auto logisitcs report

Final Report

Methodology for measuring the logistics cost for major manufacturing exports and assessing

its impact on their competitiveness

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Table of contents

1 Introduction ........................................................................................................................... 9 1.1 Project background ........................................................................................................... 9

1.2 Objectives of the study ................................................................................................... 10 1.3 Scope of the study .......................................................................................................... 11 1.4 Approach ........................................................................................................................ 11 1.5 Purpose of the report ...................................................................................................... 13 1.6 Limitations of the study.................................................................................................. 13

1.7 Structure of this report.................................................................................................... 14 2 Executive Summary ............................................................................................................. 16 3 Chemicals ............................................................................................................................. 32

3.1 Present Scenario ............................................................................................................. 32 3.2 Geographical presence ................................................................................................... 33 3.3 Government policies covering exports ........................................................................... 34 3.4 Export potential .............................................................................................................. 36

3.5 SWOT Matrix ................................................................................................................. 36 3.6 Factors affecting Competitiveness ................................................................................. 36

3.7 Major bottlenecks identified and recommendations ...................................................... 39 3.8 Feedback from trade bodies ........................................................................................... 41 3.9 Competing countries scenario ........................................................................................ 42

3.10 Other recommendations .............................................................................................. 42 4 Textiles .................................................................................................................................. 44

4.1 Present Scenario ............................................................................................................. 44

4.2 Geographical presence ................................................................................................... 45

4.3 Government policies covering exports ........................................................................... 46 4.4 Export potential .............................................................................................................. 46

4.5 SWOT matrix ................................................................................................................. 47 4.6 Factors affecting competitiveness .................................................................................. 47 4.7 Major bottlenecks identified and recommendations ...................................................... 48

4.8 Feedback from trade bodies ........................................................................................... 50 4.9 Competing countries' scenario ....................................................................................... 51 4.10 Other recommendations .............................................................................................. 52

5 Automobiles & auto components ....................................................................................... 53 5.1 Present scenario .............................................................................................................. 53 5.2 Geographical presence ................................................................................................... 56

5.3 Government policies covering exports ........................................................................... 57 5.4 Export potential .............................................................................................................. 58 5.5 SWOT matrix ................................................................................................................. 59 5.6 Factors affecting competitiveness .................................................................................. 60

5.7 Feedback obtained from industry trade bodies .............................................................. 61 5.8 Major bottlenecks identified and recommendations ...................................................... 62 5.9 Competing countries scenario ........................................................................................ 69 5.10 Other recommendations .............................................................................................. 70

6 Food processing.................................................................................................................... 72 6.1 Present scenario .............................................................................................................. 73

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6.2 Geographical presence ................................................................................................... 73 6.3 Government policies covering exports ........................................................................... 73 6.4 Export potential .............................................................................................................. 75 6.5 SWOT matrix ................................................................................................................. 75

6.6 Factors affecting competitiveness .................................................................................. 76 6.7 Feedback obtained from industry trade bodies .............................................................. 77 6.8 Major bottlenecks identified and recommendations ...................................................... 77 6.9 Competing countries scenario ........................................................................................ 88 6.10 Other recommendations .............................................................................................. 89

7 Policy initiatives by concerned Ministries ......................................................................... 90 7.1 Chemicals ..................................................................................................................... 90

7.2 Textiles & Apparels ....................................................................................................... 91

7.3 Auto & Auto components .............................................................................................. 92 7.4 Food processing.............................................................................................................. 93

8 Issues inflating the logistics costs and leading to time over-runs .................................... 95

9 Mapping of logistics movement and cost analysis – West Zone .................................... 100 9.1 Zonal mapping and logistics cost analysis - Maharashtra and adjoining areas ............ 100

9.2 Zonal mapping and logistics cost analysis - Gujarat .................................................... 104 9.3 Major bottlenecks identified and recommendations .................................................... 109

10 Mapping of logistics movement and cost analysis – East zone .................................. 113

10.1 East zone overview ................................................................................................... 113 10.2 Zonal mapping and logistics cost analysis ............................................................... 114

10.3 Major bottlenecks identified and recommendations ................................................. 121 11 Mapping of logistics movement and cost analysis – North Zone ............................... 124

11.1 North zone overview ................................................................................................ 124 11.2 Zonal mapping and logistics cost analysis ............................................................... 125

11.3 Major bottlenecks identified by the exporters and recommendations ...................... 131 12 Mapping of logistics movement and cost analysis – South Zone ............................... 134

12.1 South zone overview ............................................................................................... 134

12.2 Zonal mapping and logistics cost analysis ............................................................... 135 12.3 Major bottlenecks identified and recommendations ................................................. 140

13 Logistic policy framework ............................................................................................. 146 14 Logistics performance and benchmarking .................................................................. 155

15 Recommendations for improvement of exports competitiveness .............................. 165 15.1 Seaports .................................................................................................................... 165 15.2 Rail............................................................................................................................ 171

15.3 Shipping .................................................................................................................... 173 15.4 Roads ........................................................................................................................ 174 15.5 Exports policy ........................................................................................................... 176 15.6 Others........................................................................................................................ 177

15.7 Role of industry in improving competitiveness ........................................................ 178 15.8 Specific issues pertaining to policies ........................................................................ 179 15.9 Suggested action points for the Government ............................................................ 180

Annexure 1: Chemical sector recommendations ........................................................................ 184 Annexure 2: Government policies related to textile exports ....................................................... 188 Annexure 3: Textile sector specific recommendations ................................................................ 190

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Annexure 4: Food processing sub sectors .................................................................................. 194 Annexure 5: Recommendations for the FPI ................................................................................ 198 Annexure 6: Food laws ............................................................................................................... 201 Annexure 7: Licensed FPI units in the country .......................................................................... 202

Annexure 8: Competitor countries in food processing ............................................................... 203 Annexure 9: List of respondents ................................................................................................. 206 Annexure 10: Clarifications to the queries on the Final Report indicated by NMCC ............... 210

List of figures

Figure 1 : Study approach ....................................................................................................................... 12

Figure 2: Respondents covered under the primary survey ................................................................ 13

Figure 3 : Distribution of manufacturing capacity in Chemicals ........................................................ 33

Figure 4 : Concentration of Chemical industries in Gujarat ............................................................... 33

Figure 5 : Chemical industry competitiveness model ......................................................................... 37

Figure 6 : Distribution of textile capacity ............................................................................................... 45

Figure 7 : Valuation of global textile market ......................................................................................... 46

Figure 8 : Textile Industry competitiveness model .............................................................................. 48

Figure 9 : Export trends for passenger and commercial vehicles segment .................................... 53

Figure 10 : Export trends for two wheeler and three wheeler segment ........................................... 54

Figure 11 : Export turnover of auto-components sector in USD billion ............................................ 55

Figure 12 : Major automotive cluster in India. ...................................................................................... 56

Figure 13 : Projected automotive exports till 2012 .............................................................................. 58

Figure 14 : Projected auto component exports in US$ million till 2012 ........................................... 58

Figure 15 : Automobile and auto-component industry competitiveness model .............................. 60

Figure 16 : Food Processing industry competitiveness model .......................................................... 76

Figure 17 : Logistics cost parameters ................................................................................................. 100

Figure 18 : Recommendations for facilitating seamless export movement from Gujarat region 108

Figure 19 Recommendations for facilitating seamless export movement from Maharashtra & South Gujarat .......................................................................................................................................... 108

Figure 20 : Major CONCOR - NCR Export Cargo Movement (April 2006-07).............................. 124

Figure 21 : Recommendations for facilitating seamless export movement from the NCR ......... 128

Figure 22: Recommendations for facilitating seamless export from Indore – Pithampur region .................................................................................................................................................................. 130

Figure 23 : Southern India region ........................................................................................................ 134

Figure 24 : Hinterland mapping for Cochin Port ................................................................................ 135

Figure 25 : Efficiency of the clearance process by customs and other border agencies ............ 155

Figure 26 : Quality of transport and information technology infrastructure for logistics .............. 156

Figure 27 : Ease and affordability of arranging international shipments ....................................... 157

Figure 28 : Competence of the local logistics industry ..................................................................... 157

Figure 29 : Ability to track and trace international shipments .......................................................... 158

Figure 30 : Domestics logistics costs .................................................................................................. 159

Figure 31 : Timeliness of shipments in reaching destinations......................................................... 159

Figure 32 : LPI score of India and other countries ............................................................................ 160

Figure 33: Global Logistic Best Practices ........................................................................................... 161

Figure 34 : Hinterland based classification of ports in India ............................................................ 165

Figure 35: Port connectivity model ...................................................................................................... 167

Figure 36 : Port road connectivity ........................................................................................................ 168

Figure 37: Conceptual diagram of barging operations ..................................................................... 169

Figure 38: Proposed linkage with DFC ............................................................................................... 172

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Figure 39: Reorganization model for unorganized SSI unit’s development (proposed).............. 192

List of tables

Table 1: Valuation of Indian chemical market segment ...................................................................................... 32

Table 2: SWOT analysis of the Indian Chemical industry ................................................................................... 36

Table 3: Logistics cost associated with chemical exports ................................................................................... 37

Table 4: Export of Indian Textile segments in value terms during April to February (2006-07 & 2007-08). 44

Table 5: Export value of Indian Textile post MFA ................................................................................................ 45

Table 6: SWOT analysis of the Indian textile and apparel industry ................................................................... 47

Table 7: Major auto/ ancillary export destinations ................................................................................................ 55

Table 8: SWOT analysis of the Indian automobile and auto-component industry .......................................... 59

Table 9: Vehicle registrations in 2007 across the leading Asian automobile manufacturing nations ........... 70

Table 10: SWOT analysis of the Indian food processing industry ..................................................................... 75

Table 11 : Inland freight cost by road from factory unit to JN Port .................................................................. 103

Table 12 : Break-up of total logistics cost for the movement of a TEU from Kolhapur to JNPT ................ 103

Table 13 : TEU rail tariff charges from Sabarmati to JNPT/NSICT/GTIL ports ............................................. 105

Table 14 : Break-up of total logistics cost ex Sabarmati to JNPT port ............................................................ 105

Table 15 : TEU rail tariff charges from Baroda to JNPT/NSICT/GTIL ports ................................................ 106

Table 16: Comparison between ICD of Ahmedabad, Baroda and Indore ...................................................... 106

Table 17 : Terminal Handling Charges for FCL at Kolkata , Haldia and ICD ................................................. 118

Table 18 : Terminal Handling Charges for LCL at Kolkata , Haldia and ICD ................................................ 119

Table 19 : Movement of a 20’ container (TEU) from Hugli to Kolkata (excludes sea-freight) ..................... 119

Table 20 : Movement of a 10 ton truck load from Kolkata to Bangladesh ...................................................... 119

Table 21 : Movement of a rake (40 wagons) from Barauni at Bihar to Bangladesh ..................................... 120

Table 22 : Movement of a 20’ container (TEU) from Assam to Kolkata (excludes sea-freight) .................. 120

Table 23: TEU & FEU rail tariff charges ex Ludhiana to western region ports .............................................. 127

Table 24: TEU & FEU rail tariff charges ex Tughlakabad to western region ports ....................................... 127

Table 25: Break-up of total logistics cost ex NCR to JNPT port ...................................................................... 128

Table 26: TEU rail tariff charges ex Pithampur to JNPT/ NSICT / GTIL ports .............................................. 129

Table 27 : Break-up of total logistics cost for movement of a TEU from Pithampur to JNPT ...................... 130

Table 28 : Comparative cost of rail freight v/s inland road transportation in % ............................................. 131

Table 29 : Road freight charges ........................................................................................................................... 137

Table 30 : Rail freight charges In INR (excluding the applicable taxes) ......................................................... 137

Table 31 : Movement of a 20’ container (TEU) from Hyderabad to various ports by road .......................... 137

Table 32 : Movement of a 20’ container (TEU) from Hyderabad to various ports by rail ............................. 138

Table 33 : Movement of a 20’ container (TEU) from Chennai and adjoining areas to Chennai Port by road ................................................................................................................................................................................... 138

Table 34 : Movement of a 20’ container (TEU) from Coimbatore to various ports by road ......................... 138

Table 35 : Movement of a 20’ container (TEU) from Bangalore to various ports by road & rail ................. 139

Table 36 : Movement of a 20’ container (TEU) from Cochin and adjoining areas to Cochin Port .............. 139

Table 37 : Movement of a 20’ container (TEU) from Palakkad and adjoining areas to Cochin Port .......... 140

Table 38 : Comparison of load capacities in various countries ........................................................................ 158

Table 39 : Country specific logistics performance data..................................................................................... 160

Table 40 : Comparison between container traffic at all India ports and North West ports ........................... 166

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3PL Third Party Logistics

4PL Fourth Party Logistics

AAI Airports Authority of India

ACMA Automotive Component Manufacturers Association of India

AEPC Apparel Export Promotion Council

AMP Automotive Mission Plan

APEDA The Agriculture and Processed Food Products Exports Promotion Agency

ASEAN Association of South East Asian Nations

ATC Agreement on Textile and Clothing

ATI Automotive Training Institute

AWBC Australian Wine Board Council

BAF Bunker Adjustment Factor

BG Broad Gauge

BIS Bureau of Indian Standards

BIWA Bangladesh Inland Waterways Authority

BoI Board of Investment

BOOT Build, Own, Operate and Transfer

BRIC Brazil, Russia, India, and China

C&F Clearing and Forwarding Agent

CAF Currency Adjustment Factor

CAGR Compound Annual Growth Rate

CAPEXIL Chemical and Allied Export Products Council

CBEC Central Board of Excise and Customs

CBU Completely Built Unit

CEPC Carpet Export Promotional Council

CFS Container Freight Station

CFTRI Central Food Technical Research Institute

CHA Customs House Agents

CIWTC Central Inland Water Transport Corporation

CKD Complete Knocked Down

CMIE Centre for Monitoring Indian Economy

CNG Compressed Natural Gas

CONCOR Container Corporation of India Ltd.

Cr. Crore

CV Commercial Vehicles

CWC Central Warehousing Corporation

CY Container Yard

D.G.C.I.& S Directorate General of Commercial Intelligence and Statistics

DEPB Duty Entitlement Pass Book

DFC Dedicated Freight Corridor

DGFT Director General of Foreign Trade

EDI Electronic Data Interchange

EOU Export Oriented unit

EPCG Export Promotion Capital Goods

EPZ Export Processing Zones

ERMIU Economic Research and Market Intelligence Unit

ETP Effluent Treatment Plant

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EU European Union

EXIM Export Import

FDI Foreign Direct Investment

FEU Forty-feet Equivalent Unit

FICCI Federation of Indian Chamber of Commerce and Industry

FOB Free on Board

FPI Food Processing Industry

FTA Free Trade Agreement

FTZ Free Trade Zones

GACL Gujarat Alkalies and Chemicals Ltd

GDP Gross Domestic Product

GHS Globally Harmonized System

GoI Government of India

GPS Global Positioning System

GSFC Gujarat State Financial Corporation

GSP Generalized Systems of Preferences

GTIL Gateway Terminals India Private Ltd.

ICD Inland Container Depot

INR Indian Rupee

IPCL Indian Petrochemicals Corporation Limited

IPR Intellectual Property Rights

IRR Internal Rate of Return

ITI Industrial Training Institute

JIT Just in Time

Km Kilo Meter

KoPT Kolkata Port Trust

LC Letter of Credit

LCC Low Cost Countries

LCL Less than Container Load

LCV Light Commercial Vehicles

LDPE Low Density Polyethylene

LPI Logistic Performance Index

LSP Logistics Service Providers

M&HCV Medium & Heavy Commercial Vehicles

MFA Multi-Fibre Agreement

MIS Management Information System

MOCI Ministry of Commerce and Industries

MPEDA The Marine Products Export Development Authority

MPV Multi-Purpose Vehicles

MSME Micro, Small and Medium Enterprises

MSP Minimum Support Price

N/A Not Applicable

NATRIP National Automotive Testing and R&D Infrastructure Project

NCR National Capital Region

NH National Highway

NHAI National Highway Authority of India

NHDP National Highway Development Programme

NMDP National Maritime Development Programme

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NMCC National Manufacturing Competitiveness Council

NMPT New Mangalore Port Trust

NSICT Nhava Sheva International Container Terminal

NVOCC Non Vessels Owning Container Operator

OEM Original Equipment Manufacturer

OPE Out of Pocket Expenses

PC Port connectivity

PCPIR Petroleum, Chemicals and Petrochemical Investment Region

PMO Prime Minister's Office

PPP Public Private Partnership

PV Passenger Vehicles

R&D Research and Development

RBI Reserve Bank of India

RCA Revealed Comparative Advantage

RCT Rail Container Terminal

REACH Registration on Authorisation, Evaluation, Authorization and Restriction of Chemicals

RTO Road Transport Office

SAARC South Asian Association for Regional Cooperation

SCI Shipping Corporation of India

SEZ Special Economic Zone

SIAM Society of Indian Automobile Manufacturers

SKD Semi Knocked Down

SME Small and Medium Enterprises

SPV Special Purpose Vehicle

SSI Small Scale Industry

SWOT Strengths, Weaknesses, Opportunities and Threats

TAMP Tariff Authority for Major Ports

TEU Twenty-Feet Equivalent Unit

TEXPROCIL Cotton Textiles Export Promotion Council

THC Terminal Handling Charges

TKD Tughlakabad

TPM Total Productive Maintenance

TQM Total Quality Management

TRAI Telecommunications Regulatory Authority of India

U.K United Kingdom

UNIDO United Nations Industrial Development Organization

USA United States of America

VAT Value Added Tax

VKGUY Vishesh Krishi Gram Udyog Yojana

w.r.t. With respect to

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1 Introduction

1.1 Project background

Post-liberalization, India has been consistently recording impressive economic growth rate despite myriad

challenges being faced in the global market place. After an average growth rate of 7.7% in the Tenth Plan

period (2002-03 to 2006-07) out of which the last four years had an average growth rate of 8.7%, India is

targeting a growth rate of 8.5% in the eleventh Five Year Plan. History has shown that export-led growth

is crucial for sustaining economic growth. Accordingly India must initiate necessary measures to create

an environment conducive for growth in exports in all its major industrial sectors.

The figure below illustrates the export performance trends over the past five years

* - ( Apr-Dec average)

Source: CSO, PM’s economic advisory council, DIPP, Economic Survey 2009-10

Given the high growth rate witnessed in EXIM trade over the past few years, there is concern over the

adequacy and efficiency of logistics infrastructure system to support the growing foreign trade at a

competitive cost. The need to improve on the existing logistics setup for seamless cargo movements and

facilitated by trade-friendly EXIM policies has been long felt. The Union Industry and Commerce Minister,

(Government of India) vide a forward note in the foreign trade policy 2004-09 has spelt out the

commitment of the Government in facing the challenges to make India a trading superpower.

The key to success in a global market would be to add value (to enable command better price and reduce

competition) and trim down cost by integrating process and capacity to enjoy economies of scale.

Government assistance would be required in improving common infrastructure including logistics and

providing impetus by policy incentives.

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Logistics cost in India is comparatively high, and is estimated to be around 13-15% of the national GDP,

compared to other developed countries where the logistics cost is restricted to single digit percentage. A

reduction in logistics costs by even one percentage point will result in noteworthy savings annually1.

Besides, significant benefits can also be reaped through the multiplier effect of having a better logistics

infrastructure thus accelerating India‘s economic growth. It has also been identified that manufacturing

and marketing companies spend about 6 to 36% of their expense on sales on logistics activities. In effect,

this entails the need for joint involvement of the Government of India (GoI) and the industry to identify the

various logistics constraints and to facilitate framing of policy initiatives for the development of necessary

logistics infrastructure in order to reduce logistics cost. This will in effect improve competitiveness of the

Indian Industry in the global marketplace.

Federation of Indian Chamber of Commerce and Industry (FICCI) is one of the premier trade bodies covering

a large number of Chambers of Commerce and industry members. FICCI leads as the proactive business

solution provider through research, interactions at the highest political level and global networking. It has in

the past undertaken various initiatives to study the factors affecting the export potential of Indian Industry.

FICCI has now been requested by the National Manufacturing Competitiveness Council (NMCC),

Government of India, to conduct a comprehensive study on identifying the total logistics cost attached to the

exports logistic transactions of a few identified commodities and to recommend steps needed for

improvement in the export logistics transaction and any fiscal initiatives.

A few major industry sectors have been identified by NMCC that would act as the sample sectors for

assessment of the logistics costs involved in the industries‘ exports and its impact on the industries‘ per se

competitiveness. The major industry sectors so identified are:

Textiles and Apparels

Automobile & Auto-components

Processed Food

Chemicals

This Report contains additional points on the 2009 report titled “Logistics Cost Study” and have been

included based on the request of NMCC. These additional details have been highlighted in bold in the

report and are derived from the feedback on the report received by NMCC from some of the key

stakeholders

1.2 Objectives of the study

Logistics plays a vital role in facilitating the export import (EXIM) trade. With a view to identify the issues

faced by the industries in movement of export-destined goods, and with an objective to reduce time and cost

involved, a study to identify the major bottlenecks faced by the various industries was mandated. The study

covered the inland logistics mapping of export consignments, problems faced by the exporters in various

regions along with the cost and time overrun. This was primarily carried out through interactions with various

stakeholders associated with the identified industries. Possible recommendations to address the issues so

1 World Bank’s report on LPI suggests that a 0.5% decrease in logistics costs leads to 2% growth in trade

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identified have also been detailed in an endeavor to make the export logistics chain more efficient. This

would enable reduction in time and logistics costs.

The study seeks to achieve and cover the following objectives:-

1. To measure the logistics cost (both in terms of time & money) for the major exports of India

2. To analyze the impact of this logistics cost on the competitiveness of these manufactured export

items

3. To identify the various parameters that determines the cost of logistics service of these exports

4. To identify the cost at each point of movement and suggest measures to minimize the cost

1.3 Scope of the study

The study would essentially involve interacting and obtaining feedback from a prudent mix of leading

manufacturers, Small & Medium Enterprises (SMEs) and other relevant stakeholders across the country,

with 100 respondents from each zone. The data / information obtained from the sample groups would

reflect the ground reality faced by the manufacturers / exporters on logistics related issues. Secondary

research would assist in understanding the various industry sectors and to review the various regulatory

aspects / policies impacting export performance. After considering the inputs received from primary

survey interactions, the study will suggest suitable recommendations.

The following activities list out scope of the study in brief:

To understand and map out the various logistics factors and parameters involved in exports of the

industries identified by undertaking a pan-India primary survey

Analyze and identify the major hurdles / bottlenecks faced by exporters in the referred industry

sectors

To recommend measures for the reduction of the logistics cost and time over-runs

To review various governmental policies and its impact on export performance and to provide

implementable recommendations in this regard

To outline various influencing factors affecting the growth and potential of exports in each sector in

comparison with the international scenario

To provide suggestions and recommendations for encouraging exports

1.4 Approach Sample size and mix

Export competitiveness being directly associated with efficient production process, innovative supply

chain and cost optimization, manufacturers from the identified industry were included in the pan–India

primary survey. In addition to the manufacturers, export houses that outsource their production process

were also included. A prudent sample size of manufacturers- exporters, export houses involved in the

whole process of sourcing raw material and exporting finished products were selected to provide their

opinion based on ground realities. Balance sample size covering major EOU, SME units, logistics service

providers, trade bodies, gateway ports etc were also included in the sample to provide a holistic

perspective.

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Figure 1 : Study approach

A data base of location, segment and size specific companies was taken as a base and their current

operations and export status was ascertained before interacting with them. The sample size was at a pan

India level covering the major hubs and industrial locations which was divided into four zones (viz. North,

South, East and West) with minimum 100 contacts to be covered in each zone.

Sampling Process

All four industries were covered in each zone with variation based on the concentration of the same in a

particular zone. A questionnaire was chalked out for eliciting suitable responses from the selected

stakeholders. Exporter-manufactures were the major stakeholders covered in the sample mix. In addition,

trade bodies, Logistics Service Providers (LSP) including Shipping Lines, Port Authorities, rail service

providers, Inland Container Depots (ICD), Container Freight Stations (CFS), Customs House Agents

(CHA), freight forwarders, road freight operators, transporters in interior cities etc were also some of the

key stakeholders whose valuable inputs were sought..

Approach

Interviews were undertaken by initially sending questionnaire by email after providing a brief of the study

to the stakeholder concerned and later following it up with personal visits to obtain the necessary inputs of

the selected respondent. In a few of the cases, where personal visits were not possible, inputs were

obtained either over phone or through email interaction.

The following has been the overall step by step approach for undertaking the study:

1. Understanding the industry and issues through secondary research and by attending conferences

2. Identifying the sample group and designing questionnaire

INFORMATION COLLECTED

1. Identification of various parameters that determine the cost of logistics services

of the goods.

2. Mapping the entire movement, distribution and warehousing of goods

3. Identification of major hurdles / bottlenecks faced by the exporters vis-à-vis their

competiveness.

4. Various regulatory policies ( Centre & State) impacting export performance.

5. Export scenario & growth forecast in comparison with international scenario.

6. Emerging opportunities vis-a-vis- exports and future challenges.

7. Key factors affecting growth and potential of exports benchmarking with

international performance.

SECONDARY RESEARCH

Information on industry sectors, various

factors & parameters influencing logistics

practices and cost to be obtained from

sources like the websites, magazines, annual

reports, research reports etc

PRIMARY SURVEY

To obtain first hand data & information on

the logistics cost & practices for the identified

sectors by undertaking surveys/ interviews

covering a minimum of one hundred units in

each region i.e North, South, East and West.

Sectors covered

Automobile&

Auto-components

ProcessedFood

ChemicalsTextiles

&Apparels

RESEARCH ANALYSIS

• Measuring the logistics cost (

both in terms of time &

money) for the identified

sector exports of India.

• Analysing the impact of this

logistics cost on the

competitiveness of these

manufacturing export items

• Identifying the various

parameters that determine

the cost of logistics services

of these exports

• Identifying the cost at each

point of movement and

suggesting measures to

minimise the cost.

• Providing detailed

suggestions and

recommendations

• Measuring the logistics cost (

both in terms of time &

money) for the identified

sector exports of India.

• Analysing the impact of this

logistics cost on the

competitiveness of these

manufacturing export items

• Identifying the various

parameters that determine

the cost of logistics services

of these exports

• Identifying the cost at each

point of movement and

suggesting measures to

minimise the cost.

• Providing detailed

suggestions and

recommendations

STUDY

REPORT

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3. Circulating questionnaire after speaking and explaining objectives to the targeted respondents

4. Visiting and conducting personal interview

5. Tabulating and analyzing the responses

6. Internal brainstorming with focus group sessions

7. Listing key logistics issues and working to find solutions

8. Listing recommendations based on best global trade practices and standards, adapted to Indian

scenario

Figure 2: Respondents covered under the primary survey

1.5 Purpose of the report Prior to this report, an inception report was submitted which covered the overview of various industrial

sectors based on secondary research, along with the primary survey questionnaire. Based on the scope

of work and approved questionnaire, a primary survey across India covering over 400 contacts i.e.

minimum 100 contacts in each zone was undertaken.

This final report seeks to document the understanding of the industry and the logistics issues faced by the

exporters through interaction and feedback obtained from the major stakeholders. It also seeks to present

solutions and recommendations based on the analysis of the information so collected, which possibly the

Government can look into for addressing the various issues with an aim to make the logistics chain more

efficient and to improve the competitiveness of the Indian industry.

1.6 Limitations of the study The findings of the study have primarily been obtained from the interaction with various exporters met

during the course of the study.

WEST ZONE

Chemicals - 33

Processed Food - 20 Textiles & Apparels - 17 Automobile & Auto components - 21 Others (trade bodies, etc) - 12 Total = 103

EAST ZONE

Chemicals -22 Processed Food -28 Textiles & Apparels - 31 Automobile & Auto components -15

Others (trade bodies, etc) - 5 Total = 101

SOUTH ZONE

Chemicals - 18

Processed Food - 25 Textiles & Apparels - 32 Automobile & Auto components -16 Others (trade bodies, etc) - 9 Total = 100

NORTH ZONE

Chemicals - 28 Processed Food - 27 Textiles & Apparels - 32 Automobile & Auto components - 20


All IndiaTotal422

Primary survey contacts covered

WEST ZONE

Chemicals - 33

Processed Food - 20 Textiles & Apparels - 17 Automobile & Auto components - 21 Others (trade bodies, etc) - 12 Total = 103

EAST ZONE

Chemicals -22 Processed Food -28 Textiles & Apparels - 31 Automobile & Auto components -15


SOUTH ZONE

Chemicals - 18

Processed Food - 25 Textiles & Apparels - 32 Automobile & Auto components -16 Others (trade bodies, etc) - 9 Total = 100

NORTH ZONE

Chemicals - 28 Processed Food - 27 Textiles & Apparels - 32 Automobile & Auto components - 20


All IndiaTotal422

Primary survey contacts covered

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Some of the sectors were more predominant in a particular zone and accordingly this has been

reflected in the sector representation (respondents so contacted) from that zone. However efforts

have been made to have a prudent mix of sector representation in each of the zone.

During the course of the study, many of the respondents so contacted may not have been in a

position to furnish all the information to the questionnaire posed. However it has been the endeavor of

the survey team to obtain the maximum relevant information from the respondents

All the primary survey findings are based on the feedback obtained from the respondents. Whereas

efforts have been made to verify the correctness of the information thus provided to the extent

possible with other sources of information, this verification exercise cannot be considered full and

complete. This is due to the very subjective nature of the findings sought to be obtained and also the

availability of other valid sources for comparison. .

The data for logistic benchmarking (India vis-à-vis foreign countries) was obtained from secondary

sources and there was no primary survey carried out for the same.

The effect of the recent economic meltdown and global financial crisis on India‘s economy and

exports has not been captured in this report.

.

1.7 Structure of this report The contents of this report are organized as under:

Chapter 1 provides the introduction, with objectives, purpose and scope of the study report

Chapter 2 provides a brief executive summary of the contents of the report

Chapter 3 provides the overview of the chemical industry scenario, its export potential and specific

recommendations for improving its exports

Chapter 4 provides the overview of the textile and apparel industry scenario, its export potential and

specific recommendations for improving its exports

Chapter 5 provides the overview of the automobile and auto component industry scenario , its export

potential and specific recommendations for improving its exports

Chapter 6 provides the overview of the food processing industry scenario , its export potential and

specific recommendations for improving its exports

Chapter 7 provides the policy initiatives taken by the Ministries concerned to boost the sector‘s

competiveness

Chapter 8 identifies the various issues that leads to costs and time –over-runs incurred by the Shipper /

Exporter during an export transaction.

Chapter 9 details out the mapping of the logistics movement of exports consignment along with the

associated costs factor and the various issues and recommendations as suggested by the

exporters from the West zone



exporters from the East zone



exporters from the North zone


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exporters from the South zone

Chapter 13 Logistics Policy Framework

Chapter 14 commentary on logistic benchmarking and logistic performance index is given in this chapter

Chapter 15 indicates the recommendations for improvement in the overall export logistics infrastructure

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2 Executive Summary

Industrial competitiveness of a country, which is the prerequisite for capacity building, depends upon two

major dimensions, namely:

1. Internal - covering the process, technology, human resource, systems and management of the

industry

2. External - covering the macroeconomic factors which are beyond the control of the industry and

affects the export competitiveness of a product. Factors include transportation and utility

infrastructure, cost of power, land, incentives, free trade agreement (FTA), exchange rate, import duty

(antidumping duty), EXIM and sector specific government policies etc

It is for the external factors that the industry looks to the Government for support. The present study,

based on interaction with the exporters and related stakeholders from the sample industries has

attempted to identify bottlenecks faced during export and recommendations to enable a seamless export

transaction based on the inputs as received from the respondents. The issues and the recommendations

have been classified on the following parameters:

Hard infrastructure - Transportation related infrastructure, utility infrastructure, other facilities

Soft infrastructure - Labour, R&D, training, EDI

Policy related - Taxation & duties, regulatory issues, EXIM policies and incentives

Logistics - Connectivity (air, road, rail, water), documentation, border management

etc

Others - Transparency required for doing business, logistic services available in

the country, etc

The above classification of the issues and recommendations has been made initially for industry specific

(Chemical, Textiles, Automobile and auto-components, Food processing) and later for each zone (North,

West, East and South).

Chemical industry

The Indian Chemical industry during the last decade has moved up the value chain by transitioning from

being a basic chemical producer, to development of specialized chemicals and setting up bases outside

India. As per the Ministry of Chemicals & Fertilizers, Indian chemicals industry is today worth around US$

35 billion (For details on the sector, please refer section 3 of the report). Some of the Chemical industry

specific issues and recommendations as mentioned by the various stakeholders are indicated below:

Hard Infrastructure

Area Issues Suggestions

Warehouses No separate storage systems for

hazardous chemicals at CFS

Mandatory ruling for storage and

handling of hazardous chemicals

by means of a separate stowage

system both at the ports and in

CFS

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Certification labs Lack of adequate testing facilities for

sample testing for export items

Need to develop common testing

facility in chemical clusters. Such

shared common facilities will

ensure cost reduction.

Soft Infrastructure


R&D New product manufacturing requires

approval which takes up to 3 months

for registration, by the time the market

may be lost to competitors

Need for expediting the procedures

for registration, approval etc to

enable the exporter to maintain his

edge over other competitors by

reducing the ―time-to-market‖

EXIM Policy


Import duty Bangladesh government imposes a

high import duty on Indian exports of

polyurethane based adhesives.

Engage in bilateral negotiation to

reduce the import duty prevalent in

Bangladesh

Customs Usually for some chemical exporters,

shipment consists of small sample

size of various different chemicals

including hazardous chemicals hence

creates classification problem

Common classification needs to be

followed by all customs offices to

avoid disparity

Logistics


Ports / sea

connectivity and

freight charges

Regular increase in sea freight for

container cargo and surcharge on

hazardous cargo affecting profit

margins

Effective regulatory mechanism to

contain the exorbitant increase in

sea freights

Some of the other sector specific recommendations include:

Incentives for more R&D in high value segments covering knowledge and specialty chemicals

covering bio chemicals, catalysts, adsorbents and sealants, flavors & fragrance, cleaning agents &

toiletries, coating and adhesives and substitutes for hazardous chemicals

Non availability, increase or variation in price of the feedstock affects the production and export

commitment. A separate category in classification listing chemicals used as feedstock should be

developed, regularly upgraded so that special policy focus and incentives can be given to this

category as and when required

Clusters having EOU and other units especially for chemicals should be assisted by external agency

to plan and develop common supporting infrastructure which would help them in better logistics,

operations and exports.

Textiles

India‘s total textile industry is estimated at US$ 49 billion, with exports accounting for 39% share. The

world market is estimated at US$ 450 billion and is expected to grow to US$ $ 700 billion by 2010. Indian

textile export basket consists of wide range of items containing cotton yarn, fabrics, man-made yarn and

fabrics, wool and silk fabrics, and variety of garments. India‘s textile products, including handlooms and

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handicrafts, are exported to more than hundred countries (for details, refer section 4). Some of the

reasons for the Indian textile exports being uncompetitive include:

Higher production costs on account of power and capital costs

Infrastructure bottlenecks causing delays

Under developed supply chain management and 3PL logistics service providers

Outdated and inflexible labour laws

Fluctuation in the currency exchange rate

Lack of capacity and value addition

EU has granted the status of Generalized Systems of Preferences to Sri Lanka, while Bangladesh has

got the Least Developed Country status from EU. Pakistan, meanwhile, has got a zero duty tariff level

from both EU and US. The non-tariff barriers, such as anti-dumping and countervailing duties, quota

restrictions, packaging, labeling, testing and quarantine requirements are affecting Indian exporters.

Some of the other Textile industry specific issues and recommendations as mentioned by the various

stakeholders are indicated below:

Hard Infrastructure


Support

infrastructure

Lack of support infrastructure in the

unorganized sectors

Reorganization Model for

development of unorganized

clusters into co-operatives, assisted

by a nodal government agency

Soft Infrastructure


Research &

Development

Expenses incurred in R&D equipment

should be exempted from tax

List of such equipment needs to be

extended to cover all equipments

rather than selected ones for

textiles industry

EXIM Policy


Anti-dumping

duty

Indian Textile readymade garments

face the highest anti dumping duty in

the European Union compared to

other countries

The Government shall negotiate

with EU to ensure that India is

treated at par with other countries

that undertake textile exports to EU

Duty refunds /

drawback

Various studies conducted by DGFT

and Export Promotion Council shows

that the present state duties amount

to 6% of FOB value. This is presently

not refunded resulting in export of

these levies in the form of increased

price of exports, reducing the

competitiveness of textile exports.

Suitable policy intervention is

required to improve the export

competitiveness of Indian textile

products

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Some of the other sector specific recommendations include:

Policy should aim at gradually reducing and discouraging export of raw cotton. A minimum support

purchase (MSP) price is fixed for domestic cotton to ensure that farmers get a fair price.

A value addition scheme should be launched by the government to especially target Export Oriented

Units (EOU) and cotton processing units by offering them assistance in the form of soft financial loan

and consultancy advise to identify value added products and segment.

The Cotton Textiles Export Promotion Council (TEXPROCIL) can be given a bigger role of covering

the various clusters across India to build, develop capacity especially in garmenting and value

addition.

Automobile and auto-components

The automotive industry provides direct and indirect employment to 10.1 million people (2% of the labour

force) and accounts for around 5% of India's industrial output. In terms of number of units sold, the two

wheeler segment garners a dominant 77% share followed by passenger vehicles at 14%. Commercial

vehicles and the three wheeler segment have a market share of 5% and 4% respectively. The key

destinations for automotive exports are the SAARC countries and the European Union (Germany, U.K,

Belgium, Netherlands and Italy). The Government has undertaken a lot of initiatives to further facilitate the

growth of the sector. Some of the policy initiatives include:

Automatic approval for foreign equity investment up to 100%

No minimum investment criteria

Weighted tax deduction up to 150% for in-house research and R&D activities

Government‘s intention on harmonizing the regulatory standards with the rest of world

The Automotive Mission Plan 2006-‗16

While the Indian automobile industry grew at more than 15 per cent in the past five years, it is presently

facing numerous challenges due to shrinking of demand, mostly driven by inadequate consumer finance,

high interest rates and high cost of fuel. Some of the other Automobile and Automotive industry specific

issues and recommendations as mentioned by the various stakeholders are indicated below:

Hard Infrastructure


Port

Infrastructure

International ports like Nagoya in

Japan and in South Korea have a

capacity to handle more than a million

vehicles annually whereas India lacks

dedicated facilities at ports to handle

automobile exports.

India needs to develop at least two

major car terminals one near

Chennai / Ennore (to serve the

southern hubs) and other in South

Gujarat to link the northern (NCR

region) and western (Pune) hubs

Soft Infrastructure


Training Some of the auto-clusters in the

western part of the country have

difficulty in obtaining trained labour

The 11th Five year Plan Working

Commission has recommended

setting up of a National Level

Automotive Institute which will run

training courses in the automobile

sector.

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EXIM Policy


Taxation Currently taxes are levied at the city

level (octroi), state level (sales tax,

registration) and at the central level

(excise).

There is a need to streamline the

tax structure and accordingly

reduce the cost of ownership.

Both the Central and State

Governments to initiate steps for

tax rationalization

Logistics


Local, regional

and national

regulations

There is no uniform specification for

car carriers, with each state having

different rules and RTO procedures.

This causes difficulties in inert-state

movements.

Common traffic rules should be

formulated and applied at an all

India level to save procedural time,

expenses and harassment for

Interstate cargo movement

Food processing

Food processing involves any type of value addition to agricultural or horticultural produce and also

includes processes such as grading, sorting, and packaging which enhance the shelf life of food products.

In India, processing level is very low i.e. around 2% for fruits & vegetables, 26% for marine, 6% for poultry

and 20% for buffalo meat, as against an average of 60 -70% in developed countries. Despite a huge raw

material base, India accounts for only 1.5% of the international food trade. This shows the huge potential

available for both investors and exporters in this sector. Government has initiated several schemes in

order to give fillip to the sector (please see section 6 for details). However, to improve the industry

competitiveness, the industry needs to have a supply chain that is efficient, agile and adaptable and that

can handle larger volumes, expand reach, balance costs and address the demographic variations while

providing scalability. Some of the other Food processing industry specific issues and recommendations

as mentioned below:

Hard Infrastructure


Road The fruits and vegetables and other

perishables takes a lot of time to

reach the factory from the various

destinations. The time traveled by the

trucks in a day in India is very less

(250-300 km) when compared to the

international standards (600-800 km).

Improve road conditions

Clear the check post issues for

hassle free movement of trucks

Warehouses &

Cold chain

There is a shortage of cold chain

infrastructure in India. Companies are

forced to have their own cold chain

infrastructure facility.

Government of India should take up

projects under PPP in providing

temperature controlled

warehouses, refrigerated transport

vehicles and other auxiliary

facilities.

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Reefer trucks There are about 25000 reefer

vehicles involved in perishable

products transportation of which dairy

(wet milk) constitutes about 80%

thereby leaving only about a fleet of

5000 refrigerated transport vehicles

for all other categories put together.

Government should consider

setting up an authority that can

oversee the demand-supply

scenario of the containers amongst

the various ports and ICD and

coordinate the same with the

exporters so that they can get the

reefer and empty containers from

the nearest locations in the shortest

possible time.

Soft Infrastructure


Research &

Development

The Indian black tiger shrimp

(Pennious Monodone) is prone to

disease due to the pollution and

contamination of water. Other S.E

Asian countries have come out with a

hybrid species called Pennious

Mannami., which is more resistant to

diseases, has a better production rate

(almost 3 times more) and has a

much superior taste than the Indian

black tiger. While the EU has

accepted this hybrid variety for

exports, the production of this shrimp

does not take place in India.

The GoI should explore accepting

the new hybrid species of shrimp

so that the Indian seafood exporter

can capitalize on this export

opportunity. Ministry of Agriculture

shall initiate steps in this regard.

EXIM Policy


Market

intelligence

Farmers are not aware of the supply

demand scenario of various products

in the international market.

Market intelligence reports

(symmetric information on demand

of items at specific point of time in

the international market) should be

disseminated to the farmers

through some credible networks on

a real time basis.

Others


Packaging Cost of packaging is the other major

constraint for this sector. Cost of

packaging ranges anywhere from 10

to 60% of production cost.

Incentives to promote packaging

sector and training of concerned

personnel

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Issues inflating the logistics cost and leading to time over-runs

To understand the constraints and bottlenecks faced by exporters due to various factors, feedback from

primary survey covering the four zones; namely north, south, east, west were analyzed to understand

and identify the root cause of various logistics related constraints which in turn affects the export

competitiveness. For the purpose of detailing out the issues / constraints faced by the Shippers during

each activity / sub-activity of the logistics transaction, the same has been broken down into the following

three heads.

A – Factory premises formalities which includes the following –

1. Central excise clearance

2. Transfer of cargo into container in presence of Central Excise Inspector

3. Stowage of cargo in container

4. Central excise sealing

5. Loading of container on truck

B - Inland movement and customs clearance formalities, which includes the following sub-activities

6. Road journey

7. Unloading of container from truck and storage/stacking of container in buffer yard in CFS.

8. Customs clearance/sealing of container

C – Port related logistics formalities, which includes the following sub-activities –


10. Transportation of loaded container to container yard in port

11. Unloading of container in Container Yard in Port

12. Stacking of container in Container Yard in Port

13. Loading of container on truck to move container alongside ship

14. Truck journey from Container Yard to alongside ship i.e., Quay.

15. Loading of container from truck to cellular hold of ship

16. Sea voyage

The issues raised by the Shippers / Exporters across each of the heads reflect a certain uniformity in the

factors that cause a time and cost over-runs across all zones and the same has been enumerated in the

section 8.1 of this report

Mapping of logistics movement and cost analysis – West Zone

Maharashtra

Amongst the shippers contacted in Maharashtra and adjoining areas of Gujarat and Karnataka, most of

the shippers preferred to move their cargo by road to the gateway JN Port. This included exporters from

the districts of Nashik, Pune, Kolhapur, Ratnagiri, Nagpur, Aurangabad, North Karnataka and Southern

Gujarat.

The break-up of the indicated logistics costs involved in the movement of a TEU from Kolhapur to JNPT is

mentioned below:

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Segment Cost (INR) Cost % Time

(days)

Break - up of export cost excluding sea freight

Road freight movement 23,000 60.53 1.0

CHA Charges / customs clearance 5,000 13.16 0.5

Terminal Handling Charges 6,000 15.79 -

Documentation charges 1,000 2.63 0.5

Others ( Detention charges due to congestion for

three days @ INR 1000 / day)

3,000 7.89 3.0

Total 38,000 100 5.0

Gujarat

The major share of the commodities exported from ICD Sabarmati (Ahmedabad) consists of raw cotton,

synthetic organic dyes, stainless steel coils, pharmaceuticals, marble stones and blocks, cotton dyed

denims, foodstuff, machineries, assembly lines and agricultural products. The break-up of the indicated

logistics costs involved in the movement of a TEU from the ICD Sabarmati to JNPT is mentioned below:

Segment Cost

(INR)

Cost % Time

(days)


Transportation by road (50 km radius from ICD

Sabarmati & back)

3,500 13.91 1.0

Rail movement to port (average) 11,160 44.36 2.0

Custom clearance 2,500 9.94 0.5

Terminal handling 6,000 23.85 -

Documentation 1,000 3.97 0.5

Others 1,000 3.97 1.0

Total 25,160 100 5.0

Some2 of the West zone specific issues and recommendations are mentioned below:

Hard Infrastructure


Road

infrastructure

Poor road conditions between:

o Nashik and JN Port

o Silvassa to JN Port

o The patch of road in NH4 B from

Phalava phatak to JN port

Need for a synergy between the

Road Developer, the transporter,

cargo industry etc. The roads so

constructed, the materials so used

are woefully inadequate to cater the

axle load of the container carriers.

Hence whenever the tenders for

road development are floated by

2 The detailed findings of the issues and recommendation for each of the zone is provided in the respective chapters

of this report

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the Developer, the views and

opinion of the trade must also be

taken into consideration and the

design criteria needs to be

technically strengthened.

Port

infrastructure

The perpetual congestion at the ports,

which gets even severe during every

quarter end.

The severe congestion follows a

certain pattern. The officials

concerned can at least make their

planning in advance to nullify such

a congestion scenario

The development of other ports in

the western region shall lessen the

load on JNPT.

Soft Infrastructure


EDI There are occurrences of breakdown

of the ICEGATE (EDI system) once or

twice a month. During the breakdown

of EDI, the Customs have no fall back

arrangement for getting the shippers

file their shipping bills, as a result of

which the shipper often misses out

the intended vessel.

The exporters have requested that

the Customs should make

necessary arrangements to have

an alternate method of having the

shipping bills filed in the event of

the tripping of the ICEGATE.

Need to revamp the system into a

more reliable version

EXIM Policy


VAT VAT is applied on the packaging

material thereby increasing the overall

FOB value of the product

Since the packaging material is

used for goods meant for exports,

VAT should not be levied on it.

Logistics


Check post /

road connectivity

Lot of shipments are caught up in the

octroi naka for want of a customs

noted shipping bill, which is required

to be submitted for the Octroi waiver.

The shipper has to make

arrangements to have a

representative pick up the customs

notified shipping bill and hand it over

the octroi naka to make the shipment

pass without the payment of the octroi

Suggestion to include Octroi as part

of the proposed Port Connectivity

System

Alternatively, Octroi system shall be

abolished by the respective local

self-government. They may seek

alternative revenue generating

mechanism to compensate for the

revenue losses on account of

Octroi abolition.

Ports / Sea

connectivity /

Additional

There are additional charges levied by

the shipping lines:

o BAF – Bunker adjustment

Need for a regulator to monitor the

operations of CFS / Shipping lines -

This may done on the lines of

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shipping charges charges (due to hike in price of

fuel) – US$ 250 / container

o CAF – Currency Adjustment

Factor

o Hazardous charges – US$ 150 /

container

o And Off season charges

TAMP for major ports or TRAI for

telecom etc.

Mapping of logistics movement and cost analysis – East Zone

The companies surveyed in the Eastern region were predominantly from in and around West Bengal

which access Kolkata / Haldia port as their gateway for exports. Apart from the exports from the ports,

there is also substantial cargo movement from West Bengal to Bangladesh. Petrapole (in West Bengal) in

the road sector and Gede (in West Bengal) in the railway sector are the two noted ones, which together

share over 70% of the India–Bangladesh border trade. Another gateway is through the Amingaon ICD

near Guwahati, which is a seasonal ICD and is active during the tea shipment season. Even during the

season, traffic is available only for one direction, that is, the Amingaon-Kolkata port leg. The costs

associated with the movement of a 20‘ container (TEU) from Hugli to Kolkata (includes sea-freight) is

illustrated below:

Segment Cost (INR) Cost % Time (days)

Transportation by road – 60 km 5,000.00 15.53 1

Customs clearance 3,500.00 10.87 1

Terminal handling charges 5,000.00 15.53

Documentation charges 1,500.00 4.66

Congestion surcharge @ US$ 150 per TEU 6,750.00 20.96

Bunker surcharge @ US$ 110 per TEU 4,950.00 15.37

Other costs ( detention charges for 3 days / other

OPEs)

5,500.00 17.08 3

Total 32,200.00 5

The costs associated with the movement of a 10 ton truck load from Kolkata to Bangladesh are indicated

below:


Transportation by road 12,000.00 55.05 2


Documentation 1,500.00 6.88

Coolie charges 2,000.00 9.17

Detention costs due to delays 2,800.00 12.84 4

Other OPEs including speed money 1,500.00 6.88

Total 21,800.00 7

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During the course of interaction with the exporters, there were various observations / recommendations

mentioned by the exporters from the East zone, some of which are indicated below:

Hard Infrastructure


Road

Infrastructure

The roads leading to the port are in a

bad condition

The roads to Haldia port are also in a

bad state, same is the case with the

roads from Jharkhand to Haldia. The

road from Falta to Kolkatta is also not

good.

The 4 laning of Kolaghat – Haldia

port connectivity section needs to

expedited

Port

infrastructure

For the type and quality of services

provided, the port has been

increasing its port related charges

which the exporters feel is unfair,

since it adds to their cost of shipment,

without obtaining any value added

services.

The improvement should be in

terms of material handling system,

labour productivity, development of

additional berths, increase of draft,

proper and a reliable EDI system at

KoPT.

Soft Infrastructure


Labour KoPT is plagued with strikes and go-

slow agitation by the workers

Need to introduce productivity

linked incentives for the workers

(having a variable pay component)

Logistics


Ports / Sea

connectivity

There are no regular services to

Chittagong from Kolkata; it is

transshipped through Singapore. The

cost of shipment through Singapore is

around US$ 1500 and the time taken

is around 10-15 days, while the

shipment from Kolkata to Chittagong

is around US$ 300 to US$ 400 per

TEU.

Need for a regular weekly service

from Kolkata to Chittagong

Mapping of logistics movement and cost analysis – North Zone

Delhi and the adjoining states form the major industrial clusters in the northern region. Inland container

depots in the North connect to the container handling ports of Mundra, Kandla, Pipavav and JN Port /

NSICT, through which most of the cargo movement takes place. The ICD serves the areas of

Tughlakabad, Moradabad, Panipat, Dhandarikalan, Ballabhgarh, Jodhpur, Jaipur, Rewari, Dadri, Agra,

Gwalior, Kanpur, Ravtha Road etc

The break-up of the total logistics costs involved in the movement of a TEU from the NCR to JNPT is

indicated below:

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Transportation by road (30 km radius

in NCR from ICD)

5,000 12.78 1.0

Rail movement to port (average)

Note – The time includes the dwell

time of the loaded export container

which is usually less than 24 hours

and transit time of 46 hours

23,120 59.10 2.5

Custom 3,000 7.67 0.5

Terminal Handling 6,000 15.34 -


Others 1,000 2.56 1.0

Total 39,120 100 5.5

The break-up of the total logistics costs involved in the movement of a TEU from the Pithambur to JNPT

is indicated below:


Break up of export logistic cost, excluding sea freight

Road Transportation (100 kms - ICD

Pithampur - Ratlam)

8,300 25.61 1.0





Others 1,000 3.08 1.0

Total 32,415 100 13.0

Some of the North zone specific issues and recommendations are indicated below:

Hard Infrastructure


Infrastructure The overall infrastructure (roads,

power, warehousing facilities etc)

covering the industrial region

surrounding New Delhi (NCR) is

inadequate, considering the volume of

Need for a better infrastructure and

planning to cover the industrial

region surrounding New Delhi

which extends up to 150 km.

