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TRANSCRIPT
Intermodal and Multimodal Logistics
Knowledge Paper
September 2012
www.deloitte.com/in
Intermodal and Multimodal Logistics | 2
Intermodal and Multimodal Logistics | 3
Contents
Abbreviations ................................................................................................................................................................... 4
Foreword .......................................................................................................................................................................... 5
The Concept .................................................................................................................................................................... 6
Focus areas for Infrastructure development ................................................................................................................... 10
Regulatory Reforms ....................................................................................................................................................... 23
Logistics Technology trends ........................................................................................................................................... 26
The Way Forward .......................................................................................................................................................... 28
Bibliography & References ............................................................................................................................................. 29
Contacts......................................................................................................................................................................... 30
Intermodal and Multimodal Logistics | 4
Abbreviations
Abbreviation Description
3PL Third Party Logistics
BRIC Brazil, Russia, India, China
CFS Container Freight Station
CONCOR Container Corporation of India
CWC Container Warehousing Corporation
DC Distribution Centre
DFC Dedicated Freight Corridor
DGS Director General, Shipping
ERP Enterprise Resource Planning
FDI Foreign Direct Investment
FICCI Federation of Indian Chambers of Commerce and Industry
GDP Gross Domestic Product
GOI Government of India
GPS Global Positioning System
GQ Golden Quadrilateral
GST Goods and Service Tax
ICD Inland Container Depot
ICTT International Container Transhipment Terminal
IMMTA International Multimodal Transport Association
IR Indian Railways
IWT Inland Waterway Transport
JICA Japan International Cooperation Agency
LASH Lighter Aboard Ship
LPI Logistics Performance Index
MORTH Ministry of Road Transport and Highways
MT Metric Tonnes
MTO Multimodal Transport Operator
NCR National Capital Region
NHAI National Highways Authority of India
NHDP National Highway Development Project
PFT Private Freight Terminal
PPP Public Private Partnership
R&R Rehabilitation and Resettlement
RFID Radio frequency Identification
ROB Rail Over Bridges
Ro-Ro Roll-on/Roll-off
RUB Rail Under Bridges
SaaS Software-as-a-Service
TEU Twenty-feet equivalent unit
Intermodal and Multimodal Logistics | 5
Foreword
India has experienced fast-paced growth over the last decade. Though the growth has
primarily come from the Services sector, manufacturing and exports have also risen
substantially. Logistics as a function is being increasingly outsourced by
manufacturers. However, the Indian logistics sector in many ways still lags behind the
global standards of performance. This is evident from the fact that we are ranked as
low as 46th among 155 countries in the World Bank International Logistics
Performance Index. Comparatively, our neighbour China got the 26th rank. The
average logistics cost in India is around 13% of GDP. Given this, there is a substantial
need to invest in, and improve efficiencies in, intermodal and multimodal logistics
sector so that the friction costs do not impede the desired shifts.
Intermodal logistics is designed to cut transit times, decongest congested modes and
reduce logistics cost. Estimates indicate that intermodal logistics can potentially reduce transit times by 40-50%.
Considering the potential benefits, the Indian Government and the private sector have already done quite a bit to spur
growth in this sector. The Multimodal Transport Act, 1993 is specifically aimed at increasing exports from India. Indian
Railways has invited private sector participation in building freight terminals, wagons and operating container trains with
the objective of improving rail infrastructure and augmenting capacity. It is also investing heavily in the Dedicated
Freight Corridor project. Moreover, Goods and Service Tax as well as FDI in multi-brand retail are expected to bring
around radical changes in back-end logistics infrastructure.
While it presents an array of opportunities, intermodal and multimodal logistics brings along several challenges also. If it
has to grow quickly, all stakeholders need to invest time and effort in its development. In this paper, Deloitte has
identified three focus areas – infrastructure, regulation and technology – which demand attention from the stakeholders.
We have tried to bring out the latest developments in these areas and the status of on-going issues.
Though this may not be a comprehensive listing of all issues, our intention is to serve the purpose of prompting a
discussion on these developments at the conference. We hope that readers find the Knowledge Paper helpful in
obtaining a quick appreciation of these emerging issues and in catalysing a meaningful interaction at the conference.
Warm Regards,
Hemant B. Bhattbhatt
Senior Director, Consulting
Deloitte Touche Tohmatsu India Pvt. Ltd.
Intermodal and Multimodal Logistics | 6
The Concept
Intermodal transport
Intermodal transport is a particular type of multimodal transport, wherein the goods are moved in one and the same
loading unit, for example: containers. Intermodal transport uses more than one mode of transport, however, since the
loading unit remains the same, the goods being transported, are themselves not handled each time there is a change of
mode.
Development of intermodal transport specifically requires growth of loading units which are usable across multiple
modes. Containers are the most commonly known examples. Lately, more innovative methods are being used.
Roll-on/Roll-off: This mode combines different means of transportation (sea and road), and is used most often with
new automobiles, which are shipped by sea and them simply driven off the vessel to the importer‟s warehouse. Heavy
and over-dimensional cargo is also suitable for Ro-Ro transport.
Lighter Aboard Ship: LASH transport is the combination of deep sea and inland waterway transportation. Barges
operating on inland waterways can be loaded onto a LASH and carried across sea to the destination port.
Subsequently, the unloaded barge can carry cargo further to the hinterland.
It must be noted that LASH vessels are expensive. Furthermore, it is necessary to check on the availability of the
special handling facilities necessary in the ports of origin and destination.
