Indian Logistics Sector: Operational Impediments & Suggested Measures to Overcome Same with Special Reference to Controlled Temperature

Warehousing
An Independent Project Report submitted to

AIIM
In partial fulfillment of the requirements of the Post Graduate Programme in Infrastructure Management Course

By: Anuj Rawat Roll No - 03

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DECLARATION
I hereby declare that I have followed the directions given in IP Guidelines document and I confirm that this report is my own personal work and that all material other than my own is properly referenced. Students Name: Anuj Rawat (Roll No 03) Students Signature:

Date: July 24, 2011

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ACKNOWLEDGEMENT In completing this study, I did my level best correcting my shortcomings to possible extent and I sincerely hope that this report will serve its purpose. I extend my heartiest thanks to all those persons whose willing cooperation led to the timely completion of the project. I express my sincere gratitude to Dr B Gangula and Dr. K. K Sharma, my Project Guides, for sharing their valuable knowledge and immense experience in making this project successful. Their words of advice provided great support, kept me motivated and helped me a great deal to complete project.

I am also thankful to Dr (Mrs) P Vyas, Chairperson Program Chair for appreciating our concerns/issues and resolving same on priority. I express my thanks to Dr Bakul Dholakia, Director, Adani Institute of Infrastructure Management, for extending his support for said project.

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Contents
LIST OF FIGURES .............................................................................................................................. 6 LIST OF TABLES ................................................................................................................................ 7 CHAPTER 1: INTRODUCTION ........................................................................................................ 10 CHAPTER 2: ROADS ....................................................................................................................... 16 2.1. 2.2. 2.3. 2.4. 2.5. GENERAL................................................................................................................................... 16 IMPROVEMENT IN THE ROAD NETWORK....................................................................................... 16 SHARE OF TRANSPORTATION LOAD ........................................................................................... 16 FLEET CONFIGURATION ............................................................................................................. 18 CHALLENGES AND SUGGESTED MITIGATION MEASURES ASSOCIATED WITH ROAD....................... 19

CHAPTER 3: RAILWAYS ................................................................................................................. 21 3.1. 3.2. 3.3. 3.4. GENERAL................................................................................................................................... 21 LOSING MARKET SHARE ............................................................................................................ 21 BUDGETARY REALLOCATIONS ................................................................................................... 22 CHALLENGES AND SUGGESTED MITIGATION MEASURES ASSOCIATED WITH RAILWAYS ............... 22

CHAPTER 4: WATERWAYS & PORTS ........................................................................................... 25 4.1. GENERAL................................................................................................................................... 25 4.2. ADVANTAGES ............................................................................................................................ 25 4.3. INLAND WATER TRANSPORTATION............................................................................................. 25 4.4. INLAND WATERWAYS ................................................................................................................. 26 4.5. CONDITIONS FOR A WATERWAY1 ............................................................................................... 27 4.6. ADVANTAGES OF WATERWAYS .................................................................................................. 28 4.7. DISADVANTAGES OF INLAND WATER TRANSPORT SYSTEMS ...................................................... 29 4.8. COASTAL SHIPPING ................................................................................................................... 29 4.9. REASONS FOR LESS TRAFFIC .................................................................................................... 29 4.10. CHALLENGES AND SUGGESTED MITIGATION MEASURES ASSOCIATED WITH IWT, COSTAL SHIPPING AND PORTS .......................................................................................................................... 30

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CHAPTER 5: WAREHOUSING ........................................................................................................ 33 5.1. 5.2. 5.3. 5.4. 5.5. GENERAL................................................................................................................................... 33 COST STRUCTURE ..................................................................................................................... 34 SERVICES PROVIDED BY WAREHOUSES ..................................................................................... 35 GOVERNMENT POLICY ON LOGISTICS PARKS AND FREE TRADE WAREHOUSE ZONES(FTWZ). .. 35 ISSUES RELATED WITH POOR GROWTH OF WAREHOUSING .......................................................... 36

CHAPTER 6: COLD CHAIN ............................................................................................................. 38 6.1. 6.2. 6.3. 6.4. 6.5. 6.6. 6.7. 6.8. 6.9. 6.10. 6.11. 6.12. 6.13. 6.14. 6.15. 6.17. 6.18. 6.19. 6.20. INTRODUCTION........................................................................................................................... 38 2ND GREEN REVOLUTION .......................................................................................................... 38 INTEGRATED COLD CHAIN CONCEPT ......................................................................................... 39 DIFFERENCE BETWEEN COLD STORAGE AND TEMPERATURE CONTROLLED WAREHOUSE(TCW 39 CHILL/FREEZING INJURIES ......................................................................................................... 39 PROCESS ................................................................................................................................... 40 PRE-COOLING ........................................................................................................................... 40 BENEFITS.................................................................................................................................. 41 MARKET ANALYSIS. ................................................................................................................... 42 DEMAND AND SUPPLY GAP...................................................................................................... 42 MARKET SIZE .......................................................................................................................... 43 COST STRUCTURE. .................................................................................................................. 43 LOCATION OF TCWS ............................................................................................................... 46 ISSUES RELATED WITH POOR GROWTH OF WAREHOUSING ........................................................ 46 HINDRANCES IN COMMERCIALIZATION OF TCWS ..................................................................... 47 STEPS TAKEN BY GOVERNMENT OF INDIA TO PROMOTE TCWS ................................................ 47 REGULATORY FRAMEWORK ..................................................................................................... 48 RISK ANALYSIS: ...................................................................................................................... 49 OWNERSHIP OF COLD CHAIN. .................................................................................................. 49

CHAPTER 7: CONCLUSION ............................................................................................................ 51 REFERENCES .................................................................................................................................. 54

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List of Figures
Figure 1: Heads of Logistics .............................................................................................. 10 Figure 2: Spectrum of Logistics ......................................................................................... 11 Figure 3: Proposed Expenditiure on Roads for balanced modal mix ................................. 17 Figure 4: Truck Ownership in India ................................................................................... 18 Figure 5: Rail spend up to 2020 ........................................................................................ 22 Figure 6 : Inland Waterways of India ................................................................................. 27 Figure 7: GST Driven Warehousing reorganization ........................................................... 37 Figure 8 : A typical ambient supply chain for fruits and vegetables ................................... 38 Figure 9 : Flow Chart of Integrated Cold Chain ................................................................. 39 Figure 10 : Product flow in a Cold Chain ........................................................................... 40 Figure 11 : Market Size - Cold Chain ................................................................................ 43 Figure 12: Capital cost break-up TCW .............................................................................. 44 Figure 13 : Typical US Cooperative Cold Chain ................................................................ 49 Figure 14: Proposed shift in Inter Modal Transport ........................................................... 51

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List of Tables
Table 1: Country wise Logistics cost as percent of GDP ................................................... 12 Table 2: Elements of Logistics costs ................................................................................. 13 Table 3: Comparison of Logistics Performance Index of Comparative Countries ............. 14 Table 4 :Comparison of Key parameters of Logistics, India vs. Global ............................. 15 Table 5: Challenges and Suggested Mitigation measures associated Roads ................... 19 Table 6: Indian Railways losing freight market share ........................................................ 21 Table 7: Challenges and Suggested Mitigation measures associated with Railways ........ 22 Table 8 : Challenges and Suggested Mitigation measures associated with IWT, Costal Shipping and Ports ............................................................................................. 30 Table 9: Details of types of Warehouses ........................................................................... 33 Table 10 : Break Up of Capital cost of Warehouses .......................................................... 34 Table 11 : Break Up of Operating Cost of Warehouse ...................................................... 35 Table 12: Salient aspects of Logistics Parks and FTWZs ................................................. 35 Table 13 : Challenges and Suggested Mitigation measures associated with Warehousing .......................................................................................................................................... 36 Table 14 : Post Harvest Life Comparison of Some Common Use Items ........................... 41 Table 15: Demand Supply of TCW storage ....................................................................... 42 Table 16 : Challenges and Suggested Mitigation measures associated with Setting Up of Cold Chain ........................................................................................................................ 46 Table 17 : Risk Allocation framework for TCW project ...................................................... 55

