ebtc - 2013 - overview of the demand in the indian transport & logistics industry

7/26/2019 EBTC - 2013 - Overview of the Demand in the Indian Transport & Logistics Industry

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OVERVIEW OF THE DEMAND IN

THE INDIAN TRANSPORT AND

LOGISTICS INDUSTRY

www.ebtc.eu


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Contents

Introduction 1

1. Transport and Logistics Industry a Potential for Growth?! 3

2. Indias Roads 7

2.1 Development and growth potential 8

2.1.1 Growth of vehicles 8

2.1.2 Growth in Road Length 9

2.2 Current Situation and future Projects 10

2.2.1 National Highways 11

2.2.2 State Highways 12

2.2.3 Rural Roads 132.3 Challenges in Transport by Roads 14

2.4.1 Natural challenges 14

2.4.2 Industrial/economic barriers 15

2.4 Potentials in Developing the Road Sector 16

3. The railway network in India 19

3.1 Development of the Rail Sector 20

3.2 Actual Circumstances 21

3.3 Improvements and Potentials of the Railways 23

3.5 Challenges 24

4. Indian aviation traffic 27

4.1 Progress of Indian Airways 28

4.2 Current domestic and international traffic 30

4.3 Airlines in India 31

4.4 Potentials Creating Projects 33

Overview of the demand in

the Indian transport andlogistics industry


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EUROPEAN BUSINESS AND TECHNOLOGY CENTRE www.ebtc.eu

2 OVERVIEW OF THE DEMAND IN THE INDIAN TRANSPORT AND LOGISTICS INDUSTRY

5. Indian Waterways 37

5.1 Progress and Current Situation of Seaways and Ports 39

5.1.1 Major Ports 40

5.2 Potential for Growth and Projects 425.3 Challenges in the Maritime Sector 44

6. Urban Transport 47

6.1 Development of Urbanization 48

6.2 Current Situation of Urban Transport Systems 48

6.2.1 Travel demand 48

6.2.2 Potential for Urban Transportation 49

6.2.3 Challenges Facing Urban Transport 50

7. Logistics in Private Sector 537.1 Importance of Logistics (in India) 54

7.2 Potentials in Logistics and Technologies 54

7.3 Challenges in Logistics services 58

8. Summary of the main challenges and opportunities 61

8.1 Facing challenges 62

8.1.1 Natural Challenges 62

8.1.2 Industrial/Economic Challenges 64

8.2 Opportunities for India and EU 658.2.1 Opportunities for India 65

8.2.2 Industry Potential for EU Companies 66

Conclusion 69

References 70


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www.ebtc.eu EUROPEAN BUSINESS AND TECHNOLOGY CENTRE

3OVERVIEW OF THE DEMAND IN THE INDIAN TRANSPORT AND LOGISTICS INDUSTRY

List of Tables

Table 1: Share of the transport sector in the national economy 4

Table 2: Profile of the Road Sector 9Table 3: Logistics Costs in different Countries 10

Table 4: State Road Projects with Private Sector Participations 13

Table 5: Profile of the Railway Sector 21

Table 6: Load Capacities in different Countries 22

Table 7: Improvements in the operations of Indian Railways 22

Table 8: Airport Statistics in 2003-04 29

Table 9: Investment plans in Indias aviation sector 34

Table 10: Profile of Indian Ports and Waterways, since 1980 39Table 11: Cargo handled by Major Ports 42

Table 12: Major planned Investments in Jawaharlal Nehru Port 43

Table 13: Major planned Investments in Chennai Port 44

Table 14: Progress of the Share of Indian Metropolises 48

Table 15: Indo-EU Projects 67

List of Figures

Figure 1: Growth of registered Motor Vehicles in India, 1981-2003 8

Figure 2: National Highway Development Program 11

Figure 3: The Demand Growth of the Transport Sector

in India in the 1990s 20

Figure 4: Development of Aircraft Movement since 2001 28

Figure 5: Development of Passenger Traffic since 2001 29

Figure 6: Development of Cargo Traffic since 2001 30

Figure 7: Transport Profile Air India and Indian Airlines 33Figure 8: Traffic Growth in Indian ports 39

Figure 9: Road accidents in Indian metropolises in 2000 51

Figure 10: Gap analysis- Automobile Sector 57

Figure 11: Indian Electricity Production 2006 62


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AbstractIndia is one of the fastest growing economies in Asia and the entire world. Especially

in the transport and logistics industry sector, India shows superior growth rates

creating enhanced potential for foreign players. The objective of this summary

is to identify the market potential as well as the current demand in this sector

and to point out the investment perspectives, especially for European players.Certainly, climate change affects these prospects. Hence, this summary exposes

the current Indian situation and the main challenges contributing to this. But

despite these problems and also resulting from these, India offers a high potential

for investments as the current studies have already shown.


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India is one of the largest and fastest growing economies in the world.1

But it isalso a large underserved market.2

The following document is a summary of the demand in the Indian transport andlogistics sector. This has been prepared within the framework of the project PromotingEuropean Clean Technologies & Tackling Climate Change of the European Businessand Technology Centre (EBTC). Therefore, it will give an overview of the currentmarket situation in this industry and identify related challenges and gaps.3

The summary describes different sub-sectors of the transport and logisticsIndustry in India by size and share. Additionally, the current situation is analysedto demonstrate challenges faced by each sub-sector, which includes thedemonstration of market potential and the implicated perspectives.

Chapter 1 introduces the transport and logistics industry in India and shows itsshare in the overall economy

In chapter 2, the Indian road sector is discussed. It accounts for more than the halfof Indias passenger and freight traffic.

Chapter 3 displays the railway network of India which is one of the worlds largest

and most heavily used railway networks4.

In the 4thChapter the Indian aviation sector is described and analyzed. This fastgrowing sector with its open sky policy already attracts foreign players.

Chapter 5 explains the current situation of Indian waterways. Its main challenge isthe current infrastructure situation which cannot cope with its constantly increasingusage5.

The purpose of Chapter 6 is to demonstrate the urban transport system in India.

Urban transport is a vital factor in maintaining the productive efficiency of aneconomy and providing adequate mobility.6

The penultimate chapter shows in general, the situation of the Indian logistics sub-sectors, concerning private entrepreneurship development and its technologypenetration by displaying the need for logistics service providers, especially thirdparty logistics and technology transfer.

The 8thand final chapter summarizes all perceived challenges and potentials at aglance.

Introduction

1 see Parera (2009), p. 292 see Kilgore/Joseph/Metersky (2007), p. 363 see Parera (2009), p.12

4 see N.N. (2004), p. 145 see N.N. (2006a), p.2ff

6 see Padam/Singh (2004), S. 27


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1. Transport and Logistics

Industry a Potentialfor Growth?!


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The transport and logistics sector is a pivotal fundament that is important forthe development of a country. Since the 1990s, the transportation infrastructureof India has undergone a significant change. While in the 90s, the demand for

transport grew at an annual rate of 10%, in the last decade the demand in thetransport and logistics industry grew along with the accelerating Indian GDP7. This

growth increased the demand for practically all transport services.

As shown in Table 1, the share of the transport sector of the GDP increases andexceeds the proportion of investments in maintenance or improvement of thissector.8

Table 1: Share of the transport sector in the national economy

Year Contribution of TransportIn GDP (%)

Proportion of Transport inTotal Expenditures (%)

1999-2000 5.7 3.2

2000-2001 5.8 4,5

2001-2002 5.8 4.8

2002-2003 6.0 4.1

2003-2004 6.2 3.9

2004-2005 6.4 4.2

The annual cost spends for Logistics services are estimated at 14% of the GDP asthe share of the total value of goods. Normally, in emerging economies, these costsare about 6%-8% of the GDP. With this figure, Indian logistics costs are estimated tobe the highest in the world.9Therefore it is necessary to manage this sector moreprofessionally in order to reduce operational costs, improve customer services andsatisfaction levels and to become more competitive in global markets10.

Another fact is that transport and logistics services in India, consume a large

portion of energy, especially petroleum products. This share increases even morein India with the growth of economy and population11.

Urbanization and fast industrialization also increase this consumption because ofhigher demand in freight and passenger transport.12 The Indian urban populationgrows at an average rate of 3% a year and has increased significantly in the last 50years from 62 million in 1951 to 285 million in 2001.

Source: Central Statistics Office. Government of India. (2006). National Account Statistics/CMIE. (2004).Public

Finance. Economic Intelligence Service.