Piggyback / Trailer train: This is a system of unitised multimodal land transportation, a combination of transport by
road and rail. It combines the speed and reliability of rail on long hauls with the door-to-door flexibility of road transport
for collection and delivery. The goods are packed in trailers and hauled by tractors to the railway station. At the station,
the trailers are moved onto railway flat cars and the transport tractors, which stay behind, are then disconnected. At
destination, tractors again haul the trailers to the warehouses of the consignee.
The system has undergone refinements and sophistication by the introduction of the so-called "trailer train" which uses
the same trailer as a vehicle on the road and a rail vehicle on the rail. In other words, the trailer moves on its wheels as
a truck on the road but the wheels can be retracted by an air suspension system and connected to a rail bogie for
movement by rail. At the end of the rail journey, the conversion back to being road vehicle is effected for delivery of the
goods to the customers.
Sea train: This is another innovation in the multimodal transport system involving the use of rail and ocean transport. It
is similar to the Ro-Ro system except that in the place of the Ro-Ro vehicle a rail car is used so that geographically
separated rail systems can be connected by the use of an ocean carrier. Typically these vessels are long and thin and
consist of one main deck running the length of the ship. They are quicker at loading trains than general cargo vessels
since the train‟s carriages do not need to be detached from one another.
Intermodal and Multimodal Logistics | 7
Multimodal transport
The International Multimodal Transport Association defines multimodal transport as “the chain that interconnects
different links or modes of transport – air, sea, and land into one complete process that ensures an efficient and cost-
effective door-to-door movement of goods under the responsibility of a single transport operator, known as a Multimodal
Transport Operator, on one transport document”.
Thus transportation of oil or coal cannot be intermodal, but only multimodal because they will have to be “handled” at
the time of changing modes. On the other hand, transportation of containerized goods like fertilizers or grains is mostly
intermodal.
A multimodal transport contract is a single contract for carriage of goods by at least two different modes of transport. A
multimodal transport operator is a person who concludes a multimodal transport contract and assumes responsibility for
the performance thereof as a carrier.
Multimodal transport is beneficial to the shippers in terms of increasing flexibility and reducing cost of logistics. More
specifically, the benefits are:
Single point of contact: Shipper has to deal with and entirely rely on a single counterparty i.e. the multimodal
operator.
Reduces burden of documentation and formalities: A single contract can be negotiated with the MTO. There is
a single responsibility and uniform liability regime.
Saves time and cuts pilferage at the points of transhipment: The MTO maintains necessary communication
links and coordinates with each party throughout the logistics chain, reducing risks of loss of time, pilferage and
damage to cargo at transhipment points.
Reduces cost: The MTO, being an intermediary, can manage to get attractive freight rates. This brings down the
overall logistics cost for the shipper and in the long term, increases demand. Indirectly, it also brings down cost of
exports making them more attractive.
Makes the best of each mode: It is possible to combine the specific advantages of each mode in the trip such as
flexibility of road haulage, larger capacity of railways and the lower costs of water transport in the best possible
fashion.
Frees up working capital: An indirect benefit to the shippers is that faster transit times allows companies to keep
less inventory on hand which in turn frees up precious working capital.
Better distribution of wealth: Multimodal transport brings down the virtual distance between the origin and
destination of cargo. This helps in shifting industrial growth from the traditionally developed coastal regions to the
landlocked interiors of the country.
The main stakeholders involved in the multimodal system of transportation are regulatory authorities, customs, shippers,
multimodal transport operators, logistics intermediaries like ocean carriers, freight forwarders, terminal operators,
ancillary service providers, etc. The MTO acts as an agent for the shipper. Their relationship is governed by a single
multimodal transport contract. The MTO, in turn, enters into separate contracts with transporters, cargo consolidators,
ports, airports etc., coordinates customs procedures and thus manages end-to-end freight movement.
Intermodal and Multimodal Logistics | 8
A multimodal transport system usually enables the shipper to enjoy certain additional value added services. One or
more of the following services may be provided by MTOs –
Consignee billing
Logistical support (inventory control, distribution and reporting) for time sensitive products
Pickup-on-call for air freight
Electronic tracking of shipments
Delivery confirmation service
The multimodal transport sector is still nascent. With growth comes competition. The key differentiator among the MTOs
would then be quality of service as indicated by factors like speed, door-to-door capability, reliability, security, safety,
flexibility and availability.
The Principal Issues
For developing an efficient intermodal/multimodal transport system, the need of the hour is to look into the three
principal issues – infrastructure development, regulatory / policy reforms and investment in technology.
1. Infrastructure development: Intermodal/Multimodal transport builds on the operational efficiencies of the transport
system. Without adequate infrastructure, the incremental benefits of intermodal transport will be negligible.
Necessary infrastructure development to provide for compatibility between modes, less friction costs, low dwell
times, less pilferage and increase in containerization is basic to growth of intermodal transport.
2. Regulatory reforms: Intermodal/Multimodal transport operations need to be appropriately regulated with an
objective of controlled development of the sector, driving growth while mitigating possible risks. Generally, controls
may be placed on licensing, pricing, contracting and service standards. For the growth of international intermodal
transport, necessary changes may be required in the customs procedures and export-import procedures among
others. For domestic transport, changes in Cabotage laws, octroi levies, privatization of railways and such moves.
might be the need of the hour.
Shipper
Multimodal Transport Operator
(MTO)
Regulatory Authorities
Truckers / Indian Railways /
Shipping lines
CFSs / ICDs
Ports / Airports
Single Multimodal transport contract
Individual contracts
Intermodal and Multimodal Logistics | 9
3. Investment in technology: An Intermodal/Multimodal operator enters into a single contract with the shipper, but
multiple contracts with transporters, customs agents, ports / airports, railways, warehouse operators and other
related entities. The voluminous documentation requirements and need to coordinate with a number of parties
creates a need for appropriate information technology support. Additionally, the transport and warehousing
technology must itself be up-to-date to facilitate accurate tracking of shipments and reduce logistics cost and time.