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exports being catered to.


Rail connectivity Lack of last mile rail connectivity of

ICD Pithampur with Ratlam has

limited the export growth, compelling

the exporters to either bear the delay

of 10 -15 days for movement to JN

Port by rail, or move containers

directly by road on the already busy

NH 3 adding to the traffic congestion

Need for a feasibility study to

understand the cost-benefit

analysis for extension of rail from

Ratlam to ICD Pithampur

Ministry of Railways shall conduct

the feasibility for the proposed

route / project and take necessary

follow up actions

Mapping of logistics movement and cost analysis – South Zone

South zone is an important region involved in the export of textile, auto & auto components, chemicals

and food processing. The companies in the southern region export the commodities mainly through five

major ports; Chennai, JNPT, Vizag, Cochin and Tuticorin

The break-up of logistics cost for the movement of a 20‘ container (TEU) from Hyderabad to various ports

by road is as follows:

Hyderabad to various ports (road) JNPT Chennai Port Trust

Logistics cost parameters Cost Cost % Time

(days)

Cost Cost % Time

(days)

Inland transportation charges – road 22000 60.27% 2 22000 64.14% 2

Inland transportation charges – rail 0 0% 0 0 0.00% 0

Inland transportation charges – water 0 0% 0 0 0.00% 0

Transit facility (ICD / CFS / ware

housing / etc)

5000 13.70% 2 2800 8.16% 1

Custom House Agent /Clearance 2500 6.85% 2500 7.29%

Terminal Handling Charges 6000 16.44% 6000 17.49%

Documentation Charges 800 2.19% 500 1.46%

Other Logistic costs 200 0.55% 1 500 1.46% 1

Total logistic costs 36500 100% 5 34300 100% 4

The break-up of logistics cost for the Movement of a 20‘ container (TEU) from Coimbatore to various ports

by road is given below:

Coimbatore to various

ports (road)

Cochin Port Trust Chennai Port Trust Tuticorin Port Trust

Logistics cost

parameters

Cost Cost

%

Time Cost Cost

%

Time Cost Cost

%

Time

Inland transportation

charges – road

14000 56% 1 18000 65% 1.5 14500 61% 1


charges – rail

0 0% 0 0 0% 0 0%

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Coimbatore to various

ports (road)


Logistics cost

parameters

Cost Cost

%

Time Cost Cost

%

Time Cost Cost

%

Time


charges – water

0 0% 0 0 0% 0 0%

Transit facility (ICD /

CFS / ware housing /

etc)

4500 18% 2 2000 7% 1 1500 6% 1

Custom House Agent

/Clearance

1200 5% 1200 4% 2000 8%

Terminal Handling

Charges

4000 16% 5800 21% 4800 20%

Documentation Charges 600 2% 500 2% 800 3%

Other Logistic costs 500 2% 0.5 0 0% 0 0%

Total logistic costs 24800 100% 3.5 27500 100% 2.5 23600 100% 2

Some of the observations / recommendations for the South zone are indicated below:

Hard Infrastructure


Rail The container and goods trains are

made to wait for the passenger trains

to pass by. This increases the transit

time for movement by rail.

Railways should initiate steps to

have dedicated lines for the

containers and goods trains.

Airport There are no scanning machines

available for scanning bigger pallets

(over 1200 mm length) at Coimbatore

airport.

Airport infrastructure should be

improved and steps should be

taken for handling bigger pallets.

Logistics


Rail connectivity Poor rail connectivity between the

following regions

o Hyderabad to Chennai

o Hyderabad to JNPT

o Bangalore to Chennai

o Bangalore to Mangalore

CONCOR and private container

operators should improve their

services in these regions. This shall

reduce the inland logistics cost to a

great extent.

Indian Railways to improve the rail

connectivity in these routes.

Air connectivity Less cargo flights connectivity in the

following southern region airports

o Chennai

o Coimbatore

More cargo flights to be introduced

at Chennai and Coimbatore, which

are high cargo potential regions.

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Recommendations for improvement in the exports logistics infrastructure

Sea-ports With a growth rate of 19%, India‘s container cargo traffic is estimated to reach 21

million TEUs by 2016, and the north western ports which handle the bulk of the

containerized traffic would require creation of additional facilities and improving

efficiency.

Ports should also facilitate hinterland connectivity projects to ensure seamless cargo

flow.

As the cargo from the north moves through the western ports, a new Greenfield port

which can handle fourth and fifth generation vessels with overall length exceeding

305 m and capacity of carrying 4,000 – 5,000 TEUs with a draught of 14 m needs to

be developed.

IPA can consider including private ports (like Gujarat Pipavav Port Limited, Mundra

Port Limited, etc) as its members thereby covering a larger canvas and fulfilling its

objectives of increasing efficiency for Indian ports as a whole.

Railways All sea ports especially those handling major container cargo, should have rail link

which can handle double stack trains

Indian Railways are working to reduce the ratio of payload to tare weight load i.e. for

every 1 mt of freight carried, the dead tare weight of the wagons should be ideally

around 200 kg (presently it is around 333 kg). Thus, a rake of 58 wagons will be

able to haul an additional freight of 673 tonnes, which works out to about 16.6%

more than the existing payload of a rake.

Shipping State governments having sea coast line shall be asked to conduct pre- feasibility

studies and identify ports or locations which can be developed exclusively for

coastal shipping (This may be considered under the existing NMDP)

Under the Shipping Trade Practices Bill, committees can also look into the issues of

sea freight increase and other charges with service standards by interacting and

inviting improvement suggestions from the trade.

Roads As suggested by the Committee of Secretaries under the Planning Commission, the

port connectivity classification can be considered on certain sections which link the

port with the industrial hubs

Exports policy

related

To ensure exports getting due attention, priority and resources, a dedicated cell

under the Prime Minister‘s Office (PMO) can be setup

As testing is not the core function of the Central Excise & Customs, a dedicated

facility / authority shall be set up to test the samples of EXIM items.

The government shall take initiatives in devising a Logistic Policy framework aimed

at providing broader policy guidelines to various state governments, trade bodies,

exporters, customs and other stakeholders (please see chapter 11 for details)

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Logistics best practices

A recent report prepared by the World Bank suggests that India is ranked only 39 in terms of the logistic

performance index (LPI). LPI is an indicator of how well the country is placed in terms of its logistic

efficiency and service quality. Singapore stands first in the global LPI rankings followed by the

Netherlands (Rank 2), Germany (Rank 3), Japan (Rank 6) and USA (Rank 14). Mainland China ranks

thirty whereas India is placed at 39th position. The countries that are top performers are mainly the

logistic hubs and they have adopted a comprehensive approach in improving logistic performance. This

includes bringing in synergies in infrastructure, transport regulations, investment, customs, foreign trade

and better border management.

It is also important to adopt logistic best practices by companies and logistic service providers, some of

them are highlighted below:

Design the network (route planning, mode of transport etc.)

Companies shall partner with Logistic Service Providers and outsource the operations in which

they do not have competence (outsource non-core areas)

The manufacturer-exporter needs to have a proper risk and contingency plan in place

It is important for a country like India to devise a National Logistic Policy that encompasses various

components of logistics as illustrated in chapter 13 of this report (Logistic policy framework). Apart from

doing a ‗facilitation agenda‘, the government needs to take steps to bring in better infrastructure (roads,

rail, sea ports, warehouses, airports, etc), efficient fleet management, and overall market reforms for

logistic services. What the government and its various agencies can do to help improving the logistic

competitiveness of Indian industry is spelt out in sub section 15.9 of this report. However the action points

mentioned under different ministries, departments and independent agencies of the Government in the

above section are only indicative.

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3 Chemicals The chemical industry covers more than 70,000 commercial products offering ample opportunity for

research, growth, innovation and integration with other products. The Chemical industry broadly

constitutes petrochemicals, dyes and dyestuff, pharmaceutical, paints, agrochemical, special chemical

and fertilizers industry. The global market is estimated at US$ 1.8 to 2.0 trillion and Western Europe, US

and Asia together contributes to 90% of the total production.

3.1 Present Scenario As per the Ministry of Chemicals & Fertilizers, Indian chemicals industry is worth around US$ 35 billion or

about 3% of India's GDP. Indian Chemical industry during the last decade has moved up the value chain

from being a basic chemical producer to the developer of specialized and knowledge chemicals. The

Industry consists of both small and large scale units with the average size of Chlor-alkali industry (which

contributes nearly 45% of building blocks for the industry), at around 175 MT per day against the required

500 MT capacity. Some of the major markets for Indian chemicals are North America, Western Europe,

Japan and emerging economies in Asia and Latin America. The valuation of the Indian chemical market

segment wise is indicated in Table 1

Table 1: Valuation of Indian chemical market segment

Segment Market Value (Billion, US$)

Basic Chemicals 20

Specialty Chemicals 9

High End / Knowledge Segment 6

Total 35

Source: Ministry of Chemicals & Fertilizers

Following are some of the salient points of the Indian chemical industry:

The total investment in the sector is approx. US$ 60 billion and total employment generated is about

1 million

The sector accounts for 13-14% of total exports and 8-9% of total imports of the country in value

terms

In terms of volume, the Indian chemical industry is the 12th largest in the world and 3rd largest in Asia

Currently, per capita consumption of products of chemical industry in India is about 1/10th of the

world average

China has emerged as the second largest partner for India in international trade during April-October

2007.

Gujarat contributes to nearly 51% of the country‘s total manufacturing capacity in chemicals (2006-

07)

India has emerged from a net importer till year 1990 to an exporter from year 2000 onwards

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Petrochemical sectorŦ

This sector includes upstream petrochemicals consisting of naphtha / natural gas crackers along

with downstream plants to manufacture polymers, synthetic fibre, intermediate and other

intermediate chemicals derived from hydrocarbons. These are integrated complexes

manufacturing bulk products (liquid / solid products) and are generally of global scale of

operations. These projects are both capital intensive and technology intensive

3.2 Geographical presence

The Indian Chemical industry, to a large extent, is concentrated geographically in the western region of

Gujarat and Maharashtra. The cluster approach with shared common infrastructure, R&D and knowledge

source helps in cost optimization and better input-output linkages and has been responsible for such

geographical concentration.

Figure 3 : Distribution of manufacturing capacity in Chemicals

Source: Ministry of Chemicals

The concentration of chemical industries in Gujarat is located on the 300 km

long corridor referred to as the golden corridor starting from Vapi to

Ahmedabad. It covers various industrial estates like Vilayat, Jhagadia,

Dahej, Nandesari, and Vatva.

With heavy concentration in the western region, the movement of cargo

(both raw material and EXIM trade) is through JNPT (which handles around

60% of the country‘s container traffic) followed by Mundra / Kandla and

Pipavav in Gujarat. The national highway NH8 passes through the coastal

region of South Gujarat up to Ahmedabad, covering the chemical industries

located along this belt. This makes it one of the busiest traffic routes as

traffic to NCR also passes through this industrial belt.

Punjab, 4%

Tamil Nadu, 6%

Maharashtra, 8%

Others, 23%

Uttar Pradesh, 8%

Gujarat, 51%

Figure 4 : Concentration of Chemical industries in Gujarat Source: Deloitte Research

Ŧ This paragraph contains additional points on the 2009 report titled “Logistics Cost Study” and have been included

based on the request of NMCC . These additional details have been derived from the feedback on the report received by NMCC from some of the key stakeholders

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Similarly the rail network from Mumbai moving to western region and northern states also passes via

Gujarat making the route between Mumbai up to Vadodara as the one with the highest rail traffic

movement.

In the absence of any port in South Gujarat, cargo from this industrial region from Ahmedabad (up to 500

km) is being moved to JNPT, thereby adding to the traffic from NCR and Maharashtra, which also uses

JNPT port. Movement to Pipavav port and Kandla / Mundra from Central Gujarat and NCR has still not

picked up, due to the limited choice of shipping lines and frequency of trains to these ports.

3.3 Government policies covering exports

Following are some of the policies initiated by the Government for facilitating Chemical exports:

1. Promotion of a Petroleum, Chemical, and Petrochemical Investment Regions (PCPIR) covering a

processing area of 100 km, with a mother plant to provide basic raw material and feedstock to the

surrounding units enabling vertical integration and value addition. Under this scheme, an investment

region with an area of around 250 square kilometers is planned for the establishment of

manufacturing facilities for domestic and export led production in petroleum, chemicals &

petrochemicals, along with the associated services and infrastructure. The PCPIR may include one or

more Special Economic Zones, Industrial Parks, Free Trade & Warehousing Zones, Export Oriented

Units, or growth centers.

2. REACH (Regulation on Registration, Evaluation, Authorization and Restriction of Chemicals) is the

new European Union Chemical Regulatory Legislation, which has come into force from 1st June 2007

and units exporting to European Countries are required to take registration by 30th November, 2008.

As per REACH, substances and preparations or articles can only be exported to EU market after

manufacturer / importers have knowledge about the full impact of their products on human health and

the environment. Further, such manufacturers have to assure the EU Member Country and Chemical

Agency that downstream risk arising through exposure of the hazardous substances is contained. If

this condition of pre registration is not complied, it will not be possible to make exports to European

Countries for the next 11 Years. All chemicals, dye and dye intermediates, textiles, garments, paper,

soaps and detergents, inks, pharmaceuticals, packaging Industry and industries related to chemicals

etc. will have to comply with this new REACH norm.

As per REACH guidelines only manufacturers and importers based in EU come under the purview of

REACH and need to register themselves and chemical to be produced/ sold by them. Only if a

concern is directly selling its product in EU markets need to appoint an Only Representative in EU to

comply with REACH guidelines. However there is indirect impact on exporters, if the importers in EU

do not pre-register. Importers in EU may also ask exporters to furnish technical data to be provided

for REACH registration. If pre-registration deadline of 1st December 2008 is missed, then concerned

company can still register will not get benefit of extended deadlines. Polymers are exempted from

REACH regulations, but monomers are not exempted.

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3. Department of Chemicals & Petrochemicals is part of a joint committee with Ministry of

Commerce, Ministry of Environment & Forest, CHEMEXCIL and various industry associations

to ensure adequate preparedness of Indian Chemical Industry to comply with obligations

under REACH legislation. Various awareness workshops have been held to address specific

issues of concern to the Indian industry. A helpdesk on REACH has been established in

CHEMEXCIL for helping the exporters of Chemicals to the EU. Ŧ

4. In order to strengthen Indian R&D effort in general and the industries preparedness to comply

with REACH in particular, Department of Chemicals & Petrochemicals has been pursuing

upgradation of selected Indian labs to GLP standards. In collaboration with Department of

Science & Technology, the issue of recognition of data from GLP recognized labs in India is

also being regularly taken up. The issue of extending financial assistance to the labs

concerned is also under consultation with Ministry of Commerce. Ŧ

5. SEZ policies offer benefits to firms located in the Special Economic Zones, in the form of Income Tax

incentives covering 100% tax holiday for a period of any 10 consecutive years out of 15 years, 10

years corporate tax holiday on export profits, exemption from dividend distribution tax, tax exemption

on interest of long term finance and long-term capital gains arising on transfer of shares in developer

company, indirect tax incentives including nil customs and excise duty.

6. Free Trade Agreement (FTA) with the 10-member Association of Southeast Asian Nations (ASEAN)

was signed in Singapore, which aims at reducing tariffs in a phased manner to zero for over 4,000

goods out of 5,000 that are traded.

7. Extension of the Duty Entitlement Pass Book (DEPB) scheme till December 2010 and tax exemption

to 100 per cent Export Oriented Units till 2012.

8. Allowing FDI units in SSI units by removing the 24% FDI limit. A total of 79 manufacturing activities-

including a part of food products, chemicals, plastics and drugs are reserved for the SSI sector.

According to government data, there are about 12.8 million small & medium enterprises in India,

which produce goods worth over US$140 billion. These companies also export goods worth US$ 33

billion, accounting for around a third of India's total exports.

9. The Ministry of Micro, Small and Medium Enterprises (MSME) is planning to bring down the number

of items reserved for the small scale industry (SSI) to 35 from 100. MSM Enterprises account for over

90 per cent of the total number of industrial enterprises providing employment to more than 31.25

million people in 2006-07. Major MSME export products include readymade garments, chemicals,

pharmaceuticals, engineering goods, processed foods, leather products and marine products.

Ŧ

The bullet points 3 and 4 contains additional points on the 2009 report titled “Logistics Cost Study” and have

been included based on the request of NMCC . These additional details have been derived from the feedback on the report received by NMCC from some of the key stakeholders

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3.4 Export potential

Indian chemical industry ranks 12th in the world in terms of volume and is poised to grow at an average

rate of 9.2%. Presently valued at US$ 35 billion3, it is expected to reach US$ 50 billion by the year 2010.

The promising segments are knowledge (Biotechnology based chemicals, pigments and dyes) and

specialty segments (catalysts, adsorbents, sealants, adhesives and industrial gases).

3.5 SWOT Matrix The SWOT analysis of the Indian Chemical industry is furnished in the table below:

Table 2: SWOT analysis of the Indian Chemical industry

Strengths Weaknesses

Availability of skilled human resource

Matured industry with proficiency in

understanding specification and requirement of

foreign buyers

Flexibility in developing specialized chemicals

with low capacity plants (small batch production)

Strong IT base amenable for application in

chemicals processing

Relatively weak R & D base

Lack of common logistics supporting

infrastructure

Chlor-alkali industry depends upon

imported membrane in processes

Lack of global marketing set-up

Opportunities Threats

Development of Special Economic Zones and

PCPIR

Gas discovery at the KG basin by state PSU and

private players

Raw materials availability with skilled human

resource enables tie-up for technological

products

Large capacity and government support

enjoyed by Chinese companies

Large capacity creation in Gulf countries

Patents and Research and Development

advancement in EU and USA

Stringent environmental norms and

regulations

Source: Deloitte Research.

3.6 Factors affecting Competitiveness India can leverage upon its huge talent pool for the knowledge based Chemical industry. The

competitiveness of the industry hinges upon factors as outlined below and the figure depicted

immediately thereafter:

Size and economies of scale

Market reach

Adaptability and flexibility for change

Innovation and strong R & D base

Cost and differentiation

Efficient and rapid supply chain to cater to global markets

3 iNDEXTb

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In short, the logistics cost also plays a direct role in the export competitiveness of the product. The

logistics cost is directly proportional to the distance and handling incurred while transporting the goods

from one destination to the other. As per the Working Group on Logistics for the 11th Plan, the cost of a

moving container by rail between Delhi and Nhava Sheva is around INR 0.87 (1.9 cents per km) for an

average TEU container of 15 tonnes capacity. However, exporters have to bear costs of a minimum of

INR1.5 per tonne km (3.3 cents)4 after taking into account costs such as charges at ICDs / Terminal

Handling Charges / rail - road costs of empty container repositioning etc.

Figure 5 : Chemical industry competitiveness model

Source: Deloitte Research.

Some of the reasons for the delay in time and cost incurred during various stages of export cargo

movement (For e.g.: container from Gurgaon - NCR region) are listed below:

1. Allotment of empty container (subject to availability) would take 2 to 3 days. Obtaining permission

from shipping lines for hazardous cargo would take more than a week.

2. As movement in the NCR region is only during night hours, it takes around two days for stuffing of

empty container and the movement of the stuffed container from the exporter‘s factory to ICD

(distance of around 30 km), incurring additional time and cost.

3. At the ICD the cargo may wait for another 3 days for sufficient train inducement (collection of 80 / 90

TEUs) to run a train to JNPT.

4. On arrival at the port, the container may be loaded on the scheduled vessels or would have to wait for

another 7 days to connect the next vessel.

In case of direct road movement from the exporter‘s factory to port, buffer yard charges are applicable for

storage of export loaded containers (outside port) till the scheduled vessels arrival.

Table 3: Logistics cost associated with chemical exports

4 FIEO

Competitiveness - Internal and External factors

Chemical Industry

Production • Consolidation in basic and

knowledge segment

• Collaboration and cost

reduction

• Competitive interest, power

tariff and labour laws

• Domestic demand

• Availability of quality raw

material at competitive prices

Market Access• Supporting logistics & industrial

infrastructure

• Competitive export cost

• Reduction in time and low

transaction cost

• Research in high value and

specialty products

• Marketing and Process

technology

Competitiveness - Internal and External factors

Chemical Industry

Production • Consolidation in basic and

knowledge segment

• Collaboration and cost

reduction

• Competitive interest, power

tariff and labour laws

• Domestic demand


material at competitive prices

Market Access• Supporting logistics & industrial

infrastructure


• Reduction in time and low

transaction cost

• Research in high value and

specialty products


technology

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Logistics factors affecting the chemical industry Time delay

(days)

Additional

Cost

Pre - shipment

Obtaining approval from the shipping lines for hazardous

chemicals (Additional hazardous surcharge on sea freight

charges)

7-10 US$ 150

Allotment of empty container at the ICD 2 - 3

Stuffing and movement of export loaded container to port 4 - 5

Buffer yard charges applicable for road movement arrivals INR 5000

Post - shipment

Absence of certification and testing lab 5 - 7 INR 2000

Source: Deloitte Research

Just in Time (JIT) concept is followed by many chemical companies globally to avoid any delay and

additional charges by way of storage and multiple handling. JIT enables the system to work in co-

ordination with the process requirement on which basis cargo has to move .Just in Time requires a

scheduled system in place with known time and cost to enable cargo to be delivered accordingly.

Chemicals products are used for processing and manufacturing products, hence delay in the Import or

availability of raw material due to logistics or issuance of import license etc affects the production and the

business. Importers abroad prefer cargo just in time so that it can be mechanically offloaded and directly

used in the plant process without incurring any storage cost.

Petrochemicals Ŧ

The logistics cost are basically transportation of the feed stocks for the complex by pipelines

infrastructure or by tankers by road to the plant site and finished products from the plant site to

the market / port for domestic / export market. Petrochemical products prices are cyclic in nature

and to an extent depend on the crude oil price movements. Effective road infrastructure with

optimum cost of transportation will help in increasing the competitiveness. Most of the complexes

have their own power generation facility. Fuel cost for power generation is an important factor in

the cost of the finished products. Maintaining a duty structure comparable to the existing

structure in the region, will promote investment in value added products as well as s make the

industry more competitive. Downstream plastic processing industry is widely spread throughout

the country. Plastic processing industry is a power intensive industry and plastic processing

operation basically depends on polymer raw material availability and quality power at affordable

price. The logistic cost basically include availability of polymer at as stable price and quality,

power availability at a reasonable price, transportation cost of the finished articles to the market/

export, port handling facility quality testing facility to develop brand India, waste / scrap recycling

facility, common utilities etc.

Ŧ The highlighted para on Petrochemicals contains additional points on the 2009 report titled “Logistics Cost Study”

and have been included based on the request of NMCC . These additional details have been derived from the feedback on the report received by NMCC from some of the key stakeholders

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3.7 Major bottlenecks identified and recommendations

Some of the specific issues faced by the exporters during the shipment of chemical consignments and

suitable suggestions for improvement are mentioned below:

Hard Infrastructure


Warehouses There are no separate storage

systems for storing hazardous

chemicals. An example given was that

one of the containers of hazardous

chemicals was not handled properly in

the CFS and was kept along with the

normal containers. The chemicals

started leaking and started eating out

the containers. The exporter had to

rush in a fire brigade and a special

team to take necessary actions

Mandatory ruling for storage and

handling of hazardous chemicals

by means of a separate stowage

system both at the ports and CFS

Certification labs Non availability of testing facility at

Nandesari, Vadodara

There is a need to develop

common testing facility in

chemicals clusters certified by a

reputed agency

Soft Infrastructure


Research &

Development

New product manufacturing requires

approval which takes up to 3 months

for registration, by the time the market

is already lost to competitors

Need for expediting the procedures

for registration, approval etc to

enable the exporter to maintain his

edge over other competitors

(international / domestic)

More thrust required for NPD (New

Product Development), and to

encourage original research, etc.

Assistance in developing fire

retardant product and material and

adding value.

Policy required to encourage

original research

Government policies to encourage

R & D for specialty chemicals

Tie-up in high value segments can

be encouraged

EXIM Policy


Import duty Bangladesh government imposes a high Need for the Indian government to

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EXIM Policy


import duty on Indian exports of

polyurethane based adhesives. This

makes the Indian exports uncompetitive

address the issue through bilateral

discussions with its Bangladesh

counterpart.

Customs Different offices of customs follow different

classifications for same type of cargo

Common classification needs to

be followed by all customs offices

to avoid disparity

Customs dept. is not the competent

authority to conduct the sample tests and

certify items

An independent agency with all

India laboratory facility should

process and issue reports on

behalf of Customs to avoid delays

Export of laboratory chemicals faces

problems in classification and obtaining

approval from shipping lines

There should be clear guidelines

on classification norms meant for

all laboratory chemicals.

Other issues Ambiguity in DFIA license scheme (duty

paid on raw material) covering the central

excise part needs to be addressed

Import license is valid for 18 months only,

and the short duration affecting the raw

material imports

The validity period of import license

can be increased to 3 years or so

Ambiguity regarding to classification of

chemicals leading to application of

different rates on duty drawback

A more comprehensive classification

would help in solving difficulties faced

due to difference in rate of duty

drawback.

Logistics


Sea Connectivity For Linear Alkyl Benzene (LAB) ,non-

availability of small tankers which can

carry 1000 MT causes delay and

increases logistics cost

Ensure availability of custom-built

tankers for LAB manufacturing

facilities

Regular increase in sea freight for

container cargo and surcharge on

hazardous cargo affects profit

margins

Regulation of freights through

Shipping Practices Trade Bill,

which can exercise controls over

undue hike if the shipping freights

and surcharges

Limited slot for hazardous chemicals

on vessels calling Chennai induces

exporters to move cargo to JNPT

incurring high transportation cost

Negotiate with shipping lines calling

at Chennai to accommodate more

hazardous chemicals

Others


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Others


Raw Material Increase in raw material prices should

be notified in advance through a

credible mechanism. This will enable

exporters renegotiate their export

orders accordingly.

Better market intelligence

mechanism (with the Government

as the facilitator) to provide

advance information to export-

manufacturers

Shortage of Aniline based raw

material affects manufacturing.

Domestic demand of raw material

should be covered first before export

Suitable policies to protect

domestic industries shall be put in

place

Raw material controlled by major

companies who dictate the prices

Develop or use mechanisms to

prevent monopolistic situations

High cost of raw material like Ethylene

Alcohol, Chlorine, Sulphuric acid etc

makes downstream products

unprofitable

The respective industries /

management have to take prudent

decisions to survive in the market

and the Consultants cannot offer

any specific suggestions here.

China dominates phosphorous raw

material market and has a

considerable monopoly in the raw

material pricing thereby affecting the

export pricing of the Indian exporters‘

final product.

Beat the competition through

differentiation (by producing value

added, superior products that can

command a premium in the market)

Government shall incentivize R&D

3.8 Feedback from trade bodies

The Chemicals and Allied Products Export Promotion Council (CAPEXIL) –

Anti dumping duties on raw material and products should be discouraged

Import duties on raw materials should be lower than intermediate and finished goods

Benefits under target plus scheme must be restored specifically for status holders who account for

nearly 70% of exports

More chemical products and countries to be covered under the Focus Market & Products Schemes

EPCG scheme should be imposed with zero percent duty

Conversion of shipping bills from one scheme to the other should be considered

Service tax rebate mechanism should be addressed immediately

Exporters must be exempted from VAT

Levy of CST on deemed exports should be exempted

DEPB scheme should be continued by extending the time line beyond the specified date of expiry

To provide railway freight concessions from bulk movement of consignment from factory to port for

exports

The cost of containers for export shipment is in the range of US$ 10,000 to 15,000; whereas in China

the costs for containers are only US$ 3,000. Therefore the container cost should be reduced.

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3.9 Competing countries scenario

The Asia Pacific region is seen as the fastest growing region in the global chemical sector and it is

predicted that by 2010 Asia will be one of the major markets for chemicals in the world with 40% of the

world's chemical manufacturing capacity situated in the region. Chinese economic growth is forecast to

reach 10.5%, off slightly from the 11.4% expansion seen in 2007-08. Chemical manufacturers in China

are confident that earnings will continue to grow with China's demand for cosmetic chemicals growing at a

fast pace in the past decade. In the next five years, both production and demand will continue to grow

with the country remaining a large importer of cosmetic chemicals through the next century. In Japan,

chemical makers are confident about the countries short-term growth.

The American Chemistry Council forecasts 2.1% growth for the U.S. industry in 2008, better than the

1.3% it projected for 2007, with Plastic resins segment accounting for a growth of 2.5%, which is due to

the fact that basic chemicals are derived from ethylene, which is manufactured in the U.S. mostly from

natural gas. Because price of natural gas hasn't risen nearly as much as oil, many U.S. chemical

producers can sell their products overseas cheaper than their foreign rivals, who typically use ethylene

feedstock derived from oil. The European Chemical Industry Council is expecting 1.9% chemical industry

growth, down from 2.6% in 2007, due to the impact of the U.S. financial crisis on the global economic

environment.

While most of the Indian exporters indicated that the major competition was from China, the comparative

advantages of certain Asian countries are as given below:

China Large scale capacity leading to economies of scale

Heavy subsidy in power

Low labour costs

Better logistic infrastructure (ahead of India in Logistic Performance Index)

Middle East Large scale capacity is being added in the Middle East for light olefins projects

Abundant availability of feed stocks such as Natural Gas, Naphtha and Olefins

at cheaper costs

3.10 Other recommendations

The sector-specific recommendations aimed at improving the overall competitiveness of the chemicals

industry is given as annexure 1. However, the more relevant suggestions from the list are reproduced

below:

Pesticides export requires registration in the country to which the item is to be exported. The SAARC

countries have evolved a common registration procedure by which any exporter from SAARC country

can register in the SAARC office which would be valid and approved for all member countries. This

would save multiple registrations and facilitate more trade between member‘s countries. A similar

kind of set up may be thought of between India and its major trade blocks, which will save time and

cost.

More than 65 countries under the United Nations Globally Harmonized System (GHS) are amending

their present system of Classification and Labeling of Chemicals, by types of hazards and is co-

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coordinating to have a common harmonized hazard communication element, including labels and

safety data sheets. The REACH legislation in EU has a wide-ranging impact on all companies that

manufacture, import or use chemicals. A joint committee with the industry and government can be

constituted to involve the industry and develop strategy for meeting the challenges poised by GHS

and REACH.

Clusters having EOU and other units especially for chemicals should be assisted by external agency

to plan and develop common supporting infrastructure which would help them in better logistics,

operations and exports.

All custom offices should be EDI / EDP enabled. A common information centre at the highest level

should be setup, which can process enquiries and provide clarifications covering classification of

goods and duty drawbacks etc. This is to enable ensure application of rules and classification across

the country in an identical manner to solve issues arising out of different interpretation of customs

rules and guidelines.

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4 Textiles

India‘s total textile industry is estimated at US$ 49 billion, with exports accounting for 39% share. The

world market is estimated at US$ 450 billion and is expected to grow to US$ 700 billion by 2010. Indian

textile export basket consists of wide range of items containing cotton yarn, fabrics, man-made yarn and

fabrics, wool and silk fabrics, made-ups and variety of garments. India‘s textile products, including

handlooms and handicrafts, are exported to more than hundred countries. The EU is the top destination

of India‘s exports followed by US

4.1 Present Scenario

The value of total textile exports up to April- February 2007-08 [P] were INR 77867.11 Crore as against

INR 78690.09 Crore during the corresponding period in 2006-07. This decline of 1.05% in Rupee terms

could be attributed to the appreciation of the rupee against the US Dollar.

Table 4: Export of Indian Textile segments in value terms during April to February (2006-07 & 2007-08)

Period

T E X T I L E S Handicraf

ts, coir,

jute etc.

Grand

Total Value RMG Cotton

Textiles

Wool and

Woolens

Manmade

textiles

Silk Total

Textiles

Apr- Feb

2007-08 {p}

32459.99 23079.46 1688.04 11427.65 2301.75 70956.89 6910.22 77867.1 INR

Crore

8064.19 5733.74 419.37 2839.03 571.83 17628.17 1716.73 19344.9 US$

Million

Apr-Feb

2006-07

33928.47 22760.3 1812.05 9828.97 2965.87 71295.66 7394.43 78690.1 INR

Crore

7494.72 5027.7 400.28 2171.2 655.15 15749.06 1633.41 17382.5 US$

Million

Growth %

(INR) -4.33 1.4 -6.84 16.26 -22.39 -0.48 -2.9 -1.05

INR

Crore

Growth %

(US$) 7.6 14.04 4.77 30.76 -12.72 11.93 34.13 11.29

US$

Million

Total Share

2007-08 {p}

41.69 29.64 2.17 14.68 2.96 91.13 8.87 100

Source: D.G.C.I.& S. (Provisional),

India‘s exports share for carpets in the world market is 35% with more than 3 million workers involved in

this handspun, handmade carpet trade mostly from unorganized sector. Carpet exports have increased

from INR 2583.62 crores in 2004-05 to INR 3524.73 crores in 2007-08.

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Table 5: Export value of Indian Textile post MFA

Growth in exports post MFA (

January 1 2005 )

Calendar year

2005

Calendar year

2006

Calendar year

2007

European Union 18.68% 14.73% 13.10%

United States of America 25.92% 8.15% 1.39%

Source: D.G.C.I. & S. (MOCI)


The Indian textile and apparel industry operates largely in the form of regional clusters. There are over 70

clusters producing 80% of the country‘s total textile output.

Figure 6 : Distribution of textile capacity

Source: UNIDO

The map above gives details for 20 key clusters. The Government of India‘s cluster development

initiative, involving technical assistance, subsidies for technology up gradation and marketing support,

has strengthened the competitiveness of the clusters and consolidated their position in the global value

chain. Gujarat, Maharashtra, Rajasthan, Haryana, Punjab, Andhra Pradesh, Madhya Pradesh, Karnataka

and Tamil Nadu are main cotton producing states in India. There are approximately 1200 medium to large

scale textile mills in India. 20% of these mills are located in Coimbatore (Tamil Nadu).Availability of cotton

Cluster Location

State Product Specialization

Guntur Andhra Pradesh

Power loom & Ginning

Nagari Andhra Pradesh

Power looms Weaving –process

Ahmedabad Gujarat Ready Made Garments

Surat Gujarat Power looms weaving –Process

Panipat Haryana Hand loom & Made-ups

Ludhiana Punjab Woolen Knitwear

Jodhpur Rajasthan Hand Processing

Jaipur/ Sangner Rajasthan Apparel Manufacturing

Kanpur Uttar Pradesh Defense related Textiles

Ichalkaranji Maharashtra Power looms weaving- Process

Solapur Maharashtra Power looms & Chaddars

Kannur Kerala Hand looms

Agartala Tripura Hand looms

Kolkata West Bengal Cotton Hosiery

Bhubaneshwar Orissa Hand looms

Salem Tamil Nadu Power looms

Tirupur Tamil Nadu Cotton Knitwear

Karur Tamil Nadu Home Textile

SuramPatti Tamil Nadu Power looms

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in places south of Hyderabad is affected due to poor logistics, which is impacting the competitiveness of

textile industry in these regions (Coimbatore etc.). The domestic consumption of cotton in the year 2007-

08 was 241 lakh bales whereas the domestic availability was 369 lakh bales. Nearly 85 lakh bales of

cotton were exported during the above period. India has 34 million cotton textile spindles for

manufacturing cotton yarn. Cotton yarns account for 70% of India's textile exports. The domestic knitting

industry is characterized by small scale units which lack adequate facilities for dyeing, processing and

finishing. The industry is concentrated in Tirupur (Tamil Nadu) and Ludhiana (Punjab).


The agreement on textile and clothing (ATC) came into effect in 1995, under which quotas were phased

out in four stages over a ten year period and were eliminated in January 1, 2005. This step, while

increasing globalization also eliminated the barriers exposing the domestic market to imports. To enhance

the competitiveness of the domestic industry, the government has continued to modify and launch new

schemes with the objective of increasing the industry‘s capacity, reducing its operational costs and

encouraging it to move up the value chain.

The details of various schemes launched by the government are given in Annexure 2.


The global textile market is expected to be worth more than US$ 400 billion by 2010.

Figure 7 : Valuation of global textile market

Source: World Trade Organisation

During the last quarter of the previous century, share of developing countries in world textile exports

improved from 15% to 50%. Costs remain the driving factor in the post-quota world with fabric weaving

alone using around 28 million tonnes of fiber every year which is expected to reach more than 35 million

tonnes by 2010. Asia is slated to be one of the key regions for growth.

0

100

200

300

400

500

2006 2008 2010

In U

SD

bil

lio

n

Apparel Textiles

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4.5 SWOT matrix

The SWOT analysis of the Indian textile and apparel industry is indicated in the table below:

Table 6: SWOT analysis of the Indian textile and apparel industry


Availability of quality raw material

Presence of skilled labour in all process and

segments

Manufacturing flexibility for scaling up

production

Textile clusters with concentration of 80% units

in cluster form

Presence of supporting training and skill

development institutes

Lack of common manufacturing and logistics

supporting infrastructure

Unfavorable / outdated labour laws

Absence of global marketing setup

Highly fragmented industry lacking economics

of scale.

Lack of technological advancement in

processes, machinery and value addition


Raw material availability enables tie-up for

production of technical textiles

Large domestic market can act as driver for

capacity creation supported by growing

economy and global market

Development of SEZ and Integrated textile

units

Post quotas regime (large scale value addition

and capacity creation made feasible)

Bangladesh and Vietnam with low cost of

labour and favored export status

Large capacity of Chinese firms


4.6 Factors affecting competitiveness

The competitiveness of textile industry depends on a host of internal as well as external factors as

depicted in the figure 8

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Figure 8 : Textile Industry competitiveness model



Hard Infrastructure


Support

infrastructure

Lack of support infrastructure in the

unorganized sectors

Reorganization Model for

development of unorganized

clusters into co-operatives,

assisted by nodal government

agency.

In addition, agencies like Cotton

Textiles Export Promotion Council

(TEXPROCIL) shall be entrusted

with a bigger role in helping to

build and develop necessary

support infrastructure capacity in

various clusters

Testing facilities Laboratory for design with state-of-the-

art technology should be made

available in all zones

Need to develop common testing ,

design facilities in the textile

clusters certified by a reputed

agency

Production

High production

standards per machine

Large scale economics

to cover export orders

Competitive interest and

power tariff rates

Flexible labor laws

Cluster development

with segment focus.

Luster development with

Competitiveness Internal and External factors

Market Access

Supporting logistics &

industrial infrastructure

Competitive export

cost

Reduction in time and

low transaction cost

Vertical integration

from yarn to made-ups

with sales promotion

Preferential trade

agreement & removal

of anti-dumping duty.

Textile Industry

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Hard Infrastructure


Certification labs Testing facility is not available in

Indore and the exporters in and

around the region have to access the

testing facilities at Ahmadabad,

leading to delays

Testing facilities to be created at

Indore to facilitate testing and

certification for exporters in and

around the region

Soft Infrastructure


Research &

Development

Import duty on R&D equipments The list needs to be extended to

cover all equipments rather than

selected ones for textiles industry,

so that tax exemption shall be

availed for procuring these

equipments

EXIM Policy


Anti-dumping

duty

Indian readymade garments face the

highest anti dumping duty in the

European Union compared to other

countries. This makes Indian exports

less competitive as buyer in EU

demand lower price to compensate

for the antidumping duty paid

The Industry desires that the

Government take up this matter

with the EU to ensure that there is

an equal common import duty for

all countries

Customs Imports are usually viewed with

suspicion by the Customs authorities

at the airport, especially for the textile

related items

Import of textile related items

(labels and accessories) should get

priority in import clearance at the

airports, since the time delay in

clearance of these goods adds a

cost component which inflates the

price of the product for exports

Other issues Incentives not provided by the

Government to promote exports for

attending international trade fairs in

Australia and New Zealand.

Incentives in terms of

reimbursement of marketing related

expenses are provided for only

those trade fairs that are approved

by the government. The

government may consider the

exporter‘s request in this regard.

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Others


Raw Material

exports

China and Taiwan which account for

about 60% of cotton exports from

India, are offering higher prices

especially for Shanker - 6 variety

which has lead to average cotton

prices shooting up from INR 43 - 45

per kg two years back to INR 50 - 52

per kg, affecting Indian industry.

Cotton and yarn should be

converted into value-added

products like fabrics before being

exported.

This may require domestic capacity

enhancement and better logistics to

transport raw cotton from farm to

factory

Others European Union is a lucrative market

for cotton textiles made from organic

farming

Textile Policy should encourage

organic farming

Indore region has potential for textile

clusters

New Textile zone should be

developed around Indore to exploit

the location advantage (enabling

easy sourcing of raw material from

MP, Punjab, Maharashtra and

Gujarat).

4.8 Feedback from trade bodies

Apparel Export Promotion Council (AEPC)

AEPC is a nodal agency sponsored by the Ministry of Textiles, Government of India for promoting

readymade garment exports from India. APEC indicated that there has been a decline in the exports for

the year 2007-08. The reasons articulated were as follows:

Rigid labour laws: Issues like restrictions on contract labour, fixed time employment, employment of

women in night shift, retrenchment, closure of loss making units, etc. have not only affected

production flexibilities, but also discouraged new investment in this sector, leaving it largely

decentralized and small scaled.

Higher production costs: As per the Gherzi report on cost factors of the textile sector, India's labour

cost is 8% higher while power cost is 15% higher than that of China. This translates into higher cost

of raw material for the garment industry and affects its competitiveness.

Transaction cost: Although foreign trade policy of 2007- 08 has promised to address the issue of high

transaction cost; the present state of infrastructure, poor cargo handling facilities, levies, custom

handling, etc increases FOB price substantially.

Non-Refund of State levies: Various studies conducted by DGFT and Export promotion Council

shows that the present state duties amount to 6% of FOB value. This is presently not refunded

resulting in these levies being included in the form of increased price of exports.

Rupee appreciation against the US Dollar affects the export competitiveness.

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Carpet Export Promotional Council (CEPC)

CEPC was set up by the Government of India to promote the exports of hand knotted carpets and other

floor coverings. Its main objectives are to support, protect, maintain, increase and promote the exports of

hand knotted carpets, woolen druggets and floor covering.

CEPC indicated that government intervention would help the industry by:

Application of global interest rates for pre and post shipment up to 365 days at interest rate not

exceeding 6% to compete against Pakistan, China, Iran & Nepal

Exemption from VAT & Sales Tax for export cargo

Income Tax Exemption under section 80HHC of Income Tax Act

Development of Infrastructure at major clusters covering Bhadoi, Jaipur and Panipat

Indian Institute of Carpet Technology at Bhadohi (Uttar Pradesh) under the Ministry of Textile is

involved in training and proving technical support. IICT can be assisted to setup and cover other

important clusters for skill development.

4.9 Competing countries' scenario Competition from other low cost countries like China, Bangladesh, Vietnam and Turkey are posing

serious threats to industry with their prices being 20% lower than Indian rates. Some reasons for the

Indian exports being uncompetitive include:

Higher production costs on account of power and capital costs

Lower labour productivity

Infrastructure bottlenecks causing delays

Under developed supply chain management and 3PL logistics service providers

Outdated and Inflexible labour laws

Fluctuation in the currency exchange rate

Lack of capacity and value addition.

EU has granted the status of Generalized Systems of Preferences to Sri Lanka, while Bangladesh has

got the Least Developed Country status from EU. Pakistan, meanwhile, has got a zero duty tariff level

from both EU and US. The non-tariff barriers, such as anti-dumping and countervailing duties, quota

restrictions, packaging, labeling, testing and quarantine requirements are affecting Indian exporters.

While Vietnam‘s share in exports of textile and clothing has risen from 0.8% in 1995 to 1.6% in 2007,

with exports to US increasing from 0.04% to 4.7% in 2007. Bangladesh has improved from sixth position

amongst the leading exporters in 2002 to fourth in 2007.The share of China in the US market also soared

from 11% to 33.5% in 2007, but has declined in the period January to July 2008 by 4.63%.This decline in

export share has spilled over to Vietnam whose exports have surged 23%, Indonesia by 1.37% and

Bangladesh by 9% July 2008.

Main factors for growth of Vietnam are the July 2000 Bilateral Trade Agreement with the US and the

country‘s entry into the World Trade Organisation, which helped open the way for foreign companies to

enter the country (Gucci, Burberry, Levi‘s and Lacoste all entered Vietnam only after its WTO entry). FDI

reached an estimated US$ 6.1bn in 2007, compared with US$ 1.5bn in 20035.

5 Economic Intelligence Unit

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China‘s new Labour Contract Law (which went into effect this year) mandates costly social benefits for

employees. Along with labour costs, energy and food prices have risen; forcing manufactures to raise

their products‘ prices. This is prompting many to look elsewhere for lower-cost suppliers. There are more

than 400 Chinese textile companies which have shifted their low-end production to Cambodia, and some

100 others are now setting shop in Bangladesh mainly on account of the prevailing low labour wages

there. The main attraction of Cambodia is the country‘s preferential trading status with the US and its

exemption from the EU‘s export licenses. Meanwhile, Bangladesh offers various government incentives

for investors in its garment industry, such as tax exemption for the first ten years.


The sector-specific recommendations and the wish list aimed at improving the overall competitiveness of

the textile industry is given in section 4.8. Further details are attached as annexure 3.

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5 Automobiles & auto components

Continuous liberalization since the early 1990s and a large domestic market have made India a prime

destination for the global automotive players. The automotive industry provides direct and indirect

employment to 10.1 million people (2% of the labour force) and accounts for around 5% of India's

industrial output. The Automotive Mission Plan (AMP) 2006-2016 prepared by the Ministry of Heavy

Industries & Public Enterprises visualizes India emerging as a destination of choice in the world for design

and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion

accounting for more than 10% of the GDP and providing additional employment to 25 million people by

2016. In terms of number of units sold, the two wheeler segment garners a dominant 77% share followed

by passenger vehicles at 14%. Commercial Vehicles and the three wheeler segment have a market share

of 5% and 4% respectively.

5.1 Present scenario

Passenger/commercial vehicle segment

This sector is one of India's largest and fastest-growing manufacturing sectors, with domestic vehicle

sales (excluding two- and three-wheelers) more than doubling to 1.9 million units in the five years to

fiscal year 2008-09. The passenger vehicle segment consists of passenger cars, utility vehicles and

Multi-Purpose Vehicles (MPVs). The commercial vehicle segment consists of Light Commercial Vehicles

(LCVs) and Medium & Heavy Commercial Vehicles (M&HCV). On the exports front, there has been a

consistent growth over the past six years as depicted below:

Figure 9 : Export trends for passenger and commercial vehicles segment

Source: Society of Indian Automobile Manufacturers (SIAM)

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During 2007-08, the growth witnessed in the passenger vehicle and commercial vehicle segment over the

previous year was 10.06% and 19.10% respectively.

Two/three wheeler segment

The two-wheeler industry consists of three segments viz. scooters, motorcycles and mopeds. India is the

second largest producer and manufacturer of two-wheelers in the world. However in 2008-09, domestic

sales in three wheeler witnessed a decrease to 3,49,719 units from 3,64,781 units in 2007-08.

The two wheeler segment performed relatively better registering sales of around 74 lakh units in 2008-09

as compared to around 72 units in 2007-08.

The sales volumes of this segment were sluggish during the year 2008-09 primarily due to stringent

financing norms and high interest rates. Following the excise duty cut, all major two wheeler

manufacturers have reduced the prices of their vehicles in order to pass on the benefit to end customers.

However the rising raw material cost could negate the impact of reduction in prices due to excise duty cut.

Figure 10 : Export trends for two wheeler and three wheeler segment

Source: Society of Indian Automobile Manufacturers (SIAM)

Auto-component segment

The auto-components industry is highly fragmented and there are around 5,000 players in the

unorganized sector, contributing primarily to replacement market and constituting 23% to the market

share. There are around 400 players in the organized sector, contributing to original equipment

manufacturers, exports and replacement markets and having a market share of 77%. The component

industry has now holistic capability to manufacture the entire range of auto-components e.g. engine

parts, transmission parts, suspension & braking parts, electricals, body and chassis parts, equipment etc.

The companies in southern region are more specialized in engine and related components, whereas auto

component companies in northern region are more specialized in body parts and accessories. Western

region specializes more in forging.

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During the past three years, the auto-component industry witnessed a restrained growth due to economic

instability and fluctuating business prospects for the automotive industry including rising interest rates,

strengthening of the rupee and an unprecedented increase in the cost of raw materials.

The overall exports in 2008-09 stood at US$ 3.8 billion as against US$ 3.52 billion in 2007-08l.

* - Estimated

Figure 11 : Export turnover of auto-components sector in USD billion

Source: Automotive Component Manufacturers Association of India

Export destinations

The key destinations for automotive exports are the SAARC countries and the European Union as

summarized in the table below:

Table 7: Major auto/ ancillary export destinations

S

No

Segment Major Export Destinations

1 Passenger Car Developing countries in Asia, Middle East and Africa ( Egypt, Kenya

and Nigeria), and Western Europe

2 Commercial

Vehicles

Developing markets of Asia, Middle East, South Africa and Latin

America

3 Two / Three

wheeler

SAARC nations (Bangladesh, Sri Lanka, Bhutan and Nepal),

Columbia and North America

4 Auto-components Europe, North America, Asia and Africa

Source: Various

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The concept of organized auto clusters has started materializing in India. The auto clusters have been

established in all the four regions with global and domestic automotive players investing in them along

with their component suppliers, mainly tier I. The entities in the automotive industry tend to locate within

close proximity in a particular region enabling them to obtain an economic edge in the backward and

forward assembly linkages. The below map indicates the geographical presence of the auto clusters in

the country.

Figure 12 : Major automotive cluster in India.

These clusters are expected to be the prime movers for India‘s automotive exports growth. For units

located in the western auto cluster, exports are usually undertaken through JN Port. The inland

transportation for these units is by roads. Units in North, undertake their exports through either JN Port or

Mundra. The inland transport from North to these ports is undertaken through rakes from the ICDs in

Dadri, Tughlakabad.

Rajkot - Halol

Nashik

PuneMumbai

Aurangabad

Hyderabad

Chennai

Bengaluru

Hosur

Pithampur

Delhi

Gurgaon

Noida

Ghaziabad

LudhianaHardwar

Kolkata

Jamshedpur

North

East

South

West

Rajkot - Halol

Nashik

PuneMumbai

Aurangabad

Hyderabad

Chennai

Bengaluru

Hosur

Pithampur

Delhi

Gurgaon

Noida

Ghaziabad

LudhianaHardwar

Kolkata

JamshedpurRajkot - Halol

Nashik

PuneMumbai

Aurangabad

Hyderabad

Chennai

Bengaluru

Hosur

Pithampur

Delhi

Gurgaon

Noida

Ghaziabad

LudhianaHardwar

Kolkata

Jamshedpur

North

East

South

West

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Units in the auto-clusters in South prefer Chennai Port as their gateway for exports. The Eastern region

does not have a very significant presence of auto units. The ones which do exist in East undertake their

exports through Kolkatta Port. However the vessels calling in Chennai Port and Kolkatta Port are feeder

vessels and the consignment is transshipped either in Singapore or at Colombo.


Automotive exports have grown by an impressive CAGR of 40% in the last five years. India is also viewed

as a manufacturing hub for small cars for the global majors. The Government has undertaken a lot of

initiatives to further facilitate the growth of the sector. In 2002, the Indian Government formulated an Auto

Policy aimed at promoting an integrated, phased enduring and self-sustained growth of the industry.

Some of the policy initiatives include:

Automatic approval for foreign equity investment up to 100%

No Minimum Investment Criteria

Weighted Tax Deduction up to 150% for in-house R&D activities

Government‘s intention on harmonizing the regulatory standards with the rest of world

The Government has also prepared a ten-year (2006-2015) Automotive Mission Plan (AMP) to chalk out

a road map for future plan of action and to remove obstacles in the way of competition. The plan

envisages a tax holiday for the industry on investments exceeding US$ 225,000, 100% tax deductions of

export profits, and deductions of 50% on foreign-exchange earnings. It also calls for a one-stop clearance

for foreign direct investment (FDI) proposals in the sector and deductions of 30% of net income for 10

years for new industrial undertakings. To bring down the cost of power and fuel, which accounts for 6% of

the manufacturing costs in the auto sector, captive power generation would be encouraged to enable

industries to access reliable, quality and cost-effective power.

