CHAPTER 32

Dr.G.Raghuram

LOGISTICS INFRASTRUCTURE IN INDIA AND ITS IMPLICATIONS FOR SUPPLY CHAIN MANAGEMENT

G Raghuram, Indian Institute of Management, Ahmedabad

1. Framework

Logistics and supply chain management concerns itself with two principal actors: the suppliers and the users. The supply side to effective logistics and supply chain management is characterized by poor infrastructure in India. This is especially there in the area of transportation and storage. While IT infrastructure is improving at a faster pace, it is still inadequate. On the financial side, while banking services are improving, insurance is inadequate. The suppliers of logistics form part of the infrastructure sector. The focus of this paper is to examine the supplier user linkages, both from the perspective of the suppliers and users. We study the market environment, status and trends, and supplier user interface. In this context, improvement possibilities in the supply chain are explored.

It has been estimated that logistics and supply chain management related costs are in the range of 12 to 15 per cent of the GDP for a developing country while it is around 18 to 20 per cent for a developed country [Raghuram, 1992]. (It has been estimated that transportation related costs alone account for approximately 10 per cent of the US GNP, 15 per cent for UK, 16 per cent for Canada and 9 per cent for France [Crainic and Laporte, 1997]). The difference, apart from reflecting the countrys geography, is due to better customer service parameters and in fact a better material quality of life in the developed countries. Customer sensitivity has been moving along similar lines in India, with aspirations for improved service and material quality of life.

This paper attempts to develop a common framework for analysing all the issues of the infrastructure sector dealing with logistics. The infrastructure can broadly be classified as hardware and software. The hardware consists of the physical assets which comprise of the terminal/storage facilities, right of way for movement and the vehicles/equipment which are the facilitating medium for movement. The software, which is essentially the service super structure, consists primarily of maintenance, operations and value added services. Figure 1 outlines this framework which helps understand the complexity of activities required to provide a holistic support for logistics [Pangotra and Raghuram, 1997].

4PRIVATEFramework to Analyse Infrastructure Sector

Infrastructure Hardware

Terminal / Storage

Right of Way

Vehicles / Equipment

Infrastructure Software

Maintenance

Operations

Value Added Services

Figure 1

The above framework can be applied to the various infrastructure flows, namely physical, information and cash.

As an example, we examine this framework in the context of the physical flow. In the case of railways in India, all the activities are under one umbrella for freight logistics, except containerised transport which is managed by a different organisation (CONCOR), however owned by the railways. While this has the benefit of a standardised service, the service levels themselves are poor because of the monolithic nature of the organisation. On the other hand, in the case of the road sector, the activities are under different organisational entities, leading to relatively better service levels especially at the customer interface. This better service level has resulted in the customer mode choice being in favour of road which has a higher market share of 60 per cent of the total ton km freight traffic. However, it is still a matter of debate as to whether unbundling of the infrastructural activities, possibly along the lines suggested in Figure 1, would actually improve service (including cost and safety parameters), especially since transactions cost due to increased need for co-ordination would go up significantly. It is also felt that for resource additionality for investment in these sectors, such unbundling may be essential to attract private operators.

The next section outlines the market environment of the infrastructure sector, defining the specific nature, variety and scope of the service desired. The following section deals with the current status and trends of the various infrastructure sectors. The final section examines the supplier user interface.

2. Market Environment

Figure 2 outlines a framework to segment the users as bulk, industrial, consumer durable and consumer goods manufacturers. Bulk goods manufacturers deal with raw materials extraction and subsequent conversion (eg, cements sponge iron, etc). Industrial manufacturers deal with capital goods and machinery and processed inputs (eg, steel, machine tools, lubricants, etc). Consumer durable manufacturers deal with white goods (eg, refrigerators, washing machine,

Figure 2

Framework to Segment Users

PRIVATEBulkIndustrialConsumer DurableConsumer Goods

Value Addition (VA)LowHigh

Consumer TypeIntermediaryFinal Consumer

% of Logistics Costs as Proportion to VAHighLow

Customer Sensitivity to Availability LowHigh

television, etc). Consumer goods manufacturers deal with non durable (eg, pharmaceuticals, toiletries, etc).

