Logistics Report, Cygnus Business Consulting & Research (2007)

National Council of Applied Economic Research

Analysis of India’s Logistics Costs

Submitted to Logistics Division, Ministry of Commerce New Delhi

Report September 20190901 2019

AnalysisAnalysis ofofof India’s India’sIndia’s Logistics LogisticsLogistics Costs CostsCosts

SubmittedSubmitted toto to LogisticsLogisticLogisticss Division,Division,Division, MinistryMinistry Ministry ofof of CommerceCommerce Commerce NewNew Delhi DelhiDelhi

September,SeptemberSeptember,, 20192019 2019

NationalNNationalational Council CCouncilofouncilof of Applied AAppliedpplied Economic EEconomicconomic ResearchRRsearchsearch NCAERNCAER India IndiaIndia CentreCentre,Centre, ,11 11 Indraprastha Indraprastha Estate, Estate,Estate, New NewNew Delhi DelhiDelhi 110 110 110002, 002, 002, IndiaIndia Tel:Tel: +91 ++91 91-11-2345--1111--2337986123379861 2698,--63,63, 6120 Fax: Fax: 2657,+91 +91--11 11Fax:--2337016423370164 + 91-11-2337 [email protected] [email protected] 0164 [email protected] www.ncaer.org

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Published by Prof. Anil K. Sharma Secretary and Operations Director, NCAER The National Council of AppliedApplied Economic Research NCAERParisila Bhawan, India Centre, 11, Indraprastha 11 Indraprastha Estate Estate New Delhi–110Delhi–110 002,002 India Tel: +91-11-2345-2698,+91-11-2345 2698, 6120 2657 Fax: +91-11-2337-0164+91-11-2337-0164 [email protected] www.ncaer.org

Publications Coordinator Jagbir Singh Punia

DiscDisclaimer:laimer: The findings, interpretations, interpretations, and andconclusions conclusions expressed expressed are those are of those the authorsof the and authors do not and necessarily do not reflectnecessarily reflect theviewsthe views of of the the Governing Governing Body Body or or Management Management ofof NCAERNCAER..

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Study Team

Research Team Devendra B Gupta Sanjib Pohit Devender Pratap Avisha Alawadhi Lavanya Sayal Sameer Malik

Technical Support Praveen Sachdeva Sadhna Singh

Editor Anupma Mehta

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Foreword

Globalisation has opened up economic opportunities for developing countries in the form of the outflow of value-added services, access to low-cost raw materials and human resource skills, improved market access for exports, efficiency gains in their economies through technology transfer and spill-overs, and resource re-allocations. Consequently, several developing countries, including India, have increasingly begun to position themselves to exploit these opportunities through greater participation in regional and global markets. This also makes it imperative for India to build its capacity for establishing linkages with global and regional markets for optimising the benefits of engaging with other countries in a globalised world. This, in turn, depends on the creation of an efficient logistics system in the country. For this purpose, most of the developed and emerging economies estimate logistics costs on a regular basis, and use performance indicators to measure the efficiency levels of logistics activities. For India, it is essential to measure these logistics costs in order to assess where and how the country stands vis-à-vis its competing economies in this sphere, and to consequently enhance its competitiveness. Simultaneously, it is also important to identify the factors and measures that would facilitate a reduction in logistics costs.

Before making any policy intervention, it is important to estimate the overall logistics costs, including the various associated components/elements in order to understand and identify the problem areas and arrive at meaningful solutions. This NCAER report symbolises a major step in the direction of quantification of logistics costs. Such an exercise, in fact, needs to be conducted at regular intervals for estimating and monitoring the performance indicators and accordingly identifying the areas that need intervention. Hitherto, no serious attempt had been made to carry out research using a proper methodological framework for quantifying the logistics costs being incurred in India. Albeit, some estimates of the logistics costs incurred in the country are available in the public domain. However, these costs cannot be validated due to the non-availability of a framework for their estimation procedures. This also necessitates more comprehensive research in the area of estimation of logistics costs in India.

In this context, the Logistics Division, Ministry of Commerce, has commissioned NCAER to undertake interlinked studies for addressing the following issues related to the logistics ecosystem of India:

¥ Route Study: Time and cost analysis of cargo movement along major routes in the country; ¥ Estimation of overall logistics costs in India; and ¥ Organisation of a Policy Roundtable among stakeholders to identify and tackle the challenges being faced by this sector.

We are grateful to Mr N. Sivasailam, Special Secretary, (and his predecessor, Mr Vinay Kumar), Logistics Division, Department of Commerce, Ministry of Commerce and Industry, who reposed faith in NCAER for undertaking this challenging work. Thanks are also due to Mr Anant Swarup, Joint Secretary in the Logistics Division, who showed a consistently keen interest in the study.

I would like to thank all the stakeholders who provided the relevant information feeding into the estimation of the macroeconomic logistics, as well as the time and cost analysis of the different route studies. Our special thanks go out to all the speakers and participants for their valuable contributions during the brainstorming sessions and advisory committee meetings held at NCAER. These contributions have strengthened our understanding of the issues entailed in execution of this project, while enabling us to carry out a more meaningful analysis of the findings of the study.

In ending, I would like to thank members of the NCAER project team, including Professor Sanjib Pohit, Team Leader; Professor Devendra B Gupta, Senior Adviser; and Mr Devender Pratap, Fellow. Mr Sameer Malik and Ms Avisha Alawadhi, Research Associate, and Ms Lavanya Sayal, Research Intern, also worked tirelessly for completing this study.

New Delhi DrDr ShekharShekhar ShahShah September 11, 11, 2019 2019 DirectorDirector GeneralGeneral NCAER NCAER

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Abbreviations and Acronyms

Units used in the Report 1 crore = 10 millions 1 lakh = 100 thousands

1PL First-Party Logistics 2PL Second-Party Logistics 3Pl Third-Party Logistics 4Pl Fourth-Party Logistics A.R.E. Application for Removal of Excisable Goods BP Basic Price CBEC Central Board of Excise and Customs CCL Central Coalfields Limited CFS Container Freight Station CHA Customs House Agent CSO Central Statistical Organisation EXIM Export-Import FCL Full Container Load FMCG Fast Moving Consumer Goods FMCD Fast Moving Consumer Durables F_USE Final Use GDP Gross Domestic Product GST Goods and Services Tax GVA Gross Value Added GVO Gross Value of Output LCL Less than Container Load IGM Import General Manifest IO Input Output INT_USE Intermediate Use INR Indian Rupees NCAER National Council of Applied Economic Research NCR National Capital Region JNPT Jawaharlal Nehru Port Trust RTO Regional Transport Office SEZ Special Economic Zones SUT Supply and Use Tables TTM Trade and Transport Margins

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Contents

Study Team iii ForewordForeward v Abbreviations vvii Executive Summary iixx

1. Introduction 1 1.1. About the Present StuStudydy 1 1.2. Sample Characteristics 3 1.3. Plan of the Report 4

2. Analysis of Selected EXIM Routes 75 2.1. Route:Route: Che Chennainnai Port Port to Coimbatoreto Coimbatore 75 2.2. Route: Chennai to Katupalli Port 1512 2.3. Route: Durgapur to Kolkata Port 2182 2.4. Route: Hazira Port to Mumbai 2824 2.5. Route: Hyderabad to JNPT Port 3632 2.6. Route: Hyderabad to Visakhapatnam Port 4393 2.7. Route: Kanpur to DelDelhihi Airport 5461 2.8. Route: Kolkata to Petrapole 5953 2.9. Route: Kozhikode to Cochin 6759 2.10. Route: Mumbai region to JNPT Port, Mumbai 7465 2.11. Route: Nagpur to JNPT Port, Mumbai 8171 2.12. NashikRoute: Nashikto JNPT to Port, JNPT Mumbai Port, Mumbai 8789 2.13. Route: NCR (Noida) to Delhi Airport 9684 2.14. Route: NCR to Mundra Port, Gujarat 19002 2.15. Route: Porbandar to Mumbai 19711 2.16. Route: Pune to Mumbai Airport 110318 2.17. RRoute:oute: Pune to Mumbai Airport (Export(Export of Pharmaceutical Products)Products) 110925 2.18. RouteRoute::Rajkot Rajkot to to Pipavav Pipavav 132115 2.19. Route: Surat to Hazira 112139 2.20. Route: Surat to JNPT Port 112747 2.21. Route: Tirupur -to to Kochi Kochi 113455 2.22. Route: Tirupur to Tuticorin 114062 2.23. Route: Trichy to Chennai 114669 2.24. Route: Vadodra toto MundraMundra PortPort 176152 2.25. Route: Vijaywada to Kakinada (Export for Granite/Marble) 181594 2.26. Route: Vijaywada to Kakinada (Export of Non-BasmatiNon-Basmati Rice) 191165 2.27. Route: NCR to JNPT Port 198171

3. Analysis of Selected Domestic Routes 204 3. Analysis of Selected Domestic Routes 176 3.1. Route: Ahmedabad to Bengaluru 205 3.1. Route: Ahmedabad to Bengaluru 177 3.2. Route: Ahmedabad to Kolkata 214 3.2. Route: Ahmedabad to Kolkata 185 3.3. Route: Bengaluru to Kolkata 223 3.3. Route: Bengaluru to Kolkata 192

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3.4. Route: Bengaluru to Nagpur 199 3.5. Route: Hyderabad to Kolkata 206 3.6. Route: Jaipur to Bengaluru 214 3.7. Route: Jaipur to Kolkata 222 3.8. Route: Ludhiana to Bengaluru 230 3.9. Route: Ludhiana to Kolkata 238 3.10. Route: Ludhiana to Mumbai 246 3.11. Route: Mumbai to Bengaluru 254 3.12. Route: Mumbai to Chennai 261 3.13. Route: Mumbai to Hyderabad 269 3.14. Route: Mumbai to Kolkata 276 3.15. Route: NCR to Bengaluru 284 3.16. Route: NCR to Chennai 292 3.17. Route: NCR to Guwahati 300 3.18. Route: NCR to Hyderabad 308 3.19. Route: NCR to Mumbai 316 3.20. Route: NCR to Nagpur 324

4. Analysis of Selected Bulk Cargo Routes 332 4.1 Route: Burdwan to Guwahati, Bulk Cargo – Fertilisers 332 4.2 Route: Chanderiya to NCR, Bulk Cargo – Cement 337 4.3 Route: Ramgarh to Lucknow, Bulk Cargo – Coal 341 4.4 Route: Dhanbad to Lucknow, Bulk Cargo – Coal 344 4.5 Route: Nalgonda to Chennai, Bulk Cargo – Cement 348

5. Quantifying the Macro Logistics Costs of India 352 5.1 Introduction 352 5.2 Review of Literature: Estimating Logistics Cost 352 5.2.1 Approaches for Measuring Logistic Cost 356 5.2.2 Estimates of Logistics Costs: Indian Perceptive 358 5.3 Methodological Framework for estimating India’s Logistics Cost 358 5.4 Result 364

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Executive Summary

Globalisation has opened up economic opportunities for developing countries in the form of the outflow of value- added services, low-cost raw materials, human resource skills, improved market access for their exports, efficiency gains in their economies through technology transfer and spill-over, and resource re-allocations. Consequently, various developing countries, including India, have increasingly begun to position themselves for greater participation in regional and global markets. However, in order to optimise its competitiveness in a globalised world, India needs to build its capacity for establishing linkages and engaging with global and regional markets. This, in turn, depends on the creation of an efficient logistics system in the country. For this purpose, most of the developed and emerging economies estimate logistics costs on a regular basis, and use performance indicators to measure the efficiency levels of logistics activities. For India too, it is imperative to measure these logistics costs in order to analyse where and how it stands vis-à-vis the competing countries in this sphere.Simultaneously, it is equally important to identify the factors that could facilitate a reduction in logistics costs. In this context, the Logistics Division, Ministry of Commerce, has commissioned NCAER to undertake interlinked studies for addressing the following issues related to the logistics eco-System of India: � Conducting a Route Study for the time and cost analysis of cargo movement on major routes; � Estimating logistics costs in India; and � Organising Policy Roundtables among stakeholders to identify the challenges faced by this sector. This report fulfils the first two objectives of the study,as it presents the findings of detailed route studies conducted by the NCAER team, along with estimates of the macro logistics costs being incurred in India. The objective of the route studies is to assess both the time in hours and costs in rupees entailed in transporting cargoes for domestic/export-import (EXIM) purposes along major routes in India, with an emphasis on identifying the differences in cost and efficiency of carrying cargo across various modes of transport. The macro logistics part of the study, on the other hand, attempts to estimate India’s logistics costs as a percentage of Gross Value Added (GVA) to enable comparability with corresponding results for different countries.1 We have undertaken route studies for 27 EXIM routes, 20 domestic routes, and 5 routes for the movement of bulk cargoes like fertilisers, coal, and cement. The routes have been chosen to specifically ensure that: (a) important commodities and routes are not left out, and (b) the selected routes represent an all-India perspective. Given the limited published data in this sphere in India, the NCAER team resorted to interactions with stakeholders on a pan-India basis to collate information on the above issues. This was complemented with interactions with the stakeholders in the logistics sector. In all, about 1100 interviews were conducted with stakeholders, representing a mix of large, medium, and small players in the sector.

1 Following the change in the definition of the national accounting system in India, GVA is the measure corresponding to GDP at factor cost. 2 The transportation time in hours includes only the time taken for transit, including first and last mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the xi ix

Key Findings of the NCAER Studies: 1. Uneven regional development in India has led to the establishment of production facilities only in a few regions in India. This, in turn, has resulted in an imbalance of cargo loads across India. More often than not, after delivering their cargo, especially in the North-east, transporters have to bring back their trucks completely or partially empty. This leads to higher logistics costson some of the routes where one of the nodes of transportation lies in eastern/north-eastern India. 2. Unionisation is an important factor leading to an escalation in logistics costs in some states like Himachal Pradesh, Kerala, and West Bengal. This is one of the reasonswhy exporters located in Tirupur do not send their export consignments through the nearest port, namely, Kochi. 3. There is a serious problem of harassment faced by truck drivers from the RTOs and police officials on every route, with the NCR-Mumbai route recording comparatively the least harassment, and the Ludhiana-Bengaluru and NCR-Guwahati routes registering the worst problems. It may be noted that the NCR-Guwahati route also faces other serious challenges like leakage of consignments and the need to pay bribes to allow for smooth movement of the cargo along the route. 4. There is an urgent need to train officials at the check point. It has been observed that currently, these officials prefer to work in the traditional way and are reluctant to accept electronic documents. 5. The transportation cost, on an average, contributes to nearly 50 per cent of the total logistics costs across all domestic/EXIM routes. This holds true for both transportation by road as well as by rail. Thus, high fuel costs in India have a significant impact on the logistics costs. Further, frequent changes in fuel prices cause uncertainty with respect to the logistics costs from the perspective of the management. 6. The overall transportation speed, inclusive of stoppage time across the domestic routes (km/hour), is estimated to be about 21 km per hour by road, on average, and varies between 21 km per hour by rail in the best case scenario and 12 km per hour by rail in the normal scenario. However, what is worrying is the variation in the speed, with a standard deviation of about 4, among the routes, which makes logistics planning a difficult task. This is also true of our EXIM route studies though the variation in this case is lower, with a standard deviation of about 2.5. 7. By and large, we find that the logistics costs fall across all routes, including both domestic and EXIM routes when the operation is undertaken by integrated service providers. This makes it imperative to create an incentive framework for bringing all stand-alone operators under the ambit of integrated service providers in the logistics sector. 8. Among the EXIM routes under study, the lowest logistics cost of Rs 4.4 per tonne-km is observed on the route from Hyderabad to JNPT via road. The same route is also found to be the most efficient when the cargo is moved by rail, which entails an estimated cost of Rs 3.3 per tonne-km. 9. Among the domestic routes under study, the lowest cost of logistics, at Rs 4.35 per tonne-km, is observed on the Bengaluru to Nagpur route via road. The same route is also found to be the most efficient when the cargo is moved by rail, which entails an estimated cost of Rs 3.31 per tonne-km. 10. The use of multi-modal transportation with a mix of road/rail transport is characteristic of only a few routes. One of the main reasons why railways is not used extensively for transporting cargo is the absence of scheduled cargo trains or prevalence of infrastructural bottle necks along most rail routes. Albeit, using railways as a means of transport brings down the logistics costs but this advantage is neutralised by the unpredictability of delivery times of consignments transported by train. 11. India’s logistics costs amounted to 8.87 per cent of GVA at basic prices during the year 2017-18. This is equivalent to 8.10 per cent of GDP at market prices during the year 2017-18. 12. It must be noted that the logistics costs detailed in the findings above are, in no way, an indicator of the contribution of the logistics sector to the economy. The number estimated above reflects only the logistics costs incurred in the economy during the year 2017-18.

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1. Introduction

1.1 About the Present Studystudy The high logistics costs in India as compared to those in other countries with similar environments and states of development are a matter of concern for the attainment of high manufacturing growth and comprehensive development of the country. Several reasons are cited for the high logistics costs in India. These include an unfavourable policy regime, lack of a multimodal transport system, and the consequent heavy reliance on road transport, fragmented storage infrastructure, the presence of multiple stakeholders in the entire transport and storage value chain, poor quality of road and port infrastructure, and the absence of technology intervention in storage/transportation and distribution activities. These high logistics costs inevitably have an adverse effect on the country’s competiveness in the globalised world. Before making any policy intervention, therefore, it is imperative to estimate the overall logistics costs, including the various associated components/elements in order to understand and identify the problem areas and their corresponding solutions. Such an exercise should be conducted at regular intervals for computing and monitoring the performance indicators and accordingly identifying the areas that need intervention. In this context, the Logistics Division, Ministry of Commerce, has commissioned NCAER to undertake interlinked studies for addressing these issues (see Box 1).

Box 1: Scope of NCAER’s Work on Logistics

� Route Study: Cost analysis of cargo movement on major routes. This pertains to the time and cost analysis of cargo movement on the major selected routes to understand the differences in cost as well as efficiency across the following areas: a) Modes of transport (road, railways, air and waterways); b) Type of products (containerised/non-containerised, perishable/non-perishable); and c) Nature of logistics operations (first party /second party /third party logistics players).

� Estimation of logistics costs in India as a percentage of the GDP using primary and secondary data.

� Organisation of a policy roundtable among stakeholders. The purpose is to create a forum at NCAER to undertake brainstorming events in which the key stakeholders of logistics services in private and public sectors would interact with policy-makers for exchange of ideas and identifying challenges faced by this sector.

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The route pertains to a cost analysis of cargo movement on major routes. The objective is to understand the time in hours and costs in rupees of transporting cargo for domestic/export-import (EXIM) purposes on major routes in India with an emphasis on cost as well as efficiency differences across: � Modes of transport (road, railways, air and waterways); � Type of products/cargo moved (containerized versus non-containerized, perishable versus non- perishable); and � Nature of logistics operations, namely, First Party Logistics (1PL) players, Second Party Logistics (2PL) players, and Third Party Logistics (3PL) players. Given the limited published data in this area in India, we had to resort to a pan-India survey to collate information on the above issues. This survey was complemented with interactions with the stakeholders in this sector. The main objectives of the above interactions were to assess the following: � Cargo movement patterns across the country; � Proportion of the cost of each logistics component in the overall logistics cost; � Logistics cost per ton per km on each of the logistics routes under consideration. � Differential in logistics costs across routes, modes, products, types of cargo, and service operations.

To fulfil the above objectives, interactions were also conducted with the logistics service providers (Second Party Logistics/Third Party Logistics players, for instance), end-users managing logistics on their own, freight forwarders, and ICD/CFS, industry associations, among others. Two sets of interviews were conducted in these route studies. Firstly, interviews with the senior managements of the companies were conducted using a semi-structured questionnaire. It is believed that only senior managements of companies at either the corporate offices or regional offices would be privy to relevant information about the sector, such as the market landscape, operating environment, and other important aspects. Hence, holding an in-depth discussion with open-ended questions would be the key for engaging with such high- level officials. However, certain information such as logistics costs are standard data and can be only understood through a structured questionnaire. For this reason, we have also used a structured questionnaire to collate information on our topic of interest.

The routes have been decided in consultation with the Ministry officials. The routes that are under the purview of the research study are classified into three categories: EXIM cargo route, domestic cargo route, and bulk route.

While everybody understands the need for keeping logistics cost on the lower side, no serious effort has been made in India to quantify the same and track its changes over the years. In this context, an effort has been made to quantify the logistics costs in India with a view to providing policy recommendations. The approach has been to use both primary and secondary data for the estimation of the logistics cost.

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1.2 Sample Characteristics Table 1.1 shows the types of respondents that were interviewed and the information that was collected from them and subsequently collated. We have devised different questionnaires for different stakeholders so that relevant data points are captured.

Table 1.1: Nature of Respondents Stakeholder Category Major Focus Areas Logistics firms (Third Party Logistics, Second Logistics costs, transportation of cargo—pattern and Party Logistics, Others) other dynamics Standalone warehouse operators Storage costs, distribution costs End users managing own logistics (First Party Logistics costs, transportation of cargo—pattern and Logistics) other dynamics Freight forwarders/clearing agents Transportation of cargo—pattern and other dynamics Transporters Transportation of cargo—pattern and other dynamics End-users (manufacturing companies as well as Logistics costs, operating dynamics. standalone importers) Market landscape, operating dynamics, logistics costs Port authorities/experts at ports, among other things. Source: Compiled by NCAER’s Research Team.

Details of the number of stakeholders who were interviewed in each respondent category are given in Table 1.2. Table 1.2: Sample Size of Respondents Respondent Category No. of Interviews Logistics firms (Third Party Logistics, Second Party Logistics, Others) 490 End-users managing own logistics (First Party Logistics) 140 Freight forwarders 140 Transporters 105

End-users (manufacturing companies as well as standalone importers) 210

Port authorities/experts 35 Total 1120 Source: Compiled by NCAER’s Research Team.

Most of the key players in this sector were interviewed to solicit the required information. The names of the respondents are, however, not being made public to preserve the confidentiality of the respondents.

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1.3 Plan of the Report Following this introductory chapter, Chapter 2 of the report delineates our EXIM route studies. The chapters 3 and 4 discuss our findings regarding the various aspects of the domestic routes and bulk cargo route studies. All the information reported in these route studies has been primarily collated from pan- India primary surveys and stakeholder interactions. All the estimates of cost in terms of money or time that have been reported are the simple averages of the respondents’ perceptions of the same. This also applies to the perceptions of barriers/hindrances in the various routes. Chapter 5 describes the methodology as well as our estimates of India’s logistics costs as a percentage of GDP. Finally, Chapter 6 provides the concluding remarks.

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2. Analysis of Selected EXIM Routes

EXIM routes that are under the purview of the research study encompass both export and import cargoes. We have attempted to ensure an all-India coverage. All three modes of transport, namely, land, water, and air have been chosen to identify the bottlenecks. Below, we describe our selected routes and the commodities chosen for our study. The movement of empty containers and their costs have also been studied as one route (Sl. No. 27). EXIM Routes under study Sl. No. Route/Product Sl. No. Route/Product 1. Chennai Port → Coimbatore, 16. Rajkot → Pipavav, Cargo: Imports of machine tools Cargo: Exports of inorganic chemicals 2. Chennai → Katupalli Port, 17. Surat → Hazira, Cargo: Exports of organic chemicals Cargo: Exports of Agricultural products 3. Route: Durgapur → Kolkata, 18. Surat → JNPT Port, Cargo: Exports of steel cargos cargo: exports of textile items 4. Hazira → Mumbai, 19. Tirupur- Kochi, Cargo: Import of organic chemicals Cargo: Exports of textile items 5. Hyderabad → JNPT Port, 20. Tirupur → Tuticorin, Cargo: Exports of pharmaceutical Cargo: Exports of textile items products 6. Hyderabad → Visakhapatnam Port, 21. Trichy → Chennai Cargo: Exports of pharmaceutical Cargo: Exports of leather products products 7. Kanpur → Delhi Airport, 22. Vadodara → Mundra Port, Cargo: Exports of leather items Cargo: Exports of Basmati rice 8. Kolkata → Petrapole, 23. Vijaywada → Kakinada, Cargo: Exports of Fast Moving Cargo: Exports of granite/marble Consumer Goods (FMCGs) 9. Kozhikode → Cochin, 24. Vijaywada → Kakinada Port Cargo: Exports of carpets Cargo: Exports of Non-Basmati rice 10. Mumbai region → JNPT Port, 25. NCR → JNPT Port, Cargo: Exports of electrical machinery Category: Movement of empty containers 11. Nagpur → JNPT Port, Mumbai,

Cargo: Exports of horticulture products 12. Nasik → JNPT Port Mumbai,

Cargo: Exports of grapes 13. NCR (Noida) → Delhi Airport, Cargo: Export of gems and jewellery items 14. NCR → Mundra Port,

Cargo: Exports of automobiles 15. Porbandar → Mumbai,

Cargo: Import of cosmetics items

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The estimates of the costs derived in each of these studies are based on primary surveys, the details of which have been mentioned in Chapter 1. We have attempted to focus on the following in each of these route studies: 1. Route characteristics; 2. Impediments in the route; 3. Time and cost of transportation; 4. Costs of logistics in terms of time and money and by activities; and 5. Degree of the challenges faced in the transportation.

2.1 EXIM Route: Chennai Port → Coimbatore Type of Cargo: Imports of Machine Tools

Introduction

Coimbatore, an industrial hub, is located at a distance of about 520 km from Chennai port (see Figure 2.1- 1). In financial terms, it would make sense to use railways for transportation of cargo because of this distance. However, the most feasible mode for transporting imported machine tools along this route is road due to the non-availability of a scheduled goods train from Chennai to Irugur ICD in Coimbatore.

Figure 2.1-1: Route Map

Impediments on the Route

� Although the highway is a six-lane road in good condition, the following locations/stretches of the road are prone to congestion and act as traffic bottlenecks, leading to an increase in both the travel time as well as transportation costs:

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a. The 15 km stretch from Ponammali to Sriperumbudur, which has heavy traffic as it is part of the greater Chennai region; and b. A 4-5 km stretch of the highway passing through Sriperumbudur town, as local vehicles also use the same road. � There is no direct railway connectivity from Chennai port to Irugur ICD at Coimbatore. The availability of this facility would have allowed movement of a significant portion of the cargo by railways.

Route Characteristics Approximately 65 per cent of the total cargo is handled by integrated service providers (3PL/4PL firms) along this route. The rest of the cargo is handled by stand-alone operators. Out of the total imported machine tools cargo transported on this route, about 67 per cent constitute containerised cargo (Figure 2.1-2). After customs clearance, which is undertaken at Chennai, some cargo, especially less than container load (LCL) shipments are de-containerised and transported to Coimbatore without containers. Approximately 55 per cent of the containers used for cargo movement on this route are 20 feet in length, whereas the rest are 40 feet in length.

Figure 2.1-2: Shares of Containerised Cargo (per cent)

67% 33%

Containerised movement Non-Containerised movement

Time and Cost of Transportation The average time for cargo transportation, inclusive of stoppage time on roads along this route, is estimated to be 28 hours (Table 2.1-1).2 The table shows efficiency of this route terms of the travel time as compared to the national average. The average cost of transportation per tonne-km by road is observed to be Rs 2.72 for a truck of 16 tonnes.3 Note that the cost turns out to be lower than the national average.

Table 2.1-1: Time and Cost Estimates of Transportation, Mode Road Average Total Time (hours) - 28 Cost in INR per tonne km Time (hour) per km This route National Average This route National Average 2.72 2.79 0.01 0.06

Source: Authors’ estimate. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne km) by the same mode of travel across all routes under study.

2 The transportation time in hours includes only the time taken for transit, including first and last mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. The time taken for de-containerisation has also not been included in the transportation time.

3 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination along the route. 7 7

Cost of Logistics The average cost of logistics per tonne-km on this route is estimated to vary between Rs 4.9 and Rs 5.25 per tonne km depending on the nature of the operation (Table 2.1-2). The table shows that the cost is low by national standards.

Table 2.1-2: Logistics Costs in INR per tonne-km, Mode: Road This Route National Average Average Cost 4.9 5.22 Cost incurred if undertaken by 3PL firms 4.6 5.08 Cost incurred if undertaken directly by end users 5.25 5.45

Source: Authors’ estimate. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode across all routes under study.

Figure 2.1-3 indicates that transportation contributes to more than 50 per cent of the total logistics cost. The next two items entailing high costs are warehousing and material handling. This is also true for 3PL/4PL firms.

Figure 2.1-3: Shares of Components of the Logistics Costs

(per cent)

Transportation 54.0% 53.0% Warehousing 12.0% 11.8%

Material Handling 10.0% 10.3% Customs Clearance 5.0% 4.8% Documentation 4.0% 4.3%

Logistics System Management 2.0% 2.0% Administration cost 2.0% 2.0% Insurance cost 2.0% 3.0%

Software & Maintenance 1.3% 1.3% 2.0% Cost of Logistics Equipment 1.7% 1.0% Marketing cost 0.8% 0.6% IT - Hardware & Software Cost 1.0% 0.5% Speed Money 0.3% 0.5% Demurrage 0.5% 3.0% Others 3.0% 3PL Firms Overall Note: 3PL Logistics Service Provider—This refers to an integrated service provider, providing the complete range of logistics services to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers.

Figure 2.1-4 shows the cost in per tonne-km for the major components of logistics activities. As expected, transportation is a major component of the time cost.

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Figure 2.1-4: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne km

Similarly, we have estimated the time chart for major components of logistics activities (Figure 2.1-5). In this case, warehousing is the principal component.

Figure 2.1-5: Logistics Time in Hours by Activity Mode: Road

Logisti cs Time in hours

Note: 1. The average number of days for warehousing at both nodes =1.5 days. 2. Warehousing at the destination is considered only till de-containerisation takes place at the destination. 3. War ehousing time at the port is considered only after customs clearance. 9 9

The efficiency of this route in terms of the time required for all logistics activities vis-à-vis the national average is shown in Table 2.1-3. This route is clearly more efficient than the national one!

Table 2.1-3: Logistics Time in Hours per km, Mode: Road This Route National Average Average hour 0.14 0.41

Source: Authors’ estimates. Note: We have estimated our national average by taking the simple average of the time required per km by the same mode across all the routes under study.

Perception Analysis of Transportation The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on the route during cargo transportation is mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity while 10 implies a high intensity challenge/problem. Our findings are shown in Figure 2.1-6. Harassment by officials emerges as a serious issue. Resolving this issue does not entail a large investment but needs an efficient administrative policy.

Figure 2.1-6: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Ease of Customs & 9 8 Harassment by RTO officials Documentation 7 6 5 4 3 Harassment by gangs/ Pilferage Chennai Port Infrastructure 2 1 of Consignment 0

Limited infrastructure in terms Harassment by Police/ Other of parking terminals with Agencies refreshment facilities for driver

Need to pay Bribes/ Facilitation Limitations in terms of Rail money Infrastructure

10 10

Movement of Import Cargo at Chennai Port

The movement of import cargo at the Chennai port and the average time taken in hours for completion of various customs and other procedures at the port (inclusive of material handling) until the goods move out of port are shown in Figure 2.1-7. The figure indicates that post-berthing activities take up significant time at the Chennai port.

Figure 2.1-7: Movement of Cargo at the Chennai Port (Hours)

Note: a) IGM = Import General Manifest; b) CHA = Customs House Agent.

Figure A2.1-1: Shares of Components of the Transportation Costs, Mode: Road (per cent) Fuel 59%

Tolls 13%

Salary and Allowances 14%

Maintenance including Consumables 7%

Speed Money/ Bribes 2%

Others (Insurance, Vehicle parking 5% charges, RTO fines & penalties etc.)

11 11

2.2 EXIM Route: Chennai → Katupalli Port

Type of Cargo: Exports of Organic Chemicals

Introduction

Chennai is one of the prominent manufacturing hubs for organic chemicals in India. The chemical manufacturing hub in Chennai comprises large industries such as petrochemicals and chemicals. There are 336 micro and small enterprises in the district. Moreover, the chemicals giant Dow Chemicals has research and development facilities in Chennai. Chennai port faces various bottlenecks including traffic congestion, and infrastructural issues leading to delay in transportation of goods (Figure 2.2-1). It is for this reason that Katupalli port, which is located only about 38 km from Chennai, is increasingly being preferred as a site for exports. Given the short distance between the Chennai and Katupalli ports, roadways is the most preferred mode of transportation for exporters.

Figure 2.2-1: Route Map

Impediments on the Route

� There is traffic congestion on the Ennore highway road, as it passes through the Chennai region. Manali and Mandiabakkam junctions are the two major sources of congestion on this route. � There are restrictions on cargo truck movement within the Chennai city limits between 6 AM and 8 PM. Since most organic chemical manufacturing units are located outside the city limits, this restriction marginally affects their cargo movement.

12 12

Route Characteristics The 3PL/4PL firms caters to about 75 per cent of the cargo on this route. The rest is handled by stand- alone operators.

Movement of containerised freight is the hallmark of this route. Our discussions with stakeholders indicate that about 65 per cent of the containers used for cargo movement on this route are 40 feet in length, whereas the rest are 20 feet in length.

Time and Cost Estimates of Transportation

The average time for cargo transportation by road is estimated to be 4.5 hours (Table 2.2-1).4 It may be noted that the time taken in hours per km on this route is lower than the national average. The time required would have been shorter had there been no traffic congestion on the Ennore Highway road. The average cost of transportation per tonne-km by roadways on this route is observed to be Rs 3.4 for a truck of 16 tonnes. The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include expenses incurred on any other logistics activity at the origin or destination of the route.

Table 2.2-1: Time and Cost Estimates of Transportation, Mode: Road Average Total Time (hours) – 4.5 Cost in INR per tonne-km Time (hour) per km This route National Average This route National Average 3.4 2.79 0.01 0.06

Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne km) by the same mode across all routes under study.

Cost of Logistics

The average cost of logistics on this route is estimated to vary between Rs 6.3 and Rs 6.6 per tonne-km, depending on the nature of the operation (Table 2.2-2). It may be noted that the cost is higher than the national average. However, the movement of chemicals needs extra protection, which may be leading to the higher costs.

Table 2.2-2: Logistics Costs in INR per tonne-km, Mode: Road This Route National Average Average Cost 6.5 5.22 Cost incurred if undertaken by 3PL firms 6.3 5.08 Cost incurred if undertaken directly by end users 6.6 5.45

Source: Authors’ estimates. Note: We have estimated the national average by taking the simple cost (or cost in INR per tonne-km) by the same mode across all routes under study.

4 The transportation time in hours includes only the time taken for transit including first and last mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination along the route.

13 13

It may be observed that transportation, warehousing, and material handling constitute are the three principal components of the logistics costs (Figure 2.2-2).

Figure 2.2-2: Share of Components of the LogisticsCosts (per cent)

Transportation 52.0% 52.0% Warehousing 13.4% 12.5%

Material Handling 10.0% 9.5% Customs Clearance 7.0% 6.6% Documentation 4.8% 5.0% Logistics System 1.5% 1.5% Packaging Costs 2.1% 2.3%

Administration cost 1.9% 2.3% Insurance cost 2.1% 2.5% Software & Maintenance 1.6% 2.0%

Cost of Logistics 1.0% 1.5% Marketing cost 0.5% 1.0% IT - Hardware & Software 1.0% 1.0%

Speed Money 0.2% 0.2% Demurrage 0.9% 0.9% Others 0.0% 0.0%

Overall 3PL Firms

Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing a complete range of logistics services to end-users. End-users can outsource 100 per cent of their logistics activities to such service providers.

Figure 2.2-3 shows the cost in per tonne-km for the major components of logistics activities. As expected, transportation is a major component of the time-related costs.

Figure 2.2-3: Logistics Costs in INR per tonne-km by ActivityMode: Road

Logi stics Cost in INR per tonn e km

14 14

Similarly, we have estimated the time chart for major components of logistics activities (Figure 2.2-4). In this case, warehousing emerges as the principal component.

Figure 2.2-4: Logistics Time in Hours by Activity Mode: Road

Logistics Time in Hours

Note: Average number of days for warehousing on both sides=2

The efficiency of this route vis-à-vis the national average is shown in Table 2.2-3. The table shows that this route entails less time.

Table 2.2-3: Logistics Time in Hours per km, Mode: Road This Route National Average Average hour 0.14 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required by the same mode across all routes under study.

Perception Analysis of the Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on this route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 means that the challenge is of low intensity while a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 2.2-5. As regards the soft infrastructure, harassment by officials seems to be a major challenge.

15 15

Figure 2.2-5: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 9 Ease of Customs & 8 Harassment by RTO Documentation 7 officials 6 5 4 3 2 Harassment by Port Infrastructure 1 0 gangs/ pilferage of at Katupalli consignment

Limited Harassment by infrastructure in Police/ Other terms of parking Agencies terminals with Need to pay Bribes/ Facilitation money

Note: As the Chennai–Katupalli Port (for transport of organic chemicals) is a short distance route (35 kms), factors

such as limitations in rail infrastructure andnon-availability of intermodal exchange points have not been considered

for assessment.

Movement of Export Cargo at the Katupalli Port The movement of cargo at the Katupalli port and the average time taken in hours for various customs and other procedures at the Container Freight Station (CFS) and at the port (inclusive of material handling) are shown in Figure 2.2-6.

16 16

Figure 2.2-6: Movement of Cargo at the Katupalli Port (Hours)

Figure A2.2: Shares of Components of the Transportation Costs, Mode: Road

Fuel 66%

Salary and Allowances 16%

Maintenance including Consumables 6%

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle 8% parking charges, RTO fines &

17 17

2.3 EXIM Route: Durgapur → Kolkata Port

Type of Cargo: Exports of Steel Products

Introduction Durgapur is a steel manufacturing hub in the Paschim Bardhaman district in the state of West Bengal. Steel Authority of India Ltd. (SAIL) has two major steel plants in the region—the Durgapur Steel Plant, and the Alloy Steel Plant. The Durgapur Steel Plant is a major steel plant with a capacity of 2.088 million tonnes of hot metal, 1.8 million tonnes crude steel, and 1.586 million tonnes saleable steel. This cluster exports steel to countries like the Philippines, Nepal, Sri Lanka, Myanmar, Thailand, and Malaysia.

Considering the short distance (~175 kms.) to be traversed along this route, roadways is the most feasible mode for cargo transportation (Figure 2.3-1). Figure 2.3-1: Route Map

Impediments on the Route

� Although the condition of the road is good, there are incidences of traffic piling up at the following locations on this route—the 2-km stretch at Dankunibil, Chikrand, and Santragachi after a detour is taken from the highway towards Kolkata city—leading to an increase in both the travel time as well as transportation costs. � There are restrictions on the entry and movement of cargo trucks in Kolkata city from 8AM to 10PM. Since the vehicles need to pass through the Kolkata area to access the port, this may increase the waiting time if the travel is not planned accordingly.

18 18

Route Characteristics Out of the total export-bound steel transported on this route, nearly 65 per cent of the cargo is handled by integrated service providers, while the remaining is transported by stand-alone operators. The usage of containers (≈ 15 per cent) is extremely low as a majority of the steel products are ultimately shipped as bulk cargo. Approximately 60 per cent of the containers used for cargo movement are 40 feet in length, whereas the rest are 20 feet in length (Figure 2.3-2).

Figure 2.3-2: Shares of Containerised Cargo ( per cent) 15% 85% Containerised movement Non-Containerised movement

Time and Cost Estimates of Transportation The average time for cargo transportation on this road is estimated to be eight hours (Table 2.3-1).5 The average cost of transportation is found to be Rs 2.4 per tonne-km for a 16-tonnage truck. The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route. The cost incurred on this route is found to be lower than our estimated national average.

Table 2.3-1: Time and Cost Estimates of Transportation, Mode: Road Average Time (Hours) – 8 Cost in INR per tonne-km Time (hour) per km This route National Average This route National Average 2.4 2.79 0.05 0.06

Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne-km) by the same mode across all routes under study.

Cost of Logistics The average cost of logistics on this route is Rs 4.75 per tonne-km. It could increase to Rs 4.9 per tonne km if the end-users themselves take care of the logistics (Table 2.3-2). The table shows that the cost is low by national standards.

Table 2.3-2: Logistics Costs in INR per tonne-km, Mode: Road This Route National Average Average Cost 4.75 5.22 Cost incurred if undertaken by 3PL firms 4.7 5.08 Cost incurred if undertaken directly by end-users 4.9 5.45

5 The transportation time in hours includes only the time taken for transit including first and last mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination along the route. 19 19

Figure 2.3-3 indicates that transportation contributes to more than 50 per cent of the total logistics costs. The next two big items of costs are warehousing and material handling. This is also true for 3PL/4PL firms.

Figure 2.3-3: Share of Components of the Logistics Costs (per cent)

Transportation 51.7% 52.0% Warehousing 11.2% 11.5% Material Handling 10.9% 10.2% Customs Clearance 6.6% 6.4%

Documentation 4.5% 4.7% Logistics System 2.3% 2.5% Packaging Costs 1.0% 1.0%

Administration cost 2.0% 2.3% Insurance cost 2.5% 2.5% Software & Maintenance 1.2% 1.5% Cost of Logistics 2.0% 1.8% Marketing cost 0.5% 1.4% IT - Hardware & Software 0.8% 1.0% Speed Money 0.3% 0.3% Demurrage 0.4% 0.4% Others 2.0% 0.8%

Note: - 3PL Logistics Service Provider—This refers to an integrated service provider providing a complete range of logistics services to end-users. End-users can outsource 100 per cent of their logistics activities to such service providers.

20 20

Figure2.3-4: Logistics Costs in INR per tonne-km by ActivityMode: Road

Logist ics Cost in INR per tonne km

Figure 2.3-4 shows the cost in per tonne-km for the major components of logistics activities. As expected, transportation comprises a major component of the time cost.

Figure 2.3-5: Logistics Time in Hours by Activity Mode: Road

Logistics Time in Hours

Similarly we have estimated the time chart for major components of logistics activities (Figure 2.3-5). In this case, warehousing emerges as the principal component.

21 Note: Average number of days for warehousing=2

The efficiency of this route in terms of the time required for all logistics activities to take place vis-à-vis the national average is shown in Table 2.3-3. The table shows that as far as efficiency is concerned, this route scores the same as the national average.

Table 2.2-3: Logistics Time in Hours per km, Mode: Road This Route National Average Average hours 0.41 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km by the same mode across all routes under study.

Perception Analysis of the Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity whereas a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 2.3-6. The figure shows that the route involves a high degree of challenges in most of the indicators barring pilferage and road condition.

Figure 2.3-6: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 9 Ease of Customs & Harassment by RTO 8 Documentation 7 officials 6 5 4 3 Harassment by Kolkata Port 2 gangs/Pilferage of Infrastructure 1 consignment 0

Limited infrastructure in Harassment by terms of parking Police/ Other terminals with Agencies refreshment Limitations in terms Need to pay Bribes/ of Rail Facilitation money Infarstructure

22 22

Movement of Export Cargo at the Kolkata Port

The movement of cargo at the Kolkata port and the average time taken in hours for various customs and other procedures at CFS and at the port (inclusive of material handling) are shown in Figure 2.3-7.

Figure 2.3-7: Movement of Cargo at the Kolkata Port (Hours)

Figure A2.3-1: Shares of Components of the Transportation Costs (per cent)Mode: Road

Fuel 52%

Tolls 14%

Salary and Allowances 14%

Maintenance including Consumbales 9%

Speed Money/ Bribes 4% Others (Vehicle Insurance, Vehicle 7% Parking charges, RTO fines & penalties

23 23

2.4 EXIM Route: Hazira Port → Mumbai

Type of Cargo: Import of Organic Chemicals Introduction Roadways is the most prominent mode used for transporting imported organic chemicals from Hazira port to Mumbai considering the short distance of about 300 kms between the two points (Figure 2.4-2). The Ankleshwar Inland Container Depot (ICD), which is situated at a distance of around 70 kms from Hazira port, is usually used when the cargo is moved via railways. However, the first mile connectivity is by road. In this route, approximately 78 per cent of the cargo is handled by integrated service providers. Almost the entire quantum of imports of organic chemicals is transported via containers.6 Modes used for cargo transportation on Figure

Figure 2.4-1: Route Map 2.4-2: Modal Shares in Transportation (per cent)

90%

0% 10%

Roadway Railway

Impediments on the Route As seen in Figure 2.4-1, there are two/three distinct points of congestion on the roads. Our interactions reveal the following congestion points: (a) the stretch near Ghodbunder in Thane (Maharashtra) on the outskirts of Mumbai city, and (b) Bhilad and Achad at the border between Gujarat and Maharashtra. The following are the other issues that need to be addressed on this route: � There are entry restrictions on the movement of cargo vehicles in the Mumbai region after entry into Ghodbunder between 7AM and 10 PM. This increases the waiting time if the travel is not planned accordingly; � The signage at the toll plazas is incomplete/improper as compared to that on the other highways, leading to confusion and wastage of time.

6 Approximately 60 percent of the containers used for cargo movement are 40 feet in length whereas the rest are 20 feet in length. 24 24

� The regional transport officials (RTO) harass the drivers, especially around the Bhilad border, over technicalities, such as non-availability of the second driver in the vehicle, and the driver not wearing shoes, among other things, for the purpose of seeking bribes/facilitation money; � There are reports of recurrent harassment by police officials within Mumbai city, seeking speed money from truck drivers.

Time and Cost of Transportation

The average time for cargo transportation is estimated to be 28 hours for roadways and 86 hours for railways.7The time taken for transporting cargo via the railways is higher due to the intermodal exchange at the Ankleshwar ICD and the average storage time taken before movement of cargo from Ankleshwar ICD to the Mundra port. Table 2.4-1: Time and Cost Estimates of Transportation Average Total Time (Hours) Cost in INR per tonne-km Roadways Railways (first and last Roadways Railways (first and last mile mile transit by road) transit by road) 20 86 This National This Route National Time (hours) per km Route Average Average This National This route National 2.65 2.79 2.2 1.81 route Average Average 0.07 0.06 0.29 0.14

Source: Authors’ estimates. Note: We have estimated our national average by taking the simple average of the time required per km (cost in INR per tonne km) by same mode across all routes under study.

Table 2.4-1 also shows the cost of transportation per tonne-km for this route, and the national average across all routes.8 It may be noted that the while cost in INR on road is lower than the national average, it is above the national average in the case of railways.

Cost of Logistics The average cost of logistics per tonne-km for various modes on this route are shown in Table 2.4-2. It varies between Rs 4.8 and Rs 5.2 per tonne-km, depending on the modes and type of logistics player. It may be noted that the costs are lower than the national average in the case of roadways but higher than the national average in the case of railways.

7 The average time for transportation in hours includes the time required for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling on either the origin or the destination on the route. 8 The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination along the route. We have assumed the tonnage of the truck to be 16 tonnes, which is the norm on this route. 25 25

Table 2.4-2: Logistics Costs in INR per tonne-km Indicators Roadway Railway (first & last mile transit by road) This National This National Route Average Route Average Average cost 5 5.22 4.1 3.84 Cost incurred if undertaken by 3PL firms 4.8 5.08 4 3.75 Cost incurred if undertaken directly by end-users 5.2 5.45 4.15 3.94

Source: Authors’ estimates. Note: We have estimated the national average by taking the simple cost in INR per tonne-km by the same mode across all routes under study.

Figure 2.4-3 indicates that transportation contributes to more than 50 per cent of the total logistics costs. The next two big items of costs are warehousing and material handling. This is also true for 3PL/4PL firms.

Figure. 2.4-3: Shares of Components of the Logistics Costs (per cent)

Transportation 53.5% 53.0% Warehousing 12.5% 12.5%

Material Handling 9.0% 9.5% Customs Clearance 6.5% 6.5%

Documentation 5.0% 4.8% Logistics System 2.5% 2.0%

Administration cost 1.5% 1.7% Insurance cost 2.5% 2.5% 1.0% Software & Maintenance 1.0% Cost of Logistics 1.0% 1.0%

Marketing cost 0.5% 0.5% IT - Hardware & Software 1.0% 0.8% Speed Money 0.2% 0.3%

Demurrage 0.4% 0.4%

Others 3.0% 3.0%

Overall 3PL firms

Note: - 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics services to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers.

Figure 2.4-4 shows the cost in per tonne-km for the major components of logistics activities. As expected, transportation comprises a major component of the time cost.

26 26

Figure 2.4-4: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne km

The activity-based cost chart for railways is shown in Figure 2.4-5. Here too, transportation accounts for the bulk of the cost.

The efficiency of this route in terms of the time required for all logistics activities vis-à-vis the national average in shown in Table 2.4-3. This route is efficient only with respect to road transportation.

Figure2.4-5: Logistics Costs in INR per tonne-km by Activity Mode: Rail

Logistics Cost in INR per ton km

27 27

Figure 2.4-6: Logistics Time in Hours by Activity

Mode: Road

Logistics Time in Hours

Table 2.4-3: Logistics Time in Hours per km

Measure Roadways Railways This National Average This Route National Average Route Average hour 0.21 0.41 0.43 0.26

Source: Authors’ estimates. Note: For the railways, first-/last-mile transit is assumed to be the roadways.

The commensurate time required for various logistics activities on this route is shown in Figure 2.4-6 for roadways, and in Figure 2.4-7 for railways, respectively. Albeit, it is assumed that the first- and last-mile connectivity for railways is through roadways.

28 28

Figure 2.4-7: Logistics Time in Hours by ActivityMode: Rail

6 120 Storage during transit 36 100

Stoppage during rail journey 80 11 3

60 Actual transit time

Logistics Time in Hours Time Logistics 40 72 Warehousing*

20 Material Handling

0 Note: Average number of days for warehousing at both nodes =1.5 days. Warehousing at the destination is considered only till de-containerisation at the destination. Warehousing time at the port is considered only after customs clearance.

Perception Analysis of the Transportation Challenges The information was collated on the basis of interactions with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity whereas a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 2.4-8. The figure shows that the port infrastructure does not seem to be a hurdle. However, the rail infrastructure poses a problem. Movement of Import Cargo at the Hazira Port The movement of import cargo at the Hazira port and the average time taken in hours for various customs and other procedures at the port, inclusive of material handling, until the goods move out of the port are shown in Figure 2.4-9.

29 29

Figure 2.4-8: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Ease of Customs & 9 Harassment by RTO Documentation 8 officials 7 6 5 Hazira Port 4 Pilferage/Leakage of Infrastructure 3 Consignment 2 1 0 Limited infrastructure Harassment by Police/ in terms of parking Other Agencies terminals with Unavaliability of Need to pay Bribes/ Intermodal exchange Facilitation money points Limitations in terms of Rail Infrastructure

Figure 2.4-9: Movement of Cargo at the Hazira Port (Hours)

Note: - a) IGM = Import General Manifest; b) CHA = Customs House Agent.

30 30

Figure A2.4-1: Shares of Components of the Transportation CostsMode: Road

Fuel 56%

Tolls 11%

Salary and Allowances 16%

Maintenance including Consumables 8%

Speed Money/ Bribes 2%

Others (Vehicle Insurance, Vehicle 7% Parking charges, RTO fines etc.

31 31

2.5 EXIM Route: Hyderabad → JNPT Port

Type of Cargo: Exports ofofPharmaceutical Pharmaceutical ProductsProducts

Introduction Hyderabad, the capital city of Telangana, is a pharmaceutical manufacturing hub in South India. The region has 25 large, 40 medium, and 281 small pharmaceutical manufacturing concerns, which provide employment to approximately 13,000 people.

Dr Reddy’s, Aurobindo Pharma, Granules India, Divis Laboratories, and Suven Life Sciences are some of the prominent pharmaceutical companies based in Hyderabad. Apart from catering to the domestic demand, these pharmaceutical products are also exported across the world. The total value of exports from the cluster stood at Rs17,500 crore in 2017-18. The major export destinations include the USA, UK, South Africa, Russia, Middle East, and Brazil. As a majority of the export markets are catered to by vessels that berth at JNPT, most of the cargo is exported via the JNPT port (Figure 2.5-1).

Roadways is the principal mode of cargo movement on this route, even though the distance between the origin and destination is about 700 km (Figure 2.5-2). Although there is a direct railway linkage with the JNPT port, there are severe limitations in terms of the railway infrastructure due to the limited number of scheduled trains along this rail route. In this scenario, roadways is the most feasible mode for transportation on this route. Nearly, 50 per cent of the export-bound pharmaceutical products are transported using refrigerated vehicles or reefer containers. Airways as a mode of transportation is used only in special cases such as when production delays and stringent delivery schedules need to be met.

