Intermodal and Multimodal Logistics Knowledge Paper · A multimodal transport contract is a single contract for carriage of goods by at least two different modes of transport. A multimodal

Intermodal and Multimodal Logistics

Knowledge Paper

September 2012

www.deloitte.com/in

Intermodal and Multimodal Logistics | 2


Contents

Abbreviations ................................................................................................................................................................... 4

Foreword .......................................................................................................................................................................... 5

The Concept .................................................................................................................................................................... 6

Focus areas for Infrastructure development ................................................................................................................... 10

Regulatory Reforms ....................................................................................................................................................... 23

Logistics Technology trends ........................................................................................................................................... 26

The Way Forward .......................................................................................................................................................... 28

Bibliography & References ............................................................................................................................................. 29

Contacts......................................................................................................................................................................... 30


Abbreviations

Abbreviation Description

3PL Third Party Logistics

BRIC Brazil, Russia, India, China

CFS Container Freight Station

CONCOR Container Corporation of India

CWC Container Warehousing Corporation

DC Distribution Centre

DFC Dedicated Freight Corridor

DGS Director General, Shipping

ERP Enterprise Resource Planning

FDI Foreign Direct Investment

FICCI Federation of Indian Chambers of Commerce and Industry

GDP Gross Domestic Product

GOI Government of India

GPS Global Positioning System

GQ Golden Quadrilateral

GST Goods and Service Tax

ICD Inland Container Depot

ICTT International Container Transhipment Terminal

IMMTA International Multimodal Transport Association

IR Indian Railways

IWT Inland Waterway Transport

JICA Japan International Cooperation Agency

LASH Lighter Aboard Ship

LPI Logistics Performance Index

MORTH Ministry of Road Transport and Highways

MT Metric Tonnes

MTO Multimodal Transport Operator

NCR National Capital Region

NHAI National Highways Authority of India

NHDP National Highway Development Project

PFT Private Freight Terminal

PPP Public Private Partnership

R&R Rehabilitation and Resettlement

RFID Radio frequency Identification

ROB Rail Over Bridges

Ro-Ro Roll-on/Roll-off

RUB Rail Under Bridges

SaaS Software-as-a-Service

TEU Twenty-feet equivalent unit


Foreword

India has experienced fast-paced growth over the last decade. Though the growth has

primarily come from the Services sector, manufacturing and exports have also risen

substantially. Logistics as a function is being increasingly outsourced by

manufacturers. However, the Indian logistics sector in many ways still lags behind the

global standards of performance. This is evident from the fact that we are ranked as

low as 46th among 155 countries in the World Bank International Logistics

Performance Index. Comparatively, our neighbour China got the 26th rank. The

average logistics cost in India is around 13% of GDP. Given this, there is a substantial

need to invest in, and improve efficiencies in, intermodal and multimodal logistics

sector so that the friction costs do not impede the desired shifts.

Intermodal logistics is designed to cut transit times, decongest congested modes and

reduce logistics cost. Estimates indicate that intermodal logistics can potentially reduce transit times by 40-50%.

Considering the potential benefits, the Indian Government and the private sector have already done quite a bit to spur

growth in this sector. The Multimodal Transport Act, 1993 is specifically aimed at increasing exports from India. Indian

Railways has invited private sector participation in building freight terminals, wagons and operating container trains with

the objective of improving rail infrastructure and augmenting capacity. It is also investing heavily in the Dedicated

Freight Corridor project. Moreover, Goods and Service Tax as well as FDI in multi-brand retail are expected to bring

around radical changes in back-end logistics infrastructure.

While it presents an array of opportunities, intermodal and multimodal logistics brings along several challenges also. If it

has to grow quickly, all stakeholders need to invest time and effort in its development. In this paper, Deloitte has

identified three focus areas – infrastructure, regulation and technology – which demand attention from the stakeholders.

We have tried to bring out the latest developments in these areas and the status of on-going issues.

Though this may not be a comprehensive listing of all issues, our intention is to serve the purpose of prompting a

discussion on these developments at the conference. We hope that readers find the Knowledge Paper helpful in

obtaining a quick appreciation of these emerging issues and in catalysing a meaningful interaction at the conference.

Warm Regards,

Hemant B. Bhattbhatt

Senior Director, Consulting

Deloitte Touche Tohmatsu India Pvt. Ltd.


The Concept

Intermodal transport

Intermodal transport is a particular type of multimodal transport, wherein the goods are moved in one and the same

loading unit, for example: containers. Intermodal transport uses more than one mode of transport, however, since the

loading unit remains the same, the goods being transported, are themselves not handled each time there is a change of

mode.

Development of intermodal transport specifically requires growth of loading units which are usable across multiple

modes. Containers are the most commonly known examples. Lately, more innovative methods are being used.

Roll-on/Roll-off: This mode combines different means of transportation (sea and road), and is used most often with

new automobiles, which are shipped by sea and them simply driven off the vessel to the importer‟s warehouse. Heavy

and over-dimensional cargo is also suitable for Ro-Ro transport.

Lighter Aboard Ship: LASH transport is the combination of deep sea and inland waterway transportation. Barges

operating on inland waterways can be loaded onto a LASH and carried across sea to the destination port.

Subsequently, the unloaded barge can carry cargo further to the hinterland.

It must be noted that LASH vessels are expensive. Furthermore, it is necessary to check on the availability of the

special handling facilities necessary in the ports of origin and destination.