Bulk goods are typically transported in large shipment sizes. Therefore dedicated vehicles, specialised modes of transport and handling are important. Industrial goods have high value and are often critical. Therefore the need for speedier transport of goods. Some items require specialised transportation and handling. For consumer durable goods, inventory costs trade off are significant. Appropriate distribution networks play an important role. For consumer goods, availability is an important factor. Logistics choices are governed by better service levels rather than costs. Appropriate distribution networks and warehouse locations play an important role. The users are often willing to pay a premium for superior service.

We consider four key attributes on which these segments can be distinguished. They are value addition (VA), consumer type, percentage of logistics costs as proportion to VA, and customer sensitivity to availability.

Value addition refers to the difference in the selling price of the output and the cost price of material inputs. This is typically lower in the bulk goods industries and higher in the consumer goods industries.

By consumer type we mean whether the consumers are intermediaries who add value through further conversion of the product, or the final consumers of the product. Bulk and industrial sectors sell products which go through further conversions, while consumer durable and consumer good sectors sell products to the final consumers.

The percentage of logistics cost to the total value added signifies the importance of logistics related activities from the cost perspective. It is high for bulk goods manufacturers, while it is low for the consumer goods manufacturers. For bulk goods, total logistics cost as a proportion of value addition is about 70 per cent, out of which transportation costs constitute nearly two third. Such customers are very price sensitive. For consumer goods and durables, total logistics costs as a proportion of value addition does not exceed 10 per cent, out of which transportation costs constitute less than a third. Such customers are very service sensitive.

Customer sensitivity to availability is how sensitive the customer would be in switching product loyalties, should availability (or, any other service parameter) be in question. It is generally low for bulk goods manufacturers, while it is high for consumer goods manufacturers.

Apart from the commodity wise segmentation provided while discussing the framework in the paper, other dimensions of segmentation should also be kept in mind. Some of these are by special nature of the commodity, geographic or by use. For example, perishable commodities or hazardous commodities require specialised infrastructure support. Understanding geographic (origin-destination) requirements would enable a focus on appropriate infrastructure investments, especially from the perspective of economies of scale. The segmentation by use would enable an assessment of value addition provided to the customer and the consequent requirements of infrastructural services. For example, movement of samples, spares, or repair and return would require a high level of co-ordination and appropriate speedy servicing to truly add value to the customer.

We discuss below two examples of special nature of commodities, namely perishable products and hazardous goods. Both of these are inadequately provided for in the Indian context.Transportation and storage of perishable foods and drugs need adequate and geographically spread cold chain infrastructure, including cold rooms and warehouses, refrigerated trucks, appropriate containers with cold packs etc. These commodities need to be kept cold till they are consumed, so as to maintain their freshness and reduce wastage. Losses and wastage in perishables is estimated to be as high as 30%.

Transportation of hazardous goods assumes great importance for a variety of industries such as petrochemicals, textiles, dyes and chemicals etc. The logistics problems arise due to the handling requirements and safety aspects. The transportation and storage of such goods are both under and over regulated. Under regulation often leads to accidents with consequential damages and inadequate post accident measures. On the other hand, over regulation leads to delays and high costs of transportation.

The demand today is for heightened service performance - shorter lead times, more frequent deliveries, no losses, and delivery within specified time windows, as well as value added services like bar coding of secondary packaging, direct store/customer delivery and insurance. At the

same time, the users could be induced to pay a premium for such infrastructure services, and even more if a branded service stands guarantee.

3. Status and Trends

We examine the status and trends of key infrastructure providers who enable the physical, information and cash flows. For the physical flow, we classify the infrastructure according to the technology of the mode used for the right of way. These are rail, road, water, air and pipeline. Key infrastructure providers in each mode are described, followed by intermodal (materials handling and warehousing) and multimodal transport operators. This is followed by providers for the other two flows, namely information technology services and banking, and lastly integerated service providers called Business Logistics Services.

