Logistics - Cygnus - ToC

Industry Insight – Logistics

© Cygnus Business Consulting & Research Pvt. Ltd. 2009 1

IInndduussttrryy IInnssiigghhtt

LLOOGGIISSTTIICCSS

March 2009

Disclaimer: All information contained in this report has been obtained from sources believed to be accurate by Cygnus Business Consulting & Research (Cygnus). While reasonable care has been taken in its preparation, Cygnus makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. The information contained herein may be changed without notice. All information should be considered solely as statements of opinion and Cygnus will not be liable for any loss incurred by users from any use of the publication or contents

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SYNOPSIS

Logistics industry in India, which comprises air, sea and surface transport, is driven by the

country’s economic growth. India’s economy has been growing at over 9% since 2005-06,

giving a boost to the logistics industry. The surface transport of the country consists of road

and railways. Road transport has a significant share in India’s transportation sector with a

share of 4.6% in India’s GDP in 2007-08. The road network handles about 65% of freight and

85% of passenger traffic. According to the Planning Commission, the road freight traffic is

estimated to reach the value of 1,231 billion tonne km (BTKM) by 2011-12. The Public-

Private Partnership (PPP) model in the road sector is likely to expedite the growth and

modernisation of roads and will further help road transportation play a significant role in

logistics. Indian Railways also witnessed an excellent growth rate of 8.98% in 2007-08

against the previous year and carried 794.21m tonnes of revenue earned cargo. Shipping

industry is equally significant in the Indian economy as 95% of the country’s international

trade by volume and 70% by value are seaborne. By the end of December 2007, there were

850 vessels with 9.03 million Gross Registered Tonnage (GRT). India’s container traffic has

increased to 92.05 million tonnes in 2007-08. Similarly, air cargo traffic also experienced a

significant growth in 2007-08 and total air cargo traffic was 1.71 million tonnes against 1.55

million tonnes in 2006-07, registering a growth rate of 10.32%. The growth was driven by

buoyant economy, rise in exports of gems and jewellery and special chemicals and high-value

pharmaceuticals.

Cygnus Business Consulting & Research has come up with a comprehensive report on Indian

Logistics Industry comprising 11 chapters. The report starts with a global overview of

logistics industry and moves on to discuss the three segments of logistics in India, followed

by overview of intermediaries and support service providers, market dynamics, growth

drivers, major players, cost structure of the industry, issues and challenges, government

initiatives and future outlook.

The report would be useful to all those connected with the logistics industry, financial

institutes tracking the industry and its players, industry researchers watching out any latest

developments in Indian logistics and logistics management students.

No. of Pages: 252 No of Figures: 63 No. of Tables: 49



CONTENTS

Executive Summary ................................................................................................... 11

Highlights ..................................................................................................................... 20

1. Logistics Industry Structure .................................................................................. 24

1.1 Global Logistics Industry Overview ......................................................................................... 24

1.1.1 Components of Logistics Cost ........................................................................... 25

1.2 Indian Logistics Industry Overview .......................................................................................... 26

1.2.1 Spending on Logistics in India ............................................................................. 28

1.2.2 Cost Component of Indian Logistics Industry ................................................... 29

1.2.3 Infrastructure Development – Boost to Logistics Industry ............................... 29

2. Transport System in India ..................................................................................... 31

2.1 Surface Transport System in India ............................................................................................ 31

2.1.1 Road Transport system in India ......................................................................... 31

2.1.2 Railways .............................................................................................................. 44

2.2.Transportation System-Marine Transport .............................................................................. 51

2.2.1. Shipping .............................................................................................................. 51

2.2.2 PORTS ................................................................................................................ 57

2.3. Air Transport System in India .................................................................................................. 73

2.3.1 Overview ............................................................................................................ 73

2.3.2 Air Transport Sector & India’s GDP .................................................................. 76

2.3.3 Airports .............................................................................................................. 76

2.3.4 Air Cargo Market ............................................................................................... 86

2.3.5 Airport Authority of India .................................................................................. 92

2.3.6 Carriers ............................................................................................................... 93

2.3.7 Recent Trends .................................................................................................... 96