In order to ensure speedy and effective implementation of AMP recommendations, five Inter Ministerial

Groups (IMG) were constituted. These groups have been meeting to take forward important issues. In

addition, with a view to have greater industry participation, three Joint Working Groups (JWG) under the

Development Council for Automobile and Allied Industries (DCAAI) have also been formed. . The

Department of Heavy Industries (DHI) is also periodically reviewing the progress of the various AMP

recommendations.

DHI is mulling over the setting up of a body to coordinate skill development for auto sector. JWG (of

DCAAI) on infrastructure, HRD and AMP related matters have been activated to look further into the

matter. In addition as per the Foreign Trade Policy 2009-14, following are some of the additional

incentives proposed for the Automotive sector

o Market Linked Focused Product Scheme (MLFPS) benefits has been extended for export to

additional new markets for certain products. These products include auto components, motor cars,

bicycle and its parts among others.

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o Automobile industry, having their own R&D establishment, would be allowed free import of reference

fuels (petrol and diesel), upto a maximum of 5 KL per annum, which are not manufactured in India.


The Automotive Mission Plan (AMP) 2006-16 aims at doubling the contribution of automotive sector in

GDP by taking the turnover to somewhere between US$ 122 billion to US$ 159 billion including US$ 35

billion worth exports.

CVs – Commercial Vehicles; PVs – Passenger Vehicles Figure 13 : Projected automotive exports till 2012

Source: Society of Indian Automobile Manufacturers

While export opportunities for the passenger vehicle segment would remain predominantly amongst the

small car segment, the exports of two wheeler and three wheelers is expected to become substantial in

the years to come.

Figure 14 : Projected auto component exports in US$ million till 2012

Source: Automotive Component Manufacturers Association of India

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5.5 SWOT matrix The SWOT analysis of the Indian automobile and auto-component industry is indicated in the table below:

Table 8: SWOT analysis of the Indian automobile and auto-component industry


Application engineering

Low costs with good technology base

Easy access to raw materials

Upcoming base for Research and

Development (R&D).

Ability to cater to low volumes

Proficiency in understanding technical

drawings and well conversant in all global

automotive standards: American,

Japanese, Korean, European Standards etc.

Appropriate automation leading to economic

production costs

Flexibility in small-batch production

Growing IT capability for design, development

& simulation

Respect for intellectual property (IPR)

High-skilled manpower

Adoption of high quality & productivity

initiatives (TQM, TPM, Six Sigma, etc.)

Proximity to markets

Multiple tax components in the cost of the

vehicle

Inadequate R&D facilities

Lack of economies of scale

Supply chain infrastructure bottlenecks


MNCs focusing on low cost outsourcing

opportunity

Viewed as a global manufacturing hub for small

cars

Exports projected to grow at over 30% p.a.

India‘s share in world Auto Components is

expected to grow over 2.5% by 2015

National Automotive Testing and R&D

Infrastructure Project (NATRIP), a US$ 400

million initiative, aims to create the state-of-art

dedicated Testing, Validation and R&D

infrastructure across the country

Opportunity to set up R&D centres in India

High level of sourcing of auto components from

low cost countries (LCC) to act as a growth

driver

Increase in the fuel prices may lead to

slowdown in the sales

Import of components from ASEAN and China

will have adverse impact on GDP and

employment

Increased cost of raw materials (steel, etc)

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5.6 Factors affecting competitiveness

The current ownership of vehicles per capita in India is one of the lowest in the world. Historical trends

show an increase in auto ownership as country per capita GDP increases, and there is reason for

optimism in India‘s case. The BRIC report postulates that over the next few decades India‘s rate of GDP

growth is bound to exceed the other BRIC countries—namely Brazil, Russia and China. The logical

conclusion is that, if the GDP growth continues in India, and it is stable and sustainable over a period of

time, manufacturing output represented by the vehicle output or penetration is bound to grow.

However, while the Indian automobile industry grew at more than 15 per cent in the past five years, it is

presently facing numerous challenges due to shrinking of demand driven by lack of available consumer

finance, high interest rates and high cost of fuel. In addition, the cost of input material has witnessed

massive increases. In the last two years, prices of steel, copper and natural rubber have gone up

tremendously, affecting various segments of the automobile industry significantly. In addition, following

are some of the other factors which are affecting the competitiveness of the industry. These include:

Lack of scale in crucial areas of production, distribution, and marketing/sales—key capabilities

needed to efficiently access nation-wide and global markets

High cost of funding expansion and working capital

Lack of managerial talent with international exposure to pursue international expansion opportunities

The factors that affect the competitiveness of auto sector are depicted as follows:

Figure 15 : Automobile and auto-component industry competitiveness model


Production

• Application engineering

to integrate product with

process covering all levels

• Collaboration, cost

reduction and attaining

economics of scale

• Domestic demand


material at competitive

prices

Competitivness Internal and External factors

Market Access

• Supporting logistics &

industrial Infrastructure


•Reduce time and low

transaction cost

•Research in design,

development,

innovation and simulation


technology

• Indian Industry 18 -20%

less competitive due to

External factors

Automobile & Auto component Industry

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Strategies for globalization include developing market strength based on unique customer knowledge,

and then expanding to take advantage of market adjacencies by expanding into countries with similar

segments and in a similar economic development cycle. A company might then develop market niches

globally to access additional markets and develop future technologies. Tata Motors‘ plan to develop

manufacturing competitiveness follows these strategies. For well over three decades now, the company

has invested in a very capable and well staffed R&D organization—truly state of the art in most of the

critical areas of activity—backed up by its optimally automated production facilities.

Logistics factors affecting the competitiveness of the auto industry

Over the last few years, automobile companies have increasingly realized the importance of logistics as a

tool for competitive advantage. Leading automobile companies now rigorously follow the concepts of pull

against push and just-in-time to improve the efficiency of their supply chain. Organizations have

implemented end-to-end approach integrating functions like purchasing, production planning, order

processing and fulfillment, inventory management, transportation, distribution and customer service etc.

While organizations have taken up adequate measures within their perimeter to bring down logistics cost,

there are several aspects of distribution and supply chain, not entirely under their control, which tends to

act as a bottleneck thereby increasing their cost and time period of shipment.

Poor infrastructure in terms of poorly maintained and insufficient road network, smaller and congested

ports, insufficient warehousing facilities, etc. are seriously impacting the auto logistics industry and

causing a significant delay in movement of auto and auto components. In general, the transportation cost

alone constitute around 40% of total logistics cost and is increasing; an indicator of ineffectiveness of the

transportation system due to multiple factors like delay in customs, ports, inter-state laws, road

congestions, lack of infrastructure, etc. All these reasons render the Indian companies less competitive in

the global market.

From the responses obtained from the primary survey, it was indicated that for export shipments, the

respondents from the auto- auto ancillary industry start planning at least 7–8 days before the

consignment is to leave the factory. However even after considerable planning, there is always a delay of

2-3 days and incurrence of additional cost for reasons beyond their control. Some of the factors affecting

the logistics movement of export consignments of the auto/auto ancillary industry include port congestion,

shortage of containers (both TEUs / FEUs), shortage of trailers / trucks, lack of regular train services to

bring the hinterland cargo to the ports, increase in sea freight cost etc.

5.7 Feedback obtained from industry trade bodies Automotive Component Manufacturers Association of India (ACMA) and Society of Indian Automobile Manufacturers (SIAM)

The following were the observations and recommendations made by the trade bodies:

External factors (beyond the industries‘ control) make Indian auto sector about 18-20% less

competitive

Against exports of INR 3.5 billion, imports were recorded at INR 4.9 billion (Imports have remained

higher than exports in the last 5 years). Imports are mainly from Europe /Japan where car

manufacturers have their bases and China where the cost is 30% cheaper. China‘s advantage is due

to lower taxes, cheap power, labour, fixed exchange rate, favourable land cost etc

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To comply with WTO guidelines, the government can assist the industry by providing necessary

subsidy in auto / auto ancillary R&D activities and also by stepping up measures for environment

protection

The Auto policy prepared by Ministry of Heavy Industries & Public Enterprise, Government of India

should be implemented without any delay

Classification of imports under the category ―Others‖ should be discouraged in order to have a

precise data of different items imported which would help in FTA (WTO) trade negotiation. It would

also help the government impose anti-dumping duty where ever required.

Disparity in import duty between raw materials and components (duty slab being higher for raw

materials import vis-à-vis the import of auto-components

R&D should be encouraged for Automobile sector, which should also cover subcontracting to

agencies abroad that have the expertise to design and develop products, subject to patents being

held by Indian companies

While Original Equipment Manufacturer (OEM) suppliers have to adhere to a very high standard of

quality there is some difference in the quality standards for auto parts and components produced for

after sales market. For India to develop as a global auto hub there is a need for industry standards

including after sales products to be of superior quality.

Many automobile units such as Hyundai, Ford India, Mahindra, Mitsuibishi, etc. along with hundreds

of automobile ancillaries have recently been set up at Kancheepuram District of Tamil Nadu. The

volume of export from this area has been quite significant. Government should declare

Kancheepuram District as an Industrial Cluster for automobiles and provide infrastructure facilities of

global standards.


Some of the issues that impede the seamless movement of the export consignment as identified by the

shippers of auto/auto components and their indicative suggestions for the improvement of the same are

mentioned below:

Hard Infrastructure


Port

Infrastructure

International ports like Nagoya in

Japan and in South Korea have a

capacity to handle more than a million

vehicles annually (Approx. 1.9 million

completed automobiles) are shipped

from the Port of Nagoya, with about

113,556 motorbikes. It has yards

capable of accommodating a total of

38,000 cars, an inspection facility and

a test course. India presently does not

have such automobile specific

infrastructure

India needs to develop at least two

major car terminals - one near

Chennai / Ennore (to serve the

southern hubs) and other in South

Gujarat to link the northern (NCR

region) and western (Pune) hubs.

The car terminal should be capable

of handling two foreign going car

carriers simultaneously (700 meters

with 12 meters draught) with a

multi berth / coastal berth for

costal/feeder vessels.

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Hard Infrastructure


Congestion at JN Port has been

identified as the one of the root cause

of shipment delays. The total time

taken for the handing over the

container to the shipping line, once

the same enters the port gates should

not take more than 3-4 days, However

due to congestion, there is always a

minimum of three days delay for the

same

Promotion of other ports / diversion

of cargo to other ports will help

reducing the congestion at JNPT

Road

infrastructure

Poor road conditions at some of the

auto industrial estates causing

marginal increase in the cost of

shipment

A separate corpus fund should be

allotted to the maintenance of

roads by the respective Industrial

Development Corporation

Water There is a major water scarcity in

Shapar (Rajkot district) for industrial

estate and surroundings areas

The state government shall take

necessary measures to mitigate

water scarcity

Power It has been indicated that by 2016, the

total requirement of power by the auto

industry would be 6,760 MW. This

would mean an additional 2,500 MW

of electricity. It also been given to

understand that at present around 40-

50% power is being generated by the

industry in-house, which being a

costly affair adversely affects the

competitiveness of the Indian auto

industry. ACMA has indicated that

the Indian auto component industry

has lost its competitive advantage due

to high costs of power due to a large

portion of its requirement being met

through expensive self generation

It is the responsibility of the

government to provide clean, stable

and un-interrupted supply of power

to the industry. Industry may work

out projections for the geographical

dispersement of demand for

electricity in the future. This is

essential to have a better

understanding of the additional

amount of electricity required at

different regions / states.

Automobile industry can also

explore the possibility of forming a

3rd

party SPV for putting up captive

power plant having the minimal

economically viable levels of

generation

Soft Infrastructure


Training There is a problem of getting trained

labour in the Rajkot Cluster for auto &

auto components.

In addition, to improve the export

competitiveness of the auto sector,

there is a need for quantification of

To meet the growing scarcity of

trained human resources, the 11th

Five Year Plan Working

Commission has recommended

setting up of a National Level

Automotive Institute which will run

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Soft Infrastructure


the future requirement of skilled

manpower and also the new skill sets

and competencies that would be

required in future and the strategies to

fill in this gap

training courses in automobile

sector and formulate courses and

modules for training in Automobile

sector to be imparted by various

ITIs and ATIs.

The Institute can also work as a

repository of data and knowledge

for analyzing business trends within

the country and globally and

making it available to the industry.

The Institute can also be resource

base for the Department in

formulating policies in the auto

sector.

R&D It has been observed that there is lack

of R&D initiatives undertaken by the

auto industry. It has also been noted

that there is also a lack of proper co-

ordination amongst the various

Ministries and agencies who have

taken up or sponsored auto sector

R&D and that the industry has mainly

relied on borrowed technology, which

at times is suboptimal.

Accordingly it has been viewed that

it is of utmost importance for the

industry to keep abreast of the fast

changing scenarios and automobile

technologies and efforts should be

made by Indian industry towards

enhancing their R&D investments.

DHI has set up an IMG (R&D) with

the prime objective of improving co-

ordination amongst the various

Ministries / agencies and industry

on the automobile related R&D

initiatives being undertaken /.

supported by them. This initiative

will not only help avoid duplication,

but also help optimize the use of

limited resources and bring about

synergy of efforts. This forum would

also provide an excellent platform

for understanding the efforts being

made by different ministries,

agencies and industry and help in

building consensus on the key

priority areas to be focused upon.

These efforts should lead to the

developing the national

recommendations on R&D efforts in

the automobile sector

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EXIM Policy


DEPB Renewing procedure for DEPB license

is a very cumbersome

Hence there is a need to increase

the DEPB license validity period

There is no specific definition of DEPB

scheme for three wheeler segment.

There have been instances when

three wheeler companies have faced

some problems regarding the claiming

of DEPB as their products have front

engines

The segment requires specific

definition of DEPB for SKD, CKD &

CBU condition of vehicles. In

addition, the industry feels that the

DEPB rates should be increased to

support the three wheeler industry

as it has huge growth potential.

Earlier it was 14-16% of the FOB

value and presently it has come

down to 9% only for the three

wheeler sector.

The government has been mulling

over the plan to discontinue the DEPB

scheme

The exporters have indicated that

the government should continue

with the DEPB scheme. The

benefit accrued from the DEPB

scheme, say at 3% of FOB comes

to around INR 30,000 to INR

40,000/- which takes care of inland

transportation cost and provides

some respite for the exporters

There is no DEPB Rate available for

mini tractor segment

This segment has also huge

exports potential. Accordingly the

government should provide special

attention on this segment.

Schemes /

Policy

Any major policy changes as

communicated to the exporters on a

very short notice sometimes forcing

them to forgo their export

commitments

As Automobile sector consists of

small and medium size

manufactures / vendor also, any

major changes in the policy should

be notified at least 3 to 6 months in

advance before implementation, to

enable proper understanding of the

procedures be developed.

This would enable mitigation of

many problems faced by the small

manufacturers. One month can be

given for the documentation

procedures to be completed and

another two months can be given

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EXIM Policy


for providing training to the staff

members implementing the

policies along with the exporters

Taxation Currently taxes are levied at the city

level (octroi), state level (sales tax,

registration) and at the central level

(excise). Depending on the location of

manufacturing and the suppliers,

these taxes total to a substantial

figure.

There is a need to streamline the

tax structure and accordingly

reduce the cost of ownership.

Central and state taxes and levies on

manufacturing increases the cost of

the automobile

The government should proceed

on internal reforms at an

accelerated pace by bringing in full

country-wide VAT and at the same

time withdrawing all other central

and state taxes and levies on

manufacturing.

The government should also

implement a comprehensive GST

and reduction of tariffs on raw

materials, before further reduction

in the automotive tariffs is done.

The same should preferably be

done in consultation with industry

Customs If public holidays come immediately

before / after the weekend then there

arises a holiday period of 3-4 days

wherein no official work is undertaken.

Due to this, the congestion problem at

the port is further compounded

Customs Dept. needs to make

arrangements to work on

weekends (like in factories in a

shift system).

Logistics


Check posts /

documentation

It has been observed that each state

demands a different set of

documentation, which usually is not in

place during the inter-state

movement. In the event of absence of

the required set of documents, the

truck is made to wait causing delays.

The Government should consider a

uniform single set of documentation

valid for the interstate movement

across all the states. This would

eliminate huge amount of time and

money spent in documentation

processing. Another element of

cost is incurred due to the long

queue at check posts which delay

shipments and increase logistics Local, regional Transportation of auto vehicles is

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Logistics


and national

regulations

through car carriers (as they are light

cargo) from the manufacturing

location to the sea ports and land

border posts for exports to

neighbouring SAARC countries.

There is no uniform specification for

car carrier, with each state having

different rules and RTO procedures

Delays due to octroi collection points /

toll tax collection centres - The

average distance travelled by a road

carrier is just 250 kms a day

compared to 650 kms a day in foreign

countries due to delays at toll tax

collection booths and octroi booths.

Rail transport cost works out 15%

higher, as rail tariff is based on

weight. Due to lack of common

standards, car carriers have to pay

penalty for violating traffic rules at

each state border crossing causing

delay and cost overrun.

costs.

Common traffic rules should be

formulated and applied at an all

India level to save procedural time,

expenses and harassment for

Interstate cargo movement

A study can be conducted to

understand in detail, the routes

near the major gateways where

major congestion has been taking

place with possible solutions that

can be beneficial for all. Further the

matter can also be discussed with

the highway authority for evolving

mechanism for speedy and smooth

clearance of goods carriers.

Rail connectivity The Pune – Chakan area, despite

being a major auto industrial hub,

does not have any rail connectivity

available at Chakan

SIAM may be mandated to prepare

a proposal taking into consideration

problem areas, quantity of demand

and possible routes available.

Proposal can be submitted to all

the stakeholders in government to

get a viable solution

Last mile connectivity

Lack of connectivity to ports, frequent

changes to tariff and no proper

parking spaces near ports creates

problems

SIAM may consider putting forward

relevant grievances faced by the

automotive industry in front of

Ministry of Shipping

Others There is no CONCOR tariff slab for

cargo below 15 MT owing to which

exporters prefer to send light cargo by

trucks

Container operators shall seek to

address ―less than 15 MT‖ slab that

may boost the rail cargo movement

Setting up of new auto clusters and Existing schemes like Industrial

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Logistics


augmentation of the already existing

auto clusters / auto parks

Infrastructure Upgradation scheme

(IIUS) by Department of Industrial

Policy and Promotion (DIPP) and

schemes of SMEs by Ministry of

MSME should be availed to set up

new clusters and augment the

existing clusters. If gaps continue to

prevail then GOI could be

approached for new initiatives.

Also SIAM and ACMA should hold

wider consultations with their

members and furnish their views on

feasibility and likely contours for

development of new auto clusters.

To address the various issues,

since government intervention in all

the areas is not possible, it is felt

that there is also a need to create

viable business models to solve the

present problems and infrastructure

deficit in the automobile sector

Others


Fragmented

component

industry

Indian auto industry is highly

fragmented. This fragmentation is

preventing players to meet large

volume demand of global auto majors.

Industry structure is evolving with

more major players entering India.

This will lead to consolidation in

future

Raw Material There has been a substantial increase

in the price of raw materials like steel

and rubber over the past few months

thereby affecting the profit margins of

auto auto –component manufacturers

The industry requires a more liberal

credit facility to meet the working

capital requirements

Financial

Institutions

The shipment to Dubai usually

reaches within a week. If there is any

delay from the Indian Bank to forward

the LC related documents to its Dubai

counterpart, the consignment has to

wait at the Dubai port before being

released thereby attracting demurrage

charges for the buyer

The RBI should direct all the banks

to act on LC related documents on

a priority basis

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Others


Alternative fuels Increase in fuel costs impacts the sale

of automobiles

Government should assist R & D

initiatives for developing alternative

automobile fuels. Thrust should be

more on environmentally-friendly

modes.


Japan

The automotive industry is one of the core industrial sectors of Japanese economy. Japan is the world's

largest automobile manufacturer and exporter by number of vehicles manufactured in a year and has

three of the world's ten largest automobile manufacturers. In the first quarter of 2008, Toyota surpassed

American General Motors to become the world's largest car manufacturer. The Japanese automakers

and suppliers over the years have pioneered quality products, aggressive pricing, and unique business

practices. Japanese motor vehicle manufacturers are pioneering development and commercialization of

fuel cells, hybrid vehicles, and intelligent vehicles.

China

China has an underlying competitiveness in various factors ranging from human resources, energy costs,

cost of the no-exit policy, engineering capability, lower taxes, fixed exchange rate, land cost etc. The auto

policy enacted in China is a single-minded document aimed at fostering the creation of large

multinationals in the auto sector and has played a large part in making Chinese industries competitive

and has enabled them to flourish in the last few years.

Thailand

Double digit export growth over the past few years has illustrated Thailand‘s rising significance as a

regional automotive manufacturer and supplier. Several major auto manufacturers rely on their Thai

operations to serve both domestic and regional demand. Thailand‘s extensive supporting network of auto

parts manufacturers is also a crucial advantage contributing to the industry‘s strength while giving

Thailand an edge over its competitors.

The Board of Investment (BoI), Thailand is attracting high-level parts suppliers by offering ‗priority activity‘

status to investments in identified key components. Priority activity status confers the maximum incentives

of eight-year tax holidays, duty-free machinery, and other important rights and benefits such as visa and

work permit support and land ownership rights etc. In addition, the BOI has also provided maximum

incentives to activities that support development of target sectors such as auto industry. These activities

include R&D, design activities and human resources development.

South Korea

South Korea has emerged as a regional hub for the global auto-parts industry. The Asian financial crisis

(1997-98) made Korean assets cheap. In this process, global giants bought out scores of struggling car-

parts companies. The U.S. and European entrants brought along fresh capital and state-of-the-art

manufacturing practices, helping to elevate local quality. Korea's parts makers offer higher quality than

their Chinese counterparts at costs that are lower than in Japan.

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The South Korean Government on its part is aiming to position its automotive manufacturing industry

among the world's top four by 2010. Accordingly, the government has taken various measures for

creating an environment conducive to achieve the referred objective. This includes forming automotive

parts clusters, announcing tax holidays for companies operating in these zones.

A comparative chart of the referred countries‘ vehicle registration numbers and retail sales of petrol for

the year 2007 is depicted in the table below. High registration numbers across all segments of vehicles in

China is a reflection of the increased cargo movement, construction material movement for infrastructure

development and also the rising income levels leading to an upsurge in the sales of passenger cars.

Table 9: Vehicle registrations in 2007 across the leading Asian automobile manufacturing nations

Japan S Korea Thailand China India

New passenger car registrations ('000) 4,400 986 178 4,701 1,575

Stock of passenger cars (per 1,000 population)

484 219 N.A 14 10

New commercial vehicle registrations (‗000) 938 233 456 5,100 536

Light commercial vehicle registrations (‗000) 766 N.A N.A 2,045 227

Heavy & medium truck registration (‗000) 172 N.A N.A 3,055 309

Retail sales of petrol (‗000 tonnes) 47,071 9,067 6,321 47,032 11,047

Source: Economist Intelligence Unit, U.K


Need for Innovation

R&D should be encouraged for the automobile industry, which should also cover subcontracting to

outside agencies abroad who have the expertise to design and develop products, subject to patents

being held by Indian companies (provision should be made to allow on selected basis especially for

major important components needed by the industry)

The Auto policy should encourage Tier 1 companies which are mainly in Product Technology to

encourage setting up and developing Tier 2 and 3 companies which are in Process Technology. This

would enable development of more indigenous component manufacturing capacity, reducing imports

and facilitating innovation based on cost reduction and new material. This can only be possible if all

levels of manufacturers are present in India, as any change in the make of the component has to be

approved and accepted by all to fit in overall final product design.

Logistics route assessment

Society of Indian Automobile Manufacturers (SIAM) can consider conducting a route assessment from

various manufacturing plants sites across the country, till the land border with SAARC countries, and

identify issues, locations and infrastructure requirement like CNG pumps and repair facility en-route the

land border crossing. The study would also identify the problems faced in border crossing. This will help

in creation of required infrastructure facility, so that CNG and other exports vehicles can drive down to the

border saving time and cost due to trailer charges (PROJECT)

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A transport committee in coordination with the state government and Society of Indian Automobile

Manufacturers (SIAM) can evolve a set of rules and guidelines based on the existing state of transport

infrastructure available in the country. A separate revised fixed annual charge for National permit vehicles

and for car carriers can also be considered which would include one time yearly penalty to stop the state

wise fines being imposed on car carriers

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6 Food processing

The food processing industry in India is one of the largest in terms of production, consumption, export and

growth prospects. Rapidly rising per capita income levels and renewed corporate interest in the organized

retail market shall act as growth drivers for the Indian food industry, which is poised for a quantum jump. It

is estimated that the sector is likely to grow over US $ 310 billion by 2015.

Food processing involves any type of value addition to agricultural or horticultural produce and also

includes processes such as grading, sorting, and packaging which enhance the shelf life of food products.

Food processing industry provides vital linkages and synergies between industry and agriculture.

India with arable land of 184 million hectares, produces annually 90 million tonnes of milk (the largest),

150 million tonnes of fruits & vegetables (2nd largest), 485 million livestock (the largest), 204 million

tonnes of food grain (3rd largest), 6.3 million tonnes of fish (3rd largest), 489 million poultry and 45,200

million eggs6. India‘s agricultural production base is quite strong but at the same time wastage of

agricultural produce is massive. Processing level is very low i.e. around 2 % for fruits & vegetables, 26 %

for marine, 6 % for poultry and 20 % for buffalo meat, as against an average of 60 -70 % in developed

countries.

Despite its raw material base, India accounts for only 1.5 % of the international food trade. This shows the

huge potential available for both investors and exporters in this sector. High availability of land, low cost

of labour and abundant availability of raw materials make India a very favourable location amongst

investors. Several global food giants and leading Indian industrial enterprises are already making their

presence felt in a big way in the sector. Some of them are Nestle India, Cadbury's India, Kelloggs,

Hindustan Unilever, ITC-Agro, Godrej Foods and MTR Foods. It is estimated that the food production in

India is likely to grow two-fold in the next ten years. Thus, there are ample opportunities for investments in

food and food-processing technologies and equipments; especially in areas of canning, dairy & food-

processing, specialty processing, packaging, frozen food and thermo processing, cold chains and in the

area of food retail.

Ministry of food processing in its Vision 2015 document has estimated the size of processed food sector

to treble, processing level of perishable to increase from 6 % to 20 %, value addition to increase from 20

% to 35 % and India‘s share in global food trade to increase from 1.5 % to 3 %. The government‘s focus

towards food processing industry as a priority sector will ensure policies to support investment in this

sector and attract more FDI. India with its vast pool of natural resources and growing technical knowledge

base has strong comparative advantages over other nations. According to CII estimates, food-processing

sector has the potential of attracting US $33 billion of investment in 10 years and generate employment of

9 million person-days. The food-processing sector in India is clearly an attractive sector for investment

and offers significant growth potential to investors.

6 The numbers given in brackets are world wide rankings

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6.1 Present scenario The food processing industry consists of fruits & vegetables, dairy, edible oils, meat & poultry, fisheries,

non alcoholic beverages, alcoholic beverages, confectionery, grains processing, packaged &

convenience food and floriculture. The detailed description of each of these sub sectors is mentioned in

Annexure 4 which provides information of export quantity, country of export, etc.


The food processing companies / cluster is spread across the country. With large number of retail

industry getting organized, the food processing industries are poised to grow exponentially. Government

of India is planning to set up 30 mega food parks across the country. GOI also estimates FDI in this

sector to further record a three-fold rise to touch US$ 325.93 million by 2009. The details of the licensed

FPI units in the country are given in annexure 7.

Major multinational companies like Coca-Cola, Pepsi, Britannia, Danone, Nestle, Cadbury, Unilever,

Kelloggs, Heinz, International Best Foods, Walls, Perfetti and Van Melle already have presence in India.

Many more MNCs are set to enter India in a big way.


Food processing and agro industries have been given high priority by the government with a number of

important incentives and subsidies being made available. Some of the important policy changes are as

follows:

Regulation and Control

FDI up to 100 % is permitted under the automatic route in the food infrastructure (Food Park, cold

chain / warehousing)

Automatic approval to FDI up to 100 % equity in FPI sector excluding alcoholic beverages and a few

reserved items

Foreign investments are allowed in SSI reserved items under an export obligation (pickles, chutneys,

bread, pastry, hard-boiled sugar candy, rapeseed oil, sesame oil, groundnut oil, sweetened cashew

nut products, ground and processed spices other than spice oil and oleoresin, tapioca sago and its

flour)

FDI up to 100% is permitted on the automatic route for distillation & brewing of alcohol subject to

licensing by the appropriate authority

No industrial license is required for almost all the food & agro processing industries except for some

items like beer, potable alcohol, wines and cane sugar.

Animal fats & oils and items reserved for exclusive manufacture in the small-scale sector.

Up to a maximum of 24% foreign equity is allowed in SSI sector.

Fiscal policy and taxation:

Rupee is now fully convertible on current account and convertibility on capital account with unified

exchange rate mechanism is foreseen in coming years

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Repatriation of profits is freely permitted in many industries except for some, where there is an

additional requirement of balancing the dividend payments through export earnings

Liberal corporate tax policy is applicable for export and domestic earnings, income tax rebate allowed

(100% of profits for five years and 25% of profits for the next five years) for setting up of new agro-

processing industries to process and package fruits & vegetables

Fruits & vegetables, and dairy machineries are completely exempt from central excise duty. Central

excise duty on preparation of meat, poultry and fish, pectin and yeast is also completely exempt.

Quantity restrictions on all food products have been removed. Peak rate of customs duty has been

reduced from 30% to 25% (excluding agricultural and dairy products) and duty structure on

designated items has been rationalized.

Customs duty on refrigerated goods transport vehicles has been reduced from 20% to 10%

Excise Duty of 16% on dairy machinery has been fully waived off and excise duty on meat, poultry

and fish products has been reduced from 16% to 8%.

Export promotion Food-processing industry is one of the thrust areas identified for exports. Free Trade Zones (FTZ)

and Export Processing Zones (EPZ) have been set up with necessary infrastructure. Also, setting up

of 100% Export Oriented Units (EOU) is encouraged in other areas. They may import free of duty all

types of goods, including capital foods.

Capital goods, including spares up to 20% of the CIF value of the capital goods may be imported at a

concessional rate of customs duty subject to certain export obligations under the EPCG scheme.

Export linked duty free imports are also allowed.

Units in EPZ / FTZ and 100% EOU can retain 50% of foreign exchange receipts in foreign currency

accounts

50% of the production from EPZ, FTZ and 100% EOU units, are saleable in domestic tariff area

All profits from export sales are completely free from corporate taxes and also exempt from MAT

Setting up of 60 agricultural zones for end-to-end development for export of specific product from

geographically contiguous areas. 53 food parks were approved to enable small and medium F & B

units to set up and use capital intensive common facilities such as cold storage, warehouse, quality

control labs, effluent treatment plant, etc. 100% Automatic FDI is allowed for setting up of Industrial

parks as well

Regulatory framework

There are different laws that govern the food-processing sector in India. The prevailing laws and

standards adopted by the Government to verify the quality of food and drugs is one of the best in the

world. Multiple laws / regulations prescribe varied standards regarding food additives, contaminants,

food colours, preservatives and labelling.

In order to rationalize the multiplicity of food laws, a Group of Ministers was recently set up to suggest

legislative and other changes to formulate a modern, integrated food law, which will be a single

reference point in relation to the regulation of food products. The food laws in India are enforced by

the Director General of Health Services, Ministry of Health and Family Welfare, Government of India

(GOI).

The detailed description of the food laws are mentioned in annexure 6.

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With the success of Green and White Revolution, India is now poised for the Food Revolution. Entry

of multinationals, low cost of technology and rise in commodity branding has resulted in a change in

the Indian food industry.

Indian food-processing industry is poised for explosive growth driven by changing demographics,

growing population and rapid urbanization along with increased government support. These factors

will increase the demand for value added products and thus improve the prospects of food-

processing industry in India. The government‘s focus towards food processing industry as a priority

sector will ensure policies to support investment in this sector and attract more FDI.

India with its vast pool of natural resources and growing technical knowledge base has strong

comparative advantages over other nations. According to estimates, food-processing sector has the

potential of attracting US$ 33 billion of investment in 10 years and generate employment of 9 million

person-days. The food processing sector in India is clearly an attractive sector for investment and

offers significant growth potential to investors.

Vision 2015 adopted by this Ministry of Food Processing envisages

Trebling the size of the processed food sector

Increasing level of processing of perishables from 6% to 20%

Value addition to increase from 20% to 35%

Share in global food trade to increase from 1.5% to 3%

6.5 SWOT matrix The SWOT analysis of the Indian food processing industry is indicated in the table below

Table 10: SWOT analysis of the Indian food processing industry


Abundant availability of raw materials

Relatively young population

High availability of irrigated /arable land in India

Vast network of manufacturing facilities all over

the country

Poor cold chain infrastructure

High transportation costs

Lack of 3PL / 4PL logistics service provider

Fragmented supply chain

High taxes & regulations

Poor lobbying by Indian Government

High requirement of working capital

Inadequate automation

Remuneration is less attractive to lure talent

pool

Inferior usage of seeds

Inefficient farm management

High cost of power & other utilities

Poor branding & marketing

Inadequate linkages between R&D labs and

industry

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Life style changes and rising income levels of

population

Vast rural consumer base (potential)

New food and food-processing technologies

Opening up of global markets will lead to export

of our developed technologies and facilitate

generation off additional income and

employment

Huge competition from global players

Loss of trained manpower to other industries

and other professions due to better working

conditions prevailing there.

Technology (food processing) obsolescence.

6.6 Factors affecting competitiveness The major factors that influence the export competitiveness of textile sector are mentioned below:

Figure 16 : Food Processing industry competitiveness model


Organized and short

supply chain

Supply chain need to be efficient, agile and adaptable that can handle larger

volumes, expand reach, balance cost and address the demographic

variations while providing scalability

Infrastructure Faster road and rail movements at cheaper rates

Cold chain infrastructure

Terminal markets

Effluent treatment plants

Logistics service Should have a proper 3PL/ 4PL logistics service provider

Production

Large scale processing capacity to cover export orders

Competitive interest and power tariff rates

Flexible labour laws with training standards

Supply chain integration

Competitiveness Internal and External factors

Market Access

Supporting logistics & industrial infrastructure

Competitive export cost

Reduction in time and low transaction cost

Collection and transportation network

Processed Food

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providers

Cost & quality of farm

produce

Good quality of farm produce at reasonable prices

Packaging Low packaging cost

Warehousing &

transportation

State of the art warehouses and container handling terminals

Support facilities Power, water and other utilities at a reasonable rates

R&D Research on better farm produces and high quality seeds

Branding Branding initiatives at international level and tie ups with retailers

Marketing campaigns and road shows inviting the food retailers and

marketers to the Indian market and pushing for growth of Indian retail

industry

Direct access to

importers

High reliance on the merchant exporters in the supply of raw materials is

leading to price pressure on processors

Know how of export

procedures

Proper know how of export procedures will increase the competitiveness

Proper understanding

of destination market

Proper understanding of destination market is required for developing the

new products

Productivity at farm

level

Poor quality seeds and planting material, lack of advanced harvesting

methods, cold chains reduce the productivity of the processed food

Linkages Proper linkages between farmers, the industry and the R&D institutions are

required

6.7 Feedback obtained from industry trade bodies

The Agricultural and Processed Food Products Export Development Authority (APEDA) was established

by the Government of India in 1985, replacing the Processed Food Export Promotion Council (PFEPC).

Processed food culture is still to be developed in India as people prefer fresh fruits due to its

availability.

Large domestic capacity still not set-up in India which can service the whole market including exports

Need for domestic infrastructure development covering cold storage and logistics chain

Need to have integrated transportation which can reduce weight of foods by semi processing to avoid

damage.(example tomato pulp can be transported instead of whole tomatoes)

Meat processing requires high investment in modern abattoir , with supporting cold chain and

scientific rearing of livestock to avoid diseases

State animal husbandry needs to be developed

Feedback from Tea Association of Coimbatore and Seafood Exporters Association of India has been

covered in the section below.


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In this section we shall identify the major hurdles / bottlenecks faced by the food processing exporters.

The issues related to hard infrastructure, soft infrastructure, policy and other issues are mentioned below:

Hard infrastructure


Road Longer transit time for the transportation

of fruits and vegetables from various

destinations to factory

For example, it takes around 5 days to

transport 10 tons of fruits from Bihar to

Hyderabad which costs over INR 1 lakh.

The time traveled by the trucks in a day

in India is very less when compared to

the international standards. Indian cargo

travels 250 to 300 km per day vis-à-vis

600-800 km as per international norms.

Government should initiate steps to

improve the road conditions and

increase the per day distance

covered by the trucks

Rail Railways do not have a proper cold chain

/ refrigeration facilities

Railways should come up with

projects to create refrigerated

storage facilities. These projects

can be taken on PPP basis

There is poor connectivity to specific food

producing regions by the railways. This

forces the transporters to rely on other

modes of transport which are costlier

Railways should connect food

parks and build storage & handling

capacity. This would lead to better

connectivity and lesser wastage of

food products.

Port

infrastructure

Water seepage inside the containers

during the monsoons, leading to spoilage

of processed food stored inside the

containers

Ports should have proper raised

platforms for storing the containers

during the monsoons

Congestion, labour strikes and slow

handling of the cargo at the various ports

causes huge delays in the export of

processed food consignment which has a

shorter shelf life

Processed food consignments

should be given priority at the ports

for handling, clearance and export

as these items are perishable

Airport There is shortage of warehouses at the

airports across the country

State-of-the-art warehouse facilities

need to be created at the major

airports

Inland water

transport

There is less usage of inland water

transport for shipment of processed

foods, especially fruits and vegetables in

the eastern region to western region.

Inland water transport mode should

be encouraged for transporting the

processed food across the country

as IWT mode costs much less than

land and rail transportation charges

Power Power supply is a major requirement for

food processing and there is a major

Government should take up this

issue on a priority basis and should

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Hard infrastructure


problem of power shortages across the

country. Exporters end up paying huge

amounts of money on generators. This

issue was mainly reported from the

states of Kerala, Tamil Nadu and

Maharashtra

try to provide reliable electricity for

the food processing units.

Water There is shortage of supply of potable

water for peeling sheds in Kerala

Food processing requires potable and

adequate water supply. There is a

shortage of availability of potable water

for the processing units

Steps to ensure adequate supply of

potable water to the food

processing units

Warehouses

& Cold chain

Shortage of cold chain infrastructure in

India

Refrigerated trucks - There is a need for

more refrigerated trucks to cater to the

industry. It is estimated that about 25000

vehicles are involved in perishable

products transportation of which dairy

(wet milk) constitutes about 80% thereby

leaving only about a fleet of 5000

refrigerated transport vehicles for all

other categories put together

Government should take up

projects in providing temperature

controlled warehouses of varied

capacities, refrigerated transport

vehicles and other auxiliary

facilities. The project should have

end to end capabilities across the

entire supply chain and would cater

to the requirement of various

industries where controlled

atmospheric conditions are

necessary for storing raw materials,

intermediate and finished goods.

Lack of common cold chain facility is a

major cause of concern. This is forcing

the companies to have their own cold

chain infrastructure facility.

There is an urgent need to build the

integrated cold chain functions

across the country in order to

provide advanced environment

controlled warehousing and

transport solutions, right form the

farm till end use consumption. It will

assist in storage of significant

quantity of commodities to enable

uninterrupted supply throughout the

year. The presence of these

facilities will reduce the fixed costs

for the companies.

There is a need for cold storage facilities

at the airports across the country

Initiate projects to have state-of-

the-art cold storage facilities across

the major and tier I & tier II airports

Empty / reefer Availability of reefer containers is a major Government should consider

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Hard infrastructure


container /

trucks

issue in Andhra Pradesh & Kerala. This

causes a major delay in the transit time

for exporting the consignments.

Shortage of empty containers is a

common problem with the exporters

especially in the South. This is forcing the

exporters to fetch the empty containers

from the ports and thereby incurring huge

costs.

setting up of authority that can

oversee the demand supply

scenario of the containers amongst

the various ports and ICDs and

coordinate the same with the

exporters so that they can get the

reefer and empty containers from

the nearest locations at the

shortest possible time.

Waste

treatment

plants

There is a shortage of common effluent

and waste treatment plants across the

country. This is a major requirement for

the food processing where huge

quantities of effluents which gets

generated are required to be treated

before letting out.

Government shall provide special

incentives / grants to FP clusters to

help them set up ETPs.

Terminal

markets

There is a shortage of terminal markets

across the country

Need to have more terminal

markets across the country.

Government needs to replicate the

SAFAL market model across the

country. Initiatives should be taken

in such a way that these markets

are constructed at all the urban

cities within a span of 5 years.

Smaller replicas of the same can

be considered in the suburban and

rural places.

Certification

labs

There is a shortage of quality certification

labs across the country

Government should initiate steps

for setting up quality certification

labs across the country.

Testing charges - Export Inspection

agency checks the export sample and

the charges varies from US$ 3 to 10 per

sample depending on the value of the

consignment. Since the tests done are

uniform, the agency should have a

nominal flat out rate charge instead of

charging it as per the value of the

consignment of the sample. The agency

may charge the same by weight instead

of consignment value.

The government should direct the

testing agencies to charge a flat out

rate per sample instead of the

testing rate being decided by the

value of the consignment.

Huge time delays in testing of the The government should establish 2

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Hard infrastructure


samples of wines meant for exports – In

case of wine exports around 4 bottles of

wines are required to be sent to the

Central Food Technical Research

institute (CFTRI) at Mysore, which is

recognized by the European Union.

These samples have to be sent by

exporters with a requisite letter from the

Excise Department. After testing, the

institute is required to issue a certificate

indicating that the samples are fit for

human consumption. The testing of such

samples takes a lot of time (20-25 days),

since the institute is the only one in the

country. The export consignments are

not allowed to be cleared without the

certificate.

more CFTRI like institutes to ease

the pressure on Mysore CFTRI.

This will enable the wine exporters

to get their sample testing done in

less time. There is also a need for

reducing the need for shortening

the testing time to around 10 days.

For certain countries Phytho sanitary

certificate has to be collected which

involves time and money.

GoI should take up with such

countries to have an independent

survey certification accepted.

Others There is a shortage of food processing

zone and food parks across the country

Steps should be taken to have food

processing zones in each of the

states. This can be operated on a

PPP basis

Government should look into

setting up pre-processing centers

and pre-cooling facilities near farms

& mandis, and upgrade food

processing clusters.

Soft infrastructure


Labour There is a shortage of skilled / unskilled

labourers for the marine food processing

sector.

Government should initiate actions

to start new marine training institutes

Research &

Development

There is a shortage of advanced

technology usage in the processed food

testing laboratories

Government shall try to upgrade the

testing labs with the latest

technology

Indian black tiger shrimp (Pennious

Monodone), is prone to disease due to

the pollution and contamination of water.

The other S.E Asian countries have

come out with a hybrid species called

The GoI should accept the new

species of the shrimp for the Indian

seafood exporter to capitalize on the

export opportunity.

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Soft infrastructure


Pennious Mannami. This hybrid product

is more resistant to diseases, has a

better production rate (almost 3 times

more) and has a much superior taste

than the Indian breed. While the EU has

accepted this hybrid variety for exports,

the Government of India has not yet

accepted the new shrimp species and

hence production of this shrimp does

not take place in India.

Ceramic membrane helps raw milk to be

preserved for a longer period and also

helps in separating proteins for more

casein production. Unfortunately,

Ceramic membrane is not available in

India and has to be imported from

France at a very high cost.

There is a need to have proper R&D

on ceramic membrane, which will

facilitate its development in India at

a lower cost. The government can

arrange to supply the same to diary

industry if required at a subsidized

rate.

The packaging cost are very high in

India

High quality packaging today

requires costly machinery as well as

costly materials. Research on

packaging needs to be stepped up

to arrive at cost effective solutions.

Poor cultivation methods adopted in

India

Govt. should try to invest more

money in R&D and try to identify

different cultivation methods as

adopted by foreign countries which

gives them more outputs

India does not have proper R&D for

launching new product lines

Government should set up new

research and development division

to focus on innovation and new

product development

Training There is a shortage of qualified trained

labour for the food processing sector

Government should start training

institutions for the encouraging the

skilled labour in the sector

There is lack of adequate training to

farmers which has resulted in wastages

and lack of outputs

Policy should promote contract

based farming where exporters can

develop a regional base, educate

the local growers and increase and

export output.

Export norms in EU countries not very

clear about Ghee import hence require

assistance from some central agency or

association to streamline and develop

Government should have a division

who can educate the exporters and

farmers on various country‘s norms

(What is prevailing in EU, USA, etc)

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Soft infrastructure


market in EU

The usage of unbranded pesticides by

farmers is creating low quality food (raw

materials for FPI).

Government should also educate

the farmers about the ill effects of

such unbranded pesticides and

launch an awareness program

amongst the farmers to use BIS

certified pesticides.

Government can also try to give

some discount on the purchase of

the branded pesticides

LCL stuffing of food item is not done

properly in the country

There should be training programs

for the employees of the CFS on the

LCL stuffing.

Problem with the Logistics service

providers - The logistics service provider

in a bid to save cost on diesel, invariably

shuts off the DG set of the reefer

container after covering some distance

from the factory. This leads to the

damage of the processed food whose

shelf life is short and thereby forcing the

exporters to use a vigilance team to

keep track on the reefer trucks

The Service Level Agreements

should be made mandatory by the

government and strict actions should

be taken against those who do not

follow the guidelines

EDI The shipping bills are required to be

filed through the EDI system. Even

though the shipper has filed the shipping

bill, sometimes the shipping bill does not

appear in the EDI system.

The Customs seriously need to

resolve the problems in their EDI

system by making it more reliable

and robust.

There is a regular delay for exporters in

obtaining necessary incentive benefits

from the DGFT. The necessary

formalities for incentives should be

coordinated between DGFT and

customs, however the actual paper

formalities occur only when the exporter

steps in and follows up with the

authorities concerned. Exporters have

indicated that obtaining benefits in a

timely manner provides them much

needed relief and thereby being able to

manage their working capital in a much

better manner.

There should be proper coordination

between DGFT and customs

Policy

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Local,

regional &

national

regulations

There is entry time restriction for trucks

and trailers inside the cities which

increases the transit time. Eg.

Hyderabad, Coimbatore, Gurgaon, Noida

etc.

The Government needs to come up

with alternative routes for the

vehicles to move in the city

DEPB DEPB claims have procedural delays

Earlier 1% rebate on packing and 2.5 %

DEEP was made available to the

exporter, which has also been withdrawn.

DEPB- The present rate for DEPB on

Chilly is 1.2% which needs to be

increased.

DEPB scheme even though online still

require a lot of paper work which needs to

be eliminated

The office of the DGFT shall

consider the merits of the arguments

of the exporter community and take

steps to reduce the procedural

delay, etc.

VAT &

others

Different VAT rates in the country

Government should try

implementing a common VAT

system across the country and try to

keep the essentials in the lowest

slab

Market

intelligence

Farmers are not aware of the supply

demand scenario in the international

market. They produce food commodities

meant for export which do not have

demand during a particular period of time

and finally end up wasting the whole

produce

Government should come up with a

detailed website / magazine wherein

the information on international

trends and market scenario is

readily made available to the

farmers. Also there is a need to

create a suitable mechanism to pass

on this information to farmers on

time.

Brand

Promotion

There is lack of awareness of Indian

processed food in the international

market

Govt. should have promotional

campaigns across the globe to

popularize Indian processed food

Indian tea is usually exported to Kenya

and then routed to Pakistan as Kenyan

Tea.

Government should look into the

issue and try to initiate a dialogue to

resolve the issue.

Absence of strong lobby from India for

marine food related exports - The ASEAN

countries especially Thailand and China

have a strong lobby

India should have a strong lobby to

take up the issues faced by the

exporters whenever required.

Indian marine industry has a poor

hygiene image amongst the international

community

Govt. should try to remove the poor

sanitary and hygiene image for

Indian marine foods products in the

international markets by proper

branding & seminar participation

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Soft infrastructure


MPEDA MPEDA scheme: Allowed to import 1% of

turnover duty free – FOB.

Peeling sheds to have a minimum quality

Government may have to re-look at

the 1% rate and may increase it to

5%

Peeling sheds should be MPEDA

certified

Subsidy APEDA offers some subsidy through

government on reefer inland

transportation, but the same is not

applicable for food processed exports in

normal container transport

Financial

support

Lack of adequate and timely funds for the

companies

Government should establish a

financial institution which can cater

to the needs of the entire food

processing supply chain and provide

credit at the right time.

EXIM Rice variety like PONNI-S India command

a higher price than Basmati rice but are

not allowed to be exported.

The govt. may allow the export of

Ponni variety rice (by studying the

pros and cons of export)

In India, exports of the fresh fruits is not

looked at seriously, there is no strong

support / lobby for the growth of the

exports.

Need for government facilitation for

helping the fresh fruit exports from

India

Sugar exports are decided by GOI.

Usually the ban of sugar exports is

announced all of a sudden and exporters

lose huge amounts of money as they

would have already started executing the

export orders.

Sugar exports being decided by the

government, it should provide for

adequate time period for the

exporters in the event it wants to

stop the export of the commodity for

a time period for various reasons.

In the event the government decides

to stop the exports of any

commodity say from 1/11/2008, then

it should allow transit exports of that

commodity i.e. for any order that

was executed before 1/11/2008.

Schemes /

policy

Promoting organic food segment in India Policy should also encourage

organic food segment

The government came out with a scheme

to encourage product specific exports to

the African countries in early 2007. As per

the scheme, the exporter would be given

certain benefits and incentives. However

there was no proper notification provided

to the actual ground staff regarding how

Government should devise effective

communication modes to

disseminate information on all the

schemes/ policy to the concerned

authorities handling the same

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Soft infrastructure


the incentives and benefits should be

provided. The ground staffs were clueless

on the type of documents required to

avail of the benefits. Some asked for the

proof that the product as actually

exported to the country in the form of Bill

of Entry (which was impossible to obtain,

especially for a land locked country)

though the shipping bill filed with the

Customs actually indicate the country of

export.

No specific wine policy in India - In India

wine exports is not taken seriously unlike

countries like Australia, wherein they

have specific wine related bodies like the

AWBC (Australian Wine Board Council)

comprising of wine producers of Australia

which assist in wine exports

India should have a specific wine

policy in place

There is a periodic change of various

forms by the Government agency and this

forces the exporters to adapt to the new

forms quite frequently

Government should try to have the

policy and schemes fixed for at

least, say, a period of 2 years

Tea not included in VKGUY - The

government should include tea as one of

the commodities under Vishesh Krishi

Gram Udyog Yojana for the exporters to

avail some subsidies.

Steps shall be taken to include tea

as one of the commodities under

VKGUY scheme

For marine exports to EU, India has to

pay a duty of 4.5%. Bangladesh, India‘s

main competitor, is exempted from this

duty on account of its special status

Indian Government shall negotiate

with the EU for a similar kind of

preferential status

Anti dumping duty in US - Indian marine

exports face an anti dumping duty which

was as high as 26% and now has been

reduced to 1.7%, which is not the case for

Bangladesh, for which it is practically

zero.

Indian government should initiate a

discussion with US to remove the

anti dumping duty

The ban on certain processed food items

are slapped all of a sudden, thereby

causing huge losses to the exporters

Government should not implement

the ban of commodities overnight or

in a short duration and the exporters

shall be given reasonable time to

this effect.

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Soft infrastructure


Others Government authorities charging

commission on the duty draw back

schemes refunds

Government shall put in place a

robust corruption prevention

mechanism through policy

interventions (including punitive

measures) and by simplifying the

refund procedures

Indian winery is not branded

internationally

The government shall make every

efforts to position and brand Indian

wines in the world market through

campaigns, seminars an and

advertisements

India shall follow policies on the

lines of that of the Australian

government.