Indian Railways

In 1997-98, IR carried nearly 12 million passengers per day and lifted more than 1.2 million ton of freight traffic daily on a network spread over 62, 495 route km (right of way) covering 6995 stations (terminals). As of March 1998, there were 7200 locomotives (62 per cent diesel) and 2,64,000 wagons (vehicles) [Indian Railways, 1999].

The IR network essentially consists of two gauges: broad gauge and metre gauge. Broad gauge, although forming 69 per cent of the route, generated 98 per cent of the freight output in net ton kms and 91 per cent of the passenger output in passenger kms. Transhipment from broad gauge to metre gauge and vice versa is a costly affair. The operating ratio (total cost/total revenue) for metre gauge is 171 per cent as compared to 81 per cent for broad gauge. To increase the capacity of the system and to improve the efficiency of its network, IR has been involved in an ambitious project of converting 13,000 kms from metre gauge to broad gauge. Selection of routes/areas for conversion is an important decision which may be based on a cost benefit analysis. Specifically, the cost of gauge conversion (estimated to be 75 per cent of laying a new railway line) and the benefits due to factors such as lesser transhipment requirements, greater load carrying capacity for the network, greater terminal efficiency and rolling stock utilisation due to reduced turn around times, and the improved reliability/flexibility of the network needs to be evaluated.

The IR have been affected by competition from road, often attributable to poor customer orientation. For example, although wagon utilisation is going up, the time taken for the customer to get a wagon is increasing with attendant uncertainty. This reflects in customers preferring roads (especially consumer goods, consumer durable and industrial manufacturers) or having to buffer with additional inventory (bulk goods manufacturers). Assuming that current rail customers have to keep a months additional inventory, the increased investment cost to the customers is of the order of Rs 25-35 b, resulting in a working capital cost of Rs 3.5 b per year.

IR does not find a place in the consumer goods and durables market. In the bulk segment, IR is a major player, but could be pricing itself out with consistent fare increases. The overall share of traffic in ton kms in1997-98 for IR was under 40 per cent. Out of the total traffic in ton kms in 1997-98, coal accounted for 45 per cent, food grains 11 per cent, fertilisers 8 per cent, cement, ores, and petroleum and petroleum products 7 per cent each.

The financial support available to IR is inadequate to meet the investment requirement for various projects. This has prompted IR to look for alternative means of financing and execution of projects. At a strategic level, the restructuring of railways is an issue to facilitate revenue increases and cost minimisation. At a tactical level, all possible efforts to improve customer orientation would be critical.

Roads

Roads are classified into National Highways (NH) and State Highways (SH), which primarily carry the freight traffic, and a few other categories which primarily provide connectivity. The total length of NH is 35,000 km and that of SH 130,000 km. Out of the total 165,000 km length of NH and SH, only 2 per cent of their length is four lane, 34 per cent two lane and 64 per cent single lane. Between 1951 and 1994, the total number of vehicles has grown over eighty fold from 0.3 m to 25.3 m, ie, 8000 percent while the NH and SH have barely increased by 55 per cent and 118 per cent respectively. Congestion on the NH, which constitute 2 per cent of the total road length but carry 37 per cent of traffic in ton km, has thus become a significant problem.

Road conditions in India are among the worst in the world. Commercial vehicles in India are able to run only 250 km on an average per day, as compared to 600 km per day in the developed countries. The accident rates per vehicle km are among the highest in the world. The economic losses due to poor conditions of roads is estimated at Rs 200-300 b per annum [Mohan, 1996].

The working group on roads for the Eighth Five Year Plan predicted that freight and passenger traffic are expected to rise further to 800 BTK and 3000 BPK respectively by 2001. The elasticity of road traffic growth vis--vis GDP growth is 1.5 for freight traffic and 2 for passenger traffic. With a GDP growth rate of 7 per cent, the road traffic is expected to grow at a rate of 10 per cent per annum. There is a need to create expressway facilities to allow for rapid, unhindered and safe movement of fast moving vehicles. For medium traffic density corridors, widening to two lanes and strengthening of pavement and support infrastructure would be essential. For low traffic density roads, construction of missing links, and improvement of riding quality and safety need to be taken up.