Piggyback / Trailer train: This is a system of unitised multimodal land transportation, a combination of transport by

road and rail. It combines the speed and reliability of rail on long hauls with the door-to-door flexibility of road transport

for collection and delivery. The goods are packed in trailers and hauled by tractors to the railway station. At the station,

the trailers are moved onto railway flat cars and the transport tractors, which stay behind, are then disconnected. At

destination, tractors again haul the trailers to the warehouses of the consignee.

The system has undergone refinements and sophistication by the introduction of the so-called "trailer train" which uses

the same trailer as a vehicle on the road and a rail vehicle on the rail. In other words, the trailer moves on its wheels as

a truck on the road but the wheels can be retracted by an air suspension system and connected to a rail bogie for

movement by rail. At the end of the rail journey, the conversion back to being road vehicle is effected for delivery of the

goods to the customers.

Sea train: This is another innovation in the multimodal transport system involving the use of rail and ocean transport. It

is similar to the Ro-Ro system except that in the place of the Ro-Ro vehicle a rail car is used so that geographically

separated rail systems can be connected by the use of an ocean carrier. Typically these vessels are long and thin and

consist of one main deck running the length of the ship. They are quicker at loading trains than general cargo vessels

since the train‟s carriages do not need to be detached from one another.


Multimodal transport

The International Multimodal Transport Association defines multimodal transport as “the chain that interconnects

different links or modes of transport – air, sea, and land into one complete process that ensures an efficient and cost-

effective door-to-door movement of goods under the responsibility of a single transport operator, known as a Multimodal

Transport Operator, on one transport document”.

Thus transportation of oil or coal cannot be intermodal, but only multimodal because they will have to be “handled” at

the time of changing modes. On the other hand, transportation of containerized goods like fertilizers or grains is mostly

intermodal.

A multimodal transport contract is a single contract for carriage of goods by at least two different modes of transport. A

multimodal transport operator is a person who concludes a multimodal transport contract and assumes responsibility for

the performance thereof as a carrier.

Multimodal transport is beneficial to the shippers in terms of increasing flexibility and reducing cost of logistics. More

specifically, the benefits are:

Single point of contact: Shipper has to deal with and entirely rely on a single counterparty i.e. the multimodal

operator.

Reduces burden of documentation and formalities: A single contract can be negotiated with the MTO. There is

a single responsibility and uniform liability regime.

Saves time and cuts pilferage at the points of transhipment: The MTO maintains necessary communication

links and coordinates with each party throughout the logistics chain, reducing risks of loss of time, pilferage and

damage to cargo at transhipment points.

Reduces cost: The MTO, being an intermediary, can manage to get attractive freight rates. This brings down the

overall logistics cost for the shipper and in the long term, increases demand. Indirectly, it also brings down cost of

exports making them more attractive.

Makes the best of each mode: It is possible to combine the specific advantages of each mode in the trip such as

flexibility of road haulage, larger capacity of railways and the lower costs of water transport in the best possible

fashion.

Frees up working capital: An indirect benefit to the shippers is that faster transit times allows companies to keep

less inventory on hand which in turn frees up precious working capital.

Better distribution of wealth: Multimodal transport brings down the virtual distance between the origin and

destination of cargo. This helps in shifting industrial growth from the traditionally developed coastal regions to the

landlocked interiors of the country.

The main stakeholders involved in the multimodal system of transportation are regulatory authorities, customs, shippers,

multimodal transport operators, logistics intermediaries like ocean carriers, freight forwarders, terminal operators,

ancillary service providers, etc. The MTO acts as an agent for the shipper. Their relationship is governed by a single

multimodal transport contract. The MTO, in turn, enters into separate contracts with transporters, cargo consolidators,

ports, airports etc., coordinates customs procedures and thus manages end-to-end freight movement.


A multimodal transport system usually enables the shipper to enjoy certain additional value added services. One or

more of the following services may be provided by MTOs –

Consignee billing

Logistical support (inventory control, distribution and reporting) for time sensitive products

Pickup-on-call for air freight

Electronic tracking of shipments

Delivery confirmation service

The multimodal transport sector is still nascent. With growth comes competition. The key differentiator among the MTOs

would then be quality of service as indicated by factors like speed, door-to-door capability, reliability, security, safety,

flexibility and availability.

The Principal Issues

For developing an efficient intermodal/multimodal transport system, the need of the hour is to look into the three

principal issues – infrastructure development, regulatory / policy reforms and investment in technology.

1. Infrastructure development: Intermodal/Multimodal transport builds on the operational efficiencies of the transport

system. Without adequate infrastructure, the incremental benefits of intermodal transport will be negligible.

Necessary infrastructure development to provide for compatibility between modes, less friction costs, low dwell

times, less pilferage and increase in containerization is basic to growth of intermodal transport.

2. Regulatory reforms: Intermodal/Multimodal transport operations need to be appropriately regulated with an

objective of controlled development of the sector, driving growth while mitigating possible risks. Generally, controls

may be placed on licensing, pricing, contracting and service standards. For the growth of international intermodal

transport, necessary changes may be required in the customs procedures and export-import procedures among

others. For domestic transport, changes in Cabotage laws, octroi levies, privatization of railways and such moves.

might be the need of the hour.

Shipper

Multimodal Transport Operator

(MTO)

Regulatory Authorities

Truckers / Indian Railways /

Shipping lines

CFSs / ICDs

Ports / Airports

Single Multimodal transport contract

Individual contracts


3. Investment in technology: An Intermodal/Multimodal operator enters into a single contract with the shipper, but

multiple contracts with transporters, customs agents, ports / airports, railways, warehouse operators and other

related entities. The voluminous documentation requirements and need to coordinate with a number of parties

creates a need for appropriate information technology support. Additionally, the transport and warehousing

technology must itself be up-to-date to facilitate accurate tracking of shipments and reduce logistics cost and time.

