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  • Transport and Logistics
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LATEST NEWS

Overview

  • The Transport sector has become an integral part for the economic development of India, and is among the high growth focus sectors in the country. India spends around 14.4% of its GDP on logistics and transportation as compared to less than 8% spent by other developing countries.
  • The Indian transport sector is evolving significantly, driven by the rising investments, mega infrastructure projects and favorable regulatory policies, amid an improving economy. The sector encompasses road and rail transportation, shipping, aviation and logistics services.

Significance

Global Scenario

  • Global transport and logistics sector (T&L) sector is expected to reach to $15.5 Trillion by 2024 at a CAGR of 7.5%.
  • Asia-Pacific region accounts for nearly 47% of the global T&L industry, at an estimated size of $3.8 Trillion in 2015.
  • Global transport and logistics sector (T&L) markets in terms of volume was valued at 54.7 Billion tons in 2015 and is expected to reach 92.10 Billion tons by 2024.

Indian Scenario

  • India jumped 19 places to 35 in 2016 from 54 in 2014 in the 'World Bank Logistics Performance Index (LPI)"
  • India's logistics sector currently employs nearly 22 million people and is expected to grow at a rate of 16% over the next two years.

Indian logistics market to touch US$ 307 billion by 2020: Ram Kripal Yadav, May 2016 Business Standard

Sector Contribution to the Economy

Logistics sector as a whole contributes nearly 5% to the economy

strength

Railways

 

The Indian Railways is among the world's largest rail networks. The Indian Railways route length network is spread over 115,000 km, with 12,617 passenger trains and 7,421 freight trains each day from 7,349 stations plying 23 million travellers and 3 million tonnes (MT) of freight daily. India's railway network is recognised as one of the largest railway systems in the world under single management.

The railway network is also ideal for long-distance travel and movement of bulk commodities, apart from being an energy efficient and economic mode of conveyance and transport.

The Government of India has focused on investing on railway infrastructure by making investor-friendly policies. It has moved quickly to enable Foreign Direct Investment (FDI) in railways to improve infrastructure for freight and high-speed trains. At present, several domestic and foreign companies are also looking to invest in Indian rail projects.

 

Government initiatives

  • The Government of India is going to come up with a 'National Rail Plan' which will enable the country to integrate its rail network with other modes of transport and develop a multi-modal transportation network.
  • The Ministry of Railways, Government of India, has launched the Smart Freight Operation Optimisation & Real Time Information (SFOORTI) application to optimise freight operations and manage traffic flows.
  • A 'New Online Vendor Registration System' has been launched by the Research Designs & Standards Organisation (RDSO), which is the research arm of Indian Railways, in order to have digital and transparent systems and procedures.
  • The Government of India has signed an agreement with the Government of Japan under which Japan will help India in the implementation of the Mumbai-Ahmedabad high speed rail corridor along with a financial assistance that would cover 81 per cent of the total project cost.
  • To enhance transparency in the processing and settlement of bills, Indian Railways has come up with a new bill tracking system for contractors/vendors of Indian Railways to track status of their bills.
  • The cumulative savings of Indian Railways due to procurement of power under open access arrangements reached Rs 5,636 crore (US$ 869.8 million) during April 2015 - October 2017 and are estimated to reach Rs 41,000 crore (US$ 6.3 billion) by 2025.
  • The Indian Railways has planned to phase out diesel locomotives over the next five years and replace them with electric ones, which will help them save about Rs 11,500 crore (US$ 1.78 billion) yearly, stated Mr Piyush Goyal, Minister of Railways, Government of India.
  • With the aim of boosting connectivity between India and Bangladesh, Mr Narendra Modi, Prime Minister of India, and Ms Sheikh Hasina, Prime Minister of Bangladesh, launched various connectivity projects including a new passenger train service between Kolkata and Khulna.
  • Indian Railways has put forward a global tender for obtaining 700,000 metric tonnes of railway track for improving track safety, as per Mr Piyush Goyal, Minister of Railways and Coal, Government of India.