Figure 2.5-1: Route Map Figure 2.5-2:Modal Shares in Transportation (per cent)

95%

1%4%

Roadway Railway Airway

32 32

Impediments on the Route � There are incidences of harassment by RTO officials, especially at the state borders of Zaheerabad, who demand bribes/facilitation money for allowing the trucks to pass through. � Incidences of misbehaviour with drivers by flying squads of police officials are common, especially in the Solapur belt of Maharashtra. � There is restriction on the entry of trucks in the Mumbai city region between 7 AM and 10 PM. This increases the wait time if the travel is not planned accordingly. � There is perennial traffic congestion near the JNPT port. � There are incidences of harassment by police near the JNPT port for the purpose of extorting money from truck drivers. Route Characteristics Approximately 80 per cent of the total cargo on this route is handled by integrated service providers. This is driven by the presence of an integrated service provider ecosystem, and exporters, mainly large pharmaceutical manufacturing firms, prefer to use these service providers.

Out of the total export-bound pharmaceuticals transported in this route, approximately 98 per cent of the cargo is moved using containers. This is driven by mandatory requirements imposed by buyers as well as the need for transporting a large component of the cargo using temperature-sensitive vehicles or reefer containers. Approximately 65 per cent of the containers used for cargo movement are 40 feet in length, whereas the rest are 20 feet in length.

Time and Cost of Transportation The average time for cargo transportation, inclusive of stoppage time, is estimated to be 35 hours by road and 57 hours by rail.9 The average transportation time is only 12 hours in the case of airways, where the first/last mile transit is by road.

Table 2.5-1: Time and Cost Estimates of Transportation Average Total Time (Hours) Cost in INR per tonne-km Roadways Railways (First and Last Roadway Railways (First and Last Mile Mile Transit by Road) (16 tonne truck) Transit by Road) 35 57 This National This Route National Time (Hour) per km Route Average Average This National This Route National 2.35 2.79 1.9 1.81 Route Average Average (3.25*) (3.44*) 0.05 0.06 0.08 0.14 Average total time (hours) for airways**: 12 Average cost in INR per tonne-km in airways**: 7.4

* Refrigerated cargo ** First and Last Mile Transit by Road Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne-km) by the same mode across all the routes under study.

Table 2.5-1 also shows the cost of transportation per tonne-km for this route and the national average across all routes.10 It may be noted that the time and cost entailed on this route for the road and rail modes of travel seem to be lower than the national average.

9 The average time required for transportation in hours includes only the time taken for transit, including the first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination along the route. 33 33

Cost of Logistics The average logistics costs per tonne-km undertaken for various modes are shown in Table 2.5-2. The cost is estimated to be Rs 4.4 on road per tonne-km, which increases to Rs 6 if the cargo is refrigerated. The cost seems to go down if 3PL firms undertake the logistics operations. The cost incurred on this route is lower than the national average for both the road and rail modes of travel.

Table 2.5-2: Logistics Costs in INR per tonne-km Indicators Roadways Railways (Airways): First and Last Mile Transit by Road This National This National Route Average Route Average Average cost 4.4 5.22 3.3 3.84 (6*) (11.45**) Cost incurred if undertaken by 3PL firms 4.35 5.08 3.15 3.75 (5.85*) (6.66*) (11.1**) Cost incurred if undertaken directly by end-users 4.8 5.45 3.4 3.94 (6.34*) (6.97*) (11.8**) Source: Authors’ estimates. Note: * refers to refrigerated cargo; ** refers to airways.

The share of various components of the logistics costs incurred on this route are shown in Figure 2.5-3. Transportation costs account for nearly 55 per cent of the cost. This is also true for 3PL/4PL firms.

Figure 2.5-3: Shares of Components of the Logistics Costs (per cent)

Transportation costs56.0% 55.0%

Warehousing 10.0% 10.0%

Material Handling 8.0% 8.5% Customs Clearance 6.5% 6.3% Documentation 3.8% 3.8%

Logistics System 2.4% 2.5% Packaging Costs 3.2% 3.0% Administration cost 1.7% 2.0% Insurance cost 3.0% 3.0% Software & Maintenance 1.0% 1.0% Cost of Logistics 1.8% 2.0% Marketing cost 0.8% 1.0% IT - Hardware & Software 1.0% 1.0% Speed Money 0.4% 0.4% Demurrage 0.5% 0.5% Others 0.5% 0.0% Overal 3PL firms l 10The average transportation cost per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination along the route. We have assumed the tonnage of the truck to be 16 tonnes, which is the norm on this route

34 34

Note: - 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics services to end-users. End-users can outsource 100 per cent of their logistics activities to such service providers.

The activity costs entailed in using roadways and railways in INR per tonne-km on this route are shown in Figures 2.5-4 and 2.5-5, respectively. As expected, transportation is a major component of the cost.

Figure 2.5-4: Logistics Costs in INR per tonne-km by Activity Mode: Road (Refrigerated)

Logistics Cost in INR per tonne km

Figure 2.5-5: Logistics Costs in INR per tonne-km by Activity, Mode: Railways

Logistics Cost in INR per tonne km

Similarly, we have estimated the time chart for major components of the logistics activities for roadways and for railways in Figures 2.5-6 and 2.5-7, respectively. Albeit, it is assumed that the first and last mile connectivity for the railways is through the roadways.

35 35

Figure 2.5-6:Logistics Time in Hours by Activity Mode: Roadways

Logistics Time in Hours

Note: Average number of days for warehousing on both sides=2

Figure 2.5-7: Logistics Time in Hours by

Activity Mode: Rail

Logistics Time in Hours

Note: Average number of days for warehousing=2 Average number of days of storage during transit =1

The efficiency of this route in terms of the time required for all logistics activities vis-à-vis the national average is shown in Table 2.5-3. The route seems to be an efficient one if we compare it with our estimates of the national average of the logistics time in hours per km.

Table 2.5-3: Logistics Time in Hours per km Measure Roadways Railways This National Average This Route National Average Route Average hour 0.14 0.41 0.17 0.26 Source: Authors’ estimates. Note: For the railways, first/last mile transit is assumed to be roadways.

36 36

Perception Analysis of the Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity whereas a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 2.5-8. The intensity of the challenge seems to be more than 7 on a scale of 1–10 for most of the indicators.

Figure 2.5-8: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Ease of Customs & 9 Harassment by RTO Documentation 8 officials 7 6 5 Infrastructure at 4 Pilferage/Leakage 3 JNPT Port 2 of Consignment 1 0 Limited Harassment by infrastructure in Police/ Other terms of parking Agencies Unavaliability of Need to pay Bribes/ Intermodal Facilitation money exchange points Limitations in terms of Rail Infrastructure

Movement of Export Cargo at the JNPT Port The movement of cargo at JNPT and the average time taken in hours for various customs and other procedures at the Container Freight Station and at the port, inclusive of material handling, is shown in Figure 2.5-9.

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Figure 2.5-9: Movement of Export Cargo at the JNPT Port (Hours)

Figure A2.5-1: Shares of CompnentsComponents of of the the Transportation Transportation Cost Cost Mode: Road (per cent)

Fuel 54%

Tolls 15%

Salary and Allowances 14%

Maintenance including Consumables 7%

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle 7% Parking, RTO fines etc.)

38 38

2.6 EXIM Route: Hyderabad → Visakhapatnam Port Type of Cargo: Exports of Pharmaceutical Products

Introduction Hyderabad, the capital city of Telangana, is a pharmaceutical manufacturing hub in southern India. The region has 25 large, 40 medium, and 281 small pharmaceutical manufacturing concerns, which provide employment to approximately 13,000 people.

Dr Reddy’s, Aurobindo Pharma, Granules India, Divis Laboratories, and Suven Life Sciences are some of the prominent pharmaceutical companies that are based in Hyderabad. Apart from catering to the domestic demand, the products are exported across the world. USA, UK, South Africa, Russia, and Brazil are the major export destinations.

Approximately 30 per cent of the export-bound pharmaceutical products from the Hyderabad cluster are routed via Visakhapatnam port.

The cargo is undertaken prominently using roadways (Figure 2.6-2). Although there is rail connectivity to Visakhapatnam port, and the distance is about 625 km, rail usage is minimal as limited scheduled trains run from Sanath Nagar ICD in Hyderabad. Airways is used only in rare cases if there are production delays and stringent delivery schedules have to be met.

The integrated service providers cater to about 68 per cent of the cargo on this route. The route is characterised by a high degree of containerised traffic: 97 per cent of the cargo is moved using containers or closed body vehicles. Moreover, about 50 per cent of the export-bound pharmaceutical products are transported using refrigerated vehicles or reefer containers. In general, 60 per cent of the containers used for cargo movement are 40 feet in length, whereas the rest are 20 feet in length.

Figure 2.6-1: Route Map Figure 2.6-2: Modal Shares in Transportation (per cent)

96%

1% 3%

Roadway Railway Airway

39 39

Impediments in the Route

� The stretch passing through Vijayawada city on the highway (NH65/AH45) is a traffic bottleneck due to the absence of a bypass road. � The 15 km stretch within Visakhapatnam city is a congestion zone till the diversion towards Visakhapatnam port. � The approach road to Visakhapatnam port is narrow, resulting in severe traffic congestion, and sometimes leading to a detention cost for the shipper.

Time and Cost Estimates of Transportation

Table 2.6-1 shows the time and cost estimates of transportation on this route by various modes.11 As this table shows, the transportation time is observed to be 28 hours by road and 48 hours by rail. The cost of transportation comes to about Rs. 2.5 (2.1) per tonne-km by road (rail).12 Our cost estimate on road seems to be lower than 6 national average. Table 2.6-1: Time and Cost Estimates of Transportation Average total time (hours) Cost in INR per tonne km Roadways Railways: First & last Roadways (16 Railways: First & last mile mile transit by road tonne truck) transit by road 28 48 This National This route National Time (hour) per km route Average Average This National This route National 2.5 2.79 2.1 1.81 route Average Average (3.15*) (3.44*) 0.04 0.06 0.08 0.14 Average total time (hours) for airways: 14** Average cost in INR per tonne km in airways: 7.8**

Source: Authors’ estimates. * Refrigerated cargo. ** First & last mile transit by road. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne-km) by the same mode of travel across all the routes under study.

Cost of Logistics The average cost of logistics in INR per tonne-km for various modes of transport is shown in Table 2.6-2. Note that employing 3PL lowers the cost in all the modes. The data in the table seem to point to the efficiency of the route in terms of transportation by road.

11 The average total time taken for transportation in hours includes only the time taken for transit, including the first- and last- mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 12 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route. 40 40

Table 2.6-2: Logistics Costs in INR per tonne-km Indicators Roadway Railway (Airways) : first & last mile transit by road This National This route National route Average Average Average Cost 4.8 5.22 4 3.84 (6.3*) (12.2**) Cost incurred if undertaken by 3PL firms 4.58 5.08 3.96 3.75 (6.3*) (6.66*) (12.1**) Cost incurred if undertaken directly by end users 5.3 5.45 4 3.94 (6.4*) (6.97*) (12.3**) Source: Authors’ estimates. Note: * refers to refrigerated cargo; ** refers to airways.

The average share of various components of the overall logistics costs is shown in Figure 2.6-3. Transportation and warehouse are the two major items costs. This is true for all logistics players combined as well as for 3PL firms.

Figure 2.6-3: Shares of Components of the Logistics Cost (per cent)

Transportation 53.0% 52.0% 11.8% Warehousing 12.1% Material Handling 7.8% 8.0% Customs Clearance 7.2% 6.8% Documentation 4.9% 4.5% 2.3% Logistics System 2.0% Packaging Costs 3.0% 3.0% Administration cost 2.3% 2.5% Insurance cost 2.5% 2.5%

Software & Maintenance 1.3% 1.5% 1.3% Cost of Logistics 1.5% Marketing cost 0.6% 1.0% IT - Hardware & Software 1.0% 1.0% Speed Money 0.8% 0.8%

Demurrage 0.3% 0.3% Others 1.0% 1.0%

Overall 3Pl Firms

41 41

Figures 2.6-4 and 2.6-5 provide estimates of the costs for various activities related to logistics operations in respect of refrigerated road cargo and rail cargo for this route, respectively.

Figure 2.6-4: Logistics Cost in INR per tonne-km by Activity Mode: Road -Refrigerated cargo

Logistics Cost in INR per tonnekm

Figure 2.6-5: Logistics Cost in INR per tonne-km by Activity Mode: Rail

Logistics Cost in INR per tonne km

42 42

Time Cost of Logistics Figures 2.6-6 and Figure 2.6-7 show the decomposition of the logistics time in hours by various activities for roadways and railways, respectively. As these figures show, the time spent on warehousing activities is quite high as per interactions with stakeholders.

Figure 2.6-6: LogisticsTime in Hours by Activity Mode: Road

Logistics Time in Hours

Note: *The average number of days for warehousing on bothsides=2

Figure 2.6-7: Logistics Costs in Hours by Activity Mode: Rail

Logistics Time in Hours

Note: * The Average number of days for warehousing on both nodes =2 The Average number of days for storage during transit = 1

The efficiency of this route in terms of the time required in hours per km for all logistics activities vis-à- vis the national average is shown in Table 2.6-3. It seems that the time required is less relative to the national average on this route.

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Table 2.6-3: Logistics Time in Hour per km Measure Roadways Railways This route National Average This route National Average Average hour 0.15 0.41 0.18 0.26

Source: Authors’ estimates. Note: For the railway, first/last mile transit is assumed to be roadway.

Perception Analysis of the Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on this route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 means that the challenge is of low intensity while a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 2.6-8. The perceptions about the route are positive with respect to the road condition and the lower incidence of pilferage/harassment by gangs along the route. It scores more than 6 in all the other parameters. Figure 2.6-8: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Ease of Customs & 9 Harassment by RTO Documentation 8 officials 7 6 5 Harassment by Visakhapatnam Port 4 gangs/Pilferage of Infrastructure 3 2 Consignment 1 0 Limited Harassment by infrastructure in Police/ Other terms of parking Agencies terminals with

Unavaliability of Need to pay Bribes/ Intermodal exchange Facilitation money points Limitations in terms of Rail Infrastructure

44 44

Movement of Export Cargo at the Visakhapatnam Port The movement of cargo at the Visakhapatnam port and the average time taken in hours for various customs and other procedures at the CFS and at the port (inclusive of material handling) are shown in Figure 2.6-9.

Figure 2.6-9: Movement of Export Cargo at the Visakhapatnam Port (Hours)

Figure A2.6-1: Shares of Components in the Transportation Costs (per cent)Mode: Road

Fuel 55%

Tolls 14%

Salary and Allowances 15%

Maintenance including Consumables 7%

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle Parking, 6% RTO Fines etc.)

45 45

2.7 EXIM Route: Kanpur → Delhi Airport

Product: Exports of Leather Items

Introduction Kanpur is one of the largest leather products manufacturing clusters in India. The Kanpur leather industry is well known for sole leather, industrial shoes, and saddlery products. The products manufactured here are primarily exported to the USA, UAE, Hong Kong, and China.

The export-bound leather goods are mainly transported by roadways on the Kanpur → Delhi airport route (Figure 2.7-2). The distance between of Kanpur and Delhi is about 480 km. Roadways are preferred due to last-mile connectivity and the absence of a scheduled freight train. Airways are used only when production has been delayed and delivery schedules need to be stringently met.

The 3PL/4PL firms handle approximately 65 per cent of the cargo on this route while the rest is managed by stand-alone operators. Nearly 90 per cent of the cargo is moved using containers or closed body vehicles primarily due to mandatory requirements from product importers. Containers of both 40 feet in length (accounting for about 55 per cent of the usage) and 20 feet length in length are used for cargo movement. By and large, 16-tonne trucks are used for transportation.

Figure 2.7-‐1: Route Map Figure 2.7-2: Modal Shares in Transportation (per cent)

94%

1% 5%

Roadway Railway Airway

Impediments on the Route � Between 6 AM and 11 PM, there is restriction on the entry of trucks in Delhi city limits. The transportation has to be thus planned accordingly, otherwise it leads to delays in cargo delivery. � The RTO officials harass the drivers for extorting money to allow smooth passage of the trucks through the city. � The toll charges per km on this route (NH19) are relatively higher, which increases the cost of transportation.

46 46

Time and Cost Estimates of Transportation Table 2.7-1 shows the time and cost estimates of transportation on this route by various modes.13 As this table shows, this route is efficient in terms of the transportation time in comparison to the national average.

Table 2.7-1: Time and Cost Estimates of Transportation Average total time (hours) Cost in INR per tonne km Roadways Railways: First & last Roadways (16 Railways: First & last mile mile transit by road tonne truck) transit by road 18 60 This National This route National Time (hour) per km route Average Average This National This route National 2.6 2.79 1.9 1.81 route Average Average 0.02 0.06 0.13 0.14 Average total time (hours) for airways**: 10 Average cost in INR per tonne km in airways**: 7.6

Source: Authors’ estimates. ** first- and last-mile transit by road Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne-km) by the same mode of travel across all routes under study.

The average cost of transportation per tonne-km by road is observed to be Rs 2.6 for a truck of 16 tonnes.14 Our estimate comes to about Rs 1.9 in the case of railways. It may be noted that the cost is lower than the national average for roadways but higher in the case of railways.

Cost of Logistics The average cost of logistics per tonne-km by various modes is shown in Table 2.7-2. It varies between Rs 5.1 and Rs 5.45 per tonne-km by road, depending on the type of operators, but is found to be lower than the national average. Our estimate of the same by railways is also found to be lower than our estimate of the national average.

13 The average time for transportation in hours includes only the time taken for transit, including the first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or destination of the route. 14 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route. 47 47

Table 2.7-2: Logistics Costs in INR per tonne-km Indicators Roadway Railway (Airways) : first & last mile transit by road This National This route National route Average Average Average Cost 5.2 5.22 3.7 3.84 (12.76**) Cost incurred if undertaken by 3PL firms 5.1 5.08 3.65 3.75 (12.5**) Cost incurred if undertaken directly by end users 5.45 5.45 3.75 3.94 (13.1**)

Source: Authors’ estimates. Note: ** refers to airways.

The average share of various components of the overall logistics costs is shown in Figure 2.7-3 for all the logistics players combined and for 3PL/4PL firms separately. There is not much difference in the cost structure. Nearly 50 per cent of the cost may be attributed to transportation.

Figure 2.7-3: Share of Components of the Logistics Cost (per cent) 49.7% Transportation 50.0% 10.0% Warehousing 11.0% 10.0% Material Handling 9.8% 6.4% Customs Clearance 6.2%

Documentation 4.3% 5.0% Logistics System Management 2.3% 2.0% Packaging Costs 3.0% 3.0%

Administration cost 2.4% 2.0% Insurance cost 2.8% 3.0% Software & Maintenance 1.5% 1.5%

Cost of Logistics Equipment 2.4% 2.0% Marketing cost 1.5% 1.2% IT - Hardware & Software Cost 1.0% 1.0%

Speed Money 0.5% 0.5% Demurrage 0.4% 0.3% Others 1.5% 2.5% Overall 3PL/4PLfirms

Figures 2.7-4 and Figure 2.7-5 show these costs by the components of logistics activities for transportation by roadways and railways, respectively, to facilitate an understanding of the sources of improvements. As expected, the main cost is that of transportation.

48 48

Figure 2.7-4: Logistics Cost in INR per tonne-km by Activity Mode: Road

Figure 2.7-5: Logistics Cost in INR per tonne-km by Activity Mode: Rail

Logistics Cost in INR per tonnekm

Figures 2.7-6 and Figure 2.7-7 show the decomposition of the logistics time in hours by various activities for roadway and railways, respectively. As these figures show, the time spent on warehousing activities is quite high as revealed during interactions with stakeholders.

49 49

Figure 2.7-6: Logistics Time in Hours by Activity Mode: Road

Logi stics Time in Hou rs

Note: * Average no. of days for warehousing on both sides =2

Figure 2.7-7: Logistic Time in Hours by Activity Mode: Rail

Logis tics time in Hour s

Note: * The average number of days for warehousing on both nodes =2 The average number of days for storage during transit = 1

The efficiency of this route in terms of the time required for all logistics activities vis-à-vis national average in shown in Table 2.7.3. Clearly, this route is an efficient one, particularly for transportation by roadways!

50 50

Table 2.7-3: Logistics Time in Hour per km Measure Roadways Railways This route National Average This route National Average Average hour 0.18 0.41 0.26 0.26 Source: Authors’ estimates. Note: For the railways, first/last mile transit is assumed to be roadways.

Perception Analysis of the Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on this route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 means that the challenge is of low intensity while a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 2.7-8. The route performs well in terms of the road condition. However, harassment by officials is a serious issue. What is needed for resolving this issue is not a large investment but an effective administrative policy design.

Figure 2.7-8: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Ease of Customs & 9 Harassment by RTO officials Documentation 8 7 6 5 4 Harassment of gangs/ Pilferage Delhi Airport Infrastructure 3 of Consignment 2 1 0

Limited infrastructure in terms Harassment by Police/ Other of parking terminals with Agencies refreshment facilities for driver

Need to pay Bribes/ Unavaliability of Intermodal Facilitation money exchange points

Limitations in terms of Rail Infrastructure

51 51

Movement of Export Cargo at the Delhi Airport The movement of cargo at the Delhi Airport and the average time taken in hours for completing various customs and other procedures at the CFS and at the port (inclusive of material handling) are shown in Figure 2.7-9. Figure 2.7-9: Movement of Export Cargo at Delhi Airport (Hours)

Figure A 2.7-1: Shares of Components in the Transportation Costs (per cent) Mode: Road

Fuel 53%

Tolls 16%

Salary and Allowances 14%

Maintenance including Consumables 9%

Speed Money/ Bribes 2%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO Fines etc.)

52 52

2.8 EXIM Route: Kolkata → Petrapole

Type of cargo: Exports of Fast Moving Consumer Goods (FMCGs)

Introduction In view of the short distance of about 80 km between Kolkata and Petrapole, the entire cargo on this route is transported via roadways. A majority of the cargo (about 70 per cent) moved using containers or closed-body vehicles. The prevalent type of containers used are 20 feet in length, accounting for 70 per cent of the usage. The integrated service providers handle about 70 per cent of the cargo on this route. Impediments on the route � The 7 km stretch from Bongaon village to Petrapole border is severely congested. � There are recurrent incidences of pilferage near the Petrapole border wherein the trucks are forced to wait for long hours due to heavy traffic. � There is shortage of parking space at the Petrapole border. � There are limited number of loading/unloading stations at the border, which leads to increased waiting time for trucks. � The police and RTO officials harass the drivers close to the Petrapole border.

Figure 2.8-1: Route Map

53 53

Time and Cost Estimates of Transportation

Although the distance to be covered is just 80 km, the transportation time amounts to 12 hours due to traffic congestion on the route (Table 2.8-1).15

The average cost of transportation is estimated to be Rs. 4.5 per ton-km for a 16-tonnage truck.16 The cost of transportation per tonne-km on this route is relatively higher primarily due to huge traffic congestion along the route and long waiting time for unloading the goods at the station for customs clearance. Table. 2.8-1: Time and Cost Estimates of Transportation Average total time (including stoppage) – 12 Cost in INR per tonne km hours Time ( hour/ km) - This route National Average This Route National Average 4.5 2.79 0.15 0.06 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne-km) by the same mode of travel across all the routes under study.

Cost of Logistics

The average cost of logistics per tonne-km is estimated to be Rs 7.2 per tonne km (Table 2.8-2). It may be noted that the cost is higher than our estimated national average.

Table 2.8-2: Logistics Costs in INR per tonne-Km This route National Average Average cost 7.2 5.22 Cost incurred if undertaken by 3PL 7.2 5.08 firms Cost incurred if undertaken directly by 7.2 5.45 end users

Source: Authors’ estimates. Note: We have estimated the national average by taking the simple (cost in INR per tonne km) by the same mode of travel across all the routes under study.

The average shares of various components of the overall logistics costs are shown in Figure 2.8-2 for all the logistics players combined and for 3PL/4PL firms separately. There is not much difference in the cost structure. Nearly 60 per cent of the cost may be attributed to transportation. On other routes, the share of transportation in the total cost amounts to 50 per cent.

15 The average time for transportation in hours includes only the transit time, including the first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling on the route. 16 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred onother logistics activities. 54 54

Figure 2.8- 2: Shares of Components of the Logistics Costs (per cent)

Transportation 61.0% 59.0%

Warehousing 9.5% 10.0% Material Handling 7.8% 7.5% Customs Clearance 5.8% 5.5% Documentation 4.5% 4.0%

Logistics System 1.6% 1.5% Packaging Costs 2.4% 2.4% Administration cost 1.5% 1.6%

Insurance cost 2.0% 2.0%

Software & 1.4% 1.4% Cost of Logistics 1.5% 1.5% Marketing cost 0.5% 0.5%

IT - Hardware & 0.5% 0.5% Speed Money 0.4% 0.4% Demurrage 0.3% 0.3% Others 0.5% 2.0% Overall 3Pl firms Note: - a) 3PL Logistics Service Provider—This refers to an integrated service provider providing a complete range of logistics services to end-users. End-users can outsource 100 per cent of their logistics activities to such service providers.

Figure 2.8-3 shows these costs by the components of logistics activities for facilitating an understanding of the sources of improvements. As expected, the main cost is that of transportation.

Figure 2.8-3: Logistics Costs in INR per tonne-km by ActivityMode: Road

Logistics Cost in INR per tonne km

55 55

Figure 2.8-4 shows the distribution of the total time spent on logistics activities by major components. The figure shows indicates that the time spent on warehousing activities is quite high, based on interactions with stakeholders.

Figure 2.8-4: Logistics Time in Hours by Activity Mode: Road

Lo gis tic s Ti me in Ho urs

Note: * The average number of days for warehousing on both sides=2

The efficiency of this route in terms of the time required for all logistics activities vis-à-vis the national average is shown in Table 2.8.3. This route clearly needs a significant improvement as per our measures of efficiency.

Table 2.8-3: Logistics Time in Hour per km Indicator This route National Average Average hour 0.95 0.41 Source: Authors’ estimate. Note: We have estimated the national average by taking the simple average of the time required per km by the same mode of travel across all routes under study.

Perception Analysis of Transportation Challenges Information was collated from interaction with stake-holders to understand the major transportation and logistics challenges in this route. The intensity of the major challenges faced on the route during cargo transportation is mapped on a scale of 1-10, where 1 means the challenge is of low intensity and 10 means high intensity challenge/problem. Our findings are shown in Figure 2.8-7. The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on this route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 means that the challenge is of low intensity while a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 2.8-7. According to stakeholders’ perceptions, the scores of most of the indicators are in the range of 8-9, suggesting a high degree of challenges on this route.

56 56

Figure 2.8-5: Intensity of the Challenges

Road Condition including signage 10 9 Ease of Customs 8 Harassment by & Documentation 7 RTO officials 6 5 4 3 2 1 Pilferage/Leakage Port Infrastructure 0 of Consignment

Limited infrastructure in Harassment by terms of parking Police/ Other terminals with Agencies refreshment Need to pay Bribes/ Facilitation money

Movement of Export Cargo at the Petrapole Land Port The movement of cargo at the Petrapole Land Port and the average time taken in hours for various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, are shown in Figure 2.8-6.

57 57

Figure 2.8-6: Movement of Export Cargo at the Petrapole Land Port (Hours)

Figure A. 2.8-1: Share of Components in the Transportation Costs, Mode: Road (per cent)

Fuel 59%

Tolls 8%

Salary and Allowances 15%

Maintenance including Consumables 8%

Speed Money/ Bribes 5%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO fines etc.)

58 58

2.9 EXIM Route: Kozhikode → Cochin

Product: Exports of Carpets

Introduction Considering the short distance between Kozhikode and the Kochi port (183 km), roadways is the most viable option for transporting export-bound carpets on this route. About 58 per cent of the consignments on this route are handled by integrated service providers, which is lower than that on other EXIM routes. Nearly 86 per cent of the cargo is moved using containers or closed-body vehicles. Both types of containers, including those of 40 feet and 20 feet length, respectively, are used on this route.

Figure 2.9-1: Route Map

Impediments on the Route

� There is a shortage of trucks on this route. � Although the condition of the road (NH66) is good, the stretches of the road passing through the Tannur, Tirur and Talakkad locations experience congestion, leading to an increase in both the travel time as well as the transportation cost.

59 59

Time and Cost Estimates of Transportation

The time required to cover this distance is found to be 8.5 hours (Table 2.9-1).17 On the other hand, the average cost of transportation on this route is estimated to be Rs 2.4 per ton-km for a 16-tonnage truck18. The cost in monetary terms seems to be lower than our estimated national average.

Table. 2.9-1: Time and Cost Estimates of Transportation Average time (including stoppage) – 8.5 hours Cost in INR per tonne km Time ( hour/ km) This route National Average This Route National Average 2.4 2.79 0.05 0.06 Source : Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne km) by the same mode of travel across all routes under study.

Cost of Logistics The average cost of logistics per tonne-km on this route is shown in Table 2.9-2. Employing 3PL firms seems to reduce the logistics costs. It may be noted that the cost on this route is lower than the national average.

Table 2.9-2: Logistics Costs in INR per tonne-km This route National Average Average cost 4.9 5.22 Cost incurred if undertaken by 3PL 4.78 5.08 firms Cost incurred if undertaken directly by 4.95 5.45 end users Source: Authors’ estimates. Note: We have estimated the national average by taking the simple (cost in INR per tonne-km) by the same mode of travel across all the routes under study.

The shares of various components of the overall logistics costs on this route are shown in Figure 2.9-2 for all the logistics players combined and for 3PL firms separately. Nearly 50 per cent of the cost can be attributed to transportation.

17 The average total time for transportation in hours includes only the transit time, including the first- and last-mile connectivity, to warehouses and stoppages during transit. It does not include the warehousing, packaging, or material handling time on the route. 18 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity along the route. 60 60

Figure 2.9-2:2.9-2 SharesShares ofof ComponentsComponents of of the the Logistics Logistics Costs Costs (percent (per cent))

Transportation 54.0% Warehousing 10.0% 53.5% Material Handling 9.0% 11.0% Customs Clearance 6.7% 9.0% Documentation 4.5% 6.5% Logistics System Management 1.5% 4.5% Packaging Costs 3.0% 1.5% Administration cost 2.0% 2.8% Insurance cost 2.5% 2.5% Software & Maintenance 2.0% 2.5% Cost of Logistics Equipment 1.5% 2.0% Marketing cost 0.5% 1.5% IT - Hardware & Software Cost 1.2% 0.5% Speed Money 0.3% 1.2% Demurrage 0.6% 0.3% Others 0.5% 0.6% 0.5% Overall 3PL Firms

61 61

Figure 2.9-3 shows the logistics costs by the components of logistics activities for this route. As expected, transportation seems to be the principal cost element.

Figure 2.9-3: Logistics Costs in INR per tonne-km by Activity, Mode: Road

Logistics Cost in INR per tonne km

Figure 2.9-4 shows the distribution of the total time spent on logistics by major components. The figure indicates that the time spent on warehousing activities is quite high, based on interactions with stakeholders.

Figure 2.9-4: Logistics Time in Hours by Activity Mode: Road

Logistics Time in Hours

Note: * The average number of days for warehousing=2

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The efficiency of this route in terms of the time required for all logistics activities vis-à-vis the national average in shown in Table 2.9.3.

Table. 2.9-3: Logistics Time in Hour per km This route National Average Average hour 0.40 0.41 Source: Authors’ estimates.

Perception Analysis of the Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on this route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 means that the challenge is of low intensity while a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 2.9-5. While the perceptions regarding the ease with which customs and documentation procedures are completed are not too negative, harassment by officials on this route is apparently an issue that needs to be addressed.

Figure 2.9-5: Intensity of the Challenges Faced in Transportation

Road Condition including signage Ease of 10 9 Customs & 8 Harassment by 7 Documentatio 6 RTO officials 5 n 4 3 2 Harassment by Port 1 gangs/ 0 Infrastructure Pilferage of Consignment Limited Harassment by infrastructure Police/ Other in terms of Agencies parking Need to pay Bribes/ Facilitation money

Movement of Export Cargo at the Kochi Port The movement of cargo at the Kochi port and the average time taken in hours for various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, is shown in Figure 2.9-6.

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Figure 2.9-6: Movement of Export Cargo at the Kochi Port (Hours)

Figure A2.9-1: Shares of Components in the Transportation Costs (per cent)

Fuel 54%

Tolls 13%

Salary and Allowances 16%

Maintenance including Consumables 7%

Speed Money/ Bribes 4%

Others (Vehicle Insurance, Vehicle 6% Parking charges, RTO fines etc.)

64 64

2.10 EXIM Route: Mumbai region → JNPT Port, Mumbai

Products: Exports of Electrical Machinery

Introduction Mumbai district is a hub for the production of transformers, generator sets, control panels, powerhouse equipment, and household electrical gadgets and fittings. Considering the short distance of less than 70 km between Mumbai region and the JNPT port, Mumbai, roadways is the most feasible mode for transporting export-bound electrical machinery equipment on this route (Figure 2.10-1).

The penetration of integrated service providers on this route, at 53 per cent, is lower as compared to other routes. Most manufacturing units are MSME firms that prefer to use stand-alone operators to avoid additional costs. The route is characterised by lower container traffic, at (≈38 per cent) as a majority of the cargo is either Over Dimensional Cargo (ODC) or cargo that does not necessitate the usage of containers.

Figure 2.10-1: Route Map

Impediments on the Route � There is traffic congestion within the Mumbai city limits, particularly in close proximity to the JNPT port. � The police officials in Mumbai city harass the truck drivers for extorting speed money from them. � There are restrictions on the entry/movement of trucks within Mumbai city between 7 AM and 10 PM.

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Time and Cost Estimates of Transportation

The time required to cover this distance is found to be four hours (Table 2.10-1).19 It may be noted that the cost of transportation is estimated to be Rs. 2.65 per tonne-km for a 16-tonnage truck.20 This cost is marginally lower than our estimated national average.

Table. 2.10-1: Time and Cost Estimates of Transportation Average time (including stoppage) – 4 hours Cost in INR per tonne km Time ( hour/ km) This route National Average This Route National Average 2.65 2.79 0.06 0.06 Source: Authors’ estimates. We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne-km) by the same mode of travel across all the routes under study.

Cost of Logistics The average cost of logistics per tonne-km on this route is shown in Table 2.10-2. Employing 3PL firms seems to reduce the logistics costs by about 5 per cent. It may be noted that the cost incurred on this route is lower than the national average by 12 per cent.

Table 2.10-2: Logistics Costs in INR per tonne-km This route National Average Average cost 4.8 5.22 Cost incurred if undertaken by 3PL 4.58 5.08 firms Cost incurred if undertaken directly by 5.3 5.45 end users Source: Authors’ estimates. Note: We have estimated the national average by taking the simple (cost in INR per tonne km) by the same mode of travel across all the routes under study.

The share of various components of the logistics costs on this route are shown in Figure 2.10-2 for all the logistics players combined and for 3PL firms separately. It may be noted that transportation accounts for nearly 55 per cent of the total cost.

19 The average time for transportation in hours includes only the transit time, including the first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the warehousing, packaging, or material handling time. 20 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activities. 66 66

Figure 2.10-2: Shares of Components of the Logistics Costs (per cent)

Transportation 55.0% 54.0%

Warehousing 10.0% 11.0% Material Handling 7.5% 8.0% Customs Clearance 6.0% 6.5% Documentation 4.5% 4.0%

Logistics System 2.0% 2.0% Packaging Costs 2.0% 2.5%

Administration cost 2.6% 2.8% Insurance cost 2.5% 2.0%

Software & Maintenance 1.5% 1.5% Cost of Logistics Equipment 2.5% 2.0% Marketing cost 1.0% 1.0%

IT - Hardware & Software 1.0% 1.0%

Speed Money 0.3% 0.5% Demurrage 0.5% 0.4% Others 1.0% 1.0% Overall 3PL Firms

Figure 2.10-3 provides the break-up of these costs by the principal logistics activity. Transportation seems to be the principal cost element.

Figure 2.10-3: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne km

Figure 2.10-4 shows the distribution of the total time spent on logistics by the major components.

Figure 2.10-4: Logistics Time in Hours by Activity Mode: Road

Lo gist ics Ti me in Ho urs

Note: * The average number of days for warehousing on both sides=2

The efficiency of this route in terms of the time required for all logistics activities vis-à-vis the national average in shown in Table 2.10.3. Clearly, the route is an inefficient one in terms of the transportation time spent per km. Table. 2.10-3: Logistics Time in Hour per km, Mode: Road This route National Average Average hour 0.97 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km by the same mode of travel across all the routes under study.

Perception Analysis of the Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on this route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 means that the challenge is of low intensity while a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 2.10-5. The route performs reasonably well with respect to the following two indicators: road condition, and pilferage of consignment. There is scope for improvement in the case of the other indicators.

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Figure 2.10-5: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 9 Ease of Customs & 8 Harassment by RTO Documentation 7 officials 6 5 4 3 2 Infrastructure at JNPT 1 Pilferage/Leakage of 0 Port Consignment

Limited infrastructure in terms of parking Harassment by Police/ terminals with Other Agencies refreshment facilities for driver Need to pay Bribes/ Facilitation money

Movement of Export Cargo at the JNPT Port The movement of cargo at the JNPT port and the average time taken in hours for completing various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, is shown in Figure 2.10-6.

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Figure 2.10-6: Movement of Export cargo at the JNPT Port (Hours)

Figure A2.10-1: Shares of Components in the Transportation Costs ( Per cent) Mode: Road

Fuel 60%

Tolls 6%

Salary and Allowances 16%

Maintenance including Consumables 9%

Speed Money/ Bribes 4%

Others (Vehicle Insurance, Vehicle 5% Parking, RTO Fines etc.)

70 70

2.11 EXIM Route: Nagpur → JNPT Port, Mumbai

Product: Export of Horticulture Products

Introduction Nagpur is often referred as the “Orange City” for being a major trade centre of oranges cultivated in the region. Nagpur is the largest producer of oranges in India and contributes to over 3 per cent of the world production. Apart from meeting the domestic demand, Nagpur’s oranges are also exported to countries like Bangladesh, Dubai, Sri Lanka, and Qatar. Roadways is the most prominent mode used for transporting cargo on this route. Interactions with stakeholders show that roadways caters to around 75 per cent of the cargo while the remaining is carried by railways. Although the distance on this route is about 830 km, roadways is preferred due to last-mile connectivity and lower turnaround time taken for transportation. Multimodal transportation is not used on this route. On this route, 3PL/4PL firms handle about 65 per cent of the total cargo. The container traffic, inclusive of containers or closed-body vehicles, is used for moving about 70 per cent of the cargo on this route. This is mainly driven by the mandatory requirement of operating condition imposed by some of the importers. Most of the containers on this route are 40 feet in length.

Figure 2.11-1: Route Map

Impediments on the Route � There are restrictions on the entry of cargo vehicles in the Mumbai city limits between 7 AM and 10 PM. This increases the waiting time, if the travel is not planned accordingly. � There is significant traffic congestion in Nagpur city due to the process of infrastructure development. � The signage at toll plazas is inadequate relative to other highways, leading to confusion and wastage of time at the tolls if vehicles enter the wrong lane.

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� Incidences of misbehaviour by flying squads of police officials are common on this route, especially in the Vidarbha region near Nagpur. � There are limitations in terms of lack of both railway infrastructure and the number of scheduled cargo trains.

Time and Cost Estimates of Transportation

The average time for cargo transportation on this route is estimated to be 62 hours for roadways and 95 hours for railways (Table 2.11-1).21 It may be noted that the time in hours per km is higher than the national average on this route.

Table 2.11-1: Time and Cost Estimates of Transportation Average total time (hours) Cost in INR per tonne km Roadways Railways (first & last mile Roadways (16 Railways (first & last mile transit by road) tonne truck) transit by road) 62 95 This National This route National Time (hour) per km route Average Average This National This route National 2.4 2.79 1.9 1.81 route Average Average 0.07 0.06 0.11 .014

Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne km) by the same mode of travel across all the routes under study.

Table 2.11-1 also shows the cost of transportation per tonne-km for this route and the national average across all routes. The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route. We have assumed the tonnage of the truck to be 16 tonnes, which is the norm on this route.

Although the cost of transportation by railways is lower, it is less preferred due to infrastructural bottlenecks as well as due to absence of scheduled cargo trains.

Cost of Logistics The average cost of logistics per tonne-km undertaken by road/rail is shown in Table 2.11-2. The cost is estimated to be Rs 4.7 on road per tonne-km. As expected, the cost is lower in the case of usage of railways. It may be noted that the cost by roadways/railways on this route is lower than our estimated national cost for the respective modes. The data in the table also reflect variations in the cost depending on the type of operators.

21 The average time for transportation in hours includes only the time required for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time needed for warehousing, packaging or material handling at either the origin or the destination on the route. 72 72

Table 2.11-2: Logistics Costs in INR per tonne-km Indicators Roadway Railway : first & last mile transit by road This National This route National route Average Average Average Cost 4.7 5.22 3.5 3.84

Cost incurred if undertaken by 3PL firms 4.5 5.08 3.45 3.75

Cost incurred if undertaken directly by end users 4.85 5.45 3.65 3.94

Source: Authors’ estimates.

The shares of various components of the overall logistics costs on this route are shown in Figure 2.11-2 for all logistics players combined and for 3PL/4PL firms separately. It may be noted that transportation accounts for nearly 51 per cent of the total logistics costs.

Figure 2.11-2: Shares of Components of the Logistics Cost (per cent)

Transportation 52.0% 51.0%

Warehousing 11.5% 12.0% Material Handling 9.0% 8.0% Customs Clearance 6.0% 6.5%

Documentation 4.4% 4.8% Logistics System 2.5% 2.0% Packaging Costs 2.6% 3.0%

Administration cost 1.7% 1.7% Insurance cost 2.0% 2.0% Software & Maintenance 1.7% 1.6%

Cost of Logistics 2.7% 2.4% Marketing cost 0.5% 1.0% IT - Hardware & Software 1.0% 1.0%

Speed Money 0.3% 0.3% Demurrage 0.4% 0.4% Others 2.0% 2.0%

Overall 3PL Firms

73 73

The logistics costs in INR per tonne-km by activity for roadways and railways are shown in Figures 2.11- 3 and 2.11-4, respectively. Transportation seems to be the principal cost element.

Figure 2.11-3: Logistics Costs in INR per tonne-km by Activity, Mode: Road

Logistics Cost in INR per ton km

Figure 2.11-4: Logistics Costs in INR per tonne-km by Activity Mode: Rail

Logistics Cost in INR per tonne kmkms.

Figure 2.11-5 shows the distribution of the time spent on various components of logistics activities on this route when the mode of transport is roadways. Figure 2.11-6 shows our corresponding estimates when the mode of transport is railways.

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Figure 2.11-5: Logistics Time in Hours by Activity Mode: Road

Logistics Time in Hours

Note: *The average number of days for warehousing on both sides=2 Figure 2.11-6: Logistics Time in Hours by Activity

Mode: Rail

Logistics Time in Hours

Note: * The average number of days for warehousing on both nodes=2 The average number of days of storage during transit =3

The efficiency of this route in terms of the time required for all logistics activities by road vis-à-vis the national average in shown in Table 2.11.3. Clearly, the route is an efficient one in terms of the time spent per km.

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Table. 2.11-3: Logistics Time in Hour per km, Mode: Road This route National Average Average hour 0.15 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km by same mode of travel across all routes under study.

Perception Analysis of Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on this route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 means that the challenge is of low intensity while a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 2.11-7. The route shows a medium challenge, with a score of 5, for with respect to three indicators—road condition, pilferage, and customs documentation—out of ten indicators. For all other indicators, it scores more than 5, indicating a high degree of challenges.

Figure 2.11-7: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Ease of Customs & 9 Harassment by RTO Documentation 8 officials 7 6 5 JNPT Port 4 Pilferage/Leakage 3 Infrastructure 2 of Consignment 1 0 Limited Harassment by infrastructure in Police/ Other terms of parking Agencies terminals with Unavaliability of Need to pay Bribes/ Intermodal Facilitation money exchange points Limitations in terms of Rail Infarstructure

76 76

Movement of Export Cargo at the JNPT Port The movement of cargo at JNPT and the average time taken in hours for completing various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, is shown in Figure 2.11-8.

Figure 2.11.-8: Movement of Eexport Cargo at the JNPT Port (hours)

Figure A2.11-1: Shares of Components in the Transportation Costs (Per cent), Mode: Road

Fuel 51%

Tolls 13%

Salary and Allowances 11%

Maintenance including consumables 15%

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle 7% Parking, RTO fines etc.) 2.

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2.121212 EXIM EXIM Route: Route: Nashik Nashik → → JNPT JNPT Port, Port, Mumbai Mumbai

Product:Product: Export Export of ofGrapes Grapes

IntroductionIntroduction NashikNashik is knownis known as asthe the ‘Grapes ‘Grapes capital capital of ofIndia’. India’. Apart Apart from from catering catering to tothe the domestic domestic demand, demand, the the grapes grapes growngrown in inNashik Nashik are are exported exported mainly mainly to tothe the European European and and Middle Middle Easte Eastern rncountries. countries. Additionally, Additionally, Nashik Nashik is alsois also home home to toa thriving a thriving wine wine industry industry with with the the presence presence of ofvineyards vineyards of ofleading leading brands brands such such as asSula Sula and and York,York, among among others. others. TheThe grapes grapes from from Nashik Nashik are are mainly mainly exported exported from from the the JNPT JNPT port, port, Mumbai. Mumbai. A Atotal total of ofaround around 12,0 12,000-00- 14,00014,000 containers containers per per annum annum are are moved moved from from Nashik Nashik for for export. export. The The standard standard operating operating procedure procedure for for the the exportexport of ofgrapes grapes is isthat that reefer reefer containers containers are are moved moved from from the the JNPT JNPT Port Port to tograpes grapes-packing-packing houses houses in in Nashik,Nashik, and and after after loading, loading, the the trucks trucks again again move move back back to theto the port. port. NearlyNearly 96 96per per cent cent of ofthe the cargo cargo is handledis handled by byintegrated integrated service service providers providers due due to tothe the need need for for temperature temperature controlcontrol and and specialised specialised handling handling during during cargo cargo movement. movement. All All the the cargoes cargoes are are moved moved using using reefer reefer containers.containers. SinceSince the the distance distance betwe between enNashik Nashik and and the the JNPT JNPT port port is onlyis only about about 190 190 km, km, roadways roadways is theis the preferred preferred modemode of oftransport. transport.

FigureFigure 2.12 2.12-1:- 1:Route Route Map Map

ImpedimentsImpediments on on the the Route Route � � ThereThere are are several several stretches stretches of ofthe the road road with with a higha high degree degree of ofcongestion, congestion, particularly particularly the the stretch stretch nearnear Bhiwandi Bhiwandi in Thane,in Thane, and and the the 40 40km km stretch stretch from from Thane Thane to theto the JNPT JNPT port port (Figure (Figure 2.12 2.12-1).-1). � � TheThe truck truck drivers drivers face face harassment harassment from from the the police police near near the the JNPT JNPT port, port, who who attempt attempt to toextort extort moneymoney from from them. them. � � ThereThere are are incidences incidences of ofharassment harassment by bygangs, gangs, especially especially along along the the gha ghat sectiont section of ofthe the highway. highway.

7878 78

12 EXIM Route: Nashik → JNPT Port, Mumbai Time and Cost Estimates of Transportation 22 Product: Export of Grapes The time taken for transporting cargo via roadways is estimated to be 12 hours. On an average, 38 per cent of the time is required to cover the last 25 per cent of the distance within the Mumbai region (Table Introduction 2.12-1). Nashik is known as the ‘Grapes capital of India’. Apart from catering to the domestic demand, the grapes The average cost of transportation is estimated to be Rs 3.82 per tonne-km for a 16-tonnage truck.23 The grown in Nashik are exported mainly to the European and Middle Eastern countries. Additionally, Nashik cost of transportation per tonne-km on this route is relatively higher due to the usage of refrigerated is also home to a thriving wine industry with the presence of vineyards of leading brands such as Sula and vehicles for cargo movement on the route York, among others. Table. 2.12-1: Time and Cost Estimates of Transportation The grapes from Nashik are mainly exported from the JNPT port, Mumbai. A total of around 12,000- Average total time (including stoppage) – 12 Cost in INR per tonne km 14,000 containers per annum are moved from Nashik for export. The standard operating procedure for the hours export of grapes is that reefer containers are moved from the JNPT Port to grapes-packing houses in Time in hour per km This route National Average Nashik, and after loading, the trucks again move back to the port. This Route National Average 3.82 3.44 0.07 0.06 Nearly 96 per cent of the cargo is handled by integrated service providers due to the need for temperature Source: Authors’ estimates. control and specialised handling during cargo movement. All the cargoes are moved using reefer Note: We have estimated the national average by taking the simple average of the time required per km (cost in containers. INR per tonne-km) by reefer containers across the routes under study. Since the distance between Nashik and the JNPT port is only about 190 km, roadways is the preferred mode of transport. Cost of Logistics The estimated logistics costs per tonne-km are shown in Table 2.12-2. The high cost incurred on this

Figure 2.12-1: Route Map route is due to the use of refrigerated containers.

Table 2.12-2: Logistics Costs in INR per tonne-Km This route National Average Average cost 7.5 6.70 Cost incurred if undertaken by 3PL 7.55 6.66 firms Cost incurred if undertaken directly by 7.8 6.97 end users Source: Authors’ estimates. Note: We have estimated the national average by taking the simple cost in INR per tonne-km by reefer containers across the routes under study.

The share of components of the logistics costs on this route is shown in Figure 2.12-2. It may be noted that transportation accounts for nearly 51 per cent of the total logistics costs.

Impediments on the Route � There are several stretches of the road with a high degree of congestion, particularly the stretch near Bhiwandi in Thane, and the 40 km stretch from Thane to the JNPT port (Figure 2.12-1). � The truck drivers face harassment from the police near the JNPT port, who attempt to extort money from them. � There are incidences of harassment by gangs, especially along the ghat section of the highway.

22 The time for transportation in hours includes only the transit time, includingthe first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the warehousing, packaging, or material handling time on the route. 23 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity along the route. 78 79 79

Figure 2.12-2: Shares of Components of the Logistics costs (per cent)

Transportation 51.0% 50.0% Warehousing 11.5% 12.5% Material Handling 9.5% 10.0% Customs Clearance 6.5% 6.0% Documentation 4.0% 4.5% Logistics System 1.8% 1.8% Packaging Costs 3.5% 3.0% Administration cost 1.8% 2.0% Insurance cost 2.5% 2.8% Software & Maintenance 1.5%

1.5% Cost of Logistics Equipment 1.4% 1.4% Marketing cost 0.8% 1.0% IT - Hardware & Software 1.0% 1.0% Speed Money 0.3% 0.3% Demurrage 0.3% 0.3% Others 3.0% 2.0% Overall 3PL Firms Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing a complete range of logistics services to end-users. End-users can outsource 100 per cent of their logistics activities to such service providers.

Figure 2.12-3 shows the decomposition of the total cost in Rs per tonne-km by the principal logistics activities. Transportation seems to be principal cost element.

Figure 2.12-3: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne km kms.

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Figure 2.12-4 shows the distribution of the total time spent on the major components of logistics activities.

Figure 2.12-4: Logistics Time in Hours by activity Mode: Road

Logistics Time in Hours

Note: * The average number of days for warehousing on both sides=2

The efficiency of this route in terms of the time required for all logistics activities by roadways vis-à-vis the national average in shown in Table 2.12.3. Clearly, the route is an inefficient one in terms of the time spent per km.

Table 2.12-3: Logistics Time in hour per km This route National Average Average hour 0.46 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km by the same mode of travel across all the routes under study.

Perception Analysis of the Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on this route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 means that the challenge is of low intensity while a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 2.12-5. The most daunting challenges on this route are the availability of limited parking terminals with refreshment facilities for drivers, and harassment of the drivers by officials.

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Figure 2.12-5: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 9 Ease of Customs & 8 Harassment by Documentation 7 RTO officials 6 5 4 3 2 Infrastructure at 1 Pilferage/Leakage 0 JNPT Port of Consignment

Limited infrastructure in Harassment by terms of parking Police/ Other terminals with Agencies refreshment Need to pay Bribes/ Facilitation money

Movement of Export Cargo at the JNPT Port The movement of cargo at the JNPT port and the average time taken in hours for various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, is shown in Figure 2.12-6.

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Figure 2.12-6: Movement of Export Cargo at the JNPT Port (Hours)

Figure A2.12-1: Shares of Components in the Transportation Costs (Per cent) Mode: Road (Refrigerated cargo)

Fuel 61%

Tolls & Other Expenses on journey 10%

Salary and Allowances 14%

Maintenance including Consumables 8%

Speed Money/ Bribes 2%

Others (Vehicle Insurance, Vehicle Parking, 6% RTO Fines etc.)

83 83

2.13 EXIM Route: NCR (Noida) → Delhi Airport

Product: Export of Gems and Jewellery Items

Introduction

The National Capital Region (NCR) Export Production Cluster encompasses the entire NCT of Delhi and several districts surrounding it from the states of Haryana, Uttar Pradesh, and Rajasthan. The NCR consists of two operational Special Economic Zones (SEZs) for gems and jewellery. We have studied one of these, that is, the Noida SEZ for our route survey. The integrated service providers cater to 65 per cent of the cargo on this route. Nearly 90 per cent of the cargo is moved in a non-containerised manner. Containers are used only in the case of imitation jewellery.

