nmcc finalreport june2011
TRANSCRIPT
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
Others (trade bodies, etc) - 11 Total = 118
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
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
Others (trade bodies, etc) - 11 Total = 118
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
Chapter 10 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 East zone
Chapter 11 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 North zone
Chapter 12 details out the mapping of the logistics movement of exports consignment along with the
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associated costs factor and the various issues and recommendations as suggested by the
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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 –
9. Loading of container on truck
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)
Break - up of export cost excluding sea freight
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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:
Segment Cost (INR) Cost % Time (days)
Transportation by road 12,000.00 55.05 2
Customs clearance 2,000.00 9.17 1
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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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Segment Cost (INR) Cost % Time (days)
Break - up of export cost excluding sea freight
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 -
Documentation 1,000 2.56 0.5
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:
Segment 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
Rail movement to port (average) 13,115 40.46 10.0
Custom clearance 3,000 9.25 0.5
Terminal handling 6,000 18.51 -
Documentation 1,000 3.08 0.5
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
Area Issues Suggestions
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.
Page 28 of 218
exports being catered to.
Area Issues Suggestions
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
Inland transportation
charges – rail
0 0% 0 0 0% 0 0%
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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 – 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
Area Issues Suggestions
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
Area Issues Suggestions
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
Page 34 of 218
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
Page 36 of 218
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
• 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
Page 38 of 218
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
Page 39 of 218
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
Import duty Bangladesh government imposes a high Need for the Indian government to
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EXIM Policy
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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Others
Area Issues Suggestions
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-
Page 43 of 218
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.
Page 44 of 218
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.
Page 45 of 218
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)
4.2 Geographical presence
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
Page 46 of 218
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).
4.3 Government policies covering exports
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.
4.4 Export potential
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
Page 47 of 218
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
Strengths Weaknesses
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
Opportunities Threats
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
Source: Deloitte Research
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
Source: Deloitte Research
4.7 Major bottlenecks identified and recommendations
Hard Infrastructure
Area Issues Suggestions
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
Page 49 of 218
Hard Infrastructure
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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.
Page 50 of 218
Others
Area Issues Suggestions
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
Page 52 of 218
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.
4.10 Other recommendations
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)
Page 54 of 218
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.
Page 55 of 218
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
Page 56 of 218
5.2 Geographical presence
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
Page 57 of 218
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.
5.3 Government policies covering exports
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.
5.4 Export potential
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
Strengths Weaknesses
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
Opportunities Threats
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
Source: Deloitte Research
Production
• Application engineering
to integrate product with
process covering all levels
• Collaboration, cost
reduction and attaining
economics of scale
• Domestic demand
• Availability of quality raw
material at competitive
prices
Competitivness Internal and External factors
Market Access
• Supporting logistics &
industrial Infrastructure
• Competitive export cost
•Reduce time and low
transaction cost
•Research in design,
development,
innovation and simulation
• Marketing and Process
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.
5.8 Major bottlenecks identified and recommendations
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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.
5.9 Competing countries scenario
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
5.10 Other recommendations
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 $33 billion of investment in 10 years and generate employment of
9 million person-days. The food-processing sector in India is clearly an attractive sector for investment
and offers significant growth potential to investors.
6 The numbers given in brackets are world wide rankings
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6.1 Present scenario The food processing industry consists of fruits & vegetables, dairy, edible oils, meat & poultry, fisheries,
non alcoholic beverages, alcoholic beverages, confectionery, grains processing, packaged &
convenience food and floriculture. The detailed description of each of these sub sectors is mentioned in
Annexure 4 which provides information of export quantity, country of export, etc.
6.2 Geographical presence
The food processing companies / cluster is spread across the country. With large number of retail
industry getting organized, the food processing industries are poised to grow exponentially. Government
of India is planning to set up 30 mega food parks across the country. GOI also estimates FDI in this
sector to further record a three-fold rise to touch US$ 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.
6.3 Government policies covering exports
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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6.4 Export potential
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
Strengths Weaknesses
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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Opportunities Threats
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
Source: Deloitte Research
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.
6.8 Major bottlenecks identified and recommendations
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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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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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Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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.
6.9 Competing countries scenario
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
6.10 Other recommendations
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
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 –
9. Loading of container on truck
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
Page 102 of 218
Sr No Parameter Description
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.
Page 103 of 218
Sr No Parameter Description
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
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
Page 104 of 218
Segment Cost (INR) Cost % Time (days)
Break - up of export cost excluding sea freight
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.
The mapping of the inland logistics movement and cost break-up for shipment of export consignment
from ICD Ahmedabad is indicated below:
Sr No Parameter Description
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
Page 105 of 218
Sr No Parameter Description
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)
Break - up of export cost excluding sea freight
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
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 6.0
Source: Deloitte Research
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
Page 106 of 218
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)
Weight ( MT ) TEU FEU TEU FEU
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
Source: CONCOR & Deloitte Research
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
Source: Deloitte Research
Page 107 of 218
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.