7 see Mitra (2006), p. 4f8 see Singru (2007) p. 19 see Vaidyanathan, (2007), p. 1310 see Mitra (2006), p. 111 see Ramanathan/Parikh (1999)12 see Ramanathan/Parikh (1999)


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13 see Ramanathan/Parikh (1999)14 see Ramaswamy/Srinivas (2009), p. 1

Additionally, higher income and government liberalisation measures led to a rapidgrowth in the number of automobiles, two- and three-wheelers, private and publicbuses and urban rail networks, as well as an increased demand for leisure-related

travel.13

But despite the growth of the population of India and its economy in general thetransport and logistics sector faces accompanying challenges with its infrastructure,environment pollution, increasing traffic density, policies and other inefficiencies inthe system.14


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2. Indias Roads


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2.1 Development and growth potential

For a country, particularly of Indias size, an efficient road network is mandatoryfor national integration, for socio-economic development and to sustain Indianeconomic growth. Therefore, in the last few decades the transport sectortransformed increasingly from rail-dominated to road-dominated. 15

Although transport services by rail also exist in the metropolises, they play no majorrole in Indian passenger mobility.16 Thus the roadways already hold an estimatedshare of 80% of the demand on land transport. Furthermore, the demand inpassenger transport by road, recorded an immense growth since the 1980s asit increased at a rate of 8% per year.17 This points to the growing presence andvariety of transport vehicles.

2.1.1 Growth of vehicles

The annual growth of motorized vehicles during the last decade was around 10%.Compared to 21.7 million vehicles in 1991 the number of vehicles nearly trebled in2001 with 55 million.18

Figure 1 gives an overview of the development of the motorized transport vehiclesfrom 1981 to 2003.

Figure 1: Growth of Registered Motor Vehicles in India, 1981-2003

Source: Singru (2007), Profile of The Indian Transport Sector, p. 1.

15 see Ramanathan/Parikh (1999), p. 1516 see Padam/Singh (2004), p. 39f17 see Singru (2007), p. 118 see Padam, Singh (2004), p.27

2

0

4

6

8

10

12

14

TwoWheelers

Cars,Jeeps and

Taxis

Buses GoodsVehicles

Others TotalVehicles

Average

AnnualGrowthRate(%)

1981-2003

Above all, the two-wheelers have a high growth rate which constitutes to over ahalf of total vehicles.19Furthermore, two-wheelers and cars account for example,

19 see Ramanathan/Parikh (1999), p.17


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more than 88% in Hyderabad and 91% in Kanpur. However, the share of buseswhen compared to the two-wheelers is insignificant. They constitute merely 0.5%in each of the cities mentioned above.20

Along with the vehicular growth, the freight transport also increased over theyears with an annual growth rate of about 12%.21 This can be attributed to therise in container traffic, as exports and imports increased 22-25% per year.22Additionally, while traditional, non-mechanized means of transport, e.g. elephantsand camels, are still common, an increasing number of vehicles, especially trucks,lead to increasing congestion.23

2.1.2 Growth in Road Length

At the beginning of the 90s the road length in India was about 2,041,000 km whichgrew at an annual rate of approximately 3% in the following ten years. Comparedto this growth rate, the number of transport vehicles grew at approximately 15%annually, indicating an increase in road usage, compared with the growth of roadlength which developed proportionately low.

Besides, national highways which accounted for about 40% of the road traffic,formed only a marginal, 1-2% of the total road length. Additional capacities werehardly added, indicating a growth rate of merely half a percent in the NationalHighways during the nineties. Due to the high growth in number of vehiclesand vehicle miles travelled and the slow growth in infrastructure, the capacitieswere almost saturated and caused the need for large investments in the Indianinfrastructure.24

A profile of the road sector is given in Table 2 showing the development of thetotal network and national highways and the marginal investments in each of thesesectors.

Table 2: Profile of the Road Sector

Source: Singru (2007), Profile of The Indian Transport Sector, p. 3

Parameter Unit 1980-81 1990-1991 1997-98 1999-2000Total network 000 km 1485 2350 2540 2695

National highways 000 km 32 33.7 38.52 52.01

20 see Padam/Singh (2004), p. 2721 see Singru (2007), p. 122 see Vaidyanathan, (2007), p. 1323 see N.N. (2004), p. 13f24 see Ramanathan/Parikh (1999), p. 17


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2.2 Current Situation and future Projects

The extensive road network in India consists of 3,3 million km and is the secondlargest road network in the world. About 61% of the freight and 85% of thepassenger traffic is carried by road. The annual growth of cargo traffic is 15-18%and that of passenger traffic is 12-15%.25 However, the concept of domestic cargocontainer movement is still in its infancy in India.26

Regarding the modes of transports, also in present there is a mixture ofmodern and traditional means. While in urban transit mostly motor vehicles likeautomobiles, minibuses, trucks and two- or three-wheelers are dominating, in thelandside transportation by beasts of burden like bullocks, camels and elephantsstill exist.27

In India, the central and state governments are responsible for the transportsystems.The central government has amongst others the responsibility for national highways,railways, as well as national inland waterways and civil aviation. Thereby each mode iscontrolled by a mode-specific ministry in the central government. The development,management and maintenance of the national highways is in responsibility of theNational Highways Authority of India (NHAI) whereas the road development of thestates is managed through the several roads and buildings departments or publicworks departments of the regions. In terms of village roads, the supply is held by

local bodies (panchayat).

In general, the infrastructure and network of the Indian roads are not in goodcondition. About 1.4 million km of total route length are surfaced and more than 1million km are covered with gravel, crushed stone or earth.28 There is no ability tomeet the high demand and density of the daily traffic. Further, the fuel prices arerising, axel loads are more and more reduced and the freight costs for road (andrail) are very high compared to other countries, see Table 3 below.

Table 3: Road transport Costs in different Countries

Source: Vaidyanathan, (2007), Current Status of Logistics in India, p. 13

Country Costs in cents/km

France 5.5

Japan 3.7

Canada 2.0

India 7.0

25 http://www.infrastructure.gov.in/highways.htm26 Vaidyanathan, (2007), Current Status of Logistics in India, S. 1327 see N.N. (2004), p. 1328 see N.N. (2004), p. 13


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The Government of India already planned some improvements to change thissituation for the better with aid of public and also private sector funding.

Revenues from the road sector are token from different sources, fuel taxes, vehiclestaxes and direct taxes on freight and passengers. In addition, road tolls and annualfees are taken. With these public earnings expenditures for improvements in theroad network are funded.29

Furthermore, the beginning of the liberalisation process leads to changes in theinfrastructure sector, which is more and more opened up for private investmentand foreign direct investment (FDI).30

2.2.1 National Highways

More than 150 highways are announced as National Highways.31The nationalhighway network which has a total length of 66,590 km, contains single-lane, for38% of total national highways, and double-lane highways which account for 59%of the national highways.32 Therewith it has a share of merely 2% of all roads butcarries about 40% of the road traffic and serves as arterial infrastructure acrossIndia.33

The NHAI initiated the National Highway Development Program (NHDP) in 1998to improve and widen the national highways. It is implementing 24,000km andtherewith constitutes a huge institutional success related with a positive impact

on the road sector development.34 Furthermore, the program completes a four-laning, 5846 km long Golden Quadrilateral which connects the four big cities Delhi,Mumbai, Chennai and Kolkata.35 With this programme, the Indian governmentinitiated the largest rehabilitations program for national highways, coveringpresently round about 17,161 km with the aim of linking Indians major cities andspanning the country north-south and east-west.36

An abstract of the subjects initiated of the NHAI in the NHDP is given in Figure 2.

Figure 2: National Highway Development Program

29 see Singru (2007), p. 6f30 see Padam/Singh (2004), p. 2731 see N.N. (2004), p. 1332 see Singru (2007), p. 6f33 see N.N. (2006a)34 see Singru (2007), p. 735 see N.N. (2006a), p.36 see Singru (2007), p. 8

National Highway Development Program (NHDP)

NHDP I.: Four-laning of the Golden Quadrilateral; Link the four metropolitan cities: Chennai, Delhi, Kolkata, and Mumbai.

NHDP II.: Four-laning of the North-South and East-West corridors; The North-South corridor connects Srinagar to Kanyakumari; The East-West corridor connects Silchar to Porbandar;

NHDP III.: Four-laning of high-density national highways totalling 12,109 km; The stretches covered carry high volume of traffic; Provide connectivity to places of economic, commercial, and tourist importance.