Considering the extremely short distance of (~60-75 km) to be traversed on this route, roadways is the most feasible mode for transporting export-bound cargo from Noida to the Delhi airport.

Figure 2.13-1: Route Map

Impediments on the Route

� There is restriction on the movement of trucks within the Delhi city limits between 6 AM and 10 PM. � Since the available bypass (Kundli-Manesar-Palwal road) to reach the Delhi airport from the Noida SEZ is a very long stretch, it is not used due to the additional transportation time and cost it entails. � Harassment by the police and RTO officials is the norm on this route. Payment of speed money by truck drivers is the custom to facilitate their smooth passage through the city.

84 84

Time and Cost Estimates of Transportation The time taken for transporting cargo via roadways is estimated to be seven hours24 (Table 2.13-1). The average time for transporting cargo is high due to traffic congestion as well as the various stoppages the vehicle is forced to make for checking by the RTO officials and police.

The average cost of transportation on this route is Rs 2.35 per tonne-km for 16-tonnage trucks.25

Table. 2.13-1: Time and Cost Estimates of Transportation Average total time (including stoppage) – 7 hours Cost in INR per tonne km Time ( Hour/ km) This route National Average This Route National Average 2.35 2.79 0.10 0.06 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne-km) by the same mode of travel across all the routes under study.

Cost of Logistics

The estimated logistics costs per tonne-km on this route are shown in Table 2.13-2. The cost is significantly lower than the national average.

Table 2.13-2: Logistics Costs in INR per tonne-Km This route National Average Average cost 4.8 5.22 Cost incurred if undertaken by 3PL 4.55 5.08 firms Cost incurred if undertaken directly by 5.16 5.45 end users Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The shares of components of the logistics costs in this route are shown in Figure 2.13-2. It may be noted that transportation accounts for a little less than 50 per cent of the total logistics costs. Incidentally, this is one of the few routes where our estimates come to be lower than 50 per cent.

24 The time for transportation in hours includes only the transit time, including the first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the warehousing, packaging, or material handling time on the route. 25 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activities. 85 85

Figure 2.13-2: Shares of Components of the Logistics Costs (per cent)

Transportation 48.5% 49.0% Warehousing 11.0% 11.0%

Material Handling 4.0% 5.0% Customs Clearance 7.5% 6.5% Documentation 5.3% 5.5%

Logistics System 2.7% 2.4%

Packaging Costs 5.0% 5.0% Administration cost 3.0% 2.5% Insurance cost 3.0% 3.5%

Software & Maintenance 1.5% 1.3%

Cost of Logistics Equipment 1.5% 1.5%

Marketing cost 1.5% 1.5% IT - Hardware & Software 1.5% 1.5%

Speed Money 0.3% 0.3%

Demurrage 0.3% 0.3%

Others 3.0% 3.0%

Overall 3PL Firms

Figure 2.13-3 shows the decomposition of the total cost in Rs per tonne-km by the principal logistics activities. Transportation cost is understandably the largest component of the total cost.

Figure 2.13-3: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne km

86 86

Figure 2.13-4 shows the distribution of the time spent on various logistics activities.

Figure 2.13-4: Logistics Time in Hours by Activity Mode: Road

Logistics Time in Hours per

Note: *The average number of days for warehousing on both sides=2

The efficiency of this route in terms of the time required for all logistics activities by roadways vis-à-vis the national average in shown in Table 2.13.3. The time spent per km is significantly high on this route.

Table. 2.13-3: Logistics Time in Hour per km This route National Average Average hour 1.05 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km by road across all the routes under study.

Perception Analysis of the Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on this route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 means that the challenge is of low intensity while a score of 10 implies a high-intensity challenge/problem. The perceptions of the stakeholders are shown in Figure 2.13-5. Harassment of drivers by officials turns out to be the biggest problem on this route.

87 87

Figure 2.13-5: Intensity of the Challenges Faced in Transportation Road Condition including signage 10 Ease of Customs 9 Harassment by & 8 7 RTO officials Documentation 6 5 4 3 2 Airport 1 Pilferage of Infrastructure 0 Consignment

Limited Harassment by infrastructure in Police/ Other terms of parking Agencies terminals with Need to pay Bribes/ Facilitation money Movement of Export Cargo at the Delhi Airport The movement of cargo at the Delhi Airport and the average time taken in hours for completing various customs and other procedure at the Container Freight Station (CFS) and at the port, inclusive of material handling, is shown in Figure 2.13-6.

Figure 2.13-6: Movement of Export Cargo at the Delhi Airport (Hours)

88 88

Figure A2.13-1: Shares of Components in the Transportation Costs (per cent)

Fuel 61%

Tolls 5%

Salary and Allowances 16%

Maintenance including Consumables 9%

Speed Money/ Bribes 2%

Others 7%

89 89

2.14 EXIM Route: NCR → Mundra Port, Gujarat

Product: Export of Automobiles

Introduction The nnational Capital Region (NCR) is home to the second largest automotive cluster in India. The cluster is spread across three states—Uttar Pradesh, Haryana, and Delhi—and has production facilities for almost all the large established players in the automobile industry. The cluster accounts for approximately 30 per cent of passenger cars and 50 per cent of two-wheelers manufactured in the country.

Roadways is the principal mode adopted for the movement of export-bound cargo, even though the distance is about 1100 km (Figure 2.14-1). Of late, the use of railways for transporting cargo has increased significantly, primarily due to the direct cargo rail connectivity from ICDs in the NCR to the Mundra port (Figure 2.14-2).

Approximately 68 per cent of the cargo is handled by integrated service providers. On this route, nearly 90 per cent of the cargo is moved using containers or closed body vehicles. This is mainly due to the nature of the products, which necessitates the usage of closed-body vehicles for transportation. All the cargo on this route is transported via 40-feet containers.

Figure 2.14-1: Route Map Figure 2.14-2: Modal Shares in Transportation (per cent)

60%

40% 0%

Roadway Railway

Impediments on the Route � The signage at tolls on the highways at Rajasthan is inadequate as compared to the other highways. � There is a high degree of railway congestion in the NCR region during transit, leading to higher transportation time and sometimes, an opportunity cost in terms of missed delivery schedules. � Limited infrastructure is available in terms of the parking and resting facilities for truck drivers. � There are incidences of harassment by the RTO officials, especially along the state border between Rajasthan and Gujarat. The RTO squads try to harass the drivers and ask for bribes. Such incidents are witnessed more in the portion of the National Highway 27 that passes through Gujarat.

90 90

Time and Cost Estimates of Transportation

The average time in hours, including stoppage for cargo transportation, is estimated to be 57 hours for roadways and 72 hours for railways.26 The average time taken by railways is higher than that by roadways mainly due to the congestion in the NCR region caused by the excessive pressure on the prevailing railway infrastructure. To avoid this railway congestion within NCR, stakeholders have started adopting multimodal transportation on this route. Cargo is transported by roadways from NCR to the Kathuwas Concor ICD near Rewari, and subsequently the movement takes place by rail from Kathuwas to the Mundra port. This approach leads to significant cost savings for the end-users.

Table 2.14-1: Time and Cost Estimates of Transportation Average total time (hours) Cost in INR per tonne km Roadways Railways (first & last mile Roadways Railways (first & last mile transit by road) transit by road) 57 72 This National This route National Time (hour) per km route Average Average This National This route National 2.5 2.79 2 1.81 route Average Average 0.05 0.06 0.06 0.14 Mutimodal (This route): 65 Mutimodal (This route): 1.9 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne km) by the same mode of travel across all routes under study.

Table 2.14-1 also shows the cost of transportation per tonne-km for this route and the national average across all the routes.27 Although the cost of transportation by railways is lower than by other modes, sometimes railways is not preferred due to rail congestion within NCR that leads to delays. Although roadways is expensive, it is preferred, as the transit and product delivery in this case are not dependent on the schedule of cargo trains for the Mundra port. The use of multimodal transportation signals a new development in this route. However, it would take some time before we can expect a more pronounced shift in this direction.

The data in the table provides some indications regarding the efficiency of this route. The cost is lower in monetary terms by road relative to our estimated national average.

Cost of Logistics The average cost of logistics per tonne-km in this route is shown in Table 2.14-2. It varies between Rs 4.9 and Rs 5.2 per tonne-km, depending on the modes and type of logistics players. The cost is significantly lower than the national average.

26 The average time for transportation in hours includes only the time taken for transit, including the first-and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling. 27 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activities at the origin or destination of the route. We have assumed the tonnage of the truck to be 16 tonnes, which is the norm on this route. 91 91

Table 2.14-2: Logistics Costs in INR per tonne-km Indicators Roadway Railway (first & last mile transit by road) This National This route National route Average Average Average Cost 4.9 5.22 3.8 3.84 Cost incurred if undertaken by 3PL firms 4.8 5.08 3.75 3.75 Cost incurred if undertaken directly by end users 5.2 5.45 3.8 3.94 Average cost – Multimodal: 4 per tonne km Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonnekm by the same mode and the same type of players across all the routes under study.

The shares of various components of the overall logistics costs and separately for 3PL firms on this route are shown in Figure 2.14-3. Transportation is a principal component of the cost.

Figure 2.14-3: Shares of Components of the Logistics Costs (per cent)

Transportation 51.0% 51.0% Warehousing 12.0% 11.0% Material Handling 9.0% 9.5% Customs Clearance 6.4% 5.8% Documentation 4.0% 3.8% Logistics System 2.0% 2.3% Packaging Costs 2.0% 2.3% Administration cost 2.0% 2.0% Insurance cost 3.0% 2.5% Software & Maintenance 1.5% 1.3% Cost of Logistics Equipment 2.5% 3.0% Marketing cost 1.2% 1.0% IT - Hardware & Software 1.0% 1.0% Speed Money 0.5% 0.4% Demurrage 0.4% 0.3% Others 1.5% 3.0% Overall 3PL Firms

Figure 2.14-4 shows the decomposition of this cost for road by different activities. As expected, the major cost is that of transportation.

92 92

Figure 2.14-4: Logistics Costs in INR per tonne- km by Activity Mode: Road

Logistics Cost in INR per tonne km kms.

Figure 2.14-5 shows the decomposition of the similar costs when the mode of transport is railway.

Figure 2.14-5: Logistics Costs in INR per tonne-km by Activity Mode: Rail

Logistics Cost in INR per tonne-km s

Figures 2.14-6 and 2.14-7 show the decomposition of the total time spent on logistics by various components for roadways and railways, respectively.

93 93

Figure 2.14-6: Logistics Time in Hours by Activity Mode: Road

Logi stics Time in Hou rs

Note: *The average number of days for warehousing on both sides=2

The efficiency of this route in terms of the time required for all logistics activities by roadways/railways vis-à-vis the national average is shown in Table 2.14-3. The time spent seems to be lower than the national average.

Figure 2.14-7: Logistics Time in Hours by Activity Mode: Rail

Logist ics Time in Hours

Note: *The average number of days for warehousing on both nodes=2

^The average number of days of storage during transit = 1

94 94

Table 2.14-3: Logistics Time in Hours per km Measure Roadways Railways This route National Average This route National Average Average hour 0.11 0.41 0.12 0.26 Source:Authors’ estimates. Note: For the railways, the first-/last-mile transit is assumed to be roadways.

Perception Analysis of Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on this route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 means that the challenge is of low intensity while a score of 10 implies a high-intensity challenge/problem. Figure 2.14-8 shows the perceptions of the respondents. The port infrastructure, road condition, customs procedure, and documentation seem to represent a low degree of challenges faced on this route.

Figure 2.14-8: Intensity of Challenge

Road Condition including signage 10 Ease of Customs & 9 Harassment by RTO Documentation 8 officials 7 6 5 4 Pilferage of Port Infrastructure 3 Consignment 2 1 0 Limited Harassment by infrastructure in Police/ Other terms of parking Agencies terminals with

Unavaliability of Need to pay Bribes/ Intermodal exchange Facilitation money points Limitations in terms of Rail Infrastructure

95 95

Movement of Export Cargo at the Mundra Port The movement of cargo at the Mundra port and the average time taken in hours for completion of various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, are shown in Figure 2.14-9.

Figure 2.14-9: Movement of Export Cargo at the Mundra Port (Hours)

Figure A2.14-1: Shares of Components in the Transportation Costs (per cent)

Mode: Road

Fuel 53%

Tolls 15%

Salary and Allowances 14%

Maintenance including 9% Consumables

Speed Money/ Bribes 2%

Others (Vehicle Insurance, Vehicle Parking, RTO Fines 7% etc.)

96 96

2.15 EXIM Route: Porbandar → Mumbai

Product: Import of Cosmetics Items

Introduction The distance by road on this route is about 890 km. Roadways is still the most feasible mode for transporting imported cosmetics products from Porbandar to Mumbai due to the absence of scheduled cargo trains on this route.

Approximately 70 per cent of the cargo is handled by integrated service providers on this route. The share of containerised cargo/closed-body vehicles is about 80 per cent. Containers that are 40 feet in length are typically used for transporting the cargo.

Figure 2.15-1: Route Map

Impediments on the Route � Some of the traffic congestion points on this route are Godbunder in Thane on the outskirts of Mumbai city, Bhilad, and Achad at the border between Gujarat and Maharashtra. � The drivers face harassment from the RTO officials, especially around the Bhilad border over technicalities such as the absence of a second driver in the vehicle, and the driver not wearing shoes, among other things, which ultimately force the drivers to pay bribes to these officials. � There are restrictions on the entry and movement of cargo trucks within Mumbai city from 7 AM to 10 PM. This increases the waiting time, if the travel is not planned accordingly.

97 97

Time and Cost Estimates of Transportation

The time for transporting cargo via roadways is estimated to be 72 hours (Table 2.15-1)28. The average time for transporting cargo on this route seems to be high relative to the national average.

The average cost of transportation is estimated to be Rs 2.44 per tonne-km for a 16 tonnage truck, which is lower than the national average.29

Table 2.15-1: Time and Cost Estimates of Transportation Average total time (including stoppage) – 12 Cost in INR per tonne km hours Time ( hour) per km This route National Average This Route National Average 2.44 2.79 0.08 0.06 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne-km) by the same mode of travel across all the routes under study.

Cost of Logistics The estimated cost of logistics per tonne-km in this route is shown in Table 2.15-2. The average cost seems to be 14 per cent per tonne-km on this route.

Table 2.15-2: Logistics Costs in INR per tonne-km Indicator This route National Average Average cost 4.7 5.22 Cost incurred if undertaken by 3PL 4.5 5.08 firms Cost incurred if undertaken directly by 4.85 5.45 end users Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average (cost in INR per tonne-km) by the same mode of travel across all the routes under study.

The shares of various components of the overall logistics costs on this route are shown in Figure 2.15-2. Transportation seems to be the principal cost element.

28 The time for transportation in hours includes only the transit time, includingthe first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the warehousing, packaging, or material handling times. 29 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activities. 98 98

Figure 2.15-2: Shares of Components of the Logistics Costs (per cent)

Transportation 52.5% 51.7%

Warehousing 11.3% 10.8%

Material Handling 9.6% 9.9%

Customs Clearance 6.5% 6.3%

Documentation 5.0% 4.9% Logistics System 2.0% 2.2% Management Administration cost 1.5% 1.8%

Insurance cost 2.5% 2.5%

Software & Maintenance 1.0% 1.5%

Cost of Logistics Equipment 1.4% 1.8% Marketing cost 0.5% 1.0% IT - Hardware & Software 0.7% Cost 1.0%

Speed Money 0.3% 0.3%

Demurrage 0.4% 0.4%

Others 4.0% 4.0%

Overall 3PL firms

Figure 2.15-3 shows the decomposition of the cost in Rs per tonne-km by the principal logistics activities.

Figure 2.15-3: Logistics Costs in INR per tonne-km by Activity

Mode: Road

Logistics Cost in INR per tonne- km kms.

99 99

Figure 2.15-4 shows the distribution of the total time spent on logistics activities by major components. It may be noted that three activities, viz., warehousing activities, actual transportation, and stoppage during transit, are the three principal components of logistics activities that take the maximum time.

Figure 2.15-4: Logistics Time in Hours by Activity Mode: Road

Logistics Time in Hours

Note: * The average number of days for warehousing at both nodes =1.5 days. Warehousing at destination is only considered till de-containerisation. Warehousing time at the port is only considered after customs clearance.

The efficiency of this route in terms of the time required for all logistics activities by roadways vis-à-vis the national average in shown in Table 2.15.3. The time spent per km is significantly lower on this route.

Perception Analysis of the Transportation Challenges Table. 2.15-3: Time Costs of Logistics in Hour per km This route National Average Average hour 0.13 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km by the same mode of travel across all the routes under study.

The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on this route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 means that the challenge is of low intensity while a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 2.15-5. The score is about 3, signifying a low-intensity challenge on two counts, viz., the road condition and pilferage of consignments. There is, however, considerable scope for improvement on all the other counts.

100 100

Figure 2.15-5: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Ease of Customs & 9 Harassment by RTO 8 Documentation 7 officials 6 5 Porbandar Port 4 Pilferage/Leakage 3 Infrastructure 2 of Consignment 1 0 Limited Harassment by infrastructure in Police/ Other terms of parking Agencies Unavaliability of Need to pay Bribes/ Intermodal Facilitation money exchange points Limitations in terms of Rail Infrastructure

Movement of Import Cargo at the Porbandar Port The movement of import cargo at the Porbandar port and the average time taken in hours for completing various customs and other procedures at the port, inclusive of material handling, until the goods move out of the port, are shown in Figure 2.15-6. Figure 3.15-6: Movement of Import Cargo at the Porbandar Port (Hours)

Note: - a) IGM = Import General Manifest b) CHA = Customs House Agent

101 101

Figure A2.15-1:Shares of Components in the Transportation Costs, Mode: Road (per cent)

Fuel 54%

Tolls 15%

Salary and Allowances 15%

Maintenance including 7% Consumables

Speed Money/ Bribes 3%

Others(Vehicle Insurance, Vehicle 6% Parking,RTO fines etc.)

102 102

2.16 EXIM Route: Pune→ Mumbai Airport

Type of Cargo: Export of Floriculture

Introduction The Pune region is one of the biggest floriculture production centres in India, spread across a radius of 100 to 200 kilometres. The cluster is the largest producer of flowers like Dutch Rose, Marigold, Chandni, Aastar, and White Sewanti, and is also a major producer of high-quality ornamental flowers, trees, and potted plants. It accounts for one-third of the flower exports from India. It has a locational advantage of being close to Mumbai where India's biggest perishable cargo complex exists, enabling quick export of these products. This cluster exports fresh flowers to countries like Australia, Japan, the UK, the Netherlands, and UAE.

A majority of the cargo, viz., 88 per cent, is handled by integrated service providers. The entire cargo is moved using temperature-controlled vehicles or reefer containers on the Pune-Mumbai (floriculture) cargo route.30 Approximately 50 per cent of the containers used for cargo movement are 40 feet in length, whereas the remainder are 20 feet in length.

Given the short distance of 150 km, and the need for temperature-controlled transportation for the export of flowers, transportation of the product on this route is undertaken primarily by roadways (Figure 2.16- 2). Airways is used only in the case of mandatory requirements imposed by importers.

Figure 2.16-1: Route Map Figure 2.16-2: Modal Shares Transportation (per cent)

99%

1% 0%

Roadway Airway

Impediments on the Route � Traffic congestion in areas close to the Mumbai airport is common on this route. � Harassment by police officials for extracting money from the truck drivers in Mumbai, especially in Navi Mumbai and areas close to the airport, is a major problem. � There are restrictions on the entry and movement of cargo trucks in Mumbai between 7 AM and 10 PM. This increases the waiting time if the travel is not planned accordingly.

30 The containerised freight here consists of cargo movement by containers as well as closed-body vehicles. 103 103

Time and Cost Estimates for Transportation

Table 2.16-1 shows the time and cost estimates of transportation via roadways on this route.31 As this table shows, the cost of road transportation per tonne-km is relatively higher as compared to that on other similar routes.

Table 2.16-1: Time and Cost Estimates of Transportation Average total time (including stoppage) – 7 hours Cost in INR per tonne km Time ( hour) per km This Route National Average This Route National Average 3.65* 3.44* 0.05 0.06 Source: Authors’ estimates. Note: * Refrigerated cargo We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne km) by the same mode of travel across all routes under study.

Cost of Logistics The average cost of logistics in INR per tonne-km by various modes is shown in Table 2.16-2. It may be noted that employing 3PL providers lowers the cost in all the modes of transportation. The higher cost on this route is due to the use of specialized temperature-controlled containers for movement of floriculture items.

Table 2.16-2: Logistics Costs in INR per tonne-km Indicators Roadway This route National Average Average Cost 7.3 6.7 Cost incurred if undertaken by 3PL firms 7.3 6.66 Cost incurred if undertaken directly by end users 7.5 6.97 Source: Authors’ estimates.

The shares of various components of the overall logistics costs are shown in Figure 2.16-3. Transportation and warehouse are the two major item costs. This is true for all logistics players combined as well as for 3PL firms.

31 The average total time for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging or material handling at either the origin or the destination on the route. Similarly, the average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity on the route.

104 104

Figure 2.16-3: Shares of Components of the Logistics Costs (per cent)

Transportation 50.0% 50.0% Warehousing 11.0% 10.0%

Material Handling 8.0% 8.0% Customs Clearance 6.8% 6.6%

Documentation 5.0% 4.8%

Logistics System 2.6% 2.6%

Packaging Costs 3.2% 3.5%

Administration cost 2.3% 2.4%

Insurance cost 3.0% 3.0% Software & Maintenance 1.0% 1.5% Cost of Logistics Equipment 2.5% 2.8%

Marketing cost 1.0% 1.0%

IT - Hardware & Software 1.2% 1.0% Speed Money 0.3% 0.3% Demurrage 0.5% 0.5%

Others 2.0% 2.0% Overall 3PL Firms

Figure 2.16-4 shows the decomposition of this cost by various activities when the mode of transport is roadways. As expected, transportation accounts for the major cost.

Figure 2.16-4: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne-km

Figure 2.16-5 shows the distribution of the time spent on various logistics activities.

105

Figure 2.16-5: Logistics Costs in Hours by Activity Mode: Road

Logi stics Tim e in Hou r

Note: *The average number of days for warehousing on both sides=2

The efficiency (time in hours) of this route vis-à-vis the national average is shown in Table 2.16.3. Table 2.16-3: Logistics Time in Hour per km, Mode: Road Measure This Route National Average Average hour 0.48 0.41 Source: Authors’ estimates.

Perception Analysis of the Transportation Challenges We have attempted to measure the intensity of the challenges faced on this route based on interactions with stakeholders. Here, a score of 1 means that the challenge is of low intensity whereas a score of 10 implies a high-intensity challenge/problem. The relevant findings are shown in Figure 2.16-6. As this figure shows, there is no issue of the stake-holders in respect of road condition or pilferage of consignments. The main challenge is harassment by the police and other officials.

106 106

Figure 2.16-6: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 9 Ease of Customs & 8 Harassment by RTO Documentation 7 officials 6 5 4 3 2 Airport 1 Pilferage/Leakage 0 Infrastructure of Consignment

Limited infrastructure in Harassment by terms of parking police terminals with refreshment Need to pay Bribes/ Facilitation money

Movement of Export Cargo at the Mumbai Airport The movement of cargo at the Mumbai Airport and the average time taken in hours for completion of various customs and other procedures at the Container Freight Station (CFS) and at the port (inclusive of material handling) are given in Figure 2.16-7.

107 107

Figure 2.16-7: Movement of Cargo at the Mumbai Airport

Figure A2.16-1: Shares of Components in the Transportation Costs, Mode: Road (per cent)

Fuel 55%

Tolls 15%

Salary and Allowances 15%

Maintenance including Consumables 7%

Speed Money/ Bribes 2%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO fines etc.)

108 108

2.17 EXIM Route: Pune → Mumbai Airport

Product: Export of Pharmaceutical Products Introduction Pune is a major bio-pharmaceutical hub in the state of Maharashtra. The Serum Institute of India, one of the oldest Indian firms and largest biopharmaceutical companies in the country, is based in Pune. Apart from that, the cluster also houses companies like Maple Biotech Pvt Ltd, Emcure Pharmaceuticals Ltd, Acton Biotech Pvt Ltd, TCG Lifesciences Limited, Hikal, Lupin Pharmaceuticals, Hindustan Antibiotics Ltd, and CIAN Health Care Pvt Ltd, among others. The distance of Pune from Mumbai airport is about 160 km. Most of the cargo, viz. 98.5 per cent, is moved by roadways due to the presence of a well-connected road. Only in rare cases entailing tight delivery schedules is the cargo moved by airways. Nearly 95 per cent of the total cargo is moved using containers or closed-body vehicles. This is driven by mandatory requirements imposed by buyers, where a large component of the cargo is transported using temperature-sensitive vehicles or reefer containers. Approximately 60 per cent of the containers used for cargo movement are 40 feet in length, whereas the rest are 20 feet in length. Approximately 78 per cent of the cargo is handled by integrated service providers on this route.

Figure 2.17-1: Route Map

Impediments on the Route � There is traffic congestion within Mumbai city limits, especially in close proximity to Mumbai airport. � Harassment by police officials in Navi Mumbai and areas closer to the airport is also a challenge on this route. � There are restrictions on the entry and movement of cargo trucks within Mumbai city between 7 AM and 10 PM.

109 109

Time and Cost Estimates of Transportation

The time taken for transporting cargo via roadways is estimated to be seven hours32 (Table 2.17-1). The average cost of transportation by roadways on this route is estimated to be Rs 3.35 per tonne-km for a 16- tonnage truck.33 The cost of road transportation per tonne-km is relatively lower higher as compared to that on other similar routes. Table 2.17-1: Time and Cost Estimates of Transportation Average total time (hours) Cost in INR per tonne km Roadways Airways (first mile transit by Roadways road) 7 5 This National Average Route Time (hour) per km (Road) This route National Average 3.35 3.44 0.05 0.06 Source: Authors’ estimates. Note:We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne km) by the same mode of travel across all routes under study.

Cost of Logistics

The cost of logistics per tonne-km by roadways and airways by the type of operators is shown in Table

Table 2.17-2: Logistics Costs in INR per tonne-km Indicators Roadway This National Route Average Average Cost 6.4 6.7 Cost incurred if undertaken by 3PL firms 6.28 6.66 Cost incurred if undertaken directly by end users 6.8 6.97 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple cost in INR per tonne km by the same mode of travel across all routes under study.

2.17-2. Note that the cost on this route is lower than the national average.

The shares of various components of the overall logistics costs on this route are shown in Figure 2.17-2. As expected, transportation accounts for the major cost.

32 The time for transportation in hours includes only the transit time,including the first- and last-mile connectivity to warehouses and stoppages during transit. 33 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. 110 110

Figure 2.17-2: Shares of Components of the Logistics Costs (per cent)

Transportation 52.0% 53.0%

Warehousing 11.0% 10.0%

Material Handling 9.0% 9.0% Customs Clearance 7.0% 6.5%

Documentation 4.5% 4.5% Logistics System 2.6% 2.6%

Packaging Costs 2.8% 2.9%

Administration cost 2.3% 2.4%

Insurance cost 3.0% 3.0% Software & Maintenance 1.0% 1.0%

Cost of Logistics Equipment 1.5% 1.5%

Marketing cost 1.0% 1.0% IT - Hardware & Software 0.5% 0.5% Speed Money 0.3% 0.3%

Demurrage 0.5% 0.5% Others 1.0% 1.0%

Overall 3PL Firms

Figure 2.17-3 shows the decomposition of this cost by different activities. As expected, the major cost is that of transportation. Figure 2.17-3: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne- km kms.

111 111

Figure 2.17-4 shows the distribution of the total time spent on logistics activities by major components.

The transportation time for the package amounts to 10 hours, probably due to the nature of the product.

Figure 2.17-4: Logistics Time Hours by Activity Mode: Road

Logistics Time in Hour

Note: *Theaverage number of days for warehousing on both sides=2

The efficiency of this route in terms of the time required for all logistics activities by roadways/railways vis-à-vis the national average in shown in Table 2.17-3. The time spent seems to be higher than the corresponding national average. It should be kept in mind that package needs considerable time for transportation due to the nature of the product.

Table. 2.17-3: Logistics Time in Hours per km, Mode: Road This Route National Average Average hour 0.48 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km by the same mode across all the routes under study.

Perception Analysis of Transportation Challenges The information was collated on the basis interactions with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity while a score of 10 implies a high intensity challenge/problem. The relevant findings are shown in Figure 2.17-5.

112 112

Figure 2.17-6: Intensity of the Challenges Faced in Transportation Road Condition including signage 10 Ease of 9 Harassment by Customs & 8 7 RTO officials Documentation 6 5 4 3 2 Pilferage/ Airport 1 Leakage of Infrastructure 0 Consignment

Limited infrastructure in Harassment by terms of Gangs parking terminals with Need to pay Bribes/ Facilitation money

Movement of Export Cargo at the Mumbai Airport

The movement of cargo at the Mumbai Airport and the average time taken in hours for completion of various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, are shown in Figure 2.17-7.

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Figure 2.17-8: Movement of Export Cargo at the Mumbai Airport (Hours)

Figure A2.17-1: Shares of Components in the Transportation Costs (per cent)

Fuel 51%

Tolls 15%

Salary and Allowances 15%

Maintenance & Consumables 9%

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle 7% Parking, RTO fines etc.)

114 114

2.18 EXIM Route: Rajkot → Pipavav

Product: Export of Inorganic Chemicals

Introduction Rajkot city hosts several small-scale manufacturing industries. Some of the industrial products for which Rajkot is known include inorganic chemicals, diesel engines, kitchenware, watch parts, auto components, machine tools, and inorganic chemicals. There are 1864 registered micro and small industrial units within the Rajkot chemical cluster, which provide direct employment to approximately 15,000 people. Although the chemical cluster is largely focussed on domestic demand, there is a push by the government to increase chemical exports from the region.

Considering the short haul of 200 kms) and the non-availability of direct dedicated cargo train connectivity from Rajkot to the Pipavav port, roadways is the only option for the movement of export- bound inorganic chemicals on this route.

Out of the total export bound inorganic chemicals transported in this sector, Approximately 65 per cent of the total export-bound cargo of inorganic chemicals transported on this sector is handled by integrated service providers and the remaining by stand-alone operators. All the cargoes are moved in containers. As regards the container size, containers of both 20 feet as well 40 feet in length are equally used on this route.

Figure 2.18-1: Route Map

Impediments on the Route Figure 2.18-1 shows that the route is characterised by several congestion points. The road is narrow in comparison to the density of traffic on the route. This reduces the speed of traffic, thus increasing the turnaround time for cargo movement. There is limited infrastructure at the toll plazas in terms of the number of toll gates leading to the piling of traffic.

115 115

Time and Cost Estimates of Transportation

The time taken for transporting cargo via roadways is estimated to be 9 hours34 (Table 2.18-1).

The average cost of transportation on this route is Rs 2.78 per tonne-km for 16-tonnage trucks.35 It may be noted that the cost on par with our estimated national average.

Table. 2.18-1: Time and Cost Estimates of Transportation, Mode: Road Average total time (including stoppage) – 9 hours Cost in INR per tonne km Time ( hour) per km) This Route National Average This Route National Average 2.78 2.79 0.05 0.06 Source: Authors’ estimates. Note: * The estimate for national average is not computed due to limited number of observations. We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne km) by the same mode of travel across all routes under study.

Cost of Logistics The estimated cost of logistics per tonne-km on this route is shown in Table 2.18-2. The cost seems to be lower than the national average.

Table 2.18-2: Logistics Costs in INR per tonne-Km, Mode: Road This Route National Average Average cost 5 5.22 Cost incurred if undertaken by 3PL 4.85 5.08 firms Cost incurred if undertaken directly by 5.14 5.45 end users Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of cost in INR per tonne km by the same mode of travel across all routes under study.

The shares of various components of the overall logistics costs are shown in Figure 2.18-2. The transportation component of the cost seems to be nearly 55 per cent, which is higher than that incurred on other routes.

34 The time for transportation in hours includes only the transit time, including the first- and last-mile connectivity to warehouses and stoppages during transit. 35 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. 116 116

Figure 2.18-2: Shares of Components of the Logistics Costs (per cent)

Transportation 56.0% 55.8% Warehousing 10.0% 10.5%

Material Handling 8.5% 9.0% Customs Clearance 6.7% 6.0% Documentation 4.5% 5.0% Logistics System 1.5% 1.8% Packaging Costs 2.8% 3.0% Administration cost 1.8% 1.5% Insurance cost 2.5% 2.4% Software & Maintenance 1.5% 1.0% Cost of Logistics 1.5% 2.0% Marketing cost 0.5% 1.0% IT - Hardware & Software 1.2% 0.5% Speed Money 0.3% 0.2% Demurrage 0.6% 0.5% Others 0.5% 0.0%

Overall 3PL Firms

Figure 2.18-3 shows the decomposition of the total cost in Rs per tonne-km by the principal logistics activities.

Figure 2.18-3: Logistics Costs in INR per tonne-km by Activity Mode: road

Logistics Cost in INR per tonne km

117 117

Figure 2.18-4 shows the distribution of the total time spent on various logistics activities.

Figure 2.18-4: Logistics Time in Hours by Activity Mode: Road

Logistics Time in Hour

Note: *The average number of days for warehousing on both sides=2

The efficiency of this route in terms of the time required for all logistics activities vis-à-vis the corresponding national average in shown in Table 2.18-3. The time spent seems to be lower than the corresponding national average.

Table. 2.18-3: Logistics Time in Hour per km, Mode: Road This Route National Average Average hour 0.37 0.41 Source: Authors’ estimates.

Perception Analysis of Transportation Challenges The information was collated on the basis of interaction with stake-holders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on the route during cargo transportation is mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity while 10 implies a high-intensity challenge/problem. The perception of the stake-holders is shown in Figure 2.18-5. It seems that there is considerable scope for improvement in the soft infrastructure, which could help address the problems of harassment by officials and the demand for facilitation money, and ease customs and documentation procedures, among other things. The port infrastructure also seems to be good.

118 118

Figure 2.18-5: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Ease of Customs & 9 Harassment by RTO 8 Documentation 7 officials 6 5 4 3 Pipavav Port 2 Leakage of Infrastructure 1 Consignment 0

Limited Harassment by infrastructure in Police/ Other terms of parking Agencies terminals with Need to pay Bribes/ Limitations in terms Facilitation money of Rail Infarstructure

Movement of Export Cargo at the Pipavav Port The movement of cargo at the Pipavav port and the average time taken in hours for the completion of various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, are shown in Figure 2.18-6.

Figure 2.18-6: Movement of Export Cargo at the Pipavav port (Hours)

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Figure A 2.18-1: Shares of Components in the Transportation Costs, Mode: Road (per cent)

Fuel 60%

Tolls & Other Expenses on journey 12%

Salary and Allowances 13%

Maintenance including Consumables 6%

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO fines etc.)

120 120

2.19 EXIM Route: Surat Hazira (Agro Products) Product: Export of Agricultural Products

Introduction Surat district and the adjoining areas constitute the one of the important horticulture zones in Gujarat. Green gram, mango, banana, sapota, sugarcane, groundnut, fennel and cumin are the major crops grown in the district. The region ranks first in papaya and second in banana production in Gujarat, accounting for approximately 15 per cent of the total fruit production in the country.

Bahety Corporation, JK Food Industries, Tapi Food Products, and Gujarat Food Products are some of the major food processing companies present in the agro cluster in Surat. Surat is notified under the Agri Export Zone for mangoes and vegetables. In a bid to boost the agro processing industry in the cluster, the government established Gujarat’s first mega park in Surat District in October 2018.

The agro products from this cluster are largely exported via Hazira port. Considering the extremely short distance of approximately 35-40 km, roadways is a feasible mode used for transporting cargo.

Approximately 55 per cent of the total cargo transported on this route is handled by integrated service providers. Approximately 42 per cent of the cargo on this route is moved using containers or closed-body vehicles (Figure 2.19-2). The percentage of containerisation is lower as the product category does not necessitate movement by containers. Nearly 60 per cent of the containers used for cargo movement on this route are 20 feet in length, whereas the rest are 40 feet in length.

Figure 2.19-1: Route Map

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Impediments on the Route � Apart from being narrow, the condition of the road from Surat to the Hazira port is not good. This results in huge traffic congestion as one approaches the Hazira port. Sometimes the trucks are forced to pay detention charges due to the congestion. � The police officials harass the drivers over technical reasons and try to seek bribes from them as they approach the port.

Figure 2.19-2: Share of Containerised Cargo (per cent)

42% 58%

Containerised movement Non-Containerised movement

Time and Cost Estimates of Transportation Although the distance to be covered is just 35-40 km, stoppage during the journey due to huge traffic congestion on the road and near the Hazira port, in particular, leads to an average duration of four hours for transportation (Table 2.19-1).36

The average cost of transportation on this route is observed to be Rs 3.30 per tonne-km for 16-tonnage trucks. The cost of transportation by roadways per tonne-km on the Surat-Hazira route for the transportation of agro products is relatively higher as transporters charge more due to the heavy traffic congestion present on the route.37 Table 2.19-1: Time and Cost Estimates of Transportation, Mode: Road Average total time (including stoppage) – 4 hour Cost in INR per tonne km Time ( hour) per km This Route National Average This Route National Average 3.30 2.79 0.11 0.06 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne km) by the same mode of travel across all routes under study.

36The average time for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. 37 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation.

122 122

Cost of Logistics The average cost of logistics in INR per tonne-km is shown in Table 2.19-2. The cost is higher than the corresponding national average.

Table 2.19-2: Logistics Costs in INR per tonne-km, Mode: Road This Route National Average Average cost 6.7 5.22 Cost incurred if undertaken by 3PL 6.6 5.08 firms Cost incurred if undertaken directly by 6.7 5.45 end users Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne- km by the same mode of travel across all routes under study.

The shares of various components of the overall logistics costs on this route are shown in Figure 2.19-3.

Figure 2.19-3: Shares of Components of the Logistics Costs (Per cent)

47.8% Transportation 49.0% 12.5% Warehousing 13.0% 9.7% Material Handling 10.0% 6.0% Customs Clearance 6.3% 4.8% Documentation 4.9% 2.5% Logistics System 2.0% 3.0% Packaging Costs 3.2%

2.5% Administration cost 2.0% Insurance cost 2.0% 2.0% 1.8% Software & Maintenance 1.4% Cost of Logistics Equipment 1.9% 2.0%

Marketing cost 0.8% 1.0% IT - Hardware & Software 1.4% 1.0% 0.4% Speed Money 0.4% 0.8% Demurrage 1.0% Others 1.0% 2.0%

Overall 3PL Firms

Figure 2.19-4 shows the decomposition of this cost by various logistics activities. As expected, the major cost is that of transportation.

123 123

Figure 2.19-4: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne- km

Figure 2.19-5 shows the decomposition of the logistics time in hours by various activities.

Figure 2.19-5: Logistics Time in Hours by Activity, Mode: Road

Logistics Time in Hours

Note: *The average number of days for warehousing on both sides=2

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The efficiency (time in hours) of this route vis-à-vis the national average is shown in Table 2.19.3.

Table 2.19-3: Logistics Time in Hours per km Measure Roadways This Route National Average Average hour 1.81 0.41 Source: Authors’ estimates. Note: For the railways, first/last mile transit is assumed to be roadways.

Perception Analysis of the Transportation Challenges We have attempted to measure the intensity of the challenges faced on this route based on interactions with stakeholders. Here, a score of 1 implies that the challenge is of low intensity whereas a score of 10 indicates a high-intensity challenge/problem. The relevant findings are shown in Figure 2.19-6. As this figure shows, there is no issue of the stake-holders in respect pilferage of consignment. The score is more than 5 for all the other parameters. The top problem area is harassment of the truck drivers by the police and other officials.

Figure 2.19-6: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 9 Ease of Customs & 8 Harassment by RTO Documentation 7 officials 6 5 4 3 2 Hazira Port 1 Pilferage/Leakage of Infrastructure 0 Consignment

Limited infrastructure in Harassment by terms of parking Police/ Other terminals with Agencies refreshment Need to pay Bribes/ Facilitation money

Movement of Export Cargo at the Hazira Port The movement of cargo at the Hazira port and the average time taken in hours for completion of various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, are shown in Figure 2.19-7.

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Figure 2.19-7: Movement of Export Cargo at the Hazira Port (Hours)

Figure A2.19-1: Shares of Components in the Transportation Costs (per cent) Mode: Road

Fuel 65%

Tolls & Other Expenses on journey 8%

Salary and Allowances 12%

Maintenance & Consumables 8%

Speed Money/ Bribes 2%

Others 5%

126 126

2.20 Route: Surat → JNPT Port

Product: Export of Textiles Items

Introduction Surat is one of the largest textile manufacturing clusters in India. The textile cluster is mainly engaged in the activities of yarn production, weaving, processing as well as embroidery. It is also well known for its synthetic products market as it is engaged in the production and trading of synthetic textile products. The major export destinations of this cluster are USA, Europe, UAE, and other countries in the Middle East.

Considering the short haul of 300 kms on this route, and last-mile connectivity, roadways is the preferred mode for transporting export-bound textiles from Surat to JNPT. The movement using railways is undertaken via the Ankleshwar Inland Container Depot (ICD), which is situated at a distance of around 40 km from Surat. However, our interactions reveal that the share of railways is hardly 2 per cent.

The integrated service providers (3PL firms) cater to 68 per cent of the cargo on this route. Most of the cargo (90 per cent) is moved using containers or closed-body vehicles. Approximately 60 per cent of the containers used for cargo movement are 40 feet in length, whereas the rest are 20 feet in length.

Figure 2.20-1: Route Map

Impediments on the Route � The stretch between Godbunder in Thane (Maharashtra) and the JNPT port, and between Bhilad and Achad at the Gujarat–Maharashtra border are traffic congestion points (Figure 2.20-1). � There are restrictions on the entry of cargo vehicles within the Mumbai region after Godbunder between 7 AM and 10 PM. This increases the waiting time, if the travel is not planned accordingly. � The signage at tolls plazas is inadequate/improper as compared to that on other highways. � There are incidences of harassment by the RTO officials, especially around the Bhilad border over technicalities such as the non-availability of a second driver in the vehicle, and the driver not wearing shoes, among other things, for the purpose of extracting bribes/facilitation money.

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� There are also incidences of harassment by police officials within Mumbai city near the JNPT port for extracting bribes from truck drivers.

Time and Cost Estimates for Transportation

The average time in hours including stoppage for cargo transportation is estimated to be 20 hours for roadways and 86 hours for railways38 (Table 2.20-1). The lack of connectivity by scheduled cargo trains to the JNPT port leads to long waiting times during transit if the cargo is being transported by railways. Table 2.20-1: Time and Cost Estimates of Transportation Average total time (hours) Cost in INR per tonne km Roadways Railways (first & last mile Roadways Railways (first & last mile transit by road) transit by road) 20 86 This National This Route National Time (hour) per km Route Average Average This National This Route National 2.8 2.79 2.2 1.81 Route Average Average 0.07 0.06 0.29 0.14 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne-km) by the same mode of travel across all routes under study.

Table 2.20-1 also shows the cost of transportation per tonne-km for this route and the national average across all the routes.39 The data in the table provides some indications regarding the efficiency of this route. While the cost is on par if roadways are used, it is significantly higher in case of usage of railways.

Cost of Logistics The average cost of logistics per tonne-km for the two modes of transport on this route is shown in Table 2.20-2. It varies between Rs 4.8 and Rs 5.2 per tonne-km, depending on the modes and type of the logistic player. While the logistics cost via roadways is marginally lower than the corresponding national average, it is higher when railways are used as a mode of transportation.

Table 2.20-2: Logistics Costs in INR per tonne-km Indicators Roadway Railway (first & last mile transit by road) This National This National Route Average Route Average Average Cost 5.2 5.22 4.4 3.84 Cost incurred if undertaken by 3PL firms 5.1 5.08 4.3 3.75 Cost incurred if undertaken directly by end users 5.4 5.45 4.8 3.94 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple cost in INR per tonne km by the same mode of travel across all routes under study.

38 The average time for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. 39The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination along the route. We have assumed the tonnage of the truck to be 16 tonnes, which is the norm on this route.

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The shares of various components of the overall logistics costs on this route are shown in Figure 2.20-2. The transportation cost comes out to be about 53 per cent of the total cost.

Figure 2.20-2: Shares of Components of the Logistics Costs (per cent)

53.0% Transportation 53.0% 10.0% Warehousing 9.0% 9.0% Material Handling 8.0% 6.5% Customs Clearance 6.0% 4.6% Documentation 5.0%

2.2% Logistics System 2.0% 2.8% Packaging Costs 3.0% 2.0% Administration cost 2.0% Insurance cost 3.0% 2.5%

Software & Maintenance 1.5% 1.5% Cost of Logistics Equipment 1.5% 2.0% 1.0% Marketing cost 1.0% IT - Hardware & Software 1.0% 1.0%

Speed Money 0.4% 0.8% Demurrage 1.0% 1.0% Others 2.5% 0.0% 3PL Firms Overall Note: 3PL Logistics Service Provider —This refers to an integrated service provider providing the complete range of logistics service to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers.

Figures 2.20-3 and Figure 2.20-4 show the decomposition of this cost in INR per tonne-km by different activities for roadways and railways, respectively.

Figure 2.20-3: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logisti cs Cost in INR per tonne km

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Figure 2.20-4: Logistics Costs in INR per tonne-km by Activity Mode: Rail

Logisti cs Cost in INR per tonne km

Figures 2.20-5 and 2.20-6 show the decomposition of the time cost of logistics for various activities by roadways and railways, respectively.

Figure 2.20-5: Logistics Time in Hours by Activity Mode: Road

Logistics Time in hours

Note: *The average number of days for warehousing on both sides=2

130 130

Figure 2.20-6: Logistics Time in Hours by Activity Mode: Rail

Logistics Time in Hour

Note: *The average number of days for warehousing on both nodes=2 The average number of days of storage during transit =3

The efficiency of this route in terms of the time required for all logistics activities by roadways/railways vis-à-vis the national average is shown in Table 2.20-3. The time spent seems to be low relative to the national average in the case of use of roadways. Table 2.20-3: Logistics Time in Hour per km Measure Roadways Railways This National Average This Route National Average Route Average hour 0.28 0.41 0.50 0.26 Source: Authors’ estimates.

Perception Analysis of Transportation Challenges The information was collated on the basis interaction with stake-holders to identify understand the major transportation and logistics challenges on this route. The intensity of the major challenges faced on the route during cargo transportation is mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity while 10 implies a high intensity challenge/problem. Figure 2.20-7 shows our analysis. Only the following two indicators show a low degree of challenges: pilferage of consignments, ease of customs and documentation procedures, and road condition. There is considerable scope for improvement in the case of all the other parameters.

131 131

Figure 2.20-7: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Ease of Customs & 9 Harassment by RTO Documentation 8 officials 7 6 5 JNPT Port 4 Pilferage/Leakage of Infrastructure 3 Consignment 2 1 0 Limited infrastructure in terms of parking Harassment by Police/ terminals with Other Agencies refreshment facilities

Unavaliability of Need to pay Bribes/ Intermodal exchange Facilitation money points Limitations in terms of Rail Infrastructure

Movement of Export Cargo at the JNPT Port The movement of cargo at the JNPT port and the average time taken in hours for completion of various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, are shown in Figure 2.20-8.

Figure 2.20-8: Movement of Export Cargo at the JNPT Port (Hours)

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Figure A2.20-1: Shares of Components in the Transportation Costs

Mode: Road (per cent)

Mode: Road

Fuel 57%

Tolls 10%

Salary and Allowances 16%

Maintenance & Consumables 8%

Speed Money/ Bribes 2%

Others (Vehicle Insurance, 7% Vehicle Parking, RTO fines etc.)

133 133

2.21 EXIM Route: Tirupur → Kochi

Type of Cargo: Export of Textile Items

Introduction The Tirupur apparel manufacturing cluster is one of the largest garment manufacturing hubs in India, contributing 50 per cent of the total garments made in the country. The cluster has around 800 garment manufacturing and exporting firms, and 1200 merchant exporters. The cluster has a vibrant ecosystem of more than 2000 small units, which specialise in knitting, compacting, calendaring, bleaching, dyeing, and embroidery, and support the garment manufacturers.

Apart from catering to the domestic market, Tirupur is one of the major export-oriented clusters in India and contributes to approximately 50 per cent of the knitwear exports from India. The products are mainly exported to the European Union, USA, Canada, Japan, and the Middle East. Some of the world's largest retailers, including C&A, Nike, Walmart, Primark, Adidas, Switcher, Polo, Ralph Lauren, Diesel, Tommy Hilfiger, M&S, FILA, H&M, and Reebok import apparel and textiles from Tirupur.

Approximately 70 per cent of the total cargo transported on this route is handled by Integrated Service providers. Nearly 92 per cent of the total export-bound cargo on the route is moved using containers. Approximately 55 per cent of the containers used for cargo movement on this route are 20 feet in length, whereas the rest are 40 feet in length.

Considering the short haul of 250 kms, roadways is the most feasible mode for transporting export-bound cargo to the Kochi port.

Figure 2.21-1: Route Map

Impediments on the Route � The cost of road transportation on this route is higher as trucking firms do not get adequate return loads from the Kochi port, on account of limited imports from the port. Hence, they charge a higher cost for cargo movement. This is one of the major factors why exporters from Tirupur prefer to use Tuticorin over Kochi though Kochi port is closer to Tirupur. � The toll charges per km are relatively higher on this route as compared to those on the Tirupur– Tuticorin route. This is another reason why exporters prefer to use Tuticorin.

134 134

Time and Cost Estimates of Transportation

Table 2.21-1 shows that the average time for transportation on this route is 16 hours. The average total time taken for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the warehousing, packaging, or material handling time on the route. Table 2.21-1: Time and Cost Estimates of Transportation, Mode: Road Average total time (including stoppage) – 16 Cost in INR per tonne km hours Time ( hour) per km This route National Average This Route National Average 3.8 2.79 0.06 0.06 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne km) by the same mode of travel across all routes under study.

The average cost of transportation on this route is Rs. 3.8 per tonne-km for a 16-tonnage truck.40 The cargo transportation cost by roadways on this route is high as trucks do not get return loads from Kochi. Consequently, they charge a higher rate as compared to what trucks charge on other similar routes in the region.

Cost of Logistics The average cost of logistics per tonne-km is shown in Table 2.21-2. The cost is higher than the national average.

Table 2.21-2: Logistics Costs in INR per tonne-Km This route National Average Average cost 6.30 5.22 Cost incurred if undertaken by 3PL 6.15 5.08 firms Cost incurred if undertaken directly by 6.40 5.45 end users

The share of various components of the overall logistics costs on this route is shown in Figure 2.21-2. The transportation cost varies between 57 and 60 per cent, which is comparatively higher than that incurred on most of the routes under study.

40 The average cost of transportation per tonne-km for roadways includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity on the route. 135 135

Figure 2.21-2: Share of Components of the Logistics Costs (per cent)

Transportation 57.0% 60.0% Warehousing 9.5% 10.0%

Material Handling 7.0% 6.9% Customs Clearance 5.8% 5.4% Documentation 3.8% 4.0%

Logistics System 2.0% 1.5% Packaging Costs 2.4% 2.5% Administration cost 1.5% 1.3% Insurance cost 1.8% 2.3%

Software & Maintenance 1.5% 1.5% Cost of Logistics Equipment 2.0% 1.8%

Marketing cost 0.7% 1.3% IT - Hardware & Software 0.7% 1.0%

Speed Money 0.4% 0.4% Demurrage 0.8% 0.8% Others 0.0% 2.0%

Overall 3PL Firms Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics service to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers.

Figure 2.21-3 shows the decomposition of the cost by various logistics activities.

Figure 2.21-3: Logistics Costs in INR per tonne-km by Activity Mode: Road

Log istic s Cos t in IN R per ton ne- km

Figure 2.21-4 shows the decomposition of the logistics time in hours by various activities.

136 136

Figure 2.21-4: Logistics Time in Hours by Activity Mode: Road

Logis tics Time in Hour s

Note: * The average number of days for warehousing on both sides=2

The efficiency (time in hours) of this route vis-à-vis the national average is shown in Table 2.21-3. It seems that the time required per km on this route is lower by 20 per cent as compared to the national average. Table. 2.21-3: Logistics Time in Hour per km This Route National Average Average number of hours 0.32 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km by the same mode of travel across all routes under study.

Perception Analysis of the Transportation Challenges We have attempted to measure the intensity of the challenges faced on this route based on interactions with stakeholders. Here, a score of 1 implies that the challenge is of low intensity whereas a score of 10 indicates a high-intensity challenge/problem. The relevant findings are shown in Figure 2.21-5. Barring the road condition, and to some extent, the ease of completing customs and documentation procedures, the general perception is that there are problems in all the other parameters.