The following sections of the knowledge paper focuses on the aforementioned three issues and detail the current
scenario, challenges faced and reforms required.
Intermodal and Multimodal Logistics | 10
0%
2%
4%
6%
8%
10%
12%
14%
16%
India BRIC Developed countries
% o
f G
DP
Average logistics cost in India as a % of GDP is higher than even the other BRIC countries
Focus areas for Infrastructure
development
The major drivers of the logistics industry are economic growth and transport costs. India has been growing at an
average rate of over 7.5% over the last 10 years1, primarily driven by the services sector. Manufacturing and exports
have also shown considerable growth. However, the logistics sector has not kept pace. Logistics costs in India are also
high as compared to other countries.
Source: Report of the Indian Foundation of Transport Research and Training
The Indian transportation sector when benchmarked with global standards seems to be lagging far behind, both in terms
of capacity and efficiency. Primary reasons for this are lack of capacity creation, lack of funds and delays in projects.
Mode Particulars India Global
Ro
ad Average speed of truck (km / hr) 25-35 60-80
Average distance covered by a truck in a day (km)
250 400-450
Four lane highway length (km) 7,500 34,500 (China)
Po
rts
Turnaround time 4.67 days (major ports in 2010-11)
7-10 hrs (Hong Kong)
Pre berthing delay (hrs) 55.7 (major ports in 2010-11)
3-5 (Hong Kong)
Average output per ship berth day („000 tons) 10.735 45-60 (Australia)
Ra
il
Double Line (km) 17,400 26,400 (China)
No. of locomotives (nos.) 8,867 18,500 (China)
Freight Wagons (nos.) 2,35,000 5,78,000 (China)
Source: Deloitte Research
1 World Bank, Deloitte Analysis
Intermodal and Multimodal Logistics | 11
This is quite evident from India‟s 46th rank among 155 countries in the World Bank‟s International Logistics
Performance Index Global Ranking. India‟s LPI score was 3.08 (on a scale of 1-5, with 5 being the highest). Singapore,
with a score of 4.13 was the top performer, the USA scored 3.93 and came 9th whereas India‟s neighbour China came
26th with a score of 3.52. The following chart shows scores of India in comparison to Singapore, USA and China on
each of the five areas on which countries were scored.
Source: World Bank's International Logistics Performance Index Global Ranking
0
1
2
3
4
5
Customs
Infrastructure
International shipments
Logistics competence
Tracking & tracing
Timeliness
India ranks 46th among 155 countries on Logistics performance
Singapore United States China India
Intermodal and Multimodal Logistics | 12
This section identifies the key areas in infrastructure development which need focus in order to develop
intermodal/multimodal transport.
Containerization
Containerization is the primary driver of growth of intermodal logistics. Container traffic at major ports has almost
doubled in the past 5 years. Globally, container traffic has grown at around 10% per annum over the past 20 years.
Source: Indian Ports Association
According to estimates, the world container throughput will reach 1 billion TEUs by 2020, which is almost double of the
current container traffic. The emerging Asian & African Countries are expected to be the prime movers in achieving this
growth. Most of the shipyards are filled with orders for container ships of capacity over 10,000 TEUs. These container
ships will form a major part of the world fleet in the coming years.
0%
5%
10%
15%
20%
25%
0
20
40
60
80
100
120
2005-06 2007-08 2008-09 2009-10 2010-11
CA
GR
(%
)
Mil
lio
n t
on
nes
Container Traffic at Major Ports has grown at a CAGR of 12.97% over the last 5 years
Container Traffic (in MT) Growth in Container Traffic (in %)
Intermodal and Multimodal Logistics | 13
The advantages of containerization include among others, minimal or no damage to goods, optimum utilization of
storage & warehousing capacity, technology adoption due to mechanized handling required for containers, reduction in
transport time and end-to-end delivery of goods, ultimately leading to significant cost savings.
Source: Indian Ports Association, Deloitte Analysis
Presently, just over 20% of traffic at Major ports is in containers. Major ports together handled 120.22 million tonnes of
container cargo in 2011-122. It is estimated that the total container traffic will go up to 680 million tonnes by 2025-263,
which will be 42.61% of total traffic. To cater to this demand, there is a need to quickly ramp up container infrastructure.
Indian ports have been investing in building container infrastructure. As shown in the following table over Rs. 16,000
crores are planned to be invested, adding almost 20 million TEUs of handling capacity at major ports in India.
Port Name Planned Capacity creation (million TEUs)
Estimated Project Cost (Rs. crores)
JNPT – 4th container terminal 6.80 6,800
Chennai 4.00 3,686
Cochin (Vallarpadam) 4.00 2,118
Mumbai Port 1.20 1,461
Ennore 2.40 1,407
JNPT – 330m extension 0.60 600
Tuticorin 0.60 312
New Mangalore 0.37 270
Total 19.97 16,654
Source: Update on Indian Port Sector (31.03.11), Transport Research Wing, Ministry of Road Transport and Highways; Deloitte Research
Additionally, capacity creation projects are being undertaken at a large scale at ports of Mundra, Rewas and Kattupalli.
2 Source: Indian Ports Association
3 Source: Port Development Plan For Major Ports - Port of Rotterdam Authority
0%
5%
10%
15%
20%
25%
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Share of Containerized cargo out of total cargo at major ports has been steadily rising
Intermodal and Multimodal Logistics | 14
Dry Ports
The present Indian logistics set-up has dry ports in the form of Container Freight Stations and Inland Container Depots.