According to estimates made by the surface transport ministry, Rs 745 b will be required for removal of deficiencies in the road sector over the next 10 to 15 years. Of this, the four laning of the "golden quadrilateral" linking the four metros alone is estimated to cost Rs 210 b. There is need to add another 32,000 km to the NH network, which is likely to cost about Rs 4000 b. This will have to be achieved by the construction of toll roads through organisations which would be a partnership between government and the private organised construction industry.

Trucking Companies

There are over 1.5 m trucks on the Indian roads. The industry is completely in the private sector. There are two kinds of players: trucking companies and truck operators. The former are really organised marketing companies, while the latter are generally owner driven, operating in a cut throat competitive environment with low overhead costs and margins. The trucking markets in India are well developed both in terms of geographical spread and market access through a brokerage system.

Due to the low margins, truckers tend to overload for short-term financial returns. The marginal returns from overloading are high enough that they can be shared with those incharge of enforcement, leading to a breakdown of the entire system. Further, there are inordinate delays at checkpoints. According to unpublished reports of Indian Motor Transport Congress, this delay is upto 50 per cent of the total transit time of trucks.

There is a move towards express distribution system. The operators are now able to offer services with predetermined schedule with a provision of penalty in case of default. In order to offer these services, a dedicated fleet of vehicles are needed. Therefore, the ownership of trucking companies becomes an important issue. Rather than private operators owning one or two vehicles, large operators with branded service would be essential. Strategies like choice of business focus on a route, a region, or a commodity, fleet composition (type and capacity) and size etc would be crucial.

The truck manufacturing sector has come up with much needed variety only since the 80s. Efficiency improvements in trucking operations depends significantly on the availability of multiple types of vehicles.

It is to the credit of the trucking sector that on price and on service dimensions like door o door delivery and claims processing, it has effectively competed with rail. Trucking serves the consumer goods, consumer durables and industrial products almost entirely and is taking an increasing share of the bulk goods. Reforms like removal of roadside tax collections, and more liberalised financing of trucks would be essential for further growth of the sector.

Shipping Companies

The strength of the Indian fleet is around 450 ships of just under 7-m grt (a carrying capacity of over 10 m tons). The average age of the Indian fleet at 15 years, which compares favorably with the average age of world fleet. The importance of shipping is due to the fact that 95 per cent of Indian exports and imports by volume is by sea. About 70 per cent of the cargo moves by foreign shipping companies. While availability of shipping per se is not a problem for the trade, the policy on promoting Indian shipping is ambiguous. Container traffic is projected to cross 2 m TEUs by 2000. There is also some growth in coastal shipping, especially since road and rail modes are quite congested.

Amendments in the Merchant Shipping Act have opened private capital markets to Indian vessel operators. The amendments also allow equity holding upto 51 per cent by foreign companies in Indian shipping companies, enabling the latter access to better technology, management and funds. The shipping industry has not been recognised as an infrastructure for various concessions. For example, depreciation is allowed at 20 per cent on written down value basis which is less than the other modes of commercial transport which enjoy 40 per cent depreciation.

The issues facing the shipping industry serving India are technology upgradation, increased container carrying capacity and focus on coastal shipping.

Ports

India has an extensive coastline of around 6000 km, with 11 major ports and 139 operable minor ports. The major ports account for 95 per cent of the total traffic handled. The major port traffic has been growing at 10 per cent annually over the recent few years. Out of the total traffic in tons during 1997-98, petroleum and petroleum products account for over 40 per cent, iron ore 18 per cent, coal 15 per cent, containers 8 per cent and fertiliser 4 per cent.