3. Intermediaries and Support Service Providers ................................................... 97

3.1 Reasons to Outsource Logistics Functions ............................................................................ 97

3.2 3PL Market Size ............................................................................................................................ 98

3.3 Function of Third Party Logistics .............................................................................................. 98

3.4 State of 3PL in India ..................................................................................................................... 99

3.5 Fourth Party Logistics (4PL)....................................................................................................... 99



3.6 Clearing & Forwarding Agents ................................................................................................ 100

3.7 Warehousing ............................................................................................................................... 101

4. Market Dynamics .................................................................................................. 102

4.1 Surface Transport ....................................................................................................................... 102

4.1.1 Market size ........................................................................................................ 102

4.1.2 Demand Supply Scenario .................................................................................. 104

4.2 Marine Transport ....................................................................................................................... 107

4.2.1 Overview of Shipping and Port in India ............................................................ 107

4.2.2 Market Size ....................................................................................................... 108

4.2.3 Demand Supply Scenario .................................................................................. 108

4.3 Air Transport .............................................................................................................................. 110

4.3.1 Overview of Indian Aviation Industry .............................................................. 110

4.3.2 Market Size of Air Transport System in India .................................................. 110

4.3.3. Demand-Supply Scenario ................................................................................. 110

5. Growth drivers ...................................................................................................... 114

5.1 Economic growth ....................................................................................................................... 114

5.2 Global trade ................................................................................................................................. 114

5.3 Corporate Trend ....................................................................................................................... 115

5.4 Improved infrastructure ............................................................................................................ 116

5.5 Growth in the manufacturing sector and retail boom ....................................................... 117

5.6 Emergence of global manufacturing networks and increased FDI .................................. 117

5.7 Information technology ............................................................................................................. 118

5.8 Liberalization and Deregulation .............................................................................................. 118

5.9 Development of E-commerce ................................................................................................. 119

6. Technology & Innovation ..................................................................................... 120


6.1.1 Road Transport Sector ..................................................................................... 120

6.1.2 Indian Railways .................................................................................................. 122


6.2.1. Recent Trends ................................................................................................. 126

6.3 Air Transport .............................................................................................................................. 129

6.3.1 Air Traffic Management (ATM) ........................................................................ 129



6.3.2 Communication/Navigation/Surveillance .......................................................... 130

6.3.3. Electronic Data Interchange ............................................................................ 131

6.3.4 Advance Passenger Information System (APIS) ............................................... 131

7. Major Players......................................................................................................... 134


7.1.1 Road Transport ................................................................................................ 134

7.1.2 Railways ............................................................................................................ 146


7.2.1 Shipping Corporation of India .......................................................................... 151

7.2.2 Great Eastern Shipping Company .................................................................... 158

7.2.3 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping

Limited) ...................................................................................................................... 163

7.2.4 Varun Shipping Company Ltd ........................................................................... 167

7.3 Air Transport .............................................................................................................................. 171

7.3.1 National Aviation Company of India Limited (merger of Air India and Indian)171

7.3.2 Jet Airways ........................................................................................................ 174

7.3.3. Kingfisher Airlines Ltd ..................................................................................... 177

7.3.4 Blue Dart .......................................................................................................... 179

Business Profile ......................................................................................................... 179

7.3.5 SpieceJet Cargo ................................................................................................. 181

8. Cost Structure ...................................................................................................... 182


8.1.1 Road Transport ................................................................................................ 182

8.1.2 Railways ............................................................................................................ 182


8.3 Air Transport .............................................................................................................................. 184

8.3.1 Cost Drivers ..................................................................................................... 184

9. Issues and Challenges ........................................................................................... 186


9.1.1 Road Transport ................................................................................................ 187

9.1.2 Railways ............................................................................................................ 192




9.2.1 Shipping Industry ............................................................................................... 195

9.2.2 Port Sector ....................................................................................................... 196

9.3 Air Transport .............................................................................................................................. 199

9.3.1 Major Indian Airports Running Out of Capacity .............................................. 199

9.3.2 High Waiting Time and Congestion in Airports .............................................. 199

9.3.3 High Fuel Cost .................................................................................................. 200