137 137

2.21-5: Intensity of the Challenge Faced in Transportation Road Condition including signage 10 Ease of 9 8 Harassment by Customs & 7 RTO officials Documentation 6 5 4 3 2 Harassment by Port 1 0 gangs/ Pilferage Infrastructure of Consignment

Limited infrastructure in Harassment by terms of Police/ Other parking Agencies terminals with Need to pay Bribes/ Facilitation money

Movement of Export Cargo at the Kochi Port

The movement of cargo at the Kochi port and the average time taken in hours for completion of various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, are shown in Figure— 2.21-6.

Figure 2.21-6: Movement of Export Cargo at the Kochi Port (Hours)

138 138

Figure A2.21-1: Shares of Components in the Transportation Costs, Mode: Road (Per cent)

Fuel 58%

Tolls 13%

Salary and Allowances 14%

Maintenance including 6% Consumables

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO fines etc.)

139 139

2.22 EXIM Route: Tirupur Tuticorin

Product: Export of Textile Items → Introduction The Tirupur apparel manufacturing cluster has around 800 garment manufacturing and exporting firms and 1200 merchant exporters. The main products produced in the Tirupur apparel and textiles cluster include T-shirts, pullovers, polo shirts, sportswear, sweat shirts, children’s garments, nightwear, home furnishings, and industrial fabrics. Apart from catering to the domestic market, Tirupur is one of the major export-oriented clusters in India and contributes to approximately 50 per cent of the knitwear exports from the country. The products manufactured here are mainly exported to the European Union, USA, Canada, Japan, and the Middle East.

On this route, the integrated service providers cater to about 70 per cent of the cargo. About 90 per cent of the cargo is moved using containers or closed-body vehicles. Approximately 60 per cent of the containers used on this route are 40 feet in length, whereas the rest are 20 feet in length.

Considering the short haul of 345 kms on this route and the lack of direct cargo railway connectivity from the Tirupur ICD to Tuticorin, roadways is the most feasible mode for transporting export-bound garments and textile products on this route.

Figure 2.22-1: Route Map

Impediments on the Route On this route, only 60 per cent of the road is a four-lane highway, whereas 90 per cent of the remainder is a single-lane road without a divider. Moreover, about a 15 km stretch between Tirupur and Palladam passes through the residential area of the town. The stretch from Palladam to the Dindigul bypass road is also a single-lane road without a divider. The section also passes through several towns such as Kangayam and Kudaloor. Consequently, these areas result in major traffic jams. Furthermore, the demand–supply gap in terms of the availability of transportation vehicles on this route results in a higher cost of transportation.

140 140

Time and Cost Estimates of Transportation The average time for transporting cargo via roadways is 18 hours, mainly due to the congestion faced while exiting Tirupur (Table 2.22-1).41 Approximately 55 per cent of the time is taken to traverse the first 35 per cent of the road from Tirupur to the Dindigul bypass.

Table. 2.22-1: Time and Cost Estimates of Transportation, Mode: Road Average total time (including stoppage) – 18 Cost in INR per tonne-km hours Time (hour/ km) - This Route National Average This Route National Average 3.1 2.79 0.05 0.06 Source: Authors’ estimates. Note : We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne km) by road across all routes under study.

The average cost of transportation on this route is observed to be Rs 3.10 per tonne-km for 16-tonnage trucks.42 The cost of transportation per km is relatively higher on this route due to the demand–supply gap for cargo transportation vehicles. Cost of Logistics

The average cost of logistics in INR per tonne-km on this route is shown in Table 2.22-2. The cost is higher than the corresponding national average. This is true for all types of operations.

Table 2.22-2: Logistics Costs in INR per tonne-km, Mode: Road This Route National Average Average cost 5.8 5.22 Cost incurred if undertaken by 3PL 5.7 5.08 firms Cost incurred if undertaken directly by 6.1 5.45 end users Source: Authors’ estimates. Note: We have estimated the national average by taking the simple (cost in INR per tonne km) by the same mode of travel across all routes under study.

The shares of various components of the overall logistics costs on this route are shown in Figure 2.22-2. Transportation accounts for about 53 per cent of the total cost.

41 The average total time for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 42 The average cost of transportation per tonne-km for various modes of transport includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination along the route. 141 141

Figure 2.22-2: Shares of Components of the Logistics Costs (per cent)

Transportation 53.5% 53.0%

Warehousing 12.0% 11.5% Material Handling 8.5% 8.8% Customs Clearance 5.9% 5.8%

Documentation 4.3% 4.6% Logistics System 1.8% 2.5% Packaging Costs 2.8% 2.7%

Administration cost 1.8% 1.5% Insurance cost 2.6% 2.8% Software & Maintenance 1.0% 1.0% Cost of Logistics 1.9% 2.0% Marketing cost 0.5% 1.5% IT - Hardware & Software 1.0% 1.0% Speed Money 0.5% 0.3% Demurrage 1.0% 0.6% Others 1.0% 1.0% Overall 3PL Firms

Figure 2.22-3 shows the decomposition of this cost by various logistics activities.

Figure 2.22.3: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne km

142 142

Figure 2.22-4 shows the decomposition of the logistics time in hours by various activities.

Figure 2.22-4: Logistics Time in Hour by Activity Mode: Road

Logistic s Time in Hour

Note: * The average number of days for warehousing on both sides=2

The efficiency (time in hours) of this route vis-à-vis the national average in shown in Table 2.22-3. The time required per km is apparently lower than the corresponding national average.

Table 2.22-3: Logistics time in Hour per km, Mode: Road Measure This Route National Average Average hour 0.24 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km by the same mode of travel across all routes under study.

Perception Analysis of the Transportation Challenges We have attempted to measure the intensity of the challenges faced on this route based on interactions with stakeholders. Here, a score of 1 implies that the challenge is of low intensity whereas a score of 10 indicates a high-intensity challenge/problem. The relevant findings are shown in Figure 2.22-5. Barring the road condition, the general perception is that there are problems with regard to all the other parameters on this route.

143 143

Figure 2.22-5: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 9 Ease of Customs 8 Harassment by & Documentation 7 RTO officials 6 5 4 3 2 Harassment by Tutticorin Port 1 0 gangs/Pilferage of Infrastructure Consignment

Limited infrastructure in Harassment by terms of parking Police/ Other terminals with Agencies refreshment Need to pay Bribes/ Facilitation money

Movement of Export Cargo at the Tuticorin Port The movement of cargo at the Tuticorin port and the average time taken in hours for completion of various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, are shown in Figure 2.22-6. Figure 2.22-6: Movement of Export Cargo at the Tuticorin Port (Hours)

144 144

Figure A2.22-1:Shares of Components in the Transportation Costs, Mode: Road (per cent)

Fuel 56%

Tolls 13%

Salary and Allowances 15%

Maintenance including Consumables 7%

Speed Money/ Bribes 3%

Others (Vehcile Insurance, Vehcile 6% Parking, RTO fines etc.)

145 145

2.23 Route: Trichy → Chennai

Product: Exports of Leather Products

Introduction The leather Industry in Tamil Nadu accounts for 70 per cent of the leather tanning capacity in India and 38 per cent of the leather footwear and components. Trichy is one of the hubs for leather and leather products within Tamil Nadu. There are many tanneries located on the way to Pudukkottai in Trichy, where mostly high-standard East Indian tanned goat skins are produced. There are 261 leather manufacturing units, which employ around ~1200 people. This cluster mostly exports to countries like England, Italy, and Spain. This route is dominated by stand-alone operators handling about 55 per cent of the cargo. This is driven by the lack of an evolved ecosystem of integrated service providers on this route, and also the fact that most exporters are smaller MSME firms that prefer to use stand-alone exporters primarily to save costs. Nearly, 85 per cent of the cargo is moved using containers or closed-body vehicles primarily due to mandatory requirements from the product importers. Containers of 40 feet in length, accounting for (≈55 per cent usage) are primarily used on this route. Considering the short haul (~300 km) on this route and the lack of direct cargo railway connectivity from Trichy to Chennai, roadways is the most feasible mode for transporting export-bound leather and leather products on this route.

Figure 2.23-1: Route Map

Impediments on the Route � Although the highway is a six-lane road in good condition, the following locations/stretches of the road are prone to severe congestion and act as traffic bottlenecks, leading to an increase in both the travel time as well as transportation costs: a. There is heavy congestion on the stretch of the highway passing through Guduvencherry town due to local traffic. b. The approach road to the Chennai port is narrow and there is enormous vehicular pressure on the road. This leads to huge traffic jams and increases the turnaround time for trucks. Considering this, mainline carrier Maersk has shifted from Chennai to the Ennore port.

146 146

� Traffic congestion at the port is also caused due to the limited number of entry gates at the port. � There are incidences of harassment by RTO officials, especially at the Chennai city border, over technicalities such as the non-availability of a second driver in the vehicle, and the driver not wearing shoes, among other things, for the purpose of extorting facilitation money.

Time and Cost Estimates for Transportation by Roadways The average time taken for transporting cargo on this route is 17 hours (Table 2.23-1).43 Table 2.23-1: Time and Cost Estimates of Transportation, Mode: Road Average total time (including stoppage) – 17 Cost in INR per tonne km hours Time ( hour/ km) - This Route National Average This Route National Average 2.6 2.79 0.06 0.06 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km (cost in INR per tonne km) by the road across all routes under study.

The average cost of transportation on this route is observed to be Rs 2.60 per tonne-km for 16-tonnage trucks.44The cost of transportation per km is estimated to be lower than the corresponding national average.

Cost of Logistics The average cost of logistics in INR per tonne-km on this route is shown in Table 2.23-2. The cost on this route seems to be significantly lower than the corresponding national average. This is true for all types of operations.

Table 2.23-2: Logistics Costs in INR per tonne-km, Mode: Road This route National Average Average cost 4.8 5.22 Cost incurred if undertaken by 3PL 4.65 5.08 firms Cost incurred if undertaken directly by 4.95 5.45 end users Source: Authors’ estimates. Note: We have estimated the national average by taking the simple cost in INR per tonne km by the same mode of travel across all the routes under study.

The shares of various components of the overall logistics costs on this route is shown in Figure 2.23-2. The overall transportation cost is about 53 per cent of the total cost incurred on this route.

43 The average total time taken for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 44 The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route. 147 147

Figure 2.23-2: Shares of Components of the Logistics Costs (per cent)

Transportation 54.0% 53.5%

Warehousing 12.5% 12.0% Material Handling 10.0% 9.4% Customs Clearance 6.5% 6.2% Documentation 4.5% 4.3% Logistics System Management 1.5% 1.8% Packaging Costs 2.9% 3.2% Administration cost 2.0% 1.5% Insurance cost 3.0% 2.7% Software & Maintenance 0.7% 1.0% Cost of Logistics Equipment 0.5% 0.8% Marketing cost 0.5% 1.2% IT - Hardware & Software 0.5% 0.8% Speed Money 0.3% 0.3% Demurrage 1.0% 0.8% Others 0.5% 1.0% Overall 3PL Firms Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics services to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers.

Figures 2.23-3 and 2.23-4 shows the decomposition of this cost in Rs/hour by various logistics activities.

Figure 2.23-3: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne km

148 148 Figure 2.23-4: Logistics Time in Hour by Activity, Mode: Road

Logistics Time in Hour

Note: *The average number of days for warehousing on both sides=2

The efficiency (time in hours) of this route vis-à-vis the national average in shown in Table 2.23-3. It may be noted that the time taken per km on this route is significantly lower than the corresponding national average.

Table 2.23-3: Logistics Time in Hour per km, Mode: Road Measure This route National Average Average hour 0.27 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km by the same mode of travel across all routes under study.

Perception Analysis for this Route with respect to the Key Cargo Transportation Challenges The intensity of the major challenges faced on this route during cargo transportation is mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity whereas a score of 10 indicates a high-intensity challenge/problem. The relevant findings are shown in Figure 2.23-5.

149 149

Figure 2.23-5: Intensity of the Challenge Faced in Transportation

Road Condition including signage 10 9 Ease of Customs & 8 Harassment by Documentation 7 RTO officials 6 5 4 3 2 Harassment by Chennai Port 1 0 gangs/Pilferage of Infrastructure Consignment

Limited Harassment by infrastructure in Police/ Other terms of parking Agencies terminals with Need to pay Bribes/ Facilitation money

Movement of Export Cargo at the Chennai Port The movement of cargo at the Chennai port and the average time taken in hours for completion of various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, are shown in Figure 2.23-6.

Figure 2.23-6: Movement of Export Cargo at the Chennai Port (Hours)

150 150

Figure A2.23-1: Shares of Components in the Transportation Costs, Mode: Road (per cent)

Fuel 54%

Tolls & Other Expenses on journey 13%

Salary and Allowances 16%

Maintenance including Consumables 7%

Speed Money/ Bribes 2%

Others (Vehicle Insurance, Vehicle 7% Parking, RTO fines, etc.)

151 151

2.24 EXIM Route: Vadodara → Mundra Port

Product: Export of Basmati Rice

Introduction Vadodara is well connected to various locations in India and acts as a storage-cum-trading location for agricultural produce from the region. Rice is one of the major crops cultivated in Vadodara, and it is exported to countries like Saudi Arabia, Iran, UAE, Iraq, Kuwait, UK, USA, the Yemen Republic, Oman, and Canada.

The 3PL firms handle nearly 65 per cent of the cargo on this route while the rest is handled by stand-alone operators. Approximately 45 per cent of the total export-bound cargo on this route is moved using containers. Non-containerised movement is mainly observed in cargo transportation by roadways. The containers normally used on this route are 20 feet in length. Roadways is the most preferred mode for transportation for export-bound Basmati rice on the 450 km long route from Vadodara to Mundra port. Nearly 64 per cent of the cargo is transported by road, while the remaining cargo is transported by railways. In the absence of direct cargo rail connectivity from Vadodara or Chhanni ICD to the Mundra port, the first-mile transportation of cargo is undertaken by road to the Khodiyar ICD in Ahmedabad, from where it is sent to the Mundra port by railways. Figure 2.24-1: Route Map

Impediments on the Route � The toll charges per km on this route are relatively higher than on other routes. � In the absence of a direct cargo train, the first-mile transit of 108 km to Ahmedabad or the Khodiyar ICD needs to be undertaken by roadways, thereby increasing the transit time. � Although the highway is a six-lane road in good condition, there are stretches along the road, such as a 4 km stretch at Vasadava, and a 5 km approach road to the port, which experience congestion.

152 152

Time and Cost Estimates of Transportation

The average time including stoppage for cargo transportation is estimated to be 18 hours for roadways and 48 hours for railways.45 Table 2.24-1: Time and Cost Estimates of Transportation Average total time (hours) Cost in INR per tonne km Roadways Railways (first & last Roadways Railways (first & last mile mile transit by road) transit by road) 18 48 This National This route National Time (hour) per km route Average Average This National This route National 2.8 2.79 2.1 1.81 route Average Average 0.04 0.06 0.11 0.14 Source: Authors’ estimates.

Table 2.24-1 also shows the cost of transportation per tonne-km for this route and the national average across all the routes. The average cost of transportation per tonne-km for all the modes of transportation includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route. We have assumed the tonnage of the truck to be 16 tonnes, which is the norm on this route.

The cost of transportation by roadways is approximately 35 per cent higher than that by railways. In fact, railways is used only from a cost-saving perspective when the delivery schedules are not stringent.

Cost of Logistics The average cost of logistics per tonne-km by roadways/railways is shown in Table 2.24-2. It varies between Rs 3.75 and Rs 5.4 per tonne-km, depending upon the modes and types of logistics players. The cost incurred on roadways is along the same lines as that of the national average.

Table 2.24-2: Costs of Logistics in INR per tonne-km Indicators Roadway Railway (first mile transit by road to Ahmedabad – Khodiyar ICD) This National This route National route Average Average Average Cost 5.4 5.22 3.9 3.84 Cost incurred if undertaken by 3PL firms 5.3 5.08 3.75 3.75 Cost incurred if undertaken directly by end users 5.8 5.45 3.95 3.94 Source: Authors’ estimates.

The shares of various components of the overall logistics costs on this route are shown in Figure 2.24-2. The transportation cost turns to be 53 per cent of the total cost incurred on this route.

45 The average total time taken for transportation in hours is only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 153 153

Figure 2.24-2:Shares of Components of the Logistics Costs (per cent)

Transportation 53.0% 53.0% Warehousing 12.4% 13.0% Material Handling 10.7% 9.8% Customs Clearance 6.2% 5.8% Documentation 4.5% 4.3%

Logistics System 1.5% 1.5% Packaging Costs 1.9% 2.3%

Administration cost 1.5% 2.0% Insurance cost 2.0% 2.0%

Software & Maintenance 1.4% 1.5% Cost of Logistics Equipment 1.5% 1.5% Marketing cost 0.5% 1.0%

IT - Hardware & Software 1.5% 1.4%

Speed Money 0.4% 0.4% Demurrage 0.9% 0.9% Others 0.5% 1.0%

Overall 3PL Firms

Note:3PL Logistics Service Provider—This refers to integrated service provider providing the complete range of logistics services to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers.

Figure 2.24-4 shows the decomposition of this cost for road by different activities. As expected, the major cost is that of transportation.

Figure 2.24-4: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne- kms.

154 154

Figure 2.24-5 shows the decomposition of similar costs when the mode of transport is railways.

Figure 2.24-5: Logistics Costs in INR per tonne-km by Activity Mode: Rail

Logistics Cost in INR per tonne km

Figures 2.24-6 and 2.24-7 show the decomposition of the total time spent on logistics by various activities for roadways and railways, respectively.

Figure 2.24-6: Logistics Time in Hours by Activity Mode: Road

Logistics Time in Hour

Note: * The average number of days for warehousing on both sides=2

155 155

Figure 2.24-7: Logistics Time in Hours by Activity Mode: Rail

Logistics time in hour

Note: *The average number of days for warehousing on both nodes=2 The average number of days of storage during transit =1

The efficiency (time in hour per km) of this route vis-à-vis the national average in shown in Table 2.24-3.

Table 2.24-3: Logistics Time in Hour per km Measure Roadways Railways This National Average This Route National Average Route Average hour 0.18 0.41 0.25 0.26 Source: Authors’ estimates. Note: For the railways, first/last mile transit is assumed to be roadways.

The time taken on road per km seems to be significantly lower than the corresponding national average.

Perception of the Transportation Challenges The information was collated on the basis of interaction with stake-holders to identify the major transportation and logistics challenges in this route. The intensity of the major challenges faced on the route during cargo transportation is mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity while 10 implies a high intensity that the challenge/problem. Figure 2.24-8 shows our analysis. Barring the road condition, all the other parameters are considered as serious challenges by the stakeholders.

156 156

Figure 2.24-8: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Ease of Customs & 9 Harassment by RTO Documentation 8 officials 7 6 5 4 Harassment by gangs/ Port Infrastructure 3 pilferage 2 1 0 Limited infrastructure in terms of parking Harassment by Police/ terminals with Other Agencies refreshment facilities

Unavaliability of Need to pay Bribes/ Intermodal exchange Facilitation money points Limitations in terms of Rail Infrastructure

Figure 2.24-9: Movement of Export Cargo at the Mundra Port (Hours)

157 157

Figure A2.24-1: Shares of Components in the Transportation Costs,

Mode: Road (per cent)

Fuel 53%

Tolls 16%

Salary and Allowances 15%

Maintenance including Consumables 8%

Speed Money/ Bribes 2%

Others (Vehicle Insurance, Vehicle 6% Parking,RTO fines etc.)

158 158

2.25 Route: Vijaywada → Kakinada Product: Export of Granite/Marble

Introduction Considering the short distance of approximately 225 km on this route as well as the absence of a direct cargo train from the Guntur ICD to Kakinada, roadways is the only feasible mode of cargo transportation from Vijaywada to the Kakinada port.

Approximately 55 per cent of the cargo transported on this route is handled by integrated service providers. The use of containers on this route is low, at 25 per cent, due to the nature of the product. Approximately 65 per cent of the containers used for cargo movement on this route are 20 feet in length, whereas the rest are 40 feet in length.

Figure 2.25-1: Route Map

Impediments on the Route � Although the condition of the road is good, the following locations/stretches of the road experience severe congestion and act as traffic bottlenecks, leading to an increase in both the travel time as well as transportation cost: o The 10 km stretch on the road connecting the highway to Kakinada—The road is a single-lane road without any divider. The movement of trucks is slow due to congestion. o A 5 km approach road to the Kakinada port—There is heavy congestion leading to traffic jams and delays. � The truck operators/drivers on this route who are not associated with the port unions are harassed by various officials.

159 159

Time and Cost Estimates of Transportation by Road

Table 2.21-1 shows that the average time taken for transportation on this route is 14 hours, which is in line with the corresponding national average.46

The average cost of transportation on this route is estimated to be Rs 2.5 per tonne-km for 16-tonnage trucks. The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route.

Table. 2.25-1: Time and Cost Estimates of Transportation Average total time (including stoppage) – 14 hrs Cost in INR per tonne km Time ( hour/ km) - This Route National Average This Route National Average 2.5 2.79 0.06 0.06 Source: Authors’ estimates.

Cost of Logistics

The average cost of logistics per tonne-km is estimated to vary between Rs 4.6 and Rs 4.75, depending upon the nature of the operator (Table 2.25-1). It may be noted that these estimates are lower than the corresponding national average.

Table 2.25-2: Logistics Costs in INR per tonne-km, Mode: Road This route National Average Average cost 4.60 5.22 Cost incurred if undertaken by 3PL 4.35 5.08 firms Cost incurred if undertaken directly by 4.75 5.45 end users Source: Authors’ estimates. Note: We have estimated the national average by taking the simple cost in INR per tonne km by the same mode of travel across all routes under study.

The shares of various components of the overall logistics costs are shown in Figure 2.21-2. Transportation accounts for about 55 per cent of the total cost.

46 The average time in hours is only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 160 160

Figure 2.25-2: Shares of Components of the Logistics Costs (per cent)

Transportation 54.5% 55.0% Warehousing 12.0% 11.8%

Material Handling 10.4% 10.0% Customs Clearance 6.5% 6.4% Documentation 4.4% 4.3% Logistics System 1.8% 2.4%

Packaging Costs 0.0% 0.0% Administration cost 1.5% 2.0% Insurance cost 2.2% 2.3% Software & Maintenance 1.0% 1.5%

Cost of Logistics Equipment 1.0% Overall 2.0% 3PL Firms Marketing cost 0.5% 1.0% IT - Hardware & Software 0.8% 1.0% Speed Money 0.3% 0.3%

Demurrage 0.3% 0.3% Others 2.0% 0.0%

Figure 2.25-3/4 shows the decomposition of this cost in INR per tonne-km and in hours by various logistics activities.

Figure 2.25-3: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne km

161 161 Figure 2.25-4: Logistics Time in Hours by Activity Mode: Road

Logistics time in Hour

Note: * The average number of days for warehousing on both sides=2

The efficiency or time taken in hours on this route vis-à-vis the corresponding national average is shown in Table 2.21-3. It seems to be lower than the national average.

Table. 2.25-3: Logistics Time in Hour per km This route National Average Average no: of hours 0.35 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km by the same mode of travel across all the routes under study.

Perception Analysis of the Transportation Challenges The intensity of the major challenges faced on the route during cargo transportation have been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and 10 means high intensity challenge/problem based on the interaction with stake-holders. Figure 2.25-5 shows our analysis.

162 162

Figure 2.25-5: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 9 Ease of Customs & 8 Harassment by RTO Documentation 7 officials 6 5 4 3 2 1 Harassment by Port Infrastructure 0 gangs/Pilferage of Consignment

Limited infarstructure in Harassment by terms of parking Police/ Other terminals with Agencies refreshment facilities Need to pay Bribes/ Facilitation money

Movement of Export Cargo at the Kakinada Port The movement of cargo at the Kakinada port and the average time taken in hours for completion of various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, are shown in Figure 2.25-6.

Figure 2.25-6: Movement of Export Cargo at the Kakinada Port (Hours)

163 163

FigureA.2.25-1: Shares of Components in the Transportation Costs, Mode: Road (per cent)

Fuel 55%

Tolls 13%

Salary and Allowances 16%

Maintenance including Consumables 8%

Speed Money/ Bribes 2%

Others (Vehcile Insurance, Vehicle 6% Parking, RTO fines etc.)

164 164

2.26 Route: Vijaywada → Kakinada Port

Type of Cargo: Export of Non-Basmati Rice

Introduction Vijayawada is situated in the Krishna district of the Indian state of Andhra Pradesh, which is referred to as the rice bowl of India. Vijaywada city is the trading hub for agricultural produce, especially rice produced in the region, which is processed in various units in Vijaywada. Apart from meeting the domestic consumption needs, rice is exported to countries like China, Iran, Benin, Cameroon, UK, South Africa, France, and Senegal.

On this route, 3PL firms handle about 60 per cent of the cargo while the rest is transported by stand-alone operators. Approximately 65 per cent of the total cargo of export-bound rice on this route is moved using containers.

Considering the short distance of approximately 225 km on this route as well as the absence of a direct cargo train from the Guntur ICD to Kakinada, roadways is the most feasible mode for transportation of cargo from Vijaywada to the Kakinada port.

Figure2.26-1: Route Map

Impediments on the Route � Although the condition of the road is good, the following locations/stretches of the road experience severe congestion and act as traffic bottlenecks, leading to an increase in both the travel time as well as the transportation cost: a. The 10 km stretch on the road connecting the highway to Kakinada—The road is a single-lane road without any divider. The movement of trucks on this road is slow due to congestion. b. A 5 km approach road to the Kakinada port—There is huge congestion on this road, leading to traffic jams and delays.

� The truck operators/drivers who are not associated with the port unions are harassed for facilitation money by gangs in the proximity of the Kakinada port.

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Time and Cost Estimates of Transportation

Table 2.26-1 shows our estimate of the transportation time on this route.47 It takes about 14 hours to cover the distance of 225 km, which is in line with our estimated national average. Table. 2.26-1: Time and Cost Estimates of Transportation, Mode: Road Average total time (including stoppage) – 14 Cost in INR per tonne-km hours Time ( hour/ km) - This Route National Average This Route National Average 2.7 2.79 0.06 0.06 Source: Authors’ estimates.

The average cost of transportation on this route is Rs 2.7 per tonne-km for 16-tonnage trucks.48 It is lower than our estimated national average.

Cost of Logistics in Monetary Terms (INR) The average cost of logistics per tonne-km is estimated to vary between Rs 4.6 and Rs 5.00 per tonne-km (Table 2.26-2).The cost is significantly lower than the national average. This is true for all types of operations.

Table 2.26-2: Logistics Costs in INR per tonne-km, Mode: Road This Route National Average Average cost 4.6 5.22 Cost incurred if undertaken by 3PL 4.75 5.08 firms Cost incurred if undertaken directly by 5.00 5.45 end users Source:Authors’ estimates. Note: We have estimated the national average by taking the simple cost in INR per tonne km by the same mode of travel across all routes under study.

47 The average total time taken for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 48 The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination along the route. 166 166

The shares of various components of the overall logistics costs on this route are shown in Figure 2.26-2. The transportation cost accounts for nearly 55 per cent of the total cost incurred on this route.

Figure 2.26-2: Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms

55.0 Transportation 55.5% 12.5 % Warehousing 13.0% % Material Handling 9.4% 9.0% Customs Clearance 5.5% 5.3%

Documentation 3.9% 3.8% 1.8% Logistics System 1.5% Packaging Costs 1.9% 2.2% Administration cost 1.5% 2.0% 2.2% 2.3% Insurance cost Software & Maintenance 1.0% 1.5% Cost of Logistics 1.0% 2.0% 1.0% Marketing cost 0.5% 1.0% IT - Hardware & 0.8% 0.3% Speed Money 0.3% 0.3% Demurrage 0.3% 0.0% Others 2.0%

Figures 2.26-3 and 2.26-4 show the decomposition of the logistics costs in INR per tonne-km and in hours by various activities, respectively.

Figure 2.26-3: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne km

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Figure 2.26-4: Logistics Time in Hour by Activity, Mode: Road

Logistics Time in hour

Note: * The average number of days for warehousing on both sides=2

Table 2.26-3 shows our estimate of the efficiency of this route vis-à-vis the corresponding national average. The data in the table seem to suggest that this is an efficient route.

Table. 2.26-3: Time Costs of Logistics in Hour per km, Mode: Road This route National Average Average no: of Hours 0.35 0.41 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the time required per km by the same mode across all routes under study.

Perception Analysis of the Route with Respect to the Key Cargo Transportation Challenges The intensity of the major challenges faced on this route during cargo transportation have been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity whereas a score of 10 indicates a high-intensity challenge/problem. The perceptions of the stakeholders are shown in Figure 2.26-5.

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Figure 2.26-5: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 9 Ease of Customs & 8 Harassment by RTO Documentation 7 officials 6 5 4 3 2 1 Harassment by Port Infrastructure 0 gangs/Pilferage of Consignment

Limited infrastructure in Harassment by terms of parking Police/ Other terminals with Agencies refreshment facilities Need to pay Bribes/ Facilitation money

Movement of Export Cargo at the Kakinada Port The movement of cargo at the Kakinada port and the average time taken in hours for various customs and other procedures at the Container Freight Station (CFS) and at the port, inclusive of material handling, are shown in Figure 2.26-6.

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Figure 2.26-6: Movement of Export Cargo at the Kakinada Port (Hours) Figure 2.26-6: Movement of Export Cargo at the Kakinada Port (Hours)

Figure A2.26-1:Shares of Components in the Transportation Costs, Mode: Road (per cent) Figure A2.26-1:Shares of Components in the Transportation Costs, Mode: Road (per cent)

Fuel 55% Fuel 55%

Tolls & Other Expenses on journey 13% Tolls & Other Expenses on journey 13%

Salary and Allowances 16% Salary and Allowances 16%

Maintenance including Consumables 8% Maintenance including Consumables 8%

Speed Money/ Bribes 2% Speed Money/ Bribes 2%

Others (Vehicle Insurance, Vehicle Others (Vehicle Insurance, Vehicle 6% Parking, RTO Fines etc.) 6% Parking, RTO Fines etc.)

170 170 170

2.27 EXIM Route: NCR → JNPT Port

Category: Movement of Empty Containers Introduction Roadways is usually used to move empty containers on this route even though the distance is nearly 1400 km. There is a low preference for railways due to infrastructural bottlenecks such as the availability of a limited number of scheduled trains, which causes long waiting times at the railway stations.49 As there is no packaging, material handling or specialised warehousing involved, the transportation is undertaken mainly by stand-alone transportation firms. Figure 2.27-1: Route Map

Impediments on the Route � The RTO officials, especially at the state border of Rajasthan at Ratanpur, harass the drivers to extract facilitation money. � The signage at tolls is inadequate as compared to that on the other highways leading to confusion and wastage of time at the tolls if the vehicles enter an improper lane. This situation is particularly prevalent in Rajasthan. � Although the road conditions are good, a 2 km stretch of the highway near Bharuch and the Wada–Vasai Bridge in Thane near Mumbai are perceived to be congestion points leading to traffic jams.

Time and Cost Estimates of Transportation

The average time including stoppage is estimated to be 72 hours for roadways and 120 hours for railways in the normal scenario (Table 2.27-1).50 However, the time taken by railways goes down to 65 hours in the best case scenario.

49 The share of transportation by railways is only 10 per cent against 90 per cent in the case of roadways. 50 The average time taken for transportation in hours includes the time for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. 171 171

Table 2.27-1: Time and Cost Estimates of Transportation Average total time (hours) Cost in INR per tonne km Roadways Railways (first & last mile Roadways Railways (first & last mile transit by road) transit by road) 72 120 (65*) 1.8 1.45 Source: Authors’ estimates. Note: *Best case scenario

Table 2.27-1 also shows the cost of transportation per tonne-km for this route, and the corresponding national average across all the routes. The average cost of transportation per tonne-km for all the modes includes the cost of transportation, and other direct and indirect expenses incurred during transportation. We have assumed the tonnage of the truck to be 16 tonnes, which is the norm on this route.

The cost of transportation by railways is lower than that by roadways. In a bid to increase their market share in the segment, the Indian railways is currently providing a discount of 25 per cent on the movement of empty containers. This has further reduced the cost of transporting empty containers by railways.

Cost of Logistics

The average cost of logistics per tonne-km for roadways/railways is shown in Table 2.27-2. It varies between Rs 2 and Rs 2.65 per tonne-km depending upon the modes of transport used and types of logistics players.

Table 2.27-2: Logistics Costs in INR per tonne-km Indicators Road Rail (First & last mile transit by road) Average Cost 2.4 2 Cost incurred if undertaken by 3PL firms 2.4 2 Cost incurred if undertaken directly 2.65 2.1 Source: Authors’ estimates.

The shares of various components of the overall logistics costs on this route are shown in Figure 2.27-2. The transportation cost seems high as some other cost elements such as packaging, warehousing, and material handling do not figure in the case of movement of empty containers.

172 172

Figure 2.27-2: Share of Components of the Logistics costs

Transportation 75.0% 73.0%

Documentation 4.0% 5.5%

Cost of Logistics Equipment 4.0% 4.0% Logistics System 3.5% Management 3.2% IT - Hardware & Software 3.3% Cost 3.0%

Administration cost 3.2% 3.2%

Cost of Logistics Equipment 2.5% 3.0%

Software & Maintenance 2.0% 2.0%

Marketing cost 0.5% 0.5%

Speed Money 0.3% 0.3%

Others 2.0% 2.3%

Overall 3PL Firms Note: 3PL Logistics Service Provider – This refers to an integrated service provider providing the complete range of logistics services to end users. The end users can outsource 100 percent of their logistics activities to such service providers.

Figure 2.27-3 (Figure 2.27-4) shows the decomposition of this cost for roadways (railways) by different activities. Figure 2.27-3: Logistics Costs in INR per tonne-km by Activity Mode: Road

Logistics Cost in INR per tonne km

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Figure 2.27-4: Logistics Costs in INR per tonne-km by Activity Mode: Rail

Logist ics Cost in INR per tonne km

Figures 2.27-5 and 2.14-6 show the decomposition of the total time spent on logistics by various activities for roadways and railways, respectively.

Figure 2.27-5: Logistics Time in Hour by Activity Mode: Road

Logistics time in Hour

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Figure 2.27-6 Logistics Time in Hour by activity Figure 2.27-6 LogisticsMode: Time Rail in Hour by activity Mode: Rail

Log Log istic istics tims etim in e in Ho Hour ur

2.15 andar → 2.15 andar → Figure A2.27-1: Shares of Components in the Transportation Costs Figure A2.27-1: Shares of Components in the Transportation Costs Mode: Road (per cent) Mode: Road (per cent)

Fuel 53% Fuel 53%

Tolls 15% Tolls 15%

Salary and Allowances 14% Salary and Allowances 14%

Maintenance including Maintenance including 9% Consumables 9% Consumables

Speed Money/ Bribes 4% Speed Money/ Bribes 4% Others (Vehicle Insurance, Others (Vehicle Insurance, Vehicle Parking, RTO fines 6% Vehicle Parking, RTO fines 6% etc.) etc.)

175 175

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3. Analysis of Selected Domestic Routes

The domestic routes that are analysed encompass both containerised and non-containerised cargoes. We have attempted to have an all-India coverage with an emphasis on capturing the important routes. Below, we describe our selected routes. The sectors/products that these routes focus on include automobiles and ancillaries, cement, chemicals, electronics, engineering, food processing, Fast Moving Consumer Goods (FMCGs), Fast Moving Consumer Durables (FMCDs), metal, metallurgy including steel, pharmaceuticals, and textiles.

Domestic Routes under Study Domestic Route Domestic Route Sl. No. Route/Product Sl. No. Route/Product 1. Ahmedabad → Bengaluru, 11. Mumbai → Bengaluru, Cargo: Containerised/Non-containerised Cargo: Containerised/Non-containerised 2. Ahmedabad → Kolkata, 12. Mumbai → Chennai, Cargo: Containerised/Non-containerised Cargo: Containerised/Non-containerised 3. Bengaluru → Kolkata, 13. Mumbai → Hyderabad, Cargo: Containerised/Non-containerised Cargo: Containerised/Non-containerised 4. Bengaluru → Nagpur, 14. Mumbai → Kolkata, Cargo: Containerised/Non-containerised Cargo: Containerised/Non-containerised 5. Hyderabad → Kolkata, 15. NCR → Bengaluru, Cargo: Containerised/Non-containerised Cargo: Containerised/Non-containerised 6. Jaipur → Bengaluru, 16. NCR → Chennai, Cargo: Containerised/Non-containerised Cargo: Containerised/Non-containerised 7. Jaipur → Kolkata, 17. NCR → Guwahati, Cargo: Containerised/Non-containerised Cargo: Containerised/Non-containerised 8. Ludhiana → Bengaluru, 18. NCR → Hyderabad, Cargo: Containerised/Non-containerised Cargo: Containerised/Non-containerised 9. Ludhiana → Kolkata, 19. NCR → Mumbai, Cargo: Containerised/Non-containerised Cargo: Containerised/Non-containerised 10. Ludhiana → Mumbai, 20. NCR → Nagpur, Cargo: Containerised/Non-containerised Cargo: Containerised/Non-containerised

The cost estimates derived for each of these studies are based on primary surveys, which have been detailed in an earlier chapter. Each of the route studies covers the following areas:

1. Route characteristics; 2. Impediments along the route; 3. Time and cost involved in transportation; 4. Logistics costs in terms of time and money, and by activities; and 5. Challenges faced in transportation.

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3.1 Domestic Route: Ahmedabad → Bengaluru

The Ahmedabad → Bengaluru cargo route is an important freight transportation route which connects North and South India, and accounts for approximately 1.5 per cent of the overall domestic cargo movement. The Ahmedabad and Bengaluru regions are both large manufacturing as well as consumption clusters. These locations also act as redistribution points for manufactured/agricultural products that originate in the region.

Figure 3.1-1: Route Map Figure 3.1-2:Modal Shares in Transportation (per cent)

87%

1% 12%

Roadway Railway Airway

Key Impediments on the Route � The RTO officials harass the drivers especially at the state border at Jhalki, which falls on the road route via Solapur. Even if all rules and regulations have been complied with, the RTO officials harass the drivers over technicalities such as the non-availability of a second driver in the vehicle, or the driver not wearing shoes, among other things, and ask for bribes/facilitation money. In order to avert such situations, most truck drivers prefer to take the route via the Nipani state border crossing even though toll charges are higher on this particular route. � Overall, the toll charges on this route are relatively higher than on other routes due to the higher toll costs in Maharashtra and Karnataka. The signage at the tolls is insufficient/ improper as compared to that on other highways, leading to confusion and wastage of time at the tolls if vehicles moves into the wrong improper lane. � Incidences of pilferage have been recorded on the stretch of the highway between the Bellary and Davangere regions of Karnataka and the border areas of Jhalki. Pilferage is also routinely reported between the Vapi and Boisar stretch of the highway in Gujarat.

Route Characteristics The major product categories (domestic freight) transported on this route are textiles, electronics, engineering goods, processed foods, and agricultural products. Roadways is the preferred mode of transportation across most product categories on this route with railway transportation being used only for agricultural products or low-value items (Figure 3.1-2).

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The usage of containers is mainly driven by the automobile, textiles, and pharmaceutical sectors where the need and usage of containerised movement are traditionally higher than those in the other sectors. The lengths of containers used on the route are generally 32 feet (accounting for approximately 65 per cent usage) and 24 feet (accounting for ~15 percent usage).

Figure 3.1-3: Shares of Containerised Cargo (per cent)

70% 65% 54% 48% 47%

Overall Automobile & Auto Components Textiles Pharmaceuticals Electronics

Out of the total cargo transported in this route, approximately 10 per cent of the cargo is handled by integrated service providers. Integrated service providers mostly undertake containerised cargo movement and mainly service automobile, electronics and pharmaceutical sectors.

The incidence of usage of multimodal transportation on the Ahmedabad – Bengaluru route is low (8 per cent). Multimodal transportation on this route is undertaken using a combination of road and rail.

Time and Cost of Transportation

The average time for cargo transportation inclusive of stoppage time by road in this route is estimated to be 70 hours (Figure 3.1-4). The average time taken for transporting cargo via roadway and railway does not have too much of difference, however there is a preference for roadways due to last mile connectivity and lower material handling & warehousing costs51. The no. of days of warehousing is higher for rail transportation due to infrastructure bottlenecks such as unavailability of scheduled cargo trains, which leads to unreliability in terms of transportation schedule and sometimes opportunity cost for the shipper.

51The average total time taken for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 178 178

Figure 3.1-4: Average Time inHours by Modes of Transportation

118 104 70 70

Roadway Railway Best Case (First & Railway Normal Case (First Airway (First & last mile Multimodal (Road - Rail last mile transit by road) & last mile transit by road) transit by road) Combination)

The average cost of transportation per tonne-km varies between Rs.1.90 -6.9 which is slightly higher than the national average in some of the modes of transport. The average cost of transportation per tonne-km by various modes in this route and national average is shown in Table 3.1-1.52

Table 3.1-1: Average Cost of Transportation in INR per tonne-km Mode This Route National Average Roadway* 2.6 2.48 Roadway* - Refrigerated 3.2 3.01 Railway (First & last mile transit by road) 1.9 1.88 Airway (First & last mile transit by road) 6.9 7.1 Multimodal (Road+ Rail) 2.35 2.23 *We have considered the payload capacity of the truck to be 16 tonnes. Note: We have estimated our national average by taking the simple average of the cost in INR per tonne km by same mode across all routes under study. Source: Authors’ estimate.

The cost also differs depending between onward and return journeys (Figure 3.1-5). The cost of road transportation is lower from Bengaluru to Ahmedabad than the other way round.

52The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include expenses incurred for any other logistics activities at the origin or destination of the route. 179 179

Figure. 3.1-5: Average cost of Road Transportation for Onward and Return Journeys in INR per tonne-km

Ahmedabad to Bengaluru Bengaluru to Ahmedabad

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km using various modes on this route is shown in Table 3.1-2. The average cost of logistics per tonne-km on this route varies depending upon the nature of the operation and modes of transportation. As expected, the logistics costs are the highest for airways. By and large, the cost on this route is lower than the national average.

Table 3.1-2: Logistics Costs in INR per tonne-km Logistics Logistics Overall Undertaken by Undertaken 3PL Firms Directly Modes This National This National This National Route Average Route Average Route Average Roadways 4.9 5.02 4.51 4.67 5.39 5.44 Railways (first- and last-mile transit by 3.7 3.66 3.65 3.54 3.85 3.78 road) Airways (first- and last-mile transit by 10.5 11.38 10.4 11.2007 10.4 11.60 road) Multimodal Transportation (Combination 4.2 4.73 of Roadways and Railways) Source: Authors’ estimates. Note: We have estimated our national average by taking the simple average of the cost in INR per tonne-km by the same mode across all the routes under study.

180 180

The variation in the average logistics costs per tonne-km for major commodities is shown in Table 3.1-3. The average logistics costs by rail/road are the highest for automobile companies.

Table 3.1-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Auto components 5.0 3.60 Automobiles 5.5 3.80 Electronics 3.8 3.7 FMCDs 3.85 3.5 FMCGs 4.2 3.65 Processed Food 4.0 3.8 Textiles 5.3 3.73 Source: Authors’ estimates.

The principal components of the logistics costs via road in INR per tonne-km, and in hours by different activities are shown in Figures 3.1-6 and 3.1-7, respectively. Transportation is a major component of the logistics costs in INR per tonne-km as well an in hours.

Figure 3.1-6: Logistics Costs in INR per tonne-km Figure 3.1-7: Logistics Time in Hours by Activity by Activity, Mode: Road Mode: Road

Logi stics Logistics Cost in INR Tim e in per tonne hour km.

Note: Average number of days for warehousing on both sides=2

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Similarly, Figures 3.1-8 and 3.1-9 show the decomposition of the time/cost by major logistics activities by rail, respectively. Storage during transit is a major component of the time cost.

Fig. 3.1-9 Logistics Time in Hours by Activity Fig. 3.1-8: Logistics Costs in INR per tonne-km Model: Rail Model: Rail Fig. 3.1-9 Logistics cost in hours by Activity Model: Rail

Logistics Time in Hour Logistics Cost in INR per tonne km.

Note: Average number of days for warehousing in both nodes =2 Average number of days for storage during transit = 3

Perceptions of Key Cargo Transportation Challenges

The information was collated on the basis of interactions with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.1-10. As per our findings, harassment by the RTO officials and the police, demand for facilitation money, and infrastructural limitations are some of the major problems faced by transporters on this route.

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Figure 3.1-10: Intensity of the Challenges Faced in Transportation

Road Condition including signage Limited 10 infrastructure in 9 8 Harassment by terms of parking 7 RTO officials terminals with 6 refreshment 5 4 3 Need to pay 2 Pilferage/ Bribes/ 1 0 Leakage of Facilitation Consignment money

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies

Unavaliability of Intermodal exchange points

Figure A3.1-1: Shares of Components in the Transportation Costs

Mode: Road (Per cent)

Fuel 54%

Tolls 14%

Salary and Allowances 13%

Maintenance including Consumables 10%

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle Parking, RTO ﬁnes etc.) 6%

183 183

Figure A3.1-2: Average Transportation Cost of Major Commodities in INR per tonne-km

Roadways Railways

Textiles 2.8 Automobiles 1.95

Processed Food 2.1 Processed Food 1.95

FMCG 2.2 Textiles 1.92

Electronics 1.9 FMCD 2.05 FMCG 1.88 Electronics 2 Auto components 1.85 Automobiles 2.95 FMCD 1.8 Auto components 2.65

Figure A3.1-3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms 4PL Firms

Transportation 52% 51% 50 11 % Warehousing 10% 11% 10% Material Handling 11% 10% 5% Documentation 5% 4% %4 Logistics System 3% 4% %3 Packaging Costs 3% 3% %4 Administration cost 3% 3% % Insurance cost 1% 1 2% %2 Software & Maintenance 2% 3% % Cost of Logistics 2% 3% 3 % Marketing cost 2% 2% 2 % IT - Hardware & Software 2% 2% 1 % Speed Money 1% 1% 0 %3 Others 3% 3% % Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics services to end-users. The end users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider—This refers to an integrated service provider to whom end-users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to the service provided by 3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end-users, and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

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3.2 Domestic Route: Ahmedabad → Kolkata

The Ahmedabad → Kolkata cargo route is an important freight transportation route, which connects western and eastern India, and accounts for approximately ~2 per cent of the overall domestic cargo movement. Kolkata is mainly a consumption cluster and a point for cargo storage and re-distribution whereas the Ahmedabad region is a major manufacturing hub, especially for automobiles, textiles, and engineering goods.

Figure 3.2-1: Route Map Figure 3.2-2:Modal Shares in Transportation (per cent)

81%

1% 18%

Roadway Railway

Key Impediments on the Route � The RTO officials harass the drivers, particularly at the state borders, to extract speed money even if all the regulations are properly followed: o Route via Nagpur/Chhattisgarh: The harassment points are the Pitol border and Raipur in Chhattisgarh, and Angul and Balasur in Odisha. o Route via Uttar Pradesh: The harassment points are the Pitol border and Jhashi in Madhya Pradesh. � There are incidences of pilferage and robbery, especially along the Ajaygarh-Panna belt in Madhya Pradesh. The local gangs create roadblocks to get on to the slow-moving vehicles and plunder them. � The miscreants pose as fake RTO officials, and attempt to primarily target the large vehicles and extort money from truckers. Such harassment by local gangs is seen mainly on the Raipur-Bhilai belt on the NH47 route, and near Dhanbad on the NH19 route. � Incidences of misbehaviour by flying squads of police officials with drivers is common in Vidarbha, especially after the vehicles have crossed over into Nagpur. � The road conditions are poor in parts of Chhattisgarh, along stretches around Durg, Bhilai, and Angul in Odisha, on the NH47 highway. These are major bottlenecks that cause traffic congestion on the route.

Route Characteristics The major product categories transported on this route are auto and auto ancillaries, textiles, chemicals, engineering goods, fast moving consumer goods (FMCGs), steel, and agricultural products.

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The main drivers of container traffic on this route are the automobile, textiles, and FMCG sectors (Figure 2.2-3). Containers of length 32 feet, accounting for usage in approximately 70 per cent cases, and of 20 feet in length, accounting for usage in 16 per cent of the cases, are mainly used on this route.

Figure 3.2-3: Shares of Containerised Cargo (per cent)

65% 52% 48% 45% 39% 35%

Overall Auto & Auto TexKles FMCG Engineering Goods Electronics Ancillaries

Out of the total cargo transported on this route, approximately 12 per cent of the cargo is handled by integrated service providers (3PL/4PL service providers). Integrated service providers mostly undertake containerised cargo movement, primarily servicing the FMCG and electronics sectors on this route. The adoption of multimodal transportation on this route has been limited due to the lack of infrastructural facilities and scope for cost savings.53 However, as one of the road routes to Kolkata from Ahmedabad passes from Varanasi, the NW1 highway can be leveraged to transport cargo downstream to Kolkata.

Time and Cost of Transportation

Figure 3.2-4 shows our estimate of transportation by various modes in this route. The average time for cargo transportation, inclusive of stoppage time on roads on this route, is estimated to be 115 hours. The average cost of transportation per tonne-km by various modes on this route and the national average are shown in Table 3.2-1.54 The average cost of transportation per tonne-km varies between Rs 1.8 and Rs 5.8, which is higher than the national average.

Figure 3.2-4: Average Time in Hours by Modes

Roadway Railway Best Case (First Railway Normal Case Airway (First & last mile MulKmodal (Road -‐ Rail & last mile transit by (First & last mile transit transit by road) CombinaKon) road) by road)

53 Only 8 per cent of our respondents used multimodal transportation. 54The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activities at the origin or destination of the route. 186 186

Table 3.2-1: Average Cost of Transportation in INR per tonne-km Mode This Route National Average Roadways* 2.8 2.48 Roadways* - Refrigerated 3.9 3.01 Railways (first- and last-mile transit by road) 1.8 1.88 Airways (first- and last-mile transit by road) 6.9 7.10 Multimodal Transportation (Roadways + Railways) 2.35 2.23 Source: Authors’ estimates. *We have considered the payload capacity of the truck to be 16 tonnes. Note: We have estimated our national average by taking the simple average of the cost in INR per tonne-km by the same mode across all routes under study.

Although the cost of undertaking multimodal transportation is low, it is rarely adopted by users due to the lack of supporting infrastructure and difficulty in using this mode of transportation. However, stakeholders have opined that there is a large potential for the adoption of multimodal transportation on this route.

The cost also differs between the onward and return journeys (Figure 3.2-5). The cost of road transportation is lower from Kolkata to Ahmedabad than the other way round.

Figure 3.2-5: Average Cost of Road Transportation for Onward and Return Journeys in INR per tonne-km

Ahmedabad to Kolkata Kolkata to Ahmedabad

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km using various modes in this route is shown in Table 3.2-2. The average cost of logistics per tonne-km on this route varies depending on the nature of the operation and the modes of transport. As expected, the logistics costs are the highest for airways.

187 187

Table 3.2-2: Logistics Costs in INR per tonne-km Logistics Logistics Overall undertaken by undertaken 3PL Firms directly Mode This National This National This National Route Average Route Average Route Average Roadways 5.3 5.02 4.88 4.67 5.83 5.44 Railways (first- and last-mile transit by 3.7 3.68 3.46 3.54 3.8 3.78 road) Airways (first and last-mile transit by 11.7 11.38 11.5 11.20 11.89 11.60 road) Multimodal Transportation (Combination 4.24 4.71 of Roadways and Railways) Source: Authors’ estimates. Note: We have estimated our national average by taking the simple average of the cost in INR per tonne-km by the same mode across all the routes under study.

The variation in the average logistics costs per tonne-km for major commodities is shown in Table 3.2-3. The average logistics costs via road are the highest for auto components.

Table 3.2-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Agricultural products 5.0 3.60 Auto components 5.5 3.80 Engineering Goods 3.8 3.7 Textiles 3.85 3.5 Automobiles 4.2 3.65 Chemicals 4.0 3.8 Source: Authors’ estimates.

Figures 3.2-6 and 3.2-7 show the cost on road in Rs per tonne-km, and in hours for the major components of logistics activities, respectively. As expected, transportation is a major component of the logistics costs in Rs per tonne-km and in hours.

188 188

Figure 3.2-6: Logistics Costs in INR per tonne- Figure 3.2-7: Logistics Time in Hours by km by Activity, Mode: Road Activity Mode: Road

Logistics Logistics Cost in INR Time in per tonne Hours km.

Note: Average number of days for warehousing on both sides=2

Similarly, in Figures 3.2-8 and 3.2-9, we show the decomposition of the cost (Rs/hour) on using rail by different components of logistics activities. Transportation is again the largest component of the logistics costs in Rs per tonne-km via rail.