Other issues


Intermediaries Involvement of multiple intermediaries in

the supply chain

Length of the chain of commission

agents need to be reduced with an

ideal situation of eliminating the

commission agents completely.

Lack of best

practices

Absence of post harvesting facility and

Infrastructure causing loss in post

harvest collection

Need to have better post-harvest

management systems

Shortage of

raw materials

There is a shortage of raw materials for

food processing

Government should try to improve

availability of appropriate variety of

raw materials at reasonable price

through increased productivity,

focused R&D, procurement and

storage

Government should try to acquire

new improved varieties of seeds

Shrimps and fish: There has been

irregular supply of shrimps and fish for

processing in the recent years which

makes the companies impossible to

satisfy the order book positions

Government of India should take

actions for banning foreign trawler

vessels fishing in Indian waters

Packaging High cost of plastic granules (raw

material for packaging material) due to

the increased price of naphtha, the

feedstock for polymer manufacturing

Duty reduction on petroleum

derivatives may be thought of to

contain the price of plastic

packaging materials

Packing material like cans, glass bottles

are subject to excise duty and tax which

Excise duty on packaging material

has to be reduced

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Other issues


reduces export competitiveness.

Cost of packaging is the other major

constraint for this sector. Cost of

packaging ranges anywhere from 10 to

60% of production cost.

Reduce the higher level of

intermediation in the Indian food

chain

Others The post and pre shipment credits are

high in India which makes the finance

cost higher for the exporters

Improve the credit and lending

facilities to promote exports

There is a shortage of contract farming

in India. Contract farming is an

important factor which appears to have

helped the growth of the processing

industry as well farmer‘s incomes.

Take necessary steps to encourage

contract farming

Processor-farmer linkages lacking in the

country

Need for development of

relationship between farmers and

processors for productivity increase

Processed food and fresh food prices

are usually within a reasonable

comparative range in developed

countries. In India, however due to a

variety of factors processed food prices

are higher than fresh food.

Try to achieve scale economies,

with cost effective processing will

bring down the price of processed

food in the market.


During the interaction with various exporters, the respondents indicated specific competitive countries

depending on their product and the USP the competitive country possessed. The table below indicates

the competitive countries feedback as obtained from the exporters.

Product Competitor USP

Mango pulp, gherkins,

jams, squashes &

sauces

Brazil These countries have an advantage of a

superior infrastructure which guarantees

their products reaching the destination as

per the promised schedule. The Indian

exporters cannot assure timely delivery for

circumstances beyond his control.

Thailand

China

Grapes Chile Chile‗s economy runs on the grapes exports

and hence there is tremendous support

from the respective government

The quality of grapes is superior

South Africa Better quality grapes

Higher amount of production

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Product Competitor USP

Less domestic consumption leading to more

exports

Mango drink beverages Brazil and other South –

East Asian countries

where mango and other

tropical fruits are

obtained.

Some of the developed countries in Europe

obtain raw material in pulp format from

Brazil or other countries where mango is

available. The import duty levied is very low,

since it is treated as raw materials. The

counties then process the pulp and sell it at

a very competitive price.

Wine France & Italy Adequate and quality grape cultivation

The enormous brand equity and mind share

they enjoy all over the world

Australia and South

Africa

Due to the strong co-operative set up

Sugar Thailand and Brazil The port infrastructure at Brazil is excellent

resulting excellent turn around time and

reliable delivery schedules unlike India,

where the exporter ends up committing a

delivery schedule, which he can‘t commit for

reasons not under his control

Biscuits China China – quality is not good, however their

ports are very efficient and hence the freight

charges are less thus giving them a cost

advantage. In addition, the labour is very

cost effective

Tea Sri Lanka / Kenya /

Nepal

Sri Lanka being a major transshipment port

has an intrinsic freight cost advantage than

over Kolkata, wherein the shipment is

brought in feeder vessels to Colombo thus

adding the cost

Kenya – Climate conducive for tea

plantation and growth

Nepal is emerging as a competitor owing to

its low price relatively new plantations

Marine shrimps Bangladesh

The exports from Bangladesh to EU are not

imposed any import duty on their products ,

while the Indian shrimp exporters are

required to pay import duties

Further details of some of our competitor countries are given as annexure 8


The sector-specific recommendations and the wish list aimed at improving the overall competitiveness are

attached as annexure 5.

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7 Policy initiatives by concerned

Ministries As detailed in the report, the export competitiveness of products depends on a host of factors such as:

The international trade policies and tariffs

Preferential trade agreements and treaties

Government policies

Industry per se competitiveness

Logistic and supply chain factors

The business operates in an ecosystem which consists of all these factors, which are often intermingled

and intertwined. The initiatives by respective ministries and departments to provide fillip to the concerned

sectors are summarized as below:

7.1 Chemicals

The various initiatives (both direct and with the involvement of other departments) by the Ministry of

Chemicals & Fertilizers in order to improve the industry competitiveness (both domestic and export

related competitiveness) are mentioned below:

Promotion of a Petroleum, Chemical, and Petrochemical Investment Regions (PCPIR) covering a

processing area of 100 km, with a mother plant to provide basic raw material and feedstock to

the surrounding units enabling vertical integration and value addition. Under this scheme, an

investment region with an area of around 250 square kilometers is planned for the establishment

of manufacturing facilities for domestic and export led production in petroleum, chemicals &

petrochemicals, along with the associated services and infrastructure. The PCPIR may include

one or more Special Economic Zones, Industrial Parks, Free Trade & Warehousing Zones, ports,

etc. The PCPIR would ensure better input-output linkages thereby reducing the logistic costs to

be incurred for transporting feedstock, raw materials, etc.

Government will evolve the feasibility of setting up of dedicated Plastic Parks to promote a cluster

approach in the areas of development of plastic applications and plastic recycling. These would

mainly benefit the downstream petrochemical sector in the areas of technology development,

best practices, market development and recycling of plastic waste. The feasibility report has been

prepared. The Chemicals and Fertilisers Ministry will soon approach the Planning Commission

and the Finance Ministry with a proposal to provide various fiscal incentives for the development

of such parks. The sops include tax holidays, exemption in sales tax, octroi, excise, as well as

subsidy.

The government has provided a number of fiscal incentives and other support measures for

promoting R&D in industry and increased utilization of locally available R&D options for industrial

development. These include the following:

i. Write off of revenue expenditure on R&D; vide (Section 35 (1) (i) of Income-tax

Act).

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ii. Write off of capital expenditure on R&D in the year the expenditure is incurred;

(vide Sec.35 (1) (iv) of Income Tax Act).

iii. Weighted tax deduction of 125% for sponsored research programmes in

approved national laboratories, Universities functioning under the aegis of the

Indian Council of Agricultural Research (ICAR), Indian Council of Medical

Research (ICMR), Council of Scientific and Industrial Research (CSIR), Defence

Research & Development organization (DRDO), Department of Electronics,

Department of Biotechnology, Department of Atomic Energy, Universities and

IITs is available to the sponsor.

iv. Weighted tax deduction @ 125% (raised to 150% by the Finance Act 2000) on

R&D expenditure to companies engaged in the business of bio-technology or in

the business of manufacture or production of drugs, pharmaceuticals, electronic

equipment, computers, telecommunication equipment, automobile and its

components, chemicals, manufacture of aircraft's and helicopters in government

approved in-house R&D centres.

The Export Promotion Council of India (Mumbai), a government body, has pledged to cover 50%

of the REACH pre-registration costs of small- and medium-sized enterprises. CHEMEXCIL, with

the help of Government of India, is working out concessional rates for the benefit of member

exporters for Pre-registration and Registration.

7.2 Textiles & Apparels The Ministry of Textiles had launched several initiatives in order to provide new impetus to the sector.

These policy initiatives are aimed at not only improving the industry per se competitiveness but the export

competitiveness of the sub segments covered under these schemes also.

The Scheme for Integrated Textile Parks (SITP) was launched in the year 2005 with the primary

objective of providing the industry with world class infrastructure facilities for establishing textile

units (under PPP) and to neutralize the weakness of fragmentation. The scheme would facilitate

textile units to meet international environment and social standards (covering sectors of weaving,

knitting, processing and garmenting) at potential growth centres.

The National textile Policy (NTP 2000) aims at increasing exports through productivity

enhancements and through innovative marketing strategies

Development of mega cluster schemes for powerloom, handloom and handicrafts are initiated

already by the Ministry.

o CPCDS will be initially implemented in two clusters - Bhiwandi and Erode. Nature and

level of assistance to each of the said clusters will be need based and would include the

components that are necessary for meeting the objectives. Illustrative list of permissible

activities include - Technology Upgradation, Product Diversification, Raw Material Bank,

Credit, Market Development, Forward & Backward Linkages, Human Resource & Skill

Development, Social Security, Physical Infrastructure, Export & Marketing, Margin Money

for Working Capital, Corpus Fund for Yarn Depot.

o Comprehensive Handloom Cluster Development Scheme (CHCDS) - comprehensive

Handloom Cluster Development Scheme will be implemented for development of 2

Handloom Clusters (Varanasi & Sibsagar), each covering over 25,000 looms at a cost of

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Rs.70.00 Crore per cluster. The scheme would be implemented as a Central Sector Plan

Scheme. The objective is to develop 2 Mega Clusters that are located in clearly

identifiable geographical locations that specialize in specific products, with close linkages

and inter dependents amongst the key players in the cluster by improving the

infrastructure facilities, with better storage facilities, technology up-gradation in pre-

loom/on-loom/post-loom operations, weaving shed, skill up-gradation, design inputs,

health facilities etc. which would eventually be able to meet the discerning and changing

market demands both at domestic and at the international level and raise living standards

of the millions of weavers engaged in the handloom industry.

o Comprehensive Handicrafts Cluster Development Scheme ( CHDS) - It is proposed to

scale up infrastructure and production facility of large clusters with artisans more than

20000 in a cluster with geographical area such as a district, by adopting two as mega

clusters i.e Moradabad (Uttar Pradesh) and Narasapur (Andhra Pradesh), for which

comprehensive development plans would be drawn up and implemented by way of

dovetailing various schemes on a PPP basis

Handloom sector - The important schemes being implemented for the holistic growth and

development of the sector are: (i) Integrated Handlooms Development Scheme, (ii) Marketing &

Export Promotion Scheme, (iii) Handloom Weavers Comprehensive Welfare Scheme, (iv) Mill

Gate Price Scheme, (v) Diversified Handloom Development Scheme, and (vi) the 10% Rebate on

the sale of handloom fabrics(Non-Plan Scheme)

1. Technology Mission on Cotton - In order to consolidate the strength in raw material especially the

cotton sector and to remove contamination, the Government had set up the Technology Mission on

Cotton (TMC) on 20th February 2000. The Mission, consisting of four Mini-Missions, was intended to

run for a 5-year term, commencing from 1999-2000. It has since been extended by 3 years to cover

the entire Tenth Plan period, ending with 2006-07 (31.03.2007). Mini Mission III and IV were

extended up to 31 March 2010 and there is likelihood that these schemes will be continued beyond

the year 2010.

7.3 Auto & Auto components Similar to the policy initiatives of other Ministries and Departments, the Ministry of Heavy Industries and

Public Enterprises had come up with several schemes to improve the auto and auto component sector in

India; some of which are highlighted below:

The Automotive Mission Plan (AMP) unveiled by Prime Minister in January 2007 lays down the

collective Vision of the industry and the Government for 2016 for the automotive industry. The

Automotive Mission Plan (AMP) envisages increase in production of automotive industry to reach

Rs. 600000 crore by 2016. Government has already developed the blueprint for the industry

through Automotive Mission Plan, which lays down some of the policies that need to be

strategized and put into play for promotion of the industry.

National Automotive Testing and R&D Infrastructure Project (NATRIP) would be providing state-

of-the-art facilities for testing and homologation by 2009. One of the biggest tracks in the world is

being built at Indore for the auto sector.

The stimulus package announced recently has taken several measures for boosting exports in

the auto sector. This includes -

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o DEPB rates – The GoI has decided to restore DEPB rates to those prevailing prior to

November 2008. In order to predictability and to provide stability of regime in short term for

future contracts, it has also been decided that the DEPB scheme would be extended till

31.12.2010

o In order to sort out the procedural issues and other similar problems facing exporters, the GoI

has decided to constitute a Committee under the chairmanship of the Finance Secretary

including Secretaries of the Departments of Revenue and Commerce to look into and resolve

these issues on a fast-track basis.

Automotive Research Association of India (ARAI), Pune - In line with ARAI‘s vision to increase

contribution from R&D work and to strengthen competence, Technology gaps were identified.

Based on their relevance and current need, following 6 R&D projects have been taken up.

o Design & Development of High Performance 3 Cylinder CRDI Euro 4 Diesel Engine.

o Development of Diesel Engine using HCCI Combustion Concept to meet EURO IV & EURO

V Norms.

o Development of Electronic Fuel Injection System for 4-stroke, Single Cylinder Gasoline

Engine.

o Development of 6 Cylinder HCNG (H2+CNG) Engine Compliant to Euro-V Norms.

o Measurement of nanoparticle Emissions of Automobiles.

o Measurement of road profile on Indian roads and Study its effect on Vehicle Durability and

Ride

7.4 Food processing

The Government of India has identified food processing industries as a major thrust area for exports. The

Ministry of Food Processing (MoFP) has launched the following programmes / initiatives to achieve these

objectives.

Food-processing industry is one of the thrust areas identified for exports. Free Trade Zones (FTZ)

and Export Processing Zones (EPZ) have been set up with necessary infrastructure. Also, setting up

of 100% Export Oriented Units (EOU) is encouraged in other areas. They may import free of duty all

types of goods, including capital foods.

All profits from export sales are completely free from corporate taxes and also exempt from MAT

Setting up of 60 agricultural zones for end-to-end development for export of specific product from

geographically contiguous areas. 56 food parks were approved to enable small and medium F & B

units to set up and use capital intensive common facilities such as cold storage, warehouse, quality

control labs, effluent treatment plant, etc.

There are different laws that govern the food-processing sector in India. The prevailing laws and

standards adopted by the Government to verify the quality of food and drugs is one of the best in the

world. Multiple laws / regulations prescribe varied standards regarding food additives, contaminants,

food colours, preservatives and labelling.

In order to rationalize the multiplicity of food laws, a Group of Ministers was recently set up to suggest

legislative and other changes to formulate a modern, integrated food law, which will be a single

reference point in relation to the regulation of food products. The food laws in India are enforced by

the Director General of Health Services, Ministry of Health and Family Welfare, Government of India

(GOI).

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Total outlay of Rs. 2,631 Crores is expected in 11th plan on Mega Food Parks, Setting up of cold

chain facilities and setting up and modernization of abattoirs7. The Cabinet in its meeting held on

11.09.08 had approved establishment of 30 Mega Food Park (MFP) under the Infrastructure

Development Scheme for Mega Food Parks during 11th Plan Period out of which 10 Mega Food

Parks have been approved for being taken up in the 1st phase. In-principle approval for these 10

Mega Food parks was accorded on 16/12/08 out of which Detailed Project Reports (DPR) for five

MFPs have been accepted. DPRs from remaining five are expected soon.

During 11th plan, this Ministry has launched a comprehensive scheme for modernisation of abattoirs

across the country. Based on detailed discussion with stakeholders, industries and State

Government, the Scheme has now been modified to induct private capital, better technology,

backward and forward linkages. The financial assistance will be provided, subject to necessary

approval, 50% and 75% of the cost of plant & machineries and technical civil work in general and

difficult areas respectively subject to a maximum of Rs. 15 Crores for each project. The scheme will

be implemented preferably under PPP mode with the involvement of local bodies (Municipal

Corporations and Panchayats) and will have flexibility for involvement of private investors / Exporters

/ FDI on a BOO / BOT / JV basis. Regulatory functions will continue to be discharged through local

bodies. This will enable the local bodies to participate in the venture and also be assured of a stream

of income.

To encourage setting up of cold chain facilities and backward linkages in the country and to provide

integrated and complete cold chain and preservation infrastructure facilities without any break, from

the farm gate to the consumer, Ministry of Food Processing Industries (MFPI) has launched a Plan

Scheme during 11th Plan to provide financial assistance to project proposals received from public /

private organisations for integrated cold chain infrastructure development. The initiatives are aimed at

filling the gaps in the supply chain, strengthening of cold chain infrastructure, establishing value

addition with infrastructural facilities like sorting, grading, packaging and processing for horticulture

including organic produce, marine, dairy, poultry, etc. The scheme envisages financial assistance in

the form of grant-in-aid @ 50% of the total cost of plant and machinery and technical civil works in

general areas and 75% for North Eastern Region and difficult areas subject to a maximum of

Rs.10.00 Crore. 11th Plan outlay for the MFPI is Rs. 4031 Crore. Of this, integrated cold chain

infrastructure is Rs. 210 Crore for setting up of 30 units during 11th Five Year Plan

7 7 Annual report MOFPI 2008-09

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8 Issues inflating the logistics costs

and leading to time over-runs

To understand the constraints and bottlenecks faced by exporters due to various factors, feedback from

primary survey covering the four zones; namely north, south, east, west were analyzed to identify the root

cause of various logistics related constraints affecting the exporters, which in turn affects the export

competitiveness. These logistics related issues and other policy related problems encountered by the

exporters specific to a particular zone is indicated in the subsequent sections.

However before spelling out the specific zonal logistics related issues including the time and cost factor

involved in the export transaction of a particular zone, overview of some of the major common issues /

bottlenecks faced by the exporters / shippers across all the zones has been indicated below. For the

purpose of detailing out the issues / constrains faced by the Shippers during each activity / sub-activity of

the logistics transaction, the same has been broken down into the following three heads.

A – Factory premises formalities which includes the following –

1. Central excise clearance

2. Transfer of cargo into container in presence of Central Excise Inspector

3. Stowage of cargo in container

4. Central excise sealing


B - Inland movement and customs clearance formalities, which includes the following sub-activities

6. Road journey

7. Unloading of container from truck and storage/stacking of container in buffer yard in CFS.

8. Customs clearance/sealing of container

C – Port related logistics formalities, which includes the following sub-activities –


10. Transportation of loaded container to container yard in port

11. Unloading of container in Container Yard in Port

12. Stacking of container in Container Yard in Port

13. Loading of container on truck to move container alongside ship

14. Truck journey from Container Yard to alongside ship i.e., Quay.

15. Loading of container from truck to cellular hold of ship

16. Sea voyage

Majority of the Shippers who were interviewed for the purpose of this survey dispatched their cargo by

FCL mode. The issues raised by them reflect a certain commonality in the factors that cause a time and

cost over-runs across all zones thus affecting the competitiveness of Indian exports.

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A. Factory premises formalities –

1. Difficulties in obtaining refunds from Excise - The shippers are supposed to obtain their excise

refund after not more than 7 days from the date of submitting the relevant documents. However the

actual time taken is around 30-35 days. In addition, the excise department does not provide any

refund payments for the month of January, February and March citing year end closing. Shippers

have indicated that the excise refund for the shipments undertaken for the referred three months adds

up to a significant amount,

In addition to compound to the Shipper‘s problems, the time taken for obtaining the export incentives

is also around 3 months. The above factors create a very tight working capital and cash flow situation

. The shipper, to meet his shortfall in funds, is forced to obtain loans at a higher interest rates, thus

affecting the competitiveness of his exports. The respondents indicated that the practice of Excise

Dept not providing refunds in the month of January, February and March under the pretext of year

ending should be stopped and if required the matter should be taken up with the necessary higher

authorities.

2. Banking related - The shipment to Dubai from JNPT usually reaches within a week. If there is any

delay from the Indian Bank to forward the LC related documents to its Dubai counterpart, the

consignment has to wait at the Dubai port before being released thereby attracting demurrage

charges.

3. Availability of empty containers – Obtaining empty containers, especially reefer

containers on time is a major issue which upsets the entire logistics planning exercise.

B. Inland movement and customs clearance formalities

1. Export documentation - For completing an export transaction a minimum of 23 sets of documents

are required catering to customs, excise, ports authorities, shipping lines, banks and various other

agencies involved. There is a need for reduction in documents and designing standardized

documents acceptable to all the agencies. The excess documentation results in increase in the effort

of resources both time and money ( transaction cost)

2. Issue of holidays - If the public holidays come immediately before / after the weekend there are

three-four consecutive holidays, which aggravates the congestion problem . The Govt. may hence

request the Customs to work on one of the weekend days to decongest the logistics movement

3. Hardware system deployed in Customs - The hardware systems used by the Customs are slow,

with an occurrence of a mandatory breakdown once in a while. Though it might be perceived as a

very minor issue, shippers have indicated that the important hardware should be reliable, dependant

and sturdy so as not to break down. Any delays in the clearance may result in the shipper missing the

vessels and having to wait for the next call which might be in a week‘s time.

4. Abysmal record keeping procedures - The record keeping of the customs is very poor. Due to

documents or soft copies not being properly managed, sometime the shippers are called to prove that

they have actually exported the goods.

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5. Errors in documentation -. The entry of the documents has been outsourced by Customs to a third

party. Mistakes do happen while typing and the exporter has to face problems because of the

typographical errors. Amendments to these documents take a lot of time and are hassle prone. This

results in delay of 1 week to 10 days..

In addition, the Customs have made it a habit of finding loopholes / discrepancies in the documents.

They would point at one discrepancy and after correcting the one discrepancy, the officer would then

point out another discrepancy. This leads to time over-runs, which sometimes results in missing the

vessel.

Delays in obtaining the customs clearance results in delay in obtaining the required documents for

obtaining the payment from the bank

6. Lack of qualified staff in CFS – There is an urgent need for more qualified staff, especially in the

CFS so that damage of goods can be reduced . The personnel that handle the goods are not

professionals and sometimes unskilled resources handle the cargo. This ends up damaging the

consignment in many cases.

7. Difficulties in obtaining export benefits – The shipper has to pay the import duty to get his raw

material cleared and he obtains the benefits only after he has exported the required quantity under

the advanced license scheme. The shippers are supposed to obtain their Export Promotion (E.P)

certificate after the 3rd to 4th week of the shipment. But the actual time period may take around 3

months. To avail the benefits, the shipper has to approach the DGFT, based on the E.P certificate

issued by the customs. DGFT does not check the physical copy of the E.P certificate. The EP

certificate issued by the customs is uploaded on the main server, from where the DGFT accesses

and views the certificate. Similarly the Advanced license issued by the DGFT is again uploaded on

the server for the Customs to view and take the necessary steps with the shipper concerned.

However the uploading of the E.P certificate and / or the advanced license never happens in a timely

manner, thus delaying the shipper in obtaining his incentives dues. In addition, the shipper also has to

invest in time and other resources to follow up with the customs / DGFT in ensuring the uploading of

the necessary documents.

8. Inspection of LCL cargo and free shipping bill –Shipping bills that do not accrue any duty

drawback need not have any customs inspection. For drawback shipping bills, the norm is that

around 2% of the shipping bills would be inspected. The senior custom officials have informed the

CHAs that in the event of inspection of any free shipping bills, the same may be reported to the senior

custom officials concerned. However during the actual operational procedure, the CHA representative

hardly has the time to call the customs senior officials when he undertakes the inspection of the free

shipping bill. Because of the above, customs insist on checking even the free shipping bills. The CHA

representative has to open the carton, show it to the official who has insisted on the inspection and

again repack it. Though there are facilities for re-packing, the packing is not done in the same way as

the first time. .

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9. Constrains in LCL cargo movement – For urgent LCL shipments it has been observed that the

shipper sends his cargo by booking an entire TEU even if his load is just about 3-4 tons. It has been

given to understand that this is because the CHA agent tries to obtain three-four LCL shipments

before transferring it to the shipping line thereby causing a delay of 2-3 days. If an urgent shipment

misses a vessel, it would require him to wait for a further period of around 7 days.

In addition, for LCL shipments, the shipper has to pay speed money over and above the normal port

charges he pays to get the bare minimal of work done. No work is done unless this extra amounts are

paid, right from unloading the LCL cargo at the CFS, filing and getting a shipping bill approved by the

customs, stuffing of the LCL in the container; obtaining the necessary forklifts or material handling

equipments etc to move his container from buffer yard to the shipping line.

10. Policy related issues - The Government is thinking of phasing out the DEPB Scheme. Right now the

DEPB value availed by the shippers (based on the % availed for the commodity) comes to

Rs.30,000/- Rs.40,000/- which takes care of the inland transportation costs and provides some relief

in terms of cost competitiveness Shippers therefore, are of the opinion that the Government should

continue with the DEPB scheme.

There are various item categories which entail different rates of DEPB, accordingly the rates may

vary from 3 to 4% of the FOB value. If the exporter claims DEPB under a particular category, the

excise takes objection on the classification indicating that it should come under a different

classification, though the exporter may be right. This leads to lot of un-necessary hassles.

11. Infrastructure at CFSs – There is a need for more CFSs around JN Port. The existing CFSs are

already working more than the actual capacity especially in the second half of the year. In addition,

infrastructure is woefully inadequate to cater to the growing exports scenario

C. Port related logistics formalities -

1. Port / Congestion issues - The total time for the container to be handed over to the shipping line

should not take more than 4 days (from the commencement of journey from the factory). However

there may be a delay of three days due to the congestion faced at JN Port. The congestion issue is at

its peak during the month of Feb-March, when one can safely assume that the consignment would

definitely be delayed by a minimum of three days

Shippers have indicated that the officials concerned should realize that due to the port congestion,

the exporters have to bear expenses due to the delays, which cannot be passed on to the buyer.

These expenses (buffer yard charges, payments to the transporters for holding on to the

consignment, time of the resource etc) eventually add up to a significant amount. In addition, the

intangible cost associated with the delays dents the organization‘s reputation of timely delivery

service and in a way harms the country‘s image. These factors can‘t be quantified; however the

impact on the export competitiveness is definitely felt.

The other constraints seem secondary as compared to congestion at ports which delays the handing

over of the consignment to the shipping line and has a ripple effect on the shipment costs in terms of

truck detention charges, inability to catch the planned vessel, loss in terms of the re-order value from

Clients etc.

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When a shipper misses his vessel and he keeps his consignment at the Buffer yard to dispatch the

said consignment by the next vessel, he pays the port authorities a charge of Rs. 2,000 / day /

container as the buffer yard usage charges. The transfer of the container from the buffer yard to the

shipping line is the responsibility of the port authorities after the same has been approved by the

Customs. However Shippers have indicated that it is usually the shipper himself through his CHA who

has to make the necessary arrangements for the transfer of the container from the buffer yard to the

shipping line. For these arrangements, the shipper has to shell out extra money to the CHA which is

never reimbursed by the buyer.

Shippers have indicated that for a particular shipment they start the planning at least 7 days before

the consignment is to leave the factory, but even after considerable planning, there is always a delay

of 2-3 days for reasons beyond their control

2. Hidden costs - There are a lot of hidden charges (OPEs) caused due to corruption, demurrage

charges due to delays caused by congestion and other charges for which receipts or bills cannot be

obtained ranging from Rs. 5,000 to Rs. 15,000 per TEU.

3. Shipping Lines related issues - The Shipping lines should not be charging Service tax, but they are

charging the same from the exporters.

It has also been observed that the vessels overbook orders to an extent of 20-25%. The vessels

undertake this step to hedge in the eventuality of any cancelled orders. It may occur that the shipper

may be forced to miss the vessel and would be required to wait for the second vessel of the same

liner. Here the shipper cannot ship through an alternate liner, since he would again be required to

take it to the factory, re-stuff and undertake all the other related hassles. Hence the shippers prefer to

pay the additional charges as shut out charges to the shipping line for keeping the consignment at its

yard. The cost per day per container is around 2,500- Rs.3,000 / day , which the shipper can‘t bill to

the client.

For imports, the shipping line has a pre-decided CFS where it is unloaded. The importer does not

have the option to choose his own Logistics Service Provider LSP. Accordingly undesirable practices

are observed due to the restriction posed by the Shipping Line and CFS. This is a peculiar position

only in India, where the importer is not allowed to select the CFS where the cargo will be de-stuffed. If

one has to take the initiative of reducing the logistics cost then the importer needs to select his own

service provider to move the goods from the port (Container Yard) to (CFS). The LSP as decided by

the shipping line and the CFS charges an exorbitant rate to the tune of Rs.3,850 to Rs. 7,000 just to

cover a distance of 10 kms from the port ( CY) to the CFS

Further to understand the cost factors and the time associated with the logistics movement of export

consignment, a zonal wise analysis was undertaken. The subsequent chapters indicates the zone wise

findings of the primary survey and details out the time , cost factor involved in the relevant zonal export

transaction. The zone wise specific issues encountered by the shipper and the possible solutions have

also been elucidated.

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9 Mapping of logistics movement

and cost analysis – West Zone

9.1 Zonal mapping and logistics cost analysis - Maharashtra

and adjoining areas

The major logistics cost parameters have been identified based on the following factors:

Figure 17 : Logistics cost parameters

Amongst the shippers contacted in Maharashtra and adjoining areas of Gujarat and Karnataka, most of

the shippers preferred to move their cargo by road to the gateway JN Port. This included exporters from

the districts of Nashik, Pune, Kolhapur, Ratnagiri, Nagpur, Aurangabad, North Karnataka and Southern

Gujarat. Movement of consignment by rail was reported for sugar from ICD Miraj to JN Port. The cargo

volume growth witnessed at JN Port over the past one year has been an impressive 24.41% with around

4.05 million TEUs handled in the year 2007-08.

Amongst the industries so identified in the survey, the Chemical industries have its pre-dominant base in

Southern Gujarat (Vapi, Surat and Ankleshwar) and in Ratnagiri (Lote Parshuram), Thane – Belapur belt.

Inland road transportation

Inland rail transportation

Inland water transportation

Transit facility – ICD / CFS/ warehouse

Shipping cost

Documentation charges

Other logistics cost

Logistics cost

Custom house agent charges

Inland road transportation

Inland rail transportation

Inland water transportation

Transit facility – ICD / CFS/ warehouse

Shipping cost

Documentation charges

Other logistics cost

Logistics cost

Custom house agent charges

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The automobile / auto components have a strong cluster presence in the districts of Pune and Kolhapur,

with the latter known for its casting components industry. The textile units are spread across the western

region with a strong base in Silvassa, Vapi, Karad–Ichalkaranji, Nashik and in and around Mumbai. The

food processing industry had its presence in the Nashik–Pune belt, Sangli and standalone units spread

across the state.

The mapping of the inland logistics movement and cost break-up for shipment of export consignment

from different parts of Maharashtra is indicated below:

Sr No Parameter Description

1 Inland road

transportation

The road freight charges from Vapi / Silvassa to JN Port (around 220 km)

by road has been reported at INR17, 000 per FEU and INR 12,000 per

TEU. The rates so mentioned are the to & fro charges incurred by the

transporters i.e the empty container movement from container yard at JN

Port to Vapi / Silvassa and the loaded container movement from the factory

at Vapi / Silvassa to JN Port.

From Karad to JN Port , for a distance of around 300 km, the inland freight

charge reported for the movement of a TEU was INR 18,000 / - and for the

movement of a FEU , it was INR 23,500/- (inclusive of service tax). For the

inland transport a reefer FEU from Nashik to JN Port (around 200km), the

transport cost has been reported at INR 19,000/- . From Kolhapur to JN

Port (around 360 km), the inland freight cost has been stated as INR 22,000

to INR 23,000 per TEU

The total weight stuffed inside a container depends on the product. For e.g.

in case of home textiles, around 3,500 pieces can be stuffed inside a TEU

and double the quantity in a FEU. For polyester yarn, whose shipments are

done in 40‘ High Cube container, around 25 tonnes can be stuffed. For

knitted fabric around 7 to 10 tonnes of material can be stuffed depending on

its GSM and for woven fabrics around 11 tonnes can be shipped in a TEU.

For export of chemicals, the tonnage capacity that can be stuffed increases,

for e.g. in a TEU, the total parcel size ranges from 13 to 18 tonnes

depending on the chemical product. For auto components, the quantity that

can be stuffed in a TEU again varies from 13 to 18 tonnes depending on the

product characteristics. For export of fruit pulp, etc around 15-20 tonnes can

be stuffed in a TEU, while for a milk flavoured powder which is packed in

PET bottles, only 7.5 tonnes can be accommodated in a TEU.

2 Inland rail

transportation

Movement of cargo by rail was observed for the heavy shipment of sugar

through the Miraj ICD which is dominantly by sugar belt within a radius of

125 km. Exports of sugar is primarily dependant on government policies.

Miraj ICD has been estimated to handle around 1,800 TEU per annum.

The ICD has a siding of 13,000 sq m, which can accommodate a single

rake of 40 to 45 wagons with storage space of 1,000 sq m for stuffing. As

per a circular issued by the Customs; the Miraj ICD can provide export

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consignment only to terminals at JN Port. During the off-season (when

sugar exports were banned), the ICD had handled around 80-90 containers

of second hand imported capital goods machinery for Forbes Gokak.

The transportation cost per 20 ft container to JN Port is INR 21, 000 and

around 27 MT of sugar is stuffed in one TEU (540 bags of 50 kg for bulk

sugar, whereas break bulk sugar cargo is allowed to be packed in 100 kg.)

Due to restriction of allowing maximum 16 mt via road transport sugar

exporters prefer dispatching their cargo by rail. It was reported that Miraj

ICD has the business potential given the presence of sugarcane belt. The

priority for allotment of rakes is first given to North India by CONCOR,

leading to shortage of rakes for Miraj.

For exporters from Vapi, the nearest ICD facility is available at Ankleshwar.

However the facilities are not adequate and the train service is not regular,

thus taking more time than the road transportation. Though shippers would

prefer dispatching their container by rail rakes, they do not want to take a

gamble and miss their vessels. Ankleshwar being home to many exporters,

the government should properly equip the ICD and regularize train services

to JN Port thereby saving costs by means of fuel charges.

3 Transit facility

(ICD / CFS /

ware housing

/ etc)

More than 40% of up-country cargo is being transported to Container

Freight Stations (CFSs) for carting; It is containerized at CFS and

transported to JNPT for loading on the vessels at JNPT, NSICT and GTI.

Some of the CFS near JN Port includes that of Balmer Lawrie, CWC –

Kalamboli, Sea Bird Marine Services, and Forbes Gokak etc.

While most of the respondents dispatched their containers factory stuffed, a

few of the respondents actually dispatched their consignment on LCL basis.

They reported that the CHA, loading – unloading, stuffing at CFS comes to

around INR 1.5 to INR 1.8 / kg

4 Terminal

Handling

Charges

It has been reported that over the past one year, there has been a rise of

almost 100% in the THC charges from INR 4,000 to INR 7,500 per TEU

container. The increase in the cost of the THC has a major affect on

shippers who have around 15-20 containers to be shipped per month

thereby affecting his export price competitiveness

5 Other

logistics cost

During the survey, the exporters interacted from the eastern zone indicated

that their west zone peers had the advantage of a superior gateway which

facilitated in reduction of their logistics cost component. The shippers from

the western region acknowledged that infrastructure at JNPT is indeed

world class; however with India‘s EXIM trade on a growth path and with

increasing containerization of commodities, and JN Port being the

containerized port of preference, the port infrastructure is bursting at its

seams. The de-congestion of the JN Port should be taken at an immediate

and utmost priority.

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The congestion is also not a onetime event. It is almost perpetual with it

being very severe during every quarter ending. A repercussion of

congestion is the port gates seldom open on the allotted time, thus making

the exporter pay extra charges per day to the transporters for holding its

consignment. The transporters again may have other commitments and

would be losing money due to its truck not being deployed to transport the

next consignment. The transporters charge around INR 1,000 – INR 1, 500

/ TEU / day for the delay to the shipper. There have been of occurrences

where the port gates opening have been antedated without informing the

shippers thereby catching them totally off-guard.

The congestion at the port has a cascading effect and the respondents

indicated that they have to incur out of pocket expenses for an export

consignment in the range of a minimum of INR 5,000 - 10,000.

An indicative freight cost estimates for transportation from factory to JN Port is depicted in the table

below:

Table 11 : Inland freight cost by road from factory unit to JN Port

Sr. No Location of factory unit Road Freight cost to JNPT in INR

Approx Distance in

km 20' 40'

1 Vapi / Silvassa 14000 18000 220

2 Karad 18000 23500 300

3 Nashik 19000 ( reefer)

200

4 Shiroli, near Kolhapur 22000 400

5 Pune 13000 160

6 Paithan, near Aurangabad 22000

7 Lothe Parshuram, Ratnagiri 17000 250

8 Narayangaon, near Pune 15000 210

Note: The figures quoted in the table are the responses provided by various exporters

While most of the inland freight cost so surveyed ranged between INR 1.00 per kg to INR 1.50 per kg,

there have been certain cases, wherein the freight cost was reported at INR 3.00 per kg.

Table 12 : Break-up of total logistics cost for the movement of a TEU from Kolhapur to JNPT



Road freight movement 23,000 60.53 1.0

CHA Charges / customs clearance 5,000 13.16 0.5

Terminal Handling Charges 6,000 15.79 -

Documentation charges 1,000 2.63 0.5

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Others ( Detention charges due to congestion for three days @ INR 1000 / day)

3,000 7.89 3.0

Total 38,000 100 5.0

9.2 Zonal mapping and logistics cost analysis - Gujarat

Ahmedabad

Ahmedabad is the commercial capital of Gujarat and strategically located in the industrial belt of

Central Gujarat. The ICD Sabarmati is the major flagship ICD of CONCOR located in Ahmedabad on

the NH 8 which links it to Mumbai. It is also connected by NH 8C from Rajasthan and NH 8A from

Rajkot. A direct rail link, with sufficient space, backed by equipments has enabled it to efficiently

move a train daily to JNPT and bi-weekly to Mundra port. Sabarmati ICD acts as the collecting point

for industrial cargo from Kadi – Kalol (Mehsana), agriculture products like groundnut, sesame seeds

from Saurashtra region, and granite and marbles from South Rajasthan.

The major share of the commodities exported in 2007-08 consisted of raw cotton, synthetic organic

dyes, stainless steel coils, pharmaceuticals, marble stones and blocks, cotton dyed denims, foodstuff,

machineries, assembly lines and agricultural products. The destination countries were China followed

by the US, the Middle East and European countries. The major commodities imported in 2007-08

were waste paper, newsprint, scrap, LDPE, stainless steel products, steel items, compressors and

glass. The present cargo movement from Ahmedabad region (covering the surrounding area) is

above 1.50 lakh TEU per annum. CONCOR during the period April 2007 to March 08 handled

1,39,778 TEU with an overall growth of 24% over the previous year.


from ICD Ahmedabad is indicated below:


1 Inland road

transportation

The ICD located near the Ahmedabad – Mumbai NH 8, enjoys excellent

road connectivity from Saurashtra region in the south, Rajasthan in the

north, Mehsana district industrial areas in the west and industrial clusters

around Ahmedabad.

Road movement is mostly to Mundra / Kandla ports which are at a distance

of 410 / 360 km respectively, while JN Port is connected by a daily train

which has reduced the movement by road.

2 Inland rail

transportation

Most of the export cargo moves by rail from the ICD to the seaports of

JNPT / NSICT/ GTIL at Nhava Sheva. Other ports like Mundra / Kandla at

Kutch, and Pipavav port in Amreli (Gujarat), are also connected by rail

network, but cargo moves directly to the port of Mundra by road due to cost

and time advantage over rail.

The CONCOR tariff rates from ICD Sabarmati to the port of Nhava Sheva

have been considered for the subsequent cost analysis since most of the

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export cargo moves through it.

3 Inland water

transportation

It was found that there is no inland water transport taking place in this

region for moving goods of export

4 Transit facility

(ICD / CFS /

ware housing

/ etc)

Sabarmati has CONCOR ICD which has its own tariff and schedule of rates

for its service offerings.

Table 13 : TEU rail tariff charges from Sabarmati to JNPT/NSICT/GTIL ports

Sabarmati-

Ahmedabad

Rail Tariff - JNPT/NSICT/GTIL Cost (INR) Road Charges- Cost (INR)

Weight ( MT ) TEU FEU TEU FEU

12 8,200 15,000

32,000

40,000

15 8,900 15,000

18 8,900 15,400

22 14,000 15,400

28 15,600 15,400

Source: CONCOR & Deloitte Research

Table 14 : Break-up of total logistics cost ex Sabarmati to JNPT port

Segment Cost (INR)

Cost % Time (days)


Transportation by road (50 km radius from ICD Sabarmati & back) Note - The time in days includes container movement from ICD to factory, factory stuffing and container movement from factory to ICD

3,500 13.91 2.0





Others 1,000 3.97 1.0

Total 25,160 100 6.0


The bottlenecks faced have been collaborated in section 9.3.

Baroda

Located 400 km from Mumbai on the NH - 8 towards Ahmedabad on the golden industrial corridor,

the city is also home to some of the top industries like GSFC, GACL, IPCL (Reliance), Apollo tyres,

General Motors etc

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Export container handling facilities are spread out in three different locations:

o CONCOR Rail Container Terminal (RCT) which is a single rail sliding located in the city

o CONCOR CFS at Chhani which is further 3 km parallel from the (RCT), where only warehouses

and stuffing facility are available and road movement is possible

o Central Warehouse Corporation CFS located 12 km, North of Baroda city on the NH 8 where

cargo stuffing, de stuffing with road movement to port or through RCT by rail takes place

Hence two CFS / ICD are linked by one RCT where rail movement is possible incurring additional

charges of INR 1800 to INR 2500 per TEU.

Table 15 : TEU rail tariff charges from Baroda to JNPT/NSICT/GTIL ports

Baroda Rail Tariff - JNPT/NSICT/GTIL Cost (INR) Road Charges- Cost (INR)


12 6,700 12,200

26,000

35,000

15 7,100 13,400

18 7,100 13,400

22 10,700 13,400

28 11,900 13,400


Present volumes from Baroda region are about 4000 TEUs per month, out of which 1200 TEUs

export and about 800 TEUs import per month is handled by ICD which has three train connections

every week to JNPT, balance move by road to JNPT / Kandla / Mundra

The break-up cost of movement of a TEU from Baroda to JNPT is similar to that of ICD Ahmedabad

except for a reduction in basic rail freight of INR 1500 – 3000 which is nullified by the additional

charges paid for movement of container from CFS to RCT in Baroda. This additional charge is

caused due to having CFS and railhead at different locations. The road movement from Baroda to

JNPT is about 7 hours drive on the NH-8. A comparative chart of ICD Sabarmati (Ahmedabad), ICD

Baroda and ICD Pithampur (Indore) is indicated in Table 23. The ICDs in Sabarmati and Pithampur

are both situated in the commercial capitals of their respective states and both the ICDs have a cargo

potential of above one lakh TEUs per annum.

Table 16: Comparison between ICD of Ahmedabad, Baroda and Indore

Parameter ICD Sabarmati

Ahmedabad

ICD Pithampur

Indore

ICD Baroda

EXIM cargo TEUs /

annum

> 1,50,000 > 1,00,000 > 50,000

EXIM rail movement > 80% < 30% > 60%

Road / Rail connectivity Good Poor Needs Improvement

Frequency of rail link Direct daily rail

connection to

JNPT port

No direct rail link which

compels cargo to move via

Ratlam 110 km away, or by

road.

Thrice a week, with

separate facility of CFS &

RCT with a distance of 3 /

12 km leading to additional

handling cost


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Rajkot

Located in Saurashtra region of Gujarat, it has industrial estates for automobile industry spread over

Gondal, Paddhari, Tankara, Jetpur, Upleta along with textile units in Jamnagar district specializing in

Bhandni hand printed designer dresses and garments which are exported. Rajkot is surrounded by

ports handling container cargo namely Pipavav around 200 km (South East), Kandla 220 km /

Mundra 260 km (North West). Due to the short distance from the port, an ICD which was opened in

Rajkot region earlier did not find sufficient cargo and was later closed down. Exporters prefer to truck

their cargo or collect empty containers from the port for factory stuffing.

NH 8A extension to Kandla is four lane and good except for about 30 km patch which is being

developed. Mundra has a four lane road from Anjar to the port but it passes through Mundra town

where a bypass is required to be constructed. Road to Pipavav port from Rajkot is a State Highway

which requires improvement.

Kandla Port

Located in Kutch district of Gujarat, Kandla port was developed after India lost Karachi to Pakistan

during partition. Kandla port handles the highest volume (64.89 million tonnes in 2007- 08) Port has

privatized berth no 11 and 12 which has been developed for handling container cargo and has plans

to extend it further to handle containers.

As the port road passes to the old town of Gandhidham which is about 20 km before Kandla port

there is heavy congestion and a bypass is urgently required at Gandhidham for which the port should

take the lead and develop the same. As port has primarily been handling bulk cargo, the existing

facilities are tuned for handling the same. A separate planning for container handling with approach

and exit, buffer yard etc needs to be done. As Vadinar under Kandla handles the highest number of

oil tankers, there is a need for the development of an advance vessel intimation system jointly with

other terminals like Reliance and Mundra port.

Mundra Port

Privately developed by Gujarat Maritime Board GMB with Adani group, the port has separate deep

drafted berths to handle main line container ships along with liquid and bulk cargoes.

The port has connected to the hinterland by developing a private rail connection from Gandhidham

and also a four lane road from Anjar to the port .A bypass road near the old town of Mundra is

required to ensure smooth traffic flow.

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Figure 18 : Recommendations for facilitating seamless export movement from Gujarat region

Figure 19 Recommendations for facilitating seamless export movement from Maharashtra & South

Gujarat

Recommendations for infrastructure specific improvements to facilitate exports

from Maharashtra, South Gujarat region

• Plans have been approved for

extending the 100 km

Mahatma Gandhi expressway

no 1 (currently between

Ahmedabad and Vadodara)

to Mumbai, as also

broadening the NH – 8 and

removing bottlenecks on

bridges, crossing etc.

• The NH-8 and expressway

would run parallel to each

other on the western coast

which is also one of the

busiest highway moving

cargos for Gujarat, Rajasthan

and NCR region.

• Considering the large volumes

especially chemicals and over

dimension cargo moving on

this route a express road has

to be ensured with last mile

connectivity and bypass linking

the NH – 8 with JNPT node to

enable cargo movement to

JNPT port without any delay

and traffic congestion

• Better port traffic management

especially for cargo moving by

road which consists and

coverage a large hinterland.

This would require advance

intimation, better buffer yard

planning based on vessels

arrival. EDI working

environment etc.

• Six lane highway linking NH 8

from Bhayander (on the outskirts

of Mumbai city) via Thane to New

Mumbai and JNPT would

facilitate linking NH 3 from Nasik

– Indore ,NH 4 from Pune –

Bangalore and N H 17 from Goa

with each other, in a smooth

manner avoiding traffic

congestion and preventing any

potential disaster due to the

heavy movement of vehicles

approaching the port with

different types of cargo including

hazardous chemicals .

• JN Port should take the lead in

developing it into six lane under

PPP model with flyovers and

underpasses wherever required

for local traffic

Recommendations for infrastructure specific improvements to facilitate exports

from Maharashtra, South Gujarat region

• Plans have been approved for

extending the 100 km

Mahatma Gandhi expressway

no 1 (currently between

Ahmedabad and Vadodara)

to Mumbai, as also

broadening the NH – 8 and

removing bottlenecks on

bridges, crossing etc.

• The NH-8 and expressway

would run parallel to each

other on the western coast

which is also one of the

busiest highway moving

cargos for Gujarat, Rajasthan

and NCR region.

• Considering the large volumes

especially chemicals and over

dimension cargo moving on

this route a express road has

to be ensured with last mile

connectivity and bypass linking

the NH – 8 with JNPT node to

enable cargo movement to

JNPT port without any delay

and traffic congestion

• Better port traffic management

especially for cargo moving by

road which consists and

coverage a large hinterland.

This would require advance

intimation, better buffer yard

planning based on vessels

arrival. EDI working

environment etc.

• Six lane highway linking NH 8

from Bhayander (on the outskirts

of Mumbai city) via Thane to New

Mumbai and JNPT would

facilitate linking NH 3 from Nasik

– Indore ,NH 4 from Pune –

Bangalore and N H 17 from Goa

with each other, in a smooth

manner avoiding traffic

congestion and preventing any

potential disaster due to the

heavy movement of vehicles

approaching the port with

different types of cargo including

hazardous chemicals .

• JN Port should take the lead in

developing it into six lane under

PPP model with flyovers and

underpasses wherever required

for local traffic

Recommendations for improvement of exports

from Gujarat region

• ICD-Sabarmati was started

converting the existing rail

sliding at Adalaj to handle

import and export cargo.

However with volumes

exceeding 8000 TEUs per

month. CONCOR has plans to

shift the EXIM operations at

DCT-Khodiyar for which road

connectivity and other

supporting infrastructure should

be assessed and developed by

CONCOR

• A new green field ICD should be

planned south of Baroda on the

Mumbai – Delhi rail line parallel to

the NH – 8 to shift all EXIM cargo

handling. This would enable plan

for the increase volumes, convert

about 2000 TEUs presently

moving to JN Port by road to rail

mode and offer LCL stuffing and

other services from one location

reducing cost and increasing rail

frequency.

• This new Greenfield ICD can also

be linked to ICD Pithampur by rail (

after gauge conversion which is

on) .This would enable a rail hub

where cargo from three ICD

namely Vadodara / Indore /

Ankleshwar can be collected to

have a daily scheduled train to JN

port / Mundra

• Bypass at Gandhidham to be

developed by Kandla port trust

and around old Mundra town by

Mundra port

• Four lane expressway from

Rajkot to Pipavav should be

developed by Pipavav port

under PPP model with

bypasses and supporting

infrastructure for truck terminals

and cargo movement


from Gujarat region

• ICD-Sabarmati was started

converting the existing rail

sliding at Adalaj to handle

import and export cargo.

However with volumes

exceeding 8000 TEUs per

month. CONCOR has plans to

shift the EXIM operations at

DCT-Khodiyar for which road

connectivity and other

supporting infrastructure should

be assessed and developed by

CONCOR

• A new green field ICD should be

planned south of Baroda on the

Mumbai – Delhi rail line parallel to

the NH – 8 to shift all EXIM cargo

handling. This would enable plan

for the increase volumes, convert

about 2000 TEUs presently

moving to JN Port by road to rail

mode and offer LCL stuffing and

other services from one location

reducing cost and increasing rail

frequency.

• This new Greenfield ICD can also

be linked to ICD Pithampur by rail (

after gauge conversion which is

on) .This would enable a rail hub

where cargo from three ICD

namely Vadodara / Indore /

Ankleshwar can be collected to

have a daily scheduled train to JN

port / Mundra

• Bypass at Gandhidham to be

developed by Kandla port trust

and around old Mundra town by

Mundra port

• Four lane expressway from

Rajkot to Pipavav should be

developed by Pipavav port

under PPP model with

bypasses and supporting

infrastructure for truck terminals

and cargo movement

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Hard Infrastructure


Road

Infrastructure

Road stretches across various parts

of the state leading to JN port is in a

bad state

Need for a synergy between the Road

Developers, transporters, cargo

industry etc. Whenever the tenders for

road development are floated by the

Developer, the views and opinion of

the trade must also be taken into

consideration and the design criteria

needs to be technically strengthened

so that the axle load of the container

carriers are adequately addressed.

Rail

Infrastructure

There is usually congestion at the rail

siding at JN Port.

In addition, there is a shortage of

prime movers to drive the cargo trains

India should concentrate on providing

better cargo facilities across the rail

heads including better storage

facilities, better material handling

equipments, inclusion of more stations

in the freight network. This will facilitate

in reducing the inland logistics cost and

congestion at the rail siding of the port

Port

Infrastructure

Congestion at JN Ports is almost

perpetual with it being very severe

during every quarter ending

The severe congestion follows a

certain pattern. The officials concerned

can make their planning in advance to

reduce / nullify such a congestion

scenario

The material handling systems

existing in the MbPT port is around 30

years old and needs refurbishment /

replacement

Need to plan for futuristic capacity to

allow for gradual build up of traffic

without affecting the port infrastructure

facilities

The CHAs are required to travel a

distance of around 5-6 km to obtain

the necessary clearances for the

consignment shipment

Port authorities may position the offices

concerned for clearance of a shipment

in the same building or adjacent

buildings to save the CHA‘s time,

which will result in faster clearance of

the consignment

Airport

Infrastructure

The infrastructure at the air cargo

complex has not kept pace with the

cargo volume growth

The movement of the cargo to the

customs clearances terminal is

affected due to shortage of loaders,

The Industry sources feel that the

authorities should have the basics of

the following infrastructure and

services in place –

o Efficient warehousing and

identification system

o Regular maintenance and up

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Hard Infrastructure


pallet trucks and other material

handling equipments

Regular break-down in the printers,

computers and other IT hardware

support structure leads to further

delay and back log of customs

clearances

gradation of the IT hard ware and

support system

o Change in the attitude of the staff

by treating the cargo as a potential

revenue generation

o A robust EDI system that offers

proper co-ordination between AAI

and Customs officials to streamline

the whole process

o Improved material handling

facilities for speedy movement of

the goods within the complex

Trucks /

trailers

The drivers of trucks usually siphon of

diesel and do not go through the

optimum routes, while delivering the

cargo.