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NHDP IV.: Two-laning of 20,000 km of national highways; Provide balanced distribution of improved highway network throughout country; Capacity, speed, and safety on the new two-lane highways;

NHDP V.: Six-laning of 6,500 km of four-lane national highways; Comprising the Golden Quadrilateral and other high-density stretches of the 6,500 kmproposed under NHDP V, about 5,700 km will be taken up in the Golden Quadrilateral.

NHDP VI.: Development of 1,000 km of expressways to serve the growing urban centres; Particularly those located within a few hundred kilometres of each other.

NHDP VII.: Other highway projects:for full use of highway capacity and enhanced safety &efficiency

Source: see N.N. (2006a). Indian Highways. Emerging opportunities for Profitable Partnerships. p. 8f

Additionally, an extra expedited road development program for the Regions in north-east (NHDP-Northeast) with 7,639 km road length is included whereof merely 40%

are national highways. The objective of this program is to connect the north-easternstates and therewith accelerate the development in this less privileged region.37

Another important objective of the NHDP is the Port Connectivity Project involvingthe improvement of national highway connections to the 10 major ports: Chennai,Haldia, Jawaharlal Nehru Port, Kandla, Kochi, Mangalore, Mormugao, Paradip,Tuticorin, and Visakhapatnam. Furthermore, the implementation of the roadconnectivity objective to the ports helps to decongest and therewith to facilitategrowing port areas and their work.38

Summarizing, restructuring and strengthening steps are taken by the NHAI andsome mechanisms to address bottlenecks due to delays in environmental clearanceor land acquisition are established. In addition, traffic management and safetyrelated issues are more and more focussed.39

2.2.2 State Highways

The highways of the state together with major district roads reflect 13% of theroads in India and carry 40% of the traffic. They are very diverse in their actualstate and stage of development.

While the central government is funding the national highways, state highwaysdepend solely on funding by state governments.Besides, a larger share of the state funding is used for the development of ruralroads because of the extreme need to improve them. Private sector interventionthus becomes more and more important in financing state highways.40

An overview of Indian states involving private sector participation in several projectsand the projected investment is given in Table 4.

37 see Singru (2007), p. 838 see Singru (2007), p. 8f39 see N.N. (2006a)40 see Singru (2007), S. 6f, Profile of The Indian Transport Sector


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Table 4: State Road Projects with Private Sector Participations 2.2.3 Rural Roads

State No. of Projects Estimated Costs($million)

Gujarat 5 25

Jharkhand 1 12

Karnataka 5 104

Maharashtra 4 1,310

Orissa 1 8

Punjab 11 157

Rajasthan 28 90

Tamil Nadu 3 42Total 58 1,748

2.2.3 Rural Roads

The rural road network in India consists of more than 2.70 million km of which1 million km do not meet common technical standards due to unsystematicplanning.There are diverse agencies aiming the development and maintenance of rural roadsbut without any uniform development plan.The rural roads development agency of each Indian state, manages the rural roadsprogram Pradhan Mantri Gram Sadak Yojana (PMGSY) which is sponsored by thecentral government. The PMGSY is initiated in parallel to the National HighwaysDevelopment Program ( NHDP) for the national highways and has the objective tosystematize the rural road development effort.

Following guidelines were considered while planning the rural road program:

all-weather connectivity for all habitations with population 500 (250 for

hill states and desert / tribal areas) network augmentation and modernization

new connectivity to: 60,000 habitations with population 1000,81,000 habitations with population 500,29,000 habitations with population 250

upgrade of rural roads of about 370,000 km.

The guidelines changed several times because of uncertainties of implementationand the prioritization of arrangements. Projects were in confusion as the dataof habitations were not reliable. As a result, the program implemented only


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several low-priority projects at the beginning. This was mainly because they wereconvinced these projects had high priority. However, these problems have nowbeen addressed.41

2.3 Challenges in Transport by Roads

2.4.1 Natural challenges

Energy

The transport sectors energy consumption amounts to petroleum products suchas gasoline and high speed diesel and depends on the one hand on the modal splitand on the other hand on the vehicle speed. Among different modes of transport,buses on average, have the least consumption of energy per passenger-km. Forcomparison, two wheelers have 2.5 times the consumption of buses and three-wheelers 4.8 times that of buses. Furthermore, cars consume on an average, themost energy per passenger-km, i.e. they consume 6 times more energy. This alsoimplies that the fuel costs differ accordingly. For example two-wheelers are 6.8times costlier than buses. Further, three-wheelers and cars are up to 11 timescostlier. Not only does a car use more energy and is therefore costlier, it also takesmore road space than buses when providing the same passenger mobility level.42Due to the motorization in India an immense pressure on the natural energy

resources of India is imposed.43

Air Pollution

The cities in India have to cope with environmental problems due to strong airpollution. The increasing number of fuel using vehicles, lead to increased pollution.The vehicular emissions alone contribute to 72% of air pollution in total in Delhiand the burning of fossil fuels accounts for about 83% of the carbon dioxideemissions.44 The most common particles associated with motorized vehiclespolluting the atmosphere are nitrogen oxides, hydrocarbons, carbon monoxide,

as wells as sulphur oxides. The air pollution in most Indian cities has becomedangerous and has badly influenced the health of the population with regard todiseases in respiration.45

Transport systems and air pollution are directly related whereas the emissions ofvehicles depends on different factors such as their speed, age and emission rate.The Centre of Science and Environment states that that there is a negative correlationbetween the quantity of the pollutants, above all nitrogen oxide, hydrocarbons andcarbon monoxide and the speed of a vehicle. Since the average speed in peakhours is very slow, during these times the air pollution drastically increases. Hence,

41 see Singru (2007), p. 9

42 see Padam/Singh (2004), p.3843 see N.N. (2009), p. 144 see N.N. (2009b), p. 145 Padam/Singh (2004), p.37


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congestion in cities leads not only to delays but also to an increase in pollution.Further, personalized vehicles such as two-wheelers and cars and para transitmodes such as rickshaws have a high emission rate, i.e. the number of pollutants

per km, compared to mass transport modes such as buses and trucks. Thus, asmentioned before increases in personalized modes of transport also increase thevehicular emission.46

2.4.2 Industrial/economic barriers

Fragmentation of Industry

The fragmented structure even in the organized sector of the road industry and thenumerous dominating unorganized operators in this sector, make development and

fair competition very difficult.47

However, small operators depend on other playersfor handling and marketing, for example: brokers depend on booking agents. Thelast mentioned group of handlers is the dominant one with the ability to set freightrates. This system increases the price for the end users, leading to low quality ofservices as well as low profitability for truck operators.48More over, because ofthis fragmentation of the industry, economies of scale can rarely be achieved. 49

Bureaucracy

There exist numerous barriers, concerning the movement of road freight betweendifferent Indian states:One major hindrance for freight vehicles is the non-uniform state tax structure anda huge bureaucracy in checking essential documents, e.g. the vehicle registrationbook, the driving license and the imposed taxes, as well as octroi at some ofthe the state borders. Moreover, documentation requirements vary from stateto state and make this industry unattractive and ineffective. A violation of theserules can lead to penalties such as detention. Such barriers cause long delays infreight transportation and increase transaction and operational costs which createopportunities for rent-seeking, e.g. dodging the taxes and norms. To give an example,a transport vehicle loses 1 to 2 days complying with all formalities on Indian roadsand has to pay up to 25% of its transported value for taxes annually. Due to this,

the freight costs including all these operational costs are major components of theproduct costs themselves.50

When internationally compared, this results in a lower competitiveness of Indianlogistics providers.

Infrastructure

Infrastructure is a significant set back in India. Other than on highways, runningtrucks is only possible for firms using trucks smaller than 20 feet.51Hence, the road

46 Padam/Singh (2004), p.37

47 Mitra (2006) p. 548 see Ganguli (2008), p. 3149 Mitra (2006) p. 550 see Mitra (2006) p. 551 see Kilgore/Joseph/Metersky (2007), p. 38


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infrastructure constitutes a major hurdle.For example, for large vehicles such asmulti-axle trucks.52 The infrastructure of Indias roads is limited and the conditionsof the roads make it difficult to have a smooth transportation and operation system.