During 1994-95, out of over 12,169 port calls by vessels at the major ports, nearly 29,000 ship days were accounted for by pre berthing delays, 24,000 ship days due to non working time at the berth, and 37,000 ship days as working time at the berth. A rough assessment of the standing charges payable on various counts, keeping in view the profile of the ships, was US$258 m for pre berthing delays, US$189 m for non working time at the berth and US$315 m for working time at the berth. The unproductive time consisting of pre berthing delays and non working time at the berth add upto US$447 m. This accounts for nearly Rs 16 b as standing charges paid by the trade [Raghuram, 1997]. During 1997-98, similar calculations amount to Rs 25 b. This amount would wipe out a significant portion of the foreign earnings of the shipping sector. Thus, cargo shipped from Indian ports becomes cost inefficient and non competitive in the international market. Siltation is another problem affecting the major ports. This implies reduced draft availability, necessitating the use of uneconomical vessels and berthing delays.

It is imperative that ports be developed in a manner that they can be more efficient in stacking, loading, unloading and evacuating cargo. There are moves to simplify and rationalise port tariffs and restructuring ports to ensure a lean and responsive organisation. Other deregulation like in the petroleum products imports industry has released bottlenecks in infrastructure in terms of addition of new terminals and petroleum handling facilities. These have been financed entirely with private capital or as in the case of TISCOs leased berths at Haldia. Private investors could also rehabilitate, operate and maintain container terminals as has been done in the case of JNPT.

Apart from the major ports, development of minor ports is key step in developing coastal shipping. A lot more private interest has been evoked here by states like Gujarat and Maharashtra, presumably because the private parties see greater control in a minor port. Even shipping companies have entered the fray. The entry of shipping companies in the port sector is a good thing to happen and must be encouraged, since there are significant synergies in this.

Airlines and Airports

India has eight international airports including the four major metros and 85 domestic airports. The major airports handle over 90 per cent of the international traffic along with 40 per cent of the domestic traffic. There has been a significant increase in the air traffic ever since the government policy of open skies. The first segment to be liberalised was the air cargo service.

Growth in the aviation sector is primarily due to the private operators, and air express and courier companies. The growth is a result of a need for an efficient and speedy door to door cargo delivery requirement. In this respect, airport operations are still a bottleneck. Recently, airports have also been opened up for privatisation. In the express and small package market, acquisition of aircraft and expansion of services and a stream of new air eligible commodities have played significant roles in the growth of air cargo.

Pipelines

This is an emerging mode of transportation for products like petroleum (including gas and crude oil), iron-ore pellets, coal, etc, apart from the traditional products of water and sewage. In the Indian context, petroleum transportation by pipelines is receiving significant attention. Currently, out of eleven petroleum pipelines (ten for products and one for crude) in the public sector, IOC owns seven product and one crude oil pipeline. With the 1443 km long Kandla Bhattinda product pipeline, the IOC network of 5093 km carried 30.5 million tons of crude and petroleum products during 199798.

Indias existing pipeline network is grossly inadequate for transporting petroleum products, whose demand is expected to reach 115 million tons by 2011-12. During 1997-98, 24% of petroleum products were transported by pipeline, 31% by road, 38% by rail and 7% by coastal shipping. The pipeline mode is preferable to the other modes as it is cheaper, safer, more convenient and involves lesser losses and is environmentally neutral.

Government has set up a holding company called Petronet, with equity participation by major oil PSUs. As many as 18 product lines have been identified to be implemented by Petronet. Private sector companies are also planning to set up their own pipeline networks. RPL has proposed to construct a 3000 km pipeline network, cutting across seven states to carry petroleum products from Jamnagar to Hyderabad.

Materials Handling and Warehousing

Scientific warehousing is largely provided by public sector organisations, like Central Warehousing Corporation (CWC) and State Warehousing Corporations. These are generally perceived to be only for food grains and fertiliser, since they were historically developed for the agricultural sector. However, most organisations still resort to use of own warehousing, often in privately rented premises equipped poorly, rather than public warehousing. Third party logistics companies are a new entrant in providing warehousing.

Availability of sophisticated materials handling technologies is limited. Labour is most commonly used for materials handling. Consequently, in India, the total loss of goods while

transporting from the production centre to the final user is estimated to be 14 per cent, while in developed countries it would be in the range of 4-6 per cent. The wastage in case of agricultural commodities and other perishable commodities is significantly higher, estimated at 30 per cent. Delays are also a consequence of the above problems.