Figure 3.2-9: Logistics Time in Hours by Activity Figure 3.2-8: Logistics Costs in INR per tonne-km by Activity, Mode: Rail Mode: Rail

Logistics Cost in Logistics INR per Time in tonne km Hours

Note: Average no. of days for warehousing in both nodes =2 Average no. of days for storage during transit = 3

189 189

of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.2-10. The figure indicates that harassment by the RTO officials and the police, and the demand for facilitation money are some of the serious problems on this route.

Figure 3.2-10:Intensity of the Challenges Faced in Transportation Road Condition including signage Limited 10 infrastructure 9 8 Harassment by in terms of 7 RTO officials parking 6 5 terminals with 4 3 Need to pay 2 Pilferage/ Bribes/ 1 0 Leakage of Facilitation Consignment money

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies Unavaliability of Intermodal exchange points

Figure A3.2-1: Shares of Components in the Transportation Costs (per cent) Mode: Road

Fuel 56%

Tolls 13%

Salary and Allowances 14%

Maintenance including Consumables 7%

Speed Money/ Bribes 4%

Others (Vehicle Insurance, Vehicle Parking, 6% RTO fines etc.)

190 190

Figure A 3.2-2: Average Transportation Cost for Major commodities in INR per tonne-km

Roadways Railways

Chemicals 3.2 Chemicals 2

Automobiles 3 Automobiles 1.92

Textiles 2.8 Auto components 1.78

Engg Goods 2.68 Textiles 1.75

Engg Goods 1.72 Auto components 2.65

Agri Products 2.55 Agri Products 1.65

Figure A3.2-3: Shares of Components of the Logistics Costs (per cent) Overall 3PL Firms 4PL Firms

Transportation 52% 50% 50%

Warehousing 10% 10% 11% Material Handling 11% 9% 10%

Documentation 5% 6% 5% Logistics System 4% Management 4% 4%

Packaging Costs 4% 4% 4% Administration cost 2% 3% 3%

Insurance cost 2% 2% 2%

Software & Maintenance 2% 2% 2%

Cost of Logistics Equipment 3% 3% 3%

Marketing cost 1% 2% 2% IT - Hardware & Software 1% Cost 2% 1% Speed Money 1% 0% 0% Others 2% 3% 3%

Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics services to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider—this refers to an integrated service provider to whom the end-users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to 3PL service providers, the firm has the capability of managing the entire supply chain on behalf of the client. The firm manages various 3PL service providers in case of complex supply chains, acts as a knowledge partner to the end-users, and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

191 191

3.3 Domestic Route: Bengaluru → Kolkata

The Bengaluru-Kolkata cargo route is an important freight transportation route, which connects southern and eastern India, and accounts for approximately 3 per cent of the overall domestic cargo movement. Bengaluru and Kolkata are both manufacturing and consumption hubs, and act as redistribution points for regional agricultural and manufactured products.

Figure 3.3-1: Route Map Figure 3.3-2:Modal Shares in Transportation (per cent)

84%

2% 12%

Roadway Railway Airway

Impediments on the Route � The RTO officials harass the drivers, especially at the state border between Andhra Pradesh and Odisha, and at the Icchapuram and Jamsola borders of Odisha, demanding bribes/facilitation money for allowing trucks to pass, even if all the regulations have been complied with. � There are incidences of pilferage and robbery, especially in Odisha and West Bengal. � The miscreants pose as fake RTO officials, and try to extort money from truckers. Such harassment by local gangs is seen mainly in the Kendujahar area in Odisha. The same gangs also indulge in pilferage of goods.

Route Characteristics

The major product categories (domestic freight) transported on this route are textiles, engineering goods, electronics, fast moving consumer goods (FMCGs), processed food, and agricultural products.

The usage of containers for domestic freight transportation on this route is mainly driven by the textiles, engineering goods, electronics, and auto and auto components sectors, where the need for containerised movement is higher than in the other sectors. The main type of containers used on this route are 32 feet in length, accounting for approximately 68 per cent of the usage, and 20 feet in length, accounting for 14 per cent of the usage.

192 192

Figure 3.3-3:Shares of Containerised Cargo (per cent)*

57% 43% 39% 36% 25%

Overall Textiles Engineering Electronics Auto & Auto Goods Components

Note: Containerised freight depicted in Figure 3.3-3 consists of cargo movement by containers and/or closed body trucks.

Out of the total cargo transported on the route, approximately 12 per cent is handled by integrated service providers. Integrated service providers mostly undertake containerised cargo movement for the FMCG, engineering goods, and processed food sectors.

The usage of multimodal transportation on this route is quite low as only 8 per cent of the respondents reported its usage.

Time and Cost of Transportation Figure 3.3-4 shows the average time in hours by different modes on this route.55 The average time taken for cargo transportation, inclusive of stoppage time on roads on this route, is estimated to be 92 hours.

Figure 3.3-4:Average Time in Hours by Modes of Transport

Roadway Railway Best Case (First Railway Normal Case Airway (First & last mile Multimodal (Road - Rail & last mile transit by road) (First & last mile transit by transit by road) Combination) road)

The average cost of transportation per tonne-km by various modes is shown in Table 3.3-1. The average cost of transportation per tonne-km varies between Rs 1.56 and Rs 7.5. Although the cost of

55The average time for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time spent on warehousing, packaging, or material handling at either the origin or the destination on the route. 193 193

transportation by railways is lower than that by other modes, it is less preferred due to infrastructural bottlenecks that lead to longer waiting periods at the railway depots, primarily due to the non-availability of rakes and the low frequency of trains for cargo movement. Table 3.3-1: Average Cost of Transportation in INR per tonne-km Mode This Route National Average Roadways* 2.4 2.48 Roadways* - Refrigerated 2.9 3.01 Railways (first- and last-mile transit by road) 1.56 1.88 Airways (first- and last-mile transit by road) 7.5 7.10 Multimodal Transportation (Combination of Roadways and Railways) 1.9 2.23 Source: Authors’ estimates. *We have considered the payload capacity of the truck to be 16 tonnes. Note: We have estimated our national average by taking the simple average of the cost in INR per tonne-km by the same mode across all routes under study.

The cost also varies for onward and return journeys. The cost of road transportation from Kolkata to Bengaluru is lower than the other way round.

Figure 3.3-5:Average Cost of Road Transportation for Onward and Return Journeys in INR per tonne-km

Bengaluru to Kolkata Kolkata to Bengaluru

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km for various modes is shown in Table 3.3-2. The average cost of logistics per tonne-km on this route varies depending on the nature of the operation and the modes of transport. As expected, the logistics costs are the highest for airways. By and large, the cost on this route is estimated to be below the national average.

194 194

Table 3.3-2: Logistics Costs in INR per tonne-km Logistics Logistics Overall undertaken by undertaken Mode 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadway 4.8 5.02 4.4 4.67 5.28 5.44 Railway (first- and last-mile transit by 3.54 3.78 3.65 3.68 3.6 road) 3.8 Airway (first and last-mile transit by road) 11.4 11.38 11.2 10.89 11.85 11.60 Multimodal (Combination of Roadways 4.4 4.71 and Railways) Source: Authors’ estimates. Note: We have estimated our national average by taking the simple average of the cost in INR per tonne-km by the same mode across all routes under study.

The variation in the average logistics costs per tonne-km for major commodities is shown in Table 3.3-3. The average logistics costs via both rail and road are the highest for pharmaceutical products.

Table 3.3-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Electronics 5.16 3.6 Engineering goods 4.60 3.50 Fast Moving Consumer Durables (FMCDs) 5.20 3.86 Pharmaceutical products 5.60 4.05 Steel 4.00 3.40 Textiles 5.30 3.70 Electronics 5.16 3.6 Source: Authors’ estimates.

Figures 3.3-7 and 3.3-8 show the cost in Rs per tonne-km, and in hours by road for the major components of logistics activities, respectively. As expected, the time taken for transportation or transit time is a major component of the logistics costs in terms of INR per tonne-km (in hours).

Figure 3.3-7: Logistics Costs in INR per tonne-km by Figure 3.3-8:Logistics Time in Hours by Activity Activity Mode: Road Mode: Road

Lo gis Logistics Cost in INR tic per tonne s km Ti me in Ho ur

195 Note: Average number of days for warehousing on both 195 sides=2

Similarly, in Figures 3.3-9 and 3.3-10, we show the decomposition of the cost (Rs/hour) by rail by different components of logistics activities. Transportation is again the largest component of the logistics costs in terms of INR per tonne-km via rail. On the other hand, storage during transit is a principal factor for time escalation in logistics activity via rail.

Figure 3.3-9: Logistics Costs in INR per tonne-km by Figure 3.3-10:Logistics Time in Hours by Activity activity Mode: Rail Mode: Rail

Lo L ogistics gist Cost in ics INR per Ti tonne km me in Ho ur

Note: Average number of days for warehousing on both nodes =2 Average number of days for storage during transit = 3

Perceptions of Key Cargo Transportation Challenges

The information was collated on the basis of interactions with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.3-11. The figure shows that harassment by the RTO officials and the police, and demand for facilitation money are the most serious challenges on this route.

196 196

Figure 3.3-11: Intensity of the Challenges Faced in Transportation

Road Condition including signage Limited 10 infrastructure in 9 8 Harassment by terms of parking 7 RTO officials terminals with 6 refreshment 5 4 3 2 Need to pay Bribes/ 1 Pilferage/Leakage 0 Facilitation money of Consignment

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies

Unavaliability of Intermodal exchange points

Figure A3.3-1: Shares of Components of Transportation Costs (per cent)

Mode: Road

Fuel 52%

Tolls 15%

Salary and Allowances 14%

Maintenance including 8% Consumables

Speed Money/ Bribes 5%

Others (Vehicle Insurance, Vehicle Parking, RTO fines 6% etc.)

197 197

Figure A3.3-2:Average Transportation Costs of Major Commodities in INR per tonne-km Roadways Railways

Pharmaceuticals 2.8 Pharmaceuticals 1.75

Textiles 2.65 FMCD 1.65

FMCD 2.6 Textiles 1.6

Electronics 2.58 Electronics 1.55

Engg Goods 2.3 Engg Goods 1.5

Steel 2 Steel 1.45

Figure A3.3-3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms 4PL Firms

Transportation 49% 49% 48% Warehousing 14% 13% 14%

Material Handling 12% 12% 13%

Documentation 4% 5% 4% Logistics System 3% Management 4% 3% Packaging Costs 4% 4% 3% Administration cost 3% 3% 3%

Insurance cost 2% 2% 2%

Software & Maintenance 2% 2% 2% Cost of Logistics Equipment 2% 2% 2% Marketing cost 1% 1% 1% IT - Hardware & Software 2% Cost 1% 1%

Speed Money 1% 0% 1%

Others 2% 3% 3% Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics services to end-users. The end users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider—This refers to an integrated service provider to whom end-users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to the service provided by 3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end-users, and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

198 198

3.4 DomesticBengaluru Route: → 3.4Nagpur Bengaluru → Nagpur

The Bengaluru → NagpurThe cargoBengaluru route →is Nagpuran important cargo freightroute istransportation an important route freight accounting transportation for route accounting for approximately less thanapproximately 1 per cent of less the thanoverall 1 perdomestic cent ofcargo the overallmovement. domestic Bengaluru cargo ismovement. a large Bengaluru is a large consumption centre as wellconsumption as a manufacturing centre as well hub as for a fastmanufacturing moving consumer hub for goodsfast moving (FMCGs) consumer and goods (FMCGs) and electronics, whereas Nagpur,electronics, being centrally whereas located,Nagpur, is being a prominent centrally warehousing located, is a andprominent redistribution warehousing point and redistribution point for products bound for northernfor products and southernbound for India. northern Although and southern the road India. distance Although on this the route road is distancea little on this route is a little over 1000 km, there is a highover usage1000 km,of roadways there is a by high transporters usage of roadways (Figure 3.4 by- 2).transporters (Figure 3.4-2).

Figure 3.4-1: Route Map Figure 3.4-1: Route FigMapure 3.4-2:Modal SharesFig inure Transportation 3.4-2:Modal Shares(per cent) in Transportation (per cent)

85% 85%

1% 14% 1% 14%

Roadway Railway Roadway Airway Railway Airway

Key Impediments on theKey Route Impedim ents on the Route � The drivers usually �face The harassment drivers usuallyby RTO face officials harassment at the by state RTO borders officials of Telanganaat the state and borders of Telangana and Maharashtra. Maharashtra. � Incidences of misbehavior� Incidences with drivers of misbehavior by flying squads with driversof police by officialsflying squads are common of police on officials this are common on this route, especially in the Vidarbharoute, especially area of Maharashtra. in the Vidarbha area of Maharashtra. � Although the road conditions� Although are, thein general,road conditions good, there are, inare general, heavy trafficgood, congestionthere are heavy points traffic congestion points around Nagpur. around Nagpur. Route Characteristics Route Characteristics The major product categoriesThe major (domestic product freight) categories transported (domestic on freight)this route transported include processedon this routefoods, include processed foods, FMCGs, pharmaceuticals,FMCGs, and agricultural pharmaceuticals, products. and agricultural products.

The usage of containers Thefor domesticusage of freightcontainers transportation for domestic is mainlyfreight transportationdriven by the ispharmaceutical mainly driven and by the pharmaceutical and FMCG sectors, where theFMCG need for sectors, containerised where the movement need for containerisedis higher than movementin other sectors. is higher than in other sectors. The major type of containersThe majorused on type the of route con tainersare 32 usedfeet in on length, the route accounting are 32 feet for inapproximately length, accounting 65 per for approximately 65 per cent of the usage, and 20 centfeet ofin length,the usage, accounting and 20 feet for in15 length, per cent accounting of the usage. for 15 per cent of the usage.

199 199 199

Figure 3.4-3: Shares of Containerised Cargo (per cent)

52% 44% 42% 34% 38%

Overall Pharmaceuticals Textiles FMCG Electronics

Out of the total cargo transported, approximately 13 per cent is managed by integrated service providers (3PL/4PL). They mostly deal in pharmaceutical products and FMCGs.

Time and Cost of Transportation Figure 3.4-4 shows the average time taken in hours by different modes on this route.56 The average time for cargo transportation, inclusive of stoppage time by road, on this route is estimated to be 48 hours.

Figure 3.4-4: Average Time in Hours by Modes

Roadway Railway Best Case (First Railway Normal Case Airway (First & last mile Multimodal (Road - Rail & last mile transit by (First & last mile transit transit by road) Combination) road) by road)

The average cost of transportation per tonne-km by various modes is shown in Table 3.4-1.The average cost of transportation per tonne-km varies between Rs 1.6 and Rs 8.4 The average cost incurred on this route seems to be lower than the national average in all modes except airways.

56The average total time taken for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route.

200 200

Table 3.4-1: Average Cost of Transportation in INR per tonne-km Mode This Route National Average Roadway* 2.1 2.48 Roadway* - Refrigerated 2.6 3.01 Railway (First & last mile transit by road) 1.6 1.88 Airway (First & last mile transit by road) 8.4 7.10 Multimodal (Road + Rail) 1.9 2.23 Source: Authors’ estimates. *We have considered the payload capacity of the truck to be 16 tonnes. Note: We have estimated our national average by taking the simple average of the cost in INR per tonne-km by the same mode across all routes under study.

The cost also varies for onward and return journeys. The cost of road transportation is lower from Bengaluru to Nagpur than the other way round. Figure 3.4-5: Average Cost of Road Transportation for Onward and Return Journeys in INR per tonne-km

Bengaluru to Nagpur Nagpur to Bengaluru

Cost of Logistics Our estimate of the average cost of logistics per tonne-km for various modes is shown in Table 3.4-2. The average cost of logistics per tonne-km on this route varies depending upon nature of the operation and the modes of transportation used. As expected, the logistics costs are the highest for airways. The data in the table suggest that the logistic costs on this route are lower than our estimated national average.

Table 3.4-2: Logistics Costs in INR per tonne-km Logistics Logistics Mode Overall undertaken by undertaken 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadway 4.35 5.02 4 4.67 4.79 5.44 Railway (First & last mile transit by road) 3.65 3.68 3.27 3.54 3.36 3.78 Airway (First & last mile transit by road) 11.5 11.38 11.4 11.2 11.79 11.60 Multimodal (Road - Rail Combination) 4.4 4.71

Source: Authors’ estimates. Note: We have estimated our national average by taking the simple average of the cost in INR per tonne-km by the same mode across all the routes under study.

201 201

The variation in the average logistics costs per tonne-km for major commodities is shown in Table 3.4-3. The average logistics costs are the highest for textile companies by road and for processed food products by rail.

Table 3.4-3: Average Logistics Costs for Major Commodities in INR per tonne-km

Mode Commodity Road Rail FMCDs 3.95 3.3 FMCGs 4.1 3.5 Processed food 4.7 3.9 Agricultural products 4.7 3.0 Pharmaceutical products 4.8 3.8 Textiles 5.0 3.2 Source: Authors’ estimates.

Figures 3.4-6 and 3.4-7 show the cost incurred by road in Rs per tonne-km, and in hours for the major components of logistics activities, respectively. While warehousing is a major component of the time cost, transportation is the largest contributor of cost in INR per tonne-km among various logistics activities.

Figure 3.4-6: Logistics Costs in INR per tonne-km by Activity Figure 3.4-7: Logistics Time in Hours by Activity Mode: Road Mode: Road

Lo gis tic Ti Logistic me s Cost in INR in per Ho tonne ur km.

Note: Average number of days for warehousing on bothsides=2 Similarly, Figures 3.4-8 and 3.4-9 show the decomposition of the cost (Rs/hour) by rail by different components of logistics activities. Transportation is the largest contributor of cost in INR per tonne-km among various logistics activities. Storage during transit is a major component of the time cost via rail.

202 202

Figure 3.4-8:Logistics Costs in INR per tonne-km by Figure 3.4-9: Logistics Time in Hours by Activity Activity, Mode: Rail Mode: Rail

Logistics Logistics Time in Costs — in Hours INR per tonne- km .

Note:Average number of days for warehousing on both nodes =2 Average number of days for storage during transit = 3

Perceptions of Key Cargo Transportation Challenges The information was collated on the basis of interactions with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.4-10. Harassment by the RTO officials and the police, and the demand for facilitation money are the two most pressing issues faced by transporters on this route.

203 203

Figure 3.4-10: Intensity of the Challenges Faced in Transportation

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies

Unavaliability of Intermodal exchange points

Figure A3.4-1: Shares of Components in the Transportation Costs, Mode: Road (per cent)

Fuel 54%

Tolls 13%

Salary and Allowances 16%

Maintenance & Consumables 8%

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle Parking, 6% RTO fines etc.)

204 204

Figure A3.4-2: Average Transportation Costs of Major Commodities in INR per tonne-km

Roadways Railways

Textiles 2.4 Pharmaceuticals 1.85

Pharmaceuticals 2.32 FMCG 1.7

Agri Products 2.25 FMCD 1.6 Processed Food 2.25 Textiles 1.54 FMCG 2

FMCD 1.9 Agri Products 1.45

Figure A3.4-3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL firms 4PL firms

45% Transportation 46% 45%

13% Warehousing 14% 14% Material Handling 13% 14% 13% Documentation 6% 5% 6% Logistics System 4% 3% 3%

Packaging Costs 4% 4% 5% Administration cost 3% 3% 3% Insurance cost 2% 3% 2%

Software & Maintenance 2% 2% 1%

Cost of Logistics Equipment 2% 2% 3% 1% Marketing cost 1% 1% 3% IT - Hardware & Software 2% 3% 1% Speed Money 1% 1%

1% Others 2% 2%

Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics services to end-users. The end users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider—This refers to an integrated service provider to whom end-users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to the service provided by 3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end-users, and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

205 205

3.5 Domestic Route: Hyderabad → Kolkata The Hyderabad → Kolkata cargo route is an important freight transportation route, which connects northern and southern India and accounts for approximately 2 per cent of the overall domestic cargo movement. Hyderabad and Kolkata are both manufacturing and consumption hubs, and act as redistribution points for regional agricultural and manufactured products.

Figure 3.5-1: Route Map Figure 3.5-2: Modal Shares in Transportation (per cent)

85%

2% 13%

Roadway Railway Airway

Impediments on the Route � RTO officials harass the drivers, particularly at the Jamsola border between Odisha and West Bengal, demanding bribes/facilitation money for allowing trucks to pass even if all the regulations have been complied with. � There are incidences of pilferage and robbery, especially in Odisha and West Bengal. The local gangs create artificial roadblocks to get on to the slow-moving vehicles at night. � There are limited intermodal road and rail exchange points on this route.

Route Characteristics The major product categories (domestic freight) transported on this route are textiles, electronics, processed foods, pharmaceuticals, and engineering goods. Agricultural commodities also constitute a major product category transported using railways.

The usage of containers for domestic freight transportation on the Hyderabad-Kolkata route is mainly driven by the textiles and pharmaceutical sectors where the usage of containerised movement is traditionally higher than that in the other sectors. The major type of containers used on this route are 32 feet in length, accounting for approximately 60 per cent of the usage, and of 28 feet in length, accounting for 15 per cent of the usage.

206 206

Figure 3.5-3: Shares of Containerised Cargo (per cent)

57% 48% 43% 38% 39%

Overall Textiles Pharmaceuticals Engineering Goods Electronics

The integrated service providers (3PL/4PL) handle about 10 per cent of the cargo. They mostly undertake containerised pharmaceutical and engineering cargo movements.

The incidence of multimodal transportation or combined usage of railways and roadways is quite low, as only 7 per cent of the respondents reported such usage.

Time and Cost of Transportation

Figure 3.3-4 shows the average time taken in hours by different modes on this route.57

Figure 3.5-4: Average Time in Hours by Modes

137 95 72 89 14

Roadway Railway Best Case Railway Normal Case Airway (First & last Multimodal (Road - Rail (First & last mile transit (First & last mile transit mile transit by road) Combination) by road) by road)

The average time taken for cargo transportation inclusive of stoppage time by roads on this route is estimated to be 72 hours. There is a preference for roadways due to last-mile connectivity and lower material handling costs.

57The average time taken for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or destination on the route. 207 207

The average cost of transportation per tonne-km by various modes and national average is shown in Table 3.5-1.58 The average cost of transportation per tonne-km varies between Rs 1.6 and Rs 6.8. The cost on this route seems to be lower than the national average. Although the cost of transportation by railways is lower than by other modes, it is less preferred due to infrastructural bottlenecks that cause longer waiting time at railway depots, primarily due to the low frequency of scheduled trains for cargo movement. In the event of limited infrastructure supporting multimodal transportation, the cost of multimodal transportation is nearly similar to that of road transportation.

Table 3.5-1: Average Cost of Transportation in INR per tonne-km

Mode This Route National Average Roadway* 2.3 2.48 Roadway* - Refrigerated 2.8 3.01 Railway (First & last mile transit by road) 1.6 1.88 Airway (First & last mile transit by road) 6.8 7.10 Multimodal (Road + Rail) 2.1 2.23 Source: Authors’ estimates. *We have considered the payload capacity of the truck to be 16 tonnes. Note: We have estimated our national average by taking the simple average of the cost in INR per tonne-km by the same mode across all the routes under study.

The cost also varies for onward and return journeys. The average cost of road transportation from Kolkata to Hyderabad is lower than the other way round.

Figure 3.5-5: Average Cost of Road Transportation for Onward and Return Journeys in INR per tonne- km

Hyderabad to Kolkata Kolkata to Hyderabad

Cost of Logistics Our estimate of average cost of logistics per tonne-km for various modes is shown in Table 3.5-2. The average cost of logistics per tonne-km on this route varies depending on the nature of the operation and the modes of transportation used. As expected, the logistics costs are the highest for airways. It may be noted that the logistics costs on this route are lower than the national average.

58The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route. 208 208

Table 3.5-2: Logistics Costs in INR per tonne-km Logistics Logistics Overall Undertaken by Undertaken Mode 3PL Firms Directly This National This National This National Route Average Route Average Route Average Roadways 4.9 5.02 4.5 4.67 5.4 5.44 Railways (first- and last-mile transit by 3.31 3.68 3.5 3.54 3.71 3.78 road) Airways (First- and last-mile transit by 10.9 11.38 10.8 11.2 11.12 11.60 road) Multimodal (Combination of Roadways 4.25 4.71 and Railways) Source: Authors’ estimates. Note: We have estimated our national average by taking the simple average of the cost in INR per tonne km by same mode across all routes under study.

The variation in the average logistics costs per tonne-km for major commodities (domestic cargo) is shown in Table 3.5-3. The average logistics costs via both railways and roadways are the highest for pharmaceutical products.

Table 3.5-3: Average Logistics Costs for Major Commodities in INR per tonne-km

Mode Commodity Roadways Railways Engineering goods 4.90 3.35 FMCGs 5.90 3.60 Pharmaceutical products 6.10 4.00 Processed foods 5.40 3.70 Source: Authors’ estimates.

Figures 3.5-6 and 3.5-7 show the cost on road in Rs per tonne-km and in hours for the major components of logistics activities, respectively. Transportation is the highest component of the logistics costs in INR per tonne-km. On the other hand, warehousing and transit activities are the components leading to the maximum time escalation.

209 209

Fig ure 3.5-6:Logistics Costs in INR per tonne-km by Activity Figure 3.5-7: Logistics Time in Hours by Activity Mode: Road Mode: Road

Logistic Time in Hour

Logistics Costs in INR per tonne km

Note:Average number of days for warehousing on both sides=2

Similarly, Figures 3.5-8 and 3.5-9 show the decomposition of cost (Rs/hour) on railways by different components of logistics activities, respectively. Here, storage is a major component of the time cost.

Figure 3.5-9: Logistics Time in Hours by Activity Mode: Figure 3.5-8: Logistics Costs in INR per tonne-km Rail Mode: Rail

Logistic Logistics Time in Cost in Hour INR per tonne km

Note:Average number of days for warehousing on both nodes =2 Average number. of days for storage during transit = 3

210 210

Perceptions of Key Cargo Transportation Challenges The information was collated on the basis of interactions with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.5-10. As per our findings, harassment by the RTO officials and the demand for facilitation money are two of the most pressing problems on this route.

Figure 3.5-10: Intensity of the Challenges Faced in Transportation

Road Condition including signage Limited 10 9 infrastructure in 8 Harassment by 7 terms of parking 6 RTO officials terminals with 5 4 3 Need to pay 2 Bribes/ 1 Pilferage/Leakage 0 Facilitation of Consignment money

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies Unavaliability of Intermodal exchange points

Figure A3.5-1: Shares of Components in the Transportation Costs (per cent) Mode: Road

Fuel 53%

Tolls 15%

Salary and Allowances 15%

Maintenance including Consumables 7%

Speed Money/ Bribes 4%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO fines etc.)

211 211

Figure A3.5-2: Average Transportation Costs of Major Commodities in INR per tonne-km

Railways Roadways

Pharmaceuticals 2.85 Pharmaceuticals 1.8

FMCG 2.75 FMCG 1.6

Processed foods 2.55 Processed foods 1.65

Engineering goods 2.3 Engineering goods 1.5

Figure A3.5-3: Shares of Components of the Logistics Costs (per cent)

3PL firms Overall 4PL firms

Transportation 48% 47% 48%

Warehousing 11% 11% 10% Material Handling 13% 12% 13%

Documentation 5% 6% 5% Logistics System 4% Management 4% 3% Packaging Costs 3% 3% 4%

Administration cost 3% 4% 3%

Insurance cost 2% 2% 3%

Software & Maintenance 2% 2% 2%

Cost of Logistics Equipment 3% 3% 3% Marketing cost 1% 2% 2% IT - Hardware & Software 2% Cost 2% 2% Speed Money 1% 1% 1% Others 3% 3% 3%

212 212

213 213

3.6 Domestic Route: Jaipur → Bengaluru

The Jaipur- Bengaluru cargo route is an important freight transportation route which connects North and South India and accounts for approximately ~4 per cent of the overall domestic cargo movement. Jaipur is mainly a consumption centre, whereas Bengaluru is a consumption centre as well as manufacturing hub for electronics, engineering goods and FMCG products.

Figure 3.6-1: Route Map Figure 3.6-2:Modal Shares in Transportation (per cent)

72%

3% 25%

Roadway Railway Airway

Key impediments on the route • The RTO officials harasses drivers at the state borders in Madhya Pradesh (NH44) and Ratanpur border (NH48) for bribes. • The misbehavior by flying squads of police officials with drivers is common especially in Vidarbha area of Maharashtra and Madhya Pradesh. • There are incidences of pilferage and robbery especially in Madhya Pradesh on NH44 route. • There are limited availability of containerized transportation facilities in this route due to uncertainty of return load. • Although the road conditions are good, congestion is recurrent phenomenon in the 10 km stretches around Nagpur. Route Characteristics The major product categories transported in this route are textiles, engineering goods, FMCG, chemicals and FMCD products. Agricultural commodities and products such as rice, coffee are transported from Bengaluru to Jaipur. Considering the long haul, the usage of railways for freight transportation is relatively higher than other prominent routes (Figure 3.6-2).

The usage of containers in this route is mainly driven by FMCG, textiles, electronics and engineering goods sectors. As Jaipur is not a prominent manufacturing location, the demand for container movement from Bengaluru to Jaipur outstrips the demand for containerised movement from Jaipur to Bengaluru in the ratio of 3:1. The major type of containers used in the route are of length 32 feet (approximately 70 per cent usage) and 24 feet (~12 per cent usage).

214 214

Figure 3.6-3:Shares of Containerised Cargo (per cent)

42% 38% 38% 36% 23%

Overall FMCG Textiles Electronics Engineering Goods

Out of the total cargo transported on the route, approximately 8 per cent of the cargo is handled by integrated service providers. The absence of major manufacturing hubs in Jaipur, lower demand for containerised movement and lack of commensurate return load from Jaipur to Bangalore are some of the reasons contributing to relatively lower penetration of integrated service providers. The adoption of multimodal transportation is relatively higher than other prominent domestic cargo routes. About 18 per cent of our respondents have indicated that they have used multimodal mode at least once in this route. The modes used are a combination of railway and roadway. Nagpur being centrally located is an important intermodal exchange point, as until Nagpur the cargo is transported as FCL by rail for redistribution to various location and the part load bound to destination (Jaipur/Bengaluru) is subsequently transported by roadways.

Time and cost of Transportation

Figure 3.6-4 shows the average time in hours by different modes in this route59. The average time for cargo transportation inclusive of stoppage time by roads in this route is estimated to be 95 hours. The roadways is preferred due to last mile connectivity and higher reliability for time bound delivery. The railway is not preferred due to high unreliability and infrastructural bottlenecks including long delays due to warehousing during transit. The average cost of transportation per tonne-km by various modes is shown in Table 3.6-160. The average cost of transportation per tonne-km varies between Rs.1.85 - 7.9. Although the cost of transportation by railway is low, it is not preferred as there are no scheduled cargo trains on the route. The cost of multimodal transportation is lower than roadways. But, it is not preferred due to unreliability of the railways and lack of supporting ecosystem such as intermodal exchange points, material handling and transfer capabilities etc.

59The average time for transportation in hours includes only the time taken for transit including first and last mile connectivity to warehouses and stoppages during transit. It does not include time taken for warehousing, packaging or material handling on either the origin or the destination on the route. 60The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include expenses incurred for any other logistics activity at the origin or destination of the route.

215 215

Figure 3.6-4:Average Time in Hours by Modes of Transportation

Roadway Railway Best Case (First & Railway Normal Case (First Airway (First & last mile Multimodal (Road - Rail last mile transit by road) & last mile transit by road) transit by road) Combination)

Table 3.6-1: Average Cost of Transportation in INR per tonne-km Mode This Route National Average Roadways* 2.5 2.48 Roadways* - Refrigerated 3.1 3.01 Railways (first - and last mile transit by road) 2.1 1.88 Airway (first- and last mile transit by road) 7.9 7.10 Multimodal Transportation (Combination of Roadways and 1.85 2.23 Railways) Source: Authors’ estimates. *We have considered the payload capacity of the truck to be 16 tonnes. Note: We have estimated our national average by taking the simple average of the cost in INR per tonne km by same mode across all routes under study.

The cost also varies for onward and return journeys (Figure 3.6-5). The cost of road transportation is lower from Bengaluru to Jaipur than the other way round.

Figure 3.6-5:Average Cost of Road Transportation for Onward and Return Journeys in INR per tonne-km

Jaipur to Bengaluru Bengaluru to Jaipur

216 216

Cost of Logistics

Our estimate of the average cost of Logistics per tonne-km by various modes is shown in Table 3.6-2. The average cost of logistics per tonne-km in this route varies depending on nature of the operation and modes. The cost of logistics as expected is highest for airways. Note that the cost in some of the modes in this route is higher than our estimated national average.

Table 3.6-2: Logistics Costs in INR per tonne-km Logistics Logistics Overall undertaken by undertaken Mode 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadways 5.2 5.02 4.78 4.67 5.72 5.44 Railways (first – and last mile transit by 3.57 3.68 3.12 3.54 3.5 3.78 road) Airway (first – and last mile transit by 13.2 11.38 12.03 11.20 13.3 11.60 road) Multimodal Transportation (Combination 4.7 4.71 of Roadways and Railways) Source: Authors’ estimates. Note: We have estimated our national average by taking the simple average of the cost in INR per tonne km by same mode across all routes under study.

The variation in average cost of logistics per tonne-km for major commodities is shown in Table 3.6-3. The average cost of logistics via both rail and road is highest for pharmaceutical products.

Table 3.6-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Agricultural products 4.20 3.25 Electronics 5.50 3.5 FMCDs 4.37 3.3 FMCGs 4.80 3.0 Pharmaceutical products 5.60 3.6 Processed food 5.65 3.3 Source: Authors’ estimates.

Figure 3.6-6 and Figure 3.6-7 shows the cost in Rs per tonne-km and in hours by road for the major components of logistics activities respectively. The transportation cost and actual time in transit are the major contributing factors for escalation in logistics cost in INR per tonne-km and in hours respectively.

217 217

Figure 3.6-7: Logistics Time in Hours by Activity Figure 3.6-6: Logistics Costs in INR per tonne-km by Mode: Road ActivityMode: Road

Logistics Cost in INR per tonne km Logistics Time in Hour

Note:Average number . of days for warehousing on both sides=2

Similarly, we show below the decomposition of cost (Rs/hour) by rail for different components of logistics activities. The transportation cost is the largest component of logistics cost in INR per tonne-km via rail. The activity storage during transit is the major component for time escalation in hours via rail.

Figure 3.6-8: Logistics Costs in INR per tonne-km by Figure 3.6-9: Logistics Time in Hours by Activity Activity, Mode: Rail Mode: Rail

Lo gis tic s Ti m Logistics e Cost in in INR per H tonne km ou r

Note: Average number . of days for warehousing on both nodes =2 Average no. of days for storage during transit = 3

218 218

Perception of key cargo transportation challenges The information was collated on the basis of from interactions with stake-holders to identify understand the major transportation challenges onin this route. The intensity of the major challenges faced on the route during cargo transportation has been is mapped on a scale of 1-10, where a score of 1 implies that means the challenge is of low intensity and a score of 10 implies a means high- intensity challenge/problem. Our findings are shown in Figure 3.6-10. As per our findings, harassment by RTO officials and the police, demand for facilitation money and limited infrastructure are some of the most severe problems in this route. Figure 3.6-10: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Limited 9 8 Harassment by infrastructure in 7 6 RTO officials terms of parking 5 4 3 Need to pay 2 Pilferage/ 1 Bribes/ 0 Leakage of Facilitation Consignment

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies Unavaliability of Intermodal exchange points

Figure A3.6-1: Shares of Components in the Transportation Costs (per cent)

Mode: Road

Fuel 53%

Tolls 14%

Salary and Allowances 16%

Maintenance including 7% Consumables

Speed Money/ Bribes 4%

Others (Vehicle Insurance, 6% Vehicle Parking, RTO fines etc.) 219 219

Figure A3.6-2:Average Transportation Cost of Major Commodities in INR per tonne-km

Roadways Railways

Processed Food 2.7 Pharmaceuticals 2.25

Pharmaceuticals 2.65 Electronics 2.15

Electronics 2.65 Processed Food 2.1

Textiles 2.5 FMCD 2.05

FMCG 2.35 Agri Products 2

FMCD 2.1 Textiles 2

Agri Products 2 FMCG 1.85

Figure A3.6-3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms 4PL Firms

49% 50% Transportation 50% 14% 12% Warehousing 13% 11% Material Handling 12% 11% 5% 5% Documentation 6%

Logistics System 3% 3% Management 3% 3% 3% Packaging Costs 3% 2% Administration cost 3% 2% 2% Insurance cost 2% 2% 2% Software & Maintenance 2% 1% 2% Cost of Logistics 2% Equipment 2% 1% Marketing cost 1% 2%

IT - Hardware & Software 2% 1% Cost 1% 1% Speed Money 1% 1% 3% Others 3% 3%

220 220

221 221

3.7 Domestic Route: Jaipur → Kolkata

The Jaipur → Kolkata cargo route is an important freight transportation route accounting for approximately 3 per cent of the overall domestic cargo movement. Kolkata and Jaipur are mainly large consumption centres and act as redistribution points for manufactured products and agricultural commodities produced in the region around the hubs.

Figure 3.7-1: Route Map Figure 3.7-2: Modal Shares in Transportation (%)

82%

2% 16%

Roadway Railway

Key Impediments on the Route � Harassment of truck drivers by the RTO officials and the police, especially in West Bengal and Bihar, is a major concern during road transportation on this route. The harassment of drivers is so severe, especially in West Bengal, that transportation firms sometimes resort to paying monthly facilitation money to the RTO officials at various checkpoints on this route. � To some extent, the drivers are harassed in Bihar due to the stringent guidelines concerning the height of the trucks. � There are far too many toll booths in this route leading to time delays. The toll charges per km in Rajasthan are also amongst the highest in India. � There are incidences of pilferage and robbery, especially in the areas around the Sasaram– Mohania belt in Bihar and Dhanbad in Jharkhand during night time. � The limited availability of return cargo load is an issue raised by truck drivers.

Route Characteristics The major product categories (domestic freight) transported on this route are textiles, chemicals, electronics items, engineering goods, FMCGs, and steel products. Agricultural commodities are also transported from Kolkata to Jaipur.

The products primarily transported through containers on this route include automobiles, textiles, and pharmaceutical products. The major types of containers used on this route are 32 feet in length, accounting for approximately 64 per cent of the usage, and 28 feet in length, accounting for (~15 per cent usage).

222 222

Figure 3.7-3: Shares of Containerised Cargo (per cent)

51% 50% 43% 38% 34%

Overall Textiles FMCG Electronics Engineering Goods

Note: Containerised Freight depicted in the chart consists of Cargo moved by Containers as well as Closed Body Trucks.

Approximately 8 per cent of the total cargo transported on this route is handled 3PL/4PL players, who mainly deal in containerised cargo. There is hardly any usage of multimodal transportation on this route. As the road route passes through Varanasi, National Waterway 1 can be used for the onward journey from Varanasi to Kolkata. This represents an opportunity to save costs on the route by using a combination of roadways and inland waterways once the infrastructure at the inland waterways terminal is improved.

Time and Cost of Transportation Figure 3.7-4 shows the average time taken in hours by different modes on this route.61 It may be noted that the time taken via roadways is nearly 22 hours less than that taken by railways in the best case scenario.

Figure 3.7-4: Average Time in Hours by Modes of Transportation

Roadway Railway Best Case Railway Normal Airway (First & Last Multimodal (Road - (First & Last mile Case (First & Last mile transit by road) Rail Combination) transit by road) mile transit by road)

61The average total time taken for transportation in hours includes only the time taken for transit, including the first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on this route. 223 223

The average cost of transportation per tonne-km by various modes is shown in Table 3.7-1. The cost on this route is higher than the national average. There is little gain by switching to a multi-modal format on this route. Although the cost of transportation by railways is lower than by other modes, it is less preferred due to infrastructural bottlenecks that cause longer waiting times at the railway depots primarily due to the non-availability of rakes and the low frequency of trains for cargo movement. This leads to longer overall time for cargo movement and consequently opportunity costs due to delayed deliveries.

Table 3.7-1: Average Costs of Transportation in INR per tonne-km

Mode This Route National Average Roadways* 2.5 2.48 Roadways* - Refrigerated 3.1 3.01 Railways (first last mile transit by road) 2.2 1.88 Airways (first last mile transit by road) 7.5 7.10 Multimodal Transportation (Combination of Roadways and 2.4 2.23 Railways) Source: Authors’ estimates. *We have considered the payload capacity of the truck to be 16 tonnes. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The cost also varies for onward and return journeys. The cost incurred on the return journey seems to be lower.

Figure 3.7-5:Average Costs of Road Transportation for Onward and Return Journeys in INR per tonne- km

2.65

2.38

Jaipur to Kolkata Kolkata to Jaipur

224 224

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.7-2. It varies between Rs 4.8 and Rs 11.4 per tonne-km.

Table 3.7-2: Logistics Costs in INR per tonne-km Overall Logistics Logistics undertaken by undertaken Mode 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadways 5.1 5.02 4.69 4.67 5.61 5.44 Railways (First and last mile transit by road) 3.4 3.68 3.29 3.54 3.76 3.78 Airways (First and last mile transit by road) 11.4 11.38 12.3 11.20 11.82 11.60 Multimodal Transportation (Combination of 4.8 4.71 Roadways – Railways ) Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The variation in the average cost of logistics per tonne-km for major commodities (domestic cargo) is shown in Table 3.7-3. The logistics costs seem to be the highest for chemical products via roadways and for textile products via railways.

Table 3.7-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Steel products 4.75 3.20 Engineering goods 5.20 3.58 Agricultural products 5.30 3.15 Textiles products 5.50 3.70 Chemical products 5.70 Source: Authors’ estimates.

Figures 3.7-6 and 3.7-7 show the cost on road in Rs per tonne-km and in hours for the major components of logistics activities, respectively. Transportation is the highest cost element in terms of Rs per tonne- km. On the other hand, transit time is the largest contributing factor for time escalation in logistics costs in hours.

225 225

Figure 3.7-6: Logistics Costs in INR per tonne-km by Activity, Mode: Road Figure 3.7-7: Logistics Time in Hours by Activity Mode: Road Mode: Road

Logistics Time in Hour Logistics Cost in INR per tonne km

Note: The average number of days for warehousing on both sides=2

Similarly, Figures 3.7-6 and 3.7-7 show the decomposition of cost (Rs/hour) by railways by different components of logistics activities. Again, transportation is estimated to be the highest cost element in terms of Rs per tonne-km. On the other hand, storage during transit time is found to be the largest contributing factor for time escalation in the logistics costs in hours.

Figure 3.7-8: Logistics Costs in INR per tonne-km Figure 3.7-9:Logistics Time in Hours by Activity

by Activity, Mode: Rail Mode: Rail

Logistic Time in Hour

Logistics Cost in INR per tonne-‐ km

Note: The average number of days for warehousing on both nodes =2 The average number of days for storage during transit = 3

226 226

Perceptions of the Key Cargo Transportation Challenges The information was collated on the basis of interactions with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.7-10. Two indicators, namely harassment by the RTO officials and payment of facilitation money, have been mapped at 9 on a scale of 1–10, indicating that these two factors need the utmost attention. Figure 3.7-10: Intensity of the Challenges Faced in Transportation

Road Condition including signage Limited 10 infrastructure in 9 terms of parking 8 Harassment by terminals with 7 RTO officials refreshment 6 facilities for driver 5 4 3 2 Need to pay 1 Pilferage/Leakage Bribes/ Facilitation 0 of Consignment money

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies

Unavaliability of Intermodal exchange points

227 227

Figure A3.7-1: Shares of Components in the Transportation Costs (per cent) Mode: Road

Fuel 51%

Tolls 14%

Salary and Allowances 16%

Maintenance including 9% Consumables

Speed Money/ Bribes 4%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO fines etc.)

Figure A3.7-2:Average Transportation Costs of Major Commodities in INR per tonne-km

Roadway Railway

Chemicals 2.8 Textiles 2.3

Textiles 2.7 Engg Goods 2.25 Agri Products 2.6

Agri Products 2 Engg Goods 2.6

Steel 2.18 Steel 1.9

228 228

Figure A3.7-3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms 4PL Firms

TransportaKon 50% 49% 48% Warehousing 13% 11% 12%

Material Handling 12% 11% 13%

DocumentaKon 5% 4% 5%

LogisKcs System Management 3% 4% 4%

Packaging Costs 3% 3% 3% 3% AdministraKon cost 2% 3% Insurance cost 1% 2% 2%

SoRware & Maintenance 2% 3% 2%

Cost of LogisKcs Equipment 3% 3% 2%

MarkeKng cost 2% 2% 2%

IT -‐ Hardware & SoRware Cost 2% 2% 2% 0% Speed Money 1% 0%

Others 3% 3% 3%

229 229

3.8 Domestic Route: Ludhiana → Bengaluru

The Ludhiana–Bengaluru cargo route is an important freight transportation route, which connects northern and southern India, and accounts for approximately ~3 per cent of the overall domestic cargo movement. Ludhiana is an important manufacturing hub for auto components, garments, and engineering goods, whereas Bengaluru is one of the largest consumption clusters in the country. Bengaluru is also an important manufacturing hub for FMCGs, pharmaceuticals, and engineering goods, and acts as a warehousing and cargo redistribution point for agriculture and manufacturing products in southern India.

Considering the long haul, the usage of railways for freight transportation on this route is higher than on other prominent routes (Figure 3.8-2). . Figure 3.8-1: Route Map Figure 3.8-2:Modal Shares in Transportation (per cent)

72%

4% 24%

Roadway Railway Airway

Key Impediments on the Route � The truck drivers face harassment by the RTO officials, especially at the state border of Madhya Pradesh, with the latter demanding bribes/facilitation money for allowing trucks to pass even if all the regulations are complied with. The incidence of harassment by RTO officials is higher around the Hinganghat area in Maharashtra on the NH44 route and around the Madhya Pradesh– Maharashtra border at Sendwa border on the NH48 road route. � The toll charges are high in Rajasthan, Maharashtra, and Karnataka relative to other states. Hence, the route through Madhya Pradesh (NH44) is preferred despite incidences of pilferage in some sectors in Madhya Pradesh. � Incidences of misbehaviour by police officials of flying squads is common on the route, especially in Maharashtra. This is prevalent in the highway belt around Manesar and Sonegaon in Maharashtra. � Although the road conditions are good, in general, the stretch of the highway (NH44) around Nagpur is observed to be a major congestion point leading to traffic jams. Route Characteristics The major product categories (domestic freight) transported on this route are FMCGs, textiles, electronics, engineering goods, and steel products.

Textiles and auto-components are prmarily transported in containers. The containers used on this route are 32 feet in length, accounting for a usage of approximately 68 per cent, and 20 feet in length, accounting for a usage of 13 per cent.

230 230

Figure 3.8-3:Shares of Containerised Cargo (per cent) 53% 48%

35% 32% 31%

Overall Textiles Auto Components Electronics FMCG

Note: Containerised freight depicted in the chart consists of cargo moved by containers as well as close body trucks.

Approximately 11 per cent of the total cargo transported on the route is handled by integrated service providers, catering primarily to FMCGs and textile products. As regards the usage of multimodal modes of transport, 11 per cent of the respondents reported that they had used multimodal transportation at least once in the past. The modes used included a combination of railways and roadways. Being centrally located, Nagpur is an important intermodal exchange point. In the case of usage of multimodal transportation, the cargo is mainly transported from NCR to Nagpur as the FCL by railways for redistribution to various locations and the part load bound for Bengaluru are subsequently transported by roadways.

Time and Cost of Transportation Figure 3.8-4 shows the average time in hours by the different modes on this route.62

Figure 3.8-4:Average Time in Hours by Modes of Transportation

Roadway Railway Best Case (First Railway Normal Case Airway (First & last mile Multimodal (Road - Rail & last mile transit by (First & last mile transit transit by road) Combination) road) by road)

The time taken for airways is slightly higher relative to the other routes as the first-mile transportation is undertaken by road to the Chandigarh or Amritsar airport from where the cargo is airlifted. Around 80 per cent of the air cargo is routed via Chandigarh and the remainder from Amritsar airport.

The average cost of transportation per tonne-km by various modes is shown in Table 3.8-1. The cost varies between Rs 1.89 and Rs 6.8 per tonne-km. It may be noted that the cost across all modes of transportation on this route is lower than our estimated national average.

62The average time for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. 231 231

Although the route is suited for multimodal transportation, it has not seen much adoption on the route. This is primarily due to the lack of support infrastructure such as intermodal exchange points and an enabling environment for the adoption of multimodal transportation. If infrastructure is developed to support multimodal transportation on this route, the cost benefits will actually be realised.

Table 3.8-1: Average Costs of Transportation in INR per tonne-km Mode This Route National Average Roadways* 2.24 2.48 Roadways* - Refrigerated 2.7 3.01 Railways (first and last mile transit by road) 1.89 1.88 Airways (first and last mile transit by road) 6.8 7.10 Multimodal Transportation (Combination of Road and Rail) 2.15 2.23 Source: Authors’ estimates. Note: *We have considered the payload capacity of the truck to be 16 tonnes. We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The cost also varies for onward and return journeys. The cost is cheaper for return loads.

Figure 3.8-5: Average Costs of Road Transportation for Onward and Return Journeys in INR per tonne-km

Ludhiana to Bengaluru Bengaluru to Ludhiana

232 232

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.8-2. The overall cost via road is Rs 4.7 per tonne-km, which falls to Rs 4.32, if logistics is undertaken by 3PL firms. However, the cost via road goes up to Rs 6.5 if logistics is undertaken directly. The cost on this route seems to lower than the national average in case of usage of some of the modes of transportation.

Table 3.8-2: Logistics Costs in INR per tonne-km Overall Logistics Logistics undertaken by undertaken Mode 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadways 4.7 5.02 4.32 4.67 6.5 5.44 Railways (First & last mile transit by 4.0 3.68 4.0 3.54 4.2 3.78 road) Airways (First & last mile transit by road) 11.3 11.38 11.2 11.112 11.5 11.60 Multimodal Transportation (Combination 4.34 4.71 of Roadways and - Railway ) Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The variation in the average cost of logistics per tonne-km for major commodities (domestic cargo) is shown in Table 3.8-3. The logistics costs of FMCGs are the highest via roadways whereas the corresponding costs for pharmaceutical products are the highest via railways.

Table 3.8-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Electronics items 4.5 3.40 FMCDs 4.2 3.68 FMCGs 5.5 3.58 Pharmaceutical products 4.8 3.77 Textiles products 5.3 3.50 Source: Authors’ estimates.

Figures 3.8-6 and 3.8-7 shows the cost on road in Rs per tonne-km and in hours for the major components of logistics activities, respectively. The transportation cost in INR per tonne-km and actual transit time in hours are two of the most important factors accounting for the increase in logistics costs in Rs per tonne- km and in hours, respectively.

233 233

Figure 3.8-6:Logistics Costs in INR per tonne-km Figure 3.8-7:Logistics Time in Hours by Activity by Activity, Mode: Road Mode: Road Mode: Road

Log istic s Logistics Cost in INR Tim per tonne- e in km Ho ur

Note: The average number of days for warehousing on both sides=2

Similarly, Figures 3.8-8 and 3.8-9 show the decomposition of cost (Rs/hour) by railways for different components of logistics activities. Again, we observe that the transportation cost in INR per tonne-km is a major component of the logistics costs. However, storage time during transit is found to be a major factor leading to time escalation in the logistics operations via railways.

Figure 3.8-8:Logistics Costs in INR per Figure 3.8-9:Logistics Time in Hours by Activity, tonne-km by Activity, Mode: Rail Mode: Rail

Lo Logistics gist Cost in ics INR per tonne km Ti me in Ho ur

Note: Theaverage number of days for warehousing on both nodes =2 The Average number of days for storage during transit = 3

234 234

Perceptions of Key Cargo Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation and logistics challenges on this route. The intensity of the major challenges faced on this route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 means that the challenge is of low intensity while a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.8-10. Barring road conditions and pilferage of consignments, all the other indicators have high scores, thereby suggesting that there are several problem areas that need immediate attention. Figure 3.8-10: Intensity of the Challenges Faced in Transportation.

Road Condition including signage Limited 10 infrastructure in 9 8 Harassment by terms of parking 7 RTO officials terminals with 6 refreshment 5 4 3 2 Need to pay 1 Pilferage/Leakage Bribes/ Facilitation 0 of Consignment money

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies

Unavaliability of Intermodal exchange points

235 235

Figure A3.8-1: Shares of Components in the Transportation Costs (per cent)

Mode: Road

Fuel 55%

Tolls 14%

Salary and Allowances 15%

Maintenance including 7% Consumables

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO fines etc.)