Therefore, the few but better conditioned national highways are overloaded andfilled with the big vehicles lowering the average speed to 10-20 miles per hour. 53Further, this leads to more accidents, shorter lifespan of vehicles, an increase inthe fuel consumption, higher operating costs caused due to making detours andreduced efficiency.54 However, the infrastructure investments are merely 4%.55

Additionally, the difficulties in inter-state movement mentioned above is alsohampering the logistics companies, resulting in delays. Thus, the presence of asystem of using containerized trucks would be better for logistics because it wouldfasten the transfers at ports and avoid great thefts at checkpoints.56

Labour policy

The almost non-existing labour policy is yet another barrier in the road transportsystem.. The drivers of trucks are poorly trained due to lack of formal traininginstitutes for related areas like proper handling etc. and due to a lack of participationin driver training schools. So there is a higher demand in getting a drivers licensethan the supply of training institutes. Further, the quality and standards of the fewexisting ones is often not controlled.57

2.4 Potentials in Developing the Road Sector

Bus Transport

Regarding the challenges of high energy costs and air pollution, bus transport mayplay a major role to provide passenger mobility with a certain level of safety. Incomparison with the other vehicles, bus transport is favourable in its efficiencyfrom the environmental point of view. Since it is not easy to make people changetheir habits in using private vehicles, a certain quality in bus services as well as agiven variety of bus transport modes is necessary to cater to the demand of widesegments of society.

Optimum public satisfaction can only be reached through flexibility in determiningthe transport factors, such as frequency of service or the routes and sizes of vehiclesused. Too much government influence and governmental restrictions in these factorsmay lead to lower quality and inefficiencies. Therefore, a policy with private publicparticipation would be a potential for operators becoming more responsive to theneeds of the customers.

52 see Ganguli (2008), p. 3153 see Kilgore/Joseph/Metersky (2007), p. 3854 see Ganguli (2008), p. 31

55 see Kilgore/Joseph/Metersky (2007), p. 3856 see Ganguli (2008), p. 31f57 see Ganguli (2008), p. 32


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With the rapid growth of population and the related travel demand, bus transportservices may have an even higher demand and an expansion of public masstransport systems is a solution.58

Road Infrastructure and Automobile Sector

Also, in the infrastructure and transport management system strategy, there ispotential to increase the existing capacity and safety on the roads. This may beseen not only in constituting a uniform traffic system, but also in improved signalsand bus priority lanes. In the short run, the potential in the infrastructure is inimproving the quality of roads, providing ring roads and detours and in constructionof new footpaths and roads. In the long term however, an upgrade of technologyis important for improvement in this sector and hence this constitutes a potentialfor investments.59India has already made some bilateral investments, inbound andoutbound deals with EU companies, e.g. with Elsamex SA to finance and organizethe development of the road infrastructure. 60

Due to the growth of the population and the related demand in personalized vehiclesthere exists a potential for the automobile industry, i.e. an increase in car sales anduse.61 Also the Indian know-how in this sector becomes convenient for globalcar companies, e.g. to test their vehicle performances and to get internationallycertificated. Many auto and engineering firms also located their internationalpurchase offices in India.Some of the EU original equipment manufacturers like Ford Motor Company,

Volkswagen, BMW, and Man Force Trucks Private Ltd. have establishedmanufacturing facilities in India.62 Robert Bosch GmbH has also established somemanufacturing facilities to produce its automotive components in India.63

Coping with Energy and Climate Change

Developments in the field of renewable energy have the potential to reduce Indiasdependence on carbon-emitting fuels. Hydropower and new energy such as solarand wind power could lower this dependence.64 Indo-EU co-operations couldsupport this, e.g. the British BP has already built a Joint Venture with Tata called

TataBP Solar, to promote solar power as an alternate source of energy.65

In order to reduce the environmental impact of the fast economic growth and hugemotorization, an improvement in the coal-based power plant efficiency is needed.Currently, the Indian power plants are based on sub-critical steam cycle technology.More efficient and cost-effective plants are an option for EU-India collaborationsexploring possibilities of lower cost plants through foreign direct investment in thissector.66 Further potential for a collaboration with the EU in R&D work, is the ZeroEmission Power Plant with Carbon Capture and Storage (CCS) as a solution forcarbon emissions to identify suitable geologic storage sites.67

58 see Padam/Singh (2004), p.40

59 see Padam/Singh (2004), p.4160 see Parera (2009), p. 33f61 see Bose/Sperling (2001), p. 362 see Parera (2009), p. 40

63 see Parera (2009), p. 38

64 see Kumar (2007), p. 1265 see Parera (2009), p. 5966 see Kumar (2007), p. 1267 see Kumar (2007), p. 11


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3.The railway network in India


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3.1 Development of the Rail Sector

Since 1980, the share of railways in total transport economy recorded a decline of20% in passenger as well as freight transport. The total kilometres effected withtransport by rail was approximately 553 billion in the 1990s which is only one-fifthof those from the roadways.68

Figure 3 illustrates a comparison of the road and railway development since the1990s which underlines the transformation of the transport sector from railways -to roadway-dominated.

Figure 3: The Demand Growth of the Transport Sector in India in the 1990s


FreightPassenger

Moreover, the demand for rail transport did not grow as fast as the road sector. Inthe passenger traffic, the demand is growing at just 3.6% annually and in freighttransport, the growth rate is only 1.4% per annum.

Table 5 gives an overview of the development in the railway sector since 1980 to

underline the small growth rate in this sub-sector. The total route length increasedfrom 1980 merely from 61,240 km to 62,759 km in 2000. The passenger trafficincreased from 3,613 million passengers in 1980/81 to 4,585 million passengers inthe year 2000 and the freight traffic had a rise from 220 t to 456,4 t over a periodof 20 years.69

2

0

4

6

8

10

12

14

Road Rail DomesticAir

InternationalAir

Seaports

A

verageAnnualGrowthRate(%)

68 see Ramanathan/Parikh (1999), p. 1769 see Singru (2007), p. 2


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Table 5: Profile of the Railway Sector 3.2 Actual Circumstances

Parameter Unit 1980-81 1990-1991 1997-98 1999-2000

Route Length km 61,240 62,367 62,495 62,759

Freight Traffic metric ton (t) 220 341,4 429,4 456,4

PassengerTraffic

million 3,613 3,858 4,348 4,585

3.2 Actual Circumstances

In sharp contrast to these historical data of merely 3-4% of growth rate, the freightand passenger traffic in the railway sector has been growing at an average rate of9.4% and 7.4% in the last years and the revenue has grown even faster. 70 Both,freight and passenger carriage, keep on continuing to expand annually.

The Indian Railways are the single national domestic provider since the 19th century.It owns and presently operates 63,221 route km, has 1.42 million employees, 440billion km of freight and 615 billion passenger km and thus is one of the worldslargest rail networks. This railway infrastructure constitutes the mainstay of transportinfrastructure of the entire country71 and is further the fourth most heavily used

one.72 At present, the freight and passenger revenues of Indian Railways are risingwith the international trade and growing traffic flows on rail and road.

Indian Railways holds 44 steam locomotives, 4801 diesel and 3065 electrifiedones. These locomotives are equipped with more than 220000 wagons to carrythe high passenger and freight demand. Daily, 16021 trains run whereof about40% of them are trains used to transport freight and 60% are passenger trains tocarry nearly 15 million passengers per day.73 Compared to 5 million passengers inthe year 2000, the demand in railways has increased tremendously.