Need to incorporate track and trace

systems for identifying the movement,

diesel consumption etc. Need to have

an affordable GPS system in place.

Warehousing

facility

An ICD facility is available at

Ankleshwar. However the facilities are

not adequate and the train service is

not regular, thus taking more time

than the road transportation

Need to properly equip the ICD and

regularize train service to JN Port

thereby saving costs by means of fuel

charges by road

Though there are several CFSs

around JN Port, the infrastructure is

not up to the mark and this causes

decrease in productivity and increase

transaction time

There is a need for a system, where in

Key Performance Indicators are kept

and for delays beyond a certain time

period the shipper / consignee should

be provided a concession in the rates.

Soft Infrastructure


EDI Regular occurrences of breakdown of the

ICEGATE system used in JNPT

The Customs should have

alternative arrangements to file

shipping bills in the event of the

tripping of the EDI

In the EDI system, the Customs is

required to upload the shipping bill for the

DGFT to take note, so they in turn issue

the export completion certificate for the

Customs to cancel the customs bond filed

by the shipper. However there is no

proper co-ordination between the two

entities, documents get lost between the

two and the exporter does not obtain his

Better coordination sought between

DGFT, customs and other

authorities

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Soft Infrastructure


incentives on time

EXIM Policy


Customs Sometimes there is a delay in

commencing loading operations for want

of clearances from customs, immigration

and health officers

Need to provide performance

indicators to various departments

involved in cargo shipment to

improve standards

Each Customs officer has his own

interpretation of the customs law thereby

causing problems with the shipments

Need to simplify procedures and

do away with ambiguity .Never to

give/ vest discretionary powers to

the customs officials, since then he

interprets the rules as per his

convenience.

Octroi In Maharashtra, it is estimated that

around INR 5,500 Cr / annum is the

Octroi collection from the industry. In

addition, around INR 10,000 cr per annum

is the estimated figure that the industry

has to shell out by way of under the table

amount for the Octroi staff.

It would be a welcome step on the

part of the Maharashtra State

Government to abolish Octroi to

realize the lost costs in terms of

loss of time in transit, fuel cost,

man-hour costs

Excise The Excise department does not provide

any refund payments for the month of

January, February and March citing year

end closing

It may be prudent if the

government do away with the

payment of the required taxes at

the point of exports and provide

the exporters the direct benefit of

the taxes, than have an elaborate

procedure to have the charges

reversed, which is not only time

consuming but also involves lot of

administrative and other resources'

time which cannot be quantified

While filing for the excise bond, the

necessary clearance is not obtained

smoothly and is not given on time. The No

Objection formats issued by the Excise

Superintendent is sometimes not

accepted by the Range officers , saying

that the format is not proper even though

it has been issued by the same dept

Standardization of forms and

procedures that should be followed

by the officials

VAT VAT is applied on the packaging material

thereby increasing the overall FOB value

of the product

Since the packaging material is

used for goods meant for exports,

VAT should not be levied on it

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EXIM Policy


Service Tax Even with refund of service tax on

commission paid to foreign buyers and

agents, notification no 17 / 2008 dated 1st

April, 2008 limits to only 2% of the FOB,

while exporters pay anything between

10% to 15% of the FOB.

Such piecemeal refund only adds

to the administration work for both

the government and exporters

without providing any immediate

relief. What is important that the

exemption should be straightaway

given instead of paying tax and

subsequent claiming the refund

Schemes /

Policy

A minimum delay of 2 months for

obtaining the incentives

The government needs to fine tune

the policy and inform the ground

staff for the proper implementation

Schemes /

Policy

With regards to the Focus Market

Scheme, there is no proper notification

provided to the actual ground staff

regarding how the incentives and benefits

should be provided.

Logistics

Area Issues raised by the exporter Suggestions provided by exporter

Check post /

road connectivity

Lot of shipments are caught up in the

octroi naka for want of a customs

noted shipping bill, which is required

to be submitted for the Octroi for it to

pass without the payment of octroi.

Suggestion to include Octroi as part

of the proposed Port Connectivity

System

Ports / Sea

connectivity

There are lot of additional charges

levied by the shipping line with

regards to

o BAF – Bunker adjustment

charges ( due to hike in price of

fuel) – USD 250 / container

o CAF – Currency Adjustment

Factor ( due to currency

fluctuation adjustment)

o Hazardous charges – USD 150 /

container

o And Off season charges

Need for a regulator to monitor the

operations of CFS / Shipping lines -

There is a need for strict guidelines

and a regulator for covering the

stakeholders under the logistics

chain, just as one has the TAMP

for major ports, the TRAI for

telecom etc

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and cost analysis – East zone

10.1 East zone overview

The companies surveyed in the Eastern region were predominantly from in and around West Bengal

which access Kolkata / Haldia port as their gateway for exports. The inland transportation mostly happens

by road. For tea exports from Assam, the inland transportation is through rail after the commodity is

loaded at the CONCOR ICD at Amingaon, from where it is brought to Kolkata. Few of the companies so

surveyed in Bhubaneswar, Orissa prefer to route their cargo through Vishakapatnam port due to the

relatively faster turnaround time of the vessels and good hinterland connectivity.

Apart from the exports from the ports, there is also a substantial cargo movement from West Bengal to

Bangladesh. At present, there are officially 35 Land Customs Stations (LCS) through which India‘s trade

with Bangladesh is carried out. Among these 35 LCSs, Petrapole (in West Bengal) in the road sector and

Gede (in West Bengal) in the railway sector are the two noted ones, which together share over 70% of

the India–Bangladesh border trade.

In addition, amongst the respondents surveyed, a few of the textiles / apparels manufacturers export their

cargo through air via Kolkata airport.

A brief description of the gateways most used by the exporters in the East Zone is indicated below:

Kolkata port

The Port of Kolkata is a riverine port in the city of Kolkata, India.

The Port has two distinct dock systems - Kolkata Dock System at Kolkata and a

deep water dock at Haldia Dock Complex, Haldia. Kolkata Port has a vast

hinterland, comprising the entire Eastern India including West Bengal, Bihar, UP,

Jharkand, Assam, North East Hill States and the two landlocked neighbouring

countries viz. Nepal and Bhutan.

ICD

Amingaon at

Assam

The Amingaon ICD is a seasonal ICD, and is active during the tea shipment season.

Even during the season, traffic is available only for one direction, that is, the

Amingaon-Kolkata port leg.

Only the empties are moved in the opposite direction, i.e. from Kolkata port to

Amingaon. In 2007-08, the Amingaon ICD handled 2,501 of TEUs of tea exports as

compared to 2,597 TEUs in 2006-07. The throughput in the current fiscal (2008-09),

is estimated to be around 3,500 TEUs primarily due to the not-so-satisfactory

Kenyan crop this year.

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Kolkatta

airport

Textiles constitute around 15-20 per cent of the exports from the airport. However

the largest share of around 60 per cent of total airport exports is of leather garments

and accessories.

Out of the total of around 25,000 tonnes of cargo exported in 2007-08, perishable

items comprised around1, 700 tonnes (6.8 per cent), while tea constituted only 2 per

cent.

Petrapole-

Benapole

border

Petrapole - Benapole is very strategic point for border trading between India and

Bangladesh. It is estimated by the Land Port Authority of Bangladesh that around 90

percent of the total imported items from India comes through Benapole land port.

10.2 Zonal mapping and logistics cost analysis


through the East zone gateways is indicated below:

Sr. No Parameter Description

1 Inland road

transportation

There have been issues of shortage of trucks / trailers due to the vehicles

being tied up on contract basis for movement of the construction material

and equipment / machinery for the various projects being developed in

West Bengal. This has lead to rise in the inland transportation cost over

the past few months. Most of the exporters surveyed in West Bengal had

their plants / warehouses near the port and hence the distance required to

ship the consignment from the plant to Kolkata port ranged between

anywhere from 10-12 km to around 100 -120 km with the corresponding

transportation cost for a TEU to Kolkata port ranging from INR 4,000/- to

INR 12,000/-.

For the shipments whose factory is located in the 100 km range, the inland

transport cost per kg varies from INR1 to 1.5 per kg. Concern on the

quality of the roads leading to the ports has been raised by almost all the

shippers, which tends to increase the cost. For the inland transportation

cost of tea by trucks from Siliguri to Kolkata for a distance of round 500

km, the cost has been indicated as INR 5 / kg. The high cost of

transportation is due to the hilly geographical terrain.

Tea exports from Assam are usually routed through rail by Amingaon ICD.

However there have been respondents who have indicated that they

undertake road movement from Assam to Kolkata. From Guwahati to

Kolkata for a distance of around 1400 km, it takes around 6-7 days of time

period with the inland transportation cost coming to INR 7-8 per kg. For

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silk exports which are high value items, routed via air and shipped in LCL

consignments, the inland transportation cost from Bhagalpur, Bihar to

Kolkata (around 500km) is around INR 9 / kg.

For the land side exports to Bangladesh, most of the respondents

surveyed were routing it from Kolkata through the Petrapole – Benapole

customs border. In January 2008, trucks to Bangladesh were available at

INR 4,000; however due to shortages of trucks, the freight charges has

increased almost double fold. In addition, there are various issues in the

border shipment which leads to increase the cost of the exports.

The shippers contacted indicated that it has become more of a thumb rule

to consider a minimum delay of three days for the road side exports to

Bangladesh. Due to the delays caused at the check post, the shippers

have to bear a demurrage cost to the trucker which is around INR 700 /

day. A minimum additional cost of INR4,000–4,500 per shipment is always

envisaged during the shipments to Bangladesh.

2 Inland rail

transportation

The CONCOR tariff rates for one way movement of a loaded container

from Amingaon ICD to Kolkata Port is INR 13,300 / TEU and INR 26,600 /

FEU. Similarly, the rate for a one way movement of empty container from

Kolkata port to Amingaon ICD is INR 8,950 for a TEU and INR 16,650 for

a FEU. Amingaon ICD is facing an issue of inadequate arrivals of imported

containers. This creates a mismatch and as a result, the shipping lines are

required to reposition the empties at a cost borne by the shippers.

Exports to Bangladesh are also undertaken via rail. There is rail movement

of processed food products from India to Bangladesh. The cargo traffic

however can only be carried in Indian Railways (IR) wagons as

Bangladesh Railways (BR) wagons do not meet the technical standards

(brake systems and wagon running speeds) required by IR. BR

locomotives haul the wagons inside Bangladesh but as IR trains are longer

and heavier, the trains have to be reconfigured at the border. Rail cargo

has to be transshipped to trucks, barges or BR wagons for final delivery,

significantly reducing the rail advantage. One of the respondents which is

a trading house and undertakes rake movement of maize and /de-oiled

cakes indicated that the referred products are shipped from Bihar (Barauni

/ Kadaria) to Bangladesh (via Benepole / Darshana / Rohanpur). The

freight cost for one rake consisting of 40 wagons and having a load factor

of around 2,500 tonnes is around INR 22 lakhs. The freight cost comes to

around Rs 0.88 / kg.

3 Inland water

transportation

There is movement of cargo via the rivers from India to Bangladesh by the

Central Inland Water Transport Corporation (CIWTC) and Bangladesh

Inland Waterways Authority (BIWA).

Amongst the cargo moved from India to Bangladesh include rice, coal,

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cement, project goods, steel coils etc. The shippers indicated that they

preferred the road movement since the border post is only 120 km away

from Kolkata and road movement was more convenient with the handling

cost by road being comparatively less as compared to movement by

water.

4 Transit facility

(ICD / CFS /

ware housing)

It has been indicated by the respondents that the stuffing cost for a TEU

comes to around INR 5,000–6,000/-. The majority of EXIM traffic in the

region is handled at the port side terminals of Haldia and CONCOR

Terminal KoPT Coal Dock Road (CTKR). Amingaon near Guwahati is the

Inland Container Depot in the Assam region, functioning almost

exclusively for the handling of tea exports. Export of steel consignments is

also dealt with through the ICD at Tatanagar.

Container Corporation of India is to launch two new terminals and upgrade

facilities at two of the existing inland container depots (ICDs) in the eastern

region. The new terminals will be located at Durgapur (West Bengal) and

Rourkela (Orissa), while the existing ICDs at Amingaon (Assam) and

Balasore (Orissa) will be upgraded. The new terminals will cater mainly to

the steel sector. Central Warehousing Corporation also operates

warehouses across the Eastern region and has its own tariff and schedule

of rates covering its service offering.

It has been felt by the exporters that there is an urgent need of more CFS

near KoPT. At the moment, there are only two, one of Balmer Lawrie and

the other of CWC. The government should take measures to provide land

for new CFSs and invite private players for the same.

5 Custom House Agent / Clearance

Calcutta Customs House Agents' Association (CCHAA) is an apex body of

the authorized agents of Kolkata Customs and is engaged in clearing and

forwarding freight at the Airport and Seaports of West Bengal. It maintains

close tie with Calcutta Port authority.

The market rates usually charged by the Customs House Agents (CHAs)

are INR 3,500 per TEU and INR 4,200 per FEU. These charges are

exclusive of Service Tax.

6 Terminal handling charges

THC is charged by the respective shipping lines for handling, movement

and loading of the container on the ship. It varies from shipping line to line

and is fixed and non-negotiable.

7 Congestion surcharge

The shippers from Kolkata Port also have to pay a congestion surcharge

amounting to US$ 150 / TEU and US$ 300 / FEU. The shipping lines have

imposed the surcharge citing reasons of inordinate delay in vessel

turnaround and under-utilization of vessels leading to increase in port

stays.

Exporters shipping their consignment from Kolkata Port report that they

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are burdened due to increased freight costs accounting from the

congestion surcharge. The surcharge when imposed was expected to be a

temporary phenomenon and would be withdrawn when the congestion is

eased out. The shippers cited the example of Chennai Port which had a

similar surcharge imposed from December 07, 2007 and was later

withdrawn in the month of February, 2008 when the congestion eased.

However in Kolkata port, the exporters have voiced their concern that

there seems to be no abatement of the surcharge and is being imposed for

many months now.

8 Shipping cost Being a riverine port, the Kolkata port problems and features are unique

and cannot be compared with other ports of India. Silting is a major

problem for KoPT, and due to the low drafts available, only feeder vessels

cater to the port. Hence exports from Kolkata necessitate transshipment

from Colombo or Singapore which involves an additional cost of around

US$ 350 / TEU. Most of the shipments are undertaken on FOB basis and

the sea freight is directly borne by the buyer. It is estimated that the sea

freight approximately comes to around INR 7- 9 per kg depending on the

destination location, route and transit time.

For shipments via air, the cost of shipment comes to around INR 140 /kg.

But again, the rates vary slightly depending on the destination, the airline

and the cargo volume.

9 Documentation cost

The shipper has to incur a cost of INR 1,000 per Bill of Lading from

Kolkata. Apart from the referred documents, the shipper would also be

required to bear the nominal L/ C charges which vary depending on the

bank. The other charges incurred by the shipper include courier & fax

charges, certificate of origin charges etc. Accordingly the total charges

associated with documentation would be around INR 1,500–2,000/-.

10 Other logistics cost

The exporters from Kolkata port have to pay a bunker surcharge of US$

110 / TEU, which again inflates the cost of the exports. The other costs

associated include inspection charges, foreign bank charges, custom

cess, fumigation charges, supply of electricity to reefer containers etc.

There are also non-receipt expenses which include hidden costs that an

exporter has to shell out during the export transaction. There are also

some other variable costs that arise primarily due to congestion at the port

/ border check post and which consequently has a cascading effect on

other activities associated with exports thereby forcing the exporters to

shell out extra money. During shipment, the normal delays that one can

anticipate in Kolkata port is anywhere between 7 to 10 days. In addition,

there are also delays in the port gates for the truck to enter; this delay may

be around 1-2 days.

Given the increase in exports from the eastern region, the port is

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functioning at more than 100% of its existing capacity. The draft being low,

no main line vessels come down to KoPT. The feeder vessels are usually

not on schedule and if the feeder vessels miss the main line vessel at

Singapore or Colombo, the consignment shipment is further delayed by 10

-15 days. Respondents have indicated that due to the congestion,

increased freight charges etc, they are finding the exports unviable and

are more concentrating on the domestic front. There have been instances

when the respondent has lost out on export order to its competitor from

Delhi due to the high freight charges and longer transit time taken from the

Kolkata port. From Kolkata to Europe the average time taken is 35 days,

while that from JN Port, it is around 18 days.

Apart from the delays in the congestion, the shippers face problems in

obtaining the containers on time, the interest cost incurred due to the

delays in the availing the benefits of various governmental schemes for

exports promotion, demand of bribes for ―speedy‖ work, detention time

incurred by the shipper on the truck when it is in the queue in front of the

port gates / customs border etc.

Shippers incur an additional cost of INR 700 to INR800 per day due to

congestion delays at the Bangladesh border; and around INR 1,000–1,500

per day for congestion delays at Kolkata Port,

Table 17 : Terminal Handling Charges for FCL at Kolkata , Haldia and ICD

In INR

A THC for FCL Container

Kolkata Kolkata / ICD

Haldia

5/8 NSD8 CPY

9 Non-CPY MHC

10

CPY GCB

11

TEU FEU TEU FEU TEU FEU TEU FEU TEU FEU

1 For FCL ( House Stuffed) Export Container

575 715 2100 3000 3425 5000 2400 3125 2100 3150

2 For FCL ( Dock Stuffed) Export Container

8500 12755 10125 15040 10125 15040 X X 4525 6760

3 For FCL ( Dock Stuffed) Import Container

1375 1915 2825 4085 10325 15340 2675 3765 4525 6760

4 For FCL ( House Stuffed) Import Container

575 715 2100 3000 3425 5000 X X 2000 3000

8 Netaji Subhash Dock

9 Calcutta Port Yard

10 Mobile Harbour Crane

11 General Cargo Berth

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In INR

A THC for FCL Container

Kolkata Kolkata / ICD

Haldia

5/8 NSD8 CPY

9 Non-CPY MHC

10

CPY GCB

11

TEU FEU TEU FEU TEU FEU TEU FEU TEU FEU

5 For discharge of FCL and delivery ex-hook import container

X X 2100 3000 2100 3000 X X 650 975

Table 18 : Terminal Handling Charges for LCL at Kolkata , Haldia and ICD

B THC for LCL Container

Kolkata Kolkata Haldia

5/8 NSD CPY Non-CPY MHC ICD GCB

1 LCL Export Container

INR 555 / CBM X INR 555 / CBM X X INR 285 / CBM

INR 885 / 1000 kgs. X INR 885 / 1000 kgs.

X X INR 460 / 1000 kgs

2 LCL Import Container

INR 570 / CBM X INR 570 / CBM X X INR 285 / CBM

INR 900-1000 kgs X INR900/1000 kgs

X X INR 460 / 1000 kgs

For a factory (house) stuffed container, the CHA is also required to pay port related charges (in addition

to the THC) of INR 4,263 for a FCL 20‘ container at NSD and INR 2,600 for a FCL 20‘ container at CPY.

Similarly the port charges for a factory stuffed FEU at NSD is around INR 6,000–6,300. So the total

charges (THC + port charges) for a factory stuffed TEU at NSD would come to INR 575 /- + INR 4,263/- =

INR 4,838/- and that for a FEU would be around Rs 7,000/-.

The following tables depict the indicative costs associated during the exports transaction in various transit

routes. The bottlenecks and the various issues which causes an increase in the logistics cost as well as

well as time over-runs is indicated in section 10.3 :

Table 19 : Movement of a 20’ container (TEU) from Hugli to Kolkata (excludes sea-freight)


Transportation by road – 60 km 5,000.00 15.53 1






Other costs ( detention charges for 3 days / other OPEs)

5,500.00 17.08 3

Total 32,200.00 5


Table 20 : Movement of a 10 ton truck load from Kolkata to Bangladesh


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Transportation by road 12,000.00 55.05 2


Documentation 1,500.00 6.88

Coolie charges 2,000.00 9.17

Detention costs due to delays 2,800.00 12.84 4

Other OPEs including speed money 1,500.00 6.88

Total 21,800.00 7


Table 21 : Movement of a rake (40 wagons) from Barauni at Bihar to Bangladesh


Freight cost by rail per rake. Each rake would have 40 wagons. Total rake capacity - 2,500 tonnes (from Barauni, Bihar to Bangladesh via Darshana / Benapole / Rohanpur customs border)

2,200,000.00 72.13 7.0

Transportation of 2,500 tonnes by road to rail head (on Indian side) @ INR2,000 / 10 ton truck load

500,000.00 16.39 3.0

Customs clearance @ INR 40 / ton 100,000.00 3.28 0.5

Material Handling charges @ 10% of freight cost 250,000.00 8.20 1.0

Total 3,050,000.00 11.5

Note – The value of the referred consignment is usually around INR 2 crores (Deoiled cakes)


Table 22 : Movement of a 20’ container (TEU) from Assam to Kolkata (excludes sea-freight)


Transportation by road (from Tea Garden to ICD Amingaon) @ INR 1.25 / kg

13,125.00 24.48 1.5

Rail movement from ICD mingaon to Kolkata Port 13,300.00 24.80 3.0

Customs clearance 3,500.00 6.53 2.0





Other costs ( delays and other OPEs) 5,500.00 10.26 4.0

Total 53,625.00 10.5

(Exchange rate US$ 1=INR 45/-)

Source: CONCOR and Deloitte Research

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10.3 Major bottlenecks identified and recommendations During the course of interaction with the exporters, there were various observations / recommendations

mentioned by the exporters, some of which are indicated below:

Hard Infrastructure


Rail

Infrastructure

Indian Railways have provided a few

stations for the private container

operators. Surprisingly, Durgapur which is

a major industrial hub as not been

declared as a Container Rail Terminal.

It is recommended that adequate

container rail terminals are

established at important industrial

stations (with provisions for private

rail carriers) to improve cargo

uploading

Port

Infrastructure

The Kolkata port has been increasing its

port related charges which the exporters

feel is unfair, since it adds to their cost of

shipment, without obtaining any value

added services.

Promotion of Kerrier dock - The berth

where the vessel will dock depends on

the port and authorities are trying to

promote the Kerrier dock at Kolkata Port.

However the said dock does not have the

necessary material handling equipment

on shore.

There is an urgent need for

improvements and capacity

addition in the sea port

infrastructure. The improvement

should be in terms of material

handling system, labour

productivity, development of

additional berths, increase of draft,

and a proper and reliable EDI

system.

Haldia Dock has better port infrastructure

than KoPT. But Haldia is 100 kms away

from Kolkata and many CHAs do not have

have their offices at Haldia. The

supporting infrastructure at Haldia has not

come up and hence exporters are averse

to ship their cargo from Haldia.

Endeavour to make Haldia more

accessible and also provide

necessary supporting infrastructure

in and around Haldia, so that the

shipper earnestly looks at Haldia

as an alternate port of preference

Airport

Infrastructure

The storage charges levied by AAI in

Kolkata is very high (approx Rs. 7 / kg),

while in Bangalore it is Rs. 2 / kg.

Time taken for processing of documents

at the air cargo complex is high.

Infrastructure for cargo clearance at the

Kolkata airport is poor.

The charges at Kolkata airport

should be brought down. In

addition, the free days for storage

of import cargo is 3 days which is

very less and should be increased

to a minimum of 7 days.

Need for improvement of the

facilities at the cargo complex.

Warehouse

facility

There is a shortage of warehouses in and

around Kolkata, especially cold storage

Need for establishing more

warehouses under PPP model.

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Soft Infrastructure


Labour The low productivity of the port workers

Need to provide incentives for the

workers by having a variable pay

component which is directly linked

to the particular department‘s

output.

EDI The EDI system at the Kolkata port is not

very reliable. Breakdown in the computer

hardware system, especially printers and

server is frequent. This causes delays in

obtaining the shipping bill.

Need for a more robust EDI

system, which should also be

connected to the state borders /

Check Nakas.

EXIM Policy


Customs It has been observed that there would be

15-20 CHAs gathered around one

Customs official table, each coaxing the

Customs official to clear his papers

leading to delays in goods clearance.

A token number system shall be

implemented to avoid queues /

scrambles In Customs office

Excise The Excise B1 bond12

was earlier issued

for five years. It has been changed and

now the same is issued for one year.

It has been suggested by the

exporters that issuance of the B1

bond may be increased to five

years again.

VAT and

others

The Sales Tax department is very stingy

in issuing the Form H used for sales tax

exemption by the exporter. It takes

around 2-3 days for a shipper to obtain

the Form H after having his documents

scrutinized

For regular exporters, the forms

should be preferably available on

demand.

Service Tax Though service tax is exempted for

exports transaction, exporters are still

paying for it.

Clarity is required on Service tax

issues especially with regard to the

service tax incurred by the CHA ,

transporter etc for providing

services for exports

Schemes /

Policy

The policies of the government keep

changing and hence may directly impact

the export of a product if it is included

under the list of non-exportable item.

Any policy change implementation

should be notified in advance to

provide the exporter sufficient time

period to take necessary measures

to implement the same

12

The exporter can execute B-1 bond for export of goods without payment of excise duty. The bond can be with

surety or security or only guarantee. The bond should be at least equal to the duty chargeable on the goods, with

such surety or security as the excise officer may approve. The bond can be executed with the Maritime

Commissioners or Assistant / Deputy Commissioner under whose jurisdiction the factory is situated or Assistant /

Deputy Commissioner (Export) as officer authorized by Board.

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Logistics


Ports / Sea

Connectivity

Chittagong is just a one and a half

days sailing from Kolkata. But since

there are no regular services to

Chittagong from Kolkata, the

shipments are first routed to

Singapore and from Singapore it is

then transshipped to Chittagong. The

cost of shipment of the consignment

through Singapore is around USD

1500 and the time taken is around

10-15 days, while the shipment from

Kolkata to Chittagong is around USD

300 to USD 400 per TEU.

Need for a regular weekly service

from Kolkata to Chittagong.

Rail Connectivity Since only feeder vessel calls, the

cost of transshipment is extra for

Kolkata port. There have been

instances when the respondent has

lost out on export order to its

competitor from Delhi due to the high

freight charges and longer transit time

taken. Exporters are reportedly

mulling on dispatching their goods to

JNPT via rail to save on the

congestion time caused at Kolkata

port and to gain direct access to

Mother Ships.

To facilitate the movement of their

container from Kolkata to JN Port,

exporters have indicated that there

should be regular container train

service from Kolkata to JN Port.

Bottlenecks at

the Petrapole –

Benapole border

At present there is no agreement

between Bangladesh and India for

freight and vehicles movement by

road. Thus, trade has to be

transshipped at the border. This

transshipment of cargo is carried out

either by unloading the cargo in the

warehouses of the other country or

directly from one vehicle to another in

at the ‗no-man‘s land‘ at Benapole

(Bangladesh). At Petrapole (India),

Customs checking is done at a place

other than within the terminal

premises, which results in delays and

increased transaction costs.

Need for a formal agreement

between Bangladesh and India to

lay down guidelines for freight and

vehicles movement by road.

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and cost analysis – North Zone

11.1 North zone overview

The industrial location of the northern region surrounds New Delhi and the adjacent states bordering the

capital. Export cargo is facilitated from the various inland container depots which is concentrated on the

main rail line between Mumbai / JN Port and Delhi.

Export volume from National Capital Region – (NCR)

NCR covers a total of 30,242 sq km covering Delhi and parts of Haryana, Rajasthan and Uttar Pradesh.

Inland container depots in the North connect the container handling port of Mundra / Kandla / Pipavav

and JN Port / NSICT, through which most of the cargo movement takes place. In 2006 – 07 the ICD

covering Tughlakabad, Moradabad, Panipat, Dhandarikalan, Ballabhgarh, Jodhpur, Jaipur, Rewari, Dadri,

Agra, Gwalior, Kanpur, Ravtha Road etc handled a total of 9,30,304 TEU13

. The major movement of

export containers is through CONCOR rail network with their flagship ICD at Tughlakabad (TKD) which

handles more than 0.4 million TEU per annum.

Figure 20 : Major CONCOR - NCR Export Cargo Movement (April 2006-07)

Source: CONCOR

ICD Tughlakabad is followed by Dadri and Ludhiana in handling EXIM volumes. As ICD Tughlakabad is

located inside Delhi the cargo movement from NCR region (which extends and covers a vast area of

Haryana including the auto hub of Gurgaon and industries located at Faridabad) moves inside Delhi

which has to be avoided and reversed. There is a proposal to close down ICD Tughlakabad, for which

reverse planning needs to be put in place. This would require creation of additional facilities at other ICDs

(south of NCR). Cargo coming from South Delhi in the first stage can be gradually diverted to ICD at

13

Indian Ports Association

Rewari, 2%Moradabad, 6%

Ludhiana, 17%

Dadri, 19%

Tughlakabad,

56%

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Rewari where supporting infrastructure including offices of shipping companies etc should be facilitated

with additional trains siding and connectivity from ICD Rewari on a daily basis.


For exports from NCR

The following section indicates the mapping of the inland logistics movement and cost break-up for

shipment of export consignment from NCR


1 Inland road

transportation

NCR collects cargo from various industrial hubs located in the states of

Haryana, Punjab, Rajasthan, Himachal Pradesh, Uttarakhand, and Uttar

Pradesh. The road haulage freight rate depends upon the type of vehicles

and its availability (supply) in the market. For light cargo movement in forty

feet equivalent unit – FEU, the rail freight charged is 1.8 times that of a

twenty equivalent unit -TEU (Two TEU are considered as one FEU)

however the road charges comparatively are cheaper by about 15% for

textiles goods and about 25% for automobile spare parts moving from

NCR to JN Port in FEU.

This discourages light cargo from moving by rail leading to additional traffic

of FEU on the highways which create congestion in the absence of

dedicated traffic lanes. Association of Container Train Operators (ACTO)

has demanded that the Railways should fix the haulage charges for

FEU containers at 1.6 times of the corresponding rates for a TEU.

2 Inland rail

transportation

Most of the export cargo moves by rail from the ICD to the seaports of JN

Port / NSICT/ GTIL - Nhava Sheva in Maharashtra, Mundra / Kandla port

at Kutch - Gujarat, and Pipavav port in Amreli, Gujarat.

The CONCOR tariff rates from Ludhiana and Tughlakabad have been

compared for the port of Nhava Sheva, and Gujarat based port of Mundra

and Pipavav. From the comparison analysis ( as depicted in Table 14 ), it

can be noted that in spite of the tariff for Gujarat ports being 8-10% lower

than of that of Nhava - Sheva, the cargo movement is higher for Nhava

Sheva port due to the number of sailing ships and frequency offered from

the ports, especially main line direct vessels.

3 Inland water

transportation

It was found that there is no inland water transport taking place in this

region for moving goods meant for exports. A feasibility study shall be

considered for inland water transportation on the Yamuna River which may

require having small dams to maintain a sufficient level of water to develop

flat bottom barge movement.

4 Transit facility

(ICD / CFS /

ware housing /

etc

NCR has various ICD / CFS including private owned and operated ones,

which have their own tariff and schedule of rates for their respective

service offerings

5 Custom House

Agent /

The Bombay Custom House Agents' Association popularly known as

BCHAA is the oldest association representing the custom house agents in

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Clearance

various trade and government bodies.

The Custom house agents (CHA) have their main offices at the sea ports

of Mumbai and have branch offices covering ICD and dry ports .They are

regulated and obtain registration from the customs to operate .Their

charges vary between INR. 2000 - 3500 /- per TEU / FEU. The survey has

identified that the staff working with customs and logistics movement

needs to be trained.

6 Terminal

Handling

Charges

(THC)

THC is charged by the respective shipping lines for handling, movement

and loading of the container on the ship. It varies from shipping line to line

and is fixed and non-negotiable.

It has been reported that over the past one year, there has been a rise of

almost 100% in the THC charges from INR 4,000 to INR 7,500 per TEU

container. The quality of service provided however has not improved to

commensurate with the increase witnessed in the cost. The increase in

THC is affecting price competitiveness of major shippers who have around

15-20 containers to be shipped per month

7 Shipping cost Sea freight is paid to the shipping line or NVOCC (Non Vessels Owning

Container Operator) who issues the Bill of Lading to the exporter. The sea

freight depends on shipping line to line, the route and transit time. The

exporter agrees to the sea freight on which basis booking note with empty

container is issued for stuffing of the export cargo.

During the period 2007- 08, sea freight rate for Europe from JN Port has

increased from US$ 1200 to 2000 for a TEU and now has averaged to

around US$ 1500 per TEU. For shipment to USA, the freight rate had

come down from US$ 2000 to US$ 1500 due to less volume and has now

recovered to US$ 2200 – 2500 per TEU.

8 Documentation

Charges

The documentation charges cover the expenses incurred for obtaining the

necessary documents required for processing export shipment including

bank related documents. It covers the charges of obtaining Bill of lading

(INR 750) from the shipping line, charges for certificate of origin, etc.

depending upon the product

9 Other logistic

costs

Other logistics costs include cost of movement of the empty container by

road or rail to the ICD, cost of loading, unloading, stuffing, palletisation,

fumigation, excise inspection etc.

Based on the primary survey and ICD rail tariff, which is on weight basis

and common for non–hazardous cargo, average rail freight for a TEU was

been taken for calculating the various components of cost incurred for

moving an export container from the exporter‘s factory to the port.

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Table 23: TEU & FEU rail tariff charges ex Ludhiana to western region ports

LUD-TEU 1 2 Tariff Difference

between 1 and 2

(INR)

3 Tariff

Difference

between 1and

3 (INR)

Weight

(MT)

Tariff -

JNPT/NSICT/GTIL

Tariff - Pipavav Tariff -

Mundra

12 20,700 18,200 2,500 17900 2,800

15 23,300 21,200 2,100 20800 2,500

18 23,300 21,200 2,100 20800 2,500

22 30,600 30,600 0 30500 100

28 35,100 35,800 -700 35300 -200

LUD-FEU

18 40,100 34,100 6,000 33600 6,500

22 42,200 36,000 6,200 35400 6,800

28 44,300 36,900 7,400 36300 8,000


As highlighted from the comparison statement above, basic rail freight of CONCOR charges to Mundra

are INR 8000 / - less for a FEU from Ludhiana to JN Port and as Ludhiana has more of FEU movement

same can lead to a substantial saving for the exporters.

Table 24: TEU & FEU rail tariff charges ex Tughlakabad to western region ports

TKD-TEU 1 2 Tariff Difference

between 1 and 2

(INR)

3 Tariff

Difference

between 1

and 3 (INR)

Weight

(MT)

Tariff -

JNPT/NSICT/GTIL

Tariff -

Pipavav

Tariff -

Mundra

12 17,300 15,600 1,700 15,400 1,900

15 19,500 18,200 1,300 17,800 1,700

18 19,500 18,200 1,300 17,800 1,700

22 27,200 26,200 1,000 25,900 1,300

28 32,100 29,000 3,100 28,500 3,600

TKD- FEU

18 32,800 30,100 2,700 29,500 3,300

22 34,900 31,700 3,200 31,000 3,900

28 36,500 33,100 3,400 31,900 4,600


As highlighted from the comparison statement above, basic rail freight of CONCOR charges to Mundra

are INR 3600 / - less for a TEU from Tughlakabad (NCR) then to JNPT.

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Table 25: Break-up of total logistics cost ex NCR to JNPT port

Segment Cost

(INR)

Cost % Time

(days)


Transportation by road (30 km radius in NCR from ICD) 5,000 12.78 1.0

Rail movement to port (average)

Note – The time includes the dwell time of the loaded

export container which is usually less than 24 hours and

transit time of 46 hours

23,120 59.10 2.5

Custom 3,000 7.67 0.5

Terminal Handling 6,000 15.34 -


Others 1,000 2.56 1.0

Total 39,120 100 5.5


From the break - up of the total cost, it is observed that sea freight charges contribute to a high

percentage of above 70% followed by the inland charges for movement from the hinterland factory to the

port. The sea freight charges especially for container cargo are also subject to fluctuations increasing by

up to 80% in the last year 2007- 08 in the EU sector and involves freight brokers and NVOCC which add

to the final cost paid by the exporter.

A reduction in sea freight of 10% would save about INR 9000 which would reduce the total cost by about

6%. The second cost element of 18% is the inland haulage which is directly due to the distance of NCR

from JNPT. Other expenses incurred, are cost of repositioning the empty container from the port to the

ICD (which is the rail freight of an empty container plus handling charges) the charges of which are borne

by the exporter.

Figure 21 : Recommendations for facilitating seamless export movement from the NCR


from the NCR region

1. The National Capital Region Planning Board which has the

mandate for preparing a Plan for the development of the NCR

should include a master plan for logistics movement also. This plan

needs to be incorporated in the overall development plan; to enable

seamless movement of logistics to take place. Logistics Plan can

suggest bypasses, under/over bridges, dedicated lanes and linkage

with certain sections especially for Gurgaon and Faridabad.

2. The logistics plan should (based on the proposed route of Delhi –

Mumbai Industrial corridor DMIC and feeder rail linkage with ICDs

in the north) suggest the proposed Western Peripheral road

expressway for NCR to facilitate cargo movement from Chandigarh

and Northern Haryana to move south, linking the feeder rail

connection on which future ICDs can be developed. Similarly

industrial hubs of eastern Delhi can also be linked to the feeder rail

links connecting the DMIC by planned road .This would enable

traffic to move away from Delhi to link the feeder routes and DMIC


from the NCR region

































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For exports from ICD Pithampur (Indore)

Indore is the commercial capital of Madhya Pradesh and strategically located in the industrial belt of

Dewas. ICD Pithampur lies 45 km from Indore in the industrial belt, where other textile and

pharmaceutical parks are also being developed. ICD Pithampur is 110km from Ratlam, the nearest

railhead on the busy Delhi–Mumbai broad gauge rail link. Export containers have to move to Ratlam rail

head which leads to double handling and additional cost and delay reducing the benefit offered by lower

rail freight. Lack of last mile rail connectivity of ICD with Ratlam has limited the growth, compelling the

exporters to either bear the delay of 10 -15 days for movement to JN Port by rail, or move containers

directly by road on the already busy NH 3 adding to the traffic congestion. Non development of rail and

smooth road connectivity is directly affecting the growth and development of south MP region, which has

very good potential for textile, food, pharmaceutical and auto industry.

The present cargo potential from Indore region (covering the surrounding area) is about 1 lakh TEUs per

annum. CONCOR during the period April 2006 - March 2007 handled 27,384 TEU from ICD Pithampur

with road movement accounting for the balance. The following section indicates the mapping of the inland

logistics movement and cost break-up for shipment of export consignment from ICD Pithampur.


1 Inland road

transportation

ICD Pithampur being in the industrially developed region, can act as a

gateway ICD for the entire region covering Indore, Pithampur, Dewas,

Mandideep, Bhopal, Nagda, Ghatabillod, Dhamnod, Sarangpur, Ratlam,

Pilukhedi etc; provided:

o The area is linked with good state road network

o Provide rail connectivity with Ratlam (MP) and Dahod (Gujarat)

2 Inland rail

transportation

Most of the export cargo moves by road from the factory to the seaports of

JNPT / NSICT/ GTIL at Nhava Sheva, Maharashtra. Other ports like

Mundra / Kandla at Kutch, and Pipavav port in Amreli, (Gujarat), do not

have good connectivity or rail network ex Indore.

The CONCOR tariff rates from ICD Pithampur have been taken for port of

Nhava Sheva which is about 700 km as most of the cargo moves through it.

3 Transit facility

(ICD / CFS /

ware housing

/ etc.

Indore has CONCOR ICD which has its own tariff and schedule of rates for

its service offering. Fairdeal Group (private ICD) has just commenced its

road linked ICD from 1st October 2008 and another is being developed by

Allcargo Global Logistics

Table 26: TEU rail tariff charges ex Pithampur to JNPT/ NSICT / GTIL ports

INDORE Rail Tariff - JNPT/NSICT/GTIL - Cost (INR) Road Charges - Cost (INR)


Up to 12 MT 10,200

19,800

30,000

45,000

>12 <= 16 MT 10,900

>16 <= 20 MT 10,900

>20 <= 25 MT 14,400

>25 <= 26 MT 14,400


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from Indore – Pithampur region

• Government of India along with

state government should

prepare a master plan for

Pithampur -Dewas - Mhow

region, covering industrial

potential areas with

infrastructure planning for

helping setup non-polluting

based industries in food,

pharmaceuticals, textiles,

automobile, information

technologies, etc

• Master plan should also identify

a new location for green field

ICD to be developed by

CONCOR with sufficient land to

cover future growth. This ICD

should be aligned with the rail

line being developed between

Ratlam-Indore as the present

ICD at Pithampur is constrained

for space being in the SEZ

zone.

• Priority should be given to

develop rail connectivity

between Indore (Pithampur)

with Ratlam so that rail

movement can take place

directly from Indore. Similarly

Indore - Ratlam highway via

PPP mode should be

expedited

• Converting NH 3 from Indore

to Mumbai (Maharashtra) and

NH 59 from Indore to Godhra

(Gujarat) into six lanes should

also be expedited.

• Roads linking Indore with

other major cities in South

MP, Rajasthan, Gujarat and

Maharashtra should be

developed using PPP models

(Minimum 6 lanes should be

envisaged)

• Conversion / development work

of Dahod (Gujarat) – Indore

(MP) via Jhabua and Chhota

Udaipur - Dhar has already been

inaugurated by the Prime

Minister on 8 February 2008.Its

first leg between Pratapnagar

(Vadodara) to Chhota Udepur

has been completed and opened

for traffic on 2nd October 2008

.However from Chhota Udepur

to Dhar the work needs to be

expedited which would finally

link Indore. Similarly Ratlam -

Mhow section which is underway

as part of the Ratlam - Khandwa

- Akola, project should be

completed to enable Indore city

via ICD Pithampur getting

connected to Ratlam junction by

rail..


from Indore – Pithampur region

• Government of India along with

state government should

prepare a master plan for

Pithampur -Dewas - Mhow

region, covering industrial

potential areas with

infrastructure planning for

helping setup non-polluting

based industries in food,

pharmaceuticals, textiles,

automobile, information

technologies, etc

• Master plan should also identify

a new location for green field

ICD to be developed by

CONCOR with sufficient land to

cover future growth. This ICD

should be aligned with the rail

line being developed between

Ratlam-Indore as the present

ICD at Pithampur is constrained

for space being in the SEZ

zone.

• Priority should be given to

develop rail connectivity

between Indore (Pithampur)

with Ratlam so that rail

movement can take place

directly from Indore. Similarly

Indore - Ratlam highway via

PPP mode should be

expedited

• Converting NH 3 from Indore

to Mumbai (Maharashtra) and

NH 59 from Indore to Godhra

(Gujarat) into six lanes should

also be expedited.

• Roads linking Indore with

other major cities in South

MP, Rajasthan, Gujarat and

Maharashtra should be

developed using PPP models

(Minimum 6 lanes should be

envisaged)

• Conversion / development work

of Dahod (Gujarat) – Indore

(MP) via Jhabua and Chhota

Udaipur - Dhar has already been

inaugurated by the Prime

Minister on 8 February 2008.Its

first leg between Pratapnagar

(Vadodara) to Chhota Udepur

has been completed and opened

for traffic on 2nd October 2008

.However from Chhota Udepur

to Dhar the work needs to be

expedited which would finally

link Indore. Similarly Ratlam -

Mhow section which is underway

as part of the Ratlam - Khandwa

- Akola, project should be

completed to enable Indore city

via ICD Pithampur getting

connected to Ratlam junction by

rail..

Table 27 : Break-up of total logistics cost for movement of a TEU from Pithampur to JNPT

Segment4 Cost (INR) Cost % Time (days)

Break up of export logistic cost, excluding sea freight

Road Transportation (100 kms - ICD

Pithampur - Ratlam)

8,300 25.61 1.0





Others 1,000 3.08 1.0

Total 32,415 100 13.0


Comparison of logistics constraints faced by Tughlakabad, Delhi and ICD Pithampur, Indore

The rail freight is charged based on the distance and weight and increases proportionally based on

the location of the ICD. However the handling charges and other cost of enabling stuffing and

movement of empty container back to rail terminal depends upon the location of the ICD and

availability of rail connection from the same.

At Indore the rail head is 110 km from the industrial area and ICD Pithampur. Hence an empty

container picked up from the ICD moves to the factory at Indore and back to Ratlam where rail

movement to the port is available, covering a distance of 150–200 km which accounts for 63% of

transportation cost associated with rail movement (rail freight is INR 13,115 and inland haulage is INR

8300). The referred cost is 25% more as compared to the inland freight cost incurred by exporters

shipping from ICD Tughlakabad– Delhi.

Figure 22: Recommendations for facilitating seamless export from Indore – Pithampur region

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Table 28 : Comparative cost of rail freight v/s inland road transportation in %

ICD Tkd – Delhi ICD Indore Difference

Inland road charges = 22% of

basic rail freight

Inland road charges = 63% of

basic rail freight

41%

11.3 Major bottlenecks identified by the exporters and

recommendations

Some of the major logistics issues highlighted by exporters of NCR and Indore regions during the primary

survey are indicated below:

Hard Infrastructure


Infrastructure The overall infrastructure ( roads,

power, warehousing facilities etc)

covering the industrial region

surrounding New Delhi is inadequate

to take care of the volume of exports

being carried out

Need for a better infrastructure and

planning to cover the industrial

region surrounding New Delhi

which extends up to 150 km

Road

infrastructure

Poor road connectivity between

Indore and Mumbai /JNPT / Kandla /

Mundra sea ports

Suitable planning and execution of

road projects to be done with the

help of NHAI

Warehouses Lack of ICD infrastructure in North

Haryana and Chandigarh region. Now

the cargo has to move to South Delhi

or East Delhi for further connectivity to

the gateway ports in the western

region

The government can facilitate

development of ICDs across export

centers on PPP basis by providing

land and other ancillary support for

the necessary development of ICD

infrastructure

Lack of infrastructure facility at ICD

Pithampur – Indore

ICDs in India are not inter linked for

information management

A Management Integrated system

(MIS) can be setup linking all the

ICDs in the country

Cold chain Lack of cold storage especially at

Delhi Airport

Need for development and up

gradation of cold storage facilities

that offers reliable services at the

major gateway terminals in the

North zone

Certification lab Lack of authorized Certification

laboratory facilities for sample testing

of export consignments

Agency with pan India presence

(lab facility) should test and issues

reports on behalf of customs to

avoid delay

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Soft Infrastructure


Labour Inflexible labour laws Labour laws in the country are not

in tune with industry requirement

and needs amendments.

EXIM Policy


Service tax Refund of service tax is causing

delays and discomforts for exporters

Exporters should be exempted

from paying service tax, rather

than asking them to pay and claim

refund which involves time and

documentation.

Logistics


Rail connectivity Rail carriage with 4 cars is very light

(4 MT) for which the freight charged is

higher than that of truck charges from

NCR to seaports in the western region

Need for rationalizing the rail freight

rates by the rail cargo operators

Export containers have to move from

ICD Pithampur to Ratlam rail head

which leads to double handling and

additional cost and delay reducing the

benefit offered by lower rail freight.

Lack of last mile rail connectivity of

ICD Pithampur with Ratlam has

limited the export growth, compelling

the exporters to either bear the delay

of 10 -15 days for movement to JN

Port by rail, or move containers

directly by road on the already busy

NH 3 adding to the traffic congestion.

Need for a feasibility study to

understand the cost-benefit

analysis for extension of rail from

Ratlam to ICD Pithampur

Check post /

road connectivity

Two toll charges between Indore and

ICD Pithampur and high cost of ICD

operations discourages exporters

from using ICD facilities

Need for ICDs offering competitive

rates and services in order to

encourage exporters to use the

facilities. Private participation for

ICD operations is a right step in this

direction

Others Inland movement of exports from

Indore to Mumbai incur procedural

delay due to N form

Export cargo should be exempted

from Octroi formalities to avoid

delay. Exporters association can

file a bond on behalf of exporters

and co-ordinate for documentation

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Logistics


Restricted movement from Gurgaon

and Noida factory allowed only during

certain limited hours

This step was taken to alleviate

road congestion but long term

measures like construction of

bypass lanes to move cargo should

be thought of

Source: Primary survey findings

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and cost analysis – South Zone

12.1 South zone overview

South zone is an important region involved in the

export of textile, auto & auto components,

chemicals and food processing. The south zone

comprises of consists of four states namely;

Andhra Pradesh

Karnataka

Kerala

Tamil Nadu

And two union territories

Lakshadweep

Pondicherry

Figure 23 : Southern India region

Commodity profile

The commodity profile of the region is as follows

State Commodities exported

Andhra Pradesh Textiles, Chemicals, Food Processing

Karnataka Auto components, Food processing,

Kerala Food processing

Tamil Nadu Auto components, Textiles

The export gateways

The companies in the southern region export the commodities mainly from 5 major ports; Chennai, JNPT,

Vizag, Cochin and Tuticorin.

State Locations covered in

the survey

Mode of transport

to port

Gateway ports used

Andhra Pradesh Hyderabad, Medak,

Prakasham

Road, Rail Mangalore, Chennai Port

Trust, Cochin Port Trust

Karnataka Bangalore, Hosur Road, Rail Chennai Port Trust,

Mangalore, Cochin Port Trust

Kerala Ernakulam, Allapuzha,

Thrissur, Palakkad

Road Cochin Port Trust

Tamil Nadu Chennai, Coimbatore, Road, Rail Chennai Port Trust, Tuticorin

Port Trust, Cochin Port Trust

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The subsequent sections has a brief description of the gateways most used by the respondents contacted

Chennai Port Trust

Chennai Port, the third oldest port among the 12 major ports, is an emerging hub port in the East Coast of

India. This gateway port for all cargo has completed 126 years of glorious service to the nation‘s maritime

trade. Currently Cargo to / from ChPT is handled through rail (33%), road (40%) and pipeline (27%).

Cochin Port Trust

Cochin is the fastest growing maritime gateway to

peninsular India. An all-weather natural Port, it is

located strategically close to the busiest

international sea routes from the Gulf to Singapore

and Europe to the Far East circuits. The port is

spearheading fast-track maritime and industrial

growth in the large geographical spread of its

economically vibrant hinterland. The logistically

sensitive port is emerging as the most preferred

investment destination for maritime commerce.

The port attracts cargo from the region of Andhra

Pradesh, Kerala, Tamil Nadu and Karnataka.

Figure 24 : Hinterland mapping for Cochin Port

Tuticorin Port Trust

Tuticorin has been a centre for maritime trade and pearl fishery for more than a century. The natural

harbour with a rich hinterland activated the development of the Port, initially with wooden piers and iron

screw pile pier and connections to the railways. Tuticorin was declared as a minor anchorage port in

1868. Since then there have been various developments over the years.

Visakhapatnam Port Trust

It plays a crucial role as the middle point distribution base for Southern, Eastern, Central and Northern

states of India. Described as the ―Brightest Jewel‖ of all Indian major ports for its outstanding performance

and productivity, Visakhapatnam Port serves as a catalyst in spurring domestic and international trade.



1 Inland

transportation

charges –

Road

The freight rates from the various southern hinterland export centers to the

various gateways is indicated in table 33

2 Inland

transportation

charges – Rail

The rail transportation is preferred from Andhra Pradesh and Karnataka.

The transportation charges for transporting the containers from various

destinations to the ports are mentioned in Table 34

3 Inland

transportation

charges –

At present it is seen that there is no inland water transportation mode used

by the exporters. It is seen that except for Kerala no other state uses

Inland water transport as preferred mode to transport the consignments.

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Water However considering the economies of scale in transporting via water, the

mode of travel is to be encouraged in future for reducing the logistics cost.