They are equipped with fixed installations and offer services for handling and temporary storage of import / export laden
and empty containers carried under customs control. Transhipment of cargo also takes place from such stations.
As per the Ministry of Commerce, as on 30th June, 2011 a total of 247 CFSs/ICDs were approved by the Inter-
Ministerial Committee out of which 73 were under implementation and the rest were fully functional. To support the
planned container terminal projects at major and non-major ports CFSs/ICDs are expected to come up in their vicinity.
According to a study, by the time all phases of the Vallarpadam ICTT are commissioned, it is expected to create a need
for around 20 CFSs in the region.
Drivers & Challenges for the development of CFS / ICDs
Though increase in container traffic is driving growth, dry ports face several challenges as well. The initial costs of
developing facility are quite high – the main cause being rising real estate prices. Compliances and procedures required
for cargo movement play their part in increasing dwell times and delaying cargo movement. Also, the sudden surge in
this sector has brought in a lot of competition for the existing players.
With focus on intermodal/multimodal logistics, multimodal logistics parks are now being planned, which are much larger
than CFSs/ICDs and provide several value added services. Private players have already started coming up with such
logistics park on a large scale with state-of-the-art infrastructure. Several parks have also been planned along the
Dedicated Freight Corridor, as has been discussed in the following sections.
Intermodal and Multimodal Logistics | 15
92.85
91.88
97.6
92.3
90.98
86
88
90
92
94
96
98
100
2005-06 2006-07 2007-08 2008-09 2009-10
% c
ap
acit
y u
tili
sati
on
Major ports in India are operating above optimum capacity
Port Sector in India
India currently has 12 major ports and 187 minor ports. Port traffic grew at 7.66% p.a. between 2005-06 & 2010-11.
While non-major ports registered a double-digit growth at 13.55%, traffic at major ports grew only at 5.37%. POL, iron
ore, and coal constitute a major chunk of traffic at both major and non-major ports.
Source: Indian Ports Association (IPA), Deloitte Analysis
P = Projected
Although the sector witnessed significant growth in cargo traffic, it has still not been able to optimize operations owing to
technical and institutional constraints as under –
Capacity constraint4: As of 2009-10, around 8 of the 12 major ports were operating at more than optimum range
of 70-75% capacity utilisation. Vizag, Tuticorin, Mormugao, & Mumbai ports are in fact experiencing more than
100% utilization. Correspondingly, the average capacity utilization at non-major ports was around 77% in 2009-10.
Source: Indian Ports Association
4 Indian Ports Association
423,570 519,159 561,090 570,032
150,120
206,380
288,862 314,785
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
2005-06 2007-08 2009-10 2010-11 (P)
(in
000 T
on
s)
India's Port Sector Traffic Growth
Major Ports Minor Ports
Intermodal and Multimodal Logistics | 16
Inefficient cargo handling & low productivity: A study placed in the Parliament in February, 2010 by the
Comptroller and Auditor General of India, highlighted that cargo handling services at ports were inefficient. A
predominant number of berths did not have the dedicated facilities necessary for the quick handling of cargo.
Around 55% of the equipment available at all ports, except at JN Port, were running beyond their rated economic
lives, resulting in low productivity.
The average pre-berthing time at major ports varies between 0.4 hours and 23 hours. The average turnaround time
also varies between two to five days. In contrast, the turnaround time at globally competing ports like Singapore or
Hong Kong is between four and six hours.
Inadequate drafts & poor connectivity with other modes: Future shipping trends point towards larger vessels
with a minimum of 6000-8000 TEUs and a few vessels with 12000-14000 TEUs. These future generation vessels
would require drafts between 13 to 15.5 mtr.
Due to current draft restrictions, several Indian ports are unable to handle larger vessels typically with more than
9.5 mtr. draft. This could lead to shipping lines moving to other ports. Therefore, there is a need to firm up dredging
plans and also improve productivity through removal of constraints like inadequate infrastructure, absence of
seamless connectivity with other modes, etc.
The dredging of the JNPT approach channel has just begun. The channel is planned to be dredged to a depth of
13.9 mtrs. in the first phase and then to 16.1 mtrs. in Phase 2. This is a promising sign for the sector.
Cumbersome institutional arrangements & other issues: Institutional and regulatory arrangements need to be
reviewed to provide for speedy development of ports. Similarly, the procedure regarding environmental clearances
needs to be rationalized.
Other issues facing Indian ports relate to high cost structures, different tariff setting frameworks for major & non-
major ports, port security, land acquisition, etc.
Intermodal and Multimodal Logistics | 17
25
80
105
0
50
100
150
Road Transport Rail Transport Inland Water TransportTo
nn
e-k
m p
er
litr
e
IWT is more fuel efficient as compared to road and rail transport
Adequate connectivity to the port acts as a catalyst for the port‟s growth. Despite having proper depth and adequate
facilities, ports may be stranded for the want of containerized cargo, while other ports may be burdened with an excess
they can‟t handle. The Committee of Secretaries (CoS), Government of India has recommended that a minimum 4-lane
road and double line rail connectivity be provided at major ports. Minor ports, which are now showing high growth, also
consider connectivity as an important parameter to further growth in business.
Type of cargo, place of delivery and customer preferences are among the various factors considered while deciding on
the mode of transport of goods. Keeping in mind the planned capacity expansions and the projected traffic numbers, the
Ministry of Shipping has planned various rail-road connectivity projects for the major ports. The following table enlists
the phase-wise rail-road projects planned by the Ministry.