9.3.4 Taxation ............................................................................................................ 200

9.3.5 Aviation Security ............................................................................................... 201

9.3.6 Lack of skilled Human Power ........................................................................... 201

10. Government Initiatives, Schemes & Regulations ............................................ 203

10.1 Initiatives .................................................................................................................................... 203

10.1.1 Roads .............................................................................................................. 203

10.1.2 Railways .......................................................................................................... 208

10.1.3 Marine Transport ............................................................................................ 213

10.1.4 Air Transport .................................................................................................. 217

10.2 Regulations ................................................................................................................................ 222

10.2.1 Road Transport .............................................................................................. 222

10.2.2 Railways .......................................................................................................... 223

10.2.3 Marine Transport ............................................................................................ 225

10.2.4 Air Transport .................................................................................................. 229

11. Future Outlook ................................................................................................... 234

11.1 Surface Transport .................................................................................................................... 234

11.1.1 Road Transport .............................................................................................. 234

11.1.2 Railways .......................................................................................................... 236

11.2 Marine Transport ..................................................................................................................... 238

11.2.1 Shipping ........................................................................................................... 239

11.2.2 Port ................................................................................................................. 240

11.3 Air Transport ............................................................................................................................ 241

Annexure I: List of Abbreviations ........................................................................... 244

Annexure II: Bibliography ........................................................................................ 249



LIST OF FIGURES

Figure 1.1: Elements of Global Logistics Costs, 2007-08

Figure 1.2: Logistics Industry Structure

Figure 1.3: Spending on logistics in India

Figure 1.4: Elements of Logistics Costs in India (%), 2007-08

Figure 2.1: Road Network Structure in India

Figure 2.2: Distribution of Roads in India, 2007

Figure 2.3: Road Freight Index in India

Figure 2.4: Road Freight (Organised Vs Unorganised)

Figure 2.5: Map of NHDP projects

Figure 2.6: Railway Network

Figure 2.7: Roads and Railways Freight and Passenger Traffic Share (2007-08)

Figure 2.8: Trends in Indian Railways Freight Movement

Figure 2.9: Railway Freight Revenue

Figure 2.10: Growth of Indian Fleet

Figure 2.11: Shipping Industry

Figure 2.12: Classification of Overseas Shipping Fleet

Figure 2.13: Composition of Indian Fleet (As on July 1, 2006)

Figure 2.14: Share of the Fleet in Different Age Categories (As on July 1, 2006)

Figure 2.15: Map of Major Ports in India

Figure 2.16: Cargo Handled at Non-major Ports

Figure 2.17: Container Traffic in Indian Ports

Figure 2.18: Size of Air Transport System in India

Figure 2.19: Air Cargo Market in India

Figure 2.20: Composition of Airports managed by A.A.I.

Figure 4.1: Market Size of Road Transport Industry (at 1999-00 prices)

Figure 4.2: Indian Railways Revenue Earning Break-up

Figure 4.3: Industry Size of Water Transport System in India (at 1999-2000 prices)

Figure 4.4: Major Commodity-wise Traffic Trends

Figure 5.1: India's GDP Growth Rate

Figure 5.2: India’s Export-Import Growth Rate

Figure 7.1: TCI Segment-wise Revenue Break-up, (2007-08)



Figure 7.2 TCI Net Sales

Figure 7.3: TCI Profit After Tax

Figure 7.4: Balmer Lawrie Segment-wise Revenue Break-up, (2007-08)

Figure 7.5: Balmer Lawrie Net Sales

Figure 7.6: Balmer Lawrie Profit After Tax

Figure 7.7: Gati Segment wise Revenue Break-up (2007-08)

Figure 7.8: Gati Net Sales

Figure 7.9: Gati Profit After Tax

Figure 7.10: Trends in Operating Ratio of Indian Railways (in %)

Figure 7.11: Trends in Gross Traffic Receipts of IR

Figure 7.12: SCI Segment-wise Revenue Break-up, (2007-08)

