 2012/2013 Good News – Bad News

Source: GTAI 10/2012


Rupee crashes! •  makes Exports more competitive

High Manufacturing costs in India! •  makes import of capital goods attractive

Domestic demand is slackening! •  domestic manufacturers turn to exports

Red Tape increases in India! • 

A consumption economy thrives on imports & exports

I see Risk… You see Opportunity

Bad news … may be good for logistics Risk or Opportunity?

Werner Heesen Consulting GmbH LOGISTICS FORUM »MORE THAN CURRY« OGISTICS FORUM »MORE THAN CURRY«

Open Retail & Aviation to FDI

Clarify Unfriendly Tax Provisions

Reduce Subsidies on Diesel, Petrol, LPG

Clarify Environmental & Land Acquisition

Policy

Increase FDI in Insurance &

Pensions

Issue new Bank licenses

Reduce Subsidies on Fertilizer and

Kerosene

Kick-start pending infrastructure projects

&

ReeeeeeeeeeeeeeeeeeeeeeeeeeeedDDDDDDDDDDDDDDDDi

I

A Snapshot by the end 2012/2013 Need for Policy Announcements to Lift the Mood

Source: Waco-System 22 OCT 2012


Projection by 2020 India’s Rapid Growth Requires a Strong Logistics Industry

GDP could increase from

1,7 to 30 trillion USD,

with production of

physical goods

increasing by factor 8-10

times

Energy consumption expected to

double. India needs 20

billions tons of coal by 2030 of which 75%

need to be transported – 30% trough

ports

Crude steel production expected to increase by

factor 4 between 2007

and 2030.

Demand for cement to double by

2030

Agricultural output to

increase from current 207

million tonnes to 295 million

tonnes by 2020


Projection by 2020 India’s Rapid Growth Requires a Strong Logistics Industry

Container traffic

expected to increase from

existing 8 million to 15 Millions TEUS

in the next 3-5 years

Overall EXIM cargo of

Indian ports to increase to around 1,500 million tons by

2015

Finished consumer goods –

Indian made and imported – transported

to middle-class consumers is

likely to increase by 4

times

Modern warehousing

space is expected to increase to around 100 million sq.ft.

by 2015


Mega Trends in Logistics in India Three Key Areas Affecting Type and Nature of Logistics

1 Changing demographics Rapid urbanization Cost effective ways to serve the needs of changing urban/industrial centres

2 Evolving requirements of trade Sophistication, modernization, clustering of manufacturing activities

3 Evolving inter-modal mix of commodities Bulk commodities to be moved across India more rapidly, safely and efficiently


Mega Trends in Logistics in India Three Key Areas Affecting Type and Nature of Logistics

“It is estimated that India’s transportation and logistics bottlenecks hinder its GDP growth by approximately 2 per cent.”

(Business India – 22 July 2012)

“What is usually missed out is the realisation that we in India have one of the lowest transportation and warehouse costs in the world. The total logistics cost are driven by inventory and other losses due to inefficiency and poor business practices. In the US these costs account for 25 per cent of logistic costs, whereas in India they account for over 55 per cent of costs.”

Mahendra Agarwal, MD, Gati-KWE


Mega Trends in Logistics in India Changing Demographics – Rapid Urbanization

Increasing migration towards urban areas expected

60% of India’s urban population will be concentrated in 25-30 urban clusters

Urbanization and clustering will lead to specialized agglomerations and satellite cities to serve these clusters

Source: National Transport Development Policy Committee – Delhi, February 2012


Mega Trends in Logistics in India Changing Demographics – Rapid Urbanization

Key action points

Long term

  Cargo Routes for speedy access   Intra-city transportation   Sea container, air cargo and truck

offloading facilities > Inland Container Depots

Short term

•  Designated areas for warehousing •  Link to rail systems



Mega Trends in Logistics in India Evolving Requirements: Sophistication and Modernisation

Existing infrastructure will become obsolete due to the “exploding” trade volume

Introduction of international standards will push forward competitive service-oriented environment



Mega Trends in Logistics in India Evolving Requirements: Sophistication and Modernisation

Key action points (examples)

  Efficient warehouse management systems

  Go-down to replaced by larger modern warehouses

  Added value services – cold chain warehousing, packaging, track-and-trace- services



Mega Trends in Logistics in India Multi-Modal and Intermodal Transportation: Getting the Mix Right

Misuse of transportation mode for the wrong type of commodity.