Figure A3.8-2:Average Transportation Costs of Major Commodities in INR per tonne-km

Roadways Railways

FMCG 2.6 Pharmaceuticals 2

Textiles 2.5 FMCD 1.95

Pharmaceuticals 2.28 FMCG 1.9

Electronics 2.15 Textiles 1.85

FMCD 1.95 Electronics 1.78

236 236

Figure A3.8-3: Shares of Components of the Logistics Costs (per cent) 3PL Firms 4PL Firms Overall

Transportation 50% 48% 49%

Warehousing 13% 12% 12%

Material Handling 11% 11% 10%

Documentation 6% 7% 6%

Logistics System 3% 4% 3%

Packaging Costs 3% 4% 3%

Administration cost 2% 2% 2% Insurance cost 2% 2% 3% Software & Maintenance 2% 2% 2%

Cost of Logistics Equipment 2% 2% 3%

Marketing cost 1% 2% 2% 2% IT - Hardware & Software 2% 2% 0% Speed Money 0% 1% Others 3% 3% 3%

237 237

3.9 Domestic Route: Ludhiana → Kolkata

The Ludhiana → Kolkata cargo route is an important domestic freight transportation route and accounts for approximately 4 per cent of the overall domestic cargo movement. Apart from being a large consumption market, Ludhiana is a major manufacturing cluster for auto components and engineering goods whereas Kolkata is a redistribution point for regional agricultural produce and other products.

Figure 3.9-1: Route Map Figure 3.9-2:Modal Shares in Transportation (per cent)

72%

23% 5%

Roadway Railway Airway

Key Impediments on the Route � The harassment of drivers by RTO officials and police, especially in West Bengal and Bihar, is a major concern faced during road transportation. The harassment of drivers is so severe, especially in West Bengal, that transportation firms sometimes resort to paying monthly facilitation money to RTO officials at various checkpoints on this route. � To some extent, the drivers are harassed in Bihar due to the prevalence of stringent guidelines concerning the height of the trucks. � There are as many as about 29 toll booths on this route, leading to stoppage as well as higher transportation costs. Further, West Bengal charges special state entry tax per trip at Chirkunda. � There are incidences of pilferage and robbery, especially in Bihar and certain areas around the Sasaram–Mohania belt during night time.

Route Characteristics The major product categories transported on this route are auto components, FMCGs, steel products, engineering goods, textiles, and foodgrains.

238 238

The usage of containers and closed-body trucks on this route is mainly driven by the auto components, textile, and FMCG sectors. Mostly, containers 32 feet in length, accounting for approximately 60 per cent of the usage, and 20 feet in length, accounting for 40 per cent of the usage, are used.

Figure 3.9-3:Shares of Containerised Cargo (per cent)

44% 32% 33% 28% 27%

Overall Textiles FMCG Automobile & Auto Electronics Components

Integrated logistics service providers cater to 14 per cent of the cargo on this route, focusing primarily on textiles, auto components, and electronics items.

Presently, there is limited usage of multimodal transportation on this route. Only 12 per cent of our respondents reported using multimodal transport earlier. The focus on National Waterways 1 (Allahabad to Haldia) may create an avenue for the usage of multimodal transportation on this route.

Time and Cost of Transportation

Figure 3.9-4 shows the average time in hours by different modes on this route.63 Agricultural produce, especially foodgrains, is generally transported using railways. The time taken by airways is inclusive of the time taken for first-mile connectivity of nearly three hours from Ludhiana to the Chandigarh airport. As seen in the figure, it takes about 122 hours for moving cargo by roadways while the average time by railways is about 155 hours.

Figure 3.9-4:Average Time in Hours by Modes of Transportation

Roadway Railway Best Case (First Railway Normal Case Airway (First & last mile Multimodal (Road - Rail & last mile transit by (First & last mile transit transit by road) Combination) road) by road)

63The average time taken for transportation in hours includes only the time taken for transit, including the first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either of the nodes. 239 239

The average cost of transportation per tonne-km by various modes is shown in Table 3.9-1. It seems that the cost on this route is higher than our estimated national average.

Table 3.9-1: Average Costs of Transportation in INR per tonne-km Mode This Route National Average Roadways* 2.8 2.48 Roadways - Refrigerated 3.2 3.01 Railways (First and last mile transit by road) 2.3 1.88 Airways (First and last mile transit by road) 7.5 7.10 Multimodal Transportation (Combination of Roadways and 2.5 2.23 Railways) Source: Authors’ estimates. *We have considered the payload capacity of the truck to be 16 tonnes. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne km by the same mode of travel across all the routes under study.

The cost also varies for onward and return journeys. The cost is lower for the return load.

Figure 3.9-5:Average Costs of Road Transportation for Onward and Return Journeys in INR per tonne-km

Ludhiana to Kolkata Kolkata to Ludhiana

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.9-2. The logistics costs seem to be higher than the national average for all modes except railways. Employing 3PL firms for cargo movement seem to lower the cost.

240 240

Table 3.9-2: Logistics Costs in INR per tonne-km Overall Logistics Logistics undertaken by undertaken Modes 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadways 6.2 5.02 5.9 4.67 6.5 5.44 Railways (First and last mile transit by 3.5 3.68 4 3.54 4.2 3.78 road) Airways (First and last mile transit by 12.2 11.38 12.1 11.20 12.49 11.60 road) Multimodal Transportation (Combination 5.9 4.71 of Roadways and Railways ) Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The variation in the average cost of logistics per tonne-km for major commodities (domestic cargo) is shown in Table 3.9-3. Among the major cargo items moved on this route, the maximum cost seems to be incurred on the transport of textile items by roadways and auto components by railways.

Table 3.9-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Agricultural products 5.10 3.55 Auto components 6.42 3.85 Engineering goods 5.40 3.73 FMCGs 5.75 3.8 Steel items 5.0 3.50 Textiles items 6.64 4.0 Source: Authors’ estimates.

Figures 3.9-6 and 3.9-7 show the cost in Rs per tonne-km and in hours by road for the major components of logistics activities, respectively. As expected, transportation is the major contributor of the logistics costs, whether in monetary terms or in time in hours.

241 241

Figure 3.9-6: Logistics Costs in INR per tonne-km Figure 3.9-7:Logistics Time in Hours by Activity by Activity, Mode: Road Mode: Road

Logistics Time in Hour Logistics

Cost in INR per tonne km

Note:The average number of days for warehousing on both sides=2

Figures 3.9-8 and 3.9-9 show the decomposition of the cost (Rs/hour) by railways by different components of logistics activities. It may be noted that more than 50 per cent of the logistics costs in INR per tonne-km can be attributed to transportation activity. On the other hand, two-thirds of the logistics time is spent on the activities pertaining to storage during transit and the actual transit time.

Figure 3.9-8:Logistics Costs in INR per tonne-km, Figure 3.9-9: Logistics Time in Hours by Activity: Mode: Rail Mode: Rail

Logistics Cost in INR per tonne km Logistics Time in Hour

Note:Theaverage number of days for warehousing on both nodes =2 The average .number of days for storage during transit = 3

242 242

Perceptions of Key Cargo Transportation Challenges The information was collated on the basis of interactions with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.9-10. As this figure shows, two of the most important challenges faced on this route are harassment by the RTO and other officials, and payment of facilitation money.

Figure 3.9-10: Intensity of the Challenges Faced in Transportation

Road Condition including signage Limited infrastructure 10 9 in terms of parking 8 Harassment by RTO terminals with 7 officials refreshment facilities 6 for driver 5 4 3 2 Need to pay Bribes/ 1 Pilferage/Leakage of 0 Facilitation money Consignment

Limitations in terms Harassment by Police/ of Rail Infarstructure Other Agencies

Unavaliability of Intermodal exchange points

243 243

Figure A3.9 -1: Shares of Components in the Transportation Costs (per cent)

Mode: Road

Fuel 52%

Tolls 14%

Salary and Allowances 14%

Maintenance including 9% Consumables

Speed Money/ Bribes 4%

Others (Vehicle Insurance, Vehicle Parking, RTO fines 7% etc.)

Figure A3.9-2:Average Transportation Costs of Major Commodities in INR per tonne-km

Roadways Railways

Textiles 3 Textiles 2.3

Auto components 2.2 Auto components 2.9 FMCG 2.2 FMCG 2.6 Engg Goods 2.15 Engg Goods 2.45 Agri Products 2.05 Agri Products 2.3

Steel 2 Steel 2.25

244 244

Figure A3.9-3: Shares of Components of the Logistics Costs (per cent)

3PL Firms 4PL Firms Overall

Transportation 44% 40% 43%

Warehousing 13% 12% 10%

Material Handling 12% 9% 12%

Documentation 3% 5% 7%

Logistics System 5% 7% 5% Management

Packaging Costs 4% 5% 6%

Administration cost 3% 6% 4%

Insurance cost 3% 3% 3%

Software & Maintenance 3% 3% 2%

Cost of Logistics Equipment 4% 2% 3%

Marketing cost 1% 2% 2% IT - Hardware & Software 1% Cost 3% 1% Speed Money 1% 1% 1%

Others 3% 3% 1%

— Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics services to end-users. The end users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider—This refers to an integrated service provider to whom end-users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to the service provided by 3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end-users, and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

245 245

3.10 Domestic Route: Ludhiana → Mumbai

The Ludhiana → Mumbai cargo route is an important freight transportation route, accounting for approximately ~3 per cent of the overall domestic cargo movement. Ludhiana is mainly a manufacturing hub of auto components and textiles (garments) whereas the Mumbai region is both a strong consumption centre as well as a manufacturing and product redistribution hub in the region.

Figure 3.10-1: Route Map Figure 3.10-2:Modal Shares in Transportation (per cent)

73%

4% 23%

Roadway Railway Airway

Key Impediments on the Route � The RTO officials, especially in Punjab and Rajasthan, harass the drivers over technicalities such as the non-availability of a second driver in the vehicle, and the driver not wearing shoes, among other things, to extract bribes. � Incidences of misbehaviour by flying squads of police officials are common, particularly in Maharashtra. � The availability of limited railway infrastructure leads to long waiting times for using rakes. � The signage at tolls is inadequate/improper as compared to that on other highways, leading to confusion and wastage of time at the tolls. This situation is prevalent more in Rajasthan as compared to the other states along the NCR-Mumbai route. � There is traffic congestion at the following places on this route: (a) 2 km stretch of the highway near Bharuch, and (b) the Wada Vasai Bridge in Thane near Mumbai.

Route Characteristics The main goods transported on this route include auto components, textiles (garments), engineering goods, processed foods, electronic goods, and pharmaceutical products. Agricultural produce is also transported mainly from Ludhiana to the Mumbai region for domestic consumption and processing, using the railways.

The containers are mainly used for transporting automobiles, textiles, and pharmaceutical products. Mostly, containers 32 feet in length accounting for approximately 65 per cent of the usage.

246 246

Figure 3.10-3:Shares of Containerised Cargo (per cent)

45% 45% 42% 37% 37% 31%

Overall Auto & Auto Textiles Pharmaceuticals Engineering Electronics Ancillaries Goods

Approximately 15 per cent of the total cargo transported on this route is handled by 3PL/4PL firms. They mostly undertake containerised cargo movement. The multimodal transportation on this route mainly entails an intermodal transfer at Delhi NCR. The goods are brought to Delhi NCR by road and the onward transportation to Mumbai takes place by railways. Only about 15 per cent of our respondents reported the usage of multimodal transportation in the past.

Time and Costs of Transportation

Figure 3.10-4 shows the average time in hours by different modes in this route.64 In the normal case, the time required for transportation by railways is more than double the time required for movement by road due to heavy traffic on the railway tracks, which leads to frequent stoppage of cargo trains. The time taken by airways is inclusive of the time taken for first-mile connectivity from Ludhiana to Chandigarh airport of nearly three hours.

Figure 3.10-4:Average Time in Hours by Modes of Transportation

Roadway Railway Best Case (First Railway Normal Case Airway (First & last mile Multimodal (Road - Rail & last mile transit by (First & last mile transit transit by road) combination) road) by road)

64The average time for transportation in hours is only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 247 247

The average cost of transportation per tonne-km by various modes is shown in Table 3.10-1. The cost on this route seems to be lower than the national average.

Although the cost of transportation by railways is lower than by other modes, it is less preferred due to the presence of infrastructural bottlenecks that cause longer waiting time at the railway depots, primarily due to the non-availability of rakes and low frequency of trains for cargo movement. Apart from this, frequent stoppage during the journey due to congestion and to give priority to the movement of passenger trains makes the railways mode of transportation less appealing to end-users.

Table 3.10-1: Average Costs of Transportation in INR per tonne-km Mode This Route National Average Roadways* 2.2 2.48 Roadways* - Refrigerated 2.6 3.01 Railways (First and last mile transit by road) 1.65 1.88 Airways (First and last mile transit by road) 7 7.10 Multimodal Transportation (Combination of Roadways and 1.9 2.23 Railways) Source: Authors’ estimates. Note:*We have considered the payload capacity of the truck to be 16 tonnes. We have estimated the national average by taking the simple average of the cost in INR per tonne km by the same mode of travel across all the routes under study.

The cost also varies for onward and return journeys (Figure 3.10-5). The cost is higher for the return journey.

Figure. 3.10-5:Average Costs of Road Transportation for Onward and Return Journeys in INR per tonne-km

Ludhiana to Mumbai Mumbai to Ludhiana

248 248

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.10-2. We find that the logistics costs on this route are lower than the national average for all modes. The logistics costs invariably reduce if one employs 3PL firms.

Table 3.10-2: Logistics Costs in INR per tonne-km Logistics Logistics Overall undertaken by undertaken Mode 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadways 4.6 5.02 4.29 4.67 5.06 5.44 Railways (First and last mile transit by 3.5 3.68 3.23 3.54 3.6 3.78 road) Airways (First and last mile transit by 10.8 11.38 10.7 11.20 11.15 11.60 road) Multimodal Transportation (Combination 4.34 4.71 Roadways and Railways ) Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The variation in the average cost of logistics per tonne-km for major commodities is shown in Table 3.10- 3. The movement of processed food via roadways/railways seems to cost the most among the major commodities that are usually moved on this route.

Table 3.10-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Agricultural products 4.4 3.72 Auto components 3.76 3.56 Engineering goods 3.9 3.39 Processed food 5.2 4.1 Textiles items 4.2 3.7 Source: Authors’ estimates.

Figures 3.10-6 and 3.10-7 show the cost on road in Rs per tonne-km and in hours for the major components of logistics activities, respectively. As Figure 3.10-6 shows, the largest component of costs in INR per tonne-km is transportation. Figure 3.10-7 indicates that the largest component of logistics costs in hours is warehousing.

249 249

Figure 3.10-6: Logistics Costs in INR per tonne-km Figure 3.10-7: Logistics Time in Hours by Activity, by Activity, Mode: Road Mode: Road

Logistics Logistic Cost in s Time INR per in Hour tonne km

Note:Theaverage number of days for warehousing on both sides=2

Figures 3.10-8 and 3.10.9 show the decomposition of the cost (Rs/hour) by railways for different components of logistics activities. It may be noted that more than 50 per cent of the logistics costs in INR per tonne-km can be attributed to transportation activity. On the other hand, nearly one-third of the logistics time is spent on the activities pertaining to storage during transit.

Figure 3.10-8: Logistics Costs in INR per tonne-km by Figure 3.10-9: Logistics Time in Hours by Activity, Mode: Rail Activity, Mode: Rail

Logistics Logistics Cost in Time in INR per Hour tonne km

Note:The average number of days for warehousing on both nodes =2 The average number of days for storage during transit = 3

250 250

Perceptions of the Key Cargo Transportation Challenges The information was collated on the basis of interactions with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.10-10. The road condition and pilferage of consignments seem to be the least problem areas on this route. Like on any other route, harassment by officials and the payment of facilitation money also seem to be problem areas on this route.

Figure 3.10-10: Intensity of the Challenges Faced in Transportation

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies

Unavaliability of Intermodal exchange points

251 251

Figure A3.10 -1: Shares of Components in the Transportation Costs (per cent) Mode: Road

Fuel 51%

Tolls 15%

Salary and Allowances 16%

Maintenance including Consumables 8%

Speed Money/ Bribes 4%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO fines etc.)

Figure A3.10-2:Average Transportation Cost of Major Commodities in INR per tonne-km

Roadway Railway

Processed Food 2.5 Processed Food 1.95

Agri Products 2.1 Agri Products 1.75

Textiles 2 Textiles 1.75

Engg Goods 1.85 Auto 1.68 components

Auto components 1.8 Engg Goods 1.6

252 252

Figure A.3.10-3: Shares of Components of the Logistics Costs (per cent) s Overall 3PL Firms 4PL Firms

48% 47% 49% Transportation Warehousing 11% 10% 11%

Material Handling 12% 9% 8%

Documentation 6% 5% 6%

Logistics System 4% 6% 6% Packaging Costs 4% 5% 4% Administration cost 4% 3% 3%

Insurance cost 3% 2% 2%

Software & Maintenance 2% 3% 2%

Cost of Logistics 1% 2% 2% Marketing cost 2% 3% 2% 1% IT - Hardware & Software 2% 1%

Speed Money 1% 0% 1% Others 2% 3% 3%

253 253

3.11 Domestic Route: Mumbai → Bengaluru

The Mumbai → Bengaluru cargo route is an important freight transportation route connecting western and southern India and accounts for approximately ~2 per cent of the overall domestic cargo movement. Mumbai and Bengaluru regions are both large manufacturing as well as consumption clusters. The said locations also act as redistribution points for manufactured/ agricultural products that originate in the region.

Figure 3.11-1: Route Map Figure 3.11-2:Modal Shares in Transportation (per cent)

77%

5% 18%

Roadway Railway Airway

Impediments on the Route � There are incidences of harassment by RTO officials, especially at the state border at Jhalki, which falls on the road route going via Solapur. Frequently, the RTO officials harass the drivers over technicalities such as the non-availability of a second driver, and the driver not wearing shoes, among other things, to extract facilitation money. In order to avert this, most truck drivers prefer to go via the Nipani state border crossing, though the toll charges on that route are higher. � The toll charges on this route are relatively high. � The signage at tolls is inadequate/improper as compared to that on other highways, leading to confusion and wastage of time at tolls if the vehicle enters the wrong lane. � Incidences of pilferage have been recorded in areas around the state border at Jhalki.

254 254

Route Characteristics The major product categories transported on this route are engineering goods, auto components, textiles, electronics, and pharmaceuticals.

Engineering goods, electronics, textiles, and pharmaceutical items are generally moved by containers in this route (Figure 3.11-3). Typically, containers of 32 feet in length, accounting for approximately 60 per cent of the usage, and of 20 feet in length, accounting for (~20 per cent of the usage) are used on this route.

Figure 3.11-3: Shares of Containerised Cargo (per cent)

57% 47% 43% 40% 30%

Overall Engineering Goods Electronics Pharmaceuticals Textiles

Approximately 15 per cent of the total cargo transported on this route is handled by integrated service providers. They mostly deal in containerised cargo. There is low adoption of multimodal transportation on this route as there is little scope of benefiting through a reduction in time or cost savings.65

Time and Costs of Transportation Figure 3.11-4 shows the average time in hours by different modes in this route.66 The transportation time via road is lower than 16 hours relative to the time taken by railways in the best case scenario. Hence, roadways is the preferred mode of transportation.

Figure 3.11-4:Average Time in Hours by Modes

Roadway Railway Best Case Railway Normal Case Airway (First & last Multimodal (Road - Rail (First & last mile by (First & last mile by mile by road) Combination) road) road)

65 Only 5 per cent of our respondents indicated the usage of multimodal transportation in the past. 66The average total time for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging or material handling at either the origin or the destination. 255 255

The average cost of transportation per tonne-km by various modes is shown in Table 3.11-1. In spite of the slightly higher cost of using roadways as compared to railways, the former is the preferred mode of transportation due to last-mile connectivity. Airways is used mainly for high-value items such as life- saving drugs or high-value engineering goods.

Table 3.11-1: Average Costs of Transportation in INR per tonne-km Mode This Route National Average Roadways* 2.3 2.48 Roadways* - Refrigerated 2.8 3.01 Railways (First- and last-mile transit by road) 1.9 1.88 Airways (First- and last-mile transit by road) 6.3 7.10 Multi-modal transportation (Combination of roadways and railways) 2.2 2.23 Source: Authors’ estimates. Note:*We have considered the payload capacity of the truck to be 16 tonnes. We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The cost also varies for the onward and return journeys.

Figure 3.11-5: Average Cost of Road Transportation for Onward and Return Journeys in INR per tonne-km

Mumbai to Bengaluru Bengaluru to Mumbai

256 256

Cost of Logistics Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.11-2. Except in the case of airways and multi-modal transportation, the costs on this route are lower than the national average. It is also clear that the logistics cost declines when the operation is undertaken by 3PL firms. On the other hand, the cost goes up if the logistics operation is undertaken directly. Table 3.11-2: Logistics Costs in INR per tonne-km Overall Logistics Logistics undertaken by undertaken Mode 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadways 4.6 5.02 4.42 4.67 4.75 5.44 Railways (First- and last-mile transit by 3.5 3.68 3.40 3.54 3.5 3.78 road) Airways (First- and last-mile transit by 11.2 11.38 10.80 11.20 11.46 11.60 road) Multi-modal transportation (Combination 4.3 4.71 of roadways and railways) Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The variation in the average cost of logistics per tonne-km for major commodities (domestic cargo) is shown in Table 3.11-3. The logistics cost of chemical items is found to be the highest via roadways/railways across the major commodities moved on this route.

Table 3.11-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Engineering goods 4.40 3.30 Electronics items 4.50 3.40 FMCGs 4.60 3.15 Textile items 5.35 3.68 Pharmaceutical items 5.60 3.75 Chemicals items 5.80 3.90 Source: Authors’ estimates.

Figures 3.11-6 and 3.11-7 show the cost on road in Rs per tonne-km and in hours for the major components of logistics activities, respectively. As expected, transportation is observed to be the major component of the logistics cost when measured in INR per tonne-km

257 257

Figure 3.11-6: Logistics Costs in INR per tonne-km by Figure 3.11-7: Logistics Time in Hours by Activity Mode: Road Activity Mode: Road

Logistics Cost in Lo INR per gis tonne- tic km s Ti me in ho ur s

Note:Theaverage number of days for warehousing on both sides=2 Similarly, Figures 3.11-8 and 3.11-9 shows the decomposition of the cost (Rs/hour) on railways by different components of logistics activities. Again, transportation is found to be the major component of the logistics costs in monetary terms. Storage time during transit is observed to be a major factor for escalating logistics time in hours.

Figure 3.11-8: Logistics Costs in INR per tonne-km Figure 3.11-9: Logistics Time in Hours by Activity by Activity, Mode: Rail Mode: Rail

Logistics Cost in Logistics INR per Time in tonne km hours

Note: The average number of days for warehousing on both nodes =2 The average number of days for storage during transit = 3

258 258

Perceptions of the Key Cargo Transportation Challenges The information was collated on the basis of interaction with stake-holders to identify the major transportation challenges in this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high intensity challenge/problem. Our findings are shown in Figure 3.11-10. The road condition and pilferage of consignments seem to be the positive factors on this route. There is a moderate to high degree of challenges on all the other indicators. Figure 3.11-10: Intensity of the Challenges Faced in Transportation

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies

Unavaliability of Intermodal exchange points

Figure A3.11-1: Shares of Components in the Transportation Costs (per cent)

Fuel 54%

Tolls 14%

Salary and Allowances 14%

Maintenance including Consumables 8%

Speed Money/ Bribes 3% Others (Vehicle Insurance, Vehicle Parking, 7% RTO fines etc.)

259 259

Figure A3.11-2: Average Transportation Costs of Major Commodities in INR per tonne-km

Roadway Railway

Chemicals 3 Chemicals 2.3 Pharmaceuticals 2.9 Pharmaceuticals 2.25 Textiles 2.8 Textiles 2.1

FMCG 2.3 Electronics 1.95 Electronics 2 Engg Goods 1.88

Engg Goods 2 FMCG 1.8

Figure A3-11.3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms 4PL Firms

Transportation 50% 49 48 % % Warehousing 10% 10 10 % % Material Handling 12% 11 11 % % Documentation 5% 4% 5% Logistics System 4% 5% 5% 4% Packaging Costs 4% 4% 3% Administration cost 2% 4% Insurance cost 2% 2% 2% Software & Maintenance 2% 2% 1% Cost of Logistics Equipment 2% 3% 2% Marketing cost 1% 2% 3% IT - Hardware & Software 1% 2% 2% Speed Money 1% 1% 1% Others 3% 3% 2% Note: 3PL Logistics Service Provider – This refers to an integrated service provider, providing the complete range of logistics service to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider – This refers to an integrated service provider to whom end users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to the service provided by 3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end-users and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

260 260

3.12 Domestic Route: Mumbai →Chennai

The Mumbai → Chennai cargo route is an important freight transportation route which connects western and southern India and accounts for approximately ~3 per cent of the overall domestic cargo movement. Both the Mumbai and Chennai regions are large manufacturing as well as consumption clusters. The said locations also act as redistribution points for manufactured/agricultural products that originate in the area.

Figure 3.12-1: Route Map Figure 3.12-2:Modal Shares in Transportation (%)

73%

6% 21%

Roadway Railway Airway

Impediments on the Route � There are incidences of harassment by the RTO officials, especially at the state border at Jhalki, which falls on the road route going via Solapur. Frequently, the RTO officials harass the drivers over technicalities, such as the non-availability of a second driver, and the driver not wearing shoes, among other things, to extract facilitation money. In order to avert this, most truck drivers prefer to go via the Nipani state border crossing, though the toll charges are higher on that route. � There are incidences of pilferage in this route. Further, gangs pose as fake RTO officials/policemen to extort money from the drivers around the border areas of Tamil Nadu, especially in Krishnagiri. � The toll charges on this route are relatively high. � The signage at tolls is inadequate/improper as compared to that on other highways, leading to confusion and wastage of time at the tolls if the vehicle enters the wrong lane. Route Characteristics

The major product categories transported on this route are automobile and auto components, textiles, electronics, chemicals, pharmaceuticals, electronic goods, and agricultural products. Agricultural commodities and low-value products are transported via railways, whereas high-value and sensitive items such as life-saving drugs and specialised engineering goods are shipped via airways.

Figure 3.12-3 shows the category of commodities where the usage of containers is the most prevalent. The containers commonly used on this route are 32 feet in length, accounting for approximately 70 per cent of the usage, and of 20 feet in length, accounting for ~16 per cent of the usage.

261 261

Figure 3.12-3:Shares of Containerised Cargo (per cent)

65%

40% 45% 37% 35% 32%

Overall Auto & Auto Engineering Goods Textiles Pharmaceuticals FMCG Components

The integrated service providers handle about 13 per cent of the cargo on this route. They mostly deal in containerised cargo. Only 10 per cent of the respondents reported using multi-modal transportation on this route. The modes used include a combination of railways and roadways. Bengaluru is an intermodal exchange point as sometimes the cargo is transported from Mumbai as FCL by rail for redistribution to various locations and the part load bound to Chennai is subsequently transported by roadways.

Time and Costs of Transportation

Figure 3.12-4 shows the average time in hours by different modes on this route.67 Figure 3.12- 4: Average Time in Hours by Modes

Roadway Railway Best Case Railway Normal Case Airway (First & last Multimodal (Road - (First & last mile (First & last mile mile transit by road) Rail Combination) transit by road) transit by road)

Roadways are preferred due to last-mile connectivity as well as the good road condition on this route.

The average cost of transportation per tonne-km by various modes is shown in Table 3.12-1. The transportation cost seems to be lower on this route than the estimated national average barring in the case of use of multi-modal transportation. Although the cost of transportation by railways is lower than by other modes, it is less preferred due to infrastructural bottlenecks that cause longer waiting time at railway depots, primarily due to the unavailability of rakes and the low frequency of scheduled trains for cargo movement. This leads to longer overall time for cargo movement leading to delayed deliveries .

67The average total time for transportation in hours includes only the time taken for transit, including first- and last- mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 262 262

Table 3.12-1: Average Costs of Transportation in INR per tonne-km Mode This Route National Average Roadways* 2.10 2.48 Roadways* - Refrigerated 2.60 3.01 Railways (First- and last-mile transit by road) 1.75 1.88 Airways (First- and last-mile transit by road) 6.40 7.10 Multi-modal transportation (Combination of 2.20 2.23 roadways and railways) Source: Authors’ estimates. Note: We have considered the payload capacity of the truck to be 16 tonnes. We have estimated the national average by taking the simple average of the cost in INR per tonne km by the same mode of travel across all routes under study.

The cost also varies for the onward and return journeys.

Figure 3.12-5:Average Costs of Road Transportation for Onward and Return Journeys in INR per tonne- km

Mumbai to Chennai Chennai to Mumbai

Figure 3.12-5 shows an average cost difference of 30 per cent between the outward and return journey in INR per tonne-km.

Cost of Logistics Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.12-2. The table shows that the logistics cost on this route is lower than the national average in all modes.

263 263

Table 3.12-2: Logistics Costs in INR per tonne-km Logistics Logistics Overall undertaken by undertaken Mode 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadways 4.7 5.02 4.54 4.67 5.17 5.44 Railways (First- and last-mile transit by 3.57 3.68 3.5 3.54 3.6 3.78 road) Airways (First- and last-mile transit by 11.3 11.38 10.6 11.2 11.36 11.60 road) Multi-modal transportation 4.5 4.71 (Combination of roadways and railways) Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The variation in the average cost of logistics per tonne-km for major commodities (domestic cargo) is shown in Table 3.12-3. The average cost of logistics via roadways/railways is observed to be the highest for pharmaceutical items.

Table 3.12-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Auto components 4.15 3.50 FMCDs 4.50 3.58 Engineering goods 4.70 3.55 Automobiles 4.80 3.80 Agricultural products 5.50 3.50 Textiles 5.60 3.60 Pharmaceuticals 5.85 3.98 Source: Authors’ estimates.

Figures 3.12-6 and 3.12-7 show the cost on road in Rs per tonne-km and in hours for the major components of logistics activities, respectively. Among the logistics costs in INR per tonne-km, the highest cost is incurred on transportation activity while the lowest is that on packaging activity. Figure 3.12-7 indicates that the maximum time escalation is due to the activity during transit time, followed by the time spent in warehousing.

264 264

Figure 3.12-6:Logistics Costs in INR per tonne-km by Figure 3.12-7:Logistics Time in Hours by Activity, Activity, Mode: Road Mode: Road

Logis tics Lo Cost in gist INR ics per Ti tonn me e km in hou rs

Note:The average number of days for warehousing on both sides=2 Similarly, Figures 3.12-8 and 3.12-9 show the decomposition of the cost (Rs/hour) on railways by different components of logistics activities. While transportation turns out to be the largest contributor of cost in INR per tonne-km among all the logistics activities, activity, storage time during transit contributes the most to the time escalation in logistics activities.

Figure 3.12-8:Logistics Costs in INR per tonne-km by Figure 3.12-9:Logistics Time in Hours by Activity, Mode: Activity, Mode: Rail Rail

Lo gis Logistics tics Cost in INR Ti per tonne km me in ho urs

Note:Theaverage number of days for warehousing on both nodes =2 The average number of days for storage during transit = 3

265 265

Perceptions of the Key Cargo Transportation Challenges The information was collated on the basis interaction with stake-holders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation is mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity while 10 implies high intensity challenge/problem. Our findings are shown in Figure 3.12-10. Apart from road condition, all the other parameters indicate a high degree of challenges. Figure 3.12-10: Intensity of the Challenges Faced in Transportation Road Condition including signage Limited 10 infrastructure in 9 Harassment by terms of 8 7 RTO officials parking 6 terminals with 5 4 3 Need to pay 2 Pilferage/ Bribes/ 1 Leakage of Facilitation 0 Consignment money

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies

Unavaliability of Intermodal exchange points

Figure A3.12-1: Shares of Components in the Transportation Costs (per cent) Mode: Road

Fuel 52%

Tolls 14%

Salary and Allowances 15%

Maintenance including Consumables 8%

Speed Money/ Bribes 4%

Others (Vehicle Insurance, Vehicle Parking, RTO 7% fines etc.) 266 266

Figure A3.12-2:Average Transportation Costs of Major Commodities in INR per tonne-km

Roadway Railway

Pharmaceuticals 2.85 Pharmaceuticals 1.96

Textiles 2.55 Automobiles 1.86

Agri Products 2.45 Textiles 1.78

Automobiles 2.15 Engg Goods 1.75

Engg Goods 2.1 Auto components 1.72

Agri Products 1.7 FMCD 2

FMCD 1.68 1.85 Auto components

Figure A3.12-3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms 4PL Firms

46% Transportation 47% 46%

Warehousing 14% 13% 12%

Material Handling 12% 10% 11%

Documentation 5% 5% 5% Logistics System 4% 4% 5% Management

Packaging Costs 3% 4% 3%

Administration cost 3% 3% 4%

Insurance cost 2% 2% 2%

Software & Maintenance 2% 3% 2% Cost of Logistics 2% 3% Equipment 3% Marketing cost 2% 2% 2% IT - Hardware & Software 2% 2% 2% Cost Speed Money 1% 1% 0%

Others 4% 3% 3%

267 267

Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics service to end users. The end-users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider—This refers to an integrated service provider to whom end-users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to the service provided by3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end-users, and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

268 268

3.13 Domestic Route: Mumbai → Hyderabad

The Mumbai → Hyderabad cargo route is an important freight transportation route accounting for approximately ~2 per cent of the overall domestic cargo movement. Apart from being a large consumption hub, Mumbai region is an important manufacturing hub for textiles, processed foods and engineering goods. Hyderabad is a hub of pharmaceutical and FMCG manufacturing as well as the storage and re-distribution point for agricultural products especially rice which is produced in the region.

Figure 3.13-1: Route Map Figure 3.13-2: Modal Shares in Transportation (per cent)

82%

6% 12%

Roadway Railway Airway

Impediments in on the Route � The drivers face harassment from the RTO officials at the state borders of Zaheerabad. � Incidences of misbehavior by flying squads of police officials is common, particularly in the Solapur belt of Maharashtra. � There is limited availability of railway infrastructure relative to the volume of cargo traffic at Mumbai.

Route Characteristics

The major product categories (domestic freight) transported on this route are pharmaceuticals, FMCGs, processed foods, textiles, electronics, engineering goods and agricultural commodities.

Figure 3.13-3 shows the category of commodities where container usage is the most prevalent. Typically, the containers used on this route are of 32 feet in length, accounting for approximately 60 per cent of the usage and 20 feet in length, accounting for ~20 per cent of the usage.

269 269

Figure 3.13- 3:Shares of Containerised Cargo (per cent)

60% 47% 46% 42% 44% 37%

Overall Pharmaceuticals FMCG Textiles Auto & Auto FMCD Components

The 3PL/4PL firms handle about 12 per cent of the cargo on this route. They mostly deal in containerised cargo. The adoption of multimodal transportation remains low on this route, with less than 3 per cent of the respondents reporting its usage.

Time and Cost of Transportation Figure 3.13-4 shows the average time in hours by different modes on this route.68 There is a preference for roadways on this route due to last-mile connectivity.

Figure 3.13-4: Average Time in Hours by Modes

Roadway Railway Best Case Railway Normal Case Airway (First & last Multimodal (Road - (First & last mile transit (First & last mile transit mile transit by road) Rail Combination) by road) by road)

The average cost of transportation per tonne-km by various modes is shown in Table 3.13-1.69 By and large, the transportation cost on this route is higher than the corresponding national average. Although the

68The average total time taken for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 69 The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination along the route.

270 270

cost of transportation by railways is lower than by other modes, it is less preferred due to the presence of infrastructural bottlenecks that cause longer waiting times at the railway depots, primarily due to the non- availability of rakes and low frequency of trains for cargo movement. This leads to longer overall time for cargo movement leading to opportunity costs due to delayed deliveries.

Table 3.13-1: Average Costs of Transportation in INR per tonne-km This Route National Average Roadways* 2.6 2.48 Roadways* - Refrigerated 2.7 3.01 Railways (First- and last-mile transit by road) 1.85 1.88 Airways (First- and last-mile transit by road) 7.5 7.10 Multi-modal transportation (Combination of roadways and railways) 2.3 2.23 Source: Authors’ estimates. Note: *We have considered the payload capacity of the truck to be 16 tonnes. We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The cost also varies for onward and return journeys. An average cost difference of 21.27 per cent can be seen between Mumbai and Hyderabad for the return and outward journeys in INR per tonne-km.

Figure 3.13-5: Average Costs of Road Transportation for Onward and Return Journeys in INR per tonne- km

2.85 2.35

Mumbai to Hyderabad Hyderabad to Mumbai

271 271

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.13-2. The logistics cost via roadways/railways is observed to be lower than the national estimated average.

Table 3.13-2: Logistics Costs in INR per tonne-km Overall Logistics Logistics undertaken by undertaken 3PL Firms directly This National This Nationa This Nation Route Average Route l Rout al Averag e Averag e e Roadways 4.65 5.02 4.28 4.67 5.12 5.44 Railways (First- and last-mile transit by 3.57 3.68 3.4 3.54 3.49 3.78 road) Airways (First- and last-mile transit by road) 12.0 11.38 11.70 11.2 11.8 11.60 Multi-modal transportation (Combination of 4.5 4.71 roadways and railways) Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The variation in the average cost of logistics per tonne-km for major commodities (domestic cargo) is shown in Table 3.13-3. The logistics costs seem to be the highest for FMCGs when they are moved via roadways. The logistics costs in the use of railways seem to be the highest for pharmaceutical products.

Table 3.13-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Processed food 4.3 3.5 Pharmaceutical products 4.7 3.8 Textiles 5.0 3.4 FMCGs 5.1 3.5 Source: Authors’ estimates.

Figures 3.13-6 and 3.13-7 show the cost on road in Rs per tonne-km and in hours for the major components of logistics activities, respectively. Transportation is observed to be the largest contributor of the logistics costs in INR per tonne-km. On the other hand, warehousing activity is the largest contributor of escalation in time in hours among all the logistics activities.

272 272

Figure 3.13-6: Logistics Costs in INR per tonne-km by Figure 3.13-7: Logistics Time in Hours by Activity, Activity, Mode: Road Mode: Road

Log isti cs Ti me Logistics in Cost in Ho INR per ur tonne km

Note:Theaverage number of days for warehousing on both sides=2

Similarly, Figures 3.13-8 and 3.13-9 show the decomposition of the cost (Rs/hour) on railways by different components of logistics activities. Transportation is again observed to be the largest contributor of the logistics costs in INR per tonne-km. On the other hand, the activity pertaining to storage during transit is the largest contributor of time escalation in hours among all the logistics activities.

Figure 3.13-8: Logistics Costs in INR per tonne-km, Figure 3.13-9: Logistics Time in Hours by Activity, Mode: Rail Mode: Rail

Log isti c Logistics Ti Cost me inINR in per Ho ur tonne km

Note: The average number of days for warehousing on both nodes =2 The average number of days for storage during transit = 3

273

Perceptions of the Key Cargo Transportation Challenges

The information was collated on the basis interaction with stake-holders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation is mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity while 10 implies a high intensity challenge/problem. Our findings are shown in Figure 3.13-10. There seem to be few challenges with respect to the road condition or pilferage of consignments. The maximum challenge (8 on a scale of 10) seems to be with regard to harassment by the police and other agencies. Figure 3.13-10: Intensity of the Challenges Faced in Transportation

Road Condition including signage Limited 10 9 infrastructure in 8 Harassment by terms of parking 7 RTO officials 6 terminals with 5 4 3 Need to pay 2 1 Pilferage/Leakage Bribes/ 0 of Consignment Facilitation money

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies Unavaliability of Intermodal exchange points

Figure A3.13-1: Shares of Components in the Transportation Costs (per cent) Mode: Road

Fuel 54%

Tolls 15%

Salary and Allowances 14%

Maintenance including 8% Consumables

Speed Money/ Bribes 3%

Others (Vehcile Insurance, Vehicle 6% Parking, RTO fines etc.) 274

274

Figure A3.13-2: Average Transportation Costs of Major Commodities in INR per tonne-km Railways Roadways

Pharmaceutical FMCG 2.9 2.05 s

Textiles 2.83 Processed Food 1.9

Pharmaceuticals 2.8 FMCG 1.9

Textiles 1.85 Processed Food 2.45

Figure A3.13-3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms 4PL Firms

Transportation 55% 55% 54 % Warehousing 12% 11% 11%

Material Handling 9% 10% 8% Documentation 5% 5% 5% Logistics System 2% 3% 3%

Packaging Costs 3% 3% 3% 2% Administration cost 3% 3% Insurance cost 2% 2% 2% Software & Maintenance 2% 2% 3%

Cost of Logistics 3% 2% 2% Marketing cost 1% 2% 2% IT - Hardware & Software 2% 2% 2% Speed Money 1% 0% 0% Others 1% 2% 1% Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics service to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider—This refers to an integrated service provider to whom end-users can fully outsource the management of supply chains. Apart from providing integrated logistics services which is akin to the service provided by 3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end-users, and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

275 275

3.14 Domestic Route: Mumbai →Kolkata

The Mumbai → Kolkata cargo route is an important freight transportation route, which connects western and eastern India and accounts for approximately ~4 per cent of the overall domestic cargo movement. Mumbai is an important manufacturing and redistribution hub for products whereas Kolkata is one of the largest consumption hubs in India. Figure 3.14-1: Route Map Figure 3.14-2: Modal Shares in Transportation (per cent)

70%

2% 28%

Roadway Railway Airway

Impediments on the Route � There are incidences of harassment by RTO officials around Raipur in Chhattisgarh, and Angul and Balasore in Odisha, apart from areas in the vicinity of the state borders. � Incidences of pilferage and robbery occur in places such as Kendujhar in Odisha. The local gangs create roadblocks and attempt to get on to the slow-moving vehicles. � The miscreants often pose as fake RTO officials and attempt to target mainly the large vehicles to extort money from the truck drivers. Such harassment by local gangs is seen mainly along the Raipur-Bhilai belt. � Incidences of misbehaviour with drivers by flying squads of police officials are common in Vidarbha, especially after Nagpur. � The road conditions are poor in parts of Chhattisgarh on stretches around Durg, Bhilai, and Angul in Odisha. This often leads to traffic congestion on these stretches. Route Characteristics

The major product categories transported on this route are textiles, electronics, engineering goods, FMCGs, pharmaceuticals, chemicals, and agricultural commodities. Considering the long haul on this route, there is higher usage of railways for freight transportation than on other prominent routes (Figure 3.14-2).

On this route, containers are mainly used for moving textiles and FMCGs. The containers are mostly 32 feet in length, accounting for approximately 72 per cent of the usage, and of 28 feet in length, accounting for 12 per cent of the usage.

276 276

Figure 3.14-3: Shares of Containerised Cargo (per cent)

48% 45% 39% 35% 34%

Overall Textiles FMCG Pharmaceuticals Engineering Goods

The integrated service providers cater to about 15 per cent of the total cargo, focusing primarily on containerised traffic of FMCGs and pharmaceutical products. The use of multi-modal transportation on this route entails a combination of railways and roadways. Nagpur is an important intermodal exchange point on this route. It is seen that in most cases of multimodal transportation, the cargo is transported by road to Nagpur while the onward journey is undertaken using railways. Among our respondents, 16 per cent reported the usage of multi-modal transportation at least once on the route.

Time and Costs of Transportation Figure 3.14-4 shows the average time in hours by different modes on this route.70 Roadways is the most preferred route due to higher reliability and availability of last-mile connectivity. Railways is used mainly for transportation in the case of products where delivery schedules are not critical.

Figure 3.14-4: Average Time in Hours by Modes

Roadway Railway Best Case (First Railway Normal Case Airway (First & last Multimodal (Road - Rail & last transit by road) (First & last transit by transit by road) Combination) road)

70The average total time for transportation in hours includes only the time taken for transit, including first- and last- mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 277 277

The average cost of transportation per tonne-km by various modes is shown in Table 3.14-1.71 This table shows that the cost on this route is higher than our estimated national average cost.

Although the cost of transportation by railways is low, it is not preferred due to the absence of scheduled cargo trains and the limited availability of railway infrastructure on this route. The cost of multimodal transportation is lower than that of roadways. However, it is not preferred due to the unreliability of the railways and the lack of a supporting ecosystem such as intermodal exchange points, and material handling and transfer capabilities.

Table 3.14-1: Average Costs of Transportation in INR per tonne-km This Route National Average Roadways* 2.7 2.48 Roadways* - Refrigerated 3.3 3.01 Railways (First- and last-mile transit by road) 1.9 1.88 Airways (First- and last-mile transit by road) 7.6 7.10 Multi-modal transportation (Combination of roadways and railways) 2.4 2.23 Source: Authors’ estimates.

Note: *We have considered the payload capacity of the truck to be 16 tonnes. We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all he routes under study.

The cost also varies for the onward and return journeys (Figure 3.14-5). The cost seems to be lower on the return route.

Figure 3.14-5: Average Costs of Road Transportation for Onward and Return Journeys in INR per tonne- km

Mumbai to Kolkata Kolkata to Mumbai

Cost of Logistics

71The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route.

278 278

Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.14-2.

Table 3.14-2: Logistics Cost in INR per tonne-km Overall Logistics Logistics undertaken by undertaken 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadways 5.2 5.02 4.95 4.67 5.67 5.44 Railways (First- and last-mile transit by 3.44 3.68 3.81 3.54 4 3.78 road) Airways (First- and last-mile transit by 11.9 11.38 11.6 11.2 12.1 11.60 road) Multi-modal transportation 4.34 4.71 (Combination of roadways and railways) Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The variation in the average cost of logistics per tonne-km for major commodities is shown in Table 3.14- 3. The maximum cost is entailed in the movement of pharmaceutical products among all the products transported on this route via roadways. The maximum cost in transportation by railways on this route is incurred on FMCGs.

Table 3.14-3: Average Logistics Costs for Major Commodities in INR per tonne-km

Mode Commodity Road Rail Agricultural products 4.95 3.75 Chemicals 5.68 4.6 Engineering goods 4.62 3.85

FMCG 4.80 3.9 Pharmaceutical products 5.70 4.5 Steel products 4.46 3.80 Textile products 5.25 4.2 Source: Authors’ estimates.

Figures 3.14-6 and 3.14-7 show the cost on road in Rs per tonne-km and in hours for the major components of logistics activities, respectively. While transportation is the largest contributor of the cost in INR per tonne-km among all the logistics activities, the actual transit time is largest contributing factor for time escalation in logistics activities.

279 279

Figure 3.14-7:Logistics Time in Hours by Activity, Figure 3.14-6:Logistics Costs in INR per tonne-km by Mode: Road Activity, Mode: Road

Lo gist ics Ti Logistics me Cost in INR in per tonne Ho km ur

Note: Theaverage number of days for warehousing on both sides=2

Similarly, Figures 3.14-8 and 3.14-9 show the decomposition of the cost (Rs/hour) by railways for different components of logistics activities. Transportation is the highest contributor of the logistics costs in INR per tonne-km among all the components of logistics activities. The time taken during transit is the principal component of time escalation among all the logistics activities when the cargo is moved via railways.

Figure 3.14-8: Logistics Costs in INR per tonne-km Figure 3.14-9: Logistics Time in Hours by Activity, by Activity, Mode: Rail Mode: Rail

Log istic Tim Logistics Cost in INR e in per tonne Ho km ur

Note:Theaverage number of days for warehousing on both nodes =2 The average number of days for storage during transit = 3

280 280

Perception of the Key Cargo Transportation Challenges The information was collated on the basis of interaction with stake-holders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high intensity challenge/problem. Our findings are shown in Figure 3.14-10. The figure shows that the scores are above 6 for all the components, indicating that this route is rife with transportation challenges.

Figure 3.14-10: Intensity of the Challenges Faced in Transportation

Road Condition including signage Limited 10 infrastructure in 9 terms of parking 8 Harassment by terminals with 7 RTO officials refreshment 6 5 facilities for 4 3 Need to pay 2 Bribes/ 1 Pilferage/Leakage 0 Facilitation of Consignment money

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies

Unavaliability of Intermodal exchange points

281 281

Figure A3.14-1:Shares of Components in the Transportation Costs (per cent)

Mode: Road

Fuel 54%

Tolls 15%

Salary and Allowances 14%

Maintenance including Consumables 8%

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO fines etc.)

Figure A3.14-2: Average Transportation Costs of Major Commodities in INR per tonne-km

Roadway Railway

Pharmaceuticals 3.1 Chemicals 2.2

Chemicals 2.95 Pharmaceuticals 2.15

Textiles 2.75 Textiles 2

Agri Products 2.55 FMCG 1.88

FMCG 2.5 Engg Goods 1.85

Engg Goods 2.4 Steel 1.8

Steel 2.32 Agri Products 1.8

282 282

Figure A3.14-3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms 4PL Firms

50% Transportation 51% 50% 10% 12% Warehousing 11% 9% 10% Material Handling 11% Documentation 6% 6% 6%

Logistics System 3% 4% 4%

Packaging Costs 3% 3% 3%

Administration cost 2% 3% 3%

Insurance cost 2% 2% 2% Software & Maintenance 2% 2% 2% Cost of Logistics 2% 2% 2%

Marketing cost 1% 6% 3% 1% 1% IT - Hardware & Software 1% Speed Money 1% 0% 1%

Others 3% 3% 3%

Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing the omplete range of logistics service to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider—This refers to an integrated service provider to whom end users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to the service provided by 3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end-users, and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

283 283

3.15 Domestic Route: NCR → Bengaluru

The National Capital Region (NCR) → Bengaluru cargo route is an important freight transportation route, which connects northern and southern India and accounts for approximately ~5 per cent of the overall domestic cargo movement. NCR is a large hub for manufacturing of automobiles and FMCDs, whereas Bengaluru is one of the largest consumption clusters in the country. Bengaluru is also an important hub for warehousing and a cargo redistribution point for agricultural and manufacturing products in southern India.

Figure 3.15-1: Route Map Figure 3.15-2:Modal Shares in Transportation (per cent)

70%

2% 28%

Roadway Railway Airway

Impediments on the Route � Harassment by the RTO officials is common on this route, particularly at the state borders of Madhya Pradesh. � There are incidences of misbehaviour with drivers by flying squads of police officials on the highway belt around Manesar and Sonegaon in Maharashtra. � There is heavy traffic congestion on a 10 km stretch near Nagpur due to the infrastructural works.

Route Characteristics

The main goods transported on this route include automobile and auto components, textiles, FMCGs, electronics, and agricultural products. Considering the long distance, there is a higher usage of railways for freight transportation on this route than on other domestic routes (Figure 3.15-2). The main products transported via railways include agricultural commodities. The usage of containers on this route is mainly driven by automobiles, textiles, pharmaceutical products and FMCGs (Figure 3.15-3). Containers of 32 feet length, accounting for approximately 70 per cent of the usage, and of 28 feet in length, accounting for ~12 per cent of the usage are mainly used on this rout

284 284

Figure 3.15-3:Shares of Containerised Cargo (per cent)

65%

49% 48% 45% 45%

Overall Auto & Auto Textiles Pharmaceuticals FMCG Ancillaries

The integrated service providers cater to about 17 per cent of the cargo, focusing primarily on containerised traffic. Multi-modal transportation on this route involves a combination of railways and roadways. Being centrally located, Nagpur is an important intermodal exchange point. Till Nagpur, the cargo is transported as FCL for redistribution to various locations, and subsequently the part load bound to the destination of Bengaluru is transported. Among our respondents, 14 per cent reported the indicated usage of multimodal transportation at least once in the route.

Time and Cost of Transportation

Figure 3.15-4 shows the average time in hours by different modes on this route.72

Figure 3.15-4:Average Time in Hours by Modes

Roadway Railway Best Case Railway Normal Case Airway (First & last Multimodal (Road - Rail (First & last mile transit (First & last mile transit mile transit by road) Combination) by road) by road)

72The average total time taken for transportation in hours is only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 285 285

Although the transportation time by railways is best case scenario is only marginally higher than by roadways, it is not preferred due to the high degree of unreliability associated with railway transportation on this route. Further, the time taken by road transportation has reduced by about 10-12 per cent after the introduction of GST and e-way bill, which has made transportation by roadways appealing to users.

The average cost of transportation per tonne-km by various modes is shown in Table 3.15-1.73 It may be noted that the cost of transportation on this route is lower than the corresponding national average.

Table 3.15-1: Average Costs of Transportation in INR per tonne-km Modes This Route National Average Roadway* 2.3 2.48 Roadways* - Refrigerated 2.8 3.01 Railways (First- and last-mile transit by road) 1.9 1.88 Airways (First and last-mile transit by road) 6.8 7.10 Multi-modal Transportation (Combination of roadways and railways) 2.2 2.23 Source: Authors’ estimates. Note: *We have considered the payload capacity of the truck to be 16 tonnes. We have estimated the national average by taking the simple average of the cost in INR per tonne-km by same the mode of travel across all the routes under study.