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Abstract Transportation is an essential and major sub head of logistics. In fact it is back bone of entire logistics and supply chain business. A sound transportation system will result in right product in right quantity, in right condition, at right place, in right time at right price to right customer. Despite being the second largest food producer, quite a few people in India do not get two square meals. Main reason behind this is 25-40% of produce gets wasted due to lack of proper handling after harvest and storage. In order to avoid said wastage food grain and agricultural produce is stored in Controlled Atmosphere Storage (CAS)/ Temperature Controlled Warehouses (TCWs), where in spoilage due to aging of produce is arrested. Thus it is essential to know various challenges associated with various components of logistics and CAS/TCW, so that necessary steps can be taken to address them. So in order to find out various issues extensive research and interactions with some industry players was carried out and answers to following questions are addressed in this report:-. Why logistics costs are more in India Vis a Vis other global competitors? Suggest measures to reduce them.

What are the various challenges faced by Indian Logistics industry in various sectors and how can they be mitigated?

Controlled atmosphere storage facility should be located near the production center or consumption center. Comment

What are the various hindrances in development and commercialization of controlled atmosphere storage?

What are the various measures Government has taken to promote to usage controlled atmosphere storage?

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 How various PPP models can be incorporated in establishing controlled atmosphere storage?

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Chapter 1: Introduction
1.1. Before we start it is imperative that we should know what we mean by logistics. As

per Wikipedia and Oxford dictionary meaning of Logistics are given below:(a). The word logistics has its origin in the French verb loger to lodge or to quarter. Its

original use was to describe the science of movement, supplying & maintenance of military forces in the field. Later on it was used to describe the management of materials flow through an organization, from raw materials through to finished goods. (b). Logistics is considered to have originated in the military's need to supply

themselves with arms, ammunition and rations as they moved from their base to a forward position. In ancient Greek, Roman and Byzantine empires, military officers with the title Logistikas were responsible for financial and supply distribution matters. (c). Oxford English Dictionary defines logistics as "the branch of military science relating

to procuring, maintaining and transporting materiel, personnel and facilities." Another dictionary definition is "the time-related positioning of resources." (d). Logistics management deals with application of management principles to logistics

operations for efficient and cost effective movement of goods and personnel.

Logistics

Transportation

Warehousing

Value added service

Figure 1: Heads of Logistics

(Source: National Skill Development Corporation, Transportation, Logistics, Warehousing, Packaging Sector 2022-A Report).

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Figure 2: Spectrum of Logistics

(Source: Transportation in India vol 1 by KPMG)

1.2.

Economic development of any country requires efficient logistics / supply chain

management. Logistics infrastructure includes all means of modern transport of a country. Studies of various analysts and organizations have forecasted due to fast pace of economic growth soon India will emerge as a manufacturing hub. Due to which freight traffic will increase by 100%.

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1.3.

The annual logistics cost in India is estimated to be 14% of GDP, while same is only

8% in US. Logistics costs is a huge cost to any industry and generally second to material used in manufacturing. Generally logistics expenditures are to the tune of 5-35% of sales, depending upon terrain, weight, ratio and type of business. Thus by having an efficient logistics our country can save to the tune of US $ 50 billion per annum. Thus inefficient logistics not only retard economic growth but also at times leads to discontented customer. Table 1: Country wise Logistics cost as percent of GDP S.No Country Logistics Cost as percent of GDP 1. 2. 3. 4. 5. 6. 7. China India Singapore United Kingdom France Japan United states
(Source: IMD (2003))

14.5 14.0 12.5 12.2 11.7 10.5 8.7

1.4.

Typically Logistics Costs will include transportation costs, inventory carrying costs

(including inventories, handling, warehousing and transportation) and administrative costs. 1.5. Impediments to Indian logistics industry are not only limited to poor physical

infrastructure but also includes poor communication, low penetration of Information technology there by hampering flow of information, interstate taxation, carriage of less than truck load and more than full truck load, illiteracy of truck drivers, financial exploitation by fleet operators, monopoly of Indian Railways in freight carriage by rail , lack of
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dedicated rail freight corridor, low mechanization of ports, poor IT skills of managers also affects logistics industry adversely. Thus it is very relevant to single out these impediments and necessary actions to be undertaken at the earliest to resolve them so as avoid any hindrance in economic growth of nation. 1.6. Presently Indias competitive advantage of low cost manufacturing is greatly eroded

due to high logistics costs in general and transportation cost in particular. Due to poor transportation infrastructure and cumbersome documentation, delays are caused there by resulting in holding more inventories which leads to holding more inventory thus increasing inventory cost and warehousing cost etc. Thus in order to reduce logistics cost, our focus should be improved physical infrastructure and policies and rest of things will automatically fall in place. Table 2: Elements of Logistics costs Head Percent Contribution Transportation Warehousing , Packaging and losses 3. 4. Inventory Order processing
(Source: Sanyal (2006a))

S.No 1. 2.

40 26

24 10

1.7.

In fact World Bank has derived an Logistics Performance Index, (LPI) is an

interactive benchmarking tool to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance. Various parameters measured in LPI are given below:(a) (b). (c). Efficiency of the customs clearance process. Quality of trade and transport related infrastructure. Ease of arranging competitively priced shipments.
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(d). (e). (f).

Competence and quality of logistics servicies. Ability to track and trace consignments. Frequency with which shipments reach the consignee within scheduled time.

1.8.

If we compare our country LPI with of other comparative countries whose size/

economy is also developing like our country, we see that only in international shipments and customs we are better off than Brazil and slightly ahead of South Africa in timeliness and in rest of the parameters we are lagging behind. Table 3: Comparison of Logistics Performance Index of Comparative Countries

(Source: World Bank)

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1.9.

Comparison of some key parameters pertaining to Indian logistics setup with global

averages is given below:Table 4 :Comparison of Key parameters of Logistics, India vs. Global

(Source: Transportation in India vol 1 by KPMG)

1.10. In order to study challenges faced by Indian Logistics, we shall be discussing them under following heads:(a). (b). (c). Roads Railways. Waterways and Ports.

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Chapter 2: ROADS
2.1. General India has one of the largest road networks in world, aggregating to present consisting of 200 km of Expressways, 66,754 km of National Highways, 128,000 km of State Highways, 470,000 km of Major District Roads, and about 2,650,000 km of other district and rural roads. National Highways account for only about 2 per cent of the total road length of the country, but carry about 40 per cent of the total traffic across the length and breadth of the country. Out of the total length of National Highways, about 35 per cent is of single lane/ intermediate lane width, about 53 per cent is 2-lane standard, and about 12 per cent is 4-lane standard or more. 2.2. Improvement in the road network : Through the twin objectives of accessibility and

mobility has been accorded high priority in developmental planning. The accessibility objective is to be achieved through improved rural roads network through the Pradhan Mantra Gram Sadak Yojana (PMGSY), which aims at connecting every village with allweather roads. The mobility is to be facilitated through improvement in capacity and strengthening high-density corridors. Considering the importance of the National Highways and the rapid increase in traffic, the Government has taken up the National Highways Development Project (NHDP). The rst initiative in this regard was the 4/6 laning of the Golden Quadrilateral followed by the North South East West (NSEW) corridor. Further, keeping in view the need for nationwide connectivity, the Committee on Infrastructure, under the chair of the Prime Minister, has approved the a seven phase programme for highway development, with the investment of INR 236,247 crore.