The following sections of the knowledge paper focuses on the aforementioned three issues and detail the current

scenario, challenges faced and reforms required.


0%

2%

4%

6%

8%

10%

12%

14%

16%

India BRIC Developed countries

% o

f G

DP

Average logistics cost in India as a % of GDP is higher than even the other BRIC countries

Focus areas for Infrastructure

development

The major drivers of the logistics industry are economic growth and transport costs. India has been growing at an

average rate of over 7.5% over the last 10 years1, primarily driven by the services sector. Manufacturing and exports

have also shown considerable growth. However, the logistics sector has not kept pace. Logistics costs in India are also

high as compared to other countries.

Source: Report of the Indian Foundation of Transport Research and Training

The Indian transportation sector when benchmarked with global standards seems to be lagging far behind, both in terms

of capacity and efficiency. Primary reasons for this are lack of capacity creation, lack of funds and delays in projects.

Mode Particulars India Global

Ro

ad Average speed of truck (km / hr) 25-35 60-80

Average distance covered by a truck in a day (km)

250 400-450

Four lane highway length (km) 7,500 34,500 (China)

Po

rts

Turnaround time 4.67 days (major ports in 2010-11)

7-10 hrs (Hong Kong)

Pre berthing delay (hrs) 55.7 (major ports in 2010-11)

3-5 (Hong Kong)

Average output per ship berth day („000 tons) 10.735 45-60 (Australia)

Ra

il

Double Line (km) 17,400 26,400 (China)

No. of locomotives (nos.) 8,867 18,500 (China)

Freight Wagons (nos.) 2,35,000 5,78,000 (China)

Source: Deloitte Research

1 World Bank, Deloitte Analysis


This is quite evident from India‟s 46th rank among 155 countries in the World Bank‟s International Logistics

Performance Index Global Ranking. India‟s LPI score was 3.08 (on a scale of 1-5, with 5 being the highest). Singapore,

with a score of 4.13 was the top performer, the USA scored 3.93 and came 9th whereas India‟s neighbour China came

26th with a score of 3.52. The following chart shows scores of India in comparison to Singapore, USA and China on

each of the five areas on which countries were scored.

Source: World Bank's International Logistics Performance Index Global Ranking

0

1

2

3

4

5

Customs

Infrastructure

International shipments

Logistics competence

Tracking & tracing

Timeliness

India ranks 46th among 155 countries on Logistics performance

Singapore United States China India


This section identifies the key areas in infrastructure development which need focus in order to develop

intermodal/multimodal transport.

Containerization

Containerization is the primary driver of growth of intermodal logistics. Container traffic at major ports has almost

doubled in the past 5 years. Globally, container traffic has grown at around 10% per annum over the past 20 years.

Source: Indian Ports Association

According to estimates, the world container throughput will reach 1 billion TEUs by 2020, which is almost double of the

current container traffic. The emerging Asian & African Countries are expected to be the prime movers in achieving this

growth. Most of the shipyards are filled with orders for container ships of capacity over 10,000 TEUs. These container

ships will form a major part of the world fleet in the coming years.

0%

5%

10%

15%

20%

25%

0

20

40

60

80

100

120

2005-06 2007-08 2008-09 2009-10 2010-11

CA

GR

(%

)

Mil

lio

n t

on

nes

Container Traffic at Major Ports has grown at a CAGR of 12.97% over the last 5 years

Container Traffic (in MT) Growth in Container Traffic (in %)


The advantages of containerization include among others, minimal or no damage to goods, optimum utilization of

storage & warehousing capacity, technology adoption due to mechanized handling required for containers, reduction in

transport time and end-to-end delivery of goods, ultimately leading to significant cost savings.

Source: Indian Ports Association, Deloitte Analysis

Presently, just over 20% of traffic at Major ports is in containers. Major ports together handled 120.22 million tonnes of

container cargo in 2011-122. It is estimated that the total container traffic will go up to 680 million tonnes by 2025-263,

which will be 42.61% of total traffic. To cater to this demand, there is a need to quickly ramp up container infrastructure.

Indian ports have been investing in building container infrastructure. As shown in the following table over Rs. 16,000

crores are planned to be invested, adding almost 20 million TEUs of handling capacity at major ports in India.

Port Name Planned Capacity creation (million TEUs)

Estimated Project Cost (Rs. crores)

JNPT – 4th container terminal 6.80 6,800

Chennai 4.00 3,686

Cochin (Vallarpadam) 4.00 2,118

Mumbai Port 1.20 1,461

Ennore 2.40 1,407

JNPT – 330m extension 0.60 600

Tuticorin 0.60 312

New Mangalore 0.37 270

Total 19.97 16,654

Source: Update on Indian Port Sector (31.03.11), Transport Research Wing, Ministry of Road Transport and Highways; Deloitte Research

Additionally, capacity creation projects are being undertaken at a large scale at ports of Mundra, Rewas and Kattupalli.

2 Source: Indian Ports Association

3 Source: Port Development Plan For Major Ports - Port of Rotterdam Authority

0%

5%

10%

15%

20%

25%

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Share of Containerized cargo out of total cargo at major ports has been steadily rising


Dry Ports

The present Indian logistics set-up has dry ports in the form of Container Freight Stations and Inland Container Depots.

They are equipped with fixed installations and offer services for handling and temporary storage of import / export laden

and empty containers carried under customs control. Transhipment of cargo also takes place from such stations.