The cost also varies for onward and return journeys (Figure 3.15-5). The figure shows an average cost difference of 0.1 per cent between NCR and Bengaluru for outward and return journeys in INR per tonne- km.

Figure 3.15-5:Average Cost of Road Transportation for Onward and Return Journeys in INR per tonne-km

NCR to Bengaluru Bengaluru to NCR

73The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route.

286 286

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.15-2. The table shows that the difference in logistics costs between this route and the national average is the highest for use of airways. The transportation cost on this route is generally lower than the corresponding national average.

Table 3.15-2: Logistics Costs in INR per tonne-km Overall Logistics Logistics Modes undertaken by undertaken 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadways 4.9 5.02 4.5 4.67 5.39 5.44 Railways (First- and last-mile transit by 3.72 3.68 3.65 3.54 3.87 3.78 road) Airways (First- and last-mile transit by 10.5 11.38 10.4 11.2 10.9 11.60 road) Multi-modal Transportation 4.67 4.71 (Combination of roadways and railways) Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne km by the same mode of travel across all the routes under study.

The variation in the average cost of logistics per tonne-km for major commodities is shown in Table 3.15- 3. The cost is the highest in the case of transportation of FMCGs via roadways/railways.

Table 3.15-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Agricultural products 4.3 3.62 Auto components 4.47 3.52 Automobiles 4.9 3.82 FMCGs 5.1 3.9 Textiles 4.6 3.8 Source: Authors’ estimates.

Figures 3.15-6 and 3.15-7 show the cost on road in Rs per tonne-km and in hours for the major components of logistics activities, respectively. Figure 3.15-6 shows that transportation is the highest contributor to the logistics costs in INR per tonne-km. The data in Figure 3.15-7 suggests that the activity ‘transit time’ is the single largest contributor to the time spent in logistics activities.

287 287

Figure 3.15-6 Logistics Costs in INR per tonne-km Figure 3.15-7: Logistics Time in Hours by Activity, by Activity,Mode: Road Mode: Road

Log istic Tim e in Logistics Cost in Ho INR per ur tonne km.

Note:Theaverage number of days for warehousing on both sides=2

Similarly, Figures 3.15-8 and 3.15-9 show the decomposition of the cost (Rs/hour) via railways by different components of logistics activities. Transportation and storage during transit seem to be the largest contributors of the logistics costs in INR per tonne-km and in hours, respectively.

Figure 3.15-8:Logistics Costs in INR per tonne-km by Figure 3.15-9:Logistics Time in Hours by Activity Activity, Mode: Rail Mode: Rail

Logistic Time in Hour

Logistics Cost in INR per tonne km

Note: The average number of days for warehousing on both nodes =2 The averagenumber of days for storage during transit = 3

288 288

Perceptions of the Key Cargo Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation is mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.15-10. It seems that the challenge is of a low degree in the case of road condition. However, many indicators of the soft infrastructure, such as harassment by officials and the demand for facilitation money are perceived as problem areas, in addition to the need for making large investments in hard infrastructure on this route.

Figure 3.15-10: Intensity of the Challenges Faced in Transportation

Road Condition including signage Limited infrastructure 10 in terms of parking 9 8 Harassment by RTO terminals with 7 officials refreshment facilities 6 for driver 5 4 3 2 Need to pay Bribes/ 1 Pilferage/Leakage of 0 Facilitation money Consignment

Limitations in terms of Harassment by Police/ Rail Infrastructure Other Agencies

Unavaliability of Intermodal exchange points

289 289

Figure A3.15-1: Shares of Components in the Transportation Costs (per cent)

Mode: Road

Mode: Road Fuel 52%

Tolls 14%

Salary and Allowances 15%

Maintenance including 9% Consumables

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle Parking, RTO 7% fines etc.)

Figure A3.15-2:Average Transportation Costs of Major Commodities in INR per tonne- km

Roadways Railways

FMCG 2.38 FMCG 2

Automobiles 2.3 Automobiles 1.95

Textiles 2.15 Textiles 1.95

Auto components 2.1 Agri Products 1.85

Agri Products 2 Auto components 1.8

290 290

Figure A3.15-3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms 4PL Firms

Transportation 49% 49% 48%

Warehousing 13% 12% 10%

Material Handling 12% 10% 11%

Documentation 5% 5% 4%

Logistics System Management 4% 5% 5% 4% 5% Packaging Costs 3% Administration cost 3% 2% 2%

Insurance cost 2% 3% 2%

Software & Maintenance 2% 2% 2%

Cost of Logistics Equipment 2% 3% 3%

Marketing cost 1% 2% 2% IT - Hardware & Software 1% 2% 1% Cost Speed Money 1% 1% 3%

Others 0% 1% 3%

Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics service to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider—This refers to an integrated service provider to whom end-users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to the service provided by 3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end-users, and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

291 291

3.16 Domestic Route: NCR → Chennai

The NCR → Chennai cargo route is an important freight transportation route, which connects northern and southern India, and accounts for approximately ~4 per cent of the overall domestic cargo movement. Chennai and NCR are both large manufacturing clusters, especially for the automobile, FMCD, and electronics sectors, as well as amongst the largest consumption clusters in the country.

Figure 3.16-1: Route Map Figure 3.16-2: Modal Shares in Transportation (per cent)

76%

4% 20%

Roadway Railway Airway

Impediments on the Route � Incidences of harassment by RTO officials are common on this route, particularly at the state borders of Madhya Pradesh. � There are incidences of misbehaviour with drivers by flying squads of police officials on the highway belt around Manesar and Sonegaon in Maharashtra. � There is heavy traffic congestion on a 10 km stretch near Nagpur due to infrastructural works.

Route Characteristics

The main goods transported on this route include automobile and auto components, FMCGs, FMCDs, engineering goods, textiles and foodgrains. Considering the long haul on this route, there is a higher usage of railways for freight transportation on this route (Figure 3.16-2).

The usage of containers on this route is mainly driven by the automobile, textiles, and pharmaceutical sectors, where there is a higher need for containerised movement as compared to other sectors. Containers of 32 feet length, accounting for approximately 70 per cent of the usage, and of 20 feet length, accounting for about 16 per cent of the usage, are mostly used on this route.

292 292

Figure 3.16-3: Shares of Containerised Cargo (per cent)

75%

55% 48% 46% 38% 29%

Overall Auto & Auto Ancillaries Textiles Pharmaceuticals Engineering Goods Electronics

The integrated service providers cater to about 15 per cent of the cargo on this route, focusing primarily on containerised traffic. The use of multi-modal transport on this route includes a combination of railways and roadways. Being centrally located, Nagpur is an important intermodal exchange point. Till Nagpur, the cargo is transported as FCL for redistribution to various locations and subsequently the part load bound to the destination (NCR/Bengaluru) is transported. Approximately 22 per cent of the respondents reported the usage of multi-modal transportation at least once on the route.

Time and Cost of Transportation

Figure 3.16-4 shows the average time in hours by different modes on this route.74 Figure 3.16-4: Average Time in Hours by Modes

Roadway Railway Best CaseRailway Normal CaseAirway (First & lastMultimodal (Road-Rail (First & last mile transit(First & last mile transitmile transit by road) Combination) by road) by road)

74The average time for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 293 293

The average cost of transportation per tonne-km by various modes is shown in Table 3.16-1.75 Although the cost of railway transportation is low, it is not preferred due to the unreliability of rail travel. It may be noted that the transportation cost by roadways on this route is lower than the corresponding national average.

Table 3.16-1: Average Cost of Transportation in INR per tonne-km Mode This Route National Average Roadways* 2.3 2.48 Roadways* - Refrigerated 2.7 3.01 Railway (First- and last-mile transit by road) 2 1.88 Airways (First and last-mile transit by road) 7.0 7.10 Multi-modal transportation (Combination of roadways and railways) 2.1 2.23 Source: Authors’ estimates. *We have considered the payload capacity of the truck to be 16 tonnes. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The cost also varies for onward and return journeys (Figure 3.16-5). The figure shows an average cost difference of 0.09 per cent between NCR and Chennai for outward and return journeys in INR per tonne- km.

Figure 3.16-5: Average Cost of Road Transportation for Onward and Return Journeys in INR per tonne-km

NCR to Chennai Chennai to NCR

75The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route.

294 294

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.16-2. The table shows that the logistics costs on this route barring airways is higher than national average.

Table 3.16-2: Logistics Costs in INR per tonne-km Logistics Logistics Overall undertaken by undertaken Mode 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadways 5.1 5.02 4.69 4.67 5.61 5.44 Railways (First- and last-mile transit by 3.72 3.68 3.98 3.54 4.15 3.78 road) Airways (First- and last-mile transit by 10.6 11.38 10.5 11.2 10.88 11.60 road) Multi-modal Transportation 4.97 4.71 (Combination of roadways and railways) Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The variation in the average cost of logistics per tonne-km for major commodities is shown in Table 3.16- 3. The average cost of logistics is the highest when roadways is used for as a mode of transportation for auto components. The transportation cost is also the highest for auto components among all commodities in the case of use of railways.

Table 3.16-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Agricultural products 4.5 3.42 Auto components 5.28 3.55 Automobiles 5.4 4.10 Engineering goods 4.8 3.60 Textiles 5.1 3.9 Source: Authors’ estimates. Figures 3.16-6 and 3.16-7 show the cost by roadways and railways in Rs per tonne-km and in hours for the major components of logistics activities, respectively. Figure 3.16-6 shows that the largest component of costs in INR per tonne-km is transportation, while the lowest one is the administration cost. Figure 3.16-7 shows that the largest component of logistics costs in hours is the actual transit time.

295 295

Figure 3.16-6: Logistics Costs in INR per tonne-km by Activity, Mode: Road Figure 3.16-7: Logistics Time in Hours by Activity, Mode: Road

Logistics Cost in INR Logistics per tonne Time in km Hours

Note: The average number of days for warehousing on both sides=2

Figures 3.16-8 and 3.16-9 show the decomposition of the cost (Rs/hour) on railways by different components of logistics activities. While transportation is the largest contributor of cost in INR per tonne- km among all logistics activities, storage time during transit and actual transit time are the two highest contributors for time escalation in logistics activities.

Figure 3.16-8: Logistics Cost in INR per tonne-km by Figure 3.16-9: Logistics Time in Hours by Activity, Activity, Mode: Rail Mode: Rail Mode: Rail

Logi stics Cost in INR per Logistics ton time in km Hours

Note: The average number of days for warehousing on both nodes =2 The average number of days for storage during transit = 3 296 296

Perceptions of the Key Cargo Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.16-10. The top two challenges on this route are the demand for payment of facilitation money and harassment by the RTO officials.

Figure 3.16-10: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Limited infrastructure 9 in terms of parking 8 Harassment by RTO terminals with 7 officials refreshment facilities 6 for driver 5 4 3 2 1 Need to pay Bribes/ Pilferage/Leakage of 0 Facilitation money Consignment

Limitations in terms Harassment by Police/ of Rail Infarstructure Other Agencies

Unavaliability of Intermodal exchange points

297 297

Figure A.3.16-1: Shares of Components in the Transportation Costs, Mode: Road (per cent)

Fuel 53%

Toll 15%

Salary and Allowances 16%

Maintenance including 7% Consumables

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle Parking, RTO fines 6% etc.)

Figure A3.16-2: Average Transportation Costs of Major Commodities in INR per tonne-km

Roadway Railway

Automobiles 2.45 Automobiles 2.15

Auto components 2.38 Textiles 2.1

Textiles 2.3 Engg Goods 1.9

Engg Goods 2.15 Agri Products 1.8

Agri Products 2.05 Auto components 1.8

298 298

Figure A3.16-3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms 4PL Firms

Transportation 48% 49% 44% 13% 12% Warehousing 13% Material Handling 12% 12% 13%

Documentation 5% 5% 5%

Logistics System 5% 4% 6% Management Packaging Costs 3% 3% 4%

Administration cost 2% 3% 4%

Insurance cost 2% 2% 2%

Software & Maintenance 2% 1% 2%

Cost of Logistics Equipment 2% 2% 2% 2% 2% Marketing cost 1% IT - Hardware & Software 2% 1% 2% Cost 1% Speed Money 1% 1%

Others 2% 1% 0%

Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing complete range of logistics service to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider—This refers to an integrated service provider to whom end-users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to the service provided by 3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end-users and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

299 299

3.17 Domestic Route: NCR → Guwahati

The NCR → Guwahati cargo route is an important freight transportation route in India, which connects NCR with the north-eastern part of India. Although the route accounts for only around ~3 per cent of the overall domestic cargo movement, it is important from the perspective of connectivity of north-east with north India.

Figure 3.17-1: Route Map Figure 3.17-2: Modal Shares in Transportation (percent)(per cent)

90%

1% 9%

Roadway Railway Airway

Impediments on the route

� The RTO officials of Bihar and West Bengal routinely harass the drivers. As a result, some of the transportation firms make monthly facilitation payments at various checkpoints on this route. � There are instances of gangs posing as fake policemen to extort money from the less educated drivers. This practice is prevalent in Bihar around the Muzzaffarpur area. � The drivers are harassed by flying squads of police officials on the West Bengal stretch of the route. � There is limited availability of containerised transportation facilities from NCR to Guwahati as there is hardly any comparable return load from Guwahati. Most of the trucks that go from NCR to Guwahati visit Kolkata to seek return loads on their way back to NCR.

Route Characteristics

The major products transported on this route are FMCGs, processed foods, agricultural products, textiles and electronic products (Figure 3.17-3).

The level of containerised traffic movement on this route is lower than on other prominent domestic routes. The containers are generally used for transporting FMCGs, pharmaceutical products, and textiles products. Containers of 32 feet in length, accounting for approximately 62 per cent of the usage, and of 20 feet in length, accounting for about 15 per cent of the usage, are mostly used on this route.

300 300

Figure 3.17-3: Shares of Containerised Cargo (per cent)

28% 30% 23% 23% 14%

Overall FMCG Pharmaceuticals Textiles Auto & Auto Ancillaries

The integrated logistics firms handle 13 per cent of the cargo on this route, which is mostly containerised cargo.

Time and Cost of Transportation

The data in Figure 3.17-4 suggests that a total time of 103 hours by road is required to move cargo on this route. Although the time taken for transportation via railways is lower than that by roadways, it is not used extensively due to limitations such as infrequent rail services and non-availability of rakes on this route. Automobiles are reportedly transported via railways on this route.

Figure 3.17-4: Average Time in Hours by Modes

142 103 94 120

Roadway Railway Best Case Railway Normal Case Airway (First & last Multimodal (Road - (First & last mile transit (First & last mile transit mile transit by road) Rail Combination) by road) by road)

The average cost of transportation per tonne-km by various modes is shown in Table 3.17-1.76 Although the cost of railway transportation is low, it is not preferred due to the unreliability of railway services. It may be noted that the transportation cost on this route is high relative to the corresponding national average for all modes of transport.

76The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route.

301 301

Table 3.17-1: Average Cost of Transportation in INR per tonne-km Mode This Route National Average Roadways* 3.5 2.48 Roadways* - Refrigerated 4.3 3.01 Railways (First- and last-mile transit by road) 1.9 1.88 Airways (First- and last-mile transit by road) 7.3 7.10 Multi-modal transportation (Combination of roadways and railways) 3.2 2.23 Source: Authors’ estimates. *We have considered the payload capacity of the truck to be 16 tonnes. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.17-2. It may be noted that the cost is higher than the national average by all modes (barring railways) and all types of operators.

Table 3.17-2: Logistics Costs in INR per tonne-km Overall Logistics Logistics undertaken by undertaken Mode 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadways 6.5 5.02 6.4 4.67 6.7 5.44 Railways (First- and last-mile transit by 3.5 3.68 4 3.54 4.5 3.78 road) Airways (First- and last-mile transit by 11.8 11.38 11.6 11.2 12.23 11.60 road) Multi-modal transportation 5.35 4.71 (Combination of roadways and railways) Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The variation in the average cost of logistics per tonne-km for major commodities is shown in Table 3.17- 2. The average cost of logistics for both roadways and railways is the maximum in the case of transportation of the pharmaceutical products. This is probably due to the need for transporting these items in a temperature-controlled environment.

302 302

Table 3.17-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail FMCGs 6.5 4.43 Pharmaceutical goods 6.9 4.75 Processed food 6.7 4.53 Textile items 6.4 4.18 Source: Authors’ estimates.

Figures 3.17-5 and 3.17-6 show the cost on road in Rs per tonne-km and in hours for the major components of logistics activities, respectively. It may be noted that the highest cost is incurred on transportation. Figure 3.17-6 shows that the actual transit time is the principal source of logistics costs in hours.

Figure 3.17-6: Logistics Time in Hours by Activity Figure 3.17-5:Logistics Costs in INR per tonne-km by Mode: Road Activity, Mode: Road

Logistics Logistics Cost in Time in INR per Hour tonne km.

Note: The average number of days for warehousing on both sides=2

Similarly, Figures 3.17-7 and 3.17-8 show the decomposition of the cost (Rs/hour) on railways by different components of logistics activities. Transportation and storage during transit are found to be the highest contributing factors for the cost escalation in INR per tonne-km and logistics costs in hours, respectively.

303 303

Figure 3.17-7: Logistics Costs in INR per tonne-km by activity Figure 3.17-8 Logistics Time in Hours by Activity, Mode: Mode: Rail Rail

Logi stics Logi Cost stics in Tim INR e in per Hou tonn r e km

Note:Theaverage number of days for warehousing on both nodes =2 The average number of days for storage during transit = 3

Perceptions of the Key Cargo Transportation Challenges The information was collated on the basis of interaction with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.17-9. It may be noted the challenges seem to be high for all the parameters. However, the maximum problems are observed to be harassment by officials and the demand for bribes

304 304

Figure 3.17-9: Intensity of the Challenges Faced in Transportation

Road Condition including signage Limited 10 9 infrastructure in 8 Harassment by terms of parking 7 RTO officials 6 terminals with 5 4 3 Need to pay 2 Pilferage/ Bribes/ 1 0 Leakage of Facilitation Consignment money

Limitations in Harassment by terms of Rail Police/ Other Infrastructure Agencies Unavaliability of Intermodal exchange points

Figure A3.17-1: Shares of Components in the Transportation Costs,

Mode: Road (per cent)

Fuel 56%

Tolls 14%

Salary and Allowances 13%

Maintenance including Consumables 9%

Speed Money/ Bribes 4%

Others (Vehicle Insurance, Vehicle 5% Parking, RTO fines etc.)

305 305

Figure A3.17-2: Average Transportation Costs of Major Commodities in INR per tonne-km Roadways Railways

Pharmaceuticals 3.9 Pharmaceuticals 2.25

Processed Food 3.6 Processed Food 2

FMCG 3.5 FMCG 1.95

3.25 Textiles Textiles 1.85

Figure A3.17-3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL firms 4PL firms

Transportation 54% 52% 49%

Warehousing 9% 9% 12%

Material Handling 10% 8% 10%

Documentation 4% 5% 5% Logistics System 3% 4% 4% Management Packaging Costs 5% 5% 4%

Administration cost 4% 4% 5%

Insurance cost 3% 2% 2%

Software & Maintenance 2% 2% 2% Cost of Logistics 2% 2% 2% Equipment Marketing cost 1% 2% 2% IT - Hardware & Software 2% Cost 2% 1% Speed Money & Bribes 1% 1% 1%

Others 0% 2% 2%

306 306

307 307

3.18 Domestic Route: NCR → Hyderabad

The NCR→ Hyderabad cargo route is an important freight transportation route, which accounts for approximately 5 per cent of the overall domestic cargo movement. NCR is a major manufacturing as well as consumption centre, whereas Hyderabad is a hub for the production of pharmaceutical products and FMCGs. Moreover, Hyderabad is a storage and re-distribution point for agricultural products, especially rice, which is produced in the region.

Figure 3.18-1: Route Map Figure 3.18-2: Modal Shares in Transportation (per cent)

72%

3% 25%

Roadway Railway Airway

Impediments on the route � Drivers are frequently harassed by RTO officials at the state borders in Madhya Pradesh, who extract bribes even if all regulations are in order. � Flying squads of police officials routinely create problems for drivers in the Narsinghpur and Chapra regions in Madhya Pradesh and at Wadki in Maharashtra. � There are incidences of pilferage/robbery by gangs at night in Madhya Pradesh. � There are limited facilities for truck drivers for rest and refreshments on this route. � A 10 km stretch near Nagpur is a major traffic congestion point on this route.

Route Characteristics The main products moved on this route include automobile and auto ancillaries, FMCGs, FMCDs, textiles, and electronic items. Agricultural commodities such as rice, cotton, and soybean are generally transported from Hyderabad to NCR.

Automobiles, textiles and pharmaceutical products are largely moved in containers on this route (Figure 3.18-3). Containers of 32 feet length, accounting for approximately 70 per cent of the usage, and of 24 feet length, accounting for about 15 per cent of the usage, are mostly used on this route.

308 308

Figure 3.18-3:Shares of Containerised Cargo (per cent)

65% 56% 49% 43% 45%

Overall Auto & Auto Ancillaries Textiles Pharmaceuticals FMCG

Approximately 13 per cent of the total cargo transported on this route is handled by 3PL/4PL firms, which basically specialise in moving containerised traffic.

About 12 per cent of the respondents reported the usage of multi-modal transport on this route at least once in the past. The modes used include a combination of railways and roadways. Nagpur is an important intermodal exchange point on this route. In the case of multimodal transportation, the cargo is mainly transported from NCR to Nagpur as FCL by railways for redistribution to various locations, and the part load bound to Hyderabad is subsequently transported by roadways.

Time and Cost of Transportation

Figure 3.18-4 shows the average time in hours by different modes on this route.77

Figure 3.18-4: Average Time in Hours by Modes

Roadway Railway Best Case (First Railway Normal Case Airway (First & last mile Multimodal (Road - Rail & last mile transit by (First & last mile transit transit by road) Combination) road) by road)

77The average total time taken for transportation in hours is only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 309 309

Roadways is the most preferred route due to higher reliability and provision of last-mile connectivity. Railways is used mainly for transportation of agricultural commodities and products where delivery schedules are not critical.

The average cost of transportation per tonne-km by various modes is shown in Table 3.18-1.78 Although the cost of railway transportation is low, it is not preferred due to the unreliability of railway services. It may be noted that the cost of using airways is lower than the national average on this route. All the other costs are found to be higher. Table 3.18-1: Average Costs of Transportation in INR per tonne-km This Route National Average

Roadways* 2.7 2.48 Roadways* - Refrigerated 3.2 3.01 Railways (First- and last-mile transit by road) 2.1 1.88 Airways (First- and last-mile transit by road) 6.4 7.10 Multi-modal transportation (Combination of 2.4 2.23 roadways and railways) Source:Authors’ estimates. Note: *We have considered the payload capacity of the truck to be 16 tonnes.

We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The cost also varies for onward and return journeys (Figure 3.18-5). The figure shows an average cost difference of 1.86 per cent between NCR and Hyderabad for outward and return journeys in INR per tonne-km.

Figure 3.18-5:Average Costs of Road Transportation for Onward and Return Journeys in INR per tonne-km

NCR to Hyderabad Hyderabad to NCR

78The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route.

310 310

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.18-2. By and large, the costs on this route for using both roadways and railways are higher than the corresponding national averages. However, the cost is lower than the corresponding national average in the case of use of other modes of transport. Table 3.18-2: Logistics Costs in INR per tonne-km Overall Logistics Logistics undertaken by undertaken 3PL Firms directly Mode This National This National This National Route Average Route Average Route Average Roadway 5.4 5.02 4.9 4.67 5.8 5.44 Railway (First & last mile transit by 4.1 3.68 3.8 3.54 4.2 3.78 road) Airway (First & last mile transit by road) 10.8 11.38 10.8 11.2 11.13 11.60 Multimodal (Road - Rail Combination) 4.7 4.71 Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The variation in the average cost of logistics per tonne-km for major commodities is shown in Table 3.18- 3. There are variations in the average cost of logistics across commodities and modes of transportation. The average cost of logistics is the highest when the pharmaceutical industry uses roadways as a mode of transportation whereas in the case of use of railways, the cost of logistics is the highest for transporting FMCGs. The difference between the logistics costs across different modes of transportation and commodities commodity is the highest in the case of transport of processed food.

Table 3.18-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Auto components 5.20 3.90 Automobiles 5.5 4.20 FMCDs 5.40 4.1 FMCGs 5.6 4.25 Pharmaceuticals items 5.7 4.3 Processed food 5.4 3.9 Textile items 5.3 3.9 Source: Authors’ estimates.

Figures 3.18-6 and 3.18-7 show the cost by roadways and railways in Rs per tonne-km and in hours for the major components of logistics activities, respectively. Transportation, followed by warehousing, are found to be the principal components of the cost in INR per tonne-km.

311 311

Figure 3.18-6: Logistics Cost in INR per tonne-km by Figure 3.18-7: Logistics Time in Hours by Activity, Activity, Mode: Road Mode: Road

Logistics Cost in Logistics INR per Time in ton km Hours

Note:Theaverage number of days for warehousing on both sides=2

Similarly, Figures 3.18-8 and 3.18-9 show the decomposition of the cost (Rs/hour) on railways for different components of logistics activities.

Figure 3.18-8:Logistics Costs in INR per tonne-km by Figure 3.18-9: Logistics Time in Hours by Activity, Mode: Activity, Mode: Rail Rail

Logistics Cost in INR per tonne km Logistics Time in s. Hour

Note: Theaverage number of days for warehousing on both nodes =2 The average number of days for storage during transit = 3

312 312

Perceptions of the Key Cargo Transportation Challenges The information was collated on the basis of with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.18-10. According to the stakeholders, harassment by different officials and payment of facilitation money are the twin challenges on this route, which can be addressed without the need for large investments.

Figure 3.18-10: Intensity of the Challenges Faced in Transportation

Limitations in terms of Harassment by Police/ Rail Infrastructure Other Agencies

Unavaliability of Intermodal exchange points

313 313

Figure A3.18-1: Shares of Components in the Transportation Costs

Mode: Road (per cent)

Fuel 53%

Tolls & Other Expenses on journey 15%

Salary and Allowances 14%

Maintenance including Consumables 8%

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO fines etc.)

Figure A3.18-2: Average Transportation Costs of Major Commodities in INR per tonne-km

Roadway Railways s Pharmaceuticals 2.85 Pharmaceuticals 2.2 FMCG 2.8 FMCG 2.18 Automobiles 2.75 Automobiles 2.15 FMCD 2.7 FMCD 2.1 Processed Food 2.7 Processed Food 2 Textiles 2.65 Textiles 2 Auto components 2.6 Auto components 2 Agri Products 2.6 Agri Products 1.9

314 314

Figure A3.18-3: Shares of Components of the Logistics Costs (per cent)

Overall 4PL Firms 3PL Firms

48% 53% Transportation 49% Warehousing 12% 11% 12%

Material Handling 11% 9% 10%

Documentation 7% 6% 5% Logistics System 4% 6% 4%

Packaging Costs 4% 4% 3% Administration cost 2% 3% 3%

Insurance cost 2% 3% 2%

Software & Maintenance 1% 2% 2% Cost of Logistics 3% 3% 2%

Marketing cost 1% 2% 2%

IT - Hardware & Software 1% 1% 1%

Speed Money 1% 1% 1%

Others 3% 2% 0%

Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing the complete range of logistics service to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider—This refers to an integrated service provider to whom end-users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to the service provided by 3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end users, and is even authorised to take supply chain-related decisions on behalf of the end-—user clients.

315 315

3.19 Domestic Route: NCR → Mumbai

The NCR → Mumbai cargo route is probably the most prominent freight transportation route in India, accounting for approximately 20 per cent of the overall domestic cargo movement. NCR and Mumbai are the major regional hubs where commodities/products are produced and further redistributed to other markets.

Figure 3.19-1: Route Map Figure 3.19-2: Modal Shares in Transportation (per cent)

80%

5% 15%

Roadway Railway Airway

Impediments on the Route � The state border of Rajasthan at Ratanpur is a harassment point. Even if all regulations are complied with, the RTO officials harass the drivers over technicalities such as the non-availability of a second driver, and the driver not wearing shoes, to extract facilitation money. � The signage at tolls is inadequate/improper as compared to that on other highways, leading to confusion and wastage of time at the tolls. This situation is particularly prevalent in Rajasthan. � The railway infrastructure is inadequate for dealing with the high volume of traffic on this route, leading to long waiting times for availing of the rakes at the stations. � Although the road conditions are good, the following stretches of the highway are major congestion points on this route: a 2 km stretch of the highway near Bharuch, and the Wada–Vasai Bridge in Thane near Mumbai.

Route Characteristics The prominent products transported on this route include automobile and auto components, FMCDs, textiles, electronics, and pharmaceutical products. NCR is a manufacturing hub of automobiles and FMCDs, whereas pharmaceutical products manufactured in Himachal Pradesh are routed to other parts of India from NCR. Foodgrains are also transported mainly through railways on this route (Figure 3.19-2).

Automobiles and textiles constitute the primary containerised cargo on this route (Figure 3.19-3). Containers of 32 feet length, accounting for approximately 68 per cent of the usage, and of 28 feet length, accounting for about 12 per cent of the usage, are mostly used on this route.

316 316

Figure 3.19-3: Shares of Containerised Cargo (per cent)

72% 56% 46% 46% 41% 36%

Overall Auto & Auto Textiles Pharmaceuticals Electronics Engineering Goods Ancillaries

On this route, integrated logistics service providers (3PL/4PL) handle about 24 per cent of the cargo. They mostly deal in containerised cargo.

Since this route entails a shorter haul as compared to other longer routes and is characterised by a relatively easier terrain, there is limited incidence of multi-modal transportation on this route. Only 7 per cent of our respondents reported the usage of multi-modal transportation on this route at least once in the past.

Time and Cost of Transportation

Figure 3.19-4 shows the average time in hours by different modes on this route.79 Figure 3.19-4: Average Time in Hours by Modes

Roadway Railway Best Case Railway Normal Case Airway (First & last Multimodal (Road - (First & last mile transit (First & last mile transit mile transit by road) Rail Combination) by road) by road)

Roadways is the most preferred mode of transportation on this route due to higher reliability and provision of last mile connectivity. Moreover, the time taken for road transportation has further reduced in comparison to railways due to the introduction of GST. The average cost of transportation per tonne-km by various modes is shown in Table 3.19-1.80 The cost on this route seems to be lower than on other routes.

79The average total time taken for transportation in hours is only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route.

317 317

Table 3.19-1: Average Costs of Transportation in INR per tonne-km This Route National Average Roadways* 2 2.48 Roadways* - Refrigerated 2.4 3.01 Railways (First- and last-mile transit by road) 1.7 1.88 Airways (First- and last-mile transit by road) 6.8 7.10 Multi-modal transportation (Combination of roadways and railways) 2.21 2.23 Source: Authors’ estimates. Note: *We have considered the payload capacity of the truck to be 16 tonnes. We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The cost also varies for onward and return journeys (Figure 3.19-5).

Figure 3.19-5: Average Cost of Road Transportation for Onward and Return Journeys in INR per tonne-km

NCR to Mumbai Mumbai to NCR

Figure 3.19-5 shows an average cost difference of 34.28 per cent between NCR and Nagpur for outward and return journeys in INR per tonne-km.

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.19-2. Note that the cost on this route is relatively lower than the national average.

80The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route. 318 318

Table 3.19-2: Logistics Costs in INR per tonne-km Logistics Logistics Overall undertaken by undertaken Mode 3PL Firms directly This National This National This National Route Average Route Average Route Average 4.5 5.02 4.1 4.67 4.6 5.44 Roadways Railways (First- and last-mile transit by 3.65 3.68 3.2 3.54 3.4 3.78 road) Airways (First- and last-mile transit by 11.2 11.38 11.4 11.2 11.46 11.60 road) Multi-modal transportation 4.2 4.71 (Combination of roadways and railways) Note: We have estimated our national average by taking the simple average of the cost in INR per tonne-km by the same mode across all routes under study. Source: Authors’ estimate.

The variation in average cost of logistics per tonne-km for major commodities is shown in Table 3.19-3. There are variations in the average logistics costs across commodities and modes of transportation. The average cost of logistics is the highest when the pharmaceutical industry uses roadways as a mode of transportation whereas in the case of railways, the cost of logistics is the highest in the case of transport of chemicals. The difference between the logistics costs across different modes of transportation and commodities is the highest for pharmaceuticals. Table 3.19-3: Average Logistics Costs for Major Commodities in INR per tonne-km

Mode Commodity Road Rail Auto components 3.9 3.38

Automobiles 4.5 3.52 Chemicals 5.3 4.4 Electronics items 4.2 3.5 FMCDs 3.9 3.3 Pharmaceutical products 5.4 4.0

Textile items 4.7 3.6 Source: Authors’ estimates.

Figures 3.19-6 and 3.19-7 show the cost on road in INR per tonne-km and in hours for the major components of logistics activities, respectively. It may be noted that the highest cost is incurred for transportation, whereas significant time is required for the following two activities: transportation and warehousing activities.

319 319

Figure 3.19-6: Logistics Costs in INR per tonne-km by Figure 3.19-7: Logistics Time in Hours by Activity, Activity, Mode: Road Mode: Road

Logistics Cost in Logistic INR per Time in tonne km Hour

* Average no. of days for warehousing = 2

Note: The average number of days for warehousing on both sides=2

Similarly, Figures 3.19-8 and 3.19-9 shows the decomposition of the cost (Rs/hour) on railways by different components of logistics activities. Figure 3.19-8 shows that transportation entails the maximum cost. Figure 3.20-9 indicates that storage during transit and warehousing activities require the maximum time.

Figure 3.19-8: Logistics Costs in INR per tonne-km, Figure 3.19-9: Logistics Time in Hours by Activity, Mode: Mode: Rail Rail

Logistics Cost in Logistics INR p er Time in tonne km Hour

Note: The average numberof days for warehousing on both nodes =2 The average number of days for storage during transit = 3

320 320

Perceptions of the Key Cargo Transportation Challenges

The information was collated on the basis of interaction with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation is mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.19-10. Out of the eight parameters under study, our estimated score is less than 4 (indicating a low challenge) in four of the indicators, whereas in the other indicators, the scores are more than 5, indicating moderate/high degree of challenge.

Figure 3.19-10: Intensity of the Challenges Faced in Transportation

Road Condition including signage Limited 10 infrastructure in 9 8 Harassment by RTO terms of parking 7 officials terminals with 6 refreshment 5 4 3 2 Need to pay Bribes/ 1 Pilferage/Leakage Facilitation money 0 of Consignment

Limitations in terms Harassment by of Rail Police/ Other Infrastructure Agencies

Unavaliability of Intermodal exchange points

321 321

Figure A3.19-1: Shares of Components in the Transportation Costs,

Mode: Road (per cent)

Fuel 53%

Tolls & Other Expenses on journey 15%

Salary and Allowances 14%

Maintenance including Consumables 9%

Speed Money/ Bribes 4%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO fines etc.)

Figure A3.19-2: Average Transportation Costs of Major Commodities in INR per tonne-km

Roadways Railways

Pharma 2.4 Chemicals 2.2

Chemicals 2.37 Pharma 2

Textiles 2.1 Textiles 1.8

Automobile 2 Automobile 1.75

Electronics 1.85 Electronics 1.72

Auto-comp 1.75 Auto-comp 1.68

FMCD 1.73 FMCD 1.65

322 322

Figure A3.19-3: Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms 4PL Firms

45% Transportation 46% 46% Warehousing 12% 11% 11%

Material Handling 11% 11% 9%

Documentation 5% 6% 5% Logistics System 4% 4% 4% Management Packaging Costs 4% 4% 4%

Administration cost 3% 3% 5%

Insurance cost 3% 3% 2%

Software & Maintenance 3% 3% 3%

Cost of Logistics Equipment 1% 2% 3%

Marketing cost 2% 2% 3%

IT - Hardware & Software 2% 3% Cost 3%

Speed Money 1% 1% 1%

Others 3% 2% 2% Note: 3PL Logistics Service Provider—This refers to an integrated service provider providing complete range of logistics service to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider— This refers to an integrated service provider to whom end-users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to the service provided by 3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end-users, and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

323 323

3.20 Domestic Route: NCR → Nagpur

The NCR → Nagpur cargo route accounts for approximately 4 per cent of the overall domestic cargo movement. NCR is a major manufacturing centre for automobiles, FMCDs, and electronics as well as a consumption hub, whereas Nagpur, being centrally located, is a prominent warehousing and redistribution point for products bound for northern and southern India.

Figure 3.20 -‐1: Route Map Figure 3.20-2: Modal Shares in Transportation (per cent)

83%

1% 16%

Roadway Railway Airway

Impediments on the Route ¥ The RTO officials routinely harass the drivers at the state borders in Madhya Pradesh to extract facilitation money. ¥ Flying squads of police officials misbehave with drivers, especially in Maharashtra before approaching Nagpur. ¥ There is perennial traffic congestion at a 10 km stretch of road around Nagpur due to road development and infrastructure works.

Route Characteristics

Automobile and auto components, electronics, FMCDs, FMCGs, and textiles (garments) are the prominent products transported on this route. Agricultural commodities, especially rice, processed food, and engineering goods are largely sourced from Nagpur.

On this route, containers are primarily used for transporting products like automobiles, textiles (garments), and electronic items. Containers of 32 feet length, accounting for approximately 63 per cent of the usage, and of 24 feet length, accounting for about 15 per cent of the usage, are mostly operated on this route

324 324

Figure 3.20-3: Shares of Containerised Cargo (per cent)

65%

44% 38% 26% 28%

Overall Auto & Auto Eelctronics Textiles Engineering Goods Ancillaries

On this route, 16 per cent of the total cargo is handled by integrated service providers, who basically operate container cargo.

In the absence of any scope for cost and time savings as well as the non-availability of related infrastructure, the usage of multi-modal transportation is virtually non-existent on this route.

Time and Cost of Transportation Figure 3.20-4 shows the average time in hours by different modes on this route.81 Roadways is the most preferred route due to higher reliability and the provision of last-mile connectivity.

Figure 3.20-4: Average Time in Hours by Modes

Roadway Railway Best Case (First Railway Normal Case Airway (First & last mile Multimodal (Road - Rail & last mile transit by (First & last mile transit transit by road) Combination) road) by road)

The average cost of transportation per tonne-km by various modes is shown in Table 3.20-1.82 The table shows that the transportation cost on this route is high relative to the corresponding national average.

81The average time for transportation in hours includes only the time taken for transit, including first- and last-mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route. 82The average cost of transportation per tonne-km for various modes includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route. 325 325

Table 3.20-1: Average Costs of Transportation in INR per tonne-km Mode This Route National Average Roadways* 2.6 2.48 Roadways* - Refrigerated 3.2 3.01 Railways (First- and last-mile transit by road) 2.02 1.88 Airways (First- and last-mile transit by road) 6.0 7.10 Multi-modal transportation (Combination of roadways and railways) 2.3 2.23 Source: Authors’ estimates. Note: *We have considered the payload capacity of the truck to be 16 tonnes. We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

The cost also varies for onward and return journeys (Figure 3.20-5).

Figure 3.20-5: Average Costs of Road Transportation for Onward and Return Journeys in INR per tonne-km

NCR to Nagpur Nagpur to NCR

Figure 3.20-5 shows an average cost difference of 17.76 per cent between NCR and Nagpur for outward and return journeys in INR per tonne-km.

Cost of Logistics

Our estimate of the average cost of logistics per tonne-km by various modes is shown in Table 3.20-2. The cost on this route seems to lower than the corresponding national average. Table 3.20-2: Logistics Costs in INR per tonne-km Overall Logistics Logistics undertaken by undertaken Mode 3PL Firms directly This National This National This National Route Average Route Average Route Average Roadways 4.8 5.02 4.4 4.67 5.28 5.44 Railways (First- and last-mile transit by 3.65 3.68 3.4 3.54 3.8 3.78 road) Airways (First- and last-mile transit by 11.2 11.38 11.1 11.2 11.34 11.60 road) Multi-modal transportation 4.7 4.71 (Combination of roadways and railways) Source: Authors’ estimates. Note: We have estimated the national average by taking the simple average of the cost in INR per tonne-km by the same mode of travel across all the routes under study.

326 326

The variation in average cost of logistics per tonne-km for major commodities is shown in Table 3.20-3.

Table 3.20-3: Average Logistics Costs for Major Commodities in INR per tonne-km Mode Commodity Road Rail Auto components 4.52 3.47 Automobiles 4.76 3.83 Electronics items 4.62 3.6 FMCDs 4.43 3.4 FMCGs 4.80 3.7 Source: Authors’ estimates.

There are variations in the average cost of logistics across commodities and modes of transportation. The average cost of logistics is the highest when the FMCG industry uses roadways as a mode of transportation whereas in the case of use of railways, the cost of logistics is the highest in the case of the automobiles industry. The difference between the cost of logistics across different modes of transportation and commodities is the highest for auto components. Figures 3.20-6 and 3.20-7 show the cost on road in Rs per tonne-km and in hours for the major components of logistics activities, respectively. It may be noted that the highest cost is incurred on transportation, followed by material handling and transfers. Figure 3.20-7 indicates that the maximum time is spent in warehousing activity.

Figure 3.20-7: Logistics Time in Hours by Activity, Figure 3.20-6: Logistics Costs in INR per tonne-km by Mode: Road Activity, Mode: Road

Logistics Cost in INR per tonne Logistics km Time in hours

Note: The average number of days for warehousing on both sides=2

327 327

Similarly, Figures 3.20-8 and 3.20-9 show the decomposition of cost (Rs/hour) on railways by different components of logistics activities.

Figure 3.20-8: Logistics Cost in INR per tonne-km by Figure 3.20-9: Logistics Time in Hours by Activity Activity, Mode: Rail Mode: Rail

Logistics Cost in INR per Logisti tonne km cs Time in hours

Note: The average number of days for warehousing on both nodes =2 The average number of days for storage during transit = 3

Perceptions of the Key Cargo Transportation Challenges

The information was collated on the basis of interaction with stakeholders to identify the major transportation challenges in this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 3.20-10. The figure indicates a low degree of challenge only in the case of road infrastructure.

328 328

Figure 3.20-10: Intensity of the Challenges Faced in Transportation

Limitations in terms Harassment by of Rail Police/ Other Infrastructure Agencies

Unavaliability of Intermodal exchange points

Figure A3.20-1: Shares of Components in the Transportation Costs,

Mode: Road (per cent)

Fuel 53%

Tolls 15%

Salary and Allowances 16%

Maintenance including Consumables 8%

Speed Money/ Bribes 3%

Others (Vehicle Insurance, Vehicle 6% Parking, RTO fines etc.)

329 329

Figure A3.20-2: Average Transportation Costs of Major Commodities in INR per tonne-km

Roadways Railways

Automobiles 2.1 FMCG 2.6

Automobiles 2.58 FMCG 2.05

Electronics 1.96 Electronics 2.5

Auto components 1.9 Auto components 2.45

FMCD 1.85 FMCD 2.4

Figure A3.20-3 Shares of Components of the Logistics Costs (per cent)

Overall 3PL Firms 4PL Firms

52% 50% Transportation 53% 10% 10% Warehousing 10% 11% 13% Material Handling 12% 5% 4% Documentation 4% 3% Logistics System 4% Management 3% 4% 6% Packaging Costs 4% 2% 2% Administration cost 3% 2% 3% Insurance cost 3% 1% 1% Software & Maintenance 1% 2% 2% Cost of Logistics Equipment 2% 2% 1% Marketing cost 1% 2% 2% IT - Hardware & Software 2% Cost 1% 1% Speed Money 1% 2% 2% Others 1% 330 330

Note: 3PL Logistics Service Provider – This refers to an integrated service provider providing complete range of logistics service to end-users. The end-users can outsource 100 per cent of their logistics activities to such service providers. 4PL Logistics Service Provider—This refers to an integrated service provider to whom end-users can fully outsource the management of supply chains. Apart from providing integrated logistics services, which is akin to the service provided by 3PL service providers, the firm has the capability to manage the entire supply chain on behalf of the client. The firm manages various 3PL service providers in the case of complex supply chains, acts as a knowledge partner to the end-users and is even authorised to take supply chain-related decisions on behalf of the end-user clients.

331

4. Analysis of Selected Bulk Cargo Routes

The movement of bulk cargoes is an important part of domestic cargo movement. Although there is no fixed definition of bulk cargoes, we have considered coal, cement, and fertilisers for analysis in this study. The following bulk cargo routes have been analysed: 1. Fertiliser movement, Burdwan to Guwahati (Mode: Road); 2. Cement transportation, Chanderiya to NCR (Mode: Road); 3. Coal transportation, Ramgarh to Lucknow (Mode: Multimodal-Road/Rail); 4. Coal transportation, Dhanbad to Lucknow (Mode: Rail); and 5. Cement transportation, Nalgonda to Chennai (Mode: Rail). The cost estimates for each of these studies are based on primary surveys, which have been detailed in an earlier chapter. As in the other reports, each of these route studies covers the following areas:

4.1 Domestic Route: Burdwan → Guwahati, Bulk Cargo – Fertiliser, Mode: Road

Figure 4.1-1: Route Map West Burdwan district is the most important industrial manufacturing hub in West Bengal. Although iron and steel manufacturing plants have been traditionally present in the cluster, other manufacturing sectors such as fertilisers have come up in the region. The most prominent fertiliser manufacturing units are Durgapur Fertilizer Plant and Matix Fertilizers and Chemicals.

The product is transported using roadways to Guwahati (~950 km), which further acts as a re-distribution point catering to the North-eastern region of India. The cargo is mostly moved by stand-alone operators.

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Key Impediments on the Route � The cost of transportation incurred on this route is higher than on others as trucks do not get adequate return load from Guwahati. Hence, they charge a higher transportation cost. � Although there are no particular major bottlenecks or congestion points, the traffic is slow- moving on the 350 km stretch of road, which is a single lane from Burdwan to National Highway 27. � There are instances of gangs posing as fake policemen who try to extort money from the less educated drivers. The same gangs indulge in pilferage and robbery of goods, especially at night. In view of these security concerns, most drivers do not drive their vehicles on this route during night-time.

Time and Cost Estimates of Transportation

The average time taken for transporting cargo via roadways on this ~950 km route is observed to be about 58 hours. The average cost of transportation is estimated to be Rs 3.15 per tonne-km (Table 4.1-1). The average cost of transportation per tonne-km includes only the cost of transportation and other direct and indirect expenses incurred during transportation. The cost of transportation per tonne-km on this route is relatively high as trucks do not get commensurate return loads from Guwahati.

Table 4.1-1: Time and Cost Estimates of Transportation Average Time (Hours) – 58 Cost in INR per tonne-km: 3.15 Source: Authors’ estimates.

Cost of Logistics

The average cost of logistics on this route is Rs 5.3 per tonne-km, which could increase to Rs 5.38 per tonne-km if undertaken by end-users themselves (Table 4.2-2).

Table 4.2-2: Cost of Logistics in INR per tonne-km Mode This Route Average Cost 5.3 Cost incurred if undertaken by 3PL firms 5.1 Cost incurred if undertaken directly by end-users 5.38 Source: Authors’ estimate.

The principal components of the logistics costs via road in INR per tonne-km and in hours by different activities are shown in Figures 4.1-2 and 4.1-3, respectively. Transportation is a major component of the logistics costs in INR per tonne-km.

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Figure. 4.1-2: Logistics Costs in INR per tonne- Figure. 4.1-3: Logistics Time in Hours by

km by Activity, Mode: Road Activity, Mode: Road

Logistics Logistics Cost in INR Time in per tonne Hours km

Note: Average number of days for warehousing on both sides=2 Perception of Key Cargo Transportation Challenges The information was collated on the basis of interactions with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 4.1-4. As per our findings, harassment by the RTO officials and the police, demand for facilitation money and infrastructural limitations are some of the serious problems on this route.

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Figure 4.1-4: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Limited 9 infrastructure in 8 terms of parking 7 Harassment by RTO terminals with 6 officials refreshment facilities 5 for driver 4 3 2 1 0 Need to pay Bribes/ Pilferage/Leakage of Facilitation money Consignment

Harassment by Limitations in terms Police/ Other of Rail Infrastructure Agencies

Figure A4.1-1: Shares of Components in the Transportation Cost,

Mode: Road (per cent)

Fuel 57%

Tolls & Other Expenses on journey 10%

Salary and Allowances 15%

Maintenance including Consumables 10%

Speed Money/ Bribes 5%

Others 2%

335 335

Figure A4.1-2: Shares of Components of the Logistics Costs (per cent)

Transportation 61%

Warehousing 8%

Material Handling 13%

Documentation 4%

Logistics System 3%

Administration cost 3% Insurance cost 2%

Software & Maintenance 2% Cost of Logistics Equipment 2% Marketing cost 1%

IT - Hardware & Software 2% Speed Money 0% Others 1%

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4.2 Domestic Route: Chanderiya → NCR, Bulk Cargo – Cement, Mode: Road

Chanderiya is one of the largest cement manufacturing clusters in Figure 4.2-1: Route Map India. The cement manufacturing sector has evolved in Chanderiya due to the presence of extensive reserves of cement grade limestone in the region. Birla Cement, Ultratech, Wonder Cement and JK Cement are some of the prominent cement manufacturing companies that have units in Chanderiya.

The product is mainly transported using roadways to the national Capital Region (NCR), a distance of about 520 km, due to the provision of last-mile delivery. Railways is mainly used for catering to institutional supply. A majority of the cargo (85 per cent) is moved by stand-alone operators.

Key Impediments on the Route � The principal traffic congestion points on this route are around Behror and Shahjahanpur. � Since there are restrictions on the entry/movement of cargo truck within Delhi between 6 AM and 11 PM, the transportation has to be planned accordingly to prevent long waiting periods for the trucks. � Police and RTO officials harass the drivers within the city limits of Delhi by extorting money to facilitate the smooth passage of the cargo through the city.

Time and Cost Estimates of Transportation The average time taken for transporting cargo via road on this ~575 km-long route is 20 hours.83 The road route is a national highway with good conditions. Our findings suggest that the average cost of transportation by road is Rs 2.3 per tonne-km on this route. The average cost of transportation per tonne- km includes only the cost of transportation and other direct and indirect expenses incurred during transportation. Table 4.2-1: Time and Cost Estimates of Transportation Average Time (Hours) – 20 Cost in INR per tonne km: 2.3 Source: Authors’ estimates.

Cost of Logistics

The average cost of logistics on this route is Rs 4.4 per tonne-km. It could increase to Rs 4.5 per tonne km if the logistics are undertaken by the end-users themselves (Table 4.4.3-2).

83 The average time for transportation in hours includes only the time required for transit, including first- and last- mile connectivity to warehouses and stoppages during transit. It does not include the time taken for warehousing, packaging, or material handling at either the origin or the destination on the route.

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Table 4.2-2: Cost of Logistics in INR per tonne-km Mode This Route Average Cost 4.4 Cost incurred if undertaken by 3PL firms 4.35 Cost incurred if undertaken directly by end-users 4.5 Source: Authors’ estimates.

The principal components of the logistics costs via road in INR per tonne-km and in hours by different activities are shown in Figures 4.2-2 and 4.2-3, respectively. Transportation is a major component of the logistics costs in INR per tonne-km. Figure 4.2-2: Logistics Costs in INR per Figure 4.2-3: Logistics Time in Hours by tonne-km by Activity, Mode: Road Activity, Mode: Road

Logistics Logisti Cost in INR cs Time per tonne in km Hours

Note :Average no. of days for warehousing on both sides=2

Perception of Key Cargo Transportation Challenges The information was collated on the basis of interactions with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 4.2-4. As per our findings, harassment by the RTO officials and the police, demand for facilitation money and infrastructural limitations are some of the serious problems on this route.

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Figure 4.2-4: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 Limited 9 infrastructure in 8 Harassment by RTO terms of parking 7 6 officials terminals with 5 refreshment facilities 4 3 2 1 0 Need to pay Bribes/ Pilferage/Leakage of Facilitation money Consignment

Harassment by Limitations in terms Police/ Other of Rail Infrastructure Agencies

Figure A4.2 -1: Shares of Components in the Transportation Cost, Mode: Road (Per cent)

Fuel 53%

Tolls & Other Expenses on journey 15%

Salary and Allowances 16%

10%

Speed Money/ Bribes 3%

Others 3%

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Figure A4.2-2: Shares of Components of the Logistics Cost (per cent)

Transportation 52%

Warehousing 10%

Material Handling 11%

Documentation 4%

Logistics System 4%

Administration cost 3%

Insurance cost 3%

Software & Maintenance 3% Cost of Logistics 4% Marketing cost 1% IT - Hardware & Software 3% Speed Money 0% Others 3%

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4.3 Domestic Route: Ramgarh → Lucknow, Bulk Cargo – Coal, Mode: Multimodal

Figure 4.3-1: Route Map The Ramgarh coalfield covers an area of 98 square km and has a total coal reserves of ~1060 million tonnes. The coalfield has not been explored much as the coal mined in Ramgarh is of a low grade. The major coal mine operator in Ramgarh is the government-owned Central Coalfield Limited (CCL).