2.3.

Share of Transportation Load: Roads are the dominant mode of transportation in

India today. They carry almost 90 percent of the countrys passenger traffic and 56 percent of its freight due to lower cost, flexibility and last mile connectivity. The density of Indias highway network -- at 0.66 km of highway per square kilometer of land is similar to that of the United States (0.65) and much greater than China's (0.16) or Brazil's (0.20). However, most highways in India are narrow and congested with poor surface quality, and 40 percent of Indias villages do not have access to all-weather roads. In order to improve
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road network and make it congestion free reallocation of budgetary allocations should be carried out.

Figure 3: Proposed Expenditiure on Roads for balanced modal mix

(Source: Building India, transforming the nations logistics infrastructure by Mckinesy India)

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2.4.

Fleet Configuration. Road transport is fragmented and most of the truck operators

are having a small fleet of 4-5 trucks. Small fleet operators carry large proportion of national freight and almost most of the regional freight. Drivers of small fleet operators are generally uneducated and paid low wages to use old and vintage equipment so as to capture business with low quotes and hardly any effort is made to provide any value added service.

Figure 4: Truck Ownership in India

(Source: Transportation in India vol 2 by KPMG)

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2.5.

Challenges and suggested mitigation measures associated with road: Same have

been tabulated below:Table 5: Challenges and Suggested Mitigation measures associated Roads S.No Challenges Suggested Mitigation Measures 1. Poor and inadequate road Stricter norms by Indian Road congress. Adopt PPP of mode private and involve in

infrastructure.

participation

players

improvement of infrastructure. 2. Roads passing through Construction of bypasses well outside the city limits.

congested areas. 3.

Damage to roads by overloading Model Concession Agreement to be of trucks. amended to include provision of

weighbridges at all toll collection points. Surprise check of trucks to be carried out and data captured should be

electronically transferred to a central location. Strict compliance of Supreme Court of India directions and detain trucks at toll booths so as to avoid damaging of roads. 4. Interstate taxation and multiple Implementation of GST. check posts. 5. 6. Different interpretation of laws. Delay at toll collection points. Intervention of Supreme Court of India Electronic toll collection with daily

clearing system and electronic transfer of revenue share to escrow account. 7. Old trucks with Vintage Use of latest and modern multi axle trucks with aerodynamic body, better fuel efficiency capacity. and more load carrying

technology.

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Lower per ton toll rates for modern trucks. Tax benefit for use of modern trucks. Phasing out of trucks older than 15 years. 8. Driver fatigue due to poor design Use of modern trucks with ergonomic of vehicles. design for better crew comfort. Creation of way side amenities for rest of drivers. 9. Unfair competition. industry, Due to Organized players should showcase

fragmented

smaller value added service like prompt delivery,

player get away with paying less safety and insurance cover of goods. taxes norms. 10. Multiple check by posts and Educated drivers. and avoid regulatory

harassment officials. 11.

government

Different rates of taxation among Taxation rules pertaining to all states states. should be same.

12.

Delay caused at state borders for Networking of all check posts and RTOs. checking of documents. Driver to file scanned copy of documents at starting station. Revenue to be shared by use of smartcards. Also help in identifying trucks with bogus registration numbers.

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Chapter 3: RAILWAYS
3.1. General. Indian Railways (IR) is the principal mode of transportation for bulk freight and long distance passenger traffic. It is the worlds second largest rail network under a single management, and has been contributing to the industrial and economic landscape of the country and is one of the worlds largest employers. Of the main two segments freight and passengerof IR, It carries some 17 million passengers and 2 million tonnes of freight a day in year. Freight segment accounts for roughly two-thirds of revenue. Within the freight segment, bulk traffic accounts for nearly 95 per cent, of which coal is about 45 per cent. At the end of 200809, the IR network was spread over 63,630 route kilometres (rkms), comprising 52,002 rkm of broad gauge and 11,628 rkm of metre gauge. Around 36 per cent of this network is electried. IR loaded 833 million tons of revenue generating payload and generated 538 billion net tonnes kilometre (BTKM). 3.2. Losing Market Share: Over a period of time railways are losing quite a considerable

amount of freight share to road network. Same is evident from table given below:Table 6: Indian Railways losing freight market share

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3.3.

Budgetary Reallocations: In order to regain its earlier market share railways will have to carry

out a introspection and reallocate budgetary allocations. Same has been amplified in the figure given below:-

Figure 5: Rail spend up to 2020

(Source: Building India, transforming the nations logistics infrastructure by Mckinesy India)

3.4.

Challenges and suggested mitigation measures associated with railways: Same

have been tabulated below:Table 7: Challenges and Suggested Mitigation measures associated with Railways S.No Challenges Suggested Mitigation Measures 1. Carriage of Less payload i.e. in Revisit payload guidelines and make it to tune of 20.3-22.9 tons/axle in 30 ton/axle for goods wagon. goods wagons. 2. Non availability of funds to Optimal loading of wagons.

replace poor and old railway Invest in better wagons with more tracks and sleepers. carriage capacity. Utilize additional revenue generated for
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improvement/ infrastructure. 3 Poor design of wagons.

replacement

of

Wagons to have heavy base to bear load and sidewalls of light and composite material so as to reduce tare weight, increase weight. payload with same gross

4.

Movement of empty wagons.

Revisit tariff structure and share revenue when importers are exporters also. Discount to users on return haulage, so as to recover cost of running and not to earn profits.

4.

Delay in loading/unloading of Use of precision calibrated mechanical wagons. handling equipment to load wagons. Use of wider access by fixing sliding doors to have more number of persons for manual loading.

5.

Optimum

loading

of

wagons Modification of covered wagons such that

carrying processed food/ delicate they should have provision to place a items. horizontal sheet for carrying additional load. 6. Poor access to railway stations. Shift/ construct dedicated freight handling stations on the outskirts of town for speedy and timely movement of cargo. 7. Less freight volume. Run goods train as per a fixed schedule. Invite private players to run dedicated sidings and provide value added door to door service and share revenue. 8. Design of infrastructure. New infrastructure should be created with a futuristic vision. Like instead of double

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stacking of containers it should cater to triple stacking and also Over Dimension Consignment. 9. Overburdened corridor resulting Timely and early completion of dedicated in low priority and slow freight corridors.

movement of goods train. 10. Timely completion of projects. Award of contracts to private players with penalty clause for delay. 11. Sudden fare revision jeopardizes Fare revision should be related either long term contracts. with Whole Sale Price Index / Energy charges. Should be revised every 10% change either way. 12. Shortage of Wagons Bulk users to own private wagons and freight charges to be adjusted

accordingly. Will reduce wagon maintaince load of wagons to a large extent. 13. Shortage of funds for track up Use budgetary allocation for mechanizing gradation. loading/unloading sites. Increase speed of trains. Faster turnaround will result in more trips generation. Additional revenue generated can be used for track up gradation in phased manner.