Port Investments (Rs. in crores)
Phase 1 +
Ongoing
Phase 2 Phase 3 Total Investment
(2010-12) (2012-17) (2017-20)
Chennai 1,000 - 225 1,225
Kolkata 30 1,075 - 1,105
V. O. Chidambaranar 127 640 300 1,067
Ennore 576 446 - 1,022
Cochin 803 40 - 843
Visakhapatnam 396 150 200 746
JNPT 681 45 - 726
Paradip 615 - - 615
Mumbai 333 - - 333
Kandla 45 116 - 161
New Mangalore 70 - - 70
Mormugao - - - -
Total 4,676 2,512 725 7,912
Source: Maritime Agenda 2020
Inland Waterways
India has navigable inland waterways of almost 14,500 km, of which 5,200 km of major rivers and 500 km of canals are
suitable for mechanized crafts. Currently, IWT handles only around 1% of total inland cargo transport. There is potential
for other cargo such as coal, dry bulk, break bulk and containers to be transported economically and effectively through
IWT.
Inland Waterway transport is environment-friendly and less costly when compared to other conventional modes like
road and rail. It reduces the traffic congestion problems on road and rail.
Source: IWAI
Intermodal and Multimodal Logistics | 18
IWT projects demand comparatively lower investments both for creation and sustenance as compared to other modes
of transport. IWT is ideal for transport of coal, over-dimensional cargo and project cargo. However, until now inland
waterways have largely been used for transporting boulders, cement and waste oil.
Source: Indiastat website
As shown in the following table, the coming decade promises investment worth Rs. 30,710 crores for the development
of IWT projects. Since, development of IWT in India is still in its initial stages, significant government funding is
necessary. Still given the long term benefits, the private sector is expected to invest over Rs. 19,000 crores over the
next decade.
Particulars Budgetary Support
(Rs. in crore)
PrivateFunding
(Rs. in crore)
Total (Rs. in crore)
On-going projects 4,175 8,400 12,575
New projects 6,630 11,505 18,135
Total 10,805 19,905 30,710
Source: Maritime Agenda 2020
17,182 , 35%
8,100 , 17%
7,500 , 15%
7,300 , 15%
4,500 , 9%
1,500 , 3% 1,500 , 3%
550 , 1%
550 , 1%
200 , 1%
CIWTC transported around 49,000 tonnes of cargo in 2010-11 most of which was low-value cargo
Boulder
Waste Oil
Pet Cake/Personal Effect
Peas
Cement/W. Cement
Fly Ash
Cement Clinkers
POL
Miscellaneous
Aluminum Block
Intermodal and Multimodal Logistics | 19
Road Transportation
Roads have always been the primary mode of transport in India. India has one of the largest road networks of
approximately 42.36 lakh kms. As per the Road Transport & Highways Department around 60% of the total freight and
around 87% of passenger traffic is carried by Indian roads. Traffic is forecasted to grow at around 8-10% p.a.
The quality of the road infrastructure remains a big concern. Analysis of the transport budgets of some states shows
that the amount of money allocated to the sustenance of the existing road network far surpasses the allocation to the
new road development. In some regions, it is almost double the budget for new works.
The NHDP is a single multi-crore project of NHAI and GOI with several phases. The following table shows the status as
on 31st December, 2010 of the NHDP projects:
Phases Total Length
(in km)
Length Completed (in
Km)
Likely date of
Completion
I - GQ, North South-East West
corridors, Port connectivity &
others
7,498 7384 N/A
II - 4/6-laning North South-East
West Corridor, Others
6,647 4934 Dec -2010
III - Upgradation, 4/6-laning 12,109 1968 Dec-2013
IV- 2- laning with paved
Shoulders
20,000 - Dec- 2015 (as per
financing plan)
V - 6-laning of GQ and High
density corridor
6,500 443 Dec-2012
VI - Expressways 1000 NIL Dec-2015
VII - Ring Roads, Bypasses and
flyovers and other structures
700 km of ring roads/
bypass+ flyovers etc.
NIL Dec-2014
Source: Annual Report of MORTH, 2010-11
It is noteworthy that most of the projects under NHDP are proposed to being developed in association with private
players / developers on PPP basis.
The following table represents the allocation from the Central Road Fund under various heads for the year 2010-11. We
can clearly see that the National Highways (including Expressways) allocation clearly outclasses the other allocations.
Allocation Head Amount (In Cr.)
Grant to State Governments and UTs for State Roads 1,893.75
Grant to States & UTs for Roads of Inter-state Connectivity & Economic Importance 210.42
National Highways 7,848.98
Rural Roads 4,434.12
Railways 876.73
Total 15,264.00
Source: Annual Report of MORTH, 2010-11
Intermodal and Multimodal Logistics | 20
While developing such an extensive network of highways across India, many restraints and challenges are being faced
by both, the government as well as the private players. The common yet key challenges raising their hood against the
advancement of the road network have been summarized below5 –
Land Acquisition: There has been inordinate delay in acquisition of land in some States mainly due to procedural
formalities, court cases and lack of full co-operation from the State Governments concerned
Environment and Forest Clearances: There have been considerable delays in getting the forest clearance both
at the Central and State level.
Clearances from Railways: ROBs and RUBs have to be constructed to make the highways free from level
crossing on Railways. Obtaining the clearances/approvals is a time-consuming task requiring coordination with
several Railway departments.
Shifting of Utilities: Shifting of utilities of different types e.g. electric lines, water pipelines, sewer lines,
telecommunication lines requires assistance of the concerned utility owning agencies which takes a considerable
time.
Law and order problems: Adverse law and order conditions and active anti-social groups have hindered road
development in certain states. Also there were frequent stoppages by the local population demanding additional
underpasses / bypasses, flyovers etc.
Poor performance of some contractors: Cash flow problems have led to poor performance of some of the
contractors. The termination of such contracts often results in long-drawn litigation and further delays in completion
of work.