As per the Ministry of Commerce, as on 30th June, 2011 a total of 247 CFSs/ICDs were approved by the Inter-

Ministerial Committee out of which 73 were under implementation and the rest were fully functional. To support the

planned container terminal projects at major and non-major ports CFSs/ICDs are expected to come up in their vicinity.

According to a study, by the time all phases of the Vallarpadam ICTT are commissioned, it is expected to create a need

for around 20 CFSs in the region.

Drivers & Challenges for the development of CFS / ICDs

Though increase in container traffic is driving growth, dry ports face several challenges as well. The initial costs of

developing facility are quite high – the main cause being rising real estate prices. Compliances and procedures required

for cargo movement play their part in increasing dwell times and delaying cargo movement. Also, the sudden surge in

this sector has brought in a lot of competition for the existing players.

With focus on intermodal/multimodal logistics, multimodal logistics parks are now being planned, which are much larger

than CFSs/ICDs and provide several value added services. Private players have already started coming up with such

logistics park on a large scale with state-of-the-art infrastructure. Several parks have also been planned along the

Dedicated Freight Corridor, as has been discussed in the following sections.


92.85

91.88

97.6

92.3

90.98

86

88

90

92

94

96

98

100

2005-06 2006-07 2007-08 2008-09 2009-10

% c

ap

acit

y u

tili

sati

on

Major ports in India are operating above optimum capacity

Port Sector in India

India currently has 12 major ports and 187 minor ports. Port traffic grew at 7.66% p.a. between 2005-06 & 2010-11.

While non-major ports registered a double-digit growth at 13.55%, traffic at major ports grew only at 5.37%. POL, iron

ore, and coal constitute a major chunk of traffic at both major and non-major ports.

Source: Indian Ports Association (IPA), Deloitte Analysis

P = Projected

Although the sector witnessed significant growth in cargo traffic, it has still not been able to optimize operations owing to

technical and institutional constraints as under –

Capacity constraint4: As of 2009-10, around 8 of the 12 major ports were operating at more than optimum range

of 70-75% capacity utilisation. Vizag, Tuticorin, Mormugao, & Mumbai ports are in fact experiencing more than

100% utilization. Correspondingly, the average capacity utilization at non-major ports was around 77% in 2009-10.

Source: Indian Ports Association

4 Indian Ports Association

423,570 519,159 561,090 570,032

150,120

206,380

288,862 314,785

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

2005-06 2007-08 2009-10 2010-11 (P)

(in

000 T

on

s)

India's Port Sector Traffic Growth

Major Ports Minor Ports


Inefficient cargo handling & low productivity: A study placed in the Parliament in February, 2010 by the

Comptroller and Auditor General of India, highlighted that cargo handling services at ports were inefficient. A

predominant number of berths did not have the dedicated facilities necessary for the quick handling of cargo.

Around 55% of the equipment available at all ports, except at JN Port, were running beyond their rated economic

lives, resulting in low productivity.

The average pre-berthing time at major ports varies between 0.4 hours and 23 hours. The average turnaround time

also varies between two to five days. In contrast, the turnaround time at globally competing ports like Singapore or

Hong Kong is between four and six hours.

Inadequate drafts & poor connectivity with other modes: Future shipping trends point towards larger vessels

with a minimum of 6000-8000 TEUs and a few vessels with 12000-14000 TEUs. These future generation vessels

would require drafts between 13 to 15.5 mtr.

Due to current draft restrictions, several Indian ports are unable to handle larger vessels typically with more than

9.5 mtr. draft. This could lead to shipping lines moving to other ports. Therefore, there is a need to firm up dredging

plans and also improve productivity through removal of constraints like inadequate infrastructure, absence of

seamless connectivity with other modes, etc.

The dredging of the JNPT approach channel has just begun. The channel is planned to be dredged to a depth of

13.9 mtrs. in the first phase and then to 16.1 mtrs. in Phase 2. This is a promising sign for the sector.

Cumbersome institutional arrangements & other issues: Institutional and regulatory arrangements need to be

reviewed to provide for speedy development of ports. Similarly, the procedure regarding environmental clearances

needs to be rationalized.

Other issues facing Indian ports relate to high cost structures, different tariff setting frameworks for major & non-

major ports, port security, land acquisition, etc.


25

80

105

0

50

100

150

Road Transport Rail Transport Inland Water TransportTo

nn

e-k

m p

er

litr

e

IWT is more fuel efficient as compared to road and rail transport

Adequate connectivity to the port acts as a catalyst for the port‟s growth. Despite having proper depth and adequate

facilities, ports may be stranded for the want of containerized cargo, while other ports may be burdened with an excess

they can‟t handle. The Committee of Secretaries (CoS), Government of India has recommended that a minimum 4-lane

road and double line rail connectivity be provided at major ports. Minor ports, which are now showing high growth, also

consider connectivity as an important parameter to further growth in business.

Type of cargo, place of delivery and customer preferences are among the various factors considered while deciding on

the mode of transport of goods. Keeping in mind the planned capacity expansions and the projected traffic numbers, the

Ministry of Shipping has planned various rail-road connectivity projects for the major ports. The following table enlists

the phase-wise rail-road projects planned by the Ministry.