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Chapter 4: WATERWAYS & PORTS

4.1. General. Historically most of the civilizations came up next to water bodies due to availability of water for daily usage and agricultural purpose. Thereafter initially major industries also came on banks of a water bodies as it not only provided water for industry but also for movement of raw materials and semi finished/ finished goods. Transport over waterways is especially effective when the source and/or destination are waterfront locations and connected. It is one of the most effective and cheapest means of transport as operating costs of fuel and environmental pollution is lowest than for corresponding volumes of movement by road, rail or air. For domestic freight water transport can be divided two categories i.e. Inland waterways which includes rivers, canals and lakes and Coastal shipping. 4.2. Advantages: Major advantage of waterway is the main infrastructure is often depth,

naturally available, which only has to be modified i.e. by creating adequate

maintained and upgraded by creating suitable infrastructure on coasts. The viability of goods movement using waterways can be analyzed from following perspectives:(a) (b). (c). 4.3. Technological. Physical viability. Commercial potential. Inland Water Transportation: Inland water transport includes natural modes as

navigable rivers and artificial modes such as canals. The Inland waterways have played an important role in the Indian transport system since ancient times as mentioned earlier. However, in recent times the importance of this mode of transport has declined considerably with the expansion of road and rail transport. In addition, diversion of river water for irrigation has also reduced the importance of inland water transport. The decline is also due to deforestation of hill ranges leading to erosion, accumulation of silt in rivers and failure to modernize the fleet to suit local conditions.

Development of inland water transport commenced from the Second Five Year Plan and up to the end of Fifth five year plan the total expenditure on this sector was Rs. 34 crore. It
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was only in the Sixth Five year plan that this sector was given priority and specific schemes of inter-State and national importance for development of inland water transport were taken up. The Seventh Plan was an important landmark in the development of inland water transport. The expenditure on this sector in the Plan (at Rs. 131.85 crore) was more than the expenditure incurred right up to the end of the Sixth Plan. Inland Waterway Authority of India (IWAI) was set up on October 27 th 1986, for development and regulation of inland waterways for shipping and navigation which is a big step forward and should help in the accelerated development of inland water transport. In 2007-08 inland waterways were used to carry a freight of 55.82 million tons which was just 0.34% of 14500 million tons of total Indian freight. Actions are being carried out to increase this percentage to 2% by 2025. 4.4. Inland Waterways: Five Inland waterways have been declared. All these

waterways are governed by IWAI. Brief about them is given below: National Waterway No 1: Ganga Hooghly River Water System 1620 KM. From Haldia, (West Bengal) to Allahabad (Uttar Pradesh) passing through Uttar Pradesh, Bihar and West Bengal. National Waterway No 2: Bramaputra River - 891 KM. From Sadia to Dhubri in Assam. National Waterway No.3: West Coast Canal Including Champakkara &

Udyogamandal Canals - 205 Km. From Kollam to Kottapuram in Kerala. National Waterway No.4: Integrated Canal System from Kakinada Port to Pondicherry including Godavari & Krishna Rivers - 1095 Km in Andhra Pradesh Tamilnadu and Pondicherry. National Waterway No.5: East Coast Canal Integrated with Brahmani & Mahanadi Delta River System - 623 Km in West Bengal & Orissa.

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Figure 6 : Inland Waterways of India

( Source: IWAI website)

4.5.

Conditions for a Waterway1. A water body can be declared a Waterway provided it

meets following criteria: It should possess capability of navigation by mechanically propelled vessels of minimum 300 tonnes (DWT) capacity (45m x 8m x 1.2m), and It should have a fairway of minimum 40m wide channel with 1.4m depth in case of rivers and minimum 30 m wide channel with 1.8 m depth in case of canals. (Exception may be given in case of irrigation-cum-navigation canals based on request of the concerned State Govt in order to safeguard the interest of irrigation). It should be continuous stretch of minimum 50 kms; the only exception to be made to waterway length is for urban conglomerations and intra-port traffic, and pass
Page 27 of 57 1: IAWI Website

through and serve the interest of more than one states, or connect a vast and prosperous hinterland and major port, or either pass through or connect a strategic region where development of navigation is considered necessary to provide logistic support for economic development or national security, or connect place not served by any other mode of transport. 4.6. Advantages of Waterways: Waterways provide enormous advantages as a mode given

of transport compared to land and air modes of transports. Some of them are below:

Low Capital Cost. Requires only 5-10% of cost of developing an equivalent four lane expressway. Low Maintenance Cost. Maintenance cost is only 20% of equivalent roadway. Fuel Efficient. Due to fuel efficiency cost of transportation goes down. It is transport.

estimated that 1 liter of fuel can move 105 ton-km by inland water

Whereas the same amount of fuel can move only 85 ton-km by rail and 24 ton-km by road. Convenient For Bulk and Over Dimension Cargo. Easy integration with sea transport - Inland water transport can easily integrated with Sea transport and hence it reduces the extra cost required for land-sea or airsea transport interface infrastructure development. It also reduces the time taken to transfer the goods to and from sea transport vessels. Environment Friendly. The biggest advantage of IWT is that its pollution less, less effect on the environment & more on the economy and most importantly no Land acquisition is required.

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4.7.

Disadvantages of Inland Water Transport systems Low availability of inland waterways - Out of the total inland water body available in the world, very low percentage of it is potentially navigable. Low speed - Water transport is much slower than its competitors

(Source: IWAI website)

4.8.

Coastal Shipping. India has a long coastline of 7,516 kms, a number of ports (12

major and 200 minor working ports) and a vast hinterland. Therefore coastal shipping holds a great promise more so because it is the most energy efficient and cheapest mode of transport for carriage of bulky goods like iron and steel, iron ore, coal, timber, etc.

over long distances. Despite this only 7% of domestic cargo moved by coastal shipping. 4.9. Reasons for Less traffic. The main factors affecting the growth of coastal shipping

adversely are given below: High transportation costs. Due to multiple handling of cargo overall transportation cost becomes high. Poor turnaround time due to port delays, over aged vessels and lack of mechanical handling facilities. It is estimated that at present 70 per cent of ship time is spent at ports and only 30 per cent on voyage. Imbalance in coastal traffic movement, results in non availability of adequate traffic for both legs of journey there by at times ships have to travel return journey.
(Source: www.adb.org/Documents/Papers/INRM-PolicyBriefs/inrm14.pdf)

with ballast, on

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4.10. Challenges and suggested mitigation measures associated with IWT, Costal Shipping and Ports: Same have been tabulated below:Table 8 : Challenges and Suggested Mitigation measures associated with IWT, Costal Shipping and Ports S.No 1. Challenges Suggested Mitigation Measures

Insufficient depth/draft, excessive Periodic and regular dredging and create siltation, channel. frequent shifting of draft up to 2.5 / 3 meters in water channels and at least 17 meters at port . Use of low draft barges.

2. 3.

Low speed.

Use of modern equipment.

Non availability of cargo/ return Tax benefits/holidays for setting up of cargo industry on banks of national waterways.

4.

Inefficient handling of goods due Concessions for creation of infrastructure to lack of infrastructure. at selected places under a laid down policy.

5.

Disposal of dredged material

Use it as embankment for channelizing and increasing depth of channel.

6.