Important decisions related to warehousing are: own vs rent, centralised vs decentralised warehousing, number of warehouses, capacity of warehouse, location, layout and design and level of technology, especially for materials handling.

Multimodal Transport Operators

Multimodal transport refers to transportation of goods across more than one mode in an integrated and seamless manner from the origin to the destination. Containerisation of goods is a key technology in making multimodal transport more effective and efficient. Containerised transportation is provided by CONCOR, major shipping lines and other multimodal transport operators (MTOs). Terminal infrastructure like Inland Container Depots (ICDs), and Container Freight Stations (CFSs) are provided by Central Warehousing Corporation, CONCOR, and certain shipping lines. A Multimodal Transport of Goods Act was enacted in 1993 to provide the necessary legislative framework to promote multimodal transport.

Containerisation has brought about a technological revolution on account of benefits such as door to door delivery, speedy intermodal transfers, low handling costs, reduced breakage and pilferage, lower insurance costs etc. It has been recommended that to make ports more efficient in handling container traffic, it is necessary to evacuate containers away from port areas to ICDs. Apart from containerisation, roll on roll off (RORO) services also facilitate multimodal transport. Examples are trucks using ferries for river and gulf crossings, or even longer segments, say along the coast, or by rail along key congested road segments. The recent RORO service offered by Konkan Railway Corporation for trucks is an example of the latter.

While there is growth in the physical infrastructure, the growth in the service infrastructure is less than desirable, in spite of the enabling legislation. Various shortcomings have since been identified in the Act. Necessary banking, insurance and document transfer support has not yet fallen into place. The need of the hour is a branded, single window service which the MTOs can provide. Also speedy and transparent custom clearance will help in a large way to facilitate multimodal transport for exports and imports. While multimodal service infrastructure has developed in the export import domain, its scope in domestic movement is largely untapped.

The government is also thinking about streamlining customs formalities and allowing private truckers to move containers "in bond" over roads, reducing delivery times. There is a need to simplify the customs procedures, especially for container stuffing and destuffing operations. A more effective system of providing insurance to the inland segment of freight movement is required.

Information Technology Services

Information Technology (IT) plays a crucial role in improving the service levels of any company.

IT software which is used in Management Information Systems for tracking raw materials, finished goods, inventory management, etc. is provided by software and consultancy companies. Integrated software like Enterprise Resource Planning (ERP) is being used increasingly. Electronic transfer of documents through Electronic Data Interchange (EDI), on line transaction processing and other network services are beginning to be commercially available. A new revolution in terms of E-commerce is expected to influence the nature of logistics and supply chain management considerably. Decision support system oriented software for supply chain management is also coming into the market. Information technology solutions providers, communication companies and third party logistics companies offer such services.

With the continued reduction in import tariffs of communication equipment and the entry of IT multinationals, Indian companies have started implementing state of the art communication systems, viz, VSAT, leased lines, etc, which aid logistics management. The reach and reliability of such services is still less than desirable. Standardisation of these software and documentation is another problem.

Adoption of IT has been slower than what is technologically possible due to lack of availability of wide communication networks in the public domain, lack of awareness on the part of the users and lack of suitable legislation for dispute settlement.

Banks

Banks are a key infrastructure in the cash flow part of supply chain management. Quick clearance of checks, advances against letters of credit, insurance against payment defaults etc are essential services. The utility of a cheque as an instrument for payment and transfer of money depends upon its quick clearance. The banking system has grown tremendously in reach. The number of commercial bank branches has increased from a little over 4000 in 1951 to nearly 64,000 in 1997. In the same period the number of cheques cleared went up from 280 lakh to 7833 lakh per annum.

Banks are making increase use of information technology, including mechanised clearance of cheques. Electronic funds transfer through inter bank electronic network is another facilitator of supply chain management. However, in terms of speed and value added service, there is scope for improvement.