Port Investments (Rs. in crores)

Phase 1 +

Ongoing

Phase 2 Phase 3 Total Investment

(2010-12) (2012-17) (2017-20)

Chennai 1,000 - 225 1,225

Kolkata 30 1,075 - 1,105

V. O. Chidambaranar 127 640 300 1,067

Ennore 576 446 - 1,022

Cochin 803 40 - 843

Visakhapatnam 396 150 200 746

JNPT 681 45 - 726

Paradip 615 - - 615

Mumbai 333 - - 333

Kandla 45 116 - 161

New Mangalore 70 - - 70

Mormugao - - - -

Total 4,676 2,512 725 7,912

Source: Maritime Agenda 2020

Inland Waterways

India has navigable inland waterways of almost 14,500 km, of which 5,200 km of major rivers and 500 km of canals are

suitable for mechanized crafts. Currently, IWT handles only around 1% of total inland cargo transport. There is potential

for other cargo such as coal, dry bulk, break bulk and containers to be transported economically and effectively through

IWT.

Inland Waterway transport is environment-friendly and less costly when compared to other conventional modes like

road and rail. It reduces the traffic congestion problems on road and rail.

Source: IWAI


IWT projects demand comparatively lower investments both for creation and sustenance as compared to other modes

of transport. IWT is ideal for transport of coal, over-dimensional cargo and project cargo. However, until now inland

waterways have largely been used for transporting boulders, cement and waste oil.

Source: Indiastat website

As shown in the following table, the coming decade promises investment worth Rs. 30,710 crores for the development

of IWT projects. Since, development of IWT in India is still in its initial stages, significant government funding is

necessary. Still given the long term benefits, the private sector is expected to invest over Rs. 19,000 crores over the

next decade.

Particulars Budgetary Support

(Rs. in crore)

PrivateFunding

(Rs. in crore)

Total (Rs. in crore)

On-going projects 4,175 8,400 12,575

New projects 6,630 11,505 18,135

Total 10,805 19,905 30,710

Source: Maritime Agenda 2020

17,182 , 35%

8,100 , 17%

7,500 , 15%

7,300 , 15%

4,500 , 9%

1,500 , 3% 1,500 , 3%

550 , 1%

550 , 1%

200 , 1%

CIWTC transported around 49,000 tonnes of cargo in 2010-11 most of which was low-value cargo

Boulder

Waste Oil

Pet Cake/Personal Effect

Peas

Cement/W. Cement

Fly Ash

Cement Clinkers

POL

Miscellaneous

Aluminum Block


Road Transportation

Roads have always been the primary mode of transport in India. India has one of the largest road networks of

approximately 42.36 lakh kms. As per the Road Transport & Highways Department around 60% of the total freight and

around 87% of passenger traffic is carried by Indian roads. Traffic is forecasted to grow at around 8-10% p.a.

The quality of the road infrastructure remains a big concern. Analysis of the transport budgets of some states shows

that the amount of money allocated to the sustenance of the existing road network far surpasses the allocation to the

new road development. In some regions, it is almost double the budget for new works.

The NHDP is a single multi-crore project of NHAI and GOI with several phases. The following table shows the status as

on 31st December, 2010 of the NHDP projects:

Phases Total Length

(in km)

Length Completed (in

Km)

Likely date of

Completion

I - GQ, North South-East West

corridors, Port connectivity &

others

7,498 7384 N/A

II - 4/6-laning North South-East

West Corridor, Others

6,647 4934 Dec -2010

III - Upgradation, 4/6-laning 12,109 1968 Dec-2013

IV- 2- laning with paved

Shoulders

20,000 - Dec- 2015 (as per

financing plan)

V - 6-laning of GQ and High

density corridor

6,500 443 Dec-2012

VI - Expressways 1000 NIL Dec-2015

VII - Ring Roads, Bypasses and

flyovers and other structures

700 km of ring roads/

bypass+ flyovers etc.

NIL Dec-2014

Source: Annual Report of MORTH, 2010-11

It is noteworthy that most of the projects under NHDP are proposed to being developed in association with private

players / developers on PPP basis.

The following table represents the allocation from the Central Road Fund under various heads for the year 2010-11. We

can clearly see that the National Highways (including Expressways) allocation clearly outclasses the other allocations.

Allocation Head Amount (In Cr.)

Grant to State Governments and UTs for State Roads 1,893.75

Grant to States & UTs for Roads of Inter-state Connectivity & Economic Importance 210.42

National Highways 7,848.98

Rural Roads 4,434.12

Railways 876.73

Total 15,264.00

Source: Annual Report of MORTH, 2010-11


While developing such an extensive network of highways across India, many restraints and challenges are being faced

by both, the government as well as the private players. The common yet key challenges raising their hood against the

advancement of the road network have been summarized below5 –

Land Acquisition: There has been inordinate delay in acquisition of land in some States mainly due to procedural

formalities, court cases and lack of full co-operation from the State Governments concerned

Environment and Forest Clearances: There have been considerable delays in getting the forest clearance both

at the Central and State level.

Clearances from Railways: ROBs and RUBs have to be constructed to make the highways free from level

crossing on Railways. Obtaining the clearances/approvals is a time-consuming task requiring coordination with

several Railway departments.

Shifting of Utilities: Shifting of utilities of different types e.g. electric lines, water pipelines, sewer lines,

telecommunication lines requires assistance of the concerned utility owning agencies which takes a considerable

time.

Law and order problems: Adverse law and order conditions and active anti-social groups have hindered road

development in certain states. Also there were frequent stoppages by the local population demanding additional

underpasses / bypasses, flyovers etc.

Poor performance of some contractors: Cash flow problems have led to poor performance of some of the

contractors. The termination of such contracts often results in long-drawn litigation and further delays in completion

of work.

