Rail Road Logistics is a Strategic Opportunity for INDIA
When warren Buffet invested 26 billion dollars year before last to acquire control of Burlington Northern Railroad in the United States, there was a buzz around the world in Logistics industry about the importance of railroad logistics. This only emphasizes the importance of Rail Road Logistics in the hinterland of every country. After all a good Logistics infrastructure in the hinterland boosts imports and exports of the country in a big way. There is a lesson also for India in it that Rail Road Logistics can not be neglected any more and has a very crucial role in improving freight traffic. Today every leading country in the world including China and European countries are busy in expanding their Rail Road network and linking it to their main ocean ports. China already has the most advanced and extensive high speed rail line in the world and soon that network will be connected all the way to Europe and the UK! China is now making plans to connect its high speed rail line through 17 other countries in Asia and Europe in order to connect to the existing infrastructure in the EU. Additional rail lines will also be built into South East Asia as well as Russia, in what will likely become the largest infrastructure project in history.
There is world wide recognition now to the fact that Rail networks have a long term optimal logistics play for the future and are vital for inevitable expansion of global trade.
It is now a well known fact that Logistics cost in India are among highest in the world and are of the order of 13 per cent of GDP while in developed countries, it is only 8 to 9 percent of the GDP. In China, it is 10 per cent of GDP. A higher Logistics cost in India as compared to other developed nations is a major worry and is a symptom of poor logistics infrastructure of the hinterland. This is largely due to heavy congestion at the inland, Road and ocean ports, higher turn around time of the cargo ships and most of all a lack of good and dedicated Rail road network for the movement of goods apart from modern ocean ports.
And among various options as remedy to above problems lies in improving Rail Logistics in the country so as to shift most of the goods traffic from Road to Rail.
As fuel prices rise, trucking will be further impacted. In contrast, rail can move product more cost effectively in most cases and will also contribute to lower carbon emissions contributing towards a green world. In India as organized Retail is to increase as and when Government of India allows multi branding Retail for multinationals, the efficient movement of both raw material and consumer products will be essential to the country's continued expansion as a rising economic super power of the 21st Century. When viewing the current scenario, the national highway system of India is estimated to encompass approximately 4% of the total road system of the nation, yet 40% of the cargo volume moves by truck along this network.
There are inherent advantages of the Rail container transport over transportation by road and can be briefly summarized as under.
i) Lower transportation cost
ii) Reliability is higher in comparison to Road
iii) Safer and secure movement of goods
iv) Reduced Accidents
v) Very environment friendly
Inspite of the above advantage , the present rail share in container transport is around 27% and is not increasing because of following reasons.
· comparative benefits offered by road transport: faster, door to door service, aggregation of smaller volumes
· Lesser waiting time at ports and terminals
· avoidance of additional handling of cargo at rail terminals
All these help reduce costs in comparison to rail. We have in our country world’s second largest Rail network to boast about spread over more than 81000 Km and the freight segment accounts for roughly two third of Railway’s revenue but our Tonne per Kilometer costs for Rail freight is three times that of China which is really alarming.
Some of the efforts taken by Indian Railway to improve the situation are as under but more needs to be done.
i) Enhance Rail Logistics in form of Double stacked containers
ii) Dedicated Freight Corridors connecting the hinterland
iii) Private participation scheme.
Let us see the benefits of each efforts one by one.
Why Double stacked Containers
Double stacked Containers technology is a cheaper way of movement of Goods as shown in the above picture requiring lesser number of goods trains. Due to lower haulage cost, the rail share shall increase. This also shall match the throughput for larger ships thus leading to lower turnaround time for the vessels resulting in huge savings of handling costs at the port. This shall increase better utilization of track capacity and rolling stock. As delivery time of goods shall improve , this is bound to reduce inventory at various pockets throughout the industry.
Dedicated Freight Corridors
Dedicated freight corridors for Rail Road enable the railway infrastructure to carry very high level of freight leading in reduction of transportation costs and inventory costs at Inland Container Depot. Such corridors ( DFC) are being created from Jawaharlal Nehru Port in Mumbai to Dadri and Delhi's main container terminal at Tughlakabad while eastern DFC will run from Ludhiana to Sonnagar via Kanpur and Allahabad.
Private participation scheme
Indian railways have enjoyed a near monopoly but recently private players like Adani Logistics have been allowed to enter Rail Road Logistics in a big way.
Conclusion
There is a a huge expected growth in area of Textiles, handicrafts , readymade garments and many industrial products and as such greater demand for containerization is being forecasted. Industrial development is bound to increase coupled with developments of larger SEZs and industrial parks. This will help container trade to go up.with private container trains assisting sufficient hinterland connectivity for ports, Railroad Logistics is bound to play a crucial role in contributing towards higher GDP growth in the country.
Written by Professor Akhil Chandra
Institute of Logistics and Aviation
New Delhi
Akhilchandra06@gmail.com