4 Transit facility

(ICD/ CFS/

Warehousing

etc)

The companies in the hinterland use the following ICD and CFS

State ICD / CFS

Andhra Pradesh Hyderabad (CWC, CONCOR), Guntur

Karnataka Whitefield, Desur

Kerala Cochin

Tamil Nadu Coimbatore, Chennai, Madurai, Tuticorin

It has been seen that most of the bigger companies in the hinterland

prefers to directly stuff the containers in the port premises and smaller

companies prefer sending the LCL to the ICDs/ CFSs where they get

stuffed and is then taken to the various ports depending on the export

destinations.

5 Custom house

agent charges

The custom house agent charges are INR 2,000 per TEU and INR 3,000

per FEU. These charges are exclusive of Service Tax.

6 Shipping cost The companies in the southern region prefer JNPT and Cochin Port Trust

as they handle direct vessels. Tuticorin and Chennai are less preferred as

the ports are mainly into transshipment and hence are costlier when

compared to other ports. Depending on the urgency and the high value

consignments the exporters prefer air or sea options.

7 Documentation

charges

The shipper has to incur a cost of around INR 600 to INR 1,000 per Bill of

Lading in the southern ports. Apart from the referred documents, the

shipper would also be required to bear the nominal L/ C charges which

vary depending on the bank. The other charges incurred by the shipper

include courier & fax charges, certificate of origin charges etc. Accordingly

the total charges associated with documentation would be around INR

1,000–2,000/-.

8 Other logistics

cost -

Unauthorized

check posts

The exporters in the southern region have to pay hefty bribes in the check-

posts spread across the country. According to the exporters, in some

cases they end up paying around INR 1000 to INR 2000.

9 Total logistics

cost

Most of the cargo in the southern hinterland moves by road. This is mainly

because of lesser distance from the factories to the gateway ports. It could be

seen that exporters prefer rail movement if the distance between the factory to

the gateway ports is more than 600 kilometers. The logistics cost for the

following routes have been analyzed in detail for

Andhra Pradesh

Hyderabad to JNPT

Hyderabad to Chennai Port Trust

Tamil Nadu

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Chennai to Chennai Port Trust

Coimbatore to Cochin Port Trust

Coimbatore to Chennai Port Trust

Hossur to Cochin Port Trust

Hosur to Chennai Port Trust

Kerala

Cochin to Cochin Port Trust

Allapuzha to Cochin Port Trust

Thrissur / Palakkad to Cochin Port Trust

Karnataka

Bangalore to Cochin Port Trust

Bangalore to Chennai Port Trust

Table 29 : Road freight charges

Cochin Port Trust Chennai Port Trust JNPT Tuticorin

20" 40" 20" 40" 20" 40" 20" 40"

Allapuzha 3000 4600

Bangalore NA NA NA NA

Chennai 2000 4000

Cochin 1000 2000

Coimbatore 12000 18000 16500 28000 14000 21000

Hyderabad 21600 38000 22000 42000

Palakkad 13500 13500

Note: The figures quoted in the table are the responses provided by various exporters

Table 30 : Rail freight charges In INR (excluding the applicable taxes)

Cochin Port Trust Chennai Port Trust JNPT

20" 40" 20" 40" 20" 40"

Bangalore 8500 16,300 6,300 12,200

Hyderabad 10,500 19,200 10,700 20,700

Source: CONCOR

Table 31 : Movement of a 20’ container (TEU) from Hyderabad to various ports by road

Hyderabad to various ports (road) JNPT Chennai Port Trust

Logistics cost parameters Cost Cost % Time (days)

Cost Cost % Time (days)

Inland transportation charges – road 22000 60.27% 2 22000 64.14% 2

Inland transportation charges – rail 0 0% 0 0 0.00% 0

Inland transportation charges – water 0 0% 0 0 0.00% 0

Transit facility (ICD / CFS / ware housing / etc)

5000 13.70% 2 2800 8.16% 1

Custom House Agent /Clearance 2500 6.85% 2500 7.29%




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Table 32 : Movement of a 20’ container (TEU) from Hyderabad to various ports by rail

Hyderabad to various ports (rail) JNPT Chennai Port Trust

Logistics cost parameters Cost Cost % Time (days)

Cost Cost % Time (days

)

Inland transportation charges – road 2000 7.35 1 2500 1.97 1

Inland transportation charges – rail 10700 39.34 4 10700 8.44 3

Inland transportation charges – water 0 - 0 0 - 0


5000 18.38 2 2800 2.21 1

Custom House Agent /Clearance 2500 9.19 2500 1.97

Terminal Handling Charges 6000 22.06 6000 4.73

Documentation Charges 800 2.94 500 0.39

Other Logistic costs 200 0.74 1 500 0.39 1

Total logistic costs 27200 8 25500 6


Table 33 : Movement of a 20’ container (TEU) from Chennai and adjoining areas to Chennai Port by road

Chennai to various ports (road) Chennai Port Trust


Inland transportation charges – road 3000 2.69% 1

Inland transportation charges – rail 0 0.00%

Inland transportation charges – water 0 0.00%


2000 1.79% 1

Custom House Agent /Clearance 1200 1.08%

Terminal Handling Charges 5800 5.20%

Shipping cost 99000 88.79%

Documentation Charges 500 0.45%

Other Logistic costs 0 0.00%

Total logistic costs 111500 100% 2


Table 34 : Movement of a 20’ container (TEU) from Coimbatore to various ports by road

Coimbatore to various ports (road)


Logistics cost parameters

Cost Cost %

Time Cost Cost %

Time Cost Cost %

Time

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Coimbatore to various ports (road)


Logistics cost parameters

Cost Cost %

Time Cost Cost %

Time Cost Cost %

Time

Inland transportation charges – road

14000 56% 1 18000 65% 1.5 14500 61% 1

Inland transportation charges – rail

0 0% 0 0 0% 0 0%

Inland transportation charges – water

0 0% 0 0 0% 0 0%


4500 18% 2 2000 7% 1 1500 6% 1

Custom House Agent /Clearance

1200 5% 1200 4% 2000 8%

Terminal Handling Charges

4000 16% 5800 21% 4800 20%

Documentation Charges 600 2% 500 2% 800 3%

Other Logistic costs 500 2% 0.5 0 0% 0 0%

Total logistic costs 24800 100% 3.5 27500 100% 2.5 23600 100% 2


Table 35 : Movement of a 20’ container (TEU) from Bangalore to various ports by road & rail

Bangalore to various ports (road /rail)

Cochin Port Trust Chennai Port Trust

Logistics cost parameters Cost Cost % Time Cost Cost % Time


18500 63.14% 2 15000 61.22% 2


0 0.00% 0 0 0.00% 0


0 0.00% 0 0 0.00% 0


4500 15.36% 2 2000 8.16% 1


1200 4.10% 1200 4.90%






Table 36 : Movement of a 20’ container (TEU) from Cochin and adjoining areas to Cochin Port

Cochin to various ports (road)

Cochin Port Trust


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Cochin to various ports (road)

Cochin Port Trust



3000 34.65% 1


0 0.00%


0 0.00%


5158 59.57% 2


0 0.00%

Terminal Handling Charges 0 0.00%





Table 37 : Movement of a 20’ container (TEU) from Palakkad and adjoining areas to Cochin Port

Palakkad to various ports (road) Cochin Port Trust


Inland transportation charges – road 13500 65.85% 1

Inland transportation charges – rail 0 0.00%

Inland transportation charges – water 0 0.00%

Transit facility (ICD / CFS / ware housing / etc) 6500 31.71%

2

Custom House Agent /Clearance 0.00%

Terminal Handling Charges 0.00%






Hard infrastructure


Road Road conditions of the following stretch Concept of express highways

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Hard infrastructure


are very poor

o Coimbatore to Cochin

o Coimbatore to Chennai

should be explored in the high

traffic routes

Rail The preference is always given for

passenger trains over goods trains. This

increases the transit time for movement

by rail

If found feasible, Railways should

initiate steps to have dedicated

freight corridors in the South,

Ports Direct connecting vessels are not

available from Chennai and this is forcing

the companies to go for transshipment

and thereby incurring higher logistics cost.

At present most of ships either goes to

Singapore or Colombo for transshipment.

Government should take steps for

increasing the direct connectivity

from India

The development of Vallarpadam

Transshipment Terminal at Kochi

and Vizhinjam Port near

Thiruvananthapuram will address

the transshipment problems as

mother vessels can carry cargo

directly from these ports

Airport Bigger pallets handling at Coimbatore

airport - According to Shippers, air

freighting the bigger pallets (over 1200

length mm) is not available at Coimbatore

airport. No scanning machines available

for scanning the bigger pallets.

Airport infrastructure should be

improved and steps should be

taken for handling bigger pallets

There is a shortage of cargo flights from

Coimbatore

Power Power shortages in Kerala and Tamil

Nadu are affecting the operations for the

exporters. In most of the places, there are

mandatory power cuts and mandatory

holidays.

Government should take actions to

provide proper power connectivity

to the exporters. Power generation

under private sector participation

should be encouraged

Water There is a shortage of potable water to

the exporting units

Suitable steps to curb water

wastage and to ensure better

water management shall be taken

Warehouses

& Cold chain

There is a shortage of adequate

warehouses and cold chain facilities in the

south

Steps should be taken to increase

the warehouses and cold chains in

South. Setting up of common cold

chain infrastructure shall be

encouraged.

Empty / reefer

container /

trucks

Availability of empty containers in the

south a major problem for the exporters.

This forces the exporters to incur extra

costs in fetching the containers from the

nearby ports.

Ensure on time availability of

reefer containers

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Hard infrastructure


Terminal

markets

There is a need for more terminal markets

across Southern states

Seek to set up more terminal

markets

Soft infrastructure


Labour Shortage of labour especially for the

textiles and food processing sector in

the South

Training should be imparted to local

people through ITIs, polytechnics,

etc so that successful persons shall

be inducted to the industry

Research &

development

There is a need for proper R&D

investment in food processing and

textiles

Government should initiate actions to

have proper R&D facilities in the

South

EDI There are no EDI systems in

Coimbatore. This increases the time

taken for clearing the containers

EDI systems should be implemented

in Coimbatore

Policy


Local,

regional &

national

regulations

Time restrictions for entering the city

premises in Hyderabad, Coimbatore cities

is increasing the logistics cost for

exporters


to have separate roads / highways

for the trucks and trailers

Customs /

Excise

Customs do not have enough testing

facilities

Customs should have proper testing

facilities

Customs do not work on Saturdays &

Sundays.

Customs should be operational on

24/7 basis

Hectic documentation procedures for

availing various schemes

Reduction in documentation

procedure for exporters

Excise and customs official should be

knowledgeable about the products they

handle and avoid time delays

Proper technical training to the

officers to be imparted

According to exporters, Customs charge

overtime charges after 7 pm. Respondent

feels that Customs should not charge the

overtime charges and should be on the

regular scale.

There should not be any overtime

charges for any transactions

According to exporters, rejection and call

back consignments from the customers is

charged customs duty and import duty

This issue needs to be jointly

resolved by DGFT, CBEC and the

concerned ministries

In customs there is no provision for DDU

and DDP ( Delivery duty unpaid &

Customs should have a provision for

DDU & DDP

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Policy


delivery duty paid)

Brand

Promotion

Brand promotion should be done for

processed foods and textiles

Government should take steps for

branding the sectors

Logistics issue


Road

connectivity

Poor road conditions inhibiting the

seamless cargo movement by road

A comprehensive planning to be

carried out for multilane express

ways that can carry cargo traffic

Rail

connectivity

Poor rail connectivity between the

following regions

o Hyderabad to Chennai

o Hyderabad to JNPT

o Bangalore to Chennai

Because of the poor rail connectivity the

companies are forced to send their

consignment via trucks which is costlier

CONCOR shall improve the

connectivity from the high cargo

region to gateway ports

Alternatively, private participation

in the container operations shall be

encouraged in these regions

Hold up of goods at ICD Bangalore -

Frequency of trains from ICD to Chennai

is very less

Frequency of goods trains from

Bangalore to Chennai has to be

increased

The transit time associated with rail

transportation is very high

Railway should introduce high

speed container and goods trains

to reduce the transit time

Air

connectivity

Less cargo flights connectivity in the

following southern region airports

o Chennai

o Coimbatore

More cargo flights to be introduced

in Chennai and Coimbatore to tap

the high cargo potential

Ports / Sea

connectivity

Longer than usual time taken for cargo

clearance at ports

The exporters are of the opinion

that the Government should take

some steps in reducing the

container and cargo clearance

timings.

Congestion at Chennai Port Trust Proper rail and road linkages

should be provided between ChPT

to reduce traffic congestion.

At Chennai Port the free time has been

reduced from 7 days to 3 days.

The respondent feels that port

should keep the same 7 free time.

Fraught with frequent strikes at ChPT,

Cochin Port and Tuticorin Port

Promulgation of ordinance /

legislations to bring the port

operations under ―essential

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Logistics issue


services‖ thereby curbing the flash

strikes, etc.

Amenable changes in the labour

legislation is sought to tackle this

problem.

Terminal charges are high at Cochin Port

Trust

Terminal charges at CPT should

be reduced and should be in line

with other major ports.

Thefts and pilferage at the major ports Strict patrolling should be done at

the ports to stop thefts and

pilferages.

Transshipment delays from Chennai,

Cochin & Tuticorin Port Trust


to increase the draft at the Indian

ports and attract direct mother

vessels to come to India.

The prices charged by the shipping lines

are very high and there is no regulating

authority in the ocean freight

The prices charged by the shipping

lines should be regulated by the

government. There should be strict

guidelines laid down by the

Government in regulating the

shipping lines.

Inadequate port facilities result in high

demurrage costs.


to improve the facilities at the port

Inefficient crane operation leading to

delays in container offloading at Chennai

port

Port authorities should provide

adequate training to the crane

operators.

There is lack of control over the CHA

agents by the governments and as a

result the work carried out by the agents

lacks professionalism.

Government should have a proper

control over the CHAs through a

suitable mechanism.

Check post Unauthorized check post across South Government should make it

mandatory to have only authorized

check posts

Delays at Valayar Check Post have made

it difficult for the consignments to reach on

time. Trucks and trailers have to wait at

the check post for hours before getting the

clearance.


regarding the same.

3PL

providers

Lack of 3PL operators in the south Government should encourage the

3PL operators in India in order to

decrease the inland logistics cost.

Third party logistics providers

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Logistics issue


(3PL) have a significant opportunity

of growth with the outsourced

logistics market in India.

Less number of rail freight logistics

service providers in India

The exporters feel that more

private players be allowed to

operate rail services in the Indian

market which will considerably

reduce the logistics cost.

CHA‘s do not follow the best practices Respondent feels that lack of

proper logistics players are driving

the logistics cost for the industry.

Government needs to educate the

players on the best practices

available in the market and should

encourage them to follow the

practices. Companies should also

take care to encourage CHAs who

follow these practices.

During congestion shipping lines impose

congestion charges on exporters. The

congestion chares are 20 to 30 US$ and

consumes up the profits

Government / Port authorities

should try to regulate the

congestion charges charged by the

shippers.

Shipping lines increase GRI by 300 to 500

for 40 hi cube every month and it‘s a

major factor on export competitiveness

Others Documentation hassles during inland

transportation. The consignor indicated

that the Government should consider a

uniform single set of documentation valid

for the interstate movement across all the

states.

The documentation involved in the

export of the consignments should

be reduced and be made IT-

enabled.

Weight restriction at the highway - Almost

90% of the textile companies use 40" hi

cube containers. These containers are

considered over weight by police officers /

RTO officials and drivers are asked for

bribes for proceeding further.

Government should have some

provision for the 40‖ hi cube

containers and the same should

not be considered as overweight.

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13 Logistic policy framework Increased competition worldwide, the emergence of new technology, ubiquitous connectivity, changing

demographics, climate change etc. are bound to affect the ―Big Picture‖ of business across the world.

New capabilities are to be developed by industries in order to be competitive in the global market place.

The development of new capabilities also depends upon enabling policy environment in the logistics

space. In other words, in order to create an environment which facilitates a seamless flow of material

within the country and also for EXIM purposes, it is important for Government to devise a logistics policy

framework. This shall be done with a long term perspective ensuring consistency in policies.

The logistic policy should be aimed at:

Intelligent regulation in tune with the market realities

Achieving cost efficiency

Seamless integration of business flows

Level playing field for SMEs and big players

Encouraging private participation by chalking out clear roles

Focusing on infrastructure development

Aligning the policies of Central government and various state governments and Union Territories

While the logistics policy should try to address all the issues of the logistics components in an export

transaction, most of the shippers have indicated that policy measures should be more focused on ports.

While the constraints faced by the Shippers in the other logistics chain have also to be dealt with, these

however (as per the shippers) seem secondary as compared to issues / constrains faced at the ports

which delays the handing over of the consignment to the shipping line and has a ripple effect on the

shipment costs in terms of truck detention charges, inability to catch the planned vessel, loss in terms of

the re-order value from Clients etc.

Since Ports handle more than 90% of the export volume, specific policy measures aimed at fixing these

shortcomings would help in achieving desired efficiency in operations, which in turn, would translate into

benefit in form of cost saving / loss minimization to individual importer/exporter, thus improving his export

competitiveness. The section below elucidates specific policy measures for the port sector followed by

policy measures for the other parameters of the logistics chain.

1. Procedural delays – Manual processing, multiple physical interfaces and redundancy characterize

the EXIM processes at Indian ports. Bottlenecks and limited use of information technology in the

processes hamper the seamless transfer of cargo in the supply logistics chain. Switching to a policy

that propagates efficient online procedures & paperless regime will help achieve time bound

clearances

2. Poor infrastructure – Unlike most Indian ports, international ports are characterized by sufficient port

infrastructure in terms of modern resources, port superstructure and services. The draught available

in these ports ensures that neither the size of vessels nor the nature of cargo is a constraint.

Internationally, the norm is that infrastructure developments precede the demand for port services

and as a result resources wait for servicing the vessels / cargo.

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Most Indian ports lack the necessary draft, due to which they are rendered uncompetitive. Efficient

handling of container traffic may require creation of deepwater facilities (17 m) capable of berthing

Suezmax vessels. While this holds good for hub ports, feeder ports would require upto 12 m draft.

Bigger, deeper ports allow for larger ships, in turn, allowing for larger parcel sizes (number of

containers handled at a time) bringing in operational and, in turn – price efficiencies.

A national policy prescribing time-definite creation of minimum 14 m draught for all major ports & 12

m draught for non-major ports, will give port sector the necessary boost. The cost of maintaining

minimum draught should be funded by the Central Government (for major ports) and respective State

Governments (for non-major ports).

3. Congestion – Any reduction in dwell time of cargo would reduce transaction / inventory costs, and

also increase the capacity of existing port infrastructure. This in turn would facilitate trade in general

and enhance competitiveness of Indian goods in international markets. At most Indian ports, over-

utilization of capacity is the pressing factor and it not only increases the vessel turnaround time, but

also leads to cost overruns. This typically forces shipping lines to prefer foreign ports for

transshipment over Indian ports. The government is already focusing on increasing the capacity of

major ports to 1 billion tons by the end of fiscal 2012. But alongside the State Ports sector will also

need to ramp up considerably, more than doubling their present capacity to 580 million tons by then.

Policy interventions initiated by Ministry of Shipping to reduce congestion at ports -

In recent times, the Ministry of Shipping has undertaken certain steps mostly in the area of enhancing

port capacity at Major Ports, which in a way also assist in decongesting ports. These include:

Directions to ports to undertake process engineering with a view to reduce the otherwise high

dwell times of cargo

Advice to ports to undertake study of their internal yard planning to help evacuate cargo

better

Formulation of projects to be implemented through Public Private Participation (PPP) for

creation of new port infrastructure facilities, procurement of new cargo handling equipments

and mechanization of handling systems to increase productivity

Implementing 24 X 365 – Round the clock port working to ensure higher productivity and

faster evacuation

Introducing IT as a strategic weapon in port sector and implementation of Port Community

System (PCS)

4. Inadequate connectivity - Inadequacies in the infrastructure for ports-hinterland connectivity has

resulted in delays in evacuation of goods from ports, thereby hampering efficiency. A minimum four-

lane road connectivity and double line rail connectivity are a must for major ports. Incorporating

stringent service level agreements (SLAs) in the contracts underlying connectivity projects &

speeding up the development of Dedicated Freight Corridor (DFC) would go a long way in enhancing

reach & mobility of goods originating from distant industrial belts.

5. Lack of state-level initiative in development of non-major ports – States like Orissa, West Bengal

& Karnataka are still without a maritime board, which is an important state-level nodal body

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instrumental in facilitating port development. Of late, although a lot of interest has been evinced by

industrialists for setting up captive port facilities at various locations, there is an urgent need for state-

level intervention for regulation & coordination of such development initiatives. Although initiatives

seem to be lined up in this regard, the need of the hour is to accelerate their pace and achieve

tangible outcome. The Maritime States Development Council (MSDC) should make the respective

state governments accountable for development and monitoring of non-major ports by devising

performance metrics in line with national targets and demanding compliance thereto.

6. Uncompetitive pricing – While privatisation has led to increase in productivity, there is little benefit

for the cargo owner as concessions are hard to obtain. Even if concessions are awarded, the

government nets 30-50 per cent of the revenue, leaving the price of cargo on the higher side.

Generally, the port authority tends to retain ‗marine services‘ such as pilotage, vessel handling, etc,

charges for which are some of the highest in the world. For instance, a single call by a mid-sized

container vessel at JNPT port costs over Rs 20 lakh. Such high port costs deter ship owners from

making multiple port calls along the coastline resulting in over concentration of cargo in one area.

Added to this is the ship-to-shore fee of over Rs 5,000 per TEU, a yard handling fee, a gate fee and

several such fees. Standardization / setting a permissible range to the extent possible for various port

charges can be envisaged to provide a level-playing field to port developers & make Indian port

sector globally competitive.

7. Unskilled labour / Low mechanization – To improve the efficiency levels, there is need for high

degree of mechanization and skill intensive, technology driven workforce, both of which are relatively

lacking in the Indian context. The human resources aspect of port policy should stipulate mobilization

of adequate multi-skilled & disciplined labour force, and employment based on issue of licenses by

the Port / local Government to such labour force.

As per industry sources, any reduction of logistics cost by 1 per cent of GDP translates to savings of over

Rs. 6,000 Crores. Understanding trends, learning from best practices and developing insights will be

critical to evaluating the competitiveness of Indian logistics sector and evolving a path forward. As trade in

manufactured cargo increases, there would be rising demand for multimodal services. At present, the

cost of switching from one mode to another is high as different modal nodes are located far away from

each other. The government should plan logistics infrastructure development by linking it with ports in a

manner that such exchanges are adjusted and economic transfer is facilitated.

To sum up, the policy framework for port sector should be so designed that it culminates into

Rapid transition of port authorities into autonomous and empowered institutions overseeing landlord

functions

Integration of major and non-major ports so that they constitute a hub-and-spoke model and

complement each other

Development of capacity critical to structuring bankable PPP projects & attracting investment

Creation of a conductive regulatory environment for sustainable PPPs with transition in TAMP‘s role

from mere tariff setting to economic regulation of the ports including checking of anti-competitive

practices and dispute resolution

Enhanced safety and security measures in a bid to prevent losses due to pilferage & unforeseen

events like accidents, etc

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Creation of an apex body for logistics by integrating all modes of transportation, system, process and

the related documentation issues

In addition, the table below enunciates some of the other key policy measures that are required in the

logistics space

Area Policies required Agencies responsible

(Only indicative)

Logistic

services

regulation

There exists a gap in various services offered and the

pricing by different logistic service providers. A

regulatory authority needs to be set up by the

Government, which can stipulates minimum service

standards and benchmarks for the logistic and supply

chain industry.

New Regulatory

Authority shall be

formed at All India level

Mechanization

and up-

gradation

Logistics policy should identify specific prime movers

(category of service providers) that have an impact on

the logistics movement in the state and provide

necessary incentive to these identified categories for

upgrading their material handling equipment.

Government shall enact

special provisions / tax

incentives to promote

mechanized handling

Multimodal Logistics hubs

In order to facilitate uninterrupted movement of cargo

using multimodal transport, the development of

integrated logistics hubs that act as a link between

road, rail and coastal carriers is vital. These logistics

hubs would help in the movement of domestic and

international cargo.

The development of such multi-modal logistic hubs

shall be formed as part of the Comprehensive Traffic &

Transportation Plan

Inter-ministerial Group

comprising officials from

Ministry of Shipping,

Ministry of Road,

Ministry of Railways and

Ministry of Civil Aviation

Packaging

Policies pertaining to the training & development of

personnel in the packaging industry to boost the

industry competitiveness

HRD Ministry in

consultation with the

relevant industry sectors

/ trade bodies

Connectivity Policy to encourage development of proper road / rail

linkages to the ports & airports thereby enabling easy

clearances of the cargo

Centre shall increase the allocation for infrastructure

fund (Viability gap funding) to address the connectivity

issues

Government

departments / bodies

(For e.g.: Surface

Transport, Shipping,

Aviation, Planning

Commission etc.)

Effective

space

utilization

Need to have effective utilization of the available

resources including Pavement Management systems,

Bridge Management Systems etc.

Government (Ministry of

Surface Transport) shall

provide guidelines for

Pavement / Bridge

Management Systems

Telematics Route and load planning is essential to maximize

vehicle utilization and reduce the incidence of empty-

running, yet little work has so far been undertaken on

Special incentives for

players who adopt IT for

fleet management

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(Only indicative)

transport efficiency and fuel savings that can be

achieved from IT based systems.

Inland

congestion

Congestion is faced not just at ports, but also along

highways & roads connecting towns and cities

The Government should identify congestion zones

along the various states, assess the impact of the traffic

flow and the delays caused due to the congestion.

Based on the congestion analysis report, the state

government may take up construction of bypasses

across important congestion zones. It is generally

accepted that construction of bypasses around

congestion habitats decongests the area and allows the

seamless flow of traffic.

Government should make it mandatory not to allow the

development of any further commercial activity within

the vicinity of the by-pass that would restrict the flow of

traffic.

Government (both

Central and State) and

Private players

Pollution State Government in collaboration with the Central

Government has to provide an appropriate

environmental framework that provides a balance

safeguarding the transporters‘ interest and also

protecting the environment.

Various options like alternative fuels – CNG & LPG,

scrapping of old vehicles should be encouraged

Government (E.g.:

Ministry for

Environments &

Forests)

Cargo tracking Government to make it mandatory to have GPS based

systems / Telematics installed in the Commercial

Vehicles used in cargo transportation in a phased

manner spread over a period of 3-5 years.

Government shall

incentivize the adoption

of cargo tracking by

logistic players

Code of

conduct

It is proposed to develop a ―code of conduct‖ and

operational standards that would comprise of the best

practices of the logistics industry and award such

companies with certifications or incentives for achieving

those standards of performance.

Union Government

Land

acquisition

Government should propose a revised land acquisition

policy for easy clearance / acquisition of the lands for

various infrastructure projects

The Government of

India shall enact a

legislation to simplify the

land acquisition policies

and procedures for

infrastructure projects.

The guidelines shall be

communicated to

various state

governments and UTs to

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(Only indicative)

follow.

Warehouse

planning

Warehouses should be safe, functional and efficient to

ensure that the productivity of the staff employed in the

warehouse is always on the higher side thereby

reducing operating costs and improving customer

service. In addition design provision should also be

made for yard management which allows for the

management of inventory and equipment (trailers,

containers) that are located outside the usual ―four-wall‖

warehouse space.

Government can ensure that the warehouses so built

should have the best-in-class in terms of adherence to

the layout planning, safety and provision for future

additional incorporations by introducing a warehouse

policy.

Government, Private

players

Consolidation

centers

There is a requirement for Primary Collection Centers

(PCCs), for the cause of a potential reduction in the

mileage associated with transporting less-than

truckload consignments to retailers.

Private players

Cold storage Government should also explore the possibility of

setting up a state of the art common cold storage

systems in major cities across the country. This would

ensure the proper utilization of perishable commodities.

Government shall

provide incentives to

developers of cold

storage (Public-private

partnership shall be

promoted to develop

facilities)

EDI systems The electronic media is being used very widely for

dissemination of information by the Customs, the DGFT

and the Reserve Bank of India. The Government

should consider having a single focal point as it would

make it easier for the shippers to access information.

Government (GoI) shall

implement an integrated

EDI system for CBEC,

RBI, DGFT, CBDT and

port authorities.

Advance

infrastructure

planning

Government should try to create the logistics

infrastructure well in advance. This can be done by

conducting traffic studies and infrastructure requirement

studies.

Government (Planning

Commission can act as

a nodal agency for

infrastructure Planning)

3PL / 4PL/ 7PL There is a need to have the best logistics service

providers in place to reduce the overall logistics cost

and bring in the efficiency in the system

Government shall

introduce schemes and

incentives to third party

logistics players (for the

adoption of best

practices)

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(Only indicative)

Information

Management

A common information centre at the highest level

should be setup, which can process enquiries and

provide clarifications covering classification of goods

and duty drawbacks etc.

Government (The

National Informatics

Centre may coordinate

this)

Usage of

inland water

transport

There is a need for the improving the usage of the

inland transportation between the west and the east

coast of India. This shall improve the logistics cost to a

great extent.

Government, (For e.g.:

Central Inland Water

Authority)

Unauthorized

check posts

Policy / directives by the respective state governments /

UTs to regulate the number of check posts across the

state highways

Government

Faster

clearances

There is a need for faster clearances of documents /

consignments to improve the logistics activity.

This shall be achieved by the introduction of a Single

Common Document System acceptable by shippers,

DGFT, Customs & Excise, Income Tax Dept etc

Introduction of Electronic Data Interchange connecting

all sea ports, airports, check posts, Customs, Income

Tax and other similar offices

Planning Commission,

Various Ministries /

Government Depts. like

Finance, Commerce,

Industry, Shipping,

Aviation etc.

Common RTO

guidelines &

Web based

Database

Creation of a web-based database of the vehicles

having National Permits and adopting e-payment

scheme for payment of taxes of various states so as to

eliminate problems such as delayed remittance and

fraud / forgery etc.

There is a need to have a uniform RTO guidelines for

the trucks / trailers across all the states in the country

The Ministry of Surface

Transport shall provide

guidelines to various

State Governments and

Union Territories in this

regard.

Faster trains Introduction of high speed trains for freight movements

Dedicated Freight Corridor (hasten the process of

implementation of DFC in the West and East corridors

and also earmark for such corridors in other regions of

India)

Government (Ministry of

Railways, Finance,

Planning Commission

etc.)

Safety

measures and

adequate

parking

spaces

It is observed that there have been regular occurrences

of theft and pilferage of material from the goods carrier,

when it is parked near highway / road side eateries

Most of the road side eateries do not have proper

parking facilities, due to which most drivers who

patronize such eateries are forced to park them along

road side.

The logistics policy should mandate State governments

to identify locations at specific intervals of say 50 kms

along the highways, that would serve as secure parking

arrangements for goods vehicles belonging to Logistics

NHAI

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(Only indicative)

Service Providers (LSPs)

Road accidents could be due to fatigue resulting from

long working hours, consumption of alcohol by drivers,

condition of vehicles, etc. While the element of human

error in the accidents is known to be high, the State

Government can undertake various preventive

measures to reduce the same. These preventive

measures include – providing XX numbers of signage

boards per YY km of roads; providing XX number of

lamp posts per 500 meters distance in those stretches

of roads where street lighting is not present; providing

plantations on the road dividers etc.

Issue of return

cargo

unavailability

Usually goods carrier vehicles enter a city either to load

/ unload the cargo and / or to access facilities for

repairs or other supporting services. Entry of goods

vehicles in a city only to access the services related to

repairs, shelter etc may pose a problem to the existing

city traffic.

To de-congest traffic caused by the entry of Medium /

Heavy Commercial Vehicles (goods carriers) inside the

cities, the State Government may introduce the concept

of ‗Transport Nagar‘: a self –sufficient hub, located at

the outskirts of a city, for all the transport related

activities ranging from parking facilities, eateries,

dormitories, cloak-rooms, repair and maintenance

facilities for vehicles, office space for the transport

owners, petrol / diesel pumps etc. Transport Nagar

would enable a transporter to avail the required

facilities without actually entering the main city.

The logistics service provider (LSP) is forced to bring

back his vehicle empty, since he is not aware of the

availability of any return cargo. It is here that the

concept of ‗Transport Nagar‘ can play a pivotal role in

filling up the information void & providing the necessary

data to the logistics service provider of the availability of

such a cargo.

The methodology can be mooted on the basis of an

enquiry made by the logistics service provider based in

city X to the Transport Nagar office of its scheduled

destination in city Y on the availability of a return cargo

State Government‘s

surface transport

department

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(Only indicative)

to city X from city Y on a specified date. The Transport

Nagar office, meanwhile would have received enquiries

for dispatch of cargo to city X. The Transport Nagar

office would then accordingly inform the LSP of the

availability of such cargo from city Y to X and in turn co-

ordinate with the Shipper of city Y. The above

information exchange via the Transport Nagar office will

provide a win-win situation to all the stakeholders

concerned. Both the shippers in city X and City Y would

eventually bear the transportation cost for only a one

way trip thereby selling the product at a reduced cost

and thus improving their competitiveness.

Need for State Logistics Authority Ŧ

As part of the Logistics Policy framework, a Logistics Regulatory Authority that would be formed

at All India level was mooted, which as part of its profile would stipulate the minimum service

standards and benchmarks for the logistics and supply chain industry. However each state may

have different terrain and an eco-system for logistics activity that would be unique to the

particular state. Hence, the stakeholders from some states may have difficulty in complying with

the logistics standards as set by the National Authority. Accordingly to assist the National

Logistics Regulatory Authority for deriving the best practices for the particular state (within the

framework as envisaged), it would be worthwhile to have a state level regulatory authority that

would chalk out a state level logistics policy within the guidelines and benchmarks as established

by the National Logistics Regulatory Authority.

The state level logistics policy as drafted by the State Regulatory Authority would enable to create

an environment which facilitates a seamless flow of material in the States for EXIM purposes and

for inland consumption. The policy would also provide a road map for facilitating best in class

logistics practices for the state and would be drafted would be done after taking into account the

opinions and views of the logistics stakeholders concerned. The policy so prepared would be

reviewed and updated on a bi-annual basis to take into cognizance the new developments and the

changing logistics environment.

The above arrangement would facilitate a smoother co-ordination of the state with the National

Logistics Regulatory Authority.

Ŧ

The highlighted para contains additional points on the 2009 report titled “Logistics Cost Study” and have been

included based on the request of NMCC . These additional details have been derived from the feedback on the report received by NMCC from some of the key stakeholders

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14 Logistics performance and

benchmarking

Logistics performance plays an important role in the export competitiveness of a country. The

performance of Customs, trade related infrastructure, inland transit, logistics services, information

systems and port efficiency are all very essential for countries to export the goods and services on time

and at low cost.

A recent study by World Bank on the Logistics Performance Index places India on 39th position amongst

the 150 countries so studied. The study was mainly conducted to help countries identify the challenges

and opportunities they face in their performance on trade logistics and what they can do to improve their

performance.

The LPI was captured by focusing on the following seven parameters:

1. Efficiency of the clearance process by Customs and other border agencies

2. Quality of transport and information technology infrastructure for logistics

3. Ease and affordability of arranging international shipments

4. Competence of the local logistics industry

5. Ability to track and trace international shipments

6. Domestic logistics costs

7. Timeliness of shipments in reaching destination

The benchmarking of the above indicated factors has been taken on a scale from 1 to 5, with 5 being the

epitome of the efficiency rating for the particular parameter (except for the domestic logistics cost

parameter). For this report, India has been benchmarked with Singapore, Netherlands, Germany, Japan,

Hong Kong, United States and China

India‘s standing vis-à-vis the referred countries on each of the logistics efficiency parameter is indicated in

the subsequent section.

1. Efficiency of the clearance process by customs and other border agencies

Efficient clearance process by customs and border agencies plays a major role in the logistics

performance. In India the interstate and country border check posts causes huge time delays in the transit

of the consignment. Some of the key issues identified for this delay are:

Plethora of documents required to be verified at check posts and customs due to the absence of

a uniform single document being used for exports

Occasional failure of Electronic Data Interchange systems necessitate waiting till the EDI is

restored as there are no fall back options being exercised by the customs

Need for 24X7 office hours for customs offices to ensure speedy clearances of export

consignment

Demands for ―speed money‖ from officials further complicate this matter

Figure 25 : Efficiency of the clearance process by customs and other border agencies

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3.9 3.99 3.88 3.79 3.84

3.52

2.99

2.69

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Singapore Netherlands Germany Japan Hong Kong,

China

United States China India

Source: World Bank report: Trade logistics in global economy 2007

2. Quality of transport and information technology infrastructure for logistics

Telecommunications and IT infrastructure are an essential component of modern trade processes. The

physical movement of goods now entails the efficient and timely exchange of information. The ability of

the country of having the requisite infrastructure in place well in advance based on the future traffic

projections plays a major role in facilitating the seamless movement of cargo.

4.27 4.29 4.19 4.11 4.06 4.07

3.22.9

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5


China


Figure 26 : Quality of transport and information technology infrastructure for logistics Source: World Bank report: Trade logistics in global economy 2007

The bottlenecks pertaining to the physical infrastructure like ports, warehouses, cold chains, roads, rail,

inland waterways, etc are highlighted in the respective chapters before, and for the sake of brevity, those

issues are not reproduced here.

3. Ease and affordability for arranging international shipments

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For any country, the availability of the facilities for ensuring a seamless export transaction, and its

associated costs act as a deciding factor in logistics performance. India again scores poorly as compared

to the other sample countries

4.04 4.053.91

3.77 3.783.58

3.313.08

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5


China


Figure 27 : Ease and affordability of arranging international shipments Source: World Bank report: Trade logistics in global economy 2007

4. Competence of the local logistics industry

The logistics performance also depends on the quality of services delivered by the private sector through

CHA agents and road transport companies and on the competence and diligence of public agencies in

charge of border procedures. Indian companies are increasingly using specialist logistics service

providers to reduce costs and focus on their core competence. This shall increase India‘s competency in

the local logistics industry.

4.21 4.25 4.21 4.12 3.993.85

3.43.27

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5


China


Figure 28 : Competence of the local logistics industry Source: World Bank report: Trade logistics in global economy 2007

5. Ability to track and trace international shipments

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Information flow is the blood line for any efficient supply chain system. For the end user / supplier who are

more worried of where his consignment may be, information regarding the location of his material in

transit helps in reducing the anxiety factor and assists in planning the production schedule. As per the

indicators mentioned below, India has to undertake adequate measures to provide an enabling framework

for implementing track and trace technology in the domestic transportation.

4.25 4.14 4.12 4.08 4.06 4.01

3.37

3.03

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5


China


Figure 29 : Ability to track and trace international shipments Source: World Bank report: Trade logistics in global economy 2007

6. Domestic logistics costs

The domestic logistics costs are an important factor affecting the logistics performance. The domestic

logistics cost in India on the higher side when compared to the other developed countries. This is mainly

due to the relatively higher transit time taken by rail and road transport in India. The following table shows

the comparison of the rail load capacities carried in India viz-a-viz EU, USA and Australia.

Table 38 : Comparison of load capacities in various countries

Comparison of load capacities in various countries

Description (RAIL) EU / USA / AUSTRALIA India

Average speed (kmph) 100 23.3

Capacities (TEU) 150 90

Axle load wagons (tons) 30 22

Load capacity per wagon (ton) 120 88

Pay load: Tare weight of wagon 4.5-5.5 2-2.06

Source: Deloitte resources

In India only two per cent of roads constitute national highways but carry 40 per cent of all cargo. Only 48

per cent of villages are covered by road network and Indian cargo travels 250 to 300 km per day vis-à-vis

600-800 km as per international norms. This severely limits the access of rural producers to the consumer

markets and increases the domestic logistics cost. For figure 29, the score 5 denotes that the country has

the highest domestic logistics cost and score of 1 denotes the lowest.

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2.7 2.65

2.34

2.02

2.66

2.2

2.973.08

0

0.5

1

1.5

2

2.5

3

3.5


China


Figure 30 : Domestics logistics costs Source: World Bank report: Trade logistics in global economy 2007

7. Timeliness of shipments in reaching destination

With the global manufacturing following the JIT principle, timely delivery of international shipments is a

pre-requisite for follow-up orders. India is placed way below in the above parameter and need to improve

on this front dramatically.

4.534.38 4.33 4.34 4.33

4.11

3.683.47

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5


China


Figure 31 : Timeliness of shipments in reaching destinations Source: World Bank report: Trade logistics in global economy 2007, Deloitte Resources

Logistics Performance Index

Taken together, all these factors—quality of infrastructure, the competence of private and public logistics

service providers, the roles of Customs and other border agencies, governance issues such as corruption

and transparency, and the reliability of the trading system and supply chains—confirm once again that

logistics performance is about predictability (see figure 31). Predictability is central to the overall costs

that companies incur in logistics and thus to their competitiveness in global supply chains.

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4.19 4.18 4.1 4.02 43.84

3.323.07

161.3776.1

33214375.4

207.2

3242

13807.6

1131.8

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5


China


0

2000

4000

6000

8000

10000

12000

14000

16000

LPI Score GDP (US $ Bn)

Figure 32 : LPI score of India and other countries

Source: World Bank report: Trade logistics in global economy 2007, Deloitte resources

The following table highlights the various country specific performance data based on the different

parameters

Table 39 : Country specific logistics performance data

Parameters Units Sin

ga

pore

Neth

erl

an

ds

Germ

any

Japan

Hong K

ong

US

A

Chin

a

India

Rate of physical inspection % 3 3 2 3 2 3 7 25

Customs clearance * days 1.1 0.6 0.7 1.4 0.6 1.1 1.4 2.4

Lead time, export, median case ** days 2.4 2.6 2.3 3 1.9 3.6 2.6 4

Lead time, import, best case *** days 1.2 1.6 1.6 1.3 1.3 2.5 2.4 4

Lead time, import, median case # days 2.2 2.6 2.4 2.7 2.4 3.9 3.8 4.7

Number of border agencies exports 1.5 2.9 2.8 3 2.5 2.9 4 2.9

Number of border agencies imports 1.7 1.7 3.7 3 3.7 3.2 3.9 2.4

Possibility of a review procedure ## % 67 80 100 100 67 64 36 39 Typical charge for a 40" export container ### US $ 311 298 806 721 561 861 380 601

Typical charge for a 40" import container US $ 311 364 806 630 654 1008 388 619

Source: World Bank report: Trade logistics in global economy 2007 *. Time taken between the submission of an accepted customs declaration and customs clearance **. From shipper to port of loading, median case = 50 percent of shipments. ***. From port of discharge to consignee, best case = 10 percent of shipments. #. From port of discharge to consignee, median case = 50 percent of shipments. ##. The percentages reported in this column represent the proportion of respondents answering that a simple and inexpensive review procedure is available. ###. Total cost to transport and port services.

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Globalization and Consolidation

• Mergers and acquisitions are creating firms that may have capability to provide a single point of contact that can handle global supply chains for their clients Globalization of traditional businesses is driving the logistics industry to international trade, etc

Increased Outsourcing

• Supply chains are becoming complex to manage. • Companies are focusing more on core competencies •

Security and Risk Management

• Supply Chain Security and Risk Management will be a key area to prevent disruptions like weather, labor issues, diseases or terrorist attacks

Technological Advancements

• Rapid advancements in supply chain technology enablers (like RFI will lead to increased functionality and greater potential to improve performance of supply chains

Increased Customer Expectations

• Customers will be moving away from tactical transactional based services Outsourcing to solutions that are more strategic in nature and supported By leading edge technology and systems .

Globalization and Consolidation

•

Increased Outsourcing

• • • In order to increase flexibility and responsiveness in their supply chain,

companies are increasingly utilizing logistics outsourcing

Security and Risk Management

•

Technological Advancements

•

Increased Customer Expectations

•

.

. .

Countries that top the rankings are major global transport and logistics hubs or the base of a strong

logistics service industry. Logistics services in these countries tend to benefit from economies of scale

and are often sources of innovation and technological change.

Industry research suggests that the following interdependent factors will shape the Global Logistics

Industry over the next 5-10 years:

Figure 33: Global Logistic Best Practices

.

India with its long coastline and the proximity to the international maritime routes, stand a better chance to

transform itself into global logistic hub by introducing better infrastructure, enabling policies, duty

rationalization, simplified procedures, robust IT systems, etc, and by bringing about improvements in

transaction processes

Future Logistics scenario Ŧ

The World Bank Study report on the Logistics Performance Index (LPI) of countries gives India a

score of 3.07 as compared to 3.32 for China, 3.84 for United States and 4 for Hong Kong. While

India presently lacks in logistics competitiveness vis-à-vis its peers amongst the developed

nations, a series of infrastructural developments have been lined up across the country that aims

to propel India in the League of Nations, whose logistics competitiveness would be the best

amongst the world.

Ŧ The highlighted sub-section on “Future Logistics scenario” contains additional points on the 2009 report titled

“Logistics Cost Study” and have been included based on the request of NMCC . These additional details have been derived from the feedback on the report received by NMCC from some of the key stakeholders

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A brief overview of the infrastructural development so planned that would provide a reflection of

the future logistics scenario is indicated in the section below

Sr. No Infrastructure Infrastructure description

1. Dedicated

Freight

Corridor

Background

The Dedicated Freight Corridor (DFC) project was conceived mainly

due to the capacity constraints faced by the existing railway

network. At present the freight and the passenger trains are using

the same tracks causing delays.

Western rail freight corridor

The Western Corridor covers a distance of 1,483 km of double line

electric (2 X 25 KV) track from JNPT to Dadri via Vadodara-

Ahmedabad-Palanpur-Phulera-Rewari.

The traffic on the Western Corridor mainly comprises of containers

from JNPT and Mumbai Port and ports of Pipavav, Mundra and

Kandla destined for ICDs located in northern India, especially at

Tughlakabad, Dadri and Dandharikalan. Besides Containers, other

commodities moving on the Western DFC are POL, Fertilizers, Food

grains, Salt, Coal, Iron & Steel and Cement.

The rail share of container traffic on this corridor is slated to

increase from 0.69 million TEUs in 2005-06 to 6.2 million TEUs in

2021-22.

Eastern rail freight corridor

The Eastern Corridor encompasses a double line electrified traction

corridor from Sonnagar on the East Central Railway to Khurja on the

North Central Railway (820 Km), Khurja to Dadri on NCR Double Line

electrified corridor (46 Km) and Single electrified line from Khurja to

Ludhiana (412 Km) on Northern Railway. The total length works out

to 1279 Km.

The Eastern Corridor will traverse 6 states and is projected to

cater to a number of traffic streams - coal for the power plants in

the northern region of U.P., Delhi, Haryana, Punjab and parts of

Rajasthan from the Eastern coal fields, finished steel, food

grains, cement, fertilizers, lime stone from Rajasthan to steel

plants in the east and general goods. The total traffic in UP

direction is projected to go up from 38 million tonnes in 2005-06

to 116 million tonnes in 2021-22. Similarly, in the Down direction,

the traffic level has been projected to increase from 14 million

tonnes in 2005-06 to 28 million tons in 2021-22.

2. Delhi-Mumbai

Industrial

Delhi-Mumbai Industrial Corridor (DMIC) is conceived to be

developed as “Global Manufacturing and Trading Hub” supported by

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Corridor (

DMIC)

world class infrastructure and enabling policy framework. The focus

is on ensuring high impact developments within 150km distance on

either side of alignment of DFC

The project objectives of DMIC include -

Develop new industrial clusters and upgradation of existing

industrial estates/ clusters in the corridor

Provide efficient logistics chain with multi-modal logistics hubs.

The existing industrial belts which would benefit from DMIC include

–

Uttar Pradesh- Noida/ Greater Noida, Ghaziabad (General

Manufacturing)

Haryana- Gurgaon, Faridabad, Sonepat (Automobile,

Electronics, Handloom)

Rajasthan - Jaipur, Alwar, Kota, Bhilwara, Jodhpur (Marble,

Leather, Textile)

Gujarat- Ahmedabad, Vadodara, Anand, Bharuch, Surat

(Engineering, Gems & Jewelry, Chemicals)

Maharashtra - Mumbai, Pune, Nashik (Auto/Auto Component,

Textile, Pharma, Aluminum)

One of the project goals is to quadruple exports from the DMIC

region in five years.

3. Network of

SEZs /

logistics

hubs

Plans have been mooted to develop integrated multi-modal logistics

in an area of around 500 to 700 in the following locations –

Bawal & Palwalin Haryana;

Ajmer& Marwar in Rajasthan;

Palanpur, Dholera, Dahej/ Hazira in Gujarat

Nashik, Pune, Dighi in Maharashtra;

Indore, Dewas in Madhya Pradesh

In addition, there are also plans across various the country to

develop new Export Oriented Units (EOU)/Special Economic

Zones / Parks/ Clusters for potential sectors

Augmentation of existing industrial estates/clusters/parks

Setting up Industrial Units in new/existing industrial

parks/clusters

4. New and

emerging

ports

The coastal states under the aegis of the respective state

governments are planning to develop non-major ports across the

various locations. These non-major ports along with the major ports

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can develop a hub-and-spoke arrangement to optimize the logistics

cost.

In addition to the development of the non-major ports, the various

major port authorities are chalking and implementation plans to

enhance their existing capacity, facilitate faster turnaround time

and improve last mile connectivity.

Accordingly based on some of the above developments indicated, it is expected that over the long

term, the transportation and industrial infrastructure of the country is bound to change for the

better. The new infrastructure development would provide the necessary platform to trigger and

sustain India‟s economic growth, logistics competitiveness and subsequently the growth of

overall exports from the country. The subsequent section indicates some of the recommendations

for improving the export competitiveness.

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15 Recommendations for improvement

of exports competitiveness

15.1 Seaports

Seaports are interface between two modes of transport, namely land and sea and its efficiency is directly

related to the connectivity covering both the modes of transport. Seaside would require sheltered water,

sufficient draught, navigational and communication facility and proper port management. Land side would

require handling equipments, sufficient and well designed stack yard, cargo evacuation facility and

hinterland connectivity with supporting infrastructure and systems. Container terminals should provide

rapid transit facilities for containerized cargo (similar to an Airport where passenger arrive and depart with

ready luggage / cargo). This would enable the ports to plan and utilize land optimally for the benefit of the

ships and not for stowage for which CFS / ICD are planned. Containerized unit is the form through which

most of the exports from textiles and apparels, automobile & auto-components, processed food and

chemicals takes place. Hence ports and terminals handling containers are reviewed under this study and

classified on the basis of their coverage of the hinterland. As north India cargo moves through the

western ports, the same is classified under one heading i.e. north western

Figure 34 : Hinterland based classification of ports in India


From the export figures illustrated below, a comparison between containers traffic at all India ports and

North West ports is shown:

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Table 40 : Comparison between container traffic at all India ports and North West ports

TEUs in Million

Ports 2003-04 2004-05 2005-06 2006-07 Growth Y-o-Y

%

All India Ports 3.98 4.52 5.01 6.14 22.55%

N - W Ports 2.71 3.06 3.37 4.31 27.89%

N - W Ports

contribution

68.09% 67.70% 67.26% 70.19%


During the period 2003-07, the North–western ports have grown at a higher rate of 27. 89% compared

against the national average of 22. 55% accounting for around 70% of container traffic of the country.

Among the North Western ports, Jawaharlal Nehru (JN) Port continues to handles the largest number of

containers (4.06 MTEU) accounting for over 61 per cent of the total all India cargo shipped in containers,

followed by Mundra / Kandla and Pipavav (GPPL). As all these ports share a common hinterland (shown

in the above hinterland map in yellow colour) the cargo movement to JNPT is based on better frequency

of mainline vessels sailing which offers more choices to the exporters, while due to limitation of draught,

feeder vessels cover most of the other ports increasing the cost of exports due to transshipment.