Further, most of the rolling stock and other elements are produced by domesticcompanies but more and more commercial agreements with foreign enterprisesexist to manufacture components for the railway sector.There exist some high speed routes in India and the use of them is also increasing.Besides, several urban passenger rail systems are also used in India. Chennai forexample has a rapid transit system, Kolkata has a full metro system and the metrosystem in New Delhi is expanding. Further, there are suburban rail networks, e.g.in Bangalore and Mumbai.74

70 see N.N. (2006c), p. 371 see N.N. (2006c), p. 3

72 see N.N. (2004), p. 1473 see N.N. (2006c), p. 374 see N.N. (2004), p. 14


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The broad upturn in the performance results of the railways, results from astrategy for regaining the predominance of railways in the whole transport sector.This strategy was built around the optimization of already existing equipment,

infrastructure and another approach to the traffic segment. Some examples ofinnovations are: an increase in axle load (from 20.3 to 22.9 t), a reduced turnaroundtime of 5 days, a rise in popular passenger trains using spare stocks of coaches, allin all providing an adequate freight-loading and carrying capacity per train.In comparison to other countries, as it can be seen in Table 6, the pay load is evensmaller in India. Indian Railways can carry 450kg of wagons with dead weight forevery 1000kg of freight carried. In the US for e.g. for the same amount of freightcarried, only 170kg wagons with dead weight can be carried.75

Table 6: Load Capacities in different Countries

CountriesParameter

India Australia/Europe/US

Average Speed (kmph) 23.3 100

Capacity (TEUs) 90 150

Axle Load of Wagons (TONs) 22 30

Load Capacity per Wagon (TON) 88 120

Pay Load: Tare Weight of Wagon 2.-2.6 4.5-5.5

Indicator 2000-2001 2005-2006

Freight unit cost (paise per net ton-km) 61 52

Freight operating margin (%) 22 57

Net ton-km per wagon per day 2,042 3,000

Source: Vaidyanathan, (2007), Current Status of Logistics in India, p. 16

Source: Singru (2007), Profile of The Indian Transport Sector, p.10

All these reinventions linked with All these reinventions linked with the newstrategy led to a positive by-product of lower unit costs of operation, which can beseen in Table 7.

Table 7: Improvements in the operations of Indian Railways76

With these measures, With these measures, the railways could act and operateagain as a competitive and feasible option to road transport and redefined thetransport sector India. Now, this sub sector is regaining market share and exceedswith its traffic growth the growth in GDP. Operating margins are only someadvantages of the transformation. Moreover, huge efficiency gains and financialsurpluses were delivered.77

75 see Vaidyanathan, (2007), p. 1676 see Singru (2007), p. 10

77 see N.N. (2006c), p. 4ff


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3.3 Improvements and Potentials of the Railways

Indian Railways set up a strategy to avoid or remove bottlenecks and increase thecapacity of handling traffic to match the demand. The most important elementsof this strategy would lead to investments in development of infrastructure, inthe modernisation of the technology of the wagons and in a better signalling-and telecommunication system, as well as in high horsepower locomotives andinformation technology. All in all, the aim is to improve transit times, operation unitcosts and terminals and to bench mark to get best standard in the world.78

The measures for keeping and further improving the new advantages includeamongst others:

Commercial development of railways land and air space (non-tariff) to

generate revenues Roll-on roll-off services on Konkan Railways

Tie-up with Central Warehousing Corporation

Door-to-door transportation of freight.79

The Metro City Railway Stations in the metropolis like Delhi and Mumbai and soon, also need modernization to offer world-class services for passengers mainlydue to the large quantity of passengers using these stations. There is a pilot projectfor Delhi Station already ongoing.80 Other plans for metro, light rail, or both exist

for Bangalore, Coimbatore, Hyderabad, Jaipur, Lucknow, Mumbai, and Pune.81

Another potential to generate revenues is the commercial use of around 43,000hectares of vacant land owned by Indian Railways. These areas around railwaystations are mostly installed in lengthwise strips along the tracks and could serveas capital for modernization.82

In addition, the Ministry of Railways also decided to develop the rail tracks withbuilding dedicated freight corridorsin high-density routes in Western and EasternIndia, e.g. the Delhi- Mumbai Industrial Corridor, to enable the Indian Railways to

compete with the road sub-sector. This includes new tracks for freight trains alongthe Golden Quadrilateral and a possibility for the trains to run over 100 km per hour.By the way, those separate tracks help to avoid accidents with passenger trainsand resulting delays.

Further initiatives are technological upgradation and modernization, transformationfrom bulk- to multi-modal transporters and Public Private Partnership envisagingnew railway stations, routes and logistics parks. Attracting private investments by

78 see N.N. (2006c), p. 379 see Singru (2007), p. 10

80 see N.N. (2006c), p. 681 see N.N. (2004), p. 1482 see N.N. (2006c), p. 6


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allowing the areas around stations to be commercially developed while operational/passenger-handling areas are separated from commercial ones, are some of theplans of the Ministry to implement the initiatives.83

Another initiative of the government to improve the current situation is the NationalRail Vikas Yojana. Its objective is to develop and improve capacity in sections of therailway network that are critical. Further, it has three components:

Golden Quadrilateral rail services and strengthen diagonals

Rail connectivity to ports strengthen/ develop multimodal corridors

(particular to hinterland) Construct 4 major brigdes (Bogibeel, Munger, Patna Ganga, brigde over

Kosi river). 84

With these improvements, railways will be able to handle twice as much trafficvolume as at present, by 2012.

3.5 Challenges

In the railways sector the incidence of hurdles is lower than in the road sector asreported from logistics companies. It can be noticed that the major barrier liess inthe lack of a dedicated freight corridor. 85

Obligations of Service Providers

A major barrier in this industry is the high dependence on external operatorsor agencies, such as Indian Railways, which is the only provider of the railwaynetwork.86

Indian Railways, offering the entire infrastructure such as signals and containershas many social obligations, e.g. low cost passenger service and is coping withthem by subsidizing which involves excessive freight tariffs to cover the runningcosts of the railway.87Also other operational issues such as service guaranteeand dedicated freight corridors are still unresolved. There exists such a volumefragmentation because of too many operations and uncontrolled haulage costs.88

Furthermore, financial constraints such as the fare structure determined by thepolicy, hamper the railway sector traffic.89

83 see N.N. (2006c), p. 684 see Singru (2007), p. 1085 see Ganguli (2008), p. 32

86 see Vaidyanathan, (2007), p. 1687 see Ganguli (2008), p. 3288 see Vaidyanathan, (2007), p. 1689 see Ganguli (2008), p. 32


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Infrastructure : Inadequate Connectivity

In addition, delays even in transports on the main railways between the metropolises

are attributed to inadequate rail corridors, as it takes nearly a week to transportcargo from Mumbai to Delhi. Lack of proper connections to ports is another causefor hindrance in a smooth transport system. Often there is only a single track linedirectly connected to one of the Indian ports.90 For example, about 60% of the,port traffic on the west coast, is moved by rail to the northern hinterland implyinghuge congestion on these routes.91

However, barriers such as red tape and high taxes, and the associated additionalcosts as in the road sector is not applicable in the rail sector.92

90 see Ganguli (2008), p. 3291 see Vaidyanathan, (2007), p. 1692 see Ganguli (2008), p. 32


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4. Indian aviation traffic


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4.1 Progress of Indian Airways

The Indian civil aviation traffic, especially aircraft movement and passenger traffic,is growing in great leaps.93

Regarding the aircraft movement in general, the traffic increased from about500,000 flights in 2001-2002 to nearly 840,000 flights in 2005-06, as shown inFigure 4. This describes a leap in the growth of aircraft movement from 9.9% to16.8%.94 As can be seen in the Figure, the domestic traffic is even higher than theinternational one.

Figure 4: Development of Aircraft Movement since 2001

Source: Ministry of civil Aviation (2006), p.2

Since 1980-81 the number of Indian airports increased from a total of 84 to 122in 1999-2000 and 125 at present. Collectively, they handled about 40 millionpassengers at the beginning of 2003.95

Table 8 illustrates the passenger traffic for the several airports in 2003-04.

93 see Ministry of civil Aviation (2006), p. 194 see Ministry of civil Aviation (2006), p. 295 see N.N. (2004), p. 14f


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Source: Ministry of civil Aviation (2006), p.2

Source: N.N. (2006d), Airports. http://www.infrastructure.gov.in/airports.htm

Airport

Passenger traffic

(million, 2003-04)

Bangalore 3.2

Chennai 4.6

Delhi 10.3

Hyderabad 2.2

Kolkata 3.0

Mumbai 13.3

Table 8: Airport Statistics in 2003-04

By 2004 and 2005 about 60 million passengers were handled at Indian airports.From 2001 the growth rates in passenger traffic jumped from 9.4% to 23.7% in2005-06.96 This development of passenger traffic is illustrated in Figure 5.

Figure 5: Development of Passenger Traffic since 2001

In the first half of 2006-07 the domestic passenger traffic grew at 48% and theinternational passenger traffic at a rate of 16.3% compared to the previous year.97

At the beginning of 2003, Indian airports handled around 900,000 tonnes of cargoand by 2004-05, 1.3 million tonnes of cargo has been handled..98 In this sector, thegrowth rates also showed a growing trend even if there were some upsurges andsome downturns in the yearly growth rates. For example in 2002-03, there was

96 see Ministry of civil Aviation (2006), p. 297 see Ministry of civil Aviation (2006), p. 298 N.N. (2006d), p. 1


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Source: Ministry of civil Aviation (2006), p. 2

a growth of 14.6% compared to the year before and in 2003-04, the growth ratecompared to 2002-03 was only 9.1% but grew again in 2004-05.99The cargo trafficdevelopment is shown in Figure 6.