Non

availability

of

high Wavier in custom and excise duty for off the shelf purchase. Subsidy/ Viability gap funding for building high technology vessels/barges.

technology vessels.

7.

Non

availability

of

night Budgetary allocation for off the shelf procurement. PPP mode. Private party installs said infrastructure and charges user (BOT Concession)/ Government pays annuity to private party (BOT Annuity).

navigation aids

8.

Shore protection work

Budgetary allocation for execution of civil work and tree plantation at crucial places.

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9.

High tariffs particularly at ports.

Priority berthing rights at earmarked berths with discount on port dues.

10.

Lack of talent due to income tax Amend income tax laws to provide same laws. benefits to people employed in vessels engaged in coastal shipping.

11.

High cost of bunker fuel

Same treatment to be meted out to all vessels whether employed in coastal shipping and inland waterways.

12.

Poor infrastructure at ports

Upgrade mechanical handling equipment at ports. Discard vintage and inefficient equipment as scrap. Incentivize port labor for achieving

certain levels. 13. Poor efficiency at ports Use of modern/ state of art mechanical handling equipment. Procure adequate no of mechanical handling equipment. Participation of private players in creation and up gradation of port infrastructure. 14. Shortage of space for expansion Participatory approach. Persons whose land has been acquired may be allocated a share of profits for duration of

concession. 15. Capital intensive Grant of Infrastructure status like roads so as to enjoy tax benefits and borrowing at low cost. 16. Cabotage Law Revisit provisions of Cabotage law and open coastal shipping for foreign players to have more competition.

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Policy can be revised at a later stage. 17. Poor hinterland connectivity for Connect all ports with broad gauge speedy evacuation of cargo. railway station and national highways. Amend guidelines and all ports having traffic of laid down limits to have railway siding in a stipulated timeframe. 18. High port dues. Faster turnaround of ships will result in more number of ships being turnaround in same time, thereby reducing charges levied on ships. 19. Multiple regulator Policies should be formulated after due consultation with affected ministries and various industries federations like CII and FICCI.

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Chapter 5: Warehousing
5.1. General. Typically warehousing in India can be divided into two categories, firstly Government and secondly private. Government warehousing basically dealt with storage of food grains in warehouses of Food Corporation of India (FCI) and Central Warehousing Corporation (CWC). On other hand private warehouses/godowns has been dominated by small players with small capacities and poor material handling, stacking and monitoring technologies. In fact quite private warehouse/godowns used to be a medium size room with goods kept all over in an unorganized manner. Generally these warehouses were used by transporters to store goods pending collection from consignee or aggregate goods prior to dispatch a full truck load to a particular destination or by a wholesaler using it for stocking for further distribution. Relevant aspects of different types of Warehouses are given below:-

S.No 1.

Table 9: Details of types of Warehouses Type of Warehouse Details Private Owned & operated by private entities and individuals. Licensed for exclusive use of goods owned, imported by or on behalf of licensee only.

2.

Public

Licensed by government to private entities, individuals or cooperative society. Permitted to offer storage facilities to general public or other entities for a fee. Typically located near transportation points and critical in marketing of agricultural products.

3.

Bonded

Licensed to accept import goods for storage until payment of customs duty. Warehouses give a "Bond" that goods will not be removed authorities. without prior consent from customs

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Primarily located near ports. Operated by government. Used primarily by importers & exporters.

(Source: Research on India Warehouse 2009)

As warehouse is one of the vital components of logistics management. It is pertinent to mention here that warehousing cost accounts for about 25-27 per cent of the total logistics cost thus warehousing has become an important focus point. With growth in export import trade, arrival of organized players and government policies like Logistics Hubs and rolling out of Goods and Service Tax (GST) sector is going to witness significant growth.

5.2.

Cost structure: Cost break up of various components of warehouse are given

below:(a). Capital Cost. A warehouse with a capacity of 0.15 million sq feet will require a

capital outlay of INR 140-150 million. Table 10 : Break Up of Capital cost of Warehouses Head Percentage Remarks of Total Cost 1. Land 14 Vary as per location. Minimum area of 3-5 acres 2. 3. Civil Work Plant & equipment 77 6 Min eco size is 0.12-0.15 million sq ft. Fork lift, weighing machine, firefighting equipment, racks and pellets etc. 4. 5. 6. Land development Misc assets Gestation Period 2 1 1-2 years

S.No

(Source: CRISIL Research, Warehousing 2009)

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(b).

Operating Cost. Table 11 : Break Up of Operating Cost of Warehouse Head Percentage of Total Cost Rentals and Capital Charges Labor Repairs & Maintenance Electricity Pallet charges 52 26 10 8 4

S.No 1. 2. 3. 4. 5.

(Source: CRISIL Research, Warehousing 2009)

5.3.

Services provided by Warehouses. In fact now warehouses are not only used for

storing goods but also value added services like packaging, distribution , transportation, tracking and reverse logistics etc. In fact FCI has outsourced its warehousing and distribution functions to Adani Agro Logistics Limited (AALL) for 20 years in certain locations. AALL will not store food grain in specially designed silos at designated locations but also ferry it to distribution centers located in other parts of India in specially designed wagons under USE OR PAY contract. 5.4. Government policy on Logistics Parks and Free Trade Warehouse Zones(FTWZ).

In order to boost warehousing development, government has invited private sector to build Logistics Parks and FTZW. Salient aspect of Logistics Park and FTWZ are given below. Industry is likely to grow by a rate of CAGR of 9% till 2013-14 and may see an overall investment of up to INR 300 Billion.
(Source: CRISIL Research, Warehouse 2009)

S.No 1.

Table 12: Salient aspects of Logistics Parks and FTWZs Parameter Logistics Park FTWZ Description Includes warehouses, Special form of SEZ with focus warehousing and

container facilities and cold on chain infrastructure 2. Components Rail and Road connectivity.

international trading. Standard and Bonded

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Banks, ATMs etc Hotels, Food parks

Warehouse. and Rail and Road sidings.

entertainment facilities. 3. 4. Focus Regulatory Domestic Market Classified Infrastructure Industry 5. Specification NA EXIM trade under Designated as foreign territory. Governed under SEZ Act 2005. Minimum built up area of 0.5 mn sq mtrs Minimum area of 40 Hectares Minimum capital outlay of INR 1 billion. 6. Incentives 22% tax exemption for Same as SEZ.

continuous operations for 10 years. Granted only to developers. 7. Location Developers and operators can avail benefits

Near SEZs and dedicated FTWZ itself is considered as an freight corridor SEZ

(Source: Research on India Warehouse 2009)

5.5.

Issues related with poor growth of warehousing. Various issues related with

Warehousing industry and their mitigation measures have been tabulated below:Table 13 : Challenges and Suggested Mitigation measures associated with Warehousing S.No Challenges Suggested Mitigation Measures 1. Huge investment on setting up of Logistics parks may compensate same warehouse. 2. Warehouses state due located to in by giving some tax breaks. each Rolling out of GST will result in reduction tax of warehouses

complex

structure. 3. Limited organized and Growth in organized retailing will boost warehousing.
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outsourced warehousing

4.

Inefficient handling of goods.

Use

of

IT

for

better

inventory

management and modern mechanical handling devices will improve efficiency.