As JNPT accounts for a major share in container handling and would remain so in the medium term till

new capacities are created which divert its cargo, increasing efficiency in cargo handling at JNPT would

contribute to improvement in the logistics of export

Recommendations

With a growth rate of 19%, India‘s container cargo traffic is estimated to reach 21 Million TEUs by 2016,

and the north western ports would require creation of additional facilities and improving efficiency in some

of the features listed below

1. Connectivity

Unlike Singapore which has more than 70% transshipment cargo which only use one mode of

connectivity i.e. sea ways, or Rotterdam which has industry located in its primary hinterland with a wide

range of berths to handle different type of cargo, JNPT has cargo arriving from hinterland which is more

than 1700 km away from the port. This not only requires an exporter to plan for just in time shipment from

the port requiring seamless port connectivity.

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Legend

All Inland container depots would be linked to all gateway ports to provide information on

export cargo movement. Similarly import information will be received by ICDs from the

ports.

All factory stuffed export containers will register data at NH terminal which is linked to all

gateway ports. This would enable port to plan storage and gate/ yard management. Also

one consolidated toll charges up to the port will be paid to NHA cutting down time delay.

Port Hinterland Port would develop and maintain rail and road connection to cover their hinterland jointly

with railways / NHA. Last mile connectivity to the NH will be the responsibility of the port /

ICD.

Figure 35: Port connectivity model


Better cargo management at the port can be made possible, with advance and better communication

which can lead to better planning and optimum utilization of space and resources. The model above

shows the communication setup which can be developed by the major ports especially those handling

containers covering both private and public sector entities. All ports should jointly appoint an agency to

setup EDI connection with ICD / CFS and major junctions on expressway and National Highways. A

export vehicle would pay a single toll tax on the first EDI point, which would cover movement up to the

port (a sticker with port based colour code and number can be attached on the vehicle).This would

enable data collection covering type of cargo, weight etc with safety and security enhancement.

Possibility of tracking by the seaport to know the number of vehicles expected during the day at a

particular port can also be enabled, along with processing of octroi refunds online. This would save the

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export vehicle delay at toll and other state border posts by crossing via a separate lane / gate and also

help seaport with better entry and yard management.

Vitronic which has already successfully implemented a free flow traffic system for collected toll with

unimpeded traffic flow on Autobahns throughout Germany is now implementing a similar system on

several roads operated by Queensland Motorways Limited – Australia. . Payment will be made by either a

transponder located on the vehicle‘s windscreen or through license plate identification - at full motorway

speeds. Tolls are subsequently deducted from pre-registered accounts

2. Port road connectivity projects

Ports should also facilitate hinterland connectivity projects to ensure seamless cargo flow. The

government can mandate all ports under automatic approval, to develop projects under Swiss challenge

system for supporting infrastructure connecting their hinterland. These projects have to be developed by

the ports either by themselves or through JV with other companies. This would include four lane express

roads, port railways and supporting infrastructure like truck terminals, warehouses and handling

equipments. Other than a vast hinterland, JNPT also has a large number of cargo coming by road namely

from Industrial belt of South Gujarat, Indore along with Pune and parts of Maharashtra amongst others.

JNPT can take a lead in developing a six lane road from its port node to connect NH – 8 which would also

enable linkage with NH – 4 connecting Pune – Bangalore, NH – 3 connecting Nasik – Indore and the

busy NH-8 which is also being developed with a parallel expressway.

Figure 36 : Port road connectivity


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Mundra port has taken a lead in developing connectivity by having 2 railway sidings for container traffic

(which is being increased to 3 sidings) and two dedicated diesel locomotives with a 64 km private railway

line. It has also stake in the Kutch Rail Company Ltd. (KRCL), a project by the Indian railways to shorten

the distance between the northern hinterlands. In September 2008, the port handled 106 trains, which

increased the hinterland ICD share from 10 per cent in the second quarter to 23 per cent of the overall

terminal‘s monthly throughput.

3. Development of barging facilities

Rotterdam handles about 50% cargo by barge movement as it offers easy movement on the river .As

JNPT would continue to handle large volumes of NCR cargo which requires rail connectivity, it can

seriously consider barging movement between JNPT and Mumbai port. This would enable utilization of

the developed infrastructure including rail and private road network of Mumbai port which is presently

under utilized only due to draught limitation.

Mumbai port shall consider a feasibility study in

which various types of barges can be

considered and a suitable one (preferably flat

bottom) can be leased for a period of 6 months

to run between JNPT and Mumbai. Based on

the viability, suitable types of self propelled

barges capable of carrying 250 - 300 TEUs can

be built in Indian shipyard and a fleet can be

deployed to operate between Mumbai and

JNPT. Specification of self propelled barges

which can carry 292 TEUs is as follows ; length

overall 85.04 m ,beam 19.98 m and maximum

draft 8 m) can be considered. A separate JV

company between the two ports of Mumbai and

JNPT can be formed to promote and develop

coastal movement of cargo including barging of

containers. This will enable develop expertise in

costal shipping which is untapped in India.

Figure 37: Conceptual diagram of barging operations


A study can also cover developing a new terminal parallel to the approach channel south of the Gharapuri

Island (Elephanta caves) which can be used for barging. This would enable ships calling at JNPT to use

the same channel and discharge part cargo at the new Elephanta terminal which can be moved to

Mumbai by barges (a conceptual diagram of the same is shown in figure 29

Bharati Shipyard in India is to build the first ship in the world to be fuelled solely with liquefied natural gas

(LNG), to be delivered in 2010 it would have a simple mechanical drive propulsion system. The 132.8m

long vessel will be able to carry 5,600 tonnes of cargo on a draught of 6 m, with up to 94 TEU of

containers on deck and 1,140 lane-metres of Ro-Ro capacity

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4. Creation of a new Greenfield container port

As the cargo from the north moves through the western ports, a new Greenfield port which can handle

fourth and fifth generation vessels with overall length exceeding 305 m and capacity of carrying 4,000 –

5,000 TEUs with a draught of 14 m needs to be developed. Linkage has to be made with the proposed

Delhi-Mumbai Industrial Corridor (DMIC).The government can consider giving certain specific

concessions to ports coming up on the coast, north of Mumbai up to Bharuch (Gujarat) which can meet

with this requirement. This will enable more cargo to be directly exported on mother vessels reducing the

cost of transshipment and delay while reducing the share and congestion at JNPT.

5. Benchmarking terminal operations

Gateway Terminal India at JNPT is a joint venture between A.P.Moller-Maersk and CONCOR which has

set many new records including -

Handling 11 trains in 24 hours

Highest berth productivity of an average 145.37 moves / hour.

Handling 1, 38,600 TEUs in July 2008 against a capacity of approximately 1, 10,000 TEUs per month.

To support its operations it is backed by 8 post panamax twin lift Quay Cranes, 18 wide, 61 mt SWL on a

quay length of 712 meters which is connected to the yard with 3 approach bridges. The stack yard is

serviced by 29 Rubber Tyred Gantry Cranes, capable of 7 wide and 5 high stacking. Connectivity is

through 3 X 830 meters dedicated rail sidings and 11 lane separate and dedicated Gate complex for in /

out road movements. These are Indian standards which are comparable at the global level and hence

can be studied and emulated by other ports handling container cargo, duly modifying it to suit their cargo

mix. In other words, the benchmarking of terminal operations shall be done by operators of respective

ports at globally comparable levels.

6. Inter-cooperation and co-ordination between major ports

Indian Ports Association (IPA) is an apex organization covering the major public sector 12 ports with the

prime objective of developing and increasing efficiency and productivity in major ports and its working

environment.

IPA can consider including private ports like Gujarat Pipavav Port Limited, Mundra Port Limited, etc as its

members to enable IPA to cover a larger canvas and fulfil its objectives of increasing efficiency for Indian

ports as a whole. They may look forward to having:

Increased interaction through workshops and training sessions, thereby enabling knowledge

dissemination

Collective tenders for purchase of port equipments etc through IPA can give all its members cost

advantage

Compile case studies on efficiency parameters and working, which can be documented in the

knowledge repository. These documents shall be shared among the members of IPA.

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15.2 Rail

Indian railways with a rail network of 1,09,221 kms, is also the world‘s fourth largest freight carrier and

accounts for 2.3% of GDP. Freight loading has increased by 9.06% in 2007- 08 to 794 million tonnes and

is expected to cross 1 billion tonnes by 2011-12. During the 11th plan period (2007-12) the Railways have

plans to invest US$ 46.70 billion for the modernization, capacity increase and completion of new projects,

with plans to attract US$ 24.63 billion through public private partnership. Some major projects lined up for

supporting logistics include:-

Dedicated freight corridor projects (Western and Eastern)

Modernization of Railway stations.

Manufacturing facilities for locomotives, coaches, and other railway equipment

Container services

Creation of Inland Container Depots and warehouses.

Port connectivity projects

Economics of rail transportation

Movement of goods for distances exceeding 500 km is preferred by rail mode, especially for heavy cargo

due to the various advantages it offers. Road movement, especially of FEU, in the absence of dedicated

traffic lanes would only lead to more traffic congestion. The Association of Container Train Operators

(ACTO) has demanded that the Railways should fix the haulage charges for FEU containers at 1.6 times

of the corresponding rates for TEUs. This shall be applicable for rail cargo being moved for distances

above 500 km.

Recommendations

To enable railways to carry more light cargo including vehicles, auto parts, textiles in FEUs at competitive

rates, some steps for rail traffic improvement shall be considered as follows:

1. Port connectivity for container traffic on double stack trains

All sea ports especially those handling major container cargo, should have rail link which can handle

double stack trains. A feasibility report should be available which identifies the routes where double stack

container trains movement is possible in the next one or two years (This will assist in route planning on

which basis ICDs for collecting cargo for movement to the port can be planned). Similarly major routes

like NCR to Mumbai port and others where container ports are being developed should also be covered

so that route identification, realignment and conversion can be considered. This will enable reduce tariff

charges and increase carriage of more containers at competitive haulage rates on existing routes.

Studies for new rail routes from sea ports, keeping the development of new ports and expansion of

existing ones in mind, should be commissioned. The Ministry of Railways shall take initiatives to introduce

the concept of double stack trains connecting the major ports of India with the hinterlands by conducting a

feasibility study. The public-private partnership model may be adopted for the development and operation

of double stack trains in these routes.

The rail team of Jawaharlal Nehru Port‘s Gateway Terminals India (GTI) terminal, on July 13 2008, set a

new record by handling 180 TEUs in 15 minutes, bettering the previous record by 5 minutes. Earlier, on

June 23, GTI had achieved a record-breaking performance by handling 11 trains in 24 hours.

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2. The proposed Dedicated Freight Corridor – Western (DFC)

DFC is to connect NCR via Ajmer and Vadodara to Mumbai / JNPT. There is also provision for feeder

routes from the main DFC route linking ports

and cargo centres.

A feasibility study shall be done simultaneously

to link Ajmer (proposed dedicated freight

corridor route) to Kota (existing rail junction)

covering a distance of 201 km so that trains

from Kota can move to the DFC. Similarly the

study can also cover possibility of adding a

couple of tracks between Kota and Vadodara.

This would enable immediate use of DFC leg

between Ajmer - Delhi by connecting it with

Kota, as this bypass can also be used for

exigencies and for movement of empties in the

future, giving DFC an added route to move

containers etc up to Vadodara.

Figure 38: Proposed linkage with DFC

3. Reduction in pay load

Indian Railways are working to reduce the ratio of payload to tare weight load i.e. for every 1.0 mt of

freight carried the dead tare weight of the wagons etc which should be ideally around 200 kgs14

(presently

it is around 333 kgs). Railways have recently flagged off a stainless steel (SS) body wagon, upgraded

from an open wagon, from the Carriage and Wagon Works at Perambur, which has the capacity to carry

an additional freight of 11.6 tonnes. Thus, a rake of 58 wagons will be able to haul an additional freight of

673 tonnes, which works out to about 16.6% more than the existing payload of a rake

Rail wagon leasing companies should be encouraged to develop their activities in India for which proper

framework covering leasing period, rental, survey and maintenance parameters should be drawn up. This

would enable availability of sufficient stocks of wagons by the industry to meet their demand without

investing or facing delay.

Two schemes, i.e. the wagon leasing scheme (WLS) and the liberalized wagon investment scheme

(LWIS) that will permit private companies to own and lease wagons, has been launched .This would help

private companies who have sufficient captive cargo to own and also lease special type of wagons

including 27 mt wagons.

4. Co-operation between Private rail operators and ICD / CFS

A meeting can also be initiated by the Railway Ministry through Container Corporation of India

(CONCOR) and other private rail operators in which guidelines for co-operation between various rail

operators shall be discussed and formalized. This may include tariff finalization for using each other‘s

14

Hon. Railway Minister budget speech 2007-08

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container freight stations, Inland container depots and slots on the container train. This would facilitate

common trains and more interaction between rail operators resulting in better utilizing of limited logistics

resources, reducing idling and increasing efficiency.

15.3 Shipping

India with a vast 7517 km coastline should be amongst the top ten countries in the world with respect to

shipping fleet. However the shipping tonnage as on June 1, 2008, has declined from its peak of over 9

million gross tonnages to 8.84 million GT with DWT standing at 14.55 million. A policy promoting

companies from buying ships especially for captive cargo can be considered with incentives

Recommendations

1. Coastal shipping

With an aim of developing regional trade especially among SAARCC countries by sea mode, coastal

shipping would play an important role. In this regard, state governments having sea coast line should be

asked to conduct a pre- feasibility study and identify ports or locations which can be developed

exclusively for coastal shipping. Central government can assist the state government in developing

required infrastructure and connectivity. For instance, under the National Maritime Development

Programme, public investments will be made available for creating common user infrastructure at the

ports such as construction of breakwaters, deepening of navigations channels, rail-road connectivity etc.,

whereas private parties shall be encouraged to construct, operate and maintain port terminals. Shipping

Corporation of India plans to connect coastal sea routes from Chittagong to Karachi, by joining hands with

private service operators to provide coastal feeder service is a welcome step in this direction and should

be encouraged.

2. Hinterland connectivity

All existing seaports and upcoming ones should prepare a hinterland connectivity assessment report,

which should list; the present supporting infrastructure, the future requirements including projects in

progress, implemented, planned and required. The 12 major ports have already prepared a business

plan, which includes the hinterland connectivity issues which can be compiled in a separate report. New

upcoming and private ports can prepare a similar document and send it to the Government. The objective

of this exercise would be to integrate the ports connectivity issues into a common plan, which can be

factored in by the Planning Commission for the next FYP.

3. Sea freight

As per the Planning Commission‘s Report of ―The High Level Group on Services Sector for the Revealed

Comparative Advantage‖, the RCA show a decline with respect to transportation (of which shipping is the

major component).

During the year 2007- 08, the ocean freight rate to major global destinations, particularly Europe and Gulf

among others, had increased more than 50% e.g. ocean freight for a TEU from India to EU has increased

from US$ 1200 / - to US$ 1800 / - affecting the competitiveness of Indian exports. The exporter has no

control over such costs which are decided by the shipping lines operating under a conference or cartel

covering a particular sector. As ocean freight constitutes a major element in the overall cost (60–70%),

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which has to be borne by the exporter in any type of contract, there is need to regulate it to the extent

possible. One way to achieve this is by increasing the tonnage in container trade through proper route

planning, dedicated scheduled vessels at regular intervals, and mandating a full sequence of ships to

serve a sector, for example service to US East coast would require 8 dedicated ships to cover.

National carrier, the Shipping Corporation of India (SCI) shall consider preparing a status report on the

number of cellular (container ships) required to cover important export destinations like US East coast,

Mediterranean service, Europe. Africa etc. SCI plans to add three container ships of 4,400 TEU each out

of which two SCI Chennai and SCI Mumbai were recently acquired. SCI also plans an East Coast string

from Chennai, Tuticorin to Europe and the Mediterranean, with 6 vessels in the 2,000-2,500 TEU range

which needs to be supported by other private operators.

Based on the total vessels requirement the government can induce other non container Indian shipping

companies, to jointly operate with SCI, or buy cellular ships which would be taken on long term lease by

SCI. The lease should be guaranteed by the Government which would enable companies to raise funds.

The Government can also support it by not levying any service charge for lease rental paid to Indian

lessor companies against the present 12.4% charged as also offering other mainly tax incentives as

suggested by the Planning Commission15

―As ships are undergoing technological advancement with

8,000 -10,000 TEU vessels becoming the norms in transoceanic trade, India needs to have at least

adequate ships in the 4,400 TEU range which can be then be replaced with bigger vessels for foreign

trade. The smaller ships (4400 TEU range) can then be used for coastal service and feeder routes to

cover SAARC countries.

Lack of development of foreign going fleet is directly affecting:

o The development of coastal shipping

o Socio - economic impact on strategy position and employment generation

o The ocean freight rate which is going northwards

Share of Indian ships in the carriage of India‘s overseas trade have fallen from 31.5% in 1999 - 2000 to

13.7% in 2005-06.While cargo traffic is to rise to 708 MMT by 2011-12 with maximum growth in container

traffic in which India does not have sufficient tonnage.

4. Regulation of shipping practice

The Shipping Trade Practices Bill has been cleared by the Union Ministry of Law and Justice. It seeks to

regulate and register the thousands of maritime logistical service providers, like consolidators, NVOCC

Customs House Agents (CHA), etc. Under this bill, committees can also look into the issues of sea

freight increase and other charges with service standards by interacting and inviting improvement

suggestions from the trade.

15.4 Roads

India accounts for the world‘s second largest road network with over 3.34 million kilometers. Share of

road transportation is over 4.6% in the GDP in 2007 with annual average growth of 9.5% during the

period 2000-01 and 2005 – 06. Roads contribute to 65% to total freight traffic with the national highways

15

Report of the High Level Group on Services Sector, Chapter 4

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accounting for about 2 per cent of the total road network, carrying 40% of the total goods and

passengers. Out of the total length of national highways, 32% is single lane / intermediate lane, 56% is 2-

lane standard and the balance of 12% is 4-lane standard or more.

Out of 3.3 million kilometers of roadway in India only 195,000 kilometers are highways (State and

National Highways). China, on the other hand, has roughly 1.4 million kilometers of highway.

During the 11th plan period (2007 - 12) investment in this sector is projected at US$ 93.11 billion,

according to the Planning Commission with approximately US$ 46.05 billion projected to be invested in

national highways, US$ 34.65 billion for state roads, US$ 10.97 billion in rural roads, and US$ 1.42 billion

in roads in the North-East. The private sector investment is expected to be US$ 33.61 billion, accounting

for 36.1 per cent of the total investment.

The Government has taken various initiatives and reform measures to encourage development of the

road sector which include:

National Highway Development Programme (NHDP) involving a total investment of US$ 54.1 billion

up to 2012.

Bharat Nirman Programme that aims to cover every village with over 1000 population or over 500 in

hilly and tribal areas with all-weather roads. To achieve this around 1, 46,185 km of road length is

proposed to be constructed by 2009.

100 per cent foreign direct investment (FDI) under the automatic route in all road development

projects.

100 per cent income tax exemption for a period of 10 years, the NHAI provides grants / viability gap

funding for marginal projects, and formulation of model concession agreements among others

Committee of Secretaries under the Planning Commission ,Government of India has prepared a

detailed report on ―Road Rail Connectivity of Major Ports‖ which has suggested projects

strengthening the connectivity of ports with the hinterland which an be expedited.

Effect of bad infrastructure on the road sector indirectly adds to the cost which has to be borne by the

exporter in the form of delay and high transport charges. These are:

High variable costs due to frequent break down and non-working time

High fuel consumption due to congestion, traffic jams, reduced average speed and poor fleet

condition

High maintenance costs, high tyre usage (typically 2 or 3 times higher than that in EU)

Lack of training affects driver‘s behavior and professional ethics

Lack of maintenance especially during monsoon creates potholes creating bottlenecks and delays

Recommendations

1. JN Port six lane expressway

JNPT handles more than 60% of containerized cargo of the country . An express road (6 lane) needs to

be planned, starting from the port node connecting the NH – 8 linking other important highways including

NH-4B Mumbai -Pune Expressway, NH -17 Mumbai-Goa Highway, SH-54 to Navi Mumbai, Thane,

Nasik, etc. It is very important to link the NH–8 with JNPT to reduce transit time and congestion as NH–8

is also one with a very heavy traffic flow. Existing roads and projects around JNPT port can be aligned

with this express road so that separate lane for port cargo is ensured enabling smooth traffic flow.

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2. Reclassification of roads with port connectivity

As suggested by the Committee of Secretaries under the Planning Commission, port connectivity

classification shall be considered on certain sections which link the port with the industrial hubs. Such

classification should not be limited to the last mile connectivity (as suggested) but should enable a

coordinated corridor approach which covers the total leg between ports and cargo centres i.e. based on

Origin – Destination transit. This can ensure total transit time management and can bring several benefits

such as improved state border-crossings, better information sharing, bottleneck identification and

solutions finding to address them. Corridor cooperation can also lead to more in depth re-engineering of

the transit systems.

A coordinated development plan can be finalized and divided between the states and NHAI with last mile

connectivity covered by the industrial hubs. Such Port Connectivity projects need to be initiated by the

ports under BOT mode and funding support mechanisms such as ‗viability gap funding‘ by the Centre can

be made available for important projects with lower internal rate of returns.

15.5 Exports policy

Under the present structure of the Government, two ministries are actively involved in the promotion and

regulation of the countries export–import trade; namely the Ministry of Commerce and Industry through

Director General of Foreign Trade (DGFT) and Ministry of Finance through Central Board of Excise and

Customs (CBEC) under the Department of Revenue.

As exports in a global economy is also a benchmark of the countries competitiveness, which for India

(with a billion plus population and a large domestic market to protect) is very important as our domestic

market is also an export market for our competitors.

Based on the primary survey interaction with the stakeholders, it was found that a body which can help

resolve and clarify implementation issues and disputes between the customs and DGFT would be

appreciated by the trade This would also show the Governments seriousness and act as a moral support

booster to the trade, It would ensure speedy implementation and help focus approach on national issues

which are affecting export competitiveness like infrastructure and connectivity.

Recommendations

1. Dedicated Export cell

To ensure exports get the due attention, priority and resources, a dedicated cell under the Prime

Minister‘s Office can be setup which can have a retired secretary from either the Commerce or Finance

ministry to co-ordinate, monitor import-export of certain identified products, prioritize implementation of

MFN treaties and fine tune foreign policy with trade and exports. The cell would also interact with the

trade bodies, receive feedbacks and suggest policy initiative and government intervention from time to

time. This would help in responding promptly to the dynamics of the international market forces

2. Representative in the Board of Trade

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Small and Medium enterprise (SME) account for more than 35% of the country‘s manufacturing sector. As

the share of manufacturing in GDP can only be increased by developing SSI and SME into major

companies, this sector needs to be represented effectively in the committees looking into policy matters.

Association of SMEs shall be included in the Board of Trade (formed to advise the DGFT on policy

matters).

3. Dedicated laboratory and testing facility

As testing is not the core function of the central customs & excise and to expedite testing of samples

covering import & exports, a dedicated all India laboratories and testing facility provider needs to be

developed. This shall be separated from the customs and can be entrusted to some other governmental

agency specializing in laboratory work, which would develop world recognition and accreditation as

required and offer services to the trade in an efficient manner covering all locations within and outside the

country as required. Ministry of Finance shall initiate steps to de-link the testing and certification facility

from the Excise & Customs Department and can be reconstituted as an independent certification and

testing agency.

In 2005, China‘s international trade dwarfed that of India. According to the WTO, China‘s merchandise exports

were US$764 billion versus US$96 billion for India. By comparison, Korea‘s exports were US$290 billion and

Thailand‘s were US$110 billion. Roughly 91% of China‘s exports were manufactured goods versus 75% for

India. While India is better known for its exports of services, here again China leads. In 2004, China‘s service

exports were US$62 billion versus US$40 billion for India. On the other hand, 60% of China‘s service exports

were travel and transportation services while in India the figure was 22%. A large share of India‘s service

exports were related to information technology and IT related services which might go down in future on

account of the decreasing labour arbitrage opportunities and global economic recession.

Source: World Trade Organization

15.6 Others

Equipment

ICD / CFS / Rail depots / Warehouses / Sea and dry ports/ third party service providers, handling export

cargo should get a periodical certification in the form of assessment of their equipment standards and

maintenance by a competent independent agency. This agency would also issue guidelines for

housekeeping of equipments with type and number of equipment required to be maintained based on

capacity and handling projections. This would ensure adequate working equipment is made available to

service the cargo, preventing delay in cargo handling and movement.

Packing

The Indian Institute of Packaging is a national enterprise set up in May 1966 by the Indian Packaging and

allied industry and the Government of India, Ministry of Commerce. It has its registered office in Mumbai

and branch offices at Delhi, Kolkata, Chennai and Hyderabad and is assisting in developing packing

solutions for various modes of transport, including testing and certification.

The Institute can consider opening extension counters in unrepresented regions like Ahmedabad,

Lucknow, Indore, Nagpur, Bangalore etc. The institute can also actively pursue and develop innovative

storage solutions which are both environmental friendly and user friendly. Such storage solutions should

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be for transportation and preservation of fruits and vegetables in the rural areas where uninterrupted

electricity is still a major issue. Similarly, it could also develop with the chemical industry, packing material

to safely handle liquid and powder chemicals which are accepted by the importing foreign country, where

most of the chemical handling is done by machines only. The Institute can also conduct training and

awareness programme to improve the hygienic condition in food industries and other needs of the

industry.

15.7 Role of industry in improving competitiveness

While the government shall provide an enabling environment to boost the industry competitiveness

through policy interventions and incentives, it is equally important for the industry per se to strive for

excellence in manufacturing, warehousing, distribution and marketing of finished products. Since logistics

is only a component out of many other elements that determine the export competitiveness, it is crucial

for industries to constantly innovate in the area of design, manufacturing, distribution and logistics, etc.

Needless to say, these measures are important to reduce cycle time, cut costs of manufacturing, storage

and distribution and to bring about differentiation in product features, etc.

Indian textile industry need to move up the value chain from the lower end markets to value-for-money

and also to the high end value added products. Some of the initiatives required are mentioned below:

Modernization of power looms and textile machinery

Investment in R&D for productivity improvements and New Product Development

Industry shall aim to create network organization to tap synergies among various industries

including support organizations, distributors, ware housing, logistics, training and development

etc.

Work force must be trained and oriented towards high productivity

Embrace ICT, e-commerce and m-commerce to reduce transaction costs, delays and wastes

Follow a cluster based approach

Similarly, chemical industry shall strive to achieve excellence by adopting a slew of measures like:

Focus on ―brand building‖ of their products in overseas markets

Increased Research & Development initiatives for product innovation adhering to cleaner

methods of production

Outsource non-core areas by focusing on areas of core competence

Enter into alliance with companies abroad for product-specific marketing

Create facilities to handle bulk chemicals and POL (Petroleum, Oil and Lubricants) by setting up

captive jetties / berths at ports (under PPP mode)

Encourage pipeline transportation either by sharing the pipeline facility available with public

sector companies or by creating new facilities through joint venture participation

Beef up procedures to comply with REACH legislation of the European Union so that the exports

to EU are not suffered

As discussed in chapter 6, the food processing potential in India is grossly under-utilized. But with the

entry of multinationals and big corporate in this sector is poised to change the scenario for better. The

industry shall initiate the following measures to improve the overall competitiveness of the industry and

thereby the export competitiveness of the sector too:

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Setting up of comprehensive Cold Chain Infrastructure for preservation, storage, warehousing

and distribution of processed food through collaboration among different industry sub sectors in

which the government can play a facilitator‘s role

Mechanized and state-of-the-art abattoirs shall be set up under PPP mode that can benefit the

meat processing segment

Collaborating with MNCs will help in adopting best practices in collection of input materials,

grading, sorting, preservation, processing, testing, labeling and dispatch of processed food items

Industry shall enter into tie ups with target firms (reputed international players in the respective

segments) for overseas marketing of their products

Some of the measures (apart from those already spelt out in respective chapters) that the Auto industry

shall attempt to improve the competitiveness are mentioned below:

The industry trade bodies shall invest hugely in R & D in order to develop alternative fuels and

also to design and build more fuel-efficient and environment-friendly vehicles

The industry shall take necessary steps to construct and operate dedicated car terminals at ports

closer to the auto manufacturing hubs. These terminals shall have roll on-roll off facilities to

promote coastal movements of automobiles. These may be achieved through joint ventures with

existing port operators.

Expanding overseas (either through organic or inorganic routes) looks like a feasible proposition

for Indian automotive and auto component companies to improve upon their design and

manufacturing capabilities in addition to the opportunity to create new brand equity in the

international market.

India is slowly becoming a manufacturing and export hub for small cars and it is high time for

Indian auto giants to think even bigger (To conceive, design, build, mass produce and market

future generation vehicles to the world market)

15.8 Specific issues pertaining to policies

The sector-specific and the region-specific logistic issues are analyzed in the respective chapters, and

therefore this section contains only some highlights pertaining to policy reforms / amendments etc.

There is no DEPB rate available for the mini-tractor segment under the ―Schedule of DEPB Rates‖,

which may be addressed suitably by amendment / modification to the DGFT clause under the Foreign

Trade Policy 2004-09. A similar situation was prevailing for Front-engine three wheeler drive away

Chassis in CKD/SKD/ CBU condition, which got amended by the Director General of Foreign Trade

through a public notice dated 12/7/2007 through powers conferred under Paragraph 2.4 of the

Foreign Trade Policy, 2004-2009 and Paragraph 1.1 of the Handbook of Procedures (Vol.I).

There is no uniform specification for car carriers transporting vehicles and this is causing harassment

to the drivers at state check posts, etc. A clear communication to this effect shall be sent by the

concerned ministry / department to every state governments so that issues related to non-uniform

standards are resolved, leading to no penalty for car-carriers used in inter-state transportation.

The VAT imposed on packaging materials used for exports shall be done away with in order to

reduce the cost.

State levies such as octroi, electricity duty, mandi tax etc., are not reimbursed to the exporters. The

multiplicity of taxes not only increases costs of export but also the time taken for clearing the goods.

The Government shall take suitable measures either to compensate the exporters directly or do away

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with the levies (by compensating the states / local self bodies for their revenue losses on account of

the abolition of such levies).

More items under the chemicals category shall be covered under the Focus Market and Focus

Product Scheme unveiled by the DGFT. This may provide the desired impetus for chemicals export.

All R & D equipments procured for research purposes (with an aim to bring in innovation in each of

these sectors of industry) shall be exempted from import duties and other forms of taxes. Presently,

the list does have only a few equipments on which tax exemption is available.

The Government of India shall frame a wine policy (similar to that of Australia) with an effort to make

the wines produced in India popular across the world. Thrust is to be given on the branding and

quality aspects of wines produced in India. Ministry of Agriculture shall play a dominant role here.

Efforts may be put to bring tea and coffee under the Vishesh Krishi Gram Udyog Yojana (VKGUY)

scheme to provide more benefits to this segment

The Ponni-S variety of rice is banned for exports. This variety commands a better price in the world

market than Basmati and hence the ban may be lifted subject to the resolution of issues in connection

with the export of this rice variety.

The Government of India has not approved the production of shrimp variety called ‗Pennious

Mannami‘ which has better taste and immunity to diseases than the black tiger shrimp. This variety

has good market in the Europe and hence the GoI shall lift the ban on production of the above

variety.

All ports with valuation facilities notified by Customs for export-import shall be included as ports under

Export Promotion Schemes.

15.9 Suggested action points for the Government Indicated below are some action points that the various departments, ministries and independent

agencies of the Government may take in order to improve the logistic and export competitiveness of

Indian industry.

Ministry /

Department /

Govt. agencies

Issues / areas of concern Suggestions / recommendations

Empowered

Group of

Ministers under

the

Chairmanship of

Prime Minister /

Task Force

under the

Planning

Commission

National Logistic Policy- It is high time for

a country like India to have a

comprehensive ―Logistic Policy‖ at the

national level.

An indicative framework is given in this

report (please refer chapter 13 for

details).

The Parliament shall enact a bill on

Logistics Services Regulation Act

as part of the above policy.

The Logistics Policy shall spell out

the roadmap for creating cold chain

facilities, terminal markets,

collection centres and warehouses

across the country

It can also devise a model

concession agreement to promote

PPP for logistic infrastructure

A Task Force under the Planning

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Commission can be set up to

specifically look into the issues and

formulate suitable policies

Ministry /

Department /

Govt. agencies


Inter-Ministerial

Group (IMG)

Further simplification of customs

procedures for export / import

The IMG shall recommend for the

simplification of custom procedures at

all ports of export / import and also at

international check posts.

‗Single Common Document‘ to reduce

complexities with regard to export / import

The IMG shall design / recommend a

Single Common Document acceptable

to Customs, Excise, DGFT, CHAs,

Banks, Octroi, etc. Procedural delays

with respect to export / import can be

reduced significantly by this.

Ministry of

Railways,

Government of

India

Need to have dedicated rail lines for

container movement of goods from

hinterlands to major ports of exports

Expedite the Western and Eastern

Dedicated Freight Corridor projects

Conduct feasibility for DFCs in the

South (For e.g.: Hyderabad-

Chennai, Bangalore-Chennai,

Coimbatore-Vallarpadam-Vizhinjam

etc.)

Container traffic on Double Stack trains Rail links which can handle double

stack trains on major container routes

connecting major ports shall be

considered

To develop Pithambur (Indore)-Ratlam

broad gauge rail linkage

Rail connectivity from Indore to Ratlam

to be developed to benefit the

industries in Indore and surrounding

region

CONCOR Rail carriage with 4 cars attracts a higher

freight than that charged by truckers from

NCR to JNPT. Similarly, there is no rail

tariff slab available for cargo below 15 MT.

Rationalization of rail freight for light

cargo is sought from CONCOR

Department of

Shipping

(Ministry of

Shipping, Road

Transport and

Highways)

Dedicated car terminals at ports closer to

automotive hubs (on the lines of Port of

Nagoya in Japan)

Favorable policies to be developed to

build and operate car terminals at ports

near automotive hubs, capable of

handling foreign-going car carriers. The

Department of Shipping shall forward

proposals to this effect and Planning

Commission shall set up a task force in

this context and allocate resources

accordingly in the Five Year Plan.

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Ministry /

Department /

Govt. agencies


Central Inland

Water Transport

Corporation

(CIWTC)

Inland water transport mode is

underutilized within the country for moving

goods

CIWTC shall initiate steps to revitalize

the inland water transport as a cheaper

mode for cargo movement. This may

also de-congest the already clogged

highways.

Various State

Governments

(Public Works

Department)

Need to develop various state highways in

different parts of the country that interlinks

the National Highways and Expressways

to derive maximum benefits of network

planning

Each state government shall constitute

an autonomous, multidisciplinary

professional body (on the lines of

NHAI) which shall be mandated to

develop, maintain and manage State

Highways (S.H.). Each of these State

Highway Authorities shall be made

responsible for envisioning the State

Highways Development Programme

and implement them through PPP

mode. Model Concession Agreements

shall be developed for PPPs by the

SHAs.

Central Board of

Excise and

Customs

(CBEC)

To reduce the time taken for clearance of

goods at ports and air cargo complex

CBEC shall extend the Risk

Management System-based clearance

procedures to all EDI-enabled ports

and air cargo complexes, which shall

help in reducing the dwell time.

Reserve Bank of

India

Any delay from Indian banks to forward

the Letter of Credit (LC) related

documents to its Dubai counterpart leads

to the consignment getting stuck thereby

attracting demurrage charges

RBI shall direct all banks to act on LC

related documents as a top priority and

penalty may be slapped on defaulting

banks on his account.

Jawaharlal

Nehru Port Trust

(JNPT) and

Mumbai Port

Trust (MPT)

The container movements by rail and road

in the Mumbai Metropolitan Region is

leading to congestion

JNPT and MPT shall consider barge

movements between the two ports and

also between other minor ports in

Maharashtra. Feasibility study shall be

carried out to operate ‗flat bottom, self-

propelled barges‘ between the ports,

which can de-congest the road / rail

traffic in Mumbai.

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Ministry /

Department /

Govt. agencies

Issues / areas of concern

(indirectly related to export

competitiveness)

Suggestions / recommendations

Ministry of

Agriculture

There is no specific ‗wine policy‘ in India India should develop a ―Wine Policy‖ to

promote Indian wines abroad

The Ministry of

Agriculture & the

Ministry of

Commerce and

Industry

Tea is not covered under Vishesh Krishi

Gram Udyog Yojana (VKGUY)

The benefits under VKGUY may be

extended to the exporters of tea

Ponni-S variety of rice is banned for

exports, which commands a good price in

the export market

The ban may be lifted subject to the

resolution of issues surrounding this

The ―pennious mannami‖ shrimp variety

which has a better taste and immunity to

diseases than the black tiger shrimp is not

approved for production in India. This

variety is very much in demand in Europe.

The Government may approve the

production of this shrimp variety by

suitably resolving any issues related to

it.

The export competitiveness of any country depends on a host of factors such as infrastructure,

innovation, R & D, human resources, government policies, robust supply chain, etc. Therefore, it is

important to bring in synergies in infrastructure, transport regulations, investment, customs, foreign trade

and better border management. Apart from doing a ‗facilitation agenda‘, the government needs to take

steps to bring in better infrastructure (roads, rail, sea ports, warehouses, airports, etc) , efficient fleet

management, and overall market reforms for logistic services. The transformation to a developed country

will be hastened if the export competitiveness is improved upon through creation of infrastructure and

policies conducive to the business environment.

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Annexure 1: Chemical sector recommendations

1. Policy guidelines

New policy initiatives should be interlinked to in a manner to encourage industrial development, creation

of value addition, development of a cohesive industrial setup which can respond and seize global market

opportunities (If required a new chemical policy can also be considered). Some aspects which the policy

should seek to address and cover may include:

Raw Material

Ensuring availability of basic raw material or feedstock, by developing indigenous capacity and

monitoring its export to ensure domestic industry is not deprived of the basic product (Separate

classification can be considered for products which consist of Raw material and the list can be

regularly upgraded). This would include increasing capacity creation of import substitution products,

especially in Olefins and Aromatics, which have wide range of applications and high growth potential

Capacity Enhancement

Facilitating merger and tie-up among Indian companies especially between SSI units or downstream

integration between a major producer and SSI unit to exploit the benefits of vertical integration. This

would enable major companies to have small SSI units under them producing specialized captive

products meant for exports (Tax breaks and concessions in mergers can be considered)

Incentives for capacity expansion for manufacturing value added products

Incentives for more R&D in high value segments covering knowledge and specialty chemicals

Encouraging integration with SSI units and others by developing contract manufacturing.

2. Pesticides export promotion

As pesticides require registration in the importer countries, the South Asian Association for Regional

Cooperation (SAARC) can have a common registration procedure and data base by which any

exporter from SAARC country can register in the SAARC office which would be valid and approved for

all member countries. This would save multiple registrations and facilitate more trade between

member‘s countries.

3. Human Resource Development

Existing research institutes under Council of Scientific and Industrial Research (CSIR) like Indian

Institute of Chemical Technology - Hyderabad, or National Chemical Laboratory - Pune, should

identify developing chemicals hubs and open extension counters with industries participation. These

extension counters can be modelled on the industry-specific requirement and can be gradually

developed into a full fledged setup with R&D, specialized courses, training etc.

One year onsite plant training should be made mandatory for process and automation engineers etc,

as practiced in Germany. This would ensure orientation and development of proper aptitude for

pursuing career in the respective field of study.

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4. United Nations Globally Harmonized System (GHS) for classification of chemicals

- More than 65 countries under the United Nations Globally Harmonized System (GHS) are amending

their present system of Classification and Labelling of Chemicals, by types of hazards and is co-

coordinating to have a common harmonized hazard communication element, including labels and

safety data sheets. Areas covered include transport, environment, occupational health and safety,

pesticide management and prevention and treatment of poisoning. As the same is an important factor

for trade facilitation, there is a need for a review by the industry in association with the government.

- REACH is new European legislation about the Registration, Evaluation and Authorization of

Chemicals. The complex wide-ranging regulation will have a big impact on all companies that

manufacture, import or use chemicals. A joint committee with the industry and government can be

constituted to involve the industry and develop strategy for meeting the challenges poised by GHS

and REACH.

5. Fire Fighting and Disaster Management (FFDM)

A disaster prevention and management plan should be developed by the GoI, in which basic requirement

of fire fighting infrastructure and support systems would be indicated. The plan should be an evolving one

and subject to periodic review for up gradation to cover security threats, perceptions and modern

equipment and technology. This plan would be given to all states as guidelines for improvement and

development of their FFDM plan. Feedback from states and various agencies involved would be

incorporated to make FFDM effective and purposeful. Some guidelines in the FFDM plan would include:

Highways should be divided into zones based on response time. Each zone should have a supporting

emergency response team with fire fighting service maintained by a major chemical unit of that zone

named as Zone FF unit. These zone wise fire fighting or disasters management team (Zone FF unit)

should have experienced fire fighting and emergency disaster management experts on permanent

basis, preferably trained and recruited from neighbouring cities and towns, who are familiar with the

region. The Zone FF units should co-ordinate, train and equip other units to effectively cover the

allocated zone

Chemical tanker driver should have an ID card that should indicate the type of chemicals authorized to

drive, transporting route, and training received from Zone FF unit and emergency contact numbers.

Villages, towns en-route should also be covered by training selected persons in Dos and Don‘ts by the

Zone FF unit.

Zone FF units should be part of the state wise disaster management plan and should be supported by

a mobile air unit which can cover the state with required fire fighting and disaster management training

and specialized equipments. This would be required for all states and regions but priority should be

given for areas where chemicals transportation is being undertaken.

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6. Technology

Web based Industry specific domain portal on the Chemical Industry should be developed and

maintained by a professional agency with regular updates on links, news and views. This portal would act

as a focal point for the industry and would feature in all marketing, trade & business development

publicity. It would provide links to a wide range of other websites and companies in India which provide

service and products covering this sector. The portal could be on similar lines as developed by Singapore

government i.e. http://www.chemindustry.org.sg.

NASSCOM expertise can be garnered to register web professionals (includes training ,security checks

etc ) who can provide services to develop and regularly update web based portal for all export oriented

companies, who can be linked to the industries domain e portal. These web developers would be able to

ensure accessibility, quality service at a very nominal rate to facilitate marketing via the website route

while maintaining the required standards

7. Research

India has a huge talent pool, whose knowledge can be channelized into industry applications. Some

approaches which the Government can consider include -

For Education Institutes government can invite research concept paper on relevant topics based on

usefulness, global trends, application etc. The list of such research topics can be developed by major

educational, scientific, research, industrial and other related organizations who can contribute in

preparing a master list of research topics.

Similarly Research Institutes (government and private) based on the approved master list, can also

select topics and areas which they would like to research and develop further against a possible

outcome, time and budget. Government can provide some upfront assistance for such research start-

up and balance in phases, based on outcome of theses researches. This would give an impetus as

also cover new areas in research. Private sector funding can also be tapped based on specific

research projects

Chlor-alkali industry consists of Caustic Soda, Chlorine and Soda Ash, which are the basic building

blocks in the chemical processing industry. These are used as essential inputs in about 45% of the

total chemical industry. With around 82% plants using Membrane Technology, (membrane cell

process requires the lowest consumption of electric energy and the amount of steam needed for

concentration of the caustic is relatively small), there is a need to develop and produce indigenously

technology. Research Institutes can be directed to undertake this task, if required through tie ups with

other global institutes to meet the industries requirement

8. Green Chemicals - Banning and Substitution

A list of potential chemicals (which are sought to be banned or substituted globally due to their toxic

nature) should be compiled preferably by chemicals associations. Manufacturers of these in India should

be identified and assisted to develop alternative process or chemicals which are more environmental

friendly and acceptable. (This would ensure that there is a planned switch over, and replacement

developed for these products in time to fill in the gap caused by withdrawal of banned chemicals from the

major export markets. This would also enable development of innovative products using India‘s traditional

knowledge base and help lead the industry in modifying its production adhering to the relevant

environment and global trends.

http://www.chemindustry.org.sg/

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9. Feedstock

The chemical industry especially the SSI units are dependant on availability of raw material which

includes feedstock for manufacturing. Non availability or increase, variation in price of the feedstock

affects the production and export commitment. A separate category in classification listing chemicals

used as feedstock should be developed, regularly upgraded so that special policy focus and incentives

can be given to this category as and when required.

Policy can encourage indigenous capacity creation and expansion; regulate exports to ensure domestic

requirements are fully met to add value and export finished products. An association of feedstock

manufactures can be developed and regular meetings can be held to ensure domestic requirement at

competitive price is ensured. Any shortage of any specific chemicals can be met by imports collectively

through the feedstock association with assistance from the government if required. This will ensure

availability of raw material to the industry at competitive prices round the year to enable them to meet the

production and export targets.

10. Others

Clusters having EOU and other units especially for chemicals should be assisted by external agency to

plan and develop common supporting infrastructure which would help them in better logistics, operations

and exports.

Assistance by the respective state and central government agencies can be in the form of improving

common facility covering fire fighting equipments, providing training to all plant personnel, setting up of

independent laboratory, conducting power audit with state government agencies to identify and suggest

power saving methods, developing common facility with information centre with conference hall for

sharing latest industrial news, logistics information, sea freight rates etc.

All custom office should be EDI / EDP enabled. A common information centre at the highest level should

be setup, which can process enquiries and provide clarifications covering classification of goods and

duty drawbacks etc. This is to enable ensure application of rules and classification across the country in

an identical manner to solve issues arising out of different interpretation of customs rules and guidelines.

Custom and excise officers should be trained in EXIM policy and implementation of guidelines.

Arbitration panel should be setup presided over by the Deputy Commissioner with other trade members

on a monthly basis to review and assist the trade in solving working issues.

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Annexure 2: Government policies related to textile exports

1. The Scheme for Integrated Textiles Parks (SITP)

The scheme for Apparel Parks for Exports (SITP) was launched in August 2005, by merging Apparel Park

for Export Scheme and Textile Centres Infrastructure Development Scheme. The Scheme is being

implemented under public-private partnership through a Special Purpose Vehicle (SPV). The industry

associations / group of entrepreneurs are the main promoters of SITP. The primary objective of SITP is to

provide the industry with world class infrastructure facilities for establishing textile units. The scheme

would facilitate textile units to meet international environment and social standards (covering sectors of

weaving, knitting, processing and garmenting) at potential growth centres.

2. Technology Up gradation Funds Scheme (TUFS)

This scheme for the Textile and Jute Industry was launched from April 1, 1999 and has been extended

Scheme extended till 31-03-11 but with exceptions. The decision of the Government places special thrust

on garmenting, technical textiles and processing segments of the textiles industry in view of their potential

for value-addition and employment generation. This decision is expected to help the textile sector to

achieve the targeted growth rate of 16% and make an investment of INR 150,600 crores in the above

plan period.

3. Technology Mission on Cotton (TMC)

TMC was launched in February 2000 and has completed 4 phases (missions). It focuses on improving

cotton production and handling with better infrastructure. The objective of mission 1 was cotton research

and technology generation, while that of mission 2 was transfer of technology and development covering

the following

Increase productivity in cotton production

Steps to be taken to reduce the cost of cultivation

Improve fiber attributes

The objective of mission 3 is development of market infrastructure (including development of 4 new

market yards and also improvement of 250 existing ones).Mission‘s 4 objective is to modernize / up

grade 1,000 ginning and pressing factories covering infrastructure of cotton agriculture markets and

improving and modernizing ginning and pressing factories.

4. Jute Technology Mission (JTM)

Approved in June 2006 and under the Mini Mission III & IV of JTM were launched to develop efficient

market linkages for raw jute under MM-III and to modernize, technologically upgrade, improve

productivity, diversify and develop human resource for the jute industry under MM-IV.

5. Foreign Direct Investment (FDI).

The Government has allowed foreign equity participation up to 100%, through automatic route, in the

textile sector with the only exception of knitwear / knitting sector, which was reserved for SSI.

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6. Incentives as mentioned in the Foreign Trade Policy 2009-14

With an objective to promote investment in upgradation of technology of some specified sectors

including Textiles, Jute and Handicrafts as indicated in Para 3.16.4 of FTP 2009-2014, Status Holders

shall be entitled to incentive scrip @1% of FOB value of exports made during 2009-10 and during

2010-11, of these specified sectors, in the form of duty credit.

Special incentives for Handlooms sector under new FTP 2009-14

o Specific funds are earmarked under MAI / MDA Scheme for promoting handloom exports.

o Duty free import entitlement of specified trimmings and embellishments is 5 % of FOB value of

exports during previous financial year.

o Duty free import entitlement of hand knotted carpet samples is 1 % of FOB value of exports

during previous financial year.

o Duty free import of old pieces of hand knotted carpets on consignment basis for re-export after

repair is permitted.

o New towns of export excellence with a threshold limit of Rs 150 crore shall be notified.

o Machinery and equipment for effluent treatment plants is exempt from customs duty

o Duty free import entitlement of tools, trimmings and embellishments is 5 %of FOB value of

exports during previous financial year. Entitlement is broad banded, and shall extend also to

merchant exporters tied up with supporting manufacturers.

o Handicraft EPC is authorized to import trimmings, embellishments and consumables on behalf of

those exporters for whom directly importing may not be viable.

o Specific funds are earmarked under MAI & MDA Schemes for promoting Handicraft exports.

o CVD is exempted on duty free import of trimmings, embellishments and consumables.

o New towns of export excellence with a reduced threshold limit of Rs 150 crore shall be notified.

o Machinery and equipment for effluent treatment plants are exempt from customs duty.

o All handicraft exports would be treated as special Focus products and entitled to higher

incentives.

Exporters in Small Scale Industry (SSI) / Tiny Sector / Cottage Sector, Units registered with KVICs

/KVIBs, Units located in North Eastern States, Sikkim and Jammu & Kashmir, Units exporting

handloom/ handicrafts / hand knotted or silk carpets, exporters exporting to countries in Latin America

/ CIS / sub- Saharan Africa, units having ISO 9000 (series) / ISO 14 000 (series) / WHOGMP/

HACCP / SEI CMM level-II and above status (granted by agencies approved by the government),

exports of services and exports of agro products shall be entitled for double weightage on exports

made for grant of status. Double Weightage shall be admissible to Merchant as well as Manufacturer

Exporters.

In addition as per the Foreign Trade Policy 2009-14, Market Linked Focused Product Scheme

(MLFPS) benefits has been extended for export to additional new markets for certain products

including apparels among others

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Annexure 3: Textile sector specific recommendations

1. Exports of raw cotton and value addition

Policy should aim at gradually reducing and discouraging export of raw cotton. China and Taiwan

which account for about 60% of cotton exports from India, are offering higher prices especially for

Shanker - 6 variety which has lead to average cotton prices shooting up from INR 43 - 45 per kg

two years back to INR 50 - 52 per kg, affecting Indian industry. China which has already moved up

the value chain with its large capacity and is the largest exporter to the United States with 33.5% of

market share. China requires raw cotton which is also supplied by India. On July 24, 2008 the

Government has made it mandatory for all cotton exports to be registered with the Textile

Commissioner before their shipment. Policy should further aim at developing and utilizing capacity

to process cotton into yarn and fabrics. This policy can be reviewed after a three year period to

further reduce the export of yarn while developing exports of value added products like readymade,

apparels, etc.

A minimum support purchase (MSP) price is fixed for domestic cotton to ensure that farmers get a

fair price. Import duty has been withdrawn on cotton imports along with incentives for exports.

Similarly minimum export price of raw cotton (based on international prices) should also be fixed,

along with a quota which can be exported.

Indian domestic textile companies purchasing cotton should be registered under a central scheme

in which their financial position and working capital requirement can be assessed by a team of

bankers. A credit limit can be fixed which can be integrated with the exporter‘s gold card scheme

(RBI scheme) to provide soft loan to enable them to buy raw cotton. The loan could be repaid from

the export foreign inward remittance proceeds received, or within a certain fixed period of 9

months, whichever is earlier. This would ensure that funds are available with the textile companies

for purchasing cotton on cash basis, helping the farmers and the industry. Textile companies can

also enter in forward deals with the farmers, advancing them certain amount and balance on

delivery of the cotton to help in cultivating organic cotton farming.

Similarly a value addition scheme should be launched by the government to especially target

Export Oriented Units (EOU) and cotton processing units by offering them assistance in the form of

soft financial loan ,consultancy advise to identify value added products and segment, to enable

them to expand / forward integrate into value addition products (example yarn processing units can

expand into fabrics and ready-mades).This scheme would be for a fixed period of 3 / 5 years after

which all EOUs would be converted into domestic tariff units. This would enable EOU to prepare

them to face competition with a cut off period and help them forward integrated into value products.