Figure 6: Development of Cargo Traffic since 2001

As can be seen in Figure 6, international cargo traffic is more likely in demand thandomestic cargo traffic.

4.2 Current domestic and international traffic

Compared to worlds aviation industries, the aviation industry in India, is one ofthe fastest growing with an annual growth rate of about 18%. In 2008, it wasworth US$ 5.6 billion. These results are not only as from the open sky policy ofthe government and the fast air traffic growth, that has exceeded 20% in the last

two years, bringing out many foreign players and new private airlines to enter themarket. Further, higher frequency of flights for international airlines could also benoticed.100 So, the industry could grow in terms of players as well as in terms ofnumber of aircrafts. From the 12th position in the worlds aviation market, Indiareached the 9th position in 2009. By 2010, more than 100 million passengers onthe total market are expected from the Centre for Asia Pacific Aviation (CAPA).101Currently, the Airports Authority of India (AAI) regulates and controls all 125 airports

99 see Ministry of civil Aviation (2006), p. 2100 see N.N. (2009c), p. 1101 see N.N. (2009c), p. 1


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whereof 11 are declared as international airports.102 The scheduled domestic airservices can be provided from 82 airports to match the high demand, compared to75 in 2006. As forecasted by the Centre for Asia Pacific Aviation (CAPA), the traffic

at domestic airlines will increase by 25-30% by 2010.103

The prognosis of the CAPA for the international traffic mentions an increase ingrowth by 15% by 2010.104 Big cities like Kolkata, Chennai (Madras), Mumbai, NewDelhi and Thiruvananthapuram posses the major international airports. But alsoBangalore, Guwahati, Hyderabad provide international service.105Indias cultural heritage and nature are an interesting destination for leisuretravellers from overseas but also due to a growing economy, India is attractive forinternational business travellers.

Currently, several policies to support aviation infrastructure are in place. Foreigndirect investments under the automatic route, are permitted up to 100% for greenfield airports and partly for existing airports. Further, private players developing theinfrastructure are allowed to setup general airports and airstrips at a distance of150 km to the existing airports. Moreover, for new airport projects, a tax exemptionis given over a period of 10 years. While 100% equity ownership is allowed to beheld by non-resident Indians in domestic airlines, only 49% FDI is permitted underthe automatic route, however, not for foreign airlines. In cargo, nearly 75% of FDIis permissible.106

Delhi and Mumbai airports are already privatised and expanded in 2006 at anestimated investment of US$ 4 billion. Also new international airports are operational

in Bangalore and Hyderabad which are built by private players or consortiums at aninvestments of about 600 million.107

4.3 Airlines in India

In 1953,the government of India nationalized all existing airlines and built the IndianAirline Corporation engaged in domestic air services and Air India Internationaloffering international services. These two companies had a monopoly positionon the Indian aviation market until the year 1991. In 1994, private airlines werealso allowed to operate scheduled air services. In 2003, the aviation industrywitnessed a major change. Air Deccan introduced budget flights by offering lowertransportation expenses down to 17% of the prices of other airlines. Currently, thelist of budget airlines consists of Spice Jet, Go Airways and Kingfisher Airlines, aswell as the Paramount Airways. They mainly own the major market share on Indianaviation industry market and set off newer trends.108

102 see N.N. (2006d), p.1103 see N.N. (2009c), p. 1104 see N.N. (2009c), p. 1

105 see N.N. (2004), p. 14f106 see N.N. (2006d), p.1107 see N.N. (2009c), p. 1108 see N.N. (2009d), p. 1


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National airlines

The central government of India currently owns two airlines, i.e. Air India and

Indian Airlines, as well as one helicopter service, the Pawan Hans. Both airlinesare international as well as domestic flag carriers.109

The development of Air India and Indian Airlines since 1980 is given in the followingfigure.

Figure 7: Transport Profile Air India and Indian Airlines

Available ton-km: Air India

million

Available ton-km: Indian Airlines

0

500

1000

1500

2000

2500

1980-81 1990-91 1997-98 1999-2000

AverageAnnualGrowthRate(%)

Source: Ministry of civil Aviation (2006), p. 2

In 2003, the government has divested more than the half of the equity in both ofthe airlines. The major regional airports are located amongst others in Ahmadabad,Allahabad, Chandigarh, Cochin, Nagpur and Pune.110

Private Airlines

Currently, there are 12 privately owned airlines, e.g. Jet, Sahara, Kingfisher and

Spicejet, that account for round about 75% share of the general domestic aviationmarket and especially for around 60% of the domestic passenger traffic. They arealso offering international flights to certain destinations.111

The airlines continuously offer new flights/routes and an innovative pricing structureto attract more customers.112

109 see N.N. (2006d), p.1110 see N.N. (2004), p. 15111 see N.N. (2006d), p.1

112 see N.N. (2009d), p. 1


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In support of the aviation industry growth, ten of the major domestic airlinespromoted the Federation of Indian Airlines (FIA) for growth in the airportinfrastructure, to cope with potential problems in the domestic segment and to

create new trends in this sector. The research of the Ministry of Civil Aviationensures technological advancement.113

4.4 Potentials Creating Projects

Successful demographics and a fast growing economy, indicate a continuedincrease in domestic passenger traffic as well as in international outbound traffic.The inbound traffic at the international level will also grow further with additionaltrade activities and investments.114

To boost the growth in civil aviation, significant measures are on the anvil.Opportunities and potential in the Indian aviation sector can be seen throughincreasing investments in new aircraft, development of airport infrastructure aswell as maintenance, repair and training.115

Modernisation of existing airports is one of the measures of the government, withthe plan to invest about US$ 9 billion. In addition, the development of around 300unused airstrips is planned. 116

Huge investments are planned during the next 5 years.. Nearly half of this investmentwill be used for the metro airports in Chennai, Kolkata and Trivandrum. The balancewill be used to upgrade non-metro airports, city airports, aeronautical equipment, aswell as Greenfield airports for resort destinations or for emerging metros like Goa,Pune and Kannur. The Greenfield international airports in Bangalore and Hyderabadwill be modernized and are under construction. Also Delhi and Mumbai airports arelisted to be modernized. A plan for 35 non-metro airports is also projected to keepa balanced airport development.117

There are different companies showing interest in the aviation industry of India.Nearly two-thirds of the Investments in airport infrastructure are expected tocome through public private partnerships.118To provide a level playing field to allplayers, including foreign companies, the government wants to set up an AirportEconomic Regulatory Authority.

113 see N.N. (2009d), p. 1114 see N.N. (2006d), p.1115 see N.N. (2006d), p.1

116 see N.N. (2009c), p. 1117 see N.N. (2006d), p.1118 see N.N. (2009c), p. 1


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Some companies and their plans concerning investments in Indian aviation sectorare given in Table 9 below.

Table 9: Investment plans in Indias aviation sector

Company Plans Estimated costs

Tata Advanced SystemLimited

Helicopter manufacturing at theAerospace Special Economic Zone near

Hyderabad international airport

113.63 million

Global Vectra Helicopters Increase its fleet and consolidateits operations in dedicated offshore

transportation

130 million

Boeing Co. Delivering 100 planes 17 billion

Source: N.N. (2009c). http://www.ibef.org/industry/aviation.aspx, 15.11.2009

Also for EU companies, the Indian aviation sector seems to be worth a potentialin investments. The Siemens Projects Venture, Germany, together with L&T andUnique Zurich formed a consortium and hold about 17% stake developing theBangalore International Airport Ltd.119

A further successful example of a bilateral investment in the Indian airports is ofFraport AG. Fraport AG in a consortium amongst others with GMR, holds a 10%stake in developing the Delhi Airport. Its noticeable experience in the developmentand management of airports globally could be advantageously used in the Delhiairport development project. 120

Aims of the projects are amongst others the creation of an infrastructure able tohandle about 280 million passengers and therewith a growth in passenger trafficof over 15% in the following 5 years. Additionally, handling of more than 3.3 milliontonnes of cargo traffic and therewith an envisaged growth rate of more than 20%should be possible.121