Figure 7: GST Driven Warehousing reorganization

(Source: Transportation in India vol 2 by KPMG)

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Chapter 6: COLD CHAIN

6.1. Introduction: India is the worlds second largest producer of food. India produces 47 million tons of fruits and 96 million tons of vegetables annually. Out of this 25-40% of annual agricultural produce is wasted and does not reaches consumer. In fact in 2003 produce worth INR 58,000 crore was wasted while same amount has been reduced to INR 30,000 crore in 2010. Following are reasons for same:(a). Improper post harvest handling due to lack of awareness among farmers about

advantages and methods of pre-cooling. (b). Poor road and transportation infrastructure result in slow movement of produce

from to place of origin to point of sale. (c). Unavailability of temperature controlled warehouses.

Figure 8 : A typical ambient supply chain for fruits and vegetables

(Source: Avon Consulting Research)

6.2.

2nd Green Revolution As 1st Green Revolution emphasized on modernization and

mechanization of means of agriculture. Now due to rapidly rising population and shrinking agriculture land, 2nd Green Revolution has to come by ensuring zero wastage of produce between point of origin and point of sale by proper processing & preservation.

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6.3.

Integrated Cold Chain Concept. Cold Chain is a system which provides a series of

facilities for maintaining ideal storage conditions for perishables from the point of origin to the point of sale. Pictorial diagram of same is given below.

Collection Centres

Processing centre

Temperatur e Controlled Warehouse (TCW)

Temperatur e Controlled Transport ( TCTs / Reefer Vans)

Point of Sale/ Retail Stores

Consumer Handleing/ Refrigitatio n

Figure 9 : Flow Chart of Integrated Cold Chain

6.4.

Difference between Cold Storage and Temperature controlled Warehouse(TCW).

Cold storage and TCW both use low temperature to store products but TCWs are more scientific and systematic in nature. In fact cold storage preceded TCWs. In cold storage temperature used to be fixed for complete storage, while in case of TCW, temperature of storage is maintained as per product kept inside storage, so as avoid chill / freezing injuries to product. 6.5. Chill/Freezing Injuries. It is basically injury/ decomposition and/or deterioration of

produce due to exposure to low temperatures. Temperature is dependent on product and may not be same for everyone. Due to this injury certain products may start producing Ethylene gas also, which may result in damage to other products also which are healthy so far. In fact certain drugs/ injections decompose due chill / freezing injury and lose their potency and may be harmful due to change in composition.

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6.6.

Process. After collection from farm i.e. point of origin, produce has to go through

various stages before it reaches a buyer. Schematic diagram of these activities is given below. In the above activities two processes of Pre-cooling and handling (from point of harvest to point of sale) are very important as small error can be very costly. Details about Pre-cooling are given below. However if produce is not properly handled to include transported, cleaned, graded, sorted and packaged, might result in one bad product may pass through, then due to volume of produce stored it will be a herculean task to find out that bad product later on. Processing of bad product may remind us of old adage that One Bad Apple may spoil the Whole Basket. Due to enormous volume, size of basket may become quite large, thus there is a requirement of frequent and periodic inspection and turnover of produce stored in the CAS/ TCW. This will lead to arrest the deterioration of other produce at the earliest.

Figure 10 : Product flow in a Cold Chain

(Source:-http://www.slideshare.net/pxkohli/module-cc)

6.7.

Pre-Cooling. Pre-cooling is key component in the preservation of quality for

perishable by rapid removal of heat from freshly harvested produce. Due to exposure to sun and ambient temperature a lot of heat is stored inside farm produce. Respiration due to enzymatic oxidation in the growing produce continues after harvest. This process results in the consumption of sugars, starches and moisture without replenishment by the
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plant. Carbon dioxide and other gases along with heat are generated in the process. If the heat is not removed, the process is accelerated. Growth of molds and the loss of moisture from the produce are also accelerated by heat. Bruising of the produce further accelerates these processes, resulting in the loss of texture, firmness, color, flavor and appearance. In addition, some nutritional value may also be lost. When these losses occur, the produce is generally considered to have lost its freshness and quality. This process is typically done before the produce is put into TCW. In fact pre cooling within 5 hours of harvest can double shelf life of produce.
(Ref: http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/agdex7461)

6.8. (a). (b). (c). (d). (e). (f).

Benefits: By using a cold chain environment we can reap following benefits:Minimize post-harvest spoilage. Extend shelf life and freshness of produce. Round the year availability of produce. Maintain nutritive value. Prevent decay especially in non vegetarian and dairy products. Safeguard potency of vaccines. Table 14 : Post Harvest Life Comparison of Some Common Use Items S.No Item Post Harvest Life Post Harvest Life with without Controlled Atmosphere Storage (in days) 1. 2. 3. 4. 5. 6. Banana Mango Apple Orange Papaya Grapes 12 12 21 21 21 10
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Controlled Atmosphere Storage (in days) 28 21 180 84 84 56

7. 8. 9. 10.

Egg Plant Cabbage Tomato Peas

10 18 7 5

14 180 21 14

6.9.

Market Analysis. On perusal of benefits mentioned above it can be inferred that

cold chain will be extensively used by following market segment:(a). (b). (c). (d). (e). (f). Organized retail malls. Exotic vegetable dealers. Frozen non vegetarian product dealers. Hotels. Dairy produce dealers. Wholesale pharmaceuticals distributors.

6.10. Demand and Supply Gap. Cold chain being a nascent industry in India, there is a huge demand and supply gap, same is evident from following data. Table 15: Demand Supply of TCW storage Supply Demand (in Thousand Tonnes) 1 2 3 2005-06 2007-08 2010-11 17000 19000 23000 (in Thousand Tonnes) 82,000 84,000 90,000

S.No

Year

Short fall (in Thousand Tonnes) 65,000 65,000 67,000

(Source:- www.transreporter.in/index.php?action=page&id=13&issue=SCM&id1=72)

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6.11. Market Size. Over past few years market segment of TCWs in value terms have grown at @19% CAGR, while in volume terms it has grown @12-14% CAGR. As per research estimates growth rate in volume will be slightly low in forthcoming years due to capacity addition in last few years. However revenue earned will keep on rising due to increase in utilisation levels from 60% to 70%. Market size from revenue aspect of cold chain is given below:Market Size - Cold Chain

Figure 11 : Market Size - Cold Chain (In Billion of Rs)

(Source:- http://www.omafra.gov.on.ca/english/crops/facts/98-021.htm)

6.12. Cost Structure. A cold chain has got two main components i.e. TCWs and TCTs. In order to reduce cost of land and additional civil construction, processing centre and TCWs are co-located. Details of various cost structure of a cold chain are given below:Cold Chain Cost TCW Construction (7-10 TCWs) TCT Cost (15-20 TCTs) Rs 250-400 Million Rs 30-40 million each Rs 1.5-3.5 million each
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Minimum Economic Size Capital Cost /Ton Land (Cost not included) 6.12.1 below:-

4000-5000 Tonnes Rs 6000-7000 1.0-1.5 Acres

Cost Component TCW. Details of various components of TCWs are given

Others Utility 8% 5% Civil Construction 42%

Insulation 20%

Refrigeratio n 25%
Figure 12: Capital cost break-up TCW
(Source: CRISIL Report)

6.12.2.

Operating cost break-up TCW. Extensive and continue air conditioning is

required so as to maintain desired temperature in various chambers of TCW therefore cost of power is the main component of operating cost. Licence 4% Maintenance 10%

Labour 22%

Power 64%

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6.12.3.