Congestion mismatch amongst various modes

Inefficiencies cost and time



Mega Trends in Logistics in India Desired State of Logistics Infrastructure in India

Multimodal Freight Corridors Logistics Parks in Remote Areas Vessels Multimodal Logistics Parks Pipelines Roads Ports Economic Trade Zones



Enabling multimodal transport Benefits of Network with Planned Overlaps

Optimal utilization of logistics infrastructure: Reduction of fuel requirements by 15-20 %. Reduction of logistics expenditure between 0.5 and 2 % of GDP

Increase utilization of railways for cargo movements from 30% to 60%

Increase utilization of pipelines from 55% to 80% (intern benchmark)

Enhance combined share of long coastline and inland waterways from 8 to 15%


Enabling multimodal transport Coastal Shipping, Inland Water Transportation, Ports


Enabling multimodal transport Coastal Shipping, Inland Water Transportation, Ports

  Adequate supply of vessels

  Improve availability of port infrastructure at viable pricing

  Skilled manpower   Maintenance of

important waterways and navigational aids

  Reduce bunkering costs (20-30% above global average)

Key Issues

  Investment for domestic cargo corridors

  PPP for additional smaller berths

  Increased capacity of carriers handling bulk cargo. Government incentives for investors

  Increase average vessel sizes

Related Issues Policy Changes

  Allowing international capacity for domestic and EXIM cargo

  Fixed time single window approval policies

  Take the load off the road – RORO jetties

  Extend port network for EXIM traffic with simplified handling procedures


Enabling multimodal transport Pipelines


Enabling multimodal transport Pipelines

  Existing Pipelines highly underutilized

  No return of “empties but ideal for uni-directional traffic

  Extension of National Pipeline Grid along with the National Electricity Grid

Key Issues

  Scope to transport upstream and downstream products in the same pipeline system (e.g. crude oil, gasoline)


  “Common Carrier” classification in line with international practices

  Standard tariff system levied to all users

  Fiscal and tax incentives for potential investors

  Single Window Clearance System for setting up new pipeline systems


Enabling multimodal transport Rail


Enabling multimodal transport Rail

  Increase of track length

  Increase average speed for cargo trains

  Customization of wagons for specialized cargo

Key Issues

  Introduction of service level agreements

  Development of interconnected dedicated freight corridors

  Set-up Multimodal Parks

  Introduction of modern wagons

  Encourage leasing and supply of wagons


  Freight-market benchmarked tariff structures to reduce over-utilization of road traffic

  Commodity based pricing

  Enhance privatisation drive


Enabling multimodal transport Roads


Enabling multimodal transport Roads

  Paved road-density low, share of highways only 15% of which 0,5% have 2/4 lane traffic

  Inadequate structures reduce load per axle

  Road Safety - Accident rate one of the highest in the world

Key Issues

  Promotion of private fleet exchanges

  Improvement of off-road infrastructure (truck stops, rest rooms)


  Improvement of new composite fee regime for national permit

  Reliable Commercial Vehicle Driver Training Schools

  Usage of Route Vehicle Intra State Movement in city distribution

  Harmonization/standardization of road containers


Enabling multimodal transport Air


Enabling multimodal transport Air

  Domestic air cargo market underserved (1 cargo airline only)

  Ensuring availability of co-located warehouse and storage facilities

  Scope for improving the speed of evacuation of air cargo in line with international turnaround times

Key Issues

  Co-location of shippers, forwarders, agents, express operators, carriers and customs in integrated cargo villages

  Air Cargo Hubs with strong intermodal facilities in BOM/DEL/NAG/PNQ/BLR

  Integrated common user cargo warehouse facilities


  Grant permission to stakeholders to set up off airport private bonded facilities.

Note: Although air cargo represents only a small percentage of India’s trade volume it however includes vital commodities to cater for the social needs, for the manufacturing sector and overall consumption.


Introduction of Benchmarking Key Benchmarks to Monitor Processes


  Cost related

  Efficiency

  Safety and environment

Main Areas

  Lack of benchmark identification concerning transportation and logistic systems

  Lack of adherence to existing benchmark specifications

  Existing systems need to be upgraded

Related Issues Examples

  Turnaround time for ships at ports

  Service level commitments for railways

  Turn around commitments by customs and excise

  Waiting time control at collection points

Introduction of Benchmarking Key Benchmarks to Monitor Processes


Conclusions “A Wish List” – Recommendations to Improve the Status Quo

Connect industrial hubs and new urban centres with distribution hubs

Create policy changes for each mode of transport by increasing investment

Channel commodities movements to the appropriate mode of transport

Engineer the overlap of cargo networks, insuring intersections being close to production centres

Harmonize and streamline processes across government bodies

  Collect data comprehensively to support planning and investment decisions

Decongest airports and seaport by shifting clearance activities away to inland locations

Set benchmarks and standards. Drive for uniformity of warehouses, storage and transportation equipment

Set safety, health and environmental standards


Acknowledgements

Bernhard Steinrücke, Director General, Indo-German Chamber of Commerce, Mumbai

Carsten Hernig – Regional Director South Asia and Middle East, Lufthansa Cargo AG

Cyrus Guzder, Chairman, AFL Private Limited, Mumbai

CII, Confederation of Indian Industry CII Institute of Logistics


Thank you for your kind attention

Werner Heesen Consulting GmbH Gartenweg 8 55246 Mainz-Kostheim/Germany

Tel/Landline + 49 6134 729507 MD/Owner Margret Heesen Email: [email protected] www.heesen-consulting.com

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India‘s Infrastructure - Trends, Projections, … Heesen Consulting GmbH LOGISTICS FORUM »MORE THAN CURRY« India‘s Infrastructure - Trends, Projections, Requirements