Coal is first transported from the mines in Ramgarh to the Dhanbad Railway depots by road (distance of 120-150 km) and subsequent transportation to Lucknow is undertaken by railways. The movement of cargo is mostly undertaken by stand-alone operators.

Key Impediments on the Route � There are infrastructural bottlenecks on this route, such as the limited availability of rakes as well as infrastructural issues at the railway yard in Dhanbad, which lead to long waiting time. � There are incidences of harassment by police officials at the stage of last-mile transportation in Lucknow.

Time and Cost Estimates of Transportation

The average time taken for transporting coal via multimodal means on this route is observed to be about 55 hours. This includes storage time during transit at the railway cargo yards/depots. The average cost of transportation is estimated to be Rs 3.15 per tonne-km. The average cost of transportation per tonne-km includes only the cost of transportation and other direct and indirect expenses incurred during transportation.

Table 4.3-1: Time and Cost Estimates of Transportation Average Time (Hours) – 55 Cost in INR per tonne km: 1.9 Source: Authors’ estimates.

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Cost of Logistics

The average cost of logistics on this route is estimated to be Rs 5.3 per tonne-km.

The principal components of logistics costs incurred via roadways in INR per tonne-km and in hours by different activities are shown in Figures 4.3-2 and 4.3-3, respectively. Transportation is a major component of the logistics costs in INR per tonne-km.

Figure 4.3-2: Logistics Costs in INR per tonne- Figure 4.3-3: Logistics Time in Hours by km by Activity Activity

Logistics Cost in INR per tonne Logistics km Time in Hours

Notes: Average number of days taken for storage at Ramgarh =1. Warehousing of coal does not take place at the destination.

Figure 4.3-4: Intensity of the Challenges Faced in Transportation

Pilferage/Leakage of Consignment 10 9 8 Infrastructure at 7 Harassment by unloading station at 6 Police/ Other Railways yard in 5 4 Agencies Lucknow 3 2 1 0

Waiting time at Limitations in terms loading station at of Rail Infrastructure Dhanbad rail yard

Infrastructure at loading station at Dhanbad rail yard 342 342

Figure A4.3-1: Shares of Components of the Logistics Costs (per cent)

Transportation 55%

Warehousing 4%

Material Handling 13%

Documentation 6%

Logistics System 4%

Administration cost 4%

Insurance cost 3%

Software & Maintenance 3%

Cost of Logistics Equipment 4%

Marketing cost 1%

IT - Hardware & Software 3%

Speed Money 0%

Others 3%

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4.4 Domestic Route: Dhanbad → Lucknow, Bulk Cargo – Coal, Mode: Rail

Dhanbad has some of the largest coal mines in India and is Figure 4.4-1: Route Map referred to as the ‘coal capital of India’. The region around Jharia in Dhanbad has 112 coal mines with a production of approximately 27.5 million tonnes in 2016-17.

Coal is transported to consumption markets primarily by railways. The major coal mines have integrated loading points via rail sidings. The other mines which do not have integrated loading points use the railways yards/depots in Dhanbad for transporting coal to Lucknow or other locations.

Given the nature of the commodity, nearly the entire cargo is shipped by stand-alone operators.

Key Impediments on the Route � There are infrastructural bottlenecks on the route such as limited availability of rakes at the railway yard in Dhanbad, leading to waiting time for loading. � The policy officials harass the drivers at the stage of last-mile transportation in Lucknow.

Time and Cost Estimates of Transportation The average time for transportation, including stoppage for cargo transportation by railways, a distance of about 700 km, is estimated to be 47 hours (Table 4.4-1). A majority of the large mines, which use railways for transportation, have integrated loading points within their respective manufacturing facilities, which helps save the time usually taken for first-mile transportation by road and related material handling. The average cost of transportation by railways is found to be Rs 1.75 per tonne-km. The average cost of transportation per tonne-km includes the cost of transportation and other direct and indirect expenses incurred during transportation. It does not include the expenses incurred on any other logistics activity at the origin or destination of the route.

Table 4.4-1: Time and Cost Estimates of Transportation Average Time (Hours) – 47 Cost in INR per tonne km: 1.75 Source: Authors’ estimates.

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Cost of Logistics

The average cost of logistics on this route is estimated to be Rs 3.3 per tonne-km.

The principal components of the logistics costs via road in INR per tonne-km and in hours by different activities are shown in Figures 4.4-2 and 4.4-3, respectively. Transportation is a major component of the logistics costs in INR per tonne-km.

Figure 4.4-2: Logistics Costs in INR per tonne- Figure 4.4-3: Logistics Time in Hours by km by Activity, Mode: Rail Activity Mode: Rail

Logistics Cost in Logistics INR per Time in tonne km Hours

Note: Average no. of days for storage at Ramgarh =1. Warehousing of coal does not take place at destination

Perception of key Cargo Transportation Challenges The information was collated on the basis of interactions with stakeholders to identify the major transportation challenges on this route. The intensity of the major challenges faced on the route during cargo transportation has been mapped on a scale of 1-10, where a score of 1 implies that the challenge is of low intensity and a score of 10 implies a high-intensity challenge/problem. Our findings are shown in Figure 4.4-4. This figure indicates that the availability of infrastructure at the loading station at Dhanbad is the most serious challenge on this route.

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Figure 4.4-4: Intensity of the Challenges Faced in Transportation

Pilferage/Leakage of Consignment 10 9 8 Infrastructure at 7 Harassment by unloading station at 6 Police/ Other Railways yard in 5 4 Agencies Lucknow 3 2 1 0

Waiting time at Limitations in terms loading station at of Rail Infrastructure Dhanbad rail yard

Infrastructure at loading station at Dhanbad rail yard

Figure A4.4-1: Shares of Components in the Transportation Costs (per cent), Mode: Rail

Fuel 55%

Rake Hiring Charges 8%

Other Operating costs - (Engine hiring, 13% rake detention, wayment) Cost of Manpower (Salary and Allowances) 15%

Maintenance including Consumables 5%

Insurance of Assets & other Infrastructure 2% (Rakes, Wagons etc.)

Others 2%

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Figure A4.4-2: Shares of Components of the Logistics Costs (per cent), Mode: Rail

Transportation 53%

Warehousing 5%

Material Handling 13%

Documentation 6%

Logistics System 4%

Administration cost 4%

Insurance cost 3%

Software & Maintenance 3%

Cost of Logistics 4%

Marketing cost 1%

IT - Hardware & Software 3%

Speed Money 0%

Others 3%

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4.5 Domestic Route: Nalgonda → Chennai, Bulk Cargo – Cement, Mode: Rail Figure 4.5-1: Route Map Nalgonda is one of the largest cement manufacturing clusters in India. The cement manufacturing sector has evolved in Nalgonda due to a high concentration of limestone deposits as well as its proximity to major consumption markets in the region. Anjani Portland Ltd, DCL-Deccan Cements Limited, Zuari Cements, India Cements, and Penna Cements are some of the prominent cement manufacturers in the cluster.

Most of the large cement companies have integrated rail cargo loading points within their manufacturing facilities. These end-users thus use railways for transporting cement to Chennai whereas others rely on roadways for transportation.

Out of the total cargo transported on this route, approximately 10 per cent of the cargo is handled by integrated service providers. Key Impediments on the Route � There are restrictions on cargo truck movement within the city limits of Chennai between 6 AM and 8 PM. This affects movement of the cargo if the last-mile connectivity from the railway yard is within the city limits. Thus, the cargo movement needs to be scheduled accordingly in order to prevent waiting time. � There are bottlenecks on the route, such as the limited availability of rakes as well as infrastructural issues at the railway yard in Chennai (Kurgpet).

Time and Cost Estimates of Transportation The average time for transportation, including stoppage of cargo transportation by railways, a distance of about 600 km, is estimated to be 28 hours (Table 4.5-1)84. A majority of the companies that use railways have integrated loading points within their respective manufacturing facilities, which usually helps save time required for first-mile transportation by road and related material handling. The average transportation cost is estimated to be Rs 1.85 per tonne-km by railways on this route (Table 4.5-1). There is not much difference in the cost of transportation via railways and roadways on this route. The average cost incurred on transportation via roadways on this route is about Rs 2 per tonne-km, which is nearly similar to that incurred on transportation by railways. Hence, in this scenario, the usage of railways is preferred only if the rail sidings and integrated loading points are located within the factory

84The average time for transportation in hours includes only the time taken for transit including first and last mile connectivity to warehouses and stoppages during transit. It does not include time taken for warehousing, packaging or material handling on either the origin or the destination on the route. 348 348

Table 4.5-1: Time and Cost Estimates of Transportation Average Time (Hours) – 28 Cost in INR per tonne km: 1.85 Source: Authors’ estimates.

Cost of Logistics

The average cost of logistics on this route is estimated to be Rs 3.3 per tonne-km by railways. The principal components of the logistics costs via road in INR per tonne-km and in hours by different activities are shown in Figures 4.5-2 and 4.5-3. Transportation is a major component of the logistics costs in INR per tonne-km.

Figure 4.5-2: Logistics Costs in INR per Figure 4.4-3: Logistics Time in Hours

tonne-km by Activity, Mode: Rail by Activity Mode: Rail

Logi stics Cost Logi stics in INR Cost in per tonn Hou rs e km

Note: Average no. of days for storage on both nodes = 2

Perceptions of Key Cargo Transportation Challenges

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Figure 4.5-4: Intensity of the Challenges Faced in Transportation

Road Condition including signage 10 9 8 Infrastructure at 7 6 Harassment by unlaoding station 5 RTO officials at Chennai 4 3 2 1 0

Limitations in Pilferage/Leakage terms of Rail of Consignment Infrastructure

Harassment by Police/ Other Agencies

Figure A4.5-1: Shares of Components in the Transportation Costs (per cent), Mode: Rail

Fuel 53%

Rake Hiring Charges 6%

Other Operating costs - (Engine hiring, rake 14% detention, wayment)

Cost of Manpower (Salary and Allowances) 15%

Maintenance including Consumables 6%

Insurance of Assets & other Infrastructure 3% (Rakes, Wagons etc.)

Others 3%

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Figure A4.5-2: Shares of Components of the Logistics Costs (per cent), Mode: Rail

Overall 3PL Firms

58% Transportation 57% 8% Warehousing 7%

10% Material Handling 9%

4% Documentation 5% Logistics System 4% 4% Management

Administration cost 3% 3%

Insurance cost 3% 3%

Software & Maintenance 3% 3%

Cost of Logistics Equipment 4% 3%

Marketing cost 1% 1% IT - Hardware & Software 3% 3% Cost Speed Money 0% 0%

2% Others 3%

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5.5. Quantifying theMacro Macro Logistics Logistics Costs Costsof India of India

5.1 Introduction This chapter outlines the methodology adopted by the research team tFo estimate the logistics costs. However, several issues need to be sorted out and the following questions have to be addressed before estimation of the costs: Firstly, what are the elements that should be considered for quantifying the logistics costs? Secondly, what approaches have been adopted by different researchers world-wide to estimate the logistics costs, in general, and whether the same can be replicated in the Indian context? Thirdly, what approaches have been adopted in different studies for estimating the logistics costs India? It must be noted that the metrics of logistics costs in the literature differ across studies. By and large, the following three main metrics are used to assess the logistics costs: (a) percentage of Gross Domestic Product (GDP), (b) percentage of sales or turnover, and (c) absolute costs. However, most of the studies report logistics costs as a percentage of GDP in order to facilitate comparability with results for different countries. The question, however, remains as to whether there is a difference between the logistics costs quoted as a percentage of the turnover versus as a percentage of GDP. In general, these are not wholly equivalent. The difference between them may relate, for example, to inclusion of the value of export, which may especially have an effect on questionnaire-based results. GDP excludes the exportation, but it can be assumed that companies include it as a percentage of their turnovers when assessing their logistics costs. The issue is not as relevant in statistics-based and case study approaches, which are based on mathematical modelling and may utilise national statistics data (e.g. GDP). However, the general practice is to report logistics cost as a percentage of GDP in the literature. The plan of the rest of the chapter is as follows. Section 2 provides a brief review of the literature on estimation of the logistics costs and the approaches adopted by the different researchers. The lacunae have also been discussed in this section. The emphasis of the literature survey is primarily on the studies that address the logistics costs for the nation as this is the focal theme of this report. Section 3 describes the methodology adopted by the NCAER team to estimate the logistics costs for India. Finally, Section 4 presents the results.

5.2 Review of Literature: Estimating Logistics Cost At the outset, it is important to understand the elements that determine the logistics costs. According to Sopple (2007), the functions of the logistics process are as follows: order processing, inventory management, warehousing, transportation, material handling and storage, logistical packaging, and information. However, the weights of different factors in the overall cost vary significantly across countries and industries, and thus, the efficient use of resources and cutting down of logistics costs depends on logistics management. Christopher (2005) defines it as “the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfillment of orders.”

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There are undoubtedly various complexities in assessing the logistics costs. The primary reason is that logistics involve many different and complex processes, and obtaining information about every stage of the process from transportation to depreciation of capital is a great challenge (Farahani et al., 2009). At the micro level, both the strategic and operational choices made by the firms may lead to lack of information about the logistics costs (Pohlen et al., 2009). Also, nowadays, an increasing number of companies are outsourcing their logistics operations. According to Langley (2008), around 81 per cent of the international transportation and warehousing operations are outsourced. It becomes even more cumbersome to estimate the logistics costs if the companies outsource logistics bundled with other services because then it becomes difficult to separate out the costs of the individual functions (Rantasila, 2012). Another highly subtle issue in aggregating and accurately measuring the logistics costs at the macro level emerges from the fact that there is no common definition of supply chain management for companies to adhere to, and consequently, when these companies calculate the logistics costs, their methods vary across firms and industries (Pohlen et al., 2009). Another important issue in the macro-level estimation of logistics costs is the unavailability of sufficient data, and the reliability of the available data.

Lambert, et al. (2006), early researchers in this area, introduced the concept of total cost. This concept implies that if the management of any company focuses only on some particular cost group, then that may increase the other costs, thereby having an adverse impact on the total costs. Lambert et al. (2006) divide logistics costs into six groups. Figure 1 describes the inter-connection between these costs. The first group is ‘customer service’, which looks at the trade-off between the cost of lost sales and returned goods. This may constitute a large part of the total logistics costs, but is not always necessarily included as part of the logistics costs. The second group constitutes the transportation cost, which is unarguably one of the most important and largest part of the total logistics costs. The authors further divide this group into product- related and market-related factors. The product-related factors are the ease of handling the products, and volume of the products to be shipped, whereas the market-related factors comprise the available transport, and location of markets, among other things. The third and fourth groups consist of warehousing and inventory-carrying costs. The warehousing costs include the costs of storage, and of setting up and locating warehouses. Inventory-carrying costs include capital-opportunity costs, inventory service costs, and other risk costs. The fifth cost group include costs emanating from production and procurement, which vary with the order size and frequency. The last group includes the order processing and information systems costs.

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Figure 5.1: Interconnections between the Six Cost Groups (Lambert, 2006)

Place/customer service level ¥ Customer service

¥ Parts, service support

Inventory carrying costs Transportation costs ¥ Traffic and ¥ Inventory management transportation ¥ Packaging

Low quality costs Warehousing costs ¥ Material Handling ¥ Warehousing, storage

¥ Procurement ¥ Plant, warehouse site selection

Inventory carrying costs ¥ Order processing ¥ Logistic communication

Source: Adapted from Lambert et al (2006).

Unlike Lambert et al. (2006), Sopple (2007) looks at only a three-level breakdown of the logistics costs, namely, transportation, storage, and inventory. In a similar vein, Rushton, Croucher, and Baker (2006), in the Handbook of Logistics and Distribution Management, divide the cost components into four groups: transportation, inventory carrying, storage and warehousing costs, and the administration costs. On the other hand, Ayers (2006) considers a fifth component, comprising purchased material and associated labour as a separate group.

In a marked departure, Kivinen and Lukka (2002) examined the services required in a logistics management system through stakeholder interaction. Based on these interactions, they created a logistics cost classification consisting of the following 12 processes: warehousing, manufacturing, transportation, customer service, procurement, quality control, reverse logistics, recycling logistics, logistics technology, packaging, consultancy, and value-added services.

Table 5.1 provides a summary of the list of logistics cost components based on the literature review of some of the important publications, including questionnaire-based surveys, statistics-based studies, and scientific articles. Table 1 shows that the five most common logistics cost components are: transportation costs, warehousing costs, inventory carrying costs, administration costs, and packaging costs. The complete references of these studies encompassing scientific articles, questionnaire-based surveys, and statistics-based studies have been given in Tables A1-A2 in the Appendix.

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Table 5.1: Count of Logistic cost components in the literature Literature and Questionnaire- based Statistics- based Total Logistics Cost Component Scientific Articles Surveys Studies Count Transportation costs 15 12 11 38 Warehousing costs 12 12 7 31 Inventory carrying costs 11 7 9 27 Administration costs 5 11 10 26 Packaging costs 6 3 3 12 Other costs 1 5 1 7 Customer service 3 2 1 6 Order processing/information 4 2 6 Insurance 2 2 1 5 Handling 1 3 4 Risk and damage 2 1 3 Tied capital costs 2 1 3 Communication 1 1 2 Customs 1 1 2 Indirect logistics costs 1 1 2 Associated labour 1 1 Capital costs of goods in 1 transit 1 Consultancy 1 1 Cost of damage during transit 1 1 Fixed costs 1 1 Logistics technology 1 1 Lot quantity 1 1 Manufacturing 1 1 Procurement 1 1 Purchased materials 1 1 Quality control 1 1 Recycling logistics 1 1 Reverse logistics 1 1 Stock-out costs 1 1 Trade costs 1 1 Value-added services 1 1 Cost of commodities space 1 movement 1 Design, restructure and option 1 cost 1 Forecasting 1 1 Permission losses 1 1 Procurement 1 1

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5.2.1 Approaches for Measuring Logistics Costs To recapitulate, logistics is considered to be the part of the supply chain process that deals with the transportation, warehousing, inventory-carrying, and administration and management of physical products/services between the point of production and the point of delivery to the final consumer. This excludes the cost of passenger transport and the cost of transport, storage, packaging, and handling of mail and luggage as well as the storage and transport tasks that need to be performed during the production process. By definition, such costs imply the direct financial cost of performing logistics tasks that will be reflected in national accounts, up to the point where the final consumer purchases the product. Moreover, logistics costs include the costs of imported and exported goods movement, and storage, among other things, from the point where the goods pass through a border control point. We now study the different methodologies that have been used in previous studies to examine and estimate the logistics costs at the macro level. At the global level, the World Bank has developed the ‘Logistics Performance Index (LPI)’, which ranks countries qualitatively on various logistics indicators. However, this indicator does not provide any quantitative estimate of the logistics costs incurred by any country. According to Rantasila (2012), most of the methods used to measure logistics costs at the micro level cannot be directly used to assess logistics costs at the macro level. The previous published studies have adapted different methods based on the reliability and availability of the data. Rantasila details the following three possible methodologies that can be availed of to undertake a macro level logistics cost study:

(1) Collecting empirical data directly from respondents using questionnaires (survey method);

(2) Estimating logistics costs using existing data from different statistical sources and/or creating a model based on data collated from primary/secondary sources. The modelling approach can be an econometric, analytic, or simulation type; and

(3) Employing case study methods.

As discussed above, we can classify research methodologies used in previous literature into three categories: survey-based studies, statistical studies, and case studies. Statistical studies use statistical models and data like national accounting statistics to derive the level of logistics costs. Survey-based studies, on the other hand, rely on the information collated from structured/semi-structured questionnaires, which provide the estimates of logistics costs from the perspective of key stakeholders of the industries. Typically, questionnaires are canvassed to key persons (chief operating officers) in industries with a view to solicit the logistics costs of their respective industries. These responses are then aggregated through a suitable weighing scheme to arrive at the logistics costs of a country as a whole.

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Another subtle difference between survey and statistical studies lies in the approach taken. Statistical studies usually approach the issue from the supply side, whereas survey-based studies approach it from the demand side of the supply chain (Rantasila, 2013). Case studies, on the other hand, typically address the issue at a micro level or for a specific industry.

It must be noted that the earliest attempt to measure the macro level logistics costs was made by Heskett et al way back in 1973. They classified logistics costs as a sum of four activities: transportation, inventory, warehousing, and order processing. They adopted a modelling approach for their estimation purpose which has undergone several refinements. Bowersox (1998) refined their previous model and introduced the Artificial Neural Network (ANN) model for logistics cost assessment. The model is based on a biological simulation of the nervous system, and uses five input variables: geographic region variables, economic variables, income level variables, transportation variables, and country size variables. These input variables enter the Neural Network Model, to provide the national level logistics cost as the output. Bowersox et al. (2005) presented the logistics cost as a percentage of GDP for 24 select countries. Even though the study did not provide individual cost components of the logistics costs, it still made an important contribution in estimating the global level logistics costs.

By and large, a variant of this model has been adopted by Armstrong & Associates Inc. to provide estimates of logistics costs of all the major and emerging economies of the world. While this is a commendable effort, the caveats need to be pointed out. The neural model is estimated on the basis of the observed data of input variables (economy, and infrastructure-related variables for countries, which are readily available from the World Bank database) and output variables (with logistics costs here being a percentage of GDP) of select developed countries. Typically, estimates of output variables (with logistics costs here being a percentage of GDP) of developed countries are available from alternative methods. So, the neural model is estimated for the control countries, which are basically the developed economies. Once the neural model is estimated for the control countries, the input variables for any country are incorporated in the model to estimate the logistics costs as a percentage of GDP for the corresponding country. But for developing economies like India, where transaction costs are quite high in terms of both expenses and time, and the quality of physical infrastructure is inefficient, the application of the neural model estimated from data from the developed economies to assess the logistics costs of India may provide erroneous results. Coming to the methodology (2) mentioned above where the estimates are based on primary/secondary data, the literature on logistics suggests two approaches to estimate the logistics costs: the top-down and bottom-up approaches. The top-down approach disaggregates data published in national accounts to a level that reflects transport, storage, and other components of the logistics costs, as defined earlier. This method of calculating logistics costs is referred to as the ‘disaggregated approach’. The bottom-up approach computes logistics costs by aggregating the detailed transport and warehousing data, and relating it to the specific products. This method is referred to as the ‘aggregated approach’. Most of the developed countries adopt the latter approach to estimate the logistics costs. This approach is more data-intensive. However, as the logistics sector is more organised in the developed countries, the respective industries collate these data for their own use and the governments of the respective countries also maintain such databases.

Due to the scarcity of data, developing countries use the former approach to arrive at the logistics costs. This needs to be supplemented with a survey for the following reasons:

� The compilation of national accounts statistics at a disaggregated level depends on various parametric estimates from survey data, which are not up-to-date. For this reason, surveys are undertaken to derive up-to-date estimates of various elements of the logistics costs.

357 357

� It may also be necessary to undertake a survey as some elements of logistics may not be available from national accounts statistics. This is particularly true of the following components: administration and the management cost of distribution.

Some countries such as South Africa adopt a hybrid approach, combining the top-down and bottom-up approaches, which has the following advantages over the other commonly applied methods:

a) The aggregated and disaggregated approaches are entirely independent in their methods of analysis and sourcing of data. This allows not only for logical checks but also for an assessment of the propensity to outsource logistics tasks. b) The aggregated approach builds up the logistics costs from their most detailed input elements. This is in contrast to the methods commonly used to extrapolate cost data based on sample surveys. In this case, the validity of data can be verified at the primary source before any aggregation takes place. c) The model focuses on research for the refinement of individual input elements. This would even make it possible to add more layers for a more detailed analysis of a particular industry.

5.2.2 Estimates of Logistics Costs: Indian Perceptive In the context of India, no attempt has been made to estimate the logistics costs by the official statistical organisation. However, private bodies have computed the logistics costs, which are widely quoted to stress that India is a nation that incurs high logistics costs. Notable among these computations are the estimates provided in the Armstrong & Associates Report (2017). As per this report, for India, the logistics costs for the year 2016 were as follows: US $108 billion for highway-based trucking transportation, US $63 billion for inventory carrying costs, and US $24 billion for warehousing costs. Overall, the logistics costs amounted to 13 per cent of GDP for the year 2016. This estimate is based on their neural model, the weaknesses of which have already been pointed out earlier. Besides this, AVALON consulting firm also undertook an exercise to estimate the logistics costs incurred in India for the Confederation of Indian Industries (CII). They adopted a questionnaire-based approach to estimate the logistics costs for India. According to their report, the logistics costs for India were estimated to be 10.9 per cent of the Gross Value Added (GVA) in 2015. Basically, the stakeholders in major industries were asked to provide their respective assessments of the logistics costs as a percentage of the GVA. These were then weighed to arrive at an estimate of the logistics costs for India while taking into account the sectoral contribution to the economy.

5.3 Methodological Framework for estimating India’s Logistics Cost As noted earlier, there is no standard international definition of logistics costs. Typically, logistics activities imply the chain that facilitates the movement of goods from supply to demand as well as intermediate transfers. The following are broadly considered to be the core elements of logistics costs: handling and loading/unloading costs, packaging costs, insurance costs, transportation costs, and management and administration costs. However after examining the literature on the measurement of logistics costs, we have included a few additional components of logistics costs for measuring the total logistics costs of India, as shown in Table 5.2. It may be noted that ‘speed money’ (that is, bribes) has been incorporated in the logistics costs as this is deeply embedded in the way India’s transportation system functions.

358 358

Table 5.2: Components of Logistics Costs Transportation Other Elements of Logistics Costs

Material Handling Warehousing Administration Logistics Equipment Documentation Insurance IT—Hardware & Software Cost Logistics System Management Marketing Packaging Speed Money Software and Maintenance

Source: Authors’ compilation.

India’s National Accounts Statistics (NAS) published by the Central Statistical Organisation (CSO), Government of India, provide the national (macroeconomic) estimates of GDP, as well as cost estimates for the balance of payments, national production, input costs, consumption, investment, and other fundamental attributes of the national economy. The cost estimates are more explicitly depicted in the supply and use table (SUT) published by the CSO, which are also consistent with the national accounts statistics. Nonetheless, the logistics cost estimates cannot be directly estimated from the SUT as (a) the unit of analysis in the SUT or NAS is an establishment, and (b) logistics operations transcend multiple industries/sectors, and though their costs are embedded in the SUT/NAS, these are not apparent as they are not shown in the SUT/NAS as an independent entity.

The SUT has been the fulcrum of our estimation of logistics costs as it is consistent with the GDP estimates derived from NAS. The SUT provides the statistical framework for the three major approaches used to measure GDP, namely, production, income, and expenditure, thereby enabling the balanced estimates of GDP at both current prices and constant prices.

The SUT depicts, in matrices form, where the products come from and how they are used. The main function of the SUT is to act as an integration framework for balancing the national accounts, by recording how the supplies of different kinds of goods and services originate from domestic industries and imports, and how these supplies are allocated between various intermediate or final uses, including exports.

The SUTs of India are product X industry matrices but their entries are different. In the Supply Table, each column presents the values of the products (kept in rows) produced by an industry or the products supplied by industries to the economy while distinguishing the domestic supply from foreign supply (imports). These are at basic prices. The total supply of each product at the purchaser’s price has been obtained by adding product taxes (inclusive of tariff) less subsidies on products and trade and transport margins.

A Use Table, on the other hand, indicates the use of the product (which may be a good or a service, and kept in rows) by the type of use (kept in columns), that is, for intermediate consumption, gross capital formation, or exports. All these figures are at purchaser’s prices.

359 359

In order to balance the two tables and finally use them for analysis, it is essential to bring both the tables to the same product or industry valuation prices.

The latest SUT for the year 2012-13 prepared by CSO is the starting point of our computation exercise. These tables have been compiled at a level of disaggregation of 140 products and 66 industries. We attempted to aggregate the characteristics of 140 products to 64 industries (see Appendix Table A3).85 The criteria for any product to become the characteristic product(s) of an industry, or for any industry to become a producer of single or more products, are specialisation and coverage ratios based on the supply matrix. These specialisation and coverage ratios are the share matrices depicted in the column totals and row totals, respectively. This provides a mapping between 140 products and 64 industries.

The square SUT of 64x64 size is used for further converting into the uniform Input–Output (IO) table of 64x64 sectors by using the industry technology and standard methodology suggested in the Handbook of Input–Output published by the United Nations, 1999 (see the flow chart in Figure 5.2). The Input–Output table of a country provides the cost structure of each sector of the economy by the principal inputs (goods and services), value added (returns to factors of production), and indirect taxes paid to the Government. Since transportation is a principal input in the production process, the IO table typically provides estimates of such costs. However, other cost elements are not usually shown as separate entries in an IO table, but are rather subsumed under the service sector. Our purpose is to cull out these costs using supplementary information from survey data. The next step involved in the construction of an IO table is the preparation of a Trade and Transport Margin (TTM) matrix. There is need to distinguish between the TTM matrices for both the margin and non-margin manufacturing sectors. The services sector has no margin in the TTM matrix. The following sectors are the margin sectors: railway transport, land transport, air transport, water transport, and supporting and auxiliary transport activities. Each of these margin sectors comprises both passenger and freight segment. During construction of the TTM matrix, the values for the non-margin sectors in the TTM matrix are apportioned directly by using the row shares of total use at purchaser’s prices from the TTM vector as provided in the supply table. However, the entries for the margin sectors are not direct and are based on the sum of values of all the non-margin entries in a column.

85 Two of the industries, namely, i) manufacture of computer peripheral equipments, and ii) repair and installation of machinery and equipment have been subsumed into the manufacture of electronic components, consumer electronics, magnetic and optical media industry, as they do not have corresponding separate product mappings (see MoSPI, 2016).

360 360

Figure 5.2: Flow Chart of the Construction Procedure

Supply and use table of India, 2012-13

Distinguishing products characteristic to an industry

Aggregating supply and use table to 64*64 product and industries

Construction of TTM (Trade and Transport Margin) matrix from trade and transport margin vector given in our aggregated 64 sector Supply and Use Table

Netting out trade and transport margin matrix from use table = use table at producer price

Construction of net product tax including tariff matrix based on use table at producer price and vector of product tax less subsidy plus tariff

Construction of Input – output transaction table (IOTT) at basic price consistent with macro aggregates

Construction of aggregated 17x17 product x product matrix at basic prices consistent with macro aggregates Scaled up IOTT to 2017-18 consistent with Macro Aggregates

Scaled up IOTT to 2017-18 consistent with macro aggregates Scaled up IOTT to 2017-18 consistent with Macro Aggregates

Separating out air, road, rail, water and freight transportation services in the constructed IO transaction table using supplementary information

IOTT listing out sectors – wise freight transportation cost at basic price consistent with GDP number

Sector – wise norm derived from field surveys for other logistics cost elements

Estimation of total logistics cost

361 361 (Contd)

The sum total of the column value is further apportioned by using a share of the individual row totals of a margin commodity vis-à-vis the row sums of all the margin commodities together. The cell entries for the margin sectors in the TTMs are placed as negative values. The TTM matrix has cell entries for both intermediate and final use for the margin and non-margin sectors. We netted out the TTM matrix from the use table and further arrived at the use table at producer prices. Similarly, we constructed the matrix for net product tax including tariffs by similarly allocating the net product tax including tariffs column. Here, it is worth noting that the computation of the net product matrix is straightforward unlike the TTM matrix. We have netted out the net product tax matrix from the use table at producer prices, which further resulted in the use table by product and industry dimensions. The next step is to bring the use table at the product x product dimension to ensure that both the column and row sums of this would be the same. The methodology for transforming the product x industry matrix into a uniform product x product matrix is described in UN (1968) as well as in CSO (2012). We have used the industry technology assumption for this transformation. This resulted in a 64x64 IO transaction table, 2012–13, at basic prices.

The 64x64 IO transaction table is further aggregated to 17x17 IO transaction table. The detailed mapping is given in Table 5.3.

Table 5.3: Concordance Between SUT 64 products 17 Products

Aggregation of SUT 64 Sl. No. Products Products 1 Agriculture and Allied 1-4 2 Mining and Quarrying 5-10 3 Food, Beverage and Tobacco products 11-16 4 Textiles, Wearing Apparels and Leather Products 17-19 5 Ferrous & Non Ferrous Metal, and Metal Products 20-22 Consumer Electronics, Electronic Components, 6 including Computer Peripherals 23-24 7 Machinery and Equipment 26-28 Chemical Rubber, Plastic Products including Petroleum 8 Products 29-30,32 9 Drugs and Medicines 31 10 Cement 0.28137* 33 11 Other Non-Metallic Minerals Products 0.71863* 33 12 Wood & Wood Products 34 13 Other Manufacturing 25,35-38 14 Construction and Construction services 39 15 Electricity, Gas and Water Supply 40-42 16 Freight Transport Services 0.7245*(43-47) 17 Other Services 0.2755*(43-47), 48--64 Note: See Appendix Table A3 for description of SUT 64 industries/products. Source: Authors’ compilation.

362 362 (Contd.)

The 17 sector uniform IO table is further scaled up to the year 2017-18 using latest national account statistics. The consistency of IO table hence prepared for 2017-18 is further checked for both income and expenditure side. The freight transport services which comprises of 72.45 per cent of total (passenger and freight) transport services are used for constructing a sector for freight transport services86. The remaining passenger services are clubbed into other services. Finally, the share of total intermediate use by freight transport services as GVA basic prices as well as GVA market prices is used to enumerate the freight cost.

The updated input-output transaction table has been reported for 17 products. (See Appendix Table A4 for IOTT table). The aggregated constructed IO transaction table provides freight transportation for all sectors of the economy.

As mentioned earlier, we have computed sector-wise norm of other logistic cost elements given in Table 2 relative to transportation cost from survey data87. These norms have been applied to cull out other logistics cost element from each sector’s service input cost. The other logistic cost element are principally services activities which any industry/sector needs for production activities. So, they are accounted in IO transaction table under service input cost element. Summing up sector-wise logistics cost (freight transportation cost, freight material handling cost, and other logistic cost element) across sectors provides India’s total logistics costs.

86This is derived from latest Tourism Satellite Account of India, constructed by NCAER. 87These norms are reported in Appendix Table A5 363 363

5.4 Results

Table 5.4 shows our estimates of the logistics costs for the year 2017-18. As this table shows, the total logistics costs amount to 8.87 per cent of GVA at basic prices. The table also shows variations across sectors depending on the nature of the products (low value or high products, bulk or non-bulk commodities). It is generally observed that low value items or bulk items have higher logistics costs.

It must be noted the logistics cost displayed above is in no way an indicator of the contribution of the logistics sector to the economy. The number estimated above only reflects the logistics cost to the economy in the year 2017-18.

Table 5,4: Logistics Costs of India, 2017-18

Sl. Sectors Transport Total GVA at Basic Logistics No. Cost Logistics Price Costs as Per Costs cent of GVA

Rs Crores Rs Crores Rs Crores Per cent 1. Agriculture and Allied 265765 528615 2447239 21.60 2. Mining and Quarrying 35113 42136 377628 11.16 3. Food, Beverage and Tobacco products 28677 56890 462892 12.29 4. Textiles, Wearing Apparels and Leather 14879 29487 372665 7.91 Products 5. Ferrous & Non Ferrous Metal, and Metal 39121 58681 380694 15.41 Products 6. Consumer electronics, Electronic 1010 2040 48644 4.19 Components, incl. Computer etc. 7. Machinery and Equipment 49643 97109 540177 17.98

8. Chemical Rubber, Plastic Product incl. 30944 56490 662244 8.53 Petroleum Products 9. Drugs and Medicines 1489 2951 98679 2.99

10 Cement 2966 5873 45295 12.97 11. Other Non-Metallic Minerals Products 5487 10873 115686 9.40 12. Wood & Wood Products 1072 2112 37636 5.61 13. Other Manufacturing 6110 12446 223606 5.57 14. Construction 82304 123456 1530234 8.07 15. Electricity, Gas and Water Supply 5947 8920 445792 2.00 16. Other services 191773 287659 7156601 4.02 Aggregate 762300 1325738 14945714 8.87 Logistics Costs as Per cent of GDP at market price (Per cent) : 8.10 Source: Authors’ estimates.

364 364

Appendix Table A1: Cost Components in Literature and Scientific Articles Combined Components

Study → 991

(Year of Publication) Cost Components ↓ Bidgoli 2010 Bidgoli 2007 Sopple 2006 Ayers Lambert et al.2006 al. et Rushton 2006 and Kivinen 2004 Lakka Coyle et al. 1998 Dimitrov 1 Banomyong Creazza 2010 2009 Choi 2007 Jensen 2006 Dianwei 2005 Bowersox Zeng 2003 Transportation √ √ √ √ √ √ √ √ √ √ √ √ √ Inventory Carrying √ √ √ √ √ √ √ √ √ √ √ Warehousing √ √ √ √ √ √ √ √ √ √ √ Packaging √ √ √ √ √ √ Administration √ √ √ √ √ Customer Service √ √ √ Risk and Damage Insurance Tied Capital Order √ √ √ √ Processing/Information Associated Labour √ Capital Costs of Goods in Transit √

Communication √ Consultancy √ Damage during transit √

Fixed Costs √ Logistics Technology √ Lot Quantity √ Manufacturing √ Procurement √ Purchased Materials √ Quality Control √ Recycling Logistics √ Reverse Logistics √ Stock-out √ Trade √ Value-added Services √ Cost of Commodities Space √ Movement Customs √ Design, Restructure and Option √

Forecasting √ Handling √ Indirect Logistics √ Others √ Permission Losses √ Procurement √ Substance Consumption √ Returned Goods √ Wages, Bonus, Allowance √ Source: Measuring Logistics Costs, Karri Rantasila (2013).

365 365

Study→ (Year of Publication)

Cost Components Africa (2011) Africa

Klaus (2010) Klaus CFLP (2011) -

↓ KPMG (2008) Canada (2008) Canada CSCMP (2011) Thailand (2009) Thailand Morocco (2006) S Switzerland (2011) Switzerland Netherlands (2009) Netherlands Korea (KOTIKorea ,2010) Vinnova (Svensk,2005) Vinnova COUNT Scope (Multi/Single S S S S S S S M S M S S

country)

Transportation √ √ √ √ √ √ √ √ √ √ √ 11 Administration √ √ √ √ √ √ √ √ √ √ Inventory-carrying √ √ √ √ √ √ √ √ √ Warehousing √ √ √ √ √ √ √ Cargo Handling √ √ √ Transport Pack. √ √ √ Communication √ Customer Service √ 1 Documentation √ Equipment √ Information √ Insurance √ 1 Internal Logistics Costs √ Internal Services √ Obsolescence √ Outsourced Logistics Costs √ 1 Order Processing √ Other Logistics √ Plan/Management √ R&D √ 1 Shipper-related Costs √

366 366

Table A2: Cost Components in Questionnaire-based Studies

Study→

(Year of Publication)

Cost Components Baltic Finland Finland Norway Norway COUNT Colombia SCI (2011) ↓ (Ray,2008) ELA (2009) PwC) (2008 (Hovi, 2010) (Hovi, (Ojala,2007) Japan (2007) Japan Davis (2010) Davis GMA (2010) Aslog (2009) Aslog

TF 2003 (ret.) TF 2003 (ind.) (Hansen,2008) Straube (2008) Straube 2010) (Solakiv, Scope S M S M S M S S M S S S M S S (Multi/Single

Country) Cost Components Transportation √ √ √ √ √ √ √ √ √ √ √ √ 12 Warehousing √ √ √ √ √ √ √ √ √ √ √ √ 12 Administration √ √ √ √ √ √ √ √ √ √ √ 11 Inventory Carrying √ √ √ √ √ √ √ 7 Other Logistics √ √ √ √ √ 5 Transport and packaging √ √ √ 3 Insurance √ √ 2 Obsolescence √ √ 2 Customer Service/Order √ √ 2 Entry Appraisal √ 1 Cost of Capital √ 1 Customs √ 1 Damages √ 1 Depreciation √ 1 Delivery √ 1 Distribution centres √ 1 Management/Overheads √ 1 Other Indirect Logistics √ 1 Costs Shipper-related Costs √ 1 Source: Measuring Logistics Costs, Karri Rantasila (2013).

367 367

Table A3: Concordance Map between 64 industries and 140 products S. No. Industry Products 1. Agriculture Paddy Wheat Coarse cereals Gram Arhar Other pulses Groundnut Rapeseed and mustard Other oil seeds kapas jute, hemp and mesta Sugarcane Coconut Tobacco Tea Coffee Rubber Fruits Vegetables Other food crops 2. Livestock Milk Wool Egg and poultry Other livestock products 3. Forestry and Logging Industry Wood Firewood Other forestry products 4. Fishing & Aquaculture Inland Fish Marine Fish 5. Coal and Lignite Coal and Lignite 6. Crude petroleum Crude petroleum 7. Natural Gas Natural Gas 8 Iron Ores Iron Ore 9. Nonferrous metal ores Manganese ore Bauxite Copper ore Other Metallic minerals 10. Other Mining Limestone Mica Other non-metallic minerals 11. Production, processing and preservation of meat, Processed poultry meat & poultry meat products fish, fruit, vegetables, oils and fats Processed other meat & meat products Processed fish & fish products Processed fruits & Processed Vegetables Edible Oils and Fats 12. Manufacture of dairy products Dairy products 13. Manufacture of grain mill products, etc. and Grain Mill products, starch and starch products animal feeds 14. Manufacture of other food products Sugar Bread & Bakery products Miscellaneous food products, Tea Processed, Coffee Processed 15. Manufacture of beverages Alcoholic beverages Nonalcoholic beverages 16. Manufacture of tobacco products Tobacco Products 17. Manufacture of textiles + cotton ginning Cotton Yarn and Cotton Textiles Synthetic yarn and synthetic textiles Wool yarn and woolen textiles Silk yarn and silk textiles Carpet weaving Misc. textile products 18. Manufacture of wearing apparel, except custom Readymade garments tailoring 19. Manufacture of leather and related products Leather footwear

368 368

Table A3: Concordance Map between 64 industries and 140 products S. No. Industry Products Leather and leather products except footwear 20. Manufacture of Basic Iron and Steel + Casting of Iron and steel Ferro alloys iron and steel Iron and steel casting and forging Iron and steel foundries 21. Manufacture of basic precious and non-ferrous Nonferrous basic metals (including alloys) metals + Casting of non-ferrous metals 22. Manufacture of fabricated metal products, except Hand Tools, hardware machinery and equipment Miscellaneous metal products 23. Manufacture of electronic component, consumer Electronic equipment including T.V electronics, magnetic and optical media Manufacture of computer and peripheral Manufactures of Computer and Peripheral equipment equipment Repair and installation of machinery and equipment 24. Manufacture of communication equipment Communication equipment 25. Manufacture of optical and electronics products Medical precision, optical instrument, Watches & Clocks n.e.c 26. Manufacture of Electrical equipment Electrical industrial machinery Electrical cables, wires Batteries, Electrical Appliances 27. Manufacture of machinery and equipment n.e.c Tractors and other agricultural implements Industrial machinery for food and textile industry Industrial machinery (except food and textile) Machine tools Other non-electrical machinery Other electrical machinery 28. Manufacture of Transport Ships and boats Rail equipment Motor vehicles Motor cycles and scooters Bicycles, cycle-rickshaw Aircrafts & Spacecraft Other transport equipment 29. Manufacture of coke and refined petroleum Petroleum products products Coal tar products 30. Manufacture of chemical and chemical products Inorganic chemicals except pharmaceuticals, medicinal and botanical Organic chemicals products Paints, varnishes and lacquers, Fertilizers, Pesticides Soaps, cosmetics and glycerin Synthetic fibres, resin Other chemicals and chemical products 31. Manufacture of pharmaceutical; medicinal Drugs and medicine chemicals and botanical products 32. Manufacture of rubber & plastic products Rubber products Plastic products 33. Manufacture of other non-metallic mineral Cement products Nonmetallic mineral products 34. Mfg. of wood and products of wood and cork, Wood and wood products except furniture except furniture; manufacture of articles of straw and plaiting material 35. Manufacture of paper and paper products Paper, Paper products and newsprint 36. Printing and reproduction of recorded media Publishing, printing and allied activities except publishing 37. Manufacture of furniture Furniture & Fixtures 38. Other manufacturing Gems & jewellary Miscellaneous manufacturing 39. Construction Construction and construction services 40. Electricity Electricity 41. Gas Gas 42. Water supply Water Supply 43. Railway Transport Railway Transport 44. Land transport Land transport 45. Water Transport Water Transport

369 369

Table A3: Concordance Map between 64 industries and 140 products S. No. Industry Products 46. Air transport Air transport 47. Supportive & Auxiliary transport activities Supportive and Auxiliary transport activities 48. Storage & warehousing Storage and warehousing 49. Communication services Communication services 50. Trade Trade, Repair & Maintenance of Motor Vehicle 51. Hotels & Restaurant Hotels & Restaurant 52. Financial services Financial services 53. Insurance services Insurance services 54. Ownership of dwellings Ownership of dwellings 55. Education & Research Research & Development Services Education services 56. Medical and Health Human health and social care services 57. Legal services Legal services 58. Computer related services Computer related services 59. Other Business services Other Business services 60. Real estate activities Real estate services 61. Renting of machinery and equipment Renting of machinery & equipment 62. Community, social & personal services Community, social and personal services 63. Other services Recreation, entertainment and radio & TV broadcasting and other services 64. Public administration & defense Public administration and defense

Note:The original 66 industries in SUT 2012-13 are clubbed into 64 as two industries (Sl. 24, and 40) are clubbed into 23 Source: The original industry and production description is provided in MoSPI (2016).

370 370 985 897 1935 8228 1972 6456 2516 6042 37184 11344 23976 11679 13862 30944

972948 428828 139673 112052 662244 8 1699471 2473767 Chemical Rubber, Plastic Product incl. Petroleum Products

23 311 1499 4389 2178 5562 1695 1714

3 13032 20897 62344 49643 77859 79800 7 301677 101906 103397 778129 540177 1398106 Machinery and Equipment

0 1 38 117 846 677 123 794

4134 7386 8019 1729 5577 6925 1010 4827 5741 continued be 12936 55138 48644

109524 6 Consumer electronics, Electronic Compone nts incl. Computer peripheral

1 94 94 212 596

2598 2331 5953 6806 5 13759 74360 27945 35011 39121 84668 58539 169755 272861 736164 380694 1175396 Ferrous &Non Ferrous Metal, and Metal Products 16 14 36 71 573 502

2224 1207 1062 1679

13400 66428 10734 14879 61849 18441 4 129948 103740 408362 372665 799468 Textiles, Wearing Apparels and Leather Products 51 19 48 214 254 184 241 537

7476 5141 8936 1479 1148

25348 28677 30757 - 3 625859 113357 818969 462892 1251104 Food, Food, Beverage Tobacco and products

371

0 0 0 0 0 402 1278 5821 1692 3454 5284 3426 5113

11323 28227 3 11403 3 34333 17149 2 171757 377628 566534 Mining &Mining Quarrying

0 0 18, Rs18, crores … to

- 223 948 306 947 1022 3250 1108 3749 7942

27994 50447 10838 1 151006 265765 156657 682200 194912 - 2447239 2934526 Agriculture and Allied

Metallic Minerals Products -

Product X Product Product Allied and Agriculture &Mining Quarrying products Tobacco and Beverage Food, Wearing Apparels andTextiles, Leather Products Metal and & Metal, NonFerrous Ferrous Products Components, Electronic Consumer electronics, incl. Computer peripheral Equipment and Machinery incl. Product Chemical Rubber, Plastic Products Petroleum Medicines Drugs and Cement NonOther Wood & Wood Products Manufacturing Other Construction Gas and Water Supply Electricity, Freight Transport (TPT) Services Other Services Total input Use Net Prod Tax GVA GVO

1 2 3 4 5 6 7 8 9

10 11 12 13 14 15 16 17

Table A4: Input Output Transaction Table 2017 Basic at Prices, Sl. No.

371

17 985 897 1935 8228 1972 6456 2516 6042 Other 37184 11344 23976 11679 13862 30944 972948 428828 139673 112052 662244 Services 1699471 2473767

3 562 16 23 31 1 1499 4389 2178 5 1695 31714 13032 20897 62344 49643 77859 79800 Freight 301677 101906 103397 778129 540177 Services 1398106 Transport Transport

0 1 15 38 117 846 677 123 794 4134 7386 8019 1729 5577 6925 1010 4827 5741 12936 55138 48644 Supply 109524 Electricity, Gas and Water

n 1 14 94 94 212 596 2598 2331 5953 6806 13759 74360 27945 35011 39121 84668 58539 169755 272861 736164 380694 1175396 Constructio

g 13 16 14 36 71 573 502 2224 1207 1062 1679 Other 13400 66428 10734 14879 61849 18441 129948 103740 408362 372665 799468 Manufacturin

12 51 19 48 214 254 184 241 537 7476 5141 8936 1479 1148 30757 Wood 25348 28677 - 625859 113357 818969 462892 Wood & Products 1251104

0 0 0 0 0 11 402 1278 5821 1692 3454 5284 Non - Other 372 11323 28227 33426 11403 35113 34333 17149 171757 377628 566534 Metallic Products Minerals

0 0 10 223 948 306 947 1022 3250 1108 3749 7942 27994 50447 10838 194912 151006 265765 156657 682200 Ceme nt - 2447239 2934526 18, Rs18, crores …… be to continued -

etal, and Metal Products

Metallic Minerals Products -

mical Rubber, Plastic Product incl. Petroleum Products

Table A4: Input Output Transaction Table at Basic Prices, 2017 Product X Product Product Agriculture and Allied &Mining Quarrying products Tobacco and Beverage Food, Wearing Apparels and Products Leather Textiles, M & Non Ferrous Ferrous Computer incl. Components, Electronic electronics, Consumer peripheral Equipment and Machinery Che Medicines and Drugs Cement Non Other Wood & Wood Products Manufacturing Other Construction Electricity, Gas and Water Supply TPT Services Freight Other Services Total input Use Net Prod Tax GVA GVO

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Sl. No.

372

91747 70741 566534 799468 109524 181977 232237 577499 798529 741717 2934527 1251104 1175396 1398106 2473767 3005721 8358692 1459887 1417290

Total Use 4454 81279 78069 71959 11376 43505 20583

- 667461 276535 391452 813219 - 1777814 1133149 1193629 1063155 2710320 6621779 1066576 15296430 16363005

Final USE

0 0 7641 3319 8476 6623 8982 28558 42167 50323

872299 141258 130969 106696 630347 396215 739742 584902 3758518 3758518

Imports

4654 2087 5885 83210 35798 25152 73698 11887 82749 104709 164622 160164 205406 575906 351532 245 256 1077832 2965291 3210547 EXP

3478 5902 4332 8974 1980 11170 19160 30725 24897 46906 57203 19813 45116 113303 170061 530364 201636 218395 173279 CIS - - - -

0 0 0 0 0 0 0 577 8232 1134 8 353 11 29645

134290 494752 292615 281027 1286581 2543357 4834493 5115519 373 GFCF

1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1

72166 GFCE 1813446 1885613 18, Rs18, crores

0 0 584 4121 5178 1492 21846 37484 518975 274786 734851 150180 391452 447709 423011 PFCE 1703761 11 38973 4224424 5431391 10083123

ices

onics, Electronic Allied

Metallic Minerals -

Product X Product Product and Agriculture &Mining Quarrying Tobacco and Beverage Food, products Wearing Apparels andTextiles, Products Leather & Metal, NonFerrous Ferrous Products Metal and Consumer electr Computer incl. Components, peripheral Equipment and Machinery Product Chemical Rubber, Plastic incl. Petroleum Products Medicines Drugs and Cement NonOther Products Wood & Wood Products Manufacturing Other Construction Gas and Water Electricity, Supply TPT Serv Freight Other Services Total input Use Net Prod Tax GVA GVO

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 No.

Table A4: Input Output Transaction Table at Basic Prices, 2017 Source: Authors’ Compilations

373

Table A5: Sector-wise Multiplication Factor of other Logistics cost elements in relation to Transportation cost Sl. No. Sectors Factor

1 Agriculture and Allied 1.20 2 Mining and Quarrying 1.98 3 Food, Beverage and Tobacco products 1.98 4 Textiles, Wearing Apparels and Leather Products 1.50 5 Ferrous & Non Ferrous Metal, and Metal Products 2.02 6 Consumer electronics, Electronic Components, incl. Computer etc. 1.96 7 Machinery and Equipment 1.83 8 Chemical Rubber, Plastic Product incl. Petroleum Products 1.98 9 Drugs and Medicines 1.98 10 Cement 1.98 11 Other Non-Metallic Minerals Products 1.97 12 Wood & Wood Product 2.04 13 Other Manufacturing 1.50 14 Construction 1.50 15 Electricity, Gas and Water Supply 1.50 16 Other services 1.20 Source: Authors’ estimates.

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