There is a need to address these issues immediately to expedite the development of the road network and cater to the

increasing traffic flows.

5 Source: Annual Report of MORTH, 2010-11


Dedicated Freight Corridors6

A large portion of railway sidings is single line and is utilized by passenger as well as freight trains. The sharing of

railway sidings amongst the passenger and freight trains causes disruption in the smooth functioning of the trains. Long

waiting times and uncertainty of arrival are the two primary reasons for the delay in time of freight goods.

The overall freight traffic has been continuously rising. Over the last 10 years, traffic has grown at a CAGR of 6.27%.

IR‟s available infrastructure does not have enough capacity to cater to this traffic leading to severe network capacity

constraints.

Source: Economic Survey, 2011-12

The DFC project is expected to tackle some of these issues. The government has already sanctioned the Western

Corridor (Mumbai to Dadri) and the Eastern Corridor (Dankuni to Ludhiana) projects which have a total cost in excess of

Rs. 45,000 crores. Studies have also commenced to analyse the prospects of the East-West corridor (Kolkata-Mumbai),

the North-South corridor (Delhi-Chennai), East Coast corridor (Kharagpur-Vijaywada) and Southern corridor (Chennai-

Goa).

The main objectives of the DFC project are:

Increase the share of railways in freight transport

Build separate infrastructure for handling freight to enable a focused approach for developing both passenger and

freight business

Provide seamless connectivity to customers

Reduce unit cost of transportation through use of a competitive tariff structure

Work on both Western and Eastern corridors has started and both are expected to be fully functional by the end of

2017. The project is being funded jointly by JICA, the World Bank, Government of India and the private sector (through

PPP).

6 Source: DFCCIL website

93

156 197 220

341

504

926

-

100

200

300

400

500

600

700

800

900

1,000

1950-51 1960-61 1970-71 1980-81 1990-91 2000-01 2010-11

Mil

lio

n t

on

nes

Over the last decade rail freight traffic has almost doubled


The DFC project plans to provide new services including:

Roll-on Roll-off for all types of road vehicles which can piggy-back on wagons

Triple-deck automobile wagon on Western corridor and Double-deck on Eastern corridor.

Movement of over-dimensional consignments from ports to construction sites

Setting up of new terminals with a “one-stop-shop” solution for all value added services like warehousing,

packaging, custom bonding etc.

Several multimodal logistics parks have been planned along the corridors including those at Delhi-NCR, Jaipur,

Gandhidham, Ahmedabad, Vapi and Navi Mumbai on the Western corridor and at Kanpur and Ludhiana. These parks

are planned to be developed on PPP basis and would be aimed at being a one-stop shop for logistics needs providing

several value added services like IT support, tracking, inventory control etc.

Considering the above factors, it is expected that DFC will provide a boost to multimodal transportation.


Regulatory Reforms

Multimodal Transport Act, 1993

The Indian government recognised the benefits of multimodal transport way back in the early 1990s and came up with

the Multimodal Transportation of Goods Act in 1993 with the objective of encouraging growth of exports from India.

Through the Act the government aimed at developing international multimodal transport which would reduce logistics

costs and thus make Indian products more competitive in the global market. The Act established licensing requirements,

contractual terms (through the Multimodal Transport Document) and liability regime. The Act was again amended in

year 2000 to give more protection to shippers.

According to trade, the current version of the Act still has several lacunae. The Association of Multimodal Transport

Operators of India have proposed several amendments including compulsory registration of MTOs with DGS, changes

to the Customs Act to enable seamless movement of goods, penalties for offences among others. Trade estimates that

these amendments should bring down transit time for transport of goods by 40-50%.

Private Freight Terminals Policy

The policy aims to stimulate development of privately owned freight terminals on private land for dealing with break bulk

goods, parcel traffic and containers. Indian Railways‟ goods sheds are not in a very good condition, which is why they

have gone for PPP mode of development. Under this policy, PFTs are expected to provide goods handling,

warehousing and other associated logistics services to rail users and facilitate expansion of the 3PL sector.

After the lukewarm response to its original policy the IR revamped it recently. CWC, CONCOR and several private

players are looking to build and operate PFTs. If this is a success, it is bound to increase the share of rail freight

transport.

Draft Coastal Shipping Policy

The proposed coastal shipping policy is aimed at boosting coastal trade and various support services with special focus

on coastal ships, River Sea Vessels (RSVs), Inland Vessels (IVs) and Cross trade compatible vessels.

A draft policy has been released which gives recommendations, indicating the level at which it would be advisable to

implement them:

Infrastructure: Setting up more minor ports along the coast, dedicated berths for coastal ships, promotion of Ro-

Ro jetties, ship repair facilities and dry-docks, LNG supply facilities, dedicated warehouses for coastal cargo, rail

and road connectivity and deepening of sea channels at minor ports

Financial incentives including subsidies: Implementing an aggressive ship-building subsidy policy, exemption

from certain taxes, lower tariffs than foreign ships, subsidies for Ro-Ro and repair jetties, fiscal incentives for small

ports and establishing a Coastal Development Fund for coastal ships

Resolving manpower issues: Solving problems with regard to manpower and manning scales to organise for

availability of adequate and good quality manpower

Promoting modal shift from road and rail to coastal shipping: Improve competitive ability of coastal ships and

promoting the Carbon credit scheme


Data base and communication infrastructure: Establishing & maintaining a robust system/database for

collection of accurate data, publishing annual reports on coastal shipping, developing a freight exchange and

streamlining the multi-modal transport operations

The above measures are expected to provide a boost to the coastal shipping in India.