Solar Power. Some market players in developed countries have tried to

reduce power cost by installing solar/ photo volatile panels on roof of warehouse. Life of these panels is around 20 years and cost gets break even in approx six years, there by supplying almost free power for next 14 years or so. Break even period of this option highly depends on geographical location of warehouse. Power is used in a following manner. (i). (ii). Initially power from solar panels installed on roof is utilized. In case of less daylight, consumption and source of power are prioritized. Light dimmers which are activated by sensors are used so as to make up for shortfall power generation and to ensure enough power is available for air conditioning. (iii). (iv). In case of totally over- casted sky, power from grid is drawn. At the time of designing warehouse, emphasis light is available in working area

there by reducing power consumption.

(Ref:- http://www.nuworldresearch.com/images/051023%20Payback%20example%20DG%20.pdf)

( Ref:- http://www.corbisimages.com/Enlargement/Enlargement.aspx?id=42-4352066&caller=search)

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6.13. Location of TCWs. While planning location of TCW, following two options are available:(a). Next to Produce/ Harvest. When TCW is located close to harvest area it is

economical for farmers to take their produce to TCW also product is relatively fresh as less time is spent in transportation. It may be possible that TCW may not be utilized for complete year as area may be producing one crop only. Also setup cost may be less due to comparatively cheap land but operational cost may be high as product will require frequent transshipment in TCVs to point of sale. Will require more number of TCVs as turnaround time of TCV will be more. (b). Next to Market. When TCW is located next to market it can be operational

throughout the year as different products as per market demand can be stored, however due care and speedy movement of harvested produce has to be carried out as delay will set up aging in produce. Initial setup cost may be high due to costly land prices but operational cost may be less as TCV will be used for shorter distance and frequent replenishment of retail stores is possible. Also few TCVs will be required due to short turnaround time. 6.14. Issues related with poor growth of warehousing. Various issues related with Warehousing industry and their mitigation measures have been tabulated below:Table 16 : Challenges and Suggested Mitigation measures associated with Setting Up of Cold Chain

S.No 1.

Challenges

Suggested Mitigation Measures

Huge Investment on setting up Opt for Cooperative or PPP model stores & Refrigerated vehicles.

2.

High

Operating

cost,

erratic Use of Solar Power panels and intelligent lighting system with generator for back up.

Power Supply.

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3.

Food Safety-Increased Incident Strict adherence to Hazard Analysis of food borne contamination. Critical Control Points (HACCP) norms. pre Case should be projected to government

4.

Allied

infrastructure

like

cooling, transportation etc are not through various channels like CII, FICCI given any incentive. 5. Optimum Utilization of Space to revise policy. Establish integration. backward and forward

6.15. Hindrances in Commercialization of TCWs. (a). High Real Estate Prices. A typical 4000 -5000 ton TCW will require 1-1 acre of land, which may cost INR 1-1 Crore, thereby creating an entry barrier. (b). Erratic Power Supply. Due to power deficit in country, areas face frequent load shedding, thus investor has to procure generator set for power back up. Thus cost on account of procurement and operation of generator goes up. (c). Psyche of Indian Consumer. Indian consumer is price sensitive and may sacrifice quality for price hence products may spend more time in storage and shelf there by reducing margins. 6.17. Steps taken by Government of India to promote TCWs. (a). Cold chain was given status of Infrastructure in finance budget of 2011, where in 100% FDI is permissible. (b). Apart from this government has proposed some tax breaks by means of reducing custom duty to 2.5% and full wavier of exercise duty on plant equipment for refrigeration, air conditioning and conveyor belts. (c). Viability Gap Funding by government up to 25% of project cost is permissible.
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(d).

Launched scheme of mega food parks

6.18. Regulatory framework. In order to ensure safety and quality of products in cold chain it is vital to preserve the safety and quality of refrigerated foods and comply with regulatory norms and industry best practices. Hazard Analysis Critical Control Point (HACCP) spells out norms/practices for processing, handling, distribution and storage of chilled and frozen foods. HACCP provides management a tool aimed at complete commitment to product quality and safety. Seven principles of HACCP, with a brief

indication of necessary action are given below: Identify the Potential Hazards: Together with the HACCP team (including microbiologists and process engineers) construct a flow diagram for all product/process operations list all hazards associated with each process step list measures which will eliminate or reduce hazards. Determine the critical control points (CCPs) for identified hazards: Determine the CCP (a step at which control can be applied and is essential to eliminate the hazard). Establish the target levels/tolerances for controlling the CCPs: Establish a predetermined value for control which has been shown to eliminate hazards at a CCP. Establish/implement monitoring systems for controlling CCPs: Set out a planned sequence of observations or measurements to assess the degree of control on identified CCPs. Identify corrective actions when a deviation occurs at a CCP: Identify a predetermined action for when the CCP indicates a loss of control. Verify that the HACCP system is working: Establish and apply methods to ensure that the HACCP system is working, including documentary evidence, e.g. auditing, end product testing, process validation. Establish a documentation system for procedures and records: maintain procedures and practices for record keeping. Develop and

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6.19. Risk Analysis: Like any other project, there are lots of parameters which can be beyond the control of operators of TCW. Associated risks, their allocation and mitigation framework is given at appendix A. 6.20. Ownership of Cold Chain. As cold chain is a capital intensive industry and specially requires huge capital cost in during setup stage. Suggested framework for two ownerships models i.e. Cooperative Model and Public Private Partnership Models is given below:(a). Cooperative Model. In this various stakeholders contribute and form a cooperative and pool in finances and resources. Setup of a typical US cooperative is given below:-

Figure 13 : Typical US Cooperative Cold Chain

(Source: Avon Consulting Research)

(b).

PPP Model : In order to utilize expertise, experience and finance of private sector, TCWs can be established in PPP mode where in they will be used to store precious agri-produce so as to avoid wastage. One such model of Use or Pay in Build-Own-Operate and Transfer Model (BOLT) is discussed here. In
Page 49 of 57

said model private player will arrange for finance, construct, own, operate and maintain a TCW for 12-15 years period and there-after handover the infrastructure to public sector for further operation (Provided technology obsolesce has not taken place and equipment installed is functioning efficiently ). Government can contribute in said project by following means: Provisioning of government land for creation of infrastructure. Arranging 30% of capital at low interest rates/ viability gap funding as cost of setting up of TCW chain are high. Developing necessary infrastructure like provision of connectivity, electricity and water etc on priority. Arranging mandatory regulatory clearances from single window for early commencement of project. Getting into contract of Use or Pay for 25-35% of storage space/ tonnage for usage by cooperative stores like Mother Dairy vegetable stores etc to provide off season vegetables at moderate prices. Revenue earned by private player by this arrangement will be utilized for day to day operation. Provision of power at domestic/ household rates for initial five years i.e. till the time capacity utilization levels comes to 80-85% (whichever happens earlier) and thereafter industrial/ commercial prices. As mentioned earlier that revenue earned by private sector from public sector will be used to pay for day to day expenditure and revenue earned by own operations of TCW of 75-65% space/ tonnage, can be used by private sector can be used to pay back loan amount/ cost of capital.

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Chapter 7: Conclusion
7.1. In order to improve Indias logistics efficiency and make it comparable to global standards it is suggested that a National Integrated Logistics Policy (NILP) should be laid down. Key objectives of NILP can be:-

Increase rail freight to more than 45% by 2020. Limiting the economic losses attributed to logistics to less than 4 per cent of GDP (USD100 billion). Achieving on-time and on-budget delivery of infrastructure projects, which requires an improvement in project implementation relative to current performance.

