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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Industry Insight – Logistics
© Cygnus Business Consulting & Research Pvt. Ltd. 2009 2
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
Industry Insight – Logistics
© Cygnus Business Consulting & Research Pvt. Ltd. 2009 3
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
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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 Surface Transport ....................................................................................................................... 120
6.1.1 Road Transport Sector ..................................................................................... 120
6.1.2 Indian Railways .................................................................................................. 122
6.2 Marine Transport ....................................................................................................................... 126
6.2.1. Recent Trends ................................................................................................. 126
6.3 Air Transport .............................................................................................................................. 129
6.3.1 Air Traffic Management (ATM) ........................................................................ 129
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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 Surface Transport ....................................................................................................................... 134
7.1.1 Road Transport ................................................................................................ 134
7.1.2 Railways ............................................................................................................ 146
7.2 Marine Transport ....................................................................................................................... 151
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 Surface Transport ....................................................................................................................... 182
8.1.1 Road Transport ................................................................................................ 182
8.1.2 Railways ............................................................................................................ 182
8.2 Marine Transport ....................................................................................................................... 183
8.3 Air Transport .............................................................................................................................. 184
8.3.1 Cost Drivers ..................................................................................................... 184
9. Issues and Challenges ........................................................................................... 186
9.1 Surface Transport ....................................................................................................................... 186
9.1.1 Road Transport ................................................................................................ 187
9.1.2 Railways ............................................................................................................ 192
9.2 Marine Transport ....................................................................................................................... 195
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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
Industry Insight – Logistics
© Cygnus Business Consulting & Research Pvt. Ltd. 2009 7
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)
Industry Insight – Logistics
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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
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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
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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