Page 108 of 218
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
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
Page 109 of 218
9.3 Major bottlenecks identified and recommendations
Hard Infrastructure
Area Issues Suggestions
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
Page 110 of 218
Hard Infrastructure
Area Issues Suggestions
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
Area Issues Suggestions
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
Page 111 of 218
Soft Infrastructure
Area Issues Suggestions
incentives on time
EXIM Policy
Area Issues Suggestions
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
Page 112 of 218
EXIM Policy
Area Issues Suggestions
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
Page 113 of 218
10 Mapping of logistics movement
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
The mapping of the inland logistics movement and cost break-up for shipment of export consignment
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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Sr. No Parameter Description
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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Sr. No Parameter Description
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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Sr. No Parameter Description
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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Sr. No Parameter Description
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)
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
Source: Deloitte Research
Table 20 : Movement of a 10 ton truck load from Kolkata to Bangladesh
Segment Cost (INR) Cost % Time (days)
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Segment Cost (INR) Cost % Time (days)
Transportation by road 12,000.00 55.05 2
Customs clearance 2,000.00 9.17 1
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
Source: Deloitte Research
Table 21 : Movement of a rake (40 wagons) from Barauni at Bihar to Bangladesh
Segment Cost (INR) Cost % Time (days)
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)
Source: Deloitte Research
Table 22 : Movement of a 20’ container (TEU) from Assam to Kolkata (excludes sea-freight)
Segment Cost (INR) Cost % Time (days)
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
Terminal handling charges 5,000.00 9.32
Documentation charges 1,500.00 2.80
Congestion surcharge @ US$ 150 per TEU 6,750.00 12.59
Bunker surcharge @ US$ 110 per TEU 4,950.00 9.23
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
Page 121 of 218
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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.
Page 123 of 218
Logistics
Area Issues Suggestions
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.
Page 124 of 218
11 Mapping of logistics movement
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%
Page 125 of 218
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.
11.2 Zonal mapping and logistics cost analysis
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
Sr No Parameter Description
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
Page 126 of 218
Sr No Parameter Description
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.
Page 127 of 218
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
Source: CONCOR & Deloitte Research
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
Source: CONCOR & Deloitte Research
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.
Page 128 of 218
Table 25: Break-up of total logistics cost ex NCR to JNPT port
Segment Cost
(INR)
Cost % Time
(days)
Break - up of export cost excluding sea freight
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 -
Documentation 1,000 2.56 0.5
Others 1,000 2.56 1.0
Total 39,120 100 5.5
Source: Deloitte Research
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
Recommendations for improvement of exports
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
Recommendations for improvement of exports
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
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
Page 129 of 218
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.
Sr No Parameter Description
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)
Weight ( MT ) TEU FEU TEU FEU
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
Source: CONCOR & Deloitte Research
Page 130 of 218
Recommendations for improvement of exports
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..
Recommendations for improvement of exports
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
Rail movement to port (average) 13,115 40.46 10.0
Custom clearance 3,000 9.25 0.5
Terminal handling 6,000 18.51 -
Documentation 1,000 3.08 0.5
Others 1,000 3.08 1.0
Total 32,415 100 13.0
Source: Deloitte Research
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
Page 131 of 218
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
Area Issues Suggestions
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
Page 132 of 218
Soft Infrastructure
Area Issues Suggestions
Labour Inflexible labour laws Labour laws in the country are not
in tune with industry requirement
and needs amendments.
EXIM Policy
Area Issues Suggestions
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
Area Issues Suggestions
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
Page 133 of 218
Logistics
Area Issues Suggestions
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
Page 134 of 218
12 Mapping of logistics movement
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
Page 135 of 218
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.
12.2 Zonal mapping and logistics cost analysis
Sr No Parameter Description
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.