Figure 14: Proposed shift in Inter Modal Transport

(Source: Building India, transforming the nations logistics infrastructure by Mckinesy India)

7.2.

Key programmes of NILP should focus on following issues:Rail dedicated freight corridors: Programme should have a dual focus. First, accelerating the construction of two planned DFCsDelhi- Kolkata and DelhiMumbaiand simultaneously incorporating SPVs for three additional DFCs i.e. Kolkata-Mumbai, Delhi-Chennai, Mumbai-Chennai corridors.

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Coastal freight corridors: Objective is to strengthen the Western i.e., Kandla to Kochi and Eastern i.e., Kolkata to Chennai coastal freight corridors through integrated projects that include last-mile rail and road programmes, transshipment hubs, proactive marketing and accelerated port development.

National expressways: Includes constructing expressways of 100 to 300 km stretches, so as to cater for expected increases in traffic by 2020. While currently 5 to 7 expressways are likely to be built by 2020, ideally, the number of expressways should be increased to over 20 by 2020. Expressways should include high-traffic routes such as Nasik-Shirpur and Ghaziabad-Bareilly.

Last-mile roads: Creating a dedicated last mile programme with over 750 last-mile links to connect in particular port and railway terminals to production and distribution centers.

Last-mile rail: Aim is to ensure last mile rail infrastructure in many of the last 750 mile links. It will include developing track and rail head infrastructure to support 8 to 10 critical coal corridors in mineral rich states such as Jharkhand, Chattisgarh and Orissa.

Multi-modal logistics parks: These parks will predominantly focus on demarcating land for logistics parks at 15 to 20 key points where different modes overlap, near major cities, or along proposed DFC routes. Designed as concessions, these should be equipped with the necessary infrastructure to ensure the seamless movement of freight across modes.

Roads maintenance: This will involve creating long (e.g. 10 years) annuity-based maintenance contracts for 400 km to 500 km stretches. The current practice of issuing contracts for shorter distances of 50 km to 100 km will be done away with. By extending both the duration of contracts and increasing the road stretches to be maintained could act as an incentive to providers to achieve scale and invest in better technology, thereby reducing costs.
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Adoption of electronic tolling: This will standardize technology for nationwide electronic toll collection (ETC) in future contracts and establishing a nationwide clearing house with set norms and service standards to facilitate transactions, thereby reducing waiting time and improving service levels.

Logistics skills development: Adopting a balanced modal approach will increase demand for requisite skills. In particular, demand for four types of personnel will grow i.e. warehouse managers, logistics managers, coastal seafarers and truck drivers. This in turn will require upgrading the training infrastructure and collaborating with institutes of technology, engineering colleges, marine training institutes and driver training institutes to help meet growing demand.

Enabling access to better equipment and setting common standards: Will involve acquiring access to better equipment such as larger trucks and higher tare load railway wagons and developing common standards to aid inter-modal transport that ensures consistency in containers, pallets and cranes.

(Source: Building India, transforming the nations logistics infrastructure by Mckinesy India)

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References
S. No. Reference
1 http://www.ieor.iitb.ac.in/files/faculty/narayan/transport/iwt-tec-rep-oct-05.pdf retrieved on 19 Jul 2011. 2 3 http://www.tcil.com/water.asp retrieved on 19 Jul 2011 http://www.scribd.com/doc/58239035/India-Logistic-Paper-Report-Cushman-Wakefield retrieved on 21 Jul 2011. 4 5 6 7 8 9 10 11 12 13 Internal Waterway Authority of India. http://iwai.gov.in Long term perspective on Inland Waterway Transport in India by Dr S Sriram http://planningcommission.nic.in/reports/genrep/rep_logis.pdf www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/agdex7461 www.corbisimages.com/Enlargement/Enlargement.aspx?id=42-4352066&caller= search www.nuworldresearch.com/images/051023%20Payback%20example%20DG%20 www.slideshare.net/pxkohli/module-cc www.omafra.gov.on.ca/english/crops/facts/98-021.htm www.transreporter.in/index.php?action=page&id=13&issue=SCM&id1=72 http://www.constructionupdate.com/News.aspx?nId=+mVddpTDZP5V1ZNbAIP3AA==&Ne wsType=Cold-chain:-Finally-warming-up-to-India--India-Sector 14 15 http://logisticsweek.com/feature/2011/07/fresh-look-at-cold-chain-sector/ http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTTRANSPORT/EXTTLF/0,,cont entMDK:21514122~menuPK:3875957~pagePK:210058~piPK:210062~theSitePK:515434,0 0.html 16 17 http://www.nsdcindia.org/pdf/transportation-logistics.pdf http://www.mckinsey.com/locations/india/mckinseyonindia/pdf/Logistics_Infrastructure_by20 20_fullreport.pdf 18 19 20 Building India, transforming the nations logistics infrastructure by Mckinesy India http://go.worldbank.org/FUE8JM6E40 http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/EXTSARRE GTOPTRANSPORT/0,,contentMDK:20703625~menuPK:868822~pagePK:34004173~piPK: 34003707~theSitePK:579598,00.html 21 22 23 24 http://www.adb.org/Documents/Papers/INRM-PolicyBriefs/inrm14.pdf Bottlenecks in the Growth of Coastal Shipping by S. Sundar and Pragya Jaswal http://www.marinersnetwork.com/index2.php?option=com_content&do_pdf=1&id=81 ftp://59.165.244.210/ebrok/Research/Sector/Railways%20Sector-IDBICap.pdf

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Appendix A (Refers to Para 6.19) Table 17 : Risk Allocation framework for TCW project Risk Type Sensitivity Risk Primary Remarks Period
(in years)

S,No

Risk Bearer Private sector Private player has to achieve financial

1.

Financing Risk

Medium

0-3

closure in a given time frame after award of contract. May seek viability gap funding or loan lower interest rates 2. Delay in land Medium 0-1 Private sector Care-full research and analysis of business model i.e. store more quantities of few on

purchase

products by locating TCW near produce or by opting less quantity of more products by locating market. 3. Design and Medium 0-1 Private sector If TCW is located near produce then will have fewer rooms with more storage else will have more rooms with less storage.
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TCW

near

layout of TCW

4.

Regulatory approvals initiation for

Low

0-1

Private sector

Private sector has to take clearances various various from government

bodies for initiation of project till completion of project. 5. Construction Risk Medium 0-2 Private sector Said risk can to be EPC and award of

transferred contractor mitigated

turnkey contract with penalty clause for

delay in construction time and stipulating

total cost of project. 6. Technology Obsolesce 7. Maintenance of Medium safety health audit and hazard 0-15 Medium 5-15 Private Sector Private sector Hire manpower. trained Use of proven state of art technology. Periodic safety audits.

Periodic safety drills.

Periodic inspection by regulatory regarding bodies practices

adopted at TCW. 8. Capacity utilization

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High

0-10

Private sector

Aggressive marketing.

and Public Sector

Spreading awareness among farmers about advantages. Attracting farmers by providing them good quality seeds and

reasonable price for produce so as to have a win win situation for both parties. Use or Pay contract with public sector for a fixed volume/ tonnage of storage. 9. Provision uninterrupted power supply of Medium 0-15 Private sector Use of gensets for short and planned

power outages.

Use of solar power for power deficit area.

Use

of

modern

technology.

Use of better quality of insulation material for maintaining temperature. 10. Force Majeure High 0-12 Private Sector Can be mitigated by insuring project. desired

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