Cabotage Policy

The Cabotage policy checks the coastal trade of a country. Few countries practice absolute Cabotage law while others

practice a tailored one. In India, the Cabotage Policy is not absolute. It is regulated through provisions of sections 406

and 407 of the Merchant Shipping Act, 1958.

The original Cabotage policy required foreign ships to take a licence for plying on the coastline of the country. Coastal

shipping thus had to be carried out only by Indian ships or ships chartered by Indian citizens. Due to this and several

other reasons, a considerable part of Indian transhipment cargo was getting diverted to Colombo, Singapore & Jebel Ali

Ports.

Recently the policy has been relaxed specifically so that ICTT, Vallarpadam would attract transhipment cargo destined

for Indian ports. It would allow containers arriving there to be shipped to other Indian ports. Traffic growth at ICTT,

Vallarpadam, which was specifically developed to operate as a transhipment hub, has been lacklustre till now and

significantly below estimates. This policy change is expected to aid in growth of traffic at there and more importantly,

reduce diversion of Indian cargo traffic to ports in other countries. However, the flipside is that domestic shipping

companies may face severe loss of business.

Policy to permit Operators to move container trains on Indian Railways

This policy was formulated to permit rail linking of ICDs by private parties other than CONCOR and to allow them to

move container trains on the same lines as CONCOR for both international and domestic traffic. The private players

would own the trains and IR would provide the engine and crew. Privatization of container rail operation enticed 16

players and brought in investments of around Rs. 2,000 crore.

However, restrictions have been placed on private players to carry certain commodities such as coal, coke, some

minerals. The private players have to rely on IR‟s infrastructure which, they argue, is not upto standards. They face

severe competition from CONCOR, which is an IR subsidiary and has been present in this sector since a long time.

Additionally, haulage charges have been raised time and again, the recent one being that for pig iron and sponge iron,

squeezing out profit margins of private players. IR, on the other hand, maintains that it follows the cross-subsidization

policy by trying to earn more from freight transport so as to be able to continue providing cheap passenger transport.

Impact of GST

Indirect Taxes are thoroughly associated with the movement of goods. It decides both the incidence and quantum of tax

to be levied. One of the major implications of the GST is that the incidence and coverage of tax for providing of services

will rise while at the same time there will be lesser need for the warehouses due to supply chain efficiencies. This, in

turn, may require companies to rethink their supply chain / logistics strategies.


GST is likely to have the following impact on the logistics industry as a whole:

Increase in outsourcing of the warehousing function to 3PL service providers

Reduction in number of Distribution Centres: Post GST, state specific distribution centres are expected to give way

to regional DCs. The outcome being fewer DCs of relatively larger size and network coverage, more value

inventory and improvement in quality of services.

Alleviation of the complexities in documentation and inter-state barriers

The challenge then lies in the formulation of the network design which will compress supply chain for GST efficiency

while ensuring that the business objectives in and around the logistics network are also met.

Foreign Direct Investments

In emerging economies like India, the budgetary allocation for development of infrastructure is structured phase-wise so

as to develop the infrastructure as well as to do justice to other sectors like education, health, food & nutrition, defence

etc. In such a scenario and given the typical nature of returns on investments in this sector, foreign investments and

loans from multilateral agencies become important sources of finance.

The Indian Government, in 1992, relaxed the norms for foreign

investments in India and opened the infrastructure sector to

foreign investments. India allows 100% FDI in maritime

infrastructure like ports, terminals, jetties, harbours, merchant

shipbuilding as well as in support infrastructure like

warehousing, roads and Inland Water Transport. Since, then

there has been significant investment especially in the ports

sector by foreign players the major ones being those by DP

World, APM Terminals and PSA Singapore among others.

Consideration should be given to provide incentives to foreign

players to venture into developing other transport

infrastructure as well.


Logistics Technology trends

Inspite of being a shared service and not contributing directly to the revenues of a company, investments in technology

reap huge returns indirectly. Today, information availability, visibility, operational flexibility and scalability are critical to a

successful logistics function. Some of the developments in technology applicable in the logistics sector have been

examined here.

Cloud computing and Software-as-a-Service

Cloud computing as a concept has rapidly picked up in the recent years. The top logistics firms, manufacturers and

distributors have already invested in this technology to reap its benefits. Theoretically, cloud computing and SaaS are

one and the same. Instead of buying and setting up software solutions internally, companies can rent them from an

outside provider that hosts the applications on its own servers. However, in addition to offering software as a service, a

cloud network may also offer service-oriented architecture, platform, infrastructure, database, or other capabilities as a

service.

Some of the benefits of Cloud / SaaS based models for logistics companies include –

Low cost footprint: Low up-front investment and small payback periods.

Enables collaboration: Entities in a supply chain including transporters, 3PLs and suppliers, can connect on the

cloud to collaborate on logistics planning, forecasting, and procurement management

Scalable: Because of the ease and agility of deploying these solutions, they are scalable to meet volatile customer

demands

Integration: It increases supply chain efficiencies by integrating information on the same platform than having

disparate systems that don‟t work together

Real-time visibility: With all data normalized on one platform, users get real-time visibility of inbound

transportation and shipments in transit

Global Positioning System

GPS technology gives the details of the origin and destination of a shipment. During transit, it helps in providing the

exact position of a consignment. There are sophisticated GPS maps and technology available through which one can

track the movement, and be proactive to customers by informing about the shipment status and expected delivery time.

GPS system helps logistics companies to track the location of their goods.

With the GPS systems becoming cheaper and more advanced, by the day, many of the large and medium sized

logistics players have adopted GPS tracking systems for their truck.