Road ahead

  • Desired investment of $130.7 billion in the next 5 years.
  • $15 billion sanctioned for Mumbai-Ahmedabad high speed rail (Bullet Train) Project.
  • 700 Stations to be fed with solar power in medium term.
  • 48 Stations to be redeveloped in 2017-18.
  • 3500 Kilometers of railway lines to be commissioned in 2017-18.
  • 3360 Kilometers of dedicated freight corridors by 2019.

Air Transport

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The civil aviation industry in India has emerged as one of the fastest growing industries in the country during the last three years. India is currently considered the third largest domestic civil aviation market in the world. India is expected to become the world's largest domestic civil aviation market in the next 10 to 15 years.

According to International Air Transport Association IATA, India will displace the UK for the third place in 2025.

The Civil Aviation industry has ushered in a new era of expansion, driven by factors such as low-cost carriers (LCCs), modern airports, Foreign Direct Investment (FDI) in domestic airlines, advanced information technology (IT) interventions and growing emphasis on regional connectivity.

Government Initiatives

  • Allocation to Civil Aviation Ministry has been tripled to Rs 6,602.86 crore (US$ 1,019.9 million) under Union Budget 2018-19.
  • In February 2018, the Prime Minister of India launched the construction of Navi Mumbai airport which is expected to be built at a cost of US$ 2.58 billion. The first phase of the airport will be completed by end of 2019.
  • Under the second round of Regional Connectivity Scheme (RCS 2) the government has awarded 325 routes to airlines as well as helicopter operators with the objective of enhancing flight services to hilly and remote areas. Under the scheme airline operators have to offer half of their seats at discounted rates and helicopter operators can offer up to 13 seats at lower fares with the government providing Viability Gap Funding (VGF) or subsidy to airlines and helicopter operators.
  • Constructing 17 highways-cum-airstrips are the government's priorities and it will start work on them this year, Union Minister Nitin Gadkari has said. The projects are designed in such a fashion that the roads will double up as airstrips and traffic will be stopped when an airplane lands or takes off. The road and air connectivity will also provide better access to remote areas.
  • Airport building and modernization projects worth over Rs 19,300 crore (US$ 2.99 billion) have been recommended green clearance, in line with the Government of India's focus on improvement in regional air connectivity.
 

Road Ahead

  • India's aviation industry is largely untapped with huge growth opportunities, considering that air transport is still expensive for majority of the country's population, of which nearly 40 per cent is the upwardly mobile middle class.
  • The industry stakeholders should engage and collaborate with policy makers to implement efficient and rational decisions that would boost India's civil aviation industry. With the right policies and relentless focus on quality, cost and passenger interest, India would be well placed to achieve its vision of becoming the third-largest aviation market by 2025.
  • In the coming 20 years, Indian companies will buy 2,100 new planes worth US$ 290 billion. Also, domestic air traffic in India is expected to cross 150 million in FY19, on the back of unprecedented capacity induction by airlines*.

Road Transport

India has the second largest road network across the world at 5.4 million km. This road network transports more than 60 per cent of all goods in the country and 85 per cent of India's total passenger traffic. Road transportation has gradually increased over the years with the improvement in connectivity between cities, towns and villages in the country.

The Indian roads carry almost 90 per cent of the country's passenger traffic and around 65 per cent of its freight. In India sales of automobiles and movement of freight by roads is growing at a rapid rate.