Page 136 of 218
Sr No Parameter Description
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
Page 137 of 218
Sr No Parameter Description
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%
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
Page 138 of 218
Total logistic costs 36500 100% 5 34300 100% 4
Source: Deloitte Research
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
Transit facility (ICD / CFS / ware housing / etc)
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
Source: Deloitte Research
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
Logistics cost parameters Cost Cost % Time
Inland transportation charges – road 3000 2.69% 1
Inland transportation charges – rail 0 0.00%
Inland transportation charges – water 0 0.00%
Transit facility (ICD / CFS / ware housing / etc)
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
Source: Deloitte Research
Table 34 : Movement of a 20’ container (TEU) from Coimbatore to various ports by road
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
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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
Inland transportation charges – rail
0 0% 0 0 0% 0 0%
Inland transportation 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
Source: Deloitte Research
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
Inland transportation charges – road
18500 63.14% 2 15000 61.22% 2
Inland transportation charges – rail
0 0.00% 0 0 0.00% 0
Inland transportation charges – water
0 0.00% 0 0 0.00% 0
Transit facility (ICD / CFS / ware housing / etc)
4500 15.36% 2 2000 8.16% 1
Custom House Agent /Clearance
1200 4.10% 1200 4.90%
Terminal Handling Charges 4000 13.65% 5800 23.67%
Documentation Charges 600 2.05% 500 2.04%
Other Logistic costs 500 1.71% 1 0 0.00% 1
Total logistic costs 29300 100% 5 24500 100% 4
Source: Deloitte Research
Table 36 : Movement of a 20’ container (TEU) from Cochin and adjoining areas to Cochin Port
Cochin to various ports (road)
Cochin Port Trust
Logistics cost parameters Cost Cost % Time
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Cochin to various ports (road)
Cochin Port Trust
Logistics cost parameters Cost Cost % Time
Inland transportation charges – road
3000 34.65% 1
Inland transportation charges – rail
0 0.00%
Inland transportation charges – water
0 0.00%
Transit facility (ICD / CFS / ware housing / etc)
5158 59.57% 2
Custom House Agent /Clearance
0 0.00%
Terminal Handling Charges 0 0.00%
Documentation Charges 500 5.78%
Other Logistic costs 0 0.00%
Total logistic costs 8658 100% 3
Source: Deloitte Research
Table 37 : Movement of a 20’ container (TEU) from Palakkad and adjoining areas to Cochin Port
Palakkad to various ports (road) Cochin Port Trust
Logistics cost parameters Cost Cost % Time
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%
Documentation Charges 500 2.44%
Other Logistic costs 0 0.00%
Total logistic costs 20500 100% 3
Source: Deloitte Research
12.3 Major bottlenecks identified and recommendations
Hard infrastructure
Area Issues Suggestions
Road Road conditions of the following stretch Concept of express highways
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Hard infrastructure
Area Issues Suggestions
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
Area Issues Suggestions
Terminal
markets
There is a need for more terminal markets
across Southern states
Seek to set up more terminal
markets
Soft infrastructure
Area Issues Suggestions
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
Area Issues Suggestions
Local,
regional &
national
regulations
Time restrictions for entering the city
premises in Hyderabad, Coimbatore cities
is increasing the logistics cost for
exporters
Government should initiate actions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Area Issues Suggestions
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
Government should initiate actions
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.
Government should initiate actions
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.
Government should initiate actions
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
Area Issues Suggestions
(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.
Page 147 of 218
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
Page 148 of 218
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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Area Policies required Agencies responsible
(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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Area Policies required Agencies responsible
(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)
Page 152 of 218
Area Policies required Agencies responsible
(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
Page 153 of 218
Area Policies required Agencies responsible
(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
Page 154 of 218
Area Policies required Agencies responsible
(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
Page 155 of 218
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
Page 156 of 218
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
Singapore Netherlands Germany Japan Hong Kong,
China
United States China India
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
Page 157 of 218
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
Singapore Netherlands Germany Japan Hong Kong,
China
United States China India
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
Singapore Netherlands Germany Japan Hong Kong,
China
United States China India
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
Page 158 of 218
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
Singapore Netherlands Germany Japan Hong Kong,
China
United States China India
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.
Page 159 of 218
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
Singapore Netherlands Germany Japan Hong Kong,
China
United States China India
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
Singapore Netherlands Germany Japan Hong Kong,
China
United States China India
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.
Page 160 of 218
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
Singapore Netherlands Germany Japan Hong Kong,
China
United States China India
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.
Page 161 of 218
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
Page 162 of 218
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
Page 163 of 218
Sr. No Infrastructure Infrastructure description
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
Page 164 of 218
Sr. No Infrastructure Infrastructure description
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.
Page 165 of 218
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
Source: Deloitte Research
From the export figures illustrated below, a comparison between containers traffic at all India ports and
North West ports is shown:
Page 166 of 218
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%
Source: Deloitte Research
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
Source: Deloitte Research
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
Source: Deloitte Research
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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
Source: Deloitte Research
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
Issues / areas of concern Suggestions / recommendations
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
Issues / areas of concern Suggestions / recommendations
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.
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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)
Source: Deloitte Research
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
Leading Indian states
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
Leading Indian states
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.
Leading Indian states
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
Leading Indian states
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
Leading Indian states
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
Leading Indian states
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
Leading Indian states
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
Leading Indian states
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
Leading Indian states
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.
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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
West South North East
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
Page 207 of 218
Chemicals
West South North East
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
West South North East
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
Page 208 of 218
Textiles and Apparels
West South North East
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
Page 209 of 218
Others
West South North East
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
Page 210 of 218
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
Page 211 of 218
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
Page 212 of 218
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
Page 213 of 218
Sr.
No
Parameter Issues Suggestions Entity
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
Page 214 of 218
Sr.
No
Parameter Issues Suggestions Entity
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.
Page 215 of 218
Sr.
No
Parameter Issues Suggestions Entity
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
Page 216 of 218
Sr.
No
Parameter Issues Suggestions Entity
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
Page 217 of 218
Sr.
No
Parameter Issues Suggestions Entity
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”
Page 218 of 218
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