There is a need to address these issues immediately to expedite the development of the road network and cater to the
increasing traffic flows.
5 Source: Annual Report of MORTH, 2010-11
Intermodal and Multimodal Logistics | 21
Dedicated Freight Corridors6
A large portion of railway sidings is single line and is utilized by passenger as well as freight trains. The sharing of
railway sidings amongst the passenger and freight trains causes disruption in the smooth functioning of the trains. Long
waiting times and uncertainty of arrival are the two primary reasons for the delay in time of freight goods.
The overall freight traffic has been continuously rising. Over the last 10 years, traffic has grown at a CAGR of 6.27%.
IR‟s available infrastructure does not have enough capacity to cater to this traffic leading to severe network capacity
constraints.
Source: Economic Survey, 2011-12
The DFC project is expected to tackle some of these issues. The government has already sanctioned the Western
Corridor (Mumbai to Dadri) and the Eastern Corridor (Dankuni to Ludhiana) projects which have a total cost in excess of
Rs. 45,000 crores. Studies have also commenced to analyse the prospects of the East-West corridor (Kolkata-Mumbai),
the North-South corridor (Delhi-Chennai), East Coast corridor (Kharagpur-Vijaywada) and Southern corridor (Chennai-
Goa).
The main objectives of the DFC project are:
Increase the share of railways in freight transport
Build separate infrastructure for handling freight to enable a focused approach for developing both passenger and
freight business
Provide seamless connectivity to customers
Reduce unit cost of transportation through use of a competitive tariff structure
Work on both Western and Eastern corridors has started and both are expected to be fully functional by the end of
2017. The project is being funded jointly by JICA, the World Bank, Government of India and the private sector (through
PPP).
6 Source: DFCCIL website
93
156 197 220
341
504
926
-
100
200
300
400
500
600
700
800
900
1,000
1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2010-11
Mil
lio
n t
on
nes
Over the last decade rail freight traffic has almost doubled
Intermodal and Multimodal Logistics | 22
The DFC project plans to provide new services including:
Roll-on Roll-off for all types of road vehicles which can piggy-back on wagons
Triple-deck automobile wagon on Western corridor and Double-deck on Eastern corridor.
Movement of over-dimensional consignments from ports to construction sites
Setting up of new terminals with a “one-stop-shop” solution for all value added services like warehousing,
packaging, custom bonding etc.
Several multimodal logistics parks have been planned along the corridors including those at Delhi-NCR, Jaipur,
Gandhidham, Ahmedabad, Vapi and Navi Mumbai on the Western corridor and at Kanpur and Ludhiana. These parks
are planned to be developed on PPP basis and would be aimed at being a one-stop shop for logistics needs providing
several value added services like IT support, tracking, inventory control etc.
Considering the above factors, it is expected that DFC will provide a boost to multimodal transportation.
Intermodal and Multimodal Logistics | 23
Regulatory Reforms
Multimodal Transport Act, 1993
The Indian government recognised the benefits of multimodal transport way back in the early 1990s and came up with
the Multimodal Transportation of Goods Act in 1993 with the objective of encouraging growth of exports from India.
Through the Act the government aimed at developing international multimodal transport which would reduce logistics
costs and thus make Indian products more competitive in the global market. The Act established licensing requirements,
contractual terms (through the Multimodal Transport Document) and liability regime. The Act was again amended in
year 2000 to give more protection to shippers.
According to trade, the current version of the Act still has several lacunae. The Association of Multimodal Transport
Operators of India have proposed several amendments including compulsory registration of MTOs with DGS, changes
to the Customs Act to enable seamless movement of goods, penalties for offences among others. Trade estimates that
these amendments should bring down transit time for transport of goods by 40-50%.
Private Freight Terminals Policy
The policy aims to stimulate development of privately owned freight terminals on private land for dealing with break bulk
goods, parcel traffic and containers. Indian Railways‟ goods sheds are not in a very good condition, which is why they
have gone for PPP mode of development. Under this policy, PFTs are expected to provide goods handling,
warehousing and other associated logistics services to rail users and facilitate expansion of the 3PL sector.
After the lukewarm response to its original policy the IR revamped it recently. CWC, CONCOR and several private
players are looking to build and operate PFTs. If this is a success, it is bound to increase the share of rail freight
transport.
Draft Coastal Shipping Policy
The proposed coastal shipping policy is aimed at boosting coastal trade and various support services with special focus
on coastal ships, River Sea Vessels (RSVs), Inland Vessels (IVs) and Cross trade compatible vessels.
A draft policy has been released which gives recommendations, indicating the level at which it would be advisable to
implement them:
Infrastructure: Setting up more minor ports along the coast, dedicated berths for coastal ships, promotion of Ro-
Ro jetties, ship repair facilities and dry-docks, LNG supply facilities, dedicated warehouses for coastal cargo, rail
and road connectivity and deepening of sea channels at minor ports
Financial incentives including subsidies: Implementing an aggressive ship-building subsidy policy, exemption
from certain taxes, lower tariffs than foreign ships, subsidies for Ro-Ro and repair jetties, fiscal incentives for small
ports and establishing a Coastal Development Fund for coastal ships
Resolving manpower issues: Solving problems with regard to manpower and manning scales to organise for
availability of adequate and good quality manpower
Promoting modal shift from road and rail to coastal shipping: Improve competitive ability of coastal ships and
promoting the Carbon credit scheme
Intermodal and Multimodal Logistics | 24
Data base and communication infrastructure: Establishing & maintaining a robust system/database for
collection of accurate data, publishing annual reports on coastal shipping, developing a freight exchange and
streamlining the multi-modal transport operations
The above measures are expected to provide a boost to the coastal shipping in India.