2. Infrastructure creation and capacity building

The Cotton Textiles Export Promotion Council (TEXPROCIL) based in Mumbai, since its inception in

1954 as an autonomous, non-profit export promotion body has been facilitating exports (especially

during the quota regime) and has contributed to the growth of the sector. TEXPROCIL can be given a

bigger role of covering the various clusters across India to build, develop and train capacity especially

in garmenting and value addition by implementing not only the various central government schemes

like Textile Centres Infrastructure Development Scheme (TCIDS) - for modernizing infrastructure

facilities at major textile centres of the country, but also evolve other functions like providing

consultancy, training, research, fashion trends and value addition assistance. This would enable an

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experienced agency to lead the growth of the industry and ensure effective implementation and

amendments in various schemes.

Through TEXPROCIL offices and extension counters at major clusters, exporters would be assisted

by offering them information on prices, trends, designs and development of other common user‘s

facility in the form of designing and lab facility along with other services, covering documentation

and procedural assistance to facilitate exports and data collection . Testing and designing studio

would enable textile exporters to have their products designed and print required samples by

paying a nominal charge. Students doing Fashion designing at National Institute of Fashion

Technology - NIFT can as part of their curriculum offers their services through TEXPROCIL in

designing and training at clusters. Infrastructure setup would also cover efficient communication

facility for video-conferencing with foreign buyers and act as a market place for circulating enquires

for contract work and other market information.

The main objectives of TEXPROCIL would be to develop and leverage the combined strength of

small and medium size units, to represent and execute major export order with quality checks in the

shortest time. This would be achieved by development of supporting facility to help in improving

quality and design of products. This would enable TEXPROCIL to also develop as a nodal agency

which can collect orders from other exporters / buyers like The Handicrafts & Handloom Exports

Corporation of India Ltd., and get it executed through contract work covering various clusters

through its network of offices.

TEXPROCIL would have an ongoing relationship with fashion and textiles research institutes to

collect and dispense information on latest manufacturing machines, process, fashion trends etc.

The services provided by CTSU should be subsidized by the government.

3. Marketing and Sales promotion

For business promotion and feedback on global fashion trends, textile malls / marts should be

opened abroad in various markets; Such Indian malls would be owned and developed by Central

government agencies in locations identified by the textile associations as major markets. Such

malls should be capable of showcasing and selling different products like food, textile etc which

have good potential of creating value. Such malls can be leased to the textile associations or

TEXPROCIL for a reasonable rent and period. Textile associations would manage and make

available display and sales counter to Indian textile companies to promote and increase their

exports. This would give a permanent display for our brands and products which can also be

rotated depending upon the demand and festival season.

4. Capacity enhancement in unorganized clusters

Reorganization Model for development of unorganized clusters into co-operatives, assisted by

nodal government agency. The small scale units (unorganized) would be formed in co-operatives

which would then be trained, upgraded to ensure improvement in quality and output levels. Each

co-operative on a combined basis would have the capacity which would enable them to undertake

and deliver on export order. Each co-operative would have an elected team to manage their

various functions.

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Figure 39: Reorganization model for unorganized SSI unit’s development (proposed)


5. R & D and Institutional development

Non-woven textiles and Technical textiles

Technical textiles are defined as comprising all those textile-based products which are used

principally for their performance or functional characteristics rather than for their aesthetics, mainly for

non-consumer (i.e. industrial) applications. Technical Textile industry is estimated to be worth 115

billion dollars, and expected to reach 125 billion dollar16

by 2010. Some of the industries where it can

be applied in extent are Construction, Defence, and Healthcare.

Government is aware of the potential and in collaboration with trade organization like FICCI has

already held conferences to create awareness in the industry.

There is a need to have an Institutional framework which can look after the objectives of integrating

various industries with textiles to develop products which fulfil their requirement. A Technical textile

cell can start with enrolling manufactures as members in various categories covering functionalized

fibers, regenerated fibers; smart textiles, medical textiles etc. Similarly data on basic raw material or

feedstock like high tenacity polyester, with their capacity and manufacturers in India can be listed for

the benefit for its members. Interaction between Indian industries, R&D centres and global institutions

can be promoted to understand the demand in international market and integrate with the same. This

can be followed by policy interventions to assist, develop and promote value addition and expansion

or creation of capacity in required feedstock and products.

The Synthetic and Rayon Textiles Export Promotion council (under the Ministry of Textiles, GoI) can

16

Conversion of non woven roll goods to hygiene and medical products By : Dr. S. K. Basu, Mr. D. Ghosh

Information Flow

Co-operative

Nodal government agency

Central Textile Body

Small scale units

Textile Cluster (Unorganised)

Co- operative Team

Business

Training

Management

Operations

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be given the mandate to formulate an agenda for structuring and development which can include,

introduction of the subject in academic Institutes among others.

Some of the industries where Technical textiles can be used include:

Industry Application

Aero Parachutes ,Glider Fabrics, Composites

Agriculture Flexible silos, Sacks

Apparel Reinforced threads, Fire retardant, protective clothing, shoes

Automobile Tyre cord, Seat material & belts

Chemical Protective clothing

Civil Separator, Road material stabilizer, Drainage

Construction Tarpaulin, Slings

Defence Camouflages

Electrical Insulating fabrics

Food Wrappings, Bags

Horticulture Shades and Shields

Industries Applications

Manufacturing Composites, Sound Insulation

Medical Absorbent cloths ,Bandages, Swaps

Mining Conveyor belts

Shipping Hovercraft skirts, Inflatable and Sails

Water Membrane, Hoses, etc

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Annexure 4: Food processing sub sectors

1. Fruits and vegetables

Fruits & vegetables Fruits: Banana, Mango, Citrus, Papaya, Guava, Grape, Pineapple, Apple,

Lichi, Sapota

Vegetables: Potato, Brinjal, Tomato, Tapioca, Cabbage, Onion, Cauliflower,

Okra, Peas, Sweet Potato

Processed fruits &

vegetables product

line

Jam, pickles, sauce/ Ketchup, pulp/ concentrate, juices, squashes, ready to

eat vegetables, chips, pastes, frozen and dehydrated products wafers

Ready to eat F&V - Mangoes, grapes, citrus fruits, pomegranates, banana

and dried, assorted canned, preserved vegetables

Major export

destinations

Pakistan, Bangladesh, U.S.A., Japan, Netherlands, Malaysia, Sri Lanka,

U.A.E., Nepal , U.K, Saudi Arabia, Belgium, Russia, France, Germany &

Spain

Leading Indian states

in production

Fruits: Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka & Uttar

Pradesh

Vegetables: West Bengal, Uttar Pradesh, Bihar & Orissa

Facts India is one of the leading players in the fruit and vegetable production. As the

second largest producer, India is known as the fruit and vegetable basket of

the world.

Less than 2% of the F&V produced in India is processed

2. Dairy products

Dairy Milk

Product line Packaged liquid milk, ethnic sweets, curd & curd products, cheese, butter,

ghee, milk powder, infant milk food, whitener, condensed milk, malted milk

food and Ice Cream

Major destinations Bangladesh, Algeria, U.A.E., Yemen Arab Republic & Egypt


in production

Andhra Pradesh, Bihar, Gujarat, Haryana, Karnataka, Madhya Pradesh,

Maharashtra, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, West Bengal

Facts India ranks 1st in the world in terms of milk production

Around 35% of the milk production in India is processed

Milk sector contributes approximately a fifth of the income generated by

agriculture and allied sectors

Dairy Cooperatives account for the major share of processed liquid milk

marketed in the India

Milk is processed and marketed by 170 Milk Producers‘ Cooperative Unions,

which federate into 15 State Cooperative Milk Marketing Federations

3. Edible oil

Edible oil Groundnut, mustard, sesame, safflower, linseed, Niger seed, castor seed,

soyabean, coconut and sunflower

Product line Oil, oil cakes, refined oil

Major export

destinations

Europe, Japan, South East Asia, Europe, Indonesia

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3. Edible oil


in production

Oilseeds are mainly grown in central and southern regions of Madhya

Pradesh, Gujarat, Rajasthan, Andhra Pradesh and Karnataka.

Mustard/rapeseed in the north east, groundnut in the west, soyabean in the

north, coconut oil in the south

Facts India is world‘s fourth largest vegetable oil economy

India is the third largest consumer

Groundnut, soybean and mustard together form about 85 % of the country‘s

oil seed production.

4. Meat and poultry

Meat and poultry Buffalo meat, Goat & mutton, poultry

Product line Frozen and packed mainly in fresh form

(Buffalo, Goat, Sheep and poultry products)

Major export

destinations

France, Germany, China, Italy, Japan, Jordan, Angola, Kuwait, Malaysia,

Netherlands, Oman, Philippines, Portugal, Qatar, Saudi Arabia, Seychelles ,

Spain, U.A.E., U.K., U.S.A & Yemen Arab Rep.


in production

Tamil Nadu, Kerala, Madhya Pradesh and Karnataka

Facts At 485 million, India has the world‘s largest livestock population- accounting

for over 55% and 16% of the world‘s buffalo and cattle populations

respectively (the world‘s largest bovine population). It ranks second in goats,

third in sheep and camels, and seventh in poultry populations in the world.

India ranks among the top six egg producing countries and ranks among the

top five chicken producing countries.

India has always been free from the dreaded Mad Cow Disease (BSE) and

has been free from Rinderpest since 1995. There has not been a single

incidence of Contagious Bovine Pleuro Pneumonia (CBPP) in India during the

previous 12 years.

5. Fisheries

Fisheries Fish, prawns, tuna, cuttlefish, squids, octopus, red snappers, ribbon fish,

mackerel, lobster, cat fish

Product line Chilled & frozen (shrimps, tuna, crustaceans, mollusks), dry, salted, brined,

steamed, boiled, flesh

Frozen and canned products mainly in flesh form (Rohu, Katla, prawns etc.)

Major export

destinations

USA, Japan, China, Singapore, Germany, Saudi Arabia, UK, UAE, Australia &

Russia


in production

Gujarat, Tamil Nadu, Andhra Pradesh, Maharashtra, Andaman & Nicobar,

Orissa

Facts The processing in India is entirely export oriented

India is the third largest fish producer in the world and is second in inland fish

production. India has a natural advantage with a long coastline of 8,118 km

constituting 3937 fishing villages.

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6. Non alcoholic beverages

Non alcoholic

beverages

Tea, coffee, soft aerated drinks, mineral water and other forms of non

alcoholic beverages

Product line Loose, packed

Major export

destinations

USA, Germany, Saudi Arabia, UK & UAE


in production

Tea- Assam, West Bengal, Kerala, Tamil Nadu

Coffee – Karnataka, Kerala & Tamil Nadu

Facts India is the largest tea producer and fourth largest exporter in the world

India is fifth largest coffee producer in the world

The soft drinks constitute the 3rd largest packaged food regularly consumed

after packed tea and packed biscuits.

7. Alcoholic beverages

Alcoholic beverages Beer, wine, country liquor and Indian Made Foreign Liquor (IMFL)

Product line Beer, wine, country liquor, Indian Made Foreign Liquor (IMFL), rum, gin,

vodka etc.

Major export

destinations

USA, Europe, Chile, South Africa


in production

Maharashtra, Karnataka, Kerala, Tamil Nadu, Andhra Pradesh, Goa, Haryana

Facts Liquor industry has been under strict government control

Whisky, gin and rum accounts for almost 90% of the market share

It is expected that the segment will grow by over 7% till 2015

8. Confectionery

Confectionery Sugar, cocoa

Product line Hard boiled candies & toffees, éclairs, chewing gum, bubble gum, mints and

lozenges.

Chocolate bars, mint & gums, chocolate gums, sugar confectionery, Sugar

boiled confectionery, hard boiled candies, toffees, chocolates and other

sugar-based candies

Major export

destinations

USA, Europe, West Asia, African countries, Brazil, Russia


in production

Haryana, Uttar Pradesh

Facts India is the largest producer of sugar in the world

The confectionery market is expected to grow at over 5% till 2014-15.

9. Grains processing

Grains processing Rice, wheat, maize, jowar, bajra

Product line Flour, bakeries, biscuits, starch, glucose, cornflakes, malted foods, vermicelli,

pasta food, beer and malt extracts, grain based alcohol, Non- basmati rice,

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9. Grains processing

basmati rice, wheat and other cereals

Major export

destinations

U.S.A, U.K, Nepal, Sri Lanka, U.A.E. Indonesia, Maldives, Kuwait, Yemen

Arab Rep. Nigeria, Bangladesh, South Africa, Ivory Coast, Philippines, Sudan,

Myanmar, Benin, Thailand & Pakistan


in production

Punjab, Haryana, Uttar Pradesh, Rajasthan, Andhra Pradesh

Facts This segment is expected to grow at over 6% till 2015.

10. Floriculture & seeds

Floriculture Flowers, seeds

Product line Cactus, cut flowers, mushroom, roses, other live flowers etc

Major export

destinations

U.S.A., Japan, U.K., Netherlands & Germany


in production

Karnataka, Andhra Pradesh, Tamil Nadu, West Bengal, Maharashtra,

Rajasthan

Facts Present status and growing trade is still in infancy. Floriculture & Seeds in

India is being viewed as a high growth Industry. Commercial floriculture has

gained importance over the years.

Indian floriculture industry has been shifting from traditional flowers to cut

flowers for export purposes.

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Annexure 5: Recommendations for the FPI Reorganisation of state agricultural board and standardisation of investment process

The Government of India has announced the creation of Agriculture Export Zone (AEZ) implemented

by the Ministry of Commerce, through the Agriculture and Processed Food Export Development

Authority (APEDA), New Delhi – the nodal agency. Under this scheme more than 60 zones covering

35 crops of various fruits, vegetables, spices, cashew, tea, basmati rice, medicinal plants, pulses etc.,

have been identified for promotion. With a view to attract private investment in development of these

zones there is a need to have a uniform state level board which can be termed as State Agriculture

and processed food board covering the various states (this can be achieved by reorganising the

existing state board in a common structure formulated by APEDA). This would make it more effective,

cohesive and user friendly for investors to understand and process investment in multi zones covering

different states in one application.

Setting up of State focused body at APEDA - ASB for domestic and supporting infrastructure

development

Food processing industry requires an evolving frame work to be setup with domestic focus, with

regulation covering user-friendly, hygiene, safety and quality standards, preventing adulteration,

wastage and encouraging growth. The frame work would look at the challenges, from the pre-

harvesting stage till the final processing stage covering the farmer or the producer of fruits,

vegetables and also include the final consumer. This would be only achieved with the active and lead

participation of the states; hence the framework would include a body formed with the various state

boards and APEDA with the main objective of promoting food wealth of the economy involving the

local farmer. This would be sought to be achieved by better co-ordination and evolving the states, to

identify products based on their natural advantage in which they can play a leading role and act a

Champions. The body can be called the APEDA State board- (ASB)

Policy based on the zone identified to create large capacity private investment food parks which

would act as a catalyst for growth in the region. Policy should cover involvement of small farmers in

contract farming under the private food park, with the food park providing required training and

support. Guidelines for the food park created in various states should also cover common supporting

infrastructure like cold storage, bottling plant etc which would not only process the local available

fruits but also be in a position to receive bulk material from other states for packing and distribution in

their zone.

The APEDA State board – (ASB) would also initiate projects to be funded by the central government

and the respective states, to supplement the efforts of the private investor by developing supporting

infrastructure .This would also cover the setting up of R & D labs, research and training institute,

providing courses covering food industry, with specialized courses in certain food products in which

the state is declared as the champion. This will enable gradual coverage of all fruits, vegetable and

other processing eatables for research and development, starting from varieties in which India has an

advantage, distributed among the various states based on their natural advantage and traditional

knowledge. Portals can be developed and maintained by the respective champion states for the fruit

in which they are specializing to market and educate (example www.mango.org ) this would lay a

strong foundation for development of institutes covering the whole country which would lead to

harvesting the untapped potential of this sector.

http://www.mango.org/

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Development of Dairy sector

Dairy development is directly connected with the welfare of the landless and women population hence

has a larger social – economical affect on the economy. As animal husbandry is a state subject, there

is a need to have a common integrated approach between various states, to upgrade and develop

their breeding capacity of good livestock .This can be achieved by APEDA State Board – (ASB) cell

(suggested earlier) which would have representatives of all the states to have a common

understanding and uniform model for development. Such interaction would also encourage learning

and training programs between states.

The dairy policy can be dived in three major components and implemented by APEDA – ASB cell.

States which have grazing land masses but low milk production can be given assistance to

reorganize and upgrade their animal husbandry department. Help of registered non governmental

organizations – (NGO)can also be taken, to increase the livestock count of milk producing animals,

which can be sold (at subsidized rate )to landless and people below the poverty line, after training

them in animal health care and milk collection and management. States like Orissa, Andhra Pradesh,

Maharashtra, Bihar and West Bengal can be considered for this scheme. This would help in

increasing the milk production levels and developing a dairy culture with creation of supporting

infrastructure.

States which have good milk production but lack dairy development like Uttar Pradesh, Rajasthan,

Punjab and Andhra Pradesh can be assisted through similar body with a different scheme which

creates awareness about benefits of co-operative dairy development, provides training at mass levels

in milk management and provides milk coolers and encourages joint ventures diary development with

established Indian companies. This will help in better milk collection, increasing earnings and social

welfare.

States like Gujarat which have created successful dairy development can be assisted by encouraging

value addition and research in high value products. Expertise of co-operative can also be used for

training and developing similar models in other states.

Infrastructure development

Each Taluka should have post harvesting storage facility which should be minimum 3 numbers of 20

mt capacity each (20 mt X 3 compartments ) with + 4/ + 5 degree temperature moderation . As many

regions still lack uninterrupted electric supply, a country wide innovation contest can be held in which

packaging institutes and students can also participate to make prototype of such cold storage

systems which smaller capacity also ,which can run on alternative fuel including solar energy. This

will give us new products and concepts, which can be further developed by our professional institutes

to come up with a final design, which can be developed, patented and mass produced to cover the

rural food processing scenario.

The first priority for this sector would be to develop innovative cost effective pre and post harvesting

techniques, by involving various institutes specializing in handling, packing and agro–education.

Example; A simple cost effective nylon net can be designed to be spread below the fruit tree midair to

cover and catch the fruits which fall. This can be tried for high value fruits.

Food processing industry requires large capacity and huge investment to cover pan India locations.

GoI should encourage companies with tax and other benefits, to setup large scale integrated food

parks. Such parks would have all required facility in-house, mandated by the policy and would

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encourage development of support facility and collection of perishable cargo from the region. This

would lead to better value creation and realization, leading to more cash crop plantations benefiting

the rural population.

Rural thrust

Industries creating products and adding value from crops like bajra, jowar and barley should be

encouraged with incentives for expansion and to create new capacity in selected identified areas.

This would help in better utilizing of shallow land helping the poor and marginalized farmer .Malt

based industries can add value by producing products used in breweries, distilleries, confectionery,

pharmaceuticals.

Meat Products

India's export of meat and meat products reached Rs. 3,224 crores during 2006-07. Frozen bovine

meat dominated the exports with a contribution of over 97%. The demand for bovine meat in

international market has sparked a sudden increase in the meat exports from India. The main

markets for Indian bovine meat are Malaysia, Philippines, Mauritius, and Gulf countries. (Source:

Directorate General of Foreign Trade, 2007)

Meat exports is a segment which requires high investment(up to 100 crores) due to the process

involved with chilling plant and cold storages, with supporting infrastructure to monitor the health of

the livestock, to ensure that they are disease free and the meat is fit for export meeting the required

health quality parameters.

Buffalo (bovine) meat is a segment where India has an advantage due to the large livestock of

buffaloes (Largest in the world with around half of the world‘s buffalo population).

States (based on their buffalo population) can be asked to identify locations where modern animal

abattoirs can be setup. Based on the proposals received from the states a feasibility study can be

conducted by APEDA to arrive at the capacity and expected stock in livestock requirement. The

feasibility study would also include an environment assessment for effluent treatment, with availability

of large amount of water, power and land for packing plants where retail packing can also be made to

add value to the final product.

Guidelines considering the Indian sensitivity should be drawn up, which would cover the

transportation vehicles, timing and health standards and methods to be followed .A policy in which the

major buyers of meat especially in the UAE can be targeted to invest and develop modern abattoirs

can be formulated. The company setting up the abattoir would also be required to incorporate a

balance of social benefit along with scientific management and upgrading of generic resources of

livestock. The main abattoir meat plant could be located in a remote location and connected by

various offices across the state, with mobile animal hospital units to provide health care and treatment

to the animals to ensure disease free and healthy livestock.

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Annexure 6: Food laws

Various food laws applicable to food and related products in India

Prevention of Food Adulteration Act (PFA), 1954 and Rules (Ministry of Health & Family

Welfare): Covers specifications related to food colour, preservatives, pesticide residues, packaging

and labelling, and regulation of sales. The Standards of Weights and Measures Act, 1976, and

Standards of Weights and Measures (Packaged Commodities) Rules, 1977: Designed to

establish fair trade practices with respect to packaged commodities

Agriculture Produce (Grading & Marking) Act (Ministry of Rural Development).

Essential Commodities Act, 1955 (Ministry of Food & Consumer Affairs).

Fruit Products Order (FPO), 1995: Specifications and quality control requirements regarding the

production and marketing of processed fruits and vegetables, sweetened aerated water, vinegar, and

synethic syrups.

Meat Food Products Order, 1973 (MFPO): Administers the permissible quantity of heavy metals,

preservatives, and insecticide residues for meat products

Milk and Milk Products Order, 1992: Regulates the production, distribution, and supply of milk

products; establishes sanitary requirements for dairies, machinery, and premises; and sets quality

control standards for milk and milk products.

The Food Safety and Standards Act, 2006: In August 2006, the Government of India had passed a

new legislation Food Safety and Standards Act. The Act proposes establishment of a new authority,

the Food Safety and Standards Authority, reorganisation of scientific support pertaining to the food

chain through the establishment of an independent risk assessment body and a new Food Law,

merging eight separate Acts.

o The Infant Milk Substitutes, Feeding Bottles and Infant Foods (Regulation of Production, Supply

and Distribution) Act, 1992 and Rules 1993.

o The Insecticide Act, 1968.

o Export (Quality Control and Inspection) Act, 1963.

o Environment Protection Act, 1986.

o Pollution Control (Ministry of Environment and Forests).

o Industrial Licenses.

o BIS Act, 1986.

o VOP (Control) Order – 1947.

o SEO (Control) Order -1967.

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Annexure 7: Licensed FPI units in the country The detailed list of licensed units under various states as on 1st Jan 2008

Sl.

No

State No. of

licenses

Sl.

No

State No. of

licenses

1 Maharashtra 1240 18 Bihar 52

2 Uttar Pradesh 638 19 Assam 48

3 Tamil Nadu 577 20 Orissa 38

4 Kerala 483 21 Jharkhand 30

5 Gujarat 461 22 Chhattisgarh 25

6 Karnataka 409 23 Pondicherry 22

7 Delhi 394 24 Chandigarh 20

8 Haryana 372 25 Manipur 14

9 Punjab 336 26 Meghalaya 11

10 West Bengal 325 27 Dadra Nagar Havali & Daman Diu 10

11 Andhra Pradesh 321 28 Nagaland 8

12 Rajasthan 244 29 Andaman & Nicobar 7

13 Himachal Pradesh 154 30 Tripura 6

14 Jammu &Kashmir 128 31 Sikkim 3

15 Madhya Pradesh 127 32 Mizoram 3

16 Uttaranchal 120 33 Arunachal Pradesh 2

17 Goa 108 6437

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Annexure 8: Competitor countries in food processing

Brazil

The food industry in Brazil is one of the economic driving forces in Brazil. It accounts for 20% of all

industrial establishments, 12% of industrial jobs, 14% of production value and around 25% of Brazilian

exports. The products exported include wheat, bananas, apples, soybeans, maize, coffee, animal

products like chicken meat, beef, pork and processed food like sugar ( raw and refined), chicken meat, oil

of soybeans, orange juice ( concentrated), beef and pork. The Brazilian packaged foods and meats

market grew by 4.6% in 2007 to reach a value of US$ 71 billion.

In 2012, the Brazilian packaged foods and meats market is forecast to have a value of $87.4 billion, an

increase of 23.1% since 2007. Agribusiness is a matter of survival for Brazil and the focus is on creation

of large farms to grow crops for export. Brazil is spending millions of dollars on research to transform

savanna scrubland, into productive farmland. It is using the World Trade Organization and other

international trade agreements to challenge U.S. and European subsidies and open up markets.

The Brazilian food industry adheres to Good Hygienic Practices (GHPs), whose implementation is

ensured by official regulations of National Agency of Sanitary Monitoring (ANVISA) of the Ministry of

Health. In addition, the exporting companies also adhere to Hazard Analysis Critical Control Point

(HACCP) and Good Agricultural Practices (GAP) norms. In addition, there are specific technical training

and academic education provided in the field of food technology. These training programs are full time

courses and range between 2 to 3 years with around 58 B.Sc programs, 31 M.Sc programs and 19 PhD

programs catering to food technology courses.

Australia

Indian wine manufacturers face major competition from Australia. Australian wine has won an

international reputation for quality and value. Wine grape growing and winemaking are carried out in

each of the six states and two mainland territories of Australia. In 2006–07, sales of Australian wine

totalled approximately 1.23 billion litres of which 449 million litres were sold domestically and 786 million

litres were exported. Australian wine exports were worth $2.87 billion. Australia‘s largest wine export

market in 2006–07 was the United Kingdom (269 million litres, worth $977 million), closely followed by the

United States (215 million litres, worth $856 million). Other leading destinations for Australian wines

included Canada, Germany and New Zealand.

Australia maintains national standards for wine that are administered by both the state and territory

governments. Federal regulations focus on quality control. The Australian federal government assists the

industry by improving the trade environment (redressing barriers to trade) and by improving the domestic

economic operating environment. The Australian Wine and Brandy Corporation promote and control the

export of wine and brandy. The Grape and Wine Research and Development Corporation is the body

responsible for investing in grape and wine research and development, on behalf of the Australian wine

industry and the Australian community.

Australia‘s reputation as one of the most technologically advanced wine-producing nations owes much to

the industry‘s emphasis on research and development. A number of Australian universities and other

tertiary education institutions offer courses in viticulture and oenology.

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In addition, Australian government supports in the branding of their wines in a very proactive manner by

directing its consulates across the globe to order and serve only Australian wine at their consulate

centres.

Kenya

One of the competitors for India in tea is Kenya, which is the largest exporter of tea in the world. Tea

production in Kenya has expanded dramatically in the last 10-12 years and it has replaced coffee as the

highest foreign exchange earner. Kenyan tea has also consistently been certified as meeting the highest

standards set by various world bodies. This is because, the planting materials released to growers are

carefully selected by Kenyan scientists to ensure only high quality, high yielding and pest and disease

resistant elite clones are planted

Tea is grown on the slopes of highlands within the altitudes of between 1500 to 2700 m, above sea level

These regions are endowed with an ideal climate for tea growing. The tropical volcanic soils are rich in

nutrients and give the tea a unique flavour and character. The rainfall in these regions ranges between

1200-2700 mm annually. Currently, about 62% of the total crop in the country is produced by the

smallholder growers who process and market their crop through their own management agency, Kenya

Tea Development Agency (KTDA) Ltd., which is the largest single producer of tea in the world. The

balance of 38% is produced by the large scale estates, which are managed by major multinational firms

associated with tea in the world. The main buyers of Kenyan tea are Pakistan who imports about 23% of

the total exports followed by the United Kingdom, Egypt and Yemen.

The tea industry in Kenya is fully liberalized and the marketing of tea is independently carried out by trade

members. However, the Tea Board of Kenya in its capacity as the apex body in the industry plays a

pivotal role in strengthening the traditional markets for Kenyan tea as well as diversification into new

markets. For this reason the Board is involved in both local and international promotion of Kenyan tea

through participation in local and international fairs, symposiums, seminars and as well as subscribing to

membership of various Tea Councils and Associations across the world.

The tea sub-sector currently offers a number of investment opportunities for those wishing to invest in the

industry. Some of these include investment in tea plantations and processing and packaging of tea for

export under the Manufacturing Under Bond (MUB) or the Export Processing Zones programs. The

attractiveness of Kenya as an investment location for the tea sub-sector is further strengthened by the

presence of big multinationals operating in the sector in Kenya

Bangladesh

In Bangladesh, fisheries are an important sector of the economy and contribute to more than 5% of the

country‘s Gross Domestic Product (GDP) and more than 6.2% of the foreign exchange earnings. 95% of

the total fish products are exported to EU countries, USA and Japan. The balance 5% is exported to the

countries in South East Asia and Middle East. Some of the inherent strengths of the Bangladesh shrimp

industry include:

processing capacity is underutilized

willingness to invest in safety and quality improvements

vast pool of semi-skilled labour/skilled personnel with over three decades of experience

labour force is competitively priced

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production technology is with minimal use of chemicals/ antibiotics and relatively pollution free

environment

potential to increase volume of production with transfer of technology

opportunity to export mixed containers/mixed product

In addition, as indicated earlier, the developed nations are assisting the Bangladesh shrimp industry by

providing them with required support in duty rate cut. For e.g the Indian shrimp exports to US and Europe

are required to pay an import duty of 10.6% and 4% respectively, while the exports from Bangladesh

have zero import duty. In addition, there is no lobby for encouraging the exports of Indian sea food, while

there is a strong lobby from the Bangladeshi side.

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Annexure 9: List of respondents

Automobile and Auto components

West South North East

Atul Auto Captain Tractors Decora Auto Forge ECHJAY Ind Gati auto General Motors Harsha Engineers Hindustan Composites Kadavani Forge Kalyani Carpenter Matric Metallics Nikoo Forge Orbit Bearings P.M Diesels Panchnath Auto PDF Rolex Rings Silver Forge Vikrant Auto Gatge Patil Mahindra Intertrade Apollo Tyres

Torsion products Andromeda Energy Shakthi automotive Group RSM Autokast Ltd. Pricol Limited Avasarla Rapsri VST tillers and tractors Bosch Deplhi automations Vishnu Forge Ramind Cold Forge Private Limited Rane Engine Valve Ltd MMG India Pvt. Ltd Rambal ltd. Simpson & co. Ltd. Power System (Madras) Pvt.. Ltd.

Eicher motors KDR Auto Maruti Suzuki Onassis Auto Saini auto spares Windsor Exports Auto Ignition Ltd. Bajaj Motors Benda Amtek Ltd./ Amtek Auto Ltd . Clutch Auto Ltd. Hella India Lighting Ltd. Indication Instruments Ltd J B M Auto Ltd. Jamna Auto Knorr bremse India Ltd. Life long India Ltd. Lumax Industries Ltd. Mark Exhaust System. Ltd. Bharat Gears Ltd. Escorts

Karsons Leadstone Energy Waxpol industries Deepak industries East Coast Enteprisers Ltd. Dum Dum Foundry Eng P. Ltd Torsa Calcutta Iron Foundry Balmukand Sponz & Iron Ltd KSE Electrical Pvt. Ltd Calcutta Spring Ltd A.k.V. International Charu Enterprise Graphite India Auro Industries

Chemicals


Ashok Organics Base Metal Inorganics Ceraflux Chloritech Industries Ciba Chemicals Excel Industries Limited Filtra Catalysts GACL Gayathri Chemicals Gujarat Flourochemicals Universal drugs & chemicals GSFC Heaubach Color P Ltd. Jubilant Org Lubrizoll Sandhya Nanvati Coramandal Kutch Chemicals Lanxess Metrochem industries Navin chemicals Sabri chemicals Saurastra solid Somaiya Organo Sujag Fine Chemicals

Bakelite Hylam Pragati Organics Fenoplast Limited Bhagirada Chemicals Sree Rayalaseema Y M chemicals Fleming laboratory Akzo Nobel Coating Karnataka soaps and detergents Nipa Chemicals Ltd. Sai Mirra Innopharm Pvt. Ltd Astrra Chemicals Lab Chemicals Lalchand Bhimraj Kawarlal & Co Pondy Oxides& Chemicals Ltd Grasse International Surfactants & Allied Chemicals Pvt Ltd. H.Chandanmal & Co.

Chemico chemicals Indai Glycols Insecticides India MP Dyechem Qualikem Chemicals S.D Agro Sanchi Chemicals Sharp Menthol India Pvt. Ltd. FCL Technology Product Ltd Ganpati Plast Fab Ltd Mewar Polytex Ltd. K.G. Petro Chem Ltd. Asian Peroxide Ltd. Kanpur Plastipack Ltd. Max Speciality products India Ltd. Sigma Minerals Limited Jalpac India Ltd. Pearl Polymers Ltd. Cosmo films Ltd. Goldane laminates Ltd. Bharat Rasayan ltd. Polyplex Corporation Ltd Macino Plastics Ltd Global Drilling Ltd.

Export Linkers Allied Udyog Pvt. Ltd. Adhesive Devostik JG Chemicals Bengal Chemicals & Pharmeacuticals Ltd Bicco Agro Products Pvt Ltd Reliance Dyes & Chemicals Co DIC Chemicals Ltd Vinmay Pvt. Ltd. Eastern Naptha Chem Ltd Kanoria Chemicals & Industries Ltd Anjana Minerals Company Alfa (India) Amro Feo Trading (P) Ltd Assam State Fertilizers & Chemicals Ltd Meteor Private Limited HJI Prop.GMMCO ltd Jyothy Laboratories Ltd Emamami HiTEch Mica Singhania & Sons Gimpex

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Chemicals


Super chemicals Swati chemicals Tarak Chemicals Transmetal Transpek Silox Rashtriya Chemicals & Fertilizers Ltd Sumitomo Corporation India Pvt Ltd

Dauraa Organics Marvel Vinyls Limited Mawana Sugar Ltd Punjab Chemical Ind

Processed Food


Adani foods Aum Agri Freeze Foods Baba Group Foods & Ins Parle group Sula wines Kisan Dehydration Modern foods Nina foods Rasna Inter Saraf foods Temptation foods Allansons Ant international exports Eurofruits MM Poonjajiaji Champagne Indage Cadburys Renuka Sugars Indian Extractions Ltd

Bambino Agro Industries Avanti feeds Creamline Dairy Heritage foods Shakthi Sugars Tea association of TN Amalgam foods Cherukattu Industries Cochin Frozen Sea food association Baby marine Paragon foods Prima Agro Lotus chocolate Sneha Florist Sagar Grandhi Export Pvt. Ltd. Asians pacific Corporation Five Star Marin Export Pvt. Ltd Scant export ltd. Goldmarine Exports Pvt Ltd Sri Sakthi Marine Products Pvt. Ltd Sharat Industries Limited Trident trade house Nila Sea Food Pvt. Ltd. Cresent Sea Food Mohan mutta Export .Pvt. Ltd SSF Limited Farm Suzanne Pvt. Ltd Welcome Fisheries ltd.

Darshan foods Guruji foods Haldiram foods Imperial malt Temptation Paras Dairy Shiv Global Surya Foods Modern Dairies Ltd. Rana Sugar td. SBEC Sugar Ltd. Milk Food Ltd. Surya Foods Agro Ltd. Sudarshan Overseas Ltd. Domino Pizzas Pvt. Ltd. Shri BANKEY Behari Foods Kejriwal and Co. Paam Eatables Ltd. Param dairy Ltd. Field Fresh Foods Pvt Ltd. DAV Exports Sita Shree Foods Kohinoor Foods Ltd. Pioneer Agro Extracts Ltd. Mohaan foods Ltd. Herman Milk Food Ltd. Kla Rice India (p) Ltd.

Chamong Tea Exports Ambo Exports Anmol Biscuits Ltd Assam Company Ltd Bengani Exports (India) Pvt Ltd Calcutta Seafoods Digha Sea Food Exports Radharam Sohanlal Ralli Singh and Grand Sons Pvt Ltd Reform Flour Mills Bengal Tea and Fabrics Ltd Star Tea Company (P) Ltd S.R. Trading MPS Food Products Iran Tea Trading Co. Pvt Ltd A. Tosh & Sons Ltd Elque & Co PS Trading Dinmay Exim Avenue (P) Ltd Teekay Marines Pvt Ltd Singhania Rungajuna Tea & Industries Pvt Ltd Madhu Jayanti International Ltd Balaji Agro Pvt. Ltd Bay Sea Food (P) Ltd S.K. Exports (P) Ltd Konark Aquatics & Exports Private Limited Falcon Marine Exports Ltd Kanco Enterprises Ltd

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Textiles and Apparels


Ajantha Universal Fabrics Alok industries Asarwa mills Avani exports Dinesh mills Jayshri impex Kanan Knitwear Mafatlal Industries Nandan Exim Ltd. Orbit Fabrics NRC Limited Raymond Ventura Textiles Bombay Dyeing Century Textiles Siyaram Silk Mills Mandhana Industries Ltd

Suryalatha Spinning mills Rajvir industries Sanghi group Priyadarshini textiles GTN industries Chitra Impex Suryakiran International Suryalakshmi Cotton mills Suryajyothi spinning mills Suryavamshi spinning mills CAV cotton mills Prathishta textiles Super spinning mills Aruna textiles Harshini textiles Kanpiram mills Shivam Texyarn Lakshmi mills Veejay Lakshmi mills Ramakrishna mills Kaiser knitting company Aspinwall textile Patsping textile Kitex garments Covema filaments Aravind mills Himatsingka limited Natural textile Texport overseas Synergy lifestyle Madura garments Sonal garments

Bharat exports overseas F.A Exports Handicraft & handloom exports Indorama synthetics Century Textiles Jyothi overseas LNJ Bhilwara Prathiba Syntex Ramesh Textiles Shivalik Global STI Ginni Filaments Ltd Ashnoor Textiles Ltd Bhandari Hoseory export Aarti International Overseas Carpets Ltd T T Limited Riba Textiles Ltd. Malwa Fridastries. Ltd M/S Young man Wollen Mills Oswal Wollen Mills Ltd. Rana patycoat ltd. Vallabh Group. Sharman Woolen Mill Ltd. S L P Industries Abhishek Industries Nahar Fiber's Ltd. Ganga Acrowools ltd. D C M Shriram Aacrulic Limmited. H.P. Cotton Textile Mills Ltd. Garg Acrylic Ltd.

J J Exporters Eastern silk Eastern Traders R A International Delta Industries Limited Spincan Manufacturing Company The Naihati Jute Mills Company Ltd Bengal Tea and Fabrics Ltd Bengal Waterproof Limited M.R. Industries & Export Roquitte & Company D P Mitass Boutique ARN-N-ITA Handloom Export Co Cheviot Company Ltd Budge Budge Co Ltd Lalchand Dharamchand Tejijut Kamarhati Jute Co Ltd Uniworth Ltd Reliance Jute Mills (International) Ltd A. Enterprise A1 Champdany Industries Ltd Syndicate Apparel Jais Expo (India) New Hosiery Impex (P) Ltd Kurlon Ltd Pacific Jute Ltd Vibgyor Inc Dulal choudhury (Muga Bastra) Rhino Bamboo

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Others


Shriram Temp EICL Ion Exchange Textile Committee Geeta Shipping Global Saga Logistics Nagarkot Logistics Bombay Customs House Agents' Association Mumbai Port Trust Murmugao Port Trust Rank Shipping Agency Pvt Ltd R & Y Logistics Pvt Ltd

CONCOR ICD - Hyd CWC ICD SIMA Tirupur Textile Association Eroor ICD Chettinad ICD

CONCOR - Pitampur Inlogistics Automotive Tyre Manufacturers' Association, (ATMA) Carpet Export Promotional Council (CEPC) Automotive component Manufacturers Association of India –ACMA Apparel Export Promotion Council (AEPC) The Agricultural and Processed Food Products Export Development Authority (APEDA)

TKM Global Logistics EXIM Bank Scanwell Logistics India Pvt Ltd Innovative Logistics CAPEXIL

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Annexure 10: Clarifications to the queries on the Final Report

indicated by NMCC Ŧ

1. Query 1 – the identification and relocation( if any) of ICDs and cost effective multi-mode

transportation model for moving raw materials and / or finished products of T&G needs to be

dealt with in details with respect to the identified textile cluster

Clarification 1 –

The textile industry of India operates largely in the form of clusters. The major textile clusters so

identified and their distance from the nearest ICD is indicated in the table below-

Sr.

No

Cluster

Location

State Product

Specialization

Nearest ICD/ CFS

1. Guntur Andhra

Pradesh

Power loom &

Ginning

Domestic rail ICD terminal at Guntur

2. Nagari Andhra

Pradesh

Power looms

Weaving –

process

Combined ( EXIM + Domestic) ICD rail

Terminal at Tondiarpet near Chennai at a

distance of around 100 kms

3. Ahmedabad Gujarat Ready Made

Garments

EXIM ICD rail Terminal at Sabarmati,

Ahmedabad

4. Surat Gujarat Power looms

weaving –

Process

Combined ICD rail Terminal at Ankleshwar (60

kms North of Surat).

5. Panipat Haryana Hand loom &

Made-ups

Presence of rail ICD terminals at

Tughlakabad ( distance of 109 kms)

Dadri ( distance of 123 kms)

Riwari ( distance of 154 kms)

6. Ludhiana Punjab Woolen

Knitwear

Presence of EXIM rail ICD terminal at

Dhandarikalan ( Ludhiana)

7. Jodhpur Rajasthan Hand

Processing

Combined ICD rail terminal at Jodhpur

(Bhagat Ki Kothi)

8. Jaipur/

Sangner

Rajasthan Apparel

Manufacturing

Presence of ICD rail terminal at Kanakpura in

Jaipur( distance of around 13 kms)

9. Kanpur Uttar

Pradesh

Defense

related Textiles

ICD rail terminal at Kanpur

10. Ichalkaranji Maharashtra Power looms

weaving-

Process

ICD rail terminal at Miraj ( at a distance of 16

kms )

Ŧ Annexure 10 contains additional points on the 2009 report titled “Logistics Cost Study” and have been included

based on the request of NMCC . These additional details have been derived from the feedback on the report received by NMCC from some of the key stakeholders

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From the above table it is reflected that most of the textile clusters have an ICD to facilitate their

cost effective EXIM and domestic movement. Barring for the textile cluster of Agartala, for which

the nearest ICD is at Amingaon (at a distance of around 583 kms); the other textile clusters are

strategically located quite close to an ICD. For some of the major textile cluster locations

including Tirupur, Ludhiana, Ahmedabad, Guntur, and Jaipur; the ICD is present in the very

location of the town/ industrial area where the textile cluster is situated. This provides a strategic

fit helping in the reduction of the logistics cost thereby improving the overall production cost and

subsequently the export competitiveness of the textile cluster‟s products.

For some of the textile cluster locations which do not have an ICD located nearby e.g. Kannur and

Bhubaneswar, the same is off-set with the presence of a major port at a distance of 150 km and

100 kms respectively. In this case, the last mile connectivity is undertaken by road.

Accordingly the need for an ICD to be re-located to cater to the particular textile cluster may not

arise, given the proximity of these textile clusters to the ICDs in their region and / or to the

gateway ports. The only exception to the above is the textile cluster at Agartala, for which the

nearest ICD is at Amingaon, which caters to a bulk of the tea cargo originating from Assam.

Relocation of Amingaon to Agartala would not be a prudent move. Accordingly to cater to the

Agartala cluster, a new ICD would then be required to establish. However developing an ICD

requires huge tracts of land, rail connectivity, commitment of two way cargo generation, etc.

Hence a separate cost- benefit analysis study has to be undertaken to justify for the establishment

of an ICD in the vicinity of Agartala.

11. Kannur Kerala Hand looms Around 151 kms away from Mangalore Port.

12. Agartala Tripura Hand looms Around 583 kms away from Amingaon ICD

Terminal

13. Kolkata West

Bengal

Cotton Hosiery ICD terminal at Cossipore, Kolkata

14. Bhubaneswar Orissa Hand looms Nearest ICD terminal at Balasore ( distance of

200 kms)

However Paradip port is situated at a distance

of around 100 kms from Bhubaneswar

15. Salem Tamil Nadu Power looms Domestic ICD terminal at Salem

16. Tirupur Tamil Nadu Cotton

Knitwear

EXIM rail ICD terminal at Tirupur

17. Karur Tamil Nadu Home Textile EXIM rail ICD Terminal at Tirupur situated at a

distance of 93 kms

18. SuramPatti Tamil Nadu Power looms EXIM rail ICD terminal at Tirupur situated at a

distance of 55 kms from Surampatti

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2. Query 2 – The procedural issues at customs depots at ports/ airports/ road tax issues need to

be identified and prioritized for resolving by the respective actors. The proposed logistics

policy should delineate the „must do‟ items and by ‟whom it should be done‟ as far as possible

Clarification 2 - During the course of the study, various issues related to Customs were obtained

from the various stakeholders contacted. The same has already been documented in the main

section of the study report. Some of the major „Must-Do‟ issues related to customs depots at ports

/ airports / road have been enumerated in the table below

Sr.

No

Parameter Issues Suggestions Entity

responsible

1. Interpretation

of customs law

Each Customs officer

has his own

interpretation of the

customs law thereby

causing problems/

delays with the

processing of the

shipments

Need to simplify

procedures and do

away with

ambiguity.

Not to provide /

vest discretionary

powers to the

customs officials,

since then he

interprets the rules

as per his

convenience.

Member (

Customs &

Export

Promotion)

and Member

(Personnel &

Vigilance),

CBEC

2. Excise refunds The Excise department

does not provide any

refund payments for the

month of January,

February and March

citing year end closing

It may be prudent if

the government do

away with the

payment of the

required taxes at

the point of exports

and provide the

exporters the direct

benefit of the taxes,

than have an

elaborate

procedure to have

the charges

reversed, which is

not only time

consuming but

also involves lot of

administrative and

Member (

Central

Excise),

CBEC

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Sr.

No


responsible

other resources'

time which cannot

be quantified

3. Standardization

of Excise forms

While filing for the

excise bond, the

necessary clearance is

not obtained smoothly

and is not given on time.

The No Objection

formats issued by the

Excise Superintendent

is sometimes not

accepted by the Range

officers , saying that the

format is not proper

even though it has been

issued by the same

department

It is important to

have

standardization of

forms and

procedures that

should be followed

and accepted by

the officials.

This will help in

avoiding any

ambiguity in

acceptance of

forms issued by an

officer from the

Excise Department

and not accepted

by another set of

Excise officials

Member (

Central

Excise),

CBEC

4. Refund of

service tax on

commission

paid to foreign

buyers and

agents

Through Notification

number 17 / 2008 dated

1st April, 2008 indicates

“refund of service tax

shall be restricted to

actual amount of service

tax paid or service tax

calculated on two per

cent of FOB value of

export goods,

whichever is less.

The actual service tax

amount paid by the

exporters, amount to

anywhere between 10 to

15% of the FoB value.

Such piecemeal

refund only adds to

the administration

work for both the

government and

exporters without

providing any

immediate relief.

What is important

that the exemption

should be

straightaway given

instead of paying

tax and subsequent

claiming the refund

Director

General (

Service Tax),

CBEC

5. Focus market

schemes

With regards to the

Focus Market Scheme,

there is no proper

notification provided to

the actual ground staff

The government

needs to fine tune

the policy and

inform the ground

staff for the proper

Member (

Customs &

Export

Promotion),

CBEC

of 218

Sr.

No


responsible

regarding how the

incentives and benefits

should be provided

implementation

6. Clearance of

customs

documents

It has been observed

that there would be 15-

20 CHAs gather around

one Customs official

table, each coaxing the

Customs official to clear

his papers. This leads to

confusion and also

delays customs

clearance.

A token number

system shall be

implemented to

avoid queues /

scrambles In

Customs office

Member (

Customs &

Export

Promotion),

CBEC

7. Service tax Though service tax is

exempted for exports

transaction, exporters

are still paying for it.

Clarity is required

on Service tax

issues especially

with regard to the

service tax

incurred by the

CHA , transporter

etc for providing

services for

exports

Director

General (

Service Tax),

CBEC

8. Issue of Excise

B1 bond

The Excise B1 bond17

was earlier issued for

five years. It has been

changed and now the

same is issued for one

year

It has been

suggested by the

exporters that

issuance of the B1

bond may be

increased to five

years again. This

would enable them

to save precious

administrative time

for various export

transactions

Member (

Central

Excise),

CBEC

9. Bottlenecks at

the Petrapole –

Benapole (

At present there is no

agreement between

Bangladesh and India

Need for a formal

agreement between

Bangladesh and

Member (

Customs &

Export

17

The exporter can execute B-1 bond for export of goods without payment of excise duty. The bond can be with

surety or security or only guarantee. The bond should be at least equal to the duty chargeable on the goods, with

such surety or security as the excise officer may approve. The bond can be executed with the Maritime

Commissioners or Assistant / Deputy Commissioner under whose jurisdiction the factory is situated or Assistant /

Deputy Commissioner (Export) as officer authorized by Board.

of 218

Sr.

No


responsible

India-

Bangladesh)

border

for freight and vehicles

movement by road.

Thus, trade has to be

transshipped at the

border.

This transshipment of

cargo is carried out

either by unloading the

cargo in the warehouses

of the other country or

directly from one

vehicle to another in at

the „no-man‟s land‟ at

Benapole (Bangladesh).

At Petrapole (India),

Customs checking is

done at a place other

than within the terminal

premises, which results

in delays and increased

transaction costs.

India to lay down

guidelines for

freight and vehicles

movement by road

Promotion),

CBEC and

Ministry of

External

Affairs

10. Training of

Customs &

Excise officials

Excise and customs

official should be

knowledgeable about

the products they

handle and avoid time

delays

Proper technical

training to the

officers to be

imparted

Member (

Customs &

Export

Promotion)

and Member

(Personnel &

Vigilance),

CBEC

11. Overtime

charges

According to exporters,

Customs charge

overtime charges after 7

pm. Respondent feels

that Customs should

not charge the overtime

charges and should be

on the regular scale.

There should not

be any overtime

charges for any

transactions

Member (

Customs &

Export

Promotion),

CBEC

12. Duties on

rejected export

goods

According to exporters,

rejection and call back

consignments from the

customers is charged

customs duty and

import duty

This issue needs to

be jointly resolved

by DGFT, CBEC

and the concerned

ministries

DGFT and

Member (

Customs &

Export

Promotion),

CBEC

of 218

Sr.

No


responsible

13. Difficulties in

obtaining

export benefits

The shipper has to pay

the import duty to get

his raw material cleared

and he obtains the

benefits only after he

has exported the

required quantity under

the advanced license

scheme.

The shippers are

supposed to obtain their

Export Promotion (E.P)

certificate after the 3rd

to 4th week of the

shipment. But the actual

time period may take

around 3 months. To

avail the benefits, the

shipper has to approach

the DGFT, based on the

E.P certificate issued by

the customs. DGFT

does not check the

physical copy of the E.P

certificate.

The EP certificate

issued by the customs

is uploaded on the main

server, from where the

DGFT accesses and

views the certificate.

Similarly the Advanced

license issued by the

DGFT is again uploaded

on the server for the

Customs to view and

take the necessary

steps with the shipper

concerned.

However the uploading

Need for Customs

to issue and upload

the Export

Certificate within

3rd

to 4th

week of

the export

shipment.

Need to have a

better server

connection for

easily uploading

and viewing of

certificates

between DGFT and

Customs

DGFT and

Member (

Customs &

Export

Promotion),

CBEC

of 218

Sr.

No


responsible

of the E.P certificate and

/ or the advanced

license never happens

in a timely manner, thus

delaying the shipper in

obtaining his incentives

dues. In addition, the

shipper also has to

invest in time and other

resources to follow up

with the customs / DGFT

on the uploading of the

necessary documents.

3. Query 3 – The need for a Regulatory authority at state level logistics also to be elaborated to

have smooth co-ordination with the national Logistics Authority

The same has been incorporated at the end of Chapter 13 under the section “ Need for State

Logistics Authority”

4. Query 4 – The emerging Dedicated Freight Corridors by railways, Delhi – Mumbai Industrial

corridor ( DMIC), network of SEZ and the ICDs, the new and emerging ports etc are to be

grouped in a Future Logistics scenario section with a long term perspective may be

incorporated to improve the benchmark value of the study

The same has been incorporated at the end of Chapter 14 under the section “Future Logistics

Scenario”

of 218

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