119 see Parera (2009), p. 93120 see Parera (2009), p. 94121 see N.N. (2006d), p.1


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5. Indian Waterways


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5.1 Progress and Current Situation of Seaways andPorts

India possesses round about 14,400 km of inland waterways of which more than3,600 km are navigable by large vessels. However, only 2,000 km of them are used.With the aim of developing water navigation and maintenance or conservation,3 of the inland waterways have been pronounced as National Waterways: theAllahabad-Haldia part of Ganga-Bhagirathi-Hooghly rivers with about 1,620km,the Sadiya-Dhubri partition of Brahmaputra River with 891 km, as well as thecombination of western canals with 205 km. In general, the transportation potentialis underused.122

The ports in India handled about 519 million tonnes of cargo in 2004-2005. Thisconstitutes a growth of 11.8% compared to 2003-2004. There are 12 major portsin India, six each on the west and east coast that together handled 383.75 milliontonnes, which is around 75% of the total sea-borne traffic. Almost all major portsare administered by the government except for one -Ennore. In addition, there are187 minor ports along 7,517 km of Indian coastline , as well as seven shipyards undercentral governmental control, 2 shipyards under the control of state governmentsand 19 private ones.124

Regarding the freight, nearly three-quarter of the traffic in the major ports are dryand liquid bulk, like coal, iron or crude oil. The remaining traffic is general cargoand containers, growing at a rate of 14% over the last half decade. The cargo thatis handled at Indias major ports is 75% of the total traffic and has increased overthe last 3 years at 9.5% annually. All in all, the international trade is handled up toabout 95% by volume (and 70% by value) by the major ports and a number of theother ports.125

122 see N.N. (2004), p. 14123 see N.N. (2006a), p. 3124 see N.N. (2004), p. 14

125 see N.N. (2006a), p. 2ff


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Source: Singru (2007), Profile of the Indian Transport Sector, p. 3. / Vaidyanathan, (2007), Current Status of

Logistics in India, p. 16.

Source: Singru (2007), Profile of the Indian Transport Sector, p. 3

Major PortsNon-Major Ports

Overall

0

50

100

150

200

250

300

350

400

mmt

1980-81 1990-91 1997-98 1999-2000

Figure 8 shows the development of traffic growth in Indian ports during the lastfew decades.

Figure 8: Traffic Growth in Indian ports

Table 10 gives an additional overview of the development of the major ports andthe length of useable waterways, since 1980.

Table 10: Profile of Indian Ports and Waterways, since 1980

Parameter Unit 1980-81 1990-1991 1997-98 1999-2000

No. of Major Ports: number 10 11 11 12

Inland Waterways-length of navigable

waterways

km 14,544 14,544 14,646 14.646

By the year 2000, approximately 102 shipping companies were operating in India.Five of them were owned by private players based in India and one single companywas government owned, the Shipping Corporation of India. Regarding the ships,

there were about 640 ships including those owned by the Indian governmenthaving 91 oil tankers, 70 dry cargo bulk carriers and 10 cellular container vessels.

In the past, the Indian government controlled and dominated the maritimeactivities. However, the current indications are towards the private sector leadingin the development and operations of port activities. Hence, the sub sector ports,has experienced significant investments by major global operators in the portsbusiness. Effects can be seen for example in some major ports now acting aslandlord ports or in minor ports which are to some extent already developedby domestic and international private investors, as Pipavav Port by Maersk and


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Mundra Port by Adanai Group. Above all, the growing merchandise exports and theincreasing demand involved with it makes it necessary to invest more and more ininfrastructure of ports.126

Maybe, ports have the best potential for wide-ranging investment and modernisationin India, besides telecommunication and roads. The countrys efforts to modernisethe infrastructure of ports got a quick start with the first private internationalcontainer terminal ever in India, the Nhava Sheva International Container Terminal(NSICT).127

5.1.1 Major Ports

There is high traffic congestion at several ports. The Major ports which are important

to handling the increasing international traffic will be specified below.

At first, there is an artificially-made, all weather harbour; Chennai Port. It has awet dock and boat basin on its outer harbour, with a twenty-four-seven navigationfacility. Recently, it is rapidly appearing as a hub port and has connectivity to theroad from Channai to Kolkata, from Chennai and Dindigul, as well as connectivityto rail to reach the southern parts of Tamil Nadu and the rest of India.

Moreover, in 2005-2006 47.25 million tonnes of traffic, above all iron ore, coal, carsand sugar were handled at a capacity of 48.80 million tonnes annually. 128

Another all weather port is the Cochin Port, more and more developing into animportant maritime gateway to India. Two bridges, on the Mattanchery Channeland on the Ernakulam Channel, build the road connectivity from the mainland tothe port. Also a single rail line from Shornur-Trivandrum to Ernakulam goes to theCochin Port. Concerning the transported freights, Cochin Port handles mainly allthe trade of tea, spices and coffee. In 2005-2006, about 13.94 million tonnes werehandled, against a capacity of 19.35 million tonnes per annum.

The Ennore Portis the first major corporate port in India and recently is a landlordport with only coal being transported. Ennore Port has road and rail connectivity

and a traffic of merely 9.17 million tonnes in 2005-2006 against a capacity of 13million tonnes a year.

The largest container handling port dealing with more than half the nationalcontainer traffic, is Jawaharlal Nehru Port(JNPT) in the south of Mumbai Portwhere, two out of three terminals are operated by private players. This port hub isconnected with Mumbai- Pune expressway as well as with Mumbai-Goa highwayto western India. A rail connectivity to Panvel is also given. In the year 2005-2006,against an annual, new capacity of 36.1 million tonnes, it handled 37.35 milliontonnes of traffic.

126 see N.N. (2006a), p. 2ff127 see N.N. (2006a), p. 2ff

128 see N.N. (2006a), p. 9f


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The Kandla Portis located in the well developed Gujarat State on the west coastof India. It constitutes a gateway to the north western part of India with accessto huge hinterland up to Jammu and Kashmir. The port is also connected with the

big cities of Mumbai and Delhi by rail. Iron, steel and salt are the major freightstransported. In 2005-2006 the Kandla Port utilized almost its entire annual capacityof 46 million tonnes.

Under the Kolkata Portone should understand the Kolkata Dock System and theHaldia Dock Complex. The first mentioned is a riverine port, constituting a gatewayto the eastern part of India. Its connectivity by road and rail is well pronounced,e.g. through city roads, national highways connecting the port with the airport.The general cargo and other traffic handled in 2005-2006 was 10.61 million tonnesagainst 12.60 million tonnes of total capacity. However, Haldia Dock Complextransports above all fertilizers, minerals and thermal or coking coal, exceeding itsannual capacity of 42.20million tonnes, in 2005-2006.

One of the first natural harbours of the world is the Mormagao Portalso on thewest coast of India. About 32% of Indias iron ore exports are handled fromthisport. A connectivity by road and rail is given. The yearly capacity of 29.50 milliontonnes is insufficient to cope with the high demand.

In the commercial capital of India, the Mumbai Porthas a natural deep harbourwith three dock systems and 50 berths. Various national highways and IndianRailways build the connection to almost all parts of India. There, pulses, sugar and

electronics are transported at a recently enhanced capacity of nearly 44 milliontonnes a year. 129

At Panambur, Mangalore, the artificial New MangalorePort is situated. Whilehaving connectivity to the industrial hubs of Southern and Northern India throughbroad-gauge railway line and diverse national highways, about 38 million tonnes oftraffic, mostly food grains, can be handled annually

The Paradip Port, situated in Orissa, the state which is developing into a steelproduction hub has a high potential for growth. State and national highways build

the connectivity to iron ore mines and steel plants and further rail lines are underconstruction. However, the capacity of 51,40 million tonnes of cargo per annum isonly utilized up to about 60%.

The Tuticorin Port, is located in the eastern part of India and is considered asbeing the best south Indian gateway port with connectivity by road and rail to thebig cities. Palm oil and raw cashews are some of the freight handled there at atotal recent capacity of about 20million tonnes.

The top ranking port in India with an inner and outer harbour and about 55 million

129 see N.N. (2006a), p.10f


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tonnes handled yearly is the Visakhapatnam Port. It is connected to a nationalhighway and the main railway line of the east coast.130

Table 11 shows the major ports in India and the cargo handled by them. For theKolkata Port, the Kolkata Dock System and Haldia Dock Complex are separatelymentioned.