Cabotage Policy
The Cabotage policy checks the coastal trade of a country. Few countries practice absolute Cabotage law while others
practice a tailored one. In India, the Cabotage Policy is not absolute. It is regulated through provisions of sections 406
and 407 of the Merchant Shipping Act, 1958.
The original Cabotage policy required foreign ships to take a licence for plying on the coastline of the country. Coastal
shipping thus had to be carried out only by Indian ships or ships chartered by Indian citizens. Due to this and several
other reasons, a considerable part of Indian transhipment cargo was getting diverted to Colombo, Singapore & Jebel Ali
Ports.
Recently the policy has been relaxed specifically so that ICTT, Vallarpadam would attract transhipment cargo destined
for Indian ports. It would allow containers arriving there to be shipped to other Indian ports. Traffic growth at ICTT,
Vallarpadam, which was specifically developed to operate as a transhipment hub, has been lacklustre till now and
significantly below estimates. This policy change is expected to aid in growth of traffic at there and more importantly,
reduce diversion of Indian cargo traffic to ports in other countries. However, the flipside is that domestic shipping
companies may face severe loss of business.
Policy to permit Operators to move container trains on Indian Railways
This policy was formulated to permit rail linking of ICDs by private parties other than CONCOR and to allow them to
move container trains on the same lines as CONCOR for both international and domestic traffic. The private players
would own the trains and IR would provide the engine and crew. Privatization of container rail operation enticed 16
players and brought in investments of around Rs. 2,000 crore.
However, restrictions have been placed on private players to carry certain commodities such as coal, coke, some
minerals. The private players have to rely on IR‟s infrastructure which, they argue, is not upto standards. They face
severe competition from CONCOR, which is an IR subsidiary and has been present in this sector since a long time.
Additionally, haulage charges have been raised time and again, the recent one being that for pig iron and sponge iron,
squeezing out profit margins of private players. IR, on the other hand, maintains that it follows the cross-subsidization
policy by trying to earn more from freight transport so as to be able to continue providing cheap passenger transport.
Impact of GST
Indirect Taxes are thoroughly associated with the movement of goods. It decides both the incidence and quantum of tax
to be levied. One of the major implications of the GST is that the incidence and coverage of tax for providing of services
will rise while at the same time there will be lesser need for the warehouses due to supply chain efficiencies. This, in
turn, may require companies to rethink their supply chain / logistics strategies.
Intermodal and Multimodal Logistics | 25
GST is likely to have the following impact on the logistics industry as a whole:
Increase in outsourcing of the warehousing function to 3PL service providers
Reduction in number of Distribution Centres: Post GST, state specific distribution centres are expected to give way
to regional DCs. The outcome being fewer DCs of relatively larger size and network coverage, more value
inventory and improvement in quality of services.
Alleviation of the complexities in documentation and inter-state barriers
The challenge then lies in the formulation of the network design which will compress supply chain for GST efficiency
while ensuring that the business objectives in and around the logistics network are also met.
Foreign Direct Investments
In emerging economies like India, the budgetary allocation for development of infrastructure is structured phase-wise so
as to develop the infrastructure as well as to do justice to other sectors like education, health, food & nutrition, defence
etc. In such a scenario and given the typical nature of returns on investments in this sector, foreign investments and
loans from multilateral agencies become important sources of finance.
The Indian Government, in 1992, relaxed the norms for foreign
investments in India and opened the infrastructure sector to
foreign investments. India allows 100% FDI in maritime
infrastructure like ports, terminals, jetties, harbours, merchant
shipbuilding as well as in support infrastructure like
warehousing, roads and Inland Water Transport. Since, then
there has been significant investment especially in the ports
sector by foreign players the major ones being those by DP
World, APM Terminals and PSA Singapore among others.
Consideration should be given to provide incentives to foreign
players to venture into developing other transport
infrastructure as well.
Intermodal and Multimodal Logistics | 26
Logistics Technology trends
Inspite of being a shared service and not contributing directly to the revenues of a company, investments in technology
reap huge returns indirectly. Today, information availability, visibility, operational flexibility and scalability are critical to a
successful logistics function. Some of the developments in technology applicable in the logistics sector have been
examined here.
Cloud computing and Software-as-a-Service
Cloud computing as a concept has rapidly picked up in the recent years. The top logistics firms, manufacturers and
distributors have already invested in this technology to reap its benefits. Theoretically, cloud computing and SaaS are
one and the same. Instead of buying and setting up software solutions internally, companies can rent them from an
outside provider that hosts the applications on its own servers. However, in addition to offering software as a service, a
cloud network may also offer service-oriented architecture, platform, infrastructure, database, or other capabilities as a
service.
Some of the benefits of Cloud / SaaS based models for logistics companies include –
Low cost footprint: Low up-front investment and small payback periods.
Enables collaboration: Entities in a supply chain including transporters, 3PLs and suppliers, can connect on the
cloud to collaborate on logistics planning, forecasting, and procurement management
Scalable: Because of the ease and agility of deploying these solutions, they are scalable to meet volatile customer
demands
Integration: It increases supply chain efficiencies by integrating information on the same platform than having
disparate systems that don‟t work together
Real-time visibility: With all data normalized on one platform, users get real-time visibility of inbound
transportation and shipments in transit
Global Positioning System
GPS technology gives the details of the origin and destination of a shipment. During transit, it helps in providing the
exact position of a consignment. There are sophisticated GPS maps and technology available through which one can
track the movement, and be proactive to customers by informing about the shipment status and expected delivery time.
GPS system helps logistics companies to track the location of their goods.
With the GPS systems becoming cheaper and more advanced, by the day, many of the large and medium sized
logistics players have adopted GPS tracking systems for their truck.