Government Initiatives

  • The Cabinet Committee on Economic Affairs (CCEA), Government of India, has approved the construction of Zoji La tunnel which is a strategic transport project for all-weather connectivity in Srinagar, Kargil and Leh.
  • The Ministry of Road Transport and Highways, Government of India has sanctioned projects worth Rs 13,411 crore (US$ 2.1 billion) for development of national highways in Assam between 2014-15 and 2017-18.
  • The Central Road Fund (Amendment) Bill, 2017 has been passed by Lok Sabha, Government of India which would result in revenues of Rs 2,300 crore (US$ 358.7 million) for national waterways in the country.
  • The Government of India has succeeded in providing road connectivity to 85 per cent of the 178,184 eligible rural habitations in the country under its Pradhan Mantri Gram Sadak Yojana (PMGSY) since its launch in 2014.
  • The land acquisition process and detailed project reports (DPR's) for the Bharatmala Pariyojana are underway and the first project is expected to be awarded before the end of 2018, according to Mr Nitin Gadkari, Minister for Road Transport and Highways.
  • The Ministry of Road Transport and Highways, Government of India plans to implement 'Value Engineering Programme' in order to promote use of new technologies and material in highway projects being executed in India.

Road Ahead

The government, through a series of initiatives, is working on policies to attract significant investor interest. The Indian government plans to develop a total of 66,117 km of roads under different programmes such as National Highways Development Project (NHDP), Special Accelerated Road Development Programme in North East (SARDP-NE) and Left Wing Extremism (LWE). The government has identified development of 2,000 km of coastal roads to improve the connectivity between ports and remote villages.

The National Highways Authority of India (NHAI) plans to build 50,000 km of roads worth US$ 250 billion by 2022 as part of a long-term goal of doubling the length of the national highway network to 200,000 km.

The Government of India will spend around Rs 1 lakh crore (US$ 15.26 billion) during FY 18-20 to build roads in the country under Pradhan Mantri Gram Sadak Yojana (PMGSY).

The Government of India has decided to invest Rs 7 trillion (US$ 107.82 billion) for construction of new roads and highways over the next five years.

National Highways constructed at record average of about 27KM/day at a cost of over $18 Billion. Target of constructing highways at 40KM/Day in FY19.

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Shipping and Ports

The freight capacity (GRT) by Indian fleet increased at a healthy rate of 6.2% per year between 2014 and 2017.

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Coastal Economic Zones (CEZs)

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Logistics

Development of 35 Multi Modal Logistics Park (MMLP)

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Avenues

  • Multi Modal Logistic Parks (MMLP)

    The concept is relatively new in India and hence untapped. Opportunities exist in management and operation of dry ports, warehouses, cargo terminals, cold chain, banking & office spaces and supply chain to transport commodities.

  • Roadways

    Fleet exchanges to bring together transport customers and vendors like the stock exchange model. Electronic Toll Collection (ETC) would amount to estimated fuel savings of INR 86,000 Crores per annum.

  • Railways

    Re-development of railway stations, Freight terminal operations.

  • Ports & Shipping

    Port development, port support services e.g. pilotage, dredging, harboring and provision of marine assets such as barges and dredgers.

Incentive to Invest

The Transport and Logistics Sector offers a business friendly investment environment.

  • Development of Multi Modal Logistics Park (MMLP)
    1. i. To serve 50% of freight movements
    2. ii. Enable 10% reduction in transportation cost
    3. iii. 12% cut in CO2 emissions
  • 'Bharatmala Pariyojana' focuses on efficient freight and passenger movement
    1. i. Economic corridors
    2. ii. Inter corridors and feeder routes
    3. iii. National corridor efficiency improvement
    4. iv. Coastal and Port connectivity
    5. v. Greenfield expressways
  • Increasing port efficiency via 'Sagarmala' Project
    1. i. $61.6 Billion infrastructure investment mobilization
    2. ii. $5.3-6.1 Billion logistics cost saving per annum
    3. iii. $110 Billion boost to exports
  • DFCCIL setup to improve rail fright infrastructure in joint venture with foreign/private players
    1. i. Create additional capacity
    2. ii. Set up MMLPs across DFCs to provide complete transport solution
    3. iii. Efficient, reliable, safe and cheaper mobility option