Figure 7.13: SCI Net Sales

Figure 7.14: SCI Profit After Tax

Figure 7.15: GE Shipping Business Segment wise Revenue Break-up

Figure 7.16: GE Shipping Net Sales

Figure 7.17: GE Shipping Profit After Tax

Figure 7.18 ESPLL Net Sales

Figure 7.19 ESPLL Profit After Tax

Figure 7.20 Varun Shipping Net Sales

Figure 7.21: Varun Shipping Profit After Tax

Figure 7.22: Jet Airways Operating Revenue Break-up, (2007-08)

Figure 7.23: Jet Airways Total Revenue

Figure 7.24: Jet Airways Profit After Tax

Figure 7.25: Blue Dart Revenues

Figure 7.26: Blue Dart Profit After Tax

Figure 8.1: Cost component – Shipping Industry

Figure 8.2: Cost Component of Air Transport in India (% in 2007-08)

Figure 9.1: Relative Share Railway Vs Roads (1950 – 51)

Figure 9.2: Relative Share Railway Vs Roads (2007-08)

Figure 11.1: Forecasted Road Freight in India

Figure 11.2: Forecasted Cargo Volumes by all Ports in India

Figure 11.3 Indian Air Cargo Market Outlook



LIST OF TABLES

Table 1.1: Projected spending on Infrastructure from 2007-08 to 2011-12

Table 2.1: Indian Road Network

Table 2.2: Road Network as of December 2007

Table 2.3: Development of Roads in India

Table 2.4: NHDP Projects

Table 2.5: Indian Railway Zones

Table 2.6: Rail Network 2006-07

Table 2.7: Key Statistics of Indian Railways, 2006-07

Table 2.8: Commodity-wise Break-up of Indian Railways

Table 2.9: Position of Indian Tonnage as on 31.12.2007

Table 2.10: Distribution of Gross Tonnage for Shipping Companies as on December 31, 2007

Table 2.11: Traffic handled at major ports

Table 2.12: Commodity-wise Traffic at Major Ports

Table 2.13: Productivity of Ports

Table 2.14: Cargo Traffic Handled at top 46 Airports in India

Table 4.1: 11th Five Year Plan – Investments Details

Table 4.2: Traffic Trends at Major Ports

Table 4.3: Total Air Cargo Traffic Trends

Table 4.4: Industry Consensus Traffic Forecast by Region

Table 4.5: Global Air Cargo Forecast (%) – 2007-2009

Table 7.1: Financial Highlights of TCI

Table 7.2: Financial Highlights of Balmer Lawrie

Table 7.3: Financial Highlights of Gati

Table 7.4: Financial Highlights of SCI

Table 7.5: Financial Highlights of GE Shipping

Table 7.6: Financial Highlights of ESPLL

Table 7.7: Financial Highlights of Varun Shipping

Table 7.8: Cargo Fleet details of NACIL

Table 7.9: Financial Highlights of Jet Airways

Table 7.10: Financial Highlights of Kingfisher Airlines

Table 7.11: Financial Highlights of Blue Dart

Table 9.1: Ownership Pattern of Trucks



Table 9.2: Trucks and its Payload Capacity

Table 9.3: Age-wise average distance covered by trucks

Table 10.1: 11th Five Year Plan – Investments Details

Table 10.2: Status of NHDP & Other NHAI Projects (Status: October 31, 2008)

Table 10.3: Ongoing and Sanctioned Port Connectivity Projects

Table 10.4: Head wise Summary of 11th Plan Outlay

Table 10.5: Private Investment - Present Status

Table 10.6: Proposed Investment Non-Major Ports in 11th Plan

Table 10.7: Airport Development Programme in India

Table 10.8: Guidelines of Railway Transportation of Hazardous Goods

Table 11.1: 11th Five Year Plan Projections for Road Freight (2007-08 to 2011-12)

Table 11.2: Average Cost of Truck/ton km

Table 11.3: Forecast of Railway Traffic - Different Scenarios

Table 11.4: Addition Target of Gross Tonnage in Shipping Industry

Table 11.5: Projected Cargo Traffic, Product-wise

Table 11.6: Air Transport Industry Consensus Traffic Forecast by Region

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