In addition to tracking, GPS systems have also been found to be useful to reduce truck breakdowns. In the event of a
breakdown, it minimizes the amount of time spent in recovering the vehicle by sending service personnel located
nearest to the vehicle to do the repair job. Also, certain GPS systems allow setting up of preventive maintenance alerts
by calendar time, engine on-time or mileage to notify the operator when the vehicles are due for maintenance.
Moreover, GPS systems also allow effective planning of delivery jobs to track that the vehicle closest to the
source/destination for performing the job. This helps in substantial reduction of fuel and maintenance costs as well as
Intermodal and Multimodal Logistics | 27
reduces time required per job. Businesses can even incorporate hard data gathered through GPS tracking into
employee appraisals and bonus/reward schemes. Bonuses based on tangible performance metrics can encourage
productivity and boost morale.
Radio Frequency Identification
Radio frequency identification is an automatic identification method, relying on storing and remotely retrieving data using
devices called RFID tags or transponders. It allows tracking, monitoring, reporting and managing products, documents,
assets and people more effectively and efficiently as they move between locations anywhere at any time.
An RFID tag is incorporated into a product for the purpose of identification using radio waves. Some tags can be read
from several meters away and beyond the line of sight of the reader. These RFID tags can be active or passive and
they require a reading device and interface computer to process information.
Importance of RFID in logistics
Allows the service provider to track items at each supply chain location, from plant to consumer
Protects against copying and counterfeit of goods by embedding a unique Electronic Product Code into each item
Proves the origin and improves handling of goods. Shippers can use RFID tags to show robustness of a supply
chain and to ensure greater security in processes
Tracks the amount of goods in the supply chain and helps to save capital required for distribution and warehousing
storage costs
RFID technology –
Reduces the manpower requirement considerably
Saves time as scanning of cases/items takes place rapidly. RFID can scan upto 1,000 boxes per second whereas
bar coding would take a few hours to scan the same number of boxes
Has a high level of security as data cannot be hacked
Enterprise Resource Planning
ERP systems integrate several data sources and processes of an organization into a unified system. A typical ERP
system uses multiple components of computer software and hardware to achieve the integration.
ERP induces enough visibility in the supply chain so that an efficient work flow can be established. By pulling together
and sharing information from functions such as purchasing, warehousing, and sales it helps to control costs. The only
issue is that installation and upgrades of ERP systems are very costly.
Mobile Technology
The recent developments in mobile technologies allow companies to stay connected anywhere, anytime. Many of the
large logistics players have developed mobile applications to allow anytime-access to information through almost any
mobile device. These tools provide immediate insight into the status of a shipment, making operations run faster and
smoother. These applications function on Apple, Blackberry and Android platforms and are free-to-use.
Intermodal and Multimodal Logistics | 28
The Way Forward
As noted above, several initiatives have already been taken by the Government and the private sector in developing
intermodal/multimodal transport. However, many issues still remain to be tackled. There is a need to prioritize issues
based on whether they can be resolved in the near term or the long term.
There needs to be a strong focus on containerization for both domestic and EXIM cargo. The Dedicated Freight Corridor
project needs to be completed without delays. It will go a long way in increasing railways‟ market share in freight
transport and bringing down logistics costs. There also needs to be a push to develop Inland Waterways and Coastal
Shipping. This initially needs to come from the government by way of policy reforms and subsidies or other financial
incentives.
GST has met a certain amount of opposition from the States on the issue of revenue sharing. However, it has
undergone several rounds of changes and is now about to be passed. The sooner it is passed, the better it will be
especially for the logistics sector. Private investment in development of railways must be encouraged. Policies for PFTs,
wagon development and moving container traffic by rail have already been passed, but they have done little to spur
investments. Necessary lacunae in those policies need to be looked into and plugged at the earliest. Amendments to
the Multimodal Transport Act and Customs Act should aid in inducing cross-border intermodal/multimodal logistics.
On the technology front, manufacturers and distributors managing their own logistics need to seriously consider
integrating their entire supply chain by the use Cloud computing. For large logistics companies it would act as an
enabler for increasing process efficiencies and a platform for information exchange with its customers. GPS and RFID
may be deployed by transporters to track their vehicles and shipments.
Intermodal/multimodal logistics has tremendous potential to increase supply chain efficiencies. The right policy
incentives from the government and interests from the private sector should together go a long way to spur growth in
this sector.
Intermodal and Multimodal Logistics | 29
Bibliography & References
1. Report of the Indian Foundation of Transport Research and Training
2. World Bank's International Logistics Performance Index Global Ranking
3. Indian Ports Association
4. Update on Indian Port Sector (31.03.11), Transport Research Wing, Ministry of Road Transport and Highways,
Government of India
5. Port Development Plan For Major Ports - Port of Rotterdam Authority
6. Maritime Agenda, 2010-2020, Ministry of Shipping, Government of India
7. Inland Waterways Authority of India
8. Indiastat website
9. Annual Report of Ministry of Road Transport and Highways, 2010-11
10. DFCCIL website
11. Deloitte Research and Analysis
Intermodal and Multimodal Logistics | 30
Contacts
About the Authors
Hemant Bhattbhatt is a Senior Director in Deloitte‟s India practice. He is the Shipping Practice Leader for Deloitte in
India.
This Report has been prepared based on inputs & contributions from Shailendra Ranjan and Archit Mehta.
Hemant B. Bhattbhatt
Senior Director, Consulting
Deloitte Touche Tohmatsu India Private Limited
E-mail: [email protected]
Intermodal and Multimodal Logistics | 31
Intermodal and Multimodal Logistics | 32
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