Table 11: Cargo handled by Major Ports

Major PortTrade

(04-05, MMT)

Container Traffic(04-05)(million TEU*)

*Twenty foot equivalent unit

Chennai 44 0.62Cochin 14 0.19

Ennore 9.5

Haldia 36 0.13

JNPT 33 2.37

Kandla 42 0.18

Kolkata Dock System 10 0.16

Mormagao 31 0.01

Mumbai 35 0.22

New Mangalore 34 0.01Paradip 30

Tuticorin 16 0.31

Vizag 50 0.05

Source: N.N. (2006b). http://www.infrastructure.gov.in/port.htm

Summarizing, the west coast ports cope with more than three-quarter of totalcontainer cargo of which almost 70% of west coast traffic is handled by JawaharlalNehru Port Trust (JNPT).131

5.2 Potential for Growth and Projects

To handle the large and sudden increase in cargo traffic which grew as alreadymentioned at round about 10% annually the ports in India focus more and more onexpanding their cargo handling capacity. In 2006, the aggregate handling capacitywas about 456.20 million tonnes annually, in the major ports, as against a demandor traffic of 423.42 million tonnes in 2005-2006. However, the minor ports copedwith 150 million tonnes during the same period.132

130 see N.N. (2006a), p. 12f131 Vaidyanathan, (2007), p. 14

132 see N.N. (2006a), p. 3


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Nr. Name of the projectEstimated Costsin US$ (million)

Deepening Channels/Berths

1. Deepening and widening of Main Harbour Channel 177.78

Berth Development

2. Extension of container berth by 330 m and other facilities 100.66

3. Development of fourth container terminal 976.00

4. Marine Chemical Terminal 936.00

Equipment Procurement/Modernisation

5. Acquisition of new cranes 66.67

6. Replacement of tugs 20.00

Others

3. Infrastructure facilities for Warehousing etc. 79.11

5. Infrastructure facilities for port based industries 42.67

Source: N.N. (2006a), p. 20ff

The Governement of India, has different plans underway to bring the handlingcapacity of the major ports, up to a level of 1000 million tonnes per annum by2011-2012 per annum in order to cope with increasing international trade and to

smoothen the traffic flow. The aim is to boost the capacity by about 545 milliontonnes within the next 6-7years. One of them is the Sethusamundram projectwhich shall facilitate maritime trade through dredging of the Palk Strait in SouthernIndia. In order to expand and modernise the capacities of the Indian ports anotherproject, the National Maritime Development Programme (NMDP) has beenestablished.

Under the NMDP about $13.5 billion investment in the major ports and $4.5 billioninvestment in the minor ports is required to improve their infrastructure withinthe next 7 years. The government plans different measure to reach their goalsconcerning the handling capacity:

Projects to develop the ports, like construction and development of berths

and jetties Maintenance and upgrading of the cargo handling equipment at ports

Improvement of drafts while deepening the channels

Diverse projects concerning the connectivity of ports.133

Some investment examples are given in Table 12 and 13 showing the major projectsof the Jawaharlal Nehru Port and Chennai Port.

Table 12: Major planned Investments in Jawaharlal Nehru Port

133 see N.N. (2006a), p. 2ff


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Nr. Name of the project

Estimated Costs

in US$ (million)

Deepening Channels/Berths

1. Deepening of Channels, Basin and Berths 31.77

Equipment Procurement/Modernisation

2. Modernisation of Chennai Port 44.44

Others

3. Creation of additional open storage yards by reclamation 44.44

4. Multilevel stack yard for Automobile Exports 11.11

5. Construction of Marina 66.66

Source: N.N. (2006a), p. 20ff

Table 13: Major planned Investments in Chennai Port

To finance these 276 planned projects for maintaining and improving the majorand minor ports, the government encourages the public-private partnership model,including direct foreign investment up to 100% - like in the other sub sectors ofthe transport and logistics industry. In order to provide common user infrastructurefacilities, the plan is to use public funds.134Given these facts, 64% of the submittedinvestments are expected to be financed by the private sector, particularly thecommercially viable projects like the construction of berths and operation of

terminals. Already 15 private sector projects are recently operational.135

Also EU companies are attracted to invest in the Indian port sector. An example forthis is Maersk, being a player who is already present in India in the context of theProjects of Port Development initiatives e.g. at Gujarat.136

5.3 Challenges in the Maritime Sector

Congestion

The main problem or barrier for logistics companies in the maritime sector in Indiais the congestion at over-burdened ports.137 However India has a long coastlineand its port system is not well utilized. The seaborne trade is handled to about 70%by 2 of the 12 major ports. The 180 minor ports having infrastructure problems arealmost unused. Resulting from this is a long turnaround time which is lagging behindother global ports. Further, even the larger ports cant support larger containershipsmaking about 25% of the shipping volume.138

134 see N.N. (2006a), p.4

135 see N.N. (2006a), p.4136 see Parera (2009), p. 92137 see Ganguli (2008), p. 33f138 see Kilgore/Joseph/Metersky (2007), p.38


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Moreover, inadequate cargo handling equipments, frequent breakdowns and extendedclearance time for cargo, make it difficult to handle the increasing traffic at ports.139

Transhipment

Due to missing main lines, cargo containers from India take a high transit timebecause they still have to go through a transhipment centre.140 Furthermore, due todelays in loading and unloading, many larger shipping liners avoid the Indian ports.This causes the Indian exporters to have to use ports such as Dubai and Singaporeto tranship which causes additional costs and delays in transportation.141

The lack of connectivity is a major problem for the ports. In addition, there is noconnection to the hinterland and no guarantee of fixed timings with the trains.142Moreover, this sector is highly dependent on external operators such as shippinglines and port terminal operators.143

Labour policy

Skilled labour for operating the equipment at ports and for administration isscarce144 and among the Indian shippers there exists a lack of trust and awarenessconcerning outsourcing of logistics. Compared to developed countries the volumeof outsourcing by Indian shippers still lies at a very low level of 10%. There existsa scepticism concerning losing control of sensitive information when outsourcingand there arre expectations of more visibility and the ability to a real-time tracking

system.145

139 see Ganguli (2008), p. 33f140 see Ganguli (2008), p. 33f141 see Mitra (2006) S. 5

142 see Ganguli (2008), p. 33f143 see Vaidyanathan, (2007), p. 16144 see Ganguli (2008), p. 33f145 see Mitra (2006) S. 5


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6. Urban Transport


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6.1 Development of Urbanization

The urban population of India almost doubled during 1981-2001, from 160 millionto 285 million, and is constantly growing. The size of cities has increased therewithconsiderably. The growth of urban population was in the 1980s about 36% andslowed down a bit in the 1990s with a decadal growth rate of 31%. Despitethe slowdown in urban dwellers, metropolitan cities had their upturn. From 5metropolises, with more than 1 million inhabitants, in 1951, e.g. Mumbai, Delhi,Hyderabad, Chennai and Hyderabad the number of metropolises raised to 35 in2001 having huge growth rates, e.g. Dehli (51.9%), Surat (85.1%) or Pune (50.6%).

All in all, the metropolises accounted for a larger portion of total urban populationdue to the decadal growth of these huge cities with at a rate of 34% and the 31%

decadal growth of urban population.146

Table 14: Progress of the Share of Indian Metropolises

Year 1981 1991 2001

Nr. of metropolises (>5) 23 35

Share of metropolises (in%) 26.4 32.5 37.8

Source: Padam, Singh (2004), Urbanization and urban transport in India: the sketch for a policy, p. 27

The public transport system in India could not keep up with the increasing demandof the past decades. Passengers turned more and more to personalized vehiclesrather than using the degraded bus services leading to traffic congestion.147

6.2 Current Situation of Urban Transport Systems

6.2.1 Travel demand

The range of urbanization varies from state to state. Transport is one of the factorsthat contributes to that variation. The states with a high urbanization level alsopresent a higher economic development which implies a positive correlationbetween those two characteristics.148The travel demand of urban population increased over the years substantially. Ingeneral, there are some specific factors that are responsible for that.One is the increasing Indian population. Due to urbanization, the population sizeof an area in India grows in two decades by itself.The second factor is the average number of trips per person daily, i.e. the mobility

146 see Padam/Singh (2004), p.27147 see Padam/Singh (2004), S.27

148 see Padam/Singh (2004), S.27


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rate. In India, the mobility rat

ebtc - 2013 - overview of the demand in the indian transport & logistics industry

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