In addition to tracking, GPS systems have also been found to be useful to reduce truck breakdowns. In the event of a

breakdown, it minimizes the amount of time spent in recovering the vehicle by sending service personnel located

nearest to the vehicle to do the repair job. Also, certain GPS systems allow setting up of preventive maintenance alerts

by calendar time, engine on-time or mileage to notify the operator when the vehicles are due for maintenance.

Moreover, GPS systems also allow effective planning of delivery jobs to track that the vehicle closest to the

source/destination for performing the job. This helps in substantial reduction of fuel and maintenance costs as well as


reduces time required per job. Businesses can even incorporate hard data gathered through GPS tracking into

employee appraisals and bonus/reward schemes. Bonuses based on tangible performance metrics can encourage

productivity and boost morale.

Radio Frequency Identification

Radio frequency identification is an automatic identification method, relying on storing and remotely retrieving data using

devices called RFID tags or transponders. It allows tracking, monitoring, reporting and managing products, documents,

assets and people more effectively and efficiently as they move between locations anywhere at any time.

An RFID tag is incorporated into a product for the purpose of identification using radio waves. Some tags can be read

from several meters away and beyond the line of sight of the reader. These RFID tags can be active or passive and

they require a reading device and interface computer to process information.

Importance of RFID in logistics

Allows the service provider to track items at each supply chain location, from plant to consumer

Protects against copying and counterfeit of goods by embedding a unique Electronic Product Code into each item

Proves the origin and improves handling of goods. Shippers can use RFID tags to show robustness of a supply

chain and to ensure greater security in processes

Tracks the amount of goods in the supply chain and helps to save capital required for distribution and warehousing

storage costs

RFID technology –

Reduces the manpower requirement considerably

Saves time as scanning of cases/items takes place rapidly. RFID can scan upto 1,000 boxes per second whereas

bar coding would take a few hours to scan the same number of boxes

Has a high level of security as data cannot be hacked

Enterprise Resource Planning

ERP systems integrate several data sources and processes of an organization into a unified system. A typical ERP

system uses multiple components of computer software and hardware to achieve the integration.

ERP induces enough visibility in the supply chain so that an efficient work flow can be established. By pulling together

and sharing information from functions such as purchasing, warehousing, and sales it helps to control costs. The only

issue is that installation and upgrades of ERP systems are very costly.

Mobile Technology

The recent developments in mobile technologies allow companies to stay connected anywhere, anytime. Many of the

large logistics players have developed mobile applications to allow anytime-access to information through almost any

mobile device. These tools provide immediate insight into the status of a shipment, making operations run faster and

smoother. These applications function on Apple, Blackberry and Android platforms and are free-to-use.


The Way Forward

As noted above, several initiatives have already been taken by the Government and the private sector in developing

intermodal/multimodal transport. However, many issues still remain to be tackled. There is a need to prioritize issues

based on whether they can be resolved in the near term or the long term.

There needs to be a strong focus on containerization for both domestic and EXIM cargo. The Dedicated Freight Corridor

project needs to be completed without delays. It will go a long way in increasing railways‟ market share in freight

transport and bringing down logistics costs. There also needs to be a push to develop Inland Waterways and Coastal

Shipping. This initially needs to come from the government by way of policy reforms and subsidies or other financial

incentives.

GST has met a certain amount of opposition from the States on the issue of revenue sharing. However, it has

undergone several rounds of changes and is now about to be passed. The sooner it is passed, the better it will be

especially for the logistics sector. Private investment in development of railways must be encouraged. Policies for PFTs,

wagon development and moving container traffic by rail have already been passed, but they have done little to spur

investments. Necessary lacunae in those policies need to be looked into and plugged at the earliest. Amendments to

the Multimodal Transport Act and Customs Act should aid in inducing cross-border intermodal/multimodal logistics.

On the technology front, manufacturers and distributors managing their own logistics need to seriously consider

integrating their entire supply chain by the use Cloud computing. For large logistics companies it would act as an

enabler for increasing process efficiencies and a platform for information exchange with its customers. GPS and RFID

may be deployed by transporters to track their vehicles and shipments.

Intermodal/multimodal logistics has tremendous potential to increase supply chain efficiencies. The right policy

incentives from the government and interests from the private sector should together go a long way to spur growth in

this sector.


Bibliography & References

1. Report of the Indian Foundation of Transport Research and Training

2. World Bank's International Logistics Performance Index Global Ranking

3. Indian Ports Association

4. Update on Indian Port Sector (31.03.11), Transport Research Wing, Ministry of Road Transport and Highways,

Government of India

5. Port Development Plan For Major Ports - Port of Rotterdam Authority

6. Maritime Agenda, 2010-2020, Ministry of Shipping, Government of India

7. Inland Waterways Authority of India

8. Indiastat website

9. Annual Report of Ministry of Road Transport and Highways, 2010-11

10. DFCCIL website

11. Deloitte Research and Analysis


Contacts

About the Authors

Hemant Bhattbhatt is a Senior Director in Deloitte‟s India practice. He is the Shipping Practice Leader for Deloitte in

India.

This Report has been prepared based on inputs & contributions from Shailendra Ranjan and Archit Mehta.

Hemant B. Bhattbhatt

Senior Director, Consulting

Deloitte Touche Tohmatsu India Private Limited

E-mail: [email protected]



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Documents

Intermodal and Multimodal Logistics Knowledge Paper · A multimodal transport contract is a single contract for carriage of goods by at least two different modes of transport. A multimodal