Road Transport - India & Global

Group 1
Abhishek Aniruddha Yelve (2016PGP002)
Aditya Kumar Gaur (2016PGP004)
Alok Kumar Singh (2016PGP008)
Amit Dhiman (2016PGP009)
Arjun Bhargava (2016PGP015)
Faraz Ahmad (2016PGP019)
Harshit Kumar Pandey (2016PGP023)

1
Global Transport
Infrastructure
• Western Europe’s share of global transport
infrastructure spending is forecast to remain broadly
unchanged from 11% in 2014 to 10% in 2025 because of
high demand for more social infrastructure, especially
in healthcare
• US and Canada investment is expected to grow by an
average of just 3% per year over the coming decade
• Investment in roads by Middle east is expected to
increase as well by almost 116% over this period to
reach $31bn per year by 2025
• Sub-Saharan Africa is the fastest growing regional
infrastructure market, with a projected average
increase in transport spending of over 11% per year
from 2015 to 2025

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Global Road Transport
• Transportation and logistic industry has a size
of 2.7 trillion Euros
• Of which the road segment contributes 1.4
trillion euros
• The road segment experienced a growth of
4.8% durin2010-2014 and 4.6% during 2014-
2018
• The Returns of the companies in this segment
showed very high variability

3
 Logistics Sector in India
• The size of the logistics sector in India is estimated to be Logistics Costs (% of GDP)
USD 260 billion
• Unlike global trends, the logistics sector in India has been 14% 13%
growing at a healthy rate of ~14% over the last 5 years 12%

• India's logistical costs as a percentage of GDP is on the

9%
8.2%

higher side: 13.0% vs. global average of 11.7%.

• Logistics in India are plagued by an inefficient system,
lagging infrastructure, lower average trucking speeds, United States Europe Asia Pacific South America India

congestion and bottlenecks in surface transportation, etc

Composition of Transportation and
• In terms of the relative composition of transportation and
Logistics costs
logistics costs, transportation costs in the US and China are
high due to widespread geography USA 49% 9% 24% 18%

• Interestingly, costs are also high in India, but due to a

combination of factors including vehicle quality, stressed CHINA 50% 25% 15% 10%

drivers, overloading, poor road infrastructure, and low INDIA 35% 9% 25% 31%
average speeds. In addition, costs are higher due to
excessive taxes and toll expenditures Transportation Warehousing Inventories Others
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 Evolution of Logistics Sector in India
Before 1990s 1990s to 2000 2000 to 2014 Beyond 2014
• Limited to outsourcing • With Port • Growth in trade volumes • Digitization of logistics
of transportation modernization, & regulations has led to services to increase
activities for movement discharge & loading emergence of CFS/ICD transparency resulting
of goods through operations at port operations in disintermediation of
warehouses became efficient • Third-party logistics services.
• Mainly annual contracts • Custom clearance, service providers needed • Market demanded total
• Due to complex excise freight forwarding, and to handle movement of integration of logistics
tax and other duties the inventory management cargo across the logistics services and
focus was on cargo became more value chain outsourcing to 3PL/4PL
movement for reducing structured, restricted to • Higher outsourcing and service providers
inventory and operations in periphery more value added services • Efficiency and cost
distribution costs of port came into play like in-plant rationalization through
through physical • Focus on integration of management, reverse adaptation and
distribution business functions to logistics etc. automation of
management manage supply chain, • Focus on integrating technology on back of
mostly multimodal supply chain, service easing regulation
including open yard providers to meet
management customers distribution 5
need
Unfavourable Modal Mix
• Cargo movement in India is skewed towards road
networks
Modal Mix - Transportation (in %)
• India boasts the world's fourth largest railway network
and is cheaper than roads, but suffers from under
investment resulting in capacity constraints, redundant 1 1 1 1

railway sliding, inadequate rolling stocks, and non- 8 14

availability of cargo hubs in proximity to industrial hubs 43
46
with a large work-force 37
60
• Inland waterways, despite being green and cost
effective, are affected due to inadequate transit
30
gateways between inland waterways and linkages to 46
coastal shipping 48
31
23
• Air is the fastest transportation mode but continues to 10
have miniscule (1%) share in the transportation pie INDIA CHINA US EUROPE
and suffers from limited connectivity and an absence
Rail Road Water Air
of designated cargo terminal
• The inability to provide last mile connection leads
industries to prefer the road as mean of transportation
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of goods
Trends in Growth and Development of Transport
Distinct modes – rail, road, coastal shipping, civil aviation, inland water transport, and
pipelines

Rail and roads dominate the transport system (87%)