Business Logistics Services

The service sector which was characterised by not so professional and local agents involved as clearing and forwarding agents, distribution agents, stockists, wholesalers etc, who competed primarily on "contacts," is giving way to a branded national service requirement being provided by third party logistics companies. These companies also manage the transportation and storage infrastructure. Today, there are atleast six companies with a national presence and providing such services to multinationals, high value and critical item industries, like computers, engineering spares, etc.

Insufficient access to high quality infrastructure and the resultant capital investments requirements are deterrents to this otherwise sunrise sector.

4. Supplier User Interface

Examining the infrastructure provider and user interaction, we can state that the bulk manufacturers would be more dependent on the infrastructure hardware, while at the other end, the consumer goods manufacturers would be more dependent on the infrastructure software and even more specifically on value added services. While examining the market for an infrastructure hardware provider, say a terminal operator, it can be stated that the bulk manufacturer market is more significant then a consumer good manufacturer. Similarly, for storage services, the consumer good manufacturer market would be more significant than the bulk manufacturer. This is because consumer goods have to reach retail outlets, often through a break bulk point where storage services are essential. However, bulk goods often can be transported directly from point of production to point of consumption. Thus, the infrastructure provider has to be sensitive to the market environment in terms of their logistical requirements.

For the user, one of the key decisions regarding infrastructure is how much to insource versus outsource. The more extensive the logistics requirements and/or the more uncertainty due to logistics supply, insourcing would be a right direction. Else, the general norm in this business is outsourcing. If insourcing (as generally in the case of bulk manufacturers), capacity and location of infrastructure would be key decisions. If outsourcing (as generally in the case of consumer goods and durables), selection of infrastructure service provider and appropriate contracting terms in a partnership context would be key decisions.

The overall significance of the infrastructure sector can be assessed from the investment requirements estimated for the coming decade. Assuming, an average 10 to 12 per cent per annum industrial growth and a 15 per cent average growth rate for exports for the next decade, the estimated investments required in the infrastructure sector are as given below: Rs 4000-4500 b for the five year period 1996-97 to 2000-01, and Rs 7500 b for the period 2001-02 to 2005-06. These include investments in power, telecom and urban infrastructure, which do not have direct implications limited to logistics. The sector wise financial requirement for the 10 year period are: power Rs 5000 b, telecom Rs 1000 b, roads Rs 1150 b, ports Rs 255 b, urban infrastructure Rs 2800 b and railways Rs 2000 b [Mohan, 1996].

The major bottlenecks in infrastructure management are: (a) generating resources, (b) using them effectively in asset creation, and (c) effective and efficient operations management. To overcome these bottlenecks, better stake holding by involving the private sector has been recommended. The involvement of private parties in a significant way has yet to take place.

Infrastructure providers will have to reorganise themselves along business divisions and reorient their outlook to fit into the logistics requirements of their customers. Sharing of information with customers and improving the quality of such information is another important step. For example, a track and trace system to enable online information of cargo status is critical. The IRs freight operations information system is a desirable step in this regard. Using IT network features, all infrastructure service providers should provide online access to customers on a variety of features like pricing, schedules, status, order processing, etc.

Most infrastructural services can provide value addition to the customer by appropriately extending the scope of services, keeping in mind customer needs. Analysis would typically include market segmentation and then examining the costs and benefits for various alternatives both from the customer segment and infrastructure providers perspective. Unless there is long term thinking, investment planning would be sub optimal. Appropriate strategic orientation on the part of infrastructure providers is called for.

References

1. Crainic TG and Laporte G, Planning Models for Freight Transportation, European Journal of Operational Research, 1997

2. Indian Railways, Year Book 1997-98, 1999

3. Mohan Rakesh, The India Infrastructure Report, National Council of Applied Economic Research, New Delhi, 1996

4. Pangotra PP and Raghuram G, Resource Mobilisation Strategies for Financing of Transport Infrastructure and Services, Asian Transport Journal, May 1997

5. Raghuram G, Logistics Management: An Introductory Note, Vikalpa, 1992

6. Raghuram G, Towards a National Shipping Policy - A Study of the Indian Shipping Industry PSG Monograph no. 67 Indian Institute of Management, Ahmedabad. 1997

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