Railways consistently lost out to roads due to inability to install capacity or respond
to market needs

Transport sector has received special attention in India’s planning process

Private sector participation is required to improve service delivery and efficiency

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Road and Road Transport

Total road length – 33 lakhs km (NHAI)

3 main categories – National Highways, State Highways, and rural road network

Big boost with NHDP and Pradhan Mantri Gram Sadak Yojana

About 65% of freight and 80% passenger traffic is carried by the roads

Number of vehicles has been growing at an average pace of 10.16% per annum over last 5 years

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 Advantages of Road Freight Transport
• Cost effectiveness
• Quick and scheduled delivery
• Local, over border, long or
short haul deliveries even in
rural areas
• Flexible service
• Saving in Packing Cost
compared to other modes
• Complete door-to-door service
and it is one of the more
economical means of
transport.

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Cost of Operations

Source: Joint
Report by TCI
and IIM
10 Calcutta
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 Impact of GST on Road Transport
• Regional hubs will come on the scene: The implementation of GST will facilitate emergence of key
hubs in major states to allow streamlining of processes. It will also allow manufacturers with the
flexibility to have warehouses only in selected states.
• Reduced turnaround time: For the purpose of compliance with state laws and taxes, the trucking
industry spends a large amount of time at interstate checkpoints and tracking of interstate sales
tax. It is estimated that the logistics industry spends 50-60 per cent of its time on all of the above
functions. Thus, lower interstate compliances and reduced paperwork is expected to result into
faster turnaround time for trucks.
• Process would be streamlined: The highly fragmented nature of Indian transportation is also such
because engagement with unorganized players is preferred for tax considerations. Implementation
of GST is expected to create greater opportunities for and create incentives for companies to enter
the organized sector.
• Reduced cost: All the above factors working together will automatically result in lower cost of
transportation. According to a World Bank report, corporates can save up to 40 per cent of their
logistics incurred at check posts. 12
 Strategies for Primary Road Development
An overall length of 100000 km for HNs and 200000 km for SHs should be adequate for the country

NHDP has done well for capacity augmentation of National Highways

States should formulate programmes on the lines of NHDP for capacity augmentation of SHs

Use of RFID technology is recommended to collect tolls electronically

Special needs of connectivity to ports, airports, mining areas should be factored in road development
programmes

Investment required over 20 years– INR 21400 billion for National Highways, INR 11600 billion for State
Highways
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Strategies for Secondary Road Development
These are Major District Roads (MDR) that connect production area with markets and rural roads
with primary road network

Have not received the desired level of attention in past

Recommended target – 400000 km

Widening of these roads to two lanes with a provision of rail over/ under bridge

Investment required – INR 6000 billion, spread over 20 years

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 Strategies for Tertiary Road Development
Good progress under Pradhan Mantri Gram Sadak Yojana (PMGSY)

Well engineered roads are being constructed in rural areas

It covers roads required for new connectivity and upgradation of existing roads

PMGSY-II has also been approved

Current goal of the program should be expanded to achieve universal connectivity to ensure poverty
alleviation

Investment required – INR 5700 billion, spread over 20 years

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 Investments Required
 Annual investments of the order of Rs 3000 billion in the 15th Five year plan
 Private sector financing up to 15% on PPP basis
 Current estimates road asset of Rs 10,300 billion to be maintained timely to avoid accelerated

SCHEME 2017-22 2022-27 2027-32 2012-32

TOTAL PVT.SECTO TOTAL PVT.SECTOR TOTAL PVT.SECTOR TOTAL PVT.SECTOR
R
Expressways 600 100 1200 300 1800 1000 3800 1400

NH 3150 800 4200 1150 5700 1450 15200 4000

Special 400 NIL 500 50 600 50 1750 100
Schemes(NE)
Central 150 NIL 200 NIL 200 NIL 650 NIL
Schemes
State Highways 2700 250 3200 350 3600 400 11600 1150
District Roads 1300 NIL 1600 NIL 2100 NIL 6000 NIL
Rural Roads 1850 NIL 1300 NIL 1100 NIL 5700 NIL
Total 10150 1150 12200 1850 15100 2900 44700 6650
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Capacity Building & Enhancing Delivery Efficiency
 Technology for maintenance needs a quantum
jump
 Evolve long lasting pavements to increase
renewal cycle from 4-5 years to 12-15 years
 Mobile maintenance units need to become a
normal practice
 BOT method to be stopped as it is not a
sustainable option
 Under existing BOT, there should be a cap( say
15%) for year by year contingent liability

The current IRC mandate, a system of formulating design of roads, needs an overhaul to align itself with
international practices

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